WEBVTT - Bloomberg Wall Street Week - November 3rd, 2023 0:00:00.240 --> 0:00:02.440 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 And we may not have an overall recession, We're having 0:00:04.400 --> 0:00:06.720 a rolling recession. To kind of roll looks pretty strongly 0:00:06.720 --> 0:00:08.840 it is when it comes to jobs, the financial stories 0:00:08.920 --> 0:00:11.960 that shape our world. Three major regional bank failures send 0:00:12.000 --> 0:00:14.680 shockwaves through the banking system. We're all trying to figure 0:00:14.680 --> 0:00:17.000 out what to make of generative AI. 0:00:16.920 --> 0:00:19.320 Through the eyes of the most influential voices. 0:00:19.440 --> 0:00:22.400 Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 0:00:22.560 --> 0:00:25.279 deebro Lair of the Paulson Institute, well Then Hubbard of 0:00:25.280 --> 0:00:26.280 the Columbia Business School. 0:00:26.280 --> 0:00:30.120 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:31.040 --> 0:00:35.320 A strike settles, the FED decides, the Treasury bar short, 0:00:35.479 --> 0:00:38.680 and a war in Gaza enters a new phase. This 0:00:38.760 --> 0:00:42.560 is Bloomberg Wall Street Week. I'm David Weston. This week's 0:00:42.560 --> 0:00:45.800 special contributor Larry Summers of Harvard and former Biden Chief 0:00:45.840 --> 0:00:48.960 economist to Celia Rouse on the jobs numbers, the FED decision, 0:00:49.040 --> 0:00:51.000 and what comes next for the US economy. 0:00:51.240 --> 0:00:54.160 This was a favorable number, but I don't think anybody 0:00:54.160 --> 0:00:55.320 should overinterpret it. 0:00:55.560 --> 0:00:56.120 I think we. 0:00:56.160 --> 0:00:59.360 Are seeing the slowing of the labor market, which has 0:00:59.400 --> 0:01:00.640 been long in anticipated. 0:01:00.680 --> 0:01:02.240 Some might say, what took so long? 0:01:02.440 --> 0:01:06.600 Cars are Steve Rattner of Will Advisors on the auto settlement. 0:01:06.240 --> 0:01:08.360 And that's the yun and the yang for the unions 0:01:08.360 --> 0:01:11.120 to think about, because if General Motors and Stalantis and 0:01:11.240 --> 0:01:14.959 Ford can be competitive with Tesla, then they're gonna lose jobs. 0:01:14.720 --> 0:01:18.040 And kk ours Henry McVeigh, I'm investing in Asia as 0:01:18.080 --> 0:01:20.560 the Chinese economy comes back down to earth. 0:01:20.680 --> 0:01:23.679 When you think about China as a global growth engine, 0:01:24.040 --> 0:01:26.479 used to be one third of global GDP growth, it's 0:01:26.520 --> 0:01:39.880 clearly not that engine there. 0:01:41.040 --> 0:01:44.080 Global Wall Street. It spent yet another week keeping one 0:01:44.160 --> 0:01:47.240 eye on the war unfolding between Israel and Hamas. As 0:01:47.360 --> 0:01:50.680 Israeli troops moved into Gaza, calls. 0:01:50.360 --> 0:01:54.400 For cease far are calls for Israel to surrender to Hamas, 0:01:54.600 --> 0:01:57.480 to surrender to terrorists, to surrender to barbaras. 0:01:58.560 --> 0:02:01.800 That will not happen. And still it was hard to 0:02:01.840 --> 0:02:05.040 see any light at the end of this long tunnel. 0:02:05.200 --> 0:02:08.200 We're sending in between fire and eight hundred trucks a day. 0:02:08.280 --> 0:02:10.080 Right now, we're up to almost sixty. 0:02:10.240 --> 0:02:11.160 We're trying to get to one. 0:02:11.080 --> 0:02:14.160 Hundred this week. That is the bare minimum of what's needed. 0:02:14.320 --> 0:02:17.040 But even as we followed more tragedy in the Middle East, 0:02:17.120 --> 0:02:20.240 there was some good news as the UAW announced the 0:02:20.320 --> 0:02:23.560 third and final tentative agreement with the Big three automakers. 0:02:24.120 --> 0:02:27.360 Today's historic agreement, because you had another piece of good 0:02:27.360 --> 0:02:32.360 economic news showing something I've always believed, worker power. 0:02:32.680 --> 0:02:36.000 The Fed came out with its much anticipated rates decision, 0:02:36.160 --> 0:02:40.079 and as anticipated, didn't budge with Chair Pal saying they 0:02:40.120 --> 0:02:42.280 will take it one step at a time. 0:02:42.680 --> 0:02:45.680 We're going meeting, my meeting, We're asking ourselves whether we've 0:02:45.680 --> 0:02:48.320 achieved a stance of policy to the sufficiently restrictive to 0:02:48.560 --> 0:02:50.600 bring inflation down to two percent over time. 0:02:50.840 --> 0:02:53.680 Over a treasury they came out with their borrowing plans 0:02:53.680 --> 0:02:56.160 for the next quarter, which came in a bit light 0:02:56.400 --> 0:02:57.360 and a bit short. 0:02:57.560 --> 0:03:00.280 The problem, of course for the Treasury Department is that 0:03:00.320 --> 0:03:03.000 people are criticizing them for not turning out earlier. They 0:03:03.040 --> 0:03:05.520 have to pay more, so they are kind of locked 0:03:05.560 --> 0:03:05.959 in here. 0:03:06.120 --> 0:03:08.800 And artificial intelligence was back in the news, not that 0:03:08.880 --> 0:03:11.200 it was ever really out of it. As President Biden 0:03:11.280 --> 0:03:13.359 signed a new executive order. 0:03:13.400 --> 0:03:15.960 To realize the promise of AI and void the risk 0:03:16.040 --> 0:03:17.680 we need to govern this technology. 0:03:18.040 --> 0:03:21.280 On Thursday, a jury in southern Manhattan needed only a 0:03:21.280 --> 0:03:25.680 few hours to convict Samuel Bankman freed on all seven counts. 0:03:26.240 --> 0:03:29.640 Sam Bankman free perpetrated one of the biggest financial frauds 0:03:29.840 --> 0:03:33.600 in American history, a multi billion dollar scheme designed to 0:03:33.600 --> 0:03:35.000 make him the king of crypto. 0:03:35.360 --> 0:03:40.000 We respect the jury's decision. We're very disappointed in the result. 0:03:41.560 --> 0:03:44.920 On Friday, US jobs numbers confirmed a slowing of the 0:03:45.000 --> 0:03:47.560 US labor market, adding one hundred and fifty thousand new 0:03:47.640 --> 0:03:50.280 jobs rather than the one hundred and eighty thousand that 0:03:50.360 --> 0:03:53.120 had been expected, and the unemployment rate ticked up just 0:03:53.160 --> 0:03:55.560 a bit to three point nine percent. To help us 0:03:55.640 --> 0:03:58.600 understand these jobs numbers and the FED decision from earlier 0:03:58.640 --> 0:04:01.120 in the week, we welcome the person who until recently 0:04:01.200 --> 0:04:03.720 interpreted them for President Biden, and as of the first 0:04:03.720 --> 0:04:06.200 of the year, we'll be taking the helmet the Brookings Institution. 0:04:06.520 --> 0:04:08.840 She is doctor Cecilia Rouse. So, doctor Ross, thank you 0:04:08.920 --> 0:04:11.520 so much for being with us. You're an economist to 0:04:11.520 --> 0:04:13.960 give us put these in perspective. We're looking for some 0:04:14.200 --> 0:04:16.320 slowing in the economy, in partly because we don't want 0:04:16.400 --> 0:04:18.799 that overheating with the inflation. Do you think we're seeing 0:04:18.839 --> 0:04:19.200 it yet? 0:04:20.360 --> 0:04:23.800 I think we are seeing the slowing of the labor market, 0:04:23.880 --> 0:04:26.560 which has been long anticipated. Some might say what took 0:04:26.600 --> 0:04:29.719 so long? But what we see is that employment growth 0:04:29.760 --> 0:04:32.799 remains healthy. Like if we were to talk pre pandemic, 0:04:33.400 --> 0:04:35.400 an average job growth if we look over the last 0:04:35.400 --> 0:04:37.880 three months has been just over two hundred thousand jobs 0:04:37.920 --> 0:04:40.559 a month. This month it came into one hundred and fifty. 0:04:40.560 --> 0:04:43.560 That number will be revised, but what we see is 0:04:43.760 --> 0:04:46.560 healthy job growth, which is consistent with an economy that 0:04:46.760 --> 0:04:50.480 is powering along, but which is coming down from the 0:04:50.600 --> 0:04:53.400 very high growth we had as the economy recovered from 0:04:53.400 --> 0:04:55.880 the pandemic. I think these numbers will be welcomed by 0:04:55.920 --> 0:04:58.360 the Fed. As I said, I think many economists will 0:04:58.360 --> 0:05:02.080 see this as the natural of the economy getting back 0:05:02.080 --> 0:05:02.560 to normal. 0:05:02.920 --> 0:05:05.599 Well, no offense to the economists such as you, but 0:05:06.040 --> 0:05:09.440 you've been off on some few things recently, and let 0:05:09.440 --> 0:05:12.119 me talk about that specifically, the relationship between the labor 0:05:12.160 --> 0:05:14.320 market on the one hand and inflation on the other. 0:05:14.520 --> 0:05:17.080 We thought we knew what that was, that it seemed 0:05:17.120 --> 0:05:19.800 to really the relationship went away. That Phillips currency knew 0:05:19.839 --> 0:05:22.039 really flat. Where are we now? Do we have a 0:05:22.120 --> 0:05:25.320 theory about what the labor market means for inflation? 0:05:26.560 --> 0:05:31.000 So you know, the reality is that in economics there's 0:05:31.080 --> 0:05:34.480 not a fabulous theory and one theory of inflation, and 0:05:34.520 --> 0:05:36.359 I think that is part of the challenge. 0:05:36.600 --> 0:05:38.840 Another part of the challenge is what was the source. 0:05:38.960 --> 0:05:43.040 We know that we had unprecedented supply challenges due to 0:05:43.120 --> 0:05:46.440 the pandemic, both in terms of getting goods to people 0:05:46.760 --> 0:05:49.320 manufacturing goods because people have a part of that process 0:05:49.360 --> 0:05:51.159 and with the pandemic they couldn't show. 0:05:51.080 --> 0:05:51.599 Up to work. 0:05:51.839 --> 0:05:54.840 And then we also know we had unprecedented demand because 0:05:54.880 --> 0:05:58.600 of the remarkable support that the federal government here and 0:05:58.640 --> 0:06:02.280 abroad provide to consumers and businesses to get them through 0:06:02.320 --> 0:06:05.360 the pandemic. So we know we had this mismatch of 0:06:05.400 --> 0:06:07.960 supply and demand. The question is which was going to 0:06:08.080 --> 0:06:11.480 win in terms of regularizing faster. 0:06:12.240 --> 0:06:14.880 So I think this goes back to we hadn't. 0:06:14.640 --> 0:06:18.440 Seen inflation for a long time, economics doesn't have one solid, 0:06:18.480 --> 0:06:21.080 well established theory of inflation, and the fact that we 0:06:21.120 --> 0:06:24.920 had an unprecedented shock to our domestic economy and the 0:06:24.960 --> 0:06:30.160 global economy. What we're seeing now is monetary authorities stepped in, 0:06:30.880 --> 0:06:34.279 the federal government stepped in. They pulled back appropriately, and 0:06:34.320 --> 0:06:35.839 the economy is getting back to normal. 0:06:36.320 --> 0:06:40.080 Another big development this week was the Federal Reserve decision 0:06:40.200 --> 0:06:42.719 and the press conference, the news conference from Chair Pow 0:06:42.880 --> 0:06:44.039 And when you were with the one as you would 0:06:44.040 --> 0:06:46.080 always say, that's their business. I stay out of that. 0:06:46.160 --> 0:06:48.000 But now you're not at the White House anymore. I'm 0:06:48.000 --> 0:06:49.360 not going to ask you to tell them what to do. 0:06:49.800 --> 0:06:53.000 But are you sympathetic to what I take to be 0:06:53.000 --> 0:06:55.280 a chair Pole's position, which is, we just don't know 0:06:55.400 --> 0:06:57.760 right now. We've got to take this meeting by meeting. 0:06:58.080 --> 0:07:01.680 I can't predict out too far because we're in uncertain territory. 0:07:01.760 --> 0:07:03.320 Is that the way you see the ecount right now, 0:07:03.320 --> 0:07:06.840 because it's grown awfully strong considering all those increases in 0:07:06.839 --> 0:07:07.880 your rates that you referred to. 0:07:09.279 --> 0:07:13.920 Yeah, I'm very sympathetic to charb. Howell's view of how 0:07:13.960 --> 0:07:17.760 to proceed. One thing we know is that our economic 0:07:17.840 --> 0:07:22.480 models have the economic forecasting has been rather imprecise through 0:07:22.480 --> 0:07:23.240 this pandemic. 0:07:23.640 --> 0:07:24.840 It's tricky business. 0:07:24.880 --> 0:07:28.240 Again, we hadn't had the kind of shock both to 0:07:28.280 --> 0:07:31.160 the supply side of the domestic and global economy and 0:07:31.200 --> 0:07:34.560 then this demand support. We just hadn't seen that, and 0:07:34.640 --> 0:07:37.800 so the economy is not behaving the way that many 0:07:37.840 --> 0:07:40.720 economists predicted. So I think he and his colleagues are 0:07:40.760 --> 0:07:44.280 right to say, Look, we remain at the We stand 0:07:44.320 --> 0:07:48.280 at the ready. We understand that inflation is costly to everyone. 0:07:48.600 --> 0:07:51.400 At the same time, we understand that there are huge 0:07:51.440 --> 0:07:54.600 benefits to a strong labor market and a full economy. 0:07:54.840 --> 0:07:56.440 So we are going to wait. 0:07:56.520 --> 0:07:58.280 We don't want to be sit back on our heels, 0:07:58.560 --> 0:08:00.720 but we are going to take this eating by meeting 0:08:00.880 --> 0:08:04.360 as we watch all of the data and assess what's 0:08:04.400 --> 0:08:05.240 the best way forward. 0:08:05.800 --> 0:08:08.160 And finally, we look at all these data sort of 0:08:08.200 --> 0:08:10.280 week by week, month by month, quarter by quarter, but 0:08:10.280 --> 0:08:13.160 there's also the longer term trends. And when it comes 0:08:13.200 --> 0:08:15.120 to the labor market, something you've done a lot of 0:08:15.120 --> 0:08:17.400 work on is the role of women in the workplace 0:08:17.400 --> 0:08:20.440 and particularly childcare. Tell us about why we should be 0:08:20.480 --> 0:08:23.360 focused not maybe for this week or this month, but 0:08:23.400 --> 0:08:26.800 a longer term on that part of the labor market. 0:08:27.560 --> 0:08:27.840 Yeah. 0:08:27.880 --> 0:08:30.040 So this was a speech given in Washington, d c. 0:08:30.720 --> 0:08:33.480 Sponsored by the one hundred Foundation. This is Adam Smith, 0:08:33.559 --> 0:08:37.080 three hundredth birthday, birth year, And the point I was 0:08:37.120 --> 0:08:41.600 making is that as women have entered the labor force 0:08:42.440 --> 0:08:46.679 and women disproportionately care for children, men are obviously can 0:08:46.720 --> 0:08:48.960 be caretakers as well, but if we just look at 0:08:49.000 --> 0:08:52.680 the data, women bear the disproportioned share of that care. 0:08:53.320 --> 0:08:55.920 If we want to have a robust labor market, which 0:08:55.920 --> 0:08:58.239 we know we need to do, we have falling fertility, 0:08:58.320 --> 0:09:01.680 we have an aging demograph, we have an immigration system 0:09:01.679 --> 0:09:03.680 that is not replenishing. If we're going to have a 0:09:03.720 --> 0:09:06.320 robust labor market, we need everybody who wants to work 0:09:06.320 --> 0:09:07.640 to be able to work and to be able to 0:09:07.720 --> 0:09:08.600 do so productively. 0:09:09.200 --> 0:09:11.959 The reality is children need to be careful. 0:09:12.360 --> 0:09:15.040 So in order for people to be able to balance 0:09:15.120 --> 0:09:16.800 work and family, they. 0:09:16.720 --> 0:09:19.280 Need to be able to provide for childcare. So there 0:09:19.360 --> 0:09:19.680 is an. 0:09:19.640 --> 0:09:22.000 Externality there that means that there are benefits that go 0:09:22.080 --> 0:09:24.560 beyond the family but to the rest of society, both 0:09:24.600 --> 0:09:28.040 in terms of the benefit and economic growth, but also 0:09:28.080 --> 0:09:30.960 in terms of making investments in children and high quality 0:09:31.040 --> 0:09:34.680 childcare have benefits to the rest of us throughout their lifetimes. 0:09:35.000 --> 0:09:38.679 So there's a role for government in providing or subsidizing 0:09:38.800 --> 0:09:42.679 high quality childcare. Labored on top of the fact that 0:09:42.800 --> 0:09:45.760 childcare is expensive and that happens at a time when 0:09:45.840 --> 0:09:49.040 families and workers are not at their peak earnings. You 0:09:49.120 --> 0:09:51.400 can't take out a loan to pay for childcare, so 0:09:51.480 --> 0:09:53.960 again we have a problem in our credit markets. Again 0:09:54.040 --> 0:09:57.680 a potential role for government. And finally that it's very 0:09:57.760 --> 0:10:01.199 costly for providers, and so most providers, not the big chains, 0:10:01.240 --> 0:10:03.920 but the little providers where most children are cared for, 0:10:04.200 --> 0:10:06.680 are barely getting by, and we know that their workers 0:10:06.720 --> 0:10:10.199 are paid very little. More than fifty percent of childcare 0:10:10.240 --> 0:10:14.040 workers receive some form of public assistance, so there's high turnover, 0:10:14.440 --> 0:10:16.360 not consistent with high quality childcare. 0:10:16.640 --> 0:10:18.320 So this is a market that could use help. 0:10:18.559 --> 0:10:22.240 It's a role that the government should be actively involved in, 0:10:22.280 --> 0:10:25.360 whether it's provision, subsidization, but the point is that it's 0:10:25.559 --> 0:10:30.120 critical if we're going to improve and maintain our economic growth, 0:10:30.120 --> 0:10:31.280 which benefits us all. 0:10:31.760 --> 0:10:33.720 Doctor Ross, thank you so very much for being with us. 0:10:33.720 --> 0:10:35.760 The best of luck as you take over the helmet Brookings. 0:10:35.880 --> 0:10:40.720 That is doctor Cecilia Rauss. Coming up, we'll go through 0:10:40.800 --> 0:10:43.319 how the market reacted to all the news this week 0:10:43.440 --> 0:10:47.640 with Scott Kronert of City that's coming up next do 0:10:47.640 --> 0:10:49.400 on Wall Street Week on Bloomberg. 0:10:50.760 --> 0:10:55.000 This is Bloomberg Wall Street Week with David Weston from 0:10:55.120 --> 0:10:57.800 Bloomberg Radio. 0:11:02.600 --> 0:11:04.760 This is Wall Street Week. I'm David Weston. The market 0:11:04.800 --> 0:11:08.040 had one wild week as the SMP five hundred added 0:11:08.080 --> 0:11:11.240 five point eighty five percent to end up at forty 0:11:11.400 --> 0:11:14.240 three point fifty eight, though that is still below the 0:11:14.320 --> 0:11:16.960 median year end number of our Bloomberg ls, which is 0:11:16.960 --> 0:11:19.480 at forty four to thirty five. The Nasdaq was up 0:11:19.559 --> 0:11:22.240 six point six percent, while the yield on the ten 0:11:22.320 --> 0:11:25.280 year gave up a full twenty eight basis points, falling 0:11:25.360 --> 0:11:27.760 all the way back down to four point five seven. 0:11:27.960 --> 0:11:30.080 Here to explain it all to us to Scott Cronerd, 0:11:30.080 --> 0:11:32.600 he's City US equity strategist. It's gott great to have 0:11:32.640 --> 0:11:34.720 you back with us. So why don't you explain because 0:11:34.760 --> 0:11:36.760 it was quite a wild weekend as the week went 0:11:36.800 --> 0:11:38.160 on and got wilder and wilder. 0:11:39.040 --> 0:11:40.960 Well, I think, David, let's just start with, you know, 0:11:41.000 --> 0:11:43.960 two words interest rates. So to put some context into 0:11:43.960 --> 0:11:47.240 what happened this week, let's consider the following since the 0:11:47.320 --> 0:11:49.959 end of July. So over the past three months, you've 0:11:50.000 --> 0:11:54.040 seen the nominal SMP the nominal tenure ye'ld move from 0:11:54.520 --> 0:11:58.280 roughly four percent to approaching five percent as recently as 0:11:58.320 --> 0:12:00.920 a week or so ago. In the mean time, really 0:12:01.000 --> 0:12:04.160 yields moved from roughly one and a half percent up 0:12:04.160 --> 0:12:06.480 to two and a half percent. This had a couple 0:12:06.480 --> 0:12:09.800 of profound impact on the SMP. First, what it did 0:12:10.040 --> 0:12:15.920 was increase the concern regarding the economic readthrough to rising rates. Second, yes, 0:12:16.000 --> 0:12:19.080 it had some valuation influence on the broader market, but 0:12:19.120 --> 0:12:23.080 then third it also increased the concern about even higher 0:12:23.160 --> 0:12:26.400 rates and the implications that may have for our growing 0:12:26.400 --> 0:12:30.800 deficit situation. So this week, essentially what happened to your point, 0:12:31.000 --> 0:12:34.040 you took ten year yields down and the response to 0:12:34.080 --> 0:12:37.679 some of the economic data fed commentary, and essentially you 0:12:38.040 --> 0:12:41.120 snapped the rubber band that had been getting stretched pretty wide, 0:12:41.200 --> 0:12:43.840 as the SMP had pulled back roughly ten percent over 0:12:43.880 --> 0:12:44.559 that timeframe. 0:12:44.880 --> 0:12:46.160 And you have a chart that will put up for 0:12:46.200 --> 0:12:49.400 our television audience actuation showing that rubber band snapping back, 0:12:49.440 --> 0:12:52.560 which is a relative yield between stocks and bonds. Essentially 0:12:52.559 --> 0:12:55.079 to simplify the chart that will show it to the audience. 0:12:55.679 --> 0:12:58.120 Yeah, essentially, what's been happening here is as rates have 0:12:58.200 --> 0:13:03.400 backed up, are cross asset valuation work has increasingly favored 0:13:03.400 --> 0:13:06.440 fixed income or bonds. And so essentially, as you look 0:13:06.440 --> 0:13:08.640 at the opportunity and say a five year ten year 0:13:08.720 --> 0:13:12.160 yield versus the expected return on the S and B 0:13:12.200 --> 0:13:16.280 five hundred or US equities, it's increasingly skewed in favor of, Hey, 0:13:16.520 --> 0:13:18.480 why didn't I stay in bonds, whether it be short 0:13:18.600 --> 0:13:21.240 term be money market funds where the Fed funds rate is, 0:13:21.600 --> 0:13:23.960 or longer term out to the ten year yield. And 0:13:24.080 --> 0:13:27.400 so our point here is that that concern, we think 0:13:27.480 --> 0:13:31.199 has kept a lot of flow headwind on US equities, 0:13:31.559 --> 0:13:34.920 and again, combined with this pullback in ten year yields 0:13:34.960 --> 0:13:38.600 this week, you've triggered a snapback that has had the 0:13:38.640 --> 0:13:41.679 effect of drawing money back into equities very quickly. 0:13:41.800 --> 0:13:44.440 Scott, it strikes me through that really lucid explanation of 0:13:44.480 --> 0:13:46.920 the week, there wasn't that much reference to the Fed 0:13:46.960 --> 0:13:49.160 and what they're doing the rates. I mean, sure, we 0:13:49.280 --> 0:13:53.040 had a news conference with Chair Japal and they came 0:13:53.040 --> 0:13:55.160 out of the decision not to do anything, But how 0:13:55.240 --> 0:13:57.440 much of this is really a matter of federal funds rates? 0:13:57.440 --> 0:13:59.520 As opposed to other macro factors right now. 0:14:00.240 --> 0:14:03.560 Yeah, So I think the federal funds situation, I think 0:14:03.600 --> 0:14:06.640 most investors have gotten comfortable that if we're not at 0:14:06.720 --> 0:14:09.320 a FED fund peak, we're awfully close, right, And so 0:14:09.600 --> 0:14:12.720 whether the Fed decided to put another twenty five basis 0:14:12.720 --> 0:14:16.160 points on or not was certainly relevant. But in our 0:14:16.240 --> 0:14:18.960 view it's kind of paled in comparison to what's been 0:14:19.000 --> 0:14:23.320 happening within the bond market internals, where this move in 0:14:23.600 --> 0:14:26.760 the ten yere yields is probably more indicative of the 0:14:26.880 --> 0:14:30.880 rate that you would use for evaluating future projects and 0:14:30.920 --> 0:14:33.840 a company by company basis, how you think about this 0:14:33.920 --> 0:14:37.440 again stock versus bond math, and increasingly how you think 0:14:37.480 --> 0:14:41.320 about the longer term valuation set up for equities, and 0:14:41.400 --> 0:14:45.400 so yes, Fed funds is very important here. Our focus 0:14:45.400 --> 0:14:47.800 for the past month or longer has really been more 0:14:47.880 --> 0:14:51.680 so on the ten year yield component as the culmination 0:14:51.800 --> 0:14:53.880 of all these issues that are coming into play right now. 0:14:53.960 --> 0:14:55.880 Really great to have you with us. That's Scott Croner 0:14:56.200 --> 0:15:00.760 of City. UAW has tentative agreements with all three major 0:15:00.880 --> 0:15:05.360 US automakers. Did the uawhad, Sean Fain says, didn't leave 0:15:05.520 --> 0:15:07.680 any money on the table from his point of view, 0:15:07.880 --> 0:15:09.920 to take us through those deals and what they may 0:15:10.000 --> 0:15:12.800 mean for the industry. Welcome back now, Steve Radner, Chairman 0:15:12.840 --> 0:15:15.680 and CEO of Will Advisors, which invests the personal and 0:15:15.760 --> 0:15:18.680 philanthropic assets of Michael Bloomberg. He is, of course our 0:15:18.720 --> 0:15:21.800 founder and majority shareholders. In addition to so many things 0:15:21.840 --> 0:15:24.240 you've done in your career, you're also the lead advisor 0:15:24.280 --> 0:15:26.920 to President Obama for the Presidential task Force in the Auditors. 0:15:26.920 --> 0:15:29.320 So you know this business terribly Well, what do you 0:15:29.360 --> 0:15:31.840 make of the deals as they've been described so far 0:15:31.960 --> 0:15:32.760 for the Big Three? 0:15:33.040 --> 0:15:35.520 Well, I think we have the details now, have packaged. 0:15:35.520 --> 0:15:37.840 It's this stick I was just reading it. I think 0:15:37.840 --> 0:15:40.760 it's a good outcome for both sides. Actually, I think 0:15:40.800 --> 0:15:42.960 the union got what they want, most of what they 0:15:43.000 --> 0:15:45.400 were much of what they wanted, and much of what 0:15:45.440 --> 0:15:49.080 they deserve, which are substantial pay increases. They got cola 0:15:49.160 --> 0:15:52.320 cost of living adjustments, back, the right to strike in 0:15:52.360 --> 0:15:55.080 certain places, things like that. And I think from the 0:15:55.080 --> 0:15:58.160 standpoint of the companies, what's really important is that there 0:15:58.200 --> 0:16:02.160 was no backsliding on world rules, on all the restrictions 0:16:02.160 --> 0:16:04.680 that made it hard to manage those companies before we 0:16:04.720 --> 0:16:07.480 restructured them in two thousand and nine, and they also 0:16:07.560 --> 0:16:10.760 did not go back to define benefit pension plans or 0:16:11.440 --> 0:16:15.080 company paid retirey healthcare, which of course everybody would like 0:16:15.200 --> 0:16:18.800 workers to have, but simply isn't in the playbook anymore 0:16:18.520 --> 0:16:20.440 in today's economy. 0:16:20.600 --> 0:16:23.480 What about that flexibility because earlier on Walls Reetvik, you 0:16:23.560 --> 0:16:25.840 weren't warned about those work rules because you had to 0:16:25.880 --> 0:16:27.920 deal with those back two thousand and twousand and nine, 0:16:28.400 --> 0:16:30.960 there were some agreements such as, for example, the right 0:16:31.000 --> 0:16:33.840 to strike as I understand it, for any individual plant closing. 0:16:34.080 --> 0:16:36.600 Do you think this will still give the auto companies 0:16:36.680 --> 0:16:40.360 enough flexibility to deal with a really changing environment in autos. 0:16:40.640 --> 0:16:43.120 Yeah, I do. I think the thing that the union 0:16:43.480 --> 0:16:46.320 has to be careful about is, as we've talked about before, 0:16:46.400 --> 0:16:48.720 the INN and the Yang, is that when you increase 0:16:48.760 --> 0:16:51.960 pay increase costs to the companies. They're talking about eight 0:16:52.040 --> 0:16:54.600 or nine hundred dollars a car potentially of increased costs. 0:16:54.920 --> 0:16:57.680 What can happen then is the jobs can move, that 0:16:57.720 --> 0:17:01.040 the next plant doesn't get built in the US, it 0:17:01.080 --> 0:17:04.200 gets built in Mexico, and that the right to strike 0:17:04.280 --> 0:17:07.879 does not prevent that from happening. And that's what's been 0:17:07.920 --> 0:17:10.280 happening in the auto industry for the last fifteen years, 0:17:10.320 --> 0:17:12.560 the number of the jobs I've been moving. It's not 0:17:12.680 --> 0:17:16.320 a coincidence that the big three companies essentially don't really 0:17:16.359 --> 0:17:18.200 make small cars in the US anymore. 0:17:18.240 --> 0:17:19.080 They cannot afford. 0:17:19.080 --> 0:17:21.840 They simply can't make them with any kind of reasonable 0:17:21.840 --> 0:17:24.840 profit margin given the cost structures they have. So we 0:17:24.880 --> 0:17:27.000 all want workers to do more, but we don't want 0:17:27.040 --> 0:17:29.000 it to cost jobs. And that's the thing we have 0:17:29.040 --> 0:17:30.119 to be really careful about. 0:17:30.200 --> 0:17:32.160 Come back to your point of at a competition moving 0:17:32.240 --> 0:17:34.880 to Mexico, moving to right to work states, there's also 0:17:34.880 --> 0:17:39.679 a competition from non union producers, for example of teslas, 0:17:39.960 --> 0:17:43.680 you know, for electric vehicles. Does this put the Big 0:17:43.720 --> 0:17:47.359 three at a substantially greater disadvantage to the Teslas of 0:17:47.359 --> 0:17:50.120 this world and also some of the Japanese automakers, who, 0:17:50.119 --> 0:17:51.920 as understand, also don't have unions. 0:17:52.280 --> 0:17:53.080 Yeah, it does. 0:17:53.359 --> 0:17:56.080 No getting around that if you increase your costs of 0:17:56.119 --> 0:17:58.439 a car by eight or nine hundred dollars, you're at 0:17:58.480 --> 0:18:01.159 a disadvantage. And I get to mention Tesla because it 0:18:01.200 --> 0:18:03.159 wasn't really around in two thousand and nine. I was 0:18:03.200 --> 0:18:06.720 thinking about Mexico and the southern transplants, but Tesla is 0:18:06.760 --> 0:18:09.840 absolutely a factor in this, and companies like Tesla that 0:18:09.960 --> 0:18:12.960 don't have unions and pay substantially less, and again that's 0:18:12.960 --> 0:18:15.320 the yin and the yang for the unions to think about, 0:18:15.359 --> 0:18:19.080 because if General Motors and Stillantis and Ford can't be 0:18:19.200 --> 0:18:21.760 competitive with Tesla, then they're going to lose jobs. They're 0:18:21.760 --> 0:18:24.840 gonna lose sales, which means losing jobs. And you can 0:18:24.880 --> 0:18:27.159 have the right to strike all day long, but if 0:18:27.600 --> 0:18:30.080 if the company ends up closing a factory or reducing 0:18:30.080 --> 0:18:32.720 the number of shifts, that's what's going to happen. 0:18:33.119 --> 0:18:35.720 What do you make of the question of the shift 0:18:35.920 --> 0:18:39.480 in power toward labor. There has been historically shift away 0:18:39.480 --> 0:18:43.800 from labor toward capital overall and certainly the private sector particularly. 0:18:45.040 --> 0:18:47.639 Are we seeing a fundamental shift back again, or are 0:18:47.640 --> 0:18:51.040 we seeing essentially a peak time when labor has the 0:18:51.080 --> 0:18:53.440 most power and it may well come down from there. 0:18:53.720 --> 0:18:56.240 I think somewhere in between. I think we're definitely seeing 0:18:56.320 --> 0:18:58.960 a shift back. If you look at a chart showing 0:18:59.080 --> 0:19:02.400 stays lost to you'll see that relative to five years 0:19:02.480 --> 0:19:05.040 or ten years ago, there's been a significant increase in 0:19:05.119 --> 0:19:07.359 days loss to strikes. We all know about the ups 0:19:07.440 --> 0:19:10.600 drivers and the screenwriters and the auto workers, but you'll 0:19:10.600 --> 0:19:12.600 also see the days lost or nothing compared to what 0:19:12.640 --> 0:19:15.720 they were back in the seventies and eighties. So we're 0:19:15.760 --> 0:19:18.520 not anywhere back in that zip code. I think this 0:19:18.560 --> 0:19:22.000 is a healthy development. Actually, I think that capital has 0:19:22.040 --> 0:19:24.000 benefited too much at the expense of labor. 0:19:24.520 --> 0:19:24.960 You're in a. 0:19:24.880 --> 0:19:28.000 Situation now where people's real wages still have not recovered 0:19:28.040 --> 0:19:31.000 given the inflation we've had, but corporate profits have remained 0:19:31.040 --> 0:19:34.000 quite strong. And I'm happy corporate profits have remained quite strong, 0:19:34.320 --> 0:19:36.720 But I think companies can ford to do more. 0:19:36.960 --> 0:19:39.080 Okay, Steve, thank you so much for Rebecca. Great to 0:19:39.080 --> 0:19:41.479