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Speaker 1: This is Bloomberg Wall Street Week.

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Speaker 2: And we may not have an overall recession, We're having

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Speaker 2: a rolling recession to conge roll looks pretty strongly it

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Speaker 2: is when it comes to jobs.

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Speaker 1: The financial stories that shape our world.

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Speaker 2: Three major regional bank failures send shockwaves through the banking system.

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Speaker 2: We're all trying to figure out what to make of

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Speaker 2: generative AI.

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Speaker 1: Through the eyes of the most influential voices.

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Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America,

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Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of

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Speaker 2: the Columbia Business School.

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

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Speaker 2: Taking different paths. China slows down as the United States

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Speaker 2: heads toward a soft landing after all, and Morgan Stanley

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Speaker 2: fires on all cylinders while Goldman reboots. This is Bloomberg

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Speaker 2: Wall Street Week. I'm David Weston. This week contributors Larry

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Speaker 2: Summers of Harvard and Steve Rattner of will It Advisors

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Speaker 2: on what generative AI could mean for the economy and

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Speaker 2: for investors.

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Speaker 3: I have a suspicion that AI is coming for the

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Speaker 3: cognitive clash.

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Speaker 4: History is probably still on the side that we will

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Speaker 4: find our way through this in a positive way.

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Speaker 2: Oh And Thomas of Boston Properties on just how bad

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Speaker 2: it could get in commercial real estate.

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Speaker 5: The sentiment is worse than the reality that we're experiencing.

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Speaker 2: And Dennis Arfa of Artist Group International about what Taylor

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Speaker 2: Swift's billion dollar tour means for the business of music.

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Speaker 6: She's raised the bar, she said, a new bar.

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Speaker 1: Global.

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Speaker 2: Wall Street spent the week looking two different directions as

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Speaker 2: China economic numbers once again pointed to a disappointing year.

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Speaker 7: The private sector is a big part of the Chinese economy.

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Speaker 7: They're just not spending or investing like they used to, and.

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Speaker 2: Kris Delina Giorgieva of the IMF warned about what that

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Speaker 2: could mean for the rest of the world.

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Speaker 1: In a slowing down, of course, affects Setia, affects the worlds.

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Speaker 2: But at the same time that the numbers seem to

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Speaker 2: be getting worse in China, they continue to point towards

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Speaker 2: strength in the United States, leading Treasury Secretary of Yellen

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Speaker 2: to say a US recession may be off the table.

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Speaker 6: I don't expect a recession.

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Speaker 5: I think that we're on a good pass to bringing

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Speaker 5: inslation downs that.

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Speaker 2: Stronger than we saw at US economy helped most of

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Speaker 2: the big banks do better than we expected on their earnings,

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Speaker 2: led by Morgan Stanley, with CEO James Gorman chalking the

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Speaker 2: success up to three basic things.

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Speaker 8: The combination of really high conservative capital levels, pl vious.

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Speaker 2: Organic growth within a couple of cool businesses, and very

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Speaker 2: high diven end yeok. But things weren't quite as rosy

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Speaker 2: over at Gold and Sachs, with reduced profits in part

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Speaker 2: because of challenges in the commercial real estate business.

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Speaker 7: They have about twenty eight billion dollars in loans in

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Speaker 7: the commercial real estate space, so that's about fifteen percent

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Speaker 7: of their total lown portfolio.

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Speaker 2: And CEO David Solomon admitted that the bank is going

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Speaker 2: through something of a rebuilding period. We're making tough decisions

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Speaker 2: that are driving the strategic evolution of firm. Given both

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Speaker 2: these factors, that should come as no surprise that we're

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Speaker 2: going to a period of lower results through it all,

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Speaker 2: The S and P five hundred continued, it's surprising march upward,

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Speaker 2: adding another seven tens of an percent to end the

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Speaker 2: week at forty five thirty six, way above where the

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Speaker 2: Bloomberg elves had been, although in fairness, the Elves have

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Speaker 2: been taking their median estimate up now indicating a forty

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Speaker 2: three hundred SMP by the end of the year. The

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Speaker 2: NANTSAC didn't do quite well, giving up just under six

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Speaker 2: tens percent, while the yield and the tenure was just

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Speaker 2: about flat, hanging out at three point eight three, though

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Speaker 2: it did dip as low as three point seven three

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Speaker 2: on Wednesday and then flirted with three point eighty seven

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Speaker 2: late on Thursday. To take us through the week in

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Speaker 2: the markets and what investors should make of then we

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Speaker 2: welcome back Sarah Malak, she's Nouvene chief Invents one officer,

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Speaker 2: and Christina Hooper and Vesco chief Global Market Strategy. So

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Speaker 2: welcome to both of you. Thanks for being back with this.

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Speaker 2: Let me start with you. As for Christina, what did

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Speaker 2: you make of the week of the markets?

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Speaker 9: So I was happy to see a continued broadening in markets.

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Speaker 9: So we didn't see tech do well, but that's okay

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Speaker 9: because there was more participation from a variety of sectors.

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Speaker 9: So I think in general this is a fairly healthy environment,

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Speaker 9: but we should expect that it's not surprising if we

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Speaker 9: get some kind of pullback we've had a strong rally

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Speaker 9: this year, there should be or there should likely be,

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Speaker 9: a digestion period over the coming months, So a.

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Speaker 2: Broadening in the market. Do you see that as well, Sarah,

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Speaker 2: We actually at Bloomberg have a chart indicating the relationship

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Speaker 2: between small caps and the S and P five hundred,

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Speaker 2: suggesting is a bigger divergence that there been in twenty years.

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Speaker 2: Are you seeing a broadening of the markets or not.

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Speaker 10: Well, there's three reasons why the bulls beat the bears

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Speaker 10: again this week. One is broader participation in the indexes,

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Speaker 10: Second is inflation, which is continuing to moderate, and third,

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Speaker 10: of course is earning seas and so participation rate for

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Speaker 10: everything outside of those top ten technology socks has been

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Speaker 10: very strong since June. First, that's a healthy sign for

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Speaker 10: the markets. Moderating inflation with CPI and PPI coming in

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Speaker 10: under expectations is another positive. But we are still concerned

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Speaker 10: about wage inflation and core inflation, which remains above the

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Speaker 10: FEDCE target.

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Speaker 2: So sure, we're still early on in the earning scenes

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Speaker 2: so far, so we'll have to find out what actually happens.

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Speaker 2: But where are you in the S and P five

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Speaker 2: hundred by the end of the year.

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Speaker 10: We still think there's upside as long as employment markets

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Speaker 10: remain strong and the consumers keep spending, and you tend

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Speaker 10: to see that when people are comfortable with their jobs,

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Speaker 10: they will keep spending money. I think the market still

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Speaker 10: has upside if that's the case now. I do acknowledge

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Speaker 10: sixteen months of monetary tightening, including what we think is

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Speaker 10: one more rate hike next week until and then we're

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Speaker 10: done with rate hikes for a while. But all of

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Speaker 10: that putting together, as long as we don't see a

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Speaker 10: recession this year, which we doubt that we will, I

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Speaker 10: think the markets keeps climbing higher. Technology. I wouldn't count

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Speaker 10: that out either. It has a lot of tailwinds like

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Speaker 10: lower inflation, heels that are moderating, and artificial intelligence. I

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Speaker 10: think tech sucks also will continue to move higher once

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Speaker 10: they can.

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Speaker 2: Solve what eight David.

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Speaker 9: I don't disagree with Sarah. I think after that digestion

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Speaker 9: period that I talked about and the potential for a

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Speaker 9: modest pullback, what we're likely to see is some improvement

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Speaker 9: in the S and P five hundred by year end.

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Speaker 9: And I would argue that that is being fueled by

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Speaker 9: what I will call a bumpy landing. I don't think

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Speaker 9: it's a soft landing, but I don't think we go

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Speaker 9: into any kind of significant, broad based recession. We're also

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Speaker 9: going to see history help us. What we know is

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Speaker 9: that when the FED stops hiking rates, typically in the

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Speaker 9: one year period the two years after the end of

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Speaker 9: rate hikes, that is when we tend to see good performance,

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Speaker 9: strong returns, usually from the S and P five hundred.

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Speaker 9: I don't think this is going to be different this year,

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Speaker 9: especially since this time around, this kind of downturn is

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Speaker 9: a job full downturn, and so we see the consumer

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Speaker 9: continuing to spend, as Sarah mentioned, because they have jobs

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Speaker 9: and they can spend, and with inflation coming down that

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Speaker 9: also helps helps with discretionary spend.

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Speaker 2: If it is summer, it is time to catch some

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Speaker 2: live music, and this summer, the biggest live music that

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Speaker 2: there is out there comes from Taylor Swift, whose Eras

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Speaker 2: tour is expected to bring in a billion dollars. Welcome now,

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Speaker 2: Dennis Arfa. He's head of Global Music at IAG. He

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Speaker 2: has represented artists such as Billy Joel, Metallica, Rod Stewart,

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Speaker 2: and many others. Thanks so much, Dennis for being with

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Speaker 2: us appreciated. So we have a sense as fans, as

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Speaker 2: people who follow Tyror Swift that she's really big. But

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Speaker 2: for the music business, how big is she?

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Speaker 6: Well, what she has accomplished with her tour is unprecedented.

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Speaker 6: Never before have we ever seen an artist put multiple

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Speaker 6: stadium shows on sale in the same city and blow

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Speaker 6: them all out on the on sale, and that's never happened.

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Speaker 6: And so she's raised the bar, she said, a new bar,

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Speaker 6: because now that somebody can play whatever I believe it's

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Speaker 6: fifty one stadium shows and sell it out on the

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Speaker 6: on sale is incredible. It's what I'd call a beatlesque.

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Speaker 2: It's what we would.

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Speaker 6: Have expected the Beatles to do had they been touring

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Speaker 6: in prime time as today they would kind of we

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Speaker 6: would expect to have that same kind of result.

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Speaker 2: So we talked to investors. Here give us a sense

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Speaker 2: of the economics of this. You refer to the Beatles.

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Speaker 2: My understanding for reading about it is the economics were

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Speaker 2: different back then, that a lot of the economics were

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Speaker 2: driven by the records, the old LPs that we bought.

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Speaker 2: Not so much anymore when we talk about perhaps a

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Speaker 2: billion dollars in this tour, where does that money come from?

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Speaker 2: How does it break down?

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Speaker 6: Well, it breaks down from ticket sales and then the

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Speaker 6: additional moneies that come from ticket sales, platinum tickets, VIP tickets,

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Speaker 6: merchandising as a big gradient sponsorship, you know, so those

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Speaker 6: are kind of the things that bring up the dollar amounts.

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Speaker 6: But it's ticket sales is the base.

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Speaker 2: We're just recorded music fit in anymore.

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Speaker 6: Well, you know, today you can have a record that's

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Speaker 6: number one and be one hundred thousand or fifty thousand units.

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Speaker 6: Twenty five years ago, you know, many artists were selling

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Speaker 6: a million, million albums, million records, you know, on release

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Speaker 6: or you know, it was it was more common. So

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Speaker 6: the album sales are diluted and the record sales are

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Speaker 6: diluted in comparison to what it used to be. I mean,

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Speaker 6: there's artists, whether it's the Eagles or Billy Joel and

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Speaker 6: twenty four million, twenty seven million, Michael Jackson the Thriller,

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Speaker 6: those numbers really don't exist, and if they do, they're

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Speaker 6: really aberrations. The Adele success to Taylor Swift's success, those

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Speaker 6: are our that really wasn't the case twenty five years ago.

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Speaker 6: I have a lot of gold records and platinum records

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Speaker 6: on my wall, and some of those artists you don't

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Speaker 6: even know who they are. And today you know, if

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Speaker 6: you did twenty five thousand in the week, you could

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Speaker 6: end up being in the top ten.

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Speaker 2: Okay, Dennis, thank you so much for being on Wall

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Speaker 2: Street Week. That is Dennis Arfa. He's the founder of AGI.

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Speaker 2: Coming up everywhere return we hear about problems with commercial

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Speaker 2: real estate. We'll talk with the head of the largest

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Speaker 2: public and traded developer of high end office space in

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Speaker 2: the country, Owen Thomas of BXP.

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Speaker 5: Remote work is like a benefit, it's like compensation. You

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Speaker 5: have to meet the market.

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Speaker 2: That's next on Wall Street Week on Bloomberg. This is

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Speaker 2: Wall Street Week. I'm David Weston. This week brought another

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Speaker 2: round of bad news and commercial real estate from Goldwyn

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Speaker 2: Sacks sing a four hundred and eighty five million dollars

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Speaker 2: it from the property market to news. Have yet another

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Speaker 2: big mortgage default, this one for two hundred and twelve

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Speaker 2: million dollars on an Atlanta office tower owned by Star

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Speaker 2: would Capital. To put it all in a broader perspective,

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Speaker 2: the good and maybe even the not so good. Welcome

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Speaker 2: back now, Owen Thomas. He's chairman and CEO of XP

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Speaker 2: that is the largest publicly traded developer of high end

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Speaker 2: office space in the country. Own always great to have

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Speaker 2: you with us, as I say, and you know, there's

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Speaker 2: so much bad news in commercial real estate. Put in

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Speaker 2: a larger perspective exactly where we are at this way?

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Speaker 2: What are you seeing in your business particular in terms

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Speaker 2: of occupancy rates? Are people really coming to the office yet?

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Speaker 5: Yeah, Well, David's nice to be with you. I would

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Speaker 5: say in summary that the sentiment is worse than the

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Speaker 5: reality that we're experiencing. So let's talk a little bit

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Speaker 5: about usage of buildings. There's a steady stream of corporate

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Speaker 5: announcements going on right now. If companies returning to the

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Speaker 5: office like Amazon did on May first, companies that were

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Speaker 5: in the office three days a week moving to four days,

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Speaker 5: even some companies saying we're going to evaluate all new

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Speaker 5: employees based on your office attendance that you're in. So

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Speaker 5: you're seeing more and more of this. I think CEOs

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Speaker 5: all want more in person work. They recognize that remote

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Speaker 5: work is like a benefit, it's like compensation you have

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Speaker 5: to meet the market, but it comes with a real

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Speaker 5: cost of productivity and culture.

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Speaker 2: Are you seeing your buildings though, and actually people showing

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Speaker 2: up because we have things like castle card reporting, it's

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Speaker 2: still like fifty percent in Manhattan. Are you seeing it

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Speaker 2: move up?

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Speaker 5: So the building we don't use castle systems and a

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Speaker 5: lot of the landlords that we compete with don't, So

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Speaker 5: I know the industry uses their data, So I'll tell

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Speaker 5: you what we're experiencing. So in New York and Boston, Tuesday, Wednesday,

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Speaker 5: Thursday is more or less at pre pandemic attendance. I

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Speaker 5: think Monday's about sixty percent of that peak and Friday's

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Speaker 5: probably less than thirty percent of that peak. The West

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Speaker 5: coast markets where we operate, Seattle, San Francisco, and LA

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Speaker 5: they're probably fifty percent of all those known or so

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Speaker 5: well behind.

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Speaker 2: What about repurposing some of these others buildings because we've

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Speaker 2: heard a lot about that and whether we're residential or

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Speaker 2: I think you've been big in life sciences? Actually haven't

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Speaker 2: you at VXB?

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Speaker 1: Yes?

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Speaker 2: How's that going? Is there too much of a move

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Speaker 2: into life sciences? Are you seeing a glut?

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Speaker 5: Yeah? Well, let me talk about the repurposing. We definitely

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Speaker 5: have repurposed several office buildings successfully into life science, and

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Speaker 5: we've done it very carefully in some of the premiere

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Speaker 5: life science markets in the country. But on the residential

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Speaker 5: conversions which you asked about, this is something that theoretically

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Speaker 5: makes a tremendous amount of sense. We need more housing

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Speaker 5: in our cities. We need less obsolescent office buildings, we

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Speaker 5: need more real estate tax revenues, we need more activity

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Speaker 5: on the street. And when you repurpose an asset, the

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Speaker 5: carbon footprint of doing that is much lower than demolishing

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Speaker 5: and reconstructing. However, there are obstacles to doing all these things.

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Speaker 5: Regulatory zoning requirements, residential zoning versus commercial zoning, physical requirements.

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Speaker 5: Building has to be empty, the depth of the buildings.

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Speaker 5: Residential needs more light and air than office, and many

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Speaker 5: office buildings have deep floor plates. And then financial you know,

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Speaker 5: to do a successful conversion, the office building has to

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Speaker 5: be contributed at something pretty close to land value. So

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Speaker 5: there it makes a tremendous amount of sense. There are

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Speaker 5: a lot of obstacles, but I would think about it

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Speaker 5: this way, David. There are four hundred million square feet

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Speaker 5: of office space in New York. If one to two

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Speaker 5: percent was converted, that's four to eight million square feet

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Speaker 5: of new housing, and it's also probably you know, five

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Speaker 5: to ten percent of the vacant office building, so not

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Speaker 5: a lot, as a percent has to happen for it

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Speaker 5: to be meaningful.

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Speaker 2: You raised the geography question because you particularly are obviously

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Speaker 2: in Boston, but also New York, San Francisco. Some of

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Speaker 2: the cities have been hit a little harder when it

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Speaker 2: comes to residential I'm sorry, office space. Are you thinking

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Speaker 2: about going to other places? We hear a lot about Austin,

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Speaker 2: we hear about Miami, we hear about Florida. Are you

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Speaker 2: thinking about expanding into the geographic areas well.

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Speaker 5: We're very happy with our footprint. We believe in having

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Speaker 5: real estate where they are barriers to new supply and

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Speaker 5: also knowledge clusters of workers, and we think our cities

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Speaker 5: have those. There's clearly been some migration to the Sun Belt,

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Speaker 5: and there's been strong growth in the Sun Belt markets,

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Speaker 5: but there's also been a lot of development. If you

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Speaker 5: look at the vacancy rates in many of the Sun

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Speaker 5: Belt cities, they've gone up very significantly over the last

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Speaker 5: year to eighteen months, and in many cases are above

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Speaker 5: the vacancy rates in the cities where we operate when.

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Speaker 2: You're in a particular position, which is a publicly traded company,

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Speaker 2: the largest publicly traded company when it comes to high

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Speaker 2: end office buildings, which means you have a lot of resources,

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Speaker 2: access to a lot of resources, and you have to

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Speaker 2: there's a marked to market every single day in a

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Speaker 2: sense that's affected your stock like every else's. As you

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Speaker 2: look at it right now, do you see opportunities? I mean,

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Speaker 2: are there bargains out there, because in fact there are

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Speaker 2: problems getting financing, the prices are coming down. I think

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Speaker 2: there are.

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Speaker 5: We So for example, we launched at the end of

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Speaker 5: last year a billion and a half dollars of life

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Speaker 5: science development in East Cambridge. We're building a six hundred

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Speaker 5: plus thousand square foot lab building for AstraZeneca at attractive

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Speaker 5: yields to our shareholders. We're also converting another significant office

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Speaker 5: building in East Cambridge to life science for the Broad Institute,

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Speaker 5: also at attractive yields. So those are the types of

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Speaker 5: things that we've been investing in. But I think as

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Speaker 5: this market evolves and there's more pricing, discovery and a reset,

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Speaker 5: I do think it will create great opportunities for a

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Speaker 5: well capitalized player like BXP.

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Speaker 2: Thank you so much, Always a treat to have you

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Speaker 2: with us. That's Owen Thomas of b XP. To everything

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Speaker 2: there is a season, but sometimes that season can last

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Speaker 2: pretty long. It's the summer of everything old being new again.

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Speaker 2: We're a year away from the true start to the

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Speaker 2: next presidential race, and a lot of the focus is

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Speaker 2: already on the age of the two front runners, as

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Speaker 2: former President Trump, a spry seventy seven year old, looks

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Speaker 2: to reclaim the White House from the more senior President Biden,

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Speaker 2: clocking in at a mature eighty. But then again, Senate

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Speaker 2: Minority Leader Mitch McConnell beats them both at eighty one,

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Speaker 2: and some of those after mister Biden's job aren't too

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Speaker 2: shy about showing off how useful and vigorous they are.

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Speaker 2: From Robert Kennedy Junior doing bear chested pushups for the

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Speaker 2: camera at age sixty nine, it's a good boy to

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Speaker 2: the baby in the group. Forty five year old Miami

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Speaker 2: mayor Francis Suarez demonstrating he can run all over town

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Speaker 2: in a tight T shirt and shorts. I'm going to

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Speaker 2: run for present. It's not just Washington where the mature

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Speaker 2: are showing their staying power. Bob Iger retired as CEO

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Speaker 2: of Disney at age seventy after fifteen years running the company,

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Speaker 2: only to come back for return performance with a contract

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Speaker 2: that now will keep him in charge until he's at

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Speaker 2: least seventy five. This isn't really a huge surprise, right

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Speaker 2: that his contract has been renewed at this point. It's

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Speaker 2: incredibly enticing, I think, and very tempting to keep him

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Speaker 2: on board. But Bob is just the right age to

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Speaker 2: deal with. Some of the leading men driving the box

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Speaker 2: office this summer. From Tom Cruise at sixty starring in

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Speaker 2: yet another mission Impossible, I don't accept that. To Arnold

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Speaker 2: Schwarzenegger at seventy five saving the world in Foo Bar

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Speaker 2: I'm retired. To Harrison Ford returning as Indiana Jones at

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Speaker 2: age eighty. I've been looking for this all my life.

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Speaker 2: But wait, there's more. The star of what may well

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Speaker 2: be the hit movie of the summer tops them all

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Speaker 2: at the age of eighty three. Yes, eighty three years old,

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Speaker 2: and she is a leading lady. I'm talking, of course,

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Speaker 2: about the one and only Barbie. You might say, no,

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Speaker 2: Barbie is only nineteen. Well, that is the age she

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Speaker 2: was when she first appeared.

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Speaker 10: My Barbie Dull is really.

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Speaker 2: But that was back in nineteen fifty nine. Since then,

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Speaker 2: she's come back again and again, including for the Millennium,

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Speaker 2: when she made a guest appearance on Wall Street Week

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Speaker 2: with Lewis Rockeiser for Christmas back in two thousand.

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Speaker 8: Barbie is stating another of her periodic comebacks, Betell's Millennium

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Speaker 8: Princess version as a hot seller this season at forty dollars.

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Speaker 2: And now Barbie is back bigger than ever in her

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Speaker 2: own blockbuster movie as a thoroughly mature eighty three year old,

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Speaker 2: something that even Barbie herself may not want to think

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Speaker 2: too hard about. The best day ever. It is the

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Speaker 2: best day ever.

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Speaker 9: So is yesterday, and so is tomorrow. In every daypnurship.

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Speaker 5: Forever, you don't ever think about nine.

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Speaker 2: Here's to eternal use coming up. We're told the generative

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Speaker 2: AI will change all of our lives in ways we

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Speaker 2: just can't imagine. We put together a special Wall Street

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Speaker 2: Week roundtable of Larry Summers and Steve Radner to give

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Speaker 2: us an early read and the possible effects of this

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Speaker 2: revolution on macroeconomics and on investors.

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Speaker 3: Here's a substantial chance the AI is going to be

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Speaker 3: much more of a threat to IQ than it is

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Speaker 3: to EQ.

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Speaker 4: It is the cognitive classes, as you call them, who

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Speaker 4: are most at risk.

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Speaker 2: This is Wall Street Week on Bloomberg.

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

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Speaker 1: Bloomberg Radio.

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Speaker 2: Artificial intelligence. We may not yet know exactly what it is,

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Speaker 2: even though the technology isn't all that new, but everyone

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Speaker 2: agrees it's going to be huge.

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Speaker 6: We don't know yet all of the different applications that

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Speaker 6: are going to come up.

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Speaker 2: Well, you're seeing that just.

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Speaker 6: Swipping the past six months is a revolution.

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Speaker 2: With Julie's Sweet of accenture saying just about all executives

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Speaker 2: believe it will change their world.

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Speaker 9: In fact, ninety seven percent of executives and a recent

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Speaker 9: survey that we did have said they believe that Jenna

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Speaker 9: I will transform their industry and their company, leading.

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Speaker 2: Those funding startups to shift their investments. With Pitchbook reporting

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Speaker 2: VC's last quarter spend less on crypto and digital assets

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Speaker 2: than at any time since twenty twenty, while investing more

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Speaker 2: in A than crypto even at its peak. Hopes are

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Speaker 2: high the AI will make our lives better.

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Speaker 10: We'll also see AI coming more and more to the forefront,

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Speaker 10: both to help folks say productive and from a security perspective.

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Speaker 2: But as with all powerful tools, there are also risks involved.

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Speaker 2: With the head of Google's Deep Mind calling for more

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Speaker 2: work on guardrails.

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Speaker 10: The number one thing that needs to be done right

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Speaker 10: now is to put more investment into AI safety research

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Speaker 10: and understanding what these systems can do and what God

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Speaker 10: wills that we therefore should have.

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Speaker 2: And Elon Musk urging the government to step up to

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Speaker 2: the challenge. I'm in favor of AI regulation because.

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Speaker 5: I think advanced AI is a risk to the public.

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Speaker 2: But chat GPT pioneer Sam Altman warns about the difficulties.

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Speaker 2: Global regulation is hard.

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Speaker 8: You know, you don't want to overdo it for sure,

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Speaker 8: but I think global regulation can help make.

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Speaker 2: It safe, leaving us all with some difficult questions about

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Speaker 2: how to get the best of what artificial intelligence promises

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Speaker 2: and yet manage the risks. To help us begin to

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Speaker 2: explore some of the questions we have about AI, welcome

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Speaker 2: now our special contributor Larry Summers of Harvard and Steve Ratner,

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Speaker 2: Chairman and CEO of will It Advisors, which manages the

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Speaker 2: personal and philanthropic assets of our founder and majority shareholder

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Speaker 2: Michael Bloomberg. So welcome to back to both of you. Steve,

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Speaker 2: let me start with you, because you wrote a piece

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Speaker 2: in The New York Times that a lot of us

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Speaker 2: thought was quite thoughtful about this, making the point of

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Speaker 2: part this is not a new thing. You like the

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Speaker 2: seventeenth century their questions about looms give us your sense

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Speaker 2: about AI the opportunity to offer us and some of

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Speaker 2: the resistance to it.

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Speaker 4: As I wrote in the piece, I think that that

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Speaker 4: economic growth and prosperity and better living standards for everybody

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Speaker 4: in the world, no matter who they are, where they are,

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Speaker 4: depends on increasing productivity efficiency at work, and in my

440
00:22:50,200 --> 00:22:53,840
Speaker 4: mind AI it may be a quantum leap. We don't

441
00:22:53,840 --> 00:22:56,160
Speaker 4: know that yet, but as part of a continuum going

442
00:22:56,200 --> 00:22:59,919
Speaker 4: back to even the thirteenth century. I wrote about all

443
00:23:00,200 --> 00:23:04,359
Speaker 4: that piece briefly of improvements and in productivity and getting

444
00:23:04,359 --> 00:23:06,399
Speaker 4: those into the hands of the workers so that people

445
00:23:06,400 --> 00:23:09,040
Speaker 4: can have a higher standard of living. And as part

446
00:23:09,040 --> 00:23:12,360
Speaker 4: of that you have what Trumpeter famously called creative destruction.

447
00:23:12,720 --> 00:23:14,840
Speaker 4: You have some jobs that are lost and other jobs

448
00:23:14,880 --> 00:23:17,320
Speaker 4: that are gained. We had four hundred and fifty thousand

449
00:23:17,359 --> 00:23:20,080
Speaker 4: telephone operators in this country in the nineteen fifties. You

450
00:23:20,160 --> 00:23:22,720
Speaker 4: tell me the last time you talked to a telephone operator,

451
00:23:22,960 --> 00:23:25,040
Speaker 4: we had close to two million people. I assume most

452
00:23:25,080 --> 00:23:27,639
Speaker 4: of them women classified as typists. That's not even a

453
00:23:27,720 --> 00:23:31,240
Speaker 4: job category anymore in the BLS. This is all things

454
00:23:31,240 --> 00:23:35,480
Speaker 4: that have happened. And alternatively, we've developed millions of jobs

455
00:23:35,520 --> 00:23:38,760
Speaker 4: in technology industries and finance and other sectors that have

456
00:23:38,800 --> 00:23:40,800
Speaker 4: actually been helped by the development of technology.

457
00:23:41,359 --> 00:23:44,240
Speaker 2: So Steve, of course is an investor. Larry, you were

458
00:23:44,280 --> 00:23:47,400
Speaker 2: a macroeconomist. As a macroeconomist, is Steve on the right

459
00:23:47,440 --> 00:23:50,640
Speaker 2: trail about restoring the growth of productivity which has dropped off?

460
00:23:50,640 --> 00:23:52,800
Speaker 2: As Steve pointed out his piece, it really has dropped

461
00:23:52,800 --> 00:23:53,640
Speaker 2: off significantly.

462
00:23:54,080 --> 00:23:59,680
Speaker 3: Steve's right to be four technological progress and to recognize

463
00:24:00,240 --> 00:24:06,440
Speaker 3: overall it's through change and evolution mediated through markeats that

464
00:24:06,600 --> 00:24:09,920
Speaker 3: life has gotten so much better. And it's all right,

465
00:24:10,840 --> 00:24:16,120
Speaker 3: just one thing. In the nineteen sixties, ninety six percent

466
00:24:16,200 --> 00:24:21,640
Speaker 3: of American American men twenty five to fifty four were working,

467
00:24:22,359 --> 00:24:27,520
Speaker 3: and only four percent were not. Today it's more like

468
00:24:27,640 --> 00:24:28,680
Speaker 3: fourteen percent.

469
00:24:29,600 --> 00:24:31,000
Speaker 2: Are there things we should be doing right now that

470
00:24:31,040 --> 00:24:33,639
Speaker 2: we fail to do with automation and with globalization, to

471
00:24:33,760 --> 00:24:38,040
Speaker 2: think about those distributional effects potentially of AI to make

472
00:24:38,080 --> 00:24:41,160
Speaker 2: sure that we bring more people along with the progress.

473
00:24:41,359 --> 00:24:44,359
Speaker 4: Absolutely, I don't think actually, Larry and I really disagree.

474
00:24:44,480 --> 00:24:47,600
Speaker 4: I understand the problem he's talking about. It actually relates

475
00:24:47,640 --> 00:24:51,720
Speaker 4: to automation a lot, and also to trade. And where

476
00:24:51,800 --> 00:24:54,159
Speaker 4: I think, frankly, the economists Larry may jump down my

477
00:24:54,200 --> 00:24:56,159
Speaker 4: throat for this part. I think the economists got it

478
00:24:56,200 --> 00:24:58,439
Speaker 4: wrong on trade, which is similar in a lot of

479
00:24:58,480 --> 00:25:01,600
Speaker 4: respects to automation or other technological improvements in terms of

480
00:25:01,640 --> 00:25:05,000
Speaker 4: its impact. Is that trade had huge macroeconomic benefits for

481
00:25:05,000 --> 00:25:09,000
Speaker 4: the country. We missed the macroeconomic impacts those workers in

482
00:25:09,040 --> 00:25:11,760
Speaker 4: Flint or Detroit or in Ohio. Some of their jobs

483
00:25:11,800 --> 00:25:13,760
Speaker 4: were and I actually just read something the other day,

484
00:25:13,800 --> 00:25:16,680
Speaker 4: you know rough Justice. Maybe half their jobs were lost

485
00:25:16,680 --> 00:25:19,399
Speaker 4: to automation, the other half were lost to trade. And

486
00:25:19,480 --> 00:25:22,720
Speaker 4: we had this little trade adjustment assistance program which basically

487
00:25:22,760 --> 00:25:25,160
Speaker 4: did nothing. And we have not really done a great

488
00:25:25,200 --> 00:25:28,000
Speaker 4: job as a society both in getting the benefits of

489
00:25:28,080 --> 00:25:31,840
Speaker 4: technology into the hands of everybody. There's been this lack

490
00:25:31,880 --> 00:25:34,480
Speaker 4: of wage growth commensurate with the productivity growth over a

491
00:25:34,600 --> 00:25:38,000
Speaker 4: fairly long period of time now, as well as individuals

492
00:25:38,000 --> 00:25:39,639
Speaker 4: and finding them things to do where they can be

493
00:25:39,680 --> 00:25:40,920
Speaker 4: more productive and happier.

494
00:25:41,480 --> 00:25:44,159
Speaker 2: Lurie, what about it? Did the economists, and yes, the

495
00:25:44,160 --> 00:25:46,720
Speaker 2: policymaker in Washington, it sort of let us all down

496
00:25:46,960 --> 00:25:49,040
Speaker 2: with respect to both automation and trade.

497
00:25:49,680 --> 00:25:54,560
Speaker 3: We should have done more to cushion the various changes

498
00:25:54,640 --> 00:25:58,200
Speaker 3: associated with trade. I agree with that, I'm not sure

499
00:25:58,200 --> 00:26:02,720
Speaker 3: I agree with Steve's quantification, and I think that a

500
00:26:02,840 --> 00:26:07,040
Speaker 3: full calculus on trade has to recognize a large number

501
00:26:07,040 --> 00:26:11,280
Speaker 3: of benefits in terms of jobs created and in terms

502
00:26:11,320 --> 00:26:14,600
Speaker 3: of real wages enhanced. But that brings me to the

503
00:26:14,640 --> 00:26:19,520
Speaker 3: other point I wanted to make about AI. And I

504
00:26:19,560 --> 00:26:23,600
Speaker 3: don't know for sure about this, but if my suspicion

505
00:26:23,760 --> 00:26:29,040
Speaker 3: is right, it's very big. Most of the technological changes

506
00:26:29,080 --> 00:26:36,760
Speaker 3: we've had before came for working people doing relatively routine things.

507
00:26:37,560 --> 00:26:42,160
Speaker 3: They were automatic ways of picking cotton. It came from

508
00:26:42,640 --> 00:26:50,280
Speaker 3: agricultural workers. They were things that replaced typists or telephone operators.

509
00:26:50,520 --> 00:26:56,199
Speaker 3: As Steve mentioned, I have a suspicion that AI is

510
00:26:56,280 --> 00:26:59,960
Speaker 3: coming for the cognitive class. And part of the reason

511
00:27:00,040 --> 00:27:05,960
Speaker 3: and you're seeing such hysteria now, is that it's the

512
00:27:06,080 --> 00:27:11,760
Speaker 3: people who write articles and their friends, the people like

513
00:27:12,160 --> 00:27:17,000
Speaker 3: the three of us, who are more at risk from

514
00:27:17,240 --> 00:27:21,520
Speaker 3: AI competition than has been the case with most of

515
00:27:21,560 --> 00:27:27,879
Speaker 3: the technological innovations in the past. I would say that

516
00:27:28,480 --> 00:27:32,720
Speaker 3: there's a substantial chance the AI is going to be

517
00:27:33,160 --> 00:27:36,760
Speaker 3: much more of a threat to IQ than it is

518
00:27:36,840 --> 00:27:37,359
Speaker 3: to EQ.

519
00:27:38,440 --> 00:27:43,800
Speaker 11: It will be a very long time before AI will

520
00:27:43,960 --> 00:27:48,680
Speaker 11: replace many of the kinds of direct physical work. Think

521
00:27:48,680 --> 00:27:52,760
Speaker 11: of working in a garden, for example.

522
00:27:53,240 --> 00:27:59,000
Speaker 3: So I have a suspicion that the distributional consequences of

523
00:27:59,119 --> 00:28:04,119
Speaker 3: AI for the bosses versus the boss may be very

524
00:28:04,119 --> 00:28:08,200
Speaker 3: different than the distributional consequences of many of the other

525
00:28:08,720 --> 00:28:13,879
Speaker 3: technological revolutions, and that affects how bosses are going to

526
00:28:13,920 --> 00:28:17,399
Speaker 3: think about it in profound ways. They're going to be

527
00:28:17,480 --> 00:28:20,960
Speaker 3: much more scared, and on the other side, may be

528
00:28:21,000 --> 00:28:25,000
Speaker 3: more benign from the point of view of some of

529
00:28:25,040 --> 00:28:27,320
Speaker 3: those who've been traditionally left behind.

530
00:28:28,280 --> 00:28:30,199
Speaker 2: So Larry, I agree. I agree with that.

531
00:28:30,760 --> 00:28:33,359
Speaker 4: I think it is the cognitive classes, as you call them,

532
00:28:33,400 --> 00:28:35,360
Speaker 4: who are most at risk. I might make a dicis

533
00:28:35,400 --> 00:28:37,080
Speaker 4: I'm not sure. I would think about it as bosses

534
00:28:37,119 --> 00:28:39,320
Speaker 4: and boss and I'll use it but I will use

535
00:28:39,320 --> 00:28:41,920
Speaker 4: this historical analogy to give us a little bit of hope.

536
00:28:42,040 --> 00:28:45,320
Speaker 4: When I started on Wall Street as a young investment banker,

537
00:28:45,440 --> 00:28:47,640
Speaker 4: I had nothing. I had an early HB twelve C

538
00:28:47,840 --> 00:28:52,000
Speaker 4: calculator in my hand. We had no EXL we had

539
00:28:52,040 --> 00:28:54,200
Speaker 4: no computers to speak of, we had know nothing. All

540
00:28:54,200 --> 00:28:56,600
Speaker 4: of our spreadsheets were done by hand. They took a

541
00:28:56,640 --> 00:28:58,840
Speaker 4: really long time. They had to then be typed up.

542
00:28:58,880 --> 00:29:01,040
Speaker 4: We'll put the type of societ and then if I

543
00:29:01,080 --> 00:29:02,640
Speaker 4: wanted to make a change, I had to start all

544
00:29:02,640 --> 00:29:04,720
Speaker 4: over again. And now that can all be done with

545
00:29:04,800 --> 00:29:07,000
Speaker 4: the click of a mouse with an Excel program by

546
00:29:07,000 --> 00:29:10,960
Speaker 4: anybody with a small personal computer. And yet the number

547
00:29:11,000 --> 00:29:13,240
Speaker 4: of people doing what I did forty years ago when

548
00:29:13,240 --> 00:29:16,880
Speaker 4: I started on Wall Street has multiplied since then, and

549
00:29:16,960 --> 00:29:20,480
Speaker 4: so it became a productivity enhancing tool, not a job

550
00:29:20,560 --> 00:29:24,720
Speaker 4: destructing destructive tool. I'm perfectly prepared to believe that this

551
00:29:24,760 --> 00:29:27,000
Speaker 4: may come out a different way. All I'm saying is

552
00:29:27,000 --> 00:29:29,160
Speaker 4: I don't think we know yet, and I think history

553
00:29:29,720 --> 00:29:31,840
Speaker 4: is probably still on the side that we will find

554
00:29:31,840 --> 00:29:33,680
Speaker 4: our way through this in a positive way.

555
00:29:35,040 --> 00:29:37,440
Speaker 2: Many thanks to Larry Summers of Harvard and Steve Radner

556
00:29:37,520 --> 00:29:42,840
Speaker 2: of Willet Advisors coming up, has the strong dollar run

557
00:29:42,880 --> 00:29:45,720
Speaker 2: its course? We'll go through where we are and how

558
00:29:45,760 --> 00:29:48,880
Speaker 2: we got here. That next down Wall Street Week on Bloomberg.

559
00:29:51,760 --> 00:29:56,000
Speaker 1: This is Bloomberg Wall Street Week with David Weston from

560
00:29:56,120 --> 00:30:01,800
Speaker 1: Bloomberg Radio.

561
00:30:03,520 --> 00:30:06,040
Speaker 2: This is Wall Street Week. I'm David Weston. The US

562
00:30:06,040 --> 00:30:09,000
Speaker 2: dollar had been on something of a tear, recently hitting

563
00:30:09,000 --> 00:30:12,120
Speaker 2: its peak last September, driven by all those rate hikes

564
00:30:12,200 --> 00:30:15,120
Speaker 2: and expectations of more to come. But since then it's

565
00:30:15,160 --> 00:30:18,280
Speaker 2: given up over five percent, with prospects that the Fed

566
00:30:18,400 --> 00:30:20,600
Speaker 2: may be nearing the end of turning up the heat,

567
00:30:20,880 --> 00:30:23,640
Speaker 2: and JP Morgan warned this week it may get worse

568
00:30:23,680 --> 00:30:26,560
Speaker 2: from here, but it's still nothing compared to what Lewis

569
00:30:26,640 --> 00:30:29,040
Speaker 2: Rickhauser was looking at on Wall Street weeek. Back in

570
00:30:29,120 --> 00:30:31,040
Speaker 2: nineteen ninety three.

571
00:30:32,560 --> 00:30:37,000
Speaker 8: The American dollar repeatedly dived to new postwar lows against

572
00:30:37,040 --> 00:30:41,479
Speaker 8: the Japanese yen, fast approaching the once unthinkable level of

573
00:30:41,880 --> 00:30:45,840
Speaker 8: one hundred yen to the dollar, and one Japanese financier

574
00:30:45,960 --> 00:30:49,120
Speaker 8: confided to me that the next logical step would be

575
00:30:49,160 --> 00:30:53,000
Speaker 8: to revalue, knocking off the last two zeros so that

576
00:30:53,120 --> 00:30:57,560
Speaker 8: one yen would equal and perhaps even exceed one dollar.

577
00:30:58,840 --> 00:31:02,400
Speaker 8: Never mind that many amus seriously questioned the wisdom of

578
00:31:02,440 --> 00:31:05,920
Speaker 8: a succession of our own governments whooping the yen higher

579
00:31:06,000 --> 00:31:09,000
Speaker 8: and the dollar lower while beating on the Japanese to

580
00:31:09,080 --> 00:31:10,360
Speaker 8: open their markets wider.

581
00:31:12,400 --> 00:31:14,200
Speaker 2: To take us through where we are today with the

582
00:31:14,280 --> 00:31:16,680
Speaker 2: dollar and where we may be going, we welcome back

583
00:31:16,680 --> 00:31:20,600
Speaker 2: Bloomberg International Economics and Policy correspondent Michael McKee.

584
00:31:22,760 --> 00:31:26,400
Speaker 7: Unfortunately for mister Ruchiser, the dollar continued its dive in

585
00:31:26,480 --> 00:31:30,360
Speaker 7: nineteen ninety five, reaching the once unthinkable level of eighty yen.

586
00:31:31,040 --> 00:31:33,680
Speaker 7: That was back in the days when American consumers seem

587
00:31:33,760 --> 00:31:37,640
Speaker 7: to be buying everything Japan could manufacture. The slide wasn't

588
00:31:37,720 --> 00:31:41,280
Speaker 7: arrested until Robert Rubin, who became Treasury Secretary just as

589
00:31:41,280 --> 00:31:44,560
Speaker 7: the dollar reached its NATI, was able to hammer home

590
00:31:44,600 --> 00:31:47,000
Speaker 7: a new mantra that a strong dollar was in the

591
00:31:47,040 --> 00:31:50,080
Speaker 7: best interests of the United States, and since then, as

592
00:31:50,120 --> 00:31:52,960
Speaker 7: you've often heard, markets go up and markets go down.

593
00:31:53,640 --> 00:31:56,360
Speaker 7: By nineteen ninety eight, the yen had weakened so much

594
00:31:56,600 --> 00:31:58,960
Speaker 7: the US was willing to join with other G seven

595
00:31:59,040 --> 00:32:02,440
Speaker 7: nations to strengthen it. Why well, for one thing, the

596
00:32:02,440 --> 00:32:07,040
Speaker 7: euphemisms strong and weak are quite misleading. There are advantages

597
00:32:07,080 --> 00:32:11,400
Speaker 7: and disadvantages to both conditions. If the dollar appreciates, it

598
00:32:11,440 --> 00:32:14,640
Speaker 7: means foreign goods are cheaper to buy. That helps hold

599
00:32:14,640 --> 00:32:17,840
Speaker 7: down inflation, which means interest rates can stay lower than

600
00:32:17,880 --> 00:32:23,640
Speaker 7: otherwise necessary. But it also means American exports cost more overseas.

601
00:32:23,760 --> 00:32:27,480
Speaker 7: If the dollar is depreciating, those exports are cheaper and

602
00:32:27,640 --> 00:32:31,640
Speaker 7: US companies can sell more. More foreign tourists can afford

603
00:32:31,680 --> 00:32:36,680
Speaker 7: to visit, and American assets become more attractive to foreign buyers. Now,

604
00:32:36,760 --> 00:32:40,240
Speaker 7: some politicians worry about what they call a week dollar,

605
00:32:40,440 --> 00:32:44,040
Speaker 7: and it has been depreciating. The dollar rows because the

606
00:32:44,160 --> 00:32:46,920
Speaker 7: US economy has been much stronger than others, and the

607
00:32:46,960 --> 00:32:50,240
Speaker 7: FEDS raised US interest rates higher than other central banks.

608
00:32:50,720 --> 00:32:54,840
Speaker 7: With the Fed almost done, that's changing against many currencies.

609
00:32:55,360 --> 00:33:00,120
Speaker 7: Currency strategists forecasts some dollar weakening, but no crash. It's

610
00:33:00,160 --> 00:33:04,880
Speaker 7: still historically strong. A drop may disrupt some carry trades

611
00:33:04,920 --> 00:33:08,960
Speaker 7: and other strategies, but it's not necessarily a bad thing

612
00:33:09,040 --> 00:33:11,000
Speaker 7: for the US. Just sounds bad.

613
00:33:11,560 --> 00:33:16,800
Speaker 2: David, thanks to Bloomberg's Michael McKee. That does it. For

614
00:33:16,840 --> 00:33:19,080
Speaker 2: this episode of Wall Street Week, I'm David Weston. This

615
00:33:19,200 --> 00:33:34,200
Speaker 2: is Bloomberg. See you next week,