1 00:00:00,520 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,840 --> 00:00:07,120 Speaker 1: to the markets this week. U S CPI nevers, reinforcing 3 00:00:07,160 --> 00:00:10,639 Speaker 1: concerns about inflation. The financial stories that chief are worth 4 00:00:10,720 --> 00:00:13,480 Speaker 1: a really different reaction to mark. Its more indications of 5 00:00:13,640 --> 00:00:16,239 Speaker 1: just how hot the U. S economy really is. Through 6 00:00:16,239 --> 00:00:19,520 Speaker 1: the eyes of the most influential voices Larry Summers, the 7 00:00:19,560 --> 00:00:22,479 Speaker 1: former Tritory Secretary, Katherine Keating, CEO of the n Y 8 00:00:22,600 --> 00:00:26,160 Speaker 1: Mallam Sam's l Sharmon and founder of Equatic Group Investment 9 00:00:26,200 --> 00:00:30,600 Speaker 1: in Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 10 00:00:30,600 --> 00:00:34,360 Speaker 1: We just don't know about the U S elections about inflation, 11 00:00:34,479 --> 00:00:38,760 Speaker 1: and goodness knows about cryptocurrencies. This is Bloomberg Wall Street Week. 12 00:00:38,840 --> 00:00:42,479 Speaker 1: I'm David Weston this week special contributor to Larry Summers 13 00:00:42,479 --> 00:00:45,160 Speaker 1: of Harvard on the good, the bad, and the ugly 14 00:00:45,320 --> 00:00:49,519 Speaker 1: of U S elections. I'm quite encouraged, Uh, the center 15 00:00:49,600 --> 00:00:53,440 Speaker 1: is holy. And Glenn Hubbard of Columbia on a Republican 16 00:00:53,440 --> 00:01:10,280 Speaker 1: plan for building an economy for sustainable growth. An awful 17 00:01:10,360 --> 00:01:12,720 Speaker 1: lot happened this week, but it's not yet clear what 18 00:01:12,840 --> 00:01:17,080 Speaker 1: it all meant. The US held those much anticipated midterm elections, 19 00:01:17,280 --> 00:01:19,560 Speaker 1: and instead of a big red wave, we got what 20 00:01:19,640 --> 00:01:23,920 Speaker 1: amounted to a little red ripple. The red wave didn't happen. Instead, 21 00:01:23,959 --> 00:01:26,559 Speaker 1: we're going to have more divided government, with the full 22 00:01:26,600 --> 00:01:29,320 Speaker 1: consequences is still up in the air. How do you 23 00:01:29,360 --> 00:01:32,600 Speaker 1: get things done with the Republican House and eagerly evenly 24 00:01:32,680 --> 00:01:37,199 Speaker 1: divided Senate in bodless process. We also got consumer price 25 00:01:37,280 --> 00:01:39,800 Speaker 1: numbers for the United States. They were good, coming in 26 00:01:39,959 --> 00:01:42,920 Speaker 1: lower than expected on both the headline and the core numbers, 27 00:01:43,280 --> 00:01:46,119 Speaker 1: but they left us wondering whether this was the beginning 28 00:01:46,200 --> 00:01:51,600 Speaker 1: of inflations end for a false dawn, a significant improvement 29 00:01:51,720 --> 00:01:55,400 Speaker 1: in the data that wasn't expected by the markets. And 30 00:01:55,480 --> 00:01:58,600 Speaker 1: then we come to the wonderful land of cryptocurrencies. The 31 00:01:58,640 --> 00:02:02,520 Speaker 1: so called Emperor of Crypto got dethroned, Sam bankmun Fried 32 00:02:02,640 --> 00:02:04,320 Speaker 1: had to turn over the keys to his f t 33 00:02:04,520 --> 00:02:08,040 Speaker 1: X kingdom to his arch rival Jao ching Ping, only 34 00:02:08,080 --> 00:02:10,919 Speaker 1: to have him promptly give them back. And then as 35 00:02:10,919 --> 00:02:14,840 Speaker 1: the weekended, the other shoe dropped. SPF resigned to CEO 36 00:02:15,120 --> 00:02:18,680 Speaker 1: as f t X filed for Chapter eleven bankruptcy, leaving 37 00:02:18,760 --> 00:02:22,840 Speaker 1: questions about the broader crypto industry. One of the people 38 00:02:22,919 --> 00:02:25,600 Speaker 1: that are kind of a larger speakers in this industry 39 00:02:25,639 --> 00:02:28,440 Speaker 1: had said that we were looking for contagion in the industry. 40 00:02:28,560 --> 00:02:32,840 Speaker 1: This is the contagion. But if the rest of us 41 00:02:32,840 --> 00:02:35,280 Speaker 1: had some doubts for this week, the markets sure didn't 42 00:02:35,280 --> 00:02:37,880 Speaker 1: share those doubts. The markets took one look at those 43 00:02:37,880 --> 00:02:41,079 Speaker 1: CPI members and never looked back. With the SMP five 44 00:02:41,520 --> 00:02:43,799 Speaker 1: up five point nine percent in the week, it's best 45 00:02:43,800 --> 00:02:46,799 Speaker 1: week since June, the NASDAC a a whopping eight point 46 00:02:46,919 --> 00:02:49,760 Speaker 1: one percent, and bonds very much in demand, with the 47 00:02:49,840 --> 00:02:52,959 Speaker 1: yield on the tenure falling thirty five basis points over 48 00:02:53,000 --> 00:02:54,720 Speaker 1: the course of the week. Here to take us through 49 00:02:54,760 --> 00:02:58,480 Speaker 1: what they saw in this dramatic market turn are Lori Calvacina, 50 00:02:58,600 --> 00:03:01,680 Speaker 1: she's head of US Equity Strata for OURBC Capital Markets. 51 00:03:01,840 --> 00:03:04,760 Speaker 1: And David Bianco, he's chief investment officer at d SO. 52 00:03:04,840 --> 00:03:06,480 Speaker 1: Welcome back both you. Good to have you here, be 53 00:03:06,480 --> 00:03:08,240 Speaker 1: able to start with you. What did you make it 54 00:03:08,240 --> 00:03:10,760 Speaker 1: this week? It was such a dramatic turnaround on Thursday 55 00:03:10,760 --> 00:03:14,000 Speaker 1: show we believe it. I would not. I would take 56 00:03:14,000 --> 00:03:16,000 Speaker 1: it with a grain of salt. What a week it was. 57 00:03:16,360 --> 00:03:19,560 Speaker 1: The midterm elections and the inflation report, and let's not 58 00:03:19,600 --> 00:03:23,000 Speaker 1: forget Veterans Day. Without our vets a big thanks for them, 59 00:03:23,000 --> 00:03:26,000 Speaker 1: there wouldn't be peace. Uh. The inflation reports stole the 60 00:03:26,520 --> 00:03:28,839 Speaker 1: limelight though for the week, and in arguably I don't 61 00:03:28,840 --> 00:03:31,920 Speaker 1: think it should have. It's just one data point. And 62 00:03:31,960 --> 00:03:34,960 Speaker 1: whilst very welcome that inflation has come down from the highs, 63 00:03:35,600 --> 00:03:40,360 Speaker 1: it still seems broad based, and particularly broad based in services, 64 00:03:40,360 --> 00:03:43,880 Speaker 1: which suggests the labor market is still extremely tight. I'd 65 00:03:44,040 --> 00:03:49,280 Speaker 1: argue that we see narrow disinflation at goods, apparel, used cars, 66 00:03:49,560 --> 00:03:54,000 Speaker 1: and still broad based uh, service inflation. So I I 67 00:03:54,320 --> 00:03:56,880 Speaker 1: think inflation is still still a risk. And I just 68 00:03:56,920 --> 00:04:01,320 Speaker 1: remind people that in October inflation was about six percent 69 00:04:01,440 --> 00:04:04,120 Speaker 1: back then and so it's still about over six percent 70 00:04:04,240 --> 00:04:06,400 Speaker 1: on a core basis. Now, that's a lot of inflation 71 00:04:06,440 --> 00:04:09,080 Speaker 1: over the past two years. It's a really good point. 72 00:04:09,160 --> 00:04:10,680 Speaker 1: I mean, we we like to focus on how much 73 00:04:10,720 --> 00:04:12,920 Speaker 1: has come down. It has come down some finally, but 74 00:04:12,960 --> 00:04:14,560 Speaker 1: it's still at a very high level. And do we 75 00:04:14,560 --> 00:04:16,360 Speaker 1: have any insurance it's going to keep coming down at 76 00:04:16,360 --> 00:04:18,400 Speaker 1: a fairly brisk level that goes down to two percent 77 00:04:18,520 --> 00:04:20,640 Speaker 1: or they're about well, look, I think it's all about 78 00:04:20,640 --> 00:04:23,200 Speaker 1: where the numbers come in versus expectations, and if you 79 00:04:23,200 --> 00:04:26,640 Speaker 1: look at street consensus, they're already baking in pretty significant moderation, 80 00:04:26,680 --> 00:04:28,960 Speaker 1: you know, kind of heading back to three percent next year. 81 00:04:29,080 --> 00:04:31,760 Speaker 1: So I think it was, you know, not surprising to 82 00:04:31,839 --> 00:04:34,320 Speaker 1: me to see such a fierce reaction and markets maybe not. 83 00:04:34,360 --> 00:04:36,400 Speaker 1: I didn't expect quite as much as what we got. 84 00:04:36,880 --> 00:04:38,400 Speaker 1: But I can tell you, David, I've talked to a 85 00:04:38,400 --> 00:04:41,119 Speaker 1: lot of investors the last few weeks who have really 86 00:04:41,640 --> 00:04:44,400 Speaker 1: kind of quietly arguing it was getting ready to come 87 00:04:44,440 --> 00:04:47,520 Speaker 1: down building their models. Um, and you know, had gotten 88 00:04:47,560 --> 00:04:49,520 Speaker 1: fooled by this, you know, several times in the past 89 00:04:49,560 --> 00:04:51,200 Speaker 1: when it didn't happen. And I think there was just 90 00:04:51,320 --> 00:04:55,320 Speaker 1: tremendous relief that this kind of idea that inflation is moderating, 91 00:04:55,360 --> 00:04:58,120 Speaker 1: that we finally got the data to cooperate. It's monitoring 92 00:04:58,160 --> 00:05:00,599 Speaker 1: for one data point, Laurie, but we've had the chair 93 00:05:00,600 --> 00:05:02,320 Speaker 1: of the FED say again and again and again, I 94 00:05:02,360 --> 00:05:04,080 Speaker 1: need more than one data point. I need quite a 95 00:05:04,080 --> 00:05:05,919 Speaker 1: few data points before I'm really gonna believe it. So 96 00:05:06,080 --> 00:05:08,600 Speaker 1: do we think there's actually gonna change FED behavior at 97 00:05:08,600 --> 00:05:11,039 Speaker 1: this point? Well, I, you know, unfortunately, I think that 98 00:05:11,080 --> 00:05:13,520 Speaker 1: the FED probably didn't like the reaction that we saw 99 00:05:13,560 --> 00:05:16,160 Speaker 1: on Thursday, and I wouldn't be surprised to see the rhetoric, 100 00:05:16,279 --> 00:05:18,640 Speaker 1: you know, take another kind of hawkish tone to try 101 00:05:18,640 --> 00:05:21,120 Speaker 1: to clamp down enthusiasm. Um, I think things are going 102 00:05:21,160 --> 00:05:23,560 Speaker 1: to stay choppy for quite some time. You know, Let's 103 00:05:23,600 --> 00:05:25,480 Speaker 1: enjoy the day while at last it was a nice week. 104 00:05:25,640 --> 00:05:27,000 Speaker 1: You know, we we've been in need of a nice 105 00:05:27,040 --> 00:05:29,520 Speaker 1: week in the equity market. Um. But I wouldn't you know, 106 00:05:29,640 --> 00:05:31,680 Speaker 1: necessarily expect this to go up in a straight line 107 00:05:31,680 --> 00:05:34,200 Speaker 1: from here. Dude, I want to other markets basically baking 108 00:05:34,240 --> 00:05:36,400 Speaker 1: and really getting back down, if not to two percent, 109 00:05:36,480 --> 00:05:37,960 Speaker 1: to sort of two and a half three percent. Are 110 00:05:38,000 --> 00:05:41,080 Speaker 1: they a little complacently bond markets? But I think the 111 00:05:41,240 --> 00:05:44,320 Speaker 1: markets are complacent. It's it's interesting how the bond market 112 00:05:44,440 --> 00:05:48,040 Speaker 1: also yields fell upon the inflation report, and maybe that's 113 00:05:48,040 --> 00:05:52,560 Speaker 1: all that equities need to know. But yes, investors expect 114 00:05:52,560 --> 00:05:55,440 Speaker 1: inflation to come down. But at this stage we can't 115 00:05:55,560 --> 00:05:58,760 Speaker 1: keep saying. Eventually, it's important that the FED or other 116 00:05:58,800 --> 00:06:02,000 Speaker 1: factors get inflation down quickly because we're looking on the 117 00:06:02,080 --> 00:06:05,640 Speaker 1: verge of inflation for inflation becoming a multi year problem, 118 00:06:05,880 --> 00:06:08,440 Speaker 1: and if high inflation is a multi year problem, that 119 00:06:08,520 --> 00:06:12,039 Speaker 1: might change the entire inflation risk premium demanded by the 120 00:06:12,040 --> 00:06:15,159 Speaker 1: bond market. So I think we're very lucky that the 121 00:06:15,160 --> 00:06:17,560 Speaker 1: bond market is staying calm about inflation so far. We 122 00:06:17,560 --> 00:06:20,760 Speaker 1: shouldn't press our luck. So clearly, the CPI drove the 123 00:06:20,800 --> 00:06:24,320 Speaker 1: markets this week and they drowned out any news about 124 00:06:24,360 --> 00:06:26,440 Speaker 1: the mid terms? Was that right, David? Did we pay 125 00:06:26,600 --> 00:06:28,320 Speaker 1: enough attention to do you think the markets to the 126 00:06:28,360 --> 00:06:30,200 Speaker 1: mid terms? Well, you know, Lori and I were talking. 127 00:06:30,200 --> 00:06:33,240 Speaker 1: It seemed like investors were trying to follow some game 128 00:06:33,279 --> 00:06:35,159 Speaker 1: plan they had in mind about how the market would 129 00:06:35,240 --> 00:06:39,799 Speaker 1: rally post midterm elections, and Republican red wave didn't happen. Hopefully, 130 00:06:39,880 --> 00:06:43,800 Speaker 1: the inflation report wasn't a surprise negatively, it was positively. 131 00:06:44,520 --> 00:06:47,240 Speaker 1: But I think this has gone too far, too fast, 132 00:06:47,640 --> 00:06:49,719 Speaker 1: and I think they did put too much emphasis on 133 00:06:49,760 --> 00:06:52,680 Speaker 1: the inflation report trying to ignore the midterm elections, which 134 00:06:52,720 --> 00:06:56,840 Speaker 1: are still on certain Laura Cavacina and David Bianco will 135 00:06:56,880 --> 00:06:58,559 Speaker 1: be staying with us as we turned from what happened 136 00:06:58,600 --> 00:07:01,159 Speaker 1: this week to invest around it next week in the 137 00:07:01,200 --> 00:07:03,600 Speaker 1: week after for that matter. That's next on Wall Street 138 00:07:03,640 --> 00:07:09,400 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 139 00:07:09,560 --> 00:07:34,880 Speaker 1: David Weston from Bloomberg Radio. In reality, a disillusioned American 140 00:07:34,880 --> 00:07:41,120 Speaker 1: electorate quite plainly, sternly reassessed the empty promises of and 141 00:07:41,200 --> 00:07:46,280 Speaker 1: concluded unmistakably that the incumbent administration not only had presented 142 00:07:46,320 --> 00:07:50,480 Speaker 1: itself in false economic colors as something new rather than 143 00:07:50,520 --> 00:07:54,040 Speaker 1: an all too familiar throwback to the nineteen sixties, but 144 00:07:54,160 --> 00:07:56,840 Speaker 1: had been seriously off base and way out of touch 145 00:07:56,880 --> 00:07:59,960 Speaker 1: with the changing times. Bill Clinton has been campaigning for 146 00:08:00,080 --> 00:08:04,840 Speaker 1: the start against the nineteen eighties this week the eighties 147 00:08:04,840 --> 00:08:08,240 Speaker 1: one that, of course, was Lewis Rockeys around Wall Street 148 00:08:08,400 --> 00:08:12,360 Speaker 1: back in when a different president's first midterm election ended 149 00:08:12,480 --> 00:08:15,480 Speaker 1: in the repudiation of his aconomic program, and the number 150 00:08:15,480 --> 00:08:18,640 Speaker 1: one movie in America was interviewed with the Vampire, while 151 00:08:18,640 --> 00:08:20,800 Speaker 1: the number one song was I'll Make Love to You 152 00:08:20,880 --> 00:08:24,200 Speaker 1: by Boys Two Men. What a difference thirty eight years makes. 153 00:08:24,560 --> 00:08:28,200 Speaker 1: Some people expected a similar rejection of President Biden's economic plans, 154 00:08:28,320 --> 00:08:30,600 Speaker 1: but they didn't get it, as the two parties fought 155 00:08:30,600 --> 00:08:33,640 Speaker 1: to essentially a draw, and the Democrats are on a 156 00:08:33,720 --> 00:08:36,520 Speaker 1: path to losing fewer mid term seats than any party 157 00:08:36,559 --> 00:08:39,200 Speaker 1: in power in twenty years. Still with us our David 158 00:08:39,200 --> 00:08:43,320 Speaker 1: Bianco of DWS and Lori Calasina of RBC. So let 159 00:08:43,320 --> 00:08:45,080 Speaker 1: me let me come back to you, Laurie for a second. 160 00:08:45,160 --> 00:08:47,040 Speaker 1: Let's talk about how you invest around what we're seeing 161 00:08:47,120 --> 00:08:48,880 Speaker 1: right now, given what's going on the CPI, given some 162 00:08:48,880 --> 00:08:51,479 Speaker 1: of the uncertainties about inflation and for that matter, geopolis, 163 00:08:51,920 --> 00:08:54,320 Speaker 1: how do you make investment decisions in this climate? So, 164 00:08:54,360 --> 00:08:55,880 Speaker 1: I think you still have to stick with the longer 165 00:08:55,960 --> 00:08:57,800 Speaker 1: term trajectory, you know, kind of where you see the 166 00:08:57,800 --> 00:09:00,960 Speaker 1: most opportunities longer term. Um. I think that there is 167 00:09:01,000 --> 00:09:03,560 Speaker 1: still a real case to be made for switching from 168 00:09:03,600 --> 00:09:05,840 Speaker 1: the kind of new economy back to the old economy. 169 00:09:05,920 --> 00:09:09,280 Speaker 1: Areas like industrials, energy, financials. A lot of these areas 170 00:09:09,280 --> 00:09:12,080 Speaker 1: still have very very good valuations. I think on the 171 00:09:12,160 --> 00:09:13,880 Speaker 1: more growthy side of the market, I think you want 172 00:09:13,880 --> 00:09:16,520 Speaker 1: to be more selective. So we obviously saw things like 173 00:09:16,559 --> 00:09:19,520 Speaker 1: communications services, a lot of the tech companies really rallied 174 00:09:19,559 --> 00:09:22,040 Speaker 1: pretty fiercely over the last couple of days. UM, I 175 00:09:22,040 --> 00:09:24,240 Speaker 1: think you still want to be careful there. UM. So 176 00:09:24,280 --> 00:09:26,560 Speaker 1: we like tech, we like things like software, we like 177 00:09:26,640 --> 00:09:29,880 Speaker 1: things like semis, which look pretty washed out on earning sentiment. Um, 178 00:09:29,920 --> 00:09:31,440 Speaker 1: but we'd be a little bit more cautious with some 179 00:09:31,480 --> 00:09:34,360 Speaker 1: of the internet related names. To draw a football analogy 180 00:09:34,480 --> 00:09:36,880 Speaker 1: that sounds like running off tackle three yards instead of 181 00:09:36,920 --> 00:09:39,160 Speaker 1: throwing a long ball. That you're not really betting on 182 00:09:39,280 --> 00:09:41,520 Speaker 1: a lot of big growth in the near term. I 183 00:09:41,520 --> 00:09:43,480 Speaker 1: think so, I think so. And you know what we 184 00:09:43,600 --> 00:09:46,120 Speaker 1: see when we look at different economic forecast is the 185 00:09:46,120 --> 00:09:48,880 Speaker 1: price we're likely to pay for a short, shallow recession 186 00:09:49,200 --> 00:09:52,280 Speaker 1: is subpar economic growth that follows. So think of something 187 00:09:52,320 --> 00:09:54,880 Speaker 1: like half a percent one percent um. That is an 188 00:09:54,960 --> 00:09:58,000 Speaker 1: environment in which valuation will matter. So, so, DA, what 189 00:09:58,000 --> 00:09:59,360 Speaker 1: do you think of that? I mean, is this the 190 00:09:59,400 --> 00:10:01,760 Speaker 1: time to really dial it back some? What are you 191 00:10:01,800 --> 00:10:05,080 Speaker 1: interested in? Is investment opportunity? Well forward the latter parts 192 00:10:05,080 --> 00:10:10,000 Speaker 1: of this week, we've gotten more defensively positioned. Um. I 193 00:10:10,040 --> 00:10:12,319 Speaker 1: do think that we have a small recession next year, 194 00:10:12,360 --> 00:10:14,320 Speaker 1: and I do believe it hits profits. Profits would be 195 00:10:14,320 --> 00:10:16,920 Speaker 1: flat at best, probably down five percent. I think Lori's 196 00:10:16,920 --> 00:10:18,960 Speaker 1: down a little bit more than that. And har estimate 197 00:10:19,000 --> 00:10:23,280 Speaker 1: so the SMPS at eighteen nineteen times forward earnings. And 198 00:10:23,360 --> 00:10:25,400 Speaker 1: you know, even though it's just in our view a 199 00:10:25,520 --> 00:10:29,240 Speaker 1: short and shallow recession ahead. I think there's gonna be 200 00:10:29,280 --> 00:10:31,959 Speaker 1: more frequent recessions than we've been accustomed to in the 201 00:10:32,000 --> 00:10:35,480 Speaker 1: past twenty thirty years during the ties, and also inflation 202 00:10:35,480 --> 00:10:39,000 Speaker 1: a little bit more sticky. I love these clips after 203 00:10:39,040 --> 00:10:42,360 Speaker 1: that midterm election. I mean that's when when Clinton pivoted, 204 00:10:42,640 --> 00:10:45,640 Speaker 1: and it's also one of the Republicans had strong messaging 205 00:10:45,720 --> 00:10:50,880 Speaker 1: and policy suggestions and a long period of economic growth 206 00:10:50,880 --> 00:10:54,840 Speaker 1: and decline in inflation for uh that decade and twenty 207 00:10:54,880 --> 00:10:57,560 Speaker 1: five years after that. So I'm just not sure we 208 00:10:57,600 --> 00:11:00,200 Speaker 1: saw the signs of that happening today. So what's SCS 209 00:11:00,240 --> 00:11:02,360 Speaker 1: do you like, David? What what are we looking? Well? 210 00:11:02,400 --> 00:11:04,520 Speaker 1: Were there there? I focus on industries and then my 211 00:11:04,559 --> 00:11:08,360 Speaker 1: portfolio managers picked the stocks and the various strategies. I'm 212 00:11:08,679 --> 00:11:13,400 Speaker 1: most overweight healthcare, both big biotech and pharmaceuticals and and 213 00:11:13,559 --> 00:11:16,440 Speaker 1: big banks. Uh. Then we're we're dabbling in a few 214 00:11:16,440 --> 00:11:19,040 Speaker 1: other areas like in our space and defense and oil services. 215 00:11:19,040 --> 00:11:21,559 Speaker 1: But we're overweight, but we're also underweight a lot of 216 00:11:21,559 --> 00:11:23,840 Speaker 1: things that we think are going to be weighed on 217 00:11:23,960 --> 00:11:28,120 Speaker 1: by the the goods and the manufacturing recession that we 218 00:11:28,200 --> 00:11:32,880 Speaker 1: see ahead. Materials, much of industrials. We're still cautious on 219 00:11:32,920 --> 00:11:38,479 Speaker 1: semi conductors, UM and all of everything consumer, consumer discretionary, 220 00:11:38,559 --> 00:11:41,840 Speaker 1: auto retailing, of of both brick and mortar, and even 221 00:11:41,840 --> 00:11:44,440 Speaker 1: internet retailing. How does that match up with you, for example, 222 00:11:44,480 --> 00:11:45,959 Speaker 1: semi conductors. Do you have a different view on some 223 00:11:46,040 --> 00:11:48,400 Speaker 1: of conductors. So, I think with semi conductors, what we're 224 00:11:48,440 --> 00:11:51,760 Speaker 1: seeing is that basically nobody's taking earnings revisions earnings estimates 225 00:11:51,840 --> 00:11:54,920 Speaker 1: up right now, and historically when nobody's taking earnings revisions 226 00:11:55,000 --> 00:11:57,920 Speaker 1: up or earnings estimates up, it's usually pretty good twelve 227 00:11:57,920 --> 00:11:59,600 Speaker 1: month forward signal in the market. Now, it doesn't mean 228 00:11:59,640 --> 00:12:01,520 Speaker 1: they're going to turnaround to day. We have seen some 229 00:12:01,640 --> 00:12:04,160 Speaker 1: of the you know, price action improved, they're a bit lately, 230 00:12:04,200 --> 00:12:07,400 Speaker 1: but it's really a longer term, kind of contrarian type call. Um. 231 00:12:07,400 --> 00:12:08,760 Speaker 1: I would say, though, I think David and I are 232 00:12:08,800 --> 00:12:10,760 Speaker 1: mostly on the same page on a lot of stuff. 233 00:12:10,760 --> 00:12:12,400 Speaker 1: You know, we like the banks, um, I think we 234 00:12:12,480 --> 00:12:14,760 Speaker 1: both still like small caps at this point in time, 235 00:12:15,320 --> 00:12:18,720 Speaker 1: and you know, I'm probably you know, a little more 236 00:12:18,840 --> 00:12:21,120 Speaker 1: cautious on the defensive areas of the market. I think 237 00:12:21,160 --> 00:12:24,520 Speaker 1: things like staples and utilities still very expensive, you've had 238 00:12:24,600 --> 00:12:27,560 Speaker 1: some room left and health care valuations, but that's starting 239 00:12:27,559 --> 00:12:30,760 Speaker 1: to creep up as well. UM, So I'm really by 240 00:12:30,800 --> 00:12:33,160 Speaker 1: health cares. Maybe David is I'm still overweight, but I'm 241 00:12:33,160 --> 00:12:35,400 Speaker 1: getting a little concerned about it. I mean, frankly, just 242 00:12:35,440 --> 00:12:38,120 Speaker 1: because coming into this reporting season we were getting close 243 00:12:38,160 --> 00:12:39,960 Speaker 1: to peak valuation on that sector as well, and now 244 00:12:39,960 --> 00:12:41,920 Speaker 1: we've knocked it down a peggatu that there were some 245 00:12:42,000 --> 00:12:44,480 Speaker 1: rough earnings um with this sector, but I think we 246 00:12:44,520 --> 00:12:47,680 Speaker 1: have to tread cautiously on the defensives. I like small caps, 247 00:12:47,679 --> 00:12:50,160 Speaker 1: I like banks because they are typically areas that do 248 00:12:50,240 --> 00:12:53,720 Speaker 1: well coming out of a recession. You've got really cheap valuations. 249 00:12:53,960 --> 00:12:55,920 Speaker 1: In the case of small caps, we've got a bucket 250 00:12:55,920 --> 00:12:58,320 Speaker 1: of work showing that they're pricing in a recession already. 251 00:12:58,600 --> 00:13:01,200 Speaker 1: In financials, I think it's more of an ings resiliency thesis, 252 00:13:01,200 --> 00:13:03,439 Speaker 1: more of a domestic play um. But I think it's 253 00:13:03,480 --> 00:13:06,160 Speaker 1: probably time, in my estimation, to start looking for some 254 00:13:06,240 --> 00:13:08,760 Speaker 1: of those recovery trades. What extent have the projections of 255 00:13:08,800 --> 00:13:11,080 Speaker 1: earnings taken at account inflation, because that really is a 256 00:13:11,120 --> 00:13:14,199 Speaker 1: margin pressure issue, isn't it? Well? So well, our modeling 257 00:13:14,280 --> 00:13:16,360 Speaker 1: is shown on inflation that if we you know, if 258 00:13:16,400 --> 00:13:18,320 Speaker 1: you sort of think about how they play into an 259 00:13:18,320 --> 00:13:22,320 Speaker 1: earnings model. For example, UM, I see see positive correlations 260 00:13:22,320 --> 00:13:25,360 Speaker 1: with revenues. So the inflationary backdrop has really been goosing 261 00:13:25,360 --> 00:13:29,080 Speaker 1: revenues in SMP companies. UM. We find that when inflation 262 00:13:29,120 --> 00:13:32,000 Speaker 1: comes down, it doesn't really help margins all that much. 263 00:13:32,000 --> 00:13:35,040 Speaker 1: But bringing inflation down is going to pull revenues down. 264 00:13:35,559 --> 00:13:38,240 Speaker 1: UM wages are actually you know, have a more important 265 00:13:38,640 --> 00:13:41,160 Speaker 1: factor within margins. So one of the reasons why we've 266 00:13:41,160 --> 00:13:43,080 Speaker 1: been so cautious on earnings next year as a whole 267 00:13:43,120 --> 00:13:45,400 Speaker 1: is because we are baking in that moderation and inflation 268 00:13:45,720 --> 00:13:47,400 Speaker 1: it's going to pull the revenues down is not going 269 00:13:47,440 --> 00:13:49,160 Speaker 1: to help the margins as much. But I do think 270 00:13:49,160 --> 00:13:51,960 Speaker 1: a lot of people who cover stocks don't understand the 271 00:13:52,000 --> 00:13:55,280 Speaker 1: revenue dynamic and don't appreciate that the impact on margins 272 00:13:55,320 --> 00:13:56,920 Speaker 1: isn't going to be as big as they think. Where 273 00:13:56,920 --> 00:13:59,200 Speaker 1: are you on earnings going forward? What are you rejecting? 274 00:14:00,000 --> 00:14:02,559 Speaker 1: I estimate for next year's to twenty and I expect 275 00:14:02,559 --> 00:14:05,960 Speaker 1: this year to finish up at about twenty three too, 276 00:14:06,600 --> 00:14:12,120 Speaker 1: thanks to energy slightly UM the average recession, but we're 277 00:14:12,120 --> 00:14:16,360 Speaker 1: expecting smaller than average causes a decline in profits, but 278 00:14:16,559 --> 00:14:19,000 Speaker 1: usually more than half of that decline in profits is 279 00:14:19,040 --> 00:14:21,800 Speaker 1: from financials and energy. Energy smaller than it's been in 280 00:14:21,800 --> 00:14:24,520 Speaker 1: the past, although it's growing every day. Uh, and we 281 00:14:24,600 --> 00:14:27,240 Speaker 1: think banks will be fine because we're not expecting credit 282 00:14:27,280 --> 00:14:31,040 Speaker 1: costs to surge. Thanks to Julie Sally, Danny Burger, and 283 00:14:31,160 --> 00:14:35,440 Speaker 1: Romaine Bostick coming up with the United States is getting 284 00:14:35,440 --> 00:14:38,720 Speaker 1: a new Congress. However, the votes ultimately add up with 285 00:14:38,840 --> 00:14:43,000 Speaker 1: an opportunity to rethink of policy for sustainable growth. We're 286 00:14:43,000 --> 00:14:45,800 Speaker 1: gonna talk with former chairman of the Council of Economic Adviudgers, 287 00:14:45,800 --> 00:14:49,360 Speaker 1: Glenn Hubbard of Columbia about what a sensible Republican plan 288 00:14:49,560 --> 00:14:54,840 Speaker 1: might look like. That's next on Wall Street Week on Bloomberg. 289 00:14:56,800 --> 00:15:00,760 Speaker 1: This is Bloomberg Wall Street Week with David Stick from 290 00:15:00,920 --> 00:15:13,400 Speaker 1: Bloomberg Radio. This is Wall Street Week. I'm David weston 291 00:15:13,440 --> 00:15:16,320 Speaker 1: the u S midterm elections may not be fully resolved yet. 292 00:15:16,560 --> 00:15:18,920 Speaker 1: The President Biden didn't wait to talk about whether they 293 00:15:18,920 --> 00:15:22,360 Speaker 1: point to a rethink of his policies. What in the 294 00:15:22,400 --> 00:15:24,960 Speaker 1: next two years do you intend to do differently to 295 00:15:25,480 --> 00:15:28,560 Speaker 1: change people's opinion of the direction of the country, particularly 296 00:15:28,560 --> 00:15:30,480 Speaker 1: as you can to play a run for president in 297 00:15:30,480 --> 00:15:33,920 Speaker 1: twy twenty four. Nothing, because they're just finding out what 298 00:15:33,960 --> 00:15:36,520 Speaker 1: we're doing. The more they know about what we're doing, 299 00:15:36,560 --> 00:15:40,120 Speaker 1: the more support through is to give us. His views 300 00:15:40,160 --> 00:15:43,240 Speaker 1: of where economic policy might be headed. Welcome now, Glenn Hubbard. 301 00:15:43,280 --> 00:15:45,720 Speaker 1: He's dean emeritus at the Columbia Business School and he 302 00:15:45,840 --> 00:15:48,520 Speaker 1: was the chair of President George W. Bush's Council of 303 00:15:48,560 --> 00:15:51,800 Speaker 1: Economic Advisors. It's also author of The Wall and the Bridge, 304 00:15:52,080 --> 00:15:55,560 Speaker 1: Fear and Opportunity in Disruptions wig So, Dean Hubbard, thank 305 00:15:55,560 --> 00:15:57,320 Speaker 1: you so much for being back with us, my pleasure. 306 00:15:57,360 --> 00:15:58,880 Speaker 1: I really wanted to talk to you because there is 307 00:15:58,880 --> 00:16:00,680 Speaker 1: this question where do we go for here? I mean, 308 00:16:00,720 --> 00:16:02,760 Speaker 1: we don't yet know exactly what happened in the interns. 309 00:16:02,760 --> 00:16:05,200 Speaker 1: We've got a pretty good hunch, probably a narrow majority 310 00:16:05,240 --> 00:16:07,800 Speaker 1: for the Republicans of the House. Quite possibly Democrats will 311 00:16:07,840 --> 00:16:11,440 Speaker 1: hold a sort of split in Senate. What should Republicans 312 00:16:11,480 --> 00:16:13,440 Speaker 1: do if you're up on Capitol Hill? Is there a 313 00:16:13,480 --> 00:16:17,480 Speaker 1: sustainable economic policy for growth they could pursue? I think 314 00:16:17,480 --> 00:16:19,400 Speaker 1: there is, and in fact there's a pivot for the 315 00:16:19,440 --> 00:16:22,760 Speaker 1: president to you know, listening to him just now reminds 316 00:16:22,800 --> 00:16:26,600 Speaker 1: one of the aphorism of learning nothing and forgetting nothing. 317 00:16:26,920 --> 00:16:29,000 Speaker 1: It's time for a pivot, and I think for Republicans 318 00:16:29,120 --> 00:16:34,560 Speaker 1: GOP is instructive growth, opportunity and participation. There's a way 319 00:16:34,600 --> 00:16:40,200 Speaker 1: to develop bridges to take people, take communities, take more 320 00:16:40,280 --> 00:16:42,440 Speaker 1: people to the economy that will be in the future. 321 00:16:42,480 --> 00:16:44,240 Speaker 1: We've done this before in the country. We can do 322 00:16:44,280 --> 00:16:46,840 Speaker 1: it again. And it doesn't have a partisan label. Anybody 323 00:16:46,840 --> 00:16:49,240 Speaker 1: could grab it. But it's especially after the GOP. So 324 00:16:49,320 --> 00:16:51,720 Speaker 1: let's talk about walls and bridges, which you wrote about 325 00:16:51,720 --> 00:16:53,600 Speaker 1: in your book. It strikes me and maybe I'm not 326 00:16:54,440 --> 00:16:56,320 Speaker 1: being careful enough. I'm listening to it. I hear a 327 00:16:56,320 --> 00:16:58,640 Speaker 1: lot more about walls and bridges. I think these days 328 00:16:58,760 --> 00:17:02,120 Speaker 1: a lot more about protect against change, perhaps both of 329 00:17:02,160 --> 00:17:04,399 Speaker 1: the Democrats and the Republicans. Then about how do we 330 00:17:04,440 --> 00:17:06,879 Speaker 1: embrace change and get ready for it? You do, I mean, 331 00:17:06,960 --> 00:17:09,640 Speaker 1: if you start with the growth part. Change is important. 332 00:17:09,680 --> 00:17:12,320 Speaker 1: There is no model or theory of growth that doesn't 333 00:17:12,359 --> 00:17:14,919 Speaker 1: involve change. So we need change. The question is how 334 00:17:14,960 --> 00:17:17,440 Speaker 1: do you bring everybody along? And that's what we hadn't 335 00:17:17,480 --> 00:17:20,920 Speaker 1: been doing so well in the past few decades. Populism 336 00:17:21,040 --> 00:17:25,040 Speaker 1: comes embraces that and we need to address it. And 337 00:17:25,119 --> 00:17:28,640 Speaker 1: so to do that, you really have to help individuals 338 00:17:28,640 --> 00:17:31,840 Speaker 1: with training and education. You have to help communities to 339 00:17:32,040 --> 00:17:35,359 Speaker 1: bring people along. Can we afford to do it because 340 00:17:35,760 --> 00:17:39,040 Speaker 1: we don't have zero interest rates anymore? Oh sure. In 341 00:17:39,080 --> 00:17:43,400 Speaker 1: the book I outline everything from community college block grants, 342 00:17:43,520 --> 00:17:46,639 Speaker 1: to aid to communities, to reform of the earned income 343 00:17:46,680 --> 00:17:50,120 Speaker 1: tax credit to support work. All of that is probably 344 00:17:50,160 --> 00:17:53,639 Speaker 1: about a hundred billion dollars a year. That's real money, 345 00:17:53,800 --> 00:17:57,320 Speaker 1: but compared to what we've been doing, compared to student 346 00:17:57,359 --> 00:18:00,280 Speaker 1: loan relief alone, that was four hundred billion dollar allers 347 00:18:00,440 --> 00:18:03,040 Speaker 1: the stroke of a pen. We can afford to do this. 348 00:18:03,440 --> 00:18:05,320 Speaker 1: You mentioned earned income tax and a lot of people 349 00:18:05,400 --> 00:18:07,840 Speaker 1: think that that's a good reform that could be pursued. 350 00:18:07,960 --> 00:18:09,879 Speaker 1: What about the child tax credit, because that's something that 351 00:18:09,920 --> 00:18:12,840 Speaker 1: democrats badly want, They wanted to put through publicans don't 352 00:18:12,880 --> 00:18:15,080 Speaker 1: like it so much. Is that a constructive thing to 353 00:18:15,160 --> 00:18:18,320 Speaker 1: allow people to re enter the workforce in a positive way. 354 00:18:18,359 --> 00:18:20,159 Speaker 1: I think it could be, and it's part of what 355 00:18:20,320 --> 00:18:23,320 Speaker 1: could be a compromise package. You know, if you want 356 00:18:23,359 --> 00:18:25,720 Speaker 1: to allow more people to come back to work, you 357 00:18:25,760 --> 00:18:28,120 Speaker 1: have to loosen all constraints on work, and I think 358 00:18:28,119 --> 00:18:31,080 Speaker 1: the child tax Credit could play a very powerful role 359 00:18:31,119 --> 00:18:34,520 Speaker 1: there if it's accompanied by rewarding work, which is what 360 00:18:34,560 --> 00:18:37,320 Speaker 1: the earned income tax Credit could do very well. Well, 361 00:18:37,480 --> 00:18:39,720 Speaker 1: what about that point the specifically is I understand it 362 00:18:39,760 --> 00:18:42,120 Speaker 1: at least one of the issues for Republicans. If you're 363 00:18:42,119 --> 00:18:44,760 Speaker 1: going to give these breaks, you should actually sort of 364 00:18:44,760 --> 00:18:47,080 Speaker 1: require work. It should be conditioned upon getting to work 365 00:18:47,160 --> 00:18:49,120 Speaker 1: rather than just giving people the money. Is that right? 366 00:18:49,560 --> 00:18:52,320 Speaker 1: It should be, But that's a feature, not a bug, 367 00:18:52,400 --> 00:18:56,639 Speaker 1: in the sense that participation in the economy brings dignity, 368 00:18:56,720 --> 00:19:00,800 Speaker 1: it brings honor, and it brings support for the economic system. 369 00:19:00,880 --> 00:19:02,800 Speaker 1: So that ought to be one of our goals. The 370 00:19:02,920 --> 00:19:06,480 Speaker 1: question is really supporting work and making work pay. The 371 00:19:06,560 --> 00:19:08,920 Speaker 1: e I T C or an income tax credit among 372 00:19:08,920 --> 00:19:11,879 Speaker 1: other things, can do that. So, as I understand from 373 00:19:11,920 --> 00:19:14,040 Speaker 1: you economists, there are two ways to grow. One is 374 00:19:14,040 --> 00:19:17,399 Speaker 1: more people working, in other is more productivity. Ideally you 375 00:19:17,440 --> 00:19:19,639 Speaker 1: get both of those. Talking about more people working, some 376 00:19:19,720 --> 00:19:21,640 Speaker 1: of them are living in the United States right now. 377 00:19:21,680 --> 00:19:24,760 Speaker 1: What about immigration? Is there a way to really address immigration, 378 00:19:24,800 --> 00:19:27,520 Speaker 1: which is really divided the parties. It's a problem we 379 00:19:27,560 --> 00:19:29,320 Speaker 1: have to address at some point in a way that 380 00:19:29,320 --> 00:19:32,600 Speaker 1: would actually give us more people constructively in the workforce. 381 00:19:32,720 --> 00:19:35,840 Speaker 1: It's super important. Immigration has always been one of America's 382 00:19:35,880 --> 00:19:39,240 Speaker 1: great strengths. And the immigration story is really two parts 383 00:19:39,240 --> 00:19:42,679 Speaker 1: in policy. One is about very high skilled immigration, and 384 00:19:42,720 --> 00:19:48,840 Speaker 1: then there should be no doubt we should want every scientist, doctor, businessperson, 385 00:19:49,080 --> 00:19:51,680 Speaker 1: entrepreneur in the world wants to be here, should be here. 386 00:19:52,040 --> 00:19:55,760 Speaker 1: The political debate over low skilled immigration is harder. But 387 00:19:55,960 --> 00:19:59,040 Speaker 1: rather than saying no to low skilled immigration, how about 388 00:19:59,240 --> 00:20:03,919 Speaker 1: yes to training support and helping more people come along. 389 00:20:04,320 --> 00:20:07,960 Speaker 1: I think that would ease the political dilemma. Have we 390 00:20:08,080 --> 00:20:10,159 Speaker 1: ever done that training support well? And by the way, 391 00:20:10,200 --> 00:20:12,159 Speaker 1: should it be private sector or a public sector or 392 00:20:12,160 --> 00:20:14,479 Speaker 1: a combination of both. The truth is we have so 393 00:20:14,520 --> 00:20:17,240 Speaker 1: if you think back to the nineteenth century, the whole 394 00:20:17,320 --> 00:20:20,280 Speaker 1: land grant college movement, which I build on for community 395 00:20:20,280 --> 00:20:23,440 Speaker 1: colleges is exactly that. The g I Bill with President 396 00:20:23,480 --> 00:20:27,000 Speaker 1: Franklin Roosevelt after the Second World War. We have done this, 397 00:20:27,480 --> 00:20:30,719 Speaker 1: and yes it should have heavy involvement of the private sector. 398 00:20:30,760 --> 00:20:34,600 Speaker 1: Throughout the country. We've got great partnerships of business people 399 00:20:35,040 --> 00:20:38,720 Speaker 1: with community colleges, with communities because they know where the 400 00:20:38,800 --> 00:20:41,040 Speaker 1: jobs are fascinating. Great to have you with us. Is 401 00:20:41,080 --> 00:20:43,360 Speaker 1: wall and Bridge is a really powerful way of thinking 402 00:20:43,359 --> 00:20:45,639 Speaker 1: about it. Many thanks to Glenn Hubbard of the Columbia 403 00:20:45,680 --> 00:20:47,639 Speaker 1: Business School. Coming up, and we're gonna wrap up the 404 00:20:47,680 --> 00:20:49,840 Speaker 1: week with our special Wall Street Week contributor to Larry 405 00:20:49,840 --> 00:20:52,320 Speaker 1: Summers at Harvard. That's next on Wall Street Week. Here 406 00:20:52,320 --> 00:21:06,920 Speaker 1: on Bloomberg, this is Wall Street Week. I'm David Weston. 407 00:21:06,960 --> 00:21:09,359 Speaker 1: We're delighted to have our very special contributor, Larry Summers 408 00:21:09,400 --> 00:21:11,360 Speaker 1: are Harrid back with us now on Wall Street Week. 409 00:21:11,480 --> 00:21:13,240 Speaker 1: So Larry, it was a big week on a lot 410 00:21:13,240 --> 00:21:16,080 Speaker 1: of fronts. Let's start with the CPI numbers. They came out. 411 00:21:16,320 --> 00:21:18,840 Speaker 1: They certainly got the markets attention. What did you make 412 00:21:18,840 --> 00:21:21,119 Speaker 1: of those CPN numbers? Are they as encouraging as some 413 00:21:21,160 --> 00:21:23,560 Speaker 1: people seem to think. I think they were good. They were. 414 00:21:23,600 --> 00:21:27,960 Speaker 1: They were good numbers, But one number is never decisive, 415 00:21:28,480 --> 00:21:31,440 Speaker 1: and there were a lot of special factors in these numbers, 416 00:21:31,840 --> 00:21:36,680 Speaker 1: some of which will be reversed. Particular. As always, Team 417 00:21:36,720 --> 00:21:40,800 Speaker 1: Transitory only focuses on the things that are likely to 418 00:21:40,840 --> 00:21:43,920 Speaker 1: come down in the future, not the things that are 419 00:21:44,080 --> 00:21:46,000 Speaker 1: likely to go up in the future. I don't pick 420 00:21:46,000 --> 00:21:48,840 Speaker 1: a power prices will keep going down so fast. I 421 00:21:48,880 --> 00:21:54,000 Speaker 1: don't think we've really got structural disinflation in uh medical care. 422 00:21:54,440 --> 00:21:57,320 Speaker 1: But this was a good number, and the market was 423 00:21:57,480 --> 00:22:01,160 Speaker 1: right to respond positively. Whether the agnitude of the reaction 424 00:22:01,320 --> 00:22:05,639 Speaker 1: was right, I think that's very much in question. There 425 00:22:05,720 --> 00:22:09,399 Speaker 1: was another number yesterday, which was the Atlanta Fed number 426 00:22:09,920 --> 00:22:15,560 Speaker 1: on wages, and that was showing continued strong wage inflation. 427 00:22:16,119 --> 00:22:19,679 Speaker 1: And I don't see away as long as inflation is 428 00:22:19,760 --> 00:22:24,120 Speaker 1: running in the five six range that we're getting to target. 429 00:22:24,760 --> 00:22:29,359 Speaker 1: So I think the people who declared victory on the 430 00:22:29,400 --> 00:22:35,040 Speaker 1: basis of this number yesterday were overreacting. But look, it 431 00:22:35,160 --> 00:22:39,760 Speaker 1: certainly was an encouraging number, but we had similar encouraging 432 00:22:39,840 --> 00:22:44,680 Speaker 1: numbers in March and similar encouraging numbers in July, and 433 00:22:45,040 --> 00:22:49,160 Speaker 1: one swallow didn't make a spring uh then, And so 434 00:22:49,240 --> 00:22:52,560 Speaker 1: I think we've got to do what j. Powell said 435 00:22:52,600 --> 00:22:56,280 Speaker 1: he's gonna do, which is be vigilant and integrate all 436 00:22:56,320 --> 00:22:59,080 Speaker 1: the data looking forward. And that was my question. Actually, 437 00:22:59,240 --> 00:23:01,000 Speaker 1: we know how the market reacted, The question is how 438 00:23:01,000 --> 00:23:02,760 Speaker 1: will the Fed react. We have a little time to 439 00:23:02,880 --> 00:23:05,080 Speaker 1: that December meeting. At the same time, given what you've 440 00:23:05,080 --> 00:23:07,520 Speaker 1: seen so far, it can change. Do you think that 441 00:23:07,520 --> 00:23:10,600 Speaker 1: the FED should be variance path one iota? Some people 442 00:23:10,600 --> 00:23:14,320 Speaker 1: are now saying fifty, for example in December. Well, I 443 00:23:14,320 --> 00:23:16,840 Speaker 1: think the market has been expecting fifty for some time 444 00:23:16,960 --> 00:23:19,199 Speaker 1: is the most likely case, and I don't see a 445 00:23:19,240 --> 00:23:25,280 Speaker 1: reason to change UH from UH that expectation. I don't 446 00:23:25,320 --> 00:23:28,520 Speaker 1: think you can make judgments based on a single months 447 00:23:28,760 --> 00:23:34,600 Speaker 1: UH data. There was a very substantial adjustment in markets 448 00:23:34,640 --> 00:23:38,159 Speaker 1: expectations of what the FED would do, and I wonder 449 00:23:38,240 --> 00:23:43,440 Speaker 1: whether that change quite that large of more than one 450 00:23:43,600 --> 00:23:49,399 Speaker 1: full UH move one full basis point move was warranted 451 00:23:49,440 --> 00:23:52,960 Speaker 1: on the basis of UH justice number, but it may 452 00:23:53,000 --> 00:23:57,400 Speaker 1: well prove to be appropriate given what we see UH 453 00:23:57,480 --> 00:24:01,240 Speaker 1: in the in the future, Laria. Much more difficult are 454 00:24:01,280 --> 00:24:04,200 Speaker 1: the markets making the Fed's job because the financial conditions 455 00:24:04,280 --> 00:24:07,960 Speaker 1: loosened dramatically in responsive CPO never the most sense march 456 00:24:08,040 --> 00:24:11,520 Speaker 1: of anounced two trillion dollars in fistical simulants, you have 457 00:24:11,640 --> 00:24:14,400 Speaker 1: to look at both the FED funds rate and at 458 00:24:14,440 --> 00:24:19,879 Speaker 1: the overall UH level of financial conditions. To some extent, UH, 459 00:24:20,040 --> 00:24:24,120 Speaker 1: I don't I think these financial conditions inducas are misleading 460 00:24:24,680 --> 00:24:27,680 Speaker 1: because when the stock market goes up, they call that 461 00:24:27,800 --> 00:24:30,960 Speaker 1: an improvement in financial conditions, but it may just be 462 00:24:31,080 --> 00:24:36,800 Speaker 1: a change towards more optimism about the economy. So I'm 463 00:24:36,840 --> 00:24:40,439 Speaker 1: not that taken with the financial conditions in disease like 464 00:24:40,520 --> 00:24:43,359 Speaker 1: the ones that come out of Golden Sacks to give 465 00:24:43,480 --> 00:24:48,760 Speaker 1: significant weight UH to the stock market or to credit 466 00:24:48,840 --> 00:24:52,720 Speaker 1: spreads in the overall assessment, because I think in some 467 00:24:52,800 --> 00:24:55,960 Speaker 1: sense they're not just reflecting what the Fed does, They're 468 00:24:56,000 --> 00:25:00,600 Speaker 1: reflecting changing views about the economy. Larry are arguably the 469 00:25:00,640 --> 00:25:02,920 Speaker 1: other big news this week with the midterm elections, which 470 00:25:02,920 --> 00:25:05,880 Speaker 1: by the way, aren't really fully fine finalized yet because 471 00:25:05,880 --> 00:25:08,520 Speaker 1: we don't know the results, including who controls the House 472 00:25:08,520 --> 00:25:10,840 Speaker 1: and the Senate. But at this point in the process, 473 00:25:11,040 --> 00:25:12,639 Speaker 1: what do you make these mid terms? And one thing 474 00:25:12,680 --> 00:25:15,000 Speaker 1: I learned was, once again, the people don't pay that 475 00:25:15,080 --> 00:25:18,720 Speaker 1: much attention to pulsters or by the way, the media. David, look, 476 00:25:18,880 --> 00:25:23,760 Speaker 1: I'm I'm quite encouraged. UH. The center is holding. If 477 00:25:23,800 --> 00:25:26,639 Speaker 1: you look at people on the extreme of either party, 478 00:25:27,160 --> 00:25:32,679 Speaker 1: they actually underperformed quite badly. The there was more ticket 479 00:25:32,760 --> 00:25:36,760 Speaker 1: sledding as people voted for one Democrat and one Republican, 480 00:25:37,200 --> 00:25:44,800 Speaker 1: rejecting the radical more radical UH candidates. The swing towards UH. 481 00:25:45,200 --> 00:25:50,880 Speaker 1: Democrats came from independence UM and came from more Republicans 482 00:25:50,960 --> 00:25:57,000 Speaker 1: voting Democratic. I think the reaction to the radical Supreme 483 00:25:57,040 --> 00:26:02,959 Speaker 1: Court decision was actually a substantial part of UH this 484 00:26:03,320 --> 00:26:09,120 Speaker 1: UH story. That's probably cautionary UM for Democrats because it's 485 00:26:09,160 --> 00:26:13,440 Speaker 1: not always going to UH be that be that way. 486 00:26:13,840 --> 00:26:17,479 Speaker 1: But look, we're not having people in the streets fighting 487 00:26:17,520 --> 00:26:21,840 Speaker 1: over the results of elections. Candidates who lose, even very 488 00:26:21,920 --> 00:26:28,119 Speaker 1: radical candidates who lose, are are conceding. I think this 489 00:26:28,400 --> 00:26:34,320 Speaker 1: was an election that suggested some movement back towards the 490 00:26:34,400 --> 00:26:37,560 Speaker 1: center of the country holding. What message you think the 491 00:26:37,560 --> 00:26:39,639 Speaker 1: White House should take away from this, particularly aspect to 492 00:26:39,680 --> 00:26:43,040 Speaker 1: economic policy. Is this time for a mid course correction? 493 00:26:43,119 --> 00:26:45,200 Speaker 1: Are there some lessons in here for the White House? 494 00:26:45,320 --> 00:26:46,920 Speaker 1: And by the way, should they even take a look 495 00:26:46,960 --> 00:26:48,840 Speaker 1: at who the who's on the economic team? Is the 496 00:26:48,920 --> 00:26:51,560 Speaker 1: time to revamp that? I think they've got very good people. 497 00:26:51,600 --> 00:26:56,119 Speaker 1: I don't think the people are are are the issue. 498 00:26:56,160 --> 00:27:01,919 Speaker 1: It's a very experienced UH team. Invitably to over time, 499 00:27:01,960 --> 00:27:07,520 Speaker 1: administrations have turnover. Look, I think the country is governed 500 00:27:07,640 --> 00:27:14,080 Speaker 1: best when it's governed from UH the center and governed 501 00:27:14,600 --> 00:27:19,320 Speaker 1: with moderation nobody's going back to three and a half 502 00:27:19,359 --> 00:27:24,159 Speaker 1: trillion dollar h new deals. That's not on the table, 503 00:27:24,240 --> 00:27:27,159 Speaker 1: and I think it's appropriate given inflation, that nothing like 504 00:27:27,320 --> 00:27:30,680 Speaker 1: that be on the table. I think there's a lot 505 00:27:30,880 --> 00:27:33,959 Speaker 1: we can do to bring down the price of energy 506 00:27:34,040 --> 00:27:39,840 Speaker 1: by promoting energy production of all kinds, renewable and non 507 00:27:39,920 --> 00:27:44,160 Speaker 1: and uh non renewable. I think there's a lot uh 508 00:27:44,720 --> 00:27:49,880 Speaker 1: that the administration can do and will do. With respect 509 00:27:50,000 --> 00:27:57,639 Speaker 1: to technology, particularly in the semiconductor area, it's a big 510 00:27:57,720 --> 00:28:02,879 Speaker 1: challenge to actually the old infrastructure out well in a 511 00:28:02,920 --> 00:28:08,520 Speaker 1: way that's going to contribute to reducing bottlenecks uh in 512 00:28:08,600 --> 00:28:13,880 Speaker 1: our economy. I would like to see more partnership between 513 00:28:15,080 --> 00:28:18,760 Speaker 1: business and government. And frankly, if we're gonna build out 514 00:28:18,880 --> 00:28:23,439 Speaker 1: the necessary energy infrastructure, I don't around the world, I 515 00:28:23,480 --> 00:28:27,800 Speaker 1: don't think, uh, there's any alternative. So I think that 516 00:28:27,880 --> 00:28:34,720 Speaker 1: the administration has a real opportunity now to move to 517 00:28:35,480 --> 00:28:40,680 Speaker 1: an implementation UH phase Larry. One other big development globally 518 00:28:40,720 --> 00:28:42,960 Speaker 1: at least this week, was the next climate Suner and 519 00:28:43,040 --> 00:28:46,360 Speaker 1: co top Charmel shake. Are we making progress on the 520 00:28:46,360 --> 00:28:48,360 Speaker 1: climate or not? It seems sometimes like they just get 521 00:28:48,400 --> 00:28:52,040 Speaker 1: together and talk. Yeah, that's what. Yes, I I agree 522 00:28:52,120 --> 00:28:56,480 Speaker 1: with that, But David, I think UH more is happening 523 00:28:57,080 --> 00:29:01,800 Speaker 1: in UH the laboratory and less is happening in the 524 00:29:01,880 --> 00:29:06,560 Speaker 1: conference room. The good news is that tremendous progress is 525 00:29:06,680 --> 00:29:12,080 Speaker 1: being made in all sorts of UH technologies that point 526 00:29:12,160 --> 00:29:18,800 Speaker 1: towards UH renewable energy. There some really exciting developments with 527 00:29:18,840 --> 00:29:23,400 Speaker 1: respect to batteries and storage that enables renewables. Because it's 528 00:29:23,400 --> 00:29:29,960 Speaker 1: not always windy or sunny. So I think, ironically, even 529 00:29:29,960 --> 00:29:33,200 Speaker 1: though there's less political progress than one would have hoped, 530 00:29:33,680 --> 00:29:36,480 Speaker 1: I actually think we're in a better place with respect 531 00:29:36,520 --> 00:29:39,640 Speaker 1: to the problem than one might have expected a decade 532 00:29:39,640 --> 00:29:43,560 Speaker 1: ago because of the progress and technology. Okay, Larry, that 533 00:29:43,640 --> 00:29:45,800 Speaker 1: was very helpful. Once again, that is Larry Summers of 534 00:29:45,800 --> 00:29:49,040 Speaker 1: Harvard are very special contributor here on Wall Street Week. Finally, 535 00:29:49,200 --> 00:29:53,160 Speaker 1: one more thought, looking for opportunity wherever you can find it. 536 00:29:53,640 --> 00:29:56,840 Speaker 1: In a time of market downturns, investors are looking at 537 00:29:56,840 --> 00:30:01,200 Speaker 1: portfolio losses that remind them of two thousand and runaway inflation. 538 00:30:01,520 --> 00:30:03,960 Speaker 1: What matters is the FED saying we've got to get 539 00:30:04,000 --> 00:30:08,160 Speaker 1: inflation back down, and more than a little political uncertainty. 540 00:30:08,360 --> 00:30:10,720 Speaker 1: Of course, we'll have to see the final results of 541 00:30:10,760 --> 00:30:13,760 Speaker 1: these mid terms. That's we were looking at razor than margins. 542 00:30:13,840 --> 00:30:16,000 Speaker 1: Right now, all of us have to be even more 543 00:30:16,080 --> 00:30:19,760 Speaker 1: resourceful and looking for new opportunities. Former Bank of England 544 00:30:19,800 --> 00:30:23,080 Speaker 1: Governor Mark Karney wants us to find them in sustainable energy. 545 00:30:23,360 --> 00:30:25,720 Speaker 1: A lot of the answer to energy security problems that 546 00:30:25,760 --> 00:30:28,760 Speaker 1: have been exposed by Russia's illegal war have to do 547 00:30:28,760 --> 00:30:33,040 Speaker 1: with sustainability. Citadel CEO Ken Griffin thinks he's found opportunities 548 00:30:33,040 --> 00:30:36,240 Speaker 1: in moving to Florida. I'm gonna say something, it's like, uh, 549 00:30:36,320 --> 00:30:40,040 Speaker 1: you know, it's gonna be thrown out of here. Taxes 550 00:30:40,160 --> 00:30:42,080 Speaker 1: were not part of our decision to come to Florida, 551 00:30:42,240 --> 00:30:44,560 Speaker 1: because when you've got great schools, when you've had a 552 00:30:44,600 --> 00:30:47,720 Speaker 1: great environment, when your streets are safe and clean, you've 553 00:30:47,760 --> 00:30:49,480 Speaker 1: got a place where people want to live in call home. 554 00:30:49,960 --> 00:30:52,640 Speaker 1: And not surprisingly, the CEO of Delta Airlines has found 555 00:30:52,640 --> 00:30:56,080 Speaker 1: opportunities in travel. We're seeing an incredible amount of demand 556 00:30:56,080 --> 00:30:58,440 Speaker 1: that's continuing. It's it's been in place for most of 557 00:30:58,480 --> 00:31:02,400 Speaker 1: this year. We're looking at the upcoming holiday period looks very, 558 00:31:02,480 --> 00:31:06,880 Speaker 1: very strong. And then then there's the irrepressible Simon Cowell, 559 00:31:07,320 --> 00:31:11,520 Speaker 1: record producer International television personality and creator of reality series 560 00:31:11,560 --> 00:31:14,560 Speaker 1: like The X Factor In America's Got Talent, Kyle can 561 00:31:14,560 --> 00:31:17,760 Speaker 1: take credit for discovering hit makers like Fifth Harmony and 562 00:31:17,880 --> 00:31:22,000 Speaker 1: One Direction. Kyle's latest discovery, well, it is the bond market, 563 00:31:22,200 --> 00:31:26,000 Speaker 1: where he just raised one million dollars selling bonds backed 564 00:31:26,040 --> 00:31:30,000 Speaker 1: by his gut talent TV shows. Right now, I feel 565 00:31:30,080 --> 00:31:32,920 Speaker 1: like James Bowmen. But the all time winner of the 566 00:31:32,960 --> 00:31:36,280 Speaker 1: Golden Opportunity Award goes at least this week to the 567 00:31:36,320 --> 00:31:39,600 Speaker 1: holder of the single lottery tickets sold in California that 568 00:31:39,720 --> 00:31:43,200 Speaker 1: earned for its lucky holder get this, two billion, forty 569 00:31:43,360 --> 00:31:46,360 Speaker 1: million dollars. And it wasn't only the winner who got 570 00:31:46,360 --> 00:31:49,280 Speaker 1: some opportunity. The man who sold the ticket, Joe from 571 00:31:49,360 --> 00:31:52,960 Speaker 1: Joe's Service Center, is walking away with a cool million 572 00:31:53,000 --> 00:31:57,640 Speaker 1: dollars as well, with the family with whatever I had needed, 573 00:31:58,200 --> 00:32:02,760 Speaker 1: what my kicks, My gosh, then I live grandchildren. Now 574 00:32:02,880 --> 00:32:06,160 Speaker 1: that is what I call opportunity. That does it. For 575 00:32:06,160 --> 00:32:08,520 Speaker 1: this episode of Wall Street Week, I'm David Weston. This 576 00:32:08,680 --> 00:32:10,320 Speaker 1: is Bloomberg. See you next week.