1 00:00:00,240 --> 00:00:04,960 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer pricing, 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,480 --> 00:00:10,479 Speaker 1: utter reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the eels are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,160 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's mind inflation through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan Wynahan back of America, willmar Ceo of Charlie Sharp. 10 00:00:27,360 --> 00:00:32,520 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio proceed. 11 00:00:32,720 --> 00:00:36,040 Speaker 1: We have cautioned confusing reports on the delta variant and 12 00:00:36,159 --> 00:00:39,479 Speaker 1: mixed numbers on the economy make us think again about 13 00:00:39,520 --> 00:00:42,880 Speaker 1: that rush to reopen. This is Bloomberg Wall Street Week. 14 00:00:43,120 --> 00:00:46,159 Speaker 1: I'm David Weston, and the markets this week seemed to 15 00:00:46,200 --> 00:00:49,839 Speaker 1: reflect all of it the hope, with stronger than expected 16 00:00:49,920 --> 00:00:53,479 Speaker 1: jobs numbers out on Friday taking the SMP record highs 17 00:00:53,800 --> 00:00:56,920 Speaker 1: as well as the trupidation, with the NASTAC actually down 18 00:00:56,960 --> 00:00:59,520 Speaker 1: on Friday a bit, even though it was overall up 19 00:00:59,520 --> 00:01:01,800 Speaker 1: a bit for the week, and the ten year yields 20 00:01:01,880 --> 00:01:04,600 Speaker 1: struggled to get back to one point three after falling 21 00:01:04,600 --> 00:01:07,399 Speaker 1: as low as one point one three earlier in the week. 22 00:01:07,800 --> 00:01:09,840 Speaker 1: To help us put this all together, we have with 23 00:01:09,920 --> 00:01:13,320 Speaker 1: this David Kelly, JP Morgan Asset Management Chief Global Strategist, 24 00:01:13,440 --> 00:01:16,560 Speaker 1: and Laura Tyson, Professor at the Has School of Business 25 00:01:16,680 --> 00:01:20,039 Speaker 1: at University of California, Berkeley. Dr Tyson served as chair 26 00:01:20,240 --> 00:01:22,800 Speaker 1: of the Council of Economic Advisors under President Obama. So 27 00:01:23,080 --> 00:01:24,880 Speaker 1: Dr Tyson, thank you so much for being with us, 28 00:01:25,120 --> 00:01:28,120 Speaker 1: give us a sense of while you interpreted those employment numbers. 29 00:01:28,200 --> 00:01:30,280 Speaker 1: It seemed to be strong pretty much across the board. 30 00:01:30,440 --> 00:01:33,880 Speaker 1: But did it take into account the delta variant? Well, 31 00:01:33,880 --> 00:01:36,319 Speaker 1: it was strong, and I certainly think it's important to 32 00:01:36,319 --> 00:01:38,200 Speaker 1: look at the three months average. If you get a 33 00:01:38,240 --> 00:01:41,240 Speaker 1: three months average of adding eight hundred thousand, uh eight 34 00:01:41,280 --> 00:01:44,680 Speaker 1: hundred thousand jobs a month, those are strong numbers and 35 00:01:44,680 --> 00:01:48,320 Speaker 1: and show continued strengthening of the labor market. That's the 36 00:01:48,360 --> 00:01:51,200 Speaker 1: first thing. The second thing is it is true that 37 00:01:51,320 --> 00:01:54,680 Speaker 1: a lot of the employment growth in July was what 38 00:01:54,760 --> 00:01:59,360 Speaker 1: I would call in person activities. It was leisure, retail, 39 00:01:59,640 --> 00:02:02,880 Speaker 1: hospital totality, people going to restaurants, people going out to 40 00:02:03,040 --> 00:02:07,360 Speaker 1: personal services. What is a little unclear, and by the way, 41 00:02:07,400 --> 00:02:11,200 Speaker 1: also education, what is a little unclear is what is 42 00:02:11,240 --> 00:02:14,480 Speaker 1: the course of delta going into the fall and will 43 00:02:14,560 --> 00:02:18,160 Speaker 1: that slow that momentum for those kinds of jobs and 44 00:02:18,240 --> 00:02:21,240 Speaker 1: services death. And I think that's a legitimate question, and 45 00:02:21,280 --> 00:02:24,040 Speaker 1: I'm not sure. We don't We don't know the answer. Therefore, 46 00:02:24,160 --> 00:02:26,160 Speaker 1: I think that's one of the reasons why the market 47 00:02:26,680 --> 00:02:30,280 Speaker 1: is saying hard to interpret, hard to interpret. So let's 48 00:02:30,320 --> 00:02:33,000 Speaker 1: go to the markets. Actually, David, it's over to you here. 49 00:02:33,000 --> 00:02:34,840 Speaker 1: And what happened, because when I came in and looked 50 00:02:34,840 --> 00:02:36,600 Speaker 1: at the numbers of that, boy, these are great numbers 51 00:02:36,600 --> 00:02:38,600 Speaker 1: and markets are really going to go up, they didn't 52 00:02:38,639 --> 00:02:39,959 Speaker 1: go up that much. It was mixed. In fact, the 53 00:02:40,000 --> 00:02:42,880 Speaker 1: NASTAC was down a little bit. Is that because, as 54 00:02:42,960 --> 00:02:45,840 Speaker 1: Laura said, this is some doubts about delta iron or 55 00:02:45,880 --> 00:02:48,200 Speaker 1: is it really fear that may cause the FED to 56 00:02:48,400 --> 00:02:51,639 Speaker 1: increase rates sooner. I don't really think it's either of those. 57 00:02:51,639 --> 00:02:54,400 Speaker 1: I mean, the markets are very there. I mean, we're 58 00:02:54,400 --> 00:02:56,799 Speaker 1: going up for a very long time. We are for 59 00:02:56,919 --> 00:02:59,800 Speaker 1: these heights. It's it's you know, it's hard to justify 60 00:03:00,280 --> 00:03:03,519 Speaker 1: moving up quickly from here. But on the delta variant. 61 00:03:03,520 --> 00:03:06,320 Speaker 1: I mean, look, I know that the virus is mutating, 62 00:03:06,560 --> 00:03:08,200 Speaker 1: but you know what, in some ways, the economy is 63 00:03:08,280 --> 00:03:12,200 Speaker 1: mutating also. I think it is really interesting that, you know, 64 00:03:12,280 --> 00:03:15,440 Speaker 1: we had a huge crash in the economy last year 65 00:03:15,480 --> 00:03:17,800 Speaker 1: and then and then a rebound in the third quarter, 66 00:03:17,840 --> 00:03:19,720 Speaker 1: but every quarter since then we've grown. We were on 67 00:03:19,800 --> 00:03:22,480 Speaker 1: our fourth wave of COVID here, but the economy is 68 00:03:22,520 --> 00:03:25,000 Speaker 1: really adapting to it. So I do think the delta 69 00:03:25,080 --> 00:03:27,840 Speaker 1: variant will slow things down a little bit over the 70 00:03:27,880 --> 00:03:31,120 Speaker 1: next month or two. Um, you know, I think hopefully 71 00:03:31,120 --> 00:03:32,760 Speaker 1: it will. He can come down again. But you know, 72 00:03:32,800 --> 00:03:34,399 Speaker 1: as I look at the economy, it looks like people 73 00:03:34,440 --> 00:03:36,440 Speaker 1: are adapting to it. Yes, we're gonna have to. We're 74 00:03:36,440 --> 00:03:39,120 Speaker 1: gonna get much more serious about vaccine mandates. You know, 75 00:03:39,160 --> 00:03:40,800 Speaker 1: you want to work here, you gotta have a vaccine. 76 00:03:40,840 --> 00:03:43,080 Speaker 1: We're gonna get more serious about wearing masks, but it's 77 00:03:43,080 --> 00:03:44,840 Speaker 1: not going to stop people from the open. The schools 78 00:03:44,840 --> 00:03:46,840 Speaker 1: are getting back to doing the things that want to do. 79 00:03:46,880 --> 00:03:48,520 Speaker 1: We're just gonna have to do them in a different way. 80 00:03:48,680 --> 00:03:51,240 Speaker 1: But I've I've confidence. You know, Yeah, the virus mutates, 81 00:03:51,240 --> 00:03:53,240 Speaker 1: but we mutate too, and I think the economy is 82 00:03:53,240 --> 00:03:55,800 Speaker 1: actually going to keep on growing through this. So so 83 00:03:55,880 --> 00:03:57,840 Speaker 1: we're back to you. What does that say to the 84 00:03:57,840 --> 00:04:00,360 Speaker 1: Fed and monetary policies a practic matter? But is I 85 00:04:00,360 --> 00:04:02,120 Speaker 1: think what I just heard from David is we're learning 86 00:04:02,120 --> 00:04:03,880 Speaker 1: to adapt to it. It's not going to be as 87 00:04:03,960 --> 00:04:06,400 Speaker 1: robust as we thought. It will be more tempered. But 88 00:04:06,440 --> 00:04:08,280 Speaker 1: does that mean actually the FED can be a bit 89 00:04:08,280 --> 00:04:13,160 Speaker 1: more leaning with monetary policy longer? So I look, I 90 00:04:13,200 --> 00:04:15,960 Speaker 1: think the said is it was very clear you You 91 00:04:16,080 --> 00:04:19,120 Speaker 1: had a comment from Vice Chair Claradon, but we also 92 00:04:19,160 --> 00:04:23,320 Speaker 1: had a comment last week from Jerome Pell And basically, 93 00:04:23,360 --> 00:04:27,440 Speaker 1: what they're saying, is it right now, given the advanced guidance, 94 00:04:27,480 --> 00:04:31,440 Speaker 1: they continue to to continue to issue um with a 95 00:04:31,520 --> 00:04:35,440 Speaker 1: goal of maximum employment and a long run target of 96 00:04:35,480 --> 00:04:38,880 Speaker 1: inflation of two percent with some overshoot for some period 97 00:04:38,920 --> 00:04:43,560 Speaker 1: of time. Yeah. The the conditions in the economy, I 98 00:04:43,600 --> 00:04:47,640 Speaker 1: think continue to indicate that that meeting those conditions may 99 00:04:47,760 --> 00:04:51,600 Speaker 1: sometimes may occur sometime in two or early twenty three. 100 00:04:51,600 --> 00:04:54,960 Speaker 1: I don't think there's any news here in this report 101 00:04:55,400 --> 00:04:58,080 Speaker 1: which would suggest what the SAID has been saying. The 102 00:04:58,200 --> 00:05:01,919 Speaker 1: SED has believes, and I believe that most of the 103 00:05:02,320 --> 00:05:05,880 Speaker 1: significant increase in inflation over the past few months has 104 00:05:05,920 --> 00:05:09,599 Speaker 1: been the result of transitory factors. Those factors won't die out, 105 00:05:10,120 --> 00:05:13,040 Speaker 1: and we will end up with a perhaps a somewhat 106 00:05:13,120 --> 00:05:16,760 Speaker 1: higher inflation rate over two percent, but not much, and 107 00:05:16,960 --> 00:05:20,359 Speaker 1: that will be consistent with the Fed's guidance on what 108 00:05:20,480 --> 00:05:23,279 Speaker 1: its policy is going to be. So David's that means 109 00:05:23,279 --> 00:05:24,960 Speaker 1: the sky's the limit. As far as equity is scary 110 00:05:24,960 --> 00:05:27,240 Speaker 1: concern because it seems like almost no matter what happens, 111 00:05:27,320 --> 00:05:30,000 Speaker 1: equity markets just go up. How much of that is 112 00:05:30,040 --> 00:05:34,000 Speaker 1: just supported by the FED as opposed to fundamental underlying growth. Well, 113 00:05:34,040 --> 00:05:35,600 Speaker 1: I think a lot of it is. But of course 114 00:05:35,640 --> 00:05:39,400 Speaker 1: the Federal Reserve has been fueling asset price increases all 115 00:05:39,480 --> 00:05:41,760 Speaker 1: over the place for years, ready for a decade now. 116 00:05:42,080 --> 00:05:44,320 Speaker 1: And my real concern is not so much the FED 117 00:05:44,440 --> 00:05:47,719 Speaker 1: is fueling inflation, but it's just causing assetprises to rise 118 00:05:47,839 --> 00:05:50,960 Speaker 1: much faster than the economy overall, and that could cause 119 00:05:51,600 --> 00:05:54,039 Speaker 1: asset bubbles, are generalized asset bubbles, So I think the 120 00:05:54,080 --> 00:05:57,320 Speaker 1: Federal Reserve needs to begin to normalize. I agree with Laura, 121 00:05:57,320 --> 00:05:59,119 Speaker 1: I don't think they're going to We're looking at hyper 122 00:05:59,160 --> 00:06:02,200 Speaker 1: inflation are very high inflation. I think most of its transitory, 123 00:06:02,240 --> 00:06:04,760 Speaker 1: but we have seen big increases in asset prices, and 124 00:06:04,800 --> 00:06:06,520 Speaker 1: I'm you know, I think what's going on is these 125 00:06:06,600 --> 00:06:08,799 Speaker 1: very low interest rates are fueling a lot of nefarious 126 00:06:08,839 --> 00:06:11,200 Speaker 1: things in the economy that we really don't want to see. 127 00:06:11,400 --> 00:06:14,000 Speaker 1: You very high increases in home prices, a lot of 128 00:06:14,040 --> 00:06:16,720 Speaker 1: spectors of assets, and you're drawing money in. So I 129 00:06:16,760 --> 00:06:19,320 Speaker 1: think the Federal Reserve really needs to think about normalizing 130 00:06:19,360 --> 00:06:21,240 Speaker 1: and they also have to think about timetables. Here. You're 131 00:06:21,279 --> 00:06:24,440 Speaker 1: supposed to get ahead of this, not not react late 132 00:06:24,480 --> 00:06:26,560 Speaker 1: to it. So I'm worried that they're they're taking too 133 00:06:26,640 --> 00:06:31,039 Speaker 1: much time getting to tapering and talking about raising interest 134 00:06:31,120 --> 00:06:33,880 Speaker 1: rates from essentially zero levels in an economy which is 135 00:06:33,920 --> 00:06:36,719 Speaker 1: really barreling towards full employment. That's former Chair of the 136 00:06:36,760 --> 00:06:40,200 Speaker 1: Council of Economic Advisors Laura Tyson and David Kelly from 137 00:06:40,279 --> 00:06:44,240 Speaker 1: JP Morgan Asset Management. Coming up, we hear from legendary 138 00:06:44,240 --> 00:06:48,680 Speaker 1: investor Leon Cooperman. That's next on Wall Street Week on Bloomberg. 139 00:06:54,000 --> 00:06:57,960 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 140 00:06:58,080 --> 00:07:02,560 Speaker 1: Bloomberg Radio. This week's another chapter in the drama of Washington, 141 00:07:02,640 --> 00:07:05,680 Speaker 1: with the Senate apparently getting closer to a major bipartisan 142 00:07:05,760 --> 00:07:08,880 Speaker 1: infrastructure package, coming on top of over five trillion dollars 143 00:07:08,880 --> 00:07:11,600 Speaker 1: in fiscal stimulus already pumped in the system, and more 144 00:07:11,680 --> 00:07:14,720 Speaker 1: on the way if Democrats have their way. Leon Koperman 145 00:07:14,840 --> 00:07:17,560 Speaker 1: has been a key investor for many years, first of 146 00:07:17,640 --> 00:07:19,480 Speaker 1: Goldman Sachs and then his head of his own firm, 147 00:07:19,600 --> 00:07:22,440 Speaker 1: Omega Advisors. And we welcome now to Wall Street Week. 148 00:07:22,520 --> 00:07:25,040 Speaker 1: So Lee, thank you so much for joining us. So 149 00:07:25,080 --> 00:07:27,720 Speaker 1: many people look to you for investment advice. I've heard 150 00:07:27,720 --> 00:07:30,920 Speaker 1: you described as a fully invested bear. Could you tell 151 00:07:31,000 --> 00:07:33,600 Speaker 1: us what that means and why? Yeah, Well, let me 152 00:07:33,640 --> 00:07:36,040 Speaker 1: first say, you know, it's a pleasure to be with you. 153 00:07:36,040 --> 00:07:39,520 Speaker 1: You know, I reside with Ruis Lewis Luckyser on Direct 154 00:07:39,560 --> 00:07:42,080 Speaker 1: and the initial Wall Street Week four or five times. 155 00:07:42,280 --> 00:07:44,000 Speaker 1: This is a lot more convenient. You know, I'm sitting 156 00:07:44,000 --> 00:07:46,520 Speaker 1: in my home in New Jersey and I didn't have 157 00:07:46,560 --> 00:07:50,400 Speaker 1: to travel Owens Mills, Maryland, so it's a pretty painless experience. 158 00:07:50,880 --> 00:07:54,880 Speaker 1: Fully invested bear is uh explained by the fact that 159 00:07:55,080 --> 00:07:58,760 Speaker 1: is a cyclical and secular outlook. The cyclical conditions are 160 00:07:58,840 --> 00:08:02,520 Speaker 1: not uh suggestive of a bear market. You know, basically, 161 00:08:02,520 --> 00:08:05,960 Speaker 1: bear markets don't come about through a maculate conception. To 162 00:08:06,080 --> 00:08:10,760 Speaker 1: come about for certain fundamental reasons. Number one, celebrating problematic inflation. 163 00:08:11,000 --> 00:08:13,320 Speaker 1: We're heading in that direction. We're not there yet, mainly 164 00:08:13,320 --> 00:08:16,800 Speaker 1: because the FED speak hostile FED, which you don't have. 165 00:08:16,880 --> 00:08:18,960 Speaker 1: In fact, I'm critical of the FED, and I'll talk 166 00:08:19,000 --> 00:08:21,720 Speaker 1: about that in the moment. Uh an oncoming recession. We're 167 00:08:21,720 --> 00:08:26,720 Speaker 1: just coming out of recession or a exhuberantly braced price market. 168 00:08:27,000 --> 00:08:29,480 Speaker 1: I have to say, even though I'm conservative in my outlook, 169 00:08:29,520 --> 00:08:31,160 Speaker 1: I have to admit the stock market has been very 170 00:08:31,200 --> 00:08:33,760 Speaker 1: self corrective. The area of the market has been most 171 00:08:33,800 --> 00:08:37,560 Speaker 1: exploited and overvalued has had a very big decline. So cyclically, 172 00:08:37,640 --> 00:08:40,160 Speaker 1: the conditions are big decline on present and that explains 173 00:08:40,240 --> 00:08:44,360 Speaker 1: my positive view. My long term concerns are I think 174 00:08:44,360 --> 00:08:47,800 Speaker 1: we're's kind of barring from the future. You know, Laura 175 00:08:47,840 --> 00:08:49,960 Speaker 1: Tyson is a very distinguished economists. I know if you're 176 00:08:50,000 --> 00:08:52,480 Speaker 1: still listening, But I would say, if I lined up 177 00:08:52,520 --> 00:08:54,760 Speaker 1: a hundred economists and they asked him, what is the 178 00:08:54,760 --> 00:08:58,560 Speaker 1: potential real growth of the U S economy? Responsively centered 179 00:08:58,600 --> 00:09:01,840 Speaker 1: around two percent real and that's been a function of 180 00:09:02,480 --> 00:09:04,320 Speaker 1: labor force growth, which is about a half and one 181 00:09:04,320 --> 00:09:07,000 Speaker 1: percent per antum, and productivity growth was about one and 182 00:09:07,040 --> 00:09:09,360 Speaker 1: a half percent peratum. So that determines real growth in 183 00:09:09,400 --> 00:09:12,120 Speaker 1: any economy. So two percent real if you're economic bull, 184 00:09:12,160 --> 00:09:13,440 Speaker 1: you say two and a half of your bear, you 185 00:09:13,480 --> 00:09:15,559 Speaker 1: say one and a half. Add to that about two 186 00:09:15,559 --> 00:09:19,880 Speaker 1: percent for inflation. So nominal GDP grows four percent. We 187 00:09:19,960 --> 00:09:23,319 Speaker 1: have real growth this year of four times potential. Yet 188 00:09:23,360 --> 00:09:25,920 Speaker 1: the fittest holding interest rates in near zero. Makes no 189 00:09:26,040 --> 00:09:28,960 Speaker 1: sense to me, and I understand what they're doing or 190 00:09:28,960 --> 00:09:30,760 Speaker 1: why they're doing it, but I think it's going to 191 00:09:30,880 --> 00:09:33,600 Speaker 1: have a bad end to it. Secondly, you just referenced 192 00:09:33,600 --> 00:09:36,079 Speaker 1: in a minute ago. You know we've already injected into 193 00:09:36,080 --> 00:09:39,040 Speaker 1: the economy a trillion dollars of stimulus and excess of 194 00:09:39,120 --> 00:09:41,679 Speaker 1: wage is lost. Yet they're trying to do another two 195 00:09:41,679 --> 00:09:44,120 Speaker 1: it's for trillion on top of that. And so you 196 00:09:44,160 --> 00:09:46,640 Speaker 1: know this nation was found two and forty five years ago. 197 00:09:46,679 --> 00:09:48,920 Speaker 1: We had no national debt. Three years ago is about 198 00:09:48,960 --> 00:09:51,280 Speaker 1: twenty trillion. I think now it's not going to do 199 00:09:51,320 --> 00:09:53,760 Speaker 1: a twenty eight trillion is growing at a rate foreign 200 00:09:53,800 --> 00:09:57,360 Speaker 1: nexus the growth rate the economy, and when this party ends. Basically, 201 00:09:57,400 --> 00:10:00,640 Speaker 1: it's not gonna end well, and nobody knows is gonna end. 202 00:10:00,960 --> 00:10:04,600 Speaker 1: You know, Socrates around I think four BC said he 203 00:10:04,640 --> 00:10:07,240 Speaker 1: was the wisest man alive. He knows one thing, and 204 00:10:07,240 --> 00:10:09,720 Speaker 1: that is I know nothing. And then a few thousand 205 00:10:09,760 --> 00:10:13,000 Speaker 1: years later, Warren Buffetts at Forecast of the Future, tell 206 00:10:13,000 --> 00:10:14,880 Speaker 1: you more about the forecast, and they tell you about 207 00:10:14,920 --> 00:10:17,719 Speaker 1: the future. So we're all guessing. But I think we 208 00:10:17,800 --> 00:10:19,360 Speaker 1: have a bad end to this. I think we've been 209 00:10:19,360 --> 00:10:24,040 Speaker 1: borrowing from the future. I think bonds are totally totally mispriced. 210 00:10:24,400 --> 00:10:27,120 Speaker 1: You know, if I told you historically, attending US government 211 00:10:27,120 --> 00:10:30,840 Speaker 1: bond is yielded in line with nominal GDP. So let's 212 00:10:30,840 --> 00:10:34,040 Speaker 1: say nominal GDP on trend basis grows at four percent, 213 00:10:34,360 --> 00:10:37,359 Speaker 1: so that would imply a four percent ten year bond. Okay, 214 00:10:37,400 --> 00:10:39,720 Speaker 1: this year, I think in the third court of nominal 215 00:10:39,880 --> 00:10:43,360 Speaker 1: GDP is expected to grow with thirteen percent. Yet we 216 00:10:43,440 --> 00:10:45,960 Speaker 1: have a one point three percent tenure government bond rate. 217 00:10:46,200 --> 00:10:49,000 Speaker 1: You're an investor, you pay taxes, you keep sixty percent 218 00:10:49,160 --> 00:10:52,360 Speaker 1: of the one point three that's what seventy eight basis 219 00:10:52,400 --> 00:10:55,040 Speaker 1: points called eighty basis points inflation. Your rates running four 220 00:10:55,080 --> 00:10:58,400 Speaker 1: or five. So you know, stocks make all the sense 221 00:10:58,400 --> 00:11:00,960 Speaker 1: in the world relative to bonds. The bonds make no sense. 222 00:11:01,000 --> 00:11:03,480 Speaker 1: And I think the FED is over staying in their position, 223 00:11:03,880 --> 00:11:07,800 Speaker 1: and that that bothers me greatly. So also in troubled 224 00:11:07,840 --> 00:11:10,680 Speaker 1: by the shift to the leftist taking place in the country. 225 00:11:11,120 --> 00:11:14,760 Speaker 1: You know, of the young people today, I think socialism 226 00:11:14,840 --> 00:11:17,280 Speaker 1: is prefer insistance to capitalism. They don't have a clue. 227 00:11:17,600 --> 00:11:20,000 Speaker 1: My good buddy who I admired greatly, cal and go 228 00:11:20,080 --> 00:11:22,000 Speaker 1: and says it, well, he'd like to put a bunch 229 00:11:22,040 --> 00:11:24,640 Speaker 1: of people in his private plane flight to Venezuela, Cuba 230 00:11:24,800 --> 00:11:27,520 Speaker 1: and let them see what socialism is all about. So 231 00:11:28,120 --> 00:11:30,120 Speaker 1: let me ask you one specific question. If you're putting 232 00:11:30,120 --> 00:11:32,160 Speaker 1: money to work right now, how do you take into 233 00:11:32,200 --> 00:11:34,920 Speaker 1: account the fact that some people have said the referee 234 00:11:35,000 --> 00:11:36,480 Speaker 1: is now playing in the game, whether it's on the 235 00:11:36,480 --> 00:11:39,960 Speaker 1: monetary policy side or or the fiscal policy side. You 236 00:11:40,040 --> 00:11:42,840 Speaker 1: referred to long term growth patterns, but thus far the 237 00:11:42,880 --> 00:11:44,800 Speaker 1: government and this, by the way, it's true under President 238 00:11:44,800 --> 00:11:47,880 Speaker 1: Trump as well. I could argue Goose is up the 239 00:11:47,960 --> 00:11:52,720 Speaker 1: nominal growth rate by really intervening. Absolutely, Trump was no hero. 240 00:11:52,960 --> 00:11:55,360 Speaker 1: In my opinion. We were running a trillion dollar deficit 241 00:11:55,720 --> 00:11:59,839 Speaker 1: in early UM while he was president and we had 242 00:11:59,840 --> 00:12:03,240 Speaker 1: all the employed economy. Well, really what happened is prior 243 00:12:03,320 --> 00:12:06,800 Speaker 1: prior to COVID, hitting the unemployed, when there's about five 244 00:12:06,840 --> 00:12:09,720 Speaker 1: and a half million people, it balloon to twenty three 245 00:12:09,720 --> 00:12:15,600 Speaker 1: million people and uh at the peak, and now we're 246 00:12:15,640 --> 00:12:19,080 Speaker 1: down about eight million. And we're conducting fiscal monetary policy 247 00:12:19,120 --> 00:12:21,320 Speaker 1: with the idea of getting unemployment that back down to 248 00:12:21,400 --> 00:12:23,840 Speaker 1: it was pre COVID, and so, you know, not a 249 00:12:23,840 --> 00:12:26,959 Speaker 1: worthwhile objective. But I think the combination very similar to 250 00:12:27,040 --> 00:12:30,199 Speaker 1: fiscal monetary policy, it will turn out to be problematic. 251 00:12:30,360 --> 00:12:32,520 Speaker 1: So so let me ask you one last question here, 252 00:12:32,559 --> 00:12:37,960 Speaker 1: which goes to a fundamental issue. Historically, historically the best 253 00:12:37,960 --> 00:12:40,560 Speaker 1: and the brightest have gone to Wall Street. Is that 254 00:12:40,760 --> 00:12:44,080 Speaker 1: still true? Or is Wall Streets struggling to attract the 255 00:12:44,160 --> 00:12:47,240 Speaker 1: best talent these days because they're going off to other sources, 256 00:12:47,280 --> 00:12:51,120 Speaker 1: including tech as well as maybe biotech. I don't know. 257 00:12:51,559 --> 00:12:54,200 Speaker 1: In all honesty, David, I've always advocated I do a 258 00:12:54,200 --> 00:12:57,760 Speaker 1: lot of speaking to young people in high school and colleges, 259 00:12:57,800 --> 00:12:59,520 Speaker 1: and I tell them the only way to be successful, 260 00:13:00,000 --> 00:13:01,760 Speaker 1: he said, do what you love and love what you do, 261 00:13:02,200 --> 00:13:04,200 Speaker 1: so you know, don't go into a field to make 262 00:13:04,240 --> 00:13:05,880 Speaker 1: a lot of money. Go into a field because you 263 00:13:05,920 --> 00:13:08,400 Speaker 1: have a passion for it. And I think wolf Streets 264 00:13:08,440 --> 00:13:11,520 Speaker 1: a place where uh, I love every minute I worked there. 265 00:13:11,520 --> 00:13:13,600 Speaker 1: I had a great twenty five year un a Golden Stacks, 266 00:13:13,679 --> 00:13:16,040 Speaker 1: terrific firm, had a great run, and O make it 267 00:13:16,080 --> 00:13:18,880 Speaker 1: for another twenty five years. And then in two thousand 268 00:13:18,920 --> 00:13:22,640 Speaker 1: and eighteen, I decided to I tell everybody, I'm like 269 00:13:22,880 --> 00:13:26,319 Speaker 1: uh Hyman Roth and Godfather too. You know if I 270 00:13:26,400 --> 00:13:28,280 Speaker 1: saw the movie a hundred times, but it's a scene 271 00:13:28,320 --> 00:13:31,360 Speaker 1: at the airport right before they shoot him. He professed 272 00:13:31,400 --> 00:13:33,880 Speaker 1: to be retired executive living in a pension. I'm a 273 00:13:34,040 --> 00:13:37,120 Speaker 1: retired money manager living on investment income. The bad news 274 00:13:37,160 --> 00:13:39,800 Speaker 1: is they have no active income, no wages, no salaries. 275 00:13:41,000 --> 00:13:43,040 Speaker 1: You know. All my income has differences an interest. I 276 00:13:43,160 --> 00:13:45,360 Speaker 1: have enough of it. Don't worry about me. Uh. And 277 00:13:45,480 --> 00:13:47,520 Speaker 1: the good news is I have no pressure. So at 278 00:13:47,559 --> 00:13:51,600 Speaker 1: a seventy eight I decided to swept pressure for income. 279 00:13:52,160 --> 00:13:56,040 Speaker 1: You know, pressure, uh for income, let's pressure more income. 280 00:13:56,080 --> 00:13:58,360 Speaker 1: I like to make money because my goal is to 281 00:13:58,400 --> 00:14:00,520 Speaker 1: give it away, and I like to have more money giveaway. 282 00:14:01,400 --> 00:14:05,400 Speaker 1: But basically I love what I'm doing, so wals she 283 00:14:05,480 --> 00:14:08,080 Speaker 1: will get its share of good people, and the legal 284 00:14:08,120 --> 00:14:10,120 Speaker 1: profession is gonna get its share of good people. And 285 00:14:10,520 --> 00:14:12,360 Speaker 1: you know, money goes the money streeted best. But I 286 00:14:12,400 --> 00:14:14,439 Speaker 1: think the way to be successful is to go we 287 00:14:14,559 --> 00:14:17,520 Speaker 1: have a passion and you know, uh And that's kind 288 00:14:17,520 --> 00:14:19,200 Speaker 1: of what got me to Wall Street. I I just 289 00:14:19,800 --> 00:14:23,400 Speaker 1: I look at my career. I say, you know, uh uh, 290 00:14:23,680 --> 00:14:28,040 Speaker 1: it was luck, hard work and intuition that made for 291 00:14:28,120 --> 00:14:31,840 Speaker 1: my success. Hard work, intuition. That's Omega Family Office Chairman 292 00:14:32,120 --> 00:14:36,360 Speaker 1: Leon Cooperman. Coming up. The CEO of True America, Robert Hart, 293 00:14:36,680 --> 00:14:40,160 Speaker 1: on the extension of the eviction moratorium that's next on 294 00:14:40,240 --> 00:14:49,360 Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street 295 00:14:49,400 --> 00:14:53,800 Speaker 1: Week with David Weston from Bloomberg Radio. Millions of Americans 296 00:14:53,840 --> 00:14:56,520 Speaker 1: were exposed to possible eviction because of the pandemic, but 297 00:14:56,640 --> 00:15:01,040 Speaker 1: we're protected by Congress. When that moratorium on evictions lapsed, 298 00:15:01,120 --> 00:15:04,840 Speaker 1: than they were exposed, along with hundreds of thousands of landlords. 299 00:15:04,880 --> 00:15:08,560 Speaker 1: The CDC this week stepped in and imposed a new moratorium. 300 00:15:08,800 --> 00:15:11,720 Speaker 1: But the issue still remains. And we turn now to 301 00:15:11,920 --> 00:15:15,760 Speaker 1: Bob Heart. He's the CEO of True America Multi Family, 302 00:15:16,080 --> 00:15:20,320 Speaker 1: which manages some forty seven thousand units around the country. So, Bob, 303 00:15:20,400 --> 00:15:22,480 Speaker 1: thank you so much. Welcome to Wall Street. We're good 304 00:15:22,520 --> 00:15:25,160 Speaker 1: to have you here. Give us a sense about this industry, 305 00:15:25,200 --> 00:15:27,240 Speaker 1: because some of us may not have followed that closely. 306 00:15:27,560 --> 00:15:30,400 Speaker 1: How many people really are behind on their rent? How 307 00:15:30,440 --> 00:15:33,080 Speaker 1: many people do you have in your units who are behind? Well, 308 00:15:33,200 --> 00:15:36,440 Speaker 1: David Um, there's quite a number of people in America 309 00:15:36,480 --> 00:15:41,200 Speaker 1: that are behind right now. It's about fifteen percent of 310 00:15:41,280 --> 00:15:45,680 Speaker 1: the total rental population of about forty four million households, 311 00:15:46,480 --> 00:15:50,360 Speaker 1: and either they're currently behind or they have some pass 312 00:15:50,400 --> 00:15:56,160 Speaker 1: through form of rent um. However, the situation has improved 313 00:15:56,680 --> 00:16:00,120 Speaker 1: for many many of us because more people are are 314 00:16:00,160 --> 00:16:03,880 Speaker 1: working as the economy has improved. And I think if 315 00:16:03,920 --> 00:16:08,080 Speaker 1: you look at current statistics, it's probably less than five 316 00:16:08,200 --> 00:16:11,360 Speaker 1: per cent of the rent of population that is currently 317 00:16:11,440 --> 00:16:15,680 Speaker 1: not paying, either because you're choosing not to pay due 318 00:16:15,720 --> 00:16:19,480 Speaker 1: to the eviction mortorim or they simply cannot pay. So 319 00:16:19,920 --> 00:16:22,840 Speaker 1: the situation has improved, but there is a lot of 320 00:16:23,040 --> 00:16:27,280 Speaker 1: past do rent that's affecting particularly the small landlord. The 321 00:16:27,360 --> 00:16:30,720 Speaker 1: corporate landlords are hurting as well. But to the extent 322 00:16:31,160 --> 00:16:35,440 Speaker 1: UH this problem is really partially affecting a small landlord. 323 00:16:35,520 --> 00:16:40,520 Speaker 1: It's deriving uh passive income or or retirement income from 324 00:16:40,760 --> 00:16:45,160 Speaker 1: the rental of apartments. Congress has enacted various rental assistant programs. 325 00:16:45,840 --> 00:16:48,160 Speaker 1: How much have they helped and why haven't they've taken 326 00:16:48,160 --> 00:16:51,080 Speaker 1: care of the problem. It just began a few months ago. 327 00:16:52,320 --> 00:16:55,480 Speaker 1: The programs have traveled from the federal government to the 328 00:16:55,520 --> 00:16:59,280 Speaker 1: state government down the local government, and the administration lies 329 00:16:59,360 --> 00:17:03,400 Speaker 1: with local government. So it's spotty in California. And we 330 00:17:03,480 --> 00:17:06,160 Speaker 1: have areas like Sacramento that are doing really, really well, 331 00:17:06,200 --> 00:17:10,240 Speaker 1: Orange County that's doing really well and paying folks. Los 332 00:17:10,320 --> 00:17:14,199 Speaker 1: Angeles City not so much. It depends on the local jurisdiction. 333 00:17:14,680 --> 00:17:17,240 Speaker 1: So there's a lot of hope. But the landlord has 334 00:17:17,280 --> 00:17:19,320 Speaker 1: to do the work. The landlord has to work with 335 00:17:19,440 --> 00:17:22,480 Speaker 1: the individual household and get them to cooperate with the 336 00:17:22,520 --> 00:17:26,240 Speaker 1: submission of an application to the municipal authority in order 337 00:17:26,240 --> 00:17:27,879 Speaker 1: to get in the line. And then you have to 338 00:17:27,920 --> 00:17:30,720 Speaker 1: get in line after that. And wait, isn't your impression 339 00:17:30,760 --> 00:17:33,320 Speaker 1: this is a timing issue, as we might say in business, 340 00:17:33,640 --> 00:17:36,760 Speaker 1: or a fundamental issue is to say billion dollars has 341 00:17:36,800 --> 00:17:38,760 Speaker 1: been appropriate. I think three or four billion has been spent. 342 00:17:39,119 --> 00:17:41,560 Speaker 1: When it comes out, that's gonna really address much of 343 00:17:41,640 --> 00:17:43,840 Speaker 1: the problem. I think it will address a lot of 344 00:17:43,920 --> 00:17:46,720 Speaker 1: the past two problem and a little bit of the 345 00:17:46,920 --> 00:17:51,399 Speaker 1: current problem. It's not a permanent solution. We've got to 346 00:17:51,440 --> 00:17:54,280 Speaker 1: get people back to work and we've got to get 347 00:17:54,520 --> 00:17:58,640 Speaker 1: into a normalized economic situation as far as rendership goes, 348 00:17:59,200 --> 00:18:01,879 Speaker 1: and we are moving in that direction because more and 349 00:18:02,000 --> 00:18:07,200 Speaker 1: more people are paying their rent. So the headlines always 350 00:18:07,200 --> 00:18:08,960 Speaker 1: talk about the folks that aren't, but we have to 351 00:18:09,040 --> 00:18:12,199 Speaker 1: remember that over the people are paying their rent. They 352 00:18:12,240 --> 00:18:16,320 Speaker 1: are protecting their livelihoods, their households, and their families, and 353 00:18:16,359 --> 00:18:18,480 Speaker 1: they're doing the right thing. As I listened to you, 354 00:18:18,640 --> 00:18:20,760 Speaker 1: as I read about this, it sounds like this is 355 00:18:20,800 --> 00:18:24,680 Speaker 1: a somewhat troubled business right now. Is investing in and 356 00:18:24,840 --> 00:18:27,600 Speaker 1: owning rental units right now? Is that a good business? 357 00:18:27,800 --> 00:18:29,639 Speaker 1: If you read the headlines, you would say it's not. 358 00:18:30,440 --> 00:18:33,600 Speaker 1: But there's really two different worlds. The investment world, uh 359 00:18:33,920 --> 00:18:37,800 Speaker 1: seems to be running counter to the headlines, and multi 360 00:18:37,840 --> 00:18:40,639 Speaker 1: family investment is extremely robust in the country right now 361 00:18:41,400 --> 00:18:45,600 Speaker 1: because the landlords and the corporate owners and folks believe 362 00:18:45,760 --> 00:18:49,960 Speaker 1: that things will normalize. Things have improved, Rents are going 363 00:18:50,320 --> 00:18:54,000 Speaker 1: up in certain areas UH, and the business model is 364 00:18:54,200 --> 00:18:58,640 Speaker 1: very very sound, so the investment climate is quite robust. 365 00:18:59,119 --> 00:19:02,600 Speaker 1: What makes it a good business is it a cash business? 366 00:19:02,680 --> 00:19:04,479 Speaker 1: That is to say, you don't have to invest very 367 00:19:04,560 --> 00:19:08,640 Speaker 1: much more. You can sort of really receive rents ongoing 368 00:19:08,720 --> 00:19:11,880 Speaker 1: from the current investments. What's always made apartments of good 369 00:19:11,880 --> 00:19:14,680 Speaker 1: business is what you just said, the durability of the 370 00:19:14,760 --> 00:19:19,400 Speaker 1: cash flow streams. People can invest twenty or thirty percent 371 00:19:19,480 --> 00:19:23,000 Speaker 1: of the value of a building and borrow at at 372 00:19:23,119 --> 00:19:26,760 Speaker 1: rates today that are very very attractive UH fixed rate 373 00:19:26,840 --> 00:19:29,639 Speaker 1: loans or in the sub four percent range and variable 374 00:19:29,720 --> 00:19:32,200 Speaker 1: rate loans or as low as three percent or even lower. 375 00:19:33,000 --> 00:19:36,560 Speaker 1: And if they can buy UH at a cash on 376 00:19:36,720 --> 00:19:39,640 Speaker 1: cash return of say five or six percent, they're making 377 00:19:39,680 --> 00:19:43,320 Speaker 1: a spread of their money. Rents do grow and there 378 00:19:43,480 --> 00:19:48,320 Speaker 1: is economic benefits through depreciation and other factors that improve 379 00:19:48,440 --> 00:19:51,320 Speaker 1: that durability of cash flow over a long period of time. 380 00:19:51,560 --> 00:19:54,919 Speaker 1: And finally, Bob, are you seeing inflation because we hear 381 00:19:55,000 --> 00:19:58,960 Speaker 1: some economists concerned about the possibility of rising housing prices, 382 00:19:59,440 --> 00:20:01,320 Speaker 1: both on the ownership side on the world side. Are 383 00:20:01,359 --> 00:20:03,760 Speaker 1: you seeing that in your units are you raising prices? 384 00:20:04,080 --> 00:20:07,600 Speaker 1: We are. We're trying to do so thoughtfully because we 385 00:20:07,640 --> 00:20:10,480 Speaker 1: don't want to price out the renter. But we're facing 386 00:20:11,080 --> 00:20:15,440 Speaker 1: higher labor costs, higher costs of goods when we're renovating 387 00:20:16,200 --> 00:20:18,320 Speaker 1: and and so forth. So we are in fact seeing 388 00:20:19,200 --> 00:20:23,400 Speaker 1: core inflation. It's not spiraling, but we are seeing inflation. Okay, Bob, 389 00:20:23,440 --> 00:20:25,399 Speaker 1: thank you so very much, Really appreciate you being with 390 00:20:25,520 --> 00:20:28,000 Speaker 1: us today. On Wall Street Week. That is Bob Hart. 391 00:20:28,320 --> 00:20:32,520 Speaker 1: He is CEO of True America. Coming up staffing the FED. 392 00:20:32,960 --> 00:20:36,320 Speaker 1: We ask our special contributor Larry Summers about what leadership 393 00:20:36,440 --> 00:20:40,200 Speaker 1: the FED needs going forward as President Biden considers whether 394 00:20:40,320 --> 00:20:43,480 Speaker 1: to make some changes at the top. That's next on 395 00:20:43,600 --> 00:20:52,760 Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street 396 00:20:52,800 --> 00:20:56,720 Speaker 1: Week with David Weston from Bloomberg Radio. No one ever 397 00:20:56,880 --> 00:20:59,240 Speaker 1: said that the job of fit share is an easy one. 398 00:20:59,600 --> 00:21:01,960 Speaker 1: But when J. Powell moved up to the big chair, 399 00:21:02,200 --> 00:21:04,800 Speaker 1: he couldn't have known that he'd be faced with a pandemic, 400 00:21:05,160 --> 00:21:07,840 Speaker 1: an economy brought to an abrupt stop, and that he'd 401 00:21:07,880 --> 00:21:10,159 Speaker 1: have to step in and help save the day by 402 00:21:10,240 --> 00:21:13,440 Speaker 1: keeping the financial system alive while lawmakers worked out a 403 00:21:13,600 --> 00:21:17,800 Speaker 1: series of stimulus packages. We are deploying these lending powers 404 00:21:17,880 --> 00:21:21,440 Speaker 1: to an unprecedented extent, enabled in large part by the 405 00:21:21,600 --> 00:21:24,359 Speaker 1: financial backing from the Congress and the Treasury. It was 406 00:21:24,440 --> 00:21:27,120 Speaker 1: President Obama who first named Pole to the FED Board 407 00:21:27,160 --> 00:21:30,600 Speaker 1: back in two twelve, and then President Trump who elevated 408 00:21:30,680 --> 00:21:34,040 Speaker 1: him to be chair in two seventeen. Accordingly, it is 409 00:21:34,160 --> 00:21:37,159 Speaker 1: my pleasure and my honor to announce my nomination of 410 00:21:37,560 --> 00:21:44,640 Speaker 1: Jerome Powell to be the next Chairman of the Federal Reserve. Congratulations, 411 00:21:45,040 --> 00:21:48,400 Speaker 1: I'm both honored and humbled by this opportunity to serve 412 00:21:48,520 --> 00:21:52,040 Speaker 1: our great country. Powell's term as chair expires just over 413 00:21:52,200 --> 00:21:55,880 Speaker 1: six months from now, in February two two, and though 414 00:21:55,960 --> 00:21:58,760 Speaker 1: he has been praised for his bold action on monetary 415 00:21:58,800 --> 00:22:02,160 Speaker 1: stimulus when we need it most, naming his own chair 416 00:22:02,280 --> 00:22:05,080 Speaker 1: could give President Biden an opportunity to put his stamp 417 00:22:05,359 --> 00:22:08,440 Speaker 1: on monetary policy in the only way he can, by 418 00:22:08,560 --> 00:22:12,560 Speaker 1: choosing who will set that policy. My administration understands that 419 00:22:12,600 --> 00:22:15,440 Speaker 1: if we were to ever experience unchecked inflation over the 420 00:22:15,480 --> 00:22:18,760 Speaker 1: long term, that would pose a real challenge to our economy. 421 00:22:19,080 --> 00:22:23,119 Speaker 1: The FED is independent to take whatever steps it deems 422 00:22:23,200 --> 00:22:26,360 Speaker 1: necessary to support a strong, durable economic recovery. And it's 423 00:22:26,400 --> 00:22:29,240 Speaker 1: not just the FED chair whom President Biden has the 424 00:22:29,320 --> 00:22:33,120 Speaker 1: opportunity to choose. The terms for vice chairs Richard Clarida 425 00:22:33,320 --> 00:22:36,600 Speaker 1: and Randall Coral's also expire in the coming months, and 426 00:22:36,720 --> 00:22:39,879 Speaker 1: that's in addition to one vacancy on the seven member 427 00:22:40,000 --> 00:22:43,520 Speaker 1: board here's Clarida. There are risk to any outlook, and 428 00:22:43,600 --> 00:22:45,600 Speaker 1: I do believe that the risk to my outlook for 429 00:22:45,680 --> 00:22:49,520 Speaker 1: inflation are to the upside. It may not be monetary 430 00:22:49,600 --> 00:22:53,520 Speaker 1: policy that will inform the president's decision. Some Democrats want 431 00:22:53,680 --> 00:22:57,159 Speaker 1: tougher regulation of banks, more attention to climate change, and 432 00:22:57,320 --> 00:23:02,280 Speaker 1: greater focus on reducing economic inequality. My concern is that 433 00:23:02,680 --> 00:23:06,320 Speaker 1: over and over he has weakened a regulation. Here, he 434 00:23:06,440 --> 00:23:09,159 Speaker 1: has led the FED to ease up. There, he has 435 00:23:09,240 --> 00:23:12,640 Speaker 1: led the FED to help protect the biggest financial institutions 436 00:23:13,200 --> 00:23:15,840 Speaker 1: UH and there have been de sens against that that. 437 00:23:16,040 --> 00:23:19,479 Speaker 1: Senator Elizabeth Warren one member of the Board who has 438 00:23:19,520 --> 00:23:22,560 Speaker 1: been an aggressive advocate for big bank oversight, and his 439 00:23:22,720 --> 00:23:25,359 Speaker 1: voice or opposition to some of Paul's track record on 440 00:23:25,440 --> 00:23:29,400 Speaker 1: regulation is Leole Brainerd. A number of common sense reforms 441 00:23:29,440 --> 00:23:32,760 Speaker 1: can be put in place to address the unresolved structural vulnerabilities, 442 00:23:32,760 --> 00:23:37,240 Speaker 1: particularly in non bank financial intermediation and short term funding markets. 443 00:23:37,480 --> 00:23:40,159 Speaker 1: One of the shrewdest observers of the Federal Reserve has 444 00:23:40,200 --> 00:23:43,280 Speaker 1: been Larry Summers, former Treasury Secretary now at Harvard, and 445 00:23:43,359 --> 00:23:45,720 Speaker 1: of course a special contribute right here at Wall Street Week. 446 00:23:45,880 --> 00:23:48,840 Speaker 1: So Larry, give us your sins. As President, Biden looks 447 00:23:48,840 --> 00:23:52,080 Speaker 1: forward to the possibility of perhaps appointing the chair and 448 00:23:52,320 --> 00:23:55,560 Speaker 1: two vice chairs the Third Reserve, without regard to who 449 00:23:55,640 --> 00:23:58,520 Speaker 1: it might be, whether the present people or others. What 450 00:23:58,680 --> 00:24:00,960 Speaker 1: do we need? What are the choose the FEDS likely 451 00:24:01,000 --> 00:24:02,560 Speaker 1: to have to address it in the next three, four 452 00:24:02,640 --> 00:24:05,560 Speaker 1: or five years. Look, the most fundamental choice the Fens 453 00:24:05,600 --> 00:24:11,080 Speaker 1: gonna face involve monetary policy. They involve making judgments about 454 00:24:11,200 --> 00:24:16,760 Speaker 1: the inflation risks UH that I've expressed concern about going forward, 455 00:24:17,160 --> 00:24:21,600 Speaker 1: whether those whatever the right UH view is. And they 456 00:24:21,640 --> 00:24:27,240 Speaker 1: involved the monetary policy challenge of a long run environment 457 00:24:27,760 --> 00:24:32,080 Speaker 1: where we're gonna have exceptionally low real interest rates at 458 00:24:32,160 --> 00:24:35,960 Speaker 1: least if one looks at markets and a variety of 459 00:24:36,040 --> 00:24:40,520 Speaker 1: other UH indicators. So I think it's the macroeconomic policy 460 00:24:41,080 --> 00:24:46,000 Speaker 1: that's at the center of the FEDS responsibilities and that's 461 00:24:46,040 --> 00:24:50,000 Speaker 1: really the core task. Clearly, you need someone with a 462 00:24:50,760 --> 00:24:57,800 Speaker 1: deep commitment UH to a stable financial system who understands 463 00:24:58,000 --> 00:25:02,560 Speaker 1: that Dodd Frank was a big getting and UH not 464 00:25:03,280 --> 00:25:08,720 Speaker 1: UH an end. So for me, monetary policy followed closely 465 00:25:08,920 --> 00:25:16,119 Speaker 1: by UH financial stability. I believe that it's government's job 466 00:25:16,280 --> 00:25:21,560 Speaker 1: to deal with the environment, it's government's job to deal 467 00:25:21,760 --> 00:25:26,359 Speaker 1: with social justice, and I don't think that trying to 468 00:25:26,520 --> 00:25:31,600 Speaker 1: push those responsibilities UH to the Fed UH should be 469 00:25:31,800 --> 00:25:36,399 Speaker 1: a priority. So my hope is that it will be 470 00:25:36,880 --> 00:25:41,720 Speaker 1: UH someone who can provide guidance with the right wisdom 471 00:25:41,840 --> 00:25:46,760 Speaker 1: and the right character on monetary policy and also on 472 00:25:47,760 --> 00:25:52,920 Speaker 1: the maintenance of UH financial stability. So you mentioned first 473 00:25:52,960 --> 00:25:56,120 Speaker 1: and foremost monetary policy. Give us a sense of where 474 00:25:56,160 --> 00:25:58,399 Speaker 1: we are right now on monetary policy. And let's be honest, 475 00:25:58,680 --> 00:26:01,239 Speaker 1: most people talk right now about called tapering when they 476 00:26:01,280 --> 00:26:04,280 Speaker 1: started backing off of the bond purchases and then eventually 477 00:26:04,440 --> 00:26:07,480 Speaker 1: some interest rate raised. We just got this week new 478 00:26:07,560 --> 00:26:10,920 Speaker 1: jobs numbers that were better than expected. The unapointment rate 479 00:26:11,200 --> 00:26:13,920 Speaker 1: fell the the lowest rate has been since before the pandemic. 480 00:26:14,280 --> 00:26:17,040 Speaker 1: Does that tell us anything about that question about monetary 481 00:26:17,080 --> 00:26:20,560 Speaker 1: policy and tapering? Look, I think the FED has misjudged 482 00:26:20,880 --> 00:26:24,119 Speaker 1: the overheating risk. I think, given that they have an 483 00:26:24,200 --> 00:26:28,639 Speaker 1: instrument that operates with lags, given the level of inflationary 484 00:26:28,800 --> 00:26:34,480 Speaker 1: pressure in our economy, given prospective growth and closure of 485 00:26:34,640 --> 00:26:39,840 Speaker 1: the GDP gap, given the extent of inflation and housing markets, 486 00:26:40,480 --> 00:26:45,760 Speaker 1: given record levels of job openings, I don't think they 487 00:26:45,800 --> 00:26:49,320 Speaker 1: should be buying anything like forty billion dollars a month 488 00:26:49,400 --> 00:26:52,959 Speaker 1: of mortgage backed securities or a hundred twenty billion dollars 489 00:26:53,240 --> 00:26:58,160 Speaker 1: a month of treasuries. What they are doing is shifting 490 00:26:58,200 --> 00:27:03,240 Speaker 1: America's funding structure towards being shorter term rather than longer term. 491 00:27:03,760 --> 00:27:06,320 Speaker 1: There was ever a moment to be locking in long 492 00:27:06,480 --> 00:27:10,920 Speaker 1: term funding, I think it's this moment. So I think 493 00:27:11,000 --> 00:27:16,840 Speaker 1: the Fed should be moving with all deliberate speed to tapering. 494 00:27:17,520 --> 00:27:23,560 Speaker 1: It should be signaling its concern about overheating. It should 495 00:27:23,600 --> 00:27:28,919 Speaker 1: be recognizing that there may well need to be UH 496 00:27:29,160 --> 00:27:33,840 Speaker 1: a tightening UH in terms of raising rates UH well 497 00:27:34,000 --> 00:27:38,080 Speaker 1: before what's now embodied in the dot plot or what's 498 00:27:38,160 --> 00:27:43,359 Speaker 1: embodied in UH market expectations. So let's wrap up, as 499 00:27:43,400 --> 00:27:46,160 Speaker 1: we do every week, with a rapid round. As Summer says, 500 00:27:46,320 --> 00:27:48,200 Speaker 1: I got three of them for you, this week, Larry. 501 00:27:48,240 --> 00:27:50,639 Speaker 1: First of all, cryptocurrency very much in the news in 502 00:27:50,680 --> 00:27:52,800 Speaker 1: all sorts of different ways. But my question to you is, 503 00:27:53,040 --> 00:27:56,080 Speaker 1: from where you sit, is the greater risk over regulating 504 00:27:56,119 --> 00:27:59,919 Speaker 1: cryptocurrency or under regulating it? Greater risk is under regular 505 00:28:00,000 --> 00:28:04,480 Speaker 1: writing it. If we regulate it right, will protect a 506 00:28:04,600 --> 00:28:08,640 Speaker 1: lot of people, will be able to enforce against financial 507 00:28:08,760 --> 00:28:13,520 Speaker 1: crime of various sorts, and ultimately, by regularizing and making 508 00:28:13,600 --> 00:28:20,479 Speaker 1: more trustworthy uh, cryptocurrencies will enable the benefits of cryptocurrency 509 00:28:20,560 --> 00:28:24,600 Speaker 1: and the success of the cryptocurrency industry to grow. Okay. 510 00:28:24,720 --> 00:28:26,840 Speaker 1: Second one, also much in the news this week is 511 00:28:26,920 --> 00:28:30,159 Speaker 1: Robin Hood and what it means about retail investors. As 512 00:28:30,240 --> 00:28:33,320 Speaker 1: you look at the overall financial system, is that more 513 00:28:33,359 --> 00:28:35,159 Speaker 1: of a risk or more of an opportunity. It's on 514 00:28:35,200 --> 00:28:37,400 Speaker 1: the one hand, democratizing it. On the other hand, there's 515 00:28:37,440 --> 00:28:40,360 Speaker 1: a lot of volatili associated with it. We're seeing some 516 00:28:40,680 --> 00:28:46,720 Speaker 1: version of the errors of the nineteen twenties. Uh. There, 517 00:28:47,320 --> 00:28:52,560 Speaker 1: this is as clearer case for enhanced regulation as uh 518 00:28:53,280 --> 00:28:58,040 Speaker 1: I've ever as I've ever seen, and we need much 519 00:28:58,120 --> 00:29:06,200 Speaker 1: more serious coaches to meme stocks, to the marketing of stocks, 520 00:29:06,400 --> 00:29:13,200 Speaker 1: to problematic retail investors. UH. This whole meme stock phenomenon 521 00:29:13,400 --> 00:29:15,840 Speaker 1: is not going to end well. And finally, let's get 522 00:29:15,880 --> 00:29:18,360 Speaker 1: back to employment. When do you think we will reach 523 00:29:18,600 --> 00:29:21,120 Speaker 1: full employment at the rate we're going I think we're 524 00:29:21,160 --> 00:29:27,360 Speaker 1: pretty close, uh, David. Uh. If you look at job vacancies, 525 00:29:28,160 --> 00:29:31,880 Speaker 1: we're at record levels, higher than we've ever been. If 526 00:29:31,920 --> 00:29:34,120 Speaker 1: you look at the rate at which people are quitting, 527 00:29:34,720 --> 00:29:37,760 Speaker 1: which is an indicator of how secure they feel in 528 00:29:37,840 --> 00:29:44,880 Speaker 1: the labor market, that is at historically UH records UH rates. 529 00:29:45,560 --> 00:29:48,760 Speaker 1: If you take account of the fact that because of 530 00:29:49,120 --> 00:29:52,880 Speaker 1: COVID and everybody's moving to different places and thinking differently 531 00:29:52,920 --> 00:29:55,040 Speaker 1: about the kinds of jobs are gonna do and we're 532 00:29:55,080 --> 00:29:59,480 Speaker 1: gonna do them, we've got much more structural UH change. 533 00:30:00,280 --> 00:30:06,720 Speaker 1: I think we're not far from full employment, and certainly 534 00:30:06,840 --> 00:30:11,040 Speaker 1: the tendency of wage growth to be accelerating, especially when 535 00:30:11,080 --> 00:30:15,000 Speaker 1: you adjust from the quality of UH workers. Larry, thank 536 00:30:15,040 --> 00:30:17,480 Speaker 1: you so very much as Larry Summers our special Wall 537 00:30:17,520 --> 00:30:21,400 Speaker 1: Street we contribute and of course from Harvard University. Finally, 538 00:30:21,560 --> 00:30:25,000 Speaker 1: one more thought, let's make a deal. Workers around the 539 00:30:25,040 --> 00:30:28,120 Speaker 1: country are coming to terms slowly with the need to 540 00:30:28,200 --> 00:30:30,960 Speaker 1: come back to the office as employers coax them back 541 00:30:31,360 --> 00:30:33,280 Speaker 1: or just play and say they have to come back. 542 00:30:33,720 --> 00:30:35,520 Speaker 1: But it turns out that for a whole lot of us, 543 00:30:35,640 --> 00:30:37,920 Speaker 1: we sort of like the idea of working from home 544 00:30:38,040 --> 00:30:41,440 Speaker 1: if we could eliminating those long commutes and having the 545 00:30:41,520 --> 00:30:45,080 Speaker 1: flexibility to fit our personal life around the office rather 546 00:30:45,160 --> 00:30:49,240 Speaker 1: than the other way around. Some employers may insist people 547 00:30:49,320 --> 00:30:52,280 Speaker 1: come back in person, and some workers may just refuse, 548 00:30:52,720 --> 00:30:55,560 Speaker 1: although the work from home camp may be able to 549 00:30:55,680 --> 00:30:58,800 Speaker 1: delay their sacrifices for a few more months as the 550 00:30:58,920 --> 00:31:01,600 Speaker 1: list of companies to laying plans to bring workers back 551 00:31:01,640 --> 00:31:05,480 Speaker 1: to physical offices is growing. But in between is where 552 00:31:05,600 --> 00:31:08,920 Speaker 1: negotiation may be taking place. After all, there's always a 553 00:31:08,960 --> 00:31:12,080 Speaker 1: price for everything, right, and some surveys are starting to 554 00:31:12,240 --> 00:31:15,080 Speaker 1: set the market price in the bid and the ask 555 00:31:15,400 --> 00:31:18,400 Speaker 1: for returning to the office. The insurance company Breeze did 556 00:31:18,480 --> 00:31:21,920 Speaker 1: an online survey showing two thirds of those whose jobs 557 00:31:22,000 --> 00:31:24,120 Speaker 1: could be done from home would accept the pay cut 558 00:31:24,200 --> 00:31:28,720 Speaker 1: of five and another survey done by pole Fish pointed 559 00:31:28,800 --> 00:31:31,040 Speaker 1: to fift percent of people who were willing to take 560 00:31:31,080 --> 00:31:33,560 Speaker 1: a much deeper cut, as much as a quarter of 561 00:31:33,680 --> 00:31:37,680 Speaker 1: their pay or all of their paid time off. But 562 00:31:37,800 --> 00:31:40,680 Speaker 1: maybe the most disturbing result was what else people would 563 00:31:40,680 --> 00:31:43,280 Speaker 1: give up to work from home. Giving up Netflix or 564 00:31:43,320 --> 00:31:45,520 Speaker 1: social media for a year isn't so shocking. It could 565 00:31:45,560 --> 00:31:47,800 Speaker 1: do some of us some good after all. But more 566 00:31:47,880 --> 00:31:50,560 Speaker 1: troubling is the third respondents who said that they would 567 00:31:50,560 --> 00:31:53,400 Speaker 1: give up the right to vote in all future national 568 00:31:53,520 --> 00:31:57,200 Speaker 1: and local elections if they could just work from home forever. 569 00:31:57,760 --> 00:31:59,360 Speaker 1: So I'll leave it up to you to think about 570 00:31:59,400 --> 00:32:02,040 Speaker 1: whether that's or about the pain of community, or about 571 00:32:02,080 --> 00:32:06,000 Speaker 1: how deeply we are discounting our role in choosing our leaders. 572 00:32:06,480 --> 00:32:08,280 Speaker 1: That does it for this episode of Wall Street Week. 573 00:32:08,400 --> 00:32:11,400 Speaker 1: I'm David Weston. This is Bloomberg. Say you next week.