1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: I mean may not have an overall recession. We're having 3 00:00:04,400 --> 00:00:06,720 Speaker 2: a rolling recession. To kind of roll looks pretty strongly 4 00:00:06,720 --> 00:00:07,680 Speaker 2: it is when it comes to jobs. 5 00:00:07,720 --> 00:00:09,880 Speaker 1: The financial stories that shape our world. 6 00:00:09,960 --> 00:00:13,640 Speaker 2: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,480 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,600 --> 00:00:17,360 Speaker 2: generative AI through. 9 00:00:17,160 --> 00:00:19,320 Speaker 1: The eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 11 00:00:22,560 --> 00:00:25,279 Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of 12 00:00:25,280 --> 00:00:28,360 Speaker 2: the Columbia Business School. Bloomberg Wall Street Week with David 13 00:00:28,400 --> 00:00:33,159 Speaker 2: Weston from Bloomberg Radio. No end, insight for war in Gaza, 14 00:00:33,320 --> 00:00:37,199 Speaker 2: for inflation, and despite it all, for strong markets. This 15 00:00:37,280 --> 00:00:41,000 Speaker 2: is Bloomberg Wall Street Week. I'm David Weston. This week 16 00:00:41,040 --> 00:00:43,839 Speaker 2: we'll talk with Richard has of Centerview Partners on the 17 00:00:44,000 --> 00:00:47,320 Speaker 2: uncertain path for US foreign policy. In an uncertain world, 18 00:00:47,400 --> 00:00:48,519 Speaker 2: we could be a great power. 19 00:00:48,640 --> 00:00:51,640 Speaker 3: You need to be predictable and reliable, and right now 20 00:00:51,720 --> 00:00:55,040 Speaker 3: I'm not sure that's consistent with the reality of American politics. 21 00:00:55,360 --> 00:00:58,400 Speaker 2: And with Bob Steele, a parrella Weinberg on the global 22 00:00:58,520 --> 00:01:00,440 Speaker 2: surge in infrastructure investing. 23 00:01:00,880 --> 00:01:03,560 Speaker 4: There's a special role for the private sector that I 24 00:01:03,680 --> 00:01:09,080 Speaker 4: believe can do, in many cases a better job of organizing, executing, planning, 25 00:01:09,120 --> 00:01:13,040 Speaker 4: and delivering on the ambition that government has outlined. 26 00:01:25,720 --> 00:01:29,720 Speaker 2: But we start with inflation, the subject global Wall Street 27 00:01:29,720 --> 00:01:32,800 Speaker 2: has been focused on for the last three years. Back 28 00:01:32,800 --> 00:01:35,720 Speaker 2: in twenty twenty one, some were warning us inflation was 29 00:01:35,760 --> 00:01:38,840 Speaker 2: about to come roaring back, including Jillian Tat as the 30 00:01:38,880 --> 00:01:39,760 Speaker 2: Financial Times. 31 00:01:40,200 --> 00:01:43,119 Speaker 5: If you do have a big fiscal steamers package from 32 00:01:43,200 --> 00:01:48,200 Speaker 5: Joe Biden's incoming administration, and if that coincides with the 33 00:01:48,240 --> 00:01:52,120 Speaker 5: pandemic vaccine gradually spreading across the country and reducing the 34 00:01:52,200 --> 00:01:55,800 Speaker 5: pandemic fears, you could have those two factors coming together 35 00:01:55,840 --> 00:02:00,000 Speaker 5: and create quite a big upsearch and growth later this year. 36 00:02:00,800 --> 00:02:03,200 Speaker 2: And our special contributor Larry Summers of. 37 00:02:03,160 --> 00:02:06,480 Speaker 6: Harvard, My guess is that at the end of the year, 38 00:02:06,680 --> 00:02:11,840 Speaker 6: inflation will for this year come out pretty close to 39 00:02:12,000 --> 00:02:13,280 Speaker 6: five percent. 40 00:02:13,360 --> 00:02:15,960 Speaker 2: Even as Fedchair j Powell at the time was telling 41 00:02:16,040 --> 00:02:18,760 Speaker 2: us they couldn't really see that inflation yet. 42 00:02:18,760 --> 00:02:21,280 Speaker 3: We expect readings on inflation to move up. 43 00:02:21,280 --> 00:02:22,400 Speaker 1: That's called base effects. 44 00:02:22,480 --> 00:02:26,359 Speaker 7: That'll be a temporary effect and it won't really signal anything. 45 00:02:26,600 --> 00:02:28,840 Speaker 2: But by March of twenty twenty two, the FED had 46 00:02:28,919 --> 00:02:31,920 Speaker 2: changed its tune and undertook a series of rate hikes, 47 00:02:32,000 --> 00:02:35,120 Speaker 2: adding five hundred basis points over seventeen months. 48 00:02:35,639 --> 00:02:39,440 Speaker 3: Inflation is much too high, and we understand the hardship 49 00:02:39,480 --> 00:02:42,640 Speaker 3: it is causing, and we're moving expeditiously to bring it 50 00:02:42,720 --> 00:02:43,160 Speaker 3: back down. 51 00:02:43,520 --> 00:02:46,160 Speaker 2: Whether they expecting inflation to be a problem or not, 52 00:02:46,560 --> 00:02:49,840 Speaker 2: pretty much everyone was surprised when the Fed's tough medicine 53 00:02:49,919 --> 00:02:52,960 Speaker 2: didn't seem to phase the jobs market, taking a soft 54 00:02:53,040 --> 00:02:55,520 Speaker 2: landing that seemed like a long shot and turning it 55 00:02:55,520 --> 00:02:57,760 Speaker 2: into what may be the likely result. 56 00:02:58,560 --> 00:02:59,880 Speaker 1: Nobody expected this. 57 00:03:00,080 --> 00:03:02,640 Speaker 8: If we look back, we had inflation that went up 58 00:03:02,880 --> 00:03:06,840 Speaker 8: during COVID, a FED raised interest rates, Inflations come down 59 00:03:07,160 --> 00:03:10,720 Speaker 8: very consistently, so that was kind of expected. What didn't 60 00:03:10,760 --> 00:03:14,079 Speaker 8: happen was unemployment didn't go up, growth didn't slow down. 61 00:03:14,560 --> 00:03:16,720 Speaker 2: Then this week we got a reminder that we aren't 62 00:03:16,800 --> 00:03:20,200 Speaker 2: past the inflation dragon yet, as USCPI numbers came in 63 00:03:20,280 --> 00:03:24,280 Speaker 2: surprisingly hot, holding at three point nine percent year over year, 64 00:03:24,680 --> 00:03:27,920 Speaker 2: way above that two percent target. To take us through 65 00:03:27,919 --> 00:03:30,480 Speaker 2: the CPI numbers is the person who has warned us 66 00:03:30,520 --> 00:03:33,520 Speaker 2: about the risks for three years now. Our special contributor 67 00:03:33,680 --> 00:03:36,200 Speaker 2: Larry Summers of Harvard. So, Larry, thanks all very much 68 00:03:36,240 --> 00:03:37,880 Speaker 2: for being with us. I suspect that you being right 69 00:03:37,920 --> 00:03:41,080 Speaker 2: about this is not really good news necessarily. But where 70 00:03:41,080 --> 00:03:43,600 Speaker 2: are we right now in your estimation inflation. It's certainly 71 00:03:43,600 --> 00:03:45,800 Speaker 2: not at the five or six number level, but it 72 00:03:45,840 --> 00:03:47,160 Speaker 2: doesn't look like it's getting out to two. 73 00:03:47,640 --> 00:03:52,120 Speaker 6: Look, it's always a mistake to over interpret one month's number, 74 00:03:52,760 --> 00:03:59,440 Speaker 6: and that's especially true in January, where calculating seasonality is difficult. 75 00:03:59,760 --> 00:04:02,400 Speaker 6: I think I think we have to recognize the possibility 76 00:04:02,680 --> 00:04:07,480 Speaker 6: of a mini paradigm shift. The soft landing paradigm. With 77 00:04:07,600 --> 00:04:12,040 Speaker 6: the assumption that inflation was headed down to two in 78 00:04:12,080 --> 00:04:16,840 Speaker 6: a tranquil, healthy real economy has certainly been called into 79 00:04:16,920 --> 00:04:21,680 Speaker 6: question by these data. There had been a strong assumption 80 00:04:21,880 --> 00:04:27,240 Speaker 6: that housing was headed towards being a major inflationary force. 81 00:04:28,040 --> 00:04:32,719 Speaker 6: That doesn't show up in these numbers on owner occupied housing, 82 00:04:33,320 --> 00:04:36,560 Speaker 6: And as I've looked carefully at these numbers, I think 83 00:04:36,600 --> 00:04:40,760 Speaker 6: there's good reasons for that. The idea is that when 84 00:04:40,839 --> 00:04:45,360 Speaker 6: we judge the cost of owner occupied houses, we try 85 00:04:45,400 --> 00:04:48,680 Speaker 6: to estimate what it would cost to rent the residents 86 00:04:48,720 --> 00:04:52,240 Speaker 6: in question, and many people have done that by looking 87 00:04:52,279 --> 00:04:57,040 Speaker 6: at at all rentals, but most rentals are apartments and 88 00:04:57,080 --> 00:04:59,719 Speaker 6: those don't have much to do with the price of 89 00:04:59,760 --> 00:05:01,239 Speaker 6: owner occupied housing. 90 00:05:01,680 --> 00:05:03,719 Speaker 1: If you look at the data focus. 91 00:05:03,560 --> 00:05:08,520 Speaker 6: On single family housing houses with lawns and suburbs and 92 00:05:08,640 --> 00:05:13,640 Speaker 6: the like, you don't get nearly as deflationary picture. The 93 00:05:13,760 --> 00:05:18,680 Speaker 6: model I've been using for several years now with my 94 00:05:18,760 --> 00:05:24,479 Speaker 6: co authors at the NBER is still looking for three 95 00:05:24,640 --> 00:05:31,000 Speaker 6: four percent owner equivalent rental inflation through the remainder of 96 00:05:31,040 --> 00:05:37,440 Speaker 6: this year. That's thirty percent of core CPI inflation. If 97 00:05:37,480 --> 00:05:40,400 Speaker 6: it's running at three and a half, that uses up 98 00:05:40,480 --> 00:05:43,680 Speaker 6: a lot of the room there is, and under a 99 00:05:43,760 --> 00:05:47,719 Speaker 6: two percent inflation target, I think the Fed is going 100 00:05:47,760 --> 00:05:51,440 Speaker 6: to have to be very careful. They were never right 101 00:05:51,880 --> 00:05:56,599 Speaker 6: to be focused on March for a cut. I had 102 00:05:56,960 --> 00:06:02,080 Speaker 6: been saying that that seemed pre mature, and they they 103 00:06:02,160 --> 00:06:03,479 Speaker 6: and the markets. 104 00:06:03,040 --> 00:06:05,040 Speaker 1: Have come around on that. 105 00:06:06,040 --> 00:06:11,080 Speaker 6: I think that may is odds off at this point 106 00:06:11,160 --> 00:06:14,000 Speaker 6: and probably should be odds off. 107 00:06:14,839 --> 00:06:17,960 Speaker 1: And gosh, I think we've. 108 00:06:17,720 --> 00:06:23,280 Speaker 6: Got to recognize what no one's talking about. There's a 109 00:06:23,360 --> 00:06:28,960 Speaker 6: meaningful chance, maybe it's fifteen percent that the next move 110 00:06:29,680 --> 00:06:36,120 Speaker 6: is going to be upwards in rates, not downwards in rates. 111 00:06:36,600 --> 00:06:39,160 Speaker 6: You know you use a metaphor, David, that I used 112 00:06:39,200 --> 00:06:43,840 Speaker 6: to use on this show. The worst thing you can 113 00:06:43,880 --> 00:06:49,640 Speaker 6: do when the doctor prescribes you antibiotics is finish part 114 00:06:49,680 --> 00:06:50,360 Speaker 6: of the course. 115 00:06:51,360 --> 00:06:53,600 Speaker 1: Feel better, give up on. 116 00:06:53,600 --> 00:06:58,640 Speaker 6: The antibiotics because you don't like taking them, and see 117 00:06:58,680 --> 00:07:02,839 Speaker 6: what happens. The disease tends to come back, and it 118 00:07:02,960 --> 00:07:06,720 Speaker 6: tends to be harder to go after the second time, 119 00:07:07,560 --> 00:07:14,840 Speaker 6: and interst rates elevated to contain inflation are like antibiotics. 120 00:07:15,320 --> 00:07:16,800 Speaker 1: So I think the FED has. 121 00:07:16,680 --> 00:07:22,840 Speaker 6: To be very careful in this environment. 122 00:07:23,040 --> 00:07:24,400 Speaker 1: And I think that. 123 00:07:24,560 --> 00:07:29,960 Speaker 6: Many people who confused what they wanted with what was 124 00:07:30,080 --> 00:07:33,920 Speaker 6: real were in much too much of a hurry to 125 00:07:34,080 --> 00:07:40,280 Speaker 6: declare that we were obviously in a phase of major easing. 126 00:07:40,320 --> 00:07:42,160 Speaker 1: With respect to monetary policy. 127 00:07:42,320 --> 00:07:45,320 Speaker 2: So, Larry, let me continue your analogy to a disease, 128 00:07:45,600 --> 00:07:48,400 Speaker 2: and perhaps what we have here is we're not recovering 129 00:07:48,400 --> 00:07:50,680 Speaker 2: fully to two percent. On the other hand, the fevers 130 00:07:50,720 --> 00:07:53,240 Speaker 2: not spiking up to five, six, seven percent the way 131 00:07:53,240 --> 00:07:55,320 Speaker 2: it was before. What happens that we have just a 132 00:07:55,320 --> 00:07:58,679 Speaker 2: low grade fever at the three to three plus level. 133 00:07:58,760 --> 00:08:00,000 Speaker 2: What does that mean for the economy. 134 00:08:00,600 --> 00:08:05,840 Speaker 6: Gosh, German Powell has said so many times two percent, 135 00:08:06,000 --> 00:08:10,800 Speaker 6: two percent, two percent. As you'll recall from our previous conversations, 136 00:08:11,240 --> 00:08:13,320 Speaker 6: I didn't think it was a great idea to have 137 00:08:13,480 --> 00:08:18,920 Speaker 6: had so specific and tight a target, but we've had one, 138 00:08:19,040 --> 00:08:22,920 Speaker 6: and we've set it, and we've repeated it a large 139 00:08:23,040 --> 00:08:27,680 Speaker 6: number of times. If we decide that two sort of 140 00:08:27,720 --> 00:08:30,840 Speaker 6: has lost its meaning and it's not something we have 141 00:08:30,960 --> 00:08:36,760 Speaker 6: to accept when there's strong political pressures to ease, if 142 00:08:36,840 --> 00:08:41,520 Speaker 6: we send that signal, I wonder why anyone would believe 143 00:08:42,280 --> 00:08:46,520 Speaker 6: that we're going to stick with two and a half 144 00:08:46,840 --> 00:08:52,160 Speaker 6: or three or whatever it is that we settle into. 145 00:08:52,840 --> 00:08:56,600 Speaker 6: And then when that feeds into expectations. 146 00:08:56,080 --> 00:08:59,559 Speaker 1: It'll get harder to hold the level we have. 147 00:09:00,520 --> 00:09:05,360 Speaker 6: And of course we are headed into David, as populist 148 00:09:06,559 --> 00:09:10,800 Speaker 6: election period is you or I can remember in our lifetimes, 149 00:09:11,480 --> 00:09:16,800 Speaker 6: and we usually think of the FED as a bulwark 150 00:09:16,960 --> 00:09:27,040 Speaker 6: against populism, not as a reinforcer of populist pressures. 151 00:09:27,240 --> 00:09:29,679 Speaker 2: Let's continue on the subject of that populist election, as 152 00:09:29,679 --> 00:09:32,080 Speaker 2: you call it, and specifically respect a fiscal policy. You 153 00:09:32,120 --> 00:09:34,160 Speaker 2: and I have talked before about the deficit and the 154 00:09:34,200 --> 00:09:37,440 Speaker 2: debt that is mounting here. I know you've just helped 155 00:09:37,480 --> 00:09:40,480 Speaker 2: want something new called the Tax Reform Project, and in 156 00:09:40,520 --> 00:09:43,200 Speaker 2: the introduction that you talk about that issue of the 157 00:09:43,240 --> 00:09:45,880 Speaker 2: debt and the deficit, but it's somewhat of a new approach. 158 00:09:45,920 --> 00:09:47,720 Speaker 2: There are a lot of people who have tax policies, 159 00:09:47,920 --> 00:09:49,760 Speaker 2: but we haven't heard from the practitioners. 160 00:09:50,480 --> 00:09:50,680 Speaker 1: Yeah. 161 00:09:50,800 --> 00:09:57,079 Speaker 6: So I'm supporting my former student and wonderful colleague, Natasha 162 00:09:57,160 --> 00:10:02,840 Speaker 6: Saren at the Ye Law School, who's the driving force. 163 00:10:03,559 --> 00:10:09,800 Speaker 6: She's focused on IRS reform, and we're focused on IRS reform. 164 00:10:09,920 --> 00:10:12,080 Speaker 1: Just to enforce the tax law we have. 165 00:10:13,000 --> 00:10:18,040 Speaker 6: And there was important new research showing that from the IRS, 166 00:10:18,120 --> 00:10:21,760 Speaker 6: showing that if we're able to carry through on the 167 00:10:21,800 --> 00:10:26,000 Speaker 6: eighty billion dollar program that was part of President Biden's 168 00:10:26,040 --> 00:10:30,120 Speaker 6: Recovery Act, that can pay off ten to one in 169 00:10:30,520 --> 00:10:34,840 Speaker 6: eight hundred and fifty billion dollars of revenue collections, in 170 00:10:34,840 --> 00:10:38,480 Speaker 6: addition to making our tax code fairer. And that's where 171 00:10:38,520 --> 00:10:41,320 Speaker 6: tax reform discussions should start. 172 00:10:41,800 --> 00:10:44,000 Speaker 2: And finally, Larry, there's a lot of talk about commercial 173 00:10:44,000 --> 00:10:47,520 Speaker 2: real estate, particularly in the office space area. Obviously, the 174 00:10:47,600 --> 00:10:51,200 Speaker 2: increased interest rates and failure to return to the office 175 00:10:51,240 --> 00:10:53,800 Speaker 2: on some parts is really putting pressure on the valuations. 176 00:10:53,960 --> 00:10:56,800 Speaker 2: So clearly there are some people who are hurting because 177 00:10:56,840 --> 00:10:59,440 Speaker 2: of the reduced valuations. But my question is is a 178 00:10:59,480 --> 00:11:02,839 Speaker 2: matter of individual banks for that matter, as well as 179 00:11:02,840 --> 00:11:05,400 Speaker 2: owners being hurt or is there a potential for a 180 00:11:05,440 --> 00:11:08,120 Speaker 2: more systemic problem here with commercial real estate. 181 00:11:08,559 --> 00:11:12,040 Speaker 6: I think that this is something that our Central Bank 182 00:11:12,280 --> 00:11:17,080 Speaker 6: is right to be looking at, and right to be 183 00:11:17,280 --> 00:11:21,720 Speaker 6: looking at with an awareness that almost always in the 184 00:11:21,840 --> 00:11:29,320 Speaker 6: past we have acted too slowly to force banks to 185 00:11:29,360 --> 00:11:35,439 Speaker 6: stop distributing capital, to force banks to raise. 186 00:11:35,800 --> 00:11:38,520 Speaker 1: New capital where that's appropriate, to. 187 00:11:38,600 --> 00:11:44,520 Speaker 6: Force banks to fortify liquidity. I think it would be 188 00:11:44,800 --> 00:11:50,120 Speaker 6: much more productive for our central bank to be focused 189 00:11:50,800 --> 00:11:58,280 Speaker 6: on the question of real estate portfolios in the banks 190 00:11:58,760 --> 00:12:03,320 Speaker 6: they supervise what the genuine value and credit worthiness of 191 00:12:03,360 --> 00:12:06,640 Speaker 6: those assets is. I think that would be a much 192 00:12:06,679 --> 00:12:10,840 Speaker 6: more productive focus for the Fed than some of the 193 00:12:10,880 --> 00:12:17,160 Speaker 6: more abstract and politically driven arguments about various kinds of 194 00:12:17,240 --> 00:12:24,000 Speaker 6: capital charges on the largest banks. The second set of 195 00:12:24,120 --> 00:12:27,040 Speaker 6: arguments is an important one to have, but I think 196 00:12:27,080 --> 00:12:28,520 Speaker 6: it's less urgent. 197 00:12:32,800 --> 00:12:33,600 Speaker 1: Than the first. 198 00:12:34,000 --> 00:12:36,120 Speaker 2: Okay, Larry, thank you so very much for joining us again. 199 00:12:36,160 --> 00:12:38,000 Speaker 2: That's our special contributor here on Wall Street Week. He 200 00:12:38,080 --> 00:12:42,400 Speaker 2: is Larry Summers of Harvard. Coming up, we'll take a 201 00:12:42,400 --> 00:12:45,040 Speaker 2: look at how the markets responded to those CPI numbers 202 00:12:45,040 --> 00:12:50,400 Speaker 2: with Lisa Erickson of US Bank Wealth Management. That's next 203 00:12:50,400 --> 00:12:56,200 Speaker 2: down Wall Street Week on Bloomberg. This is Bloomberg Well 204 00:12:56,240 --> 00:13:06,520 Speaker 2: Street Week with David Weston from Bloomberg Radio. This is 205 00:13:06,559 --> 00:13:09,880 Speaker 2: Wall Street Week. I'm David Weston. Infrastructure has gone from 206 00:13:09,880 --> 00:13:13,160 Speaker 2: the boring building of roads, bridges, and water systems to 207 00:13:13,200 --> 00:13:15,640 Speaker 2: be all the rage, not just the United States, but 208 00:13:15,720 --> 00:13:19,040 Speaker 2: all around the world. Bob Steel Pirella Weinberg helped put 209 00:13:19,080 --> 00:13:22,000 Speaker 2: together one of the biggest deals in recent years, BlackRock's 210 00:13:22,040 --> 00:13:24,760 Speaker 2: purchase of Global International Partners for twelve and a half 211 00:13:24,960 --> 00:13:28,240 Speaker 2: billion dollars. But when we sat with Bob, we started 212 00:13:28,320 --> 00:13:29,840 Speaker 2: with the larger contexts. 213 00:13:30,200 --> 00:13:32,160 Speaker 4: I try to think about this with a bit of 214 00:13:32,200 --> 00:13:35,800 Speaker 4: an on ramp into the conversation. You know, for thousands 215 00:13:35,800 --> 00:13:39,199 Speaker 4: of years we had an agrarian economy. For a little 216 00:13:39,200 --> 00:13:42,160 Speaker 4: more than one hundred years, we transitioned to an industrial economy, 217 00:13:42,600 --> 00:13:44,720 Speaker 4: and now we're in the stage of moving to a 218 00:13:44,800 --> 00:13:49,199 Speaker 4: knowledge and global economy. And each one of those economies 219 00:13:49,240 --> 00:13:53,560 Speaker 4: required a different set of foundational infrastructure in order to 220 00:13:53,600 --> 00:13:57,360 Speaker 4: allow the economy to succeed. And so there are lots 221 00:13:57,400 --> 00:14:01,480 Speaker 4: of transitions going here, and there'll be lots of spending 222 00:14:01,559 --> 00:14:05,720 Speaker 4: required to organize that transition. You're right, there's an energy 223 00:14:05,760 --> 00:14:10,000 Speaker 4: transition underway, but there's also a transition with regard to 224 00:14:11,040 --> 00:14:17,240 Speaker 4: how we move goods and services in a global economy, Ports, airports, 225 00:14:17,320 --> 00:14:23,000 Speaker 4: things like that, and the digital infrastructure required too. And 226 00:14:24,240 --> 00:14:26,560 Speaker 4: we all grew up where we built a highway system 227 00:14:26,600 --> 00:14:30,040 Speaker 4: in America to move cars. Now we need the digital 228 00:14:30,080 --> 00:14:34,440 Speaker 4: infrastructure to move data, which is the equivalent of in 229 00:14:34,480 --> 00:14:37,240 Speaker 4: my mind, of the highway of knowledge for the future. 230 00:14:37,480 --> 00:14:40,320 Speaker 4: So all of these things are coming together. Yes, energy 231 00:14:40,320 --> 00:14:42,320 Speaker 4: transition is a large part of it, but I think 232 00:14:42,360 --> 00:14:43,240 Speaker 4: it's much more than that. 233 00:14:43,440 --> 00:14:45,720 Speaker 2: Well, given the size of it, it's too big for 234 00:14:45,880 --> 00:14:48,560 Speaker 2: either the private sector to do it by itself, or 235 00:14:48,600 --> 00:14:50,600 Speaker 2: for that matter, for government to do it by itself. 236 00:14:51,080 --> 00:14:52,920 Speaker 2: What is the relationship to you, to the private and 237 00:14:52,960 --> 00:14:55,800 Speaker 2: the public as we move into this transformation you describe 238 00:14:55,800 --> 00:14:57,080 Speaker 2: in infrastructure, Well. 239 00:14:57,280 --> 00:14:58,360 Speaker 1: Let's think about it together. 240 00:14:58,520 --> 00:15:02,280 Speaker 4: First of all, it's up to government and our elected 241 00:15:02,320 --> 00:15:09,920 Speaker 4: officials to organize the projects and the rules and regulations 242 00:15:09,920 --> 00:15:13,320 Speaker 4: for how the economy should be set and that's their 243 00:15:13,400 --> 00:15:17,880 Speaker 4: job is to lay out what's the destination or the blueprint. 244 00:15:18,720 --> 00:15:22,480 Speaker 4: And I think that, but when you get to implementing that, 245 00:15:23,200 --> 00:15:25,800 Speaker 4: I believe there's a special role for the private sector 246 00:15:26,120 --> 00:15:28,560 Speaker 4: that I believe can do, in many cases a better 247 00:15:28,680 --> 00:15:34,160 Speaker 4: job of organizing, executing, planning, and delivering on the ambition 248 00:15:34,600 --> 00:15:38,560 Speaker 4: that government is outlined that the government's going to write 249 00:15:38,640 --> 00:15:43,720 Speaker 4: the rules on energy transition, what are the requirements for cars, 250 00:15:43,800 --> 00:15:46,560 Speaker 4: what are this and that? But it's up to business 251 00:15:46,640 --> 00:15:49,800 Speaker 4: to respond and work with government in order to lay 252 00:15:49,840 --> 00:15:52,880 Speaker 4: down the tracks to accomplish this and take us to 253 00:15:53,000 --> 00:15:57,560 Speaker 4: the destination that our elected officials have organized in response 254 00:15:57,600 --> 00:15:58,960 Speaker 4: to what we all think and need. 255 00:16:00,240 --> 00:16:03,040 Speaker 2: The government has laid down a lot of infrastructure track 256 00:16:03,120 --> 00:16:05,720 Speaker 2: in the last three years through the Inflation Reduction Act, 257 00:16:05,720 --> 00:16:09,160 Speaker 2: the Bipartisan Infrastructure Bill, and the Chips and Science Act. 258 00:16:09,600 --> 00:16:13,720 Speaker 4: I think that the three examples you gave of legislation 259 00:16:13,840 --> 00:16:16,520 Speaker 4: and direction from the federal government are all in the 260 00:16:16,600 --> 00:16:21,239 Speaker 4: right way, and they're serving as a stimulant to basically 261 00:16:21,360 --> 00:16:25,760 Speaker 4: encourage this type of investment. We know that the Chips Act, 262 00:16:25,760 --> 00:16:29,160 Speaker 4: while controversial, is going to bring new focus to the 263 00:16:29,160 --> 00:16:32,520 Speaker 4: semiconductor industry. In the United States, and the group on 264 00:16:32,600 --> 00:16:37,800 Speaker 4: behalf of Secretary Romundo that's organizing that are working hard 265 00:16:37,840 --> 00:16:40,000 Speaker 4: to make sure the money is allocated in the right 266 00:16:40,040 --> 00:16:42,400 Speaker 4: way to the right place, so that when we come 267 00:16:42,440 --> 00:16:45,200 Speaker 4: back in three to five years, we've really made progress. 268 00:16:45,200 --> 00:16:46,840 Speaker 4: And think about that for a second. It was a 269 00:16:46,880 --> 00:16:51,040 Speaker 4: government organized project. The government's brought in outsize advisors to 270 00:16:51,040 --> 00:16:52,360 Speaker 4: help them allocate the capital. 271 00:16:52,640 --> 00:16:53,640 Speaker 1: The capital will. 272 00:16:53,440 --> 00:16:56,200 Speaker 4: Go to companies who now are going to be managing 273 00:16:56,240 --> 00:16:59,480 Speaker 4: that way. That seems to me like a good combination 274 00:17:00,280 --> 00:17:04,720 Speaker 4: of interest and skills where hopefully we'll make progress on this, 275 00:17:05,000 --> 00:17:06,560 Speaker 4: but it's going to take a long time. 276 00:17:06,960 --> 00:17:09,600 Speaker 2: Whatever the efforts of the US government, it's not alone 277 00:17:09,600 --> 00:17:13,040 Speaker 2: in pushing hard on infrastructure, particularly when it comes to chips, 278 00:17:13,280 --> 00:17:15,159 Speaker 2: and particularly when it comes to China. 279 00:17:15,480 --> 00:17:18,399 Speaker 9: You know, it's easy to imagine a fantasy world in 280 00:17:18,400 --> 00:17:20,640 Speaker 9: which no one's subsidizing, but that's just. 281 00:17:20,640 --> 00:17:22,240 Speaker 1: Not the world that we live in. 282 00:17:22,320 --> 00:17:25,200 Speaker 9: And in fact, China started as semi connecer subsidies first 283 00:17:25,240 --> 00:17:29,320 Speaker 9: and twenty fourteen sheet called to Conductors of core technology, 284 00:17:29,359 --> 00:17:33,160 Speaker 9: and China started setting up its first government backed investment 285 00:17:33,200 --> 00:17:35,160 Speaker 9: funds to pour money into the chip industry. 286 00:17:35,200 --> 00:17:36,320 Speaker 1: And so whether you're the. 287 00:17:36,359 --> 00:17:38,560 Speaker 9: US or Japan or Europe, You've got to act with 288 00:17:38,600 --> 00:17:40,840 Speaker 9: that as a fact. That's just a given, and you're 289 00:17:40,840 --> 00:17:43,040 Speaker 9: going to devise your policy around that. And I think 290 00:17:43,119 --> 00:17:45,920 Speaker 9: one of the reasons why the US Congress passed the 291 00:17:46,000 --> 00:17:49,439 Speaker 9: Chips Act was because they realized that there were US firms, 292 00:17:49,520 --> 00:17:52,240 Speaker 9: US based firms that were getting more money in subsidies 293 00:17:52,280 --> 00:17:55,119 Speaker 9: from foreign governments than from the US government. And so 294 00:17:55,520 --> 00:17:58,480 Speaker 9: given those circumstances, it wasn't a surprise that the US 295 00:17:58,520 --> 00:18:02,879 Speaker 9: companies were moving manufacturing overseas. And so given the scale 296 00:18:02,920 --> 00:18:05,120 Speaker 9: of Chinese subsidies, I think a lot of governments are saying, 297 00:18:05,200 --> 00:18:08,199 Speaker 9: we may not like industrial policy, we'll be skeptical of it, 298 00:18:08,280 --> 00:18:09,840 Speaker 9: but what is the alternative. 299 00:18:10,280 --> 00:18:12,879 Speaker 2: Given the size of the need and the opportunity, the 300 00:18:12,880 --> 00:18:16,720 Speaker 2: government alone can't drive the transformation and infrastructure that's needed. 301 00:18:17,200 --> 00:18:21,359 Speaker 2: Including large nonprofit foundations like the Rockefeller Foundation. 302 00:18:21,440 --> 00:18:23,880 Speaker 10: Every big company out there should be a big part 303 00:18:23,880 --> 00:18:26,560 Speaker 10: of this transition. If you run a food company, you 304 00:18:26,560 --> 00:18:29,520 Speaker 10: should join a coalition we're helping to establish that wants 305 00:18:29,520 --> 00:18:33,040 Speaker 10: fifty percent of your supply chains to be from regenerative agriculture, 306 00:18:33,080 --> 00:18:37,760 Speaker 10: agriculture that actually sequesters carbon and avoids releasing unnecessary carbon 307 00:18:37,800 --> 00:18:40,760 Speaker 10: into the atmosphere, and those types of transitions are going 308 00:18:40,800 --> 00:18:42,920 Speaker 10: to be fundamentally commercial transitions. 309 00:18:43,040 --> 00:18:45,679 Speaker 2: One way to let the marketplace direct all this capital 310 00:18:45,720 --> 00:18:49,200 Speaker 2: to the most effective uses is through a voluntary carbon market. 311 00:18:49,480 --> 00:18:52,440 Speaker 11: So I think these are very practical issues. Now combine 312 00:18:52,440 --> 00:18:56,800 Speaker 11: that with governments and NGOs who are trying to come 313 00:18:56,880 --> 00:19:02,120 Speaker 11: up with realistic solutions, and they need concessionary capital. They 314 00:19:02,160 --> 00:19:04,520 Speaker 11: need first lost money. This is where I think that 315 00:19:04,560 --> 00:19:09,120 Speaker 11: the voluntary carbon markets can help, because companies that are 316 00:19:09,119 --> 00:19:13,439 Speaker 11: making every effort to get to either carbon neutrality or 317 00:19:13,640 --> 00:19:18,040 Speaker 11: net zero nonetheless can't get there because the infrastructure isn't 318 00:19:18,040 --> 00:19:20,399 Speaker 11: in place or technology isn't in place. 319 00:19:20,680 --> 00:19:23,280 Speaker 2: When it comes to global investment in infrastructure, it's not 320 00:19:23,359 --> 00:19:26,480 Speaker 2: just a need. Major players see it as a ripe opportunity. 321 00:19:26,760 --> 00:19:29,719 Speaker 2: As we saw in the recent acquisition of Global Infrastructure 322 00:19:29,760 --> 00:19:31,000 Speaker 2: Partners by black Rock. 323 00:19:31,600 --> 00:19:34,640 Speaker 12: This is going to be the golden age of infrastructure investing, 324 00:19:34,960 --> 00:19:37,120 Speaker 12: both in terms of the need for capital as well 325 00:19:37,160 --> 00:19:40,359 Speaker 12: as investors who want that capital. Okay, and so the 326 00:19:40,440 --> 00:19:43,320 Speaker 12: question we asked ourselves was how can we accelerate the 327 00:19:43,359 --> 00:19:46,480 Speaker 12: pace at which we're getting things done? Investing new assets 328 00:19:46,560 --> 00:19:48,080 Speaker 12: as well as getting. 329 00:19:48,240 --> 00:19:50,240 Speaker 1: Pension funds, wealth funds'. 330 00:19:50,320 --> 00:19:53,280 Speaker 12: Asset managers to give us additional capital. And so if 331 00:19:53,280 --> 00:19:58,560 Speaker 12: you look at the marriage between ourselves and Blackrock, Rob 332 00:19:58,600 --> 00:20:01,320 Speaker 12: Commuter said it was one plus one equals four. I'm 333 00:20:01,359 --> 00:20:03,080 Speaker 12: not sure whether it was four or five oh three, 334 00:20:03,119 --> 00:20:05,159 Speaker 12: but he's certainly had right that one plus one is 335 00:20:05,200 --> 00:20:08,560 Speaker 12: more than two. As Larry said, perfect mirror images of 336 00:20:08,600 --> 00:20:11,360 Speaker 12: each other. They have a great infrastructure business, but very 337 00:20:11,359 --> 00:20:15,040 Speaker 12: complimentary with us. We do large cap transactions, they do 338 00:20:15,520 --> 00:20:19,479 Speaker 12: mid cap transactions. They have a terrific infrastructure of debt business. 339 00:20:19,960 --> 00:20:23,879 Speaker 12: It's primarily investment grade. OS is primarily below investment grade. 340 00:20:23,960 --> 00:20:27,000 Speaker 12: They have an infrastructure solutions business, which we don't have. 341 00:20:27,200 --> 00:20:29,679 Speaker 12: So you put these two businesses together, we can go 342 00:20:29,760 --> 00:20:34,000 Speaker 12: to governments, We can go to companies large, small, medium 343 00:20:34,080 --> 00:20:36,439 Speaker 12: size and offer them an integrated solution. 344 00:20:36,800 --> 00:20:40,800 Speaker 4: The conversation you had with Larry and Bayou highlighted this idea. 345 00:20:41,160 --> 00:20:43,760 Speaker 4: Our firm was the advisor, one of the advisors on 346 00:20:43,760 --> 00:20:46,800 Speaker 4: that transaction, and I think what you're seeing and what 347 00:20:46,960 --> 00:20:49,920 Speaker 4: Larry and Bio talked about, was that there's a global 348 00:20:49,960 --> 00:20:53,840 Speaker 4: demand for capital, private capital to go with government capital 349 00:20:54,080 --> 00:20:58,280 Speaker 4: in order to organize these large and important products. And now, David, 350 00:20:58,320 --> 00:21:00,760 Speaker 4: the scale of these projects is so large, they're just 351 00:21:00,800 --> 00:21:03,720 Speaker 4: a small handful of firms that can provide the capital, 352 00:21:03,960 --> 00:21:07,560 Speaker 4: of which the combined Blackrock GIP combination will be one 353 00:21:07,560 --> 00:21:10,359 Speaker 4: of the leaders. But there's different types of capital. The 354 00:21:10,400 --> 00:21:12,960 Speaker 4: way I think about it is the government can provide 355 00:21:13,000 --> 00:21:17,280 Speaker 4: some of the foundational capital to size the risk so 356 00:21:17,320 --> 00:21:20,159 Speaker 4: that it's appropriate for private capital to come in. Some 357 00:21:20,200 --> 00:21:23,159 Speaker 4: of these projects are so big and they're subjects to 358 00:21:23,359 --> 00:21:28,640 Speaker 4: change by the population and by legislators and regulators. That's 359 00:21:28,720 --> 00:21:31,720 Speaker 4: not the right risk for private people to underwrite. That 360 00:21:31,720 --> 00:21:35,200 Speaker 4: should be underwritten by government. And then private capitals should 361 00:21:35,200 --> 00:21:37,680 Speaker 4: come in to work with the projects once they're defined, 362 00:21:37,920 --> 00:21:41,080 Speaker 4: and that's what the infrastructure investors have been able to accomplish. 363 00:21:41,080 --> 00:21:43,840 Speaker 4: And so providing the private capital, and I think also 364 00:21:44,359 --> 00:21:47,480 Speaker 4: private capital speaks to the issue you were just talking about, 365 00:21:47,560 --> 00:21:50,800 Speaker 4: is where do you get the discipline to manage the 366 00:21:50,880 --> 00:21:54,960 Speaker 4: projects well, to make the hard decisions and allocate capital 367 00:21:54,960 --> 00:21:58,400 Speaker 4: in the right way. I think that when private capital 368 00:21:58,760 --> 00:22:02,280 Speaker 4: is part of the equation, that brings that skill to 369 00:22:02,440 --> 00:22:05,280 Speaker 4: the table and ensures that the project turns out in 370 00:22:05,320 --> 00:22:08,600 Speaker 4: a better, more efficient more focused fashion than if it 371 00:22:08,600 --> 00:22:10,600 Speaker 4: were just a government project. 372 00:22:10,600 --> 00:22:13,920 Speaker 2: And that GP expertise in putting together and running big 373 00:22:13,960 --> 00:22:16,920 Speaker 2: projects was an important part of what Blackrock saw when 374 00:22:16,920 --> 00:22:19,160 Speaker 2: it made its twelve and a half billion dollar investments. 375 00:22:19,800 --> 00:22:22,720 Speaker 7: They invest in major and larger projects than what we 376 00:22:22,880 --> 00:22:27,280 Speaker 7: did in infrastructure, like Gatwick Airport and Sydney Airport, but 377 00:22:27,400 --> 00:22:33,040 Speaker 7: they're particularly superb in the operational efficiencies of these investments. 378 00:22:33,040 --> 00:22:35,119 Speaker 1: They improved the quality of service. 379 00:22:36,760 --> 00:22:39,399 Speaker 7: And so if you think about what we have brought 380 00:22:39,720 --> 00:22:42,879 Speaker 7: at Blackrock over the last eight years in infrastructure, what 381 00:22:43,040 --> 00:22:46,679 Speaker 7: GP has been doing since two thousand and six, the 382 00:22:46,720 --> 00:22:49,600 Speaker 7: two organizations look like a perfect match. And then you 383 00:22:49,960 --> 00:22:55,720 Speaker 7: overlaid the cultural connection, and we always underestimate the cultural connection. 384 00:22:56,119 --> 00:22:58,800 Speaker 2: Though GIP, now combined with black Write is one of 385 00:22:58,800 --> 00:23:01,920 Speaker 2: the biggest global infra structure players, it is far from 386 00:23:01,960 --> 00:23:02,879 Speaker 2: the only one. 387 00:23:03,040 --> 00:23:05,680 Speaker 13: It's not just GIPS, not just black Rock. If you 388 00:23:06,280 --> 00:23:08,600 Speaker 13: look at pro logis, if you look at really any 389 00:23:08,880 --> 00:23:14,160 Speaker 13: large company investing in infrastructure or logistics looking at two areas. 390 00:23:14,520 --> 00:23:18,399 Speaker 13: One is clean energy and energy transition in order to 391 00:23:18,400 --> 00:23:23,480 Speaker 13: reduce costs and increase reliability and reduce risks. And also 392 00:23:23,640 --> 00:23:27,000 Speaker 13: AI obviously and those are getting more and more intentwined, 393 00:23:27,080 --> 00:23:30,280 Speaker 13: and inter relationship between AI and clean energy I think 394 00:23:30,320 --> 00:23:32,200 Speaker 13: will be an interesting area to watch. 395 00:23:32,520 --> 00:23:34,960 Speaker 2: When we're talking the trillions of dollars that will be 396 00:23:35,040 --> 00:23:38,320 Speaker 2: needed for infrastructure investment around the world, you simply can't 397 00:23:38,320 --> 00:23:41,239 Speaker 2: get there without major roles for the private sector and 398 00:23:41,600 --> 00:23:42,800 Speaker 2: for the markets. 399 00:23:43,080 --> 00:23:48,560 Speaker 4: I trust the marketplace and business on behalf of the 400 00:23:48,600 --> 00:23:53,520 Speaker 4: marketplace with their ambitions to organize how to pursue the path, 401 00:23:53,760 --> 00:23:56,919 Speaker 4: and so that'll be the idea. We know that we 402 00:23:57,040 --> 00:24:00,199 Speaker 4: have an issue with greenhouse gases, and we know we 403 00:24:00,240 --> 00:24:03,560 Speaker 4: have an issue with the carbon aspect of the economy. Now, 404 00:24:03,600 --> 00:24:05,920 Speaker 4: as I said when I started, there were one hundred 405 00:24:06,040 --> 00:24:09,760 Speaker 4: years of the industrialization of America and the driving energy 406 00:24:09,800 --> 00:24:14,240 Speaker 4: form came from hydrocarbons, and that was successful. It lowered 407 00:24:14,240 --> 00:24:17,200 Speaker 4: the price of energy, and we know low energy prices 408 00:24:17,200 --> 00:24:22,120 Speaker 4: and energy availability are very progressive positive aspects for growing 409 00:24:22,160 --> 00:24:26,600 Speaker 4: the economy. And we became connected to that form of 410 00:24:26,720 --> 00:24:30,240 Speaker 4: energy and it accomplished a lot of great things. Now 411 00:24:30,280 --> 00:24:33,080 Speaker 4: we're at a point we recognize that's not the right 412 00:24:33,160 --> 00:24:35,600 Speaker 4: path for the future, so we're going to pivot. We 413 00:24:35,640 --> 00:24:40,160 Speaker 4: know the large generators of greenhouse gases, we know its transportation, 414 00:24:40,280 --> 00:24:42,560 Speaker 4: we know it's heating, we know its industrial, we know 415 00:24:42,760 --> 00:24:44,600 Speaker 4: all the different things that are and we're going to 416 00:24:44,640 --> 00:24:47,520 Speaker 4: have to make adjustments to each one of those things 417 00:24:47,600 --> 00:24:51,680 Speaker 4: by public policy, and then I think the marketplace can 418 00:24:51,720 --> 00:24:54,560 Speaker 4: respond by helping to organize it in the right way. 419 00:24:56,280 --> 00:24:59,800 Speaker 2: Coming up, wars in Ukraine and Gaza, military pressure from 420 00:25:00,400 --> 00:25:02,920 Speaker 2: whoever wins the White House in November, they will face 421 00:25:03,000 --> 00:25:06,280 Speaker 2: a range of challenges and opportunities. We go through them 422 00:25:06,280 --> 00:25:08,040 Speaker 2: with Richard Hawes, a Center View partner. 423 00:25:08,400 --> 00:25:10,639 Speaker 3: Our ability to set a model that the rest of 424 00:25:10,640 --> 00:25:13,000 Speaker 3: the world respects, that's questionable. 425 00:25:14,080 --> 00:25:24,399 Speaker 2: That's next on Wall Street Week on Bloomberg. This is 426 00:25:24,400 --> 00:25:27,399 Speaker 2: Wall Street Week. I'm David Weston. Whoever is elected President 427 00:25:27,440 --> 00:25:29,639 Speaker 2: of the United States in November, they will face a 428 00:25:29,760 --> 00:25:33,280 Speaker 2: daunting list of foreign relations challenges, and in some ways, 429 00:25:33,359 --> 00:25:36,359 Speaker 2: the two most likely candidates, President Joe Biden and Foreign 430 00:25:36,359 --> 00:25:39,920 Speaker 2: President Donald Trump, have distinctly different policies when it comes 431 00:25:39,920 --> 00:25:42,120 Speaker 2: to dealing with the world. To give us a sense 432 00:25:42,160 --> 00:25:45,159 Speaker 2: of the challenges and the approaches, welcome back now, Richard 433 00:25:45,200 --> 00:25:48,199 Speaker 2: Hawes of Set of You Partners. Richard is President Emeritus 434 00:25:48,200 --> 00:25:51,280 Speaker 2: of the Council Foreign Relations, and he writes a weekly newsletter. 435 00:25:51,320 --> 00:25:54,720 Speaker 2: I recommend on subsect. It's called home in a way, Richard. 436 00:25:54,720 --> 00:25:56,960 Speaker 2: Great to have you back with us. Great to be back, David. So, 437 00:25:56,960 --> 00:25:59,280 Speaker 2: first of all, talk about the campaign. Traditionally it's thought 438 00:25:59,359 --> 00:26:03,159 Speaker 2: that are not elected based on foreign policy. 439 00:26:03,400 --> 00:26:04,040 Speaker 1: Is not going to be true. 440 00:26:04,040 --> 00:26:06,359 Speaker 2: This time, for better or worse, that will be true. 441 00:26:07,080 --> 00:26:09,160 Speaker 3: I actually think Joe Biden's done a pretty good job 442 00:26:09,400 --> 00:26:10,440 Speaker 3: on foreign policy. 443 00:26:10,560 --> 00:26:11,320 Speaker 2: I might have one or. 444 00:26:11,240 --> 00:26:14,320 Speaker 3: Two areas I disagree, but whatever you think about it, 445 00:26:14,440 --> 00:26:16,760 Speaker 3: I don't think voters are going to have that. Foremost 446 00:26:16,800 --> 00:26:19,199 Speaker 3: in their minds might be questions of his age, or 447 00:26:19,200 --> 00:26:23,200 Speaker 3: mister Trump's legal issues, maybe questions of the border, or inflation, 448 00:26:23,320 --> 00:26:25,800 Speaker 3: you name it. What's so interesting, David, though, is even 449 00:26:25,840 --> 00:26:29,320 Speaker 3: though most voters won't vote on the basis of foreign policy, 450 00:26:29,640 --> 00:26:31,840 Speaker 3: whoever's elected, given what you said in the lead in 451 00:26:32,200 --> 00:26:35,679 Speaker 3: the differences, this election will have enormous consequences for the 452 00:26:35,680 --> 00:26:37,840 Speaker 3: world and for America's relationship with the world. 453 00:26:38,080 --> 00:26:39,800 Speaker 2: Yeah. One of the things that strikes me George W. 454 00:26:39,880 --> 00:26:42,240 Speaker 2: Bush did not run on foreign policy, and yet he 455 00:26:42,359 --> 00:26:45,119 Speaker 2: ended up being a foreign policy president, whether he wanted 456 00:26:45,160 --> 00:26:46,800 Speaker 2: to or not. So give us a sense of some 457 00:26:46,840 --> 00:26:48,800 Speaker 2: of the differences you think on some of the key 458 00:26:48,840 --> 00:26:52,800 Speaker 2: issues warn Ukraine. Continuing, You've got Middle East, you've got climate, 459 00:26:52,800 --> 00:26:55,280 Speaker 2: you've got China. What are some of the differences between 460 00:26:55,320 --> 00:26:56,000 Speaker 2: these two people. 461 00:26:56,119 --> 00:26:58,000 Speaker 3: Well, actually, China is one of the areas that differences 462 00:26:58,080 --> 00:27:02,000 Speaker 3: might not be that great. They're pretty tough on China economically, 463 00:27:02,359 --> 00:27:05,639 Speaker 3: not so clear about geopolitically, Mister Biden is tough, not 464 00:27:05,720 --> 00:27:08,320 Speaker 3: clear about Donald Trump on trade. Need the one of 465 00:27:08,359 --> 00:27:10,840 Speaker 3: them as much of an enthusiast for trade. As you've noticed, 466 00:27:11,119 --> 00:27:13,600 Speaker 3: both wanted to get out of Afghanistan. But that probably 467 00:27:13,680 --> 00:27:19,960 Speaker 3: ends most of the similarities Ukraine. Obviously fundamental differences. Joe 468 00:27:20,000 --> 00:27:22,800 Speaker 3: Biden has really made that the centerpiece of his foreign policy. 469 00:27:22,960 --> 00:27:26,240 Speaker 3: More broadly, the centerpiece of his foreign policy his allies. 470 00:27:26,280 --> 00:27:29,920 Speaker 3: It's an ally first approach. He sees allies as giving 471 00:27:29,960 --> 00:27:33,760 Speaker 3: us a real comparative advantage, a way of leveraging American power. 472 00:27:33,920 --> 00:27:37,560 Speaker 3: Donald Trump sees allies as an albatross, as free rioters. 473 00:27:37,600 --> 00:27:39,720 Speaker 3: He doesn't much care about them, doesn't much care about 474 00:27:39,800 --> 00:27:44,440 Speaker 3: Ukraine's fate. That's probably the biggest single difference. Climate change, though, 475 00:27:44,520 --> 00:27:47,280 Speaker 3: is also fundamental. Last time mister Trump was in he 476 00:27:47,320 --> 00:27:50,200 Speaker 3: took the United States out of the so called Paris process. 477 00:27:50,600 --> 00:27:53,560 Speaker 3: Joe Biden did the ira very much once in America, 478 00:27:54,320 --> 00:27:58,480 Speaker 3: more than pull its weight in the climate area. Middle 479 00:27:58,520 --> 00:28:02,280 Speaker 3: East is more complicated. Not clear that either would have 480 00:28:02,359 --> 00:28:05,080 Speaker 3: a whole lot of influence over this Israeli government. Mister 481 00:28:05,119 --> 00:28:08,400 Speaker 3: Biden may try to have more influence. Not clear though 482 00:28:08,400 --> 00:28:13,440 Speaker 3: that it's leading too much. When mister Trump was president, 483 00:28:13,640 --> 00:28:16,960 Speaker 3: he wasn't much interested in the Palestinian issue. Joe Biden, however, 484 00:28:17,160 --> 00:28:20,920 Speaker 3: is big difference, big difference there Iran. Neither one is 485 00:28:21,000 --> 00:28:23,639 Speaker 3: quite sure what to do. Iran is getting closer to 486 00:28:24,160 --> 00:28:28,000 Speaker 3: nuclear weapons capability. Donald Trump somewhat argue he'll pave the 487 00:28:28,000 --> 00:28:31,640 Speaker 3: way to that by pulling the United States out of 488 00:28:30,640 --> 00:28:35,399 Speaker 3: the nuclear agreement. Joe Biden wanted to get the United 489 00:28:35,400 --> 00:28:38,520 Speaker 3: States back in. It didn't work either way. Who's ever elected, 490 00:28:38,800 --> 00:28:40,720 Speaker 3: He's going to have to deal with an Iran that's 491 00:28:40,760 --> 00:28:45,680 Speaker 3: probably on the so called threshold of a nuclear agreement. 492 00:28:45,880 --> 00:28:48,280 Speaker 3: Plus should make a really good point more broadly, you 493 00:28:48,280 --> 00:28:49,280 Speaker 3: don't know what's going to happen. 494 00:28:50,040 --> 00:28:51,760 Speaker 2: Richard's such a treat having you on Wall Street Week. 495 00:28:51,800 --> 00:28:55,360 Speaker 2: Always thank you so much. That's Richard has of Centerview Partners. 496 00:28:56,160 --> 00:28:58,920 Speaker 2: The markets reacted to those CPI numbers this week as 497 00:28:58,960 --> 00:29:00,600 Speaker 2: the S and P five hundred. We gave up four 498 00:29:00,640 --> 00:29:03,880 Speaker 2: tens percent, but still ended over five thousand, which puts 499 00:29:03,920 --> 00:29:07,080 Speaker 2: it ten points above the Bloomberg El's year end median 500 00:29:07,240 --> 00:29:09,800 Speaker 2: number of forty nine to fifty. The NASDAC lost one 501 00:29:09,800 --> 00:29:12,360 Speaker 2: point three percent, while the yield on the tenure was 502 00:29:12,480 --> 00:29:14,720 Speaker 2: up ten basis points to end the week, it's just 503 00:29:14,760 --> 00:29:18,040 Speaker 2: about four point three percent. To explain the market's reaction, 504 00:29:18,120 --> 00:29:20,680 Speaker 2: we welcome down Lisa Erickson, head of Public Markets at 505 00:29:20,800 --> 00:29:22,920 Speaker 2: US Bank Wealth Management. Lisa, thank you so much for 506 00:29:22,920 --> 00:29:25,200 Speaker 2: being back with us. So we heard from Larry about 507 00:29:25,200 --> 00:29:26,920 Speaker 2: what happened to the economy. Tell us about how the 508 00:29:26,960 --> 00:29:28,680 Speaker 2: markets reacted to those numbers. 509 00:29:28,440 --> 00:29:31,520 Speaker 14: That we got really certainly a seesaw week in the market. 510 00:29:31,560 --> 00:29:33,600 Speaker 14: And to your point, on the back of those hot 511 00:29:33,640 --> 00:29:37,280 Speaker 14: CPI numbers, the market really had a tough reaction. And 512 00:29:37,320 --> 00:29:39,400 Speaker 14: if we were to step back and really think about 513 00:29:39,400 --> 00:29:43,160 Speaker 14: what was driving that tough reaction, it really would be 514 00:29:43,240 --> 00:29:47,080 Speaker 14: well captured by the words growth inflation puzzle, and what 515 00:29:47,120 --> 00:29:49,320 Speaker 14: I mean by that is really up to this point, 516 00:29:49,360 --> 00:29:52,680 Speaker 14: and as mister Summers had mentioned, we really had a 517 00:29:52,720 --> 00:29:55,200 Speaker 14: situation where the market was looking at everything in a 518 00:29:55,320 --> 00:29:59,960 Speaker 14: very goldilocks fashion. We've had inflation coming down, and yet 519 00:30:00,120 --> 00:30:03,640 Speaker 14: growth has remained in the Okay zone, slowing a little bit, 520 00:30:03,720 --> 00:30:08,080 Speaker 14: but generally beating some expectations. And really, what happened with 521 00:30:08,200 --> 00:30:11,800 Speaker 14: that Tuesday hot CPI print is a market finally realized, 522 00:30:12,000 --> 00:30:14,880 Speaker 14: oh my goodness, it's not necessarily a straight line down 523 00:30:14,920 --> 00:30:18,240 Speaker 14: on inflation, and therefore the Fed may not be able 524 00:30:18,280 --> 00:30:20,920 Speaker 14: to cut interest rates as quickly as we think. And 525 00:30:21,000 --> 00:30:24,440 Speaker 14: so really that there was that difficult reaction on Tuesday, 526 00:30:24,840 --> 00:30:27,320 Speaker 14: and then again today when some of those more tough 527 00:30:27,680 --> 00:30:31,560 Speaker 14: PPI numbers as well also rattled markets to a little bit. 528 00:30:31,880 --> 00:30:33,840 Speaker 2: We've been in a bull market when it comes to equity. 529 00:30:33,920 --> 00:30:36,000 Speaker 2: Is how much of that is because of anticipated cuts 530 00:30:36,080 --> 00:30:38,800 Speaker 2: the fake ause you heard Larry say, I don't think 531 00:30:38,840 --> 00:30:41,240 Speaker 2: it's any time to cut anytime soon. In fact, there's 532 00:30:41,280 --> 00:30:43,560 Speaker 2: even a chance fifteen percent chance the next move will 533 00:30:43,560 --> 00:30:46,000 Speaker 2: be up the market, I suspect are not prepared for that. 534 00:30:46,280 --> 00:30:48,640 Speaker 14: Well, certainly when we have looked at the data and 535 00:30:48,800 --> 00:30:52,200 Speaker 14: analyzed really what's been driving markets really over the last 536 00:30:52,320 --> 00:30:55,600 Speaker 14: many months, it has been highly correlated with the fact 537 00:30:55,640 --> 00:31:01,479 Speaker 14: that rates, our expectations have been very sanguine, and so 538 00:31:01,640 --> 00:31:05,840 Speaker 14: that really has been a very recent driver actually until 539 00:31:06,080 --> 00:31:09,320 Speaker 14: really the more recent past, when some of these positive 540 00:31:09,680 --> 00:31:14,720 Speaker 14: surprises that we're getting on macroeconomic indicators indicating growth being 541 00:31:14,760 --> 00:31:18,800 Speaker 14: better than expected has then further carried the rally. But again, 542 00:31:18,840 --> 00:31:21,000 Speaker 14: both of these things are still very much in focus, 543 00:31:21,040 --> 00:31:23,640 Speaker 14: and again I think what you see from the reaction 544 00:31:23,800 --> 00:31:27,600 Speaker 14: this past week is that again if we continue to 545 00:31:27,640 --> 00:31:31,640 Speaker 14: see concerns that inflation may throw off that FED rate 546 00:31:31,680 --> 00:31:34,080 Speaker 14: cut path that the market was expecting, we can have 547 00:31:34,120 --> 00:31:35,200 Speaker 14: a pretty tough reaction. 548 00:31:36,440 --> 00:31:38,200 Speaker 2: We've certainly have been in a bold market, a lot 549 00:31:38,280 --> 00:31:40,720 Speaker 2: that's been driven by that magnificent seven whatever you want 550 00:31:40,720 --> 00:31:44,080 Speaker 2: to call them. How concentrated is the drive in the 551 00:31:44,120 --> 00:31:46,560 Speaker 2: markets at this point or are you seeing some dispersion. 552 00:31:47,240 --> 00:31:50,200 Speaker 14: Well, certainly, throughout twenty twenty three and most of this 553 00:31:50,320 --> 00:31:53,120 Speaker 14: year to date, we have continued to see leadership to 554 00:31:53,160 --> 00:31:56,120 Speaker 14: your point, really from the largest stocks within the market, 555 00:31:56,160 --> 00:31:59,280 Speaker 14: as well as very concentrated in terms of more secular 556 00:31:59,280 --> 00:32:03,600 Speaker 14: growth names, particularly technology. Now, what's been interesting since we've 557 00:32:03,600 --> 00:32:06,680 Speaker 14: flipped the calendar on twenty twenty four is we've certainly 558 00:32:06,720 --> 00:32:11,160 Speaker 14: had some spouts of smaller companies and cyclical companies really 559 00:32:11,200 --> 00:32:13,600 Speaker 14: trying to come back to the fore but they really 560 00:32:13,600 --> 00:32:17,400 Speaker 14: have not been able to maintain a steady run at it, 561 00:32:17,440 --> 00:32:20,920 Speaker 14: such that the leadership again remains very concentrated. And that 562 00:32:21,080 --> 00:32:24,280 Speaker 14: is one of the reasons why even though we recognize 563 00:32:24,600 --> 00:32:28,240 Speaker 14: the macro fundamentals have generally been okay again with inflation 564 00:32:28,360 --> 00:32:33,000 Speaker 14: coming down and growth doing okay, we have not really 565 00:32:33,080 --> 00:32:35,400 Speaker 14: feelt like there's an all clear signal because when you 566 00:32:35,440 --> 00:32:38,080 Speaker 14: look at how the market is reacting to that, again, 567 00:32:38,160 --> 00:32:41,959 Speaker 14: it's very concentrated and we haven't seen a sustained rally 568 00:32:42,080 --> 00:32:44,400 Speaker 14: to broaden out the breadth of participation. 569 00:32:44,880 --> 00:32:48,360 Speaker 2: Where do you stand possible opportunities for investors on either 570 00:32:48,440 --> 00:32:51,240 Speaker 2: the fixed income side or the equity side right now? 571 00:32:51,600 --> 00:32:55,440 Speaker 14: Well, certainly, even though again we don't see a necessarily 572 00:32:55,480 --> 00:32:59,680 Speaker 14: a fat pitch in terms of being over enthusiastic on 573 00:33:00,280 --> 00:33:04,840 Speaker 14: for example, or overly pessimistic as well, within certain areas, 574 00:33:04,920 --> 00:33:07,040 Speaker 14: we do see some opportunities. So if we take the 575 00:33:07,080 --> 00:33:10,000 Speaker 14: fixed income markets, for example, we do see some really 576 00:33:10,040 --> 00:33:13,840 Speaker 14: interesting opportunities to pick up extra income. A great area 577 00:33:13,920 --> 00:33:17,960 Speaker 14: for example is non agency mortgages. These our securities that 578 00:33:18,040 --> 00:33:23,360 Speaker 14: are backed by mortgages that are not necessarily sponsored by 579 00:33:23,440 --> 00:33:28,400 Speaker 14: the US agency market, but nonetheless have very strong fundamentals 580 00:33:28,440 --> 00:33:31,160 Speaker 14: behind them. And as we know, the housing market has 581 00:33:31,200 --> 00:33:33,720 Speaker 14: continued to be supported by quite a bit of demand 582 00:33:34,080 --> 00:33:38,080 Speaker 14: for people wanting to move into their own ownership, and 583 00:33:38,560 --> 00:33:41,120 Speaker 14: as we continue to track the credit supporting that, it's 584 00:33:41,240 --> 00:33:45,040 Speaker 14: very strong. And yet these securities offer some nice extra yield, 585 00:33:45,120 --> 00:33:49,120 Speaker 14: again just because they are a little bit more complex 586 00:33:49,200 --> 00:33:52,880 Speaker 14: market for investors to understand. So that's just one example 587 00:33:52,920 --> 00:33:56,040 Speaker 14: of an area where again there's some extra yield that 588 00:33:56,080 --> 00:33:58,560 Speaker 14: could be picked up with very strong fundamentals. 589 00:33:58,680 --> 00:34:00,479 Speaker 2: Always good to have extra yield things. Thank you so much, 590 00:34:00,520 --> 00:34:02,000 Speaker 2: li so always great to have you with us. That 591 00:34:02,120 --> 00:34:05,880 Speaker 2: is Lisa Erickson of US Bank. Finally, one more slag. 592 00:34:06,400 --> 00:34:09,880 Speaker 2: The German World War II General Irwin Rommel said, don't 593 00:34:09,880 --> 00:34:12,920 Speaker 2: fight a battle if you don't gain anything by winning. 594 00:34:13,400 --> 00:34:16,200 Speaker 2: I learned that lesson at my first Annual Shareholders Medium 595 00:34:16,239 --> 00:34:19,120 Speaker 2: Capital Cities ABC. I was a brand new general counsel 596 00:34:19,200 --> 00:34:21,279 Speaker 2: and I was proud that we'd won the battle of 597 00:34:21,360 --> 00:34:24,279 Speaker 2: keeping a shareholder initiative off the ballot after taking it 598 00:34:24,280 --> 00:34:26,920 Speaker 2: into the SEC. As I sat in front of hundreds 599 00:34:26,920 --> 00:34:30,120 Speaker 2: of shareholders on the dais with the chairman, CEO and CFO. 600 00:34:30,560 --> 00:34:34,040 Speaker 2: I watched in dismay as person after person stood up 601 00:34:34,080 --> 00:34:36,520 Speaker 2: and told us we should be ashamed for not putting 602 00:34:36,560 --> 00:34:39,640 Speaker 2: their idea on the ballot for the meeting, and every 603 00:34:39,680 --> 00:34:42,400 Speaker 2: one of those shareholders won a nun's habit or a 604 00:34:42,440 --> 00:34:45,319 Speaker 2: priest's schollar. It turned out that the initiatives had come 605 00:34:45,360 --> 00:34:47,840 Speaker 2: from a group of Roman Catholics, and my chairmen and 606 00:34:47,920 --> 00:34:51,560 Speaker 2: CEO were devout Catholics. As we walked off that stage, 607 00:34:51,600 --> 00:34:54,879 Speaker 2: the CEO said to me, quietly but firmly, make this 608 00:34:55,000 --> 00:34:58,400 Speaker 2: go away, which of course I did. This week we 609 00:34:58,480 --> 00:35:01,000 Speaker 2: had more than one example of people fighting battles with 610 00:35:01,120 --> 00:35:04,760 Speaker 2: questionable results even if they win. Farmers from the United 611 00:35:04,800 --> 00:35:07,760 Speaker 2: States to India to Spain are up in arms about 612 00:35:07,800 --> 00:35:11,920 Speaker 2: higher costs on climate regulations, with the most militant in France, 613 00:35:12,160 --> 00:35:13,480 Speaker 2: where they shut down the capitol. 614 00:35:13,880 --> 00:35:16,600 Speaker 15: We share the goals, for example, the protection of nature, 615 00:35:16,680 --> 00:35:19,040 Speaker 15: because we all live in nature and with nature, and 616 00:35:19,480 --> 00:35:24,040 Speaker 15: the best ambassadors for nature are the farmers themselves, and 617 00:35:24,160 --> 00:35:26,680 Speaker 15: important is for us that we find common solutions. 618 00:35:26,719 --> 00:35:29,359 Speaker 2: But it's not clear what farmers will gain given what 619 00:35:29,400 --> 00:35:31,840 Speaker 2: climate change is doing. To their livelihood. 620 00:35:32,000 --> 00:35:34,760 Speaker 16: If you take, for example, the Western United States everything 621 00:35:34,800 --> 00:35:40,560 Speaker 16: west of my house in Colorado, the combination of specialty 622 00:35:40,600 --> 00:35:44,120 Speaker 16: products or a portfolio of different types of products which 623 00:35:44,120 --> 00:35:48,720 Speaker 16: are having different price and supply and demand dynamics exacerbated 624 00:35:48,760 --> 00:35:53,880 Speaker 16: a course by terrible drought conditions unevenly distributed across the 625 00:35:54,040 --> 00:35:57,560 Speaker 16: entire Western United States, the story there is of a 626 00:35:57,600 --> 00:36:01,000 Speaker 16: net decline of net farm income on I can sayalidated basis. 627 00:36:01,120 --> 00:36:04,120 Speaker 2: We've known all about Elon Musk's odd battle with Bob 628 00:36:04,160 --> 00:36:07,160 Speaker 2: Eiger for not advertising on X, but then again, Bob 629 00:36:07,239 --> 00:36:09,680 Speaker 2: may now be picking his own battle with an important 630 00:36:09,680 --> 00:36:12,680 Speaker 2: partner of his. Reports are that the NFL is none 631 00:36:12,719 --> 00:36:15,440 Speaker 2: too pleased with plans for ESPN to form a joint 632 00:36:15,600 --> 00:36:19,400 Speaker 2: sports streaming service with Fox and Warner Brothers Discovery, something 633 00:36:19,440 --> 00:36:22,280 Speaker 2: put together in secret. At the same time, the reported 634 00:36:22,320 --> 00:36:25,760 Speaker 2: of the NFL was considering an investment in ESPN. 635 00:36:25,840 --> 00:36:27,480 Speaker 1: Is certainly an unusual situation. 636 00:36:27,560 --> 00:36:29,920 Speaker 6: They haven't decided who's going to manage it yet, but 637 00:36:30,000 --> 00:36:33,600 Speaker 6: you can imagine they'll be fights over controlled and payments 638 00:36:33,640 --> 00:36:35,520 Speaker 6: and strategy and things like that. 639 00:36:35,680 --> 00:36:38,279 Speaker 2: Of course, the most renowned picker of battles may be 640 00:36:38,400 --> 00:36:41,360 Speaker 2: our former President Donald Trump, who has made no secret 641 00:36:41,400 --> 00:36:44,640 Speaker 2: of his skepticism on NATO. This week, the former president 642 00:36:44,760 --> 00:36:47,600 Speaker 2: raised the decibel level by taking on pretty much all 643 00:36:47,680 --> 00:36:50,720 Speaker 2: of NATO, saying he told at least one NATO member 644 00:36:50,760 --> 00:36:53,960 Speaker 2: that he would welcome President Putin's attacking them if they 645 00:36:53,960 --> 00:36:56,120 Speaker 2: didn't meet their commitments for defense spending. 646 00:36:56,280 --> 00:36:58,200 Speaker 1: They said, you got to pay up. They asked me 647 00:36:58,280 --> 00:36:58,800 Speaker 1: that question. 648 00:36:58,920 --> 00:37:02,759 Speaker 17: One of the presidents of the big country stood up, said, well, sir, 649 00:37:03,200 --> 00:37:06,680 Speaker 17: if we don't pay and we're attacked by Russia, will 650 00:37:06,719 --> 00:37:10,200 Speaker 17: you protect us? I said, you didn't pay you delinquent? 651 00:37:11,000 --> 00:37:13,280 Speaker 17: He said, yes, let's say that happened. 652 00:37:13,560 --> 00:37:14,840 Speaker 1: No, I would not protect you. 653 00:37:14,960 --> 00:37:17,480 Speaker 17: In fact, I would encourage them to do whatever the 654 00:37:17,520 --> 00:37:18,360 Speaker 17: hell they want. 655 00:37:18,560 --> 00:37:20,680 Speaker 2: And then there was the biggest battle of them all. 656 00:37:20,840 --> 00:37:23,840 Speaker 2: That is, of course, the Super Bowl or Everyone expected 657 00:37:23,880 --> 00:37:26,160 Speaker 2: a knock down, drag out fight to the finish between 658 00:37:26,160 --> 00:37:29,040 Speaker 2: the San Francisco forty nine ers and the Kansas City Chiefs, 659 00:37:29,200 --> 00:37:32,480 Speaker 2: which is what we got with the Chiefs winning in overtime. 660 00:37:32,880 --> 00:37:35,360 Speaker 2: But what we might not have expected was a separate 661 00:37:35,400 --> 00:37:38,840 Speaker 2: battle on the sidelines between Chiefs star tight end Travis 662 00:37:38,920 --> 00:37:42,160 Speaker 2: Kelcey and his coach Andy Reid. He subsequently quipped that 663 00:37:42,320 --> 00:37:44,600 Speaker 2: rather than cursing him out the way the lip readers 664 00:37:44,640 --> 00:37:47,480 Speaker 2: said he had, he really said something much nicer. 665 00:37:47,719 --> 00:37:49,320 Speaker 1: I was just telling him how much I love him. 666 00:37:49,320 --> 00:37:51,880 Speaker 2: But in the end, despite picking a battle with his coach, 667 00:37:52,160 --> 00:37:54,919 Speaker 2: mister Kelsey did get the big reward of a kiss 668 00:37:54,960 --> 00:37:58,680 Speaker 2: from none other than, of course, Taylor Swift. That does 669 00:37:58,680 --> 00:38:01,120 Speaker 2: it for this episode of Wall Street. I'm David Weston. 670 00:38:01,239 --> 00:38:03,160 Speaker 2: This is Bloomberg. See you next week.