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Speaker 1: This is Bloomberg Wall Street. We turn our attention to

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Speaker 1: the markets this week. USCPI never's reinforcing concerns about inflation,

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Speaker 1: the financial stories that cheap our world, a really different

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Speaker 1: reaction to markets. More indications of just how hot the

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Speaker 1: US economy really is. Through the eyes of the most

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Speaker 1: influential voices Larry Summers, the former Treachery Secretary, Katherine Keene,

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Speaker 1: CEO of the ny Mellen Sam's l Sherman Pan, founder

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Speaker 1: of Equity Group Investment in Bloomberg Wall Street Week with

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Speaker 1: David Weston from Bloomberg Radio. New beginnings for Britain's relations

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Speaker 1: with Europe, for America's semiconductor industry, and maybe for the

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Speaker 1: Chinese economy. This is Bloomberg Wall Street Week. I'm David

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Speaker 1: Weston this week special contributor to Larry Summers on signs

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Speaker 1: of a Chinese resurgence. When a populations deciding to have

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Speaker 1: half as many children have that revolution in six years,

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Speaker 1: it says there's some very fundamental concerns about the future

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Speaker 1: in that society. Renee James of am Here on the

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Speaker 1: bold new US industrial policy for semiconductors. It's brought the

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Speaker 1: importance of semi conductors in the semiconductor industry into the

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Speaker 1: public discourse and Professor Melissa Carney of the University of

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Speaker 1: Maryland on investing in the future workers of America. We

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Speaker 1: have the tools and the resources to reduce child poverty

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Speaker 1: in this country, which would remove major impediments to children's

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Speaker 1: learning cognitive development. That is a way to invest in

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Speaker 1: our future. Everywhere you look. This week, Global Wall Street

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Speaker 1: seemed to be turning over a new leaf, with the

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Speaker 1: UK and the EU patching things up over Northern Ireland

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Speaker 1: announced in the shadow of Windsor Castle prod. Prime Minister

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Speaker 1: Rishi Sunac un confident the Windsor Framework that we announced

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Speaker 1: resolves the issues that people have with a protocol. It

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Speaker 1: restores balance to the Belfast Good Friday Agreement and that's

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Speaker 1: what was needed. And President Ursula underlying this new framework

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Speaker 1: will allow us to begin a new chapter. It provides

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Speaker 1: for long lasting solutions that both of us are confident

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Speaker 1: will work for all people and businesses in Northern Ireland,

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Speaker 1: Solutions that respond directly to the concerns they had raced.

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Speaker 1: While the United States moved forward with the first stage

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Speaker 1: of its Chips and Science Act, investing billions of dollars

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Speaker 1: to bring semiconductor manufacturing back to America's shores. Everybody knows

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Speaker 1: that this little chip that we have as part of

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Speaker 1: everything that we do in our life, and most of

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Speaker 1: them are manufactured overseas. So the idea here is to

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Speaker 1: bring those manufacturing capabilities back home. Not to be outdone,

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Speaker 1: China got into the act with pm I numbers way

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Speaker 1: above expectations, indicating its economy maybe roaring back faster than

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Speaker 1: was thought. There was a rebound expected when the Chinese

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Speaker 1: came out of their lunar New Year, but this has

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Speaker 1: been much stronger than people thought, and paving the way

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Speaker 1: for President She's coronation at the National People's Congress at

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Speaker 1: the beginning this weekend. This is really the last act

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Speaker 1: of the transition poor She shanping into his third term,

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Speaker 1: but from the time he was given the third term

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Speaker 1: at the Party Congress. So now the costs of She

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Speaker 1: Shinping's policies have been piling up and markets pretty much

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Speaker 1: picked up on the upbeat. Mood of the week is

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Speaker 1: the SMP five hundred made up put at a loss

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Speaker 1: last week, adding one point nine percent, while the Nasdaq

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Speaker 1: was up almost two point six percent. Bon yields surged

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Speaker 1: on Thursday, with the ten year well above four, but

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Speaker 1: then settled back down under three point nine six for

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Speaker 1: a gain of just over four basis points for the

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Speaker 1: week overall. Here for their interpretation of what the markets

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Speaker 1: were trying to tell us this week are Amy wu Silverman,

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Speaker 1: she is head of Derivative Strategy at RBC Capital Markets,

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Speaker 1: and David Beyond Cio America's for DWS Group. So welcome

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Speaker 1: both of you. Great to have you here day. We

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Speaker 1: got to start with you. What did you hear out

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Speaker 1: of the markets this week? Confusion? It was an up week,

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Speaker 1: and I'm glad that the machines have been shut off,

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Speaker 1: but it was a very volatile week. The market was lower,

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Speaker 1: the market was up. I think the main issue for

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Speaker 1: the week was the culmination of the realization that we

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Speaker 1: don't know what's going to happen with inflation over the

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Speaker 1: course of this year, so inflations back. What's the Fed

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Speaker 1: going to do about it is a big question? Amy, Yeah,

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Speaker 1: you know, look, I would say the derivative market echoed

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Speaker 1: that to some degree. Even though we ended the week up,

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Speaker 1: what we saw was actually a lot of hedging during

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Speaker 1: this whole week, So you know, as the market kind

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Speaker 1: of wrestles with concerns about inflation, what you're actually seeing

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Speaker 1: as investors going out buying downside protection kind of four

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Speaker 1: to six months out, wrestling with where this terminal weight

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Speaker 1: is going to be, and the sentiment is still leaning

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Speaker 1: pretty Barishley, So what does that tell you when people

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Speaker 1: are really buying those hedges four to six months out?

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Speaker 1: As you say, what are they anticipating four to six

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Speaker 1: months from now? So you know, the derivatives market, it

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Speaker 1: has to be very specific, so meaning if you don't

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Speaker 1: get the timing right, it doesn't really matter if you

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Speaker 1: get the direction right. And so you know, they're essentially

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Speaker 1: saying four to six months from now there is going

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Speaker 1: to be some sort of reckoning. We're either going to

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Speaker 1: be on the right glide path to a soft landing

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Speaker 1: or unfortunately, we may be wrestling with a terminal rate

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Speaker 1: that is actually much higher than initially expected and that

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Speaker 1: could cause downside to the market. Dude, I'm curious about

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Speaker 1: this glide path to a soft landing. Are he talks

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Speaker 1: about that? Are we on the right guide path or

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Speaker 1: do we even know at this point? Because we thought

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Speaker 1: that we thought inflation is coming down. We've had some

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Speaker 1: data in recent weeks in the game maybe not so

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Speaker 1: fast you maybe the airport's moving around. It's one of

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Speaker 1: those pop up airports in it. Well, the lights for

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Speaker 1: landing are still on. There's still a chance. But so

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Speaker 1: much data has come in suggesting that inflation sticky, particularly

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Speaker 1: at services. Service demand is strong. Thus jobs are still

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Speaker 1: strong and really tight labor market. And I think you've

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Speaker 1: got a labor market that's not too pleased with the

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Speaker 1: pay they're getting. You still have prices rising faster than

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Speaker 1: wages and wages rising faster than productivity. So the path

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Speaker 1: to a soft landing is getting trickier. But I think

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Speaker 1: there's still time and maybe just a little bit of

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Speaker 1: time left for the FED to act aggressively and bring

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Speaker 1: down inflation. For talk about the FED acting exactly, we're

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Speaker 1: going to hear from Jpal next week two days a

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Speaker 1: testament on Capitol Hill at a time when he was saying,

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Speaker 1: don't worry so much about inflation. He said, if it comes,

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Speaker 1: we will have the tools to deal with it. Does

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Speaker 1: it look like he does have the tools right now

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Speaker 1: or if are those tools working? They have the tools,

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Speaker 1: And he said if inflation comes and they've reiterated that

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Speaker 1: they are data dependent, that they're not on a predestined

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Speaker 1: course in terms of the terminal rate destination, how high

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Speaker 1: will they go? And there's no certainty or pre planned

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Speaker 1: amount of rate increases from here, So be data dependent

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Speaker 1: and consider strongly consider a larger hike the March meeting.

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Speaker 1: So what are you seeing in the derivative market when

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Speaker 1: it comes to things like the rates, Because there are

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Speaker 1: people talking about five and a half more or less

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Speaker 1: terminal rate, but now people are starting to say, may

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Speaker 1: it'll be six, Maybe we'll have to keep going. Given

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Speaker 1: the data we've had from the economics lately, what are

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Speaker 1: you seeing in derivatives? So one thing about derivatives markets

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Speaker 1: is they really think about what the tail is. So

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Speaker 1: right now I would say that twenty five basis points

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Speaker 1: of the next meeting is still kind of consensus, but

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Speaker 1: that tail of fifty basis points has actually risen, and

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Speaker 1: we're seeing investors play that either through rates options, through

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Speaker 1: sofa options, or through equity options. And you really see that,

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Speaker 1: David in the market structure as well, because we've really

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Speaker 1: taken the tenor of the average option down from something

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Speaker 1: like a month to a week or a day because

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Speaker 1: people are playing these data points so specifically because they

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Speaker 1: matter so much. Well, I want to talk about this

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Speaker 1: a week or a day? What did it do to

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Speaker 1: have an option it's for one day or less than

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Speaker 1: a day. It seems to be a big upswing in that.

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Speaker 1: I guess I started with memestocks. Actually it did, and

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Speaker 1: it's you know, for some one like myself who's been

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Speaker 1: watching the rotis market for twenty years, it's just unbelievably

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Speaker 1: shocking because right now almost half of all volume in

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Speaker 1: the entire SMP five hundred isn't concentrated in options that

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Speaker 1: are less than a data expiration. That really tells you

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Speaker 1: one how much the market structure has changed, especially on

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Speaker 1: days like today where it doesn't seem to fit the

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Speaker 1: market narrative. But secondly, you know, it exacerbates this intra

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Speaker 1: day volatility that you haven't seen in a way since

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Speaker 1: prior to the pandemic. It's really changed the market structure

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Speaker 1: of the day to day. So this is why I

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Speaker 1: would get about that, David. I would think normally, given

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Speaker 1: all the uncertainty out there, people would be saying I

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Speaker 1: don't want to take as much risk, but trading in

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Speaker 1: options for less today sounds like a pretty risky venture.

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Speaker 1: I guess some investors don't want to pay for the

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Speaker 1: time value, and maybe they think they've got the right

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Speaker 1: trade for the day. I would simply say that that's

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Speaker 1: why I don't read into any one day's market activity.

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Speaker 1: It's been volatile. I think that's the message in the

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Speaker 1: equity market and the derivatives market. This week was especially

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Speaker 1: volatile and the bond market, and that is the root

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Speaker 1: of a lot of the uncertainty out there. Where are

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Speaker 1: yields heading both short term interest rates and longer ten

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Speaker 1: year treasury bond yields. And the ten year yield poked

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Speaker 1: its head up above four percent this week, and I

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Speaker 1: think that's a reminder the bond market only has so

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Speaker 1: much patience, and I think it's running out for inflation

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Speaker 1: to come down faster. So I put you in the

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Speaker 1: spot here because I think you used the derivative person.

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Speaker 1: Are your derivatives taking some of the value away from

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Speaker 1: the signals we're getting at the equity markets because we

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Speaker 1: can't quite tell it's all about options. You know, whenever

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Speaker 1: folks need someone to blame, they usually come back to

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Speaker 1: the derivatives, So so you know, I'll just take one

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Speaker 1: for the team there. But you know, one thing we've

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Speaker 1: spoken about with investors is people used to use the

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Speaker 1: VIX as a signal. It's quite a common signal for

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Speaker 1: a risk. The VIX has broken down. So the correlation

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Speaker 1: between the market and the VIX used to be if

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Speaker 1: the VIX went up, the market should be going down,

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Speaker 1: and vice versa. They've been going in the same direction

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Speaker 1: for a while. And part of it is the VIX

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Speaker 1: isn't capturing what's happening in traday. It's essentially what's capturing

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Speaker 1: it's happening kind of on a one month out basis,

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Speaker 1: but all the action is really really short dated, and

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Speaker 1: so even some of our old standard indicators, if you will,

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Speaker 1: for volatility are are having to be reframed. Okay, thank

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Speaker 1: you so much to David Bianco and when Amy wu Silverman,

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Speaker 1: they're both going to stay with us. We're gonna show

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Speaker 1: you the question of how do we make some money

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Speaker 1: out of all this uncertainty? And by the way, does

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Speaker 1: any of it reside in China? That's going up next

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Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall

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Speaker 1: Street Week with David Weston from Bloomberg Radio. We are

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Speaker 1: in a period where country companies are copying the capitalist system.

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Speaker 1: They're privatizing government owned businesses everywhere, They're privatizing pension systems,

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Speaker 1: and it's just a fantastic time to be in the

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Speaker 1: financial business and you have the opportunity to participate in

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Speaker 1: this global growth. That was then City Group CEO Sandy

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Speaker 1: Wild on Wall Street Week back in November of two thousand,

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Speaker 1: when the number one movie in the country was How

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Speaker 1: the Grinch Stole Christmas? The number one sawing in the

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Speaker 1: country was Come On Over, Baby by the Backstree Boys,

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Speaker 1: and China was well on its way to join the WTO,

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Speaker 1: raising hopes its style of running economy might be coming

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Speaker 1: on over toward the Western Way. Still with us our

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Speaker 1: Amy Wu Silverman of RBC and David Bianco of DBAWS,

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Speaker 1: so we talked about the markets. In the last segment,

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Speaker 1: Amy gives us a sense of where the opportunities and

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Speaker 1: let me ask you specifically, do you think there are

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Speaker 1: opportunities in China? Given we're about to go into the

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Speaker 1: NBC or C presidents g reupt, I do I think

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Speaker 1: their opportunities and options in China specifically because there's an event,

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Speaker 1: and that's what options love the most. They love to

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Speaker 1: play an event because anything that could potentially increase your

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Speaker 1: volatility can increase the value of your options. So for

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Speaker 1: folks who have been looking at the China reopening story,

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Speaker 1: that may be a way to get back in to

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Speaker 1: ashr FXI em calls, which we've seen before in the

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Speaker 1: beginning of the year, and maybe reloaded. Now, what about

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Speaker 1: other sectors, David, haven't you mentioned banks? What about big tech?

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Speaker 1: For example? They had a hard year last year. Where's

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Speaker 1: it this year? It's off to traffic. Start the proper tech,

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Speaker 1: the proper tech titans, the ones that are in the

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Speaker 1: technology sector have held up really well. And I think

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Speaker 1: part of that is the people are seeking the stability

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Speaker 1: of those businesses, the strength and resilience of those businesses.

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Speaker 1: And don't forget those are strong balance sheets with a

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Speaker 1: lot of cash, earning more interest income than they did

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Speaker 1: in the year's past. But we also try to look

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Speaker 1: at the market as to where's their upside that's worth

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Speaker 1: the risk. I see that in healthcare there's more risk,

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Speaker 1: but good upside. And banks and tech were underweight now

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Speaker 1: we've moved more significantly underweight. On it. We're sticking more

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Speaker 1: things like communications where we see more of a price

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Speaker 1: discount and more upside worth the risk there. What do

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Speaker 1: you think about healthcare? David mentioned it. Yeah, it's interesting.

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Speaker 1: We just went through an exercise essentially through our universe

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Speaker 1: of covered companies within the RBC universe, and we essentially

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Speaker 1: looked at their sharp ratiows. We just said, given that

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Speaker 1: the risk free rate has gone so much higher, you know,

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Speaker 1: where's your excess return attractive per level volatility? And healthcare

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Speaker 1: is actually one of the sectors that is ranking quite well.

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Speaker 1: It's interesting. Healthcare you think is a strong one. Yes,

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Speaker 1: it had a tough start, as I think there are

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Speaker 1: investors running to the circicles, or running to the defensives,

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Speaker 1: or maybe leaving the equity asset class to go into bonds,

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Speaker 1: which is an alternative, powerful alternative. At this stage, healthcare

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Speaker 1: got left behind. But I think that's the sector for

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Speaker 1: the decade. Where we're talking about equities, obviously we're talking

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Speaker 1: in part about earnings expectations. Where are we on earnings?

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Speaker 1: So we bottomed out? No, they keep drifting down almost

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Speaker 1: in the painful, steady gradual drip of downward earnings estimates.

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Speaker 1: For especially the first half of this year. I think

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Speaker 1: at the best SMP earnings will be flat at about

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Speaker 1: two hundred and twenty two dollars, which is what hernings

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Speaker 1: were last year. So, Amy, as I understand sharp ratio,

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Speaker 1: which is limited. It's a combination of volatility and return.

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Speaker 1: But you're in really yet when you look at that,

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Speaker 1: where do you see the highest volatil the highest return. Yeah,

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Speaker 1: So essentially what the sharp ratio is saying to you is,

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Speaker 1: you know, for the level of heartache, the level of

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Speaker 1: risk that I'm taking, where are you getting your most return. So,

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Speaker 1: as I mentioned, healthcare was one of the sections we

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Speaker 1: looked at which looks attractive and interestingly, the other is

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Speaker 1: large cap technology, and the reason is actually not related

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Speaker 1: to the excess return. It's actually because the volatilities come

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Speaker 1: in on a twelve month basis in those stocks. Okay,

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Speaker 1: thank you so much. It's really great to have both

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Speaker 1: of you with us today for this discussion. That's Amy

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Speaker 1: wu Silverman of RBC Capital Markets, by the way, a

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Speaker 1: derivative person as you might have noticed, and David Bianco

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Speaker 1: of DWS America. And one of the things we focus

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Speaker 1: on here are the long term prospects for investors, and

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Speaker 1: necessarily those prospects depend upon our growth, and that is

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Speaker 1: a dependent upon the size and the quality of our workforce.

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Speaker 1: And when we talk about that, we necessarily have to

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Speaker 1: think about our children. Melissa Carney, Professor of Economic University

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Speaker 1: Marian has been focusing on just this subject and she

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Speaker 1: joins us once again on Walstert Week. Welcome back, Melissa.

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Speaker 1: It's great to have you here, so thanks for having me, David. So,

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Speaker 1: we tend to think about children and the future workforce

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Speaker 1: in terms of education and goodness, does we have a

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Speaker 1: lot we can do in this country about this. But

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Speaker 1: you point out that from the pandemic we saw something

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Speaker 1: about not just the education but the care for our children.

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Speaker 1: It's exactly right. So everybody is behind the need for

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Speaker 1: a skilled workforce and boosting educational attainment, and everyone's behind

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Speaker 1: improving schools. But the truth of the matter is the

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Speaker 1: kid's home life really dictates their ability to thrive and

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Speaker 1: learn in schools, and we don't do nearly enough in

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Speaker 1: this country to make sure that the material needs of

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Speaker 1: our nation's children's are being taken care of. We have

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Speaker 1: millions of children show up at school every day with

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Speaker 1: the burdens of poverty or economic and security. They're too

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Speaker 1: tired or hungry or stress to learn to the fullest

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Speaker 1: of their ability. What was amazing during the pandemic is that,

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Speaker 1: somewhat surprisingly, we actually managed to reduce child poverty in

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Speaker 1: this country by a half or a third. I mean,

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Speaker 1: this was really a historic accomplishment. And so how did

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Speaker 1: we do that? Well, Congress extended the child tax credit,

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Speaker 1: made it more generous, increase the full credit amount from

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Speaker 1: two thousand to three thousand dollars thirty six hundred dollars

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Speaker 1: for a child under the age of six, and it

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Speaker 1: made the credit fully refundable, which meant that even parents

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Speaker 1: who didn't work, who had no earnings, could get the

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Speaker 1: full credit amount. And the upshot of that was a

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Speaker 1: historic reduction in child poverty. And I think that means

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Speaker 1: looking for a bipartisan way forward to an enhanced child

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Speaker 1: tax credit. So coming back to the investment question, I mean,

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Speaker 1: we're not continuing that program the way it was, at

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Speaker 1: least not as of right now. Objections have been cost

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Speaker 1: too much money and it actually discourage his work. That's right. So, Congress,

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Speaker 1: despite everybody the celebrated reduction in child poverty. Congress did

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Speaker 1: not make the expansion of the child tax credit permanent,

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Speaker 1: and a few there were a few key hangoups, political hangoups,

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Speaker 1: reasonable hangoups. So one was the worry that if we

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Speaker 1: permanently sent checks to out of work parents of three

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Speaker 1: thousand or thirty six hundred dollars, that would actually induce

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Speaker 1: too many parents to leave the workforce. That was a

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Speaker 1: really big hangoup with congressional Republicans, as you mentioned. Another

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Speaker 1: worry was that it was too expensive. It added, you know,

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Speaker 1: over one hundred billion dollars to the cost of the

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Speaker 1: existing child tax credit. We propose that parents who are

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Speaker 1: out of work only get half of the full amount,

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Speaker 1: and then the full credit amount of three thousand or

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Speaker 1: thirty six hundred that could phase in steeply. And so

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Speaker 1: what does this do? This rewards work, This incentivizes parents

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Speaker 1: to go to work, and it still gets a lot

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Speaker 1: of money material resources to these very low income families.

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Speaker 1: The phase and is I understand that means if I

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Speaker 1: make more money as somebody who has half of the style,

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Speaker 1: I get some more of my full credit incrementally exactly

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Speaker 1: as you go to work. For every hundred dollars you earn,

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Speaker 1: you get thirty dollars until you hit the full credit amount, right,

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Speaker 1: So we're increasing the return to an hour of work.

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Speaker 1: On the issue of the child tax credit during the

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Speaker 1: twenty twenty one expansion being too expensive, well, a lot

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Speaker 1: of the additional income was actually not going towards fighting

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Speaker 1: child poverty or bolstering the income of low income families.

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Speaker 1: A lot of that was the full credit three thousand

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Speaker 1: dollars thirty six hundred dollars was going very high income families.

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Speaker 1: So there's a way to keep the cost down. Target

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Speaker 1: the resources on children and families for whom this money

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Speaker 1: will make a real difference. It would really increase their

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Speaker 1: ability to pay the rent, to buy nutritious food, to

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Speaker 1: pay for high quality childcare. Target the resources were we

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Speaker 1: know there's a real large social return, and do it

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Speaker 1: in a way that doesn't discourage parental work. Again, there's

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Speaker 1: an easy path forward here. It's obvious. It's just playing

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Speaker 1: with the policy parameters, and we can't afford not to

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Speaker 1: do this as a country. Professor, thank you so much

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Speaker 1: for being back with us. That is Professor Melissa Carney

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Speaker 1: of the University of Maryland. Coming up, we wrap up

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Speaker 1: the Week with special contributor Larry Summers of Harvard. That's

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Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg

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Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. This

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Speaker 1: is Wall Street Week. I'm David Weston. We're joined once

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Speaker 1: again by our very special contributor, Larry Summers of Harvard. So, Larry,

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Speaker 1: we spent a lot of the week trying to figure

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Speaker 1: out is the FED ahead of the behind? Where the

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Speaker 1: markets and relationship? Where is the Fed compared to where

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Speaker 1: it thought it was going to be, what its plan is?

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Speaker 1: The Fed is behind the curve. There have been six

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Speaker 1: jolts to the FED in the last six weeks. The

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Speaker 1: seasonal adjustments of the CPI took the trend downwards in

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Speaker 1: inflation during twenty twenty two out of the data. The

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Speaker 1: inflation figures for the last several months of twenty twenty

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Speaker 1: two were revised upwards, further taking any sign of declining

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Speaker 1: inflation out. We got a CPI number that was very

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Speaker 1: disappointing in terms of how high the level and the

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Speaker 1: core was, and that was reinforced by the pc information

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Speaker 1: when it came in. All the indicators for January read

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Speaker 1: strong suggesting that monetary policy has not yet gotten substantial

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Speaker 1: traction in slowing the fullness of the aggregate economy dawn.

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Speaker 1: The wage inflation numbers, as they have been revised, no

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Speaker 1: longer show the kind of reductions that we had been expecting,

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Speaker 1: or many had been expecting to see. And you see

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Speaker 1: interest rates move to ratchet upwards with the ten year

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Speaker 1: crossing four and the two year reaching record levels. Put

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Speaker 1: all that together, and I think a reasonable assessment of

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Speaker 1: where the fat is would say that they have not

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Speaker 1: been this far behind the curve for a year or so.

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Speaker 1: Once again, the forces the arguments made by Team Transitory

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Speaker 1: have unfortunately looked more like wishful thinking. And you can

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Speaker 1: see that in the evolution of rhetoric from we will

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Speaker 1: have a soft landing towards it's possible that we will

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Speaker 1: have a soft landing. Of course, it is possible that

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Speaker 1: we will have a soft landing, but maximizing that limited

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Speaker 1: prospect depends upon realistically assessing the situation. Okay, once they've

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Speaker 1: assessed the situation realistically, if they're behind the curve, how

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Speaker 1: do they catch up? What do they do going forward?

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Speaker 1: What is the policy? Look, they're not in the right

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Speaker 1: place right now with respect to March. I saw an

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Speaker 1: estimate suggesting that markets right now are assigning a twenty

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Speaker 1: two percent probability to a fifty basis point move in March.

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Speaker 1: The FED right now should have the door wide open

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Speaker 1: to a fifty basis point move in March. No need

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Speaker 1: to be committed to that till we see the next

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Speaker 1: employment figures, till one sees what happens in markets. But

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Speaker 1: if markets are now saying twenty two percent, that means

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Speaker 1: the door isn't open to that possibility, and there's a

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Speaker 1: very significant chance that that's going to be the right

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Speaker 1: thing to do. The main reason to move slowly in

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Speaker 1: monetary policy is because you want to preserve the option

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Speaker 1: of moving less far. It's looking less and less likely

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Speaker 1: that the right thing to do is to not raise

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Speaker 1: rates by at least another fifty basis points. And if

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Speaker 1: that is the right thing to do, it's best for credibility,

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Speaker 1: at its best for ultimate stability to make that move

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Speaker 1: more quickly. So I've been very disappointed to see some

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Speaker 1: of the speeches coming out of the FED that have

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Speaker 1: seemed to leave March off the table as a possible

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Speaker 1: place for fifty and I hope the senior leadership of

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Speaker 1: the FED will guide to agnosticism on the possibility of

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Speaker 1: a fifty basis point move in March, and we'll do

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Speaker 1: that sometime very soon. Larry All cling to the notion

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Speaker 1: that our central bank is independent from the political process

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Speaker 1: in this country. The same time, we're gonna have j.

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Speaker 1: Powell up protesting me for two days before Congress next week.

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Speaker 1: We also have a nomination to come of a new

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Speaker 1: vice chair. Does politics necessarily get injected? Were already people

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Speaker 1: are talking about possible candidates for the vice chair position,

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Speaker 1: whether they're a hawk or a dove, with some of

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Speaker 1: the more progressives in Congress saying let's get a dove

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Speaker 1: in there, I guess i'd say this. I'd say that

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00:24:59,600 --> 00:25:03,040
Speaker 1: the chair Airman has an important opportunity when he testifies

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Speaker 1: to reset expectations and to address the growing credibility problems

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Speaker 1: that the FED has. I think progressives are making a

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00:25:16,359 --> 00:25:20,760
Speaker 1: serious mistake, even by their own lights. If there's a

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Speaker 1: sense that progressive political conviction is guiding the next nomination,

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00:25:27,040 --> 00:25:32,240
Speaker 1: and even more, if that's successful in getting a person confirmed,

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00:25:32,880 --> 00:25:35,840
Speaker 1: I think there'll be very little impact on the next

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00:25:35,840 --> 00:25:39,360
Speaker 1: two or three appointments. It took two or three decisions

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00:25:39,840 --> 00:25:43,800
Speaker 1: because the Fed's going to want to show its independence.

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00:25:43,840 --> 00:25:46,280
Speaker 1: The incumbents are going to want to look like they

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00:25:46,359 --> 00:25:51,040
Speaker 1: have not been pushed around. New person's not going to

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00:25:51,119 --> 00:25:56,119
Speaker 1: have mediate impact, so you won't affect rates in the

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00:25:56,200 --> 00:26:04,320
Speaker 1: short run, but that sign of politicization will cause issues

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Speaker 1: of medium term expectation, and that will close the back

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00:26:08,680 --> 00:26:13,040
Speaker 1: end of the curve to rise. So ironically, that kind

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00:26:13,080 --> 00:26:18,400
Speaker 1: of political pressure is likely to put more inflation premium

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00:26:18,440 --> 00:26:22,560
Speaker 1: into interest rates and likely to lead to higher long rates,

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00:26:22,600 --> 00:26:27,840
Speaker 1: which means higher mortgage rates for the very people progressives

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00:26:28,280 --> 00:26:34,240
Speaker 1: are trying to help. This is really a very misguided

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00:26:34,359 --> 00:26:41,480
Speaker 1: and problematic strategy for progressives, even if one had their

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00:26:41,640 --> 00:26:47,560
Speaker 1: judgment that what's most important is lower rates and to

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00:26:47,600 --> 00:26:52,880
Speaker 1: stimulate the economy. So I hope they'll back off this

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00:26:53,000 --> 00:26:56,960
Speaker 1: kind of public campaign. Larry on Sunday begins the meetings

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Speaker 1: of the National People's Congress over in China. Every reason

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00:26:59,800 --> 00:27:02,600
Speaker 1: to opening new projections for growth as well as a

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00:27:02,640 --> 00:27:05,320
Speaker 1: new economic team for President g What are you looking for?

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00:27:06,240 --> 00:27:08,879
Speaker 1: You know? I think there are two things that people

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00:27:09,640 --> 00:27:16,639
Speaker 1: should keep in mind as they're thinking about China. One

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00:27:16,880 --> 00:27:26,359
Speaker 1: is the importance of predictability and stability. I think that

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00:27:26,600 --> 00:27:34,520
Speaker 1: the Chinese underestimate the extent to which previously respected members

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00:27:34,560 --> 00:27:39,920
Speaker 1: of the financial community can disappear without that having collateral

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00:27:39,960 --> 00:27:48,199
Speaker 1: impacts on confidence and on the flow of capital. And

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00:27:48,400 --> 00:27:53,720
Speaker 1: if there's a sense of the politicization of things financial

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00:27:54,359 --> 00:27:58,480
Speaker 1: to a growing degree, I think that's something they've got

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00:27:58,480 --> 00:28:01,280
Speaker 1: to be very careful of. The backdrop that's maybe an

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00:28:01,320 --> 00:28:08,240
Speaker 1: undertold story, which is that which is what's happening demographically.

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Speaker 1: Nick Eberstat, who is the leading watcher of all things demographic,

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00:28:15,800 --> 00:28:19,440
Speaker 1: tells us in The Washington Post that China has half

473
00:28:19,440 --> 00:28:23,280
Speaker 1: as many births last year as it did in twenty sixteen.

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00:28:23,960 --> 00:28:29,560
Speaker 1: That is a sea change with extraordinary speed. The downwards

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00:28:29,600 --> 00:28:34,520
Speaker 1: trend had heavily started before COVID, And in addition to

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00:28:34,600 --> 00:28:37,000
Speaker 1: what that means for the labor force and the age

477
00:28:37,040 --> 00:28:41,520
Speaker 1: structure of the population down the road, when a population's

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00:28:41,600 --> 00:28:45,040
Speaker 1: deciding to have half as many children and have that

479
00:28:45,120 --> 00:28:49,880
Speaker 1: revolution in six years, it says there's some very fundamental

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00:28:49,920 --> 00:28:53,280
Speaker 1: concerns about the future in that society. Larry, thank you

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00:28:53,320 --> 00:28:55,600
Speaker 1: so very vich. That's our very special contributor here in

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00:28:55,600 --> 00:29:00,680
Speaker 1: Wall Street Week he's Larry Summers of Harvard coming up.

483
00:29:00,720 --> 00:29:04,000
Speaker 1: If baseball can pick up the face, why can't Congress?

484
00:29:05,120 --> 00:29:15,880
Speaker 1: This is Wall Street Week on Bloomberg. Finally, one more thought.

485
00:29:16,360 --> 00:29:20,360
Speaker 1: Haste makes waste, so Erasmus supposedly said back in the

486
00:29:20,360 --> 00:29:24,160
Speaker 1: sixteenth century. But whatever passed for hasty five hundred years

487
00:29:24,200 --> 00:29:27,920
Speaker 1: ago looks awfully slow today, what with apps giving us

488
00:29:27,960 --> 00:29:33,760
Speaker 1: instantaneous trading. Investing should be as ubiquitous as shopping online.

489
00:29:33,800 --> 00:29:36,480
Speaker 1: It should just be something that people do. Or those

490
00:29:36,520 --> 00:29:39,280
Speaker 1: scratch off lottery tickets. We won't admit that we are

491
00:29:39,320 --> 00:29:42,040
Speaker 1: all buying. I got you a cast multiplayer tickets, so

492
00:29:42,080 --> 00:29:44,360
Speaker 1: gives a chance the multiplier winnings up to one hundred times.

493
00:29:45,240 --> 00:29:48,320
Speaker 1: Even as fast as most things are today, some things

494
00:29:48,320 --> 00:29:52,760
Speaker 1: could move a bit more quickly, like baseball games notorious

495
00:29:52,760 --> 00:29:55,840
Speaker 1: for going along, though not as long as that twenty

496
00:29:56,080 --> 00:29:59,760
Speaker 1: eighteen World Series game that went eighteen innings in over

497
00:30:00,080 --> 00:30:02,760
Speaker 1: seven hours. That was a Greig baseball game. I don't

498
00:30:02,760 --> 00:30:05,800
Speaker 1: know seven hours, whatever it was. You know, probably people

499
00:30:05,840 --> 00:30:07,520
Speaker 1: back home are waking up right now to the end.

500
00:30:07,520 --> 00:30:11,080
Speaker 1: It's probably one of the best, if not the best

501
00:30:11,080 --> 00:30:14,400
Speaker 1: game I've been part of. The Red Sox coach Cora

502
00:30:14,760 --> 00:30:17,800
Speaker 1: might have enjoyed that long game, but Major League Baseball

503
00:30:17,840 --> 00:30:20,560
Speaker 1: has a better idea. This week we saw the first

504
00:30:20,560 --> 00:30:23,040
Speaker 1: games played under new rules that are supposed to pick

505
00:30:23,160 --> 00:30:26,160
Speaker 1: up the pace, including a pitch clock to keep the

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00:30:26,200 --> 00:30:29,640
Speaker 1: game moving. I think that the clock has been really

507
00:30:29,840 --> 00:30:35,000
Speaker 1: successful in the minor leagues with a minimum of disruption

508
00:30:35,080 --> 00:30:37,400
Speaker 1: in terms of the play of the game. Early reviews

509
00:30:37,440 --> 00:30:40,160
Speaker 1: indicated it was shortening games by an average of thirty

510
00:30:40,200 --> 00:30:43,640
Speaker 1: minutes a game, though also causing a bit of confusion

511
00:30:43,760 --> 00:30:46,480
Speaker 1: when one of the first violations wasn't for the pitcher

512
00:30:46,560 --> 00:30:48,760
Speaker 1: failing to deliver the ball to the plate on time,

513
00:30:49,120 --> 00:30:53,320
Speaker 1: but for the batter not getting ready time called Conley

514
00:30:54,000 --> 00:30:57,880
Speaker 1: took too much time. He's out. He wasn't. He didn't

515
00:30:57,880 --> 00:31:01,320
Speaker 1: have his eyes on the pitcher by the eight second

516
00:31:01,360 --> 00:31:04,080
Speaker 1: pitch mark on the pitch clock. It makes us wonder

517
00:31:04,160 --> 00:31:07,240
Speaker 1: what else might benefit from a pitch clock or its equivalent.

518
00:31:07,400 --> 00:31:11,280
Speaker 1: An obvious target are those Oscar acceptance speeches, which they've

519
00:31:11,320 --> 00:31:14,520
Speaker 1: tried to keep shorter by turning up the music, leading

520
00:31:14,600 --> 00:31:17,920
Speaker 1: some award winners to try a competition with the audible

521
00:31:18,040 --> 00:31:20,560
Speaker 1: pitch clock. Who among us hasn't wished for a pitch

522
00:31:20,560 --> 00:31:23,520
Speaker 1: clock to be put on those endless strategic planning meetings

523
00:31:23,560 --> 00:31:26,720
Speaker 1: we all attend. But most of all, what we apparently

524
00:31:26,720 --> 00:31:29,920
Speaker 1: need is a pitch clock on debt ceiling relief, one

525
00:31:29,920 --> 00:31:32,680
Speaker 1: that would require Congress to get its act together before

526
00:31:32,720 --> 00:31:36,720
Speaker 1: we're on the brink of default. Do it clean, do

527
00:31:36,760 --> 00:31:42,080
Speaker 1: it without brinksmanship, do it without this risk of hostage

528
00:31:42,080 --> 00:31:45,040
Speaker 1: taking where things could blow up. And while we're at it,

529
00:31:45,240 --> 00:31:48,480
Speaker 1: maybe we could ban shifting in Congress the way they've

530
00:31:48,480 --> 00:31:51,960
Speaker 1: done for the infield in baseball. But then again, where

531
00:31:51,960 --> 00:31:54,560
Speaker 1: would that leave Joe Mansion? And so now we're back

532
00:31:54,560 --> 00:31:57,920
Speaker 1: in the Mansionology game, wondering whether there's one more ending

533
00:31:58,000 --> 00:32:00,360
Speaker 1: left to play that does it. For this episode of

534
00:32:00,360 --> 00:32:03,040
Speaker 1: Wall Street Week, I'm David Weston. This is Bloomberg. See

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00:32:03,080 --> 00:32:12,600
Speaker 1: you next week. M