Bloomberg Talks
00:00:02 · Tom Keene, Gary Gensler, Paul Sweeney, Tom Keene, S4
[00:00:02] S0: Bloomberg Audio Studios. [00:00:04] S1: Podcasts. [00:00:05] S2: Radio. [00:00:06] S3: News. [00:00:07] S4: He's no introduction to Global Wall Street. Mr. [00:00:10] S3: Gensler's here, the former chairman of the Securities Exchange Commission. The Nobel laureate Simon Johnson has the privilege of. [00:00:16] S4: Working with him up at MIT. How's that going? [00:00:19] S3: How's this wonderful experiment of Gensler and Johnson, Johnson and Gensler going? [00:00:25] S0: We're having a lot of fun. [00:00:26] S1: And of course, the markets and we call this show the power and consequence. And there's so many different things going on around this White House, around international affairs, in Europe, and of course, artificial intelligence. So we're doing all right. I don't think we're nipping at your heels yet, though, Tom. [00:00:45] S3: Well, we're living it every day. Paul and I are living this fire hose of news flow. Let me just begin with almost a Greenspan and Schiller of Yale idea of Gensler calibrating the exuberance. [00:00:59] S4: The word I use is almost people feel it's febrile. [00:01:02] S3: It's almost got a fever to it, this moment we're living in of technology, of politics, of Iran, the news this morning that maybe there'll be talks. Do you sense a constructive or less than constructive exuberance?
00:01:02 · Tom Keene, Gary Gensler, Tom Keene, S4, Paul Sweeney
[00:01:02] S3: It's almost got a fever to it, this moment we're living in of technology, of politics, of Iran, the news this morning that maybe there'll be talks. Do you sense a constructive or less than constructive exuberance? [00:01:18] S1: Well, I think that we will have a deceleration of this AI boom. And then some form of a reversal in the next 18 to 30 months. And the question really to me is a little bit about timing, when, and then how deep it is. And I think the depth of it is going to be all dependent upon all the debt. [00:01:41] S0: How much debt's in the system? Where is it? Who holds it? [00:01:44] S1: So I don't know, Tom, if that does it for you. And now in terms of politics, we're going to have the midterms in a week. [00:01:54] S4: And then. [00:01:55] S0: Katie, bar the door, there's going. [00:01:56] S1: To be 15 or 20 people running for president for 28 that will all be announced by January or February of next year. [00:02:03] S4: Or by the Wednesday after the election. Exactly. [00:02:07] S2: So, Gary, yesterday was... Just an incredible day for AI, the story, the theme. We had Anthropic File. It's S1, long-awaited. [00:02:16] S0: Have you read the 400 pages yet? [00:02:18] S4: We're getting through it. [00:02:18] S2: I'm having AI work on it for me. We also had Meta just do a fly-by $ 90 billion equity offering. So just extraordinary amounts of capital here. How do you frame this AI discussion? Because one could argue, as you just suggested, that to the extent it ever pulls back, rolls over, whatever you want to say, that.
00:02:18 · Paul Sweeney, S4, Tom Keene, Gary Gensler
[00:02:18] S2: I'm having AI work on it for me. We also had Meta just do a fly-by $ 90 billion equity offering. So just extraordinary amounts of capital here. How do you frame this AI discussion? Because one could argue, as you just suggested, that to the extent it ever pulls back, rolls over, whatever you want to say, that. [00:02:37] S4: Could be problematic. [00:02:39] S0: Well, Paul, it will pull back. I mean, history tells us this. [00:02:43] S1: You can be positive about the technology and still say our capital markets tends to overfund in an exuberance. There's some game theory, too, that everybody wants to get in on it, on railroads, on canals, on the internet, and on this. And so it's just a question of when and then how deep It goes, and I would say this, when you see the metas raising $ 90 billion, when you see the debt issuance, which is very significant. You saw Broadcom announce late yesterday a $ 63 billion package that's not even in that S-1. They have to amend the S-1 and put that in. $ 63 billion of complex guarantees and so forth, all off balance sheet. [00:03:36] S0: You start to worry. [00:03:37] S1: That's feeling a little like that 08 off-balance sheet craze.
00:03:37 · Gary Gensler, Tom Keene, Tom Keene, S4
[00:03:37] S1: That's feeling a little like that 08 off-balance sheet craze. [00:03:42] S3: Gary Gensler, with his service to the nation, many different jobs, but I would suggest with the election, there's a less regulatory persuasion and then a more regulatory persuasion. Does the government at some point, particularly if the Democrats take over again, have to step in and begin managing There's huge amounts of money flowing in, the risk to the public. Do you desire more regulation? [00:04:12] S0: I think it's a balance. [00:04:13] S1: And I would say in terms of the capital markets, I think we're really. [00:04:17] S0: Successful in the U.S. [00:04:19] S1: Keeping the government out of the choices we make, that we're merit neutral. And if the public wishes to invest in Anthropic, that's the public's choice as long as there's the material disclosures of all the risks. On the other hand, there's this cleanup crowd that has to come in afterwards. And if I were at the Federal Reserve this week, I'd be saying, look, if we have a deceleration, what does that mean for inflation, for growth in 2027, 2028? I think they're going to have a rate increase come December. But what do they do after that? And I am starting to think they're going to start to see a deceleration and maybe they don't raise rates as much in 27. [00:05:03] S3: Well, Vice Chairman Gensler, can you see it? I can see it. You know, Vice Chairman Gensler has a ring to it. [00:05:09] S4: I'm kidding, folks.
00:05:09 · S4, Tom Keene, Gary Gensler, Tom Keene
[00:05:09] S4: I'm kidding, folks. [00:05:10] S3: But if I was speaking to Vice Chairman Clarity, it'd be the same question. Out of COVID, stimulus one, stimulus two. Many have a stimulus that was called the Biden stimulus. Maybe there's a fourth, fifth stimulus as well. Has this nominal GDP been goosed so much that we risk not disaster, but some real pain and angst and workout as we pull nominal GDP down? [00:05:37] S1: Well, look, this is a challenge for any central bank. [00:05:42] S0: But if you feel that you're kind of. [00:05:43] S1: At the late stages of a capital expenditure boom, that's what I contend we are. if you're at that late stages, how do you affect monetary policy? And by the way, you might have been the right first person right here to say that there's going to be a fiscal stimulus package in 2028 on the horizon. [00:06:03] S0: If we have that deceleration. I'll give you that credit. [00:06:07] S3: Well, let's turn it over to Jack Lew because I think I stole, I. [00:06:11] S4: Steal from everybody. I mean, I know nothing about Duke. I steal it all from Paul. [00:06:15] S3: But the answer is, I believe Secretary Lew was the one that suggested that The morning after the 28th election, we get fiscal challenges and also Social Security study. [00:06:27] S4: That's where it begins.
00:06:27 · S4, Gary Gensler, Paul Sweeney
[00:06:27] S4: That's where it begins. [00:06:28] S1: I think Jack's right about that. But that's the long-term structural thing. So we're already running very high debt to our economy. But see what's happening in France, who has even higher debt to economy. They don't have what's called fiscal room to step in. We have limited fiscal room as well, but we're a bigger, I would say more significant economy. [00:06:54] S2: We're going to have these elections a week from today. Presumably the Democrats are going to gain a little bit more leverage in the House, maybe even the Senate. What does that mean for our executive branch for the next two years here? A lot of folks are saying, you think you've seen some stuff here in the first two years? Just wait for the next two. [00:07:13] S1: Well, look, it History tells us that presidents tend in the last two years, and remember this president will have had six years already, will turn more to foreign affairs. They have less leverage with Congress. But I do think that there'll be Democrats on the Hill that will look to still get some things done. And if this president wants to work with them, and that's a question, I think they'll want to get some things done on behalf of the American voters. and address affordability, address housing, address the AI worry that's on everybody's mind, AI safety, and my kids being addicted to this stuff. [00:07:54] S2: How about the kids up at MIT? How do they interact with AI broadly defined?