Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: The global push into infrastructure, breaking the IPO logjam in text.
Speaker 3: The financial stories that shape.
Speaker 2: Are were cutting inflation without losing jobs? Do we need
Speaker 2: rate cuts? And if so? How many? Investing in a
Speaker 2: time of geopolitical turmoil.
Speaker 3: Through the eyes of the most influential voices.
Speaker 2: Ten Roguoff economists at Harvard former FDIC had Shila Bert
Speaker 2: ge CEO, Larry Kulp, San Francisco fed President Mary Daily Bloomberg.
Speaker 3: Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: To President's debate, the Yen struggles and voters head to
Speaker 2: the polls in France. This is Bloomberg Wall Street Week.
Speaker 2: I'm David Weston.
Speaker 4: This week.
Speaker 1: Roger Altman of.
Speaker 2: Evercore on what's at stake in the US elections?
Speaker 5: Did voters are queasy? Your sour about the economy?
Speaker 2: Very lovely of the Peterson Institute on the Chinese economy
Speaker 2: on the eve of the.
Speaker 4: Third plumm He needs to find a way to restore
Speaker 4: confidence while also helping to transition.
Speaker 2: And Ray McGuire of Lozard on the wad wave of
Speaker 2: investment needs coming our.
Speaker 6: Way one would be generative AI in the drop down box.
Speaker 6: There is a mount of capital that we're going to
Speaker 6: need to ploy in order to support generative AI.
Speaker 2: We begin with the markets, where the S and P
Speaker 2: five hundred reach for yet another record high on Friday,
Speaker 2: but fell down to give up eight tens percent for
Speaker 2: the week. Overall still and end of the quarter at
Speaker 2: fifty four to sixty, and that is just above the
Speaker 2: Bloomberg L's year end media number of fifty four to fifty.
Speaker 2: The NAAZAC was up point twenty four percent on the week,
Speaker 2: while the yield and the tenure gained thirteen basis points,
Speaker 2: almost all of it on Friday, to end the week
Speaker 2: at four point three eight percent. For the perspective of
Speaker 2: someone putting real money to work for almost twenty four
Speaker 2: years as CIO of the California State Teacher's Retirement System,
Speaker 2: welcome back now a longtime friend of Wall Street Week,
Speaker 2: he is mister Chris Aylman. So, Chris, great to have
Speaker 2: you back with us. Thank you for being with us.
Speaker 2: So let's start with those elves, because you've been a
Speaker 2: fan of the elves for a good long time. You
Speaker 2: worked on getting us to reintroduce them. Here, figure out
Speaker 2: how to do it right now? If you listen to
Speaker 2: the Blueberg elves. They say basically, you can put your
Speaker 2: pencil down and go home for the rest of the year.
Speaker 2: We're just gonna be flat for the rest of the year.
Speaker 2: Does that make sense, you.
Speaker 7: Know, David, I think it does.
Speaker 8: This is a good example of summer aduldrums. Sell them
Speaker 8: may and go away. I really think people should pay
Speaker 8: attention to these elves. I mean it is a bit
Speaker 8: different than back with Lewis ru Kaiser, but they were
Speaker 8: very predictive and powerful. And the fact that they're saying
Speaker 8: that this is where the market may be at the
Speaker 8: end of the year.
Speaker 7: Look at the French election.
Speaker 8: Look how non US and particularly Europe has sold off
Speaker 8: in anticipation in that election. I think we're going to
Speaker 8: see a lot of volatility in the fall and concern
Speaker 8: about how this election goes. Last night was I had nightmares.
Speaker 8: That was not a good feeling after that. So I
Speaker 8: just think the market is really capped out in here
Speaker 8: and probably it may hit another highway, but it's going
Speaker 8: to be trading sideways for a while.
Speaker 7: So go below the.
Speaker 2: Top line number to what's going on below. Because it's
Speaker 2: a pretty concentrated market. It's really just envidiing a couple
Speaker 2: other related stocks driving it is that going to continue?
Speaker 2: Is there going to be any broadening this market at all?
Speaker 8: Everybody would like to see it, but the Russell two
Speaker 8: thousand is not confirming, and I don't think you will.
Speaker 8: It isn't It is an AI market that is the
Speaker 8: whole focus, that is the growth potential, and at the
Speaker 8: start we're just going to see, as we're already seeing
Speaker 8: now with some of the early products, some value but
Speaker 8: not a lot of revenue. And so I don't think
Speaker 8: the rest of the market. The economy is okay despite
Speaker 8: what you're last night. The economy is okay, but it's
Speaker 8: not gangbusters. So I think that that the broad market
Speaker 8: stocks are going to have decent returns, but the earnings
Speaker 8: are not going to add a bunch of boosts in
Speaker 8: the summertime, and we will probably as we keep waiting
Speaker 8: for the FED to take action. The market is moving
Speaker 8: okay with a FED at four and a half on
Speaker 8: that thirty year bond, and obviously they only control the
Speaker 8: short end at five. I look at a full fiscal year,
Speaker 8: so June thirty today we close the books into my
Speaker 8: career here and I have to tell you that the
Speaker 8: market was up twenty five percent year over year at
Speaker 8: June thirty, non US up over almost fifteen tremendous returns.
Speaker 7: I just don't see the gas to take it farther.
Speaker 2: Of course, at custors, you put a lot of money
Speaker 2: to work for a long time. I mean, and you
Speaker 2: got to have a long term time horizon given what
Speaker 2: you're doing with pensions. There is the market indicating something
Speaker 2: longer term about AI and what it could mean for
Speaker 2: fundamental growth.
Speaker 1: Yeah.
Speaker 8: Absolutely, I mean you look at at Nvidia, that stock
Speaker 8: alone is up two hundred percent one year return right now.
Speaker 8: That expectation of opportunistic growth and the expectation of efficiency
Speaker 8: in the markets and in the economy, Wall Street is
Speaker 8: always overshooting and over stimistic. And you already saw some
Speaker 8: sellback two weeks ago in Nvidia because almost every mutual
Speaker 8: fund I look at even some of the value funds
Speaker 8: hold in Vidia in their holdings.
Speaker 7: You couldn't afford not to.
Speaker 8: But that's going to run out of gas because it's
Speaker 8: the old question of fear of missing out. I think
Speaker 8: it's finally reaching the point. It's got tremendous grow threate
Speaker 8: twenty five percent in sales, but the recognition is it
Speaker 8: can't go to the moon.
Speaker 7: And where are the other stocks?
Speaker 8: So I think the market the narrow leadership is always
Speaker 8: a concern, but we're not going to see that broad
Speaker 8: build out for a while. I think June thirty is
Speaker 8: a classic time for four h one k investors to
Speaker 8: grab that statement and then diversify. They're going to find
Speaker 8: their overweight stocks, and they're probably overweight tech stocks. This
Speaker 8: is a good time to rebalance and to move some money,
Speaker 8: a little bit into bonds and a little bit into
Speaker 8: other types of mutual funds.
Speaker 2: Chris, thanks so much for being with us today, for
Speaker 2: all you've contributed to Wall Street Weeks through the years,
Speaker 2: and for spending part of your very last day on
Speaker 2: the job of Counselor's here with us. We look forward
Speaker 2: to seeing Chris again in his new life. Longtime friend
Speaker 2: of Wall Street Week, he is mister Chris Almen. This week,
Speaker 2: Bloomberg Invests convened in Lower Manhattan to talk with some
Speaker 2: of the leaders of Global Wall Street about what investors
Speaker 2: should be thinking about. We talked with Ray maguire, president
Speaker 2: of Lazard, and started with what he sees is driving
Speaker 2: the need for investment over the next few years.
Speaker 6: That goes to kind of a macro opportunities that we have,
Speaker 6: and I would put him in five categories. One would
Speaker 6: be generative AI in the drop down box there is
Speaker 6: the amount of capital that we're going to need deploy
Speaker 6: in order to support generative AI data centers as an example.
Speaker 6: Renewable energy or energy transition would be another of a
Speaker 6: macro trend and the drop down box and renewable energy
Speaker 6: and energy transition is how do we invest in the
Speaker 6: infrastructure that's going to allow us to remain competitive and
Speaker 6: energy transition and also be effective in how we go
Speaker 6: about energy transition. The other is this has taken on
Speaker 6: a different nomenclature dependent upon who's communicating. It's either enshuring, fringesuring, deglobalization,
Speaker 6: or what I would call reglobalization. And the reglobalization means
Speaker 6: how do we invest in US manufacturing. Remember we peaked
Speaker 6: in US manufacturing in June of nineteen seventy nine, where
Speaker 6: one in five Americans worked in a factory in the
Speaker 6: manufacturing bay said Ey, it's probably one in twenty. And
Speaker 6: much of the dependence that we have in the manufacturing
Speaker 6: world for all the things that we do or dependent
Speaker 6: upon the supply chain, So reglobalization, it's going to be
Speaker 6: another factor. The other factor that I would look to
Speaker 6: is the largest growing population that exists in North America
Speaker 6: is sixty five years and older, and so how we
Speaker 6: drop down box, how do we engage in healthcare for
Speaker 6: that demographic, How do we manage the trench of wealth
Speaker 6: or not in the last of cybersecurity, macro themes, and
Speaker 6: the investment that we will have to make from the
Speaker 6: private sectors, investment that we also today see being led
Speaker 6: by what's taking place in Washington, the IRA as an
Speaker 6: example of the Chips Act. Fundamental to how we compete
Speaker 6: going forward.
Speaker 2: Just where I wanted to go, which is the role
Speaker 2: of private versus public as we go forward. As you
Speaker 2: look at from your point of view at LAZARD, what
Speaker 2: it's the right role for the government, what's the right
Speaker 2: role for the private sector in supplying the capital that's needed.
Speaker 6: It's going to have to be a partnership, especially for
Speaker 6: the elements of the macro transit order for us to compete,
Speaker 6: it's going to have to be public private partnerships, which
Speaker 6: we're seen in many ways. I think with the IRA
Speaker 6: and with the Chips Act and look at a number
Speaker 6: of private enterprises that are involved in that with the
Speaker 6: support of the government. So there's those partnerships, and each
Speaker 6: one of these macro themes is going to have to
Speaker 6: be public private partnerships. As we reglobalize, how do we
Speaker 6: invest in the elements of that reglobalization. The way that
Speaker 6: we do that is through we need government policy that's
Speaker 6: going to be supportive, and then we need private enterprise
Speaker 6: to partner, and across the spectrum you're going to see
Speaker 6: public private partnerships that lead our ability to remain competitive.
Speaker 2: Let me pick up on one of the things you've mentioned
Speaker 2: a couple times is workers, the number of workers, trained workers,
Speaker 2: specificlarly trained works or to grow as an economy, you
Speaker 2: need more laborers. In the recent past, it appears that
Speaker 2: we've been sustained to some extent by legal immigration, actually
Speaker 2: legal migrants being added as a workforce. What's the role
Speaker 2: of immigration in terms of the growth of this economy.
Speaker 2: So as you look at some of those huge projects
Speaker 2: where you need the workers and also the trained workers.
Speaker 6: Well, apart from the political implication that first of all,
Speaker 6: we need to make certain that the workforce that we
Speaker 6: currently have as a workforce that is trained to be
Speaker 6: able to address the huge opportunities the demand for labor.
Speaker 6: In my senses that as you think about the IRA
Speaker 6: and you think about projects like Gateway, and you think
Speaker 6: about the organizations today that train the labor, that there's
Speaker 6: a tremendous opportunity for us to continue to invest in that.
Speaker 6: Unions as an example, how do we invest in that
Speaker 6: and how do we make sure that the unions is
Speaker 6: supportive so they can go train the workforce, reducing the
Speaker 6: requirements that you have a college degree in order to
Speaker 6: do some of the work that's going to be necessary.
Speaker 6: So workforce training is critical. By the same token, workforce
Speaker 6: housing is going to be critical. So for seventy two
Speaker 6: thousand people commuting into this geography, where do you house them?
Speaker 6: That's going to be part of the overall thought process
Speaker 6: and part of the overall architecture is we think about
Speaker 6: projects like Gateway, and as I think about what gateways,
Speaker 6: the implications of Gateway were found and exciting in a
Speaker 6: reflection of what we can do when we decide to
Speaker 6: invest in this country and invest in the most important
Speaker 6: part of the country, which is the talent.
Speaker 2: When we talk about things like generative AI as well
Speaker 2: as energy transition. It's hard to have that discussion without
Speaker 2: talking about China somehow, because China has really put a
Speaker 2: lot of investment into those There's obviously national security issues
Speaker 2: of the China at the same time, how can we
Speaker 2: get along if I can put it that way with
Speaker 2: China in terms of economies, so that we both get
Speaker 2: the best of it without conceding or compromising our national security.
Speaker 6: So I would say when it comes to generator of
Speaker 6: AI that we are ahead in the actual general of AI,
Speaker 6: the technology of generative AI, and if you look at
Speaker 6: who are the architects of that, they reside in this country.
Speaker 6: So I take confidence in that when it comes to
Speaker 6: the energy sources that are necessary for energy transition. As
Speaker 6: an example, seventy to ninety percent of the raw materials
Speaker 6: necessary for renewable energy energy transition is refined by China,
Speaker 6: and so as we think about that, we'll have to
Speaker 6: reduce our exposure to the supply chain.
Speaker 2: That was Ray McGuire of Lizard coming up. The Chinese
Speaker 2: Communist Party begins its Third Party Plenum next month in Beijing.
Speaker 2: We go over the state of the Chinese economy and
Speaker 2: what will be on the agenda with Mary Lovely, senior
Speaker 2: fellow of the Peterson Institute.
Speaker 4: He has put his money down on innovation and so
Speaker 4: called high quality development.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 3: This is Bloomberg Wall Street Week with David Weston from
Speaker 3: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. Next month,
Speaker 2: the Chinese Communist Party will hold its delayed plan on
Speaker 2: economic issues for a preview of what we should look for.
Speaker 2: We welcome now very Lovely, Peterson Institute for International Economics,
Speaker 2: Senior Fellow. So, Mary, welcome back. Great to have you
Speaker 2: here now. As I understand, typically this Third Plan and
Speaker 2: does focus on some ecademic issues. Going back in history,
Speaker 2: there were some major announcements coming out. This one's been
Speaker 2: delayed a year. Do we know why I was delayed?
Speaker 4: Well, I think it was delayed because the president president,
Speaker 4: she was focused on other events, and there may be
Speaker 4: more in the background that we don't know. One of
Speaker 4: the interesting things about the Third Planum is that it
Speaker 4: allows for a bit of horse trading economic reforms, as
Speaker 4: China needs to undertake create some winners and losers, and
Speaker 4: so the planem allows a chance for multiple issues we
Speaker 4: put on this table on the same time, so that
Speaker 4: maybe I lose in some ways, I win in others.
Speaker 4: So it allows some political bargaining to have and that
Speaker 4: may allow us to see some real progress.
Speaker 2: Mary, let me put you in President G's chair right
Speaker 2: now as he looks at his economy. What do you
Speaker 2: think his top priorities are. We have the property issues
Speaker 2: you described, local government, You've got use unemployment, which is
Speaker 2: an issue. You've got deflation in a lot of places.
Speaker 2: But what do you think are the big priorities for him?
Speaker 4: Well, we've written recently about what we think of as
Speaker 4: China's stuck transition. So China is transitioning from its old
Speaker 4: growth model to a new growth model, a new growth
Speaker 4: model that really is just being born. And President she
Speaker 4: himself has warned about breaking the old before building the new.
Speaker 4: So I think that's really his problem right now. We
Speaker 4: see weak domestic demand, low consumer sentiment, well business sentiment,
Speaker 4: some signs of exit of foreign investors.
Speaker 1: So we have some work to do on the short
Speaker 1: run to revive the economy in the short run.
Speaker 4: A little bit longer term, there's lots and lots of challenges.
Speaker 4: He has put his money down on innovation and so
Speaker 4: called high quality development. This encompasses reforms to very broad
Speaker 4: sectors of the economy. But nevertheless, these things are things
Speaker 4: that need to be done, and the changes need to
Speaker 4: be made now. So he needs to find a way
Speaker 4: to restore confidence while also helping to transition to an
Speaker 4: economy that's really built on investment, greening the system, building
Speaker 4: a more sustainable system, and building a more equal system.
Speaker 2: Mary tell us about the relationship between the Chinese economy
Speaker 2: and the economies of the rest of the world, and
Speaker 2: particularly start with the United States in particular. So a
Speaker 2: lot of talk about US so called Second China Shock,
Speaker 2: a lot of concern about subsidies of businesses over there
Speaker 2: with experts United States. I could start with evs, electric vehicles.
Speaker 2: By the way, Europe's concerned about that as well. How
Speaker 2: big an issue is that for China.
Speaker 4: Over China, it's a very big issue, and we've seen
Speaker 4: this in their diplomatic response to the US claims of
Speaker 4: overcapacity city. They have consistently said that the world needs
Speaker 4: their green energy products. They've doubled down on their strategy.
Speaker 4: It's not unusual in China for there to be lots
Speaker 4: of sort of ramp and growth, particularly because a lot
Speaker 4: of industrial policy is uncoordinated.
Speaker 1: It's done through the.
Speaker 4: Provinces, and then there's a period of rationalization, and we're
Speaker 4: seeing some of that right now, as some firms are
Speaker 4: surely going to exit because of weak earnings or even
Speaker 4: losses that overwhelmed their ability to stay in business. So
Speaker 4: we're seeing China rationalize at the same time that we're
Speaker 4: seeing the West say, hey, no way are we going
Speaker 4: to experience what we experienced before.
Speaker 1: We're going to take preventative steps. And we saw President Biden.
Speaker 9: Just a few weeks ago levy tariffs on evs, solar,
Speaker 9: medical equipment, and other products as a way to get
Speaker 9: ahead of this so called new wave of Chinese exports.
Speaker 2: Let's talk about those preventative measures, as you call them.
Speaker 2: I wonder, as far as you can discern, what is
Speaker 2: US policy economically, specifically with respect to China right now.
Speaker 2: There was a time when we talked about decoupling. He
Speaker 2: said decoupling was way too much because it's too large
Speaker 2: an economy, that it was de risking. But it seems
Speaker 2: like we're de risking an awful lot of what China's
Speaker 2: trying to give us.
Speaker 1: Yeah.
Speaker 4: I mean every step we take seems to be more
Speaker 4: toward decoupling really than de risking. And the reason I
Speaker 4: say that is because de risking would have a specific targets.
Speaker 4: You know, when President Biden puts tariffs on medical supplies
Speaker 4: coming out of China, in some sense, that's a bit
Speaker 4: de risking because we saw during the pandemic that we
Speaker 4: were overrelianed on China for personal protective equipment and other
Speaker 4: medical supplies.
Speaker 1: So that would be a form de risking. But we
Speaker 1: see so.
Speaker 4: Many different approaches to moving away from China, Marriott.
Speaker 2: We have an election going on here in the United
Speaker 2: States coming up in November, and of course President Trump
Speaker 2: when he was president, really took a very strong stance
Speaker 2: on China. It's not at all clear that President Biden
Speaker 2: backed off that for all the reasons you just described,
Speaker 2: in some ways even went further with it. How much
Speaker 2: of a difference do you think it makes in US
Speaker 2: China relations which man is the next president United States?
Speaker 4: I think it makes profound difference. President Biden has been
Speaker 4: more effective, I think in terms of hitting China in
Speaker 4: ways that matter for US security, in particular the export
Speaker 4: controls and the key to the success of the export
Speaker 4: controls has been coordination with other nations, in particular Japan
Speaker 4: and Europe, who hold key.
Speaker 1: Parts of the semiconductor supply chain.
Speaker 4: Without that coordination, the export controls would not be effective.
Speaker 4: President Trump is promising ten percent tacks across the board
Speaker 4: on all nations, so called flat sixty on China. This
Speaker 4: is a clear signal to the other nations that the
Speaker 4: US is in it for itself, American first, and I
Speaker 4: think it would really undermine a lot of the policies
Speaker 4: that we're taking to push back on Chinese policies that
Speaker 4: we think are unfair, but also to diversify the global economy.
Speaker 4: So I think it is a vitally important election for
Speaker 4: US Tina relations.
Speaker 2: Mary, it's always such a treat to have you. Thank
Speaker 2: you so much for your time. That is Mary Lovely
Speaker 2: of the Peterson Institute. American voters will choose between two
Speaker 2: very different approaches to business and the economy at the
Speaker 2: polls this November. For his views on the possible consequences,
Speaker 2: we welcome back now Roger Oltman. He's founder and senior
Speaker 2: chairman of Evercore. So Roger, always great to have you
Speaker 2: with us. We're looking forward to this election. In whichever
Speaker 2: he is doing. At this point, we do increasingly hear
Speaker 2: very different points of view between on the one hand, Bidenomics,
Speaker 2: which I think did take a departure from some of
Speaker 2: the neoliberalism sort of less regulation, less government of bolvement
Speaker 2: on the one hand, and then President Trump now is
Speaker 2: talking about things that sounds like merketfulism. He wants to
Speaker 2: all to be tariffs. Give us your sense, somebody a
Speaker 2: veteran of both Wall Street and Washington, what's at stake here?
Speaker 5: Well, there are, as you say, two very different visions, and.
Speaker 1: Voters will have the chance.
Speaker 5: To render a verdict, so to speak, on President Biden's
Speaker 5: record because it's right now, whereas President Trump's was a.
Speaker 1: Few years ago.
Speaker 5: There are two main takeaways from the question of Biden's record.
Speaker 5: On the one hand, I think most presidents, including the
Speaker 5: two I serve David would be very.
Speaker 1: Proud to have the basics of his record.
Speaker 5: Sixteen million new jobs created, an unemployment rate below four
Speaker 5: percent for one of the longest stretches in American history,
Speaker 5: huge increases in private investment and consisting growth. Even at
Speaker 5: this very moment four years after this recovery, began, which
Speaker 5: would have been in the second half of twenty twenty,
Speaker 5: as COVID lessened it a bit. We're growing at about
Speaker 5: two point seven two point seventy five percent right this minute,
Speaker 5: and to be doing that this late in a recovery
Speaker 5: is remarkable. On the other hand, we can see that
Speaker 5: voters are queasy or sour about the economy and at
Speaker 5: the moment rating Trump more highly than President Biden on
Speaker 5: the economy.
Speaker 1: And why is that?
Speaker 5: And I think the answer is this much discussed topic
Speaker 5: of affordability. It is true that grocery prices, gasoline prices,
Speaker 5: shelter costs have all risen in the low twenty percent
Speaker 5: range since President Biden took off us and I'm talking
Speaker 5: about absolute.
Speaker 1: Levels of increase.
Speaker 5: In other words, grocery prices in generally are about twenty
Speaker 5: one percent higher today than they were in President Biden
Speaker 5: took office.
Speaker 1: And voters are unhappy about that.
Speaker 5: Fortunately for President Biden, we're seeing some better news on
Speaker 5: that grocery prices actually fell last month. The inflation rate
Speaker 5: is coming down handsomely or nicely. CORECEE, which is the
Speaker 5: Fed's favorite measure, is already below two percent based on
Speaker 5: the latest data. And the Biden team is working over
Speaker 5: time on a.
Speaker 1: Series of initiatives to do better.
Speaker 5: Medicare, prescription drugs, insulin costs, junk fees, and a list
Speaker 5: of things which they are working hard on to lower
Speaker 5: costs for everyday Americans. And they fully admit that prices
Speaker 5: are still too high for middle class families.
Speaker 1: So it's a bit of a split screen question.
Speaker 5: And we have four and a half months to go
Speaker 5: roughly before election day, and that seems to me the
Speaker 5: core question is by the time election day really comes,
Speaker 5: will voters have a better view of the Biden economy
Speaker 5: than they do right now? The very latest polls suggest
Speaker 5: improvement in this one category, but still a ways to
Speaker 5: go for President Biden on this question, And with voters
Speaker 5: saying that the economy is their number one issue, it's
Speaker 5: really important if he's going to get re elected, then
Speaker 5: he closed the gap further.
Speaker 2: You know, the people who run American business, how do
Speaker 2: they feel about the Biden record?
Speaker 1: Well, a few comments on that.
Speaker 5: I serve twice in the Treasury at length, and part
Speaker 5: of my responsibilities involved interacting a lot with business, and
Speaker 5: the business community always wants certain change. That's the nature
Speaker 5: of that interaction. I think you put your finger pretty
Speaker 5: well on it. The macro from the business community's point
Speaker 5: of view is very good. At this very moment. All
Speaker 5: the major stock indencies are around all time highs. The
Speaker 5: last few weeks have been a pretty major rally and
Speaker 5: fixed into markets. The yield on the tenure treasury is
Speaker 5: about forty basis points lower than it was three or
Speaker 5: four weeks ago. That's pretty big change.
Speaker 1: And we're still seeing consistent growth. As I mentioned.
Speaker 5: So the macro from a business community's point of view
Speaker 5: is good. Yes, there are a lot of people in
Speaker 5: the business community that think the Biden administration is doing
Speaker 5: too much from a regulation point of view. They don't
Speaker 5: like the stance of the FTC and the Justice Department,
Speaker 5: for example, on any trust and some of course in
Speaker 5: the energy industries don't like some of the regulation that
Speaker 5: the Biden administration has promulgated in that area. However, hitting
Speaker 5: CEOs david of major companies do not as a rule
Speaker 5: endorse presidential candidates. That's not new, and by the way,
Speaker 5: today most boards of directors of major public companies wouldn't
Speaker 5: permit their CEO to make an endorsement of a presidential candidate,
Speaker 5: So they're not going to take a position publicly one
Speaker 5: way or the other. But when they look at the
Speaker 5: Trump agenda, I think a number of them don't like it.
Speaker 2: Okay, I do like to say Roger Altman will be
Speaker 2: staying with us as we focus in on where the
Speaker 2: economy is today and particularly what is driving the markets.
Speaker 2: That's coming up next on Wall Street Week on bloomberth.
Speaker 3: This is Bloomberg Wall Street Week with David Weston from
Speaker 3: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. Roger Altman
Speaker 2: of Evercore has remained with us. Roger, thank you for
Speaker 2: staying with this. I want to talk about the economy.
Speaker 2: We talked about it earlier a bit, but specifically what's
Speaker 2: the relationship with what the economy is doing right now
Speaker 2: and the markets are doing, because, as you said, the
Speaker 2: markets really are i'll use my expression shooting the lights
Speaker 2: out right at the moment.
Speaker 1: I think it's a pretty clear relationship. David.
Speaker 5: We're in a Goldie Locks moment in terms of the economy,
Speaker 5: and in particular we're seeing some modest slowing. Retail sales
Speaker 5: were actually down last month. There's some modest loosening in
Speaker 5: labor markets. Unemployment rate went up a touch, ratio of
Speaker 5: job vacancies.
Speaker 1: To unemployed workers went down a bit.
Speaker 5: And that's slowing is enabling or facilitating a lower inflation rate.
Speaker 5: As I mentioned earlier, Core PCE is already below two
Speaker 5: percent CPI, Core CPI just above three, and inflation is
Speaker 5: headed towards the Fed's long term two percent target, which
Speaker 5: in turn will allow the FED to cut. At the moment,
Speaker 5: it looks like once or twice during the remainder of
Speaker 5: twenty twenty four, with the final amount of cuts depending
Speaker 5: on the interim inflation data. And at the same time,
Speaker 5: we're continuing, and I think it's remarkable to show steady
Speaker 5: economic growth at this moment.
Speaker 1: It looks to us at.
Speaker 5: Evercore, as though the US economy is growing about two
Speaker 5: point seven percent, I don't see any sharp slowing of that.
Speaker 5: Emphasize sharp in the office, and parenthetically, corporate profits are
Speaker 5: doing well. The markets look at that and say, this
Speaker 5: is exactly what we wanted. We wanted inflation to come down,
Speaker 5: which allows the FED to cut the Federal Fund's rate
Speaker 5: and turn toward monetary ease. That's now happening looks like
Speaker 5: a soft landing. Which is so much desired and so
Speaker 5: much discussed, looks like it's playing out right in front
Speaker 5: of us.
Speaker 1: So it couldn't be better.
Speaker 5: From a financial market point of view and open market
Speaker 5: indust rate, it's apart from what the FED controls have
Speaker 5: fallen quite a bit.
Speaker 1: The yield on the ten year.
Speaker 5: Terasury I mentioned in the earlier segment is at about
Speaker 5: forty basis points in the last two weeks, and that's
Speaker 5: a big move. So from a market point of view,
Speaker 5: it could be better. From in terms of macroeconomics, which
Speaker 5: I think is why all the major indocies are right
Speaker 5: around records, there's a whole separate question within the market.
Speaker 5: I mean, in terms of a sub segment of the
Speaker 5: market about the belief that artificial intelligence may be the third,
Speaker 5: in a certain sense, the third economic revolution, and that
Speaker 5: it's going to be completely transformative.
Speaker 1: But that's not driving all stocks. That's just driving a
Speaker 1: component of them.
Speaker 2: I want to talk about AI, but before we do that,
Speaker 2: let me ask you about that growth rate, which is
Speaker 2: above historical trend lines. It's above what economists tell us
Speaker 2: is the potential of the economy. So ironically, the economy
Speaker 2: is generating more than what economists say, is the potential
Speaker 2: Can you have Heaven forbid too much of a good thing?
Speaker 2: I mean, sooner or later that has to come in line?
Speaker 1: Does it not a medium and longer term?
Speaker 4: Yes?
Speaker 5: But I think there are two factors that explain why
Speaker 5: the economy, or at least above other factors, is suing
Speaker 5: so well.
Speaker 1: One is there's been a.
Speaker 5: Surge, remarkable surge in private fixed investment during the Biden presidency,
Speaker 5: especially the last year year and a half.
Speaker 1: It's way and I think from memory, and.
Speaker 5: This number might be wrong, but I think it's I
Speaker 5: think it's eight hundred billion above the trend. That would
Speaker 5: have been a step would have been normal prior to
Speaker 5: the last two years, in other words, what the trend
Speaker 5: would have been as compared to what it actually is today.
Speaker 5: A lot of that, By the way, it's far an investment,
Speaker 5: not just domestic but coming into this country. And some
Speaker 5: of that's been triggered by the very major legislation that
Speaker 5: the Biden administration got passed, especially the Chips and Science
Speaker 5: Act and the Inflacial Reduction Act, and the especially the
Speaker 5: green energy portions of the Inflacier Reduction Act. But anyway,
Speaker 5: big surgeon, the private fixed investment, which of course gives
Speaker 5: rise to a lot of jobs and growth.
Speaker 1: The second factor is immigration.
Speaker 5: Most of the rest of the world doesn't have much immigration,
Speaker 5: but the United States, and people of course are very
Speaker 5: hotly debate whether they like the way it's playing out.
Speaker 5: But the United States, historically and continuing right through this moment,
Speaker 5: is benefiting from consistent levels of immigration, which means that
Speaker 5: our labor force continues to grow, unlike, for example, Western Europe,
Speaker 5: unlike Japan, and before very long unlike China. And it's
Speaker 5: very hard to grow your overall economy if your labor
Speaker 5: for US is falling. So the United States has an
Speaker 5: extra advantage there, partly because our population is a bit
Speaker 5: younger than those other regions, but also because we have
Speaker 5: consistent immigration above levels that other countries have. And I
Speaker 5: think those two factors explain why we continue to grow
Speaker 5: for the moment.
Speaker 2: Above trend Roger will come back to artificial intelligence generative
Speaker 2: AI as we call it.
Speaker 1: Here.
Speaker 2: You actually are working with corporations. You're seeing what's going
Speaker 2: on right now. It seems like every CEO has to
Speaker 2: invoke AI in their earnings called no matter what, and
Speaker 2: as soon as they do, their price goes up with
Speaker 2: their stock. How much of this is a proper reaction
Speaker 2: to the markets, and how much could be an overreaction
Speaker 2: to markets? I mean, how real is this in your assessment?
Speaker 5: Well, two part answer, I'm not smart enough to know
Speaker 5: whether valuing Nvidia at three point four trail, which is
Speaker 5: the current value, is sensible or it isn't I've done
Speaker 5: this or I've worked around finance.
Speaker 1: In finance for a long time and.
Speaker 5: Valuations constantly change, and I've learned essentially that there's no
Speaker 5: such things as the correct valuation because someone there's so
Speaker 5: much psychology that is involved in valuations. So I don't
Speaker 5: know whether the market is overreacting to this or not.
Speaker 5: But as to whether from an industrial point of view,
Speaker 5: AI and generative generative AI is profound or not, the
Speaker 5: answer I think clearly is yes, it is profound. Yes
Speaker 5: it is transformative. And some of the presentations I've listened
Speaker 5: to recently, both from companies and more generally at conferences
Speaker 5: and the like, are stunning in terms of the anticipated
Speaker 5: transformative effect of this.
Speaker 1: Including in the next few years.
Speaker 5: I think what a lot of people may not have
Speaker 5: internalized yet is how fast it's happening.
Speaker 1: So valuations it beats me.
Speaker 5: But in terms of the real economy and growth and
Speaker 5: industrial transformation, yes it's real.
Speaker 2: Roger. It's always so helpful to talk to you. Thank
Speaker 2: you so much for your time. That's Roger Altman of Evercore.
Speaker 2: All things come to those who wait. You may remember
Speaker 2: the slogan from Heinz Ketchup commercials or a Guinness Stout campaign,
Speaker 2: but it goes back at least as far as the
Speaker 2: nineteenth century and an English poem by Lady Mary Montgomery Curry.
Speaker 2: This week it proved to still be true, as some
Speaker 2: good things came to some people who've been waiting for
Speaker 2: a long time, like the Florida Panthers, who won their
Speaker 2: first Stanley Cup since joining the NHL thirty years ago,
Speaker 2: and to Julian Assange, who spent over five years in
Speaker 2: a British prison after being holed up in the Ecuadorian
Speaker 2: embassy in London for seven years, all to avoid US
Speaker 2: prosecution for his role in publishing some seven hundred and
Speaker 2: fifty thousand classified documents. This week, mister Assange pled guilty
Speaker 2: to a single count of conspiracy, was sentenced to time served,
Speaker 2: and finally returned to his native Australia.
Speaker 10: Julian should never have spent a single day in prison.
Speaker 1: But today we celebrate because today Julian is free.
Speaker 4: This is a huge win for Australia and for Australian democracy.
Speaker 1: This is a huge win for free speech.
Speaker 2: To be sure, there are some who continue to wait
Speaker 2: for things to come their way, like the crypto community
Speaker 2: waiting for SEC approval of a second spot etf this
Speaker 2: one for Ether, though SEC chaired Gensler says they have
Speaker 2: the key to their own jail and can end it
Speaker 2: whenever they want.
Speaker 11: It's really about the asset managers making the full disclosure
Speaker 11: so that those registrations statements can go effective.
Speaker 7: And those lawyers know what that is. It's smoothly functioning.
Speaker 11: It's really up to the asset managers to make the
Speaker 11: proper disclosures.
Speaker 2: Currency traders keep waiting for Japan to raise its interest
Speaker 2: rates and give some life to the end after twenty
Speaker 2: five years of zero or negative interest rates, but in
Speaker 2: the meantime saw the END fall to its lowest level
Speaker 2: against the dollar in nearly forty years.
Speaker 12: It's now just question of managing the downward descent of
Speaker 12: the END rather than changing policy. They're not going to
Speaker 12: be able with intervention alone to stem this.
Speaker 2: For the big US banks, it looks right now like
Speaker 2: waiting is the best way for things to come their way,
Speaker 2: as Federal bank regulars got so much criticism of their
Speaker 2: proposal to increase reserve requirements that they've gone back to
Speaker 2: the drawing board to start from scratch.
Speaker 10: If I were a betting person, I'd take the ladder
Speaker 10: or a reproposal, because I think the changes will be
Speaker 10: so significant, But it's probably not much more than a
Speaker 10: coin flip.
Speaker 2: Banks and all the rest of us continue to wait
Speaker 2: for the Federal Reserve to back off those high rates
Speaker 2: it took up by five hundred basis points in record time.
Speaker 13: What matters is that first rate cut is indeed a
Speaker 13: light switch, because what that signals is the FED believes
Speaker 13: that it has won the war on inflation, and so
Speaker 13: it's all downhill from there in terms of rates.
Speaker 2: But this week we were told once again that we'd
Speaker 2: have to be patient.
Speaker 14: With significant progress on inflation and the labor market cooling gradually,
Speaker 14: at some point it will be appropriate to reduce the
Speaker 14: level of policy restriction to maintain a healthy balance in
Speaker 14: the economy. The timing of any such adjustment will depend
Speaker 14: on how economic data evolve and what they imply for
Speaker 14: the economic outlook and balance of risks.
Speaker 2: Then there's what may be the biggest weight of them all,
Speaker 2: at least for New York City, where we've been waiting
Speaker 2: for over one hundred years for the promised extension of
Speaker 2: the Second Avenue subway line. After tearing down the elevated
Speaker 2: rail lines in the forties and fifties and anticipation of
Speaker 2: imminent subway service, construction finally got underway in nineteen seventy
Speaker 2: two and then was suspended for over thirty years for
Speaker 2: lack of money. In twenty seventeen, phase one of the
Speaker 2: Second Avenue Subway finally opened.
Speaker 12: First conceived of in the twenties.
Speaker 15: Now eighty five years later, construction is blasting forward. So far,
Speaker 15: officials have yet to raise the money or even budget
Speaker 15: the remaining phases that will extend and complete the line.
Speaker 2: Over a century of waiting was supposed to be drawing
Speaker 2: to a close this year, as revenues from congestion pricing
Speaker 2: were going to fund finally finishing the Second Avenue Subway.
Speaker 2: But then, as it had so many times before, the
Speaker 2: funding disappeared, at least for now.
Speaker 16: It's fifteen billion dollars directly to the MTA, and that
Speaker 16: will spar at least another five billion in terms of
Speaker 16: federal funds. That's a twenty billion dollar infusion to the
Speaker 16: transit system. It also would have resulted in more than
Speaker 16: fifteen billion dollars in bonds that were going to be issued,
Speaker 16: So it's a real blow financially to the region.
Speaker 2: We can only hope that Lady Curry was right, that
Speaker 2: it will come if we wait long enough. That does it.
Speaker 2: For this episode of Wall Street Week, I'm David Weston.
Speaker 2: This is Bloomberg. See you next week.