1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa A. Brawnowitz Jaily. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,360 Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 5 00:00:23,360 --> 00:00:29,520 Speaker 1: dot Com, and of course on the Bloomberg terminal. Right now, 6 00:00:29,560 --> 00:00:32,640 Speaker 1: a really important conversation for global Wall Street. We're gonna 7 00:00:32,680 --> 00:00:34,599 Speaker 1: go geek on you and we want you to keep up. 8 00:00:35,200 --> 00:00:39,400 Speaker 1: Robert Lucas invented my concept of expectations. The Giant from 9 00:00:39,479 --> 00:00:43,080 Speaker 1: Chicago was one of my first interviews when I joined Bloomberg. 10 00:00:43,400 --> 00:00:48,159 Speaker 1: Always controversial within economics. And William Dudley of Berkeley Goldman Saxon, 11 00:00:48,200 --> 00:00:50,919 Speaker 1: of course, the former Fed President for New York, has 12 00:00:50,960 --> 00:00:54,480 Speaker 1: driven the conversation this morning, making it clear this is 13 00:00:54,560 --> 00:00:59,120 Speaker 1: a federal reserve system is fighting the last war. Let 14 00:00:59,200 --> 00:01:02,440 Speaker 1: us go to the ornament. The economist Deshel Hammett, this 15 00:01:02,480 --> 00:01:06,040 Speaker 1: is some Jeremy Rudd's controversial paper right now. This is 16 00:01:06,080 --> 00:01:09,920 Speaker 1: the great detective author of another time in place. Nobody 17 00:01:09,959 --> 00:01:13,120 Speaker 1: thinks clearly, no matter what they pretend, that's why people 18 00:01:13,200 --> 00:01:16,240 Speaker 1: hang on so tight to their beliefs and opinions, because 19 00:01:16,280 --> 00:01:20,000 Speaker 1: compared to the haphazard way they've arrived at it, even 20 00:01:20,000 --> 00:01:24,960 Speaker 1: the goofiest opinions seems wonderfully clear, sane, and self evident. 21 00:01:25,200 --> 00:01:29,080 Speaker 1: Bill Dudley. That's in Jeremy Rudd's paper on expectations is 22 00:01:29,160 --> 00:01:34,440 Speaker 1: our belief in inflation? Expectations are belief in gaining the 23 00:01:34,560 --> 00:01:39,000 Speaker 1: future through what people believe the future will believe. Is 24 00:01:39,040 --> 00:01:42,400 Speaker 1: it over? I think the key question is how to 25 00:01:42,600 --> 00:01:46,960 Speaker 1: households respond to high inflation. They revise up their expectations 26 00:01:47,000 --> 00:01:50,160 Speaker 1: of inflation, and is that effect their behavior or are 27 00:01:50,160 --> 00:01:52,760 Speaker 1: their threshold effects which Jeremy Rudd talks about, where in 28 00:01:52,800 --> 00:01:55,680 Speaker 1: other words, they only react one's inflation and we just 29 00:01:55,760 --> 00:01:58,000 Speaker 1: get to a certain level by actually starting to change 30 00:01:58,120 --> 00:02:00,800 Speaker 1: where they are actually willing to, you know, switched it 31 00:02:00,840 --> 00:02:03,200 Speaker 1: from one employer to another. I think Jeremy is raising 32 00:02:03,240 --> 00:02:06,440 Speaker 1: some interesting questions about is our model of how inflation 33 00:02:06,520 --> 00:02:09,919 Speaker 1: is generated correct or not? Built the essence of your 34 00:02:09,919 --> 00:02:12,160 Speaker 1: pace this morning, I think it's been at the epicenter 35 00:02:12,200 --> 00:02:14,480 Speaker 1: of your call for much of this year. You think 36 00:02:14,480 --> 00:02:16,440 Speaker 1: the Federal Reserve is gonna be too late, and when 37 00:02:16,480 --> 00:02:18,720 Speaker 1: they start, they're gonna have to move quickly. They're gonna 38 00:02:18,720 --> 00:02:21,320 Speaker 1: have to move faster than people expect. What's the argument 39 00:02:21,360 --> 00:02:25,600 Speaker 1: that underpins that, cold Bill Well, I think the issue 40 00:02:25,639 --> 00:02:28,320 Speaker 1: is that the FED learned some lessons from the last crisis, 41 00:02:28,360 --> 00:02:31,840 Speaker 1: but they don't really apply to the current recovery. Lessons 42 00:02:31,840 --> 00:02:34,160 Speaker 1: from the last crisis, where it was that inflation we 43 00:02:34,200 --> 00:02:37,760 Speaker 1: had trouble get pushing inflation back up to two uh. 44 00:02:37,800 --> 00:02:40,880 Speaker 1: They thoughtful employment was at a higher level of the 45 00:02:40,919 --> 00:02:43,400 Speaker 1: unemployer rate than it actually turned out to be. So 46 00:02:43,600 --> 00:02:46,000 Speaker 1: they revised their mo entary policy framework and they said, well, 47 00:02:46,040 --> 00:02:48,560 Speaker 1: we're really going to really work really hard to push 48 00:02:48,560 --> 00:02:50,720 Speaker 1: inflation up, and we're gonna work really hard to push 49 00:02:50,760 --> 00:02:55,480 Speaker 1: the unemployment down to level past full employment. Well that's 50 00:02:55,520 --> 00:02:58,120 Speaker 1: great for that last cycle, but what about this cycle. 51 00:02:58,200 --> 00:03:01,680 Speaker 1: We already have inflation above the offense target UM, and 52 00:03:01,760 --> 00:03:03,280 Speaker 1: we have a lot of uncertain about how much slack 53 00:03:03,320 --> 00:03:04,799 Speaker 1: there actually is in the libor market. So I think 54 00:03:04,800 --> 00:03:07,480 Speaker 1: the risk is that they're fighting the last war. The 55 00:03:07,480 --> 00:03:10,320 Speaker 1: problem isn't inflation too low, that the problem is inflation 56 00:03:10,360 --> 00:03:12,960 Speaker 1: too high UM. And I think we also have all 57 00:03:12,960 --> 00:03:15,960 Speaker 1: this all these questions about you know, how much slack 58 00:03:16,000 --> 00:03:17,560 Speaker 1: do we actually have in the U S. Libor market. 59 00:03:17,760 --> 00:03:19,720 Speaker 1: The one question is always hard, but what it's a 60 00:03:19,840 --> 00:03:22,240 Speaker 1: question we have to ask, when do you think this 61 00:03:22,320 --> 00:03:25,239 Speaker 1: Federal Reserve will realize come to a realization of what 62 00:03:25,600 --> 00:03:27,800 Speaker 1: you believe, and what will lead them to have that 63 00:03:27,880 --> 00:03:32,040 Speaker 1: read think well, I think the interesting question they have 64 00:03:32,280 --> 00:03:34,160 Speaker 1: in the current set of projections is they have the 65 00:03:34,240 --> 00:03:37,160 Speaker 1: unemployer right going below their view of what's maximum sustainable 66 00:03:37,160 --> 00:03:42,200 Speaker 1: employment in two UH and staying there through if they 67 00:03:42,200 --> 00:03:45,760 Speaker 1: have in their forecast inflation falling over that period, and 68 00:03:45,800 --> 00:03:47,920 Speaker 1: they have the Fed not getting back even to a 69 00:03:47,960 --> 00:03:51,320 Speaker 1: neutral monetary policy setting by the end of four So 70 00:03:51,360 --> 00:03:53,520 Speaker 1: I think what they're going to realize is that if 71 00:03:53,640 --> 00:03:56,560 Speaker 1: Monterrey policy is this easy for this long, at this 72 00:03:56,600 --> 00:03:58,880 Speaker 1: type of a labor market, they're going to have more 73 00:03:58,880 --> 00:04:01,800 Speaker 1: of an inflation consequince they have written what they've written 74 00:04:01,800 --> 00:04:05,720 Speaker 1: down in their current set of projections. Bill, if you're right, faster, Bill, 75 00:04:05,760 --> 00:04:08,440 Speaker 1: if you're right, why have we not seen more material 76 00:04:08,480 --> 00:04:11,520 Speaker 1: wage pressure, wage increases that actually exceed the pace of 77 00:04:11,600 --> 00:04:16,159 Speaker 1: consumer inflation more dramatically. I think it's still early days. 78 00:04:16,160 --> 00:04:18,640 Speaker 1: I mean, we've just emerged from the pandemic over the 79 00:04:18,680 --> 00:04:21,120 Speaker 1: last year, and the employment rates come down sharply over 80 00:04:21,120 --> 00:04:23,720 Speaker 1: the over the last year. I think it's really too 81 00:04:23,720 --> 00:04:26,000 Speaker 1: soon to say what's going to happen to wages. Uh, 82 00:04:26,000 --> 00:04:29,200 Speaker 1: the Employment cost Index is the most reliable indicator on 83 00:04:29,279 --> 00:04:32,040 Speaker 1: wages that only comes out once a quarters. So we're 84 00:04:32,040 --> 00:04:34,640 Speaker 1: still looking, we're looking backwards. That's sort of old information. 85 00:04:35,160 --> 00:04:36,760 Speaker 1: But you've made the argument, I have to get back 86 00:04:36,760 --> 00:04:39,200 Speaker 1: to neutral more quickly. You've talked about the speed Let's 87 00:04:39,200 --> 00:04:41,200 Speaker 1: talk about a speed limit. What is the speed limit? Now? 88 00:04:41,360 --> 00:04:43,359 Speaker 1: How high can they go with the Fed funds right 89 00:04:43,400 --> 00:04:46,200 Speaker 1: in an economy like this one. Well, I think they 90 00:04:46,240 --> 00:04:47,960 Speaker 1: can go a lot faster than what they pencil in. 91 00:04:48,040 --> 00:04:50,000 Speaker 1: I mean, if you look what people have reacted to 92 00:04:50,040 --> 00:04:52,560 Speaker 1: the last from C Minute meeting as as the Fed 93 00:04:52,600 --> 00:04:54,559 Speaker 1: being really hawkish. But if you look, if it takes 94 00:04:55,040 --> 00:04:57,320 Speaker 1: three years to get to a median federal fund rate 95 00:04:57,360 --> 00:04:59,800 Speaker 1: at one eight percent, that's not a very fast rate 96 00:04:59,839 --> 00:05:03,000 Speaker 1: of obtaining. A comparison would be the two thousand four, 97 00:05:03,120 --> 00:05:06,080 Speaker 1: two thousand sixth episode for the FED raised the fund 98 00:05:06,160 --> 00:05:09,719 Speaker 1: raid a quarter point seventeen consecutive from meetings, taking the 99 00:05:09,720 --> 00:05:11,919 Speaker 1: fund raid from one percent to five and the quarter percent, 100 00:05:13,480 --> 00:05:15,880 Speaker 1: but it could be but it could be something a 101 00:05:15,880 --> 00:05:18,160 Speaker 1: lot more than what they've got. Christ In, it's seventeen 102 00:05:18,200 --> 00:05:19,760 Speaker 1: and it's not that extreme, Bill, But I'm just trying 103 00:05:19,760 --> 00:05:22,120 Speaker 1: to understand whether this economy with this much deck can 104 00:05:22,320 --> 00:05:25,240 Speaker 1: can take those kind of moves. Well, I think you're 105 00:05:25,400 --> 00:05:27,240 Speaker 1: right that that they're not going to get all the 106 00:05:27,240 --> 00:05:29,640 Speaker 1: way to probably five percent, because the economy will start 107 00:05:29,680 --> 00:05:32,720 Speaker 1: to you know, react to that, to that burden. But 108 00:05:33,240 --> 00:05:35,200 Speaker 1: it seems to me that it's reasonable to think that 109 00:05:35,200 --> 00:05:36,520 Speaker 1: the fall Reserve is gonna have to get to a 110 00:05:36,600 --> 00:05:41,480 Speaker 1: kpe montary policy setting before the end of belt. Great 111 00:05:41,480 --> 00:05:44,800 Speaker 1: conversation and fantastic pace. Bloomberg column out this morning on 112 00:05:44,839 --> 00:05:47,360 Speaker 1: Bloomberg dot Com and on the Bloomberg Terminal built Duntley 113 00:05:47,360 --> 00:05:49,560 Speaker 1: There the Waterful built Downtley, formerly in the New York 114 00:05:49,560 --> 00:05:52,520 Speaker 1: Fed and now Bloomberg opinion columnists and senior adviser to 115 00:05:52,640 --> 00:06:01,400 Speaker 1: Bloomberg Economics, Christian Nelson, Jotscha Bank, Private Bank leve We'll see, Christian, 116 00:06:01,839 --> 00:06:04,760 Speaker 1: what should these central banks do in the environment like 117 00:06:04,760 --> 00:06:08,000 Speaker 1: the warm we're in right now? So I think very important. 118 00:06:08,080 --> 00:06:10,160 Speaker 1: Right where the market is changing, it's not new that 119 00:06:10,200 --> 00:06:12,919 Speaker 1: there is inflation coming in. We have always talked about 120 00:06:12,920 --> 00:06:16,800 Speaker 1: base effect, but now, especially in Europe, gas prices really 121 00:06:16,800 --> 00:06:20,880 Speaker 1: skywriting yesterday and today even more. I think there's really 122 00:06:20,920 --> 00:06:24,719 Speaker 1: the scenario that there is this call its deflationary supply 123 00:06:24,839 --> 00:06:27,080 Speaker 1: side chock. And of course you have the question what 124 00:06:27,120 --> 00:06:29,479 Speaker 1: the center banks should be doing. And let's not forget 125 00:06:29,520 --> 00:06:31,760 Speaker 1: you talked about the fat um here. The e c 126 00:06:31,839 --> 00:06:34,560 Speaker 1: D is not having the goal of of really economic growth. 127 00:06:34,600 --> 00:06:37,440 Speaker 1: It's just price stability, and that's why they are probably 128 00:06:37,480 --> 00:06:39,560 Speaker 1: concerned about this if we stay at these levels or 129 00:06:39,600 --> 00:06:41,960 Speaker 1: even go further up. But I think they are not 130 00:06:42,080 --> 00:06:45,040 Speaker 1: in a situation to really increase rates as you would 131 00:06:45,080 --> 00:06:47,640 Speaker 1: normally do. If you see your flationary pressures, they are 132 00:06:47,640 --> 00:06:50,280 Speaker 1: still saying it's transitory. We are more in the camp 133 00:06:50,360 --> 00:06:52,559 Speaker 1: that inflation will stay higher. And if you talk about 134 00:06:52,600 --> 00:06:55,400 Speaker 1: fighting war was I agree, it's not the inflationary war 135 00:06:55,880 --> 00:06:59,000 Speaker 1: is a bit more inflationary. However, that's not bad for 136 00:06:59,040 --> 00:07:01,200 Speaker 1: the central banks if you get a bit more inflation. 137 00:07:01,279 --> 00:07:04,080 Speaker 1: In the question though, is is it too fast now 138 00:07:04,080 --> 00:07:08,880 Speaker 1: and they need to act? Christian is tapering tightening? I 139 00:07:08,920 --> 00:07:11,760 Speaker 1: would say, of course it is yes, because you take 140 00:07:12,080 --> 00:07:14,600 Speaker 1: let's say money you don't supply to the market, anymore. 141 00:07:15,200 --> 00:07:18,040 Speaker 1: The question though, is what's the speed of tapering? Do 142 00:07:18,080 --> 00:07:20,320 Speaker 1: you do you step by step or do it very fast? 143 00:07:20,400 --> 00:07:22,400 Speaker 1: And the markets can react to that, and I think 144 00:07:22,720 --> 00:07:25,080 Speaker 1: that's where the center branks are quite confident to get 145 00:07:25,120 --> 00:07:27,640 Speaker 1: this done. So I would not conum. Let's say it's 146 00:07:27,680 --> 00:07:30,800 Speaker 1: the same situation combined this with two thousand thirteen tape 147 00:07:30,800 --> 00:07:33,120 Speaker 1: on tantrum. That's I think not the Christian you admire. 148 00:07:33,120 --> 00:07:37,000 Speaker 1: With this weakness in the secuity market this morning, sorry 149 00:07:37,040 --> 00:07:39,200 Speaker 1: say again you are buyer of the weakness we're seeing 150 00:07:39,240 --> 00:07:43,080 Speaker 1: on the screens this morning in the secuity Yeah, cautious 151 00:07:43,080 --> 00:07:45,600 Speaker 1: in the markets. We have been expecting a downturn and 152 00:07:45,640 --> 00:07:48,280 Speaker 1: we don't think it's too too early now, so we 153 00:07:48,320 --> 00:07:50,320 Speaker 1: are waiting a little bit too to go back into 154 00:07:50,320 --> 00:07:52,800 Speaker 1: the markets. I would say if you look at the US, 155 00:07:52,840 --> 00:07:55,160 Speaker 1: for example, I wouldn't be surprised if you see a 156 00:07:55,240 --> 00:07:57,240 Speaker 1: setback to the two on a day moving average in 157 00:07:57,280 --> 00:08:00,160 Speaker 1: the SNP. I wouldn't do that out because they are 158 00:08:00,320 --> 00:08:03,520 Speaker 1: some some topics that could weigh on the market also 159 00:08:03,560 --> 00:08:05,120 Speaker 1: in the next days and weeks. So you see the 160 00:08:05,240 --> 00:08:08,680 Speaker 1: energy prices, gas prices in Europe, cold prices in China, 161 00:08:09,240 --> 00:08:12,960 Speaker 1: so China GDP from becoming maybe even weaker than expected. 162 00:08:13,040 --> 00:08:16,119 Speaker 1: You have the earning season to start where I would 163 00:08:16,120 --> 00:08:17,920 Speaker 1: say the growth rate is not the same as we 164 00:08:18,000 --> 00:08:20,640 Speaker 1: have seen before, and that's because they're both there. Don't 165 00:08:20,640 --> 00:08:22,680 Speaker 1: get me wrong, but I think there will be some 166 00:08:22,800 --> 00:08:25,920 Speaker 1: better opportunities throughout the next days and weeks. Christian were 167 00:08:25,960 --> 00:08:28,520 Speaker 1: being buffeted by the temporary as you write in your 168 00:08:28,560 --> 00:08:32,839 Speaker 1: important note recently, how do corporations in Europe, how do 169 00:08:32,960 --> 00:08:37,920 Speaker 1: corporations in America? How do corporations in Asia adapt to 170 00:08:38,000 --> 00:08:43,679 Speaker 1: the temporary six standard deviation shock of net gas? Well, 171 00:08:43,679 --> 00:08:46,439 Speaker 1: the issue with gases with the companies is that they 172 00:08:46,480 --> 00:08:49,040 Speaker 1: normally have to take contracts with their clients, so they 173 00:08:49,040 --> 00:08:52,160 Speaker 1: cannot increase the prices as the incoming prices, and that's 174 00:08:52,160 --> 00:08:55,680 Speaker 1: why their margin is drinking or even getting negative. And 175 00:08:55,720 --> 00:08:59,560 Speaker 1: that's why some companies have been saying we are reducing output, 176 00:09:00,160 --> 00:09:02,360 Speaker 1: and of course that's weighing on growth. And then you 177 00:09:02,400 --> 00:09:04,960 Speaker 1: have an issue with with the growth in general, because 178 00:09:04,960 --> 00:09:08,520 Speaker 1: everyone needs energy, and I think that's why it's so important. 179 00:09:08,520 --> 00:09:10,640 Speaker 1: If it's going so fast, I would expect that this 180 00:09:10,800 --> 00:09:13,760 Speaker 1: is the governments are saying, Okay, what can we do 181 00:09:13,880 --> 00:09:17,199 Speaker 1: through this, do we take some actions on price cips. 182 00:09:17,200 --> 00:09:19,760 Speaker 1: We've seen that already in Europe, in Spain, for example, 183 00:09:20,200 --> 00:09:22,720 Speaker 1: the UK is obviously just nothing that, but also European 184 00:09:22,800 --> 00:09:25,440 Speaker 1: Union with let me discussed that. Christine greed to catch up. 185 00:09:25,480 --> 00:09:28,319 Speaker 1: What a morning for it, Christian Deutsche Bank, Private Bank, 186 00:09:28,360 --> 00:09:37,800 Speaker 1: Globo see. I Oh, this is a joy. It's always 187 00:09:37,800 --> 00:09:40,160 Speaker 1: a joy because she is what we try to do 188 00:09:40,200 --> 00:09:43,160 Speaker 1: in America. I'm not gonna mince words, she started out, 189 00:09:43,320 --> 00:09:47,280 Speaker 1: challenged overcame dyslexia, was picking up a phone at a 190 00:09:47,320 --> 00:09:50,360 Speaker 1: real estate company and said, wait a minute, I can 191 00:09:50,400 --> 00:09:52,960 Speaker 1: do this. This is the only voice I want to 192 00:09:53,000 --> 00:09:56,520 Speaker 1: talk to on the insanity of real estate right now, 193 00:09:56,840 --> 00:09:59,040 Speaker 1: Barbara Corker. And of course you order from Shark Tank, 194 00:09:59,120 --> 00:10:01,680 Speaker 1: she joins us. Now, but Barbara, as you give the 195 00:10:01,720 --> 00:10:05,080 Speaker 1: spirit the small business and all like you invented, I 196 00:10:05,120 --> 00:10:07,960 Speaker 1: need to talk to you about the pricing of housing 197 00:10:08,320 --> 00:10:11,360 Speaker 1: in America. I just looked up at Corcoran Group and 198 00:10:11,400 --> 00:10:15,000 Speaker 1: I'm gonna pay thirty four thousand dollars on taxes on 199 00:10:15,080 --> 00:10:18,320 Speaker 1: a piece in Brooklyn. How have we done this? How 200 00:10:18,320 --> 00:10:24,200 Speaker 1: have we priced America out of real estate? Well, most 201 00:10:24,240 --> 00:10:26,760 Speaker 1: people are priced out of the market here exactly right. 202 00:10:27,160 --> 00:10:31,400 Speaker 1: The market has been going absolutely bonkers with no end 203 00:10:31,440 --> 00:10:35,240 Speaker 1: in sight. No prices nationwide have gone up. I have 204 00:10:35,360 --> 00:10:38,079 Speaker 1: never seen an increase like that in the thirty years. 205 00:10:38,080 --> 00:10:40,079 Speaker 1: The last thirty years, I think it was the last time. 206 00:10:40,760 --> 00:10:42,920 Speaker 1: No one could believe what's going on. In fact, if 207 00:10:42,960 --> 00:10:44,760 Speaker 1: you want to buy a house, I don't know how 208 00:10:44,840 --> 00:10:48,160 Speaker 1: you did on your purchase, but everything is being sold 209 00:10:48,160 --> 00:10:50,400 Speaker 1: in bidding wars A six of the houses. I mean, 210 00:10:50,480 --> 00:10:53,560 Speaker 1: people are so uncomfortable, and yet they keep paying the 211 00:10:53,600 --> 00:10:55,920 Speaker 1: prices in this no end insight. Barbara, I looked at 212 00:10:55,960 --> 00:10:58,720 Speaker 1: the meat, the regression rather of housing and oh four 213 00:10:58,880 --> 00:11:01,240 Speaker 1: oh five, oh s X and you know what, we 214 00:11:01,440 --> 00:11:04,199 Speaker 1: regress back to the mean you live that at Cork 215 00:11:04,360 --> 00:11:06,360 Speaker 1: and group. Are we going to do the same thing 216 00:11:06,440 --> 00:11:09,839 Speaker 1: this time I did? Are we going to do it again? No, 217 00:11:10,040 --> 00:11:13,160 Speaker 1: it's not the same kind of a market. No, no, no, no, 218 00:11:13,240 --> 00:11:15,520 Speaker 1: you know what you have it says, market is fueled 219 00:11:15,520 --> 00:11:18,520 Speaker 1: by individual buyers who want a better place to live. 220 00:11:18,640 --> 00:11:21,000 Speaker 1: They bring their businesses home, they want to raise their kids. 221 00:11:21,280 --> 00:11:24,319 Speaker 1: When we had that drop off, it was fueled by investors, 222 00:11:24,360 --> 00:11:29,120 Speaker 1: house flippers, poor mortgages that shouldn't have been a mortgage, 223 00:11:29,400 --> 00:11:31,800 Speaker 1: mortgage companies that should have been lending money at the time. 224 00:11:32,080 --> 00:11:34,240 Speaker 1: I mean, it was a it was a false market 225 00:11:34,280 --> 00:11:36,640 Speaker 1: with a false bottom and it fell. We're not going 226 00:11:36,679 --> 00:11:39,120 Speaker 1: to have that now. I'm just hoping that the price 227 00:11:39,240 --> 00:11:42,080 Speaker 1: is cool down a bit, because, as you started to 228 00:11:42,160 --> 00:11:44,680 Speaker 1: say just a minute ago, so many people are left 229 00:11:44,720 --> 00:11:46,920 Speaker 1: out of the market. It just seems unfair. Just to 230 00:11:46,960 --> 00:11:49,360 Speaker 1: have a house, you have to feel like you have 231 00:11:49,440 --> 00:11:52,400 Speaker 1: to be a pro investor bidding up the prices. It's 232 00:11:52,440 --> 00:11:54,880 Speaker 1: it's just insanity. I've never seen anything like it, Barba. 233 00:11:54,960 --> 00:11:57,840 Speaker 1: This is for individuals, but it's also for small corporations, 234 00:11:57,880 --> 00:11:59,600 Speaker 1: and I know you do speak with a lot of them. 235 00:11:59,600 --> 00:12:03,760 Speaker 1: I'm one during how much this dampens their enthusiasm, their optimism, 236 00:12:03,760 --> 00:12:06,800 Speaker 1: their willingness to hire, to expand. If the fixed costs 237 00:12:06,840 --> 00:12:11,800 Speaker 1: are going up as quickly as they are. With the 238 00:12:11,840 --> 00:12:14,840 Speaker 1: fixed costs going up for business, that's not always true, 239 00:12:14,920 --> 00:12:18,400 Speaker 1: all right, Commercial rents are much lower than they were 240 00:12:18,640 --> 00:12:24,200 Speaker 1: if you were talking about business. I'm assuming, right, yes, yeah, yeah, 241 00:12:24,240 --> 00:12:26,679 Speaker 1: so that their fixed costs are actually lower. People are 242 00:12:26,720 --> 00:12:30,720 Speaker 1: renting less space. People who have large floor plates in 243 00:12:31,080 --> 00:12:33,560 Speaker 1: large ventro Politan areas are negotiating their way out of 244 00:12:33,559 --> 00:12:37,200 Speaker 1: the leases, the subleasing, the space. Retail prices have come down. 245 00:12:37,640 --> 00:12:40,040 Speaker 1: No one wants a large retail space anymore because it's 246 00:12:40,040 --> 00:12:42,840 Speaker 1: a shop front versus holding all of the inventory. They 247 00:12:42,840 --> 00:12:45,440 Speaker 1: don't do that anymore. They sell it online. So actually 248 00:12:45,480 --> 00:12:48,520 Speaker 1: the cost of doing business has come down. And of 249 00:12:48,600 --> 00:12:52,960 Speaker 1: course the problem, the main problem with all of business 250 00:12:53,080 --> 00:12:55,320 Speaker 1: right now is finding the right people. That is the 251 00:12:55,400 --> 00:12:58,240 Speaker 1: single largest challenge. Whether you own a restaurant or shoe 252 00:12:58,280 --> 00:13:01,920 Speaker 1: shop or a giant corporate ration, hiring and finding and 253 00:13:02,120 --> 00:13:04,920 Speaker 1: luring in the right people has been the biggest challenge. 254 00:13:05,000 --> 00:13:07,720 Speaker 1: But Barbara, we have not seen the increase in wages 255 00:13:07,760 --> 00:13:09,960 Speaker 1: that we would have expected given all of the labor 256 00:13:10,000 --> 00:13:12,480 Speaker 1: market shortages that we hear about. In fact, it still 257 00:13:12,559 --> 00:13:16,080 Speaker 1: lags behind the pace of inflation. Bill Dudley, formerly of 258 00:13:16,080 --> 00:13:17,440 Speaker 1: the New York Fed, was just on the show and 259 00:13:17,480 --> 00:13:19,880 Speaker 1: he was saying he thinks it will accelerate pretty dramatically 260 00:13:19,920 --> 00:13:23,400 Speaker 1: in the near term. Do you see evidence from small 261 00:13:23,440 --> 00:13:26,720 Speaker 1: business owners that they are willing to pay up that 262 00:13:26,880 --> 00:13:29,600 Speaker 1: much more dramatically in the upcoming months that will lead 263 00:13:29,640 --> 00:13:33,839 Speaker 1: to that kind of wage inflation. You know, if they 264 00:13:33,880 --> 00:13:36,360 Speaker 1: had they're going to not have a choice. So far, 265 00:13:36,400 --> 00:13:38,880 Speaker 1: they've had a choice. They've cut back on this staff. 266 00:13:39,120 --> 00:13:41,960 Speaker 1: They intentionally cut back on their overhead. They got rid 267 00:13:42,000 --> 00:13:45,280 Speaker 1: of everybody they really didn't want working for them. During 268 00:13:45,320 --> 00:13:48,400 Speaker 1: the pandemic. I mean, all these companies slimmed down and 269 00:13:48,440 --> 00:13:51,040 Speaker 1: got the house in order. Whether or not they're willing 270 00:13:51,080 --> 00:13:53,480 Speaker 1: to pay a higher wage remains to be seen. But 271 00:13:53,600 --> 00:13:56,880 Speaker 1: so far they are not people holding onto their profits 272 00:13:56,880 --> 00:13:59,040 Speaker 1: and I'm very reluctant to let any of that money out. 273 00:14:00,240 --> 00:14:02,680 Speaker 1: It's more I don't want to use the word selfish, 274 00:14:02,720 --> 00:14:04,920 Speaker 1: but I would say, yes, people want to a little 275 00:14:04,920 --> 00:14:06,840 Speaker 1: greed has set in, but they're gonna have to get 276 00:14:06,920 --> 00:14:10,480 Speaker 1: They're gonna have to give something. Question you in support 277 00:14:10,520 --> 00:14:13,480 Speaker 1: with A T and T are actually out there talking 278 00:14:13,520 --> 00:14:16,760 Speaker 1: to real people. These are webinars and things like that 279 00:14:16,800 --> 00:14:21,280 Speaker 1: where Barbara Corkrand Folks is talking to people about small businesses. 280 00:14:21,640 --> 00:14:23,440 Speaker 1: Let me raise my hand in the back room of 281 00:14:23,480 --> 00:14:27,960 Speaker 1: the zoom call, Barbara, could you do now what you did? Then? 282 00:14:32,400 --> 00:14:35,680 Speaker 1: Yes I could, because you know what, the pandemic has 283 00:14:36,240 --> 00:14:38,720 Speaker 1: proven that and that's what the purpose of the Business 284 00:14:38,800 --> 00:14:42,840 Speaker 1: Unusual webinar series presented by A T and T actually is. 285 00:14:43,280 --> 00:14:46,320 Speaker 1: We're trying to give people the tools they need to 286 00:14:46,480 --> 00:14:50,480 Speaker 1: reinvent themselves with very little money in their hand. And 287 00:14:50,520 --> 00:14:56,000 Speaker 1: today's market accommodates that everybody is rewriting their business plan, 288 00:14:56,400 --> 00:14:59,880 Speaker 1: redoing the way they deliver their products to customers, reinvent 289 00:15:00,120 --> 00:15:03,680 Speaker 1: how they could attract customers in And that's actually why 290 00:15:04,000 --> 00:15:06,000 Speaker 1: A T and T decided to do the webinar series, 291 00:15:06,040 --> 00:15:07,800 Speaker 1: because a lot of people don't know how to do that. 292 00:15:07,960 --> 00:15:10,120 Speaker 1: I know how to do it. I know how people 293 00:15:10,160 --> 00:15:11,880 Speaker 1: who could tell people how to do it. Barbara, I'm 294 00:15:11,880 --> 00:15:14,080 Speaker 1: looking for four bedrooms upper East Side. See what you 295 00:15:14,080 --> 00:15:16,680 Speaker 1: can do this afternoon, Barbara Corkrand, thank you so much 296 00:15:17,280 --> 00:15:22,960 Speaker 1: with the a sublease on my place sub sub lease, 297 00:15:23,280 --> 00:15:32,480 Speaker 1: Thank you so much. Barbara Corkin Serato, Japa joins US 298 00:15:32,520 --> 00:15:37,360 Speaker 1: right now with Sucken Socigi General as a US rate strategist. Sobrata, 299 00:15:37,480 --> 00:15:40,080 Speaker 1: it's an interesting movie here. Let's start with what has 300 00:15:40,200 --> 00:15:47,520 Speaker 1: not happened? Why are yields not moving like net gas? Well, 301 00:15:47,560 --> 00:15:50,400 Speaker 1: because of the fact that you know, we're a big 302 00:15:50,440 --> 00:15:53,840 Speaker 1: market and we look at fundamentals um you know, and 303 00:15:54,360 --> 00:15:56,560 Speaker 1: bond yields in general in the US have been some 304 00:15:56,640 --> 00:15:59,800 Speaker 1: more you know, slow to react to what's happening on 305 00:15:59,840 --> 00:16:02,800 Speaker 1: the commodity complex because it's not that big of an issue. 306 00:16:02,840 --> 00:16:05,520 Speaker 1: I think that the specul moves in that gast especially 307 00:16:06,000 --> 00:16:09,480 Speaker 1: are quite speculative, so I'm not sure that there should 308 00:16:09,480 --> 00:16:12,160 Speaker 1: be a reaction in the bottom market from moves in 309 00:16:12,200 --> 00:16:16,600 Speaker 1: that gas. But broadly speaking, I think higher oil prices 310 00:16:16,640 --> 00:16:20,920 Speaker 1: and fears of inflation have been driving yields higher. Nothink 311 00:16:20,920 --> 00:16:22,680 Speaker 1: that sort of trend is here to stay for the 312 00:16:22,680 --> 00:16:25,520 Speaker 1: remainder of the year. Among others, Lisa Brandow's has really 313 00:16:25,560 --> 00:16:29,160 Speaker 1: emphasized the paper out there in the insatiable demand for it. 314 00:16:29,600 --> 00:16:33,240 Speaker 1: If I like yield at one point three five priced down, 315 00:16:33,360 --> 00:16:36,120 Speaker 1: yield up, I gotta really like it at one point 316 00:16:36,160 --> 00:16:39,440 Speaker 1: five five. Is there a huge thirst here to buy 317 00:16:39,480 --> 00:16:43,200 Speaker 1: the dip in bonds. I think what you're going to 318 00:16:43,280 --> 00:16:46,000 Speaker 1: see from investors is some level of caution given the 319 00:16:46,040 --> 00:16:48,720 Speaker 1: fact that we've seen this sort of very sharp move 320 00:16:48,920 --> 00:16:51,400 Speaker 1: from around one thirty prior to the f o MC 321 00:16:51,520 --> 00:16:54,480 Speaker 1: meeting a couple of weeks ago to around one fifty five, 322 00:16:54,600 --> 00:16:57,160 Speaker 1: and the momentum seems to be towards higher yields given 323 00:16:57,200 --> 00:17:00,240 Speaker 1: headlines around inflation. I think what you're going to see 324 00:17:00,280 --> 00:17:03,800 Speaker 1: over the next coming weeks is more cautious approach in 325 00:17:03,840 --> 00:17:05,800 Speaker 1: the barn market. You know, you're not going to see 326 00:17:05,840 --> 00:17:08,800 Speaker 1: deep buyers coming right away. They're going to need to 327 00:17:08,840 --> 00:17:11,760 Speaker 1: see tenure yields stabilize. I would say between say one 328 00:17:11,800 --> 00:17:15,040 Speaker 1: fifty and one seventy before they come in and start 329 00:17:15,080 --> 00:17:17,320 Speaker 1: buying the market here. So I think over the new 330 00:17:17,480 --> 00:17:20,080 Speaker 1: term they probably stay in the sidelines, especially heading into 331 00:17:20,200 --> 00:17:23,000 Speaker 1: payrolls this weekend, and then beyond that I think that 332 00:17:23,040 --> 00:17:25,280 Speaker 1: would be stabilized into a new range. Then you'll start 333 00:17:25,280 --> 00:17:27,639 Speaker 1: seeing investors coming in and buying the depth. So Beno, 334 00:17:27,680 --> 00:17:30,800 Speaker 1: many investors, many legends of the investment world are worried 335 00:17:30,800 --> 00:17:32,840 Speaker 1: about this s word, and I want to discuss it 336 00:17:32,880 --> 00:17:34,280 Speaker 1: with you. I think it's a difference between being an 337 00:17:34,320 --> 00:17:37,200 Speaker 1: economist and looking at stagflation and saying the stack piece 338 00:17:37,200 --> 00:17:39,480 Speaker 1: of this does not work. We just had anice M 339 00:17:39,520 --> 00:17:42,560 Speaker 1: north of sixty grosser expected to have a four handle 340 00:17:42,600 --> 00:17:46,160 Speaker 1: through next year. That's not stagflation. Market participants are looking 341 00:17:46,200 --> 00:17:49,760 Speaker 1: at rady change and saying, look, gross decelerating and inflation 342 00:17:49,840 --> 00:17:53,360 Speaker 1: expectations are still elevated, and maybe they might accelerate into 343 00:17:53,400 --> 00:17:55,440 Speaker 1: a new year. I want to understand how a bond 344 00:17:55,440 --> 00:17:58,600 Speaker 1: market behaves in that kind of environment of decelerating growth 345 00:17:58,840 --> 00:18:01,520 Speaker 1: and persistently high and like what does that look like? 346 00:18:03,160 --> 00:18:06,680 Speaker 1: So I think that inflation expectations should rise modesty, especially 347 00:18:06,720 --> 00:18:10,840 Speaker 1: given where inflation expectations are in the UK or Europe. 348 00:18:10,880 --> 00:18:13,639 Speaker 1: And this is not just a US phenomena. You're seeing 349 00:18:13,680 --> 00:18:17,840 Speaker 1: global inflation expectations rise quite meaningfully. We actually did the 350 00:18:17,960 --> 00:18:21,439 Speaker 1: chart comparing inflation expectations across different regions last week in 351 00:18:21,440 --> 00:18:24,840 Speaker 1: our weekly and what you notice is that US tenure 352 00:18:24,840 --> 00:18:27,280 Speaker 1: break evens, for instance, have been very much in a 353 00:18:27,480 --> 00:18:31,879 Speaker 1: range and and sort of until yesterday they've kind of 354 00:18:31,880 --> 00:18:35,280 Speaker 1: been hestited to break above two forties. So I think 355 00:18:35,280 --> 00:18:38,840 Speaker 1: of inflation risks persist, you're going to see room for 356 00:18:39,320 --> 00:18:42,159 Speaker 1: break evens to continue to rise from here on. But 357 00:18:42,280 --> 00:18:46,400 Speaker 1: broadly speaking, I think that the fundamental picture is very supportive. 358 00:18:46,440 --> 00:18:49,320 Speaker 1: Growth is quite strong. Um, you know, yes, we're seeing 359 00:18:49,320 --> 00:18:51,639 Speaker 1: a revision revisions to growth in the third quarter, but 360 00:18:51,720 --> 00:18:56,320 Speaker 1: that's just pushing out growth for into the the upcoming 361 00:18:56,400 --> 00:18:59,400 Speaker 1: quarters as well as well into introllect here. So it's 362 00:18:59,400 --> 00:19:02,080 Speaker 1: not growth that we're losing, it's just kind of getting postponed. 363 00:19:02,119 --> 00:19:05,400 Speaker 1: There's no derailment, there's just a postponement if you will, 364 00:19:05,480 --> 00:19:08,159 Speaker 1: on on growth. So in that sort of context, I 365 00:19:08,200 --> 00:19:11,320 Speaker 1: think that you'll should continue to rise and entration expectations 366 00:19:11,520 --> 00:19:13,639 Speaker 1: perhaps continue to rise as well, at least about with 367 00:19:13,640 --> 00:19:16,720 Speaker 1: the classic em dilemma and AGAM. Central banker often confronts 368 00:19:17,119 --> 00:19:19,960 Speaker 1: upside inflation risk, downside growth risk, and often they do 369 00:19:20,040 --> 00:19:23,000 Speaker 1: one thing, they hike. I'm trying to understand what DM 370 00:19:23,160 --> 00:19:25,480 Speaker 1: central banks are going to do through next year. Well, 371 00:19:25,520 --> 00:19:28,280 Speaker 1: they have the patience, do you think the tolerance to 372 00:19:28,280 --> 00:19:32,400 Speaker 1: sit this one through? I think they will. I think that, 373 00:19:32,520 --> 00:19:35,440 Speaker 1: you know, like I think Fed Vice Hip Tarata said, 374 00:19:35,480 --> 00:19:38,400 Speaker 1: they want to really see what the inflation prints are 375 00:19:38,520 --> 00:19:40,280 Speaker 1: up to the end of the year and beyond to 376 00:19:40,359 --> 00:19:44,360 Speaker 1: see if there's really a persistence of inflation. So they're 377 00:19:44,359 --> 00:19:47,840 Speaker 1: not going to really rush into guiding the markets towards 378 00:19:47,920 --> 00:19:51,880 Speaker 1: hiking or rate heights anytime soon. They're still focused on 379 00:19:52,000 --> 00:19:54,960 Speaker 1: the taper announcement, which is probably going to come in November, 380 00:19:55,000 --> 00:19:58,440 Speaker 1: regardless of what happens to the unemployment report on Friday. 381 00:19:58,760 --> 00:20:00,520 Speaker 1: I think beyond that they're going to need to see 382 00:20:00,560 --> 00:20:05,000 Speaker 1: some consistent pressure supply chain pressures, wage pressures before they 383 00:20:05,000 --> 00:20:07,199 Speaker 1: start thinking about hiking. It's but what they're doing right 384 00:20:07,240 --> 00:20:10,280 Speaker 1: now is setting up for the ability to be to 385 00:20:10,560 --> 00:20:13,280 Speaker 1: raise rates in the second half of next year by 386 00:20:13,359 --> 00:20:16,000 Speaker 1: finishing the tapering, perhaps by the middle of next year. 387 00:20:16,760 --> 00:20:18,840 Speaker 1: They're going to be tapering bonds at a time when 388 00:20:18,840 --> 00:20:21,399 Speaker 1: there is this market deceleration in growth. And I do 389 00:20:21,440 --> 00:20:24,160 Speaker 1: want to circle back to this idea of the s word, 390 00:20:24,240 --> 00:20:27,920 Speaker 1: the stag fit siflation debate. How high can yields get 391 00:20:28,200 --> 00:20:30,640 Speaker 1: if we do experience an environment like that not later 392 00:20:30,680 --> 00:20:33,080 Speaker 1: this year, but even next year as some of those 393 00:20:33,119 --> 00:20:35,840 Speaker 1: bond purchases start to wear off, as we start to 394 00:20:35,840 --> 00:20:39,000 Speaker 1: see a more normalized economy with the supply chain disruptions 395 00:20:39,080 --> 00:20:42,879 Speaker 1: still in full force. So I think the tapering of 396 00:20:42,920 --> 00:20:47,240 Speaker 1: acid purchases on margins should actually help push yields higher. 397 00:20:47,240 --> 00:20:49,400 Speaker 1: If anything. I mean our forecast, we think the tenny 398 00:20:49,440 --> 00:20:51,960 Speaker 1: years probably get to you know, two and a quarter 399 00:20:52,200 --> 00:20:55,040 Speaker 1: by the by the third quarter of next year, so 400 00:20:55,080 --> 00:20:57,239 Speaker 1: that's sort of the time frame that we're looking at 401 00:20:57,280 --> 00:21:00,639 Speaker 1: a very gradual rise in yields UM. I think that 402 00:21:00,800 --> 00:21:03,320 Speaker 1: over the last couple of weeks the market has very 403 00:21:03,359 --> 00:21:07,720 Speaker 1: meaningfully priced in a much more faster pace of great 404 00:21:07,800 --> 00:21:10,560 Speaker 1: tax So that's putting some pressure in the belly of 405 00:21:10,600 --> 00:21:13,399 Speaker 1: the curve right now. I think the market seems quite 406 00:21:13,440 --> 00:21:16,440 Speaker 1: efficiently priced for hikes for the for the next three 407 00:21:16,520 --> 00:21:19,600 Speaker 1: years up to four. We just need more data for 408 00:21:19,640 --> 00:21:21,840 Speaker 1: the market to be able to price in perhaps a 409 00:21:21,920 --> 00:21:25,159 Speaker 1: much more faster pace of of hikes from here on. 410 00:21:25,520 --> 00:21:27,160 Speaker 1: So really I think there's going to be a very 411 00:21:27,240 --> 00:21:31,240 Speaker 1: gradually pricing higher as we get data over the upcoming quarters. 412 00:21:31,320 --> 00:21:34,639 Speaker 1: How much potential is there for significant policy risk due 413 00:21:34,680 --> 00:21:36,720 Speaker 1: to the composition of the Federal Reserve at the time 414 00:21:36,880 --> 00:21:42,600 Speaker 1: when it's increasingly politicized who will be the next bed chair? Um? 415 00:21:42,640 --> 00:21:45,359 Speaker 1: I think that there is some policy risks, clearly. I 416 00:21:45,400 --> 00:21:48,320 Speaker 1: still I still view that. I think chairs chairman power 417 00:21:48,359 --> 00:21:52,360 Speaker 1: gets it, gets another you know, extension in this term. Um. 418 00:21:52,400 --> 00:21:55,000 Speaker 1: But for the most part, I think if the composition changes, 419 00:21:55,080 --> 00:21:58,360 Speaker 1: I think that the composition might actually turn more dubbish. 420 00:21:58,640 --> 00:22:03,120 Speaker 1: So if anything, again, more caution, more accommodation is probably 421 00:22:03,840 --> 00:22:07,080 Speaker 1: how the composition will change. So, you know, the big 422 00:22:07,119 --> 00:22:09,520 Speaker 1: scheme of things. You know, the FED is an independent 423 00:22:09,560 --> 00:22:11,800 Speaker 1: body and they're going to look at fundamentals before they 424 00:22:11,840 --> 00:22:15,680 Speaker 1: make any sort of major changes in their policy, so 425 00:22:16,080 --> 00:22:19,399 Speaker 1: I'm not necessarily concerned about any change in the composition 426 00:22:19,440 --> 00:22:22,720 Speaker 1: for SAE Savantria. Thank you as always, Evantia, that of 427 00:22:22,760 --> 00:22:30,720 Speaker 1: Silk gen U s right strategy head for the first 428 00:22:30,760 --> 00:22:34,400 Speaker 1: time in this pandemic. We welcome Mr Rubinstein into our studios. 429 00:22:34,400 --> 00:22:36,840 Speaker 1: Thank you so much for joining us here. Pleasure took 430 00:22:36,840 --> 00:22:39,120 Speaker 1: you what three days to get into the building. It's 431 00:22:39,119 --> 00:22:41,160 Speaker 1: a little more complicated, but it's worth it. And Mike's 432 00:22:41,160 --> 00:22:43,040 Speaker 1: really done a great job of trying to make it, 433 00:22:43,320 --> 00:22:46,920 Speaker 1: you know, not not comfortable, but just processed driven. So 434 00:22:46,960 --> 00:22:49,919 Speaker 1: we get it. Maybe that's gonna be the future for business. 435 00:22:50,000 --> 00:22:52,720 Speaker 1: Julie Sweet has to deal with this at Accenter. She's 436 00:22:52,720 --> 00:22:55,760 Speaker 1: going a different path together. First of all, tell us 437 00:22:55,880 --> 00:22:58,919 Speaker 1: how the Columbia Law grad is different from what we 438 00:22:59,000 --> 00:23:01,960 Speaker 1: see at McKinnon, the and the others. I remember, Accenter 439 00:23:02,119 --> 00:23:04,400 Speaker 1: is a publicly traded company. It has a market cap 440 00:23:05,200 --> 00:23:07,239 Speaker 1: per year the last ten years, right, more than two 441 00:23:07,359 --> 00:23:10,359 Speaker 1: hundred billion dollars in market cap. So it's one of 442 00:23:10,359 --> 00:23:12,440 Speaker 1: the largest companies in the world run by a woman, 443 00:23:12,960 --> 00:23:15,520 Speaker 1: and she has trained as a lawyer, not as a consultant. 444 00:23:15,800 --> 00:23:17,760 Speaker 1: And they are one of the biggest. They are now 445 00:23:17,800 --> 00:23:20,040 Speaker 1: the biggest consulting firm in the world at Center, which 446 00:23:20,040 --> 00:23:22,520 Speaker 1: was a spinoff of Arthur Anderson many years ago, and 447 00:23:22,560 --> 00:23:24,719 Speaker 1: they've just done a better job in building their presence 448 00:23:24,760 --> 00:23:27,920 Speaker 1: around the world. They have now six thousand employees. What 449 00:23:28,080 --> 00:23:31,040 Speaker 1: I find it interesting here, and she's really from two 450 00:23:31,080 --> 00:23:33,960 Speaker 1: thousand ninety really pushed the needle. I would suggest on 451 00:23:34,080 --> 00:23:37,840 Speaker 1: this in an example to other corporations is the reigning 452 00:23:37,840 --> 00:23:40,840 Speaker 1: debate of work from home. How did the best and 453 00:23:40,960 --> 00:23:45,680 Speaker 1: brightest work from home versus work from the Carlisle office. Well, 454 00:23:45,720 --> 00:23:48,879 Speaker 1: it turns out that during COVID, people that have technology 455 00:23:48,920 --> 00:23:51,240 Speaker 1: skills can work from home. Now, as you know, businesses 456 00:23:51,240 --> 00:23:53,359 Speaker 1: are now saying we want to get your employees back. 457 00:23:53,720 --> 00:23:55,760 Speaker 1: But during COVID, when you had to work from home, 458 00:23:56,440 --> 00:23:58,520 Speaker 1: AC Center did a great job of of doing this 459 00:23:58,800 --> 00:24:01,000 Speaker 1: with their clients. They work fromly with their clients and 460 00:24:01,040 --> 00:24:02,720 Speaker 1: it worked out so well that they had to add 461 00:24:02,760 --> 00:24:06,240 Speaker 1: a hundred thousand eployees during the COVID period of time. David. 462 00:24:06,560 --> 00:24:08,080 Speaker 1: One of the reasons why I thought found it so 463 00:24:08,119 --> 00:24:11,160 Speaker 1: fascinated that you, of old people interviewed Julie sweetest first 464 00:24:11,160 --> 00:24:15,080 Speaker 1: by your fantastic interviewer. But also she has a law degree. 465 00:24:15,160 --> 00:24:17,600 Speaker 1: She was a law firm partner, that is how she 466 00:24:17,680 --> 00:24:20,360 Speaker 1: came into this company. And you also have a law 467 00:24:20,400 --> 00:24:23,520 Speaker 1: degree from the University of Chicago. What is the intersection 468 00:24:23,560 --> 00:24:26,600 Speaker 1: that you see as increasingly relevant or not going forward 469 00:24:26,600 --> 00:24:29,399 Speaker 1: of having a law degree in business in the changing 470 00:24:29,400 --> 00:24:33,120 Speaker 1: world we're in now. Well, she was a partner at Kervass, 471 00:24:33,119 --> 00:24:36,120 Speaker 1: Swain and More, and I was a summer associate there. 472 00:24:36,160 --> 00:24:38,520 Speaker 1: She was much more senior than I ever was at 473 00:24:38,560 --> 00:24:41,600 Speaker 1: that firm, but she showed that she was really really analytical, 474 00:24:41,680 --> 00:24:43,520 Speaker 1: could get along with clients. And I think a law 475 00:24:43,560 --> 00:24:47,080 Speaker 1: degree helps you reason. Well, clearly a lot of CEOs 476 00:24:47,080 --> 00:24:49,760 Speaker 1: have law degrees. Obviously some have NBA's, but a law 477 00:24:49,800 --> 00:24:51,920 Speaker 1: degree gives you a certain grounding in a certain way 478 00:24:51,920 --> 00:24:54,399 Speaker 1: of thinking logically about things, and clearly it helps you 479 00:24:54,640 --> 00:24:56,920 Speaker 1: solve problems. And so I think she thinks her law 480 00:24:56,960 --> 00:24:59,560 Speaker 1: degree really has helped her run Act Century. I should 481 00:24:59,560 --> 00:25:02,320 Speaker 1: point out that she runs it without any headquarters. At 482 00:25:02,320 --> 00:25:05,080 Speaker 1: Center has no headquarters. She's based in Washington, but it's 483 00:25:05,080 --> 00:25:06,520 Speaker 1: one of the few companies in the world of any 484 00:25:06,560 --> 00:25:09,000 Speaker 1: size that doesn't have a corporate headquarters. So you have 485 00:25:09,119 --> 00:25:11,280 Speaker 1: that on one side, or basically she's saying, you guys 486 00:25:11,359 --> 00:25:13,639 Speaker 1: don't have to have a seat in the office, you 487 00:25:13,640 --> 00:25:15,159 Speaker 1: can work from home. We can make it work. And 488 00:25:15,240 --> 00:25:17,960 Speaker 1: then you have others, particularly on Wall Street, where people 489 00:25:17,960 --> 00:25:19,800 Speaker 1: are saying, if you don't get back to the office, 490 00:25:20,359 --> 00:25:22,879 Speaker 1: you probably are making a mistake. If you're a junior employee, 491 00:25:22,880 --> 00:25:25,399 Speaker 1: where do you weigh in on this. I think most 492 00:25:25,800 --> 00:25:28,840 Speaker 1: employers would prefer to have their employees in the in 493 00:25:28,880 --> 00:25:31,560 Speaker 1: the office a few days a week. I think Wall 494 00:25:31,600 --> 00:25:33,520 Speaker 1: Street people are saying, come on back at least a 495 00:25:33,520 --> 00:25:35,520 Speaker 1: couple of days a week. Maybe not five days a week, 496 00:25:35,520 --> 00:25:36,879 Speaker 1: but at least a couple of days a week. I 497 00:25:36,920 --> 00:25:39,560 Speaker 1: think JP Morgan, Goldman, Sacks and others are warning their 498 00:25:39,560 --> 00:25:42,320 Speaker 1: employees back in the office, but not necessarily in five 499 00:25:42,400 --> 00:25:45,040 Speaker 1: days a week the same hours as before. I think 500 00:25:45,520 --> 00:25:48,119 Speaker 1: private equity firms are largely the same. We would like 501 00:25:48,200 --> 00:25:50,600 Speaker 1: to have people come back when it's safe to come back, 502 00:25:50,800 --> 00:25:52,520 Speaker 1: but it may not be that people will come back 503 00:25:52,560 --> 00:25:54,159 Speaker 1: and work five days a week the same kind of 504 00:25:54,160 --> 00:25:56,320 Speaker 1: way they did before, and that way COVID has really 505 00:25:56,400 --> 00:25:58,359 Speaker 1: changed the way people are gonna work for quite some time. 506 00:25:58,680 --> 00:26:02,600 Speaker 1: What does it do for business? Travel. What you know, 507 00:26:02,640 --> 00:26:06,000 Speaker 1: the airlines are talking premium excuse me, business class to 508 00:26:06,040 --> 00:26:10,000 Speaker 1: premiums alls, jump through hoops? What's it actually due to 509 00:26:10,119 --> 00:26:13,000 Speaker 1: business travel? While business travel was down on the on 510 00:26:13,040 --> 00:26:16,160 Speaker 1: the airlines, leisure travel is beginning to come back better 511 00:26:16,200 --> 00:26:19,359 Speaker 1: than business travel. Business people have realized that you can 512 00:26:19,480 --> 00:26:22,600 Speaker 1: you can do things remotely and certainly by zoom or 513 00:26:22,680 --> 00:26:24,840 Speaker 1: zoom equivalent without having it. So you and I don't 514 00:26:24,840 --> 00:26:27,719 Speaker 1: need to go to Davos. I think when you have 515 00:26:27,800 --> 00:26:30,480 Speaker 1: a large gathering of people, it probably is helpful to 516 00:26:30,520 --> 00:26:34,080 Speaker 1: get together occasionally, and Davos is once a year, so 517 00:26:34,119 --> 00:26:37,320 Speaker 1: I think if you weren't, we're going to go. Yeah, 518 00:26:37,320 --> 00:26:42,280 Speaker 1: what about accenture? What about accenture is dealing with clients remotely? 519 00:26:42,520 --> 00:26:44,960 Speaker 1: They can deal with them in person. But I think 520 00:26:44,960 --> 00:26:47,000 Speaker 1: if you once you have the relationship, you can work 521 00:26:47,000 --> 00:26:49,280 Speaker 1: on a project remotely and probably help solve it. But 522 00:26:49,359 --> 00:26:51,240 Speaker 1: I do think if you don't ever see your clients, 523 00:26:51,240 --> 00:26:53,000 Speaker 1: I think there's a downside to it. And I think 524 00:26:53,080 --> 00:26:56,159 Speaker 1: most businesses now realize you've got to have some interpersonal 525 00:26:56,160 --> 00:26:58,679 Speaker 1: connection if you're really going to have your employees be 526 00:26:58,800 --> 00:27:01,040 Speaker 1: mentored and your client and feel like that people are 527 00:27:01,040 --> 00:27:03,560 Speaker 1: paying attention to them, David, this is a crucial conversation 528 00:27:03,560 --> 00:27:05,560 Speaker 1: also to have on the CUSP on the eve of 529 00:27:05,600 --> 00:27:07,600 Speaker 1: the Job's report that we get on Friday, at a 530 00:27:07,600 --> 00:27:09,520 Speaker 1: time when a lot of companies are complaining about not 531 00:27:09,560 --> 00:27:12,080 Speaker 1: being able to find the workers to hire et cetera, 532 00:27:12,240 --> 00:27:15,199 Speaker 1: hired a hundred thousand of them. How much are you 533 00:27:15,280 --> 00:27:18,520 Speaker 1: hearing from Julie Sweet and from other executives who speak 534 00:27:18,560 --> 00:27:21,679 Speaker 1: to how willing are they to pay up for employees 535 00:27:21,920 --> 00:27:25,119 Speaker 1: for for talent at this moment given what we've seemed 536 00:27:25,119 --> 00:27:28,760 Speaker 1: to be seeing, which is friction and shortages. Well, and 537 00:27:29,000 --> 00:27:31,760 Speaker 1: as we all know, companies that are in the technology 538 00:27:31,760 --> 00:27:34,280 Speaker 1: world and financial service world have done extremely well. They 539 00:27:34,280 --> 00:27:35,960 Speaker 1: can afford to pay up, and they are trying to 540 00:27:36,000 --> 00:27:38,680 Speaker 1: pay up. I think the biggest problem is at entry 541 00:27:38,720 --> 00:27:40,600 Speaker 1: level kind of jobs, the kind of people that are 542 00:27:40,600 --> 00:27:43,320 Speaker 1: working at large private equity firms are consulting firms. Um, 543 00:27:43,480 --> 00:27:46,119 Speaker 1: they are not as difficult to get, though they're harder 544 00:27:46,160 --> 00:27:48,040 Speaker 1: to get them they used to be. But it's getting 545 00:27:48,040 --> 00:27:51,000 Speaker 1: people to work at McDonald's or the equivalent entry level jobs. 546 00:27:51,119 --> 00:27:52,640 Speaker 1: A lot of those people are not willing to work 547 00:27:52,680 --> 00:27:54,960 Speaker 1: at minimum wage or even slightly above minimum wage. Now 548 00:27:55,000 --> 00:27:56,960 Speaker 1: that's where the real problem is, I think in the economy. 549 00:27:57,440 --> 00:27:59,520 Speaker 1: The other day, David Rubinstein, I've got to leave with 550 00:27:59,560 --> 00:28:01,920 Speaker 1: this with your public service to the nation. With James 551 00:28:01,960 --> 00:28:05,640 Speaker 1: Earl Carter, it's as if Lincoln was alive in nineteen 552 00:28:05,680 --> 00:28:10,520 Speaker 1: o six. Jimmy Carter seven birthday, What did you get wrong? 553 00:28:10,560 --> 00:28:13,280 Speaker 1: With all the criticisms of the ear of the dismal seventies, 554 00:28:13,600 --> 00:28:17,640 Speaker 1: what did we most get wrong about President Carter? Well, 555 00:28:17,680 --> 00:28:20,399 Speaker 1: he tried to do so many things that while he 556 00:28:20,480 --> 00:28:22,119 Speaker 1: got a lot of them done, the fact that he 557 00:28:22,119 --> 00:28:24,239 Speaker 1: didn't get everything done made people think he wasn't as 558 00:28:24,280 --> 00:28:27,200 Speaker 1: successful as he really was. Today, if a president gets 559 00:28:27,240 --> 00:28:29,760 Speaker 1: one major bill done in a year, that's a big thing. 560 00:28:29,960 --> 00:28:31,920 Speaker 1: Carter was getting many done, but he was trying to 561 00:28:31,960 --> 00:28:35,480 Speaker 1: get even more done. So I think we underestimated his capabilities. 562 00:28:35,480 --> 00:28:38,760 Speaker 1: And also, in hindsight, some of the issues he challenged 563 00:28:38,480 --> 00:28:41,760 Speaker 1: he attacked, like human rights abroad, were things that were 564 00:28:41,800 --> 00:28:43,920 Speaker 1: ahead of his time. But in the end, uh, I 565 00:28:43,920 --> 00:28:46,720 Speaker 1: want to wish I'm happy ninety seventh birthday like everybody else. 566 00:28:46,760 --> 00:28:49,640 Speaker 1: And I think his ex presidency or post presidency has 567 00:28:49,680 --> 00:28:52,040 Speaker 1: been a real model for all presidents of the United States, 568 00:28:52,200 --> 00:28:55,160 Speaker 1: David Thinkings, Almost David Rubinstein. This is an important interview. 569 00:28:55,240 --> 00:28:59,040 Speaker 1: Julie Sweet is out front in accenture, trying to figure 570 00:28:59,040 --> 00:29:04,800 Speaker 1: out modern achnology and business. This is the Bloomberg Surveillance Podcast. 571 00:29:05,040 --> 00:29:08,400 Speaker 1: Thanks for listening. Join us live weekdays from seven to 572 00:29:08,480 --> 00:29:12,560 Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television 573 00:29:12,920 --> 00:29:16,920 Speaker 1: each day from six to nine am for insight from 574 00:29:16,960 --> 00:29:21,480 Speaker 1: the best in economics, finance, investment, and international relations. And 575 00:29:21,600 --> 00:29:26,720 Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg 576 00:29:26,800 --> 00:29:30,520 Speaker 1: dot com, and of course on the terminal. I'm Tom Keene, 577 00:29:30,520 --> 00:29:32,600 Speaker 1: and this is Bloomberg