1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: And we may not have an overall recession, We're having 3 00:00:04,400 --> 00:00:06,720 Speaker 2: a rolling recession. To kind of roll looks pretty strongly 4 00:00:06,720 --> 00:00:08,840 Speaker 2: it is when it comes to jobs, the financial stories 5 00:00:08,920 --> 00:00:11,960 Speaker 2: that shape our world. Three major regional bank failures send 6 00:00:12,000 --> 00:00:14,680 Speaker 2: shockwaves through the banking system. We're all trying to figure 7 00:00:14,680 --> 00:00:17,000 Speaker 2: out what to make of generative AI. 8 00:00:16,920 --> 00:00:19,320 Speaker 1: Through the eyes of the most influential voices. 9 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 10 00:00:22,560 --> 00:00:25,279 Speaker 2: deebro Lair of the Paulson Institute, well Then Hubbard of 11 00:00:25,280 --> 00:00:26,280 Speaker 2: the Columbia Business School. 12 00:00:26,280 --> 00:00:30,120 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 13 00:00:31,040 --> 00:00:35,320 Speaker 2: A strike settles, the FED decides, the Treasury bar short, 14 00:00:35,479 --> 00:00:38,680 Speaker 2: and a war in Gaza enters a new phase. This 15 00:00:38,760 --> 00:00:42,560 Speaker 2: is Bloomberg Wall Street Week. I'm David Weston. This week's 16 00:00:42,560 --> 00:00:45,800 Speaker 2: special contributor Larry Summers of Harvard and former Biden Chief 17 00:00:45,840 --> 00:00:48,960 Speaker 2: economist to Celia Rouse on the jobs numbers, the FED decision, 18 00:00:49,040 --> 00:00:51,000 Speaker 2: and what comes next for the US economy. 19 00:00:51,240 --> 00:00:54,160 Speaker 3: This was a favorable number, but I don't think anybody 20 00:00:54,160 --> 00:00:55,320 Speaker 3: should overinterpret it. 21 00:00:55,560 --> 00:00:56,120 Speaker 4: I think we. 22 00:00:56,160 --> 00:00:59,360 Speaker 5: Are seeing the slowing of the labor market, which has 23 00:00:59,400 --> 00:01:00,640 Speaker 5: been long in anticipated. 24 00:01:00,680 --> 00:01:02,240 Speaker 4: Some might say, what took so long? 25 00:01:02,440 --> 00:01:06,600 Speaker 2: Cars are Steve Rattner of Will Advisors on the auto settlement. 26 00:01:06,240 --> 00:01:08,360 Speaker 6: And that's the yun and the yang for the unions 27 00:01:08,360 --> 00:01:11,120 Speaker 6: to think about, because if General Motors and Stalantis and 28 00:01:11,240 --> 00:01:14,959 Speaker 6: Ford can be competitive with Tesla, then they're gonna lose jobs. 29 00:01:14,720 --> 00:01:18,040 Speaker 2: And kk ours Henry McVeigh, I'm investing in Asia as 30 00:01:18,080 --> 00:01:20,560 Speaker 2: the Chinese economy comes back down to earth. 31 00:01:20,680 --> 00:01:23,679 Speaker 7: When you think about China as a global growth engine, 32 00:01:24,040 --> 00:01:26,479 Speaker 7: used to be one third of global GDP growth, it's 33 00:01:26,520 --> 00:01:39,880 Speaker 7: clearly not that engine there. 34 00:01:41,040 --> 00:01:44,080 Speaker 2: Global Wall Street. It spent yet another week keeping one 35 00:01:44,160 --> 00:01:47,240 Speaker 2: eye on the war unfolding between Israel and Hamas. As 36 00:01:47,360 --> 00:01:50,680 Speaker 2: Israeli troops moved into Gaza, calls. 37 00:01:50,360 --> 00:01:54,400 Speaker 1: For cease far are calls for Israel to surrender to Hamas, 38 00:01:54,600 --> 00:01:57,480 Speaker 1: to surrender to terrorists, to surrender to barbaras. 39 00:01:58,560 --> 00:02:01,800 Speaker 2: That will not happen. And still it was hard to 40 00:02:01,840 --> 00:02:05,040 Speaker 2: see any light at the end of this long tunnel. 41 00:02:05,200 --> 00:02:08,200 Speaker 4: We're sending in between fire and eight hundred trucks a day. 42 00:02:08,280 --> 00:02:10,080 Speaker 4: Right now, we're up to almost sixty. 43 00:02:10,240 --> 00:02:11,160 Speaker 8: We're trying to get to one. 44 00:02:11,080 --> 00:02:14,160 Speaker 4: Hundred this week. That is the bare minimum of what's needed. 45 00:02:14,320 --> 00:02:17,040 Speaker 2: But even as we followed more tragedy in the Middle East, 46 00:02:17,120 --> 00:02:20,240 Speaker 2: there was some good news as the UAW announced the 47 00:02:20,320 --> 00:02:23,560 Speaker 2: third and final tentative agreement with the Big three automakers. 48 00:02:24,120 --> 00:02:27,360 Speaker 9: Today's historic agreement, because you had another piece of good 49 00:02:27,360 --> 00:02:32,360 Speaker 9: economic news showing something I've always believed, worker power. 50 00:02:32,680 --> 00:02:36,000 Speaker 2: The Fed came out with its much anticipated rates decision, 51 00:02:36,160 --> 00:02:40,079 Speaker 2: and as anticipated, didn't budge with Chair Pal saying they 52 00:02:40,120 --> 00:02:42,280 Speaker 2: will take it one step at a time. 53 00:02:42,680 --> 00:02:45,680 Speaker 6: We're going meeting, my meeting, We're asking ourselves whether we've 54 00:02:45,680 --> 00:02:48,320 Speaker 6: achieved a stance of policy to the sufficiently restrictive to 55 00:02:48,560 --> 00:02:50,600 Speaker 6: bring inflation down to two percent over time. 56 00:02:50,840 --> 00:02:53,680 Speaker 2: Over a treasury they came out with their borrowing plans 57 00:02:53,680 --> 00:02:56,160 Speaker 2: for the next quarter, which came in a bit light 58 00:02:56,400 --> 00:02:57,360 Speaker 2: and a bit short. 59 00:02:57,560 --> 00:03:00,280 Speaker 7: The problem, of course for the Treasury Department is that 60 00:03:00,320 --> 00:03:03,000 Speaker 7: people are criticizing them for not turning out earlier. They 61 00:03:03,040 --> 00:03:05,520 Speaker 7: have to pay more, so they are kind of locked 62 00:03:05,560 --> 00:03:05,959 Speaker 7: in here. 63 00:03:06,120 --> 00:03:08,800 Speaker 2: And artificial intelligence was back in the news, not that 64 00:03:08,880 --> 00:03:11,200 Speaker 2: it was ever really out of it. As President Biden 65 00:03:11,280 --> 00:03:13,359 Speaker 2: signed a new executive order. 66 00:03:13,400 --> 00:03:15,960 Speaker 9: To realize the promise of AI and void the risk 67 00:03:16,040 --> 00:03:17,680 Speaker 9: we need to govern this technology. 68 00:03:18,040 --> 00:03:21,280 Speaker 2: On Thursday, a jury in southern Manhattan needed only a 69 00:03:21,280 --> 00:03:25,680 Speaker 2: few hours to convict Samuel Bankman freed on all seven counts. 70 00:03:26,240 --> 00:03:29,640 Speaker 6: Sam Bankman free perpetrated one of the biggest financial frauds 71 00:03:29,840 --> 00:03:33,600 Speaker 6: in American history, a multi billion dollar scheme designed to 72 00:03:33,600 --> 00:03:35,000 Speaker 6: make him the king of crypto. 73 00:03:35,360 --> 00:03:40,000 Speaker 8: We respect the jury's decision. We're very disappointed in the result. 74 00:03:41,560 --> 00:03:44,920 Speaker 2: On Friday, US jobs numbers confirmed a slowing of the 75 00:03:45,000 --> 00:03:47,560 Speaker 2: US labor market, adding one hundred and fifty thousand new 76 00:03:47,640 --> 00:03:50,280 Speaker 2: jobs rather than the one hundred and eighty thousand that 77 00:03:50,360 --> 00:03:53,120 Speaker 2: had been expected, and the unemployment rate ticked up just 78 00:03:53,160 --> 00:03:55,560 Speaker 2: a bit to three point nine percent. To help us 79 00:03:55,640 --> 00:03:58,600 Speaker 2: understand these jobs numbers and the FED decision from earlier 80 00:03:58,640 --> 00:04:01,120 Speaker 2: in the week, we welcome the person who until recently 81 00:04:01,200 --> 00:04:03,720 Speaker 2: interpreted them for President Biden, and as of the first 82 00:04:03,720 --> 00:04:06,200 Speaker 2: of the year, we'll be taking the helmet the Brookings Institution. 83 00:04:06,520 --> 00:04:08,840 Speaker 2: She is doctor Cecilia Rouse. So, doctor Ross, thank you 84 00:04:08,920 --> 00:04:11,520 Speaker 2: so much for being with us. You're an economist to 85 00:04:11,520 --> 00:04:13,960 Speaker 2: give us put these in perspective. We're looking for some 86 00:04:14,200 --> 00:04:16,320 Speaker 2: slowing in the economy, in partly because we don't want 87 00:04:16,400 --> 00:04:18,799 Speaker 2: that overheating with the inflation. Do you think we're seeing 88 00:04:18,839 --> 00:04:19,200 Speaker 2: it yet? 89 00:04:20,360 --> 00:04:23,800 Speaker 5: I think we are seeing the slowing of the labor market, 90 00:04:23,880 --> 00:04:26,560 Speaker 5: which has been long anticipated. Some might say what took 91 00:04:26,600 --> 00:04:29,719 Speaker 5: so long? But what we see is that employment growth 92 00:04:29,760 --> 00:04:32,799 Speaker 5: remains healthy. Like if we were to talk pre pandemic, 93 00:04:33,400 --> 00:04:35,400 Speaker 5: an average job growth if we look over the last 94 00:04:35,400 --> 00:04:37,880 Speaker 5: three months has been just over two hundred thousand jobs 95 00:04:37,920 --> 00:04:40,559 Speaker 5: a month. This month it came into one hundred and fifty. 96 00:04:40,560 --> 00:04:43,560 Speaker 5: That number will be revised, but what we see is 97 00:04:43,760 --> 00:04:46,560 Speaker 5: healthy job growth, which is consistent with an economy that 98 00:04:46,760 --> 00:04:50,480 Speaker 5: is powering along, but which is coming down from the 99 00:04:50,600 --> 00:04:53,400 Speaker 5: very high growth we had as the economy recovered from 100 00:04:53,400 --> 00:04:55,880 Speaker 5: the pandemic. I think these numbers will be welcomed by 101 00:04:55,920 --> 00:04:58,360 Speaker 5: the Fed. As I said, I think many economists will 102 00:04:58,360 --> 00:05:02,080 Speaker 5: see this as the natural of the economy getting back 103 00:05:02,080 --> 00:05:02,560 Speaker 5: to normal. 104 00:05:02,920 --> 00:05:05,599 Speaker 2: Well, no offense to the economists such as you, but 105 00:05:06,040 --> 00:05:09,440 Speaker 2: you've been off on some few things recently, and let 106 00:05:09,440 --> 00:05:12,119 Speaker 2: me talk about that specifically, the relationship between the labor 107 00:05:12,160 --> 00:05:14,320 Speaker 2: market on the one hand and inflation on the other. 108 00:05:14,520 --> 00:05:17,080 Speaker 2: We thought we knew what that was, that it seemed 109 00:05:17,120 --> 00:05:19,800 Speaker 2: to really the relationship went away. That Phillips currency knew 110 00:05:19,839 --> 00:05:22,039 Speaker 2: really flat. Where are we now? Do we have a 111 00:05:22,120 --> 00:05:25,320 Speaker 2: theory about what the labor market means for inflation? 112 00:05:26,560 --> 00:05:31,000 Speaker 5: So you know, the reality is that in economics there's 113 00:05:31,080 --> 00:05:34,480 Speaker 5: not a fabulous theory and one theory of inflation, and 114 00:05:34,520 --> 00:05:36,359 Speaker 5: I think that is part of the challenge. 115 00:05:36,600 --> 00:05:38,840 Speaker 4: Another part of the challenge is what was the source. 116 00:05:38,960 --> 00:05:43,040 Speaker 5: We know that we had unprecedented supply challenges due to 117 00:05:43,120 --> 00:05:46,440 Speaker 5: the pandemic, both in terms of getting goods to people 118 00:05:46,760 --> 00:05:49,320 Speaker 5: manufacturing goods because people have a part of that process 119 00:05:49,360 --> 00:05:51,159 Speaker 5: and with the pandemic they couldn't show. 120 00:05:51,080 --> 00:05:51,599 Speaker 4: Up to work. 121 00:05:51,839 --> 00:05:54,840 Speaker 5: And then we also know we had unprecedented demand because 122 00:05:54,880 --> 00:05:58,600 Speaker 5: of the remarkable support that the federal government here and 123 00:05:58,640 --> 00:06:02,280 Speaker 5: abroad provide to consumers and businesses to get them through 124 00:06:02,320 --> 00:06:05,360 Speaker 5: the pandemic. So we know we had this mismatch of 125 00:06:05,400 --> 00:06:07,960 Speaker 5: supply and demand. The question is which was going to 126 00:06:08,080 --> 00:06:11,480 Speaker 5: win in terms of regularizing faster. 127 00:06:12,240 --> 00:06:14,880 Speaker 4: So I think this goes back to we hadn't. 128 00:06:14,640 --> 00:06:18,440 Speaker 5: Seen inflation for a long time, economics doesn't have one solid, 129 00:06:18,480 --> 00:06:21,080 Speaker 5: well established theory of inflation, and the fact that we 130 00:06:21,120 --> 00:06:24,920 Speaker 5: had an unprecedented shock to our domestic economy and the 131 00:06:24,960 --> 00:06:30,160 Speaker 5: global economy. What we're seeing now is monetary authorities stepped in, 132 00:06:30,880 --> 00:06:34,279 Speaker 5: the federal government stepped in. They pulled back appropriately, and 133 00:06:34,320 --> 00:06:35,839 Speaker 5: the economy is getting back to normal. 134 00:06:36,320 --> 00:06:40,080 Speaker 2: Another big development this week was the Federal Reserve decision 135 00:06:40,200 --> 00:06:42,719 Speaker 2: and the press conference, the news conference from Chair Pow 136 00:06:42,880 --> 00:06:44,039 Speaker 2: And when you were with the one as you would 137 00:06:44,040 --> 00:06:46,080 Speaker 2: always say, that's their business. I stay out of that. 138 00:06:46,160 --> 00:06:48,000 Speaker 2: But now you're not at the White House anymore. I'm 139 00:06:48,000 --> 00:06:49,360 Speaker 2: not going to ask you to tell them what to do. 140 00:06:49,800 --> 00:06:53,000 Speaker 2: But are you sympathetic to what I take to be 141 00:06:53,000 --> 00:06:55,280 Speaker 2: a chair Pole's position, which is, we just don't know 142 00:06:55,400 --> 00:06:57,760 Speaker 2: right now. We've got to take this meeting by meeting. 143 00:06:58,080 --> 00:07:01,680 Speaker 2: I can't predict out too far because we're in uncertain territory. 144 00:07:01,760 --> 00:07:03,320 Speaker 2: Is that the way you see the ecount right now, 145 00:07:03,320 --> 00:07:06,840 Speaker 2: because it's grown awfully strong considering all those increases in 146 00:07:06,839 --> 00:07:07,880 Speaker 2: your rates that you referred to. 147 00:07:09,279 --> 00:07:13,920 Speaker 5: Yeah, I'm very sympathetic to charb. Howell's view of how 148 00:07:13,960 --> 00:07:17,760 Speaker 5: to proceed. One thing we know is that our economic 149 00:07:17,840 --> 00:07:22,480 Speaker 5: models have the economic forecasting has been rather imprecise through 150 00:07:22,480 --> 00:07:23,240 Speaker 5: this pandemic. 151 00:07:23,640 --> 00:07:24,840 Speaker 4: It's tricky business. 152 00:07:24,880 --> 00:07:28,240 Speaker 5: Again, we hadn't had the kind of shock both to 153 00:07:28,280 --> 00:07:31,160 Speaker 5: the supply side of the domestic and global economy and 154 00:07:31,200 --> 00:07:34,560 Speaker 5: then this demand support. We just hadn't seen that, and 155 00:07:34,640 --> 00:07:37,800 Speaker 5: so the economy is not behaving the way that many 156 00:07:37,840 --> 00:07:40,720 Speaker 5: economists predicted. So I think he and his colleagues are 157 00:07:40,760 --> 00:07:44,280 Speaker 5: right to say, Look, we remain at the We stand 158 00:07:44,320 --> 00:07:48,280 Speaker 5: at the ready. We understand that inflation is costly to everyone. 159 00:07:48,600 --> 00:07:51,400 Speaker 5: At the same time, we understand that there are huge 160 00:07:51,440 --> 00:07:54,600 Speaker 5: benefits to a strong labor market and a full economy. 161 00:07:54,840 --> 00:07:56,440 Speaker 4: So we are going to wait. 162 00:07:56,520 --> 00:07:58,280 Speaker 5: We don't want to be sit back on our heels, 163 00:07:58,560 --> 00:08:00,720 Speaker 5: but we are going to take this eating by meeting 164 00:08:00,880 --> 00:08:04,360 Speaker 5: as we watch all of the data and assess what's 165 00:08:04,400 --> 00:08:05,240 Speaker 5: the best way forward. 166 00:08:05,800 --> 00:08:08,160 Speaker 2: And finally, we look at all these data sort of 167 00:08:08,200 --> 00:08:10,280 Speaker 2: week by week, month by month, quarter by quarter, but 168 00:08:10,280 --> 00:08:13,160 Speaker 2: there's also the longer term trends. And when it comes 169 00:08:13,200 --> 00:08:15,120 Speaker 2: to the labor market, something you've done a lot of 170 00:08:15,120 --> 00:08:17,400 Speaker 2: work on is the role of women in the workplace 171 00:08:17,400 --> 00:08:20,440 Speaker 2: and particularly childcare. Tell us about why we should be 172 00:08:20,480 --> 00:08:23,360 Speaker 2: focused not maybe for this week or this month, but 173 00:08:23,400 --> 00:08:26,800 Speaker 2: a longer term on that part of the labor market. 174 00:08:27,560 --> 00:08:27,840 Speaker 4: Yeah. 175 00:08:27,880 --> 00:08:30,040 Speaker 5: So this was a speech given in Washington, d c. 176 00:08:30,720 --> 00:08:33,480 Speaker 5: Sponsored by the one hundred Foundation. This is Adam Smith, 177 00:08:33,559 --> 00:08:37,080 Speaker 5: three hundredth birthday, birth year, And the point I was 178 00:08:37,120 --> 00:08:41,600 Speaker 5: making is that as women have entered the labor force 179 00:08:42,440 --> 00:08:46,679 Speaker 5: and women disproportionately care for children, men are obviously can 180 00:08:46,720 --> 00:08:48,960 Speaker 5: be caretakers as well, but if we just look at 181 00:08:49,000 --> 00:08:52,680 Speaker 5: the data, women bear the disproportioned share of that care. 182 00:08:53,320 --> 00:08:55,920 Speaker 5: If we want to have a robust labor market, which 183 00:08:55,920 --> 00:08:58,239 Speaker 5: we know we need to do, we have falling fertility, 184 00:08:58,320 --> 00:09:01,680 Speaker 5: we have an aging demograph, we have an immigration system 185 00:09:01,679 --> 00:09:03,680 Speaker 5: that is not replenishing. If we're going to have a 186 00:09:03,720 --> 00:09:06,320 Speaker 5: robust labor market, we need everybody who wants to work 187 00:09:06,320 --> 00:09:07,640 Speaker 5: to be able to work and to be able to 188 00:09:07,720 --> 00:09:08,600 Speaker 5: do so productively. 189 00:09:09,200 --> 00:09:11,959 Speaker 4: The reality is children need to be careful. 190 00:09:12,360 --> 00:09:15,040 Speaker 5: So in order for people to be able to balance 191 00:09:15,120 --> 00:09:16,800 Speaker 5: work and family, they. 192 00:09:16,720 --> 00:09:19,280 Speaker 4: Need to be able to provide for childcare. So there 193 00:09:19,360 --> 00:09:19,680 Speaker 4: is an. 194 00:09:19,640 --> 00:09:22,000 Speaker 5: Externality there that means that there are benefits that go 195 00:09:22,080 --> 00:09:24,560 Speaker 5: beyond the family but to the rest of society, both 196 00:09:24,600 --> 00:09:28,040 Speaker 5: in terms of the benefit and economic growth, but also 197 00:09:28,080 --> 00:09:30,960 Speaker 5: in terms of making investments in children and high quality 198 00:09:31,040 --> 00:09:34,680 Speaker 5: childcare have benefits to the rest of us throughout their lifetimes. 199 00:09:35,000 --> 00:09:38,679 Speaker 5: So there's a role for government in providing or subsidizing 200 00:09:38,800 --> 00:09:42,679 Speaker 5: high quality childcare. Labored on top of the fact that 201 00:09:42,800 --> 00:09:45,760 Speaker 5: childcare is expensive and that happens at a time when 202 00:09:45,840 --> 00:09:49,040 Speaker 5: families and workers are not at their peak earnings. You 203 00:09:49,120 --> 00:09:51,400 Speaker 5: can't take out a loan to pay for childcare, so 204 00:09:51,480 --> 00:09:53,960 Speaker 5: again we have a problem in our credit markets. Again 205 00:09:54,040 --> 00:09:57,680 Speaker 5: a potential role for government. And finally that it's very 206 00:09:57,760 --> 00:10:01,199 Speaker 5: costly for providers, and so most providers, not the big chains, 207 00:10:01,240 --> 00:10:03,920 Speaker 5: but the little providers where most children are cared for, 208 00:10:04,200 --> 00:10:06,680 Speaker 5: are barely getting by, and we know that their workers 209 00:10:06,720 --> 00:10:10,199 Speaker 5: are paid very little. More than fifty percent of childcare 210 00:10:10,240 --> 00:10:14,040 Speaker 5: workers receive some form of public assistance, so there's high turnover, 211 00:10:14,440 --> 00:10:16,360 Speaker 5: not consistent with high quality childcare. 212 00:10:16,640 --> 00:10:18,320 Speaker 4: So this is a market that could use help. 213 00:10:18,559 --> 00:10:22,240 Speaker 5: It's a role that the government should be actively involved in, 214 00:10:22,280 --> 00:10:25,360 Speaker 5: whether it's provision, subsidization, but the point is that it's 215 00:10:25,559 --> 00:10:30,120 Speaker 5: critical if we're going to improve and maintain our economic growth, 216 00:10:30,120 --> 00:10:31,280 Speaker 5: which benefits us all. 217 00:10:31,760 --> 00:10:33,720 Speaker 2: Doctor Ross, thank you so very much for being with us. 218 00:10:33,720 --> 00:10:35,760 Speaker 2: The best of luck as you take over the helmet Brookings. 219 00:10:35,880 --> 00:10:40,720 Speaker 2: That is doctor Cecilia Rauss. Coming up, we'll go through 220 00:10:40,800 --> 00:10:43,319 Speaker 2: how the market reacted to all the news this week 221 00:10:43,440 --> 00:10:47,640 Speaker 2: with Scott Kronert of City that's coming up next do 222 00:10:47,640 --> 00:10:49,400 Speaker 2: on Wall Street Week on Bloomberg. 223 00:10:50,760 --> 00:10:55,000 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 224 00:10:55,120 --> 00:10:57,800 Speaker 1: Bloomberg Radio. 225 00:11:02,600 --> 00:11:04,760 Speaker 2: This is Wall Street Week. I'm David Weston. The market 226 00:11:04,800 --> 00:11:08,040 Speaker 2: had one wild week as the SMP five hundred added 227 00:11:08,080 --> 00:11:11,240 Speaker 2: five point eighty five percent to end up at forty 228 00:11:11,400 --> 00:11:14,240 Speaker 2: three point fifty eight, though that is still below the 229 00:11:14,320 --> 00:11:16,960 Speaker 2: median year end number of our Bloomberg ls, which is 230 00:11:16,960 --> 00:11:19,480 Speaker 2: at forty four to thirty five. The Nasdaq was up 231 00:11:19,559 --> 00:11:22,240 Speaker 2: six point six percent, while the yield on the ten 232 00:11:22,320 --> 00:11:25,280 Speaker 2: year gave up a full twenty eight basis points, falling 233 00:11:25,360 --> 00:11:27,760 Speaker 2: all the way back down to four point five seven. 234 00:11:27,960 --> 00:11:30,080 Speaker 2: Here to explain it all to us to Scott Cronerd, 235 00:11:30,080 --> 00:11:32,600 Speaker 2: he's City US equity strategist. It's gott great to have 236 00:11:32,640 --> 00:11:34,720 Speaker 2: you back with us. So why don't you explain because 237 00:11:34,760 --> 00:11:36,760 Speaker 2: it was quite a wild weekend as the week went 238 00:11:36,800 --> 00:11:38,160 Speaker 2: on and got wilder and wilder. 239 00:11:39,040 --> 00:11:40,960 Speaker 10: Well, I think, David, let's just start with, you know, 240 00:11:41,000 --> 00:11:43,960 Speaker 10: two words interest rates. So to put some context into 241 00:11:43,960 --> 00:11:47,240 Speaker 10: what happened this week, let's consider the following since the 242 00:11:47,320 --> 00:11:49,959 Speaker 10: end of July. So over the past three months, you've 243 00:11:50,000 --> 00:11:54,040 Speaker 10: seen the nominal SMP the nominal tenure ye'ld move from 244 00:11:54,520 --> 00:11:58,280 Speaker 10: roughly four percent to approaching five percent as recently as 245 00:11:58,320 --> 00:12:00,920 Speaker 10: a week or so ago. In the mean time, really 246 00:12:01,000 --> 00:12:04,160 Speaker 10: yields moved from roughly one and a half percent up 247 00:12:04,160 --> 00:12:06,480 Speaker 10: to two and a half percent. This had a couple 248 00:12:06,480 --> 00:12:09,800 Speaker 10: of profound impact on the SMP. First, what it did 249 00:12:10,040 --> 00:12:15,920 Speaker 10: was increase the concern regarding the economic readthrough to rising rates. Second, yes, 250 00:12:16,000 --> 00:12:19,080 Speaker 10: it had some valuation influence on the broader market, but 251 00:12:19,120 --> 00:12:23,080 Speaker 10: then third it also increased the concern about even higher 252 00:12:23,160 --> 00:12:26,400 Speaker 10: rates and the implications that may have for our growing 253 00:12:26,400 --> 00:12:30,800 Speaker 10: deficit situation. So this week, essentially what happened to your point, 254 00:12:31,000 --> 00:12:34,040 Speaker 10: you took ten year yields down and the response to 255 00:12:34,080 --> 00:12:37,679 Speaker 10: some of the economic data fed commentary, and essentially you 256 00:12:38,040 --> 00:12:41,120 Speaker 10: snapped the rubber band that had been getting stretched pretty wide, 257 00:12:41,200 --> 00:12:43,840 Speaker 10: as the SMP had pulled back roughly ten percent over 258 00:12:43,880 --> 00:12:44,559 Speaker 10: that timeframe. 259 00:12:44,880 --> 00:12:46,160 Speaker 2: And you have a chart that will put up for 260 00:12:46,200 --> 00:12:49,400 Speaker 2: our television audience actuation showing that rubber band snapping back, 261 00:12:49,440 --> 00:12:52,560 Speaker 2: which is a relative yield between stocks and bonds. Essentially 262 00:12:52,559 --> 00:12:55,079 Speaker 2: to simplify the chart that will show it to the audience. 263 00:12:55,679 --> 00:12:58,120 Speaker 10: Yeah, essentially, what's been happening here is as rates have 264 00:12:58,200 --> 00:13:03,400 Speaker 10: backed up, are cross asset valuation work has increasingly favored 265 00:13:03,400 --> 00:13:06,440 Speaker 10: fixed income or bonds. And so essentially, as you look 266 00:13:06,440 --> 00:13:08,640 Speaker 10: at the opportunity and say a five year ten year 267 00:13:08,720 --> 00:13:12,160 Speaker 10: yield versus the expected return on the S and B 268 00:13:12,200 --> 00:13:16,280 Speaker 10: five hundred or US equities, it's increasingly skewed in favor of, Hey, 269 00:13:16,520 --> 00:13:18,480 Speaker 10: why didn't I stay in bonds, whether it be short 270 00:13:18,600 --> 00:13:21,240 Speaker 10: term be money market funds where the Fed funds rate is, 271 00:13:21,600 --> 00:13:23,960 Speaker 10: or longer term out to the ten year yield. And 272 00:13:24,080 --> 00:13:27,400 Speaker 10: so our point here is that that concern, we think 273 00:13:27,480 --> 00:13:31,199 Speaker 10: has kept a lot of flow headwind on US equities, 274 00:13:31,559 --> 00:13:34,920 Speaker 10: and again, combined with this pullback in ten year yields 275 00:13:34,960 --> 00:13:38,600 Speaker 10: this week, you've triggered a snapback that has had the 276 00:13:38,640 --> 00:13:41,679 Speaker 10: effect of drawing money back into equities very quickly. 277 00:13:41,800 --> 00:13:44,440 Speaker 2: Scott, it strikes me through that really lucid explanation of 278 00:13:44,480 --> 00:13:46,920 Speaker 2: the week, there wasn't that much reference to the Fed 279 00:13:46,960 --> 00:13:49,160 Speaker 2: and what they're doing the rates. I mean, sure, we 280 00:13:49,280 --> 00:13:53,040 Speaker 2: had a news conference with Chair Japal and they came 281 00:13:53,040 --> 00:13:55,160 Speaker 2: out of the decision not to do anything, But how 282 00:13:55,240 --> 00:13:57,440 Speaker 2: much of this is really a matter of federal funds rates? 283 00:13:57,440 --> 00:13:59,520 Speaker 2: As opposed to other macro factors right now. 284 00:14:00,240 --> 00:14:03,560 Speaker 10: Yeah, So I think the federal funds situation, I think 285 00:14:03,600 --> 00:14:06,640 Speaker 10: most investors have gotten comfortable that if we're not at 286 00:14:06,720 --> 00:14:09,320 Speaker 10: a FED fund peak, we're awfully close, right, And so 287 00:14:09,600 --> 00:14:12,720 Speaker 10: whether the Fed decided to put another twenty five basis 288 00:14:12,720 --> 00:14:16,160 Speaker 10: points on or not was certainly relevant. But in our 289 00:14:16,240 --> 00:14:18,960 Speaker 10: view it's kind of paled in comparison to what's been 290 00:14:19,000 --> 00:14:23,320 Speaker 10: happening within the bond market internals, where this move in 291 00:14:23,600 --> 00:14:26,760 Speaker 10: the ten yere yields is probably more indicative of the 292 00:14:26,880 --> 00:14:30,880 Speaker 10: rate that you would use for evaluating future projects and 293 00:14:30,920 --> 00:14:33,840 Speaker 10: a company by company basis, how you think about this 294 00:14:33,920 --> 00:14:37,440 Speaker 10: again stock versus bond math, and increasingly how you think 295 00:14:37,480 --> 00:14:41,320 Speaker 10: about the longer term valuation set up for equities, and 296 00:14:41,400 --> 00:14:45,400 Speaker 10: so yes, Fed funds is very important here. Our focus 297 00:14:45,400 --> 00:14:47,800 Speaker 10: for the past month or longer has really been more 298 00:14:47,880 --> 00:14:51,680 Speaker 10: so on the ten year yield component as the culmination 299 00:14:51,800 --> 00:14:53,880 Speaker 10: of all these issues that are coming into play right now. 300 00:14:53,960 --> 00:14:55,880 Speaker 2: Really great to have you with us. That's Scott Croner 301 00:14:56,200 --> 00:15:00,760 Speaker 2: of City. UAW has tentative agreements with all three major 302 00:15:00,880 --> 00:15:05,360 Speaker 2: US automakers. Did the uawhad, Sean Fain says, didn't leave 303 00:15:05,520 --> 00:15:07,680 Speaker 2: any money on the table from his point of view, 304 00:15:07,880 --> 00:15:09,920 Speaker 2: to take us through those deals and what they may 305 00:15:10,000 --> 00:15:12,800 Speaker 2: mean for the industry. Welcome back now, Steve Radner, Chairman 306 00:15:12,840 --> 00:15:15,680 Speaker 2: and CEO of Will Advisors, which invests the personal and 307 00:15:15,760 --> 00:15:18,680 Speaker 2: philanthropic assets of Michael Bloomberg. He is, of course our 308 00:15:18,720 --> 00:15:21,800 Speaker 2: founder and majority shareholders. In addition to so many things 309 00:15:21,840 --> 00:15:24,240 Speaker 2: you've done in your career, you're also the lead advisor 310 00:15:24,280 --> 00:15:26,920 Speaker 2: to President Obama for the Presidential task Force in the Auditors. 311 00:15:26,920 --> 00:15:29,320 Speaker 2: So you know this business terribly Well, what do you 312 00:15:29,360 --> 00:15:31,840 Speaker 2: make of the deals as they've been described so far 313 00:15:31,960 --> 00:15:32,760 Speaker 2: for the Big Three? 314 00:15:33,040 --> 00:15:35,520 Speaker 6: Well, I think we have the details now, have packaged. 315 00:15:35,520 --> 00:15:37,840 Speaker 6: It's this stick I was just reading it. I think 316 00:15:37,840 --> 00:15:40,760 Speaker 6: it's a good outcome for both sides. Actually, I think 317 00:15:40,800 --> 00:15:42,960 Speaker 6: the union got what they want, most of what they 318 00:15:43,000 --> 00:15:45,400 Speaker 6: were much of what they wanted, and much of what 319 00:15:45,440 --> 00:15:49,080 Speaker 6: they deserve, which are substantial pay increases. They got cola 320 00:15:49,160 --> 00:15:52,320 Speaker 6: cost of living adjustments, back, the right to strike in 321 00:15:52,360 --> 00:15:55,080 Speaker 6: certain places, things like that. And I think from the 322 00:15:55,080 --> 00:15:58,160 Speaker 6: standpoint of the companies, what's really important is that there 323 00:15:58,200 --> 00:16:02,160 Speaker 6: was no backsliding on world rules, on all the restrictions 324 00:16:02,160 --> 00:16:04,680 Speaker 6: that made it hard to manage those companies before we 325 00:16:04,720 --> 00:16:07,480 Speaker 6: restructured them in two thousand and nine, and they also 326 00:16:07,560 --> 00:16:10,760 Speaker 6: did not go back to define benefit pension plans or 327 00:16:11,440 --> 00:16:15,080 Speaker 6: company paid retirey healthcare, which of course everybody would like 328 00:16:15,200 --> 00:16:18,800 Speaker 6: workers to have, but simply isn't in the playbook anymore 329 00:16:18,520 --> 00:16:20,440 Speaker 6: in today's economy. 330 00:16:20,600 --> 00:16:23,480 Speaker 2: What about that flexibility because earlier on Walls Reetvik, you 331 00:16:23,560 --> 00:16:25,840 Speaker 2: weren't warned about those work rules because you had to 332 00:16:25,880 --> 00:16:27,920 Speaker 2: deal with those back two thousand and twousand and nine, 333 00:16:28,400 --> 00:16:30,960 Speaker 2: there were some agreements such as, for example, the right 334 00:16:31,000 --> 00:16:33,840 Speaker 2: to strike as I understand it, for any individual plant closing. 335 00:16:34,080 --> 00:16:36,600 Speaker 2: Do you think this will still give the auto companies 336 00:16:36,680 --> 00:16:40,360 Speaker 2: enough flexibility to deal with a really changing environment in autos. 337 00:16:40,640 --> 00:16:43,120 Speaker 6: Yeah, I do. I think the thing that the union 338 00:16:43,480 --> 00:16:46,320 Speaker 6: has to be careful about is, as we've talked about before, 339 00:16:46,400 --> 00:16:48,720 Speaker 6: the INN and the Yang, is that when you increase 340 00:16:48,760 --> 00:16:51,960 Speaker 6: pay increase costs to the companies. They're talking about eight 341 00:16:52,040 --> 00:16:54,600 Speaker 6: or nine hundred dollars a car potentially of increased costs. 342 00:16:54,920 --> 00:16:57,680 Speaker 6: What can happen then is the jobs can move, that 343 00:16:57,720 --> 00:17:01,040 Speaker 6: the next plant doesn't get built in the US, it 344 00:17:01,080 --> 00:17:04,200 Speaker 6: gets built in Mexico, and that the right to strike 345 00:17:04,280 --> 00:17:07,879 Speaker 6: does not prevent that from happening. And that's what's been 346 00:17:07,920 --> 00:17:10,280 Speaker 6: happening in the auto industry for the last fifteen years, 347 00:17:10,320 --> 00:17:12,560 Speaker 6: the number of the jobs I've been moving. It's not 348 00:17:12,680 --> 00:17:16,320 Speaker 6: a coincidence that the big three companies essentially don't really 349 00:17:16,359 --> 00:17:18,200 Speaker 6: make small cars in the US anymore. 350 00:17:18,240 --> 00:17:19,080 Speaker 2: They cannot afford. 351 00:17:19,080 --> 00:17:21,840 Speaker 6: They simply can't make them with any kind of reasonable 352 00:17:21,840 --> 00:17:24,840 Speaker 6: profit margin given the cost structures they have. So we 353 00:17:24,880 --> 00:17:27,000 Speaker 6: all want workers to do more, but we don't want 354 00:17:27,040 --> 00:17:29,000 Speaker 6: it to cost jobs. And that's the thing we have 355 00:17:29,040 --> 00:17:30,119 Speaker 6: to be really careful about. 356 00:17:30,200 --> 00:17:32,160 Speaker 2: Come back to your point of at a competition moving 357 00:17:32,240 --> 00:17:34,880 Speaker 2: to Mexico, moving to right to work states, there's also 358 00:17:34,880 --> 00:17:39,679 Speaker 2: a competition from non union producers, for example of teslas, 359 00:17:39,960 --> 00:17:43,680 Speaker 2: you know, for electric vehicles. Does this put the Big 360 00:17:43,720 --> 00:17:47,359 Speaker 2: three at a substantially greater disadvantage to the Teslas of 361 00:17:47,359 --> 00:17:50,120 Speaker 2: this world and also some of the Japanese automakers, who, 362 00:17:50,119 --> 00:17:51,920 Speaker 2: as understand, also don't have unions. 363 00:17:52,280 --> 00:17:53,080 Speaker 8: Yeah, it does. 364 00:17:53,359 --> 00:17:56,080 Speaker 6: No getting around that if you increase your costs of 365 00:17:56,119 --> 00:17:58,439 Speaker 6: a car by eight or nine hundred dollars, you're at 366 00:17:58,480 --> 00:18:01,159 Speaker 6: a disadvantage. And I get to mention Tesla because it 367 00:18:01,200 --> 00:18:03,159 Speaker 6: wasn't really around in two thousand and nine. I was 368 00:18:03,200 --> 00:18:06,720 Speaker 6: thinking about Mexico and the southern transplants, but Tesla is 369 00:18:06,760 --> 00:18:09,840 Speaker 6: absolutely a factor in this, and companies like Tesla that 370 00:18:09,960 --> 00:18:12,960 Speaker 6: don't have unions and pay substantially less, and again that's 371 00:18:12,960 --> 00:18:15,320 Speaker 6: the yin and the yang for the unions to think about, 372 00:18:15,359 --> 00:18:19,080 Speaker 6: because if General Motors and Stillantis and Ford can't be 373 00:18:19,200 --> 00:18:21,760 Speaker 6: competitive with Tesla, then they're going to lose jobs. They're 374 00:18:21,760 --> 00:18:24,840 Speaker 6: gonna lose sales, which means losing jobs. And you can 375 00:18:24,880 --> 00:18:27,159 Speaker 6: have the right to strike all day long, but if 376 00:18:27,600 --> 00:18:30,080 Speaker 6: if the company ends up closing a factory or reducing 377 00:18:30,080 --> 00:18:32,720 Speaker 6: the number of shifts, that's what's going to happen. 378 00:18:33,119 --> 00:18:35,720 Speaker 2: What do you make of the question of the shift 379 00:18:35,920 --> 00:18:39,480 Speaker 2: in power toward labor. There has been historically shift away 380 00:18:39,480 --> 00:18:43,800 Speaker 2: from labor toward capital overall and certainly the private sector particularly. 381 00:18:45,040 --> 00:18:47,639 Speaker 2: Are we seeing a fundamental shift back again, or are 382 00:18:47,640 --> 00:18:51,040 Speaker 2: we seeing essentially a peak time when labor has the 383 00:18:51,080 --> 00:18:53,440 Speaker 2: most power and it may well come down from there. 384 00:18:53,720 --> 00:18:56,240 Speaker 6: I think somewhere in between. I think we're definitely seeing 385 00:18:56,320 --> 00:18:58,960 Speaker 6: a shift back. If you look at a chart showing 386 00:18:59,080 --> 00:19:02,400 Speaker 6: stays lost to you'll see that relative to five years 387 00:19:02,480 --> 00:19:05,040 Speaker 6: or ten years ago, there's been a significant increase in 388 00:19:05,119 --> 00:19:07,359 Speaker 6: days loss to strikes. We all know about the ups 389 00:19:07,440 --> 00:19:10,600 Speaker 6: drivers and the screenwriters and the auto workers, but you'll 390 00:19:10,600 --> 00:19:12,600 Speaker 6: also see the days lost or nothing compared to what 391 00:19:12,640 --> 00:19:15,720 Speaker 6: they were back in the seventies and eighties. So we're 392 00:19:15,760 --> 00:19:18,520 Speaker 6: not anywhere back in that zip code. I think this 393 00:19:18,560 --> 00:19:22,000 Speaker 6: is a healthy development. Actually, I think that capital has 394 00:19:22,040 --> 00:19:24,000 Speaker 6: benefited too much at the expense of labor. 395 00:19:24,520 --> 00:19:24,960 Speaker 8: You're in a. 396 00:19:24,880 --> 00:19:28,000 Speaker 6: Situation now where people's real wages still have not recovered 397 00:19:28,040 --> 00:19:31,000 Speaker 6: given the inflation we've had, but corporate profits have remained 398 00:19:31,040 --> 00:19:34,000 Speaker 6: quite strong. And I'm happy corporate profits have remained quite strong, 399 00:19:34,320 --> 00:19:36,720 Speaker 6: But I think companies can ford to do more. 400 00:19:36,960 --> 00:19:39,080 Speaker 2: Okay, Steve, thank you so much for Rebecca. Great to 401 00:19:39,080 --> 00:19:41,479 Speaker 2: have you on. Willsh Reek. That is Steve Retner of 402 00:19:41,520 --> 00:19:47,040 Speaker 2: Willet Advisors coming up. China's economic miracle may be a 403 00:19:47,119 --> 00:19:50,760 Speaker 2: little bit less miraculous. What does that mean for investors 404 00:19:50,800 --> 00:19:54,080 Speaker 2: in Asia? We ask Henry McVeigh of KKR. 405 00:19:54,520 --> 00:19:57,399 Speaker 7: Now you get to China and it feels more disinflationary, 406 00:19:57,800 --> 00:20:01,760 Speaker 7: and Japan feels more inflationary. There's a repositioning of global 407 00:20:01,800 --> 00:20:06,080 Speaker 7: macro economic trends within Asia. 408 00:20:06,320 --> 00:20:08,679 Speaker 2: That's next on Wall Street Week on Bloomberg. 409 00:20:09,880 --> 00:20:14,080 Speaker 1: This is Bloomberg Well Street Week with David Weston from 410 00:20:14,200 --> 00:20:20,480 Speaker 1: Bloomberg Radio. 411 00:20:22,400 --> 00:20:26,560 Speaker 2: China. Until recently it was an economic miracle, having grown 412 00:20:26,640 --> 00:20:29,359 Speaker 2: its economy more than any nation in history. 413 00:20:30,000 --> 00:20:33,800 Speaker 8: China is not just a rising power. China has risen. 414 00:20:34,600 --> 00:20:39,400 Speaker 9: China is now seriously rivaling in the US in virtually 415 00:20:39,520 --> 00:20:40,159 Speaker 9: every domain. 416 00:20:40,640 --> 00:20:43,119 Speaker 2: But recently things have gotten a bit rougher for the 417 00:20:43,240 --> 00:20:46,800 Speaker 2: rising Middle Kingdom, led by challenges in its huge real 418 00:20:46,920 --> 00:20:47,680 Speaker 2: estate market. 419 00:20:47,920 --> 00:20:51,800 Speaker 11: A commercial regisling market in China has had a huge 420 00:20:51,840 --> 00:20:55,120 Speaker 11: policy correction, and I think we are at the bottom 421 00:20:55,160 --> 00:20:58,159 Speaker 11: of the market, but it will take quite a while 422 00:20:58,200 --> 00:21:02,040 Speaker 11: for that market to recover and gain momentum. 423 00:21:01,480 --> 00:21:03,760 Speaker 2: Which is spread to the broader economy. 424 00:21:04,280 --> 00:21:06,679 Speaker 12: It's to be acknowledged that the current state of the 425 00:21:06,720 --> 00:21:10,359 Speaker 12: economy is under pressure in China, and that's also something 426 00:21:10,520 --> 00:21:12,800 Speaker 12: that we see coming back through in our results. 427 00:21:13,000 --> 00:21:15,560 Speaker 2: And it doesn't help that its main economic rival, the 428 00:21:15,680 --> 00:21:18,680 Speaker 2: United States, is pulling back at least in some areas 429 00:21:18,840 --> 00:21:19,639 Speaker 2: like high tech. 430 00:21:20,000 --> 00:21:23,399 Speaker 13: So we intend to continue with a major trade relationship 431 00:21:23,440 --> 00:21:25,600 Speaker 13: with China. But we have said and this is the 432 00:21:25,680 --> 00:21:29,080 Speaker 13: small yard, high fence, the d risking strategy that we 433 00:21:29,119 --> 00:21:33,040 Speaker 13: are not going to permit the sale of advanced semiconductors 434 00:21:33,080 --> 00:21:36,560 Speaker 13: AI chips into China that could be used for military 435 00:21:36,600 --> 00:21:38,080 Speaker 13: advantage by the PLA. 436 00:21:38,160 --> 00:21:41,200 Speaker 2: Which raises questions for investors about whether China is their 437 00:21:41,280 --> 00:21:44,680 Speaker 2: go to destination as it once was, or whether other 438 00:21:44,720 --> 00:21:48,000 Speaker 2: places in Asia may offer more attractive alternatives. 439 00:21:48,400 --> 00:21:52,040 Speaker 14: I think that you think some other signs of life 440 00:21:52,040 --> 00:21:55,920 Speaker 14: and other places like Japan is doing much better. It's 441 00:21:55,960 --> 00:21:58,040 Speaker 14: done much better this year. I think some of the 442 00:21:58,080 --> 00:22:01,520 Speaker 14: emerging markets outside of China have done relatively well. 443 00:22:01,720 --> 00:22:06,000 Speaker 15: Money has slowed into impact this year, into Taiwan, into Korea, 444 00:22:07,480 --> 00:22:10,800 Speaker 15: into the rest of the emerging world, but particularly India 445 00:22:10,880 --> 00:22:12,560 Speaker 15: has been the biggest beneficiary. 446 00:22:17,000 --> 00:22:19,119 Speaker 2: And to take us through the prospects of investing in 447 00:22:19,200 --> 00:22:22,119 Speaker 2: Asia today, wilkinsony who knows the area terribly well and 448 00:22:22,160 --> 00:22:23,919 Speaker 2: has a lot of money at work there. He is 449 00:22:23,960 --> 00:22:28,840 Speaker 2: Henry Vay. He is KKR CIO of the balance sheet. 450 00:22:28,840 --> 00:22:30,320 Speaker 2: So welcome Henry. It's really good to have you on. 451 00:22:30,400 --> 00:22:31,200 Speaker 8: It's great to be here. 452 00:22:31,520 --> 00:22:34,399 Speaker 2: Until recently, China was sort of the economic miracle. It 453 00:22:34,480 --> 00:22:36,679 Speaker 2: was the one place you went to invest. Now we 454 00:22:36,760 --> 00:22:38,720 Speaker 2: hear from a lot of investors, maybe not so much 455 00:22:38,760 --> 00:22:41,919 Speaker 2: given some sloat on growth, some uncertainty with the government. 456 00:22:42,080 --> 00:22:43,400 Speaker 2: Where are you in China right now? 457 00:22:43,520 --> 00:22:45,800 Speaker 7: So I think from a growth standpoint, China used to 458 00:22:45,920 --> 00:22:49,800 Speaker 7: run in a nominal GDP, which is real GDP plus inflation, 459 00:22:49,840 --> 00:22:52,720 Speaker 7: about twenty percent, which is a huge number. Today that's 460 00:22:52,760 --> 00:22:55,280 Speaker 7: about six percent, so it's down by a third. 461 00:22:55,440 --> 00:22:57,200 Speaker 8: So when you think about China. 462 00:22:56,960 --> 00:22:59,760 Speaker 7: As a global growth engine, used to be one third 463 00:22:59,800 --> 00:23:02,760 Speaker 7: of global GDP growth, it's clearly not that engine. 464 00:23:03,160 --> 00:23:03,560 Speaker 8: There. 465 00:23:03,800 --> 00:23:05,440 Speaker 7: You know, this is my third trip I just got 466 00:23:05,480 --> 00:23:07,960 Speaker 7: back this year and what I would have been going 467 00:23:08,000 --> 00:23:10,440 Speaker 7: since ninety five, so we do have some comparing contrast. 468 00:23:11,200 --> 00:23:12,800 Speaker 7: What I would say is, I think the story on 469 00:23:12,840 --> 00:23:17,160 Speaker 7: what's growing in China's actually misunderstood right. One is that housing. 470 00:23:17,280 --> 00:23:19,440 Speaker 7: I think people know that it's not growing, and I 471 00:23:19,480 --> 00:23:23,399 Speaker 7: think that's been well documented. What they're missing, though, is 472 00:23:23,440 --> 00:23:26,440 Speaker 7: the growth drivers. What you're seeing is a huge growth 473 00:23:26,480 --> 00:23:30,320 Speaker 7: surge in the decarbonization or the energy transition. And the 474 00:23:30,359 --> 00:23:34,199 Speaker 7: second is really around industrial automation. Most investors have been 475 00:23:34,240 --> 00:23:37,960 Speaker 7: focused on consumption upgrades, which is certainly an attractive area, 476 00:23:38,040 --> 00:23:40,679 Speaker 7: but there's a real shift in the underlying momentum of 477 00:23:40,720 --> 00:23:44,600 Speaker 7: the economy. I'd say the economy actually bottomed in April. 478 00:23:44,600 --> 00:23:46,480 Speaker 7: That was my second trip, and what we saw was 479 00:23:46,520 --> 00:23:49,240 Speaker 7: some slight improvement when we were back there recently. 480 00:23:49,400 --> 00:23:51,480 Speaker 2: So, as you say, historically it's been sort of export 481 00:23:51,520 --> 00:23:55,720 Speaker 2: driven as well as housing property. Now it's shifting over. 482 00:23:56,080 --> 00:23:59,800 Speaker 2: You've got the climate change issues, green issues. You also 483 00:23:59,800 --> 00:24:03,080 Speaker 2: got industrialization and sort of the monetization of there is 484 00:24:03,440 --> 00:24:05,760 Speaker 2: the government behind that because one of the questions always 485 00:24:05,880 --> 00:24:07,560 Speaker 2: is how's the government going to come out of this? 486 00:24:07,600 --> 00:24:10,080 Speaker 2: Because the government shifted on some things like tech for example. 487 00:24:10,280 --> 00:24:13,959 Speaker 7: Yeah, Look, I think tech has been well documented remains 488 00:24:13,960 --> 00:24:16,720 Speaker 7: a complex area for a variety of reasons, both in 489 00:24:16,760 --> 00:24:21,000 Speaker 7: the United States in China. On the decarbonization that is 490 00:24:21,040 --> 00:24:23,520 Speaker 7: a massive part of the economy. It's already ten percent 491 00:24:23,520 --> 00:24:26,280 Speaker 7: of the economy, it's growing forty percent year every year, 492 00:24:26,560 --> 00:24:31,119 Speaker 7: and it goes across multiple different areas. Industrial kind of 493 00:24:31,160 --> 00:24:34,520 Speaker 7: what I would say is digitalization. That's phase two of 494 00:24:34,520 --> 00:24:37,520 Speaker 7: the exports story that you mentioned. It's really about how 495 00:24:37,560 --> 00:24:40,240 Speaker 7: to create automation. Right when I first went to China 496 00:24:40,520 --> 00:24:44,080 Speaker 7: and China joined the WTO, labor costs were forty four 497 00:24:44,160 --> 00:24:47,560 Speaker 7: times cheaper than the US today. That's four and they 498 00:24:47,600 --> 00:24:52,280 Speaker 7: actually have a negative growth rate for Chinese locals that 499 00:24:52,320 --> 00:24:54,000 Speaker 7: are in the age group twenty to. 500 00:24:53,960 --> 00:24:55,480 Speaker 8: Fifty, so they need automation. 501 00:24:55,880 --> 00:24:58,399 Speaker 7: One of the areas that we spend time learning about 502 00:24:58,480 --> 00:25:01,960 Speaker 7: was actually robots a year every year. That's growing seventy 503 00:25:01,960 --> 00:25:05,000 Speaker 7: five percent year every year that business in China. Second 504 00:25:05,119 --> 00:25:08,160 Speaker 7: is civil aviation is growing about forty percent year every year. 505 00:25:08,320 --> 00:25:12,280 Speaker 7: These are not typical industries that China has been affiliated 506 00:25:12,320 --> 00:25:14,720 Speaker 7: with in the past. I think form about global You know, 507 00:25:14,720 --> 00:25:17,680 Speaker 7: we're a global firm. We're very local though in Asia, 508 00:25:17,720 --> 00:25:22,320 Speaker 7: including China. But we've got eight offices around Asia in 509 00:25:22,359 --> 00:25:25,240 Speaker 7: about seventy or eighty billion dollars across a variety of 510 00:25:25,240 --> 00:25:29,400 Speaker 7: asset classes in Asia. And what you need to understand 511 00:25:29,480 --> 00:25:32,960 Speaker 7: is not only investing in China, but how is it connected. 512 00:25:33,080 --> 00:25:35,440 Speaker 8: What we see as. 513 00:25:35,080 --> 00:25:40,680 Speaker 7: A local investor is that intra Asia trade is escalating massively, 514 00:25:40,840 --> 00:25:42,720 Speaker 7: and so a lot of people think about us China 515 00:25:42,720 --> 00:25:43,879 Speaker 7: trade is the only avenue. 516 00:25:44,040 --> 00:25:45,359 Speaker 8: You're missing the bigger story. 517 00:25:45,760 --> 00:25:48,320 Speaker 2: Just as we hear from some investors, we're not as 518 00:25:48,440 --> 00:25:50,840 Speaker 2: enthusiasts we had China anymore. I hear a lot of 519 00:25:50,960 --> 00:25:52,800 Speaker 2: enthusiasm about Japan. What's going on there? 520 00:25:52,920 --> 00:25:55,399 Speaker 8: Yeah, Look, our view. We've been in Japan for a 521 00:25:55,480 --> 00:25:55,960 Speaker 8: long time. 522 00:25:56,000 --> 00:25:59,119 Speaker 7: We did one private equity transaction seven years and then 523 00:25:59,160 --> 00:26:01,480 Speaker 7: we've done probably fourteen or fifteen in the last couple 524 00:26:01,480 --> 00:26:03,879 Speaker 7: of years. A lot of these have been around corporate 525 00:26:03,920 --> 00:26:07,960 Speaker 7: carb outs. The final legacy of abonomics will be that 526 00:26:08,040 --> 00:26:12,520 Speaker 7: corporate reform is accelerating and that's leading to big companies Hatachi, 527 00:26:12,840 --> 00:26:15,119 Speaker 7: you know, Panasonic, companies like that that are starting to 528 00:26:15,160 --> 00:26:19,240 Speaker 7: look to sell subsidiaries to create growth and value creation. 529 00:26:19,760 --> 00:26:22,400 Speaker 7: That's kind of theme one where we've been active. Second 530 00:26:22,520 --> 00:26:24,800 Speaker 7: is we did make an acquisition in the real estate 531 00:26:24,880 --> 00:26:28,040 Speaker 7: market in Japan and that's starting to create value, which 532 00:26:28,080 --> 00:26:30,080 Speaker 7: is can you unlock some of the real estate value 533 00:26:30,240 --> 00:26:34,000 Speaker 7: that was maybe suppressed in a deflationary environment. And then 534 00:26:34,040 --> 00:26:37,000 Speaker 7: the third is you're seeing more activism and I think 535 00:26:37,080 --> 00:26:39,160 Speaker 7: KKR has really emerged as a kind of a white 536 00:26:39,280 --> 00:26:41,600 Speaker 7: Night and more of that. What I would say is 537 00:26:41,640 --> 00:26:46,640 Speaker 7: activist market. So things are accelerating. You know, it's somewhat ironic, 538 00:26:46,680 --> 00:26:48,280 Speaker 7: which is we used to go to China and people 539 00:26:48,280 --> 00:26:51,200 Speaker 7: talk about inflation as a constraint, and then the constraint 540 00:26:51,200 --> 00:26:54,159 Speaker 7: in Japan was deflation. Now you go to China and 541 00:26:54,160 --> 00:26:58,520 Speaker 7: it feels more disinflationary and Japan feels more inflationary. So 542 00:26:58,560 --> 00:27:03,440 Speaker 7: it's really there's a repositioning of global macro economic trends 543 00:27:03,760 --> 00:27:04,680 Speaker 7: within Asia. 544 00:27:04,720 --> 00:27:06,399 Speaker 2: Well, that was one of those I asked, do you 545 00:27:06,440 --> 00:27:08,080 Speaker 2: think inflation's back to stay in Japan? 546 00:27:08,200 --> 00:27:10,399 Speaker 8: I do, I do. I think there's this cyclical in 547 00:27:10,440 --> 00:27:11,040 Speaker 8: the secular. 548 00:27:11,280 --> 00:27:14,840 Speaker 7: The cyclical is around food and energy inflation, which I 549 00:27:14,840 --> 00:27:17,680 Speaker 7: actually don't think is good inflation. I think the wage 550 00:27:17,720 --> 00:27:21,600 Speaker 7: growth is actually very constructive, and so that's what you're seeing. 551 00:27:21,600 --> 00:27:25,320 Speaker 7: That leads to more spending, It creates confidence. The offset 552 00:27:25,359 --> 00:27:27,800 Speaker 7: of that and where we focus as a firm, it's 553 00:27:27,840 --> 00:27:31,640 Speaker 7: back to this industrial automation concept, which is you need 554 00:27:31,680 --> 00:27:35,439 Speaker 7: to get productivity gains that allow wages to grow without 555 00:27:35,520 --> 00:27:39,040 Speaker 7: margins being pressured. And that's what we're seeing. You saw 556 00:27:39,080 --> 00:27:41,280 Speaker 7: this from the Prime Minister when he was in New York. 557 00:27:41,520 --> 00:27:43,840 Speaker 7: What did he talk about. He talked about Capex in 558 00:27:43,960 --> 00:27:46,880 Speaker 7: Japan was at a record level. That Capex is going 559 00:27:46,920 --> 00:27:51,520 Speaker 7: back into creating productivity into a workforce that probably needs 560 00:27:51,560 --> 00:27:55,280 Speaker 7: more automation, needs more sophistication. So you've got to watch 561 00:27:55,359 --> 00:27:58,600 Speaker 7: all parts of the economic story together. You can't just 562 00:27:58,680 --> 00:28:01,080 Speaker 7: focus solely on inflation component. 563 00:28:01,240 --> 00:28:04,200 Speaker 2: So when you look for the economy to grow in Japan, 564 00:28:04,640 --> 00:28:06,320 Speaker 2: you have to make up for some of the demographic 565 00:28:06,359 --> 00:28:08,639 Speaker 2: issues and the workforce issues that you just referred to. 566 00:28:09,040 --> 00:28:11,520 Speaker 2: Do you think that it's possible for CAPEX to be 567 00:28:11,680 --> 00:28:13,840 Speaker 2: enough to make up for some of the challenges they 568 00:28:13,880 --> 00:28:15,480 Speaker 2: have with an aging population. 569 00:28:15,960 --> 00:28:17,719 Speaker 8: I think one is there are a couple of things 570 00:28:17,760 --> 00:28:18,320 Speaker 8: to keep in mind. 571 00:28:18,440 --> 00:28:21,280 Speaker 7: Japan's done an incredible job of actually bringing women into 572 00:28:21,320 --> 00:28:24,199 Speaker 7: the workforce, and if you think about childcare costs in Japan, 573 00:28:24,520 --> 00:28:27,280 Speaker 7: they're four times cheaper than they are in the US. 574 00:28:27,560 --> 00:28:31,560 Speaker 7: That's a massive competitive advantage. Second of they've actually gotten 575 00:28:32,160 --> 00:28:34,640 Speaker 7: males fifty five and older to come back in the workforce, 576 00:28:34,680 --> 00:28:37,080 Speaker 7: and they're starting to get some small signs on immigration. 577 00:28:37,200 --> 00:28:40,080 Speaker 7: So we're not looking for, you know, ten percent real 578 00:28:40,080 --> 00:28:43,080 Speaker 7: GDP growth in Japan. What we're really looking for is 579 00:28:43,440 --> 00:28:47,400 Speaker 7: some improvement from really on a nominal basis which was 580 00:28:47,480 --> 00:28:52,280 Speaker 7: deflationary to inflationary, some positive nominal GDP growth, and then 581 00:28:52,280 --> 00:28:55,320 Speaker 7: we're looking for corporate reforms, and so I think investors 582 00:28:55,320 --> 00:28:56,240 Speaker 7: have to separate the. 583 00:28:57,720 --> 00:28:58,920 Speaker 8: Earnings from GDP. 584 00:28:59,320 --> 00:29:02,320 Speaker 7: The best ronment for KKR is actually, can you help 585 00:29:02,360 --> 00:29:07,480 Speaker 7: companies grow their earnings when GDP growth is actually somewhat slower, 586 00:29:07,760 --> 00:29:10,360 Speaker 7: and that means that the central bank doesn't have to overtighten. 587 00:29:10,640 --> 00:29:13,240 Speaker 7: And that's really what you get in Japan. I mean, 588 00:29:13,480 --> 00:29:16,160 Speaker 7: our founder is Henry Cravis and George Roberts saying internally 589 00:29:16,400 --> 00:29:19,440 Speaker 7: they pioneered the private equity business and they said, if 590 00:29:19,480 --> 00:29:21,440 Speaker 7: we were twenty two, we would go to Japan right now, 591 00:29:21,480 --> 00:29:23,760 Speaker 7: because that's actually where you're seeing some of the real 592 00:29:23,840 --> 00:29:26,520 Speaker 7: movement and creating some opportunities in private equity. 593 00:29:26,520 --> 00:29:29,200 Speaker 2: That's saying something. One last one India. We hear a 594 00:29:29,200 --> 00:29:31,600 Speaker 2: lot about a boom coming in India, yasually they don't 595 00:29:31,600 --> 00:29:34,040 Speaker 2: have that demographic problem that we talked about with Japan. Yeah, 596 00:29:34,040 --> 00:29:35,080 Speaker 2: what's going on in India? 597 00:29:35,200 --> 00:29:35,600 Speaker 8: India? 598 00:29:35,640 --> 00:29:37,800 Speaker 7: I actually there are two things that are going on 599 00:29:37,840 --> 00:29:40,440 Speaker 7: in India. One is the exports are actually picking up 600 00:29:41,120 --> 00:29:43,680 Speaker 7: and some of that as you've seen some reshoring into India, 601 00:29:43,720 --> 00:29:46,320 Speaker 7: So when you look at their export momentum, it's actually 602 00:29:46,400 --> 00:29:50,160 Speaker 7: quite strong. And then second is similar to Japan and 603 00:29:50,200 --> 00:29:54,320 Speaker 7: similar to China, there's a global capex cycle where they're 604 00:29:54,320 --> 00:29:57,000 Speaker 7: seeing their infrastructure investment in particular go up. 605 00:29:57,240 --> 00:29:58,000 Speaker 8: That's a big. 606 00:29:57,840 --> 00:30:00,440 Speaker 2: Deal and they're really great. Tavin wealshreet than for having me. 607 00:30:00,600 --> 00:30:03,320 Speaker 2: It's great to tell you. As Hendrik Faye of KKR 608 00:30:05,600 --> 00:30:07,280 Speaker 2: coming up, how are you going to keep them back 609 00:30:07,280 --> 00:30:10,520 Speaker 2: in the office after they've worked from home? Maybe try 610 00:30:10,640 --> 00:30:14,560 Speaker 2: a little magic. That's next Don wall Street Week on Bloomberg. 611 00:30:15,560 --> 00:30:19,800 Speaker 1: This is Bloomberg wall Street Week with David Weston from 612 00:30:19,920 --> 00:30:20,840 Speaker 1: Bloomberg Radio. 613 00:30:27,760 --> 00:30:31,880 Speaker 2: Finally, one more thought. Aristotle taught that pleasure in the 614 00:30:32,000 --> 00:30:35,480 Speaker 2: job puts perfection in the work. Judging by what we're 615 00:30:35,520 --> 00:30:37,960 Speaker 2: seeing these days, it's no wonder we aren't seeing much 616 00:30:38,000 --> 00:30:41,000 Speaker 2: perfection in the work because a lot of employees don't 617 00:30:41,040 --> 00:30:43,560 Speaker 2: seem to be getting much pleasure from doing the work. 618 00:30:43,960 --> 00:30:46,960 Speaker 2: Auto workers have spent weeks off the job demanding they 619 00:30:46,960 --> 00:30:49,400 Speaker 2: get a larger share of the fruits of their labor. 620 00:30:49,600 --> 00:30:54,400 Speaker 9: This contract demonstrates the incredible power that workers have when 621 00:30:54,440 --> 00:30:55,920 Speaker 9: they are not afraid to use it. 622 00:30:56,040 --> 00:30:58,400 Speaker 2: They were the latest of this series of work actions 623 00:30:58,440 --> 00:31:01,280 Speaker 2: around the world, starting with a major strike against the 624 00:31:01,320 --> 00:31:03,960 Speaker 2: trains and schools in England at the beginning of the year. 625 00:31:04,360 --> 00:31:06,920 Speaker 2: This is really the biggest school night to strike actually 626 00:31:06,920 --> 00:31:08,880 Speaker 2: we've seen in the UK for a decade, and then 627 00:31:09,040 --> 00:31:12,440 Speaker 2: German airport workers shut down the nation's major airports in 628 00:31:12,480 --> 00:31:12,920 Speaker 2: the spring. 629 00:31:13,080 --> 00:31:15,440 Speaker 7: You have the Services Union VERDI and also the rail 630 00:31:15,560 --> 00:31:17,120 Speaker 7: Transmit Union EVG. 631 00:31:17,280 --> 00:31:19,160 Speaker 6: So they started these strikes at midnight tonight. 632 00:31:19,360 --> 00:31:21,800 Speaker 11: It is, you know, disrupting all kinds of travel. 633 00:31:21,920 --> 00:31:24,840 Speaker 2: For much of the year, Hollywood has been saddled with strikes, 634 00:31:25,000 --> 00:31:27,560 Speaker 2: first by the writers and then by the actors. 635 00:31:27,760 --> 00:31:30,080 Speaker 12: This has been a very difficult time obviously going doing this. 636 00:31:30,200 --> 00:31:32,960 Speaker 12: And the goal here is to get people back to work. 637 00:31:33,360 --> 00:31:35,200 Speaker 12: The goal is to get the town opened up. This 638 00:31:35,320 --> 00:31:38,280 Speaker 12: is not just hurting our industry, it's hurting every other 639 00:31:38,320 --> 00:31:39,760 Speaker 12: business that supports our industry. 640 00:31:40,040 --> 00:31:42,760 Speaker 2: And then just this week, technology workers at the New 641 00:31:42,840 --> 00:31:45,440 Speaker 2: York Times walked off the job to protest they're being 642 00:31:45,480 --> 00:31:48,400 Speaker 2: required to come back into the office instead of working 643 00:31:48,400 --> 00:31:51,720 Speaker 2: from home. Fans of working from home think employers should 644 00:31:51,760 --> 00:31:55,400 Speaker 2: see working from home as an opportunity rather than a challenge. 645 00:31:55,680 --> 00:31:58,080 Speaker 4: Now, the question is we have this amazing, once in 646 00:31:58,160 --> 00:32:02,640 Speaker 4: a lifetime opportunity to recreate it in our within our 647 00:32:02,680 --> 00:32:03,520 Speaker 4: own creativity. 648 00:32:03,720 --> 00:32:07,200 Speaker 2: And Steve Schwarzman says he understands the motivation, whether or 649 00:32:07,240 --> 00:32:08,880 Speaker 2: not he agrees with the result. 650 00:32:09,240 --> 00:32:13,080 Speaker 3: People got used to, you know, staying at home, and 651 00:32:14,080 --> 00:32:17,800 Speaker 3: it was actually more profitable for them to stay at 652 00:32:17,800 --> 00:32:21,200 Speaker 3: home because one they didn't work as hard, regardless of 653 00:32:21,200 --> 00:32:25,040 Speaker 3: what they tell you. And the second is they don't 654 00:32:25,160 --> 00:32:29,680 Speaker 3: spend money to commute. You know, they can make their 655 00:32:29,760 --> 00:32:34,600 Speaker 3: lunch at home, they don't have to buy expensive clothes, 656 00:32:34,640 --> 00:32:37,560 Speaker 3: and so their incomes are higher. 657 00:32:37,680 --> 00:32:40,600 Speaker 2: Given all the worker discontent, it is no surprise that 658 00:32:40,680 --> 00:32:43,440 Speaker 2: employers are trying to come up with some creative ways 659 00:32:43,440 --> 00:32:47,560 Speaker 2: to keep their workers happy or at least happier. Everything 660 00:32:47,560 --> 00:32:50,600 Speaker 2: from the World Bank upping its subsidy for communing costs 661 00:32:50,640 --> 00:32:53,840 Speaker 2: and cutting the costs of childcare, to a British office 662 00:32:53,840 --> 00:32:57,280 Speaker 2: building a Sheffield constructing a circular slide employees can take 663 00:32:57,320 --> 00:32:59,640 Speaker 2: to get from the third floor to the ground floor 664 00:33:00,240 --> 00:33:03,320 Speaker 2: seven seconds, has reported in The Wall Street Journal. To 665 00:33:03,440 --> 00:33:06,960 Speaker 2: the latest and perhaps the grandest word came this week 666 00:33:07,000 --> 00:33:09,720 Speaker 2: that Ken Griffin is paying for twelve hundred of his 667 00:33:09,840 --> 00:33:13,600 Speaker 2: Asia employees and family members to travel to Tokyo's Disney 668 00:33:13,600 --> 00:33:17,440 Speaker 2: resort for a three day celebration of the company's anniversary, 669 00:33:17,760 --> 00:33:20,920 Speaker 2: and will cost mister Griffin a pretty penny. As Bloomberg 670 00:33:20,960 --> 00:33:23,040 Speaker 2: reported this week that the costs for a week long 671 00:33:23,080 --> 00:33:25,360 Speaker 2: trip for a family of fourd to Disney World back 672 00:33:25,360 --> 00:33:27,360 Speaker 2: here in the United States has gone up to twenty 673 00:33:27,360 --> 00:33:30,280 Speaker 2: five thousand dollars and could go as high as forty 674 00:33:30,320 --> 00:33:33,640 Speaker 2: thousand dollars. But no matter the cost, it looks like, 675 00:33:33,760 --> 00:33:37,920 Speaker 2: at least for Citadel's Asia employees, their dreams really may 676 00:33:38,160 --> 00:33:45,640 Speaker 2: come true. Where are your Jeans Come True? That does 677 00:33:45,640 --> 00:33:47,880 Speaker 2: it for this episode of Wall Street Week. I'm David Weston. 678 00:33:47,960 --> 00:33:49,840 Speaker 2: This is Bloomberg. See you next week.