1 00:00:00,280 --> 00:00:02,560 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,680 --> 00:00:07,280 Speaker 2: The global push into infrastructure, breaking the IPO logjam in text. 3 00:00:07,160 --> 00:00:09,280 Speaker 3: The financial stories that shape. 4 00:00:08,920 --> 00:00:12,000 Speaker 2: Our work, cutting inflation without losing jobs. Do we need 5 00:00:12,119 --> 00:00:14,560 Speaker 2: rate cuts and if so? How many? Investing in the 6 00:00:14,560 --> 00:00:16,120 Speaker 2: time of geopolitical turmoil. 7 00:00:16,200 --> 00:00:18,560 Speaker 1: Through the eyes of the most influential voices. 8 00:00:18,720 --> 00:00:22,520 Speaker 2: Ten Rogueff Economists of Harvard, former FDIC had Shiela Beert 9 00:00:22,640 --> 00:00:25,799 Speaker 2: g E CEO Larry Kulp, San Francisco FED President Mary 10 00:00:25,880 --> 00:00:27,360 Speaker 2: Daily Bloomberg. 11 00:00:26,840 --> 00:00:30,240 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. 12 00:00:30,360 --> 00:00:33,559 Speaker 2: Big elections in Mexico and India. In Europe, the ECB 13 00:00:33,680 --> 00:00:36,560 Speaker 2: cuts rates, and in the US all eyes are on 14 00:00:36,600 --> 00:00:39,400 Speaker 2: the jobs numbers. This is Bloomberg Wall Street Week. I'm 15 00:00:39,479 --> 00:00:43,120 Speaker 2: David Weston. This week we're Alph Schlostein of Evercore on 16 00:00:43,280 --> 00:00:47,080 Speaker 2: getting deals back on track or actually. 17 00:00:47,240 --> 00:00:49,280 Speaker 3: In a period of returning activity. 18 00:00:50,080 --> 00:00:52,560 Speaker 2: Ragaram Rajin of the Booth School on what the Indian 19 00:00:52,600 --> 00:00:54,720 Speaker 2: election means for investors. 20 00:00:54,880 --> 00:00:58,120 Speaker 4: Hopefully a more democratic to India, which is what this 21 00:00:58,240 --> 00:01:01,400 Speaker 4: election means actually into some of them. 22 00:01:02,040 --> 00:01:05,400 Speaker 2: And Ford CEO Jim Farley on the return of Detroit 23 00:01:05,440 --> 00:01:07,679 Speaker 2: and the US auto industry. 24 00:01:07,760 --> 00:01:19,399 Speaker 5: Were in a different era where Detroit is growing after decades. 25 00:01:24,040 --> 00:01:26,399 Speaker 2: We begin with the markets and their reaction to those 26 00:01:26,480 --> 00:01:29,640 Speaker 2: US jobs numbers out on Friday. Once again, the labor 27 00:01:29,680 --> 00:01:32,240 Speaker 2: market surprised thep side, adding another two hundred and seventy 28 00:01:32,280 --> 00:01:35,520 Speaker 2: two thousand jobs with earnings increasing four tenths of a percent, 29 00:01:35,920 --> 00:01:38,559 Speaker 2: both well above what was expected, and at the same time, 30 00:01:38,800 --> 00:01:42,399 Speaker 2: the unemployment rate paradoxically ticked up to four percent. The 31 00:01:42,440 --> 00:01:45,000 Speaker 2: bond market reacted with a vengeance, as the yield shot 32 00:01:45,080 --> 00:01:47,440 Speaker 2: up fourteen basis points to four point four to three 33 00:01:47,480 --> 00:01:49,880 Speaker 2: percent at the end of the week that until Friday 34 00:01:50,000 --> 00:01:53,120 Speaker 2: was all about falling yields. The stock market, though once again, 35 00:01:53,240 --> 00:01:55,680 Speaker 2: seemed to take it pretty much in strive. For the week, 36 00:01:55,720 --> 00:01:57,680 Speaker 2: the S and P five hundred was up one point 37 00:01:57,680 --> 00:02:00,080 Speaker 2: three percent to close at fifty three forty seven, and 38 00:02:00,080 --> 00:02:03,440 Speaker 2: that is nicely above that median number our Bloomberg ls 39 00:02:03,480 --> 00:02:05,720 Speaker 2: have for the year end of fifty two hundred, and 40 00:02:05,720 --> 00:02:08,440 Speaker 2: the NASDAC it was up two point four percent for 41 00:02:08,480 --> 00:02:10,919 Speaker 2: the week. To take us through all us Now, welcome 42 00:02:10,919 --> 00:02:13,440 Speaker 2: to Sarah Ketter of Causeway Capitals. So, Sarah, thank you 43 00:02:13,480 --> 00:02:15,480 Speaker 2: so much for being back with this really appreciated. So 44 00:02:15,800 --> 00:02:18,560 Speaker 2: explain exactly what the market reaction was this week, because 45 00:02:18,600 --> 00:02:21,680 Speaker 2: the stock market really didn't react too vigorously, although the 46 00:02:21,919 --> 00:02:23,520 Speaker 2: bond market did to these jobs numbers. 47 00:02:25,000 --> 00:02:25,799 Speaker 6: Well, thanks David. 48 00:02:26,120 --> 00:02:30,080 Speaker 7: That stock market is likely taking its queue from earnings 49 00:02:30,120 --> 00:02:35,559 Speaker 7: more than it is any of these potential underlying impetus 50 00:02:35,560 --> 00:02:36,959 Speaker 7: for changes and interest rates. 51 00:02:37,960 --> 00:02:41,919 Speaker 6: The likely most investors. 52 00:02:41,320 --> 00:02:44,600 Speaker 7: Recognize that the FED is in a difficult position and 53 00:02:45,600 --> 00:02:48,960 Speaker 7: lowering rates might be tough with this sort of strong data. 54 00:02:49,720 --> 00:02:51,800 Speaker 7: On the other hand, earnings coming out of some of 55 00:02:51,840 --> 00:02:55,440 Speaker 7: the market leaders still looks really good, and that's probably 56 00:02:55,480 --> 00:02:58,160 Speaker 7: what's keeping the market aflut So. 57 00:02:58,280 --> 00:03:00,359 Speaker 2: I wonder about this question of interest rate. There's a 58 00:03:00,360 --> 00:03:02,399 Speaker 2: lot of speculation about what's going to happen this year 59 00:03:02,400 --> 00:03:04,560 Speaker 2: for the fad we winning the year with six six 60 00:03:04,639 --> 00:03:06,360 Speaker 2: rate cuts blood baked in. We're way off of that 61 00:03:06,440 --> 00:03:08,840 Speaker 2: now at this point. But what about for the longer term? 62 00:03:08,960 --> 00:03:11,560 Speaker 2: Are we is getting a sense maybe the longer term 63 00:03:11,560 --> 00:03:13,799 Speaker 2: intry some people call the nutro rate will be higher 64 00:03:13,880 --> 00:03:15,320 Speaker 2: And if so, what does that mean for you as 65 00:03:15,320 --> 00:03:16,320 Speaker 2: an equity investor? 66 00:03:18,000 --> 00:03:20,359 Speaker 7: Well, if you care about valuation, you have to use 67 00:03:20,400 --> 00:03:22,960 Speaker 7: tools like discount rates. In other words, as stock is 68 00:03:23,000 --> 00:03:25,200 Speaker 7: just worth the present value of all the cash that 69 00:03:25,240 --> 00:03:29,280 Speaker 7: can generate into perpetuity discounted to present, and the higher 70 00:03:29,280 --> 00:03:31,919 Speaker 7: that discount rate goes, the less the cash flow stream 71 00:03:32,040 --> 00:03:35,120 Speaker 7: is worth, or they give it another way that the 72 00:03:35,400 --> 00:03:37,280 Speaker 7: valuation multiples need to come down. 73 00:03:37,920 --> 00:03:40,040 Speaker 6: So prolonged higher. 74 00:03:39,840 --> 00:03:42,600 Speaker 7: Rates is a kind of a sobering effect for markets 75 00:03:42,600 --> 00:03:43,320 Speaker 7: and investors. 76 00:03:43,360 --> 00:03:45,360 Speaker 6: We have to be very careful about what we pay. 77 00:03:45,840 --> 00:03:49,280 Speaker 7: And it also makes fixed income a very viable alternative 78 00:03:49,320 --> 00:03:53,480 Speaker 7: to equities, so there's competition out there. So higher rates, 79 00:03:53,640 --> 00:03:56,960 Speaker 7: if they're sustained, also have economic impacts. 80 00:03:56,480 --> 00:03:58,240 Speaker 6: That we have to take into account when we do 81 00:03:58,400 --> 00:03:59,280 Speaker 6: valuation work. 82 00:04:00,080 --> 00:04:04,080 Speaker 7: Old myriad of reasons why sustained higher rates can lead 83 00:04:04,160 --> 00:04:09,200 Speaker 7: to a tougher environment for stocks, not just because companies' 84 00:04:09,200 --> 00:04:12,160 Speaker 7: earnings may be under pressure, but also because investors might 85 00:04:12,200 --> 00:04:13,760 Speaker 7: want to go elsewhere or. 86 00:04:13,760 --> 00:04:15,640 Speaker 2: For any reasonable period of time. The stock market has 87 00:04:15,680 --> 00:04:17,559 Speaker 2: done pretty well, take the S and PO five hundred, 88 00:04:17,560 --> 00:04:20,120 Speaker 2: for example, but there are a few stocks that have 89 00:04:20,160 --> 00:04:23,239 Speaker 2: really driven it disproportionately. Some of those big tech stacks 90 00:04:23,240 --> 00:04:24,880 Speaker 2: at AI stacks. Can I keep going? 91 00:04:27,880 --> 00:04:28,640 Speaker 6: They could. 92 00:04:28,800 --> 00:04:31,640 Speaker 7: It's very hard to call the tops of any of 93 00:04:31,680 --> 00:04:34,719 Speaker 7: these stocks that have so much momentum behind them. And 94 00:04:34,839 --> 00:04:38,719 Speaker 7: have sold their product like Nvidia far out into the future. 95 00:04:39,320 --> 00:04:42,760 Speaker 7: They look so certain, and yet as the price rises, 96 00:04:42,800 --> 00:04:47,159 Speaker 7: it gets closer to something that approximates fair value. And 97 00:04:47,200 --> 00:04:50,760 Speaker 7: we're not seeing the big earnings upgrades any longer. Let 98 00:04:50,880 --> 00:04:53,560 Speaker 7: pace of that is slowed. So it's very likely that 99 00:04:53,680 --> 00:04:56,080 Speaker 7: these big market leaders, at least for the time being 100 00:04:56,120 --> 00:04:58,880 Speaker 7: the next twelve months, have seen the bulk of their returns. 101 00:04:59,440 --> 00:05:03,040 Speaker 6: Now is what's the next set of stocks? 102 00:05:03,040 --> 00:05:05,760 Speaker 7: It will benefit from the same theme that propelled these 103 00:05:05,880 --> 00:05:10,479 Speaker 7: big these big market leaders. And if it's not Gpu, 104 00:05:11,240 --> 00:05:13,720 Speaker 7: it's not the chips, and it's not the servers or 105 00:05:13,760 --> 00:05:18,440 Speaker 7: the data centers, than what and there are some fascinating 106 00:05:20,080 --> 00:05:24,360 Speaker 7: great stocks in that layer beneath who should benefit from, 107 00:05:24,760 --> 00:05:28,160 Speaker 7: for example, the demand for much more memory. So that's 108 00:05:28,320 --> 00:05:32,560 Speaker 7: DRAM memory, not just the high bendwidth memory that an 109 00:05:32,600 --> 00:05:36,880 Speaker 7: SK Micron has and Samsung Electronics soon will have, and 110 00:05:37,279 --> 00:05:41,320 Speaker 7: Micron in the US, but even the commodity memory will 111 00:05:41,360 --> 00:05:44,279 Speaker 7: be more in demand because there's only so much factory 112 00:05:44,360 --> 00:05:47,680 Speaker 7: floor space. There's almost only so much room to make 113 00:05:47,720 --> 00:05:52,880 Speaker 7: these high bandwidth memory chips. They're faster, they're they're more 114 00:05:53,240 --> 00:05:57,479 Speaker 7: less power consumptive. So memory is so interesting, and stocks 115 00:05:57,520 --> 00:05:59,919 Speaker 7: like Samsung traded very reasonable multiple. 116 00:06:00,520 --> 00:06:02,360 Speaker 2: What about some of the stocks that have actually taken 117 00:06:02,360 --> 00:06:05,479 Speaker 2: something of a hit taking the information tech services area 118 00:06:05,760 --> 00:06:09,159 Speaker 2: and the assumption that perhaps AI generative AI really hurt 119 00:06:09,160 --> 00:06:11,960 Speaker 2: their business. Is it possible the market's overreacted with some 120 00:06:12,000 --> 00:06:12,600 Speaker 2: of those. 121 00:06:13,640 --> 00:06:17,000 Speaker 7: Oh, those stocks had a terrible time when Cloud was 122 00:06:17,040 --> 00:06:21,800 Speaker 7: first transitioning because enterprises say, oh, we can do it ourselves, 123 00:06:21,839 --> 00:06:25,040 Speaker 7: and they very much can't. First of all, for most companies, 124 00:06:25,080 --> 00:06:28,440 Speaker 7: they need to build the infrastructure to adopt AI tools, 125 00:06:28,960 --> 00:06:32,800 Speaker 7: So infrastructure comes first and then application second. And there 126 00:06:32,800 --> 00:06:37,120 Speaker 7: are you can look across almost all IT services companies 127 00:06:37,120 --> 00:06:40,400 Speaker 7: and find that the market is very negative on them, 128 00:06:40,720 --> 00:06:44,760 Speaker 7: but they have good based businesses and without doubt, and 129 00:06:44,800 --> 00:06:47,479 Speaker 7: says companies like Cognizant, for example in the US or 130 00:06:47,640 --> 00:06:50,920 Speaker 7: Fujitsu in Japan, the orders will have to pick up 131 00:06:50,960 --> 00:06:52,719 Speaker 7: because enterprises we're going to need help. 132 00:06:52,720 --> 00:06:53,559 Speaker 6: They'll have to work. 133 00:06:54,080 --> 00:06:56,480 Speaker 7: Enterprises will have to work with their IT services companies 134 00:06:56,480 --> 00:06:59,480 Speaker 7: in ways they'd never done before in order to implement AI. 135 00:07:00,040 --> 00:07:01,719 Speaker 2: Sarah, it's always such a pleasure to have you with us. 136 00:07:01,760 --> 00:07:04,560 Speaker 2: Thank you so much. That is Sarah Kutter of Causeway 137 00:07:04,560 --> 00:07:08,640 Speaker 2: Capital Higher rates and greater uncertainty have put a damper 138 00:07:08,680 --> 00:07:12,080 Speaker 2: on corporate deals coming off of what had been record years. 139 00:07:12,280 --> 00:07:14,120 Speaker 2: To fill us in on where things stand today, we 140 00:07:14,120 --> 00:07:17,680 Speaker 2: welcome back now Ralph Schlostein evercore chairman Emeritis. So Relph, 141 00:07:17,680 --> 00:07:19,680 Speaker 2: great to have you back with us. Where are we 142 00:07:19,760 --> 00:07:20,800 Speaker 2: right now on deal flow? 143 00:07:21,320 --> 00:07:25,280 Speaker 3: Well, we're actually in a period of returning activity. So 144 00:07:25,320 --> 00:07:29,000 Speaker 3: if you look, particularly in the US, announced transactions in 145 00:07:29,040 --> 00:07:31,160 Speaker 3: the first half of the first five months of the 146 00:07:31,240 --> 00:07:35,080 Speaker 3: year are about forty percent of last year. The last 147 00:07:35,360 --> 00:07:40,520 Speaker 3: two years have been a period of low activity, driven 148 00:07:40,600 --> 00:07:47,440 Speaker 3: by predominantly by uncertainty rather than economic uncertainty, because that 149 00:07:47,600 --> 00:07:51,640 Speaker 3: is the enemy of M and A activity. And if 150 00:07:51,640 --> 00:07:55,520 Speaker 3: you look back over the last forty five years, go 151 00:07:55,640 --> 00:07:58,680 Speaker 3: back to nineteen eighty, m and A has generally been 152 00:07:58,760 --> 00:08:02,600 Speaker 3: characterized by five to eight year up cycles and two 153 00:08:02,600 --> 00:08:05,600 Speaker 3: to three year down cycles. And we're kind of at 154 00:08:05,600 --> 00:08:08,320 Speaker 3: the end of that two to three year down cycle 155 00:08:08,480 --> 00:08:10,960 Speaker 3: and at the beginning of what I suspect will be 156 00:08:11,080 --> 00:08:17,239 Speaker 3: an extended period of increased activity, twenty four being better 157 00:08:17,280 --> 00:08:20,200 Speaker 3: than twenty three and twenty five being better than twenty four. 158 00:08:20,400 --> 00:08:22,080 Speaker 2: So, as you know, here a Bloomberg repay. A lot 159 00:08:22,080 --> 00:08:23,880 Speaker 2: of attention to the FED. Are they going to cut it? 160 00:08:23,880 --> 00:08:25,040 Speaker 2: They're not going to cut it, They're going to raise 161 00:08:25,080 --> 00:08:26,600 Speaker 2: what's going to happen. At the beginning of the year 162 00:08:26,640 --> 00:08:29,280 Speaker 2: there was something like six great cuts priced in. Now 163 00:08:29,280 --> 00:08:32,559 Speaker 2: we're down to maybe one. Does that affect CEOs thing 164 00:08:32,600 --> 00:08:35,719 Speaker 2: about doing deals? It really doesn't. 165 00:08:35,800 --> 00:08:40,079 Speaker 3: What they care more about is the availability of debt 166 00:08:40,120 --> 00:08:43,280 Speaker 3: capital rather than the cost. And I think we're at 167 00:08:43,280 --> 00:08:48,040 Speaker 3: a period right now where the cost of debt capital 168 00:08:48,280 --> 00:08:51,520 Speaker 3: the risks are asymmetric. The risk that it goes up 169 00:08:51,640 --> 00:08:55,560 Speaker 3: is lower than the risk that it stays where it 170 00:08:55,640 --> 00:08:59,200 Speaker 3: is or drifts down. So that's kind of off the 171 00:08:59,280 --> 00:09:05,600 Speaker 3: table today. In terms of transaction activity, economic uncertainty and 172 00:09:05,679 --> 00:09:12,520 Speaker 3: political uncertainty now are not unimportant in having people think 173 00:09:12,559 --> 00:09:14,600 Speaker 3: hard about whether they do transactions. 174 00:09:14,720 --> 00:09:16,360 Speaker 2: If you talk to private credit people, is I know 175 00:09:16,480 --> 00:09:19,000 Speaker 2: you do all the time? They say, Yes, we're lending 176 00:09:19,040 --> 00:09:20,920 Speaker 2: a lot of money, but we're much more careful about it. 177 00:09:20,920 --> 00:09:23,200 Speaker 2: We put a lot more restrictions and covenants and things 178 00:09:23,240 --> 00:09:24,160 Speaker 2: like that on it. 179 00:09:24,200 --> 00:09:29,480 Speaker 3: Is that true in your experience? No, To be honest, 180 00:09:29,559 --> 00:09:35,319 Speaker 3: I think there's this thing called the credit cycle that 181 00:09:35,360 --> 00:09:40,480 Speaker 3: we've heard about for many years and credit. There are 182 00:09:40,480 --> 00:09:44,520 Speaker 3: periods of time like right now, where people feel some 183 00:09:44,600 --> 00:09:48,160 Speaker 3: amount of pressure to put assets on the books, whether 184 00:09:48,200 --> 00:09:55,200 Speaker 3: they're private credit or banking, and that tends to weaken 185 00:09:55,320 --> 00:10:00,800 Speaker 3: a little bit. The underwriting discipline not thrown away, because 186 00:10:00,880 --> 00:10:03,080 Speaker 3: I think we all learned from two thousand and eight 187 00:10:04,080 --> 00:10:08,480 Speaker 3: that discipline and credit is really really important. But I 188 00:10:08,520 --> 00:10:13,440 Speaker 3: recall once when I was at Blackrock, we were hired 189 00:10:14,320 --> 00:10:17,960 Speaker 3: by Xerox to make a decision about what they should 190 00:10:17,960 --> 00:10:22,640 Speaker 3: do with their insurance business. And one of the things 191 00:10:22,640 --> 00:10:25,120 Speaker 3: we did is we visited five of the smarter people 192 00:10:25,200 --> 00:10:29,400 Speaker 3: in the insurance property and casualty business, one of whom 193 00:10:29,480 --> 00:10:32,760 Speaker 3: was Warren Buffett. So we flew out to Omaha and 194 00:10:32,800 --> 00:10:35,760 Speaker 3: we met with him, and he talked about the property 195 00:10:35,800 --> 00:10:39,600 Speaker 3: and casualty business. He said, you know, I've bought every 196 00:10:39,640 --> 00:10:44,560 Speaker 3: single one of my underwriters a golf club membership, and 197 00:10:45,360 --> 00:10:47,760 Speaker 3: the only thing that I do is I tell them 198 00:10:47,760 --> 00:10:50,640 Speaker 3: when they must use their golf club membership and when 199 00:10:50,640 --> 00:10:54,560 Speaker 3: they can't. And his point was, there's sometimes when the 200 00:10:54,640 --> 00:10:57,439 Speaker 3: underwriting cycle is really bad, and I want you all 201 00:10:57,480 --> 00:11:01,079 Speaker 3: to play golf, and there are times when it's really 202 00:11:01,120 --> 00:11:03,520 Speaker 3: attractive and that's when I want you to not play 203 00:11:03,559 --> 00:11:08,520 Speaker 3: golf and write lots of policies. And you know, bankers 204 00:11:08,559 --> 00:11:14,400 Speaker 3: and private credit don't have that same luxury. So you know, 205 00:11:14,920 --> 00:11:20,560 Speaker 3: discipline not in major ways, but in minor ways. Ebbs 206 00:11:20,600 --> 00:11:24,920 Speaker 3: and flows and pricing, the tightening of spreads. So we've 207 00:11:24,920 --> 00:11:28,040 Speaker 3: had a period where longer term interest rates have risen 208 00:11:28,760 --> 00:11:32,880 Speaker 3: that has been largely offset by a tightening of spreads 209 00:11:33,280 --> 00:11:36,559 Speaker 3: versus the treasury market. So a double B borrower today 210 00:11:37,320 --> 00:11:40,840 Speaker 3: can borrow more cheaply than they could a year ago, 211 00:11:41,080 --> 00:11:44,439 Speaker 3: notwithstanding the fact the treasury rates are up eighty ninety 212 00:11:44,440 --> 00:11:45,640 Speaker 3: basis points. 213 00:11:45,760 --> 00:11:49,120 Speaker 2: Cycles and M and A. Are there also trends because 214 00:11:49,160 --> 00:11:51,000 Speaker 2: most recently some of the deals we've seen have not 215 00:11:51,040 --> 00:11:54,960 Speaker 2: been conglomerations really bringing together bigger companies, but actually focus 216 00:11:55,040 --> 00:11:57,199 Speaker 2: spinning off. If you look at g you look at DuPont. 217 00:11:57,520 --> 00:12:00,679 Speaker 2: Is that a trend right now? Are people more interesting focusing? 218 00:12:01,200 --> 00:12:05,800 Speaker 3: I would say, you know, over forty to fifty years, 219 00:12:05,840 --> 00:12:13,720 Speaker 3: you've seen a period of time when conglomerates were overvalued 220 00:12:13,960 --> 00:12:17,560 Speaker 3: relative to the sum of their parts and period when 221 00:12:17,600 --> 00:12:22,360 Speaker 3: they are undervalued. We're in one of those periods where 222 00:12:23,600 --> 00:12:29,360 Speaker 3: in companies that are in multiple disconnected business lines. The 223 00:12:29,480 --> 00:12:33,120 Speaker 3: value of the whole company is generally less than the 224 00:12:33,240 --> 00:12:38,600 Speaker 3: value of its constituent parts. Ralph s Losneger is. 225 00:12:38,600 --> 00:12:40,280 Speaker 2: Going to be staying with us. As returned from the 226 00:12:40,280 --> 00:12:43,400 Speaker 2: business climate for merchants and acquisitions to the political climate 227 00:12:43,679 --> 00:12:45,920 Speaker 2: as next on Wall Street Week on Bloomberg. 228 00:12:50,240 --> 00:12:54,480 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 229 00:12:54,600 --> 00:12:55,520 Speaker 1: Bloomberg Radio. 230 00:13:01,960 --> 00:13:04,360 Speaker 2: This is Wall Street Week. I'm David western Evercourt chairman 231 00:13:04,360 --> 00:13:06,800 Speaker 2: of Meritis. Ralph last nine has stayed with us. So, Ralph, 232 00:13:07,000 --> 00:13:08,800 Speaker 2: you were good enough to tell us about the business 233 00:13:08,800 --> 00:13:10,920 Speaker 2: climate for Emine And let's talk about the political climate 234 00:13:11,160 --> 00:13:13,160 Speaker 2: where we are right now, particularly as we're looking toward 235 00:13:13,160 --> 00:13:15,960 Speaker 2: an election come November. What are the things that might 236 00:13:16,040 --> 00:13:19,720 Speaker 2: affect actually the level of deals that get done well. 237 00:13:19,760 --> 00:13:25,439 Speaker 3: First of all, you have to recognize that anti trust 238 00:13:26,600 --> 00:13:32,480 Speaker 3: is driven predominantly by the law. The law has not changed. 239 00:13:33,559 --> 00:13:37,040 Speaker 3: There are people at the FTC and obviously the Assistant 240 00:13:37,040 --> 00:13:41,720 Speaker 3: Attorney General for Anti trust who may have a more 241 00:13:41,760 --> 00:13:47,559 Speaker 3: aggressive or less aggressive posture within the confines of the law, 242 00:13:48,640 --> 00:13:51,840 Speaker 3: and sometimes not within the confines of the law. So 243 00:13:52,080 --> 00:13:55,920 Speaker 3: there's no question that the Biden administration has tried to, 244 00:13:57,520 --> 00:14:04,600 Speaker 3: you know, reasonably aggressively slowed down activity almost any transaction 245 00:14:04,720 --> 00:14:09,480 Speaker 3: of consequence. There is a discussion of that, and what 246 00:14:09,520 --> 00:14:16,600 Speaker 3: you're finding increasingly, where there's a judgment that the anti 247 00:14:16,679 --> 00:14:23,080 Speaker 3: trust law is not being violated, companies are willing to 248 00:14:23,120 --> 00:14:27,160 Speaker 3: go ahead and basically say, let them take me to court. 249 00:14:27,400 --> 00:14:29,680 Speaker 2: So you worked for President Carter, as I recall, in 250 00:14:29,720 --> 00:14:32,400 Speaker 2: the Carter White House, and you've been identified with democratic 251 00:14:32,400 --> 00:14:34,360 Speaker 2: causes through the years. At the same time, you're very 252 00:14:34,440 --> 00:14:36,480 Speaker 2: much a part of Wall Street. There's sort of a 253 00:14:36,480 --> 00:14:39,320 Speaker 2: prevailing sense right now among some of Wall Street right 254 00:14:39,320 --> 00:14:43,160 Speaker 2: now that it just makes sense for them personally to 255 00:14:43,400 --> 00:14:46,440 Speaker 2: have Trump in the White House because they'll make more money, 256 00:14:46,560 --> 00:14:47,320 Speaker 2: they'll be richer. 257 00:14:47,640 --> 00:14:52,360 Speaker 3: Is that wrong? Well, it's interesting. I once got asked 258 00:14:52,400 --> 00:14:55,880 Speaker 3: what was the very best piece of advice I received 259 00:14:55,920 --> 00:15:00,600 Speaker 3: in my entire forty five year professional career was actually 260 00:15:00,640 --> 00:15:02,600 Speaker 3: the first day of my very first job, when I 261 00:15:02,640 --> 00:15:06,040 Speaker 3: was an economist on the Joint Economic Committee, and the 262 00:15:06,080 --> 00:15:09,480 Speaker 3: staff director had this sort of welcome talk that he 263 00:15:09,560 --> 00:15:12,760 Speaker 3: gave to, you know, kids right out of graduate school, 264 00:15:13,600 --> 00:15:18,800 Speaker 3: and the gist of it was listen to people. This 265 00:15:19,000 --> 00:15:22,320 Speaker 3: was a Joint committee bipartisan committee. You're going to have 266 00:15:22,360 --> 00:15:29,960 Speaker 3: disagreements on substance, but never question someone's motives. So I 267 00:15:30,000 --> 00:15:35,360 Speaker 3: do believe certainly that there are some people in the 268 00:15:35,400 --> 00:15:41,080 Speaker 3: Wall Street community, the financial community, who probably are driven 269 00:15:41,160 --> 00:15:45,600 Speaker 3: to a certain extent by what's best for their pocketbooks. 270 00:15:46,360 --> 00:15:47,360 Speaker 2: But I'm also. 271 00:15:49,840 --> 00:15:53,400 Speaker 3: I think, open minded enough to say that there are 272 00:15:53,440 --> 00:15:57,440 Speaker 3: certainly some of them who may support President Trump who 273 00:15:57,480 --> 00:16:01,640 Speaker 3: do so because they have, you know, particular policy agreements 274 00:16:01,680 --> 00:16:06,280 Speaker 3: with him or disagreements with the current administration. So I 275 00:16:06,280 --> 00:16:12,520 Speaker 3: don't think it's purely financial. And I happen to be, 276 00:16:12,960 --> 00:16:19,040 Speaker 3: as you say, very democratically inclined. But in this election, honestly, 277 00:16:19,120 --> 00:16:24,680 Speaker 3: I think the stakes and policy are really important, but 278 00:16:24,760 --> 00:16:31,000 Speaker 3: the stakes on support of our democratic institutions are even 279 00:16:31,000 --> 00:16:37,760 Speaker 3: more important. And the idea that our judiciary deserves to 280 00:16:37,840 --> 00:16:43,320 Speaker 3: be truly independent, the idea that our federal reserve should 281 00:16:43,360 --> 00:16:47,800 Speaker 3: be truly independent, the idea that our Justice Department should 282 00:16:47,840 --> 00:16:53,560 Speaker 3: be free to investigate independently, the idea that our press 283 00:16:54,160 --> 00:16:59,520 Speaker 3: should feel unencumbered by fear of reprisal if they report, 284 00:17:00,680 --> 00:17:05,199 Speaker 3: you know, unhappily on the current administration. Those are things 285 00:17:05,240 --> 00:17:10,520 Speaker 3: to me that are so important that to me, that's 286 00:17:10,560 --> 00:17:12,400 Speaker 3: a really critical part of this selection. 287 00:17:12,760 --> 00:17:14,679 Speaker 2: I didn't mean to suggest it's wrong to be considered 288 00:17:14,720 --> 00:17:17,400 Speaker 2: a pocketbook because it's generally thought in most elections, most 289 00:17:17,480 --> 00:17:21,000 Speaker 2: voters in part are voting their pocketbook. It's perfectly understandable. 290 00:17:21,240 --> 00:17:23,440 Speaker 2: But when it comes to a Trump administration, one of 291 00:17:23,520 --> 00:17:27,200 Speaker 2: the differences potentially with the Bide administration is taxes, the excise, 292 00:17:27,200 --> 00:17:30,040 Speaker 2: which is taxation, and it's closely I think related to 293 00:17:30,080 --> 00:17:32,840 Speaker 2: a concern that some people express that just the Biden administration, 294 00:17:33,440 --> 00:17:36,480 Speaker 2: for whatever reason, has gotten the government just involved in 295 00:17:36,520 --> 00:17:39,320 Speaker 2: a lot more of business and that that's not in 296 00:17:39,359 --> 00:17:40,280 Speaker 2: the long term healthy. 297 00:17:40,359 --> 00:17:44,200 Speaker 3: What do you make of that, well, I think attractiveness 298 00:17:44,640 --> 00:17:49,200 Speaker 3: of generally Republican policies in terms of a little, you know, 299 00:17:49,560 --> 00:17:52,680 Speaker 3: somewhere between a little and a lot less regulation, I'm 300 00:17:52,720 --> 00:17:56,439 Speaker 3: not negative on that, to be very honest. I think 301 00:17:57,359 --> 00:18:03,720 Speaker 3: the most critical thing for narrowing the economic gap in 302 00:18:03,760 --> 00:18:11,320 Speaker 3: this country is economic growth and regulation. Sometimes over regulation 303 00:18:11,480 --> 00:18:16,920 Speaker 3: can certainly constrain economic growth. So I think there are 304 00:18:17,040 --> 00:18:23,840 Speaker 3: elements of what would be considered traditional Republican policy that 305 00:18:23,920 --> 00:18:29,520 Speaker 3: I think are very supportive of economic growth and helping 306 00:18:29,560 --> 00:18:33,280 Speaker 3: those who are in need in our society. Tax policy, 307 00:18:34,320 --> 00:18:39,480 Speaker 3: I think two things are really important. One is the 308 00:18:39,520 --> 00:18:44,120 Speaker 3: share of our GDP that goes to federal taxes. Today 309 00:18:44,359 --> 00:18:48,840 Speaker 3: it's around sixteen percent. That's down from about nineteen percent. 310 00:18:49,680 --> 00:18:53,280 Speaker 3: We're not paying for the government that we want and 311 00:18:53,320 --> 00:18:58,520 Speaker 3: that's a long term, non sustainable situation. So that has 312 00:18:58,600 --> 00:19:01,680 Speaker 3: to be corrected one way or other. And the second 313 00:19:01,760 --> 00:19:06,120 Speaker 3: thing is, I think you know, the tax policy has 314 00:19:06,720 --> 00:19:10,400 Speaker 3: been significantly responsible for the widening in the wealth gap 315 00:19:10,440 --> 00:19:13,639 Speaker 3: in this country. I'm one of these very rare people 316 00:19:13,640 --> 00:19:17,600 Speaker 3: in finance who believes that capital gains and dividends should 317 00:19:17,600 --> 00:19:21,480 Speaker 3: be taxed like ordinary income rather than at half the rate, 318 00:19:22,520 --> 00:19:27,040 Speaker 3: because there's no reason on the planet that when I 319 00:19:27,160 --> 00:19:31,240 Speaker 3: make a private equity investment the tax rate should be 320 00:19:31,359 --> 00:19:36,200 Speaker 3: less than somebody who's making a couple hundred thousand dollars 321 00:19:36,240 --> 00:19:40,880 Speaker 3: a year and working forty fifty sixty seventy hours a week. 322 00:19:41,040 --> 00:19:43,840 Speaker 3: I'm a minority. I probably even am a minority in 323 00:19:43,880 --> 00:19:48,159 Speaker 3: my own party in that regard. But look, I think 324 00:19:48,480 --> 00:19:56,000 Speaker 3: if you look back over centuries and centuries, great societies 325 00:19:56,160 --> 00:20:02,600 Speaker 3: failed because the have had too much relative to the 326 00:20:02,640 --> 00:20:05,440 Speaker 3: have nots, and that's not a healthy thing for America 327 00:20:05,640 --> 00:20:06,200 Speaker 3: in my view. 328 00:20:06,800 --> 00:20:08,720 Speaker 2: Okay, well, thank you so very much. It's really great 329 00:20:08,800 --> 00:20:13,080 Speaker 2: Davy with us. That's Ralph Shlstein of Evercore. India completed 330 00:20:13,119 --> 00:20:15,920 Speaker 2: its national elections this week and to the surprise of many, 331 00:20:16,040 --> 00:20:19,200 Speaker 2: President Modi did not receive the overwhelming majority that had 332 00:20:19,200 --> 00:20:21,840 Speaker 2: been expected. For an early sense of what this may 333 00:20:21,920 --> 00:20:25,000 Speaker 2: mean for the Indian economy and for investors, welcome now 334 00:20:25,119 --> 00:20:27,840 Speaker 2: rogarram Rogen. He is the former governor of the Reserve 335 00:20:27,880 --> 00:20:30,520 Speaker 2: Bank of India. Mister Rogin is now professor of finance 336 00:20:30,640 --> 00:20:32,880 Speaker 2: at Chicago's Boost School. So, professor, thank you so much 337 00:20:32,880 --> 00:20:35,919 Speaker 2: for joining us. I know it's early going, but obviously 338 00:20:36,000 --> 00:20:39,760 Speaker 2: Premiseermody was known for his economic reforms, his economic projects. 339 00:20:40,119 --> 00:20:42,520 Speaker 2: What do you think is made of those enlighted this 340 00:20:42,760 --> 00:20:43,600 Speaker 2: narrow victory. 341 00:20:44,080 --> 00:20:47,919 Speaker 4: Well, first, he doesn't have a majority anymore with his party, 342 00:20:48,119 --> 00:20:51,119 Speaker 4: so he needs coalition partners, which means he needs to 343 00:20:51,160 --> 00:20:55,040 Speaker 4: develop more consensus as he goes along. I think that's 344 00:20:55,040 --> 00:20:59,399 Speaker 4: good news actually, because part of what was going on 345 00:20:59,520 --> 00:21:02,359 Speaker 4: with this guy government was it had a lot of 346 00:21:02,400 --> 00:21:05,840 Speaker 4: reforms in its first term, but the second term has 347 00:21:05,880 --> 00:21:09,040 Speaker 4: been more focused on the social agenda of the government. 348 00:21:09,640 --> 00:21:14,240 Speaker 4: Sometimes the majority in agenda, while the few attempts at 349 00:21:14,280 --> 00:21:19,440 Speaker 4: economic reforms, including the change in agricultural laws, were done 350 00:21:19,520 --> 00:21:24,480 Speaker 4: without developing a broad consensus and essentially were withdrawn after 351 00:21:24,560 --> 00:21:28,320 Speaker 4: tremendous pushback by the farmers. So this may actually mean 352 00:21:28,480 --> 00:21:32,480 Speaker 4: that the reforms that are proposed going forward have more 353 00:21:32,600 --> 00:21:34,840 Speaker 4: consensus and therefore more sticking power. 354 00:21:35,720 --> 00:21:38,240 Speaker 2: Did the reforms in your opinion? Are they likely to 355 00:21:38,280 --> 00:21:40,960 Speaker 2: focus on some of the lower income families, because the 356 00:21:41,000 --> 00:21:44,080 Speaker 2: reports at least of the politics of this election were 357 00:21:44,119 --> 00:21:46,960 Speaker 2: that many of the lower income voters did not back 358 00:21:47,119 --> 00:21:47,800 Speaker 2: mister motive. 359 00:21:48,160 --> 00:21:48,360 Speaker 8: Yeah. 360 00:21:48,440 --> 00:21:51,960 Speaker 4: I think a big problem which the government hadn't paid 361 00:21:52,080 --> 00:21:57,080 Speaker 4: enough attention to was growing levels of unemployment, especially amongst 362 00:21:57,240 --> 00:22:02,520 Speaker 4: educated youth, a growing sense of insecureity amongst poorer households. 363 00:22:02,600 --> 00:22:08,200 Speaker 4: The small and medium enterprises were also suffering, so essentially 364 00:22:08,640 --> 00:22:12,000 Speaker 4: the government was looking at the big you know, capital 365 00:22:12,000 --> 00:22:16,000 Speaker 4: intensive enterprises which comprise much of the stock market. No 366 00:22:16,119 --> 00:22:19,119 Speaker 4: wonder the stock market took fright after the early election 367 00:22:19,240 --> 00:22:21,760 Speaker 4: results has come back a little bit, But really the 368 00:22:21,840 --> 00:22:25,199 Speaker 4: government has to pay more attention to these groups and 369 00:22:25,240 --> 00:22:29,119 Speaker 4: it actually may help even enhance growth over the short 370 00:22:29,119 --> 00:22:32,920 Speaker 4: to medium term because consumption hasn't been strong. As these 371 00:22:32,960 --> 00:22:36,600 Speaker 4: households feel anxious, you know, a revival in consumption could 372 00:22:36,760 --> 00:22:38,840 Speaker 4: help the economic grow faster. 373 00:22:39,440 --> 00:22:41,040 Speaker 2: One of the things that investors have paid attention to 374 00:22:41,160 --> 00:22:44,720 Speaker 2: is inflation in India, which is still has inflation, but 375 00:22:44,760 --> 00:22:46,520 Speaker 2: it's more out of control than it has been in 376 00:22:46,560 --> 00:22:49,320 Speaker 2: the past. Is there are risk trying to address some 377 00:22:49,400 --> 00:22:51,160 Speaker 2: of the needs from the voters who did that well 378 00:22:51,160 --> 00:22:53,600 Speaker 2: for mister Bildy, that you actually have more physical stimulus 379 00:22:53,600 --> 00:22:56,240 Speaker 2: and you actually have more problems with inflation going forward. 380 00:22:56,480 --> 00:23:00,720 Speaker 4: Well, one of the sort of hallmarks of the Modi 381 00:23:00,800 --> 00:23:05,760 Speaker 4: administration has been fiscal restraint, and I don't see why 382 00:23:05,760 --> 00:23:09,720 Speaker 4: they should suddenly abandon that. Yes, there needs to be 383 00:23:09,760 --> 00:23:14,240 Speaker 4: a repurposing of resources. As you know in a recent book, 384 00:23:14,840 --> 00:23:18,359 Speaker 4: Breaking the Mold, I argue that you know, we need 385 00:23:18,480 --> 00:23:23,359 Speaker 4: more jobs in areas like services, and that requires killing 386 00:23:23,400 --> 00:23:27,879 Speaker 4: the workforce. That requires some redeployment of resources away from, 387 00:23:27,920 --> 00:23:32,359 Speaker 4: for example, massive subsidies to manufacturing, to actually investing in 388 00:23:32,440 --> 00:23:36,400 Speaker 4: colleges and schools in skilling programs. But I think this 389 00:23:36,760 --> 00:23:39,800 Speaker 4: is something that can be done without breaking the budget. Yes, 390 00:23:39,920 --> 00:23:43,520 Speaker 4: there will be some more fiscal spending given the nature 391 00:23:43,760 --> 00:23:48,040 Speaker 4: of the verdict, but I think it will help, you know, 392 00:23:48,200 --> 00:23:52,520 Speaker 4: solidify the economy and actually remove household anxiety, which I 393 00:23:52,520 --> 00:23:53,480 Speaker 4: think would be a big win. 394 00:23:53,800 --> 00:23:55,439 Speaker 2: What do you think this election may mean for the 395 00:23:55,440 --> 00:24:01,040 Speaker 2: relationship with the central government and the individual states? Understand it? In India, 396 00:24:01,119 --> 00:24:03,040 Speaker 2: the states have a fair amount of power. The Prime 397 00:24:03,040 --> 00:24:05,560 Speaker 2: Minister can't do certain things without this before the states. 398 00:24:05,800 --> 00:24:07,639 Speaker 2: Is that going to shift now because mister Modi has 399 00:24:07,640 --> 00:24:09,520 Speaker 2: perceived its being somewhat less powerful. 400 00:24:09,640 --> 00:24:13,280 Speaker 4: It should, but I think in the right direction. One 401 00:24:13,320 --> 00:24:17,440 Speaker 4: of the problems in the mood the administration has been 402 00:24:17,480 --> 00:24:20,400 Speaker 4: the appointment of governors who have stood in the way 403 00:24:20,600 --> 00:24:24,119 Speaker 4: of state governments doing what they wanted to do uh 404 00:24:24,640 --> 00:24:29,240 Speaker 4: and not playing out as constitutional sort of impartial governors. 405 00:24:29,840 --> 00:24:32,800 Speaker 4: And as a result, I think some of the states 406 00:24:32,840 --> 00:24:35,960 Speaker 4: have not been able to sort of conduct the kinds 407 00:24:35,960 --> 00:24:40,199 Speaker 4: of programs that they wanted. I think that should be 408 00:24:40,840 --> 00:24:44,600 Speaker 4: ameliorated in a new administration where there are checks and 409 00:24:44,680 --> 00:24:48,879 Speaker 4: bounces on the government and where the press is a 410 00:24:48,920 --> 00:24:52,600 Speaker 4: lot more inviegorated in pointing out some of these problems. 411 00:24:52,880 --> 00:24:57,000 Speaker 4: I think in the last two administrations of the Modi government, 412 00:24:57,680 --> 00:25:01,800 Speaker 4: the press was cowed, was un willing to point out problems. 413 00:25:02,080 --> 00:25:02,360 Speaker 8: I think. 414 00:25:02,400 --> 00:25:05,880 Speaker 4: With the press more alive, I think we'll get stronger 415 00:25:05,960 --> 00:25:10,359 Speaker 4: debate and hopefully debate leads to better economic as well 416 00:25:10,400 --> 00:25:11,960 Speaker 4: as political policy. 417 00:25:11,960 --> 00:25:13,679 Speaker 2: Professor, thank you so very much for being with us. 418 00:25:13,680 --> 00:25:17,320 Speaker 2: It's terribly helpful. As Raghuram Rajan of Chicago's Booth School 419 00:25:19,080 --> 00:25:21,639 Speaker 2: coming up the highs and lows of the US auto 420 00:25:21,680 --> 00:25:24,600 Speaker 2: industry and the motor city it created, we go to 421 00:25:24,640 --> 00:25:27,439 Speaker 2: Detroit for the story of the rise and fall and 422 00:25:27,640 --> 00:25:30,760 Speaker 2: rise again of a proud city and automaker. 423 00:25:31,040 --> 00:25:33,399 Speaker 5: The train station felt like the right kind of challenge 424 00:25:33,480 --> 00:25:35,800 Speaker 5: for four to be part of, so that we could 425 00:25:35,800 --> 00:25:37,960 Speaker 5: be part of the revitalization of Detroit. 426 00:25:39,480 --> 00:25:41,639 Speaker 2: That's next on Wall Street Week on Bloomberg. 427 00:25:43,200 --> 00:25:47,440 Speaker 1: This is Bloomberg Well Street Week with David Weston from 428 00:25:47,560 --> 00:25:48,480 Speaker 1: Bloomberg Radio. 429 00:25:55,400 --> 00:25:57,800 Speaker 2: This is Wall Street Weeek. I'm David Weston. This week, 430 00:25:57,840 --> 00:26:00,520 Speaker 2: the city of Detroit went back to its past on 431 00:26:00,600 --> 00:26:03,359 Speaker 2: the way to its future with a grand reopening of 432 00:26:03,359 --> 00:26:07,320 Speaker 2: Michigan Central Station, once a proud icon of the motor city, 433 00:26:07,680 --> 00:26:11,080 Speaker 2: then a derelict hulk that was nearly torn down, and 434 00:26:11,160 --> 00:26:13,600 Speaker 2: now restored to its former grandeur with the help of 435 00:26:13,600 --> 00:26:16,760 Speaker 2: the Ford Motor Company and the dedication of a mayor 436 00:26:16,960 --> 00:26:20,280 Speaker 2: who just wouldn't give up. Our Bloomberg Radio colleague Michael 437 00:26:20,320 --> 00:26:23,520 Speaker 2: Barr is a native Detroiter who watched the city burn 438 00:26:23,680 --> 00:26:25,480 Speaker 2: during the Riots of the late sixties. 439 00:26:25,960 --> 00:26:28,080 Speaker 9: I'm going to give away my age because that happened 440 00:26:28,080 --> 00:26:31,760 Speaker 9: in sixty seven and I was three years old, and 441 00:26:32,040 --> 00:26:36,000 Speaker 9: I was in southwest Detroit and at the time I 442 00:26:36,040 --> 00:26:41,320 Speaker 9: saw the National Guard in a jeep go by. Now, 443 00:26:41,400 --> 00:26:44,639 Speaker 9: being a stupid kid, I'm thinking, oh, Gi Joe, I 444 00:26:44,680 --> 00:26:48,400 Speaker 9: didn't realize that the dagon city is burning down. It's 445 00:26:48,440 --> 00:26:53,920 Speaker 9: sad and out between that, how the auto industry really 446 00:26:53,960 --> 00:26:55,240 Speaker 9: took a hard nosedive. 447 00:26:56,440 --> 00:26:58,320 Speaker 2: What was Detroit's lowest point do you think? 448 00:26:58,960 --> 00:27:02,800 Speaker 10: Oh, I think probably bankruptcy in twenty thirteen was rock bottom. 449 00:27:02,800 --> 00:27:04,800 Speaker 8: But we had a lot of bad years before that. 450 00:27:04,960 --> 00:27:07,639 Speaker 10: And I said, I'm sixty five years old and the 451 00:27:07,640 --> 00:27:10,760 Speaker 10: city of Detroit has lost population every year. I've been 452 00:27:10,800 --> 00:27:13,639 Speaker 10: alive until last year. So that was a lot of 453 00:27:13,760 --> 00:27:18,840 Speaker 10: years of auto plants moving out, restaurants moving out, movie 454 00:27:18,840 --> 00:27:21,600 Speaker 10: theaters moving out, people moving out. 455 00:27:22,480 --> 00:27:24,840 Speaker 2: The story of Detroit has long been a story of 456 00:27:24,880 --> 00:27:27,679 Speaker 2: the auto companies that helped make it, sometimes for better 457 00:27:27,880 --> 00:27:29,159 Speaker 2: and sometimes for worse. 458 00:27:29,480 --> 00:27:31,720 Speaker 5: I think World War Two is a big challenge for 459 00:27:31,760 --> 00:27:35,560 Speaker 5: the company. And when Henry Ford the second led the 460 00:27:35,600 --> 00:27:39,200 Speaker 5: company back to a revitalized state, you know, we went 461 00:27:39,240 --> 00:27:42,360 Speaker 5: through the whiz kids. We hired all these logistics experts 462 00:27:42,359 --> 00:27:44,240 Speaker 5: from the army after the World War Two, and they 463 00:27:44,440 --> 00:27:49,600 Speaker 5: really created this kind of bureaucratic but an incredibly efficient machine. 464 00:27:49,960 --> 00:27:53,080 Speaker 5: And the company was back in the sixties, and then 465 00:27:53,240 --> 00:27:57,280 Speaker 5: the energy crisis came. The company didn't have efficient vehicles, 466 00:27:57,520 --> 00:28:00,280 Speaker 5: it wasn't competitive amount quality, and it really low this 467 00:28:00,400 --> 00:28:03,320 Speaker 5: way in the seventies as well as the city of 468 00:28:03,359 --> 00:28:09,480 Speaker 5: Detroit after the riots, and you know, we were lost in. 469 00:28:09,480 --> 00:28:11,040 Speaker 2: Less than twenty five years. 470 00:28:11,359 --> 00:28:14,399 Speaker 4: Henry Ford, the son of I the America dualism and 471 00:28:14,480 --> 00:28:15,639 Speaker 4: freedom of enterprise. 472 00:28:16,160 --> 00:28:19,200 Speaker 2: It wasn't always this way. As the twentieth century began, 473 00:28:19,320 --> 00:28:22,560 Speaker 2: Henry Ford started mass producing a new mode of transportation, 474 00:28:22,880 --> 00:28:27,480 Speaker 2: the automobile. In Detroit. Ford invited the first moving assembly 475 00:28:27,520 --> 00:28:30,040 Speaker 2: line in the world, and by the nineteen twenties had 476 00:28:30,040 --> 00:28:32,400 Speaker 2: produced some twenty million model tees. 477 00:28:32,800 --> 00:28:34,919 Speaker 5: My grandfather's a good example. You know, he was an 478 00:28:35,040 --> 00:28:37,120 Speaker 5: educated man, but he had a great job. 479 00:28:36,920 --> 00:28:38,719 Speaker 3: At Ford and built his family. 480 00:28:38,760 --> 00:28:42,479 Speaker 5: As kids went to college, eventually, and just like your family, 481 00:28:42,880 --> 00:28:45,200 Speaker 5: you know, there are millions of people around our country, 482 00:28:45,200 --> 00:28:47,640 Speaker 5: around the world, have been infected by Ford. And at 483 00:28:47,640 --> 00:28:50,680 Speaker 5: that time Ford was the pinnacle. We had eighty percent 484 00:28:50,760 --> 00:28:52,800 Speaker 5: market share globally of the car business. 485 00:28:53,200 --> 00:28:56,040 Speaker 2: The Michigan Central Railway station was a result of that 486 00:28:56,200 --> 00:29:00,320 Speaker 2: automotive success, built in nineteen thirteen when the mythic Ford 487 00:29:00,440 --> 00:29:04,000 Speaker 2: Rouge plant was still under construction. At its peak, over 488 00:29:04,040 --> 00:29:07,040 Speaker 2: two hundred passenger trains a day left the station, carrying 489 00:29:07,040 --> 00:29:10,640 Speaker 2: over four thousand passengers, and another three thousand people worked 490 00:29:10,640 --> 00:29:12,600 Speaker 2: in the office tower above the station. 491 00:29:13,320 --> 00:29:16,680 Speaker 10: But again, I see Detroit through the eyes of a 492 00:29:16,840 --> 00:29:19,480 Speaker 10: kid who remembers a beautiful city. 493 00:29:19,560 --> 00:29:21,440 Speaker 8: I remembered a beautiful train station. 494 00:29:22,040 --> 00:29:24,360 Speaker 2: But in the end, the auto industry that helped build 495 00:29:24,400 --> 00:29:27,160 Speaker 2: Michigan Central was also a central cause of its fall. 496 00:29:27,600 --> 00:29:30,600 Speaker 2: As people moved away from passenger trains and took to 497 00:29:30,640 --> 00:29:33,440 Speaker 2: the cars, Detroit was churning out for the entire country. 498 00:29:34,080 --> 00:29:37,240 Speaker 2: By the nineteen eighties, it was the domestic auto industry's turn, 499 00:29:37,480 --> 00:29:40,040 Speaker 2: as US sales of the big three automakers peaked in 500 00:29:40,120 --> 00:29:44,560 Speaker 2: nineteen seventy nine and then declined steadily ever since, falling 501 00:29:44,640 --> 00:29:48,000 Speaker 2: victim to a rising tide of foreign cars, and with it, 502 00:29:48,040 --> 00:29:51,560 Speaker 2: the entire state of Michigan's contribution to National GDP fell 503 00:29:51,560 --> 00:29:55,040 Speaker 2: from over four percent to less than two point four percent. 504 00:29:55,880 --> 00:29:59,600 Speaker 10: It was heartbreaking over the years to see Dodge Main. 505 00:30:00,000 --> 00:30:03,480 Speaker 8: It was to see Cadillac Fleetwood close, and. 506 00:30:03,480 --> 00:30:05,520 Speaker 10: The jobs went with them, and they went to the suburbs, 507 00:30:05,520 --> 00:30:07,360 Speaker 10: and eventually they went to Mexico. 508 00:30:07,720 --> 00:30:09,960 Speaker 2: By the start of this century, what was once a 509 00:30:10,000 --> 00:30:14,000 Speaker 2: glorious building had been abandoned, its windows broken, its roof 510 00:30:14,120 --> 00:30:16,960 Speaker 2: open to the sky, its marble scavenged. 511 00:30:17,040 --> 00:30:19,360 Speaker 8: With the windows gone, the air blowing through. 512 00:30:19,960 --> 00:30:22,600 Speaker 10: It was depressing every single time it came into town 513 00:30:22,600 --> 00:30:23,160 Speaker 10: on the freeway. 514 00:30:23,480 --> 00:30:26,160 Speaker 2: By twenty thirteen, the Detroit City Council had voted to 515 00:30:26,200 --> 00:30:29,520 Speaker 2: tear Michigan Central down, and it took a Detroit backed 516 00:30:29,520 --> 00:30:33,080 Speaker 2: by Dan Gilbert's real estate investments, a determined Mayor Duggan, 517 00:30:33,520 --> 00:30:36,320 Speaker 2: and a Bill Ford, whose family had helped build Detroit, 518 00:30:36,360 --> 00:30:39,880 Speaker 2: to reclaim it and restore Michigan Central to what as 519 00:30:39,920 --> 00:30:41,920 Speaker 2: of this week it is again. 520 00:30:42,640 --> 00:30:47,120 Speaker 10: So from my first day in office, getting that train 521 00:30:47,160 --> 00:30:51,680 Speaker 10: station reoccupied was a central focus. There was no way 522 00:30:51,720 --> 00:30:54,120 Speaker 10: it was going to be a demolished just meant too 523 00:30:54,160 --> 00:30:57,080 Speaker 10: much to too many generations. And so my first month, 524 00:30:57,360 --> 00:30:59,320 Speaker 10: Matt Moron and the owner, was in my office had 525 00:30:59,320 --> 00:31:01,760 Speaker 10: a list of things that they wanted and I said, 526 00:31:02,160 --> 00:31:02,960 Speaker 10: I want one thing. 527 00:31:03,280 --> 00:31:06,000 Speaker 8: I want you to put windows in that abandoned train station. 528 00:31:06,400 --> 00:31:08,120 Speaker 10: And he looked to me like I was crazy, and 529 00:31:08,160 --> 00:31:10,000 Speaker 10: I said, all people see when they look at the 530 00:31:10,240 --> 00:31:11,320 Speaker 10: train station is blake. 531 00:31:11,480 --> 00:31:14,040 Speaker 8: I remember when it was beautiful. 532 00:31:14,440 --> 00:31:16,440 Speaker 10: And so we made a deal on some other things 533 00:31:16,440 --> 00:31:18,520 Speaker 10: where they spend a million dollars to put in windows. 534 00:31:18,640 --> 00:31:22,239 Speaker 10: And when the windows started to go in, it hit 535 00:31:22,280 --> 00:31:24,080 Speaker 10: an electric effect in the city. 536 00:31:24,160 --> 00:31:27,120 Speaker 8: Everybody driving by in the freeway said, oh my god. 537 00:31:28,840 --> 00:31:32,280 Speaker 2: For Michigan Central and for Detroit to come back, Ford 538 00:31:32,320 --> 00:31:34,320 Speaker 2: and the rest of the auto industry had to come 539 00:31:34,360 --> 00:31:38,600 Speaker 2: back as well, once again showing their mutual dependence, which 540 00:31:38,680 --> 00:31:41,520 Speaker 2: is why Ford stepped up with nearly a billion dollars 541 00:31:41,600 --> 00:31:45,160 Speaker 2: to rebuild a train station from nineteen thirteen that hadn't 542 00:31:45,200 --> 00:31:47,400 Speaker 2: been used in nearly forty years. 543 00:31:47,720 --> 00:31:50,400 Speaker 5: I think it's you know, obviously it's a family company. 544 00:31:50,400 --> 00:31:55,560 Speaker 5: He builds vision, but also for the train station is 545 00:31:55,640 --> 00:32:00,680 Speaker 5: very much a symbol, a kind of a along our 546 00:32:00,800 --> 00:32:06,200 Speaker 5: journey to to create a great company, and we avoided bankruptcy, 547 00:32:06,240 --> 00:32:09,200 Speaker 5: which was amazing in the early two thousands, mid two thousands, 548 00:32:09,520 --> 00:32:12,600 Speaker 5: but to build a vibrant company, you know, in the 549 00:32:12,640 --> 00:32:16,560 Speaker 5: ev world, the digital vehicle world, the train station felt 550 00:32:16,640 --> 00:32:20,440 Speaker 5: like the right kind of challenger project to afford to 551 00:32:20,480 --> 00:32:22,800 Speaker 5: be part of, so that we could be part of 552 00:32:22,840 --> 00:32:25,440 Speaker 5: the you know, revitalization. 553 00:32:24,760 --> 00:32:26,360 Speaker 2: Of Detroit, which had really. 554 00:32:26,160 --> 00:32:29,720 Speaker 5: Been kind of used by almost the national media as 555 00:32:29,760 --> 00:32:33,440 Speaker 5: a you know, example of the decay of the country. 556 00:32:34,000 --> 00:32:36,920 Speaker 5: And this felt like the kind of project that would 557 00:32:37,000 --> 00:32:41,880 Speaker 5: be emblematic of our recovery as a company. It's a 558 00:32:42,000 --> 00:32:47,840 Speaker 5: very American story really of starts and stops, of great 559 00:32:47,920 --> 00:32:51,800 Speaker 5: leadership at moments, but at other moments a loss of 560 00:32:51,880 --> 00:32:55,000 Speaker 5: focus on the customer. I mean this is this is 561 00:32:55,040 --> 00:32:58,360 Speaker 5: the truism of an industrial company. You have to have 562 00:32:58,600 --> 00:33:03,400 Speaker 5: cost and quality pettiveness and that changes. The benchmark changes. 563 00:33:03,720 --> 00:33:07,440 Speaker 5: Oh at many points of the you know, we almost 564 00:33:07,480 --> 00:33:09,520 Speaker 5: went banquet with the model t If you look at 565 00:33:09,520 --> 00:33:14,360 Speaker 5: the company, this has happened many, many times. It's a 566 00:33:14,400 --> 00:33:17,200 Speaker 5: company that's been through a lot. But it's a company 567 00:33:17,200 --> 00:33:20,040 Speaker 5: though that when it gets is back against the wall, 568 00:33:20,680 --> 00:33:22,200 Speaker 5: something magical happens. 569 00:33:23,360 --> 00:33:25,840 Speaker 2: Where are you on the roadback. How far along that 570 00:33:26,000 --> 00:33:26,600 Speaker 2: road are you? 571 00:33:27,000 --> 00:33:31,160 Speaker 5: Our backs are off the stovepipes. We're well into the 572 00:33:31,160 --> 00:33:35,440 Speaker 5: messy middle of the most transformational time other than the 573 00:33:35,440 --> 00:33:39,520 Speaker 5: Model T. You know, we've never gone through this electrification 574 00:33:40,200 --> 00:33:44,000 Speaker 5: transition for low CO two drive trains. We've never had 575 00:33:44,040 --> 00:33:47,360 Speaker 5: a digital product before. We never could give people time 576 00:33:47,520 --> 00:33:51,720 Speaker 5: back like we will with level three autonomy. We're investing 577 00:33:51,720 --> 00:33:56,400 Speaker 5: in all that enabling technology. We're very profitable with our 578 00:33:56,520 --> 00:34:00,840 Speaker 5: pro business and our combustion business. We have vehicles like 579 00:34:00,880 --> 00:34:03,800 Speaker 5: Bronco Mustang they're doing n F one fifty that are 580 00:34:03,840 --> 00:34:05,840 Speaker 5: doing so well, but we still have a lot of 581 00:34:05,880 --> 00:34:09,000 Speaker 5: execution to do. I'd say, you know, we're just a 582 00:34:09,000 --> 00:34:13,520 Speaker 5: few years away from another vibrant period for the company, 583 00:34:13,560 --> 00:34:16,000 Speaker 5: and as leaders, we see it before everyone else sees it, 584 00:34:17,400 --> 00:34:20,279 Speaker 5: and so it's it's exciting for us, but we feel 585 00:34:20,280 --> 00:34:25,200 Speaker 5: a tremendous amount of responsibility for your parents, for you, 586 00:34:25,520 --> 00:34:26,680 Speaker 5: for my grandparents. 587 00:34:28,000 --> 00:34:30,520 Speaker 2: As Ford and the other Detroit automakers have fought their 588 00:34:30,560 --> 00:34:34,160 Speaker 2: way back, they've brought jobs with them. Michigan unemployment peaked 589 00:34:34,280 --> 00:34:37,400 Speaker 2: apart from the pandemic in nineteen eighty three at sixteen 590 00:34:37,480 --> 00:34:41,239 Speaker 2: point five percent, well above the national average, and now 591 00:34:41,280 --> 00:34:43,720 Speaker 2: it's all the way down to three point nine percent, 592 00:34:44,040 --> 00:34:45,680 Speaker 2: right at that national average. 593 00:34:45,840 --> 00:34:48,080 Speaker 10: But when I started, I sat with Bill Ford, I 594 00:34:48,080 --> 00:34:51,040 Speaker 10: sat with Mary Barr, and I sat then with Sergio Marcioni, 595 00:34:51,040 --> 00:34:54,520 Speaker 10: who was running Fiat Chrysler, and I said, look, if 596 00:34:54,520 --> 00:34:56,359 Speaker 10: Detroit's going to come back, we've got to come back 597 00:34:56,360 --> 00:34:57,959 Speaker 10: on our strength. We're not going to be the tech 598 00:34:58,040 --> 00:35:01,680 Speaker 10: hobb the biomedical hibe. The next time use site of 599 00:35:01,760 --> 00:35:05,520 Speaker 10: parts plant, please ask them to come talk to me first. 600 00:35:07,600 --> 00:35:10,760 Speaker 2: William Faulkner famously wrote that the past is never dead. 601 00:35:11,080 --> 00:35:14,000 Speaker 2: It's not even passed. This week we had our fair 602 00:35:14,040 --> 00:35:16,799 Speaker 2: share of reminders of the past remaining very much with 603 00:35:17,000 --> 00:35:20,160 Speaker 2: us in Detroit. The iconic Michigan Central Station came back 604 00:35:20,160 --> 00:35:23,040 Speaker 2: from the near dead and emerged as a gleaming new 605 00:35:23,080 --> 00:35:25,280 Speaker 2: home for Google and high tech mobility. 606 00:35:25,640 --> 00:35:28,440 Speaker 5: This is going to be an innovation hub with software 607 00:35:28,480 --> 00:35:31,759 Speaker 5: engineers and our Ford pro business and many non forward 608 00:35:31,800 --> 00:35:32,800 Speaker 5: people in the building. 609 00:35:33,160 --> 00:35:36,960 Speaker 2: Memestocks like GameStop, which seemed oh so twenty twenty one, 610 00:35:37,280 --> 00:35:40,440 Speaker 2: came roaring back to life, with Keith Gill posting on 611 00:35:40,480 --> 00:35:42,600 Speaker 2: social media what appeared to be a one hundred and 612 00:35:42,640 --> 00:35:45,239 Speaker 2: sixteen million dollar position in the stock, together with a 613 00:35:45,320 --> 00:35:48,839 Speaker 2: green reverse unocard, which seems a bit retro in and 614 00:35:48,840 --> 00:35:49,440 Speaker 2: of itself. 615 00:35:49,560 --> 00:35:52,040 Speaker 11: The only people that I really dislike and loathe in 616 00:35:52,080 --> 00:35:57,080 Speaker 11: this entire situation are the people who pretend that buying 617 00:35:57,160 --> 00:35:59,520 Speaker 11: Game Stop or buying AMC is some sort of like 618 00:35:59,560 --> 00:36:02,120 Speaker 11: revolutionary actor, like sticking it to the man, or like 619 00:36:02,400 --> 00:36:05,200 Speaker 11: that it makes no sense, there's no like, there's no 620 00:36:05,360 --> 00:36:05,919 Speaker 11: there there. 621 00:36:06,600 --> 00:36:09,600 Speaker 2: And speaking of social media, this week, former President Trump 622 00:36:09,719 --> 00:36:12,480 Speaker 2: returned to the question of TikTok, but came up with 623 00:36:12,560 --> 00:36:15,400 Speaker 2: a very different answer. This time. When he was president, 624 00:36:15,480 --> 00:36:17,799 Speaker 2: he wanted to ban it. Now that he's on a 625 00:36:17,880 --> 00:36:20,680 Speaker 2: quest to attract young voters, he decided, you'd rather join it. 626 00:36:21,200 --> 00:36:23,680 Speaker 3: The president is now on TikTok's in my honor. 627 00:36:24,000 --> 00:36:25,960 Speaker 2: And when it comes to politics, what could be more 628 00:36:26,040 --> 00:36:29,279 Speaker 2: nostalgic than a rematch of Trump and Biden, something we 629 00:36:29,320 --> 00:36:32,480 Speaker 2: saw most recently only four years ago. I have never 630 00:36:33,400 --> 00:36:36,200 Speaker 2: tried to forecast the outcome of an election where you 631 00:36:36,280 --> 00:36:39,319 Speaker 2: had the current incumbent running against the former incumbent in 632 00:36:39,360 --> 00:36:42,200 Speaker 2: big media. This week we saw two very different examples 633 00:36:42,239 --> 00:36:45,120 Speaker 2: of the past, not ever fully going away. As Rupert 634 00:36:45,160 --> 00:36:48,440 Speaker 2: Murdock got married for the fifth time at the mature 635 00:36:48,480 --> 00:36:51,320 Speaker 2: age of ninety three, to a woman twenty six years 636 00:36:51,360 --> 00:36:55,000 Speaker 2: his junior. But mister Murdoch's marriage may have been eclipsed 637 00:36:55,000 --> 00:36:57,759 Speaker 2: by a bigger union in the media world, as Paramount 638 00:36:57,800 --> 00:37:01,320 Speaker 2: moved toward merging with David Ellison's Sky and Studio, something 639 00:37:01,360 --> 00:37:03,400 Speaker 2: that's been in the works for a while now, and 640 00:37:03,440 --> 00:37:06,640 Speaker 2: that is very much driven by the media revolution of streaming, 641 00:37:06,680 --> 00:37:09,799 Speaker 2: which is yet another example of the past never being 642 00:37:09,960 --> 00:37:13,120 Speaker 2: entirely behind us. We've had periodic upsets in the media 643 00:37:13,160 --> 00:37:16,560 Speaker 2: world that almost always bring corporate shakeups. When I went 644 00:37:16,560 --> 00:37:19,840 Speaker 2: to Cap Cities ABC in nineteen ninety one, broadcast television 645 00:37:19,880 --> 00:37:22,359 Speaker 2: was in the process of being turned upside down by 646 00:37:22,360 --> 00:37:25,279 Speaker 2: what we used to call basic cable, a new way 647 00:37:25,320 --> 00:37:28,120 Speaker 2: to get better reception of network reruns that turned into 648 00:37:28,160 --> 00:37:32,040 Speaker 2: a powerhouse of original programming tailor made for particular audiences, 649 00:37:32,120 --> 00:37:35,560 Speaker 2: everything from drama to sports, to news to cooking. And 650 00:37:35,600 --> 00:37:37,560 Speaker 2: as much as we talked about it, too many of 651 00:37:37,640 --> 00:37:40,720 Speaker 2: us at the network told ourselves that this upstart cable 652 00:37:40,760 --> 00:37:43,080 Speaker 2: could never challenge the strength of the networks. But it's 653 00:37:43,080 --> 00:37:46,160 Speaker 2: safe to say that was a simpler and occasionally more 654 00:37:46,200 --> 00:37:47,360 Speaker 2: ridiculous time. 655 00:37:47,440 --> 00:37:51,440 Speaker 10: The decision has been passed down to make Veronica or 656 00:37:51,520 --> 00:37:52,120 Speaker 10: co anchor. 657 00:37:52,560 --> 00:37:56,080 Speaker 2: Now, let's hope that as big media makes the big 658 00:37:56,120 --> 00:37:58,840 Speaker 2: transition this time, we can leave some of the past 659 00:37:59,160 --> 00:38:00,359 Speaker 2: truly behind us. 660 00:38:01,080 --> 00:38:01,560 Speaker 3: That does it. 661 00:38:01,560 --> 00:38:03,720 Speaker 2: For this episode of Wall Street Week, I'm David Weston. 662 00:38:03,800 --> 00:38:05,640 Speaker 2: This is Bloomberg. See you next week.