WEBVTT - Bloomberg Wall Street Week - December 8th, 2023 0:00:00.240 --> 0:00:02.440 This is Bloomberg Well Street Week. 0:00:02.480 --> 0:00:04.400 I mean may not have an overall recession, We're having 0:00:04.400 --> 0:00:06.960 a rolling recession. Economy roll looks pretty strongly is when 0:00:07.000 --> 0:00:07.640 it comes to jobs. 0:00:07.680 --> 0:00:09.879 The financial stories that shape our world. 0:00:09.920 --> 0:00:13.600 Three major regional bank failures send shockwaves through the banking system. 0:00:13.680 --> 0:00:15.480 We're all trying to figure out what to make of 0:00:15.560 --> 0:00:17.320 generative AI through. 0:00:17.160 --> 0:00:19.280 The eyes of the most influential voices. 0:00:19.440 --> 0:00:22.400 Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 0:00:22.520 --> 0:00:25.320 Zebra Lair of the Paulson Institute, Glen Hubbard of the 0:00:25.320 --> 0:00:26.280 Columbia Business School. 0:00:26.280 --> 0:00:30.120 Bloomberg Well Street Week with David Weston from Bloomberg Radio. 0:00:30.320 --> 0:00:34.000 A lot of talk about climate, about US China relations, 0:00:34.000 --> 0:00:37.000 about the big banks, but the action still is in 0:00:37.040 --> 0:00:40.800 Gaza is Israel presses ahead. This is Bloomberg Wall Street Week. 0:00:40.920 --> 0:00:44.720 I'm David Weston, this week's special contributor Larry Summers of 0:00:44.760 --> 0:00:47.000 Harvard about US jobs numbers and more. 0:00:47.400 --> 0:00:50.879 I still think the market is a bit overpricing. How 0:00:50.960 --> 0:00:56.960 much easing the Fed's going to decide it can prudently undertake. 0:00:57.240 --> 0:00:57.720 Howne you all. 0:00:57.800 --> 0:01:00.880 CEO Vimill Kapoor on his latest at inquisition and how 0:01:00.960 --> 0:01:03.520 it fits into his overall business model. 0:01:03.640 --> 0:01:05.720 So it fits right in the heart of our building 0:01:05.720 --> 0:01:09.600 automation business and prepares it for higher growth trade in 0:01:09.640 --> 0:01:10.120 the future. 0:01:10.680 --> 0:01:13.399 And Bob Diamond of Atlas Merchant Capital on the Big 0:01:13.440 --> 0:01:29.880 Bank's big appearance on Capitol Hill. Gill wall Street watched 0:01:29.920 --> 0:01:33.440 this week as those eighty thousand delegates continued their Top 0:01:33.520 --> 0:01:36.720 twenty eight meetings in Dubai, with US Special Envoy John 0:01:36.800 --> 0:01:40.679 Carey turning up the rhetorical heat. The best scientists in 0:01:40.720 --> 0:01:44.840 the world are saying what we face now is alarming, terrifying, 0:01:44.959 --> 0:01:48.520 while Chinese officials reacted badly to Commerce Secretary of Romando's 0:01:48.560 --> 0:01:50.960 saying it poses a risk to the United States, even 0:01:51.000 --> 0:01:55.360 as Trade Representative Catherine Tye talked in terms of balance, the. 0:01:55.360 --> 0:01:58.200 Lessons that we've learned from the past seven years on 0:01:58.360 --> 0:02:02.240 trade mean that we can't ever ignore the domestic political 0:02:02.240 --> 0:02:04.120 consequences of what we're doing in trade. 0:02:04.160 --> 0:02:05.680 There was a lot of talk in front of the 0:02:05.720 --> 0:02:08.840 Senate Banking Committee this week as CEOs made their case 0:02:08.960 --> 0:02:11.960 that ramping up reserve requirements would not be good for 0:02:12.000 --> 0:02:12.600 the economy. 0:02:12.760 --> 0:02:15.600 The most likely result of increasing the costs of banks 0:02:15.639 --> 0:02:18.360 to offer a variety of products. Is that it would 0:02:18.400 --> 0:02:22.040 move more activity into the less regulated non bank sector, 0:02:22.280 --> 0:02:25.840 which carries its own risk for consumers and the stability 0:02:25.960 --> 0:02:27.320 of the financial system. 0:02:27.440 --> 0:02:29.880 The place where there was much more than just talk 0:02:30.120 --> 0:02:34.040 was once again in Gaza, as Israeli forces renewed their offensives, 0:02:34.040 --> 0:02:37.360 spreading into southern areas and urging civilians to flee. 0:02:37.880 --> 0:02:38.280 Again. 0:02:38.760 --> 0:02:42.120 The real question is how do you, on the one hand, 0:02:42.919 --> 0:02:47.320 allow a sovereign nation like Israel to go after terrorist targets, 0:02:47.320 --> 0:02:49.400 while on the other hand, have them do so in 0:02:49.440 --> 0:02:53.040 a way that minimizes the harm to civilians. 0:02:53.160 --> 0:02:55.799 And Israel was very much the subject on Capitol Hill 0:02:55.840 --> 0:02:58.880 when the presidents of Harvard, Penn and MIT were summoned 0:02:58.919 --> 0:03:01.120 to address the rise of anti Semitism. 0:03:01.400 --> 0:03:05.080 I have sought to confront hate while preserving free expression. 0:03:05.440 --> 0:03:08.560 This is difficult work, and I know that I have 0:03:08.720 --> 0:03:10.239 not always gotten it right. 0:03:10.560 --> 0:03:13.040 And then on Friday we got the US jobs numbers, 0:03:13.160 --> 0:03:16.160 showing once again that the labor market is stronger than 0:03:16.160 --> 0:03:18.840 people thought, as the US added another one hundred and 0:03:18.880 --> 0:03:22.280 ninety nine thousand jobs in November, taking an unemployment rate 0:03:22.440 --> 0:03:26.679 down to three point seven percent, while wage growth accelerated. 0:03:31.320 --> 0:03:33.480 And here to take us through these employment numbers for 0:03:33.520 --> 0:03:36.360 this week, we welcome our very special contributor, Larry Summers 0:03:36.400 --> 0:03:39.200 of Harvard. SOI, Larry, more jobs were created than expected 0:03:39.240 --> 0:03:41.040 and unemployment was lower than expected. 0:03:41.280 --> 0:03:42.400 How do you interpret. 0:03:42.120 --> 0:03:44.680 Them, David? These were good numbers. 0:03:45.240 --> 0:03:50.240 They showed an economy that, at least as of November, 0:03:50.920 --> 0:03:55.960 was still looking pretty robust. Some of the greatest fears 0:03:56.000 --> 0:03:59.280 that the economy was turning over certainly looked to have 0:03:59.400 --> 0:04:00.040 been false. 0:04:01.520 --> 0:04:05.920 By this number. The fact that average. 0:04:05.600 --> 0:04:09.560 Hourly earnings were running running at four tenths of a 0:04:09.600 --> 0:04:16.159 percent bit more than was expected reinforces my sense that 0:04:16.240 --> 0:04:19.920 people need to be careful about declaring the war against 0:04:19.960 --> 0:04:24.039 inflation as having been one. They need to be nervous 0:04:24.279 --> 0:04:29.400 about what could happen from supply shocks, from. 0:04:29.320 --> 0:04:31.520 Other adverse developments. 0:04:31.920 --> 0:04:36.560 But I read these as a pretty favorable. 0:04:37.360 --> 0:04:37.760 Number. 0:04:37.920 --> 0:04:42.520 They certainly make a soft landing look more in play, 0:04:43.200 --> 0:04:46.760 although I certainly think it would be a mistake to 0:04:46.960 --> 0:04:51.039 treat a soft landing as something we can take for 0:04:51.160 --> 0:04:53.719 granted or be confidence about. 0:04:54.200 --> 0:04:55.400 What do they say to the Fed? 0:04:55.480 --> 0:04:57.440 Do you think, Larry, Because on the one hand, you say, boy, 0:04:57.480 --> 0:05:00.120 this is a pretty robust labor economy. We don't need 0:05:00.160 --> 0:05:03.320 to cut too soon, and people were expecting some cuts. 0:05:03.560 --> 0:05:05.920 And as you say, on inflation, there are some indications 0:05:06.000 --> 0:05:07.719 inflation is ticking back up. We have a line of 0:05:07.720 --> 0:05:10.520 Fed that says that, and they have you miss consumer 0:05:11.200 --> 0:05:13.880 in a sentiment this week indicated that it really dropped 0:05:13.880 --> 0:05:18.400 the consumer expectations for inflation for one year out look. 0:05:18.480 --> 0:05:20.560 I think the Fed's got to be very careful. 0:05:22.120 --> 0:05:26.560 Progress has been made about against inflation, but they've got 0:05:26.560 --> 0:05:30.320 to make sure that it keeps being made, and they've 0:05:30.360 --> 0:05:34.040 got to make sure that once it's made, it's entrenched 0:05:34.279 --> 0:05:37.640 and locked in. And I think this will make it 0:05:37.720 --> 0:05:43.800 easier for them to do that. They've got a very 0:05:43.839 --> 0:05:52.440 tricky problem at the FED because whenever people conclude that 0:05:53.360 --> 0:05:56.000 it's looking good that we're not going to need more 0:05:56.080 --> 0:06:01.760 rat increases, they long rates come way down, and the 0:06:01.760 --> 0:06:05.880 stock market has a tendency to go up, and that 0:06:06.040 --> 0:06:11.280 then undoes some of the tightening that they have already 0:06:11.360 --> 0:06:12.200 put in place. 0:06:12.800 --> 0:06:15.680 So I think it's very hard to know what's going 0:06:15.760 --> 0:06:16.320 to happen. 0:06:16.520 --> 0:06:19.960 I still think the market is a bit overpricing how 0:06:20.040 --> 0:06:26.120 much easing the Fed's going to decide it can prudently undertake. 0:06:26.760 --> 0:06:31.040 But those issues are very much at the margin, unlike 0:06:31.080 --> 0:06:34.240 the situation we had a couple of years ago where 0:06:34.279 --> 0:06:38.080 it seemed to me the FED was very far, very 0:06:38.120 --> 0:06:41.160 far off. So I think the Fed's in broadly the 0:06:41.240 --> 0:06:48.920 right place of watchful waiting. But the moment they turn 0:06:49.400 --> 0:06:52.680 or announce they're going to turn, is going to be 0:06:52.800 --> 0:06:59.200 a seismic moment, and for that reason, they probably need 0:06:59.240 --> 0:07:03.400 to be very deliberative and careful about getting to that 0:07:03.640 --> 0:07:10.680 point and waiting until they see some overwhelming evidence of 0:07:11.600 --> 0:07:17.800 inflation being locked in low or see some real evidence 0:07:18.440 --> 0:07:21.800 of the economy churning over. And I don't think we 0:07:21.920 --> 0:07:24.320 have either of those at this point. 0:07:24.960 --> 0:07:25.800 Let me just turn this something. 0:07:25.840 --> 0:07:27.720 It's very much in the news once again this week, 0:07:27.760 --> 0:07:29.840 and you have spoken out about it, and that is 0:07:29.960 --> 0:07:32.920 the rise of antisemitism, at least on some college campuses. 0:07:33.160 --> 0:07:35.800 We had the three university presidents go down and appear 0:07:35.840 --> 0:07:38.320 in Congress from your own Harvard, as well as MIT 0:07:38.480 --> 0:07:40.920 and pen And if they meant to put an end 0:07:41.000 --> 0:07:44.360 to this, they certainly did not succeed. As of right now, 0:07:44.400 --> 0:07:46.160 it looks like if anything got to be more so, 0:07:46.360 --> 0:07:48.600 but this is one of my questions. You ran Harvard, 0:07:48.640 --> 0:07:50.560 you're a president there, but you also were at very 0:07:50.600 --> 0:07:53.920 senior levels in the government. When things start to go 0:07:54.040 --> 0:07:56.240 off the rails, when you start to lose control of 0:07:56.240 --> 0:07:58.040 the narrative, how do you get it back. Because we 0:07:58.080 --> 0:08:01.960 have everybody now wanting to run universities for the college presidents, 0:08:01.960 --> 0:08:04.560 whether it's Congress is where the contributors or whatever, how 0:08:04.600 --> 0:08:06.440 do you regain control of the narrative. 0:08:08.880 --> 0:08:13.440 I think this is as difficult a moment for elite 0:08:13.520 --> 0:08:19.320 higher education as any moment since the Vietnam War period, 0:08:20.000 --> 0:08:25.440 perhaps more difficult. I think everybody needs to take a 0:08:25.480 --> 0:08:30.800 bit of a deep breath. I've had considerable sympathy with 0:08:32.080 --> 0:08:35.360 some of the things that have been saying said by 0:08:35.920 --> 0:08:41.160 both people in the government and by some of the 0:08:41.800 --> 0:08:48.280 billionaires some of the donors to these universities. But even 0:08:48.320 --> 0:08:51.960 when the concerns are warranted, it's very important for us 0:08:52.000 --> 0:08:57.720 to remember that if universities start being run by politicians 0:08:58.280 --> 0:09:01.920 or by small groups of large doors, that's going to 0:09:01.960 --> 0:09:09.160 be a very problematic thing over time for the American 0:09:09.920 --> 0:09:13.320 university system, which is a huge source of. 0:09:13.200 --> 0:09:15.679 Strength for our country. 0:09:16.800 --> 0:09:21.680 That said, David, we have to recognize that there's been 0:09:21.720 --> 0:09:28.520 a double standard in how incidents of racism have been 0:09:28.600 --> 0:09:34.640 regarded in the past, Incidents of what people call micro aggressions, 0:09:35.360 --> 0:09:40.800 incidents of things that make people feel hurt or sensitive 0:09:41.160 --> 0:09:44.920 have been regarded in the past, and the way things 0:09:45.000 --> 0:09:50.240 that are abhorrent to the sensibilities of so many of 0:09:50.320 --> 0:09:56.240 us have been regarded in the last several months. And 0:09:56.800 --> 0:10:00.040 that double standard, which in different ways has been and 0:10:00.559 --> 0:10:08.400 present on many campuses, creates an extremely difficult situation. I 0:10:08.559 --> 0:10:13.160 do not side with those who believe that the answer 0:10:13.960 --> 0:10:23.760 is simply to ratchet up the protections and condemnations of 0:10:24.720 --> 0:10:34.000 speech which is offensive, to include Jewish students more fully 0:10:34.640 --> 0:10:37.920 in what has happened in the past. 0:10:38.880 --> 0:10:40.719 Larry, really food for thought, Thank you so much. 0:10:40.760 --> 0:10:43.359 That's our special contribuity here on Wall Street Week is Larry. 0:10:43.080 --> 0:10:44.319 Summers of Harvard. 0:10:46.360 --> 0:10:48.400 Coming up, we take a look at the weekend markets 0:10:48.400 --> 0:10:52.040 with Aaron Brown of Pimco. That's next on Wall Street 0:10:52.040 --> 0:10:53.079 Week on Bloomberg. 0:10:55.440 --> 0:10:59.600 This is Bloomberg Wall Street Week with David Weston from 0:10:59.679 --> 0:11:02.920 blue Berg Radio. 0:11:07.400 --> 0:11:09.080 This is Wall Street Week. I'm David Weston. 0:11:09.200 --> 0:11:12.040 Stocks had another good week, helped by those jobs numbers, 0:11:12.080 --> 0:11:14.880 so the SMB five hundred, up for the sixth straight week, 0:11:14.960 --> 0:11:16.840 and to get forty six oh four that is well 0:11:16.840 --> 0:11:19.240 above the median estimate of the Bloomberg elves for the 0:11:19.360 --> 0:11:20.679 end of this year and for that matter, for the 0:11:20.760 --> 0:11:23.000 end of next year as well. The NASAQ was up 0:11:23.000 --> 0:11:26.200 seven tenths percent, while bonds had an up and down week, 0:11:26.280 --> 0:11:28.200 but in the end, the yield and the tenure added 0:11:28.200 --> 0:11:30.560 a bit over three basis points to finish at four 0:11:30.600 --> 0:11:33.080 point two to three. To interpret all these markets for US, 0:11:33.120 --> 0:11:36.079 we welcome back now Aaron Brown. She's PIMCO Multi Asset 0:11:36.160 --> 0:11:38.960 Strategies portfolio manager erin great to have you back with us. 0:11:39.200 --> 0:11:41.559 So I start with the jobs numbers, the other economic 0:11:41.600 --> 0:11:42.400 data we got this week. 0:11:42.440 --> 0:11:43.679 How did the markets react to it? 0:11:45.320 --> 0:11:48.800 So I think that the markets actually behaved pretty rationally. 0:11:49.240 --> 0:11:53.479 We had a significant rally into the end of November, 0:11:53.559 --> 0:11:56.320 both across equity markets as well as bond markets, and 0:11:56.360 --> 0:11:58.920 I think probably the bomb market got a little bit 0:11:58.960 --> 0:12:02.640 ahead of itself going into today's number. You know, keep 0:12:02.679 --> 0:12:06.280 in mind that prior to today, the market was pricing 0:12:06.360 --> 0:12:08.640 in about one hundred and twenty seven basis points of 0:12:08.800 --> 0:12:12.559 interest rate cuts next year, which is a really aggressive 0:12:12.640 --> 0:12:16.080 interest rate cutting cycle that had been priced in, you know, 0:12:16.280 --> 0:12:20.720 particularly against the backdrop of still elevated inflation, wage growth 0:12:20.800 --> 0:12:24.520 north of four percent, and a pretty healthy economy. And 0:12:24.559 --> 0:12:26.640 so what you saw today I think was just some 0:12:26.760 --> 0:12:29.480 of that optimism of rate cuts being priced out of 0:12:29.520 --> 0:12:32.280 the market. What's interesting is it didn't really hurt the 0:12:32.280 --> 0:12:35.480 equity markets. Equity still, you know, rallied into the end 0:12:35.480 --> 0:12:39.000 of the day, did quite well. But the market really 0:12:39.080 --> 0:12:42.280 is pricing in a pretty soft landing across both equity 0:12:42.320 --> 0:12:44.520 and bond markets, and I think just some of that 0:12:44.679 --> 0:12:47.160 enthusiasm was priced out of the bond market, but still 0:12:47.200 --> 0:12:51.400 a very healthy environment of healthy macroblock backdrop for stocks. 0:12:51.559 --> 0:12:53.520 Aaron, Well, well, in December now it started to time 0:12:53.559 --> 0:12:54.880 to start thinking about twenty twenty four. 0:12:55.000 --> 0:12:55.839 It's not too early. 0:12:56.480 --> 0:12:58.520 What are you projecting for twenty twenty four? And as 0:12:58.520 --> 0:13:00.800 you talk about those rate cuts, it always strikes me 0:13:01.000 --> 0:13:02.560 the only reason they cut rates is if maybe things 0:13:02.600 --> 0:13:04.079 are not going so well the economy. So I'm not 0:13:04.120 --> 0:13:05.280 sure if we should wish for that. 0:13:07.160 --> 0:13:09.840 Well, there's other reasons why the Fed would would price 0:13:09.880 --> 0:13:13.040 in rate cuts, and the reason for that is right now, 0:13:13.120 --> 0:13:16.080 rates are quite restrictive. You know, the rates are probably 0:13:16.160 --> 0:13:20.000 two hundred basis points over the neutral rate, and that 0:13:20.160 --> 0:13:23.960 was really necessary given the very elevated levels of inflation. 0:13:24.120 --> 0:13:26.840 But we're starting to see inflation come down, and as 0:13:26.880 --> 0:13:30.080 we see inflation normalize, the FED may want to take 0:13:30.120 --> 0:13:33.520 out some of that restrictiveness even apps in a recession, 0:13:33.640 --> 0:13:36.120 so that we could still see rate cuts in a 0:13:36.160 --> 0:13:40.840 healthy macro environment long as long as inflation is lower 0:13:40.880 --> 0:13:43.600 than where it is today. What was a little bit 0:13:43.600 --> 0:13:46.600 concerning about the job's number is we saw wage growth 0:13:46.640 --> 0:13:49.960 increase again and it's you know, elevated above four percent. 0:13:50.679 --> 0:13:53.600 The FED is probably going to have difficulty cutting rates 0:13:53.640 --> 0:13:57.400 with inflation wage inflation above three percent, so we need 0:13:57.440 --> 0:14:00.440 to see that mark that really move lower in order 0:14:00.520 --> 0:14:04.280 to be in the fence comfort level overall to start 0:14:04.320 --> 0:14:07.080 cutting rates. I think next year we're going to continue 0:14:07.080 --> 0:14:11.760 to see a gradually slowing economic environment that could stagnate, 0:14:11.880 --> 0:14:14.720 but right now at least, I'm not pricing in a 0:14:14.760 --> 0:14:17.680 recession for next year, but I do expect a slow 0:14:17.720 --> 0:14:21.960 growth environment in the US with the potential for recession risk, 0:14:22.080 --> 0:14:26.680 particularly outside of the US, that could open the door 0:14:26.760 --> 0:14:29.920 for ray cuts towards the end of next year, but 0:14:29.960 --> 0:14:32.200 it's unlikely that we're going to see ray cuts in 0:14:32.200 --> 0:14:35.200 the first quarter, particularly after tip today's payroll print. 0:14:35.520 --> 0:14:37.360 Aaron, I know your job is really monitoring to that 0:14:37.480 --> 0:14:39.720 balance between equities on the one hand and bonds on 0:14:39.760 --> 0:14:42.360 the other. Now, bonds are giving you some real returns. 0:14:42.440 --> 0:14:44.520 I mean, you're getting some real money. What does that 0:14:44.640 --> 0:14:46.440 mean you at your investment portfolio as you go into 0:14:46.440 --> 0:14:47.200 twenty twenty four. 0:14:48.760 --> 0:14:52.080 So I think bonds are in a really unique sweet 0:14:52.080 --> 0:14:55.760 spot right for investors. Typically, there's three things that you 0:14:55.800 --> 0:14:57.840 look for in bonds, and I call it the trifecta 0:14:57.880 --> 0:15:02.040 of bonds. The first is yield, and you want real 0:15:02.160 --> 0:15:04.600 yield from bonds. If you look at a core US 0:15:04.640 --> 0:15:08.080 bond portfolio today, it's yielding four point eight percent on 0:15:08.120 --> 0:15:12.000 a real basis, so absent inflation, if you subtract out inflation, 0:15:12.080 --> 0:15:15.120 that's a positive real return from your fixing come portfolio. 0:15:15.960 --> 0:15:19.680 That's really elevated versus where we've seen during very slow 0:15:19.680 --> 0:15:23.240 growth environments, and certainly very elevated versus the yield that 0:15:23.280 --> 0:15:26.360 you were getting from any type of bond portfolio over 0:15:26.360 --> 0:15:29.320 the last decade or so. The second is the potential 0:15:29.320 --> 0:15:33.200 for capital appreciation, and just given the really rapid sell 0:15:33.200 --> 0:15:35.560 off and the extent of the selloff that we saw 0:15:35.640 --> 0:15:39.600 both in twenty twenty two and twenty twenty three with 0:15:39.760 --> 0:15:42.720 across you know, fixing come portfolios, I think you could 0:15:42.760 --> 0:15:46.640 see the potential for real capital return as well next 0:15:46.680 --> 0:15:50.000 year as bond's rally as a continuation of what we 0:15:50.040 --> 0:15:54.360 saw over the last month. And then the third is diversification. 0:15:54.560 --> 0:15:57.520 And we've seen you know, stock bond correlation go back 0:15:57.560 --> 0:16:01.600 to inversely correlated with one another, which means that when 0:16:01.680 --> 0:16:05.640 bonds sell off, stocks rally, and when stocks sell off, 0:16:05.760 --> 0:16:09.520 bonds rally. And that's really important from a diversification perspective 0:16:09.880 --> 0:16:14.560 for most investors' acid mix and their core acid allocation 0:16:15.080 --> 0:16:18.720 across their portfolios. And so you're now getting all three 0:16:18.760 --> 0:16:22.520 benefits from bonds, whereas you know two years ago you're 0:16:22.560 --> 0:16:26.480 really only getting you know, potential for diversification which failed. 0:16:26.560 --> 0:16:28.840 So I think bonds are in a real sweet spot 0:16:28.840 --> 0:16:30.000 next year for investors. 0:16:31.960 --> 0:16:35.360 The COVID nineteen pandemic has triggered some big changes in 0:16:35.400 --> 0:16:38.600 investment patterns and supply chains around the world. To take 0:16:38.680 --> 0:16:41.600 us through what his industrial company is doing, we welcome now. 0:16:41.680 --> 0:16:44.720 The CEO of Honeywell is Vimal Kapoor. So Vim Well, 0:16:44.720 --> 0:16:45.760 thank you so much for being with us. 0:16:45.800 --> 0:16:46.480 Great to have you here. 0:16:46.720 --> 0:16:48.600 Thanks for having me David, and it's a pleasure to 0:16:48.600 --> 0:16:48.960 be here. 0:16:49.040 --> 0:16:50.600 A lot of talk about supply chains. 0:16:50.680 --> 0:16:53.560 Give us a sense from Honeywell's perspective, what has changed, 0:16:53.600 --> 0:16:55.080 if anything, since the pandemic. 0:16:55.280 --> 0:16:58.000 I heard a thing I would say, I mean, it's 0:16:58.040 --> 0:17:00.880 been a biggest diceuption in our business for the last 0:17:00.880 --> 0:17:04.760 two years. It started with the disruption in electronics, which 0:17:04.800 --> 0:17:07.560 we all well aware, and you don't get chips, you 0:17:07.600 --> 0:17:09.680 don't get parts, and that was really I would say 0:17:09.680 --> 0:17:12.960 about two years back. That's mostly healed for most part. 0:17:14.160 --> 0:17:16.679 What's still left behind for US. Aerospace is the largest 0:17:16.680 --> 0:17:20.920 segment for Honeywell, and then they're the healing is yet 0:17:20.920 --> 0:17:23.159 to happen completely. We are in a midway and the 0:17:23.200 --> 0:17:28.080 constraint there is Tier three Tier four suppliers. They moved 0:17:28.119 --> 0:17:29.880 on with a lot of people during COVID and when 0:17:29.880 --> 0:17:32.840 the capacity came back. Rebuilding the capacity of the people 0:17:33.080 --> 0:17:35.720 has been a big challenge because these are certified skills, 0:17:36.680 --> 0:17:39.639 not too easy to hire people. And that's the state 0:17:39.680 --> 0:17:45.480 we are in. So electronics mostly healed on the mechanical side, 0:17:45.720 --> 0:17:48.640 products in aerospace more in the midway. But we're making 0:17:48.640 --> 0:17:51.600 progress every week, every month and continue. 0:17:51.240 --> 0:17:52.080 To produce more. 0:17:52.520 --> 0:17:56.080 Other thing I must bring in it changed is how 0:17:56.119 --> 0:18:01.080 we think about insourcing versus outsourcing. That was I would 0:18:01.080 --> 0:18:05.480 say we generally practice the strategy of local for local, 0:18:05.560 --> 0:18:08.639 so produce for North America, and North America for Europe 0:18:08.640 --> 0:18:11.000 and Asia for Asia. So for us live with not 0:18:11.040 --> 0:18:14.399 a lot of moves. But when should you outsource and 0:18:14.400 --> 0:18:16.840 when you should not outsource? Because one thing we learned 0:18:17.080 --> 0:18:21.240 was that when we control the supply chain, we healed quickly, 0:18:22.119 --> 0:18:25.840 and when it was outsourced more, we healed slower. And 0:18:25.880 --> 0:18:27.960 that kind of also raising the question on how should 0:18:27.960 --> 0:18:31.680 we configure on the things we do outsource, specifically electronic side, 0:18:32.160 --> 0:18:34.240 and should that not be done by us to drive 0:18:34.280 --> 0:18:35.840 more control and more execution. 0:18:36.280 --> 0:18:37.840 So what about geography. 0:18:38.080 --> 0:18:40.880 There's been a lot of talk with other companies about 0:18:41.160 --> 0:18:45.200 friends sourcing and on shoring things like that. Has that 0:18:45.320 --> 0:18:46.960 been a shift for you? Is most of your supply 0:18:47.040 --> 0:18:49.520 chain within the United States, you have you taken it 0:18:49.520 --> 0:18:53.159 into other countries that we will call so called friends showing. 0:18:53.400 --> 0:18:57.120 So we always had a strategy of local for local, 0:18:57.280 --> 0:19:00.879 and our North America supply chain always supported in US 0:19:00.960 --> 0:19:05.199 and Mexico, and Europe was in Europe, and Asia was 0:19:05.240 --> 0:19:10.639 prominently China. So for US what changes. Certainly Mexico has 0:19:10.680 --> 0:19:14.240 become more important. We always had a great presence there, 0:19:14.600 --> 0:19:17.000 so probably we are doing some insourcing type of work 0:19:17.000 --> 0:19:20.800 in Mexico, considering that to do moving forward. But we 0:19:20.880 --> 0:19:25.040 see a lot of our customers moving into friend shoring. 0:19:25.040 --> 0:19:29.240 We see activity in Asian countries like in Vietnam, Malaysia, 0:19:29.359 --> 0:19:31.240 we see a lot of activity in Poland, we see 0:19:31.280 --> 0:19:36.200 activity in Turkey. Mexico is probably top of the charts there. 0:19:36.400 --> 0:19:40.399 So clearly people are making decisions to redo their businesses 0:19:40.480 --> 0:19:42.960 to align more with the friend shoring. 0:19:43.160 --> 0:19:45.600 Well, thank you so much. That is Wikapoor. He is 0:19:45.640 --> 0:19:46.719 the Honeywell CEO. 0:19:48.800 --> 0:19:49.840 Coming up the Big. 0:19:49.640 --> 0:19:52.680 Bank statement of their case to the Senate Banking Committee 0:19:52.680 --> 0:19:55.600 on Wednesday. We'll go through with Bob Diamond to Atlas 0:19:55.600 --> 0:19:59.960 Capital Management. That's next on Wall Street Week on Bloomberg. 0:20:01.600 --> 0:20:05.800 This is Bloomberg Wall Street Week with David Weston from 0:20:05.920 --> 0:20:06.879 Bloomberg Radio. 0:20:13.560 --> 0:20:14.400 This is Wall Street Week. 0:20:14.440 --> 0:20:17.080 I'm David Weston, the CEOs of the major banks appeared 0:20:17.080 --> 0:20:18.440 before the Senate Banking. 0:20:18.160 --> 0:20:19.760 Committee this week, and most. 0:20:19.600 --> 0:20:22.440 Of the discussion was about the proposed regulations increasing reserve 0:20:22.480 --> 0:20:25.399 requirements as part of that move to Basel three requirements. 0:20:25.560 --> 0:20:27.800 To give us an expert view on the merits of 0:20:27.840 --> 0:20:30.280 the complaints we heard this week, Welcome to Bob Diamond. 0:20:30.320 --> 0:20:32.960 He's founder and CEO of Atlas Merchant Capital. Bob, great 0:20:32.960 --> 0:20:34.560 to have you back on Wall Street week. So, as 0:20:34.600 --> 0:20:36.320 I say, listen to some of those CEOs. They're not 0:20:36.320 --> 0:20:39.080 too happy with this idea about these reserves, are they right? 0:20:39.440 --> 0:20:41.879 Is it really gonna suppress lending? Is it really going 0:20:41.960 --> 0:20:42.960 to hurt the economy? 0:20:43.520 --> 0:20:45.919 Well, listen, of course the bank CEOs are not going 0:20:46.000 --> 0:20:49.760 to be looking for higher capital levels. I think the 0:20:49.800 --> 0:20:52.159 banks are doing pretty well right now. You know, the 0:20:52.240 --> 0:20:54.480 mantra that I used in two thousand and eight, David, 0:20:54.640 --> 0:20:57.960 was how do we how do we keep banks safe 0:20:57.960 --> 0:21:01.400 and sound while also driving jobs. 0:21:01.040 --> 0:21:02.000 And economic growth? 0:21:02.720 --> 0:21:04.199 And it would be hard to say that we're not 0:21:04.240 --> 0:21:06.520 doing a pretty good job on both of those right now. 0:21:06.560 --> 0:21:08.760 I think the banks are safer and sounder than they've 0:21:08.800 --> 0:21:11.000 been since two thousand and eight. And I think, on 0:21:11.040 --> 0:21:15.040 the other hand, people are pretty pleased with economic growth, 0:21:15.520 --> 0:21:18.399 really pleased with job creation in the US. So I 0:21:18.480 --> 0:21:20.080 think one of the things they're saying is there's some 0:21:20.240 --> 0:21:24.760 of balance. Factually, if you raise those capital levels, they 0:21:24.760 --> 0:21:27.840 are going to have lower rowe and factually they'll be 0:21:27.960 --> 0:21:31.359 less capital for lending. So I think what they said 0:21:31.440 --> 0:21:33.479 is correct. I think the balance you have to put 0:21:33.560 --> 0:21:35.600 it is one of safety and soundness. 0:21:35.760 --> 0:21:39.879 Well, and safety and soundness hasn't gotten more important to 0:21:40.320 --> 0:21:42.720 make sure that these really big banks, they're really big 0:21:42.720 --> 0:21:45.040 money center banks, are safe Because there was a time 0:21:45.080 --> 0:21:46.600 we say we don't want to have too big to fail. 0:21:46.880 --> 0:21:48.480 I think we're past that point, at least with that 0:21:48.520 --> 0:21:50.879 handful of big banks. I'm not sure we can handle 0:21:50.880 --> 0:21:51.320 if they fail. 0:21:52.000 --> 0:21:52.160 Well. 0:21:52.200 --> 0:21:53.560 I think that's a very good point. And if you 0:21:53.600 --> 0:21:55.879 go back to two thousand and eight, both City and 0:21:55.960 --> 0:21:58.840 Bank of America, two of the biggest four banks in 0:21:58.880 --> 0:22:02.480 the US were pretty much and solvent without the TART program. 0:22:02.880 --> 0:22:05.680 So the Fed and the Treasury came up with a 0:22:05.760 --> 0:22:07.880 program to put equity in the banks, and they're doing 0:22:07.880 --> 0:22:11.879 great today. But the truth is the big four banks JP, Morgan, 0:22:11.960 --> 0:22:16.560 ba A, Wells, Fargo City today versus two thousand and 0:22:16.600 --> 0:22:21.520