1 00:00:00,520 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,840 --> 00:00:07,120 Speaker 1: to the markets this week. U S CPI nevers, reinforcing 3 00:00:07,160 --> 00:00:10,639 Speaker 1: concerns about inflation. The financial stories that chief are worth 4 00:00:10,720 --> 00:00:13,480 Speaker 1: a really different reaction to mark. Its more indications of 5 00:00:13,640 --> 00:00:16,239 Speaker 1: just how hot the U. S. Economy really is. Through 6 00:00:16,239 --> 00:00:19,520 Speaker 1: the eyes of the most influential voices Larry Summers, the 7 00:00:19,560 --> 00:00:22,479 Speaker 1: former Treatory Secretary, Katherine Keating, CEO of d n Y 8 00:00:22,600 --> 00:00:26,160 Speaker 1: mom Sam's l Sharmon and founder of Equatic Group Investment 9 00:00:26,200 --> 00:00:30,280 Speaker 1: in Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 10 00:00:30,920 --> 00:00:33,600 Speaker 1: History was made this week with the death of Queen 11 00:00:33,600 --> 00:00:37,840 Speaker 1: Elizabeth of Great Britain, the longest serving monarch in British history, 12 00:00:38,120 --> 00:00:42,320 Speaker 1: overshadowing for a moment economics and currencies and central banks 13 00:00:42,560 --> 00:00:45,880 Speaker 1: and yes, even wars. This is Bloomberg Wall Street Week. 14 00:00:46,040 --> 00:00:50,839 Speaker 1: I'm David Weston. This week special contributor Larry Summers and 15 00:00:50,960 --> 00:01:07,720 Speaker 1: Rick Reader of Black Rock. Queen Elizabeth a Great Britain 16 00:01:08,080 --> 00:01:10,839 Speaker 1: passed away this week at the age of nine six, 17 00:01:11,240 --> 00:01:14,680 Speaker 1: leaving behind a seventy year reign and a new king, 18 00:01:15,080 --> 00:01:19,160 Speaker 1: King Charles the Third. Queen Elizabeth was a life well 19 00:01:19,200 --> 00:01:24,560 Speaker 1: lived a promise with destiny kept, and she has mourned 20 00:01:24,640 --> 00:01:28,600 Speaker 1: most deeply in her post. But even as the world 21 00:01:28,600 --> 00:01:31,840 Speaker 1: took a moment to reflect on an era that has passed, 22 00:01:32,160 --> 00:01:36,360 Speaker 1: it continued to contend with the current one, where war 23 00:01:36,440 --> 00:01:39,399 Speaker 1: in Ukraine has led to an energy crisis in Europe. 24 00:01:39,760 --> 00:01:43,279 Speaker 1: As President Putin insisted that he is not using oil 25 00:01:43,319 --> 00:01:46,080 Speaker 1: and gas as a weapon, even as he shut down 26 00:01:46,200 --> 00:01:51,760 Speaker 1: his nord Stream pipeline indefinitely. Nord Stream one is now 27 00:01:51,800 --> 00:01:55,080 Speaker 1: practically shut down, and everyone is saying Russia is using 28 00:01:55,200 --> 00:01:58,480 Speaker 1: energy as a weapon. Ship more nonsense. We deliver as 29 00:01:58,560 --> 00:02:01,760 Speaker 1: much as our partner's needs, and the easy be reacted 30 00:02:01,920 --> 00:02:05,200 Speaker 1: to the inflation triggered by the energy crisis by raising 31 00:02:05,280 --> 00:02:09,320 Speaker 1: rates and historic seventy five basis points with more to come. 32 00:02:10,200 --> 00:02:14,760 Speaker 1: The Governing Council today decided to raise the three key 33 00:02:14,960 --> 00:02:19,280 Speaker 1: ECB interest rates by seventy five basis points. This may 34 00:02:19,360 --> 00:02:24,360 Speaker 1: just frontloads the transition from the prevailing highly accommodative level 35 00:02:24,400 --> 00:02:28,080 Speaker 1: of policy rates towards levels that will ensure the timely 36 00:02:28,120 --> 00:02:31,920 Speaker 1: return of inflation to our two percent medium term target. 37 00:02:32,720 --> 00:02:36,080 Speaker 1: While in the United Kingdom, just before news came the 38 00:02:36,160 --> 00:02:40,079 Speaker 1: Queen's death, the Prime minister she had installed only two 39 00:02:40,160 --> 00:02:43,440 Speaker 1: days before, and now has caps on household energy costs 40 00:02:43,520 --> 00:02:47,200 Speaker 1: and promised to pull her economy through. I have a 41 00:02:47,240 --> 00:02:52,720 Speaker 1: bowl plan to grow the economy. Three tax cuts and reform. 42 00:02:52,760 --> 00:02:56,200 Speaker 1: I will cut taxes to reward hard work and base 43 00:02:56,280 --> 00:03:00,200 Speaker 1: business led growth and investment. I will dry of a 44 00:03:00,320 --> 00:03:04,480 Speaker 1: film in my mission to get the unitsing, Kingdom working, 45 00:03:04,680 --> 00:03:08,720 Speaker 1: building and grabbing. In the United States, markets waited for 46 00:03:08,800 --> 00:03:12,520 Speaker 1: the next Fed decision, now less than two weeks away, 47 00:03:12,680 --> 00:03:15,280 Speaker 1: with all indications that the f m C will stay 48 00:03:15,280 --> 00:03:19,320 Speaker 1: the course and keep raising rates until it's sure inflation 49 00:03:19,600 --> 00:03:22,240 Speaker 1: is under control. We're in this for as long as 50 00:03:22,280 --> 00:03:25,880 Speaker 1: it takes to get inflation down. So far, we've expeditiously 51 00:03:26,000 --> 00:03:29,440 Speaker 1: raised the policy rate to the peak of the previous cycle, 52 00:03:29,800 --> 00:03:34,840 Speaker 1: and the policy rate will need to rise further. And 53 00:03:34,880 --> 00:03:36,840 Speaker 1: when all was said and done, the market has had 54 00:03:36,840 --> 00:03:39,080 Speaker 1: a good week, at least if you were along with 55 00:03:39,160 --> 00:03:42,839 Speaker 1: the SMP three point six in a shortened trading week 56 00:03:43,120 --> 00:03:45,840 Speaker 1: with much of the game coming on Friday, while the 57 00:03:45,960 --> 00:03:49,760 Speaker 1: NASDAK track the SMP nicely up over four with the 58 00:03:49,800 --> 00:03:52,960 Speaker 1: game once again on Friday. And all this was despite 59 00:03:53,200 --> 00:03:55,400 Speaker 1: a rise in bond yield, with the yield on the 60 00:03:55,440 --> 00:03:58,800 Speaker 1: tenure and the week just over three point up about 61 00:03:58,800 --> 00:04:02,520 Speaker 1: twelve basis points. Here to explain all this equity appetite, 62 00:04:02,560 --> 00:04:05,560 Speaker 1: how are Sarah Malick, chief investment officer at Nuvine and 63 00:04:05,640 --> 00:04:09,360 Speaker 1: Jim McDonald, Northern Trust, chief Investment Strategies. Welcome to both 64 00:04:09,360 --> 00:04:11,400 Speaker 1: of you here to Wall Street Weeks. Let me start 65 00:04:11,400 --> 00:04:13,320 Speaker 1: with you, Jim, what do we read into this market? 66 00:04:13,360 --> 00:04:15,280 Speaker 1: Are happy days here again? I mean, we did have 67 00:04:15,320 --> 00:04:17,360 Speaker 1: a really nice game this week, David. I think you 68 00:04:17,360 --> 00:04:19,080 Speaker 1: could spend a couple of hours looking through all the 69 00:04:19,080 --> 00:04:22,080 Speaker 1: fundamental data and not find anything that really supported a 70 00:04:22,120 --> 00:04:25,040 Speaker 1: big increase in risk appetite this week. So I think 71 00:04:25,040 --> 00:04:26,839 Speaker 1: you really have to attribute it to the fact that 72 00:04:26,880 --> 00:04:29,360 Speaker 1: we had a couple of weeks of softness preceding this, 73 00:04:30,000 --> 00:04:33,440 Speaker 1: and then sentiment is terrible, and then technically the market 74 00:04:33,520 --> 00:04:37,039 Speaker 1: is making higher lows. So technically it looks okay here. 75 00:04:37,320 --> 00:04:38,880 Speaker 1: But if you think about what's going to drive the 76 00:04:38,880 --> 00:04:41,520 Speaker 1: market over the next six to twelve eighteen months, the 77 00:04:41,560 --> 00:04:45,440 Speaker 1: growth outlook is deteriorating. Europe's likely in recession, China's is 78 00:04:45,520 --> 00:04:48,200 Speaker 1: clearly in recession. In the US fifty fifty, we think 79 00:04:48,200 --> 00:04:50,120 Speaker 1: over the next twelve months, the FED in the e 80 00:04:50,200 --> 00:04:54,000 Speaker 1: c B or raising rates resolutely, and the inflation picture, 81 00:04:54,000 --> 00:04:58,280 Speaker 1: while improving, is probably overly discounted in the markets. At 82 00:04:58,320 --> 00:05:00,360 Speaker 1: one year break even on the tip, this is a 83 00:05:00,480 --> 00:05:03,640 Speaker 1: two percent, so we think that the environment is probably 84 00:05:03,680 --> 00:05:07,040 Speaker 1: not as robust as this week's market action might indicate. Well, 85 00:05:07,040 --> 00:05:09,840 Speaker 1: I'm sorry, Sarah. When I hear two percent in one 86 00:05:09,920 --> 00:05:12,120 Speaker 1: year break even, that sounds like maybe inflation is coming 87 00:05:12,160 --> 00:05:14,840 Speaker 1: back down again. I think that that number is coming 88 00:05:14,839 --> 00:05:17,360 Speaker 1: back down. Inflation is moderating. Will likely see a little 89 00:05:17,360 --> 00:05:20,039 Speaker 1: bit more moderation when CPI comes out next week, but 90 00:05:20,120 --> 00:05:22,960 Speaker 1: that slope is probably too aggressive. I think inflation will 91 00:05:22,960 --> 00:05:26,560 Speaker 1: remain sticky. We have higher wages and higher shelter prices. 92 00:05:26,560 --> 00:05:28,520 Speaker 1: Those likely stick around, and that's going to keep core 93 00:05:28,560 --> 00:05:31,359 Speaker 1: inflation numbers probably much higher. I wouldn't would would be 94 00:05:31,360 --> 00:05:33,799 Speaker 1: wouldn't be surprised to see that break even actually increase 95 00:05:33,880 --> 00:05:36,160 Speaker 1: over time. The other thing we're watching for is the FED. 96 00:05:36,200 --> 00:05:39,080 Speaker 1: Before we decide if this rally is sustainable, we'd want 97 00:05:39,120 --> 00:05:41,159 Speaker 1: to see more signs of a FED pivot, and we're 98 00:05:41,160 --> 00:05:43,240 Speaker 1: not seeing that. So we agree with Jim, this is 99 00:05:43,279 --> 00:05:46,000 Speaker 1: probably not a sustainable recovery. What about the FED pivot? 100 00:05:46,120 --> 00:05:48,480 Speaker 1: Is it dead effectively? I mean, certainly sounds like J. 101 00:05:48,560 --> 00:05:50,240 Speaker 1: Powe recently has not been saying much it would be 102 00:05:50,279 --> 00:05:52,400 Speaker 1: consisted of the pivot. I don't think we're going to 103 00:05:52,440 --> 00:05:54,719 Speaker 1: see a pivot in early twenty three. But J Pell 104 00:05:54,760 --> 00:05:56,680 Speaker 1: has been saying is that he's going to do what's 105 00:05:56,760 --> 00:05:59,720 Speaker 1: necessary to fight inflation, even if that comes somewhat at 106 00:05:59,720 --> 00:06:02,479 Speaker 1: the spence of the economy, and given that inflation likely 107 00:06:02,480 --> 00:06:05,200 Speaker 1: has the sticky components to it, I think he continues 108 00:06:05,240 --> 00:06:08,679 Speaker 1: to raise rates, likely basis points at the September meeting, 109 00:06:08,880 --> 00:06:11,360 Speaker 1: and then more moderate rate increases from there. If anything, 110 00:06:11,400 --> 00:06:13,920 Speaker 1: you'll see a pause in three, but you will see 111 00:06:13,960 --> 00:06:16,440 Speaker 1: rate cuts until we hit a recession and we see 112 00:06:16,440 --> 00:06:19,599 Speaker 1: that demand destruction. Yeah, David, we've seen in the last 113 00:06:19,640 --> 00:06:22,400 Speaker 1: month a reduction in the cuts that the market is 114 00:06:22,440 --> 00:06:25,359 Speaker 1: priced in. They were pricing in fifty basis points of 115 00:06:25,360 --> 00:06:27,719 Speaker 1: cuts in twenty three. It's now come down to just 116 00:06:27,760 --> 00:06:30,800 Speaker 1: twenty five basis points. And what I'm most interested in 117 00:06:30,880 --> 00:06:33,159 Speaker 1: keeping an eye on is the labor markets. I think 118 00:06:33,200 --> 00:06:37,000 Speaker 1: the FED can't stop raising rates because growth is hurt. 119 00:06:37,320 --> 00:06:40,080 Speaker 1: They can't stop because the market is struggling. They need 120 00:06:40,120 --> 00:06:44,400 Speaker 1: to see the unemployment rate increase to give them cover 121 00:06:44,720 --> 00:06:47,960 Speaker 1: to be able to start slowing down the pace of increase. Okay, 122 00:06:48,000 --> 00:06:50,280 Speaker 1: Sarah Malick and Jim McDonald will be staying with us 123 00:06:50,279 --> 00:06:53,039 Speaker 1: as we get their thoughts on what the smart investor 124 00:06:53,120 --> 00:06:55,880 Speaker 1: does with their portfolio given more we've just been talking about. 125 00:06:56,200 --> 00:07:01,440 Speaker 1: This is Wall Street Week on Bloomberg. This is Bloomberg 126 00:07:01,520 --> 00:07:11,360 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. Well, 127 00:07:11,400 --> 00:07:16,040 Speaker 1: it wasn't pretty. There was unforgettable heroism among the victims 128 00:07:16,640 --> 00:07:20,840 Speaker 1: and the rescuers, but the financial markets, even after what 129 00:07:21,000 --> 00:07:24,120 Speaker 1: was supposed to have been a useful time out, staged 130 00:07:24,160 --> 00:07:32,960 Speaker 1: a historically panicky retreat, mumbling legalistic rationalizations like fiduciary responsibility 131 00:07:33,600 --> 00:07:37,600 Speaker 1: as an excuse for what rapidly descended into unchecked hysteria. 132 00:07:38,560 --> 00:07:41,520 Speaker 1: That was Lewis Orchiser, of course, describing the immediate market 133 00:07:41,560 --> 00:07:43,840 Speaker 1: reaction to the tragic events of nine eleven That was 134 00:07:43,880 --> 00:07:47,120 Speaker 1: twenty one years ago this coming weekend, a reaction delayed 135 00:07:47,160 --> 00:07:48,640 Speaker 1: by the closing at the time of the New York 136 00:07:48,680 --> 00:07:51,280 Speaker 1: Stock Exchange and heroic efforts to get it back up 137 00:07:51,280 --> 00:07:53,880 Speaker 1: and running after just six days. So with us are 138 00:07:53,920 --> 00:07:56,680 Speaker 1: Sara Manic of Nuvine and Jim McDonald of Northern Trust. 139 00:07:56,680 --> 00:07:58,760 Speaker 1: So I'm happy to say we do not have anything 140 00:07:58,760 --> 00:08:00,640 Speaker 1: like the tragedy of nine eleven that we're going fronting 141 00:08:00,680 --> 00:08:03,240 Speaker 1: right now at the same time, impair amount of pressure 142 00:08:03,280 --> 00:08:06,080 Speaker 1: on the markets and things. Fair to say, in this environment, 143 00:08:06,400 --> 00:08:09,040 Speaker 1: how does one constructive portfolio? Well, it's not all doom 144 00:08:09,040 --> 00:08:11,560 Speaker 1: and gloom when we think about portfolio construction. There are 145 00:08:11,640 --> 00:08:14,800 Speaker 1: waste of bl portfolios that are resilient to inflationary environments 146 00:08:14,800 --> 00:08:18,280 Speaker 1: across asset classes that the typical sixty forty equities fixed 147 00:08:18,320 --> 00:08:21,520 Speaker 1: income portfolio has struggled this year. But within equities there's 148 00:08:21,520 --> 00:08:24,000 Speaker 1: companies that are more resilient, like dividend growers. These are 149 00:08:24,000 --> 00:08:26,720 Speaker 1: companies like that continue to grow their divon is over time. 150 00:08:26,800 --> 00:08:29,320 Speaker 1: Broad Com is a great example of that. In fixed income, 151 00:08:29,320 --> 00:08:31,240 Speaker 1: an area that people may not be thinking about it 152 00:08:31,280 --> 00:08:33,719 Speaker 1: for approaching our session is high yield. You can get 153 00:08:33,760 --> 00:08:36,080 Speaker 1: returns of over eight percent and high yield fixed income 154 00:08:36,240 --> 00:08:38,560 Speaker 1: so you're paid to wait until spreads tightened, and the 155 00:08:38,600 --> 00:08:40,720 Speaker 1: companies are higher quality than they used to be. So 156 00:08:41,000 --> 00:08:42,679 Speaker 1: that's a lot to chew on. But let's start with 157 00:08:42,760 --> 00:08:44,960 Speaker 1: one of them, which is credit and high yield. Where 158 00:08:44,960 --> 00:08:47,480 Speaker 1: are you on that? So we're very constructive on how yield. 159 00:08:47,520 --> 00:08:50,360 Speaker 1: It's our largest tactical overweights with a yield the worst 160 00:08:50,360 --> 00:08:53,160 Speaker 1: of eight and a half percent or so downside risk 161 00:08:53,200 --> 00:08:56,040 Speaker 1: of about a third of the equity markets. UH. In 162 00:08:56,200 --> 00:08:58,600 Speaker 1: the high yield markets, you need to think about high 163 00:08:58,640 --> 00:09:00,920 Speaker 1: yield as a risk asset. So this is not something 164 00:09:00,960 --> 00:09:03,880 Speaker 1: we're taking UH investment great bonds and putting it into 165 00:09:03,920 --> 00:09:07,400 Speaker 1: high yields. It's much more of an equity substitutenous environment. 166 00:09:07,600 --> 00:09:10,280 Speaker 1: But that kind of return looks really attractive here. Another 167 00:09:10,320 --> 00:09:14,600 Speaker 1: aspect I would mention is geographic exposure with inequities, So 168 00:09:14,640 --> 00:09:17,280 Speaker 1: we have a slight overweight to the US and underweights 169 00:09:17,480 --> 00:09:20,640 Speaker 1: x US and an emerging market equities really reflecting the 170 00:09:20,760 --> 00:09:25,760 Speaker 1: significant growth issues and inflation problems that are being realized overseas. 171 00:09:25,920 --> 00:09:28,560 Speaker 1: That's another way to give clients some confidence that we're 172 00:09:28,559 --> 00:09:31,200 Speaker 1: positioning for what we think is going to unfold over 173 00:09:31,240 --> 00:09:33,240 Speaker 1: the next twelve months. And lastly, I would say the 174 00:09:33,240 --> 00:09:35,800 Speaker 1: real assets side, we also very much support having some 175 00:09:35,840 --> 00:09:39,920 Speaker 1: inflation exposure, whether it's in globalist and infrastructure which has 176 00:09:39,960 --> 00:09:43,439 Speaker 1: that pricing power, or on a long term basis commodities, 177 00:09:43,640 --> 00:09:46,160 Speaker 1: where we think you can get in a basket of 178 00:09:46,280 --> 00:09:50,280 Speaker 1: listed commodity producers a yield near six percent, which is 179 00:09:50,280 --> 00:09:52,880 Speaker 1: really attractive in this environment. So we're actually more concerned 180 00:09:52,880 --> 00:09:56,800 Speaker 1: about commodities excluding energy because we think that commodities are 181 00:09:56,880 --> 00:09:59,320 Speaker 1: very exposed to demand destruction. But energy is a different 182 00:09:59,360 --> 00:10:02,480 Speaker 1: story where supply remains tight demanded to remain strong. And 183 00:10:02,480 --> 00:10:04,800 Speaker 1: what we love about energy producers is that they're being 184 00:10:04,840 --> 00:10:07,719 Speaker 1: very disciplined this cycle. They're returning cash to shareholders rather 185 00:10:07,760 --> 00:10:10,840 Speaker 1: than just working to just increase volume. Good for those 186 00:10:10,840 --> 00:10:13,319 Speaker 1: companies and to keep oil prices but beneficial to them. 187 00:10:13,400 --> 00:10:16,800 Speaker 1: But Sarah put together, if you will, the slight overweight 188 00:10:16,840 --> 00:10:19,440 Speaker 1: to us not much more than slight that Jim talked about, 189 00:10:19,520 --> 00:10:21,319 Speaker 1: and what you just said about energy, because given this 190 00:10:21,480 --> 00:10:24,120 Speaker 1: energy situation, one might say it's more than a slight 191 00:10:24,480 --> 00:10:26,760 Speaker 1: overweight to U S. Where are you? We are probably 192 00:10:26,800 --> 00:10:28,360 Speaker 1: more constructive on the U S and the rest of 193 00:10:28,400 --> 00:10:30,200 Speaker 1: the world. We think the U S will continue to 194 00:10:30,240 --> 00:10:32,880 Speaker 1: be the safe haven trade because of the resilience of 195 00:10:32,920 --> 00:10:35,240 Speaker 1: the economy versus the rest of the world. Europe could 196 00:10:35,280 --> 00:10:38,960 Speaker 1: run into sagflationary issues with their aggressive increases in interest 197 00:10:39,040 --> 00:10:42,240 Speaker 1: rates while the economy suffers and emerging markets are challenged 198 00:10:42,240 --> 00:10:44,880 Speaker 1: because of the continued lockdowns in China and some of 199 00:10:44,880 --> 00:10:47,120 Speaker 1: the other areas that are having issues. So I think 200 00:10:47,120 --> 00:10:48,920 Speaker 1: non US is going to be a struggle, especially with 201 00:10:48,960 --> 00:10:51,240 Speaker 1: the strong dollar, and so I would add to that 202 00:10:51,480 --> 00:10:54,280 Speaker 1: from a US exposure standpoint. We also like the energy 203 00:10:54,320 --> 00:10:57,000 Speaker 1: sector and the other one that we like our technology stocks. 204 00:10:57,040 --> 00:11:00,280 Speaker 1: They have really struggled this year, improved the valuation. Is 205 00:11:00,559 --> 00:11:03,719 Speaker 1: clearly a long term growth leader globally, and so it's 206 00:11:03,720 --> 00:11:06,679 Speaker 1: a bit of a balanced approach within a US equity portfolio, 207 00:11:06,960 --> 00:11:11,040 Speaker 1: liking both energy and technology stocks. Interesting technology socks tend 208 00:11:11,080 --> 00:11:13,959 Speaker 1: to struggle though when interestrates are increasing because they're considered 209 00:11:14,000 --> 00:11:17,040 Speaker 1: long duration stocks. An area for example Sema Connectors, which 210 00:11:17,040 --> 00:11:20,160 Speaker 1: have even underperformed the technology benchmark. But I think you 211 00:11:20,200 --> 00:11:22,200 Speaker 1: can find value in some of these areas. This this 212 00:11:22,240 --> 00:11:25,160 Speaker 1: goes back to dividend growers. Abroad Coms, a company that 213 00:11:25,360 --> 00:11:27,280 Speaker 1: within the Sema conactor space, tends to be kind of 214 00:11:27,280 --> 00:11:32,120 Speaker 1: offenses and defensive, more resilient business with their enterprise demand 215 00:11:32,160 --> 00:11:34,760 Speaker 1: and also with their software mix and a nice dividend 216 00:11:34,800 --> 00:11:37,400 Speaker 1: that's growing over time. So so as you're putting together 217 00:11:37,440 --> 00:11:40,079 Speaker 1: your portfolio, do you take into account the possibility or 218 00:11:40,120 --> 00:11:42,920 Speaker 1: even some say likelihood of recession or not, Because, for example, 219 00:11:42,920 --> 00:11:44,720 Speaker 1: when you say hi yield, HI, it's a good thing, 220 00:11:44,880 --> 00:11:46,920 Speaker 1: I get a little nervous if we're going into anything. 221 00:11:47,120 --> 00:11:49,280 Speaker 1: But it's a real recession, right Jim. So you have 222 00:11:49,320 --> 00:11:51,199 Speaker 1: to have a view on what the recession will be 223 00:11:51,240 --> 00:11:53,839 Speaker 1: if it unfolds. We're at a fifty fifty probability in 224 00:11:53,840 --> 00:11:56,200 Speaker 1: the US, but we think it will be shallow. The 225 00:11:56,200 --> 00:11:59,480 Speaker 1: baggage system is in dramatically better situation than it was 226 00:11:59,720 --> 00:12:03,120 Speaker 1: during global financial crisis, so credit creation won't really be 227 00:12:03,240 --> 00:12:06,200 Speaker 1: hurts howlshold balance sheets are not in bad shape, so 228 00:12:06,240 --> 00:12:09,359 Speaker 1: it's much more likely to be a shallow cyclical recession. 229 00:12:09,640 --> 00:12:12,000 Speaker 1: And how yield with a starting yield the worst of 230 00:12:12,000 --> 00:12:14,040 Speaker 1: eight and a half percent gives you a very nice 231 00:12:14,080 --> 00:12:16,200 Speaker 1: question in that environment, I agree with that. I mean, 232 00:12:16,200 --> 00:12:18,719 Speaker 1: we're looking for areas, given the environment out there, where 233 00:12:18,800 --> 00:12:21,000 Speaker 1: you're getting the best bang for your book. And so 234 00:12:21,200 --> 00:12:23,480 Speaker 1: even though we do predict a recession, now you're getting 235 00:12:23,480 --> 00:12:25,520 Speaker 1: paid to weight and how yield with that kind of return, 236 00:12:25,760 --> 00:12:28,680 Speaker 1: you can have that resilient income producing portfolio and equities 237 00:12:28,679 --> 00:12:31,160 Speaker 1: with divining growers, and then look for those asset classes 238 00:12:31,280 --> 00:12:34,079 Speaker 1: that actually can benefit from inflation, like within real assets. 239 00:12:34,200 --> 00:12:36,200 Speaker 1: How important is liquidity in all this? When you start 240 00:12:36,240 --> 00:12:38,680 Speaker 1: talking about real estate, for example, farmland, things like that, 241 00:12:38,679 --> 00:12:40,960 Speaker 1: that sounds like I'm giving up something on duration, Right, 242 00:12:41,160 --> 00:12:44,080 Speaker 1: You're giving up something, You're giving up some liquidity, um, 243 00:12:44,120 --> 00:12:46,680 Speaker 1: you're also dampening your volatility. That's why we recommend a 244 00:12:46,679 --> 00:12:48,840 Speaker 1: balanced portfolio. You want to make sure that you have 245 00:12:48,880 --> 00:12:51,280 Speaker 1: your publics and your privates within your portfolio so that 246 00:12:51,320 --> 00:12:53,880 Speaker 1: you do have warries where you can get liquidity if 247 00:12:53,880 --> 00:12:56,480 Speaker 1: you need it, but also the resilience and less volatile 248 00:12:56,480 --> 00:12:59,640 Speaker 1: pieces of the private asset classes can be beneficial, especially 249 00:12:59,640 --> 00:13:02,080 Speaker 1: in this year which is unique where the sixty forty 250 00:13:02,080 --> 00:13:04,960 Speaker 1: typical equity and fixed income portfolios, if people have have 251 00:13:05,040 --> 00:13:08,280 Speaker 1: been highly correlated, all fixed income obviously has not created 252 00:13:08,280 --> 00:13:10,959 Speaker 1: equal Where are you in investment grade, Jim? So we're 253 00:13:11,000 --> 00:13:13,800 Speaker 1: significantly underweight investment grade. We just don't think that the 254 00:13:13,880 --> 00:13:18,359 Speaker 1: nominal yield or the real yield opportunity looks particularly attractive. 255 00:13:18,400 --> 00:13:21,840 Speaker 1: And our number one risk case around sticky inflation, investment 256 00:13:21,840 --> 00:13:23,840 Speaker 1: grade bonds are not going to do well in that environment, 257 00:13:23,920 --> 00:13:28,160 Speaker 1: so that's an underweight in our tactual portfolios. Do you agree, Sarah? 258 00:13:28,200 --> 00:13:30,640 Speaker 1: Generally we would prefer high yield over investment grade for 259 00:13:30,640 --> 00:13:32,800 Speaker 1: the same thing. You're getting greater returns, more bank for 260 00:13:32,840 --> 00:13:34,800 Speaker 1: your buck from high yield. And where are you on tech, 261 00:13:34,920 --> 00:13:37,360 Speaker 1: Jim Teddy? Tech might be a good idea, although, as 262 00:13:37,360 --> 00:13:39,600 Speaker 1: you said, if the interests are going up, typically that 263 00:13:39,720 --> 00:13:42,040 Speaker 1: hurts tech. Yeah, I mean generally, bigger picture, the macro 264 00:13:42,120 --> 00:13:45,040 Speaker 1: environment is not good for long duration technology socks. That's 265 00:13:45,040 --> 00:13:47,360 Speaker 1: why you need to be selective, and we're looking for 266 00:13:47,480 --> 00:13:49,960 Speaker 1: what we said, kind of offensive and defensive tech together 267 00:13:50,000 --> 00:13:52,640 Speaker 1: the companies that either or more resilient because they have 268 00:13:52,679 --> 00:13:55,480 Speaker 1: healthy growing dividends or they have pricing power so they 269 00:13:55,520 --> 00:13:58,560 Speaker 1: can survive the environment. The trade of pre pandemic where 270 00:13:58,559 --> 00:14:00,840 Speaker 1: all technology socks kind of all did well, I think 271 00:14:00,920 --> 00:14:03,280 Speaker 1: that's over. I would just add that the market knows 272 00:14:03,320 --> 00:14:05,560 Speaker 1: that interest rates are going up and have gone up, 273 00:14:05,559 --> 00:14:09,000 Speaker 1: and that has killed evaluations within the technology sector. So 274 00:14:09,080 --> 00:14:12,000 Speaker 1: we think that's what's set up the opportunity today. Tech 275 00:14:12,000 --> 00:14:15,000 Speaker 1: stocks have discounted a great amount of the higher rates. 276 00:14:15,000 --> 00:14:18,280 Speaker 1: But it's interesting if you look at markets are actually 277 00:14:18,360 --> 00:14:21,240 Speaker 1: less less hawkish than the FED. So there's a mismatch 278 00:14:21,280 --> 00:14:23,520 Speaker 1: there in markets. If now caught up to the Fed 279 00:14:23,600 --> 00:14:26,440 Speaker 1: same level of hawkishness, markets are saying, you know what, 280 00:14:26,680 --> 00:14:29,240 Speaker 1: we expect less rate hikes in the FED expects, and 281 00:14:29,240 --> 00:14:31,400 Speaker 1: we'll see if that happens. Probably depends on if we 282 00:14:31,480 --> 00:14:34,600 Speaker 1: hit that recession and inflation finally dropped significantly. Okay, this 283 00:14:34,640 --> 00:14:36,920 Speaker 1: is really, as I say, really truly discussion. Thank you 284 00:14:37,160 --> 00:14:40,000 Speaker 1: so very much. That's Sarah Mallick of now Vene as 285 00:14:40,000 --> 00:14:45,120 Speaker 1: well as Jim McDonald of Northern Trust coming up. It's 286 00:14:45,120 --> 00:14:48,400 Speaker 1: an uncertain time for investors, full of risk without a 287 00:14:48,400 --> 00:14:52,200 Speaker 1: lot of certain return, but Rippery or black Rock thinks 288 00:14:52,240 --> 00:14:54,880 Speaker 1: that there's the potential for the patient investment to really 289 00:14:54,880 --> 00:14:58,800 Speaker 1: do quite well. That's going up next on Wall Street 290 00:14:58,800 --> 00:15:03,800 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 291 00:15:03,880 --> 00:15:10,480 Speaker 1: David Weston from Bloomberg Radio. They say it's always darkest 292 00:15:10,600 --> 00:15:13,280 Speaker 1: before the dawn, and there's plenty of dark out there 293 00:15:13,320 --> 00:15:16,800 Speaker 1: for investors right now. With the stock market off, overall 294 00:15:16,840 --> 00:15:19,920 Speaker 1: positioning has still been pretty depressed, and sentiment reflects that 295 00:15:20,160 --> 00:15:24,680 Speaker 1: inflation still raging. Inflation seekiness is not going away anytime. Soon, 296 00:15:25,040 --> 00:15:28,640 Speaker 1: and the FED intent on continuing to hike rates was 297 00:15:28,680 --> 00:15:30,920 Speaker 1: fairly obvious coming a year that the FED would tighten. 298 00:15:31,200 --> 00:15:33,800 Speaker 1: But there may also be some early rays of light 299 00:15:34,240 --> 00:15:38,160 Speaker 1: with commodity prices coming back down. If the Fed continues 300 00:15:38,240 --> 00:15:41,160 Speaker 1: to tighten, and we believe the dollar will turn back 301 00:15:41,360 --> 00:15:44,440 Speaker 1: up and these commodities will continue to fall. So the 302 00:15:44,520 --> 00:15:47,560 Speaker 1: question is whether this is a false dawn or whether 303 00:15:47,600 --> 00:15:50,600 Speaker 1: it's actually a good time for the patient investor to 304 00:15:50,680 --> 00:15:55,280 Speaker 1: position for a rosier future. And that till tell us 305 00:15:55,320 --> 00:15:57,920 Speaker 1: which of those it is. We welcome back now, Rick Reader, 306 00:15:58,040 --> 00:16:01,360 Speaker 1: black Rock ce IO for Global Income and also ahead 307 00:16:01,400 --> 00:16:04,200 Speaker 1: of the Global Allocation Investment team, which includes the black 308 00:16:04,280 --> 00:16:08,640 Speaker 1: Rock Strategic Income Opportunities Fund, rated five stars and gold 309 00:16:08,680 --> 00:16:10,280 Speaker 1: by morning Star. I'm sure you don't want to brag 310 00:16:10,320 --> 00:16:12,360 Speaker 1: about that, but I think we should read for your 311 00:16:12,440 --> 00:16:15,360 Speaker 1: Rick there. So we're very good. Rick. Give us your 312 00:16:15,360 --> 00:16:17,160 Speaker 1: sense of this market from your point of view. I mean, 313 00:16:17,200 --> 00:16:19,280 Speaker 1: you're putting the money to work all the time, both 314 00:16:19,280 --> 00:16:21,760 Speaker 1: on fixed income and also inequities. What do you make 315 00:16:21,760 --> 00:16:24,840 Speaker 1: of this market right now? So I mean, David, I 316 00:16:24,880 --> 00:16:26,560 Speaker 1: mean you're thinking about We came in the beginning of 317 00:16:26,560 --> 00:16:28,840 Speaker 1: this week and so We've got energy caps, You've got 318 00:16:28,840 --> 00:16:33,120 Speaker 1: the turning off of nord Stream. You've got China growth, China, COVID, China, Taiwan. 319 00:16:33,320 --> 00:16:36,400 Speaker 1: You've got a series of issues, uh that are that 320 00:16:36,440 --> 00:16:38,080 Speaker 1: are hard to get your arms around. By the way, 321 00:16:38,240 --> 00:16:41,440 Speaker 1: the good sector of the US economy is softening, So 322 00:16:41,480 --> 00:16:43,840 Speaker 1: there's a lot of challenges out there in the world. 323 00:16:43,880 --> 00:16:45,720 Speaker 1: That being said, you know, if you take a step 324 00:16:45,720 --> 00:16:49,280 Speaker 1: back and you think about as an investor, you know, 325 00:16:49,280 --> 00:16:51,560 Speaker 1: with the FED moving rates higher, all of a sudden, 326 00:16:51,960 --> 00:16:55,040 Speaker 1: you could buy short end interest rates at levels we 327 00:16:55,080 --> 00:16:57,040 Speaker 1: haven't seen a really long time. I was thinking about 328 00:16:57,040 --> 00:16:59,360 Speaker 1: a year or two ago. You know, you had to 329 00:16:59,360 --> 00:17:02,920 Speaker 1: pay less than one percent of fund companies fifty basis points, 330 00:17:02,960 --> 00:17:06,280 Speaker 1: so Amazon twenty five basis points. In three years, all 331 00:17:06,320 --> 00:17:08,280 Speaker 1: of a sudden, you could buy You could buy short 332 00:17:08,400 --> 00:17:12,160 Speaker 1: end assets at four or four and a half five cent, 333 00:17:13,119 --> 00:17:16,080 Speaker 1: Put some money to work, get some carry, and then 334 00:17:16,280 --> 00:17:18,840 Speaker 1: tactically look at areas that are that are where there's 335 00:17:18,840 --> 00:17:22,639 Speaker 1: opportunity and listen. I mean, you can get really really 336 00:17:22,840 --> 00:17:24,960 Speaker 1: concerned about where the world is when you when you 337 00:17:25,000 --> 00:17:27,960 Speaker 1: step back and think about US economy, we think is 338 00:17:28,000 --> 00:17:31,240 Speaker 1: going to have nominal GDP this year five nominal GDP 339 00:17:31,320 --> 00:17:33,520 Speaker 1: of five. You know, you've got a service sector that's 340 00:17:33,520 --> 00:17:35,480 Speaker 1: doing well. I've got a healthcare sector that's doing well. 341 00:17:35,480 --> 00:17:37,800 Speaker 1: You've got parts of the economy. So there's things to do. 342 00:17:37,920 --> 00:17:39,240 Speaker 1: I mean, you know, while it is one of the 343 00:17:39,280 --> 00:17:42,720 Speaker 1: most challenging uncertain times that we've seen in markets in 344 00:17:42,720 --> 00:17:45,560 Speaker 1: a long time, with central banks tightening, there's some things 345 00:17:45,560 --> 00:17:47,439 Speaker 1: to do in the markets, and there's some there's some 346 00:17:47,480 --> 00:17:50,320 Speaker 1: reason to look at some some opportunities out there. So 347 00:17:50,400 --> 00:17:53,040 Speaker 1: there's just as my math works, from a quarter of 348 00:17:53,040 --> 00:17:55,240 Speaker 1: a percent to five cents, pretty big difference. That sounds 349 00:17:55,240 --> 00:17:57,360 Speaker 1: pretty good. You get that kind of return. The same time, 350 00:17:57,400 --> 00:17:59,080 Speaker 1: it depends on what's going on inflation, Right we get 351 00:17:59,080 --> 00:18:01,280 Speaker 1: cp I nembers come out next week. If we've got 352 00:18:01,359 --> 00:18:04,040 Speaker 1: a headline inflation around eight and we've got core around 353 00:18:04,040 --> 00:18:06,560 Speaker 1: five or six, that five percent doesn't look quite so good, 354 00:18:06,600 --> 00:18:09,680 Speaker 1: does it. It actually doesn't look good at all. And 355 00:18:09,880 --> 00:18:11,959 Speaker 1: if you assume that we're going to be running at 356 00:18:11,960 --> 00:18:13,760 Speaker 1: those sort of levels for a period of time. But 357 00:18:13,840 --> 00:18:15,840 Speaker 1: you look at where the inflation markets are, where the 358 00:18:15,960 --> 00:18:19,960 Speaker 1: where real capital including ourselves, are transacting, and today we 359 00:18:19,960 --> 00:18:23,360 Speaker 1: were we were locking in inflation in two years at 360 00:18:23,440 --> 00:18:26,639 Speaker 1: under two point two percent, for two years, five years, 361 00:18:27,080 --> 00:18:29,360 Speaker 1: five years around two and a half percent, ten years 362 00:18:29,359 --> 00:18:31,639 Speaker 1: around two point four. So if you say, gosh, I 363 00:18:31,640 --> 00:18:34,840 Speaker 1: can buy one in two year high quality assets at 364 00:18:34,960 --> 00:18:38,439 Speaker 1: four and a half to five, I'm projecting my inflation 365 00:18:38,640 --> 00:18:42,840 Speaker 1: risk in the low two's. Boy, I'm locking in real rates. 366 00:18:42,880 --> 00:18:46,240 Speaker 1: I'm financing company by the way, not just companies commercial mortgages, 367 00:18:46,760 --> 00:18:49,680 Speaker 1: UM financing companies with a real rate. That's pretty attractive. 368 00:18:49,720 --> 00:18:51,920 Speaker 1: And you can actually people can talk about the stickiness 369 00:18:51,960 --> 00:18:55,560 Speaker 1: of inflation, which is real shelter inflations, high wages are high. 370 00:18:55,880 --> 00:18:58,040 Speaker 1: But boy, you can do some things in the market 371 00:18:58,320 --> 00:19:01,280 Speaker 1: that can that can certainly hedge your your inflation risk 372 00:19:01,359 --> 00:19:04,280 Speaker 1: and then carried quite well in the market today. So 373 00:19:04,400 --> 00:19:07,320 Speaker 1: it's the inflation risk is not what some people fear, 374 00:19:07,320 --> 00:19:09,720 Speaker 1: it is is actually coming down. Why is that? Is 375 00:19:09,720 --> 00:19:12,280 Speaker 1: that because the feed is tightening and tightening the money 376 00:19:12,359 --> 00:19:14,520 Speaker 1: or is it actually is there something the notion the 377 00:19:14,520 --> 00:19:17,840 Speaker 1: supply chain is loosening up some So I think it's 378 00:19:17,840 --> 00:19:19,920 Speaker 1: two parts. One. I think the Fed deserves an awful 379 00:19:19,960 --> 00:19:21,520 Speaker 1: lot of credit, don't So now is there was enough 380 00:19:21,520 --> 00:19:24,520 Speaker 1: criticism to go around myself included that last year they're 381 00:19:24,520 --> 00:19:26,879 Speaker 1: waited too long, Kui. I think that's been well chronicled. 382 00:19:27,480 --> 00:19:31,080 Speaker 1: This year. They cannot be anymore clear. They cannot be 383 00:19:31,840 --> 00:19:35,520 Speaker 1: uh more more strident in inflation is what they're doing, 384 00:19:35,560 --> 00:19:37,240 Speaker 1: and they're not going to back off that. And you know, 385 00:19:37,280 --> 00:19:39,280 Speaker 1: I think they're going to get the funds rate to 386 00:19:39,640 --> 00:19:42,240 Speaker 1: four or three and three quarters of the four probably four, 387 00:19:42,640 --> 00:19:44,320 Speaker 1: and then I think they're gonna let long and variable 388 00:19:44,400 --> 00:19:47,680 Speaker 1: lags of montary policy do their things. So they're pretty clear. 389 00:19:47,720 --> 00:19:50,919 Speaker 1: So I think there's a credibility from the Fed that 390 00:19:50,960 --> 00:19:52,800 Speaker 1: I think you've you've got to uh, you've got to 391 00:19:52,800 --> 00:19:56,359 Speaker 1: applaud in terms of what they're doing today. Second is, 392 00:19:56,400 --> 00:19:59,480 Speaker 1: as you said, supply chain. You see real, real improvement 393 00:19:59,520 --> 00:20:01,960 Speaker 1: and supply change. You see in some of the PPI numbers. 394 00:20:02,240 --> 00:20:04,679 Speaker 1: You see freight costs coming down, you see commodity costs 395 00:20:04,680 --> 00:20:07,919 Speaker 1: coming down. So there are some reasons to see you 396 00:20:08,280 --> 00:20:11,720 Speaker 1: to see that they cash some of this inflation. You know, 397 00:20:11,760 --> 00:20:13,560 Speaker 1: by the way, you also see an inventory levels look 398 00:20:13,600 --> 00:20:15,840 Speaker 1: at retailers or inventory levels are up quite a bit. 399 00:20:16,200 --> 00:20:17,959 Speaker 1: In fact, there's not there's not places to put some 400 00:20:18,040 --> 00:20:21,000 Speaker 1: things that I see you'll see some price discounts. Um 401 00:20:21,160 --> 00:20:23,560 Speaker 1: there and uh. And by the way, in semiconductors, it's 402 00:20:23,600 --> 00:20:26,600 Speaker 1: not it's not perfectly solved around supply chains. But you 403 00:20:26,640 --> 00:20:29,200 Speaker 1: look at some of the semiconductor show stocks these days, 404 00:20:29,400 --> 00:20:32,480 Speaker 1: people are concerned about oversupply. That's not something we've talked 405 00:20:32,520 --> 00:20:35,080 Speaker 1: about for a long time. So it's better and there's 406 00:20:35,119 --> 00:20:37,240 Speaker 1: some reason for optimism, But I think you have to 407 00:20:37,280 --> 00:20:39,919 Speaker 1: start with a central bank that is there is no 408 00:20:39,960 --> 00:20:42,760 Speaker 1: ambiguity and they're quite clear in how they're communicating that. 409 00:20:43,000 --> 00:20:44,639 Speaker 1: Thank you so much, always great to have you with us. 410 00:20:44,640 --> 00:20:47,520 Speaker 1: It's Rick Reader of Black Rock. Coming up. We're gonna 411 00:20:47,520 --> 00:20:49,480 Speaker 1: wrap up the week with our special com twitter Larry 412 00:20:49,520 --> 00:20:53,159 Speaker 1: Summers of Harvard. This is Wall Street Week on Bloomberg. 413 00:21:00,440 --> 00:21:04,400 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 414 00:21:04,520 --> 00:21:13,960 Speaker 1: Bloomberg Radio. This is Wall Street Week. I'm David western. 415 00:21:13,960 --> 00:21:16,080 Speaker 1: We were joined once again by our very special contributor 416 00:21:16,160 --> 00:21:19,280 Speaker 1: Larry Summers of Harvard. Larry, welcome back. At one of 417 00:21:19,280 --> 00:21:21,840 Speaker 1: the big events of this week, besides the queen passing, 418 00:21:21,920 --> 00:21:24,080 Speaker 1: was actually what's going on with currencies with the US 419 00:21:24,119 --> 00:21:26,800 Speaker 1: dollar setting record after record at the same time, the 420 00:21:26,840 --> 00:21:29,040 Speaker 1: yours really falling on and boy, look at the end, 421 00:21:29,359 --> 00:21:32,480 Speaker 1: what is going on with the economies. Look, the United 422 00:21:32,520 --> 00:21:36,119 Speaker 1: States has a huge advantage. We've recognized it for a 423 00:21:36,160 --> 00:21:40,399 Speaker 1: long time in terms of our lack of dependence on 424 00:21:40,560 --> 00:21:46,280 Speaker 1: egregiously expensive foreign energy, and that is benefiting the relative 425 00:21:46,400 --> 00:21:50,360 Speaker 1: strength of our economy. At the same time, we've mounted 426 00:21:50,400 --> 00:21:55,960 Speaker 1: a stronger response macro economically to the pandemic. Our central 427 00:21:56,000 --> 00:22:01,520 Speaker 1: bank is moving faster to do necessary are tightening with 428 00:22:01,600 --> 00:22:07,560 Speaker 1: respect to UH, the respect to monetary policy. UH. Given 429 00:22:07,600 --> 00:22:12,919 Speaker 1: inflation and all those various factors are making us safe 430 00:22:12,920 --> 00:22:17,280 Speaker 1: haven a mecca for capital, and that's causing resources to 431 00:22:17,800 --> 00:22:22,280 Speaker 1: flow into the dollar. It's remarkable that people were saying 432 00:22:22,320 --> 00:22:26,480 Speaker 1: that the dollar's day was past, uh not very long ago, 433 00:22:27,480 --> 00:22:31,639 Speaker 1: given its current strength, and my guess is that there's 434 00:22:31,760 --> 00:22:37,359 Speaker 1: room for this to continue. You know, the euro was 435 00:22:38,800 --> 00:22:43,199 Speaker 1: in the low eighties against the dollar UH twenty some 436 00:22:43,359 --> 00:22:48,119 Speaker 1: years ago, and in some ways the relative fundamentals of 437 00:22:48,160 --> 00:22:51,760 Speaker 1: the United States compared to Europe are even stronger now 438 00:22:51,840 --> 00:22:56,119 Speaker 1: than they were then. So Larry, Uh, there's talk actually 439 00:22:56,160 --> 00:22:58,840 Speaker 1: about for the possibility of intervention in Japan to try 440 00:22:58,840 --> 00:23:00,760 Speaker 1: to support the end given what you just said that 441 00:23:00,800 --> 00:23:05,199 Speaker 1: it's larger macroeconomic factors. Is it possible for Japan actually 442 00:23:05,200 --> 00:23:08,800 Speaker 1: intervened and actually shore up the end? I tend to 443 00:23:08,840 --> 00:23:16,480 Speaker 1: be skeptical that intervention can have sustained impacts UM. The 444 00:23:16,520 --> 00:23:21,040 Speaker 1: capital markets are just so big, even relative to the 445 00:23:21,080 --> 00:23:27,720 Speaker 1: resources that the authorities UH have UH that I would 446 00:23:27,760 --> 00:23:34,200 Speaker 1: be surprised in today's world if interventions could have large 447 00:23:34,440 --> 00:23:40,560 Speaker 1: sustained impacts on maintaining UH the value of the end. 448 00:23:40,680 --> 00:23:44,840 Speaker 1: I think the more fundamental questions UH for the end 449 00:23:45,560 --> 00:23:49,240 Speaker 1: involve the level of Japanese interest rates, both in the 450 00:23:49,359 --> 00:23:53,320 Speaker 1: short and over the longer term, and the extent to 451 00:23:53,400 --> 00:23:57,760 Speaker 1: which the Japanese will at some point feel comfortable raising 452 00:23:57,800 --> 00:24:02,399 Speaker 1: those interest rates, which is not a simple proposition given 453 00:24:02,440 --> 00:24:05,520 Speaker 1: the magnitude of debts in Japan. So we're seeing a 454 00:24:05,520 --> 00:24:07,840 Speaker 1: different sort of intervention over in Europe, both through the 455 00:24:07,880 --> 00:24:10,159 Speaker 1: respect of the United Kingdom, where the new Prime Minister 456 00:24:10,320 --> 00:24:12,600 Speaker 1: is Trust now is trying to impose a cap on 457 00:24:12,640 --> 00:24:15,359 Speaker 1: the cost of households. We also have the possibility of 458 00:24:15,359 --> 00:24:18,240 Speaker 1: a price cap being agreed upon in Europe. Is that 459 00:24:18,320 --> 00:24:21,479 Speaker 1: a reasonable intervention is likely to be effective at dealing 460 00:24:21,560 --> 00:24:27,080 Speaker 1: with the runaway energy costs, particularly in Europe. Look, it's 461 00:24:27,080 --> 00:24:33,080 Speaker 1: an extraordinarily difficult situation, and it's a mistake to be 462 00:24:33,359 --> 00:24:39,480 Speaker 1: too judgmental from too far away. But when I saw 463 00:24:39,640 --> 00:24:46,800 Speaker 1: the emerging plan, it reminded me of standard UM Latin 464 00:24:46,840 --> 00:24:55,600 Speaker 1: American populist approaches fixed the price and commit to unlimited subsidy, 465 00:24:56,000 --> 00:25:00,440 Speaker 1: and those policies often have not worked out well at 466 00:25:00,480 --> 00:25:07,560 Speaker 1: all for those who implemented them, and so it seems 467 00:25:07,680 --> 00:25:11,119 Speaker 1: a very dangerous course. Now. I think we ought to 468 00:25:11,160 --> 00:25:16,080 Speaker 1: give the British authorities an opportunity to explain the rationale 469 00:25:16,200 --> 00:25:21,679 Speaker 1: for their policy, to explain the financing mechanisms behind UH 470 00:25:22,119 --> 00:25:29,920 Speaker 1: their policies. But a policy of tax cutting, avoiding taxation 471 00:25:30,320 --> 00:25:39,960 Speaker 1: of windfall profits, subsidizing consumers for UH low priced energy 472 00:25:40,000 --> 00:25:44,840 Speaker 1: in the face of a nearly unlimited potential liability UH 473 00:25:45,000 --> 00:25:48,399 Speaker 1: seems to me to at least raise very serious and 474 00:25:48,480 --> 00:25:53,840 Speaker 1: severe arithmetic UH questions. And I think people who are 475 00:25:53,880 --> 00:26:00,200 Speaker 1: thinking about the pound are thinking about that is the 476 00:26:00,240 --> 00:26:03,359 Speaker 1: story that overshadowed the entire week, not necessarily in economics 477 00:26:03,440 --> 00:26:06,480 Speaker 1: or finance, but overall, was the passing of Queen Elizabeth 478 00:26:06,480 --> 00:26:09,280 Speaker 1: the Second at the age of ninety six, And I 479 00:26:09,320 --> 00:26:11,359 Speaker 1: wonder if that gives us an occasion to reflect on 480 00:26:11,440 --> 00:26:13,920 Speaker 1: what has happened to the British economy since the nine 481 00:26:14,720 --> 00:26:17,040 Speaker 1: when she became queen and to the present time. It's 482 00:26:17,080 --> 00:26:18,800 Speaker 1: been through an awful lot, it's grown up firm at 483 00:26:18,840 --> 00:26:20,840 Speaker 1: the same time, and what we think is likely in 484 00:26:20,920 --> 00:26:24,840 Speaker 1: store for King Charles the Third. You know, in today's world, 485 00:26:25,119 --> 00:26:32,240 Speaker 1: there are very few leaders who command nearly universal respect, 486 00:26:33,160 --> 00:26:38,280 Speaker 1: and there are very few leaders who are able, through 487 00:26:38,359 --> 00:26:44,160 Speaker 1: decades in the public eye, to maintain um, that dignity 488 00:26:44,400 --> 00:26:49,040 Speaker 1: and to maintain respect. And Queen Elizabeth did that, and 489 00:26:49,400 --> 00:26:51,960 Speaker 1: did it as recently as this year at the age 490 00:26:52,000 --> 00:26:58,360 Speaker 1: of ninety six, and it's a quite extraordinary thing that 491 00:26:58,440 --> 00:27:05,639 Speaker 1: I think history will uh long remember. She stood for 492 00:27:06,960 --> 00:27:14,720 Speaker 1: taking the long view. She stood for rising above passions 493 00:27:14,880 --> 00:27:20,440 Speaker 1: of the moment, and I think those are useful lessons 494 00:27:20,480 --> 00:27:26,200 Speaker 1: for all of us involved in political economy, useful lessons 495 00:27:26,400 --> 00:27:32,440 Speaker 1: when the urge to point scoring or cheap partisan advantage 496 00:27:33,080 --> 00:27:39,480 Speaker 1: um looms large in politics, and useful lessons in with 497 00:27:39,560 --> 00:27:45,719 Speaker 1: respect to uh economics and economic policy as well. And 498 00:27:45,840 --> 00:27:53,480 Speaker 1: one has to take a longer view. And so Queen 499 00:27:53,520 --> 00:27:58,719 Speaker 1: Elizabeth was always acting not with a view to the 500 00:27:58,720 --> 00:28:02,159 Speaker 1: newspaper headline, but with a view to the history books. 501 00:28:02,880 --> 00:28:08,240 Speaker 1: And my counsel to uh those who will lead Britain 502 00:28:08,400 --> 00:28:12,719 Speaker 1: politically at this very difficult moment is to do the 503 00:28:12,760 --> 00:28:15,919 Speaker 1: same thing. And I think that's something we can all 504 00:28:16,480 --> 00:28:21,600 Speaker 1: uh usefully keep in mind in every country. So, Larry, 505 00:28:21,680 --> 00:28:24,480 Speaker 1: let's convened the Larry Summers Book Club. Here. Who are 506 00:28:24,520 --> 00:28:26,160 Speaker 1: you reading these days? I understand you have a book 507 00:28:26,160 --> 00:28:31,600 Speaker 1: you like a lot. Brad DeLong, my former student, now 508 00:28:32,359 --> 00:28:37,600 Speaker 1: colleague at the Treasury Department, now a professor at Berkeley, 509 00:28:37,720 --> 00:28:41,120 Speaker 1: has written the one economic history book that I think 510 00:28:41,200 --> 00:28:47,480 Speaker 1: everybody should take a very serious look at. Slouching towards 511 00:28:47,600 --> 00:28:52,320 Speaker 1: Utopia is the title, and it chronicles the world from 512 00:28:52,360 --> 00:28:57,280 Speaker 1: the moment uh growth really took off in eighteen seventy 513 00:28:57,360 --> 00:29:00,520 Speaker 1: pretty much up to the present. And the only thing 514 00:29:00,560 --> 00:29:03,760 Speaker 1: we really can learn from for thinking about the future 515 00:29:03,800 --> 00:29:09,440 Speaker 1: economy is history. And Brad tells it in a dramatic 516 00:29:09,560 --> 00:29:13,680 Speaker 1: and strongly thematic uh way. Thank you so much. I 517 00:29:13,760 --> 00:29:15,719 Speaker 1: really appreciate you being back with us since Larry Summers 518 00:29:15,720 --> 00:29:19,560 Speaker 1: of Harvard our very special contributor here on Wall Street Week. Finally, 519 00:29:19,640 --> 00:29:22,720 Speaker 1: one more thought, everything that goes up must come down, 520 00:29:22,880 --> 00:29:25,680 Speaker 1: or to put it in financial terms, reverts to the mean. 521 00:29:26,200 --> 00:29:29,280 Speaker 1: We've seen it recently in things like Bitcoin coming back 522 00:29:29,320 --> 00:29:32,680 Speaker 1: down towards Earth. The weight that we've seen on Bitcoin 523 00:29:32,720 --> 00:29:35,960 Speaker 1: in the crypto space at large denverblementum. From a longer 524 00:29:36,040 --> 00:29:38,880 Speaker 1: term spect it is very barished right now. In meme 525 00:29:38,880 --> 00:29:42,280 Speaker 1: stocks shooting up and shooting right back down again, so 526 00:29:42,440 --> 00:29:44,720 Speaker 1: called meat stocks like Game Stop down eight percent, AMC 527 00:29:44,880 --> 00:29:47,120 Speaker 1: Entertainment will sit down. And in those n f T 528 00:29:47,400 --> 00:29:49,280 Speaker 1: s that we're going to take us all into the 529 00:29:49,320 --> 00:29:53,040 Speaker 1: bold new world of the metaverse n f team market 530 00:29:53,120 --> 00:29:55,400 Speaker 1: has crashed for the glost has come off of that 531 00:29:55,520 --> 00:29:58,400 Speaker 1: particular world, and now we're seeing it in the world 532 00:29:58,400 --> 00:30:02,280 Speaker 1: of specs. Those special purpose acquisition companies that held out 533 00:30:02,280 --> 00:30:05,040 Speaker 1: the promise of all the benefits of going public without 534 00:30:05,040 --> 00:30:08,200 Speaker 1: all those pesky sec requirements in this back market in 535 00:30:08,240 --> 00:30:11,880 Speaker 1: particular not doing well. This fact craze is over. I 536 00:30:11,920 --> 00:30:15,640 Speaker 1: think that investor sentiment has soured on the product. This 537 00:30:15,680 --> 00:30:18,560 Speaker 1: week we saw the latest stumble of US back when 538 00:30:18,560 --> 00:30:21,320 Speaker 1: the company former President Trump chose to help him take 539 00:30:21,400 --> 00:30:24,560 Speaker 1: his truth. Social media company Public ran into trouble with 540 00:30:24,600 --> 00:30:27,760 Speaker 1: shareholders who refused to let an extend the time to 541 00:30:27,800 --> 00:30:32,360 Speaker 1: close the deal, as the app itself continues to have issues, 542 00:30:32,400 --> 00:30:36,320 Speaker 1: including a ban from the Google Play Store. Truth Social, 543 00:30:36,440 --> 00:30:39,400 Speaker 1: that content moderation piece and making sure that they can 544 00:30:39,480 --> 00:30:42,200 Speaker 1: kind of abide by the standards that Google expects seems 545 00:30:42,240 --> 00:30:44,600 Speaker 1: to be the breaking point at the moment, which brings 546 00:30:44,640 --> 00:30:46,760 Speaker 1: us to baseball and to the New York Yankees, the 547 00:30:46,760 --> 00:30:49,600 Speaker 1: best team in baseball at least through the month of June, 548 00:30:50,120 --> 00:30:53,600 Speaker 1: winning almost seventy of their games during that time period, 549 00:30:53,840 --> 00:30:56,800 Speaker 1: only to revert to that mean with a record well 550 00:30:56,840 --> 00:31:00,320 Speaker 1: below five since then. But in a world of things 551 00:31:00,360 --> 00:31:02,960 Speaker 1: coming back down to earth, there is one part of 552 00:31:03,000 --> 00:31:08,320 Speaker 1: the Yankees that hasn't. He's named Aaron Judge, who has 553 00:31:08,440 --> 00:31:11,800 Speaker 1: already hit well over fifty home runs this season, and 554 00:31:11,840 --> 00:31:13,960 Speaker 1: he's on a pace that, with a little luck and 555 00:31:14,080 --> 00:31:17,280 Speaker 1: a bit of his skill, could approach or even pass 556 00:31:17,600 --> 00:31:21,480 Speaker 1: Roger Morris's record of I'm just blessed to be in 557 00:31:21,480 --> 00:31:23,760 Speaker 1: this position, to be with those guys, and you know, 558 00:31:23,800 --> 00:31:25,760 Speaker 1: looking forward him, you know, send more records with those 559 00:31:25,760 --> 00:31:27,880 Speaker 1: guys and hopefully eventually getting a ring at the end 560 00:31:27,920 --> 00:31:29,920 Speaker 1: of the year. As big a deal as that is 561 00:31:30,000 --> 00:31:32,160 Speaker 1: for the sport of baseball, it may be even a 562 00:31:32,200 --> 00:31:35,640 Speaker 1: bigger deal for Judge's bank account. He was offered two 563 00:31:35,960 --> 00:31:39,080 Speaker 1: thoint five million dollars in a contract attention at the 564 00:31:39,120 --> 00:31:41,720 Speaker 1: beginning of the year, only to turn it down and 565 00:31:41,840 --> 00:31:44,320 Speaker 1: beat on himself and decide he was going to have 566 00:31:44,320 --> 00:31:46,560 Speaker 1: a new contract than the year. Well that that it 567 00:31:46,640 --> 00:31:49,840 Speaker 1: looks like it's likely to pay off. That does it 568 00:31:49,960 --> 00:31:52,040 Speaker 1: for this episode of Wall Street Week. I'm David Weston. 569 00:31:52,120 --> 00:32:09,560 Speaker 1: This is Bloomberg. See you next week. It's turn, It's turn.