WEBVTT - Surveillance: Davos, Day 1 (Podcast) 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.160 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:30.240 and of course, on the Bloomberg Terminal. Let's get started 0:00:30.280 --> 0:00:34.200 now at these world Economic for meetings with someone who 0:00:34.200 --> 0:00:38.480 can synthesize it together. Jason Furman. He's professor at Harvard 0:00:38.560 --> 0:00:41.320 Kennedy School, former chairman of the U S Council of 0:00:41.360 --> 0:00:44.519 Economic Advisors. What he does more than anyone in this 0:00:44.720 --> 0:00:48.640 nation is stand up in front of bright cherubs and 0:00:48.720 --> 0:00:52.080 teach them their first course in economics at Harvard. He 0:00:52.360 --> 0:00:54.800 is the one who has followed on from mank You 0:00:54.920 --> 0:01:00.120 and Martin Feldstein to deliver what's called eck ten. What 0:01:00.120 --> 0:01:02.760 did you say in the first week of May to 0:01:03.440 --> 0:01:06.119 the eager students who have never seen a buying market 0:01:06.240 --> 0:01:10.200 like this and never seen the second derivative moves that 0:01:10.280 --> 0:01:13.920 we're seeing in markets as it relates to our economy. Well, 0:01:13.920 --> 0:01:15.800 to my students, I told them that when the price 0:01:15.840 --> 0:01:21.319 goes down, the yield goes up. Where do we need 0:01:21.360 --> 0:01:25.000 somebody tired? I think your viewers are probably on top 0:01:25.040 --> 0:01:27.400 of that one already. Um, what I'm not sure your 0:01:27.440 --> 0:01:29.880 viewers are on top of is that I think this 0:01:29.920 --> 0:01:32.360 inflation is going to be pretty persistent, not where it 0:01:32.480 --> 0:01:34.520 is now, but way above where the Fed wants it 0:01:34.600 --> 0:01:36.520 going to be to be. That means the Fed is 0:01:36.560 --> 0:01:38.800 going to need to stay at it. A FED funds 0:01:38.840 --> 0:01:42.720 right to four percent or higher, completely plausible, not at 0:01:42.760 --> 0:01:44.920 all priced into the market right now because a lot 0:01:45.000 --> 0:01:47.560 of people like Marky Batel who was just on, believes 0:01:47.560 --> 0:01:49.640 that the Federals are will come out and they will 0:01:49.640 --> 0:01:53.840 rescue the markets. And you're saying, no way why because 0:01:54.040 --> 0:01:57.560 we are way above our inflation target. That is the 0:01:57.680 --> 0:02:01.320 job the Fed was assigned. You have a share who 0:02:01.360 --> 0:02:04.120 talks about himself in the sort of wake of Paul 0:02:04.200 --> 0:02:07.600 Boker and that historical shadow. He wants to bring that 0:02:07.680 --> 0:02:10.600 inflation down right now. The market is helping him do 0:02:10.720 --> 0:02:13.800 his job. I think this is not an accident. This 0:02:13.880 --> 0:02:17.120 is almost something that they are fine with. We were laughing. 0:02:17.200 --> 0:02:19.680 We shouldn't have been laughing completely because the prospect of 0:02:19.680 --> 0:02:22.480 a recession is horrendous. Do you think it's avoidable, as 0:02:22.520 --> 0:02:25.040 Joe Biden said, or do you think the Fed frankly 0:02:25.360 --> 0:02:28.120 has to essentially allow that to happen to cool the 0:02:28.160 --> 0:02:31.919 inflation as it is over the next year. I'm not 0:02:32.040 --> 0:02:34.920 that worried. I mean, I'm always attent for a recession. 0:02:35.080 --> 0:02:38.400 Maybe I'm at now for the next year, but not 0:02:38.520 --> 0:02:41.800 much higher. Consumers are still spending a lot, there's people 0:02:41.840 --> 0:02:46.080 coming off the sidelines for jobs. This more inventory rebuilding 0:02:46.080 --> 0:02:48.560 to be done. When you look after this year, that's 0:02:48.600 --> 0:02:50.360 when I get more worried. That's when more of the 0:02:50.360 --> 0:02:54.200 FED rate hikes start to kick in and affecting the economy. Jason, 0:02:54.280 --> 0:02:57.680 the pungentry out there right now, I've never seen It's 0:02:57.680 --> 0:03:02.200 worth some two thousand nine. Those pundits are silent when 0:03:02.280 --> 0:03:06.359 they listen to you within the geometry of where we are. 0:03:06.520 --> 0:03:09.119 When we get interest rates to slam like they are 0:03:09.520 --> 0:03:12.239 when you give us the fear of a terminal rate 0:03:12.320 --> 0:03:15.680 to four percent, how does that link in to the 0:03:15.800 --> 0:03:21.760 actual assumption of bonds and separately, the total return of equities. Yeah, 0:03:21.880 --> 0:03:26.560 I think that the long bonds haven't fully priced in that. 0:03:26.760 --> 0:03:29.160 You know, they think the Fed's gonna stop at three percent. 0:03:29.720 --> 0:03:31.840 That might happen. We might hit a recession and they 0:03:31.840 --> 0:03:34.440 go back to zero, but that we could be at four, 0:03:34.600 --> 0:03:38.560 well above four. I think that's the modal scenario. When 0:03:38.560 --> 0:03:41.200 you look at something like the long yields, those just 0:03:41.320 --> 0:03:43.200 haven't gone up the same way they have on the 0:03:43.200 --> 0:03:46.760 front end. Or Benjamin Friedman, the giant of Harvard Economics, 0:03:46.840 --> 0:03:49.280 let's go back to the Napoleonic Wars, or the Panic 0:03:49.360 --> 0:03:52.920 of eighteen seventy, the gyrations out of World War One, 0:03:53.240 --> 0:03:56.839 of fractured Europe and all. That's the arch fear that's 0:03:56.880 --> 0:04:00.600 out there for truly a generation or two that have 0:04:00.680 --> 0:04:04.280 not enjoyed what we're in right now. What does it 0:04:04.520 --> 0:04:07.400 do to a portfolio? What does it do to a 0:04:07.480 --> 0:04:10.840 pension fund? Yeah? I mean that interest rate shows up 0:04:10.880 --> 0:04:14.440 in every single stock price as on the discount factor. 0:04:14.560 --> 0:04:18.200 That's why you know almost every single stock price is 0:04:18.360 --> 0:04:23.160 going down right now. Leverage locas from like you trying 0:04:23.200 --> 0:04:25.680 to pitch that is how what you're going They want 0:04:25.720 --> 0:04:27.720 me to start it if they wann't starting the E 0:04:27.880 --> 0:04:30.360 T F for an n n F T. Remember what 0:04:31.240 --> 0:04:36.520 I can imagine defense the fear here, Jason, is if 0:04:36.560 --> 0:04:39.200 we get a further first and second to rivetive move 0:04:39.279 --> 0:04:42.440 that we've all enjoyed for four months, that we're going 0:04:42.480 --> 0:04:45.560 to get a true negative thirty five percent. Now, we're 0:04:45.600 --> 0:04:48.719 gonna get bonds like we've never never seen back to 0:04:48.760 --> 0:04:51.560 say the thirties. Do you ascribe to them. I think 0:04:51.600 --> 0:04:56.160 that's a possibility. Look, I focused more on the real economy. 0:04:56.200 --> 0:04:58.360 I look at households that have two point three trillion 0:04:58.400 --> 0:05:01.479 dollars still saved up from all the transfers they got 0:05:01.480 --> 0:05:04.160 over the last two years. I look at businesses who 0:05:04.320 --> 0:05:07.320 still are facing pretty good financing if they want to 0:05:07.360 --> 0:05:12.640 make more investments. I look at a global environment where 0:05:12.680 --> 0:05:16.159 the dollar strength is you know, worrying me, and the 0:05:16.240 --> 0:05:19.440 down draft we're getting on net exports. So I'm looking 0:05:19.520 --> 0:05:22.880 at those factors overall. You know, I think we're gonna 0:05:22.880 --> 0:05:24.880 see a lot of jobs this year. So there are 0:05:24.920 --> 0:05:27.359 some people who believe that the more we see a 0:05:27.360 --> 0:05:30.120 momentum and a lack of recession now, the worst it 0:05:30.160 --> 0:05:32.800 will be later. And they point to people levering up 0:05:32.800 --> 0:05:35.600 on the consumer side once again in order to fuel 0:05:35.640 --> 0:05:39.120 their purchases even at higher prices. Do you agree I 0:05:39.160 --> 0:05:42.360 think that's possible. It really depends, you know, the fat things. 0:05:42.360 --> 0:05:44.320 Inflation is coming down to two and a half percent. 0:05:45.279 --> 0:05:48.640 If that happens in this sort of a chance it happens, 0:05:49.040 --> 0:05:51.480 that will be wonderful. We can avoid all these things 0:05:51.760 --> 0:05:54.800 if inflation stays stuck at four and a half five percent, 0:05:54.920 --> 0:05:58.480 and that's roughly where the underlying inflation rate is right now. Um. 0:05:58.960 --> 0:06:00.680 I don't know what sort of and you'd need if 0:06:00.720 --> 0:06:03.960 you want to bring it back down. One minute long 0:06:04.000 --> 0:06:08.239 agoing far away, a Columbia professor saw a kid at Harvard, 0:06:08.240 --> 0:06:11.080 and you said, this kid is different. He's gonna work 0:06:11.080 --> 0:06:15.280 with me. How dead on was your mentor? Joe Stiglets 0:06:15.279 --> 0:06:21.080 on globalization and its discontents. It's shocky I saw Joe. Joe. 0:06:21.160 --> 0:06:24.240 Joe doesn't love globalization, but Joe likes it here in Davos. 0:06:24.880 --> 0:06:29.799 Uh um uh. You know. I think I think we're 0:06:29.800 --> 0:06:32.800 seeing a pause and globalization. I think we're seeing a plateau. 0:06:33.120 --> 0:06:35.440 I don't think we're going to see that bigger transtrument 0:06:35.520 --> 0:06:39.080 because there are so many efficiency gains from operating all 0:06:39.120 --> 0:06:42.200 over the world. We'll see some recalibration, but I don't 0:06:42.200 --> 0:06:43.840 think there's going to be a big withdrawal from it. 0:06:43.839 --> 0:06:45.600 And I don't think there should be in the agreement 0:06:45.680 --> 0:06:47.680 that we have folks. Just so you understand this is 0:06:47.720 --> 0:06:49.359 I get to choose one guest, so we have the 0:06:49.400 --> 0:06:53.240 optimism of Jason Furman and you stiglets. We haven't ye 0:06:53.360 --> 0:06:56.880 Siglets will be coming up and he'll be character we said, 0:06:56.920 --> 0:06:59.200 we heard that you like globalization here at Davos, I 0:06:59.240 --> 0:07:01.120 was wishing, I told us. And we'll see what he 0:07:01.120 --> 0:07:11.720 responds to get a start of here in Dovlson right 0:07:11.760 --> 0:07:14.000 now at the conversation Tom that we're about to have 0:07:14.160 --> 0:07:17.440 really sums up. Can we get a reprieve from the 0:07:17.560 --> 0:07:21.160 seven straight weeks of declines the longest stretch going back 0:07:21.200 --> 0:07:24.040 to two thousand one? Is this what we're seeing this morning? 0:07:24.440 --> 0:07:26.360 Head fake? Or is it really the start of a 0:07:26.400 --> 0:07:28.920 by the depth and it goes to the synthesis that 0:07:29.000 --> 0:07:33.920 we're in here, and it's the market coverage of equities, bonds, currencies, bonds. 0:07:33.960 --> 0:07:37.440 Rebecca Patterson has dealt in all those areas and it's 0:07:37.480 --> 0:07:41.160 culminated after her work at Bessemer with Bridgewater, where she 0:07:41.240 --> 0:07:44.440 is chief investment strategist with a guy named Prince and 0:07:44.520 --> 0:07:47.600 Dalio as well our Prince, our Prince and Dalio in 0:07:47.640 --> 0:07:52.200 speaking terms, absolutely, Okay, what what's the latest meetings like 0:07:52.320 --> 0:07:57.440 in terms of the volatility we're seeing, the complexities and nuances. 0:07:57.520 --> 0:08:00.800 What is the tone within your meetings as you assess 0:08:01.320 --> 0:08:06.400 is two thousand twenty two. Well, obviously, as you hinted 0:08:06.440 --> 0:08:09.200 at least that there's just so much changing now structurally 0:08:09.240 --> 0:08:11.920 as well as cyclically, and so there's a lot of 0:08:12.040 --> 0:08:14.200 people saying, where are we going not just the next 0:08:14.240 --> 0:08:16.720 month or next quarter, but the next five to ten years. 0:08:16.760 --> 0:08:19.880 If we do deglobalize or regionalize, what does that look like? 0:08:19.920 --> 0:08:22.680 What are the implications of that? As well as the 0:08:22.680 --> 0:08:25.520 short term worries over can the Fed? Will the FED 0:08:25.640 --> 0:08:28.720 tighten enough to get inflation back down to its target? 0:08:28.840 --> 0:08:31.920 If we have higher, stickier inflation for longer, how does 0:08:31.960 --> 0:08:35.000 that flow through to the market. So a lot of uncertainty. 0:08:35.000 --> 0:08:36.760 If I had to sum it up, how do you 0:08:36.880 --> 0:08:39.240 determine whether a move like what we're seeing ahead of 0:08:39.240 --> 0:08:41.960 the open today is a head fake or not. Well, 0:08:41.960 --> 0:08:44.959 we don't trade daily wiggles in the market, so we'd 0:08:45.000 --> 0:08:48.160 take a step back and say, Okay, what's discounted? A 0:08:48.200 --> 0:08:50.079 lot has changed since the beginning of the year. I 0:08:50.120 --> 0:08:53.400 think the biggest change has been discounted tightening by central banks, 0:08:53.440 --> 0:08:56.480 particularly the FED, and we have seen that flow through 0:08:56.559 --> 0:08:59.040 clearly to the bond market, and we have seen the 0:08:59.040 --> 0:09:02.560 equity declined so far largely a function of the change 0:09:02.559 --> 0:09:05.840 and discount rates. You haven't seen a major change in 0:09:06.000 --> 0:09:09.520 expected earnings growth, and so that to us is the 0:09:09.559 --> 0:09:12.199 thing we're watching. If this is a head fake or continuing, 0:09:12.520 --> 0:09:14.280 that would be the shoe to drop. If the FED 0:09:14.360 --> 0:09:17.360 continues to tighten to try to reduce demand to get 0:09:17.400 --> 0:09:20.439 inflation under control, I would expect to see that flow 0:09:20.520 --> 0:09:24.320 through into discounted growth, which then eventually should bring equities 0:09:24.360 --> 0:09:27.560 that next leg lower. For years, people were saying that 0:09:27.720 --> 0:09:30.600 markets were benefiting even though the economy was not, and 0:09:30.600 --> 0:09:34.520 it actually we saw all of the financialization represented by 0:09:34.559 --> 0:09:37.880 an STP on a vertical trajectory. Are we heading into 0:09:37.920 --> 0:09:40.320 the opposite? Can we be heading into the opposite where 0:09:40.360 --> 0:09:43.800 we see markets lag behind an economy that continues to 0:09:43.840 --> 0:09:46.439 be strong. Actually, that has been our view and continues 0:09:46.480 --> 0:09:48.959 to be our view as we look ahead, that we're 0:09:48.960 --> 0:09:51.959 in a situation now where the nominal economy is likely 0:09:52.000 --> 0:09:56.640 to outperform financial markets fairly substantially. UM and that is 0:09:56.840 --> 0:09:59.640 mainly a function of the policy reaction we got during 0:09:59.640 --> 0:10:03.040 the pan stomach, all the fiscal and monetary stimulus that 0:10:03.120 --> 0:10:06.319 came through and left households wealthier than before the pandemic, 0:10:06.559 --> 0:10:09.760 corporate balance sheets stronger than before the pandemic. It gives 0:10:09.760 --> 0:10:12.760 them a cushion to withstand the tightening. So it is 0:10:12.760 --> 0:10:15.160 going to feed through to markets. And obviously that wealth 0:10:15.160 --> 0:10:18.040 effect will also feed through to the economy. But that's 0:10:18.040 --> 0:10:21.240 starting strong. Non no point for the economy means financial 0:10:21.240 --> 0:10:25.319 assets could underperform. You've got it, Bridgewater and your fancy kitchen. 0:10:25.360 --> 0:10:27.960 They get the whole sub zero thing like the big stone. 0:10:28.040 --> 0:10:35.000 Look who's talking blue? Hello, Regalile memorial pressure cooker. And 0:10:35.000 --> 0:10:37.240 the only reason I hired you is the steam coming 0:10:37.280 --> 0:10:40.440 out of the kettle. Is the currency market? To me 0:10:40.559 --> 0:10:44.360 the conundrum here, and you beautifully describe the fiscal impulse 0:10:44.440 --> 0:10:47.280 and the wealthy that occurred, and maybe the d well 0:10:47.360 --> 0:10:52.320 thing that's occurred. Now, what what releases the pressure is 0:10:52.400 --> 0:10:56.679 dollar dynamics? What kind of pressures will we see? Well, 0:10:56.720 --> 0:10:59.080 I think the most important thing to understand about the 0:10:59.080 --> 0:11:03.400 dollar right now is how quickly our external need for 0:11:03.400 --> 0:11:07.040 foreign capital is increasing. So if you go on your 0:11:07.040 --> 0:11:09.600 Bloomberg page, it will show our current account deficit for 0:11:09.600 --> 0:11:11.760 the United States at around three and a half percent, 0:11:11.760 --> 0:11:15.720 which is already a big widening. Our timely estimates suggest 0:11:15.840 --> 0:11:18.840 us closer to five or six percent of GDP. And 0:11:18.920 --> 0:11:21.160 so for the dollar to stay supported, we need to 0:11:21.160 --> 0:11:24.560 continue getting enough capital to offset that, and we think 0:11:24.600 --> 0:11:27.480 there's a growing risk around that. So the dollar we 0:11:27.520 --> 0:11:30.160 think is vulnerable on a cyclical basis and also a 0:11:30.160 --> 0:11:32.800 structural basis. This is important, Steve Roach one oh one. 0:11:32.880 --> 0:11:36.240 Someone has supported us for years here and and Davos. 0:11:36.480 --> 0:11:39.400 And if we get a twin deficit, do you link 0:11:39.520 --> 0:11:44.800 those two together mathematically or philosophically? Do you link current 0:11:44.840 --> 0:11:49.959 account with recession bloom together or the two separate events. Well, 0:11:49.960 --> 0:11:53.000 they are mathematically linked, as as you know. Well, Tom, 0:11:53.000 --> 0:11:57.040 you're being humble, Yeah you do. But I think what 0:11:57.040 --> 0:12:00.960 what we're following. It's like this is a tip, surveillance tip. 0:12:01.240 --> 0:12:04.000 Don't ask the question unless you know the answer. It's 0:12:04.040 --> 0:12:08.120 just like judge, Judy, continue, so that the current account, 0:12:08.120 --> 0:12:10.800 the balance of payments is what I'm focused on, relatively 0:12:10.840 --> 0:12:14.040 more um and so that financing need is the is 0:12:14.080 --> 0:12:16.679 the canary in the coal mine. If US growth continues 0:12:16.760 --> 0:12:19.400 to outperform the rest of the world, if interest rates 0:12:19.440 --> 0:12:21.679 in the US continue to be so much more attractive, 0:12:21.760 --> 0:12:24.400 both on an absolute level and on a change basis, 0:12:24.800 --> 0:12:27.440 that maybe the US does continue to hold up for 0:12:27.520 --> 0:12:30.680 the dollar. But it's a question market where do Where 0:12:30.679 --> 0:12:33.120 does the money go if it doesn't go to the Well, 0:12:33.280 --> 0:12:36.120 let's look, let's look. I mean you're to date, Japanese 0:12:36.160 --> 0:12:39.520 equities are actually outperforming US equities if you take out 0:12:39.520 --> 0:12:43.560 the currency effect. Um UK stocks are outperforming US stocks, 0:12:43.559 --> 0:12:46.719 Some emerging market equities are outperforming, and so not all 0:12:46.760 --> 0:12:49.600 the capital is flooding here. It is looking for opportunities 0:12:49.600 --> 0:12:53.199 where policymakers are less constrained, where valuations are a lot 0:12:53.280 --> 0:12:56.600 less demanding, where positions where exposure is is a lot 0:12:56.640 --> 0:12:59.640 more moderate. What you said about yields being attractive to 0:12:59.720 --> 0:13:02.240 other nations, how high do treasure yields have to go 0:13:02.600 --> 0:13:05.679 in order to remain that attractive to support the dollar. 0:13:05.840 --> 0:13:07.880 That's a great question, and I don't have a number 0:13:07.920 --> 0:13:10.760 for you. But what what is interesting to us when 0:13:10.760 --> 0:13:12.719 we look at the bond market, so we try to 0:13:12.800 --> 0:13:15.840 understand all the different players in every market. What motivates 0:13:15.880 --> 0:13:17.880 them to buy or sell. And when we look at 0:13:17.880 --> 0:13:20.640 the US bond market today, even though you have less 0:13:20.679 --> 0:13:24.720 issuance for the FED, flipping from quantitative easy into quantitative 0:13:24.800 --> 0:13:29.240 tightening is obviously very significant. But the big player that 0:13:29.280 --> 0:13:32.199 we're watching that we think is is suggest more upside 0:13:32.200 --> 0:13:35.240 for bond yields are banks. So a year ago you 0:13:35.360 --> 0:13:37.840 had a steep curve, you had a ton of deposits 0:13:37.840 --> 0:13:39.839 coming in and the banks were putting that into bonds, 0:13:39.920 --> 0:13:42.120 so you had a lot of demand keeping down the yield. 0:13:42.480 --> 0:13:46.120 That's over the curve is flatter, the deposit inflow is slower, 0:13:46.440 --> 0:13:49.280 so there's less bank buying of bonds to hold down 0:13:49.280 --> 0:13:51.599 the yield. So when we look at who's going to 0:13:51.679 --> 0:13:54.520 buy those bonds if the Feds out, we still see 0:13:54.520 --> 0:13:57.680 a supply demand and balance that to us suggest yields higher. 0:13:57.720 --> 0:13:59.400 I don't know what the magic number is, but we 0:13:59.440 --> 0:14:01.319 still think we have further to go on the upside. 0:14:01.360 --> 0:14:04.120 To go. Electrical engineering on you, this is within the 0:14:04.160 --> 0:14:07.120 perfect electrical system of Switzerland, and trust me, folks, it 0:14:07.200 --> 0:14:11.840 is perfect. The slew rates here that you're describing, how 0:14:11.880 --> 0:14:16.800 do you affect an interest rate parody strategy? A sophisticated 0:14:16.920 --> 0:14:21.080 hedge if you will. Given SLEW rates we've never seen before. 0:14:21.680 --> 0:14:24.400 Are you talking about risk parity? Are we talking about Yeah? 0:14:24.560 --> 0:14:27.760 So what's so interesting to me about all of this 0:14:28.040 --> 0:14:30.840 is when you think about how most investors in the 0:14:30.840 --> 0:14:33.160 world of position for the last one or two decades, 0:14:33.800 --> 0:14:36.840 they have been biased towards rising growth and falling inflation. 0:14:36.920 --> 0:14:39.440 That's sixty forty, right, You're going to do your equities 0:14:39.440 --> 0:14:41.600 do well and growth is rising, et cetera. Right, it 0:14:41.640 --> 0:14:44.720 worked great till now and the world has gone upside down. 0:14:45.200 --> 0:14:48.280 So now we have falling growth and rising inflation. Obviously 0:14:48.280 --> 0:14:51.560 we've seen the portfolio hit those folks have taken. The 0:14:51.600 --> 0:14:55.120 difference with risk parity strategies is that their balance for 0:14:55.200 --> 0:14:59.400 growth and inflation. So even if bond deals are going up, 0:14:59.480 --> 0:15:02.360 you have Allan's and other parts of the portfolio, namely 0:15:02.480 --> 0:15:05.720 commodities and other inflation sensitive assets, so they tend to 0:15:05.720 --> 0:15:08.760 hold up better through the cycles, including these periods. If 0:15:08.880 --> 0:15:10.440 they let me go back to New York, can you 0:15:10.520 --> 0:15:13.240 come back and visit us to continue this discussion. Of course, 0:15:13.800 --> 0:15:17.720 it's the arch financial question for our listeners and viewers 0:15:18.000 --> 0:15:28.880 is the death of calibration? Rebecca Patterson just brilliant right now, Well, 0:15:28.880 --> 0:15:30.680 we've got a lot of things to speak of in 0:15:30.720 --> 0:15:35.160 a one hour conversation. We will compress with John Kerry. 0:15:35.360 --> 0:15:39.040 He is U S Special Climate Envoy and former U 0:15:39.120 --> 0:15:42.640 S Secretary of State, and whatever your politics, he is 0:15:42.720 --> 0:15:46.160 someone who has honed our political debate of this nation 0:15:46.560 --> 0:15:49.520 for decades. It started at St. Paul's School. You're up 0:15:49.520 --> 0:15:52.720 at St. Paul's in Conquered New Hampshire. A few years 0:15:53.120 --> 0:15:57.640 that debate and discussion was beaten into you, wasn't it. 0:15:57.800 --> 0:16:02.480 At Although we we had to tradition of back and 0:16:02.520 --> 0:16:06.720 forth socratic, it was a it was a really important 0:16:06.720 --> 0:16:10.680 tradition back then. What happened to America where we walked 0:16:10.680 --> 0:16:16.240 away from the niceties of debate? Um? Well, the United 0:16:16.240 --> 0:16:20.640 States Senate used to be the greatest deliberative body in 0:16:20.680 --> 0:16:25.240 the world, and obviously a lot of people are anxious 0:16:25.280 --> 0:16:29.120 about where the deliberation is today. It's it's changed, It's 0:16:29.160 --> 0:16:31.960 really changed. I think what happened is in the ninety 0:16:32.080 --> 0:16:36.560 nineties are politics changed? It became far angrier, far more intense, 0:16:37.080 --> 0:16:41.240 far more personal. You remember the discussions of politics of 0:16:41.320 --> 0:16:44.840 personal destruction and now, um, we have a lot of 0:16:44.880 --> 0:16:49.200 angry people who are who are appropriately angry on either 0:16:49.280 --> 0:16:52.560 side of the aisle right left, and they just don't 0:16:52.600 --> 0:16:54.600 feel the government's delivering to them, and we have to 0:16:54.680 --> 0:16:58.040 change that. How does the US lead with such disunity 0:16:58.080 --> 0:17:01.680 at home? Oh? I think President Biden and showing you 0:17:01.720 --> 0:17:05.560 how you lead right now, he's in Asia uh and 0:17:05.840 --> 0:17:09.880 uh meeting with the Quad. He's been leading on global 0:17:09.920 --> 0:17:14.200 climate to change around the world. He put America back 0:17:14.280 --> 0:17:17.159 into the into put the United States back into the 0:17:17.160 --> 0:17:23.280 Paris Agreement, helped raise ambition in Glasgow, make Glasgow of success. Um. 0:17:24.280 --> 0:17:27.400 You know, I think people understand that we had four 0:17:27.480 --> 0:17:31.720 difficult years. The country decided that was an aberration and 0:17:31.840 --> 0:17:37.480 elected President Biden. Now, Uh, we're in the busy building 0:17:37.520 --> 0:17:40.520 back process. But I think we've made a lot of 0:17:40.520 --> 0:17:44.440 progress of last year. The helicopter flying over says gop 0:17:44.640 --> 0:17:48.120 on the side of it. I think that's what right now, 0:17:48.560 --> 0:17:51.000 the Senator Kerry, I want to talk to you about climate. 0:17:51.359 --> 0:17:53.520 I was blown away a number of years ago with 0:17:54.240 --> 0:17:57.840 the Bank of America people. You you are not another 0:17:57.960 --> 0:18:02.160 face talking climate, You're not another celeb talking client. You've 0:18:02.200 --> 0:18:05.800 actually leaned over the desk uh in Boston and said, 0:18:06.000 --> 0:18:09.200 I gotta learn the math. I gotta learn the statistics. 0:18:09.440 --> 0:18:12.800 It's been knocked asunder by the price of coal by 0:18:12.800 --> 0:18:17.600 this war in Ukraine. What is your strategy to sustain 0:18:17.840 --> 0:18:22.320 our focus on climate change given the tumult is measured 0:18:22.520 --> 0:18:26.120 by the price of coal. Well, President Biden is determined 0:18:26.160 --> 0:18:28.040 that over the course of the next months, we're gonna 0:18:28.040 --> 0:18:30.840 get ready for the next meeting by trying to raise 0:18:30.880 --> 0:18:34.560 ambition around the world. We are very busy right now 0:18:35.320 --> 0:18:40.119 working with specific countries Indonesia, Vietnam, South Africa, India to 0:18:40.240 --> 0:18:43.159 bring capital to the table, to bring the finance and 0:18:43.240 --> 0:18:47.560 the technology to help them be able to deploy UH 0:18:47.600 --> 0:18:51.679 to meet the goals of the Glasgow Powers Agreement. But 0:18:52.040 --> 0:18:55.040 in addition to that, we have to work to get 0:18:55.080 --> 0:18:59.480 the trillions of dollars deployed. This is going to cost 0:18:59.720 --> 0:19:04.440 Litter League trillions of dollars in order to effect the transitions. 0:19:05.320 --> 0:19:08.600 And the way that we can do that is by 0:19:08.680 --> 0:19:13.920 bringing various players to the table, philanthropy to help blend 0:19:14.080 --> 0:19:18.000 the finance. So you have people taking first risk, people 0:19:18.040 --> 0:19:22.800 who are de risking the investment and hopefully UH there 0:19:22.840 --> 0:19:24.680 are a lot of folks doing that we have companies 0:19:24.720 --> 0:19:28.200 that are now signing up. On Wednesday, we'll be making 0:19:28.240 --> 0:19:30.920 a major announcement with Bill Gates and Mark many Off 0:19:30.920 --> 0:19:35.640 of Salesforce, others of CEOs who are directing their companies 0:19:36.080 --> 0:19:40.879 to become first movers. They're they're they're creating demand in 0:19:40.920 --> 0:19:44.880 the marketplace. Ordering ten of the steel Volvo or Ford 0:19:44.920 --> 0:19:49.000 Motor Company will buy is going to be uh green 0:19:49.119 --> 0:19:52.800 steel cement. The largest cement dealer in the world. Fulls 0:19:52.840 --> 0:19:56.719 in Lafarte is producing green cement. I mean there's just 0:19:56.840 --> 0:20:01.000 a whole range of things and aluminum in in car removal, 0:20:01.600 --> 0:20:04.560 in shipping. We only have a couple of minutes left 0:20:04.560 --> 0:20:07.280 and I do want to get your sense on gas. 0:20:07.320 --> 0:20:10.240 You've talked about natural gas being central to the transition 0:20:10.359 --> 0:20:13.600 to a greener future, but not talked about investing over 0:20:13.640 --> 0:20:15.720 the next thirty to forty years. Because you're hoping to 0:20:15.760 --> 0:20:18.760 transition away from that. How do you dovetail them now 0:20:19.240 --> 0:20:26.040 into the future. I think it's critical that lending institutions 0:20:26.080 --> 0:20:28.560 that have a vast amount of capital involved in the 0:20:28.600 --> 0:20:33.760 fosil field industry begin to demand more from that industry. 0:20:34.720 --> 0:20:38.760 It is appropriate, I think to have a gas transition 0:20:39.200 --> 0:20:42.639 for a short period for some period of time while 0:20:42.760 --> 0:20:46.639 you bring technology to scale that is going to change 0:20:46.640 --> 0:20:50.960 altogether what we're doing. The enormous amount of research right now, 0:20:51.280 --> 0:20:54.000 and frankly it's about a trillion dollars of venture capital 0:20:54.320 --> 0:20:58.960 already moving towards these new technologies green hydrogen, longer battery storage, 0:20:59.200 --> 0:21:02.919 direct air have been capture, green hydraten. I mean, there 0:21:03.040 --> 0:21:05.000 there are things that are going to just change the 0:21:05.040 --> 0:21:08.280 way businesses do business, and that's going to be part 0:21:08.280 --> 0:21:11.720 of this revolution. I think we're looking at and I 0:21:11.760 --> 0:21:14.760 don't think this is exaggeration. We're looking at the largest 0:21:15.200 --> 0:21:19.800 economic opportunity and transformation since the Industrial Revolution. And this 0:21:19.840 --> 0:21:23.200 will be bigger because every nation in the world is 0:21:23.240 --> 0:21:26.560 going to have to move to a clean, new energy 0:21:26.840 --> 0:21:29.560 economy and future. I want to center back here in 0:21:29.560 --> 0:21:33.960 the final question to the future of the Democratic Party. 0:21:34.080 --> 0:21:37.800 What we have seen is a centrist Joe Biden and you, 0:21:38.000 --> 0:21:43.200 as a centrist John Carey, overrun by a rigid progressive 0:21:43.400 --> 0:21:46.840 or liberal wing of the Democratic Party. What is your 0:21:46.880 --> 0:21:51.440 counsel as they maybe lose the House, maybe lose the Senate. 0:21:51.680 --> 0:21:54.239 Who knows of the White House, But what is the 0:21:54.280 --> 0:21:59.080 council you have to liberals who will not bend as 0:21:59.200 --> 0:22:02.399 you have spent a career bending. Well, I'd like to 0:22:02.440 --> 0:22:06.400 thank I have it. I find the compromise where you can, 0:22:06.440 --> 0:22:09.200 and you need to. But you have to be reasonable. Obviously, 0:22:09.280 --> 0:22:12.000 you have to recognize, I mean the old saying in Washington, 0:22:12.520 --> 0:22:14.600 don't let the good, you know, don't let the perfect 0:22:14.680 --> 0:22:17.160 become the enemy of the good. You have to find 0:22:17.160 --> 0:22:19.840 a compromise. That's the nature of legislating. If you decide 0:22:19.880 --> 0:22:22.960 you want to be a legislator, do that, and we 0:22:23.040 --> 0:22:25.000 need to move in that direction. But I'm not in 0:22:25.040 --> 0:22:28.120 the politics of the back and forth now. I'm trying 0:22:28.119 --> 0:22:32.240 to bring people together Republican, Democrat, liberal, conservative, to understand 0:22:32.880 --> 0:22:37.480 that this crisis is existential, doesn't have a political label. 0:22:37.960 --> 0:22:41.200 It's universal. It's not a bilateral issue between China and 0:22:41.200 --> 0:22:45.240 the United States. It is existential for everybody on the planet, 0:22:45.600 --> 0:22:47.960 and we need to be smarter about coming to solution. 0:22:48.240 --> 0:22:50.879 The best way you get there is through, you know, 0:22:51.040 --> 0:22:55.040 winning an election, but then also compromising to find a 0:22:55.160 --> 0:22:57.720 path forward. John Kerry, thank you so much for joining 0:22:57.760 --> 0:23:01.879 us as he is. You are Special Presidential Envoy for 0:23:02.160 --> 0:23:10.960 Climate This is an important conversation each and every year 0:23:11.000 --> 0:23:14.640 at Davos there is someone who owns the valley. Usually 0:23:14.680 --> 0:23:17.919