This is Bloomberg Wall Street Week.
We turn our attention to the markets.
This week.
USCPI nembers reinforcing concerns about inflation.
The financial stories that shape our worth, a.
Really different reaction to the market. Some more indications of just how hot the US economy really is.
Through the eyes of the most influential voices.
Katherine Keating, CEO of B and Y Moan, Ryan Winnahan, a Bank of America, Sam Zell Sharman and founder of Atrey Group Investments, Bloomberg.
Wall Street with David Weston from Bloomberg Radio this week.
There may have been a lot going on, but it seemed like all Global Wall Street could talk about were those on again, off again talks at the White House of the dead Ceiling I Speaker McCarthy kept insisting there would be no default provided there were spending guts. We're not going to default, but we have to spend less than we spent last year. House Minority Leader Hakim Jefferies responded that the cuts McCarthy was demanding just go too far.
House Republicans are determined to either extract deep, painful cuts that will hurt the health, the safety, or the well being of everyday Americans or crash the economy, and.
President Biden conceded that there would have to be some spending cuts, but that there had to be revenue increases as well.
We've got to get something you can sell to both sides, and we need to cut spending.
But are they revenue matters?
And through it all, Wall Street insiders like Steve Schwartzman continue to insist that in the end they'll work it out.
Tomhow this is someone of micheal wills and desire to not blink in the whole world is watching.
But despite all the budgets, storm and drawing, there were some other things worth paying attention to this week, like China's move against Micron selling its chips there.
Broadly, this action appears inconsistent with the PRC's assertions that it is open for business and committed to a transparent regulatory framework.
FED minutes from the last meeting showed how uncertain the Central Bank is about where it is heading next.
But mined show FED officials were more divided than usual at their May meeting as they debated uncertainties about bank problems, inflation, and the debt limit.
And Nvidia shot the lights out with revenue projections as the world stampedes to AI.
When you look at the data center market, it is white hot. People that are developing data centers don't even get them developed before one of the fangs leases for thirty years.
The US economic numbers came in stronger than anticipated, with personal and business spending up and the year over your PCE core deflators stubbornly up at four point seven percent.
But the markets for the week pretty much reacted to those two other stories, the debt, ceialing negotiations and what AI means for tech, with the S and P five hundred upo point three two percent for the week ending of just over that forty two hundred number of people have been focused on and two hundred points above our Bloomberg Elves median estimate for the end of the year
four thousand. Vanasak was up a whopping two point five percent, while the yield on the tenure added another twelve basis points and in the week just under three point eight percent. To take us through the week. In the markets, Welcome now Lori Kalvacinas, she's RBC Capital Markets Head of US Equity Strategy, and Jillian Teent Financial Times chair of the editorial board and editor at large US. So welcome back to both of you.
Laurie.
Let me start with you and what's going on with the markets. Given all of the nervousness on some front about the debt, it's surprising, least to me, the equity markets didn't really react all that much, did they.
They didn't. I would say the market's generally been reacting by rotating as opposed to pulling money out. And if you talk to US based equity investors, they'll tell you, hey, look, we've seen this story before. The stakes are high, but we think a deal is going to get done. So they've moved out of cyclicals and into things like tech and defensives, which is generally what you see in debt
sealing drawdowns. But at the same time, we're hearing from the big kind of non US investors that they've been very worried about this. They don't know our politics as well, So I would say kind of the steadier and the more kind of even keeled local investors are taking it in stride. That doesn't mean they don't care, that doesn't mean the markets won't react if we don't end up getting a deal. But there is a patience here that makes sense.
So so, Laurie, what about that recession question, because we have been hearing these predictions of a recession in twenty twenty three, it was going to be the second quarter, it's going to be the third quarter, and it's a fourth quarter. Is it just a matter of timing or is there a question even whether there will be a recession.
I think there's a question, a legitimate one, about whether or not we're even going to get it, or if you end up getting something similar to twenty fifteen twenty sixteen, which was pretty close but not quite. And I think what's interesting, and I see this more from the lens of earnings, is that we're in an asynchronous cycle in terms of the economy. There are different industries and different sectors. They're going through different processes at different points in time.
If you think about sort of your inflation, you know sort of beneficiaries, the beneficiaries of higher interest rates, things like financials and energy they saw big upward revisions last year, while tech companies, growth companies, supply chain centric sectors were all seen downward revisions. Now the tables have turned everything that was getting hurt last year as in a recovery, and things that were benefiting from inflation and interest rates
stramping are seen their downward revision cycle. That's a very very confusing cross current, but if you spread the pain out a bit, you could actually skate by without a true sort of recession happening.
One more before we turn to everybody's favorite topic, which is of course artificial intelligence. But Jillian, to you, you mentioned the FED and what the FED is likely to do. We got some strong numbers in this week, actually indicating both on the inflation staying up but also the economy being quite strong. Where do you think the FED is heading? Do you think they're going to continue to rise at all? And by the way, if you want to, you can give us the job's number for next Friday. It's okay.
Well, if I did that, i'd be a trader.
I think the FED is under pressure to keep raising, keep tightening. It may skip that for this coming meeting and do a wait and see stance, but I certainly don't think it's going to cut any time soon. And I'm actually think the market projections of twenty five bases point rise now is quite reasonable given the fat that we still haven't seen a significant decline in the inflation rate, and the economy hasn't yet shown signs of being in recession.
I think in many ways, a more interesting issue that the Fed's also facing, though, is, you know, is it going to give any hint of rethinking the inflation target going forward again. One of the messages that came back from being down in the South earlier this week and talking to people is that a lot of the commercial real estate sector are constantly asking FED officials, you know, are you going to change the inflation target. There's a kind of desperate hope amongst many in that sector that
actually the rate rises will stop because the inflation target changes. Now, the fled's been very keen to squash that quite forcefully, but that question is going to liner and linger, particularly if the inflation keeps coming in higher than people had expected.
I'm going to turn to that subject, which is everyone's favorite subject and now is generative AI. And if it weren't our favorite preessional subject before. When Vidio came out with those earnings projections, it was really pretty extraordinary. We have people saying this is as big as electricity or fire or the invention of the wheel overestimating what this generative AI mean for us all.
Well, the reason why the Navidio stot hoped sodomatically and came up with the extordy ownings is very much down to the dazzle factor, but also the confusion factor. Because investors know that something big is happening, they don't really understand the technology. They don't understand the degree to which companies that our AI companies actually have a moat that can defend them from you know, new rivals, and so
there's a lot of uncertaintly there. The one thing that's crystal clear though, is that this is going to require a lot of computing power and a lot of chips. So people are grasping on anything they can see the shiny new thing to try and have a play at this whole wave. In terms of the significance of generative AI is obviously very significant. You know, we've had AI for a very long time. It's all part of our
everyday experience. But you know, for me, one of the ways to explain what's going on is that as an anthropologist, I always used to joke that the one thing that AI couldn't do is have a sense of human and tell jokes, because jokes are fundamentally rooted in culture, which is hard to describe and hard to define and often very contradictory. And most of the traditional platforms inside computers
looked for logic and patterns and things like that. What you'll start to see with platforms like Generator of AI are machines that are so sophisticated and so good at watching people and replicating human behavior even if it's not logical, and behaving like an anthropologist not a scientist, that you're starting to get AI platforms which are almost beginning to tell jokes. So it's really quite a big change in
terms of what's happening. The big question though, is what it means in terms of real world applications and company valuations.
So as a loyal turn to you here and how big this could be? Is this a new lease on life for all of tech essentially?
So, look, I think this is another thing you can put in the category of rallies that have been deserved. I know it's sort of trendy to go out and say, you know, the market is toppy and this is just all this AI hype and it's not deserved. I think there's a paucity of growth stories out there right now, and when you think about the conversation on reshoring that's been going on and talking to a lot of investors about that in recent months, is kind of the only
big interesting growth narrative out there. Well, now we've got something to keep it company, which is AI. Ultimately, my gut is that this is going to be another productivity enhancer, something very cool, something very interesting that enhances productivity. Is it going to completely transform society? I'm not quite sure.
I'm in that camp, But in terms of the market and why it's getting so excited, I think it's because there hasn't been a lot of other things in this kind of category of secular growth stories to get excited about recently.
Julian, I'm going to ask you to do something very unfair. You have a terrific column in the Financial Times ABOUTIA I believe it's called in Ukraine. Could you just give us thirty or forty five seconds of that because I thought it was really extraordinary. I'd love you to come back and really explain it more detail.
As an Idea is an app that Ukrainians thought three years ago to enable Ukrainian citizens to do all the usual government functions that any of us ever have to do, not by going to an office and filling in paper storms, but on your phone with app. And initially it seemed like just a very minor tool that a few people might use for things like vaccinations, status in COVID. But these days seventy percent of Ukrainian phones have this app.
Half the population is using it. They're doing almost everything to do with the government on this cell phone app. And the key point is that not only has it meant that Ukraine's kept functioning even as refugees have flooded everywhere because they've all got their passports and stuff on their phone, but it's also meant that they have one
way potentially to try and cut down in corruption. And the crucial thing to understand, the reason why it's so important this week is because they're trying to take it. The USAID is trying to take it and export it to other countries.
A tech export from Ukraine. How about that, and particularly if it deals with DMV, I'd be all for it. Many Thanks to Lori Calvascino of RBC Cattle Markets and Julian tat Has, the Financial Times coming up could your friendly neighborhood chat Ai beat the stock market. We're going to hear from investing guru David Booth's Dimensional Fund ad Advisors. He has some doubts about it. He's not sure that you can beat the market within. That's going to come up next on Wall Street Weeedons.
This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Private equity, it's come a long way since Henry Cravis and George Roberts put it on the map with that twenty five billion dollar buyout of R JR. Nabisco back in nineteen eighty eight, made famous in Barbarians at the Gate.
I'm talking about putting a mountain of money into everybody's pocket right now.
And it has evolved since Democrats tried to make Mitt Romney's role in running Bain Capital and issue in the twenty twelve presidential campaign.
It's a very healthy and positive debate.
That doesn't mean the private equity world is going to enjoy it very much.
Today, private equity is a massive asset class with over eleven trillion dollars invested and another three trillion dollars and so called dry powder waiting to be deployed. Although higher rates slowed things down at the end of last year, it's just beginning to show signs of coming back.
Fourth quarter of twenty two you had nothing today, you actually had the markets loosening out for the right deals.
Leaving us all to look for that right deal and to take us into the world of private equity. We welcome to people who are in it from HGGC. We have, first of all Steve Young, who's the chairman of HGGC as well as the co founder, and we also have Rich Lawson who's the CEO and also co founder of HGGC. So welcome, gentlemen. It's great to have you here. First of all, give us a sense of how HGGC fits into this world of private equity. Steve, if you want to go first, from.
The very beginning, from our roots, we decided that we wanted to do private equity differently, and we believe that across the table were people that were founders, you know, financial sponsors, management teams. Across the table as somebody who cares more about who I am than the last dollar and what I bring to the table than.
The last dollar.
Fundamental principle is that partnership investing.
Will we'll wile of the world.
And fifteen years ago that was a little bit of a bet. Today partnership investing has taken over the world. And so for us, the differentiation that we make is that we live here, we seek your reference across the table. We need your reference at the end of this engagement where because that's how we're going to go forward, because
that's all we do is partnership investing. Where others will say we're partnership investors, but they rent here, they rent here for the time, and they don't really it's not rooted to who they are rich.
This partnership investing sounds really nice, and like I understand why you might attract a lot of heels that way, can you make as much money? Because that's not, let's be frank, the model historically associated with private equity. We think it was coming in and buying it, tripping a lot of costs out and reselling it.
Where we focus is in the middle market, so medium sized businesses. So for us, as a seven billion dollar private equity firm, where we tend to see the opportunity to create real appha is buying good businesses in the middle market as traditionally defined with the goal of transforming them into great companies.
So rich.
It sounds like when you come in, it's not the management team that you're replacing. You don't come in by definition. You've picked companies that have good management teams. So what is it you're providing? Is it capital? Basically, and typically in private equity, we think of leveraging up your capital is equity as I understand.
It, we would think about it in sort of three different deal market types. One is buy and built with very important in this type of macro environment. The second would be in business transformation, helping up upgrading core capabilities
and processes. And third is growth enablement, maybe changing the go to market process, the go to market motion, helping businesses called global But again we're taking very distinctly medium sized companies call it a billion dollars of enterprise value below, and we're creating multi billion dollar enterprises over the course of a partnership with the owners of that business.
Steve, I understand you focus on the middle market, if I can call it that. Are there particular sectors that you tend to be attracted to or see deals from.
We live in Palo Alto, California. That's our that's our our base of operations. So we've been in technology for twenty five thirty years. So we're going to do some technology, no question. But how tech has informed places like business services, financial services, and even some consumer in particular places is
where we will kind of trade. We won't go further than that, but that's a pretty wide swath, but we are gaining, uh through our thematic sourcing efforts, uh, some real expertise in our shop and uh, you know, we'll we are.
Now trying for the first time.
You think I've been in kind of working to do a sports angle and sports investing from the very beginn income my previous life, but I I took my my heroes, Roger Staubach's uh uh he told me that, you know when I when I first retired, So what should I do? What's your what your recommendation is just run? And so I ran. And so I felt a little bit awkward, you know, reinvesting back into sports. But now I've kind of matured in my private equity life that I've been in longer than I played football.
Well, I was going to ask you that, Steve, obviously, given we all think of you as a forty nine ers hold on. That's the way we know Steve Young. Given that do you get more deal flow out of sports? So people tend to come to you. And I know you've done a lot of work actually with other former professional athletes to help them in their business ventures.
So one of my passions is to try to pay it forward and trying to create trying to create a repository of transition stories from professional life into the next phase of their lives. And I've always talked about that as a hard ending to a passion for people and then finding out that they're middle aged and they.
Don't have it.
You know, I was great at something and the next day I'm not good at anything. And so how do those transition stories and how to pay it forward for other athletes Today, I'm really passionate about trying to figure out how to tell those stories about people who have transition good and bad.
Rich Palin, the last time I checked is in Silicon Valley. We had Silicon Valley Bank has the failure of Silicon Value Bank and some of the other regional banks. Has it affected your business.
In a way, It's sort of excel rated the opportunity around this tilt towards partnership, we find that that really large and growing ecosystem of venture backed businesses are looking for outcomes. Right, you have an ecosystem of venture capital and growth equity investors. You have wonderful entrepreneurs that are
around these businesses. But if you think about what Steve had mentioned, the essence of what we do, we're looking for folks that in the kind of businesses that we're transforming from good companies or good businesses to great companies
is numerous owners. And so what we found, David, is that because of what's happened with the macro environment with SVB and others, you have this really large universe of smaller companies that would have typically raised a series CDF and gone public that have now said, maybe it might be better to join forces with one of our core active portfolio companies.
Rich.
One of the precipitating causes of what happened at Silico ELI back the higher interest rates that really took down the valuations of a lot of private equity companies. Is it affecting your business?
Rich?
The diminishment I assume of the valuations given what's going with a discount rate.
In uncertain macro environments, business quality becomes more important than ever. And because these companies tend to be more resilient in the face of macro pressures, the type of businesses that we look for invest in and help support transform. Even if they do get impacted in the near term, you will see them rebound quickly.
Steve, I can't let a Super Bowl Most Valuable Player quarterback go without asking one question about valuations and professional sports teams. They are through the roof as we talk to people. It is just extraordinary. And I talked to some of the investors to say they're going to keep going. What do you make about some of the valuations we're seeing now on some of the pro teams.
My stat might be a little bit off, but it's not a lot off. Seventy five of the top one hundred shows on television the highest rated shows on television, Seventy five of the top one hundred were NFL football games. Think of the power in that stat. Equity values have twenty times in the last twenty years. And you know people say players have played too much. Quarterbacks are making sixty million dollars a year. As far as equity value
growth in the last twenty years. Quarterback salary growth has not is only half of it, and so I'm not saying this should be paid more. I'm just saying that equity values are through the roof because of the power of live television. And you've seen that around the sports world and NBA it manage League Baseball was on its back twenty years ago. I'm overstating it, but you know now flourishing because life television runs the world, and the
NFL runs life television by a long way. So you talk about the power of the NFL, that power only grows. And that's why you think, you know, a forty nine or team that's worth eight to ten billion dollars could be twenty billion, could be I mean the upper ends are you know, who knows. But the NFL has done a great job of building equity value, that's for sure.
General, I can't thank you enough for joining us here on Wall Street Week. That is Steve Young, of course, as well as Rich Lawson of HGGC.
Coming up.
There's a big fight in Washington over the depth sit what should there be? We ask Nobel Prize winning economist Paul Krugman, what.
Really bothers me. Where we are right now is that the programs that apparently are safer saying are programs for the elderly.
That's next on Wall Street Week on Bloomberg.
This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
I thought Hamilton had it right. He said a national debt could be a national blessing, and the national debt having a liquid market there provides a good benchmark for the private sector. It probably underpins the role of the dollar in the world. It allows the Fed to conduct monetary policy easily. I think we have to keep in mind the costs of paying down the day. There is among some people single minded focus on it, but there's no free lunch in this world.
That was Larry Lindsay, President George W. Bush's director of the National Economic Council back in two thousand and one. That was a time when the concern was not about how big the federal debt was, but that we might actually pay it all off. To explain today what we should and should not be worried about when it comes to the debt and the deficits were running up, we welcome to Dow Doctor Paul Krugman. He's distinguished Professor of economics at the City University of New York and the
recipient of the Nobel Prize in the Economic Sciences. So, doctor Kruman, thank you so much for being with us. We hear a lot of talk from politicians in Washington, as we should about the debt. We don't hear as much. I don't hear about the economics of it all. Once you give us your analysis of what we should be concerned about with the debt and what we should not be as concerned.
About, Okay, there is a pretty strong case the debt is just a number that the United States absent loitical games over the debt ceiling, which is a really uniquely American dysfunction. Aside from that, there's no hint that financial markets are concerned about America's ability to service its debt. There's no real sign that the debt is putting any strain on the economy. There are. US debt is very
high for by our own historical standards. The only time we've been close to this level was in the immediate aftermath of World War Two. But it's not that high compared with what a lot of other countries have experienced over the years without any kind of crisis. So the numbers are enormous, but everything about the US economy is enormous. So you say thirty one trillion dollars and you do
your best doctor evil imitation. But it's not at all clear that the debt is a top priority you know that it's a catastrophic issue, or even that it even belongs in the top five or maybe even the top ten of ISI she's to concern the United States.
So maybe not catastrophic, but is it a growing problem? In this sense, the debt itself is just one number. What about when you put it together with another number, which is debt service? Because as I understand it, part of the question is how fast is debt service costs growing? We have had essentially zero cost of debt service. Those are going up. Now does that pose a real risk?
The idea that having to that were then we're in some kind of debt spiral where we have to borrow to pay interest and then we have to I mean, the numbers don't support that at all. The numbers don't suggest that anything like that is going to be a
problem for the foreseeable future. So no, I mean it's just it's we've gone from a point where money was you know, free, or even in real terms, possibly we were being the faraoh government was being paid to take on debt to one where it costs something, but it's still pretty small.
So let's talk about some of the proposals about it. How to raising the death too much, and that is some capping of spending, particularly discretionary spending. What are the possible consequences of that if in fact we do freeze or reduce spending off of twenty twenty two levels.
What really bothers me where we are right now is that the programs that apparently are sacrisanc Are programs for the elderly, Medicare, social Security are off the table. They're being protected, and a lot of the stuff that discretionary is really things like programs that support children, to support education, that support nutrition for the young, which is the future. So what's happening right now is that in the effort to hold down headline spending right now, we're actually kind
of disinvesting in the country's future. And that's that's pretty alarming.
So that is a terribly important and very unpopular point. Going back to the politics for a moment here, and that is when you say let's cut things for the elder. That's very popular. I'm elderly at this point. But at the same time, we're not really investing in future growth, as I understand, by paying more, for example, on social security, whereas investing in education or children or infrastructure could increase
the future growth. To what extent do we need to concerned about growing ourselves out of whatever debt issues we have.
Well, to a large extent, that's going to happen anyway. I mean when I say you need to adjust for inflation, you really also need to ask about growth. And you know, the example I always like to use is, you know, how did we pay off the debt from World War Two? And the answers we didn't. We had slightly higher debt when John F. Kennedy took office that we did on you know, when we declared victory over Japan, but the
debt had dwindled. It was it was less than half the share of GDP that had been at the end of World War Two because we had a growing economy and a little bit of inflation over that period. And this large we're still in a world where we really are already set to, if not exactly grow out of our debt, at least not have it grow very much uncontrollably unless we do some really even more irresponsible things
that we do now. So and look, if you want to try to accelerate economic growth, there's not a lot of things that we know work. Investing more in children's health nutrition is one of the things that we do know works, but it works with a very long leg. It's something that will show up thirty years from now in a better economy. Aside from that, if you asked what can we do to make the economy growth a lot faster over the next ten years, the answer is nobody knows the answer to that.
So, professor, you referred to the size of the debt, going back to GDP right now, the rejections, I think we're somewhere our line ninety seven ninety eight percent of GDP something like that right now, and the rejection from CBO, as you know, go up to undred and twenty percent, and maybe keep going. At what point do we become concerned about that? You say, now, it's not a problem, But when does it become a problem. When would you start saying, wait a second, we're running into trouble.
It's hard to come up with a number. And you know, we've looked at Japan with two hundred percent of GDP, and j Pan has lots of problems, but unwillingness of the market to buy Japanese government bonds is not is not one of them. I always I like to point out that the if we go back to, you know, the Industrial Revolution in Great Britain, first half the nineteenth century, Britain had debt that was one hundred and eighty percent
of GDP at the end of the Napoleonic Wars. By eighteen fifty it was only down to one hundred and thirty percent of GDP. And this is the you know, this is the Industrial Revolution, this is the birth of the modern age taking place under what anybody now would say, Oh, that must be a crippling debt burden. So, you know, is there any there must be somehow we can't have our death, can't exceed our total national wealth. But we're
nowhere close to that. And I don't see any number anywhere in these projections that is one that based on history, would lead you to be concerned.
One of the things we hear about from some quarters at least is a concern about the strength of the dollar, that in fact the globe will lose some confidence in our fiscal abilities here in the United States, and we have seen sort of a dilution of the dollar as the reserve currency of the world. Fewer transactions that I and stand today are being transacted in dollars than before.
You've written about the fact that you don't think there's another currency that will overtake it, but that perhaps will become more of a plurality. Is that a likely development and is so what would be the consequences.
I always say that the big problem is not that something else might take the dollar's place. The problem is that there may be nothing else that can take the dollar's place. When you think about the alternatives. The Euro is unfortunately, because of eurocrises and divergences, there's not a Euro bond market. They're just there's an Italian bond market, a German bond market. So that's a fragmented market, which means that eurosecurities are not liquid in the way that
dollar securities are. China has capital controls, It has an authoritarian regime given to making erratic sudden changes in policy, who wants to use R and B as a as their key asset. Japan is just too small an economy. So you know, it's not that the US derives a huge advantage from the fact that the dollar is the
currency in the world. It's that the world there is a huge advantage from the fact that there are safe, highly liquid assets that can be used as collateral, that can be used as the sort of underpinning of the whole world financial system. And those safe liquid assets are US treasury securities. And if we manage to destroy the credibility, then the whole world, including US, but not the whole world's suffice. It's not that somebody gains at our advantage. It's that we undermined the whole system.
Okay, professor, thank you so very much for joining us as Professor Paul Krugman of the City University of New York coming up would arose by any other name, smell as sweet. Some people seem to think so, including maybe even the FED. That's the next one Wall Street Week on Bloomberg.
This is Bloomberg Wall Street Week with David Weston from Bloomberg Radios.
So AI may or may not be helping one on the stock market at least right now. But the question is what could it do for the longer term and respect to investments, And for that we turn to a truly gifted investor. He is David Booth. He is, of course, the founder and chair of Dimensional Fund Advisors. David, thank you so much for being with us, wrote a column in The Financial Times expressing some, if I can put it, skepticism about whether all of this generative AI may help
us be better stock pickers. How do you see it?
AI is going to be incredibly useful in a lot of areas because it can process such enormous amounts of information, and that's really what what selecting securities is all about, is trying to figure out how much undiscounted information is out there. So at first blush, it looks like it could be incredibly useful, although regardless of how elaborate and extensive your AI is is not as elaborate and extensive
as the market. You think of the stock market as just being We think of it as this being this enormous information processing machine that everyone in the world's out there trying to buy and sell securities, and it's their action that causes prices to be settled at reasonable at reasonable levels.
So finally, one more thought, what's in a name? Shakespeare had Romeo asked that question to suggest that this perceived difference between his monocues and his beloved Juliet's capulets shouldn't come between them. But in today's world, how a person, or a product, or even a country is perceived can be all important. Take for example, Korean car company Hyundai.
Once perceived as a reliable and expensive, rather boring alternative to high priced and flashier European alternatives, it has gotten a whole new lease on life, creating adventurous designs for the EV world, making it a formidable competitor even to Tesla, causing The Wall Street Journal this week to ask, how did Hyundai get so cool?
It's a EV rhymes with Kevin, and it's not just.
Hyundai that's looking to freshen up its brand. Consider Facebook, with Mark Zuckerbert going so far as to rename his entire company and had bid to make up some lost ground to TikTok, though the arc of his space shot to the metaverse make it bent a bit by the gravitational pull of generative AI.
AI is already crucial to the foundations of the metaverse and will be even more so in the future.
All this rebranding has now apparently made it all the way to the Oval Office, as the New York Times caught Speaker of the House McCarthy as well as House Minority Leader Hakim Jeffries holding an important debt ceiling meeting with the President wearing those flashy dressed sneakers. But before we get too terribly excited, it would be well to remember some famous instances where attempts to rebrand fell well short of the mark, Starting with the audio industry itself.
Does anyone remember the campaign in the late eighties to make us think that the Oldsmobile was really for young people?
In short, the new Cutlass Supreme is your further as Oldsmobile.
And has anyone seen any Oldsmobiles around lately? Or how about that so called new Coke who was going to revive a time honored brand.
New Coke is catching on? Is better?
You said?
The word rebranding has been known to extend even to the world of geopolitics, a Secuary of State Hillary Clinton did with her famous campaign to turn things around with Russia.
We want to reset our relationship.
Looking back on it now in the light of Ukraine, it's not clear exactly what the world got out of that particular rebranding. Even the central banks are getting into the game, with the debate raging this week about whether the FED would execute a pause or a skip at its June meeting.
I'm not a massive fan of these linguistic acrobatics that central banks end up getting themselves into.
But maybe the place where we need rebranding the most is in how Washington deals with things like budgets and deficits, oh and oh yes, the full faith and credit of the United States America. But that may take more than just a new logo or new shoes with white soles. For that, we may need a fundamental rethinking.
The point is, we need a new spending process.
That does it.
For this episode of Wall Street Week, I'm David Weston. This is Bloomberg. See you next week.