Brian Moynihan: Blockchain not Bitcoin

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populism hits the financial markets
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is it a fluke or does it point to
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something deeper this is bloomberg wall
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street week i’m david weston
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this week special contributor larry
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summers of harvard
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yes there is retail fraud
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not everything that’s done by short
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sellers
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is especially attractive bank of america
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ceo
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brian moynihan it’s good people
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investing i think people have to be
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careful and we all know that
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charming mossovar rachmani of goldman
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sachs
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it is clear that this is not necessarily
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justified from a valuation perspective
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jared bernstein of the council of
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economic advisors
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related company’s ceo jeff blau
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and peter atwater of financial insights
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there was a lot going on this week the
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federal reserve had its first meeting of
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the new year
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the economy is a long way from our
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employment and inflation goals
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and it is likely to take some time for
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substantial further progress to be
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achieved
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president biden issued a new series of
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executive orders janet yellen was sworn
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in as the first woman to be the u.s
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treasury secretary and oh yes the titans
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of tech
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announced their earnings from last
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quarter but despite
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all of the major news global wall street
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was consumed with the story of what had
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been
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a small largely overlooked company that
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sold
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video games at the local mall a company
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that the big hedge funds were happy to
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bet against
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until a flash mob on the social media
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site reddit
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decided to take on the shorts and the
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rest
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is history this has captured the
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attention of the america
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and every trader and nitrater alike the
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word nuttiness comes to mind to be
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honest
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the gamestop story is good fun to watch
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a sort of financial porn
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but we need to ask ourselves whether
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there’s more to it than just a battle of
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the netizens versus the shorts
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whether a combination of the liquidity
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in the market driven by the fed
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put together with the phenomenon of
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social media with just a pinch of
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lingering resentment of a financial
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system
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that seems to be rigged is part of a
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larger truth
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something that could point to an ugly
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reckoning around the corner
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with historically loose monetary and
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fiscal policy
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it’s really been the printing of money
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by the central bank and the distribution
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by the the government that’s financed a
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lot of the activity
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here to help us make some sense out of
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these markets and how they’re reacting
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to the news of the week
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is charming most of our rachmani she is
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chief investment officer at goldman
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sachs wealth management sure i mean
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always a pleasure to have you on we had
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a fair amount of up and down in the
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equity markets this week on wednesday
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they were down the most since october
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and you can tell us why that is maybe
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because of what we heard of jay powell
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the fetch here
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and then on thursday they came roaring
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back again what do we make out of all
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this is it telling us anything more
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fundamental about the economy
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first of all thank you for having me i
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always enjoy being on your show as well
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in terms of the specifics of this type
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of volatility
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if you think about the equity markets on
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average the volatility is around 15
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now since the pandemic we’ve been above
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20 for a long period of time
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so seeing this type of market moves is
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inevitable
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in fact if we go back and look at the
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post global financial crisis period
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we have had episodes of the market down
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five percent
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uh at least 95 percent of the time
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episodes of down 10 75 of the time
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so one has to look at this at this kind
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of market move and recognize
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that this is just a lot of noise the
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main
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signal and the main message that we’re
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giving our clients
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is to stay invested we have good
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economic growth
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we have a very very favorable
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earnings outlook and so when you combine
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all of those
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our recommendation continues to be stay
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invested
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and look beyond this kind of volatility
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at this time
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as you know we heard from chair powell
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this week and he was asked about the
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question of
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bubble or froth or sort of extended
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valuations because of the
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very accommodative monetary policy he
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sort of dismissed that i think it’s fair
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to say he didn’t think that’s
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the real problem here do you have any
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concern about that at all because
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there’s a lot of talk around right now
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about
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things being overextended when we look
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at equity valuations
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uh there are a couple of different
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perspectives we bring to bear
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first and foremost we look at a series
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of metrics
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but we look at them not just compared to
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long-term averages
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but one actually has to look at them in
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the context of a period of low and
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stable inflation
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so when you’re looking at the
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environment we have been in since
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april of 1996 which is low and stable
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inflation
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we actually are not as expensive as
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people think we are
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in fact based on looking at the broad
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range of uh
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these metrics our view is that given a
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view on where we’re going to be
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on earnings this year we’re probably
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about 14 to 20 percent overvalued
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that is not a bubble in addition we
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actually look at equity risk premium
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what are equities yielding relative to
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what bonds are we
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yielding that is also above average and
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finally we actually have something we
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called
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um is it’s an indicator that looks at
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explosive price behavior
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and we have to get that to around 90 to
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100 to think we’re in a bubble
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that currently stands at 26 it’s at a
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hundred percent for bitcoin
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but for something like equities it is
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not showing bubble levels at all
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furthermore if we compare it to where we
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were in the dot-com bubble levels
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we’re substantially below that so
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definitely not a bubble trouble yet from
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our perspective
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charming a moment ago you explo referred
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to explosive growth
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we cannot talk about explosive growth
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this week without talking about gamestop
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i mean you just have to talk about it
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give us your take on game stock what is
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going on there is that a fluke is it a
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symptom of something else
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what’s driving that when we look at
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these types of uh
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headlines and this kind of price action
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um it is clear that you this is not
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necessarily justified from a valuation
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perspective
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so what is it driving driving in an era
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of social media
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easy access to trading very low cost
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in terms of transaction costs for people
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you could have a lot of momentum and a
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lot of investors can pile into an
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investment theme
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and that does mean that you’re going to
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end up with prices that
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don’t probably reflect fair value and
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this could be seen
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in many areas it’s not just individually
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in a particular stock
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you could see it in other sectors and
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asset classes and again cryptocurrencies
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are a good example where you see the
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same
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type of price action where it’s not
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clear these are justified by
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any value argument and any fundamental
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arguments
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yeah i don’t hear anybody arguing that
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it was justified by value arguments
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does it pose anything of a risk for the
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rest of the market in terms of the price
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action it’ll get some attention it’ll
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get a lot of headlines
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but at the end of the day again one has
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to separate all this noise
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from the main signal it’s not as if we
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would recommend our clients have a
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significant
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allocation to any of these sectors or
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specific talks
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core assets really need to be uh in
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something like the s p 500 in something
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like ifa
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very small allocation for example to
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emerging markets but it needs to be more
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diversified
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one of the pillars of our investment
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philosophy is the real way
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to create good long-term wealth is
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through having some diversification in
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the portfolio
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okay charming as i say it’s always a
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great pleasure to have you with us that
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charming most of our rachmani
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of goldman sachs coming up
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what caused the gamestop spectacle and
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what should be done about it
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from peter atwater of financial insights
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what we’re seeing today is very aimed at
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going after companies that everybody was
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convinced was
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you know we’re on their way out in the
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stretcher
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this is wall street week on bloomberg
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[Music]
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a video game store is at the heart of a
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titanic struggle between
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short sellers and retail investors until
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recently gamestop
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was a company whose time seemed to have
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passed with serious gamers turning to
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the internet not the mall to get their
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games
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but then social media got involved
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starting a meteoric rise
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in gamestop stock after reddit’s wall
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street bets forum started pumping the
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stock to its users
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the army of social media empowered day
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traders catapulted the former small caps
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market value
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beyond those of even members of the s p
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500.
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it just reflects the liquidity that
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exists and the new players in the
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markets you know historically it’s
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indicative of a bubble type environment
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but you know to go for a long time
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the amateur day traders were targeting
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short positions held by
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gabe plotkin’s melvin capital and andrew
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left
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citroen research hedge fund titans ken
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griffin and steve cohen
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injected a total of two and
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three-quarters billion dollars into
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melvin capital
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amid the short squeeze distress what’s
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happening is that the retail right now
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is stronger but
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the short bets come back and fill in so
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it’s it’s just a battle that’s going to
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continue you’re going to see
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game stuff go way higher within a matter
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of days the reddit army had pushed the
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rally so high
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that melvin capital and citroen threw in
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the towel on their short positions
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citron research will no longer be
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publishing what can be considered
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as short selling reports the reddit army
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of day traders also boosted other
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has-beens including blackberry
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retailer express and amc which is
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fighting to save
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off bankruptcy hedge funds are now on
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the hunt for other companies that could
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end up on the reddit mob’s radar
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i think you’re going to see a number of
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hedge funds declare bankruptcy in the
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next several days
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online brokerages reported service
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disruptions caused by the retail trading
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frenzy
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and a number of them including robin
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hood took the rare step of limiting some
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transactions on shares of gamestop
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amc and others you’re witnessing the
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french revolution of finance where the
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proletariat is rising up to change
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the order structure and finance there’s
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been a surge in overall retail
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trading activity as people stuck at home
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tried their hands at trading
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according to bloomberg intelligence
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individual investors accounted for
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almost 20
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of the trading volume in 2020. the fact
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that retail investors are going to be
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able to communicate with one another
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that they can actually consolidate their
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buying power is something i don’t think
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the regulars would have anticipated
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even three years ago
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[Music]
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so what caused the perfect storm that
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some call gamestop
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we asked peter atwater president of
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financial insights
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and he said it was something that had
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been in the works for some time
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what we’ve seen over the past couple of
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years have been these flash mobs with
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money as i call them where
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investors particularly using social
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media get together and
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you know aim at a single company you saw
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this with tilray beyond
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me just one after the other and what
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we’ve started to see
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is they move from moving shares to
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buying options to now buying options and
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things that are
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you know most shorted and to me this
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just reflects
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on the the confidence of the crowd
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they’ve gotten much more strident
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much more aggressive and and honestly
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they’ve succeeded at it so
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so behaviorally this looks very very
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predictable
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and it’s coming to a head let’s talk
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about regulation
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because there’s various discussion about
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whether the sec or someone else should
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be getting involved does this
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potentially
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lie afoul of what’s going on with the
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sec in terms of
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existing regulation i i don’t know if it
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runs a foul or not
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but as a researcher i have found that
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regulators
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when they act react to sentiment and so
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i expect that if sentiment becomes too
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extreme
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people become concerned about systemic
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safety
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then you’ll see the regulators moving in
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force and and
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you know that that’s what they do they
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will close the barn
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doors at the moment that the the animals
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have already left they’ll they’re going
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to pour
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water on a fire that was already
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extinguishing
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those who defend short selling say this
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is a way of really communicating
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information in early stage
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at least questions about a company that
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really facilitates an effective market
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functioning
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uh does this get in the way of that or
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is this just that same
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market signaling on steroids as it were
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yeah
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i’m in the camp that this is signaling
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on steroids i mean what you
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have right now is absolute speculation
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using enormous leverage
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you know targeted where they believe it
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will be most effective
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and i step back and say that only
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happens david
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near the climax of a confidence cycle
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where people are so certain that they’re
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going to win
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that they bet the ranch in things that
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have enormous leverage this is
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this is flipping houses um you know from
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2005
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on steroids in 2021 well that’s one of
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my questions actually because you are a
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researcher
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looking back through history whether
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it’s the housing bubble or going back
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further than that to tulips and south
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sea and things like that
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are there analogies that would inform us
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now that might inform where we’re going
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or is this a one-off
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no i think that the the analogies hold
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these are these tend to be climatic
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events
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where you know the crowd is enormous
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it’s moving
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in a manic very frequent way i mean it’s
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to me it’s less
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of a bubble than it’s a series of one
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craze right after the other
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and those those high energy moments tend
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to happen
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you know just at the at the peak in the
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confidence cycle
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peter we can’t get in the minds of the
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people who are participating
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particularly on reddit here
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but from your research from your
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reporting is this about finance as a
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base or is it actually about
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politics or about social norms and a
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real resistance to sort of
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some of the institutions we’ve had
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including going all the way back to 2008
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and
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sort of a resentment about the fact that
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perhaps those in the financial
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system were not held properly to account
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i i i sort of look at the evolution of
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of this
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this paradigm starting with sort of
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gamesmanship people going online and
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using
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uh social media to to make money almost
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as a game
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then it became very greed filled and now
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what you’re seeing
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is i i think a consequence of that
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k-shaped recovery
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that i’ve been talking about for the
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past year where
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there is a there’s a jealousy there’s an
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anger there’s a frustration at the
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system and i think
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that the size of the crowd now
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encompasses that
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aspect i mean don’t get me wrong there’s
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there’s always a stridents to peaks in
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the market
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but this is this has got anger behind it
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and the behavior of the mob in many ways
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reminds me of what we saw two weeks ago
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at the capitol it’s a it’s a mishmash of
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a whole lot of people
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again we’re reaching for analogies
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because it’s so unprecedented but i also
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wonder if it has
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something to do in parallel with some of
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the cryptocurrency speculation the
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extreme volatility there and is it
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perhaps a generational issue
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you know what started though was was
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very futuristic
15:36
you know bitcoin tesla you know evs it
15:39
was very
15:40
oriented towards possibility what we’re
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seeing today is very
15:45
aimed at going after companies that
15:48
everybody
15:49
was convinced was you know were on their
15:51
way out in a stretcher
15:52
you know the retailers these are these
15:54
are companies that nobody
15:56
was expecting to prosper and the short
15:59
interest just
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really has enabled the crowd to catalyze
16:02
around them
16:05
that was peter atwater president of
16:06
financial insights
16:09
coming up bank of america ceo brian
16:11
moynihan on the rise of retail investors
16:14
and
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what it means for the markets it’s
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already been pretty democratized it’s
16:18
good people are investing i think people
16:19
have to be careful and we all know that
16:23
this is wall street week on bloomberg
16:36
this is wall street week i’m david
16:38
weston brian moynihan during his time as
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chairman and ceo of bank of america has
16:42
emphasized the strategy of responsible
16:44
growth
16:45
what went on with gamestop this week
16:48
seems like just the opposite of that as
16:49
some
16:50
would say was the earlier parabolic
16:52
increase in bitcoin
16:53
but brian says that it’s not a problem
16:55
with the democratization of finance
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the forces are larger than that
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it’s already been pretty democratized we
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we everybody talked about free trading
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i think somewhere in like 2007 or
17:09
something like that i
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i was riding around manhattan on a
17:12
double decker bus was free trading on
17:14
the side
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side of it from bank of america this is
17:16
not a new concept and so
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you know we we’ve seen 30 percent growth
17:21
in in our
17:22
uh balances for our in our maryland
17:24
which is our more affluent segment we’ve
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seen a
17:27
net growth of 10 i think in in
17:30
what you call sort of digital brokerage
17:32
accounts and stuff and so it’s it’s good
17:34
people are investing i think people have
17:35
to be careful and we all know that but i
17:37
think if you look at it overall
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if you look longer term what what are
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the themes in financial services
17:42
more and more digital we saw we’re now
17:44
up to 80 of our direct consumer loans
17:46
done digitally
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up from the start three years ago uh
17:50
more and more digital
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more and more demand for i want digital
17:53
and i want high touch i want the
17:55
branches and i want the digital
17:57
more and more artificial intelligence
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applied more and more operational
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excellence
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across all our platforms in terms of
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process engineering and taking out paper
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and
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putting in digital work those are the
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themes are just going to be tremendous
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artificial intelligence distributed
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networks
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data information movement all those
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things are incredibly important
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but those things have been with us now
18:18
the questions we may have made a step
18:20
change and we’ll be after that so
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yes investors yes borrowers yes
18:24
everything but
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it’s really the digital it’s the new
18:27
news not as much as the underlying
18:29
asset cost when we talk about a lot of
18:31
capital looking for
18:32
a limited number of investments it’s not
18:34
limited to esg goodness knows
18:36
we’re seeing a lot of situations that
18:38
some people think
18:39
might be a bubble or at least froth or
18:41
something are you concerned that in fact
18:42
because the liquidity that’s been
18:44
injected for good and sufficient reason
18:45
to help the economy
18:46
that we really are risking ourselves in
18:48
some places i’ll give you two examples
18:50
bitcoin goodness knows has gone all over
18:52
the place and another gamestop right now
18:54
that is really quite a phenomenon and
18:55
it’s not the only one right now that’s
18:57
really getting bid way up
18:58
should we be concerned that maybe this
18:59
is an indication that maybe we’re
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getting a little bit out over our skis
19:03
yeah you know those issues the moment
19:06
happen that time you know in the ebbs
19:08
and flows in the market and frankly i
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don’t have great insight as to
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uh those things uh we’ve been clear
19:14
about how we stand on bitcoin and
19:16
versus blockchain which is a technology
19:17
and stuff but let me let me back up
19:19
and and and the question is when you
19:22
look at the economy
19:24
and it’s about as big as it was in 2018
19:27
the projections from our team offered to
19:28
grow up five percent this year
19:30
in 21. um laugh at in 2018 in the
19:33
in the second quarter was the economy
19:35
was this big it was projected to grow at
19:37
like one half to two percent
19:38
and the interest rate environment was
19:39
100 150 basis points higher
19:42
and there wasn’t all this uh so there
19:44
wasn’t interest rate accommodation there
19:45
was a fiscal stimulus out there
19:47
now you have the same thing so the
19:49
fiscal stimulus is needed to help people
19:51
make it across the river here you have
19:53
six percent plus unemployment you have
19:54
these companies have an open that’s the
19:56
ppp
19:56
program you have holes in state budgets
19:58
and and that were created by the
20:00
cost of paying for all this work and
20:03
maybe tax
20:04
loss revenues and stuff those ought to
20:06
be dealt with and i think if we deal
20:07
with that
20:08
responsibly then what happens but the
20:10
possibility of overshooting here
20:12
is real and that’s what you’re hearing
20:13
less about the equity trading values the
20:15
moment but more about the question
20:17
when rates are one percent are going to
20:18
stay there for a long time
20:20
it’ll lead to risk and that could lead
20:21
to bubbles but the real question that
20:23
would be fundamentally bad for everybody
20:25
is if
20:25
if we miss the inflation turn and it’s
20:27
not there now but that’s one of the
20:29
challenges that
20:30
you know every that chair powell and his
20:32
colleagues have is to is to really be
20:34
watching this thing and they need to
20:36
make sure this great economy
20:37
grows again at the right rate and above
20:39
that right rate
20:40
and there’s some inflation in order to
20:42
make sure it doesn’t go backwards but on
20:43
the other hand
20:44
it’s going to be an interesting you know
20:46
as we move through the end of this year
20:47
the next year when this has all come
20:48
true the vaccine’s out and stuff it’ll
20:50
be interesting to see how they play
20:51
through that
20:52
well exactly let’s pursue that just for
20:54
a moment because uh there’s been a lot
20:56
of money given to a lot of people
20:58
again for good and sufficient reason
20:59
they’ve needed it but the indications
21:01
are a lot of it’s getting saved it’s not
21:02
getting spent in part because they don’t
21:04
have a place to spend it frankly because
21:05
a lot of the economy is shut down
21:07
how concerned are you as you look at the
21:09
economy because you have a real vantage
21:10
point into the economy broadly
21:12
i’ll continue there might be a snapback
21:14
that might actually trigger
21:16
believe it or not inflation we haven’t
21:17
talked about in a long time well
21:19
there’s been i mean it’s kind of
21:20
interesting if you traced last year
21:22
and we’ll see what the fourth quarter
21:24
all ends up final but
21:25
if you think about down 30 up 30 and up
21:28
a few percent
21:29
you have three four percentage points or
21:30
whatever it turns out to be and then
21:32
this quarter
21:32
the projections are may come down closer
21:34
to flat and that has a little bit to do
21:35
with the first quarter but
21:37
if you actually then pull that apart and
21:38
look at our our consumer
21:40
uh what we call consumer spending and so
21:43
debit and credit card spending is one
21:45
thing but this is around you know people
21:46
taking money on
21:47
atms and spending it writing checks for
21:50
services
21:50
uh p2p the zell product which is huge
21:53
right now
21:54
if you look at that spending through the
21:57
first 23 days of january
21:59
it’s up eight or nine percent over last
22:01
year’s first 23 days of january which
22:03
was up nine percent of the year before
22:05
so it is bigger in dollar amount it is
22:07
growing faster than it grew from
22:10
uh uh from eight uh from 19 to 20 18 to
22:14
19 and as fast as 19 to 20
22:16
if you look at the customer obviously
22:17
for the people who are unemployed and
22:19
you can see them receiving unemployment
22:20
benefits they’re using the money faster
22:22
if you look at the rest of customers
22:23
they’re using a discretionary retail not
22:25
uh sustenance retailing not you know so
22:27
they they are paying for their food
22:28
because they’re employed and so i think
22:30
these stimulus dollars can be spent much
22:32
more precise and i think the last
22:34
case was a good one and that it went
22:35
unemployment to the unemployment some
22:37
supplement there this
22:39
dollars under seventy five thousand
22:40
those are those are good items and
22:41
future stimulus ought to be likewise
22:43
geared
22:44
because otherwise it gets diminishing
22:46
returns and then you have the issue how
22:47
you pay for it long term and
22:50
the issue of whether it creates
22:51
inflation but there’s a lot of pent-up
22:53
savings and we would expect a good
22:54
second half of the year
22:56
now this is the mistake everybody makes
22:58
is they get talked about all the
22:59
economics and they forget there’s one
23:01
simple question
23:02
which is we have to win the war on the
23:03
virus and
23:05
right now we’re going in with a much
23:07
better
23:08
situation from a fight and that we have
23:10
this vaccine
23:11
and there’s vaccines going into people’s
23:13
arms and that then changes the course of
23:15
this
23:15
and yet that’s still out there but
23:17
that’s a light in a tunnel that wasn’t
23:19
here this year
23:19
you know last year in the summer
23:23
that was brian moynihan chairman and ceo
23:25
of bank of america
23:28
coming up working from home once seemed
23:30
to be the bold new innovation
23:33
but now for many the question is when
23:35
can i come back
23:36
to work people don’t come back to the
23:38
office new york cannot recover
23:40
and that’s really that’s really the sad
23:42
thing that’s happening now
23:45
this is wall street week on bloomberg
23:51
[Music]
23:58
this is wall street week i’m david
24:00
weston wall street has joined so many
24:02
others in figuring out how to work from
24:04
home
24:04
efficiently and effectively but the
24:07
appreciation for all that added
24:08
flexibility just
24:09
may be wearing off it feels like it is
24:13
fraying it is hard it takes a lot of
24:18
inner strength it’s remarkable that it’s
24:20
working as well as it is but i don’t
24:21
think it’s sustainable we have
24:23
10 12 back we weren’t telling they come
24:25
back but a lot of people want to come
24:26
back
24:28
related companies is the largest
24:30
landlord in new york city
24:32
and one of the most important real
24:33
estate developers in the entire country
24:35
and we asked its ceo jeff blau what it’s
24:38
going to take to get people back
24:39
into the office in new york the two
24:42
obvious answer answers are
24:44
vaccine roll out but probably even more
24:47
critical right now is testing um you
24:50
know we all thought
24:51
after new year’s that everyone would
24:52
would return right back to the office
24:54
but
24:55
in an interesting twist i i have a
24:57
feeling that the vaccine announcement
24:59
and the
25:00
closeness of it has really enabled
25:02
companies to just say you know i’m going
25:04
to
25:04
just wait it’s so close i’m not going to
25:06
pull everyone back to the office yet
25:08
you know unfortunately in new york
25:11
you know office actual occupancy people
25:13
showing up for
25:14
at their desk every day is under 10
25:17
um and it’s it’s critical that we kind
25:20
of
25:20
really push testing make people feel
25:23
safe and comfortable
25:24
until they ultimately do get vaccine so
25:26
people come back to the office if people
25:28
don’t come back to the office new york
25:29
cannot recover one of the things we’re
25:31
very conscious of in new york obviously
25:32
are the financial organizations uh do
25:34
you have a sense of companies in
25:36
in wall street how eager they are to get
25:38
their people back in
25:40
you know i’d say it varies i mean i’m
25:42
sure you’ve heard david solomon really
25:44
encouraging
25:45
uh goldman to encourage his employees to
25:48
get back
25:49
he had a very uh funny quote he kind of
25:52
said
25:52
well sure you guys all want to work home
25:54
from your living room and you can do
25:56
that
25:57
until your competitor shows up in person
25:59
and wins an assignment
26:00
you guys need to get back to the office
26:02
right so i do think that there is
26:04
pressure
26:05
um the market will ultimately bring
26:07
pressure for people to come back
26:09
you know it’s interesting you hear a lot
26:10
about uh tech tenants or ceos saying
26:14
i’m gonna let my employees just work
26:15
from home until june or december or or
26:18
forever in some cases
26:20
and yet behind the scenes when you talk
26:22
to them and i i spent a lot of my time
26:25
doing exactly that really trying to
26:26
understand
26:27
what their plans are they realize that
26:30
this doesn’t work from a
26:32
long-term perspective they realize that
26:34
culture is not
26:35
does not work it is not created over
26:37
zoom over skype or
26:39
whatever we’re using today and you
26:42
really
26:42
interactions happen in the hallway and
26:44
you bump into each other i know
26:46
certainly here at related that’s how
26:48
we work it’s a little bit less formal
26:50
and our best meetings just occur
26:52
when you walk down the hall and see
26:53
somebody and it’s it’s hard to
26:56
to create that on zoom you can’t
26:57
schedule that interaction
26:59
um how do you how do you train new
27:02
people
27:03
you know you have an incoming class of
27:05
analysts
27:06
uh goldman has 2500 new analysts come in
27:10
and what are they supposed to do on zoom
27:12
so i i ultimately do think
27:14
um i think the long run answer here is
27:18
that
27:18
there will be more flexibility in the
27:20
workplace
27:21
i think that employees value the ability
27:24
to work from home
27:25
a portion of the time if you divide a
27:27
person’s day into
27:29
the bump into a hall an interactive
27:31
meeting and
27:32
writing an investment memo which they
27:34
can do by themselves
27:35
maybe there’s a way to divide that work
27:37
up and the i’m just using this the
27:39
investment memo writing actually happens
27:41
you know on friday at home
27:43
um and the rest is but it also needs to
27:46
be a coordinated day
27:47
in that world of more flexibility as you
27:49
call it does that affect the long-term
27:51
demand
27:52
for commercial real estate as a
27:54
practitioner are you looking at a
27:55
different curve on the out years
27:58
um i don’t really think so because
28:00
ultimately you still need
28:02
for those days that you’re coming in
28:05
people to have an office
28:06
i what i think might happen is that the
28:09
build out of space
28:10
might change so there might be more
28:12
meeting rooms more conference facilities
28:14
more auditoriums
28:15
and smaller certainly private offices
28:18
and and maybe more open cube type
28:22
seating so
28:23
i think it’s going to change i don’t i
28:25
don’t think it will really affect
28:26
the overall demand are you seeing a
28:29
shift in your own business between
28:31
commercial on the one hand and
28:33
and uh residential on the other and
28:35
particularly when it comes to some of
28:36
the big luxury malls you had a really
28:38
big one there
28:39
at hudson yards are you shifting your
28:41
use at that massive project on hudson
28:43
yards
28:44
yes so we spent a lot of time thinking
28:47
about the future of real estate
28:48
development
28:49
um in response to the pandemic but also
28:52
just over time that everything evolves
28:55
and actually if you think about hudson
28:56
yards it really
28:58
had uh many of the features that we
29:00
think are critical today
29:02
i mean the the the words that people
29:04
like to say today are
29:05
15 minute cities what does that really
29:07
mean it means that you want basically
29:09
everything you could work your whole day
29:11
or spend your whole day within a
29:12
15-minute walk so it goes back to
29:15
kind of the live work play nature of of
29:17
the way we’ve been designing our
29:19
mixed-use developments
29:20
so you think about hudson yards here we
29:22
have office retail residential retail as
29:24
you said
29:26
yes is there too much retail in many of
29:28
these things today
29:29
yes and we are converting a former
29:32
neiman marcus base into
29:33
420 000 square feet of of incredible
29:36
office space
29:37
because there is demand for office and
29:39
less demand for retail
29:42
that was jeff blau ceo of related
29:44
companies at the bloomberg year ahead
29:46
summit
29:48
coming up the biden administration takes
29:50
on the battle with covet
29:52
and dealing with the economic
29:53
consequences of it we talked with
29:55
council of economic advisers member
29:57
jared bernstein about what is needed
30:00
this package
30:01
uh uh is is what is what it’s going to
30:05
take
30:05
to finally put covet 19 behind us
30:11
this is wall street week on bloomberg
30:24
this is wall street week i’m david
30:26
weston the bind administration is
30:27
hitting the ground running
30:29
but boy does it have a lot of ground to
30:30
cover we talked with the long time bind
30:33
advisor
30:34
just named to the council of economic
30:35
advisers jared bernstein
30:37
about what it needs to get done
30:40
the biggest problem is a dual problem
30:42
and you yourself david just
30:45
nailed it which is the dual impact
30:48
of the persistence of the virus
30:51
and its impact on economic activity on
30:54
commerce
30:55
unemployment on our ability to really
30:58
get
30:58
a recovery underway and as i think you
31:02
know
31:02
it’s not a uh an impact that is hitting
31:05
everyone
31:06
when the president talks about a
31:08
k-shaped recovery he’s talking about
31:09
something real
31:10
when he talks about racial equity he’s
31:12
also making a connection
31:14
between who gets most hurt by these
31:16
dynamics these dual dynamics were
31:18
describing
31:19
and this uh legislative priority top
31:22
legislative priority
31:23
of passing the american rescue plan uh
31:26
this package
31:27
uh uh is is what is what it’s going to
31:30
take
31:31
to finally put covet 19 behind us
31:35
and get a bona fide recovery underway it
31:38
funds a national
31:39
vaccine campaign to dramatically
31:42
increase the pace of inoculations of
31:45
vaccines it mobilizes a hundred thousand
31:48
public health workers
31:49
it ramps up testing treatments and
31:51
therapeutics
31:52
it engages with emergency paid leave it
31:55
brings science
31:56
back into the picture in a big way it
31:58
provides states and localities
32:00
with the money they need to reopen
32:01
schools which is so important for kids
32:03
and their parents and the economy
32:05
and that and you know i can say much
32:06
more about its components but
32:08
that is the dual challenge we face
32:11
and this plan is designed to attack it
32:14
and attack it hard
32:16
and i must say jared i don’t hear many
32:18
people republican or democrat
32:19
complaining about trying to really
32:20
attract the coronavirus getting the
32:22
vaccination program up supporting public
32:24
health things like that
32:25
there are other issues though that
32:26
people ask is it really targeted at that
32:28
k
32:28
aspect you just addressed how do we make
32:30
sure the dollars get to the people who
32:32
need it the most
32:33
for example on the 1400 payments anybody
32:35
will say some people really
32:36
need that desperately frankly some
32:38
people don’t they’ve kept their jobs
32:39
they’re doing just fine
32:41
yeah now that’s important and i think
32:43
the uh thing to recognize
32:45
there is that the checks are are better
32:48
targeted than i think many folks realize
32:50
now that doesn’t mean that they just go
32:52
to folks at the bottom
32:54
but that’s because it’s not just folks
32:56
at the bottom who need the money
32:57
and if anybody’s listening to me in the
32:59
you know 75 100k
33:01
range uh many of them yes many have kept
33:04
their jobs many have lost hours many
33:06
have lost wages
33:07
lots of those folks again i’m not just
33:10
talking about the poorest i’m talking
33:11
about folks in the middle class
33:12
something that’s always been
33:14
very important uh to uh to president
33:16
biden so he talks a lot about the
33:18
struggles that middle class families
33:20
have had in recent decades
33:21
many of those folks face um uh
33:24
uh issues around rent and um mortgage
33:27
payments so
33:28
there’s been these moratorium in play as
33:30
you know and that’s a lot that but
33:31
moratorium is not
33:33
you know forbearance is is not
33:34
forgiveness so at the end of these
33:36
moratoria
33:38
uh people face very significant bills
33:40
now that means that they and this is
33:42
really
33:42
important bit of economics here this
33:44
gets down into some keynesian
33:45
multipliers
33:47
um what we’re talking about here is that
33:50
yes
33:50
some of these expenditures will be
33:53
initially saved and not spent
33:55
and that gives them kind of you know a
33:57
low mo a lower multiplier in a keynesian
33:59
sense
34:00
but that’s just kind of a technocratic
34:02
concern
34:03
i think what’s most important is that we
34:05
finally
34:06
look ahead that was jared bernstein
34:10
member of president biden’s council of
34:12
economic advisors at the bloomberg
34:13
year ahead summit and now it’s time for
34:15
a look at the week ahead
34:17
on global wall street thanks david the
34:20
liquidity squeeze in china will remain
34:23
front and center
34:24
well we’ll be looking at the january
34:26
readings on china’s pmis to get an idea
34:28
of the economy’s pulse
34:30
we also have central bank meetings in
34:31
australia and thailand
34:33
with the rba expected to maintain its 77
34:36
billion
34:36
quantitative easing program india’s
34:39
finance minister has a tough job on her
34:41
hands to help spur a recovery in an
34:43
economy facing its worst recession
34:46
since 1952 when the country’s budget is
34:49
handed down on monday
34:51
and quiet show technology the main rival
34:53
to bike dance in china
34:55
is slated to list in hong kong on friday
34:57
in what would be the world’s
34:58
biggest internet ipo since uber danny
35:02
thanks juliet in the eu a dispute has
35:05
opened up
35:06
between them and astrazeneca with the eu
35:09
saying that they need to fill their
35:10
contractual obligation to deliver more
35:13
vaccines
35:13
despite the fact there was a glitch in
35:15
belgium production
35:17
at the week ahead we also have a boe
35:19
meeting to look forward to
35:21
what will the reaction from the boe be
35:23
considering that data has significantly
35:26
weakened
35:26
in the uk we’ll see what type of
35:28
stimulus they might
35:30
propose or any other support measures
35:32
romaine
35:33
thanks danny well u.s investors will
35:35
have a slew of corporate earnings to
35:36
digest next week more than a quarter
35:39
of the 1000 largest u.s listed companies
35:41
set to report earnings
35:42
big tech will be in focus alibaba
35:45
alphabet and amazon
35:46
and in the healthcare space pfizer amgen
35:48
and regeneron
35:49
will be ones to keep an eye on based on
35:51
the company’s reporting so far
35:53
the s p 500 in aggregate has seen about
35:56
a one percent drop in earnings per
35:58
share despite the fact that revenues are
36:00
actually higher now on the economic
36:01
front keep an eye out for manufacturing
36:03
data on monday
36:04
auto sales on tuesday and u.s monthly
36:06
employment numbers
36:07
that arrives on friday and will be sure
36:09
to bring back into focus
36:11
that two trillion dollar fiscal stimulus
36:13
plan that president joe biden
36:14
is trying to push through congress david
36:18
thanks to juliet danny and romain
36:22
coming up we wrap up the week as always
36:24
with special contributor larry summers
36:26
of harvard
36:28
this is wall street week on bloomberg
36:41
this is wall street week i’m david
36:42
weston we wrap up every week with our
36:44
special contributor larry summers of
36:46
harvard
36:46
and this week we have to get larry’s
36:48
thoughts on the phenomenon that is
36:50
gamestop
36:51
and what it may tell us about the state
36:52
of our markets our economy and maybe our
36:55
politics
36:56
more broadly i should say larry so thank
36:58
you so much for being with us uh you’re
37:00
a macroeconomist you’re not a day trader
37:02
that i’m aware of you’re not a short
37:03
seller that i’m aware of
37:05
so i’m not asking about as a trader but
37:07
from a macro perspective
37:09
is gamestop let me put it simply a fluke
37:12
or a symptom
37:15
i think it’s a bit of i think it’s a bit
37:16
of both i think it
37:18
points up that there’s a lot of activity
37:22
in finance and in financial markets
37:24
that’s not necessarily particularly
37:26
productive
37:27
or particularly rational and that
37:29
there’s a need for
37:30
adult supervision uh sometimes
37:33
uh i don’t think that this is something
37:36
that’s either gonna
37:37
lift the economy up or bring the
37:40
american economy
37:42
uh down but it does seem like there’s
37:45
more risk uh than there has to be
37:49
born in a variety of directions so
37:52
that’s a question really could this be a
37:53
canary in the mine shaft
37:55
the economy’s not going to make it or
37:58
not make it based on gamestop goodness
37:59
knows
38:00
but it could be an indication couldn’t
38:02
it of of of sort of froth or even more
38:05
than fourth maybe a bubble as you know
38:06
chair powell has asked about that
38:08
this week look i i think you’ve got to
38:11
be
38:12
concerned gamestop is one thing
38:16
the uh ways in which ipos have
38:19
popped by a factor of two or three
38:23
the uh new financing vehicles
38:26
associated with some of what’s happened
38:30
in
38:31
the spac sector certainly not all of
38:33
what’s happened in the
38:34
uh spac sector all of this
38:37
has a slight feeling of 2000 or 1929
38:42
uh in the air and so i think the idea
38:46
that we’ve got a new group of financial
38:48
regulators coming in who are
38:50
more committed to regulation than the
38:53
previous
38:54
uh group i think that’s all welcome
38:58
whether that means that markets are in
39:00
some
39:01
aggregate sense uh overvalued uh
39:05
that’s not a judgment uh that i’d be
39:08
prepared to reach
39:09
uh certainly with confidence but i
39:12
certainly think
39:12
risks are uh in a
39:16
two-way direction but i also
39:20
think david that you got to look at both
39:22
sides as yes
39:23
there is retail froth not everything
39:27
that’s done by
39:28
short short sellers is especially
39:31
attractive
39:32
either and certainly there have been
39:34
excesses of the practice
39:37
of uh short selling and then trying to
39:40
disparage and
39:42
so there are things that have gone on in
39:44
the hedge fund
39:45
uh community that i think uh
39:48
can at least be uh questioned
39:51
uh as well and in general the activity
39:55
of some people trying to short and other
39:56
people trying to
39:58
uh squeeze them and people trying to
40:01
create bandwagons
40:02
to the down uh to the downside
40:06
it’s a pretty imperfect uh
40:09
business and i don’t think anybody can
40:12
feel entirely comfortable about what’s
40:14
there
40:15
i guess the other question i’d want to
40:17
put
40:18
is not all well-intentioned regulation
40:23
works out well and you know it turned
40:26
out that in their early incarnations
40:28
certainly circuit breakers ended up
40:31
exacerbating volatility because people
40:34
started selling when they were afraid
40:36
the market
40:37
might close in the incarnation that got
40:40
put in some of the rules we had on money
40:43
market funds
40:44
actually made runs on money market funds
40:47
more likely not less likely so
40:51
indignation and dismay about the status
40:54
quo
40:55
may be a necessary condition for new
40:57
regulation
40:59
but it’s not a sufficient condition for
41:01
any kind of
41:03
regulations i think we’re going to need
41:06
people who are with regulatory
41:07
responsibility to sit down
41:09
consult with all the parties reflect
41:12
very carefully
41:13
on what’s happened here and what its
41:16
lessons are
41:18
larry from your experience having
41:20
studied these things and lived through a
41:21
fair number of them
41:22
where does this all lead i mean this
41:24
week we had the likes of
41:25
alexandria ocasio-cortez joined together
41:28
with ted cruz for goodness sakes to
41:30
agree
41:30
there’s got to be a congressional
41:31
investigation where does washington take
41:33
something like this
41:38
look i’d almost be prepared to say that
41:41
whenever aoc and ted cruz agree
41:44
they’re wrong and that there’s a general
41:47
principle
41:49
when a cause attracts the attention
41:53
of both extremes
41:56
you have to worry a lot about that
42:00
particular uh cause
42:03
and i think the idea that
42:06
somehow the people who are involved in
42:10
this
42:10
are really great social justice warriors
42:13
um and that this is an occasion to get
42:16
the man
42:17
i don’t think is a particularly fruitful
42:20
way to think about
42:21
uh policy but my guess is that two
42:25
things are going to happen
42:26
one is this thing’s gonna in some ways
42:30
set in its own undoing they’re gonna be
42:32
some painful lessons learned
42:34
people are gonna be more careful about
42:36
shorts about shorting
42:38
because they got squeezed and routed on
42:40
the one side
42:41
and people who are involved in pushing
42:43
this stock up to ludicrous levels are
42:45
probably going to end up losing a lot of
42:47
money
42:48
and they’re going to learn a lesson from
42:49
that too so to some extent
42:51
this thing is going to teach its own
42:53
lessons and
42:55
i think the dull work of government
42:58
we’re not going to have any instant
43:00
legislation
43:02
but we’re going to have committees
43:03
formed to study various aspects of this
43:07
to make recommendations that are then
43:09
considered
43:10
is actually going to probably lead us
43:12
with better financial
43:14
markets and a better set of rules
43:17
than the rules we have today okay larry
43:20
let’s wrap up the week as we do every
43:22
week
43:22
with some summer says three quick
43:24
questions number one on the vaccination
43:26
program
43:27
will it over perform or underperform
43:29
what is now expected
43:30
i think it’s going to over perform i
43:32
think it was a masterpiece of spin
43:35
frankly to define the objective as 100
43:38
million doses over
43:39
100 days at a time when even the trump
43:42
administration had figured out how to do
43:44
850 000
43:46
doses a day so i think they’re going to
43:49
see that
43:49
target massively outperformed on
43:52
my best guess would be you’ll see 175
43:56
million doses
43:57
in uh the first hundred days and that’s
44:00
as it should be
44:02
and if we don’t get a bad shock from
44:05
biology
44:06
i think we’re going to make more
44:07
progress more quickly on covid
44:10
than many people expect what kind of
44:12
progress we’re going to see with the
44:13
economy
44:13
second question is will we over perform
44:16
or underperform current expectations for
44:18
the u.s economy
44:19
different people have different
44:21
expectations but i’m betting on growth
44:23
above six percent this year
44:25
and i think that’s over performing on
44:28
most people’s expectations i really
44:30
think we
44:31
very much now are in a world of
44:34
two-sided risk
44:36
both in terms of real activity and in
44:38
terms of possible inflation risk
44:41
third thing jay powell chairman of the
44:44
federal reserve we heard from this week
44:45
we heard from the fomc
44:47
how do you react to what you heard and
44:49
saw
44:52
we’re lucky to have jay there and i
44:55
think in the fullness of it all he’s
44:57
made
44:58
very good judgments i
45:01
think that they need to be more mindful
45:04
of the possibility that the conventional
45:07
wisdom is wrong
45:09
and that we have a little more inflation
45:12
picking up
45:13
a little sooner or that financial
45:16
markets get away from us
45:18
and so i thought he was
45:21
so focused on providing reassurance
45:25
on the fed’s continued stimulus to the
45:28
economy
45:29
that he created a dynamic where if it
45:32
was necessary
45:33
to do things the other way it would come
45:36
as a pretty jarring shock
45:38
and that was my worry about how he
45:41
calibrated the balance
45:43
by all things considered i’m glad he’s
45:45
there
45:46
larry it’s always such a pleasure to
45:48
deal with you every single week that is
45:50
special wall street week contributor
45:51
larry summers
45:52
of harvard finally one more thought
45:57
the vaccination site 800 years in the
46:00
making
46:00
as we press forward urgently impatiently
46:03
to get as many people vaccinated as soon
46:06
as possible
46:06
we face a series of hurdles
46:08
manufacturing doses as fast as we can
46:10
testing and approving new vaccines
46:12
getting the medicine distributed
46:14
covering the last mile and getting it
46:16
into people’s arms
46:18
only vaccinating everybody everywhere
46:22
would get us out of the risk of this
46:24
mutation
46:25
but of all the problems we face real
46:27
estate isn’t really one of them
46:30
google the term mass vaccination sites
46:32
and you get almost
46:33
one and a half million results
46:35
everything from pharmacies to hospitals
46:37
to sports arenas we hope to open up in
46:40
roughly about
46:40
two weeks time to do base center for uh
46:43
mass
46:44
vaccination centers but there’s only one
46:46
that has the highest spire in all of
46:48
england
46:48
the largest cathedral clothes the
46:50
largest cloister and that is the
46:51
cathedral of salisbury
46:53
where according to legend at least back
46:55
in about 12 20 or so
46:57
a bishop shot an arrow into the air hit
46:59
a deer and where the deer fell is where
47:01
they built the cathedral
47:02
and that cathedral now is a mass
47:04
vaccination site
47:06
and now the chapel of saint michael the
47:08
archangel is filled with refrigerators
47:10
for the vaccine the huge nave is full of
47:13
chairs
47:13
rather than pews and that’s where the
47:15
elderly who have been inoculated wait to
47:18
make sure they have
47:19
no allergic reaction wait while two
47:22
church organists play soothing music
47:24
while they wait
47:25
you can call it song freud you can call
47:28
it a stiff upper lip
47:29
but as we all wait for the vaccine we
47:31
believe will save us
47:33
leave it to the brits to do it with
47:35
class
47:36
that does it for this episode of wall
47:38
street week i’m david weston this is
47:40
bloomberg
47:41
see you next week