WEBVTT - Bloomberg Wall Street Week: Bianco, Moore, Altman 0:00:00.520 --> 0:00:03.920 This is Bloomberg Wall Street. We turn our attention to 0:00:03.960 --> 0:00:07.080 the markets this week. U s c BEHIN members reinforcing 0:00:07.120 --> 0:00:10.600 concerns about inflation, the financial stories that cheap our work, 0:00:10.680 --> 0:00:13.480 a really different reaction to Mark two. More indications of 0:00:13.600 --> 0:00:16.200 just how hot the U. S. Economy really is through 0:00:16.239 --> 0:00:19.520 the eyes of the most influential voices Larry Summers, the 0:00:19.520 --> 0:00:22.919 former Treachery Secretary, Katherine Keene, CEO of v n Y Moms, 0:00:22.920 --> 0:00:26.239 Sam's l Chairman and founder of Equity Group Investment in 0:00:26.280 --> 0:00:30.200 Bloomberg wool Street Week with David Weston from Bloomberg radew 0:00:30.320 --> 0:00:34.440 When it rains, it pours, inflation, supply chains, war and 0:00:34.600 --> 0:00:38.559 tightening financial conditions. We've got it all. This is Bloomberg 0:00:38.560 --> 0:00:42.839 Wall Street Week. I'm David Weston this week special contributing 0:00:42.920 --> 0:00:45.560 Larry Summers on what it will take to get inflation 0:00:45.800 --> 0:00:51.599 back under control. The real determinants of inflation have to 0:00:51.640 --> 0:00:56.200 do with the total level of demand that's being stimulated 0:00:56.240 --> 0:01:00.040 by policies. And Roger Altman of Evercreps on whether of 0:01:00.160 --> 0:01:03.120 things really are as bad as they look and what 0:01:03.320 --> 0:01:07.880 can be done about it. It certainly could get worse 0:01:07.920 --> 0:01:23.920 before it gets better. It wasn't a great week on 0:01:23.959 --> 0:01:27.120 Global Wall Street. Consumer price numbers may have slowed down 0:01:27.120 --> 0:01:29.639 how bad, but according to Sarah House of Wells Fargo, 0:01:29.920 --> 0:01:34.720 not nearly enough. You are seeing some deceleration pair, but 0:01:34.800 --> 0:01:37.120 you're going to need to see a lot more. The 0:01:37.160 --> 0:01:40.560 war in Ukraine continued as President Putin made it clear 0:01:40.680 --> 0:01:45.000 he's not about to stop any time soon. It was 0:01:45.120 --> 0:01:48.440 not just sum delier Neat countries didn't want to listen 0:01:48.480 --> 0:01:51.760 to us, and in fact what happened they had completely 0:01:51.760 --> 0:01:55.760 different plans. While in China doubts grow about the economic 0:01:55.840 --> 0:01:59.640 path forward. It's less the story about John estimilating the 0:01:59.640 --> 0:02:01.400 global commy and more about whether or not it can 0:02:01.440 --> 0:02:05.160 even get its own economy on the base level. And 0:02:05.240 --> 0:02:07.920 you can forget about crypto as a place to hide 0:02:07.920 --> 0:02:10.960 from the storm. As Terris u s D stable coin 0:02:11.240 --> 0:02:15.640 lost its dollar peg. In short, the entire model fell 0:02:15.680 --> 0:02:19.040 apart and was unable to withstand a black spawn event 0:02:19.280 --> 0:02:22.400 or an adverse event, and Secretary Yelling warned of the 0:02:22.440 --> 0:02:26.800 potential risks for the financial system overall. I think that 0:02:26.960 --> 0:02:32.480 simply illustrates that this is a rapidly growing a product 0:02:33.000 --> 0:02:38.760 and there are risks to financial stability. And if all 0:02:38.840 --> 0:02:41.040 that weren't enough for you, we ended the week on 0:02:41.120 --> 0:02:44.360 Friday the thirteenth with Elon Musk tweeting that he has 0:02:44.400 --> 0:02:48.240 been for Twitter was on temporary hold sending the stock 0:02:48.280 --> 0:02:51.000 down by as much as at one point before he 0:02:51.040 --> 0:02:54.520 sent another tweet saying he was still committed to the deal, 0:02:54.800 --> 0:02:57.079 which helped a bit but still left the stock off 0:02:57.120 --> 0:03:00.440 about ten percent. And as for the markets, overall, equities 0:03:00.480 --> 0:03:03.000 made a valiant effort on Friday to come back from 0:03:03.000 --> 0:03:05.640 a bad week, but the SMP five hundred still finished 0:03:05.680 --> 0:03:08.079 down two point four percent for the week, closing Laura 0:03:08.160 --> 0:03:10.840 for the sixth week in a row, while the NASDAC 0:03:10.919 --> 0:03:13.240 was off two point eight percent and the yield on 0:03:13.280 --> 0:03:16.480 the tenure came down twenty basis points, ending the week 0:03:16.639 --> 0:03:18.840 at two point nine To to help us make some 0:03:18.960 --> 0:03:21.840 sense out of this rather chaotic week, we welcome now 0:03:21.919 --> 0:03:24.799 Kate Moore, she's black Rock Global Allocation team head a 0:03:24.919 --> 0:03:29.480 thematic strategy and David Bianco c i O for DWS America. So, David, 0:03:29.480 --> 0:03:32.000 it's not a very easy task. But what sense was 0:03:32.120 --> 0:03:34.840 made out of this week? Oh? This week was volatile, 0:03:35.160 --> 0:03:37.840 at least ended on a happy note. UH and We 0:03:37.880 --> 0:03:41.000 appreciate that equities ended the week on on a strong note, 0:03:41.000 --> 0:03:43.960 but let's face at the equity market and most asset 0:03:43.960 --> 0:03:46.200 classes have been under a lot of pressure here to date. 0:03:46.480 --> 0:03:49.760 The SMP it's flirting with a bear market. Who was 0:03:49.840 --> 0:03:53.560 down as much as during the week now it's down 0:03:53.560 --> 0:03:55.960 six from its all time hose And I think we're 0:03:55.960 --> 0:03:59.120 in a range bound market for some time. Markets just 0:03:59.200 --> 0:04:02.320 need to figure out what the normal interest rates are 0:04:02.320 --> 0:04:05.080 and until we have an understanding, has to wear interest 0:04:05.200 --> 0:04:09.640 rates stabilize, and especially not until the bond markets stop 0:04:09.720 --> 0:04:13.360 suffering losses. The equity markets have risk. So so okay, 0:04:13.400 --> 0:04:14.920 when you look at the equity market relations to the 0:04:14.960 --> 0:04:18.080 bond market, how much of this is discounting future earnings 0:04:18.080 --> 0:04:20.800 basically it's a discount rate put against future earnings. And 0:04:20.839 --> 0:04:23.559 how much is actually the multiple in the highest growth 0:04:23.600 --> 0:04:26.240 parts of the market, the stuff that was commanding ridiculous 0:04:26.320 --> 0:04:29.520 multiples for a lot of one. You know, that d 0:04:29.760 --> 0:04:33.719 rating is really started in November UM and has continued 0:04:33.800 --> 0:04:37.640 through the course of We still believe we're far away 0:04:37.640 --> 0:04:39.840 from a recession, and we think the FED is in 0:04:39.920 --> 0:04:43.480 the very early stages of normalizing policy, both in terms 0:04:43.480 --> 0:04:46.400 of policy rates, as well as of course quantitative tightening 0:04:46.400 --> 0:04:49.880 and reducing our partnering changing the size of the balance sheet. 0:04:49.960 --> 0:04:52.800 So you know, those two things together are going to 0:04:52.920 --> 0:04:54.720 I think, exert a bit of pressure and I think 0:04:54.800 --> 0:04:58.560 gonna keep volatility high. We keep watching the relationship between 0:04:59.120 --> 0:05:02.080 you know, rates fall and equity ball and see if 0:05:02.080 --> 0:05:03.720 there's a change in the pattern. But right now, I 0:05:03.760 --> 0:05:06.680 think they're going to stay elevated. That's exactly right. I mean, 0:05:06.880 --> 0:05:10.479 we're watching interest rates, we're watching interest rate volatility. It's 0:05:10.560 --> 0:05:14.159 just representative of how much uncertainty there is on where 0:05:14.160 --> 0:05:17.200 interest rates are likely to go up, but where do 0:05:17.240 --> 0:05:21.800 they plateau. And yes, higher interest rates, particularly higher real 0:05:21.839 --> 0:05:25.840 interest rates, is reducing the PE multiple. And then there's 0:05:25.880 --> 0:05:30.039 this uncertainty about how long this expansion might last. I've 0:05:30.080 --> 0:05:32.880 said that this expansion is two years old, perhaps going 0:05:32.920 --> 0:05:35.360 on seven or nine years old biologically, when it has 0:05:35.400 --> 0:05:38.760 a tenure expected lifespan. So they've not only used to 0:05:38.800 --> 0:05:41.560 hire discount rate to take in the PE, they've also 0:05:41.600 --> 0:05:46.120 shortened their forecast horizons and not paying for future growth. Instead, 0:05:46.160 --> 0:05:48.680 they're valuing the more certain earnings and dividends that you 0:05:48.680 --> 0:05:50.919 see coming from certain companies now yea, and I have 0:05:51.000 --> 0:05:53.000 to say, you know, we look around and say, there 0:05:53.000 --> 0:05:55.479 are a lot of high quality companies that you want 0:05:55.480 --> 0:05:57.960 to own for the next three or five years that 0:05:58.000 --> 0:06:02.000 are trading it pretty attractive multiple right now. That said, 0:06:02.279 --> 0:06:05.520 could the multiples overshoot to the downside? I mean, I 0:06:05.520 --> 0:06:08.520 think the answer is yes, there's a high probability that 0:06:08.560 --> 0:06:12.000 as the uncertainty rises around the macro environment and policy, 0:06:12.360 --> 0:06:14.440 that you end up seeing multiples get to kind of 0:06:14.600 --> 0:06:17.120 really silly cheap levels if you want to average in 0:06:17.279 --> 0:06:20.160 the great But it's this is a challenging environment. I 0:06:20.200 --> 0:06:22.919 think it's still a good environment for the long term investor. 0:06:23.120 --> 0:06:25.000 You have to find that person. That person needs to 0:06:25.040 --> 0:06:28.240 really understand the volatility they may be facing. A twin 0:06:28.520 --> 0:06:32.599 pe is still reasonable given these interest rates, Uh, they're 0:06:32.640 --> 0:06:34.960 still much lower than history. Now the Fed has an 0:06:34.960 --> 0:06:38.840 inflation fight to fight, but it's unlikely that interest rates 0:06:38.920 --> 0:06:41.120 go anywhere near where they were historically. Kate wore a 0:06:41.160 --> 0:06:44.320 black rock and David Bianco DWS America's where we're staying 0:06:44.360 --> 0:06:46.040 with us as we take a look down the road 0:06:46.200 --> 0:06:48.920 and what it means for investors if this inflation is 0:06:48.960 --> 0:06:52.000 here to stay. That's gonna have next on Wall Street 0:06:52.000 --> 0:07:05.039 Week on Bloomberg. This is Bloomberg Wall Street Week with 0:07:05.200 --> 0:07:09.400 David Weston from Bloomberg Radio. We've got some inflation built 0:07:09.400 --> 0:07:14.240 into the system, and price risers aren't going to go 0:07:14.280 --> 0:07:17.560 away overnight. But I think we begin seeing some hopeful 0:07:17.600 --> 0:07:21.080 signs that we're at a point here where we can 0:07:21.240 --> 0:07:25.160 begin getting a grip on this situation. That, of course, 0:07:25.200 --> 0:07:27.200 was Paul Volker on Wall Street with way back in 0:07:28.240 --> 0:07:30.080 That was when he was the president of New York Fed, 0:07:30.480 --> 0:07:33.080 before he got to administer his medicine to the economy 0:07:33.120 --> 0:07:35.440 as head of the Federal Reserve. David Bianco of W 0:07:35.720 --> 0:07:38.160 DW S America said, Kate Moore of Black Rock are 0:07:38.200 --> 0:07:40.000 still with us? Okay, let me ask you a question 0:07:40.000 --> 0:07:42.320 that I'm hearing more and more. Some people are suggesting 0:07:42.560 --> 0:07:44.360 this may be here for a long time to come. 0:07:44.480 --> 0:07:47.000 We had Jason Furman on from Harvard earlier this week 0:07:47.040 --> 0:07:48.920 on Bloomberg. He said he thinks it could be years 0:07:49.000 --> 0:07:52.120 we have really high inflation. If that's right, If that 0:07:52.240 --> 0:07:56.280 proves me true, what does that stay for two investors? Well, actually, 0:07:56.360 --> 0:07:59.040 you know, as much stress as we have around higher 0:07:59.040 --> 0:08:01.240 inflation rates, part really since most of us haven't had 0:08:01.280 --> 0:08:04.080 to deal with us for the majority of our lives. Um, 0:08:04.240 --> 0:08:09.000 there's actually really interesting investment theme around higher inflation. It's 0:08:09.000 --> 0:08:12.840 really interesting to look at within industries, which companies have 0:08:12.920 --> 0:08:15.840 pricing power, which companies are doing a really good job 0:08:15.880 --> 0:08:18.960 of managing their costs and managing to their margins, and 0:08:19.000 --> 0:08:21.480 which are struggling. I mean, I also like this theme 0:08:21.520 --> 0:08:25.120 of looking at companies that have very high labor intensity 0:08:25.200 --> 0:08:28.120 to sales. In other words, do they have to continue 0:08:28.120 --> 0:08:30.280 to hire and especially at a time where we know 0:08:30.360 --> 0:08:34.000 the total cost of an employee continues to rise, or 0:08:34.120 --> 0:08:36.240 do they have business models that are scalable they can 0:08:36.280 --> 0:08:39.360 continue to grow without adding to additional labor. I mean, 0:08:39.600 --> 0:08:41.880 we have to live in this environment and invest in 0:08:41.880 --> 0:08:45.120 this environment, and I think there's some pretty interesting opportunities, 0:08:45.679 --> 0:08:48.640 even though inflation does pinch our wallets. Well, Okay, give 0:08:48.640 --> 0:08:50.680 me an example, what sorts of sectors at least you're 0:08:50.679 --> 0:08:54.439 talking about. Okay, an example might be like, if you're 0:08:54.480 --> 0:08:57.280 just thinking in the consumer sectors, for example, you know, 0:08:57.360 --> 0:09:00.280 some companies have done a really good job of you know, 0:09:00.520 --> 0:09:04.480 writing longer term contracts, of managing their input costs. Sometimes 0:09:04.520 --> 0:09:07.760 they've made great investments in software and systems and technology 0:09:08.040 --> 0:09:11.000 so that they've been able to reduce their dependence on labor. 0:09:11.400 --> 0:09:13.560 All of these things help to sort of mitigate the 0:09:13.600 --> 0:09:18.120 margin pressure that an inflationary environment might otherwise scare us into. Right, 0:09:18.240 --> 0:09:21.960 and so there are some decent fundamental stories even in 0:09:22.000 --> 0:09:24.760 a higher inflationary environment. But you really got to get 0:09:24.800 --> 0:09:27.200 to know the company. And there are some beneficiaries of 0:09:27.200 --> 0:09:30.800 the FED fighting inflation. Banks, insurance companies. They should benefit 0:09:30.840 --> 0:09:33.560 from higher interest rates with the utilities or a really 0:09:33.559 --> 0:09:36.920 good bond substitute with inflation protection, and probably delivering the 0:09:37.000 --> 0:09:40.600 energy of the future electrification. Uh. And we like healthcare, 0:09:40.880 --> 0:09:43.680 and healthcare has become the biggest part of consumer spending. 0:09:43.760 --> 0:09:47.520 It continues to be the fastest growing part. Productivity, medicines, 0:09:47.640 --> 0:09:51.960 devices are needed. There these productivity providers, we think they're 0:09:51.960 --> 0:09:54.079 gonna be able to play an important role in capture profits. 0:09:54.120 --> 0:09:57.480 But I'd love about your clip in nine is that 0:09:57.800 --> 0:10:01.560 even the provoker recognized the challenge ahead. It's surprised even him, 0:10:01.760 --> 0:10:04.640 the big man, to the upside. Inflation can be a 0:10:04.720 --> 0:10:06.880 very big problem when that genie is out of the bottle. Okay, 0:10:06.880 --> 0:10:09.000 that leads me exactly my question you, David, which is 0:10:09.040 --> 0:10:12.000 you studied that period, do we need this time the 0:10:12.040 --> 0:10:14.400 sort of medicine that Paul Wolker ended up administring that 0:10:14.559 --> 0:10:17.760 because it was pretty tough. It was brutal medicine, and 0:10:17.800 --> 0:10:20.120 I think people need to appreciate that it was a 0:10:20.200 --> 0:10:23.960 very high price to pay for allowing inflation to accelerate 0:10:24.000 --> 0:10:28.080 for so long. Folker hyped the overnight interest rate to 0:10:28.280 --> 0:10:33.240 and inflation got to uh, it caused a recession. But 0:10:33.520 --> 0:10:35.640 one of the things that's important to recognize is that 0:10:36.200 --> 0:10:39.920 there was this combination of tightening monetary policy. While there's 0:10:39.920 --> 0:10:42.599 a lot of pro supply side policy. Who was a 0:10:42.640 --> 0:10:48.040 Reaganomics with Volkers monetary discipline that really helped seed a 0:10:48.120 --> 0:10:51.840 terrific nineteen eighties and longer expansion. So Kate helped me 0:10:51.880 --> 0:10:54.319 here because you're responsible for making these sorts of decisions. 0:10:54.400 --> 0:10:56.080 And normal if you've got a lot of inflation, you 0:10:56.080 --> 0:10:58.400 don't want to have cash because it's dwindling as you 0:10:58.520 --> 0:11:00.080 hold onto it. On the other hand, we got a 0:11:00.080 --> 0:11:03.400 lot of uncertainty. So what's your approach. Yeah, you know, 0:11:03.559 --> 0:11:05.840 normally I would say holding cash in the bank and 0:11:05.920 --> 0:11:08.480 not investing it or putting it to work in the 0:11:08.520 --> 0:11:11.320 market in some way, you know, is a waste, and 0:11:11.640 --> 0:11:14.040 especially in real terms, you just think about that cash 0:11:14.080 --> 0:11:16.440 kind of burning away. Of course, holding cash in this 0:11:16.559 --> 0:11:20.040 environment where we've had a really really challenging period for 0:11:20.559 --> 0:11:24.280 both bonds and stocks in terms of returns, has actually 0:11:24.320 --> 0:11:28.680 proven to be a really good portfolio diversifier. In fact, 0:11:28.760 --> 0:11:31.679 we're holding a fairly high level of cash both as 0:11:31.679 --> 0:11:34.680 an expression of our duration view, so we've had a 0:11:34.679 --> 0:11:37.439 sort of shorter duration position in the fund. We also 0:11:37.480 --> 0:11:41.280 de risk part of our equity portfolio while still holding 0:11:41.320 --> 0:11:43.800 some of the higher growth, higher quality companies that I 0:11:43.840 --> 0:11:46.520 think they can compound over the next couple of years. 0:11:47.280 --> 0:11:50.520 I think you should have dry powder. I really recommend 0:11:50.520 --> 0:11:53.280 people having some cash at this point. We're going to 0:11:53.400 --> 0:11:56.240 get some interesting bites at the Apple Um, you know, 0:11:56.400 --> 0:11:58.800 some other high quality companies, as I was mentioning before, 0:11:59.080 --> 0:12:01.760 may even get che birth in this as we know, 0:12:01.800 --> 0:12:04.120 have a very volatile period over the next couple one 0:12:04.200 --> 0:12:08.080 months of policy adjustment, and you know, recession fears, recession 0:12:08.320 --> 0:12:11.839 appears fading. David in a time of inflation, one thing 0:12:11.840 --> 0:12:14.160 people tend to go to his real assets, real estate, 0:12:14.160 --> 0:12:16.120 and now guy's realized sistem. Does that make sense right now? 0:12:16.360 --> 0:12:19.319 It does, And there's a nice availability of real assets, 0:12:19.320 --> 0:12:21.440 and they're investable more than they were back in the past. 0:12:21.480 --> 0:12:24.360 It's easier to invest in commodities, it's easier to invest 0:12:24.400 --> 0:12:28.400 in real estate, it's easier to even buy inflation protected securities. 0:12:28.840 --> 0:12:32.280 These things, particularly the ease of which they're investable nowadays. 0:12:32.520 --> 0:12:34.480 I bet your investors wish they had those options in 0:12:34.480 --> 0:12:37.000 the late seventies and early eighties. So there are ways 0:12:37.040 --> 0:12:40.280 to help manage through this period of uncertainty and the 0:12:40.360 --> 0:12:43.280 risks of inflation being high. Okay, so this is unfair. 0:12:43.360 --> 0:12:45.760 There's a curveball, Kade, I'll throw your way. Cash is 0:12:45.800 --> 0:12:48.400 not trash. What about crypto? I mean, we've had this 0:12:48.400 --> 0:12:51.640 whole discussion. There was something like two seventy billion dollars worth. 0:12:51.640 --> 0:12:54.200 The value came out of crypto and out of stable coins. 0:12:54.240 --> 0:12:56.520 As we did that teach us anything in general. I 0:12:56.559 --> 0:12:58.960 talked to Larry Summers and he said mainly that greed 0:12:59.040 --> 0:13:02.280 drives the marketplace. Yeah, first of all, I'm stealing Dave's 0:13:02.280 --> 0:13:04.960 cash is not trash, and I might make a little 0:13:04.960 --> 0:13:08.240 tattoo of that on my shoulder. But this is what 0:13:08.280 --> 0:13:11.360 I'll say. I'm by far away not an expert or 0:13:11.400 --> 0:13:14.920 an authority in any on on crypto or digital assets. 0:13:15.520 --> 0:13:17.600 I just would say that for people who are adding 0:13:17.640 --> 0:13:20.400 that into their portfolios as a diversifier, I think we've 0:13:20.440 --> 0:13:24.480 seen an incredibly higher correlation between all of these assets 0:13:24.480 --> 0:13:26.240 and actually between a lot of them and you know, 0:13:26.800 --> 0:13:30.360 more speculative parts of the technology sector. And you know, 0:13:31.000 --> 0:13:33.880 you've got to really think about your portfolio construction. This 0:13:33.960 --> 0:13:36.760 is the very early stages of this, you know, um, 0:13:37.360 --> 0:13:41.040 digital finance revolution, if you will, and you have to 0:13:41.120 --> 0:13:44.160 be I think, pretty balanced in your portfolio if you're 0:13:44.200 --> 0:13:46.920 going to own some of those assets. I don't know 0:13:46.920 --> 0:13:49.920 where it goes from here, but I will say, um, 0:13:49.960 --> 0:13:52.640 you have to be cautious. Just quickly. That's such a 0:13:52.679 --> 0:13:55.600 great point Cages made. We talk about trying to avoid correlation. 0:13:57.080 --> 0:13:58.320 I'm not sure I heard a lot of people talk 0:13:58.360 --> 0:14:00.240 about the corelation between big tech on the on hand 0:14:00.240 --> 0:14:01.880 in crypto on the other, but we surely certainly have 0:14:01.920 --> 0:14:05.079 seen it recently a lot of the same owners, so yes, 0:14:05.160 --> 0:14:07.319 they find themselves haven't been hurt and perhaps having to 0:14:07.400 --> 0:14:11.240 do risk. Um. The thing about one of the things 0:14:11.280 --> 0:14:13.440 to keep in mind the dollar has been getting stronger 0:14:13.880 --> 0:14:16.679 and if the Fed pulls this off, well the dollar 0:14:16.800 --> 0:14:20.000 will reign supreme again. What about that, Kate, What about 0:14:20.000 --> 0:14:22.360 a strong dollar? What does it due to your investment? Yeah, 0:14:22.480 --> 0:14:25.880 we take some concurrency views into consideration. I gotta tell 0:14:25.880 --> 0:14:27.880 you though, over the course of my career, I don't 0:14:27.920 --> 0:14:32.720 have the best batting average and making cross currency. That's 0:14:33.240 --> 0:14:36.240 you know. What I will tell you though, is you 0:14:36.240 --> 0:14:38.440 know it does affect how we think about our internationally. 0:14:38.600 --> 0:14:40.680 I'm sure not currency traders. So thank you so much. 0:14:40.760 --> 0:14:42.160 Great to have you both of us as Kate Moore 0:14:42.240 --> 0:14:46.600 black Rock and David Bianco of DWS Americans. Coming up, 0:14:46.640 --> 0:14:48.120 we take a look at what's coming up next week 0:14:48.240 --> 0:15:06.320 on the Wall Street. This is Bloomberg Wall Street Week 0:15:06.520 --> 0:15:16.640 with David Weston from Bloomberg Radio. Run up in stocks 0:15:16.640 --> 0:15:18.800 and then they subsequent set off in stocks on Wall 0:15:18.800 --> 0:15:21.120 Street is really working his way into the global narrative 0:15:21.280 --> 0:15:24.320 thing that sell off pattern in stocks and bonds really continue. 0:15:24.520 --> 0:15:28.600 But economic slowdown spurred another bout of risk aversion. Here's 0:15:28.640 --> 0:15:32.040 that rainy day. It's been a long bowl run in 0:15:32.080 --> 0:15:35.720 the markets, in wealth accumulation and in the economy which 0:15:35.760 --> 0:15:38.320 came back fast even after being brought to a halt 0:15:38.560 --> 0:15:41.760 by a pandemic. The fact is Americans a lot to 0:15:41.760 --> 0:15:45.800 be proud of. We're experiencing the strongest economic recovery in 0:15:45.840 --> 0:15:49.560 the world. But now everything that looked so rosy gives 0:15:49.600 --> 0:15:52.800 cause for concern from inflation. To look at the numbers, 0:15:52.840 --> 0:15:55.880 the headline comes in up three tenths of eight per 0:15:55.880 --> 0:15:58.480 cent to the supply chain. Some of the supply chain 0:15:58.520 --> 0:16:02.800 headaches that someone saying reaching an old time higher. To Ukraine, 0:16:03.160 --> 0:16:06.120 the Russians have been acting more like a bulldozer than 0:16:06.400 --> 0:16:09.760 than a tesla. To China, I think we're they're headed 0:16:09.800 --> 0:16:12.160 for growth recession. So yeah, I think the rest of 0:16:12.160 --> 0:16:14.120 the year is going to be very tough for China, 0:16:14.640 --> 0:16:17.960 leaving an investor to wonder how bad will it get? 0:16:21.760 --> 0:16:24.040 And when you ask a question as basic as how 0:16:24.080 --> 0:16:26.520 big and it gets, you want a true veteran, even 0:16:26.520 --> 0:16:28.800 a legend of Wall Street and Washington, and that's what 0:16:28.880 --> 0:16:31.480 we have here in Roger Altman is the senior chairman, 0:16:31.520 --> 0:16:33.920 of course, the founder of ever Core. Roger, welcome back. 0:16:33.960 --> 0:16:35.800 It's great to have you, Thank you, great to see you. 0:16:36.080 --> 0:16:38.560 So it's been a week maybe a month of hearing 0:16:38.760 --> 0:16:42.120 all the bad things everywhere you turn, and it's inflation, 0:16:42.160 --> 0:16:44.880 and it's the FED, and it's Ukraine, it's China, it's 0:16:44.920 --> 0:16:48.480 the plate China. How bad is it? Well, l as 0:16:48.480 --> 0:16:52.640 of right now is down more or less. And that's 0:16:53.200 --> 0:16:57.200 the definition of a true correction. And so I would 0:16:57.240 --> 0:17:00.720 say it's been pretty severe. Uh. I think the big 0:17:00.800 --> 0:17:04.720 question is how much worse can it get? Uh? And 0:17:04.800 --> 0:17:06.840 no one knows the answer to that, and I certainly don't, 0:17:06.840 --> 0:17:10.760 but it certainly could get worse before it gets better. 0:17:11.160 --> 0:17:15.800 And you know, historically, when you see such a profound 0:17:16.400 --> 0:17:19.840 change of monetary policy, which as as worth having now 0:17:20.440 --> 0:17:23.440 or in the beginning stages of now, historically it's been 0:17:24.240 --> 0:17:28.360 at least over the short term after the change starts 0:17:28.760 --> 0:17:33.080 bad for equity values. It's really been the case very often. 0:17:33.920 --> 0:17:37.639 So it's not surprising that stocks are down now that 0:17:37.680 --> 0:17:42.000 the Fed has ended this relatively long period of almost 0:17:42.080 --> 0:17:45.720 free money uh and has headed up on a on 0:17:45.800 --> 0:17:51.360 a substantial, substantial upward trajectory in terms of tightening. It's 0:17:51.400 --> 0:17:53.679 not surprising stocks are down, But I think, as you 0:17:53.800 --> 0:17:56.920 just said, it coincides with a lot of other negative news. 0:17:57.960 --> 0:18:00.720 Most basically inflation, but also some of the other points 0:18:00.720 --> 0:18:03.760 you make about Ukraine, uh and so forth, and so 0:18:04.040 --> 0:18:05.960 it could get worse. Do I think we're in the 0:18:06.960 --> 0:18:10.200 on the verge of a financial crisis. I don't. I don't. 0:18:10.240 --> 0:18:14.920 I just think it's a sharp correction in equity values, which, 0:18:14.920 --> 0:18:17.000 when you step back and think about them, in so 0:18:17.040 --> 0:18:21.800 many cases, especially tech, were hard to hard to rationalize 0:18:21.880 --> 0:18:25.760 before this change. I mean, there was some astronomical values, 0:18:25.800 --> 0:18:29.120 as you well know, and it's not surprising that they're 0:18:29.160 --> 0:18:32.520 finally recked being rectified. So you're talking about the equity markets, 0:18:32.560 --> 0:18:34.320 We've talked with the bond markets as well, which is 0:18:34.600 --> 0:18:37.639 really taken it on the chin. What's the relationship between 0:18:37.640 --> 0:18:39.840 those financial markets on one hand, and if I can 0:18:39.880 --> 0:18:41.800 put it this way, the rural world, because a lot 0:18:41.840 --> 0:18:43.960 of your work at ever Core is dealing with real 0:18:44.000 --> 0:18:47.120 companies who are buying and selling companies or pieces of companies. 0:18:47.320 --> 0:18:50.440 Does it directly translate into the value of those assets 0:18:50.600 --> 0:18:53.639 or is it somewhat removed. It does directly translate in 0:18:53.960 --> 0:19:00.560 two ways. Uh. The stock market is a uh pretty 0:19:00.560 --> 0:19:06.560 reliable predictor of the broad economy, albeit uh nine months 0:19:06.640 --> 0:19:09.800 or so in advance. Of the real economy is changing. 0:19:10.400 --> 0:19:14.800 So um, right now there's a big debate as to 0:19:14.800 --> 0:19:21.080 whether we may have a recession, and uh, I think 0:19:21.119 --> 0:19:26.800 that's about myself. But uh, we're slowing down even right now, 0:19:27.640 --> 0:19:30.680 and and the market is in effect telling us that 0:19:31.200 --> 0:19:33.080 in terms of our own business, Oh yes, it has 0:19:33.080 --> 0:19:36.439 a big effect because when when the volatility is so 0:19:36.520 --> 0:19:40.280 high and people hesitate, they want to step back and 0:19:40.320 --> 0:19:43.040 wait for the smoke to clear in the environment to settle, 0:19:43.720 --> 0:19:48.480 and so transactions slow down. There's no doubt about it. Um. 0:19:48.520 --> 0:19:50.040 And you can see that by the way and the 0:19:50.119 --> 0:19:55.200 valuations of all the investment banks which have come down 0:19:55.200 --> 0:19:56.800 a lot for a variety of reasons, but one of 0:19:56.840 --> 0:19:59.480 them is an anticipated slow down in transaction volume. But 0:19:59.520 --> 0:20:02.159 it's interesting people start to sit in their hands, if 0:20:02.200 --> 0:20:03.680 I can put it that where they're afraid to make 0:20:03.680 --> 0:20:06.600 a move, and that Trump's would otherwise might be an 0:20:06.600 --> 0:20:08.480 instinct is you know, there are some bargains now, so 0:20:08.600 --> 0:20:11.679 prices are coming down. It's the price takes is lower. 0:20:11.920 --> 0:20:13.840 It might cause some cities to say now is the 0:20:13.840 --> 0:20:16.119 time to move well, And in fact, just before I 0:20:16.160 --> 0:20:18.600 just on my way over here, I was on the 0:20:18.600 --> 0:20:20.320 phone with some of my colleagues because we're having a 0:20:20.400 --> 0:20:23.159 call uh with a very very well known company that 0:20:23.160 --> 0:20:26.119 we work with closely. That's a technology company, a very 0:20:26.160 --> 0:20:30.640 big one and a lot of it. The smaller companies 0:20:30.680 --> 0:20:33.320 they've been interested in buying in recent years have just 0:20:33.400 --> 0:20:35.560 been too expensive. Roger, thank you so very much. This 0:20:35.680 --> 0:20:37.960 is so helpful. How was the pleasure? David as Roger Allman. 0:20:38.040 --> 0:20:43.800 He is senior chairman and founder of ever Core. Coming up, 0:20:43.840 --> 0:20:45.960 we wrap up the week with our special Wall Street 0:20:46.000 --> 0:20:51.119 Week contributor Larry Summers of Harvard. This is Wall Street 0:20:51.119 --> 0:20:56.600 Week on Bloomberg. This is Bloomberg Wall Street Week with 0:20:56.760 --> 0:21:00.240 David Weston from Bloomberg Radio. This is Wall Spog Week time. 0:21:00.280 --> 0:21:02.719 David Weston ats time once again this week to have 0:21:02.800 --> 0:21:05.800 Larry Summers at Harvard come to us and explain this 0:21:06.000 --> 0:21:08.280 really perplexing week. So Larry, thanks so much for being 0:21:08.320 --> 0:21:10.720 back with this. I could call this the week of inflation, 0:21:10.720 --> 0:21:13.200 as it were. With the CPI numbers, the PPI numbers 0:21:13.200 --> 0:21:15.560 something you've been warning about for some time now. Some 0:21:15.600 --> 0:21:17.560 people are saying that show sort of we've hit the peak, 0:21:17.600 --> 0:21:19.840 it's starting to come down. What did you read into 0:21:19.880 --> 0:21:22.800 those numbers? You know, once again, the numbers were worse 0:21:22.880 --> 0:21:27.800 than people expected them to be. We may have hit 0:21:27.840 --> 0:21:32.520 a peak last month at eight point five, but we're 0:21:32.560 --> 0:21:37.840 not heading anywhere near to anytime soon, and that says 0:21:37.960 --> 0:21:41.800 that we've got very big challenges ahead of us in 0:21:41.920 --> 0:21:46.520 terms of managing UH this economy. And I think there's 0:21:46.560 --> 0:21:51.160 a lot of real risks out there. I see an 0:21:51.160 --> 0:21:56.280 overheated labor market as the core of the inflation process, 0:21:56.800 --> 0:22:00.359 driving service prices up. And I see a lot of 0:22:00.480 --> 0:22:06.280 risks geopolitically in terms of supply chains, geopolitically in terms 0:22:06.440 --> 0:22:10.760 of UH commodity prices. And so I think this is 0:22:10.800 --> 0:22:13.600 gonna be a very difficult environment for quite some time 0:22:13.640 --> 0:22:16.040 to come. Well let's talk about that quite some time 0:22:16.080 --> 0:22:18.000 to come, because we're now starting to see some people, 0:22:18.080 --> 0:22:21.280 including Jason Furman on Bloomberger this week, say he thinks 0:22:21.280 --> 0:22:23.159