1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,400 --> 00:00:10,479 Speaker 1: Federal Reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the yields are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,200 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investors minds inflation through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan Wynahan, a backup America Will Smart CEO Charlie Sharp. 10 00:00:27,360 --> 00:00:31,560 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 11 00:00:31,960 --> 00:00:36,280 Speaker 1: Caught in the middle, bank CEOs between Democrats and Republicans, 12 00:00:36,560 --> 00:00:41,520 Speaker 1: Exxon management, between new activism and old finances, and investors 13 00:00:41,680 --> 00:00:44,919 Speaker 1: between inflation and a Fed that will have none of it. 14 00:00:45,520 --> 00:00:50,240 Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. Each 15 00:00:50,280 --> 00:00:52,559 Speaker 1: week on this program we take a look at the 16 00:00:52,560 --> 00:00:55,200 Speaker 1: big events of the week that the smart investor wants 17 00:00:55,240 --> 00:00:58,040 Speaker 1: to be paying attention to. But let's be honest, sometimes 18 00:00:58,080 --> 00:01:00,560 Speaker 1: it is hard to separate at the signal from the noise. 19 00:01:00,920 --> 00:01:03,200 Speaker 1: We are fortunate to have with us today a really 20 00:01:03,240 --> 00:01:06,160 Speaker 1: smart investor. He is Mr David Booth. He is the 21 00:01:06,319 --> 00:01:09,560 Speaker 1: chairman and co founder of Demential Fund Advisors. They have 22 00:01:09,640 --> 00:01:12,360 Speaker 1: been in business for forty years with an extraordinary track 23 00:01:12,400 --> 00:01:14,800 Speaker 1: record over that period of time. Welcome to Wall Street. 24 00:01:14,800 --> 00:01:16,600 Speaker 1: We're good to have you, David. Let's go without that 25 00:01:16,640 --> 00:01:19,479 Speaker 1: forty year history. I mean, I'm not sure that every 26 00:01:19,560 --> 00:01:21,960 Speaker 1: month or every quarter, maybe even ever year you were up, 27 00:01:22,000 --> 00:01:24,520 Speaker 1: but over the long term you did very very well. 28 00:01:24,600 --> 00:01:28,040 Speaker 1: Give us some advice in that forty years, What did 29 00:01:28,120 --> 00:01:30,399 Speaker 1: you pay attention to? What did you leave behind and 30 00:01:30,480 --> 00:01:34,120 Speaker 1: not get distracted by? If you look at over the 31 00:01:34,200 --> 00:01:37,080 Speaker 1: last forty years, what we've learned, I think kind of 32 00:01:37,120 --> 00:01:39,360 Speaker 1: ties in with your first comment trying to separate the 33 00:01:39,680 --> 00:01:42,920 Speaker 1: signal from the noise. You know what, I think good 34 00:01:43,520 --> 00:01:46,640 Speaker 1: The set of ideas around which we've built the firm 35 00:01:47,280 --> 00:01:50,440 Speaker 1: have shown that you can have a successful investment experience 36 00:01:50,520 --> 00:01:54,520 Speaker 1: without having to forecast the market turns, without trying to 37 00:01:54,520 --> 00:01:57,760 Speaker 1: outguess the market. So a lot of that is tuning 38 00:01:57,760 --> 00:02:02,400 Speaker 1: out the noise, focusing on on what really matters. You know, 39 00:02:02,840 --> 00:02:05,600 Speaker 1: you can't control markets, but you can't control the amount 40 00:02:05,640 --> 00:02:08,760 Speaker 1: of risk you take, for example, so that's largely what 41 00:02:08,800 --> 00:02:12,240 Speaker 1: it's about is coming up a sensible long term strategy 42 00:02:12,800 --> 00:02:15,360 Speaker 1: and emphasizing long term, because if you're going to invest 43 00:02:15,360 --> 00:02:18,359 Speaker 1: in risky assets, you need to have a long term 44 00:02:18,400 --> 00:02:22,000 Speaker 1: investment strategy. It's a strategy that that that you believe 45 00:02:22,040 --> 00:02:24,000 Speaker 1: in enough that you can stick with it through the 46 00:02:24,080 --> 00:02:27,160 Speaker 1: ups and downs of markets. Markets are going to go 47 00:02:27,240 --> 00:02:31,080 Speaker 1: up and down, that's what they do, and and so 48 00:02:31,120 --> 00:02:33,600 Speaker 1: what investors need to do is figure out how to 49 00:02:33,600 --> 00:02:35,880 Speaker 1: deal with that uncertainty and come up with a sensible 50 00:02:35,880 --> 00:02:39,239 Speaker 1: solution for them that they can stick with. So isn't 51 00:02:39,280 --> 00:02:41,799 Speaker 1: that one of the real challenges for an investor, David, 52 00:02:42,600 --> 00:02:44,960 Speaker 1: Because if you didn't have uncertainty, if you didn't have risk, 53 00:02:45,000 --> 00:02:47,079 Speaker 1: you wouldn't have gained. As a practical matter, the one 54 00:02:47,160 --> 00:02:50,400 Speaker 1: comes with the other. The question is how much risk? 55 00:02:50,480 --> 00:02:52,560 Speaker 1: How much uncertainty? I mean, when does it leave off 56 00:02:52,639 --> 00:02:54,679 Speaker 1: being an investment and turn into a gamble. Because let's 57 00:02:54,680 --> 00:02:56,680 Speaker 1: be honest, some of what's going on the market sometimes 58 00:02:56,720 --> 00:02:59,520 Speaker 1: looks to me an awful light like gambling. Well totally, 59 00:02:59,560 --> 00:03:02,120 Speaker 1: I mean exily. Trying to time short term movements in 60 00:03:02,160 --> 00:03:06,200 Speaker 1: the market is more akin to gambling than investing, and 61 00:03:06,600 --> 00:03:09,280 Speaker 1: you know, we think, uh, if you're going to invest 62 00:03:09,320 --> 00:03:11,240 Speaker 1: in the market, you have to have a long term focus. 63 00:03:11,560 --> 00:03:17,160 Speaker 1: This last year, for example, it's been a your It 64 00:03:17,200 --> 00:03:23,160 Speaker 1: was a great example. Uh. Markets down first few months 65 00:03:23,200 --> 00:03:26,519 Speaker 1: of the year, and a lot of people bailed out, 66 00:03:27,000 --> 00:03:29,880 Speaker 1: but the market ended up for the year. So if 67 00:03:29,919 --> 00:03:33,040 Speaker 1: you didn't stay invested, if you tried to time that 68 00:03:33,120 --> 00:03:36,040 Speaker 1: market got out, you know, you you missed out on 69 00:03:36,040 --> 00:03:38,640 Speaker 1: a big return. And missing out on those big up 70 00:03:38,680 --> 00:03:43,320 Speaker 1: markets is frequently as costly as being invested and and 71 00:03:43,400 --> 00:03:46,240 Speaker 1: losing money in the down market. So those, uh, those 72 00:03:46,280 --> 00:03:49,520 Speaker 1: are the those are the ideas that are tough for 73 00:03:49,520 --> 00:03:52,280 Speaker 1: people to grasp that you can have a good experience 74 00:03:52,280 --> 00:03:55,920 Speaker 1: without shifting things around all the time. David, you are, 75 00:03:55,960 --> 00:03:59,040 Speaker 1: by all accounts a patient investor. Are the people who 76 00:03:59,040 --> 00:04:00,560 Speaker 1: put their money with your pay and as well? I 77 00:04:00,600 --> 00:04:03,280 Speaker 1: mean you manage over six billion dollars right now? Are 78 00:04:03,320 --> 00:04:05,760 Speaker 1: they willing to stay with you through those downturns? What's 79 00:04:05,760 --> 00:04:10,520 Speaker 1: your experience? Well, it's you know, throw any downturn, you're 80 00:04:10,520 --> 00:04:14,040 Speaker 1: going to have people who get discouraged and lose confidence 81 00:04:14,040 --> 00:04:17,200 Speaker 1: in what you're doing and bail out. That's the business 82 00:04:17,200 --> 00:04:20,760 Speaker 1: we've chosen to be in you know. I but our 83 00:04:20,839 --> 00:04:23,400 Speaker 1: view is if you educate people well and I have 84 00:04:23,520 --> 00:04:26,880 Speaker 1: them and they're transparent, can help them think through, uh, 85 00:04:27,279 --> 00:04:30,960 Speaker 1: how to go about doing creating an investment portfolio that's 86 00:04:31,440 --> 00:04:34,000 Speaker 1: uh gives them the best chance of winning. If you 87 00:04:34,080 --> 00:04:37,599 Speaker 1: focus on those things, then uh, you know you can 88 00:04:38,120 --> 00:04:41,000 Speaker 1: over the long haul do really quite well. So David, 89 00:04:41,040 --> 00:04:43,599 Speaker 1: give us a little insight into your day. You're working 90 00:04:43,720 --> 00:04:45,680 Speaker 1: day when you come into the office. What do you 91 00:04:45,720 --> 00:04:47,799 Speaker 1: look at? I mean I like to have a dashboard 92 00:04:47,800 --> 00:04:49,960 Speaker 1: where I look at certain things indicators. I'll give you 93 00:04:50,000 --> 00:04:53,120 Speaker 1: one specific example, the tenure yield. I heard Warren Buffett 94 00:04:53,160 --> 00:04:54,840 Speaker 1: once say, if there's one thing you'd like to know 95 00:04:55,480 --> 00:04:57,560 Speaker 1: five years out is what the yield on the ten 96 00:04:57,640 --> 00:04:59,200 Speaker 1: year is going to be. Do you pay much attention 97 00:04:59,240 --> 00:05:00,919 Speaker 1: to that? Because this week actually there's been a lot 98 00:05:01,000 --> 00:05:02,840 Speaker 1: of talk about Yale. People thought it was gonna go 99 00:05:02,880 --> 00:05:04,760 Speaker 1: up to two point Oh it's now in the one 100 00:05:04,800 --> 00:05:08,279 Speaker 1: point six range. Do you pay attention to that? Uh? 101 00:05:08,440 --> 00:05:10,880 Speaker 1: We don't pay attention to the short term movements. I 102 00:05:10,880 --> 00:05:13,359 Speaker 1: mean what you want to look at are all kinds 103 00:05:13,360 --> 00:05:16,440 Speaker 1: of investment scenarios. You know, currently people are asking what 104 00:05:16,480 --> 00:05:19,320 Speaker 1: about inflation that's a big topic to or where's the 105 00:05:19,320 --> 00:05:22,480 Speaker 1: ten year going all those things are you obviously would 106 00:05:22,480 --> 00:05:25,640 Speaker 1: be very interesting to know where things are gonna be 107 00:05:25,680 --> 00:05:29,400 Speaker 1: five years from now, but we don't know. And it 108 00:05:29,480 --> 00:05:31,479 Speaker 1: gets back to trying to tune out the noise. You 109 00:05:31,560 --> 00:05:35,479 Speaker 1: have to prepare yourself for whatever happens. Uh, you know, 110 00:05:36,279 --> 00:05:38,400 Speaker 1: you know, plan for the worst and hope for the best. 111 00:05:38,480 --> 00:05:40,680 Speaker 1: You know, that's that's as true and investing as it 112 00:05:40,760 --> 00:05:45,120 Speaker 1: is in other parts of life. You know. So um, 113 00:05:45,200 --> 00:05:47,719 Speaker 1: we we don't know exactly when the markets we're going 114 00:05:47,800 --> 00:05:49,320 Speaker 1: to go up and down. We just know they're going 115 00:05:49,360 --> 00:05:52,440 Speaker 1: to go up and down. And to your point earlier, 116 00:05:52,839 --> 00:05:56,680 Speaker 1: it's that that uncertainty that creates the opportunity. You know, 117 00:05:56,720 --> 00:05:59,440 Speaker 1: people want to shrink away from uncertainty. But if there 118 00:05:59,440 --> 00:06:01,839 Speaker 1: are no one, sir, then your your your your return 119 00:06:01,880 --> 00:06:03,919 Speaker 1: would be something like a money market fund on the 120 00:06:03,920 --> 00:06:07,120 Speaker 1: return on the money market fund. So it's it's balancing 121 00:06:07,160 --> 00:06:09,839 Speaker 1: all of that, you know, dealing with the uncertainty in 122 00:06:09,839 --> 00:06:14,520 Speaker 1: a way that doesn't you can provoke a lot of anxiety. 123 00:06:14,800 --> 00:06:17,680 Speaker 1: In the meantime, some powerful advice from as I say, 124 00:06:17,680 --> 00:06:21,280 Speaker 1: a very smart investor, David Booth of Dimensional Fund Advisors. 125 00:06:21,279 --> 00:06:24,120 Speaker 1: Thank you so much for being with us. Coming up, 126 00:06:24,200 --> 00:06:28,039 Speaker 1: Big Tech, Big Media, and now a marriage of the two. 127 00:06:28,480 --> 00:06:31,360 Speaker 1: We talk about what the dramatic increase in concentration in 128 00:06:31,400 --> 00:06:35,120 Speaker 1: American business means for the economy with our contributors Stephanie 129 00:06:35,160 --> 00:06:39,120 Speaker 1: Flanders of Bloomberg. That's next on Wall Street Week on Bloomberg. 130 00:06:45,000 --> 00:06:48,960 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 131 00:06:49,080 --> 00:06:53,599 Speaker 1: Bloomberg Radio. Big media is getting only bigger, with Discovery 132 00:06:53,640 --> 00:06:56,160 Speaker 1: and A. T and T. S Warner coming together last 133 00:06:56,160 --> 00:06:59,479 Speaker 1: week in an unlikely combination of cooking shows and award 134 00:06:59,480 --> 00:07:02,320 Speaker 1: winning draw Mammas. We're not just better together, but that 135 00:07:02,880 --> 00:07:05,760 Speaker 1: that we're probably the best media company in the world. 136 00:07:05,920 --> 00:07:09,120 Speaker 1: I can't and good conscience not allow these assets to 137 00:07:09,400 --> 00:07:13,200 Speaker 1: develop their full potential. That's Discovery CEO David Zaslow and 138 00:07:13,320 --> 00:07:16,520 Speaker 1: A T and T CEO John Stanky. This week, it 139 00:07:16,640 --> 00:07:20,640 Speaker 1: was Amazon's turn. The tech giant is buying Hollywood's iconic 140 00:07:20,840 --> 00:07:24,320 Speaker 1: MGM for eight point four or five billion dollars, bringing 141 00:07:24,440 --> 00:07:28,119 Speaker 1: James Bond and Rocky to the Everything Store, adding even 142 00:07:28,200 --> 00:07:30,679 Speaker 1: more heat to the race to a mass and stream 143 00:07:30,840 --> 00:07:35,200 Speaker 1: entertainment content triggered first by Netflix and then Disney. Here's 144 00:07:35,240 --> 00:07:38,000 Speaker 1: the Zone chairman, Kevin Mayer. I think there's only a 145 00:07:38,040 --> 00:07:41,200 Speaker 1: handful of truly global, you know, greater than a hundred 146 00:07:41,200 --> 00:07:44,920 Speaker 1: million subscriber based type of services that can that can exist. 147 00:07:45,120 --> 00:07:48,200 Speaker 1: Amazon's latest expansion in media comes after it's moved into 148 00:07:48,280 --> 00:07:51,239 Speaker 1: groceries and bricks and mortar with its thirteen point seven 149 00:07:51,240 --> 00:07:54,840 Speaker 1: billion dollar acquisition of Whole Foods back in two thousand seventeen. 150 00:07:55,360 --> 00:07:57,560 Speaker 1: And Amazon the mergers working on great for us. We're 151 00:07:57,680 --> 00:08:01,239 Speaker 1: much better company today than we were Amazon. That's Whole 152 00:08:01,240 --> 00:08:06,040 Speaker 1: Food CEO John Mackie. By expanding its entertainment and retail offerings, 153 00:08:06,080 --> 00:08:08,600 Speaker 1: Amazon is adding more bang for the buck to its 154 00:08:08,640 --> 00:08:13,200 Speaker 1: one nine dollar a year Prime membership. Not to be outdone, 155 00:08:13,200 --> 00:08:17,040 Speaker 1: Walmart launched a competing subscription service called Walmart Plus for 156 00:08:17,200 --> 00:08:20,520 Speaker 1: ninety eight dollars a year, offering free shipping and delivery, 157 00:08:20,880 --> 00:08:25,080 Speaker 1: but Walmart still trails Amazon's dominance in e commerce. Here's 158 00:08:25,160 --> 00:08:28,400 Speaker 1: Alan Patrick off of Greycroft. You know, it's something I 159 00:08:28,440 --> 00:08:32,920 Speaker 1: think we're all enjoying, you know, overnight deliveries at low prices. 160 00:08:32,960 --> 00:08:35,240 Speaker 1: But how long can that keep going on? To the 161 00:08:35,240 --> 00:08:38,480 Speaker 1: two hundred million Prime members around the world, Amazon is 162 00:08:38,480 --> 00:08:41,880 Speaker 1: a one stop shop, but regulators aren't convinced it's in 163 00:08:41,920 --> 00:08:45,080 Speaker 1: the public interest. This week, the Washington d c. Attorney 164 00:08:45,120 --> 00:08:48,440 Speaker 1: General brought in and a trust case against Amazon, alleging 165 00:08:48,480 --> 00:08:51,440 Speaker 1: it is engaging in anti competitive practices that have raised 166 00:08:51,480 --> 00:08:54,720 Speaker 1: prices for consumers. While Amazon claims that it does what 167 00:08:54,920 --> 00:09:00,520 Speaker 1: every retailer does to stay competitive. The monopoly power Amazon 168 00:09:00,880 --> 00:09:04,760 Speaker 1: tells you what to set the price at and punishes 169 00:09:04,840 --> 00:09:09,680 Speaker 1: you if you do not adhere to those rules. That is, 170 00:09:09,800 --> 00:09:14,880 Speaker 1: an our view, an abuse of marketing power. That's Washington 171 00:09:14,960 --> 00:09:19,280 Speaker 1: D C. Attorney General Carl Racine. The consolidation of corporate 172 00:09:19,280 --> 00:09:24,079 Speaker 1: power has reached an almost unimaginable scale since the profits 173 00:09:24,120 --> 00:09:27,120 Speaker 1: of the world's fifty largest companies has gone from sixty 174 00:09:27,120 --> 00:09:31,040 Speaker 1: eight billion dollars to seven eight eight billion dollars, now 175 00:09:31,120 --> 00:09:34,080 Speaker 1: accounting for more than one percent of total global GDP. 176 00:09:34,840 --> 00:09:39,120 Speaker 1: And at this point just four companies, Amazon, Facebook, Microsoft 177 00:09:39,160 --> 00:09:42,280 Speaker 1: and Google together make as much money in one week 178 00:09:42,679 --> 00:09:46,240 Speaker 1: as the entire country of Zimbabwe does in an entire year. 179 00:09:46,559 --> 00:09:51,880 Speaker 1: Here's Rhode Island Congressman David Cicillini. These platforms have enormous 180 00:09:52,120 --> 00:09:56,320 Speaker 1: market dominance, they are have really monopoly power. They really 181 00:09:56,360 --> 00:09:59,439 Speaker 1: don't have competitors in a serious way. And what that 182 00:09:59,520 --> 00:10:04,320 Speaker 1: produced is is behaviors that monopolis engage in, you know, 183 00:10:04,400 --> 00:10:07,719 Speaker 1: favoring their own products and services. Stephanie Flanders is a 184 00:10:07,840 --> 00:10:10,400 Speaker 1: senior executive editor for Economics at Bloomberg, and on a 185 00:10:10,480 --> 00:10:14,360 Speaker 1: recent episode of her very important podcast called Stephanomics, she 186 00:10:14,440 --> 00:10:18,400 Speaker 1: addressed the question of increased concentration in industries around the world. 187 00:10:18,400 --> 00:10:21,000 Speaker 1: Welcoming now back to Wall Street Week. Thank you for 188 00:10:21,080 --> 00:10:23,240 Speaker 1: being with a Stephanie. So I listened to this podcast, 189 00:10:23,240 --> 00:10:25,160 Speaker 1: it was fascinating. First of all, you and your team 190 00:10:25,200 --> 00:10:28,560 Speaker 1: economics team of Bloomberg actually took a look and has 191 00:10:28,600 --> 00:10:32,640 Speaker 1: it become more concentrated globally are our industries? And you 192 00:10:32,720 --> 00:10:35,520 Speaker 1: had some pretty remarkable conclusions. Yeah, we were actually just 193 00:10:35,600 --> 00:10:38,840 Speaker 1: taking stock of the biggest fifty companies in the world. 194 00:10:39,040 --> 00:10:41,920 Speaker 1: Who are the biggest fifty companies now? And how does 195 00:10:41,960 --> 00:10:44,440 Speaker 1: that compare in terms of the sectors there in the 196 00:10:44,520 --> 00:10:49,199 Speaker 1: sheer size of them to And it was it was 197 00:10:49,320 --> 00:10:52,439 Speaker 1: very striking just on the numbers that how much bigger 198 00:10:52,480 --> 00:10:55,079 Speaker 1: they are as a share of GDP. Certainly their market 199 00:10:55,120 --> 00:10:59,360 Speaker 1: cap is worth nearly a third of global GDP or 200 00:10:59,360 --> 00:11:03,240 Speaker 1: the equivalent of which is up from five percent in 201 00:11:04,520 --> 00:11:07,920 Speaker 1: and their profits are also about three times higher relative 202 00:11:08,000 --> 00:11:10,800 Speaker 1: to the global economy, so we could see there's to scale. 203 00:11:11,200 --> 00:11:13,880 Speaker 1: But clearly we've also seen a big change in the 204 00:11:13,920 --> 00:11:17,000 Speaker 1: in the makeup of who are those of those big companies, 205 00:11:17,200 --> 00:11:21,160 Speaker 1: And it is no surprise it's tech firms much more 206 00:11:21,200 --> 00:11:23,920 Speaker 1: evident than they were before twenty one of the top fifties. 207 00:11:23,920 --> 00:11:25,920 Speaker 1: So this is you know, there's there's lots of things 208 00:11:25,920 --> 00:11:28,559 Speaker 1: to say about that research by the chief economist Tom 209 00:11:28,559 --> 00:11:33,000 Speaker 1: Alick and his colleague Justin n Jimenizum, but that was 210 00:11:33,559 --> 00:11:36,360 Speaker 1: the sheers scale of these companies and their dominance in 211 00:11:36,400 --> 00:11:39,680 Speaker 1: their industries echoes what we've seen in studies of the US, 212 00:11:39,760 --> 00:11:42,640 Speaker 1: for example, have found three quarters of US industries had 213 00:11:42,679 --> 00:11:46,560 Speaker 1: seen an increasing concentration in the past twenty years. And 214 00:11:46,600 --> 00:11:48,920 Speaker 1: the role of tech that you refer to I find 215 00:11:49,080 --> 00:11:52,040 Speaker 1: quite fascinating because it does raise questions about the consequences 216 00:11:52,040 --> 00:11:54,959 Speaker 1: of the concentration. I mean, in industrial society, it was 217 00:11:54,960 --> 00:11:58,200 Speaker 1: almost inevitable that prices would go up, in quality would 218 00:11:58,240 --> 00:12:00,960 Speaker 1: go down, and you became monopolis. It's not clear that's 219 00:12:01,000 --> 00:12:03,360 Speaker 1: happening with tech. In fact, if anything, that the prices 220 00:12:03,400 --> 00:12:05,880 Speaker 1: may go down as you get bigger and bigger. Yeah, 221 00:12:05,920 --> 00:12:07,920 Speaker 1: and of course we're seeing in the numbers we're looking 222 00:12:07,920 --> 00:12:09,800 Speaker 1: at that we've got to sort of dual effect of 223 00:12:09,840 --> 00:12:12,840 Speaker 1: the rise of the tech giants, but also just globalization 224 00:12:12,920 --> 00:12:15,599 Speaker 1: allowing companies. If you're very successful now, you get to 225 00:12:15,640 --> 00:12:17,800 Speaker 1: be successful on a global scale in the way that 226 00:12:17,840 --> 00:12:21,319 Speaker 1: you weren't able to twenty or thirty years ago. But 227 00:12:21,360 --> 00:12:24,199 Speaker 1: you're right that there are structural features of these companies. 228 00:12:24,640 --> 00:12:28,760 Speaker 1: We have this perception that they invest less and certainly 229 00:12:28,880 --> 00:12:33,240 Speaker 1: higher a fewer workers per per sort of billion of 230 00:12:33,440 --> 00:12:36,160 Speaker 1: market cap than the big companies of previous series. And 231 00:12:36,200 --> 00:12:39,319 Speaker 1: that's borne out by this. If you just take IBM 232 00:12:40,320 --> 00:12:43,600 Speaker 1: was the world's largest company. It devoted at that point 233 00:12:43,920 --> 00:12:47,520 Speaker 1: nine percent of its revenue to capex to investment spending 234 00:12:47,559 --> 00:12:50,280 Speaker 1: every year. Have you take that. If you've come forward 235 00:12:50,320 --> 00:12:53,480 Speaker 1: to today, Apple has that crown. Now it's the biggest 236 00:12:53,480 --> 00:12:58,120 Speaker 1: company of the world and it's investing in in capex 237 00:12:58,320 --> 00:13:01,640 Speaker 1: a third of that amount three So you can see 238 00:13:01,679 --> 00:13:05,400 Speaker 1: they're investing less and they certainly have a fewer workers 239 00:13:05,840 --> 00:13:08,719 Speaker 1: um for the for their scale than the companies in 240 00:13:08,760 --> 00:13:12,920 Speaker 1: the past, which affects their contribution to society. I also wonder, stephanitely, 241 00:13:12,960 --> 00:13:15,640 Speaker 1: if it affects our ability. Who actually regulate our kind 242 00:13:15,679 --> 00:13:17,839 Speaker 1: of There was a time gone by that we thought, 243 00:13:17,840 --> 00:13:19,520 Speaker 1: if we regulate the interest rates, we have the fair 244 00:13:19,600 --> 00:13:22,720 Speaker 1: regular interests, it's really gonna affect how much how fast 245 00:13:22,960 --> 00:13:25,439 Speaker 1: the economy is moving. If these companies don't need to borrow, 246 00:13:25,480 --> 00:13:27,800 Speaker 1: they don't need to really care about what they're paying 247 00:13:27,800 --> 00:13:29,439 Speaker 1: in interest, right, Yeah, I mean that was one of 248 00:13:29,480 --> 00:13:31,280 Speaker 1: the fascinating things that came out of this. Right, So 249 00:13:31,360 --> 00:13:33,720 Speaker 1: we we could also see in these numbers they're paying 250 00:13:33,760 --> 00:13:36,800 Speaker 1: less tax. They're paying about They were probably paying about 251 00:13:36,800 --> 00:13:40,319 Speaker 1: thirty five percent of their profits in tax on the 252 00:13:40,440 --> 00:13:45,040 Speaker 1: kind of average scale globally UM. Now that numbers more 253 00:13:45,040 --> 00:13:48,000 Speaker 1: like seventeen, so it's sort of around half. But their 254 00:13:48,040 --> 00:13:51,240 Speaker 1: profit margin has more or less traveled from about seven 255 00:13:51,280 --> 00:13:54,200 Speaker 1: percent to twent And the result of that is they 256 00:13:54,200 --> 00:13:57,079 Speaker 1: have loads of money. They have nearly two trillion dollars 257 00:13:57,400 --> 00:14:00,680 Speaker 1: cash pier. We often talk about Apple's cash pier, but uh, 258 00:14:00,760 --> 00:14:03,400 Speaker 1: this is true of many other companies now. And if 259 00:14:03,440 --> 00:14:06,240 Speaker 1: you have that kind of money, you cann't finance anything 260 00:14:06,280 --> 00:14:08,679 Speaker 1: you want without paying any attention to what the Federal 261 00:14:08,760 --> 00:14:12,560 Speaker 1: Reserve or any other central bank is is charging for 262 00:14:12,600 --> 00:14:15,080 Speaker 1: full liquidity. So yeah, there is a sort of question 263 00:14:15,120 --> 00:14:18,280 Speaker 1: mark about that. The transmission mechanisms that we've got used 264 00:14:18,280 --> 00:14:22,440 Speaker 1: to thinking about um for certainly for monetary policy maybe 265 00:14:22,440 --> 00:14:24,560 Speaker 1: not working in the way we'd like with these kind 266 00:14:24,560 --> 00:14:27,480 Speaker 1: of companies fasting, I do recommend the Stephans podcast use 267 00:14:27,520 --> 00:14:30,240 Speaker 1: you're all go listen to it. Many thanks to Stephanie Flanders. 268 00:14:30,440 --> 00:14:34,080 Speaker 1: She is the senior executive editor for Economics at Bloomberg. 269 00:14:34,720 --> 00:14:38,560 Speaker 1: Coming up, speaking of concentration, what did the Biden administration 270 00:14:38,640 --> 00:14:41,080 Speaker 1: mean for the mergen and acquisition business. We're gonna talk 271 00:14:41,120 --> 00:14:44,160 Speaker 1: with Blair Afron, co founder of center View Partners. That's 272 00:14:44,200 --> 00:14:47,680 Speaker 1: coming up next. This is Wall Street Week on Bloomberg. 273 00:14:52,600 --> 00:14:56,520 Speaker 1: This is Bloomberg Wall Street Week with David Western from 274 00:14:56,680 --> 00:14:59,600 Speaker 1: Bloomberg Radio. As we've seen the last two weeks in 275 00:14:59,640 --> 00:15:04,040 Speaker 1: the to A world, mergers and acquisitions continue apace, despite 276 00:15:04,120 --> 00:15:07,840 Speaker 1: what famed investor Carl Icon thinks about some of the prices. 277 00:15:08,280 --> 00:15:11,040 Speaker 1: Blair Afron, co founder of Centerview Partners, is in the 278 00:15:11,200 --> 00:15:14,160 Speaker 1: middle of many of the most important deals getting done, 279 00:15:14,680 --> 00:15:17,320 Speaker 1: and he does admit that there are concerns out there 280 00:15:17,400 --> 00:15:20,680 Speaker 1: about the market getting overheated, but he also has his 281 00:15:20,800 --> 00:15:23,600 Speaker 1: eye on the yet to be determined by the administration 282 00:15:23,640 --> 00:15:28,080 Speaker 1: approach to merger review. Obviously a lot of tell into 283 00:15:28,080 --> 00:15:32,120 Speaker 1: the economy. Uh, it's easy to imagine that this goes 284 00:15:32,360 --> 00:15:37,280 Speaker 1: well into twenty two and beyond. But someone like me, UH, frankly, 285 00:15:37,440 --> 00:15:39,840 Speaker 1: you were always trying to figure out the ground corners 286 00:15:39,840 --> 00:15:43,520 Speaker 1: and say, what are some of the clouds in the horizon. 287 00:15:43,840 --> 00:15:48,200 Speaker 1: You just talked about inflation. We only have really a 288 00:15:48,280 --> 00:15:51,520 Speaker 1: month where the data uh, the economy, the world's opening up. 289 00:15:51,680 --> 00:15:56,600 Speaker 1: You should assume it's obviously mismatched in terms of materials allocation, 290 00:15:56,680 --> 00:16:00,160 Speaker 1: in terms of jobs, but that's a data point. Um. 291 00:16:00,960 --> 00:16:04,680 Speaker 1: The markets generally, we obviously are being priced at a 292 00:16:04,720 --> 00:16:08,880 Speaker 1: premium uh pe multiples on next twelve months earnings three 293 00:16:09,000 --> 00:16:12,560 Speaker 1: points above the five year average. UH. You have pockets 294 00:16:12,600 --> 00:16:16,960 Speaker 1: of the market where the particularly uh petty, whether it's crypto, 295 00:16:17,480 --> 00:16:20,480 Speaker 1: whether it's facts, whether it's just retail investment volumes. So 296 00:16:20,640 --> 00:16:26,520 Speaker 1: you ask yourself what were the antecedents back in Obviously 297 00:16:26,720 --> 00:16:29,640 Speaker 1: the are balance sheets UH is on people's minds, and 298 00:16:30,200 --> 00:16:33,080 Speaker 1: then just the geo political situations. So I say that 299 00:16:34,080 --> 00:16:38,920 Speaker 1: a ton of tail winds, but clearly a watch out 300 00:16:39,720 --> 00:16:43,600 Speaker 1: for what might seep into the markets that we're not 301 00:16:43,680 --> 00:16:46,760 Speaker 1: planning one today. So when you talk about possible clouds 302 00:16:46,760 --> 00:16:48,320 Speaker 1: in their eyes and we're not looking for the half 303 00:16:48,400 --> 00:16:50,080 Speaker 1: enter product glass, but we should be prepared for it 304 00:16:50,080 --> 00:16:52,440 Speaker 1: at least. We do want to talk about the supply 305 00:16:52,560 --> 00:16:55,000 Speaker 1: demand in balance, and you see it in various places. 306 00:16:55,160 --> 00:16:57,080 Speaker 1: You said, we just may be seeing it right now 307 00:16:57,160 --> 00:16:59,840 Speaker 1: in housing where the prices of new houses really skyrocketing, 308 00:17:00,080 --> 00:17:02,080 Speaker 1: but the purchases are going down, and that may be 309 00:17:02,360 --> 00:17:05,520 Speaker 1: really a shortage of supply of lumber, of various inputs. 310 00:17:05,600 --> 00:17:07,920 Speaker 1: We also see it perhaps in the labor market, where 311 00:17:07,960 --> 00:17:10,119 Speaker 1: it looks like the demand right now for employees is 312 00:17:10,160 --> 00:17:13,359 Speaker 1: outstripping the supply. The question, of course, is is it 313 00:17:13,560 --> 00:17:16,040 Speaker 1: to use the T word transitory. That's what we're all 314 00:17:16,040 --> 00:17:18,720 Speaker 1: trying to figure out. Again, it's one month worth of data. 315 00:17:19,000 --> 00:17:24,640 Speaker 1: The economy UH, and openings have been incredibly UH robust, 316 00:17:24,920 --> 00:17:27,680 Speaker 1: rapid and broad, just like New York City in terms 317 00:17:27,720 --> 00:17:30,240 Speaker 1: of restaurants opening, in terms of jobs going back, in 318 00:17:30,400 --> 00:17:35,280 Speaker 1: terms of events, UH, massive squir Garden basketball game, teen 319 00:17:35,320 --> 00:17:38,800 Speaker 1: thousand people. All of this has gotten a certain economy 320 00:17:38,880 --> 00:17:44,359 Speaker 1: it's it's natural to expect that UH, jobs and people 321 00:17:44,440 --> 00:17:49,120 Speaker 1: looking for jobs, UM will have a modest lag. Remember, 322 00:17:49,320 --> 00:17:51,560 Speaker 1: only a month ago we had less than a third 323 00:17:51,640 --> 00:17:56,720 Speaker 1: of the country UH vaccinated. So I think that it's 324 00:17:56,920 --> 00:18:02,479 Speaker 1: it's there. We see the surge, but I'm a believer that, uh, 325 00:18:03,320 --> 00:18:06,280 Speaker 1: it is more transitory than not. We had a record 326 00:18:06,600 --> 00:18:09,320 Speaker 1: downturn because we shut down the economy effectively as we 327 00:18:09,400 --> 00:18:11,480 Speaker 1: needed to because of the pandemic. And now it seems 328 00:18:11,520 --> 00:18:14,119 Speaker 1: like we're having a record rebound. But we gave it 329 00:18:14,200 --> 00:18:17,159 Speaker 1: a lot of push on both monetary and fiscal policy. 330 00:18:17,160 --> 00:18:18,800 Speaker 1: We pumped a lot of money in the economy and 331 00:18:18,880 --> 00:18:21,040 Speaker 1: we're not done yet. Not all of the money from 332 00:18:21,040 --> 00:18:23,480 Speaker 1: the American Rescue Plan has yet been expressed in the economy. 333 00:18:23,840 --> 00:18:26,720 Speaker 1: And as you refer to, we're having twenty billion dollars 334 00:18:26,720 --> 00:18:30,080 Speaker 1: a month pumped in from the Fed. Do we need 335 00:18:30,200 --> 00:18:33,960 Speaker 1: that monetary stimulus right now? Okay, So I think David, 336 00:18:34,000 --> 00:18:36,640 Speaker 1: the word should be lesson focus on the word stimulus 337 00:18:36,720 --> 00:18:39,160 Speaker 1: and more on the word investment. Right now, there's three 338 00:18:39,160 --> 00:18:41,240 Speaker 1: and a half billion in two bills, as you know 339 00:18:41,359 --> 00:18:46,159 Speaker 1: in Congress, UH, Human infrastructure and physical infrastructure. UH. And 340 00:18:46,280 --> 00:18:49,080 Speaker 1: that's over ten years. Okay, I think the extent we 341 00:18:49,240 --> 00:18:53,440 Speaker 1: can invest back on a methodical basis, on a long 342 00:18:53,560 --> 00:18:56,440 Speaker 1: term basis, and done so where you getting quote return 343 00:18:56,480 --> 00:18:59,920 Speaker 1: on investment, I think it actually becomes a good tail. 344 00:19:00,000 --> 00:19:02,520 Speaker 1: And just to put a perspective, every one point of 345 00:19:02,640 --> 00:19:05,560 Speaker 1: growth on GDP, you do that for ten years, that's 346 00:19:05,600 --> 00:19:09,280 Speaker 1: three killion dollars more UH in the economy. So it's 347 00:19:09,400 --> 00:19:12,040 Speaker 1: it's less about steamless that thinking more about using the 348 00:19:12,119 --> 00:19:16,040 Speaker 1: moment two um do what this country needs to do. 349 00:19:16,320 --> 00:19:18,119 Speaker 1: And you have that FED balance sheet. I mean one 350 00:19:18,160 --> 00:19:21,159 Speaker 1: of the issues here also is that let's call it 351 00:19:21,280 --> 00:19:23,639 Speaker 1: monetary support if you would right now coming out of 352 00:19:23,640 --> 00:19:26,560 Speaker 1: the FED and for example, talk about the mortgage backed securities. 353 00:19:26,600 --> 00:19:29,159 Speaker 1: I mean, given where mortgage rates are right now and 354 00:19:29,240 --> 00:19:31,159 Speaker 1: given the housing market, do we need the FED to 355 00:19:31,240 --> 00:19:34,800 Speaker 1: be supporting that. I think the FED has proven itself 356 00:19:34,920 --> 00:19:38,360 Speaker 1: to be nimble in the past. Let's go back to December. 357 00:19:40,000 --> 00:19:43,359 Speaker 1: The FED at that point saw a economy that they 358 00:19:43,400 --> 00:19:46,040 Speaker 1: assumed was rising. A signal of free rate cuts would 359 00:19:46,040 --> 00:19:49,680 Speaker 1: happen next all months would happened. The economy didn't rise, 360 00:19:49,880 --> 00:19:53,399 Speaker 1: started flatten out a reverse course UH. And in fact, 361 00:19:53,760 --> 00:19:56,920 Speaker 1: over the next year, UH cut rates. I think what 362 00:19:57,040 --> 00:20:01,440 Speaker 1: you're getting is a said that will be vigilant to 363 00:20:01,800 --> 00:20:04,919 Speaker 1: facts on the ground. Bell Brainer just this morning, UH 364 00:20:05,119 --> 00:20:08,880 Speaker 1: mentioned that, and I think the FED is also recognizing 365 00:20:08,920 --> 00:20:13,240 Speaker 1: that the recovery in many ways is still prevent um. 366 00:20:13,640 --> 00:20:18,000 Speaker 1: COVID obviously great progress in the US, not necessarily in 367 00:20:18,160 --> 00:20:21,560 Speaker 1: certain pockets outside the US. And in jobs. You have 368 00:20:21,680 --> 00:20:25,119 Speaker 1: eight million people still out of work who were working 369 00:20:25,200 --> 00:20:29,680 Speaker 1: for FORK. So there's a Uh, it's a complicated time 370 00:20:29,800 --> 00:20:32,080 Speaker 1: that I believe that that will be nimble enough to 371 00:20:32,320 --> 00:20:34,200 Speaker 1: figure out that the hast to tap on the brakes. 372 00:20:34,320 --> 00:20:36,960 Speaker 1: We're not static comes in. That was Blair Afron, co 373 00:20:37,119 --> 00:20:40,879 Speaker 1: founder of Center View Partners. Coming up, we wrap up 374 00:20:40,920 --> 00:20:43,960 Speaker 1: the week with our special contributor Larry Summers of Harvard. 375 00:20:44,840 --> 00:20:53,040 Speaker 1: That's next on Wall Street Week on Bloomberg. This is 376 00:20:53,119 --> 00:20:57,440 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 377 00:20:58,200 --> 00:20:59,959 Speaker 1: Wrap up the week, as we always do with our 378 00:21:00,119 --> 00:21:03,320 Speaker 1: special contributor Larry Summers of Harvard. Let's start with the 379 00:21:03,400 --> 00:21:06,200 Speaker 1: big event on Friday, which was the president's announcement of 380 00:21:06,359 --> 00:21:09,880 Speaker 1: his budget six trillion dollars one point three trillion dollars 381 00:21:09,920 --> 00:21:12,159 Speaker 1: in deficits in each of the next ten years, it 382 00:21:12,240 --> 00:21:15,400 Speaker 1: looks like, what's your reaction to that budget? Look, he's 383 00:21:15,400 --> 00:21:19,040 Speaker 1: going to keep our country together by building back better. 384 00:21:19,720 --> 00:21:23,800 Speaker 1: He's gonna fix a whole set of lagging public investments 385 00:21:24,440 --> 00:21:28,240 Speaker 1: in everything from making the airport's work so it doesn't 386 00:21:28,320 --> 00:21:31,000 Speaker 1: take half again as long to fly from Boston to 387 00:21:31,080 --> 00:21:34,200 Speaker 1: Washington as it used to, to making the I r 388 00:21:34,359 --> 00:21:38,320 Speaker 1: S be able to collect taxes, to having modern investments 389 00:21:38,359 --> 00:21:42,560 Speaker 1: in science and technology. That's all right, and that's crucial. 390 00:21:43,040 --> 00:21:46,040 Speaker 1: So is doing much more for children. So he's doing 391 00:21:46,200 --> 00:21:49,640 Speaker 1: much more for people who have been left behind. I'm 392 00:21:49,680 --> 00:21:53,440 Speaker 1: all with that, and I think it's hugely important. But 393 00:21:54,040 --> 00:21:57,320 Speaker 1: just because you care doesn't mean you don't also have 394 00:21:57,520 --> 00:22:00,320 Speaker 1: to count. And I think we are as a country 395 00:22:00,760 --> 00:22:02,800 Speaker 1: going to have to look at the total amount of 396 00:22:02,920 --> 00:22:06,080 Speaker 1: spending we're calling forward and the total amount of taxing 397 00:22:06,520 --> 00:22:10,359 Speaker 1: we're calling forward. And I am worried in both the 398 00:22:10,520 --> 00:22:15,159 Speaker 1: short and the medium term about overheating. It might be 399 00:22:15,520 --> 00:22:18,640 Speaker 1: that the forces of what I used to call secular 400 00:22:18,720 --> 00:22:22,440 Speaker 1: stagnation basically people not wanting to spend, are gonna be 401 00:22:22,600 --> 00:22:27,520 Speaker 1: so strong that we need these kinds of uh, massive 402 00:22:27,640 --> 00:22:32,399 Speaker 1: budget deficits and extraordinarily low interest rates to propel the 403 00:22:32,520 --> 00:22:35,720 Speaker 1: economy forward, and this will work out fine. That that 404 00:22:35,920 --> 00:22:39,240 Speaker 1: could be the case, but I think the greater chance 405 00:22:39,800 --> 00:22:42,600 Speaker 1: is that we're going to have some kind of collision 406 00:22:43,200 --> 00:22:48,280 Speaker 1: between demand and UH supply, And from my money, what 407 00:22:48,440 --> 00:22:51,840 Speaker 1: we need is more in the way of UH tax 408 00:22:52,000 --> 00:22:58,040 Speaker 1: increases of the kind that the administration proposed, and even beyond, 409 00:22:58,320 --> 00:23:01,520 Speaker 1: we need to stretch out the spending. We need to 410 00:23:01,680 --> 00:23:04,320 Speaker 1: take UH some of the spending that was in the 411 00:23:04,840 --> 00:23:08,320 Speaker 1: first Act, the Rescue Act that really had no warrant, 412 00:23:08,920 --> 00:23:11,800 Speaker 1: the huge grants to state and local governments that are 413 00:23:11,840 --> 00:23:17,560 Speaker 1: doing just fine, for example, the support for medical institutions, 414 00:23:17,680 --> 00:23:20,640 Speaker 1: some of which actually have from an economic point of view, 415 00:23:21,160 --> 00:23:25,440 Speaker 1: come through this UH very well, and reprogram that to 416 00:23:25,680 --> 00:23:29,520 Speaker 1: necessary public investments. So there are things we can do. 417 00:23:29,920 --> 00:23:35,119 Speaker 1: The broad impulse is UH right, but I am concerned, 418 00:23:35,160 --> 00:23:38,840 Speaker 1: as you know I have been for some time, David. 419 00:23:38,920 --> 00:23:42,959 Speaker 1: You know, if you look at the administration's economic forecast, 420 00:23:43,520 --> 00:23:48,159 Speaker 1: they've done what all administrations do, and it's entirely legitimate. 421 00:23:48,640 --> 00:23:54,160 Speaker 1: They several months ago froze a set of budget assumptions 422 00:23:54,920 --> 00:23:58,960 Speaker 1: um to reflect in an entirely honest and accurate way 423 00:23:59,520 --> 00:24:04,240 Speaker 1: what the census was then, but gosh, the consensus sure 424 00:24:04,320 --> 00:24:07,440 Speaker 1: has changed. I don't think the idea of a one 425 00:24:07,520 --> 00:24:11,800 Speaker 1: point two percent ten year eight for this year looks 426 00:24:11,840 --> 00:24:17,720 Speaker 1: particularly good right now. Uh. We've already had just about 427 00:24:17,800 --> 00:24:21,920 Speaker 1: two percent inflation UM just in the months we've had 428 00:24:22,000 --> 00:24:24,440 Speaker 1: of this year, So I think the year of the 429 00:24:24,640 --> 00:24:29,680 Speaker 1: year inflation figure is gonna come in uh pretty high um. 430 00:24:30,480 --> 00:24:35,159 Speaker 1: And I think that the magnitude of those surprises just 431 00:24:35,359 --> 00:24:38,040 Speaker 1: speaks to the fact that we're gonna have to make 432 00:24:38,520 --> 00:24:44,440 Speaker 1: uh some adjustments uh that go beyond what I think 433 00:24:44,600 --> 00:24:48,920 Speaker 1: is the Washington three parts cycle on inflation. First you 434 00:24:49,040 --> 00:24:52,000 Speaker 1: deny that it's a problem. Then you say that it's 435 00:24:52,119 --> 00:24:57,080 Speaker 1: just due to specific factors and specific transitory factors, and 436 00:24:57,200 --> 00:24:59,159 Speaker 1: then you say, well, it's not really that big a 437 00:24:59,280 --> 00:25:02,040 Speaker 1: problem after are all because wages are going to go 438 00:25:02,200 --> 00:25:05,720 Speaker 1: up along with prices, and it's all gonna sort of 439 00:25:05,800 --> 00:25:08,600 Speaker 1: be okay. And I guess I see us moving through 440 00:25:08,680 --> 00:25:11,840 Speaker 1: that cycle a bit, and that worries me. And it 441 00:25:12,320 --> 00:25:16,600 Speaker 1: worries me because I think it's so important to do 442 00:25:16,880 --> 00:25:21,359 Speaker 1: the fundamental things that the president is trying uh to do, 443 00:25:21,760 --> 00:25:27,080 Speaker 1: but you do have to manage the macroeconomics right as well. Larry. 444 00:25:27,160 --> 00:25:29,040 Speaker 1: One of the things you mentioned was the possibility of 445 00:25:29,040 --> 00:25:30,760 Speaker 1: taking some of the money that's been appropriated for the 446 00:25:30,880 --> 00:25:33,760 Speaker 1: state and local governments that may not need in reusing 447 00:25:33,800 --> 00:25:36,480 Speaker 1: in other ways. It appears that the sentim Minority leader 448 00:25:36,520 --> 00:25:38,439 Speaker 1: Mitchill kind of agrees with you on that. He quoted 449 00:25:38,480 --> 00:25:40,159 Speaker 1: you on that and said, boy, Larry Summers has got 450 00:25:40,200 --> 00:25:43,920 Speaker 1: it right, So you're enraging agreement appears with a Republican here. Well. 451 00:25:44,000 --> 00:25:47,880 Speaker 1: I wouldn't have necessarily expected to be on the same 452 00:25:48,000 --> 00:25:52,120 Speaker 1: side as Mitch McConnell, but I think on that question 453 00:25:52,320 --> 00:25:54,359 Speaker 1: he does have the right view, and I think I 454 00:25:54,480 --> 00:25:57,760 Speaker 1: have a view that we would do well to follow. 455 00:25:58,240 --> 00:26:04,480 Speaker 1: But uh, the minority leader is selective when he quotes 456 00:26:04,600 --> 00:26:07,720 Speaker 1: me because he doesn't tend to pick up on my 457 00:26:08,000 --> 00:26:13,280 Speaker 1: view that the Trump tax cuts are looking increasingly grotesque 458 00:26:13,880 --> 00:26:19,639 Speaker 1: in uh, the current environment of massive stock market zero 459 00:26:19,840 --> 00:26:25,040 Speaker 1: cost of UH capital, all of that, and the kinds 460 00:26:25,119 --> 00:26:29,359 Speaker 1: of steps that President Biden wants to take to restore 461 00:26:29,520 --> 00:26:34,159 Speaker 1: some normality to internet, to corporate taxation, and to at 462 00:26:34,280 --> 00:26:37,639 Speaker 1: long last do what we all ought to be able 463 00:26:37,760 --> 00:26:41,800 Speaker 1: to agree on cracked down on the erosion of profits 464 00:26:41,920 --> 00:26:46,480 Speaker 1: because they're moved to the Cayman Islands and places like 465 00:26:46,720 --> 00:26:51,440 Speaker 1: that through international cooperation. I have to say, I'm disappointed 466 00:26:51,520 --> 00:26:56,960 Speaker 1: that that can't be an area of bipartisan American UH 467 00:26:57,280 --> 00:27:01,920 Speaker 1: corporation cooperation. I would have thought that that was the 468 00:27:02,119 --> 00:27:06,919 Speaker 1: kind of thing that Republicans would stand for on strengthening 469 00:27:07,400 --> 00:27:15,040 Speaker 1: UM America grounds encouraging investment UH in America. So I 470 00:27:15,160 --> 00:27:21,360 Speaker 1: think the UH minority leader is UM way too selective 471 00:27:21,920 --> 00:27:24,960 Speaker 1: in his focus on what we should do about the deficit. 472 00:27:25,119 --> 00:27:28,520 Speaker 1: And deficits have to do with both revenues and spending, 473 00:27:28,600 --> 00:27:32,680 Speaker 1: and I sure wish the minority leader would get behind revenues. 474 00:27:32,760 --> 00:27:37,520 Speaker 1: I mean, really, how can anybody say that it's right 475 00:27:38,400 --> 00:27:43,399 Speaker 1: to cut the I R S enforcement effort against millionaires 476 00:27:43,960 --> 00:27:49,440 Speaker 1: by more than fifty percent when an extra day of auditing, 477 00:27:49,840 --> 00:27:54,360 Speaker 1: an extra day one day, one auditor brings in thousands 478 00:27:54,400 --> 00:27:58,920 Speaker 1: and thousands of dollars, and we're slashing UH that kind 479 00:27:59,040 --> 00:28:02,760 Speaker 1: of investment, which is obviously in the interest of all 480 00:28:02,800 --> 00:28:05,520 Speaker 1: of us. Finally, let's sneak in a couple of short 481 00:28:05,760 --> 00:28:07,960 Speaker 1: summer says here at the end, there's a big event 482 00:28:08,040 --> 00:28:11,000 Speaker 1: in the corporate world this week when Exxon Mobile. The 483 00:28:11,119 --> 00:28:15,440 Speaker 1: management lost a vote actually getting active as shareholders to 484 00:28:15,480 --> 00:28:17,560 Speaker 1: put two at least two members on the board to 485 00:28:17,680 --> 00:28:19,879 Speaker 1: really make it more of a climate friendly company. Is 486 00:28:19,960 --> 00:28:22,359 Speaker 1: this the beginning of something to come in terms of 487 00:28:22,400 --> 00:28:25,200 Speaker 1: shareholder activism, particularly in E s G. I think it 488 00:28:25,359 --> 00:28:30,280 Speaker 1: marks something. Uh you can like s G investment, you 489 00:28:30,359 --> 00:28:34,359 Speaker 1: cannot like SG investment, but it is here to stay 490 00:28:35,119 --> 00:28:40,000 Speaker 1: as a major phenomenon that's gonna be really important in 491 00:28:40,840 --> 00:28:44,880 Speaker 1: many capital market aspects. And I just hope the steps 492 00:28:44,960 --> 00:28:49,640 Speaker 1: that are taken are substantive rather than just optical. And 493 00:28:49,720 --> 00:28:52,640 Speaker 1: I think we have to think very carefully. You know, 494 00:28:52,880 --> 00:28:55,720 Speaker 1: if we're gonna have a charge away from fossil fuels 495 00:28:55,840 --> 00:28:58,000 Speaker 1: and we're gonna move to renewables, which is the right 496 00:28:58,080 --> 00:29:01,520 Speaker 1: thing to do. Is extra x ON play a larger role? 497 00:29:02,600 --> 00:29:05,440 Speaker 1: Or is x ON good at fossil fuels and they 498 00:29:05,520 --> 00:29:07,920 Speaker 1: may not be the best at solar power and they're 499 00:29:08,000 --> 00:29:10,800 Speaker 1: better off paying out their cash flows and letting the 500 00:29:10,920 --> 00:29:14,440 Speaker 1: markets allocate those cash flows to the best places. I 501 00:29:14,520 --> 00:29:16,880 Speaker 1: think there's some hard questions that we have to think about, 502 00:29:17,000 --> 00:29:19,880 Speaker 1: But for sure E s G is a big deal 503 00:29:20,000 --> 00:29:22,560 Speaker 1: for a long time to come. Last one, Larry and 504 00:29:22,800 --> 00:29:25,480 Speaker 1: the real yield has been in negative territory. Well in 505 00:29:25,560 --> 00:29:27,239 Speaker 1: negative territory. It's come up a little bit, but it's 506 00:29:27,280 --> 00:29:29,680 Speaker 1: still negative. When do you think we'll see a positive 507 00:29:29,720 --> 00:29:38,920 Speaker 1: really yield between a THAD that's complacent about inflation rising 508 00:29:39,440 --> 00:29:48,440 Speaker 1: UH inflation, UH tendency, and crucially UM a whole set 509 00:29:48,520 --> 00:29:56,840 Speaker 1: of structural factors demography, cheap information, UH technology, demassification of 510 00:29:56,920 --> 00:29:59,880 Speaker 1: the economy. I think it's gonna be a long time 511 00:30:00,400 --> 00:30:05,280 Speaker 1: until we see a ten year tip UH that has 512 00:30:05,360 --> 00:30:10,080 Speaker 1: a positive real yield. Not in the next three or 513 00:30:10,160 --> 00:30:13,040 Speaker 1: four years, would be my guess. Thank you so much 514 00:30:13,080 --> 00:30:17,720 Speaker 1: for our special Larry Summers of Harvard. Finally, one more thought. 515 00:30:18,560 --> 00:30:22,240 Speaker 1: It ain't easy being a CEO these days. Much of 516 00:30:22,320 --> 00:30:25,320 Speaker 1: Wall Street watched this week as the princess of the realm, 517 00:30:25,440 --> 00:30:28,560 Speaker 1: and finally, one princess in the form of Jane Fraser, 518 00:30:29,040 --> 00:30:31,520 Speaker 1: testified to Congress about all the things they're doing to 519 00:30:31,640 --> 00:30:35,560 Speaker 1: help people recover from the pandemic, although Senator Elizabeth Warren 520 00:30:35,640 --> 00:30:37,880 Speaker 1: was having and none of it when it came to 521 00:30:37,960 --> 00:30:41,640 Speaker 1: Jamie Diamonds JP Morgan charging for overdrafts. You and your 522 00:30:41,680 --> 00:30:44,000 Speaker 1: colleagues come in today to talk about how you stepped 523 00:30:44,040 --> 00:30:46,840 Speaker 1: up and took care of customers during the pandemic, and 524 00:30:46,920 --> 00:30:48,880 Speaker 1: it's a bunch of blowney. One of the issues that 525 00:30:49,000 --> 00:30:51,360 Speaker 1: got the most attention was what the banks were doing 526 00:30:51,440 --> 00:30:54,560 Speaker 1: about climate change. But when it comes to climate, the 527 00:30:54,800 --> 00:30:58,560 Speaker 1: real SmackDown this week was an Exceon Mobile's annual shareholders 528 00:30:58,640 --> 00:31:02,360 Speaker 1: meeting were an upstar activist shareholder group holding only a 529 00:31:02,480 --> 00:31:06,400 Speaker 1: miniscule portion of Exson chairs, took on management and to 530 00:31:06,600 --> 00:31:10,040 Speaker 1: everyone's surprise, forced at least two of its candidates onto 531 00:31:10,040 --> 00:31:13,440 Speaker 1: the Exxon board directors, who will advocate for remaking the 532 00:31:13,520 --> 00:31:17,200 Speaker 1: company to address climate issues, and just in case any 533 00:31:17,320 --> 00:31:21,360 Speaker 1: CEOs didn't get the message. The same day, Chevron shareholders 534 00:31:21,440 --> 00:31:24,880 Speaker 1: overruled its management to require the company to cut pollution 535 00:31:25,040 --> 00:31:28,360 Speaker 1: from its customers, and a Dutch court told Shell it 536 00:31:28,480 --> 00:31:32,240 Speaker 1: had to move faster to cut emissions. Now it isn't 537 00:31:32,280 --> 00:31:35,560 Speaker 1: easy at the top. Sure, you get paid a small fortune, 538 00:31:35,600 --> 00:31:39,160 Speaker 1: in some cases more than small, but you are reporting 539 00:31:39,160 --> 00:31:41,520 Speaker 1: to an ever expanding group of people with a say 540 00:31:41,680 --> 00:31:45,200 Speaker 1: in your business. Now it's not just the shareholders and 541 00:31:45,280 --> 00:31:49,240 Speaker 1: the employees and customers and Wall Street. Now now it 542 00:31:49,280 --> 00:31:54,080 Speaker 1: includes social movements and perhaps just perhaps the weight of 543 00:31:54,200 --> 00:31:57,600 Speaker 1: history itself that does it. For this episode of Wall 544 00:31:57,640 --> 00:32:00,560 Speaker 1: Street Week, I'm David Weston, This is Bloom or see 545 00:32:00,600 --> 00:32:05,360 Speaker 1: you next week. M hm.