1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Well Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: I mean may not have an overall recession, We're having 3 00:00:04,400 --> 00:00:06,960 Speaker 2: a rolling recession. Economy roll looks pretty strongly is when 4 00:00:07,000 --> 00:00:07,640 Speaker 2: it comes to jobs. 5 00:00:07,680 --> 00:00:09,879 Speaker 3: The financial stories that shape our world. 6 00:00:09,920 --> 00:00:13,600 Speaker 2: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,480 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,560 --> 00:00:17,320 Speaker 2: generative AI through. 9 00:00:17,160 --> 00:00:19,280 Speaker 3: The eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 11 00:00:22,520 --> 00:00:25,320 Speaker 2: Zebra Lair of the Paulson Institute, Glen Hubbard of the 12 00:00:25,320 --> 00:00:26,280 Speaker 2: Columbia Business School. 13 00:00:26,280 --> 00:00:30,120 Speaker 3: Bloomberg Well Street Week with David Weston from Bloomberg Radio. 14 00:00:30,320 --> 00:00:34,000 Speaker 2: A lot of talk about climate, about US China relations, 15 00:00:34,000 --> 00:00:37,000 Speaker 2: about the big banks, but the action still is in 16 00:00:37,040 --> 00:00:40,800 Speaker 2: Gaza is Israel presses ahead. This is Bloomberg Wall Street Week. 17 00:00:40,920 --> 00:00:44,720 Speaker 2: I'm David Weston, this week's special contributor Larry Summers of 18 00:00:44,760 --> 00:00:47,000 Speaker 2: Harvard about US jobs numbers and more. 19 00:00:47,400 --> 00:00:50,879 Speaker 4: I still think the market is a bit overpricing. How 20 00:00:50,960 --> 00:00:56,960 Speaker 4: much easing the Fed's going to decide it can prudently undertake. 21 00:00:57,240 --> 00:00:57,720 Speaker 5: Howne you all. 22 00:00:57,800 --> 00:01:00,880 Speaker 2: CEO Vimill Kapoor on his latest at inquisition and how 23 00:01:00,960 --> 00:01:03,520 Speaker 2: it fits into his overall business model. 24 00:01:03,640 --> 00:01:05,720 Speaker 6: So it fits right in the heart of our building 25 00:01:05,720 --> 00:01:09,600 Speaker 6: automation business and prepares it for higher growth trade in 26 00:01:09,640 --> 00:01:10,120 Speaker 6: the future. 27 00:01:10,680 --> 00:01:13,399 Speaker 2: And Bob Diamond of Atlas Merchant Capital on the Big 28 00:01:13,440 --> 00:01:29,880 Speaker 2: Bank's big appearance on Capitol Hill. Gill wall Street watched 29 00:01:29,920 --> 00:01:33,440 Speaker 2: this week as those eighty thousand delegates continued their Top 30 00:01:33,520 --> 00:01:36,720 Speaker 2: twenty eight meetings in Dubai, with US Special Envoy John 31 00:01:36,800 --> 00:01:40,679 Speaker 2: Carey turning up the rhetorical heat. The best scientists in 32 00:01:40,720 --> 00:01:44,840 Speaker 2: the world are saying what we face now is alarming, terrifying, 33 00:01:44,959 --> 00:01:48,520 Speaker 2: while Chinese officials reacted badly to Commerce Secretary of Romando's 34 00:01:48,560 --> 00:01:50,960 Speaker 2: saying it poses a risk to the United States, even 35 00:01:51,000 --> 00:01:55,360 Speaker 2: as Trade Representative Catherine Tye talked in terms of balance, the. 36 00:01:55,360 --> 00:01:58,200 Speaker 7: Lessons that we've learned from the past seven years on 37 00:01:58,360 --> 00:02:02,240 Speaker 7: trade mean that we can't ever ignore the domestic political 38 00:02:02,240 --> 00:02:04,120 Speaker 7: consequences of what we're doing in trade. 39 00:02:04,160 --> 00:02:05,680 Speaker 2: There was a lot of talk in front of the 40 00:02:05,720 --> 00:02:08,840 Speaker 2: Senate Banking Committee this week as CEOs made their case 41 00:02:08,960 --> 00:02:11,960 Speaker 2: that ramping up reserve requirements would not be good for 42 00:02:12,000 --> 00:02:12,600 Speaker 2: the economy. 43 00:02:12,760 --> 00:02:15,600 Speaker 7: The most likely result of increasing the costs of banks 44 00:02:15,639 --> 00:02:18,360 Speaker 7: to offer a variety of products. Is that it would 45 00:02:18,400 --> 00:02:22,040 Speaker 7: move more activity into the less regulated non bank sector, 46 00:02:22,280 --> 00:02:25,840 Speaker 7: which carries its own risk for consumers and the stability 47 00:02:25,960 --> 00:02:27,320 Speaker 7: of the financial system. 48 00:02:27,440 --> 00:02:29,880 Speaker 2: The place where there was much more than just talk 49 00:02:30,120 --> 00:02:34,040 Speaker 2: was once again in Gaza, as Israeli forces renewed their offensives, 50 00:02:34,040 --> 00:02:37,360 Speaker 2: spreading into southern areas and urging civilians to flee. 51 00:02:37,880 --> 00:02:38,280 Speaker 5: Again. 52 00:02:38,760 --> 00:02:42,120 Speaker 8: The real question is how do you, on the one hand, 53 00:02:42,919 --> 00:02:47,320 Speaker 8: allow a sovereign nation like Israel to go after terrorist targets, 54 00:02:47,320 --> 00:02:49,400 Speaker 8: while on the other hand, have them do so in 55 00:02:49,440 --> 00:02:53,040 Speaker 8: a way that minimizes the harm to civilians. 56 00:02:53,160 --> 00:02:55,799 Speaker 2: And Israel was very much the subject on Capitol Hill 57 00:02:55,840 --> 00:02:58,880 Speaker 2: when the presidents of Harvard, Penn and MIT were summoned 58 00:02:58,919 --> 00:03:01,120 Speaker 2: to address the rise of anti Semitism. 59 00:03:01,400 --> 00:03:05,080 Speaker 8: I have sought to confront hate while preserving free expression. 60 00:03:05,440 --> 00:03:08,560 Speaker 8: This is difficult work, and I know that I have 61 00:03:08,720 --> 00:03:10,239 Speaker 8: not always gotten it right. 62 00:03:10,560 --> 00:03:13,040 Speaker 2: And then on Friday we got the US jobs numbers, 63 00:03:13,160 --> 00:03:16,160 Speaker 2: showing once again that the labor market is stronger than 64 00:03:16,160 --> 00:03:18,840 Speaker 2: people thought, as the US added another one hundred and 65 00:03:18,880 --> 00:03:22,280 Speaker 2: ninety nine thousand jobs in November, taking an unemployment rate 66 00:03:22,440 --> 00:03:26,679 Speaker 2: down to three point seven percent, while wage growth accelerated. 67 00:03:31,320 --> 00:03:33,480 Speaker 2: And here to take us through these employment numbers for 68 00:03:33,520 --> 00:03:36,360 Speaker 2: this week, we welcome our very special contributor, Larry Summers 69 00:03:36,400 --> 00:03:39,200 Speaker 2: of Harvard. SOI, Larry, more jobs were created than expected 70 00:03:39,240 --> 00:03:41,040 Speaker 2: and unemployment was lower than expected. 71 00:03:41,280 --> 00:03:42,400 Speaker 5: How do you interpret. 72 00:03:42,120 --> 00:03:44,680 Speaker 1: Them, David? These were good numbers. 73 00:03:45,240 --> 00:03:50,240 Speaker 4: They showed an economy that, at least as of November, 74 00:03:50,920 --> 00:03:55,960 Speaker 4: was still looking pretty robust. Some of the greatest fears 75 00:03:56,000 --> 00:03:59,280 Speaker 4: that the economy was turning over certainly looked to have 76 00:03:59,400 --> 00:04:00,040 Speaker 4: been false. 77 00:04:01,520 --> 00:04:05,920 Speaker 1: By this number. The fact that average. 78 00:04:05,600 --> 00:04:09,560 Speaker 4: Hourly earnings were running running at four tenths of a 79 00:04:09,600 --> 00:04:16,159 Speaker 4: percent bit more than was expected reinforces my sense that 80 00:04:16,240 --> 00:04:19,920 Speaker 4: people need to be careful about declaring the war against 81 00:04:19,960 --> 00:04:24,039 Speaker 4: inflation as having been one. They need to be nervous 82 00:04:24,279 --> 00:04:29,400 Speaker 4: about what could happen from supply shocks, from. 83 00:04:29,320 --> 00:04:31,520 Speaker 1: Other adverse developments. 84 00:04:31,920 --> 00:04:36,560 Speaker 4: But I read these as a pretty favorable. 85 00:04:37,360 --> 00:04:37,760 Speaker 5: Number. 86 00:04:37,920 --> 00:04:42,520 Speaker 4: They certainly make a soft landing look more in play, 87 00:04:43,200 --> 00:04:46,760 Speaker 4: although I certainly think it would be a mistake to 88 00:04:46,960 --> 00:04:51,039 Speaker 4: treat a soft landing as something we can take for 89 00:04:51,160 --> 00:04:53,719 Speaker 4: granted or be confidence about. 90 00:04:54,200 --> 00:04:55,400 Speaker 5: What do they say to the Fed? 91 00:04:55,480 --> 00:04:57,440 Speaker 2: Do you think, Larry, Because on the one hand, you say, boy, 92 00:04:57,480 --> 00:05:00,120 Speaker 2: this is a pretty robust labor economy. We don't need 93 00:05:00,160 --> 00:05:03,320 Speaker 2: to cut too soon, and people were expecting some cuts. 94 00:05:03,560 --> 00:05:05,920 Speaker 2: And as you say, on inflation, there are some indications 95 00:05:06,000 --> 00:05:07,719 Speaker 2: inflation is ticking back up. We have a line of 96 00:05:07,720 --> 00:05:10,520 Speaker 2: Fed that says that, and they have you miss consumer 97 00:05:11,200 --> 00:05:13,880 Speaker 2: in a sentiment this week indicated that it really dropped 98 00:05:13,880 --> 00:05:18,400 Speaker 2: the consumer expectations for inflation for one year out look. 99 00:05:18,480 --> 00:05:20,560 Speaker 1: I think the Fed's got to be very careful. 100 00:05:22,120 --> 00:05:26,560 Speaker 4: Progress has been made about against inflation, but they've got 101 00:05:26,560 --> 00:05:30,320 Speaker 4: to make sure that it keeps being made, and they've 102 00:05:30,360 --> 00:05:34,040 Speaker 4: got to make sure that once it's made, it's entrenched 103 00:05:34,279 --> 00:05:37,640 Speaker 4: and locked in. And I think this will make it 104 00:05:37,720 --> 00:05:43,800 Speaker 4: easier for them to do that. They've got a very 105 00:05:43,839 --> 00:05:52,440 Speaker 4: tricky problem at the FED because whenever people conclude that 106 00:05:53,360 --> 00:05:56,000 Speaker 4: it's looking good that we're not going to need more 107 00:05:56,080 --> 00:06:01,760 Speaker 4: rat increases, they long rates come way down, and the 108 00:06:01,760 --> 00:06:05,880 Speaker 4: stock market has a tendency to go up, and that 109 00:06:06,040 --> 00:06:11,280 Speaker 4: then undoes some of the tightening that they have already 110 00:06:11,360 --> 00:06:12,200 Speaker 4: put in place. 111 00:06:12,800 --> 00:06:15,680 Speaker 1: So I think it's very hard to know what's going 112 00:06:15,760 --> 00:06:16,320 Speaker 1: to happen. 113 00:06:16,520 --> 00:06:19,960 Speaker 4: I still think the market is a bit overpricing how 114 00:06:20,040 --> 00:06:26,120 Speaker 4: much easing the Fed's going to decide it can prudently undertake. 115 00:06:26,760 --> 00:06:31,040 Speaker 4: But those issues are very much at the margin, unlike 116 00:06:31,080 --> 00:06:34,240 Speaker 4: the situation we had a couple of years ago where 117 00:06:34,279 --> 00:06:38,080 Speaker 4: it seemed to me the FED was very far, very 118 00:06:38,120 --> 00:06:41,160 Speaker 4: far off. So I think the Fed's in broadly the 119 00:06:41,240 --> 00:06:48,920 Speaker 4: right place of watchful waiting. But the moment they turn 120 00:06:49,400 --> 00:06:52,680 Speaker 4: or announce they're going to turn, is going to be 121 00:06:52,800 --> 00:06:59,200 Speaker 4: a seismic moment, and for that reason, they probably need 122 00:06:59,240 --> 00:07:03,400 Speaker 4: to be very deliberative and careful about getting to that 123 00:07:03,640 --> 00:07:10,680 Speaker 4: point and waiting until they see some overwhelming evidence of 124 00:07:11,600 --> 00:07:17,800 Speaker 4: inflation being locked in low or see some real evidence 125 00:07:18,440 --> 00:07:21,800 Speaker 4: of the economy churning over. And I don't think we 126 00:07:21,920 --> 00:07:24,320 Speaker 4: have either of those at this point. 127 00:07:24,960 --> 00:07:25,800 Speaker 5: Let me just turn this something. 128 00:07:25,840 --> 00:07:27,720 Speaker 2: It's very much in the news once again this week, 129 00:07:27,760 --> 00:07:29,840 Speaker 2: and you have spoken out about it, and that is 130 00:07:29,960 --> 00:07:32,920 Speaker 2: the rise of antisemitism, at least on some college campuses. 131 00:07:33,160 --> 00:07:35,800 Speaker 2: We had the three university presidents go down and appear 132 00:07:35,840 --> 00:07:38,320 Speaker 2: in Congress from your own Harvard, as well as MIT 133 00:07:38,480 --> 00:07:40,920 Speaker 2: and pen And if they meant to put an end 134 00:07:41,000 --> 00:07:44,360 Speaker 2: to this, they certainly did not succeed. As of right now, 135 00:07:44,400 --> 00:07:46,160 Speaker 2: it looks like if anything got to be more so, 136 00:07:46,360 --> 00:07:48,600 Speaker 2: but this is one of my questions. You ran Harvard, 137 00:07:48,640 --> 00:07:50,560 Speaker 2: you're a president there, but you also were at very 138 00:07:50,600 --> 00:07:53,920 Speaker 2: senior levels in the government. When things start to go 139 00:07:54,040 --> 00:07:56,240 Speaker 2: off the rails, when you start to lose control of 140 00:07:56,240 --> 00:07:58,040 Speaker 2: the narrative, how do you get it back. Because we 141 00:07:58,080 --> 00:08:01,960 Speaker 2: have everybody now wanting to run universities for the college presidents, 142 00:08:01,960 --> 00:08:04,560 Speaker 2: whether it's Congress is where the contributors or whatever, how 143 00:08:04,600 --> 00:08:06,440 Speaker 2: do you regain control of the narrative. 144 00:08:08,880 --> 00:08:13,440 Speaker 4: I think this is as difficult a moment for elite 145 00:08:13,520 --> 00:08:19,320 Speaker 4: higher education as any moment since the Vietnam War period, 146 00:08:20,000 --> 00:08:25,440 Speaker 4: perhaps more difficult. I think everybody needs to take a 147 00:08:25,480 --> 00:08:30,800 Speaker 4: bit of a deep breath. I've had considerable sympathy with 148 00:08:32,080 --> 00:08:35,360 Speaker 4: some of the things that have been saying said by 149 00:08:35,920 --> 00:08:41,160 Speaker 4: both people in the government and by some of the 150 00:08:41,800 --> 00:08:48,280 Speaker 4: billionaires some of the donors to these universities. But even 151 00:08:48,320 --> 00:08:51,960 Speaker 4: when the concerns are warranted, it's very important for us 152 00:08:52,000 --> 00:08:57,720 Speaker 4: to remember that if universities start being run by politicians 153 00:08:58,280 --> 00:09:01,920 Speaker 4: or by small groups of large doors, that's going to 154 00:09:01,960 --> 00:09:09,160 Speaker 4: be a very problematic thing over time for the American 155 00:09:09,920 --> 00:09:13,320 Speaker 4: university system, which is a huge source of. 156 00:09:13,200 --> 00:09:15,679 Speaker 1: Strength for our country. 157 00:09:16,800 --> 00:09:21,680 Speaker 4: That said, David, we have to recognize that there's been 158 00:09:21,720 --> 00:09:28,520 Speaker 4: a double standard in how incidents of racism have been 159 00:09:28,600 --> 00:09:34,640 Speaker 4: regarded in the past, Incidents of what people call micro aggressions, 160 00:09:35,360 --> 00:09:40,800 Speaker 4: incidents of things that make people feel hurt or sensitive 161 00:09:41,160 --> 00:09:44,920 Speaker 4: have been regarded in the past, and the way things 162 00:09:45,000 --> 00:09:50,240 Speaker 4: that are abhorrent to the sensibilities of so many of 163 00:09:50,320 --> 00:09:56,240 Speaker 4: us have been regarded in the last several months. And 164 00:09:56,800 --> 00:10:00,040 Speaker 4: that double standard, which in different ways has been and 165 00:10:00,559 --> 00:10:08,400 Speaker 4: present on many campuses, creates an extremely difficult situation. I 166 00:10:08,559 --> 00:10:13,160 Speaker 4: do not side with those who believe that the answer 167 00:10:13,960 --> 00:10:23,760 Speaker 4: is simply to ratchet up the protections and condemnations of 168 00:10:24,720 --> 00:10:34,000 Speaker 4: speech which is offensive, to include Jewish students more fully 169 00:10:34,640 --> 00:10:37,920 Speaker 4: in what has happened in the past. 170 00:10:38,880 --> 00:10:40,719 Speaker 5: Larry, really food for thought, Thank you so much. 171 00:10:40,760 --> 00:10:43,359 Speaker 2: That's our special contribuity here on Wall Street Week is Larry. 172 00:10:43,080 --> 00:10:44,319 Speaker 5: Summers of Harvard. 173 00:10:46,360 --> 00:10:48,400 Speaker 2: Coming up, we take a look at the weekend markets 174 00:10:48,400 --> 00:10:52,040 Speaker 2: with Aaron Brown of Pimco. That's next on Wall Street 175 00:10:52,040 --> 00:10:53,079 Speaker 2: Week on Bloomberg. 176 00:10:55,440 --> 00:10:59,600 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 177 00:10:59,679 --> 00:11:02,920 Speaker 3: blue Berg Radio. 178 00:11:07,400 --> 00:11:09,080 Speaker 5: This is Wall Street Week. I'm David Weston. 179 00:11:09,200 --> 00:11:12,040 Speaker 2: Stocks had another good week, helped by those jobs numbers, 180 00:11:12,080 --> 00:11:14,880 Speaker 2: so the SMB five hundred, up for the sixth straight week, 181 00:11:14,960 --> 00:11:16,840 Speaker 2: and to get forty six oh four that is well 182 00:11:16,840 --> 00:11:19,240 Speaker 2: above the median estimate of the Bloomberg elves for the 183 00:11:19,360 --> 00:11:20,679 Speaker 2: end of this year and for that matter, for the 184 00:11:20,760 --> 00:11:23,000 Speaker 2: end of next year as well. The NASAQ was up 185 00:11:23,000 --> 00:11:26,200 Speaker 2: seven tenths percent, while bonds had an up and down week, 186 00:11:26,280 --> 00:11:28,200 Speaker 2: but in the end, the yield and the tenure added 187 00:11:28,200 --> 00:11:30,560 Speaker 2: a bit over three basis points to finish at four 188 00:11:30,600 --> 00:11:33,080 Speaker 2: point two to three. To interpret all these markets for US, 189 00:11:33,120 --> 00:11:36,079 Speaker 2: we welcome back now Aaron Brown. She's PIMCO Multi Asset 190 00:11:36,160 --> 00:11:38,960 Speaker 2: Strategies portfolio manager erin great to have you back with us. 191 00:11:39,200 --> 00:11:41,559 Speaker 2: So I start with the jobs numbers, the other economic 192 00:11:41,600 --> 00:11:42,400 Speaker 2: data we got this week. 193 00:11:42,440 --> 00:11:43,679 Speaker 5: How did the markets react to it? 194 00:11:45,320 --> 00:11:48,800 Speaker 9: So I think that the markets actually behaved pretty rationally. 195 00:11:49,240 --> 00:11:53,479 Speaker 9: We had a significant rally into the end of November, 196 00:11:53,559 --> 00:11:56,320 Speaker 9: both across equity markets as well as bond markets, and 197 00:11:56,360 --> 00:11:58,920 Speaker 9: I think probably the bomb market got a little bit 198 00:11:58,960 --> 00:12:02,640 Speaker 9: ahead of itself going into today's number. You know, keep 199 00:12:02,679 --> 00:12:06,280 Speaker 9: in mind that prior to today, the market was pricing 200 00:12:06,360 --> 00:12:08,640 Speaker 9: in about one hundred and twenty seven basis points of 201 00:12:08,800 --> 00:12:12,559 Speaker 9: interest rate cuts next year, which is a really aggressive 202 00:12:12,640 --> 00:12:16,080 Speaker 9: interest rate cutting cycle that had been priced in, you know, 203 00:12:16,280 --> 00:12:20,720 Speaker 9: particularly against the backdrop of still elevated inflation, wage growth 204 00:12:20,800 --> 00:12:24,520 Speaker 9: north of four percent, and a pretty healthy economy. And 205 00:12:24,559 --> 00:12:26,640 Speaker 9: so what you saw today I think was just some 206 00:12:26,760 --> 00:12:29,480 Speaker 9: of that optimism of rate cuts being priced out of 207 00:12:29,520 --> 00:12:32,280 Speaker 9: the market. What's interesting is it didn't really hurt the 208 00:12:32,280 --> 00:12:35,480 Speaker 9: equity markets. Equity still, you know, rallied into the end 209 00:12:35,480 --> 00:12:39,000 Speaker 9: of the day, did quite well. But the market really 210 00:12:39,080 --> 00:12:42,280 Speaker 9: is pricing in a pretty soft landing across both equity 211 00:12:42,320 --> 00:12:44,520 Speaker 9: and bond markets, and I think just some of that 212 00:12:44,679 --> 00:12:47,160 Speaker 9: enthusiasm was priced out of the bond market, but still 213 00:12:47,200 --> 00:12:51,400 Speaker 9: a very healthy environment of healthy macroblock backdrop for stocks. 214 00:12:51,559 --> 00:12:53,520 Speaker 2: Aaron, Well, well, in December now it started to time 215 00:12:53,559 --> 00:12:54,880 Speaker 2: to start thinking about twenty twenty four. 216 00:12:55,000 --> 00:12:55,839 Speaker 5: It's not too early. 217 00:12:56,480 --> 00:12:58,520 Speaker 2: What are you projecting for twenty twenty four? And as 218 00:12:58,520 --> 00:13:00,800 Speaker 2: you talk about those rate cuts, it always strikes me 219 00:13:01,000 --> 00:13:02,560 Speaker 2: the only reason they cut rates is if maybe things 220 00:13:02,600 --> 00:13:04,079 Speaker 2: are not going so well the economy. So I'm not 221 00:13:04,120 --> 00:13:05,280 Speaker 2: sure if we should wish for that. 222 00:13:07,160 --> 00:13:09,840 Speaker 9: Well, there's other reasons why the Fed would would price 223 00:13:09,880 --> 00:13:13,040 Speaker 9: in rate cuts, and the reason for that is right now, 224 00:13:13,120 --> 00:13:16,080 Speaker 9: rates are quite restrictive. You know, the rates are probably 225 00:13:16,160 --> 00:13:20,000 Speaker 9: two hundred basis points over the neutral rate, and that 226 00:13:20,160 --> 00:13:23,960 Speaker 9: was really necessary given the very elevated levels of inflation. 227 00:13:24,120 --> 00:13:26,840 Speaker 9: But we're starting to see inflation come down, and as 228 00:13:26,880 --> 00:13:30,080 Speaker 9: we see inflation normalize, the FED may want to take 229 00:13:30,120 --> 00:13:33,520 Speaker 9: out some of that restrictiveness even apps in a recession, 230 00:13:33,640 --> 00:13:36,120 Speaker 9: so that we could still see rate cuts in a 231 00:13:36,160 --> 00:13:40,840 Speaker 9: healthy macro environment long as long as inflation is lower 232 00:13:40,880 --> 00:13:43,600 Speaker 9: than where it is today. What was a little bit 233 00:13:43,600 --> 00:13:46,600 Speaker 9: concerning about the job's number is we saw wage growth 234 00:13:46,640 --> 00:13:49,960 Speaker 9: increase again and it's you know, elevated above four percent. 235 00:13:50,679 --> 00:13:53,600 Speaker 9: The FED is probably going to have difficulty cutting rates 236 00:13:53,640 --> 00:13:57,400 Speaker 9: with inflation wage inflation above three percent, so we need 237 00:13:57,440 --> 00:14:00,440 Speaker 9: to see that mark that really move lower in order 238 00:14:00,520 --> 00:14:04,280 Speaker 9: to be in the fence comfort level overall to start 239 00:14:04,320 --> 00:14:07,080 Speaker 9: cutting rates. I think next year we're going to continue 240 00:14:07,080 --> 00:14:11,760 Speaker 9: to see a gradually slowing economic environment that could stagnate, 241 00:14:11,880 --> 00:14:14,720 Speaker 9: but right now at least, I'm not pricing in a 242 00:14:14,760 --> 00:14:17,680 Speaker 9: recession for next year, but I do expect a slow 243 00:14:17,720 --> 00:14:21,960 Speaker 9: growth environment in the US with the potential for recession risk, 244 00:14:22,080 --> 00:14:26,680 Speaker 9: particularly outside of the US, that could open the door 245 00:14:26,760 --> 00:14:29,920 Speaker 9: for ray cuts towards the end of next year, but 246 00:14:29,960 --> 00:14:32,200 Speaker 9: it's unlikely that we're going to see ray cuts in 247 00:14:32,200 --> 00:14:35,200 Speaker 9: the first quarter, particularly after tip today's payroll print. 248 00:14:35,520 --> 00:14:37,360 Speaker 2: Aaron, I know your job is really monitoring to that 249 00:14:37,480 --> 00:14:39,720 Speaker 2: balance between equities on the one hand and bonds on 250 00:14:39,760 --> 00:14:42,360 Speaker 2: the other. Now, bonds are giving you some real returns. 251 00:14:42,440 --> 00:14:44,520 Speaker 2: I mean, you're getting some real money. What does that 252 00:14:44,640 --> 00:14:46,440 Speaker 2: mean you at your investment portfolio as you go into 253 00:14:46,440 --> 00:14:47,200 Speaker 2: twenty twenty four. 254 00:14:48,760 --> 00:14:52,080 Speaker 9: So I think bonds are in a really unique sweet 255 00:14:52,080 --> 00:14:55,760 Speaker 9: spot right for investors. Typically, there's three things that you 256 00:14:55,800 --> 00:14:57,840 Speaker 9: look for in bonds, and I call it the trifecta 257 00:14:57,880 --> 00:15:02,040 Speaker 9: of bonds. The first is yield, and you want real 258 00:15:02,160 --> 00:15:04,600 Speaker 9: yield from bonds. If you look at a core US 259 00:15:04,640 --> 00:15:08,080 Speaker 9: bond portfolio today, it's yielding four point eight percent on 260 00:15:08,120 --> 00:15:12,000 Speaker 9: a real basis, so absent inflation, if you subtract out inflation, 261 00:15:12,080 --> 00:15:15,120 Speaker 9: that's a positive real return from your fixing come portfolio. 262 00:15:15,960 --> 00:15:19,680 Speaker 9: That's really elevated versus where we've seen during very slow 263 00:15:19,680 --> 00:15:23,240 Speaker 9: growth environments, and certainly very elevated versus the yield that 264 00:15:23,280 --> 00:15:26,360 Speaker 9: you were getting from any type of bond portfolio over 265 00:15:26,360 --> 00:15:29,320 Speaker 9: the last decade or so. The second is the potential 266 00:15:29,320 --> 00:15:33,200 Speaker 9: for capital appreciation, and just given the really rapid sell 267 00:15:33,200 --> 00:15:35,560 Speaker 9: off and the extent of the selloff that we saw 268 00:15:35,640 --> 00:15:39,600 Speaker 9: both in twenty twenty two and twenty twenty three with 269 00:15:39,760 --> 00:15:42,720 Speaker 9: across you know, fixing come portfolios, I think you could 270 00:15:42,760 --> 00:15:46,640 Speaker 9: see the potential for real capital return as well next 271 00:15:46,680 --> 00:15:50,000 Speaker 9: year as bond's rally as a continuation of what we 272 00:15:50,040 --> 00:15:54,360 Speaker 9: saw over the last month. And then the third is diversification. 273 00:15:54,560 --> 00:15:57,520 Speaker 9: And we've seen you know, stock bond correlation go back 274 00:15:57,560 --> 00:16:01,600 Speaker 9: to inversely correlated with one another, which means that when 275 00:16:01,680 --> 00:16:05,640 Speaker 9: bonds sell off, stocks rally, and when stocks sell off, 276 00:16:05,760 --> 00:16:09,520 Speaker 9: bonds rally. And that's really important from a diversification perspective 277 00:16:09,880 --> 00:16:14,560 Speaker 9: for most investors' acid mix and their core acid allocation 278 00:16:15,080 --> 00:16:18,720 Speaker 9: across their portfolios. And so you're now getting all three 279 00:16:18,760 --> 00:16:22,520 Speaker 9: benefits from bonds, whereas you know two years ago you're 280 00:16:22,560 --> 00:16:26,480 Speaker 9: really only getting you know, potential for diversification which failed. 281 00:16:26,560 --> 00:16:28,840 Speaker 9: So I think bonds are in a real sweet spot 282 00:16:28,840 --> 00:16:30,000 Speaker 9: next year for investors. 283 00:16:31,960 --> 00:16:35,360 Speaker 2: The COVID nineteen pandemic has triggered some big changes in 284 00:16:35,400 --> 00:16:38,600 Speaker 2: investment patterns and supply chains around the world. To take 285 00:16:38,680 --> 00:16:41,600 Speaker 2: us through what his industrial company is doing, we welcome now. 286 00:16:41,680 --> 00:16:44,720 Speaker 2: The CEO of Honeywell is Vimal Kapoor. So Vim Well, 287 00:16:44,720 --> 00:16:45,760 Speaker 2: thank you so much for being with us. 288 00:16:45,800 --> 00:16:46,480 Speaker 5: Great to have you here. 289 00:16:46,720 --> 00:16:48,600 Speaker 6: Thanks for having me David, and it's a pleasure to 290 00:16:48,600 --> 00:16:48,960 Speaker 6: be here. 291 00:16:49,040 --> 00:16:50,600 Speaker 5: A lot of talk about supply chains. 292 00:16:50,680 --> 00:16:53,560 Speaker 2: Give us a sense from Honeywell's perspective, what has changed, 293 00:16:53,600 --> 00:16:55,080 Speaker 2: if anything, since the pandemic. 294 00:16:55,280 --> 00:16:58,000 Speaker 6: I heard a thing I would say, I mean, it's 295 00:16:58,040 --> 00:17:00,880 Speaker 6: been a biggest diceuption in our business for the last 296 00:17:00,880 --> 00:17:04,760 Speaker 6: two years. It started with the disruption in electronics, which 297 00:17:04,800 --> 00:17:07,560 Speaker 6: we all well aware, and you don't get chips, you 298 00:17:07,600 --> 00:17:09,680 Speaker 6: don't get parts, and that was really I would say 299 00:17:09,680 --> 00:17:12,960 Speaker 6: about two years back. That's mostly healed for most part. 300 00:17:14,160 --> 00:17:16,679 Speaker 6: What's still left behind for US. Aerospace is the largest 301 00:17:16,680 --> 00:17:20,920 Speaker 6: segment for Honeywell, and then they're the healing is yet 302 00:17:20,920 --> 00:17:23,159 Speaker 6: to happen completely. We are in a midway and the 303 00:17:23,200 --> 00:17:28,080 Speaker 6: constraint there is Tier three Tier four suppliers. They moved 304 00:17:28,119 --> 00:17:29,880 Speaker 6: on with a lot of people during COVID and when 305 00:17:29,880 --> 00:17:32,840 Speaker 6: the capacity came back. Rebuilding the capacity of the people 306 00:17:33,080 --> 00:17:35,720 Speaker 6: has been a big challenge because these are certified skills, 307 00:17:36,680 --> 00:17:39,639 Speaker 6: not too easy to hire people. And that's the state 308 00:17:39,680 --> 00:17:45,480 Speaker 6: we are in. So electronics mostly healed on the mechanical side, 309 00:17:45,720 --> 00:17:48,640 Speaker 6: products in aerospace more in the midway. But we're making 310 00:17:48,640 --> 00:17:51,600 Speaker 6: progress every week, every month and continue. 311 00:17:51,240 --> 00:17:52,080 Speaker 1: To produce more. 312 00:17:52,520 --> 00:17:56,080 Speaker 6: Other thing I must bring in it changed is how 313 00:17:56,119 --> 00:18:01,080 Speaker 6: we think about insourcing versus outsourcing. That was I would 314 00:18:01,080 --> 00:18:05,480 Speaker 6: say we generally practice the strategy of local for local, 315 00:18:05,560 --> 00:18:08,639 Speaker 6: so produce for North America, and North America for Europe 316 00:18:08,640 --> 00:18:11,000 Speaker 6: and Asia for Asia. So for us live with not 317 00:18:11,040 --> 00:18:14,399 Speaker 6: a lot of moves. But when should you outsource and 318 00:18:14,400 --> 00:18:16,840 Speaker 6: when you should not outsource? Because one thing we learned 319 00:18:17,080 --> 00:18:21,240 Speaker 6: was that when we control the supply chain, we healed quickly, 320 00:18:22,119 --> 00:18:25,840 Speaker 6: and when it was outsourced more, we healed slower. And 321 00:18:25,880 --> 00:18:27,960 Speaker 6: that kind of also raising the question on how should 322 00:18:27,960 --> 00:18:31,680 Speaker 6: we configure on the things we do outsource, specifically electronic side, 323 00:18:32,160 --> 00:18:34,240 Speaker 6: and should that not be done by us to drive 324 00:18:34,280 --> 00:18:35,840 Speaker 6: more control and more execution. 325 00:18:36,280 --> 00:18:37,840 Speaker 5: So what about geography. 326 00:18:38,080 --> 00:18:40,880 Speaker 2: There's been a lot of talk with other companies about 327 00:18:41,160 --> 00:18:45,200 Speaker 2: friends sourcing and on shoring things like that. Has that 328 00:18:45,320 --> 00:18:46,960 Speaker 2: been a shift for you? Is most of your supply 329 00:18:47,040 --> 00:18:49,520 Speaker 2: chain within the United States, you have you taken it 330 00:18:49,520 --> 00:18:53,159 Speaker 2: into other countries that we will call so called friends showing. 331 00:18:53,400 --> 00:18:57,120 Speaker 6: So we always had a strategy of local for local, 332 00:18:57,280 --> 00:19:00,879 Speaker 6: and our North America supply chain always supported in US 333 00:19:00,960 --> 00:19:05,199 Speaker 6: and Mexico, and Europe was in Europe, and Asia was 334 00:19:05,240 --> 00:19:10,639 Speaker 6: prominently China. So for US what changes. Certainly Mexico has 335 00:19:10,680 --> 00:19:14,240 Speaker 6: become more important. We always had a great presence there, 336 00:19:14,600 --> 00:19:17,000 Speaker 6: so probably we are doing some insourcing type of work 337 00:19:17,000 --> 00:19:20,800 Speaker 6: in Mexico, considering that to do moving forward. But we 338 00:19:20,880 --> 00:19:25,040 Speaker 6: see a lot of our customers moving into friend shoring. 339 00:19:25,040 --> 00:19:29,240 Speaker 6: We see activity in Asian countries like in Vietnam, Malaysia, 340 00:19:29,359 --> 00:19:31,240 Speaker 6: we see a lot of activity in Poland, we see 341 00:19:31,280 --> 00:19:36,200 Speaker 6: activity in Turkey. Mexico is probably top of the charts there. 342 00:19:36,400 --> 00:19:40,399 Speaker 6: So clearly people are making decisions to redo their businesses 343 00:19:40,480 --> 00:19:42,960 Speaker 6: to align more with the friend shoring. 344 00:19:43,160 --> 00:19:45,600 Speaker 2: Well, thank you so much. That is Wikapoor. He is 345 00:19:45,640 --> 00:19:46,719 Speaker 2: the Honeywell CEO. 346 00:19:48,800 --> 00:19:49,840 Speaker 5: Coming up the Big. 347 00:19:49,640 --> 00:19:52,680 Speaker 2: Bank statement of their case to the Senate Banking Committee 348 00:19:52,680 --> 00:19:55,600 Speaker 2: on Wednesday. We'll go through with Bob Diamond to Atlas 349 00:19:55,600 --> 00:19:59,960 Speaker 2: Capital Management. That's next on Wall Street Week on Bloomberg. 350 00:20:01,600 --> 00:20:05,800 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 351 00:20:05,920 --> 00:20:06,879 Speaker 3: Bloomberg Radio. 352 00:20:13,560 --> 00:20:14,400 Speaker 5: This is Wall Street Week. 353 00:20:14,440 --> 00:20:17,080 Speaker 2: I'm David Weston, the CEOs of the major banks appeared 354 00:20:17,080 --> 00:20:18,440 Speaker 2: before the Senate Banking. 355 00:20:18,160 --> 00:20:19,760 Speaker 5: Committee this week, and most. 356 00:20:19,600 --> 00:20:22,440 Speaker 2: Of the discussion was about the proposed regulations increasing reserve 357 00:20:22,480 --> 00:20:25,399 Speaker 2: requirements as part of that move to Basel three requirements. 358 00:20:25,560 --> 00:20:27,800 Speaker 2: To give us an expert view on the merits of 359 00:20:27,840 --> 00:20:30,280 Speaker 2: the complaints we heard this week, Welcome to Bob Diamond. 360 00:20:30,320 --> 00:20:32,960 Speaker 2: He's founder and CEO of Atlas Merchant Capital. Bob, great 361 00:20:32,960 --> 00:20:34,560 Speaker 2: to have you back on Wall Street week. So, as 362 00:20:34,600 --> 00:20:36,320 Speaker 2: I say, listen to some of those CEOs. They're not 363 00:20:36,320 --> 00:20:39,080 Speaker 2: too happy with this idea about these reserves, are they right? 364 00:20:39,440 --> 00:20:41,879 Speaker 2: Is it really gonna suppress lending? Is it really going 365 00:20:41,960 --> 00:20:42,960 Speaker 2: to hurt the economy? 366 00:20:43,520 --> 00:20:45,919 Speaker 10: Well, listen, of course the bank CEOs are not going 367 00:20:46,000 --> 00:20:49,760 Speaker 10: to be looking for higher capital levels. I think the 368 00:20:49,800 --> 00:20:52,159 Speaker 10: banks are doing pretty well right now. You know, the 369 00:20:52,240 --> 00:20:54,480 Speaker 10: mantra that I used in two thousand and eight, David, 370 00:20:54,640 --> 00:20:57,960 Speaker 10: was how do we how do we keep banks safe 371 00:20:57,960 --> 00:21:01,400 Speaker 10: and sound while also driving jobs. 372 00:21:01,040 --> 00:21:02,000 Speaker 5: And economic growth? 373 00:21:02,720 --> 00:21:04,199 Speaker 10: And it would be hard to say that we're not 374 00:21:04,240 --> 00:21:06,520 Speaker 10: doing a pretty good job on both of those right now. 375 00:21:06,560 --> 00:21:08,760 Speaker 10: I think the banks are safer and sounder than they've 376 00:21:08,800 --> 00:21:11,000 Speaker 10: been since two thousand and eight. And I think, on 377 00:21:11,040 --> 00:21:15,040 Speaker 10: the other hand, people are pretty pleased with economic growth, 378 00:21:15,520 --> 00:21:18,399 Speaker 10: really pleased with job creation in the US. So I 379 00:21:18,480 --> 00:21:20,080 Speaker 10: think one of the things they're saying is there's some 380 00:21:20,240 --> 00:21:24,760 Speaker 10: of balance. Factually, if you raise those capital levels, they 381 00:21:24,760 --> 00:21:27,840 Speaker 10: are going to have lower rowe and factually they'll be 382 00:21:27,960 --> 00:21:31,359 Speaker 10: less capital for lending. So I think what they said 383 00:21:31,440 --> 00:21:33,479 Speaker 10: is correct. I think the balance you have to put 384 00:21:33,560 --> 00:21:35,600 Speaker 10: it is one of safety and soundness. 385 00:21:35,760 --> 00:21:39,879 Speaker 2: Well, and safety and soundness hasn't gotten more important to 386 00:21:40,320 --> 00:21:42,720 Speaker 2: make sure that these really big banks, they're really big 387 00:21:42,720 --> 00:21:45,040 Speaker 2: money center banks, are safe Because there was a time 388 00:21:45,080 --> 00:21:46,600 Speaker 2: we say we don't want to have too big to fail. 389 00:21:46,880 --> 00:21:48,480 Speaker 2: I think we're past that point, at least with that 390 00:21:48,520 --> 00:21:50,879 Speaker 2: handful of big banks. I'm not sure we can handle 391 00:21:50,880 --> 00:21:51,320 Speaker 2: if they fail. 392 00:21:52,000 --> 00:21:52,160 Speaker 4: Well. 393 00:21:52,200 --> 00:21:53,560 Speaker 10: I think that's a very good point. And if you 394 00:21:53,600 --> 00:21:55,879 Speaker 10: go back to two thousand and eight, both City and 395 00:21:55,960 --> 00:21:58,840 Speaker 10: Bank of America, two of the biggest four banks in 396 00:21:58,880 --> 00:22:02,480 Speaker 10: the US were pretty much and solvent without the TART program. 397 00:22:02,880 --> 00:22:05,680 Speaker 10: So the Fed and the Treasury came up with a 398 00:22:05,760 --> 00:22:07,880 Speaker 10: program to put equity in the banks, and they're doing 399 00:22:07,880 --> 00:22:11,879 Speaker 10: great today. But the truth is the big four banks JP, Morgan, 400 00:22:11,960 --> 00:22:16,560 Speaker 10: ba A, Wells, Fargo City today versus two thousand and 401 00:22:16,600 --> 00:22:21,520 Speaker 10: eight are bigger, more concentrated, closer to government, more like 402 00:22:21,640 --> 00:22:22,640 Speaker 10: utilities or an. 403 00:22:22,520 --> 00:22:23,960 Speaker 1: Oligopoly at that level. 404 00:22:24,160 --> 00:22:27,040 Speaker 10: And so if there was a mistake, if there was 405 00:22:27,080 --> 00:22:30,280 Speaker 10: a systemic failure, it would be a problem. 406 00:22:30,440 --> 00:22:32,960 Speaker 2: Well, talk about the banking system overall. Are we headed 407 00:22:33,000 --> 00:22:35,320 Speaker 2: to our world where we really have a handful of 408 00:22:35,400 --> 00:22:38,760 Speaker 2: megabanks and then presumably a lot of small community banks 409 00:22:38,880 --> 00:22:40,800 Speaker 2: and local things, and we really are putting a lot 410 00:22:40,840 --> 00:22:43,119 Speaker 2: of pressure on the middle the so called regional banks. 411 00:22:43,640 --> 00:22:46,200 Speaker 10: Well, this is why we have been talking so much 412 00:22:46,280 --> 00:22:50,320 Speaker 10: in Alys Smirntry Capital about the opportunities in regional community 413 00:22:50,960 --> 00:22:54,000 Speaker 10: specialist banking. You know, we have over four thousand banks 414 00:22:54,040 --> 00:22:56,760 Speaker 10: in this country. We're very very unique in that way, 415 00:22:57,200 --> 00:23:00,600 Speaker 10: and I think the benefit that that as to our 416 00:23:00,600 --> 00:23:05,240 Speaker 10: economy the diversification of lending, particularly the lending to specialist 417 00:23:05,280 --> 00:23:08,880 Speaker 10: companies middle market companies. But we also have a very 418 00:23:08,880 --> 00:23:13,199 Speaker 10: diverse financial services industry outside of the banks. So you know, 419 00:23:13,240 --> 00:23:17,240 Speaker 10: we own three middle market m and a advisory platforms 420 00:23:17,359 --> 00:23:20,639 Speaker 10: or advisory platforms from middle market companies in the US. 421 00:23:21,920 --> 00:23:25,080 Speaker 10: They serve small businesses and family owned businesses in a 422 00:23:25,080 --> 00:23:28,320 Speaker 10: way that the large megabanks just can't afford to serve 423 00:23:28,359 --> 00:23:32,760 Speaker 10: them in all of that benefits the financial services industry. 424 00:23:32,840 --> 00:23:36,080 Speaker 10: So we're very positive on the regional banks and the 425 00:23:36,080 --> 00:23:39,159 Speaker 10: community banks, and we think that there's clearly a spot 426 00:23:39,200 --> 00:23:40,119 Speaker 10: for them. 427 00:23:40,720 --> 00:23:42,600 Speaker 2: The regional banks in twenty twenty three have come into 428 00:23:42,680 --> 00:23:45,560 Speaker 2: a lot of stress starting with SVP. We had those failures. 429 00:23:45,560 --> 00:23:47,720 Speaker 2: There was a lot of concern about them. They caught 430 00:23:47,760 --> 00:23:50,080 Speaker 2: in between and they have a lot of the costs, 431 00:23:50,160 --> 00:23:52,959 Speaker 2: particularly regulatory and other costs that the huge banks have, 432 00:23:53,280 --> 00:23:55,600 Speaker 2: but they can't distribute it quite as broadly. Should we 433 00:23:55,720 --> 00:23:59,960 Speaker 2: be promoting, encouraging, allowing more consolidation at that rank. 434 00:24:00,320 --> 00:24:02,639 Speaker 10: I think it's going to happen fairly naturally. And you know, 435 00:24:02,680 --> 00:24:04,879 Speaker 10: to your point, David, they got hit with you know, 436 00:24:05,280 --> 00:24:09,800 Speaker 10: a triple whammy with interest rates moving up quickly. The 437 00:24:09,840 --> 00:24:13,399 Speaker 10: mark to market portfolio or the treasury portfolio that was 438 00:24:13,440 --> 00:24:17,119 Speaker 10: not marked to market got hit for every bank. I 439 00:24:17,119 --> 00:24:19,840 Speaker 10: think loans is a percentage of assets are higher in 440 00:24:19,920 --> 00:24:23,359 Speaker 10: regional and community banks, and so there's been some concern there. 441 00:24:23,400 --> 00:24:27,720 Speaker 10: And lastly, and I think it's not really a topic 442 00:24:27,920 --> 00:24:30,760 Speaker 10: as much as it should be, is the higher regulatory 443 00:24:30,800 --> 00:24:35,760 Speaker 10: costs and post SVB, And first Republic. The impact of 444 00:24:36,880 --> 00:24:40,520 Speaker 10: regulation and inspection on the smaller community banks is just 445 00:24:40,640 --> 00:24:42,679 Speaker 10: much greater than it would be on the larger banks. 446 00:24:42,760 --> 00:24:45,640 Speaker 2: As you say above, there's increased regulatory costs and those 447 00:24:45,640 --> 00:24:48,680 Speaker 2: get distributed. They don't ramp up or ramp down. They're 448 00:24:48,680 --> 00:24:51,560 Speaker 2: not scalable. But what about tech costs as well. We're 449 00:24:51,600 --> 00:24:54,000 Speaker 2: looking at we're on the edge of AI, generative AI, 450 00:24:54,040 --> 00:24:57,720 Speaker 2: and how that's going to probably transform banking. Again, there's 451 00:24:57,760 --> 00:24:59,800 Speaker 2: one thing for a city or a Bank of America 452 00:24:59,880 --> 00:25:02,080 Speaker 2: or JP Morgan to afford it, it's another thing for 453 00:25:02,119 --> 00:25:03,200 Speaker 2: some of these smaller banks. 454 00:25:02,960 --> 00:25:03,399 Speaker 5: To afford it. 455 00:25:03,520 --> 00:25:05,320 Speaker 10: I think it's going to be a huge advantage for them. 456 00:25:05,359 --> 00:25:08,399 Speaker 10: I think, really, I think that technology of processing and 457 00:25:08,600 --> 00:25:11,840 Speaker 10: back office and those are big, big challenges for the 458 00:25:11,880 --> 00:25:17,399 Speaker 10: smaller banks, but I think their access to AI excuse me, 459 00:25:18,000 --> 00:25:20,040 Speaker 10: will be a huge boost for them. So I think 460 00:25:20,080 --> 00:25:22,080 Speaker 10: one of the things that we're pretty excited about going 461 00:25:22,119 --> 00:25:25,200 Speaker 10: forward is that will be a pretty positive impact. But 462 00:25:25,240 --> 00:25:28,880 Speaker 10: back to your point, David, four thousand banks today, some 463 00:25:28,960 --> 00:25:31,480 Speaker 10: of the smaller ones are really really good banks, but 464 00:25:31,520 --> 00:25:34,239 Speaker 10: they're struggling to get their return on equity up. So 465 00:25:34,320 --> 00:25:37,560 Speaker 10: we think some of the stronger ones are right for investment, 466 00:25:38,040 --> 00:25:41,639 Speaker 10: and that investment can be to help increase capital levels, 467 00:25:41,640 --> 00:25:44,120 Speaker 10: but it can also be to give them the capital 468 00:25:44,240 --> 00:25:45,919 Speaker 10: to acquire some of the smaller banks. 469 00:25:46,200 --> 00:25:47,520 Speaker 5: One more point about those hearings. 470 00:25:47,560 --> 00:25:50,159 Speaker 2: We've heard a fair amount of concern, especially by the CEOs, 471 00:25:50,480 --> 00:25:53,440 Speaker 2: that as you increase some of the regulatory requirements, you're 472 00:25:53,520 --> 00:25:56,240 Speaker 2: driving money out of the regulated bank banking system. You're 473 00:25:56,320 --> 00:25:59,600 Speaker 2: driving into private credit into some of the non bank banks. 474 00:26:00,119 --> 00:26:02,200 Speaker 2: Is that a real issue? Is it a real problem? 475 00:26:02,200 --> 00:26:03,920 Speaker 2: Should we be concerned about it? 476 00:26:04,520 --> 00:26:06,639 Speaker 10: Of course, you want to be concerned about everything in 477 00:26:06,680 --> 00:26:10,240 Speaker 10: financial services. But I think one of the great attributes 478 00:26:10,560 --> 00:26:13,520 Speaker 10: of the financial services industry in the US and its 479 00:26:13,600 --> 00:26:17,760 Speaker 10: impact in the economy is the diversification. So the amount 480 00:26:17,760 --> 00:26:21,040 Speaker 10: of private credit is actually quite a small percentage relative 481 00:26:21,080 --> 00:26:26,720 Speaker 10: to all credit from the banking system. But it's venture funds, 482 00:26:27,119 --> 00:26:31,600 Speaker 10: it's hedge funds, it's credit opportunity funds, it's regional banks, 483 00:26:31,680 --> 00:26:35,359 Speaker 10: it's community banks, it's m and a advisory platforms for 484 00:26:35,440 --> 00:26:39,080 Speaker 10: middle market companies. No other country has is diverse and 485 00:26:39,160 --> 00:26:44,239 Speaker 10: strong and diversified financial services industries we have. I think 486 00:26:44,240 --> 00:26:47,320 Speaker 10: it's one of our great strengths. So does it need 487 00:26:47,400 --> 00:26:49,480 Speaker 10: to be regulated, of course, But is it a real 488 00:26:49,560 --> 00:26:53,080 Speaker 10: positive for our economy that not all of this activity 489 00:26:53,160 --> 00:26:55,960 Speaker 10: is happening in four banks as it is in Canada 490 00:26:56,400 --> 00:26:57,840 Speaker 10: in many of the European countries. 491 00:26:57,880 --> 00:26:58,920 Speaker 5: I think it's a real positive. 492 00:26:59,160 --> 00:27:01,600 Speaker 2: But taking the of the large banks just for a 493 00:27:01,640 --> 00:27:05,360 Speaker 2: moment here, is there a risk of the small the 494 00:27:05,400 --> 00:27:09,840 Speaker 2: private credit facilities cherry picking. It may not be big 495 00:27:09,960 --> 00:27:11,879 Speaker 2: in the overall course things, but they may get the 496 00:27:11,920 --> 00:27:12,640 Speaker 2: most lucrative. 497 00:27:12,920 --> 00:27:13,680 Speaker 1: It's competition. 498 00:27:14,040 --> 00:27:16,960 Speaker 10: I think it's fantastic. Of course, the private credit platforms 499 00:27:17,000 --> 00:27:20,119 Speaker 10: are going to look for the best pieces of the 500 00:27:20,200 --> 00:27:24,720 Speaker 10: lending sector, so I think that competition will be very good. 501 00:27:25,080 --> 00:27:27,960 Speaker 2: Is there systemic risk is the big issue from a regulator, 502 00:27:28,240 --> 00:27:29,960 Speaker 2: and that's what we really care about, is the overall system. 503 00:27:30,680 --> 00:27:33,000 Speaker 2: Is there systemic risk because we don't really know what's 504 00:27:33,040 --> 00:27:34,800 Speaker 2: in a lot of the private credit. 505 00:27:34,920 --> 00:27:38,080 Speaker 10: Listen, one of the things that it's been hard for 506 00:27:38,119 --> 00:27:40,600 Speaker 10: anyone to think about since two thousand and eight is 507 00:27:40,600 --> 00:27:44,359 Speaker 10: that failure is okay, too big to fail? Is talking 508 00:27:44,400 --> 00:27:47,960 Speaker 10: about systemic risk for the economy. So many of these 509 00:27:48,000 --> 00:27:52,120 Speaker 10: private credit platforms have sovereign wealth funds investing in them, 510 00:27:52,440 --> 00:27:55,360 Speaker 10: so the risk is well well diversified, and I think 511 00:27:55,400 --> 00:27:57,480 Speaker 10: if the FED and the Treasury felt that there was 512 00:27:57,560 --> 00:28:01,560 Speaker 10: systemic risk on the private capital platforms, they should take action. 513 00:28:02,080 --> 00:28:05,080 Speaker 10: But I don't see any evidence that failure in private 514 00:28:05,080 --> 00:28:07,280 Speaker 10: credit right now is going to create systemic risk. 515 00:28:07,680 --> 00:28:10,639 Speaker 2: Historically, private credit was available to sort of the more wealthy, 516 00:28:10,680 --> 00:28:13,600 Speaker 2: the more sophisticated investors of various sorts. But we've seen, 517 00:28:13,640 --> 00:28:16,359 Speaker 2: certainly in private equity a move into retail, the ways 518 00:28:16,359 --> 00:28:18,600 Speaker 2: to figure out retail to participate. Is that happening in 519 00:28:18,640 --> 00:28:20,679 Speaker 2: private credit, and it's that pose a risk for just 520 00:28:20,720 --> 00:28:23,000 Speaker 2: a mom and pop putting their money, their savings into this. 521 00:28:24,119 --> 00:28:26,480 Speaker 10: I'm not as close to some of the private equity firms, 522 00:28:26,480 --> 00:28:28,400 Speaker 10: but I would expect they're looking more and more at 523 00:28:28,400 --> 00:28:33,200 Speaker 10: retail as well. So again it's the diversification, and it's 524 00:28:33,200 --> 00:28:35,360 Speaker 10: the question of is their systemic risk. 525 00:28:35,560 --> 00:28:37,960 Speaker 2: So to make the banking system even stronger than it is today, 526 00:28:38,000 --> 00:28:39,560 Speaker 2: you said it's pretty good shape. 527 00:28:39,280 --> 00:28:39,880 Speaker 5: What would you do? 528 00:28:40,520 --> 00:28:44,120 Speaker 10: Well, listen, I think what Michael Barr is looking at 529 00:28:44,120 --> 00:28:46,600 Speaker 10: as the vice chair in terms of the capital levels 530 00:28:47,160 --> 00:28:52,760 Speaker 10: is appropriate given that the banks are larger, more concentrated, 531 00:28:53,440 --> 00:28:56,360 Speaker 10: and carry a larger and larger percentage of the deposits. 532 00:28:56,400 --> 00:28:58,720 Speaker 10: So at some point, you know, you and I have 533 00:28:58,800 --> 00:29:02,600 Speaker 10: talked about this is Is it four large banks at 534 00:29:02,600 --> 00:29:06,800 Speaker 10: the expense of a couple thousand banks. I'd like to 535 00:29:06,840 --> 00:29:09,760 Speaker 10: see at the capital levels a little bit less onerous 536 00:29:10,120 --> 00:29:13,120 Speaker 10: at the smaller community banks, and the regulatory costs a 537 00:29:13,120 --> 00:29:16,520 Speaker 10: little bit less onerous there and give them a chance 538 00:29:16,560 --> 00:29:18,600 Speaker 10: to continue to grow and get their row up. 539 00:29:19,000 --> 00:29:20,880 Speaker 2: Bob, it's always such a treaty, have you of Wall Street. 540 00:29:20,880 --> 00:29:22,080 Speaker 5: We thank you so much for coming in. 541 00:29:22,400 --> 00:29:28,800 Speaker 2: That is Bob Diamond of Atlas Merchant Capital, coming up 542 00:29:28,960 --> 00:29:31,400 Speaker 2: enough with the fountain of youth. Get ready for a 543 00:29:31,400 --> 00:29:34,920 Speaker 2: fountain of age, brought to you compliments of your friendly 544 00:29:35,120 --> 00:29:41,000 Speaker 2: generative AI. That's next on Wall Street Week on Bloomberg. 545 00:29:50,960 --> 00:29:55,200 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 546 00:29:55,320 --> 00:30:00,920 Speaker 3: Bloomberg Radio. 547 00:30:02,600 --> 00:30:03,920 Speaker 5: Finally, one more thought. 548 00:30:04,400 --> 00:30:06,880 Speaker 2: Mark Twain taught us that age is an issue of 549 00:30:06,920 --> 00:30:10,200 Speaker 2: mind over matter. If you don't mind, it doesn't matter, 550 00:30:10,560 --> 00:30:13,160 Speaker 2: it must be Frank, we do mind, and yes it 551 00:30:13,200 --> 00:30:16,880 Speaker 2: does matter. After all, didn't ponste leone spend years back 552 00:30:16,880 --> 00:30:19,920 Speaker 2: in the sixteenth century looking for that lost fountain of youth? 553 00:30:20,400 --> 00:30:23,440 Speaker 2: In these days, it sometimes seems as though we're surrounded 554 00:30:23,440 --> 00:30:25,400 Speaker 2: by people who could use a drink from that found 555 00:30:25,440 --> 00:30:29,000 Speaker 2: of youth, starting with many of our politicians. People do 556 00:30:29,080 --> 00:30:33,280 Speaker 2: believe that our elected leaders are just too old, and 557 00:30:33,320 --> 00:30:34,000 Speaker 2: those same. 558 00:30:33,760 --> 00:30:36,520 Speaker 9: Elected leaders are really reluctant to give up that. 559 00:30:36,600 --> 00:30:39,080 Speaker 2: Power, which makes it all the harder for the young 560 00:30:39,120 --> 00:30:41,800 Speaker 2: to wait for their turn in the big leagues. But 561 00:30:41,840 --> 00:30:43,880 Speaker 2: it turns out there are at least some places where 562 00:30:43,920 --> 00:30:47,600 Speaker 2: that weight is getting shorter rather than getting longer, like tech, 563 00:30:47,640 --> 00:30:51,080 Speaker 2: for example, where Mark Zuckerberg became a billionaire at twenty three. 564 00:30:51,320 --> 00:30:54,360 Speaker 2: This guy's probably smiling big day, yes. 565 00:30:54,280 --> 00:30:55,400 Speaker 1: Big small in his face. 566 00:30:55,560 --> 00:30:58,360 Speaker 9: His wealth went up by one point six billion dollars 567 00:30:58,480 --> 00:30:58,960 Speaker 9: just in one. 568 00:30:58,920 --> 00:31:03,280 Speaker 2: Day yesterday, and Evan Spiegel made it by twenty five. 569 00:31:03,680 --> 00:31:06,560 Speaker 2: Sam Bankman Freed was a billionaire briefly when he was 570 00:31:06,560 --> 00:31:09,160 Speaker 2: twenty nine, But I'm not sure that that one still counts. 571 00:31:09,480 --> 00:31:11,680 Speaker 5: The players like Sam Bankman Freed might be new. 572 00:31:12,240 --> 00:31:15,520 Speaker 8: Just kind of fraud, kind of corruption is as old as. 573 00:31:15,400 --> 00:31:19,200 Speaker 2: Time or In sports, we have young baseball players racing 574 00:31:19,200 --> 00:31:21,760 Speaker 2: their way through the miners like never before. According to 575 00:31:21,800 --> 00:31:25,560 Speaker 2: sports site Defector, like Jackson Holliday moved up by the 576 00:31:25,600 --> 00:31:28,360 Speaker 2: Orioles to triple a ball only a year out of 577 00:31:28,400 --> 00:31:31,719 Speaker 2: high school, aided by high tech applied to his training. 578 00:31:32,200 --> 00:31:35,000 Speaker 2: Though Detroit Tigers fans like me might recall that our 579 00:31:35,120 --> 00:31:38,040 Speaker 2: al kline first played in the Major's A eighteen, long 580 00:31:38,080 --> 00:31:41,800 Speaker 2: before we used all those new fangled computers, which takes 581 00:31:41,880 --> 00:31:46,080 Speaker 2: us to artificial intelligence. Nobel Prize winner Michael Spence told 582 00:31:46,120 --> 00:31:48,120 Speaker 2: us that the best use of AI may well be 583 00:31:48,280 --> 00:31:50,960 Speaker 2: to augment what we do, rather than replace it. 584 00:31:51,160 --> 00:31:55,800 Speaker 3: Our best guess is that generative AI is mainly, not exclusively, 585 00:31:55,840 --> 00:31:58,840 Speaker 3: but mainly going to turn out to be a powerful 586 00:31:58,920 --> 00:32:00,320 Speaker 3: digital assistant. 587 00:32:00,120 --> 00:32:03,640 Speaker 2: And some professions are already using this new digital assistant 588 00:32:03,720 --> 00:32:07,200 Speaker 2: to advance the careers of their junior talent faster than 589 00:32:07,200 --> 00:32:07,960 Speaker 2: ever before. 590 00:32:08,320 --> 00:32:09,959 Speaker 5: This week, Bloomberg. 591 00:32:09,440 --> 00:32:13,200 Speaker 2: Reported that new graduates hired at KPMG are using artificial 592 00:32:13,240 --> 00:32:16,280 Speaker 2: intelligence tools to do tax works that used to require 593 00:32:16,280 --> 00:32:19,640 Speaker 2: at least three or four years of experience, and law 594 00:32:19,640 --> 00:32:23,320 Speaker 2: firm McFarland's has junior lawyers working with AI to interpret 595 00:32:23,360 --> 00:32:26,280 Speaker 2: complex legal documents that the partners wouldn't let us go 596 00:32:26,440 --> 00:32:28,840 Speaker 2: near back when I was starting out. All of which 597 00:32:28,880 --> 00:32:31,440 Speaker 2: may mean those accountants and those lawyers will get their 598 00:32:31,480 --> 00:32:35,400 Speaker 2: coveted partnerships much earlier than we used to. So it 599 00:32:35,480 --> 00:32:38,360 Speaker 2: turns out that four hundred and fifty years after constantly 600 00:32:38,440 --> 00:32:41,080 Speaker 2: owned trapes around Florida looking for that fountain of youth, 601 00:32:41,400 --> 00:32:45,200 Speaker 2: we have found the opposite, artificial intelligence that lets us 602 00:32:45,240 --> 00:32:49,560 Speaker 2: grow old earlier. Call it maybe the fountain of age. 603 00:32:49,720 --> 00:32:52,400 Speaker 2: Now the question is whether this will spread from lawyers 604 00:32:52,440 --> 00:32:56,320 Speaker 2: to doctors. Stanford Medical School Dean Lloyd Miners says they're 605 00:32:56,360 --> 00:32:59,480 Speaker 2: already well into integrating AI into medicine. 606 00:32:59,560 --> 00:33:02,760 Speaker 11: There will be less emphasis on memorization, more emphasis, I 607 00:33:02,760 --> 00:33:06,920 Speaker 11: think on truly understanding and in particular understanding what these 608 00:33:06,960 --> 00:33:10,440 Speaker 11: models are doing and how they can be responsibly deployed 609 00:33:10,720 --> 00:33:11,440 Speaker 11: and trained. 610 00:33:11,960 --> 00:33:14,560 Speaker 2: So we may be just around the corner from bringing 611 00:33:14,640 --> 00:33:17,640 Speaker 2: to the world what thirty years ago TV only imagined 612 00:33:17,640 --> 00:33:21,000 Speaker 2: in Doogie Houser, who graduated from med school at fourteen 613 00:33:21,120 --> 00:33:23,200 Speaker 2: and was practicing medicine at sixteen. 614 00:33:24,080 --> 00:33:28,200 Speaker 7: Today's sixteenth birthday getting his license would just be the 615 00:33:28,240 --> 00:33:29,280 Speaker 7: most perfect present. 616 00:33:29,520 --> 00:33:30,959 Speaker 9: You want to go to jail, No, you'll be going 617 00:33:31,000 --> 00:33:32,480 Speaker 9: to deal for criminal negligence. 618 00:33:33,200 --> 00:33:36,240 Speaker 7: Who is a character that's. 619 00:33:36,120 --> 00:33:39,080 Speaker 5: My sin with the doctor that does it. 620 00:33:39,120 --> 00:33:41,320 Speaker 2: For this episode of Wall Street Week, I'm David Weston, 621 00:33:41,440 --> 00:33:42,520 Speaker 2: This is Bloomberg. 622 00:33:42,760 --> 00:33:43,600 Speaker 5: See you next week.