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Speaker 1: This is Bloomberg Wall Street Week. We turn our attention

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Speaker 1: to the markets this week. Us CPI Nemers reinforcing concerns

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Speaker 1: about inflation. The financial stories that chief are worth a

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Speaker 1: really different reaction to Mark. It's more indications of just

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Speaker 1: how hot the U. S economy really is. Through the

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Speaker 1: eyes of the most influential voices Larry Summers, the former

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Speaker 1: Treator Secretary, Katherine Keening, CEO of v n Y Mollins,

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Speaker 1: Sam's l Sharmon and founder Equitic Group Investment in Bloomberg

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

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Speaker 1: week of hope about inflation and interest rates, about China's

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Speaker 1: relations with the United States, about Britain getting serious about

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Speaker 1: its budget, and of course, former President Trump's hope that

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Speaker 1: he can do it all again. This is Bloomberg Wall

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Speaker 1: Street Week. I'm David Weston. This week special contributor Larry

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Speaker 1: Summers on what came out of the G twenty meetings

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Speaker 1: in Bali, and former FIT vice chair Rich Clarada on

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Speaker 1: the liquidity problem in the Treasury's market and what can

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Speaker 1: be done about it. It was a week of hoping,

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Speaker 1: hoping that things just white start to move in a

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Speaker 1: better direction in US China relations. After a President Biden's

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Speaker 1: meeting in Vali with President g I absolutely believe there's

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Speaker 1: need not be a new co war. I do not

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Speaker 1: think there's any imminent attempt on the part of China

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Speaker 1: to invade Taiwan, and it made it clear that our

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Speaker 1: policy in Taiwan has not changed at all. Hoping that

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Speaker 1: inflation may just be easing a bit in the United States,

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Speaker 1: with Fidd, vice chair at Leo Brainer, telling Bloomberg we

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Speaker 1: might see a bit of moderation in rate hikes. I

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Speaker 1: think it will probably be appropriate to move to a

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Speaker 1: slower pace of increases. But I think what's really important

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Speaker 1: to emphasize we've done a lot, but we have additional

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Speaker 1: work to do, both on raising rates and sustaining restraint

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Speaker 1: to bring inflation down. Hoping that the new British government

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Speaker 1: has gotten the message as it put forth a new

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Speaker 1: budget designed to reassure the markets. So today we deliver

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Speaker 1: a plan to tackle the cost of living crisis and

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Speaker 1: rebuild our economy. Our priorities are stability, growth and public services.

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Speaker 1: And then of course there's that special kind of hope

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Speaker 1: the former President Trump brings to everything he does, deciding

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Speaker 1: that despite what happened in the mid terms to his

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Speaker 1: handpicked candidates, this was the right time to announce he's

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Speaker 1: running again for president in order to make America great

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Speaker 1: and glorious again. I am tonight announcing my candidacy for

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Speaker 1: President of the United States. Even as prominent investor and

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Speaker 1: Republican supporter Ken Griffin of Citadel couldn't find much to

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Speaker 1: hope for in Mr Trump's candidacy. He lost. We lost

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Speaker 1: Georgia because of his behavior in the Senate race. In

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Speaker 1: that's a second loss. And then this year the Republicans

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Speaker 1: lost the Senate because the Trump back candidates and Senate

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Speaker 1: races were rejected by American voters. That's a three time loser.

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Speaker 1: And I'd like to think that the Republican Party is

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Speaker 1: ready to move on from somebody who's been for this

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Speaker 1: party a three time loser. Well, whatever we were all

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Speaker 1: hoping for this week, we didn't really get that much

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Speaker 1: out of the markets, which traded without real conviction, with

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Speaker 1: the sp just seven tents of a percent for the week,

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Speaker 1: and the NAZAC down one point five seven and the

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Speaker 1: yield on the ten year up about seven basis points

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Speaker 1: ending the week at three point a two. To help

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Speaker 1: us sort it all out, we welcome now a Sonny Beschlis,

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Speaker 1: CEO of Rock Creek, and Bob Michael, he's chief investment

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Speaker 1: officer and head of the global fixed income unit at

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Speaker 1: JP Morgan Asset Management. So welcome both you. Great to

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Speaker 1: have you back. Let me start with you. I mean,

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Speaker 1: I watched the eco numbers, I listened to the Fed speak.

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Speaker 1: I sort of felt like I was going both ways

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Speaker 1: at the same time. What did you see? Well for

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Speaker 1: a bond investor, all of us who have been battered

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Speaker 1: this year, this is one of the weeks that made

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Speaker 1: sense to us. We had a nice tail wind coming

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Speaker 1: in from the inflation data. It was great all the

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Speaker 1: way through core when you look at shelter everything. Yes,

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Speaker 1: the markets went a little crazy, they went wild, and

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Speaker 1: the central bankers did what they're supposed to do. They

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Speaker 1: came in one by one and reminded us, don't declare

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Speaker 1: victory yet. These are only a couple of prints. There

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Speaker 1: are more hikes to come, but maybe there is some

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Speaker 1: optimism and the market settled down. So I look at

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Speaker 1: this week and I thought, this is the first great

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Speaker 1: week in a long time. So sunny. Is that the

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Speaker 1: way you saw it as well. And there's still some

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Speaker 1: more rate hikes to come. How many? I think at

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Speaker 1: least another three to start with fifty basis points uh

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Speaker 1: next time in December, followed by at least two or

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Speaker 1: three twenty five basis points next year, and then we'll

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Speaker 1: see from there. And I think what that Bob said

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Speaker 1: is very true. At the same time, as we were

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Speaker 1: listening to at least three fat people come and speak,

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Speaker 1: I wrote that I think they all had very different coats,

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Speaker 1: and you had some of that when Leo Bernard talked,

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Speaker 1: but you also had the president of St. Louis FED

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Speaker 1: says something slightly different, as if you know we would

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Speaker 1: start continue, we would continue with rate increases for a

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Speaker 1: while longer than she had implied. And then of course

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Speaker 1: we had Susan Collins coming today with even you know,

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Speaker 1: sort of potential seventy five basis points. So we're hearing

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Speaker 1: numbers that a little bit all over the place and

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Speaker 1: trying to make sense of fit. So so, Bob, the

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Speaker 1: markets making it harder for the FED as a practical matter,

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Speaker 1: Um they were at the start of the week, I

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Speaker 1: think not so much now. I think we're all in

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Speaker 1: the same spot. We've all got realistic expectations. The Fed's

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Speaker 1: headed to four and a half five percent. They'll get

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Speaker 1: there sometime in the first quarter. We'll see where inflation is.

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Speaker 1: If it's below the FED funds rate, then that gives

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Speaker 1: them some scope to pause on the tightening. We can

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Speaker 1: reevaluate at that point. But right now, bond yelts have

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Speaker 1: gone up a long way in a very short period

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Speaker 1: of time. It's time for a breath. Bob. Does that

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Speaker 1: get us to a soft landing? Unfortunately it does not.

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Speaker 1: And I think that's the one consistent message from the

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Speaker 1: Fed Susan Collins aside, which is there is going to

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Speaker 1: be paid for businesses and households. When you have this

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Speaker 1: magnitude of rate hikes in such a short period and

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Speaker 1: you're also withdrawing liquidity through quantitative tightening, it's going to bite.

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Speaker 1: And we're already seeing it's biting the economy hard. Thankfully,

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Speaker 1: it's also now starting to bite inflation. Bob Michael of

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Speaker 1: JP Morgan and Sal Bechelist of ROCKEK. We'll be staying

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Speaker 1: with us as we look at what this week meant

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Speaker 1: for our investment decisions. As next on Wall Street Week

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Speaker 1: on Bloomberg. This is Bloomberg Will Streek Week with good

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Speaker 1: Weston from Bloomberg Radio. We think it will create some

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Speaker 1: of the most valuable companies the markets ever seen. And

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Speaker 1: I think it's certainly driven companies like Cisco, given them

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Speaker 1: the life that they've had. It's obviously also spectacularly volatible.

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Speaker 1: But the market is pulled back in this sector since

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Speaker 1: it became public. Since it began, it's pulled back thirty

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Speaker 1: at least seven or eight times. That was Henry Bloger

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Speaker 1: talking about the Internet and tech on Wall Street way

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Speaker 1: back in June of two thousand, when the number one

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Speaker 1: movie in the country was Mission Impossible Too, and the

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Speaker 1: most popular song in the country was Maria Maria by Santana.

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Speaker 1: Bob Michael of JP Morgan and Sonny bechelists of Rock Creek,

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Speaker 1: are still with us. So Sonny, certainly Mr Blodget was

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Speaker 1: right that we gave us some awfully big and successful companies,

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Speaker 1: no question about it. Some people thought that would happen

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Speaker 1: as well in the crypto space. This week, we're not

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Speaker 1: quite as sure. After f t X. What do we

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Speaker 1: make of that is that it doesn't have a broader

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Speaker 1: significance of the markets or is it just a one off. Um.

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Speaker 1: Hopefully it is more limited. I think there's no question

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Speaker 1: that without regulation, and we've all been talking about having

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Speaker 1: this sector regulated, it would help. Um, it's the market itself,

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Speaker 1: but also the investors going in. Having this particular comp

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Speaker 1: you know, ft X, which is an exchange for crypto

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Speaker 1: be based in the Bahamas with not just no regulation,

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Speaker 1: but also with a few people who had very limited

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Speaker 1: experience in finance or in anything really run it. I

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Speaker 1: think the shocking part of it, David, was that very

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Speaker 1: very sophisticated adventure firms from Sequoya and others who were invested.

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Speaker 1: It was not just retail getting involved in that market.

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Speaker 1: So it was a surprise. But hopefully it will get limited,

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Speaker 1: and I think it has put a lot of pressure

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Speaker 1: on increasing regulations sooner here and that will be a

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Speaker 1: good thing for the market. Now, let's not forget that

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Speaker 1: the whole market is less than you know, nine billion.

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Speaker 1: I'm not saying that that's tiny, but it's still not

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Speaker 1: significant enough to create any kind of stress in the

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Speaker 1: market unless we're missing something that we don't know at

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Speaker 1: this point. I think what's important, David, when you watch

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Speaker 1: that cliff and that was the absolute peak in in

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Speaker 1: the dot com bubble. Yes, there was a massive shakeout,

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Speaker 1: there was a massive consolidation, but I would argue the

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Speaker 1: Internet and tech evolved far beyond what any of us

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Speaker 1: ever thought it would be in two thousand. I wonder

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Speaker 1: if we're going through the same thing with crypto and

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Speaker 1: n f T s that it got a great start.

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Speaker 1: There is going to be a shakeout of Sania's right,

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Speaker 1: there's probably going to be a lot of regulation. But

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Speaker 1: when I talked to the young people on our desk,

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Speaker 1: in our platform, there's still a big believer. And if

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Speaker 1: the millennials are a believer, twenty two years from now,

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Speaker 1: they're going to be looking at this clip and I

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Speaker 1: hope we got it right. That's fascinating. There is no

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Speaker 1: question as a generational as you're here, let's come back

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Speaker 1: to the current generation and people who as old as

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Speaker 1: I am, I'm older than you are, but as all time,

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Speaker 1: what about bonds right now? Do you invest in bonds

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Speaker 1: for the first time in a decade? Absolutely, And and

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Speaker 1: I will tell you that we're seeing interest from everywhere now,

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Speaker 1: every wealth management platform in JP Morgan, every institutional client

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Speaker 1: they're coming to us, they're putting money in bonds, they're

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Speaker 1: looking to commit more, and they haven't done so for

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Speaker 1: for years. If I look at where we got to

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Speaker 1: at the start of the year, a general bond fund

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Speaker 1: that the UM the Bloomberg AAG yielded one point seven percent.

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Speaker 1: Now we're up at four point seven percent. We have

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Speaker 1: three percent higher yields, and that's going to track investment.

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Speaker 1: And as I said, I think the FED is close

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Speaker 1: to the end. I don't know if they get to

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Speaker 1: five percent, we're kind of in the four and a

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Speaker 1: half four and three quarters percent. That's going to bring

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Speaker 1: a lot of stability to the market. At these levels,

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Speaker 1: bonds are back. So I was siding you manage a

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Speaker 1: very amount of money. What about for you, our bonds

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Speaker 1: attractive at this point or you just equities? I think,

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Speaker 1: as said it is very interesting right now, is even

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Speaker 1: in any foundation or endowment or the assets that we manage,

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Speaker 1: you're finding the exactly the same phenomenal where people had

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Speaker 1: moved away from bonds and cash and we're all equities

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Speaker 1: and and private investments moving back into holding bonds. And

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Speaker 1: as we're sort of reaching that four or five percent,

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Speaker 1: that Bob talked about much more interest in bonds in

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Speaker 1: a more balanced kind of portfolio. And of course people

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Speaker 1: are looking at cash with four percent at with the

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Speaker 1: Treasury bills at the level that is much higher than

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Speaker 1: cash has earned in a very long time. But I

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Speaker 1: think the bigger thing that is happening in the portfolios

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Speaker 1: we're looking at is obviously a lot of investors, institution

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Speaker 1: investors have been also investing in venture private equity, real

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Speaker 1: estate in private form, and I think that is going

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Speaker 1: through some sort of transformation to well lots to take

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Speaker 1: a segwe if we could from that sort of investment

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Speaker 1: in the CAP twenty seven as we're speaking right now,

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Speaker 1: still going is gonna end on Saturday right now, of sunny,

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Speaker 1: you know, farther than I do. It looks like it's

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Speaker 1: gonna be difficult for them to get to the objectives

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Speaker 1: that they had. You're absolutely right, so far as we

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Speaker 1: know tonight, the latest news was not too positive. Not

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Speaker 1: things could change tomorrow morning, but they didn't really have

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Speaker 1: anything major to announce. Again, as you remember, remember in

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Speaker 1: the top twenty six they had the g fans, which

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Speaker 1: was a large number of large asset managers signing up

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Speaker 1: to make a pretty significant shifts in their carbon print,

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Speaker 1: but most recently they started walking back from that or

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Speaker 1: not wanting to sign quite on what they had agreed

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Speaker 1: to in COP twenty six. So I think it's very

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Speaker 1: very important as we're having these meetings. Maybe they shouldn't

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Speaker 1: be every year, maybe they should be every other year

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Speaker 1: or less often, but show some sort of progress. And

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Speaker 1: the most important part of the discussion the time, David

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Speaker 1: has been the fact that developing countries again have felt

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Speaker 1: that they are in some cases um suffering because if

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Speaker 1: they're an island economy, they're going underwater, if they are

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Speaker 1: affected by by droughts and by floods. A lot of

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Speaker 1: it might be caused by those who did use a

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Speaker 1: lot of carbon over the last ten twenty years, and

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Speaker 1: they're asking if they could get help, and that help

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Speaker 1: is really not coming. And I think that is the

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Speaker 1: really major summary of COP twenty seven, which is that

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Speaker 1: the expectations of investments into climate are probably less than

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Speaker 1: what we expected going into the COP well and just

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Speaker 1: picking upout that on the investments in it. Bob, I

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Speaker 1: want to connect to you because I want to think

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Speaker 1: at least I'm taking away from CAP twenty seven. You

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Speaker 1: can certainly here listen to John Kerry, the President's Special

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Speaker 1: envoy on this subject. We're not going to get it

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Speaker 1: from public money alone. It's going to take a fair

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Speaker 1: amount of private investment. As a bond person, are their

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Speaker 1: bonds that are green bonds in the climate that makes

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Speaker 1: senses of business matter? Um, there are, I think for sure.

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Speaker 1: If you're going to finance something, which is what bond

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Speaker 1: investors do, you want something that has something of a

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Speaker 1: green agenda to it. And we're hearing that from our clients.

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Speaker 1: There's more and more money coming into the space. I

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Speaker 1: think Asania help is on the way for the island economies. Uh,

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Speaker 1: the large scale investors want to commit capital to this space.

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Speaker 1: Thank you so much, Really great to have both of

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Speaker 1: you with with us. As Asani Bechelist of Rockery and Bob

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Speaker 1: Michael of JP Morgan coming up. We saw it happen

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Speaker 1: in the guilt market. Could a crisis come to the

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Speaker 1: markets for US treasuries and would it come from a

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Speaker 1: lack of liquidity? We're gonna ask former vice chair of

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Speaker 1: the Fed, Richard Clarata of Pimco. That's next on Wall

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Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week

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

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Speaker 1: I'm David western We spent a good deal of this

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Speaker 1: week trying to figure out where the FED is heading

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Speaker 1: on rate increases, and part of what we were watching

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Speaker 1: was the FED Spice chair Leo Brainerd, who gave us

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Speaker 1: at least some hope that we might be getting closer

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Speaker 1: to slowing down. I think it will probably be appropriate,

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Speaker 1: um uh soon um to move to a slower pace

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Speaker 1: of increases. But I think what's really important to emphasize

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Speaker 1: we've done a lot, but we have additional work to do,

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Speaker 1: both on raising rates and sustaining restraint to bring inflation down.

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Speaker 1: Were welcome now MS Brainard's predecessor as vice chair, Richard Clarida,

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Speaker 1: now Global Economic Advisor to PIMCO. So, Richard, thank you

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Speaker 1: so much for being back with us. Good to have

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Speaker 1: you back with us. So do you agree with your

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Speaker 1: successor there? Do you think we're at least approaching a

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Speaker 1: point where we might slow down the pace of increases? David,

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Speaker 1: I do you know the Fed has done a lot

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Speaker 1: this year. In fact, it will be the fastest pace

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Speaker 1: of rate hikes since the early nineteen eighties. I do

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Speaker 1: anticipate that at the December meeting they'll they'll they'll slow

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Speaker 1: the pace from seventy five to fifty basis points UH.

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Speaker 1: And I think as we move into three I think

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Speaker 1: they think, and I agree that that they're close at

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Speaker 1: least to a pause, probably in the first half of

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Speaker 1: next years. They said it in the November statement. They've

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Speaker 1: done a lot and they want to see how the

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Speaker 1: rate hikes are impacting the economy. So, Richard, I mean,

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Speaker 1: you have the advantage of having been in the room,

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Speaker 1: and having been in the room relatively recently give us

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Speaker 1: a sense of what they're looking at their dashboard, because

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Speaker 1: I'm gonna say the economic numbers sometimes point in different directions.

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Speaker 1: On the one hand, where we do have some indications,

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Speaker 1: like the CPI numbers that it may be slowing down

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Speaker 1: a little bit the inflation, and they had the overall

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Speaker 1: inflation is still pretty high. It is, And you know,

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Speaker 1: the challenge the Fed faces and other central banks in

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Speaker 1: the world is that the economy is running hot, and

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Speaker 1: in particular, wages UH in the economy are growing much

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Speaker 1: faster than consistent with the two longer run goal. And

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Speaker 1: so I think that the Fed will be looking at

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Speaker 1: the labor market data, it will also be looking at

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Speaker 1: inflation expectations. We have downshifted demand growth. You know, there's

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Speaker 1: an imbalance between demand and supply, and this year demand

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Speaker 1: growth has already downshifted. So that's an important thing to note.

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Speaker 1: We're certainly along the way to where we need to be,

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Speaker 1: but the Fed has more to do, and we need

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Speaker 1: to get inflation back down towards the two percent objected.

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Speaker 1: So everyone seems to agree there's more for the Fed

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Speaker 1: to be done. We just heard Leo Branders say exactly that.

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Speaker 1: And the question is how much more? And and part

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Speaker 1: of the question is what's the terminal rate? I mean,

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Speaker 1: how far up do we go? We had some somewhat

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Speaker 1: conflicting indications this week actually, and the banks basically project

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Speaker 1: these things are come up with very different sorts of answers.

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Speaker 1: What determines that term rate? And me ask you, perhaps

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Speaker 1: more pointedly, some people think that there was a little

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Speaker 1: slow getting off the market getting going. Does the slowness

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Speaker 1: of getting started mean the terminal rate? We will have

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Speaker 1: to be hired necessarily, David, I don't think so. I

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Speaker 1: think what what what launching the rate? Heights in March

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Speaker 1: did meet and I think Cheripal recognized this pretty early on,

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Speaker 1: was that it made sense to get to the destination

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Speaker 1: uh pretty quickly, and that's why we've had the four

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Speaker 1: success of seventy five basis point heights. UH. My sense

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Speaker 1: right now is the committee believes and I share the

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Speaker 1: view that My baseline view is that I want to

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Speaker 1: get the funds rate around five percent. If the inflation

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Speaker 1: data comes in on the soft side, maybe four and

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Speaker 1: three quarters. If it comes in on the hot side,

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Speaker 1: maybe five and a quarter, where perhaps, as President Baller indicated,

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Speaker 1: maybe north of them, but I think around five in

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Speaker 1: the spring will be at a level where they've done

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Speaker 1: a lot. They realized that inflation responds to policy of

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Speaker 1: the lag um, and I think that that will be

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Speaker 1: a good place to take stock. So I think that

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Speaker 1: I wouldn't call that necessarily the turnal rate. I hope

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Speaker 1: it is. If the inflation data doesn't improve, then they

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Speaker 1: may have to do more, but I think they will

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Speaker 1: pause at around five. So I think you just put

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Speaker 1: the figure on the thing that at least perplexes me,

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Speaker 1: which is a two place function. I mean, you've got

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Speaker 1: what the rates are. You also have what inflation is

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Speaker 1: and how restrictive that it depends on how far and

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Speaker 1: how fast inflation comes down. So going into the spring,

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Speaker 1: if you're at five percent, how far down do you

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Speaker 1: get need to get inflation before you say, okay, that's

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Speaker 1: restrictive enough. It's an excellent point because typically monetary policy

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Speaker 1: does operate with the lag. So the FED wants to

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Speaker 1: look ahead. And indeed, for example, Governor Waller and and

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Speaker 1: others have made reference to comparing the policy rate to

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Speaker 1: where professional forecasters think inflation will be towards the end

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Speaker 1: of the year. And I appreciate that point. My own

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Speaker 1: research actually indicates that's a simple thing to do. I

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Speaker 1: think the challenge they face, David, is that, quite frankly,

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Speaker 1: the Fed's record at forecasting inflation has not been very good,

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Speaker 1: including what I was there last year, and so I

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Speaker 1: think it's going to be a balance between adjusting policy

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Speaker 1: according to both the forecast and the incoming data. Which

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Speaker 1: thank you so much for being on Wall Street. We go,

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Speaker 1: you'll come back off and it's really good to have you.

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Speaker 1: Which Richard Clara of Pimco coming up. We're gonna wrap

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Speaker 1: up the week with our special COFFREI to Larry Summers

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Speaker 1: of Harvard. That's next on Wall Street Week on Bloomberg.

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

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Speaker 1: Bloomberg Radio. This is Wall Street Week. I'm David western

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Speaker 1: Welcome back now our special contributor Larry Summers of our

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Speaker 1: Harvard to wrap up the week for us. Larry, thank

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Speaker 1: you so much for being back with us. A lot

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Speaker 1: of us spent a lot of the week actually trying

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Speaker 1: to figure out where the FED is head in, particularly

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Speaker 1: where the terminal rate is, and we had conflicting I

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Speaker 1: think at least someone conflicting answers out of the FED,

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Speaker 1: including with Mr Bullard, the FED President, saying well five

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Speaker 1: having a quarter and then put up a chart using

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Speaker 1: the tailor rule and suggested seven. Where are we look?

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Speaker 1: No one knows. I think it's a mistake to be

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Speaker 1: slavish about tailor rules. The market thinks the number is

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Speaker 1: going to be about five. I look at things and

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Speaker 1: my senses there's more room for that to be too

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Speaker 1: low than there is for that to be too high.

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Speaker 1: But it's pretty clear that we've had the big moves

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Speaker 1: on this cycle and now we're going to be finishing

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Speaker 1: that process off. My view is that there's more risk

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Speaker 1: from stopping prematurely and not really uh curing inflation and

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Speaker 1: setting the stage up for a re acceleration of inflation

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Speaker 1: after it comes down. I see that as a bigger

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Speaker 1: risk than going too far, because going too far with

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Speaker 1: mean bringing inflation down below two percent, and that still

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Speaker 1: seems to me like an awfully remote risk, uh starting

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Speaker 1: from where we are. But I think that the FED

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Speaker 1: has this in the right place when it says that

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Speaker 1: they're going to move up somewhat more and they're gonna

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Speaker 1: take stock of the situation and see what the inflation

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Speaker 1: data is saying and seeing what the inflation forecasts are saying.

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Speaker 1: When we get to next get to the spring of

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Speaker 1: next fall, spring winter rather spring of next year, I

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Speaker 1: have to say that if they hadn't made as many

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Speaker 1: mistakes as they did of excessive optimism about inflation, they

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Speaker 1: probably have a little more room than they do uh

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Speaker 1: to rely on forecasts that hadn't yet proved doubt that

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Speaker 1: inflation was going to come down. Larry, you and I

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Speaker 1: talk a lot about monetary policy and fiscal stimulus and things,

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Speaker 1: but geo politics have also factored increasingly and some of

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Speaker 1: the issues having to do with the economy. This week

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Speaker 1: we had what is potentially we don't know if it

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Speaker 1: is an important development in the meeting of President g

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Speaker 1: of China and President Biden. What do you make of

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Speaker 1: those discussions and even ongoing discussions, because now we have

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Speaker 1: the U. S. T r. Amount Ty actually meeting with

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Speaker 1: their counterpart. What do you make of the situation with

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Speaker 1: China right now in the United States. Look, as Churchill

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Speaker 1: famously said, uh Jaw Jaw is a lot better than

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Speaker 1: Bang Bang. And so the fact that they had a

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Speaker 1: meaningful conversation that lasted more than three hours, the fact

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Speaker 1: that they both came out of the conversation with a

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Speaker 1: sense that there had been satisfying dialogue, the sense that

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Speaker 1: there are some follow on steps. I think that's all

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Speaker 1: to the good. What it's really gonna mean, what really

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Speaker 1: is going to happen. Is there going to be constructive

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Speaker 1: movement out of those dialogues. I think that's something we're

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Speaker 1: gonna have to wait and see. But I'm encouraged by

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Speaker 1: but by what I saw, and I think it means

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Speaker 1: that President Biden's whole trip has to be regarded as

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Speaker 1: a success. The United States back in the game with

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Speaker 1: respect to climate. In Chamal Shaik the meeting with h G.

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Speaker 1: I don't think this G twenty will be long remembered,

433
00:25:02,000 --> 00:25:05,480
Speaker 1: but at a very vexing moment, there could have been

434
00:25:05,560 --> 00:25:09,000
Speaker 1: some kind of breakdown, and there certainly was not that

435
00:25:09,160 --> 00:25:11,320
Speaker 1: it's such an important point, and it takes me back

436
00:25:11,359 --> 00:25:13,600
Speaker 1: at least to China because it seems to me that

437
00:25:13,720 --> 00:25:17,399
Speaker 1: sometimes we've been overly optimistic. I mean, for example, going

438
00:25:17,480 --> 00:25:19,119
Speaker 1: back to the time we admitted to the w t OH,

439
00:25:19,119 --> 00:25:20,960
Speaker 1: we thought China was going to become more like us,

440
00:25:21,200 --> 00:25:23,240
Speaker 1: and then we go over the other extreme of being

441
00:25:23,400 --> 00:25:26,320
Speaker 1: perhaps overly pessimistic about China. I guess my question for

442
00:25:26,320 --> 00:25:28,760
Speaker 1: you is former Treasury sector, among other things, how do

443
00:25:28,880 --> 00:25:31,080
Speaker 1: we play both sides of that we don't know how

444
00:25:31,119 --> 00:25:33,040
Speaker 1: it will end up. How do we keep open the

445
00:25:33,080 --> 00:25:35,840
Speaker 1: realistic possibility we can really work closely with China, but

446
00:25:35,960 --> 00:25:42,639
Speaker 1: also protect ourselves against the possibility of confrontation. We in

447
00:25:42,640 --> 00:25:47,280
Speaker 1: the United States probably need to be careful about our

448
00:25:47,320 --> 00:25:51,879
Speaker 1: evangelizing influence. I don't think it's really for us to

449
00:25:52,000 --> 00:25:56,840
Speaker 1: tell China how they should organize their entire society. I

450
00:25:56,840 --> 00:25:59,480
Speaker 1: think it's for us to stand up for some of

451
00:25:59,480 --> 00:26:04,480
Speaker 1: our fund mental interests in security and fair economic competition,

452
00:26:05,160 --> 00:26:10,520
Speaker 1: but to leave it um at UH that point, I

453
00:26:10,520 --> 00:26:13,040
Speaker 1: think we're gonna need to be very careful with respect

454
00:26:13,080 --> 00:26:17,280
Speaker 1: to our diplomacy on the issue of Taiwan. I think

455
00:26:17,320 --> 00:26:20,840
Speaker 1: we need to be very careful about trying about giving

456
00:26:21,000 --> 00:26:25,240
Speaker 1: China the sense that we are trying to change the

457
00:26:25,359 --> 00:26:30,639
Speaker 1: traditional one China policy, because I think that could risk

458
00:26:31,080 --> 00:26:36,680
Speaker 1: UH disastrous UH conflict. So I think the operative words

459
00:26:36,760 --> 00:26:42,879
Speaker 1: for us need to be respect for them, respect for

460
00:26:43,760 --> 00:26:47,560
Speaker 1: the positions and the fundamental interests that they have, and

461
00:26:47,640 --> 00:26:51,359
Speaker 1: at same time absolute insistence on our own. And I

462
00:26:51,359 --> 00:26:55,640
Speaker 1: would say one other thing, Uh, David, I think ultimately

463
00:26:56,400 --> 00:27:02,399
Speaker 1: we will prevail in this broad contest with China. But

464
00:27:02,480 --> 00:27:05,840
Speaker 1: I think if and when we prevail, it is going

465
00:27:05,880 --> 00:27:10,040
Speaker 1: to be more than anything else on the strength of

466
00:27:10,560 --> 00:27:16,760
Speaker 1: our example. And that's why domestic renewal at home, whether

467
00:27:16,800 --> 00:27:21,440
Speaker 1: the issue is scientific innovation or infrastructure, whether the issue

468
00:27:21,560 --> 00:27:25,080
Speaker 1: is doing something about obiit opiate deaths, or whether the

469
00:27:25,119 --> 00:27:30,960
Speaker 1: issue is strengthening our education UH system, whether the issue

470
00:27:31,200 --> 00:27:37,359
Speaker 1: is building on the greatness of our universities or the

471
00:27:37,480 --> 00:27:43,280
Speaker 1: greatness of our national parks, Ultimately, it's gonna be our

472
00:27:43,359 --> 00:27:47,280
Speaker 1: ability to remain the country that's the envy of the world,

473
00:27:47,880 --> 00:27:51,320
Speaker 1: the country to which people want to come, that is

474
00:27:51,359 --> 00:27:56,320
Speaker 1: going to determine our success. And if we change our

475
00:27:56,400 --> 00:28:03,159
Speaker 1: focus from building ourselves up to tearing China down, I

476
00:28:03,200 --> 00:28:06,200
Speaker 1: think we will be making a very risky and very

477
00:28:06,280 --> 00:28:09,560
Speaker 1: unfortunate choice. Larry, thank you so very much, as Larry

478
00:28:09,600 --> 00:28:14,160
Speaker 1: Summers are very special contributor. Finally, one more thought, If

479
00:28:14,200 --> 00:28:16,880
Speaker 1: tom Brady's for it, it's got to be good, right,

480
00:28:17,080 --> 00:28:21,240
Speaker 1: I'm getting into crypto. Despite that endorsement from the greatest

481
00:28:21,320 --> 00:28:24,479
Speaker 1: quarterback of all time, the collapse of Sam Bankman Freeds

482
00:28:24,520 --> 00:28:27,240
Speaker 1: f t X has brought heartbreak to a lot of people,

483
00:28:27,640 --> 00:28:30,600
Speaker 1: wiping out in one fell swoop what was estimated to

484
00:28:30,640 --> 00:28:34,080
Speaker 1: be a thirty two billion dollar empire, leaving what its

485
00:28:34,119 --> 00:28:36,760
Speaker 1: lawyers now say could be as many as a million

486
00:28:36,840 --> 00:28:40,080
Speaker 1: creditors holding the bag, and by the way, triggering a

487
00:28:40,160 --> 00:28:44,000
Speaker 1: class action lawsuit against Tom Brady and others paid to

488
00:28:44,000 --> 00:28:46,960
Speaker 1: tout f t X to the world. The ripple effects

489
00:28:47,080 --> 00:28:49,040
Speaker 1: of the collapse of f t X and the rest

490
00:28:49,040 --> 00:28:52,360
Speaker 1: of Sam Bankman Freese empire now beginning here as we

491
00:28:52,400 --> 00:28:55,280
Speaker 1: wait for bankruptcy proceedings, all of which has shaken the

492
00:28:55,320 --> 00:28:58,840
Speaker 1: confidence of many investors. That's according to Siddel's Ken Griffin

493
00:28:59,000 --> 00:29:03,440
Speaker 1: f t X is is one of these absolute travesties

494
00:29:03,680 --> 00:29:06,480
Speaker 1: in the history of financial markets. People are gonna lose

495
00:29:06,560 --> 00:29:13,480
Speaker 1: billions of dollars, and that undermines trust in all financial markets.

496
00:29:13,640 --> 00:29:17,160
Speaker 1: But as bad as the FTX collapse, maybe it's only

497
00:29:17,160 --> 00:29:19,960
Speaker 1: the latest in a series of major meltdowns we've seen

498
00:29:20,000 --> 00:29:22,840
Speaker 1: in recent years. Just think back to two thousand and one,

499
00:29:23,040 --> 00:29:26,880
Speaker 1: when that mythical energy giant, Enron hit the skids. It's

500
00:29:26,920 --> 00:29:30,240
Speaker 1: former CEO, Jeff Skilling, reflected back on the loss in

501
00:29:30,400 --> 00:29:35,240
Speaker 1: his later testimony before Congress. I am devastated by an

502
00:29:35,240 --> 00:29:39,920
Speaker 1: apologetic about what Enron has come to represent. No words

503
00:29:40,160 --> 00:29:43,600
Speaker 1: can make things right. Too many people have been heard

504
00:29:43,640 --> 00:29:47,360
Speaker 1: too much or world com in the telecommunications phenomen of

505
00:29:47,400 --> 00:29:50,120
Speaker 1: the late nineties that followed Enron into bankruptcy in two

506
00:29:50,160 --> 00:29:52,760
Speaker 1: thousand two, wiping out a market cap of a hundred

507
00:29:52,760 --> 00:29:55,880
Speaker 1: and eighties six billion dollars and sending its former CEO,

508
00:29:56,000 --> 00:29:59,600
Speaker 1: Bernie Evers to prison despite his trying to seek protection

509
00:29:59,680 --> 00:30:03,000
Speaker 1: behind the Fifth Amendment. I've been instructed by my counsel

510
00:30:03,040 --> 00:30:07,040
Speaker 1: not to testify based on my Fifth Amendment constitutional rights.

511
00:30:07,200 --> 00:30:10,360
Speaker 1: Or that emblem of the first Internet bubble Pets dot

512
00:30:10,400 --> 00:30:13,880
Speaker 1: Com with that cute sock puppet mascot, which was an

513
00:30:13,920 --> 00:30:17,160
Speaker 1: instant market hit when it went public and just as

514
00:30:17,240 --> 00:30:22,120
Speaker 1: quickly went flop. What goes up must come down. All

515
00:30:22,160 --> 00:30:26,200
Speaker 1: of these notorious failures shared a bold vision, a confident leader,

516
00:30:26,320 --> 00:30:28,200
Speaker 1: and a belief that they'd come up with a better

517
00:30:28,280 --> 00:30:31,880
Speaker 1: mouse trap, just like Mr Bankman freed, And if ft

518
00:30:32,160 --> 00:30:34,800
Speaker 1: X follows the pattern, it will share one other thing

519
00:30:34,960 --> 00:30:38,840
Speaker 1: with colossal failures through the years, a lot of lawyers

520
00:30:39,000 --> 00:30:42,720
Speaker 1: making a lot of money despite all the carnage. When

521
00:30:42,840 --> 00:30:45,560
Speaker 1: Enron went into bankruptcy, it had assets of over sixty

522
00:30:45,560 --> 00:30:49,240
Speaker 1: five billion dollars. In the ultimate resolution, shareholders were wiped

523
00:30:49,280 --> 00:30:51,680
Speaker 1: out at a loss of seventy four billion dollars, but

524
00:30:51,760 --> 00:30:55,760
Speaker 1: the lawyers they walked away with over one billion dollars

525
00:30:55,880 --> 00:30:59,520
Speaker 1: along with the accountants. World Colm was three times as

526
00:30:59,600 --> 00:31:03,360
Speaker 1: big losing investors and estimated one seventy five billion dollars

527
00:31:03,600 --> 00:31:06,560
Speaker 1: while the lawyers were making over ten million dollars a month.

528
00:31:06,600 --> 00:31:08,680
Speaker 1: In a proceeding to Lass at well over a year,

529
00:31:09,040 --> 00:31:12,360
Speaker 1: Leman was forced into bankruptcy amid one of the most

530
00:31:12,400 --> 00:31:16,040
Speaker 1: turbulent periods in our economic history, which culminated in a

531
00:31:16,120 --> 00:31:19,480
Speaker 1: catastrophic crisis of confidence and a run on the bank.

532
00:31:19,720 --> 00:31:23,240
Speaker 1: But those were all small potatoes compared with Lehman bankruptcy

533
00:31:23,400 --> 00:31:26,320
Speaker 1: that wiped out between forty six billion and sixty three

534
00:31:26,360 --> 00:31:29,200
Speaker 1: billion dollars according to the New York Fed, and netted

535
00:31:29,200 --> 00:31:32,560
Speaker 1: the lawyers and other consultants a cool get this six

536
00:31:32,800 --> 00:31:36,240
Speaker 1: billion dollars. So we'll see how much the ft X

537
00:31:36,320 --> 00:31:39,400
Speaker 1: creditors end up writing off much less the token holders

538
00:31:39,760 --> 00:31:41,920
Speaker 1: as much pain as they're feeling, though, you can be

539
00:31:42,000 --> 00:31:45,760
Speaker 1: sure that there's one group that will come out okay.

540
00:31:45,800 --> 00:31:49,520
Speaker 1: It's always the lawyers that does it. For this episode

541
00:31:49,520 --> 00:31:52,200
Speaker 1: of Wall Street Week, I'm David Weston. This is Bloomberg.

542
00:31:52,440 --> 00:32:01,160
Speaker 1: See you next week. The