1 00:00:00,520 --> 00:00:03,920 Speaker 1: This is Bloomberg Wall Street. We turn our attention to 2 00:00:03,960 --> 00:00:07,080 Speaker 1: the markets this week. U s c BEHIN members reinforcing 3 00:00:07,120 --> 00:00:10,600 Speaker 1: concerns about inflation, the financial stories that cheap our work, 4 00:00:10,680 --> 00:00:13,480 Speaker 1: a really different reaction to Mark two. More indications of 5 00:00:13,600 --> 00:00:16,200 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 00:00:19,520 --> 00:00:22,919 Speaker 1: former Treachery Secretary, Katherine Keene, CEO of v n Y Moms, 8 00:00:22,920 --> 00:00:26,239 Speaker 1: Sam's l Chairman and founder of Equity Group Investment in 9 00:00:26,280 --> 00:00:30,200 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg radew 10 00:00:30,320 --> 00:00:34,440 Speaker 1: When it rains, it pours, inflation, supply chains, war and 11 00:00:34,600 --> 00:00:38,559 Speaker 1: tightening financial conditions. We've got it all. This is Bloomberg 12 00:00:38,560 --> 00:00:42,839 Speaker 1: Wall Street Week. I'm David Weston this week special contributing 13 00:00:42,920 --> 00:00:45,560 Speaker 1: Larry Summers on what it will take to get inflation 14 00:00:45,800 --> 00:00:51,599 Speaker 1: back under control. The real determinants of inflation have to 15 00:00:51,640 --> 00:00:56,200 Speaker 1: do with the total level of demand that's being stimulated 16 00:00:56,240 --> 00:01:00,040 Speaker 1: by policies. And Roger Altman of Evercreps on whether of 17 00:01:00,160 --> 00:01:03,120 Speaker 1: things really are as bad as they look and what 18 00:01:03,320 --> 00:01:07,880 Speaker 1: can be done about it. It certainly could get worse 19 00:01:07,920 --> 00:01:23,920 Speaker 1: before it gets better. It wasn't a great week on 20 00:01:23,959 --> 00:01:27,120 Speaker 1: Global Wall Street. Consumer price numbers may have slowed down 21 00:01:27,120 --> 00:01:29,639 Speaker 1: how bad, but according to Sarah House of Wells Fargo, 22 00:01:29,920 --> 00:01:34,720 Speaker 1: not nearly enough. You are seeing some deceleration pair, but 23 00:01:34,800 --> 00:01:37,120 Speaker 1: you're going to need to see a lot more. The 24 00:01:37,160 --> 00:01:40,560 Speaker 1: war in Ukraine continued as President Putin made it clear 25 00:01:40,680 --> 00:01:45,000 Speaker 1: he's not about to stop any time soon. It was 26 00:01:45,120 --> 00:01:48,440 Speaker 1: not just sum delier Neat countries didn't want to listen 27 00:01:48,480 --> 00:01:51,760 Speaker 1: to us, and in fact what happened they had completely 28 00:01:51,760 --> 00:01:55,760 Speaker 1: different plans. While in China doubts grow about the economic 29 00:01:55,840 --> 00:01:59,640 Speaker 1: path forward. It's less the story about John estimilating the 30 00:01:59,640 --> 00:02:01,400 Speaker 1: global commy and more about whether or not it can 31 00:02:01,440 --> 00:02:05,160 Speaker 1: even get its own economy on the base level. And 32 00:02:05,240 --> 00:02:07,920 Speaker 1: you can forget about crypto as a place to hide 33 00:02:07,920 --> 00:02:10,960 Speaker 1: from the storm. As Terris u s D stable coin 34 00:02:11,240 --> 00:02:15,640 Speaker 1: lost its dollar peg. In short, the entire model fell 35 00:02:15,680 --> 00:02:19,040 Speaker 1: apart and was unable to withstand a black spawn event 36 00:02:19,280 --> 00:02:22,400 Speaker 1: or an adverse event, and Secretary Yelling warned of the 37 00:02:22,440 --> 00:02:26,800 Speaker 1: potential risks for the financial system overall. I think that 38 00:02:26,960 --> 00:02:32,480 Speaker 1: simply illustrates that this is a rapidly growing a product 39 00:02:33,000 --> 00:02:38,760 Speaker 1: and there are risks to financial stability. And if all 40 00:02:38,840 --> 00:02:41,040 Speaker 1: that weren't enough for you, we ended the week on 41 00:02:41,120 --> 00:02:44,360 Speaker 1: Friday the thirteenth with Elon Musk tweeting that he has 42 00:02:44,400 --> 00:02:48,240 Speaker 1: been for Twitter was on temporary hold sending the stock 43 00:02:48,280 --> 00:02:51,000 Speaker 1: down by as much as at one point before he 44 00:02:51,040 --> 00:02:54,520 Speaker 1: sent another tweet saying he was still committed to the deal, 45 00:02:54,800 --> 00:02:57,079 Speaker 1: which helped a bit but still left the stock off 46 00:02:57,120 --> 00:03:00,440 Speaker 1: about ten percent. And as for the markets, overall, equities 47 00:03:00,480 --> 00:03:03,000 Speaker 1: made a valiant effort on Friday to come back from 48 00:03:03,000 --> 00:03:05,640 Speaker 1: a bad week, but the SMP five hundred still finished 49 00:03:05,680 --> 00:03:08,079 Speaker 1: down two point four percent for the week, closing Laura 50 00:03:08,160 --> 00:03:10,840 Speaker 1: for the sixth week in a row, while the NASDAC 51 00:03:10,919 --> 00:03:13,240 Speaker 1: was off two point eight percent and the yield on 52 00:03:13,280 --> 00:03:16,480 Speaker 1: the tenure came down twenty basis points, ending the week 53 00:03:16,639 --> 00:03:18,840 Speaker 1: at two point nine To to help us make some 54 00:03:18,960 --> 00:03:21,840 Speaker 1: sense out of this rather chaotic week, we welcome now 55 00:03:21,919 --> 00:03:24,799 Speaker 1: Kate Moore, she's black Rock Global Allocation team head a 56 00:03:24,919 --> 00:03:29,480 Speaker 1: thematic strategy and David Bianco c i O for DWS America. So, David, 57 00:03:29,480 --> 00:03:32,000 Speaker 1: it's not a very easy task. But what sense was 58 00:03:32,120 --> 00:03:34,840 Speaker 1: made out of this week? Oh? This week was volatile, 59 00:03:35,160 --> 00:03:37,840 Speaker 1: at least ended on a happy note. UH and We 60 00:03:37,880 --> 00:03:41,000 Speaker 1: appreciate that equities ended the week on on a strong note, 61 00:03:41,000 --> 00:03:43,960 Speaker 1: but let's face at the equity market and most asset 62 00:03:43,960 --> 00:03:46,200 Speaker 1: classes have been under a lot of pressure here to date. 63 00:03:46,480 --> 00:03:49,760 Speaker 1: The SMP it's flirting with a bear market. Who was 64 00:03:49,840 --> 00:03:53,560 Speaker 1: down as much as during the week now it's down 65 00:03:53,560 --> 00:03:55,960 Speaker 1: six from its all time hose And I think we're 66 00:03:55,960 --> 00:03:59,120 Speaker 1: in a range bound market for some time. Markets just 67 00:03:59,200 --> 00:04:02,320 Speaker 1: need to figure out what the normal interest rates are 68 00:04:02,320 --> 00:04:05,080 Speaker 1: and until we have an understanding, has to wear interest 69 00:04:05,200 --> 00:04:09,640 Speaker 1: rates stabilize, and especially not until the bond markets stop 70 00:04:09,720 --> 00:04:13,360 Speaker 1: suffering losses. The equity markets have risk. So so okay, 71 00:04:13,400 --> 00:04:14,920 Speaker 1: when you look at the equity market relations to the 72 00:04:14,960 --> 00:04:18,080 Speaker 1: bond market, how much of this is discounting future earnings 73 00:04:18,080 --> 00:04:20,800 Speaker 1: basically it's a discount rate put against future earnings. And 74 00:04:20,839 --> 00:04:23,559 Speaker 1: how much is actually the multiple in the highest growth 75 00:04:23,600 --> 00:04:26,240 Speaker 1: parts of the market, the stuff that was commanding ridiculous 76 00:04:26,320 --> 00:04:29,520 Speaker 1: multiples for a lot of one. You know, that d 77 00:04:29,760 --> 00:04:33,719 Speaker 1: rating is really started in November UM and has continued 78 00:04:33,800 --> 00:04:37,640 Speaker 1: through the course of We still believe we're far away 79 00:04:37,640 --> 00:04:39,840 Speaker 1: from a recession, and we think the FED is in 80 00:04:39,920 --> 00:04:43,480 Speaker 1: the very early stages of normalizing policy, both in terms 81 00:04:43,480 --> 00:04:46,400 Speaker 1: of policy rates, as well as of course quantitative tightening 82 00:04:46,400 --> 00:04:49,880 Speaker 1: and reducing our partnering changing the size of the balance sheet. 83 00:04:49,960 --> 00:04:52,800 Speaker 1: So you know, those two things together are going to 84 00:04:52,920 --> 00:04:54,720 Speaker 1: I think, exert a bit of pressure and I think 85 00:04:54,800 --> 00:04:58,560 Speaker 1: gonna keep volatility high. We keep watching the relationship between 86 00:04:59,120 --> 00:05:02,080 Speaker 1: you know, rates fall and equity ball and see if 87 00:05:02,080 --> 00:05:03,720 Speaker 1: there's a change in the pattern. But right now, I 88 00:05:03,760 --> 00:05:06,680 Speaker 1: think they're going to stay elevated. That's exactly right. I mean, 89 00:05:06,880 --> 00:05:10,479 Speaker 1: we're watching interest rates, we're watching interest rate volatility. It's 90 00:05:10,560 --> 00:05:14,159 Speaker 1: just representative of how much uncertainty there is on where 91 00:05:14,160 --> 00:05:17,200 Speaker 1: interest rates are likely to go up, but where do 92 00:05:17,240 --> 00:05:21,800 Speaker 1: they plateau. And yes, higher interest rates, particularly higher real 93 00:05:21,839 --> 00:05:25,840 Speaker 1: interest rates, is reducing the PE multiple. And then there's 94 00:05:25,880 --> 00:05:30,039 Speaker 1: this uncertainty about how long this expansion might last. I've 95 00:05:30,080 --> 00:05:32,880 Speaker 1: said that this expansion is two years old, perhaps going 96 00:05:32,920 --> 00:05:35,360 Speaker 1: on seven or nine years old biologically, when it has 97 00:05:35,400 --> 00:05:38,760 Speaker 1: a tenure expected lifespan. So they've not only used to 98 00:05:38,800 --> 00:05:41,560 Speaker 1: hire discount rate to take in the PE, they've also 99 00:05:41,600 --> 00:05:46,120 Speaker 1: shortened their forecast horizons and not paying for future growth. Instead, 100 00:05:46,160 --> 00:05:48,680 Speaker 1: they're valuing the more certain earnings and dividends that you 101 00:05:48,680 --> 00:05:50,919 Speaker 1: see coming from certain companies now yea, and I have 102 00:05:51,000 --> 00:05:53,000 Speaker 1: to say, you know, we look around and say, there 103 00:05:53,000 --> 00:05:55,479 Speaker 1: are a lot of high quality companies that you want 104 00:05:55,480 --> 00:05:57,960 Speaker 1: to own for the next three or five years that 105 00:05:58,000 --> 00:06:02,000 Speaker 1: are trading it pretty attractive multiple right now. That said, 106 00:06:02,279 --> 00:06:05,520 Speaker 1: could the multiples overshoot to the downside? I mean, I 107 00:06:05,520 --> 00:06:08,520 Speaker 1: think the answer is yes, there's a high probability that 108 00:06:08,560 --> 00:06:12,000 Speaker 1: as the uncertainty rises around the macro environment and policy, 109 00:06:12,360 --> 00:06:14,440 Speaker 1: that you end up seeing multiples get to kind of 110 00:06:14,600 --> 00:06:17,120 Speaker 1: really silly cheap levels if you want to average in 111 00:06:17,279 --> 00:06:20,160 Speaker 1: the great But it's this is a challenging environment. I 112 00:06:20,200 --> 00:06:22,919 Speaker 1: think it's still a good environment for the long term investor. 113 00:06:23,120 --> 00:06:25,000 Speaker 1: You have to find that person. That person needs to 114 00:06:25,040 --> 00:06:28,240 Speaker 1: really understand the volatility they may be facing. A twin 115 00:06:28,520 --> 00:06:32,599 Speaker 1: pe is still reasonable given these interest rates, Uh, they're 116 00:06:32,640 --> 00:06:34,960 Speaker 1: still much lower than history. Now the Fed has an 117 00:06:34,960 --> 00:06:38,840 Speaker 1: inflation fight to fight, but it's unlikely that interest rates 118 00:06:38,920 --> 00:06:41,120 Speaker 1: go anywhere near where they were historically. Kate wore a 119 00:06:41,160 --> 00:06:44,320 Speaker 1: black rock and David Bianco DWS America's where we're staying 120 00:06:44,360 --> 00:06:46,040 Speaker 1: with us as we take a look down the road 121 00:06:46,200 --> 00:06:48,920 Speaker 1: and what it means for investors if this inflation is 122 00:06:48,960 --> 00:06:52,000 Speaker 1: here to stay. That's gonna have next on Wall Street 123 00:06:52,000 --> 00:07:05,039 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 124 00:07:05,200 --> 00:07:09,400 Speaker 1: David Weston from Bloomberg Radio. We've got some inflation built 125 00:07:09,400 --> 00:07:14,240 Speaker 1: into the system, and price risers aren't going to go 126 00:07:14,280 --> 00:07:17,560 Speaker 1: away overnight. But I think we begin seeing some hopeful 127 00:07:17,600 --> 00:07:21,080 Speaker 1: signs that we're at a point here where we can 128 00:07:21,240 --> 00:07:25,160 Speaker 1: begin getting a grip on this situation. That, of course, 129 00:07:25,200 --> 00:07:27,200 Speaker 1: was Paul Volker on Wall Street with way back in 130 00:07:28,240 --> 00:07:30,080 Speaker 1: That was when he was the president of New York Fed, 131 00:07:30,480 --> 00:07:33,080 Speaker 1: before he got to administer his medicine to the economy 132 00:07:33,120 --> 00:07:35,440 Speaker 1: as head of the Federal Reserve. David Bianco of W 133 00:07:35,720 --> 00:07:38,160 Speaker 1: DW S America said, Kate Moore of Black Rock are 134 00:07:38,200 --> 00:07:40,000 Speaker 1: still with us? Okay, let me ask you a question 135 00:07:40,000 --> 00:07:42,320 Speaker 1: that I'm hearing more and more. Some people are suggesting 136 00:07:42,560 --> 00:07:44,360 Speaker 1: this may be here for a long time to come. 137 00:07:44,480 --> 00:07:47,000 Speaker 1: We had Jason Furman on from Harvard earlier this week 138 00:07:47,040 --> 00:07:48,920 Speaker 1: on Bloomberg. He said he thinks it could be years 139 00:07:49,000 --> 00:07:52,120 Speaker 1: we have really high inflation. If that's right, If that 140 00:07:52,240 --> 00:07:56,280 Speaker 1: proves me true, what does that stay for two investors? Well, actually, 141 00:07:56,360 --> 00:07:59,040 Speaker 1: you know, as much stress as we have around higher 142 00:07:59,040 --> 00:08:01,240 Speaker 1: inflation rates, part really since most of us haven't had 143 00:08:01,280 --> 00:08:04,080 Speaker 1: to deal with us for the majority of our lives. Um, 144 00:08:04,240 --> 00:08:09,000 Speaker 1: there's actually really interesting investment theme around higher inflation. It's 145 00:08:09,000 --> 00:08:12,840 Speaker 1: really interesting to look at within industries, which companies have 146 00:08:12,920 --> 00:08:15,840 Speaker 1: pricing power, which companies are doing a really good job 147 00:08:15,880 --> 00:08:18,960 Speaker 1: of managing their costs and managing to their margins, and 148 00:08:19,000 --> 00:08:21,480 Speaker 1: which are struggling. I mean, I also like this theme 149 00:08:21,520 --> 00:08:25,120 Speaker 1: of looking at companies that have very high labor intensity 150 00:08:25,200 --> 00:08:28,120 Speaker 1: to sales. In other words, do they have to continue 151 00:08:28,120 --> 00:08:30,280 Speaker 1: to hire and especially at a time where we know 152 00:08:30,360 --> 00:08:34,000 Speaker 1: the total cost of an employee continues to rise, or 153 00:08:34,120 --> 00:08:36,240 Speaker 1: do they have business models that are scalable they can 154 00:08:36,280 --> 00:08:39,360 Speaker 1: continue to grow without adding to additional labor. I mean, 155 00:08:39,600 --> 00:08:41,880 Speaker 1: we have to live in this environment and invest in 156 00:08:41,880 --> 00:08:45,120 Speaker 1: this environment, and I think there's some pretty interesting opportunities, 157 00:08:45,679 --> 00:08:48,640 Speaker 1: even though inflation does pinch our wallets. Well, Okay, give 158 00:08:48,640 --> 00:08:50,680 Speaker 1: me an example, what sorts of sectors at least you're 159 00:08:50,679 --> 00:08:54,439 Speaker 1: talking about. Okay, an example might be like, if you're 160 00:08:54,480 --> 00:08:57,280 Speaker 1: just thinking in the consumer sectors, for example, you know, 161 00:08:57,360 --> 00:09:00,280 Speaker 1: some companies have done a really good job of you know, 162 00:09:00,520 --> 00:09:04,480 Speaker 1: writing longer term contracts, of managing their input costs. Sometimes 163 00:09:04,520 --> 00:09:07,760 Speaker 1: they've made great investments in software and systems and technology 164 00:09:08,040 --> 00:09:11,000 Speaker 1: so that they've been able to reduce their dependence on labor. 165 00:09:11,400 --> 00:09:13,560 Speaker 1: All of these things help to sort of mitigate the 166 00:09:13,600 --> 00:09:18,120 Speaker 1: margin pressure that an inflationary environment might otherwise scare us into. Right, 167 00:09:18,240 --> 00:09:21,960 Speaker 1: and so there are some decent fundamental stories even in 168 00:09:22,000 --> 00:09:24,760 Speaker 1: a higher inflationary environment. But you really got to get 169 00:09:24,800 --> 00:09:27,200 Speaker 1: to know the company. And there are some beneficiaries of 170 00:09:27,200 --> 00:09:30,800 Speaker 1: the FED fighting inflation. Banks, insurance companies. They should benefit 171 00:09:30,840 --> 00:09:33,560 Speaker 1: from higher interest rates with the utilities or a really 172 00:09:33,559 --> 00:09:36,920 Speaker 1: good bond substitute with inflation protection, and probably delivering the 173 00:09:37,000 --> 00:09:40,600 Speaker 1: energy of the future electrification. Uh. And we like healthcare, 174 00:09:40,880 --> 00:09:43,680 Speaker 1: and healthcare has become the biggest part of consumer spending. 175 00:09:43,760 --> 00:09:47,520 Speaker 1: It continues to be the fastest growing part. Productivity, medicines, 176 00:09:47,640 --> 00:09:51,960 Speaker 1: devices are needed. There these productivity providers, we think they're 177 00:09:51,960 --> 00:09:54,079 Speaker 1: gonna be able to play an important role in capture profits. 178 00:09:54,120 --> 00:09:57,480 Speaker 1: But I'd love about your clip in nine is that 179 00:09:57,800 --> 00:10:01,560 Speaker 1: even the provoker recognized the challenge ahead. It's surprised even him, 180 00:10:01,760 --> 00:10:04,640 Speaker 1: the big man, to the upside. Inflation can be a 181 00:10:04,720 --> 00:10:06,880 Speaker 1: very big problem when that genie is out of the bottle. Okay, 182 00:10:06,880 --> 00:10:09,000 Speaker 1: that leads me exactly my question you, David, which is 183 00:10:09,040 --> 00:10:12,000 Speaker 1: you studied that period, do we need this time the 184 00:10:12,040 --> 00:10:14,400 Speaker 1: sort of medicine that Paul Wolker ended up administring that 185 00:10:14,559 --> 00:10:17,760 Speaker 1: because it was pretty tough. It was brutal medicine, and 186 00:10:17,800 --> 00:10:20,120 Speaker 1: I think people need to appreciate that it was a 187 00:10:20,200 --> 00:10:23,960 Speaker 1: very high price to pay for allowing inflation to accelerate 188 00:10:24,000 --> 00:10:28,080 Speaker 1: for so long. Folker hyped the overnight interest rate to 189 00:10:28,280 --> 00:10:33,240 Speaker 1: and inflation got to uh, it caused a recession. But 190 00:10:33,520 --> 00:10:35,640 Speaker 1: one of the things that's important to recognize is that 191 00:10:36,200 --> 00:10:39,920 Speaker 1: there was this combination of tightening monetary policy. While there's 192 00:10:39,920 --> 00:10:42,599 Speaker 1: a lot of pro supply side policy. Who was a 193 00:10:42,640 --> 00:10:48,040 Speaker 1: Reaganomics with Volkers monetary discipline that really helped seed a 194 00:10:48,120 --> 00:10:51,840 Speaker 1: terrific nineteen eighties and longer expansion. So Kate helped me 195 00:10:51,880 --> 00:10:54,319 Speaker 1: here because you're responsible for making these sorts of decisions. 196 00:10:54,400 --> 00:10:56,080 Speaker 1: And normal if you've got a lot of inflation, you 197 00:10:56,080 --> 00:10:58,400 Speaker 1: don't want to have cash because it's dwindling as you 198 00:10:58,520 --> 00:11:00,080 Speaker 1: hold onto it. On the other hand, we got a 199 00:11:00,080 --> 00:11:03,400 Speaker 1: lot of uncertainty. So what's your approach. Yeah, you know, 200 00:11:03,559 --> 00:11:05,840 Speaker 1: normally I would say holding cash in the bank and 201 00:11:05,920 --> 00:11:08,480 Speaker 1: not investing it or putting it to work in the 202 00:11:08,520 --> 00:11:11,320 Speaker 1: market in some way, you know, is a waste, and 203 00:11:11,640 --> 00:11:14,040 Speaker 1: especially in real terms, you just think about that cash 204 00:11:14,080 --> 00:11:16,440 Speaker 1: kind of burning away. Of course, holding cash in this 205 00:11:16,559 --> 00:11:20,040 Speaker 1: environment where we've had a really really challenging period for 206 00:11:20,559 --> 00:11:24,280 Speaker 1: both bonds and stocks in terms of returns, has actually 207 00:11:24,320 --> 00:11:28,680 Speaker 1: proven to be a really good portfolio diversifier. In fact, 208 00:11:28,760 --> 00:11:31,679 Speaker 1: we're holding a fairly high level of cash both as 209 00:11:31,679 --> 00:11:34,680 Speaker 1: an expression of our duration view, so we've had a 210 00:11:34,679 --> 00:11:37,439 Speaker 1: sort of shorter duration position in the fund. We also 211 00:11:37,480 --> 00:11:41,280 Speaker 1: de risk part of our equity portfolio while still holding 212 00:11:41,320 --> 00:11:43,800 Speaker 1: some of the higher growth, higher quality companies that I 213 00:11:43,840 --> 00:11:46,520 Speaker 1: think they can compound over the next couple of years. 214 00:11:47,280 --> 00:11:50,520 Speaker 1: I think you should have dry powder. I really recommend 215 00:11:50,520 --> 00:11:53,280 Speaker 1: people having some cash at this point. We're going to 216 00:11:53,400 --> 00:11:56,240 Speaker 1: get some interesting bites at the Apple Um, you know, 217 00:11:56,400 --> 00:11:58,800 Speaker 1: some other high quality companies, as I was mentioning before, 218 00:11:59,080 --> 00:12:01,760 Speaker 1: may even get che birth in this as we know, 219 00:12:01,800 --> 00:12:04,120 Speaker 1: have a very volatile period over the next couple one 220 00:12:04,200 --> 00:12:08,080 Speaker 1: months of policy adjustment, and you know, recession fears, recession 221 00:12:08,320 --> 00:12:11,839 Speaker 1: appears fading. David in a time of inflation, one thing 222 00:12:11,840 --> 00:12:14,160 Speaker 1: people tend to go to his real assets, real estate, 223 00:12:14,160 --> 00:12:16,120 Speaker 1: and now guy's realized sistem. Does that make sense right now? 224 00:12:16,360 --> 00:12:19,319 Speaker 1: It does, And there's a nice availability of real assets, 225 00:12:19,320 --> 00:12:21,440 Speaker 1: and they're investable more than they were back in the past. 226 00:12:21,480 --> 00:12:24,360 Speaker 1: It's easier to invest in commodities, it's easier to invest 227 00:12:24,400 --> 00:12:28,400 Speaker 1: in real estate, it's easier to even buy inflation protected securities. 228 00:12:28,840 --> 00:12:32,280 Speaker 1: These things, particularly the ease of which they're investable nowadays. 229 00:12:32,520 --> 00:12:34,480 Speaker 1: I bet your investors wish they had those options in 230 00:12:34,480 --> 00:12:37,000 Speaker 1: the late seventies and early eighties. So there are ways 231 00:12:37,040 --> 00:12:40,280 Speaker 1: to help manage through this period of uncertainty and the 232 00:12:40,360 --> 00:12:43,280 Speaker 1: risks of inflation being high. Okay, so this is unfair. 233 00:12:43,360 --> 00:12:45,760 Speaker 1: There's a curveball, Kade, I'll throw your way. Cash is 234 00:12:45,800 --> 00:12:48,400 Speaker 1: not trash. What about crypto? I mean, we've had this 235 00:12:48,400 --> 00:12:51,640 Speaker 1: whole discussion. There was something like two seventy billion dollars worth. 236 00:12:51,640 --> 00:12:54,200 Speaker 1: The value came out of crypto and out of stable coins. 237 00:12:54,240 --> 00:12:56,520 Speaker 1: As we did that teach us anything in general. I 238 00:12:56,559 --> 00:12:58,960 Speaker 1: talked to Larry Summers and he said mainly that greed 239 00:12:59,040 --> 00:13:02,280 Speaker 1: drives the marketplace. Yeah, first of all, I'm stealing Dave's 240 00:13:02,280 --> 00:13:04,960 Speaker 1: cash is not trash, and I might make a little 241 00:13:04,960 --> 00:13:08,240 Speaker 1: tattoo of that on my shoulder. But this is what 242 00:13:08,280 --> 00:13:11,360 Speaker 1: I'll say. I'm by far away not an expert or 243 00:13:11,400 --> 00:13:14,920 Speaker 1: an authority in any on on crypto or digital assets. 244 00:13:15,520 --> 00:13:17,600 Speaker 1: I just would say that for people who are adding 245 00:13:17,640 --> 00:13:20,400 Speaker 1: that into their portfolios as a diversifier, I think we've 246 00:13:20,440 --> 00:13:24,480 Speaker 1: seen an incredibly higher correlation between all of these assets 247 00:13:24,480 --> 00:13:26,240 Speaker 1: and actually between a lot of them and you know, 248 00:13:26,800 --> 00:13:30,360 Speaker 1: more speculative parts of the technology sector. And you know, 249 00:13:31,000 --> 00:13:33,880 Speaker 1: you've got to really think about your portfolio construction. This 250 00:13:33,960 --> 00:13:36,760 Speaker 1: is the very early stages of this, you know, um, 251 00:13:37,360 --> 00:13:41,040 Speaker 1: digital finance revolution, if you will, and you have to 252 00:13:41,120 --> 00:13:44,160 Speaker 1: be I think, pretty balanced in your portfolio if you're 253 00:13:44,200 --> 00:13:46,920 Speaker 1: going to own some of those assets. I don't know 254 00:13:46,920 --> 00:13:49,920 Speaker 1: where it goes from here, but I will say, um, 255 00:13:49,960 --> 00:13:52,640 Speaker 1: you have to be cautious. Just quickly. That's such a 256 00:13:52,679 --> 00:13:55,600 Speaker 1: great point Cages made. We talk about trying to avoid correlation. 257 00:13:57,080 --> 00:13:58,320 Speaker 1: I'm not sure I heard a lot of people talk 258 00:13:58,360 --> 00:14:00,240 Speaker 1: about the corelation between big tech on the on hand 259 00:14:00,240 --> 00:14:01,880 Speaker 1: in crypto on the other, but we surely certainly have 260 00:14:01,920 --> 00:14:05,079 Speaker 1: seen it recently a lot of the same owners, so yes, 261 00:14:05,160 --> 00:14:07,319 Speaker 1: they find themselves haven't been hurt and perhaps having to 262 00:14:07,400 --> 00:14:11,240 Speaker 1: do risk. Um. The thing about one of the things 263 00:14:11,280 --> 00:14:13,440 Speaker 1: to keep in mind the dollar has been getting stronger 264 00:14:13,880 --> 00:14:16,679 Speaker 1: and if the Fed pulls this off, well the dollar 265 00:14:16,800 --> 00:14:20,000 Speaker 1: will reign supreme again. What about that, Kate, What about 266 00:14:20,000 --> 00:14:22,360 Speaker 1: a strong dollar? What does it due to your investment? Yeah, 267 00:14:22,480 --> 00:14:25,880 Speaker 1: we take some concurrency views into consideration. I gotta tell 268 00:14:25,880 --> 00:14:27,880 Speaker 1: you though, over the course of my career, I don't 269 00:14:27,920 --> 00:14:32,720 Speaker 1: have the best batting average and making cross currency. That's 270 00:14:33,240 --> 00:14:36,240 Speaker 1: you know. What I will tell you though, is you 271 00:14:36,240 --> 00:14:38,440 Speaker 1: know it does affect how we think about our internationally. 272 00:14:38,600 --> 00:14:40,680 Speaker 1: I'm sure not currency traders. So thank you so much. 273 00:14:40,760 --> 00:14:42,160 Speaker 1: Great to have you both of us as Kate Moore 274 00:14:42,240 --> 00:14:46,600 Speaker 1: black Rock and David Bianco of DWS Americans. Coming up, 275 00:14:46,640 --> 00:14:48,120 Speaker 1: we take a look at what's coming up next week 276 00:14:48,240 --> 00:15:06,320 Speaker 1: on the Wall Street. This is Bloomberg Wall Street Week 277 00:15:06,520 --> 00:15:16,640 Speaker 1: with David Weston from Bloomberg Radio. Run up in stocks 278 00:15:16,640 --> 00:15:18,800 Speaker 1: and then they subsequent set off in stocks on Wall 279 00:15:18,800 --> 00:15:21,120 Speaker 1: Street is really working his way into the global narrative 280 00:15:21,280 --> 00:15:24,320 Speaker 1: thing that sell off pattern in stocks and bonds really continue. 281 00:15:24,520 --> 00:15:28,600 Speaker 1: But economic slowdown spurred another bout of risk aversion. Here's 282 00:15:28,640 --> 00:15:32,040 Speaker 1: that rainy day. It's been a long bowl run in 283 00:15:32,080 --> 00:15:35,720 Speaker 1: the markets, in wealth accumulation and in the economy which 284 00:15:35,760 --> 00:15:38,320 Speaker 1: came back fast even after being brought to a halt 285 00:15:38,560 --> 00:15:41,760 Speaker 1: by a pandemic. The fact is Americans a lot to 286 00:15:41,760 --> 00:15:45,800 Speaker 1: be proud of. We're experiencing the strongest economic recovery in 287 00:15:45,840 --> 00:15:49,560 Speaker 1: the world. But now everything that looked so rosy gives 288 00:15:49,600 --> 00:15:52,800 Speaker 1: cause for concern from inflation. To look at the numbers, 289 00:15:52,840 --> 00:15:55,880 Speaker 1: the headline comes in up three tenths of eight per 290 00:15:55,880 --> 00:15:58,480 Speaker 1: cent to the supply chain. Some of the supply chain 291 00:15:58,520 --> 00:16:02,800 Speaker 1: headaches that someone saying reaching an old time higher. To Ukraine, 292 00:16:03,160 --> 00:16:06,120 Speaker 1: the Russians have been acting more like a bulldozer than 293 00:16:06,400 --> 00:16:09,760 Speaker 1: than a tesla. To China, I think we're they're headed 294 00:16:09,800 --> 00:16:12,160 Speaker 1: for growth recession. So yeah, I think the rest of 295 00:16:12,160 --> 00:16:14,120 Speaker 1: the year is going to be very tough for China, 296 00:16:14,640 --> 00:16:17,960 Speaker 1: leaving an investor to wonder how bad will it get? 297 00:16:21,760 --> 00:16:24,040 Speaker 1: And when you ask a question as basic as how 298 00:16:24,080 --> 00:16:26,520 Speaker 1: big and it gets, you want a true veteran, even 299 00:16:26,520 --> 00:16:28,800 Speaker 1: a legend of Wall Street and Washington, and that's what 300 00:16:28,880 --> 00:16:31,480 Speaker 1: we have here in Roger Altman is the senior chairman, 301 00:16:31,520 --> 00:16:33,920 Speaker 1: of course, the founder of ever Core. Roger, welcome back. 302 00:16:33,960 --> 00:16:35,800 Speaker 1: It's great to have you, Thank you, great to see you. 303 00:16:36,080 --> 00:16:38,560 Speaker 1: So it's been a week maybe a month of hearing 304 00:16:38,760 --> 00:16:42,120 Speaker 1: all the bad things everywhere you turn, and it's inflation, 305 00:16:42,160 --> 00:16:44,880 Speaker 1: and it's the FED, and it's Ukraine, it's China, it's 306 00:16:44,920 --> 00:16:48,480 Speaker 1: the plate China. How bad is it? Well, l as 307 00:16:48,480 --> 00:16:52,640 Speaker 1: of right now is down more or less. And that's 308 00:16:53,200 --> 00:16:57,200 Speaker 1: the definition of a true correction. And so I would 309 00:16:57,240 --> 00:17:00,720 Speaker 1: say it's been pretty severe. Uh. I think the big 310 00:17:00,800 --> 00:17:04,720 Speaker 1: question is how much worse can it get? Uh? And 311 00:17:04,800 --> 00:17:06,840 Speaker 1: no one knows the answer to that, and I certainly don't, 312 00:17:06,840 --> 00:17:10,760 Speaker 1: but it certainly could get worse before it gets better. 313 00:17:11,160 --> 00:17:15,800 Speaker 1: And you know, historically, when you see such a profound 314 00:17:16,400 --> 00:17:19,840 Speaker 1: change of monetary policy, which as as worth having now 315 00:17:20,440 --> 00:17:23,440 Speaker 1: or in the beginning stages of now, historically it's been 316 00:17:24,240 --> 00:17:28,360 Speaker 1: at least over the short term after the change starts 317 00:17:28,760 --> 00:17:33,080 Speaker 1: bad for equity values. It's really been the case very often. 318 00:17:33,920 --> 00:17:37,639 Speaker 1: So it's not surprising that stocks are down now that 319 00:17:37,680 --> 00:17:42,000 Speaker 1: the Fed has ended this relatively long period of almost 320 00:17:42,080 --> 00:17:45,720 Speaker 1: free money uh and has headed up on a on 321 00:17:45,800 --> 00:17:51,360 Speaker 1: a substantial, substantial upward trajectory in terms of tightening. It's 322 00:17:51,400 --> 00:17:53,679 Speaker 1: not surprising stocks are down, But I think, as you 323 00:17:53,800 --> 00:17:56,920 Speaker 1: just said, it coincides with a lot of other negative news. 324 00:17:57,960 --> 00:18:00,720 Speaker 1: Most basically inflation, but also some of the other points 325 00:18:00,720 --> 00:18:03,760 Speaker 1: you make about Ukraine, uh and so forth, and so 326 00:18:04,040 --> 00:18:05,960 Speaker 1: it could get worse. Do I think we're in the 327 00:18:06,960 --> 00:18:10,200 Speaker 1: on the verge of a financial crisis. I don't. I don't. 328 00:18:10,240 --> 00:18:14,920 Speaker 1: I just think it's a sharp correction in equity values, which, 329 00:18:14,920 --> 00:18:17,000 Speaker 1: when you step back and think about them, in so 330 00:18:17,040 --> 00:18:21,800 Speaker 1: many cases, especially tech, were hard to hard to rationalize 331 00:18:21,880 --> 00:18:25,760 Speaker 1: before this change. I mean, there was some astronomical values, 332 00:18:25,800 --> 00:18:29,120 Speaker 1: as you well know, and it's not surprising that they're 333 00:18:29,160 --> 00:18:32,520 Speaker 1: finally recked being rectified. So you're talking about the equity markets, 334 00:18:32,560 --> 00:18:34,320 Speaker 1: We've talked with the bond markets as well, which is 335 00:18:34,600 --> 00:18:37,639 Speaker 1: really taken it on the chin. What's the relationship between 336 00:18:37,640 --> 00:18:39,840 Speaker 1: those financial markets on one hand, and if I can 337 00:18:39,880 --> 00:18:41,800 Speaker 1: put it this way, the rural world, because a lot 338 00:18:41,840 --> 00:18:43,960 Speaker 1: of your work at ever Core is dealing with real 339 00:18:44,000 --> 00:18:47,120 Speaker 1: companies who are buying and selling companies or pieces of companies. 340 00:18:47,320 --> 00:18:50,440 Speaker 1: Does it directly translate into the value of those assets 341 00:18:50,600 --> 00:18:53,639 Speaker 1: or is it somewhat removed. It does directly translate in 342 00:18:53,960 --> 00:19:00,560 Speaker 1: two ways. Uh. The stock market is a uh pretty 343 00:19:00,560 --> 00:19:06,560 Speaker 1: reliable predictor of the broad economy, albeit uh nine months 344 00:19:06,640 --> 00:19:09,800 Speaker 1: or so in advance. Of the real economy is changing. 345 00:19:10,400 --> 00:19:14,800 Speaker 1: So um, right now there's a big debate as to 346 00:19:14,800 --> 00:19:21,080 Speaker 1: whether we may have a recession, and uh, I think 347 00:19:21,119 --> 00:19:26,800 Speaker 1: that's about myself. But uh, we're slowing down even right now, 348 00:19:27,640 --> 00:19:30,680 Speaker 1: and and the market is in effect telling us that 349 00:19:31,200 --> 00:19:33,080 Speaker 1: in terms of our own business, Oh yes, it has 350 00:19:33,080 --> 00:19:36,439 Speaker 1: a big effect because when when the volatility is so 351 00:19:36,520 --> 00:19:40,280 Speaker 1: high and people hesitate, they want to step back and 352 00:19:40,320 --> 00:19:43,040 Speaker 1: wait for the smoke to clear in the environment to settle, 353 00:19:43,720 --> 00:19:48,480 Speaker 1: and so transactions slow down. There's no doubt about it. Um. 354 00:19:48,520 --> 00:19:50,040 Speaker 1: And you can see that by the way and the 355 00:19:50,119 --> 00:19:55,200 Speaker 1: valuations of all the investment banks which have come down 356 00:19:55,200 --> 00:19:56,800 Speaker 1: a lot for a variety of reasons, but one of 357 00:19:56,840 --> 00:19:59,480 Speaker 1: them is an anticipated slow down in transaction volume. But 358 00:19:59,520 --> 00:20:02,159 Speaker 1: it's interesting people start to sit in their hands, if 359 00:20:02,200 --> 00:20:03,680 Speaker 1: I can put it that where they're afraid to make 360 00:20:03,680 --> 00:20:06,600 Speaker 1: a move, and that Trump's would otherwise might be an 361 00:20:06,600 --> 00:20:08,480 Speaker 1: instinct is you know, there are some bargains now, so 362 00:20:08,600 --> 00:20:11,679 Speaker 1: prices are coming down. It's the price takes is lower. 363 00:20:11,920 --> 00:20:13,840 Speaker 1: It might cause some cities to say now is the 364 00:20:13,840 --> 00:20:16,119 Speaker 1: time to move well, And in fact, just before I 365 00:20:16,160 --> 00:20:18,600 Speaker 1: just on my way over here, I was on the 366 00:20:18,600 --> 00:20:20,320 Speaker 1: phone with some of my colleagues because we're having a 367 00:20:20,400 --> 00:20:23,159 Speaker 1: call uh with a very very well known company that 368 00:20:23,160 --> 00:20:26,119 Speaker 1: we work with closely. That's a technology company, a very 369 00:20:26,160 --> 00:20:30,640 Speaker 1: big one and a lot of it. The smaller companies 370 00:20:30,680 --> 00:20:33,320 Speaker 1: they've been interested in buying in recent years have just 371 00:20:33,400 --> 00:20:35,560 Speaker 1: been too expensive. Roger, thank you so very much. This 372 00:20:35,680 --> 00:20:37,960 Speaker 1: is so helpful. How was the pleasure? David as Roger Allman. 373 00:20:38,040 --> 00:20:43,800 Speaker 1: He is senior chairman and founder of ever Core. Coming up, 374 00:20:43,840 --> 00:20:45,960 Speaker 1: we wrap up the week with our special Wall Street 375 00:20:46,000 --> 00:20:51,119 Speaker 1: Week contributor Larry Summers of Harvard. This is Wall Street 376 00:20:51,119 --> 00:20:56,600 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 377 00:20:56,760 --> 00:21:00,240 Speaker 1: David Weston from Bloomberg Radio. This is Wall Spog Week time. 378 00:21:00,280 --> 00:21:02,719 Speaker 1: David Weston ats time once again this week to have 379 00:21:02,800 --> 00:21:05,800 Speaker 1: Larry Summers at Harvard come to us and explain this 380 00:21:06,000 --> 00:21:08,280 Speaker 1: really perplexing week. So Larry, thanks so much for being 381 00:21:08,320 --> 00:21:10,720 Speaker 1: back with this. I could call this the week of inflation, 382 00:21:10,720 --> 00:21:13,200 Speaker 1: as it were. With the CPI numbers, the PPI numbers 383 00:21:13,200 --> 00:21:15,560 Speaker 1: something you've been warning about for some time now. Some 384 00:21:15,600 --> 00:21:17,560 Speaker 1: people are saying that show sort of we've hit the peak, 385 00:21:17,600 --> 00:21:19,840 Speaker 1: it's starting to come down. What did you read into 386 00:21:19,880 --> 00:21:22,800 Speaker 1: those numbers? You know, once again, the numbers were worse 387 00:21:22,880 --> 00:21:27,800 Speaker 1: than people expected them to be. We may have hit 388 00:21:27,840 --> 00:21:32,520 Speaker 1: a peak last month at eight point five, but we're 389 00:21:32,560 --> 00:21:37,840 Speaker 1: not heading anywhere near to anytime soon, and that says 390 00:21:37,960 --> 00:21:41,800 Speaker 1: that we've got very big challenges ahead of us in 391 00:21:41,920 --> 00:21:46,520 Speaker 1: terms of managing UH this economy. And I think there's 392 00:21:46,560 --> 00:21:51,160 Speaker 1: a lot of real risks out there. I see an 393 00:21:51,160 --> 00:21:56,280 Speaker 1: overheated labor market as the core of the inflation process, 394 00:21:56,800 --> 00:22:00,359 Speaker 1: driving service prices up. And I see a lot of 395 00:22:00,480 --> 00:22:06,280 Speaker 1: risks geopolitically in terms of supply chains, geopolitically in terms 396 00:22:06,440 --> 00:22:10,760 Speaker 1: of UH commodity prices. And so I think this is 397 00:22:10,800 --> 00:22:13,600 Speaker 1: gonna be a very difficult environment for quite some time 398 00:22:13,640 --> 00:22:16,040 Speaker 1: to come. Well let's talk about that quite some time 399 00:22:16,080 --> 00:22:18,000 Speaker 1: to come, because we're now starting to see some people, 400 00:22:18,080 --> 00:22:21,280 Speaker 1: including Jason Furman on Bloomberger this week, say he thinks 401 00:22:21,280 --> 00:22:23,159 Speaker 1: that we could have years of inflation even if you 402 00:22:23,160 --> 00:22:25,520 Speaker 1: get a recession. We would because there are some structural 403 00:22:25,600 --> 00:22:30,040 Speaker 1: factors that could give us long, long inflation instead along COVID. Look, 404 00:22:30,080 --> 00:22:33,200 Speaker 1: I think the two sets of issues that mean that 405 00:22:33,200 --> 00:22:38,840 Speaker 1: that is a plausible view. One is, most inflations don't 406 00:22:38,840 --> 00:22:43,680 Speaker 1: get stopped with a single slow down, there are multiple 407 00:22:43,720 --> 00:22:49,280 Speaker 1: attempts to break inflation before there's ultimate success. That was 408 00:22:49,359 --> 00:22:53,600 Speaker 1: certainly the case in the previous big inflation that we've 409 00:22:54,040 --> 00:22:57,399 Speaker 1: had in the modern era, in the nineteen sixties and 410 00:22:57,520 --> 00:23:01,840 Speaker 1: nineteen seventies. And then there is the argument, I'm never 411 00:23:01,920 --> 00:23:05,320 Speaker 1: sure how much weight to give it, that we're probably 412 00:23:05,359 --> 00:23:07,920 Speaker 1: in a more labor short economy that we used to be, 413 00:23:08,400 --> 00:23:11,280 Speaker 1: that the pressures of globalization that we used to feel 414 00:23:11,880 --> 00:23:19,000 Speaker 1: are no longer there, that there's more capacity of firms 415 00:23:19,119 --> 00:23:23,399 Speaker 1: to niche market than there used to be, and that 416 00:23:23,640 --> 00:23:26,240 Speaker 1: all of that means there's gonna be a bit less 417 00:23:26,400 --> 00:23:31,119 Speaker 1: ruthless deflationary pressure than we've seen in most of the 418 00:23:31,320 --> 00:23:34,560 Speaker 1: century so far, and that that could operate in the 419 00:23:34,640 --> 00:23:41,520 Speaker 1: direction of higher inflation. I think I'd be very surprised 420 00:23:41,560 --> 00:23:45,880 Speaker 1: at the average inflation rate during the ties wasn't materially 421 00:23:46,000 --> 00:23:51,880 Speaker 1: higher than the average inflation rate UH during the decade 422 00:23:51,880 --> 00:23:57,240 Speaker 1: of the teens, and it's reinforced via growing number of 423 00:23:57,320 --> 00:24:01,800 Speaker 1: voices UH. I'm not yet prepared to join the chorus 424 00:24:02,040 --> 00:24:07,000 Speaker 1: saying that we should set a target for inflation that 425 00:24:07,200 --> 00:24:12,840 Speaker 1: is higher than two percent. It could conceivably be ultimately right, 426 00:24:13,040 --> 00:24:17,120 Speaker 1: but I think moving in that direction immediately would very 427 00:24:17,240 --> 00:24:22,360 Speaker 1: much undermine what limited anti inflation credibility the FED has, 428 00:24:23,119 --> 00:24:25,240 Speaker 1: So Larry the question that, obviously is what do we 429 00:24:25,280 --> 00:24:27,640 Speaker 1: do about this inflation? Is there anything that can be done? 430 00:24:27,720 --> 00:24:31,040 Speaker 1: Obviously the Federal Reserve has the frontline responsibility, but we 431 00:24:31,119 --> 00:24:34,880 Speaker 1: also have the executive branch and now the legislature saying, well, 432 00:24:34,880 --> 00:24:37,320 Speaker 1: we can do some things. We have President Biden saying 433 00:24:37,320 --> 00:24:39,280 Speaker 1: to the FEC, take a look at price gouging. And 434 00:24:39,320 --> 00:24:42,160 Speaker 1: then we have the Speaker of the House, Nancy Pelosi 435 00:24:42,200 --> 00:24:46,440 Speaker 1: saying she's going to bring legislation forward next week about 436 00:24:46,480 --> 00:24:48,399 Speaker 1: price gouging at the pump? Is that going to help us? 437 00:24:49,440 --> 00:24:53,600 Speaker 1: The price gouging at the pump? Uh? Stuff, the more 438 00:24:53,640 --> 00:24:59,840 Speaker 1: general price gouging stuff is to economic science what President 439 00:25:00,040 --> 00:25:08,960 Speaker 1: Trump's remarks about disinfectant in your veins was to medical science. Uh. 440 00:25:09,040 --> 00:25:16,480 Speaker 1: It is dangerous, nonsens Uh. There is no material prospect 441 00:25:17,119 --> 00:25:22,240 Speaker 1: that in any enduring way gouging legislation can have any 442 00:25:22,280 --> 00:25:28,880 Speaker 1: substantial effect on inflationary pressure. But it can cause and 443 00:25:28,960 --> 00:25:34,760 Speaker 1: contrive all kinds of shortages. It can distort a complex 444 00:25:34,880 --> 00:25:41,320 Speaker 1: network of flows between crude and refined product. It can 445 00:25:41,520 --> 00:25:46,119 Speaker 1: inhibit the supply responses that are what's ultimately the best 446 00:25:46,240 --> 00:25:53,879 Speaker 1: way to overcome UH inflation. UH. This gouging talk is 447 00:25:53,960 --> 00:26:01,120 Speaker 1: a diversionary confusion. It's something that tends to happen when 448 00:26:01,160 --> 00:26:07,760 Speaker 1: we have inflations. But we only make progress once we 449 00:26:07,920 --> 00:26:13,680 Speaker 1: move through that and we understand that the real determinants 450 00:26:13,760 --> 00:26:17,840 Speaker 1: of inflation have to do with the total level of 451 00:26:17,880 --> 00:26:23,640 Speaker 1: demand that's being stimulated by policies. If politicians outside the 452 00:26:23,640 --> 00:26:28,480 Speaker 1: FED want to make a difference on inflation to the 453 00:26:28,600 --> 00:26:33,159 Speaker 1: limited extent they can, they should be reducing tariffs. They 454 00:26:33,160 --> 00:26:37,600 Speaker 1: should be letting more immigrants into the country. They should 455 00:26:37,640 --> 00:26:43,679 Speaker 1: be reducing regulatory burdens like the Jones Act that mandates 456 00:26:43,720 --> 00:26:49,359 Speaker 1: that only US ships can take crude oil from Texas 457 00:26:49,720 --> 00:26:55,399 Speaker 1: UH to UH the northeast. So let's wrap up this 458 00:26:55,440 --> 00:26:57,960 Speaker 1: week with a couple of quick rips from the headlines. 459 00:26:58,080 --> 00:27:01,159 Speaker 1: One of them is cryptocurrencies and stable coins. The prices 460 00:27:01,160 --> 00:27:02,919 Speaker 1: of those certainly didn't go up this week, and in 461 00:27:02,920 --> 00:27:05,199 Speaker 1: fact I saw it was something like two seventy billion 462 00:27:05,240 --> 00:27:07,479 Speaker 1: dollars where the market value taken away. Do we know 463 00:27:07,560 --> 00:27:10,160 Speaker 1: anything at the end of the week about cryptocurrency stable 464 00:27:10,200 --> 00:27:12,000 Speaker 1: coin that we didn't know at the beginning of the week. 465 00:27:13,240 --> 00:27:15,840 Speaker 1: We've been reminded of something we should have known, which 466 00:27:15,960 --> 00:27:20,840 Speaker 1: is that fear and greed drive financial markets. All financial 467 00:27:20,880 --> 00:27:26,000 Speaker 1: markets and cryptos not immune from that, and bank run phenomena, 468 00:27:26,119 --> 00:27:30,560 Speaker 1: whether it's banks, whether it's money market UH funds, whether 469 00:27:30,600 --> 00:27:34,159 Speaker 1: it's repo, or whether it's crypto. When you don't have 470 00:27:34,320 --> 00:27:37,240 Speaker 1: backing and you lose confidence, you get a big mess. 471 00:27:37,840 --> 00:27:39,640 Speaker 1: And finally, Larry at the very end of the week 472 00:27:39,640 --> 00:27:42,080 Speaker 1: on Friday, Elon Musk tweeted on the one hand that 473 00:27:42,160 --> 00:27:44,520 Speaker 1: he was having some second thoughts about Twitter, and then 474 00:27:44,560 --> 00:27:46,240 Speaker 1: he came back and said, don't know, he's still committed 475 00:27:46,280 --> 00:27:48,720 Speaker 1: to It's not clear. The stocks certainly went down, came 476 00:27:48,720 --> 00:27:51,200 Speaker 1: back a little bit, but it certainly went down substantially. 477 00:27:52,160 --> 00:27:54,640 Speaker 1: Does this say something larger about what's going with tech? 478 00:27:54,800 --> 00:27:56,679 Speaker 1: It right now? We saw that the value of so 479 00:27:56,720 --> 00:28:00,160 Speaker 1: many big tech companies has come down. It's possible, well, 480 00:28:00,160 --> 00:28:05,399 Speaker 1: this is actually having some buyer's remorse. Eon is I 481 00:28:05,520 --> 00:28:08,040 Speaker 1: think you Musk is? I think in some ways the 482 00:28:08,240 --> 00:28:17,520 Speaker 1: Andrew Carnegie of our time, a titanic, innovative, driving, extraordinarily 483 00:28:17,680 --> 00:28:23,720 Speaker 1: wealthy UH figure who when he has leverage uses it, 484 00:28:24,080 --> 00:28:26,919 Speaker 1: and with the changes of Twitter that have already taken 485 00:28:27,000 --> 00:28:31,280 Speaker 1: place in the absence of other bidders, he has enormous 486 00:28:31,359 --> 00:28:34,679 Speaker 1: leverage in this situation, and I suspect he's using it. 487 00:28:35,119 --> 00:28:38,080 Speaker 1: That's fascinating and Andrew Carnegie of our time. That will 488 00:28:38,120 --> 00:28:41,720 Speaker 1: go down. But as the larger issue is techn not 489 00:28:41,840 --> 00:28:44,000 Speaker 1: going to have as larger role in the markets going 490 00:28:44,040 --> 00:28:46,320 Speaker 1: forward as it has in the past. I suspect that 491 00:28:47,680 --> 00:28:52,040 Speaker 1: the share of total wealth, total stock market that's in 492 00:28:52,160 --> 00:28:55,480 Speaker 1: tech maybe somewhat lower over the next few years than 493 00:28:55,560 --> 00:28:59,080 Speaker 1: it has been over the last few years. But I 494 00:28:59,080 --> 00:29:01,560 Speaker 1: think it's gonna can sinue to be the case that 495 00:29:02,320 --> 00:29:06,720 Speaker 1: the most valuable companies are tech companies. I think it's 496 00:29:06,760 --> 00:29:09,600 Speaker 1: going to continue to be the case that as it 497 00:29:09,640 --> 00:29:14,560 Speaker 1: always is, that UH technology and the transformations that it 498 00:29:14,720 --> 00:29:22,760 Speaker 1: brings our driving history. My guess is that we're gonna 499 00:29:22,800 --> 00:29:27,920 Speaker 1: see very profound changes coming out of artificial intelligence over 500 00:29:27,960 --> 00:29:31,920 Speaker 1: the next decade, and I'm not sure where that's gonna go. Okay, Larry, 501 00:29:31,920 --> 00:29:33,960 Speaker 1: it's always such a pleasure, a real treat to have 502 00:29:34,040 --> 00:29:36,320 Speaker 1: you with us. As Larry Summers of Harvard a very 503 00:29:36,320 --> 00:29:39,880 Speaker 1: special contributor for Wall Street week. Finally, one more thought. 504 00:29:40,160 --> 00:29:43,000 Speaker 1: There's no shortage of pessimism in the markets these days, 505 00:29:43,040 --> 00:29:45,800 Speaker 1: with central bankers falling over one another to tell us 506 00:29:45,800 --> 00:29:48,480 Speaker 1: how determined they are to raise rates. We don't will 507 00:29:48,480 --> 00:29:51,240 Speaker 1: out seventy five forever, right, I mean, what I'm gonna 508 00:29:51,280 --> 00:29:53,680 Speaker 1: do is I think fifty the canes were going now 509 00:29:53,760 --> 00:29:56,520 Speaker 1: seems about right to me, and those higher rates can 510 00:29:56,560 --> 00:29:59,840 Speaker 1: mean only one thing, money coming out of the market 511 00:29:59,840 --> 00:30:03,080 Speaker 1: and making all those financial assets less valuable than we 512 00:30:03,120 --> 00:30:05,960 Speaker 1: thought they were. The trader actually told me that the 513 00:30:06,200 --> 00:30:09,680 Speaker 1: consensus here is at the SPI will ultimately trade down 514 00:30:09,760 --> 00:30:12,719 Speaker 1: to a PE multiple of sixteen to eighteen. We're at 515 00:30:12,720 --> 00:30:15,840 Speaker 1: about twenty to twenty one right now, so by that standard, 516 00:30:16,040 --> 00:30:17,840 Speaker 1: we still have a lot more selling to go. When 517 00:30:17,840 --> 00:30:20,120 Speaker 1: it comes to taking money off the table, we always 518 00:30:20,120 --> 00:30:23,440 Speaker 1: start with the riskier, more speculative parts of our portfolio 519 00:30:23,880 --> 00:30:28,000 Speaker 1: like bitcoin. Bitcoin of course extending losses even dropping below 520 00:30:28,040 --> 00:30:30,960 Speaker 1: almost thirty thousand one point on Monday. This is the 521 00:30:31,040 --> 00:30:33,800 Speaker 1: first time it goes as low since back in July. 522 00:30:35,000 --> 00:30:38,280 Speaker 1: And tech socks, including those in Cathy Wood's ARC fund, 523 00:30:38,600 --> 00:30:41,040 Speaker 1: which this week gave back all of its gains against 524 00:30:41,040 --> 00:30:46,040 Speaker 1: the smp F, and then some Cathy would strategy, for example, 525 00:30:46,080 --> 00:30:49,680 Speaker 1: of picking stocks that have fallen victim to the tech meltdown, 526 00:30:50,120 --> 00:30:52,840 Speaker 1: some of her favorites tumbling in an environment of rising 527 00:30:52,880 --> 00:30:55,320 Speaker 1: interest rates and high inflation. There's a look at the 528 00:30:55,440 --> 00:30:58,400 Speaker 1: arc innovation et F. But fear not, there are some 529 00:30:58,480 --> 00:31:02,640 Speaker 1: assets that are holding up nicely, even setting new records, like, 530 00:31:02,760 --> 00:31:05,800 Speaker 1: for example, twentieth century American art. One not to the 531 00:31:05,800 --> 00:31:08,840 Speaker 1: beginning I wanted to send me in one sentiment in 532 00:31:09,000 --> 00:31:12,719 Speaker 1: one twenty. This week, Andy Warhol's portrait of Marilyn Monroe, 533 00:31:12,800 --> 00:31:16,640 Speaker 1: it's called Shot Sage Blue Maryland, set a new record, 534 00:31:16,960 --> 00:31:21,120 Speaker 1: going for one million dollars. That's almost double the previous 535 00:31:21,160 --> 00:31:23,960 Speaker 1: record of one ten million dollars for a painting by 536 00:31:24,080 --> 00:31:29,080 Speaker 1: Jean Michel Basquiette. We did sell the most expensive painting 537 00:31:29,120 --> 00:31:32,480 Speaker 1: of the twentieth century. It's the highest price ever paid, 538 00:31:33,280 --> 00:31:36,560 Speaker 1: close to two hundred million dollars. Uh, let it sink in. 539 00:31:37,000 --> 00:31:40,920 Speaker 1: It's quite something. So with all the talk about cryptocurrencies 540 00:31:40,960 --> 00:31:43,120 Speaker 1: and n f t s is the value of the future, 541 00:31:43,480 --> 00:31:45,960 Speaker 1: It's good to know that the safe haven investment may 542 00:31:46,040 --> 00:31:49,000 Speaker 1: just be in the end good old fashioned art. Though 543 00:31:49,040 --> 00:31:52,520 Speaker 1: I'm sure Mr Warhol would not appreciate being called old 544 00:31:52,600 --> 00:31:56,160 Speaker 1: fashioned in any way that does it. For this episode 545 00:31:56,160 --> 00:31:58,600 Speaker 1: of Wall Street Week, I'm David Weston. This is Bloomberg. 546 00:31:58,920 --> 00:32:05,640 Speaker 1: See you next week.