WEBVTT - Bloomberg Wall Street Week: Summers, Kraus, Davis 0:00:00.240 --> 0:00:03.920 Are we sure about this recovery? From a looming natural 0:00:03.960 --> 0:00:07.920 gas shortage to slowing Chinese growth to in decision in Washington, 0:00:08.320 --> 0:00:11.799 you have to start wondering. This is Bloomberg Wall Street Week. 0:00:12.000 --> 0:00:17.800 I'm David Weston this week special contributor Larry Summers on inflation, 0:00:18.160 --> 0:00:22.120 bond yields, and whether it's all just a bliff. Markets 0:00:22.120 --> 0:00:27.840 are substantially underestimating what it's likely to happen to interest rates. 0:00:28.040 --> 0:00:44.960 Before too long, investors had their fair share to worry 0:00:45.000 --> 0:00:48.479 about this week, starting with a dramatic spike in natural 0:00:48.560 --> 0:00:52.080 gas prices in Europe, putting at risk heat in homes 0:00:52.200 --> 0:00:56.800 and power in China. Here's Jeff Curry Goldman Sachs, Global 0:00:56.840 --> 0:01:00.960 head of Commodity Research. This is just the first inning 0:01:01.040 --> 0:01:05.399 of a multi year, potentially decade long commodity supercycle, which 0:01:05.440 --> 0:01:09.560 only fed the concerns already out there about inflation. Here 0:01:09.640 --> 0:01:14.479 is Republican Congressman French Hill of Arkansas. We have addiction 0:01:14.560 --> 0:01:17.760 to spending in this city, We've had since seventy nine, 0:01:18.000 --> 0:01:21.080 but it's on steroids right now, and it's creating inflationary 0:01:21.080 --> 0:01:24.559 expectations that I think concern every retired person and every 0:01:24.600 --> 0:01:28.200 low income person, because inflation is a thief. And when 0:01:28.200 --> 0:01:31.280 we talk inflation, concerns about the FED tapering its bond 0:01:31.319 --> 0:01:35.080 purchases cannot be far behind. Something Fed Chair j Pole 0:01:35.200 --> 0:01:39.200 put in play last week. So long as the recovery 0:01:39.240 --> 0:01:43.520 remains on track, a gradual tapering process that concludes around 0:01:43.560 --> 0:01:46.000 the middle of next year is likely to be appropriate 0:01:46.600 --> 0:01:49.680 and did nothing to back off of during his testimony 0:01:49.760 --> 0:01:53.600 this week before the Senate Banking Committee. Mainly, what we've 0:01:53.640 --> 0:01:57.840 seen is that the the supply side restrictions that that 0:01:58.000 --> 0:02:00.080 are so much at the heart of the inflation and 0:02:00.120 --> 0:02:03.160 we're seeing have not only not gotten better, they've actually 0:02:03.640 --> 0:02:07.120 in some cases gotten worse. But then again, Senator Warren 0:02:07.240 --> 0:02:09.640 said that if she had her way, it wouldn't be 0:02:09.720 --> 0:02:14.480 Mr Pyle making the decisions anyway. Over and over, you 0:02:14.600 --> 0:02:18.760 have acted to make our banking system less safe, and 0:02:18.840 --> 0:02:21.799 that makes you a dangerous man. And if all that 0:02:21.840 --> 0:02:24.799 weren't enough to set markets off, this week, we had 0:02:24.840 --> 0:02:28.160 the continuing spector of the United States possibly defaulting on 0:02:28.240 --> 0:02:32.119 its debt as Republicans and Democrats continued to bicker over 0:02:32.160 --> 0:02:36.080 the debt ceiling, with each side blaming the other. Here's 0:02:36.120 --> 0:02:40.800 Senators Pat Toomey and Shared Brown. The Democrats have chosen 0:02:40.840 --> 0:02:43.600 to ignore our warnings about this excess of spending, but 0:02:43.639 --> 0:02:46.120 they want us to vote to raise the debt ceiling 0:02:46.720 --> 0:02:50.560 in order to permit the massive spending increases that they're planning. Senator, 0:02:50.600 --> 0:02:53.839 can I really speak between witnesses, but I wonder if 0:02:54.760 --> 0:02:57.760 sexually takes you up on the offer to go get 0:02:57.760 --> 0:03:02.160 a cocktail, if if you would pay, or you'd skip 0:03:02.160 --> 0:03:04.800 out on paying the bill and the expect sector yelling 0:03:04.840 --> 0:03:07.840 to pay, and the markets, well, it could have been worse. 0:03:07.919 --> 0:03:10.640 After taking a hit on Tuesday, equities gained some of 0:03:10.680 --> 0:03:13.040 it back, with the SMP closing the week down just 0:03:13.160 --> 0:03:16.000 over two percent. Well, the NASDAC took the biggest hit, 0:03:16.040 --> 0:03:19.000 down over three percent for the week, while the tenure yield, 0:03:19.040 --> 0:03:21.960 after jumping up on Tuesday's, settled down a bit to 0:03:22.120 --> 0:03:24.360 end the week just under the one point five level, 0:03:24.680 --> 0:03:28.320 while Bitcoin put on a late week surge, closing over 0:03:28.480 --> 0:03:31.040 forty eight thousand. Tell Us make some sort of sense 0:03:31.080 --> 0:03:33.320 out of these markets this week. Welcome to Peter Krause, 0:03:33.360 --> 0:03:36.200 he's chairman and CEO of Aperture Investors. Welcome back. It's 0:03:36.240 --> 0:03:38.080 great to have you back. On Wall Street Week, Peter, 0:03:38.280 --> 0:03:39.720 So it give us a sense of what you think 0:03:39.760 --> 0:03:41.880 happened this week. It was it all about the tenure yield. 0:03:42.080 --> 0:03:44.920 I think you're I think you're opening remarks were terrific, 0:03:45.240 --> 0:03:47.600 But I would say the following there's a lot of 0:03:47.680 --> 0:03:50.800 noise out there, so let's focus on the facts. The 0:03:50.880 --> 0:03:54.480 facts are. The FED has clearly said they're going to table. 0:03:54.680 --> 0:03:56.160 The facts that are the FED is that I'm not 0:03:56.200 --> 0:03:59.080 going to increase interest rates until well into twenty two 0:03:59.200 --> 0:04:02.400 early twenties. Rate facts aren't we continue to have growth. 0:04:02.720 --> 0:04:06.760 Facts are we continue to have elevated inflation, not runaway inflation, 0:04:07.080 --> 0:04:10.920 So in that sense it's transitory, but certainly more inflation 0:04:10.920 --> 0:04:12.960 than we had at one point five to two percent. 0:04:13.160 --> 0:04:15.640 So if you have growth, you have inflation, you have 0:04:15.680 --> 0:04:17.839 the FED seeing they're going to taper, you have the 0:04:17.839 --> 0:04:20.039 FED saying you're not going to increase interest rates, it 0:04:20.080 --> 0:04:22.680 seems pretty clear to me that long term rates have 0:04:22.760 --> 0:04:26.800 to start rising, and they have them, that the energy 0:04:26.839 --> 0:04:30.960 prices are reacting, and we have growth, We're not at 0:04:30.960 --> 0:04:33.760 the point of a recession. So I think if you 0:04:33.800 --> 0:04:36.720 take away all the noise, it's actually reasonably clear. But 0:04:36.839 --> 0:04:40.040 reasonably clear as as a good market to invest in 0:04:40.240 --> 0:04:42.360 as a questionable market, because it seems like if you 0:04:42.440 --> 0:04:45.119 take this week and last we put together both weeks 0:04:45.160 --> 0:04:47.640 for different reasons, we had big sellouts and equis and 0:04:47.680 --> 0:04:50.080 they come back again, it seems to be very choppy. 0:04:50.120 --> 0:04:52.840 As they say, yeah, I think at the equity market 0:04:53.400 --> 0:04:57.000 as at the level that is at is clearly at 0:04:57.000 --> 0:05:00.920 a value that is getting a little bit high, and 0:05:00.960 --> 0:05:03.719 I think the equity markets behaving that way. Now. I 0:05:03.760 --> 0:05:05.720 don't think we're going to see your recession, so I 0:05:05.760 --> 0:05:08.159 don't think we're going to see a significant pullback, but 0:05:08.240 --> 0:05:10.599 I've said for the last you know, six months to 0:05:10.800 --> 0:05:14.880 eight months, this equity market could certainly see a retrenchment 0:05:14.920 --> 0:05:19.039 of ten to fifteen perhaps even as it reprices itself. 0:05:19.440 --> 0:05:23.160 The FED activity over the last number of years has 0:05:23.240 --> 0:05:26.039 clearly driven interest rates to very low levels. We know 0:05:26.200 --> 0:05:28.720 wheel rates in the United States are negative, wheel rates 0:05:28.720 --> 0:05:30.800 in Europe are negative. So what does that mean. That 0:05:30.880 --> 0:05:33.599 means that all the cash that might have been running 0:05:33.680 --> 0:05:36.880 after fixed income markets went in the equity markets. So 0:05:37.000 --> 0:05:40.240 clearly the capital allocation is not normal, and people have 0:05:40.400 --> 0:05:43.080 more invested in the equity markets than traditionally, and they've 0:05:43.160 --> 0:05:45.960 driven prices to high levels. So do we have volatility 0:05:46.160 --> 0:05:49.040 rates start to move? Absolutely, would you put cash in 0:05:49.080 --> 0:05:52.320 the equity market today? You probably wait to see for 0:05:52.360 --> 0:05:56.400 the volatility to reside. So the question is if low 0:05:56.520 --> 0:05:59.279 rates really drive this so much? That does depend critically? 0:05:59.320 --> 0:06:02.000 Does it not? On J Pali statement, this is transitory, 0:06:02.240 --> 0:06:04.000 is not permanent. Even this week when he was giving 0:06:04.000 --> 0:06:06.000 testament over the Hill, he said, you know, it's worse 0:06:06.040 --> 0:06:08.240 than we thought it wasn't It's more durable. And every 0:06:08.279 --> 0:06:11.599 time he talks, there's another reason. It was used cars, 0:06:11.720 --> 0:06:14.279 you know, and now it's natural gas prices. There's always 0:06:14.320 --> 0:06:16.680 something else. And those supply chain problems are gonna linger 0:06:16.720 --> 0:06:18.720 for a while, aren't they, Peter? I do think they will. 0:06:18.760 --> 0:06:22.440 I I don't like the word transitory because it suggests 0:06:22.920 --> 0:06:27.200 that the level of inflation it's currently there is going 0:06:27.240 --> 0:06:30.000 to recede to the level of inflation we had before 0:06:30.680 --> 0:06:34.120 rates or inflation became quote unquote higher. I don't think 0:06:34.160 --> 0:06:35.919 that's the case, and I actually don't think that's what 0:06:35.960 --> 0:06:38.400 Pal means. What I think he means is that four 0:06:38.440 --> 0:06:42.159 percent five percent inflation is transitory, but not necessarily two 0:06:42.240 --> 0:06:44.800 or two and a half percent is transitory, and if 0:06:44.800 --> 0:06:47.440 we had two and two and a half percent inflation 0:06:47.600 --> 0:06:50.279 that was normal unstable, we would definitely have higher rates 0:06:50.520 --> 0:06:53.600 and capital allocation would take place, and I suspect the 0:06:53.640 --> 0:06:56.480 equity market would have to reprice that. Thank you so much, 0:06:56.480 --> 0:06:58.640 Peter Krause. He's gonna be staying with us as we 0:06:58.680 --> 0:07:01.160 take a closer look at inflation and how investors might 0:07:01.160 --> 0:07:03.680 cope if in fact it's here to stay contrary to 0:07:03.760 --> 0:07:06.720 what j Pole claims. That's next. This is Wall Street 0:07:06.760 --> 0:07:16.480 Week on Bloomberg. This is Bloomberg Wall Street Week. I'm 0:07:16.520 --> 0:07:19.360 David Weston. There was more talk of inflation this week 0:07:19.360 --> 0:07:21.640 with fed share Powell admitting it's a bit worse and 0:07:21.680 --> 0:07:24.440 more persistent than he'd expected, but still not really something 0:07:24.480 --> 0:07:27.120 to worry about. And natural gas prices really shot through 0:07:27.120 --> 0:07:29.200 the roof over in Europe because they have some problems 0:07:29.240 --> 0:07:32.240 with some supply chains. What if chair Pole is wrong 0:07:32.440 --> 0:07:34.720 and real inflation is here to stay after all, what 0:07:34.800 --> 0:07:37.400 should investor do? Still well, this is Peter Krause of 0:07:37.400 --> 0:07:40.000 Aperture Investments and now joining us as Nancy Davis of 0:07:40.040 --> 0:07:43.640 Quadratic Capital. She is the CEO and founder of that organization. 0:07:43.640 --> 0:07:45.840 So Nancy, let's start with you, because you've made something 0:07:45.880 --> 0:07:47.680 a name for yourself. When I say that in the 0:07:47.720 --> 0:07:50.880 area of inflation, without regard to whether you think it 0:07:50.920 --> 0:07:53.520 really is persistent or not. If it were to be persistent, 0:07:53.720 --> 0:07:57.440 what should investor do? I think every investor needs to 0:07:57.440 --> 0:08:01.640 be concerned about inflation, especially retire ease, because you're not 0:08:01.680 --> 0:08:04.440 going to benefit from the wage inflation if you're not 0:08:04.520 --> 0:08:07.000 in the labor force anymore. So we do live in 0:08:07.040 --> 0:08:10.240 a in a real world, and inflation is a risk 0:08:10.280 --> 0:08:14.400 to every investor portfolio because it reduces purchasing power. I 0:08:14.400 --> 0:08:17.320 think investors just shouldn't be taking a bet on whether 0:08:17.480 --> 0:08:20.640 it's transitory or not, and really should have as part 0:08:20.640 --> 0:08:25.760 of a diversified portfolio, should own some amount of inflation protection. Well, 0:08:26.040 --> 0:08:28.960 just to follow that, Nancy, what does inflation protection look like? 0:08:29.480 --> 0:08:32.400 Is that gold? Is that real estate? What is that? Well? 0:08:32.640 --> 0:08:35.920 I definitely have a different view about what inflation protection is. 0:08:35.960 --> 0:08:38.800 I know a lot of investors look at commodities because 0:08:38.840 --> 0:08:41.199 that worked in the seventies in the last period of 0:08:41.280 --> 0:08:44.559 hyper inflation. But we just I think commodities are like 0:08:44.800 --> 0:08:47.840 the laptop. You know, I'm talking with you on tonight. 0:08:47.960 --> 0:08:51.720 It's deflationary. Technology has innovated in that space, So I 0:08:51.760 --> 0:08:54.240 just don't think commodities are the only way to think 0:08:54.240 --> 0:08:58.959 about how to capture inflation. I personally like using um 0:08:59.000 --> 0:09:02.320 the difference between short and long dated rates as another 0:09:02.400 --> 0:09:07.520 measure of inflation expectations outside the consumer price index. I 0:09:07.520 --> 0:09:10.120 think that's the thing that investors have to keep in mind, 0:09:10.280 --> 0:09:13.720 is that's just one index. It's like if you were 0:09:13.760 --> 0:09:16.920 to buy equities, nobody would buy just the Dow Jones 0:09:16.960 --> 0:09:20.920 index and say, oh, I have all equities. I think 0:09:20.920 --> 0:09:24.400 investors have to be diversified. Peter, same question to you 0:09:24.480 --> 0:09:27.280 if you think I think Nancy makes a really good 0:09:27.320 --> 0:09:30.840 point about that. First of all, in in the commodity 0:09:30.840 --> 0:09:33.000 inflation time period, we didn't have the same kind of 0:09:33.040 --> 0:09:36.880 technology boom that we see today, and we didn't have 0:09:36.920 --> 0:09:41.319 anywhere near these social um I shouldn't say social, but 0:09:42.000 --> 0:09:46.800 ecologically beneficial ways to actually produce energy. And Nancy's business 0:09:46.840 --> 0:09:51.320 has has really focused on a long term structural benefit 0:09:51.360 --> 0:09:54.520 that's out there of taking advantage of the difference between 0:09:54.679 --> 0:09:57.199 short and long term rates, and she's made it liquid. 0:09:57.600 --> 0:09:59.800 And I think that if you want to buy inflation 0:09:59.840 --> 0:10:02.920 for detection. That's a piece that's a part of your 0:10:02.960 --> 0:10:06.520 portfolio that you could easily tailor own, and it would 0:10:06.520 --> 0:10:09.719 give you protection to do that. You can also own commodities, 0:10:09.720 --> 0:10:14.040 but you are you are susceptible to supply and demand changes, 0:10:14.320 --> 0:10:18.080 political changes, technology changes. So there's more going on in 0:10:18.120 --> 0:10:20.760 the commodity world than there is in the sort of 0:10:20.800 --> 0:10:23.520 pure rate opportunity. So but let me just pick up 0:10:23.520 --> 0:10:25.760 with something you referred to, which is what's going on 0:10:25.840 --> 0:10:27.520 with climate change and some of the things that are 0:10:27.520 --> 0:10:30.080 being done by the bodymustriction and others. In response that, 0:10:30.280 --> 0:10:32.800 Julian Tether Financial Times this week wrote a column and 0:10:32.800 --> 0:10:35.679 which is she called greenflation because she said, as we 0:10:35.760 --> 0:10:39.400 make this transition, it's a massive transition away from greenhouse gases, 0:10:39.520 --> 0:10:41.280 it's got to drive some prices up. There's got to 0:10:41.320 --> 0:10:45.360 be inflation issue, right. I think she's right. I I 0:10:45.400 --> 0:10:48.560 definitely think she's right, and I think it's a little 0:10:48.559 --> 0:10:51.520 bit difficult to calculate. So what I mean by that 0:10:51.720 --> 0:10:54.960 is we're all going to move towards a green world. 0:10:55.400 --> 0:10:57.920 That's a good objective and we should go there. But 0:10:58.000 --> 0:10:59.800 what we don't know is how long is it going 0:10:59.840 --> 0:11:03.640 to take us us collectively as a global economy to 0:11:03.640 --> 0:11:06.439 actually get to the point where the green world is efficient, 0:11:07.040 --> 0:11:10.760 cost effective, and actually produces enough energy for us to 0:11:10.800 --> 0:11:14.240 operate our world in and that time period we don't know, 0:11:14.440 --> 0:11:17.720 And if we haven't invested enough in carbon fuels to 0:11:17.800 --> 0:11:20.680 actually have the supply to get us there, we're gonna 0:11:20.679 --> 0:11:23.720 see price fake spikes, and we're gonna see them actually 0:11:23.760 --> 0:11:28.959 be very rapid and actually quite uh disconcerting, because you're 0:11:28.960 --> 0:11:31.360 not gonna be able to increase the supply fast enough 0:11:31.559 --> 0:11:34.559 to be able to deal with the shortfall. One of 0:11:34.559 --> 0:11:36.760 the things Nancy, clearly we have not invest enough in 0:11:36.840 --> 0:11:38.880 his supply chains all around the world, and would start 0:11:38.920 --> 0:11:40.880 with semi conductors, but it's gone well beyond that. Take 0:11:40.920 --> 0:11:43.120 a look at all the ships lined up outside of 0:11:43.160 --> 0:11:45.720 Los Angeles and even here in New York. What about 0:11:45.760 --> 0:11:47.680 that is an effect on inflation? Is that going away 0:11:47.720 --> 0:11:51.760 anytime soon? Well, it's really a result of the supply 0:11:51.880 --> 0:11:54.880 shocks around the world. It hopefully will go away soon, 0:11:55.000 --> 0:11:58.040 But we're also having labor shocks at the same time, 0:11:58.200 --> 0:12:00.959 so goods and services are not being able to be 0:12:01.000 --> 0:12:04.360 shipped around the world. Factories are not working at full capacity, 0:12:04.400 --> 0:12:06.480 and it's a bit of a catch twenty two because 0:12:06.880 --> 0:12:10.360 you know something's got to give eventually, and eventually the 0:12:10.440 --> 0:12:13.120 demand will be met. The question is whether we're going 0:12:13.160 --> 0:12:17.480 to have higher costs without the earnings per share growth 0:12:17.520 --> 0:12:20.160 that has been priced into corporate America. If you look 0:12:20.200 --> 0:12:24.960 at stocks and corporate credit, the markets are really expecting 0:12:25.000 --> 0:12:27.120 a lot of growth. And when you listen to some 0:12:27.200 --> 0:12:29.800 of the companies as they report earnings this season, a 0:12:29.880 --> 0:12:33.080 lot of people are talking about the labor market and 0:12:33.160 --> 0:12:37.000 the delays and the higher costs that are not necessarily 0:12:37.440 --> 0:12:41.480 growthee costs there are more potentially a stagflationary costs, or 0:12:41.520 --> 0:12:46.040 we have higher costs but not the earnings for share growth. Peters. 0:12:46.040 --> 0:12:48.439 I listened to Nancy. A lot of what she describes 0:12:48.600 --> 0:12:50.680 is the direct result I suspect to the pandemic. We 0:12:50.720 --> 0:12:52.679 had to shut down the economy and bring it back up. 0:12:53.240 --> 0:12:55.960 But is it really the cause of what we're seeing 0:12:56.120 --> 0:13:00.600 or did the pandemic reveal some underlying structural weaknesses we had, 0:13:00.640 --> 0:13:03.400 perhaps around the supply chain, having too much devoted to 0:13:03.400 --> 0:13:06.160 certain countries like, for example, China. Is it really revealing 0:13:06.160 --> 0:13:09.559 more structural issues for the economy that have to be addressed. Well, 0:13:09.600 --> 0:13:12.640 that's an interesting question. I think you could argue that 0:13:12.720 --> 0:13:16.559 there was nothing structurally wrong with the supply chain, although 0:13:16.559 --> 0:13:20.520 it was clearly concentrated in certain areas. I mean, remember 0:13:20.840 --> 0:13:27.680 the nuclear disaster in Japan and UH automobile manufacturers realized 0:13:27.720 --> 0:13:32.679 that their supply constraints were disrupted dramatically because they were 0:13:32.720 --> 0:13:35.400 getting a lot of supplies at in Japan in a 0:13:35.440 --> 0:13:39.200 specific place. It was near Fukushima. So national events do 0:13:39.360 --> 0:13:42.720 have an effect on supply chain, and COVID had the 0:13:42.760 --> 0:13:46.280 same effect, although in a global basis, and so you know, 0:13:46.320 --> 0:13:48.760 now we're trying to figure out how do we diversify 0:13:48.840 --> 0:13:52.960 the supply chain so that effect isn't doesn't happen as often. 0:13:53.040 --> 0:13:55.600 But we're always going to have some aggregation of supply 0:13:55.679 --> 0:13:59.719 because ultimately there's a benefit of suppliers being near each other. 0:14:00.200 --> 0:14:03.200 They use the same kind of labor costs, use the 0:14:03.240 --> 0:14:05.760 same kind of energy costs, and if those costs are 0:14:05.760 --> 0:14:08.280 low and attractive, you're going to attract the number of 0:14:08.280 --> 0:14:11.840 people that produce goods that have an ecosystem around them. 0:14:11.920 --> 0:14:14.800 So I suspect that you're always going to have these 0:14:14.880 --> 0:14:17.520 kinds of shocks in the supply chain when you have 0:14:17.720 --> 0:14:21.000 natural events that are catastrophic. So in that sense, I 0:14:21.040 --> 0:14:25.160 don't think that COVID exposed a weakness. It exposed kind 0:14:25.160 --> 0:14:28.160 of the persistent issue you have when you're when you've 0:14:28.200 --> 0:14:33.080 got a global supply uh, you know, structure and effectively 0:14:33.640 --> 0:14:37.560 there's a concentration in the system somewhere. Really interesting discussion 0:14:37.560 --> 0:14:40.360 about inflation and the labor market and commodities and the 0:14:40.440 --> 0:14:42.960 climate change. Can't get much more than that. Thank you 0:14:43.040 --> 0:14:46.120 so much to Peter Krausse of Aperture Investments, and also 0:14:46.160 --> 0:14:49.160 to Nancy Davis of Quadratic Capital, where she is CIO 0:14:49.320 --> 0:14:53.400 and founder. Coming up, Bloomberg opinion columnist Frank Berry has 0:14:53.400 --> 0:14:56.240 a bad news for New Yorkers when it comes to elections. 0:14:56.400 --> 0:14:59.880 Boston is beating you. That's next on Wall Street Week 0:15:00.120 --> 0:15:08.200 on Bloomberg. This is Bloomberg Wall Street Week with David 0:15:08.200 --> 0:15:12.160 Weston from Bloomberg Radio. Over the next six weeks, Boston 0:15:12.240 --> 0:15:15.080 voters will witness a hotly contested campaign to determine the 0:15:15.120 --> 0:15:18.200 city's next mayor, while in New York voters know that 0:15:18.240 --> 0:15:22.040 November's mayoral election is all but over. We're joined now 0:15:22.080 --> 0:15:25.560 by Bloomberg opinion columnist Frank Berry, who writes admitted New 0:15:25.600 --> 0:15:29.160 Yorkers Boston is beating us. I took a look at 0:15:29.200 --> 0:15:32.720 the city from a different perspective, which is politics, and 0:15:32.920 --> 0:15:35.200 the contrast between Boston and New York could not be 0:15:35.240 --> 0:15:38.040 any different. Right now. Boston's in the middle of an 0:15:38.040 --> 0:15:44.440 extremely close, heated, closely followed mayoral election between two women, 0:15:45.040 --> 0:15:47.480 and in New York it's the opposite. We've got an 0:15:47.520 --> 0:15:51.400 election that no one's particularly following because no one has 0:15:51.400 --> 0:15:54.360 any expectation that the outcome will be any different than 0:15:54.840 --> 0:15:57.120 what everyone believes it will be. And in part that 0:15:57.240 --> 0:16:01.080 is because we have Eric Adams, the former New York 0:16:01.400 --> 0:16:04.800 Police captain, who is the nominee of the Democratic Party, 0:16:04.880 --> 0:16:08.280 and New York City is overwhelmingly Democratic. New York City 0:16:08.320 --> 0:16:11.880 is overwhelmingly Democrat. He won the Democratic Party primary. He's 0:16:11.920 --> 0:16:17.240 facing a Republican who has marginal support, has raised a 0:16:17.240 --> 0:16:19.840 little bit of money, not a lot. But it's a 0:16:19.960 --> 0:16:24.360 race that's really devoid of debate. It's not capturing anybody's attention. Uh. 0:16:24.400 --> 0:16:26.800 And I think that's in large part because everyone expects 0:16:26.800 --> 0:16:30.320 that Adams will win running away. In Boston, it's the 0:16:30.360 --> 0:16:33.520 exact opposite story. It's a very close race between two 0:16:33.560 --> 0:16:37.800 Democrats who both have strong basis of support. One is 0:16:38.120 --> 0:16:40.360 running more from the left, one is running more from 0:16:40.360 --> 0:16:43.640 the center. And so it's very much a debate about Boston, 0:16:43.720 --> 0:16:48.160 but it has national repercussions or overtones, because it mirrors 0:16:48.160 --> 0:16:50.400 a debate that is playing out in Washington and art 0:16:50.520 --> 0:16:54.040 cities across the country between the progressive wing of the 0:16:54.080 --> 0:16:56.560 party and the more centrist wing. And you put your 0:16:56.560 --> 0:16:58.800 finger on the structural difference, which is you have two 0:16:58.840 --> 0:17:02.320 Democrats running into each other. You don't. You don't have 0:17:02.360 --> 0:17:04.359 a Republican versus a Democrat the way you do in 0:17:04.359 --> 0:17:07.200 New York City. Correct. So in Boston they run an 0:17:07.280 --> 0:17:10.720 election process that is often called top two or nonpartisan, 0:17:10.760 --> 0:17:13.320 and everyone gets to compete on the same ballot in 0:17:13.359 --> 0:17:15.639 the first round of voting in the primary, and the 0:17:15.680 --> 0:17:18.159 top two finishers, no matter what party they belong to, 0:17:18.240 --> 0:17:21.080 advanced to the November general election. So that way you're 0:17:21.119 --> 0:17:24.160 short of getting two candidates who are your too strongest candidates, 0:17:24.200 --> 0:17:26.800 no matter what party they belong to. In New York, 0:17:26.920 --> 0:17:29.800 we run party primaries, so each party gets a chance 0:17:29.840 --> 0:17:34.320 to advance one candidate. The problem is the Republican Party 0:17:34.320 --> 0:17:37.720 has been weak for many decades, and they often go 0:17:37.800 --> 0:17:41.520 outside their party to find someone and often don't find 0:17:41.520 --> 0:17:44.000 a strong candidate, and so you end up often with 0:17:44.119 --> 0:17:48.639 a very highly competitive Democratic primary UH and UM a 0:17:48.720 --> 0:17:51.639 Republican candidate who is very weak. And so in New 0:17:51.720 --> 0:17:55.240 York we had a very closely contested Democratic primary, Eric 0:17:55.280 --> 0:17:59.760 Adams one against a very strong field, including two women 0:17:59.800 --> 0:18:02.879 can unidates who were close on his heels, but that 0:18:02.960 --> 0:18:06.800 effectively ended the election, and the November contest that will 0:18:06.840 --> 0:18:10.320 take place is basically afford go one conclusion. Whereas in 0:18:10.359 --> 0:18:14.240 Boston they're getting a chance. They also had a competitive primary, 0:18:14.280 --> 0:18:17.640 but because they didn't give a Republican a free pass 0:18:17.680 --> 0:18:19.919 to the general election, Republican had to compete in the 0:18:19.920 --> 0:18:23.119 primary same as everyone else. UH, they were able to 0:18:23.160 --> 0:18:26.160 advance to November two candidates who either one of them 0:18:26.760 --> 0:18:28.760 has a shot at winning this so it could be 0:18:28.800 --> 0:18:32.120 a coincidence, but you mentioned it's two women in Boston. 0:18:32.400 --> 0:18:34.960 New York City in its history has never had a 0:18:35.000 --> 0:18:38.040 woman mayor, which is pretty extraordinary, never had a woman mayor, 0:18:38.200 --> 0:18:40.720 And we came as close as we ever have this 0:18:40.840 --> 0:18:46.040 year to UH to having a serious UH woman in 0:18:46.080 --> 0:18:50.320 the general election, and had New York been running Boston's 0:18:50.400 --> 0:18:54.360 system of elections where you advanced the top two, it's 0:18:54.480 --> 0:18:57.520 very likely, in fact, let's say it's most likely that 0:18:57.600 --> 0:19:00.800 one of those women, if not both, but certainly one 0:19:00.840 --> 0:19:03.560 of them would have been in the November election. And 0:19:03.600 --> 0:19:07.520 we may very well be talking about the next woman 0:19:07.560 --> 0:19:09.639 mayor or the first woman mayor of New York. So 0:19:09.720 --> 0:19:13.240 let's talk about possible reform. What are the prospects of 0:19:13.280 --> 0:19:15.960 reform of the system in New York City? And we 0:19:15.960 --> 0:19:17.879 should have a little disclaimer here that you worked on 0:19:18.440 --> 0:19:21.399 Michael Bloomberg's campaigns for mayor, and he of course is 0:19:21.440 --> 0:19:24.760 the majority owner and founder of Bloomberg LPR parent company, 0:19:25.000 --> 0:19:27.200 So not that out of the way. Where the projects 0:19:27.200 --> 0:19:29.679 of changing that and and UH and a Boston kit 0:19:29.800 --> 0:19:32.600 I might it's right, you've got another disclaimer. So we've 0:19:32.600 --> 0:19:36.760 got all kinds of disclaimers there. But it's it's always 0:19:36.760 --> 0:19:38.639 been an uphill battle in New York because the parties 0:19:38.680 --> 0:19:42.520 are strong, and UH, in general, neither the Democratic Party 0:19:42.600 --> 0:19:47.399 organizations nor the Republican Party organizations are eager to change 0:19:47.440 --> 0:19:50.240 the system because they have certain advantages that come with 0:19:50.359 --> 0:19:54.600 the status quo um. I actually worked on a uh 0:19:54.640 --> 0:19:57.240 an effort to change the system that Mayor Bloomberg had 0:19:58.359 --> 0:20:02.480 supported back in the early days of his administration, but 0:20:03.320 --> 0:20:05.840 for a variety of reasons it failed, including running in 0:20:05.560 --> 0:20:08.800 a in a low turnout there's a referendum in a 0:20:08.840 --> 0:20:13.720 low turnout primary campaign. But it's my hope that that 0:20:13.800 --> 0:20:15.919 voters will take a look at what's going on in 0:20:15.960 --> 0:20:17.959 New York and what's going on not just in Boston, 0:20:18.000 --> 0:20:22.520 but in places like Seattle, UH places like Atlanta, Cincinnati, Cleveland, 0:20:22.920 --> 0:20:26.200 other places that run their elections like Boston are also 0:20:26.280 --> 0:20:32.000 going to have very competitive elections in November, and places 0:20:32.040 --> 0:20:34.679 that run them like New York, which we're seeing in 0:20:35.080 --> 0:20:38.639 Pittsburgh and Buffalo, are having the opposite of that, having 0:20:38.680 --> 0:20:41.920 the same scenario where the winner of the primary election 0:20:42.119 --> 0:20:45.600 is basically your rubber stamp poinner for the general. That's 0:20:45.640 --> 0:20:49.320 Bloomberg opinion columnist Frank Berry coming up. We wrap up 0:20:49.359 --> 0:20:52.040 the week as we always do with Larry Summers of Harvard. 0:20:52.400 --> 0:21:02.159 That's next on Wall Street Week on Bloomberg. This is 0:21:02.200 --> 0:21:06.560 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:21:07.119 --> 0:21:09.439 We're return to Larry Summers of Harvard. Once again our 0:21:09.480 --> 0:21:12.040 special trailer on Wall Street Week to really take us 0:21:12.080 --> 0:21:14.560 through the week, Larry, First of all, let's start with inflation, 0:21:14.640 --> 0:21:17.080 something we've talked about, I think every single week, but 0:21:17.160 --> 0:21:19.800 we got really some news this week, in no small 0:21:19.840 --> 0:21:21.920 way because of what happened with the ten year yield 0:21:21.960 --> 0:21:24.320 and the treasury which really spiked up. It's still a 0:21:24.359 --> 0:21:27.040 modest number overall, but it climbed really quickly. And you 0:21:27.040 --> 0:21:28.760 and I have talked about the question, if we really 0:21:28.800 --> 0:21:31.359 have an inflation problem, why isn't the tenure yield going up? 0:21:32.000 --> 0:21:35.680 Look at maybe that this is a recognition of some 0:21:35.760 --> 0:21:38.000 combination of the fact that we're going to have more 0:21:38.040 --> 0:21:40.720 inflation and that the FED is going to do more 0:21:40.760 --> 0:21:43.400 than people thought it was gonna need to do in 0:21:43.520 --> 0:21:49.320 order to contain inflation. You know, once these things start, 0:21:49.400 --> 0:21:54.320 they sometimes have a tendency uh to trend. So I 0:21:54.480 --> 0:22:00.119 stand by my view that markets are substantially underestimate in 0:22:00.760 --> 0:22:04.560 what's likely to happen to interest rates before too long. 0:22:05.119 --> 0:22:07.560 You know, if you look at the so called tailor 0:22:07.640 --> 0:22:11.920 rules predictions of FED behavior, and you feed any kind 0:22:11.960 --> 0:22:17.119 of traditional tailor rule through with the way current economic 0:22:17.240 --> 0:22:20.880 data is running. It points you to a pretty substantial 0:22:20.960 --> 0:22:28.920 concern about inflation overheating. So I've got pretty real anxieties. 0:22:29.359 --> 0:22:33.719 I think what's happening with oil makes the kind of 0:22:33.760 --> 0:22:37.600