1 00:00:00,240 --> 00:00:03,920 Speaker 1: Are we sure about this recovery? From a looming natural 2 00:00:03,960 --> 00:00:07,920 Speaker 1: gas shortage to slowing Chinese growth to in decision in Washington, 3 00:00:08,320 --> 00:00:11,799 Speaker 1: you have to start wondering. This is Bloomberg Wall Street Week. 4 00:00:12,000 --> 00:00:17,800 Speaker 1: I'm David Weston this week special contributor Larry Summers on inflation, 5 00:00:18,160 --> 00:00:22,120 Speaker 1: bond yields, and whether it's all just a bliff. Markets 6 00:00:22,120 --> 00:00:27,840 Speaker 1: are substantially underestimating what it's likely to happen to interest rates. 7 00:00:28,040 --> 00:00:44,960 Speaker 1: Before too long, investors had their fair share to worry 8 00:00:45,000 --> 00:00:48,479 Speaker 1: about this week, starting with a dramatic spike in natural 9 00:00:48,560 --> 00:00:52,080 Speaker 1: gas prices in Europe, putting at risk heat in homes 10 00:00:52,200 --> 00:00:56,800 Speaker 1: and power in China. Here's Jeff Curry Goldman Sachs, Global 11 00:00:56,840 --> 00:01:00,960 Speaker 1: head of Commodity Research. This is just the first inning 12 00:01:01,040 --> 00:01:05,399 Speaker 1: of a multi year, potentially decade long commodity supercycle, which 13 00:01:05,440 --> 00:01:09,560 Speaker 1: only fed the concerns already out there about inflation. Here 14 00:01:09,640 --> 00:01:14,479 Speaker 1: is Republican Congressman French Hill of Arkansas. We have addiction 15 00:01:14,560 --> 00:01:17,760 Speaker 1: to spending in this city, We've had since seventy nine, 16 00:01:18,000 --> 00:01:21,080 Speaker 1: but it's on steroids right now, and it's creating inflationary 17 00:01:21,080 --> 00:01:24,559 Speaker 1: expectations that I think concern every retired person and every 18 00:01:24,600 --> 00:01:28,200 Speaker 1: low income person, because inflation is a thief. And when 19 00:01:28,200 --> 00:01:31,280 Speaker 1: we talk inflation, concerns about the FED tapering its bond 20 00:01:31,319 --> 00:01:35,080 Speaker 1: purchases cannot be far behind. Something Fed Chair j Pole 21 00:01:35,200 --> 00:01:39,200 Speaker 1: put in play last week. So long as the recovery 22 00:01:39,240 --> 00:01:43,520 Speaker 1: remains on track, a gradual tapering process that concludes around 23 00:01:43,560 --> 00:01:46,000 Speaker 1: the middle of next year is likely to be appropriate 24 00:01:46,600 --> 00:01:49,680 Speaker 1: and did nothing to back off of during his testimony 25 00:01:49,760 --> 00:01:53,600 Speaker 1: this week before the Senate Banking Committee. Mainly, what we've 26 00:01:53,640 --> 00:01:57,840 Speaker 1: seen is that the the supply side restrictions that that 27 00:01:58,000 --> 00:02:00,080 Speaker 1: are so much at the heart of the inflation and 28 00:02:00,120 --> 00:02:03,160 Speaker 1: we're seeing have not only not gotten better, they've actually 29 00:02:03,640 --> 00:02:07,120 Speaker 1: in some cases gotten worse. But then again, Senator Warren 30 00:02:07,240 --> 00:02:09,640 Speaker 1: said that if she had her way, it wouldn't be 31 00:02:09,720 --> 00:02:14,480 Speaker 1: Mr Pyle making the decisions anyway. Over and over, you 32 00:02:14,600 --> 00:02:18,760 Speaker 1: have acted to make our banking system less safe, and 33 00:02:18,840 --> 00:02:21,799 Speaker 1: that makes you a dangerous man. And if all that 34 00:02:21,840 --> 00:02:24,799 Speaker 1: weren't enough to set markets off, this week, we had 35 00:02:24,840 --> 00:02:28,160 Speaker 1: the continuing spector of the United States possibly defaulting on 36 00:02:28,240 --> 00:02:32,119 Speaker 1: its debt as Republicans and Democrats continued to bicker over 37 00:02:32,160 --> 00:02:36,080 Speaker 1: the debt ceiling, with each side blaming the other. Here's 38 00:02:36,120 --> 00:02:40,800 Speaker 1: Senators Pat Toomey and Shared Brown. The Democrats have chosen 39 00:02:40,840 --> 00:02:43,600 Speaker 1: to ignore our warnings about this excess of spending, but 40 00:02:43,639 --> 00:02:46,120 Speaker 1: they want us to vote to raise the debt ceiling 41 00:02:46,720 --> 00:02:50,560 Speaker 1: in order to permit the massive spending increases that they're planning. Senator, 42 00:02:50,600 --> 00:02:53,839 Speaker 1: can I really speak between witnesses, but I wonder if 43 00:02:54,760 --> 00:02:57,760 Speaker 1: sexually takes you up on the offer to go get 44 00:02:57,760 --> 00:03:02,160 Speaker 1: a cocktail, if if you would pay, or you'd skip 45 00:03:02,160 --> 00:03:04,800 Speaker 1: out on paying the bill and the expect sector yelling 46 00:03:04,840 --> 00:03:07,840 Speaker 1: to pay, and the markets, well, it could have been worse. 47 00:03:07,919 --> 00:03:10,640 Speaker 1: After taking a hit on Tuesday, equities gained some of 48 00:03:10,680 --> 00:03:13,040 Speaker 1: it back, with the SMP closing the week down just 49 00:03:13,160 --> 00:03:16,000 Speaker 1: over two percent. Well, the NASDAC took the biggest hit, 50 00:03:16,040 --> 00:03:19,000 Speaker 1: down over three percent for the week, while the tenure yield, 51 00:03:19,040 --> 00:03:21,960 Speaker 1: after jumping up on Tuesday's, settled down a bit to 52 00:03:22,120 --> 00:03:24,360 Speaker 1: end the week just under the one point five level, 53 00:03:24,680 --> 00:03:28,320 Speaker 1: while Bitcoin put on a late week surge, closing over 54 00:03:28,480 --> 00:03:31,040 Speaker 1: forty eight thousand. Tell Us make some sort of sense 55 00:03:31,080 --> 00:03:33,320 Speaker 1: out of these markets this week. Welcome to Peter Krause, 56 00:03:33,360 --> 00:03:36,200 Speaker 1: he's chairman and CEO of Aperture Investors. Welcome back. It's 57 00:03:36,240 --> 00:03:38,080 Speaker 1: great to have you back. On Wall Street Week, Peter, 58 00:03:38,280 --> 00:03:39,720 Speaker 1: So it give us a sense of what you think 59 00:03:39,760 --> 00:03:41,880 Speaker 1: happened this week. It was it all about the tenure yield. 60 00:03:42,080 --> 00:03:44,920 Speaker 1: I think you're I think you're opening remarks were terrific, 61 00:03:45,240 --> 00:03:47,600 Speaker 1: But I would say the following there's a lot of 62 00:03:47,680 --> 00:03:50,800 Speaker 1: noise out there, so let's focus on the facts. The 63 00:03:50,880 --> 00:03:54,480 Speaker 1: facts are. The FED has clearly said they're going to table. 64 00:03:54,680 --> 00:03:56,160 Speaker 1: The facts that are the FED is that I'm not 65 00:03:56,200 --> 00:03:59,080 Speaker 1: going to increase interest rates until well into twenty two 66 00:03:59,200 --> 00:04:02,400 Speaker 1: early twenties. Rate facts aren't we continue to have growth. 67 00:04:02,720 --> 00:04:06,760 Speaker 1: Facts are we continue to have elevated inflation, not runaway inflation, 68 00:04:07,080 --> 00:04:10,920 Speaker 1: So in that sense it's transitory, but certainly more inflation 69 00:04:10,920 --> 00:04:12,960 Speaker 1: than we had at one point five to two percent. 70 00:04:13,160 --> 00:04:15,640 Speaker 1: So if you have growth, you have inflation, you have 71 00:04:15,680 --> 00:04:17,839 Speaker 1: the FED seeing they're going to taper, you have the 72 00:04:17,839 --> 00:04:20,039 Speaker 1: FED saying you're not going to increase interest rates, it 73 00:04:20,080 --> 00:04:22,680 Speaker 1: seems pretty clear to me that long term rates have 74 00:04:22,760 --> 00:04:26,800 Speaker 1: to start rising, and they have them, that the energy 75 00:04:26,839 --> 00:04:30,960 Speaker 1: prices are reacting, and we have growth, We're not at 76 00:04:30,960 --> 00:04:33,760 Speaker 1: the point of a recession. So I think if you 77 00:04:33,800 --> 00:04:36,720 Speaker 1: take away all the noise, it's actually reasonably clear. But 78 00:04:36,839 --> 00:04:40,040 Speaker 1: reasonably clear as as a good market to invest in 79 00:04:40,240 --> 00:04:42,360 Speaker 1: as a questionable market, because it seems like if you 80 00:04:42,440 --> 00:04:45,119 Speaker 1: take this week and last we put together both weeks 81 00:04:45,160 --> 00:04:47,640 Speaker 1: for different reasons, we had big sellouts and equis and 82 00:04:47,680 --> 00:04:50,080 Speaker 1: they come back again, it seems to be very choppy. 83 00:04:50,120 --> 00:04:52,840 Speaker 1: As they say, yeah, I think at the equity market 84 00:04:53,400 --> 00:04:57,000 Speaker 1: as at the level that is at is clearly at 85 00:04:57,000 --> 00:05:00,920 Speaker 1: a value that is getting a little bit high, and 86 00:05:00,960 --> 00:05:03,719 Speaker 1: I think the equity markets behaving that way. Now. I 87 00:05:03,760 --> 00:05:05,720 Speaker 1: don't think we're going to see your recession, so I 88 00:05:05,760 --> 00:05:08,159 Speaker 1: don't think we're going to see a significant pullback, but 89 00:05:08,240 --> 00:05:10,599 Speaker 1: I've said for the last you know, six months to 90 00:05:10,800 --> 00:05:14,880 Speaker 1: eight months, this equity market could certainly see a retrenchment 91 00:05:14,920 --> 00:05:19,039 Speaker 1: of ten to fifteen perhaps even as it reprices itself. 92 00:05:19,440 --> 00:05:23,160 Speaker 1: The FED activity over the last number of years has 93 00:05:23,240 --> 00:05:26,039 Speaker 1: clearly driven interest rates to very low levels. We know 94 00:05:26,200 --> 00:05:28,720 Speaker 1: wheel rates in the United States are negative, wheel rates 95 00:05:28,720 --> 00:05:30,800 Speaker 1: in Europe are negative. So what does that mean. That 96 00:05:30,880 --> 00:05:33,599 Speaker 1: means that all the cash that might have been running 97 00:05:33,680 --> 00:05:36,880 Speaker 1: after fixed income markets went in the equity markets. So 98 00:05:37,000 --> 00:05:40,240 Speaker 1: clearly the capital allocation is not normal, and people have 99 00:05:40,400 --> 00:05:43,080 Speaker 1: more invested in the equity markets than traditionally, and they've 100 00:05:43,160 --> 00:05:45,960 Speaker 1: driven prices to high levels. So do we have volatility 101 00:05:46,160 --> 00:05:49,040 Speaker 1: rates start to move? Absolutely, would you put cash in 102 00:05:49,080 --> 00:05:52,320 Speaker 1: the equity market today? You probably wait to see for 103 00:05:52,360 --> 00:05:56,400 Speaker 1: the volatility to reside. So the question is if low 104 00:05:56,520 --> 00:05:59,279 Speaker 1: rates really drive this so much? That does depend critically? 105 00:05:59,320 --> 00:06:02,000 Speaker 1: Does it not? On J Pali statement, this is transitory, 106 00:06:02,240 --> 00:06:04,000 Speaker 1: is not permanent. Even this week when he was giving 107 00:06:04,000 --> 00:06:06,000 Speaker 1: testament over the Hill, he said, you know, it's worse 108 00:06:06,040 --> 00:06:08,240 Speaker 1: than we thought it wasn't It's more durable. And every 109 00:06:08,279 --> 00:06:11,599 Speaker 1: time he talks, there's another reason. It was used cars, 110 00:06:11,720 --> 00:06:14,279 Speaker 1: you know, and now it's natural gas prices. There's always 111 00:06:14,320 --> 00:06:16,680 Speaker 1: something else. And those supply chain problems are gonna linger 112 00:06:16,720 --> 00:06:18,720 Speaker 1: for a while, aren't they, Peter? I do think they will. 113 00:06:18,760 --> 00:06:22,440 Speaker 1: I I don't like the word transitory because it suggests 114 00:06:22,920 --> 00:06:27,200 Speaker 1: that the level of inflation it's currently there is going 115 00:06:27,240 --> 00:06:30,000 Speaker 1: to recede to the level of inflation we had before 116 00:06:30,680 --> 00:06:34,120 Speaker 1: rates or inflation became quote unquote higher. I don't think 117 00:06:34,160 --> 00:06:35,919 Speaker 1: that's the case, and I actually don't think that's what 118 00:06:35,960 --> 00:06:38,400 Speaker 1: Pal means. What I think he means is that four 119 00:06:38,440 --> 00:06:42,159 Speaker 1: percent five percent inflation is transitory, but not necessarily two 120 00:06:42,240 --> 00:06:44,800 Speaker 1: or two and a half percent is transitory, and if 121 00:06:44,800 --> 00:06:47,440 Speaker 1: we had two and two and a half percent inflation 122 00:06:47,600 --> 00:06:50,279 Speaker 1: that was normal unstable, we would definitely have higher rates 123 00:06:50,520 --> 00:06:53,600 Speaker 1: and capital allocation would take place, and I suspect the 124 00:06:53,640 --> 00:06:56,480 Speaker 1: equity market would have to reprice that. Thank you so much, 125 00:06:56,480 --> 00:06:58,640 Speaker 1: Peter Krause. He's gonna be staying with us as we 126 00:06:58,680 --> 00:07:01,160 Speaker 1: take a closer look at inflation and how investors might 127 00:07:01,160 --> 00:07:03,680 Speaker 1: cope if in fact it's here to stay contrary to 128 00:07:03,760 --> 00:07:06,720 Speaker 1: what j Pole claims. That's next. This is Wall Street 129 00:07:06,760 --> 00:07:16,480 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week. I'm 130 00:07:16,520 --> 00:07:19,360 Speaker 1: David Weston. There was more talk of inflation this week 131 00:07:19,360 --> 00:07:21,640 Speaker 1: with fed share Powell admitting it's a bit worse and 132 00:07:21,680 --> 00:07:24,440 Speaker 1: more persistent than he'd expected, but still not really something 133 00:07:24,480 --> 00:07:27,120 Speaker 1: to worry about. And natural gas prices really shot through 134 00:07:27,120 --> 00:07:29,200 Speaker 1: the roof over in Europe because they have some problems 135 00:07:29,240 --> 00:07:32,240 Speaker 1: with some supply chains. What if chair Pole is wrong 136 00:07:32,440 --> 00:07:34,720 Speaker 1: and real inflation is here to stay after all, what 137 00:07:34,800 --> 00:07:37,400 Speaker 1: should investor do? Still well, this is Peter Krause of 138 00:07:37,400 --> 00:07:40,000 Speaker 1: Aperture Investments and now joining us as Nancy Davis of 139 00:07:40,040 --> 00:07:43,640 Speaker 1: Quadratic Capital. She is the CEO and founder of that organization. 140 00:07:43,640 --> 00:07:45,840 Speaker 1: So Nancy, let's start with you, because you've made something 141 00:07:45,880 --> 00:07:47,680 Speaker 1: a name for yourself. When I say that in the 142 00:07:47,720 --> 00:07:50,880 Speaker 1: area of inflation, without regard to whether you think it 143 00:07:50,920 --> 00:07:53,520 Speaker 1: really is persistent or not. If it were to be persistent, 144 00:07:53,720 --> 00:07:57,440 Speaker 1: what should investor do? I think every investor needs to 145 00:07:57,440 --> 00:08:01,640 Speaker 1: be concerned about inflation, especially retire ease, because you're not 146 00:08:01,680 --> 00:08:04,440 Speaker 1: going to benefit from the wage inflation if you're not 147 00:08:04,520 --> 00:08:07,000 Speaker 1: in the labor force anymore. So we do live in 148 00:08:07,040 --> 00:08:10,240 Speaker 1: a in a real world, and inflation is a risk 149 00:08:10,280 --> 00:08:14,400 Speaker 1: to every investor portfolio because it reduces purchasing power. I 150 00:08:14,400 --> 00:08:17,320 Speaker 1: think investors just shouldn't be taking a bet on whether 151 00:08:17,480 --> 00:08:20,640 Speaker 1: it's transitory or not, and really should have as part 152 00:08:20,640 --> 00:08:25,760 Speaker 1: of a diversified portfolio, should own some amount of inflation protection. Well, 153 00:08:26,040 --> 00:08:28,960 Speaker 1: just to follow that, Nancy, what does inflation protection look like? 154 00:08:29,480 --> 00:08:32,400 Speaker 1: Is that gold? Is that real estate? What is that? Well? 155 00:08:32,640 --> 00:08:35,920 Speaker 1: I definitely have a different view about what inflation protection is. 156 00:08:35,960 --> 00:08:38,800 Speaker 1: I know a lot of investors look at commodities because 157 00:08:38,840 --> 00:08:41,199 Speaker 1: that worked in the seventies in the last period of 158 00:08:41,280 --> 00:08:44,559 Speaker 1: hyper inflation. But we just I think commodities are like 159 00:08:44,800 --> 00:08:47,840 Speaker 1: the laptop. You know, I'm talking with you on tonight. 160 00:08:47,960 --> 00:08:51,720 Speaker 1: It's deflationary. Technology has innovated in that space, So I 161 00:08:51,760 --> 00:08:54,240 Speaker 1: just don't think commodities are the only way to think 162 00:08:54,240 --> 00:08:58,959 Speaker 1: about how to capture inflation. I personally like using um 163 00:08:59,000 --> 00:09:02,320 Speaker 1: the difference between short and long dated rates as another 164 00:09:02,400 --> 00:09:07,520 Speaker 1: measure of inflation expectations outside the consumer price index. I 165 00:09:07,520 --> 00:09:10,120 Speaker 1: think that's the thing that investors have to keep in mind, 166 00:09:10,280 --> 00:09:13,720 Speaker 1: is that's just one index. It's like if you were 167 00:09:13,760 --> 00:09:16,920 Speaker 1: to buy equities, nobody would buy just the Dow Jones 168 00:09:16,960 --> 00:09:20,920 Speaker 1: index and say, oh, I have all equities. I think 169 00:09:20,920 --> 00:09:24,400 Speaker 1: investors have to be diversified. Peter, same question to you 170 00:09:24,480 --> 00:09:27,280 Speaker 1: if you think I think Nancy makes a really good 171 00:09:27,320 --> 00:09:30,840 Speaker 1: point about that. First of all, in in the commodity 172 00:09:30,840 --> 00:09:33,000 Speaker 1: inflation time period, we didn't have the same kind of 173 00:09:33,040 --> 00:09:36,880 Speaker 1: technology boom that we see today, and we didn't have 174 00:09:36,920 --> 00:09:41,319 Speaker 1: anywhere near these social um I shouldn't say social, but 175 00:09:42,000 --> 00:09:46,800 Speaker 1: ecologically beneficial ways to actually produce energy. And Nancy's business 176 00:09:46,840 --> 00:09:51,320 Speaker 1: has has really focused on a long term structural benefit 177 00:09:51,360 --> 00:09:54,520 Speaker 1: that's out there of taking advantage of the difference between 178 00:09:54,679 --> 00:09:57,199 Speaker 1: short and long term rates, and she's made it liquid. 179 00:09:57,600 --> 00:09:59,800 Speaker 1: And I think that if you want to buy inflation 180 00:09:59,840 --> 00:10:02,920 Speaker 1: for detection. That's a piece that's a part of your 181 00:10:02,960 --> 00:10:06,520 Speaker 1: portfolio that you could easily tailor own, and it would 182 00:10:06,520 --> 00:10:09,719 Speaker 1: give you protection to do that. You can also own commodities, 183 00:10:09,720 --> 00:10:14,040 Speaker 1: but you are you are susceptible to supply and demand changes, 184 00:10:14,320 --> 00:10:18,080 Speaker 1: political changes, technology changes. So there's more going on in 185 00:10:18,120 --> 00:10:20,760 Speaker 1: the commodity world than there is in the sort of 186 00:10:20,800 --> 00:10:23,520 Speaker 1: pure rate opportunity. So but let me just pick up 187 00:10:23,520 --> 00:10:25,760 Speaker 1: with something you referred to, which is what's going on 188 00:10:25,840 --> 00:10:27,520 Speaker 1: with climate change and some of the things that are 189 00:10:27,520 --> 00:10:30,080 Speaker 1: being done by the bodymustriction and others. In response that, 190 00:10:30,280 --> 00:10:32,800 Speaker 1: Julian Tether Financial Times this week wrote a column and 191 00:10:32,800 --> 00:10:35,679 Speaker 1: which is she called greenflation because she said, as we 192 00:10:35,760 --> 00:10:39,400 Speaker 1: make this transition, it's a massive transition away from greenhouse gases, 193 00:10:39,520 --> 00:10:41,280 Speaker 1: it's got to drive some prices up. There's got to 194 00:10:41,320 --> 00:10:45,360 Speaker 1: be inflation issue, right. I think she's right. I I 195 00:10:45,400 --> 00:10:48,560 Speaker 1: definitely think she's right, and I think it's a little 196 00:10:48,559 --> 00:10:51,520 Speaker 1: bit difficult to calculate. So what I mean by that 197 00:10:51,720 --> 00:10:54,960 Speaker 1: is we're all going to move towards a green world. 198 00:10:55,400 --> 00:10:57,920 Speaker 1: That's a good objective and we should go there. But 199 00:10:58,000 --> 00:10:59,800 Speaker 1: what we don't know is how long is it going 200 00:10:59,840 --> 00:11:03,640 Speaker 1: to take us us collectively as a global economy to 201 00:11:03,640 --> 00:11:06,439 Speaker 1: actually get to the point where the green world is efficient, 202 00:11:07,040 --> 00:11:10,760 Speaker 1: cost effective, and actually produces enough energy for us to 203 00:11:10,800 --> 00:11:14,240 Speaker 1: operate our world in and that time period we don't know, 204 00:11:14,440 --> 00:11:17,720 Speaker 1: And if we haven't invested enough in carbon fuels to 205 00:11:17,800 --> 00:11:20,680 Speaker 1: actually have the supply to get us there, we're gonna 206 00:11:20,679 --> 00:11:23,720 Speaker 1: see price fake spikes, and we're gonna see them actually 207 00:11:23,760 --> 00:11:28,959 Speaker 1: be very rapid and actually quite uh disconcerting, because you're 208 00:11:28,960 --> 00:11:31,360 Speaker 1: not gonna be able to increase the supply fast enough 209 00:11:31,559 --> 00:11:34,559 Speaker 1: to be able to deal with the shortfall. One of 210 00:11:34,559 --> 00:11:36,760 Speaker 1: the things Nancy, clearly we have not invest enough in 211 00:11:36,840 --> 00:11:38,880 Speaker 1: his supply chains all around the world, and would start 212 00:11:38,920 --> 00:11:40,880 Speaker 1: with semi conductors, but it's gone well beyond that. Take 213 00:11:40,920 --> 00:11:43,120 Speaker 1: a look at all the ships lined up outside of 214 00:11:43,160 --> 00:11:45,720 Speaker 1: Los Angeles and even here in New York. What about 215 00:11:45,760 --> 00:11:47,680 Speaker 1: that is an effect on inflation? Is that going away 216 00:11:47,720 --> 00:11:51,760 Speaker 1: anytime soon? Well, it's really a result of the supply 217 00:11:51,880 --> 00:11:54,880 Speaker 1: shocks around the world. It hopefully will go away soon, 218 00:11:55,000 --> 00:11:58,040 Speaker 1: But we're also having labor shocks at the same time, 219 00:11:58,200 --> 00:12:00,959 Speaker 1: so goods and services are not being able to be 220 00:12:01,000 --> 00:12:04,360 Speaker 1: shipped around the world. Factories are not working at full capacity, 221 00:12:04,400 --> 00:12:06,480 Speaker 1: and it's a bit of a catch twenty two because 222 00:12:06,880 --> 00:12:10,360 Speaker 1: you know something's got to give eventually, and eventually the 223 00:12:10,440 --> 00:12:13,120 Speaker 1: demand will be met. The question is whether we're going 224 00:12:13,160 --> 00:12:17,480 Speaker 1: to have higher costs without the earnings per share growth 225 00:12:17,520 --> 00:12:20,160 Speaker 1: that has been priced into corporate America. If you look 226 00:12:20,200 --> 00:12:24,960 Speaker 1: at stocks and corporate credit, the markets are really expecting 227 00:12:25,000 --> 00:12:27,120 Speaker 1: a lot of growth. And when you listen to some 228 00:12:27,200 --> 00:12:29,800 Speaker 1: of the companies as they report earnings this season, a 229 00:12:29,880 --> 00:12:33,080 Speaker 1: lot of people are talking about the labor market and 230 00:12:33,160 --> 00:12:37,000 Speaker 1: the delays and the higher costs that are not necessarily 231 00:12:37,440 --> 00:12:41,480 Speaker 1: growthee costs there are more potentially a stagflationary costs, or 232 00:12:41,520 --> 00:12:46,040 Speaker 1: we have higher costs but not the earnings for share growth. Peters. 233 00:12:46,040 --> 00:12:48,439 Speaker 1: I listened to Nancy. A lot of what she describes 234 00:12:48,600 --> 00:12:50,680 Speaker 1: is the direct result I suspect to the pandemic. We 235 00:12:50,720 --> 00:12:52,679 Speaker 1: had to shut down the economy and bring it back up. 236 00:12:53,240 --> 00:12:55,960 Speaker 1: But is it really the cause of what we're seeing 237 00:12:56,120 --> 00:13:00,600 Speaker 1: or did the pandemic reveal some underlying structural weaknesses we had, 238 00:13:00,640 --> 00:13:03,400 Speaker 1: perhaps around the supply chain, having too much devoted to 239 00:13:03,400 --> 00:13:06,160 Speaker 1: certain countries like, for example, China. Is it really revealing 240 00:13:06,160 --> 00:13:09,559 Speaker 1: more structural issues for the economy that have to be addressed. Well, 241 00:13:09,600 --> 00:13:12,640 Speaker 1: that's an interesting question. I think you could argue that 242 00:13:12,720 --> 00:13:16,559 Speaker 1: there was nothing structurally wrong with the supply chain, although 243 00:13:16,559 --> 00:13:20,520 Speaker 1: it was clearly concentrated in certain areas. I mean, remember 244 00:13:20,840 --> 00:13:27,680 Speaker 1: the nuclear disaster in Japan and UH automobile manufacturers realized 245 00:13:27,720 --> 00:13:32,679 Speaker 1: that their supply constraints were disrupted dramatically because they were 246 00:13:32,720 --> 00:13:35,400 Speaker 1: getting a lot of supplies at in Japan in a 247 00:13:35,440 --> 00:13:39,200 Speaker 1: specific place. It was near Fukushima. So national events do 248 00:13:39,360 --> 00:13:42,720 Speaker 1: have an effect on supply chain, and COVID had the 249 00:13:42,760 --> 00:13:46,280 Speaker 1: same effect, although in a global basis, and so you know, 250 00:13:46,320 --> 00:13:48,760 Speaker 1: now we're trying to figure out how do we diversify 251 00:13:48,840 --> 00:13:52,960 Speaker 1: the supply chain so that effect isn't doesn't happen as often. 252 00:13:53,040 --> 00:13:55,600 Speaker 1: But we're always going to have some aggregation of supply 253 00:13:55,679 --> 00:13:59,719 Speaker 1: because ultimately there's a benefit of suppliers being near each other. 254 00:14:00,200 --> 00:14:03,200 Speaker 1: They use the same kind of labor costs, use the 255 00:14:03,240 --> 00:14:05,760 Speaker 1: same kind of energy costs, and if those costs are 256 00:14:05,760 --> 00:14:08,280 Speaker 1: low and attractive, you're going to attract the number of 257 00:14:08,280 --> 00:14:11,840 Speaker 1: people that produce goods that have an ecosystem around them. 258 00:14:11,920 --> 00:14:14,800 Speaker 1: So I suspect that you're always going to have these 259 00:14:14,880 --> 00:14:17,520 Speaker 1: kinds of shocks in the supply chain when you have 260 00:14:17,720 --> 00:14:21,000 Speaker 1: natural events that are catastrophic. So in that sense, I 261 00:14:21,040 --> 00:14:25,160 Speaker 1: don't think that COVID exposed a weakness. It exposed kind 262 00:14:25,160 --> 00:14:28,160 Speaker 1: of the persistent issue you have when you're when you've 263 00:14:28,200 --> 00:14:33,080 Speaker 1: got a global supply uh, you know, structure and effectively 264 00:14:33,640 --> 00:14:37,560 Speaker 1: there's a concentration in the system somewhere. Really interesting discussion 265 00:14:37,560 --> 00:14:40,360 Speaker 1: about inflation and the labor market and commodities and the 266 00:14:40,440 --> 00:14:42,960 Speaker 1: climate change. Can't get much more than that. Thank you 267 00:14:43,040 --> 00:14:46,120 Speaker 1: so much to Peter Krausse of Aperture Investments, and also 268 00:14:46,160 --> 00:14:49,160 Speaker 1: to Nancy Davis of Quadratic Capital, where she is CIO 269 00:14:49,320 --> 00:14:53,400 Speaker 1: and founder. Coming up, Bloomberg opinion columnist Frank Berry has 270 00:14:53,400 --> 00:14:56,240 Speaker 1: a bad news for New Yorkers when it comes to elections. 271 00:14:56,400 --> 00:14:59,880 Speaker 1: Boston is beating you. That's next on Wall Street Week 272 00:15:00,120 --> 00:15:08,200 Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David 273 00:15:08,200 --> 00:15:12,160 Speaker 1: Weston from Bloomberg Radio. Over the next six weeks, Boston 274 00:15:12,240 --> 00:15:15,080 Speaker 1: voters will witness a hotly contested campaign to determine the 275 00:15:15,120 --> 00:15:18,200 Speaker 1: city's next mayor, while in New York voters know that 276 00:15:18,240 --> 00:15:22,040 Speaker 1: November's mayoral election is all but over. We're joined now 277 00:15:22,080 --> 00:15:25,560 Speaker 1: by Bloomberg opinion columnist Frank Berry, who writes admitted New 278 00:15:25,600 --> 00:15:29,160 Speaker 1: Yorkers Boston is beating us. I took a look at 279 00:15:29,200 --> 00:15:32,720 Speaker 1: the city from a different perspective, which is politics, and 280 00:15:32,920 --> 00:15:35,200 Speaker 1: the contrast between Boston and New York could not be 281 00:15:35,240 --> 00:15:38,040 Speaker 1: any different. Right now. Boston's in the middle of an 282 00:15:38,040 --> 00:15:44,440 Speaker 1: extremely close, heated, closely followed mayoral election between two women, 283 00:15:45,040 --> 00:15:47,480 Speaker 1: and in New York it's the opposite. We've got an 284 00:15:47,520 --> 00:15:51,400 Speaker 1: election that no one's particularly following because no one has 285 00:15:51,400 --> 00:15:54,360 Speaker 1: any expectation that the outcome will be any different than 286 00:15:54,840 --> 00:15:57,120 Speaker 1: what everyone believes it will be. And in part that 287 00:15:57,240 --> 00:16:01,080 Speaker 1: is because we have Eric Adams, the former New York 288 00:16:01,400 --> 00:16:04,800 Speaker 1: Police captain, who is the nominee of the Democratic Party, 289 00:16:04,880 --> 00:16:08,280 Speaker 1: and New York City is overwhelmingly Democratic. New York City 290 00:16:08,320 --> 00:16:11,880 Speaker 1: is overwhelmingly Democrat. He won the Democratic Party primary. He's 291 00:16:11,920 --> 00:16:17,240 Speaker 1: facing a Republican who has marginal support, has raised a 292 00:16:17,240 --> 00:16:19,840 Speaker 1: little bit of money, not a lot. But it's a 293 00:16:19,960 --> 00:16:24,360 Speaker 1: race that's really devoid of debate. It's not capturing anybody's attention. Uh. 294 00:16:24,400 --> 00:16:26,800 Speaker 1: And I think that's in large part because everyone expects 295 00:16:26,800 --> 00:16:30,320 Speaker 1: that Adams will win running away. In Boston, it's the 296 00:16:30,360 --> 00:16:33,520 Speaker 1: exact opposite story. It's a very close race between two 297 00:16:33,560 --> 00:16:37,800 Speaker 1: Democrats who both have strong basis of support. One is 298 00:16:38,120 --> 00:16:40,360 Speaker 1: running more from the left, one is running more from 299 00:16:40,360 --> 00:16:43,640 Speaker 1: the center. And so it's very much a debate about Boston, 300 00:16:43,720 --> 00:16:48,160 Speaker 1: but it has national repercussions or overtones, because it mirrors 301 00:16:48,160 --> 00:16:50,400 Speaker 1: a debate that is playing out in Washington and art 302 00:16:50,520 --> 00:16:54,040 Speaker 1: cities across the country between the progressive wing of the 303 00:16:54,080 --> 00:16:56,560 Speaker 1: party and the more centrist wing. And you put your 304 00:16:56,560 --> 00:16:58,800 Speaker 1: finger on the structural difference, which is you have two 305 00:16:58,840 --> 00:17:02,320 Speaker 1: Democrats running into each other. You don't. You don't have 306 00:17:02,360 --> 00:17:04,359 Speaker 1: a Republican versus a Democrat the way you do in 307 00:17:04,359 --> 00:17:07,200 Speaker 1: New York City. Correct. So in Boston they run an 308 00:17:07,280 --> 00:17:10,720 Speaker 1: election process that is often called top two or nonpartisan, 309 00:17:10,760 --> 00:17:13,320 Speaker 1: and everyone gets to compete on the same ballot in 310 00:17:13,359 --> 00:17:15,639 Speaker 1: the first round of voting in the primary, and the 311 00:17:15,680 --> 00:17:18,159 Speaker 1: top two finishers, no matter what party they belong to, 312 00:17:18,240 --> 00:17:21,080 Speaker 1: advanced to the November general election. So that way you're 313 00:17:21,119 --> 00:17:24,160 Speaker 1: short of getting two candidates who are your too strongest candidates, 314 00:17:24,200 --> 00:17:26,800 Speaker 1: no matter what party they belong to. In New York, 315 00:17:26,920 --> 00:17:29,800 Speaker 1: we run party primaries, so each party gets a chance 316 00:17:29,840 --> 00:17:34,320 Speaker 1: to advance one candidate. The problem is the Republican Party 317 00:17:34,320 --> 00:17:37,720 Speaker 1: has been weak for many decades, and they often go 318 00:17:37,800 --> 00:17:41,520 Speaker 1: outside their party to find someone and often don't find 319 00:17:41,520 --> 00:17:44,000 Speaker 1: a strong candidate, and so you end up often with 320 00:17:44,119 --> 00:17:48,639 Speaker 1: a very highly competitive Democratic primary UH and UM a 321 00:17:48,720 --> 00:17:51,639 Speaker 1: Republican candidate who is very weak. And so in New 322 00:17:51,720 --> 00:17:55,240 Speaker 1: York we had a very closely contested Democratic primary, Eric 323 00:17:55,280 --> 00:17:59,760 Speaker 1: Adams one against a very strong field, including two women 324 00:17:59,800 --> 00:18:02,879 Speaker 1: can unidates who were close on his heels, but that 325 00:18:02,960 --> 00:18:06,800 Speaker 1: effectively ended the election, and the November contest that will 326 00:18:06,840 --> 00:18:10,320 Speaker 1: take place is basically afford go one conclusion. Whereas in 327 00:18:10,359 --> 00:18:14,240 Speaker 1: Boston they're getting a chance. They also had a competitive primary, 328 00:18:14,280 --> 00:18:17,640 Speaker 1: but because they didn't give a Republican a free pass 329 00:18:17,680 --> 00:18:19,919 Speaker 1: to the general election, Republican had to compete in the 330 00:18:19,920 --> 00:18:23,119 Speaker 1: primary same as everyone else. UH, they were able to 331 00:18:23,160 --> 00:18:26,160 Speaker 1: advance to November two candidates who either one of them 332 00:18:26,760 --> 00:18:28,760 Speaker 1: has a shot at winning this so it could be 333 00:18:28,800 --> 00:18:32,120 Speaker 1: a coincidence, but you mentioned it's two women in Boston. 334 00:18:32,400 --> 00:18:34,960 Speaker 1: New York City in its history has never had a 335 00:18:35,000 --> 00:18:38,040 Speaker 1: woman mayor, which is pretty extraordinary, never had a woman mayor, 336 00:18:38,200 --> 00:18:40,720 Speaker 1: And we came as close as we ever have this 337 00:18:40,840 --> 00:18:46,040 Speaker 1: year to UH to having a serious UH woman in 338 00:18:46,080 --> 00:18:50,320 Speaker 1: the general election, and had New York been running Boston's 339 00:18:50,400 --> 00:18:54,360 Speaker 1: system of elections where you advanced the top two, it's 340 00:18:54,480 --> 00:18:57,520 Speaker 1: very likely, in fact, let's say it's most likely that 341 00:18:57,600 --> 00:19:00,800 Speaker 1: one of those women, if not both, but certainly one 342 00:19:00,840 --> 00:19:03,560 Speaker 1: of them would have been in the November election. And 343 00:19:03,600 --> 00:19:07,520 Speaker 1: we may very well be talking about the next woman 344 00:19:07,560 --> 00:19:09,639 Speaker 1: mayor or the first woman mayor of New York. So 345 00:19:09,720 --> 00:19:13,240 Speaker 1: let's talk about possible reform. What are the prospects of 346 00:19:13,280 --> 00:19:15,960 Speaker 1: reform of the system in New York City? And we 347 00:19:15,960 --> 00:19:17,879 Speaker 1: should have a little disclaimer here that you worked on 348 00:19:18,440 --> 00:19:21,399 Speaker 1: Michael Bloomberg's campaigns for mayor, and he of course is 349 00:19:21,440 --> 00:19:24,760 Speaker 1: the majority owner and founder of Bloomberg LPR parent company, 350 00:19:25,000 --> 00:19:27,200 Speaker 1: So not that out of the way. Where the projects 351 00:19:27,200 --> 00:19:29,679 Speaker 1: of changing that and and UH and a Boston kit 352 00:19:29,800 --> 00:19:32,600 Speaker 1: I might it's right, you've got another disclaimer. So we've 353 00:19:32,600 --> 00:19:36,760 Speaker 1: got all kinds of disclaimers there. But it's it's always 354 00:19:36,760 --> 00:19:38,639 Speaker 1: been an uphill battle in New York because the parties 355 00:19:38,680 --> 00:19:42,520 Speaker 1: are strong, and UH, in general, neither the Democratic Party 356 00:19:42,600 --> 00:19:47,399 Speaker 1: organizations nor the Republican Party organizations are eager to change 357 00:19:47,440 --> 00:19:50,240 Speaker 1: the system because they have certain advantages that come with 358 00:19:50,359 --> 00:19:54,600 Speaker 1: the status quo um. I actually worked on a uh 359 00:19:54,640 --> 00:19:57,240 Speaker 1: an effort to change the system that Mayor Bloomberg had 360 00:19:58,359 --> 00:20:02,480 Speaker 1: supported back in the early days of his administration, but 361 00:20:03,320 --> 00:20:05,840 Speaker 1: for a variety of reasons it failed, including running in 362 00:20:05,560 --> 00:20:08,800 Speaker 1: a in a low turnout there's a referendum in a 363 00:20:08,840 --> 00:20:13,720 Speaker 1: low turnout primary campaign. But it's my hope that that 364 00:20:13,800 --> 00:20:15,919 Speaker 1: voters will take a look at what's going on in 365 00:20:15,960 --> 00:20:17,959 Speaker 1: New York and what's going on not just in Boston, 366 00:20:18,000 --> 00:20:22,520 Speaker 1: but in places like Seattle, UH places like Atlanta, Cincinnati, Cleveland, 367 00:20:22,920 --> 00:20:26,200 Speaker 1: other places that run their elections like Boston are also 368 00:20:26,280 --> 00:20:32,000 Speaker 1: going to have very competitive elections in November, and places 369 00:20:32,040 --> 00:20:34,679 Speaker 1: that run them like New York, which we're seeing in 370 00:20:35,080 --> 00:20:38,639 Speaker 1: Pittsburgh and Buffalo, are having the opposite of that, having 371 00:20:38,680 --> 00:20:41,920 Speaker 1: the same scenario where the winner of the primary election 372 00:20:42,119 --> 00:20:45,600 Speaker 1: is basically your rubber stamp poinner for the general. That's 373 00:20:45,640 --> 00:20:49,320 Speaker 1: Bloomberg opinion columnist Frank Berry coming up. We wrap up 374 00:20:49,359 --> 00:20:52,040 Speaker 1: the week as we always do with Larry Summers of Harvard. 375 00:20:52,400 --> 00:21:02,159 Speaker 1: That's next on Wall Street Week on Bloomberg. This is 376 00:21:02,200 --> 00:21:06,560 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 377 00:21:07,119 --> 00:21:09,439 Speaker 1: We're return to Larry Summers of Harvard. Once again our 378 00:21:09,480 --> 00:21:12,040 Speaker 1: special trailer on Wall Street Week to really take us 379 00:21:12,080 --> 00:21:14,560 Speaker 1: through the week, Larry, First of all, let's start with inflation, 380 00:21:14,640 --> 00:21:17,080 Speaker 1: something we've talked about, I think every single week, but 381 00:21:17,160 --> 00:21:19,800 Speaker 1: we got really some news this week, in no small 382 00:21:19,840 --> 00:21:21,920 Speaker 1: way because of what happened with the ten year yield 383 00:21:21,960 --> 00:21:24,320 Speaker 1: and the treasury which really spiked up. It's still a 384 00:21:24,359 --> 00:21:27,040 Speaker 1: modest number overall, but it climbed really quickly. And you 385 00:21:27,040 --> 00:21:28,760 Speaker 1: and I have talked about the question, if we really 386 00:21:28,800 --> 00:21:31,359 Speaker 1: have an inflation problem, why isn't the tenure yield going up? 387 00:21:32,000 --> 00:21:35,680 Speaker 1: Look at maybe that this is a recognition of some 388 00:21:35,760 --> 00:21:38,000 Speaker 1: combination of the fact that we're going to have more 389 00:21:38,040 --> 00:21:40,720 Speaker 1: inflation and that the FED is going to do more 390 00:21:40,760 --> 00:21:43,400 Speaker 1: than people thought it was gonna need to do in 391 00:21:43,520 --> 00:21:49,320 Speaker 1: order to contain inflation. You know, once these things start, 392 00:21:49,400 --> 00:21:54,320 Speaker 1: they sometimes have a tendency uh to trend. So I 393 00:21:54,480 --> 00:22:00,119 Speaker 1: stand by my view that markets are substantially underestimate in 394 00:22:00,760 --> 00:22:04,560 Speaker 1: what's likely to happen to interest rates before too long. 395 00:22:05,119 --> 00:22:07,560 Speaker 1: You know, if you look at the so called tailor 396 00:22:07,640 --> 00:22:11,920 Speaker 1: rules predictions of FED behavior, and you feed any kind 397 00:22:11,960 --> 00:22:17,119 Speaker 1: of traditional tailor rule through with the way current economic 398 00:22:17,240 --> 00:22:20,880 Speaker 1: data is running. It points you to a pretty substantial 399 00:22:20,960 --> 00:22:28,920 Speaker 1: concern about inflation overheating. So I've got pretty real anxieties. 400 00:22:29,359 --> 00:22:33,719 Speaker 1: I think what's happening with oil makes the kind of 401 00:22:33,760 --> 00:22:37,600 Speaker 1: Powell that I've drawn to the sixties and seventies look 402 00:22:37,720 --> 00:22:42,160 Speaker 1: more real. We just seem to be having a lot 403 00:22:42,240 --> 00:22:46,680 Speaker 1: of surprising bad shocks that are lasting longer than you think. 404 00:22:47,280 --> 00:22:51,280 Speaker 1: And when you keep being surprised again and again, it 405 00:22:51,359 --> 00:22:54,240 Speaker 1: suggests that there's a pattern and you're missing it. I 406 00:22:54,280 --> 00:22:56,919 Speaker 1: think that's a bit the case with inflation. And of 407 00:22:56,960 --> 00:23:01,160 Speaker 1: course this week we saw some growing set that while 408 00:23:01,240 --> 00:23:03,920 Speaker 1: Europe is not nearly as far along in this as 409 00:23:03,960 --> 00:23:09,639 Speaker 1: we are, that even in Germany inflations right rising to 410 00:23:10,119 --> 00:23:14,320 Speaker 1: uh surprising levels for them. At the same time, we 411 00:23:14,440 --> 00:23:17,600 Speaker 1: have back and forth up on Capitol Hill about spending 412 00:23:17,640 --> 00:23:21,479 Speaker 1: more money more potential fiscal stimulus. This week we had 413 00:23:21,560 --> 00:23:24,160 Speaker 1: Joe Mansion, the Center from West Virginia come out and say, 414 00:23:24,240 --> 00:23:26,760 Speaker 1: I don't like three point five trillion for this build 415 00:23:26,800 --> 00:23:28,680 Speaker 1: back better plan. I like it more like at one 416 00:23:28,720 --> 00:23:31,280 Speaker 1: point five trillion. Now. I don't know exactly what's in 417 00:23:31,359 --> 00:23:33,520 Speaker 1: Joe mentioned plan, but I remember last week on this 418 00:23:33,560 --> 00:23:35,720 Speaker 1: program Wall Street Week you said what you thought they 419 00:23:35,720 --> 00:23:38,200 Speaker 1: should do is do something less than three point five 420 00:23:38,240 --> 00:23:40,840 Speaker 1: trillion and make it more targeted. Is Joe Mansion taking 421 00:23:40,840 --> 00:23:45,320 Speaker 1: the Democrats in the right direction? Do you think? Look? 422 00:23:45,560 --> 00:23:50,359 Speaker 1: I think if the if the bill shrink somewhat, even 423 00:23:50,440 --> 00:23:55,120 Speaker 1: more important, if it's paid for, even more important, if 424 00:23:55,119 --> 00:23:59,600 Speaker 1: it's paid for without gimmicks. I worry about too many 425 00:23:59,680 --> 00:24:03,080 Speaker 1: things being done where they're funded for three years and 426 00:24:03,160 --> 00:24:06,280 Speaker 1: everybody assumes that will be funded after that, or it's 427 00:24:06,320 --> 00:24:10,199 Speaker 1: announced right now that it will start being funded in 428 00:24:10,960 --> 00:24:15,680 Speaker 1: uh seven years. Uh. It's crucial that there be some 429 00:24:16,400 --> 00:24:20,680 Speaker 1: quality to the spending relative to the revenue, rather than 430 00:24:20,760 --> 00:24:26,240 Speaker 1: excessive reliance on timing gimmicks. If we can avoid timing gimmicks, 431 00:24:26,800 --> 00:24:30,000 Speaker 1: if we can pay for it, and we can be 432 00:24:30,080 --> 00:24:35,520 Speaker 1: disciplined and focusing on what will grow uh the economy, 433 00:24:35,600 --> 00:24:41,040 Speaker 1: it is hugely important that we pass a bill. It 434 00:24:41,240 --> 00:24:45,479 Speaker 1: is hugely important that we start doing more than we 435 00:24:45,520 --> 00:24:51,440 Speaker 1: have done on climate change, uh for example. And I'm 436 00:24:51,480 --> 00:24:54,800 Speaker 1: not sure that we need to do everything that center 437 00:24:54,880 --> 00:24:58,719 Speaker 1: Mansion is calling for. UH. There, I think there's a 438 00:24:58,720 --> 00:25:03,520 Speaker 1: lot that absolutely he needs to uh happen, even if 439 00:25:03,560 --> 00:25:09,080 Speaker 1: there is uh some short term dislocation. UH, so I'd 440 00:25:09,160 --> 00:25:12,199 Speaker 1: like to see I think it's desperately important that we 441 00:25:12,359 --> 00:25:15,919 Speaker 1: pass a bill. I hope that this process of of 442 00:25:16,119 --> 00:25:21,280 Speaker 1: compromise uh will eventually UH get to an end, and 443 00:25:21,760 --> 00:25:26,159 Speaker 1: I'm guardedly optimistic that at the end of a process 444 00:25:26,240 --> 00:25:29,840 Speaker 1: that won't have been pretty to watch, we'll get something 445 00:25:30,480 --> 00:25:35,040 Speaker 1: that may not correspond to some people's dreams, but will 446 00:25:35,119 --> 00:25:39,720 Speaker 1: actually be a strong set of initiatives to invest in 447 00:25:39,720 --> 00:25:43,600 Speaker 1: the future of our country. That's more significant, Larry, I 448 00:25:43,680 --> 00:25:46,280 Speaker 1: wonder if you see a possible connection between these two things, 449 00:25:46,320 --> 00:25:48,600 Speaker 1: inflation on the one hand, and what we're doing with 450 00:25:48,680 --> 00:25:51,560 Speaker 1: climate on the other that you just referred to. In 451 00:25:51,560 --> 00:25:54,320 Speaker 1: this sense, we saw, for example, natural gas flat process 452 00:25:54,320 --> 00:25:57,040 Speaker 1: really spike up in Europe. We've got problems now in China. 453 00:25:57,560 --> 00:25:59,479 Speaker 1: Is this something that is really going to stay with 454 00:25:59,560 --> 00:26:01,760 Speaker 1: us on the flation front, because as we convert over 455 00:26:01,800 --> 00:26:05,240 Speaker 1: to potentially zero greenhouse gases, there's got to be a cost. 456 00:26:05,720 --> 00:26:08,919 Speaker 1: I think that's a risk. It's a complicated thing, David, 457 00:26:09,040 --> 00:26:12,840 Speaker 1: because if you reduce the demand for fossil fuels, that 458 00:26:12,880 --> 00:26:16,280 Speaker 1: will presumably reduce their price, not increase their price, and 459 00:26:16,680 --> 00:26:21,600 Speaker 1: that aspect of it will be UH anti inflationary, but 460 00:26:21,640 --> 00:26:25,680 Speaker 1: I think this is something we need to carefully monitor 461 00:26:25,760 --> 00:26:28,880 Speaker 1: and watch. I think the time frames are somewhat different. 462 00:26:28,920 --> 00:26:33,320 Speaker 1: The inflation threats are of things becoming a bit unhinged 463 00:26:33,400 --> 00:26:36,399 Speaker 1: in the next year or two. The climate plans are 464 00:26:36,520 --> 00:26:40,919 Speaker 1: things that will play out over quite a long time period. 465 00:26:41,400 --> 00:26:46,280 Speaker 1: But it's absolutely something that we need to pay very 466 00:26:46,320 --> 00:26:51,240 Speaker 1: close attention to as we UH, as we set the 467 00:26:51,359 --> 00:26:55,240 Speaker 1: policies going forward. Another I could just say, if I 468 00:26:55,240 --> 00:26:59,000 Speaker 1: if I can I just add something on the subject 469 00:26:59,080 --> 00:27:03,720 Speaker 1: of the tech of the tax debate UH that we're having. 470 00:27:04,359 --> 00:27:07,520 Speaker 1: I don't think it's going to happen. It would be fantastic, actually, 471 00:27:07,520 --> 00:27:11,280 Speaker 1: if we were able to place some kind of UH 472 00:27:11,680 --> 00:27:16,960 Speaker 1: tax on, some kind of fee on fossil fuels, not 473 00:27:17,160 --> 00:27:22,880 Speaker 1: laid directly at consumers, but placed upstream on the businesses 474 00:27:23,359 --> 00:27:26,040 Speaker 1: that produced them. I think that would be probably the 475 00:27:26,080 --> 00:27:30,840 Speaker 1: best UH public policy. UH. There is the late George 476 00:27:30,840 --> 00:27:36,840 Speaker 1: Schultz and I advocated UH several years ago. Beyond that, 477 00:27:37,760 --> 00:27:41,960 Speaker 1: I do think that one thing Center Mansion has said 478 00:27:42,800 --> 00:27:48,480 Speaker 1: is absolutely right, and that is that we should be 479 00:27:48,640 --> 00:27:53,880 Speaker 1: repealing much of the Trump tax cuts. There is no 480 00:27:54,000 --> 00:27:59,360 Speaker 1: conceivable reason why we cannot have a corporate tax rate 481 00:28:00,040 --> 00:28:05,240 Speaker 1: in uh, the United States without damaging competitiveness of US 482 00:28:05,359 --> 00:28:09,719 Speaker 1: companies costs of capital or near zero. It is not 483 00:28:09,920 --> 00:28:15,359 Speaker 1: cost of capital that is inhibiting investment. UH. Right now, 484 00:28:16,040 --> 00:28:20,800 Speaker 1: this is something we surely should be doing. And on that, 485 00:28:21,320 --> 00:28:26,920 Speaker 1: I am right with Center Mansion. I'm right with the administration. 486 00:28:27,560 --> 00:28:33,120 Speaker 1: I hope Senator Cinema. It's not clear exactly where she stands, 487 00:28:33,200 --> 00:28:36,159 Speaker 1: and she studied all of this very very carefully, but 488 00:28:36,280 --> 00:28:39,720 Speaker 1: I hope she will see her way clear to support 489 00:28:40,280 --> 00:28:46,240 Speaker 1: a carefully measures tax program that raises revenue we surely 490 00:28:46,320 --> 00:28:51,560 Speaker 1: need from people who surely can afford it um without 491 00:28:51,640 --> 00:28:56,200 Speaker 1: doing damage to investment. Okay, Larry Sumers had thank you 492 00:28:56,240 --> 00:28:58,240 Speaker 1: so very much for being back with us. Larry, of course, 493 00:28:58,280 --> 00:29:01,960 Speaker 1: is our special contributor here Wall Street Week. Finally, one 494 00:29:01,960 --> 00:29:06,200 Speaker 1: more thought, taking a random walk on a hamster wheel. 495 00:29:06,880 --> 00:29:09,520 Speaker 1: We spend a lot of our time try to understand 496 00:29:09,560 --> 00:29:12,719 Speaker 1: the markets, explain the markets, even predict the markets. And 497 00:29:12,760 --> 00:29:15,480 Speaker 1: we have no shortage of experts who can tell us 498 00:29:15,720 --> 00:29:19,120 Speaker 1: what the markets are doing, at least in retrospect. The 499 00:29:19,160 --> 00:29:23,200 Speaker 1: market is first of all rationalizing. We bond an equity 500 00:29:23,440 --> 00:29:26,920 Speaker 1: joint set off this you know, growing anxiety. We're trying 501 00:29:26,960 --> 00:29:29,640 Speaker 1: to read the tea leaves. People are just closing their 502 00:29:29,640 --> 00:29:32,200 Speaker 1: eyes and waiting for this all to be worked out. 503 00:29:32,280 --> 00:29:35,600 Speaker 1: We basically entered a high voluntary regime. You've got to 504 00:29:35,720 --> 00:29:37,720 Speaker 1: tend your yield at one and a half percent. This 505 00:29:37,920 --> 00:29:40,360 Speaker 1: opening in the yield curve. The FIT has said that 506 00:29:40,400 --> 00:29:45,320 Speaker 1: they're changing policy. They've telegraphed the tapering, of course, concerns 507 00:29:45,360 --> 00:29:48,880 Speaker 1: all the pressure on ever grand in Chinese debt markets, 508 00:29:48,960 --> 00:29:51,320 Speaker 1: you can volatility. Some days are going to be pretty uncomfortable. 509 00:29:51,360 --> 00:29:55,440 Speaker 1: Everybody's crying volatility ahead indeed, But now coming out of Germany, 510 00:29:55,520 --> 00:29:58,040 Speaker 1: we have a useful reminder of just how modest we 511 00:29:58,080 --> 00:30:00,360 Speaker 1: should be about how much we think we know about 512 00:30:00,360 --> 00:30:03,880 Speaker 1: the markets. Meet Mr Cox. He is a hamster, and 513 00:30:04,040 --> 00:30:07,200 Speaker 1: like most hamsters, spends his day running on a hamster wheel, 514 00:30:07,440 --> 00:30:09,880 Speaker 1: going in and out of tubes in his cage. But 515 00:30:10,000 --> 00:30:12,360 Speaker 1: his cage is a bit different. His owners set it 516 00:30:12,440 --> 00:30:16,160 Speaker 1: up so Mr Cox can trade cryptocurrencies. Which currency he 517 00:30:16,200 --> 00:30:18,840 Speaker 1: wants to trade depends on where he stops on his wheel, 518 00:30:19,520 --> 00:30:21,440 Speaker 1: and whether he's on the buy side of the cell 519 00:30:21,520 --> 00:30:24,800 Speaker 1: side depends on which tube Mr Cox goes in or 520 00:30:24,840 --> 00:30:28,000 Speaker 1: out of, and we can all watch Mr Cox make 521 00:30:28,160 --> 00:30:31,560 Speaker 1: his investment decisions in real time because it is streamed 522 00:30:31,720 --> 00:30:34,920 Speaker 1: on Twitch, and of course Mr Cox has his own 523 00:30:35,120 --> 00:30:38,200 Speaker 1: Twitter account as well. And the results, well, let's put 524 00:30:38,200 --> 00:30:42,320 Speaker 1: it this way, since June, Mr Cox's portfolio of cryptocurrencies 525 00:30:42,360 --> 00:30:46,040 Speaker 1: is up. If you're keeping score, that's better than Bitcoin, 526 00:30:46,280 --> 00:30:50,000 Speaker 1: better than the SMP, It's even better than Warren Buffett's 527 00:30:50,000 --> 00:30:53,520 Speaker 1: Berkshire Hathaway. But on the other hand, if you'll watch 528 00:30:53,600 --> 00:30:56,880 Speaker 1: carefully that streaming video, you notice something of Mr Cox. 529 00:30:57,240 --> 00:31:00,160 Speaker 1: He actually isn't so much a crypto trader as a 530 00:31:00,200 --> 00:31:03,760 Speaker 1: crypto holder because most of the time Mr Cox is 531 00:31:03,800 --> 00:31:06,080 Speaker 1: in his cage, not doing much of anything. He's not 532 00:31:06,120 --> 00:31:07,960 Speaker 1: in a wheel, he's not going in and out of 533 00:31:07,960 --> 00:31:11,840 Speaker 1: the tubes. So maybe, in one sense Mr Cox is 534 00:31:11,880 --> 00:31:15,640 Speaker 1: a long term investor. Does that remind you of anyone, like, 535 00:31:15,800 --> 00:31:19,960 Speaker 1: for example, investing icon Warren Buffett. I'm buying stocks and 536 00:31:20,120 --> 00:31:21,920 Speaker 1: I but I'm not buying because I think they're gonna 537 00:31:21,920 --> 00:31:23,840 Speaker 1: go up next year. I'm buying him because I think 538 00:31:23,840 --> 00:31:25,920 Speaker 1: they'll be worth quite a bit more money ten years 539 00:31:25,960 --> 00:31:27,400 Speaker 1: or twenty years from now, and I don't know whether 540 00:31:27,400 --> 00:31:29,640 Speaker 1: they're going to go off or down tomorrow or next week, 541 00:31:29,720 --> 00:31:31,840 Speaker 1: or next month or next year. I do know they're 542 00:31:31,840 --> 00:31:36,160 Speaker 1: good businesses, so perhaps maybe the German hamster Mr Cox 543 00:31:36,280 --> 00:31:40,200 Speaker 1: is one more follower of Ben Graham and Warren Buffett. 544 00:31:40,440 --> 00:31:42,080 Speaker 1: That does it for Wall Street week. For this week, 545 00:31:42,480 --> 00:31:45,600 Speaker 1: I'm David Weston. This is Bloomberg. See you next week.