1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferrell and Lisa Brownowitz Jaily. We bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:30,319 Speaker 1: and of course on the Bloomberg terminal. This is a 6 00:00:30,360 --> 00:00:33,000 Speaker 1: great pleasure. Not that Jack Lou working for Joe Monkly 7 00:00:33,080 --> 00:00:37,040 Speaker 1: years ago in Massachusetts, did it awfully young, but he 8 00:00:37,120 --> 00:00:40,519 Speaker 1: did it across multiple platforms of public service. You know 9 00:00:40,640 --> 00:00:44,080 Speaker 1: Jack Lou as a former United States Secretary of Treasury, 10 00:00:44,280 --> 00:00:47,879 Speaker 1: but far more was his tour of duty at state beforehand. 11 00:00:48,200 --> 00:00:51,519 Speaker 1: We're honored to the Secretary could join us this morning, 12 00:00:51,800 --> 00:00:54,560 Speaker 1: Jack Lou. I want to go to Leon Panetta's and 13 00:00:54,640 --> 00:00:59,480 Speaker 1: Cindy r comments equating Afghanistan to Bay of Pigs of 14 00:00:59,600 --> 00:01:03,440 Speaker 1: ninety sixty one, from Kubble to Havana and south of 15 00:01:03,520 --> 00:01:08,360 Speaker 1: Havana on the shore in April of nineties one. Are 16 00:01:08,400 --> 00:01:12,800 Speaker 1: there similarities for this nation? Okay? I think we're going 17 00:01:12,880 --> 00:01:18,319 Speaker 1: through an incredibly tragic time right now with the fall 18 00:01:18,360 --> 00:01:21,880 Speaker 1: of Afghanistan, and I think the moment calls for looking 19 00:01:21,920 --> 00:01:26,240 Speaker 1: forward not back. UM. The evacuation of people who want 20 00:01:26,240 --> 00:01:30,000 Speaker 1: to leave Afghanistan is the job right now. I think 21 00:01:30,040 --> 00:01:33,240 Speaker 1: the fact that that operation is moving ahead shows that 22 00:01:33,280 --> 00:01:36,160 Speaker 1: there was in fact planning to deal with a great 23 00:01:36,200 --> 00:01:40,600 Speaker 1: deal of uncertainty. There'll be time after this to look 24 00:01:40,640 --> 00:01:45,280 Speaker 1: back and to ask the question there have been different decisions. 25 00:01:45,600 --> 00:01:49,440 Speaker 1: I think for right now, the job number one is 26 00:01:49,520 --> 00:01:52,760 Speaker 1: to keep moving forward and to get as many people 27 00:01:52,800 --> 00:01:57,120 Speaker 1: Americans and people cooperated with and helped our effort there 28 00:01:57,560 --> 00:01:59,640 Speaker 1: who want to leave the country out of the country. 29 00:01:59,680 --> 00:02:02,640 Speaker 1: Oh agree, You've been a class act about avoiding the 30 00:02:02,720 --> 00:02:06,960 Speaker 1: Republican Democrats sniping the snark moments that we see day 31 00:02:07,080 --> 00:02:12,160 Speaker 1: after day after day, but assistance with the institutional weakness 32 00:02:12,280 --> 00:02:16,760 Speaker 1: perhaps that was there with the Trump administration. Did any 33 00:02:16,800 --> 00:02:21,760 Speaker 1: of this occur because state was institutionally weaker or our 34 00:02:21,880 --> 00:02:28,040 Speaker 1: intelligence communities were institutionally weaker? I think the four years 35 00:02:28,040 --> 00:02:32,799 Speaker 1: of the Trump administration weakened many institutions, UM in terms 36 00:02:32,960 --> 00:02:38,280 Speaker 1: of the ability of experts to voice their views and 37 00:02:38,400 --> 00:02:41,800 Speaker 1: express them and have them considered. Uh, in terms of 38 00:02:41,840 --> 00:02:45,480 Speaker 1: the people left behind and the need to rebuild. So 39 00:02:45,520 --> 00:02:48,320 Speaker 1: I think the damage is brought. I've seen it in 40 00:02:48,360 --> 00:02:52,320 Speaker 1: all the agencies that I have been at in the past. 41 00:02:53,040 --> 00:02:56,800 Speaker 1: I think that going forward, the job of rebuilding is 42 00:02:56,880 --> 00:03:00,480 Speaker 1: well under way. Um, but it takes time. And uh, 43 00:03:00,880 --> 00:03:03,959 Speaker 1: I'm not sure the extent to which the current circumstance 44 00:03:04,000 --> 00:03:07,000 Speaker 1: can be tied to anything specific in that regard, but 45 00:03:07,080 --> 00:03:09,520 Speaker 1: I do think that there was a legacy of serious 46 00:03:09,600 --> 00:03:12,120 Speaker 1: damage in many of the agencies Jack as a former 47 00:03:12,200 --> 00:03:14,880 Speaker 1: US Treasury secretary, which the US do with respect to 48 00:03:14,880 --> 00:03:18,520 Speaker 1: the financial assets of the Taliban of Afghanistan at a 49 00:03:18,600 --> 00:03:21,519 Speaker 1: time when there is this sort of peace offering, But 50 00:03:21,720 --> 00:03:25,119 Speaker 1: history has a very different story to tell. I think 51 00:03:25,120 --> 00:03:29,080 Speaker 1: the burden of proof is on the Taliban going forward. 52 00:03:29,680 --> 00:03:34,080 Speaker 1: We have too much experience from the past to take 53 00:03:34,639 --> 00:03:36,840 Speaker 1: at their word that anything is going to be different. 54 00:03:37,320 --> 00:03:40,120 Speaker 1: I certainly hope that there will be a difference, but 55 00:03:40,640 --> 00:03:44,760 Speaker 1: I think the question of whether or not to treat 56 00:03:44,840 --> 00:03:49,040 Speaker 1: the government as a legitimate government, as a partner to 57 00:03:49,160 --> 00:03:53,520 Speaker 1: open financial flows and the like, has to come after 58 00:03:54,080 --> 00:03:57,720 Speaker 1: there's more evidence of what that government is going to do. 59 00:03:58,640 --> 00:04:01,800 Speaker 1: They've clearly learned that they need to talk differently than 60 00:04:01,840 --> 00:04:03,920 Speaker 1: they did in the nineteen nineties. We now have to 61 00:04:04,000 --> 00:04:07,440 Speaker 1: learn whether they're going to active, So how concerned are 62 00:04:07,480 --> 00:04:11,320 Speaker 1: you that, as we have this controversy surrounding the Biden administration, 63 00:04:11,760 --> 00:04:14,440 Speaker 1: that we're hitting a potential debt ceiling debate that could 64 00:04:14,520 --> 00:04:17,440 Speaker 1: rival two thousand and eleven. And we have an infrastructure 65 00:04:17,480 --> 00:04:21,320 Speaker 1: plan that may get through at least the billion dollar one. 66 00:04:21,400 --> 00:04:23,680 Speaker 1: But that really is called into question when you look 67 00:04:23,680 --> 00:04:26,520 Speaker 1: at the three and a half trillion dollar Reconciliation Act. 68 00:04:26,760 --> 00:04:30,159 Speaker 1: How close are we to another debt ceiling tobaccle akin 69 00:04:30,200 --> 00:04:33,080 Speaker 1: to what we saw a decade ago. Well, I'm not 70 00:04:33,160 --> 00:04:36,440 Speaker 1: sure I would conflate the issues of what's going on 71 00:04:36,680 --> 00:04:39,800 Speaker 1: in Afghanistan with the question of the debt limit. I 72 00:04:39,839 --> 00:04:44,200 Speaker 1: think before the events of the last week, UH, there 73 00:04:44,279 --> 00:04:47,120 Speaker 1: was considerable uncertainty as to how the debt limit would 74 00:04:47,120 --> 00:04:51,960 Speaker 1: be resolved. That remains the case. I think it's extremely 75 00:04:52,040 --> 00:04:56,960 Speaker 1: dangerous for so many senators, Republican senators to sign on 76 00:04:57,040 --> 00:04:59,480 Speaker 1: to a letter saying they will not support a debt 77 00:04:59,520 --> 00:05:03,800 Speaker 1: limit increase. Procedurally, it's very challenging unless you get some 78 00:05:03,839 --> 00:05:08,000 Speaker 1: bipartisan support. Uh. Their pathways are there, but there are fewer, 79 00:05:08,520 --> 00:05:11,720 Speaker 1: and the reality is that limit is the final, not 80 00:05:11,800 --> 00:05:16,440 Speaker 1: the first decision. It's to pay old bills, not new bills. 81 00:05:16,560 --> 00:05:19,720 Speaker 1: And you know when we saw in twenty seventeen an 82 00:05:19,839 --> 00:05:22,680 Speaker 1: enormous increase in the debt through the tax cut, when 83 00:05:22,680 --> 00:05:26,320 Speaker 1: we saw through the spending through the Trump years, enormous 84 00:05:26,360 --> 00:05:31,039 Speaker 1: increases in the deficit, and the bipartisan moved to respond 85 00:05:31,120 --> 00:05:34,800 Speaker 1: appropriately to COVID. I didn't hear people saying we're going 86 00:05:34,839 --> 00:05:36,800 Speaker 1: to come back later and say we're not going to 87 00:05:36,960 --> 00:05:40,200 Speaker 1: raise the debt limit. It's wrong. It's a self inflicted 88 00:05:40,240 --> 00:05:42,400 Speaker 1: wound if we end up with a crisis that can 89 00:05:42,560 --> 00:05:46,880 Speaker 1: be completely avoided. I hope that the pathway towards resolving 90 00:05:46,920 --> 00:05:51,200 Speaker 1: it is relatively clear and quick. But if I had 91 00:05:51,240 --> 00:05:54,200 Speaker 1: to guess, there's going to be some choppiness between now 92 00:05:54,200 --> 00:05:56,640 Speaker 1: and when it's done, and we know from experience that 93 00:05:56,760 --> 00:05:59,279 Speaker 1: that causes a great deal of anxiety. This is not 94 00:05:59,360 --> 00:06:02,400 Speaker 1: a moment when there's anymore anxiety, Jack lou I don't 95 00:06:02,440 --> 00:06:05,200 Speaker 1: know if you wanted through the philosophy department at Harvard, 96 00:06:05,240 --> 00:06:08,400 Speaker 1: but there is the concentration, and so much of that 97 00:06:08,560 --> 00:06:11,440 Speaker 1: is studying the different philosophers, and I think of John 98 00:06:11,520 --> 00:06:15,960 Speaker 1: Kelvin in America's deep seated aversion to debt, and yet 99 00:06:16,000 --> 00:06:18,120 Speaker 1: here we are with a debt and a deficit that 100 00:06:18,200 --> 00:06:21,880 Speaker 1: how Brown and others never ever would have perceived it 101 00:06:21,920 --> 00:06:25,640 Speaker 1: would be. And speak to conservatives now in their concern 102 00:06:25,920 --> 00:06:30,039 Speaker 1: about the fact we have too much debt. You know, Tom, 103 00:06:30,120 --> 00:06:33,560 Speaker 1: I've actually stayed consistent through a period when so many 104 00:06:33,600 --> 00:06:37,640 Speaker 1: people who have have deviated from their traditional views on 105 00:06:38,520 --> 00:06:41,520 Speaker 1: deficits and debt. I didn't hear a lot of concerns 106 00:06:41,560 --> 00:06:45,040 Speaker 1: from conservatives about deficits and debt when we were cutting 107 00:06:45,080 --> 00:06:48,600 Speaker 1: taxes in a way that was irresponsible at a time 108 00:06:48,600 --> 00:06:52,080 Speaker 1: when the economy was very healthy. UM, I think it 109 00:06:52,120 --> 00:06:54,600 Speaker 1: was appropriate for both sides to say we're not going 110 00:06:54,640 --> 00:06:57,640 Speaker 1: to worry about the deficit of the debt at the 111 00:06:57,760 --> 00:07:00,640 Speaker 1: height of the COVID crisis. You look what's going on 112 00:07:00,839 --> 00:07:04,320 Speaker 1: right now. Congress is working with the administration to pay 113 00:07:04,440 --> 00:07:10,200 Speaker 1: for the biggest investment in my professional career in terms 114 00:07:10,240 --> 00:07:15,200 Speaker 1: of domestic priorities, critical investments, important investments. I think the 115 00:07:15,240 --> 00:07:18,960 Speaker 1: debate in Congress will come down to how much willingness 116 00:07:19,080 --> 00:07:22,920 Speaker 1: is there to pay for these investments, and that will 117 00:07:22,960 --> 00:07:26,160 Speaker 1: dictate the size of the package. I think the hopeful 118 00:07:26,600 --> 00:07:30,520 Speaker 1: sign is that there is considerable consensus on a very 119 00:07:30,640 --> 00:07:34,040 Speaker 1: large coal of offsets to pay for a significant investment. 120 00:07:34,400 --> 00:07:37,960 Speaker 1: It's fundamentally different than saying devil may care, let the 121 00:07:38,000 --> 00:07:41,120 Speaker 1: next generation pay for it. In terms of the cost 122 00:07:41,160 --> 00:07:44,679 Speaker 1: of servicing the debt. With the near zero interest rates 123 00:07:44,760 --> 00:07:47,640 Speaker 1: that we're seeing for the next five ten years, that 124 00:07:48,400 --> 00:07:51,880 Speaker 1: sustainment of payment of debt service is not the issue. 125 00:07:52,520 --> 00:07:54,600 Speaker 1: I actually think the challenge is coming out of this 126 00:07:54,760 --> 00:07:59,559 Speaker 1: getting back to a more traditional view that over time, 127 00:07:59,600 --> 00:08:01,880 Speaker 1: when the economy is doing well, you need to pay 128 00:08:01,920 --> 00:08:04,200 Speaker 1: for what you do and work at reducing the deficit, 129 00:08:04,600 --> 00:08:07,080 Speaker 1: and when the economy is in trouble, you use your 130 00:08:07,080 --> 00:08:11,040 Speaker 1: fiscal cannon to deal with that challenge. We're now at 131 00:08:11,040 --> 00:08:14,440 Speaker 1: an ambiguous moment coming out of the COVID crisis. Everything 132 00:08:14,600 --> 00:08:17,200 Speaker 1: is uncertain. You were talking earlier in the program about 133 00:08:17,200 --> 00:08:20,400 Speaker 1: the dark room. We don't know where the virus is going. 134 00:08:20,680 --> 00:08:24,960 Speaker 1: We don't know if full employment will be sustained. You know, 135 00:08:25,040 --> 00:08:27,880 Speaker 1: I think we're doing the right things making sure our 136 00:08:27,920 --> 00:08:31,679 Speaker 1: economy comes back strong and sustainably out of the worst 137 00:08:31,680 --> 00:08:35,439 Speaker 1: crisis that I've ever seen. Jack. We appreciate time. So 138 00:08:35,679 --> 00:08:37,360 Speaker 1: it's gonna hit from you, Jack Lee, that they form 139 00:08:37,400 --> 00:08:47,480 Speaker 1: a U. S. Treasury Secretary Sovereign Wealth fund discussions are 140 00:08:47,520 --> 00:08:51,880 Speaker 1: usually pretty dry, pretty bureaucratic. You can't do that with 141 00:08:52,040 --> 00:08:55,720 Speaker 1: the Norwegian Sovereign Wealth Fund CEO John Farrell. You're gonna 142 00:08:55,720 --> 00:08:59,920 Speaker 1: have a discussion with a guy truly outstanding at absolutely 143 00:09:00,040 --> 00:09:03,200 Speaker 1: turn in the hedge fund business and quite the controversy 144 00:09:03,240 --> 00:09:06,400 Speaker 1: as he took over in Norway's large pile of money. 145 00:09:06,360 --> 00:09:08,400 Speaker 1: And tell this one is a monster. It's one point 146 00:09:08,440 --> 00:09:10,800 Speaker 1: for trillion dollars. And I'm pleased to say that Nikolai 147 00:09:10,840 --> 00:09:15,199 Speaker 1: Tanger joins us now the Norwegian Selvereign Wealth Fund CEO. Nikolake, 148 00:09:15,240 --> 00:09:17,040 Speaker 1: great to have you with us. You made some headlines 149 00:09:17,080 --> 00:09:18,880 Speaker 1: over the past week with this quote. I'm gonna read 150 00:09:18,880 --> 00:09:21,400 Speaker 1: it for our audience. I think probably inflation is the 151 00:09:21,400 --> 00:09:24,160 Speaker 1: biggest threat to capital markets that we're seeing now. It 152 00:09:24,200 --> 00:09:26,640 Speaker 1: will probably hit the portfolio in a way that we 153 00:09:26,679 --> 00:09:29,240 Speaker 1: have not seen before. Nikolai, what did you mean by that? 154 00:09:30,800 --> 00:09:32,920 Speaker 1: I mean that we are at a situation now where 155 00:09:33,600 --> 00:09:36,640 Speaker 1: the bond wheels are extremely low and the stock market 156 00:09:36,760 --> 00:09:41,160 Speaker 1: is extremely high, and so therefore any main change in 157 00:09:41,160 --> 00:09:43,880 Speaker 1: invlation will will hit both part of the portfolio. You know, 158 00:09:44,240 --> 00:09:45,840 Speaker 1: and in the past, is it's one of them and 159 00:09:45,880 --> 00:09:48,880 Speaker 1: not the other. But this time we can move in. 160 00:09:49,120 --> 00:09:50,880 Speaker 1: Both can move in this generation. So do you have 161 00:09:50,960 --> 00:09:54,520 Speaker 1: to do things differently now with that in mind? Well, 162 00:09:54,559 --> 00:09:56,280 Speaker 1: we are a very long term investing you know, and 163 00:09:56,360 --> 00:09:59,640 Speaker 1: we are so big it's kind of difficult to move around. 164 00:09:59,640 --> 00:10:02,960 Speaker 1: And and we are in a way also to too 165 00:10:02,960 --> 00:10:07,000 Speaker 1: big for you know, counterparties. So uh, given that we 166 00:10:07,040 --> 00:10:09,800 Speaker 1: have a time horizon for our investments of thirty two 167 00:10:09,880 --> 00:10:12,559 Speaker 1: hundred years, we uh, we will probably have to sit 168 00:10:12,600 --> 00:10:14,839 Speaker 1: through it. You understand more than most it's not what 169 00:10:14,920 --> 00:10:17,120 Speaker 1: you own, it's what you choose not to oan. When 170 00:10:17,160 --> 00:10:19,280 Speaker 1: you're this big, Nicolain, what are you choosing not to 171 00:10:19,400 --> 00:10:24,080 Speaker 1: oan right now? And why? Well, we are quite index 172 00:10:24,160 --> 00:10:26,360 Speaker 1: inari and the way we run a old portfolio, but 173 00:10:26,440 --> 00:10:31,520 Speaker 1: we also have various things that we don't own for e. 174 00:10:31,720 --> 00:10:35,080 Speaker 1: S G reasons. We started to sell down various things 175 00:10:35,520 --> 00:10:37,560 Speaker 1: already back in two thousand and twelve and that's been 176 00:10:37,600 --> 00:10:39,280 Speaker 1: a that's been a good strategy for the fund. So 177 00:10:39,320 --> 00:10:41,960 Speaker 1: that's something we will increase going forward. What does that 178 00:10:42,000 --> 00:10:44,439 Speaker 1: mean for the regional bias going forward as well? Nikola, 179 00:10:44,440 --> 00:10:46,480 Speaker 1: I'm thinking about China e M. Do you have to 180 00:10:46,480 --> 00:10:50,479 Speaker 1: reduce that because of the s G concerns. No, not necessarily. 181 00:10:50,480 --> 00:10:52,880 Speaker 1: We have roughly five percent of the fund invested in China. 182 00:10:52,960 --> 00:10:54,800 Speaker 1: It's uh, you know, it's one of the biggest markets 183 00:10:54,840 --> 00:10:56,959 Speaker 1: in the world. It's done as it's done really well 184 00:10:57,000 --> 00:10:58,880 Speaker 1: for us, and so we continue to be invested there. 185 00:10:59,080 --> 00:11:02,080 Speaker 1: Some people call it investable. I've heard that from Martial 186 00:11:02,120 --> 00:11:04,520 Speaker 1: Waste over the last couple of weeks. I've heard it 187 00:11:04,559 --> 00:11:06,800 Speaker 1: from others too. Do you think it still is investable? 188 00:11:06,840 --> 00:11:10,480 Speaker 1: And why? Well, I think it's investable. You have a 189 00:11:10,520 --> 00:11:12,560 Speaker 1: lot of great companies there. You've got some good technology 190 00:11:12,600 --> 00:11:16,120 Speaker 1: companies there, so we have we have a large positions 191 00:11:16,160 --> 00:11:18,160 Speaker 1: there and we're really believe in a lot of those 192 00:11:18,200 --> 00:11:21,840 Speaker 1: business models. The regulatory shift, though, can happen overnight. Nicola 193 00:11:21,880 --> 00:11:23,800 Speaker 1: have to believe in the business model. You have to 194 00:11:23,800 --> 00:11:26,920 Speaker 1: have some predictable regulation there as well, some kind of 195 00:11:26,960 --> 00:11:30,440 Speaker 1: certainty looking forward several years through your time arizing a 196 00:11:30,440 --> 00:11:33,760 Speaker 1: whole lot longer. Do you have that with China? Well, 197 00:11:33,800 --> 00:11:35,720 Speaker 1: I think we haven't certainty all over the place. You know, 198 00:11:35,840 --> 00:11:39,800 Speaker 1: we haven't certainty in all markets. So it's the nature 199 00:11:39,800 --> 00:11:43,240 Speaker 1: of it. It's a bit different in Jana, but that's 200 00:11:43,559 --> 00:11:46,080 Speaker 1: that's life as an investor. Do you think things are 201 00:11:46,120 --> 00:11:48,640 Speaker 1: changing more rapidly over the last couple of weeks there 202 00:11:48,720 --> 00:11:52,839 Speaker 1: the last couple of months. Yeah, things are. Things are 203 00:11:52,920 --> 00:11:55,480 Speaker 1: changing quite quickly, and we've got people on the ground, 204 00:11:55,520 --> 00:11:58,440 Speaker 1: We got good bms. We are looking at these things 205 00:11:58,480 --> 00:12:01,320 Speaker 1: and that that makes the necessary adjustments. In the pod, 206 00:12:01,559 --> 00:12:04,960 Speaker 1: let's talk about your pms. You've brought on sports psychologists. 207 00:12:05,080 --> 00:12:07,319 Speaker 1: I know this is in an area of interest for you, 208 00:12:07,400 --> 00:12:09,920 Speaker 1: to prepare your PMS for things maybe they've not been 209 00:12:10,120 --> 00:12:13,000 Speaker 1: prepared for. Can you walk me through how you're managing 210 00:12:13,080 --> 00:12:16,040 Speaker 1: the people within the fund and the changes you're trying 211 00:12:16,040 --> 00:12:19,840 Speaker 1: to make. Yeah, so, um, we do this despite me 212 00:12:19,960 --> 00:12:22,280 Speaker 1: being pretty pathetic in sports, right, So I have absolutely 213 00:12:22,360 --> 00:12:25,200 Speaker 1: nothing to bring to the party as a as an athlete, 214 00:12:25,280 --> 00:12:28,320 Speaker 1: but I have seen how sports psychologists can help us 215 00:12:28,520 --> 00:12:32,240 Speaker 1: do different things because what we do is is very 216 00:12:32,880 --> 00:12:35,840 Speaker 1: is very tricky. It's you know, high achievers and so on. 217 00:12:35,880 --> 00:12:39,679 Speaker 1: And I would say the main parts is it's resilience 218 00:12:39,920 --> 00:12:42,240 Speaker 1: and it's bounced back ability. How do you get back 219 00:12:42,280 --> 00:12:44,679 Speaker 1: when you had losses? How do you manage to take 220 00:12:44,720 --> 00:12:46,760 Speaker 1: the same type of risk even when you've been through 221 00:12:46,800 --> 00:12:50,640 Speaker 1: a puff you know patch, That's the that's the key 222 00:12:50,679 --> 00:12:52,480 Speaker 1: I think, Nicola, can you give me an example of 223 00:12:52,520 --> 00:12:55,000 Speaker 1: real life example in your times managing money where that 224 00:12:55,040 --> 00:12:59,560 Speaker 1: has helped, where you've seen that change developed with a PM. Well, 225 00:12:59,679 --> 00:13:03,280 Speaker 1: it's how me, for instance, uh, during my during the 226 00:13:03,360 --> 00:13:06,000 Speaker 1: last eight to ten years, but where I have actively 227 00:13:06,480 --> 00:13:10,400 Speaker 1: used as sports psychologists has made me come through in 228 00:13:10,440 --> 00:13:13,040 Speaker 1: a mentally better state, you know, some of the really 229 00:13:13,120 --> 00:13:16,120 Speaker 1: volative periods. I think it's a complete no brainer. You know, 230 00:13:16,679 --> 00:13:19,000 Speaker 1: going forward from here, you're also listening to earnings calls. 231 00:13:19,040 --> 00:13:22,800 Speaker 1: I know you've done interrogation training over in Norway as well, Nick, 232 00:13:22,840 --> 00:13:24,320 Speaker 1: Can I just give me a flavor of that. How 233 00:13:24,320 --> 00:13:26,520 Speaker 1: helpful that is to understand the kind of questions you 234 00:13:26,559 --> 00:13:28,559 Speaker 1: need to be asking on an earning call, what you 235 00:13:28,600 --> 00:13:31,120 Speaker 1: need to be listening for, the tone of the delivery 236 00:13:31,320 --> 00:13:33,200 Speaker 1: from the c suite, and a kind of red flags 237 00:13:33,200 --> 00:13:35,040 Speaker 1: shou'd be looking for on calls like that as well. 238 00:13:37,160 --> 00:13:40,319 Speaker 1: You know, UM spend kind of ten years learning it. 239 00:13:40,320 --> 00:13:42,439 Speaker 1: It's not something you could just kind of teach in 240 00:13:42,440 --> 00:13:45,160 Speaker 1: in six seconds. But everything from just how you ask 241 00:13:45,280 --> 00:13:48,680 Speaker 1: questions that you don't link together different types of questions 242 00:13:48,960 --> 00:13:51,240 Speaker 1: that you look at, what managements are not answering as 243 00:13:51,320 --> 00:13:54,720 Speaker 1: much as what they actually are answering, looking for various 244 00:13:54,720 --> 00:13:58,000 Speaker 1: small words called qualifiers and so on, just the whole 245 00:13:58,080 --> 00:14:01,160 Speaker 1: range of techniques that we need to apply. Herenicolasangan very 246 00:14:01,280 --> 00:14:03,400 Speaker 1: very experienced managing money. It's good to catch up. So 247 00:14:08,880 --> 00:14:12,000 Speaker 1: let's let's such seguy here, John into what lindsay Pigs 248 00:14:12,080 --> 00:14:15,520 Speaker 1: of Stephle is worried about. And that is the strength 249 00:14:15,640 --> 00:14:18,600 Speaker 1: the power of the American consumer. We see that in 250 00:14:18,679 --> 00:14:22,240 Speaker 1: Target moments ago with some very good numbers to share. Uh, 251 00:14:22,400 --> 00:14:25,480 Speaker 1: buy back announced and uh, you know, the stocks are 252 00:14:25,560 --> 00:14:28,600 Speaker 1: churning here on what I'm gonna call really really pretty 253 00:14:28,600 --> 00:14:32,480 Speaker 1: good numbers. It'll be interesting to see targets digital presence 254 00:14:32,520 --> 00:14:34,680 Speaker 1: after what we saw from Walmart and a little bit 255 00:14:34,720 --> 00:14:37,840 Speaker 1: of digital worry yesterday at Walmart. But we'll give you 256 00:14:37,840 --> 00:14:40,400 Speaker 1: those headlines as they come in and go to dr 257 00:14:40,440 --> 00:14:43,040 Speaker 1: Pigs that lindsay, I look at where we are on 258 00:14:43,160 --> 00:14:46,840 Speaker 1: the consumer is it is there a clarity to what 259 00:14:46,880 --> 00:14:49,520 Speaker 1: the consumers doing right now or is it a mystery 260 00:14:49,560 --> 00:14:52,240 Speaker 1: into the end of the year. Well, I think the 261 00:14:52,280 --> 00:14:55,440 Speaker 1: consumers are relatively solid footing. We do see that there's 262 00:14:55,440 --> 00:14:59,320 Speaker 1: a tremendous amount of wealth that has been accumulated over 263 00:14:59,360 --> 00:15:01,520 Speaker 1: the past six twelve months. But we also know that 264 00:15:01,560 --> 00:15:04,080 Speaker 1: a tremendous amount of stimulus, which has been provided on 265 00:15:04,080 --> 00:15:08,040 Speaker 1: a monthly basis to millions of Americans, is beginning to fade. 266 00:15:08,080 --> 00:15:11,120 Speaker 1: And I think we see that pullback of stimulus reflected 267 00:15:11,120 --> 00:15:14,720 Speaker 1: in yesterday's retail sales numbers coming in at a big disappointment. 268 00:15:16,040 --> 00:15:18,800 Speaker 1: So going forward, how much you looking at this idea 269 00:15:19,080 --> 00:15:22,000 Speaker 1: that we're seeing sentiment decline, like the University of Michigan's 270 00:15:22,200 --> 00:15:26,120 Speaker 1: sentiment survey showed retail sales disappoint How much can we 271 00:15:26,200 --> 00:15:30,000 Speaker 1: tell that consumers truly are feeling the crimp of higher 272 00:15:30,040 --> 00:15:33,320 Speaker 1: prices and spending less as a result. Well, I think 273 00:15:33,320 --> 00:15:35,280 Speaker 1: they are feeling the crimp re quire prices as we 274 00:15:35,360 --> 00:15:38,560 Speaker 1: know that the CPI is up near six percentences an 275 00:15:38,600 --> 00:15:42,720 Speaker 1: incredibly elevated level of costs for consumers, and we see 276 00:15:42,720 --> 00:15:46,080 Speaker 1: that not only translating into how consumers are shifting the 277 00:15:46,080 --> 00:15:49,360 Speaker 1: goods and services in their basket, but the overall nominal 278 00:15:49,400 --> 00:15:52,080 Speaker 1: decline and how they're willing to spend. Now you layer 279 00:15:52,120 --> 00:15:56,520 Speaker 1: on this growing fear of the rise of delta variants, 280 00:15:56,520 --> 00:16:01,120 Speaker 1: so case numbers, hospitalizations, death rates constantly in the news headlines, 281 00:16:01,400 --> 00:16:04,400 Speaker 1: creating a level of fear that while we may not 282 00:16:04,480 --> 00:16:08,960 Speaker 1: go back to the ownerous restrictions that we saw during UH, 283 00:16:09,280 --> 00:16:11,680 Speaker 1: we are starting to see mass mandates come back in 284 00:16:11,960 --> 00:16:16,479 Speaker 1: and even the fear itself could serve to curtail consumer 285 00:16:16,560 --> 00:16:19,480 Speaker 1: behavior in terms of going out into the market, feeling 286 00:16:19,480 --> 00:16:23,040 Speaker 1: comfortable interacting in crowds or around other people, and that 287 00:16:23,160 --> 00:16:26,840 Speaker 1: could slow the recovery the labor market, slow overall demand 288 00:16:26,880 --> 00:16:29,680 Speaker 1: in the economy, and of course, by extension, then reduced 289 00:16:29,720 --> 00:16:32,600 Speaker 1: the outlook for overall GDP. Lindsay, there's an argument that 290 00:16:32,640 --> 00:16:36,760 Speaker 1: there's a psychological difference between spending higher spending money on 291 00:16:36,880 --> 00:16:40,560 Speaker 1: higher prices with stimulus checks versus money that you earned, 292 00:16:40,800 --> 00:16:43,400 Speaker 1: and as the stimulus text where off and people actually 293 00:16:43,480 --> 00:16:46,160 Speaker 1: see that they're spending the money that they get in 294 00:16:46,200 --> 00:16:49,760 Speaker 1: their paycheck on that much higher food bill, that they're 295 00:16:49,800 --> 00:16:52,840 Speaker 1: going to spend less and cut back more. Do you 296 00:16:52,920 --> 00:16:55,720 Speaker 1: see evidence to support this. I don't know if we 297 00:16:55,800 --> 00:16:58,120 Speaker 1: see evidence of this point yet, but we do hear 298 00:16:58,200 --> 00:17:03,280 Speaker 1: peripheral UH and and anecdotal reports that consumers are increasingly 299 00:17:03,320 --> 00:17:06,680 Speaker 1: sensitive of spending that hard earned money as opposed to 300 00:17:06,720 --> 00:17:08,639 Speaker 1: a check that is coming in the mail. Now, of course, 301 00:17:08,800 --> 00:17:10,960 Speaker 1: we're sort of splitting hairs when we talk about the 302 00:17:11,040 --> 00:17:14,760 Speaker 1: decision to spend well there, spend funds on an elevated 303 00:17:14,840 --> 00:17:18,480 Speaker 1: price item. But for the average American when they see 304 00:17:18,520 --> 00:17:23,200 Speaker 1: that check dwindle ever so uh more quickly in terms 305 00:17:23,240 --> 00:17:26,000 Speaker 1: of filling up the family car, buying groceries. When it 306 00:17:26,119 --> 00:17:29,480 Speaker 1: is your hard earned money as opposed to tax dollars, 307 00:17:31,040 --> 00:17:34,760 Speaker 1: it takes a bigger hits to uh to that that 308 00:17:34,760 --> 00:17:37,040 Speaker 1: that mental outlook that you have for not only your 309 00:17:37,080 --> 00:17:40,919 Speaker 1: financial condition, but for the halfway for the economy, Lindsay 310 00:17:40,960 --> 00:17:43,320 Speaker 1: and the clear and present. There's many people looking at 311 00:17:43,359 --> 00:17:46,359 Speaker 1: two thousand g d P over six percent off of 312 00:17:46,400 --> 00:17:49,280 Speaker 1: a boom economy. You've got a more cautious view a 313 00:17:49,400 --> 00:17:52,600 Speaker 1: g d P under six percent as well. I've got 314 00:17:52,680 --> 00:17:56,600 Speaker 1: target giving me high single digit look forward. Can we 315 00:17:56,720 --> 00:18:00,960 Speaker 1: get that? Can we get not a saggy economy like three, 316 00:18:02,000 --> 00:18:05,240 Speaker 1: but a less than boom economy as you call for, 317 00:18:05,720 --> 00:18:08,320 Speaker 1: and still have corporate America do well and have the 318 00:18:08,320 --> 00:18:11,840 Speaker 1: consumer du well. Absolutely, I think the back half of 319 00:18:11,880 --> 00:18:14,720 Speaker 1: the year is going to be noticeably reduced from what 320 00:18:14,800 --> 00:18:16,560 Speaker 1: we saw in terms of six and a half percent 321 00:18:16,960 --> 00:18:19,120 Speaker 1: across the first six months. Now, that's not to say 322 00:18:19,160 --> 00:18:21,960 Speaker 1: that the economy is losing significant momentum or that the 323 00:18:22,040 --> 00:18:25,359 Speaker 1: recovery itself is losing footing, but we're looking at the 324 00:18:25,440 --> 00:18:29,400 Speaker 1: composition of growth, and when you talk about that government component, 325 00:18:29,480 --> 00:18:33,960 Speaker 1: trillions upon trillions upon trillions of dollars no longer contributing 326 00:18:34,280 --> 00:18:36,359 Speaker 1: to growth. In the back half of the year, we 327 00:18:36,440 --> 00:18:39,479 Speaker 1: would expect that headline number to subside, and we are 328 00:18:39,520 --> 00:18:41,919 Speaker 1: looking for a number closer to three to four percent 329 00:18:42,040 --> 00:18:44,560 Speaker 1: GDP in the latter six months of the year. Now, 330 00:18:44,600 --> 00:18:47,879 Speaker 1: going forward, there's a bigger concern that as we start 331 00:18:47,920 --> 00:18:52,679 Speaker 1: to see the economy recalibrate and consumers slow down to 332 00:18:52,800 --> 00:18:57,800 Speaker 1: a more sustainable pathway based on income growth, it's likely 333 00:18:57,840 --> 00:19:00,200 Speaker 1: we returned back to the growth levels that we saw 334 00:19:00,320 --> 00:19:04,600 Speaker 1: the end of so prior to the pandemic, which as 335 00:19:04,640 --> 00:19:07,439 Speaker 1: you remember, is closer to about two p Let me 336 00:19:07,480 --> 00:19:09,520 Speaker 1: make a right angle turn. Then, if we get a 337 00:19:09,560 --> 00:19:14,480 Speaker 1: pigs economy and we get a consumer that's more cautious, 338 00:19:14,600 --> 00:19:20,159 Speaker 1: more measured, how do they afford real estate. It's a 339 00:19:20,160 --> 00:19:23,240 Speaker 1: good question, and it's something that I think policymakers are 340 00:19:23,359 --> 00:19:26,280 Speaker 1: very concerned about. In fact, we've heard from several FED 341 00:19:26,280 --> 00:19:29,960 Speaker 1: presidents argue that asset persases are no longer helping in 342 00:19:30,080 --> 00:19:34,280 Speaker 1: terms of job creation, but there instead mostly helping drive 343 00:19:34,400 --> 00:19:37,800 Speaker 1: up prices of interest rate sensitive goods such as homes 344 00:19:37,840 --> 00:19:41,160 Speaker 1: and cars. And of course to that point, we've seen 345 00:19:41,200 --> 00:19:44,440 Speaker 1: home prices specifically have risen dramatically over the past year. 346 00:19:44,800 --> 00:19:48,800 Speaker 1: The SMPK Siller Home Price Index up over sixt in 347 00:19:48,840 --> 00:19:51,080 Speaker 1: the past twelve months, and this is marking the biggest 348 00:19:51,200 --> 00:19:55,200 Speaker 1: gain in available data going back to So there is 349 00:19:55,240 --> 00:19:58,680 Speaker 1: a very big concern that a lot of these accommodative policies, 350 00:19:58,720 --> 00:20:02,240 Speaker 1: both on the monetary and the fiscal front, while benevolent 351 00:20:02,480 --> 00:20:06,720 Speaker 1: in intention, are actually creating more barriers, more burdens to 352 00:20:06,840 --> 00:20:11,320 Speaker 1: sustainable longer term growth for the consumer, for the economy. 353 00:20:11,560 --> 00:20:15,159 Speaker 1: As we look out beyond lindsay, thank you. We have 354 00:20:15,200 --> 00:20:16,960 Speaker 1: to leave it that we appreciate it's on this morning, 355 00:20:17,000 --> 00:20:25,800 Speaker 1: Lindsay p X and that stay Folk Chief Economist. A 356 00:20:25,840 --> 00:20:28,280 Speaker 1: lot of people get lettered up over Jackson Hole. I've 357 00:20:28,280 --> 00:20:31,320 Speaker 1: been there many many times. It's truly an academic conference. 358 00:20:31,359 --> 00:20:34,120 Speaker 1: There's boring papers that Michael McKee reads cover to cover. 359 00:20:34,480 --> 00:20:36,840 Speaker 1: I'll take one or two of the papers typically and 360 00:20:36,880 --> 00:20:40,359 Speaker 1: read them cover to cover, but too often they really 361 00:20:40,400 --> 00:20:42,600 Speaker 1: work at the Kansas City Fed to make it a 362 00:20:42,680 --> 00:20:47,080 Speaker 1: constructive snooze fest. James Bianco knows this Bianco research, and 363 00:20:47,119 --> 00:20:50,760 Speaker 1: he joins us now for really my first conversation on 364 00:20:50,880 --> 00:20:54,320 Speaker 1: what the Central Bank will do? What does Chairman Powell 365 00:20:54,400 --> 00:20:59,399 Speaker 1: Jim Bianco not want to do in Wyoming. He doesn't 366 00:20:59,400 --> 00:21:02,000 Speaker 1: want to cause waves. He doesn't want to cause problems, 367 00:21:02,040 --> 00:21:04,639 Speaker 1: similar to what he did in December of two thousand 368 00:21:04,640 --> 00:21:08,919 Speaker 1: and eighteen when he talked about the taper was on 369 00:21:09,000 --> 00:21:11,400 Speaker 1: automatic pilot and it was going to be like watching 370 00:21:11,440 --> 00:21:14,600 Speaker 1: paint dry, and it greatly upset the market, leading to 371 00:21:14,640 --> 00:21:17,520 Speaker 1: the pul pivot two weeks later. What he wants to 372 00:21:17,560 --> 00:21:21,080 Speaker 1: do is lay out a plan to begin a taper 373 00:21:21,200 --> 00:21:23,679 Speaker 1: sometime next year, and he's gonna put a lot of 374 00:21:23,720 --> 00:21:25,919 Speaker 1: caveats in it. And those caveats are going to be 375 00:21:26,000 --> 00:21:30,400 Speaker 1: provided that the economic growth continues and provided that there 376 00:21:30,520 --> 00:21:33,200 Speaker 1: is no surprises to the economy. And that's going to 377 00:21:33,280 --> 00:21:36,800 Speaker 1: be a shout out to if delta continues to rise 378 00:21:37,240 --> 00:21:39,920 Speaker 1: and restrictions. I don't want to see lockdowns, but restrictions 379 00:21:39,920 --> 00:21:44,480 Speaker 1: on the economy continue, that could derail the plan. For tapering, Jim, 380 00:21:44,480 --> 00:21:46,879 Speaker 1: A lot of people are looking for taper talk. However, 381 00:21:46,880 --> 00:21:49,000 Speaker 1: we've already gotten some sense that one of the main 382 00:21:49,040 --> 00:21:52,600 Speaker 1: topics will be income inequality actually contributing to low rates 383 00:21:52,640 --> 00:21:55,640 Speaker 1: going forward, and what FED policy can do about that. 384 00:21:56,000 --> 00:21:59,240 Speaker 1: As a market watcher, how much are you looking at 385 00:21:59,280 --> 00:22:02,800 Speaker 1: that as possibly giving more of a sense of what's 386 00:22:02,800 --> 00:22:07,560 Speaker 1: to come than people are perhaps expecting. Well, income inequality 387 00:22:07,600 --> 00:22:11,600 Speaker 1: is a big problem, and the federal reserves, big picture 388 00:22:11,760 --> 00:22:15,679 Speaker 1: policy can contribute to that, but the immediate policy, when 389 00:22:15,680 --> 00:22:19,160 Speaker 1: I mean immediate here year to year, it's it's very 390 00:22:19,240 --> 00:22:22,000 Speaker 1: hard to say that they're going to adjust policy either way, 391 00:22:22,040 --> 00:22:25,320 Speaker 1: because if they were going to talk about income inequality, 392 00:22:25,359 --> 00:22:27,639 Speaker 1: I really think that what they should be doing is 393 00:22:27,760 --> 00:22:31,359 Speaker 1: raising rates they or they should be tapering faster because 394 00:22:31,359 --> 00:22:35,560 Speaker 1: I think it's this low rate creating this speculative atmosphere 395 00:22:35,920 --> 00:22:40,120 Speaker 1: in financial markets that is contributing to income inequality. So yeah, 396 00:22:40,160 --> 00:22:42,119 Speaker 1: I think they're going to talk about it. I hope 397 00:22:42,160 --> 00:22:45,520 Speaker 1: they acknowledge their role in it, although sometimes I have 398 00:22:45,600 --> 00:22:48,159 Speaker 1: my doubts, and I'll see what they want to do, 399 00:22:48,200 --> 00:22:50,800 Speaker 1: but more likely it's going to be on the regulatory side, 400 00:22:50,840 --> 00:22:53,080 Speaker 1: if anything. Jim You're not alone in saying this. A 401 00:22:53,119 --> 00:22:55,480 Speaker 1: lot of people saying that FED policy has actually contributed 402 00:22:55,520 --> 00:22:58,280 Speaker 1: to widening income inequality. And it goes to a broader point. 403 00:22:58,600 --> 00:23:02,000 Speaker 1: Have we reached the three rushold at which FED policy 404 00:23:02,160 --> 00:23:05,720 Speaker 1: is viewed as perhaps harming more than helping on the margins, 405 00:23:05,760 --> 00:23:08,480 Speaker 1: not only with respect to inflating asset prices, but also 406 00:23:08,760 --> 00:23:11,679 Speaker 1: at a time when consumer prices are increasing at a 407 00:23:11,720 --> 00:23:16,040 Speaker 1: faster pace that many people had expected. Yeah, if you 408 00:23:16,119 --> 00:23:18,840 Speaker 1: look at financial markets, let's take the stock market, the 409 00:23:18,880 --> 00:23:21,840 Speaker 1: dirty little secret is it's not cheap. You know, there 410 00:23:21,840 --> 00:23:25,600 Speaker 1: are booming earnings. What you're paying for those earnings. The 411 00:23:25,760 --> 00:23:29,600 Speaker 1: valuations in the market are near the two thousand peak valuations. 412 00:23:29,640 --> 00:23:33,200 Speaker 1: But the justification is twofold one earnings are very strong 413 00:23:33,359 --> 00:23:36,640 Speaker 1: and to J. Paul's got your back. And if that 414 00:23:36,760 --> 00:23:40,640 Speaker 1: creates an environment where there is a change in policy, 415 00:23:40,800 --> 00:23:45,239 Speaker 1: like inflation is perceived to be persistent instead of transitory, 416 00:23:45,480 --> 00:23:48,160 Speaker 1: that could lead to a sharp pullback in market. So 417 00:23:48,680 --> 00:23:51,680 Speaker 1: they're setting up markets that they need to continue to 418 00:23:51,760 --> 00:23:54,840 Speaker 1: get constant good news to go up. Now they have 419 00:23:55,440 --> 00:23:57,639 Speaker 1: for nearly a year now, they've been be getting constant 420 00:23:57,640 --> 00:23:59,920 Speaker 1: good news to go up. But if that day ever 421 00:24:00,080 --> 00:24:02,520 Speaker 1: comes that it doesn't, they could be setting it up 422 00:24:02,560 --> 00:24:04,880 Speaker 1: for a bigger fall than you would otherwise. See Jim, 423 00:24:04,920 --> 00:24:07,959 Speaker 1: could you help us understand why yields are where they are? 424 00:24:08,119 --> 00:24:10,520 Speaker 1: Even fed share? J Powell has said he doesn't quite 425 00:24:10,600 --> 00:24:14,040 Speaker 1: understand why they are as low as they are. You say, 426 00:24:14,119 --> 00:24:15,840 Speaker 1: perhaps it makes sense if you take a look at 427 00:24:15,840 --> 00:24:20,960 Speaker 1: growth outlook, not necessarily inflation. Can you only elaborate? Yeah, 428 00:24:21,040 --> 00:24:23,560 Speaker 1: I think if you if you look at I've been 429 00:24:23,640 --> 00:24:27,600 Speaker 1: looking at the reopening stocks and index of them, and 430 00:24:27,680 --> 00:24:31,600 Speaker 1: they have been dramatically underperforming the market since the March peak, 431 00:24:31,720 --> 00:24:34,879 Speaker 1: which also happens to be one the tenure yield peaked. 432 00:24:34,880 --> 00:24:38,600 Speaker 1: And if you overlay a chart of reopening stocks relative 433 00:24:38,600 --> 00:24:41,679 Speaker 1: performance to the tenure yield, it's the same thing. What 434 00:24:41,840 --> 00:24:44,679 Speaker 1: that suggests is that the market is more focused on 435 00:24:44,720 --> 00:24:47,720 Speaker 1: growth as it fears that growth is going too slow. 436 00:24:47,760 --> 00:24:50,440 Speaker 1: And we're not talking recession here. We're talking about from 437 00:24:50,440 --> 00:24:53,440 Speaker 1: a very high level six percent or so GDP estimates 438 00:24:53,800 --> 00:24:56,080 Speaker 1: down to something a little bit less than that. As 439 00:24:56,119 --> 00:24:59,600 Speaker 1: growth slows, so do interest rates. At growth picks up, 440 00:25:00,080 --> 00:25:02,800 Speaker 1: so would interest rates. And the biggest driver I think 441 00:25:02,880 --> 00:25:06,439 Speaker 1: of growth slowing is the fear of restrictions from the 442 00:25:06,440 --> 00:25:09,119 Speaker 1: delta variant as we see more and more. I'm in 443 00:25:09,200 --> 00:25:12,640 Speaker 1: Chicago and just yesterday they announced that starting Friday, everybody 444 00:25:12,640 --> 00:25:15,720 Speaker 1: has to wear a mask indoors. More stuff like that 445 00:25:15,800 --> 00:25:18,119 Speaker 1: will be coming and coming and coming, And that's the 446 00:25:18,200 --> 00:25:21,639 Speaker 1: fear Jim at Jackson Hole. There'll be a lot of 447 00:25:21,680 --> 00:25:24,359 Speaker 1: academic papers and I'm gonna pick on the vice Chairman 448 00:25:24,400 --> 00:25:28,359 Speaker 1: of the feder Richard Clarida, with his wonderful dsge or 449 00:25:28,480 --> 00:25:32,440 Speaker 1: that he did with Girdler years ago. I believe does 450 00:25:32,480 --> 00:25:36,159 Speaker 1: any of the theory that we have now apply to 451 00:25:36,280 --> 00:25:41,479 Speaker 1: the actual debates of Jackson Hole? Does dynamics, stochastic general 452 00:25:41,560 --> 00:25:45,760 Speaker 1: equilibrium theory actually matter in the mill you were in? 453 00:25:47,359 --> 00:25:50,080 Speaker 1: You know, the best Federal Reserve officials to listen to 454 00:25:50,119 --> 00:25:53,280 Speaker 1: are the ones that recently leave. Dan Carillo was at 455 00:25:53,280 --> 00:25:55,440 Speaker 1: the FED during the financial crisis. Left in two thousand 456 00:25:55,520 --> 00:25:58,600 Speaker 1: seventeen and gave a speech at Brookings where he said 457 00:25:58,960 --> 00:26:02,480 Speaker 1: the FED has no working theory on inflation. That if 458 00:26:02,520 --> 00:26:06,600 Speaker 1: you test any theory you want rational expectations anchoring monetary 459 00:26:06,720 --> 00:26:10,040 Speaker 1: velocity of money, it just doesn't pan out in the 460 00:26:10,160 --> 00:26:14,200 Speaker 1: statistics that it is a good explanation of what causes inflation. 461 00:26:14,680 --> 00:26:16,679 Speaker 1: We are all kind of in the dark, and I 462 00:26:16,720 --> 00:26:19,560 Speaker 1: think Rich Clarada is also in the dark. He's been 463 00:26:19,560 --> 00:26:23,600 Speaker 1: a big advocate of inflation being well anchored. There's arguments 464 00:26:23,640 --> 00:26:26,800 Speaker 1: to be made that it's becoming unanchored because you've seen 465 00:26:26,800 --> 00:26:29,919 Speaker 1: the big rise in the inflation expectations, especially like the 466 00:26:30,000 --> 00:26:33,120 Speaker 1: University of Michigan survey. And it's going to be very 467 00:26:33,119 --> 00:26:36,520 Speaker 1: difficult for the FED because they want to project certainty 468 00:26:36,680 --> 00:26:39,159 Speaker 1: or they want to project calm that we've got this 469 00:26:39,280 --> 00:26:41,440 Speaker 1: figured out where inflation is going to go, it's going 470 00:26:41,480 --> 00:26:44,040 Speaker 1: to be transitory. But the fact of the matter is 471 00:26:44,119 --> 00:26:47,359 Speaker 1: they don't know, We don't know. Inflation is a very 472 00:26:47,440 --> 00:26:49,840 Speaker 1: difficult thing to get your head around, and it's a 473 00:26:49,960 --> 00:26:53,040 Speaker 1: very difficult thing to understand. So it's a big gas 474 00:26:53,560 --> 00:26:55,639 Speaker 1: and we'll have to see and some of those papers 475 00:26:55,680 --> 00:26:58,600 Speaker 1: I think should address that the next week. And that's 476 00:26:58,640 --> 00:27:01,040 Speaker 1: such a great line. We've got to leave that, Jim Bianca, 477 00:27:01,200 --> 00:27:04,439 Speaker 1: that at Bianca Research the President, because when you leave Lisa, 478 00:27:04,920 --> 00:27:13,359 Speaker 1: you get to say what you really think things have 479 00:27:13,520 --> 00:27:16,199 Speaker 1: changed in the last I'm gonna say one week, we 480 00:27:16,280 --> 00:27:22,560 Speaker 1: are interested now again in immigration, possibly migration from Afghanistan 481 00:27:22,640 --> 00:27:26,880 Speaker 1: to various and sundry Western countries certainly a topic at hand. 482 00:27:27,000 --> 00:27:31,240 Speaker 1: Before this event, David Rubinstein and the Carlisle Group spoke 483 00:27:31,280 --> 00:27:33,720 Speaker 1: to someone who has lived this, and of course it's 484 00:27:33,760 --> 00:27:36,720 Speaker 1: the David Rubinstein Show. We'll tell you about that here 485 00:27:36,720 --> 00:27:40,959 Speaker 1: in a moment. Mr Rubinstein joins us. Right now, I 486 00:27:41,000 --> 00:27:45,200 Speaker 1: think David of Art, Gregorian and there Armenian exercise and 487 00:27:45,240 --> 00:27:50,320 Speaker 1: now Mr Afagen, Mr Gyan and others have stated, we 488 00:27:50,320 --> 00:27:54,880 Speaker 1: were immigrants, we came here, we were successful. This can 489 00:27:54,960 --> 00:27:58,280 Speaker 1: work tell us about his path to the United States 490 00:27:58,520 --> 00:28:01,840 Speaker 1: into Great Wealth. For those who don't know, he's the 491 00:28:01,920 --> 00:28:05,560 Speaker 1: chairman of Moderna and the person who really seated the 492 00:28:05,560 --> 00:28:09,320 Speaker 1: company was his idea. UM. It's an incredible story. He's 493 00:28:09,320 --> 00:28:12,439 Speaker 1: an Armenian refugee from Lebanon. He grew up in Lebonom 494 00:28:12,440 --> 00:28:15,760 Speaker 1: and his parents were Armenian of origin, went to Canada, 495 00:28:16,000 --> 00:28:17,960 Speaker 1: got a degree at McGill, came to m I p 496 00:28:18,160 --> 00:28:21,600 Speaker 1: got a PhD, and basically started companies. He's now started 497 00:28:21,640 --> 00:28:25,600 Speaker 1: seventy six companies and many of them have been fabulously successful. 498 00:28:25,920 --> 00:28:29,879 Speaker 1: He's now running something called Flagship Pioneering, which comes up 499 00:28:29,880 --> 00:28:33,480 Speaker 1: with new ideas for biotech investing and starts companies, many 500 00:28:33,520 --> 00:28:36,160 Speaker 1: of which become successful like Moderna, though that's by part 501 00:28:36,160 --> 00:28:39,800 Speaker 1: of the most successful. How can guys like you compete 502 00:28:40,040 --> 00:28:44,640 Speaker 1: with guys like him for intellectual excellence? Doesn't he have 503 00:28:44,720 --> 00:28:48,280 Speaker 1: the upper hand over private equity and other sources of 504 00:28:48,400 --> 00:28:52,360 Speaker 1: venture capital. Well, there's no doubt that people who are 505 00:28:52,840 --> 00:28:55,840 Speaker 1: immigrants often tend to be very hard working and very 506 00:28:56,400 --> 00:28:58,920 Speaker 1: smart and uh, and then they are the leaders of 507 00:28:58,960 --> 00:29:03,080 Speaker 1: many entrepreneurial ventures. On the other hand, private equally people 508 00:29:03,120 --> 00:29:06,760 Speaker 1: are investing with him and alongside him, and so I 509 00:29:06,800 --> 00:29:10,240 Speaker 1: wouldn't say it's competitive, but there's no doubt that he 510 00:29:10,480 --> 00:29:13,479 Speaker 1: is a unique force. He is now running this venture 511 00:29:13,560 --> 00:29:17,440 Speaker 1: operation which creates companies like Moderna, and Moderna is a 512 00:29:17,480 --> 00:29:21,000 Speaker 1: company which has increased in value about a hundred times 513 00:29:21,040 --> 00:29:22,880 Speaker 1: from the initial money that he put in. I think 514 00:29:22,880 --> 00:29:25,560 Speaker 1: it was eleven million dollars initially put in. It's a 515 00:29:25,680 --> 00:29:28,440 Speaker 1: hundred times since then. And he has become very wealthy, 516 00:29:28,440 --> 00:29:31,680 Speaker 1: and he's giving away a lot of his money various causes, 517 00:29:31,720 --> 00:29:36,000 Speaker 1: including immigration related things and helping Armenia. But he's very 518 00:29:36,080 --> 00:29:39,240 Speaker 1: very interested in biotech. He's also very much at the 519 00:29:39,280 --> 00:29:42,280 Speaker 1: center of the health catastrophe that has unfolded and will 520 00:29:42,320 --> 00:29:45,080 Speaker 1: likely be a mainstay going forward as we rely on 521 00:29:45,200 --> 00:29:50,160 Speaker 1: vaccinations and potentially booster shots to ward off following variations 522 00:29:50,360 --> 00:29:53,600 Speaker 1: of this virus. There is a question of booster shots. 523 00:29:53,640 --> 00:29:56,719 Speaker 1: What does he foresee in terms of demand going forward, 524 00:29:56,760 --> 00:29:58,880 Speaker 1: in terms of the need that we will have for 525 00:29:59,000 --> 00:30:03,000 Speaker 1: ongoing shots. Well, just as we are getting used to 526 00:30:03,080 --> 00:30:05,959 Speaker 1: over many years having a flu shot every year, I 527 00:30:06,000 --> 00:30:08,600 Speaker 1: think his views will be getting a kind of a 528 00:30:08,680 --> 00:30:11,920 Speaker 1: moderner or a visor or some equivalent shot for this 529 00:30:12,000 --> 00:30:15,760 Speaker 1: type of virus every year. And right now the FDA 530 00:30:15,960 --> 00:30:17,680 Speaker 1: is probably going to say we need to have a 531 00:30:17,680 --> 00:30:20,719 Speaker 1: booster shot. I think they Biden administration is now promoting 532 00:30:20,720 --> 00:30:22,840 Speaker 1: the idea of a booster shot for those people that 533 00:30:22,880 --> 00:30:27,240 Speaker 1: have had the original moderner or visor Johnson Johnson shots. 534 00:30:27,520 --> 00:30:29,200 Speaker 1: And I think once you have the booster shot, I 535 00:30:29,200 --> 00:30:31,200 Speaker 1: think you'll be seeing this every year, and I think 536 00:30:31,240 --> 00:30:34,080 Speaker 1: his company is probably going to be benefiting from it. David, 537 00:30:34,120 --> 00:30:36,560 Speaker 1: You're on the front lines of this issue both as 538 00:30:36,600 --> 00:30:39,520 Speaker 1: the interviewer for these shows that are phenomenal every week 539 00:30:39,680 --> 00:30:43,880 Speaker 1: as well as CEO and chair of Carlisle Group. And 540 00:30:43,920 --> 00:30:47,840 Speaker 1: I'm wondering whether you've mandated vaccines, how closely you're watching 541 00:30:48,160 --> 00:30:50,600 Speaker 1: how this is unfolding on a national level, from a 542 00:30:50,600 --> 00:30:54,560 Speaker 1: corporate and federal level, to determine how to create policy 543 00:30:54,600 --> 00:30:58,640 Speaker 1: going forward for you employees. Well, I think Carlong has 544 00:30:58,680 --> 00:31:01,760 Speaker 1: decided that it's employees when they come back to work, 545 00:31:01,800 --> 00:31:05,959 Speaker 1: should be vaccinated. Um. There obviously are some medical and 546 00:31:06,200 --> 00:31:08,400 Speaker 1: religious reasons why some might not be able to be, 547 00:31:08,440 --> 00:31:10,720 Speaker 1: but we think in our offices, and I think this 548 00:31:10,880 --> 00:31:13,240 Speaker 1: is true of all the major corporations that I've been 549 00:31:13,240 --> 00:31:15,840 Speaker 1: talking to regulately, they think it's much better for their 550 00:31:15,880 --> 00:31:20,160 Speaker 1: employees to be vaccinated. That will be Carlos policy. David, 551 00:31:20,200 --> 00:31:23,120 Speaker 1: your thoughts is someone who attends world events. You and 552 00:31:23,160 --> 00:31:25,440 Speaker 1: I have shared the stage a Dablos, There's many other 553 00:31:25,480 --> 00:31:31,000 Speaker 1: events as well. Your thoughts on Afghanistan and particularly the 554 00:31:31,080 --> 00:31:34,840 Speaker 1: elite of Afghanistan, the people that have provided innovation there 555 00:31:34,920 --> 00:31:39,280 Speaker 1: for let's say ten years, maybe fifteen years. What is next? 556 00:31:40,640 --> 00:31:44,000 Speaker 1: It's a sad situation for Afghanistan and a sad situation 557 00:31:44,080 --> 00:31:46,800 Speaker 1: for our country. The most important thing now is dealing 558 00:31:46,800 --> 00:31:49,640 Speaker 1: with the humanitarian issues of getting people out who can 559 00:31:49,680 --> 00:31:52,520 Speaker 1: help with our country. Hopefully our US government will be 560 00:31:52,560 --> 00:31:54,480 Speaker 1: able to work out the ways that can be done, 561 00:31:54,760 --> 00:31:56,680 Speaker 1: but it's not going to be pleasant, not gonna be easy, 562 00:31:56,680 --> 00:31:59,760 Speaker 1: it's not gonna be quick. So clearly some mistakes were made, 563 00:31:59,760 --> 00:32:02,520 Speaker 1: as as the administration has said. But then before we 564 00:32:02,640 --> 00:32:05,440 Speaker 1: figure out who who made what mistakes and how we 565 00:32:05,480 --> 00:32:07,400 Speaker 1: can correct them in the future, we've got to deal 566 00:32:07,400 --> 00:32:10,320 Speaker 1: with the present problem of getting people out who were 567 00:32:10,360 --> 00:32:14,080 Speaker 1: loyal to the United States and the Allies in trying 568 00:32:14,080 --> 00:32:17,239 Speaker 1: to prevent the Palaban from taking over. David Reubinstein, thank 569 00:32:17,280 --> 00:32:19,160 Speaker 1: you so much with the Carlisle Group and of course 570 00:32:19,200 --> 00:32:23,440 Speaker 1: host of the David Rubinstein Show, Peer to peer Conversations. 571 00:32:24,760 --> 00:32:28,520 Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join 572 00:32:28,640 --> 00:32:31,960 Speaker 1: us live weekdays from seven to ten am Eastern on 573 00:32:32,080 --> 00:32:36,320 Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six 574 00:32:36,400 --> 00:32:41,280 Speaker 1: to nine am for insight from the best in economics, finance, investment, 575 00:32:41,440 --> 00:32:46,440 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 576 00:32:46,520 --> 00:32:50,360 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on 577 00:32:50,480 --> 00:33:01,960 Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg