Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes.
Speaker 1: The economy is in the process of rebounding. Will the
Speaker 1: Federal Reserve have its own digital currency? The financial stories
Speaker 1: that cheap hard work. Many people think the yields are
Speaker 1: just going to keep marching up. We have more spending
Speaker 1: coming out of Congress. One of the big questions I
Speaker 1: think on investors minds inflation through the eyes of the
Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary
Speaker 1: Bryan Wynahan, a backup America Will Smart CEO Charlie Sharp.
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: Caught in the middle, bank CEOs between Democrats and Republicans,
Speaker 1: Exxon management, between new activism and old finances, and investors
Speaker 1: between inflation and a Fed that will have none of it.
Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. Each
Speaker 1: week on this program we take a look at the
Speaker 1: big events of the week that the smart investor wants
Speaker 1: to be paying attention to. But let's be honest, sometimes
Speaker 1: it is hard to separate at the signal from the noise.
Speaker 1: We are fortunate to have with us today a really
Speaker 1: smart investor. He is Mr David Booth. He is the
Speaker 1: chairman and co founder of Demential Fund Advisors. They have
Speaker 1: been in business for forty years with an extraordinary track
Speaker 1: record over that period of time. Welcome to Wall Street.
Speaker 1: We're good to have you, David. Let's go without that
Speaker 1: forty year history. I mean, I'm not sure that every
Speaker 1: month or every quarter, maybe even ever year you were up,
Speaker 1: but over the long term you did very very well.
Speaker 1: Give us some advice in that forty years, What did
Speaker 1: you pay attention to? What did you leave behind and
Speaker 1: not get distracted by? If you look at over the
Speaker 1: last forty years, what we've learned, I think kind of
Speaker 1: ties in with your first comment trying to separate the
Speaker 1: signal from the noise. You know what, I think good
Speaker 1: The set of ideas around which we've built the firm
Speaker 1: have shown that you can have a successful investment experience
Speaker 1: without having to forecast the market turns, without trying to
Speaker 1: outguess the market. So a lot of that is tuning
Speaker 1: out the noise, focusing on on what really matters. You know,
Speaker 1: you can't control markets, but you can't control the amount
Speaker 1: of risk you take, for example, so that's largely what
Speaker 1: it's about is coming up a sensible long term strategy
Speaker 1: and emphasizing long term, because if you're going to invest
Speaker 1: in risky assets, you need to have a long term
Speaker 1: investment strategy. It's a strategy that that that you believe
Speaker 1: in enough that you can stick with it through the
Speaker 1: ups and downs of markets. Markets are going to go
Speaker 1: up and down, that's what they do, and and so
Speaker 1: what investors need to do is figure out how to
Speaker 1: deal with that uncertainty and come up with a sensible
Speaker 1: solution for them that they can stick with. So isn't
Speaker 1: that one of the real challenges for an investor, David,
Speaker 1: Because if you didn't have uncertainty, if you didn't have risk,
Speaker 1: you wouldn't have gained. As a practical matter, the one
Speaker 1: comes with the other. The question is how much risk?
Speaker 1: How much uncertainty? I mean, when does it leave off
Speaker 1: being an investment and turn into a gamble. Because let's
Speaker 1: be honest, some of what's going on the market sometimes
Speaker 1: looks to me an awful light like gambling. Well totally,
Speaker 1: I mean exily. Trying to time short term movements in
Speaker 1: the market is more akin to gambling than investing, and
Speaker 1: you know, we think, uh, if you're going to invest
Speaker 1: in the market, you have to have a long term focus.
Speaker 1: This last year, for example, it's been a your It
Speaker 1: was a great example. Uh. Markets down first few months
Speaker 1: of the year, and a lot of people bailed out,
Speaker 1: but the market ended up for the year. So if
Speaker 1: you didn't stay invested, if you tried to time that
Speaker 1: market got out, you know, you you missed out on
Speaker 1: a big return. And missing out on those big up
Speaker 1: markets is frequently as costly as being invested and and
Speaker 1: losing money in the down market. So those, uh, those
Speaker 1: are the those are the ideas that are tough for
Speaker 1: people to grasp that you can have a good experience
Speaker 1: without shifting things around all the time. David, you are,
Speaker 1: by all accounts a patient investor. Are the people who
Speaker 1: put their money with your pay and as well? I
Speaker 1: mean you manage over six billion dollars right now? Are
Speaker 1: they willing to stay with you through those downturns? What's
Speaker 1: your experience? Well, it's you know, throw any downturn, you're
Speaker 1: going to have people who get discouraged and lose confidence
Speaker 1: in what you're doing and bail out. That's the business
Speaker 1: we've chosen to be in you know. I but our
Speaker 1: view is if you educate people well and I have
Speaker 1: them and they're transparent, can help them think through, uh,
Speaker 1: how to go about doing creating an investment portfolio that's
Speaker 1: uh gives them the best chance of winning. If you
Speaker 1: focus on those things, then uh, you know you can
Speaker 1: over the long haul do really quite well. So David,
Speaker 1: give us a little insight into your day. You're working
Speaker 1: day when you come into the office. What do you
Speaker 1: look at? I mean I like to have a dashboard
Speaker 1: where I look at certain things indicators. I'll give you
Speaker 1: one specific example, the tenure yield. I heard Warren Buffett
Speaker 1: once say, if there's one thing you'd like to know
Speaker 1: five years out is what the yield on the ten
Speaker 1: year is going to be. Do you pay much attention
Speaker 1: to that? Because this week actually there's been a lot
Speaker 1: of talk about Yale. People thought it was gonna go
Speaker 1: up to two point Oh it's now in the one
Speaker 1: point six range. Do you pay attention to that? Uh?
Speaker 1: We don't pay attention to the short term movements. I
Speaker 1: mean what you want to look at are all kinds
Speaker 1: of investment scenarios. You know, currently people are asking what
Speaker 1: about inflation that's a big topic to or where's the
Speaker 1: ten year going all those things are you obviously would
Speaker 1: be very interesting to know where things are gonna be
Speaker 1: five years from now, but we don't know. And it
Speaker 1: gets back to trying to tune out the noise. You
Speaker 1: have to prepare yourself for whatever happens. Uh, you know,
Speaker 1: you know, plan for the worst and hope for the best.
Speaker 1: You know, that's that's as true and investing as it
Speaker 1: is in other parts of life. You know. So um,
Speaker 1: we we don't know exactly when the markets we're going
Speaker 1: to go up and down. We just know they're going
Speaker 1: to go up and down. And to your point earlier,
Speaker 1: it's that that uncertainty that creates the opportunity. You know,
Speaker 1: people want to shrink away from uncertainty. But if there
Speaker 1: are no one, sir, then your your your your return
Speaker 1: would be something like a money market fund on the
Speaker 1: return on the money market fund. So it's it's balancing
Speaker 1: all of that, you know, dealing with the uncertainty in
Speaker 1: a way that doesn't you can provoke a lot of anxiety.
Speaker 1: In the meantime, some powerful advice from as I say,
Speaker 1: a very smart investor, David Booth of Dimensional Fund Advisors.
Speaker 1: Thank you so much for being with us. Coming up,
Speaker 1: Big Tech, Big Media, and now a marriage of the two.
Speaker 1: We talk about what the dramatic increase in concentration in
Speaker 1: American business means for the economy with our contributors Stephanie
Speaker 1: Flanders of Bloomberg. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. Big media is getting only bigger, with Discovery
Speaker 1: and A. T and T. S Warner coming together last
Speaker 1: week in an unlikely combination of cooking shows and award
Speaker 1: winning draw Mammas. We're not just better together, but that
Speaker 1: that we're probably the best media company in the world.
Speaker 1: I can't and good conscience not allow these assets to
Speaker 1: develop their full potential. That's Discovery CEO David Zaslow and
Speaker 1: A T and T CEO John Stanky. This week, it
Speaker 1: was Amazon's turn. The tech giant is buying Hollywood's iconic
Speaker 1: MGM for eight point four or five billion dollars, bringing
Speaker 1: James Bond and Rocky to the Everything Store, adding even
Speaker 1: more heat to the race to a mass and stream
Speaker 1: entertainment content triggered first by Netflix and then Disney. Here's
Speaker 1: the Zone chairman, Kevin Mayer. I think there's only a
Speaker 1: handful of truly global, you know, greater than a hundred
Speaker 1: million subscriber based type of services that can that can exist.
Speaker 1: Amazon's latest expansion in media comes after it's moved into
Speaker 1: groceries and bricks and mortar with its thirteen point seven
Speaker 1: billion dollar acquisition of Whole Foods back in two thousand seventeen.
Speaker 1: And Amazon the mergers working on great for us. We're
Speaker 1: much better company today than we were Amazon. That's Whole
Speaker 1: Food CEO John Mackie. By expanding its entertainment and retail offerings,
Speaker 1: Amazon is adding more bang for the buck to its
Speaker 1: one nine dollar a year Prime membership. Not to be outdone,
Speaker 1: Walmart launched a competing subscription service called Walmart Plus for
Speaker 1: ninety eight dollars a year, offering free shipping and delivery,
Speaker 1: but Walmart still trails Amazon's dominance in e commerce. Here's
Speaker 1: Alan Patrick off of Greycroft. You know, it's something I
Speaker 1: think we're all enjoying, you know, overnight deliveries at low prices.
Speaker 1: But how long can that keep going on? To the
Speaker 1: two hundred million Prime members around the world, Amazon is
Speaker 1: a one stop shop, but regulators aren't convinced it's in
Speaker 1: the public interest. This week, the Washington d c. Attorney
Speaker 1: General brought in and a trust case against Amazon, alleging
Speaker 1: it is engaging in anti competitive practices that have raised
Speaker 1: prices for consumers. While Amazon claims that it does what
Speaker 1: every retailer does to stay competitive. The monopoly power Amazon
Speaker 1: tells you what to set the price at and punishes
Speaker 1: you if you do not adhere to those rules. That is,
Speaker 1: an our view, an abuse of marketing power. That's Washington
Speaker 1: D C. Attorney General Carl Racine. The consolidation of corporate
Speaker 1: power has reached an almost unimaginable scale since the profits
Speaker 1: of the world's fifty largest companies has gone from sixty
Speaker 1: eight billion dollars to seven eight eight billion dollars, now
Speaker 1: accounting for more than one percent of total global GDP.
Speaker 1: And at this point just four companies, Amazon, Facebook, Microsoft
Speaker 1: and Google together make as much money in one week
Speaker 1: as the entire country of Zimbabwe does in an entire year.
Speaker 1: Here's Rhode Island Congressman David Cicillini. These platforms have enormous
Speaker 1: market dominance, they are have really monopoly power. They really
Speaker 1: don't have competitors in a serious way. And what that
Speaker 1: produced is is behaviors that monopolis engage in, you know,
Speaker 1: favoring their own products and services. Stephanie Flanders is a
Speaker 1: senior executive editor for Economics at Bloomberg, and on a
Speaker 1: recent episode of her very important podcast called Stephanomics, she
Speaker 1: addressed the question of increased concentration in industries around the world.
Speaker 1: Welcoming now back to Wall Street Week. Thank you for
Speaker 1: being with a Stephanie. So I listened to this podcast,
Speaker 1: it was fascinating. First of all, you and your team
Speaker 1: economics team of Bloomberg actually took a look and has
Speaker 1: it become more concentrated globally are our industries? And you
Speaker 1: had some pretty remarkable conclusions. Yeah, we were actually just
Speaker 1: taking stock of the biggest fifty companies in the world.
Speaker 1: Who are the biggest fifty companies now? And how does
Speaker 1: that compare in terms of the sectors there in the
Speaker 1: sheer size of them to And it was it was
Speaker 1: very striking just on the numbers that how much bigger
Speaker 1: they are as a share of GDP. Certainly their market
Speaker 1: cap is worth nearly a third of global GDP or
Speaker 1: the equivalent of which is up from five percent in
Speaker 1: and their profits are also about three times higher relative
Speaker 1: to the global economy, so we could see there's to scale.
Speaker 1: But clearly we've also seen a big change in the
Speaker 1: in the makeup of who are those of those big companies,
Speaker 1: And it is no surprise it's tech firms much more
Speaker 1: evident than they were before twenty one of the top fifties.
Speaker 1: So this is you know, there's there's lots of things
Speaker 1: to say about that research by the chief economist Tom
Speaker 1: Alick and his colleague Justin n Jimenizum, but that was
Speaker 1: the sheers scale of these companies and their dominance in
Speaker 1: their industries echoes what we've seen in studies of the US,
Speaker 1: for example, have found three quarters of US industries had
Speaker 1: seen an increasing concentration in the past twenty years. And
Speaker 1: the role of tech that you refer to I find
Speaker 1: quite fascinating because it does raise questions about the consequences
Speaker 1: of the concentration. I mean, in industrial society, it was
Speaker 1: almost inevitable that prices would go up, in quality would
Speaker 1: go down, and you became monopolis. It's not clear that's
Speaker 1: happening with tech. In fact, if anything, that the prices
Speaker 1: may go down as you get bigger and bigger. Yeah,
Speaker 1: and of course we're seeing in the numbers we're looking
Speaker 1: at that we've got to sort of dual effect of
Speaker 1: the rise of the tech giants, but also just globalization
Speaker 1: allowing companies. If you're very successful now, you get to
Speaker 1: be successful on a global scale in the way that
Speaker 1: you weren't able to twenty or thirty years ago. But
Speaker 1: you're right that there are structural features of these companies.
Speaker 1: We have this perception that they invest less and certainly
Speaker 1: higher a fewer workers per per sort of billion of
Speaker 1: market cap than the big companies of previous series. And
Speaker 1: that's borne out by this. If you just take IBM
Speaker 1: was the world's largest company. It devoted at that point
Speaker 1: nine percent of its revenue to capex to investment spending
Speaker 1: every year. Have you take that. If you've come forward
Speaker 1: to today, Apple has that crown. Now it's the biggest
Speaker 1: company of the world and it's investing in in capex
Speaker 1: a third of that amount three So you can see
Speaker 1: they're investing less and they certainly have a fewer workers
Speaker 1: um for the for their scale than the companies in
Speaker 1: the past, which affects their contribution to society. I also wonder, stephanitely,
Speaker 1: if it affects our ability. Who actually regulate our kind
Speaker 1: of There was a time gone by that we thought,
Speaker 1: if we regulate the interest rates, we have the fair
Speaker 1: regular interests, it's really gonna affect how much how fast
Speaker 1: the economy is moving. If these companies don't need to borrow,
Speaker 1: they don't need to really care about what they're paying
Speaker 1: in interest, right, Yeah, I mean that was one of
Speaker 1: the fascinating things that came out of this. Right, So
Speaker 1: we we could also see in these numbers they're paying
Speaker 1: less tax. They're paying about They were probably paying about
Speaker 1: thirty five percent of their profits in tax on the
Speaker 1: kind of average scale globally UM. Now that numbers more
Speaker 1: like seventeen, so it's sort of around half. But their
Speaker 1: profit margin has more or less traveled from about seven
Speaker 1: percent to twent And the result of that is they
Speaker 1: have loads of money. They have nearly two trillion dollars
Speaker 1: cash pier. We often talk about Apple's cash pier, but uh,
Speaker 1: this is true of many other companies now. And if
Speaker 1: you have that kind of money, you cann't finance anything
Speaker 1: you want without paying any attention to what the Federal
Speaker 1: Reserve or any other central bank is is charging for
Speaker 1: full liquidity. So yeah, there is a sort of question
Speaker 1: mark about that. The transmission mechanisms that we've got used
Speaker 1: to thinking about um for certainly for monetary policy maybe
Speaker 1: not working in the way we'd like with these kind
Speaker 1: of companies fasting, I do recommend the Stephans podcast use
Speaker 1: you're all go listen to it. Many thanks to Stephanie Flanders.
Speaker 1: She is the senior executive editor for Economics at Bloomberg.
Speaker 1: Coming up, speaking of concentration, what did the Biden administration
Speaker 1: mean for the mergen and acquisition business. We're gonna talk
Speaker 1: with Blair Afron, co founder of center View Partners. That's
Speaker 1: coming up next. This is Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Western from
Speaker 1: Bloomberg Radio. As we've seen the last two weeks in
Speaker 1: the to A world, mergers and acquisitions continue apace, despite
Speaker 1: what famed investor Carl Icon thinks about some of the prices.
Speaker 1: Blair Afron, co founder of Centerview Partners, is in the
Speaker 1: middle of many of the most important deals getting done,
Speaker 1: and he does admit that there are concerns out there
Speaker 1: about the market getting overheated, but he also has his
Speaker 1: eye on the yet to be determined by the administration
Speaker 1: approach to merger review. Obviously a lot of tell into
Speaker 1: the economy. Uh, it's easy to imagine that this goes
Speaker 1: well into twenty two and beyond. But someone like me, UH, frankly,
Speaker 1: you were always trying to figure out the ground corners
Speaker 1: and say, what are some of the clouds in the horizon.
Speaker 1: You just talked about inflation. We only have really a
Speaker 1: month where the data uh, the economy, the world's opening up.
Speaker 1: You should assume it's obviously mismatched in terms of materials allocation,
Speaker 1: in terms of jobs, but that's a data point. Um.
Speaker 1: The markets generally, we obviously are being priced at a
Speaker 1: premium uh pe multiples on next twelve months earnings three
Speaker 1: points above the five year average. UH. You have pockets
Speaker 1: of the market where the particularly uh petty, whether it's crypto,
Speaker 1: whether it's facts, whether it's just retail investment volumes. So
Speaker 1: you ask yourself what were the antecedents back in Obviously
Speaker 1: the are balance sheets UH is on people's minds, and
Speaker 1: then just the geo political situations. So I say that
Speaker 1: a ton of tail winds, but clearly a watch out
Speaker 1: for what might seep into the markets that we're not
Speaker 1: planning one today. So when you talk about possible clouds
Speaker 1: in their eyes and we're not looking for the half
Speaker 1: enter product glass, but we should be prepared for it
Speaker 1: at least. We do want to talk about the supply
Speaker 1: demand in balance, and you see it in various places.
Speaker 1: You said, we just may be seeing it right now
Speaker 1: in housing where the prices of new houses really skyrocketing,
Speaker 1: but the purchases are going down, and that may be
Speaker 1: really a shortage of supply of lumber, of various inputs.
Speaker 1: We also see it perhaps in the labor market, where
Speaker 1: it looks like the demand right now for employees is
Speaker 1: outstripping the supply. The question, of course, is is it
Speaker 1: to use the T word transitory. That's what we're all
Speaker 1: trying to figure out. Again, it's one month worth of data.
Speaker 1: The economy UH, and openings have been incredibly UH robust,
Speaker 1: rapid and broad, just like New York City in terms
Speaker 1: of restaurants opening, in terms of jobs going back, in
Speaker 1: terms of events, UH, massive squir Garden basketball game, teen
Speaker 1: thousand people. All of this has gotten a certain economy
Speaker 1: it's it's natural to expect that UH, jobs and people
Speaker 1: looking for jobs, UM will have a modest lag. Remember,
Speaker 1: only a month ago we had less than a third
Speaker 1: of the country UH vaccinated. So I think that it's
Speaker 1: it's there. We see the surge, but I'm a believer that, uh,
Speaker 1: it is more transitory than not. We had a record
Speaker 1: downturn because we shut down the economy effectively as we
Speaker 1: needed to because of the pandemic. And now it seems
Speaker 1: like we're having a record rebound. But we gave it
Speaker 1: a lot of push on both monetary and fiscal policy.
Speaker 1: We pumped a lot of money in the economy and
Speaker 1: we're not done yet. Not all of the money from
Speaker 1: the American Rescue Plan has yet been expressed in the economy.
Speaker 1: And as you refer to, we're having twenty billion dollars
Speaker 1: a month pumped in from the Fed. Do we need
Speaker 1: that monetary stimulus right now? Okay, So I think David,
Speaker 1: the word should be lesson focus on the word stimulus
Speaker 1: and more on the word investment. Right now, there's three
Speaker 1: and a half billion in two bills, as you know
Speaker 1: in Congress, UH, Human infrastructure and physical infrastructure. UH. And
Speaker 1: that's over ten years. Okay, I think the extent we
Speaker 1: can invest back on a methodical basis, on a long
Speaker 1: term basis, and done so where you getting quote return
Speaker 1: on investment, I think it actually becomes a good tail.
Speaker 1: And just to put a perspective, every one point of
Speaker 1: growth on GDP, you do that for ten years, that's
Speaker 1: three killion dollars more UH in the economy. So it's
Speaker 1: it's less about steamless that thinking more about using the
Speaker 1: moment two um do what this country needs to do.
Speaker 1: And you have that FED balance sheet. I mean one
Speaker 1: of the issues here also is that let's call it
Speaker 1: monetary support if you would right now coming out of
Speaker 1: the FED and for example, talk about the mortgage backed securities.
Speaker 1: I mean, given where mortgage rates are right now and
Speaker 1: given the housing market, do we need the FED to
Speaker 1: be supporting that. I think the FED has proven itself
Speaker 1: to be nimble in the past. Let's go back to December.
Speaker 1: The FED at that point saw a economy that they
Speaker 1: assumed was rising. A signal of free rate cuts would
Speaker 1: happen next all months would happened. The economy didn't rise,
Speaker 1: started flatten out a reverse course UH. And in fact,
Speaker 1: over the next year, UH cut rates. I think what
Speaker 1: you're getting is a said that will be vigilant to
Speaker 1: facts on the ground. Bell Brainer just this morning, UH
Speaker 1: mentioned that, and I think the FED is also recognizing
Speaker 1: that the recovery in many ways is still prevent um.
Speaker 1: COVID obviously great progress in the US, not necessarily in
Speaker 1: certain pockets outside the US. And in jobs. You have
Speaker 1: eight million people still out of work who were working
Speaker 1: for FORK. So there's a Uh, it's a complicated time
Speaker 1: that I believe that that will be nimble enough to
Speaker 1: figure out that the hast to tap on the brakes.
Speaker 1: We're not static comes in. That was Blair Afron, co
Speaker 1: founder of Center View Partners. Coming up, we wrap up
Speaker 1: the week with our special contributor Larry Summers of Harvard.
Speaker 1: That's next on Wall Street Week on Bloomberg. This is
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: Wrap up the week, as we always do with our
Speaker 1: special contributor Larry Summers of Harvard. Let's start with the
Speaker 1: big event on Friday, which was the president's announcement of
Speaker 1: his budget six trillion dollars one point three trillion dollars
Speaker 1: in deficits in each of the next ten years, it
Speaker 1: looks like, what's your reaction to that budget? Look, he's
Speaker 1: going to keep our country together by building back better.
Speaker 1: He's gonna fix a whole set of lagging public investments
Speaker 1: in everything from making the airport's work so it doesn't
Speaker 1: take half again as long to fly from Boston to
Speaker 1: Washington as it used to, to making the I r
Speaker 1: S be able to collect taxes, to having modern investments
Speaker 1: in science and technology. That's all right, and that's crucial.
Speaker 1: So is doing much more for children. So he's doing
Speaker 1: much more for people who have been left behind. I'm
Speaker 1: all with that, and I think it's hugely important. But
Speaker 1: just because you care doesn't mean you don't also have
Speaker 1: to count. And I think we are as a country
Speaker 1: going to have to look at the total amount of
Speaker 1: spending we're calling forward and the total amount of taxing
Speaker 1: we're calling forward. And I am worried in both the
Speaker 1: short and the medium term about overheating. It might be
Speaker 1: that the forces of what I used to call secular
Speaker 1: stagnation basically people not wanting to spend, are gonna be
Speaker 1: so strong that we need these kinds of uh, massive
Speaker 1: budget deficits and extraordinarily low interest rates to propel the
Speaker 1: economy forward, and this will work out fine. That that
Speaker 1: could be the case, but I think the greater chance
Speaker 1: is that we're going to have some kind of collision
Speaker 1: between demand and UH supply, And from my money, what
Speaker 1: we need is more in the way of UH tax
Speaker 1: increases of the kind that the administration proposed, and even beyond,
Speaker 1: we need to stretch out the spending. We need to
Speaker 1: take UH some of the spending that was in the
Speaker 1: first Act, the Rescue Act that really had no warrant,
Speaker 1: the huge grants to state and local governments that are
Speaker 1: doing just fine, for example, the support for medical institutions,
Speaker 1: some of which actually have from an economic point of view,
Speaker 1: come through this UH very well, and reprogram that to
Speaker 1: necessary public investments. So there are things we can do.
Speaker 1: The broad impulse is UH right, but I am concerned,
Speaker 1: as you know I have been for some time, David.
Speaker 1: You know, if you look at the administration's economic forecast,
Speaker 1: they've done what all administrations do, and it's entirely legitimate.
Speaker 1: They several months ago froze a set of budget assumptions
Speaker 1: um to reflect in an entirely honest and accurate way
Speaker 1: what the census was then, but gosh, the consensus sure
Speaker 1: has changed. I don't think the idea of a one
Speaker 1: point two percent ten year eight for this year looks
Speaker 1: particularly good right now. Uh. We've already had just about
Speaker 1: two percent inflation UM just in the months we've had
Speaker 1: of this year, So I think the year of the
Speaker 1: year inflation figure is gonna come in uh pretty high um.
Speaker 1: And I think that the magnitude of those surprises just
Speaker 1: speaks to the fact that we're gonna have to make
Speaker 1: uh some adjustments uh that go beyond what I think
Speaker 1: is the Washington three parts cycle on inflation. First you
Speaker 1: deny that it's a problem. Then you say that it's
Speaker 1: just due to specific factors and specific transitory factors, and
Speaker 1: then you say, well, it's not really that big a
Speaker 1: problem after are all because wages are going to go
Speaker 1: up along with prices, and it's all gonna sort of
Speaker 1: be okay. And I guess I see us moving through
Speaker 1: that cycle a bit, and that worries me. And it
Speaker 1: worries me because I think it's so important to do
Speaker 1: the fundamental things that the president is trying uh to do,
Speaker 1: but you do have to manage the macroeconomics right as well. Larry.
Speaker 1: One of the things you mentioned was the possibility of
Speaker 1: taking some of the money that's been appropriated for the
Speaker 1: state and local governments that may not need in reusing
Speaker 1: in other ways. It appears that the sentim Minority leader
Speaker 1: Mitchill kind of agrees with you on that. He quoted
Speaker 1: you on that and said, boy, Larry Summers has got
Speaker 1: it right, So you're enraging agreement appears with a Republican here. Well.
Speaker 1: I wouldn't have necessarily expected to be on the same
Speaker 1: side as Mitch McConnell, but I think on that question
Speaker 1: he does have the right view, and I think I
Speaker 1: have a view that we would do well to follow.
Speaker 1: But uh, the minority leader is selective when he quotes
Speaker 1: me because he doesn't tend to pick up on my
Speaker 1: view that the Trump tax cuts are looking increasingly grotesque
Speaker 1: in uh, the current environment of massive stock market zero
Speaker 1: cost of UH capital, all of that, and the kinds
Speaker 1: of steps that President Biden wants to take to restore
Speaker 1: some normality to internet, to corporate taxation, and to at
Speaker 1: long last do what we all ought to be able
Speaker 1: to agree on cracked down on the erosion of profits
Speaker 1: because they're moved to the Cayman Islands and places like
Speaker 1: that through international cooperation. I have to say, I'm disappointed
Speaker 1: that that can't be an area of bipartisan American UH
Speaker 1: corporation cooperation. I would have thought that that was the
Speaker 1: kind of thing that Republicans would stand for on strengthening
Speaker 1: UM America grounds encouraging investment UH in America. So I
Speaker 1: think the UH minority leader is UM way too selective
Speaker 1: in his focus on what we should do about the deficit.
Speaker 1: And deficits have to do with both revenues and spending,
Speaker 1: and I sure wish the minority leader would get behind revenues.
Speaker 1: I mean, really, how can anybody say that it's right
Speaker 1: to cut the I R S enforcement effort against millionaires
Speaker 1: by more than fifty percent when an extra day of auditing,
Speaker 1: an extra day one day, one auditor brings in thousands
Speaker 1: and thousands of dollars, and we're slashing UH that kind
Speaker 1: of investment, which is obviously in the interest of all
Speaker 1: of us. Finally, let's sneak in a couple of short
Speaker 1: summer says here at the end, there's a big event
Speaker 1: in the corporate world this week when Exxon Mobile. The
Speaker 1: management lost a vote actually getting active as shareholders to
Speaker 1: put two at least two members on the board to
Speaker 1: really make it more of a climate friendly company. Is
Speaker 1: this the beginning of something to come in terms of
Speaker 1: shareholder activism, particularly in E s G. I think it
Speaker 1: marks something. Uh you can like s G investment, you
Speaker 1: cannot like SG investment, but it is here to stay
Speaker 1: as a major phenomenon that's gonna be really important in
Speaker 1: many capital market aspects. And I just hope the steps
Speaker 1: that are taken are substantive rather than just optical. And
Speaker 1: I think we have to think very carefully. You know,
Speaker 1: if we're gonna have a charge away from fossil fuels
Speaker 1: and we're gonna move to renewables, which is the right
Speaker 1: thing to do. Is extra x ON play a larger role?
Speaker 1: Or is x ON good at fossil fuels and they
Speaker 1: may not be the best at solar power and they're
Speaker 1: better off paying out their cash flows and letting the
Speaker 1: markets allocate those cash flows to the best places. I
Speaker 1: think there's some hard questions that we have to think about,
Speaker 1: But for sure E s G is a big deal
Speaker 1: for a long time to come. Last one, Larry and
Speaker 1: the real yield has been in negative territory. Well in
Speaker 1: negative territory. It's come up a little bit, but it's
Speaker 1: still negative. When do you think we'll see a positive
Speaker 1: really yield between a THAD that's complacent about inflation rising
Speaker 1: UH inflation, UH tendency, and crucially UM a whole set
Speaker 1: of structural factors demography, cheap information, UH technology, demassification of
Speaker 1: the economy. I think it's gonna be a long time
Speaker 1: until we see a ten year tip UH that has
Speaker 1: a positive real yield. Not in the next three or
Speaker 1: four years, would be my guess. Thank you so much
Speaker 1: for our special Larry Summers of Harvard. Finally, one more thought.
Speaker 1: It ain't easy being a CEO these days. Much of
Speaker 1: Wall Street watched this week as the princess of the realm,
Speaker 1: and finally, one princess in the form of Jane Fraser,
Speaker 1: testified to Congress about all the things they're doing to
Speaker 1: help people recover from the pandemic, although Senator Elizabeth Warren
Speaker 1: was having and none of it when it came to
Speaker 1: Jamie Diamonds JP Morgan charging for overdrafts. You and your
Speaker 1: colleagues come in today to talk about how you stepped
Speaker 1: up and took care of customers during the pandemic, and
Speaker 1: it's a bunch of blowney. One of the issues that
Speaker 1: got the most attention was what the banks were doing
Speaker 1: about climate change. But when it comes to climate, the
Speaker 1: real SmackDown this week was an Exceon Mobile's annual shareholders
Speaker 1: meeting were an upstar activist shareholder group holding only a
Speaker 1: miniscule portion of Exson chairs, took on management and to
Speaker 1: everyone's surprise, forced at least two of its candidates onto
Speaker 1: the Exxon board directors, who will advocate for remaking the
Speaker 1: company to address climate issues, and just in case any
Speaker 1: CEOs didn't get the message. The same day, Chevron shareholders
Speaker 1: overruled its management to require the company to cut pollution
Speaker 1: from its customers, and a Dutch court told Shell it
Speaker 1: had to move faster to cut emissions. Now it isn't
Speaker 1: easy at the top. Sure, you get paid a small fortune,
Speaker 1: in some cases more than small, but you are reporting
Speaker 1: to an ever expanding group of people with a say
Speaker 1: in your business. Now it's not just the shareholders and
Speaker 1: the employees and customers and Wall Street. Now now it
Speaker 1: includes social movements and perhaps just perhaps the weight of
Speaker 1: history itself that does it. For this episode of Wall
Speaker 1: Street Week, I'm David Weston, This is Bloom or see
Speaker 1: you next week. M hm.