Bloomberg Wall Street Week: Cooperman, Tyson, Kelly

most influential voices. Larry Summer is the former Treasury Secretary, Bryan Wynahan back of America, willmar Ceo of Charlie Sharp. Bloomberg Wall Street Week with David Weston from Bloomberg Radio proceed. We have cautioned confusing reports on the delta variant and mixed numbers on the economy make us think again about that rush to reopen. This is Bloomberg Wall Street Week.

I'm David Weston, and the markets this week seemed to reflect all of it the hope, with stronger than expected jobs numbers out on Friday taking the SMP record highs as well as the trupidation, with the NASTAC actually down on Friday a bit, even though it was overall up a bit for the week, and the ten year yields struggled to get back to one point three after falling as low as one point one three earlier in the week.

To help us put this all together, we have with this David Kelly, JP Morgan Asset Management Chief Global Strategist, and Laura Tyson, Professor at the Has School of Business at University of California, Berkeley. Dr Tyson served as chair of the Council of Economic Advisors under President Obama. So Dr Tyson, thank you so much for being with us, give us a sense of while you interpreted those employment numbers. It seemed to be strong pretty much across the board.

But did it take into account the delta variant? Well, it was strong, and I certainly think it's important to look at the three months average. If you get a three months average of adding eight hundred thousand, uh eight hundred thousand jobs a month, those are strong numbers and and show continued strengthening of the labor market. That's the first thing. The second thing is it is true that a lot of the employment growth in July was what

I would call in person activities. It was leisure, retail, hospital totality, people going to restaurants, people going out to personal services. What is a little unclear, and by the way, also education, what is a little unclear is what is the course of delta going into the fall and will that slow that momentum for those kinds of jobs and services death. And I think that's a legitimate question, and

I'm not sure. We don't We don't know the answer. Therefore, I think that's one of the reasons why the market is saying hard to interpret, hard to interpret. So let's go to the markets. Actually, David, it's over to you here. And what happened, because when I came in and looked at the numbers of that, boy, these are great numbers and markets are really going to go up, they didn't go up that much. It was mixed. In fact, the

NASTAC was down a little bit. Is that because, as Laura said, this is some doubts about delta iron or is it really fear that may cause the FED to increase rates sooner. I don't really think it's either of those. I mean, the markets are very there. I mean, we're going up for a very long time. We are for these heights. It's it's you know, it's hard to justify moving up quickly from here. But on the delta variant.

I mean, look, I know that the virus is mutating, but you know what, in some ways, the economy is mutating also. I think it is really interesting that, you know, we had a huge crash in the economy last year and then and then a rebound in the third quarter, but every quarter since then we've grown. We were on our fourth wave of COVID here, but the economy is really adapting to it. So I do think the delta variant will slow things down a little bit over the

next month or two. Um, you know, I think hopefully it will. He can come down again. But you know, as I look at the economy, it looks like people are adapting to it. Yes, we're gonna have to. We're gonna get much more serious about vaccine mandates. You know, you want to work here, you gotta have a vaccine. We're gonna get more serious about wearing masks, but it's not going to stop people from the open. The schools are getting back to doing the things that want to do.

We're just gonna have to do them in a different way. But I've I've confidence. You know, Yeah, the virus mutates, but we mutate too, and I think the economy is actually going to keep on growing through this. So so we're back to you. What does that say to the Fed and monetary policies a practic matter? But is I think what I just heard from David is we're learning to adapt to it. It's not going to be as

robust as we thought. It will be more tempered. But does that mean actually the FED can be a bit

more leaning with monetary policy longer? So I look, I think the said is it was very clear you You had a comment from Vice Chair Claradon, but we also had a comment last week from Jerome Pell And basically, what they're saying, is it right now, given the advanced guidance, they continue to to continue to issue um with a goal of maximum employment and a long run target of inflation of two percent with some overshoot for some period

of time. Yeah. The the conditions in the economy, I think continue to indicate that that meeting those conditions may sometimes may occur sometime in two or early twenty three. I don't think there's any news here in this report which would suggest what the SAID has been saying. The SED has believes, and I believe that most of the significant increase in inflation over the past few months has

been the result of transitory factors. Those factors won't die out, and we will end up with a perhaps a somewhat higher inflation rate over two percent, but not much, and that will be consistent with the Fed's guidance on what its policy is going to be. So David's that means the sky's the limit. As far as equity is scary concern because it seems like almost no matter what happens, equity markets just go up. How much of that is

just supported by the FED as opposed to fundamental underlying growth. Well, I think a lot of it is. But of course the Federal Reserve has been fueling asset price increases all over the place for years, ready for a decade now. And my real concern is not so much the FED is fueling inflation, but it's just causing assetprises to rise much faster than the economy overall, and that could cause asset bubbles, are generalized asset bubbles, So I think the

Federal Reserve needs to begin to normalize. I agree with Laura, I don't think they're going to We're looking at hyper inflation are very high inflation. I think most of its transitory, but we have seen big increases in asset prices, and I'm you know, I think what's going on is these very low interest rates are fueling a lot of nefarious things in the economy that we really don't want to see. You very high increases in home prices, a lot of

spectors of assets, and you're drawing money in. So I think the Federal Reserve really needs to think about normalizing and they also have to think about timetables. Here. You're supposed to get ahead of this, not not react late to it. So I'm worried that they're they're taking too much time getting to tapering and talking about raising interest rates from essentially zero levels in an economy which is

really barreling towards full employment. That's former Chair of the Council of Economic Advisors Laura Tyson and David Kelly from JP Morgan Asset Management. Coming up, we hear from legendary investor Leon Cooperman. That's next on Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from

Bloomberg Radio. This week's another chapter in the drama of Washington, with the Senate apparently getting closer to a major bipartisan infrastructure package, coming on top of over five trillion dollars in fiscal stimulus already pumped in the system, and more on the way if Democrats have their way. Leon Koperman has been a key investor for many years, first of Goldman Sachs and then his head of his own firm, Omega Advisors. And we welcome now to Wall Street Week.

So Lee, thank you so much for joining us. So many people look to you for investment advice. I've heard you described as a fully invested bear. Could you tell us what that means and why? Yeah, Well, let me first say, you know, it's a pleasure to be with you. You know, I reside with Ruis Lewis Luckyser on Direct and the initial Wall Street Week four or five times.

This is a lot more convenient. You know, I'm sitting in my home in New Jersey and I didn't have to travel Owens Mills, Maryland, so it's a pretty painless experience. Fully invested bear is uh explained by the fact that is a cyclical and secular outlook. The cyclical conditions are not uh suggestive of a bear market. You know, basically, bear markets don't come about through a maculate conception. To come about for certain fundamental reasons. Number one, celebrating problematic inflation.

We're heading in that direction. We're not there yet, mainly because the FED speak hostile FED, which you don't have. In fact, I'm critical of the FED, and I'll talk about that in the moment. Uh an oncoming recession. We're just coming out of recession or a exhuberantly braced price market. I have to say, even though I'm conservative in my outlook, I have to admit the stock market has been very self corrective. The area of the market has been most

exploited and overvalued has had a very big decline. So cyclically, the conditions are big decline on present and that explains my positive view. My long term concerns are I think we're's kind of barring from the future. You know, Laura Tyson is a very distinguished economists. I know if you're still listening, But I would say, if I lined up a hundred economists and they asked him, what is the

potential real growth of the U S economy? Responsively centered around two percent real and that's been a function of labor force growth, which is about a half and one percent per antum, and productivity growth was about one and a half percent peratum. So that determines real growth in any economy. So two percent real if you're economic bull, you say two and a half of your bear, you say one and a half. Add to that about two percent for inflation. So nominal GDP grows four percent. We

have real growth this year of four times potential. Yet the fittest holding interest rates in near zero. Makes no sense to me, and I understand what they're doing or why they're doing it, but I think it's going to have a bad end to it. Secondly, you just referenced in a minute ago. You know we've already injected into the economy a trillion dollars of stimulus and excess of wage is lost. Yet they're trying to do another two

it's for trillion on top of that. And so you know this nation was found two and forty five years ago. We had no national debt. Three years ago is about twenty trillion. I think now it's not going to do a twenty eight trillion is growing at a rate foreign nexus the growth rate the economy, and when this party ends. Basically, it's not gonna end well, and nobody knows is gonna end. You know, Socrates around I think four BC said he was the wisest man alive. He knows one thing, and

that is I know nothing. And then a few thousand years later, Warren Buffetts at Forecast of the Future, tell you more about the forecast, and they tell you about the future. So we're all guessing. But I think we have a bad end to this. I think we've been borrowing from the future. I think bonds are totally totally mispriced. You know, if I told you historically, attending US government bond is yielded in line with nominal GDP. So let's say nominal GDP on trend basis grows at four percent,

so that would imply a four percent ten year bond. Okay, this year, I think in the third court of nominal GDP is expected to grow with thirteen percent. Yet we have a one point three percent tenure government bond rate. You're an investor, you pay taxes, you keep sixty percent of the one point three that's what seventy eight basis points called eighty basis points inflation. Your rates running four or five. So you know, stocks make all the sense

in the world relative to bonds. The bonds make no sense. And I think the FED is over staying in their position, and that that bothers me greatly. So also in troubled by the shift to the leftist taking place in the country. You know, of the young people today, I think socialism is prefer insistance to capitalism. They don't have a clue. My good buddy who I admired greatly, cal and go and says it, well, he'd like to put a bunch of people in his private plane flight to Venezuela, Cuba

and let them see what socialism is all about. So let me ask you one specific question. If you're putting money to work right now, how do you take into account the fact that some people have said the referee is now playing in the game, whether it's on the monetary policy side or or the fiscal policy side. You referred to long term growth patterns, but thus far the government and this, by the way, it's true under President Trump as well. I could argue Goose is up the

nominal growth rate by really intervening. Absolutely, Trump was no hero. In my opinion. We were running a trillion dollar deficit in early UM while he was president and we had all the employed economy. Well, really what happened is prior prior to COVID, hitting the unemployed, when there's about five and a half million people, it balloon to twenty three million people and uh at the peak, and now we're

down about eight million. And we're conducting fiscal monetary policy with the idea of getting unemployment that back down to it was pre COVID, and so, you know, not a worthwhile objective. But I think the combination very similar to fiscal monetary policy, it will turn out to be problematic. So so let me ask you one last question here, which goes to a fundamental issue. Historically, historically the best and the brightest have gone to Wall Street. Is that

still true? Or is Wall Streets struggling to attract the best talent these days because they're going off to other sources, including tech as well as maybe biotech. I don't know. In all honesty, David, I've always advocated I do a lot of speaking to young people in high school and colleges, and I tell them the only way to be successful, he said, do what you love and love what you do, so you know, don't go into a field to make a lot of money. Go into a field because you

have a passion for it. And I think wolf Streets a place where uh, I love every minute I worked there. I had a great twenty five year un a Golden Stacks, terrific firm, had a great run, and O make it for another twenty five years. And then in two thousand and eighteen, I decided to I tell everybody, I'm like uh Hyman Roth and Godfather too. You know if I saw the movie a hundred times, but it's a scene at the airport right before they shoot him. He professed

to be retired executive living in a pension. I'm a retired money manager living on investment income. The bad news is they have no active income, no wages, no salaries. You know. All my income has differences an interest. I have enough of it. Don't worry about me. Uh. And the good news is I have no pressure. So at a seventy eight I decided to swept pressure for income. You know, pressure, uh for income, let's pressure more income.

I like to make money because my goal is to give it away, and I like to have more money giveaway. But basically I love what I'm doing, so wals she will get its share of good people, and the legal profession is gonna get its share of good people. And you know, money goes the money streeted best. But I think the way to be successful is to go we have a passion and you know, uh And that's kind of what got me to Wall Street. I I just

I look at my career. I say, you know, uh uh, it was luck, hard work and intuition that made for my success. Hard work, intuition. That's Omega Family Office Chairman Leon Cooperman. Coming up. The CEO of True America, Robert Hart, on the extension of the eviction moratorium that's next on Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. Millions of Americans were exposed to possible eviction because of the pandemic, but

we're protected by Congress. When that moratorium on evictions lapsed, than they were exposed, along with hundreds of thousands of landlords. The CDC this week stepped in and imposed a new moratorium. But the issue still remains. And we turn now to Bob Heart. He's the CEO of True America Multi Family, which manages some forty seven thousand units around the country. So, Bob, thank you so much. Welcome to Wall Street. We're good

to have you here. Give us a sense about this industry, because some of us may not have followed that closely. How many people really are behind on their rent? How many people do you have in your units who are behind? Well, David Um, there's quite a number of people in America that are behind right now. It's about fifteen percent of the total rental population of about forty four million households, and either they're currently behind or they have some pass

through form of rent um. However, the situation has improved for many many of us because more people are are working as the economy has improved. And I think if you look at current statistics, it's probably less than five per cent of the rent of population that is currently not paying, either because you're choosing not to pay due to the eviction mortorim or they simply cannot pay. So the situation has improved, but there is a lot of

past do rent that's affecting particularly the small landlord. The corporate landlords are hurting as well. But to the extent UH this problem is really partially affecting a small landlord. It's deriving uh passive income or or retirement income from the rental of apartments. Congress has enacted various rental assistant programs. How much have they helped and why haven't they've taken care of the problem. It just began a few months ago.

The programs have traveled from the federal government to the state government down the local government, and the administration lies with local government. So it's spotty in California. And we have areas like Sacramento that are doing really, really well, Orange County that's doing really well and paying folks. Los Angeles City not so much. It depends on the local jurisdiction. So there's a lot of hope. But the landlord has

to do the work. The landlord has to work with the individual household and get them to cooperate with the submission of an application to the municipal authority in order to get in the line. And then you have to get in line after that. And wait, isn't your impression this is a timing issue, as we might say in business, or a fundamental issue is to say billion dollars has been appropriate. I think three or four billion has been spent. When it comes out, that's gonna really address much of

the problem. I think it will address a lot of the past two problem and a little bit of the current problem. It's not a permanent solution. We've got to get people back to work and we've got to get into a normalized economic situation as far as rendership goes, and we are moving in that direction because more and more people are paying their rent. So the headlines always talk about the folks that aren't, but we have to

remember that over the people are paying their rent. They are protecting their livelihoods, their households, and their families, and they're doing the right thing. As I listened to you, as I read about this, it sounds like this is a somewhat troubled business right now. Is investing in and owning rental units right now? Is that a good business? If you read the headlines, you would say it's not.

But there's really two different worlds. The investment world, uh seems to be running counter to the headlines, and multi family investment is extremely robust in the country right now because the landlords and the corporate owners and folks believe that things will normalize. Things have improved, Rents are going up in certain areas UH, and the business model is very very sound, so the investment climate is quite robust. What makes it a good business is it a cash business?

That is to say, you don't have to invest very much more. You can sort of really receive rents ongoing from the current investments. What's always made apartments of good business is what you just said, the durability of the cash flow streams. People can invest twenty or thirty percent of the value of a building and borrow at at rates today that are very very attractive UH fixed rate loans or in the sub four percent range and variable rate loans or as low as three percent or even lower.

And if they can buy UH at a cash on cash return of say five or six percent, they're making a spread of their money. Rents do grow and there is economic benefits through depreciation and other factors that improve that durability of cash flow over a long period of time. And finally, Bob, are you seeing inflation because we hear some economists concerned about the possibility of rising housing prices,

both on the ownership side on the world side. Are you seeing that in your units are you raising prices? We are. We're trying to do so thoughtfully because we don't want to price out the renter. But we're facing higher labor costs, higher costs of goods when we're renovating and and so forth. So we are in fact seeing core inflation. It's not spiraling, but we are seeing inflation. Okay, Bob, thank you so very much, Really appreciate you being with us today. On Wall Street Week. That is Bob Hart.

He is CEO of True America. Coming up staffing the FED. We ask our special contributor Larry Summers about what leadership the FED needs going forward as President Biden considers whether to make some changes at the top. That's next on Wall Street Week on Bloomberg. This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. No one ever said that the job of fit share is an easy one.

But when J. Powell moved up to the big chair, he couldn't have known that he'd be faced with a pandemic, an economy brought to an abrupt stop, and that he'd have to step in and help save the day by keeping the financial system alive while lawmakers worked out a series of stimulus packages. We are deploying these lending powers to an unprecedented extent, enabled in large part by the

financial backing from the Congress and the Treasury. It was President Obama who first named Pole to the FED Board back in two twelve, and then President Trump who elevated him to be chair in two seventeen. Accordingly, it is my pleasure and my honor to announce my nomination of Jerome Powell to be the next Chairman of the Federal Reserve. Congratulations, I'm both honored and humbled by this opportunity to serve

our great country. Powell's term as chair expires just over six months from now, in February two two, and though he has been praised for his bold action on monetary stimulus when we need it most, naming his own chair could give President Biden an opportunity to put his stamp on monetary policy in the only way he can, by

choosing who will set that policy. My administration understands that if we were to ever experience unchecked inflation over the long term, that would pose a real challenge to our economy. The FED is independent to take whatever steps it deems necessary to support a strong, durable economic recovery. And it's not just the FED chair whom President Biden has the

opportunity to choose. The terms for vice chairs Richard Clarida and Randall Coral's also expire in the coming months, and that's in addition to one vacancy on the seven member board here's Clarida. There are risk to any outlook, and I do believe that the risk to my outlook for inflation are to the upside. It may not be monetary policy that will inform the president's decision. Some Democrats want tougher regulation of banks, more attention to climate change, and

greater focus on reducing economic inequality. My concern is that over and over he has weakened a regulation. Here, he has led the FED to ease up. There, he has led the FED to help protect the biggest financial institutions UH and there have been de sens against that that. Senator Elizabeth Warren one member of the Board who has been an aggressive advocate for big bank oversight, and his voice or opposition to some of Paul's track record on

regulation is Leole Brainerd. A number of common sense reforms can be put in place to address the unresolved structural vulnerabilities, particularly in non bank financial intermediation and short term funding markets. One of the shrewdest observers of the Federal Reserve has been Larry Summers, former Treasury Secretary now at Harvard, and of course a special contribute right here at Wall Street Week.

So Larry, give us your sins. As President, Biden looks forward to the possibility of perhaps appointing the chair and two vice chairs the Third Reserve, without regard to who it might be, whether the present people or others. What do we need? What are the choose the FEDS likely to have to address it in the next three, four or five years. Look, the most fundamental choice the Fens

gonna face involve monetary policy. They involve making judgments about the inflation risks UH that I've expressed concern about going forward, whether those whatever the right UH view is. And they involved the monetary policy challenge of a long run environment where we're gonna have exceptionally low real interest rates at least if one looks at markets and a variety of other UH indicators. So I think it's the macroeconomic policy that's at the center of the FEDS responsibilities and that's

really the core task. Clearly, you need someone with a deep commitment UH to a stable financial system who understands that Dodd Frank was a big getting and UH not UH an end. So for me, monetary policy followed closely by UH financial stability. I believe that it's government's job to deal with the environment, it's government's job to deal with social justice, and I don't think that trying to push those responsibilities UH to the Fed UH should be

a priority. So my hope is that it will be UH someone who can provide guidance with the right wisdom and the right character on monetary policy and also on the maintenance of UH financial stability. So you mentioned first and foremost monetary policy. Give us a sense of where we are right now on monetary policy. And let's be honest, most people talk right now about called tapering when they started backing off of the bond purchases and then eventually

some interest rate raised. We just got this week new jobs numbers that were better than expected. The unapointment rate fell the the lowest rate has been since before the pandemic. Does that tell us anything about that question about monetary policy and tapering? Look, I think the FED has misjudged

the overheating risk. I think, given that they have an instrument that operates with lags, given the level of inflationary pressure in our economy, given prospective growth and closure of the GDP gap, given the extent of inflation and housing markets, given record levels of job openings, I don't think they should be buying anything like forty billion dollars a month of mortgage backed securities or a hundred twenty billion dollars

a month of treasuries. What they are doing is shifting America's funding structure towards being shorter term rather than longer term. There was ever a moment to be locking in long term funding, I think it's this moment. So I think the Fed should be moving with all deliberate speed to tapering.

It should be signaling its concern about overheating. It should be recognizing that there may well need to be UH a tightening UH in terms of raising rates UH well before what's now embodied in the dot plot or what's embodied in UH market expectations. So let's wrap up, as we do every week, with a rapid round. As Summer says, I got three of them for you, this week, Larry. First of all, cryptocurrency very much in the news in

all sorts of different ways. But my question to you is, from where you sit, is the greater risk over regulating cryptocurrency or under regulating it? Greater risk is under regular writing it. If we regulate it right, will protect a lot of people, will be able to enforce against financial crime of various sorts, and ultimately, by regularizing and making more trustworthy uh, cryptocurrencies will enable the benefits of cryptocurrency and the success of the cryptocurrency industry to grow. Okay.

Second one, also much in the news this week is Robin Hood and what it means about retail investors. As you look at the overall financial system, is that more of a risk or more of an opportunity. It's on the one hand, democratizing it. On the other hand, there's a lot of volatili associated with it. We're seeing some

version of the errors of the nineteen twenties. Uh. There, this is as clearer case for enhanced regulation as uh I've ever as I've ever seen, and we need much more serious coaches to meme stocks, to the marketing of stocks, to problematic retail investors. UH. This whole meme stock phenomenon is not going to end well. And finally, let's get back to employment. When do you think we will reach full employment at the rate we're going I think we're

pretty close, uh, David. Uh. If you look at job vacancies, we're at record levels, higher than we've ever been. If you look at the rate at which people are quitting, which is an indicator of how secure they feel in the labor market, that is at historically UH records UH rates.

If you take account of the fact that because of COVID and everybody's moving to different places and thinking differently about the kinds of jobs are gonna do and we're gonna do them, we've got much more structural UH change. I think we're not far from full employment, and certainly the tendency of wage growth to be accelerating, especially when you adjust from the quality of UH workers. Larry, thank you so very much as Larry Summers our special Wall

Street we contribute and of course from Harvard University. Finally, one more thought, let's make a deal. Workers around the country are coming to terms slowly with the need to come back to the office as employers coax them back or just play and say they have to come back. But it turns out that for a whole lot of us, we sort of like the idea of working from home if we could eliminating those long commutes and having the flexibility to fit our personal life around the office rather

than the other way around. Some employers may insist people come back in person, and some workers may just refuse, although the work from home camp may be able to delay their sacrifices for a few more months as the list of companies to laying plans to bring workers back to physical offices is growing. But in between is where negotiation may be taking place. After all, there's always a price for everything, right, and some surveys are starting to set the market price in the bid and the ask

for returning to the office. The insurance company Breeze did an online survey showing two thirds of those whose jobs could be done from home would accept the pay cut of five and another survey done by pole Fish pointed to fift percent of people who were willing to take a much deeper cut, as much as a quarter of their pay or all of their paid time off. But maybe the most disturbing result was what else people would give up to work from home. Giving up Netflix or

social media for a year isn't so shocking. It could do some of us some good after all. But more troubling is the third respondents who said that they would give up the right to vote in all future national and local elections if they could just work from home forever. So I'll leave it up to you to think about whether that's or about the pain of community, or about how deeply we are discounting our role in choosing our leaders. That does it for this episode of Wall Street Week.

I'm David Weston. This is Bloomberg. Say you next week.