Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you insight from the best and economics, finance, investment, and international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, and of course on the Bloomberg terminal right now. And this is a joy because he has retired from New York University, where he provided shocking value over over two decades.
Nor Robini is a little busy. He's writing a book that will do better than good. The movie rights have already been sold before the book has been written. With Macro Associates and co CEO of the boom bus dot Com, Dr Robini joins us this morning, Norielle, I want to go right to the heart of it. You say it differently than Lawrence Summers. We have stagflation. We also have debt on top of it. You're looking at your stagflationary debt crisis. Is it here? It's on his way here.
I agree with Red, agree with Larry Summers and many others who worried that they're going to be overheating because we have a loose monitor and fiscal policy, and that could lead to inflation. But I have the second worry and the third worry. The second word is that in addition to agree the men becoming excessive, we're gonna suffer supply bottlenecks. And those supply bottlenecks are not the shorter
ones driven by say unemployment benefits. Have identified nine forces that are much more secular that like in the seventies, are present negative global supply shops that reduced potential growth, increase the cost of production, and we lose monitoring and fiscal policy and lead not only to inflation but also to start flation. The combination of inflation and recession like we had the in SEVENI is when you have to
oil shops. And on top of it, compared to the seventh is now that racials private the public are much higher. So at that time when the FED went and fund the inflation with Bolker, we had the severe double deep persession, but we did not have at that crisis after the g f C where the that crisis, but we had
low inflation because there was a negative demand shock. So we could have the wars of stagflation of the seventies and wars of that crisis after the Gypsy nor I want to go back to your restumbul in the old world. I want to go back to Genoa and Venice, when John Farrell's ancestors were doing battle with the huge industrial changes of that time, the Furtune Center for Okay, that's your carrying scenorial. We have seen over time historic change.
How does America do secular stagnation when we have a tech juggernaut like we're observing right now with Apple, Amazon, Google and that, how do we bring their excellence over to the America an experience. Well, even Larry Summers who was worried about secular stagnation, now where is about inflation?
The trouble is that we're facing a whole eight problems from a political contibue in terms of a gridlock, not just in US, but those in other parts of the world, because there are lots of people who are left behind, and whether they're voting for Trump, they're voting for Democrats or voting in Europe for published part of the right and the left that against the globalization, that against the technology,
that against hyper digitalization. But we also live in the world in which, as I pointed out, I worried that in spite of technology, maybe as it there's been the last twenty years a force for deflation, there are other forces that are gonna be staculationary. They're gonna be reducing potential growth and increased cost of production because of inequality.
We have the globalization where protection is and everybody wants to defend their own firms and workers who are going to now see balkanizations of global supply change and they're is shoring of manufacturing from low cost China to US and Europe. We're now having agent of population not only US Europe. Advanced ecolomies are also in key emerging market like China, Korea, East Asia, Russia were restricting migration now increasingly from south to north, and migration was something that
kept a lead on wage pressures in advanced economies. We're gonna have this discovering between US and China because of this Cold War becoming colder. There's a risk of the houtward decappening on technology and trade data, information, the Internet, financial flaws. Global climate change is also stack freationary. Look
at what's happening with lack of water. Even in California, one third of all vegetables two thirds of all fruits and nuts are producing in California, and now they don't have water, and the farms were water rights, rather sell it for something else. Whenever shocked to say food prices pandemics, they're gonna recurring or imply self reliance or countries on
their own domestic supply. Cyber attacks are leading again the disruption of production when they occur, or the firms will have to spend hundreds of billions of dollars to try to reduce the risk of cyber attacks. And that's going to be another there's so much to get through to the final point. If your parent inequality and the parties are gonna be pro worker grow, union, grow wages and so on. And that's what I put upward pressure on wages because I wasn't I was going to be able
to cut you off there because you were in full flow. No, I'll just take a breath just for a second, just want to frame what you're saying, because I think it's so important. You're making a supply side call on the economy. Here. A lot of people believe that we'll get this supply side response as the year grows older, that people will start to come back to the workforce from September onwards. You're saying that's not going to develop in the way
people anticipate. Can we put some numbers on this, No, real the participation rate in America, the degree to you think it will recover, things like that, Just work through it with us. Well, you know, I do believe that there are some term supply vocalnects, and maybe in the labor market, unemployment benefits, the lack of childcare, the fact that schools and not reopened may have led some workers not wanted to return to the labor market. That could
upper pressure. But in my view, even when those short term factors go away, I just described nine factors that have not include with the short term, have to do with the medium term. Each one of them is a negative supply shock, and it's a medium term in particularly the last one. The battlesh against inequality implies that in
the past, within at the protection of labor. But now look at the first when three trillion all the last year care program of Physical Stimus, then billion in December the first Biden Plan one point nine trillion, when mostly to what workers unemployed, partial employed, those left behind, rightly so,
because there is so much inequality, then do otherwise. But that puts the labor in a situation of strength right now, given them my sick transfer, you can afford waiting longer before you get a lousy job or a burger flipping job. And that tilS the balance of power between labor and capital, and a distribution is going to be not like in the past, from labor to capital, but from capital they let's pick those are neal term friends, this is really
really important. Last they shift away from capital and a leverage, shifting towards labor. That's a huge effort of this administration, and that pretty open about it. Yeah, the idea here is that the veterans are perhaps isn't helping things along. New Yal. We just have about a minute left, and I'm wondering what the FED can do in this circumstance. It's driven by so many other factors, whether it's supply bottlenecks or rejiggering of the labor market. What can I
actually do to forestall the sac flationary push. Well, my view is that the FED, that like all the same from banks, are in a debt trap. Then if you do and then if you don't, because if I'm right about overheating and stacculation. They should be tightening policy sooner and get out of tape in right now to avoid
inflation getting out of control. But if they were to try to do that, even the stocks of debts that are much haireher now than ten twenty thirty years ago, private and public, then you let a crush in the bond market, a crush in the debt market, a crushing the stock market. You're not gonna have a double deeper session like the early eighties. You're gonna have actually a depression.
Between doing that and the latter choice of keep on monetizing large physical death is its and letting inflation gradually rise. The latter choice is gonna be by the fault, the one they're gonna choose, and therefore inflation is gonna come back, and then seculation is gonna come back. So it's not as if the fact is evil. We are in a
debt trap. We're not just in physical dominance today. We're in the debt trap because private and public that are excessive, and its central bank is trapped and they're not gonna be able to exit this unconventional monetar epology, and this because the markets and the garments are crushed. This is being so depressing. I always have to tell everybody that
you're actually a really happy guy. I always have to telephone after the interviews concluded that Rabini now usually smiles Tom, He's a happy guy, a wife, and these inns happy at least the future. It's gonna catch up. You sound like Lisa. You back soon. It's gonna hear from your self as always, great to have you back in New York.
Nom repeating there the CEO of Rabini Macro associate to the co CEO of Boom Bust dot com right now, Joe Stiglets on our fixation on secular stagnation, Professor Stiglets, this goes back to Alvin Hanson and on to Laurence Summers. And you say, no, no, no, it's not secular stagnation. It's a complete focus, a fetishism on growth. Explained to
us why secular stagnation is off the mark. Well, the idea of secular stagnation was that there was something wrong with the economy such that even zero interest rates you could not maintain full employment. And that led to the idea that uh the zero lower bound. It was the inability to get interest rates negative that prevented an economic recovery. My view has always been that the reason the economy was weak and say the period after the Great Recession,
was that we did not have enough fiscal support. It wasn't anything about secular stechnation. It was about a policy failure. In that particular case, President Obama could not get the support from the Republicans of a sufficient fiscal stimulus to get the economy back into a robust recovery. And so UH today with President Biden, we've shown that if you give enough fiscal stimulus, you can get a strong economy.
The real question facing us today is where we will be able to get my call the second nose UH, the broader pages on infrastructure, family care, and so forth, that both be at mass shop support and a supply support. So that's a political debate that will have for another time. You own the little G and economics a complete focus
on the growth rate. With the new debt and deficit build up that we have and Laurence Summer's legitimate concerns over secular stagnation, do we risk too low of a growth rate which destabilizes our belief in paying off debt and reducing the deficit. We the i m F in next UH World Economic Outlook w e O, which just came out, actually said that if the Biden Plan is adopted, that went ahead to make projections assuming that it would be, our growth would be seven percent this year and over
four percent next year. So they like me, are confident that if we give the right UH support to the economy, we will have growth, and that growth will enable us UH to be in a good position UH to repay the debt and will sustain UH. You know, these investments will provide the basis of growth over the longer time. Professor Stiglett's we've been in a perpetual low inflation environment. You were talking about that as the new normal, and basically you're blaming a policy failure on the fiscal front
as the reason why. Going forward though, to shape our inflation debate, how much do we have to look at the supply chain disruptions that we're hearing from almost every company that reports earnings this season. You know, the market is quite good in steering the economy when there's a
small adjustment. We want a little bit more cars, We want bigger cars, smaller cars, We're always going through these kinds of adjustments, but we've been through an experience that, other than times of war, we've never been through where you transform shut down large parts of the economy, and the economy the market doesn't do a very good job in these very sudden transformations transitions. So yes, I am
not surprised that we are seeing lots of bottlenecks. I actually have enough confidence in the market that most of these bottlenecks will be overcome. You know, you saw that in the case of UH Timber prices went way up and then came way down. Is there any fundamental reason why the market economy can produce as many cars as Americans want to buy? Absolutely, we were complaining before about lack of demand for our cars. So of course there's going to be some hiccups as we restart the economy.
But the question is is there any fundamental reason that we should expect this to be other than transist? Is transitory? And I think the answer is no. And I think that's where the I am mep is. That's where the fet is. I think that's where all those who are not get other than those who are trying to UH oppose the kinds of measures that are that are being proposed to get the economy back on strow. Yeah, but there are some things that have changed. There's a reduction
in the emphasis and globalization. There's been a de globalization that some people have pointed to. There's also in it on the margin, has been a bit of a shift toward labor away from employee employers, which sought for example, Boeing restraining itself from firing certain employees because they didn't want to worry about rehiring them when they need did
them earlier this morning that announcement came out. I mean, what do you say to all of these shifts that they're not necessarily fundamentally changing the character in a way that could alter the path of inflation to a higher tilt. Uh. The there will be some increases in prices in the process of that kind of adjustment, But let me stay on the on the second point you made, for instance, that the profit margins have been so high that they
can easily be absorbed without uh increasing prices. That uh, you know, it's one of the one of the disconcerting things happened in the United States over the last uh fifteen twenty years has been decreased in the share of labor, and a correction to increase the share of labor would actually be welcome and can be absorbed without any significant in UH in in prices side of globalization. Uh, there's going to be some adjustments, but particularly in our trade
relations with China. But remember there are many other emerging markets out there are many developing countries, and UH, if we import a little bit less from China, a little bit more from Vietnam, do we really think that that's going to have a big back on the course of inflation over a significant period of time. I don't know, Joe Stiglets. I hate to tell you, but it's been thirteen years since you and I talked about your courage to write a book with Linda Billness on Iraq intangentially
on Afghanistan. Folks, the three Trillion Dollar War was hugely controversial, except everybody had to shut up and read it. That's what you did with Stiglets and Billmus Joe Stiglets, could you please comment after this incredibly important book about are leaving Afghanistan and the reports that we may leave Iraq, Well, you know, when we wrote the book, Uh, the three trillion dollar war highlighted the economic costs of that war.
Our own estimates were that the number was greater than three trillion, but we wanted to be on the very conservative side. We now have the evidence. Uh, the cost just two for healthcare and for uh pay for our veterans who are coming back itself is in the order of men to an excess of a couple of trillion dollars. So, in fact, it has turned out that our estimates were
as we intended them to be, vastly conservative. Uh. And UH, so that we focus on the cost of the war, I think, uh, the other side, and of course it is the benefit of the war. And I'm afraid that was negative. So that in that h if we look at that whole episode, Uh, we destabilized the Middle East. We didn't do what we did what President Bush claimed we were going to do, which was at the extra Marketoe. Professor, always appreciate your time, So got to catch up. Don't
be a stranger. Let's talk soon. Joseph Stickley's the Columbia University professor of economics and of course no Val Price winning economist. The cyclical story the ad revenue is really kicked in in a massive way, big tech delivering some big money. Cross Mark Global Investment Chief investment Officer Bob I mentioned YouTube revenue up by more than year on year over at YouTube just one unit of the overall
company that is Alphabet. Now, Bob, I just wonder from your perspective, how difficult is it to tell a client, yeah, we own them, we don't own those names. I'd be a disappointed situation if I had to tell my client that. Thankfully we do. But I think the question is what happens from here, And you've all been alluding to it. That is, we're having amazing corporate earnings in the second quarter, but almost definitionally in the back half of this year,
earnings growth is going to decelerate. Markets love when economic and earnings growth accelerate, not so keen on deceleration. The numbers will still be good, as you folks know, but not as good. And then you bring in all the other factors like his inflation, transitory or not. And I think it's just not smooth light, it's not straight up. It's bumpier from here, Bob Doll At cross Mark, the game is to extrapolate out with a vision out one
year two years, five years, ten years. We talked to the great Steve auth about this in the last hour. Give me the courage of Robert Dahl right now? How far out are you looking to believe in the reppellations of Apple, Amazon, and for that matter McDonald's. Yeah, A lot of it has to do not so much what the companies are doing. They're doing great, they're adapting, to use the words you've all been using so far this morning,
and that's good news. The problem is what happens to the valuation the multiples if and as and I think it's as interest rates creep higher, that's the trick. The company's businesses are good, they're solid. Uh, they're coming back. They've figured out how to adapt in a in a slightly different world than we've been in. So it's more
about valuations than can the companies execute. Bob, what are the scenarios that you're looking at that could actually cause that to happen, for interest rates to finally creep higher as so many expect. Well, you allude to it a minute ago, Lisa. Inflation. Is it transitory or not? My guess is some is, but not all of it. So we have some inflation that's transitory. Some that's caused by supply shortages which hopefully get fixed for too long, but
some is real. The era of zero two percent inflation, in my view, is over, and as a result, we're gonna have to use to a little inflation, um, you know, not high single digits, but enough that there's a different valuation parameter. So far, the markets have not agreed with that. The markets have said inflations transitory. Ten your treasuries at is a okay, and pe ratios where they are. We'll
see if that continues. I hope I'm wrong. I hope inflation is totally transitory, and then they'll be, uh, you know, onward and upward. Let's say you're right, let's put some numbers on it. You said not high single digits. What are you looking for, Bob, something like three or three and a half those kind of levels to persist. And if that's the case, what do you want to own in this Secony market? Yeah? I think it's three issue, or let's call it a three issues opposed to you know,
one to two. That doesn't sound like a big difference, John, but you know it is when it comes to valuation and interests or so where do I want to be? I think the counter trend move has been higher bonds, lower yields, growth stocks, defensive stocks. That's counter trend. I think you use that period we're experiencing now to beef up on your cyclical exposure. You trimm duration if you haven't already done it. The US, and increasingly the global
economy is in pretty good shape. We're gonna get good economic news, good earnings news, and a little bit of inflation, which to me means slightly higher interest rates. What's the frothiness now, Bob dolld the exuberance? I mean, is this a legit bullmarkers that's still unloved? Oh, it's it's it is legit. You know, the sentiment numbers have moved up significantly. They're not an onerous territory, but we've got to keep our eye on it. Look, I think that part of
the argument is the Tina argument. If I want to get out of stocks, where am I gonna go? Cash doesn't give me anything. Bonds I think a risky and so in traditional asset class, I just stick with my equities. Find a question from maype up just quickly. I've asked a couple of people this question over the last couple of weeks. I'll ask it of you. What do you want to winn into year end? The nasty called the Russell? What would your preference index the Russell into your end?
More cyclicality there um and lower valuations compared to the NASDA. Interesting? So can we put out a banner that Bob Dalson's sell Apple. I don't think we can do own the Russell. So I still own Apple, just less than I used to. Tom Kine Roulette is always tough across my global investment chief investment officers right now, and this is a joy out of Edinburgh and of course the prestigious residency at
the Universe of Chicago. In emergency medicine, but far more, bak De Hansauti of Johns Hopkins has done the world tour of really difficult as diseases. When you show up in Ghana, when you show up in Nepal, well, it's a different medicine than what we have in America. Dr Hansauti, welcome what comes after the delta variant virology? One oh one told me these things keep changing to s pro like you look at the delta variant is a pathway to what's coming down the road a year or two
years out. So unless we decrease the amount of circulating virus, yes, it is likely that the virus will continue to mutate and there will be an echo lambda and future variants that will be more transmissible, more variant than those that predecessors. So then how do we approach that, I mean from a medical basis, we're working on vaccines. What do you want from our politicians within the chaos we have right now? Sure?
So within the chaos that we have right now is about decreasing the amount of circulating virus, and so that is a public health challenge and that can we overcome by vaccinating individuals. So that's what we need from all politicians, need to promote vaccines, decrease transmission to virus, decrease the amount of circulating virus. So future variants of concern are slower to evolve, and certainly for the path ahead, one certainty will be vaccinations that that will be ongoing at
least the push to get them. Just want to bring you this news that fives are actually reporting earnings, blowing all estimates out of the water. Full your COVID vaccine revenue is estimated to be about thirty three point five billion dollars versus the prior forecast of twenty six billion dollars. That's the medical side, That is the response that health
officials want. But dr Ansadi, the concern here is how long are we going to have to mask, unmasked, remask based on whatever variant, based on changing scientific evidence, versus being able to say we're done with the pandemic and we can move on. Not until we get to a point where we decrease the transmission of the virus, and you know, vaccinations will prevent transmission of the virus. We so decrease the likelihood of people um getting sick and
circulating that virus. The other thing is that there may still in the future pipeline be therapeutics which can stop the reproduction of the virus and cure people of the illness before they're able to transmit to others. So, you know, I think the re mass mask. Yes, it's frustrating, but the only way to protect those who are unvaccinated or cannot mount an immune response is for us to continue
to go back to what we know works, which is masking. Yeah, but how much has the administration undermine its credibility by giving one bit of guidance a week ago and then completely flipping it out of its head this week with a set of recommendations that, by all measures, seems pretty confusing. Sure, so maybe if I've flipped the dialogue slightly here, right, I mean, on one hand, we think, okay, the data
with this is the same a week ago. That is to a then yes, that would be undermining their credibility. But we're actually seeing its responsiveness to evolving data. So in July one, I think the US had around eleven thousand daily COVID cases. Today it's around sixty three thousand. Now, that is an exponential rise, and we would not expecting anybody that transmissibility would be so high to the point that multiple counties across the country would be determined as
high transmissible or substantial transmissive counties. Stand at chart on radio right now, we're showing flags for boys. It's the number of countries ten countries that have resilience rankings. The United States is listed five. It's a pretty little chart. Dr Hansauti. Every pandemic is the same, and I would suggest my reading of CAMU are actually scientists like you. Is all we do is end up isolating socially the unvaccinated, the people rebelling against science as well. Is that where
we're heading. We're just going to isolate the unvaccinated. That is not the society that we can live in. Right. We cannot isolate over of our society. That's just not how it works. We have to rally get on the same page. But also we talk about the unvaccinated. Remember there is a substantial number of folks who have underlying medical conditions that cannot mount an immune response from medicines that suppress the immune system. Just quickly, just want to
clear something up. Tom has a child at home who's unvaccinated. Least it does too. I do not do we have to wear masks? Who has to wear a mask? And who does not have to wear a mask? In New York City at the moment, you all have to wear masks. The best thing I heard this week was be vaccinated, act unvaccinated. But each of you can take home the COVID virus to your child, whether you're vaccinated or not. Your child is unvaccinated and thus has a chance of
getting sick and transmitting it to others vaccinated children. What about me, doctor, unvaccinated and rather vaccinates it with no children at home? What do I have to wear a mask as well? Indoors in public spaces? What am I meant to do? What's the guidance? Not what you think? What is the guidance? Right now? The guidances and into a public spaces in areas of high transmission, you need to be wearing a mask irregardless of your vaccine status.
There we go. Thanks for clearing that out. Doctor. Thank you. Dr bakty Han Celtsey Johns Helpkins, Associate Professor of Emergency Medicine. Right now, our expert on storytelling, David Rubinstein, joins us. Of course period of Pier tonight night PM in New York And David, this is just just I love that you did this, a conversation with someone creating each and every day. What did you learn from ms Rhymes? Well,
she's an incredible talent. She grew up in Chicago, the youngest of six children, went to Dartmouth and decided to get into writing after she tried her hand at advertising and turned out she's the greatest writer and producer in recent Hollywood history and she's the most powerful force in in uh now in Netflix because the show she just produced and wrote Britain has just broken all the records
for Netflix. So an incredible talent, very nice person. I've gotten to know her over the years because she was on the Kennedy Center board for six years and she still helps serve on the Kenny Center Honor Selection committee. So she's incredibly smart, good writer, very creative, and a very likable person. Is she her business person or does she have people around her that help her. She's not
that focused on money so much as creativity. Um, she does have people, I guess manage her money and so forth, But she doesn't measure her self worth by her net worth. She's not trying to be the richest person in Hollywood or something. She trying to create really good shows. And now she's adopted three young girls they're now a little bit older than young and uh and and she's raising them as well as doing all the other things, and she's creating a lot of shows that are just hits.
She doesn't seem to have any failure. So, um, she's an incredible person. And she's very young. She's under the age of fifty and I must have a confession publicly. Clearly, Britain is also fabulous and they are all incredibly addictive shows. She is coming and rising at a time of incredible power of content, where content is king and there have been bidding wars. What does she say in the longevity of this trend that we have seen as a streaming
wars heat up. Well, remember, grays Anatomy has been on now for eighteen years. She's still on ABC, even though she's not directly involved so much now. Um, she has longstanding ability to kind of write things that will stay the test of time. So she's not a one shot or one trick pony, as they would say. She's produced a number of shows that have done quite well. She just has the ability to not only produce but right.
And writing is very hard. It's a solitary business. She likes to be alone and dor in COVID she could write even more because she was at home, working at home, and she now finds a probably should work at home more because it enables her to write more. Sometimes writers get out of being writers. They want to be producers, they want to be moguls. She likes writing more than
anything else. I looked David all of this, and it comes back to your interpretation of the streaming success, whether it's what ms Rymes is doing, or ted Lasso or the rest of it. Our interviews David Rubinstein is profit is not out there? How do you expand a creative business if nobody really understands where the profit is? Will there be profit? Well, there is a lot of profit in UH in streaming for sure, and of course UH Netflix is a very profitable company and has incredible number
of subscribers. It's not clear exactly where it's going to go. But I think that the streaming is the future, and that's one of the reasons she left ABC. She was on Thursday Night, the entire Thursday night evening programming for ABC for many many years, and she just left abruptly with some notice, of course, and then she went to Netflix because she saw that as the future, and probably streaming is the future of this kind of creative work.
Do you see it as a future without an identifiable profit? The Roberts family made that flip with Comcast to a substantial profit. Do you see streaming doing the same flip to a substantial sustained cash flow. I think it will be very profitable. Clearly, people are more comfortable watching things on their computers and and then on their televisions. And as we know now now know, people are are cutting the chords so speak, so to speak, on their cable
TV subscriptions. People are going to streaming, and I think that's the future. The only thing is that when you're in the investment world, you say, Okay, this is the future, But what's the future beyond this? What's the after streaming? Clearly there'll be something beyond streaming. I don't know exactly what it is, but right now I suspect it's mobile streaming and and things that you're gonna be watching on your mobile devices that will be even better than what
we have today. David, thank you so much, greatly appreciate it. Just really really really really interesting. I just find just wonderful, uh, Lisa, how he does this with so many different things. This
is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations and subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom Keene, and this is Bloomberg