1 00:00:01,240 --> 00:00:06,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:06,040 --> 00:00:08,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:08,400 --> 00:00:11,479 Speaker 1: futteral reserve have its own digital currency? The financial stories 4 00:00:11,520 --> 00:00:13,880 Speaker 1: that cheap hard work. Many people think the deals are 5 00:00:13,880 --> 00:00:16,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:16,120 --> 00:00:18,200 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:18,200 --> 00:00:20,880 Speaker 1: think on investor's minds inflation through the eyes of the 8 00:00:20,920 --> 00:00:24,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:24,640 --> 00:00:28,240 Speaker 1: Bryan Wynahan, a back of America, will smarro Ceo, Charlie Sharp, 10 00:00:28,360 --> 00:00:32,560 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio. 11 00:00:33,200 --> 00:00:36,919 Speaker 1: More action than direction, from earnings, from bonds and from 12 00:00:37,000 --> 00:00:40,240 Speaker 1: Chinese real estate. This is Bloomberg Wall Street Week. I'm 13 00:00:40,280 --> 00:00:44,960 Speaker 1: David Weston. It was a week filled with more news 14 00:00:45,040 --> 00:00:49,080 Speaker 1: than direction as earnings came in, sometimes higher than expected, 15 00:00:49,280 --> 00:00:52,000 Speaker 1: as in the case of Netflix described by its CFO. 16 00:00:53,240 --> 00:00:55,840 Speaker 1: We saw acceleration in our in our growth, which is 17 00:00:55,840 --> 00:00:58,360 Speaker 1: what we had been hoping for and expecting. But it 18 00:00:58,400 --> 00:01:00,440 Speaker 1: was good to see as we got into this are 19 00:01:00,440 --> 00:01:04,240 Speaker 1: scheduled and sometimes a bit light. Miss Tesla managed to 20 00:01:04,319 --> 00:01:08,039 Speaker 1: beat on profit, but disappointed on revenue. It was a 21 00:01:08,080 --> 00:01:10,720 Speaker 1: week when Chinese house prices fell for the first time 22 00:01:10,760 --> 00:01:14,520 Speaker 1: in six years, and more developers missed on their bond payments, 23 00:01:14,840 --> 00:01:18,080 Speaker 1: raising for some, like Scott Minored of Googenheim, the question 24 00:01:18,120 --> 00:01:24,560 Speaker 1: whether China at this point is really investable. China is uninvestable. Uh, 25 00:01:25,120 --> 00:01:28,120 Speaker 1: the Republic of China just is strowing a bond issue 26 00:01:28,160 --> 00:01:32,000 Speaker 1: this morning, thirty years at two point six percent. I mean, 27 00:01:32,360 --> 00:01:34,320 Speaker 1: if you want to tie your money up with China 28 00:01:34,400 --> 00:01:37,360 Speaker 1: for the next thirty years for two point six then 29 00:01:37,400 --> 00:01:39,120 Speaker 1: I encourage you to get out there and do it. 30 00:01:39,480 --> 00:01:41,920 Speaker 1: But for many, the most exciting news of the week 31 00:01:42,120 --> 00:01:45,120 Speaker 1: may have come in cryptocurrency, with the launch of the 32 00:01:45,200 --> 00:01:48,240 Speaker 1: first ever bitcoin futures et f traded on the New 33 00:01:48,280 --> 00:01:51,280 Speaker 1: York Stock Exchange, shooting up to one billion dollars in 34 00:01:51,320 --> 00:01:54,400 Speaker 1: assets in just two days. Something may not have come 35 00:01:54,400 --> 00:01:57,920 Speaker 1: as a surprise to early bitcoin investor Cathy Wood of 36 00:01:58,040 --> 00:02:02,120 Speaker 1: ARC Investments. It was a six billion dollar cap then 37 00:02:02,200 --> 00:02:05,280 Speaker 1: now it's over a trillion. And as much back and 38 00:02:05,400 --> 00:02:07,320 Speaker 1: forth as there was this week in the markets, in 39 00:02:07,320 --> 00:02:10,160 Speaker 1: the end, the direction for those markets was basically up, 40 00:02:10,200 --> 00:02:12,440 Speaker 1: as the SMP gained about one point six percent for 41 00:02:12,480 --> 00:02:13,880 Speaker 1: the week, with nice games for the down in the 42 00:02:13,919 --> 00:02:16,920 Speaker 1: NAZAC as well, while the tenure yield climbed to one 43 00:02:16,960 --> 00:02:19,079 Speaker 1: point six three, although giving back just a little bit 44 00:02:19,080 --> 00:02:21,040 Speaker 1: at the end of Friday. But the big news of 45 00:02:21,040 --> 00:02:23,120 Speaker 1: the week from the markets just may have been the 46 00:02:23,160 --> 00:02:26,480 Speaker 1: break evens, which spiked up on inflation expectations and then 47 00:02:26,600 --> 00:02:29,640 Speaker 1: eased a bid on Friday when Chair Pow suggested he 48 00:02:29,720 --> 00:02:32,280 Speaker 1: is on the case after all. Today us through what 49 00:02:32,400 --> 00:02:34,680 Speaker 1: we should take away from the markets to action this week. 50 00:02:34,880 --> 00:02:37,600 Speaker 1: We welcome dow Rick Reader black Rock, chief investment Officer 51 00:02:37,680 --> 00:02:40,160 Speaker 1: for Global fixed Income and head of the Global Asset 52 00:02:40,160 --> 00:02:44,640 Speaker 1: Allocation team there and Christina Hooper Investco, Chief Global Market Strategy. 53 00:02:44,720 --> 00:02:46,399 Speaker 1: So welcome to both of you. Christine, let me start 54 00:02:46,440 --> 00:02:48,560 Speaker 1: with you what we saw with the equities, as it 55 00:02:48,600 --> 00:02:51,119 Speaker 1: was basically a good week for equities. They've clawed back 56 00:02:51,160 --> 00:02:54,240 Speaker 1: what they lost in September. Basically what's driving it. We 57 00:02:54,320 --> 00:02:57,760 Speaker 1: went into the third quarter with a lot of fears 58 00:02:57,840 --> 00:03:01,480 Speaker 1: and they have not been realized thus far. In fact, 59 00:03:01,520 --> 00:03:05,959 Speaker 1: what we've seen is better earnings, positive earning surprise than 60 00:03:06,000 --> 00:03:09,320 Speaker 1: the average that we've seen um and certainly it's been 61 00:03:09,360 --> 00:03:14,160 Speaker 1: helped by some high profile earnings reports that have driven 62 00:03:14,240 --> 00:03:17,720 Speaker 1: up the averages for the overall market. But this is 63 00:03:18,360 --> 00:03:23,520 Speaker 1: certainly a good environment thus far. Now only of companies 64 00:03:23,560 --> 00:03:27,800 Speaker 1: in the SP reported thus far um but UM. But 65 00:03:27,880 --> 00:03:31,960 Speaker 1: it's been a good good season so far. So Christia, 66 00:03:31,960 --> 00:03:33,919 Speaker 1: what about that supply problem? We hear about it every 67 00:03:33,960 --> 00:03:36,760 Speaker 1: single day in one industry or the other. Are we're 68 00:03:36,760 --> 00:03:38,520 Speaker 1: seeing it show up in the earnings at all at 69 00:03:38,520 --> 00:03:40,840 Speaker 1: this point? Is it again a cloud on the horizon 70 00:03:41,040 --> 00:03:43,920 Speaker 1: for the future earnings? And some of these companies, well, 71 00:03:43,960 --> 00:03:47,960 Speaker 1: it's certainly showing up, but mostly it's about worrying about 72 00:03:47,960 --> 00:03:51,480 Speaker 1: the fourth quarter and beyond. And so already what little 73 00:03:51,520 --> 00:03:55,800 Speaker 1: guidance we've gotten for the fourth quarter is relatively negative UM. 74 00:03:55,920 --> 00:03:59,680 Speaker 1: And I think that's likely to continue. Supply chain disruptions 75 00:04:00,000 --> 00:04:02,400 Speaker 1: should be expected to last for a while. I mean, 76 00:04:02,400 --> 00:04:06,800 Speaker 1: we've gone through an extraordinary economic disruption. UM. This pandemic 77 00:04:06,960 --> 00:04:10,200 Speaker 1: has caused all kinds of issues, and they're not going 78 00:04:10,240 --> 00:04:12,480 Speaker 1: to be worked out overnight. So we have to expect 79 00:04:12,680 --> 00:04:16,839 Speaker 1: that this will persist for uh for months. So what 80 00:04:16,920 --> 00:04:19,440 Speaker 1: about the pandemic? I mean, we can't get around the pandemic. 81 00:04:19,520 --> 00:04:22,000 Speaker 1: It is the looming issue out there, but is it 82 00:04:22,080 --> 00:04:24,919 Speaker 1: an upside risk or downside risk for corporations and corporate 83 00:04:24,960 --> 00:04:27,880 Speaker 1: earnings at this point and markets for that matter. So 84 00:04:28,279 --> 00:04:30,080 Speaker 1: you know, I would say, first of all, you know, 85 00:04:30,240 --> 00:04:32,960 Speaker 1: the anticipation is that we're largely on the on the 86 00:04:32,960 --> 00:04:36,240 Speaker 1: back side in terms of the real stress around around COVID. 87 00:04:36,480 --> 00:04:38,719 Speaker 1: You know, hopefully that is the case. There is still 88 00:04:39,160 --> 00:04:43,000 Speaker 1: you know, in areas like transportation, leisure, hospitality, there is 89 00:04:43,080 --> 00:04:46,160 Speaker 1: still you know, some concerns about how quickly that the 90 00:04:46,200 --> 00:04:48,120 Speaker 1: people are willing to come back. But I would say 91 00:04:48,160 --> 00:04:51,200 Speaker 1: generally that we are on the back side of it, 92 00:04:51,240 --> 00:04:52,920 Speaker 1: and you're seeing, you know, in economy by the way, 93 00:04:52,960 --> 00:04:56,599 Speaker 1: that operated extremely well through it, and that is flexible 94 00:04:56,720 --> 00:04:59,000 Speaker 1: enough to adapt. So it is clearly one of the 95 00:04:59,000 --> 00:05:00,719 Speaker 1: big risks. I think you said earlier in the show. 96 00:05:00,800 --> 00:05:03,760 Speaker 1: China is certainly a big risk, and so they're they're 97 00:05:03,800 --> 00:05:06,120 Speaker 1: definitely some things to keep your eye on. That's one 98 00:05:06,160 --> 00:05:08,200 Speaker 1: of them. But I think at the end of the day, 99 00:05:08,240 --> 00:05:11,000 Speaker 1: I think we're seeing an economy that's flexible, adaptive enough, 100 00:05:11,520 --> 00:05:15,159 Speaker 1: with enough ingenuity and innovation that that economy generally will 101 00:05:15,160 --> 00:05:17,800 Speaker 1: work through it today, assuming it's not a significant outbreak. 102 00:05:17,960 --> 00:05:20,360 Speaker 1: Christina Rick took us right to China, which is something 103 00:05:20,360 --> 00:05:22,960 Speaker 1: I did want to ask about it because we were surprised, 104 00:05:23,000 --> 00:05:24,919 Speaker 1: de lifefully surprised that ever Grant at least made that 105 00:05:25,000 --> 00:05:27,640 Speaker 1: one dollar bond payment. People were wondering about that. At 106 00:05:27,680 --> 00:05:29,800 Speaker 1: the same time we did see Housing President trying to 107 00:05:29,839 --> 00:05:31,800 Speaker 1: come off for the first time in six years. How 108 00:05:31,839 --> 00:05:33,960 Speaker 1: big a risk is China or is there an upside 109 00:05:34,040 --> 00:05:38,599 Speaker 1: surprise potentially there? I think there is upside potential on 110 00:05:38,680 --> 00:05:41,080 Speaker 1: what we keep hearing over and over again, this mantra 111 00:05:41,240 --> 00:05:45,200 Speaker 1: that China is uninvestable says to me that there are 112 00:05:45,240 --> 00:05:48,960 Speaker 1: some opportunities there, that there is some mispricing going on, 113 00:05:49,520 --> 00:05:51,880 Speaker 1: and that if one has a long enough time arise, 114 00:05:51,960 --> 00:05:54,120 Speaker 1: and if one is willing to wait this out, UM, 115 00:05:54,160 --> 00:05:57,599 Speaker 1: they could be very pleasantly surprised with China. Cually, there 116 00:05:57,640 --> 00:05:59,840 Speaker 1: are a lot of reforms going on. But I think 117 00:05:59,839 --> 00:06:02,360 Speaker 1: we have a better handle on the areas of focused 118 00:06:02,680 --> 00:06:06,760 Speaker 1: by China right now, UM, and that that certainly helps. 119 00:06:06,839 --> 00:06:10,000 Speaker 1: And clearly what China has done specifically with the property 120 00:06:10,040 --> 00:06:15,080 Speaker 1: market UM has been somewhat calculating. When we think about 121 00:06:15,200 --> 00:06:18,000 Speaker 1: Lehman and try to compare ever Grand to Lehman, I 122 00:06:18,040 --> 00:06:20,920 Speaker 1: think it's it's incorrect because Lehman is a situation where 123 00:06:20,960 --> 00:06:23,440 Speaker 1: regulators were asleep at the wheel. This time we had 124 00:06:23,520 --> 00:06:27,760 Speaker 1: regulators focused on improving the situation and the property market 125 00:06:28,000 --> 00:06:31,400 Speaker 1: and creating casualties like ever grant, Okay, thank you so much. 126 00:06:31,400 --> 00:06:33,360 Speaker 1: Always great to have you with us, as Christina Hooper 127 00:06:33,400 --> 00:06:35,760 Speaker 1: of Invesco, Rick Reator of Black Reck will stay with 128 00:06:35,839 --> 00:06:39,039 Speaker 1: us as we turned the question of fixing that supply 129 00:06:39,160 --> 00:06:42,440 Speaker 1: problem we have, particularly when it comes to workers. That's 130 00:06:42,480 --> 00:06:55,080 Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg 131 00:06:55,120 --> 00:06:59,160 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. Whether 132 00:06:59,200 --> 00:07:01,760 Speaker 1: it's transitory or not, there is no denying that we 133 00:07:01,800 --> 00:07:04,359 Speaker 1: are seeing inflation, and then it's caused at least in 134 00:07:04,440 --> 00:07:07,040 Speaker 1: part by supply. They can't keep up with demand, whether 135 00:07:07,080 --> 00:07:10,040 Speaker 1: of goods, of services, or of workers. The question is 136 00:07:10,080 --> 00:07:12,600 Speaker 1: whether that imbalance is going away or will be with 137 00:07:12,680 --> 00:07:14,800 Speaker 1: us for a while. Rick Reader of Black Rock has 138 00:07:14,840 --> 00:07:16,720 Speaker 1: taken a hard look at the number. So Rick, we 139 00:07:16,800 --> 00:07:19,080 Speaker 1: hear this up on a Halloween. You've talked about that 140 00:07:19,120 --> 00:07:23,680 Speaker 1: the goblin of demand destruction? Are we facing demand destruction? 141 00:07:23,960 --> 00:07:26,920 Speaker 1: So in some places there is pricing. You know, companies 142 00:07:27,000 --> 00:07:30,440 Speaker 1: have what is extraordinary pricing power today, you know, because 143 00:07:30,480 --> 00:07:32,880 Speaker 1: the demand functioning economy is so strong. I mean, we 144 00:07:32,880 --> 00:07:35,040 Speaker 1: were looking at some numbers as you were saying, you know, 145 00:07:35,240 --> 00:07:37,360 Speaker 1: you think about during during this two year period that 146 00:07:37,360 --> 00:07:39,520 Speaker 1: there had been almost a your period of COVID where 147 00:07:39,600 --> 00:07:42,880 Speaker 1: consumers are actually underspent relative to what they have historically. 148 00:07:42,920 --> 00:07:45,560 Speaker 1: I've been, they haven't gone outside, they have underspent. I 149 00:07:45,600 --> 00:07:47,760 Speaker 1: took that. We took those numbers and looked at it 150 00:07:47,840 --> 00:07:49,960 Speaker 1: relative to it. The two trillion stimuluts that came in. 151 00:07:50,320 --> 00:07:53,480 Speaker 1: The demand is extraordinary. That's out there. But companies now 152 00:07:53,520 --> 00:07:57,560 Speaker 1: have pricing power, and you're seeing prices move significantly high. 153 00:07:57,600 --> 00:07:59,960 Speaker 1: You're seeing places like energy where there's a supply demand 154 00:08:00,040 --> 00:08:02,720 Speaker 1: too balances is giving a proportion driving energy prices higher, 155 00:08:02,960 --> 00:08:05,640 Speaker 1: so it will denegrate some of this demand. You're seeing 156 00:08:05,640 --> 00:08:09,080 Speaker 1: in housing very clearly that that market tends to slow down. 157 00:08:09,400 --> 00:08:12,160 Speaker 1: People people stop buying housing, just slow down for a 158 00:08:12,200 --> 00:08:14,520 Speaker 1: period of period period of time. That is some demand 159 00:08:14,560 --> 00:08:18,720 Speaker 1: destruction taking place some parts of consumer durables when you 160 00:08:18,800 --> 00:08:22,160 Speaker 1: get significant price increase because supply chain shocks or energy 161 00:08:22,240 --> 00:08:24,760 Speaker 1: or input cost shock, so there is some demand to 162 00:08:24,840 --> 00:08:27,240 Speaker 1: get detegration not being said, you know, I think what 163 00:08:27,320 --> 00:08:31,000 Speaker 1: happens over time is that some of this inflation starts 164 00:08:31,040 --> 00:08:34,199 Speaker 1: to calm down, some of the supply chains reopen um. 165 00:08:34,240 --> 00:08:36,640 Speaker 1: You'll get cap bacs, you're seeing rig counts go up, 166 00:08:36,880 --> 00:08:39,880 Speaker 1: You're seeing productivity increases and energy, so you bring down 167 00:08:39,960 --> 00:08:43,119 Speaker 1: some of that inflationary impulse, similar what the FED has described. 168 00:08:43,440 --> 00:08:45,880 Speaker 1: And I think the demand is incredible and will continue, 169 00:08:46,160 --> 00:08:48,720 Speaker 1: but there is definitely some people describe a staghulation. I 170 00:08:48,720 --> 00:08:51,960 Speaker 1: think is is misoriented. The demand is tremendous, but no 171 00:08:52,040 --> 00:08:54,439 Speaker 1: doubt people will hold back in some areas because they'll 172 00:08:54,440 --> 00:08:57,440 Speaker 1: anticipate prices coming down. And it's not just of course 173 00:08:57,440 --> 00:08:59,640 Speaker 1: for goods and services, also for workers. I mean, because 174 00:08:59,640 --> 00:09:01,800 Speaker 1: we all lot of job openings out there. It's come 175 00:09:01,840 --> 00:09:04,679 Speaker 1: down a little bit, it's still up near record levels. 176 00:09:05,000 --> 00:09:08,120 Speaker 1: What about that? What's going to correct that situation? David? 177 00:09:08,120 --> 00:09:09,880 Speaker 1: I'm and I think I've studied this back to World 178 00:09:09,920 --> 00:09:12,199 Speaker 1: War One. I've never seen I don't think we've ever 179 00:09:12,280 --> 00:09:15,040 Speaker 1: have had a hotter jobs market. And I think, you know, 180 00:09:15,080 --> 00:09:18,280 Speaker 1: you look at just the sheer magnitude of the hiring, 181 00:09:18,360 --> 00:09:21,560 Speaker 1: the Amazons, the Walmart's hundred thousand, hundred and fifty thousand 182 00:09:21,679 --> 00:09:24,800 Speaker 1: jobs for people they're looking for to fulfill these roles. 183 00:09:25,160 --> 00:09:28,000 Speaker 1: And then you look at biotech and you look at technology, 184 00:09:28,360 --> 00:09:31,000 Speaker 1: I think we're through extraordinary. I think you'renna see historic 185 00:09:31,160 --> 00:09:34,960 Speaker 1: levels of low unemployment because it's just not enough people 186 00:09:35,320 --> 00:09:37,560 Speaker 1: that are out there. And it's interesting. I watch what's 187 00:09:37,559 --> 00:09:41,040 Speaker 1: happening in hospitality restaurants, which is are oftentimes the frictional 188 00:09:41,200 --> 00:09:43,640 Speaker 1: job that's out there, tends to be not the highest 189 00:09:43,640 --> 00:09:46,040 Speaker 1: thing job, and I think it's hard to bring a 190 00:09:46,040 --> 00:09:48,760 Speaker 1: lot of those workers back because there's so many jobs 191 00:09:48,760 --> 00:09:50,640 Speaker 1: of ailb in other areas. So I quite frankly, I 192 00:09:50,640 --> 00:09:53,120 Speaker 1: am not watching the payroll data as closely as I 193 00:09:53,160 --> 00:09:56,239 Speaker 1: am some of the job openings data, the j Old State, etcetera. 194 00:09:56,600 --> 00:09:58,120 Speaker 1: And it's gonna be high for a period of time. 195 00:09:58,120 --> 00:10:00,920 Speaker 1: By the way, you see more people retiring recently, and 196 00:10:00,960 --> 00:10:02,600 Speaker 1: that's taking a lot of people out of the workforce. 197 00:10:02,640 --> 00:10:05,440 Speaker 1: So I think I think there's a supply of human capital, 198 00:10:06,160 --> 00:10:08,640 Speaker 1: uh that shortage that's going to be there for a 199 00:10:08,920 --> 00:10:11,559 Speaker 1: for an extended period of time. I don't keep wages buoyant, 200 00:10:11,960 --> 00:10:14,520 Speaker 1: and by the way, not just direct wages, but benefits 201 00:10:14,600 --> 00:10:18,960 Speaker 1: and other other forms of accommodation to workers that are 202 00:10:18,960 --> 00:10:21,319 Speaker 1: gonna be I think historic so work you're saying you 203 00:10:21,360 --> 00:10:23,480 Speaker 1: pay more attention to this point, to the open jobs 204 00:10:23,520 --> 00:10:25,840 Speaker 1: than the unemployment. You're in good company because the San 205 00:10:25,840 --> 00:10:28,160 Speaker 1: Francisco fett Is you know that a study on this 206 00:10:28,320 --> 00:10:30,520 Speaker 1: and basically said, instead of looking at unemployment when you 207 00:10:30,520 --> 00:10:32,840 Speaker 1: figure out if there's labor slack, when you're addressing the 208 00:10:32,880 --> 00:10:35,000 Speaker 1: question of potential inflation, you should be looking at the 209 00:10:35,080 --> 00:10:38,360 Speaker 1: ratio of unemployment job open jobs. If you look at that, 210 00:10:38,360 --> 00:10:41,320 Speaker 1: that might indicate we may have some wage inflation coming. 211 00:10:42,320 --> 00:10:44,200 Speaker 1: Totally agree. And by the way, I also look at 212 00:10:44,280 --> 00:10:46,280 Speaker 1: quits to layoffs. Do you look at the number of 213 00:10:46,320 --> 00:10:49,360 Speaker 1: people why are they whire quits to layoffs at historic highs? 214 00:10:49,640 --> 00:10:52,840 Speaker 1: It's because mobility. Job mobility is at an extreme level 215 00:10:52,880 --> 00:10:56,000 Speaker 1: because there's so many jobs available that paid higher wage 216 00:10:56,280 --> 00:10:59,640 Speaker 1: or better benefits, etcetera. So I think those metrics are 217 00:10:59,720 --> 00:11:02,240 Speaker 1: much more important today. And so you know, looking at 218 00:11:02,240 --> 00:11:04,439 Speaker 1: the whole suite. You know when people say, my god, 219 00:11:04,520 --> 00:11:06,920 Speaker 1: you know, like last month, that was a slower job. 220 00:11:06,960 --> 00:11:10,960 Speaker 1: Somebody the economy must be slow. It's just actually absolutely misplaced. 221 00:11:11,240 --> 00:11:13,120 Speaker 1: It's the demand. It's high it's trying to get that 222 00:11:13,160 --> 00:11:16,000 Speaker 1: supply moving into the right place. I think you can 223 00:11:16,040 --> 00:11:18,960 Speaker 1: see more and more people come a come out of retirement, 224 00:11:19,280 --> 00:11:21,800 Speaker 1: be joined the workforce. And and by the way, it's 225 00:11:21,840 --> 00:11:25,280 Speaker 1: missing that the benefits of people received you know that 226 00:11:25,880 --> 00:11:29,800 Speaker 1: largely expired. Was an immense number that expired in August September, 227 00:11:30,120 --> 00:11:31,920 Speaker 1: and so that'll cause them and re entered in the 228 00:11:31,960 --> 00:11:34,560 Speaker 1: labor force. But there's still not enough people available for 229 00:11:34,600 --> 00:11:36,920 Speaker 1: the for the jobs. So I'm watching those openings and 230 00:11:36,960 --> 00:11:39,000 Speaker 1: it quits the layoffs in a series of those metrics 231 00:11:39,000 --> 00:11:40,679 Speaker 1: to see where we're going. But there's no doubt in 232 00:11:40,720 --> 00:11:43,600 Speaker 1: my mind wages will be will be uh will be 233 00:11:43,679 --> 00:11:47,240 Speaker 1: strong for a period of time. And this all necessarily 234 00:11:47,320 --> 00:11:50,280 Speaker 1: leads back into questions about rates as a practical matter. 235 00:11:50,440 --> 00:11:53,240 Speaker 1: And you said you expect nominal rates to go up. 236 00:11:53,280 --> 00:11:55,520 Speaker 1: At the same time with the inflation we're talking about, 237 00:11:55,640 --> 00:11:59,360 Speaker 1: real yield is really staying surprisingly low. How concerned should 238 00:11:59,360 --> 00:12:01,600 Speaker 1: we be about that? Because I read cell macro economists 239 00:12:01,679 --> 00:12:04,240 Speaker 1: that's say, if you have really really low it's hard 240 00:12:04,280 --> 00:12:08,000 Speaker 1: to have the protatinty gains. So listen, and I think 241 00:12:08,040 --> 00:12:12,599 Speaker 1: looking at real yields exclusively is an archaic concept in 242 00:12:12,920 --> 00:12:15,240 Speaker 1: a in a number of ways, unless real yields are moving, 243 00:12:15,360 --> 00:12:17,480 Speaker 1: real rates are moving to extremes, like you go back 244 00:12:17,520 --> 00:12:19,800 Speaker 1: to the seventies and yet inflation you had to have 245 00:12:19,920 --> 00:12:23,680 Speaker 1: real rates that came down significantly. And listen, I think 246 00:12:24,080 --> 00:12:27,000 Speaker 1: there's something that's really important. I look at the company's 247 00:12:27,080 --> 00:12:29,800 Speaker 1: return on invested capital versus their weight at average across 248 00:12:29,840 --> 00:12:33,640 Speaker 1: the capital. That drives financial transmission, that drives investment. And 249 00:12:33,679 --> 00:12:37,839 Speaker 1: today companies return on invested capital is extremely high. You 250 00:12:37,880 --> 00:12:42,640 Speaker 1: seen companies are fift return on equity and their equated 251 00:12:42,679 --> 00:12:45,240 Speaker 1: average across the capital is really low across of equity. 252 00:12:45,240 --> 00:12:47,600 Speaker 1: Because I know how the stock market is across equities cheap, 253 00:12:48,080 --> 00:12:50,960 Speaker 1: and the way they finance themselves the real rates that 254 00:12:51,080 --> 00:12:53,200 Speaker 1: the treasury market trades, and it's not really relevant. It's 255 00:12:53,200 --> 00:12:56,199 Speaker 1: where they financed themselves. And today on the debt and 256 00:12:56,240 --> 00:12:59,240 Speaker 1: the debt market and the equity market, there's a historic 257 00:12:59,360 --> 00:13:02,000 Speaker 1: bid for yield in the market that's not going away 258 00:13:02,000 --> 00:13:05,040 Speaker 1: anytime soon. Someone goes the demographic someone because what the 259 00:13:05,040 --> 00:13:07,840 Speaker 1: Fed did. So as long as that weighted average cross 260 00:13:07,920 --> 00:13:11,280 Speaker 1: the capital stays reasonable and and and we think it 261 00:13:11,320 --> 00:13:13,360 Speaker 1: will Rachel move up a bit from here, I still 262 00:13:13,360 --> 00:13:15,400 Speaker 1: think front end shortend interest rates are gonna move up 263 00:13:15,440 --> 00:13:18,080 Speaker 1: a bit. But boy, as long as companies continue and 264 00:13:18,160 --> 00:13:20,760 Speaker 1: the demand continues to be what it is in the economy, 265 00:13:21,160 --> 00:13:24,280 Speaker 1: I'm not that concerned about small moves in real rates. Um. 266 00:13:24,320 --> 00:13:26,960 Speaker 1: You know, listen, if inflation moves dramatically higher and the 267 00:13:27,080 --> 00:13:30,800 Speaker 1: nominal interest rate moves significally higher, forcing up companies crossed 268 00:13:30,840 --> 00:13:34,000 Speaker 1: the borrow, that's significant. But I think we're far far 269 00:13:34,120 --> 00:13:36,480 Speaker 1: from that. So Rick, you invest an awful lot of 270 00:13:36,480 --> 00:13:38,439 Speaker 1: money and to have a lot offul lot of people. 271 00:13:38,600 --> 00:13:40,240 Speaker 1: Give us some investment advice here. I'm not gonna ask 272 00:13:40,240 --> 00:13:43,240 Speaker 1: you specific stocks the bonds, but tell us about what 273 00:13:43,280 --> 00:13:45,920 Speaker 1: we should do with all you've said in terms of investment, 274 00:13:46,080 --> 00:13:47,840 Speaker 1: and particular because because you are on both sides, you 275 00:13:47,880 --> 00:13:51,560 Speaker 1: swing both ways. You're you're here right, you handle both 276 00:13:51,559 --> 00:13:54,040 Speaker 1: the fixed income and the equity side. What does all 277 00:13:54,080 --> 00:13:57,240 Speaker 1: that tell us about, for example, the balance between fixed 278 00:13:57,240 --> 00:14:02,679 Speaker 1: equity and fixed income, sorry in equities. So first of all, 279 00:14:02,679 --> 00:14:05,040 Speaker 1: I think you got to look at companies operating leverage 280 00:14:05,120 --> 00:14:06,679 Speaker 1: and think about what this means. Do I want to 281 00:14:06,720 --> 00:14:08,720 Speaker 1: be a lender? You want to buy their buns or 282 00:14:08,920 --> 00:14:10,959 Speaker 1: buy their Stock. So what happens when when you get 283 00:14:10,960 --> 00:14:14,199 Speaker 1: inflation higher and if companies have pricing power in their 284 00:14:14,240 --> 00:14:16,320 Speaker 1: business and they can price it through many of their 285 00:14:16,320 --> 00:14:18,600 Speaker 1: expenses are fixed. Do they think about they signed long 286 00:14:18,679 --> 00:14:21,920 Speaker 1: term leases, that's a fixed expense, it's not subject to inflation. 287 00:14:22,520 --> 00:14:24,520 Speaker 1: A number of their expenses are fixed. So what happens 288 00:14:24,600 --> 00:14:27,240 Speaker 1: is if you get pricing power and some portion of 289 00:14:27,280 --> 00:14:29,760 Speaker 1: your expense is fixed, and so all you're doing is 290 00:14:29,760 --> 00:14:32,400 Speaker 1: your variable costs go up, you're actually benefiting Rick. It's 291 00:14:32,400 --> 00:14:34,520 Speaker 1: really great to talk with you always. Thank you so much. 292 00:14:34,960 --> 00:14:37,240 Speaker 1: That is Rick Reader of black Rock, who does invest 293 00:14:37,280 --> 00:14:39,240 Speaker 1: an awful lot of money on behalf of an awful 294 00:14:39,320 --> 00:14:44,600 Speaker 1: lot of people. Coming up the power and responsibility of 295 00:14:44,760 --> 00:14:48,080 Speaker 1: huge social media companies like Facebook. How do we get 296 00:14:48,120 --> 00:14:51,120 Speaker 1: the best of what they have to offer without the worst. 297 00:14:51,680 --> 00:14:54,800 Speaker 1: We talk with former Hewlett Packard CEO Carle Fiery Enough. 298 00:14:56,480 --> 00:15:02,360 Speaker 1: This is Wall Street Week on Bloomberg. This is Bloomberg 299 00:15:02,400 --> 00:15:08,760 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. Two 300 00:15:08,760 --> 00:15:12,520 Speaker 1: point nine billion. That's how many people use Facebook every month, 301 00:15:12,600 --> 00:15:15,640 Speaker 1: well over a third of the planet. And to hear 302 00:15:15,680 --> 00:15:18,840 Speaker 1: Mark Zuckerberg tell it, the social media company he started 303 00:15:18,880 --> 00:15:21,760 Speaker 1: to keep track of friends in college. Is using its 304 00:15:21,960 --> 00:15:25,400 Speaker 1: enormous power to do good. For most of our existence, 305 00:15:25,880 --> 00:15:29,520 Speaker 1: we focused on all the good that connecting people can bring. But, 306 00:15:29,840 --> 00:15:33,800 Speaker 1: as former HP CEO Carli Fiorina points out, with great 307 00:15:33,800 --> 00:15:39,720 Speaker 1: power comes great responsibility. What makes Facebook different is their 308 00:15:39,840 --> 00:15:45,080 Speaker 1: dominant control over people's lives and in our economy, and 309 00:15:45,160 --> 00:15:48,960 Speaker 1: a growing number of people find Facebook falling short, such 310 00:15:48,960 --> 00:15:53,640 Speaker 1: as former Facebook product manager Francis Hougan turned whistleblower. They 311 00:15:53,680 --> 00:15:56,120 Speaker 1: can't protect us from the harms that they know exists 312 00:15:56,160 --> 00:15:59,240 Speaker 1: in their own system. It is pulling families of heart 313 00:15:59,480 --> 00:16:02,160 Speaker 1: and in place is like Ethiopia. It's literally fanning at 314 00:16:02,240 --> 00:16:05,880 Speaker 1: nick violence. It's not just about harmful content being spread. 315 00:16:06,320 --> 00:16:09,960 Speaker 1: Former Goldman Sachs CEO Lloyd Blank find flags another risk. 316 00:16:10,320 --> 00:16:12,680 Speaker 1: You know, looking through it from a macro point of view, 317 00:16:13,560 --> 00:16:16,280 Speaker 1: you don't want to let pot, you know, these pods 318 00:16:16,320 --> 00:16:20,800 Speaker 1: of high concentration of economic power and influence get into place. 319 00:16:20,880 --> 00:16:25,480 Speaker 1: So I'd always thought that the tech industry was kind 320 00:16:25,520 --> 00:16:28,360 Speaker 1: of in some ways like financial services on steroids, all 321 00:16:28,360 --> 00:16:32,040 Speaker 1: of which leads lawmakers, both Republicans and Democrats to say 322 00:16:32,080 --> 00:16:35,680 Speaker 1: there has to be more regulation. With Senator Elizabeth Warren 323 00:16:35,680 --> 00:16:39,120 Speaker 1: of Massachusetts calling for Facebook to be broken up. Break 324 00:16:39,960 --> 00:16:43,240 Speaker 1: break them up. When we've got lots of competitors in 325 00:16:43,280 --> 00:16:49,760 Speaker 1: this market, no one dominates in that same way. So 326 00:16:49,800 --> 00:16:52,040 Speaker 1: how can we keep the best of what Facebook and 327 00:16:52,080 --> 00:16:54,680 Speaker 1: other social media giants have to offer and leave behind 328 00:16:54,720 --> 00:16:57,000 Speaker 1: the parts that don't make us stronger. They might even 329 00:16:57,040 --> 00:17:00,600 Speaker 1: make us weaker by stifling competition. Carli Fiorina has devoted 330 00:17:00,600 --> 00:17:02,600 Speaker 1: her career to getting the very best out of tech, 331 00:17:02,880 --> 00:17:05,200 Speaker 1: rising to become the CEO of Philip Packard. She is 332 00:17:05,240 --> 00:17:08,639 Speaker 1: the founder and chairman of Carli Fiorina Enterprises and Unlocking 333 00:17:08,680 --> 00:17:11,640 Speaker 1: Potential and were walking now to Wall Street Week. Welcome Carl. 334 00:17:11,680 --> 00:17:13,879 Speaker 1: It's great to have you with us tonight. Can we 335 00:17:13,920 --> 00:17:16,400 Speaker 1: divide it up between content regulation on the one hand 336 00:17:16,520 --> 00:17:19,200 Speaker 1: and the economic power and the other Does that make sense? Actually? 337 00:17:19,280 --> 00:17:22,639 Speaker 1: I think it does, because if you think about content 338 00:17:22,800 --> 00:17:26,240 Speaker 1: for a moment, and content in particular that harms young people, 339 00:17:26,600 --> 00:17:30,520 Speaker 1: which was the subject of the whistleblowers testimony, that we 340 00:17:30,600 --> 00:17:33,400 Speaker 1: have actually a fair number of tools that we may 341 00:17:33,440 --> 00:17:36,960 Speaker 1: not be using. Look, Facebook is in the only company 342 00:17:37,000 --> 00:17:40,120 Speaker 1: that delivers content or wants to deliver content to young 343 00:17:40,160 --> 00:17:45,800 Speaker 1: people that's harmful think video games, alcohol, cigarettes, junk food, 344 00:17:45,960 --> 00:17:50,200 Speaker 1: sugary drinks, etcetera, etcetera. And the way we've handled that 345 00:17:50,280 --> 00:17:54,479 Speaker 1: in the past is either by limiting the availability and 346 00:17:54,520 --> 00:17:58,840 Speaker 1: the accessibility age limits for example, or parental controls, or 347 00:17:59,560 --> 00:18:06,159 Speaker 1: we regulate information. Here's what this does to you. And 348 00:18:06,200 --> 00:18:08,800 Speaker 1: I don't think we've used either one of those tools 349 00:18:08,840 --> 00:18:12,600 Speaker 1: particularly aggressively or effectively with big tech, and I think 350 00:18:12,640 --> 00:18:14,560 Speaker 1: we need to look at it. That's quite apart from 351 00:18:14,640 --> 00:18:17,920 Speaker 1: breaking them up. But let's get some information out there, 352 00:18:18,080 --> 00:18:22,520 Speaker 1: and let's control availability and accessibility, which is of course 353 00:18:22,640 --> 00:18:26,880 Speaker 1: why people want more transparency from Facebook, because they don't 354 00:18:27,000 --> 00:18:32,800 Speaker 1: understand how kids are accessing this or whether parental controls work. 355 00:18:33,160 --> 00:18:34,919 Speaker 1: So let's pursue that just for a moment, because we 356 00:18:34,920 --> 00:18:37,120 Speaker 1: can get nervous about the First Amendment. But what your 357 00:18:37,119 --> 00:18:39,640 Speaker 1: suggestion is, before you start saying what you can put 358 00:18:39,680 --> 00:18:42,199 Speaker 1: in terms of substance on the site, you're saying who 359 00:18:42,280 --> 00:18:43,680 Speaker 1: gets access to It's a little bit like when you 360 00:18:43,720 --> 00:18:46,560 Speaker 1: put brown paper wrappers around the dirty magazines in the 361 00:18:46,600 --> 00:18:48,639 Speaker 1: back in the olden days and the drug stores, and 362 00:18:48,680 --> 00:18:51,760 Speaker 1: that that doesn't raise the same First Amendment concerns well exactly, 363 00:18:51,880 --> 00:18:56,440 Speaker 1: And I know it's not a perfect analogy, but let's 364 00:18:56,480 --> 00:19:00,639 Speaker 1: look at alcohol and cigarettes just for a moment, harmful 365 00:19:00,680 --> 00:19:03,800 Speaker 1: to kids. What did we do? We said, you can't 366 00:19:03,840 --> 00:19:06,720 Speaker 1: buy them if you're below a certain age, and anyone 367 00:19:06,760 --> 00:19:09,120 Speaker 1: who tries to sell them is going to be liable. 368 00:19:09,680 --> 00:19:13,160 Speaker 1: We also said that there's lots of information that has 369 00:19:13,200 --> 00:19:16,720 Speaker 1: to be provided about the product on the product to 370 00:19:16,920 --> 00:19:20,760 Speaker 1: warn kids and parents, and we're not really doing that 371 00:19:20,800 --> 00:19:24,200 Speaker 1: with Facebook or even you know this incredibly popular show 372 00:19:24,320 --> 00:19:27,119 Speaker 1: squid Game. Now there's all this information coming out that 373 00:19:27,480 --> 00:19:32,640 Speaker 1: children under sixteen shouldn't watch it and check your parental controls. 374 00:19:32,680 --> 00:19:35,080 Speaker 1: Somehow we haven't done that with tech, and we ought to. 375 00:19:35,680 --> 00:19:38,920 Speaker 1: So that's a substance of the content side. What about 376 00:19:38,920 --> 00:19:42,480 Speaker 1: the economic power issue and the notion that particularly and 377 00:19:42,560 --> 00:19:44,560 Speaker 1: when it comes to search, when it comes to advertising 378 00:19:44,600 --> 00:19:47,320 Speaker 1: things like that, there's enormous concentration amoung a handful of 379 00:19:47,359 --> 00:19:50,400 Speaker 1: really small handful of the biggest social media companies. Yes, 380 00:19:50,640 --> 00:19:55,040 Speaker 1: that's absolutely right. I would note that when Microsoft was 381 00:19:55,160 --> 00:19:59,280 Speaker 1: the big boogeyman of Silicon Valley and the big scary, 382 00:19:59,400 --> 00:20:02,480 Speaker 1: big tech company in the late nineties early two thousands, 383 00:20:02,480 --> 00:20:05,320 Speaker 1: and there was a lot of handwringing about regulation. What 384 00:20:05,560 --> 00:20:09,159 Speaker 1: ultimately worked better than anything was competition, and so I 385 00:20:09,240 --> 00:20:14,200 Speaker 1: do understand the argument about breaking them up. However, let 386 00:20:14,240 --> 00:20:17,040 Speaker 1: me say this, one of the things that we have 387 00:20:17,160 --> 00:20:20,400 Speaker 1: not done a good job of is forced disclosure. There 388 00:20:20,440 --> 00:20:23,439 Speaker 1: was an interesting second whistle blower that came out, and 389 00:20:23,520 --> 00:20:27,480 Speaker 1: this particular whistleblower went to the SEC and said, you know, 390 00:20:28,000 --> 00:20:33,280 Speaker 1: Facebook is not disclosing to shareholders the risks to the 391 00:20:33,320 --> 00:20:36,920 Speaker 1: company of all the things they are doing. I actually 392 00:20:36,960 --> 00:20:41,360 Speaker 1: think the board of Facebook and shareholders of Facebook need 393 00:20:41,440 --> 00:20:44,720 Speaker 1: to be very focused on risk. Carl, it's really great 394 00:20:44,720 --> 00:20:46,959 Speaker 1: to Havin Walster big, thank you so much for joining us. 395 00:20:46,960 --> 00:20:50,320 Speaker 1: That is Carli Fierina, founder and chairman of Carli Feer Enterprises, 396 00:20:50,440 --> 00:20:54,160 Speaker 1: and I look like the potential coming up. We wrap 397 00:20:54,240 --> 00:20:56,640 Speaker 1: up the week, as we always do, with our special 398 00:20:56,640 --> 00:21:00,320 Speaker 1: Wall Street Week contributor, Larry Summers of Harvard. That next 399 00:21:00,359 --> 00:21:06,440 Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall 400 00:21:06,520 --> 00:21:10,440 Speaker 1: Street Week with David Weston from Bloomberg Radio. We turn 401 00:21:10,560 --> 00:21:12,760 Speaker 1: once again to our very special contributor on Wall Street 402 00:21:12,760 --> 00:21:15,639 Speaker 1: Week is Larry Summers at Harvard. Larry, We've talked every 403 00:21:15,640 --> 00:21:18,760 Speaker 1: week really about inflation, your concerns. There's new data coming in, 404 00:21:18,840 --> 00:21:21,199 Speaker 1: and particularly I'll focus on the market data some of 405 00:21:21,240 --> 00:21:23,880 Speaker 1: the break evens. What is the new data telling you 406 00:21:23,920 --> 00:21:28,240 Speaker 1: about where we are in inflation. Unfortunately, it's corroborating concerns 407 00:21:28,280 --> 00:21:33,320 Speaker 1: I've had for some time. You've seen so called break evens, 408 00:21:33,359 --> 00:21:38,000 Speaker 1: the gap in yield between nominal treasuries and real index 409 00:21:38,640 --> 00:21:42,560 Speaker 1: treasuries take a break to the upside. At the five 410 00:21:42,640 --> 00:21:47,240 Speaker 1: year frequency, for example, it's up more than forty basis points, 411 00:21:47,240 --> 00:21:51,440 Speaker 1: which is a very unusual move for one month. And 412 00:21:51,480 --> 00:21:55,119 Speaker 1: what it suggests is that people are getting more and 413 00:21:55,160 --> 00:22:00,399 Speaker 1: more concerned about the possibility of rising in flayation and 414 00:22:00,480 --> 00:22:05,119 Speaker 1: inflation continuing UH longer. First it was one year, and 415 00:22:05,240 --> 00:22:07,879 Speaker 1: it was two years. Now it's starting to be five years. 416 00:22:07,880 --> 00:22:12,840 Speaker 1: It's even spilling over into uh the ten year. And 417 00:22:13,000 --> 00:22:17,600 Speaker 1: it's a reflection of growing concern that this is going 418 00:22:17,640 --> 00:22:20,960 Speaker 1: to feed through into wages, that it's going to feed 419 00:22:21,040 --> 00:22:25,760 Speaker 1: through into higher expectations, which is going to create uh 420 00:22:25,880 --> 00:22:28,600 Speaker 1: something of a spiral, and that we're gonna have a 421 00:22:28,640 --> 00:22:33,639 Speaker 1: difficult inflationary dynamic. It's not made any easier by the 422 00:22:33,800 --> 00:22:38,720 Speaker 1: sense that because of the inflation, consumer sentiment is turning 423 00:22:38,760 --> 00:22:43,960 Speaker 1: down as inflation eroads of people's real wages, and that's 424 00:22:43,960 --> 00:22:48,000 Speaker 1: gonna make it that much more difficult to stop, uh, 425 00:22:48,160 --> 00:22:53,200 Speaker 1: the inflation. So I'm afraid that the kinds of concerns 426 00:22:53,240 --> 00:22:57,880 Speaker 1: I've had for quite some time, I think, uh, the 427 00:22:57,920 --> 00:23:03,760 Speaker 1: basis for concern is uh steadily increasing. So there you 428 00:23:03,760 --> 00:23:06,440 Speaker 1: mentioned wage inflation, the possibility of it. We have heard 429 00:23:06,440 --> 00:23:07,960 Speaker 1: from the FED in the past that they're not as 430 00:23:08,000 --> 00:23:09,840 Speaker 1: worried because they are so called slack in the market, 431 00:23:10,040 --> 00:23:12,000 Speaker 1: because there are a lot of people, millions of people 432 00:23:12,080 --> 00:23:15,400 Speaker 1: unemployed who were employed before the pandemic. And yet there 433 00:23:15,440 --> 00:23:16,879 Speaker 1: is a paper out of the San Francisco FED that 434 00:23:16,920 --> 00:23:19,240 Speaker 1: you pointed out on Twitter this week. Actually it says 435 00:23:19,280 --> 00:23:20,800 Speaker 1: that's not the number you should be looking at. It 436 00:23:20,800 --> 00:23:25,000 Speaker 1: should be how many job openings are they're compared to unemployment. Look, 437 00:23:25,080 --> 00:23:28,399 Speaker 1: I think that the view that there's a lot of 438 00:23:28,480 --> 00:23:34,920 Speaker 1: labor labor market slack is looking preposterous right now. Uh. 439 00:23:35,040 --> 00:23:39,440 Speaker 1: You see the level of job openings record high, far 440 00:23:39,560 --> 00:23:42,639 Speaker 1: higher than we've ever seen before. You see the number 441 00:23:42,680 --> 00:23:46,800 Speaker 1: of people quitting their jobs to look for new jobs 442 00:23:47,359 --> 00:23:52,000 Speaker 1: record highs. Why is that going along with high unemployment 443 00:23:52,119 --> 00:23:54,919 Speaker 1: high high unemployment. First of all, the unemployment is not 444 00:23:55,000 --> 00:23:59,560 Speaker 1: that high by historical standards. Below five cent is lower 445 00:23:59,600 --> 00:24:02,680 Speaker 1: than normal. You've got all the things that are causing 446 00:24:02,720 --> 00:24:06,040 Speaker 1: the great resignation in terms of people changing their lives. 447 00:24:06,520 --> 00:24:11,320 Speaker 1: You've got households with unprecedented levels of cash, which makes 448 00:24:11,320 --> 00:24:15,800 Speaker 1: them makes it easier to be fussier about jobs. You 449 00:24:15,840 --> 00:24:19,159 Speaker 1: have some continuing concerns for some people. Not a large 450 00:24:19,160 --> 00:24:21,880 Speaker 1: fraction of the population, but even if it's only two 451 00:24:21,880 --> 00:24:27,359 Speaker 1: percent of the population, that's big relative to discussions of unemployment. 452 00:24:27,800 --> 00:24:32,080 Speaker 1: You've got evidence of early retirement on a substantial scale. 453 00:24:32,440 --> 00:24:37,440 Speaker 1: You've got evidence of more people, unfortunately who are depressed 454 00:24:37,480 --> 00:24:42,080 Speaker 1: and anxious. So I think there's every reason to think 455 00:24:42,520 --> 00:24:46,280 Speaker 1: that the so called natural rate of unemployment or non 456 00:24:46,320 --> 00:24:51,920 Speaker 1: accelerating inflation rate of unemployment should be higher for a while. Here. 457 00:24:52,359 --> 00:24:56,399 Speaker 1: I think the evidence from past business cycles suggests that 458 00:24:56,440 --> 00:24:58,119 Speaker 1: if you had to go with one or the other, 459 00:24:58,440 --> 00:25:01,440 Speaker 1: you'd be as likely to go with agencies as you 460 00:25:01,480 --> 00:25:05,679 Speaker 1: would with UH the rate of unemployment UH. And so 461 00:25:05,760 --> 00:25:09,080 Speaker 1: I think the idea that there is some substantial slack 462 00:25:09,600 --> 00:25:14,520 Speaker 1: in the labor market is UH not the one that 463 00:25:14,600 --> 00:25:18,359 Speaker 1: one should UH should bet on. I also think that 464 00:25:19,119 --> 00:25:22,800 Speaker 1: real interest rates are an important part of determining monetary policy, 465 00:25:23,240 --> 00:25:26,280 Speaker 1: and as inflation accelerates, what that means is the real 466 00:25:26,320 --> 00:25:30,240 Speaker 1: interest rates are going down, so you've got very loose 467 00:25:30,359 --> 00:25:34,760 Speaker 1: financial conditions. Larry. A lot of Washington's time this week 468 00:25:34,840 --> 00:25:37,760 Speaker 1: was consumed with the build back Better proposal of President Biden, 469 00:25:37,920 --> 00:25:39,600 Speaker 1: and more specifically, how you're gonna pay for it, with 470 00:25:39,680 --> 00:25:44,240 Speaker 1: for example, the Democratic Center from Arizona Christen Cinema saying 471 00:25:44,240 --> 00:25:46,520 Speaker 1: she does not want to raise corporate tax rates no 472 00:25:46,560 --> 00:25:48,280 Speaker 1: matter what happens, I'm gonna say. I talked to Josh 473 00:25:48,320 --> 00:25:51,000 Speaker 1: Bolton from the Business Rondel. He was adamant corporate America 474 00:25:51,080 --> 00:25:54,320 Speaker 1: cannot afford a tax rate. What do you say to them, 475 00:25:54,359 --> 00:26:00,119 Speaker 1: It's a ridiculous proposition. I'm not somebody who had has 476 00:26:00,800 --> 00:26:05,000 Speaker 1: been comfortable with all the fiscal policy this administration has pursued. 477 00:26:05,560 --> 00:26:12,080 Speaker 1: I've worried about excess stimulus. I've worried about hurting competitiveness. 478 00:26:12,119 --> 00:26:17,120 Speaker 1: I've worried about too much government all at once not 479 00:26:17,240 --> 00:26:22,360 Speaker 1: working out well. We have never had such low costs 480 00:26:22,400 --> 00:26:27,320 Speaker 1: of capital in the history of our country. You look 481 00:26:27,320 --> 00:26:30,199 Speaker 1: at the level of real interest rates. You look at 482 00:26:30,240 --> 00:26:33,480 Speaker 1: the level of the stock market, you look at the 483 00:26:33,520 --> 00:26:37,520 Speaker 1: fact that capital investments can be written off in UH 484 00:26:37,840 --> 00:26:42,800 Speaker 1: the year they're made. It is absurd to suggest that 485 00:26:43,240 --> 00:26:49,000 Speaker 1: cuts in the corporate tax rate UM are necessary at 486 00:26:49,400 --> 00:26:54,119 Speaker 1: UH this point. The business community didn't even ask for 487 00:26:54,200 --> 00:27:00,000 Speaker 1: the corporate tax rate they got. Yes, not every one 488 00:27:00,080 --> 00:27:04,359 Speaker 1: of the Biden proposals in the international area is right. Yes, 489 00:27:04,600 --> 00:27:09,680 Speaker 1: I can understand the concern to raise rates to rather 490 00:27:09,720 --> 00:27:13,560 Speaker 1: than percent. I think there's real validity there. But the 491 00:27:13,600 --> 00:27:18,360 Speaker 1: proposition that we cannot afford UH to raise the corporate 492 00:27:18,440 --> 00:27:25,280 Speaker 1: rate back to cent is an economic absurdity. The other 493 00:27:25,359 --> 00:27:29,800 Speaker 1: economic absurdity is the bank's claim that somehow they can't 494 00:27:29,960 --> 00:27:35,760 Speaker 1: figure out how to do information reporting on large deposits 495 00:27:36,080 --> 00:27:39,480 Speaker 1: UH in accounts and help the i R S enforce 496 00:27:39,840 --> 00:27:43,719 Speaker 1: UH the tax law. I've really been disappointed in parts 497 00:27:43,760 --> 00:27:47,880 Speaker 1: of UH. The business community. Their right to be focused 498 00:27:47,880 --> 00:27:51,320 Speaker 1: on what's important, and they're right to have concerns about 499 00:27:51,320 --> 00:27:55,280 Speaker 1: a variety of the trends right now. But this idea 500 00:27:55,359 --> 00:28:00,719 Speaker 1: that we can't have any corporate tax increase is dangerous 501 00:28:00,760 --> 00:28:03,840 Speaker 1: and misguided. Larry the Fed was in the news this 502 00:28:03,880 --> 00:28:06,719 Speaker 1: week for a somewhat different reason. On Thursday, they came 503 00:28:06,760 --> 00:28:09,160 Speaker 1: up with a new set of rules restricting trading coming 504 00:28:09,200 --> 00:28:11,240 Speaker 1: off of some of the incidents that we know so 505 00:28:11,320 --> 00:28:14,159 Speaker 1: well with some of the regional FED presidents. What do 506 00:28:14,200 --> 00:28:16,600 Speaker 1: you make of this entire situation with respect to the 507 00:28:16,640 --> 00:28:22,480 Speaker 1: FED and how it is administering its rules about trading securities. Look, 508 00:28:22,720 --> 00:28:25,119 Speaker 1: I'm not in a I'm not in a position to 509 00:28:25,280 --> 00:28:30,880 Speaker 1: judge any individual, but here's what actually troubles me. It's 510 00:28:30,920 --> 00:28:35,560 Speaker 1: pretty clear that whatever was done by the regional presidents 511 00:28:36,359 --> 00:28:38,960 Speaker 1: was legal under the rules that the FED had set, 512 00:28:39,960 --> 00:28:42,080 Speaker 1: and that should be a subject for some real soul 513 00:28:42,120 --> 00:28:45,960 Speaker 1: searching at the FED. Is kind of how that could 514 00:28:46,040 --> 00:28:50,719 Speaker 1: have been uh the case. You know, it's scary for 515 00:28:50,800 --> 00:28:53,240 Speaker 1: public officials to think they have to be their own 516 00:28:53,240 --> 00:28:58,360 Speaker 1: ethics officers. We should have ethics officers who write reasonable 517 00:28:58,360 --> 00:29:01,840 Speaker 1: ethics rules, and if you comply with the ethics rules, 518 00:29:01,880 --> 00:29:07,160 Speaker 1: then you've been ethical. And the FED had ethics rules 519 00:29:07,200 --> 00:29:12,200 Speaker 1: that were much to lax um prior to this, and 520 00:29:12,360 --> 00:29:15,640 Speaker 1: I think it has to ask how that happened and 521 00:29:16,160 --> 00:29:20,840 Speaker 1: do some pretty systematic review of its ethics rules across 522 00:29:20,920 --> 00:29:23,440 Speaker 1: the board. One more quick one, Larry A big piece 523 00:29:23,440 --> 00:29:27,160 Speaker 1: of news this week was this a new bitcoin futures 524 00:29:27,200 --> 00:29:29,680 Speaker 1: ets started trading and went to the moon, and now 525 00:29:29,720 --> 00:29:32,600 Speaker 1: we have some more coming online. What do you make 526 00:29:32,640 --> 00:29:34,760 Speaker 1: of what's going on here? And I guess more specifically, 527 00:29:34,800 --> 00:29:37,760 Speaker 1: is this just a new, bright and shiny object or 528 00:29:37,880 --> 00:29:41,040 Speaker 1: is there something related potentially back into inflation? Here? Is 529 00:29:41,080 --> 00:29:45,200 Speaker 1: bitcoin potentially or cryptocurrency potential hedge against inflation. Look, I 530 00:29:45,200 --> 00:29:51,240 Speaker 1: think what you saw this week was bitcoin has had 531 00:29:51,320 --> 00:29:55,520 Speaker 1: some emergence as digital gold, the thing you want to 532 00:29:55,600 --> 00:30:00,080 Speaker 1: hold if you're worried about inflation, and it all so 533 00:30:00,320 --> 00:30:05,640 Speaker 1: became easier to hold because of these et s. And 534 00:30:05,680 --> 00:30:09,680 Speaker 1: so when there's more motive to hedge against inflation, and 535 00:30:10,120 --> 00:30:14,080 Speaker 1: it's easier to hedge against inflation, you're likely to see 536 00:30:14,120 --> 00:30:16,479 Speaker 1: that asset go up. Okay, thank you Avery much. When 537 00:30:16,480 --> 00:30:18,120 Speaker 1: we want to understand what happened this week, we always 538 00:30:18,120 --> 00:30:20,200 Speaker 1: turned to you. Larry Summers are a very special contributor 539 00:30:20,320 --> 00:30:22,640 Speaker 1: to Wall Street Week. Thinks a lot, Larry, Finally, one 540 00:30:22,680 --> 00:30:26,800 Speaker 1: more thought going down the rabbitar hole. In a week 541 00:30:26,880 --> 00:30:30,160 Speaker 1: full of earnings and crypto and more trouble in Chinese 542 00:30:30,160 --> 00:30:32,760 Speaker 1: real estate, you might be forgiven if you missed or 543 00:30:32,800 --> 00:30:35,280 Speaker 1: listen to pay much attention to the exploration of a 544 00:30:35,320 --> 00:30:40,760 Speaker 1: whole new universe, or more accurately, metaverse, that reportedly is 545 00:30:40,760 --> 00:30:42,680 Speaker 1: a place where we can all go and hang out 546 00:30:42,760 --> 00:30:45,400 Speaker 1: and do business and pretty much live our lives, or 547 00:30:45,440 --> 00:30:49,320 Speaker 1: at least our avatars can live their lives facebooks. Nicola 548 00:30:49,400 --> 00:30:52,680 Speaker 1: Mendelssohn told us about her company's initiative that will start 549 00:30:52,720 --> 00:30:55,560 Speaker 1: with massive hiring right here in our current universe in 550 00:30:55,600 --> 00:30:59,080 Speaker 1: a little corner called Europe. These ten thousand highly skilled 551 00:30:59,160 --> 00:31:01,080 Speaker 1: jobs are really for us, going to put Europeans at 552 00:31:01,080 --> 00:31:03,800 Speaker 1: the heart of our plans for the company future, which 553 00:31:03,800 --> 00:31:06,920 Speaker 1: you say is all about the metaverse, and more excited 554 00:31:06,960 --> 00:31:10,680 Speaker 1: about the metaverse, which we see as being the next 555 00:31:10,720 --> 00:31:14,400 Speaker 1: computing platform. It's not just Facebook that wants to explore 556 00:31:14,440 --> 00:31:17,320 Speaker 1: this metaverse, and it isn't all way in the future. 557 00:31:17,440 --> 00:31:20,120 Speaker 1: In Las Vegas, they are having a music festival this 558 00:31:20,320 --> 00:31:23,440 Speaker 1: very weekend. It's called the Electric Daisy Carnival. And if 559 00:31:23,480 --> 00:31:25,920 Speaker 1: you can't make it there physically, well not to worry. 560 00:31:26,320 --> 00:31:29,160 Speaker 1: You can join it in the metaverse version. Not to 561 00:31:29,160 --> 00:31:32,640 Speaker 1: be done, Playboy has announced its own metaverse, built around 562 00:31:33,000 --> 00:31:35,800 Speaker 1: advertage that you might guess it are rabbits or what 563 00:31:35,880 --> 00:31:40,280 Speaker 1: they called rabbit oars. Not everyone in the current social 564 00:31:40,320 --> 00:31:43,760 Speaker 1: media world has entirely bought into this metaverse thing. When 565 00:31:43,800 --> 00:31:46,240 Speaker 1: someone tweeted that the term metaverse, after all, came from 566 00:31:46,240 --> 00:31:49,520 Speaker 1: a science fiction novel. It was about a dystopian world 567 00:31:49,560 --> 00:31:53,880 Speaker 1: created by nasty corporations who oppressed and users. They tweeted, 568 00:31:54,200 --> 00:31:56,960 Speaker 1: could that author be right? Man Jack Dorsey of Twitter, Well, 569 00:31:56,960 --> 00:32:00,680 Speaker 1: he tweeted simply he was. And I'm not how Elizabeth 570 00:32:00,720 --> 00:32:04,920 Speaker 1: Warren would go about regulating this new metaverse. But if 571 00:32:04,920 --> 00:32:07,240 Speaker 1: you thought this might just be a passing fad you 572 00:32:07,320 --> 00:32:09,400 Speaker 1: might be able to ignore it, you better think again, 573 00:32:09,600 --> 00:32:12,400 Speaker 1: particularly if you have a brand to promote or to protect. 574 00:32:12,840 --> 00:32:16,680 Speaker 1: According to Ann Hand of Super League Gaming, any brand 575 00:32:16,720 --> 00:32:19,560 Speaker 1: out there, if you don't have a metaverse play happening, 576 00:32:19,880 --> 00:32:22,080 Speaker 1: you need to think about it. That does it. For 577 00:32:22,120 --> 00:32:24,280 Speaker 1: this episode of Wall Street Week, I'm David Weston. This 578 00:32:24,440 --> 00:32:27,600 Speaker 1: is Bloomberg. See you next week.