This is Bloomberg Wall Street Week. We turn our attention to the markets this week. USCPI members reinforcing concerns about inflation, the financial stories that shape our work a really different reaction to Mark. It's more indications of just how hot the US economy really is. Through the eyes of the most influential voices Larry Summers, the former Treasurer Secretary, Katherine Keating, CEO of bny ME, and Sam zel Sharman and founder
of Aquatic Group Investment. Bloomberg Wall Street Week with David Weston from Bloomberg Radio. China gets going, Banks keep going and Fox Well Fox gets out of the trap that it made for itself. This is Bloomberg Wall Street Week. I'm David Weston. This week's special contributor Larry Summers and why we aren't more worried about that debt ceiling.
We do need to have a fundamental conversation about the future of government finances in our country.
Brian Winahan of Bank of America on what the bank tremors did to regional and local banks.
The good news is the basic industry is to report of good earnings across the board.
And Rick Reader of black Rock on whether the FED is too focused on inflation.
FED needs too exhibit a bit more patients. We don't have to hit the two percent target next month.
Global Wall Street waited for direction this week and spent its time sorting through the tea leaves to find the next big thing. China reported numbers showing its economy and particularly its consumers, are starting up again after the COVID shutdown. Looks like we are in China eighteen out a lot and buying a lot of fancy pants jewelry. As Secretary, Yellen tried to draw a line between US policy that affects the Chinese economy and having a specific goal of slowing its growth.
The United States will assert ourselves when our vital interests are at stake, but we do not seek to decouple our economy from China's. A full separation of our economies would be disastrous for both countries.
Bank earnings continued, with Bank of America, Golden Sex, and Morgan Stanley all posting some hits and some misses, but not a lot of evidence of real trouble. Following the tremors of.
March, we thought this would be the tea leaves we were looking for, and then we get guidance.
It's kind of like, eh, We're not sure. Fox walked right up to the brink of a libel trial with one point six billion dollars on the line and got away with paying Dominion only seven hundred and eighty seven million dollars, still one of the largest libel awards in history. Well, one thing Dominion earned, as they are now the world's most famous voting machines. And the job cuts just kept on coming, with Meta and Disney both cutting thousands of jobs in a big pivot for both companies.
In a way, they're a little worse than you anticipated, because while Meta is cutting ten thousand jobs now, they already cut eleven thousand in November, Disney losing up to seven thousand jobs across the board.
And what about the markets, Well, they pretty much moved sideways through the week, with the SMP five hundred down one tenth of a percent and just above forty one thirty, the NASDA giving up four tenths of a percent, and the yield on the tenure moving up about five basis points to just under three point five seven percent by the end of the week. For their reaction to what we've seen welcome back now, Charmin most of our rock money.
She's Goldman Sachs Wealth Management CIO and head of investment Strategy. And David Bianco, DWS Group, Chief Investment Officer. Welcome back to both of you here in our studio, New York. Great to have you. So let me start with you, David. Does the equity market agree with the bond market about where we're headed?
I don't think so.
And then sometimes there are good reasons for the bond market and equity market looking like they're disagreeing when they're really agreeing. But this time around, I think the equity market is ignoring the recession signals that are flashing.
Well you think about that, Charmaine. Are there recession flashes signals flashing and is the equity market disregarding it?
The cover of our outlook this year was Caution, heavy Fog, and the whole point was that there's a lot of uncertainty, there's heavy fog, and to have too much conviction on the probability for a recession is not prudent. We actually think the probability is forty five to fifty five percent. We've never been this high and we've never had a
ten percentage point range. So our view is a recession is not obvious, and clients shouldn't position themselves saying there's a recession and let's go underweight equities, or there's no recession, we should go overweight equities. And we actually don't think the bond market and the equity market are sending mixed signals.
If you look at where the equity market is, where interest rates are, and you compare them to appeared like two thousand and three, four or five six that average period, the equity risk premium, meaning the incremental earning zield relative to treasuries is the same as it was then when interest rates were the same level. So we don't think it's actually an inconsistent message.
What about the so called credit crunch, love he was, it's not a crunch at all, But at least there's credit tightening already agrees with that Charmine. What is that going to do? Does that make the likely to recession go up?
There's no doubt that we are seeing tightening of lending. So if you look at the loan officer surveys, more people are pulling back on lending than not so quite right, You see it across the board, all sectors, real estate and otherwise. But the fact is is that already priced in the market and is a growth rate of around one point four or one point six percent. That's the range we have actually reflecting that we believe it is.
Growth will probably be slower by about point four too point five percent because of tightening of credit, but not so much to cause a recession.
There were you on this unlikely to recession and particularly let me tie in the credit tightening with what the Fed's likely to do is just let the FED off the hook a little bit.
Well, it's helping the Fed, but the Fed has more work to do. We expect to another hike in May, and there might be more hikes perhaps in the autumn if inflation doesn't come down faster. I agree with Charman that the equity market under the surface there has been a defensive rotation, so there is some acknowledgment of the risks ahead, and the equity risk premium is also a healthy equity risk premu under normal conditions. But we're trying to figure out if earnings are sustainable and if these
interest rates are sustainable. There's risk that interest rates go up after this flight to safety that I think the bond market is doing right now, and earnings are going downward. We're in a profit receession. We'll talk more about it later, but there's more risks to the earnings outlook.
Charm me.
Let's switch to China just for a moment. We've got China data out this week. There were somewhat encouraging about growth. You have a big report out actually on China. You actually even have a chart in which you compare what happens if you take one hundred million dollars at the blow point of the Great Financial Crisis and investing in different securities. Take us through that chart.
Yes, if I had to say, over the last twenty years of being in private wealth management, it's one of my favorite charts because we've had a US pre eminence investment view and this chart bears the fact that this is actually what is happening, and we think that's going to continue, and that is very important in terms of
flow of funds into the US. What the chart actually shows you is if you had put in let's say, one hundred dollars in US equities, the S and P five hundred versus one hundred dollars in emerging markets or in developed non US markets or China, what would the return have been.
You would have earned eight.
Hundred dollars if it was in US equities, and only about two hundred and fifty in Chinese equities. So in spite of all this growth and enthusiasm for China, it has not been a good place to invest at all. In fact, you'd only earn about a third. And going forward, we think there's too much euphoria that this recovery from the lockdowns would be that meaningful. We can have a short term recovery, but generally we think China's going to have a substantially sower trend growth and we encapsulated it
in our report called middle Kingdom middle income. They're not going to escape the middle income trap.
David, too much euphoria over China, do you agree?
I think there's a bit of too much of your euphoria over the reopening in China. And it's good for China, it's good for China's service consumption, but I don't think it's going to stop the profit recession that we expect at the.
S and P.
And the interesting thing is America is the greatest and US equities over the past ten fifteen years have been the place to be large cats, growth stocks, tech stocks, and so many investors have said, why should I just deviate from what has worked so well over the past ten years. The trouble is things are changing, and uncertainty on the ability of profits to keep growing at a strong pace and intrade straight stay low is the concern.
So I don't want to be cute about this, but this is sort of like past performance is not a predictor of future exactly right. As your point about Charmine's chart, I mean that is all finding good going back to great financhurises. Going forward, it might be quite different. We're facing more challenges, Charmie.
So the gap between the US and the rest of the world may not continue to be as big in terms of outperformance. But the growth in the US is driven by earnings per share growth. It's not driven just by price action and multiple action. And if you look at the earnings per share growth in the US, the other countries don't even come close.
If you look.
At China, it has lacked. And it's not looking at a particular window where earnings per share growth may have been much higher. It's actually looking at long term earnings growth in the US and sector bisector, most of them have underperformed the US.
I love what you're saying.
I'm happy to elaborate on it. There's a difference between growth and good return on capital. And the S and P five hundred American companies, they know how to get strong returns on their incremental investment spending, but a lot of that has come through globalization, digitalization, and we have to see how much more upside there is on those things.
Well, let's just end on that globalization question, because I'm not saying we're going entirely away from globals, but it's not going to be the way it was in the past. It looks like it's going to be more divisive than it was in the past. Sherman, how does that affect your analysis?
If one has to think of which country in the world has benefited the most from globalization, it has been China. China's growth rate is completely dependent on globalization. They have huge surpluses. They've used that surplus to build a property sector, build the infrastructure infrastructure business that they have, and very dependent on exports. If globalization at the margin decreases a little bit, and globalization peaked in two thousand and eight before,
just at the peak of the global financial crisis. Then they are going to be hurt the most and the US hurt the least. So in fact, the slightly globalization even would be very beneficial for the US and hurt China.
Okay, this is a great conversation, so let's continue it. Coming up, we're going to continue this marketing conversation with David Bianco and Sherman and most of them our cliny, and we're going to bring back the iconic elves of the original Wall Street Week, updated of course for twenty twenty three. That's coming up next on Wall Street Week.
On Bloomberg, the continuing comeback of the volatile technology sector left NASDAK with a gain for the week. Can't scare our elves, though their consensus on the Dow's outlook for the next three months remains an.
Ultra bullish plus six.
So quickly was the mood improving that one of our bullish chief elves, Michael Metz, grew cautious and changed his boat on the next six months to neutral, bringing urlves index down a notch to a still bullish plus three. There was no stopping nasdak Amex or Russell, which seemed to be operating in an entirely different parallel universe, which, come to think of it, may be where good elves come from. Our crew are unchanged at are highly bullish plus seven.
That, of course is lews Erguiser talking about hiconic elves on the original version of Wall Street Week back in January of nineteen ninety eight, and today today we are bringing those elves back, modified and updated a bit. Instead of ten technical factors crunched by a contributor, which is
what Lewis had, our elves are real people. They are the twenty four equity and analysts Bloomberg has relied on four years to come up with a consensus call on where the SMP will end up the year, and as of this week, the medium of their projections was foury twenty five, with Tom Lee of Funstrat the highest at four thousand and seven to fifty and Michael Cantowitz of Piper Sandler the most conservative, projecting the s and P five hundred will end the year at three two hundred
and twenty five. Every week we're going to check in to see how they are doing and whether they have moved their projections. Still with us are Charmin, most of our rock Commanie of Goldbin Sachs, and David Bianco of DWS Group. So it's great to have you here back. Charmin, tell me of a David Constant. He's at four thousand, right in the middle. Yes he is.
And we obviously chat to get with each other all the time. We go through their earnings views and our earnings used and why are they different than what's driving it. It's interesting because Jan Hatzis are chief economist at Golobin Sachs has a thirty five percent probability of a recession. It's one of the lowest in the industry, actually compared to somebody like Bill Dudley who's at sixty percent. So it's very important what is actually being factored into David's numbers.
Our view is that there the S and P will end up the year at forty two fifty, so a thirteen percent total return. We allocate a fifty percent probability to that, and then we have a twenty percent probability that it actually does much better and you end up with something like your return in the twenty plus percent. Now there's a small probability to the downside, but nothing like the lows you have with the NEU l's we are more down like thirty there's a thirty percent probability
of thirty six hundred. Rview is that in the background the backdrop for earnings is generally modestly positive.
David is actually you were an ELF. Yeah, that's it.
Was an ELF. Hopefully I haven't graduated control, but yeah, I.
Was one of those equity strategists for many years.
So you see a high and a low. What are the factors are going to determine whether it's high or low? From your point of view, David.
Whether whether the high turns out to be correct or the lows. I think four thousand on the SMP at the end of the year, a little bit above four thousand for the SMP early twenty twenty four is a fair reasonable outlook. But I think there's downside skewed risks more than usual. I think it's quite possible the SMP re visits thirty six hundred and thirty seven hundred before it moves to something well above forty two hundred.
So Charmin, you have somebody supporting David Coston right at four thousand, Thanks so much to David Bianco and Charmen most of our RACHMANI. The failure of Silicon Valley Bank sent shivers through the entire banking industry, particularly when it comes to the trust depositors place in their own banks. We spoke with Brian moynihan, Chair and CEO of Bank of America about the lasting effects of what we've seen.
I think, at the end of the day, at crisis is too strong a word. Words like that get used a lot, but at the end of day, there was a fair amount of disruption for a few weeks there. Well, certain business models were sorted through. But on the other hand, you could see and we could see the stability and the other business models which would the way banking is down Gray Grand or business and stuff. And so the good news is you're seeing the earnings by the broad
industry come out this week. You're seeing things have sort of played out that way, which is very specific business models. Because the unique circumstances of the last twenty four months of thirty six months of massive amounts of cash putting the system and then rates changing caught people and.
Those had to be sorted out.
The good news is the basic industry is reported good earnings across the board. Deposits have come down, but that's intended by the FED taking money out of the system. It's got to come out of somewhere. Banking system is what they want to do to you, frankly, make credit
tighter and help slow down the economy. So that's gone on, but you look at the cap pub liquidity and the earnings power of all these companies have been tremendous, and that's that's reassuring to people, and that's good news because in the end of the day, the banking system reflects economy and American accounties around the world, and.
You hope it's in good shape, and it is. There's no question its good.
Shap our banks at an inherent disadvantage on their business model. In this sense, you're funding by demand deposits that people by definition can pull whenever they want. You're putting into long term assets you know, that are long term as opposed to some of the private credit ufits. You get locked up capital for a long period of time that they can match with the assets. Do you have an inherent mismatch in the deposits versus the assets?
Well, and we manage that. That's why we have outcome management and the team of people, and that's managed to maintain the balance and that sensitivity. So up one hundred basis points we make three billion dollars more in an I and down we make three billion less on a base of your fifty five billion dollars a year.
So it's a little bit of movement of.
Money, but that's how you balance it, because the entire balance sheet moves, and everybody looks at certain parts of it in this part.
So it's it's it's the way you manage money.
So our consumer customers, I don't know, eighty five percent of balance have been here for customers.
For ten years plus.
You know, it's it's an even on a commercial side, same thing. All the all the balance of people been relationships for a long period of time. These customers run around for decades, you know, decades and decades in some cases, and so they're very stable. It's just a matter of the ebbs and flows of the rate environment will change the profitability. But you say, is a business model flawed.
There's only four companies that have made more than fifteen billion dollars in America in the last eight years in a row. Two of them are banks, and so I don't think the business model's flawed.
As they head of Bank of America, you have a almost unique UH insight into the American economy. It's specifically the consumer. I know you said that March over March, consumer spending is up. Same time you're taking more provisions against.
Possible some losses. It's the wanting.
What does that tell you? What's around the corner? Are you seeing the end of the the spurt and consumer spending?
So the.
Three different topics. One is consumer spending in March was up nine percent of the last March across all different forms. In April, that's slowed down a little bit. We'll see how it ends up, but that's slowed down. It was slower in January, ferry picked back up in March. That that means the consumers still doing things. They're traveling. It's a lot more travel out. The home experience is so called theaters, et cetera, concert tickets, any sporting events. Everything's
going strong there. When you look at April, you're seeing it slow down a little bit.
The debate's going to.
Be is that due to some at tax timing and stuff, because that's changed this year we'll see a play out.
But the consumers a good shape.
They have more money in accounts than they did by them by multiples, especially.
The lower STRATEUSY.
The ones that don't have it are the wealthiest consumers are on platform because they put the money into the into the first in the market, now into the in the money funds. They have money. The credit quality, our charge our freight this quarter was a number which is about a third under where it was nineteen. To give you a centense saying it, but that's a fifty three year low in nineteen. So the credit quality is ye, unbelievable,
and so that's good news. Are we putting up provisions, Yeah, because we keep planning on this recession.
It seems to.
Always be out there that we haven't gotten to yet. And then the third thing is the consumers have capacity to borrow. So the usage of our lines are credit on the consumer side, home micro loans are down by from thirty billion in outstandings twenty billion outs standings during the pandemic.
And the card lines are.
Down from probably a hundred and some billion down about ninety billion. They were down as low as seventy you come back up. So there's plenty of barring capacity for consumers. So that means the consumer is going to be there and are employee, which means the job of the FED
is tougher. And that's why the f FED has to be more resilient, because the consumer drives the US economy, and the consumer is still in the game, and the consumers still employed, and we're paying our colleagues and teammates more that they're in the room, and then they have money in accouncilor spending. And that's not true for every single human being in America, but it's the average is true.
That That was Brian moynihan, Chair and CEO of Back of America coming up. Could the price of getting inflation back down to two percent be too high for the economy to pay well? As Rick Reader of black Rock. That's coming up next on Wall Street Week on Bloomberg.
This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Interest rates, they've been all over the place from the negative rates that ECB President Leguard was gingerly trying to recover from less than a year ago. We are turning our back to negative interest rates we are moving very likely into positive territory to rates going up higher and faster than ever before, with uncertain effects.
The interest rate tool as a means of controlling inflations of it's like having served you with a dull knife, because you hit the housing sector, you hit the manufacturing sector, you hit parts of the economy that have a very high sense to be the interest rates.
And quantitative tightening like we've never seen before.
The Fed has to meet this now with raising rates and QT. And the new part of this isn't the raising rates, it's the QT. We've never had QE before like this. Therefore, we've never had QT like this.
So now the question is where things will settle down. Will we come back to the very low pre pandemic levels, the way the IMF predicts in its latest World Economic Outlook, or, as Nobel Prize winning economist Michael Spence's warned, are their long term structural factors that favor continued inflation and higher interest rates.
There's been a fundamental sort of structural shift on the global economy, the world in which we had very wrong deflationary pressures from just endless supplies of tradable goods coming from emerging economies, those days are in fading, if not over.
And when it comes to interest rates, there is one person we want to talk to. That is Rick Reader, a Blackrock where he is a global CIO for fixed income as well as head of global allocation there And on top of all that, he was just named by morning Star the Outstanding Portfolio Manager of twenty twenty three. Congratulations by the way on the.
Award, Ravin, thanks a lot, thanks for having me.
So there's a lot of debate about where we're headed with interestrates in the short term, but also in the longer term, where we're going to settle down when all this is over whenever that is. Give us your perspective, not just on that question, but does the FED have the right way of thinking about the question?
Yeah, I mean it's a pretty complex question because there are so many factors that play today.
In fact, we introduced in the last month we introduced.
Something that wasn't part of the equation, that the financial sector, instability and the banking system. So that introduced another dynamic to the fact which quite.
Frankly, I think has an influence.
So listen, I think the FED is right to focus on inflation we've got the funds rate up and the market's projecting they're going to go to five and a quarter, which seems about right in terms where the funds rate is going to get to.
But now you got to think about you know, you've gone from zero. I think about where we were last year.
The funds rate was at fifty base this time last year were at fifty base points, and we're doing one hundred and twenty billion a QI.
So if they're trying to figure out how much damage are we doing? How much queen we tolerate? What factors should they looking at? What is on their dashboard? Should be on their dashboard saying wait a second, this is damages is too much.
So I I think people underestimate.
First of all, commercial real estate is about a ten trillion dollar market. Residential real estate it's about four times the size. The other stat that I don't think people realize the banking system is critically important, but it's only about fifteen percent of bening on how you measure it, of the financing in the country. So you got to think about what other things. Boy, did you hurt the banking system?
How much capital?
When you move rates this much, you think about other areas venture capitalist. It's part of why we've never seen rates move this much higher. We've never seen this much QI put in and then let's back off, and so there are so many considerations. Modern economy is incredibly complex.
Yeah, and as I understand, you're not saying we shouldn't pay attention to inflation at all, but there are other factors as well. And I know you have a different sort of analysis comparing on the one hand, unemployment with inflation sort of a traditional way of doing as opposed to comparing employment with real wages.
So if you go back, yes, so you know traditional misery index, unemployment, inflation, and the FED job is how do we improve both of those for the general well being of the economy. However, read a unique point in time, why is inflation higher? You had two exogenous shocks. You had a pandemic and they had massive monetary and fiscal stimulus come and try to try.
And solve that.
And then you had a war, a global war that inact infected food prices, energy prices, and by the way, we'll create a deglobalization that creates some durable inflation. So those were pretty extreme dynamics. So now we have to, like, how does a FED that inflation down? But it's pretty hard to bring those big macro structural dynamics down quickly. However, if wages for the people that are being infected by higher shelter food energy costs are higher, maybe we can
tolerate it a bit longer. And maybe the costs of bringing that inflation down unilaterally to a two percent goal is too painful to create, to take two or three million people out of work to the people are getting hurt.
By this inflation. There's a trade off today is as.
Long as wages are up, as long as we're moving capital to labor, which is happening today and has been happening.
That's really effective.
So I just think FED needs to exhibit a bit more patience. We don't have to hit the two percent target next month.
So time is really important to what you just said. How much time does the FED have with the two percent? They've sort of put that marker down, they can't just walk away from it, but how much time do they have to get there?
Yeah?
I mean I FED, you know, if it gets a there are a lot of critics and a lot of criticism, and can we pause for a year. Can we pause for six months? You're going to see real credit contraction. The banking system is going to amplify that credit contraction. You're going to see the natural forces, and you're seeing things like trucking. You think about how pressurized that was. I've seen some dabta about trucking be in a recession.
Now.
A lot of supply chain issues are alleviating themselves. Give it a bit of time, and you know some of the things like food costs that comes down.
And so let's be specific here when you say pause, pause now before the may this issue. And by the way, when do they start coming down again?
So I think the debate.
I think they're going to get in a room, and I think they're different constituents on that FED committee. I think they're going to get in a room and hash out can we pause now? My sense is as long as the economy is okay, as long as you don't see more stress in the banking system. My senses they want to do one more and then I think that will be the compromise.
We're going to do one more and then we're going they're gonna put it on hold. Listen. I don't the markets are priced in that the Fed's going to ease.
It's a lot of it's come out recently, but it's priced in they're going to start easing. It was in the summer so and I think the Fed is going to start easing next year.
It's possible in December.
What are the markets telling you, Rick reader about coming down? Because there was something in the last Fed minutes I suggested some of what we're seeing in the FED fund's futures right now is a matter of liquidity injection because of the financial issues with Silicon Valley Bank and the likes. Wasn't so much about an anticipating cut.
No, you hear people all.
The time saying the markets are stupid. They think the Fed's going to ease. Of course, the Fed's not going to ease. Markets aren't actually not that stupid. What they're doing is they're pricing in two things. One, the liquidity is immense. People are piling huge amounts of money, and we haven't seen these short term interest rates. I mean you can buy I have been buying commercial paper it's six percent, and so people are like, get me, I want to lock in maybe a little longer term.
If I can lock in these.
Short term interesting there's a massive amount of liquidity that's come in. That's one second being when when the Fed cuts rates, people don't believe it's going to be a wellable start easing gradually twenty five base points. If the banking system is a problem, if you have more to rest in the system, they're going to cut interest rates really quickly.
You know, it's a one hundred based once at a time.
So what the markets are doing is a probability adjusted ratio of actually, maybe they're.
Not going to cut rates gradually, maybe they cut them a lot.
Well, if they start cutting rates because of some pressure on the blankets, how does it work? Does that ease some of the mark to market problems we saw, for example, as Silicon Valley Bank, we have treasuries on their books. They're not worth as much as they used to be.
Yeah, this was a unique I don't I'll describe it as crisis. This is a unique period in the banking system. And so you think about what happened. The banks were getting hurt onto, but with quality assets, treasuries, agency mortgages to a large extent, a commercial real estate being an issue, obviously, do.
You have an advantage over the banks. What does it mean for the future of banking?
How much time you have this is? I mean that that is a tricky question.
And you know, one of the things I think about all the time is it gets a capital It's what are your assets?
Is?
What are your asses? A liability?
Your cost? What are you getting paid on your asses? Again paying your liability? And what's the term of each sad. I think something's going to happen on the backside of that. You're going to see capital raised in the banking system. But I think regulation and efficient regulation will be how do you manage duration?
Well?
How much downward pressure on the real economy is the uncertainty imposing?
Yeah, so you know this is part of the reason why I think the FED has the pause, because nobody has the playbook for this, and nobody really knows. Listen, I think when you stress it, you think about you know you're going to get credit contraction. How much does it affect GDP? You know, I've seen numbers all you know, I'd say it's not a bad assessment to say it's fifty basin points on GDP. Let's say you were running real GDP, there was going to be about one percent this year.
You're taking about half off of it.
What does it mean for investment though, is incredibly stratified. There are cyclical parts of the economy and non cyclic parts parts of the economy. They're interest sensitive parts of the economy, non interestensive. You know, today a lot of the equity investments were making things like defense.
Healthcare, parts of technology, not that interest rate sensitive. I'd rather stay there for a while.
See how the cyclicals play out, See how what is censitative sensitive the interest rate plays out, and so it changes the investment paradigm. The other one that changes the investment paradigm is you can buy short term interest rates. It's like you can sit in you know, people say, you know, what are you doing right? Your cash? My cash is my best friend today. I mean, because I'm garnering, I'll talk about commercially. Were at six percent five and a half to six for three months, six month, nine
month paper. It changes how you build a portfolio today in a big way.
Rick, thank you so much for being back on walls.
Great area.
That's Rick reader of black Rock coming up. When the best of intentions may not lead to the best of results. That's the next down on Wall Street Week on Bloomberg. Finally, one more thought. The law of unintended consequences when we set out to do one thing and it leads to
an outcome we never anticipated. American sociologist Robert Merton first laid it out in a paperback in nineteen thirty six, though it's been kicking around since sixteen ninety two, when John Locke wrote about how a law restricting interest rates might well have the unintended consequence of hurting borrowers by discouraging lending. These days, consequences we didn't intend are everywhere
we look. Take the FED who tried to get inflation back under control by raising interest rates and managed to sideswipe a Silicon Valley bank and tech startups in the process.
What's most predictable is that they're going to come down, except we can never seem to predict what seems to be most predictable.
Not to mention rich New Yorkers getting interest only mortgages for their Hampton's estates.
They were tons of loans to wealthy clientele that were interest only mortgage payments.
Or the Walt Disney Company thinking it was standing up for LGBTQ plus members of the community by taking a position against proposed Florida legislation, only to wind up with the governor threatening to build a prison next to Disney World.
People have said, you know, maybe have another maybe create a state park, maybe try to do more amusement parts. Someone even said like, maybe you need another state prison.
Who knows.
I mean, I just think that the possibilities are endless.
Netflix had the best of intentions to create a mega hit with Love Is Blind, a franchise built with the premise of getting people who'd never seen each other get engaged, only have a crash and burn its own network.
A huge disaster for Netflix.
I mean, they've you know, made a big deal about We're going to do more live events.
This is not a great start.
And maybe the most ironic of them all Major League Baseball, and we already talked about that new pitch clock they rolled out when spring training began.
Essentially all events in the game are going to have a clock on them, and batters and pitchers are going to have to comply with those requirements. Deliver pitches on time, get in the box on time, things like that, which we you know, think and hope is going to create a better pace of play, cut out some dead time, and really like highlight bring forward like the best parts of our game. Which is right, guy's playing the actual game, not just standing around fixing their bating lobes.
But now it turns out that it has been so successful that fans don't have time to go get a beer, leading four teams to extend beer sales into the eighth inning. Philly's pitcher Matt Strom, is concerned about the fans.
So now, with a faster paced game and me just being a man of common sense, if the game is going to finish quicker, what would we not move the beer sales back to the sixth inning to give our fans time sober, open trifle.
Talk about unintended consequences. That does it for this episode of Wall Street Week. I'm David Weston. This is Bloomberg. See you next week.