1 00:00:00,560 --> 00:00:02,880 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,920 --> 00:00:04,520 Speaker 2: We turn our attention to the markets. 3 00:00:04,519 --> 00:00:04,840 Speaker 3: This week. 4 00:00:05,000 --> 00:00:08,760 Speaker 2: USCPI nembers reinforcing concerns about inflation. 5 00:00:08,480 --> 00:00:10,840 Speaker 1: The financial stories that shape our worth, a. 6 00:00:10,880 --> 00:00:13,560 Speaker 2: Really different reaction to the market. Some more indications of 7 00:00:13,800 --> 00:00:16,079 Speaker 2: just how hot the US economy really is. 8 00:00:16,079 --> 00:00:18,760 Speaker 1: Through the eyes of the most influential voices. 9 00:00:18,720 --> 00:00:21,639 Speaker 2: Katherine Keating, CEO of B and Y Moan, Ryan Winnahan, 10 00:00:21,760 --> 00:00:24,520 Speaker 2: a Bank of America, Sam Zell Sharman and founder of 11 00:00:24,520 --> 00:00:26,960 Speaker 2: Atrey Group Investments, Bloomberg. 12 00:00:26,560 --> 00:00:31,200 Speaker 1: Wall Street with David Weston from Bloomberg Radio this week. 13 00:00:31,240 --> 00:00:33,400 Speaker 2: There may have been a lot going on, but it 14 00:00:33,440 --> 00:00:36,199 Speaker 2: seemed like all Global Wall Street could talk about were 15 00:00:36,360 --> 00:00:39,000 Speaker 2: those on again, off again talks at the White House 16 00:00:39,080 --> 00:00:42,040 Speaker 2: of the dead Ceiling I Speaker McCarthy kept insisting there 17 00:00:42,080 --> 00:00:45,280 Speaker 2: would be no default provided there were spending guts. We're 18 00:00:45,320 --> 00:00:48,640 Speaker 2: not going to default, but we have to spend less 19 00:00:48,960 --> 00:00:52,400 Speaker 2: than we spent last year. House Minority Leader Hakim Jefferies 20 00:00:52,440 --> 00:00:56,240 Speaker 2: responded that the cuts McCarthy was demanding just go too far. 21 00:00:56,880 --> 00:01:04,680 Speaker 4: House Republicans are determined to either extract deep, painful cuts 22 00:01:05,280 --> 00:01:08,440 Speaker 4: that will hurt the health, the safety, or the well 23 00:01:08,480 --> 00:01:12,679 Speaker 4: being of everyday Americans or crash the economy, and. 24 00:01:12,680 --> 00:01:15,080 Speaker 2: President Biden conceded that there would have to be some 25 00:01:15,319 --> 00:01:18,760 Speaker 2: spending cuts, but that there had to be revenue increases 26 00:01:18,840 --> 00:01:19,360 Speaker 2: as well. 27 00:01:19,520 --> 00:01:21,920 Speaker 5: We've got to get something you can sell to both sides, 28 00:01:22,560 --> 00:01:24,240 Speaker 5: and we need to cut spending. 29 00:01:24,319 --> 00:01:25,720 Speaker 3: But are they revenue matters? 30 00:01:26,080 --> 00:01:28,880 Speaker 2: And through it all, Wall Street insiders like Steve Schwartzman 31 00:01:29,040 --> 00:01:31,960 Speaker 2: continue to insist that in the end they'll work it out. 32 00:01:32,000 --> 00:01:37,760 Speaker 3: Tomhow this is someone of micheal wills and desire to 33 00:01:37,880 --> 00:01:40,440 Speaker 3: not blink in the whole world is watching. 34 00:01:40,920 --> 00:01:44,400 Speaker 2: But despite all the budgets, storm and drawing, there were 35 00:01:44,480 --> 00:01:47,320 Speaker 2: some other things worth paying attention to this week, like 36 00:01:47,400 --> 00:01:50,400 Speaker 2: China's move against Micron selling its chips there. 37 00:01:50,840 --> 00:01:55,120 Speaker 6: Broadly, this action appears inconsistent with the PRC's assertions that 38 00:01:55,200 --> 00:01:58,160 Speaker 6: it is open for business and committed to a transparent 39 00:01:58,200 --> 00:01:59,200 Speaker 6: regulatory framework. 40 00:01:59,360 --> 00:02:02,040 Speaker 2: FED minutes from the last meeting showed how uncertain the 41 00:02:02,080 --> 00:02:04,600 Speaker 2: Central Bank is about where it is heading next. 42 00:02:04,840 --> 00:02:07,960 Speaker 5: But mined show FED officials were more divided than usual 43 00:02:08,040 --> 00:02:13,200 Speaker 5: at their May meeting as they debated uncertainties about bank problems, inflation, 44 00:02:13,680 --> 00:02:14,840 Speaker 5: and the debt limit. 45 00:02:15,080 --> 00:02:18,240 Speaker 2: And Nvidia shot the lights out with revenue projections as 46 00:02:18,280 --> 00:02:20,320 Speaker 2: the world stampedes to AI. 47 00:02:20,720 --> 00:02:23,040 Speaker 6: When you look at the data center market, it is 48 00:02:23,280 --> 00:02:26,600 Speaker 6: white hot. People that are developing data centers don't even 49 00:02:26,639 --> 00:02:29,800 Speaker 6: get them developed before one of the fangs leases for 50 00:02:29,880 --> 00:02:30,560 Speaker 6: thirty years. 51 00:02:32,120 --> 00:02:35,160 Speaker 2: The US economic numbers came in stronger than anticipated, with 52 00:02:35,200 --> 00:02:38,239 Speaker 2: personal and business spending up and the year over your 53 00:02:38,280 --> 00:02:42,320 Speaker 2: PCE core deflators stubbornly up at four point seven percent. 54 00:02:42,680 --> 00:02:44,680 Speaker 2: But the markets for the week pretty much reacted to 55 00:02:44,720 --> 00:02:47,520 Speaker 2: those two other stories, the debt, ceialing negotiations and what 56 00:02:47,600 --> 00:02:49,720 Speaker 2: AI means for tech, with the S and P five 57 00:02:49,800 --> 00:02:52,320 Speaker 2: hundred upo point three two percent for the week ending 58 00:02:52,360 --> 00:02:54,640 Speaker 2: of just over that forty two hundred number of people 59 00:02:54,720 --> 00:02:57,040 Speaker 2: have been focused on and two hundred points above our 60 00:02:57,080 --> 00:02:59,720 Speaker 2: Bloomberg Elves median estimate for the end of the year 61 00:03:00,160 --> 00:03:04,160 Speaker 2: four thousand. Vanasak was up a whopping two point five percent, 62 00:03:04,480 --> 00:03:07,040 Speaker 2: while the yield on the tenure added another twelve basis 63 00:03:07,080 --> 00:03:09,880 Speaker 2: points and in the week just under three point eight percent. 64 00:03:10,160 --> 00:03:11,960 Speaker 2: To take us through the week. In the markets, Welcome 65 00:03:12,040 --> 00:03:15,200 Speaker 2: now Lori Kalvacinas, she's RBC Capital Markets Head of US 66 00:03:15,240 --> 00:03:18,840 Speaker 2: Equity Strategy, and Jillian Teent Financial Times chair of the 67 00:03:18,919 --> 00:03:21,680 Speaker 2: editorial board and editor at large US. So welcome back 68 00:03:21,680 --> 00:03:22,079 Speaker 2: to both of you. 69 00:03:22,160 --> 00:03:22,359 Speaker 7: Laurie. 70 00:03:22,400 --> 00:03:23,720 Speaker 2: Let me start with you and what's going on with 71 00:03:23,760 --> 00:03:27,320 Speaker 2: the markets. Given all of the nervousness on some front 72 00:03:27,440 --> 00:03:30,000 Speaker 2: about the debt, it's surprising, least to me, the equity 73 00:03:30,040 --> 00:03:32,239 Speaker 2: markets didn't really react all that much, did they. 74 00:03:32,720 --> 00:03:35,360 Speaker 8: They didn't. I would say the market's generally been reacting 75 00:03:35,400 --> 00:03:37,920 Speaker 8: by rotating as opposed to pulling money out. And if 76 00:03:37,960 --> 00:03:40,640 Speaker 8: you talk to US based equity investors, they'll tell you, hey, look, 77 00:03:40,640 --> 00:03:43,160 Speaker 8: we've seen this story before. The stakes are high, but 78 00:03:43,200 --> 00:03:44,560 Speaker 8: we think a deal is going to get done. So 79 00:03:44,600 --> 00:03:47,360 Speaker 8: they've moved out of cyclicals and into things like tech 80 00:03:47,400 --> 00:03:50,080 Speaker 8: and defensives, which is generally what you see in debt 81 00:03:50,120 --> 00:03:53,280 Speaker 8: sealing drawdowns. But at the same time, we're hearing from 82 00:03:53,280 --> 00:03:55,400 Speaker 8: the big kind of non US investors that they've been 83 00:03:55,480 --> 00:03:57,840 Speaker 8: very worried about this. They don't know our politics as well, 84 00:03:58,400 --> 00:04:00,480 Speaker 8: So I would say kind of the steadier and the 85 00:04:00,520 --> 00:04:03,720 Speaker 8: more kind of even keeled local investors are taking it 86 00:04:03,760 --> 00:04:05,560 Speaker 8: in stride. That doesn't mean they don't care, that doesn't 87 00:04:05,600 --> 00:04:07,360 Speaker 8: mean the markets won't react if we don't end up 88 00:04:07,360 --> 00:04:09,560 Speaker 8: getting a deal. But there is a patience here that 89 00:04:09,640 --> 00:04:10,200 Speaker 8: makes sense. 90 00:04:10,600 --> 00:04:13,560 Speaker 2: So so, Laurie, what about that recession question, because we 91 00:04:13,640 --> 00:04:16,479 Speaker 2: have been hearing these predictions of a recession in twenty 92 00:04:16,520 --> 00:04:18,080 Speaker 2: twenty three, it was going to be the second quarter, 93 00:04:18,080 --> 00:04:19,359 Speaker 2: it's going to be the third quarter, and it's a 94 00:04:19,360 --> 00:04:21,919 Speaker 2: fourth quarter. Is it just a matter of timing or 95 00:04:22,000 --> 00:04:24,360 Speaker 2: is there a question even whether there will be a recession. 96 00:04:24,400 --> 00:04:26,479 Speaker 8: I think there's a question, a legitimate one, about whether 97 00:04:26,520 --> 00:04:27,880 Speaker 8: or not we're even going to get it, or if 98 00:04:27,880 --> 00:04:30,640 Speaker 8: you end up getting something similar to twenty fifteen twenty sixteen, 99 00:04:30,680 --> 00:04:33,320 Speaker 8: which was pretty close but not quite. And I think 100 00:04:33,400 --> 00:04:35,359 Speaker 8: what's interesting, and I see this more from the lens 101 00:04:35,360 --> 00:04:38,240 Speaker 8: of earnings, is that we're in an asynchronous cycle in 102 00:04:38,279 --> 00:04:40,960 Speaker 8: terms of the economy. There are different industries and different sectors. 103 00:04:40,960 --> 00:04:43,760 Speaker 8: They're going through different processes at different points in time. 104 00:04:44,080 --> 00:04:46,479 Speaker 8: If you think about sort of your inflation, you know 105 00:04:46,560 --> 00:04:50,640 Speaker 8: sort of beneficiaries, the beneficiaries of higher interest rates, things 106 00:04:50,680 --> 00:04:53,720 Speaker 8: like financials and energy they saw big upward revisions last year, 107 00:04:53,960 --> 00:04:57,240 Speaker 8: while tech companies, growth companies, supply chain centric sectors were 108 00:04:57,240 --> 00:05:00,279 Speaker 8: all seen downward revisions. Now the tables have turned everything 109 00:05:00,320 --> 00:05:02,240 Speaker 8: that was getting hurt last year as in a recovery, 110 00:05:02,440 --> 00:05:04,760 Speaker 8: and things that were benefiting from inflation and interest rates 111 00:05:04,760 --> 00:05:07,760 Speaker 8: stramping are seen their downward revision cycle. That's a very 112 00:05:07,880 --> 00:05:10,239 Speaker 8: very confusing cross current, but if you spread the pain 113 00:05:10,400 --> 00:05:13,040 Speaker 8: out a bit, you could actually skate by without a 114 00:05:13,040 --> 00:05:14,600 Speaker 8: true sort of recession happening. 115 00:05:15,040 --> 00:05:17,200 Speaker 2: One more before we turn to everybody's favorite topic, which 116 00:05:17,240 --> 00:05:19,479 Speaker 2: is of course artificial intelligence. But Jillian, to you, you 117 00:05:19,560 --> 00:05:21,480 Speaker 2: mentioned the FED and what the FED is likely to do. 118 00:05:21,880 --> 00:05:24,520 Speaker 2: We got some strong numbers in this week, actually indicating 119 00:05:24,520 --> 00:05:26,839 Speaker 2: both on the inflation staying up but also the economy 120 00:05:26,920 --> 00:05:30,040 Speaker 2: being quite strong. Where do you think the FED is heading? 121 00:05:30,120 --> 00:05:32,000 Speaker 2: Do you think they're going to continue to rise at all? 122 00:05:32,120 --> 00:05:33,280 Speaker 2: And by the way, if you want to, you can 123 00:05:33,320 --> 00:05:35,520 Speaker 2: give us the job's number for next Friday. It's okay. 124 00:05:36,640 --> 00:05:38,480 Speaker 3: Well, if I did that, i'd be a trader. 125 00:05:40,279 --> 00:05:42,839 Speaker 9: I think the FED is under pressure to keep raising, 126 00:05:42,920 --> 00:05:46,240 Speaker 9: keep tightening. It may skip that for this coming meeting 127 00:05:46,279 --> 00:05:48,320 Speaker 9: and do a wait and see stance, but I certainly 128 00:05:48,360 --> 00:05:50,000 Speaker 9: don't think it's going to cut any time soon. And 129 00:05:50,040 --> 00:05:53,040 Speaker 9: I'm actually think the market projections of twenty five bases 130 00:05:53,080 --> 00:05:56,520 Speaker 9: point rise now is quite reasonable given the fat that 131 00:05:56,560 --> 00:05:59,960 Speaker 9: we still haven't seen a significant decline in the inflation rate, 132 00:06:00,200 --> 00:06:03,279 Speaker 9: and the economy hasn't yet shown signs of being in recession. 133 00:06:03,640 --> 00:06:05,440 Speaker 9: I think in many ways, a more interesting issue that 134 00:06:05,480 --> 00:06:08,200 Speaker 9: the Fed's also facing, though, is, you know, is it 135 00:06:08,240 --> 00:06:11,480 Speaker 9: going to give any hint of rethinking the inflation target 136 00:06:11,480 --> 00:06:14,680 Speaker 9: going forward again. One of the messages that came back 137 00:06:14,720 --> 00:06:17,560 Speaker 9: from being down in the South earlier this week and 138 00:06:17,640 --> 00:06:19,560 Speaker 9: talking to people is that a lot of the commercial 139 00:06:19,560 --> 00:06:23,680 Speaker 9: real estate sector are constantly asking FED officials, you know, 140 00:06:23,760 --> 00:06:26,000 Speaker 9: are you going to change the inflation target. There's a 141 00:06:26,040 --> 00:06:29,240 Speaker 9: kind of desperate hope amongst many in that sector that 142 00:06:29,400 --> 00:06:33,320 Speaker 9: actually the rate rises will stop because the inflation target changes. Now, 143 00:06:33,360 --> 00:06:36,680 Speaker 9: the fled's been very keen to squash that quite forcefully, 144 00:06:37,240 --> 00:06:39,760 Speaker 9: but that question is going to liner and linger, particularly 145 00:06:39,760 --> 00:06:43,120 Speaker 9: if the inflation keeps coming in higher than people had expected. 146 00:06:43,360 --> 00:06:45,400 Speaker 2: I'm going to turn to that subject, which is everyone's 147 00:06:45,400 --> 00:06:48,400 Speaker 2: favorite subject and now is generative AI. And if it 148 00:06:48,400 --> 00:06:51,200 Speaker 2: weren't our favorite preessional subject before. When Vidio came out 149 00:06:51,240 --> 00:06:54,120 Speaker 2: with those earnings projections, it was really pretty extraordinary. We 150 00:06:54,160 --> 00:06:56,839 Speaker 2: have people saying this is as big as electricity or 151 00:06:56,960 --> 00:07:01,599 Speaker 2: fire or the invention of the wheel overestimating what this 152 00:07:01,720 --> 00:07:03,600 Speaker 2: generative AI mean for us all. 153 00:07:03,839 --> 00:07:07,120 Speaker 9: Well, the reason why the Navidio stot hoped sodomatically and 154 00:07:07,200 --> 00:07:09,600 Speaker 9: came up with the extordy ownings is very much down 155 00:07:09,600 --> 00:07:13,239 Speaker 9: to the dazzle factor, but also the confusion factor. Because 156 00:07:13,360 --> 00:07:16,360 Speaker 9: investors know that something big is happening, they don't really 157 00:07:16,440 --> 00:07:19,280 Speaker 9: understand the technology. They don't understand the degree to which 158 00:07:19,280 --> 00:07:22,440 Speaker 9: companies that our AI companies actually have a moat that 159 00:07:22,560 --> 00:07:25,800 Speaker 9: can defend them from you know, new rivals, and so 160 00:07:25,840 --> 00:07:27,680 Speaker 9: there's a lot of uncertaintly there. The one thing that's 161 00:07:27,680 --> 00:07:30,200 Speaker 9: crystal clear though, is that this is going to require 162 00:07:30,240 --> 00:07:32,080 Speaker 9: a lot of computing power and a lot of chips. 163 00:07:32,600 --> 00:07:35,440 Speaker 9: So people are grasping on anything they can see the 164 00:07:35,480 --> 00:07:38,720 Speaker 9: shiny new thing to try and have a play at 165 00:07:38,720 --> 00:07:41,800 Speaker 9: this whole wave. In terms of the significance of generative 166 00:07:41,880 --> 00:07:46,160 Speaker 9: AI is obviously very significant. You know, we've had AI 167 00:07:46,240 --> 00:07:48,120 Speaker 9: for a very long time. It's all part of our 168 00:07:48,400 --> 00:07:51,680 Speaker 9: everyday experience. But you know, for me, one of the 169 00:07:51,680 --> 00:07:54,800 Speaker 9: ways to explain what's going on is that as an anthropologist, 170 00:07:54,880 --> 00:07:57,360 Speaker 9: I always used to joke that the one thing that 171 00:07:57,440 --> 00:08:00,400 Speaker 9: AI couldn't do is have a sense of human and 172 00:08:00,440 --> 00:08:04,680 Speaker 9: tell jokes, because jokes are fundamentally rooted in culture, which 173 00:08:04,760 --> 00:08:07,000 Speaker 9: is hard to describe and hard to define and often 174 00:08:07,120 --> 00:08:12,120 Speaker 9: very contradictory. And most of the traditional platforms inside computers 175 00:08:12,240 --> 00:08:16,000 Speaker 9: looked for logic and patterns and things like that. What 176 00:08:16,080 --> 00:08:19,080 Speaker 9: you'll start to see with platforms like Generator of AI 177 00:08:19,520 --> 00:08:21,920 Speaker 9: are machines that are so sophisticated and so good at 178 00:08:21,960 --> 00:08:26,680 Speaker 9: watching people and replicating human behavior even if it's not logical, 179 00:08:27,040 --> 00:08:30,080 Speaker 9: and behaving like an anthropologist not a scientist, that you're 180 00:08:30,080 --> 00:08:33,440 Speaker 9: starting to get AI platforms which are almost beginning to 181 00:08:33,480 --> 00:08:37,040 Speaker 9: tell jokes. So it's really quite a big change in 182 00:08:37,160 --> 00:08:39,640 Speaker 9: terms of what's happening. The big question though, is what 183 00:08:39,679 --> 00:08:43,760 Speaker 9: it means in terms of real world applications and company valuations. 184 00:08:43,880 --> 00:08:46,480 Speaker 2: So as a loyal turn to you here and how 185 00:08:46,480 --> 00:08:48,720 Speaker 2: big this could be? Is this a new lease on 186 00:08:48,760 --> 00:08:50,040 Speaker 2: life for all of tech essentially? 187 00:08:50,200 --> 00:08:51,840 Speaker 8: So, look, I think this is another thing you can 188 00:08:51,840 --> 00:08:54,000 Speaker 8: put in the category of rallies that have been deserved. 189 00:08:54,040 --> 00:08:55,960 Speaker 8: I know it's sort of trendy to go out and say, 190 00:08:56,000 --> 00:08:57,840 Speaker 8: you know, the market is toppy and this is just 191 00:08:57,880 --> 00:09:01,040 Speaker 8: all this AI hype and it's not deserved. I think 192 00:09:01,080 --> 00:09:03,360 Speaker 8: there's a paucity of growth stories out there right now, 193 00:09:03,360 --> 00:09:05,960 Speaker 8: and when you think about the conversation on reshoring that's 194 00:09:05,960 --> 00:09:08,000 Speaker 8: been going on and talking to a lot of investors 195 00:09:08,040 --> 00:09:09,760 Speaker 8: about that in recent months, is kind of the only 196 00:09:09,840 --> 00:09:12,640 Speaker 8: big interesting growth narrative out there. Well, now we've got 197 00:09:12,640 --> 00:09:15,800 Speaker 8: something to keep it company, which is AI. Ultimately, my 198 00:09:15,880 --> 00:09:18,920 Speaker 8: gut is that this is going to be another productivity enhancer, 199 00:09:19,000 --> 00:09:22,360 Speaker 8: something very cool, something very interesting that enhances productivity. Is 200 00:09:22,400 --> 00:09:24,679 Speaker 8: it going to completely transform society? I'm not quite sure. 201 00:09:24,720 --> 00:09:26,400 Speaker 8: I'm in that camp, But in terms of the market 202 00:09:26,440 --> 00:09:28,800 Speaker 8: and why it's getting so excited, I think it's because 203 00:09:28,800 --> 00:09:31,080 Speaker 8: there hasn't been a lot of other things in this 204 00:09:31,160 --> 00:09:33,480 Speaker 8: kind of category of secular growth stories to get excited 205 00:09:33,520 --> 00:09:34,120 Speaker 8: about recently. 206 00:09:34,240 --> 00:09:36,040 Speaker 2: Julian, I'm going to ask you to do something very unfair. 207 00:09:36,080 --> 00:09:39,199 Speaker 2: You have a terrific column in the Financial Times ABOUTIA 208 00:09:39,240 --> 00:09:41,400 Speaker 2: I believe it's called in Ukraine. Could you just give 209 00:09:41,480 --> 00:09:43,199 Speaker 2: us thirty or forty five seconds of that because I 210 00:09:43,360 --> 00:09:45,160 Speaker 2: thought it was really extraordinary. I'd love you to come 211 00:09:45,200 --> 00:09:46,520 Speaker 2: back and really explain it more detail. 212 00:09:46,640 --> 00:09:49,520 Speaker 9: As an Idea is an app that Ukrainians thought three 213 00:09:49,600 --> 00:09:52,680 Speaker 9: years ago to enable Ukrainian citizens to do all the 214 00:09:52,800 --> 00:09:55,320 Speaker 9: usual government functions that any of us ever have to do, 215 00:09:56,080 --> 00:09:58,600 Speaker 9: not by going to an office and filling in paper storms, 216 00:09:58,840 --> 00:10:01,640 Speaker 9: but on your phone with app. And initially it seemed 217 00:10:01,679 --> 00:10:03,800 Speaker 9: like just a very minor tool that a few people 218 00:10:03,880 --> 00:10:07,960 Speaker 9: might use for things like vaccinations, status in COVID. But 219 00:10:08,040 --> 00:10:11,120 Speaker 9: these days seventy percent of Ukrainian phones have this app. 220 00:10:11,240 --> 00:10:14,120 Speaker 9: Half the population is using it. They're doing almost everything 221 00:10:14,160 --> 00:10:16,400 Speaker 9: to do with the government on this cell phone app. 222 00:10:16,440 --> 00:10:18,400 Speaker 9: And the key point is that not only has it 223 00:10:18,440 --> 00:10:22,160 Speaker 9: meant that Ukraine's kept functioning even as refugees have flooded 224 00:10:22,240 --> 00:10:25,120 Speaker 9: everywhere because they've all got their passports and stuff on 225 00:10:25,120 --> 00:10:27,320 Speaker 9: their phone, but it's also meant that they have one 226 00:10:27,360 --> 00:10:30,320 Speaker 9: way potentially to try and cut down in corruption. And 227 00:10:30,360 --> 00:10:32,480 Speaker 9: the crucial thing to understand, the reason why it's so 228 00:10:32,520 --> 00:10:34,920 Speaker 9: important this week is because they're trying to take it. 229 00:10:34,920 --> 00:10:37,640 Speaker 9: The USAID is trying to take it and export it 230 00:10:37,679 --> 00:10:38,520 Speaker 9: to other countries. 231 00:10:38,800 --> 00:10:41,160 Speaker 2: A tech export from Ukraine. How about that, and particularly 232 00:10:41,160 --> 00:10:43,240 Speaker 2: if it deals with DMV, I'd be all for it. 233 00:10:43,440 --> 00:10:46,440 Speaker 2: Many Thanks to Lori Calvascino of RBC Cattle Markets and 234 00:10:46,520 --> 00:10:49,120 Speaker 2: Julian tat Has, the Financial Times coming up could your 235 00:10:49,200 --> 00:10:53,000 Speaker 2: friendly neighborhood chat Ai beat the stock market. We're going 236 00:10:53,040 --> 00:10:56,640 Speaker 2: to hear from investing guru David Booth's Dimensional Fund ad Advisors. 237 00:10:56,760 --> 00:10:58,800 Speaker 2: He has some doubts about it. He's not sure that 238 00:10:58,840 --> 00:11:01,000 Speaker 2: you can beat the market within. That's going to come 239 00:11:01,040 --> 00:11:05,640 Speaker 2: up next on Wall Street Weeedons. 240 00:11:07,080 --> 00:11:11,240 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 241 00:11:11,400 --> 00:11:12,319 Speaker 1: Bloomberg Radio. 242 00:11:12,520 --> 00:11:15,640 Speaker 2: Private equity, it's come a long way since Henry Cravis 243 00:11:15,720 --> 00:11:17,760 Speaker 2: and George Roberts put it on the map with that 244 00:11:17,840 --> 00:11:21,040 Speaker 2: twenty five billion dollar buyout of R JR. Nabisco back 245 00:11:21,080 --> 00:11:24,600 Speaker 2: in nineteen eighty eight, made famous in Barbarians at the Gate. 246 00:11:24,880 --> 00:11:27,880 Speaker 1: I'm talking about putting a mountain of money into everybody's 247 00:11:27,920 --> 00:11:29,040 Speaker 1: pocket right now. 248 00:11:29,200 --> 00:11:32,000 Speaker 2: And it has evolved since Democrats tried to make Mitt 249 00:11:32,040 --> 00:11:35,160 Speaker 2: Romney's role in running Bain Capital and issue in the 250 00:11:35,200 --> 00:11:37,520 Speaker 2: twenty twelve presidential campaign. 251 00:11:37,880 --> 00:11:39,880 Speaker 3: It's a very healthy and positive debate. 252 00:11:39,920 --> 00:11:42,000 Speaker 5: That doesn't mean the private equity world is going to 253 00:11:42,080 --> 00:11:42,800 Speaker 5: enjoy it very much. 254 00:11:42,960 --> 00:11:46,240 Speaker 2: Today, private equity is a massive asset class with over 255 00:11:46,320 --> 00:11:50,240 Speaker 2: eleven trillion dollars invested and another three trillion dollars and 256 00:11:50,280 --> 00:11:54,679 Speaker 2: so called dry powder waiting to be deployed. Although higher 257 00:11:54,800 --> 00:11:57,280 Speaker 2: rates slowed things down at the end of last year, 258 00:11:57,559 --> 00:12:00,240 Speaker 2: it's just beginning to show signs of coming back. 259 00:12:00,559 --> 00:12:03,920 Speaker 10: Fourth quarter of twenty two you had nothing today, you 260 00:12:04,040 --> 00:12:07,319 Speaker 10: actually had the markets loosening out for the right deals. 261 00:12:07,400 --> 00:12:13,160 Speaker 2: Leaving us all to look for that right deal and 262 00:12:13,240 --> 00:12:15,320 Speaker 2: to take us into the world of private equity. We 263 00:12:15,320 --> 00:12:18,480 Speaker 2: welcome to people who are in it from HGGC. We have, 264 00:12:18,559 --> 00:12:21,880 Speaker 2: first of all Steve Young, who's the chairman of HGGC 265 00:12:22,360 --> 00:12:24,560 Speaker 2: as well as the co founder, and we also have 266 00:12:24,679 --> 00:12:28,319 Speaker 2: Rich Lawson who's the CEO and also co founder of HGGC. 267 00:12:28,600 --> 00:12:31,000 Speaker 2: So welcome, gentlemen. It's great to have you here. First 268 00:12:31,040 --> 00:12:33,840 Speaker 2: of all, give us a sense of how HGGC fits 269 00:12:33,880 --> 00:12:35,760 Speaker 2: into this world of private equity. Steve, if you want 270 00:12:35,760 --> 00:12:36,959 Speaker 2: to go first, from. 271 00:12:36,760 --> 00:12:40,240 Speaker 11: The very beginning, from our roots, we decided that we 272 00:12:40,280 --> 00:12:43,080 Speaker 11: wanted to do private equity differently, and we believe that 273 00:12:43,120 --> 00:12:48,400 Speaker 11: across the table were people that were founders, you know, 274 00:12:48,880 --> 00:12:53,680 Speaker 11: financial sponsors, management teams. Across the table as somebody who 275 00:12:53,720 --> 00:12:56,720 Speaker 11: cares more about who I am than the last dollar 276 00:12:57,000 --> 00:12:59,120 Speaker 11: and what I bring to the table than. 277 00:12:59,000 --> 00:12:59,679 Speaker 1: The last dollar. 278 00:13:00,160 --> 00:13:03,000 Speaker 11: Fundamental principle is that partnership investing. 279 00:13:02,800 --> 00:13:04,320 Speaker 3: Will we'll wile of the world. 280 00:13:04,400 --> 00:13:07,040 Speaker 11: And fifteen years ago that was a little bit of 281 00:13:07,080 --> 00:13:10,000 Speaker 11: a bet. Today partnership investing has taken over the world. 282 00:13:10,320 --> 00:13:13,400 Speaker 11: And so for us, the differentiation that we make is 283 00:13:13,400 --> 00:13:17,760 Speaker 11: that we live here, we seek your reference across the table. 284 00:13:17,840 --> 00:13:20,119 Speaker 11: We need your reference at the end of this engagement 285 00:13:20,520 --> 00:13:22,920 Speaker 11: where because that's how we're going to go forward, because 286 00:13:22,920 --> 00:13:25,240 Speaker 11: that's all we do is partnership investing. Where others will 287 00:13:25,280 --> 00:13:28,080 Speaker 11: say we're partnership investors, but they rent here, they rent 288 00:13:28,080 --> 00:13:30,160 Speaker 11: here for the time, and they don't really it's not 289 00:13:30,240 --> 00:13:31,480 Speaker 11: rooted to who they are rich. 290 00:13:31,559 --> 00:13:34,440 Speaker 2: This partnership investing sounds really nice, and like I understand 291 00:13:34,440 --> 00:13:36,480 Speaker 2: why you might attract a lot of heels that way, 292 00:13:36,679 --> 00:13:38,640 Speaker 2: can you make as much money? Because that's not, let's 293 00:13:38,640 --> 00:13:41,720 Speaker 2: be frank, the model historically associated with private equity. We 294 00:13:41,760 --> 00:13:43,520 Speaker 2: think it was coming in and buying it, tripping a 295 00:13:43,520 --> 00:13:45,120 Speaker 2: lot of costs out and reselling it. 296 00:13:45,440 --> 00:13:47,840 Speaker 6: Where we focus is in the middle market, so medium 297 00:13:47,920 --> 00:13:51,080 Speaker 6: sized businesses. So for us, as a seven billion dollar 298 00:13:51,160 --> 00:13:54,640 Speaker 6: private equity firm, where we tend to see the opportunity 299 00:13:54,640 --> 00:13:57,760 Speaker 6: to create real appha is buying good businesses in the 300 00:13:57,800 --> 00:14:01,439 Speaker 6: middle market as traditionally defined with the goal of transforming 301 00:14:01,440 --> 00:14:03,040 Speaker 6: them into great companies. 302 00:14:02,760 --> 00:14:03,120 Speaker 3: So rich. 303 00:14:03,160 --> 00:14:05,000 Speaker 2: It sounds like when you come in, it's not the 304 00:14:05,040 --> 00:14:08,520 Speaker 2: management team that you're replacing. You don't come in by definition. 305 00:14:08,600 --> 00:14:10,840 Speaker 2: You've picked companies that have good management teams. So what 306 00:14:10,920 --> 00:14:13,880 Speaker 2: is it you're providing? Is it capital? Basically, and typically 307 00:14:13,880 --> 00:14:16,400 Speaker 2: in private equity, we think of leveraging up your capital 308 00:14:16,480 --> 00:14:18,000 Speaker 2: is equity as I understand. 309 00:14:17,600 --> 00:14:19,560 Speaker 6: It, we would think about it in sort of three 310 00:14:19,560 --> 00:14:22,720 Speaker 6: different deal market types. One is buy and built with 311 00:14:22,920 --> 00:14:26,200 Speaker 6: very important in this type of macro environment. The second 312 00:14:26,240 --> 00:14:31,240 Speaker 6: would be in business transformation, helping up upgrading core capabilities 313 00:14:31,240 --> 00:14:34,880 Speaker 6: and processes. And third is growth enablement, maybe changing the 314 00:14:34,880 --> 00:14:38,000 Speaker 6: go to market process, the go to market motion, helping 315 00:14:38,040 --> 00:14:42,240 Speaker 6: businesses called global But again we're taking very distinctly medium 316 00:14:42,280 --> 00:14:46,240 Speaker 6: sized companies call it a billion dollars of enterprise value below, 317 00:14:46,640 --> 00:14:50,560 Speaker 6: and we're creating multi billion dollar enterprises over the course 318 00:14:50,600 --> 00:14:53,680 Speaker 6: of a partnership with the owners of that business. 319 00:14:54,120 --> 00:14:56,600 Speaker 2: Steve, I understand you focus on the middle market, if 320 00:14:56,640 --> 00:14:59,120 Speaker 2: I can call it that. Are there particular sectors that 321 00:14:59,200 --> 00:15:02,720 Speaker 2: you tend to be attracted to or see deals from. 322 00:15:03,360 --> 00:15:05,800 Speaker 11: We live in Palo Alto, California. That's our that's our 323 00:15:06,400 --> 00:15:08,920 Speaker 11: our base of operations. So we've been in technology for 324 00:15:09,000 --> 00:15:11,720 Speaker 11: twenty five thirty years. So we're going to do some technology, 325 00:15:11,720 --> 00:15:15,000 Speaker 11: no question. But how tech has informed places like business services, 326 00:15:15,600 --> 00:15:19,440 Speaker 11: financial services, and even some consumer in particular places is 327 00:15:19,440 --> 00:15:21,920 Speaker 11: where we will kind of trade. We won't go further 328 00:15:22,000 --> 00:15:24,360 Speaker 11: than that, but that's a pretty wide swath, but we 329 00:15:24,440 --> 00:15:27,960 Speaker 11: are gaining, uh through our thematic sourcing efforts, uh, some 330 00:15:27,960 --> 00:15:31,120 Speaker 11: real expertise in our shop and uh, you know, we'll 331 00:15:31,600 --> 00:15:32,120 Speaker 11: we are. 332 00:15:32,000 --> 00:15:33,840 Speaker 3: Now trying for the first time. 333 00:15:33,880 --> 00:15:35,920 Speaker 11: You think I've been in kind of working to do 334 00:15:35,960 --> 00:15:39,120 Speaker 11: a sports angle and sports investing from the very beginn 335 00:15:39,120 --> 00:15:42,040 Speaker 11: income my previous life, but I I took my my heroes, 336 00:15:42,120 --> 00:15:45,640 Speaker 11: Roger Staubach's uh uh he told me that, you know 337 00:15:45,640 --> 00:15:47,400 Speaker 11: when I when I first retired, So what should I do? 338 00:15:47,440 --> 00:15:49,920 Speaker 11: What's your what your recommendation is just run? And so 339 00:15:49,960 --> 00:15:52,680 Speaker 11: I ran. And so I felt a little bit awkward, 340 00:15:53,200 --> 00:15:55,520 Speaker 11: you know, reinvesting back into sports. But now I've kind 341 00:15:55,520 --> 00:15:57,760 Speaker 11: of matured in my private equity life that I've been 342 00:15:57,800 --> 00:15:59,240 Speaker 11: in longer than I played football. 343 00:15:59,400 --> 00:16:01,280 Speaker 2: Well, I was going to ask you that, Steve, obviously, 344 00:16:01,360 --> 00:16:03,200 Speaker 2: given we all think of you as a forty nine 345 00:16:03,280 --> 00:16:05,600 Speaker 2: ers hold on. That's the way we know Steve Young. 346 00:16:06,120 --> 00:16:09,040 Speaker 2: Given that do you get more deal flow out of sports? 347 00:16:09,040 --> 00:16:10,240 Speaker 2: So people tend to come to you. And I know 348 00:16:10,280 --> 00:16:12,840 Speaker 2: you've done a lot of work actually with other former 349 00:16:12,880 --> 00:16:15,320 Speaker 2: professional athletes to help them in their business ventures. 350 00:16:15,680 --> 00:16:18,160 Speaker 11: So one of my passions is to try to pay 351 00:16:18,200 --> 00:16:21,640 Speaker 11: it forward and trying to create trying to create a 352 00:16:21,680 --> 00:16:26,360 Speaker 11: repository of transition stories from professional life into the next 353 00:16:26,400 --> 00:16:28,400 Speaker 11: phase of their lives. And I've always talked about that 354 00:16:28,480 --> 00:16:33,080 Speaker 11: as a hard ending to a passion for people and 355 00:16:33,120 --> 00:16:34,960 Speaker 11: then finding out that they're middle aged and they. 356 00:16:34,840 --> 00:16:35,280 Speaker 3: Don't have it. 357 00:16:35,360 --> 00:16:37,520 Speaker 11: You know, I was great at something and the next 358 00:16:37,560 --> 00:16:40,040 Speaker 11: day I'm not good at anything. And so how do 359 00:16:40,120 --> 00:16:42,080 Speaker 11: those transition stories and how to pay it forward for 360 00:16:42,160 --> 00:16:45,360 Speaker 11: other athletes Today, I'm really passionate about trying to figure 361 00:16:45,360 --> 00:16:47,720 Speaker 11: out how to tell those stories about people who have 362 00:16:47,800 --> 00:16:48,920 Speaker 11: transition good and bad. 363 00:16:49,600 --> 00:16:51,960 Speaker 2: Rich Palin, the last time I checked is in Silicon Valley. 364 00:16:52,080 --> 00:16:54,800 Speaker 2: We had Silicon Valley Bank has the failure of Silicon 365 00:16:54,880 --> 00:16:56,400 Speaker 2: Value Bank and some of the other regional banks. Has 366 00:16:56,400 --> 00:16:58,560 Speaker 2: it affected your business. 367 00:16:58,560 --> 00:17:01,160 Speaker 6: In a way, It's sort of excel rated the opportunity 368 00:17:01,200 --> 00:17:05,520 Speaker 6: around this tilt towards partnership, we find that that really 369 00:17:05,640 --> 00:17:10,600 Speaker 6: large and growing ecosystem of venture backed businesses are looking 370 00:17:10,680 --> 00:17:14,040 Speaker 6: for outcomes. Right, you have an ecosystem of venture capital 371 00:17:14,080 --> 00:17:18,080 Speaker 6: and growth equity investors. You have wonderful entrepreneurs that are 372 00:17:18,119 --> 00:17:20,640 Speaker 6: around these businesses. But if you think about what Steve 373 00:17:20,680 --> 00:17:24,040 Speaker 6: had mentioned, the essence of what we do, we're looking 374 00:17:24,160 --> 00:17:26,520 Speaker 6: for folks that in the kind of businesses that we're 375 00:17:26,560 --> 00:17:30,080 Speaker 6: transforming from good companies or good businesses to great companies 376 00:17:31,240 --> 00:17:34,919 Speaker 6: is numerous owners. And so what we found, David, is 377 00:17:34,960 --> 00:17:39,359 Speaker 6: that because of what's happened with the macro environment with 378 00:17:39,480 --> 00:17:43,480 Speaker 6: SVB and others, you have this really large universe of 379 00:17:43,840 --> 00:17:48,280 Speaker 6: smaller companies that would have typically raised a series CDF 380 00:17:48,560 --> 00:17:51,280 Speaker 6: and gone public that have now said, maybe it might 381 00:17:51,320 --> 00:17:53,720 Speaker 6: be better to join forces with one of our core 382 00:17:54,520 --> 00:17:56,000 Speaker 6: active portfolio companies. 383 00:17:56,280 --> 00:17:56,440 Speaker 1: Rich. 384 00:17:56,480 --> 00:17:59,359 Speaker 2: One of the precipitating causes of what happened at Silico 385 00:17:59,400 --> 00:18:02,480 Speaker 2: ELI back the higher interest rates that really took down 386 00:18:02,520 --> 00:18:05,080 Speaker 2: the valuations of a lot of private equity companies. Is 387 00:18:05,119 --> 00:18:06,160 Speaker 2: it affecting your business? 388 00:18:06,200 --> 00:18:06,400 Speaker 3: Rich? 389 00:18:06,760 --> 00:18:10,640 Speaker 2: The diminishment I assume of the valuations given what's going 390 00:18:10,880 --> 00:18:11,680 Speaker 2: with a discount rate. 391 00:18:11,960 --> 00:18:16,160 Speaker 6: In uncertain macro environments, business quality becomes more important than ever. 392 00:18:16,680 --> 00:18:19,119 Speaker 6: And because these companies tend to be more resilient in 393 00:18:19,160 --> 00:18:22,159 Speaker 6: the face of macro pressures, the type of businesses that 394 00:18:22,200 --> 00:18:27,400 Speaker 6: we look for invest in and help support transform. Even 395 00:18:27,440 --> 00:18:30,000 Speaker 6: if they do get impacted in the near term, you 396 00:18:30,040 --> 00:18:31,600 Speaker 6: will see them rebound quickly. 397 00:18:32,640 --> 00:18:36,080 Speaker 2: Steve, I can't let a Super Bowl Most Valuable Player 398 00:18:36,160 --> 00:18:38,879 Speaker 2: quarterback go without asking one question about valuations and professional 399 00:18:38,880 --> 00:18:41,240 Speaker 2: sports teams. They are through the roof as we talk 400 00:18:41,280 --> 00:18:43,280 Speaker 2: to people. It is just extraordinary. And I talked to 401 00:18:43,320 --> 00:18:45,400 Speaker 2: some of the investors to say they're going to keep going. 402 00:18:45,440 --> 00:18:47,240 Speaker 2: What do you make about some of the valuations we're 403 00:18:47,240 --> 00:18:48,919 Speaker 2: seeing now on some of the pro teams. 404 00:18:50,400 --> 00:18:52,080 Speaker 11: My stat might be a little bit off, but it's 405 00:18:52,119 --> 00:18:55,200 Speaker 11: not a lot off. Seventy five of the top one 406 00:18:55,280 --> 00:18:58,760 Speaker 11: hundred shows on television the highest rated shows on television, 407 00:18:58,800 --> 00:19:02,399 Speaker 11: Seventy five of the top one hundred were NFL football games. 408 00:19:02,520 --> 00:19:05,919 Speaker 11: Think of the power in that stat. Equity values have 409 00:19:06,320 --> 00:19:09,119 Speaker 11: twenty times in the last twenty years. And you know 410 00:19:09,240 --> 00:19:11,600 Speaker 11: people say players have played too much. Quarterbacks are making 411 00:19:11,600 --> 00:19:14,280 Speaker 11: sixty million dollars a year. As far as equity value 412 00:19:14,320 --> 00:19:17,480 Speaker 11: growth in the last twenty years. Quarterback salary growth has 413 00:19:17,560 --> 00:19:20,480 Speaker 11: not is only half of it, and so I'm not 414 00:19:20,480 --> 00:19:22,239 Speaker 11: saying this should be paid more. I'm just saying that 415 00:19:22,280 --> 00:19:25,359 Speaker 11: equity values are through the roof because of the power 416 00:19:25,800 --> 00:19:28,200 Speaker 11: of live television. And you've seen that around the sports 417 00:19:28,240 --> 00:19:30,920 Speaker 11: world and NBA it manage League Baseball was on its 418 00:19:30,960 --> 00:19:34,680 Speaker 11: back twenty years ago. I'm overstating it, but you know 419 00:19:34,880 --> 00:19:38,600 Speaker 11: now flourishing because life television runs the world, and the 420 00:19:38,720 --> 00:19:42,199 Speaker 11: NFL runs life television by a long way. So you 421 00:19:42,200 --> 00:19:45,399 Speaker 11: talk about the power of the NFL, that power only grows. 422 00:19:45,480 --> 00:19:47,679 Speaker 11: And that's why you think, you know, a forty nine 423 00:19:47,760 --> 00:19:50,560 Speaker 11: or team that's worth eight to ten billion dollars could 424 00:19:50,600 --> 00:19:53,240 Speaker 11: be twenty billion, could be I mean the upper ends 425 00:19:53,240 --> 00:19:55,280 Speaker 11: are you know, who knows. But the NFL has done 426 00:19:55,320 --> 00:19:57,720 Speaker 11: a great job of building equity value, that's for sure. 427 00:19:58,320 --> 00:20:00,400 Speaker 2: General, I can't thank you enough for joining us here 428 00:20:00,400 --> 00:20:02,440 Speaker 2: on Wall Street Week. That is Steve Young, of course, 429 00:20:02,480 --> 00:20:05,080 Speaker 2: as well as Rich Lawson of HGGC. 430 00:20:07,320 --> 00:20:07,760 Speaker 1: Coming up. 431 00:20:07,800 --> 00:20:10,240 Speaker 2: There's a big fight in Washington over the depth sit 432 00:20:10,440 --> 00:20:14,000 Speaker 2: what should there be? We ask Nobel Prize winning economist 433 00:20:14,000 --> 00:20:15,480 Speaker 2: Paul Krugman, what. 434 00:20:15,520 --> 00:20:19,600 Speaker 3: Really bothers me. Where we are right now is that 435 00:20:19,680 --> 00:20:24,040 Speaker 3: the programs that apparently are safer saying are programs for 436 00:20:24,119 --> 00:20:24,600 Speaker 3: the elderly. 437 00:20:25,320 --> 00:20:27,680 Speaker 2: That's next on Wall Street Week on Bloomberg. 438 00:20:30,000 --> 00:20:34,240 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 439 00:20:34,359 --> 00:20:35,280 Speaker 1: Bloomberg Radio. 440 00:20:36,280 --> 00:20:39,440 Speaker 10: I thought Hamilton had it right. He said a national 441 00:20:39,440 --> 00:20:42,880 Speaker 10: debt could be a national blessing, and the national debt 442 00:20:42,960 --> 00:20:46,119 Speaker 10: having a liquid market there provides a good benchmark for 443 00:20:46,160 --> 00:20:49,280 Speaker 10: the private sector. It probably underpins the role of the 444 00:20:49,320 --> 00:20:52,360 Speaker 10: dollar in the world. It allows the Fed to conduct 445 00:20:52,760 --> 00:20:56,919 Speaker 10: monetary policy easily. I think we have to keep in 446 00:20:57,080 --> 00:21:01,240 Speaker 10: mind the costs of paying down the day. There is 447 00:21:01,400 --> 00:21:04,960 Speaker 10: among some people single minded focus on it, but there's 448 00:21:04,960 --> 00:21:06,200 Speaker 10: no free lunch in this world. 449 00:21:08,320 --> 00:21:11,359 Speaker 2: That was Larry Lindsay, President George W. Bush's director of 450 00:21:11,400 --> 00:21:13,880 Speaker 2: the National Economic Council back in two thousand and one. 451 00:21:14,160 --> 00:21:15,840 Speaker 2: That was a time when the concern was not about 452 00:21:15,840 --> 00:21:18,120 Speaker 2: how big the federal debt was, but that we might 453 00:21:18,200 --> 00:21:21,320 Speaker 2: actually pay it all off. To explain today what we 454 00:21:21,359 --> 00:21:23,520 Speaker 2: should and should not be worried about when it comes 455 00:21:23,560 --> 00:21:25,600 Speaker 2: to the debt and the deficits were running up, we 456 00:21:25,600 --> 00:21:28,000 Speaker 2: welcome to Dow Doctor Paul Krugman. He's distinguished Professor of 457 00:21:28,040 --> 00:21:30,199 Speaker 2: economics at the City University of New York and the 458 00:21:30,240 --> 00:21:32,960 Speaker 2: recipient of the Nobel Prize in the Economic Sciences. So, 459 00:21:33,040 --> 00:21:34,960 Speaker 2: doctor Kruman, thank you so much for being with us. 460 00:21:35,160 --> 00:21:37,720 Speaker 2: We hear a lot of talk from politicians in Washington, 461 00:21:37,760 --> 00:21:40,240 Speaker 2: as we should about the debt. We don't hear as much. 462 00:21:40,280 --> 00:21:43,040 Speaker 2: I don't hear about the economics of it all. Once 463 00:21:43,080 --> 00:21:44,920 Speaker 2: you give us your analysis of what we should be 464 00:21:44,960 --> 00:21:46,760 Speaker 2: concerned about with the debt and what we should not 465 00:21:46,800 --> 00:21:47,720 Speaker 2: be as concerned. 466 00:21:47,440 --> 00:21:54,720 Speaker 3: About, Okay, there is a pretty strong case the debt 467 00:21:54,760 --> 00:22:00,320 Speaker 3: is just a number that the United States absent loitical 468 00:22:00,400 --> 00:22:03,760 Speaker 3: games over the debt ceiling, which is a really uniquely 469 00:22:03,800 --> 00:22:08,960 Speaker 3: American dysfunction. Aside from that, there's no hint that financial 470 00:22:09,000 --> 00:22:13,280 Speaker 3: markets are concerned about America's ability to service its debt. 471 00:22:13,720 --> 00:22:16,640 Speaker 3: There's no real sign that the debt is putting any 472 00:22:17,040 --> 00:22:22,040 Speaker 3: strain on the economy. There are. US debt is very 473 00:22:22,119 --> 00:22:26,400 Speaker 3: high for by our own historical standards. The only time 474 00:22:26,440 --> 00:22:28,840 Speaker 3: we've been close to this level was in the immediate 475 00:22:28,880 --> 00:22:31,680 Speaker 3: aftermath of World War Two. But it's not that high 476 00:22:31,720 --> 00:22:34,480 Speaker 3: compared with what a lot of other countries have experienced 477 00:22:34,480 --> 00:22:40,240 Speaker 3: over the years without any kind of crisis. So the 478 00:22:40,320 --> 00:22:44,320 Speaker 3: numbers are enormous, but everything about the US economy is enormous. 479 00:22:44,320 --> 00:22:46,520 Speaker 3: So you say thirty one trillion dollars and you do 480 00:22:46,560 --> 00:22:49,720 Speaker 3: your best doctor evil imitation. But it's not at all 481 00:22:49,800 --> 00:22:54,080 Speaker 3: clear that the debt is a top priority you know 482 00:22:54,119 --> 00:22:57,000 Speaker 3: that it's a catastrophic issue, or even that it even 483 00:22:57,040 --> 00:22:59,440 Speaker 3: belongs in the top five or maybe even the top 484 00:22:59,480 --> 00:23:02,160 Speaker 3: ten of ISI she's to concern the United States. 485 00:23:01,880 --> 00:23:04,880 Speaker 2: So maybe not catastrophic, but is it a growing problem? 486 00:23:04,920 --> 00:23:07,399 Speaker 2: In this sense, the debt itself is just one number. 487 00:23:07,440 --> 00:23:09,320 Speaker 2: What about when you put it together with another number, 488 00:23:09,359 --> 00:23:12,200 Speaker 2: which is debt service? Because as I understand it, part 489 00:23:12,240 --> 00:23:16,080 Speaker 2: of the question is how fast is debt service costs growing? 490 00:23:16,240 --> 00:23:19,400 Speaker 2: We have had essentially zero cost of debt service. Those 491 00:23:19,440 --> 00:23:21,880 Speaker 2: are going up. Now does that pose a real risk? 492 00:23:23,240 --> 00:23:26,720 Speaker 3: The idea that having to that were then we're in 493 00:23:26,760 --> 00:23:28,760 Speaker 3: some kind of debt spiral where we have to borrow 494 00:23:28,880 --> 00:23:30,480 Speaker 3: to pay interest and then we have to I mean, 495 00:23:30,800 --> 00:23:33,600 Speaker 3: the numbers don't support that at all. The numbers don't 496 00:23:33,640 --> 00:23:35,919 Speaker 3: suggest that anything like that is going to be a 497 00:23:35,960 --> 00:23:40,840 Speaker 3: problem for the foreseeable future. So no, I mean it's 498 00:23:40,920 --> 00:23:44,679 Speaker 3: just it's we've gone from a point where money was 499 00:23:44,920 --> 00:23:50,800 Speaker 3: you know, free, or even in real terms, possibly we 500 00:23:50,800 --> 00:23:53,280 Speaker 3: were being the faraoh government was being paid to take 501 00:23:53,320 --> 00:23:55,920 Speaker 3: on debt to one where it costs something, but it's 502 00:23:55,920 --> 00:23:56,959 Speaker 3: still pretty small. 503 00:23:57,240 --> 00:23:59,159 Speaker 2: So let's talk about some of the proposals about it. 504 00:23:59,400 --> 00:24:01,760 Speaker 2: How to raising the death too much, and that is 505 00:24:01,840 --> 00:24:05,679 Speaker 2: some capping of spending, particularly discretionary spending. What are the 506 00:24:05,720 --> 00:24:08,800 Speaker 2: possible consequences of that if in fact we do freeze 507 00:24:08,880 --> 00:24:11,159 Speaker 2: or reduce spending off of twenty twenty two levels. 508 00:24:11,440 --> 00:24:15,600 Speaker 3: What really bothers me where we are right now is 509 00:24:15,640 --> 00:24:20,119 Speaker 3: that the programs that apparently are sacrisanc Are programs for 510 00:24:20,200 --> 00:24:25,080 Speaker 3: the elderly, Medicare, social Security are off the table. They're 511 00:24:25,080 --> 00:24:28,240 Speaker 3: being protected, and a lot of the stuff that discretionary 512 00:24:28,480 --> 00:24:37,160 Speaker 3: is really things like programs that support children, to support education, 513 00:24:37,400 --> 00:24:41,000 Speaker 3: that support nutrition for the young, which is the future. 514 00:24:41,240 --> 00:24:44,200 Speaker 3: So what's happening right now is that in the effort 515 00:24:44,280 --> 00:24:49,280 Speaker 3: to hold down headline spending right now, we're actually kind 516 00:24:49,280 --> 00:24:54,160 Speaker 3: of disinvesting in the country's future. And that's that's pretty alarming. 517 00:24:54,440 --> 00:24:57,360 Speaker 2: So that is a terribly important and very unpopular point. 518 00:24:57,400 --> 00:24:59,679 Speaker 2: Going back to the politics for a moment here, and 519 00:24:59,720 --> 00:25:01,520 Speaker 2: that is when you say let's cut things for the elder. 520 00:25:01,560 --> 00:25:04,040 Speaker 2: That's very popular. I'm elderly at this point. But at 521 00:25:04,040 --> 00:25:06,720 Speaker 2: the same time, we're not really investing in future growth, 522 00:25:06,760 --> 00:25:09,639 Speaker 2: as I understand, by paying more, for example, on social security, 523 00:25:09,880 --> 00:25:14,240 Speaker 2: whereas investing in education or children or infrastructure could increase 524 00:25:14,280 --> 00:25:16,280 Speaker 2: the future growth. To what extent do we need to 525 00:25:16,359 --> 00:25:19,439 Speaker 2: concerned about growing ourselves out of whatever debt issues we have. 526 00:25:20,640 --> 00:25:23,840 Speaker 3: Well, to a large extent, that's going to happen anyway. 527 00:25:24,000 --> 00:25:26,800 Speaker 3: I mean when I say you need to adjust for inflation, 528 00:25:27,200 --> 00:25:30,119 Speaker 3: you really also need to ask about growth. And you know, 529 00:25:30,880 --> 00:25:33,080 Speaker 3: the example I always like to use is, you know, 530 00:25:33,080 --> 00:25:35,000 Speaker 3: how did we pay off the debt from World War Two? 531 00:25:36,119 --> 00:25:39,920 Speaker 3: And the answers we didn't. We had slightly higher debt 532 00:25:39,960 --> 00:25:42,719 Speaker 3: when John F. Kennedy took office that we did on 533 00:25:43,400 --> 00:25:47,760 Speaker 3: you know, when we declared victory over Japan, but the 534 00:25:47,800 --> 00:25:51,840 Speaker 3: debt had dwindled. It was it was less than half 535 00:25:51,920 --> 00:25:53,720 Speaker 3: the share of GDP that had been at the end 536 00:25:53,800 --> 00:25:56,520 Speaker 3: of World War Two because we had a growing economy 537 00:25:56,640 --> 00:25:59,280 Speaker 3: and a little bit of inflation over that period. And 538 00:25:59,359 --> 00:26:02,359 Speaker 3: this large we're still in a world where we really 539 00:26:02,440 --> 00:26:06,040 Speaker 3: are already set to, if not exactly grow out of 540 00:26:06,040 --> 00:26:09,520 Speaker 3: our debt, at least not have it grow very much 541 00:26:09,920 --> 00:26:16,400 Speaker 3: uncontrollably unless we do some really even more irresponsible things 542 00:26:16,440 --> 00:26:20,360 Speaker 3: that we do now. So and look, if you want 543 00:26:20,400 --> 00:26:23,840 Speaker 3: to try to accelerate economic growth, there's not a lot 544 00:26:23,880 --> 00:26:28,040 Speaker 3: of things that we know work. Investing more in children's 545 00:26:28,040 --> 00:26:31,080 Speaker 3: health nutrition is one of the things that we do 546 00:26:31,200 --> 00:26:34,160 Speaker 3: know works, but it works with a very long leg. 547 00:26:34,200 --> 00:26:36,680 Speaker 3: It's something that will show up thirty years from now 548 00:26:36,920 --> 00:26:39,680 Speaker 3: in a better economy. Aside from that, if you asked 549 00:26:39,720 --> 00:26:41,639 Speaker 3: what can we do to make the economy growth a 550 00:26:41,640 --> 00:26:44,280 Speaker 3: lot faster over the next ten years, the answer is 551 00:26:44,320 --> 00:26:45,480 Speaker 3: nobody knows the answer to that. 552 00:26:46,680 --> 00:26:49,840 Speaker 2: So, professor, you referred to the size of the debt, 553 00:26:50,160 --> 00:26:53,399 Speaker 2: going back to GDP right now, the rejections, I think 554 00:26:53,400 --> 00:26:55,320 Speaker 2: we're somewhere our line ninety seven ninety eight percent of 555 00:26:55,359 --> 00:26:58,560 Speaker 2: GDP something like that right now, and the rejection from CBO, 556 00:26:58,640 --> 00:27:00,919 Speaker 2: as you know, go up to undred and twenty percent, 557 00:27:01,200 --> 00:27:03,880 Speaker 2: and maybe keep going. At what point do we become 558 00:27:03,920 --> 00:27:05,919 Speaker 2: concerned about that? You say, now, it's not a problem, 559 00:27:06,000 --> 00:27:07,720 Speaker 2: But when does it become a problem. When would you 560 00:27:07,760 --> 00:27:09,960 Speaker 2: start saying, wait a second, we're running into trouble. 561 00:27:11,560 --> 00:27:14,040 Speaker 3: It's hard to come up with a number. And you know, 562 00:27:14,080 --> 00:27:17,360 Speaker 3: we've looked at Japan with two hundred percent of GDP, 563 00:27:18,240 --> 00:27:23,399 Speaker 3: and j Pan has lots of problems, but unwillingness of 564 00:27:23,440 --> 00:27:27,080 Speaker 3: the market to buy Japanese government bonds is not is 565 00:27:27,160 --> 00:27:31,520 Speaker 3: not one of them. I always I like to point 566 00:27:31,560 --> 00:27:34,720 Speaker 3: out that the if we go back to, you know, 567 00:27:34,760 --> 00:27:40,280 Speaker 3: the Industrial Revolution in Great Britain, first half the nineteenth century, 568 00:27:40,520 --> 00:27:44,240 Speaker 3: Britain had debt that was one hundred and eighty percent 569 00:27:44,280 --> 00:27:47,360 Speaker 3: of GDP at the end of the Napoleonic Wars. By 570 00:27:47,400 --> 00:27:49,800 Speaker 3: eighteen fifty it was only down to one hundred and 571 00:27:49,800 --> 00:27:52,400 Speaker 3: thirty percent of GDP. And this is the you know, 572 00:27:52,560 --> 00:27:54,720 Speaker 3: this is the Industrial Revolution, this is the birth of 573 00:27:54,760 --> 00:27:59,320 Speaker 3: the modern age taking place under what anybody now would say, Oh, 574 00:27:59,359 --> 00:28:03,800 Speaker 3: that must be a crippling debt burden. So, you know, 575 00:28:04,200 --> 00:28:09,000 Speaker 3: is there any there must be somehow we can't have 576 00:28:09,359 --> 00:28:12,800 Speaker 3: our death, can't exceed our total national wealth. But we're 577 00:28:12,800 --> 00:28:15,320 Speaker 3: nowhere close to that. And I don't see any number 578 00:28:15,359 --> 00:28:19,520 Speaker 3: anywhere in these projections that is one that based on history, 579 00:28:19,880 --> 00:28:21,480 Speaker 3: would lead you to be concerned. 580 00:28:22,359 --> 00:28:24,040 Speaker 2: One of the things we hear about from some quarters 581 00:28:24,040 --> 00:28:25,960 Speaker 2: at least is a concern about the strength of the dollar, 582 00:28:26,440 --> 00:28:29,240 Speaker 2: that in fact the globe will lose some confidence in 583 00:28:29,280 --> 00:28:32,520 Speaker 2: our fiscal abilities here in the United States, and we 584 00:28:32,680 --> 00:28:35,480 Speaker 2: have seen sort of a dilution of the dollar as 585 00:28:35,680 --> 00:28:38,680 Speaker 2: the reserve currency of the world. Fewer transactions that I 586 00:28:38,800 --> 00:28:41,880 Speaker 2: and stand today are being transacted in dollars than before. 587 00:28:42,080 --> 00:28:43,640 Speaker 2: You've written about the fact that you don't think there's 588 00:28:43,640 --> 00:28:46,400 Speaker 2: another currency that will overtake it, but that perhaps will 589 00:28:46,440 --> 00:28:49,600 Speaker 2: become more of a plurality. Is that a likely development 590 00:28:49,640 --> 00:28:51,240 Speaker 2: and is so what would be the consequences. 591 00:28:51,600 --> 00:28:53,680 Speaker 3: I always say that the big problem is not that 592 00:28:53,720 --> 00:28:58,360 Speaker 3: something else might take the dollar's place. The problem is 593 00:28:58,440 --> 00:29:00,640 Speaker 3: that there may be nothing else that can take the 594 00:29:00,680 --> 00:29:04,280 Speaker 3: dollar's place. When you think about the alternatives. The Euro 595 00:29:05,280 --> 00:29:11,960 Speaker 3: is unfortunately, because of eurocrises and divergences, there's not a 596 00:29:12,080 --> 00:29:15,000 Speaker 3: Euro bond market. They're just there's an Italian bond market, 597 00:29:15,000 --> 00:29:18,080 Speaker 3: a German bond market. So that's a fragmented market, which 598 00:29:18,080 --> 00:29:22,120 Speaker 3: means that eurosecurities are not liquid in the way that 599 00:29:22,200 --> 00:29:27,719 Speaker 3: dollar securities are. China has capital controls, It has an 600 00:29:27,720 --> 00:29:32,760 Speaker 3: authoritarian regime given to making erratic sudden changes in policy, 601 00:29:33,040 --> 00:29:35,880 Speaker 3: who wants to use R and B as a as 602 00:29:35,920 --> 00:29:41,080 Speaker 3: their key asset. Japan is just too small an economy. 603 00:29:41,400 --> 00:29:45,400 Speaker 3: So you know, it's not that the US derives a 604 00:29:45,520 --> 00:29:48,560 Speaker 3: huge advantage from the fact that the dollar is the 605 00:29:48,600 --> 00:29:51,920 Speaker 3: currency in the world. It's that the world there is 606 00:29:51,920 --> 00:29:55,160 Speaker 3: a huge advantage from the fact that there are safe, 607 00:29:55,240 --> 00:29:58,960 Speaker 3: highly liquid assets that can be used as collateral, that 608 00:29:59,000 --> 00:30:01,360 Speaker 3: can be used as the sort of underpinning of the 609 00:30:01,400 --> 00:30:04,800 Speaker 3: whole world financial system. And those safe liquid assets are 610 00:30:05,360 --> 00:30:09,920 Speaker 3: US treasury securities. And if we manage to destroy the credibility, 611 00:30:10,480 --> 00:30:13,000 Speaker 3: then the whole world, including US, but not the whole 612 00:30:13,000 --> 00:30:15,560 Speaker 3: world's suffice. It's not that somebody gains at our advantage. 613 00:30:15,600 --> 00:30:17,840 Speaker 3: It's that we undermined the whole system. 614 00:30:18,000 --> 00:30:20,040 Speaker 2: Okay, professor, thank you so very much for joining us 615 00:30:20,040 --> 00:30:23,120 Speaker 2: as Professor Paul Krugman of the City University of New 616 00:30:23,200 --> 00:30:28,120 Speaker 2: York coming up would arose by any other name, smell 617 00:30:28,240 --> 00:30:32,080 Speaker 2: as sweet. Some people seem to think so, including maybe 618 00:30:32,120 --> 00:30:34,840 Speaker 2: even the FED. That's the next one Wall Street Week 619 00:30:35,000 --> 00:30:35,680 Speaker 2: on Bloomberg. 620 00:30:37,560 --> 00:30:41,760 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 621 00:30:41,880 --> 00:30:42,960 Speaker 1: Bloomberg Radios. 622 00:30:43,040 --> 00:30:45,360 Speaker 2: So AI may or may not be helping one on 623 00:30:45,400 --> 00:30:47,520 Speaker 2: the stock market at least right now. But the question 624 00:30:47,640 --> 00:30:49,480 Speaker 2: is what could it do for the longer term and 625 00:30:49,560 --> 00:30:51,840 Speaker 2: respect to investments, And for that we turn to a 626 00:30:51,960 --> 00:30:55,160 Speaker 2: truly gifted investor. He is David Booth. He is, of course, 627 00:30:55,440 --> 00:30:58,480 Speaker 2: the founder and chair of Dimensional Fund Advisors. David, thank 628 00:30:58,520 --> 00:31:00,800 Speaker 2: you so much for being with us, wrote a column 629 00:31:00,880 --> 00:31:03,080 Speaker 2: in The Financial Times expressing some, if I can put it, 630 00:31:03,160 --> 00:31:07,680 Speaker 2: skepticism about whether all of this generative AI may help 631 00:31:07,760 --> 00:31:10,280 Speaker 2: us be better stock pickers. How do you see it? 632 00:31:10,920 --> 00:31:12,800 Speaker 7: AI is going to be incredibly useful in a lot 633 00:31:12,800 --> 00:31:16,640 Speaker 7: of areas because it can process such enormous amounts of information, 634 00:31:17,160 --> 00:31:21,680 Speaker 7: and that's really what what selecting securities is all about, 635 00:31:21,880 --> 00:31:26,040 Speaker 7: is trying to figure out how much undiscounted information is 636 00:31:26,080 --> 00:31:29,640 Speaker 7: out there. So at first blush, it looks like it 637 00:31:29,640 --> 00:31:36,320 Speaker 7: could be incredibly useful, although regardless of how elaborate and 638 00:31:36,400 --> 00:31:42,240 Speaker 7: extensive your AI is is not as elaborate and extensive 639 00:31:42,280 --> 00:31:46,080 Speaker 7: as the market. You think of the stock market as 640 00:31:46,160 --> 00:31:48,880 Speaker 7: just being We think of it as this being this 641 00:31:49,080 --> 00:31:55,640 Speaker 7: enormous information processing machine that everyone in the world's out 642 00:31:55,640 --> 00:31:58,160 Speaker 7: there trying to buy and sell securities, and it's their 643 00:31:58,240 --> 00:32:04,680 Speaker 7: action that causes prices to be settled at reasonable at 644 00:32:04,680 --> 00:32:07,560 Speaker 7: reasonable levels. 645 00:32:08,200 --> 00:32:12,360 Speaker 2: So finally, one more thought, what's in a name? Shakespeare 646 00:32:12,360 --> 00:32:15,280 Speaker 2: had Romeo asked that question to suggest that this perceived 647 00:32:15,280 --> 00:32:19,440 Speaker 2: difference between his monocues and his beloved Juliet's capulets shouldn't 648 00:32:19,440 --> 00:32:22,200 Speaker 2: come between them. But in today's world, how a person, 649 00:32:22,520 --> 00:32:25,120 Speaker 2: or a product, or even a country is perceived can 650 00:32:25,160 --> 00:32:29,080 Speaker 2: be all important. Take for example, Korean car company Hyundai. 651 00:32:29,440 --> 00:32:33,560 Speaker 2: Once perceived as a reliable and expensive, rather boring alternative 652 00:32:33,560 --> 00:32:37,280 Speaker 2: to high priced and flashier European alternatives, it has gotten 653 00:32:37,320 --> 00:32:40,960 Speaker 2: a whole new lease on life, creating adventurous designs for 654 00:32:41,000 --> 00:32:44,680 Speaker 2: the EV world, making it a formidable competitor even to Tesla, 655 00:32:45,160 --> 00:32:47,560 Speaker 2: causing The Wall Street Journal this week to ask, how 656 00:32:47,600 --> 00:32:49,360 Speaker 2: did Hyundai get so cool? 657 00:32:49,720 --> 00:32:53,360 Speaker 3: It's a EV rhymes with Kevin, and it's not just. 658 00:32:53,480 --> 00:32:56,840 Speaker 2: Hyundai that's looking to freshen up its brand. Consider Facebook, 659 00:32:57,200 --> 00:32:59,640 Speaker 2: with Mark Zuckerbert going so far as to rename his 660 00:32:59,800 --> 00:33:02,440 Speaker 2: entire company and had bid to make up some lost 661 00:33:02,560 --> 00:33:06,240 Speaker 2: ground to TikTok, though the arc of his space shot 662 00:33:06,320 --> 00:33:08,760 Speaker 2: to the metaverse make it bent a bit by the 663 00:33:08,840 --> 00:33:10,960 Speaker 2: gravitational pull of generative AI. 664 00:33:11,560 --> 00:33:15,080 Speaker 5: AI is already crucial to the foundations of the metaverse 665 00:33:15,320 --> 00:33:16,960 Speaker 5: and will be even more so in the future. 666 00:33:17,080 --> 00:33:19,560 Speaker 2: All this rebranding has now apparently made it all the 667 00:33:19,640 --> 00:33:22,360 Speaker 2: way to the Oval Office, as the New York Times 668 00:33:22,440 --> 00:33:24,840 Speaker 2: caught Speaker of the House McCarthy as well as House 669 00:33:24,920 --> 00:33:28,720 Speaker 2: Minority Leader Hakim Jeffries holding an important debt ceiling meeting 670 00:33:28,800 --> 00:33:33,320 Speaker 2: with the President wearing those flashy dressed sneakers. But before 671 00:33:33,360 --> 00:33:35,880 Speaker 2: we get too terribly excited, it would be well to 672 00:33:35,920 --> 00:33:39,600 Speaker 2: remember some famous instances where attempts to rebrand fell well 673 00:33:39,760 --> 00:33:43,000 Speaker 2: short of the mark, Starting with the audio industry itself. 674 00:33:43,560 --> 00:33:46,440 Speaker 2: Does anyone remember the campaign in the late eighties to 675 00:33:46,520 --> 00:33:49,280 Speaker 2: make us think that the Oldsmobile was really for young people? 676 00:33:49,520 --> 00:33:54,320 Speaker 1: In short, the new Cutlass Supreme is your further as Oldsmobile. 677 00:33:55,080 --> 00:33:59,040 Speaker 2: And has anyone seen any Oldsmobiles around lately? Or how 678 00:33:59,080 --> 00:34:01,720 Speaker 2: about that so called new Coke who was going to 679 00:34:01,800 --> 00:34:03,520 Speaker 2: revive a time honored brand. 680 00:34:03,880 --> 00:34:06,000 Speaker 3: New Coke is catching on? Is better? 681 00:34:10,000 --> 00:34:10,399 Speaker 7: You said? 682 00:34:10,400 --> 00:34:13,520 Speaker 2: The word rebranding has been known to extend even to 683 00:34:13,640 --> 00:34:17,040 Speaker 2: the world of geopolitics, a Secuary of State Hillary Clinton 684 00:34:17,120 --> 00:34:20,760 Speaker 2: did with her famous campaign to turn things around with Russia. 685 00:34:21,640 --> 00:34:24,760 Speaker 3: We want to reset our relationship. 686 00:34:26,960 --> 00:34:29,280 Speaker 2: Looking back on it now in the light of Ukraine, 687 00:34:29,400 --> 00:34:31,640 Speaker 2: it's not clear exactly what the world got out of 688 00:34:31,719 --> 00:34:35,560 Speaker 2: that particular rebranding. Even the central banks are getting into 689 00:34:35,560 --> 00:34:38,319 Speaker 2: the game, with the debate raging this week about whether 690 00:34:38,400 --> 00:34:41,960 Speaker 2: the FED would execute a pause or a skip at 691 00:34:42,000 --> 00:34:42,879 Speaker 2: its June meeting. 692 00:34:43,640 --> 00:34:47,840 Speaker 3: I'm not a massive fan of these linguistic acrobatics that 693 00:34:47,960 --> 00:34:49,880 Speaker 3: central banks end up getting themselves into. 694 00:34:50,200 --> 00:34:52,799 Speaker 2: But maybe the place where we need rebranding the most 695 00:34:53,080 --> 00:34:56,840 Speaker 2: is in how Washington deals with things like budgets and deficits, 696 00:34:56,880 --> 00:34:59,239 Speaker 2: oh and oh yes, the full faith and credit of 697 00:34:59,239 --> 00:35:02,279 Speaker 2: the United States America. But that may take more than 698 00:35:02,400 --> 00:35:05,360 Speaker 2: just a new logo or new shoes with white soles. 699 00:35:05,840 --> 00:35:08,520 Speaker 2: For that, we may need a fundamental rethinking. 700 00:35:08,960 --> 00:35:12,040 Speaker 6: The point is, we need a new spending process. 701 00:35:12,440 --> 00:35:12,920 Speaker 7: That does it. 702 00:35:13,000 --> 00:35:15,240 Speaker 2: For this episode of Wall Street Week, I'm David Weston. 703 00:35:15,280 --> 00:35:17,120 Speaker 2: This is Bloomberg. See you next week.