Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Ferrell and Lisa A. Brawnowitz Jaily. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg
Speaker 1: dot Com, and of course on the Bloomberg terminal. Right now,
Speaker 1: a really important conversation for global Wall Street. We're gonna
Speaker 1: go geek on you and we want you to keep up.
Speaker 1: Robert Lucas invented my concept of expectations. The Giant from
Speaker 1: Chicago was one of my first interviews when I joined Bloomberg.
Speaker 1: Always controversial within economics. And William Dudley of Berkeley Goldman Saxon,
Speaker 1: of course, the former Fed President for New York, has
Speaker 1: driven the conversation this morning, making it clear this is
Speaker 1: a federal reserve system is fighting the last war. Let
Speaker 1: us go to the ornament. The economist Deshel Hammett, this
Speaker 1: is some Jeremy Rudd's controversial paper right now. This is
Speaker 1: the great detective author of another time in place. Nobody
Speaker 1: thinks clearly, no matter what they pretend, that's why people
Speaker 1: hang on so tight to their beliefs and opinions, because
Speaker 1: compared to the haphazard way they've arrived at it, even
Speaker 1: the goofiest opinions seems wonderfully clear, sane, and self evident.
Speaker 1: Bill Dudley. That's in Jeremy Rudd's paper on expectations is
Speaker 1: our belief in inflation? Expectations are belief in gaining the
Speaker 1: future through what people believe the future will believe. Is
Speaker 1: it over? I think the key question is how to
Speaker 1: households respond to high inflation. They revise up their expectations
Speaker 1: of inflation, and is that effect their behavior or are
Speaker 1: their threshold effects which Jeremy Rudd talks about, where in
Speaker 1: other words, they only react one's inflation and we just
Speaker 1: get to a certain level by actually starting to change
Speaker 1: where they are actually willing to, you know, switched it
Speaker 1: from one employer to another. I think Jeremy is raising
Speaker 1: some interesting questions about is our model of how inflation
Speaker 1: is generated correct or not? Built the essence of your
Speaker 1: pace this morning, I think it's been at the epicenter
Speaker 1: of your call for much of this year. You think
Speaker 1: the Federal Reserve is gonna be too late, and when
Speaker 1: they start, they're gonna have to move quickly. They're gonna
Speaker 1: have to move faster than people expect. What's the argument
Speaker 1: that underpins that, cold Bill Well, I think the issue
Speaker 1: is that the FED learned some lessons from the last crisis,
Speaker 1: but they don't really apply to the current recovery. Lessons
Speaker 1: from the last crisis, where it was that inflation we
Speaker 1: had trouble get pushing inflation back up to two uh.
Speaker 1: They thoughtful employment was at a higher level of the
Speaker 1: unemployer rate than it actually turned out to be. So
Speaker 1: they revised their mo entary policy framework and they said, well,
Speaker 1: we're really going to really work really hard to push
Speaker 1: inflation up, and we're gonna work really hard to push
Speaker 1: the unemployment down to level past full employment. Well that's
Speaker 1: great for that last cycle, but what about this cycle.
Speaker 1: We already have inflation above the offense target UM, and
Speaker 1: we have a lot of uncertain about how much slack
Speaker 1: there actually is in the libor market. So I think
Speaker 1: the risk is that they're fighting the last war. The
Speaker 1: problem isn't inflation too low, that the problem is inflation
Speaker 1: too high UM. And I think we also have all
Speaker 1: this all these questions about you know, how much slack
Speaker 1: do we actually have in the U S. Libor market.
Speaker 1: The one question is always hard, but what it's a
Speaker 1: question we have to ask, when do you think this
Speaker 1: Federal Reserve will realize come to a realization of what
Speaker 1: you believe, and what will lead them to have that
Speaker 1: read think well, I think the interesting question they have
Speaker 1: in the current set of projections is they have the
Speaker 1: unemployer right going below their view of what's maximum sustainable
Speaker 1: employment in two UH and staying there through if they
Speaker 1: have in their forecast inflation falling over that period, and
Speaker 1: they have the Fed not getting back even to a
Speaker 1: neutral monetary policy setting by the end of four So
Speaker 1: I think what they're going to realize is that if
Speaker 1: Monterrey policy is this easy for this long, at this
Speaker 1: type of a labor market, they're going to have more
Speaker 1: of an inflation consequince they have written what they've written
Speaker 1: down in their current set of projections. Bill, if you're right, faster, Bill,
Speaker 1: if you're right, why have we not seen more material
Speaker 1: wage pressure, wage increases that actually exceed the pace of
Speaker 1: consumer inflation more dramatically. I think it's still early days.
Speaker 1: I mean, we've just emerged from the pandemic over the
Speaker 1: last year, and the employment rates come down sharply over
Speaker 1: the over the last year. I think it's really too
Speaker 1: soon to say what's going to happen to wages. Uh,
Speaker 1: the Employment cost Index is the most reliable indicator on
Speaker 1: wages that only comes out once a quarters. So we're
Speaker 1: still looking, we're looking backwards. That's sort of old information.
Speaker 1: But you've made the argument, I have to get back
Speaker 1: to neutral more quickly. You've talked about the speed Let's
Speaker 1: talk about a speed limit. What is the speed limit? Now?
Speaker 1: How high can they go with the Fed funds right
Speaker 1: in an economy like this one. Well, I think they
Speaker 1: can go a lot faster than what they pencil in.
Speaker 1: I mean, if you look what people have reacted to
Speaker 1: the last from C Minute meeting as as the Fed
Speaker 1: being really hawkish. But if you look, if it takes
Speaker 1: three years to get to a median federal fund rate
Speaker 1: at one eight percent, that's not a very fast rate
Speaker 1: of obtaining. A comparison would be the two thousand four,
Speaker 1: two thousand sixth episode for the FED raised the fund
Speaker 1: raid a quarter point seventeen consecutive from meetings, taking the
Speaker 1: fund raid from one percent to five and the quarter percent,
Speaker 1: but it could be but it could be something a
Speaker 1: lot more than what they've got. Christ In, it's seventeen
Speaker 1: and it's not that extreme, Bill, But I'm just trying
Speaker 1: to understand whether this economy with this much deck can
Speaker 1: can take those kind of moves. Well, I think you're
Speaker 1: right that that they're not going to get all the
Speaker 1: way to probably five percent, because the economy will start
Speaker 1: to you know, react to that, to that burden. But
Speaker 1: it seems to me that it's reasonable to think that
Speaker 1: the fall Reserve is gonna have to get to a
Speaker 1: kpe montary policy setting before the end of belt. Great
Speaker 1: conversation and fantastic pace. Bloomberg column out this morning on
Speaker 1: Bloomberg dot Com and on the Bloomberg Terminal built Duntley
Speaker 1: There the Waterful built Downtley, formerly in the New York
Speaker 1: Fed and now Bloomberg opinion columnists and senior adviser to
Speaker 1: Bloomberg Economics, Christian Nelson, Jotscha Bank, Private Bank leve We'll see, Christian,
Speaker 1: what should these central banks do in the environment like
Speaker 1: the warm we're in right now? So I think very important.
Speaker 1: Right where the market is changing, it's not new that
Speaker 1: there is inflation coming in. We have always talked about
Speaker 1: base effect, but now, especially in Europe, gas prices really
Speaker 1: skywriting yesterday and today even more. I think there's really
Speaker 1: the scenario that there is this call its deflationary supply
Speaker 1: side chock. And of course you have the question what
Speaker 1: the center banks should be doing. And let's not forget
Speaker 1: you talked about the fat um here. The e c
Speaker 1: D is not having the goal of of really economic growth.
Speaker 1: It's just price stability, and that's why they are probably
Speaker 1: concerned about this if we stay at these levels or
Speaker 1: even go further up. But I think they are not
Speaker 1: in a situation to really increase rates as you would
Speaker 1: normally do. If you see your flationary pressures, they are
Speaker 1: still saying it's transitory. We are more in the camp
Speaker 1: that inflation will stay higher. And if you talk about
Speaker 1: fighting war was I agree, it's not the inflationary war
Speaker 1: is a bit more inflationary. However, that's not bad for
Speaker 1: the central banks if you get a bit more inflation.
Speaker 1: In the question though, is is it too fast now
Speaker 1: and they need to act? Christian is tapering tightening? I
Speaker 1: would say, of course it is yes, because you take
Speaker 1: let's say money you don't supply to the market, anymore.
Speaker 1: The question though, is what's the speed of tapering? Do
Speaker 1: you do you step by step or do it very fast?
Speaker 1: And the markets can react to that, and I think
Speaker 1: that's where the center branks are quite confident to get
Speaker 1: this done. So I would not conum. Let's say it's
Speaker 1: the same situation combined this with two thousand thirteen tape
Speaker 1: on tantrum. That's I think not the Christian you admire.
Speaker 1: With this weakness in the secuity market this morning, sorry
Speaker 1: say again you are buyer of the weakness we're seeing
Speaker 1: on the screens this morning in the secuity Yeah, cautious
Speaker 1: in the markets. We have been expecting a downturn and
Speaker 1: we don't think it's too too early now, so we
Speaker 1: are waiting a little bit too to go back into
Speaker 1: the markets. I would say if you look at the US,
Speaker 1: for example, I wouldn't be surprised if you see a
Speaker 1: setback to the two on a day moving average in
Speaker 1: the SNP. I wouldn't do that out because they are
Speaker 1: some some topics that could weigh on the market also
Speaker 1: in the next days and weeks. So you see the
Speaker 1: energy prices, gas prices in Europe, cold prices in China,
Speaker 1: so China GDP from becoming maybe even weaker than expected.
Speaker 1: You have the earning season to start where I would
Speaker 1: say the growth rate is not the same as we
Speaker 1: have seen before, and that's because they're both there. Don't
Speaker 1: get me wrong, but I think there will be some
Speaker 1: better opportunities throughout the next days and weeks. Christian were
Speaker 1: being buffeted by the temporary as you write in your
Speaker 1: important note recently, how do corporations in Europe, how do
Speaker 1: corporations in America? How do corporations in Asia adapt to
Speaker 1: the temporary six standard deviation shock of net gas? Well,
Speaker 1: the issue with gases with the companies is that they
Speaker 1: normally have to take contracts with their clients, so they
Speaker 1: cannot increase the prices as the incoming prices, and that's
Speaker 1: why their margin is drinking or even getting negative. And
Speaker 1: that's why some companies have been saying we are reducing output,
Speaker 1: and of course that's weighing on growth. And then you
Speaker 1: have an issue with with the growth in general, because
Speaker 1: everyone needs energy, and I think that's why it's so important.
Speaker 1: If it's going so fast, I would expect that this
Speaker 1: is the governments are saying, Okay, what can we do
Speaker 1: through this, do we take some actions on price cips.
Speaker 1: We've seen that already in Europe, in Spain, for example,
Speaker 1: the UK is obviously just nothing that, but also European
Speaker 1: Union with let me discussed that. Christine greed to catch up.
Speaker 1: What a morning for it, Christian Deutsche Bank, Private Bank,
Speaker 1: Globo see. I Oh, this is a joy. It's always
Speaker 1: a joy because she is what we try to do
Speaker 1: in America. I'm not gonna mince words, she started out,
Speaker 1: challenged overcame dyslexia, was picking up a phone at a
Speaker 1: real estate company and said, wait a minute, I can
Speaker 1: do this. This is the only voice I want to
Speaker 1: talk to on the insanity of real estate right now,
Speaker 1: Barbara Corker. And of course you order from Shark Tank,
Speaker 1: she joins us. Now, but Barbara, as you give the
Speaker 1: spirit the small business and all like you invented, I
Speaker 1: need to talk to you about the pricing of housing
Speaker 1: in America. I just looked up at Corcoran Group and
Speaker 1: I'm gonna pay thirty four thousand dollars on taxes on
Speaker 1: a piece in Brooklyn. How have we done this? How
Speaker 1: have we priced America out of real estate? Well, most
Speaker 1: people are priced out of the market here exactly right.
Speaker 1: The market has been going absolutely bonkers with no end
Speaker 1: in sight. No prices nationwide have gone up. I have
Speaker 1: never seen an increase like that in the thirty years.
Speaker 1: The last thirty years, I think it was the last time.
Speaker 1: No one could believe what's going on. In fact, if
Speaker 1: you want to buy a house, I don't know how
Speaker 1: you did on your purchase, but everything is being sold
Speaker 1: in bidding wars A six of the houses. I mean,
Speaker 1: people are so uncomfortable, and yet they keep paying the
Speaker 1: prices in this no end insight. Barbara, I looked at
Speaker 1: the meat, the regression rather of housing and oh four
Speaker 1: oh five, oh s X and you know what, we
Speaker 1: regress back to the mean you live that at Cork
Speaker 1: and group. Are we going to do the same thing
Speaker 1: this time I did? Are we going to do it again? No,
Speaker 1: it's not the same kind of a market. No, no, no, no,
Speaker 1: you know what you have it says, market is fueled
Speaker 1: by individual buyers who want a better place to live.
Speaker 1: They bring their businesses home, they want to raise their kids.
Speaker 1: When we had that drop off, it was fueled by investors,
Speaker 1: house flippers, poor mortgages that shouldn't have been a mortgage,
Speaker 1: mortgage companies that should have been lending money at the time.
Speaker 1: I mean, it was a it was a false market
Speaker 1: with a false bottom and it fell. We're not going
Speaker 1: to have that now. I'm just hoping that the price
Speaker 1: is cool down a bit, because, as you started to
Speaker 1: say just a minute ago, so many people are left
Speaker 1: out of the market. It just seems unfair. Just to
Speaker 1: have a house, you have to feel like you have
Speaker 1: to be a pro investor bidding up the prices. It's
Speaker 1: it's just insanity. I've never seen anything like it, Barba.
Speaker 1: This is for individuals, but it's also for small corporations,
Speaker 1: and I know you do speak with a lot of them.
Speaker 1: I'm one during how much this dampens their enthusiasm, their optimism,
Speaker 1: their willingness to hire, to expand. If the fixed costs
Speaker 1: are going up as quickly as they are. With the
Speaker 1: fixed costs going up for business, that's not always true,
Speaker 1: all right, Commercial rents are much lower than they were
Speaker 1: if you were talking about business. I'm assuming, right, yes, yeah, yeah,
Speaker 1: so that their fixed costs are actually lower. People are
Speaker 1: renting less space. People who have large floor plates in
Speaker 1: large ventro Politan areas are negotiating their way out of
Speaker 1: the leases, the subleasing, the space. Retail prices have come down.
Speaker 1: No one wants a large retail space anymore because it's
Speaker 1: a shop front versus holding all of the inventory. They
Speaker 1: don't do that anymore. They sell it online. So actually
Speaker 1: the cost of doing business has come down. And of
Speaker 1: course the problem, the main problem with all of business
Speaker 1: right now is finding the right people. That is the
Speaker 1: single largest challenge. Whether you own a restaurant or shoe
Speaker 1: shop or a giant corporate ration, hiring and finding and
Speaker 1: luring in the right people has been the biggest challenge.
Speaker 1: But Barbara, we have not seen the increase in wages
Speaker 1: that we would have expected given all of the labor
Speaker 1: market shortages that we hear about. In fact, it still
Speaker 1: lags behind the pace of inflation. Bill Dudley, formerly of
Speaker 1: the New York Fed, was just on the show and
Speaker 1: he was saying he thinks it will accelerate pretty dramatically
Speaker 1: in the near term. Do you see evidence from small
Speaker 1: business owners that they are willing to pay up that
Speaker 1: much more dramatically in the upcoming months that will lead
Speaker 1: to that kind of wage inflation. You know, if they
Speaker 1: had they're going to not have a choice. So far,
Speaker 1: they've had a choice. They've cut back on this staff.
Speaker 1: They intentionally cut back on their overhead. They got rid
Speaker 1: of everybody they really didn't want working for them. During
Speaker 1: the pandemic. I mean, all these companies slimmed down and
Speaker 1: got the house in order. Whether or not they're willing
Speaker 1: to pay a higher wage remains to be seen. But
Speaker 1: so far they are not people holding onto their profits
Speaker 1: and I'm very reluctant to let any of that money out.
Speaker 1: It's more I don't want to use the word selfish,
Speaker 1: but I would say, yes, people want to a little
Speaker 1: greed has set in, but they're gonna have to get
Speaker 1: They're gonna have to give something. Question you in support
Speaker 1: with A T and T are actually out there talking
Speaker 1: to real people. These are webinars and things like that
Speaker 1: where Barbara Corkrand Folks is talking to people about small businesses.
Speaker 1: Let me raise my hand in the back room of
Speaker 1: the zoom call, Barbara, could you do now what you did? Then?
Speaker 1: Yes I could, because you know what, the pandemic has
Speaker 1: proven that and that's what the purpose of the Business
Speaker 1: Unusual webinar series presented by A T and T actually is.
Speaker 1: We're trying to give people the tools they need to
Speaker 1: reinvent themselves with very little money in their hand. And
Speaker 1: today's market accommodates that everybody is rewriting their business plan,
Speaker 1: redoing the way they deliver their products to customers, reinvent
Speaker 1: how they could attract customers in And that's actually why
Speaker 1: A T and T decided to do the webinar series,
Speaker 1: because a lot of people don't know how to do that.
Speaker 1: I know how to do it. I know how people
Speaker 1: who could tell people how to do it. Barbara, I'm
Speaker 1: looking for four bedrooms upper East Side. See what you
Speaker 1: can do this afternoon, Barbara Corkrand, thank you so much
Speaker 1: with the a sublease on my place sub sub lease,
Speaker 1: Thank you so much. Barbara Corkin Serato, Japa joins US
Speaker 1: right now with Sucken Socigi General as a US rate strategist. Sobrata,
Speaker 1: it's an interesting movie here. Let's start with what has
Speaker 1: not happened? Why are yields not moving like net gas? Well,
Speaker 1: because of the fact that you know, we're a big
Speaker 1: market and we look at fundamentals um you know, and
Speaker 1: bond yields in general in the US have been some
Speaker 1: more you know, slow to react to what's happening on
Speaker 1: the commodity complex because it's not that big of an issue.
Speaker 1: I think that the specul moves in that gast especially
Speaker 1: are quite speculative, so I'm not sure that there should
Speaker 1: be a reaction in the bottom market from moves in
Speaker 1: that gas. But broadly speaking, I think higher oil prices
Speaker 1: and fears of inflation have been driving yields higher. Nothink
Speaker 1: that sort of trend is here to stay for the
Speaker 1: remainder of the year. Among others, Lisa Brandow's has really
Speaker 1: emphasized the paper out there in the insatiable demand for it.
Speaker 1: If I like yield at one point three five priced down,
Speaker 1: yield up, I gotta really like it at one point
Speaker 1: five five. Is there a huge thirst here to buy
Speaker 1: the dip in bonds. I think what you're going to
Speaker 1: see from investors is some level of caution given the
Speaker 1: fact that we've seen this sort of very sharp move
Speaker 1: from around one thirty prior to the f o MC
Speaker 1: meeting a couple of weeks ago to around one fifty five,
Speaker 1: and the momentum seems to be towards higher yields given
Speaker 1: headlines around inflation. I think what you're going to see
Speaker 1: over the next coming weeks is more cautious approach in
Speaker 1: the barn market. You know, you're not going to see
Speaker 1: deep buyers coming right away. They're going to need to
Speaker 1: see tenure yields stabilize. I would say between say one
Speaker 1: fifty and one seventy before they come in and start
Speaker 1: buying the market here. So I think over the new
Speaker 1: term they probably stay in the sidelines, especially heading into
Speaker 1: payrolls this weekend, and then beyond that I think that
Speaker 1: would be stabilized into a new range. Then you'll start
Speaker 1: seeing investors coming in and buying the depth. So Beno,
Speaker 1: many investors, many legends of the investment world are worried
Speaker 1: about this s word, and I want to discuss it
Speaker 1: with you. I think it's a difference between being an
Speaker 1: economist and looking at stagflation and saying the stack piece
Speaker 1: of this does not work. We just had anice M
Speaker 1: north of sixty grosser expected to have a four handle
Speaker 1: through next year. That's not stagflation. Market participants are looking
Speaker 1: at rady change and saying, look, gross decelerating and inflation
Speaker 1: expectations are still elevated, and maybe they might accelerate into
Speaker 1: a new year. I want to understand how a bond
Speaker 1: market behaves in that kind of environment of decelerating growth
Speaker 1: and persistently high and like what does that look like?
Speaker 1: So I think that inflation expectations should rise modesty, especially
Speaker 1: given where inflation expectations are in the UK or Europe.
Speaker 1: And this is not just a US phenomena. You're seeing
Speaker 1: global inflation expectations rise quite meaningfully. We actually did the
Speaker 1: chart comparing inflation expectations across different regions last week in
Speaker 1: our weekly and what you notice is that US tenure
Speaker 1: break evens, for instance, have been very much in a
Speaker 1: range and and sort of until yesterday they've kind of
Speaker 1: been hestited to break above two forties. So I think
Speaker 1: of inflation risks persist, you're going to see room for
Speaker 1: break evens to continue to rise from here on. But
Speaker 1: broadly speaking, I think that the fundamental picture is very supportive.
Speaker 1: Growth is quite strong. Um, you know, yes, we're seeing
Speaker 1: a revision revisions to growth in the third quarter, but
Speaker 1: that's just pushing out growth for into the the upcoming
Speaker 1: quarters as well as well into introllect here. So it's
Speaker 1: not growth that we're losing, it's just kind of getting postponed.
Speaker 1: There's no derailment, there's just a postponement if you will,
Speaker 1: on on growth. So in that sort of context, I
Speaker 1: think that you'll should continue to rise and entration expectations
Speaker 1: perhaps continue to rise as well, at least about with
Speaker 1: the classic em dilemma and AGAM. Central banker often confronts
Speaker 1: upside inflation risk, downside growth risk, and often they do
Speaker 1: one thing, they hike. I'm trying to understand what DM
Speaker 1: central banks are going to do through next year. Well,
Speaker 1: they have the patience, do you think the tolerance to
Speaker 1: sit this one through? I think they will. I think that,
Speaker 1: you know, like I think Fed Vice Hip Tarata said,
Speaker 1: they want to really see what the inflation prints are
Speaker 1: up to the end of the year and beyond to
Speaker 1: see if there's really a persistence of inflation. So they're
Speaker 1: not going to really rush into guiding the markets towards
Speaker 1: hiking or rate heights anytime soon. They're still focused on
Speaker 1: the taper announcement, which is probably going to come in November,
Speaker 1: regardless of what happens to the unemployment report on Friday.
Speaker 1: I think beyond that they're going to need to see
Speaker 1: some consistent pressure supply chain pressures, wage pressures before they
Speaker 1: start thinking about hiking. It's but what they're doing right
Speaker 1: now is setting up for the ability to be to
Speaker 1: raise rates in the second half of next year by
Speaker 1: finishing the tapering, perhaps by the middle of next year.
Speaker 1: They're going to be tapering bonds at a time when
Speaker 1: there is this market deceleration in growth. And I do
Speaker 1: want to circle back to this idea of the s word,
Speaker 1: the stag fit siflation debate. How high can yields get
Speaker 1: if we do experience an environment like that not later
Speaker 1: this year, but even next year as some of those
Speaker 1: bond purchases start to wear off, as we start to
Speaker 1: see a more normalized economy with the supply chain disruptions
Speaker 1: still in full force. So I think the tapering of
Speaker 1: acid purchases on margins should actually help push yields higher.
Speaker 1: If anything. I mean our forecast, we think the tenny
Speaker 1: years probably get to you know, two and a quarter
Speaker 1: by the by the third quarter of next year, so
Speaker 1: that's sort of the time frame that we're looking at
Speaker 1: a very gradual rise in yields UM. I think that
Speaker 1: over the last couple of weeks the market has very
Speaker 1: meaningfully priced in a much more faster pace of great
Speaker 1: tax So that's putting some pressure in the belly of
Speaker 1: the curve right now. I think the market seems quite
Speaker 1: efficiently priced for hikes for the for the next three
Speaker 1: years up to four. We just need more data for
Speaker 1: the market to be able to price in perhaps a
Speaker 1: much more faster pace of of hikes from here on.
Speaker 1: So really I think there's going to be a very
Speaker 1: gradually pricing higher as we get data over the upcoming quarters.
Speaker 1: How much potential is there for significant policy risk due
Speaker 1: to the composition of the Federal Reserve at the time
Speaker 1: when it's increasingly politicized who will be the next bed chair? Um?
Speaker 1: I think that there is some policy risks, clearly. I
Speaker 1: still I still view that. I think chairs chairman power
Speaker 1: gets it, gets another you know, extension in this term. Um.
Speaker 1: But for the most part, I think if the composition changes,
Speaker 1: I think that the composition might actually turn more dubbish.
Speaker 1: So if anything, again, more caution, more accommodation is probably
Speaker 1: how the composition will change. So, you know, the big
Speaker 1: scheme of things. You know, the FED is an independent
Speaker 1: body and they're going to look at fundamentals before they
Speaker 1: make any sort of major changes in their policy, so
Speaker 1: I'm not necessarily concerned about any change in the composition
Speaker 1: for SAE Savantria. Thank you as always, Evantia, that of
Speaker 1: Silk gen U s right strategy head for the first
Speaker 1: time in this pandemic. We welcome Mr Rubinstein into our studios.
Speaker 1: Thank you so much for joining us here. Pleasure took
Speaker 1: you what three days to get into the building. It's
Speaker 1: a little more complicated, but it's worth it. And Mike's
Speaker 1: really done a great job of trying to make it,
Speaker 1: you know, not not comfortable, but just processed driven. So
Speaker 1: we get it. Maybe that's gonna be the future for business.
Speaker 1: Julie Sweet has to deal with this at Accenter. She's
Speaker 1: going a different path together. First of all, tell us
Speaker 1: how the Columbia Law grad is different from what we
Speaker 1: see at McKinnon, the and the others. I remember, Accenter
Speaker 1: is a publicly traded company. It has a market cap
Speaker 1: per year the last ten years, right, more than two
Speaker 1: hundred billion dollars in market cap. So it's one of
Speaker 1: the largest companies in the world run by a woman,
Speaker 1: and she has trained as a lawyer, not as a consultant.
Speaker 1: And they are one of the biggest. They are now
Speaker 1: the biggest consulting firm in the world at Center, which
Speaker 1: was a spinoff of Arthur Anderson many years ago, and
Speaker 1: they've just done a better job in building their presence
Speaker 1: around the world. They have now six thousand employees. What
Speaker 1: I find it interesting here, and she's really from two
Speaker 1: thousand ninety really pushed the needle. I would suggest on
Speaker 1: this in an example to other corporations is the reigning
Speaker 1: debate of work from home. How did the best and
Speaker 1: brightest work from home versus work from the Carlisle office. Well,
Speaker 1: it turns out that during COVID, people that have technology
Speaker 1: skills can work from home. Now, as you know, businesses
Speaker 1: are now saying we want to get your employees back.
Speaker 1: But during COVID, when you had to work from home,
Speaker 1: AC Center did a great job of of doing this
Speaker 1: with their clients. They work fromly with their clients and
Speaker 1: it worked out so well that they had to add
Speaker 1: a hundred thousand eployees during the COVID period of time. David.
Speaker 1: One of the reasons why I thought found it so
Speaker 1: fascinated that you, of old people interviewed Julie sweetest first
Speaker 1: by your fantastic interviewer. But also she has a law degree.
Speaker 1: She was a law firm partner, that is how she
Speaker 1: came into this company. And you also have a law
Speaker 1: degree from the University of Chicago. What is the intersection
Speaker 1: that you see as increasingly relevant or not going forward
Speaker 1: of having a law degree in business in the changing
Speaker 1: world we're in now. Well, she was a partner at Kervass,
Speaker 1: Swain and More, and I was a summer associate there.
Speaker 1: She was much more senior than I ever was at
Speaker 1: that firm, but she showed that she was really really analytical,
Speaker 1: could get along with clients. And I think a law
Speaker 1: degree helps you reason. Well, clearly a lot of CEOs
Speaker 1: have law degrees. Obviously some have NBA's, but a law
Speaker 1: degree gives you a certain grounding in a certain way
Speaker 1: of thinking logically about things, and clearly it helps you
Speaker 1: solve problems. And so I think she thinks her law
Speaker 1: degree really has helped her run Act Century. I should
Speaker 1: point out that she runs it without any headquarters. At
Speaker 1: Center has no headquarters. She's based in Washington, but it's
Speaker 1: one of the few companies in the world of any
Speaker 1: size that doesn't have a corporate headquarters. So you have
Speaker 1: that on one side, or basically she's saying, you guys
Speaker 1: don't have to have a seat in the office, you
Speaker 1: can work from home. We can make it work. And
Speaker 1: then you have others, particularly on Wall Street, where people
Speaker 1: are saying, if you don't get back to the office,
Speaker 1: you probably are making a mistake. If you're a junior employee,
Speaker 1: where do you weigh in on this. I think most
Speaker 1: employers would prefer to have their employees in the in
Speaker 1: the office a few days a week. I think Wall
Speaker 1: Street people are saying, come on back at least a
Speaker 1: couple of days a week. Maybe not five days a week,
Speaker 1: but at least a couple of days a week. I
Speaker 1: think JP Morgan, Goldman, Sacks and others are warning their
Speaker 1: employees back in the office, but not necessarily in five
Speaker 1: days a week the same hours as before. I think
Speaker 1: private equity firms are largely the same. We would like
Speaker 1: to have people come back when it's safe to come back,
Speaker 1: but it may not be that people will come back
Speaker 1: and work five days a week the same kind of
Speaker 1: way they did before, and that way COVID has really
Speaker 1: changed the way people are gonna work for quite some time.
Speaker 1: What does it do for business? Travel. What you know,
Speaker 1: the airlines are talking premium excuse me, business class to
Speaker 1: premiums alls, jump through hoops? What's it actually due to
Speaker 1: business travel? While business travel was down on the on
Speaker 1: the airlines, leisure travel is beginning to come back better
Speaker 1: than business travel. Business people have realized that you can
Speaker 1: you can do things remotely and certainly by zoom or
Speaker 1: zoom equivalent without having it. So you and I don't
Speaker 1: need to go to Davos. I think when you have
Speaker 1: a large gathering of people, it probably is helpful to
Speaker 1: get together occasionally, and Davos is once a year, so
Speaker 1: I think if you weren't, we're going to go. Yeah,
Speaker 1: what about accenture? What about accenture is dealing with clients remotely?
Speaker 1: They can deal with them in person. But I think
Speaker 1: if you once you have the relationship, you can work
Speaker 1: on a project remotely and probably help solve it. But
Speaker 1: I do think if you don't ever see your clients,
Speaker 1: I think there's a downside to it. And I think
Speaker 1: most businesses now realize you've got to have some interpersonal
Speaker 1: connection if you're really going to have your employees be
Speaker 1: mentored and your client and feel like that people are
Speaker 1: paying attention to them, David, this is a crucial conversation
Speaker 1: also to have on the CUSP on the eve of
Speaker 1: the Job's report that we get on Friday, at a
Speaker 1: time when a lot of companies are complaining about not
Speaker 1: being able to find the workers to hire et cetera,
Speaker 1: hired a hundred thousand of them. How much are you
Speaker 1: hearing from Julie Sweet and from other executives who speak
Speaker 1: to how willing are they to pay up for employees
Speaker 1: for for talent at this moment given what we've seemed
Speaker 1: to be seeing, which is friction and shortages. Well, and
Speaker 1: as we all know, companies that are in the technology
Speaker 1: world and financial service world have done extremely well. They
Speaker 1: can afford to pay up, and they are trying to
Speaker 1: pay up. I think the biggest problem is at entry
Speaker 1: level kind of jobs, the kind of people that are
Speaker 1: working at large private equity firms are consulting firms. Um,
Speaker 1: they are not as difficult to get, though they're harder
Speaker 1: to get them they used to be. But it's getting
Speaker 1: people to work at McDonald's or the equivalent entry level jobs.
Speaker 1: A lot of those people are not willing to work
Speaker 1: at minimum wage or even slightly above minimum wage. Now
Speaker 1: that's where the real problem is, I think in the economy.
Speaker 1: The other day, David Rubinstein, I've got to leave with
Speaker 1: this with your public service to the nation. With James
Speaker 1: Earl Carter, it's as if Lincoln was alive in nineteen
Speaker 1: o six. Jimmy Carter seven birthday, What did you get wrong?
Speaker 1: With all the criticisms of the ear of the dismal seventies,
Speaker 1: what did we most get wrong about President Carter? Well,
Speaker 1: he tried to do so many things that while he
Speaker 1: got a lot of them done, the fact that he
Speaker 1: didn't get everything done made people think he wasn't as
Speaker 1: successful as he really was. Today, if a president gets
Speaker 1: one major bill done in a year, that's a big thing.
Speaker 1: Carter was getting many done, but he was trying to
Speaker 1: get even more done. So I think we underestimated his capabilities.
Speaker 1: And also, in hindsight, some of the issues he challenged
Speaker 1: he attacked, like human rights abroad, were things that were
Speaker 1: ahead of his time. But in the end, uh, I
Speaker 1: want to wish I'm happy ninety seventh birthday like everybody else.
Speaker 1: And I think his ex presidency or post presidency has
Speaker 1: been a real model for all presidents of the United States,
Speaker 1: David Thinkings, Almost David Rubinstein. This is an important interview.
Speaker 1: Julie Sweet is out front in accenture, trying to figure
Speaker 1: out modern achnology and business. This is the Bloomberg Surveillance Podcast.
Speaker 1: Thanks for listening. Join us live weekdays from seven to
Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television
Speaker 1: each day from six to nine am for insight from
Speaker 1: the best in economics, finance, investment, and international relations. And
Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg
Speaker 1: dot com, and of course on the terminal. I'm Tom Keene,
Speaker 1: and this is Bloomberg