Speaker 1: This is Bloomberg Wall Street. We turn our attention to
Speaker 1: the markets this week. U s CPI never's reinforcing concerns
Speaker 1: about inflation. The financial stories that chief are worth a
Speaker 1: really different reaction to Mark. It's more indications of just
Speaker 1: how hot the U. S. Economy really is. Through the
Speaker 1: eyes of the most influential voice of Larry Summers, the
Speaker 1: former Treator Secretary Katherine Keene, CEO of the n Y
Speaker 1: mom Sam's l Sharmon and founder of Equatic Group Investment
Speaker 1: in Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: This hasn't happened in Japan in decades and decades to
Speaker 1: the present Prime minister is a very solid guy. Japan
Speaker 1: is a very very stable ally. It is cleaning out
Speaker 1: of the will of the parliamentary Conservative Party that that
Speaker 1: should be a new leader of that party, and that
Speaker 1: for a new prime minister. Two world leaders gone, Boris
Speaker 1: Johnson from Scandal and Shinzo Abe from an Assassin's Bullet.
Speaker 1: This is Bloomber of Wall Street Week. I'm David Weston.
Speaker 1: This week special contributor Larry Summers on how we can
Speaker 1: have our recession with full employment it's not something we
Speaker 1: have ever seen before. And Deborah Jackson of plumb Alley
Speaker 1: on what a downturn could mean pre venture capital. Will
Speaker 1: the market be there? In my opinion, look at look
Speaker 1: at history. Two influential leaders left the world stage this week. First,
Speaker 1: British Prime Minister Boris Johnson quit after a soap opera
Speaker 1: played out at Number ten Downing Street, a board bullying
Speaker 1: and abuse of power anywhere in this party or in
Speaker 1: any other party. None of that explains why he promoted
Speaker 1: him in the first place. I'm not going to trivialize
Speaker 1: what it's absolutely true, Mr Speaker, that it was raised
Speaker 1: with me. I greatly regret that he continued in office,
Speaker 1: ultimately leading to Prime Minister Johnson stepping down and triggering
Speaker 1: a search for a new government. And then at the
Speaker 1: end of the week, an assassin took the life of
Speaker 1: former Japanese Prime Minister Shinzo Abe. It was for us,
Speaker 1: clearly it was great leader or death. NATO Secretary of
Speaker 1: General Stoltenberg said that he would welcome Sweden and Finland
Speaker 1: into the Alliance and said, by the way, there's room
Speaker 1: for more. This is an historic day for Philon, for Sweden,
Speaker 1: for natal and for you Atlantic security, while minutes from
Speaker 1: the fo MC meeting last month did nothing to suggest
Speaker 1: that the FED is looking to back off of its
Speaker 1: tightening path regardless of the recession risk. In recent discussions,
Speaker 1: Pale has been very very clear that that he understands
Speaker 1: they have a big problem and they need to be
Speaker 1: more and more restrictive. In the midst of the turmoil,
Speaker 1: the Great and the Good of media and Tech gathered
Speaker 1: for their annual Sun Valley retreat with Discoveries, David Zaslow
Speaker 1: saying the downturn could be good for his media behemoth,
Speaker 1: a lot of termoils hitting a lot of opportunity, and
Speaker 1: with all that, the week still wasn't over, with US
Speaker 1: jobs numbers on Friday coming in higher than anticipating in
Speaker 1: number and a bit lower in wage growth, indicating that
Speaker 1: the economy is still strong, much stronger, as it turned
Speaker 1: out than Elon Musk's promised to buy Twitter. Because Friday
Speaker 1: evening we learned that Mr Musk had thought better of
Speaker 1: the deal he'd offered and was calling the whole thing off. Well,
Speaker 1: what did the markets make of all this wild week? Well,
Speaker 1: stocks were up, with the SMP five hundred higher by
Speaker 1: just under two percent and the NASDAC rising four point
Speaker 1: six percent, while bonds sold off a bit, leaving the
Speaker 1: ten year yield just above three percent rather than just
Speaker 1: under as it was last week, and the dollar posted
Speaker 1: another week of games here to help us sort it
Speaker 1: all out? Or liz Ane Saunders, chief strategist for Charles
Speaker 1: Schwab and then only Causeway Capital Management, fundamental portfolio manager.
Speaker 1: So let me start, Lisane, if I could with you,
Speaker 1: what did we learn from the markets this week on
Speaker 1: the economy? You know, if we start with the job's number,
Speaker 1: I don't want to say on the surface it was strong.
Speaker 1: I think there was you could you could nip pick
Speaker 1: a little bit with the average work week down as
Speaker 1: you mentioned, David, wages coming down. But I think that
Speaker 1: the shift in the market maybe had less to do
Speaker 1: with some change and outlook for the economy, because you
Speaker 1: just sort of, for whatever reason, saw speculative juice is
Speaker 1: sort of kick in again, the leadership back in those
Speaker 1: highly speculation driven, lower quality segments of the market, which
Speaker 1: at this point looks a little bit more like your
Speaker 1: typical bear market rally where you see just some counter
Speaker 1: trend moves versus new assessment of either the plaction or
Speaker 1: the economic landscape. And I'm not sure that the jobs
Speaker 1: data changed that to any significant degree either. So only
Speaker 1: what about from your point of view as a as
Speaker 1: an investor, here is it time to say maybe there
Speaker 1: is an area for a bear market rally or is
Speaker 1: this just a tiny blip? You know, the real earnings
Speaker 1: hit will come in second half, as we're seeing, we're
Speaker 1: hearing from companies, especially retailers, saying they're already seeing weakness
Speaker 1: from consumers. And I believe this is a tiny blip.
Speaker 1: Rates are up, you know, investment sentiment is down, and consumers,
Speaker 1: especially to the middle to the lower level of income level,
Speaker 1: they're getting squeezed. And we're already seeing consumer downtrading. Listen,
Speaker 1: what about the consumer of the U. S economy? And
Speaker 1: we kind of the consumer yet again, I don't think so.
Speaker 1: I don't know that we see a significant implosion. But
Speaker 1: what you're seeing in the data already is a slowdown
Speaker 1: and demand is slow downa spending, specially in the stay
Speaker 1: at home area, the goods oriented side of the economy,
Speaker 1: which if there's a silver lining, that bodes well for
Speaker 1: those components of metrics like CPI and inflation, because that
Speaker 1: was the breeding ground for the inflation problem with which
Speaker 1: we're still dealing. So that's a positive sign. You know,
Speaker 1: there's this debate out there about excess savings and and
Speaker 1: the strength of household balance sheets. David, we talked about
Speaker 1: that earlier, and the only rub with that analysis if
Speaker 1: you do it in the aggregate, it doesn't pick up
Speaker 1: the fact that most of that call it excess savings
Speaker 1: is concentrated up the income spectrum. So I think that
Speaker 1: the surge that was represented by the consumer in the
Speaker 1: economy coming out of the lockdowns, I think that's that's
Speaker 1: very much in the review. It's such a good point.
Speaker 1: Thank you so much, liz Ane Saunders and Eli will
Speaker 1: be staying with us as we turned to some investment
Speaker 1: advice in a somewhat conflicted market. That's gonna have next
Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. But even
Speaker 1: the slowdown seemed to be slowing down. While the mixed
Speaker 1: news they are carried some unexpected blessings, such as a
Speaker 1: temporary drop in the unemployment rate, the hope that the
Speaker 1: recession might squeeze out substantial amounts of inflation seemed to
Speaker 1: be generally fading even in the government's forecasts, and so
Speaker 1: with eminently good cause to panic and crash the stock market,
Speaker 1: that perverse little devil rallied and surged. And that was
Speaker 1: the way Lewis Roguiser saw it on Wall Street. We've
Speaker 1: been in the back in the fall of nine. We
Speaker 1: were trying to address a much bigger beast of inflation
Speaker 1: and looking for an economic downturn to do the trick
Speaker 1: liz Ane Saunders of Charles Schwab and Ellen Lee of
Speaker 1: Causeway Capital Management have saved with us. So let me
Speaker 1: start to you with you about specific investment advice, because
Speaker 1: I came across this and find it in shreaking idea
Speaker 1: of idiosyncratic self help. I think you call it what
Speaker 1: does that tell us about a company? So basically, i'd
Speaker 1: caused we were looking at companies on a bottom up basis.
Speaker 1: So I'm trying to find, you know, risk reward where
Speaker 1: we're taking a conservative view on the outlook of the company,
Speaker 1: but there are things within the control of the company
Speaker 1: where the company can increase its earnings and better the
Speaker 1: business model of the company. So an example, I will use.
Speaker 1: Here is a company called Unilever, you know, based in
Speaker 1: UK slash Netherlands, a massive consumer company. They recently had
Speaker 1: Nelson Pelts, a share older activists come in and join
Speaker 1: the board. And this is actually great news because the
Speaker 1: restructuring that they had take on themselves, you know, is
Speaker 1: going to be accelerated by a shareholder minority shareholder advocate
Speaker 1: to push things forward. They had not been as good
Speaker 1: as pushing the innovations as in a timely manner. We
Speaker 1: believe an activists being there will really push the management
Speaker 1: to accelerate that timetable. And this has nothing to do
Speaker 1: with the economic slowdown we talked about in the previous segment,
Speaker 1: because they're doing things internally to really energize their sales
Speaker 1: and ultimately increased earnings of the company. So listen, I
Speaker 1: love me put that and sell with different terms which
Speaker 1: Ellen may agree with or disagree with. You know, we
Speaker 1: say a rising tide lifts all boats. I think what
Speaker 1: you're saying is that when the tides that going up,
Speaker 1: you have to find some boats that float a little
Speaker 1: better than other boats do. What are you looking for
Speaker 1: is and in terms of advising people on investments right now, yeah,
Speaker 1: so we have. We've really been taking more of a
Speaker 1: factor based approach versus say, either a sector based approach
Speaker 1: or trying to pick your traditional style boxes of large
Speaker 1: cap small cap growth value. And really what the theme
Speaker 1: has been around the factors we've been emphasizing. It's sort
Speaker 1: of a quality wrapper um and almost hybrid factors where
Speaker 1: where you look for reasonable value. But also especially in
Speaker 1: what we think, and I know Ellen agrees, we're go
Speaker 1: heading into I think a more earnings constrained environment. So
Speaker 1: when that happens, earnings become more dear and there's more
Speaker 1: value than two. Companies that have that higher profitability, have
Speaker 1: that positive earnings revisions trends, while also keeping a mind
Speaker 1: the need to have strong free cash flow, healthy balance
Speaker 1: sheet with high cash, low debt. You sort of look
Speaker 1: at the macro picture, see what's lacking, and then look
Speaker 1: for companies that have that in relative terms, and you
Speaker 1: can apply factor based analysis or factor based screening, and
Speaker 1: Bloomberg has great data on factors across the spectrum of
Speaker 1: large cap small cap. You can look for growth characteristics
Speaker 1: in stocks that live in the value indexes and vice versa.
Speaker 1: So I think it's you're less constrained when you take
Speaker 1: a factor approach, then if you're just trying to make
Speaker 1: a sector caller to let me put a geographic lens
Speaker 1: on this if I could, and I'll start with you here.
Speaker 1: What about your What about China? Some people are investors
Speaker 1: are saying right now China is a good place for example,
Speaker 1: to look because they're loosening monetary policy at the same
Speaker 1: time the rest of the world is tightening it. I
Speaker 1: think in you know, China recently, there's been a lot
Speaker 1: of bad news price then because of the regulatory risk
Speaker 1: and the COVID policy. And as an investor myself looking
Speaker 1: at companies on the bottom up basis, you know, the
Speaker 1: fact that there is you know that they're they're in
Speaker 1: a loosening policy. Plus you know, hopefully in in the
Speaker 1: foreseeable future, the zero COVID policy goes away. I think
Speaker 1: there are companies like Macau, casino operators like Las Vegas,
Speaker 1: Sands or Sands China that could really benefit from a
Speaker 1: reopening of the country. And hence, you know, we find
Speaker 1: those opportunities to be very attractive in the current time.
Speaker 1: And in the case of Europe, you know, you you
Speaker 1: you mentioned earlier in the segment. You know, dollar has
Speaker 1: never been stronger, and now you know with your of
Speaker 1: what it's based with the Ukraine situation, there's gonna be
Speaker 1: a lot of fiscal spending to beef uppets infrastructure. I
Speaker 1: know there's a lot of concerns about recession because energy
Speaker 1: prices are going up, But if you are able to
Speaker 1: find companies where they're going to be beneficiaries of more
Speaker 1: spending because energy infrastructure has to go, has to be
Speaker 1: beefed up, you will find good opportunities in those markets
Speaker 1: as well los An opportunities geographically. So I think there's
Speaker 1: still probably some storms that are going to have to
Speaker 1: be weathered globally with with bouts of volatility, especially given
Speaker 1: what's going on in currency markets, and not to mention
Speaker 1: the war and the impact on the consumption side of
Speaker 1: economies in UH in Europe. But I think, thinking from
Speaker 1: a more secular standpoint longer term, I think when we
Speaker 1: whenever we do come out of this, I like to
Speaker 1: think of as a dual cycle when we're through the
Speaker 1: bear mark it, when we're through the recession that that
Speaker 1: I think is either happening or will happen. What tends
Speaker 1: to happen when you come out of those dual cycles,
Speaker 1: especially if they're global in nature, is you tend to
Speaker 1: see a change and where leadership resides from a macro perspective,
Speaker 1: And it is our view that we're going to see
Speaker 1: more the greater benefits of diversification outside the United States.
Speaker 1: That's different than saying we think, you know, non US
Speaker 1: is going to handle the outperform US, but there hasn't
Speaker 1: been that benefit of that global diversification. We think that's
Speaker 1: the next secular shift. Is that I can't let you
Speaker 1: go over that as well, Leon Musk and Twitter here,
Speaker 1: I know you don't like to invest by sectors. Does
Speaker 1: that phenomenon tell us anything about the sector of tech?
Speaker 1: Or is it should use the word idiosyncratic when it
Speaker 1: comes to along Musk, I don't think it's it's a
Speaker 1: news slash that he's a bit of a quirky guy.
Speaker 1: So I think making a broader inference about the industry um,
Speaker 1: at least at this point, I think is a is
Speaker 1: a stretch. I think it is more idiosyncratic that the
Speaker 1: popular word of our segment here today. Does that sound
Speaker 1: right to you? Ellen? Totally agree? Okay, that's nice to
Speaker 1: end a note of agreement here many thanks now to
Speaker 1: Ellen Lee of Causeway Capital Management and also to liz
Speaker 1: Anne Saunders of Charles Schwab coming up. The economic slowdown
Speaker 1: is hitting the public markets hard, but what's going on
Speaker 1: behind the scenes in venture capital? We asked Deborah Jackson
Speaker 1: of plumb Valley. This is Wall Street Week on Bloomberg.
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Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: Whether you call it a recession, there's probably close to
Speaker 1: a fifty chance. Maybe it's a bit less than that
Speaker 1: that we've had two negative quarters in a row or not.
Speaker 1: I think there's nothing inevitable about this recession. There is
Speaker 1: no question at this point that the economy is slowing
Speaker 1: changing the world. Whether it's the world of stocks, we're
Speaker 1: pretty close, you know, it's um it's sort of a
Speaker 1: losing game to who call the bottom of the market
Speaker 1: or of credit. Spreads were again much lower than you
Speaker 1: might look at from a tenure average relative to economic outcomes.
Speaker 1: But what about the world of patient capital, capital directed
Speaker 1: toward long term innovation capital that's meant to change the world.
Speaker 1: President Biden's Special Climate Envoy John Kerry thinks that there's
Speaker 1: a lot of money in venture capital still headed toward
Speaker 1: new technologies, directed to the energy transition. It is appropriate,
Speaker 1: I think, to have a gas transition while you bring
Speaker 1: technology to scale that is going to change altogether what
Speaker 1: we're doing. And frankly, it's about a trillion dollars a
Speaker 1: venture capital already moving towards these new technologies. But others
Speaker 1: like Ben at Coasla of Coastal Ventures, think the downturn
Speaker 1: will have to effect at least the more vulnerable venture
Speaker 1: capital firms. So I do think given the hype we've
Speaker 1: seen the last five years, we will see decline and returns.
Speaker 1: The good firms continue to be disciplined about valuations. But
Speaker 1: I do think in general for the industry will see
Speaker 1: a decline, the best phones will still do well. Debord
Speaker 1: Jackson's at the very center of venture capital with the
Speaker 1: firm that she founded and now runs. It's called plumb Alley.
Speaker 1: And we welcome right now to Wall Street Week. Great
Speaker 1: to have you here, Debora, Thank you for joining us.
Speaker 1: Thank you for having me, David. So, the big question
Speaker 1: is there's a downturn, without doubt, you look at the
Speaker 1: markets with its equities or dead or whatever downturn, is
Speaker 1: it affecting venture capital? And if so, how well the
Speaker 1: big macro issues that we're facing in the public markets
Speaker 1: like inflation, um, supply chain challenges, and also things like
Speaker 1: the recent Supreme Court ruling that would affect EPA regulations.
Speaker 1: All of those factors come into play for the public markets.
Speaker 1: They also have implications in the private markets. However, the
Speaker 1: private markets are very, very different. So the private markets,
Speaker 1: when you think of venture investors are looking at the
Speaker 1: medium term time frame, not like short day to day
Speaker 1: trading and immediate effects, but more over a course of
Speaker 1: seven years for a series A level financing, and so
Speaker 1: there are it's a it's a medium term kind of
Speaker 1: investor mentality that's happening. I think it's important to know
Speaker 1: that there is so much money that's been put out
Speaker 1: into venture capital over the last few years. We had
Speaker 1: a record amount it was over the previous year. So
Speaker 1: you think about it, we have this huge amount of
Speaker 1: capital that's already been deployed into early stage companies. We
Speaker 1: also have about six hundred thirty million billion of dry
Speaker 1: powder that's already been raised and ready to deploy. So
Speaker 1: what does that mean? That really means that these venture firms,
Speaker 1: early stage companies have a lot of fuel in the
Speaker 1: tank to keep going to weather this current market situation?
Speaker 1: Does that large amount of money, even huge amount of money,
Speaker 1: make your job more difficult? You're looking for presently for
Speaker 1: really great opportunities. If there are a lot of people
Speaker 1: in there, maybe maybe not as disciplined as plumb Alley is.
Speaker 1: What does that mean to valuations? Are people overbidding? Do
Speaker 1: you have a tough time finding a prop or prices
Speaker 1: for what you want to invest in? Yes? So at
Speaker 1: plumb Alley were very, very focused on the fundamentals. And
Speaker 1: I come from Wall Street. I spent twenty years on
Speaker 1: Wall Street at Goldman and other places, as do my
Speaker 1: team members. So we come at looking at venture from
Speaker 1: a kind of fundamental point of view, which means, do
Speaker 1: the companies have revenue, do they have real customers? Do
Speaker 1: they have a real product that we need in the world.
Speaker 1: If the answer to that is yes, then you drill
Speaker 1: down and look at the numbers. And in our case,
Speaker 1: the companies that we funded have revenues, but we only
Speaker 1: look at you know, six to seven times current revenues
Speaker 1: for a SAS company, and in the market that number
Speaker 1: has been about twelve times revenues. So we have seen
Speaker 1: this situation where valuations have been way overpriced um and
Speaker 1: I think that's a reflection of the fact there is
Speaker 1: so much capital coming into the market. When there's a
Speaker 1: lot of capital in the market, it pumps up valuations.
Speaker 1: But that's also presumably part why there's a lot of
Speaker 1: dry powder. Because if you if you're only willing to
Speaker 1: go to seven times and people are spending twelve times,
Speaker 1: you don't spend the money. You have to set on
Speaker 1: your money until you find the proper valuation. Where are
Speaker 1: the opportunities that you find right now? That makes sense? Well,
Speaker 1: we we've invested now sixty million in twenty seven companies,
Speaker 1: so we've been at this for five years, so we
Speaker 1: have had the opportunity to see the market change over time,
Speaker 1: but we have stuck to our knitting. We have stuck
Speaker 1: to the fundamentals, which is do what are the revenues?
Speaker 1: What is the company actually doing? Is the company essential
Speaker 1: for our future survival and for more productivity and industry?
Speaker 1: Does it really matter versus companies that are sort of
Speaker 1: optional like dog walking apps. Deborah Jackson, thank you so
Speaker 1: much for joining. Debora Jackson is with Plumber Alley coming up.
Speaker 1: We wrap up the week with our special contributor, Larry
Speaker 1: Summers of Harvard. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Wall Street Week. I'm David Weston. We are
Speaker 1: joined once again this week by our very special contribute
Speaker 1: to the Wall Street Week. He is Larry Summers of Harvard. So, Larry,
Speaker 1: thanks so much for your coming to us, actually from
Speaker 1: Sun Valley. It's good of you to do. We've lost
Speaker 1: It strikes me two world leaders in a sense this week,
Speaker 1: in very different circumstances. Boris Johnson of course forced to
Speaker 1: step down as Prime Minister of the United Kingdom. But
Speaker 1: then at the end of the week we lost to
Speaker 1: an assassin's bullet Shinzo Abe, the longest serving Japanese prime
Speaker 1: minister in history. I wonder is this telling us anything
Speaker 1: larger about the state of the world When we have
Speaker 1: these sorts of events in a single week. You know what,
Speaker 1: The assassination of shin zhuo Abi in Japan is a tragedy.
Speaker 1: Is a tragedy for his family, It is a tragedy
Speaker 1: for Japan. It is a tragedy for the Japanese American relationship,
Speaker 1: which is a lynchpin of our whole approach to Asia. Ultimately,
Speaker 1: I think it is a global tragedy, and I have
Speaker 1: to think about what it represents, and it represents a
Speaker 1: manifestation of a kind of swirling anger that seems far
Speaker 1: too pervasive in our politics almost everywhere in the world.
Speaker 1: In a very different way, Brexit Boris Johnson's ascendency represents
Speaker 1: that kind of swirling anger, and his ultimately falling UH
Speaker 1: from power is a product of these kinds of divisions.
Speaker 1: And we certainly see this Uh in our own country,
Speaker 1: with the question of wordly succession of power on table,
Speaker 1: with the bitter controversies that surround UH the Supreme Court.
Speaker 1: And so I think Ultimately all of us have to
Speaker 1: reckon with UH. This UH rage um. That seems to
Speaker 1: be a feature that cuts across very very many societies,
Speaker 1: and that is going to be a a framing aspect
Speaker 1: as we discuss the more narrow particulars of economic policy
Speaker 1: going forward. Larry strikes me that former Premnister Abbe had
Speaker 1: fairly profound I believe macro economic effect, unlike a lot
Speaker 1: of prime ministers and have matter of presidents. Even had
Speaker 1: it named after him, abanamics, what was aminamics? And in
Speaker 1: the end did it work? Abanomics was an attempt to
Speaker 1: jolt UH the Japanese economy out of two decades of
Speaker 1: secular stagnation and disinflation, with radically expansionary policy, both on
Speaker 1: the fiscal side and on the monetary side, and with
Speaker 1: UH structural policies like major efforts to get women working
Speaker 1: and enfranchised in UH the labor force. And I think
Speaker 1: one would have to say that it was a success
Speaker 1: by the standards of what had come before, but it
Speaker 1: was not a fully mission accomplished in terms of what
Speaker 1: was happening UH in UH Japan. But I think it
Speaker 1: will be remembered as one of the more aggressive and
Speaker 1: successful reprogrammings of macroeconomic strategy that we've seen in a
Speaker 1: long time. And if, as I fear um after this
Speaker 1: current inflationary episode, the issues of absorbing savings secular stagnation
Speaker 1: that we've talked about on and off on this show
Speaker 1: recur in Europe and in the United States, then I
Speaker 1: think that a economic legacy will be studied very very carefully,
Speaker 1: because in some sense Japan was the first to experience UH,
Speaker 1: the challenge of demographic UH contraction and of excess saving,
Speaker 1: but it may not ultimately be the last. Bringing back
Speaker 1: the United States and some of those questions you just
Speaker 1: mentioned about inflation. We got jobs numbers at the end
Speaker 1: of this week, higher in the terms of the overall
Speaker 1: addition to jobs at the same time a little lower
Speaker 1: than was expected by some, at least in the way increases.
Speaker 1: What did you make of the jobs numbers? Look, I
Speaker 1: think we have a very ambiguous UH economy right now.
Speaker 1: We've got indicators of strength in many in many sectors,
Speaker 1: particularly travel and services. This was a strong employment report.
Speaker 1: Once again, in an economy where the labor force only
Speaker 1: grows by fifty or seventy five thousand people a month,
Speaker 1: you can't forever be creating three d and seventy five
Speaker 1: thousand UH jobs. UH. There's nothing here to suggest that
Speaker 1: the economy is currently collapsing into recession, and we certainly
Speaker 1: could have seen a wage inflation number that was much
Speaker 1: more alarming, and so from that point of view, I
Speaker 1: think there was a little bit of reassurance on inflation here,
Speaker 1: but we still have a very ambiguous UH picture. I
Speaker 1: don't think that this changes fundamentally the picture we had
Speaker 1: UH coming in. So I think that most people are
Speaker 1: saying there's little in these jobs numbers they would indicate
Speaker 1: to the Federal Reserve that they should back off at
Speaker 1: least yet the rate hikes. Do you agree with that?
Speaker 1: And what factors should they be looking at as they
Speaker 1: determine whether, in fact and when they should back off.
Speaker 1: I think that there's nothing here that should change somebody's
Speaker 1: mind in a major way about what monetary policy is
Speaker 1: going to need to need to do at the next meeting,
Speaker 1: or at UH probably the meeting after UH. The next meeting,
Speaker 1: I think what would UH start to change things would
Speaker 1: be very strong have a is that the economy was
Speaker 1: slowing substantially in an across the board way with respect
Speaker 1: to consumption and investment demand. I think if you saw
Speaker 1: a precipitous decline in the level of vacancies and level
Speaker 1: of labor turnover, that would be an indicator that I
Speaker 1: would be watching. But as long as we're in almost
Speaker 1: unpressed were actually unprecedented territory in terms of the ratio
Speaker 1: of job openings to unemployed people, I don't think we
Speaker 1: can stop being uh concerned about inflation. Larre, It's always
Speaker 1: so helpful to hear from you. Thank you so much.
Speaker 1: That's Larry Summers. Our very special contribute here in Wall
Speaker 1: Street Week is of course from Harvard University. Finally, one
Speaker 1: more thought. Suddenly everyone's an expert on the economy. When
Speaker 1: President Biden first proposed that massive one point nine trillion
Speaker 1: dollar American Rescue Plan back in January of two one,
Speaker 1: our own special contributor, Larry Summers was first to say
Speaker 1: there was just too big, particularly coming after two earlier rounds.
Speaker 1: You're talking about something that relative to the GDP GAP's
Speaker 1: six times as large. But White House economists said it
Speaker 1: was needed and would not be inflationary. Getting the state
Speaker 1: of the problem and of the economy, risks of doing
Speaker 1: too little far outweigh the risks of doing too much,
Speaker 1: and Federal Reserved Chair J Powell, who by the way,
Speaker 1: is trained as a lawyer, not an economist, stuck with
Speaker 1: the transitory claim as long as he could before finally
Speaker 1: admitting that he had been wrong. What did we get wrong?
Speaker 1: And that really was looking at these supply side issues
Speaker 1: and believing that they would be resolved relatively quickly. But
Speaker 1: at least that was a bunch of economists disagreeing with
Speaker 1: one another. Now we're going way past those trained in
Speaker 1: the dark arts of economics. Inflation rules the game. Latian
Speaker 1: fears are in your head. Inflation is high. Inslation, that's
Speaker 1: the bigger problem right now. It is understandable that the
Speaker 1: President has to weigh in on the issues. So last
Speaker 1: week Mr Biden, who by the way, as a lawyer,
Speaker 1: took to Twitter to explain why he thought gas prices
Speaker 1: are too high, blaming the companies reaping record profits. I
Speaker 1: call on the companies to pass this along, every penny
Speaker 1: of this eighteen cent reduction to the consumers. But then
Speaker 1: Jeff Bezos, whose degrees are in electrical engineering and computer science,
Speaker 1: decided to give the president a lecture on economics. Responding
Speaker 1: again on Twitter, calling Biden's words misdirection or a deep misunderstanding,
Speaker 1: which in turn led John Kirby from the White House,
Speaker 1: who's a retired rear admiral trained in international relations and
Speaker 1: national security, to spring the president's defense. Anybody that knows
Speaker 1: President Biden knows he's plain spoken, and he tells me
Speaker 1: exactly what he's thinking and in terms that everybody can understand.
Speaker 1: So I think we obviously take great exception at the
Speaker 1: idea that this is somehow miss direction and not to
Speaker 1: be left out of all the fun President of Vladimir
Speaker 1: Putin of Russia apparently decided to impose his own solution
Speaker 1: for inflation by imposing an excess profits tax on gas
Speaker 1: prop without all that fancy economic talk. In the end,
Speaker 1: it is easy for those of us to second guests
Speaker 1: those who are making the decisions, particularly when they seem
Speaker 1: to be going wrong or at least have unintended consequences,
Speaker 1: which brings us back to that font off so much
Speaker 1: wisdom from over a century ago. It was former President
Speaker 1: Teddy Roosevelt at the Sorbonne who said, it is not
Speaker 1: the critic who counts, not the man who points out
Speaker 1: how the strong man stubbles. The credit belongs to the
Speaker 1: man who is actually in the arena, who at the
Speaker 1: best knows in the end the triumph of high achievement,
Speaker 1: and who, at the worst, if he fails, at least
Speaker 1: fails while daring greatly. There is no question that President Biden,
Speaker 1: the one now in Roosevelt's arena, has dared greatly when
Speaker 1: it comes to the economy. Now we all have to
Speaker 1: hope for all of our sake, the there's triumph at
Speaker 1: the end of this rocky road. That does it For
Speaker 1: this episode of Wall Street Week, I'm David Weston. This
Speaker 1: is Bloomberg. See you next week. M