WEBVTT - Surveillance: Carbon Bubble With Gore 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot com, 0:00:23.920 --> 0:00:29.960 and of course on the Bloomberg terminal in Glasgow at 0:00:29.960 --> 0:00:33.360 CUP twenty six. There are people that have parachuted into 0:00:33.440 --> 0:00:36.680 climate change that could not be said of the former 0:00:36.800 --> 0:00:39.760 Vice President of the United States, and with that there's 0:00:39.800 --> 0:00:42.960 no need to mention his name. Francine Lacroix with a 0:00:43.000 --> 0:00:49.320 gentleman from Tennessee. Yeah, thank you so much, Tom John 0:00:49.320 --> 0:00:51.159 and Lisa. I am delighted to be speaking to al 0:00:51.240 --> 0:00:54.920 Gore were the the original proponent of sustainability and climate 0:00:55.000 --> 0:00:57.680 change through for years and decades, has been trying to 0:00:57.760 --> 0:01:00.200 make this a reality of Vice President growth. You so 0:01:00.280 --> 0:01:03.520 much for joining us. Thank you. Today's Climate Finance, it's 0:01:03.600 --> 0:01:05.880 we're focusing on the funding, on the finance, on how 0:01:05.880 --> 0:01:09.840 we transition better. I want to ask about your investment firm. 0:01:09.959 --> 0:01:12.319 This is something with the joint ventures with Golden Saxon, 0:01:12.360 --> 0:01:16.720 you're basically only targeting assets that are decarbonizing, which means 0:01:16.720 --> 0:01:19.160 that all the portfolios are well below the one point 0:01:19.240 --> 0:01:23.800 five degrees. Is this how you do it? Right? Yeah? Well, 0:01:23.880 --> 0:01:27.760 Generation Investment Management was one of the small group that 0:01:27.840 --> 0:01:31.960 convened this net zero Asset Managers initiative, and it's now 0:01:32.080 --> 0:01:35.480 up to this incredibly large number of fifty two trillion 0:01:35.840 --> 0:01:38.480 dollars and it's part of the larger package that Mark 0:01:38.600 --> 0:01:42.320 Arney talked about. The rules of the road are are 0:01:42.360 --> 0:01:46.560 still being worked out in great detail. Uh. For for 0:01:46.680 --> 0:01:51.000 our part, we are actually committed to net zero, real 0:01:51.160 --> 0:01:56.560 net nead zero. Uh. Some who have made this commitment 0:01:56.640 --> 0:02:01.320 are still working toward that man maximum goal. And I 0:02:01.360 --> 0:02:04.920 think what you're seeing here in this conference overall is 0:02:04.960 --> 0:02:07.920 a big wheel turning slowly. I think the world is 0:02:07.960 --> 0:02:12.920 awakening to the dire danger our civilization is in. And 0:02:12.919 --> 0:02:16.239 I won't go into all that, but obviously Mother Nature 0:02:16.320 --> 0:02:19.239 is making the point very powerfully and people are now responding, 0:02:19.280 --> 0:02:22.840 and in the finance sector they are now saying, look, 0:02:22.960 --> 0:02:24.480 we got to be part of the solution, and we 0:02:24.560 --> 0:02:26.880 got to stop funding the problem. How do we turn 0:02:26.919 --> 0:02:30.040 the wheel faster? So, if you're an investor today, how 0:02:30.040 --> 0:02:32.640 do you avoid greenwashing? How do you avoid making the 0:02:32.720 --> 0:02:36.200 mistakes that then leads to probe saying your financial product 0:02:36.320 --> 0:02:39.680 is not s G enough. Well, in its essence, screenwashing 0:02:39.840 --> 0:02:43.600 is just a cheap trick that people are beginning to 0:02:43.639 --> 0:02:47.520 see through. Uh. It won't work for long. Uh. In 0:02:47.639 --> 0:02:50.280 the age of the Internet, people are ferretting out what's 0:02:50.320 --> 0:02:53.200 real and what's not it. It will take a little time. 0:02:53.760 --> 0:02:58.200 But you know, society as a whole is now insisting 0:02:58.800 --> 0:03:02.280 that all of the institute usians of our civilization begin 0:03:02.360 --> 0:03:05.040 to respond to this with the sense of urgency that 0:03:05.160 --> 0:03:08.720 that's appropriate. And that's why you've seen this wave of 0:03:08.880 --> 0:03:13.120 E s G investing, albeit with a lot of greenwashing. Uh. 0:03:13.120 --> 0:03:15.839 And and as people begin to focus more intently, they're 0:03:15.840 --> 0:03:18.880 going to insist that they do it for real and 0:03:18.919 --> 0:03:22.680 get rid of this greenwashing. How do you measure success 0:03:22.760 --> 0:03:24.480 if you look at some of the things, for example, 0:03:24.520 --> 0:03:27.200 investment products. I know we're waiting for a common language, 0:03:27.320 --> 0:03:30.800 we're waiting for taxonomy, we're waiting for a price on carbon. 0:03:31.320 --> 0:03:33.519 But how do you make sure that investors don't walk 0:03:33.560 --> 0:03:36.400 away from cop with a pat on the vaccine? We've 0:03:36.440 --> 0:03:38.080 done the job, but let's go back to business. The 0:03:38.080 --> 0:03:39.760 old way. Yeah, I don't think that they're going to 0:03:39.880 --> 0:03:42.640 be able to do that because a lot of the 0:03:42.760 --> 0:03:47.040 large asset owners, including pension funds, are are saying, you know, 0:03:47.840 --> 0:03:51.040 we we want to go with managers that are actually 0:03:51.400 --> 0:03:56.120 committed for real and not just to pretend commitment. Um. 0:03:56.440 --> 0:03:59.040 And I don't think that there's gonna be a letdown 0:03:59.160 --> 0:04:02.480 after this. I think the pressure is on. Uh. This, 0:04:02.480 --> 0:04:07.800 this conference or cop process includes fifty thousand people, and 0:04:08.000 --> 0:04:11.880 a lot of the major commitments and progress that's being 0:04:11.920 --> 0:04:16.000 made take place outside of this plinary hall, take place 0:04:16.040 --> 0:04:21.040 outside of the negotiating sessions, but actually involved people who 0:04:21.120 --> 0:04:25.480 are in finance in who are CEOs of businesses and 0:04:25.520 --> 0:04:28.320 they're hearing from their customers. But how much of a 0:04:28.360 --> 0:04:31.680 problem is that private money, as you say, is going 0:04:31.760 --> 0:04:34.240 faster than public money. And what can we do to 0:04:34.320 --> 0:04:36.839 change that to at least align them. Well, we need 0:04:36.960 --> 0:04:40.719 reform of the multilateral development banks, for sure. The World 0:04:40.720 --> 0:04:44.320 Bank is not yet on side. Uh. And the head 0:04:44.360 --> 0:04:47.320 of the World Bank is a perfectly nice guy appointed 0:04:47.360 --> 0:04:51.320 by the previous US president, chosen by him. Uh. The 0:04:51.360 --> 0:04:53.680 staff is actually very good. They're in my opinion, but 0:04:54.120 --> 0:04:58.480 they're not yet really committed to helping as they should. 0:04:59.080 --> 0:05:02.520 There is a tremen into amount of work going on 0:05:02.800 --> 0:05:05.840 to try to come up with sensible reforms, not only 0:05:05.880 --> 0:05:08.920 at the World Bank Group, but Crystal linea George Eva, 0:05:09.000 --> 0:05:12.159 I think is a real champion here uh and and 0:05:12.400 --> 0:05:15.679 she is pushing hard to get these reforms in place. 0:05:16.000 --> 0:05:18.760 And then there are a whole group of other multilateral 0:05:19.040 --> 0:05:23.440 development banks, regional banks, national banks. There's a general awakening 0:05:23.480 --> 0:05:27.279 among all of them. Here's an example, what francing. Uh 0:05:27.520 --> 0:05:30.680 If if you're a business in Nigeria and you want 0:05:30.680 --> 0:05:34.000 to build a wind farm, your interest rate is seven 0:05:34.080 --> 0:05:36.760 times higher than it is if you're in an O 0:05:36.880 --> 0:05:40.800 E C D country. That's insane. Obviously the market is 0:05:40.839 --> 0:05:44.520 perceiving risk of various kinds there. But that's what these 0:05:45.120 --> 0:05:49.039 publicly funded the multilateral development banks should be doing, taking 0:05:49.080 --> 0:05:52.240 that first level of risk off of the table and 0:05:52.279 --> 0:05:54.640 speaking for society as a whole and saying it's in 0:05:54.800 --> 0:05:58.920 our public interests to make this transition faster. Why is 0:05:58.960 --> 0:06:01.160 it us not doing? I know we have an agreement 0:06:01.200 --> 0:06:04.520 on methane, but at the same time President Biden has 0:06:04.560 --> 0:06:08.359 been hamstrong with some of the politics back home. Why 0:06:08.520 --> 0:06:11.080 is this happening now, well, we still have a political 0:06:11.480 --> 0:06:15.960 battle to win in the US. UH, and it's a 0:06:16.040 --> 0:06:23.480 divided UH politics in the US, and UH the narrowest 0:06:23.520 --> 0:06:27.360 possible majority in the Senate. So President Biden, I think 0:06:27.360 --> 0:06:31.160 he did a fantastic job with his two days here UH. 0:06:31.320 --> 0:06:33.880 And I think he's done a fantastic job in proposing 0:06:33.880 --> 0:06:37.480 a really meaningful climate package. But it's very tough when 0:06:37.480 --> 0:06:40.240 you have a fifty fifty Senate and a couple of 0:06:40.279 --> 0:06:43.400 the Democratic senators are not yet on board one for 0:06:43.520 --> 0:06:47.479 McCole state, so it's a challenge. I do think that 0:06:48.160 --> 0:06:51.640 in another couple of weeks, I think before the end 0:06:51.680 --> 0:06:54.359 of the year, certainly this package will be passed. It 0:06:54.400 --> 0:06:56.680 may be modified again, but I think it. I think 0:06:56.720 --> 0:06:59.400 it will be passed. We will that help with convincing 0:06:59.520 --> 0:07:04.840 China to come on board or is it about including China? Well, yes, 0:07:04.920 --> 0:07:08.039 I think it has to help and bringing China on board. Yes, 0:07:08.360 --> 0:07:12.520 if if China can say you're preaching temperance from from 0:07:12.520 --> 0:07:14.720 a bar stool, as they say, then it lets them 0:07:14.720 --> 0:07:17.720 off the hook of it. But but I'm convinced that 0:07:17.840 --> 0:07:22.200 China is a serious about making its transition. They're building 0:07:22.200 --> 0:07:24.320 more solar panels and wind farms and the rest of 0:07:24.360 --> 0:07:27.120 the world put together. They're still burning more coal than 0:07:27.120 --> 0:07:29.119 the rest of the world put together, and that has 0:07:29.160 --> 0:07:32.960 to be transitioned away much faster, and they can save 0:07:33.040 --> 0:07:37.280 money by doing it so, But the coal industry in 0:07:37.440 --> 0:07:42.120 China is as powerful as the coal industry in the US, 0:07:42.240 --> 0:07:45.680 and so it obviously is taking some time to make 0:07:45.720 --> 0:07:48.840 that transition. There's an old Chinese proverb I'm told that 0:07:48.880 --> 0:07:51.520 says the mountain is high and the emperor is far away. 0:07:52.000 --> 0:07:54.880 I think that some of the regional governments in China 0:07:54.960 --> 0:08:00.480 have close ties with coal and coal related industrial opera rations, 0:08:00.480 --> 0:08:02.680 and it takes it's taking them some time to get 0:08:02.680 --> 0:08:05.400 them on board. But they've introduced carbon pricing in a 0:08:05.680 --> 0:08:08.800 in a chunk of their society. It's due to expand 0:08:09.240 --> 0:08:12.480 they have put out a net zero goal. It's far 0:08:13.440 --> 0:08:16.080 farther out than I would like it to be, but 0:08:16.600 --> 0:08:18.600 they plan their work and work their plan, and I 0:08:18.640 --> 0:08:21.600 think they're determined to do it. Vice President. When we 0:08:21.800 --> 0:08:24.920 see how much green finance there is out there, I 0:08:24.960 --> 0:08:28.160 had a chief executive calling it tsunami of green finance. 0:08:28.320 --> 0:08:30.600 What happens to the companies that are not working on 0:08:30.640 --> 0:08:33.760 their transition. Now, well, I think we're in the early 0:08:33.840 --> 0:08:38.000 stages of a sustainability revolution. That's the biggest investing and 0:08:38.120 --> 0:08:42.840 business opportunity in history. Uh. And those who don't recognize 0:08:42.920 --> 0:08:47.800 that and adapt to it are in commercial commercial risk 0:08:47.920 --> 0:08:50.640 of course, because they're they're going to be left behind. 0:08:50.800 --> 0:08:55.360 You remember the subprime mortgage of bubble that led to 0:08:55.400 --> 0:08:58.720 the Great Recession. We now have a sub prime carbon 0:08:58.840 --> 0:09:04.319 bubble of two trillion dollars based on an absurd assumption 0:09:04.400 --> 0:09:07.400 that all of that, all of those carbon fuels are 0:09:07.400 --> 0:09:09.719 going to be burned. They're not going to be. They 0:09:09.760 --> 0:09:14.520 cannot be, especially because the new renewable sources of electricity 0:09:14.559 --> 0:09:18.959 are much cheaper now and will be cheaper in the world, 0:09:18.960 --> 0:09:21.520 already in two thirds of the world. So that do 0:09:21.559 --> 0:09:23.640 you believe that once we have a carbon market, or 0:09:23.640 --> 0:09:29.200 proper carbon market functioning with prices, that it reprices private assets? Yeah, 0:09:29.280 --> 0:09:33.360 I mean I think that once carbon risk, the climate 0:09:33.679 --> 0:09:38.760 crisis risk is internalized, then yes, it's going to affect 0:09:38.840 --> 0:09:42.920 the value of all these assets. We've had this insane 0:09:43.600 --> 0:09:47.520 illusion that we can just ignore the impact of the 0:09:47.520 --> 0:09:50.400 climate crisis. But mother Nature is telling us no, not 0:09:50.480 --> 0:09:54.040 so fast. And these events are getting more extreme and 0:09:54.120 --> 0:09:58.160 more frequent, and people everywhere are recognizing it and they're 0:09:58.240 --> 0:10:02.679 demanding action. There's resistance, of course, and the legacy fossil 0:10:02.720 --> 0:10:07.160 fuel complex and the bankers that continue to invest hundreds 0:10:07.200 --> 0:10:10.640 of billions of dollars in it every year. They remind 0:10:10.679 --> 0:10:13.720 me of the old cartoon of wiley coyote running off 0:10:13.720 --> 0:10:16.120 the edge of the cliff and the legs keep moving 0:10:16.200 --> 0:10:19.559 until gravity takes hold. We're in that moment now, We're 0:10:19.600 --> 0:10:23.280 in a transition, and those who make the transition faster 0:10:23.440 --> 0:10:26.120 are going to do better as a result. Vice President Gore, 0:10:26.160 --> 0:10:28.480 thank you so much for your time on Bloomberg today, 0:10:28.480 --> 0:10:30.000 and with that, I'm going to send it back to 0:10:30.080 --> 0:10:32.400 you in New York, John, and we'll have plenty more 0:10:32.720 --> 0:10:35.600 from Glasgow. Cup twice France say thank you so much 0:10:35.640 --> 0:10:44.040 to you as well. Eric Adams is from Brooklyn. He 0:10:44.559 --> 0:10:48.679 joins us this morning. Congratulations, Eric Adams. I just mentioned 0:10:48.720 --> 0:10:52.720 you've done seventy two interviews this morning. How is your Wednesday? Look? 0:10:54.800 --> 0:10:58.400 Busy as you could expect, but exciting and I believe 0:10:58.640 --> 0:11:01.800 that Uh I want to be known as the g 0:11:02.240 --> 0:11:06.800 S D mayor get stuff done. Tram to really deal 0:11:06.880 --> 0:11:08.960 with the problems that we're facing in the city, and 0:11:09.000 --> 0:11:12.680 I'm excited about it. I'm sure you'll accept a congratulations 0:11:12.760 --> 0:11:16.160 call from Mr Jesse at Amazon or Mr Bezos of Amazon. 0:11:17.160 --> 0:11:19.280 I'm sure you will tell me you would not have 0:11:19.360 --> 0:11:23.120 lost Amazon out of Queen's Amazon looks to move to 0:11:23.280 --> 0:11:27.160 Jersey City or at the margin, moved to Jersey City. 0:11:27.280 --> 0:11:31.200 How do you keep tech jobs in the five boroughs 0:11:32.600 --> 0:11:35.560 by doing what I have been doing for the last 0:11:36.080 --> 0:11:38.800 three months now. I had been sitting down with tech 0:11:38.880 --> 0:11:43.320 leaders ms, several Israeli companies and other companies here in 0:11:43.360 --> 0:11:46.520 the city. Just two days ago I met with thirty 0:11:46.960 --> 0:11:50.040 a large tech startups and in the borough of Brooklyn 0:11:50.360 --> 0:11:53.680 we witnessed a three hundred and fifty six increase in 0:11:53.760 --> 0:11:57.120 tech startups in a tenure period. So this has been 0:11:57.160 --> 0:12:00.200 a place where I believe in technology and how we 0:12:00.360 --> 0:12:04.480 use technology to change the delivery of goods and services 0:12:04.480 --> 0:12:06.920 in this city. I'm not going to mince words, you know, 0:12:06.960 --> 0:12:09.240 it's a tough Bloomberg interview. That's what we do here. 0:12:09.720 --> 0:12:13.560 What is going to be here? Change process. In the 0:12:13.640 --> 0:12:18.800 first thirty days from the mayor, you replace a safety 0:12:18.920 --> 0:12:21.400 zero in on gun and gang violence. We have to 0:12:21.440 --> 0:12:25.720 deal with the actualization of fear and violence and the 0:12:25.800 --> 0:12:29.960 perception because they both become a reality to people. So 0:12:30.000 --> 0:12:33.920 I'm going to institute an anti gun plane closed unit, 0:12:34.440 --> 0:12:38.120 of which is similarly disbanded by the current mayor, and 0:12:38.160 --> 0:12:42.040 we're going to zero and gun violence. Okay, I don't 0:12:42.160 --> 0:12:44.439 interrupt here, but the news flow is so important Mayor 0:12:44.520 --> 0:12:48.440 that the district attorney elected maybe disagrees with you on 0:12:48.559 --> 0:12:53.760 the how do you put in process planes, closed officers 0:12:54.080 --> 0:12:59.200 to protect the citizens? What's how do you actually affect that? Well, 0:12:59.360 --> 0:13:03.120 some things. I'm won the distric attorney. He prosecute crimes. 0:13:03.280 --> 0:13:06.960 The police department. We arrest people that there is probable 0:13:07.000 --> 0:13:09.240 cause to believe they committed crime, and I'm not going 0:13:09.280 --> 0:13:11.880 to mix the two. I think right now we are 0:13:11.920 --> 0:13:14.439 debated with the laws we don't like in Albany. We 0:13:14.480 --> 0:13:17.560 don't like the way he prosecuted the prosecuting crimes. That's 0:13:17.600 --> 0:13:20.520 not our job. My job is to make sure if 0:13:20.559 --> 0:13:23.400 someone has probable cause to commit a crime. I'm in 0:13:23.600 --> 0:13:26.440 charge of the police department. I don't need approval to 0:13:26.480 --> 0:13:29.320 put in place a plain close anti gun unit. And 0:13:29.360 --> 0:13:31.760 we're going to do our job and let others do 0:13:31.920 --> 0:13:35.000 their jobs. We're speaking with Eric Adams, new York City 0:13:35.120 --> 0:13:39.920 mayor elect. Mr Adams. You know this is this is Bloomberg. 0:13:39.960 --> 0:13:42.720 We think about the markets, we think about um, you know, 0:13:42.800 --> 0:13:45.600 stock exchanges and and right now you know, as we know, 0:13:45.640 --> 0:13:49.160 New York City has been the global leader in global finance. 0:13:49.200 --> 0:13:51.520 I think that's still the case today. The future is 0:13:51.520 --> 0:13:53.120 going to be a little bit differently. We think about 0:13:53.120 --> 0:13:56.680 some things like crypto that is a big, big growth 0:13:56.679 --> 0:14:00.679 of business within the financial services industry and technology. How 0:14:00.720 --> 0:14:03.000 are you going to make New York City a crypto 0:14:03.240 --> 0:14:06.400 friendly city, a crypto leader? Uh? And how would that 0:14:06.480 --> 0:14:10.000 benefit the city? Well, part of the meetings I have 0:14:10.080 --> 0:14:13.440 been having UH is to bring together the whole big 0:14:13.520 --> 0:14:16.480 cooin industry, and we need to do several things with it. 0:14:16.559 --> 0:14:19.680 Number one, we need to look at what's prevented the 0:14:19.760 --> 0:14:24.160 growth of big coins and cryptocurrency in our city. What 0:14:24.280 --> 0:14:25.600 is it in the way of that. I met with 0:14:25.640 --> 0:14:27.640 the mayor of Miami and we're going to have a 0:14:27.680 --> 0:14:32.920 friendly competition. Uh. He's extremely inviting. He has a Miami 0:14:33.080 --> 0:14:36.200 Miami coin that is doing very well. We're going to 0:14:36.200 --> 0:14:38.640 look in the direction to carry that out. We're also 0:14:38.680 --> 0:14:41.040 going to do something else. We have to build out 0:14:41.040 --> 0:14:43.800 a pipeline of young people that can field these jobs 0:14:43.840 --> 0:14:47.080 and understand the new technology. Because we can't have a 0:14:47.160 --> 0:14:51.800 one sided city where certain groups and areas are doing 0:14:51.840 --> 0:14:54.200 well and those of the inner cities are not. I'm 0:14:54.240 --> 0:14:57.280 going to build the pipeline to success in the city. 0:14:57.560 --> 0:14:59.680 Mary Adams. Uh, we have to wrap this up as 0:14:59.720 --> 0:15:02.200 you go of Bloomberg Television to speak with John Farrell. 0:15:02.200 --> 0:15:05.720 Good luck with that. Uh. And I'm kidding, but but but, 0:15:05.880 --> 0:15:08.680 Mary Adams, you walked in once is a tough kid 0:15:08.680 --> 0:15:13.640 in Brooklyn to precinct. That's not tough, that's fancy Fort Green. 0:15:13.760 --> 0:15:16.640 I mean, you're living large in Fort Green. You've got 0:15:16.640 --> 0:15:19.960 to walk in to a fancy Ford Green or some 0:15:20.000 --> 0:15:23.120 of the toughest districts in this city. Is an ex 0:15:23.200 --> 0:15:27.640 cop with people who maybe didn't vote for you, maybe 0:15:27.720 --> 0:15:30.680 didn't get behind you because they have a more traditional view. 0:15:31.320 --> 0:15:34.440 How do you make peace with the line officers of 0:15:34.440 --> 0:15:39.280 the New York Police Department. Well, first, it's very important 0:15:39.440 --> 0:15:43.040 not to view geographical areas of the city during our 0:15:43.040 --> 0:15:46.480 current time. Yes, for Green is wonderful right now with 0:15:46.560 --> 0:15:49.720 multimillion dollar homes. But I was there when we were 0:15:49.760 --> 0:15:53.360 dealing with real robberies, real crimes. And I also controlled 0:15:53.440 --> 0:15:56.160 this city at the transit cop during the mid eighties 0:15:56.240 --> 0:15:58.640 Ryan and subway system with a radio that did not 0:15:58.720 --> 0:16:03.000 operate alone by myself. So we start talking about tough, 0:16:03.400 --> 0:16:05.800 That's what I know. It's tough getting off the flow 0:16:05.800 --> 0:16:08.240 of a police and after you are rested, tough in 0:16:08.320 --> 0:16:11.840 a dishwasher, going to school at night, surviving education with 0:16:11.880 --> 0:16:15.400 a learning disability that was undiagnosed. Tough is not something 0:16:15.440 --> 0:16:17.800 I'm afraid of, and tough is not something that New 0:16:17.880 --> 0:16:20.520 York is off radio. We're resilient and we're going to 0:16:20.560 --> 0:16:23.880 be fine. New York is bad. I'm Bloomberg Radio, Eric 0:16:23.920 --> 0:16:27.320 Adams with us. He will continue, I'm Bloomberg Television worldwide 0:16:27.720 --> 0:16:30.520 as well. Mayor Adams, congratulations and thank you so much 0:16:30.560 --> 0:16:32.960 for joining us as well. Boy Paul, is that a 0:16:33.000 --> 0:16:35.960 different tone from I mean, I'm not trying to get 0:16:36.000 --> 0:16:38.120 into the politics of it. I will state as a 0:16:38.240 --> 0:16:40.320 fact that's a different That is a different tone, and 0:16:40.360 --> 0:16:42.800 it's probably reflective of what a lot of folks in 0:16:42.800 --> 0:16:44.320 New York City you're feeling, which is we need to 0:16:44.360 --> 0:16:46.960 kind of get control back at this city here. Um. 0:16:47.320 --> 0:16:49.640 And so that's certainly been one of the messages from 0:16:49.640 --> 0:16:52.560 Mayor elect Adams. And so again he'll have a you know, 0:16:52.800 --> 0:16:55.240 as you mentioned in your question, you know that's those 0:16:55.240 --> 0:16:57.840 first thirty days. Boy, there's a lot to get done 0:16:57.840 --> 0:17:00.560 and and and setting the tone. I guess him longer 0:17:00.600 --> 0:17:04.760 than thirty days. But but to all of our audience 0:17:04.800 --> 0:17:08.520 worldwide and across this nation, unfortunately, what the mayor talks 0:17:08.560 --> 0:17:13.600 about on people's fears, it's true. It's across all income 0:17:13.680 --> 0:17:17.480 levels everyone. You just could feel it in the city. Ye. 0:17:17.840 --> 0:17:20.560 And it's tangible. Yeah. And if we've we've seen this 0:17:20.600 --> 0:17:22.439 before in New York City, and if you could if 0:17:22.440 --> 0:17:24.800 you can get that under control, if you can get 0:17:24.800 --> 0:17:27.280 that managed, and then a lot of other things fall 0:17:27.320 --> 0:17:31.600 into place, whether it's investment, whether it's tourism, um and um. 0:17:31.720 --> 0:17:34.320 But that we've seen this before, and we've seen we 0:17:34.400 --> 0:17:37.159 have a playbook, and you know certainly would need to 0:17:37.160 --> 0:17:39.800 be adjusted for the times presumably, but that will probably 0:17:39.920 --> 0:17:43.159 one of the, if not the leading job for the 0:17:43.160 --> 0:17:45.800 mayor elect on day one. You see how I behave myself? Yeah, 0:17:45.920 --> 0:17:48.160 very well, I said very well. I didn't say, Mr 0:17:48.240 --> 0:17:52.639 Mayor the pothole. If they haven't fourth Street, can we 0:17:52.680 --> 0:17:55.919 get that fixed? Exactly? I didn't bring up Street between 0:17:56.200 --> 0:18:06.360 six and exactly as we can do. We can rip 0:18:06.440 --> 0:18:08.919 up the script with Abby Joseph Coh and she has 0:18:08.960 --> 0:18:12.040 acclaimed at Golden Sax. She is one of the people 0:18:12.160 --> 0:18:16.080 that keeps the fearful in the market participating and David 0:18:16.160 --> 0:18:19.359 Costan's great bull market over at the Goldmen Sax shop. 0:18:19.760 --> 0:18:23.240 We're thrilled at the advisory director and senior investment strategist 0:18:23.280 --> 0:18:25.960 at Golden Sex joins us this morning. Abby, I'm going 0:18:26.000 --> 0:18:27.800 to rip up the script and I can do this 0:18:28.200 --> 0:18:32.119 for someone who wrote Aristotle on investment decision making in 0:18:32.119 --> 0:18:36.400 the Financial Analyst Journal a million years ago. Abby, we're 0:18:36.480 --> 0:18:40.840 all getting length here. We're all playing the parlor game 0:18:40.920 --> 0:18:47.720 of extending the X axis. We've been here before, haven't we. 0:18:47.720 --> 0:18:50.159 We certainly have Tom and it's a pleasure to be 0:18:50.280 --> 0:18:53.399 with you in the team. Another word we could use 0:18:53.520 --> 0:18:59.159 is protracted. Basically, there are several factors now behind the 0:18:59.160 --> 0:19:03.000 inflation that we're seeing globally. Some of these may prove 0:19:03.080 --> 0:19:06.919 to be transitory, yet protracted. That includes some of the 0:19:06.960 --> 0:19:10.840 supply chain issues but some of them do represent the 0:19:10.880 --> 0:19:14.080 sort of inflation that one gets during the course of 0:19:14.119 --> 0:19:17.720 an economic expansion, And the one that I'm looking at 0:19:17.800 --> 0:19:22.240 most closely has to do with wages. We have seen 0:19:22.560 --> 0:19:26.399 a notable pickup in average hourly earnings, and on the 0:19:26.400 --> 0:19:30.399 one hand, that's terrific because it says something about the 0:19:30.400 --> 0:19:34.600 ability of consumers to continue to spend, and it also 0:19:35.040 --> 0:19:38.199 tries to get across the idea that we did go 0:19:38.280 --> 0:19:41.880 through an extended period prior to the pandemic in which 0:19:41.920 --> 0:19:46.000 wages were not quite keeping up. However, if those wages 0:19:46.040 --> 0:19:49.280 get embedded um in the economy, what we do see 0:19:49.359 --> 0:19:52.359 is that core c P I and more importantly for 0:19:52.400 --> 0:19:57.440 the Fed core pc E UH moves up. But the 0:19:57.560 --> 0:20:02.760 expectation of my Goldman Sack economist colleagues is that we 0:20:02.800 --> 0:20:05.879 will start to see that calm down. One other point, 0:20:05.920 --> 0:20:08.359 if I may, and that is we're still in a 0:20:08.440 --> 0:20:12.679 period where you and your comparisons are really difficult to 0:20:12.720 --> 0:20:17.880 do because we are emerging from this extraordinary period. Now, 0:20:18.119 --> 0:20:22.600 a year ago, personal spending was negative UH. This year 0:20:22.640 --> 0:20:25.480 it's positive. So what do we think is going to happen? 0:20:26.040 --> 0:20:28.199 They're going to be some price pressures and they're going 0:20:28.240 --> 0:20:30.399 to be some supply chain pressures as well. I mean, 0:20:30.480 --> 0:20:32.960 let's do some Cornell mathematics here, and it's about the 0:20:33.040 --> 0:20:35.640 rates of change and the dynamics involved, and we can 0:20:35.760 --> 0:20:37.880 look at wage growth is I I agree with your 0:20:37.880 --> 0:20:43.199 core theme there is well. The gloom Crew speaks of 0:20:43.240 --> 0:20:47.520 abrupt They speak of gross second derivatives and even harmful 0:20:47.560 --> 0:20:52.159 first derivatives. Your shop says, calm down, state why we 0:20:52.200 --> 0:20:56.719 should calm down and avoid the fear of dynamics. I 0:20:56.760 --> 0:20:59.439 think we should calm down for a few reasons. Tom 0:20:59.560 --> 0:21:02.840 One is, as you point out, the mathematics, uh, the 0:21:02.920 --> 0:21:06.560 year in your comparisons are really fraught right now, and 0:21:06.600 --> 0:21:10.320 we'd much rather look at an extended period of what's 0:21:10.359 --> 0:21:13.160 happening and what's happening at the core level. The other 0:21:13.200 --> 0:21:15.280 thing we need to keep in mind is that there 0:21:15.280 --> 0:21:18.920 are several factors out there, three big ones that work 0:21:19.000 --> 0:21:23.240 in the opposite direction, that may suggest that economic growth 0:21:23.280 --> 0:21:27.400 will actually have the breaks somewhat applied, even if the 0:21:27.400 --> 0:21:31.560 FED doesn't do anything. What are they? Number one, we 0:21:31.600 --> 0:21:35.280 are seeing right now a change in fiscal policy, and 0:21:35.280 --> 0:21:38.639 I'm not talking about the packages that are stuck in Congress. 0:21:38.680 --> 0:21:42.480 What we're seeing is that the programs that were previously 0:21:42.560 --> 0:21:47.760 implemented are rolling off, and so the increase in federal spending, 0:21:48.600 --> 0:21:51.760 which was as you know, robust and equal to about 0:21:51.840 --> 0:21:55.840 nine percent of GDP earlier in the pandemic, is now 0:21:55.920 --> 0:21:59.240 going to be growing at about one percent, and if 0:21:59.520 --> 0:22:04.200 fiscal policy isn't changed, it will be down about two 0:22:04.560 --> 0:22:08.560 next year in two So that's a bit of a break. Uh. 0:22:08.600 --> 0:22:10.919 The other thing that we have to keep in mind 0:22:11.320 --> 0:22:14.359 is that we are not seeing of the sword of 0:22:14.920 --> 0:22:19.640 wrote rebound that many had expected in terms of employment. 0:22:20.040 --> 0:22:22.879 Not talking about the unemployment rate, I'm talking about the 0:22:22.920 --> 0:22:26.040 participation rate, where there are many groups of people who 0:22:26.040 --> 0:22:28.600 are saying either they don't want to come back into 0:22:28.640 --> 0:22:30.800 the workforce, where they don't want to do it now. 0:22:31.280 --> 0:22:34.719 So this includes working moms who are having a problem 0:22:34.760 --> 0:22:38.119 with childcare and their kids are not yet vaccinated. It 0:22:38.200 --> 0:22:42.879 includes retirees. Uh, the baby boom generation a very large 0:22:42.920 --> 0:22:46.720 cohort in the United States. UM. And let's not forget 0:22:46.800 --> 0:22:50.520 the missing immigrants. In the decade prior to the pandemic, 0:22:50.760 --> 0:22:53.800 about ten percent of the net growth in the US 0:22:53.920 --> 0:22:56.879 labor force was due to immigration, both at the lower 0:22:57.000 --> 0:23:00.640 end of the spectrum and at the high end very 0:23:00.720 --> 0:23:04.639 skilled people. We've seen that reduce one more factor, if 0:23:04.680 --> 0:23:09.000 I may, and that is while the US and many 0:23:09.000 --> 0:23:13.879 other nations are slowly now emerging from pandemic restrictions, China 0:23:14.320 --> 0:23:19.719 is extremely tough on these restrictions. And China has roughly 0:23:20.119 --> 0:23:24.320 of the world's global manufacturing capacity. If they tighten up 0:23:24.720 --> 0:23:29.720 or stay tight, that has implications for economic growth. Everyone's 0:23:29.760 --> 0:23:34.280 been focusing on the supply chain and the inflationary aspects. 0:23:34.440 --> 0:23:37.199 It also has impact on the growth abby. All of 0:23:37.240 --> 0:23:40.600 this sounds fairly negative. However, I wonder if the biggest 0:23:40.600 --> 0:23:43.760 pain trade in markets is not being bullish enough, because 0:23:43.760 --> 0:23:47.080 it's frankly supports the idea of real yields being as 0:23:47.119 --> 0:23:50.080 negative as they are, and they're being a supportive backdrop 0:23:50.400 --> 0:23:53.879