1 00:00:00,040 --> 00:00:03,400 Speaker 1: We turn our attention to the markets this week, USCPI endeavors, 2 00:00:03,600 --> 00:00:07,440 Speaker 1: reinforcing concerns about inflation. The financial stories that sheep are 3 00:00:07,560 --> 00:00:10,560 Speaker 1: worth a really different reaction to Mark. It's more indications 4 00:00:10,600 --> 00:00:13,240 Speaker 1: of just how hot the US economy really. 5 00:00:13,039 --> 00:00:15,880 Speaker 2: Is rude the eyes of the most influential voicing. 6 00:00:15,880 --> 00:00:18,759 Speaker 1: Katherine Keating, CEO of b and Y Moan, Ryan Winningham, 7 00:00:18,880 --> 00:00:21,680 Speaker 1: a Bank of America, Sam Zell Charman and founder of 8 00:00:21,680 --> 00:00:24,200 Speaker 1: Equity Group Investment Bloomberg. 9 00:00:23,720 --> 00:00:27,320 Speaker 2: Wall Street with David Weston from Bloomberg Radio. 10 00:00:27,480 --> 00:00:31,640 Speaker 1: Testing the economy, more bank tremors, more FED rate hikes, 11 00:00:31,800 --> 00:00:35,479 Speaker 1: and the unimaginable prospect of a US default. This is 12 00:00:35,560 --> 00:00:39,600 Speaker 1: Bloomberg Wall Street Week. I'm David Weston. This week Stephen 13 00:00:39,720 --> 00:00:42,639 Speaker 1: Ross of Related Companies on Wall Street moving to Miami. 14 00:00:43,280 --> 00:00:47,120 Speaker 3: Miami is probably the most dynamic city in the country today, and. 15 00:00:47,120 --> 00:00:50,000 Speaker 1: Melissa Karney of the University of Maryland on thousands of 16 00:00:50,080 --> 00:00:51,920 Speaker 1: college students gone missing. 17 00:00:52,560 --> 00:01:07,200 Speaker 4: The decline in the Rollman is not an encouraging trend. 18 00:01:09,319 --> 00:01:11,880 Speaker 1: Global Wall Street had plenty to focus on this week. 19 00:01:11,920 --> 00:01:14,480 Speaker 1: As we began the week breathing a sigh of relief 20 00:01:14,640 --> 00:01:18,600 Speaker 1: over resolution of last week's banking crisis over First Republic. 21 00:01:19,200 --> 00:01:22,920 Speaker 1: We are all very pleased to get the major source 22 00:01:22,959 --> 00:01:26,400 Speaker 1: of uncertainty that was remaining from the recent bank term 23 00:01:26,440 --> 00:01:29,200 Speaker 1: all addressed, and that that is a good thing. But 24 00:01:29,319 --> 00:01:31,759 Speaker 1: then Treasury Sector A. Yellen told us that we may 25 00:01:31,800 --> 00:01:33,959 Speaker 1: have less time than we thought to deal with that 26 00:01:34,080 --> 00:01:37,760 Speaker 1: debt ceiling problem. Well, it would be absolutely disastrous for 27 00:01:37,840 --> 00:01:41,040 Speaker 1: me to be completely blunted. And by Tuesday we were 28 00:01:41,080 --> 00:01:43,480 Speaker 1: back to worrying about the banks again, as each day 29 00:01:43,600 --> 00:01:46,720 Speaker 1: seemed to bring news of another regional bank seeking a 30 00:01:46,800 --> 00:01:47,360 Speaker 1: new path. 31 00:01:48,240 --> 00:01:49,240 Speaker 5: It's tumbling right now. 32 00:01:49,280 --> 00:01:52,680 Speaker 4: By forty two, after seeing it's winging strategic options. 33 00:01:52,280 --> 00:01:56,040 Speaker 6: A TD bank has agreed with First Horizon to terminate 34 00:01:56,080 --> 00:01:58,680 Speaker 6: the previously announced merger, which had been agreed upon let's 35 00:01:58,680 --> 00:02:01,040 Speaker 6: be honest before all this turmoil in the banks. 36 00:02:01,360 --> 00:02:04,000 Speaker 1: But despite the problems with the banks and concerns over 37 00:02:04,000 --> 00:02:06,640 Speaker 1: the dead ceiling, the Fed on Wednesday went ahead with 38 00:02:06,720 --> 00:02:09,680 Speaker 1: the twenty five basis point rate hike. It had to telegraphs, 39 00:02:09,880 --> 00:02:12,400 Speaker 1: which here Powell opening the door to a pause, but 40 00:02:12,600 --> 00:02:16,399 Speaker 1: saying that inflation is still with us for now. Inflation 41 00:02:16,480 --> 00:02:19,640 Speaker 1: remains well above our longer run goal of two percent. 42 00:02:20,240 --> 00:02:23,520 Speaker 1: Then on Thursday, the European Central Bank followed suit, but 43 00:02:23,560 --> 00:02:25,880 Speaker 1: said it does not plan to pause. 44 00:02:26,320 --> 00:02:30,480 Speaker 7: In light of the ongoing high inflation pressures. The Governing 45 00:02:30,520 --> 00:02:34,880 Speaker 7: Council today decided to raise the three key ECB interest 46 00:02:34,960 --> 00:02:40,799 Speaker 7: rates by twenty five basis points. 47 00:02:39,280 --> 00:02:41,520 Speaker 1: And if all that weren't enough. On Friday, the US 48 00:02:41,600 --> 00:02:45,359 Speaker 1: jobs numbers came in much stronger than expected, adding another 49 00:02:45,400 --> 00:02:48,320 Speaker 1: two hundred and fifty three thousand jobs last month, though 50 00:02:48,360 --> 00:02:51,240 Speaker 1: they took away some from the month before, and as important, 51 00:02:51,320 --> 00:02:53,839 Speaker 1: the unemployment rate went back down to their record three 52 00:02:53,880 --> 00:02:57,160 Speaker 1: point four percent level and wages increased at a brisk 53 00:02:57,200 --> 00:03:00,600 Speaker 1: pace of five ten percent month over months. Equity markets 54 00:03:00,639 --> 00:03:03,240 Speaker 1: on Friday reversed all or most of all of their 55 00:03:03,280 --> 00:03:04,919 Speaker 1: losses from the rest of the week, with the S 56 00:03:04,960 --> 00:03:06,839 Speaker 1: and P five hundred ending the week off a mere 57 00:03:06,919 --> 00:03:09,919 Speaker 1: eight tenths of a percent, while the NASDAG gained less 58 00:03:09,919 --> 00:03:12,040 Speaker 1: than one tenth of a percent, and the yield in 59 00:03:12,120 --> 00:03:14,000 Speaker 1: the ten year went all the way up to three 60 00:03:14,000 --> 00:03:16,400 Speaker 1: point six percent and then all the way down to 61 00:03:16,480 --> 00:03:18,600 Speaker 1: under three point three percent to end the week just 62 00:03:18,639 --> 00:03:21,480 Speaker 1: about where it started at three point four to three percent. 63 00:03:21,800 --> 00:03:23,480 Speaker 1: To take us through the week, in the markets and 64 00:03:23,520 --> 00:03:26,760 Speaker 1: the economy, welcome back now, Ellen Lee, she's portfolio manager 65 00:03:26,800 --> 00:03:29,880 Speaker 1: at Causeway Capital, and Savita Supermanian she's Bank of America 66 00:03:29,880 --> 00:03:32,880 Speaker 1: ahead of US Equity and Quantitative Strategy. So welcome to 67 00:03:32,880 --> 00:03:34,359 Speaker 1: both you. Great to have you here. Let me start 68 00:03:34,400 --> 00:03:36,360 Speaker 1: with you, Ellen, if I could, Given what we saw 69 00:03:36,400 --> 00:03:38,760 Speaker 1: from the FED, but then from the jobs numbers, what 70 00:03:38,760 --> 00:03:40,640 Speaker 1: do we make of the economy right now and where's headed? 71 00:03:42,040 --> 00:03:42,440 Speaker 6: Well? 72 00:03:42,440 --> 00:03:48,440 Speaker 8: Clearly inflation is still high and FED still has concerns 73 00:03:48,480 --> 00:03:54,400 Speaker 8: around that, and the latest job numbers still indicate that 74 00:03:54,440 --> 00:03:58,280 Speaker 8: there is more slowing down to do. However, what's happening 75 00:03:58,320 --> 00:04:02,000 Speaker 8: with the regional banking devices. I think that will help 76 00:04:02,040 --> 00:04:06,400 Speaker 8: in this effort, but there's still more world to be done, 77 00:04:06,640 --> 00:04:11,200 Speaker 8: as inflation is not quite there, and also the slowdown 78 00:04:11,400 --> 00:04:13,800 Speaker 8: is not at a pace that we would want it 79 00:04:13,800 --> 00:04:15,120 Speaker 8: to be in the current environment. 80 00:04:15,880 --> 00:04:18,159 Speaker 1: So what about you, Savina. We heard about a possible 81 00:04:18,200 --> 00:04:21,280 Speaker 1: pause maybe on Wednesday. Is that still viable after the 82 00:04:21,320 --> 00:04:22,600 Speaker 1: jobs nurbs who saw on Friday? 83 00:04:22,960 --> 00:04:25,760 Speaker 9: I mean, look, I think we're in a data dependent 84 00:04:25,960 --> 00:04:29,440 Speaker 9: environment and the data so far is suggesting we're probably 85 00:04:29,440 --> 00:04:31,479 Speaker 9: not going to see that rate cut that everybody is 86 00:04:31,520 --> 00:04:33,760 Speaker 9: hoping for by the end of the you know, in 87 00:04:33,800 --> 00:04:36,360 Speaker 9: the next couple of quarters. I mean, our view is 88 00:04:36,400 --> 00:04:40,640 Speaker 9: that inflation might remain stickier and higher for the rest 89 00:04:40,640 --> 00:04:42,359 Speaker 9: of the year. I mean, if you look at jobs, 90 00:04:42,640 --> 00:04:46,240 Speaker 9: a big part of the tight labor market is just 91 00:04:46,320 --> 00:04:50,000 Speaker 9: a great resignation during COVID and those folks haven't come 92 00:04:50,040 --> 00:04:52,320 Speaker 9: back yet, so you know, I think it remains tight 93 00:04:52,360 --> 00:04:54,000 Speaker 9: in certain parts of the economy. 94 00:04:54,160 --> 00:04:56,120 Speaker 1: So, Savita, let's talk about the equity markets. You are 95 00:04:56,200 --> 00:04:58,280 Speaker 1: one of our twenty four l's. I'm glad to say 96 00:04:58,320 --> 00:05:00,240 Speaker 1: thank you for being here, and you're so live in 97 00:05:00,279 --> 00:05:01,880 Speaker 1: the middle of the pack. Four hundred dollars on the 98 00:05:01,920 --> 00:05:07,320 Speaker 1: EPs and and four thousand on the SB bus. Yes, 99 00:05:07,800 --> 00:05:09,800 Speaker 1: are you inclined to change that at all? Given what 100 00:05:09,839 --> 00:05:10,480 Speaker 1: we saw this. 101 00:05:10,400 --> 00:05:13,680 Speaker 9: Week, I'm right in the middle of the consensus. 102 00:05:13,720 --> 00:05:13,920 Speaker 5: Elf. 103 00:05:14,000 --> 00:05:17,040 Speaker 9: I guess well, I think we're a little lower than 104 00:05:17,440 --> 00:05:20,560 Speaker 9: consensus on earnings, and I think, if anything, I would 105 00:05:20,600 --> 00:05:24,440 Speaker 9: be inclined to move that higher after what we've heard 106 00:05:24,480 --> 00:05:27,560 Speaker 9: over the last few weeks. I mean, what really impresses 107 00:05:27,600 --> 00:05:31,200 Speaker 9: me about earning season is that guidance has been very 108 00:05:31,240 --> 00:05:35,080 Speaker 9: positive despite every reason that companies have to guide down 109 00:05:35,360 --> 00:05:38,000 Speaker 9: on this year's earnings or next year's earnings, they're actually 110 00:05:38,000 --> 00:05:41,760 Speaker 9: guiding above what consensus is expecting, so I was surprised 111 00:05:42,120 --> 00:05:46,200 Speaker 9: by that optimism. We're also seeing beats across the board, 112 00:05:46,800 --> 00:05:49,680 Speaker 9: not just in you know, technology stocks, but also in 113 00:05:49,720 --> 00:05:53,080 Speaker 9: financials and healthcare. So it's been a very healthy earning 114 00:05:53,120 --> 00:05:56,760 Speaker 9: season relative to what what folks were expecting coming into it. 115 00:05:57,800 --> 00:06:00,400 Speaker 9: I think on the market itself, what I wore about 116 00:06:00,520 --> 00:06:03,599 Speaker 9: is that it's still very tech top heavy, and that's 117 00:06:03,640 --> 00:06:07,120 Speaker 9: the part of the market that I'm actually more concerned 118 00:06:07,160 --> 00:06:09,479 Speaker 9: about from a rate risk perspective. 119 00:06:09,600 --> 00:06:11,520 Speaker 1: Allan what about tech? Tech had been a leader for 120 00:06:11,520 --> 00:06:13,200 Speaker 1: a long time, then it sort of gave up leadership. 121 00:06:13,240 --> 00:06:14,120 Speaker 1: Who's going to lead down? 122 00:06:15,240 --> 00:06:18,160 Speaker 8: I mean, we believe in the next cycle, with you know, 123 00:06:18,279 --> 00:06:25,520 Speaker 8: themes like energy transition and more automation and energy infrastructure 124 00:06:25,560 --> 00:06:29,400 Speaker 8: built and on shoring, we think industrials will be more 125 00:06:29,520 --> 00:06:32,960 Speaker 8: at the head of market leadership, as we are hearing 126 00:06:33,120 --> 00:06:36,400 Speaker 8: not only in the US but also in Europe of 127 00:06:36,520 --> 00:06:41,560 Speaker 8: continuous capex plans because of the change that's needed to 128 00:06:41,640 --> 00:06:44,640 Speaker 8: get us to the next era. And again with interest 129 00:06:44,720 --> 00:06:48,560 Speaker 8: rates where they are, you know, if we believe the 130 00:06:48,680 --> 00:06:52,200 Speaker 8: zero rate con interest rates are not bad, the biggest 131 00:06:52,279 --> 00:06:55,839 Speaker 8: beneficiarias of that actually reside in the tech sector, and 132 00:06:55,920 --> 00:06:58,560 Speaker 8: we don't think that we'll come back, and therefore we 133 00:06:58,640 --> 00:07:02,520 Speaker 8: believe in which was like industrials and energy will lead 134 00:07:02,720 --> 00:07:03,440 Speaker 8: the next valley. 135 00:07:03,720 --> 00:07:06,520 Speaker 1: So what Savita. As you look at equities, are there 136 00:07:06,560 --> 00:07:09,400 Speaker 1: some idiotocratic areas, particularly when it comes to credit, they're 137 00:07:09,440 --> 00:07:12,440 Speaker 1: getting hit worse than others. I mean, everybody's interest rates 138 00:07:12,480 --> 00:07:14,600 Speaker 1: are going up, but it may hit some companies differently 139 00:07:14,600 --> 00:07:15,080 Speaker 1: from others. 140 00:07:15,240 --> 00:07:15,520 Speaker 10: Yeah. 141 00:07:15,560 --> 00:07:18,560 Speaker 9: Absolutely, So, you know, one of the big surprises to 142 00:07:18,640 --> 00:07:20,800 Speaker 9: me is when you look at some of these so 143 00:07:20,880 --> 00:07:24,680 Speaker 9: called defensive areas of the market, like healthcare or telecom, 144 00:07:25,200 --> 00:07:30,000 Speaker 9: the credit risk is actually higher than you would expect, 145 00:07:30,200 --> 00:07:35,080 Speaker 9: whereas energy, materials, commodities, which are typically you know, kind 146 00:07:35,080 --> 00:07:39,400 Speaker 9: of at the epicenter of most credit downturns, are in 147 00:07:39,440 --> 00:07:42,760 Speaker 9: a much better position. They've been deprived of capital for many, 148 00:07:42,760 --> 00:07:46,000 Speaker 9: many years. They've become very disciplined about cash return and 149 00:07:46,040 --> 00:07:49,960 Speaker 9: balance sheets and capital allocation, Whereas the companies that have 150 00:07:50,000 --> 00:07:53,400 Speaker 9: gotten more easy money might not be in as great 151 00:07:53,400 --> 00:07:56,880 Speaker 9: a position to handle this market increase in interest rates. So, 152 00:07:57,280 --> 00:08:00,640 Speaker 9: you know, healthcare was I think it's the fourth highest 153 00:08:00,680 --> 00:08:04,400 Speaker 9: industry in terms of floating rate risk sitting on balance sheets, 154 00:08:04,440 --> 00:08:07,520 Speaker 9: which means they're going to face that move and that 155 00:08:08,360 --> 00:08:10,600 Speaker 9: a lot faster than other sectoris did not. 156 00:08:10,680 --> 00:08:12,240 Speaker 1: Know that quickly here at the n L. And you 157 00:08:12,440 --> 00:08:14,520 Speaker 1: like Europe when it comes to securities. Why is that? 158 00:08:15,640 --> 00:08:19,200 Speaker 8: Well, first of all, europe valuation is much more attractive 159 00:08:19,320 --> 00:08:24,600 Speaker 8: versus us. Secondly in terms of a higher rate, higher 160 00:08:24,600 --> 00:08:28,720 Speaker 8: interest rate environment, that should be advantageous. And thirdly, think 161 00:08:28,760 --> 00:08:32,800 Speaker 8: about the energy crisis that Europe is going through right now, 162 00:08:33,240 --> 00:08:36,680 Speaker 8: and they have to shift their energy infrastructure, which is 163 00:08:36,679 --> 00:08:39,920 Speaker 8: a very strategic element of an economy, so that spending 164 00:08:40,040 --> 00:08:43,200 Speaker 8: is going to continue, and not only that, they are 165 00:08:43,280 --> 00:08:47,480 Speaker 8: leading the efforts on decarbonization, and again that will act 166 00:08:47,559 --> 00:08:50,679 Speaker 8: as a fiscal stimulus for the growth of the economy. 167 00:08:50,960 --> 00:08:55,920 Speaker 8: And again Europe has had very little spending and infrastructure 168 00:08:56,000 --> 00:08:59,360 Speaker 8: the last thirty years. So we think this again will 169 00:08:59,400 --> 00:09:02,720 Speaker 8: work in the favor of companies that are in energy 170 00:09:02,960 --> 00:09:06,720 Speaker 8: and industrials to fuel economic growth in the next decade. 171 00:09:06,960 --> 00:09:09,079 Speaker 1: It's fascinating and I did not know that actually a 172 00:09:09,200 --> 00:09:11,480 Speaker 1: healthcare It's a fascinating voice. Savida, Thank you for bringing 173 00:09:11,520 --> 00:09:13,839 Speaker 1: it to us. Thanks so much to Sevida Supermanian and 174 00:09:13,880 --> 00:09:17,200 Speaker 1: Bank of America, and also Ellen Lee of Causeway Capital. 175 00:09:17,880 --> 00:09:20,120 Speaker 1: It's time now for our weekly look at Wall Street 176 00:09:20,120 --> 00:09:22,480 Speaker 1: Week past. Back in April of nineteen ninety one, the 177 00:09:22,559 --> 00:09:25,200 Speaker 1: number one movie in the US was out for Justice, 178 00:09:25,320 --> 00:09:28,640 Speaker 1: starring Steven Sagau. The number one song was You're in 179 00:09:28,800 --> 00:09:32,400 Speaker 1: Love by Wilson Phillips. And as now, people were worried 180 00:09:32,440 --> 00:09:35,080 Speaker 1: about the banks, with Lewis Rockgeiser to give us taking 181 00:09:35,120 --> 00:09:37,200 Speaker 1: us through the problem as he saw it back then. 182 00:09:39,280 --> 00:09:41,920 Speaker 1: Coming up, where have all the college students gone? We 183 00:09:42,000 --> 00:09:44,920 Speaker 1: talked with Professor Melissa Carney of the University of Maryland 184 00:09:44,920 --> 00:09:47,080 Speaker 1: about the drop off and high school students headed to 185 00:09:47,120 --> 00:09:49,079 Speaker 1: college and what they are missing out. 186 00:09:49,640 --> 00:09:52,560 Speaker 4: That wage premium that college graduates are getting an economy 187 00:09:52,880 --> 00:09:54,640 Speaker 4: is still really high. 188 00:09:55,320 --> 00:09:57,720 Speaker 1: That's next on Wall Street Glee on Bloomberg. 189 00:09:59,000 --> 00:10:03,160 Speaker 2: This is Bloomberg Well Street Week with David Weston from 190 00:10:03,320 --> 00:10:11,640 Speaker 2: Bloomberg Radio College. 191 00:10:11,720 --> 00:10:14,520 Speaker 1: It's been the dream of American students and their parents 192 00:10:14,520 --> 00:10:18,040 Speaker 1: for decades, the proven pathway to better jobs, higher pay, 193 00:10:18,200 --> 00:10:22,320 Speaker 1: and social mobility, and not incidentally, a crucial source for 194 00:10:22,360 --> 00:10:25,160 Speaker 1: the highly skilled workers we need for the next generation. 195 00:10:25,480 --> 00:10:27,080 Speaker 6: And we're talking about what do we have to do 196 00:10:27,160 --> 00:10:29,319 Speaker 6: in order to get our economy going, to make sure 197 00:10:29,320 --> 00:10:31,959 Speaker 6: that we are a twenty first century education system that's 198 00:10:31,960 --> 00:10:34,520 Speaker 6: preparing our children how not just to be employees, but 199 00:10:34,640 --> 00:10:35,679 Speaker 6: how to be employers. 200 00:10:36,600 --> 00:10:39,400 Speaker 1: But the risks and rewards of getting that college degree 201 00:10:39,440 --> 00:10:42,680 Speaker 1: are coming under fresh scrutiny as the cost of getting 202 00:10:42,679 --> 00:10:46,160 Speaker 1: the degree have been rising much faster than inflation for 203 00:10:46,240 --> 00:10:50,920 Speaker 1: both public and private colleges and universities, and the burden 204 00:10:50,960 --> 00:10:53,640 Speaker 1: of barring to pay those costs has been so crippling 205 00:10:53,840 --> 00:10:56,440 Speaker 1: that the Biden administration is trying to forgive a fair 206 00:10:56,559 --> 00:10:57,120 Speaker 1: amount of it. 207 00:10:57,600 --> 00:11:01,800 Speaker 3: Entire generation is now sattled with unsustained death the exchange 208 00:11:01,880 --> 00:11:04,960 Speaker 3: for an attempt at least to a college degree. 209 00:11:05,000 --> 00:11:07,840 Speaker 1: Even a Speaker McCarthy's new budget proposal would cut back 210 00:11:07,880 --> 00:11:11,400 Speaker 1: on pelgrants, which provide financial aid to the most needy. 211 00:11:12,080 --> 00:11:15,160 Speaker 1: The Department of Education shared how the Speakers bill would 212 00:11:15,160 --> 00:11:19,360 Speaker 1: remove up to sixty thousand teachers from classrooms. 213 00:11:18,800 --> 00:11:21,200 Speaker 6: Eliminate student debt relief for more. 214 00:11:21,120 --> 00:11:26,199 Speaker 4: Than forty million Americans, and make college more expensive by 215 00:11:26,240 --> 00:11:28,559 Speaker 4: reducing pelgrants for millions. 216 00:11:29,040 --> 00:11:31,600 Speaker 1: And if all that weren't enough, the COVID pandemic hit 217 00:11:31,640 --> 00:11:35,440 Speaker 1: college students particularly hard, as far fewer high school students 218 00:11:35,520 --> 00:11:39,400 Speaker 1: enroll in college today than before the pandemic, leaving us 219 00:11:39,400 --> 00:11:42,800 Speaker 1: with a critical question whether college is still worth it 220 00:11:45,280 --> 00:11:47,520 Speaker 1: and to take us through whether in fact a college 221 00:11:47,520 --> 00:11:49,440 Speaker 1: degree is still worth it, we welcome now back to 222 00:11:49,600 --> 00:11:52,200 Speaker 1: Wall Street Week Melissa Karney. She is professor of economics 223 00:11:52,200 --> 00:11:54,360 Speaker 1: at Universe and Maryland as well as director of the 224 00:11:54,360 --> 00:11:57,680 Speaker 1: Aspen Economic Strategy Group. So Melissa, great to have you 225 00:11:57,760 --> 00:12:00,480 Speaker 1: back with us. First of all, start with the basic 226 00:12:00,640 --> 00:12:04,400 Speaker 1: question about enrollment. Is enrollment down, If so, how much? 227 00:12:04,400 --> 00:12:06,240 Speaker 1: And is it because of the pandemic or did it 228 00:12:06,280 --> 00:12:07,600 Speaker 1: start before the pandemic? 229 00:12:09,000 --> 00:12:14,199 Speaker 4: Yeah, recent numbers on enrollment rates suggest that enrollment is down. 230 00:12:14,280 --> 00:12:16,560 Speaker 4: This is the sixth year that enrollment is down, so 231 00:12:16,600 --> 00:12:20,280 Speaker 4: it was starting to decline before the pandemic took hold. 232 00:12:20,640 --> 00:12:24,800 Speaker 4: But the pandemic knocked a lot of high schoolers and 233 00:12:25,040 --> 00:12:28,280 Speaker 4: young adults off their college going plans. So we hear 234 00:12:28,320 --> 00:12:32,000 Speaker 4: a lot, David about the learning loss in elementary schools 235 00:12:32,040 --> 00:12:34,840 Speaker 4: and high schools. I think another thing we really have 236 00:12:34,920 --> 00:12:38,400 Speaker 4: to be focused on is how many graduating seniors would 237 00:12:38,400 --> 00:12:41,520 Speaker 4: have otherwise enrolled in college who haven't and they haven't 238 00:12:41,520 --> 00:12:44,520 Speaker 4: come back yet. So this is concerning and how much 239 00:12:44,559 --> 00:12:44,959 Speaker 4: it's the. 240 00:12:44,960 --> 00:12:46,960 Speaker 1: Cost of the whole thing, Because you saw that Wall 241 00:12:46,960 --> 00:12:49,760 Speaker 1: Street Journal poll that said something like fifty six percent 242 00:12:49,800 --> 00:12:52,680 Speaker 1: of Americans don't believe a college degree is worth the price. 243 00:12:54,880 --> 00:12:59,560 Speaker 4: Yeah, that I found those polling numbers really quite troubling. So, 244 00:12:59,679 --> 00:13:02,960 Speaker 4: as you mentioned, a majority, a small majority, but a majority. 245 00:13:03,000 --> 00:13:05,040 Speaker 4: None of the last of American adults now doubt that 246 00:13:05,120 --> 00:13:09,640 Speaker 4: a college degree is worth it, and that is that's 247 00:13:09,760 --> 00:13:14,640 Speaker 4: just emphatically not true. So in general, people who graduate 248 00:13:14,720 --> 00:13:18,440 Speaker 4: with a four year college degree will make back the 249 00:13:18,480 --> 00:13:21,200 Speaker 4: amount of money that, if they made good decisions, that 250 00:13:21,240 --> 00:13:23,160 Speaker 4: they would have paid to get that degree. So a 251 00:13:23,200 --> 00:13:28,040 Speaker 4: college degree is still an excellent investment in one's economic future. 252 00:13:28,480 --> 00:13:31,560 Speaker 4: We know that college degree holders, four year college degree 253 00:13:31,600 --> 00:13:35,360 Speaker 4: holders in particular, have an easier time finding work. They 254 00:13:35,360 --> 00:13:39,240 Speaker 4: command much higher earnings when they do work, even in 255 00:13:39,440 --> 00:13:43,880 Speaker 4: today's tight labor market. But as you mentioned, the price 256 00:13:44,080 --> 00:13:47,200 Speaker 4: is really it's hard to figure out, and so a 257 00:13:47,200 --> 00:13:50,400 Speaker 4: lot of people actually think getting a college degree would 258 00:13:50,440 --> 00:13:52,680 Speaker 4: be more expensive than it would be for them. 259 00:13:52,880 --> 00:13:56,719 Speaker 1: In particular, Melissa, you mentioned the relative lack of transparency 260 00:13:56,760 --> 00:13:58,840 Speaker 1: and exactly knowing what the cost is. It's hard to 261 00:13:58,840 --> 00:14:00,560 Speaker 1: do a cost benefit analysis. So if you want what 262 00:14:00,600 --> 00:14:03,600 Speaker 1: the cost side is, whatever the benefit side is, why 263 00:14:03,760 --> 00:14:05,959 Speaker 1: is it so opaque. 264 00:14:06,080 --> 00:14:09,120 Speaker 4: They have their sticker price, their tuition prices, they're all 265 00:14:09,240 --> 00:14:12,800 Speaker 4: in price. What they charge people who can pay full price. 266 00:14:13,280 --> 00:14:15,560 Speaker 4: That's also what they charge the government for people who 267 00:14:15,600 --> 00:14:19,040 Speaker 4: are paying on behalf of others. But that's not what 268 00:14:19,080 --> 00:14:23,200 Speaker 4: an individual student pays. So about three quarters of students 269 00:14:23,600 --> 00:14:27,120 Speaker 4: at for Your institutions are getting some form of aid, 270 00:14:27,640 --> 00:14:30,520 Speaker 4: and so it's just really hard for students to figure 271 00:14:30,520 --> 00:14:34,280 Speaker 4: out until they've gone through the whole process of applying 272 00:14:34,320 --> 00:14:37,640 Speaker 4: for financial aid, filling out the FACA how much any 273 00:14:37,680 --> 00:14:40,160 Speaker 4: individual school will take. There are a lot of efforts 274 00:14:40,240 --> 00:14:43,960 Speaker 4: underway to make that pricing more transparent so students can 275 00:14:44,000 --> 00:14:47,000 Speaker 4: figure out earlier in the process. But I think the 276 00:14:47,480 --> 00:14:50,800 Speaker 4: real message that needs to get out is that students 277 00:14:50,800 --> 00:14:56,240 Speaker 4: should not be discouraged from applying to flagship schools, selective 278 00:14:56,280 --> 00:14:59,040 Speaker 4: for Your schools because they think they can't afford it. 279 00:14:59,080 --> 00:15:01,320 Speaker 4: They should go through the process. Students who go to 280 00:15:01,400 --> 00:15:05,040 Speaker 4: selective schools, who go to four year degrees seeking, you know, 281 00:15:05,120 --> 00:15:08,760 Speaker 4: degree granting schools, they tend to have better outcomes. Those 282 00:15:08,800 --> 00:15:12,000 Speaker 4: schools often have more resources and are better able to 283 00:15:12,120 --> 00:15:15,640 Speaker 4: serve their students. So students should not be discouraged from applying, 284 00:15:16,040 --> 00:15:19,680 Speaker 4: and they should take advantage of information that's out there 285 00:15:19,960 --> 00:15:24,200 Speaker 4: net cross calculators, information on student on school websites to 286 00:15:24,240 --> 00:15:27,440 Speaker 4: figure out what, on average is a typical student paying 287 00:15:27,560 --> 00:15:30,840 Speaker 4: to attend this school. And by the way, people should 288 00:15:30,880 --> 00:15:34,560 Speaker 4: make smart choices, like public schools charge a lot less 289 00:15:34,640 --> 00:15:37,280 Speaker 4: than private schools. So getting back to why a lot 290 00:15:37,280 --> 00:15:39,560 Speaker 4: of people don't think a school is worth it or 291 00:15:40,200 --> 00:15:43,520 Speaker 4: pursuing a college degree is worth it, you know, you 292 00:15:43,520 --> 00:15:46,320 Speaker 4: could get a lot of really good deals if you're 293 00:15:46,360 --> 00:15:49,920 Speaker 4: looking at public four year institutions as opposed to private, 294 00:15:50,280 --> 00:15:54,400 Speaker 4: especially if you're looking at in state tuition, those net 295 00:15:54,440 --> 00:15:57,720 Speaker 4: prices are much lower for typical students, and people should 296 00:15:57,800 --> 00:16:00,640 Speaker 4: take that into account when they decide where to go. 297 00:16:01,000 --> 00:16:03,000 Speaker 1: So typically in economics, as I understand it, and you 298 00:16:03,120 --> 00:16:05,560 Speaker 1: understand it much better than I do, and supply and demand, 299 00:16:05,600 --> 00:16:07,600 Speaker 1: if the supply stars come down, it might put some 300 00:16:07,640 --> 00:16:09,920 Speaker 1: pressure on the system if in fact we're getting the 301 00:16:10,000 --> 00:16:12,600 Speaker 1: less enrollment. Do you see any indication some of these 302 00:16:12,760 --> 00:16:14,880 Speaker 1: institutions of higher learning are saying, you know, we've got 303 00:16:14,880 --> 00:16:16,720 Speaker 1: to get our act together. We got to be for example, 304 00:16:16,760 --> 00:16:19,600 Speaker 1: more transparent, more direct, and by the way, even give 305 00:16:19,640 --> 00:16:21,520 Speaker 1: a sense over the four years what's going to happen 306 00:16:21,520 --> 00:16:23,520 Speaker 1: in the years, because one issue is how much you're 307 00:16:23,520 --> 00:16:24,840 Speaker 1: going to raise it once I get. 308 00:16:24,720 --> 00:16:28,360 Speaker 4: In unambiguously, the decline in the enrollment is not an 309 00:16:28,440 --> 00:16:32,440 Speaker 4: encouraging trend. Whatever pressures it might put on some schools 310 00:16:32,440 --> 00:16:35,320 Speaker 4: that are losing students, I think the decline in enrollment 311 00:16:35,360 --> 00:16:39,120 Speaker 4: is really troubling because, as we said, a college degree 312 00:16:39,200 --> 00:16:42,880 Speaker 4: really does grant an earnings premium to students who attend 313 00:16:43,040 --> 00:16:46,880 Speaker 4: and complete a four year degree. So the earnings premium 314 00:16:47,000 --> 00:16:50,400 Speaker 4: going to college workers was rising tremendously in the nineteen 315 00:16:50,440 --> 00:16:53,400 Speaker 4: eighties and nineteen nineties when demand for college level skills 316 00:16:53,440 --> 00:16:56,200 Speaker 4: really took off, and the supply of college educated workers 317 00:16:56,400 --> 00:17:02,000 Speaker 4: didn't keep up. Since two thousand, that we premium has stalled, 318 00:17:02,440 --> 00:17:06,720 Speaker 4: but importantly it is still tremendously high. So in a 319 00:17:06,760 --> 00:17:10,480 Speaker 4: typical year, you know, let's just take twenty nineteen before 320 00:17:10,520 --> 00:17:14,600 Speaker 4: the pandemic, you know, someone with a four year college degree, 321 00:17:14,880 --> 00:17:18,720 Speaker 4: on average would make about eighty eight percent more a 322 00:17:18,840 --> 00:17:21,280 Speaker 4: year than a full time, full year worker with just 323 00:17:21,359 --> 00:17:22,320 Speaker 4: a high school degree. 324 00:17:22,359 --> 00:17:24,640 Speaker 1: When you talk about the earnings premium, it surely must 325 00:17:24,640 --> 00:17:27,080 Speaker 1: depend in part upon what you study and what the 326 00:17:27,119 --> 00:17:28,879 Speaker 1: line of work you go into, right, I mean, I 327 00:17:28,880 --> 00:17:31,360 Speaker 1: can just imagine, for example, what the demands are right 328 00:17:31,400 --> 00:17:35,520 Speaker 1: now for technology, and some of the expertise and technology 329 00:17:35,960 --> 00:17:37,800 Speaker 1: are very different from what they were thirty years ago. 330 00:17:39,840 --> 00:17:43,840 Speaker 4: Absolutely, and this is a really important point. So in general, 331 00:17:44,040 --> 00:17:47,199 Speaker 4: even though I'm really emphasizing that a college degree is 332 00:17:47,240 --> 00:17:50,280 Speaker 4: a good investment in one's future, the fact of the 333 00:17:50,320 --> 00:17:54,640 Speaker 4: matter is not all institutions and not all majors deliver 334 00:17:54,840 --> 00:17:58,200 Speaker 4: large earnings premiums. And that again is something that students 335 00:17:58,280 --> 00:18:01,359 Speaker 4: have to take into account and have to make good 336 00:18:01,400 --> 00:18:05,959 Speaker 4: decisions about where they're studying and what they're studying. And 337 00:18:06,000 --> 00:18:10,120 Speaker 4: that information too is now much more readily available than 338 00:18:10,119 --> 00:18:12,040 Speaker 4: it used to be in the past. Students can look 339 00:18:12,119 --> 00:18:15,440 Speaker 4: up what is the typical earning path for someone who 340 00:18:15,480 --> 00:18:20,400 Speaker 4: pursues this major, who attends this institution, and again make 341 00:18:20,520 --> 00:18:21,440 Speaker 4: smart choices. 342 00:18:21,920 --> 00:18:24,359 Speaker 1: So well, as you look at the decline in enrollment, 343 00:18:24,440 --> 00:18:26,719 Speaker 1: what about the demographics of it? Is it affecting some 344 00:18:26,760 --> 00:18:27,760 Speaker 1: people more than others? 345 00:18:28,080 --> 00:18:31,119 Speaker 4: Yeah, the decline enrollment has been much larger among men. 346 00:18:31,200 --> 00:18:35,120 Speaker 4: Than women, which is, you know, women are doing better 347 00:18:35,200 --> 00:18:38,359 Speaker 4: overall when it comes to young women getting college degrees, 348 00:18:38,400 --> 00:18:42,440 Speaker 4: and so this is worrisome. And the pandemic related decline 349 00:18:42,520 --> 00:18:46,679 Speaker 4: was especially pronounced among non white men. Again, this is 350 00:18:46,720 --> 00:18:49,120 Speaker 4: another you know, this is another reason why these trends 351 00:18:49,119 --> 00:18:52,359 Speaker 4: are particularly worrisome. We think a college degree is a 352 00:18:52,400 --> 00:18:56,480 Speaker 4: great engine of upward mobility, and we worry if kids 353 00:18:56,520 --> 00:19:00,679 Speaker 4: from lower income homes, from non white families in particular, 354 00:19:01,040 --> 00:19:03,760 Speaker 4: are the ones who disproportionately had their college going plans 355 00:19:03,840 --> 00:19:04,600 Speaker 4: knocked off track. 356 00:19:04,840 --> 00:19:06,760 Speaker 1: Okay, Melissa, thank you so much for being back with 357 00:19:06,840 --> 00:19:08,720 Speaker 1: us on Wall Streeve. That's Melissa Carney. She's professor of 358 00:19:08,760 --> 00:19:14,440 Speaker 1: economics at the University of Maryland. Coming up, The FED 359 00:19:14,480 --> 00:19:16,680 Speaker 1: told us this week it might just pause, but with 360 00:19:16,880 --> 00:19:19,679 Speaker 1: the jobs numbers, let it pause, We asked Stephanie Flanders, 361 00:19:19,760 --> 00:19:23,240 Speaker 1: she's senior executive editor for Economics and Government on Bloomberg. 362 00:19:23,600 --> 00:19:26,679 Speaker 5: That does tell you something about the underlying strength of 363 00:19:26,720 --> 00:19:29,040 Speaker 5: this economy, and certainly in the labor market, which has 364 00:19:29,040 --> 00:19:31,160 Speaker 5: continued to confound the Fed. 365 00:19:32,840 --> 00:19:34,919 Speaker 1: This is Wall Street Week on Bloomberg. 366 00:19:37,000 --> 00:19:41,200 Speaker 2: This is Bloomberg Well Street Week with David Weston from 367 00:19:41,320 --> 00:19:42,280 Speaker 2: Bloomberg Radio. 368 00:19:48,280 --> 00:19:50,119 Speaker 1: This is Wall Streek. I'm David Weston. It was a 369 00:19:50,119 --> 00:19:52,960 Speaker 1: week full of economic news as well as actions by 370 00:19:53,000 --> 00:19:54,920 Speaker 1: central banks, and to take us through it all, we 371 00:19:55,000 --> 00:19:58,680 Speaker 1: welcome now Stephanie Flanders. She is Bloomberg Senior Executive editor 372 00:19:58,680 --> 00:20:02,320 Speaker 1: for Economics and Government and also the host of Stephanomic. 373 00:20:02,440 --> 00:20:04,920 Speaker 1: So Stephanie, thank you so much for being here. Everything's 374 00:20:04,920 --> 00:20:06,479 Speaker 1: connected to everything else as far as I can tell. 375 00:20:06,520 --> 00:20:09,320 Speaker 1: But let's start with the Federal Reserve decision on Wednesday, 376 00:20:09,600 --> 00:20:12,960 Speaker 1: raising twenty five basis points, not exactly saying what comes next, 377 00:20:12,960 --> 00:20:15,639 Speaker 1: but at least opening the door to pausing. Is it 378 00:20:15,960 --> 00:20:18,639 Speaker 1: justified the idea of a possible pause given where we 379 00:20:18,680 --> 00:20:21,960 Speaker 1: are with the economy in the United States, Well, of course. 380 00:20:21,760 --> 00:20:25,199 Speaker 5: We've ended the week with a really strong employment report. 381 00:20:25,280 --> 00:20:29,760 Speaker 5: You know, we've had ten interest rate increases in a row, 382 00:20:30,080 --> 00:20:36,240 Speaker 5: but now thirteen payrolls numbers that exceeded expectations. And you know, David, 383 00:20:36,280 --> 00:20:38,760 Speaker 5: economists have we expect them to be wrong where they're 384 00:20:38,760 --> 00:20:41,679 Speaker 5: not usually wrong in the same direction every month for 385 00:20:41,960 --> 00:20:44,680 Speaker 5: over a year. So that does tell you something about 386 00:20:44,720 --> 00:20:47,600 Speaker 5: the underlying strength of this economy and certainly of the 387 00:20:47,680 --> 00:20:51,240 Speaker 5: labor market, which has continued to confound the FED and 388 00:20:51,440 --> 00:20:56,160 Speaker 5: made it still quite difficult in trying to balance that tightening, 389 00:20:56,200 --> 00:20:59,600 Speaker 5: that historic degree of tightening in the last year, against 390 00:20:59,640 --> 00:21:04,159 Speaker 5: the sort of justified fears of creeping credit crunch problems 391 00:21:04,200 --> 00:21:08,679 Speaker 5: for regional banks, and you know, still inflation above target. 392 00:21:09,119 --> 00:21:11,040 Speaker 1: Well, let's talk about inflation just for a moment. The 393 00:21:11,080 --> 00:21:14,080 Speaker 1: connection between the strong labor market and by the way, 394 00:21:14,280 --> 00:21:17,639 Speaker 1: including those jobs numbers, were some pretty robust wage gains 395 00:21:17,720 --> 00:21:21,399 Speaker 1: month over month. So as a practical matter, have we 396 00:21:21,440 --> 00:21:23,720 Speaker 1: really got our arms around inflation? Do we have any 397 00:21:23,760 --> 00:21:26,000 Speaker 1: reason to believe that the monetary politis thud a reserve 398 00:21:26,280 --> 00:21:29,040 Speaker 1: thus far is having a material effect, It's having some effects, 399 00:21:29,080 --> 00:21:30,320 Speaker 1: a material effect on inflation. 400 00:21:31,800 --> 00:21:34,119 Speaker 5: Well, I think it is one of those things that 401 00:21:34,200 --> 00:21:36,679 Speaker 5: has the policy makers in the FED wondering, you know, 402 00:21:36,800 --> 00:21:41,080 Speaker 5: has the transmission mechanism that takes these rate increases out 403 00:21:41,080 --> 00:21:43,199 Speaker 5: of the broader economy? Has that broken down? Has it 404 00:21:43,240 --> 00:21:46,160 Speaker 5: become slower than in the past, or is there something 405 00:21:46,200 --> 00:21:49,399 Speaker 5: that's something specific in the sort of post covid Us 406 00:21:49,480 --> 00:21:52,800 Speaker 5: labor market that's causing a delay but not an end 407 00:21:53,200 --> 00:21:56,600 Speaker 5: to that transmission of tighter policies. I think what has 408 00:21:56,720 --> 00:22:01,280 Speaker 5: changed is you have in these problems in the regional 409 00:22:01,320 --> 00:22:04,159 Speaker 5: banking system, which I know we'll probably talk about, you know, 410 00:22:04,200 --> 00:22:06,840 Speaker 5: the failure of yet another bank that is telling you 411 00:22:06,880 --> 00:22:09,679 Speaker 5: that there's something that is very tangible that is going 412 00:22:09,720 --> 00:22:13,200 Speaker 5: to quite shortly has to have an impact on hiring, 413 00:22:13,280 --> 00:22:16,159 Speaker 5: and that's the squeeze in small business lending. You know, 414 00:22:16,200 --> 00:22:19,119 Speaker 5: you mentioned my podcast Stephonomics, and we heard in this 415 00:22:19,160 --> 00:22:22,080 Speaker 5: week's episode actually about somebody who wants to invest in 416 00:22:22,119 --> 00:22:27,159 Speaker 5: a pickleball slash restaurant having trouble getting a loan, a 417 00:22:27,200 --> 00:22:29,560 Speaker 5: small business having trouble getting alone. Now, you know, pickleball 418 00:22:29,680 --> 00:22:32,040 Speaker 5: is a massive phenomenon at the moment. If you can't 419 00:22:32,040 --> 00:22:35,080 Speaker 5: get money for that, I think we know that lending 420 00:22:35,119 --> 00:22:39,239 Speaker 5: conditions are tightening, and that is if small businesses are 421 00:22:39,240 --> 00:22:42,440 Speaker 5: the ones most affected by that kind of lending squeezing out. 422 00:22:42,560 --> 00:22:46,639 Speaker 5: It's tightening up, drying up, and it's small businesses that 423 00:22:46,680 --> 00:22:48,960 Speaker 5: are the source of most job growth. So it may 424 00:22:49,000 --> 00:22:50,800 Speaker 5: not happen this month, it may not happen next month, 425 00:22:50,840 --> 00:22:53,560 Speaker 5: but we do now know that this labor market is 426 00:22:53,600 --> 00:22:56,000 Speaker 5: going to cool and we have to assume that's going 427 00:22:56,040 --> 00:22:58,760 Speaker 5: to bring down inflation, might also cause a recession. 428 00:22:59,480 --> 00:23:01,240 Speaker 1: It's good to the of the original banks and the 429 00:23:01,240 --> 00:23:04,000 Speaker 1: pressure we've seen. We had a Silicon Valley Bank, and 430 00:23:04,000 --> 00:23:06,080 Speaker 1: then you had Signature Bank, and every time we would 431 00:23:06,119 --> 00:23:08,240 Speaker 1: come up, we say, oh, it's really idiosyncratic. It was 432 00:23:08,280 --> 00:23:10,760 Speaker 1: some special failure of the management there. And then we 433 00:23:10,800 --> 00:23:13,359 Speaker 1: had First Republicle that's a different sort of secrecy. This 434 00:23:13,400 --> 00:23:16,920 Speaker 1: week we saw pack West, we saw a Western Alliance. 435 00:23:16,960 --> 00:23:18,800 Speaker 1: It seems like every time we look around there's another 436 00:23:18,880 --> 00:23:21,800 Speaker 1: idiosyncrasy popping up. At what point does it become systemic 437 00:23:21,920 --> 00:23:22,879 Speaker 1: rather than in astocratic? 438 00:23:24,160 --> 00:23:26,479 Speaker 5: Yeah, And I think we're starting to say idiosyncratic is 439 00:23:26,640 --> 00:23:28,160 Speaker 5: if you're a bank that's not one of the big 440 00:23:28,200 --> 00:23:30,520 Speaker 5: four banks in the US at the moment, that's starting 441 00:23:30,520 --> 00:23:33,000 Speaker 5: to feel like the divide because almost every other bank 442 00:23:33,040 --> 00:23:35,439 Speaker 5: at one point or another has been under pressure, and 443 00:23:35,680 --> 00:23:37,919 Speaker 5: almost every other bank in the US may not be 444 00:23:37,960 --> 00:23:39,719 Speaker 5: in the kind of difficulties that we saw, the kind 445 00:23:39,760 --> 00:23:43,199 Speaker 5: of extreme business model, extreme disregard of risk that we 446 00:23:43,200 --> 00:23:45,800 Speaker 5: saw in some of those other cases, but is certainly 447 00:23:45,880 --> 00:23:49,440 Speaker 5: facing a kind of fundamental issue. Inverted yeeal curve makes 448 00:23:49,440 --> 00:23:52,200 Speaker 5: it very severely Inverted yeal curve in the key key 449 00:23:52,240 --> 00:23:54,720 Speaker 5: part of the market between you know, three months and ten, 450 00:23:55,160 --> 00:23:57,800 Speaker 5: you know, that making it hard to make money, and 451 00:23:57,880 --> 00:24:02,119 Speaker 5: this long riding of expectation that you can make profits 452 00:24:02,160 --> 00:24:06,240 Speaker 5: by not passing on short term policy rates at the 453 00:24:06,280 --> 00:24:08,680 Speaker 5: time the time when short term policy rates arising, well, 454 00:24:08,680 --> 00:24:09,600 Speaker 5: that's harder. 455 00:24:09,320 --> 00:24:10,360 Speaker 4: And harder in a world way. 456 00:24:10,400 --> 00:24:15,120 Speaker 5: We know we can have these digital instantaneous massive falls 457 00:24:15,560 --> 00:24:17,080 Speaker 5: falls in deposits. 458 00:24:16,520 --> 00:24:17,240 Speaker 4: And bank runts. 459 00:24:17,280 --> 00:24:19,920 Speaker 5: You know, I think there are questions about quite a 460 00:24:19,960 --> 00:24:22,240 Speaker 5: lot of banks in the US right now, not that 461 00:24:22,280 --> 00:24:24,680 Speaker 5: they're going to survive, but certainly that it's going to 462 00:24:24,680 --> 00:24:26,159 Speaker 5: be quite hard for them to make money in the 463 00:24:26,200 --> 00:24:26,760 Speaker 5: near future. 464 00:24:27,080 --> 00:24:29,040 Speaker 1: Except for the very big ones, as you suggest, they 465 00:24:29,080 --> 00:24:31,680 Speaker 1: seem to be doing very well, Thank you, ma'am. Does 466 00:24:31,680 --> 00:24:34,400 Speaker 1: the FED reserve face a form of a zero sum 467 00:24:34,440 --> 00:24:37,480 Speaker 1: game here where either it goes after inflation with increasing 468 00:24:37,560 --> 00:24:40,800 Speaker 1: rates or it helps the banks by not increasing rates 469 00:24:40,880 --> 00:24:42,679 Speaker 1: or even cutting rates, because part of the problem here 470 00:24:42,680 --> 00:24:46,040 Speaker 1: obviously is an interest rate risk issue that was created 471 00:24:46,400 --> 00:24:49,719 Speaker 1: maybe intentionally, maybe it's a good thing by the rapid 472 00:24:49,800 --> 00:24:50,960 Speaker 1: increase in the rates. 473 00:24:52,119 --> 00:24:53,879 Speaker 5: Well that is, you know, that's how the policy is 474 00:24:53,880 --> 00:24:57,560 Speaker 5: supposed to work in many ways, at least it's not 475 00:24:57,680 --> 00:25:00,200 Speaker 5: aimed at reducing the bank's ability to make money. You're 476 00:25:00,280 --> 00:25:03,360 Speaker 5: challenging its business model, but it certainly aimed at tightening 477 00:25:03,359 --> 00:25:08,520 Speaker 5: credit conditions, reducing lending, and reducing economic activity. As a 478 00:25:08,560 --> 00:25:10,760 Speaker 5: result of that, I think we've got to a point though, 479 00:25:10,800 --> 00:25:14,119 Speaker 5: where the Fed and indeed other central banks are so 480 00:25:14,440 --> 00:25:17,399 Speaker 5: keen to persuade us that they're not going soft on 481 00:25:17,440 --> 00:25:21,359 Speaker 5: inflation as a result in response to these concerns around 482 00:25:21,359 --> 00:25:23,560 Speaker 5: the banks, that there's almost a risk of going the 483 00:25:23,600 --> 00:25:26,480 Speaker 5: other way. You could see that with Jaypowe this week. 484 00:25:26,600 --> 00:25:30,919 Speaker 5: There was absolute determination of that separation principle that we 485 00:25:30,960 --> 00:25:33,840 Speaker 5: are going to continue in our battle against inflation and 486 00:25:33,880 --> 00:25:36,680 Speaker 5: where we have other tools, we're thinking in a separate 487 00:25:36,720 --> 00:25:41,800 Speaker 5: way about the banks, but they obviously can't be completely separated, so. 488 00:25:41,760 --> 00:25:44,120 Speaker 1: Everything you've just discussed would be plenty. But on top 489 00:25:44,160 --> 00:25:46,040 Speaker 1: of that, we had Janet Yell on the Treasury Secretory 490 00:25:46,119 --> 00:25:48,080 Speaker 1: this week saying, by the way, that's so called X 491 00:25:48,080 --> 00:25:50,160 Speaker 1: state when the government will really run out of money 492 00:25:50,160 --> 00:25:52,000 Speaker 1: and not be able to pay its debt, maybe as 493 00:25:52,040 --> 00:25:54,879 Speaker 1: early as June one. We have meetings coming up next 494 00:25:54,920 --> 00:25:57,879 Speaker 1: week of the President with leadership and Congress give us 495 00:25:57,880 --> 00:26:00,120 Speaker 1: a sense of how the debt sealing crisis may play 496 00:26:00,200 --> 00:26:03,760 Speaker 1: across the issues we've been discussing well. 497 00:26:03,600 --> 00:26:06,159 Speaker 5: When we talk about the US economy dodging recession. So 498 00:26:06,240 --> 00:26:09,000 Speaker 5: we're basically saying that it's going to drug off the 499 00:26:09,040 --> 00:26:11,480 Speaker 5: effect of the credit crunch and the smaller lenders that 500 00:26:11,520 --> 00:26:14,919 Speaker 5: I was talking about earlier, but also that we won't 501 00:26:14,960 --> 00:26:20,400 Speaker 5: have some default moment or a big increase in financial 502 00:26:20,520 --> 00:26:24,800 Speaker 5: tension around fears of the default in the next month 503 00:26:24,880 --> 00:26:27,199 Speaker 5: or two. And we think, you know, if that actually 504 00:26:27,240 --> 00:26:29,399 Speaker 5: came to a head, that could have a very significant 505 00:26:29,400 --> 00:26:31,600 Speaker 5: effect on the economy because you know, if you think 506 00:26:31,640 --> 00:26:35,359 Speaker 5: about it, it means overnight the federal government has to balance 507 00:26:35,400 --> 00:26:38,440 Speaker 5: its book, balance its books, and that means very significant 508 00:26:38,600 --> 00:26:40,960 Speaker 5: reductions in spending there and then we don't think it 509 00:26:40,960 --> 00:26:44,199 Speaker 5: will come to that, but the kind of tensions around that, 510 00:26:44,680 --> 00:26:47,720 Speaker 5: I think, you know, do give Janet Yellen and the 511 00:26:47,760 --> 00:26:50,240 Speaker 5: broader banking community. I was in at the Milk And 512 00:26:50,320 --> 00:26:52,959 Speaker 5: Institute earlier this week in LA you know, quite a 513 00:26:52,960 --> 00:26:56,760 Speaker 5: lot of concern under the surface about how this debt 514 00:26:56,800 --> 00:26:59,720 Speaker 5: ceiling issue is going to play out, and some phone 515 00:26:59,760 --> 00:27:03,160 Speaker 5: calls being made to Congress, but no real sense that 516 00:27:03,280 --> 00:27:05,160 Speaker 5: people are getting a hand on it and. 517 00:27:05,119 --> 00:27:07,200 Speaker 1: Finally, Stephan, let's not leave Europe out of it. We 518 00:27:07,320 --> 00:27:09,520 Speaker 1: heard also from the European Central Bank this week, who 519 00:27:09,680 --> 00:27:12,000 Speaker 1: hiked as well, twenty five basis points like the FED, 520 00:27:12,320 --> 00:27:14,199 Speaker 1: but unlike the FED said, you know what, we're going 521 00:27:14,240 --> 00:27:16,800 Speaker 1: to keep going, Madam mcguard was. I thought very clear 522 00:27:16,800 --> 00:27:19,520 Speaker 1: about that. What's the difference between the two economies? And 523 00:27:19,600 --> 00:27:21,600 Speaker 1: can the ECB take such a different route from the 524 00:27:21,960 --> 00:27:25,560 Speaker 1: Fed if the Fed effect does pause, well. 525 00:27:25,359 --> 00:27:28,800 Speaker 5: Of course the European Central Bank started later. It's in 526 00:27:28,840 --> 00:27:32,960 Speaker 5: a very different kind of situation. I think we tend 527 00:27:33,040 --> 00:27:35,440 Speaker 5: to maybe certainly if you talk to people in Frankfort, 528 00:27:35,480 --> 00:27:38,560 Speaker 5: they say we overplay the amounts of which they're watching 529 00:27:38,600 --> 00:27:41,800 Speaker 5: every move of the FED and thinking about their move 530 00:27:41,840 --> 00:27:43,399 Speaker 5: and relation to that. But I mean, I think it 531 00:27:43,520 --> 00:27:47,879 Speaker 5: is the case that that interest rate rise from the 532 00:27:47,920 --> 00:27:51,080 Speaker 5: FED and the talk of possible pause from the Fed, 533 00:27:51,320 --> 00:27:54,040 Speaker 5: you know, it did give some cover to Christine Legard 534 00:27:54,200 --> 00:27:57,080 Speaker 5: and her colleagues at the European Central Bank to reduce 535 00:27:57,160 --> 00:27:59,040 Speaker 5: the amount of increase that they had. So we just 536 00:27:59,040 --> 00:28:01,240 Speaker 5: saw that quarter point. They're slowing the path of interest 537 00:28:01,320 --> 00:28:04,320 Speaker 5: rate rises. She did talk about another two. We think 538 00:28:04,320 --> 00:28:06,520 Speaker 5: it's more likely to be another one that you will 539 00:28:06,560 --> 00:28:09,440 Speaker 5: see a pause in the summer because they have other 540 00:28:09,600 --> 00:28:13,600 Speaker 5: that they're allowing their balance sheet to run off after June, 541 00:28:13,640 --> 00:28:15,840 Speaker 5: so that's a continued form of tightening that they can 542 00:28:15,880 --> 00:28:19,719 Speaker 5: rely on. But you're right that ultimately, if the market's right, 543 00:28:19,760 --> 00:28:22,639 Speaker 5: for example, that the Fed's going to start cutting rates 544 00:28:22,920 --> 00:28:25,560 Speaker 5: the end of this year, that could prove very difficult 545 00:28:25,600 --> 00:28:27,680 Speaker 5: for the European Central Bank because there's certainly a long 546 00:28:27,680 --> 00:28:28,439 Speaker 5: way from cutting. 547 00:28:29,119 --> 00:28:31,800 Speaker 1: Is there a prospect in Europe of having similar difficulties 548 00:28:31,800 --> 00:28:33,280 Speaker 1: with the banks to what we've seen in the United States, 549 00:28:33,320 --> 00:28:35,120 Speaker 1: And given the fact that the UCP has been raising. 550 00:28:34,920 --> 00:28:38,880 Speaker 5: Rates, well, it's interesting, I mean, we haven't got quite 551 00:28:38,880 --> 00:28:41,880 Speaker 5: the same dynamic playing out. You certainly you don't have 552 00:28:41,920 --> 00:28:44,960 Speaker 5: the same inverted yield curve and that kind of pressure 553 00:28:45,720 --> 00:28:48,800 Speaker 5: on profitability of the banks. But on the other hand, 554 00:28:48,880 --> 00:28:52,200 Speaker 5: you have the fact that bank the broader economy is 555 00:28:52,280 --> 00:28:56,200 Speaker 5: much more dependent on bank lending. So a smaller problem, 556 00:28:56,240 --> 00:28:59,400 Speaker 5: a smaller squeeze on the European banking system could have 557 00:28:59,800 --> 00:29:02,760 Speaker 5: actually as large or even a larger effect on the economy. 558 00:29:02,800 --> 00:29:04,760 Speaker 5: So you know, it is something that the European Central 559 00:29:04,760 --> 00:29:07,240 Speaker 5: Bank has to look at we are seeing credit conduct 560 00:29:07,280 --> 00:29:11,880 Speaker 5: conditions sharpened Titan dramatically in the last few months. I 561 00:29:11,880 --> 00:29:14,000 Speaker 5: think that'll be another factor that will cause the European 562 00:29:14,040 --> 00:29:15,920 Speaker 5: Central Bank to pause in the summer. 563 00:29:16,320 --> 00:29:18,240 Speaker 1: Stephanie, thank you so much for being a Wall shery. 564 00:29:18,240 --> 00:29:21,800 Speaker 1: That's Stephanie Flanders. She is Senior executive editor for Economics 565 00:29:21,800 --> 00:29:23,200 Speaker 1: and Government at Bloomberg. 566 00:29:23,880 --> 00:29:27,880 Speaker 10: Let's see why frightened Americans looking at the financial scandals 567 00:29:27,880 --> 00:29:31,600 Speaker 10: of recent years have begun to ask is it safer 568 00:29:31,680 --> 00:29:35,120 Speaker 10: under the matpress. In the past four years alone, more 569 00:29:35,160 --> 00:29:38,360 Speaker 10: than seven hundred and fifty US banks with deposits of 570 00:29:38,400 --> 00:29:42,400 Speaker 10: seventy billion dollars have closed. So far this year, there 571 00:29:42,440 --> 00:29:45,920 Speaker 10: have been twenty two more bank failures, representing assets of 572 00:29:45,960 --> 00:29:50,680 Speaker 10: another twenty five billion. The Federal Deposit Insurance Corporation's Fund, 573 00:29:50,720 --> 00:29:54,120 Speaker 10: which guarantees that depositors won't be left in the lurch, 574 00:29:54,560 --> 00:29:58,160 Speaker 10: has steadily dwindled in recent years. In nineteen eighty five, 575 00:29:58,240 --> 00:30:00,640 Speaker 10: the fund had a dollar nineteen to cover every one 576 00:30:00,680 --> 00:30:04,600 Speaker 10: hundred dollars of deposits. Today it has only seventeen cents 577 00:30:04,600 --> 00:30:05,920 Speaker 10: for one hundred dollars. 578 00:30:07,120 --> 00:30:16,080 Speaker 1: This is Wall Street Week on Bloomberg. This is Wall 579 00:30:16,120 --> 00:30:18,920 Speaker 1: Street Week. I'm David Weston. We've all been talking about it, 580 00:30:19,080 --> 00:30:21,520 Speaker 1: the leaving of major financial firms New York City and 581 00:30:21,520 --> 00:30:23,720 Speaker 1: for them that are from Chicago to go south to Miami. 582 00:30:23,800 --> 00:30:25,920 Speaker 1: Some people who are been calling it Wall Street South 583 00:30:26,000 --> 00:30:28,200 Speaker 1: these days. Well, one person who is ahead of the 584 00:30:28,240 --> 00:30:31,200 Speaker 1: times on this really down there developing particularly commercial real estate, 585 00:30:31,360 --> 00:30:33,400 Speaker 1: is Stephen Ross. He is the founder and chairman of 586 00:30:33,520 --> 00:30:36,200 Speaker 1: Related Companies. So, Stephen, thank you so much for joining us. 587 00:30:36,320 --> 00:30:39,400 Speaker 1: You've got a big new advance in your strategy of 588 00:30:39,400 --> 00:30:41,600 Speaker 1: about commercial real estate down there. Talk to us about 589 00:30:41,600 --> 00:30:43,000 Speaker 1: one Brickle City Center. 590 00:30:44,320 --> 00:30:47,040 Speaker 3: Well, we're very excited, you know, to be here in Miami. 591 00:30:47,560 --> 00:30:50,680 Speaker 3: Miami is probably the most dynamic city in the country today. 592 00:30:51,080 --> 00:30:53,440 Speaker 3: You know, when you look at statistics of where growth 593 00:30:53,520 --> 00:30:57,160 Speaker 3: is occurring, Miami leads the way, or South Florida leads 594 00:30:57,160 --> 00:31:00,600 Speaker 3: the way. And so being able to develop, well, we 595 00:31:00,840 --> 00:31:04,240 Speaker 3: believe to be the biggest building in Miami at a 596 00:31:04,240 --> 00:31:07,640 Speaker 3: location that's Maine and Maine with all the technology and 597 00:31:07,920 --> 00:31:11,640 Speaker 3: all the things that Related puts in their buildings, and 598 00:31:11,720 --> 00:31:14,280 Speaker 3: I think, you know, people were looking to be a 599 00:31:14,360 --> 00:31:17,920 Speaker 3: tenant in a Related building today is evidenced by our 600 00:31:17,960 --> 00:31:21,680 Speaker 3: success in New York and Hudson Yards, which really continues 601 00:31:21,720 --> 00:31:22,480 Speaker 3: to grow as well. 602 00:31:23,360 --> 00:31:25,400 Speaker 1: Now, obviously you're a very big in West Palm Beach. 603 00:31:25,480 --> 00:31:27,760 Speaker 1: This is Miami we're talking about. Now, how does it 604 00:31:27,800 --> 00:31:29,960 Speaker 1: fit into your long term strategy? What comes next? 605 00:31:30,480 --> 00:31:33,880 Speaker 3: Well, I mean, you know right now, I mean, we're 606 00:31:33,880 --> 00:31:36,960 Speaker 3: continuing to build in New York, and we're very excited 607 00:31:36,960 --> 00:31:40,520 Speaker 3: about New York. But Florida is really the growth you know, 608 00:31:41,120 --> 00:31:44,960 Speaker 3: part of the country today and where there's need for 609 00:31:45,000 --> 00:31:48,560 Speaker 3: a class A office space it really needs. And it's 610 00:31:48,560 --> 00:31:51,600 Speaker 3: more than just delivering office space, it's really you know, 611 00:31:52,000 --> 00:31:56,040 Speaker 3: building communities, building cities and making sure that those cities 612 00:31:56,400 --> 00:32:00,520 Speaker 3: have the hospitals, bringing schools and all the amenities that 613 00:32:00,600 --> 00:32:04,280 Speaker 3: new tenants want in relocating to Florida. 614 00:32:05,240 --> 00:32:07,280 Speaker 1: Stephen, thank you so much, really great to have you back. 615 00:32:07,320 --> 00:32:09,280 Speaker 1: That is Stephen Rossy, of course, is the founder and 616 00:32:09,360 --> 00:32:15,400 Speaker 1: chairman of related Companies. Finally, one more thought heavy lies 617 00:32:15,440 --> 00:32:18,120 Speaker 1: the head that wears the crown, and as of this week, 618 00:32:18,240 --> 00:32:20,720 Speaker 1: King Charles the third of Great Britain knows just how heavy, 619 00:32:20,960 --> 00:32:24,520 Speaker 1: like five pounds heavy, but with nearly twenty nine hundred 620 00:32:24,560 --> 00:32:27,120 Speaker 1: diamonds embedded in it. And that's after they cut it 621 00:32:27,200 --> 00:32:29,760 Speaker 1: back for the coronation of George the Fifth and nineteen eleven. 622 00:32:30,120 --> 00:32:32,480 Speaker 1: Before that, the crown was so heavy that no one 623 00:32:32,480 --> 00:32:35,000 Speaker 1: could wear it, so they just carried it around in 624 00:32:35,040 --> 00:32:38,320 Speaker 1: the procession. The British monarchy goes back to at least 625 00:32:38,440 --> 00:32:41,400 Speaker 1: ten sixty six, and its history and tradition are a 626 00:32:41,440 --> 00:32:43,840 Speaker 1: good part of what keeps it going after nearly one 627 00:32:43,840 --> 00:32:47,280 Speaker 1: thousand years. But there are also some very modern aspects 628 00:32:47,360 --> 00:32:50,720 Speaker 1: of this coronation. Take for example, the effects of inflation. 629 00:32:51,160 --> 00:32:52,400 Speaker 1: It is hitting us all. 630 00:32:52,680 --> 00:32:54,200 Speaker 10: Inflation is still too high. 631 00:32:55,160 --> 00:32:57,520 Speaker 4: It's sticky, it's not coming down fast enough. 632 00:32:57,360 --> 00:33:00,640 Speaker 1: And that apparently includes the monarchy, which is cutting back 633 00:33:00,680 --> 00:33:02,880 Speaker 1: in the number of days and the number of people, 634 00:33:03,200 --> 00:33:05,760 Speaker 1: though it is still estimated to cause upwards of one 635 00:33:05,840 --> 00:33:08,040 Speaker 1: hundred million pounds. 636 00:33:07,840 --> 00:33:09,840 Speaker 5: I mean a cost of living crisis. The king has 637 00:33:09,880 --> 00:33:12,480 Speaker 5: asked for the service to beat good value, but with 638 00:33:12,520 --> 00:33:15,800 Speaker 5: a reported one hundred million pound price tag, it's double 639 00:33:15,880 --> 00:33:16,880 Speaker 5: the cost of his mother's. 640 00:33:17,080 --> 00:33:20,440 Speaker 1: King Charles rides in not one but two royal coaches 641 00:33:20,440 --> 00:33:23,440 Speaker 1: for the coronation, the oldest working coach in the world, 642 00:33:23,480 --> 00:33:26,240 Speaker 1: for heading back to Buckingham Palace from the cathedral after 643 00:33:26,280 --> 00:33:29,360 Speaker 1: his crowned. That is the gold State Coach, dating back 644 00:33:29,400 --> 00:33:31,960 Speaker 1: to seventeen sixty. It was first using a coronation in 645 00:33:31,960 --> 00:33:35,040 Speaker 1: the eighteen thirties, but to get to the cathedral, it's 646 00:33:35,080 --> 00:33:38,000 Speaker 1: the much newer, air condition and much more comfortable Diamond 647 00:33:38,240 --> 00:33:41,560 Speaker 1: Jubilee State Coach that Queen Elizabeth had made after she 648 00:33:41,640 --> 00:33:44,239 Speaker 1: found the ride in the old one unbearable back at 649 00:33:44,240 --> 00:33:46,360 Speaker 1: her coronation in nineteen fifty three. 650 00:33:46,640 --> 00:33:49,680 Speaker 5: This coach, beside me, will be a key part of 651 00:33:49,720 --> 00:33:53,120 Speaker 5: the procession going from Buckingham Palace to Westminster Abbey. 652 00:33:53,320 --> 00:33:56,080 Speaker 1: But for all the ancient customs and traditions surrounding the 653 00:33:56,080 --> 00:34:00,480 Speaker 1: British monarchy, the US has some more recent parallels, and Biden, 654 00:34:00,480 --> 00:34:03,040 Speaker 1: for example, has his own sort of state coach. It's 655 00:34:03,040 --> 00:34:06,000 Speaker 1: called the Beasts, made by Cadillac, dating back only to 656 00:34:06,040 --> 00:34:09,200 Speaker 1: twenty eighteen. And we had our own sort of modern 657 00:34:09,239 --> 00:34:11,759 Speaker 1: coronation in New York just this week, not of the 658 00:34:11,880 --> 00:34:14,640 Speaker 1: King of England, but of King Jamie, the first of 659 00:34:14,760 --> 00:34:18,400 Speaker 1: all of US banking, as JP Morgan stepped in to 660 00:34:18,480 --> 00:34:21,360 Speaker 1: rescue what was left the first Republic Bank, making the 661 00:34:21,400 --> 00:34:23,760 Speaker 1: biggest bank in the US even bigger. 662 00:34:24,239 --> 00:34:27,280 Speaker 8: We support and want community banks and regional banks. 663 00:34:28,120 --> 00:34:31,280 Speaker 1: You need big banks too. And finally, King Charles shares 664 00:34:31,320 --> 00:34:34,279 Speaker 1: with another president some of the difficulties in getting whom 665 00:34:34,320 --> 00:34:37,360 Speaker 1: he wants to perform at his celebration, with reports that 666 00:34:37,400 --> 00:34:40,160 Speaker 1: the new King was turned down by Elton John as 667 00:34:40,320 --> 00:34:46,440 Speaker 1: was President Trump back in twenty sixteen morulery he would 668 00:34:46,480 --> 00:34:49,759 Speaker 1: never ordinarry him, But not so. The Italian tenor as 669 00:34:49,800 --> 00:34:52,640 Speaker 1: Andrew Buchelli, declined to perform for the forty fifth president 670 00:34:52,640 --> 00:34:55,080 Speaker 1: of the United States, but answered the call from the new 671 00:34:55,200 --> 00:35:06,040 Speaker 1: King this week because of reportedly his special relationship. But 672 00:35:06,120 --> 00:35:08,520 Speaker 1: then again, King Charles does not have to face an 673 00:35:08,560 --> 00:35:11,960 Speaker 1: election in four years to keep his new job. That 674 00:35:12,080 --> 00:35:14,200 Speaker 1: does it for this edition of Bloomberg Wall Street Week. 675 00:35:14,239 --> 00:35:16,560 Speaker 1: If you missed any part of today's program, you can 676 00:35:16,640 --> 00:35:19,959 Speaker 1: listen on demand with our Wall Street Week podcast. Find 677 00:35:20,000 --> 00:35:23,600 Speaker 1: that on Apple, Spotify, or anywhere else you get your podcasts. 678 00:35:23,920 --> 00:35:26,920 Speaker 1: I'm David Weston. Stay with us. Today's top stories and 679 00:35:27,040 --> 00:35:29,800 Speaker 1: global business headlines are coming up right now.