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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Ley. We bring

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Speaker 1: you insight from the best and economics, finance, investment and

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Speaker 1: international relations. Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg

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Speaker 1: dot Com and of course on the Bloomberg terminal. Right now,

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Speaker 1: see Michel where us out of the London School of Economics.

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Speaker 1: There's some real distinction there with principal global investors in

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Speaker 1: their chief strategies. Seema, you are decidedly half full. What

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Speaker 1: do they half empty? People that the gloom crew, what

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Speaker 1: do they get wrong? I think I'm really concerned about

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Speaker 1: the fly shortages. Of course, I think the market is

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Speaker 1: really prev and now it's quite looking for the companies

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Speaker 1: which are we're looking away from the company which are

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Speaker 1: particularly vulnerable. And I think there's a lot of concerns

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Speaker 1: about growth. You know, growth is stoning, but it's still

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Speaker 1: pretty solid um and that should be enough to carry

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Speaker 1: us through. And certainly for risk assets, it's still a

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Speaker 1: supportive environment. When I look at the supportive environment here

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Speaker 1: and we saw the supportive environment from JP Morgan, what

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Speaker 1: will you look at for us forward tone that will

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Speaker 1: lead to supportive What do you want to hear on

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Speaker 1: those animals conference calls? Yeah? So I think for the banks, um,

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Speaker 1: it's going to be a little bit different, right because

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Speaker 1: they are going to be less vulnerable to some of

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Speaker 1: the supply bottle necks that we that we've been worried about.

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Speaker 1: They're less vulnerable to the energy prices. So what we

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Speaker 1: want to see from them is how do they see

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Speaker 1: the consumer panning out? Now the good thing for the

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Speaker 1: consumer is a little bit of a negative for banks,

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Speaker 1: So that's the thing that we need to watch. But

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Speaker 1: generally from earning seasons, we want to know what their

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Speaker 1: guidance is on profit margins. So how are they dealing

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Speaker 1: with that? Are they starting to be concerned about wage

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Speaker 1: pressures or is it something that they can write through

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Speaker 1: or in additionally, do they feel like they've got enough

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Speaker 1: pricing power to pass us onto consumers? So those are

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Speaker 1: the new since that we can be watching for. What

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Speaker 1: I have to say, I think we're expecting a pretty

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Speaker 1: solid earning season um and going into one it's just

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Speaker 1: about maybe slightly more challenging environments, but still pretty solid.

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Speaker 1: So the idea that Apple are reportedly by Bloomberg yesterday

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Speaker 1: it was going to cut productions significantly because of the

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Speaker 1: chip shortage, that it has not rippled through markets more.

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Speaker 1: Does that indicate to you that we've already priced in

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Speaker 1: all potential supply chain disruptions and that from here you

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Speaker 1: only have upside in terms of those pressures facing certain companies.

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Speaker 1: I think that there's definitely element of that. I think

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Speaker 1: the market has knows so much about the supply chain

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Speaker 1: issue then know that it's going to last until two

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Speaker 1: They've made that adjustment in terms of expectations. And on

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Speaker 1: top of that, you know, we all hate the word transitory,

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Speaker 1: but maybe some of these these problems for Apple are

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Speaker 1: likely to be transitory. This is just for so you know,

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Speaker 1: we should see them picking up some of those games

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Speaker 1: again once the supply shortages are finished. So is SEMA.

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Speaker 1: Are you against a big tech at this point, because

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Speaker 1: you do you see the pressure upwards and yields and

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Speaker 1: this idea that you're going to continue to see a

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Speaker 1: further correction there or do you think that it's time

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Speaker 1: to go back because they have suffered the most over

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Speaker 1: the past month and a half. Yeah, we are definitely

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Speaker 1: still supportive for big cap tech, make cap tech, and

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Speaker 1: the reason is that, yes, it's been a slightly challenging

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Speaker 1: environment with deals, but we do think that that's near

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Speaker 1: the top, right. We don't see that much additional movement

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Speaker 1: here from here on which is going to be particularly

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Speaker 1: steep or disruptive. And then just generally for big cap tech, yes,

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Speaker 1: there are supply change shortages which will impact them, but

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Speaker 1: the overall longer term demand is still really strong and

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Speaker 1: you know, as we said, the environment is getting slightly

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Speaker 1: more challenging. This is a time when you want balance

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Speaker 1: sheet You want the big profit margins, the companies that

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Speaker 1: have the power to deal with some of those maybe

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Speaker 1: margin pressures which can be facing the economy in the

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Speaker 1: next year or so. Sema, thank you. We have to

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Speaker 1: leave in their fantastic to catch up with you out

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Speaker 1: of London. As always Semi Shada, A principal Global Investors, Yeah,

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Speaker 1: this time is always different. As bank earnings, you bring

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Speaker 1: in Allison Williams, little big Intelligence senior bank analysts. Alison,

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Speaker 1: I want you to explain what Fortress JP Morgan looks like.

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Speaker 1: These are ratios you and I never studied. We never

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Speaker 1: framed tangible equity. The profitability seems overwhelming. Can it endure? Well,

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Speaker 1: some of it can. I would say that the two

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Speaker 1: big surprises that we got this quarter are are similar

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Speaker 1: to the drivers of positive surprises in recent quarters, and

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Speaker 1: that's the investment bank and the reserve releases. So the

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Speaker 1: reserve releases are something that really helps the bottom line

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Speaker 1: this year, hurt the bottom line last year, and so

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Speaker 1: obviously that's that's something that's not sustainable. The Global Investment

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Speaker 1: Bank continues to surprise to the upside this quarter. It's

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Speaker 1: really equities UM. Trading revenue growth very strong UM, advi

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Speaker 1: issory fees a new record UM. So so those are

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Speaker 1: key positives. I really set the bar ahead of Goldman

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Speaker 1: and Morgan Stanley tomorrow, but not interest income. That's the

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Speaker 1: key UM metric that investors are focusing on this quarter.

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Speaker 1: So for JP, Morgan came in banging line UM, which

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Speaker 1: is a bit neutral. But what investors are going to

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Speaker 1: be digging into our what are the prospects for loan

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Speaker 1: growth UM that can give us a little lift going forward.

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Speaker 1: And so I would say there's enough there to sort

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Speaker 1: of feed the optimism, but UM, but you know, nothing

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Speaker 1: over the top. So signs of green shoots is what

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Speaker 1: we're hearing from JP Morgan. We've heard that from Wells Fargo,

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Speaker 1: UM and and so some positives there, but I think

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Speaker 1: needs to get a little bit better Ellison. Broadly, this

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Speaker 1: is being taken as a positive for the economic story

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Speaker 1: as well as for other banks. And yet the advisory fees,

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Speaker 1: I want to really hone in on that the idea

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Speaker 1: that they hit a record. Could this be taking some

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Speaker 1: of the business of the market share away from the

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Speaker 1: likes of Morgan Stanley or is the market right to

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Speaker 1: shrug this off and says it's just basically a green

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Speaker 1: light for advisory businesses all across the street. I think

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Speaker 1: for M and A it is definitely the ladder. I mean,

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Speaker 1: I think it's going to be a great quarter for

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Speaker 1: all the banks. You know, the equity trading side of things,

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Speaker 1: I think is where you might be seeing a little

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Speaker 1: bit more market shift, but equity advisory fees. And we

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Speaker 1: saw this from Jeffrey's earlier this month. You know, last

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Speaker 1: quarter was was a record for Jeffreys. They this quarter

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Speaker 1: a new record. UM JP Morgan, you know, triple what

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Speaker 1: we were a year ago. That's not that impressive given

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Speaker 1: it was a week year ago, but sizeable growth from

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Speaker 1: last quarter. And we do think that the fundamentals are

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Speaker 1: there for JP Morgan and for the bank's broadly UM

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Speaker 1: to continue this sort of record setting M and A

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Speaker 1: piece and listen for people in the audience right now

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Speaker 1: who aren't familiar with the way these earnings to deliver it.

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Speaker 1: On the front page, the first page, you get Jamie

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Speaker 1: Timonds comments down the right side of that page at

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Speaker 1: the bottom, there is this common here. This quarter, we

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Speaker 1: became the first bank to have branches in all of

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Speaker 1: the lower forty eight states. Now that's not news, Allison,

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Speaker 1: but we know there's been a big push here to

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Speaker 1: expand from the likes of JP Morgan and others. What's

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Speaker 1: the effort here, what's behind it and how important is it?

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Speaker 1: It is important, and this is a multi year plan

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Speaker 1: that's taking place at JP Morgan, similar at Bank of America.

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Speaker 1: They're already significant across the country, but you know, rounding

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Speaker 1: out their footprint, if you will. And so while there's

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Speaker 1: a lot of focus for banks on technology and the

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Speaker 1: digital side of things, that's that's really been sort of

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Speaker 1: a boon to the bottom line UM and increasingly focusing

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Speaker 1: on the top line UM. They are building branches in

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Speaker 1: new markets, and you know the banks are the global banks,

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Speaker 1: the biggest banks back American JP Morgan winning share where

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Speaker 1: they want and we think this sort of comes back

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Speaker 1: to UM. You know the level of technology investments that

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Speaker 1: that sort of helps them be more efficient broadly UM,

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Speaker 1: as well as you know, seeking out these new markets. Annison,

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Speaker 1: thank you as always Annison Williams JP moking up by

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Speaker 1: six tenths of one percent. A whole host of banks

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Speaker 1: are pulling agnis tomorrow and that's a government on Friday.

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Speaker 1: This is an important conversation. One of the great moments

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Speaker 1: of Bloomberg surveillance. John Farrell was there as well with

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Speaker 1: for Instant Laqua was Kenneth Rogoff and Joseph Stiglets on

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Speaker 1: set with us in Davos. It was a trenchant moment

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Speaker 1: in World Bank I m F history. We are honored

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Speaker 1: today to have Laureate Stiglets with us from Columbia University

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Speaker 1: to sketch out the uproar in Washington over data integrity. Joe,

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Speaker 1: I thought you covered so much ground in your project

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Speaker 1: Syndicate s A in your defense of the managing director

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Speaker 1: of the I m F The question seems to be,

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Speaker 1: if we're gonna do data, try to to data that's

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Speaker 1: not politically tinged. Have these meetings in these institutions that

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Speaker 1: you worked at, have they become too political? Well, there's

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Speaker 1: always going to be a political element. Uh. The report

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Speaker 1: that was the subject of all this controversy was the

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Speaker 1: Doing Business Report, and that was a report that was

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Speaker 1: always problematic. In fact, just a decade ago I testified

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Speaker 1: to Congress about why that was a bad report and

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Speaker 1: ought to be uh a scrapped. Uh. They said that

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Speaker 1: doing business meant doing well, and that meant not treating

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Speaker 1: your workers well, weakening labor market protections, lowering corporate income tax.

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Speaker 1: My view was progressive taxation, finances infrastructure, and that makes

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Speaker 1: anyfication makes for his funder economy. So you're absolutely right.

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Speaker 1: If you're going to have data, make sure that, by

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Speaker 1: its very nature it's not a political database. Joe Stiglers,

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Speaker 1: do you believe that Dr Georgieva wherever follows on from

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Speaker 1: David mal Pass at the World Bank? Will they be

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Speaker 1: tinged by this? Is she does she have too much

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Speaker 1: baggage now to do her job for the remaining three years?

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Speaker 1: Absolutely not. In fact, if you look closely at what

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Speaker 1: she did. She stood up for data integrity. What she

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Speaker 1: said is, we're not going to monkey with the methodology.

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Speaker 1: She instructed her staff to make sure the data is right,

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Speaker 1: do exactly what I would have done if I were

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Speaker 1: in a position. Uh. And it turned out that when

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Speaker 1: they looked at the data, there were some rounding errors

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Speaker 1: they suggested of things, and the difference. This whole controversy

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Speaker 1: is about whether China was an eighty third or seventy

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Speaker 1: five in the ranking, and that difference is not statistically significant.

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Speaker 1: It's basically a tie. So and what they said was

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Speaker 1: our data confirmed what we said before we the literal adjustment.

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Speaker 1: What they should have done is explained the lack of

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Speaker 1: statistical significance to this difference between seventy five and Professor Stiglett's.

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Speaker 1: There's a broader story here of increasing politicization of central

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Speaker 1: bankers in general, of some of the financial authorities around

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Speaker 1: the world. And I speak about this with the Federal

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Speaker 1: Reserve in particular, Randy Quarrel stepping down as the vice

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Speaker 1: chair of supervision. How much does this weaken the role

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Speaker 1: of the likes of the Federal Reserve going forward? At

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Speaker 1: a time when they are more pivotal than ever to markets.

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Speaker 1: You cannot remove our regulatory authorities from the political context.

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Speaker 1: You know, we had a crisis in two thousand eights.

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Speaker 1: Some people seem to have forgotten that, and one side

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Speaker 1: of our political spectrum says it didn't occur, uh and

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Speaker 1: we ought to uh deregulate. The other side says, two

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Speaker 1: thousand eight actually occurred. It occurred because we did not

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Speaker 1: have adequate regulation, and we need to maintain a strong

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Speaker 1: regulatory framework. That has become political, but it's also the

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Speaker 1: essence of economics, and the same thing goes for climate change.

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Speaker 1: Climate risk is a financial risk. Countries all over the

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Speaker 1: world have recognized it, but in the United States we

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Speaker 1: seem not to have fully taken this on board. And

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Speaker 1: I'm very concerned that the Chairman of the Federal Reserve

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Speaker 1: has not taken on board the real risks associated with

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Speaker 1: climate change to our financial system, to our banking system. Professor,

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Speaker 1: what do you say to the accusation that your own

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Speaker 1: thoughts might be shaped by around politics. I'm reading the

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Speaker 1: project Syndicate Pace. You defend the Mountains director of the IMF,

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Speaker 1: but you raised the issues with the World Bank President

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Speaker 1: David Malpass, which of course was supported by the former administration.

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Speaker 1: You're now going after the chairman of the Federal Reserve,

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Speaker 1: which of course was nominated by Republicans. What would you say,

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Speaker 1: bank to people that set your own views, Shank, buy

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Speaker 1: your own personal politics. Well, I mean, obviously I'm uh.

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Speaker 1: The issues we we're talking about regulation, uh, climate change

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Speaker 1: are issues I feel very deeply about. But they're also

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Speaker 1: economic issues. Uh. In the case of David Malpass, Bloomberg

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Speaker 1: itself exposed the attempt of David Malpas to interfere with

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Speaker 1: the methodology that was used in the Doing Business Report,

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Speaker 1: a far graver concern than telling your staff to make

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Speaker 1: sure the numbers are right. And yet it is so

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Speaker 1: strange that there has been no discussion about that intervention

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Speaker 1: in the methodology of fire rap concern than uh, what

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Speaker 1: she did when she was trying to maintain integrity of

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Speaker 1: the data given the methodology. Professor, we appreciate your time,

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Speaker 1: We always do. Thank you your contribution this morning. Judge

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Speaker 1: Stiglitz there, the Columbia University professor and of course the

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Speaker 1: novad laureate in Economic We had some technical difficulties with

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Speaker 1: Fatty bro a little bit earlier this hour. I understand

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Speaker 1: we can catch up with him right now. The International

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Speaker 1: Energy Agency executive director, fancy forgive me, we gotta cut

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Speaker 1: this shot because we had some technical difficulties with you.

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Speaker 1: But let's start right here. The energy transition is increasingly

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Speaker 1: difficult right now worldwide because consumers are starting to see

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Speaker 1: higher prices of fossil fuels. How compromises that transition at

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Speaker 1: the moment, sir, thank you. I think that might be

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Speaker 1: misunderstanding or some people are trying to portrayed in a

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Speaker 1: way as if the current market classes is the first

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Speaker 1: classis of the clean energy transitions, and the current station

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Speaker 1: with natural gas or oil or coal, it is not

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Speaker 1: into the clean energy transitions. There are different fundamental drivers

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Speaker 1: for that, and in my view, clean energy is not

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Speaker 1: the cause, but the solution to this problem we have.

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Speaker 1: So therefore it is important to put this in a perspective.

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Speaker 1: And the press of oil you were just talking about

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Speaker 1: a few minutes ago. Today it is above eighty dollars.

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Speaker 1: But today we the world consumes about ninety six million

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Speaker 1: bullars per day, and only two thousand nineteen the world

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Speaker 1: was consuming much higher hundred million bars per day of

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Speaker 1: oil and the press was sixty dollars. So we cannot

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Speaker 1: talk about the lack of investment to oil or other things.

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Speaker 1: There is enough oil in the in the world, but

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Speaker 1: the high oil process must be a result of other

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Speaker 1: things rather than the lack of capacity or lack of investments.

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Speaker 1: As a representative both of the energy industry as well

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Speaker 1: as a proponent of trying the transition to a cleaner

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Speaker 1: energy future, do you think the price of oil should

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Speaker 1: stay high, should go even higher to expedite the transition period.

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Speaker 1: I think the clrent pricess oil gas coal process are

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Speaker 1: a serious challenge for the global economic recovery through higher inflation,

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Speaker 1: and it's such a those process I would like to

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Speaker 1: see as lower than they are now. But regardless of

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Speaker 1: the process, a clean energy is coming very strongly. It

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Speaker 1: is the electric cars, it is the the solar, it

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Speaker 1: is the bed. Just today I just saw the electric cars.

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Speaker 1: Says in China the largest car manufacturers, it is more

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Speaker 1: than twenty percent of all the cars sold in China

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Speaker 1: are electric cars. Same in Europe. It is going to

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Speaker 1: grow and it will end up I expect a big

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Speaker 1: impact on the will demand. We shouldn't be fixated what

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Speaker 1: is happening today in the markets as a result of

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Speaker 1: the unsustainable economic recovery around the world. Just to get

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Speaker 1: a bit beyond beyond this, and I expected the current

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Speaker 1: climate policies of many governments from China to the United States,

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Speaker 1: United States to Europe and others, we have significant implications

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Speaker 1: for the global energy markets. Fancy, we have to leave

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Speaker 1: it there. We had to kind of show off some

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Speaker 1: technical difficulties. Funny, please come back soon. We'll have a

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Speaker 1: longer conversation on an important topic. Funny people that the

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Speaker 1: II executive director. This is the Bloomberg Surveillance Podcast. Thanks

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Speaker 1: for listening to and us live weekdays from seven to

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Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television

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Speaker 1: each day from six to nine am for insight from

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Speaker 1: the best in economics, finance, investment, and international relations. And

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Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg

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Speaker 1: dot com, and of course on the terminal. I'm Tom Keane,

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Speaker 1: and this is Bloomberg