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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg

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Speaker 1: dot com, and of course on the Bloomberg terminal. Belisa

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Speaker 1: bramw it's Mr Cooperman. I believe as a caution on

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Speaker 1: the market out one year, state the case as you

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Speaker 1: see it. Well, the idea is where else are you

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Speaker 1: going to go? Are you going to go into bonds?

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Speaker 1: You're going to go into anything else. You're not going

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Speaker 1: to see a massive crash necessarily in stocks. At the

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Speaker 1: same time you're getting inflation, you're getting these cost pressures

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Speaker 1: that we heard out from General Motors. I will just

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Speaker 1: say that he himself in a recent interview so that

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Speaker 1: he did get a new car among others, although he

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Speaker 1: treated it at two thousand and two Lexis for a Hyundai.

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Speaker 1: So Leonne Cooperman, I'm sure I can talk all of that.

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Speaker 1: The supplied to me. We's got a twelve car garage,

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Speaker 1: so we know that's I look at the debate here

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Speaker 1: that we've got here on the equity markets right now,

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Speaker 1: and it's what everybody's looking at. And I think we

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Speaker 1: forget John, it's expecting out six months, nine months, a

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Speaker 1: year out. What does twenty two look like? A deceleration?

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Speaker 1: How big is that deceleration? We're still working our way

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Speaker 1: through so many huge distortions. And the analogy that I've

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Speaker 1: used right now for the American economy, and others have

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Speaker 1: shared that view too, is that it's like holding a

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Speaker 1: beach ball beneath the surface. This was a mandated recession.

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Speaker 1: Now the policy has changed. The beach ball is searching

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Speaker 1: to the surface again and going even higher. We've got

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Speaker 1: to work out what it looks like in twenty three

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Speaker 1: is a return to trend growth? And what is normal

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Speaker 1: actually look like? You how many people come on the show,

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Speaker 1: on other shows on networks like this and talk about

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Speaker 1: the return to normal? What is normal? Oh? That's true?

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Speaker 1: And that well, that's better said than when I said,

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Speaker 1: John about February pre pandemic. Was that normal? And we

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Speaker 1: really don't know in the hindsight of this natural disaster, John,

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Speaker 1: Let's start with the oil. Seven many dollars a barrel.

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Speaker 1: Good morning, Brent, flying year today and over the last

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Speaker 1: twelve months to create doing okay, right now, it's w

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Speaker 1: T I sixty six handle Bongio tie by a couple

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Speaker 1: of basis points. Tom want You're a dollar once Swenzi muted,

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Speaker 1: price action unchanged on the day, and futures bounced back

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Speaker 1: about full tents on the SMP up six tenths on

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Speaker 1: the NASTAG one hundred. Very good. Now, just get right

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Speaker 1: to it, because I know you're widely anticipate this. Leon

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Speaker 1: Cooperman joins us with decades of experience on Wall Street

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Speaker 1: and the guys and his building of a certain wing

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Speaker 1: of golden sex ages ago, someone that people hang on

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Speaker 1: every word. Leon Cooperman with Omega and their family office

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Speaker 1: chairman and CEO, Leah Cooperman, we want to talk about

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Speaker 1: the markets front and center. But I've got to ask

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Speaker 1: you once and for all, as we have seen time

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Speaker 1: after time after time, the hiding of leverage on Wall

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Speaker 1: Street to get to some form of point of greed,

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Speaker 1: and it always ends ugly and shakes market confidence. His

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Speaker 1: arcer ghosts and all that that secret leverage that no

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Speaker 1: one knew was there. Is it harmed permanently our market confidence?

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Speaker 1: I think it's permanent. Everything is cyclical, you know. Uh,

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Speaker 1: it's just the evidents of greed basically. I mean the

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Speaker 1: fact that after long term capital the industry would get

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Speaker 1: into this kind of predicament again. I don't know what

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Speaker 1: I would say so quickly, but get into the same

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Speaker 1: predicament again. It's kind of surprising. And I guess they

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Speaker 1: wanted to make a margin on what they lent this fellow.

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Speaker 1: And uh, you know, I was saying that the more

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Speaker 1: things change and more than remain the same. Late John,

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Speaker 1: Hey got to catch up as always going to see

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Speaker 1: you again. What do you make of the increased demands

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Speaker 1: for transparency disclosures of the hedge fund community and maybe

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Speaker 1: even family offices as well off the back of that incidents.

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Speaker 1: I don't get the idea of the family office, you know.

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Speaker 1: I can tell everybody. I'm like Hyman Roth and Godfather too.

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Speaker 1: I've only seen a hundred times. I never get tired

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Speaker 1: of it. Is a scene at the airport where right

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Speaker 1: before they shoot him in Ruth he said, I'm a

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Speaker 1: retired executive living on a pension, and I think of myself,

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Speaker 1: I'm a retired money manager living on investment income. The

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Speaker 1: bad news I no longer have this giant income I

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Speaker 1: used to have when I ran a hedge fund. The

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Speaker 1: good news, I have no pressure. I run my own money,

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Speaker 1: So why they have the right to regulate me, uh

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Speaker 1: is beyond my wildest dreams. But look, we're in a

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Speaker 1: very strange environment. A lot of crazy things are going on.

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Speaker 1: I think the market structure has been destroyed by a

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Speaker 1: number of moves made by government, and we'll have to

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Speaker 1: just work our salves through it. In terms of the market,

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Speaker 1: you know, I describe myself as a reasonably fully invested bear.

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Speaker 1: The fully invested part is all cyclical, you know, given

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Speaker 1: all those decades of experience that Tom attributed to me,

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Speaker 1: I've said that, you know, bear markets don't come about

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Speaker 1: because of maculate conception. They come about because of certain

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Speaker 1: fundamental factors accelerating inflation. We don't have that hotstyle FED

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Speaker 1: and we don't have that. In fact, I'd say the

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Speaker 1: FED is too accommodative. Um, you know, it comes about

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Speaker 1: because we are the market smells an oncoming recession. The

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Speaker 1: factors we're coming out of recession, corporate propers a terrific

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Speaker 1: you know, and so uh, the normal conditions that cause

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Speaker 1: the bare market are not present, and I uh. The

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Speaker 1: other one I would mention is, you know, a significant

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Speaker 1: geopolitical event which you can forecast, but we have plenty

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Speaker 1: to worry about China, Ran Taiwan, etcetera. But and I

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Speaker 1: think the biggest plus out there is the fetest creative environment,

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Speaker 1: where is there's an absence of alternatives. You know, you've

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Speaker 1: you reference this when you were chatting before, but essentially

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Speaker 1: there's an absence of alternatives. And what's happening is everybody's

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Speaker 1: being pushed out in the risk curve. The investor that

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Speaker 1: used to buy tea bills, he concluded or she concluded,

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Speaker 1: I can't survive on zero, so I'm gonna take duration

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Speaker 1: and inflation risk and I'll buy tea bonds. The team

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Speaker 1: bond buyers that I can't get by on one point

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Speaker 1: six percent, so I'm gonna buy industrial credits. The industrial

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Speaker 1: credit buyers says, I can't get buy in three percent.

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Speaker 1: I'm gonna buy high yield. The high yield buyer there's

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Speaker 1: no the thing as yield anymore, but the high yield

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Speaker 1: biases I can't get buying five or six percent. I'm

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Speaker 1: gonna buy structure credit, cellos and stuff. Like that, which

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Speaker 1: tend to have a higher yield is their moort opaque

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Speaker 1: and the and then the bond guy who buys cello

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Speaker 1: or a lady basically says, well, I'll tell you what

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Speaker 1: the markets are hid my money and equities, and the

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Speaker 1: equity person is I'm gonna put two percent in bitcoin.

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Speaker 1: So everybody, everybody has been moving on the risk curve.

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Speaker 1: That will change. I have to say, well, I'm reasonably

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Speaker 1: heavily invested. I'm having a very good year that I

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Speaker 1: I am more focused on the longer term issues. Since

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Speaker 1: I'm running my own money, I don't compete against the

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Speaker 1: SMP five hundred. I'm an absolute return guy. But it

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Speaker 1: seems to me if you step back and think about

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Speaker 1: what's going on, it's very very clear we are barring

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Speaker 1: from the future. We are barring from the future. If

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Speaker 1: you had a hundred economists on your show and you

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Speaker 1: asked him what is the potential real growth of the U.

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Speaker 1: S economy over time? The answer would be centered around

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Speaker 1: two percent real and that you get there because one

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Speaker 1: percent productivity growth, half one percent a a force growth

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Speaker 1: that determines real growth. That's two percent. You speak to

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Speaker 1: a bear, they'll say one and a half percent. You

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Speaker 1: speak to a boat, they might say two and a percent,

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Speaker 1: but the response is sent around two percent. This year,

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Speaker 1: the economy in real terms, are gonna grow three to

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Speaker 1: four times potential, Yet we're persistent in trying to hold

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Speaker 1: interest rates in zero. Makes no sense to me. I

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Speaker 1: understand that. I'll explain why in a second. Secondly, prior

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Speaker 1: to the one point nine trillion package, prior to the

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Speaker 1: two trillion dollar package, prior to less ten days four

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Speaker 1: trillion dollars of infrastructure spending, we've already injected into the

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Speaker 1: economy a trillion dollars more of transfer payments than income

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Speaker 1: that was lost. So what's really going on is very simple.

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Speaker 1: Prior to the virus hitting, we had about a five

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Speaker 1: and a a half million people unemployed. That balloon to twenty

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Speaker 1: three million people. It's now down to about nine and

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Speaker 1: a half million people, and monetary and fiscal policy to

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Speaker 1: be conducted the manner to get the unemployed back down

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Speaker 1: to the five and a half million pre COVID, and

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Speaker 1: they're less concerned about the long term issues with damage

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Speaker 1: they might be created. So that's one thing I think

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Speaker 1: we're buying from the future. That's number one it's very clear.

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Speaker 1: You know, the debt that we're racking up will have

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Speaker 1: to be paid. And unless you're into m M T,

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Speaker 1: which I'm not, Uh, this is going to create a

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Speaker 1: long term issue. Second point I would make is there's

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Speaker 1: a shift taking place to the left of government. The

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Speaker 1: people in charge now are going to go for higher taxes.

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Speaker 1: We're gonna have higher inflation, higher interest rates, which I

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Speaker 1: think will be a straining influence on multiples. Okay, I

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Speaker 1: think inflation is will be worse than Mr Powell. Secretary

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Speaker 1: Powell is assuming every company I talked to in every

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Speaker 1: business I came back to New Jersey from Florida. I'm

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Speaker 1: a Florida resident. I came back in New Jersey. Uh,

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Speaker 1: And I had the lunch the other day at the

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Speaker 1: local place called the Milburne Dinner. I asked the owner,

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Speaker 1: how's businesses coming back? But I can't find labor. I can't. Finally,

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Speaker 1: we're saying that again and again. We sit in the earnings,

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Speaker 1: you're hearing the reports, you're hearing the coals too. So

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Speaker 1: you invested there. Let's take this conversation a little bit further.

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Speaker 1: Why fully invested if you've just gone through all the

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Speaker 1: issues you've just gone through well, because you know, uh,

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Speaker 1: the near term outlook, the conditions that would lead to

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Speaker 1: a mid decline. Like I said, you know it's accelerating inflation.

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Speaker 1: We don't have that. You know, most importantly, we have

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Speaker 1: a hostile FED. When you go into a beer market,

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Speaker 1: we have a fedness extremely friendly. They tell you they're

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Speaker 1: gonna keep interest raised low, not only this year, but

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Speaker 1: we're gonna keep below next year. I'm assuming, I'm assuming

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Speaker 1: they're gonna be surprised by inflation has been more intractable,

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Speaker 1: and the market is canna be surprised if the Fed

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Speaker 1: will raise rates sometime in twenty two, will be forced

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Speaker 1: by inflation. So that's my view, the cyclical versus secular

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Speaker 1: outlook the long term ballot. Let me explain. I got

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Speaker 1: my NBA from Columbia Business School in January thirty one,

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Speaker 1: sixty seven. I was broke at a loan, had a

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Speaker 1: six month old child is now approaching fifty five. Okay,

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Speaker 1: I had no money in the bank and I couldn't

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Speaker 1: afford a vacation, so I went to work the next day.

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Speaker 1: I started my career at Goldman on February first, sixty seven.

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Speaker 1: The dad was roughly a thousand. Fourteen years later it

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Speaker 1: was roughly a thousand, So I I think we borrowed

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Speaker 1: for the future. I expect very little action from the SMP.

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Speaker 1: Everything I look at would suggests to me caution intermediate

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Speaker 1: to longer term would be the rule of the day.

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Speaker 1: But leon, how do you remain cautious if it's not

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Speaker 1: bonds right, if cash perhaps is losing value because of inflation,

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Speaker 1: if equities perhaps have borrowed from the future, Are you

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Speaker 1: going more into bitcoin? No? I don't know the only

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Speaker 1: bitcoin I owned. Let me just say this on n

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Speaker 1: f T bitcoin stuff like that you talked to somebody else,

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Speaker 1: because I tell people that I turned seventy eight a

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Speaker 1: week ago, and basically I'm too old. I don't understand

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Speaker 1: that stuff. It's crazy to me. It makes no sense.

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Speaker 1: I own a little bit of goal, but compared to

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Speaker 1: my net worth, I owned very little. Basically, I'm basically

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Speaker 1: a stock you know, a meat and potatoes guy. I'm

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Speaker 1: a stock guy. Stocks make more sense than anything else

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Speaker 1: because of FED policy. But when the FED policy changes,

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Speaker 1: I think the market is going to have a response

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Speaker 1: to that. So when you say though that you've got

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Speaker 1: your eye on the exit. What is your eye? How

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Speaker 1: are you going to exit? What does that mean? Does

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Speaker 1: it mean more cash? Yeah? I would say, Look in

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Speaker 1: the bear market, the winner is he who loses least winds.

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Speaker 1: So you know, when the market goes down, I'm gonna

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Speaker 1: lose money. I'll be worthless. I understand that every asset

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Speaker 1: has been inflated by monetary policy, every asset, whether it's

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Speaker 1: real estate, et cetera. You know, stocks, bonds, for sure.

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Speaker 1: I think the bubble is not so much the stock market.

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Speaker 1: The bubble, I think is the bondom market. And I

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Speaker 1: would say this event it turns out to be wrong.

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Speaker 1: You know, I've had a negative of bonds for for

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Speaker 1: quite a long time. If the view turns out to

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Speaker 1: be wrong and interest rates belong where they are, you

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Speaker 1: don't make double digit returns in the stock market. I

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Speaker 1: believe in the capital market line where you're earning a

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Speaker 1: bond has relevancy for what you should earn the stock market.

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Speaker 1: So bonds belong to one a half percent, you probably

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Speaker 1: earned four or five percent a year in the stock market.

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Speaker 1: But what I'm looking at for the exit or traditional things,

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Speaker 1: I'm looking for change and fed speak. I'm looking for

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Speaker 1: change in the posture of the Fed. I'm looking for uh, inflation,

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Speaker 1: I'm looking at gold I'm looking at the overall economic activity.

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Speaker 1: Let me say this, if I had to give you

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Speaker 1: a list of positive and negatives, I'm more impressed by

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Speaker 1: the negatives. Long ago at Golden Secs Asset Management, Leon

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Speaker 1: Cooperman sat there and said, you've gotta be kidding me.

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Speaker 1: We don't own enough Apple. Leon Cooperman, I want you

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Speaker 1: to talk about what Michael Mobison, one of the great

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Speaker 1: thinkers on Wall Street, a credit Sueez and leg Mason,

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Speaker 1: has always said, is we're gonna see this massive concentration

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Speaker 1: of digital success stories. Can I be overweighted Apple or Amazon?

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Speaker 1: Are they so much the fabric of this nation that

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Speaker 1: you've got to own them? Well? I own them. Uh.

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Speaker 1: They're not cheap stocks, but they're not expensive stocks. Nothing

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Speaker 1: is expensive if interest rates that stay here. I went

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Speaker 1: back by the way and I look at the nifty

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Speaker 1: fifty nineteen seventy two. In nineteen seventy two, when JP

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Speaker 1: morgan Us Trust was ruling the roost, they had the

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Speaker 1: philosophy only the right stock at any price. They don't

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Speaker 1: care what evaluation they've paid as long as they were

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Speaker 1: world class growth companies. Avon sixty five times earnings, Polaroid

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Speaker 1: ninety times earnings, SiZ Roebucks thirty five times earnings, so

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Speaker 1: and so forth. The Tenua US government in nineteen seventy

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Speaker 1: two or six and a half percent, the Tenua governors

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Speaker 1: now one sixty Google thirty three times earnings is not

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Speaker 1: an expensive stock. This is but the card of the matter,

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Speaker 1: Leon Cooperman, and you are what I would call intellectually

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Speaker 1: extremely constructive in your caution. You know that the financial

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Speaker 1: media is overwhelmed by the gloom crew every Friday to

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Speaker 1: come out the world's coming to an end. And to

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Speaker 1: their point, they're trying to avoid a polaroid or an

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Speaker 1: Eastman Kodak. How do you sidestep the polaroids that won't

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Speaker 1: make it? Well, that's the function of your discipline and

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Speaker 1: your approach. I look at the stock market. I see

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Speaker 1: three stock market. I don't see one stock market. The

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Speaker 1: first stock market I see is the Fang market. And uh,

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Speaker 1: you know, the market has been extraordinarily disciplined, I might add.

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Speaker 1: You know, for somebody that's cautious like I am, I

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Speaker 1: have to say I'm impressed by the market action. Who's

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Speaker 1: the big correction has come in the so called fangs

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Speaker 1: that have no earnings, very little in the way of revenues,

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Speaker 1: and they have their long on promise things like Amazon, Facebook, Microsoft, Google.

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Speaker 1: They've held in very well. And then that expensive against

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Speaker 1: interest rates. Okay, the secondary so they're nifty fifty today,

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Speaker 1: there'll be a high failure rate, Like there was a

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Speaker 1: high failure rate in nineteen seventy two. But what ended

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Speaker 1: in fifty fifty nineteen seventy two was a tenfold increase

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Speaker 1: in the price of oil led to a global recession.

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Speaker 1: You know, we need a recession or we need to

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Speaker 1: change and FED policy to change the attitude. Until we

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Speaker 1: have that, the market will play. Well. That's not gonna

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Speaker 1: happen for a number of years. Maybe we're talking about

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Speaker 1: an interest I don't know. I don't know what's gonna happen. Uh,

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Speaker 1: that's what the FED tells you. But I think that

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Speaker 1: Mr Powell, I think he's doing a disservice frankly when

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Speaker 1: he says the market is not expensive because of your

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Speaker 1: interest rates are If interest rates are, we belong where

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Speaker 1: they are. You don't make big returns in the stock market.

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Speaker 1: You basically, you know, the world's turned upside down. Okay,

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Speaker 1: So what I was saying before. The long term issues

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Speaker 1: to me are number one, we're clearly barring from the

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Speaker 1: future the economy growing. Six, Real interest rates shouldn't be

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Speaker 1: where they are, and we should not be injecting so

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Speaker 1: much fiscal stimuluts into the economy. Whe the economy is

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Speaker 1: growing off the charts. Okay. Secondly, we have a government

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Speaker 1: charge and I voted for Mr Buy because I thought

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Speaker 1: we need to change. Uh, you know, I voted. My

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Speaker 1: value is not my pocket book. But the truth is,

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Speaker 1: if you look over the next twelve months, we have

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Speaker 1: more inflation, higher interest rates, you know, and higher taxes.

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Speaker 1: Not particularly bullish. Third, poem makers do we have a

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Speaker 1: massive growth in debt. This nation was found in two

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Speaker 1: five years ago. We had no national debt. Three years

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Speaker 1: ago we had twenty trillion dollars and national debt and

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Speaker 1: that's going up at the rate of like three trillion

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Speaker 1: dollars a year, and that that has to be serviced,

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Speaker 1: and it's going to reduce the long term growth potentially.

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Speaker 1: Suddenly I hear all these concerns and you're going through

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Speaker 1: them point by point, and I think it resonates with

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Speaker 1: a lot of our audience. But this falls into the

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Speaker 1: should shouldn't debate a lot of the time. This is

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Speaker 1: what they should do, it's what they shouldn't do. It's

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Speaker 1: what they've done. And we've got to accept that, nat Lee.

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Speaker 1: And you've gotta put money to work, as you always do.

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Speaker 1: So the question I've got for you, it's one, are

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Speaker 1: the signposts you're looking for ultimately to get you to

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Speaker 1: d risk if you're fully invested now and here's a

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Speaker 1: whole long list of things you worried about. What are

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Speaker 1: the signposts you're actually looking for to materialize that actually

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Speaker 1: leads you to d risk to take some money off

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Speaker 1: the table. I I'm listening to FED speak. Uh you

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Speaker 1: know see how they when they change, you start to change.

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Speaker 1: I look at the stock market, and the stock marks

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Speaker 1: a high quality, leading indicator. You know, there's no indication.

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Speaker 1: I mean, the market has been very disciplined in its action.

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Speaker 1: I'm looking at the price of gold, which has been

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Speaker 1: undermined by bitcoin. I'm looking at inflation. I'm looking at

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Speaker 1: economic growth. Lean you mentioned earlier, you're looking at the

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Speaker 1: Apple is one of the stocks you own. Cast writes

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Speaker 1: in he's listening down in Florida. Good morning, Mr Cass,

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Speaker 1: and he wants to talk about the post pandemic softness

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Speaker 1: that we will see an Apple in Amazon and the others.

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Speaker 1: Are you adjusting for an Apple that stumbles after the

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Speaker 1: pandemics over, I have no credentials in Apple. I sold

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Speaker 1: Apple much lower. I had a nice profit. I got

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Speaker 1: out much too early. I do own uh you know, Microsoft.

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Speaker 1: I do own Google. I do own some Facebook, I

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Speaker 1: do own some Amazon. But I would say this another

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Speaker 1: point on the cautious side for my days back as

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Speaker 1: a strategist at Goldman, I recall that the stock market

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Speaker 1: normally peaks in line with the peak rate of change

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Speaker 1: in corporate profits. That's the second quarter. In the June

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Speaker 1: profits this quarter will be up fifty. For the third

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Speaker 1: quarter and fourth quarre will be up much less. They'll

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Speaker 1: be up up much less. So I'm watching a lot

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Speaker 1: of a host of indicators as to when they get out,

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Speaker 1: and I'm prepared to lose money because frankly, in bear markets,

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Speaker 1: the winner is he will lose his lease. I'm not

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Speaker 1: a big short seller. I believe in the long term

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Speaker 1: outlook for what I own. I own a theene at

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Speaker 1: seven point six times earnings. I owned Signal twelve and

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Speaker 1: a half times earnings. I owned Mr Cooper at five

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Speaker 1: times earnings. I own Google nine times earnings. So bad.

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Speaker 1: I own Navigant four and a half times earnings. You know,

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Speaker 1: I'm a great believe in the capitalistic system. You know,

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Speaker 1: when companies earn access returns, it attracts capacity and capital

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Speaker 1: and kills returns. The energy industry is the best example.

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Speaker 1: I came in to this year overweighted energy and everybody

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Speaker 1: hated it was three percent the SMP. You've crushed it,

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Speaker 1: and you absolutely crushed it leon when it came to

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Speaker 1: energy stocks, just real quick here there. You're talking about

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Speaker 1: the fundamentals, and yet today we see that a downside

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Speaker 1: surprise was met with buying action. Has a dovish fed

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Speaker 1: become more important to stock valuations than fundamental growth in

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Speaker 1: the economy. I think that the market structure has been destroyed.

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Speaker 1: And I say that for a few reasons. When I

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Speaker 1: came to Wall Street fifty odd years ago, the commissions

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Speaker 1: with fifty cents of share and the vocal rule didn't exist.

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Speaker 1: So the Bob Monutions of the world, the Stanley Shop

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Speaker 1: corns of the world made markets. They carried inventory, they

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Speaker 1: took risk. You can't do that in the more business

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Speaker 1: commissions any zero and there's no vigorous and there's no

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Speaker 1: there's no reward for risk taking. So the brokerage industry

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Speaker 1: don't stabilize anymore. Secondly, eight percent of the vibe used

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Speaker 1: to be done in the New York Stock Exchange of

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Speaker 1: the volume today has done off board and dock polls.

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Speaker 1: So the special as system doesn't stabilize. And Thirdly, for

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Speaker 1: some unexplained reason, and I've written to the SEC, they

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Speaker 1: ignored me, and like my wife basically really I told them,

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Speaker 1: you know, in ninety eight they enacted the uptick rule

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Speaker 1: to deal with abuses of the twenty nine. It have

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Speaker 1: worked effectively for seventy years. Then in two thousand and

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Speaker 1: seven they elimited the uptick rule, and they gave rise

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Speaker 1: to a lot of these quantitative trading systems which know

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Speaker 1: nothing about value. They know everything about price. So they

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Speaker 1: buy strength, they sell weakness. And when this market has

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Speaker 1: a reason to go down right now, it does not

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Speaker 1: have a good reason to go down. When this market

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Speaker 1: has a reason to go down, to go down so

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Speaker 1: fast your head's gonna spend and then you're gonna be

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Speaker 1: on the following daily so we can talk about it.

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Speaker 1: I knew there was a reason that you and Sam

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Speaker 1: King got on, so wow, you have that incoming. Your

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Speaker 1: wifs ignore each other. Amazing. Why don't you have Cooperman's.

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Speaker 1: But you know checkbook? I mean, that's what I'm something

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Speaker 1: of Romega. It is the General Motors company. It has

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Speaker 1: been around since nineteen o eight through various and sundry

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Speaker 1: iterations and has been reinvigorated with Mary Barr. She's chairman

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Speaker 1: and chief executive officer of General Motors. Here's our David Weston.

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Speaker 1: Thank you very much, so Mary Bar, it's a good

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Speaker 1: day for you, a good day for Will Durant to

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Speaker 1: start in General Motors all those many years ago. So

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Speaker 1: looking at the numbers, one of the first things I

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Speaker 1: look at is the top line, the revenue, and then

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Speaker 1: the profitability. The profitability. You did so much better than

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Speaker 1: anybody expected. You actually almost put a shame to analysts.

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Speaker 1: At the same time, it wasn't because of increased revenue.

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Speaker 1: So my real question is how did you do that?

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Speaker 1: How did you get so much more money in profit

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Speaker 1: out of relatively flat revenue? Well, I think it's a

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Speaker 1: it's a number of issues. First, um, strong demand for

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Speaker 1: our full size trucks and SUVs. I mean the Chevrolet Silverada,

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Speaker 1: the GMC Sierra on the Escalade, the Tahoe, et cetera.

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Speaker 1: There is exceptionally strong demand for those products, and so

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Speaker 1: I think that's what's driving a very high average transaction prices.

425
00:21:59,680 --> 00:22:01,719
Speaker 1: Because the demand is so high, we've been able to

426
00:22:01,720 --> 00:22:04,520
Speaker 1: continue to be very disciplined on incentives. And then our

427
00:22:04,600 --> 00:22:08,040
Speaker 1: financing unit, GM Financial has done an excellent job of

428
00:22:08,040 --> 00:22:11,320
Speaker 1: taking advantage of higher use care prices and just a

429
00:22:11,440 --> 00:22:15,040
Speaker 1: very strong market. We're also seeing recovery UH and and

430
00:22:15,119 --> 00:22:18,960
Speaker 1: you know, returned to strong sales in China, so across

431
00:22:19,000 --> 00:22:22,200
Speaker 1: the board they contributed to the strong numbers. So you

432
00:22:22,280 --> 00:22:24,560
Speaker 1: surprise perhaps some people are saying, not only will we

433
00:22:24,640 --> 00:22:26,920
Speaker 1: stick with our guidance going forward for the rest of

434
00:22:26,920 --> 00:22:29,000
Speaker 1: the year, but if anything, we think it's gonna towards

435
00:22:29,000 --> 00:22:32,160
Speaker 1: the upper end of that guidance. At the same time,

436
00:22:32,400 --> 00:22:34,199
Speaker 1: you have the problem with chips. We talked about at

437
00:22:34,280 --> 00:22:36,400
Speaker 1: last quarter or something like one point five to two

438
00:22:36,440 --> 00:22:38,600
Speaker 1: billion dollars being left on the table as it were.

439
00:22:39,000 --> 00:22:41,800
Speaker 1: I think that number still holds good and yet you're

440
00:22:41,800 --> 00:22:44,479
Speaker 1: doing much better than some people across the street at

441
00:22:44,520 --> 00:22:49,359
Speaker 1: Ford for that matter, via christ or Peugeot. Why Well, again,

442
00:22:49,400 --> 00:22:52,399
Speaker 1: there's not a lot of transparency between the different automakers

443
00:22:52,400 --> 00:22:54,960
Speaker 1: of what's happening. We're focused on GM and I think

444
00:22:55,240 --> 00:22:57,840
Speaker 1: what's been incredible is the work that we're doing with

445
00:22:57,880 --> 00:23:01,320
Speaker 1: our purchasing group, our engineering group, are manufacturing group in

446
00:23:01,359 --> 00:23:04,320
Speaker 1: sales and marketing and working with suppliers. You know, we've

447
00:23:04,320 --> 00:23:07,280
Speaker 1: been working to build strong relationship with our suppliers for many,

448
00:23:07,280 --> 00:23:10,199
Speaker 1: many years now, and there's just a team that is

449
00:23:10,200 --> 00:23:12,639
Speaker 1: looking understanding what chips are we going to have access to,

450
00:23:13,000 --> 00:23:15,600
Speaker 1: how do we allocate those to our highest demand and

451
00:23:15,840 --> 00:23:18,960
Speaker 1: and products that we have limited or no ability to

452
00:23:19,040 --> 00:23:22,200
Speaker 1: recover because there's just such strong demand. We run those

453
00:23:22,560 --> 00:23:27,200
Speaker 1: manufacturing operations around the clock and they're they're just being

454
00:23:27,480 --> 00:23:30,920
Speaker 1: creative and doing what engineers do of problem solving and

455
00:23:30,920 --> 00:23:34,199
Speaker 1: and in some cases re engineering to get the chips

456
00:23:34,240 --> 00:23:38,120
Speaker 1: to the right products and to just um find every

457
00:23:38,160 --> 00:23:40,800
Speaker 1: opportunity we can to build a car, trucker crossover and

458
00:23:40,800 --> 00:23:42,800
Speaker 1: get it to the customer. So it's a mixed question,

459
00:23:42,920 --> 00:23:45,040
Speaker 1: not just of the vehicles you sell, but also where

460
00:23:45,080 --> 00:23:46,960
Speaker 1: you direct your chips. It sounds like you want to

461
00:23:47,000 --> 00:23:49,400
Speaker 1: direct it to the ones that really are the most important.

462
00:23:49,840 --> 00:23:51,879
Speaker 1: Are you getting more chips? Do you think than you

463
00:23:51,880 --> 00:23:56,280
Speaker 1: would have expected, because if you're purchasing department, well, again,

464
00:23:56,320 --> 00:23:58,440
Speaker 1: there's not a lot of transparent to say more than

465
00:23:58,920 --> 00:24:02,200
Speaker 1: you know, we were very clear last year of what

466
00:24:02,240 --> 00:24:04,120
Speaker 1: we thought the demand was going to be this year

467
00:24:04,160 --> 00:24:07,320
Speaker 1: and the chips that we had ordered, and so you know,

468
00:24:07,359 --> 00:24:09,520
Speaker 1: we're continuing to work with the supply base on that

469
00:24:09,760 --> 00:24:12,600
Speaker 1: and again, but it's I think it's looking for every

470
00:24:12,600 --> 00:24:17,240
Speaker 1: opportunity and managing it centrally and also working hand in

471
00:24:17,280 --> 00:24:20,199
Speaker 1: hand with our j V and China, so across the

472
00:24:20,240 --> 00:24:23,480
Speaker 1: board we are just really being I think the team

473
00:24:23,560 --> 00:24:25,880
Speaker 1: is being really scrappy and finding ways that we can

474
00:24:25,880 --> 00:24:28,640
Speaker 1: build the vehicles, not only full size trucks and SUVs,

475
00:24:28,640 --> 00:24:31,320
Speaker 1: but also our electric vehicle programs. And I think it's

476
00:24:31,320 --> 00:24:33,560
Speaker 1: important to note that even with the challenges of the

477
00:24:33,600 --> 00:24:38,320
Speaker 1: semiconductors UH shortage, there is no impact on our electric vehicles,

478
00:24:38,400 --> 00:24:41,120
Speaker 1: on our autonomous vehicles and the growth initiatives that we've

479
00:24:41,119 --> 00:24:43,119
Speaker 1: been talking about this first quarter. That was one of

480
00:24:43,119 --> 00:24:45,320
Speaker 1: the questions I had both for the Hummer that's coming

481
00:24:45,320 --> 00:24:47,359
Speaker 1: out later this year and then the Lyric we're just

482
00:24:47,359 --> 00:24:49,720
Speaker 1: coming at and sometimes the first happen next year. Is

483
00:24:49,760 --> 00:24:52,800
Speaker 1: there going to be any delay because of the chip problem?

484
00:24:52,840 --> 00:24:55,400
Speaker 1: Absolutely not, And I can tell you those vehicle programs

485
00:24:55,400 --> 00:24:58,560
Speaker 1: are on track, and uh, I'm really excited to have

486
00:24:58,920 --> 00:25:01,200
Speaker 1: customers get in those vehicles and drive them because I

487
00:25:01,240 --> 00:25:04,199
Speaker 1: think they're going to be amazed. We understand the one

488
00:25:04,200 --> 00:25:06,200
Speaker 1: point five to two billion dollar number that was put

489
00:25:06,280 --> 00:25:08,280
Speaker 1: up before, but can you give us some sense those

490
00:25:08,320 --> 00:25:11,080
Speaker 1: those who donors the supply chain, If you had a

491
00:25:11,160 --> 00:25:13,800
Speaker 1: hundred percent of the chips you needed, what percentage you

492
00:25:13,800 --> 00:25:18,760
Speaker 1: getting now? Are you running at? You know? Uh, It's

493
00:25:18,840 --> 00:25:23,000
Speaker 1: it's a very dynamic situation, and so uh you know again,

494
00:25:23,040 --> 00:25:25,120
Speaker 1: I think it's every chip we have access to, we're

495
00:25:25,160 --> 00:25:27,560
Speaker 1: making sure it gets into the vehicles where we have

496
00:25:27,680 --> 00:25:31,240
Speaker 1: really strong customer demand. But it's something that changes every day, David,

497
00:25:31,280 --> 00:25:32,600
Speaker 1: So I'm not going to put a number on it.

498
00:25:33,080 --> 00:25:35,719
Speaker 1: This problem isn't going away in the sense that as

499
00:25:35,760 --> 00:25:37,440
Speaker 1: you go forward, you're gonna make more and more cars,

500
00:25:37,480 --> 00:25:39,800
Speaker 1: they're gonna require more and more chips. What is the

501
00:25:39,920 --> 00:25:42,640
Speaker 1: longer term solution to this so we don't have this

502
00:25:42,720 --> 00:25:45,760
Speaker 1: sort of problem you have this year. Well, I think

503
00:25:45,800 --> 00:25:48,000
Speaker 1: we are going to see recovery. We think Q two

504
00:25:48,000 --> 00:25:50,920
Speaker 1: will be the weakest for the year. We'll see some recovery,

505
00:25:50,920 --> 00:25:53,960
Speaker 1: recovery in Q three, Q four UH, And we're working

506
00:25:54,040 --> 00:25:55,919
Speaker 1: on a lot of long term strategies. I don't have

507
00:25:55,920 --> 00:25:58,879
Speaker 1: anything to share right now, but there's a you know,

508
00:25:58,920 --> 00:26:01,840
Speaker 1: a whole um menu of things that we're working on,

509
00:26:02,080 --> 00:26:05,640
Speaker 1: processes that we're changing, um. So more to come later

510
00:26:05,680 --> 00:26:07,280
Speaker 1: in the year of how we'll make sure we're never

511
00:26:07,280 --> 00:26:09,439
Speaker 1: in this situation again. But believe me, we have a

512
00:26:09,440 --> 00:26:12,560
Speaker 1: dedicated team working on that as well. When it comes

513
00:26:12,560 --> 00:26:15,240
Speaker 1: to batteries, you've sort of vertically integrated, as it were,

514
00:26:15,280 --> 00:26:17,520
Speaker 1: where the joint venture where you're making your own batteries.

515
00:26:17,680 --> 00:26:19,800
Speaker 1: Is there something like that perhaps that would make sense

516
00:26:19,840 --> 00:26:22,760
Speaker 1: for GM. You know, I'm not going to take anything

517
00:26:22,760 --> 00:26:25,040
Speaker 1: off the table. We're going to look at what what

518
00:26:25,080 --> 00:26:26,960
Speaker 1: we can do to make sure that we have the

519
00:26:27,040 --> 00:26:30,160
Speaker 1: right number of automotive grade chips UH and that we

520
00:26:30,280 --> 00:26:32,800
Speaker 1: it it doesn't constrain our growth because we see huge

521
00:26:32,840 --> 00:26:35,640
Speaker 1: opportunity not only with the product portfolio we have today,

522
00:26:35,920 --> 00:26:38,760
Speaker 1: but with the strong electric vehicle products that we have coming.

523
00:26:39,280 --> 00:26:41,679
Speaker 1: We hear some in Washington, both the Commerce Secretary and

524
00:26:41,680 --> 00:26:44,080
Speaker 1: also I talked to one of your Michigan representatives, yes

525
00:26:44,160 --> 00:26:46,520
Speaker 1: Or Hailey Stevens, who suggested perhaps there needs to be

526
00:26:46,560 --> 00:26:48,840
Speaker 1: some co investment from the government as well as the

527
00:26:48,880 --> 00:26:51,760
Speaker 1: private sector in chip production. Does that make sense for

528
00:26:51,840 --> 00:26:54,919
Speaker 1: your point of view? I think making sure we have

529
00:26:56,359 --> 00:26:59,600
Speaker 1: a secure supply chain um for the growth that I

530
00:26:59,680 --> 00:27:01,399
Speaker 1: think going to see it. I think it's something that

531
00:27:01,440 --> 00:27:03,560
Speaker 1: we all have to work together on, and we're having

532
00:27:03,600 --> 00:27:07,000
Speaker 1: regular conversations with the administration and members of Congress to

533
00:27:07,080 --> 00:27:10,200
Speaker 1: find the right solution, and we'll continue to do that.

534
00:27:10,359 --> 00:27:12,679
Speaker 1: In your presentation today, General Motors really lays out a

535
00:27:12,720 --> 00:27:16,480
Speaker 1: fairly robust program to really go to electric vehicles and

536
00:27:16,480 --> 00:27:18,960
Speaker 1: to really deal with greenhouse gases over the longer term.

537
00:27:19,000 --> 00:27:21,960
Speaker 1: You have very specific targets you're setting out there. How

538
00:27:22,000 --> 00:27:25,240
Speaker 1: do you hope to achieve those? Well, I think it's

539
00:27:25,320 --> 00:27:28,120
Speaker 1: making sure there's a whole ecosystem that when a customer

540
00:27:28,320 --> 00:27:30,720
Speaker 1: looks at can I buy an electric vehicle, they say,

541
00:27:30,800 --> 00:27:32,720
Speaker 1: I'm going to have a better experience when I buy

542
00:27:32,720 --> 00:27:35,119
Speaker 1: an electric vehicle. It's going to be a beautiful vehicle.

543
00:27:35,200 --> 00:27:36,720
Speaker 1: It's going to be in this segment that I want

544
00:27:36,760 --> 00:27:38,800
Speaker 1: to purchase because we can't. You know, person if they

545
00:27:38,880 --> 00:27:41,920
Speaker 1: want an suv or a crossover, they're not going to

546
00:27:42,000 --> 00:27:44,040
Speaker 1: buy a sedan. It's got to meet them in the

547
00:27:44,080 --> 00:27:46,399
Speaker 1: market where they want. But then it's also making sure

548
00:27:46,480 --> 00:27:49,240
Speaker 1: there's a robust charging infrastructure, and we're working on that

549
00:27:49,320 --> 00:27:51,800
Speaker 1: as well, and that will be not only what we're doing.

550
00:27:51,800 --> 00:27:56,119
Speaker 1: For instance, we're putting charging in our workplaces, but also

551
00:27:56,680 --> 00:27:59,640
Speaker 1: working with communities and then working with all the startups

552
00:27:59,640 --> 00:28:02,320
Speaker 1: that are in this business connecting those We just made

553
00:28:02,320 --> 00:28:04,959
Speaker 1: an announcement that we have now we're going to provide

554
00:28:05,000 --> 00:28:10,000
Speaker 1: access to sixty chargers across across the country to really

555
00:28:10,080 --> 00:28:12,760
Speaker 1: give confidence to customers as they buy an e V

556
00:28:12,920 --> 00:28:15,480
Speaker 1: and if even if it's their only vehicle, that they're

557
00:28:15,520 --> 00:28:18,280
Speaker 1: going to have a robust charging infrastructure. And I think

558
00:28:18,320 --> 00:28:22,119
Speaker 1: all those things combine, you know, beautiful vehicles, meets their needs,

559
00:28:22,480 --> 00:28:25,719
Speaker 1: the right range and then charging available, customers are going

560
00:28:25,760 --> 00:28:28,040
Speaker 1: to move to e v s And importantly, I think

561
00:28:28,040 --> 00:28:30,919
Speaker 1: for many investors people watch your company. I saw in

562
00:28:30,920 --> 00:28:34,000
Speaker 1: your presentation you expect to have the same profit margins

563
00:28:34,000 --> 00:28:35,280
Speaker 1: on e V s as you have on the so

564
00:28:35,359 --> 00:28:39,080
Speaker 1: called i c E. Internal combustion engine vehicles. So as

565
00:28:39,120 --> 00:28:42,320
Speaker 1: we move into the ultim platform and continue to take

566
00:28:42,400 --> 00:28:44,800
Speaker 1: costs out of the battery that that is, that is

567
00:28:44,800 --> 00:28:47,200
Speaker 1: our goal to to get there um and and have

568
00:28:47,320 --> 00:28:50,440
Speaker 1: that break even and then move beyond. But you also

569
00:28:50,440 --> 00:28:52,520
Speaker 1: have to understand there's a different cost of ownership and

570
00:28:52,560 --> 00:28:56,200
Speaker 1: an electric vehicle versus versus an internal combustion engine vehicle

571
00:28:56,560 --> 00:28:59,760
Speaker 1: from a you know gas uh, gas savings that you

572
00:28:59,760 --> 00:29:02,080
Speaker 1: don't have to you know, fuel up. So we've got

573
00:29:02,080 --> 00:29:04,120
Speaker 1: to look at the whole equation. But we're on that

574
00:29:04,200 --> 00:29:06,560
Speaker 1: journey and I'm very pleased with the work that's going

575
00:29:06,600 --> 00:29:09,760
Speaker 1: on with our battery technology to continue to take cost

576
00:29:09,840 --> 00:29:12,959
Speaker 1: out and increase energy density. I'm sure you're looking at

577
00:29:12,960 --> 00:29:15,400
Speaker 1: supply chains that go beyond just microchips at this point

578
00:29:15,520 --> 00:29:17,920
Speaker 1: as you move into e v S. Where are there

579
00:29:17,920 --> 00:29:19,959
Speaker 1: possible weak spots going forward and what are you doing

580
00:29:20,000 --> 00:29:21,880
Speaker 1: to address those in terms of what you need the

581
00:29:21,920 --> 00:29:24,600
Speaker 1: supplies you need in order to manufacture the vast number

582
00:29:24,640 --> 00:29:28,040
Speaker 1: of electric vehicles you're anticipating. Well, you know, as we

583
00:29:28,080 --> 00:29:30,480
Speaker 1: look at some of the key materials that need to

584
00:29:30,520 --> 00:29:33,120
Speaker 1: go into vehicles, especially those that are quite expensive. We're

585
00:29:33,120 --> 00:29:35,200
Speaker 1: looking at how do we reduce the need you know,

586
00:29:35,280 --> 00:29:38,800
Speaker 1: in in each each vehicle, but then also working with

587
00:29:39,200 --> 00:29:41,680
Speaker 1: trusted partners in the supply chain to make sure that

588
00:29:41,760 --> 00:29:43,920
Speaker 1: we have a secure supply and that's going to allow

589
00:29:44,000 --> 00:29:46,520
Speaker 1: us to grow. And so that's the work that we're

590
00:29:46,560 --> 00:29:48,200
Speaker 1: a lot of it's done and a lot of it's

591
00:29:48,240 --> 00:29:51,560
Speaker 1: underway right now. So Mary, as you look forward to

592
00:29:52,600 --> 00:29:55,040
Speaker 1: I say, you've said you're maintaining your guidance. If anything,

593
00:29:55,080 --> 00:29:57,720
Speaker 1: you'll be at the upper end. What are the vulnerabilities,

594
00:29:57,720 --> 00:29:59,760
Speaker 1: what's the sensitivity on it that might actually have you

595
00:30:00,000 --> 00:30:03,600
Speaker 1: all short? Well, uh, you know, with the insights that

596
00:30:03,640 --> 00:30:07,200
Speaker 1: we have right now, we believe that that guidance is

597
00:30:07,200 --> 00:30:09,480
Speaker 1: correct with where we think we're going to be from

598
00:30:09,480 --> 00:30:12,600
Speaker 1: a semiconductor perspective. But I think, you know, one of

599
00:30:12,600 --> 00:30:14,200
Speaker 1: the things that gives us a lot of comments is

600
00:30:14,280 --> 00:30:16,720
Speaker 1: just the interest in our vehicles. The demand for our

601
00:30:16,840 --> 00:30:19,800
Speaker 1: vehicles across the board, you know, whether it's a Chevy

602
00:30:19,840 --> 00:30:24,680
Speaker 1: Trailblazer or a Silverado or an Escalade, you know, across

603
00:30:24,720 --> 00:30:29,360
Speaker 1: our portfolio actually very strong midsized crossovers as well. So

604
00:30:29,760 --> 00:30:33,240
Speaker 1: the strength of our product line UM, the services that

605
00:30:33,240 --> 00:30:35,760
Speaker 1: we're providing. We continue to see growth with on stars.

606
00:30:35,840 --> 00:30:38,080
Speaker 1: So there's a lot of moving pieces that give me

607
00:30:38,120 --> 00:30:41,200
Speaker 1: a lot of confidence in our ability to hit that

608
00:30:41,400 --> 00:30:44,520
Speaker 1: um what we've said from a guidance perspective, and we're

609
00:30:44,560 --> 00:30:46,960
Speaker 1: gonna work it every day. And finally, Mary, do you

610
00:30:47,000 --> 00:30:49,440
Speaker 1: have visibility to demand for your electric vehicles? I think

611
00:30:49,440 --> 00:30:52,360
Speaker 1: the Lyric, the new electric suv you can order as

612
00:30:52,360 --> 00:30:54,200
Speaker 1: of September. Do you have any sense whether people want

613
00:30:54,240 --> 00:30:57,760
Speaker 1: the electric vehicles as oppose to your current vehicles. Well,

614
00:30:57,800 --> 00:31:00,640
Speaker 1: we've seen, um, you know, we can see growing excuse me,

615
00:31:00,680 --> 00:31:03,720
Speaker 1: growing demand for the for the bolt ev can't wait

616
00:31:03,760 --> 00:31:05,920
Speaker 1: for to get the eu V, the bolt Evy into

617
00:31:05,920 --> 00:31:08,600
Speaker 1: the hands of customers. Um. You know, we've sold out

618
00:31:08,680 --> 00:31:12,360
Speaker 1: the Hummer um e V truck and had extremely strong

619
00:31:12,440 --> 00:31:16,600
Speaker 1: demand um for quite some time for the Hummer Ev suv.

620
00:31:16,880 --> 00:31:19,959
Speaker 1: So when we start selling the Lyric, which is one

621
00:31:20,000 --> 00:31:23,560
Speaker 1: of the highest customer feedback vehicles we've had of the

622
00:31:23,680 --> 00:31:26,080
Speaker 1: just the beauty of that vehicle when they actually get

623
00:31:26,120 --> 00:31:28,160
Speaker 1: in to see it, I expect we're going to have

624
00:31:28,360 --> 00:31:31,520
Speaker 1: a strong reaction in September as well. So I'm very

625
00:31:31,800 --> 00:31:35,680
Speaker 1: um uh committed to the strength of our evs. Okay,

626
00:31:35,680 --> 00:31:37,360
Speaker 1: thank you so much to Mary Barr. She is the

627
00:31:37,440 --> 00:31:46,520
Speaker 1: chairman and CEO of General Motors. Please brands in for

628
00:31:46,600 --> 00:31:48,680
Speaker 1: Pulse whena I'm Tom Keane. What we're gonna do here?

629
00:31:48,960 --> 00:31:51,320
Speaker 1: This has been so anticipated and thank you folks for

630
00:31:51,360 --> 00:31:54,480
Speaker 1: your support of having Doug casson. He's a sea breeze.

631
00:31:54,640 --> 00:31:56,960
Speaker 1: We'd launch into a lot of baseball talk and all that,

632
00:31:57,040 --> 00:31:59,600
Speaker 1: and we finally get to the equity markets today. I'm

633
00:31:59,600 --> 00:32:02,280
Speaker 1: gonna ask one baseball question and that we're going to

634
00:32:02,400 --> 00:32:04,960
Speaker 1: get to the equity markets because I know you anticipate

635
00:32:05,080 --> 00:32:09,400
Speaker 1: Mr Cass's views there, particularly at this historic time for

636
00:32:09,440 --> 00:32:14,680
Speaker 1: the markets. Doug cass worst hitting since nineteen game after

637
00:32:14,800 --> 00:32:17,360
Speaker 1: game with two hits, three HiT's. Should they move the

638
00:32:17,400 --> 00:32:21,520
Speaker 1: mound back of foot? That doesn't apply to the Yankees

639
00:32:22,160 --> 00:32:24,840
Speaker 1: standing on the six and seven, six and seven in

640
00:32:24,840 --> 00:32:26,400
Speaker 1: a row. I know, but you know there's a lot

641
00:32:26,480 --> 00:32:29,120
Speaker 1: of minor league action going on here with real concern

642
00:32:29,600 --> 00:32:31,960
Speaker 1: over the lack of hitting in the game. Pitching domon

643
00:32:32,440 --> 00:32:35,480
Speaker 1: what was wrong When my cousin Sandy, I agree it's

644
00:32:35,560 --> 00:32:37,800
Speaker 1: against Marish Allen in the Games of War two to

645
00:32:37,920 --> 00:32:41,440
Speaker 1: one that it was beauty in that. The other thing

646
00:32:41,560 --> 00:32:44,280
Speaker 1: is that it will help those that are concerned about

647
00:32:44,320 --> 00:32:47,640
Speaker 1: long baseball games. You know. Yeah, So I'm with you.

648
00:32:47,800 --> 00:32:49,520
Speaker 1: I'm with you, but I'm just I think a lot

649
00:32:49,520 --> 00:32:52,120
Speaker 1: of people want to know what you think about this. Uh,

650
00:32:52,320 --> 00:32:55,640
Speaker 1: it's a great season. I'm watching apomy. It's going to

651
00:32:55,720 --> 00:32:58,960
Speaker 1: be a cold season for the Red Sox. Well there,

652
00:32:59,000 --> 00:33:01,240
Speaker 1: you know, they dipped under six ball, but they're doing

653
00:33:01,320 --> 00:33:04,520
Speaker 1: better leading in April, and as you well know, Doug,

654
00:33:04,680 --> 00:33:07,680
Speaker 1: August is more important. Let's get to the equity markets.

655
00:33:07,720 --> 00:33:10,360
Speaker 1: Douglas cast you've got some real caution out there. I

656
00:33:10,360 --> 00:33:12,680
Speaker 1: know you did an apple trade here, you got out

657
00:33:12,680 --> 00:33:14,720
Speaker 1: of it. I want to start first with a trading

658
00:33:14,720 --> 00:33:18,760
Speaker 1: mentality out two weeks, three weeks. How do you apply

659
00:33:18,960 --> 00:33:24,520
Speaker 1: capital right now? Okay? Um? Paul Krueg. Krugman tweeted this

660
00:33:24,560 --> 00:33:27,880
Speaker 1: morning before seven o'clock, if it should happen to rain,

661
00:33:27,960 --> 00:33:31,440
Speaker 1: we have umbrellas, he quoted yelling, and he went on

662
00:33:31,560 --> 00:33:34,800
Speaker 1: to say the panic pundits say she's predicting a hurricane.

663
00:33:35,440 --> 00:33:37,520
Speaker 1: The question I think a lot of investors are asking

664
00:33:37,600 --> 00:33:40,280
Speaker 1: right now, as you just did with Lee Kuperman on

665
00:33:40,320 --> 00:33:43,280
Speaker 1: TV earlier this morning, is whether we're in a market

666
00:33:43,320 --> 00:33:46,800
Speaker 1: squall or market hurricane, or we at an important pivot

667
00:33:46,840 --> 00:33:49,880
Speaker 1: point for the markets. Um, the FED to me is

668
00:33:49,920 --> 00:33:51,920
Speaker 1: often wrong and ever in doubt. You just look at

669
00:33:52,000 --> 00:33:54,160
Speaker 1: two thousand and eight as an example when the FED

670
00:33:54,240 --> 00:33:58,160
Speaker 1: was obsessed over inflation even as the financial crisis deepened,

671
00:33:58,200 --> 00:34:02,000
Speaker 1: and there are many other examples. Misques me. I'm taking

672
00:34:02,040 --> 00:34:05,880
Speaker 1: out my Jerry for wind buttons ready to go on

673
00:34:05,920 --> 00:34:10,440
Speaker 1: my shirt. Um. My best proxy for inflation is the

674
00:34:10,440 --> 00:34:14,719
Speaker 1: Mannheim used car indicts index. It's up fifty year over year.

675
00:34:14,880 --> 00:34:18,160
Speaker 1: There's no inventory, prices through the roof. We talked to

676
00:34:18,239 --> 00:34:21,040
Speaker 1: every single company as I do, and Lee Kuperman does,

677
00:34:21,320 --> 00:34:25,080
Speaker 1: their bottlenecks, supply issues, higher costs of broadcast, and the

678
00:34:25,120 --> 00:34:28,880
Speaker 1: prices being accepted by consumers. UM. In the fact that

679
00:34:30,120 --> 00:34:35,000
Speaker 1: Steve Matthews featuring that reporter he said, it's a huge deal.

680
00:34:35,400 --> 00:34:42,080
Speaker 1: That's amazing. The question I think the question is, so

681
00:34:42,239 --> 00:34:45,000
Speaker 1: are we undergoing a squal or a hurricane. Obviously a

682
00:34:45,080 --> 00:34:48,000
Speaker 1: squall is less lethal, it's a sudden gust to win,

683
00:34:48,520 --> 00:34:53,120
Speaker 1: it lasts only briefly. But the sustained winds of a hurricane,

684
00:34:53,160 --> 00:34:55,560
Speaker 1: on the other hand, are devastating, and if you look

685
00:34:55,560 --> 00:35:00,319
Speaker 1: at history, most market corrections are quick and squa as

686
00:35:00,360 --> 00:35:02,880
Speaker 1: an eighteen in February of last year being the exception.

687
00:35:03,239 --> 00:35:05,720
Speaker 1: And that helps to explain why I think most short

688
00:35:05,719 --> 00:35:10,600
Speaker 1: sales of trades. Shorts may protect, but long generally generate well.

689
00:35:10,680 --> 00:35:14,040
Speaker 1: Leon Cooperman's point was he was a fully invested bear

690
00:35:14,440 --> 00:35:17,799
Speaker 1: that he saw all of the signs of a potential

691
00:35:18,160 --> 00:35:21,480
Speaker 1: decline in markets. It might not happen now because just

692
00:35:21,560 --> 00:35:24,160
Speaker 1: markets don't go down for no reason. What do you

693
00:35:24,200 --> 00:35:27,080
Speaker 1: make of that? Are you also fully invested? The careful

694
00:35:27,400 --> 00:35:30,719
Speaker 1: I listened very carefully to Pharaoh's interview of Lee. You

695
00:35:30,760 --> 00:35:32,960
Speaker 1: know I'm a big fan. I worked for Lee for

696
00:35:33,000 --> 00:35:36,239
Speaker 1: a number of years. Um Um. He said, there are

697
00:35:36,239 --> 00:35:39,359
Speaker 1: as signposts to do risk. I'll tell you mine. Number

698
00:35:39,400 --> 00:35:43,319
Speaker 1: one is the markets and difference to big beats TOI consensus.

699
00:35:43,320 --> 00:35:47,279
Speaker 1: I'm thinking Amazon, Zoom and even Apple. Here a m

700
00:35:47,360 --> 00:35:52,120
Speaker 1: D had multiple upgrades by the analytical community last week,

701
00:35:52,840 --> 00:35:55,480
Speaker 1: um a big earnings beef and beat in. The stock

702
00:35:55,560 --> 00:35:58,440
Speaker 1: is down twelve dollars and the fact that the market

703
00:35:58,480 --> 00:36:01,200
Speaker 1: has begun to vault in despite the ten year hanging

704
00:36:01,200 --> 00:36:05,120
Speaker 1: around one point six means that The market isn't newsy.

705
00:36:05,160 --> 00:36:07,840
Speaker 1: It's not going lower because of higher rates. It just

706
00:36:07,960 --> 00:36:10,960
Speaker 1: begun to weaken as demand seems to be stated. Remember

707
00:36:11,040 --> 00:36:14,439
Speaker 1: David Temper famously said about a month ago that race

708
00:36:14,480 --> 00:36:17,960
Speaker 1: would be contained and that in turn stocks would head higher.

709
00:36:18,160 --> 00:36:20,960
Speaker 1: The opposite is current rates are being contained, but stocks

710
00:36:21,000 --> 00:36:25,080
Speaker 1: are moving moving lower. The overall market is stalling, admittedly

711
00:36:25,120 --> 00:36:30,799
Speaker 1: at higher levels despite strong real economic data. Markets are

712
00:36:30,840 --> 00:36:33,719
Speaker 1: typically least are about rate of change. We are now

713
00:36:33,760 --> 00:36:37,480
Speaker 1: likely seeing the great of change in profits and economic growth.

714
00:36:37,480 --> 00:36:40,480
Speaker 1: It's something that Lee mentioned. Finally, this is really the

715
00:36:40,480 --> 00:36:44,080
Speaker 1: most important thing to me. We have basically been in

716
00:36:44,120 --> 00:36:48,080
Speaker 1: a modern monetary theory position. It's been in place by

717
00:36:48,120 --> 00:36:53,160
Speaker 1: the FEDS. It's shows by their indifference towards recovery and

718
00:36:53,280 --> 00:36:57,399
Speaker 1: improving high frequency economic data. Now we are getting into

719
00:36:57,440 --> 00:37:01,439
Speaker 1: what I described as modern physical theory, and I think

720
00:37:01,440 --> 00:37:04,360
Speaker 1: in the end, all violation of the fundamental laws of

721
00:37:04,440 --> 00:37:08,000
Speaker 1: economic and financial common sense a paid for. But every

722
00:37:08,080 --> 00:37:10,960
Speaker 1: both seems to think that he will unlow before the

723
00:37:11,000 --> 00:37:14,360
Speaker 1: break and Tom it's easy enough to burst the bubble,

724
00:37:14,840 --> 00:37:17,880
Speaker 1: but to incize the bubble with the needles so that

725
00:37:17,920 --> 00:37:22,839
Speaker 1: it's subsides gradually is an operation of undebted Lisa, jump

726
00:37:22,840 --> 00:37:25,440
Speaker 1: in here. You don't know who Jim Palmer is. No,

727
00:37:25,560 --> 00:37:27,040
Speaker 1: I mean, I want to unpack a little bit of

728
00:37:27,080 --> 00:37:30,280
Speaker 1: what you said. The idea of the logic of markets

729
00:37:30,280 --> 00:37:33,399
Speaker 1: and modern fiscal theory is what you're saying, that you're

730
00:37:33,440 --> 00:37:36,360
Speaker 1: getting defensive, that you're going to cash or or please

731
00:37:36,440 --> 00:37:39,080
Speaker 1: insert what you're going to in order to be defensive

732
00:37:39,520 --> 00:37:43,480
Speaker 1: ahead of a surgeon inflation that forces offense hand and

733
00:37:43,560 --> 00:37:48,760
Speaker 1: forces valuations that we see in equities. Lisa, I'm starting

734
00:37:48,840 --> 00:37:50,960
Speaker 1: up in about two weeks a new hedge fund, Sea

735
00:37:50,960 --> 00:37:54,040
Speaker 1: Breeze Capital of Partners LP. I can't wait too short.

736
00:37:54,560 --> 00:37:55,840
Speaker 1: You know. I don't know if you guys are a

737
00:37:55,880 --> 00:37:58,600
Speaker 1: fan of the movie Caddy Shack, but there's there's a

738
00:37:58,680 --> 00:38:01,400
Speaker 1: line when when Tye Webb is walking down with this

739
00:38:02,239 --> 00:38:06,320
Speaker 1: caddy Danny Nowtan at Bushwood Country Club and he asked

740
00:38:06,400 --> 00:38:08,879
Speaker 1: Danny whether he's in Russia. We're not in Russia, are

741
00:38:08,920 --> 00:38:11,239
Speaker 1: we We may not be in Russia, but we soon

742
00:38:11,320 --> 00:38:16,600
Speaker 1: might be in zimby way. Okay, there, come on, you mean, Doug,

743
00:38:16,640 --> 00:38:19,200
Speaker 1: I get the idea of framing shorts and the you

744
00:38:19,239 --> 00:38:22,680
Speaker 1: know what makes us go here? The bullbear argument as well,

745
00:38:22,719 --> 00:38:25,440
Speaker 1: but when you mentioned above what you're talking about commodity

746
00:38:25,520 --> 00:38:28,719
Speaker 1: dynamics and you're talking about dollar dynamics, are you are

747
00:38:28,800 --> 00:38:34,160
Speaker 1: you seeing a big figure fragility the US dollar here?

748
00:38:34,200 --> 00:38:36,480
Speaker 1: The dollar is going to get killed inflation? And give

749
00:38:36,520 --> 00:38:40,799
Speaker 1: me a number, Steve Roach, Steve Roaches, do we're gonna

750
00:38:40,800 --> 00:38:43,920
Speaker 1: get a return of the bond vigilantes? And I guess

751
00:38:44,000 --> 00:38:48,400
Speaker 1: Tom one has to ask a fundamental question. If printing

752
00:38:48,480 --> 00:38:53,120
Speaker 1: and spending money was so easy, Lisa, and without adverse

753
00:38:53,160 --> 00:38:57,040
Speaker 1: economic and market ramifications, why hasn't the FED and the

754
00:38:57,120 --> 00:39:00,880
Speaker 1: prior administration simply printed and spent through at the last century?

755
00:39:01,960 --> 00:39:07,040
Speaker 1: Obvious there are adverse outcomes that come from undisciplined policy.

756
00:39:07,360 --> 00:39:08,800
Speaker 1: Is there proof to right? And this is what I

757
00:39:08,840 --> 00:39:11,080
Speaker 1: think a lot of people are watching as they're saying, Look,

758
00:39:11,120 --> 00:39:13,640
Speaker 1: in two thousand and eight, we printed money and it

759
00:39:13,719 --> 00:39:16,759
Speaker 1: had no consequence. It frankly filled a hole that would

760
00:39:16,760 --> 00:39:20,200
Speaker 1: have otherwise been potentially deflationary. Why is this time different?

761
00:39:21,560 --> 00:39:25,920
Speaker 1: It's different because we have twenty eight point five trillion

762
00:39:26,000 --> 00:39:30,560
Speaker 1: dollars in debt um. Twenty years ago we had four

763
00:39:30,719 --> 00:39:36,120
Speaker 1: point eight trillion. That means to me, Lisa um that

764
00:39:37,120 --> 00:39:41,520
Speaker 1: what was a hundred basis point increase in interest rates,

765
00:39:41,719 --> 00:39:45,400
Speaker 1: and as a consequence, debt service is now only twenty

766
00:39:45,440 --> 00:39:49,200
Speaker 1: basis points. And the reality is that nobody knows when

767
00:39:49,239 --> 00:39:52,640
Speaker 1: the twelve year bull market is going to end um.

768
00:39:52,680 --> 00:39:56,319
Speaker 1: But I think that climbing valuations, rising tax as, higher rates,

769
00:39:56,360 --> 00:39:59,680
Speaker 1: and increased inflation are bona fide. I've never heard that

770
00:39:59,800 --> 00:40:03,560
Speaker 1: you you're you're a great optimist of America and the

771
00:40:04,040 --> 00:40:07,640
Speaker 1: Los Angeles Dodgers. I've never heard you this negative. But

772
00:40:07,640 --> 00:40:09,920
Speaker 1: what I want to say is, Doug, good luck with

773
00:40:09,960 --> 00:40:12,960
Speaker 1: your hedge fund. And I just you know, I remember

774
00:40:13,000 --> 00:40:14,960
Speaker 1: that time, Doug, where you were out in the course

775
00:40:15,000 --> 00:40:17,480
Speaker 1: as you are done in Florida, and I heard you

776
00:40:17,520 --> 00:40:25,760
Speaker 1: whisper a former greenskeeper about to become Yeah, dog gast,

777
00:40:25,840 --> 00:40:28,400
Speaker 1: thank you so much. Sea Breeze Partners. He's starting a

778
00:40:28,440 --> 00:40:32,319
Speaker 1: new headshow on the Long Short Caddyshack fund as well,

779
00:40:32,520 --> 00:40:35,200
Speaker 1: more short than long. I think I've seen caddy Shack,

780
00:40:35,520 --> 00:40:40,040
Speaker 1: I'll say fourteen times. Really, this is another side of you, Tom. Yeah.

781
00:40:40,400 --> 00:40:48,960
Speaker 1: It's it's art, It's crafted every sentence. This is going

782
00:40:49,000 --> 00:40:52,719
Speaker 1: to be an important conversation. David Rubinstein joins with Peer

783
00:40:52,760 --> 00:40:56,360
Speaker 1: to Peer conversation conversations right now and with Carlo. What

784
00:40:56,400 --> 00:40:58,719
Speaker 1: I love about Gina Romando David and just one of

785
00:40:58,760 --> 00:41:02,880
Speaker 1: the great stories out there is her ability over years

786
00:41:02,920 --> 00:41:06,880
Speaker 1: to just keep moving. Her father lost his job at Boulevard.

787
00:41:06,960 --> 00:41:11,280
Speaker 1: I actually remember when Bovard Watch collapsed in Rhode Island,

788
00:41:11,520 --> 00:41:14,200
Speaker 1: and she made good on it in venture capital and

789
00:41:14,239 --> 00:41:18,480
Speaker 1: in politics. Yes, I mean, she has an incredible story.

790
00:41:18,640 --> 00:41:21,080
Speaker 1: She uh came from a blue collar family. As you

791
00:41:21,160 --> 00:41:23,319
Speaker 1: point out, her father lost her job. Nonetheless, she went

792
00:41:23,360 --> 00:41:26,280
Speaker 1: to Harvard, was near the top of her class, Rhodes scholar,

793
00:41:26,360 --> 00:41:29,120
Speaker 1: Yale Law School, venture capitalists back in Rhode Island, she

794
00:41:29,160 --> 00:41:31,240
Speaker 1: did chose not to go to New York or Washington

795
00:41:31,360 --> 00:41:33,560
Speaker 1: or l A. Went back to Rhode Island and really

796
00:41:33,560 --> 00:41:36,200
Speaker 1: built a good business before she got into politics. Well,

797
00:41:36,239 --> 00:41:38,840
Speaker 1: she got into politics and and you know got what

798
00:41:38,960 --> 00:41:42,000
Speaker 1: I would suggest high marks in a challenging Rhode Island,

799
00:41:42,080 --> 00:41:45,440
Speaker 1: and it is a Rhode Island that all agree hasn't

800
00:41:45,440 --> 00:41:49,879
Speaker 1: worn out infrastructure. She's focused on that right now. That's

801
00:41:49,880 --> 00:41:52,799
Speaker 1: correct infrastructure or something that Roode Island really needed. She

802
00:41:52,840 --> 00:41:55,759
Speaker 1: helped reform that and also did a lot in the

803
00:41:55,760 --> 00:42:00,640
Speaker 1: pension area. Elected governor twice and uh, interestingly, Um, she

804
00:42:00,920 --> 00:42:02,719
Speaker 1: chose to come to Washington. She could have stayed as

805
00:42:02,719 --> 00:42:04,840
Speaker 1: a Rhode Island governor, maybe run for president down the

806
00:42:04,920 --> 00:42:08,120
Speaker 1: road herself, and she she could not. She could still

807
00:42:08,120 --> 00:42:10,359
Speaker 1: do that, of course, down the road, but she wanted

808
00:42:10,400 --> 00:42:13,320
Speaker 1: to come to Washington release help President Biden do the

809
00:42:13,360 --> 00:42:15,320
Speaker 1: kind of things he's trying to do. So she is

810
00:42:15,320 --> 00:42:18,520
Speaker 1: a point person on the infrastructure plan right now, appoint

811
00:42:18,560 --> 00:42:21,359
Speaker 1: person with respect to infrastructure. Also a point person with

812
00:42:21,400 --> 00:42:25,040
Speaker 1: respect to our policies with China, especially considering the record

813
00:42:25,040 --> 00:42:27,640
Speaker 1: trade deficit that we just printed due to all of

814
00:42:27,640 --> 00:42:30,720
Speaker 1: the imports from that nation. How does she talk about

815
00:42:30,800 --> 00:42:34,480
Speaker 1: free markets but also having a national focus? Can you

816
00:42:34,520 --> 00:42:39,920
Speaker 1: square these ideas well? The administration hasn't really changed a

817
00:42:39,920 --> 00:42:42,720
Speaker 1: lot of the Trump trade policies yet, they haven't taken

818
00:42:42,760 --> 00:42:47,000
Speaker 1: down the the tariffs with China or the tariffs with Europe. Um.

819
00:42:47,080 --> 00:42:50,280
Speaker 1: They suspect that some things may get negotiated with Europe.

820
00:42:50,280 --> 00:42:52,080
Speaker 1: She implied that, but she didn't say it would get

821
00:42:52,080 --> 00:42:53,919
Speaker 1: done for certain. And maybe the tariffs will come down

822
00:42:53,920 --> 00:42:56,200
Speaker 1: to some extent. We don't know for certain. But right

823
00:42:56,200 --> 00:42:59,359
Speaker 1: now the administration is focused domestically on the infrastructure bill,

824
00:42:59,760 --> 00:43:02,440
Speaker 1: and don't really focus right now on new trade agreements.

825
00:43:02,480 --> 00:43:03,759
Speaker 1: And I don't think they really want the kind of

826
00:43:03,800 --> 00:43:08,360
Speaker 1: trade agreements that President Trump negotiated or are tried to negotiate.

827
00:43:08,600 --> 00:43:11,520
Speaker 1: But there's an idea here that perhaps it's behind Biden's

828
00:43:11,520 --> 00:43:16,240
Speaker 1: proposals that the government can foster good spending that can

829
00:43:16,360 --> 00:43:19,799
Speaker 1: generate corporate growth. How does she talk about that in

830
00:43:19,920 --> 00:43:22,960
Speaker 1: terms of the commerce of the United States versus federally

831
00:43:23,000 --> 00:43:26,359
Speaker 1: funded programs that are one and done well they use.

832
00:43:26,560 --> 00:43:30,200
Speaker 1: Usually the Commerce Department is often taking CEOs overseas for

833
00:43:30,280 --> 00:43:34,160
Speaker 1: trade missions to build plants and factories overseas. This administration

834
00:43:34,239 --> 00:43:36,000
Speaker 1: is not as focused on that. They want to make

835
00:43:36,040 --> 00:43:38,880
Speaker 1: certain that companies here are building more jobs here, and

836
00:43:38,920 --> 00:43:40,960
Speaker 1: that's their focus. So I don't think she's going to

837
00:43:41,080 --> 00:43:42,799
Speaker 1: lead a lot of trade missions. So she didn't say

838
00:43:42,800 --> 00:43:44,880
Speaker 1: she wouldn't do that right now, though she wants to

839
00:43:44,880 --> 00:43:48,480
Speaker 1: get the infrastructure build through and they recognize I'll have

840
00:43:48,520 --> 00:43:51,680
Speaker 1: to compromise on some parts of it, for sure, David,

841
00:43:51,760 --> 00:43:54,040
Speaker 1: you have a working number on your in your head

842
00:43:54,120 --> 00:43:56,560
Speaker 1: what that compromises. I don't mean that you know the

843
00:43:56,560 --> 00:43:59,520
Speaker 1: Washington parlor game, but does it come in does it

844
00:43:59,600 --> 00:44:02,239
Speaker 1: ease act a little bit to get done or do

845
00:44:02,280 --> 00:44:06,080
Speaker 1: you really see a much lesser statistic. Well, there are

846
00:44:06,120 --> 00:44:08,600
Speaker 1: two different issues on the compromise. What's the size of

847
00:44:08,640 --> 00:44:11,200
Speaker 1: the infrastructure bill going to be? And there're two different

848
00:44:11,239 --> 00:44:15,200
Speaker 1: infrastructure bills, a traditional infrastructure and so called care infrastructure.

849
00:44:15,440 --> 00:44:17,920
Speaker 1: I think the administration would like more than half of

850
00:44:18,280 --> 00:44:21,160
Speaker 1: what they propose, so it's unclear exactly what the number

851
00:44:21,160 --> 00:44:23,399
Speaker 1: will be. The Republicans seem to be at a little

852
00:44:23,400 --> 00:44:25,440
Speaker 1: bit less than half. And then the other issue is

853
00:44:25,480 --> 00:44:29,240
Speaker 1: the taxes, in corporate taxes and income personal income taxes.

854
00:44:29,520 --> 00:44:31,560
Speaker 1: I think the administration made it clear they're prepared to

855
00:44:31,600 --> 00:44:34,080
Speaker 1: compromise on taxes for sure, but they don't want to

856
00:44:34,080 --> 00:44:35,759
Speaker 1: put a number out yet until they kind of know

857
00:44:35,800 --> 00:44:38,240
Speaker 1: who they're negotiating with and what the other side really wants.

858
00:44:39,520 --> 00:44:43,319
Speaker 1: I look, David at the compromise to come here an infrastructure,

859
00:44:43,360 --> 00:44:47,040
Speaker 1: and it folds into capitalism in America. Should we have

860
00:44:47,120 --> 00:44:49,960
Speaker 1: a more pure bill or is Gena Romando going to

861
00:44:50,040 --> 00:44:53,560
Speaker 1: say we can do a more complex bill. Well, I

862
00:44:53,600 --> 00:44:55,640
Speaker 1: think she's one of several players that are going to

863
00:44:55,760 --> 00:44:57,839
Speaker 1: try to make a difference here. But I think right

864
00:44:57,880 --> 00:45:00,680
Speaker 1: now this is something that's likely to go forward over

865
00:45:00,719 --> 00:45:02,960
Speaker 1: the remainder of this year. I think the it's not

866
00:45:02,960 --> 00:45:05,759
Speaker 1: going to get done that quickly. The infrastructure part is

867
00:45:05,800 --> 00:45:08,640
Speaker 1: maybe easier. The harder part is the tax part. As

868
00:45:08,680 --> 00:45:11,080
Speaker 1: you know, tax legislation usually takes a year or more

869
00:45:11,120 --> 00:45:15,120
Speaker 1: to get through Congress, particularly when it's dealing with tax increases. UH.

870
00:45:15,280 --> 00:45:18,160
Speaker 1: Senator Mansion has said that he could support a corporate

871
00:45:18,160 --> 00:45:22,279
Speaker 1: tax rate about the President's proposed um, you know, a

872
00:45:22,360 --> 00:45:25,319
Speaker 1: much higher rate, but I suspect some corporate tax rate

873
00:45:25,560 --> 00:45:29,080
Speaker 1: between where it is now and will probably get done. Uh.

874
00:45:29,080 --> 00:45:32,080
Speaker 1: In terms of individual tax rates, it's unclear, but I'd

875
00:45:32,080 --> 00:45:35,319
Speaker 1: be surprised if there is no individual tax increase at all.

876
00:45:35,320 --> 00:45:38,879
Speaker 1: I suspect will be some. David, as an investor, as

877
00:45:38,880 --> 00:45:42,120
Speaker 1: the co founder and co chair of Carlisle, how much

878
00:45:42,160 --> 00:45:44,760
Speaker 1: are you relying on some of this infrastructure to get done?

879
00:45:44,800 --> 00:45:47,399
Speaker 1: How much would it getting done or not getting done

880
00:45:47,840 --> 00:45:51,560
Speaker 1: change your outlook and the way that you invest. Of course,

881
00:45:51,680 --> 00:45:54,359
Speaker 1: infrastructure is something that the country could benefit from, and

882
00:45:54,440 --> 00:45:56,600
Speaker 1: the infrastructure the President is talking about would be good

883
00:45:56,600 --> 00:45:58,840
Speaker 1: for the economy. There's no doubt it. We create jobs

884
00:45:58,880 --> 00:46:00,760
Speaker 1: and there's no doubt it would help in many different areas.

885
00:46:00,760 --> 00:46:04,920
Speaker 1: For example, telecommunications are infrastructure on cell phone towers is

886
00:46:04,960 --> 00:46:08,040
Speaker 1: really um not exactly first world. It can be much better,

887
00:46:08,080 --> 00:46:10,359
Speaker 1: as we all know when when trying to use cell

888
00:46:10,400 --> 00:46:12,920
Speaker 1: phones in the the ball's dropped. There are many different

889
00:46:12,920 --> 00:46:14,879
Speaker 1: things I think would help the economy, but it's hard

890
00:46:14,960 --> 00:46:17,320
Speaker 1: as an investor to say, well, if this bill passes,

891
00:46:17,520 --> 00:46:19,239
Speaker 1: the impact will be felt in two or three years,

892
00:46:19,320 --> 00:46:21,880
Speaker 1: I'll make an investment right now take advantage of it.

893
00:46:21,880 --> 00:46:25,120
Speaker 1: It's too unclear right now. Although there's a question about

894
00:46:25,120 --> 00:46:27,520
Speaker 1: the optimism the balance of risks that if there isn't

895
00:46:27,600 --> 00:46:30,440
Speaker 1: some sort of optimism about future growth, it's hard to

896
00:46:30,480 --> 00:46:33,960
Speaker 1: invest in assets at these valuations. Leon Cooperman just said

897
00:46:34,000 --> 00:46:37,040
Speaker 1: he was a fully invested bear and talking about how

898
00:46:37,280 --> 00:46:39,480
Speaker 1: he can line up all of the arguments for why

899
00:46:39,560 --> 00:46:41,759
Speaker 1: markets should go down, but they just aren't right now.

900
00:46:42,160 --> 00:46:44,759
Speaker 1: What's your view on that. Are you a fully invested

901
00:46:44,800 --> 00:46:46,920
Speaker 1: bear or are you looking out to some of these

902
00:46:46,960 --> 00:46:51,680
Speaker 1: programs and saying it could change the trajectory of this recovery. Well,

903
00:46:51,719 --> 00:46:54,359
Speaker 1: of course, the economy has been pretty good uh last

904
00:46:54,400 --> 00:46:56,600
Speaker 1: couple of months because of the stimulus. It's like they

905
00:46:56,600 --> 00:46:59,200
Speaker 1: continue to do pretty well for some time. Uh, the

906
00:46:59,320 --> 00:47:02,120
Speaker 1: Secretary of Rate sort of walk back our comments on

907
00:47:02,160 --> 00:47:04,880
Speaker 1: interest rate increases. So I suspect the markets will do

908
00:47:04,920 --> 00:47:07,440
Speaker 1: well today as well, because there was some concerned yesterday

909
00:47:07,440 --> 00:47:10,680
Speaker 1: about interest rate increases possibly coming along. But I'd say

910
00:47:10,760 --> 00:47:13,000
Speaker 1: for the next year or so, maybe two years, hint.

911
00:47:13,000 --> 00:47:15,239
Speaker 1: The economy is like to do quite well down the

912
00:47:15,320 --> 00:47:17,279
Speaker 1: road two or three or four years from now. It's

913
00:47:17,280 --> 00:47:19,520
Speaker 1: hard to predict. At some point things will slow down,

914
00:47:19,520 --> 00:47:22,120
Speaker 1: but the stimulus are still working its way through the economy.

915
00:47:22,200 --> 00:47:24,239
Speaker 1: But David, thank you so much. Really look forward to

916
00:47:24,280 --> 00:47:29,320
Speaker 1: Secretary Mundo with David Rubinstein, of course peer to peer conversations.

917
00:47:35,000 --> 00:47:38,160
Speaker 1: Now joining us for a four hour conversation is Michael Faroli.

918
00:47:38,920 --> 00:47:42,279
Speaker 1: He's a JP Morrigan. He has a brilliant essay out

919
00:47:42,320 --> 00:47:46,799
Speaker 1: with Team Kasman on Friday on goods and services and

920
00:47:46,880 --> 00:47:49,959
Speaker 1: on this odd John economy. But Michael Faroli, I gotta

921
00:47:50,040 --> 00:47:52,560
Speaker 1: rip up the script over what we saw you and

922
00:47:52,600 --> 00:47:56,200
Speaker 1: I adore Benjamin Friedman of Harvard Economics. He's one of

923
00:47:56,200 --> 00:47:59,320
Speaker 1: our most important thinkers. And I'm gonna go back to

924
00:47:59,400 --> 00:48:03,920
Speaker 1: Benjamin Freedman The Moral Consequences of Growth, his classic book

925
00:48:03,920 --> 00:48:08,080
Speaker 1: of twenty years ago, explain right now the moral consequences

926
00:48:08,120 --> 00:48:12,399
Speaker 1: of debt is we wring our hands over something as

927
00:48:12,440 --> 00:48:16,600
Speaker 1: strange is the debt ceiling. So I agree with where

928
00:48:16,600 --> 00:48:18,680
Speaker 1: you were going in your previous conversation. It is kind

929
00:48:18,719 --> 00:48:20,960
Speaker 1: of odd to be focusing on the debt ceiling at

930
00:48:21,000 --> 00:48:24,320
Speaker 1: this time. You know, certainly over the last few years,

931
00:48:24,320 --> 00:48:27,520
Speaker 1: we haven't worried that much about the deficit, and at

932
00:48:27,560 --> 00:48:31,560
Speaker 1: this point, as you say, Congress selects revenues, a select spending,

933
00:48:31,680 --> 00:48:34,000
Speaker 1: the debt ceiling should be a residual of that, and

934
00:48:34,040 --> 00:48:38,040
Speaker 1: the fact that it's a a concern is a bit

935
00:48:38,440 --> 00:48:40,960
Speaker 1: a bit unique to the US. My understanding is that

936
00:48:41,040 --> 00:48:44,960
Speaker 1: this can be extended via reconciliation. So hopefully this shouldn't

937
00:48:45,000 --> 00:48:47,400
Speaker 1: be too much of a headache for the market so

938
00:48:47,520 --> 00:48:49,920
Speaker 1: or for the economy this year. But that's something we'll

939
00:48:49,960 --> 00:48:51,840
Speaker 1: have to just wait and see. As far as I understand,

940
00:48:51,840 --> 00:48:54,600
Speaker 1: looking at this Treasury refunding announcement, the auction science is

941
00:48:54,640 --> 00:48:56,880
Speaker 1: the longer end left unchanged. You know, it's just a

942
00:48:56,920 --> 00:48:58,680
Speaker 1: little bit higher off the back of this announcement by

943
00:48:58,680 --> 00:49:00,960
Speaker 1: a couple of basis points or so. Michael, just going

944
00:49:01,000 --> 00:49:03,920
Speaker 1: into the payrolls report, this Friday. How big are you

945
00:49:03,960 --> 00:49:06,759
Speaker 1: looking for that number? In America? How big are you

946
00:49:06,800 --> 00:49:08,719
Speaker 1: looking north of a million? And what are the risks

947
00:49:08,719 --> 00:49:10,839
Speaker 1: around some of these companies just not being able to

948
00:49:10,840 --> 00:49:14,000
Speaker 1: meet the demand by not being able to hide the people. Yeah,

949
00:49:14,040 --> 00:49:17,719
Speaker 1: so we're right near consensus looking for a million. We

950
00:49:17,800 --> 00:49:21,240
Speaker 1: think the risks are fairly balanced. Obviously, this morning's ADP

951
00:49:21,400 --> 00:49:25,160
Speaker 1: numbers suggests there could be some downside, but as has

952
00:49:25,200 --> 00:49:28,960
Speaker 1: been the case over the past twelve thirteen months, the

953
00:49:29,600 --> 00:49:32,080
Speaker 1: range of uncertainty is obviously quite a bit larger than

954
00:49:32,160 --> 00:49:35,200
Speaker 1: normal U There are some technical factors here in terms

955
00:49:35,200 --> 00:49:38,520
Speaker 1: of how we seasonally adjust the numbers that could really

956
00:49:38,600 --> 00:49:41,719
Speaker 1: skew things one way or the other. But either way

957
00:49:41,760 --> 00:49:44,000
Speaker 1: it should be a pretty big number. But I would

958
00:49:44,120 --> 00:49:45,920
Speaker 1: if we have a miss of a couple hundred thousand

959
00:49:45,920 --> 00:49:49,600
Speaker 1: on either side of that, I wouldn't really change my

960
00:49:49,719 --> 00:49:53,000
Speaker 1: thinking about the overall course of the recovery. So expect noise,

961
00:49:53,040 --> 00:49:55,080
Speaker 1: but expected to be a pretty big number. Might do

962
00:49:55,080 --> 00:49:57,799
Speaker 1: you think labor shortage translates into high wages in the

963
00:49:57,800 --> 00:49:59,440
Speaker 1: next couple of months? It's going to be this composition

964
00:49:59,440 --> 00:50:01,920
Speaker 1: where they should in the number of Friday. But beyond that,

965
00:50:02,040 --> 00:50:04,319
Speaker 1: you think it does, yeah, and I think you're right

966
00:50:04,360 --> 00:50:06,359
Speaker 1: to say the next couple of months. Right. So, when

967
00:50:06,360 --> 00:50:08,400
Speaker 1: we think about some of the issues that are weighing

968
00:50:08,400 --> 00:50:11,959
Speaker 1: on labor supply, one of them is working parents having

969
00:50:12,000 --> 00:50:14,239
Speaker 1: to be at you know, having to be but liking

970
00:50:14,280 --> 00:50:17,400
Speaker 1: to be at home in this kind of unusual schooling environment.

971
00:50:17,440 --> 00:50:20,960
Speaker 1: We've had another maybe, and this is a little more controversial,

972
00:50:21,080 --> 00:50:25,160
Speaker 1: that the uh, the unemployment insurance bonuses may have raised

973
00:50:25,200 --> 00:50:28,080
Speaker 1: people's reservation wages and made them a little more picky

974
00:50:28,080 --> 00:50:31,239
Speaker 1: and what jobs uh they accept. You know, both of

975
00:50:31,239 --> 00:50:33,840
Speaker 1: those are temporary, so school schedules should come back to

976
00:50:33,840 --> 00:50:37,960
Speaker 1: normal in September. That bonus payment ends in September. But

977
00:50:38,040 --> 00:50:39,600
Speaker 1: in the next few months, I do think it may

978
00:50:39,640 --> 00:50:41,719
Speaker 1: be uh, you know, a little bit tight and the

979
00:50:41,760 --> 00:50:44,600
Speaker 1: labor supply front, and perhaps we saw a little evidence

980
00:50:44,640 --> 00:50:47,279
Speaker 1: of that last Friday. We had a much fair bit

981
00:50:47,280 --> 00:50:51,560
Speaker 1: strong and unexpected employment cost index, which was kind of ignored.

982
00:50:51,680 --> 00:50:54,400
Speaker 1: But but that could be one of the you know,

983
00:50:54,480 --> 00:50:57,680
Speaker 1: signs that we are facing some labor supply shortages. But

984
00:50:57,719 --> 00:51:00,839
Speaker 1: I would think they're somewhat transitory nature and that they

985
00:51:00,880 --> 00:51:02,920
Speaker 1: should we should loosen things up. I think as we

986
00:51:03,000 --> 00:51:05,480
Speaker 1: get into the fall and winter. Won't make you think, Michael,

987
00:51:05,600 --> 00:51:08,520
Speaker 1: that they're not transitory, that perhaps there is some credence

988
00:51:08,560 --> 00:51:12,319
Speaker 1: to that idea that the benefits made people a bit

989
00:51:12,360 --> 00:51:14,600
Speaker 1: more picky in terms of what they're willing to accept

990
00:51:14,880 --> 00:51:18,720
Speaker 1: with respect to wages in addition to rising input costs,

991
00:51:18,760 --> 00:51:21,360
Speaker 1: in addition to some of the constraints supply chain issues

992
00:51:21,719 --> 00:51:24,400
Speaker 1: that have caused prices to go up just generally, right,

993
00:51:24,480 --> 00:51:26,680
Speaker 1: So I think we want to distinguish wages and prices

994
00:51:26,680 --> 00:51:29,480
Speaker 1: for wages, We're just gonna have to you know, if

995
00:51:29,520 --> 00:51:33,200
Speaker 1: if those factors really do subside after September, then we

996
00:51:33,239 --> 00:51:37,479
Speaker 1: can take stock of how data developments after September start

997
00:51:37,520 --> 00:51:39,480
Speaker 1: to play out, and we're just gonna have to wait

998
00:51:40,239 --> 00:51:43,960
Speaker 1: until then. I think on prices it's a little trickier.

999
00:51:44,480 --> 00:51:46,640
Speaker 1: So certainly some of these bottlenecks are going to be

1000
00:51:46,680 --> 00:51:50,600
Speaker 1: putting off ward pressure on certain categories. Uh. You know,

1001
00:51:50,640 --> 00:51:53,280
Speaker 1: I think one area that might be useful. In the past,

1002
00:51:53,320 --> 00:51:56,160
Speaker 1: the FED has kind of drawn attention to things like

1003
00:51:56,239 --> 00:52:00,200
Speaker 1: the Dallas Fed trim mean and what measures like do

1004
00:52:00,360 --> 00:52:02,880
Speaker 1: was strip out extreme movements both to the upside and

1005
00:52:02,920 --> 00:52:05,920
Speaker 1: downside to get a better measure of the central tendency

1006
00:52:05,960 --> 00:52:08,600
Speaker 1: of inflation. Things like that may be worth looking at.

1007
00:52:08,840 --> 00:52:10,680
Speaker 1: I think over the next few months, Michael. Just to

1008
00:52:10,719 --> 00:52:12,839
Speaker 1: wrap up here, we got those ADP numbers. They came

1009
00:52:12,880 --> 00:52:15,279
Speaker 1: in disappointing, and you've got all these people coming out

1010
00:52:15,320 --> 00:52:17,560
Speaker 1: and saying, hey, they don't correlate with the monthly jobs

1011
00:52:17,560 --> 00:52:20,280
Speaker 1: report out of the government and be they're really noisy

1012
00:52:20,280 --> 00:52:22,720
Speaker 1: and messy, and their methodology doesn't capture people are getting

1013
00:52:22,719 --> 00:52:25,040
Speaker 1: rehired by the same company. What would you say in

1014
00:52:25,120 --> 00:52:29,080
Speaker 1: terms of the ADPs predictive ability, even in the best

1015
00:52:29,120 --> 00:52:32,480
Speaker 1: of times, it hasn't been great. Um. You know, over

1016
00:52:32,520 --> 00:52:35,240
Speaker 1: the past year you've had misses of over a million.

1017
00:52:35,440 --> 00:52:39,720
Speaker 1: Obviously we've had pretty big big swings over the past year. Uh,

1018
00:52:39,840 --> 00:52:42,920
Speaker 1: you know, I think but given the range of missus,

1019
00:52:43,400 --> 00:52:46,359
Speaker 1: what we saw this morning isn't that far from what

1020
00:52:46,680 --> 00:52:49,400
Speaker 1: I think we and the consensus are expecting for private

1021
00:52:49,400 --> 00:52:53,240
Speaker 1: perils on Friday. So I would say, you know, perhaps

1022
00:52:53,320 --> 00:52:55,680
Speaker 1: this takes out a little bit of risk of a

1023
00:52:55,840 --> 00:52:59,600
Speaker 1: really huge upside or downside surprise on Friday. Michael got

1024
00:52:59,600 --> 00:53:01,320
Speaker 1: to leave it. Mike, I've gotta say it's nice to

1025
00:53:01,320 --> 00:53:04,799
Speaker 1: see a full office. J I was just gonna say

1026
00:53:04,800 --> 00:53:08,640
Speaker 1: he's whipping him into order. There. It's bustling with the

1027
00:53:08,640 --> 00:53:10,719
Speaker 1: half of Mr the Diamond as well, Michael Ferratti. That

1028
00:53:13,480 --> 00:53:17,560
Speaker 1: thank you. This is the Bloomberg Surveillance Podcast. Thanks for listening.

1029
00:53:17,920 --> 00:53:21,280
Speaker 1: Join us live weekdays from seven to ten am Eastern

1030
00:53:21,520 --> 00:53:25,560
Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from

1031
00:53:25,600 --> 00:53:30,880
Speaker 1: six to nine am for insight from the best in economics, finance, investment,

1032
00:53:31,040 --> 00:53:36,040
Speaker 1: and international relations. And subscribe to the Surveillance podcast on

1033
00:53:36,120 --> 00:53:39,960
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

1034
00:53:40,080 --> 00:53:44,239
Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg