1 00:00:00,240 --> 00:00:02,480 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: And we may not have an overall recession, we're having 3 00:00:04,400 --> 00:00:06,760 Speaker 2: a rolling recession. To Cone rowl looks pretty strongly. It 4 00:00:06,800 --> 00:00:07,680 Speaker 2: is when it comes to jobs. 5 00:00:07,720 --> 00:00:09,840 Speaker 1: The financial stories that shape our world. 6 00:00:09,960 --> 00:00:13,640 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 00:00:15,600 --> 00:00:17,240 Speaker 2: generative AI. 9 00:00:16,920 --> 00:00:19,320 Speaker 1: Through 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 --> 00:00:25,360 Speaker 2: deebro Lair of the Paulson Institute, Len Hubbard of the 12 00:00:25,360 --> 00:00:26,280 Speaker 2: Columbia Business School. 13 00:00:26,280 --> 00:00:30,400 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 14 00:00:30,240 --> 00:00:32,880 Speaker 2: Looking for answers on why part of a Boeing seven 15 00:00:33,040 --> 00:00:36,280 Speaker 2: thirty seven flew off, on where inflation is heading, on 16 00:00:36,360 --> 00:00:39,720 Speaker 2: the future of bitcoint investing, and on the whereabouts of 17 00:00:39,720 --> 00:00:43,200 Speaker 2: a Secretary of Defense. This is Bloomberg Wall Street Week. 18 00:00:43,280 --> 00:00:47,320 Speaker 2: I'm David Weston. This week, Larry Fink of Blackrock and 19 00:00:47,360 --> 00:00:51,320 Speaker 2: Bioogan Lacier GIP on their big bet together on infrastructure. 20 00:00:51,560 --> 00:00:54,680 Speaker 3: We believe infrastructure is only at the beginning of a 21 00:00:54,720 --> 00:00:56,280 Speaker 3: real major asset class. 22 00:00:56,320 --> 00:00:58,840 Speaker 4: So you put these two businesses together. We can go 23 00:00:58,920 --> 00:01:02,480 Speaker 4: to governments, we can go to companies and offer them 24 00:01:02,520 --> 00:01:03,720 Speaker 4: an integrated solution. 25 00:01:04,120 --> 00:01:07,120 Speaker 2: Stephen Ratner of will It Advisors on investing in twenty 26 00:01:07,160 --> 00:01:07,720 Speaker 2: twenty four. 27 00:01:08,080 --> 00:01:10,679 Speaker 5: I'm not predicting a recession. I'm just saying we're close 28 00:01:10,760 --> 00:01:11,639 Speaker 5: enough to the edge. 29 00:01:11,840 --> 00:01:14,440 Speaker 2: And Glenn Hubbard of the Columbia Business School on the 30 00:01:14,480 --> 00:01:30,720 Speaker 2: economics of a second Trump administration. This week, Global Wall 31 00:01:30,720 --> 00:01:33,920 Speaker 2: Streets spent time trying to figure some things out, like 32 00:01:33,959 --> 00:01:37,120 Speaker 2: why a brand new Boeing seven thirty seven Max nine 33 00:01:37,280 --> 00:01:40,440 Speaker 2: lost a good chunk of its fuselage sixteen thousand feet 34 00:01:40,520 --> 00:01:41,800 Speaker 2: over Portland, Oregon. 35 00:01:42,120 --> 00:01:45,760 Speaker 5: We're going to approach this number one, acknowledging our mistake. 36 00:01:46,200 --> 00:01:48,720 Speaker 6: We are going to approach it with one hundred percent 37 00:01:48,800 --> 00:01:51,600 Speaker 6: in complete transparency every step of the way. 38 00:01:52,160 --> 00:01:54,760 Speaker 2: We waited not so patiently to find out whether the 39 00:01:54,800 --> 00:01:58,440 Speaker 2: SEC would finally approve bitcoin ETFs, and finally found out 40 00:01:58,440 --> 00:02:02,280 Speaker 2: on Tuesday. Oh no, that was a mistaken expost from 41 00:02:02,280 --> 00:02:05,160 Speaker 2: the SEC that we got on Tuesday. It was Wednesday 42 00:02:05,160 --> 00:02:08,200 Speaker 2: when the SEC actually did decide to approve all eleven 43 00:02:08,240 --> 00:02:11,480 Speaker 2: applications for those long awaited bitcoin ETFs. 44 00:02:11,880 --> 00:02:14,600 Speaker 7: What it really tells you is that from a regatory 45 00:02:14,639 --> 00:02:17,799 Speaker 7: point of view, there's been some maturing of the bitcoin market. 46 00:02:18,040 --> 00:02:20,280 Speaker 2: The future of Ecuador seemed up in the air this 47 00:02:20,360 --> 00:02:23,880 Speaker 2: week as armed gangsters seized a TV station and President 48 00:02:24,000 --> 00:02:27,079 Speaker 2: Noboa mobilized the military. We spent much of the week 49 00:02:27,120 --> 00:02:30,120 Speaker 2: trying to figure out why the Secretary of Defense, Lloyd Austin, 50 00:02:30,200 --> 00:02:33,600 Speaker 2: had gone missing for several days, without even President Biden 51 00:02:33,720 --> 00:02:36,480 Speaker 2: knowing that he was in an ICU unit at Walter Reed. 52 00:02:36,960 --> 00:02:40,639 Speaker 2: Nobody at the White House knew that Secretary of Austin 53 00:02:40,680 --> 00:02:43,840 Speaker 2: had prostate cancer until this morning, and the President was 54 00:02:43,880 --> 00:02:47,280 Speaker 2: informed of the immediate after and global. Wall Street got another 55 00:02:47,480 --> 00:02:50,600 Speaker 2: clue for the inflation puzzle on Thursday, with the latest 56 00:02:50,639 --> 00:02:53,200 Speaker 2: CPI number showing that story isn't over yet. 57 00:02:53,400 --> 00:02:56,320 Speaker 8: Looks like we had a little hotter than we expected 58 00:02:56,400 --> 00:02:59,040 Speaker 8: inflation during the month of December, up three tenths of 59 00:02:59,120 --> 00:03:01,800 Speaker 8: a percent. The forecast was for a two tenths gain. 60 00:03:02,080 --> 00:03:04,640 Speaker 8: Pushes the year over year number up to three point 61 00:03:04,720 --> 00:03:07,800 Speaker 8: four percent from three point one percent in November. 62 00:03:10,560 --> 00:03:13,480 Speaker 2: The market's reaction to all this, and particularly the CPI numbers. 63 00:03:13,520 --> 00:03:15,280 Speaker 2: But before we get to that, let's start with the 64 00:03:15,280 --> 00:03:18,160 Speaker 2: big announcement coming from Blackrock on Friday, they would make 65 00:03:18,200 --> 00:03:22,240 Speaker 2: a major move into infrastructure by merging with Global Infrastructure Partners, 66 00:03:22,440 --> 00:03:24,920 Speaker 2: and then going forward it would put its entire business 67 00:03:24,919 --> 00:03:27,920 Speaker 2: in the etf Rapper. Right after the announcements, we talked 68 00:03:27,919 --> 00:03:30,800 Speaker 2: with Blackrock CEO Larry Fink and g IP CEO Bio 69 00:03:30,880 --> 00:03:34,400 Speaker 2: open Lacy about what drove their twelve point five billion 70 00:03:34,480 --> 00:03:35,080 Speaker 2: dollar deal. 71 00:03:35,680 --> 00:03:41,000 Speaker 3: I've always looked with envy, with admiration to what Bio 72 00:03:41,040 --> 00:03:44,920 Speaker 3: and his team have done. We are both refugees from 73 00:03:44,960 --> 00:03:49,120 Speaker 3: First Boston. We knew each other at First Boston. We 74 00:03:49,560 --> 00:03:55,800 Speaker 3: have a common culture. We laugh about what we learned 75 00:03:55,800 --> 00:04:04,080 Speaker 3: at First Boston over dinners and with a respect the appreciation. 76 00:04:05,040 --> 00:04:05,560 Speaker 2: Of GIP. 77 00:04:05,720 --> 00:04:07,880 Speaker 3: When you think about GIP, what are they known for. 78 00:04:09,440 --> 00:04:12,360 Speaker 3: They invest in major and larger projects than what we 79 00:04:12,520 --> 00:04:16,960 Speaker 3: did in infrastructure, like Gatwick Airport and Sydney Airport, but 80 00:04:17,040 --> 00:04:25,240 Speaker 3: they're particularly superb in the operational efficiencies of these investments. 81 00:04:25,320 --> 00:04:29,960 Speaker 3: They improved the quality of service. And so if you 82 00:04:30,040 --> 00:04:33,040 Speaker 3: think about what we have brought at Blackrock over the 83 00:04:33,120 --> 00:04:36,680 Speaker 3: last eight years in infrastructure, what GP has been doing 84 00:04:36,720 --> 00:04:40,279 Speaker 3: since two thousand and six, the two organizations look like 85 00:04:40,320 --> 00:04:43,880 Speaker 3: a perfect match. And then you overlaid the cultural connection, 86 00:04:44,000 --> 00:04:49,440 Speaker 3: and we always underestimate the cultural connections and our business. 87 00:04:49,560 --> 00:04:52,359 Speaker 3: Our business is a business of people, and if you 88 00:04:52,400 --> 00:04:59,080 Speaker 3: don't have that cultural connection, that friendship, that continuity, it 89 00:04:59,120 --> 00:05:01,760 Speaker 3: makes it harder to do So I think we have 90 00:05:01,920 --> 00:05:05,279 Speaker 3: the business strategy down. I'm confident we are in the 91 00:05:05,360 --> 00:05:09,920 Speaker 3: early part of this infrastructure revolution, and. 92 00:05:09,839 --> 00:05:11,920 Speaker 9: We wanted to have the scale. 93 00:05:12,400 --> 00:05:16,359 Speaker 3: We wanted to have the expertise, the operational expertise of GIP, 94 00:05:17,080 --> 00:05:22,000 Speaker 3: marrying that expertise with Blackrocks global relationships with companies and governments, 95 00:05:22,520 --> 00:05:26,760 Speaker 3: marrying our existing expertise and decarbonization and infrastructure. 96 00:05:26,880 --> 00:05:29,880 Speaker 2: It's a perfect partnership. So wow, I think Larry's laid 97 00:05:29,880 --> 00:05:31,960 Speaker 2: out the opportunity here which is enormous. Let me ask 98 00:05:32,040 --> 00:05:35,920 Speaker 2: you why you need Blackrock and particularly this is your 99 00:05:35,960 --> 00:05:38,960 Speaker 2: life's work. Ye, The I in GP is infrastructure affl 100 00:05:39,040 --> 00:05:41,440 Speaker 2: You've built this problem. Why are you willing to give 101 00:05:41,520 --> 00:05:43,760 Speaker 2: up your life's work and go to work for Blackrock? 102 00:05:43,839 --> 00:05:46,760 Speaker 4: Obviously, when we've been reasonably successful at what we do, 103 00:05:47,080 --> 00:05:51,200 Speaker 4: and I completely agree with Larry, this is going to 104 00:05:51,200 --> 00:05:54,120 Speaker 4: be the golden age of infrastructure investing, both in terms 105 00:05:54,160 --> 00:05:56,960 Speaker 4: of the need for capital as well as investors who 106 00:05:56,960 --> 00:05:59,599 Speaker 4: want that capital, okay, and so the question we asked 107 00:05:59,600 --> 00:06:02,520 Speaker 4: ourselves was, how can we accelerate the pace at which 108 00:06:02,560 --> 00:06:05,680 Speaker 4: we're getting things done investing new assets as well as 109 00:06:05,839 --> 00:06:10,080 Speaker 4: getting pension funds, wealth funds, asset managers to give us 110 00:06:10,240 --> 00:06:13,800 Speaker 4: additional capital. And so if you look at the marriage 111 00:06:13,800 --> 00:06:18,360 Speaker 4: between ourselves and Black Rock, we do large cap transactions, 112 00:06:18,480 --> 00:06:22,480 Speaker 4: they do mid cap transactions. They have a terrific infrastructure 113 00:06:22,480 --> 00:06:26,400 Speaker 4: of debt business. It's primarily investment grade. Ours is primarily 114 00:06:26,520 --> 00:06:30,000 Speaker 4: below investment grade. They have an infrastructure solutions business, which 115 00:06:29,800 --> 00:06:32,560 Speaker 4: we don't have. So you put these two businesses together. 116 00:06:33,000 --> 00:06:37,280 Speaker 4: We can go to governments, we can go to companies large, small, 117 00:06:37,400 --> 00:06:40,160 Speaker 4: medium size and offer them an integrated solution. 118 00:06:40,360 --> 00:06:41,880 Speaker 9: So that was very attractive. 119 00:06:42,360 --> 00:06:44,800 Speaker 2: We also talked with Larry think about his redefining the 120 00:06:44,880 --> 00:06:48,040 Speaker 2: largest asset manager in the world to put the emphasis 121 00:06:48,040 --> 00:06:49,160 Speaker 2: on ETFs. 122 00:06:49,600 --> 00:06:52,880 Speaker 3: When we buy BGI in two thousand and nine, we 123 00:06:52,880 --> 00:06:54,200 Speaker 3: were ridiculed. 124 00:06:53,680 --> 00:06:55,080 Speaker 2: By most of the financial community. 125 00:06:55,279 --> 00:06:58,040 Speaker 3: Then you cannot marry the culture of an active investor 126 00:06:58,600 --> 00:07:01,360 Speaker 3: who we were, and and a passive culture. And we said, 127 00:07:01,360 --> 00:07:04,120 Speaker 3: why our clients use both products. Our job is to 128 00:07:04,160 --> 00:07:06,440 Speaker 3: be agnostic to our clients to work with our clients 129 00:07:06,440 --> 00:07:11,960 Speaker 3: to provide a whole portfolio solution. But over time, more 130 00:07:12,000 --> 00:07:15,040 Speaker 3: and more clients started to think about how do I 131 00:07:15,080 --> 00:07:17,640 Speaker 3: want to get an exposure? Do I want an exposure 132 00:07:17,640 --> 00:07:20,280 Speaker 3: in this area or this product, and I could do 133 00:07:20,320 --> 00:07:24,360 Speaker 3: that through actively investing in ets. In twenty twelve, we 134 00:07:24,440 --> 00:07:27,000 Speaker 3: said ATS are going to be the new engine for 135 00:07:27,080 --> 00:07:29,320 Speaker 3: fixed income, and boy did that get a lot of 136 00:07:29,560 --> 00:07:34,080 Speaker 3: ridicule by many people in the business community. And today 137 00:07:34,200 --> 00:07:39,440 Speaker 3: the fixed InCom markets are totally imbued by atfs, and 138 00:07:39,480 --> 00:07:41,920 Speaker 3: so at Blackrock. When we bought BGI, we had two 139 00:07:41,960 --> 00:07:44,320 Speaker 3: hundred ninety billion dollars at ets. Today we have three 140 00:07:44,320 --> 00:07:48,960 Speaker 3: point five trillion. And then we launched the I Shares 141 00:07:49,040 --> 00:07:52,040 Speaker 3: Bitcoin ETF, and so I would say to you, if 142 00:07:52,040 --> 00:07:56,160 Speaker 3: we could ATF a bitcoin, imagine what we could do 143 00:07:56,480 --> 00:07:59,600 Speaker 3: with all financial instruments. And so what we announced in 144 00:07:59,640 --> 00:08:05,440 Speaker 3: our chnitectural change I Shares was this business division in itself, 145 00:08:05,880 --> 00:08:10,600 Speaker 3: and we thought that's too you know, too exclusive. We 146 00:08:10,680 --> 00:08:16,080 Speaker 3: needed to include the ethos the philosophy, the spirituality of 147 00:08:16,120 --> 00:08:19,200 Speaker 3: what I Shares can provide. Everything we do at Blackrock, 148 00:08:19,560 --> 00:08:25,280 Speaker 3: because we believe we're just halfway there in the ETF revolution, 149 00:08:25,680 --> 00:08:28,920 Speaker 3: that everything is going to be etf'd and we needed 150 00:08:28,920 --> 00:08:36,640 Speaker 3: to ensure both active products, passive products, digital products are 151 00:08:36,640 --> 00:08:39,360 Speaker 3: going to be used through the vehicle of ETFs and. 152 00:08:39,280 --> 00:08:41,920 Speaker 2: Take us back to that world at credit First Boston 153 00:08:41,960 --> 00:08:44,560 Speaker 2: with the young Bio, Ogan Lacey and young Larry Fink. 154 00:08:45,240 --> 00:08:48,200 Speaker 2: What are those people looking forward to today, those people 155 00:08:48,200 --> 00:08:50,840 Speaker 2: who are just entering the business, How different is it 156 00:08:50,920 --> 00:08:53,319 Speaker 2: and where is it heading? Where are the opportunities with people? 157 00:08:53,360 --> 00:08:54,640 Speaker 2: What excites them? 158 00:08:55,559 --> 00:09:00,200 Speaker 3: I would say for those who have a passion, a 159 00:09:00,240 --> 00:09:04,400 Speaker 3: passion for investing, a passion to grow and learn, a 160 00:09:04,600 --> 00:09:09,240 Speaker 3: passion to do the right thing on behalf of your clients. 161 00:09:09,760 --> 00:09:12,520 Speaker 3: The opportunity today is just as great as when Bio 162 00:09:12,559 --> 00:09:17,640 Speaker 3: and I started our careers at First Boston. Obviously, the 163 00:09:17,720 --> 00:09:22,679 Speaker 3: markets are entirely different. They're much larger, they're much more efficient. 164 00:09:23,640 --> 00:09:26,160 Speaker 3: But my gosh, I mean the young people that we're 165 00:09:26,200 --> 00:09:31,199 Speaker 3: bringing on board at Blackrock, those who show that imagination, 166 00:09:31,720 --> 00:09:34,679 Speaker 3: that passion, there are opportunities are going to be just 167 00:09:34,720 --> 00:09:38,320 Speaker 3: as great as my opportunity that I had. And I 168 00:09:38,360 --> 00:09:41,240 Speaker 3: do believe that is the biggest differentiating between somebody who 169 00:09:41,280 --> 00:09:43,920 Speaker 3: has this great career and someone who doesn't you need 170 00:09:43,960 --> 00:09:46,360 Speaker 3: to be in a career where you're passionate about that. 171 00:09:46,480 --> 00:09:48,280 Speaker 3: Every day you want to you have a desire to 172 00:09:48,360 --> 00:09:51,560 Speaker 3: learn something new, you have a desire to impart that 173 00:09:51,600 --> 00:09:54,120 Speaker 3: to your clients and helping your clients. And then when 174 00:09:54,160 --> 00:09:56,400 Speaker 3: you get into leadership, your job is to make everybody 175 00:09:56,440 --> 00:09:59,200 Speaker 3: smarter than you. Your job as a leader is lift 176 00:09:59,280 --> 00:10:02,400 Speaker 3: more people, and as a big leader, your job is 177 00:10:02,400 --> 00:10:05,000 Speaker 3: hopefully to have more people earning more money than you did. 178 00:10:05,120 --> 00:10:07,880 Speaker 3: So I don't think anything's changed. Obviously, how we live, 179 00:10:07,880 --> 00:10:12,560 Speaker 3: our lives have changed. The you know, you think about the. 180 00:10:12,480 --> 00:10:13,640 Speaker 9: Role of the capital markets. 181 00:10:13,679 --> 00:10:17,120 Speaker 3: I'm in my mind to the two biggest firms that 182 00:10:17,160 --> 00:10:20,360 Speaker 3: were so instrumental in driving the growth of the global 183 00:10:20,360 --> 00:10:25,120 Speaker 3: capital markets is our two founding New York City companies, 184 00:10:25,280 --> 00:10:26,720 Speaker 3: and that's black Rock and Bloomberg. 185 00:10:27,160 --> 00:10:28,520 Speaker 8: And I truly believe. 186 00:10:28,200 --> 00:10:32,360 Speaker 3: There's a lot of similarities when we started. I think 187 00:10:32,360 --> 00:10:35,000 Speaker 3: Bloomberg started in eighty four, we started in eighty eight. 188 00:10:35,520 --> 00:10:39,800 Speaker 3: But the knowledge barrier, the knowledge information, expansion of the 189 00:10:39,840 --> 00:10:43,040 Speaker 3: capital markets, the globalization of the capital markets, to me, 190 00:10:43,120 --> 00:10:45,640 Speaker 3: that is what's driving the success. 191 00:10:47,360 --> 00:10:49,120 Speaker 2: Coming up, we go through the weekend the markets with 192 00:10:49,200 --> 00:10:53,440 Speaker 2: Kristin Bitterley of City. That's next on Wall Street Week 193 00:10:53,559 --> 00:10:54,240 Speaker 2: on Bloomberg. 194 00:10:55,679 --> 00:11:00,000 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 195 00:11:00,080 --> 00:11:02,959 Speaker 1: Bloomberg Radio. 196 00:11:06,880 --> 00:11:08,760 Speaker 2: This is Wall Street Week. I'm David Weston. It's time 197 00:11:08,760 --> 00:11:10,520 Speaker 2: out to take a look at what the markets did 198 00:11:10,520 --> 00:11:12,160 Speaker 2: this week. With the S and P five hundred up 199 00:11:12,160 --> 00:11:14,240 Speaker 2: one point eight percent to forty seven eighty three. That 200 00:11:14,400 --> 00:11:17,679 Speaker 2: is well above what the Bloomberg Securities analyst elves are 201 00:11:17,720 --> 00:11:19,880 Speaker 2: predicting for year end, which is a median number of 202 00:11:19,920 --> 00:11:22,880 Speaker 2: forty five hundred. The Nasdaq was up over three percent, 203 00:11:23,080 --> 00:11:25,000 Speaker 2: and the yield on the tenure gave up just ten 204 00:11:25,080 --> 00:11:28,080 Speaker 2: basis points to dip back below that four percent mark, 205 00:11:28,160 --> 00:11:30,640 Speaker 2: ending at three point nine to four. Here to explain 206 00:11:30,679 --> 00:11:33,480 Speaker 2: it all to us is Kristin Bitterly. She's City Global Wealth, 207 00:11:33,520 --> 00:11:36,040 Speaker 2: Head of Investment Solutions. Christ So, Christen, welcome back, Good 208 00:11:36,040 --> 00:11:37,920 Speaker 2: to have you here, Really great to be here. Put 209 00:11:37,920 --> 00:11:39,760 Speaker 2: together the numbers we got this week, the CPI sort 210 00:11:39,800 --> 00:11:41,920 Speaker 2: of pointed one way. PPI pointed another way at the 211 00:11:41,960 --> 00:11:44,400 Speaker 2: end of the week, with the sort of enthusiasm coming 212 00:11:44,440 --> 00:11:46,760 Speaker 2: out of December, I mean, where are we at this point? 213 00:11:46,880 --> 00:11:49,520 Speaker 10: Yeah, So it's really interesting we actually we launched in 214 00:11:49,559 --> 00:11:52,560 Speaker 10: December are our outlook for twenty twenty four, which is 215 00:11:52,600 --> 00:11:55,800 Speaker 10: called slow then Grow investing in the market's big reseid 216 00:11:56,200 --> 00:11:58,240 Speaker 10: and I think what we're seeing in the data, it's 217 00:11:58,360 --> 00:11:59,079 Speaker 10: very interesting. 218 00:11:59,320 --> 00:12:01,560 Speaker 11: The market over reacts to a lot of the data. 219 00:12:01,600 --> 00:12:03,440 Speaker 10: Just like we saw in December, the market got a 220 00:12:03,440 --> 00:12:06,040 Speaker 10: little ahead of itself in terms of pricing and rate 221 00:12:06,120 --> 00:12:08,000 Speaker 10: cuts as soon as March of this year. 222 00:12:08,400 --> 00:12:10,640 Speaker 11: But really when we look through the data, I think 223 00:12:10,640 --> 00:12:12,960 Speaker 11: there's a couple of things that still hold true. 224 00:12:13,160 --> 00:12:16,640 Speaker 10: So inflation, this week we had CPI. People reacted to 225 00:12:16,679 --> 00:12:19,120 Speaker 10: that coming and hotter than expected. But where did it 226 00:12:19,160 --> 00:12:20,400 Speaker 10: come in hotter than expected? 227 00:12:20,520 --> 00:12:24,239 Speaker 11: It was in shelter, and so shelter naturally has that lag. 228 00:12:24,080 --> 00:12:27,679 Speaker 10: In flowing through into the data, which basically is really 229 00:12:27,679 --> 00:12:30,760 Speaker 10: reflective of something that happened six to twelve months ago, 230 00:12:31,240 --> 00:12:34,439 Speaker 10: not the present state of home prices. And so when 231 00:12:34,480 --> 00:12:36,839 Speaker 10: we look at a measurement that's called supercore, which is 232 00:12:36,840 --> 00:12:38,119 Speaker 10: actually stripping out. 233 00:12:38,080 --> 00:12:40,120 Speaker 11: Shelter, you're at about two point two percent. 234 00:12:40,640 --> 00:12:44,000 Speaker 10: So there is a clear trajectory and inflation down to 235 00:12:44,040 --> 00:12:46,480 Speaker 10: about two and a half percent in our view by 236 00:12:46,480 --> 00:12:49,040 Speaker 10: the end of this year, and the PPI data that 237 00:12:49,080 --> 00:12:52,560 Speaker 10: we received actually reinforce that that ultimately is going to 238 00:12:52,600 --> 00:12:56,800 Speaker 10: flow through to consumers, which actually kind of points to 239 00:12:56,880 --> 00:12:59,720 Speaker 10: more of a disinflationary environment ahead. 240 00:13:00,080 --> 00:13:01,840 Speaker 2: So what does that tell the Fed at this point? 241 00:13:01,880 --> 00:13:03,760 Speaker 2: Does it need to cut? There's a lot of anticipasion 242 00:13:03,800 --> 00:13:05,439 Speaker 2: of cut, whether it's in March or it's in May, 243 00:13:05,440 --> 00:13:06,800 Speaker 2: where it's going to be. But as you look at 244 00:13:06,800 --> 00:13:08,960 Speaker 2: the numbers, and the numbers telling the Fed, yeah, there's 245 00:13:09,000 --> 00:13:10,440 Speaker 2: really an imperative to cut at some point. 246 00:13:10,600 --> 00:13:12,720 Speaker 10: Well, this is where I think the market, as I mentioned, 247 00:13:12,760 --> 00:13:14,200 Speaker 10: it did get a little bit ahead of itself. 248 00:13:14,200 --> 00:13:14,800 Speaker 11: In December. 249 00:13:15,080 --> 00:13:16,920 Speaker 10: We saw a rally in the equity market, but we 250 00:13:17,000 --> 00:13:19,320 Speaker 10: also saw that pricing of a rate cut move. 251 00:13:19,240 --> 00:13:20,640 Speaker 11: Up into two March. 252 00:13:20,679 --> 00:13:22,920 Speaker 10: And so the FED has, as I always say, it 253 00:13:22,960 --> 00:13:25,520 Speaker 10: has a dual mandate. It's simple, not easy to execute 254 00:13:25,559 --> 00:13:28,959 Speaker 10: on and it's inflation and full employment. And so we've 255 00:13:28,960 --> 00:13:31,680 Speaker 10: seen that resiliency of the US economy. We've seen the 256 00:13:31,760 --> 00:13:36,080 Speaker 10: resiliency in the job market. However, we have seen jolts 257 00:13:36,200 --> 00:13:40,719 Speaker 10: come down substantially. We have seen the fact that for 258 00:13:41,240 --> 00:13:44,120 Speaker 10: them that with the employment remaining strong, they're going to 259 00:13:44,200 --> 00:13:45,920 Speaker 10: keep an eye on inflation they're going to look at 260 00:13:45,920 --> 00:13:49,280 Speaker 10: this data one has to give before you ultimately get 261 00:13:49,320 --> 00:13:51,920 Speaker 10: to that first cut. One of the things that I 262 00:13:51,960 --> 00:13:54,680 Speaker 10: think is beneficial to that story of the rate cuts 263 00:13:55,000 --> 00:13:57,559 Speaker 10: is the fact that when you actually look at consumer expectations, 264 00:13:57,880 --> 00:14:00,880 Speaker 10: they're coming down and much more normalized. So when we 265 00:14:00,960 --> 00:14:03,839 Speaker 10: talk about investing in the market's reset, there's also this 266 00:14:03,960 --> 00:14:05,080 Speaker 10: kind of normalization. 267 00:14:05,440 --> 00:14:07,160 Speaker 11: There are a lot of distortions. 268 00:14:06,600 --> 00:14:10,000 Speaker 10: That came into play in prior years. This normalization creates 269 00:14:10,040 --> 00:14:11,240 Speaker 10: some interesting opportunities. 270 00:14:11,360 --> 00:14:13,000 Speaker 2: What are you hearing from clients, what do they focus on, 271 00:14:13,000 --> 00:14:14,080 Speaker 2: What do they want to know from you? 272 00:14:14,400 --> 00:14:16,719 Speaker 11: They want to know about the first rate cut. Absolutely. 273 00:14:17,200 --> 00:14:19,400 Speaker 10: I think the other interesting thing that's happening is a 274 00:14:19,520 --> 00:14:23,520 Speaker 10: shift where right now there is that concept of last 275 00:14:23,600 --> 00:14:27,760 Speaker 10: year was about hard landing, soft landing, no landing, inflation, 276 00:14:28,000 --> 00:14:30,800 Speaker 10: the health of the consumer. This year you are seeing 277 00:14:30,800 --> 00:14:35,040 Speaker 10: a shift into more geopolitics and into elections. So when 278 00:14:35,080 --> 00:14:37,320 Speaker 10: we look around the world, you have so many major 279 00:14:37,360 --> 00:14:39,600 Speaker 10: elections that are going to happen in twenty twenty four. 280 00:14:40,360 --> 00:14:42,200 Speaker 11: It's about equal to about close. 281 00:14:42,000 --> 00:14:45,800 Speaker 10: To seventy percent of the global market capitalization is going 282 00:14:45,880 --> 00:14:49,560 Speaker 10: to have an election in in their country. So I 283 00:14:49,600 --> 00:14:52,520 Speaker 10: think we may move away from this constant focus on 284 00:14:52,560 --> 00:14:55,080 Speaker 10: a recession. That's something in our belief that happened in 285 00:14:55,120 --> 00:14:57,760 Speaker 10: the past. So one of our big calls this year 286 00:14:57,800 --> 00:15:00,680 Speaker 10: is that we're going to see no landing. The recession 287 00:15:00,680 --> 00:15:04,240 Speaker 10: that everyone was anticipating was something that already occurred, and 288 00:15:04,280 --> 00:15:07,560 Speaker 10: we saw it in profits, We saw it in manufacturing. 289 00:15:07,880 --> 00:15:11,080 Speaker 10: Earnings actually troughed last year, and so there's a lot 290 00:15:11,080 --> 00:15:13,359 Speaker 10: of kind of positive outlook for investors. 291 00:15:13,440 --> 00:15:14,800 Speaker 2: That's what I was going to ask, where are we 292 00:15:15,080 --> 00:15:17,360 Speaker 2: with earnings going to twenty twenty four, because it was 293 00:15:17,400 --> 00:15:18,760 Speaker 2: pretty modest in twenty twenty three. 294 00:15:18,920 --> 00:15:21,960 Speaker 10: Yeah, it was very concentrated, obviously within the magnificent seven, 295 00:15:22,000 --> 00:15:25,800 Speaker 10: and you can see that dislocation between the valuation where 296 00:15:25,840 --> 00:15:28,720 Speaker 10: if you strip out those kind of magnificent seven, you 297 00:15:28,720 --> 00:15:31,680 Speaker 10: can see the rest of the US equity market essentially 298 00:15:31,960 --> 00:15:34,760 Speaker 10: at a forty five percent discount. But what we saw 299 00:15:34,880 --> 00:15:37,520 Speaker 10: last year, if you look at Q one, Q two, 300 00:15:37,640 --> 00:15:40,520 Speaker 10: we were in profits recession. Q three was really where 301 00:15:40,520 --> 00:15:43,040 Speaker 10: we began to turn a corner. This idea of a 302 00:15:43,080 --> 00:15:47,000 Speaker 10: broadening out of the rally because we've hit hit peak inflation, 303 00:15:47,200 --> 00:15:50,000 Speaker 10: because we see interest rates coming down, that means that 304 00:15:50,040 --> 00:15:54,560 Speaker 10: you can actually expand profitability into other sectors. And so 305 00:15:54,680 --> 00:15:57,880 Speaker 10: we see earnings growth of this year around about five percent, 306 00:15:58,440 --> 00:16:00,680 Speaker 10: so not knocking it out of the park. A markedly 307 00:16:00,680 --> 00:16:03,360 Speaker 10: different story in that concentrated story that we saw last year. 308 00:16:03,520 --> 00:16:05,080 Speaker 2: Kristin always great to have you with this, Thank you 309 00:16:05,080 --> 00:16:08,640 Speaker 2: so much. That's Kristin Bitterly of City Global Wealth. As 310 00:16:08,680 --> 00:16:11,640 Speaker 2: we moved towards US elections November, we're taking a look 311 00:16:11,680 --> 00:16:13,920 Speaker 2: at what the policies of the candidates could mean for 312 00:16:14,000 --> 00:16:16,560 Speaker 2: the economy and for business. Last week we heard from 313 00:16:16,560 --> 00:16:19,600 Speaker 2: ecconnist Larry Summers. This week we're joined by Steve Rattner. 314 00:16:19,760 --> 00:16:22,040 Speaker 2: He's chairman and CEO of Will Advisors, which invest the 315 00:16:22,080 --> 00:16:25,200 Speaker 2: personal and philanthropic assets of Michael Bloomberg. He is our 316 00:16:25,200 --> 00:16:27,800 Speaker 2: founder and majority Sheerdan, welcome back, Steve, good to have you. 317 00:16:27,920 --> 00:16:28,760 Speaker 9: Great to be here, David. 318 00:16:28,840 --> 00:16:30,600 Speaker 2: Now, we don't know who the candidates are first of all, 319 00:16:30,840 --> 00:16:34,480 Speaker 2: so early on, but we have two front runners in 320 00:16:34,520 --> 00:16:38,520 Speaker 2: the president, President Joe Biden and the once president maybe 321 00:16:38,560 --> 00:16:42,080 Speaker 2: future president Donald Trump. Just taking those examples, what do 322 00:16:42,120 --> 00:16:44,760 Speaker 2: we think we know about what the economic policies would 323 00:16:44,760 --> 00:16:46,480 Speaker 2: look like under those two presidents? 324 00:16:46,560 --> 00:16:50,520 Speaker 5: Well, they have vastly different visions. Of course, Joe Biden 325 00:16:50,680 --> 00:16:54,120 Speaker 5: is a kind of FDR democrat lean in government, can 326 00:16:54,120 --> 00:16:56,680 Speaker 5: be a positive force in the economy. Let's pass the 327 00:16:56,720 --> 00:17:00,120 Speaker 5: infrastructure bill, Let's implement the IRA and saw on and 328 00:17:00,120 --> 00:17:02,640 Speaker 5: so forth, and so I think you'd expect him to 329 00:17:02,680 --> 00:17:04,640 Speaker 5: do more of the same. I think there's a real 330 00:17:04,720 --> 00:17:08,000 Speaker 5: question about who's going to control Congress, which may limit 331 00:17:08,040 --> 00:17:11,320 Speaker 5: his degrees of freedom. The budget deficit is two trillion dollars, 332 00:17:11,359 --> 00:17:13,080 Speaker 5: and I think people are starting to focus on that, 333 00:17:13,119 --> 00:17:15,600 Speaker 5: which will limit his degrees of freedom. But there's still 334 00:17:15,600 --> 00:17:18,280 Speaker 5: an enormous amount of implementation that he can and should 335 00:17:18,359 --> 00:17:21,000 Speaker 5: do of the laws already pass, as well as a 336 00:17:21,000 --> 00:17:24,320 Speaker 5: lot of stuff that can be done regulatorily. And this 337 00:17:24,400 --> 00:17:26,360 Speaker 5: is not what I happen to agree with. But for example, 338 00:17:26,560 --> 00:17:29,680 Speaker 5: the extraordinarily robust anti trust enforcement that's going on at the. 339 00:17:29,600 --> 00:17:31,440 Speaker 9: Moment, I think you see all that from him. 340 00:17:31,600 --> 00:17:34,639 Speaker 5: I think Donald Trump has gone even further into the 341 00:17:34,680 --> 00:17:38,520 Speaker 5: populists world, based on the rhetoric at least, and based 342 00:17:38,520 --> 00:17:41,159 Speaker 5: on the advice he's getting from people like Bob Leiitthheuser, 343 00:17:41,600 --> 00:17:46,160 Speaker 5: and you're going to see a very protectionist mercantilist economic policy, 344 00:17:46,920 --> 00:17:50,480 Speaker 5: including things like banning imports of television sets from China, 345 00:17:50,840 --> 00:17:54,440 Speaker 5: which seems kind of ridiculous. We import all our bicycles 346 00:17:54,440 --> 00:17:57,000 Speaker 5: from China. We're going to stop having bicycles and so on. 347 00:17:57,080 --> 00:17:59,240 Speaker 5: So he's got all of that, and I think you 348 00:17:59,280 --> 00:18:04,080 Speaker 5: will see an absolutely opposite regulatory approach from what you 349 00:18:04,119 --> 00:18:07,840 Speaker 5: would see from Joe Biden in terms of a thousand 350 00:18:07,840 --> 00:18:08,440 Speaker 5: flowers bloom. 351 00:18:08,520 --> 00:18:10,680 Speaker 9: Let people go do what they want, and let's roll 352 00:18:10,720 --> 00:18:11,920 Speaker 9: back the regulatory state. 353 00:18:12,359 --> 00:18:14,440 Speaker 2: So a lot of the traditional accountments might really take 354 00:18:14,520 --> 00:18:16,639 Speaker 2: issue with some of what Donald Trump was proposing. But 355 00:18:16,640 --> 00:18:18,800 Speaker 2: what about global Wall Street Because as you described that, 356 00:18:19,200 --> 00:18:21,639 Speaker 2: you know a lot of more governments, more regulation in 357 00:18:21,680 --> 00:18:25,000 Speaker 2: the one hand, less government, less taxes, I would say, 358 00:18:25,560 --> 00:18:27,480 Speaker 2: less government vote than the other. A lot of the 359 00:18:27,520 --> 00:18:29,680 Speaker 2: business communit would say, well the second one sounds better 360 00:18:29,720 --> 00:18:29,919 Speaker 2: to me. 361 00:18:31,200 --> 00:18:34,119 Speaker 5: Sure, there were a lot of people who basically on 362 00:18:34,119 --> 00:18:36,560 Speaker 5: Wall Street, who you and I would know, who voted 363 00:18:36,560 --> 00:18:39,159 Speaker 5: for Trump once or even twice, and basically, look, I 364 00:18:39,200 --> 00:18:41,040 Speaker 5: don't like the guy, but I like the policies, and 365 00:18:41,160 --> 00:18:43,600 Speaker 5: they got what they wanted, the tax of the TCGA, 366 00:18:43,720 --> 00:18:44,960 Speaker 5: the Tax Cut and Jobs Act. 367 00:18:44,880 --> 00:18:46,280 Speaker 9: Being the most prominent. 368 00:18:46,560 --> 00:18:48,080 Speaker 5: But you'll remember a lot of us kind of got 369 00:18:48,080 --> 00:18:50,440 Speaker 5: this wrong on election night when it looked like Trump 370 00:18:50,520 --> 00:18:52,520 Speaker 5: was going to win. Initially, the market crash, then people 371 00:18:52,600 --> 00:18:54,359 Speaker 5: said wait a minute, Like three o'clock in the morning, 372 00:18:54,400 --> 00:18:56,680 Speaker 5: they said, oh, wait a minute, the markets sort up again, 373 00:18:56,720 --> 00:18:58,159 Speaker 5: and it kind of took off from there, and then 374 00:18:58,200 --> 00:19:00,719 Speaker 5: you had COVID and whatnot. And this time may be 375 00:19:00,800 --> 00:19:06,000 Speaker 5: more complicated because Trump's policies are not mainstream Republican orthodoxy. 376 00:19:06,080 --> 00:19:08,520 Speaker 5: He's often the populous world with all these tariffs which 377 00:19:08,560 --> 00:19:12,240 Speaker 5: business hate, with shutting down immigration, which business hates. 378 00:19:12,280 --> 00:19:13,200 Speaker 9: They need the workers. 379 00:19:13,600 --> 00:19:16,000 Speaker 5: So I don't know that global Wall Street and plus 380 00:19:16,160 --> 00:19:19,800 Speaker 5: all of his anti democratic authoritarian talk, I think it 381 00:19:19,920 --> 00:19:23,320 Speaker 5: scares people. And so I'm not sure whether the Wall 382 00:19:23,320 --> 00:19:25,440 Speaker 5: Street will react well to another Trump victory. 383 00:19:25,640 --> 00:19:27,560 Speaker 2: Steve Renner will stay with us to go through the 384 00:19:27,680 --> 00:19:30,560 Speaker 2: lay of the investing land in twenty twenty four. That's 385 00:19:30,640 --> 00:19:32,440 Speaker 2: next on Wall Street Week on Bloomberg. 386 00:19:34,560 --> 00:19:38,800 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 387 00:19:38,920 --> 00:19:39,840 Speaker 1: Bloomberg Radio. 388 00:19:46,720 --> 00:19:50,600 Speaker 2: Past performance is no guarantee of future results. It's true 389 00:19:50,600 --> 00:19:54,719 Speaker 2: for investments, and it's certainly true for entire years. The 390 00:19:54,760 --> 00:19:58,560 Speaker 2: overall performance of twenty twenty three was encouraging in many ways, 391 00:19:59,040 --> 00:20:03,120 Speaker 2: with inflation coming down while inflation adjusted income went up. 392 00:20:03,680 --> 00:20:06,120 Speaker 12: History was not a good guide to twenty twenty three. 393 00:20:07,000 --> 00:20:11,200 Speaker 12: Some things really were different this time around, at least 394 00:20:11,200 --> 00:20:16,480 Speaker 12: so far that inflation unemployment trade off that people thought 395 00:20:16,600 --> 00:20:20,520 Speaker 12: would be require a severe recession in order to bring 396 00:20:20,560 --> 00:20:24,560 Speaker 12: inflation down hasn't come to fruition. 397 00:20:25,160 --> 00:20:28,760 Speaker 2: The economy exceeding expectations in growth and jobs. 398 00:20:29,480 --> 00:20:31,720 Speaker 13: Labor is in a stronger position than it has been 399 00:20:31,760 --> 00:20:35,160 Speaker 13: for much of the past few decades. Unemployment is very low, 400 00:20:35,480 --> 00:20:37,560 Speaker 13: the economy is very strong, the shortage of labor, the 401 00:20:37,600 --> 00:20:40,160 Speaker 13: labor market has changed after the pandemic, and so there's 402 00:20:40,160 --> 00:20:42,120 Speaker 13: a sense that labor is in a stronger position. 403 00:20:42,720 --> 00:20:45,479 Speaker 2: And certainly the stock market way out performing what we 404 00:20:45,560 --> 00:20:46,520 Speaker 2: expected for the year. 405 00:20:47,119 --> 00:20:49,920 Speaker 9: What an incredible year for equity. I was wrong. 406 00:20:49,960 --> 00:20:52,720 Speaker 2: I predicted David that the markets would be down this 407 00:20:52,840 --> 00:20:55,920 Speaker 2: year because well g the Fed raised interest rates five 408 00:20:56,000 --> 00:20:57,240 Speaker 2: hundred and twenty five percent. 409 00:20:57,600 --> 00:20:58,879 Speaker 9: Should have had a rough market. 410 00:20:59,760 --> 00:21:01,920 Speaker 2: But one way in which twenty twenty three was not 411 00:21:02,000 --> 00:21:05,239 Speaker 2: at all encouraging was in climate change, giving us the 412 00:21:05,280 --> 00:21:06,920 Speaker 2: hottest year on record. 413 00:21:07,560 --> 00:21:12,520 Speaker 7: What we're seeing now is just repeated examples of natural disasters, 414 00:21:12,520 --> 00:21:17,040 Speaker 7: climate extremes happening at scales we haven't seen before in 415 00:21:17,080 --> 00:21:20,160 Speaker 7: places we haven't seen them occur before, And so we're 416 00:21:20,200 --> 00:21:24,119 Speaker 7: really in this period of growing natural disaster risk. 417 00:21:24,880 --> 00:21:27,679 Speaker 2: And now we're on to twenty twenty four and the 418 00:21:27,760 --> 00:21:30,400 Speaker 2: need to anticipate how much the trends we saw last 419 00:21:30,480 --> 00:21:34,040 Speaker 2: year will continue into the new year, or for that matter, 420 00:21:34,320 --> 00:21:37,840 Speaker 2: whether we were reading the signals correctly even last year. 421 00:21:38,480 --> 00:21:44,440 Speaker 14: Inflation looks relatively under control, but there's a lot going 422 00:21:44,480 --> 00:21:50,080 Speaker 14: on underneath the surface, and there are still substantial risks. 423 00:21:50,359 --> 00:21:54,960 Speaker 14: My gut is still that the market is underestimating the 424 00:21:55,280 --> 00:22:02,520 Speaker 14: inflation risks in the current situation, and therefore probably overestimating 425 00:22:03,000 --> 00:22:07,080 Speaker 14: the amount of FED cutting that is going to take place. 426 00:22:07,560 --> 00:22:14,560 Speaker 14: But it's a fairly close call. 427 00:22:11,880 --> 00:22:14,200 Speaker 2: For his views on the investment terrain in twenty twenty four, 428 00:22:14,280 --> 00:22:17,240 Speaker 2: Steve Ratner will IT Advisors has stayed with us. Steve 429 00:22:17,320 --> 00:22:19,560 Speaker 2: created those twenty twenty three charts we showed you as 430 00:22:19,600 --> 00:22:22,359 Speaker 2: part of the year interview. Let's talk about what looks 431 00:22:22,359 --> 00:22:24,119 Speaker 2: like from your point view twenty four. Let's start with 432 00:22:24,119 --> 00:22:27,560 Speaker 2: the first one you had, inflation and rates right now 433 00:22:27,560 --> 00:22:29,600 Speaker 2: there's a lot of higher rates inflation seeds to be 434 00:22:29,600 --> 00:22:31,600 Speaker 2: coming out down just in the United States as well 435 00:22:31,600 --> 00:22:32,720 Speaker 2: as around the world. 436 00:22:33,200 --> 00:22:35,639 Speaker 5: Inflation has definitely done better than any of us thought. 437 00:22:35,920 --> 00:22:39,359 Speaker 5: The economy has remained stronger even in the context of 438 00:22:39,880 --> 00:22:42,480 Speaker 5: out of a low unemployment rate and inflation coming down. 439 00:22:43,000 --> 00:22:44,000 Speaker 9: I think it's important to. 440 00:22:43,920 --> 00:22:46,720 Speaker 5: Note, as Larry Summers has done repeatedly on your program, 441 00:22:46,840 --> 00:22:49,239 Speaker 5: that for all of the celebration, we're not a two 442 00:22:49,280 --> 00:22:52,880 Speaker 5: percent yet. Wage growth is soul running at around four percent. 443 00:22:53,160 --> 00:22:54,920 Speaker 5: If you assume one or even one and a half 444 00:22:55,000 --> 00:22:58,359 Speaker 5: percent productivity, it implies on underlying rate of inflation of 445 00:22:58,359 --> 00:23:01,639 Speaker 5: around three, which is what corn inflation is roughly running at. 446 00:23:02,000 --> 00:23:04,159 Speaker 5: So the question is as it gets to two, I 447 00:23:04,200 --> 00:23:06,240 Speaker 5: don't believe the FED is going to raise interest rates 448 00:23:06,240 --> 00:23:09,040 Speaker 5: again unless something really onto what happens, But I think 449 00:23:09,080 --> 00:23:11,280 Speaker 5: it would be really hard for power to start cutting 450 00:23:11,359 --> 00:23:14,679 Speaker 5: rates with inflation not yet even at as target. The 451 00:23:14,680 --> 00:23:18,720 Speaker 5: market obviously has assumed substantial rate cuts this year. Most 452 00:23:18,720 --> 00:23:20,560 Speaker 5: of the people I know and talk to, including my 453 00:23:20,600 --> 00:23:23,600 Speaker 5: own colleagues, I think generally we feel that the idea 454 00:23:23,720 --> 00:23:26,000 Speaker 5: of six rate cuts one hundred and twenty five to 455 00:23:26,040 --> 00:23:28,080 Speaker 5: one hundred and fifty basis points of rate cuts this 456 00:23:28,200 --> 00:23:31,600 Speaker 5: year seems pretty unrealistic to us, and therefore you have 457 00:23:31,640 --> 00:23:33,760 Speaker 5: to raise the question, what's the implication of that for 458 00:23:33,840 --> 00:23:36,960 Speaker 5: the market, which obviously looks very closely at what the 459 00:23:37,000 --> 00:23:40,400 Speaker 5: FED and where rates are in terms of an alternative investment. 460 00:23:41,720 --> 00:23:42,000 Speaker 9: Place. 461 00:23:42,320 --> 00:23:44,800 Speaker 2: So how does it inform your decisions as someone who 462 00:23:44,880 --> 00:23:48,679 Speaker 2: oversees investment of a lot of money about equities, Because earlier, 463 00:23:48,760 --> 00:23:50,439 Speaker 2: a year or more ago, you were on this program 464 00:23:50,480 --> 00:23:53,240 Speaker 2: saying you're not so excited about equities because the rates 465 00:23:53,359 --> 00:23:55,040 Speaker 2: are high, They're going to go higher and that's going 466 00:23:55,080 --> 00:23:57,040 Speaker 2: to really cut into the value of equities given the 467 00:23:57,040 --> 00:23:59,680 Speaker 2: discount rate. At this point, do you feel better about equities? 468 00:24:00,240 --> 00:24:02,119 Speaker 2: You think, probably, it's not going to go a lot higher. 469 00:24:02,440 --> 00:24:05,480 Speaker 5: Well, first, you were nice enough not to get two 470 00:24:05,520 --> 00:24:07,119 Speaker 5: in my face about last year. But I'm going to 471 00:24:07,119 --> 00:24:09,000 Speaker 5: do a mea culpa and say, I think I don't 472 00:24:09,000 --> 00:24:12,400 Speaker 5: think almost anybody I know in the investing business expected 473 00:24:12,480 --> 00:24:15,320 Speaker 5: what happened. Obviously had the magnificent seven, but even aside 474 00:24:15,320 --> 00:24:18,440 Speaker 5: from that, the S ANDP in the market's performed much 475 00:24:18,480 --> 00:24:21,479 Speaker 5: better in light of those rates right now are kind 476 00:24:21,520 --> 00:24:24,280 Speaker 5: of where they were a year ago. But the market is, 477 00:24:24,320 --> 00:24:26,280 Speaker 5: depending on how you want to measure it, anywhere from 478 00:24:26,280 --> 00:24:29,119 Speaker 5: fifteen to twenty five to forty percent higher than it was. 479 00:24:29,160 --> 00:24:32,720 Speaker 5: So that's kind of an odd development, frankly relative to history. Anyway, 480 00:24:32,800 --> 00:24:37,399 Speaker 5: Look looking ahead, I think we feel that rates are 481 00:24:37,400 --> 00:24:39,600 Speaker 5: not going to go up anymore. You did have at 482 00:24:39,600 --> 00:24:42,200 Speaker 5: the end of the year a nice surge and things 483 00:24:42,200 --> 00:24:44,919 Speaker 5: like biotech stocks that have been hit hard by rates. 484 00:24:45,280 --> 00:24:50,040 Speaker 5: So we're cautiously optimistic or at least not scared about 485 00:24:50,040 --> 00:24:52,119 Speaker 5: the market this year because we don't see the FED 486 00:24:52,440 --> 00:24:55,600 Speaker 5: raising rates again. Corporate profits are projected to be up 487 00:24:55,640 --> 00:24:58,080 Speaker 5: a little bit, not a huge amount. The S and 488 00:24:58,080 --> 00:25:01,360 Speaker 5: P multiple is still high, but it all seems kind 489 00:25:01,400 --> 00:25:02,720 Speaker 5: of manageable in the US. 490 00:25:03,400 --> 00:25:05,960 Speaker 2: What about growth in the US for the moment because 491 00:25:06,000 --> 00:25:09,240 Speaker 2: a year ago many eccounts were predicting recession, didn't have it. 492 00:25:09,320 --> 00:25:11,320 Speaker 2: Last year, not clear at all we're going to have 493 00:25:11,320 --> 00:25:13,520 Speaker 2: it even in twenty twenty four. At this point, what 494 00:25:13,560 --> 00:25:15,600 Speaker 2: are you looking at for growth in the United States 495 00:25:15,680 --> 00:25:16,360 Speaker 2: going forward? 496 00:25:17,920 --> 00:25:21,800 Speaker 5: I have no more wisdom than any economist does. I 497 00:25:21,840 --> 00:25:24,080 Speaker 5: think the consensus is for a small amount of growth, 498 00:25:24,080 --> 00:25:27,400 Speaker 5: something less than one percent. The problem with predicting recessions. 499 00:25:27,440 --> 00:25:29,360 Speaker 5: It's a little bit like the old road Runner cartoon. 500 00:25:29,440 --> 00:25:31,280 Speaker 5: You're running your running around something, you look down and 501 00:25:31,320 --> 00:25:33,680 Speaker 5: there's nothing below you. If you look back, I think 502 00:25:33,720 --> 00:25:36,520 Speaker 5: you would find that more often than not, people did 503 00:25:36,560 --> 00:25:38,480 Speaker 5: not say we were in a recession until we were 504 00:25:38,480 --> 00:25:42,200 Speaker 5: well into the recession. And so I just there are 505 00:25:42,280 --> 00:25:44,800 Speaker 5: signs of the economy starting to weaken a little bit. 506 00:25:44,840 --> 00:25:47,680 Speaker 5: The jobs market is waking a little bit, Retail sales 507 00:25:47,680 --> 00:25:50,400 Speaker 5: are weakening on an inflation adjusted basis a little bit. 508 00:25:51,240 --> 00:25:54,119 Speaker 5: You do see signs of stresses and strains, savings rates, 509 00:25:54,320 --> 00:25:59,440 Speaker 5: credit card usage, subprime auto delinquencies, things like that. I'm 510 00:25:59,440 --> 00:26:03,439 Speaker 5: not predicting. I'm just saying that we're close enough to 511 00:26:03,480 --> 00:26:05,920 Speaker 5: the edge that it could easily tip either way. 512 00:26:05,920 --> 00:26:06,600 Speaker 9: In my opinion. 513 00:26:07,119 --> 00:26:08,679 Speaker 2: One of the things that you focused on, including in 514 00:26:08,720 --> 00:26:10,840 Speaker 2: your church for the New York Times, were on wages 515 00:26:10,840 --> 00:26:13,280 Speaker 2: and particularly what happened with labor unions, which is a 516 00:26:13,320 --> 00:26:15,560 Speaker 2: big story in twenty twenty three. Right now, last time 517 00:26:15,600 --> 00:26:18,359 Speaker 2: I checked, real wages are actually going up somewhat slightly 518 00:26:18,400 --> 00:26:20,919 Speaker 2: in the United States, its supposed going down. That's, on 519 00:26:20,920 --> 00:26:22,960 Speaker 2: the one hand, bad for margins for corporations. On the 520 00:26:23,000 --> 00:26:25,040 Speaker 2: other hand, good for consumers because they have more money spun. 521 00:26:25,080 --> 00:26:27,280 Speaker 2: It's been As you look into twenty twenty four and beyond, 522 00:26:27,400 --> 00:26:28,840 Speaker 2: what do you think is going to happen with wages? 523 00:26:29,400 --> 00:26:31,320 Speaker 5: Yeah, Look, there's no question that part of why the 524 00:26:31,359 --> 00:26:34,560 Speaker 5: economy was so strong this in twenty twenty three relative 525 00:26:34,560 --> 00:26:36,760 Speaker 5: to what people expected was because there was. 526 00:26:36,720 --> 00:26:37,760 Speaker 9: More purchasing power. 527 00:26:37,960 --> 00:26:40,840 Speaker 5: Inflation came down a lot and and wage growth went 528 00:26:40,920 --> 00:26:43,040 Speaker 5: up a little bit. And second, you have this very 529 00:26:43,119 --> 00:26:46,240 Speaker 5: large budget off it's a two billion dollars, so the 530 00:26:46,280 --> 00:26:48,960 Speaker 5: government's doing its part in terms of wages. I think 531 00:26:48,960 --> 00:26:51,560 Speaker 5: you're going to see continuing upward pressure on wages. I 532 00:26:51,560 --> 00:26:54,760 Speaker 5: don't see a wage price explosion. I think I do 533 00:26:54,800 --> 00:26:58,800 Speaker 5: think that expectations have been managed well by the Fed's 534 00:26:59,000 --> 00:27:01,760 Speaker 5: rate increases and other the other things, and so you 535 00:27:01,760 --> 00:27:04,520 Speaker 5: don't see it, as economists would say, an unanchoring of 536 00:27:04,560 --> 00:27:06,040 Speaker 5: inflationary expectations. 537 00:27:06,240 --> 00:27:07,600 Speaker 9: They seem to be under control. 538 00:27:07,840 --> 00:27:09,399 Speaker 5: So I think you're going to continue to see wage 539 00:27:09,440 --> 00:27:11,600 Speaker 5: growth in the four four and a half maybe five 540 00:27:11,600 --> 00:27:14,600 Speaker 5: percent range, and then therefore you're going to continue to 541 00:27:14,600 --> 00:27:16,719 Speaker 5: see inflation maybe in the three percent range. 542 00:27:16,960 --> 00:27:18,640 Speaker 9: And then the question will be what is the Fed 543 00:27:18,800 --> 00:27:19,280 Speaker 9: do about it. 544 00:27:19,280 --> 00:27:23,080 Speaker 5: I believe the FEDS summary of Economic projections would have 545 00:27:23,080 --> 00:27:25,560 Speaker 5: inflation pretty close to two by the end of next year. 546 00:27:25,920 --> 00:27:27,800 Speaker 5: I'm not one hundred percent sure we're going to get there, 547 00:27:27,880 --> 00:27:29,840 Speaker 5: And as I said, I don't see them raising rates. 548 00:27:29,960 --> 00:27:32,160 Speaker 5: I just see them delaying rate cuts if we don't 549 00:27:32,200 --> 00:27:32,560 Speaker 5: get there. 550 00:27:32,720 --> 00:27:34,480 Speaker 2: See if one of the things you focused on is immigration, 551 00:27:34,600 --> 00:27:36,000 Speaker 2: you do it in the charts for the year end 552 00:27:36,000 --> 00:27:38,439 Speaker 2: of twenty twenty three. You've written otherwise from the New 553 00:27:38,480 --> 00:27:41,800 Speaker 2: York Times of immigration. Immigration is an issue certainly politically. 554 00:27:41,800 --> 00:27:43,040 Speaker 2: We have a lot of people come across the border. 555 00:27:43,080 --> 00:27:46,480 Speaker 2: We have northern cities, including run by democratic mayor's really 556 00:27:46,520 --> 00:27:48,399 Speaker 2: upset about it. At the same time, we need a 557 00:27:48,440 --> 00:27:51,600 Speaker 2: certain number of workers coming in. Give us your views 558 00:27:51,600 --> 00:27:53,880 Speaker 2: on where we're going with immigration in this country. 559 00:27:54,359 --> 00:27:56,040 Speaker 5: Well, I got into this, David, because I was looking 560 00:27:56,080 --> 00:27:59,440 Speaker 5: at China, and China's population is projected to fall from 561 00:27:59,520 --> 00:28:01,800 Speaker 5: a billion forward a seven hundred and seventy million by 562 00:28:01,840 --> 00:28:04,520 Speaker 5: the end of the century because of their fertility rate 563 00:28:04,720 --> 00:28:08,439 Speaker 5: and the fact that they have emigration. Three hundred thousand 564 00:28:08,520 --> 00:28:12,280 Speaker 5: Chinese year leave and nobody comes. Because it's a monocultural society. 565 00:28:12,600 --> 00:28:17,080 Speaker 5: We take in a million a year legally, and if 566 00:28:17,080 --> 00:28:20,240 Speaker 5: you just want to maintain our population, given our fertility rate, 567 00:28:20,560 --> 00:28:22,280 Speaker 5: you have to take in four million a year or 568 00:28:22,280 --> 00:28:25,080 Speaker 5: else our population will start to decline. So we need 569 00:28:25,119 --> 00:28:27,880 Speaker 5: these people. We have a three point seven percent unemployment rate. 570 00:28:28,359 --> 00:28:31,560 Speaker 2: And finally, Steve, because you take a longer view as 571 00:28:31,600 --> 00:28:33,800 Speaker 2: an investor, are we just going to in a period 572 00:28:33,840 --> 00:28:36,800 Speaker 2: where investors have to have lower expectations. There's a lot 573 00:28:36,800 --> 00:28:38,640 Speaker 2: of talk right now that we just have to lower 574 00:28:38,680 --> 00:28:42,480 Speaker 2: our expectations about what returns regular expected returns will be 575 00:28:42,520 --> 00:28:44,000 Speaker 2: going forward. Do you share that view? 576 00:28:44,280 --> 00:28:46,320 Speaker 5: Sure, and I share it for the reason you said, 577 00:28:47,120 --> 00:28:49,520 Speaker 5: but I also share it and I don't have these 578 00:28:49,600 --> 00:28:50,320 Speaker 5: numbers in my head. 579 00:28:50,360 --> 00:28:52,240 Speaker 9: By the following point, if you look. 580 00:28:52,080 --> 00:28:54,560 Speaker 5: Back at what the market did in a five year 581 00:28:54,600 --> 00:28:57,480 Speaker 5: period or ten year period, starting in each year, you 582 00:28:57,520 --> 00:29:00,200 Speaker 5: will find that in years where the pe ratio was 583 00:29:00,240 --> 00:29:03,719 Speaker 5: as elevated it is today, the market's performance and ensuing 584 00:29:03,720 --> 00:29:06,040 Speaker 5: five and ten years was pretty modest. It was positive, 585 00:29:06,240 --> 00:29:08,200 Speaker 5: but it was sort of low. Mid single digitus is 586 00:29:08,240 --> 00:29:10,600 Speaker 5: my recollection, and so a lot of this is where 587 00:29:10,640 --> 00:29:12,880 Speaker 5: you start from, and we're starting from a very high level. 588 00:29:13,240 --> 00:29:16,440 Speaker 5: And so sure, I think our expectations are fairly muted, 589 00:29:16,440 --> 00:29:18,880 Speaker 5: and you and I had a conversation. I think last time, 590 00:29:19,080 --> 00:29:20,920 Speaker 5: we're doing a lot more in credit because if you 591 00:29:20,920 --> 00:29:24,080 Speaker 5: can make ten percent in very senior, well secured credit 592 00:29:24,880 --> 00:29:27,120 Speaker 5: versus what we think the market's going to do, we 593 00:29:27,160 --> 00:29:29,080 Speaker 5: are still shifting our dollars in that direction. 594 00:29:29,920 --> 00:29:31,600 Speaker 2: Okay, thank you so much. Always great to have you 595 00:29:31,680 --> 00:29:36,120 Speaker 2: with us. That's Steve Ratner of Willet Advisors coming up, 596 00:29:36,240 --> 00:29:41,800 Speaker 2: preparing for luck at sixteen thousand feet. That's next on 597 00:29:41,840 --> 00:29:52,120 Speaker 2: Wall Street Week on Bloomberg. Finally, one more thought. It 598 00:29:52,160 --> 00:29:55,160 Speaker 2: was the Roman philosopher Seneca who taught us that luck 599 00:29:55,320 --> 00:29:59,000 Speaker 2: is what happens when preparation meets opportunity, and many of 600 00:29:59,080 --> 00:30:01,320 Speaker 2: us spend much of our time looking for the luck 601 00:30:01,400 --> 00:30:03,960 Speaker 2: and hoping we've prepared for it when it does come, 602 00:30:04,600 --> 00:30:07,160 Speaker 2: like the luck we all had when Farmer came up 603 00:30:07,160 --> 00:30:10,360 Speaker 2: with a COVID vaccine faster than anyone imagined. A luck 604 00:30:10,400 --> 00:30:14,160 Speaker 2: born of years of companies like Pfizer investing in research is. 605 00:30:14,120 --> 00:30:14,880 Speaker 9: Not about Pfizer. 606 00:30:14,880 --> 00:30:16,680 Speaker 2: I think it's about the pharmaceutical industry. 607 00:30:16,960 --> 00:30:21,320 Speaker 1: I think this industed demonstrated the value that brings to society. 608 00:30:20,880 --> 00:30:23,480 Speaker 2: Or Elon Musk's luck in becoming the richest man in 609 00:30:23,520 --> 00:30:26,760 Speaker 2: the world after years preparing to make electric vehicles before 610 00:30:26,800 --> 00:30:28,920 Speaker 2: most of us even knew that we wanted them. 611 00:30:29,400 --> 00:30:35,040 Speaker 15: We surpassed a quarter million cumulut deliveries since the company's 612 00:30:35,080 --> 00:30:40,080 Speaker 15: inception and had record MODELESNX net orders and deliveries last quarter. 613 00:30:40,360 --> 00:30:43,160 Speaker 2: And of course, sometimes luck can go the other way, 614 00:30:43,440 --> 00:30:45,920 Speaker 2: when all the preparation we thought we'd made turns out 615 00:30:45,960 --> 00:30:48,680 Speaker 2: to have been for the wrong thing, like for Silicon 616 00:30:48,760 --> 00:30:51,280 Speaker 2: Valley Bank that no doubt thought it was preparing for 617 00:30:51,320 --> 00:30:54,000 Speaker 2: the worst by putting all that capital into long term 618 00:30:54,040 --> 00:30:57,280 Speaker 2: government bonds, only to watch the FED raise rates faster 619 00:30:57,320 --> 00:31:00,000 Speaker 2: than it ever had before and in the process reduced 620 00:30:59,960 --> 00:31:02,560 Speaker 2: the value of all those bonds. And we all know 621 00:31:02,600 --> 00:31:03,520 Speaker 2: how that turned out. 622 00:31:03,760 --> 00:31:09,120 Speaker 6: We need to recognize that around on a bank nowadays 623 00:31:09,120 --> 00:31:13,280 Speaker 6: as much different than it was five ten years ago. 624 00:31:14,080 --> 00:31:17,640 Speaker 6: In very few seconds, you can move out some money 625 00:31:18,120 --> 00:31:20,600 Speaker 6: from bank, and so we need to take in account 626 00:31:21,000 --> 00:31:25,480 Speaker 6: how we calibrate we need to requirements, but also how 627 00:31:25,560 --> 00:31:28,560 Speaker 6: we make the balance sheet of banks more eligible for 628 00:31:30,680 --> 00:31:32,880 Speaker 6: access to the Central Bank window. 629 00:31:33,080 --> 00:31:35,920 Speaker 2: And then we have the dramatic case of the Alaska 630 00:31:35,920 --> 00:31:39,440 Speaker 2: air flight taking off from Portland, Oregon, last Friday, only 631 00:31:39,440 --> 00:31:42,800 Speaker 2: to have a fuselage panel blowout at sixteen thousand feet 632 00:31:43,280 --> 00:31:46,760 Speaker 2: and narrowly averting what could have been a true catastrophe. 633 00:31:46,880 --> 00:31:49,600 Speaker 2: It's not that Boeing hadn't prepared for safety problems with 634 00:31:49,640 --> 00:31:52,479 Speaker 2: its seven thirty seven Max aircraft. After all, they'd been 635 00:31:52,480 --> 00:31:55,800 Speaker 2: grounded for nearly two years after two deadly crashes, and 636 00:31:55,880 --> 00:31:59,040 Speaker 2: Boeing CEO assured the world that it had taken extraordinary 637 00:31:59,040 --> 00:32:00,600 Speaker 2: steps to ensure their safety. 638 00:32:01,160 --> 00:32:04,320 Speaker 16: As of today, our test pilots have made more than 639 00:32:04,440 --> 00:32:08,560 Speaker 16: seven hundred seven thirty seven Max flights. With the new 640 00:32:08,720 --> 00:32:13,440 Speaker 16: updated software, we are making daily steady progress on these 641 00:32:13,480 --> 00:32:15,200 Speaker 16: final certification steps. 642 00:32:15,680 --> 00:32:19,800 Speaker 2: But despite all that preparation, Boeing had reportedly undertaken near 643 00:32:19,920 --> 00:32:24,120 Speaker 2: disaster struck and Boeing is back to the preparation drawing board. 644 00:32:24,760 --> 00:32:27,160 Speaker 2: But in that same dramatic story, we also saw a 645 00:32:27,200 --> 00:32:30,080 Speaker 2: different sort of preparation result in what seemed an almost 646 00:32:30,240 --> 00:32:34,200 Speaker 2: miraculous result. After the plane had landed safely and Apple 647 00:32:34,280 --> 00:32:36,680 Speaker 2: iPhone was discovered by the side of the road in 648 00:32:36,720 --> 00:32:39,440 Speaker 2: the area, it had been sucked out of the plane 649 00:32:39,520 --> 00:32:44,280 Speaker 2: and fell sixteen thousand feet almost unbelievably, that iPhone was 650 00:32:44,320 --> 00:32:47,560 Speaker 2: still functioning in the airplane mode, with half a charge 651 00:32:47,640 --> 00:32:50,120 Speaker 2: left on its battery and an email on the screen 652 00:32:50,160 --> 00:32:53,520 Speaker 2: from Alaska Air about checked baggage from the flight. When 653 00:32:53,520 --> 00:32:56,840 Speaker 2: Apple announced its new iPhone made of titanium no less, 654 00:32:57,080 --> 00:32:59,600 Speaker 2: some of us may have wondered what exactly Apple was 655 00:32:59,640 --> 00:33:03,920 Speaker 2: prepared sharing our iPhones four and now we know. Maybe 656 00:33:03,920 --> 00:33:06,320 Speaker 2: there's something to be said after all for getting our 657 00:33:06,360 --> 00:33:22,720 Speaker 2: phones from asteroids. That does it for this episode of 658 00:33:22,760 --> 00:33:24,240 Speaker 2: Wall Street Week, I'm David Weston. 659 00:33:24,320 --> 00:33:25,200 Speaker 9: This is Bloomberg. 660 00:33:25,360 --> 00:33:27,520 Speaker 2: See you next week.