WEBVTT - Inflation Reduction 0:00:03.960 --> 0:00:07.320 Welcome to Bloomberg Opinion on Vonny Quinn this week. There 0:00:07.520 --> 0:00:12.240 is no way these numbers suggest inflation is licked. John 0:00:12.240 --> 0:00:17.279 Authors and Jonathan Levin on inflation volatility. Also the generic ballot, 0:00:17.360 --> 0:00:19.320 people ask you intend to vote for a Democrat or 0:00:19.320 --> 0:00:22.880 Republican for the House, that question is basically tied right now. 0:00:23.400 --> 0:00:27.000 Republicans had opened up, but smallly the mats dissipated. Jonathan 0:00:27.000 --> 0:00:29.680 Bernstein on the weekend Politics, and later we speak with 0:00:29.720 --> 0:00:32.760 Any Trivetti and Dubai on the changing centers of the 0:00:32.800 --> 0:00:36.080 financial universe. First though, to the markets following the Consumer 0:00:36.120 --> 0:00:40.200 Price Index data and John Authors, So, John, CPI still 0:00:40.280 --> 0:00:42.920 up eight and a half percent. Markets ripped after the number. 0:00:43.080 --> 0:00:46.640 But it's not exactly a low inflation print. No, it isn't. 0:00:46.880 --> 0:00:48.680 And if we've been told this was going to be 0:00:48.800 --> 0:00:51.479 the number for July six months ago, even we had 0:00:51.520 --> 0:00:55.080 been horrified. And it's important not to ignore that it 0:00:55.280 --> 0:00:58.240 is true that the number came in better than the 0:00:58.280 --> 0:01:02.360 month before, and that it was better than virtually any 0:01:02.520 --> 0:01:06.600 expectation in terms of what really mattered. A lot of 0:01:06.640 --> 0:01:12.280 the really extreme price moves that were labeled transitory when 0:01:12.319 --> 0:01:14.440 they began to get going in earnest early last year, 0:01:14.520 --> 0:01:18.440 now dramatically reversing again. So things like car rental prices, 0:01:18.600 --> 0:01:24.800 used prices, they're coming down very sharply, and that helps 0:01:24.880 --> 0:01:28.600 the overall headline number. What I think needs to be 0:01:28.720 --> 0:01:31.960 addressed very carefully, however, is that if you look at 0:01:32.240 --> 0:01:35.039 core prices. There are various technical ways you can do this, 0:01:35.120 --> 0:01:38.360 but the trimmed mean is a popular one. Exclude the 0:01:38.400 --> 0:01:41.960 most and the least rising inflation components and take the 0:01:42.000 --> 0:01:45.520 average of the rest. That's got to seven percent. And 0:01:45.600 --> 0:01:48.640 it did rise, it rose less than usual, but it's 0:01:48.680 --> 0:01:52.800 not actually peaked yet. Similarly, the Atlanta FED looks at 0:01:52.840 --> 0:01:56.160 sticky prices, which takes you a while to change, compared 0:01:56.240 --> 0:01:59.160 flexible prices that can move all over the place. And 0:01:59.480 --> 0:02:02.680 initially this was all about flexible prices, and at the moment, 0:02:03.160 --> 0:02:06.560 flexible price inflation is coming down and sticky price inflation 0:02:06.760 --> 0:02:09.560 is still going up, which brings us to the question 0:02:09.600 --> 0:02:11.440 of whether it takes the impetus for a seventy five 0:02:11.440 --> 0:02:14.840 basis point hike away. We will have another CPI round 0:02:14.960 --> 0:02:19.680 and another jobs report. If you look at FED funds 0:02:19.840 --> 0:02:24.520 contract for the next meeting, it shot up on non 0:02:24.560 --> 0:02:27.320 farm payrolls. You went from in round numbers from a 0:02:27.360 --> 0:02:30.840 forty two about a seventy seventy chance of seventy bits 0:02:30.919 --> 0:02:34.360 rather than and it went straight back to exactly where 0:02:34.360 --> 0:02:37.880 it was before the non farm payrolls. After inflation, it's 0:02:37.960 --> 0:02:41.480 almost exactly a fifty fifty shot whether we get seventy 0:02:41.520 --> 0:02:47.239 five or or fifty. So a surprisingly strong employment number 0:02:47.480 --> 0:02:50.880 gave the Fed more cover a more recent to hike, 0:02:51.120 --> 0:02:54.480 and this inflation number gives them more reason not to 0:02:54.560 --> 0:02:58.560 hike if they don't feel like it politically, they don't 0:02:58.639 --> 0:03:01.520 want to hike in immediately before the mid terms if 0:03:01.560 --> 0:03:03.840 they can avoid it. They have a better shot of 0:03:03.880 --> 0:03:06.480 doing that if they hike by seventy five bits next time. 0:03:07.200 --> 0:03:12.720 And there is no way these numbers suggest inflation is licked. 0:03:13.080 --> 0:03:17.639 Headline inflation, including those extreme moves in oil, it would 0:03:17.680 --> 0:03:19.760 be very disappointing of the peak isn't in for that, 0:03:20.760 --> 0:03:23.640 but that's not something the FED can actually control that directly. 0:03:23.720 --> 0:03:26.440 The stuff that the Fed is trying to control is 0:03:26.480 --> 0:03:30.000 not clearly peaking yet. We're going to talk about the 0:03:30.040 --> 0:03:32.760 Fed potentially making a mistake in a few minutes with 0:03:32.840 --> 0:03:36.000 Jonathan Levin. But if the Fed moves seventy five or fifty, 0:03:36.000 --> 0:03:38.080 how immediate of a mistake would that be if it 0:03:38.120 --> 0:03:41.960 were the wrong number. Wouldn't there be time to turn 0:03:41.960 --> 0:03:46.440 it around? Monetary policy work works with a lag, so 0:03:47.040 --> 0:03:50.760 it's not as though the economy would immediately tank after 0:03:50.840 --> 0:03:52.920 it happened, But the market, I mean the markets might. 0:03:54.360 --> 0:03:58.160 September is often a time when a lot of the 0:03:58.200 --> 0:04:03.600 Great Market Crisis get going in September history, and so yes, 0:04:03.720 --> 0:04:07.160 you can you can imagine. I think also in terms 0:04:07.200 --> 0:04:10.880 of American politics, there is the fact that these mid 0:04:11.000 --> 0:04:13.800 terms now do look as though they could be interesting, 0:04:14.760 --> 0:04:19.359 and that will feed into some degree of volatility. Certainly, 0:04:19.360 --> 0:04:21.240 if the Democrats held onto the House, that would be 0:04:21.240 --> 0:04:24.599 a very big surprise, which at least is now conceivable. 0:04:25.320 --> 0:04:29.080 So yes, the chances of greater volatility in September there 0:04:29.680 --> 0:04:32.719 we do have Jackson hole. Between now and then, we 0:04:32.760 --> 0:04:34.440 have Jackson hole, and Powell is going to have to 0:04:34.480 --> 0:04:38.200 be so careful at exactly and another CPI and another 0:04:38.440 --> 0:04:41.599 non farm payrolls. If they haven't managed to get their 0:04:41.640 --> 0:04:44.240 messaging straight so that they can do whatever they do 0:04:44.279 --> 0:04:46.960 without shocking anyone, that would be bad management by the Fed. 0:04:47.279 --> 0:04:49.320 I'm not too worried about that myself. I mean, they 0:04:49.320 --> 0:04:51.560 don't have much more visibility than we do, and they 0:04:51.560 --> 0:04:53.800 won't have much more visibility by Jackson Hole either. So 0:04:53.920 --> 0:04:56.120 it's difficult to know what Powell will make a speech about. 0:04:56.120 --> 0:04:58.360 It will have to be something very an adyna well, yes, 0:04:59.080 --> 0:05:01.160 whether whether he wants to just say forget about the 0:05:01.160 --> 0:05:03.960 speech I made two years ago when he was going 0:05:04.000 --> 0:05:06.840 to be an inverse Vulka, but he did say that 0:05:06.880 --> 0:05:09.600 he was going to try to raise inflation, and boyd 0:05:09.600 --> 0:05:11.479 did these succeeds on that one. We can at least 0:05:11.480 --> 0:05:13.640 give him some credit for that one. Just one point 0:05:14.000 --> 0:05:16.040 before we continue on. You've pointed out this week that 0:05:16.080 --> 0:05:18.440 profit margins are an expotential pain point. I think that's 0:05:18.600 --> 0:05:21.600 consensus pretty much. Well companies be able to manage them. 0:05:22.120 --> 0:05:24.560 This is the interesting point. This is I have been 0:05:24.600 --> 0:05:28.320 skeptical about the equity market rally. The one big point 0:05:28.360 --> 0:05:30.960 that gives me pause as to whether stocks really do 0:05:31.080 --> 0:05:34.960 deserve to be rising is that margins held up much 0:05:35.279 --> 0:05:39.240 better than many had expected in the second quarter, and 0:05:39.640 --> 0:05:45.480 that does feed into quite a concerning combination. The good 0:05:45.480 --> 0:05:48.200 news if you're a shareholder, obviously, is that your companies 0:05:48.240 --> 0:05:51.520 can absorb higher costs and pass them on to consumers. 0:05:51.760 --> 0:05:54.279 The bad news for your consumer, or if you're a 0:05:54.320 --> 0:05:57.719 central banker, is that that means inflation is likely to 0:05:57.720 --> 0:06:03.040 continue to go up. It also feeds into a narrative 0:06:04.120 --> 0:06:08.640 that could be pretty bad for public companies and their shareholders. 0:06:08.720 --> 0:06:13.640 I that the inflation is being driven by corporate greed 0:06:13.720 --> 0:06:18.000 and rapacity. That would be one of the many reasons 0:06:18.040 --> 0:06:20.920 why inflation is going up. And they could be very 0:06:21.040 --> 0:06:23.080 very nice to the rest of us and helping price 0:06:23.120 --> 0:06:28.479 inflation come back down by voluntarily probits. But you know, 0:06:28.480 --> 0:06:31.120 it's just just to make clear that if you're complaining 0:06:31.120 --> 0:06:33.000 about them, this is what you want them to do. 0:06:34.160 --> 0:06:38.000 But it is a real issue, and a good populist 0:06:38.080 --> 0:06:40.200 politician can make a lot of hay with it. And 0:06:40.240 --> 0:06:42.880 the populist politicians are on both wings of politics as 0:06:42.880 --> 0:06:45.920 long as they're not getting funded by these same companies. Well, 0:06:45.960 --> 0:06:48.840 there is that. We're also now joined by Jonathan Levin. Okay, 0:06:48.880 --> 0:06:51.880 so Jonathan Levin has joined us in studio. Jonathan. One 0:06:51.920 --> 0:06:53.839 of your columns this week or several of your columns, 0:06:53.839 --> 0:06:57.080 talked about inflation volatility and how that's actually the more 0:06:57.120 --> 0:07:01.600 important thing to watch. It's also very difficult to compute. Yeah, exactly. 0:07:01.680 --> 0:07:04.599 The problem with high inflation isn't necessarily that it's high, 0:07:04.600 --> 0:07:07.279 but inflation that tends to be high also tends to 0:07:07.320 --> 0:07:10.920 be unpredictable. The models stopped working very well when we're 0:07:10.960 --> 0:07:14.240 in a regime like this. You know, in a perfect world, 0:07:14.400 --> 0:07:17.080 if I told you, Vanni, that inflation was going to 0:07:17.120 --> 0:07:20.520 be five percent next year, then you could adjust the 0:07:20.560 --> 0:07:23.480 cost of your goods and services accordingly. You could raise 0:07:23.560 --> 0:07:26.440 wages for all of your workers by five percent, and 0:07:26.480 --> 0:07:28.560 everybody would go about their business and it would be 0:07:28.600 --> 0:07:32.280 no big deal. But when the models work as badly 0:07:32.320 --> 0:07:35.360 as they're working today, and you know, I don't mean 0:07:35.440 --> 0:07:39.440 to pick on anybody, the Wall Street models have stunk, 0:07:39.840 --> 0:07:43.800 the FEDS models have stunk, and just in general, the 0:07:43.840 --> 0:07:47.320 way that we go about understanding inflation has not worked 0:07:47.480 --> 0:07:50.800 very well for more or less the last eighteen months. 0:07:51.120 --> 0:07:54.760 So what does this mean? These hard decisions for households 0:07:54.800 --> 0:07:58.800 and businesses, they're taking them without very much visibility at all. Well, 0:07:58.800 --> 0:08:01.240 and Donald there is pipe. Sandra's team did have another 0:08:01.240 --> 0:08:04.080 piece about inflation politility this weekend. It's high, they say, 0:08:04.080 --> 0:08:06.320 it's as high as levels of the nine seventies and 0:08:06.400 --> 0:08:10.440 nineteen eighties. Does it matter for real activity, as Jonathan evince, 0:08:10.480 --> 0:08:14.120 as it does. Yes, it does, because metaphor often used it. 0:08:14.120 --> 0:08:17.240 It throws sand in the wheels. It adds an extra 0:08:17.440 --> 0:08:21.440 layer of uncertainty, which more or less requires that you 0:08:21.520 --> 0:08:24.560 meet it with some degree of of wastage. It's in 0:08:24.560 --> 0:08:27.400 the same way that if you're nervous about a storm coming, 0:08:27.440 --> 0:08:29.400 you're just going to have to have more in inventory 0:08:29.400 --> 0:08:32.280 than you'd you'd prefer to have to be safe. If 0:08:32.320 --> 0:08:34.680 you're really not sure where prices are going to be 0:08:34.679 --> 0:08:38.160 in another six twelve months, your behavior is going to 0:08:38.240 --> 0:08:40.880 be less predictable and it's almost certainly going to be 0:08:41.360 --> 0:08:43.280 less efficient. So we should take confident in the fact 0:08:43.280 --> 0:08:47.080 that New York Beds inflation expectations data showed that they're 0:08:47.080 --> 0:08:48.880 coming they're coming down a little bit at least on 0:08:48.880 --> 0:08:50.840 the part of the average consumer. But we're waiting for 0:08:50.960 --> 0:08:52.760 you Michigan data to tell us a little bit more 0:08:52.800 --> 0:08:57.000 about that. But that plays very much into overall inflation volatility. Right. 0:08:57.240 --> 0:09:00.600 Jonathan wrote a great column on Michigan expectation. It's a 0:09:00.640 --> 0:09:04.320 little bit like deciding presidential elections by getting galloped, go 0:09:04.360 --> 0:09:06.960 away into a pull and tell us who one do 0:09:07.000 --> 0:09:10.720 you think those inflation expectations surveys really merit the weight 0:09:10.760 --> 0:09:13.680 that's put on them now. Well, the trouble is that 0:09:13.720 --> 0:09:16.520 a lot of economic research about inflation over probably the 0:09:16.559 --> 0:09:21.640 past twenty years has has found that inflation expectations are very, 0:09:21.760 --> 0:09:24.439 very important. We just don't know how to measure them. 0:09:24.640 --> 0:09:27.920 We have very little confidence in our ability to understand 0:09:27.960 --> 0:09:32.760 how consumers and households form their inflation expectations and to 0:09:32.880 --> 0:09:35.400 measure those expectations in real time. And yet that was 0:09:35.679 --> 0:09:39.160 the whole impetus for the fed's last move. So the 0:09:39.240 --> 0:09:42.160 question is to what extent is the FED still flying blind? 0:09:42.400 --> 0:09:46.360 Jonathan Levin, I think they were playing relatively blind. I mean, look, 0:09:46.400 --> 0:09:50.080 the situation is that we've had good reports in the past. 0:09:50.240 --> 0:09:53.640 Right in the summer of one, it really looked like 0:09:53.760 --> 0:09:56.160 we had turned to the corner. But one good report 0:09:56.240 --> 0:09:59.280 does not a trend make. Frankly, three good reports does 0:09:59.320 --> 0:10:02.240 not trend and make. I will take one and I 0:10:02.280 --> 0:10:05.440 will hope for the best. You know, two or three 0:10:05.480 --> 0:10:08.560 or four months from now. I would say at least 0:10:08.600 --> 0:10:12.720 the FED cat now takes some degree of confidence that 0:10:12.800 --> 0:10:16.920 the really extreme transitory effects that followed the pandemic are 0:10:17.000 --> 0:10:21.640 now dying down. Having been somewhat less transitory than everyone 0:10:21.640 --> 0:10:24.720 had hoped, they have still been transitory. So there's maybe 0:10:24.840 --> 0:10:29.199 one area of unpredictability that's been taken out of the situation. 0:10:29.200 --> 0:10:31.040 But I think the critical point, I think it is 0:10:31.160 --> 0:10:36.640 very likely that the headline inflation peak is in because 0:10:36.679 --> 0:10:40.160 of all those extreme oil and transport related things. So 0:10:40.440 --> 0:10:43.480 that's not what really matters. It's how quickly does it 0:10:43.600 --> 0:10:46.280 come down. If it's still at four and a half 0:10:46.360 --> 0:10:49.040 five percent at the turn of the year, everybody's going 0:10:49.040 --> 0:10:50.959 to be demanding much more in the way of wage 0:10:51.040 --> 0:10:53.000 rises than they would be if it was two and 0:10:53.040 --> 0:10:55.000 a half percent at the end of the year. Is 0:10:55.040 --> 0:10:56.840 it fair to say, and I'm asking you both that 0:10:56.880 --> 0:10:59.240 recession is the base case for the treasury market and 0:10:59.320 --> 0:11:01.960 still is still with an you know, that's one reading 0:11:02.000 --> 0:11:04.520 of the yield curve. Another reading of the yield curve, 0:11:04.600 --> 0:11:07.679 as my colleague Bob Burgess pointed out, is that the 0:11:07.679 --> 0:11:09.679 Fed is going to get the job done right and 0:11:10.080 --> 0:11:14.040 and and that's why tenure yields are significantly lower than say, 0:11:14.120 --> 0:11:18.400 two year yields. You know, for me, for six to 0:11:18.480 --> 0:11:20.880 twelve months, my base case has been if there's going 0:11:20.920 --> 0:11:22.680 to be a recession, is going to be because of 0:11:22.720 --> 0:11:25.480 the FED. Right, So on the margin, if you think 0:11:25.520 --> 0:11:28.960 that this lower is your probability distribution that they're going 0:11:29.000 --> 0:11:32.560 to go higher this this most recent report, then you 0:11:32.600 --> 0:11:36.280 know the probability of a recession has dropped slightly in 0:11:36.840 --> 0:11:39.560 in the past twenty four hours. And the possibility of 0:11:39.559 --> 0:11:43.240 a soft landing, which I hit ticked down to pretty 0:11:43.320 --> 0:11:47.360 much zero at one point, is I still don't think 0:11:47.400 --> 0:11:51.560 it's likely, but it's possible again now. But Burgess's column, 0:11:51.600 --> 0:11:54.360 as you mentioned, Jonathan Evan also though, ask the question 0:11:54.360 --> 0:11:57.760 of whether the yield curves predictability has been diminished, john Authors, 0:11:57.800 --> 0:11:59.840 would you say that that might be the case these days? 0:12:00.360 --> 0:12:04.840 Like inflation expectations, Another number that's incredibly important but totally 0:12:04.880 --> 0:12:08.040 impossible to measure in real time is the term premium. 0:12:08.520 --> 0:12:11.400 Most sensible measures of the term premium, the degree of 0:12:11.480 --> 0:12:15.320 uncertainty you factor into your future prices, suggest that the 0:12:15.400 --> 0:12:19.199 term premium has never been lower, which would in turn 0:12:19.320 --> 0:12:24.680 imply that people really aren't worried at all, which suggests 0:12:24.960 --> 0:12:27.360 in turn that something very strange isn't he going on 0:12:27.400 --> 0:12:30.560 in the bond market, because that's not the case there. 0:12:30.600 --> 0:12:34.480 They're plainly are some very strange liquidity issues going on 0:12:34.679 --> 0:12:37.600 with the bond market. That said, of all the markets 0:12:37.640 --> 0:12:39.760 that are out there, the one I would be least 0:12:40.080 --> 0:12:43.400 confident betting against would be the bond market. You don't 0:12:43.520 --> 0:12:46.680 dismiss it lightly, even if you do say, well, maybe 0:12:46.679 --> 0:12:49.040 this isn't as strong and indicator as it appears. It 0:12:49.080 --> 0:12:51.680 could be an indication of safe haven flows though known 0:12:51.760 --> 0:12:55.080 Jonathan Levin this low term premium, Yeah, certainly. I mean 0:12:55.080 --> 0:12:58.400 there's a lot of risk out there well, and managers 0:12:58.440 --> 0:13:01.280 have to do something with their portfolios it well, yeah, 0:13:01.280 --> 0:13:03.880 and and and also there's there's a shortage of safe assets. 0:13:04.280 --> 0:13:08.280 Particularly Eurozone bonds would have been regarded as interchangeable with 0:13:08.360 --> 0:13:12.480 treasuries fifteen twenty years ago, post their sovereign debt crisis. 0:13:13.320 --> 0:13:16.120 Whatever the rating agencies say, you're one degree more nervous 0:13:16.120 --> 0:13:19.280 about BTPs or French bonds than you are about treasuries, 0:13:19.440 --> 0:13:21.640 so they have more scarce the value because there are 0:13:21.720 --> 0:13:24.839 fewer apparently risk free assets out there. I guess we'll 0:13:24.840 --> 0:13:28.240 finish with this one John Authors, How does policy change 0:13:28.360 --> 0:13:30.719 affect the inflation picture? So we have the Infrastructure Plan 0:13:30.800 --> 0:13:33.280 but also the Inflation Reduction Act now, but it's been 0:13:33.280 --> 0:13:36.760 touted as inflationary and anti inflationary, depending on where you're standing. 0:13:36.920 --> 0:13:39.920 I personally doubt in the short term you'll have minimal 0:13:39.960 --> 0:13:44.439 impact on inflation. In the long term, if the money 0:13:44.520 --> 0:13:46.760 is really well invested, then in the very long term 0:13:46.760 --> 0:13:49.320 it will indeed reduce inflation. If it's wasted, it will 0:13:49.679 --> 0:13:52.920 increase it. Their politicians and they call it that. I 0:13:52.960 --> 0:13:56.520 don't think it's a particularly relevant concern. I think geo 0:13:56.520 --> 0:14:00.800 political issues really matters. So if the Ukraine Russia war, 0:14:00.880 --> 0:14:03.320 which is steadily convinced us that we can forget about 0:14:03.360 --> 0:14:05.760 it in the last month or two, flares up again, 0:14:06.200 --> 0:14:10.079 that's an issue. And obviously some of the scenarios coming 0:14:10.120 --> 0:14:14.400 into the Taiwan Street would change things profoundly. John Authors 0:14:14.440 --> 0:14:18.720 and Jonathan live in Well. The data is in New York, London, 0:14:18.840 --> 0:14:20.800 Hong Kong. They may not be the centers of the 0:14:20.840 --> 0:14:24.040 financial universe anymore. We're joined from Dubai by a junta 0:14:24.080 --> 0:14:26.320 Vetti and Janie. You looked at the data and found 0:14:26.320 --> 0:14:29.120 people are actually feeling quite differently these days about the 0:14:29.200 --> 0:14:32.040 so called traditional financial hubs. Tell us a little bit 0:14:32.040 --> 0:14:35.560 about what you found in traditional financial hubs of New York, London, 0:14:35.560 --> 0:14:38.200 and Hong Kong top the list of financial centers as 0:14:38.200 --> 0:14:41.240 the historics we have because they have deep capital markets, 0:14:41.640 --> 0:14:45.440 regulatory infrastructure of financial plumbing, and they've created an ecosystem 0:14:45.480 --> 0:14:48.840 of workers around it. Now, the ecosystem of workers that 0:14:49.000 --> 0:14:51.920 get paid relatively well also means that the costs of 0:14:52.000 --> 0:14:54.400 living in next in these places goes up relative sil 0:14:54.480 --> 0:14:58.960 go up, schooling, everything else around it. Generally costs are However, 0:14:59.000 --> 0:15:01.000 when you look at the flips out of that on 0:15:01.160 --> 0:15:04.200 the quality of living in deex events very low. And 0:15:04.240 --> 0:15:08.240 that's always been the case. And my conclusion from this 0:15:08.360 --> 0:15:10.320 is really that over the last two or three years, 0:15:10.320 --> 0:15:13.080 as they've lived to COVID works from home, people have 0:15:13.200 --> 0:15:15.960 realized they don't need to be people even commuting to 0:15:16.040 --> 0:15:19.480 the city or doing various things. They don't necessarily want 0:15:19.520 --> 0:15:21.920 to do that, and they don't necessarily feel the need 0:15:22.000 --> 0:15:25.040 to do it. And therefore we've seen things like mass 0:15:25.080 --> 0:15:28.400 trends and employment or other unemployment of the Great Resignation, 0:15:28.760 --> 0:15:31.800 and increasingly people want to be in different places and 0:15:31.920 --> 0:15:33.800 care about the way we live and want to live 0:15:34.000 --> 0:15:37.760 better live. Yeah, and interestingly, we have seen movements of 0:15:37.840 --> 0:15:40.920 certain firms. You know, they've been moves to Nashville by 0:15:40.920 --> 0:15:42.920 some firms, even their h Q. And then there's been 0:15:43.000 --> 0:15:45.960 office openings in places like Miami and West Palm Beach 0:15:46.080 --> 0:15:50.560 and in Britain outskirts cities like Birmingham. But it's not 0:15:50.640 --> 0:15:54.200 clear yet whether these cities will be able to handle 0:15:54.280 --> 0:15:57.840 the influx of these financial workers right or is it well, 0:15:57.840 --> 0:16:00.360 it isn't clear. But I think more broadly we need 0:16:00.440 --> 0:16:03.040 to be ready for and what employers and businesses need 0:16:03.080 --> 0:16:05.000 to be ready for that. You know, we need to 0:16:05.080 --> 0:16:09.040 have more spread out centers. You can't have a concentration 0:16:09.040 --> 0:16:11.480 of workers because that's just not going to work. And 0:16:11.520 --> 0:16:14.000 how you manage that in terms of you know, would 0:16:14.000 --> 0:16:16.480 you rather have employees leave and then have a cost 0:16:16.520 --> 0:16:19.360 of rehiring in the cost of looking to the talent again, 0:16:19.880 --> 0:16:23.280 or do we accommodate people workers across different areas. And 0:16:23.360 --> 0:16:25.160 this doesn't mean that people need to be going and 0:16:25.200 --> 0:16:28.480 working on a beach. You know, they can be in 0:16:28.520 --> 0:16:32.680 places where there's enough potacity a center of gravity in 0:16:32.720 --> 0:16:36.920 those regions. Is it the case that finance brings some 0:16:37.000 --> 0:16:40.440 of these problems with us it does? You know? I 0:16:40.440 --> 0:16:43.480 mean that is the caveat There are licensing and registration 0:16:43.680 --> 0:16:47.480 and all these issues that you know are constraints. However 0:16:47.520 --> 0:16:49.960 those can also mean depending on the city you choose, 0:16:50.000 --> 0:16:52.520 in the places you choose, those can be worked around. 0:16:53.120 --> 0:16:56.880 And I think ultimately it really comes down to understanding 0:16:56.960 --> 0:17:00.120 flexibility in its true sense. It doesn't have to me 0:17:00.200 --> 0:17:02.240 a black or white issue. It doesn't have to be 0:17:02.600 --> 0:17:05.119 always work from home and never work from home. But 0:17:05.200 --> 0:17:07.880 I think our understanding of the workplace has gotten better 0:17:08.600 --> 0:17:11.480 and I do think there's advantage would be in the office. 0:17:11.520 --> 0:17:14.000 That said, which is why I think, you know, if 0:17:14.040 --> 0:17:17.000 it's more convenient and if people can work in teams 0:17:17.040 --> 0:17:20.960 and being offices, there needs to be different types of 0:17:21.040 --> 0:17:24.199 arrangements and I think it also depends on new sectors 0:17:24.240 --> 0:17:27.119 and finance it can work well. Interestingly, we saw a 0:17:27.200 --> 0:17:30.119 sort of many example of this post Brexit, right we 0:17:30.119 --> 0:17:33.200 were wondering if firms would leave London, if they would 0:17:33.200 --> 0:17:35.440 need to leave London, and we definitely saw a move 0:17:35.560 --> 0:17:39.760 towards places like Frankford and other places where regulators are based, 0:17:39.880 --> 0:17:44.480 but London still held onto its status, at least so far, 0:17:44.800 --> 0:17:47.960 especially in the FX world. For example, you're in a 0:17:47.960 --> 0:17:51.560 place now which might be a burgeoning financial center. Tell 0:17:51.640 --> 0:17:53.800 us a little bit about Dubai and now, Dubai is 0:17:53.800 --> 0:17:56.679 one of those places where if they've maintained being commercial 0:17:56.840 --> 0:18:00.440 through the pandemic, they've maintained air travel very well. They've 0:18:00.520 --> 0:18:03.960 had plenty of housing, plenty of schools. It's kind of 0:18:04.000 --> 0:18:07.280 developed with the times, as you will, and while it 0:18:07.320 --> 0:18:10.159 has its own set of shortcomings, I think the more 0:18:10.160 --> 0:18:12.000 and more speak to people who've been here for the 0:18:12.040 --> 0:18:14.720 last ten years or who were here twenty years ago, 0:18:15.080 --> 0:18:19.040 it's become clear that has places attract talent, those places 0:18:19.080 --> 0:18:22.880 become central to how we think about them. So, you know, 0:18:22.960 --> 0:18:25.520 if we have more financed professionals who's been in many 0:18:25.520 --> 0:18:29.000 other places here, the quality of human capital close offs, 0:18:29.000 --> 0:18:33.280 if you will, Will it become the foremost financial center. Unlikely, 0:18:33.600 --> 0:18:36.160 because we're still competing with the life of New York 0:18:36.320 --> 0:18:39.399 and London. And London you know facts, as you mentioned, 0:18:39.400 --> 0:18:41.720 it's the center of the world. It has the deepest 0:18:41.760 --> 0:18:44.840 capital markets, but it's still had its issues in that right. 0:18:45.080 --> 0:18:47.640 People have still been able to arbitrage that and get 0:18:47.640 --> 0:18:50.400 around that. So it's the question of how we think 0:18:50.440 --> 0:18:53.719 about it. You know, regulatory oversight is also very very 0:18:53.840 --> 0:18:57.720 valid and important. It's a fairly vague framework. Well, you 0:18:57.800 --> 0:19:00.320 looked at the mercer quality of living in the and 0:19:00.480 --> 0:19:02.840 found that thanks to sky high rents and so on, 0:19:02.960 --> 0:19:05.040 which continue to go up. And it's not just New York, 0:19:05.080 --> 0:19:07.240 it's all over the United States. New York was forty 0:19:07.280 --> 0:19:09.840 four on the list, London was forty one on the list, 0:19:10.280 --> 0:19:12.679 and the city's the top of the list for places 0:19:12.720 --> 0:19:16.680 like Vienna and Zurich, and they're very developed places, but 0:19:16.840 --> 0:19:20.040 polity of living is extremely high. So why wouldn't it 0:19:20.080 --> 0:19:23.680 be an option. I would ask employers and businesses to 0:19:23.840 --> 0:19:26.240 have a small huts there. No one saying have the 0:19:26.320 --> 0:19:29.200 headquarters there. But you know those those are things that 0:19:29.240 --> 0:19:32.200 people need to consider. The regulators need to think about 0:19:32.200 --> 0:19:35.240 it and to work in trandom with businesses to see 0:19:35.240 --> 0:19:37.719 what can be set up. The things do need to develop, 0:19:37.760 --> 0:19:40.720 and of course we need guardrails in place. However, it 0:19:40.840 --> 0:19:43.280 is the time for us to reassess if we want 0:19:43.320 --> 0:19:46.520 to keep people in the workforce, then this is perhaps 0:19:46.520 --> 0:19:48.280 of time to be thinking about how to make things 0:19:48.320 --> 0:19:51.800 better and keep the workforce productive on Janet Travetti. By 0:19:51.800 --> 0:19:54.080 the way, do get in touch. Comments and opinions always 0:19:54.119 --> 0:19:56.520 welcome at Vonley Quinn on Twitter or email v Quinn 0:19:56.520 --> 0:19:59.440 at Bloomberg dot net. Now to Jonathan Bernstein and the 0:19:59.480 --> 0:20:01.719 Weekend Paul Tics. So, Jonathan, we're definitely going to talk 0:20:01.720 --> 0:20:04.840 about the primaries, but with all of the theater this week, 0:20:04.920 --> 0:20:06.720 it would be a miss not to begin with Mara 0:20:06.800 --> 0:20:09.560 Lago and also the pleading of the fifth by the 0:20:09.560 --> 0:20:13.359 former president just theater or may this have some kind 0:20:13.400 --> 0:20:17.040 of an impact on voting on people's preferences? You know, 0:20:17.160 --> 0:20:20.320 my tendency is to guess that things like this will 0:20:20.359 --> 0:20:25.000 not wind up having electoral effects. People vote for all 0:20:25.040 --> 0:20:27.800 sorts of reasons, don't vote for all sorts of reasons, 0:20:28.160 --> 0:20:31.000 And it's it seems unlikely to me that something that 0:20:31.119 --> 0:20:36.240 happened to Trump the former president in early August is 0:20:36.280 --> 0:20:39.159 going to have a major effect on whether people choose 0:20:39.160 --> 0:20:41.280 to vote or not. I would guess that things like 0:20:41.720 --> 0:20:46.160 gasoline prices and the pandemic and inflation and jobs more 0:20:46.160 --> 0:20:49.800 generally and highly sailing, and issues like abortion this year 0:20:50.000 --> 0:20:54.760 are going to have more effect on voting than this 0:20:54.840 --> 0:20:56.600 kind of thing. It's very important. There's all kinds of 0:20:56.640 --> 0:20:59.520 important things about what's happening with Trump and the law. 0:21:00.240 --> 0:21:02.040 I'm not sure that it's going to have effects on 0:21:03.040 --> 0:21:06.879 elections or for that matter, perhaps elections right, and we 0:21:06.920 --> 0:21:10.119 are seeing abortion rights becoming more of an issue at 0:21:10.119 --> 0:21:13.919 the polls. But just to tie an in other aspect 0:21:14.000 --> 0:21:16.840 of things, is the picture getting any less muddy about 0:21:16.840 --> 0:21:19.920 whether the former president might actually see charges, whether Mary 0:21:19.920 --> 0:21:24.160 Garland will actually prosecute. I try to not speculate too much. 0:21:24.280 --> 0:21:28.399 I would say it does appear that justice from it 0:21:28.560 --> 0:21:32.239 is taking the entire range of things that Trump has 0:21:32.280 --> 0:21:35.760 been doing pretty seriously. He also has the issue down 0:21:35.800 --> 0:21:39.480 in the Georgia judicial system where he's under saw. Of 0:21:39.480 --> 0:21:41.359 course that the thing in New York State, which is 0:21:41.400 --> 0:21:44.280 now a civil procedure not a criminal one. There's a 0:21:44.280 --> 0:21:49.199 lot of trouble that he's in and couldn't indictments absolutely well, 0:21:49.359 --> 0:21:51.399 at the very least. It has to be taking a 0:21:51.480 --> 0:21:53.680 lot of his time, right. I mean, there's a lot 0:21:53.680 --> 0:21:56.640