1
00:00:00,240 --> 00:00:02,960
Speaker 1: This is Bloomberg Wall Street Week, and we may not

2
00:00:03,000 --> 00:00:05,280
Speaker 1: have an overall recession, We're having a rolling recession. To

3
00:00:05,360 --> 00:00:07,040
Speaker 1: kind of roll looks pretty strongly it is when it

4
00:00:07,080 --> 00:00:09,840
Speaker 1: comes to jobs. The financial stories that shape our word.

5
00:00:09,960 --> 00:00:13,640
Speaker 1: Three major regional bank failures send shockwaves through the banking system.

6
00:00:13,680 --> 00:00:15,440
Speaker 1: We're all trying to figure out what to make of

7
00:00:15,600 --> 00:00:19,320
Speaker 1: generative AI through the eyes of the most influential voices.

8
00:00:19,440 --> 00:00:22,400
Speaker 1: Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America,

9
00:00:22,520 --> 00:00:25,320
Speaker 1: Debro Lair of the Paulson Institute, Len Hubbard of the

10
00:00:25,360 --> 00:00:28,760
Speaker 1: Columbia Business School. Bloomberg Wall Street Week with David Weston

11
00:00:28,880 --> 00:00:33,640
Speaker 1: from Bloomberg Radio. This Week contributor Larry Summers of Harvard

12
00:00:33,680 --> 00:00:36,680
Speaker 1: on how the FED is handling a stronger than expected economy.

13
00:00:36,840 --> 00:00:40,599
Speaker 2: Still think the FAT is considerably too optimistic.

14
00:00:41,040 --> 00:00:44,320
Speaker 1: Stephen Rattner of Wild Advisors on a car industry at

15
00:00:44,320 --> 00:00:45,280
Speaker 1: a crossroads.

16
00:00:45,720 --> 00:00:48,440
Speaker 3: For the Detroit companies to be winners in ev they

17
00:00:48,479 --> 00:00:49,720
Speaker 3: need help from the union.

18
00:00:49,920 --> 00:00:53,480
Speaker 1: And jose Maniyah of Neuvene on investment ideas. You may

19
00:00:53,520 --> 00:00:54,920
Speaker 1: not have thought of that.

20
00:00:55,000 --> 00:00:58,560
Speaker 4: Narrative, which was one that was largely academic around alternatives

21
00:00:58,560 --> 00:01:00,560
Speaker 4: and how do you get a better portfolio that are

22
00:01:00,560 --> 00:01:14,880
Speaker 4: correlated assets. Today it's not an academic discussion, it's an urgency.

23
00:01:17,120 --> 00:01:19,720
Speaker 1: This week, Global Wall Street watched as people tried to

24
00:01:19,720 --> 00:01:22,840
Speaker 1: get started, or at least back on track around the world.

25
00:01:23,200 --> 00:01:25,600
Speaker 1: President Biden went to the United Nations to send China

26
00:01:25,680 --> 00:01:28,360
Speaker 1: message that there's still room for cooperation.

27
00:01:28,880 --> 00:01:33,360
Speaker 5: I want to be clear and consistent. We seek to

28
00:01:33,480 --> 00:01:38,200
Speaker 5: responsibly manage the competition between our countries. We are for

29
00:01:38,520 --> 00:01:42,640
Speaker 5: d risky, not decoupling the child. We will push back

30
00:01:42,640 --> 00:01:45,319
Speaker 5: on aggression and intimidation and defend the rules of the road.

31
00:01:45,560 --> 00:01:46,120
Speaker 6: Good Chair J.

32
00:01:46,319 --> 00:01:48,720
Speaker 1: Powell steps the podium to get everyone to believe in

33
00:01:48,720 --> 00:01:49,800
Speaker 1: that soft landing.

34
00:01:50,000 --> 00:01:52,720
Speaker 7: After all, soft landing is a primary objective, and I

35
00:01:52,720 --> 00:01:53,800
Speaker 7: did not say otherwise.

36
00:01:54,000 --> 00:01:56,640
Speaker 3: That's what we've been trying to achieve for all this time.

37
00:01:56,880 --> 00:01:59,720
Speaker 1: The public offering market took another step forward with an

38
00:01:59,720 --> 00:02:02,760
Speaker 1: instant cart finally going on sale on the NASDAK.

39
00:02:03,000 --> 00:02:05,280
Speaker 8: We have the shares of instacart trading hire by thirty

40
00:02:05,360 --> 00:02:08,400
Speaker 8: nine percent right now, so we're looking at evaluation that

41
00:02:08,480 --> 00:02:09,840
Speaker 8: is closer to fourteen.

42
00:02:09,480 --> 00:02:12,760
Speaker 1: Billion, Quickly followed by eMarketer Klavio, Well, the.

43
00:02:12,760 --> 00:02:14,120
Speaker 7: Way we think about it is that part of being

44
00:02:14,120 --> 00:02:16,560
Speaker 7: a public company is showing the world you know how

45
00:02:16,560 --> 00:02:18,080
Speaker 7: you run your business and saying that you're going to be.

46
00:02:18,080 --> 00:02:18,880
Speaker 9: There for a long time.

47
00:02:19,080 --> 00:02:21,960
Speaker 1: The auto industry tried to get going again, leading to

48
00:02:21,960 --> 00:02:25,160
Speaker 1: the UAW expanding its strike to additional plants. At the

49
00:02:25,240 --> 00:02:26,720
Speaker 1: end of the week, we will.

50
00:02:26,520 --> 00:02:31,119
Speaker 2: Be striking thirty eight locations across twenty states across all

51
00:02:31,200 --> 00:02:32,760
Speaker 2: nine regions of the UAW.

52
00:02:34,600 --> 00:02:37,200
Speaker 1: The equity markets reacted to all of this, and particularly

53
00:02:37,200 --> 00:02:39,440
Speaker 1: what came out of the fad by selling off, with

54
00:02:39,520 --> 00:02:41,680
Speaker 1: the S and P five hundred having its worst week

55
00:02:41,760 --> 00:02:44,560
Speaker 1: since March, down two point nine three percent for the

56
00:02:44,600 --> 00:02:47,360
Speaker 1: week to forty three twenty eight. That is, falling below

57
00:02:47,480 --> 00:02:50,240
Speaker 1: the median year end forecast of our Bloomberg Els that's

58
00:02:50,280 --> 00:02:52,880
Speaker 1: forty four to thirty five, while the Nasdaq took an

59
00:02:52,960 --> 00:02:55,920
Speaker 1: even bigger head, dropping just over three point six percent.

60
00:02:56,280 --> 00:02:59,840
Speaker 1: The yield on the tenure added almost ten full basis points,

61
00:03:00,520 --> 00:03:03,200
Speaker 1: ending the week at forty four point four to three

62
00:03:03,320 --> 00:03:06,360
Speaker 1: one seven after spiking above four point five early in

63
00:03:06,400 --> 00:03:08,360
Speaker 1: the day on Friday. Here to help us sort it

64
00:03:08,360 --> 00:03:11,120
Speaker 1: all out, our Peter Crass, chair and founder of Aperture

65
00:03:11,160 --> 00:03:14,799
Speaker 1: Investors and Sarah Hetter, CEO and co founder of Cosway Capital.

66
00:03:14,880 --> 00:03:16,960
Speaker 1: Welcome back to both of you. Peter' always start with

67
00:03:16,960 --> 00:03:18,320
Speaker 1: you what is going on in the market. So I

68
00:03:18,360 --> 00:03:19,640
Speaker 1: didn't think what the Fed had to say was that

69
00:03:19,760 --> 00:03:21,840
Speaker 1: radically different from what we've heard before. But boy, the

70
00:03:21,880 --> 00:03:23,160
Speaker 1: market shore reacted this time.

71
00:03:23,360 --> 00:03:26,040
Speaker 7: We look in the short run, what the markets are

72
00:03:26,080 --> 00:03:30,200
Speaker 7: reacting to is their expectation of where interest rates are

73
00:03:30,240 --> 00:03:34,800
Speaker 7: going to be in twenty four. Investors believed that the

74
00:03:34,840 --> 00:03:36,960
Speaker 7: Fed was going to be able to engineer a soft landing,

75
00:03:36,960 --> 00:03:40,000
Speaker 7: which Pale again reiterated he was trying to do. But

76
00:03:40,240 --> 00:03:43,360
Speaker 7: investors believe that in twenty four interest rates would begin

77
00:03:43,440 --> 00:03:46,160
Speaker 7: to be cut, and the FED has been a little

78
00:03:46,160 --> 00:03:48,119
Speaker 7: bit more hawkish on that. The Fed has said, well,

79
00:03:48,160 --> 00:03:51,120
Speaker 7: there's probably another rate increase this year. And if you

80
00:03:51,120 --> 00:03:54,560
Speaker 7: look at the dot, which is the explanation of the

81
00:03:54,640 --> 00:03:57,600
Speaker 7: committee's estimation of where rates are going to be, those

82
00:03:57,640 --> 00:04:00,000
Speaker 7: dots moved up and that's what unsettled them are.

83
00:04:00,000 --> 00:04:00,360
Speaker 6: Market.

84
00:04:00,840 --> 00:04:04,280
Speaker 7: Now, that's a very short term activity, but the market

85
00:04:04,320 --> 00:04:06,400
Speaker 7: reacted significantly to that, Sir.

86
00:04:06,520 --> 00:04:08,400
Speaker 1: At the same time, the FED, I thought said, boy,

87
00:04:08,440 --> 00:04:10,600
Speaker 1: the economy, if anything, looks stronger than we thought it

88
00:04:10,640 --> 00:04:13,080
Speaker 1: would before. Is that good news or bad news? I mean,

89
00:04:13,120 --> 00:04:14,960
Speaker 1: if it's stronger than we thought, does that mean actually

90
00:04:15,000 --> 00:04:17,239
Speaker 1: the FED will have to keep pushing on the interest rates,

91
00:04:17,279 --> 00:04:20,080
Speaker 1: which could lead to something breaking likely.

92
00:04:20,200 --> 00:04:25,440
Speaker 8: It appears that Fed might have underestimated how insensitive US

93
00:04:25,560 --> 00:04:31,200
Speaker 8: market is to rise communists to rising rates. There's many corporates,

94
00:04:31,200 --> 00:04:34,760
Speaker 8: for example, have turned out they're dead, So longer duration dead,

95
00:04:34,839 --> 00:04:38,440
Speaker 8: its fixed rate creates a level of insulation to what

96
00:04:38,480 --> 00:04:40,960
Speaker 8: the Fed is doing. So there may be less sensitivity,

97
00:04:41,120 --> 00:04:44,880
Speaker 8: but ultimately, as rates remain higher for longer, this will

98
00:04:44,920 --> 00:04:47,719
Speaker 8: catch up with those who have borrowed too much or

99
00:04:48,040 --> 00:04:52,080
Speaker 8: where assets prices are falling. Thinking particular about parts of

100
00:04:52,080 --> 00:04:54,400
Speaker 8: the real estate sector, Peter.

101
00:04:54,279 --> 00:04:56,640
Speaker 1: What about the real estate sectors? We don't want anything

102
00:04:56,640 --> 00:04:59,080
Speaker 1: to break, but it's a decided possibility. I think it's

103
00:04:59,120 --> 00:05:00,880
Speaker 1: fair to say, is that what we should be looking on.

104
00:05:01,240 --> 00:05:03,960
Speaker 7: So the real estate sector in the economy breaks into

105
00:05:03,960 --> 00:05:06,919
Speaker 7: two pieces. There's the residential real estate business, which is

106
00:05:07,000 --> 00:05:09,360
Speaker 7: very large and affects a lot of people, And to

107
00:05:09,480 --> 00:05:12,200
Speaker 7: Sarah's point, is the part of the economy that is

108
00:05:12,360 --> 00:05:18,000
Speaker 7: very rate insensitive today because most mortgages today are fixed rate,

109
00:05:18,360 --> 00:05:20,960
Speaker 7: and they were fixed at low interest rates. So households

110
00:05:20,960 --> 00:05:23,960
Speaker 7: today have a big, big benefit. They own a very

111
00:05:24,040 --> 00:05:27,360
Speaker 7: long liability or effective we had asset to them at

112
00:05:27,440 --> 00:05:30,120
Speaker 7: very low rates, which allows them to continue to spend

113
00:05:30,480 --> 00:05:34,320
Speaker 7: and gives them positive operating leverage in their daily budgets.

114
00:05:34,600 --> 00:05:37,320
Speaker 7: In the commercial space, however, that's totally different. In the

115
00:05:37,320 --> 00:05:42,000
Speaker 7: commercial space, there you had buyers buying buildings at low

116
00:05:42,080 --> 00:05:45,240
Speaker 7: cap rates and low interest rates which do need to

117
00:05:45,240 --> 00:05:48,320
Speaker 7: be refinanced, and their sair again is absolutely correct. We

118
00:05:48,400 --> 00:05:51,040
Speaker 7: are going to see refinancing that is going to cause

119
00:05:51,520 --> 00:05:52,200
Speaker 7: problems in the.

120
00:05:52,240 --> 00:05:54,240
Speaker 6: Real estate business. We've already seen that.

121
00:05:54,360 --> 00:05:57,000
Speaker 7: We've seen significant owners in real estate of the last

122
00:05:57,040 --> 00:06:01,640
Speaker 7: six months literally walk away from buildings, unusual just.

123
00:06:01,680 --> 00:06:03,920
Speaker 8: Because at the time that bank credit is tightening too.

124
00:06:04,120 --> 00:06:07,800
Speaker 8: So it's a it's a double whamming well and the SARTA.

125
00:06:07,880 --> 00:06:09,480
Speaker 1: Let me ask you, some people are not saying forget

126
00:06:09,520 --> 00:06:12,480
Speaker 1: about the longer, for higher for longer. What if it's

127
00:06:12,560 --> 00:06:15,560
Speaker 1: higher forever? I mean, what is this Basically there's a

128
00:06:15,600 --> 00:06:17,680
Speaker 1: new normal, as it were. What does that do to

129
00:06:17,720 --> 00:06:18,680
Speaker 1: investment proposition?

130
00:06:19,440 --> 00:06:23,320
Speaker 8: Well, cycles don't normally work that way. Our expectations fall

131
00:06:23,440 --> 00:06:26,839
Speaker 8: at causeway is that the FED will achieve its two

132
00:06:26,839 --> 00:06:29,440
Speaker 8: percenter thereabouts level of inflation, but that will come at

133
00:06:29,480 --> 00:06:33,320
Speaker 8: cost with importment, and as the US economy shifts downward

134
00:06:33,360 --> 00:06:38,280
Speaker 8: and slows dramatically, that in turn will precipitate the FED easing.

135
00:06:38,680 --> 00:06:40,840
Speaker 8: But that might not happen again for quite a lot.

136
00:06:40,880 --> 00:06:42,919
Speaker 8: Couldn't be several more quarters, it could be here, it

137
00:06:42,960 --> 00:06:46,320
Speaker 8: could be longer. It's very hard to say. But the

138
00:06:46,400 --> 00:06:49,279
Speaker 8: longer rates remain high, it's like a slow asphyxiation for

139
00:06:49,360 --> 00:06:52,359
Speaker 8: those that are overleveraged. And there's plenty of that across

140
00:06:52,400 --> 00:06:54,520
Speaker 8: this economy. In fact, there's plenty of that globally.

141
00:06:55,320 --> 00:06:59,159
Speaker 7: It might be a slightly different outcome there. Certainly the

142
00:06:59,160 --> 00:07:00,880
Speaker 7: FED is said they want to get to two percent,

143
00:07:01,520 --> 00:07:05,240
Speaker 7: but I don't think the FED will consciously break the

144
00:07:05,279 --> 00:07:07,920
Speaker 7: economy to get there. And it may be that we

145
00:07:08,000 --> 00:07:12,760
Speaker 7: see inflation at three percent and then the term structure

146
00:07:12,800 --> 00:07:16,800
Speaker 7: of interest rates may shift a bit and perhaps the

147
00:07:16,920 --> 00:07:18,920
Speaker 7: ten uere isn't going to go down to three percent,

148
00:07:18,960 --> 00:07:21,040
Speaker 7: it's going to be at five to six percent and

149
00:07:21,120 --> 00:07:22,840
Speaker 7: cash is going to be at three to four percent.

150
00:07:23,040 --> 00:07:25,760
Speaker 7: And that's not an unusual position for the term structure

151
00:07:25,760 --> 00:07:28,240
Speaker 7: of rates to be. In fact, over the last seventy

152
00:07:28,240 --> 00:07:30,920
Speaker 7: to eighty years was more likely that than not. And

153
00:07:31,000 --> 00:07:33,160
Speaker 7: the economy can be just fined there and stocks could

154
00:07:33,200 --> 00:07:36,080
Speaker 7: you just find there, And that I think is also

155
00:07:36,120 --> 00:07:37,480
Speaker 7: a possibility.

156
00:07:37,040 --> 00:07:39,160
Speaker 1: Sometimes, Peter, I think we tend to focus on the

157
00:07:39,200 --> 00:07:41,360
Speaker 1: FED and the economy like that's the only two players

158
00:07:41,440 --> 00:07:44,160
Speaker 1: in the game. There's also a federal government that is

159
00:07:44,200 --> 00:07:46,280
Speaker 1: spending a lot of money and borrowing a lot of money.

160
00:07:46,680 --> 00:07:49,520
Speaker 1: What does that mean potentially for the rate structure.

161
00:07:49,720 --> 00:07:52,520
Speaker 7: Well, that's going to crowd out borrowers on the duration side,

162
00:07:52,560 --> 00:07:55,520
Speaker 7: and so that is one That is another reason why

163
00:07:55,600 --> 00:07:58,000
Speaker 7: tenure rates may not drop back to three percent or

164
00:07:58,040 --> 00:08:00,360
Speaker 7: three and a half. The federal government is spending a

165
00:08:00,360 --> 00:08:05,320
Speaker 7: lot of money. We have three big programs infrastructure, chips,

166
00:08:05,320 --> 00:08:10,040
Speaker 7: and other spending programs in climate. So I think that

167
00:08:10,120 --> 00:08:12,320
Speaker 7: that stimus is going to continue. That's going to make

168
00:08:12,360 --> 00:08:14,480
Speaker 7: it hard for rates to come down. We could have

169
00:08:14,520 --> 00:08:17,160
Speaker 7: a complete recession of bad recession, and then of course

170
00:08:17,240 --> 00:08:19,360
Speaker 7: rates will come down and we will see low rates,

171
00:08:19,400 --> 00:08:20,440
Speaker 7: but I don't think they'll stay there.

172
00:08:20,480 --> 00:08:22,720
Speaker 1: There are also some other risks out there we're seeing

173
00:08:22,760 --> 00:08:24,640
Speaker 1: right now in the marketplace. One of them is that

174
00:08:24,640 --> 00:08:27,600
Speaker 1: big uaw strikeing actually got expanded some on Friday, at

175
00:08:27,640 --> 00:08:30,000
Speaker 1: least against two of the big automakers. How big a

176
00:08:30,080 --> 00:08:32,040
Speaker 1: risk is that for the markets? Do you think over

177
00:08:32,080 --> 00:08:34,079
Speaker 1: the medium term? I won't even talk about longer term,

178
00:08:34,120 --> 00:08:34,800
Speaker 1: but medium term.

179
00:08:36,040 --> 00:08:39,480
Speaker 8: The risk for inflation in the US and the reason

180
00:08:39,559 --> 00:08:42,079
Speaker 8: why some of this comes from one of our favorite economists,

181
00:08:42,120 --> 00:08:46,320
Speaker 8: Nancy Lazar. She noted that since twenty sixteen, auto industry

182
00:08:46,400 --> 00:08:49,880
Speaker 8: productivity has been declining while auto industry and compensation has

183
00:08:49,880 --> 00:08:52,319
Speaker 8: been rising, So that means labor costs in the auto

184
00:08:52,360 --> 00:08:57,800
Speaker 8: industry have been increasing quite significantly. So without better productivity

185
00:08:58,720 --> 00:09:01,760
Speaker 8: and having wage hikes, this is going to be really

186
00:09:01,800 --> 00:09:04,440
Speaker 8: hard on auto industry and profitability, which is why this

187
00:09:04,559 --> 00:09:08,200
Speaker 8: negotiation is so incredibly fierce. The thirty to our work

188
00:09:08,200 --> 00:09:12,319
Speaker 8: week is definitely not an increase in productivity. So let's

189
00:09:12,400 --> 00:09:15,439
Speaker 8: just say the UEF gets what they want or something

190
00:09:15,480 --> 00:09:18,280
Speaker 8: close to that, then there's a cogningient effect because labor

191
00:09:18,520 --> 00:09:23,119
Speaker 8: across the country the globallyses how we want that, and

192
00:09:22,720 --> 00:09:27,120
Speaker 8: that just adds to to labor inflation, which is something

193
00:09:27,160 --> 00:09:29,400
Speaker 8: that I think that that is very concerned about, given

194
00:09:29,480 --> 00:09:31,319
Speaker 8: how tight and plant it is in this.

195
00:09:31,320 --> 00:09:32,080
Speaker 10: Country and Peter.

196
00:09:32,120 --> 00:09:34,600
Speaker 1: We're focused on the auto industry, but it's broader than

197
00:09:34,600 --> 00:09:37,440
Speaker 1: the utter industry. We've already always, already had the Writer's Guild.

198
00:09:37,480 --> 00:09:39,520
Speaker 1: They're in talks again now they haven't settled it. We

199
00:09:39,559 --> 00:09:42,480
Speaker 1: have the actors, we had ups, we had the ports,

200
00:09:42,640 --> 00:09:45,000
Speaker 1: We've got others waiting in the wings right now. Is

201
00:09:45,040 --> 00:09:47,880
Speaker 1: there the possibility of really a broader set of labor

202
00:09:48,000 --> 00:09:50,880
Speaker 1: issues here that will increase wages rather substantially.

203
00:09:51,000 --> 00:09:52,080
Speaker 6: I think we already have it.

204
00:09:52,200 --> 00:09:55,520
Speaker 7: I mean, the amount of union labor in the country

205
00:09:55,600 --> 00:09:56,480
Speaker 7: we know is low.

206
00:09:56,520 --> 00:09:57,800
Speaker 6: It's certainly historically low.

207
00:09:58,240 --> 00:10:02,559
Speaker 7: Sarah's right about the demands of the UAW and what

208
00:10:02,600 --> 00:10:05,760
Speaker 7: that may portend, at least for that codie of workers.

209
00:10:06,200 --> 00:10:08,280
Speaker 7: But there's a large number of workers in the country

210
00:10:08,320 --> 00:10:11,200
Speaker 7: that are not unionized. They are also demanding higher wages.

211
00:10:11,520 --> 00:10:13,080
Speaker 7: And we also know that we've got a very tight

212
00:10:13,160 --> 00:10:16,040
Speaker 7: labor market, which is frankly the real source of the issue.

213
00:10:16,360 --> 00:10:19,640
Speaker 7: Unemployment still remains relatively low, it's not rising very much,

214
00:10:20,200 --> 00:10:23,120
Speaker 7: and that means labor has a stronger leg at the

215
00:10:23,120 --> 00:10:26,000
Speaker 7: bargaining table, and frankly they probably shouldn't because the last

216
00:10:26,040 --> 00:10:28,920
Speaker 7: ten or fifteen years they haven't. So I think that

217
00:10:29,000 --> 00:10:31,120
Speaker 7: the FED knows that the FED is why the FED

218
00:10:31,240 --> 00:10:33,480
Speaker 7: is being tough on rates and why it's not talking

219
00:10:33,480 --> 00:10:36,320
Speaker 7: about taking them down, and I think why it's going

220
00:10:36,360 --> 00:10:38,280
Speaker 7: to be longer higher, for.

221
00:10:38,240 --> 00:10:41,199
Speaker 1: Longer many Thanks to Sarah Ketterer of Causeway Capital and

222
00:10:41,240 --> 00:10:46,480
Speaker 1: Peter Krauss of Aperture Investors. Coming up, the auto industry

223
00:10:46,600 --> 00:10:50,040
Speaker 1: enters the second week of selective strikes hitting the Big three.

224
00:10:50,240 --> 00:10:52,880
Speaker 1: We talk with where it all could end with former

225
00:10:52,920 --> 00:10:55,719
Speaker 1: cars are Stephen Rattner of Willed Advisors.

226
00:10:56,320 --> 00:10:58,600
Speaker 3: The more the autoworkers get paid, and I'm in favor

227
00:10:58,600 --> 00:11:01,000
Speaker 3: of them getting paid more, the fewer jobs they're going

228
00:11:01,080 --> 00:11:01,240
Speaker 3: to be.

229
00:11:01,640 --> 00:11:06,360
Speaker 1: That's next on Wall Street Week on Bloomberg. This is

230
00:11:06,400 --> 00:11:10,760
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

231
00:11:13,120 --> 00:11:16,400
Speaker 1: Automotive Breakdown. That's what's happened to Detroit with the auto

232
00:11:16,480 --> 00:11:19,880
Speaker 1: workers into their second week of striking, selective GM Ford

233
00:11:19,920 --> 00:11:24,040
Speaker 1: and stillants plants with no end in sight. President Biden

234
00:11:24,080 --> 00:11:26,600
Speaker 1: has more or less cited with the UAW demand that

235
00:11:26,640 --> 00:11:29,560
Speaker 1: the Big three share their record profits to make up

236
00:11:29,600 --> 00:11:30,679
Speaker 1: for lost time.

237
00:11:31,280 --> 00:11:35,880
Speaker 5: Auto companies have seen record profits, including the last few

238
00:11:35,960 --> 00:11:40,200
Speaker 5: years because of the extraordinary skill and sacrifices the UAW workers.

239
00:11:41,000 --> 00:11:44,720
Speaker 5: Those record profits have not been shared fairly in my view,

240
00:11:44,960 --> 00:11:45,880
Speaker 5: with those workers.

241
00:11:46,040 --> 00:11:49,200
Speaker 1: While Republicans like former Vice President Mike Pence say President

242
00:11:49,320 --> 00:11:52,400
Speaker 1: Biden has helped create the problem with his push for

243
00:11:52,480 --> 00:11:53,960
Speaker 1: electric vehicles.

244
00:11:53,840 --> 00:11:57,480
Speaker 10: What I'm hearing around the country is that that auto

245
00:11:57,520 --> 00:12:01,720
Speaker 10: workers are very concerned about Joe Iden's Green New Deal

246
00:12:01,840 --> 00:12:06,880
Speaker 10: heavy handed effort to use taxpayer dollars to drive these

247
00:12:06,920 --> 00:12:11,960
Speaker 10: automotive companies into electric vehicle production. I meant, you've got

248
00:12:12,000 --> 00:12:13,959
Speaker 10: one hundred and forty five thousand workers out there that

249
00:12:14,000 --> 00:12:19,040
Speaker 10: have been many of them built a lifetime making gasoline powered.

250
00:12:18,720 --> 00:12:22,040
Speaker 1: Cars, and auto CEOs like GM's Mary Borrow say that

251
00:12:22,280 --> 00:12:25,440
Speaker 1: whatever the politics, they need to invest all those profits

252
00:12:25,559 --> 00:12:27,720
Speaker 1: so they can make the move into evs.

253
00:12:28,280 --> 00:12:30,640
Speaker 11: We need to invest in our future, and we have

254
00:12:30,679 --> 00:12:32,760
Speaker 11: a plan to take all of our employees along. I

255
00:12:32,760 --> 00:12:35,840
Speaker 11: think this is very important. We have worked very carefully

256
00:12:35,880 --> 00:12:38,040
Speaker 11: to have a job for everyone so we can make

257
00:12:38,080 --> 00:12:41,679
Speaker 11: this transformation together. And frankly, when you put it up

258
00:12:41,800 --> 00:12:44,000
Speaker 11: you have a strike and we're not making vehicles, you

259
00:12:44,040 --> 00:12:45,160
Speaker 11: start to put that at risk.

260
00:12:45,360 --> 00:12:48,559
Speaker 1: Some investors, like Bruce Richards of Marathon Asset Management think

261
00:12:48,600 --> 00:12:51,520
Speaker 1: the shift back from capital to labor can ultimately be

262
00:12:51,600 --> 00:12:52,199
Speaker 1: good for us.

263
00:12:52,200 --> 00:12:55,880
Speaker 9: All companies in the next few years are going to

264
00:12:55,920 --> 00:12:58,760
Speaker 9: have a real issue because they're going to pay a

265
00:12:58,800 --> 00:13:01,319
Speaker 9: lot higher labor calls. You see that with the UAW,

266
00:13:01,800 --> 00:13:04,120
Speaker 9: you see that in Hollywood, you see that with what

267
00:13:04,280 --> 00:13:10,120
Speaker 9: the pilots negotiate with the airlines. The labor costs are increasing,

268
00:13:10,280 --> 00:13:12,160
Speaker 9: and we love to see labor costs increases.

269
00:13:12,200 --> 00:13:14,240
Speaker 6: It's good for America. It's good for Americans.

270
00:13:14,320 --> 00:13:17,200
Speaker 1: But former Treasury Secretary Larry Summers warns that this may

271
00:13:17,240 --> 00:13:19,640
Speaker 1: turn out to be a zero sum game where the

272
00:13:19,760 --> 00:13:23,000
Speaker 1: union can't afford to lose and the auto companies can't

273
00:13:23,000 --> 00:13:26,040
Speaker 1: afford for them to win, which could mean things will

274
00:13:26,080 --> 00:13:28,080
Speaker 1: get worse before they get better.

275
00:13:28,520 --> 00:13:32,560
Speaker 12: I fear that there's a bit of an in game

276
00:13:32,679 --> 00:13:37,720
Speaker 12: dynamic going on here, and in that situation, the incentives

277
00:13:37,720 --> 00:13:41,760
Speaker 12: for the union, like the incentives at one stage for

278
00:13:42,160 --> 00:13:45,880
Speaker 12: the coal miners, like the incentive one stage for the

279
00:13:45,960 --> 00:13:52,079
Speaker 12: steel workers, are to get as absolute much as they

280
00:13:52,120 --> 00:13:55,760
Speaker 12: can while they can.

281
00:13:59,200 --> 00:14:01,280
Speaker 1: And here to take us through the auto industry as

282
00:14:01,320 --> 00:14:04,160
Speaker 1: we find it today is Stephen Rattner. He is the

283
00:14:04,240 --> 00:14:07,760
Speaker 1: chairman and CEO of Willet Advisors, which invests the personal

284
00:14:07,760 --> 00:14:10,480
Speaker 1: and film topic assets of Michael R. Bernblerg. He is

285
00:14:10,520 --> 00:14:12,800
Speaker 1: our founder and majority share over. Steve, thanks so much

286
00:14:12,840 --> 00:14:14,360
Speaker 1: for being back with us. You know a little bit

287
00:14:14,400 --> 00:14:17,479
Speaker 1: about cars, goodness knows, given your service in the obamaministration

288
00:14:17,559 --> 00:14:20,640
Speaker 1: putting the industry back together beforehand. Is there a way

289
00:14:20,680 --> 00:14:22,800
Speaker 1: out of this impast right now? Because I sure don't

290
00:14:22,840 --> 00:14:23,200
Speaker 1: see it.

291
00:14:23,600 --> 00:14:26,280
Speaker 3: Look, it does certainly look tougher than I've ever seen

292
00:14:26,280 --> 00:14:29,080
Speaker 3: in any of these contract negotiations. First of all, the

293
00:14:29,320 --> 00:14:32,920
Speaker 3: uaw's demands are, even by the standard of opening demands,

294
00:14:32,960 --> 00:14:37,120
Speaker 3: pretty extreme. Secondly, they're conducting this negotiation largely in public,

295
00:14:37,440 --> 00:14:39,840
Speaker 3: which makes it harder for the union in particular to

296
00:14:39,880 --> 00:14:42,560
Speaker 3: back off their positions if and when they need to.

297
00:14:43,120 --> 00:14:45,280
Speaker 3: But all that said, there's never been a strike that

298
00:14:45,360 --> 00:14:47,560
Speaker 3: I know of that hasn't gotten resolved one way or another,

299
00:14:47,600 --> 00:14:50,000
Speaker 3: and it's not hard to see a resolution here. But

300
00:14:50,600 --> 00:14:52,200
Speaker 3: I think the mood is that it's going to take

301
00:14:52,200 --> 00:14:52,720
Speaker 3: a good while.

302
00:14:53,200 --> 00:14:55,080
Speaker 1: You have written in the New York Times that you

303
00:14:55,160 --> 00:14:58,320
Speaker 1: certainly can understand why there needs to be more wages

304
00:14:58,320 --> 00:15:01,360
Speaker 1: for autoworkers. They've lagged behind for various reason. It's inflation,

305
00:15:01,400 --> 00:15:04,240
Speaker 1: but also the contract that they had at the same time.

306
00:15:04,520 --> 00:15:06,840
Speaker 1: It's about more than just money, is it not. Because

307
00:15:07,080 --> 00:15:10,040
Speaker 1: the autoworkers say, you're going to electric vehicles will require

308
00:15:10,120 --> 00:15:13,280
Speaker 1: fewer of us than the other side the auto industry stage,

309
00:15:13,320 --> 00:15:15,560
Speaker 1: we have to go to electric vehicles or we're not

310
00:15:15,640 --> 00:15:16,840
Speaker 1: going to be in business anymore.

311
00:15:17,720 --> 00:15:20,880
Speaker 3: The classic Harvard Business School case is that a company

312
00:15:20,960 --> 00:15:23,360
Speaker 3: or an industry that tries to protect protect an old

313
00:15:23,400 --> 00:15:26,560
Speaker 3: business model when there's a new one coming ends up failing.

314
00:15:27,200 --> 00:15:29,520
Speaker 3: If the Detroit companies want to be competitive, if we

315
00:15:29,560 --> 00:15:33,320
Speaker 3: as a country want to have a viable domestic auto industry,

316
00:15:33,960 --> 00:15:36,200
Speaker 3: and by the way, it is the government's policy to

317
00:15:36,280 --> 00:15:40,200
Speaker 3: encourage electric vehicles, then we have to welcome this change,

318
00:15:40,520 --> 00:15:42,480
Speaker 3: and there will be displacements and we have to deal

319
00:15:42,480 --> 00:15:42,840
Speaker 3: with those.

320
00:15:43,200 --> 00:15:44,840
Speaker 1: I guess I'm asking how much of this do you

321
00:15:44,840 --> 00:15:47,680
Speaker 1: think in the end is about money? How much of

322
00:15:47,720 --> 00:15:49,520
Speaker 1: a raise people get because everyone agrees they're going to

323
00:15:49,560 --> 00:15:51,680
Speaker 1: get a significant raise, and how much it is more

324
00:15:51,880 --> 00:15:54,880
Speaker 1: fundamental things about the way the companies actually run their businesses.

325
00:15:55,320 --> 00:15:57,800
Speaker 3: I think it's mostly about money or money related things.

326
00:15:58,720 --> 00:16:01,000
Speaker 3: I think, yes, there's a lot of concern about the

327
00:16:01,000 --> 00:16:02,840
Speaker 3: future number of jobs, and so on and so forth.

328
00:16:03,080 --> 00:16:05,560
Speaker 3: But I'm sympathetic to the union in the sense that

329
00:16:05,680 --> 00:16:09,520
Speaker 3: if you look at the last fifteen years, auto workers

330
00:16:09,520 --> 00:16:12,200
Speaker 3: as a whole in this country have basically stayed flat

331
00:16:12,200 --> 00:16:15,520
Speaker 3: after inflation, whereas other workers have gotten some after inflation

332
00:16:15,680 --> 00:16:19,080
Speaker 3: real income increases. And they are good reasons for good reasons.

333
00:16:19,080 --> 00:16:22,120
Speaker 3: There are reasons for that, which is the fundamental competitiveness

334
00:16:22,120 --> 00:16:25,000
Speaker 3: of the auto industry on a global scale. But nonetheless,

335
00:16:25,800 --> 00:16:28,000
Speaker 3: in a world of three point eight percent unemployment and

336
00:16:28,000 --> 00:16:30,400
Speaker 3: one and a half jobs for every American, I can

337
00:16:30,520 --> 00:16:33,080
Speaker 3: understand why these workers feel like it's time for them

338
00:16:33,520 --> 00:16:35,160
Speaker 3: to get a bigger share.

339
00:16:35,880 --> 00:16:38,720
Speaker 1: Last week, President Biden weighed in on the issue, and

340
00:16:38,800 --> 00:16:41,080
Speaker 1: at least to my hearing, weighed in pretty heavily on

341
00:16:41,120 --> 00:16:43,960
Speaker 1: the UAW side, saying there have been record profits out

342
00:16:43,960 --> 00:16:45,840
Speaker 1: of the car industries and there should be a record deal.

343
00:16:45,880 --> 00:16:47,880
Speaker 1: I think he called it basically, is he making the

344
00:16:47,920 --> 00:16:50,480
Speaker 1: situation better or worse? In the port situation. I don't

345
00:16:50,480 --> 00:16:52,960
Speaker 1: recall him weighing in that heavily on the workers side.

346
00:16:53,240 --> 00:16:56,280
Speaker 3: I think that's fair. I think we are closer to

347
00:16:56,320 --> 00:16:58,880
Speaker 3: an election. I think we're talking about the Midwest, which

348
00:16:58,880 --> 00:17:01,720
Speaker 3: are swing states, I don't think California is ever going

349
00:17:01,760 --> 00:17:05,360
Speaker 3: to be a swing state, but I have to say

350
00:17:05,359 --> 00:17:08,480
Speaker 3: I don't think it's overly helpful for him to put

351
00:17:08,480 --> 00:17:11,560
Speaker 3: his finger on the scale. Look, the politics are what

352
00:17:11,640 --> 00:17:15,080
Speaker 3: they are, and I get that. But this is a

353
00:17:15,119 --> 00:17:18,480
Speaker 3: tough situation, and I think there are equities on both sides.

354
00:17:18,760 --> 00:17:21,840
Speaker 1: Whenever we have a very large conflict like this, in

355
00:17:21,840 --> 00:17:24,760
Speaker 1: my experience, at least, there are unintended consequences. There are

356
00:17:24,880 --> 00:17:27,000
Speaker 1: the principal players and who does well who doesn't, But

357
00:17:27,040 --> 00:17:28,840
Speaker 1: there are people are on the side. I can think

358
00:17:28,880 --> 00:17:33,840
Speaker 1: of people like Tesla, other automakers around the world, certain states,

359
00:17:34,000 --> 00:17:36,919
Speaker 1: they're right to work states. What are the unintended consequences

360
00:17:36,960 --> 00:17:39,119
Speaker 1: you think perhaps of this dispute.

361
00:17:39,520 --> 00:17:41,960
Speaker 3: Look, the unintended consequences are what happened is to the

362
00:17:42,080 --> 00:17:44,880
Speaker 3: number of jobs, not the price paid for each job.

363
00:17:45,200 --> 00:17:46,840
Speaker 3: The yin and the yang of this, and it's a

364
00:17:46,880 --> 00:17:49,760
Speaker 3: tough one, is that the more the auto workers get paid,

365
00:17:49,760 --> 00:17:51,879
Speaker 3: and I'm in favor of them getting paid more, the

366
00:17:51,920 --> 00:17:54,520
Speaker 3: fewer jobs are going to be. That's just the inevitable

367
00:17:54,560 --> 00:17:58,000
Speaker 3: result of this. If you look, for example, back since

368
00:17:58,040 --> 00:18:00,199
Speaker 3: two thousand and nine, at the number of jobs that

369
00:18:00,240 --> 00:18:02,280
Speaker 3: have moved to Mexico, and the fact that there are

370
00:18:02,280 --> 00:18:04,560
Speaker 3: now more auto jobs in Mexico than there are in

371
00:18:04,560 --> 00:18:08,800
Speaker 3: the United States. It tells you something about how capitalism

372
00:18:08,800 --> 00:18:11,600
Speaker 3: and free enterprise works. It finds the lowest costs locale

373
00:18:11,640 --> 00:18:12,639
Speaker 3: that can meet its needs.

374
00:18:13,440 --> 00:18:16,640
Speaker 1: What is this safe potential to investors like you making investments,

375
00:18:16,800 --> 00:18:18,600
Speaker 1: not just in the auto industry, about whether you invest

376
00:18:18,640 --> 00:18:21,240
Speaker 1: in audustry, but more broadly, it's in fact there is

377
00:18:21,280 --> 00:18:24,040
Speaker 1: a shift back toward labor that's got to squeeze margins.

378
00:18:24,040 --> 00:18:26,920
Speaker 1: It's a practical matter. Does that mean that the prospects

379
00:18:26,920 --> 00:18:29,240
Speaker 1: for equities come down some if.

380
00:18:29,119 --> 00:18:31,680
Speaker 3: All that happens? The answer is sure, I don't think

381
00:18:31,720 --> 00:18:33,520
Speaker 3: we know yet. Yes, there are a lot of strikes

382
00:18:33,520 --> 00:18:35,160
Speaker 3: and a lot of high would look like big pay

383
00:18:35,280 --> 00:18:38,199
Speaker 3: packages coming through. But you also have an economy on

384
00:18:38,200 --> 00:18:40,240
Speaker 3: the other side where companies have more pricing power and

385
00:18:40,280 --> 00:18:44,960
Speaker 3: they used to. There's less competition, frankly, less anti trust enforcement,

386
00:18:46,160 --> 00:18:49,720
Speaker 3: fewer unions in general, and so forth, and so profit

387
00:18:49,800 --> 00:18:54,720
Speaker 3: margins companies have stayed surprisingly robust. Corporate profits are far

388
00:18:55,080 --> 00:18:57,359
Speaker 3: higher right now than I think most people thought they

389
00:18:57,359 --> 00:19:01,320
Speaker 3: would be at this point in a cycle. And so yeah, sure,

390
00:19:01,520 --> 00:19:03,720
Speaker 3: corporate profits could get squeezed a bit. Maybe they should

391
00:19:03,720 --> 00:19:07,119
Speaker 3: get squeezed a bit, But I don't think that's not

392
00:19:07,160 --> 00:19:08,200
Speaker 3: what keeps me awake at night.

393
00:19:08,880 --> 00:19:10,240
Speaker 1: What does keep you awake at night?

394
00:19:10,680 --> 00:19:13,639
Speaker 3: Well, if you want to talk about this area, I

395
00:19:13,640 --> 00:19:16,480
Speaker 3: think the whole future of manufacturing is a conversation to have.

396
00:19:16,960 --> 00:19:19,640
Speaker 3: President Biden has been clear, and so have a lot

397
00:19:19,640 --> 00:19:21,440
Speaker 3: of other people that they would like to see a

398
00:19:21,480 --> 00:19:24,919
Speaker 3: manufacturing renaissance in this country. The IRA and some of

399
00:19:24,920 --> 00:19:28,399
Speaker 3: the infrastructure bill and other things are heavily tilted toward

400
00:19:28,960 --> 00:19:32,000
Speaker 3: making things here rather than elsewhere. But we have to

401
00:19:32,040 --> 00:19:36,320
Speaker 3: recognize that we cannot produce most things on a globally

402
00:19:36,359 --> 00:19:40,000
Speaker 3: competitive cost basis. We just have too high of wage structure,

403
00:19:40,200 --> 00:19:42,600
Speaker 3: we have too high of an overall cost structure. We

404
00:19:42,720 --> 00:19:45,879
Speaker 3: have much tougher environmental restrictions, which we should have in

405
00:19:45,880 --> 00:19:48,320
Speaker 3: my opinion, but which add to cost. We have permitting

406
00:19:48,320 --> 00:19:50,880
Speaker 3: problems which add to cost, and now those are unnecessary,

407
00:19:51,359 --> 00:19:55,160
Speaker 3: and so I expect that. So people who basically say

408
00:19:55,160 --> 00:19:57,960
Speaker 3: we're going to have this big manufacturing renaissance, I think

409
00:19:58,000 --> 00:20:01,560
Speaker 3: are kidding themselves, and frankly kidding the American Steve.

410
00:20:01,400 --> 00:20:02,359
Speaker 6: Is always great to have you on.

411
00:20:02,440 --> 00:20:05,640
Speaker 1: Thank you so much. Thanks Stephen Radnery of will It Advisors,

412
00:20:05,680 --> 00:20:08,600
Speaker 1: and he is fortunately a regular contributor to Wall Street Week.

413
00:20:10,800 --> 00:20:12,919
Speaker 1: Coming up, we wrap up the week with special contributor

414
00:20:13,000 --> 00:20:14,200
Speaker 1: Larry Summers of Harvard.

415
00:20:14,960 --> 00:20:19,800
Speaker 2: We've still got very real risks to the soft landing scenario.

416
00:20:20,320 --> 00:20:21,000
Speaker 6: That's next on.

417
00:20:21,040 --> 00:20:26,000
Speaker 1: Wall Street Week on Bloomberg. You're listening to Bloomberg Wall

418
00:20:26,040 --> 00:20:29,359
Speaker 1: Street Week with David Weston from Bloomberg Radio.

419
00:20:29,880 --> 00:20:30,720
Speaker 6: This is Wall Street Week.

420
00:20:30,720 --> 00:20:32,880
Speaker 1: I'm David western We're joined once again by our very

421
00:20:32,920 --> 00:20:34,880
Speaker 1: special contributor here in Wall Street Week. He is Larry

422
00:20:34,920 --> 00:20:37,160
Speaker 1: Summers of Harvard. Larry, thank you so much for being

423
00:20:37,160 --> 00:20:39,160
Speaker 1: back with us. Let's start with the Fed. We did

424
00:20:39,160 --> 00:20:41,359
Speaker 1: hear from the Fed today we have a new statement

425
00:20:41,400 --> 00:20:43,960
Speaker 1: of economic projections. What did you make about what we

426
00:20:44,119 --> 00:20:46,680
Speaker 1: heard from jpiwele the chair about where we are?

427
00:20:47,040 --> 00:20:50,040
Speaker 2: I thought, broadly it was in line with expectations.

428
00:20:50,600 --> 00:20:52,160
Speaker 6: Broadly it was reasonable.

429
00:20:52,600 --> 00:20:57,040
Speaker 2: I think the tilt to being worried about inflation was correct.

430
00:20:57,240 --> 00:21:02,280
Speaker 2: I still think the FED is considerably too optimistic. It's

431
00:21:02,440 --> 00:21:07,000
Speaker 2: possible that we will have the proverbial soft landing, but

432
00:21:07,080 --> 00:21:10,240
Speaker 2: I think the risks that inflation will be worse than

433
00:21:10,280 --> 00:21:15,360
Speaker 2: what they say are very real. You've got the UAW strike,

434
00:21:15,680 --> 00:21:19,560
Speaker 2: You've got oil prices having spiked, you've got a budget

435
00:21:19,600 --> 00:21:24,400
Speaker 2: deficit that this year will approach eight percent of GDP

436
00:21:24,640 --> 00:21:29,200
Speaker 2: if you take out the student loan accounting item, and

437
00:21:29,240 --> 00:21:32,520
Speaker 2: you've got a variety of technicals like in health insurance

438
00:21:32,920 --> 00:21:36,400
Speaker 2: that are getting ready to kick in. So I think

439
00:21:36,440 --> 00:21:40,199
Speaker 2: you've got real concerns on the inflation side, and at

440
00:21:40,240 --> 00:21:43,359
Speaker 2: the same time you've got concerns on the other side

441
00:21:43,560 --> 00:21:44,639
Speaker 2: that the consumer.

442
00:21:44,760 --> 00:21:46,120
Speaker 6: Since Labor Day, it's not.

443
00:21:46,160 --> 00:21:49,800
Speaker 2: Much time yet, but looks like the consumer is slowing

444
00:21:50,200 --> 00:21:55,280
Speaker 2: a bit. Delinquencies are starting to rise. There's some wall

445
00:21:55,320 --> 00:22:00,000
Speaker 2: of maturities that's going to come due over the next year.

446
00:22:00,600 --> 00:22:03,520
Speaker 2: So it's certainly possible that it will work out as

447
00:22:03,560 --> 00:22:06,440
Speaker 2: the Fed has it with inflation getting back to two

448
00:22:07,000 --> 00:22:12,480
Speaker 2: with only negligible increases in unemployment, But that strikes me

449
00:22:12,560 --> 00:22:17,760
Speaker 2: as more of a goal than a forecast. So I

450
00:22:17,800 --> 00:22:21,879
Speaker 2: think we've still got very real risks to the soft

451
00:22:22,000 --> 00:22:27,960
Speaker 2: landing scenario, both from the no landing continued inflation the

452
00:22:28,000 --> 00:22:30,560
Speaker 2: Fed's going to have to raise rates more than it

453
00:22:30,640 --> 00:22:36,560
Speaker 2: now expects side, and from the fact that every recession

454
00:22:37,000 --> 00:22:41,159
Speaker 2: that we've had for a generation. People have been talking

455
00:22:41,240 --> 00:22:43,800
Speaker 2: soft landing right before it, and they've turned out to

456
00:22:43,840 --> 00:22:47,920
Speaker 2: be wrong. So I think that people just a little

457
00:22:47,920 --> 00:22:52,359
Speaker 2: too optimistic right now, and I think the FEDS caught

458
00:22:52,440 --> 00:22:58,639
Speaker 2: into that optimism. And you know, on the one hand,

459
00:22:58,720 --> 00:23:00,960
Speaker 2: things won't be any better than and you aspire for

460
00:23:01,040 --> 00:23:03,760
Speaker 2: them to be. On the other hand, it's a good

461
00:23:03,800 --> 00:23:09,960
Speaker 2: idea to under forecast and overperform. So it's a very

462
00:23:09,960 --> 00:23:14,879
Speaker 2: difficult balance that the FED has to walk. But my

463
00:23:15,480 --> 00:23:19,720
Speaker 2: suspicion is that it's more likely than not that they're

464
00:23:19,840 --> 00:23:23,919
Speaker 2: either going to get surprised on the higher inflation side

465
00:23:24,560 --> 00:23:29,119
Speaker 2: or on the week or output downturn side, or possibly

466
00:23:29,200 --> 00:23:33,480
Speaker 2: both could materialize in a stagflationary kind of dynamic.

467
00:23:33,720 --> 00:23:36,560
Speaker 1: Larry, you mentioned the OAW strike that is ongoing as

468
00:23:36,560 --> 00:23:38,960
Speaker 1: we speak here, and the risk for the upside on

469
00:23:39,080 --> 00:23:41,600
Speaker 1: inflation there coming out of that. What do you make

470
00:23:41,640 --> 00:23:44,040
Speaker 1: of where we are right now in that because my

471
00:23:44,160 --> 00:23:45,920
Speaker 1: point of view looking at it is I'm not sure

472
00:23:45,960 --> 00:23:48,239
Speaker 1: where these parties can come to. Yes, between the two

473
00:23:48,240 --> 00:23:51,800
Speaker 1: of them, they seem to be almost really opposed on

474
00:23:51,840 --> 00:23:53,040
Speaker 1: some very basic things.

475
00:23:53,680 --> 00:23:57,719
Speaker 2: Look, it's always easier to compromise on numbers that it

476
00:23:57,880 --> 00:24:00,240
Speaker 2: is like, you know, how big is the way age

477
00:24:00,240 --> 00:24:03,240
Speaker 2: increase is going to be than it is on principles

478
00:24:03,280 --> 00:24:07,120
Speaker 2: like what's going to happen to the battery factories. It's

479
00:24:07,200 --> 00:24:10,560
Speaker 2: easier to compromise on numbers like the size of pension

480
00:24:10,640 --> 00:24:17,400
Speaker 2: packages than it is on questions like changing the separate

481
00:24:17,440 --> 00:24:22,600
Speaker 2: wage structure for recently hired workers. So they've still got

482
00:24:22,720 --> 00:24:28,080
Speaker 2: questions of principle as well as questions of numbers separating them.

483
00:24:28,400 --> 00:24:32,320
Speaker 2: So this may go on for a while. And I

484
00:24:32,320 --> 00:24:35,680
Speaker 2: think there are two big questions. One is what will

485
00:24:35,720 --> 00:24:39,199
Speaker 2: the spillover be to the larger economy and to the

486
00:24:39,240 --> 00:24:45,920
Speaker 2: Midwestern economy, including through price increases if cars get scarce,

487
00:24:46,000 --> 00:24:50,440
Speaker 2: and what that means for automobile and used car prices.

488
00:24:50,920 --> 00:24:55,280
Speaker 2: I also think there's some real questions here about when

489
00:24:55,320 --> 00:25:01,800
Speaker 2: you have these highly publicized labor conflicts and you see

490
00:25:01,800 --> 00:25:05,320
Speaker 2: what's likely to be a big number for the wage increase,

491
00:25:05,760 --> 00:25:08,040
Speaker 2: I suspect that's going to give a lot of workers

492
00:25:08,040 --> 00:25:11,639
Speaker 2: in a lot of places some pretty big ideas, and

493
00:25:11,640 --> 00:25:14,719
Speaker 2: that may be a source of wage pressure as well,

494
00:25:15,080 --> 00:25:22,399
Speaker 2: which complicates the issues around inflation. So this is a

495
00:25:22,560 --> 00:25:29,679
Speaker 2: very difficult thing to manage, and I suspect it's going

496
00:25:29,760 --> 00:25:31,560
Speaker 2: to be one of those things that will be with

497
00:25:31,640 --> 00:25:32,639
Speaker 2: us for quite a while.

498
00:25:32,920 --> 00:25:35,600
Speaker 1: Well, you raise a really important, profound point here, Is

499
00:25:35,640 --> 00:25:37,800
Speaker 1: it possible we're looking at something more than a couple

500
00:25:37,800 --> 00:25:41,720
Speaker 1: of labor disputes into more of a fundamental shift in

501
00:25:41,760 --> 00:25:43,960
Speaker 1: the power between capitol and the one hand and labor

502
00:25:44,000 --> 00:25:46,359
Speaker 1: on the other. Because we've had this with the ports

503
00:25:46,359 --> 00:25:48,399
Speaker 1: in Los Angeles, we had at UPS, We've got the

504
00:25:48,440 --> 00:25:50,600
Speaker 1: Writers Guild out there are a lot of other ones,

505
00:25:50,680 --> 00:25:52,480
Speaker 1: and as you know, Larry, there has been a shift

506
00:25:52,520 --> 00:25:54,720
Speaker 1: in the past really away from labor in.

507
00:25:54,680 --> 00:25:55,280
Speaker 6: The power layer.

508
00:25:55,280 --> 00:25:57,520
Speaker 1: You've even talked about the importance of organized labor.

509
00:25:58,160 --> 00:25:59,800
Speaker 6: I think that's the question.

510
00:26:00,000 --> 00:26:03,520
Speaker 2: I mean, I think there's no question my mind that

511
00:26:03,640 --> 00:26:07,359
Speaker 2: a lot about what's happened in the economy over the

512
00:26:07,480 --> 00:26:13,439
Speaker 2: last several decades can be explained by changes in labor power.

513
00:26:13,560 --> 00:26:17,840
Speaker 2: I think that's contributed substantially to increased inequality.

514
00:26:18,200 --> 00:26:20,240
Speaker 6: I think that's.

515
00:26:19,400 --> 00:26:25,640
Speaker 2: Contributed substantially to rising wage differentials between industries. I think

516
00:26:25,680 --> 00:26:30,880
Speaker 2: it's probably been a contributor to the flexibility that's allowed

517
00:26:30,920 --> 00:26:34,320
Speaker 2: the normal rate of unemployment to come down as well.

518
00:26:34,680 --> 00:26:38,320
Speaker 2: So it's been a two edged thing, and we may

519
00:26:38,359 --> 00:26:42,680
Speaker 2: be looking at things go in the opposite direction.

520
00:26:43,440 --> 00:26:45,920
Speaker 1: Larry, you have been outspoken on this program and elsewhere

521
00:26:46,080 --> 00:26:48,359
Speaker 1: about the plight of Ukraine and what the United States

522
00:26:48,359 --> 00:26:50,600
Speaker 1: and the West should be doing, particularly when it comes

523
00:26:50,600 --> 00:26:53,520
Speaker 1: to some of the Russian government assets, not private but

524
00:26:53,600 --> 00:26:56,359
Speaker 1: government assets. We've had President Zelenski, of course, at the

525
00:26:56,440 --> 00:26:58,800
Speaker 1: UN in New York this week, then going on to Washington.

526
00:26:59,440 --> 00:27:02,040
Speaker 1: Where are you right now on what canon should be

527
00:27:02,119 --> 00:27:06,000
Speaker 1: done with respective for perhaps reparations for Ukraine.

528
00:27:06,280 --> 00:27:10,959
Speaker 2: I would just say this, it does little good to

529
00:27:11,040 --> 00:27:15,800
Speaker 2: win wars if you don't win the peace. The peace

530
00:27:15,840 --> 00:27:22,400
Speaker 2: in Ukraine can't be won without a viable economy that's able.

531
00:27:22,119 --> 00:27:26,040
Speaker 6: To look to Europe.

532
00:27:25,040 --> 00:27:28,560
Speaker 2: That's got a price stag that's measured in the hundreds

533
00:27:28,600 --> 00:27:34,159
Speaker 2: of billions of dollars. There are enormous global needs that

534
00:27:34,200 --> 00:27:39,160
Speaker 2: are already unmet, for climate change, for pandemic.

535
00:27:39,680 --> 00:27:42,080
Speaker 6: For Africa.

536
00:27:42,480 --> 00:27:46,880
Speaker 2: It's a very difficult budgetary time in the United States

537
00:27:47,400 --> 00:27:52,399
Speaker 2: and other major economies. What those facts say to me

538
00:27:53,680 --> 00:27:57,120
Speaker 2: is that we're not going to find hundreds of billions

539
00:27:57,119 --> 00:28:02,600
Speaker 2: of dollars for Ukraine in our budgets, and that if

540
00:28:02,640 --> 00:28:05,359
Speaker 2: we find a lot of money. It's going to be

541
00:28:05,560 --> 00:28:09,760
Speaker 2: enormously expensive money in terms of what it means politically

542
00:28:10,240 --> 00:28:12,080
Speaker 2: and in terms of what it means for the rest

543
00:28:12,080 --> 00:28:15,240
Speaker 2: of the world. And there's a place we can go

544
00:28:15,400 --> 00:28:20,439
Speaker 2: for those resources. We can go to the assets of

545
00:28:20,480 --> 00:28:26,720
Speaker 2: the Russian state that have already been seized and frozen

546
00:28:27,320 --> 00:28:34,600
Speaker 2: and made unavailable to the Russian state. So it's practically necessary,

547
00:28:35,800 --> 00:28:43,480
Speaker 2: morally right, and legally entirely legitimate. And I hope that

548
00:28:43,600 --> 00:28:48,120
Speaker 2: President Zelenski will push President Biden on the issue. I

549
00:28:48,160 --> 00:28:52,600
Speaker 2: hope that President Biden will push his lawyers. He's had

550
00:28:52,640 --> 00:28:57,200
Speaker 2: pretty flexible lawyers when it's come to matters like student

551
00:28:57,240 --> 00:29:02,520
Speaker 2: debt relief, when it's come to matters involving environmental protection,

552
00:29:03,200 --> 00:29:06,560
Speaker 2: it would take a lot less flexibility to free up

553
00:29:06,600 --> 00:29:13,240
Speaker 2: resources here and in Europe for Ukraine at a critically

554
00:29:13,280 --> 00:29:18,440
Speaker 2: important time, and by doing it, we would also make

555
00:29:18,480 --> 00:29:20,920
Speaker 2: it possible for the world to have a much more

556
00:29:21,040 --> 00:29:26,440
Speaker 2: robust climate change global poverty effort going forward.

557
00:29:26,840 --> 00:29:28,640
Speaker 1: Larry, thank you so much for being back with us

558
00:29:28,640 --> 00:29:29,200
Speaker 1: on Wall STREETEK.

559
00:29:29,240 --> 00:29:33,200
Speaker 6: That's Larry Summers of Harvard coming up.

560
00:29:33,320 --> 00:29:36,800
Speaker 1: Jose Maniah of novegne On Investment ideas you may not

561
00:29:37,040 --> 00:29:39,880
Speaker 1: have thought of. And that's next on Wall Street Week

562
00:29:40,000 --> 00:29:44,880
Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David

563
00:29:44,880 --> 00:29:49,280
Speaker 1: Weston from Bloomberg Radio. This is Wall Street Week. I'm

564
00:29:49,360 --> 00:29:52,040
Speaker 1: David Weston. As the Fed hit the theme of higher

565
00:29:52,240 --> 00:29:55,200
Speaker 1: for longer once again this week, investors may need to

566
00:29:55,200 --> 00:29:58,280
Speaker 1: be looking for opportunities in different places. Here for his

567
00:29:58,400 --> 00:30:01,080
Speaker 1: thoughts on where those might be is Jose Mania. He

568
00:30:01,120 --> 00:30:04,120
Speaker 1: is CEO of New Vene. So Jose welcome back, great

569
00:30:04,160 --> 00:30:04,880
Speaker 1: Todavi and Wall Street.

570
00:30:05,120 --> 00:30:06,120
Speaker 4: Always good to be here, David.

571
00:30:06,520 --> 00:30:09,840
Speaker 1: So you were responsible for so many investors and their decisions.

572
00:30:09,920 --> 00:30:11,640
Speaker 1: It does look like we're going to have higher rates

573
00:30:11,640 --> 00:30:14,000
Speaker 1: for longer. We can talk about how much longer, but

574
00:30:14,280 --> 00:30:17,000
Speaker 1: how does that change potentially investment decisions.

575
00:30:17,000 --> 00:30:18,840
Speaker 4: At this point, I'm going to go back to a

576
00:30:18,920 --> 00:30:21,360
Speaker 4: narrative we've been talking about for quite a while. If

577
00:30:21,360 --> 00:30:23,280
Speaker 4: you go back in the previous decade, or we've had

578
00:30:23,320 --> 00:30:27,040
Speaker 4: more than a decade long of just rising markets and

579
00:30:27,120 --> 00:30:30,600
Speaker 4: low interest rates, at that time, we would talk about, hey,

580
00:30:30,600 --> 00:30:32,880
Speaker 4: you should be thinking about inflation. At some point. It's

581
00:30:32,880 --> 00:30:34,760
Speaker 4: going to show up. By the way, you may want

582
00:30:34,800 --> 00:30:36,600
Speaker 4: to have assets that are not correlated to each other

583
00:30:36,680 --> 00:30:39,080
Speaker 4: in your portfolio because you may have more volatility. And

584
00:30:39,080 --> 00:30:42,000
Speaker 4: by the way, rates eventually will rise. They go down

585
00:30:42,640 --> 00:30:44,640
Speaker 4: over time, and it takes a while as they go

586
00:30:44,720 --> 00:30:48,280
Speaker 4: back up, but they will start rising. That's why that narrative,

587
00:30:48,280 --> 00:30:51,560
Speaker 4: which was one that was largely academic, around alternatives and

588
00:30:51,600 --> 00:30:54,400
Speaker 4: how do you get a better portfolio, better correlated assets.

589
00:30:54,680 --> 00:30:57,920
Speaker 4: Today it's not an academic discussion. It's an urgency. So again,

590
00:30:58,040 --> 00:31:01,000
Speaker 4: going after things like private credit, going after things like

591
00:31:01,400 --> 00:31:05,200
Speaker 4: farm land that we've talked about here before, timber infrastructure,

592
00:31:05,240 --> 00:31:07,360
Speaker 4: private equity in general. These are things that are going

593
00:31:07,400 --> 00:31:10,360
Speaker 4: to be important that today largely have only been accessed

594
00:31:10,520 --> 00:31:13,480
Speaker 4: by large institutional, sophisticated investors.

595
00:31:13,560 --> 00:31:15,600
Speaker 1: If you go back just a short time ago, all

596
00:31:15,680 --> 00:31:20,000
Speaker 1: the talk and investing was about ESG, supposedly ESG Environmental

597
00:31:20,000 --> 00:31:23,280
Speaker 1: Social Governance investing. Now we see some retrenchment, We see

598
00:31:23,320 --> 00:31:25,720
Speaker 1: some of the big guys really pulling down some of

599
00:31:25,760 --> 00:31:27,880
Speaker 1: the funds that they created for ESG. By the way,

600
00:31:27,920 --> 00:31:29,920
Speaker 1: you see the government of the United Kingdom putting off

601
00:31:29,920 --> 00:31:31,400
Speaker 1: some of the dates that that that we're talking about.

602
00:31:32,080 --> 00:31:35,120
Speaker 1: Is ESG investible at this point? Is it less investable

603
00:31:35,120 --> 00:31:35,600
Speaker 1: than it was?

604
00:31:36,720 --> 00:31:39,040
Speaker 4: I believe what you're hearing in the narrative today is

605
00:31:39,080 --> 00:31:42,160
Speaker 4: actual tailwinds for the ESG discussion. And I say that

606
00:31:42,200 --> 00:31:45,000
Speaker 4: because ten years ago people would ask me the question,

607
00:31:45,080 --> 00:31:47,800
Speaker 4: is this thing real people are talking about clients really

608
00:31:47,800 --> 00:31:48,400
Speaker 4: want to buy it?

609
00:31:48,680 --> 00:31:48,760
Speaker 6: Now?

610
00:31:48,760 --> 00:31:51,520
Speaker 4: I would always say, you'll know when it's real when

611
00:31:51,520 --> 00:31:54,120
Speaker 4: the regulators show up. You know when it's real when

612
00:31:54,120 --> 00:31:57,440
Speaker 4: it becomes a political issue. And the reason is that's

613
00:31:57,440 --> 00:32:00,400
Speaker 4: when you know money is really in motion. Will wake

614
00:32:00,480 --> 00:32:03,360
Speaker 4: up when money is in motion. What is not going

615
00:32:03,400 --> 00:32:06,800
Speaker 4: to go away is the risks embedded in around environmental issues,

616
00:32:06,880 --> 00:32:10,480
Speaker 4: climate risk. These things are hitting portfolios. What's not going

617
00:32:10,520 --> 00:32:13,280
Speaker 4: away is client demand for this as well.

618
00:32:13,520 --> 00:32:15,480
Speaker 1: Jose it's always such a treat to heavy here. Thank

619
00:32:15,520 --> 00:32:17,160
Speaker 1: you so much for spending time with us. That is

620
00:32:17,240 --> 00:32:23,479
Speaker 1: jose Mania of Nuvene. Finally, one more thought clothes maketh

621
00:32:23,640 --> 00:32:26,800
Speaker 1: the man, so wrote Erasmus in his collection of Adages

622
00:32:26,800 --> 00:32:30,040
Speaker 1: from fifteen oh eight, though a version of this particular

623
00:32:30,040 --> 00:32:31,800
Speaker 1: adage can be traced all the way back to Homer

624
00:32:31,960 --> 00:32:35,920
Speaker 1: or maybe even the Babylonians. Until recently, many the man

625
00:32:36,040 --> 00:32:38,720
Speaker 1: walking the halls of power, that's whether corporate or government

626
00:32:39,000 --> 00:32:42,480
Speaker 1: took the maxim quite seriously, invariably showing up in the

627
00:32:42,560 --> 00:32:45,160
Speaker 1: uniform of a well cut suit, a white shirt and

628
00:32:45,240 --> 00:32:46,040
Speaker 1: a power tie.

629
00:32:46,320 --> 00:32:49,320
Speaker 9: The richest one percent of this country owns half our

630
00:32:49,440 --> 00:32:51,880
Speaker 9: country's well five trillion.

631
00:32:51,520 --> 00:32:55,000
Speaker 1: Dollars, and women haven't been far behind as they adopted

632
00:32:55,040 --> 00:32:57,000
Speaker 1: their own versions of power suits.

633
00:32:57,520 --> 00:32:59,800
Speaker 4: Hold all colls, Miss McGill, he has Cynthia.

634
00:33:00,240 --> 00:33:02,280
Speaker 6: You can I get you anything. This is a trainer

635
00:33:02,400 --> 00:33:02,960
Speaker 6: for feet.

636
00:33:03,080 --> 00:33:03,600
Speaker 2: To me?

637
00:33:05,800 --> 00:33:06,920
Speaker 1: Is that you right?

638
00:33:07,080 --> 00:33:07,880
Speaker 3: That'll be all.

639
00:33:08,320 --> 00:33:11,160
Speaker 1: But the pandemic may have changed all that as people

640
00:33:11,320 --> 00:33:13,600
Speaker 1: learn to work from home, where it didn't matter whether

641
00:33:13,640 --> 00:33:16,480
Speaker 1: you were wearing your power suit or your tracksuit.

642
00:33:16,800 --> 00:33:20,560
Speaker 13: People who sat at home, which I'm not a fan of.

643
00:33:20,760 --> 00:33:25,560
Speaker 13: Today people who were home were dressing casually. But I

644
00:33:25,680 --> 00:33:29,000
Speaker 13: think that the world is going very much in a

645
00:33:29,000 --> 00:33:29,760
Speaker 13: different place.

646
00:33:30,160 --> 00:33:33,160
Speaker 1: So as CEO's chafe at their workforce is not showing

647
00:33:33,240 --> 00:33:35,120
Speaker 1: up at the office, at least physically.

648
00:33:35,320 --> 00:33:37,960
Speaker 14: My golden rule is don't put the genie back in

649
00:33:38,000 --> 00:33:38,360
Speaker 14: the bottle.

650
00:33:38,400 --> 00:33:38,840
Speaker 6: You can't.

651
00:33:39,440 --> 00:33:42,160
Speaker 14: On the other hand, it's not a complete This is

652
00:33:42,200 --> 00:33:45,240
Speaker 14: not an employee choice. They don't get to Jewessday compensation,

653
00:33:45,320 --> 00:33:47,680
Speaker 14: they don't get to Jewsday promotion, they don't get to Jews.

654
00:33:47,680 --> 00:33:49,959
Speaker 14: Stay I'm five days a week. I want them with

655
00:33:50,040 --> 00:33:52,280
Speaker 14: other employees at least three or four days.

656
00:33:52,440 --> 00:33:55,000
Speaker 1: They may want to consider giving the incentive of some

657
00:33:55,120 --> 00:33:58,160
Speaker 1: extra perks. And now it turns out that no less

658
00:33:58,200 --> 00:34:00,880
Speaker 1: than the United States Senate is moving to loosen its

659
00:34:00,960 --> 00:34:04,640
Speaker 1: dress code for our nation's highest elected legislators. Call me

660
00:34:04,680 --> 00:34:07,320
Speaker 1: old fashioned, my wife and children certainly do. But I

661
00:34:07,400 --> 00:34:10,200
Speaker 1: still think how you dress says something about how seriously

662
00:34:10,280 --> 00:34:11,520
Speaker 1: you take what you're doing.

663
00:34:11,760 --> 00:34:13,640
Speaker 6: Now, I did not tell you dress copriately.

664
00:34:13,920 --> 00:34:17,279
Speaker 13: I wore this ridiculous things for you.

665
00:34:18,000 --> 00:34:20,200
Speaker 1: That does it. For this episode of Wall Street Week,

666
00:34:20,280 --> 00:34:22,000
Speaker 1: I'm David Weston. This is Bloomberg.

667
00:34:22,600 --> 00:34:23,279
Speaker 8: Stay with us.

668
00:34:23,400 --> 00:34:26,640
Speaker 1: Today's top stories and global business headlines are coming up

669
00:34:26,880 --> 00:34:27,480
Speaker 1: right now.