Speaker 1: This is Bloomberg Wall Street. We turn our attention to
Speaker 1: the markets this week. USCPI never's reinforcing concerns about inflation,
Speaker 1: the financial stories that cheap our world, a really different
Speaker 1: reaction to markets. More indications of just how hot the
Speaker 1: US economy really is. Through the eyes of the most
Speaker 1: influential voices Larry Summers, the former Treachery Secretary, Katherine Keene,
Speaker 1: CEO of the ny Mellen Sam's l Sherman Pan, founder
Speaker 1: of Equity Group Investment in Bloomberg Wall Street Week with
Speaker 1: David Weston from Bloomberg Radio. New beginnings for Britain's relations
Speaker 1: with Europe, for America's semiconductor industry, and maybe for the
Speaker 1: Chinese economy. This is Bloomberg Wall Street Week. I'm David
Speaker 1: Weston this week special contributor to Larry Summers on signs
Speaker 1: of a Chinese resurgence. When a populations deciding to have
Speaker 1: half as many children have that revolution in six years,
Speaker 1: it says there's some very fundamental concerns about the future
Speaker 1: in that society. Renee James of am Here on the
Speaker 1: bold new US industrial policy for semiconductors. It's brought the
Speaker 1: importance of semi conductors in the semiconductor industry into the
Speaker 1: public discourse and Professor Melissa Carney of the University of
Speaker 1: Maryland on investing in the future workers of America. We
Speaker 1: have the tools and the resources to reduce child poverty
Speaker 1: in this country, which would remove major impediments to children's
Speaker 1: learning cognitive development. That is a way to invest in
Speaker 1: our future. Everywhere you look. This week, Global Wall Street
Speaker 1: seemed to be turning over a new leaf, with the
Speaker 1: UK and the EU patching things up over Northern Ireland
Speaker 1: announced in the shadow of Windsor Castle prod. Prime Minister
Speaker 1: Rishi Sunac un confident the Windsor Framework that we announced
Speaker 1: resolves the issues that people have with a protocol. It
Speaker 1: restores balance to the Belfast Good Friday Agreement and that's
Speaker 1: what was needed. And President Ursula underlying this new framework
Speaker 1: will allow us to begin a new chapter. It provides
Speaker 1: for long lasting solutions that both of us are confident
Speaker 1: will work for all people and businesses in Northern Ireland,
Speaker 1: Solutions that respond directly to the concerns they had raced.
Speaker 1: While the United States moved forward with the first stage
Speaker 1: of its Chips and Science Act, investing billions of dollars
Speaker 1: to bring semiconductor manufacturing back to America's shores. Everybody knows
Speaker 1: that this little chip that we have as part of
Speaker 1: everything that we do in our life, and most of
Speaker 1: them are manufactured overseas. So the idea here is to
Speaker 1: bring those manufacturing capabilities back home. Not to be outdone,
Speaker 1: China got into the act with pm I numbers way
Speaker 1: above expectations, indicating its economy maybe roaring back faster than
Speaker 1: was thought. There was a rebound expected when the Chinese
Speaker 1: came out of their lunar New Year, but this has
Speaker 1: been much stronger than people thought, and paving the way
Speaker 1: for President She's coronation at the National People's Congress at
Speaker 1: the beginning this weekend. This is really the last act
Speaker 1: of the transition poor She shanping into his third term,
Speaker 1: but from the time he was given the third term
Speaker 1: at the Party Congress. So now the costs of She
Speaker 1: Shinping's policies have been piling up and markets pretty much
Speaker 1: picked up on the upbeat. Mood of the week is
Speaker 1: the SMP five hundred made up put at a loss
Speaker 1: last week, adding one point nine percent, while the Nasdaq
Speaker 1: was up almost two point six percent. Bon yields surged
Speaker 1: on Thursday, with the ten year well above four, but
Speaker 1: then settled back down under three point nine six for
Speaker 1: a gain of just over four basis points for the
Speaker 1: week overall. Here for their interpretation of what the markets
Speaker 1: were trying to tell us this week are Amy wu Silverman,
Speaker 1: she is head of Derivative Strategy at RBC Capital Markets,
Speaker 1: and David Beyond Cio America's for DWS Group. So welcome
Speaker 1: both of you. Great to have you here day. We
Speaker 1: got to start with you. What did you hear out
Speaker 1: of the markets this week? Confusion? It was an up week,
Speaker 1: and I'm glad that the machines have been shut off,
Speaker 1: but it was a very volatile week. The market was lower,
Speaker 1: the market was up. I think the main issue for
Speaker 1: the week was the culmination of the realization that we
Speaker 1: don't know what's going to happen with inflation over the
Speaker 1: course of this year, so inflations back. What's the Fed
Speaker 1: going to do about it is a big question? Amy, Yeah,
Speaker 1: you know, look, I would say the derivative market echoed
Speaker 1: that to some degree. Even though we ended the week up,
Speaker 1: what we saw was actually a lot of hedging during
Speaker 1: this whole week, So you know, as the market kind
Speaker 1: of wrestles with concerns about inflation, what you're actually seeing
Speaker 1: as investors going out buying downside protection kind of four
Speaker 1: to six months out, wrestling with where this terminal weight
Speaker 1: is going to be, and the sentiment is still leaning
Speaker 1: pretty Barishley, So what does that tell you when people
Speaker 1: are really buying those hedges four to six months out?
Speaker 1: As you say, what are they anticipating four to six
Speaker 1: months from now? So you know, the derivatives market, it
Speaker 1: has to be very specific, so meaning if you don't
Speaker 1: get the timing right, it doesn't really matter if you
Speaker 1: get the direction right. And so you know, they're essentially
Speaker 1: saying four to six months from now there is going
Speaker 1: to be some sort of reckoning. We're either going to
Speaker 1: be on the right glide path to a soft landing
Speaker 1: or unfortunately, we may be wrestling with a terminal rate
Speaker 1: that is actually much higher than initially expected and that
Speaker 1: could cause downside to the market. Dude, I'm curious about
Speaker 1: this glide path to a soft landing. Are he talks
Speaker 1: about that? Are we on the right guide path or
Speaker 1: do we even know at this point? Because we thought
Speaker 1: that we thought inflation is coming down. We've had some
Speaker 1: data in recent weeks in the game maybe not so
Speaker 1: fast you maybe the airport's moving around. It's one of
Speaker 1: those pop up airports in it. Well, the lights for
Speaker 1: landing are still on. There's still a chance. But so
Speaker 1: much data has come in suggesting that inflation sticky, particularly
Speaker 1: at services. Service demand is strong. Thus jobs are still
Speaker 1: strong and really tight labor market. And I think you've
Speaker 1: got a labor market that's not too pleased with the
Speaker 1: pay they're getting. You still have prices rising faster than
Speaker 1: wages and wages rising faster than productivity. So the path
Speaker 1: to a soft landing is getting trickier. But I think
Speaker 1: there's still time and maybe just a little bit of
Speaker 1: time left for the FED to act aggressively and bring
Speaker 1: down inflation. For talk about the FED acting exactly, we're
Speaker 1: going to hear from Jpal next week two days a
Speaker 1: testament on Capitol Hill at a time when he was saying,
Speaker 1: don't worry so much about inflation. He said, if it comes,
Speaker 1: we will have the tools to deal with it. Does
Speaker 1: it look like he does have the tools right now
Speaker 1: or if are those tools working? They have the tools,
Speaker 1: And he said if inflation comes and they've reiterated that
Speaker 1: they are data dependent, that they're not on a predestined
Speaker 1: course in terms of the terminal rate destination, how high
Speaker 1: will they go? And there's no certainty or pre planned
Speaker 1: amount of rate increases from here, So be data dependent
Speaker 1: and consider strongly consider a larger hike the March meeting.
Speaker 1: So what are you seeing in the derivative market when
Speaker 1: it comes to things like the rates, Because there are
Speaker 1: people talking about five and a half more or less
Speaker 1: terminal rate, but now people are starting to say, may
Speaker 1: it'll be six, Maybe we'll have to keep going. Given
Speaker 1: the data we've had from the economics lately, what are
Speaker 1: you seeing in derivatives? So one thing about derivatives markets
Speaker 1: is they really think about what the tail is. So
Speaker 1: right now I would say that twenty five basis points
Speaker 1: of the next meeting is still kind of consensus, but
Speaker 1: that tail of fifty basis points has actually risen, and
Speaker 1: we're seeing investors play that either through rates options, through
Speaker 1: sofa options, or through equity options. And you really see that,
Speaker 1: David in the market structure as well, because we've really
Speaker 1: taken the tenor of the average option down from something
Speaker 1: like a month to a week or a day because
Speaker 1: people are playing these data points so specifically because they
Speaker 1: matter so much. Well, I want to talk about this
Speaker 1: a week or a day? What did it do to
Speaker 1: have an option it's for one day or less than
Speaker 1: a day. It seems to be a big upswing in that.
Speaker 1: I guess I started with memestocks. Actually it did, and
Speaker 1: it's you know, for some one like myself who's been
Speaker 1: watching the rotis market for twenty years, it's just unbelievably
Speaker 1: shocking because right now almost half of all volume in
Speaker 1: the entire SMP five hundred isn't concentrated in options that
Speaker 1: are less than a data expiration. That really tells you
Speaker 1: one how much the market structure has changed, especially on
Speaker 1: days like today where it doesn't seem to fit the
Speaker 1: market narrative. But secondly, you know, it exacerbates this intra
Speaker 1: day volatility that you haven't seen in a way since
Speaker 1: prior to the pandemic. It's really changed the market structure
Speaker 1: of the day to day. So this is why I
Speaker 1: would get about that, David. I would think normally, given
Speaker 1: all the uncertainty out there, people would be saying I
Speaker 1: don't want to take as much risk, but trading in
Speaker 1: options for less today sounds like a pretty risky venture.
Speaker 1: I guess some investors don't want to pay for the
Speaker 1: time value, and maybe they think they've got the right
Speaker 1: trade for the day. I would simply say that that's
Speaker 1: why I don't read into any one day's market activity.
Speaker 1: It's been volatile. I think that's the message in the
Speaker 1: equity market and the derivatives market. This week was especially
Speaker 1: volatile and the bond market, and that is the root
Speaker 1: of a lot of the uncertainty out there. Where are
Speaker 1: yields heading both short term interest rates and longer ten
Speaker 1: year treasury bond yields. And the ten year yield poked
Speaker 1: its head up above four percent this week, and I
Speaker 1: think that's a reminder the bond market only has so
Speaker 1: much patience, and I think it's running out for inflation
Speaker 1: to come down faster. So I put you in the
Speaker 1: spot here because I think you used the derivative person.
Speaker 1: Are your derivatives taking some of the value away from
Speaker 1: the signals we're getting at the equity markets because we
Speaker 1: can't quite tell it's all about options. You know, whenever
Speaker 1: folks need someone to blame, they usually come back to
Speaker 1: the derivatives, So so you know, I'll just take one
Speaker 1: for the team there. But you know, one thing we've
Speaker 1: spoken about with investors is people used to use the
Speaker 1: VIX as a signal. It's quite a common signal for
Speaker 1: a risk. The VIX has broken down. So the correlation
Speaker 1: between the market and the VIX used to be if
Speaker 1: the VIX went up, the market should be going down,
Speaker 1: and vice versa. They've been going in the same direction
Speaker 1: for a while. And part of it is the VIX
Speaker 1: isn't capturing what's happening in traday. It's essentially what's capturing
Speaker 1: it's happening kind of on a one month out basis,
Speaker 1: but all the action is really really short dated, and
Speaker 1: so even some of our old standard indicators, if you will,
Speaker 1: for volatility are are having to be reframed. Okay, thank
Speaker 1: you so much to David Bianco and when Amy wu Silverman,
Speaker 1: they're both going to stay with us. We're gonna show
Speaker 1: you the question of how do we make some money
Speaker 1: out of all this uncertainty? And by the way, does
Speaker 1: any of it reside in China? That's going up next
Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. We are
Speaker 1: in a period where country companies are copying the capitalist system.
Speaker 1: They're privatizing government owned businesses everywhere, They're privatizing pension systems,
Speaker 1: and it's just a fantastic time to be in the
Speaker 1: financial business and you have the opportunity to participate in
Speaker 1: this global growth. That was then City Group CEO Sandy
Speaker 1: Wild on Wall Street Week back in November of two thousand,
Speaker 1: when the number one movie in the country was How
Speaker 1: the Grinch Stole Christmas? The number one sawing in the
Speaker 1: country was Come On Over, Baby by the Backstree Boys,
Speaker 1: and China was well on its way to join the WTO,
Speaker 1: raising hopes its style of running economy might be coming
Speaker 1: on over toward the Western Way. Still with us our
Speaker 1: Amy Wu Silverman of RBC and David Bianco of DBAWS,
Speaker 1: so we talked about the markets. In the last segment,
Speaker 1: Amy gives us a sense of where the opportunities and
Speaker 1: let me ask you specifically, do you think there are
Speaker 1: opportunities in China? Given we're about to go into the
Speaker 1: NBC or C presidents g reupt, I do I think
Speaker 1: their opportunities and options in China specifically because there's an event,
Speaker 1: and that's what options love the most. They love to
Speaker 1: play an event because anything that could potentially increase your
Speaker 1: volatility can increase the value of your options. So for
Speaker 1: folks who have been looking at the China reopening story,
Speaker 1: that may be a way to get back in to
Speaker 1: ashr FXI em calls, which we've seen before in the
Speaker 1: beginning of the year, and maybe reloaded. Now, what about
Speaker 1: other sectors, David, haven't you mentioned banks? What about big tech?
Speaker 1: For example? They had a hard year last year. Where's
Speaker 1: it this year? It's off to traffic. Start the proper tech,
Speaker 1: the proper tech titans, the ones that are in the
Speaker 1: technology sector have held up really well. And I think
Speaker 1: part of that is the people are seeking the stability
Speaker 1: of those businesses, the strength and resilience of those businesses.
Speaker 1: And don't forget those are strong balance sheets with a
Speaker 1: lot of cash, earning more interest income than they did
Speaker 1: in the year's past. But we also try to look
Speaker 1: at the market as to where's their upside that's worth
Speaker 1: the risk. I see that in healthcare there's more risk,
Speaker 1: but good upside. And banks and tech were underweight now
Speaker 1: we've moved more significantly underweight. On it. We're sticking more
Speaker 1: things like communications where we see more of a price
Speaker 1: discount and more upside worth the risk there. What do
Speaker 1: you think about healthcare? David mentioned it. Yeah, it's interesting.
Speaker 1: We just went through an exercise essentially through our universe
Speaker 1: of covered companies within the RBC universe, and we essentially
Speaker 1: looked at their sharp ratiows. We just said, given that
Speaker 1: the risk free rate has gone so much higher, you know,
Speaker 1: where's your excess return attractive per level volatility? And healthcare
Speaker 1: is actually one of the sectors that is ranking quite well.
Speaker 1: It's interesting. Healthcare you think is a strong one. Yes,
Speaker 1: it had a tough start, as I think there are
Speaker 1: investors running to the circicles, or running to the defensives,
Speaker 1: or maybe leaving the equity asset class to go into bonds,
Speaker 1: which is an alternative, powerful alternative. At this stage, healthcare
Speaker 1: got left behind. But I think that's the sector for
Speaker 1: the decade. Where we're talking about equities, obviously we're talking
Speaker 1: in part about earnings expectations. Where are we on earnings?
Speaker 1: So we bottomed out? No, they keep drifting down almost
Speaker 1: in the painful, steady gradual drip of downward earnings estimates.
Speaker 1: For especially the first half of this year. I think
Speaker 1: at the best SMP earnings will be flat at about
Speaker 1: two hundred and twenty two dollars, which is what hernings
Speaker 1: were last year. So, Amy, as I understand sharp ratio,
Speaker 1: which is limited. It's a combination of volatility and return.
Speaker 1: But you're in really yet when you look at that,
Speaker 1: where do you see the highest volatil the highest return. Yeah,
Speaker 1: So essentially what the sharp ratio is saying to you is,
Speaker 1: you know, for the level of heartache, the level of
Speaker 1: risk that I'm taking, where are you getting your most return. So,
Speaker 1: as I mentioned, healthcare was one of the sections we
Speaker 1: looked at which looks attractive and interestingly, the other is
Speaker 1: large cap technology, and the reason is actually not related
Speaker 1: to the excess return. It's actually because the volatilities come
Speaker 1: in on a twelve month basis in those stocks. Okay,
Speaker 1: thank you so much. It's really great to have both
Speaker 1: of you with us today for this discussion. That's Amy
Speaker 1: wu Silverman of RBC Capital Markets, by the way, a
Speaker 1: derivative person as you might have noticed, and David Bianco
Speaker 1: of DWS America. And one of the things we focus
Speaker 1: on here are the long term prospects for investors, and
Speaker 1: necessarily those prospects depend upon our growth, and that is
Speaker 1: a dependent upon the size and the quality of our workforce.
Speaker 1: And when we talk about that, we necessarily have to
Speaker 1: think about our children. Melissa Carney, Professor of Economic University
Speaker 1: Marian has been focusing on just this subject and she
Speaker 1: joins us once again on Walstert Week. Welcome back, Melissa.
Speaker 1: It's great to have you here, so thanks for having me, David. So,
Speaker 1: we tend to think about children and the future workforce
Speaker 1: in terms of education and goodness, does we have a
Speaker 1: lot we can do in this country about this. But
Speaker 1: you point out that from the pandemic we saw something
Speaker 1: about not just the education but the care for our children.
Speaker 1: It's exactly right. So everybody is behind the need for
Speaker 1: a skilled workforce and boosting educational attainment, and everyone's behind
Speaker 1: improving schools. But the truth of the matter is the
Speaker 1: kid's home life really dictates their ability to thrive and
Speaker 1: learn in schools, and we don't do nearly enough in
Speaker 1: this country to make sure that the material needs of
Speaker 1: our nation's children's are being taken care of. We have
Speaker 1: millions of children show up at school every day with
Speaker 1: the burdens of poverty or economic and security. They're too
Speaker 1: tired or hungry or stress to learn to the fullest
Speaker 1: of their ability. What was amazing during the pandemic is that,
Speaker 1: somewhat surprisingly, we actually managed to reduce child poverty in
Speaker 1: this country by a half or a third. I mean,
Speaker 1: this was really a historic accomplishment. And so how did
Speaker 1: we do that? Well, Congress extended the child tax credit,
Speaker 1: made it more generous, increase the full credit amount from
Speaker 1: two thousand to three thousand dollars thirty six hundred dollars
Speaker 1: for a child under the age of six, and it
Speaker 1: made the credit fully refundable, which meant that even parents
Speaker 1: who didn't work, who had no earnings, could get the
Speaker 1: full credit amount. And the upshot of that was a
Speaker 1: historic reduction in child poverty. And I think that means
Speaker 1: looking for a bipartisan way forward to an enhanced child
Speaker 1: tax credit. So coming back to the investment question, I mean,
Speaker 1: we're not continuing that program the way it was, at
Speaker 1: least not as of right now. Objections have been cost
Speaker 1: too much money and it actually discourage his work. That's right. So, Congress,
Speaker 1: despite everybody the celebrated reduction in child poverty. Congress did
Speaker 1: not make the expansion of the child tax credit permanent,
Speaker 1: and a few there were a few key hangoups, political hangoups,
Speaker 1: reasonable hangoups. So one was the worry that if we
Speaker 1: permanently sent checks to out of work parents of three
Speaker 1: thousand or thirty six hundred dollars, that would actually induce
Speaker 1: too many parents to leave the workforce. That was a
Speaker 1: really big hangoup with congressional Republicans, as you mentioned. Another
Speaker 1: worry was that it was too expensive. It added, you know,
Speaker 1: over one hundred billion dollars to the cost of the
Speaker 1: existing child tax credit. We propose that parents who are
Speaker 1: out of work only get half of the full amount,
Speaker 1: and then the full credit amount of three thousand or
Speaker 1: thirty six hundred that could phase in steeply. And so
Speaker 1: what does this do? This rewards work, This incentivizes parents
Speaker 1: to go to work, and it still gets a lot
Speaker 1: of money material resources to these very low income families.
Speaker 1: The phase and is I understand that means if I
Speaker 1: make more money as somebody who has half of the style,
Speaker 1: I get some more of my full credit incrementally exactly
Speaker 1: as you go to work. For every hundred dollars you earn,
Speaker 1: you get thirty dollars until you hit the full credit amount, right,
Speaker 1: So we're increasing the return to an hour of work.
Speaker 1: On the issue of the child tax credit during the
Speaker 1: twenty twenty one expansion being too expensive, well, a lot
Speaker 1: of the additional income was actually not going towards fighting
Speaker 1: child poverty or bolstering the income of low income families.
Speaker 1: A lot of that was the full credit three thousand
Speaker 1: dollars thirty six hundred dollars was going very high income families.
Speaker 1: So there's a way to keep the cost down. Target
Speaker 1: the resources on children and families for whom this money
Speaker 1: will make a real difference. It would really increase their
Speaker 1: ability to pay the rent, to buy nutritious food, to
Speaker 1: pay for high quality childcare. Target the resources were we
Speaker 1: know there's a real large social return, and do it
Speaker 1: in a way that doesn't discourage parental work. Again, there's
Speaker 1: an easy path forward here. It's obvious. It's just playing
Speaker 1: with the policy parameters, and we can't afford not to
Speaker 1: do this as a country. Professor, thank you so much
Speaker 1: for being back with us. That is Professor Melissa Carney
Speaker 1: of the University of Maryland. Coming up, we wrap up
Speaker 1: the Week with special contributor Larry Summers of Harvard. That's
Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. This
Speaker 1: is Wall Street Week. I'm David Weston. We're joined once
Speaker 1: again by our very special contributor, Larry Summers of Harvard. So, Larry,
Speaker 1: we spent a lot of the week trying to figure
Speaker 1: out is the FED ahead of the behind? Where the
Speaker 1: markets and relationship? Where is the Fed compared to where
Speaker 1: it thought it was going to be, what its plan is?
Speaker 1: The Fed is behind the curve. There have been six
Speaker 1: jolts to the FED in the last six weeks. The
Speaker 1: seasonal adjustments of the CPI took the trend downwards in
Speaker 1: inflation during twenty twenty two out of the data. The
Speaker 1: inflation figures for the last several months of twenty twenty
Speaker 1: two were revised upwards, further taking any sign of declining
Speaker 1: inflation out. We got a CPI number that was very
Speaker 1: disappointing in terms of how high the level and the
Speaker 1: core was, and that was reinforced by the pc information
Speaker 1: when it came in. All the indicators for January read
Speaker 1: strong suggesting that monetary policy has not yet gotten substantial
Speaker 1: traction in slowing the fullness of the aggregate economy dawn.
Speaker 1: The wage inflation numbers, as they have been revised, no
Speaker 1: longer show the kind of reductions that we had been expecting,
Speaker 1: or many had been expecting to see. And you see
Speaker 1: interest rates move to ratchet upwards with the ten year
Speaker 1: crossing four and the two year reaching record levels. Put
Speaker 1: all that together, and I think a reasonable assessment of
Speaker 1: where the fat is would say that they have not
Speaker 1: been this far behind the curve for a year or so.
Speaker 1: Once again, the forces the arguments made by Team Transitory
Speaker 1: have unfortunately looked more like wishful thinking. And you can
Speaker 1: see that in the evolution of rhetoric from we will
Speaker 1: have a soft landing towards it's possible that we will
Speaker 1: have a soft landing. Of course, it is possible that
Speaker 1: we will have a soft landing, but maximizing that limited
Speaker 1: prospect depends upon realistically assessing the situation. Okay, once they've
Speaker 1: assessed the situation realistically, if they're behind the curve, how
Speaker 1: do they catch up? What do they do going forward?
Speaker 1: What is the policy? Look, they're not in the right
Speaker 1: place right now with respect to March. I saw an
Speaker 1: estimate suggesting that markets right now are assigning a twenty
Speaker 1: two percent probability to a fifty basis point move in March.
Speaker 1: The FED right now should have the door wide open
Speaker 1: to a fifty basis point move in March. No need
Speaker 1: to be committed to that till we see the next
Speaker 1: employment figures, till one sees what happens in markets. But
Speaker 1: if markets are now saying twenty two percent, that means
Speaker 1: the door isn't open to that possibility, and there's a
Speaker 1: very significant chance that that's going to be the right
Speaker 1: thing to do. The main reason to move slowly in
Speaker 1: monetary policy is because you want to preserve the option
Speaker 1: of moving less far. It's looking less and less likely
Speaker 1: that the right thing to do is to not raise
Speaker 1: rates by at least another fifty basis points. And if
Speaker 1: that is the right thing to do, it's best for credibility,
Speaker 1: at its best for ultimate stability to make that move
Speaker 1: more quickly. So I've been very disappointed to see some
Speaker 1: of the speeches coming out of the FED that have
Speaker 1: seemed to leave March off the table as a possible
Speaker 1: place for fifty and I hope the senior leadership of
Speaker 1: the FED will guide to agnosticism on the possibility of
Speaker 1: a fifty basis point move in March, and we'll do
Speaker 1: that sometime very soon. Larry All cling to the notion
Speaker 1: that our central bank is independent from the political process
Speaker 1: in this country. The same time, we're gonna have j.
Speaker 1: Powell up protesting me for two days before Congress next week.
Speaker 1: We also have a nomination to come of a new
Speaker 1: vice chair. Does politics necessarily get injected? Were already people
Speaker 1: are talking about possible candidates for the vice chair position,
Speaker 1: whether they're a hawk or a dove, with some of
Speaker 1: the more progressives in Congress saying let's get a dove
Speaker 1: in there, I guess i'd say this. I'd say that
Speaker 1: the chair Airman has an important opportunity when he testifies
Speaker 1: to reset expectations and to address the growing credibility problems
Speaker 1: that the FED has. I think progressives are making a
Speaker 1: serious mistake, even by their own lights. If there's a
Speaker 1: sense that progressive political conviction is guiding the next nomination,
Speaker 1: and even more, if that's successful in getting a person confirmed,
Speaker 1: I think there'll be very little impact on the next
Speaker 1: two or three appointments. It took two or three decisions
Speaker 1: because the Fed's going to want to show its independence.
Speaker 1: The incumbents are going to want to look like they
Speaker 1: have not been pushed around. New person's not going to
Speaker 1: have mediate impact, so you won't affect rates in the
Speaker 1: short run, but that sign of politicization will cause issues
Speaker 1: of medium term expectation, and that will close the back
Speaker 1: end of the curve to rise. So ironically, that kind
Speaker 1: of political pressure is likely to put more inflation premium
Speaker 1: into interest rates and likely to lead to higher long rates,
Speaker 1: which means higher mortgage rates for the very people progressives
Speaker 1: are trying to help. This is really a very misguided
Speaker 1: and problematic strategy for progressives, even if one had their
Speaker 1: judgment that what's most important is lower rates and to
Speaker 1: stimulate the economy. So I hope they'll back off this
Speaker 1: kind of public campaign. Larry on Sunday begins the meetings
Speaker 1: of the National People's Congress over in China. Every reason
Speaker 1: to opening new projections for growth as well as a
Speaker 1: new economic team for President g What are you looking for?
Speaker 1: You know? I think there are two things that people
Speaker 1: should keep in mind as they're thinking about China. One
Speaker 1: is the importance of predictability and stability. I think that
Speaker 1: the Chinese underestimate the extent to which previously respected members
Speaker 1: of the financial community can disappear without that having collateral
Speaker 1: impacts on confidence and on the flow of capital. And
Speaker 1: if there's a sense of the politicization of things financial
Speaker 1: to a growing degree, I think that's something they've got
Speaker 1: to be very careful of. The backdrop that's maybe an
Speaker 1: undertold story, which is that which is what's happening demographically.
Speaker 1: Nick Eberstat, who is the leading watcher of all things demographic,
Speaker 1: tells us in The Washington Post that China has half
Speaker 1: as many births last year as it did in twenty sixteen.
Speaker 1: That is a sea change with extraordinary speed. The downwards
Speaker 1: trend had heavily started before COVID, And in addition to
Speaker 1: what that means for the labor force and the age
Speaker 1: structure of the population down the road, when a population's
Speaker 1: deciding to have half as many children and have that
Speaker 1: revolution in six years, it says there's some very fundamental
Speaker 1: concerns about the future in that society. Larry, thank you
Speaker 1: so very vich. That's our very special contributor here in
Speaker 1: Wall Street Week he's Larry Summers of Harvard coming up.
Speaker 1: If baseball can pick up the face, why can't Congress?
Speaker 1: This is Wall Street Week on Bloomberg. Finally, one more thought.
Speaker 1: Haste makes waste, so Erasmus supposedly said back in the
Speaker 1: sixteenth century. But whatever passed for hasty five hundred years
Speaker 1: ago looks awfully slow today, what with apps giving us
Speaker 1: instantaneous trading. Investing should be as ubiquitous as shopping online.
Speaker 1: It should just be something that people do. Or those
Speaker 1: scratch off lottery tickets. We won't admit that we are
Speaker 1: all buying. I got you a cast multiplayer tickets, so
Speaker 1: gives a chance the multiplier winnings up to one hundred times.
Speaker 1: Even as fast as most things are today, some things
Speaker 1: could move a bit more quickly, like baseball games notorious
Speaker 1: for going along, though not as long as that twenty
Speaker 1: eighteen World Series game that went eighteen innings in over
Speaker 1: seven hours. That was a Greig baseball game. I don't
Speaker 1: know seven hours, whatever it was. You know, probably people
Speaker 1: back home are waking up right now to the end.
Speaker 1: It's probably one of the best, if not the best
Speaker 1: game I've been part of. The Red Sox coach Cora
Speaker 1: might have enjoyed that long game, but Major League Baseball
Speaker 1: has a better idea. This week we saw the first
Speaker 1: games played under new rules that are supposed to pick
Speaker 1: up the pace, including a pitch clock to keep the
Speaker 1: game moving. I think that the clock has been really
Speaker 1: successful in the minor leagues with a minimum of disruption
Speaker 1: in terms of the play of the game. Early reviews
Speaker 1: indicated it was shortening games by an average of thirty
Speaker 1: minutes a game, though also causing a bit of confusion
Speaker 1: when one of the first violations wasn't for the pitcher
Speaker 1: failing to deliver the ball to the plate on time,
Speaker 1: but for the batter not getting ready time called Conley
Speaker 1: took too much time. He's out. He wasn't. He didn't
Speaker 1: have his eyes on the pitcher by the eight second
Speaker 1: pitch mark on the pitch clock. It makes us wonder
Speaker 1: what else might benefit from a pitch clock or its equivalent.
Speaker 1: An obvious target are those Oscar acceptance speeches, which they've
Speaker 1: tried to keep shorter by turning up the music, leading
Speaker 1: some award winners to try a competition with the audible
Speaker 1: pitch clock. Who among us hasn't wished for a pitch
Speaker 1: clock to be put on those endless strategic planning meetings
Speaker 1: we all attend. But most of all, what we apparently
Speaker 1: need is a pitch clock on debt ceiling relief, one
Speaker 1: that would require Congress to get its act together before
Speaker 1: we're on the brink of default. Do it clean, do
Speaker 1: it without brinksmanship, do it without this risk of hostage
Speaker 1: taking where things could blow up. And while we're at it,
Speaker 1: maybe we could ban shifting in Congress the way they've
Speaker 1: done for the infield in baseball. But then again, where
Speaker 1: would that leave Joe Mansion? And so now we're back
Speaker 1: in the Mansionology game, wondering whether there's one more ending
Speaker 1: left to play that does it. For this episode of
Speaker 1: Wall Street Week, I'm David Weston. This is Bloomberg. See
Speaker 1: you next week. M