1 00:00:00,560 --> 00:00:02,880 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,920 --> 00:00:05,640 Speaker 2: We turn our attention to the markets this week. USCPI 3 00:00:05,760 --> 00:00:10,160 Speaker 2: Nembers reinforcing concerns about inflation, the financial stories that shape 4 00:00:10,200 --> 00:00:12,799 Speaker 2: our work. A really different reaction to Mark. It's more 5 00:00:12,800 --> 00:00:16,000 Speaker 2: indications of just how hot the US economy really is. 6 00:00:16,079 --> 00:00:19,479 Speaker 2: Through the eyes of the most influential voices. Larry Summers, 7 00:00:19,480 --> 00:00:22,680 Speaker 2: the former Treasurer Secretary, Katherine Keating, CEO of bny ME 8 00:00:22,840 --> 00:00:26,200 Speaker 2: and Sam Zel Sharman and founder of Aquatic Group Investment. 9 00:00:26,360 --> 00:00:30,320 Speaker 2: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 10 00:00:30,680 --> 00:00:34,600 Speaker 2: Mixed signals from the economy, from earnings, but not from 11 00:00:34,600 --> 00:00:37,880 Speaker 2: President Biden. This is Bloomberg Wall Street Week. I'm David Weston. 12 00:00:38,720 --> 00:00:41,880 Speaker 2: This week special contributor Larry Summers on whether we're headed 13 00:00:41,920 --> 00:00:43,480 Speaker 2: for a recession after. 14 00:00:43,240 --> 00:00:46,960 Speaker 3: All the odds on that happening sometime in the next 15 00:00:47,479 --> 00:00:51,159 Speaker 3: twelve months, I think are pretty good, perhaps seventy percent. 16 00:00:51,520 --> 00:00:56,280 Speaker 2: Former IBM Haad Sam Palmasano on next steps for generative AI. 17 00:00:56,800 --> 00:00:59,600 Speaker 4: Business leaders and companies can show the way they could 18 00:00:59,680 --> 00:01:01,120 Speaker 4: establish the guard wear. 19 00:01:01,360 --> 00:01:04,480 Speaker 2: And Steve Rattner of Willett Advisors on how to invest 20 00:01:04,720 --> 00:01:05,560 Speaker 2: in China. 21 00:01:05,640 --> 00:01:07,800 Speaker 5: On the plus side, I would say China's back. 22 00:01:08,120 --> 00:01:10,760 Speaker 2: The flip side of it is clearly they're a bit 23 00:01:10,800 --> 00:01:26,880 Speaker 2: off balance. Global Wall Street spent the week pouring over 24 00:01:26,959 --> 00:01:29,200 Speaker 2: a lot of data looking for a signal in all 25 00:01:29,240 --> 00:01:33,080 Speaker 2: of that noise. Big tech earnings are surprised to the upside. 26 00:01:33,200 --> 00:01:36,240 Speaker 6: They have had such large gains in this sector, not 27 00:01:36,280 --> 00:01:38,440 Speaker 6: even the sector as a whole, but these fang names. 28 00:01:38,760 --> 00:01:41,720 Speaker 2: But most of the talk was about artificial intelligence and 29 00:01:41,760 --> 00:01:44,080 Speaker 2: what it could mean for the tech industry, and for 30 00:01:44,160 --> 00:01:44,959 Speaker 2: that matter, for us. 31 00:01:44,959 --> 00:01:49,560 Speaker 7: All AI is bigger than any single company, or any 32 00:01:49,600 --> 00:01:52,440 Speaker 7: single industry, or indeed any single country. 33 00:01:52,600 --> 00:01:55,400 Speaker 2: And after all those encouraging earnings last week from the 34 00:01:55,400 --> 00:01:58,080 Speaker 2: big banks, we learned just how bad things had gotten 35 00:01:58,080 --> 00:02:01,920 Speaker 2: for credit suitees before UBS came to the rescue. 36 00:02:01,320 --> 00:02:02,680 Speaker 5: In three to four years time. 37 00:02:02,960 --> 00:02:05,920 Speaker 4: I like to see the employees of the combined organization 38 00:02:06,680 --> 00:02:09,520 Speaker 4: this country, our clients to be very proud to be 39 00:02:09,560 --> 00:02:10,840 Speaker 4: associated with the UBS. 40 00:02:11,360 --> 00:02:13,440 Speaker 2: And then at the very end of the week, reports 41 00:02:13,480 --> 00:02:17,320 Speaker 2: came that the FDIC will put First Republic Bancorp into receivership, 42 00:02:17,639 --> 00:02:20,040 Speaker 2: saying the time had run out for a private solution. 43 00:02:20,440 --> 00:02:23,799 Speaker 2: President Biden was unambiguous in telling us bed indeed, he 44 00:02:23,960 --> 00:02:26,560 Speaker 2: would like another four years in the White House. 45 00:02:26,880 --> 00:02:27,959 Speaker 5: Let's finish this job. 46 00:02:28,160 --> 00:02:29,000 Speaker 2: There's nothing that. 47 00:02:29,160 --> 00:02:30,680 Speaker 5: We cannot do the thing together. 48 00:02:30,840 --> 00:02:34,240 Speaker 2: And economic numbers pointed in both directions, with home prices 49 00:02:34,280 --> 00:02:35,080 Speaker 2: and sales up. 50 00:02:35,280 --> 00:02:38,200 Speaker 7: If housing comes back does not give the consumer. 51 00:02:37,760 --> 00:02:39,919 Speaker 2: Another boost, consumer confidence down. 52 00:02:40,200 --> 00:02:43,680 Speaker 6: The consumer confidence number really interesting for April, so overall 53 00:02:43,760 --> 00:02:45,200 Speaker 6: it falls a touch, and. 54 00:02:45,240 --> 00:02:49,040 Speaker 2: GDP numbers out Thursday mixed as well, slowing in the 55 00:02:49,080 --> 00:02:51,880 Speaker 2: first quarter, but not as much as some had feared. 56 00:02:53,560 --> 00:02:56,360 Speaker 2: Then on Friday we got consumer spending numbers and the 57 00:02:56,400 --> 00:03:00,519 Speaker 2: all important Employment Cost Index showing spending was flat, while 58 00:03:00,520 --> 00:03:03,080 Speaker 2: the ECI moved up higher than expected one point two 59 00:03:03,120 --> 00:03:05,880 Speaker 2: percent for the first quarter. Markets took it all pretty 60 00:03:05,919 --> 00:03:08,120 Speaker 2: much in stride, with the yield and the tenure down 61 00:03:08,120 --> 00:03:10,640 Speaker 2: about thirteen basis points for the week, ending up at 62 00:03:10,639 --> 00:03:13,840 Speaker 2: three four hundred three point four to three nine, while 63 00:03:13,960 --> 00:03:16,840 Speaker 2: equities held up nicely. The Nasdaq was up almost one 64 00:03:16,840 --> 00:03:19,239 Speaker 2: point four percent for the week, while the sp five 65 00:03:19,320 --> 00:03:21,840 Speaker 2: hundred was up almost nine ten to percent, leaving it 66 00:03:21,880 --> 00:03:24,840 Speaker 2: at forty one sixty nine, or about ninety four points 67 00:03:24,880 --> 00:03:27,360 Speaker 2: above the median of where our l's projected will end 68 00:03:27,360 --> 00:03:29,600 Speaker 2: the year. One of the most prominent of the l's 69 00:03:29,680 --> 00:03:32,240 Speaker 2: Mike Wilson of Morgan Stanley is one of our most 70 00:03:32,240 --> 00:03:35,040 Speaker 2: parish He's projecting at a year end of about thirty 71 00:03:35,120 --> 00:03:37,480 Speaker 2: nine hundred and this week he noted a shift. This 72 00:03:37,520 --> 00:03:40,200 Speaker 2: is according to Mike, while macro news has taken a 73 00:03:40,280 --> 00:03:43,680 Speaker 2: larger focus in recent weeks, the reporting season has the 74 00:03:43,720 --> 00:03:48,600 Speaker 2: potential to refocus investors' attention on equity fundamentals. To take 75 00:03:48,680 --> 00:03:50,640 Speaker 2: us through the week in the markets, we welcome now 76 00:03:50,720 --> 00:03:54,680 Speaker 2: Greg Peters PGIM Cocio for fixed income and Monama Hodgen. 77 00:03:54,880 --> 00:03:58,440 Speaker 2: She is Edward Jones, Senior investment strategist. Welcome both you 78 00:03:58,600 --> 00:04:00,800 Speaker 2: back to Wall Street weeks. So Moon, let me start 79 00:04:00,800 --> 00:04:02,760 Speaker 2: with you. What about what Mike Wilson had to say? 80 00:04:02,960 --> 00:04:05,360 Speaker 2: Are we looking at fundamentals now more than some of 81 00:04:05,400 --> 00:04:06,680 Speaker 2: the macro factors we have been? 82 00:04:07,520 --> 00:04:09,360 Speaker 6: Yeah, you know, look, I think Mike got it right. 83 00:04:09,440 --> 00:04:09,960 Speaker 1: This week. 84 00:04:10,200 --> 00:04:13,080 Speaker 6: Certainly markets were driven by those earnings results, and really 85 00:04:13,080 --> 00:04:16,720 Speaker 6: their earnings results from the megacap technology names, and as 86 00:04:16,760 --> 00:04:19,400 Speaker 6: you noted, they surprised, and the surprised to the upside. 87 00:04:19,440 --> 00:04:21,800 Speaker 6: And that wasn't only earnings beats. A lot of them 88 00:04:21,839 --> 00:04:24,800 Speaker 6: are now showing that their business models are resilient even 89 00:04:24,880 --> 00:04:27,800 Speaker 6: through economics swings, and also they are showing off a 90 00:04:27,800 --> 00:04:30,400 Speaker 6: little bit of their cash piles. We saw a couple 91 00:04:30,480 --> 00:04:33,559 Speaker 6: of very big share buyback programs announced this week as well, 92 00:04:34,080 --> 00:04:35,680 Speaker 6: and we saw at the end of the week really 93 00:04:35,760 --> 00:04:39,000 Speaker 6: equity markets were bullish, they were positive for the week, 94 00:04:39,160 --> 00:04:43,240 Speaker 6: and that came even despite softer than expected GDP data 95 00:04:43,360 --> 00:04:45,640 Speaker 6: inflation data that might be a little bit stickier than 96 00:04:45,640 --> 00:04:49,040 Speaker 6: some might have hoped for. So generally for the last 97 00:04:49,040 --> 00:04:51,400 Speaker 6: couple of weeks, it certainly has been the earning story 98 00:04:51,560 --> 00:04:54,920 Speaker 6: driving markets and really driving those growth sectors in particular. 99 00:04:55,400 --> 00:04:58,080 Speaker 6: But as we look towards the weeks ahead, especially next week, 100 00:04:58,120 --> 00:05:01,400 Speaker 6: when the FED becomes more in focus again and as 101 00:05:01,800 --> 00:05:04,880 Speaker 6: the economy and inflation continues to remain to the forefront, 102 00:05:05,040 --> 00:05:07,720 Speaker 6: I think we'll see a swing from earnings and equity 103 00:05:07,760 --> 00:05:11,159 Speaker 6: fundamentals to macro picture becoming more in focus in the 104 00:05:11,160 --> 00:05:13,760 Speaker 6: weeks ahead as well. So it's certainly right for this week. 105 00:05:13,600 --> 00:05:16,000 Speaker 2: Greg what's driving the fixed income markets. 106 00:05:16,320 --> 00:05:19,840 Speaker 8: It is inflation, the economy, and what is the FED 107 00:05:19,960 --> 00:05:22,960 Speaker 8: going to do about it? So we're on knife's edge 108 00:05:23,120 --> 00:05:26,440 Speaker 8: in fixed income, whether it's a recession or soft landing. 109 00:05:26,480 --> 00:05:30,040 Speaker 8: There's talk of sagflation still, of course, and the data 110 00:05:30,160 --> 00:05:32,760 Speaker 8: are so all over the place in this furse that 111 00:05:32,920 --> 00:05:37,440 Speaker 8: you can basically draw a narrative or conclusion from you know, 112 00:05:37,800 --> 00:05:39,240 Speaker 8: the data in any way you want. 113 00:05:39,640 --> 00:05:41,919 Speaker 2: Well, so I'm curious about that because the tenure yield, 114 00:05:42,120 --> 00:05:43,760 Speaker 2: at least in my eye, has not been going much 115 00:05:43,760 --> 00:05:46,599 Speaker 2: of anywhere anytime soon. Is that because people are happy 116 00:05:46,600 --> 00:05:48,039 Speaker 2: with where it is, or it's because they can't just 117 00:05:48,080 --> 00:05:50,400 Speaker 2: decide anyway they look, it could go either way, They 118 00:05:50,440 --> 00:05:51,080 Speaker 2: just can't tell. 119 00:05:51,240 --> 00:05:53,880 Speaker 8: Yeah, and so that masks you know, what's underneath. And 120 00:05:53,920 --> 00:05:56,359 Speaker 8: so what we're seeing though on an inter day basis 121 00:05:56,680 --> 00:06:01,280 Speaker 8: in the week, the the moves are pretty extreme. So 122 00:06:01,400 --> 00:06:05,400 Speaker 8: fixed income volatility remains really really high. So yes, the 123 00:06:05,520 --> 00:06:10,479 Speaker 8: tenure is virtually unchanged this month of April, but the 124 00:06:10,600 --> 00:06:14,320 Speaker 8: swings are pretty substantial and mona. 125 00:06:14,360 --> 00:06:16,000 Speaker 2: What about in the equity markets? What are we seeing 126 00:06:16,040 --> 00:06:17,640 Speaker 2: in the fix is pretty subdued, is it not? 127 00:06:18,440 --> 00:06:18,719 Speaker 1: Yeah? 128 00:06:18,800 --> 00:06:21,000 Speaker 6: You know, it really is. One of the key stories 129 00:06:21,000 --> 00:06:22,919 Speaker 6: that has emerged over the last few weeks, which is 130 00:06:22,920 --> 00:06:26,760 Speaker 6: that volatility index some call it the Wall Street fear gauge, 131 00:06:26,839 --> 00:06:30,200 Speaker 6: has been very subdued. In fact, down about twenty five 132 00:06:30,279 --> 00:06:33,760 Speaker 6: percent year to date, which shows a bit of complacency 133 00:06:33,800 --> 00:06:37,360 Speaker 6: from the markets and perhaps a little bit of investors 134 00:06:37,560 --> 00:06:40,080 Speaker 6: hiding out. You know, keep in mind, cash and cash 135 00:06:40,120 --> 00:06:43,760 Speaker 6: equivalents are offering attractive yield, so investors do want to 136 00:06:44,360 --> 00:06:47,680 Speaker 6: wait for better opportunities. They certainly had an alternative now 137 00:06:48,040 --> 00:06:51,440 Speaker 6: that is a pretty attractive alternative. But generally speaking, you know, 138 00:06:51,480 --> 00:06:54,080 Speaker 6: some of the catalysts that were supposed to emerge early 139 00:06:54,120 --> 00:06:58,520 Speaker 6: on this year, including earnings, including the FED potentially next week, 140 00:06:58,560 --> 00:07:02,320 Speaker 6: and including this economic downtry, really haven't yet surprised in 141 00:07:02,360 --> 00:07:05,039 Speaker 6: any material way, and so I do think markets have 142 00:07:05,120 --> 00:07:08,200 Speaker 6: yet to see a meaningful catalyst. Perhaps the FED pause 143 00:07:08,240 --> 00:07:10,040 Speaker 6: that maybe on the horizon will be that one. 144 00:07:10,120 --> 00:07:12,680 Speaker 2: Well, well, Mona, what about the possibility of recession, because 145 00:07:12,680 --> 00:07:14,400 Speaker 2: we still have a lot of economists saying that it's 146 00:07:14,400 --> 00:07:17,160 Speaker 2: more likely than that, perhaps as highest seventy percent likelihood. 147 00:07:17,360 --> 00:07:18,760 Speaker 2: I don't think I can see that very much in 148 00:07:18,800 --> 00:07:21,080 Speaker 2: the equity markets. So does the equity markets know something 149 00:07:21,080 --> 00:07:23,360 Speaker 2: the economists don't, or do the economists know something maybe 150 00:07:23,360 --> 00:07:24,360 Speaker 2: the equity markets don't. 151 00:07:24,800 --> 00:07:26,760 Speaker 6: Yeah, you know, look, I think this recession that is 152 00:07:26,800 --> 00:07:28,720 Speaker 6: on the horizon is probably one of the worst kept 153 00:07:28,960 --> 00:07:32,720 Speaker 6: secrets that's out there among economists and investors. Everybody has 154 00:07:32,760 --> 00:07:35,640 Speaker 6: been talking about it. The deceleration. We saw this this 155 00:07:35,680 --> 00:07:39,120 Speaker 6: past week. In first quarter GDP has shown a slow 156 00:07:39,160 --> 00:07:41,800 Speaker 6: down from three point two percent in Q three, two 157 00:07:41,840 --> 00:07:44,480 Speaker 6: point six percent in Q four of last year this 158 00:07:44,960 --> 00:07:48,000 Speaker 6: quarter one point one percent, So we're seeing this downward trajectory. 159 00:07:48,160 --> 00:07:50,600 Speaker 6: The consumer is still holding up, but if you look 160 00:07:50,640 --> 00:07:52,960 Speaker 6: at forecasts for Q three and Q four of this year, 161 00:07:53,160 --> 00:07:57,120 Speaker 6: we are in fact seeing negative and slightly negative annualized 162 00:07:57,120 --> 00:07:59,760 Speaker 6: growth rates. So in our view, this idea that a 163 00:08:00,080 --> 00:08:03,280 Speaker 6: mild recession is on the horizon is very likely still 164 00:08:03,320 --> 00:08:06,320 Speaker 6: probably still a base case scenario, and markets won't be 165 00:08:06,320 --> 00:08:09,760 Speaker 6: able to completely ignore that. But keep in mind, we 166 00:08:09,800 --> 00:08:11,760 Speaker 6: did put in a lot of work to the downside 167 00:08:11,880 --> 00:08:14,760 Speaker 6: over the last fifteen months or so. The SMP went 168 00:08:14,840 --> 00:08:16,800 Speaker 6: down almost twenty five percent. 169 00:08:16,520 --> 00:08:17,320 Speaker 1: Peak to trough. 170 00:08:17,760 --> 00:08:19,800 Speaker 6: We don't see a repeat of that happening even if 171 00:08:19,840 --> 00:08:22,560 Speaker 6: we have a mild recession ahead. So any period of 172 00:08:22,640 --> 00:08:27,200 Speaker 6: volatility consolidation pullback, we think could provide some opportunities for 173 00:08:27,240 --> 00:08:30,480 Speaker 6: investors as they look past this bear market and perhaps 174 00:08:30,480 --> 00:08:31,960 Speaker 6: towards a recovery period ahead. 175 00:08:32,120 --> 00:08:34,319 Speaker 2: Greg what about the bond markets, because we got a 176 00:08:34,320 --> 00:08:36,439 Speaker 2: lot of economic data this week and it showed sort 177 00:08:36,480 --> 00:08:39,320 Speaker 2: of slow in growth, perhaps, but inflation is not going away. 178 00:08:39,400 --> 00:08:41,400 Speaker 2: Maybe a head in the right direction is not going away. 179 00:08:41,600 --> 00:08:44,040 Speaker 2: Are the bond markets prepared for the possibility to Fed 180 00:08:44,200 --> 00:08:46,400 Speaker 2: hiking even past May No. 181 00:08:46,559 --> 00:08:49,440 Speaker 8: In fact, the market's pricing in the opposite, right, they're 182 00:08:49,480 --> 00:08:52,319 Speaker 8: pricing in rate cuts in the back end of this year. 183 00:08:53,120 --> 00:08:56,240 Speaker 8: And to me, that is, you know, the risk markets 184 00:08:56,280 --> 00:08:58,760 Speaker 8: are ignoring that if the Fed cuts, that means we 185 00:08:58,800 --> 00:09:01,600 Speaker 8: are into a recession or much weaker period. But the 186 00:09:01,640 --> 00:09:04,839 Speaker 8: binding constraint continues to be inflation, and I think we're 187 00:09:04,840 --> 00:09:06,280 Speaker 8: in a very different environment. 188 00:09:07,000 --> 00:09:09,440 Speaker 2: We've been so accustomed to the FED coming to. 189 00:09:09,360 --> 00:09:11,760 Speaker 8: The rescue and it's much easier to do that when 190 00:09:11,800 --> 00:09:15,200 Speaker 8: they're operating below that two percent level. When they're above, 191 00:09:15,200 --> 00:09:19,160 Speaker 8: and they're pretty meaningfully above, their degrees of freedom really 192 00:09:19,200 --> 00:09:21,959 Speaker 8: really get much tighter. So I think the markets are 193 00:09:21,960 --> 00:09:24,240 Speaker 8: miscalibrating what the Fed can do. 194 00:09:25,120 --> 00:09:26,840 Speaker 1: And the opposite is also. 195 00:09:26,640 --> 00:09:30,080 Speaker 8: True, David, where if the numbers continue to assert themselves 196 00:09:30,080 --> 00:09:33,040 Speaker 8: on the inflation side, there's more work to do, And 197 00:09:33,120 --> 00:09:37,760 Speaker 8: the markets have been consistently wrong on the level of 198 00:09:37,800 --> 00:09:40,800 Speaker 8: inflation and what the Fed's response function. 199 00:09:40,920 --> 00:09:43,280 Speaker 2: Yeah, as has a FED quite often wrong, as best 200 00:09:43,320 --> 00:09:45,920 Speaker 2: I can tell. Greg Peers of PGUM and Mona Mahagron 201 00:09:46,200 --> 00:09:48,080 Speaker 2: of Edward Jones. We're going to be staying with us 202 00:09:48,160 --> 00:09:50,679 Speaker 2: as we turn to what a failed First Republic could 203 00:09:50,720 --> 00:09:53,280 Speaker 2: mean for the markets. That's next on Wall Street Week. 204 00:09:53,559 --> 00:10:06,400 Speaker 2: We're on Bloomberg. This is Bloomberg Well Street Week with 205 00:10:06,559 --> 00:10:16,040 Speaker 2: David Weston from Bloomberg Radio. This is Wall Street Week. 206 00:10:16,080 --> 00:10:19,000 Speaker 2: I'm David Weston. The saga of American banks continued this 207 00:10:19,080 --> 00:10:22,679 Speaker 2: week with news that First Republic is headed apparently for receivership. 208 00:10:22,840 --> 00:10:24,800 Speaker 2: To talk about what that could mean for the market, 209 00:10:24,840 --> 00:10:27,840 Speaker 2: it's Monamahadgen of Edward Jones and Greg Peters and PGUM 210 00:10:28,000 --> 00:10:29,480 Speaker 2: are still with us. So Greg, let me turn to 211 00:10:29,480 --> 00:10:32,880 Speaker 2: you first. We don't know exactly what's going on with 212 00:10:32,880 --> 00:10:35,199 Speaker 2: the First Public. Let's assume it does go into receivership, 213 00:10:35,200 --> 00:10:37,880 Speaker 2: as reports right now say it will. What does that 214 00:10:37,960 --> 00:10:39,679 Speaker 2: mean for the markets as a practical matter. 215 00:10:40,200 --> 00:10:43,079 Speaker 8: I think what it means is that the market will 216 00:10:43,120 --> 00:10:46,280 Speaker 8: continue to search for the next weekest link and so 217 00:10:46,360 --> 00:10:48,839 Speaker 8: First Republic has been very much in the market the 218 00:10:48,920 --> 00:10:50,920 Speaker 8: past month or so, so it's not a complete and 219 00:10:51,000 --> 00:10:54,240 Speaker 8: utter surprise, but the markets are really looking to suss 220 00:10:54,280 --> 00:10:58,080 Speaker 8: out the week players to see whether it's systemic or not. 221 00:10:58,640 --> 00:11:01,320 Speaker 8: But I think the real issue on the table is 222 00:11:01,760 --> 00:11:05,240 Speaker 8: how broad is the pullback and lending on the regional 223 00:11:05,280 --> 00:11:08,160 Speaker 8: and community bank side, and what influence does that have 224 00:11:08,559 --> 00:11:12,640 Speaker 8: on the market and the economy. And you know that 225 00:11:12,760 --> 00:11:15,920 Speaker 8: contraction of credit is really meaningful because it goes to 226 00:11:16,040 --> 00:11:19,160 Speaker 8: the small and medium sized businesses, which quite frankly are 227 00:11:19,200 --> 00:11:22,199 Speaker 8: the lifeblood of the economy and the labor market. 228 00:11:22,360 --> 00:11:24,520 Speaker 2: So what doesn't mean potentially for equities, but in fact 229 00:11:24,600 --> 00:11:27,000 Speaker 2: we continue to contract on the credit side because the 230 00:11:27,000 --> 00:11:30,160 Speaker 2: banks are under control, under stress, and they get more 231 00:11:30,200 --> 00:11:31,840 Speaker 2: and more conservative as a practical matter. 232 00:11:32,440 --> 00:11:34,640 Speaker 6: Yeah, you know, it certainly has been interesting on equities. 233 00:11:34,640 --> 00:11:38,000 Speaker 6: Of course, financials have had some difficulty this year and 234 00:11:38,040 --> 00:11:40,319 Speaker 6: in fact still down here to date one of the 235 00:11:40,360 --> 00:11:42,600 Speaker 6: worst performing sectors on the S and P five hundred, 236 00:11:43,080 --> 00:11:45,240 Speaker 6: and part of that, of course is the banking turmoil 237 00:11:45,280 --> 00:11:47,240 Speaker 6: we've seen over the last month and now at first 238 00:11:47,240 --> 00:11:50,120 Speaker 6: Republic coming back to the forefront. Really, the question, to 239 00:11:50,160 --> 00:11:53,559 Speaker 6: Greg's point, is is there another shoe to drop after 240 00:11:53,600 --> 00:11:57,120 Speaker 6: First republic and market uncertainty, of course, is never welcomed 241 00:11:57,120 --> 00:12:00,400 Speaker 6: by investors. But what we would say is one the 242 00:12:00,440 --> 00:12:03,760 Speaker 6: bank tightening of credit, and that actually had started even 243 00:12:03,800 --> 00:12:07,360 Speaker 6: prior to the March turmoil. We started to see metrics 244 00:12:07,400 --> 00:12:10,720 Speaker 6: like the Senior Loan Officers Survey starting to show meaningful tightening. 245 00:12:10,760 --> 00:12:13,120 Speaker 6: So what that means is banks will make it harder 246 00:12:13,160 --> 00:12:17,360 Speaker 6: for consumers and corporations to get loans. Now that that's 247 00:12:17,400 --> 00:12:20,520 Speaker 6: a double edged sword. On one side, yes, economic activity 248 00:12:20,559 --> 00:12:23,880 Speaker 6: will cool and the economic growth prospects look worse, But 249 00:12:23,960 --> 00:12:26,600 Speaker 6: on the other hand, the inflationary story we've been talking 250 00:12:26,600 --> 00:12:32,200 Speaker 6: about could see a marginally less pressure on inflation, inflation 251 00:12:32,320 --> 00:12:36,280 Speaker 6: moderating even further because banks are pulling back, and consumption 252 00:12:36,480 --> 00:12:39,560 Speaker 6: and corporate spending may thus pull back as well. So 253 00:12:40,200 --> 00:12:43,520 Speaker 6: really we're watching both edges of that story, of both 254 00:12:43,520 --> 00:12:46,599 Speaker 6: sides of that story. But more broadly, we'd say the 255 00:12:46,720 --> 00:12:49,640 Speaker 6: volatility that we've seen in the financial sector we think 256 00:12:49,800 --> 00:12:53,559 Speaker 6: probably has some room to run here. But one final 257 00:12:53,600 --> 00:12:57,240 Speaker 6: point there, we don't yet see any systemic disruption or 258 00:12:57,280 --> 00:12:59,599 Speaker 6: any scope for a systemic disruption to the US or 259 00:12:59,600 --> 00:13:02,560 Speaker 6: global banking system. We do think large cap banks here 260 00:13:02,600 --> 00:13:05,000 Speaker 6: in the US are still sound and much better. 261 00:13:05,120 --> 00:13:07,680 Speaker 2: Thank you so much, Tomana Mahadjen of Edward Jones and 262 00:13:07,720 --> 00:13:11,679 Speaker 2: also Greg Peters of p JIM. In a week full 263 00:13:11,720 --> 00:13:14,240 Speaker 2: of big tech earnings, all the talk was really about 264 00:13:14,320 --> 00:13:17,280 Speaker 2: generative AI, it's potential and also some of the potential 265 00:13:17,360 --> 00:13:20,240 Speaker 2: risks to take us through. Those who welcome now Sam Palmasano. 266 00:13:20,440 --> 00:13:22,679 Speaker 2: He was the chairman and CEO of IBM. He now 267 00:13:22,760 --> 00:13:25,320 Speaker 2: is chairman of the Center for Global Enterprise. So Sam, 268 00:13:25,360 --> 00:13:27,200 Speaker 2: great to have you back with us on Wall Street week. 269 00:13:27,440 --> 00:13:29,680 Speaker 2: Let me put you back as either CEO of IBM 270 00:13:29,800 --> 00:13:33,080 Speaker 2: or another huge corporation publicly traded. What would you be 271 00:13:33,160 --> 00:13:37,520 Speaker 2: doing right now today to prepare for or to incorporate AI. 272 00:13:38,920 --> 00:13:42,120 Speaker 4: Well, David, it's an excellent question, and as I think 273 00:13:42,120 --> 00:13:44,439 Speaker 4: about it, I would think about all the lessons I've 274 00:13:44,480 --> 00:13:47,120 Speaker 4: learned in the past, either running an IBM or or 275 00:13:47,160 --> 00:13:49,600 Speaker 4: if I was currently a CEO, what I've learned over 276 00:13:49,640 --> 00:13:52,000 Speaker 4: the past ten or fifteen years, and that is that 277 00:13:52,280 --> 00:13:56,320 Speaker 4: we face these challenges before, there's always been these disruptive 278 00:13:56,320 --> 00:14:00,600 Speaker 4: technologies to come along. They represent from phenomenal promise, but 279 00:14:00,679 --> 00:14:02,079 Speaker 4: also they can be disruptive. 280 00:14:02,280 --> 00:14:03,480 Speaker 5: There are a couple of different paths. 281 00:14:03,600 --> 00:14:05,840 Speaker 4: I mean, I'll make some suggestions, but you can dismiss it, 282 00:14:07,000 --> 00:14:08,080 Speaker 4: you can wait and see. 283 00:14:08,240 --> 00:14:09,920 Speaker 5: But then you know, you learn we learned. 284 00:14:09,760 --> 00:14:11,520 Speaker 4: In the last time that you can be left behind 285 00:14:11,559 --> 00:14:13,520 Speaker 4: if you do that and other leaders have urge in 286 00:14:13,559 --> 00:14:16,800 Speaker 4: your peer group. Another way to do is let it 287 00:14:16,840 --> 00:14:18,679 Speaker 4: just go like that would be the early days of 288 00:14:18,720 --> 00:14:19,200 Speaker 4: the internet. 289 00:14:19,280 --> 00:14:19,960 Speaker 5: Just let it run. 290 00:14:20,040 --> 00:14:21,600 Speaker 4: And then the problem is then you have to clean 291 00:14:21,640 --> 00:14:23,880 Speaker 4: it all up, you know, and that takes time, you 292 00:14:23,960 --> 00:14:25,880 Speaker 4: lose some momentum, as it cost you some money, and 293 00:14:25,920 --> 00:14:28,440 Speaker 4: those sorts of things. But I would start with creative 294 00:14:28,480 --> 00:14:32,640 Speaker 4: management system that takes advantage of these technologies in your 295 00:14:32,680 --> 00:14:37,520 Speaker 4: strategy and implement that company wide. The benefit of starting 296 00:14:37,560 --> 00:14:39,800 Speaker 4: there is you won't have the problems of the past 297 00:14:39,800 --> 00:14:43,000 Speaker 4: with digitization in the Internet, and plus you can scale 298 00:14:43,240 --> 00:14:46,160 Speaker 4: and integrate and learn a lot quicker once you get 299 00:14:46,200 --> 00:14:48,280 Speaker 4: your footing and you know where you want to go 300 00:14:48,400 --> 00:14:52,240 Speaker 4: to take your business. The other thing is that I'll 301 00:14:52,240 --> 00:14:56,000 Speaker 4: add is these technologies are going to mature, and they will. 302 00:14:56,080 --> 00:14:58,320 Speaker 4: I mean, there's a lot of innovation yet to come. 303 00:14:58,400 --> 00:15:01,040 Speaker 4: As exciting as this is a lot more to happen here, 304 00:15:01,040 --> 00:15:02,680 Speaker 4: and it has to happen in other gaps that need 305 00:15:02,720 --> 00:15:06,400 Speaker 4: to be filled. Having said that, it becomes ubiquitous, which 306 00:15:06,440 --> 00:15:09,360 Speaker 4: means it touches everybody in your workforce. So you have 307 00:15:09,440 --> 00:15:11,640 Speaker 4: to think about the jobs, the nature and work and 308 00:15:11,680 --> 00:15:14,600 Speaker 4: how it changes how you develop skills. And it's not 309 00:15:15,200 --> 00:15:17,280 Speaker 4: go out hire three data scientists. You're going to have 310 00:15:17,320 --> 00:15:21,040 Speaker 4: to train and educate your people across the entire enterprise. 311 00:15:21,680 --> 00:15:23,840 Speaker 4: And the last one, I would think ask them to 312 00:15:23,840 --> 00:15:25,880 Speaker 4: think about or I would think about culture. Culture are 313 00:15:25,920 --> 00:15:30,000 Speaker 4: so so important you need to adopt ethical principles for AI. 314 00:15:30,520 --> 00:15:33,320 Speaker 4: We see the issues today for companies that haven't done that. 315 00:15:33,920 --> 00:15:36,080 Speaker 4: You need to be trusted in this space if you're 316 00:15:36,160 --> 00:15:39,000 Speaker 4: an enterprise. But they're the things that a management system 317 00:15:39,440 --> 00:15:41,960 Speaker 4: think about, learning of your employee base and the impact 318 00:15:42,000 --> 00:15:43,360 Speaker 4: to them and your culture. 319 00:15:43,920 --> 00:15:46,840 Speaker 2: One of the issues I suspect is productivity. I mean AI, 320 00:15:46,960 --> 00:15:49,280 Speaker 2: a generative AI has the potential at least to really 321 00:15:49,320 --> 00:15:52,240 Speaker 2: increase the productivity of a company, something that we're always 322 00:15:52,320 --> 00:15:54,520 Speaker 2: looking for. How do you make sure that you take 323 00:15:54,520 --> 00:15:57,200 Speaker 2: advantage of that as a CEO without letting it go 324 00:15:57,320 --> 00:15:57,680 Speaker 2: too far? 325 00:15:57,960 --> 00:16:01,280 Speaker 4: Well, that's exactly the point fundamentally, which you need to 326 00:16:01,320 --> 00:16:03,680 Speaker 4: do is I would say you need to think about 327 00:16:03,680 --> 00:16:07,040 Speaker 4: the technology as a compliment to what's going on today. 328 00:16:07,320 --> 00:16:10,400 Speaker 4: So therefore your knowledge worker can become an expert not 329 00:16:10,480 --> 00:16:12,840 Speaker 4: just an average knowledge worker. Or a teacher can become 330 00:16:12,920 --> 00:16:15,960 Speaker 4: an expert teacher, not just a participant. 331 00:16:15,400 --> 00:16:17,920 Speaker 5: In teaching grammar or language, whatever happens to be. 332 00:16:18,440 --> 00:16:20,200 Speaker 4: So if you think about that way, you said, how 333 00:16:20,200 --> 00:16:25,160 Speaker 4: do you compliment the technology with the actual the. 334 00:16:25,080 --> 00:16:28,040 Speaker 5: Work of the knowledge worker in your organization? I think 335 00:16:28,080 --> 00:16:28,440 Speaker 5: if you. 336 00:16:28,440 --> 00:16:32,400 Speaker 4: Do that, you won't have all the chaos that occur historically. 337 00:16:32,480 --> 00:16:34,280 Speaker 4: I mean, chaos is okay, we learned, I mean, so 338 00:16:34,360 --> 00:16:37,440 Speaker 4: there's nothing wrong with learning, but let's take the learning 339 00:16:37,440 --> 00:16:38,280 Speaker 4: into the past. 340 00:16:38,040 --> 00:16:40,040 Speaker 5: And try to avoid those as we get into the future. 341 00:16:40,080 --> 00:16:42,360 Speaker 2: Here, Sam, what is the role if any of the 342 00:16:42,400 --> 00:16:44,280 Speaker 2: government all this. There's a lot of time about regulation. 343 00:16:44,360 --> 00:16:46,240 Speaker 2: We already saw it. China come out with a draft 344 00:16:46,360 --> 00:16:48,760 Speaker 2: or set of regulations basically saying whatever you do with 345 00:16:48,800 --> 00:16:50,440 Speaker 2: this general of AI, it's got to be consistent with 346 00:16:50,480 --> 00:16:53,080 Speaker 2: our values, which is all the censorship that comes with that. 347 00:16:53,480 --> 00:16:56,400 Speaker 2: So when it comes to US government, Europe, India, what 348 00:16:56,560 --> 00:17:00,400 Speaker 2: is the constructive role of government in really directing AI 349 00:17:00,560 --> 00:17:01,720 Speaker 2: in constructive ways? 350 00:17:02,600 --> 00:17:04,480 Speaker 4: Well, I think government does have a role, and we 351 00:17:04,520 --> 00:17:07,520 Speaker 4: see what happens when government's late to get ahead of 352 00:17:07,560 --> 00:17:09,520 Speaker 4: these kinds of issues. You see that today with the 353 00:17:09,560 --> 00:17:13,119 Speaker 4: social media companies and the issues around data and data privacy. 354 00:17:13,600 --> 00:17:14,680 Speaker 5: So there's clearly a role. 355 00:17:14,920 --> 00:17:18,480 Speaker 4: But the challenge is, as we know, and as we've learned, 356 00:17:18,800 --> 00:17:23,040 Speaker 4: these regulations and standards have to be global. I mean, 357 00:17:23,440 --> 00:17:27,000 Speaker 4: standards will emerge over time that are global. That takes 358 00:17:27,040 --> 00:17:29,920 Speaker 4: a long time. So in the interim, what does a 359 00:17:30,000 --> 00:17:34,480 Speaker 4: regulator do? And that's laid out the problem, David. That's 360 00:17:34,480 --> 00:17:37,879 Speaker 4: where it's complicated because there's different systems. I'll call it 361 00:17:37,880 --> 00:17:40,960 Speaker 4: the Chinese control system, there's the open system of the 362 00:17:41,080 --> 00:17:43,320 Speaker 4: United States, and let's see some of the West. 363 00:17:43,400 --> 00:17:45,040 Speaker 5: But then you're somewhere in between. 364 00:17:45,440 --> 00:17:49,439 Speaker 4: So how do you get global regulation that's consistent And 365 00:17:49,480 --> 00:17:52,440 Speaker 4: to do this regionally just won't work. It won't work 366 00:17:52,480 --> 00:17:56,400 Speaker 4: because fundamentally, these platforms are global by definition. They're open 367 00:17:56,440 --> 00:17:59,800 Speaker 4: source software by definition. So I know reagions think they 368 00:17:59,800 --> 00:18:03,160 Speaker 4: can take control, but the technology moves so fast they 369 00:18:03,200 --> 00:18:06,080 Speaker 4: will really struggle in doing so unless you completely shut 370 00:18:06,080 --> 00:18:08,400 Speaker 4: the place down and you wall it off, but that 371 00:18:08,440 --> 00:18:10,080 Speaker 4: has economic implications. 372 00:18:10,400 --> 00:18:12,480 Speaker 5: So to me, the question is in the interim, what 373 00:18:12,520 --> 00:18:14,840 Speaker 5: do you do? And I think there's a role here 374 00:18:14,880 --> 00:18:16,440 Speaker 5: for business leaders and companies. 375 00:18:16,840 --> 00:18:19,560 Speaker 4: I think business leaders and companies can show the way 376 00:18:19,880 --> 00:18:24,280 Speaker 4: they could establish the guard wails, the principles ethical transparency 377 00:18:24,480 --> 00:18:25,959 Speaker 4: and implement this themselves. 378 00:18:26,640 --> 00:18:28,800 Speaker 2: And finally, Sam, this week we had some of the 379 00:18:28,800 --> 00:18:32,560 Speaker 2: biggest tech companies reporting earnings and almost all the discussion 380 00:18:32,680 --> 00:18:36,160 Speaker 2: was really about AI and generative AI and its potential. 381 00:18:36,280 --> 00:18:38,080 Speaker 2: And there are people in the street you know this 382 00:18:38,200 --> 00:18:39,919 Speaker 2: right now who are saying, maybe this will give a 383 00:18:40,000 --> 00:18:43,040 Speaker 2: new impetus to the tech sector generally. It has been 384 00:18:43,040 --> 00:18:44,720 Speaker 2: such a growth sector for so long that it was 385 00:18:44,760 --> 00:18:46,560 Speaker 2: waning just a little bit in the growth. Now they say, 386 00:18:46,600 --> 00:18:48,560 Speaker 2: but it's a whole new wave. Do you think they're right? 387 00:18:49,800 --> 00:18:52,000 Speaker 4: Well, it's definitely going to be a huge growth in 388 00:18:52,000 --> 00:18:55,720 Speaker 4: innovation opportunities, There's no doubt about it. The question of 389 00:18:55,920 --> 00:18:59,400 Speaker 4: David is who emerges as the winner here. So I'll 390 00:18:59,400 --> 00:19:01,480 Speaker 4: take you back a little bit in history. If I 391 00:19:01,520 --> 00:19:04,600 Speaker 4: go back like fifty years of the tech industry, it's 392 00:19:05,040 --> 00:19:08,080 Speaker 4: interesting you see these patterns of who emerge as the 393 00:19:08,200 --> 00:19:10,399 Speaker 4: winner take client server to cloud. 394 00:19:11,320 --> 00:19:13,359 Speaker 2: Sam, thank you so much, as always a treasure to 395 00:19:13,440 --> 00:19:15,960 Speaker 2: have you back on Wall Streetek. That Sam PALMASONO, the 396 00:19:16,000 --> 00:19:20,600 Speaker 2: former chairman and CEO of IBM, coming up. We wrap 397 00:19:20,680 --> 00:19:23,560 Speaker 2: up the week with our special contributor Larry Summers of Harvard. 398 00:19:24,000 --> 00:19:34,480 Speaker 2: That's next on Wall Street Week on Bloomberg. This is 399 00:19:34,480 --> 00:19:36,600 Speaker 2: Wall Street Week. I'm David Western. We're joined once again 400 00:19:36,640 --> 00:19:38,680 Speaker 2: by our very special contributor here in Wall Street Week. 401 00:19:38,680 --> 00:19:40,800 Speaker 2: He is Larry Summers of Harvard. So, Larry, thank you 402 00:19:40,840 --> 00:19:41,720 Speaker 2: so much for being vick with us. 403 00:19:41,760 --> 00:19:42,480 Speaker 1: We had a lot of. 404 00:19:42,480 --> 00:19:44,640 Speaker 2: Important economic data this week. We got the first quarter 405 00:19:44,640 --> 00:19:47,280 Speaker 2: of GDP numbers, We've got personal spending, we got ECI. 406 00:19:47,440 --> 00:19:48,840 Speaker 2: What was most important. 407 00:19:48,400 --> 00:19:49,639 Speaker 1: For you, David. 408 00:19:49,680 --> 00:19:53,360 Speaker 3: I've been pointing to the ECI number because I think 409 00:19:53,400 --> 00:19:56,760 Speaker 3: the labor market is the key to the inflation process, 410 00:19:57,240 --> 00:20:01,040 Speaker 3: because it only comes quarterly, because it's the best of 411 00:20:01,080 --> 00:20:05,040 Speaker 3: the numbers for measuring wage inflation, because it includes benefits 412 00:20:05,480 --> 00:20:09,480 Speaker 3: and adjusts for changes in the composition of the labor force. 413 00:20:10,119 --> 00:20:12,360 Speaker 1: And that number was pretty strong. 414 00:20:12,760 --> 00:20:16,000 Speaker 3: That number is running about four point eight percent now, 415 00:20:16,359 --> 00:20:20,359 Speaker 3: both on an annual basis and a quarterly basis. There's 416 00:20:20,440 --> 00:20:25,040 Speaker 3: not really evidence that it is decelerating. The revision for 417 00:20:25,160 --> 00:20:29,560 Speaker 3: last quarter was a little bit upwards and four point 418 00:20:29,640 --> 00:20:34,520 Speaker 3: eight percent labor costs. Inflation just does not go with 419 00:20:35,200 --> 00:20:41,840 Speaker 3: two percent underlying inflation. So I think we've got a 420 00:20:41,880 --> 00:20:47,520 Speaker 3: bit of a stagflationary problem developing, where we have a 421 00:20:47,840 --> 00:20:52,600 Speaker 3: base inflation that's well above target, and as I've been 422 00:20:52,640 --> 00:20:55,240 Speaker 3: saying for the last year and a half, I don't 423 00:20:55,320 --> 00:20:58,800 Speaker 3: think that's going to get back to target without a 424 00:20:58,880 --> 00:21:03,480 Speaker 3: meaningful slowdown in the economy. That doesn't mean the FED 425 00:21:03,560 --> 00:21:07,159 Speaker 3: subjectives should be to induce a slowdown, but if the 426 00:21:07,200 --> 00:21:13,000 Speaker 3: FED does what's necessary to contain inflation, I think a 427 00:21:13,040 --> 00:21:18,840 Speaker 3: slowdown is likely to come along, and the odds on 428 00:21:18,880 --> 00:21:22,680 Speaker 3: that happening sometime in the next twelve months, I think 429 00:21:22,720 --> 00:21:27,600 Speaker 3: are pretty good, perhaps seventy percent. So I think we're 430 00:21:27,600 --> 00:21:34,119 Speaker 3: not looking at an easy situation facing the FED. Given 431 00:21:34,200 --> 00:21:37,720 Speaker 3: these numbers, I think it's pretty clear that the FED 432 00:21:37,880 --> 00:21:43,280 Speaker 3: has to go ahead and move rates in May given 433 00:21:43,320 --> 00:21:50,720 Speaker 3: the emerging credit problems. I think June is very much 434 00:21:50,760 --> 00:21:54,680 Speaker 3: an open question. So what I hope we'll see from 435 00:21:54,760 --> 00:21:58,480 Speaker 3: the FED is a move upwards by twenty five basis 436 00:21:58,520 --> 00:22:05,080 Speaker 3: points in May, followed by commitment to monitoring both the 437 00:22:05,119 --> 00:22:11,040 Speaker 3: activity and inflation figures on one hand, and the credit 438 00:22:11,119 --> 00:22:16,560 Speaker 3: flow issues which are leading of the economy on the 439 00:22:16,600 --> 00:22:18,560 Speaker 3: other So, Larry, there was. 440 00:22:18,560 --> 00:22:20,440 Speaker 2: A thought, not a hope, but a thought that perhaps 441 00:22:20,480 --> 00:22:22,400 Speaker 2: some of the difficulties we had at Silicon Valley Bank 442 00:22:22,480 --> 00:22:25,600 Speaker 2: and Signature Bank and now First Republic Bank might slow 443 00:22:25,600 --> 00:22:27,640 Speaker 2: down the economy on its own, so the FED wouldn't 444 00:22:27,680 --> 00:22:30,080 Speaker 2: have to go as far. We thought maybe these were 445 00:22:30,080 --> 00:22:32,920 Speaker 2: behind us, We'd now still have issues that looked up 446 00:22:33,160 --> 00:22:35,200 Speaker 2: with First Republic What do you make of the way 447 00:22:35,240 --> 00:22:37,480 Speaker 2: that's being handled as opposed to the way Silicon Valley 448 00:22:37,520 --> 00:22:38,440 Speaker 2: Bank was handled. 449 00:22:38,600 --> 00:22:41,320 Speaker 3: Let me let me just say first, David, that I 450 00:22:41,320 --> 00:22:44,800 Speaker 3: am very connected to people all over the financial sector, 451 00:22:45,240 --> 00:22:48,119 Speaker 3: but I have no specific relationship of any kind that 452 00:22:48,240 --> 00:22:54,960 Speaker 3: I know of with First Republic Bank. I'm surprised and 453 00:22:55,040 --> 00:23:01,240 Speaker 3: disappointed that this situation has continued to linger as long 454 00:23:01,280 --> 00:23:05,880 Speaker 3: as it has, with the bank stock down ninety five 455 00:23:06,680 --> 00:23:11,480 Speaker 3: percent and various other crediting dish of it in a 456 00:23:11,800 --> 00:23:13,640 Speaker 3: problematic direction. 457 00:23:14,320 --> 00:23:17,600 Speaker 1: Look, the big banks and the. 458 00:23:17,520 --> 00:23:24,800 Speaker 3: Government both have a strong stake in this situation being 459 00:23:25,880 --> 00:23:32,240 Speaker 3: contained and resolved. The big banks have deposits in First 460 00:23:32,280 --> 00:23:38,040 Speaker 3: Republic Bank in significant quantity. They have a huge stake 461 00:23:38,640 --> 00:23:41,640 Speaker 3: in the financial system staying stable. 462 00:23:42,000 --> 00:23:44,120 Speaker 2: Lariy, let's take a bit of a longer view here 463 00:23:44,240 --> 00:23:47,159 Speaker 2: now about where we're headed globally with our economy. Had 464 00:23:47,240 --> 00:23:49,840 Speaker 2: Jake Sulim, the National Security Advisor, give remarks at the Brookings' 465 00:23:50,000 --> 00:23:52,240 Speaker 2: decision this week where he laid out what I took 466 00:23:52,240 --> 00:23:55,080 Speaker 2: to be sort of framework under the Bide administration where 467 00:23:55,119 --> 00:23:57,280 Speaker 2: he wants to go with economic policy. What did you 468 00:23:57,320 --> 00:23:57,960 Speaker 2: make of that speech? 469 00:23:58,600 --> 00:24:05,480 Speaker 3: Jake is a very thoughtful leader, and it's probably the 470 00:24:05,520 --> 00:24:13,800 Speaker 3: most carefully intellectually developed exposition of the administration's philosophy that 471 00:24:14,280 --> 00:24:20,000 Speaker 3: we have had to date. And certainly he's right that 472 00:24:20,200 --> 00:24:26,119 Speaker 3: the world has changed. He's right that China represents a 473 00:24:26,200 --> 00:24:30,800 Speaker 3: new kind of challenge. He's right to emphasize, after what 474 00:24:30,840 --> 00:24:37,160 Speaker 3: we've seen in Europe with oil other things, the importance 475 00:24:37,280 --> 00:24:44,680 Speaker 3: of resilience. But I was disappointed that the speech did 476 00:24:44,680 --> 00:24:51,680 Speaker 3: not emphasize the central importance of importing low priced goods. 477 00:24:52,640 --> 00:24:56,439 Speaker 3: That is a substantial part of what determines the living 478 00:24:56,520 --> 00:25:03,560 Speaker 3: standards of Americans, is a substantial part of what determines 479 00:25:04,040 --> 00:25:10,000 Speaker 3: the competitiveness of American producers. For example, we have sixty 480 00:25:10,040 --> 00:25:13,680 Speaker 3: thousand people working in the steel industry and six million 481 00:25:13,720 --> 00:25:18,879 Speaker 3: people working in industries that use steel, So when we 482 00:25:19,000 --> 00:25:25,280 Speaker 3: raise the price of steel, we are hurting people. The 483 00:25:25,280 --> 00:25:32,200 Speaker 3: Peterson Institute estimated some time ago that trade reduced costs 484 00:25:32,280 --> 00:25:37,200 Speaker 3: for consumers by more than a trillion dollars, and if 485 00:25:37,240 --> 00:25:41,719 Speaker 3: we had removed our tariffs on other measures against China, 486 00:25:42,160 --> 00:25:46,560 Speaker 3: it would have added two percent to people's reel incomes 487 00:25:47,040 --> 00:25:55,479 Speaker 3: by reducing inflation pressure. I think that the administration is 488 00:25:56,359 --> 00:26:03,400 Speaker 3: much too quick to move to to industrial policy strategies 489 00:26:03,920 --> 00:26:05,640 Speaker 3: on grounds of resilience. 490 00:26:06,080 --> 00:26:07,840 Speaker 1: Let me give you two examples. 491 00:26:08,680 --> 00:26:14,200 Speaker 3: The Jones Act was the resilience policy of the nineteen twenties. 492 00:26:14,640 --> 00:26:19,200 Speaker 3: Let's have all our shipping be US carriers. That's made 493 00:26:19,200 --> 00:26:21,760 Speaker 3: the price of heating oil considerably. 494 00:26:21,240 --> 00:26:22,880 Speaker 1: Higher in New England all year. 495 00:26:23,600 --> 00:26:28,760 Speaker 3: That screwed up our efforts to help Puerto Rico after 496 00:26:28,840 --> 00:26:35,120 Speaker 3: the hurricane because we didn't have adequate supplies. We had 497 00:26:35,119 --> 00:26:39,240 Speaker 3: a major infant formula problem in this country that was 498 00:26:39,359 --> 00:26:44,359 Speaker 3: related to by American policies. That meant we couldn't turn 499 00:26:44,520 --> 00:26:49,320 Speaker 3: quickly to European supply chains. 500 00:26:50,000 --> 00:26:53,879 Speaker 1: So of course, we're all for resilience. 501 00:26:54,359 --> 00:27:02,720 Speaker 3: We're all for strong US producers and strong US businesses. 502 00:27:03,280 --> 00:27:11,800 Speaker 7: But what I find missing in the approach is helping consumers, which, 503 00:27:11,840 --> 00:27:16,399 Speaker 7: after all, is the middle class and is central to 504 00:27:16,480 --> 00:27:18,000 Speaker 7: how people feel they're doing. 505 00:27:18,840 --> 00:27:20,800 Speaker 2: Let's leave our audience on Wall Street here with a 506 00:27:20,880 --> 00:27:23,480 Speaker 2: quick round of long short, Whether you're long or short 507 00:27:23,520 --> 00:27:26,520 Speaker 2: certain issues and certain people. Let's start with President Biden's 508 00:27:26,520 --> 00:27:29,639 Speaker 2: the launch of his new re election campaign. It happened 509 00:27:29,640 --> 00:27:31,600 Speaker 2: this week. Are you long or short on us? 510 00:27:32,280 --> 00:27:32,919 Speaker 1: I'm long. 511 00:27:33,080 --> 00:27:36,600 Speaker 3: I think that the administration's got a lot that it 512 00:27:36,760 --> 00:27:41,600 Speaker 3: can run on, and frankly, its opposition is in very 513 00:27:41,640 --> 00:27:42,920 Speaker 3: substantial disarray. 514 00:27:44,160 --> 00:27:46,639 Speaker 2: What about the head of the Bank of Japan this 515 00:27:46,760 --> 00:27:48,920 Speaker 2: or way that he had his first meeting this week 516 00:27:49,000 --> 00:27:51,679 Speaker 2: and surprise some people about sort of putting off ultimate 517 00:27:51,680 --> 00:27:55,240 Speaker 2: decisions about you curve control? Are you long or short 518 00:27:55,280 --> 00:27:55,960 Speaker 2: on his premiere? 519 00:27:56,920 --> 00:28:03,720 Speaker 1: I think he's a cagy and shrewd guy. Any kind 520 00:28:03,760 --> 00:28:04,720 Speaker 1: of peg. 521 00:28:04,480 --> 00:28:07,760 Speaker 3: Whether it's an exchange rate or an interest rate, is 522 00:28:07,800 --> 00:28:10,040 Speaker 3: a hotel that's much easier to check. 523 00:28:09,920 --> 00:28:12,080 Speaker 1: Into than to check out of. 524 00:28:12,760 --> 00:28:19,080 Speaker 3: And I think by setting forth that study mechanism, he 525 00:28:19,359 --> 00:28:26,680 Speaker 3: is beginning a process of orchestrating leaving a peg that 526 00:28:27,080 --> 00:28:29,760 Speaker 3: probably has outlived its purpose. 527 00:28:30,240 --> 00:28:32,000 Speaker 2: And finally, we talked about the FED A lot we 528 00:28:32,000 --> 00:28:34,399 Speaker 2: don't talk about FED security very much. This week we 529 00:28:34,440 --> 00:28:37,800 Speaker 2: had this remarkable incident where apparently some people who were 530 00:28:37,800 --> 00:28:42,320 Speaker 2: apparently Russian, purported to be President Zelenski of Ukrainian got J. 531 00:28:42,520 --> 00:28:44,200 Speaker 2: Powell the share of the FED on the phone and 532 00:28:44,240 --> 00:28:46,480 Speaker 2: had a fairly detailed discussion with him. You're long and 533 00:28:46,520 --> 00:28:48,440 Speaker 2: short on security at the Federal Reserve. 534 00:28:49,200 --> 00:28:53,400 Speaker 3: Oh, I'm short looking backwards. That I'm long looking forward 535 00:28:53,560 --> 00:28:56,000 Speaker 3: because I'm sure there's going to be a pretty thorough 536 00:28:56,040 --> 00:28:59,800 Speaker 3: review of how that could have happened, that's determined to make. 537 00:29:01,280 --> 00:29:03,720 Speaker 1: That doesn't happen again. 538 00:29:04,760 --> 00:29:11,200 Speaker 3: That's kind of an embarrassing, embarrassing moment. If there's any 539 00:29:11,200 --> 00:29:14,800 Speaker 3: institution in the United States we want to be unconunable, 540 00:29:15,840 --> 00:29:18,760 Speaker 3: I would suggest that it's the FED. But there are 541 00:29:18,760 --> 00:29:22,160 Speaker 3: a lot of very dedicated people there, and I'm sure 542 00:29:22,160 --> 00:29:23,080 Speaker 3: they'll get it fixed. 543 00:29:23,280 --> 00:29:25,600 Speaker 2: Okay, Larry, thank you so very much. Always a pleasure. 544 00:29:25,640 --> 00:29:28,040 Speaker 2: That's Larry Summers of Harvard, our very special contributor here 545 00:29:28,200 --> 00:29:32,440 Speaker 2: on Wall Street Week. Coming up, The richest man in 546 00:29:32,480 --> 00:29:34,840 Speaker 2: the World gives New York a brand new gifts from 547 00:29:34,880 --> 00:29:40,200 Speaker 2: Tiffany's and he spares no expense. This is Wall Street 548 00:29:40,200 --> 00:29:51,240 Speaker 2: Week on Bloomberg. Finally, one more thought. All the goods 549 00:29:51,320 --> 00:29:53,479 Speaker 2: may not be gold, but some of it sure is. 550 00:29:54,000 --> 00:29:57,080 Speaker 2: This week mark not one, but two milestones for luxury 551 00:29:57,320 --> 00:30:00,800 Speaker 2: and particularly for the largest luxury company in the world, LVMH, 552 00:30:01,000 --> 00:30:06,320 Speaker 2: or more correctly LVMH moet Hennessy Louis Viton. This week, 553 00:30:06,360 --> 00:30:09,080 Speaker 2: the market cap of LVMH touched the five hundred billion 554 00:30:09,080 --> 00:30:12,080 Speaker 2: dollar mark, making it the first European company to do that. 555 00:30:12,520 --> 00:30:15,920 Speaker 2: Run by the world's richest man, he's Bernard Arnault, who 556 00:30:16,000 --> 00:30:18,120 Speaker 2: has added the names of some of the best known 557 00:30:18,200 --> 00:30:20,360 Speaker 2: luxury brands to the name of his company as he's 558 00:30:20,400 --> 00:30:23,960 Speaker 2: acquired them. But one iconic luxury brand name didn't make 559 00:30:24,000 --> 00:30:27,640 Speaker 2: it into the company's name. That is tiffany whose flagship 560 00:30:27,680 --> 00:30:31,080 Speaker 2: store at Fifth Avenue fifty seventh Street. Audrey Hepburn made 561 00:30:31,440 --> 00:30:34,800 Speaker 2: iconic in Breakfast at Tiffany's Don't You. 562 00:30:34,920 --> 00:30:35,640 Speaker 1: Just Love It? 563 00:30:36,360 --> 00:30:40,640 Speaker 2: Larbor Tiffany's, and that brings us to the second milestone 564 00:30:40,640 --> 00:30:43,720 Speaker 2: of the week. When LVMH bought Tiffany's back in twenty 565 00:30:43,760 --> 00:30:46,720 Speaker 2: twenty one for sixteen billion dollars, a renovation of the 566 00:30:46,720 --> 00:30:50,360 Speaker 2: Fifth Avenue store was already underway, requiring them to move 567 00:30:50,440 --> 00:30:53,760 Speaker 2: all those jewels to a safe location, hoping to avoid 568 00:30:53,800 --> 00:30:56,000 Speaker 2: the sort of thing that happened in the Italian job 569 00:30:57,240 --> 00:31:01,040 Speaker 2: truck LVMH won't say how much much at All costs, 570 00:31:01,080 --> 00:31:04,520 Speaker 2: but it does include works by Basquat, Damien Hurst, and 571 00:31:04,640 --> 00:31:07,600 Speaker 2: Rashid Johnson, as well as a restaurant from Daniel Balloon. 572 00:31:08,080 --> 00:31:11,040 Speaker 2: So finally you will be able to get indeed breakfast 573 00:31:11,200 --> 00:31:14,000 Speaker 2: at Tiffany's. The transformation of what they now called the 574 00:31:14,160 --> 00:31:17,360 Speaker 2: landmark Tiffany's Store has been overseen by one of mister 575 00:31:17,440 --> 00:31:21,200 Speaker 2: Arnault's five children, Alexandra, who it turns out, is going 576 00:31:21,200 --> 00:31:24,000 Speaker 2: through a process with his father and his siblings, as 577 00:31:24,040 --> 00:31:27,840 Speaker 2: mister Arnault has restructured his company to redistribute the power 578 00:31:27,960 --> 00:31:31,520 Speaker 2: among the five with whom he has monthly power lunches, 579 00:31:31,960 --> 00:31:35,200 Speaker 2: all in an effort to avoid that ugly succession process 580 00:31:35,360 --> 00:31:36,920 Speaker 2: dramatized in the HBO. 581 00:31:36,720 --> 00:31:38,200 Speaker 5: Series Always Tried. 582 00:31:38,240 --> 00:31:43,840 Speaker 3: Could do the best by my children because I love them. 583 00:31:44,000 --> 00:31:46,560 Speaker 2: Maybe you thought about the possibility that your children are 584 00:31:46,600 --> 00:31:47,360 Speaker 2: actually scared of you? 585 00:31:47,560 --> 00:31:48,680 Speaker 1: Fuck off? 586 00:31:49,040 --> 00:31:50,600 Speaker 2: That does it for this episode of Wall Street Week, 587 00:31:50,640 --> 00:31:57,200 Speaker 2: I'm David Weston. This is Bloomberg. See you next week.