1 00:00:00,280 --> 00:00:02,599 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,680 --> 00:00:07,280 Speaker 2: The global push into infrastructure, breaking the IPO logjam in text. 3 00:00:07,160 --> 00:00:09,200 Speaker 3: The financial stories that shape. 4 00:00:08,880 --> 00:00:12,040 Speaker 2: Are were cutting inflation without losing jobs? Do we need 5 00:00:12,119 --> 00:00:14,520 Speaker 2: rate cuts? And if so? How many? Investing in a 6 00:00:14,560 --> 00:00:16,120 Speaker 2: time of geopolitical turmoil. 7 00:00:16,200 --> 00:00:18,560 Speaker 3: Through the eyes of the most influential voices. 8 00:00:18,720 --> 00:00:22,480 Speaker 2: Ten Roguoff economists at Harvard former FDIC had Shila Bert 9 00:00:22,640 --> 00:00:27,360 Speaker 2: ge CEO, Larry Kulp, San Francisco fed President Mary Daily Bloomberg. 10 00:00:26,840 --> 00:00:30,560 Speaker 3: Wall Street Week with David Weston from Bloomberg Radio. 11 00:00:30,320 --> 00:00:33,720 Speaker 2: To President's debate, the Yen struggles and voters head to 12 00:00:33,760 --> 00:00:36,680 Speaker 2: the polls in France. This is Bloomberg Wall Street Week. 13 00:00:36,840 --> 00:00:37,720 Speaker 2: I'm David Weston. 14 00:00:38,920 --> 00:00:39,320 Speaker 4: This week. 15 00:00:39,440 --> 00:00:40,360 Speaker 1: Roger Altman of. 16 00:00:40,320 --> 00:00:43,160 Speaker 2: Evercore on what's at stake in the US elections? 17 00:00:43,520 --> 00:00:47,240 Speaker 5: Did voters are queasy? Your sour about the economy? 18 00:00:47,560 --> 00:00:50,800 Speaker 2: Very lovely of the Peterson Institute on the Chinese economy 19 00:00:51,040 --> 00:00:52,080 Speaker 2: on the eve of the. 20 00:00:52,080 --> 00:00:54,880 Speaker 4: Third plumm He needs to find a way to restore 21 00:00:55,040 --> 00:00:57,520 Speaker 4: confidence while also helping to transition. 22 00:00:57,960 --> 00:01:00,400 Speaker 2: And Ray McGuire of Lozard on the wad wave of 23 00:01:00,440 --> 00:01:02,120 Speaker 2: investment needs coming our. 24 00:01:01,960 --> 00:01:05,560 Speaker 6: Way one would be generative AI in the drop down box. 25 00:01:05,600 --> 00:01:07,200 Speaker 6: There is a mount of capital that we're going to 26 00:01:07,240 --> 00:01:09,679 Speaker 6: need to ploy in order to support generative AI. 27 00:01:22,600 --> 00:01:24,399 Speaker 2: We begin with the markets, where the S and P 28 00:01:24,480 --> 00:01:27,080 Speaker 2: five hundred reach for yet another record high on Friday, 29 00:01:27,120 --> 00:01:30,319 Speaker 2: but fell down to give up eight tens percent for 30 00:01:30,360 --> 00:01:32,800 Speaker 2: the week. Overall still and end of the quarter at 31 00:01:32,840 --> 00:01:35,040 Speaker 2: fifty four to sixty, and that is just above the 32 00:01:35,040 --> 00:01:38,120 Speaker 2: Bloomberg L's year end media number of fifty four to fifty. 33 00:01:38,400 --> 00:01:41,240 Speaker 2: The NAAZAC was up point twenty four percent on the week, 34 00:01:41,480 --> 00:01:44,720 Speaker 2: while the yield and the tenure gained thirteen basis points, 35 00:01:44,720 --> 00:01:46,880 Speaker 2: almost all of it on Friday, to end the week 36 00:01:46,959 --> 00:01:49,640 Speaker 2: at four point three eight percent. For the perspective of 37 00:01:49,680 --> 00:01:52,200 Speaker 2: someone putting real money to work for almost twenty four 38 00:01:52,280 --> 00:01:55,520 Speaker 2: years as CIO of the California State Teacher's Retirement System, 39 00:01:55,720 --> 00:01:57,920 Speaker 2: welcome back now a longtime friend of Wall Street Week, 40 00:01:57,960 --> 00:01:59,920 Speaker 2: he is mister Chris Aylman. So, Chris, great to have 41 00:01:59,920 --> 00:02:01,640 Speaker 2: you back with us. Thank you for being with us. 42 00:02:01,680 --> 00:02:03,760 Speaker 2: So let's start with those elves, because you've been a 43 00:02:03,760 --> 00:02:05,800 Speaker 2: fan of the elves for a good long time. You 44 00:02:05,960 --> 00:02:08,520 Speaker 2: worked on getting us to reintroduce them. Here, figure out 45 00:02:08,520 --> 00:02:10,880 Speaker 2: how to do it right now? If you listen to 46 00:02:10,880 --> 00:02:13,040 Speaker 2: the Blueberg elves. They say basically, you can put your 47 00:02:13,080 --> 00:02:14,799 Speaker 2: pencil down and go home for the rest of the year. 48 00:02:14,840 --> 00:02:16,160 Speaker 2: We're just gonna be flat for the rest of the year. 49 00:02:16,160 --> 00:02:17,120 Speaker 2: Does that make sense, you. 50 00:02:17,080 --> 00:02:18,240 Speaker 7: Know, David, I think it does. 51 00:02:18,360 --> 00:02:21,520 Speaker 8: This is a good example of summer aduldrums. Sell them 52 00:02:21,560 --> 00:02:24,359 Speaker 8: may and go away. I really think people should pay 53 00:02:24,360 --> 00:02:26,720 Speaker 8: attention to these elves. I mean it is a bit 54 00:02:26,760 --> 00:02:29,919 Speaker 8: different than back with Lewis ru Kaiser, but they were 55 00:02:30,080 --> 00:02:33,120 Speaker 8: very predictive and powerful. And the fact that they're saying 56 00:02:33,639 --> 00:02:35,720 Speaker 8: that this is where the market may be at the 57 00:02:35,840 --> 00:02:36,480 Speaker 8: end of the year. 58 00:02:37,000 --> 00:02:38,160 Speaker 7: Look at the French election. 59 00:02:38,280 --> 00:02:41,200 Speaker 8: Look how non US and particularly Europe has sold off 60 00:02:41,240 --> 00:02:44,280 Speaker 8: in anticipation in that election. I think we're going to 61 00:02:44,320 --> 00:02:47,239 Speaker 8: see a lot of volatility in the fall and concern 62 00:02:47,880 --> 00:02:51,440 Speaker 8: about how this election goes. Last night was I had nightmares. 63 00:02:51,480 --> 00:02:54,520 Speaker 8: That was not a good feeling after that. So I 64 00:02:54,639 --> 00:02:57,440 Speaker 8: just think the market is really capped out in here 65 00:02:57,480 --> 00:03:01,160 Speaker 8: and probably it may hit another highway, but it's going 66 00:03:01,240 --> 00:03:03,519 Speaker 8: to be trading sideways for a while. 67 00:03:03,800 --> 00:03:04,760 Speaker 7: So go below the. 68 00:03:04,720 --> 00:03:07,000 Speaker 2: Top line number to what's going on below. Because it's 69 00:03:07,000 --> 00:03:09,880 Speaker 2: a pretty concentrated market. It's really just envidiing a couple 70 00:03:10,000 --> 00:03:12,320 Speaker 2: other related stocks driving it is that going to continue? 71 00:03:12,400 --> 00:03:14,200 Speaker 2: Is there going to be any broadening this market at all? 72 00:03:15,520 --> 00:03:17,880 Speaker 8: Everybody would like to see it, but the Russell two 73 00:03:17,880 --> 00:03:20,560 Speaker 8: thousand is not confirming, and I don't think you will. 74 00:03:20,639 --> 00:03:24,240 Speaker 8: It isn't It is an AI market that is the 75 00:03:24,240 --> 00:03:27,760 Speaker 8: whole focus, that is the growth potential, and at the 76 00:03:27,840 --> 00:03:30,080 Speaker 8: start we're just going to see, as we're already seeing 77 00:03:30,080 --> 00:03:33,240 Speaker 8: now with some of the early products, some value but 78 00:03:33,400 --> 00:03:35,920 Speaker 8: not a lot of revenue. And so I don't think 79 00:03:35,960 --> 00:03:39,040 Speaker 8: the rest of the market. The economy is okay despite 80 00:03:39,080 --> 00:03:42,720 Speaker 8: what you're last night. The economy is okay, but it's 81 00:03:42,720 --> 00:03:46,520 Speaker 8: not gangbusters. So I think that that the broad market 82 00:03:46,800 --> 00:03:50,200 Speaker 8: stocks are going to have decent returns, but the earnings 83 00:03:50,240 --> 00:03:52,560 Speaker 8: are not going to add a bunch of boosts in 84 00:03:52,680 --> 00:03:57,000 Speaker 8: the summertime, and we will probably as we keep waiting 85 00:03:57,040 --> 00:04:00,360 Speaker 8: for the FED to take action. The market is moving 86 00:04:00,440 --> 00:04:03,040 Speaker 8: okay with a FED at four and a half on 87 00:04:03,080 --> 00:04:05,680 Speaker 8: that thirty year bond, and obviously they only control the 88 00:04:05,720 --> 00:04:09,200 Speaker 8: short end at five. I look at a full fiscal year, 89 00:04:09,320 --> 00:04:12,360 Speaker 8: so June thirty today we close the books into my 90 00:04:12,440 --> 00:04:15,040 Speaker 8: career here and I have to tell you that the 91 00:04:15,120 --> 00:04:18,720 Speaker 8: market was up twenty five percent year over year at 92 00:04:18,800 --> 00:04:24,200 Speaker 8: June thirty, non US up over almost fifteen tremendous returns. 93 00:04:24,360 --> 00:04:26,560 Speaker 7: I just don't see the gas to take it farther. 94 00:04:27,120 --> 00:04:28,719 Speaker 2: Of course, at custors, you put a lot of money 95 00:04:28,800 --> 00:04:30,720 Speaker 2: to work for a long time. I mean, and you 96 00:04:30,800 --> 00:04:33,960 Speaker 2: got to have a long term time horizon given what 97 00:04:33,960 --> 00:04:36,799 Speaker 2: you're doing with pensions. There is the market indicating something 98 00:04:36,880 --> 00:04:39,479 Speaker 2: longer term about AI and what it could mean for 99 00:04:39,520 --> 00:04:40,520 Speaker 2: fundamental growth. 100 00:04:40,880 --> 00:04:41,040 Speaker 1: Yeah. 101 00:04:41,040 --> 00:04:43,839 Speaker 8: Absolutely, I mean you look at at Nvidia, that stock 102 00:04:43,880 --> 00:04:47,679 Speaker 8: alone is up two hundred percent one year return right now. 103 00:04:48,240 --> 00:04:54,240 Speaker 8: That expectation of opportunistic growth and the expectation of efficiency 104 00:04:54,279 --> 00:04:57,960 Speaker 8: in the markets and in the economy, Wall Street is 105 00:04:58,000 --> 00:05:01,880 Speaker 8: always overshooting and over stimistic. And you already saw some 106 00:05:02,600 --> 00:05:07,200 Speaker 8: sellback two weeks ago in Nvidia because almost every mutual 107 00:05:07,240 --> 00:05:10,400 Speaker 8: fund I look at even some of the value funds 108 00:05:10,760 --> 00:05:12,520 Speaker 8: hold in Vidia in their holdings. 109 00:05:12,600 --> 00:05:13,800 Speaker 7: You couldn't afford not to. 110 00:05:14,440 --> 00:05:17,120 Speaker 8: But that's going to run out of gas because it's 111 00:05:17,160 --> 00:05:19,920 Speaker 8: the old question of fear of missing out. I think 112 00:05:19,960 --> 00:05:23,080 Speaker 8: it's finally reaching the point. It's got tremendous grow threate 113 00:05:23,160 --> 00:05:27,000 Speaker 8: twenty five percent in sales, but the recognition is it 114 00:05:27,040 --> 00:05:28,280 Speaker 8: can't go to the moon. 115 00:05:28,240 --> 00:05:29,760 Speaker 7: And where are the other stocks? 116 00:05:29,800 --> 00:05:33,040 Speaker 8: So I think the market the narrow leadership is always 117 00:05:33,080 --> 00:05:35,520 Speaker 8: a concern, but we're not going to see that broad 118 00:05:35,600 --> 00:05:38,279 Speaker 8: build out for a while. I think June thirty is 119 00:05:38,320 --> 00:05:41,240 Speaker 8: a classic time for four h one k investors to 120 00:05:41,360 --> 00:05:45,080 Speaker 8: grab that statement and then diversify. They're going to find 121 00:05:45,120 --> 00:05:48,760 Speaker 8: their overweight stocks, and they're probably overweight tech stocks. This 122 00:05:48,960 --> 00:05:51,520 Speaker 8: is a good time to rebalance and to move some money, 123 00:05:51,600 --> 00:05:53,599 Speaker 8: a little bit into bonds and a little bit into 124 00:05:53,640 --> 00:05:55,039 Speaker 8: other types of mutual funds. 125 00:05:55,520 --> 00:05:57,760 Speaker 2: Chris, thanks so much for being with us today, for 126 00:05:57,880 --> 00:05:59,800 Speaker 2: all you've contributed to Wall Street Weeks through the years, 127 00:05:59,800 --> 00:06:01,880 Speaker 2: and for spending part of your very last day on 128 00:06:01,920 --> 00:06:04,040 Speaker 2: the job of Counselor's here with us. We look forward 129 00:06:04,040 --> 00:06:06,240 Speaker 2: to seeing Chris again in his new life. Longtime friend 130 00:06:06,240 --> 00:06:10,000 Speaker 2: of Wall Street Week, he is mister Chris Almen. This week, 131 00:06:10,080 --> 00:06:13,080 Speaker 2: Bloomberg Invests convened in Lower Manhattan to talk with some 132 00:06:13,120 --> 00:06:16,040 Speaker 2: of the leaders of Global Wall Street about what investors 133 00:06:16,080 --> 00:06:19,600 Speaker 2: should be thinking about. We talked with Ray maguire, president 134 00:06:19,600 --> 00:06:22,599 Speaker 2: of Lazard, and started with what he sees is driving 135 00:06:22,600 --> 00:06:25,440 Speaker 2: the need for investment over the next few years. 136 00:06:25,800 --> 00:06:30,719 Speaker 6: That goes to kind of a macro opportunities that we have, 137 00:06:30,800 --> 00:06:33,480 Speaker 6: and I would put him in five categories. One would 138 00:06:33,480 --> 00:06:36,440 Speaker 6: be generative AI in the drop down box there is 139 00:06:36,480 --> 00:06:38,520 Speaker 6: the amount of capital that we're going to need deploy 140 00:06:38,600 --> 00:06:42,200 Speaker 6: in order to support generative AI data centers as an example. 141 00:06:42,839 --> 00:06:47,400 Speaker 6: Renewable energy or energy transition would be another of a 142 00:06:47,440 --> 00:06:50,240 Speaker 6: macro trend and the drop down box and renewable energy 143 00:06:50,279 --> 00:06:53,600 Speaker 6: and energy transition is how do we invest in the 144 00:06:53,680 --> 00:06:57,080 Speaker 6: infrastructure that's going to allow us to remain competitive and 145 00:06:57,279 --> 00:07:00,440 Speaker 6: energy transition and also be effective in how we go 146 00:07:00,480 --> 00:07:05,040 Speaker 6: about energy transition. The other is this has taken on 147 00:07:05,080 --> 00:07:14,560 Speaker 6: a different nomenclature dependent upon who's communicating. It's either enshuring, fringesuring, deglobalization, 148 00:07:14,760 --> 00:07:18,960 Speaker 6: or what I would call reglobalization. And the reglobalization means 149 00:07:19,000 --> 00:07:23,560 Speaker 6: how do we invest in US manufacturing. Remember we peaked 150 00:07:23,960 --> 00:07:27,239 Speaker 6: in US manufacturing in June of nineteen seventy nine, where 151 00:07:27,280 --> 00:07:30,720 Speaker 6: one in five Americans worked in a factory in the 152 00:07:30,760 --> 00:07:34,560 Speaker 6: manufacturing bay said Ey, it's probably one in twenty. And 153 00:07:35,000 --> 00:07:38,080 Speaker 6: much of the dependence that we have in the manufacturing 154 00:07:38,080 --> 00:07:40,040 Speaker 6: world for all the things that we do or dependent 155 00:07:40,120 --> 00:07:43,440 Speaker 6: upon the supply chain, So reglobalization, it's going to be 156 00:07:43,440 --> 00:07:45,440 Speaker 6: another factor. The other factor that I would look to 157 00:07:45,600 --> 00:07:49,600 Speaker 6: is the largest growing population that exists in North America 158 00:07:49,720 --> 00:07:53,120 Speaker 6: is sixty five years and older, and so how we 159 00:07:53,440 --> 00:07:56,760 Speaker 6: drop down box, how do we engage in healthcare for 160 00:07:56,800 --> 00:08:01,200 Speaker 6: that demographic, How do we manage the trench of wealth 161 00:08:02,000 --> 00:08:08,480 Speaker 6: or not in the last of cybersecurity, macro themes, and 162 00:08:08,600 --> 00:08:10,560 Speaker 6: the investment that we will have to make from the 163 00:08:10,600 --> 00:08:14,800 Speaker 6: private sectors, investment that we also today see being led 164 00:08:14,840 --> 00:08:19,520 Speaker 6: by what's taking place in Washington, the IRA as an 165 00:08:19,520 --> 00:08:23,640 Speaker 6: example of the Chips Act. Fundamental to how we compete 166 00:08:23,680 --> 00:08:24,280 Speaker 6: going forward. 167 00:08:24,760 --> 00:08:26,320 Speaker 2: Just where I wanted to go, which is the role 168 00:08:26,360 --> 00:08:29,000 Speaker 2: of private versus public as we go forward. As you 169 00:08:29,040 --> 00:08:31,120 Speaker 2: look at from your point of view at LAZARD, what 170 00:08:31,240 --> 00:08:33,200 Speaker 2: it's the right role for the government, what's the right 171 00:08:33,240 --> 00:08:36,239 Speaker 2: role for the private sector in supplying the capital that's needed. 172 00:08:37,200 --> 00:08:39,480 Speaker 6: It's going to have to be a partnership, especially for 173 00:08:39,600 --> 00:08:44,199 Speaker 6: the elements of the macro transit order for us to compete, 174 00:08:44,800 --> 00:08:46,880 Speaker 6: it's going to have to be public private partnerships, which 175 00:08:46,880 --> 00:08:49,040 Speaker 6: we're seen in many ways. I think with the IRA 176 00:08:49,200 --> 00:08:52,080 Speaker 6: and with the Chips Act and look at a number 177 00:08:52,200 --> 00:08:56,200 Speaker 6: of private enterprises that are involved in that with the 178 00:08:56,240 --> 00:08:59,480 Speaker 6: support of the government. So there's those partnerships, and each 179 00:08:59,520 --> 00:09:02,000 Speaker 6: one of these macro themes is going to have to 180 00:09:02,040 --> 00:09:07,080 Speaker 6: be public private partnerships. As we reglobalize, how do we 181 00:09:07,160 --> 00:09:11,360 Speaker 6: invest in the elements of that reglobalization. The way that 182 00:09:11,400 --> 00:09:14,280 Speaker 6: we do that is through we need government policy that's 183 00:09:14,320 --> 00:09:17,040 Speaker 6: going to be supportive, and then we need private enterprise 184 00:09:17,120 --> 00:09:20,200 Speaker 6: to partner, and across the spectrum you're going to see 185 00:09:20,200 --> 00:09:24,280 Speaker 6: public private partnerships that lead our ability to remain competitive. 186 00:09:24,400 --> 00:09:25,680 Speaker 2: Let me pick up on one of the things you've mentioned 187 00:09:25,720 --> 00:09:29,560 Speaker 2: a couple times is workers, the number of workers, trained workers, 188 00:09:29,559 --> 00:09:33,200 Speaker 2: specificlarly trained works or to grow as an economy, you 189 00:09:33,320 --> 00:09:36,680 Speaker 2: need more laborers. In the recent past, it appears that 190 00:09:36,679 --> 00:09:40,199 Speaker 2: we've been sustained to some extent by legal immigration, actually 191 00:09:40,400 --> 00:09:43,120 Speaker 2: legal migrants being added as a workforce. What's the role 192 00:09:43,160 --> 00:09:46,240 Speaker 2: of immigration in terms of the growth of this economy. 193 00:09:46,400 --> 00:09:48,040 Speaker 2: So as you look at some of those huge projects 194 00:09:48,080 --> 00:09:50,640 Speaker 2: where you need the workers and also the trained workers. 195 00:09:51,160 --> 00:09:55,880 Speaker 6: Well, apart from the political implication that first of all, 196 00:09:55,920 --> 00:09:58,640 Speaker 6: we need to make certain that the workforce that we 197 00:09:58,720 --> 00:10:01,120 Speaker 6: currently have as a workforce that is trained to be 198 00:10:01,200 --> 00:10:06,320 Speaker 6: able to address the huge opportunities the demand for labor. 199 00:10:07,240 --> 00:10:10,400 Speaker 6: In my senses that as you think about the IRA 200 00:10:10,760 --> 00:10:13,679 Speaker 6: and you think about projects like Gateway, and you think 201 00:10:13,720 --> 00:10:19,400 Speaker 6: about the organizations today that train the labor, that there's 202 00:10:19,480 --> 00:10:22,319 Speaker 6: a tremendous opportunity for us to continue to invest in that. 203 00:10:23,000 --> 00:10:26,200 Speaker 6: Unions as an example, how do we invest in that 204 00:10:26,240 --> 00:10:27,599 Speaker 6: and how do we make sure that the unions is 205 00:10:27,600 --> 00:10:32,160 Speaker 6: supportive so they can go train the workforce, reducing the 206 00:10:32,240 --> 00:10:35,680 Speaker 6: requirements that you have a college degree in order to 207 00:10:35,760 --> 00:10:37,720 Speaker 6: do some of the work that's going to be necessary. 208 00:10:37,800 --> 00:10:42,480 Speaker 6: So workforce training is critical. By the same token, workforce 209 00:10:42,520 --> 00:10:45,520 Speaker 6: housing is going to be critical. So for seventy two 210 00:10:45,520 --> 00:10:49,080 Speaker 6: thousand people commuting into this geography, where do you house them? 211 00:10:49,440 --> 00:10:51,760 Speaker 6: That's going to be part of the overall thought process 212 00:10:51,800 --> 00:10:54,320 Speaker 6: and part of the overall architecture is we think about 213 00:10:54,640 --> 00:10:57,640 Speaker 6: projects like Gateway, and as I think about what gateways, 214 00:10:57,720 --> 00:11:03,840 Speaker 6: the implications of Gateway were found and exciting in a 215 00:11:03,880 --> 00:11:07,640 Speaker 6: reflection of what we can do when we decide to 216 00:11:08,880 --> 00:11:14,559 Speaker 6: invest in this country and invest in the most important 217 00:11:14,559 --> 00:11:16,680 Speaker 6: part of the country, which is the talent. 218 00:11:17,520 --> 00:11:19,880 Speaker 2: When we talk about things like generative AI as well 219 00:11:19,920 --> 00:11:23,240 Speaker 2: as energy transition. It's hard to have that discussion without 220 00:11:23,240 --> 00:11:26,320 Speaker 2: talking about China somehow, because China has really put a 221 00:11:26,320 --> 00:11:30,560 Speaker 2: lot of investment into those There's obviously national security issues 222 00:11:30,559 --> 00:11:32,960 Speaker 2: of the China at the same time, how can we 223 00:11:33,080 --> 00:11:34,520 Speaker 2: get along if I can put it that way with 224 00:11:34,679 --> 00:11:37,719 Speaker 2: China in terms of economies, so that we both get 225 00:11:37,720 --> 00:11:41,800 Speaker 2: the best of it without conceding or compromising our national security. 226 00:11:42,040 --> 00:11:43,920 Speaker 6: So I would say when it comes to generator of 227 00:11:44,000 --> 00:11:49,120 Speaker 6: AI that we are ahead in the actual general of AI, 228 00:11:49,880 --> 00:11:54,280 Speaker 6: the technology of generative AI, and if you look at 229 00:11:54,600 --> 00:11:57,520 Speaker 6: who are the architects of that, they reside in this country. 230 00:11:58,240 --> 00:12:00,640 Speaker 6: So I take confidence in that when it comes to 231 00:12:01,280 --> 00:12:05,960 Speaker 6: the energy sources that are necessary for energy transition. As 232 00:12:06,000 --> 00:12:09,840 Speaker 6: an example, seventy to ninety percent of the raw materials 233 00:12:09,920 --> 00:12:17,680 Speaker 6: necessary for renewable energy energy transition is refined by China, 234 00:12:18,760 --> 00:12:21,640 Speaker 6: and so as we think about that, we'll have to 235 00:12:21,679 --> 00:12:23,760 Speaker 6: reduce our exposure to the supply chain. 236 00:12:24,280 --> 00:12:28,880 Speaker 2: That was Ray McGuire of Lizard coming up. The Chinese 237 00:12:28,880 --> 00:12:32,319 Speaker 2: Communist Party begins its Third Party Plenum next month in Beijing. 238 00:12:32,720 --> 00:12:34,959 Speaker 2: We go over the state of the Chinese economy and 239 00:12:35,040 --> 00:12:38,120 Speaker 2: what will be on the agenda with Mary Lovely, senior 240 00:12:38,160 --> 00:12:40,080 Speaker 2: fellow of the Peterson Institute. 241 00:12:40,480 --> 00:12:45,040 Speaker 4: He has put his money down on innovation and so 242 00:12:45,200 --> 00:12:46,640 Speaker 4: called high quality development. 243 00:12:48,200 --> 00:12:50,439 Speaker 2: That's next on Wall Street Week on Bloomberg. 244 00:12:51,840 --> 00:12:56,080 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 245 00:12:56,200 --> 00:13:00,680 Speaker 3: Bloomberg Radio. 246 00:13:03,800 --> 00:13:06,360 Speaker 2: This is Wall Street Week. I'm David Weston. Next month, 247 00:13:06,480 --> 00:13:09,520 Speaker 2: the Chinese Communist Party will hold its delayed plan on 248 00:13:09,640 --> 00:13:12,600 Speaker 2: economic issues for a preview of what we should look for. 249 00:13:12,640 --> 00:13:16,240 Speaker 2: We welcome now very Lovely, Peterson Institute for International Economics, 250 00:13:16,400 --> 00:13:18,880 Speaker 2: Senior Fellow. So, Mary, welcome back. Great to have you 251 00:13:18,960 --> 00:13:21,440 Speaker 2: here now. As I understand, typically this Third Plan and 252 00:13:21,720 --> 00:13:24,079 Speaker 2: does focus on some ecademic issues. Going back in history, 253 00:13:24,160 --> 00:13:26,880 Speaker 2: there were some major announcements coming out. This one's been 254 00:13:26,880 --> 00:13:28,880 Speaker 2: delayed a year. Do we know why I was delayed? 255 00:13:29,720 --> 00:13:32,280 Speaker 4: Well, I think it was delayed because the president president, 256 00:13:32,360 --> 00:13:35,600 Speaker 4: she was focused on other events, and there may be 257 00:13:35,760 --> 00:13:37,960 Speaker 4: more in the background that we don't know. One of 258 00:13:37,960 --> 00:13:40,400 Speaker 4: the interesting things about the Third Planum is that it 259 00:13:40,440 --> 00:13:45,000 Speaker 4: allows for a bit of horse trading economic reforms, as 260 00:13:45,080 --> 00:13:48,600 Speaker 4: China needs to undertake create some winners and losers, and 261 00:13:48,679 --> 00:13:52,520 Speaker 4: so the planem allows a chance for multiple issues we 262 00:13:52,559 --> 00:13:54,560 Speaker 4: put on this table on the same time, so that 263 00:13:54,640 --> 00:13:56,880 Speaker 4: maybe I lose in some ways, I win in others. 264 00:13:57,120 --> 00:14:00,240 Speaker 4: So it allows some political bargaining to have and that 265 00:14:00,360 --> 00:14:03,000 Speaker 4: may allow us to see some real progress. 266 00:14:03,480 --> 00:14:05,719 Speaker 2: Mary, let me put you in President G's chair right 267 00:14:05,720 --> 00:14:07,920 Speaker 2: now as he looks at his economy. What do you 268 00:14:07,920 --> 00:14:10,400 Speaker 2: think his top priorities are. We have the property issues 269 00:14:10,400 --> 00:14:14,120 Speaker 2: you described, local government, You've got use unemployment, which is 270 00:14:14,120 --> 00:14:17,880 Speaker 2: an issue. You've got deflation in a lot of places. 271 00:14:18,040 --> 00:14:20,840 Speaker 2: But what do you think are the big priorities for him? 272 00:14:21,280 --> 00:14:24,280 Speaker 4: Well, we've written recently about what we think of as 273 00:14:24,360 --> 00:14:29,680 Speaker 4: China's stuck transition. So China is transitioning from its old 274 00:14:29,720 --> 00:14:32,120 Speaker 4: growth model to a new growth model, a new growth 275 00:14:32,160 --> 00:14:35,800 Speaker 4: model that really is just being born. And President she 276 00:14:35,960 --> 00:14:39,200 Speaker 4: himself has warned about breaking the old before building the new. 277 00:14:39,640 --> 00:14:42,640 Speaker 4: So I think that's really his problem right now. We 278 00:14:42,720 --> 00:14:48,120 Speaker 4: see weak domestic demand, low consumer sentiment, well business sentiment, 279 00:14:48,560 --> 00:14:51,120 Speaker 4: some signs of exit of foreign investors. 280 00:14:51,400 --> 00:14:53,280 Speaker 1: So we have some work to do on the short 281 00:14:53,360 --> 00:14:55,560 Speaker 1: run to revive the economy in the short run. 282 00:14:56,440 --> 00:14:59,720 Speaker 4: A little bit longer term, there's lots and lots of challenges. 283 00:15:00,280 --> 00:15:05,400 Speaker 4: He has put his money down on innovation and so 284 00:15:05,480 --> 00:15:10,680 Speaker 4: called high quality development. This encompasses reforms to very broad 285 00:15:10,680 --> 00:15:15,400 Speaker 4: sectors of the economy. But nevertheless, these things are things 286 00:15:15,400 --> 00:15:17,560 Speaker 4: that need to be done, and the changes need to 287 00:15:17,560 --> 00:15:20,360 Speaker 4: be made now. So he needs to find a way 288 00:15:20,400 --> 00:15:24,320 Speaker 4: to restore confidence while also helping to transition to an 289 00:15:24,360 --> 00:15:29,840 Speaker 4: economy that's really built on investment, greening the system, building 290 00:15:29,840 --> 00:15:32,680 Speaker 4: a more sustainable system, and building a more equal system. 291 00:15:33,400 --> 00:15:35,960 Speaker 2: Mary tell us about the relationship between the Chinese economy 292 00:15:36,000 --> 00:15:37,240 Speaker 2: and the economies of the rest of the world, and 293 00:15:37,280 --> 00:15:39,600 Speaker 2: particularly start with the United States in particular. So a 294 00:15:39,680 --> 00:15:42,080 Speaker 2: lot of talk about US so called Second China Shock, 295 00:15:42,400 --> 00:15:45,280 Speaker 2: a lot of concern about subsidies of businesses over there 296 00:15:45,360 --> 00:15:48,640 Speaker 2: with experts United States. I could start with evs, electric vehicles. 297 00:15:48,640 --> 00:15:50,560 Speaker 2: By the way, Europe's concerned about that as well. How 298 00:15:50,560 --> 00:15:52,000 Speaker 2: big an issue is that for China. 299 00:15:52,480 --> 00:15:55,120 Speaker 4: Over China, it's a very big issue, and we've seen 300 00:15:55,160 --> 00:15:59,200 Speaker 4: this in their diplomatic response to the US claims of 301 00:15:59,280 --> 00:16:03,200 Speaker 4: overcapacity city. They have consistently said that the world needs 302 00:16:03,240 --> 00:16:08,800 Speaker 4: their green energy products. They've doubled down on their strategy. 303 00:16:08,920 --> 00:16:12,400 Speaker 4: It's not unusual in China for there to be lots 304 00:16:12,400 --> 00:16:15,160 Speaker 4: of sort of ramp and growth, particularly because a lot 305 00:16:15,160 --> 00:16:17,840 Speaker 4: of industrial policy is uncoordinated. 306 00:16:17,880 --> 00:16:18,800 Speaker 1: It's done through the. 307 00:16:18,680 --> 00:16:22,040 Speaker 4: Provinces, and then there's a period of rationalization, and we're 308 00:16:22,080 --> 00:16:25,080 Speaker 4: seeing some of that right now, as some firms are 309 00:16:25,120 --> 00:16:28,920 Speaker 4: surely going to exit because of weak earnings or even 310 00:16:29,400 --> 00:16:33,280 Speaker 4: losses that overwhelmed their ability to stay in business. So 311 00:16:34,320 --> 00:16:38,280 Speaker 4: we're seeing China rationalize at the same time that we're 312 00:16:38,280 --> 00:16:41,760 Speaker 4: seeing the West say, hey, no way are we going 313 00:16:41,800 --> 00:16:44,080 Speaker 4: to experience what we experienced before. 314 00:16:44,200 --> 00:16:47,760 Speaker 1: We're going to take preventative steps. And we saw President Biden. 315 00:16:48,280 --> 00:16:52,760 Speaker 9: Just a few weeks ago levy tariffs on evs, solar, 316 00:16:53,560 --> 00:16:56,920 Speaker 9: medical equipment, and other products as a way to get 317 00:16:56,960 --> 00:17:00,880 Speaker 9: ahead of this so called new wave of Chinese exports. 318 00:17:01,160 --> 00:17:03,880 Speaker 2: Let's talk about those preventative measures, as you call them. 319 00:17:04,240 --> 00:17:06,359 Speaker 2: I wonder, as far as you can discern, what is 320 00:17:06,560 --> 00:17:10,120 Speaker 2: US policy economically, specifically with respect to China right now. 321 00:17:10,240 --> 00:17:12,000 Speaker 2: There was a time when we talked about decoupling. He 322 00:17:12,119 --> 00:17:14,400 Speaker 2: said decoupling was way too much because it's too large 323 00:17:14,400 --> 00:17:16,720 Speaker 2: an economy, that it was de risking. But it seems 324 00:17:16,760 --> 00:17:19,240 Speaker 2: like we're de risking an awful lot of what China's 325 00:17:19,280 --> 00:17:19,919 Speaker 2: trying to give us. 326 00:17:20,960 --> 00:17:21,240 Speaker 1: Yeah. 327 00:17:21,359 --> 00:17:24,080 Speaker 4: I mean every step we take seems to be more 328 00:17:24,119 --> 00:17:28,000 Speaker 4: toward decoupling really than de risking. And the reason I 329 00:17:28,040 --> 00:17:32,159 Speaker 4: say that is because de risking would have a specific targets. 330 00:17:33,600 --> 00:17:37,720 Speaker 4: You know, when President Biden puts tariffs on medical supplies 331 00:17:37,760 --> 00:17:39,880 Speaker 4: coming out of China, in some sense, that's a bit 332 00:17:39,960 --> 00:17:43,200 Speaker 4: de risking because we saw during the pandemic that we 333 00:17:43,200 --> 00:17:47,560 Speaker 4: were overrelianed on China for personal protective equipment and other 334 00:17:47,600 --> 00:17:48,679 Speaker 4: medical supplies. 335 00:17:49,240 --> 00:17:51,680 Speaker 1: So that would be a form de risking. But we 336 00:17:51,760 --> 00:17:52,520 Speaker 1: see so. 337 00:17:52,680 --> 00:17:58,040 Speaker 4: Many different approaches to moving away from China, Marriott. 338 00:17:58,080 --> 00:17:59,560 Speaker 2: We have an election going on here in the United 339 00:17:59,560 --> 00:18:02,800 Speaker 2: States coming up in November, and of course President Trump 340 00:18:02,800 --> 00:18:05,200 Speaker 2: when he was president, really took a very strong stance 341 00:18:05,240 --> 00:18:07,639 Speaker 2: on China. It's not at all clear that President Biden 342 00:18:07,680 --> 00:18:09,760 Speaker 2: backed off that for all the reasons you just described, 343 00:18:09,800 --> 00:18:12,040 Speaker 2: in some ways even went further with it. How much 344 00:18:12,080 --> 00:18:13,840 Speaker 2: of a difference do you think it makes in US 345 00:18:13,920 --> 00:18:16,919 Speaker 2: China relations which man is the next president United States? 346 00:18:17,359 --> 00:18:21,240 Speaker 4: I think it makes profound difference. President Biden has been 347 00:18:22,080 --> 00:18:25,439 Speaker 4: more effective, I think in terms of hitting China in 348 00:18:25,520 --> 00:18:29,400 Speaker 4: ways that matter for US security, in particular the export 349 00:18:29,440 --> 00:18:33,280 Speaker 4: controls and the key to the success of the export 350 00:18:33,320 --> 00:18:37,680 Speaker 4: controls has been coordination with other nations, in particular Japan 351 00:18:38,359 --> 00:18:40,600 Speaker 4: and Europe, who hold key. 352 00:18:40,440 --> 00:18:42,520 Speaker 1: Parts of the semiconductor supply chain. 353 00:18:43,080 --> 00:18:47,240 Speaker 4: Without that coordination, the export controls would not be effective. 354 00:18:48,520 --> 00:18:51,800 Speaker 4: President Trump is promising ten percent tacks across the board 355 00:18:51,880 --> 00:18:56,000 Speaker 4: on all nations, so called flat sixty on China. This 356 00:18:56,040 --> 00:18:58,119 Speaker 4: is a clear signal to the other nations that the 357 00:18:58,240 --> 00:19:02,639 Speaker 4: US is in it for itself, American first, and I 358 00:19:02,680 --> 00:19:05,720 Speaker 4: think it would really undermine a lot of the policies 359 00:19:05,720 --> 00:19:08,800 Speaker 4: that we're taking to push back on Chinese policies that 360 00:19:08,840 --> 00:19:12,960 Speaker 4: we think are unfair, but also to diversify the global economy. 361 00:19:13,400 --> 00:19:16,320 Speaker 4: So I think it is a vitally important election for 362 00:19:16,520 --> 00:19:17,639 Speaker 4: US Tina relations. 363 00:19:18,000 --> 00:19:19,640 Speaker 2: Mary, it's always such a treat to have you. Thank 364 00:19:19,640 --> 00:19:21,760 Speaker 2: you so much for your time. That is Mary Lovely 365 00:19:21,880 --> 00:19:26,040 Speaker 2: of the Peterson Institute. American voters will choose between two 366 00:19:26,359 --> 00:19:28,960 Speaker 2: very different approaches to business and the economy at the 367 00:19:29,000 --> 00:19:32,360 Speaker 2: polls this November. For his views on the possible consequences, 368 00:19:32,440 --> 00:19:35,399 Speaker 2: we welcome back now Roger Oltman. He's founder and senior 369 00:19:35,480 --> 00:19:38,159 Speaker 2: chairman of Evercore. So Roger, always great to have you 370 00:19:38,200 --> 00:19:40,600 Speaker 2: with us. We're looking forward to this election. In whichever 371 00:19:40,640 --> 00:19:43,280 Speaker 2: he is doing. At this point, we do increasingly hear 372 00:19:43,480 --> 00:19:47,159 Speaker 2: very different points of view between on the one hand, Bidenomics, 373 00:19:47,240 --> 00:19:49,600 Speaker 2: which I think did take a departure from some of 374 00:19:49,680 --> 00:19:53,080 Speaker 2: the neoliberalism sort of less regulation, less government of bolvement 375 00:19:53,480 --> 00:19:55,720 Speaker 2: on the one hand, and then President Trump now is 376 00:19:55,760 --> 00:19:57,960 Speaker 2: talking about things that sounds like merketfulism. He wants to 377 00:19:57,960 --> 00:20:00,399 Speaker 2: all to be tariffs. Give us your sense, somebody a 378 00:20:00,520 --> 00:20:03,560 Speaker 2: veteran of both Wall Street and Washington, what's at stake here? 379 00:20:03,960 --> 00:20:10,200 Speaker 5: Well, there are, as you say, two very different visions, and. 380 00:20:12,280 --> 00:20:13,960 Speaker 1: Voters will have the chance. 381 00:20:13,800 --> 00:20:20,960 Speaker 5: To render a verdict, so to speak, on President Biden's 382 00:20:21,040 --> 00:20:25,840 Speaker 5: record because it's right now, whereas President Trump's was a. 383 00:20:25,760 --> 00:20:26,800 Speaker 1: Few years ago. 384 00:20:27,160 --> 00:20:31,119 Speaker 5: There are two main takeaways from the question of Biden's record. 385 00:20:32,960 --> 00:20:36,199 Speaker 5: On the one hand, I think most presidents, including the 386 00:20:36,200 --> 00:20:38,960 Speaker 5: two I serve David would be very. 387 00:20:38,760 --> 00:20:43,360 Speaker 1: Proud to have the basics of his record. 388 00:20:44,119 --> 00:20:49,640 Speaker 5: Sixteen million new jobs created, an unemployment rate below four 389 00:20:49,680 --> 00:20:53,280 Speaker 5: percent for one of the longest stretches in American history, 390 00:20:55,680 --> 00:21:01,120 Speaker 5: huge increases in private investment and consisting growth. Even at 391 00:21:01,160 --> 00:21:05,640 Speaker 5: this very moment four years after this recovery, began, which 392 00:21:05,640 --> 00:21:08,320 Speaker 5: would have been in the second half of twenty twenty, 393 00:21:09,000 --> 00:21:14,359 Speaker 5: as COVID lessened it a bit. We're growing at about 394 00:21:14,359 --> 00:21:17,320 Speaker 5: two point seven two point seventy five percent right this minute, 395 00:21:18,040 --> 00:21:20,440 Speaker 5: and to be doing that this late in a recovery 396 00:21:21,160 --> 00:21:27,040 Speaker 5: is remarkable. On the other hand, we can see that 397 00:21:27,200 --> 00:21:32,000 Speaker 5: voters are queasy or sour about the economy and at 398 00:21:32,000 --> 00:21:36,040 Speaker 5: the moment rating Trump more highly than President Biden on 399 00:21:36,119 --> 00:21:37,680 Speaker 5: the economy. 400 00:21:37,760 --> 00:21:38,640 Speaker 1: And why is that? 401 00:21:39,000 --> 00:21:42,760 Speaker 5: And I think the answer is this much discussed topic 402 00:21:42,840 --> 00:21:49,119 Speaker 5: of affordability. It is true that grocery prices, gasoline prices, 403 00:21:49,720 --> 00:21:54,000 Speaker 5: shelter costs have all risen in the low twenty percent 404 00:21:54,160 --> 00:21:57,800 Speaker 5: range since President Biden took off us and I'm talking 405 00:21:57,800 --> 00:21:59,119 Speaker 5: about absolute. 406 00:21:58,760 --> 00:22:00,399 Speaker 1: Levels of increase. 407 00:22:00,440 --> 00:22:03,280 Speaker 5: In other words, grocery prices in generally are about twenty 408 00:22:03,320 --> 00:22:06,399 Speaker 5: one percent higher today than they were in President Biden 409 00:22:06,400 --> 00:22:09,160 Speaker 5: took office. 410 00:22:08,200 --> 00:22:09,800 Speaker 1: And voters are unhappy about that. 411 00:22:11,160 --> 00:22:15,280 Speaker 5: Fortunately for President Biden, we're seeing some better news on 412 00:22:15,320 --> 00:22:20,360 Speaker 5: that grocery prices actually fell last month. The inflation rate 413 00:22:20,480 --> 00:22:25,879 Speaker 5: is coming down handsomely or nicely. CORECEE, which is the 414 00:22:25,920 --> 00:22:30,520 Speaker 5: Fed's favorite measure, is already below two percent based on 415 00:22:30,560 --> 00:22:35,520 Speaker 5: the latest data. And the Biden team is working over 416 00:22:35,600 --> 00:22:37,640 Speaker 5: time on a. 417 00:22:37,680 --> 00:22:40,480 Speaker 1: Series of initiatives to do better. 418 00:22:41,640 --> 00:22:47,400 Speaker 5: Medicare, prescription drugs, insulin costs, junk fees, and a list 419 00:22:47,440 --> 00:22:51,919 Speaker 5: of things which they are working hard on to lower 420 00:22:51,960 --> 00:22:57,120 Speaker 5: costs for everyday Americans. And they fully admit that prices 421 00:22:57,240 --> 00:23:00,080 Speaker 5: are still too high for middle class families. 422 00:23:00,359 --> 00:23:02,439 Speaker 1: So it's a bit of a split screen question. 423 00:23:03,280 --> 00:23:05,600 Speaker 5: And we have four and a half months to go 424 00:23:05,680 --> 00:23:09,320 Speaker 5: roughly before election day, and that seems to me the 425 00:23:09,320 --> 00:23:12,520 Speaker 5: core question is by the time election day really comes, 426 00:23:13,359 --> 00:23:17,359 Speaker 5: will voters have a better view of the Biden economy 427 00:23:17,480 --> 00:23:21,320 Speaker 5: than they do right now? The very latest polls suggest 428 00:23:21,359 --> 00:23:24,639 Speaker 5: improvement in this one category, but still a ways to 429 00:23:24,680 --> 00:23:28,280 Speaker 5: go for President Biden on this question, And with voters 430 00:23:28,320 --> 00:23:31,160 Speaker 5: saying that the economy is their number one issue, it's 431 00:23:31,240 --> 00:23:34,159 Speaker 5: really important if he's going to get re elected, then 432 00:23:34,200 --> 00:23:35,359 Speaker 5: he closed the gap further. 433 00:23:36,080 --> 00:23:38,960 Speaker 2: You know, the people who run American business, how do 434 00:23:39,080 --> 00:23:40,720 Speaker 2: they feel about the Biden record? 435 00:23:40,760 --> 00:23:41,920 Speaker 1: Well, a few comments on that. 436 00:23:42,440 --> 00:23:46,080 Speaker 5: I serve twice in the Treasury at length, and part 437 00:23:46,080 --> 00:23:53,000 Speaker 5: of my responsibilities involved interacting a lot with business, and 438 00:23:53,040 --> 00:23:59,720 Speaker 5: the business community always wants certain change. That's the nature 439 00:23:59,720 --> 00:24:02,359 Speaker 5: of that interaction. I think you put your finger pretty 440 00:24:02,359 --> 00:24:06,120 Speaker 5: well on it. The macro from the business community's point 441 00:24:06,119 --> 00:24:09,000 Speaker 5: of view is very good. At this very moment. All 442 00:24:09,000 --> 00:24:13,040 Speaker 5: the major stock indencies are around all time highs. The 443 00:24:13,160 --> 00:24:15,199 Speaker 5: last few weeks have been a pretty major rally and 444 00:24:15,240 --> 00:24:18,280 Speaker 5: fixed into markets. The yield on the tenure treasury is 445 00:24:18,280 --> 00:24:21,119 Speaker 5: about forty basis points lower than it was three or 446 00:24:21,119 --> 00:24:25,920 Speaker 5: four weeks ago. That's pretty big change. 447 00:24:24,480 --> 00:24:26,920 Speaker 1: And we're still seeing consistent growth. As I mentioned. 448 00:24:27,600 --> 00:24:30,560 Speaker 5: So the macro from a business community's point of view 449 00:24:30,640 --> 00:24:33,520 Speaker 5: is good. Yes, there are a lot of people in 450 00:24:33,520 --> 00:24:38,160 Speaker 5: the business community that think the Biden administration is doing 451 00:24:38,200 --> 00:24:42,440 Speaker 5: too much from a regulation point of view. They don't 452 00:24:42,560 --> 00:24:45,480 Speaker 5: like the stance of the FTC and the Justice Department, 453 00:24:45,480 --> 00:24:49,480 Speaker 5: for example, on any trust and some of course in 454 00:24:49,520 --> 00:24:54,280 Speaker 5: the energy industries don't like some of the regulation that 455 00:24:54,359 --> 00:25:00,240 Speaker 5: the Biden administration has promulgated in that area. However, hitting 456 00:25:00,400 --> 00:25:04,840 Speaker 5: CEOs david of major companies do not as a rule 457 00:25:05,200 --> 00:25:09,520 Speaker 5: endorse presidential candidates. That's not new, and by the way, 458 00:25:09,560 --> 00:25:13,280 Speaker 5: today most boards of directors of major public companies wouldn't 459 00:25:13,280 --> 00:25:17,640 Speaker 5: permit their CEO to make an endorsement of a presidential candidate, 460 00:25:18,240 --> 00:25:20,920 Speaker 5: So they're not going to take a position publicly one 461 00:25:20,960 --> 00:25:25,080 Speaker 5: way or the other. But when they look at the 462 00:25:25,160 --> 00:25:29,520 Speaker 5: Trump agenda, I think a number of them don't like it. 463 00:25:30,040 --> 00:25:31,720 Speaker 2: Okay, I do like to say Roger Altman will be 464 00:25:31,760 --> 00:25:33,560 Speaker 2: staying with us as we focus in on where the 465 00:25:33,600 --> 00:25:37,080 Speaker 2: economy is today and particularly what is driving the markets. 466 00:25:37,480 --> 00:25:39,920 Speaker 2: That's coming up next on Wall Street Week on bloomberth. 467 00:25:44,160 --> 00:25:48,320 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 468 00:25:48,480 --> 00:25:49,439 Speaker 3: Bloomberg Radio. 469 00:25:56,200 --> 00:25:58,560 Speaker 2: This is Wall Street Week. I'm David Weston. Roger Altman 470 00:25:58,600 --> 00:26:01,159 Speaker 2: of Evercore has remained with us. Roger, thank you for 471 00:26:01,200 --> 00:26:03,040 Speaker 2: staying with this. I want to talk about the economy. 472 00:26:03,040 --> 00:26:06,160 Speaker 2: We talked about it earlier a bit, but specifically what's 473 00:26:06,200 --> 00:26:08,119 Speaker 2: the relationship with what the economy is doing right now 474 00:26:08,200 --> 00:26:10,040 Speaker 2: and the markets are doing, because, as you said, the 475 00:26:10,080 --> 00:26:12,760 Speaker 2: markets really are i'll use my expression shooting the lights 476 00:26:12,800 --> 00:26:13,560 Speaker 2: out right at the moment. 477 00:26:13,960 --> 00:26:15,960 Speaker 1: I think it's a pretty clear relationship. David. 478 00:26:16,359 --> 00:26:19,960 Speaker 5: We're in a Goldie Locks moment in terms of the economy, 479 00:26:20,600 --> 00:26:26,000 Speaker 5: and in particular we're seeing some modest slowing. Retail sales 480 00:26:26,040 --> 00:26:30,760 Speaker 5: were actually down last month. There's some modest loosening in 481 00:26:30,840 --> 00:26:34,080 Speaker 5: labor markets. Unemployment rate went up a touch, ratio of 482 00:26:34,400 --> 00:26:35,640 Speaker 5: job vacancies. 483 00:26:35,160 --> 00:26:37,439 Speaker 1: To unemployed workers went down a bit. 484 00:26:39,000 --> 00:26:44,600 Speaker 5: And that's slowing is enabling or facilitating a lower inflation rate. 485 00:26:45,320 --> 00:26:48,480 Speaker 5: As I mentioned earlier, Core PCE is already below two 486 00:26:48,480 --> 00:26:53,840 Speaker 5: percent CPI, Core CPI just above three, and inflation is 487 00:26:53,840 --> 00:26:57,480 Speaker 5: headed towards the Fed's long term two percent target, which 488 00:26:57,480 --> 00:27:01,320 Speaker 5: in turn will allow the FED to cut. At the moment, 489 00:27:01,320 --> 00:27:05,440 Speaker 5: it looks like once or twice during the remainder of 490 00:27:05,480 --> 00:27:09,840 Speaker 5: twenty twenty four, with the final amount of cuts depending 491 00:27:09,840 --> 00:27:14,120 Speaker 5: on the interim inflation data. And at the same time, 492 00:27:14,560 --> 00:27:19,120 Speaker 5: we're continuing, and I think it's remarkable to show steady 493 00:27:19,480 --> 00:27:21,719 Speaker 5: economic growth at this moment. 494 00:27:22,240 --> 00:27:23,680 Speaker 1: It looks to us at. 495 00:27:23,600 --> 00:27:26,680 Speaker 5: Evercore, as though the US economy is growing about two 496 00:27:26,680 --> 00:27:31,560 Speaker 5: point seven percent, I don't see any sharp slowing of that. 497 00:27:32,080 --> 00:27:36,719 Speaker 5: Emphasize sharp in the office, and parenthetically, corporate profits are 498 00:27:36,720 --> 00:27:39,679 Speaker 5: doing well. The markets look at that and say, this 499 00:27:39,800 --> 00:27:43,320 Speaker 5: is exactly what we wanted. We wanted inflation to come down, 500 00:27:43,920 --> 00:27:48,440 Speaker 5: which allows the FED to cut the Federal Fund's rate 501 00:27:48,480 --> 00:27:52,359 Speaker 5: and turn toward monetary ease. That's now happening looks like 502 00:27:52,400 --> 00:27:55,119 Speaker 5: a soft landing. Which is so much desired and so 503 00:27:55,240 --> 00:27:57,720 Speaker 5: much discussed, looks like it's playing out right in front 504 00:27:57,720 --> 00:27:58,000 Speaker 5: of us. 505 00:27:58,560 --> 00:27:59,720 Speaker 1: So it couldn't be better. 506 00:28:00,400 --> 00:28:03,520 Speaker 5: From a financial market point of view and open market 507 00:28:03,560 --> 00:28:06,520 Speaker 5: indust rate, it's apart from what the FED controls have 508 00:28:07,920 --> 00:28:09,200 Speaker 5: fallen quite a bit. 509 00:28:09,280 --> 00:28:10,359 Speaker 1: The yield on the ten year. 510 00:28:10,359 --> 00:28:13,200 Speaker 5: Terasury I mentioned in the earlier segment is at about 511 00:28:13,200 --> 00:28:15,480 Speaker 5: forty basis points in the last two weeks, and that's 512 00:28:15,480 --> 00:28:19,080 Speaker 5: a big move. So from a market point of view, 513 00:28:19,240 --> 00:28:23,120 Speaker 5: it could be better. From in terms of macroeconomics, which 514 00:28:23,160 --> 00:28:26,400 Speaker 5: I think is why all the major indocies are right 515 00:28:26,440 --> 00:28:31,440 Speaker 5: around records, there's a whole separate question within the market. 516 00:28:31,600 --> 00:28:34,240 Speaker 5: I mean, in terms of a sub segment of the 517 00:28:34,240 --> 00:28:39,800 Speaker 5: market about the belief that artificial intelligence may be the third, 518 00:28:40,280 --> 00:28:46,440 Speaker 5: in a certain sense, the third economic revolution, and that 519 00:28:46,520 --> 00:28:49,600 Speaker 5: it's going to be completely transformative. 520 00:28:49,800 --> 00:28:52,040 Speaker 1: But that's not driving all stocks. That's just driving a 521 00:28:52,080 --> 00:28:52,880 Speaker 1: component of them. 522 00:28:53,360 --> 00:28:55,320 Speaker 2: I want to talk about AI, but before we do that, 523 00:28:55,400 --> 00:28:57,960 Speaker 2: let me ask you about that growth rate, which is 524 00:28:58,000 --> 00:29:01,280 Speaker 2: above historical trend lines. It's above what economists tell us 525 00:29:01,480 --> 00:29:03,880 Speaker 2: is the potential of the economy. So ironically, the economy 526 00:29:03,920 --> 00:29:06,680 Speaker 2: is generating more than what economists say, is the potential 527 00:29:06,880 --> 00:29:10,080 Speaker 2: Can you have Heaven forbid too much of a good thing? 528 00:29:10,280 --> 00:29:12,120 Speaker 2: I mean, sooner or later that has to come in line? 529 00:29:12,160 --> 00:29:14,320 Speaker 1: Does it not a medium and longer term? 530 00:29:14,400 --> 00:29:14,640 Speaker 4: Yes? 531 00:29:15,560 --> 00:29:18,480 Speaker 5: But I think there are two factors that explain why 532 00:29:18,520 --> 00:29:21,920 Speaker 5: the economy, or at least above other factors, is suing 533 00:29:22,000 --> 00:29:22,480 Speaker 5: so well. 534 00:29:23,960 --> 00:29:27,120 Speaker 1: One is there's been a. 535 00:29:27,280 --> 00:29:34,920 Speaker 5: Surge, remarkable surge in private fixed investment during the Biden presidency, 536 00:29:35,000 --> 00:29:36,640 Speaker 5: especially the last year year and a half. 537 00:29:37,560 --> 00:29:41,120 Speaker 1: It's way and I think from memory, and. 538 00:29:41,080 --> 00:29:44,000 Speaker 5: This number might be wrong, but I think it's I 539 00:29:44,000 --> 00:29:48,760 Speaker 5: think it's eight hundred billion above the trend. That would 540 00:29:48,760 --> 00:29:52,120 Speaker 5: have been a step would have been normal prior to 541 00:29:53,680 --> 00:29:57,680 Speaker 5: the last two years, in other words, what the trend 542 00:29:57,680 --> 00:29:59,840 Speaker 5: would have been as compared to what it actually is today. 543 00:30:00,400 --> 00:30:02,120 Speaker 5: A lot of that, By the way, it's far an investment, 544 00:30:02,160 --> 00:30:06,120 Speaker 5: not just domestic but coming into this country. And some 545 00:30:06,200 --> 00:30:09,480 Speaker 5: of that's been triggered by the very major legislation that 546 00:30:09,520 --> 00:30:12,560 Speaker 5: the Biden administration got passed, especially the Chips and Science 547 00:30:12,600 --> 00:30:17,320 Speaker 5: Act and the Inflacial Reduction Act, and the especially the 548 00:30:17,360 --> 00:30:20,920 Speaker 5: green energy portions of the Inflacier Reduction Act. But anyway, 549 00:30:20,960 --> 00:30:24,200 Speaker 5: big surgeon, the private fixed investment, which of course gives 550 00:30:24,280 --> 00:30:26,440 Speaker 5: rise to a lot of jobs and growth. 551 00:30:27,000 --> 00:30:28,720 Speaker 1: The second factor is immigration. 552 00:30:30,280 --> 00:30:33,200 Speaker 5: Most of the rest of the world doesn't have much immigration, 553 00:30:34,600 --> 00:30:37,880 Speaker 5: but the United States, and people of course are very 554 00:30:38,840 --> 00:30:41,920 Speaker 5: hotly debate whether they like the way it's playing out. 555 00:30:42,280 --> 00:30:46,720 Speaker 5: But the United States, historically and continuing right through this moment, 556 00:30:47,200 --> 00:30:53,640 Speaker 5: is benefiting from consistent levels of immigration, which means that 557 00:30:53,720 --> 00:30:57,960 Speaker 5: our labor force continues to grow, unlike, for example, Western Europe, 558 00:30:58,040 --> 00:31:03,400 Speaker 5: unlike Japan, and before very long unlike China. And it's 559 00:31:03,480 --> 00:31:06,640 Speaker 5: very hard to grow your overall economy if your labor 560 00:31:06,640 --> 00:31:09,520 Speaker 5: for US is falling. So the United States has an 561 00:31:09,560 --> 00:31:13,680 Speaker 5: extra advantage there, partly because our population is a bit 562 00:31:13,760 --> 00:31:17,240 Speaker 5: younger than those other regions, but also because we have 563 00:31:17,360 --> 00:31:21,240 Speaker 5: consistent immigration above levels that other countries have. And I 564 00:31:21,280 --> 00:31:25,360 Speaker 5: think those two factors explain why we continue to grow 565 00:31:25,400 --> 00:31:25,920 Speaker 5: for the moment. 566 00:31:26,080 --> 00:31:29,960 Speaker 2: Above trend Roger will come back to artificial intelligence generative 567 00:31:30,000 --> 00:31:31,160 Speaker 2: AI as we call it. 568 00:31:31,200 --> 00:31:31,480 Speaker 1: Here. 569 00:31:31,840 --> 00:31:35,080 Speaker 2: You actually are working with corporations. You're seeing what's going 570 00:31:35,080 --> 00:31:37,640 Speaker 2: on right now. It seems like every CEO has to 571 00:31:37,640 --> 00:31:40,400 Speaker 2: invoke AI in their earnings called no matter what, and 572 00:31:40,440 --> 00:31:42,080 Speaker 2: as soon as they do, their price goes up with 573 00:31:42,120 --> 00:31:45,600 Speaker 2: their stock. How much of this is a proper reaction 574 00:31:45,680 --> 00:31:48,200 Speaker 2: to the markets, and how much could be an overreaction 575 00:31:48,240 --> 00:31:51,280 Speaker 2: to markets? I mean, how real is this in your assessment? 576 00:31:51,920 --> 00:31:55,800 Speaker 5: Well, two part answer, I'm not smart enough to know 577 00:31:56,680 --> 00:32:00,760 Speaker 5: whether valuing Nvidia at three point four trail, which is 578 00:32:00,760 --> 00:32:06,240 Speaker 5: the current value, is sensible or it isn't I've done 579 00:32:06,280 --> 00:32:08,440 Speaker 5: this or I've worked around finance. 580 00:32:08,640 --> 00:32:10,960 Speaker 1: In finance for a long time and. 581 00:32:13,120 --> 00:32:17,480 Speaker 5: Valuations constantly change, and I've learned essentially that there's no 582 00:32:17,640 --> 00:32:21,560 Speaker 5: such things as the correct valuation because someone there's so 583 00:32:21,600 --> 00:32:27,760 Speaker 5: much psychology that is involved in valuations. So I don't 584 00:32:27,760 --> 00:32:30,520 Speaker 5: know whether the market is overreacting to this or not. 585 00:32:30,800 --> 00:32:34,080 Speaker 5: But as to whether from an industrial point of view, 586 00:32:34,880 --> 00:32:39,880 Speaker 5: AI and generative generative AI is profound or not, the 587 00:32:39,920 --> 00:32:43,640 Speaker 5: answer I think clearly is yes, it is profound. Yes 588 00:32:43,880 --> 00:32:48,440 Speaker 5: it is transformative. And some of the presentations I've listened 589 00:32:48,440 --> 00:32:53,360 Speaker 5: to recently, both from companies and more generally at conferences 590 00:32:53,360 --> 00:33:01,040 Speaker 5: and the like, are stunning in terms of the anticipated 591 00:33:01,080 --> 00:33:04,480 Speaker 5: transformative effect of this. 592 00:33:04,560 --> 00:33:06,320 Speaker 1: Including in the next few years. 593 00:33:06,320 --> 00:33:09,400 Speaker 5: I think what a lot of people may not have 594 00:33:09,480 --> 00:33:12,040 Speaker 5: internalized yet is how fast it's happening. 595 00:33:13,040 --> 00:33:16,200 Speaker 1: So valuations it beats me. 596 00:33:16,920 --> 00:33:20,600 Speaker 5: But in terms of the real economy and growth and 597 00:33:20,680 --> 00:33:23,360 Speaker 5: industrial transformation, yes it's real. 598 00:33:23,720 --> 00:33:25,480 Speaker 2: Roger. It's always so helpful to talk to you. Thank 599 00:33:25,520 --> 00:33:28,520 Speaker 2: you so much for your time. That's Roger Altman of Evercore. 600 00:33:29,760 --> 00:33:33,360 Speaker 2: All things come to those who wait. You may remember 601 00:33:33,400 --> 00:33:37,360 Speaker 2: the slogan from Heinz Ketchup commercials or a Guinness Stout campaign, 602 00:33:37,800 --> 00:33:39,840 Speaker 2: but it goes back at least as far as the 603 00:33:39,960 --> 00:33:44,760 Speaker 2: nineteenth century and an English poem by Lady Mary Montgomery Curry. 604 00:33:45,360 --> 00:33:47,760 Speaker 2: This week it proved to still be true, as some 605 00:33:47,840 --> 00:33:50,280 Speaker 2: good things came to some people who've been waiting for 606 00:33:50,320 --> 00:33:53,640 Speaker 2: a long time, like the Florida Panthers, who won their 607 00:33:53,680 --> 00:33:57,040 Speaker 2: first Stanley Cup since joining the NHL thirty years ago, 608 00:33:58,280 --> 00:34:01,280 Speaker 2: and to Julian Assange, who spent over five years in 609 00:34:01,320 --> 00:34:04,240 Speaker 2: a British prison after being holed up in the Ecuadorian 610 00:34:04,320 --> 00:34:07,880 Speaker 2: embassy in London for seven years, all to avoid US 611 00:34:07,880 --> 00:34:11,080 Speaker 2: prosecution for his role in publishing some seven hundred and 612 00:34:11,120 --> 00:34:15,400 Speaker 2: fifty thousand classified documents. This week, mister Assange pled guilty 613 00:34:15,440 --> 00:34:19,000 Speaker 2: to a single count of conspiracy, was sentenced to time served, 614 00:34:19,239 --> 00:34:21,839 Speaker 2: and finally returned to his native Australia. 615 00:34:22,360 --> 00:34:25,120 Speaker 10: Julian should never have spent a single day in prison. 616 00:34:25,719 --> 00:34:29,360 Speaker 1: But today we celebrate because today Julian is free. 617 00:34:29,640 --> 00:34:34,440 Speaker 4: This is a huge win for Australia and for Australian democracy. 618 00:34:34,840 --> 00:34:36,800 Speaker 1: This is a huge win for free speech. 619 00:34:37,560 --> 00:34:40,040 Speaker 2: To be sure, there are some who continue to wait 620 00:34:40,080 --> 00:34:42,800 Speaker 2: for things to come their way, like the crypto community 621 00:34:42,840 --> 00:34:46,239 Speaker 2: waiting for SEC approval of a second spot etf this 622 00:34:46,280 --> 00:34:49,640 Speaker 2: one for Ether, though SEC chaired Gensler says they have 623 00:34:49,719 --> 00:34:51,600 Speaker 2: the key to their own jail and can end it 624 00:34:51,640 --> 00:34:52,520 Speaker 2: whenever they want. 625 00:34:52,960 --> 00:34:58,399 Speaker 11: It's really about the asset managers making the full disclosure 626 00:34:58,560 --> 00:35:01,480 Speaker 11: so that those registrations statements can go effective. 627 00:35:01,520 --> 00:35:04,480 Speaker 7: And those lawyers know what that is. It's smoothly functioning. 628 00:35:04,680 --> 00:35:06,880 Speaker 11: It's really up to the asset managers to make the 629 00:35:07,280 --> 00:35:08,440 Speaker 11: proper disclosures. 630 00:35:09,320 --> 00:35:12,360 Speaker 2: Currency traders keep waiting for Japan to raise its interest 631 00:35:12,440 --> 00:35:14,800 Speaker 2: rates and give some life to the end after twenty 632 00:35:14,840 --> 00:35:18,200 Speaker 2: five years of zero or negative interest rates, but in 633 00:35:18,200 --> 00:35:21,120 Speaker 2: the meantime saw the END fall to its lowest level 634 00:35:21,120 --> 00:35:23,440 Speaker 2: against the dollar in nearly forty years. 635 00:35:23,920 --> 00:35:27,440 Speaker 12: It's now just question of managing the downward descent of 636 00:35:27,520 --> 00:35:32,200 Speaker 12: the END rather than changing policy. They're not going to 637 00:35:32,239 --> 00:35:34,520 Speaker 12: be able with intervention alone to stem this. 638 00:35:35,120 --> 00:35:37,360 Speaker 2: For the big US banks, it looks right now like 639 00:35:37,440 --> 00:35:39,680 Speaker 2: waiting is the best way for things to come their way, 640 00:35:40,000 --> 00:35:43,319 Speaker 2: as Federal bank regulars got so much criticism of their 641 00:35:43,320 --> 00:35:46,400 Speaker 2: proposal to increase reserve requirements that they've gone back to 642 00:35:46,400 --> 00:35:48,080 Speaker 2: the drawing board to start from scratch. 643 00:35:48,600 --> 00:35:52,080 Speaker 10: If I were a betting person, I'd take the ladder 644 00:35:52,160 --> 00:35:55,080 Speaker 10: or a reproposal, because I think the changes will be 645 00:35:55,160 --> 00:35:58,600 Speaker 10: so significant, But it's probably not much more than a 646 00:35:58,640 --> 00:35:59,280 Speaker 10: coin flip. 647 00:36:00,239 --> 00:36:02,399 Speaker 2: Banks and all the rest of us continue to wait 648 00:36:02,440 --> 00:36:04,840 Speaker 2: for the Federal Reserve to back off those high rates 649 00:36:04,840 --> 00:36:07,640 Speaker 2: it took up by five hundred basis points in record time. 650 00:36:07,960 --> 00:36:11,000 Speaker 13: What matters is that first rate cut is indeed a 651 00:36:11,080 --> 00:36:14,280 Speaker 13: light switch, because what that signals is the FED believes 652 00:36:14,320 --> 00:36:17,120 Speaker 13: that it has won the war on inflation, and so 653 00:36:17,239 --> 00:36:19,440 Speaker 13: it's all downhill from there in terms of rates. 654 00:36:19,880 --> 00:36:22,479 Speaker 2: But this week we were told once again that we'd 655 00:36:22,480 --> 00:36:23,240 Speaker 2: have to be patient. 656 00:36:23,760 --> 00:36:27,560 Speaker 14: With significant progress on inflation and the labor market cooling gradually, 657 00:36:28,000 --> 00:36:31,360 Speaker 14: at some point it will be appropriate to reduce the 658 00:36:31,480 --> 00:36:34,759 Speaker 14: level of policy restriction to maintain a healthy balance in 659 00:36:34,800 --> 00:36:39,440 Speaker 14: the economy. The timing of any such adjustment will depend 660 00:36:39,480 --> 00:36:43,160 Speaker 14: on how economic data evolve and what they imply for 661 00:36:43,239 --> 00:36:45,480 Speaker 14: the economic outlook and balance of risks. 662 00:36:45,880 --> 00:36:48,440 Speaker 2: Then there's what may be the biggest weight of them all, 663 00:36:48,600 --> 00:36:51,000 Speaker 2: at least for New York City, where we've been waiting 664 00:36:51,040 --> 00:36:54,160 Speaker 2: for over one hundred years for the promised extension of 665 00:36:54,160 --> 00:36:58,000 Speaker 2: the Second Avenue subway line. After tearing down the elevated 666 00:36:58,080 --> 00:37:00,840 Speaker 2: rail lines in the forties and fifties and anticipation of 667 00:37:00,920 --> 00:37:05,080 Speaker 2: imminent subway service, construction finally got underway in nineteen seventy 668 00:37:05,120 --> 00:37:09,040 Speaker 2: two and then was suspended for over thirty years for 669 00:37:09,120 --> 00:37:12,880 Speaker 2: lack of money. In twenty seventeen, phase one of the 670 00:37:12,920 --> 00:37:15,400 Speaker 2: Second Avenue Subway finally opened. 671 00:37:15,280 --> 00:37:16,720 Speaker 12: First conceived of in the twenties. 672 00:37:17,040 --> 00:37:22,160 Speaker 15: Now eighty five years later, construction is blasting forward. So far, 673 00:37:22,239 --> 00:37:24,720 Speaker 15: officials have yet to raise the money or even budget 674 00:37:24,760 --> 00:37:28,200 Speaker 15: the remaining phases that will extend and complete the line. 675 00:37:28,560 --> 00:37:31,200 Speaker 2: Over a century of waiting was supposed to be drawing 676 00:37:31,200 --> 00:37:34,160 Speaker 2: to a close this year, as revenues from congestion pricing 677 00:37:34,360 --> 00:37:37,880 Speaker 2: were going to fund finally finishing the Second Avenue Subway. 678 00:37:38,120 --> 00:37:41,319 Speaker 2: But then, as it had so many times before, the 679 00:37:41,360 --> 00:37:44,080 Speaker 2: funding disappeared, at least for now. 680 00:37:44,360 --> 00:37:48,359 Speaker 16: It's fifteen billion dollars directly to the MTA, and that 681 00:37:48,440 --> 00:37:51,360 Speaker 16: will spar at least another five billion in terms of 682 00:37:51,400 --> 00:37:55,279 Speaker 16: federal funds. That's a twenty billion dollar infusion to the 683 00:37:55,400 --> 00:37:59,279 Speaker 16: transit system. It also would have resulted in more than 684 00:37:59,320 --> 00:38:02,920 Speaker 16: fifteen billion dollars in bonds that were going to be issued, 685 00:38:03,320 --> 00:38:05,840 Speaker 16: So it's a real blow financially to the region. 686 00:38:06,600 --> 00:38:09,560 Speaker 2: We can only hope that Lady Curry was right, that 687 00:38:09,719 --> 00:38:13,640 Speaker 2: it will come if we wait long enough. That does it. 688 00:38:13,680 --> 00:38:16,040 Speaker 2: For this episode of Wall Street Week, I'm David Weston. 689 00:38:16,160 --> 00:38:18,160 Speaker 2: This is Bloomberg. See you next week.