1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: And we may not have an overall recession, we're having 3 00:00:04,400 --> 00:00:06,760 Speaker 2: a rolling recession. To conge roll looks pretty strongly it 4 00:00:06,800 --> 00:00:07,680 Speaker 2: is when it comes to jobs. 5 00:00:07,720 --> 00:00:09,840 Speaker 3: The financial stories that shape our world. 6 00:00:09,960 --> 00:00:13,640 Speaker 2: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,480 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,600 --> 00:00:17,000 Speaker 2: generative AI. 9 00:00:16,920 --> 00:00:19,320 Speaker 3: Through the eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America, 11 00:00:22,560 --> 00:00:25,279 Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of 12 00:00:25,280 --> 00:00:26,280 Speaker 2: the Columbia Business School. 13 00:00:26,280 --> 00:00:30,120 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 14 00:00:30,160 --> 00:00:34,040 Speaker 2: The Jobs engine continues, Tesla falters and Bob Eiger gets 15 00:00:34,080 --> 00:00:37,040 Speaker 2: his way at Disney. This is Bloomberg Wall Street Week. 16 00:00:37,120 --> 00:00:53,720 Speaker 2: I'm David Weston, but we start with investing legend Ray Daliu, 17 00:00:54,040 --> 00:00:56,279 Speaker 2: who has been on Wall Street Week several times through 18 00:00:56,320 --> 00:00:59,240 Speaker 2: the years, but perhaps never more memorably than back in 19 00:00:59,360 --> 00:01:02,600 Speaker 2: nineteen eight in the wake of the Mexican sovereign debt default, 20 00:01:02,880 --> 00:01:05,800 Speaker 2: when Ray both appear before Congress and on this program 21 00:01:05,880 --> 00:01:08,880 Speaker 2: with Marty's Wag and Lewis Rukaser to take a pretty 22 00:01:08,920 --> 00:01:11,319 Speaker 2: firm position on where things were headed. 23 00:01:13,080 --> 00:01:15,759 Speaker 4: Chairman, mister Mitchell, it's a great pleasure and a great 24 00:01:15,760 --> 00:01:18,440 Speaker 4: honor to be able to appear before you in examination 25 00:01:18,600 --> 00:01:20,640 Speaker 4: with what is going wrong. 26 00:01:20,440 --> 00:01:21,840 Speaker 3: With our economy. 27 00:01:21,959 --> 00:01:25,520 Speaker 4: The economy is now flat teetering on the brink of failure. 28 00:01:26,120 --> 00:01:28,560 Speaker 5: You were recently quoted in an article you said, I 29 00:01:28,560 --> 00:01:31,640 Speaker 5: can say this with absolute certainty because I know how 30 00:01:31,680 --> 00:01:32,440 Speaker 5: markets work. 31 00:01:32,720 --> 00:01:35,000 Speaker 4: I can say with absolute certainty that if you look 32 00:01:35,040 --> 00:01:39,000 Speaker 4: at the liquidity base in the cooperations and the world 33 00:01:39,080 --> 00:01:41,399 Speaker 4: as a whole, that there's such a reduced level of 34 00:01:41,440 --> 00:01:44,920 Speaker 4: liquidity that you can't return to an arab stagflation. 35 00:01:45,280 --> 00:01:48,440 Speaker 2: And we welcome now Ray Dalio of Bridgewater back to Wallstreet. 36 00:01:48,440 --> 00:01:50,520 Speaker 2: Big so, Ray, great to have you back on It's 37 00:01:50,520 --> 00:01:53,120 Speaker 2: great to see you somewhat younger, back in nineteen eighty two. 38 00:01:54,200 --> 00:01:56,240 Speaker 2: But take us back to nineteen eighty two, because you've 39 00:01:56,280 --> 00:01:59,400 Speaker 2: talked about that since it's being a really transformative, a 40 00:01:59,440 --> 00:02:02,360 Speaker 2: pivotal moment in your life. Tell us of what happened 41 00:02:02,400 --> 00:02:04,040 Speaker 2: and what happened afterwards. 42 00:02:03,960 --> 00:02:06,000 Speaker 3: Like watch me, was I arrogant? 43 00:02:06,760 --> 00:02:08,920 Speaker 6: I look at myself, mout I couldn't have been more 44 00:02:09,080 --> 00:02:14,440 Speaker 6: arrogant and I couldn't have been more wrong and painfully wrong. 45 00:02:15,120 --> 00:02:20,160 Speaker 6: And so that's why it was a transitional moment for me, because. 46 00:02:22,040 --> 00:02:22,880 Speaker 3: I got. 47 00:02:24,480 --> 00:02:27,880 Speaker 6: So broke that my dad had to lend me four 48 00:02:27,919 --> 00:02:30,560 Speaker 6: thousand dollars to pay for my family bills. 49 00:02:30,960 --> 00:02:33,080 Speaker 3: So that was my bottom, my big. 50 00:02:33,000 --> 00:02:37,680 Speaker 6: Bottom, and that painful experience made me think, how do 51 00:02:37,760 --> 00:02:42,680 Speaker 6: I get all the upside without the downside of risk? Okay, 52 00:02:42,680 --> 00:02:45,560 Speaker 6: so it's the big question that all investors have to 53 00:02:45,560 --> 00:02:50,080 Speaker 6: deal with being knocked out and the bet that you 54 00:02:50,080 --> 00:02:52,880 Speaker 6: can lose that can take you out is your risk. 55 00:02:52,919 --> 00:02:55,160 Speaker 6: But how do you get the great upside? And so 56 00:02:55,360 --> 00:03:01,240 Speaker 6: then I had to engineer it and I learned about diversification. 57 00:03:01,360 --> 00:03:06,080 Speaker 6: I learned that if I can have fifteen uncorrelated bets, 58 00:03:06,639 --> 00:03:10,240 Speaker 6: I can eliminate eighty percent of my risk without producing 59 00:03:10,240 --> 00:03:10,919 Speaker 6: my return. 60 00:03:11,560 --> 00:03:13,400 Speaker 2: Looking at this says, look, but look at what Bridgewater 61 00:03:13,480 --> 00:03:16,040 Speaker 2: ended up and the extraordinary success you just went through. 62 00:03:16,400 --> 00:03:19,760 Speaker 2: So go back to nineteen eighty two. You said you 63 00:03:19,760 --> 00:03:22,560 Speaker 2: should have been more diversified, and you should have had 64 00:03:22,600 --> 00:03:24,520 Speaker 2: some other points of view. What is it you got 65 00:03:24,560 --> 00:03:27,280 Speaker 2: wrong in nineteen eighty two? Exactly what was your mistake? 66 00:03:27,520 --> 00:03:29,280 Speaker 2: And could there have been somebody come along to say, 67 00:03:29,400 --> 00:03:31,280 Speaker 2: at that moment, we're a second rate. You should think 68 00:03:31,280 --> 00:03:33,880 Speaker 2: about that. You haven't thought about that over there. 69 00:03:34,080 --> 00:03:35,320 Speaker 3: Yes, So. 70 00:03:36,840 --> 00:03:41,920 Speaker 6: I calculated that Mexico, that American banks had lent more 71 00:03:41,960 --> 00:03:43,880 Speaker 6: money to foreign countries than they were going to be 72 00:03:43,880 --> 00:03:45,800 Speaker 6: able to pay back, and that was going to be 73 00:03:45,840 --> 00:03:47,640 Speaker 6: a debt default, which was true. 74 00:03:47,760 --> 00:03:48,440 Speaker 3: Which was true. 75 00:03:48,480 --> 00:03:53,680 Speaker 6: Mexico defaulted and all these countries afterwards defaulted. And I 76 00:03:53,760 --> 00:03:56,320 Speaker 6: said that that debt crisis was going to cause a 77 00:03:56,440 --> 00:04:00,680 Speaker 6: crisis all the way around the world because to banks 78 00:04:00,680 --> 00:04:04,760 Speaker 6: and so on. And I didn't realize the mechanics of 79 00:04:05,400 --> 00:04:09,240 Speaker 6: how the changing of a debt squeeze, having a debt 80 00:04:09,320 --> 00:04:12,560 Speaker 6: squeeze in those countries so money would not go to 81 00:04:12,600 --> 00:04:15,520 Speaker 6: those countries used to go to those countries and lending, 82 00:04:15,760 --> 00:04:18,800 Speaker 6: and while they were having a squeeze, we could have 83 00:04:19,040 --> 00:04:22,800 Speaker 6: a disinflationary boom, and it produced the eighties. 84 00:04:23,080 --> 00:04:25,480 Speaker 3: My point is that these. 85 00:04:25,320 --> 00:04:28,800 Speaker 6: Experiences in life, if you go back and you study 86 00:04:28,920 --> 00:04:32,680 Speaker 6: history and you see how history repeats many things never 87 00:04:32,720 --> 00:04:34,840 Speaker 6: happened in your lifetime before, and you. 88 00:04:34,880 --> 00:04:37,799 Speaker 2: Built up Bridgewater at the same time. Having studied history. 89 00:04:37,880 --> 00:04:40,040 Speaker 2: Now I'm surmising you knew you got to think about 90 00:04:40,040 --> 00:04:42,920 Speaker 2: succession at some point. You can't stay forever. Now tell 91 00:04:42,960 --> 00:04:45,520 Speaker 2: us how that's worked and has it succeeded. Are you 92 00:04:45,640 --> 00:04:47,719 Speaker 2: satisfied with that succession of Bridgewater? 93 00:04:48,360 --> 00:04:49,360 Speaker 3: It's been so great? 94 00:04:49,480 --> 00:04:53,159 Speaker 6: So I am so I did that and I had 95 00:04:53,200 --> 00:04:56,240 Speaker 6: that track record with them bringing them in as you described, 96 00:04:56,839 --> 00:05:02,440 Speaker 6: and Bob Prince, Greg Jensen, near other people. All of 97 00:05:02,480 --> 00:05:05,120 Speaker 6: those people are all part of that mission. And there 98 00:05:05,160 --> 00:05:07,800 Speaker 6: was also part of a culture of can we be 99 00:05:07,920 --> 00:05:10,320 Speaker 6: radical truth and radically transparent? 100 00:05:10,360 --> 00:05:12,640 Speaker 3: Could we trust each other? Can we go through all 101 00:05:12,640 --> 00:05:12,839 Speaker 3: of that? 102 00:05:13,520 --> 00:05:16,320 Speaker 6: And so that was all they are And then of course, 103 00:05:16,520 --> 00:05:19,960 Speaker 6: you know you want to pass it along and so 104 00:05:20,360 --> 00:05:24,440 Speaker 6: then I, with a lot of planning and with the 105 00:05:24,480 --> 00:05:28,640 Speaker 6: comfort that these great people I've worked with and I know, 106 00:05:29,040 --> 00:05:33,360 Speaker 6: and those great people working together can continue to pick 107 00:05:33,480 --> 00:05:36,320 Speaker 6: up where I left off or we left off together 108 00:05:36,680 --> 00:05:39,600 Speaker 6: and then go bring it to a higher level beyond me. 109 00:05:40,080 --> 00:05:41,640 Speaker 3: And so that's the success. 110 00:05:41,800 --> 00:05:46,520 Speaker 6: And so in about eighteen months they I turned it 111 00:05:46,560 --> 00:05:47,160 Speaker 6: over to them. 112 00:05:47,200 --> 00:05:49,640 Speaker 3: They have their it's. 113 00:05:49,480 --> 00:05:52,800 Speaker 6: Theirs and now I'm a mentor, and as a mentor, 114 00:05:53,160 --> 00:05:56,360 Speaker 6: we have the enjoyment, the great pleasure of being able 115 00:05:56,400 --> 00:05:59,880 Speaker 6: to brainstorm that way, But it's theirs and they owner, 116 00:06:00,120 --> 00:06:03,080 Speaker 6: and so when they have I'm confident that they have 117 00:06:03,120 --> 00:06:06,200 Speaker 6: the qualities and the terrific elements to be able to 118 00:06:06,240 --> 00:06:10,599 Speaker 6: bring them up to have theirs that will be hopefully 119 00:06:10,640 --> 00:06:14,760 Speaker 6: better than ours, Because Wow, I think we had an 120 00:06:14,760 --> 00:06:18,320 Speaker 6: amazing success. And the success it's like raising your kids, 121 00:06:18,720 --> 00:06:22,239 Speaker 6: you know, the joy that the ones who are older 122 00:06:22,760 --> 00:06:26,840 Speaker 6: feel about the next generation and seeing them succeed. That'll 123 00:06:26,839 --> 00:06:30,719 Speaker 6: be my mark of my success. If they succeed, it's 124 00:06:30,960 --> 00:06:34,800 Speaker 6: my success. If they don't succeed, it's my failure. But 125 00:06:34,880 --> 00:06:40,080 Speaker 6: I couldn't have a better group of people and a 126 00:06:40,120 --> 00:06:44,640 Speaker 6: greater simpatico in terms of that element of where we're 127 00:06:44,680 --> 00:06:49,919 Speaker 6: going on the same basic approaches and the same basic culture. 128 00:06:50,120 --> 00:06:53,440 Speaker 2: You've written a recent post about a pivotal year on 129 00:06:53,520 --> 00:06:57,159 Speaker 2: the brink twenty twenty four. Take us through your analysis there. 130 00:06:58,120 --> 00:07:03,400 Speaker 6: There are many things that surprised me in my life 131 00:07:03,640 --> 00:07:07,640 Speaker 6: that wouldn't have surprised me if I had studied the history, 132 00:07:07,720 --> 00:07:10,080 Speaker 6: because they didn't happen in my lifetime, but they happened 133 00:07:10,080 --> 00:07:14,000 Speaker 6: many times before. So I created a need really to 134 00:07:14,080 --> 00:07:17,000 Speaker 6: when certain things are coming along that I'm not used 135 00:07:17,040 --> 00:07:20,200 Speaker 6: to seeing to then go back and there are five 136 00:07:20,360 --> 00:07:23,320 Speaker 6: things that are now the big forces that interact together. 137 00:07:23,560 --> 00:07:27,960 Speaker 6: The way those five forces interact with each other through 138 00:07:28,120 --> 00:07:31,880 Speaker 6: history has a pattern to it, and you know those interactions. 139 00:07:32,200 --> 00:07:33,400 Speaker 3: So when we look at. 140 00:07:33,280 --> 00:07:36,240 Speaker 6: That pattern of what's now happening, and we could look 141 00:07:36,280 --> 00:07:40,720 Speaker 6: ahead with that in mind, we can see that twenty 142 00:07:40,800 --> 00:07:46,240 Speaker 6: twenty four is we are on the brink of a 143 00:07:46,320 --> 00:07:50,240 Speaker 6: number of things related to that. I can list those things, 144 00:07:50,560 --> 00:07:52,920 Speaker 6: but we're on the brink. And it becomes also somewhat 145 00:07:52,920 --> 00:07:56,880 Speaker 6: of a definitive year because of we're going to find 146 00:07:56,880 --> 00:08:00,520 Speaker 6: out how we are with each other politically, and we're 147 00:08:00,520 --> 00:08:03,400 Speaker 6: going to find out geopolitically a lot. 148 00:08:03,280 --> 00:08:06,680 Speaker 2: A definitive year, but not the only one. Neil Ferguson 149 00:08:06,720 --> 00:08:09,520 Speaker 2: of the Hoover Institution, for example, says that twenty twenty 150 00:08:09,560 --> 00:08:12,480 Speaker 2: four stands out compared with the last thirty or forty years, 151 00:08:12,760 --> 00:08:15,280 Speaker 2: but not compared to some of what came before. 152 00:08:15,840 --> 00:08:19,920 Speaker 7: If you go back maybe to the nineteen nineties, Yeah, 153 00:08:20,200 --> 00:08:25,560 Speaker 7: that period seemed pretty low risk. The Soviet Union had collapsed, 154 00:08:25,960 --> 00:08:30,840 Speaker 7: and apart from trouble in the Balkans with the breakup 155 00:08:30,880 --> 00:08:36,840 Speaker 7: of Yugoslavia and some other trouble spots like Somalia. The world, 156 00:08:36,960 --> 00:08:39,640 Speaker 7: by the standards of the rest of the twentieth century 157 00:08:40,240 --> 00:08:41,120 Speaker 7: was pretty peaceful. 158 00:08:41,240 --> 00:08:42,559 Speaker 8: But if you go back. 159 00:08:42,840 --> 00:08:48,240 Speaker 5: Fifty years, imagine we're back in nineteen seventy four. That 160 00:08:48,360 --> 00:08:50,680 Speaker 5: was a much more dangerous time than we're living through now. 161 00:08:51,440 --> 00:08:54,560 Speaker 5: And I speak with some insight as I'm in the 162 00:08:54,559 --> 00:08:57,280 Speaker 5: midst of writing about that period, as I write the 163 00:08:57,280 --> 00:09:01,160 Speaker 5: second volume of my biography of Henry Kissinger. We have 164 00:09:01,200 --> 00:09:04,600 Speaker 5: a tendency to judge the present by comparison with the 165 00:09:04,600 --> 00:09:08,240 Speaker 5: recent past. But the recent past was an inter war period, 166 00:09:08,360 --> 00:09:12,200 Speaker 5: the period between two Cold Wars. Cold War one ended 167 00:09:12,200 --> 00:09:15,400 Speaker 5: with the Soviet collapse, and we didn't really notice Cold 168 00:09:15,400 --> 00:09:17,839 Speaker 5: War two beginning. But I think it really began when 169 00:09:17,840 --> 00:09:19,600 Speaker 5: Exhijinpin came to power in China. 170 00:09:20,080 --> 00:09:22,920 Speaker 2: Geopolitical risk is not the only factor that may make 171 00:09:23,000 --> 00:09:26,640 Speaker 2: twenty twenty four pivotal. We also have elections around the world, 172 00:09:26,679 --> 00:09:29,880 Speaker 2: and particularly in the United States, which raises uncertainty over 173 00:09:29,920 --> 00:09:33,479 Speaker 2: economic policies, which Neil ferguson things markets are well equipped 174 00:09:33,600 --> 00:09:34,120 Speaker 2: to handle. 175 00:09:34,559 --> 00:09:39,160 Speaker 5: I think we know that markets try to adjust for 176 00:09:39,360 --> 00:09:43,200 Speaker 5: domestic political risk. We know this because there's been some 177 00:09:43,240 --> 00:09:47,360 Speaker 5: great work done in recent years on the way that 178 00:09:47,480 --> 00:09:53,240 Speaker 5: in an election year, investors have a tendency to make 179 00:09:53,320 --> 00:09:58,120 Speaker 5: some allowance for policy uncertainty, and the bigger the difference 180 00:09:58,200 --> 00:10:02,479 Speaker 5: between the candidates in the United States, the more uncertainty. 181 00:10:02,520 --> 00:10:07,080 Speaker 5: And we've certainly got a pretty big difference this year, 182 00:10:07,120 --> 00:10:08,920 Speaker 5: but it's the same difference that we have back in 183 00:10:08,960 --> 00:10:12,280 Speaker 5: twenty twenty between Donald Trump and Joe Biden. 184 00:10:12,679 --> 00:10:15,640 Speaker 2: But Ray Dalio is concerned that the election this year 185 00:10:15,679 --> 00:10:18,439 Speaker 2: may go past the policy uncertainty investors have dealt with 186 00:10:18,480 --> 00:10:22,440 Speaker 2: in the past, that given the disagreements, even violent disagreements, 187 00:10:22,480 --> 00:10:25,959 Speaker 2: over the last election, we may face more fundamental uncertainties 188 00:10:25,960 --> 00:10:29,760 Speaker 2: about the underlying political system. And you, in your writing 189 00:10:29,920 --> 00:10:32,760 Speaker 2: so specifically, a focus on that second force is maybe 190 00:10:32,880 --> 00:10:35,120 Speaker 2: the most dominant right now going to twenty three fourth, 191 00:10:35,240 --> 00:10:38,280 Speaker 2: the potential for internal conflict. I mean, you even write 192 00:10:38,280 --> 00:10:40,480 Speaker 2: the possible this is I have a there's a fifty 193 00:10:40,520 --> 00:10:44,120 Speaker 2: to fifty chance of civil war you talk about, Is 194 00:10:44,200 --> 00:10:45,720 Speaker 2: that right? Fifty to fifty? 195 00:10:46,440 --> 00:10:50,200 Speaker 6: Well, so let me define a civil war that you 196 00:10:50,320 --> 00:10:55,160 Speaker 6: have a situation where you have irreconcilable differences so that 197 00:10:56,000 --> 00:11:01,160 Speaker 6: there becomes a failure to follow the rules. In other words, 198 00:11:01,360 --> 00:11:05,440 Speaker 6: let's take January sixth incident. Okay, you could see a 199 00:11:05,520 --> 00:11:10,280 Speaker 6: situation in which you don't accept losing, don't accept the results. 200 00:11:10,400 --> 00:11:12,600 Speaker 6: We are getting more and more, not only just in 201 00:11:12,640 --> 00:11:15,920 Speaker 6: the election, but even in decision making as the state 202 00:11:15,960 --> 00:11:19,440 Speaker 6: of Texas deals with the federal government on issues, or 203 00:11:19,480 --> 00:11:22,720 Speaker 6: we had sanctuary city issues where there may not be 204 00:11:22,760 --> 00:11:29,720 Speaker 6: the agreeing on that these irreconcilable differences. Irreconcilable differences for example, 205 00:11:30,040 --> 00:11:33,760 Speaker 6: on children and sexuality and education, how should that be? 206 00:11:34,040 --> 00:11:39,480 Speaker 6: These are not compromisable issues. That greater and greater extremism 207 00:11:39,760 --> 00:11:42,440 Speaker 6: is an issue. And so when we come to let's 208 00:11:42,440 --> 00:11:46,200 Speaker 6: say this election period, how will we get through that 209 00:11:46,480 --> 00:11:50,120 Speaker 6: and how will we work together in an effective way? 210 00:11:50,559 --> 00:11:54,040 Speaker 6: Or will it be even so chaotic and that we 211 00:11:54,160 --> 00:11:56,720 Speaker 6: keep that we start fighting with each other. So when 212 00:11:56,760 --> 00:11:59,880 Speaker 6: I say we're on the brink, I think that it's 213 00:12:00,280 --> 00:12:03,199 Speaker 6: to say we're accurate to say that some of these 214 00:12:03,320 --> 00:12:07,760 Speaker 6: questions exist and we will find out in a year, Okay, 215 00:12:08,040 --> 00:12:10,920 Speaker 6: how well we can be together, and that well, how 216 00:12:10,960 --> 00:12:13,320 Speaker 6: well we be together not only the conflict, but how 217 00:12:13,360 --> 00:12:15,959 Speaker 6: effective can we be. We're going to find that out 218 00:12:16,040 --> 00:12:18,600 Speaker 6: over the next year. What we need I think is 219 00:12:18,679 --> 00:12:21,960 Speaker 6: a strong middle. We have to do this together with 220 00:12:22,080 --> 00:12:25,760 Speaker 6: a strong middle and a bipartisan and my opinion almost 221 00:12:26,000 --> 00:12:29,760 Speaker 6: the President of the United States should have a bipartisan cabinet, 222 00:12:30,080 --> 00:12:33,000 Speaker 6: draw the best and bring it together so that there's 223 00:12:33,040 --> 00:12:35,400 Speaker 6: a bipartisanship. 224 00:12:34,640 --> 00:12:36,400 Speaker 3: Where it's been such a pleasure having here. Thank you 225 00:12:36,440 --> 00:12:38,400 Speaker 3: so much for doing this. Oh, thank you for having me. 226 00:12:38,800 --> 00:12:39,439 Speaker 3: Many thanks to. 227 00:12:39,440 --> 00:12:44,520 Speaker 2: Ray Value of Bridgewater. Coming up, we go to Argentina 228 00:12:44,600 --> 00:12:48,800 Speaker 2: and hear from President Milay about his economic plans. That's 229 00:12:48,840 --> 00:12:50,640 Speaker 2: next on Wall Street Week on Bloomberg. 230 00:12:52,559 --> 00:12:56,720 Speaker 1: This is Bloomberg Well Street Week with David Weston from 231 00:12:56,880 --> 00:12:59,559 Speaker 1: Bloomberg Radio. 232 00:13:04,400 --> 00:13:05,360 Speaker 3: This is Walter Weegan. 233 00:13:05,400 --> 00:13:09,480 Speaker 2: I'm David Weston. After years of economic struggles, Argentina's new president, 234 00:13:09,559 --> 00:13:13,280 Speaker 2: Javier Milay, is administering shock therapy that he promised when 235 00:13:13,320 --> 00:13:14,320 Speaker 2: he campaigned. 236 00:13:13,920 --> 00:13:14,480 Speaker 8: For his job. 237 00:13:14,760 --> 00:13:19,000 Speaker 2: Bloomberg International Policy and Economics correspondent Michael McKee lays out the. 238 00:13:19,000 --> 00:13:19,800 Speaker 8: Issues for US. 239 00:13:20,400 --> 00:13:24,280 Speaker 9: Argentina has long been a symbol of economic mismanagement. A 240 00:13:24,360 --> 00:13:27,720 Speaker 9: legacy of government overspending has led to recurring bouts of 241 00:13:27,800 --> 00:13:32,040 Speaker 9: high inflation and debt defaults. Javier mile came to office 242 00:13:32,040 --> 00:13:36,640 Speaker 9: in December promising a radical transformation. His plans include massively 243 00:13:36,760 --> 00:13:42,520 Speaker 9: slashing government spending, privatizing state owned businesses, eliminating the central bank, 244 00:13:42,559 --> 00:13:47,040 Speaker 9: and most controversially, replacing the Argentine peso with the US dollar. 245 00:13:47,320 --> 00:13:50,960 Speaker 9: The dollar would, he said, solve the inflation problem because 246 00:13:51,000 --> 00:13:54,800 Speaker 9: the government couldn't spend more dollars than it has, but 247 00:13:54,920 --> 00:13:58,640 Speaker 9: Argentina doesn't have enough dollars in its foreign exchange holdings 248 00:13:58,679 --> 00:14:01,520 Speaker 9: to make it work right now. Adopting it would lead 249 00:14:01,600 --> 00:14:05,440 Speaker 9: to a deep recession and tie Argentina's economy to the 250 00:14:05,480 --> 00:14:09,680 Speaker 9: federal Reserve. While a recession may indeed be in the cards, 251 00:14:09,960 --> 00:14:13,559 Speaker 9: Mela's plans aren't working out as he'd hoped. The opposition 252 00:14:13,600 --> 00:14:17,720 Speaker 9: controlled Argentine legislature has blocked many of the changes he 253 00:14:17,800 --> 00:14:21,280 Speaker 9: wants to make. Inflation remains over twenty percent a month 254 00:14:21,360 --> 00:14:25,240 Speaker 9: or almost three hundred percent a year, so while Melee 255 00:14:25,320 --> 00:14:28,760 Speaker 9: cut the peso's value in half, dollarization. 256 00:14:28,400 --> 00:14:29,520 Speaker 8: Has been put on hold. 257 00:14:30,000 --> 00:14:33,320 Speaker 9: The Mela plan did convince the International Monetary Fund to 258 00:14:33,400 --> 00:14:36,800 Speaker 9: offer four point seven billion dollars in loans to pay 259 00:14:36,800 --> 00:14:40,120 Speaker 9: its foreign exchange debts, and the stock market is up 260 00:14:40,120 --> 00:14:43,480 Speaker 9: twenty percent since he took office. Whether Melea's plans can 261 00:14:43,640 --> 00:14:47,280 Speaker 9: succeed will depend on keeping that optimism going, getting the 262 00:14:47,320 --> 00:14:51,560 Speaker 9: economy going, and bringing down inflation enough to build up 263 00:14:51,600 --> 00:14:55,080 Speaker 9: dollar reserves. He says he's not giving up on dollarization, 264 00:14:55,200 --> 00:14:59,440 Speaker 9: but insists his program needs time until the money stops 265 00:14:59,560 --> 00:15:02,520 Speaker 9: rolling out in all directions David. 266 00:15:03,080 --> 00:15:05,680 Speaker 2: This week, our editor in chief, John Micklethway traveled to 267 00:15:05,720 --> 00:15:08,400 Speaker 2: Buenos Aires for an in depth interview with President Lay 268 00:15:08,480 --> 00:15:11,280 Speaker 2: about what he hopes to accomplish. 269 00:15:11,480 --> 00:15:15,000 Speaker 10: So, first, you need to reform the financial system, which 270 00:15:15,040 --> 00:15:17,880 Speaker 10: is what we are working on. And in that context, 271 00:15:18,400 --> 00:15:20,800 Speaker 10: it's not just that the exchange rate is flexible, but 272 00:15:20,920 --> 00:15:25,760 Speaker 10: also the money amount never varies, and as the economy 273 00:15:25,880 --> 00:15:31,480 Speaker 10: recovers and grows and the money demand increases as the 274 00:15:31,560 --> 00:15:35,040 Speaker 10: amount of business will order be a given endogenously will 275 00:15:35,120 --> 00:15:40,440 Speaker 10: have a dollarization process relating to the monetization performed by 276 00:15:40,440 --> 00:15:41,400 Speaker 10: individuals in the economy. 277 00:15:42,880 --> 00:15:44,960 Speaker 11: I know that you are doing this thing with the 278 00:15:45,080 --> 00:15:49,160 Speaker 11: floating exchange rate, where you've been deprecating or depreciating the 279 00:15:49,160 --> 00:15:53,560 Speaker 11: official rate by two percent each month, and the IMF 280 00:15:53,560 --> 00:15:56,040 Speaker 11: and various people have said, you know you must speed up, 281 00:15:56,160 --> 00:15:59,640 Speaker 11: you must go quicker. Will you proceed? I know you 282 00:15:59,640 --> 00:16:01,840 Speaker 11: are doing these other things, but when you speed up, 283 00:16:03,360 --> 00:16:05,080 Speaker 11: that's rate of appreciation. 284 00:16:06,280 --> 00:16:09,880 Speaker 10: No, because it makes no sense. It makes no sense 285 00:16:09,880 --> 00:16:11,120 Speaker 10: to do that. 286 00:16:11,120 --> 00:16:14,160 Speaker 2: That was Argentine President Milay speaking with Bloomberg Editor in 287 00:16:14,240 --> 00:16:18,960 Speaker 2: chief John Nikelthwaite. We're joined once again by our very 288 00:16:18,960 --> 00:16:22,480 Speaker 2: special contributor here on Walsteretreek. He is Larry Summers of Harvard. So, Larry, 289 00:16:22,640 --> 00:16:25,320 Speaker 2: welcome back. Great to have you here, particularly this week 290 00:16:25,360 --> 00:16:28,120 Speaker 2: when we got those jobs numbers which surprised the ouside. 291 00:16:28,280 --> 00:16:29,920 Speaker 2: What did you make of them? 292 00:16:30,160 --> 00:16:36,960 Speaker 12: This was a hot report jobs above three hundred thousand upwards, revision, strong, 293 00:16:37,000 --> 00:16:44,200 Speaker 12: household survey hours up, payrolls up at nearly a ten 294 00:16:44,240 --> 00:16:47,200 Speaker 12: percent to annualize rate. 295 00:16:47,760 --> 00:16:50,320 Speaker 8: This was a hot report that. 296 00:16:50,400 --> 00:16:56,880 Speaker 12: Suggested that, if anything, the economy is reaccelerating. This is 297 00:16:57,080 --> 00:17:01,080 Speaker 12: very different from what lots of people, most people I think, 298 00:17:01,200 --> 00:17:08,440 Speaker 12: were expecting, and fits the thesis that the neutral rate 299 00:17:08,720 --> 00:17:13,760 Speaker 12: is much higher than people supposed and take money is 300 00:17:13,880 --> 00:17:17,399 Speaker 12: much less potent than people supposed. 301 00:17:17,560 --> 00:17:19,640 Speaker 2: So let's talk about the neutral rate. You've said before 302 00:17:19,760 --> 00:17:21,720 Speaker 2: that the FED should have at least some idea of 303 00:17:21,720 --> 00:17:23,719 Speaker 2: the nutral right to know whether it's restrict or not. 304 00:17:23,800 --> 00:17:26,760 Speaker 2: We heard from share Powell this week is making out 305 00:17:26,760 --> 00:17:29,159 Speaker 2: of Stanford, where he said, yes, we are restricting of 306 00:17:29,200 --> 00:17:32,679 Speaker 2: our policy, and yet he quite explicitly said he doesn't 307 00:17:32,720 --> 00:17:34,840 Speaker 2: need to worry about where the neutral rate is for 308 00:17:35,000 --> 00:17:36,200 Speaker 2: policy going forward. 309 00:17:36,560 --> 00:17:39,159 Speaker 13: So all those are very important things, but they're not 310 00:17:39,280 --> 00:17:41,760 Speaker 13: things that affect the longer run potential output of the 311 00:17:41,880 --> 00:17:46,000 Speaker 13: United States. So honestly, though, so the question of what 312 00:17:46,080 --> 00:17:50,480 Speaker 13: will be the equilibrium interest rate, that the neutral interest 313 00:17:50,560 --> 00:17:53,320 Speaker 13: rate going forward doesn't really matter for policy today. 314 00:17:53,720 --> 00:17:56,080 Speaker 12: Saying we don't need to know what the neutral rate 315 00:17:56,320 --> 00:17:59,639 Speaker 12: is is like saying you should drive your car on 316 00:17:59,760 --> 00:18:02,920 Speaker 12: fees without looking at the speedometer. 317 00:18:03,840 --> 00:18:07,480 Speaker 8: It is just a mistake. You cannot know. 318 00:18:08,080 --> 00:18:11,320 Speaker 12: And look, I don't know what the Chairman said in 319 00:18:11,400 --> 00:18:15,879 Speaker 12: full context, and I want to be fair, but there's 320 00:18:16,000 --> 00:18:22,879 Speaker 12: no way to judge what policy is without knowing what 321 00:18:23,000 --> 00:18:28,240 Speaker 12: would be a neutral policy. My view is that the 322 00:18:28,320 --> 00:18:33,960 Speaker 12: evidence is overwhelming that the neutral rate is far higher 323 00:18:34,520 --> 00:18:36,880 Speaker 12: than the two and a half percent two point six 324 00:18:36,920 --> 00:18:41,360 Speaker 12: percent that the FED talks about. That evidence comes from 325 00:18:41,520 --> 00:18:46,600 Speaker 12: four places. First, we have high interest rates, and we 326 00:18:46,680 --> 00:18:51,200 Speaker 12: have an economy that is, if anything, growing faster than 327 00:18:51,480 --> 00:18:57,560 Speaker 12: its long run potential, creating jobs as fast or faster 328 00:18:58,160 --> 00:19:01,120 Speaker 12: than natural growth in the labor. 329 00:19:00,880 --> 00:19:02,960 Speaker 8: Force, even allowing for immigration. 330 00:19:04,000 --> 00:19:09,440 Speaker 12: Second, we have an economy with financial conditions that are 331 00:19:09,600 --> 00:19:14,440 Speaker 12: extremely loose, that are actually looser than they were before 332 00:19:14,560 --> 00:19:15,240 Speaker 12: the FED. 333 00:19:15,160 --> 00:19:17,119 Speaker 8: Started the whole tightening process. 334 00:19:17,480 --> 00:19:20,560 Speaker 12: If you look at credit spreads, you look at the 335 00:19:20,600 --> 00:19:24,280 Speaker 12: stock market, suggesting that in the fullness of it, all 336 00:19:24,560 --> 00:19:29,160 Speaker 12: financial conditions actually haven't been tightened in an appreciable way. 337 00:19:29,960 --> 00:19:32,440 Speaker 8: Third, if you look at the markets. 338 00:19:32,160 --> 00:19:37,520 Speaker 12: Estimate of the long run neutral rate as formed by 339 00:19:37,840 --> 00:19:43,320 Speaker 12: looking at longer term of forward interest rates, that neutral 340 00:19:43,400 --> 00:19:50,080 Speaker 12: rate is comfortably above four percent. Fourth, if you look 341 00:19:50,119 --> 00:19:54,960 Speaker 12: at the fundamental determinants of the neutral rate, we have 342 00:19:55,200 --> 00:19:59,720 Speaker 12: big surges in budget deficits that, if anything, look to 343 00:20:00,320 --> 00:20:03,480 Speaker 12: get worse given the political process. 344 00:20:03,880 --> 00:20:06,440 Speaker 8: We have big changes in. 345 00:20:06,840 --> 00:20:14,480 Speaker 12: Resilience, investment in green investment in new investment in data centers, 346 00:20:14,880 --> 00:20:22,040 Speaker 12: along with deglobalization which may limit capital inflows into our country. So, 347 00:20:22,080 --> 00:20:25,760 Speaker 12: whether you look at the fundamentals, you look at market estimates, 348 00:20:26,080 --> 00:20:29,000 Speaker 12: you look at financial conditions, or you look at the 349 00:20:29,040 --> 00:20:32,919 Speaker 12: current strength of the economy, seems to me the evidence 350 00:20:33,080 --> 00:20:38,160 Speaker 12: is overwhelming that the neutral rate is far higher than 351 00:20:38,200 --> 00:20:44,639 Speaker 12: the FED supposes, and so cutting rates and hitting the 352 00:20:44,800 --> 00:20:49,919 Speaker 12: accelerator in an economy creating jobs at more at a 353 00:20:49,960 --> 00:20:55,919 Speaker 12: pace of more than three million jobs a year, with 354 00:20:56,560 --> 00:21:04,480 Speaker 12: payrolls growing at rates consisting with inflation far above two percent, 355 00:21:05,160 --> 00:21:08,520 Speaker 12: with a need to hoard ammunition, because we're not one 356 00:21:08,600 --> 00:21:16,280 Speaker 12: hundred percent certain we're past every financial problem in the 357 00:21:16,320 --> 00:21:24,200 Speaker 12: banking system, and with potential supply shocks coming down the road. 358 00:21:24,359 --> 00:21:25,359 Speaker 8: Things could change. 359 00:21:25,440 --> 00:21:30,359 Speaker 12: Things are always subject to rapid change. So I don't 360 00:21:30,359 --> 00:21:35,560 Speaker 12: want to make a prescription for monetary policy in June, 361 00:21:36,119 --> 00:21:41,399 Speaker 12: but on current facts and current trends, I think it 362 00:21:41,440 --> 00:21:48,359 Speaker 12: would be a inappropriate act to cut rates in June. 363 00:21:48,880 --> 00:21:52,119 Speaker 12: And it is deeply troubling to me that the Fed 364 00:21:52,800 --> 00:21:59,040 Speaker 12: somehow thinks that fidelity to its previous forward guidance and 365 00:21:59,680 --> 00:22:04,720 Speaker 12: doc it believes some time ago is a more important 366 00:22:04,760 --> 00:22:09,800 Speaker 12: thing than trying to gauge the neutral rate on an 367 00:22:09,880 --> 00:22:12,359 Speaker 12: ongoing basis. 368 00:22:12,840 --> 00:22:14,560 Speaker 2: There's a lot of talk right now about what we're 369 00:22:14,560 --> 00:22:16,960 Speaker 2: seeing in the labor market. Here actually is an increase 370 00:22:16,960 --> 00:22:19,359 Speaker 2: in immigration, and I'm not necessarily even talking about the 371 00:22:19,400 --> 00:22:22,800 Speaker 2: people coming across the southern border illegally. I'm talking about 372 00:22:22,880 --> 00:22:26,399 Speaker 2: legal immigration, which has increased rather significantly under the Biden administration, 373 00:22:26,600 --> 00:22:29,520 Speaker 2: How is that affecting your model for economic growth in 374 00:22:29,520 --> 00:22:30,199 Speaker 2: the United States. 375 00:22:30,640 --> 00:22:38,680 Speaker 12: Look, that has meant more labor force growth, which has 376 00:22:38,960 --> 00:22:44,320 Speaker 12: meant more supply to the extent that those immigrants are 377 00:22:45,040 --> 00:22:50,359 Speaker 12: earning and increasing the capacity of the economy and remitting 378 00:22:50,400 --> 00:22:54,880 Speaker 12: the money back to their families where they came from. 379 00:22:55,520 --> 00:23:00,159 Speaker 12: It's a supply increase without a concombatant demand increase, and 380 00:23:00,200 --> 00:23:05,280 Speaker 12: therefore it's deflationary. But that's what's been baked in and 381 00:23:05,440 --> 00:23:08,560 Speaker 12: is going to happen and has been happening. And so 382 00:23:08,600 --> 00:23:12,840 Speaker 12: the question for movements and inflation is is that trend 383 00:23:12,960 --> 00:23:17,320 Speaker 12: going to accelerate or is it going to decelerate over time? 384 00:23:18,119 --> 00:23:22,800 Speaker 12: As I look at the attitude, which I find ugly 385 00:23:22,840 --> 00:23:29,560 Speaker 12: and unattractive of a potential Trump administration towards immigration, if 386 00:23:29,600 --> 00:23:34,080 Speaker 12: I look at the political pressures on the Biden administration, 387 00:23:34,680 --> 00:23:40,160 Speaker 12: seems to me much more likely that immigration flows are 388 00:23:40,200 --> 00:23:44,320 Speaker 12: going to decrease going forward then that they're going to 389 00:23:44,400 --> 00:23:48,240 Speaker 12: increase going forward. And that's just one of the ways 390 00:23:48,280 --> 00:23:53,360 Speaker 12: in which deglobalization may contribute to higher inflation. 391 00:23:53,920 --> 00:23:55,760 Speaker 2: What other things are worrying you that are out there 392 00:23:55,800 --> 00:23:56,280 Speaker 2: right now? 393 00:23:56,800 --> 00:24:02,800 Speaker 12: David I'm nervous about oil prices is given what's happening 394 00:24:02,840 --> 00:24:07,520 Speaker 12: in the Middle East, and given the increased possibility that 395 00:24:07,680 --> 00:24:15,040 Speaker 12: Iran is going to be drawn into this conflict. Given 396 00:24:15,119 --> 00:24:21,240 Speaker 12: that we've got the coming of summer combined with higher 397 00:24:21,600 --> 00:24:26,560 Speaker 12: wholesale prices projected, I think there's a real shot that 398 00:24:26,640 --> 00:24:31,880 Speaker 12: we will have gasoline prices back to having a forehandle. 399 00:24:32,119 --> 00:24:33,320 Speaker 8: And I think the last. 400 00:24:33,080 --> 00:24:38,040 Speaker 12: Thing is that if I'm right, I'm not convinced that 401 00:24:38,320 --> 00:24:42,080 Speaker 12: duration mismatches in the banking system. 402 00:24:42,200 --> 00:24:44,320 Speaker 8: Have been fully addressed. 403 00:24:45,040 --> 00:24:52,600 Speaker 12: And the combination of duration mismatches plus hot money on 404 00:24:53,920 --> 00:25:01,040 Speaker 12: the depositor side, plus problems in commercial real estate means 405 00:25:01,119 --> 00:25:07,280 Speaker 12: that we could have some real financial distress at some point. 406 00:25:07,320 --> 00:25:09,160 Speaker 8: Again, I think it's odds off. 407 00:25:09,240 --> 00:25:12,840 Speaker 12: But it's a risk, and that's another reason why I 408 00:25:12,920 --> 00:25:18,760 Speaker 12: think the FED should be hoarding its ammunition, not pumping 409 00:25:18,840 --> 00:25:24,320 Speaker 12: up bubbles with easy money at a time of rapid 410 00:25:24,400 --> 00:25:27,600 Speaker 12: growth and epically loose financial conditions. 411 00:25:28,040 --> 00:25:30,160 Speaker 2: Larry, thank you so much for being here, as Larry 412 00:25:30,240 --> 00:25:32,800 Speaker 2: Summers of Harvard are very special contributor here on Wall 413 00:25:32,880 --> 00:25:37,480 Speaker 2: Street Week. Coming up, we welcome back Sonal Desai of 414 00:25:37,520 --> 00:25:40,160 Speaker 2: Franklin Templeton to take us through the week in the markets. 415 00:25:42,080 --> 00:25:44,280 Speaker 2: That's next on Wall Street Week on Bloomberg. 416 00:25:45,520 --> 00:25:49,760 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 417 00:25:49,880 --> 00:25:50,800 Speaker 1: Bloomberg Radio. 418 00:25:56,680 --> 00:25:59,080 Speaker 2: This is Wall Street Week. I'm David Weston. Equity market 419 00:25:59,160 --> 00:26:02,000 Speaker 2: served on Friday after those strong jobs numbers. But for 420 00:26:02,040 --> 00:26:03,919 Speaker 2: the week overall, the S and P five hundred was 421 00:26:03,960 --> 00:26:06,560 Speaker 2: down by just under one percent, ending at fifty two 422 00:26:06,600 --> 00:26:07,040 Speaker 2: oh four. 423 00:26:07,200 --> 00:26:08,640 Speaker 8: That is still though one. 424 00:26:08,600 --> 00:26:11,240 Speaker 2: Hundred points over the median estimate of our Bloomberg ols. 425 00:26:11,400 --> 00:26:14,200 Speaker 2: The Nazak goes off eight tens of percent. Bond sold 426 00:26:14,200 --> 00:26:16,159 Speaker 2: off throughout the week, with the yield on the tenure 427 00:26:16,280 --> 00:26:18,760 Speaker 2: up twenty basis points ten to four point four percent. 428 00:26:18,960 --> 00:26:20,879 Speaker 2: To take us through this week in the markets. Welcome 429 00:26:20,880 --> 00:26:24,760 Speaker 2: back now, Sonaldosai Franklin, Templeton's CIO for fixed income. So 430 00:26:24,760 --> 00:26:26,439 Speaker 2: so now great to have you back with us. So 431 00:26:26,640 --> 00:26:29,320 Speaker 2: what should investor take away from this week in the markets? 432 00:26:30,280 --> 00:26:33,000 Speaker 14: Well, you know, it's a part of what investors need 433 00:26:33,040 --> 00:26:35,240 Speaker 14: to take away is it's going to stay voldotile for 434 00:26:35,280 --> 00:26:38,600 Speaker 14: a while longer. And that's really clear. I think bond 435 00:26:38,640 --> 00:26:43,280 Speaker 14: markets have started absorbing the fact that the Fed doesn't 436 00:26:43,320 --> 00:26:47,320 Speaker 14: need to rush in cutting rates. That's also quite clear. 437 00:26:47,720 --> 00:26:49,800 Speaker 14: Having said all of this, next week we might get 438 00:26:50,000 --> 00:26:52,679 Speaker 14: good inflation prints and you might get a fifteen basis 439 00:26:52,680 --> 00:26:56,720 Speaker 14: point Raley. The problem, as I see it, is that 440 00:26:56,800 --> 00:26:59,520 Speaker 14: the Fed has been very clear. Jay Powell has been 441 00:26:59,560 --> 00:27:02,280 Speaker 14: really clear that he would like to be able to cut, 442 00:27:02,800 --> 00:27:04,640 Speaker 14: and I think if he had been in a position 443 00:27:04,680 --> 00:27:07,000 Speaker 14: to cut already, he would have cut. The data has 444 00:27:07,040 --> 00:27:11,440 Speaker 14: not cooperated and so essentially there is a little bit 445 00:27:11,760 --> 00:27:16,960 Speaker 14: of whipsaw action happening right now in the bond market, 446 00:27:17,080 --> 00:27:21,760 Speaker 14: certainly at the equity market. No comments, I have no 447 00:27:21,840 --> 00:27:24,440 Speaker 14: comments as to what's going on there at all. 448 00:27:24,640 --> 00:27:26,399 Speaker 2: Just after the races. Well, as you say what you 449 00:27:26,520 --> 00:27:28,760 Speaker 2: call it rip saw color volatility, there's a lot of 450 00:27:28,840 --> 00:27:31,320 Speaker 2: risks out there that are hard to quantify. We spend 451 00:27:31,320 --> 00:27:33,080 Speaker 2: a lot of the program actually talking about a variety 452 00:27:33,080 --> 00:27:36,200 Speaker 2: of risks, not just economic, but also geopolitical and political. 453 00:27:36,600 --> 00:27:38,800 Speaker 2: As an investor, when you put together a portfolio, how 454 00:27:38,800 --> 00:27:40,840 Speaker 2: do you provide the sort of risks that we're seeing 455 00:27:40,880 --> 00:27:41,640 Speaker 2: right now out there? 456 00:27:42,560 --> 00:27:45,760 Speaker 14: So you know, the reality is, I couldn't agree more 457 00:27:45,840 --> 00:27:49,800 Speaker 14: with your earlier guests. We are you know any one 458 00:27:50,080 --> 00:27:56,760 Speaker 14: of this series of risks China and Taiwan, Russia, Ukraine, 459 00:27:57,280 --> 00:28:01,199 Speaker 14: the Middle East, and the American of course, and the 460 00:28:01,240 --> 00:28:03,120 Speaker 14: other elections we're going to see around the world. Any 461 00:28:03,160 --> 00:28:05,920 Speaker 14: one of these would have actually been somewhat significant. All 462 00:28:05,960 --> 00:28:12,200 Speaker 14: of them together, of course, increases in terms of the uncertainty. 463 00:28:12,240 --> 00:28:16,800 Speaker 14: It increases, it increases the potential impact, no doubt. The 464 00:28:16,920 --> 00:28:21,800 Speaker 14: problem is you can't actually manage your portfolio to one 465 00:28:21,840 --> 00:28:25,240 Speaker 14: of these risks, because how do you actually handicap any 466 00:28:25,359 --> 00:28:30,800 Speaker 14: one of these as being likely? Just if anything disastrous 467 00:28:30,880 --> 00:28:33,240 Speaker 14: happened in the Middle East, forward, Russia or with China. 468 00:28:33,760 --> 00:28:37,600 Speaker 14: Clearly what you'd want to be in is completely only 469 00:28:37,880 --> 00:28:41,040 Speaker 14: entirely safe. Maybe you'd want gold. I don't know. That's 470 00:28:41,040 --> 00:28:43,800 Speaker 14: not how you manage your portfolio, right, So I think 471 00:28:43,880 --> 00:28:47,160 Speaker 14: for us what we've done, you know, David, we were 472 00:28:47,320 --> 00:28:50,320 Speaker 14: very short for a long time with juist treasuries. We've 473 00:28:50,320 --> 00:28:54,960 Speaker 14: moved to a neutral position, and we are hesitant I'd 474 00:28:55,040 --> 00:28:59,760 Speaker 14: say to go overly long, despite tenures being where they 475 00:28:59,800 --> 00:29:02,960 Speaker 14: are right now, in part because the economy is pretty 476 00:29:03,000 --> 00:29:06,240 Speaker 14: strong and I'm not sure that the Fed's going to 477 00:29:06,280 --> 00:29:09,040 Speaker 14: be able to cut as quickly as they would like 478 00:29:09,120 --> 00:29:12,520 Speaker 14: to cut. So I would tend to agree entirely with Larry. 479 00:29:12,520 --> 00:29:15,040 Speaker 14: I've been saying September now for a while as being 480 00:29:15,240 --> 00:29:17,520 Speaker 14: the right time for the FED to start thinking about this. 481 00:29:18,240 --> 00:29:21,200 Speaker 14: I also think that the overall number of cuts is 482 00:29:21,240 --> 00:29:24,120 Speaker 14: not going to be quite as high as markets would like, 483 00:29:24,720 --> 00:29:27,440 Speaker 14: leading us to that neutral rate of about four percent. 484 00:29:27,920 --> 00:29:30,280 Speaker 2: So what does it tell us about duration? I mean, 485 00:29:30,280 --> 00:29:32,080 Speaker 2: you have cash on the one extreme, you have longer 486 00:29:32,160 --> 00:29:34,200 Speaker 2: duration on the other. Where do you go? Are you 487 00:29:34,280 --> 00:29:36,160 Speaker 2: moving toward more durations now? 488 00:29:36,520 --> 00:29:36,600 Speaker 15: So? 489 00:29:36,760 --> 00:29:39,080 Speaker 14: You know, what I'd say is what I would advise 490 00:29:39,160 --> 00:29:42,320 Speaker 14: people to do. You know, cash has worked incredibly well. 491 00:29:42,960 --> 00:29:46,840 Speaker 14: How can we deny it? You know it's paying really well. However, 492 00:29:47,040 --> 00:29:49,959 Speaker 14: it is important to start thinking about increasing that duration. 493 00:29:50,360 --> 00:29:54,200 Speaker 14: It's not to get massive returns in fixed income. That's 494 00:29:54,240 --> 00:29:56,920 Speaker 14: not what I'm falling for. We are neutral. I'm talking 495 00:29:56,920 --> 00:30:01,200 Speaker 14: about moving from overnight and cash towards ultra short and 496 00:30:01,240 --> 00:30:04,960 Speaker 14: then slowly dipping into low duration and beginning to move 497 00:30:05,080 --> 00:30:09,240 Speaker 14: out on that duration spectrum. But FED wilcut. The one 498 00:30:09,240 --> 00:30:11,320 Speaker 14: thing I would say, though, is this is not a 499 00:30:11,400 --> 00:30:17,160 Speaker 14: series of cuts leading to a multi year rally in yields. 500 00:30:17,520 --> 00:30:20,280 Speaker 14: I think we are in a different place if you 501 00:30:20,280 --> 00:30:22,600 Speaker 14: look at where the fiscal deficit is. You look at 502 00:30:22,600 --> 00:30:27,160 Speaker 14: the fact that inflation is stickier than any of us 503 00:30:27,160 --> 00:30:30,800 Speaker 14: would like. Wages are pretty sticky. You've got to accept 504 00:30:30,880 --> 00:30:33,440 Speaker 14: that Fixtinc. Is not going to give you equity like returns. 505 00:30:33,600 --> 00:30:33,840 Speaker 3: Yeah. 506 00:30:34,000 --> 00:30:35,680 Speaker 2: So now it's so great always to have you with this. 507 00:30:35,800 --> 00:30:36,120 Speaker 3: Thank you. 508 00:30:36,200 --> 00:30:40,440 Speaker 2: Listen now the sigh of Franklin Templeton. Rules are mostly 509 00:30:40,480 --> 00:30:42,680 Speaker 2: made to be broken and are too often for the 510 00:30:42,840 --> 00:30:46,600 Speaker 2: lazy to hide behind. So said General Douglas MacArthur during 511 00:30:46,600 --> 00:30:49,360 Speaker 2: the Korean War when he was disobeying a direct order 512 00:30:49,360 --> 00:30:52,400 Speaker 2: from President Truman. He broke the rules, and the president 513 00:30:52,520 --> 00:30:55,560 Speaker 2: promptly sacked him. There are times when all of us 514 00:30:55,600 --> 00:30:58,920 Speaker 2: have to make tough decisions about following the rules. I 515 00:30:58,920 --> 00:31:01,400 Speaker 2: got crosswise of a rial judge very early in my 516 00:31:01,480 --> 00:31:05,080 Speaker 2: career when I deliberately ignored his instruction not to move 517 00:31:05,160 --> 00:31:08,400 Speaker 2: a controversial document into evidence. It was the only way 518 00:31:08,480 --> 00:31:10,400 Speaker 2: to make a record for appeal, and so I did 519 00:31:10,440 --> 00:31:13,800 Speaker 2: it anyway. I remember Judge Barnes his name, was leaning 520 00:31:13,840 --> 00:31:17,120 Speaker 2: over the bench, raising his voice and reaming me out 521 00:31:17,160 --> 00:31:20,520 Speaker 2: for what seemed like forever on the way out of 522 00:31:20,560 --> 00:31:23,200 Speaker 2: the courtroom. A senior litigation partner for another law firm 523 00:31:23,280 --> 00:31:25,880 Speaker 2: put his arm around my shoulders and said, you don't 524 00:31:26,000 --> 00:31:29,960 Speaker 2: win cases by making friends of judges, and I certainly didn't. 525 00:31:30,600 --> 00:31:33,560 Speaker 2: The business world is full examples of people either breaking 526 00:31:33,600 --> 00:31:36,200 Speaker 2: the rules or coming so close that there's nowhere for 527 00:31:36,280 --> 00:31:40,320 Speaker 2: them to hide. Elon must notoriously kept tweeting about Tesla, 528 00:31:40,520 --> 00:31:42,520 Speaker 2: which got him in trouble with the SEC. 529 00:31:43,000 --> 00:31:46,840 Speaker 16: All of these allegations are very pointed. They're very direct 530 00:31:46,960 --> 00:31:51,800 Speaker 16: in alleging that he committed, you know, actions at least 531 00:31:51,840 --> 00:31:58,000 Speaker 16: the SEC feels were against against regulations and potentially against 532 00:31:58,040 --> 00:31:58,440 Speaker 16: the law. 533 00:31:59,240 --> 00:32:01,480 Speaker 2: Apple has been a choose to breaking the rules against 534 00:32:01,520 --> 00:32:05,080 Speaker 2: anti competitive behavior any number of times, most recently by 535 00:32:05,080 --> 00:32:07,000 Speaker 2: the Attorney General of the United States. 536 00:32:07,320 --> 00:32:10,400 Speaker 17: We alleged that Apple has employed a strategy that relies 537 00:32:10,440 --> 00:32:17,120 Speaker 17: on exclusionary anti competitive conduct that hurts both consumers and developers. 538 00:32:17,160 --> 00:32:21,560 Speaker 17: For consumers, that has meant fewer choices, higher prices and fees, 539 00:32:22,160 --> 00:32:26,920 Speaker 17: lower quality smartphones, apps and accessories, and less innovation from 540 00:32:27,000 --> 00:32:28,440 Speaker 17: Apple and its competitors. 541 00:32:28,680 --> 00:32:31,160 Speaker 2: And there are some so called rules that we observe 542 00:32:31,240 --> 00:32:34,000 Speaker 2: in the breach and may be happy doing it, like 543 00:32:34,080 --> 00:32:37,280 Speaker 2: that tailor rule that pointed to much higher interest rates 544 00:32:37,280 --> 00:32:38,800 Speaker 2: than any of us wanted. 545 00:32:38,840 --> 00:32:41,880 Speaker 15: The tailor rule. For example, a guideline that central banks 546 00:32:41,880 --> 00:32:46,040 Speaker 15: around the world have used to guide interstrate policy would 547 00:32:46,040 --> 00:32:48,000 Speaker 15: have suggested, at the outset of this you needed short 548 00:32:48,040 --> 00:32:49,680 Speaker 15: term registrates of nine or ten percent. 549 00:32:49,760 --> 00:32:50,680 Speaker 8: We didn't get there. 550 00:32:51,160 --> 00:32:53,920 Speaker 2: Sometimes it seems like General MacArthur had so our political 551 00:32:54,000 --> 00:32:56,640 Speaker 2: leaders in mind when you talked about breaking rules from 552 00:32:56,680 --> 00:32:59,600 Speaker 2: a certain short term congressman from Queens who simply made 553 00:32:59,680 --> 00:33:01,360 Speaker 2: up as qualifications for the job. 554 00:33:01,880 --> 00:33:06,200 Speaker 18: It's always, frankly, very sad when a public official that 555 00:33:06,360 --> 00:33:11,080 Speaker 18: has that is responsible for properly stewarding the public trust 556 00:33:11,480 --> 00:33:15,680 Speaker 18: portrays that trust. It is absolutely imperative that George Santos 557 00:33:15,720 --> 00:33:18,280 Speaker 18: resigned from his seat. It is extremely important for the 558 00:33:18,320 --> 00:33:19,240 Speaker 18: integrity of this body. 559 00:33:20,240 --> 00:33:23,320 Speaker 2: To a longtime New Jersey senator who stands accused of 560 00:33:23,400 --> 00:33:24,880 Speaker 2: taking bribes. 561 00:33:24,760 --> 00:33:28,000 Speaker 19: The senator and his wife accepted hundreds of thousands of 562 00:33:28,080 --> 00:33:31,520 Speaker 19: dollars of bribes in exchange for Senator Menendez using his 563 00:33:31,640 --> 00:33:35,960 Speaker 19: power and influence to protect and to enrich those businessmen 564 00:33:36,800 --> 00:33:38,840 Speaker 19: and to benefit the government of Egypt. 565 00:33:39,440 --> 00:33:42,240 Speaker 2: And then there's the arcane world of sports rules. We 566 00:33:42,280 --> 00:33:44,760 Speaker 2: couldn't play these games if we didn't have rules to follow, 567 00:33:45,040 --> 00:33:47,600 Speaker 2: But does the NFL really need a rule that ties 568 00:33:47,680 --> 00:33:49,960 Speaker 2: performance payments at the end of the year to where 569 00:33:49,960 --> 00:33:51,560 Speaker 2: a player was picked in the draft. 570 00:33:52,000 --> 00:33:53,120 Speaker 3: San Francisco forty. 571 00:33:52,920 --> 00:33:56,120 Speaker 2: Nine Ers quarterback brock Perty probably doesn't think so. This 572 00:33:56,240 --> 00:33:58,560 Speaker 2: week we learned that he came out twenty fourth on 573 00:33:58,600 --> 00:34:01,440 Speaker 2: the bonus list because, as we all know, he was 574 00:34:01,480 --> 00:34:05,040 Speaker 2: picked dead last his year, which meant that he already 575 00:34:05,080 --> 00:34:08,080 Speaker 2: made about fifty million dollars less last year than his 576 00:34:08,120 --> 00:34:11,120 Speaker 2: counterpart in the Super Bowl, Patrick Mahomes. In the world 577 00:34:11,200 --> 00:34:13,879 Speaker 2: of basketball, we certainly need rules about where we put 578 00:34:13,920 --> 00:34:17,960 Speaker 2: that three point line, which somehow got lost in the Portland, 579 00:34:17,960 --> 00:34:22,080 Speaker 2: Oregon Arena where several of the NCAA women's basketball. 580 00:34:21,680 --> 00:34:22,440 Speaker 3: Games were played. 581 00:34:23,000 --> 00:34:26,320 Speaker 2: Just before game time between Texas and North Carolina State, 582 00:34:26,719 --> 00:34:29,360 Speaker 2: the coaches learned that the three point line was closer 583 00:34:29,400 --> 00:34:31,359 Speaker 2: to the basket at one end of the court than 584 00:34:31,400 --> 00:34:34,239 Speaker 2: at the other. Faced with either playing the game with 585 00:34:34,280 --> 00:34:37,920 Speaker 2: the wrong lines or postponing the game, the coaches decided 586 00:34:37,920 --> 00:34:40,520 Speaker 2: to play on, with NC State winning. 587 00:34:40,200 --> 00:34:41,479 Speaker 3: To go on to the Final Four. 588 00:34:42,280 --> 00:34:45,360 Speaker 2: It was a real embarrassment for the NCAA, but nothing 589 00:34:45,520 --> 00:34:47,920 Speaker 2: like what it confronted three years ago when a player 590 00:34:48,000 --> 00:34:51,200 Speaker 2: went on social media showing how pathetic the weight room 591 00:34:51,239 --> 00:34:54,239 Speaker 2: provided to women athletes in the tournament was compared to 592 00:34:54,280 --> 00:34:57,840 Speaker 2: their male counterparts, where the men got an extensive facility 593 00:34:57,880 --> 00:35:00,440 Speaker 2: with weight machines, squat wrecks, and bench which is the 594 00:35:00,520 --> 00:35:04,560 Speaker 2: women were given just a single stand of dumbbells, causing 595 00:35:04,640 --> 00:35:09,040 Speaker 2: a public outrage, an NCAA apology, and promises a future 596 00:35:09,120 --> 00:35:12,480 Speaker 2: parody for men and women. This year, women's basketball got 597 00:35:12,520 --> 00:35:15,480 Speaker 2: a different sort of parody when Iowah Hawkeye guard Kaitlyn 598 00:35:15,560 --> 00:35:18,640 Speaker 2: Clark passed the men's all time scoring record. 599 00:35:19,239 --> 00:35:20,479 Speaker 3: Maybe this time the. 600 00:35:20,480 --> 00:35:23,520 Speaker 2: NCAA will learn its lesson about paying attention to the 601 00:35:23,560 --> 00:35:26,759 Speaker 2: women's side of the tournament. Or then again, it might 602 00:35:26,840 --> 00:35:30,000 Speaker 2: just need another rule about that. That does it for 603 00:35:30,040 --> 00:35:32,319 Speaker 2: this episode of Wall Street Week, I'm David Weston. This 604 00:35:32,480 --> 00:35:33,120 Speaker 2: is Bloomberg. 605 00:35:33,239 --> 00:35:41,160 Speaker 3: See you next week.