1 00:00:00,520 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:07,120 Speaker 1: to the markets this week. U S CPI nevers, reinforcing 3 00:00:07,160 --> 00:00:10,639 Speaker 1: concerns about inflation. The financial stories that chiep are worth 4 00:00:10,720 --> 00:00:13,480 Speaker 1: a really different reaction to Mark. It's more indications of 5 00:00:13,640 --> 00:00:16,239 Speaker 1: just how hot the U. S. Economy really is. Through 6 00:00:16,239 --> 00:00:19,520 Speaker 1: the eyes of the most influential voices Larry Summers, the 7 00:00:19,560 --> 00:00:22,880 Speaker 1: former Trickery Secretary, Katherine Keating, CEO of the n Y Moms, 8 00:00:22,960 --> 00:00:26,239 Speaker 1: Sam's l Sharmon and founder of Equatic Group Investment in 9 00:00:26,320 --> 00:00:30,280 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 10 00:00:30,600 --> 00:00:33,720 Speaker 1: Hoping for better days, but not before we get through 11 00:00:33,760 --> 00:00:36,880 Speaker 1: the fear of more gun violence, of keeping our democracy safe, 12 00:00:37,159 --> 00:00:40,280 Speaker 1: and of a recession. This is Bloomberg Wall Street Week. 13 00:00:40,400 --> 00:00:44,400 Speaker 1: I'm David Weston. This week's special contributor Larry Summers on 14 00:00:44,520 --> 00:00:47,400 Speaker 1: just how bad that recession could get and whether there 15 00:00:47,440 --> 00:00:50,600 Speaker 1: could be something worse coming. I still do think we 16 00:00:50,720 --> 00:00:54,400 Speaker 1: have a meaningful amount of inflation that we have to 17 00:00:54,600 --> 00:00:57,240 Speaker 1: get out of the system. And Rick Reader of Black 18 00:00:57,320 --> 00:01:00,280 Speaker 1: Rock on how we could use the expected down turn 19 00:01:00,360 --> 00:01:03,680 Speaker 1: to make sure we come back stronger. It's a very 20 00:01:03,800 --> 00:01:06,880 Speaker 1: challenging period to think through when you're trying to evaluate 21 00:01:07,319 --> 00:01:22,880 Speaker 1: risk versus reward. This week, there was a lot of 22 00:01:22,920 --> 00:01:26,520 Speaker 1: talk about what could go wrong in Ukraine, as European 23 00:01:26,640 --> 00:01:29,839 Speaker 1: leaders like Italy's Mario Draggy traveled to Kiev to say 24 00:01:29,959 --> 00:01:33,720 Speaker 1: Ukraine should join the European Union. A Cristo propos to 25 00:01:33,800 --> 00:01:36,800 Speaker 1: this purpose. I want to say today that the most 26 00:01:36,840 --> 00:01:40,280 Speaker 1: important message of our visit is that Italy wants Ukraine 27 00:01:40,520 --> 00:01:43,600 Speaker 1: in the European Union. While in the United States, concerns 28 00:01:43,640 --> 00:01:47,560 Speaker 1: over more gun violence led Republicans and Democrats finally to 29 00:01:47,680 --> 00:01:52,280 Speaker 1: come together on gun legislation, driven as Republicans Senator Cornin explained, 30 00:01:52,360 --> 00:01:57,280 Speaker 1: by constituents demanding action since shooting my officers received because 31 00:01:57,320 --> 00:02:01,520 Speaker 1: I'm sure many other members of Congers have have received 32 00:02:01,520 --> 00:02:05,240 Speaker 1: tens of thousands of calls and letters and emails with 33 00:02:05,440 --> 00:02:09,880 Speaker 1: a singular message. Do some Even as the Supreme Court 34 00:02:09,960 --> 00:02:13,600 Speaker 1: came down with a landmark decision striking down as unconstitutional 35 00:02:13,919 --> 00:02:17,600 Speaker 1: New York's license requirement for carrying concealed weapons and having 36 00:02:17,639 --> 00:02:20,839 Speaker 1: a gun out in the open, these like it's incendiary. 37 00:02:21,000 --> 00:02:23,239 Speaker 1: It will only add to fear, it will only add 38 00:02:23,240 --> 00:02:26,320 Speaker 1: to conflict and the potential for violence and when Congress 39 00:02:26,360 --> 00:02:29,400 Speaker 1: wasn't doing something to address people's fears about guns, it 40 00:02:29,480 --> 00:02:32,040 Speaker 1: was investigating a day when lawmakers fear for their own 41 00:02:32,080 --> 00:02:35,959 Speaker 1: safety as rioters came within feet of Vice President Pence, 42 00:02:36,280 --> 00:02:40,440 Speaker 1: approximately forty ft. That's all there was between the Vice 43 00:02:40,440 --> 00:02:43,600 Speaker 1: president and the mob. But the fear most investors were 44 00:02:43,600 --> 00:02:46,119 Speaker 1: talking about it was the fear of recession. As FED 45 00:02:46,240 --> 00:02:49,520 Speaker 1: Chair Powell traveled to Capitol Hill to say it was possible, 46 00:02:49,880 --> 00:02:53,960 Speaker 1: but not inevitable. It's not our intended outcome at all, 47 00:02:54,040 --> 00:02:57,200 Speaker 1: but it's certainly a possibility, And many investors said it 48 00:02:57,320 --> 00:03:00,720 Speaker 1: was more than just possible, the essentially as inevitable. At 49 00:03:00,720 --> 00:03:03,440 Speaker 1: some point, it's almost unavoidable. I got to think that 50 00:03:03,440 --> 00:03:04,920 Speaker 1: the odds side, I think there's going to be a recession. 51 00:03:04,919 --> 00:03:08,040 Speaker 1: Our economist, as you've noted this morning, had increased their 52 00:03:08,080 --> 00:03:10,480 Speaker 1: odds of the recession this year. This inflation is quite bad. 53 00:03:10,600 --> 00:03:14,840 Speaker 1: It's it's intransigent, it's not transitory, and the consequence will 54 00:03:14,840 --> 00:03:19,560 Speaker 1: be the recession. And if all that weren't enough, on Friday, 55 00:03:19,600 --> 00:03:22,880 Speaker 1: the Supreme Court came down with its monumental decision, overturning 56 00:03:22,919 --> 00:03:26,480 Speaker 1: fifty years of president deciding the Constitution does not protect 57 00:03:26,520 --> 00:03:29,840 Speaker 1: any right to abortion, something President Biden called a tragic 58 00:03:30,080 --> 00:03:33,120 Speaker 1: mistake to day to Sutreme courts in the United States 59 00:03:33,160 --> 00:03:37,040 Speaker 1: expressly took away the conscious right from the American people 60 00:03:37,920 --> 00:03:42,760 Speaker 1: that it has already recognized. They didn't limit it, they 61 00:03:42,800 --> 00:03:46,400 Speaker 1: simply took it away. That's never been done to write 62 00:03:46,400 --> 00:03:49,680 Speaker 1: so important to so many Americans, but they did it. 63 00:03:50,120 --> 00:03:53,000 Speaker 1: It's a sad day for the court and for the country. 64 00:03:53,640 --> 00:03:57,160 Speaker 1: While Republican House Minority of Leader Kevin McCarthy found the 65 00:03:57,280 --> 00:04:03,200 Speaker 1: ultimate affirmation of American values, the voiceless finally a voice. 66 00:04:03,840 --> 00:04:06,400 Speaker 1: This great nation can now live up to its core 67 00:04:06,440 --> 00:04:11,520 Speaker 1: principle that all are created equal, not for an EU 68 00:04:12,160 --> 00:04:15,320 Speaker 1: created equal, and a good part of American business was 69 00:04:15,400 --> 00:04:18,880 Speaker 1: quick to respond, with companies like Amazon, Apple, Disney, and 70 00:04:18,960 --> 00:04:21,560 Speaker 1: JP Morgan pledging to do all that they could to 71 00:04:21,600 --> 00:04:25,840 Speaker 1: support their employees getting abortions in states that still permit them. 72 00:04:25,880 --> 00:04:28,839 Speaker 1: Here to sort through it all with us are Jim McDonald, 73 00:04:29,080 --> 00:04:32,960 Speaker 1: Northern Trust chief investment strategist and Christina Hooper, chief Global 74 00:04:33,000 --> 00:04:35,920 Speaker 1: strategist at Investo. So welcome, Jim and Christina. Great to 75 00:04:35,920 --> 00:04:37,599 Speaker 1: have your Christina, let me start with you on what 76 00:04:37,680 --> 00:04:40,279 Speaker 1: happened with bond yields because they had been really ramping up. 77 00:04:40,279 --> 00:04:42,240 Speaker 1: There's been a lot of all today they settled down 78 00:04:42,240 --> 00:04:44,240 Speaker 1: a bit today this week. Is that because of a 79 00:04:44,240 --> 00:04:47,760 Speaker 1: fear of recession. I do think that it is what 80 00:04:47,800 --> 00:04:51,039 Speaker 1: we're seeing is concerns about at least a slowdown. I 81 00:04:51,080 --> 00:04:53,960 Speaker 1: don't know if it's exactly a recession. I would argue 82 00:04:54,000 --> 00:04:56,360 Speaker 1: that we'll still be able to avoid a recession in 83 00:04:56,400 --> 00:04:59,280 Speaker 1: the United States. And one could argue that that's what 84 00:04:59,320 --> 00:05:01,839 Speaker 1: the bond market telling us. So, Jimmy, isn't that exactly 85 00:05:01,839 --> 00:05:05,039 Speaker 1: what the Fed wants? Is a slowdown maybe short of recession. Absolutely, 86 00:05:05,080 --> 00:05:08,359 Speaker 1: And so I think the softives and commodity prices in 87 00:05:08,400 --> 00:05:13,080 Speaker 1: recent days has also contributed to the moderation and bond yields. 88 00:05:13,120 --> 00:05:16,000 Speaker 1: And the Fed is tightened financial conditions dramatically. And all 89 00:05:16,040 --> 00:05:17,880 Speaker 1: you have to do is look at what's happened to 90 00:05:18,640 --> 00:05:21,720 Speaker 1: mortgage rates and the impact and the housing market that 91 00:05:21,720 --> 00:05:24,520 Speaker 1: that is starting to have to understand that the Fed's 92 00:05:24,600 --> 00:05:27,200 Speaker 1: impact is already starting to make a difference. Well, I 93 00:05:27,240 --> 00:05:30,640 Speaker 1: wonder if we got a University of Michigan consumer sentiment 94 00:05:30,720 --> 00:05:33,720 Speaker 1: numbers out on Friday and they came off a little 95 00:05:33,760 --> 00:05:36,040 Speaker 1: bit actually on the longer term five to ten year 96 00:05:36,040 --> 00:05:38,920 Speaker 1: expectation and inflation. Are we starting to see some effect 97 00:05:38,960 --> 00:05:41,360 Speaker 1: of the FED, do you think? I do think we are. 98 00:05:41,640 --> 00:05:44,560 Speaker 1: I mean, but we're also just starting to see a 99 00:05:44,600 --> 00:05:49,279 Speaker 1: reflection of some commodity prices. Energy prices easing a bit 100 00:05:49,360 --> 00:05:51,400 Speaker 1: in the last several weeks, so I think that is 101 00:05:51,440 --> 00:05:53,960 Speaker 1: reflected in it. I mean. J Powell even said in 102 00:05:53,960 --> 00:05:57,200 Speaker 1: in that FOMC press conference that there is a pretty 103 00:05:57,200 --> 00:06:02,719 Speaker 1: strong correlation between energy prices headline CPI essentially, and inflation 104 00:06:02,760 --> 00:06:07,040 Speaker 1: expectations for consumers. Jim, how much they concerned about inflation 105 00:06:07,080 --> 00:06:09,800 Speaker 1: actually comes right off of energy, just straight off energy. 106 00:06:10,720 --> 00:06:12,680 Speaker 1: I think it's extremely high. I think if you look 107 00:06:12,720 --> 00:06:16,000 Speaker 1: at the correlation between gas prices and the Michigan survey, 108 00:06:16,400 --> 00:06:19,800 Speaker 1: it's really high. It's the most visible demonstration of what 109 00:06:20,000 --> 00:06:22,599 Speaker 1: energy costs are to the consumer. And so I think 110 00:06:22,760 --> 00:06:26,320 Speaker 1: it's going to be a critical point to inflation expectations 111 00:06:26,400 --> 00:06:28,880 Speaker 1: and bond yields over the next year that we see 112 00:06:28,880 --> 00:06:33,880 Speaker 1: at least a flattening, if not some moderation in gasoline prices. Okay, 113 00:06:33,960 --> 00:06:36,640 Speaker 1: Christina Hooper of Invesco and Jim McDonald of Northern Trust 114 00:06:36,680 --> 00:06:39,200 Speaker 1: We'll stay with us as we take take a look 115 00:06:39,240 --> 00:06:41,039 Speaker 1: at the market, at what they did to us last 116 00:06:41,040 --> 00:06:42,960 Speaker 1: week as opposed to what they can do for us 117 00:06:43,240 --> 00:06:46,000 Speaker 1: next week. That's next on Wall Street Week on Bloomberg. 118 00:06:58,000 --> 00:07:02,000 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 119 00:07:02,120 --> 00:07:11,040 Speaker 1: Bloomberg Radio. Everyone's looking at housing and saying it's too 120 00:07:11,120 --> 00:07:13,560 Speaker 1: high priced, and labor costs too much in the material, 121 00:07:13,640 --> 00:07:15,320 Speaker 1: that too much on the land, is too much, and 122 00:07:15,320 --> 00:07:17,320 Speaker 1: they all sit there and say it isn't that terrible? 123 00:07:18,240 --> 00:07:20,760 Speaker 1: What are they gonna do about it? That was Pierre 124 00:07:20,760 --> 00:07:23,880 Speaker 1: Renfred of Rentfred Boston appearing on Wall Street. We way 125 00:07:23,920 --> 00:07:26,320 Speaker 1: back in nineteen seventy six, and it looks like we're 126 00:07:26,360 --> 00:07:29,239 Speaker 1: back to some version of that world again, with higher 127 00:07:29,240 --> 00:07:32,080 Speaker 1: prices and higher input costs for housing, but a slowing 128 00:07:32,120 --> 00:07:34,880 Speaker 1: economy and FED chair j Poale told us this week 129 00:07:35,120 --> 00:07:37,440 Speaker 1: a slowing housing market as well. Still with us our 130 00:07:37,520 --> 00:07:41,240 Speaker 1: Christina Hooper of Invesco and Jim McDonald of Northern Trust. Jim, 131 00:07:41,240 --> 00:07:42,840 Speaker 1: this is exactly where you left us off on the 132 00:07:42,880 --> 00:07:45,800 Speaker 1: housing market. We heard j Pale this week say, yes, 133 00:07:45,840 --> 00:07:48,480 Speaker 1: it is slowing. We could even have housing prices go 134 00:07:48,600 --> 00:07:51,000 Speaker 1: down at least in some markets. How big a drag, 135 00:07:51,040 --> 00:07:53,760 Speaker 1: potentially even a danger of the economy is the housing market. 136 00:07:54,920 --> 00:07:57,360 Speaker 1: I think the danger is more from the volume standpoint 137 00:07:57,360 --> 00:07:59,800 Speaker 1: than it is from the price standpoint. If you think 138 00:07:59,800 --> 00:08:02,040 Speaker 1: of out housing today, it's about four and a half 139 00:08:02,080 --> 00:08:04,760 Speaker 1: percent of the economy. It got to six and a 140 00:08:04,840 --> 00:08:07,640 Speaker 1: half during the bubble, so we're nowhere closed to that 141 00:08:07,720 --> 00:08:10,960 Speaker 1: level of an impact. And what I think will provide 142 00:08:11,040 --> 00:08:14,600 Speaker 1: some cushion to the downside on prices is an inventory 143 00:08:14,800 --> 00:08:18,480 Speaker 1: is incredibly low, Vacancies are very low, So while the 144 00:08:18,560 --> 00:08:22,200 Speaker 1: jump and mortgage rates really hurts affordability, there is just 145 00:08:22,280 --> 00:08:25,120 Speaker 1: a mismatch between demand and supply that I think we'll 146 00:08:25,160 --> 00:08:29,400 Speaker 1: put some downside underneath prices. And I think it's going 147 00:08:29,440 --> 00:08:31,840 Speaker 1: to take a long time to work through that and 148 00:08:31,880 --> 00:08:35,640 Speaker 1: get to the point where supply meets demand, especially given 149 00:08:35,960 --> 00:08:39,960 Speaker 1: all the supply chain issues were currently experiencing. It's just 150 00:08:40,240 --> 00:08:42,360 Speaker 1: not an environment in which we're going to see a 151 00:08:42,360 --> 00:08:46,640 Speaker 1: lot of homes built, especially first time home buyers homes. 152 00:08:46,960 --> 00:08:49,600 Speaker 1: So Christina, give us a little investment advice here, right, 153 00:08:49,640 --> 00:08:52,400 Speaker 1: that's what we really want. We're saying we're clearly going 154 00:08:52,440 --> 00:08:54,840 Speaker 1: into a downturn. We don't know how bad it will be. 155 00:08:55,200 --> 00:08:56,599 Speaker 1: At the same time, we know we'll come out of 156 00:08:56,640 --> 00:08:58,720 Speaker 1: at some point. As an investor, what do I do 157 00:08:58,800 --> 00:09:01,360 Speaker 1: in the short intermediate term to make sure I'm protected, 158 00:09:01,760 --> 00:09:03,719 Speaker 1: But as important, perhaps more important, what I do to 159 00:09:03,760 --> 00:09:07,280 Speaker 1: position myself to come out of that downturn stronger than ever. Well. 160 00:09:07,320 --> 00:09:08,960 Speaker 1: I think it's a great question. I think it's great 161 00:09:09,000 --> 00:09:11,839 Speaker 1: to look at it essentially in two phases, because what 162 00:09:11,880 --> 00:09:15,920 Speaker 1: we're experiencing right now is this significant drop in the 163 00:09:15,960 --> 00:09:20,240 Speaker 1: stock market and actually a significant stop drop for some 164 00:09:20,400 --> 00:09:25,559 Speaker 1: fixed income um And what has driven that is expectations 165 00:09:25,679 --> 00:09:28,679 Speaker 1: about uh an economic slowdown, whether or not it's an 166 00:09:28,679 --> 00:09:32,120 Speaker 1: actual recession a slowdown. We know that markets tend to 167 00:09:32,280 --> 00:09:35,920 Speaker 1: signal economic events before they happen, So I think that 168 00:09:36,000 --> 00:09:39,240 Speaker 1: before long, certainly before the end of the year, we'll 169 00:09:39,240 --> 00:09:42,960 Speaker 1: start to see a start stock market recovery in anticipation 170 00:09:43,120 --> 00:09:46,120 Speaker 1: of an economic recovery next year, and so I think 171 00:09:46,120 --> 00:09:48,840 Speaker 1: we have to keep that in mind. Too often investors 172 00:09:48,840 --> 00:09:51,440 Speaker 1: have gotten spooped. Look at the global financial crisis. How 173 00:09:51,440 --> 00:09:54,440 Speaker 1: many people got out towards the bottom locked in losses. 174 00:09:54,640 --> 00:09:57,840 Speaker 1: I think it's critical to be forward looking and think 175 00:09:57,880 --> 00:10:01,319 Speaker 1: of this time frame as actually a time to start 176 00:10:01,679 --> 00:10:05,560 Speaker 1: um looking for opportunities to start dollar cost averaging. I 177 00:10:05,600 --> 00:10:08,040 Speaker 1: think you want over the shorter term to have a 178 00:10:08,080 --> 00:10:11,280 Speaker 1: pretty neutral stance when it comes to risk, but start 179 00:10:11,320 --> 00:10:14,640 Speaker 1: to look and start to allocate for that recovery because 180 00:10:14,720 --> 00:10:17,840 Speaker 1: the recovery I think is going to be longer lived 181 00:10:18,080 --> 00:10:21,200 Speaker 1: than the downturn Jim. Right now, a lot of people 182 00:10:21,200 --> 00:10:23,200 Speaker 1: are talking about high yield because of their turns. You're 183 00:10:23,200 --> 00:10:25,560 Speaker 1: getting on high yield right now over seven percent, maybe 184 00:10:25,600 --> 00:10:27,200 Speaker 1: eight per cents on the event. Is that a place 185 00:10:27,280 --> 00:10:29,840 Speaker 1: we want to be right now? I think it is. 186 00:10:29,920 --> 00:10:32,200 Speaker 1: And if you want to be defensive in this environment, 187 00:10:32,640 --> 00:10:36,119 Speaker 1: HW yield bonds provide about one third of the downside 188 00:10:36,200 --> 00:10:39,480 Speaker 1: risk that equities do. And an important distinction is do 189 00:10:39,520 --> 00:10:42,120 Speaker 1: you think of high yield is a fixed income alternative 190 00:10:42,480 --> 00:10:44,600 Speaker 1: or a risk asseid alternative? And we think of it 191 00:10:44,640 --> 00:10:48,439 Speaker 1: as a risk asset alternative. So if we go into recession, 192 00:10:48,760 --> 00:10:51,640 Speaker 1: hi yield bonds on average have declined just four and 193 00:10:51,640 --> 00:10:55,880 Speaker 1: a half percent during the past six recessions, whereas US 194 00:10:55,920 --> 00:10:58,839 Speaker 1: equities are down over twelve and you're getting a current 195 00:10:58,920 --> 00:11:01,000 Speaker 1: yield to worse of roughly eight and a half percent. 196 00:11:01,440 --> 00:11:03,280 Speaker 1: So would people say how can you buy how you 197 00:11:03,360 --> 00:11:06,400 Speaker 1: old bonds for going into recession? The answer is if 198 00:11:06,440 --> 00:11:09,319 Speaker 1: you're trading out of equities into them, it's a less 199 00:11:09,480 --> 00:11:12,319 Speaker 1: offensive position. But you don't want to trade out of 200 00:11:12,360 --> 00:11:15,640 Speaker 1: investment grade bonds into how yield if you expect we're 201 00:11:15,640 --> 00:11:18,680 Speaker 1: going to go into recession because investment grade bonds have 202 00:11:18,800 --> 00:11:21,959 Speaker 1: historically done very well in that environment. What about that 203 00:11:22,040 --> 00:11:26,440 Speaker 1: defensives in equities. Yeah. So the one nuance I would 204 00:11:26,440 --> 00:11:28,840 Speaker 1: add to that is that we still like the natural 205 00:11:28,880 --> 00:11:33,400 Speaker 1: resources sector and commodities oriented energy stocks for example, there 206 00:11:33,440 --> 00:11:35,720 Speaker 1: are a nice hedge against our number one risk case, 207 00:11:35,840 --> 00:11:38,880 Speaker 1: which is sticky inflation. We don't know when these supply 208 00:11:38,960 --> 00:11:41,520 Speaker 1: chain problems are going to get fixed. You keep hearing 209 00:11:41,559 --> 00:11:44,640 Speaker 1: about more issues in the energy patch. For example, what's 210 00:11:44,679 --> 00:11:47,600 Speaker 1: going on in the Ukraine and the big steel production 211 00:11:47,720 --> 00:11:51,120 Speaker 1: facility in Mariuple that is probably shut down and so 212 00:11:51,200 --> 00:11:53,800 Speaker 1: they're not able to provide the steel tubing that goes 213 00:11:53,880 --> 00:11:57,400 Speaker 1: into well exploration. All of those things tell us we 214 00:11:57,520 --> 00:12:01,040 Speaker 1: want to have some hedge in energy, and we do 215 00:12:01,400 --> 00:12:04,440 Speaker 1: like technology. That's a recent upgrade for us for the 216 00:12:04,480 --> 00:12:08,120 Speaker 1: secular growth reasons. We expect technology to grow its share 217 00:12:08,120 --> 00:12:11,720 Speaker 1: of GDP over the next decade by roughly double. Well, 218 00:12:11,760 --> 00:12:13,720 Speaker 1: that's really interesting because there's sort of the bloom has 219 00:12:13,720 --> 00:12:15,720 Speaker 1: been off the roads of a lot of technology recently 220 00:12:15,760 --> 00:12:18,040 Speaker 1: after a really great run, sort to come off again. 221 00:12:18,160 --> 00:12:21,000 Speaker 1: Who are you in technology, Christina? I'm very positive on 222 00:12:21,040 --> 00:12:23,440 Speaker 1: technology now. I think we need to be selective. We 223 00:12:23,480 --> 00:12:25,600 Speaker 1: want to stay away from what I would call spec tech, 224 00:12:25,760 --> 00:12:28,760 Speaker 1: which was actually the first leg of technology to fall. 225 00:12:29,160 --> 00:12:31,480 Speaker 1: But there are a lot of great names in that space, 226 00:12:31,720 --> 00:12:35,320 Speaker 1: some of which look like very good buys right now. Um, 227 00:12:35,320 --> 00:12:38,560 Speaker 1: given where valuations are and given strong cash flow, just 228 00:12:38,640 --> 00:12:42,640 Speaker 1: solid fundamentals in general, because whatever the longer term trends again, 229 00:12:42,679 --> 00:12:45,600 Speaker 1: coming out of whatever downturn there is here, what do 230 00:12:45,640 --> 00:12:48,240 Speaker 1: you think is promising? Are we talking about things like 231 00:12:49,120 --> 00:12:53,280 Speaker 1: green energy? What are we talking about? So? I certainly 232 00:12:53,320 --> 00:12:55,280 Speaker 1: think there are a lot of different themes that are 233 00:12:55,440 --> 00:12:59,559 Speaker 1: very exciting. Some are smaller than others. Green energy is 234 00:12:59,600 --> 00:13:02,120 Speaker 1: certainly one of them. Cyber security is one of them. 235 00:13:02,360 --> 00:13:04,160 Speaker 1: But I think I would take a step back and 236 00:13:04,160 --> 00:13:06,480 Speaker 1: say the bigger picture is that we're returning to a 237 00:13:06,520 --> 00:13:09,640 Speaker 1: more normal environment. And when I say more normal, more 238 00:13:09,679 --> 00:13:13,720 Speaker 1: normal relative to longer term history, Jim, more normal certainly 239 00:13:13,720 --> 00:13:16,160 Speaker 1: sounds pretty good to me right now. At the same time, 240 00:13:16,360 --> 00:13:19,679 Speaker 1: how much of that depends upon the FED not overreacting 241 00:13:19,720 --> 00:13:22,080 Speaker 1: because some people say the FITS hads a really big 242 00:13:22,120 --> 00:13:25,400 Speaker 1: say in the markets. Thus far, getting back to neutral, fine, 243 00:13:25,559 --> 00:13:28,440 Speaker 1: little above neutral, fine, But we're really going well above that, 244 00:13:28,520 --> 00:13:30,400 Speaker 1: to four or five percent. What is that going to do? 245 00:13:31,760 --> 00:13:34,280 Speaker 1: So I would define overreacting a little differently. I would 246 00:13:34,280 --> 00:13:36,520 Speaker 1: say that if they end up doing that, it's because 247 00:13:36,640 --> 00:13:39,959 Speaker 1: inflation has proven to be more persistent, and so their 248 00:13:40,000 --> 00:13:42,920 Speaker 1: action is actually justified, and that is not going to 249 00:13:43,000 --> 00:13:45,319 Speaker 1: be a good circumstance for the market. If you think 250 00:13:45,320 --> 00:13:48,439 Speaker 1: about bearer markets, there really are three categories. An event 251 00:13:48,520 --> 00:13:52,199 Speaker 1: driven one, which is the least damaging. Secondly, you can 252 00:13:52,280 --> 00:13:54,920 Speaker 1: have one that is more cyclical oriented, and then you 253 00:13:54,920 --> 00:13:57,360 Speaker 1: could have one that's driven by a financial crisis where 254 00:13:57,400 --> 00:14:01,760 Speaker 1: credit creation is impaled. If FED hikes rates too much, 255 00:14:01,840 --> 00:14:04,320 Speaker 1: we're definitely going to go from what's an event driven 256 00:14:04,400 --> 00:14:07,480 Speaker 1: to a cyclical type of recovery. But if you look 257 00:14:07,520 --> 00:14:10,840 Speaker 1: at the FED stress test results over the last twenty 258 00:14:10,840 --> 00:14:13,640 Speaker 1: four hours, and the banking systems in really good shape, 259 00:14:13,679 --> 00:14:16,320 Speaker 1: so we are very unlikely to get into a structural 260 00:14:16,559 --> 00:14:19,400 Speaker 1: bear market, which could be really damaged. Okay, that's pretty 261 00:14:19,440 --> 00:14:21,400 Speaker 1: encouraging me. I'll take that to the bank, no question 262 00:14:21,400 --> 00:14:24,960 Speaker 1: about it. Really appreciate Jim McDonald, Northan Trust and Christina 263 00:14:25,000 --> 00:14:27,800 Speaker 1: Hooper of Vesco being with us here today to really 264 00:14:27,800 --> 00:14:29,480 Speaker 1: give us an insight into what the markets have done, 265 00:14:29,480 --> 00:14:31,920 Speaker 1: but also what they're likely to do in the future 266 00:14:33,720 --> 00:14:36,760 Speaker 1: coming up. We know things are rough and likely to 267 00:14:36,760 --> 00:14:40,240 Speaker 1: get rougher. But what can investors and policymakers do to 268 00:14:40,280 --> 00:14:43,440 Speaker 1: make sure we come back stronger than ever when things 269 00:14:43,480 --> 00:14:46,440 Speaker 1: do turn around? We asked Rick Reader of black Rock. 270 00:14:47,160 --> 00:14:58,840 Speaker 1: That's next on Wall Street Week on Bloomberg. This is 271 00:14:58,880 --> 00:15:07,760 Speaker 1: Bloomberg Wolves Street Week with David Weston from Bloomberg Radio. Okay, 272 00:15:11,680 --> 00:15:14,640 Speaker 1: we can disagree about just how bad it will get. 273 00:15:14,920 --> 00:15:18,240 Speaker 1: There's a chance that we are already in a recession. 274 00:15:18,440 --> 00:15:21,720 Speaker 1: Is it severe? Is it drawn out? The shallow recession? 275 00:15:21,840 --> 00:15:26,360 Speaker 1: Verst stay deep one recession? But no one can deny 276 00:15:26,480 --> 00:15:29,640 Speaker 1: at this point that the economy will slow. Well, I 277 00:15:29,800 --> 00:15:34,200 Speaker 1: expect the economy to slow. Oh, it's been growing at 278 00:15:34,200 --> 00:15:38,239 Speaker 1: a very rapid rate. It's natural now that we expected 279 00:15:38,320 --> 00:15:43,120 Speaker 1: transition to steady and stable growth and the markets could 280 00:15:43,200 --> 00:15:45,800 Speaker 1: continue to fall at least for a while. We've done 281 00:15:45,760 --> 00:15:48,000 Speaker 1: a lot of price damage. Right, we want to be 282 00:15:48,040 --> 00:15:51,280 Speaker 1: investing into the price damage, but we think it's premature 283 00:15:51,760 --> 00:15:54,920 Speaker 1: if the recession is still increasing. But however bad it 284 00:15:54,920 --> 00:15:58,160 Speaker 1: gets and however long it lasts, things will come back, 285 00:15:58,560 --> 00:16:01,800 Speaker 1: raising the question what have we learned from the experience, 286 00:16:02,000 --> 00:16:05,320 Speaker 1: Both in the policies we adapt by most important advice 287 00:16:05,360 --> 00:16:09,400 Speaker 1: to the administrations, don't do anything to shock the economy, 288 00:16:09,640 --> 00:16:12,320 Speaker 1: and in the way we invest. I think we're going 289 00:16:12,360 --> 00:16:14,880 Speaker 1: to see a lot more investors remain on the sidelines, 290 00:16:14,920 --> 00:16:18,240 Speaker 1: remain cautiously positioned, and that actually may lead to some 291 00:16:18,520 --> 00:16:26,160 Speaker 1: interesting opportunities for longer term investors. And to take us 292 00:16:26,160 --> 00:16:28,880 Speaker 1: through where we are and more important, where we are headed, 293 00:16:29,040 --> 00:16:31,920 Speaker 1: We're welcolled now Rick Reader. He is the c i 294 00:16:32,040 --> 00:16:34,320 Speaker 1: O for Global Fixed Income and also ahead of the 295 00:16:34,320 --> 00:16:36,960 Speaker 1: Global Allocation team at black Rock. Rick, thanks so much 296 00:16:37,000 --> 00:16:39,160 Speaker 1: for being here, haven't so before we start about how 297 00:16:39,160 --> 00:16:41,200 Speaker 1: we come out of this stronger, let's talk about where 298 00:16:41,200 --> 00:16:43,880 Speaker 1: we are and now where are we? Listen, I'm for 299 00:16:43,960 --> 00:16:45,920 Speaker 1: markets and for the economy. We're one of the most 300 00:16:45,960 --> 00:16:48,240 Speaker 1: uncertain periods we've been in a long time, and quite 301 00:16:48,240 --> 00:16:50,760 Speaker 1: frankly in a generation. We have never had an experience 302 00:16:50,760 --> 00:16:54,280 Speaker 1: where economy is tangibly slowing across almost every piece of data. 303 00:16:54,800 --> 00:16:57,720 Speaker 1: Economy is slowing. You're starting to see it work through 304 00:16:57,760 --> 00:16:59,920 Speaker 1: in the claims data and unemployment data, and we think, 305 00:16:59,920 --> 00:17:01,760 Speaker 1: go with the next couple of employment parts, you're gonna 306 00:17:01,760 --> 00:17:05,360 Speaker 1: see an economy or hiring dynamic that's different. And you've 307 00:17:05,359 --> 00:17:08,080 Speaker 1: got a central bank that's got as its singular focus 308 00:17:08,200 --> 00:17:12,400 Speaker 1: today despite steel mandate, is full employment and price stability. 309 00:17:12,520 --> 00:17:15,399 Speaker 1: That has got to bring down inflation. So it is 310 00:17:15,440 --> 00:17:17,560 Speaker 1: a construct that the markets have a hard time dealing 311 00:17:17,600 --> 00:17:20,320 Speaker 1: with how much will I let the economy go? How 312 00:17:20,400 --> 00:17:22,800 Speaker 1: much with inflation which we think will come down you're 313 00:17:22,840 --> 00:17:25,119 Speaker 1: seeing you're certainly seeing indications that you're seeing in the 314 00:17:25,119 --> 00:17:28,920 Speaker 1: markets pricing of it. So it's a very challenging period 315 00:17:28,960 --> 00:17:32,640 Speaker 1: to think through when you're trying to evaluate risk versus reward. 316 00:17:33,000 --> 00:17:36,040 Speaker 1: What are interest rates doing a portfolio? What are stocks 317 00:17:36,480 --> 00:17:38,960 Speaker 1: hi yiel bonds doing a portfolio? And I think the 318 00:17:38,960 --> 00:17:42,440 Speaker 1: markets having reconciled the solution of that yet and how 319 00:17:42,520 --> 00:17:44,119 Speaker 1: much of that is the markets and they are not 320 00:17:44,160 --> 00:17:46,280 Speaker 1: economy And how much of his policy I know the 321 00:17:46,280 --> 00:17:49,360 Speaker 1: black Rock has a terrific chart basically indicating it surprised 322 00:17:49,400 --> 00:17:53,160 Speaker 1: me in recent years the volatility and monetary policy has 323 00:17:53,280 --> 00:17:56,520 Speaker 1: driven the investments more than the investments at so day. 324 00:17:56,600 --> 00:17:58,360 Speaker 1: But it's a it's a pretty incredible thing and part 325 00:17:58,359 --> 00:18:00,080 Speaker 1: of what we're trying to illustrate on the support it 326 00:18:00,080 --> 00:18:03,240 Speaker 1: is you've you've been investing twenty years ago. Ten years ago, 327 00:18:03,840 --> 00:18:07,359 Speaker 1: it was all about the central banks reaction function to 328 00:18:07,480 --> 00:18:10,520 Speaker 1: the economy and how the central bank would react when 329 00:18:10,640 --> 00:18:15,159 Speaker 1: inflation or employment moved too far away from normalcy. The 330 00:18:15,240 --> 00:18:18,440 Speaker 1: last ten years and certainly anybody we've hired or work 331 00:18:18,480 --> 00:18:20,199 Speaker 1: for us, it's been there ten years has been an 332 00:18:20,280 --> 00:18:24,320 Speaker 1: environment where the central banks are functually all you have 333 00:18:24,359 --> 00:18:27,760 Speaker 1: to focus on because they are driving the dynamic around 334 00:18:27,800 --> 00:18:30,520 Speaker 1: how prices are moving. Why is that the case? I mean, listen, 335 00:18:30,560 --> 00:18:32,760 Speaker 1: you need aggressive monitoring policy when you go through a 336 00:18:32,760 --> 00:18:35,480 Speaker 1: financial crisis or you go through a pandemic, you need 337 00:18:35,520 --> 00:18:40,399 Speaker 1: aggressive policy. But there's been this process of tweaking to 338 00:18:40,480 --> 00:18:43,359 Speaker 1: get back on the line that I would argue is 339 00:18:43,400 --> 00:18:47,080 Speaker 1: creating more volatility to markets. You know, we, I would argue, 340 00:18:47,119 --> 00:18:49,600 Speaker 1: including this central ban, including the FED, we need to 341 00:18:49,600 --> 00:18:52,600 Speaker 1: get to neutral quickly, get to neutral. The system has 342 00:18:52,600 --> 00:18:55,959 Speaker 1: an ability to recalibrate itself, be flexible. I would say 343 00:18:56,000 --> 00:18:58,240 Speaker 1: high prices are the cure for high prices. The U. 344 00:18:58,280 --> 00:19:01,240 Speaker 1: S economy is incredibly adapted of and you're seeing it. 345 00:19:01,240 --> 00:19:04,080 Speaker 1: It was a good article today about you know, you 346 00:19:04,160 --> 00:19:07,320 Speaker 1: do look at gas prices. Higher consumption comes down, the 347 00:19:07,359 --> 00:19:10,680 Speaker 1: system recalibrates. But we've become used to the Central Bank 348 00:19:10,800 --> 00:19:12,359 Speaker 1: is kind of trying to put us back on a 349 00:19:12,440 --> 00:19:16,000 Speaker 1: line of two percent inflation and full employment. And I 350 00:19:16,000 --> 00:19:19,320 Speaker 1: would argue it's actually creating more volatility at times than 351 00:19:19,520 --> 00:19:23,400 Speaker 1: is warranted by how much the economy actually actually gyrates. 352 00:19:23,560 --> 00:19:25,760 Speaker 1: We say, get back to neutral. We heard from a 353 00:19:25,880 --> 00:19:28,480 Speaker 1: chair J. Pale, and he's testimony for Congress this week 354 00:19:28,680 --> 00:19:31,000 Speaker 1: saying he still thinks neutrals are around two point five. 355 00:19:31,800 --> 00:19:33,840 Speaker 1: But even he is saying, now we may need to 356 00:19:33,880 --> 00:19:35,760 Speaker 1: go above that. You have other people saying we need 357 00:19:35,800 --> 00:19:37,880 Speaker 1: to go way above it in order to really put 358 00:19:37,880 --> 00:19:40,160 Speaker 1: a stake through the heart of inflation. Is that wrong? 359 00:19:41,119 --> 00:19:42,440 Speaker 1: I said, I don't think you have to go away 360 00:19:42,480 --> 00:19:44,480 Speaker 1: above it. I think the chair is right, and I 361 00:19:44,520 --> 00:19:46,760 Speaker 1: think what they're doing now is exactly the right policy. 362 00:19:46,800 --> 00:19:49,159 Speaker 1: I know, you know, I and others have been critical 363 00:19:49,160 --> 00:19:51,000 Speaker 1: about we waited too long to move, and I think 364 00:19:51,040 --> 00:19:53,600 Speaker 1: the Fat has been clear on that being the case. 365 00:19:54,240 --> 00:19:56,239 Speaker 1: But there's a question of what is the trade off 366 00:19:56,520 --> 00:19:58,919 Speaker 1: from if you get to neutral and in a bit beyond, 367 00:19:58,960 --> 00:20:01,520 Speaker 1: we shouldn't be at e the policy like we are today. 368 00:20:01,680 --> 00:20:04,879 Speaker 1: Get to neutral, do another seventy, get closer to neutral, 369 00:20:04,920 --> 00:20:06,560 Speaker 1: maybe do a fifty on the back side of that, 370 00:20:07,359 --> 00:20:09,400 Speaker 1: You know, you think about what you could do fiscal policy, 371 00:20:09,800 --> 00:20:12,840 Speaker 1: solar battery, You've seen some developments recently, what you could 372 00:20:12,840 --> 00:20:16,119 Speaker 1: do and precision act to help the food market. Multi 373 00:20:16,160 --> 00:20:20,480 Speaker 1: family housing incentives to build more multi family housing affordabilities 374 00:20:20,520 --> 00:20:24,600 Speaker 1: really hard, is really expensive today. Multi family is going 375 00:20:24,680 --> 00:20:26,560 Speaker 1: to be people I can stay in rental. We need 376 00:20:26,600 --> 00:20:30,240 Speaker 1: more development of multi family. These are fiscal initiatives that 377 00:20:30,320 --> 00:20:32,119 Speaker 1: need to come in and can be and by the way, 378 00:20:32,160 --> 00:20:36,280 Speaker 1: have a real velocity to them, create multiplicative economic impacts. 379 00:20:37,040 --> 00:20:39,720 Speaker 1: Just raised just keep raising rates and taking people out 380 00:20:39,720 --> 00:20:42,880 Speaker 1: of work. It's a blunt tool and maybe it doesn't work, 381 00:20:42,880 --> 00:20:45,560 Speaker 1: and maybe it doesn't bring the inflation down. I just 382 00:20:45,560 --> 00:20:48,760 Speaker 1: don't agree. Okay, Rick, thank you so much that care 383 00:20:48,960 --> 00:20:53,280 Speaker 1: Black are always great to talk to. Rick. Coming up, 384 00:20:53,320 --> 00:20:55,680 Speaker 1: we wrap up the week with our special contributor Larry 385 00:20:55,760 --> 00:20:59,480 Speaker 1: Summers of Harvard. That's next on Wall Street Week on Bloomberg. 386 00:21:01,359 --> 00:21:05,320 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 387 00:21:05,440 --> 00:21:14,240 Speaker 1: Bloomberg Radio. This is Wall Street Week. I'm David Weston, 388 00:21:14,320 --> 00:21:16,640 Speaker 1: and we welcome back once again our very special contribute 389 00:21:16,720 --> 00:21:19,159 Speaker 1: Larry Summers of Harvard. So, Larry, a good part of 390 00:21:19,160 --> 00:21:21,359 Speaker 1: the week. This week was given over to talk about 391 00:21:21,400 --> 00:21:23,600 Speaker 1: recession on the one hand and inflation on the other. 392 00:21:23,640 --> 00:21:26,280 Speaker 1: We heard from Fed Chair J Powell for two straight 393 00:21:26,359 --> 00:21:28,520 Speaker 1: days up on Capitol Hill. Let me ask you the 394 00:21:28,520 --> 00:21:30,800 Speaker 1: most basic question, as you look forward to the economy, 395 00:21:30,920 --> 00:21:32,680 Speaker 1: what do you think the biggest risk is right now 396 00:21:32,720 --> 00:21:35,959 Speaker 1: we face Look, I think, David, that a recession is 397 00:21:36,080 --> 00:21:43,080 Speaker 1: almost inevitable, probably a chance within the next two years, 398 00:21:43,160 --> 00:21:48,080 Speaker 1: and there's certainly a real risk that it will come sooner. 399 00:21:48,920 --> 00:21:52,840 Speaker 1: That's gonna be a very difficult thing though, as I say, 400 00:21:52,880 --> 00:21:55,120 Speaker 1: I think it may be inevitable given where we are, 401 00:21:55,800 --> 00:21:58,320 Speaker 1: but I think it's going to be very important to 402 00:21:58,480 --> 00:22:01,920 Speaker 1: make sure that, uh, if we're going to go through 403 00:22:01,920 --> 00:22:05,840 Speaker 1: a period of pain, we do slay the inflation dragon. 404 00:22:06,520 --> 00:22:09,359 Speaker 1: You know, there have been many failures, particularly the nineteen 405 00:22:09,480 --> 00:22:14,800 Speaker 1: seventies of the classic example of where economic policymakers did 406 00:22:14,800 --> 00:22:18,760 Speaker 1: the equivalent of stopping their antibiotic when they felt better, 407 00:22:19,240 --> 00:22:23,680 Speaker 1: but before the Tende dose UH was through. And so 408 00:22:23,720 --> 00:22:27,159 Speaker 1: it's a very very difficult set of balances and challenges 409 00:22:28,119 --> 00:22:30,560 Speaker 1: that the FED is going to have, and I very 410 00:22:30,600 --> 00:22:35,239 Speaker 1: much hope that they make UH wise choices. So so 411 00:22:35,400 --> 00:22:37,119 Speaker 1: I take your point that the only thing worse than 412 00:22:37,160 --> 00:22:40,320 Speaker 1: having recession is having one without slaying the inflation dragon 413 00:22:40,400 --> 00:22:42,560 Speaker 1: us to say, but let me ask you, at this point, 414 00:22:42,680 --> 00:22:44,679 Speaker 1: some people are predicting this will be a fairly shortened, 415 00:22:44,680 --> 00:22:46,800 Speaker 1: shallow one. Do we have reason to believe that? I 416 00:22:46,840 --> 00:22:50,399 Speaker 1: hope there. I hope they're right. Um. I think the 417 00:22:50,520 --> 00:22:54,760 Speaker 1: question is gonna be how much recession do you how 418 00:22:54,840 --> 00:22:58,760 Speaker 1: much recession is going to be part of eliminating inflation? 419 00:22:58,840 --> 00:23:02,480 Speaker 1: And that goes back to the whole debate about team transitory. 420 00:23:02,560 --> 00:23:05,520 Speaker 1: If most of inflation is transitory, then we're not going 421 00:23:05,560 --> 00:23:08,560 Speaker 1: to have to live with very much pain to UH 422 00:23:09,160 --> 00:23:12,159 Speaker 1: get the inflation out of the system. If more of 423 00:23:12,160 --> 00:23:16,600 Speaker 1: it is more ingrained, then we're gonna have to live 424 00:23:16,680 --> 00:23:21,480 Speaker 1: with uh more difficulty. I was mildly encouraged by the 425 00:23:21,600 --> 00:23:25,600 Speaker 1: number that came out today suggesting that long term inflation 426 00:23:25,680 --> 00:23:29,840 Speaker 1: expectations as measured in Michigan had gone up a little 427 00:23:29,920 --> 00:23:34,359 Speaker 1: less than people originally thought. But I still do think 428 00:23:34,480 --> 00:23:37,679 Speaker 1: we have a meaningful amount of inflation that we have 429 00:23:37,880 --> 00:23:41,320 Speaker 1: to get out of the system, and I don't think 430 00:23:41,320 --> 00:23:45,040 Speaker 1: we're gonna do that in one or two uh quarters 431 00:23:45,160 --> 00:23:49,040 Speaker 1: of economic uh slack. One of the things that share 432 00:23:49,080 --> 00:23:52,040 Speaker 1: Pile testified about this week was neutral rate that he 433 00:23:52,080 --> 00:23:54,320 Speaker 1: still thinks it's about two point five percent. I wonder 434 00:23:54,320 --> 00:23:56,280 Speaker 1: if you agree with that, and then going to say 435 00:23:56,280 --> 00:23:57,840 Speaker 1: we may have to go someone over that. Some people 436 00:23:57,840 --> 00:24:01,160 Speaker 1: think he has to go well over that word. You look, 437 00:24:01,200 --> 00:24:04,240 Speaker 1: I think that talking about the neutral rate without talking 438 00:24:04,280 --> 00:24:08,800 Speaker 1: about the rate of inflation is basically illogical. And so 439 00:24:08,920 --> 00:24:10,680 Speaker 1: when he says the neutral rate is two and a 440 00:24:10,720 --> 00:24:14,000 Speaker 1: half percent, he's assuming that the inflation rate will be 441 00:24:14,080 --> 00:24:18,639 Speaker 1: two percent, which I don't think is to be assumed, 442 00:24:19,280 --> 00:24:23,200 Speaker 1: uh without the right kinds of policies. So my guess 443 00:24:23,280 --> 00:24:25,119 Speaker 1: is we're gonna have to go well above two and 444 00:24:25,119 --> 00:24:30,800 Speaker 1: a half percent on interest rates ultimately in the long run, 445 00:24:30,880 --> 00:24:34,800 Speaker 1: when we get through this inflation uh episode. I think 446 00:24:34,800 --> 00:24:38,000 Speaker 1: there's a substantial chance that we're going to return to 447 00:24:38,040 --> 00:24:42,560 Speaker 1: the kind of secular stagnation situation we had before COVID, 448 00:24:42,880 --> 00:24:46,359 Speaker 1: which could mean a neutral rate below U two and 449 00:24:46,359 --> 00:24:48,679 Speaker 1: a half percent. So I think we're gonna have to 450 00:24:48,720 --> 00:24:55,200 Speaker 1: be very careful and UH monitor to track UH to 451 00:24:55,359 --> 00:24:59,080 Speaker 1: track what's happening. But I wish Sharmon Powell would start 452 00:24:59,240 --> 00:25:02,480 Speaker 1: framing the new control rate as a real interest rate 453 00:25:02,640 --> 00:25:06,800 Speaker 1: concept that at any moment is dependent on the underlying 454 00:25:06,920 --> 00:25:11,800 Speaker 1: rate of inflation and stop just using a nominal figure 455 00:25:12,240 --> 00:25:15,480 Speaker 1: that assumes so much of what is an issue. Staying 456 00:25:15,480 --> 00:25:18,440 Speaker 1: with chairpiles a testimony again. He also testified a fair 457 00:25:18,440 --> 00:25:20,920 Speaker 1: amount on both days of the hearing is actually about 458 00:25:20,920 --> 00:25:24,160 Speaker 1: the housing industry and the fact that necessarily the increased 459 00:25:24,240 --> 00:25:27,240 Speaker 1: rates are hurting the housing industry. Even suggested that at 460 00:25:27,280 --> 00:25:28,879 Speaker 1: least in some place in the country we may have 461 00:25:28,920 --> 00:25:31,520 Speaker 1: housing prices go down. How big a threat is that 462 00:25:31,600 --> 00:25:33,200 Speaker 1: to the kind of because that is something we saw 463 00:25:33,400 --> 00:25:35,680 Speaker 1: back during the Great Financial Crisis. I think we're in 464 00:25:35,720 --> 00:25:40,600 Speaker 1: a much less precarious situation in housing than we were 465 00:25:40,800 --> 00:25:45,639 Speaker 1: during the Great Financial Crisis, but house prices have run 466 00:25:45,720 --> 00:25:49,600 Speaker 1: way up, and I wouldn't be surprised given what's happened 467 00:25:49,640 --> 00:25:53,400 Speaker 1: to UM more good traits, if at least in many 468 00:25:53,440 --> 00:25:58,879 Speaker 1: parts of the country there was some UH backtrack of 469 00:25:59,080 --> 00:26:03,280 Speaker 1: house price. My assessment is that that's not going to 470 00:26:03,359 --> 00:26:08,240 Speaker 1: oppose the kind of systemic financial risk that it did 471 00:26:08,400 --> 00:26:14,639 Speaker 1: during the Great UH financial Crisis. But as is always true, 472 00:26:14,800 --> 00:26:20,200 Speaker 1: when there's excess, the people who get in last UM 473 00:26:20,560 --> 00:26:23,520 Speaker 1: find it expensive. Larry quite me on any testimony of 474 00:26:23,560 --> 00:26:27,040 Speaker 1: my capital Hill. We also had two very dramatic opinions 475 00:26:27,040 --> 00:26:28,560 Speaker 1: come down from the stream Corp of the United States. 476 00:26:28,800 --> 00:26:30,640 Speaker 1: I know that you're not a constitutional lawyer, at least 477 00:26:30,680 --> 00:26:32,240 Speaker 1: not that I'm aware of. At the same time, I 478 00:26:32,280 --> 00:26:34,280 Speaker 1: wonder what you think about that decision with respect the 479 00:26:34,280 --> 00:26:36,520 Speaker 1: Second A Moendment and guns, and also then at the 480 00:26:36,600 --> 00:26:38,840 Speaker 1: end of the week with respect to abortion. You have 481 00:26:38,920 --> 00:26:41,359 Speaker 1: talked on this program before about your concerns about the 482 00:26:41,400 --> 00:26:44,840 Speaker 1: institutions of democracy in this country. I'm worried about a 483 00:26:44,920 --> 00:26:52,440 Speaker 1: Supreme Court that's so radically breaks with its own precedent, 484 00:26:53,240 --> 00:26:58,880 Speaker 1: that is so fully in UH the life of the country, 485 00:26:59,560 --> 00:27:04,719 Speaker 1: and I wonder if that doesn't raise questions more broadly 486 00:27:05,320 --> 00:27:13,160 Speaker 1: about the predictability and continuity of UH policy. The extent 487 00:27:13,240 --> 00:27:17,960 Speaker 1: to which they're very strong checks and balances UH in 488 00:27:18,080 --> 00:27:24,919 Speaker 1: our democracy. By my personal values, UH, both these uh 489 00:27:25,320 --> 00:27:32,600 Speaker 1: decisions UH were appalling, but you know, everyone has their values, 490 00:27:32,720 --> 00:27:35,240 Speaker 1: and there are other people who would have very different values. 491 00:27:35,600 --> 00:27:38,320 Speaker 1: What I think is, in some ways the more fundamental 492 00:27:38,480 --> 00:27:46,840 Speaker 1: issue is this question of reversing precedent and UH mandating 493 00:27:47,400 --> 00:27:55,119 Speaker 1: UM things that have really not been UM acceptable for 494 00:27:55,440 --> 00:28:02,040 Speaker 1: UH many for many many years. I can't help but 495 00:28:02,320 --> 00:28:09,600 Speaker 1: feel that the decision that it's illegal and unconstitutional to 496 00:28:09,960 --> 00:28:16,600 Speaker 1: stop people from carrying UH concealed weapons that goes a long, 497 00:28:16,760 --> 00:28:23,080 Speaker 1: long uh way UH for for me, and I think 498 00:28:23,240 --> 00:28:26,959 Speaker 1: Roe v. Wade has been so much part of American 499 00:28:27,040 --> 00:28:33,119 Speaker 1: life that UH to remove it completely and in the 500 00:28:33,160 --> 00:28:38,640 Speaker 1: way they did with the divide completely divided course is 501 00:28:39,040 --> 00:28:44,160 Speaker 1: a kind of UH fairly shocking act. And I say 502 00:28:44,200 --> 00:28:50,800 Speaker 1: that as someone who believes very much in UH deference 503 00:28:51,200 --> 00:28:54,280 Speaker 1: UH to the Court. I was not one of those 504 00:28:54,640 --> 00:28:58,720 Speaker 1: who attacked the Court for the Bush Fee Gore decision. 505 00:28:59,240 --> 00:29:02,240 Speaker 1: Though it was not a decision I liked or supported. 506 00:29:02,600 --> 00:29:05,240 Speaker 1: I was not one who was prepared to attack the 507 00:29:05,360 --> 00:29:09,960 Speaker 1: Course for the decision they made in Citizens United, the 508 00:29:10,000 --> 00:29:14,200 Speaker 1: case about corporate funding of politics, though that was a 509 00:29:14,280 --> 00:29:17,720 Speaker 1: decision that I didn't like. Larry, Thank you so very 510 00:29:17,800 --> 00:29:20,120 Speaker 1: much as our special contribute to Larry Summers. He is, 511 00:29:20,160 --> 00:29:24,040 Speaker 1: of course from Harvard University and also an avid golfer. Finally, 512 00:29:24,160 --> 00:29:27,720 Speaker 1: one more thought, everything old is new again. We have 513 00:29:27,840 --> 00:29:30,920 Speaker 1: had more than our fair share of historic moments these 514 00:29:30,920 --> 00:29:33,840 Speaker 1: past few years. From a once in a century pandemic 515 00:29:34,280 --> 00:29:38,160 Speaker 1: it is ten times more lethal than the seasonal flu, 516 00:29:38,440 --> 00:29:41,320 Speaker 1: to an economy falling off a cliff and then bouncing 517 00:29:41,400 --> 00:29:44,680 Speaker 1: right back again, the strongest economic recovery in the world, 518 00:29:45,280 --> 00:29:47,360 Speaker 1: to a ground war in Europe the likes of which 519 00:29:47,400 --> 00:29:50,480 Speaker 1: we have not seen since World War Two. This crisis 520 00:29:50,600 --> 00:29:55,640 Speaker 1: directly affects every member of this Council and every country 521 00:29:55,720 --> 00:29:58,640 Speaker 1: in the world. And inflation higher than it's been in 522 00:29:58,680 --> 00:30:02,920 Speaker 1: at least forty years. Inflation is shating people so hard 523 00:30:03,160 --> 00:30:06,520 Speaker 1: they're coughing up bounds. If all that weren't enough, now 524 00:30:06,560 --> 00:30:10,240 Speaker 1: we have the return of labor unions and even of strikes, 525 00:30:10,640 --> 00:30:13,240 Speaker 1: as this week Great Britain saw unions shut down part 526 00:30:13,280 --> 00:30:16,800 Speaker 1: of its rail system. Britain's biggest rail strike in thirty 527 00:30:16,880 --> 00:30:20,440 Speaker 1: years starts today after unions rejected a last minute offer 528 00:30:20,480 --> 00:30:23,360 Speaker 1: from train companies, bringing back more memories of the nineteen 529 00:30:23,400 --> 00:30:27,680 Speaker 1: eighties and British Prime Minister Thatcher's uncompromising stand. What we 530 00:30:27,720 --> 00:30:31,680 Speaker 1: have seen in this country is the emergence of an 531 00:30:31,840 --> 00:30:39,080 Speaker 1: organized revolutionary minority, how prepared to exploit industrial disputes, but 532 00:30:39,280 --> 00:30:42,920 Speaker 1: whose real aim is the breakdown of law and order 533 00:30:43,280 --> 00:30:48,160 Speaker 1: and the destruction of democratic parliamentary government. But now forty 534 00:30:48,240 --> 00:30:51,520 Speaker 1: years later, the move back toward unions involves businesses that 535 00:30:51,600 --> 00:30:55,400 Speaker 1: we didn't even conceive of in Lady Thatcher's day. Now 536 00:30:55,480 --> 00:30:58,280 Speaker 1: it's our half calf no form lattes that could be 537 00:30:58,320 --> 00:31:02,560 Speaker 1: at the risk. As Starbucks were moved to organize. Starbucks 538 00:31:02,560 --> 00:31:06,280 Speaker 1: has now lost several rounds of this legal fight at 539 00:31:06,280 --> 00:31:09,000 Speaker 1: the labor board. And then there's the question of who's 540 00:31:09,000 --> 00:31:11,360 Speaker 1: going to fix our iPhones if the people at the 541 00:31:11,400 --> 00:31:15,520 Speaker 1: Apple Genius bar all joined the International Association of Machinists 542 00:31:15,520 --> 00:31:18,560 Speaker 1: and Aerospace Workers, a trend that a former nlr B 543 00:31:18,720 --> 00:31:21,840 Speaker 1: chairman says is far from over. I think it's likely 544 00:31:21,880 --> 00:31:25,880 Speaker 1: that it will happen that many more stores. We don't 545 00:31:25,920 --> 00:31:29,400 Speaker 1: know really how many uh it's likely to be, but 546 00:31:30,000 --> 00:31:33,520 Speaker 1: clearly something is happening. It may be no coincidence that 547 00:31:33,680 --> 00:31:35,840 Speaker 1: what we're seeing today comes at a time when we 548 00:31:35,880 --> 00:31:39,520 Speaker 1: have a president deeply committed to organized labor. I'm proud 549 00:31:39,560 --> 00:31:43,320 Speaker 1: of it. You know, workers have a right to determine 550 00:31:43,520 --> 00:31:45,400 Speaker 1: under what conditions were going to work or not work. 551 00:31:45,720 --> 00:31:48,320 Speaker 1: But then again, back in the eighties, when things went 552 00:31:48,400 --> 00:31:51,760 Speaker 1: too far, we managed to do without our air traffic controllers, 553 00:31:52,160 --> 00:31:55,880 Speaker 1: albeit with a very different president. If they do not 554 00:31:56,040 --> 00:31:59,560 Speaker 1: report for work within forty eight hours, they have forfeited 555 00:31:59,600 --> 00:32:03,280 Speaker 1: their jobs and will be terminated. That does it for 556 00:32:03,280 --> 00:32:05,760 Speaker 1: this episode of Wall Street Week. I'm David Weston. This 557 00:32:05,920 --> 00:32:17,800 Speaker 1: is Bloomberg. See you next week.