1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,360 Speaker 1: international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg 5 00:00:23,360 --> 00:00:30,160 Speaker 1: dot Com and of course on the Bloomberg terminal. Let's 6 00:00:30,160 --> 00:00:33,400 Speaker 1: bringing Rustco Strick now black Rock Global Allocation Fund portfolio 7 00:00:33,479 --> 00:00:35,560 Speaker 1: manager Russell. Let's ask that question it's being asked in 8 00:00:35,600 --> 00:00:37,680 Speaker 1: the ft here at Bloomberg and now swear as well. 9 00:00:37,840 --> 00:00:39,640 Speaker 1: Do you think the events of the last week could 10 00:00:39,720 --> 00:00:42,920 Speaker 1: lead to broader de leveraging in the hedge fund community. 11 00:00:43,240 --> 00:00:45,440 Speaker 1: I think you you organ to see some people rethink 12 00:00:45,479 --> 00:00:47,080 Speaker 1: their positioning. But look, I think there are a couple 13 00:00:47,120 --> 00:00:49,600 Speaker 1: of things going on here apart from the question of 14 00:00:49,720 --> 00:00:53,200 Speaker 1: leveraging derivatives. The first is we've known for many years 15 00:00:53,200 --> 00:00:56,040 Speaker 1: that liquidity can be a challenge. A lot of that 16 00:00:56,080 --> 00:00:59,040 Speaker 1: discussion was focused on the credit markets, and obviously it 17 00:00:59,120 --> 00:01:02,360 Speaker 1: extends to equity markets as well. But the second part 18 00:01:02,360 --> 00:01:04,280 Speaker 1: of this is really you know, you alluded to the 19 00:01:04,360 --> 00:01:06,959 Speaker 1: calm on the surface, and I think that's true. What 20 00:01:07,120 --> 00:01:11,480 Speaker 1: hasn't been remarked about is much is how much positions 21 00:01:11,560 --> 00:01:15,679 Speaker 1: below the surface are being whipsawed these daily rotations where 22 00:01:15,720 --> 00:01:19,880 Speaker 1: you see sectors and styles moving to three standard deviations 23 00:01:19,880 --> 00:01:23,120 Speaker 1: in a day. Because investors flip back and forth between 24 00:01:23,200 --> 00:01:26,640 Speaker 1: reopening trades uh in stay at home trades, that is 25 00:01:26,720 --> 00:01:29,679 Speaker 1: also causing a lot of pain give on the wrong 26 00:01:29,720 --> 00:01:33,440 Speaker 1: side of those moves, Russ. How do you synthesize a 27 00:01:33,640 --> 00:01:38,280 Speaker 1: bloom economy into global allocation and for that matter, just 28 00:01:38,319 --> 00:01:41,560 Speaker 1: trying to get the next Monday? How do you synthesize it? 29 00:01:41,640 --> 00:01:44,640 Speaker 1: I'm gonna take hot seas over at Golden Sacks going 30 00:01:44,680 --> 00:01:47,520 Speaker 1: out to a stunning ten percent plus statistic for Q 31 00:01:47,720 --> 00:01:51,120 Speaker 1: two growth. You and I have never seen this. Um 32 00:01:51,680 --> 00:01:54,080 Speaker 1: Rosenberg got a Carnegie email. In all the years he 33 00:01:54,200 --> 00:01:57,600 Speaker 1: studied a temper guess what, he's never seen this? How 34 00:01:57,600 --> 00:02:02,120 Speaker 1: do you frame your work in a boom mill you like? 35 00:02:02,280 --> 00:02:04,400 Speaker 1: I think this is exactly the right question, probably the 36 00:02:04,400 --> 00:02:08,040 Speaker 1: most important, because as you've said, very few living investors 37 00:02:08,040 --> 00:02:10,480 Speaker 1: have ever seen this up to me, means a couple 38 00:02:10,520 --> 00:02:12,799 Speaker 1: of things. One you were alluding to before the break, 39 00:02:13,120 --> 00:02:15,799 Speaker 1: which is that rates are going to continue to normalize. 40 00:02:16,160 --> 00:02:18,639 Speaker 1: It doesn't mean that they melt up forever. But it 41 00:02:18,800 --> 00:02:21,520 Speaker 1: is very hard. I think Tommy, you nailed this before. 42 00:02:21,560 --> 00:02:26,480 Speaker 1: To reconcile negative sixty bip real tenure yield and an 43 00:02:26,520 --> 00:02:31,080 Speaker 1: economy that may grow seven eight uh in the back 44 00:02:31,120 --> 00:02:33,720 Speaker 1: half of the year. One of those two things is wrong. 45 00:02:34,160 --> 00:02:36,960 Speaker 1: We think rates continue to normalize. The other is a 46 00:02:37,000 --> 00:02:39,640 Speaker 1: lot of investors were used to thinking only in terms 47 00:02:39,639 --> 00:02:42,840 Speaker 1: of data, what's your market exposure? I think if you're 48 00:02:42,840 --> 00:02:46,079 Speaker 1: gonna have an economy that's growing that fast, you also 49 00:02:46,080 --> 00:02:48,680 Speaker 1: have to think in terms of your cyclical exposure. There 50 00:02:48,680 --> 00:02:51,200 Speaker 1: are going to be parts of this economy companies that 51 00:02:51,240 --> 00:02:54,639 Speaker 1: they're gonna see demand they've not seen in decades. Can 52 00:02:54,680 --> 00:02:57,720 Speaker 1: you lever to those themes? Can you take advantage of 53 00:02:57,760 --> 00:03:01,919 Speaker 1: that very fundamental change in a portfolio? Those are two things. 54 00:03:01,919 --> 00:03:04,320 Speaker 1: We're focusing on. Our duration as the lowest that's been 55 00:03:04,320 --> 00:03:07,160 Speaker 1: in years, and we're looking for ways to add cyclical 56 00:03:07,200 --> 00:03:10,919 Speaker 1: exposure back into the portfolio. I know you're speaking metaphorically, 57 00:03:10,960 --> 00:03:14,520 Speaker 1: Rusby said, how can we lever those cyclical themes in 58 00:03:14,639 --> 00:03:18,440 Speaker 1: order to add exposure in your portfolio? There are people, however, 59 00:03:18,520 --> 00:03:20,880 Speaker 1: who are taking this quite literally as we have learned, 60 00:03:20,960 --> 00:03:23,720 Speaker 1: and they are leveraging up some of their positions. Yes, 61 00:03:23,840 --> 00:03:26,240 Speaker 1: rates are normalizing, but there is a belief in the 62 00:03:26,240 --> 00:03:28,480 Speaker 1: feed is adding to this that they are sitting on 63 00:03:28,520 --> 00:03:32,680 Speaker 1: the front end. As we do see some push toward normalization. 64 00:03:32,760 --> 00:03:35,520 Speaker 1: Are there more accidents waiting to happen like what we 65 00:03:35,640 --> 00:03:39,360 Speaker 1: just saw. I think whenever you see an abrupt move, 66 00:03:39,520 --> 00:03:41,200 Speaker 1: they are always going to be blow ups. They're going 67 00:03:41,240 --> 00:03:43,480 Speaker 1: to be people that are over extended. You know, you've 68 00:03:43,480 --> 00:03:46,520 Speaker 1: had a very strong bullmark, there's going to be concentration. 69 00:03:46,960 --> 00:03:49,760 Speaker 1: The thing that I would watch is actually the rapidity 70 00:03:49,760 --> 00:03:52,240 Speaker 1: of the move. You know, we we know this. We've 71 00:03:52,280 --> 00:03:54,680 Speaker 1: seen that stocks and rates can move up together. A 72 00:03:54,720 --> 00:03:57,720 Speaker 1: matter of fact, if you look at equities, equity multiples, 73 00:03:57,720 --> 00:04:00,240 Speaker 1: and real rates, they tend to move up together for 74 00:04:00,280 --> 00:04:03,000 Speaker 1: the obvious reason that as the economy gets better and 75 00:04:03,040 --> 00:04:06,880 Speaker 1: companies gain operating leverage, earnings go up. What can trip 76 00:04:06,960 --> 00:04:09,960 Speaker 1: up the market is the rapidity and more specifically the 77 00:04:10,040 --> 00:04:12,960 Speaker 1: spike and bond market volatility. If you look at what's 78 00:04:12,960 --> 00:04:16,160 Speaker 1: been happening the last three or four months, bond volatility 79 00:04:16,279 --> 00:04:20,039 Speaker 1: has been increasingly moving with stock volatility. That's where I 80 00:04:20,040 --> 00:04:22,279 Speaker 1: think the danger is if we get these days these 81 00:04:22,320 --> 00:04:26,520 Speaker 1: weeks where yields back up this quickly. That unnerves investors, 82 00:04:26,560 --> 00:04:28,520 Speaker 1: and that's when you tend to see some of these 83 00:04:28,520 --> 00:04:30,560 Speaker 1: blow ups, Russ. Before we let you run. I caught 84 00:04:30,600 --> 00:04:33,760 Speaker 1: up with Rick reader yesterday, just briefly, and he did 85 00:04:33,760 --> 00:04:35,520 Speaker 1: not sound as bullish as he has done over the 86 00:04:35,560 --> 00:04:37,480 Speaker 1: last several months. He was talking about a big cash 87 00:04:37,520 --> 00:04:40,840 Speaker 1: allocation waiting for some volatility through the summer. You were 88 00:04:40,839 --> 00:04:42,440 Speaker 1: all on the same page over a blank rock with 89 00:04:42,480 --> 00:04:45,159 Speaker 1: that view. Well, I hope so Rick and port together 90 00:04:45,200 --> 00:04:48,960 Speaker 1: we co manage the fund absolutely, we you know, so 91 00:04:49,080 --> 00:04:55,240 Speaker 1: we we had been for the last five minutes. Delicately 92 00:04:55,400 --> 00:04:58,039 Speaker 1: you sounded like a rig walk me throw it, Russ. 93 00:04:58,560 --> 00:05:01,480 Speaker 1: We we've been doing exactly what's been described, which is, look, 94 00:05:01,560 --> 00:05:05,520 Speaker 1: the fundamentals are strong with the cyclical recovery, stocks are 95 00:05:05,560 --> 00:05:07,719 Speaker 1: likely to end the year higher. But we are looking 96 00:05:07,760 --> 00:05:09,920 Speaker 1: at a chop your market. So what have we done. 97 00:05:09,920 --> 00:05:12,240 Speaker 1: We've done a couple of things. We have trimmed our 98 00:05:12,240 --> 00:05:16,320 Speaker 1: equity exposure, and we have brought the duration way way down. 99 00:05:16,320 --> 00:05:19,400 Speaker 1: As I spoke about a moment ago, instead rather than 100 00:05:19,400 --> 00:05:22,320 Speaker 1: looking it bonds for that hedge in your portfolio. Is 101 00:05:22,400 --> 00:05:25,560 Speaker 1: Rick described, We've been building up cash. Having that dry powder, 102 00:05:25,680 --> 00:05:29,159 Speaker 1: there will be opportunities to reinvest. Not trying to cause trouble. Rus. 103 00:05:29,279 --> 00:05:34,840 Speaker 1: You know that took that black Rock global allocation of 104 00:05:34,960 --> 00:05:43,480 Speaker 1: fun portfolio manage it. Okay, here's what we're gonna do, folks, 105 00:05:43,480 --> 00:05:46,480 Speaker 1: And this is important for Global, Wall Street and everybody 106 00:05:46,520 --> 00:05:49,440 Speaker 1: else on radio and TV. Why don't we find someone 107 00:05:49,520 --> 00:05:53,680 Speaker 1: out there totally removed from the madness of margin calls 108 00:05:53,720 --> 00:05:56,680 Speaker 1: and excess leverage. James Spevan would be a candidate with 109 00:05:56,760 --> 00:05:59,640 Speaker 1: c c L a chief investment officer. He has been 110 00:06:00,080 --> 00:06:04,200 Speaker 1: running sober money for decades and he joins us today. James, 111 00:06:04,200 --> 00:06:06,080 Speaker 1: I'm not going to waste your time with the margin 112 00:06:06,160 --> 00:06:09,039 Speaker 1: car discussion and that what I am going to say 113 00:06:09,080 --> 00:06:12,000 Speaker 1: to you is, how do you operate in this mill? You? 114 00:06:12,240 --> 00:06:15,760 Speaker 1: What do you actually do when you've got big banks 115 00:06:15,800 --> 00:06:20,359 Speaker 1: bouncing off of big losses. What I observe, Tom, is 116 00:06:20,400 --> 00:06:23,359 Speaker 1: that we are indeed going to get excellent economic growth 117 00:06:23,400 --> 00:06:27,479 Speaker 1: figures for April and may significantly on the back of 118 00:06:27,560 --> 00:06:31,799 Speaker 1: the actions Biden administration and not least four hundred dollars 119 00:06:32,040 --> 00:06:36,160 Speaker 1: posted out to the eligible persons. And I think that 120 00:06:36,200 --> 00:06:38,240 Speaker 1: therefore we will see something in the order of a 121 00:06:38,320 --> 00:06:40,840 Speaker 1: hundred and eighty dollars of earnings to the S and 122 00:06:40,880 --> 00:06:44,600 Speaker 1: P five hundred in the current calendar, rising to two 123 00:06:44,680 --> 00:06:48,440 Speaker 1: hundred dollars next year, and of course, baked into the 124 00:06:48,480 --> 00:06:51,240 Speaker 1: cake of those numbers is a premise that companies are 125 00:06:51,240 --> 00:06:56,200 Speaker 1: going to invest in capital that improves productivity and allows 126 00:06:56,279 --> 00:07:00,800 Speaker 1: margins to stay elevators. And given element that one might 127 00:07:00,839 --> 00:07:04,120 Speaker 1: observe for inflation and money rates, I think that justifies 128 00:07:04,160 --> 00:07:06,960 Speaker 1: the year end target for the SMP five hundred this 129 00:07:07,040 --> 00:07:11,920 Speaker 1: year of points rising to hundred points next year. And 130 00:07:12,280 --> 00:07:14,640 Speaker 1: if there is a real risk, I think it is 131 00:07:14,720 --> 00:07:19,440 Speaker 1: twofold one that the Federal Reserve continues to argue that 132 00:07:19,480 --> 00:07:22,160 Speaker 1: it doesn't need to change rates, but the bond market 133 00:07:22,200 --> 00:07:28,120 Speaker 1: therefore does the work for quilling inflation. That leads to 134 00:07:28,360 --> 00:07:33,480 Speaker 1: a dislocation between bond deals and equity prices and inevitably 135 00:07:33,760 --> 00:07:36,120 Speaker 1: leads to a correction. The other risk, which I think 136 00:07:36,200 --> 00:07:39,240 Speaker 1: is just as real, is that a large chunk of 137 00:07:39,240 --> 00:07:41,800 Speaker 1: the fourteen hundred dollars that has been posted out is 138 00:07:41,840 --> 00:07:44,640 Speaker 1: applying to the empty markets. We get them melt up 139 00:07:44,840 --> 00:07:48,440 Speaker 1: during May and early June, and that's the point where 140 00:07:48,480 --> 00:07:51,840 Speaker 1: we should take money off the table James optimal reopening 141 00:07:51,880 --> 00:07:55,560 Speaker 1: quite then, what is it for me? It's the world 142 00:07:55,640 --> 00:07:58,880 Speaker 1: class banks that operate in the United States, so JP 143 00:07:59,000 --> 00:08:01,960 Speaker 1: Morgan and Bank America. Seems to me that they have 144 00:08:02,120 --> 00:08:08,040 Speaker 1: ample opportunity to lend sensibly into an accelerating market. They 145 00:08:08,080 --> 00:08:11,440 Speaker 1: have excellent loan criteria. I don't think they're going to 146 00:08:11,520 --> 00:08:15,600 Speaker 1: trip up, but they will be significant participants in economic recovery. 147 00:08:15,800 --> 00:08:18,600 Speaker 1: The other big trade I think is shifting from consumer 148 00:08:18,680 --> 00:08:21,960 Speaker 1: staples to consumer discretionary, which is a very obvious trade. 149 00:08:22,120 --> 00:08:24,440 Speaker 1: But I'm surprised when I look at the portfolios of 150 00:08:24,640 --> 00:08:27,120 Speaker 1: fund managers in the marketplace. I hope you have yet 151 00:08:27,160 --> 00:08:30,080 Speaker 1: to really make that switch. I gotta say, it does 152 00:08:30,160 --> 00:08:32,959 Speaker 1: sound like there's some subtext there when you say your 153 00:08:33,000 --> 00:08:35,880 Speaker 1: favoring banks that lend sensibly, and then you talk about 154 00:08:35,920 --> 00:08:38,199 Speaker 1: JPMorgan and Bank of America to the banks that were 155 00:08:38,200 --> 00:08:41,280 Speaker 1: someone immune from the recent blow up of our keegos. 156 00:08:41,320 --> 00:08:45,120 Speaker 1: Are you saying away from other banks, from perhaps European 157 00:08:45,160 --> 00:08:49,160 Speaker 1: banks or Japanese banks they got embroiled in this issue, 158 00:08:49,720 --> 00:08:52,480 Speaker 1: or do you see them also as potentially holding value 159 00:08:52,480 --> 00:08:55,920 Speaker 1: as the yield curve steepens. Now I am absolutely staying 160 00:08:55,960 --> 00:08:59,280 Speaker 1: out of those areas. I worry that the European banks 161 00:08:59,520 --> 00:09:02,920 Speaker 1: face perfect storm of continuing negative rates. And after all, 162 00:09:02,920 --> 00:09:06,080 Speaker 1: what one thinks about how the European central banks Target 163 00:09:06,200 --> 00:09:10,680 Speaker 1: two system operates. Unlike the federal reserve arrangements in the States, 164 00:09:10,679 --> 00:09:14,559 Speaker 1: where the regional central banks to zero the inter bank balances, 165 00:09:14,600 --> 00:09:19,600 Speaker 1: there are huge imbalances within the euro system. Germany has 166 00:09:19,640 --> 00:09:23,160 Speaker 1: to lend huge sums into the Target two system. Buller's 167 00:09:23,160 --> 00:09:26,160 Speaker 1: Bank then calls the commercial banks to provide capital, and 168 00:09:26,160 --> 00:09:28,520 Speaker 1: having asked the capital, then sends from the bill because 169 00:09:28,520 --> 00:09:31,720 Speaker 1: of negative interest rates. No surprise, the European banks are 170 00:09:31,720 --> 00:09:34,240 Speaker 1: in real trouble. And I would observe that the French 171 00:09:34,280 --> 00:09:37,200 Speaker 1: banks have been pulling back in lending into Asia. That 172 00:09:37,280 --> 00:09:39,680 Speaker 1: strikes me as a real sign the French banks are 173 00:09:39,720 --> 00:09:42,120 Speaker 1: gain to be in relative trouble. You want you to 174 00:09:42,160 --> 00:09:44,920 Speaker 1: look outside the States. I think the most interesting area 175 00:09:44,960 --> 00:09:47,760 Speaker 1: is India, where I see an accelerating economy, I see 176 00:09:47,760 --> 00:09:51,679 Speaker 1: a reasonably well run banking system. Names like HFC I 177 00:09:51,720 --> 00:09:54,679 Speaker 1: think absolutely stand out for consideration. James are going to 178 00:09:54,760 --> 00:09:56,240 Speaker 1: jump in just to bring a break in news, just 179 00:09:56,320 --> 00:09:59,640 Speaker 1: quickly Germany to reassess the actress Nika vaccine after more 180 00:10:00,040 --> 00:10:04,040 Speaker 1: thrombosis cases. Tom this just speaks a divide between the 181 00:10:04,120 --> 00:10:06,760 Speaker 1: United States and Europe right now. Just to compare and 182 00:10:06,800 --> 00:10:09,400 Speaker 1: contrast to the last twenty four hours, President Biden talking 183 00:10:09,440 --> 00:10:13,000 Speaker 1: about making the vaccine eligible for all adults in America 184 00:10:13,600 --> 00:10:15,360 Speaker 1: of adults by the middle of next month, and here's 185 00:10:15,400 --> 00:10:19,199 Speaker 1: Europe grappling still with the Astrosennaka vaccine to reassess the 186 00:10:19,200 --> 00:10:23,439 Speaker 1: Astrosennacha vaccine in Germany after more thrombosis cases. That headline 187 00:10:23,480 --> 00:10:26,959 Speaker 1: just crossing a Bloomberg Canada yesterday with much the same treatment. 188 00:10:26,960 --> 00:10:30,600 Speaker 1: I'm not saying equivalent treatment, but certainly, John, it's a trend. James, 189 00:10:30,600 --> 00:10:32,959 Speaker 1: how on earth do you stay long Europe in any way, 190 00:10:32,960 --> 00:10:35,240 Speaker 1: shape or form with this going on in the background. 191 00:10:36,200 --> 00:10:38,800 Speaker 1: I think it's extremely difficult to be positive about the 192 00:10:38,840 --> 00:10:42,520 Speaker 1: outlook for the European economy. Justical policy is a mess. 193 00:10:42,840 --> 00:10:46,080 Speaker 1: I think that there are real tensions within the euro system. 194 00:10:46,160 --> 00:10:48,280 Speaker 1: If you asked me to talk about a country that 195 00:10:48,440 --> 00:10:52,120 Speaker 1: is worth considering, it would be Italy. I do that 196 00:10:52,160 --> 00:10:55,320 Speaker 1: there are political shifts in Italy to be positive for 197 00:10:55,320 --> 00:10:57,800 Speaker 1: the long term. Equally, when I think about the sources 198 00:10:57,840 --> 00:11:00,760 Speaker 1: of European companies that I would favor. It is the 199 00:11:00,800 --> 00:11:03,280 Speaker 1: giants that are capable of making money like oh VMH, 200 00:11:03,480 --> 00:11:06,280 Speaker 1: which I think remain extremely well run, and m Katy 201 00:11:06,400 --> 00:11:09,439 Speaker 1: should be from my perspective, long term pool holdings of 202 00:11:09,520 --> 00:11:12,840 Speaker 1: a growth focused portfolio. James, thank you as always. Let's 203 00:11:12,840 --> 00:11:14,839 Speaker 1: get back to that news. James Bavin c c L 204 00:11:14,880 --> 00:11:24,160 Speaker 1: A chief investment officer. Right now, Gregory Meeks joins us. 205 00:11:24,160 --> 00:11:26,680 Speaker 1: He is a Democrat, he is from New York. This 206 00:11:26,760 --> 00:11:29,760 Speaker 1: could be a two hour conversation because of his perspective 207 00:11:30,080 --> 00:11:33,280 Speaker 1: on foreign affairs and his perspective as a congressman from 208 00:11:33,320 --> 00:11:36,600 Speaker 1: John Fitzgerald Kennedy Airport in New York, the fifth District 209 00:11:36,600 --> 00:11:39,760 Speaker 1: in New York. And we welcome to Congressman back again. 210 00:11:40,160 --> 00:11:44,320 Speaker 1: Carruson Meeks. On infrastructure, I got good news. New Jersey's 211 00:11:44,360 --> 00:11:46,360 Speaker 1: worse than New York. That's all we need to know. 212 00:11:46,840 --> 00:11:49,400 Speaker 1: New York is doing fine right now by any civil 213 00:11:49,440 --> 00:11:52,640 Speaker 1: engineering study. But you know, when you get off the 214 00:11:52,679 --> 00:11:56,000 Speaker 1: plane in New York, at Laguardi, at JFK, anywhere else, 215 00:11:56,480 --> 00:11:58,560 Speaker 1: there's a lot of roads that are troubled, a lot 216 00:11:58,640 --> 00:12:01,800 Speaker 1: of bridges troubled. Some four hundred bridges in New York 217 00:12:01,880 --> 00:12:04,719 Speaker 1: State or a hundred years older more. How do we 218 00:12:04,800 --> 00:12:08,520 Speaker 1: fix it this with this new infrastructure bill? What's different 219 00:12:08,760 --> 00:12:12,679 Speaker 1: this time? Right now? I think that this time we're 220 00:12:12,720 --> 00:12:16,800 Speaker 1: going to get something done. Um. I think that you know, 221 00:12:16,840 --> 00:12:20,760 Speaker 1: if you talk to Democrats and Republicans, I believe they 222 00:12:20,880 --> 00:12:23,959 Speaker 1: understand that if you look at our crumbling infrastructure, like 223 00:12:24,000 --> 00:12:25,640 Speaker 1: you said, not only in the city of New York, 224 00:12:25,640 --> 00:12:28,640 Speaker 1: but across this nation, that we've got to invest in it. 225 00:12:28,640 --> 00:12:31,320 Speaker 1: It's just the same as you know, those of us 226 00:12:31,360 --> 00:12:34,040 Speaker 1: who you know workn't let their own homes. You've got 227 00:12:34,080 --> 00:12:36,400 Speaker 1: to invest in your home to keep it up. Otherwise 228 00:12:36,480 --> 00:12:39,360 Speaker 1: it will crumble down no matter how well it was built. 229 00:12:40,200 --> 00:12:42,600 Speaker 1: But if it was built fifty sixty years ago, like 230 00:12:42,640 --> 00:12:46,520 Speaker 1: our infrastructure, uh, it deteriorates. And therefore that you've got 231 00:12:46,520 --> 00:12:48,679 Speaker 1: to invest in it. And if you invest in it, 232 00:12:49,120 --> 00:12:52,839 Speaker 1: then that makes it profitable for everybody that will utilize it, 233 00:12:52,880 --> 00:12:56,080 Speaker 1: because everyone will utilize that infrastructure. Can we do this 234 00:12:56,280 --> 00:13:00,240 Speaker 1: with bond financing of the maturity and lengths of our 235 00:13:00,280 --> 00:13:03,240 Speaker 1: new bridges, our new roads, and indeed a new terminal 236 00:13:03,320 --> 00:13:06,920 Speaker 1: of JFK. Why can't we just finance this out thirty 237 00:13:07,440 --> 00:13:11,800 Speaker 1: fifty even dare I say seventy years. Well, I think 238 00:13:11,840 --> 00:13:13,559 Speaker 1: that what we need to do it is a combination 239 00:13:13,600 --> 00:13:15,920 Speaker 1: of all It's gonna take a little bit of everything 240 00:13:16,000 --> 00:13:18,040 Speaker 1: from everybody. That's why I'm a firm believer in these 241 00:13:18,480 --> 00:13:22,520 Speaker 1: a number of public private partnerships. So as I look at, 242 00:13:22,559 --> 00:13:26,120 Speaker 1: for example, of what we're doing at JFK Airport, UH, 243 00:13:26,200 --> 00:13:29,520 Speaker 1: there needs to be there some government investment in it, UH, 244 00:13:29,559 --> 00:13:31,400 Speaker 1: and we're fighting to get that. I tried to get 245 00:13:31,440 --> 00:13:34,000 Speaker 1: some of it in UH because as the result of 246 00:13:34,040 --> 00:13:37,280 Speaker 1: the pandemic. Of course, you look at the revenue that 247 00:13:37,360 --> 00:13:39,960 Speaker 1: was at the Kennedy Airport, it went down tremendously, So 248 00:13:40,080 --> 00:13:43,760 Speaker 1: government should help EDIT. But also we've had private industry 249 00:13:43,800 --> 00:13:47,200 Speaker 1: that's investing in it, so we need some sacrifice from them. 250 00:13:47,440 --> 00:13:50,840 Speaker 1: And that's why we extended the lease on the airport, 251 00:13:51,120 --> 00:13:53,199 Speaker 1: so that there's a long return for them to get 252 00:13:53,200 --> 00:13:55,080 Speaker 1: a return on their investment for the morning that they 253 00:13:55,120 --> 00:13:57,880 Speaker 1: will be putting into it. Also, so you're getting money 254 00:13:57,920 --> 00:14:00,720 Speaker 1: from both sides in that regards is fair to the 255 00:14:00,760 --> 00:14:04,880 Speaker 1: taxpayers and it's fair to the private investors. Also, Congressman, 256 00:14:04,880 --> 00:14:06,400 Speaker 1: you wear many hats, and I want to turn to 257 00:14:06,440 --> 00:14:09,880 Speaker 1: a delicate question about foreign policy, if I made companies 258 00:14:09,880 --> 00:14:12,600 Speaker 1: are getting very much entangled with what is handling in China, 259 00:14:12,720 --> 00:14:15,880 Speaker 1: very much around the colin situation in Shinjang. And I 260 00:14:15,920 --> 00:14:19,080 Speaker 1: wonder from your perspective whether you think that US based 261 00:14:19,080 --> 00:14:24,120 Speaker 1: companies should face a band of using cortinado Shinjang. Well, 262 00:14:24,160 --> 00:14:26,080 Speaker 1: here's what I think, you know, and I don't think 263 00:14:26,120 --> 00:14:28,360 Speaker 1: I think that what we should do. Uh And as 264 00:14:28,400 --> 00:14:31,240 Speaker 1: I believe there's are foreign affairs and work in multidagard ways. 265 00:14:31,640 --> 00:14:36,000 Speaker 1: So I was a strong support, a strong supporter for example, 266 00:14:36,000 --> 00:14:37,520 Speaker 1: And here's what I think that we made a mistake. 267 00:14:38,000 --> 00:14:42,440 Speaker 1: I was a strong supporter and TPP working with other 268 00:14:42,520 --> 00:14:46,080 Speaker 1: countries to make sure that the rules were leveled and 269 00:14:46,160 --> 00:14:49,840 Speaker 1: to instead of isolating ourselves, make sure that we all 270 00:14:49,880 --> 00:14:52,520 Speaker 1: are playing by the China doesn't played by those same rules. 271 00:14:52,840 --> 00:14:55,920 Speaker 1: Then China would be isolated. And so when they are 272 00:14:56,000 --> 00:15:00,160 Speaker 1: playing with certain products, particularly when you talk about the 273 00:15:01,520 --> 00:15:04,640 Speaker 1: type of product that you just mentioned and chips, et cetera, 274 00:15:05,160 --> 00:15:11,800 Speaker 1: that um um it is us who believe in you know, 275 00:15:12,080 --> 00:15:14,160 Speaker 1: I'm a firm believing the w t L and others, 276 00:15:14,160 --> 00:15:17,080 Speaker 1: and we need to enforce those laws and rules, and 277 00:15:17,480 --> 00:15:21,240 Speaker 1: China who's violating though uh and so opposed the just 278 00:15:21,240 --> 00:15:25,360 Speaker 1: just the United States by ourselves, we're not an effective, 279 00:15:25,360 --> 00:15:27,160 Speaker 1: but it was the United States and our friends and 280 00:15:27,200 --> 00:15:30,640 Speaker 1: the EU and our other doing it collectively. Now you're 281 00:15:30,720 --> 00:15:33,320 Speaker 1: having something that is really going to have effect on 282 00:15:33,400 --> 00:15:35,960 Speaker 1: Taylor the congressman right now already And forgive me for 283 00:15:36,040 --> 00:15:38,960 Speaker 1: jumping in if I may u s fake companies are 284 00:15:39,000 --> 00:15:42,280 Speaker 1: already facing potentially a boy card in the mainland right 285 00:15:42,280 --> 00:15:44,880 Speaker 1: now that will hurt their revenues, their profits, and to 286 00:15:44,960 --> 00:15:47,440 Speaker 1: get in line with the policy of the United States, 287 00:15:47,480 --> 00:15:49,640 Speaker 1: you need to get these multinationals on board. And we've 288 00:15:49,640 --> 00:15:51,480 Speaker 1: seen that repeatedly not work out. We saw it with 289 00:15:51,520 --> 00:15:53,800 Speaker 1: the Walt Disney Company last year in the production of Mulan, 290 00:15:54,160 --> 00:15:56,280 Speaker 1: and we're seeing it with Nike right now, who are 291 00:15:56,320 --> 00:15:58,960 Speaker 1: trying to avoid using colin from Shinjiang, along with other 292 00:15:59,200 --> 00:16:02,400 Speaker 1: multinationals too, and they face a boycott on the mainland. 293 00:16:02,400 --> 00:16:04,920 Speaker 1: How do you offer them cover to make the decision 294 00:16:04,920 --> 00:16:08,520 Speaker 1: that would be in line with your administration. Well, the 295 00:16:08,560 --> 00:16:12,080 Speaker 1: way to know you offer them cover is that if 296 00:16:12,080 --> 00:16:15,760 Speaker 1: they work collectively together, we can reverse it. And we 297 00:16:15,800 --> 00:16:18,720 Speaker 1: could reverse I know that they know China is doing 298 00:16:18,760 --> 00:16:21,120 Speaker 1: what it's doing because they think that they would put 299 00:16:21,200 --> 00:16:25,920 Speaker 1: pressure on us in that regards and isolate us. Uh. 300 00:16:25,960 --> 00:16:29,960 Speaker 1: So the way that you change that is working with 301 00:16:30,000 --> 00:16:33,800 Speaker 1: the multi naturals collectively, putting them all together, figuring out 302 00:16:33,880 --> 00:16:35,960 Speaker 1: how we can work together to the their issues in 303 00:16:36,080 --> 00:16:39,120 Speaker 1: their in their concerns or resolved, and then putting that 304 00:16:39,200 --> 00:16:43,400 Speaker 1: proposition versus China. But they want to be there, sir, 305 00:16:44,000 --> 00:16:46,800 Speaker 1: That's ultimately the problem. They want to be there. They 306 00:16:46,800 --> 00:16:49,480 Speaker 1: want to strandle that fine line between pleasing you and 307 00:16:49,520 --> 00:16:51,760 Speaker 1: a progressive consumer base in the United States, and they 308 00:16:51,800 --> 00:16:54,480 Speaker 1: want a presence in China at the same time. So 309 00:16:54,480 --> 00:16:56,040 Speaker 1: I have to come back to the previous question. Is 310 00:16:56,040 --> 00:16:59,240 Speaker 1: it something you would consider banning these companies and making 311 00:16:59,280 --> 00:17:01,640 Speaker 1: the decision for all them fanning them from using Carton 312 00:17:01,680 --> 00:17:04,720 Speaker 1: from that region. See, I don't like to use the 313 00:17:04,760 --> 00:17:07,680 Speaker 1: word banging. I'd like to use the word working collective together. 314 00:17:08,160 --> 00:17:10,200 Speaker 1: And and that means that you can come to a 315 00:17:10,280 --> 00:17:14,400 Speaker 1: resolution collectively, you know, understanding they all have the same 316 00:17:14,440 --> 00:17:17,480 Speaker 1: business interests. I don't want them to to to to 317 00:17:17,480 --> 00:17:21,280 Speaker 1: to damage uh their business interests that they have UH 318 00:17:21,320 --> 00:17:23,680 Speaker 1: in China. I want China to be able to. You know, 319 00:17:23,880 --> 00:17:25,840 Speaker 1: one of the things is to open up their markets 320 00:17:26,200 --> 00:17:29,320 Speaker 1: in regards to our companies so that we can compete globally, 321 00:17:30,560 --> 00:17:33,760 Speaker 1: just as China competes. And we have an open economy 322 00:17:33,800 --> 00:17:37,360 Speaker 1: here in the United States, and that's equitable. And that's 323 00:17:37,400 --> 00:17:39,359 Speaker 1: what training is all about, that's what that's how you 324 00:17:39,400 --> 00:17:45,679 Speaker 1: work both national multinational corporations. So in my estimation, what 325 00:17:45,760 --> 00:17:49,439 Speaker 1: we wanna do is um is uh talk to our 326 00:17:49,520 --> 00:17:53,879 Speaker 1: multinationals and let them know that it is important for 327 00:17:53,920 --> 00:17:57,400 Speaker 1: them to work collected together in the long haul, all 328 00:17:57,440 --> 00:17:59,720 Speaker 1: of us in the long run if we work in 329 00:17:59,800 --> 00:18:02,960 Speaker 1: that and and that's in that cooperation. Congressman, is a 330 00:18:03,000 --> 00:18:05,399 Speaker 1: really dedicate issue right now, and I appreciate your input 331 00:18:05,480 --> 00:18:07,000 Speaker 1: on the subject. I'd love to catch up with you 332 00:18:07,000 --> 00:18:09,919 Speaker 1: against soon on it to Commeressman. Thank you, Congressman Gregory 333 00:18:09,960 --> 00:18:18,840 Speaker 1: makes that a Democrat from New York. It is the 334 00:18:18,880 --> 00:18:21,399 Speaker 1: micro day that leads to the macro call. And Ethan 335 00:18:21,440 --> 00:18:24,000 Speaker 1: Harris joins us right now, expert at the macro call, 336 00:18:24,080 --> 00:18:27,480 Speaker 1: but using the resources of his Bank of America where 337 00:18:27,520 --> 00:18:30,560 Speaker 1: he's head of Global Economics. Ethan, what I do is 338 00:18:30,600 --> 00:18:32,919 Speaker 1: I look at the parlor game of one year guests 339 00:18:33,240 --> 00:18:36,359 Speaker 1: or two year guests, and I take it considered Ethan 340 00:18:36,400 --> 00:18:39,880 Speaker 1: Harris average, that's what Michelle Meyer does, and I come 341 00:18:39,880 --> 00:18:43,240 Speaker 1: out with a Chinese economy. You guys have six and 342 00:18:43,280 --> 00:18:48,080 Speaker 1: a quarter percent economic growth spread out over twenty four months. 343 00:18:48,600 --> 00:18:52,680 Speaker 1: That is a Chinese equivalent economy. How will America and 344 00:18:52,800 --> 00:18:55,840 Speaker 1: adapt and adjust to this? If we have an economy 345 00:18:55,960 --> 00:19:00,439 Speaker 1: that's not structured like China, Well, we can grow at 346 00:19:00,440 --> 00:19:04,040 Speaker 1: that pace indefinitely. I mean, this is just a huge 347 00:19:04,840 --> 00:19:09,080 Speaker 1: fiscally fueled recovery, fastest recovery in history for the US 348 00:19:09,119 --> 00:19:12,560 Speaker 1: ecomy in the next two years. Um. And eventually we 349 00:19:12,600 --> 00:19:16,240 Speaker 1: have to slow down and so uh, you know by 350 00:19:16,280 --> 00:19:19,000 Speaker 1: the time we get to two thousand twenty three, Uh, 351 00:19:19,040 --> 00:19:20,920 Speaker 1: there's gonna have to be some changes here. The FED 352 00:19:21,040 --> 00:19:23,440 Speaker 1: is gonna have to pull back a bit. We can't 353 00:19:23,440 --> 00:19:26,720 Speaker 1: really afford to continue to do trillion dollar fiscal packages 354 00:19:26,800 --> 00:19:30,080 Speaker 1: every year. Um. We can't grow at Chinese rates. We 355 00:19:30,119 --> 00:19:33,800 Speaker 1: don't have the the population, we don't have the catching 356 00:19:33,840 --> 00:19:37,439 Speaker 1: up to do a new technology that China has. But 357 00:19:37,560 --> 00:19:40,520 Speaker 1: we can get to really robust years in a row. Ethan. 358 00:19:40,520 --> 00:19:42,720 Speaker 1: I've been looking at the account spending data that you 359 00:19:42,800 --> 00:19:46,040 Speaker 1: produce in your repulse, And I just wanted for you one, 360 00:19:46,080 --> 00:19:47,960 Speaker 1: what are you seeing right now? And so how useful 361 00:19:47,960 --> 00:19:50,119 Speaker 1: has that been just to have every twist and turn 362 00:19:50,560 --> 00:19:54,120 Speaker 1: spout out for you guys just ahead of time. Yeah, 363 00:19:54,200 --> 00:19:56,440 Speaker 1: I mean, we aggregate the data, so obviously we don't 364 00:19:56,440 --> 00:20:00,320 Speaker 1: know anything about the individuals involved in this data, um, 365 00:20:00,400 --> 00:20:04,520 Speaker 1: and we we gets turned out to correlate quite well 366 00:20:04,560 --> 00:20:08,120 Speaker 1: with turns and spending. And it's particularly interesting to look 367 00:20:08,160 --> 00:20:10,480 Speaker 1: at the spending behavior when you can match it up 368 00:20:10,520 --> 00:20:14,879 Speaker 1: to policy changes like the rollout of stimulus checks and 369 00:20:14,920 --> 00:20:18,320 Speaker 1: how that impacted households who got those checks. Um. And 370 00:20:18,359 --> 00:20:21,840 Speaker 1: what you found was that the stimulus checks really boosted 371 00:20:21,880 --> 00:20:25,639 Speaker 1: spending a lot, and it's one of the factors that 372 00:20:25,760 --> 00:20:30,000 Speaker 1: convinced us to get even higher above consensus on growth 373 00:20:30,119 --> 00:20:33,840 Speaker 1: with consumer spending. We think in the UH the start 374 00:20:33,840 --> 00:20:38,520 Speaker 1: of the year at almost twelve percent annualized rates. So 375 00:20:39,240 --> 00:20:42,080 Speaker 1: the stimulus check really have put a lot of caffeine 376 00:20:42,119 --> 00:20:44,840 Speaker 1: into the economy. Unreal numbers, Ethan, Just forgive me, just 377 00:20:44,840 --> 00:20:46,200 Speaker 1: give me a couple of minutes and I'll go through 378 00:20:46,240 --> 00:20:48,320 Speaker 1: some of your research for our audience. Least look at 379 00:20:48,320 --> 00:20:51,040 Speaker 1: this seven days ending mass. Now you can do the 380 00:20:51,119 --> 00:20:52,400 Speaker 1: year over year and you can look at the base 381 00:20:52,440 --> 00:20:54,359 Speaker 1: effects and we're up forty pc. But just look at 382 00:20:54,400 --> 00:20:59,879 Speaker 1: ten the last two years nineteen or rather into twentys 383 00:21:00,080 --> 00:21:03,760 Speaker 1: is twenty one. Right now we're up on a two 384 00:21:03,840 --> 00:21:06,720 Speaker 1: year basis for retouth souths. Looking at the credit spec 385 00:21:06,800 --> 00:21:08,720 Speaker 1: con spending that we got down to bank for America, 386 00:21:08,760 --> 00:21:11,240 Speaker 1: it's not a huge But when do we move from 387 00:21:11,240 --> 00:21:14,680 Speaker 1: recovery and just making up the lost ground into something 388 00:21:14,880 --> 00:21:18,679 Speaker 1: more sustainable and that something that has perhaps longer legs 389 00:21:18,920 --> 00:21:22,280 Speaker 1: adding to employment, adding to inflation over the longer term 390 00:21:22,280 --> 00:21:24,600 Speaker 1: and ethan, it seems like the consensus is this is 391 00:21:24,640 --> 00:21:27,080 Speaker 1: a momentary blip. Morgan Stanley is saying it will burn 392 00:21:27,200 --> 00:21:29,880 Speaker 1: hot and it'll burn short. Do you agree, or their 393 00:21:29,960 --> 00:21:32,520 Speaker 1: longer lasting legs from all of this spending that could 394 00:21:32,520 --> 00:21:35,320 Speaker 1: bleed into a faster economy for an even longer period 395 00:21:35,359 --> 00:21:38,480 Speaker 1: of time. Well, I mean it is true that that 396 00:21:38,480 --> 00:21:41,000 Speaker 1: that we're not going to grow at twelve percent every 397 00:21:41,080 --> 00:21:45,040 Speaker 1: quarter going forward, but the fade and growth is not 398 00:21:45,080 --> 00:21:47,399 Speaker 1: going to be that dramatic. Were we think by the 399 00:21:47,480 --> 00:21:50,040 Speaker 1: end of next year will be growing four percent instead 400 00:21:50,080 --> 00:21:53,120 Speaker 1: of twelve percent. That's still a great number. By historic 401 00:21:53,119 --> 00:21:55,639 Speaker 1: standards says double the normal growth rate of the US. 402 00:21:56,240 --> 00:21:58,879 Speaker 1: And the reason we think there's legs in this is 403 00:21:58,960 --> 00:22:02,440 Speaker 1: because they're going to continue to roll out fiscal stimulus. 404 00:22:02,520 --> 00:22:06,119 Speaker 1: We're going to get another two or three trillion UH 405 00:22:06,160 --> 00:22:09,040 Speaker 1: spread over the next four or five years UH. And 406 00:22:09,240 --> 00:22:13,040 Speaker 1: the Fed is put got both feet planted on the accelerator. 407 00:22:13,480 --> 00:22:16,399 Speaker 1: Keeping interest rates at zero in the face of a 408 00:22:16,520 --> 00:22:22,840 Speaker 1: strong recovery and rising inflation is very stimulative. It's unprecedented. 409 00:22:23,000 --> 00:22:26,200 Speaker 1: So I don't agree with this idea of a short 410 00:22:26,320 --> 00:22:29,760 Speaker 1: run kind of caffeine high that then goes away. I 411 00:22:29,800 --> 00:22:31,760 Speaker 1: do think we slowed down, but we slow down to 412 00:22:31,960 --> 00:22:34,919 Speaker 1: still strong rates. This is a really important point. And 413 00:22:34,960 --> 00:22:38,880 Speaker 1: you raised an issue of ongoing fiscal stimulus. How much 414 00:22:38,920 --> 00:22:42,159 Speaker 1: are you thinking about these checks, not maybe four hundred, 415 00:22:42,240 --> 00:22:45,720 Speaker 1: but still checks being sent to Americans as being the 416 00:22:45,840 --> 00:22:50,080 Speaker 1: precursor to some sort of universal basic income, some sort 417 00:22:50,160 --> 00:22:53,720 Speaker 1: of ongoing payments, and that the evidence of the spending 418 00:22:53,720 --> 00:22:56,600 Speaker 1: that John was just talking about being used to justify 419 00:22:56,680 --> 00:22:59,960 Speaker 1: that kind of plan. Well, you've got you've got elements 420 00:23:00,040 --> 00:23:03,200 Speaker 1: of this already in the various plans from out of 421 00:23:03,200 --> 00:23:06,440 Speaker 1: the administration. So we've already seen an increase in the 422 00:23:06,520 --> 00:23:11,320 Speaker 1: childcare credit just for the the next year, but it's 423 00:23:11,440 --> 00:23:13,800 Speaker 1: very likely that's going to be extended, So they're gonna 424 00:23:13,800 --> 00:23:17,919 Speaker 1: be elements of trying to support moderate income families that 425 00:23:17,960 --> 00:23:20,800 Speaker 1: are developed on a sustained basis. I don't think we 426 00:23:20,880 --> 00:23:24,600 Speaker 1: go to, you know, some of the more aggressive, broader 427 00:23:24,640 --> 00:23:27,760 Speaker 1: proposals around kind of guaranteeing incomes at certain levels. I 428 00:23:27,760 --> 00:23:30,080 Speaker 1: don't think we get to that. But there's a lot 429 00:23:30,119 --> 00:23:34,080 Speaker 1: of progressive elements to this, the stimulus and tom Here 430 00:23:34,119 --> 00:23:36,600 Speaker 1: is the conundrum, in my opinion, when it comes to inflation, 431 00:23:36,600 --> 00:23:39,520 Speaker 1: which is such a key issue for markets. The idea 432 00:23:39,600 --> 00:23:42,600 Speaker 1: here that if we start getting payments directly into the 433 00:23:42,600 --> 00:23:46,399 Speaker 1: economy and an ongoing basis, could that fuel an inflationary 434 00:23:46,440 --> 00:23:49,040 Speaker 1: push that perhaps people are not factoring in. And how 435 00:23:49,119 --> 00:23:52,320 Speaker 1: much does this finally lead to wage inflation that we 436 00:23:52,359 --> 00:23:55,320 Speaker 1: have not yet seen that the wage inflation questions there, 437 00:23:55,320 --> 00:23:58,119 Speaker 1: and we'll get that evidence on Friday. Dr Harris, I 438 00:23:58,160 --> 00:24:00,520 Speaker 1: want to go back to Columbia universe a city, in 439 00:24:00,560 --> 00:24:03,960 Speaker 1: particularly to the engineering work at Clark University that was 440 00:24:04,040 --> 00:24:07,240 Speaker 1: hit over your head at a young young age, and 441 00:24:07,280 --> 00:24:11,000 Speaker 1: it goes back to systems analysis and the idea of 442 00:24:11,080 --> 00:24:14,040 Speaker 1: many people that there has to be a cost. There 443 00:24:14,080 --> 00:24:17,520 Speaker 1: has to be a price to any zero sum system. 444 00:24:17,520 --> 00:24:20,320 Speaker 1: How do you have a boom with all the benefits 445 00:24:20,359 --> 00:24:23,080 Speaker 1: of a boom that we're all hoping for and have 446 00:24:23,200 --> 00:24:25,840 Speaker 1: that emotion And there's got to be a price to 447 00:24:25,920 --> 00:24:30,160 Speaker 1: this down the road. What's the Ethan Harris price that 448 00:24:30,200 --> 00:24:34,600 Speaker 1: we will pay? Right? It just gave my whole resume 449 00:24:34,680 --> 00:24:37,960 Speaker 1: away there, thank you for that. Um On the so 450 00:24:38,160 --> 00:24:40,280 Speaker 1: in the short run we can afford to have a 451 00:24:40,280 --> 00:24:42,760 Speaker 1: big bunch of deficits. We uh, we need to get 452 00:24:42,760 --> 00:24:45,920 Speaker 1: the economy out of this whole unemployment rate still over 453 00:24:45,960 --> 00:24:50,280 Speaker 1: six percent UM. But the problem is that while you 454 00:24:50,320 --> 00:24:52,440 Speaker 1: can kind of have you know, your cake and eat 455 00:24:52,480 --> 00:24:55,840 Speaker 1: it two during a recession and do this stimulus, once 456 00:24:55,880 --> 00:24:59,159 Speaker 1: you get into a full recovery, now you're competing for 457 00:24:59,280 --> 00:25:03,040 Speaker 1: resources between the private sector and the public sector. And 458 00:25:03,080 --> 00:25:06,359 Speaker 1: if you keep on rolling out big stimulus money and 459 00:25:06,440 --> 00:25:09,800 Speaker 1: financing through the bond market, you're going to starve the 460 00:25:09,840 --> 00:25:13,359 Speaker 1: private sector of capital. And that's where the danger comes. 461 00:25:13,400 --> 00:25:17,480 Speaker 1: It's not right now. My concern is, you know, we 462 00:25:17,520 --> 00:25:21,720 Speaker 1: get into a fully employed economy late next year, and 463 00:25:22,359 --> 00:25:25,879 Speaker 1: the nobody kind of hits the stops, that sees the 464 00:25:25,920 --> 00:25:28,520 Speaker 1: stop sign there, and we don't slow down at all. 465 00:25:28,680 --> 00:25:32,240 Speaker 1: And then we get computing resources, we get some inflation, 466 00:25:33,040 --> 00:25:36,000 Speaker 1: we get some crowding out of private investment. Because you 467 00:25:36,080 --> 00:25:39,359 Speaker 1: know what's fascinating Ethan about this in brilliant analysis, is 468 00:25:39,400 --> 00:25:43,800 Speaker 1: it versus a closed economy versus open economy. If we 469 00:25:43,960 --> 00:25:48,880 Speaker 1: get to a capital allocation moment two thousand twenty three, 470 00:25:48,960 --> 00:25:54,080 Speaker 1: two thousand twenty four, we do that in a global economy, 471 00:25:54,200 --> 00:25:57,800 Speaker 1: does that leak out into the global system. Yeah, I 472 00:25:57,800 --> 00:26:00,399 Speaker 1: mean we're gonna be we are drying going to driving 473 00:26:00,440 --> 00:26:03,240 Speaker 1: the global economy in the next couple of years to 474 00:26:03,280 --> 00:26:06,280 Speaker 1: a lesser degree. China as well. Um, we're gonna be 475 00:26:06,359 --> 00:26:09,600 Speaker 1: buying a tremendous amount of imports, so we're gonna be 476 00:26:09,640 --> 00:26:13,439 Speaker 1: exporting a big chunk of our fiscal stimulus um. And 477 00:26:13,480 --> 00:26:16,520 Speaker 1: we're gonna be relying on foreign capital to help fund 478 00:26:16,600 --> 00:26:19,800 Speaker 1: our economy. And so you know that's not free money, 479 00:26:19,840 --> 00:26:21,959 Speaker 1: that's money that you you know, you owe to the 480 00:26:21,960 --> 00:26:25,120 Speaker 1: rest of the world. Um. And so there's a growing 481 00:26:25,119 --> 00:26:27,200 Speaker 1: indebted as the US to the rest of the world 482 00:26:27,600 --> 00:26:30,800 Speaker 1: continue to borrow like crazy. So we're gonna have bigger 483 00:26:30,840 --> 00:26:36,000 Speaker 1: trade deficits can sustain high budget deficits. This isn't a 484 00:26:36,040 --> 00:26:38,920 Speaker 1: free lunch here, yeah, John, this is so so important. 485 00:26:39,040 --> 00:26:41,399 Speaker 1: Goes back to Bill Gross years ago talking about the 486 00:26:41,440 --> 00:26:44,720 Speaker 1: locomotive of the system, and as Dr Harris says, there's 487 00:26:44,760 --> 00:26:47,440 Speaker 1: no question the US is a locomotive front and center 488 00:26:47,680 --> 00:26:49,320 Speaker 1: very much. You can see that in the data at 489 00:26:49,320 --> 00:26:51,560 Speaker 1: the moment the recovery and China is already mature, you 490 00:26:51,600 --> 00:26:54,200 Speaker 1: see in the credit Impulse data as well. So Ethan, 491 00:26:54,200 --> 00:26:56,640 Speaker 1: we've gotta leave you there. Ethan Harris, Bank for America Securities, 492 00:26:56,640 --> 00:27:00,720 Speaker 1: Head of Global Economics. Thank you. This is the Bloomberg 493 00:27:00,760 --> 00:27:05,080 Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from 494 00:27:05,119 --> 00:27:08,520 Speaker 1: seven to ten am Eastern on Bloomberg Radio and on 495 00:27:08,600 --> 00:27:12,879 Speaker 1: Bloomberg Television each day from six to nine am for 496 00:27:13,119 --> 00:27:18,040 Speaker 1: insight from the best in economics, finance, investment, and international relations. 497 00:27:18,520 --> 00:27:23,200 Speaker 1: And subscribe to the Surveillance Podcast on Apple podcast, SoundCloud, 498 00:27:23,359 --> 00:27:26,920 Speaker 1: Bloomberg dot com, and of course on the terminal. I'm 499 00:27:27,000 --> 00:27:29,639 Speaker 1: Tom Keene and this is Bloomberg