Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: I mean may not have an overall recesion. We're having
Speaker 2: a rolling recession. A kind of role looks pretty strongly
Speaker 2: it is when it comes to jobs. The financial stories
Speaker 2: that shape our world. Three major regional bank failures send
Speaker 2: shockwaves through the banking system. We're all trying to figure
Speaker 2: out what to make of generative AI through.
Speaker 1: The eyes of the most influential voices.
Speaker 2: Welcome down, Doctor Paul Krugman, Ryan Moynihan, a Bank of America,
Speaker 2: Zebra Lair of the Paulson Institute, Glenn Hubbard of the
Speaker 2: Columbia Business School.
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: A war intensifies, an election, hints at what lies ahead,
Speaker 2: a startup Darling goes bankrupt, and a king lays out
Speaker 2: his commitment to fight inflation. This is Bloomberg Wall Street Week.
Speaker 2: I'm David Weston. This week Nobel Laureate Michael Spence on
Speaker 2: the promise of generative AI.
Speaker 3: Generative AI is mainly, not exclusively, but mainly going to
Speaker 3: turn out to be a powerful digital assistant.
Speaker 2: Rock Creek Asny Bacheloss, explains how to make money investing
Speaker 2: in climate in China.
Speaker 4: While a lot of countries in the West talked about it,
Speaker 4: the Chinese actually became more than eighty percent of solar.
Speaker 2: And Melissa Karney is the Aspen Economic Strategy Group on
Speaker 2: building economic resilience by addressing the deficit.
Speaker 5: It's important that people are now paying attention to this.
Speaker 5: I mean, we're really on an unsustainable path.
Speaker 2: Global Wall Street spent another week watching Israel's war with
Speaker 2: Hamas unfold as Israeli forces surrounded Gaza City and the
Speaker 2: fighting intensify.
Speaker 6: Ground oppressions by the israel Defense Forces and continued bombardments
Speaker 6: are hitting civilians. At the same time, Hamas and other
Speaker 6: militants use civilians as human shields and continue to launch
Speaker 6: rockets in these streme in its league towards Israel, and.
Speaker 2: The United States joined much of the rest of the
Speaker 2: world in calling for a humanitarian pause.
Speaker 7: I don't think you know Israel is interested in a
Speaker 7: cease fire at this point, but they are perhaps willing
Speaker 7: to have what we do call humanitarian pauses.
Speaker 2: Off Your elections in Ohio, Kentucky, and Virginia tipped decidedly
Speaker 2: toward the Democrats.
Speaker 8: What's fascinating about this series of elections and the ones
Speaker 8: we had in November of twenty twenty two for the
Speaker 8: midterm election is that they're saying the same.
Speaker 2: Thing, suggesting maybe that abortion rights could play a role
Speaker 2: in the presidential election less than one year away.
Speaker 9: If you look at from the midterms to last night,
Speaker 9: from California to Kansas, Ohio to Virginia, the voters said, look,
Speaker 9: the government should not be telling a woman what.
Speaker 4: To do with her body.
Speaker 2: In two short years, the real estate startup work went
Speaker 2: for a huge potential IPO to asspack to bankruptcy. I
Speaker 2: think billions in the process.
Speaker 4: As a company, we need to accept this reality and
Speaker 4: also or need to learn the lesson from this for
Speaker 4: our future investment activity.
Speaker 2: On Wednesday, the picket lines came down in Hollywood as
Speaker 2: the studios reached a tentative agreement with SAG after raising
Speaker 2: hopes that movies and TV shows would get back into production.
Speaker 7: This and a very clear message that union's work, labor movements.
Speaker 2: Work, and no less than the King of England weighed
Speaker 2: in on the need to fight for an economic soft landing.
Speaker 10: My government will continue to take action to bring down
Speaker 10: inflation to ease the cost of living for families. And
Speaker 10: help businesses fund new jobs and investments.
Speaker 2: And then after the equity markets closed on Friday, Movies
Speaker 2: cut the US credit outlook to negative as the country
Speaker 2: looks at yet another government funding deadline next Friday. Through
Speaker 2: the week, the bond market was on something of a
Speaker 2: roller coaster, with the yield on the ten year ranging
Speaker 2: as low as four point four to seven, and then
Speaker 2: it shot up again late Friday after the Moody's news
Speaker 2: to end the week at four point sixty five. Stocks
Speaker 2: were a bit more upbeat as the S and P
Speaker 2: five hundred added another one point three percent to come
Speaker 2: within thirty points of the year end median number of
Speaker 2: four four three five that our Bloomberg elves are projecting
Speaker 2: right now, while the NASDAD gained nearly two point four percent.
Speaker 2: To explain it all to us, we welcome back now
Speaker 2: to Sonatasai. She is Franklin Temple and chief investment officer
Speaker 2: for fixed income. So thank you so much for being
Speaker 2: back with us. So before we get to what happened
Speaker 2: over all in the week, what about there right at
Speaker 2: the end on Friday with the Moody's downgraded US credit,
Speaker 2: How material is that?
Speaker 11: So you know, material is they're talking about, does it
Speaker 11: have an important impact on people's desire or ability to
Speaker 11: hold US debt. It's not going to be so important,
Speaker 11: but as a signal of how dysfunctional the US policy
Speaker 11: making is right now, it's very important, I'd say. I mean,
Speaker 11: it's a reminder that we are looking at an extremely
Speaker 11: serious fiscal problem between the debt and the deficit, and
Speaker 11: the way we are operating right now is not very reasonable.
Speaker 11: So it's a good reminder that fiscal policy is an
Speaker 11: issue and markets should pay potentially more attention than they
Speaker 11: are to fiscal issues.
Speaker 2: And it comes against the backdrop of a fair amount
Speaker 2: of volatility in your neck of the woods, that is
Speaker 2: fixed income. We saw again this week the ups and downs.
Speaker 2: They may not have been quite as big, the amplitude
Speaker 2: maybe a litle less than it has been, but it's
Speaker 2: still a fair amount of volatility because I'm not sure
Speaker 2: the markets know where it's going.
Speaker 12: I think that.
Speaker 11: Actually, if you look at what's happening that markets, what
Speaker 11: we saw last week really was once again, we've been
Speaker 11: to this show, David right, We've done this before many
Speaker 11: times over the last year and a half. You have
Speaker 11: a FED meeting, the market here's what it wants to
Speaker 11: hear from what the Fed is saying, and runs with it.
Speaker 11: So what I think that Japowell was trying to do,
Speaker 11: not this week, but the week before, was to give
Speaker 11: the market a gentle nudge in the direction of a
Speaker 11: slightly more dubvish message. The market took that slightly dubbsh
Speaker 11: message and simply ran with it. We had a close
Speaker 11: to forty basis points rally in the tenure on the
Speaker 11: back of the Fed, on the back of slightly different
Speaker 11: than anticipated a schedule from Treasury in terms of issuance,
Speaker 11: and a slightly softer job market report.
Speaker 12: The three of them together do.
Speaker 11: Not change enough of what's happening on the ground to
Speaker 11: justify the type of rally we saw. And indeed, this
Speaker 11: week we've seen a bit of a sell off that
Speaker 11: roller coaster you were talking about. I think the market's
Speaker 11: still really really focused on trying to figure out whether
Speaker 11: the Fed or the Treasury can swoop in and make
Speaker 11: it all okay again so that rates can rally and
Speaker 11: we can go back to the races.
Speaker 2: Given that situation, So now, what's an investor to do?
Speaker 2: How do you try to protect yourself and actually make
Speaker 2: some money in this environment right now, cash is actually
Speaker 2: worth something. Now when your cash is worth something, but
Speaker 2: what do you do with your bond Portfoliot's talk about
Speaker 2: that specifically.
Speaker 12: So actually, you know you're right.
Speaker 11: Cash has been very good, good for people this year.
Speaker 11: You're getting a very good, very good, good return on cash. However,
Speaker 11: as we get towards the end of this year, I
Speaker 11: said that I've been saying for a while that the
Speaker 11: FED is likely to maintain higher rates for somewhat longer
Speaker 11: than the market is anticipating.
Speaker 12: We're not getting ready.
Speaker 11: We are certainly not forecasting a hundred basis points of
Speaker 11: rape cuts starting already from the middle of next year,
Speaker 11: as is being.
Speaker 12: Now priced by the market.
Speaker 11: Nonetheless, as we get towards the next several months, I
Speaker 11: think the time to start moving away from that very
Speaker 11: very short duration and cash in fixed income. It's coming
Speaker 11: because we are looking once you get ten years at
Speaker 11: RAM five, once you look at high quality investment, great
Speaker 11: credits and mortgages areas like this are yielding over six percent.
Speaker 11: These are actually pretty attractive for attractive yields. To start
Speaker 11: slowly averaging into a little bit of duration is how
Speaker 11: I would put it. I don't think we chase the
Speaker 11: yield because the type of volatility we've seen it's.
Speaker 12: Not gone away.
Speaker 11: I do think we're going to probably see five again,
Speaker 11: so there's time to.
Speaker 12: Start factoring that in.
Speaker 11: But averaging in a true fixed income portfolio, where you
Speaker 11: start adding a little bit of duration, it's a good
Speaker 11: idea to do it right now, around now, over the
Speaker 11: next three months, over the next six months, and I'm
Speaker 11: looking forward to fixed income actually playing that traditional role
Speaker 11: of delivering income rather than equity like returns.
Speaker 12: Looking at next.
Speaker 11: Year, I'm not looking for massive capital gains out of
Speaker 11: fixed income.
Speaker 2: What about trend? Sorry? What about what side? The United States? Europe? Japan?
Speaker 12: So that's a really interesting point.
Speaker 11: So in Europe, we actually think that the underlying growth
Speaker 11: fundamentals make duration plays in Europe potentially more attractive even
Speaker 11: than the US. So that's one area because growth in
Speaker 11: the euro area is simply not as well supported as
Speaker 11: it continues to be in the US. We're slowing in
Speaker 11: the US, but we're starting from a very good place. Japan,
Speaker 11: to me is the really fascinating one because Japan and
Speaker 11: Japanese investors have actually been a major source of support
Speaker 11: for the long end of the US yield cup because
Speaker 11: rates have been so low, and Japan within the G three,
Speaker 11: the BOG is very much behind the FED and the ECB.
Speaker 12: In terms of changing its Montrey policy stunts.
Speaker 2: Thank you so much to snaw this. I always great
Speaker 2: to have you with us. She's from Franklin Templeton. Coming up,
Speaker 2: what generative AI will mean for our jobs and whether
Speaker 2: we get to decide the Nobel Laureate Michael Spence of Stanford.
Speaker 3: You can influence the direction of technology and development, and
Speaker 3: I think you know within Santas and so on, and
Speaker 3: you should be influenced in.
Speaker 13: The direction of collaboration and augmentation.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. We know
Speaker 2: it's coming and we're told it's going to be big,
Speaker 2: But what generative AI will mean to our economy and
Speaker 2: our lives is yet to be determined, including what it
Speaker 2: will be doe to what jobs and productivity. For his analysis,
Speaker 2: we welcome now Michael Spence. He's Nobel Prize winner in economics.
Speaker 2: Diana Maritis of the Stanford Business School and co author
Speaker 2: with Gordon Brown and Muhammad al Area of Permacrisis, A
Speaker 2: Plan to fix a fractured world. So, doctor Spence, thank
Speaker 2: you so much for being with us. You've written an article,
Speaker 2: co author and article in Foreign Affairs, specifically the coming
Speaker 2: AI Economic Revolution. So you've thought through these things. First
Speaker 2: of I'll start with what the challenges are that we
Speaker 2: have in terms of the size of workforce and productivity
Speaker 2: that perhaps AI could help us on.
Speaker 3: So we have a lot of what I what we
Speaker 3: call secular headwinds to growth. So we lived for three decades, David,
Speaker 3: in a world that produced massive amounts of incremental productive
Speaker 3: capacity made mainly in the emerging economies. As a result,
Speaker 3: we had a deflationary kind of you know pattern in
Speaker 3: the economy of inflation wasn't much of a problem.
Speaker 13: And all that's that force is fading rapidly.
Speaker 3: Then you've got aging in the global economy. More than
Speaker 3: seventy five percent of the global economy is in a
Speaker 3: serious pattern of aging, you know, declining workforces in some cases,
Speaker 3: you have big changes in labor market behavior. You have
Speaker 3: shortages in all the major employment sectors in the American economy, uh,
Speaker 3: the big ones. And then and then you know, you
Speaker 3: have geopolitical tensions and shocks coming from multiple sources like pandemics, climate,
Speaker 3: and a pattern of diversification initiated both by businesses, you know,
Speaker 3: in pursuit of kind of resilience and longer term you know, profitability,
Speaker 3: but also now by by economic policy and multiple jurisdictions.
Speaker 3: And when you combine all those forces and the declining
Speaker 3: productivity trend, which has been fairly dramatic in the last decade,
Speaker 3: you've got a world that switched relatively rapidly from you know,
Speaker 3: demand constraint to supply constraint growth patterns, and so we're
Speaker 3: looking for solutions to the supply side issues that are
Speaker 3: that are creating not only problems for growth, but you know,
Speaker 3: problems for the reappearance of inflation, you know, for higher
Speaker 3: interest rates, higher lower valuations, higher costs of capital and
Speaker 3: so on. And we're doing it in an environment where
Speaker 3: we have to make enormous investments and things like sustainability.
Speaker 3: So it's when I stand back and look at it, it's,
Speaker 3: you know, it's a big challenge. And so that led
Speaker 3: me and others to try to start looking for well
Speaker 3: what tools and technologies do we have to try to
Speaker 3: solve this problem.
Speaker 2: We all live through something of digital revolution in the
Speaker 2: late nineties and the early oughts in the move to
Speaker 2: the Internet, and there was a real growth impetus from that.
Speaker 2: Is our call. In what ways does this new move
Speaker 2: to digital revolution through AI compared to that. Maybe it's
Speaker 2: similar to or maybe different from.
Speaker 13: So we did get a productivity surge.
Speaker 3: It came, you know, in the late nineteen nineties after
Speaker 3: everybody got access to the Internet and the Worldwide Web
Speaker 3: came in, you know, into its own and that lasted
Speaker 3: into the early two thousands, and some of that is ongoing,
Speaker 3: you know, the digitalization of supply chains and so on.
Speaker 3: That was pretty powerful and it had had noticeable effects.
Speaker 3: It produced decline in middle class jobs in the advanced
Speaker 3: economies like ours. It produced what David Otter calls job
Speaker 3: and income polarization. There was a lot of automation in it.
Speaker 3: You know, we automated things like you know, the keeping
Speaker 3: of the General Ledger. Most of the most of the
Speaker 3: information systems that a corporation runs on are now sort.
Speaker 13: Of digital and fairly automated and so on.
Speaker 3: So, you know, it was powerful but it feels to
Speaker 3: me at least very different from the current round.
Speaker 2: One of the things you point out in your paper
Speaker 2: in Foreign Affairs is the effect that this new genera
Speaker 2: of AI could have on so called knowledge economy, which
Speaker 2: is different from the automation referred to from the Internet.
Speaker 2: That may well affect a different strata of jobs as
Speaker 2: I understand it.
Speaker 3: Yeah, I mean, you know, the knowledge economy, when you
Speaker 3: think about it carefully, kind of runs through and across
Speaker 3: the entire economy. So even in what we think of
Speaker 3: as sectors that are sort of largely blue collar, you know,
Speaker 3: there's a fair amount of knowledge, you know that goes
Speaker 3: into these skills, knowledge and so on. I mean, take
Speaker 3: something like nursing. You know, nurses are pretty highly trained people.
Speaker 3: They have to respond in intelligent ways to the signals
Speaker 3: they get from you know, the equipment that patients are
Speaker 3: using and they're.
Speaker 13: Looking after and so on.
Speaker 3: But you know, but yes, I mean, the CEO of
Speaker 3: Google when asked you know, where is this going to
Speaker 3: have its immediate impact.
Speaker 13: It's going to be in the knowledge economy.
Speaker 3: But I think, you know, we tend to think of
Speaker 3: that as sort of white collar work, and there's an
Speaker 3: element of truth in that, but I think it actually
Speaker 3: does run right across the entire economy. Maybe not to
Speaker 3: the same depth in every sector, but nevertheless it's very
Speaker 3: broad based.
Speaker 2: Do we have a sense and I understand this may
Speaker 2: not be determinate, I mean that is to say, it
Speaker 2: may differ as on what we do, but do we
Speaker 2: have a sense of the extent to which this general
Speaker 2: AI will displace jobs? They will go away as opposed
Speaker 2: to transform jobs.
Speaker 13: Look, I mean we're in a period of intense expiration
Speaker 13: and experimentation. So you know, people often say, you know
Speaker 13: that it's important to acknowledge it. You know, real.
Speaker 3: Uncertainty when you're in the early stages of this, and
Speaker 3: that's certainly characteristic of this. Having said that, James and I,
Speaker 3: our best guess is that generative AI is mainly, not exclusively,
Speaker 3: but mainly going to turn out to be, you know,
Speaker 3: a powerful digital assistant.
Speaker 2: One of the points you make in the paper is that,
Speaker 2: as I say, this is not predestined to some extent.
Speaker 2: How this ends up depends upon us and what we
Speaker 2: decide to do about it. Explain to us, well, what
Speaker 2: you think needs to be done or should be done,
Speaker 2: so that we get the most good out of generative AI,
Speaker 2: and as a subpoint, how much of that can be
Speaker 2: trusted to the markets as opposed to governments.
Speaker 3: So, you know, I think the markets in government and
Speaker 3: attitudes and what and biases you know, are all part
Speaker 3: of the mix. So I think the first order of
Speaker 3: business is to avoid what Eric Bridenelson calls that an
Speaker 3: influential paper that the touring trap. So Alan Turing proposed
Speaker 3: that we evaluate progress with digital machines by using.
Speaker 13: The following tests. Can we build a machine that.
Speaker 3: Interacts with the human and the human thinks that it's
Speaker 3: interacting with another human?
Speaker 13: Is a fairly small step, and.
Speaker 3: This is common in the AI world to evaluate progress
Speaker 3: in AI by determining how well machines do relative to
Speaker 3: human performance. So we do that in language recognition, we
Speaker 3: do it in the image recognition, which is a huge
Speaker 3: breakthrough in the you know, in the last six seven years.
Speaker 3: And we do it, you know, with the generative AI.
Speaker 3: Does the generative AI do better than the average human?
Speaker 3: On the l s at the law school have to
Speaker 3: do tests. That's okay, but there's a very small step
Speaker 3: from that to thinking that, you know, well, once the
Speaker 3: machine passes the human.
Speaker 13: Why don't we get rid of the human And that
Speaker 13: leads you to.
Speaker 3: What you might call the automation bias, and that I
Speaker 3: think we do have to resist. And that's not government,
Speaker 3: that's not business, that's got any particular sector, it's just
Speaker 3: the way we think about it.
Speaker 13: So I think that's step one.
Speaker 3: Step two is, you know, you can influence the direction
Speaker 3: of technology and development, and I think you know, with
Speaker 3: incentives and so on, and you should be influenced in
Speaker 3: the direction of collaboration and augmentation.
Speaker 13: And then third, with the way James and.
Speaker 3: I thought of it, we don't want to repeat that
Speaker 3: pattern of you know, sort of high adoption rates and
Speaker 3: very low adoption rates that we saw in earlier rounds
Speaker 3: of digital you know adoption.
Speaker 2: Doctor Spence, thank you so much for being here on
Speaker 2: Wall Street Week, really appreciate That's not to Michael Spence
Speaker 2: of the Stanford Business School. Coming up, as we count
Speaker 2: down the months until next year's elections, our colleague Michael
Speaker 2: McKee takes us back through what happened to some other
Speaker 2: incumbent presidents when the economy was in flux. That's next
Speaker 2: on Wall Street Week.
Speaker 1: On Bloomberg, this is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio.
Speaker 2: China and climate investing two destinations that were once all
Speaker 2: the rage.
Speaker 3: If I had to bet on one market or the
Speaker 3: other over the next several years, I would bet on China's.
Speaker 8: If you're global investor, you've got to be watching and
Speaker 8: investing here in China.
Speaker 7: ESG investing has gone from niche to mainstream.
Speaker 2: We're integrating ESG environmental, social and governance into every aspect
Speaker 2: of our investment decisions and across our investment workfelows, but
Speaker 2: there recently have given up some of their momentum as
Speaker 2: foreign direct investment in China has dropped off.
Speaker 14: The big question will be whether she jmping pivots and
Speaker 14: focus is more on market opening and creating the confidence
Speaker 14: and the conditions to continue to attract foreign business, which
Speaker 14: is necessary if he's going to continue to grow his economy,
Speaker 14: he can't do it without foreign business being present.
Speaker 2: And green investing has gotten increasingly controversial.
Speaker 15: Energy transition is very much misguided in my opinion. It's
Speaker 15: based on politics and emotion, it's not based on sciences.
Speaker 15: Back we're really all we're doing is we're substituting one
Speaker 15: form of mineral extraction for another.
Speaker 2: But now there's reason to take a second look as
Speaker 2: technology may be taking the place of real estate in
Speaker 2: the Chinese economy.
Speaker 16: Yes, there are excesses in parts of the Chinese economy
Speaker 16: in real estate, but their technological process is really strong.
Speaker 16: The entire clean energy economy cannot exist without Chinese components
Speaker 16: and Chinese raw materials.
Speaker 2: And China races ahead of the West and extracting the
Speaker 2: minerals that drive the move away from carbon.
Speaker 17: China has been developing this industry for twenty or thirty years,
Speaker 17: so they're really ahead of most Western democracies. It's now
Speaker 17: important for us to make sure we have diversified supply
Speaker 17: chains because no matter what the product, whether it's critical
Speaker 17: minerals or rares, having options.
Speaker 12: Around where you get these things to be really important.
Speaker 2: Leading Western investors to take a second look at parts
Speaker 2: of the Chinese economy that may be opportunities even as
Speaker 2: other parts slow down.
Speaker 3: What I would say is, I think the story on
Speaker 3: what's growing in China's actually misunderstood.
Speaker 13: Right One is that housing.
Speaker 3: I think people know that it's not growing, and I
Speaker 3: think that's been well documented.
Speaker 13: What they're ment missing though, is the growth drivers.
Speaker 5: What you're seeing is a huge growth surge in the
Speaker 5: decarbonization or the energy transition.
Speaker 2: And to give us her sense of investing in China
Speaker 2: and investing in greed at the same time. And welcome
Speaker 2: back a very special friend of Wall Street Week. She
Speaker 2: is a Sonny Bechalist of Rock Creek. Welcome back. Great
Speaker 2: to have you have, Sonny.
Speaker 4: Thank you, David, It's great to be here.
Speaker 2: So in general, you hear people are less enthusiastic these
Speaker 2: days about investing in China, but what about investing in
Speaker 2: climate in China.
Speaker 4: So you're absolutely right, David, investing in China. You put
Speaker 4: it very nicely. But I think a lot of people
Speaker 4: are taking out their money from China. We've seen now
Speaker 4: from FDI going down, to equity flows going out, to
Speaker 4: companies repatriating their profits in China, and a lot of
Speaker 4: people are actually not even making overt noises that there
Speaker 4: are because they want to build the next factory somewhere
Speaker 4: else before they say they're taking it out. So I think,
Speaker 4: if anything, what we've seen is the beginning of a
Speaker 4: process of reducing outside money going into China. And of
Speaker 4: course the biggest problems. We've talked about this before is
Speaker 4: the demographics, the big loans that the banks have, and
Speaker 4: also the fact that people are still saving so much
Speaker 4: and not consuming and that has not changed even yesterday's numbers,
Speaker 4: So there's deflation in the consumer area. So coming to
Speaker 4: the whole area of green energy, Interestingly, while a lot
Speaker 4: of countries in the West talked about it, the Chinese
Speaker 4: actually became more than eighty percent of solar production solar
Speaker 4: power production. When people talked about EV they're now fifty
Speaker 4: percent of EV exports into the world, apart from also
Speaker 4: buying EV's in China. So there is this contradiction in
Speaker 4: the broader economy in China. And I think while we
Speaker 4: are still discussing whether whether there is you know, ESG,
Speaker 4: or whether whether whether we should have renewable energy or not,
Speaker 4: they're not really looking at ESG. They're just looking at economics.
Speaker 4: They're looking at the fact that the uh these evs
Speaker 4: and and solar energy is cheaper. They are big, they
Speaker 4: have huge reliance themselves on imported.
Speaker 2: Oil and coal.
Speaker 4: So from their own point in terms of geopolitically, they
Speaker 4: have made a better plus when they went to all
Speaker 4: the cop meetings they heard loud and clear that the
Speaker 4: West is talking about this. The interesting thing is they
Speaker 4: did more than the West in terms of investments in.
Speaker 2: This area on this program before you said it's the
Speaker 2: second largest economy in the world. You can't talk about
Speaker 2: just ignoring China. You have to deal with China. So
Speaker 2: if you're going to have to deal with China as
Speaker 2: an investor, some of the issues you identify are directly
Speaker 2: or in directly titan the government, even consumer purchasing in
Speaker 2: parties because of a loss of confidence. It appears certainly
Speaker 2: in the tech sector because of what the Chinese cars are.
Speaker 2: But given what you just said about climate, is that
Speaker 2: a relatively safer sector because the Chinese government is so
Speaker 2: committed to the area.
Speaker 4: So Chinese gun is committed. It's still continuing to invest
Speaker 4: a lot in this area. But at the same time,
Speaker 4: as Janet Dellen said in her piece yesterday, they're also
Speaker 4: subsidizing a lot the energy sector. So what they have
Speaker 4: done with news sectors, as China has entered any new sector,
Speaker 4: whether it was originally tech, whether it was infrastructure, whether
Speaker 4: it is now clean energy, huge subsidies going into it.
Speaker 4: So if you can find companies that are well run
Speaker 4: that are profitable. I think it's a great area just
Speaker 4: because they are very good. But you have to be
Speaker 4: very careful to invest in companies that are really riding
Speaker 4: the low wage, the subsidized wage and subsidized subsidized loans
Speaker 4: from the government.
Speaker 2: And given what's gone on with the stock market over there,
Speaker 2: do you want to look at private companies rather than
Speaker 2: publicly traded companies.
Speaker 4: So I think maybe a few years ago, yes, But
Speaker 4: I think in private investments the biggest issue is the
Speaker 4: rule of law and certainty of whether you can take
Speaker 4: your money out in If you invested today in a
Speaker 4: private investment, you would assume you're taking your money out
Speaker 4: maybe ten years maybe later. So I think what the
Speaker 4: environment that President g has created unfortunately makes people much
Speaker 4: less comfortable making private investments. If anything, Chinese very successful
Speaker 4: private investors and tech and venture investors are starting to
Speaker 4: invest much more in Chinese companies that are investing outside
Speaker 4: of China or in Japan because they are concerned themselves
Speaker 4: that if they become too successful, the fate of Jackman
Speaker 4: and others may faund them. But also if they're not
Speaker 4: super successful, then what's the point. So the entrepreneurial spirit,
Speaker 4: which has been super important really in the last twenty
Speaker 4: years in China, particularly the last ten years. I think
Speaker 4: that is waning, and it is I think something to
Speaker 4: really watch for any kind of investment in China.
Speaker 2: Talk about more globally, we have COP twenty eight coming
Speaker 2: up at the end of this month now, and there
Speaker 2: are discussions going on even as we speak. This week,
Speaker 2: there were discussions between US and China to try to
Speaker 2: come to terms on some basic issues, including funding for
Speaker 2: some of the lower income countries. Thrilled to deal with it.
Speaker 2: If in fact, and it's a big if, if the
Speaker 2: United States and China could come to terms, if COP
Speaker 2: twenty eight could come up with some meaningful global really agreements,
Speaker 2: would that be an investment opportunity potentially because it could
Speaker 2: really jump start a lot of the green economy.
Speaker 4: I think it would be really really helpful if there
Speaker 4: was agreement. And I think starting with next week's meetings,
Speaker 4: the EPECH meetings here with a lot of Asian leaders
Speaker 4: in the US, that will be sort of the start
Speaker 4: of those conversations, and I think we should watch those
Speaker 4: to see what kind of agreements or lack of agreements
Speaker 4: there are next week in terms in terms of climate,
Speaker 4: because that is military and a climate are the two
Speaker 4: areas that people are looking for different kinds of agreements
Speaker 4: next week. So if that happens, I think we can
Speaker 4: be hopeful that when we get to cop there'll be
Speaker 4: more positive, more positive environment for some sort of agreement.
Speaker 4: My sense though is that there is the economics of
Speaker 4: renewable energy has changed a lot. So if you look
Speaker 4: at it, for example, on any given day in Texas
Speaker 4: versus California, one is ahead of the other in terms
Speaker 4: of solar production of power. So that is all based
Speaker 4: on economics, not politics of E.
Speaker 10: S G.
Speaker 4: Or all the other words that we hear. So if
Speaker 4: we're taking that line, if we're going to a lot
Speaker 4: of other countries, you're seeing that people want to want
Speaker 4: to move to eb cars just because they're cheaper at
Speaker 4: the moment in terms of running them. So if you
Speaker 4: look at that, it will be the consumers. It will
Speaker 4: be the private sector that I think will be bigger
Speaker 4: leaders in this public sector leaders have not really been
Speaker 4: while lots of you know, speeches have been made have
Speaker 4: been less uh less helpful in terms.
Speaker 2: Of executing of signing always wonderful to have you on
Speaker 2: Wall Street? Thank you so much. That's a Sonny Bachelist
Speaker 2: of Rock Creek coming up, building a more resilient economy.
Speaker 2: We talk with Aspen Economic Strategy Group Director of Melissa
Speaker 2: Carney about the subject at this year's meetings.
Speaker 5: These reforms really need to have bipartisan buy in so
Speaker 5: they're lasting.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Street Week with David Weston from Bloomberg Radio.
Speaker 2: Finally, one more thought. Children cannot rest till they get
Speaker 2: rid of their money, or as we say it, burns
Speaker 2: in their pockets. According to the Oxford English Dictionary, that's
Speaker 2: the first reference to money burning holes in pockets, and
Speaker 2: it dates back to seventeen sixty eight. These days, it
Speaker 2: seems that there are quite a few children with burning pockets.
Speaker 2: Starting with we Work only two short years ago, investors
Speaker 2: including the legendary Maseoshi Son couldn't wait to get money
Speaker 2: into the pockets that the real estate startup and JP
Speaker 2: Morgan couldn't wait to get tens of millions of dollars
Speaker 2: into the pockets of founder Adam Newman to buy luxury homes.
Speaker 18: They have a long standing relationship with Adam Newman himself.
Speaker 18: So JP Morgan has been leading something akin to a
Speaker 18: margin loan where he's been taking out loans based on
Speaker 18: his private staff.
Speaker 2: But then questions were raised about the wee Work business
Speaker 2: plan and a massive IPO turned into a much more
Speaker 2: or modest spack.
Speaker 18: It had to undergo a major restructuring. Well, that restructuring
Speaker 18: has just been complete. It did go publicly aspack in
Speaker 18: October of twenty twenty one. Sandy Mathroni took over and
Speaker 18: he did try to write the shift.
Speaker 2: Now even that's gone by the wayside as we Work
Speaker 2: made it official and declared bankruptcy this week, leaving Masseosha,
Speaker 2: son of SoftBank, about eleven point five billion dollars later
Speaker 2: in his pockets.
Speaker 19: We Work at his p twenty nineteen, here's a company
Speaker 19: that gets valued in private markets of what forty seven billion?
Speaker 19: And here we are four years later when the company's
Speaker 19: filing for bankruptcy. And in the meantime we know, based
Speaker 19: on reports that Adam Newman, the founder of the company,
Speaker 19: has managed to take in hundreds and hundreds of millions
Speaker 19: of dollars.
Speaker 2: Twenty years ago. Donald Trump, long before it was president,
Speaker 2: was eager to get money in his own pockets to
Speaker 2: buy the Durrel Golf Club in Florida, as well as
Speaker 2: a hotel and skyscraper in Chicago, and Deutsche Bank seemed
Speaker 2: eager to give him his wish, loaning him a total
Speaker 2: of two hundred and thirty two million dollars, backed by
Speaker 2: his telling them he had assets worth four point three
Speaker 2: billion dollars. A New York State judge ruled that his
Speaker 2: assets were actually worth far less, and this week mister
Speaker 2: Trump appeared before a New York City court deciding how
Speaker 2: much he owes in damages, which may leave a bit
Speaker 2: less money in the former president's pockets, despite his spending
Speaker 2: much of his time on the witness stand, badgering counsul
Speaker 2: and even the judge himself. But in the end it
Speaker 2: may all have been worth it, as Bloomberg reported this
Speaker 2: week that mister Trump's net worth has actually gone up
Speaker 2: half a billion dollars since he left office, and that
Speaker 2: brings us to what may be the biggest pockets of all.
Speaker 2: We learned this week that the most famous investor of
Speaker 2: them all, Warren Buffett of Berkshire Hathaway, as a master
Speaker 2: record one hundred and fifty seven billion dollars in cash,
Speaker 2: an amount that would burn a hole in just about
Speaker 2: anyone's pockets. It appears that mister Buffett can't find any
Speaker 2: deals that make sense at the price is on offer,
Speaker 2: leading us to wonder how long he can wait before
Speaker 2: deploying some of that huge pile of dry powder.
Speaker 13: I am curious about that cash pile.
Speaker 3: When do you think, Gregory, it will be the right
Speaker 3: time to really try to deploy a big chunk of
Speaker 3: one hundred and fifty seven billion dollars.
Speaker 2: But if we've learned anything at all about Warren Buffett,
Speaker 2: it's that he never feels the burn of money in
Speaker 2: his big pocket. He'd rather keep it where it is
Speaker 2: than invest in things like we works or loans to
Speaker 2: real estate developers with uneven records.
Speaker 13: All of a sausage muffin with Egan Jays three scuteen,
Speaker 13: is a bacon egg, and Jee's biscuit.
Speaker 15: The market's down this morning, so I can go pass
Speaker 15: up to three seventeen ag over the two twenty five.
Speaker 2: That's why he's Warren Buffett and the rest of us
Speaker 2: are not. That does it for this episode of Wall
Speaker 2: Street Week, I'm David Weston. This is Bloomberg. See you
Speaker 2: next week,