00:00The GameStop circus moves on and investors turn to hopes of more help from Congress and of more vaccines on their way. This is Bloomberg Wall Street week. I'm David Westin. This week contributors Larry Summers of Harvard. You can't look at some of the things that are happening and say there's no froth in the marketplace. And former IBM CEO Sam Palmisano. If you look at the most recent CEO appointments over the past couple of years dark cloud experience Senator Shelley Moore Capito of West Virginia former CFP head Richard Cordray City global chief economist Catherine Mann. Council on Foreign Relations senior fellow Sebastian Mallaby. The beauty of hedge funds is that through their long history a proven to be small enough to fail. And Jacob Kirkegaard of the Peterson Institute. We began the week still focused on retail investors taking stocks and even silver for a wild ride. But as the week went on the frenzy faded leaving regulators to pick up the pieces. I think a mistake would be if we take this opportunity and its use to foist more regulation on those that want greater access and leaving investors to go back and take a look at the fundamentals. Fundamentals like the jobs numbers which moved back into positive territory even as we learned that we were climbing out of a deeper hole from December than we had thought. Numbers that President Biden took as one more reason to press forward on a very large further round of economic support. I'm not cutting the size of the checks. They're going to be fourteen hundred dollars period. That's what the American people were promised. And most important reassurance from the administration that it's making good on its promise to put attacking the pandemic as its number one priority. And it's starting to increase even modestly. The supply of vaccine starting on February 11th the federal government will deliver vaccines directly to select pharmacies across the country. And it's not just the promise of stimulus or vaccines driving the market. Corporate earnings are coming in better than we expected. With big tech companies like Alphabet and Amazon regaining their mojo the e-commerce giant capped a blowout quarter with the announcement of Jeff Bezos stepping down as CEO. I will reiterate that Jeff is not leaving. He is getting a new job. And what did the markets do in the face of all this. While the equity markets pretty much took off bouncing back from a big down week to set new records for the S & P 500 and the Nasdaq posting their best results since early November while the Russell 2000 did its best since last June while treasuries sold off a bit. Adding 10 basis points to the yield on the 10 year and the spread between the two year and the 10 year was the steepest that it's been for four years. Take us through the fundamentals and what they should be telling investors. We're welcome now. Catherine Mann she is Citi Global chief economist. Catherine welcome back. Always great to have you here. Give us your sense if you would. And as you look at the economic numbers right now where are we in the recovery. Well you know the recovery has faded a little bit and that's not news to anybody but it just shows up an increasing amount of data particularly the employment numbers. I mean there are some there are some good numbers out there on the PMI ISE but the employment numbers are where the rubber really hits the road for people. And those small increases this time around about fifty thousand. You know what. When you dig down in the numbers there. There was an increase of ninety seven thousand temporary workers but that meant the net being 50 is basically 50000 lost across the board. Even in those sectors such as manufacturing and construction that had been bright spots in terms of employment recovery over the last few months. So this is a very soft employment number and it does create additional pause for when the U.S. economy is actually going to regain the pre cold mid level of GDP. Little pickle in the manufacturing numbers specifically Catherine because last time we were together you're pointing out it's a different sort of a shape of recovery depending what is manufacturing construction on the one hand versus leisure and hospitality. Heather you said it was more of a V when it comes to manufacturing construction and more of an L unfortunately with leisure and hospitality. Did the numbers today make you rethink those letters a little bit. Because as you say the manufacturing and the construction were a bit softer than we expected. Well I think you know the definition of V versus L really does stick around and may in fact become stronger going forward if the new set of stimulus activities unemployment benefits and stimulus checks go out there. Because until people can actually go out and buy consumer discretionary services they are going to continue to rotate their spending into the manufactured goods and into housing which is of course very supportive of retail residential construction. But until we really get a change in consumer behavior that comes from getting the vaccine that comes from being comfortable to get out there that comes from having the businesses actually be out there to two feet the purchase they're not going to go to the restaurant when you need a restaurant to go to. Are you going to go to the theater. You need to. They're voting. Are you going to go travel. Well borders have to be open. So until we really get a change in consumer behavior and business behavior we're not going to see that improvement in the job creation across those sectors are very very labor intensive because it gives a sense of how far we are off the mark. That is to say if you had a track of potential for the economy before the pandemic and where we are now what's that gap look like. Well as I say we're not actually back to where we were in January just a year ago. That timetable if you were optimistic you might have said it was going to be the late SEC first hat first quarter early second quarter. But it really seems to be moving off into the second half of the year. And that again is because the vaccination the discovery is of course fabulous. You know we couldn't do it without discoveries but there are many other links in the chain in order to actually get to the economic improvement and employment improvements that your you know you've got your distribution you're catching manufacturing again consumer behavior businesses response and assist in the global context in a certain sense even in the in the local U.S. context we have to be talking about border closures to comfort the people have by moving out of their comfort zone their local neighborhoods where they're more familiar. And we have a long way to go for that. So a lot of the talk this week was about the stimulus package that President Biden is proposing and he's really moving forward pretty aggressively on one point nine trillion dollars. What would that do for the economy assuming it gets through Congress. Well I really think that we have to see a kind of gauge when it's going to come out and what people are going to do with it what they can do with it. So far there has been no substantial amount of life preservers. I call these these fiscal transfers the unemployment benefits and the stimulus checks. These really are life preservers more than they are stimulative because people they are making up for losses that people you know income losses and wage losses job losses that they've been they've been burdened with. And so you to spend it on something you're spending it on you housing stuff to put your house technology and so forth. That's all very supportive of manufacturing. But again the new set that come out are we going to be able to see that money going into discretionary consumer services activities. Will we be ready to roll the services sector and be ready. Will there be jobs in those services sector. Will that increasing employment. Will people feel comfortable. Will they be vaccinated yet if the money gets out there. It's great for those who need it of course. But when we think about the spending patterns it could go into more good. We'll be saved if the services sector in the economy is not ready yet. Factions aren't prepared yet. Very briefly very brief Catherine. Are you worried they may just save it. I think a lot of people will be saving it. Yes OK. Thank you. I'll be good in the second half. But not right now. Exactly. Sooner or later. OK. Thank you so much Catherine Mann of City. Coming up sorting through the aftermath of the GameStop frenzy. Sebastian Mallaby of the Council on Foreign Relations tells us what he thinks went right and wrong with respect to Robin Hood and the fact that it had to close down on access to trading on certain stocks. That's the kind of market interruption which regulators fought to take action on. This is Wall Street week on Bloomberg. It seemed as if everyone in America with access to a microphone has been telling us this week with stunning in hindsight precisely why the Dow Jones Industrials took a record five hundred eight point twenty two point six percent nosedive Monday. Time alone will tell whether Black Monday enters the history book as the day American confidence was so shaken that a premature recession resulted. That was Luis Brookhiser on Wall Street week back in 1987 after Black Monday markets have been shaken again over the past two weeks as I read it. Day traders boosted shares of companies like GameStop and Cent short selling hedge funds running with long short funds losing 6 percent overall last month and Melbourne Capital alone plummeting 53 percent. But most hedge funds emerged unscathed and Steve Cohen's point seventy two even attracted one point five billion dollars in new money. I assume hedge funds are probably reluctant to short small cap stocks right now is the fear that the Reddit brigade might be behind those. But by early this week game stops. To the moon rally started to come back toward earth and not even the Reddit flash mob or changes at the top of the company could get the irrational exuberance going again reminding us why hedge funds and short sellers target companies like GameStop the investor that gets caught in the updraft on that and doesn't understand that investing. Well it looks like it's all going up to the person who clicked the last buy. Understand that that could happen to them. Not quickly. I asked Council on Foreign Relations senior fellow Sebastian Mallaby if anything will fundamentally change in the hedge fund world. I think that hedge funds which of course go back to the 60s at least have proven to be an amazingly robust platform from which to think creatively about risk and so they adapt. No they get new stuff gets thrown in their ways. When they began there was no such thing as trading currencies because currencies were fixed to gather. Bond markets hardly existed. You had to trade stocks by appointment and they adopted all the way through that as everything changed. A FinTech. The advent of Reddit. The advent of Robin Hood. This is just the latest iteration in a long long history of financial innovation. And every time hedge funds figure it out you also have regulators trying to figure it out as it were after the fact. We have the Treasury Secretary Janet Yellen now saying she's meeting with regulators saying we need to take a hard look at this about the volatility and whether this might actually put in jeopardy some investors. We also have hearings in Congress coming up. Do you expect there might be some tweaking at least to the regulations. I think with respect to Robin Hood and the fact that it had to close down on access to trading on certain stocks that's the kind of market interruption which regulators ought to take action on. You need the infrastructure of trading to be robust. You know you need to look at the plumbing as some regulators put it. And so I think that part of the system will definitely have a fresh look. But we certainly had some large hedge funds who took a big hit. And I wonder whether that did suggest it could be systemic risk here. Well the beauty of hedge funds is that through their long history they've proven to be small enough to fail not too big to fail. They actually can blow up. And people often cite Long-Term Capital Management in 1998 as the big exception. Actually if you go back and look at that incident the New York Fed convened the banks to recapitalize it but no taxpayer money. Zero went in. So freestanding hedge funds I'm not counting here. The subsidiary of Bear Stearns they went running a rate but freestanding hedge funds that never had a taxpayer bailout. Melvin Capital has not needed a taxpayer bailout. That's the good thing about hedge funds. And so that raises the larger the largest question maybe does this all matter. I mean it was good fun to watch from the sidelines. Certainly some people were hurt. Some people were benefited but also to the markets and to investors for that matter. Does this all matter. Does it matter. Sure. It's interesting that more individual participation in stock trading is a rising force. I think that fintech will be here to stay and we'll continue to drive changes in the characteristics of markets. But I don't think it has to be destabilizing so long as the infrastructure is served and you don't get interruptions in trading or the failure of a big clearinghouse. Sebastian is there a potential connection to larger macro economic policy. We're seeing various I won't call them bubbles would certainly spurts in various places. Look at bitcoin. The way it shoots up it comes down shoots up again. Is this in part perhaps because there's so much liquidity being pumped into the global financial marketplace led of course by the Federal Reserve but also the ECB the Bank of Japan. Well you're absolutely right of course that we've seen unprecedented liquidity pumped into the system worldwide. If you look at the stimulus after the 0 8 financial crisis it was a fraction of the size of this covert injection of money. And we know from experience that you pump money into the system. It doesn't always create inflation and normal prices. You know your eggs and your grocery store might be okay but the nest eggs may go up. And that's what you've been seeing an asset markets all over the place. And I think that is froth. I don't agree with Chairman Power when he plays that darned. I think it doesn't matter if a particular crypto currency goes up and goes down here. That's the problem with people trading that stuff. I think the same about a specific stock my stock like GameStop. But when the whole system goes up what we know is that the last two recessions in the United States the 2001 recession was off the back of the NASDAQ crash in 2000. And of course the 0 8 or 9 recession was off the back of the subprime crash. So we've moved away from a world in which traditional business inventories adjust and that causes the recession into a world where its financial imbalances that cause recessions. And so I do think the Fed needs to care about that. It's a balancing act. You want to print a lot of money when the economy is really in bad shape. But there is this risk that you create froth bubbles and then ultimately instability. What is the track record of the Fed trying to deal with that. Because I don't think it's been a very happy one. Well they've had a philosophy of clean up afterwards and in their own telling of the story they did that pretty well after the NASDAQ crash in 2000. And hey there was only a very shallow recession. I don't take that view myself because actually the response to that recession in. Very low interest rates. If you remember the Fed was down at 1 percent of the federal funds rate in 2003. That was super low at the time. And that definitely contributed to the real estate bubble that then took hold afterwards. I think you get a bubble. You throw enormous amounts of monetary stimulus to try and fix it. That creates a new bubble. It's even bigger. Even more monetary stimulus comes off the back of that. And I do think we're in a cycle where the Fed's kind of standard line which is don't worry about bubbles we'll just clean them up afterwards. I'm not sure that's the best strategy. Thanks to Sebastian Mallaby of the Council on Foreign Relations. The extreme volatility and volume of trading in stocks like GameStop and EMC caused brokerages like Robinhood to step in and impose limits leaving regulators to ask whether there was any wrongdoing along the way even while they recognize there is no putting the social media genie back in that bottle. Technology innovation is the way forward. We have to embrace it. You can't put it back in the box. The idea that you're going to stop. Read it. It's been around for quite a while is kind of absurd. Former CFB director Richard Cordray thinks regulars should act before retail investors get hurt. I'm all for people having a lot of latitude to free trade in securities. On the other hand if the market gets driven by speculative frenzy becomes tulip mania and there are a lot of people who will get hurt. If are people holding GameStop at very high values right now and the underlying fundamentals do not support it they're going to end up losing a lot of money in the long run even though they may have made money in the short run. And it's a concern. And by the way it also reinforces the bite. Administration needs to have its financial regulatory officials on the job and they're going to need to get pushed through and confirmed in a hurry by the Senate in order to be able to address these kinds of problems that are arising right now. Well so let's go back to the CFB that you were the first director of. As I recall it came out of concerns about what happened. Consumers coming out the great financial crisis 2008 2009 where there was a frenzy one might say in the mortgage market and some people got hurt. What was the solution then. And does it apply to what we're seeing now potentially. Yes and you're absolutely right. The 2008 crisis was driven by failures in the mortgage market. There was a huge impetus to reform in the mortgage market. Congress directed at the CFTC carried it out. Those reforms were very solid in the mortgage market recovered and has been very strong. Even now in the current economic downturn. And that's because mortgages are more fundamentally sound. We don't have a huge amount of mispricing in that market and we don't have people with bad loans who are going into foreclosure. The difference in this crisis is that it wasn't driven by any particular segment of the economy but by a pandemic. Nonetheless consumers end up hurt if they're unemployed if they're not having the revenue they expect. If they can't engage in spending and can't repay their debts that's the problems we're facing now in the CFP has a job to do to oversee how the financial companies are handling consumers right now. That was Richard Cordray the first director of the Consumer Financial Protection Bureau. Coming up Italy turns to Mario Draghi to put together a government even as yet. And all of Europe's struggle to overcome the pandemic. Fundamentally he said his problem is it's low growth. This is Wall Street week on Bloomberg. This is Wall Street week. I'm David Westin. Europe was on the mind of global Wall Street. This week is the Bank of England met to consider the state of the British economy and Italy as the former president of the European Central Bank Mario Draghi to form a government to deal with the Italian economy. Jacob Kirkegaard senior fellow at the Peterson Institute for International Economics says he has his work cut out for him. His basic problem is that he's a technocrat. And currently the biggest party in the Italian parliament which is also currently in the government the five star movement basically rose to its prominence in protest against the repeated technocratic government led by you know other Mario is Mario Monti during the euro crisis some years ago. So they are going to face you know they're going to have a very hard time supporting yet another technocrat. And obviously you have other parties particularly on the right and the far right in Italy that are currently in opposition. They would love to have an election because they are going to easily go into the polls are going to be winning those elections. Then you have the traditional centre right party the PD party in Italy. Their main concern is to remain in power to be in a position to help pick the next Italian president which actually in my opinion may very well turn out to be Mario Draghi. But that president is only the next president is only selected early next year. So what I think we are looking at here is a sort of temporary technocratic government under the leadership of Mario Draghi that will probably be able to competently handle and begin the implementation of the EU's big recovery fund. That basically is a big fiscal stimulus. Also in Italy. But I strongly doubt that Mario Draghi will be able to put together a governing majority in both houses of parliament. That's really going to be able to implement many of the economic reforms that Italy needs. And that indeed Mario Draghi when he was at the ECB was advocating for countries like Italy. Well that's what I wanted to ask. I mean we all like fiscal stimulus that gets us over a is over. But you have to have structural reform at some point. I think what is the structural form that he would have to try to pursue in Italy if in fact Mario Draghi were to form a government. Well I think there are several. I mean fundamentally Italy's problem is it's low growth. A lot of that has to do with its demographic outlook. But it's also very deep rooted issues concerning the industrial structure in Italy. There is lots of very small family owned businesses that find it difficult to expand beyond their local markets expand and or invest in enough I.T.. So he basically has to try to oversee a set of comprehensive reforms that will if you like see consolidation of large parts of the Italian industrial sector. This isn't something that happens overnight. He's also going to have to continue to make room forums to push more Italian women into the labor market into the labor force. Sorry Italy has arguably the lowest female labor force participation of all major industrialized countries. So with this demographic outlook this is the biggest pool of untapped labor resources that it needs to tap into if it's going to have growth going forward. That was Jacob Kirkegaard of the Peterson Institute. Coming up big tech gets big earnings but that doesn't keep Jeff Bezos at the helm of Amazon. Sam Palmisano ran IBM and he says it's understandable if you're the founder like Jeff I can imagine a very very difficult decision to make. This is Wall Street week on Bloomberg. The Everything store is getting a new CEO. Amazon's founder Jeff Bezos is stepping down to become executive chairman later this year. I will reiterate that Jeff is not leaving. He is getting a new job. Over the last 25 years under Bezos leadership an idea for an online bookstore evolved into a one point seven trillion dollar company that changed the face of retail. Like many Silicon Valley success stories Amazon started in a garage after Jeff Bezos left his job in 1994. In the late 1990s the startup expanded its offerings from books and music to include consumer goods. I e-mailed it a thousand randomly selected customers and asked them Besides the things we sell today what would you like to see yourself. Cover. One of the answers was I wish you sold windshield wiper blades because I really need windshield wiper blades. And I thought to myself we can sell anything this way. Even after Amazon went public it failed to turn a profit until 2001. Bezos business model of keeping inventory low and selling products for low prices saved the company during the dot.com bubble. Even his peers like pet scum went bust. He obviously is going to have huge influence still but it's going to be more from a vision and strategic perspective. Bezos returned to his passion for books when Amazon released its first Kindle in 2007. Changing the way people read books while building an e-commerce empire Bezos also wears a couple of other hats as the owner of The Washington Post and founder of the space company Blue Origin. I don't think it leaves Jeff Bezos able to concentrate on building rockets that he wants to deal with. The man at the helm that he can really trust. More recently Amazon's profit engine has been its cloud computing arm. Amazon Web Services which launched in 2003 NWS accounted for 60 percent of Amazon's operating income in 2020 making Amazon the world leader in cloud computing. And so it should come as no surprise. The base's successor will be the man who runs a W S Andy. Jesse think it's underappreciated. Just how amazing an innovator is and important to everything that goes on basically in technology today. The NWS is in one's. Wall Street Week contributor Sam Palmisano ran IBM and he says it's understandable that Jeff Bezos has decided to make the transition. Wasn't really a hard thing to do. I mean especially when you've built the company. I mean one thing I was 9 to 10 years as CEO and I grew up in IBM. I love IBM obviously. But it wasn't mine. It wasn't my creation. It was the Watson family. And so if you're the founder like Jeff I can imagine a very very difficult decision to make. However at the same time is really not leaving the company because you're still executive chairman. So he still has a role. But at the same time his role the company is very different. The company is different. At this point as well it's not at this meteoric rise that it's had. It's now getting besieged by the government. Yeah well that's exactly it's quite interesting as you know in the same things happen to other companies. We've talked about Microsoft IBM AT & T and it's I would look back when it comes to success. I mean when you're not successful when you get that large people were going to come after you. And usually it's your competition quite honestly. But then they lobby the various government entities and their politics takes over and then you find yourself in these difficult situations. My experience the founders have a very hard time with that. They can't understand how that could happen. I'm not saying that's the case for Jeff but my experience with both talking with Bill Gates and spending a lot of time slices port. Mr. Watson Jr. as when I was executive assistant to the chairman the CEO of IBM and I had firsthand conversations with them. So you could see as a founder why that was a very hard thing for him to psychologically cope with. Well mean you ran a big company that was under siege from the government. Is it possible not just for psychological reasons not as much fun to defend but also for the sake of the company. Is it better to have somebody a little more detached where it's not literally their child. I think that they missed. That's the way to think about it. I mean basically what happened in IBM's example and I spent a time with Tom Watson that was Frank Carey who became chairman and then John Oprah who became CEO. But Mr. Watson made a decision and he was still the founder and majority shareholder but made a decision that Kerry would become chairman and work with the government and try to resolve the suit. And John would run the company. So there really was kind of a division of responsibilities. I think that's really really important because it's really hard not to get distracted if you look what happens long term over these suits IBM. We miss the thing called client server. Microsoft obviously did extremely well there. Microsoft missed the Internet you know. And I think it's distraction. I really think a lot of it has. Because when you are the CEO and you're also dealing with the government's suit between the legal pressures and the advice you're getting from counsel on how you should proceed agents that strategy the company gets distracted for a period of time. In our case that was almost 10 years of Microsoft's case. I think it was more than ten maybe twelve. AT & T you know that happens. And then as a result of that you missed these big technological shifts. One of the things that no one's been distracted from is the cloud. A dramatic rise in the cloud including at Amazon not limited Amazon. It's probably no coincidence that the first is succeeding. Jeff Bezos really was running the cloud operation at Amazon. What do you make of that change in technology overall that huge move into the cloud. Well it's interesting because if you if you think about where Amazon began there were signs you know tapes and books on the Internet. Basically right now they're the largest provider of cloud services to NWS which is you know Andy was running at Amazon. Now having said all that it's a huge transition of the infrastructure. I think I think you may find it interesting there is that if you look at the most recent CEO appointments of the past couple of years they all have cloud experience Amazon Google Microsoft IBM. Right. So that indicates that the the leadership of those companies have concluded that the skillset required for the future is someone who understands those technologies that are going to transition as companies and those business models into this cloud era. And put on top of that artificial intelligence is the compounding of both of those things. But all those people have those backgrounds. So I think there's a it's an interesting pattern emerging here. It becomes a leadership of these tech companies. That was former IBM CEO Sam Palmisano. Coming up the prospects for another round of fiscal stimulus. Senator Shelley Moore Capito of West Virginia says Democrats are committed to getting it done one way or the other. The quickest way to get here is a bipartisan bill where we have a lot of agreement. This is Wall Street week on Bloomberg. This is Wall Street week. I'm David Westin. President Biden pressed his case for another one point nine trillion dollars in stimulus money to support the U.S. economy including meeting at the White House with 10 Republican senators who proposed a compromise package that would get bipartisan support. We talked with one of those who met with the president Senator Shelley Moore Capito of West Virginia for her take on that meeting. We had a two hour meeting with the president in the Oval Office. It was a great exchange of ideas and we talked about more targeted reform and kind of took apart a little bit his one point nine trillion. He didn't make any promises. He listened intently is very well prepared and he seemed to be interested particularly in the targeting numbers on individual checks in terms of do we really want to be sending checks to families that are making 300 thousand dollars a year whose lives really have not changed. And so I think that was the biggest area that he signaled that he might make some make some adjustments. But that's yet to be seen. There are some reports on the Bloomberg show about the very point you just made that if you really look at the upper end before it really phases out there are some people who are making a fair amount of money and as you say maybe didn't lose their jobs. Do you have an approach in your compromise proposal to deal with that into the president indicate maybe that made sense that sort of approach. Well what we did was we lowered the the income level of what you would be available to get a stimulus check to about 150000 per couple. And we felt like and the statistics bear out that you're using this as stimulus. This is money. We went back into the economy. And at those income levels where people really are hurting maybe can't pay their rent buy their food they are spending their stimulus checks. And if you get up into over 200 or 300 thousand dollars people are saving it or they're not using it to provide that stimulus that we really need to keep this economy moving. And also I think do we really want to be sending taxpayer dollars to people who have had really little or no effect during this pandemic. And I say no. Senator give us a sense of the timing. If in fact the Democrats went by way of budget reconciliation. How long would it be likely to take. You know I think that's a great question because this was one of the one of the selling points we thought was most powerful for going into talks with President Biden. He wants something. He kept stressing urgency and timing. And so we kept saying the quickest way to get here is a bipartisan bill where we have a lot of agreement. And if you're going to go through budget reconciliation what you're going to see is probably a month to six weeks and you've lost that time. So Senator I want to wrap this up by letting you brag on your state here a little bit because you're vaccination rates in West Virginia are pretty impressive. What are you doing in West Virginia. What can you teach the rest of us. You know what we're doing in West Virginia is we're utilizing all of our local assets. The governor has done a great job along with the National Guard our local pharmacies our city mayors and counties. Our county health departments have been fantastic with the federal government laid out a plan for vaccination delivery and dispensing. We want away from that and created our own plan because we know each other best. And so we have the best vaccine a vaccine distribution in the country. We're proud of it. We have I think ay ay ay a way a way forward for states to get more shots in the arms quicker. And that's what we're doing in West Virginia. We have a vulnerable population. It is really important that we get those nursing home and assisted living folks taking care of first. We know where they all work because we've been testing them. So it's just really been a logistical win for us and we're really proud of it. What's it gonna do for your economy. Because a lot of people are concerned if you can't get vaccinated can't get people back out to restaurants and things like that. Well our schools reopened about two weeks ago. And and you know there's been some pushback like we see across the nation. But by and large they're reopened and that's big. Our restaurants are reopening. And as we get this vaccine distribution we get those double shots for the ones that need the two shots. I think by the time our great tourism season comes along in the spring we have a great winter one 2 in the spring. It's going to be great. We have a new national park in West Virginia. We were able to get at the end of the year. So we got lots to see. That was Senator Shelley Moore Capito of West Virginia. And it's time now for a look ahead on global Wall Street. David next week marks the start of the great staycation in China as the usual lunar new year. Migration is put on pause ahead of China's markets closing on Thursday. We'll get a pulse check on inflation and possibly credit growth on the mainland. Plus money markets are in focus as PPC watchers assess the central bank's stance on tightening. As for earnings in Asia Softbank reports alongside Japanese carmakers Toyota Nissan and Honda. At a time when the global auto industry is grappling with a semiconductor shortage that is impacting production and looking to space. China's mission to Mars may reach the planet next week. Danny thanks Sofi for the upcoming week. The focus will be on Italy and whether the former ECB head Mario Draghi can get enough support to become the premier of Italy at the moment. He's just trying to avoid an election. So we'll see who ends up backing him. We're also going to be looking out for a raft of European Bank earnings that include Commerzbank and SOC Gen. Scarlett. Thanks Danny. We're all geared up for the Super Bowl on Sunday but after that we'll be keeping an eye on events in Washington. The Senate begins Donald Trump's impeachment trial on Tuesday. Lawyers for the former president declined an invitation for him to testify. Federal Reserve Chair Jay Powell will also speak to the Economic Club of New York on Wednesday. Now the central banker has pledged to keep money cheap and credit available to support the pandemic hit economy which is all the more important after a disappointing January jobs report. And of course the earnings parade continues. Tech and media are in the spotlight with Twitter and Disney reporting quarterly numbers along with Lyft Uber and General Motors. David back over to you. Thanks to Sophie Danny and Scarlet Fu. Coming up we wrap up the week with special contributor Larry Summers of Harvard. This is Wall Street week on Bloomberg. This is Wall Street. I'm David Westin we're to wrap up the week as always with our special training and Larry Summers of Harvard. So Larry I guess the big news really this week is about the stimulus bill that one point nine trillion dollars. President Biden is proposing. It was thought it might be bipartisan. Now it looks like he's going to really push it through no matter whether Republicans come on board or not. You were in the Obama administration when you went for a big stimulus package and some people think you didn't go far and fast enough. Do you agree with President Biden's approach that he's got to get this thing through. Let me just first say David. I don't think there's any question that in retrospect it would have been better if we'd done larger stimulus during the Obama administration. I think we understood that at the time. The constrained read President Obama's memoirs was not an economic judgment. It was a political judgment about what could pass through the Congress given the consensus that existed at that time given where Republicans were and given where Democrats like Senator Kent Conrad and Byron Dorgan Nelson from Nebraska were at that time. So I think the lesson that we need more stimulus. We wish we'd had more stimulus is really a valid lesson. I'm not in a position to judge the tactics. It's certainly better to do things on a bipartisan basis. But negotiation is about leverage. And if the Democrats have no capacity to act on their own they don't have much leverage in a bipartisan negotiation. And so if it's come to the point where they need to do it unilaterally then that's where it's come to. So I'm not prepared at all to second guess that political judgment. It's a political judgment not an economic judgment. And it may well be necessary given the intransigence of today's Republican Party. I think the really important issues. David go to how we think about fiscal policy over the course of the whole year. And we need to make sure we're supporting demand. We need to make sure that we're helping people who are in need. We need to take the kind of different perspective on fiscal policy that recent economic thinking about secular stagnation about low rates has driven us to. But that's not a reason for blank checks. And that's not a reason why any amount of fiscal policy organized in any way is appropriate. And I look at the fiscal stimulus under discussion and with the one point nine trillion dollars you're talking about something that relative to the GDP gap is six times as large as what we did in 2008. And if that's what we're going to do we need to make sure we've got a contingency plan in case we get a perfect combination of good news. Let's shift briefly from fiscal to monetary policy. In this program we spoke with Sebastian Mallaby. You know him and we talked about what he refers to as froth in the markets right now because of the reasons you know so well of the so much liquidity and whether the Fed can really address that. And he said in history the Fed traditionally has said let's wait till the bubble bursts and then pick up the aftermath. He didn't think that was necessarily an effective way to do it. Do you think there is froth in the marketplace and is that the right approach to deal with it. I think just you can't look at what happened at GameStop. You can't look at some of the things that are happening and say there's no froth in the marketplace. But monetary policy is a pretty blunt instrument. It touches everything from small business borrowing rates to overall stock market multiples to mortgage rates for homeowners. And so unless you have a pretty pervasive froth I worry about using monetary policy as a tool. And I worry about being wrong. You know Alan Greenspan made his famous statement about irrational exuberance in the fall of nineteen ninety six when the Dow was at sixty three hundred. In retrospect it's pretty clear there was no froth. And everybody at the time of the 1987 crash believed that it was a. Product of a tremendous amount of froth that had built up in the summer of 1987. But if you look at a graph of stock prices today it's far from clear that there was froth at that time really. So I worry that you have to be very sure of yourself about froth to go running around trying to burst bubbles with the blunt instrument of monetary policy. So let's conclude with a rapid fire round of summer says and pick up on something you just said. No one. You referred to GameStop. If we end up with Robin Hood against the regulators in Washington because the regulars are certainly going after this thing there's going to win regulators ISE. You're going to see a lot of attention to issues around manipulation and retail protection. I don't yet I don't feel I know what the right public policy answers are but I think there's a pretty pervasive and pretty valid sense that the spectacle of the last two weeks and the possible systemic risk that could have happened of another FTSE type situation in the last two weeks that public policy should be working to avoid that. And I suspect that we'll see new rules and regulations. We heard this week from the Bank of England and they didn't change any of their decision making but they once again sort of had it both ways on negative interest rates. We're not doing it now. We're not saying we're going to do it. But don't be surprised. We do it at some point down the road when history is written will negative interest rates prove to have been a success or a failure. I don't think they're gonna be remembered as a great success. I think they're going to be remembered more as a sign of desperation and a very difficult time. And people will know wish that we'd used fiscal policy more actively and so there'd been less need for monetary policy. And finally take us forward 12 months. What will the inflation rate in United States be and what will the unemployment rate be. I think unemployment's going to be significantly lower than people now expect. And I think inflation and especially inflationary expectations are going to escalate more rapidly than most people expect. I think we're for the first time in a generation going to have to contend with rising inflation expectations and possible inflationary psychology as a genuine issue. I think we're going to be there within a year or 18 months. Okay Larry thank you so very much for concluding the week for us as you always do. That's Larry Summers our special Wall Street. We continue from Harvard. Finally one more slide. Everybody's doing it. No I'm not talking about buying call options on a highly shorted stocks or planning vacations for whenever they let us out of this cage. That is our home. Or even buying a covered puppy. No. The craze it is truly taken over the country is the spark. That Special Purpose Acquisition Company began back in 1993 as a last resort for companies that couldn't manage an IPO. Sparks have become all the rage in this world of cheap money low returns and volatile markets that make it really hard to price a traditional IPO. If you're a private company on the rise just raise the money without telling anyone what you want to buy. Make a deal and presto change out. You have a public company where there was a private one. The growth is geometric with 83 billion dollars raised for sparks in 2020 and the pace set so far this year looking to beat that by a good margin. I think we are at a point where we've got more supply of specs than we do of companies that really would rationally merge into them. So if you're a former senior member of the Trump administration what do you do next. Well for former Commerce Secretary Wilbur Ross you create a spark and whom you bring in to help you run it. Former director of the National Economic Council Larry Kudlow they've announced plans to raise three point forty five million dollars for their new spark. They haven't said what sectors they'll be looking at although Mr. Ross has always expressed interest in the privatization of space. And Mr. Kudlow and Mr. Cutler as we know knows the media rather well. But at the end maybe the price is right for a big private leisure and hospitality group something like maybe the Trump organization. It would be one way to turn the table on your old boss. That does it for this episode of Wall Street Week. I'm David Westin. This is Bloomberg. See you next week.

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Wall Street Week - Full Show (02/05/2021)

One of the most iconic brands in financial television returns for today's issues and today's world. This week's Wall Street Week features David Westin's interviews with Former Treasury Secretary Lawrence H. Summers, Former IBM CEO Sam Palmisano, Sen. Shelley Moore Capito (R-West Virginia), Former CFPB Director Richard Cordray, Council on Foreign Relations Senior Fellow Sebastian Mallaby, and Citi Global Chief Economist Catherine Mann. The conversations highlight the change in leadership at Amazon, the fallout from the GameStop trading frenzy on hedge funds, and efforts to pass President Biden's $1.9 stimulus plan. (Corrected reference to Bezos' former company) (Source: Bloomberg)

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