Speaker 1: This is Bloomberg Wall Street Week. We turn our attention
Speaker 1: to the markets this week. Us CPI members reinforcing concerns
Speaker 1: about inflation. The financial stories that chief are worth a
Speaker 1: really different reaction to mark. Its more indications of just
Speaker 1: how hot the U. S economy really is. Through the
Speaker 1: eyes of the most influential voices. Larry Summers, the former
Speaker 1: Treatory Secretary, Katherine Keating, CEO of v n Y Mallin
Speaker 1: Sam's l Sharmon and founder of Equatic Group Investments. In
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio,
Speaker 1: speaker Pelosi goes to Taiwan, Open goes small in response
Speaker 1: to President Biden's plea for more oil, and central banks
Speaker 1: big go big in the struggle to tame inflation. This
Speaker 1: is Bloomberg Wall Street Week. I'm David Weston. This week
Speaker 1: contributors Larry Summers, Oh Harvard on a higher rate and
Speaker 1: lower employment and Steve Ratner of Will and Advisors on
Speaker 1: what the Inflation Reduction Act could mean for Wall Street.
Speaker 1: So I think this is good for investors and that
Speaker 1: it brings against some stability to fiscal policy. Affer it
Speaker 1: was a week full of signaling as Speaker of the House,
Speaker 1: Nancy Pelosi went to Taiwan to send a signal to
Speaker 1: China about US commitments. Today, our delegation, bes Don very
Speaker 1: proud came to Taiwan to make unequippically clear we will
Speaker 1: not abandon our commitment to Taiwan, and we were proud
Speaker 1: of our enjoying friendships, while China sent back its own
Speaker 1: signal of displeasure with the visit. We will do what
Speaker 1: we say, and let me say that to these measures
Speaker 1: will be firm, strong and effective and open. Plus responded
Speaker 1: to President Biden's requests for more production by increasing its limits,
Speaker 1: but by a very modest one thousand barrels a day,
Speaker 1: which Almas Hochstein of the State Department said was nice
Speaker 1: but not enough. The importance of the President has is
Speaker 1: not discussing barrels with with any country. He has been
Speaker 1: very clear that he wants to see all prices come down,
Speaker 1: and he wants to see gasoline prices come down. But
Speaker 1: it wasn't just geopolitics this week. We also spent a
Speaker 1: fair amount of time getting signals from our central banks,
Speaker 1: whether it was the Bank of England on Thursday raising
Speaker 1: rates fifty basis point as they battled even higher inflation CPR.
Speaker 1: Inflation is not expected to peak at just over and
Speaker 1: key four of this year and to remain at very
Speaker 1: elevated levels, stout much of three or various FED members
Speaker 1: all week long trying to walk back Chapal's statement for
Speaker 1: the last week that we were close to the neutral rate.
Speaker 1: We are a long way away from achieving an economy
Speaker 1: that is back at two percent inflation, and that's where
Speaker 1: we need to get to. And then then came Friday,
Speaker 1: and boy did we get a signal with jobs numbers
Speaker 1: coming in twice what was expected for five DWY eight
Speaker 1: thousand people, and June was revised up as well, with
Speaker 1: wages increasing at an annual pace of five point two percent.
Speaker 1: Not surprisingly, this gave the bond market yet another abrupt turn,
Speaker 1: and the ten year yield, which had dropped to near
Speaker 1: two point five percent earlier in the week, shot up
Speaker 1: again to end the week at two point eight three.
Speaker 1: And while equities were volable, they weren't as bad as bonds,
Speaker 1: with the spending the week up just over one third
Speaker 1: of a percent, while the NASDAC moved back toward bold territory,
Speaker 1: at least for a time. Ending the week up over
Speaker 1: two percent. Here to tell what's sort through yet another
Speaker 1: challenging week for the economy and for the markets, we
Speaker 1: welcome to Mahajen. She is chief investment strategist at Edward
Speaker 1: Jones and senior Markets editor for Bloomberg John Author. So
Speaker 1: welcome both you to Walster. We're good to have you here.
Speaker 1: More start with you, and certainly those jobs numbers really
Speaker 1: got our attention on Friday. We're really dominant. What did
Speaker 1: they tell the markets? Yeah, look, David, it's hard to
Speaker 1: really say that we're in a recessionary environment with jobs
Speaker 1: going increasing over five hundred thousand, five hundred thousand this month. Now,
Speaker 1: keep in mind the U. S economy has started here
Speaker 1: from the position of strength. So while we could see
Speaker 1: weakening in the jobs figures, in economic in earnings data
Speaker 1: in the months ahead, we certainly are nowhere near what
Speaker 1: we'd call an economic downtour or recessionary environment. Now, now,
Speaker 1: what were the market implications of this move? While you
Speaker 1: touched on some of them, but one thing we saw
Speaker 1: right off the bat, the expectations of a seventy five
Speaker 1: basis point FED rate hike really skyrocketed between yesterday and today,
Speaker 1: yesterday's probability thirty. Today we have a sixty percent probability
Speaker 1: of a seventy bas point rate hike again by the
Speaker 1: Federal Reserve in September. The second thing we saw was,
Speaker 1: of course, those yields, so treasury yields both on the
Speaker 1: tenure and the two year. Now keep in mind the
Speaker 1: two year tends to be a proxy of what the
Speaker 1: Fed may do in the next couple of years or
Speaker 1: so both skyrocketed higher um, but we continue to have
Speaker 1: what we call an inverted yield curve. So historically this
Speaker 1: inverted yield curve does provide a leading indicator of recessionary environment,
Speaker 1: but there is some lag to at six to eighteen months.
Speaker 1: So net net, we saw a market that absorbed this
Speaker 1: higher jobs figure, absorbed a potentially more aggressive FED. But
Speaker 1: what we did see under the surface was that some
Speaker 1: of those growth parts of the market, longer duration, tech, speculative,
Speaker 1: higher valuation parts the market did underperform again today, and
Speaker 1: that might be a thing we see going forward as well. So, John, others,
Speaker 1: you follow central banks all around the world all the time,
Speaker 1: including the Federal Reserve. Did the Friday numbers make the
Speaker 1: Feds already difficult job harder or didn't make it easier.
Speaker 1: I think it made it easier. They are people. I
Speaker 1: don't think myself that Pwell tried to be that dubbish
Speaker 1: last week. I think he meant to give the impression
Speaker 1: that he was still very much committed to a more
Speaker 1: hawkish series of rateykes. He was open to the the
Speaker 1: claim that he was just not credible for a while.
Speaker 1: The number of people who are convinced that the Fed
Speaker 1: will have to turn turn around swiftly because the economy
Speaker 1: will be two week it has been strong, that's been whin.
Speaker 1: We've had this really remarkable fall back down in yields,
Speaker 1: and with numbers like that, it's very hard to criticize
Speaker 1: them for tightening rates this Obviously, the the employment picture
Speaker 1: could scarcely be stronger. Thank you so much for John
Speaker 1: Arthur's Bloomberg and Mono my hygen of Edward Jones. They're
Speaker 1: gonna be staying with us as we talk a look
Speaker 1: at what else may be driving the markets, particularly in geopolitics,
Speaker 1: and where those markets may be headed. That's coming up
Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. This week,
Speaker 1: China did some saber rattling versus the US. Where does
Speaker 1: China fit in your thought process in the future? Are
Speaker 1: there any significant investment implications with what's going on in China? Well,
Speaker 1: in my group, I think that China is the biggest
Speaker 1: potential growth vehicle for Boeing. UH. Two years ago, Boeing
Speaker 1: delivered about six of their total aircraft output went to China.
Speaker 1: It slipped down a little bit the last two years,
Speaker 1: but we anticipate, say, as we get back to the
Speaker 1: turn of the century, it could go sixteen. That was
Speaker 1: Michael Holland and Peter s Oritis on Wall Street. We've
Speaker 1: back in and once again this week China was in
Speaker 1: the news with Speaker Pelosi's controversial trip to Taiwan and
Speaker 1: China's rather strong reaction which certainly caused a geopolitical stir
Speaker 1: but didn't have any effects on the markets or potential
Speaker 1: effects on the global ecount of me. Here to help
Speaker 1: us answer those questions and more are Monoma Hygen of
Speaker 1: Edward Jones and Bloomberg's senior Markets editor John Author. So, John,
Speaker 1: you actually wrote a column earlier this week noting in
Speaker 1: the bond market reaction, apparently in part to Nancy Pelosi's visit.
Speaker 1: But do you think it has longer term ramifications. I
Speaker 1: I fear it has very much greater and longer term ramifications,
Speaker 1: and I'm a little concerned both how quickly the bond
Speaker 1: market got worried. We had a brief period of not
Speaker 1: much more than twenty four hours when there was really
Speaker 1: quite intense demand for treasuries born on the classic desire
Speaker 1: for a safe haven. Uh. And more or less as
Speaker 1: soon as Nancy Pelosi's plane and landed in Taiwan without
Speaker 1: the Chinese trying to shoot it down, I'm only slightly exaggerating,
Speaker 1: the market rebounded as though everything was everything was okay.
Speaker 1: And certainly the degree of saber rattling we're seeing a
Speaker 1: present from China is quite concerning. It's conceivable that this
Speaker 1: speaker's trippers in some way called China's bluff. I'm not
Speaker 1: a military strategist, but plenty of people are pointing out
Speaker 1: that um Taiwan is an island a hundred miles away
Speaker 1: from China. It will make um. Russia couldn't make a
Speaker 1: good job of invading Ukraine. China actively invading Taiwan is
Speaker 1: going to be orders of magnitude hardaer um. So whether
Speaker 1: arguably the risk of a total breakdown and return to
Speaker 1: conflict is is still quite slim um, but that there's
Speaker 1: no question. If this leads to a serious worsening in
Speaker 1: the US Chinese relations from where they are now, or
Speaker 1: which we must all hope not outright conflict, that's very serious.
Speaker 1: That's any an when you look at it, that's going
Speaker 1: to be bad. What about your perspective, And not just
Speaker 1: limited to China, We have an awful lot of geopolitics
Speaker 1: going on, as John just referred to briefly in various respects.
Speaker 1: Do you think geopolitics is affecting the markets right now
Speaker 1: or do they have enough to worry about, whether it's inflation,
Speaker 1: or whether it's supply chains, or whether it's the Fed. Yeah,
Speaker 1: you know, David, this year we we actually got an
Speaker 1: outsized amount of geopolitics impacting markets directly, of course, starting
Speaker 1: with that Russia Ukraine conflict, which not only kind of
Speaker 1: exacerbated the inflationary problems, but I've really put upward pressure
Speaker 1: on oil, energy, grain prices across the globe. And then
Speaker 1: of course we did shift some focus to China, but
Speaker 1: because of the lockdowns and the on and off lockdowns
Speaker 1: created tensions and supply chain created some demand, reopening and
Speaker 1: then shutting down once again. And then of course, with
Speaker 1: Nancy Pelosi's trip this week, we started to think about
Speaker 1: maybe another tail risk emerging in geopolitics, which is uh,
Speaker 1: the China Taiwan situation, which could potentially, at least in
Speaker 1: an investor's mind, could be a Russia Ukraine two point oh,
Speaker 1: and keep in mind the implications would be quite a
Speaker 1: bit more severe. Supply chains and inflationary pressures again could
Speaker 1: be exacerbated to more even more extreme level. So for now,
Speaker 1: in our view, we think it's a tail risk, but
Speaker 1: certainly one that's worth monitoring, and certainly one that we're watching.
Speaker 1: Could intensify in headlines if we see you know, another
Speaker 1: similar type of trip negotiation discussion UM, but hopefully for now,
Speaker 1: a tail risk that has a lower probability than UM
Speaker 1: certainly what we saw in Russia and Ukraine. So, to
Speaker 1: translated into investment advice, if you would here, does that
Speaker 1: mean if I'm an investor, for my portfolio, I should
Speaker 1: look at more defensive investments, whether it's equities or dead Yeah,
Speaker 1: you know, I think in the near term. So look,
Speaker 1: we've had a great run rebound off the lows of
Speaker 1: mid June across equity markets and even in fixed income
Speaker 1: so inequities, we've seen the SMP rally nearly underneath the surface,
Speaker 1: the growth parts of the market, technology, et cetera, up
Speaker 1: nearly twenty per set um. Similarly, fixed income rebounded offloads
Speaker 1: as well. Now going forward, if we start to see
Speaker 1: yields move higher, you know, we've had a really nice
Speaker 1: move downward and yields, but keep in mind we still
Speaker 1: have the FED in play. We still have quantitative tightening
Speaker 1: and play which could put upward pressure and yields. If
Speaker 1: that occurs, we could probably once again see growth start
Speaker 1: to underperform or lag again. So in our view, as
Speaker 1: we get through the next few months, as those earnings
Speaker 1: and economic data perhaps start to soften catch up with
Speaker 1: what we've seen in equity markets earlier this year, we
Speaker 1: would advise a more defensive tilt, value oriented defensive sectors
Speaker 1: and equities and fixed income UM. But if and when
Speaker 1: we do get inflation kind of in earnest moving lower
Speaker 1: um the FED in earnest able to pause, that's really
Speaker 1: when we see a pickup and risk assets, but perhaps
Speaker 1: a shift towards growth once again, and that's when you'd
Speaker 1: start layering in and barbelling growth. But for now, we'd
Speaker 1: say stay invested, stay perhaps somewhat defensive, and the months ahead.
Speaker 1: So so, John just overly simplistic here briefly, Does that
Speaker 1: mean I actually have more bonds than I thought I should?
Speaker 1: That is a very difficult one. I tend to be
Speaker 1: somewhat bearish on bonds. I think that there is a
Speaker 1: risk that the peak for the tenure rate isn't in yet. Uh,
Speaker 1: And that is a that is a means that you
Speaker 1: probably don't want to pile too much, too heavily into
Speaker 1: into bonds. My best guess, because all of us have
Speaker 1: to contend with the fact that that we don't really
Speaker 1: know that the lack of good precedents for what happens
Speaker 1: to the world in twenty means that there is also
Speaker 1: a lack of good precedents for what we should be
Speaker 1: expecting now. My best guess is that rates probably have
Speaker 1: to rise higher to choke off inflation. The rule of
Speaker 1: thumb is that inflation doesn't go down doesn't peak until
Speaker 1: the interest rate exceeds the inflation rate. That implies that
Speaker 1: we're going to be going I would say above for
Speaker 1: cents at least. Uh. That would mean that you would
Speaker 1: want to be getting into more defensive kinds of stocks
Speaker 1: that actually benefit from higher rates. Just Mona said, is
Speaker 1: basically value if you want it. In terms of hel risks,
Speaker 1: there's this machiavellian possibility of getting into chipmakers that aren't
Speaker 1: from Taiwan. If that happens there, then there you know,
Speaker 1: there is something a lot more scarce Steve Chips. Yeah, there,
Speaker 1: there you go. There's an interesting investment of chipmakers are
Speaker 1: not in Taiwan. Thank you so much, Tomonomo, Hydgen of
Speaker 1: Edward Jones and Bloomberg's own John Author's coming up. Democrats
Speaker 1: like their new reconciliation package. They call it the Inflation
Speaker 1: Reduction Act, and some economists won't. They like it too,
Speaker 1: But what would it mean for investors? We asked Steve
Speaker 1: Ratner of Will Advisors. That's next on Wall Street Week
Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. Well, this is really a very
Speaker 1: comprehensive and historic piece of legislation. Joe Manchin, he made
Speaker 1: a terrible deal. Leave it to Congress to surprise us
Speaker 1: take two of our biggest problems. Inflation. We have a
Speaker 1: serious inflation challenge which is hitting economies around the click
Speaker 1: globe and climate. As the climate crisis gets worse, extreme
Speaker 1: weather will pose a rapidly growing danger to a rapidly
Speaker 1: growing number of communities. Put them together in one big
Speaker 1: package and give it the attractive name of the Inflation
Speaker 1: Reduction Act. This bill will reduce inflationary pressures on economy.
Speaker 1: In the end, it all came down to getting West
Speaker 1: Virginia Senator Joe Mansion to sign on. This is fighting inflation.
Speaker 1: This is all about the the absolute horrible position that
Speaker 1: people are in now because of the inflation cost and
Speaker 1: senator mentions. Republican colleagues like Pat Toomey of Pennsylvania can't
Speaker 1: believe he went along. It's a very significant corporate tax increase,
Speaker 1: mostly focused on manufacturers, which is a bad idea. It's
Speaker 1: combined with price controls on prescription drugs. I've been asking
Speaker 1: myself what does Joe Mantion get out of this? But
Speaker 1: thus far, economists like Larry Summers think the Inflation Reduction
Speaker 1: Act maybe just what the doctor ordered. I was glad
Speaker 1: to see the bill. I think it's going to reduce
Speaker 1: the rate of inflation, because it's going to reduce deficits
Speaker 1: and demand over time, because it's going to use the
Speaker 1: federal government's power to negotiate lower prices for pharmaceuticals, and
Speaker 1: because it's going to increase uh supply of energy. So
Speaker 1: economists really like the Inflation Reduction Act. But what does
Speaker 1: it mean for investors? To get an answer to that,
Speaker 1: we're gonna turn to someone who invests a fair amount
Speaker 1: of capital. He is Stephen Ratner. He's chairman and CEO
Speaker 1: of Willard Advisors. They invest the personal and philanthropic assets
Speaker 1: of Michael R. Bloomberg, who, of course is our founder
Speaker 1: and majority of Sheherrelder See. Thanks so much for being
Speaker 1: back on Wall Street. League, of course, love to be here.
Speaker 1: So you wrote a terrific not ed piece for The
Speaker 1: New York Times this week and which you said, these
Speaker 1: are pretty strong words. I must say. Do you think
Speaker 1: that this may be one of the best packages that
Speaker 1: you can remember Congress giving birth to? So you think
Speaker 1: it's a good idea for the country. What does it
Speaker 1: mean for investors? I think for investors it's it's basically positive.
Speaker 1: I think we're making progress on a number of our
Speaker 1: really important problems, climate being first and foremost among them.
Speaker 1: That's good for the country. It's ultimately good for investors.
Speaker 1: I think prescription drugs may not pricing may not be
Speaker 1: absolutely great for every farmer company in America, but for
Speaker 1: the average in America, and it will eventually give them
Speaker 1: more spending power and the afford the ability to buy
Speaker 1: other things, and that helps the economy. The minimum corporate tax,
Speaker 1: it's just something we needed to do. I think the
Speaker 1: Trump t c j A was so widely unfair in
Speaker 1: terms of the amount of the business rollbacks. At this
Speaker 1: broad back, I would note that after the mansion proposal
Speaker 1: was very surprisingly announced, as you know, nobody thought this
Speaker 1: was coming. But after it was announced, the stock market
Speaker 1: in the next several days had several of its best
Speaker 1: days throughout the difficult period. So obviously investors were not
Speaker 1: put off by this thing, and indeed even encouraged by
Speaker 1: the idea of progress in Washington. One of the things
Speaker 1: Republicans I think done, for example Pat too Many from Pennsylvania,
Speaker 1: is to say that corporate minium attacks effectively would take
Speaker 1: some of the benefits away from the expensing of capital investment,
Speaker 1: will deter capital investment corporations ultimately hurt us in terms
Speaker 1: of investment in terms of growth. Well, the first part
Speaker 1: of that is right. We are taking some of the
Speaker 1: centers away. Although we're doing it, we're not really directly
Speaker 1: taking them away. We didn't roll back the depreciation provision.
Speaker 1: We simply put a minimum tax on all the corporate profits,
Speaker 1: so that in fact leaves most of the investment in
Speaker 1: sentiment place. But there are those those who felt that
Speaker 1: that was simply too much when it was as the
Speaker 1: t c J. Why I give companies right off upfront?
Speaker 1: Is that really going to change the investment that much?
Speaker 1: Is it really the way you want to run tax policy?
Speaker 1: And I don't think there's a lot of evidence that
Speaker 1: had much of an impact on investment, so I don't
Speaker 1: buy that. I think I think the problem of investment
Speaker 1: here is there are not enough profitable opportunities out there,
Speaker 1: not that companies are worried about their tax rate or
Speaker 1: they don't have the cash or something like that. One
Speaker 1: of the aspects of this, obviously is the inflation reduction, because,
Speaker 1: as I understand, of reducing the deficit, actually paying for
Speaker 1: it having more in revenue than the costs going out.
Speaker 1: What does that due to investors? Well, first, on the
Speaker 1: inflation thing, the Republicans have created I think a false
Speaker 1: psychotomy away they have made. They made the point or
Speaker 1: claimed this wouldn't really reduce inflation, and that's not untrue.
Speaker 1: It's impact on inflation in the first few years is
Speaker 1: relatively small. It gets a bit larger in the out years.
Speaker 1: But the most important thing is that it is a
Speaker 1: reversaile policy from the last several packages we've passed that
Speaker 1: have been highly inflationary. So I think this is good
Speaker 1: for investors and that it brings against some ability to
Speaker 1: fiscal policy in Washington for the first time in a
Speaker 1: long time, a fiscal policy package that actually does at
Speaker 1: least lean against inflation, even if the total impact isn't enormous.
Speaker 1: If this package, and again we're assuming for the moment
Speaker 1: that it gets enacted, if it in fact gets enacted,
Speaker 1: is the benefit to investors mainly sort of the rising
Speaker 1: tide notion. I mean, it's the macro that everything goes
Speaker 1: up until we're all better off, or are the specific
Speaker 1: sectors that actually would be more attractive to investors such
Speaker 1: as you mentioned climate and energy. Probably yes, the rising
Speaker 1: tide is certainly the overarching part of this. It's not
Speaker 1: a complicated package that doesn't have that many provisions in it,
Speaker 1: so it's really it really is climate and prescription drugs
Speaker 1: and then obviously some of the tax stuff. So in
Speaker 1: climate and I don't think anyone yet has really been
Speaker 1: a comb through all the little minutia. Thank you so
Speaker 1: much so Stephen Radder, he's the chairman and CEO of
Speaker 1: will It Advisors. My pleasure. Thank you. Coming up, we
Speaker 1: wrap up the week once again with our special contributor
Speaker 1: Larry Summers of Harvard. That's next on Wall Street Week
Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. This is Wall Street Week. I'm
Speaker 1: David western We end the week as we always do
Speaker 1: with our special contributor Larry Summers of Harvard. So, Larry,
Speaker 1: thank you so much for joining us. Let's address that
Speaker 1: big number that came out on Friday. Five thousand new
Speaker 1: jobs also were vision up in June, and by the way,
Speaker 1: wages up at a rate of five point two percent
Speaker 1: year a year. President Biden came out and said this
Speaker 1: shows that his economic policy is working. What did you
Speaker 1: make of those numbers? I think it's more mixed. I
Speaker 1: celebrate all the extra jobs, and that's surely a good
Speaker 1: thing to see. But my principal concern, as you know, David,
Speaker 1: has been that we've got an overheated economy, and then
Speaker 1: if you overheat the economy longer and longer, you get
Speaker 1: more and more inflation and bigger and bigger problems down
Speaker 1: the road. And everything in this number says to me, overheating,
Speaker 1: not yet under control, not our path to being under control.
Speaker 1: So I was actually not gratified by these numbers, but
Speaker 1: my concern was actually magnified. So what message does this
Speaker 1: send to the Fed? Do you think? Look, I don't
Speaker 1: think the Fed has the thread right now. As I
Speaker 1: said on this show last week, I think the idea
Speaker 1: that we're at the neutral rate, we're near the neutral rate,
Speaker 1: is not a defensible concept. And now when we're seeing
Speaker 1: wage inflation unambiguously after this number accelerating, after this number,
Speaker 1: after the e c I, after the Atlanta Fed, we have,
Speaker 1: by every reasonable measure of core inflation um inflation running
Speaker 1: somewhere plus or minus uh five. That is more than
Speaker 1: it was when Richard Nixon UH put price controls in
Speaker 1: place that is not acceptable by any dimension. And if
Speaker 1: we don't act on it, and act strongly on it,
Speaker 1: and that means raising real interest rates UH significantly, then
Speaker 1: we're just setting the stage for stagflation. Here's what I'm
Speaker 1: very worried about. Because we've seen the movie before. I'm worried,
Speaker 1: and I was interested to see that Paul Krogman, who
Speaker 1: has hardly agreed with me in general on these things,
Speaker 1: expressed exactly this concern UH. Today. I'm worried that we're
Speaker 1: gonna see some good news on non core inflation, on commodities,
Speaker 1: on what's happened in gasolene, for example, and we're gonna
Speaker 1: see a bit of economic slowing, and that's gonna lead
Speaker 1: the FED to think that things are under control, but
Speaker 1: in fact, underlying inflation, it's gonna be still completely unacceptable.
Speaker 1: Things are gonna go up and down in terms of
Speaker 1: the non core inflation. And if we've got a labor
Speaker 1: market that's red hot, that's only gonna mean constant or
Speaker 1: even accelerating inflation, and we're gonna have a situation like
Speaker 1: we did in the nineties seventies where we perpetuated inflation
Speaker 1: by not doing enough to contain it. The doctor tells
Speaker 1: you to take all your medicine. If you take only
Speaker 1: some of your medicine, you're gonna get the illness back.
Speaker 1: The bacteria are going to be resistant, and it is
Speaker 1: going to be worse. And that is the risk that
Speaker 1: I believe we are running in this situation on the
Speaker 1: path that the FETE is predicting and on the path
Speaker 1: that the market is expecting. Another big piece of news
Speaker 1: this week I came from that Inflation Reduction Act what
Speaker 1: you talked about last week on the program, saying you
Speaker 1: were glad to see the bill. It's been adjusted in
Speaker 1: some ways to a company, particularly Center Cinema from Arizona.
Speaker 1: But as of right now, it looks like it may
Speaker 1: well pass the Senate this weekend and maybe be enacted
Speaker 1: next week. So what do you make of the bill
Speaker 1: as it looks now? The package, as much as we
Speaker 1: understand it, this is really positive news. This is good
Speaker 1: news on healthcare, This is good news on the environment
Speaker 1: and energy. This is uh good news on tax reform.
Speaker 1: This is going to make our economy better while at
Speaker 1: the same time reducing the budget deficit and contributing, albeit
Speaker 1: in a small way, to a reduction in inflation. But
Speaker 1: it is a beginning, a very important beginning, not an end.
Speaker 1: We still have huge international tax loopholes that are driving
Speaker 1: businesses abroad. We still shockingly and this is something that
Speaker 1: really disappointed me, and I was sorry with the judgment
Speaker 1: that uh Senator Cinema came to. We still have the
Speaker 1: carried interests loophoul that is allowing many of the wealthiest
Speaker 1: Americans to pay taxes at a much lower rate than
Speaker 1: the people who clean uh their floors by getting capital
Speaker 1: gains on what is really earned uh income. And it
Speaker 1: is uh just wrong, and it makes me worry about
Speaker 1: our politics that it has lasted as long as it has.
Speaker 1: But look, that's for another day. For today, it's to
Speaker 1: celebrate that this is a good and important bill that
Speaker 1: is moving the country uh forward. And I think it's
Speaker 1: a tribute to the perseverance of many the perseverance in
Speaker 1: negotiating and negotiating and negotiating of Senator Schumer, of Senator
Speaker 1: may Mention, who many people have raised questions about, and
Speaker 1: who I don't agree about on everything, but who has
Speaker 1: stuck with some basic views he had about the importance
Speaker 1: of not adding to inflation for a year, and contrary
Speaker 1: to what many people said, was prepared to reach a
Speaker 1: deal if it was the right deal and stayed at
Speaker 1: the table at above all, I think it reflects the
Speaker 1: fact that President Biden laid out an agenda. Larry addressed
Speaker 1: one specific issue that's come up in the scoring. As
Speaker 1: it's called. The Joint Committee of Taxation, which is bipartisan,
Speaker 1: came out and said that in fact, a fair amount
Speaker 1: of the tax birden would fall and people will make
Speaker 1: four dollars and less. I understand what that is. It's saying,
Speaker 1: if the corporations are paying more tax, some of that
Speaker 1: is going to go to the employees and the regular consumers.
Speaker 1: What do you make of that argument? Is it true?
Speaker 1: I don't think it's very good economics. I think that
Speaker 1: the core for share owners and other capitalists pay the
Speaker 1: vast majority of corporate taxes in general, and I think
Speaker 1: that's even more true with respect to corporate subsidies and loopholes.
Speaker 1: And it's corporate subsidies and loopholes that we're going after
Speaker 1: as a consequence of UH this UH. I think the vast,
Speaker 1: vast majority of Americans are happy to see the tax
Speaker 1: rate on companies like Amazon go up, and they're not
Speaker 1: worried that that means an increase in their taxes. They'd
Speaker 1: much rather see us when we need tax revenue, as
Speaker 1: we do now, go after companies that year after year
Speaker 1: after year or reporting billions of dollars of profits to
Speaker 1: their shareholders and still not paying taxes at a rate
Speaker 1: of even fient. And that is all that. This bill
Speaker 1: goes after high profits to shareholders, no taxes. That's the
Speaker 1: right thing to do. Larry, thank you, Silvery's special contributor
Speaker 1: here Walster Larry Summers of Harvard. Finally, one more thought.
Speaker 1: All the glitters is not gold, but it might just
Speaker 1: be crypto. Remember those glory days of yesteryear, or at
Speaker 1: least the year before last, when money was cheap the
Speaker 1: Fed was still cutting rates. Today the FMC kept interest
Speaker 1: rates near zero, and asset values had nowhere to go
Speaker 1: but up. We're here record highs, the stock markets making
Speaker 1: grand new record highs. Equities can continue to move higher.
Speaker 1: One of the hottest asset classes of the last few
Speaker 1: years was crypto, with Bitcoin peaking near seventy thousand dollars
Speaker 1: just after Mr Powell announced his decision to cut rates again,
Speaker 1: making it just too good to resist For investors like
Speaker 1: Michael Sailor, we have to invest in something, and we've
Speaker 1: chosen as a business strategy to FoST focus on what
Speaker 1: we believe is the most exciting investment idea, because it's
Speaker 1: a digital commodity that's absolutely scarce and only getting technically
Speaker 1: better every year. Well, Mike NOVERGTS told our own Eric Shasker,
Speaker 1: it was as good as gold. It's a weapon in
Speaker 1: people's portfolio. It is a version of gold. We call
Speaker 1: it digital gold. And if retail investors needed any more
Speaker 1: reason to get on the crypto bandwagon, they got a
Speaker 1: not so subtle nudge from some of the biggest celebrities around,
Speaker 1: people like greatest of all time quarterback Tom Brady, I'm
Speaker 1: getting into cryptox and Reese Witherspoon tweeting quote crypto is
Speaker 1: here to stay. And Steph Curry telling us he's not
Speaker 1: an expert, but that's not stopping him from trading crypto anyway.
Speaker 1: This is Steph Curry, the world's leading expert on cryptocurrency.
Speaker 1: I'm not, but that was then and this is now.
Speaker 1: Inflation is up. We really need to restore price stability,
Speaker 1: get inflation back down to two. The FED is on
Speaker 1: a tightening spree. Well, the message is that there will
Speaker 1: be continuing rate increases, although I think starting at September meeting,
Speaker 1: as he said, it will be meeting by meeting, and
Speaker 1: crypto isn't looking like quite the sure thing it did
Speaker 1: to some, with bitcoin down over from its peak, leading
Speaker 1: people like Eddie Low of May Bank Singapore to lose faith.
Speaker 1: Crypto was actually touted as the alternative goal when he
Speaker 1: was when bitcoin was at sixty thou but I think
Speaker 1: now at twenty thousand or below that it is no
Speaker 1: longer really that valid. And that's even before we get
Speaker 1: two questions about what mining crypto is doing to our climate.
Speaker 1: Bitcoin community should see the biggest risk of bitcoin is
Speaker 1: climate is getting worse used every day and bitcoin is
Speaker 1: contributing to that. But never fear. Matt Damon is here,
Speaker 1: and we know that the characters he plays in the
Speaker 1: movies are nothing if not courageous. We can't stay there,
Speaker 1: not say, but Damon also styles himself as brave, at
Speaker 1: least according to this Crypto dot com. Add four simple
Speaker 1: words that have been whispered by the intrepid since the
Speaker 1: time of the Romans. Fortune favors the Brave. I suspect
Speaker 1: that there just maybe some crypto owners out there hoping
Speaker 1: that fortune catches up with Mr Damon's bravery. That does
Speaker 1: it for this episode of Wall Street Week. I'm David Weston.
Speaker 1: This is Bloomberg. See you next week.