WEBVTT - Market Pullback and Alan Greenspan's Legacy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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<v Speaker 2>Joining us right now.

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<v Speaker 3>Phil Corporeal is with JP Morgan as well.

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<v Speaker 2>Your midyear review.

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<v Speaker 3>You got to be coming out with fifty sixty seventy pages.

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<v Speaker 3>What's the paragraph that you most debated about? You get

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<v Speaker 3>twenty people in a room. What was that single paragraph

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<v Speaker 3>on page thirty two where there was JP Morgan collegial debate.

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<v Speaker 2>It had to be the federal reserve over the next

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<v Speaker 2>six to twelve months. I mean there's still a camp

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<v Speaker 2>for us that believe that it's a federal reserve that's

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<v Speaker 2>going to be on hold. And then there's still a

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<v Speaker 2>camp that believes that this inflation could be a little

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<v Speaker 2>bit stickier that would have to force them to move

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<v Speaker 2>and that has acid allocation implications. Tom. But I will

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<v Speaker 2>say there's been so much headline around how much is

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<v Speaker 2>their price to move? Nine of the eighteen last week

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<v Speaker 2>believe that they should be moving rates higher. I keep

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<v Speaker 2>going back though, to the fact that this market, via

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<v Speaker 2>the ten year note, which I think is the most

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<v Speaker 2>important rate on the whole Yell curve, has given the

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<v Speaker 2>Federal Reserve a vote of confidence in terms of them

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<v Speaker 2>achieving their price stability mandate. The ten year Treasury rate

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<v Speaker 2>today right now is lower than where they came out

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<v Speaker 2>on last Wednesday when they were supposedly hawkish. Now they

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<v Speaker 2>moved the che year note up, for sure, but again

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<v Speaker 2>I think the ten year note is the most important

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<v Speaker 2>rate on the curve, and then the volatility of that rate,

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<v Speaker 2>the move index is back to where we were before

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<v Speaker 2>r N. And if you think about capital market activity, confidence,

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<v Speaker 2>even the housing market, low volatility on the ten year note,

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<v Speaker 2>I think is a really good backdrop for taking risk.

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<v Speaker 4>Bulls out there will suggest that we've seen peak great

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<v Speaker 4>peak inflation.

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<v Speaker 2>Yes, are you in that camp? We are, so, we

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<v Speaker 2>believe primarily from the fact that we sit here today

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<v Speaker 2>on June twenty third, and oil prices are around seventy

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<v Speaker 2>five dollars, and they got as high as one hundred.

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<v Speaker 2>Gas prices were up at four dollars and fifty cents.

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<v Speaker 2>They're now down at about three dollars and ninety cents.

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<v Speaker 2>So that move alone, Paul, leads us to believe that

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<v Speaker 2>we saw a peak.

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<v Speaker 5>Now.

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<v Speaker 2>Could there be some stickiness in service sector inflation? Sure,

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<v Speaker 2>I mean that's why the Federal Reserve is an easing

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<v Speaker 2>policy like they thought they were three months ago. But

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<v Speaker 2>I think that's okay. Service sector inflation is okay if

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<v Speaker 2>it's emblematic of a resilient consumer. And Paul, as you know,

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<v Speaker 2>the US consumer is the most important thing to get right.

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<v Speaker 2>If you can get the US consumer right, you can

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<v Speaker 2>get all of your acid allocation right.

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<v Speaker 4>Just filled up the VESTPA over the weekend three dollars

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<v Speaker 4>and eighty seven cents for both gallons two gallon.

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<v Speaker 3>That's going to take me for the rest of the summer.

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<v Speaker 4>Exactly. So what are we doing here as to maybe

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<v Speaker 4>kind of asset allocation here as we think back that,

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<v Speaker 4>you know, the back half of the year here.

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<v Speaker 2>Yeah, So, Paul, we still believe in the AI trade

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<v Speaker 2>irrespective of what's happening in places like Korea overnight. I

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<v Speaker 2>keep going back to that stat that there's a thirty

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<v Speaker 2>percent increase in the supply for semiconductor chips and a

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<v Speaker 2>seventy percent increase in the demand, Right, that's economics one.

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<v Speaker 2>One that those earnings we think are sustainable. But at

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<v Speaker 2>the same time, one of the things that's becoming front

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<v Speaker 2>and center is a sector that's actually negative year to date,

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<v Speaker 2>that little sector called financials. So financials for US, three

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<v Speaker 2>things really point us that way in terms of the

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<v Speaker 2>acid allocation and the rotation. The first an inflection and earnings.

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<v Speaker 2>Second is a buyback and a dividend story that looks

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<v Speaker 2>really unique. And then the third goes back to the consumers.

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<v Speaker 2>I just mentioned loan growth and if we're putting geopolitics

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<v Speaker 2>in the rear view mirror, okay, that's one of the

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<v Speaker 2>assumptions we have to make here. That then gives you know,

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<v Speaker 2>that long world story.

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<v Speaker 3>So Gale and Greenspan nineteen seventies. Loan growth, how is

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<v Speaker 3>long growth?

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<v Speaker 2>Yeah, so in terms of what the growth the overall economy.

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<v Speaker 3>I mean, it's such an old school thing to say,

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<v Speaker 3>is there demand for loans?

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<v Speaker 2>Yeah, so that we think that there is going to

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<v Speaker 2>be incremental demand for loans because the US consumer stays afloat.

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<v Speaker 2>That's what it comes down to. So if they're demanding that,

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<v Speaker 2>and again this goes back to the tenure. Note this

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<v Speaker 2>goes back to the volatility of rates. Capital markets activity

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<v Speaker 2>happens when people aren't nervous about moves higher and rates. So, Tom,

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<v Speaker 2>if we're of the view peak rates, peak inflation in

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<v Speaker 2>the second quarter, and that means you can see some

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<v Speaker 2>incremental loan growth into the back half of the year

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<v Speaker 2>in a sector that again is negative year to day.

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<v Speaker 2>So that's the relative value opportunity Tom, that we're looking for.

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<v Speaker 4>What are we doing in a fixed income market here?

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<v Speaker 4>I just sit in a two year and get four

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<v Speaker 4>spot two on a two year treasury? I mean, do

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<v Speaker 4>I take credit risk.

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<v Speaker 2>Above and beyond that? Yeah, So that's a really good question.

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<v Speaker 2>We think that the ten you note probably settles at

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<v Speaker 2>the end of the year around four and a half

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<v Speaker 2>to four point six percent, So basically where we are

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<v Speaker 2>where we are today. The real problem for me is

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<v Speaker 2>people believing that they're getting the risk free rate, the

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<v Speaker 2>federal funds rate in their checking account savings, got some

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<v Speaker 2>money market funds, Paul. The average yield on checking savings

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<v Speaker 2>and money markets in this country is fifty two basis

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<v Speaker 2>prides right, fifty two bases much you could throw a

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<v Speaker 2>dart at any asset class this year and beat fifty

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<v Speaker 2>two basis points, so within fixed income. Again, if we

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<v Speaker 2>saw peak rates, if we saw peak inflation in the

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<v Speaker 2>second quarter, extending out of cash into anything you mentioned

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<v Speaker 2>the two year and old. Okay, even even short duration

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<v Speaker 2>credit makes sense.

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<v Speaker 3>I'm looking at Cathay Pacific, just out, folks. This is

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<v Speaker 3>the giant Hong Kong. I had a huge affiliation with

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<v Speaker 3>him years ago when I used to go there all

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<v Speaker 3>the time. Paul Cathay Pacific to cut fuel search charges

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<v Speaker 3>for flights July Rar, I mean the micro data where

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<v Speaker 3>this keeps going. And to me, Phil, it's a calendar item.

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<v Speaker 3>We mentioned this with Robert Teeter. I'm sorry, nine days

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<v Speaker 3>before the end of every single quarter. Everybody has a

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<v Speaker 3>Bart Simpson cow about earnings and revenues. It's not if

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<v Speaker 3>a sophisticated but it's a calendar item. OMG, We're all

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<v Speaker 3>gonna die. That's the basic idea.

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<v Speaker 2>Yeah, so that's that's one hundred percent the case. By

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<v Speaker 2>the way, speaking of earnings, Tom, six straight quarter of

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<v Speaker 2>double digit earnings. Yeah, it's like the opposite of the

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<v Speaker 2>model again that going forward we do have doubleged earnings

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<v Speaker 2>growth into twenty seven, but six straight quarters we're not modeling.

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<v Speaker 2>We're not modeling that, Tom, but it's kind of the

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<v Speaker 2>opposite of a bubble. Like if I just look at

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<v Speaker 2>the S and P five hundred pe ratio, it's lower

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<v Speaker 2>today than where we were coming into the year. Earnings

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<v Speaker 2>have completely dominated the total return on both the index

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<v Speaker 2>level as well as the information technology level. So it's

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<v Speaker 2>pretty nice fundamental story combined with the evaluation Sloy. We

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<v Speaker 2>have to match those two things up to be bullsh

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<v Speaker 2>on the market.

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<v Speaker 3>Sill Cam Pouriel, Chief Investor Strategy is GP Morgan Wealth

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<v Speaker 3>the Management. Stay with us. More from Bloomberg Surveillance coming

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<v Speaker 3>up after this.

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<v Speaker 1>You're listening to the Bloomberg Surveillance Podcast. Catch us live

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<v Speaker 1>weekday afternoons from seven to ten am Eastern Listen on

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<v Speaker 1>Applecarplay and Android Otto with the Bloomberg Business app, or

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<v Speaker 3>Shuning so Ellen Fraser a partner and energy expert burringa

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<v Speaker 3>partners out of the United Kingdom. Ellen, can you just

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<v Speaker 3>say simply we remove the peak and petroleum prices and

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<v Speaker 3>we have a new regime now of getting back to normal.

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<v Speaker 2>Yeah, soundy?

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<v Speaker 6>That would be the hope. I think there is so

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<v Speaker 6>much economic and political pressure to make sure from all sides, frankly,

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<v Speaker 6>that Straight stays open and all of the trade flows

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<v Speaker 6>get back to normal. Certainly, the markets are pricing in

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<v Speaker 6>an expectation that we're getting back to some level of normal.

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<v Speaker 6>Let's be real about it. There's quite a rocky road ahead.

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<v Speaker 6>We've seen that in the last couple of weeks. We've

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<v Speaker 6>seen that, you know, persistently over the last few months

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<v Speaker 6>around a deal or no deal, straight open or straight not.

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<v Speaker 6>And it's really, you know, really critical that we get

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<v Speaker 6>back to reliable flows given where stock levels are more

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<v Speaker 6>generally but trending in the right direction, I think, is

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<v Speaker 6>the overall summary.

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<v Speaker 4>Ellen, what do we know about damage done to some

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<v Speaker 4>of the energy infrastructure in that part.

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<v Speaker 5>Of the world.

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<v Speaker 6>Yeah, the energy infrastructure damage was quite early on in

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<v Speaker 6>the conflict, so we saw ras Laffan taking a hit,

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<v Speaker 6>we saw some other facilities taking the hit even actually

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<v Speaker 6>the Sidi pipeline took a hit at one point as well,

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<v Speaker 6>and that Sidi pipeline being quite important because it's the

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<v Speaker 6>one of the key routes out of the Strait should

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<v Speaker 6>they actual straight be closed. It's an overlandpe line into

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<v Speaker 6>the Red Sea, so it offers a bit of an

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<v Speaker 6>alternative flow. Some of those areas of damage will be

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<v Speaker 6>relatively easy to get restored, and there will have been

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<v Speaker 6>activity on that already some of them. However, and certainly

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<v Speaker 6>you know that the Razlafan timings they quoted when it

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<v Speaker 6>first happened three to five years to get that facility

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<v Speaker 6>back up and running. Now every bit of pressure, economic

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<v Speaker 6>pressure and political pressure will be on them to get

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<v Speaker 6>that up and running more quickly, So that three to

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<v Speaker 6>five year timeline is probably worst case scenario. But there's

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<v Speaker 6>absolutely no doubt there has been some structural damage and

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<v Speaker 6>that will take time to get back to normal.

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<v Speaker 3>Well than all your knowledge found in physics at Manchester, Alan,

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<v Speaker 3>can you say that we underestimate their ability to rebuild

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<v Speaker 3>and heal and frankly to do new projects as well.

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<v Speaker 3>I mean, basically the history of these people is so

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<v Speaker 3>they have to build something, they get it done, don't they.

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<v Speaker 6>That's exactly right. You know, a very very resourceful set

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<v Speaker 6>of nations over there, and frankly, they have significant assets

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<v Speaker 6>behind them, and they have significant incentives to get that

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<v Speaker 6>oil back on the water, get the gas back on

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<v Speaker 6>the water, and all of the other products that have

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<v Speaker 6>been impacted as well, and they can pour resource into it,

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<v Speaker 6>and they're happy to buy resource from elsewhere as well.

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<v Speaker 6>We've seen that, you know, even just simple things like

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<v Speaker 6>the World Cup, the amount of effort that went into

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<v Speaker 6>building the infrastructure in very short timelines, sometimes with some

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<v Speaker 6>negative consequences in terms of human rights, etc. But you

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<v Speaker 6>know they will get it done, you know, at quite

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<v Speaker 6>an interesting pace.

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<v Speaker 3>Ellen, Thank you for the brief. Alan Fraser with us

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<v Speaker 3>from Brewing of Partners. Stay with us. More from Bloomberg

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<v Speaker 3>Surveillance coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Surveillance podcast. Catch us Live

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<v Speaker 1>weekday afternoon from seven to ten am Eastern Listen on

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<v Speaker 1>Apple Karplay and Android Otto with the Bloomberg Business app,

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<v Speaker 1>or watch us live on YouTube.

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<v Speaker 3>We now commence a three hour interview. Gary Gensler joins

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<v Speaker 3>us now. He's a former chairman of the Securities Exchange Commission,

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<v Speaker 3>a modest tenure of duty at the Gulben Sachs as

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<v Speaker 3>well and critically long ago and far away writing legislation

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<v Speaker 3>sarbains Oxley is well well well over twenty years ago. Gary,

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<v Speaker 3>I've been dying to talk to you. I read all

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<v Speaker 3>the wonderful comments on this life of Alan Greenspan, and

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<v Speaker 3>I get the criticism about interest rate dynamics in two

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<v Speaker 3>thousand and five, two thousand and six and that, But

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<v Speaker 3>I'm going to go to a guy that you have

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<v Speaker 3>a nodding acquaintance with, one S. Johnson up at MIT.

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<v Speaker 3>I've quoted this many times, folks, Simon Johnson and his

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<v Speaker 3>magisterial thirteen Bankers the SEC not Gainst's sec Final Rule

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<v Speaker 3>Alternative net capital requirements for broker dealers that are part

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<v Speaker 3>of consolidated supervised Entities August twenty, two thousand and four.

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<v Speaker 3>Gary Gensler. We can criticize Chairman Greenspan, but he had

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<v Speaker 3>a lot of help in screwing us up into the

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<v Speaker 3>financial crisis, didn't he.

0:12:22.000 --> 0:12:25.200
<v Speaker 7>Well, there was a broad miss I don't know how

0:12:25.240 --> 0:12:30.080
<v Speaker 7>else to say it. Policymakers across the spectrum and the

0:12:30.120 --> 0:12:34.320
<v Speaker 7>American public paid the price, and we exported by the

0:12:34.320 --> 0:12:38.200
<v Speaker 7>way that crisis around the globe. But in terms of

0:12:38.320 --> 0:12:42.480
<v Speaker 7>Allen himself, I worked with them closely in the late

0:12:42.600 --> 0:12:46.080
<v Speaker 7>nineteen nineties. Actually met Allen in the nineteen eighties at

0:12:46.080 --> 0:12:51.120
<v Speaker 7>a wonderful dinner at Larry and Billy Tish's house in

0:12:51.160 --> 0:12:55.880
<v Speaker 7>the mid nineteen eighties, and Alan was a dedicated economist,

0:12:55.960 --> 0:13:01.600
<v Speaker 7>a dedicated public servant, and looked none of us get

0:13:02.040 --> 0:13:06.559
<v Speaker 7>everything right. And yes, in those key years going into

0:13:06.600 --> 0:13:10.040
<v Speaker 7>that OA crisis, there was too much leverage being built

0:13:10.120 --> 0:13:14.840
<v Speaker 7>up in the housing market, too much leverage being built

0:13:14.920 --> 0:13:16.480
<v Speaker 7>up in the financial markets.

0:13:16.679 --> 0:13:19.200
<v Speaker 3>One final question in Sherman green Smith, just is Paul

0:13:19.240 --> 0:13:23.040
<v Speaker 3>and I feel the news flow right now. Gary Gensler

0:13:23.120 --> 0:13:27.319
<v Speaker 3>is just so important. He was in my estimated market economist.

0:13:27.360 --> 0:13:30.840
<v Speaker 3>I love what Greg Yips said, more accountant than theorists.

0:13:31.240 --> 0:13:35.720
<v Speaker 3>Do we need more central bankers steeped in trucking data

0:13:35.800 --> 0:13:39.400
<v Speaker 3>in Nebraska? I mean, do we need a more of

0:13:39.440 --> 0:13:44.400
<v Speaker 3>a tinge of Alan Greenspan in our future economist types?

0:13:45.240 --> 0:13:47.320
<v Speaker 7>Well, I'll tell you the other thing about Alan, having

0:13:47.360 --> 0:13:50.800
<v Speaker 7>worked closely with him for three or four years, maybe

0:13:50.840 --> 0:13:54.640
<v Speaker 7>not as closely as others. He also was really steeped

0:13:54.679 --> 0:13:57.760
<v Speaker 7>in the financial market. So there's all sorts of different

0:13:57.760 --> 0:13:58.880
<v Speaker 7>types of economists.

0:13:58.920 --> 0:14:01.800
<v Speaker 8>And we've had leaders of the Federal Reserve that were lawyers.

0:14:01.840 --> 0:14:04.840
<v Speaker 7>We've had leaders of the Federal Reserve that have come

0:14:04.880 --> 0:14:09.520
<v Speaker 7>from all sorts of places. William McChesney Martin famously, from

0:14:09.520 --> 0:14:11.760
<v Speaker 7>the nineteen fifties and sixties had run the New York

0:14:11.760 --> 0:14:17.079
<v Speaker 7>Stock Exchange. Alan understood markets. He was a young guy.

0:14:17.240 --> 0:14:21.400
<v Speaker 7>He used to trade futures in the old Chicago Mercantil

0:14:21.480 --> 0:14:25.320
<v Speaker 7>type of futures markets. And I remember conversations with Alan

0:14:25.360 --> 0:14:28.360
<v Speaker 7>about futures in the nineteen nineties, and then when I

0:14:28.400 --> 0:14:31.480
<v Speaker 7>took the role at the Commodity Futures Trading Commission, Allan

0:14:31.480 --> 0:14:33.920
<v Speaker 7>and I would sometimes get on the phone and he said, well,

0:14:33.920 --> 0:14:36.120
<v Speaker 7>this is how futures markets really work, and this is

0:14:36.160 --> 0:14:39.560
<v Speaker 7>how energy markets and he'd beg into the backwardization of

0:14:39.600 --> 0:14:43.120
<v Speaker 7>the markets. That was remarkable about Alan. I think he

0:14:43.200 --> 0:14:46.840
<v Speaker 7>had a sense of financial markets. He had too much

0:14:46.880 --> 0:14:51.000
<v Speaker 7>of a trust, though in them to right themselves when

0:14:51.000 --> 0:14:54.400
<v Speaker 7>they were in balances, and there were big imbalances he

0:14:54.600 --> 0:14:59.400
<v Speaker 7>navigated during the Internet enthusiasm, but he didn't quite navigate

0:14:59.440 --> 0:15:00.640
<v Speaker 7>that on the house markets.

0:15:00.760 --> 0:15:03.880
<v Speaker 3>Paul Sweeney, you get lucky. You have Gary Genslron and

0:15:04.040 --> 0:15:09.600
<v Speaker 3>moments ago across the Bloomberg is a five trunch SpaceX benchmark,

0:15:09.680 --> 0:15:11.680
<v Speaker 3>dead offering right, perfect timing.

0:15:12.240 --> 0:15:14.960
<v Speaker 4>Gary, We're at a time here in the markets here

0:15:14.960 --> 0:15:20.040
<v Speaker 4>where we're getting just these mega IPOs SpaceX, you know,

0:15:20.080 --> 0:15:23.600
<v Speaker 4>they went public, and we've got Anthropic and Open Aiet's

0:15:23.560 --> 0:15:25.720
<v Speaker 4>send a signal to you and to others about where

0:15:25.760 --> 0:15:26.880
<v Speaker 4>we are in this market cycle.

0:15:27.640 --> 0:15:30.960
<v Speaker 7>Well, I think so you used the word signal. I

0:15:31.080 --> 0:15:34.960
<v Speaker 7>use the word Tell Simon Johnson, who you mentioned earlier.

0:15:35.560 --> 0:15:37.520
<v Speaker 7>He and I do this podcast and we just put

0:15:37.560 --> 0:15:40.240
<v Speaker 7>one out on the mega IPOs just this morning on

0:15:40.320 --> 0:15:44.840
<v Speaker 7>power and consequences. And I think the overall equity markets,

0:15:45.520 --> 0:15:49.360
<v Speaker 7>like Alan kreen Spence nineteen nineties, equity markets is funding

0:15:49.400 --> 0:15:53.920
<v Speaker 7>this big burst of infrastructure built in AI seven hundred

0:15:53.920 --> 0:15:57.600
<v Speaker 7>and fifty billion dollars this year, up threefold in just

0:15:57.640 --> 0:16:00.240
<v Speaker 7>two years. And to scale that, that's about two and

0:16:00.320 --> 0:16:03.400
<v Speaker 7>a half percent of our gross domestic product. And so

0:16:03.560 --> 0:16:07.200
<v Speaker 7>then you have like Space Echo public and maybe Anthropic

0:16:07.240 --> 0:16:07.960
<v Speaker 7>and Open AI.

0:16:08.120 --> 0:16:09.040
<v Speaker 8>We'll see.

0:16:09.440 --> 0:16:12.880
<v Speaker 7>I think that's somewhat of a tel Google raising eighty

0:16:12.920 --> 0:16:17.840
<v Speaker 7>five billion, and the markets have to digest this, and

0:16:17.880 --> 0:16:20.640
<v Speaker 7>then there's valuation questions. You know, I at one hundred

0:16:20.640 --> 0:16:25.480
<v Speaker 7>and one hundred and forty times revenues without earnings. So

0:16:26.800 --> 0:16:29.160
<v Speaker 7>this will all sort out, but it also might be

0:16:30.640 --> 0:16:32.760
<v Speaker 7>six months from now we look back. It was fine,

0:16:33.080 --> 0:16:36.000
<v Speaker 7>but there's an equal and better chance that six months

0:16:36.040 --> 0:16:38.800
<v Speaker 7>from now we look back, we say, as all those

0:16:38.880 --> 0:16:42.440
<v Speaker 7>venture capitalists and sovereign wealth funds starts selling those shares,

0:16:42.880 --> 0:16:46.880
<v Speaker 7>that you see a downward pressure on the not just SpaceX,

0:16:46.920 --> 0:16:47.880
<v Speaker 7>but the whole market.

0:16:48.560 --> 0:16:50.840
<v Speaker 4>You're up there at MIT, Gary, and as I understand,

0:16:50.840 --> 0:16:53.760
<v Speaker 4>there's some pretty good engineers and computer geeks up there

0:16:53.800 --> 0:16:56.880
<v Speaker 4>as well. What is kind of your understanding? What's the

0:16:56.920 --> 0:17:00.240
<v Speaker 4>understanding up there at MIT just about AI today? Because

0:17:00.280 --> 0:17:03.240
<v Speaker 4>initially we in the marketplace, we just said, let's just

0:17:03.280 --> 0:17:06.960
<v Speaker 4>buy the chips, but there's more to it than that.

0:17:07.200 --> 0:17:09.840
<v Speaker 4>Market seems to be trying to discern some winners and losers.

0:17:09.960 --> 0:17:11.080
<v Speaker 4>How do you guys think about that?

0:17:12.359 --> 0:17:16.560
<v Speaker 7>Look, there's thousands of remarkable research scientists and faculty here,

0:17:16.600 --> 0:17:17.720
<v Speaker 7>so I can speak for.

0:17:17.800 --> 0:17:21.600
<v Speaker 8>Just maybe myself, and I think.

0:17:22.160 --> 0:17:26.600
<v Speaker 7>AI is the most transformative technology of our times. But

0:17:26.680 --> 0:17:30.399
<v Speaker 7>we've had this before. If you go back over the

0:17:30.480 --> 0:17:33.159
<v Speaker 7>last two hundred years from canals to the Internet to

0:17:33.240 --> 0:17:36.840
<v Speaker 7>this and what happens, and Ray Dalio talks about this too.

0:17:36.960 --> 0:17:42.600
<v Speaker 7>We get an over enthusiastic financial market support, and then

0:17:42.640 --> 0:17:45.639
<v Speaker 7>at some point we build so much infrastructure we have

0:17:45.760 --> 0:17:49.680
<v Speaker 7>a reckoning and I think that's what you learn from history,

0:17:49.760 --> 0:17:52.240
<v Speaker 7>is that we tend to have reckonings. Now, is it

0:17:52.240 --> 0:17:55.960
<v Speaker 7>a calamitous reckoning like with railroads in the eighteen seventies

0:17:55.960 --> 0:18:00.520
<v Speaker 7>where we had disastrous recessions? Is the reckoning like after

0:18:00.560 --> 0:18:03.960
<v Speaker 7>the nineteen twenties we had a big boom on.

0:18:04.119 --> 0:18:06.400
<v Speaker 8>Electrification mostly in utilities.

0:18:07.000 --> 0:18:08.639
<v Speaker 7>Or is it like the Internet where you have a

0:18:08.680 --> 0:18:14.280
<v Speaker 7>modest reckoning, still a recession. And that's so AI is transformative.

0:18:14.359 --> 0:18:15.960
<v Speaker 8>One last thing, Paul, I think of.

0:18:15.920 --> 0:18:18.240
<v Speaker 7>It a little bit like a parlay bat. You know

0:18:18.480 --> 0:18:20.800
<v Speaker 7>those the prediction markets. You have to have two things.

0:18:21.040 --> 0:18:25.600
<v Speaker 7>You have to have AI hyperscalers and open AI be

0:18:25.680 --> 0:18:28.439
<v Speaker 7>able to build the revenues. Right now they don't have

0:18:28.520 --> 0:18:32.280
<v Speaker 7>the revenues. And two, you need to build productivity in

0:18:32.320 --> 0:18:37.480
<v Speaker 7>the economy enough for the capital markets to overlook all

0:18:37.520 --> 0:18:40.240
<v Speaker 7>the disruption, all the companies that are going to be

0:18:40.359 --> 0:18:43.200
<v Speaker 7>disrupting value with a successful AI.

0:18:43.600 --> 0:18:46.159
<v Speaker 3>We continue with Gary against the former chairman of the

0:18:46.240 --> 0:18:50.320
<v Speaker 3>Securities Exchange Commission as commitment to Sloan, where he's won

0:18:50.400 --> 0:18:52.640
<v Speaker 3>a couple like student trophies. Is that right, I didn't

0:18:52.680 --> 0:18:54.960
<v Speaker 3>fall asleep in his class trophy.

0:18:54.800 --> 0:18:57.520
<v Speaker 8>Doesn't wonderful. Tom, You're two kind.

0:18:57.800 --> 0:19:00.680
<v Speaker 3>He does a wonderful podcast as Simon Johnson. I want

0:19:00.680 --> 0:19:02.320
<v Speaker 3>to go two questions here very quickly.

0:19:02.960 --> 0:19:04.000
<v Speaker 2>A lot of people.

0:19:03.800 --> 0:19:06.719
<v Speaker 3>Went retail on bitcoin and they enjoyed buying it one

0:19:06.800 --> 0:19:09.240
<v Speaker 3>hundred or one hundred and ten. What do you say

0:19:09.280 --> 0:19:12.320
<v Speaker 3>to the retail crew that have losses in bitcoin?

0:19:14.480 --> 0:19:19.119
<v Speaker 7>Look, markets both trade on sentiment and fundamentals, and the

0:19:19.359 --> 0:19:22.600
<v Speaker 7>challenge for those purchasers who are is what are the

0:19:22.600 --> 0:19:26.520
<v Speaker 7>fundamentals we were just talking about that is with SpaceX.

0:19:26.560 --> 0:19:28.840
<v Speaker 7>But there's a real business there. I mean Elon Musk

0:19:28.880 --> 0:19:31.199
<v Speaker 7>has built a real business. It's just a question of

0:19:31.240 --> 0:19:32.320
<v Speaker 7>where do you value it?

0:19:32.920 --> 0:19:33.320
<v Speaker 8>Here?

0:19:34.119 --> 0:19:39.520
<v Speaker 7>The EBB and flow of any purchaser of bitcoin has

0:19:39.560 --> 0:19:41.960
<v Speaker 7>to think, all right, what are the real use cases?

0:19:42.160 --> 0:19:46.600
<v Speaker 7>And particularly to be even more careful with the rest

0:19:46.680 --> 0:19:52.479
<v Speaker 7>of that asset class crypto. It's like meme stocks. You

0:19:52.520 --> 0:19:54.800
<v Speaker 7>have to be very careful that you're not trading just

0:19:54.880 --> 0:19:55.560
<v Speaker 7>on sentiment.

0:19:56.560 --> 0:20:00.480
<v Speaker 3>I'll refrain from editorial lensing here for Tom. I've got

0:20:00.480 --> 0:20:03.560
<v Speaker 3>to chart from Jeff Jacobson. Thank you zero Hedge for this.

0:20:03.680 --> 0:20:07.160
<v Speaker 3>Gary Gensler, to me, it's manipulated. They do an IPO

0:20:07.280 --> 0:20:10.919
<v Speaker 3>which is five percent of the SpaceX float. They trunch

0:20:10.960 --> 0:20:15.440
<v Speaker 3>it out August eleven, twenty one, September ten, September twenty five,

0:20:15.960 --> 0:20:18.640
<v Speaker 3>they get fifty percent of the stock out October ten.

0:20:19.119 --> 0:20:21.359
<v Speaker 3>They finally get out to sixty percent of the stack

0:20:21.400 --> 0:20:26.639
<v Speaker 3>out December ninth. Is it just a manipulation of folding

0:20:27.040 --> 0:20:31.080
<v Speaker 3>the trend the stock into the public in a way

0:20:31.119 --> 0:20:34.440
<v Speaker 3>that keeps the fervor up. It doesn't seem like the

0:20:34.440 --> 0:20:36.840
<v Speaker 3>old days where a company went public.

0:20:38.400 --> 0:20:42.359
<v Speaker 7>Well, so here's the other thing. Nasdaq made an accommodation

0:20:43.119 --> 0:20:47.320
<v Speaker 7>in how they do their index, the NASTAK one hundred

0:20:47.760 --> 0:20:51.920
<v Speaker 7>and Once there's thirty percent of that stock outstanding, which

0:20:52.000 --> 0:20:55.080
<v Speaker 7>might happen as soon as mid August after the earnings release.

0:20:56.240 --> 0:21:00.199
<v Speaker 7>Once that happens, the entire free float is count it

0:21:00.200 --> 0:21:05.160
<v Speaker 7>into the indexes, which put out Elon's forty fifty eight

0:21:05.200 --> 0:21:09.520
<v Speaker 7>percent might fold into the indexes, and then there's a buy.

0:21:10.119 --> 0:21:13.359
<v Speaker 7>But here's the other side. I caught the great rebalancing

0:21:13.760 --> 0:21:17.439
<v Speaker 7>all those venture capitalists and sovereign wealth funds. They're going

0:21:17.520 --> 0:21:19.760
<v Speaker 7>to want to take risk off the page. I mean, Tom,

0:21:19.800 --> 0:21:22.280
<v Speaker 7>They're not going to want to just leave their profits

0:21:22.320 --> 0:21:26.200
<v Speaker 7>in and say, let's let's go for more. They got

0:21:26.240 --> 0:21:29.080
<v Speaker 7>to take you know, a third, a half, maybe three

0:21:29.160 --> 0:21:32.280
<v Speaker 7>quarters of the risk off the page, and so there's

0:21:32.320 --> 0:21:35.680
<v Speaker 7>going to be a lot of selling pressure too as

0:21:35.760 --> 0:21:37.040
<v Speaker 7>these lockups come off.

0:21:38.000 --> 0:21:40.560
<v Speaker 4>Gary, as we think about the continued rollout of AI

0:21:40.720 --> 0:21:44.440
<v Speaker 4>across the economy, what do you think the regulatory framework

0:21:45.000 --> 0:21:46.440
<v Speaker 4>should be going forward?

0:21:47.760 --> 0:21:51.679
<v Speaker 7>Look, I think with any great technology, a society adapts

0:21:51.720 --> 0:21:53.960
<v Speaker 7>and says, listen, there's public goods and we have to

0:21:54.000 --> 0:21:55.000
<v Speaker 7>promote them.

0:21:56.000 --> 0:21:57.600
<v Speaker 8>We call it responsible AI.

0:21:57.720 --> 0:22:02.200
<v Speaker 7>I started doing work on this years ago and tried

0:22:02.240 --> 0:22:04.360
<v Speaker 7>to move the ball on that even at the Securities

0:22:04.359 --> 0:22:07.520
<v Speaker 7>and Exchange Commission. I think the most it's happening is

0:22:07.520 --> 0:22:14.399
<v Speaker 7>at the States about protecting people against bias, protecting people's privacy.

0:22:14.440 --> 0:22:17.800
<v Speaker 7>Of course, the accuracy of it, but when the algorithms

0:22:17.800 --> 0:22:21.200
<v Speaker 7>are making decisions on our behalf, who gets healthcare, who

0:22:21.240 --> 0:22:24.680
<v Speaker 7>gets a job, who gets credit, it's important that they

0:22:25.320 --> 0:22:30.439
<v Speaker 7>are accurate. And I think that right now this current

0:22:30.520 --> 0:22:36.000
<v Speaker 7>president is more into let's just support a competition with China.

0:22:36.119 --> 0:22:40.320
<v Speaker 7>Let's you know, as they say, just take off the

0:22:40.359 --> 0:22:45.040
<v Speaker 7>regulatory guard rails. And yet I think society is reacting

0:22:45.160 --> 0:22:47.880
<v Speaker 7>and starting to say, what about my kids? What about addiction,

0:22:48.240 --> 0:22:50.560
<v Speaker 7>what about the use of this, what about my lost

0:22:50.640 --> 0:22:51.679
<v Speaker 7>job potential?

0:22:51.720 --> 0:22:52.200
<v Speaker 8>Maybe?

0:22:52.520 --> 0:22:54.840
<v Speaker 7>And so it will be a very interesting next several

0:22:54.960 --> 0:22:57.560
<v Speaker 7>years in terms of the politics.

0:22:56.960 --> 0:23:01.000
<v Speaker 3>Of all this, Paul, what's it like working Simon Johnson?

0:23:01.200 --> 0:23:03.600
<v Speaker 3>I mean, I've known him for years, We're quite close,

0:23:03.640 --> 0:23:06.359
<v Speaker 3>et cetera. But I'm not in the trenches where gunstlers

0:23:06.400 --> 0:23:08.960
<v Speaker 3>to walk in the room with the Nobel Laurier. What's

0:23:08.960 --> 0:23:11.280
<v Speaker 3>it like working He's Johnson?

0:23:12.480 --> 0:23:16.840
<v Speaker 7>It's fabulous. He's a very gracious colleague. He's got a

0:23:17.080 --> 0:23:19.960
<v Speaker 7>fertile mind, I mean his mind just I mean, how

0:23:20.000 --> 0:23:22.160
<v Speaker 7>did he come up with those ideas in the nineteen

0:23:22.280 --> 0:23:25.359
<v Speaker 7>nineties working with Drona s and Oaklow and Jim Robinson.

0:23:25.440 --> 0:23:31.200
<v Speaker 7>It led to that Nobel prize. But it's a remarkable collaboration.

0:23:32.000 --> 0:23:36.879
<v Speaker 7>Sometimes sometimes we in the classroom have to make room

0:23:36.960 --> 0:23:40.160
<v Speaker 7>for each each of us. And he's he's a remarkable

0:23:40.240 --> 0:23:41.520
<v Speaker 7>chalkboard teacher as well.

0:23:41.640 --> 0:23:42.639
<v Speaker 8>This is a secret of his.

0:23:42.760 --> 0:23:46.719
<v Speaker 7>But he loves being at the chalkboard and summarizing things

0:23:46.840 --> 0:23:49.760
<v Speaker 7>and then bringing students into that conversation.

0:23:49.880 --> 0:23:53.040
<v Speaker 3>Here at MIT, Stanley Fisher has a great story. Gary

0:23:53.720 --> 0:23:58.520
<v Speaker 3>of Samuelson was so angry at his incompetence that he

0:23:58.640 --> 0:24:02.479
<v Speaker 3>ripped the chalk out of Stanley Fisher's heads threw it

0:24:02.520 --> 0:24:06.480
<v Speaker 3>across the room. Some of that some of the intensity

0:24:06.600 --> 0:24:10.680
<v Speaker 3>at the Massachusetts Institute of Technology. Their next podcast will

0:24:10.720 --> 0:24:14.119
<v Speaker 3>be how to Fix the Red Sox. Gary Gensler is

0:24:14.160 --> 0:24:16.800
<v Speaker 3>a former chairman of the SEC, and we greatly appreciate

0:24:17.600 --> 0:24:23.240
<v Speaker 3>remembrance for the life of Allen Greenspan. Stay with us.

0:24:23.480 --> 0:24:26.720
<v Speaker 3>More from Bloomberg Surveillance coming up after this.

0:24:33.960 --> 0:24:37.560
<v Speaker 1>You're listening to the Bloomberg Surveillance podcast. Catch us live

0:24:37.640 --> 0:24:40.760
<v Speaker 1>weekday afternoons from seven to ten am Eastern Listen on

0:24:40.880 --> 0:24:44.240
<v Speaker 1>Apple Karplay and Android Auto with the Bloomberg Business app,

0:24:44.440 --> 0:24:46.120
<v Speaker 1>or watch us live on YouTube.

0:24:46.320 --> 0:24:49.800
<v Speaker 3>William Dudley is a different FED president, Yes, of the

0:24:49.840 --> 0:24:53.480
<v Speaker 3>New York Fed and all, but far more. He built

0:24:53.640 --> 0:24:58.960
<v Speaker 3>Goldman Sachs Economics with Ed McKelvey and the rest of

0:24:59.040 --> 0:25:03.720
<v Speaker 3>Young Yanah. At the time, Bill Dudley joins us this

0:25:03.800 --> 0:25:06.840
<v Speaker 3>morning to me Bill Dudley, and the phrase I've always

0:25:06.960 --> 0:25:10.320
<v Speaker 3>used is chart paragraph, chart, And it was a people

0:25:10.480 --> 0:25:14.280
<v Speaker 3>like Hymen and Yardnni at CJ. Lawrence. It was the

0:25:14.320 --> 0:25:17.920
<v Speaker 3>Bear Stearns combine with mail pass and writing, but more

0:25:17.920 --> 0:25:24.240
<v Speaker 3>than anyone. It was Goldman Sachs chart paragraph chart. Alan

0:25:24.359 --> 0:25:28.040
<v Speaker 3>Greenspan loved that at the end of the day, he

0:25:28.240 --> 0:25:31.879
<v Speaker 3>was a market economist, a ween to data.

0:25:32.560 --> 0:25:34.400
<v Speaker 8>Do we have anyone that can be like.

0:25:34.480 --> 0:25:36.840
<v Speaker 3>Alan green Span in our future or was he a

0:25:36.960 --> 0:25:39.959
<v Speaker 3>one off in the history of our economics?

0:25:41.040 --> 0:25:43.359
<v Speaker 5>Well, if you're here, it takes up a long potential

0:25:43.359 --> 0:25:45.680
<v Speaker 5>times of I'm sure we'll see someone similar to green

0:25:45.720 --> 0:25:48.080
<v Speaker 5>Span in the future. But you're right. He was a

0:25:48.080 --> 0:25:52.480
<v Speaker 5>different type of FED chairman because not only was he

0:25:52.680 --> 0:25:56.200
<v Speaker 5>very knowledgeable about economics, but he wasn't academic, and so

0:25:56.240 --> 0:25:59.440
<v Speaker 5>he was basically going from the data to the decision

0:25:59.440 --> 0:26:02.520
<v Speaker 5>making rather than from the model to the decision making.

0:26:02.800 --> 0:26:05.800
<v Speaker 5>And so sometimes when the world changed, he got it

0:26:05.880 --> 0:26:08.520
<v Speaker 5>right before anybody else did. The best example, of course,

0:26:08.560 --> 0:26:10.880
<v Speaker 5>was the late nineteen nineties when there was the three

0:26:10.920 --> 0:26:15.479
<v Speaker 5>Boom and greenspand held off on tightening entree policy. So

0:26:15.760 --> 0:26:18.479
<v Speaker 5>I think he was, you know, an exceptional exceptional chairman,

0:26:19.680 --> 0:26:23.160
<v Speaker 5>both in terms of his understanding of economics, his openness

0:26:23.160 --> 0:26:26.080
<v Speaker 5>to data, his willingness to you know, change his mind

0:26:26.080 --> 0:26:30.160
<v Speaker 5>and update is his forecast. I think the only really

0:26:30.320 --> 0:26:33.360
<v Speaker 5>you know, blind spot was really his views about financial

0:26:33.440 --> 0:26:36.639
<v Speaker 5>stability and regulation. His view was always, you know, we

0:26:36.720 --> 0:26:39.040
<v Speaker 5>can't identify bubbles in real time, so all we can

0:26:39.320 --> 0:26:41.880
<v Speaker 5>clean up after the fact. And obviously the Great Financial

0:26:41.880 --> 0:26:45.520
<v Speaker 5>Crisis showed that cleaning up after the fact is always

0:26:45.600 --> 0:26:46.760
<v Speaker 5>it's not always the right approach.

0:26:46.880 --> 0:26:50.159
<v Speaker 3>Well did you get into your excellence at Berkeley and

0:26:50.240 --> 0:26:54.240
<v Speaker 3>to say, okay, it is about the regulation decision. Are

0:26:54.240 --> 0:26:58.560
<v Speaker 3>we making the same mistakes today that the critics say

0:26:58.560 --> 0:27:00.760
<v Speaker 3>were made in five six?

0:27:02.720 --> 0:27:05.880
<v Speaker 5>I don't see the same kind of problems. Number one,

0:27:06.200 --> 0:27:08.800
<v Speaker 5>in terms of, you know, the market having a lot

0:27:08.800 --> 0:27:10.880
<v Speaker 5>of assumptions that will ultimately turn out to be wrong.

0:27:10.920 --> 0:27:12.280
<v Speaker 5>I mean, if you look at two thousand and six,

0:27:12.320 --> 0:27:14.240
<v Speaker 5>two thousand and seven, there was all these assumptions triple

0:27:14.280 --> 0:27:17.280
<v Speaker 5>A CDOs are safe housing, markets can never decline on

0:27:17.320 --> 0:27:21.960
<v Speaker 5>a national basis. You know, you know, there were just

0:27:22.000 --> 0:27:24.440
<v Speaker 5>a lot of assumptions that turned out some prime lending

0:27:24.560 --> 0:27:27.240
<v Speaker 5>is not risky. All those assumptions turned out to be

0:27:27.320 --> 0:27:29.280
<v Speaker 5>dramatically wrong. So I think, you know, I think there's

0:27:29.520 --> 0:27:31.920
<v Speaker 5>risk of financial stability today, obviously in the non bank

0:27:32.000 --> 0:27:34.679
<v Speaker 5>financial sector. But the other thing is we have a

0:27:34.760 --> 0:27:37.480
<v Speaker 5>much more robust regulatory regime. I know, I know we're

0:27:37.520 --> 0:27:39.919
<v Speaker 5>in the process of dismantling that to a degree. I

0:27:39.920 --> 0:27:42.199
<v Speaker 5>think it's important that we don't throw the baby out

0:27:42.240 --> 0:27:44.600
<v Speaker 5>with the bathwater. But you know, we did learn a

0:27:44.640 --> 0:27:46.760
<v Speaker 5>lot of good lessons from the financial crisis that I

0:27:46.760 --> 0:27:49.760
<v Speaker 5>think means that the financial system fundamentally is stronger than

0:27:49.800 --> 0:27:51.679
<v Speaker 5>it was back then. All that.

0:27:53.359 --> 0:27:55.280
<v Speaker 4>Putting all that together, Bill, what do you think the

0:27:55.359 --> 0:27:58.639
<v Speaker 4>legacy is for mister Greenspan? With our little bit of

0:27:58.640 --> 0:28:00.000
<v Speaker 4>a hindsight.

0:27:59.560 --> 0:28:03.199
<v Speaker 5>Here, I think he's obviously going to go down in

0:28:03.280 --> 0:28:06.720
<v Speaker 5>history as a great central banker, also go down as

0:28:06.760 --> 0:28:09.879
<v Speaker 5>someone who was really politically adept. I mean, he navigated

0:28:09.920 --> 0:28:14.480
<v Speaker 5>through democratic and Republican administrations really well and didn't have

0:28:14.560 --> 0:28:17.040
<v Speaker 5>the kind of conflicts that a lot of other central

0:28:17.080 --> 0:28:21.439
<v Speaker 5>bankers have run into, like J. Powell, for example. So

0:28:21.520 --> 0:28:26.200
<v Speaker 5>I think that combination of good economic intuition, reliance on data,

0:28:26.359 --> 0:28:30.960
<v Speaker 5>ability to navigate through Washington really well is pretty special.

0:28:31.280 --> 0:28:33.040
<v Speaker 5>I just wish he'd done a little bit better on

0:28:33.080 --> 0:28:35.800
<v Speaker 5>the financial stability regulatory side. If you did that, he

0:28:35.920 --> 0:28:36.600
<v Speaker 5>sort of get straight.

0:28:36.640 --> 0:28:40.480
<v Speaker 4>A's let's fast forward to today, mister Walsh. We did

0:28:40.480 --> 0:28:43.160
<v Speaker 4>hear from Kevin Walsh last week for the first time

0:28:43.160 --> 0:28:44.080
<v Speaker 4>as chairman of the FED.

0:28:44.680 --> 0:28:45.560
<v Speaker 3>What were your takeaways?

0:28:47.040 --> 0:28:50.080
<v Speaker 5>Well, I think the big takeaway is number one that

0:28:50.480 --> 0:28:53.200
<v Speaker 5>it's going to be a different regime under Kevin Walsh.

0:28:53.280 --> 0:28:55.840
<v Speaker 5>You know, so the regime change that he promised is

0:28:55.880 --> 0:28:58.920
<v Speaker 5>in the process of happening. You just tell it right

0:28:58.920 --> 0:29:01.200
<v Speaker 5>off the bat with the very very much shortened statement,

0:29:01.680 --> 0:29:04.400
<v Speaker 5>I think, and the getting rid of four guides I

0:29:04.440 --> 0:29:05.520
<v Speaker 5>think is completely appropriate.

0:29:05.560 --> 0:29:06.640
<v Speaker 3>But I'm pretty.

0:29:06.400 --> 0:29:09.520
<v Speaker 5>Nervous about his views about not communicating at all about

0:29:09.560 --> 0:29:12.200
<v Speaker 5>how the FED is likely to react if the economic

0:29:12.280 --> 0:29:16.200
<v Speaker 5>circumstances has changed. This reliant on the markets views to

0:29:16.360 --> 0:29:19.360
<v Speaker 5>sort of guide policy, I think is a mistake. The

0:29:19.400 --> 0:29:22.640
<v Speaker 5>FED Reserve needs to set monetary policy, not financial markets.

0:29:22.640 --> 0:29:24.640
<v Speaker 5>And then if you're relying on the on the markets,

0:29:25.240 --> 0:29:27.800
<v Speaker 5>how do you make the decision? Markets basically don't price

0:29:27.880 --> 0:29:30.160
<v Speaker 5>to what they think the FED should do. They priced

0:29:30.200 --> 0:29:32.440
<v Speaker 5>to what the Fed what they think the Fed will do.

0:29:32.880 --> 0:29:35.800
<v Speaker 5>So if you're relying on the market, you're sort of

0:29:36.000 --> 0:29:38.320
<v Speaker 5>you have this indeterminacy about what you should do. So

0:29:38.400 --> 0:29:40.680
<v Speaker 5>I think so I think that's a mistake. I think,

0:29:41.240 --> 0:29:43.760
<v Speaker 5>you know, I think transparency, I think it is very

0:29:43.760 --> 0:29:46.440
<v Speaker 5>helpful in terms of the conduct of monitary policy, because

0:29:46.480 --> 0:29:48.480
<v Speaker 5>you do want markets to think along with the FED

0:29:49.200 --> 0:29:51.520
<v Speaker 5>when you know strong economic report comes out. You want

0:29:51.520 --> 0:29:53.960
<v Speaker 5>the markets to reprice in terms of their expectation about

0:29:53.960 --> 0:29:56.880
<v Speaker 5>the monetary policy path. But to do that well, you

0:29:56.920 --> 0:30:01.560
<v Speaker 5>need good community, good communication. Market understand the fed's Monterrey

0:30:01.600 --> 0:30:03.920
<v Speaker 5>policy reaction from you. So I think the risk here

0:30:04.040 --> 0:30:05.880
<v Speaker 5>is Kevin is throwing out the baby with the bath water.

0:30:05.920 --> 0:30:08.280
<v Speaker 5>I have no problem getting rid of afford guys, but

0:30:08.440 --> 0:30:12.600
<v Speaker 5>don't throw out information about the Fed's Monterrey policy reaction

0:30:12.720 --> 0:30:14.840
<v Speaker 5>function at the same time. And I think he did

0:30:14.880 --> 0:30:17.480
<v Speaker 5>that at the press conference because he was asked very explicitly,

0:30:17.520 --> 0:30:20.040
<v Speaker 5>what would how you didn't want to tighten Nentre palsy,

0:30:20.440 --> 0:30:22.959
<v Speaker 5>and he really want to answer the question. I mean, obviously,

0:30:23.280 --> 0:30:26.920
<v Speaker 5>obviously answer would be if inflation stays longer for higher

0:30:26.920 --> 0:30:29.640
<v Speaker 5>than I expect, then we'll obviously have to tighten Mantrey palsy.

0:30:29.840 --> 0:30:31.800
<v Speaker 5>Or if the economy is stronger than what we expect,

0:30:31.840 --> 0:30:34.320
<v Speaker 5>then obviously I'll advise up my estimate of a neutral

0:30:34.320 --> 0:30:37.200
<v Speaker 5>mantary policy. But he refused to answer those questions, and

0:30:37.240 --> 0:30:39.840
<v Speaker 5>I think that's maybe okay for the first press conference,

0:30:39.880 --> 0:30:41.600
<v Speaker 5>but I don't think that can be sustained over time.

0:30:42.240 --> 0:30:45.920
<v Speaker 3>Dudley fired up. That's what we're saying right now, William

0:30:45.960 --> 0:30:48.640
<v Speaker 3>Dudley with it. Soon we continue, the former president of

0:30:48.760 --> 0:30:52.280
<v Speaker 3>the New York Fed. You're sitting there, Bill, all fired up,

0:30:52.320 --> 0:30:55.120
<v Speaker 3>and everybody knows I agree with you on this. I

0:30:55.120 --> 0:30:58.040
<v Speaker 3>mean to be polite about it. The heritage of your

0:30:58.160 --> 0:31:02.720
<v Speaker 3>shop called Goldman, Sachs and Hosius has carried this forward.

0:31:03.040 --> 0:31:07.520
<v Speaker 3>Is a disinflation narrative? Is the big shock after this

0:31:07.640 --> 0:31:11.400
<v Speaker 3>war with West Texas? Intermediate to seventy one forty nine?

0:31:11.720 --> 0:31:14.840
<v Speaker 3>So I could get with constructive news is sixty nine handle.

0:31:14.960 --> 0:31:19.960
<v Speaker 3>Here are we prepared, Bill Dudley for the disinflation narrative

0:31:20.000 --> 0:31:20.720
<v Speaker 3>that could come.

0:31:22.200 --> 0:31:25.760
<v Speaker 5>Well, there's going to be a disinflation narrative really next month, rightway,

0:31:25.800 --> 0:31:28.560
<v Speaker 5>when we get the PC and CPI data for June.

0:31:28.640 --> 0:31:31.840
<v Speaker 5>Because obviously oil prices and gasoline prices have come down

0:31:31.920 --> 0:31:34.160
<v Speaker 5>this month. But I think that you have to look

0:31:34.160 --> 0:31:36.880
<v Speaker 5>in the broader context, what's the pressure on resources? More broadly,

0:31:36.920 --> 0:31:39.080
<v Speaker 5>we still have a lot of price pressures, like for example,

0:31:39.280 --> 0:31:43.960
<v Speaker 5>chip prices going up really rapidly. And I think the

0:31:44.000 --> 0:31:47.360
<v Speaker 5>fundamental question really for the Mantre policy. Outlook is the

0:31:47.400 --> 0:31:51.400
<v Speaker 5>question is Mantre policy actually restricted today? And my own

0:31:51.440 --> 0:31:53.480
<v Speaker 5>personal view is that there's not much evidence of that.

0:31:53.520 --> 0:31:55.920
<v Speaker 5>I mean, we've had the Mantre policy at this setting

0:31:56.040 --> 0:31:58.600
<v Speaker 5>or tighter for three years, and yeah, we're still at

0:31:58.600 --> 0:32:02.120
<v Speaker 5>an unplaying rate consistent with full employment. So if Madre

0:32:02.280 --> 0:32:06.480
<v Speaker 5>policy isn't restrictive, then why do you need to cut rates?

0:32:08.000 --> 0:32:10.640
<v Speaker 4>What's the next data point bill that you think the

0:32:10.680 --> 0:32:12.360
<v Speaker 4>market should really be focusing on.

0:32:13.120 --> 0:32:15.320
<v Speaker 5>I think the layer market is really important here. I mean,

0:32:15.360 --> 0:32:17.600
<v Speaker 5>I think if the economy is strong enough to keep

0:32:17.720 --> 0:32:20.640
<v Speaker 5>the payrolls growing like the pace they've done over the

0:32:20.720 --> 0:32:24.720
<v Speaker 5>last few months, the unemployment rates flat to declining, you know,

0:32:24.840 --> 0:32:27.400
<v Speaker 5>that's going to continue to push the FED in the

0:32:27.440 --> 0:32:30.040
<v Speaker 5>direction of thinking that they need to tighten Mandre policy.

0:32:30.480 --> 0:32:32.840
<v Speaker 5>I don't know, I'm a little uncertain about, you know,

0:32:32.920 --> 0:32:35.560
<v Speaker 5>how fast Madre policy is titan it's likely to occur,

0:32:36.280 --> 0:32:39.800
<v Speaker 5>or what that probability is, because it's not clear how

0:32:39.880 --> 0:32:42.880
<v Speaker 5>much commitment Kevin Walsh has to actually doing it. I mean,

0:32:42.920 --> 0:32:44.920
<v Speaker 5>the talk is cheap. Of course, everybody's in favor of

0:32:45.000 --> 0:32:47.400
<v Speaker 5>price stability, but the question is what are you actually

0:32:48.080 --> 0:32:50.280
<v Speaker 5>prepared to do to achieve that outcome, and I don't

0:32:50.320 --> 0:32:52.280
<v Speaker 5>think we really know that at this point. I mean,

0:32:52.320 --> 0:32:54.480
<v Speaker 5>you couldn't you couldn't have obviously said the opposite. I'm

0:32:54.480 --> 0:32:57.600
<v Speaker 5>not in favorite price stability, so it's not really clear

0:32:57.600 --> 0:32:59.440
<v Speaker 5>that there's a lot of content in that statement.

0:33:00.360 --> 0:33:03.160
<v Speaker 3>Just valuable. Thank you so much, Bill Dudley with as

0:33:03.160 --> 0:33:06.240
<v Speaker 3>a former president New York Fed in remembrance of the

0:33:06.360 --> 0:33:08.680
<v Speaker 3>life of Alan Greenspan.

0:33:09.160 --> 0:33:14.000
<v Speaker 1>This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

0:33:14.120 --> 0:33:18.400
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0:33:18.520 --> 0:33:22.000
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