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[Music] from bloomberg world headquarters new york to our tv and radio audiences worldwide welcome to balance of power where the world of politics meets the world of business i'm david weston we start with a check on the markets and joining us i'm happy to say is abigail doolittle i'm happy particularly today abigail because i can't quite figure out where we are we had a sort of rough day in the equity markets last week we had a good day yesterday today not quite so good for nasdaq where are we uh it's a bit risk off at this point david i applaud you're talking about this jittery action that we're seeing this back and forth because we are overall in a mini downtrend in the near term but yesterday we had that very impressive relief rally the question is whether or not those bulls would find legs what we're finding out today with the losses for the s p 500 the nasdaq especially weak the chip sector down well more than one percent small cap so across the board selling that investors are still nervous that rates could go higher because of course on the year we have the yield curve steepening quite dramatically that causes a repricing of risk and valuation questions especially for technology so yesterday we had the best day since june it felt like maybe the bulls were going to pull through and break this near term downtrend with the s p 500 down about one percent a little more than one percent over the last two weeks or so but today we are learning that the sellers still mean business technically david it looks like we could be going back down to the 50-day moving average so just a little bit of uncertainty here again around the effect of rising rates and what it means for the reflation trade and also technology of course that is the big lagging sector on the day factors around valuation concerns around valuation as rates do rise david all of it shows why we need you abigail doolittle thank you so much for that read markets have been trying to get their arms around the recovery and what it means for jobs and for the economy with richmond fed president tom barkin telling us just yesterday he believes that the move in bond yields really reflects a more positive outlook if the driver is normalizing inflation expectations that's welcome if the driver would be which it hasn't been so far uh elevated inflation expectations that would be worrisome if the driver is as it seems to be news about vaccines or news about health of the economy or news about fiscal stimulus then i think it's a natural uh it's a natural reaction but the recovery we're seeing so far is very uneven with many lagging behind welcome now claudia sam she's former federal reserve economist whose work there included studying the effects on families of the great recession and attempts for the federal government to make things better claudia great to have you back on with us give us your take about what really is going on with you the recovery because we hear from various people including fetcher jay powell that it is very uneven yeah well first thank you for having me on today and i will underscore both barkin's comments that we are pointed in a good direction in terms of the vaccines are coming out we're seeing the economy reopen it's spring this helps and then jay pal is absolutely correct we know that this recovery is uneven i applaud his efforts and across the federal reserve system of drumming this home i think one of the things and this is broad-based the federal reserve came out and said that unemployment rate that keeps coming down that's too high like there are people millions who have dropped out and if you focus on low-wage workers we are talking unemployment rates pushing 20 percent setting aside wage cuts i mean that's a really really serious situation that we are still in and claudia i think you'd be one of the first to say that takes us beyond the federal reserve and takes us maybe up to capitol hill and the stimulus bill that we're seeing wend its way through the senate right now give us your take on what that could do to those low-wage workers who are out of jobs well what it must do is help people get through this crisis like we have to be safe before we are bringing people back to work and then once that safety is there we have got to get people back on their feet and we've got to do it as fast as we can that was a huge lesson from the great recession congress did not do enough right out of the gate and they walked away too soon the federal reserve cannot do this alone and that is why you are seeing unprecedented clear talk from jay powell and other officials at the fed do more congress and i think we're pointed in that direction but it continues to be a struggle to underscore to some policymakers and their advisors that like no this is really serious we have got to like swing for the fences claudia i have this sense that a lot of people republicans and democrats think we do need to do more the question is how much more and when is it too much more i mean if you look at the 1.9 trillion dollars a lot of economists say that's way more than the output gap right now and the money that we're pumping out to people including with those 1400 checks a lot of them are saving it because they are not spending it's not making it the economy and they don't need it they didn't really lose their jobs yeah so i've been spending a lot of time trying to debunk the inflation hawks recently it's like whack-a-mole one thing i would say quickly is the potential output gap is the absolute wrong way to think about this it is an it is a statistic that changes so much it is so much better to think about the unemployment rate we have people get them back to work there's no reason that they would not be working if it were not for covid so like set the potential output gap aside that's just a non-starter and while i agree we should always think about the risks the risk of doing too much right now if that's even possible are so small in comparison to the risk of not doing enough and we've known that for decades so like we got to learn that lesson and one thing that comes up a lot is i know people who say well okay another 2 trillion that's great but i want a trillion of it to infrastructure not just sending you know cash transfers and i'm like we cannot build back better we cannot dress inequality if we are standing on a shaky foundation like you gotta shore up where we're at and finally claudia as we look at the uneven recovery it's also uneven with respect to sectors it's really very disproportionate as i see it at least when it comes to jobs when with respect to services particularly in things like travel and leisure things like that are there ways that we could be directing the money specifically into those parts of the economy right i think we we can now do so much more directed aid than we could in march where it was like free fall everyone needs help i think and unemployment rates we know fairly granular especially in geographic like there are metro areas like in hawaii and you know florida where have been hit so hard by leisure yes get them more money i think it is foolhardy to think that we can direct aid and then cut back on more general aid we are just not there yet claudia it's always great to have you with us thank you for coming back that's claudia sam she's former federal reserve board economist coming up here senator dan sullivan republican of alaska on the state of the stimulus bill and much more this is balance of power on bloomberg television and on radio [Music] [Music] this is balance of power on bloomberg television radio i'm david weston there's a developing story in new york right now as a growing number of democrats are calling on the governor andrew cuomo to resign this comes after a third woman now has accused him of inappropriate behavior our colleague eric larson from bloomberg joins us now with more so eric what is going on with this investigation from the attorney general leticia james oh well it has just started uh the governor finally gave his a referral uh to letitia james's office allowing her to open the investigation new york law requires that such a referral be given to the ag before a criminal investigation of this or an investigation of this nature can uh be open so she finally has that it's very early she has to hire an outside law firm to do the uh to carry out the investigation and report to her on it that was part of an agreement with cuomo so they're still in the early stages of identifying a law firm there's really no idea quite how long this investigation could take it's pretty early right now so the referring number of politicians in the state including some democrats i say who don't seem to be waiting for the investigation politically put aside the law politically why does there seem to be some gathering momentum really calling on the governor perhaps to step down well it seems that there's been some pent up uh sort of negative feelings you could say about cuomo here that are are coming out and and a lot of people simply believe these allegations uh they think that they're believable we now have three that have come out of very detailed allegations and uh folks are just saying that someone who would engage allegedly in this kind of behavior should not be running the state of new york um there's plenty of other people i suppose who could do the job you know you have us representative kathleen rice of new york came out yesterday she was the first democratic member of congress to call on him to resign other folks new york assemblyman ron kim came on bloomberg quick take quick take today said uh that there's a growing consensus for calling for impeachment so it's pretty serious uh situation for him and still again pretty early on and with your help we'll continue to monitor that eric that is bloomberg's eric larson on governor cuomo we're gonna make a big turn now back to washington president biden's stimulus package is before the senate now with hopes for bipartisan support waning we welcome now republican senator from alaska dan sullivan so senator thank you so much for being with us is there any change on the show david thanks is there any chance of any republicans voting for this well look i'm actually still reading it you know some of us actually do that job and review and read our staffs are digging into it's a big bill and um you know i think the the con and there's some good things in there there's no doubt about it but i think the biggest concern that we have on the republican side right now is that within the past year we have actually passed five very bipartisan covid relief bills totaling about 4 trillion dollars the last one was just in december 900 billion and one of the big problems here is in in all of those got 80 senators or more so that was the model when we were in power the problem with this has been a challenge is that unfortunately the biden administration chuck schumer have decided they're going to go purely partisan there's been no republican input on this this really breaks the mold of what we thought was a good model of bipartisan coveted relief and as you know close to two trillion dollars that is a lot of money that's almost as big as the original cares act in march so again i'm digging into it myself but these are some of the big concerns that we have these need to be bipartisan bills with input on both sides of the aisle that's what we've been doing for the last year unfortunately this breaks that model and i don't think that's a good start for the biden administration so senator i understand that but put that together with something else which is the state of the economy and particularly in alaska because i heard you on the floor of the senate speaking fairly eloquently about the difficulties up in alaska do your constituents up in alaska say we need this money senator well look there's no doubt that my economy the state of the alaska economy because of the pandemic is very challenged whether it's on the tourism sector whether it's on the energy sector so there's no doubt we can use more relief but i would say david from the perspective of alaska a lot of what's happening with regard to the government itself in terms of policies is as much if not more of a concern the tourism sector right now the cdc has been very slow in terms of its ability to provide guidance for example on cruise ships that's a huge part of the alaska tourism sector and even more concerningly we have the biden administration coming out literally on day one and targeting the energy sector in my state throughout the country and as you know in the 08 009 recession the driver of our recovery was the u.s energy sector capital formation gdp growth job growth it was driven by the energy sector the irony here is the biden administration is talking a lot about the need for coveted relief particularly as it relates to unemployment and at the same time they are targeting for destruction the very jobs that we think are critical to alaska and the u.s economy that's the jobs in the energy sector they have a plan that makes no sense constricting the production of american energy which will only lead to more imports of energy from russia venezuela and it kills american jobs great jobs by the way with no replacement so to me my biggest concern right now for the economy in alaska is government policies that are targeting the very jobs that we need during a recession so senator we do know and appreciate i think how important tourism and particularly energy are to your state of alaska president trump i'm sorry president biden bigger pardon says no this could be a job creator because as we shut down some of the fossil fuel jobs we're going to have a lot of renewable jobs is that true in alaska what about that he thinks this is a job creator not a not a destroyer look i am i'm the classic senator who believes in all of the above energy and we have all of the above energy in alaska renewables hydro wind oil gas that's what we need to focus on but you know i i spent a lot of time talking to our labor leaders the particularly the building trades the men and women in america who build things and when you talk to them they they can't believe hearing from john kerry and others about you know how these renewable jobs are a plentiful and b are going to replace them we can build on these jobs but to say that when you have a north slope oil and gas job on on alaska's north slope strong solid middle class wages that somehow that's going to be replaced by a green job they don't have answers for that and i'll tell you one more thing david which my constituents these great union members that i'm talking to they notice there's also a condescending element here what's going on you hear john kerry and even some of my colleagues in the senate talk about well we're going to help americans make better choices for their jobs they're going to have relevant jobs unfortunately they say some jobs need to be sacrificed you know the men and women who build this country who produce american energy until very recently we're celebrated as playing a key role in our economy in what makes our country strong and i think this condescension in terms of discussing better jobs in this sector when they're not better jobs to me is very problematic i wonder if there's one point of intersection you might agree or tend to agree with the biden administration on and that's conservation because i certainly think of alaskans as being very aware of the environment and of the of the land that they have and that they're entrusted with are you sympathetic to that and let me give you a specific example we have gary gensler right now testifying in his confirmation hearing to be head of the sec one of the questions is should we be requiring companies to disclose in their statements and their financials the future costs of climate of their generating greenhouse gases are you sympathetic that that sort of initiative well look nobody cares about the environment alaska more than more than alaskans i used to be in charge of the energy sector i was the commissioner of natural resources and energy we have the highest standards on environmental protection of any place not just in america in the world when you produce american energy in alaska ou are doing it with the highest standards again what the bible administration is looking at doing is restricting production in the jurisdictions like my state that have the highest standards the result you import more from places like russia that have no standards so the overall global environment in this regard actually gets degraded when you move away from american production to production overseas iran azerbaijan russia saudi arabia you name it the other issue that's also missed even with regard to greenhouse gas emissions from 2005 to 2017 the united states reduced greenhouse gas emissions by almost 15 percent more than any other major economy in the world by far china is still going through the roof in terms of emissions that happened because of the energy revolution in america so alaskans care more about our environment conservation than any other americans especially as it relates to our state but the key is and we proved it time and again in alaska you can protect the environment you can care about conservation and you can still protect american energy produce it and create the good paying jobs that we need in our country so desperately senator great to get the respect for alaska thank you so much for bringing it to us that senator dan sullivan republican of alaska a wealth tax was hotly debated during the democratic primaries and it's now being proposed in a bill introduced by three by three democrats congresswoman congressman brendan boyle of pennsylvania congresswoman pramila jayapal of washington and senator elizabeth warren of massachusetts we spoke earlier today with congresswoman jayapal and asked her what her bill was meant to accomplish we want to level the playing field because as you know we had a tax structure that really has not taxed wealth uh very much at all and so as we've seen over kovid we have had this situation where 1.3 trillion dollars in additional wealth has been given to the billionaires and yet at the same time we have people who are lining up in food banks around the country so what the wealth tax does is it's very simple that's one of the beauties of it if you are if you have 50 million dollars in net worth then you pay 2 cents on every dollar above that 50 million if you get up to a billion then we ask you to kick in another cent so you pay 3 cents that will generate 1 trillion dollars uh over the next 10 years three trillion dollars over the next 10 years and to be clear you pay it each year right as long as you have your wealth over that by a household according to household as i understand why did you propose to do it by wealth tax rather than increasing the tax rate on some of the wealthiest americans well because again what we've done in the past is we've done income taxes and so you could have for example jeff bezos has a base salary of 81 000 you could have a nurse on the front lines in delaware her average salary is 75 000 pretty similar they're going to get taxed at the same rate but as you know david we don't tax wealth in most cases until somebody passes away and then we value all the wealth and then we tax it at that point we do have the property tax which is a form of the wealth tax but again in terms of property tax it's very uh disproportionate because for working families middle income families lower income families if you have a house then that is a significant portion of your net worth for billionaires that is not the case i can promise you that jeff bezos's houses are a very tiny fraction of his overall wealth and that that points to one of the possible complexities here is the valuation each year it means the government every year would have to put values on these things and as you know so well a lot of it is in real estate or it's in partnerships it's things that don't have a normal market rate it's not like a stock that you can see what it's trading at that's right but we we do value it we value it when somebody dies so we actually know how to do that and what we've done in the bill is we've incorporated a hundred billion dollars of additional funds for the uh irs because we do know that this will take a little bit more work but i think it'll only take a bit more work the first time so once you've got the valuation then you look at that valuation again a year later it's not as complex and and so we're aware of that that's why we beefed up the irs in the bill and said yeah we know we need to have that kind of you know mechanism to value and then we also have to have money for enforcement because if you're going to put this in place then you need to be able to enforce it the income and wealth inequality united states is something that a lot of people are very concerned about including some wealthy people are concerned about the question is what we do about it but but i wonder what this might do for investment and growth if you knew today if you knew that in fact imposing this ultra millionaire's wealth tax would reduce growth somewhat but it would increase equality would you be in favor of it well i think that i'm already hearing from a lot of people i won't give their names but you know i come from the state where bill gates senior was a big proponent of uh increasing taxes on the wealthiest and i know that if you were alive today he would be a big supporter of this or i believe he would be um but i'm already hearing from people who are in the situation of saying you know what i've got way too much wealth and i feel bad about the fact that i keep amassing it so i'd like to be part of the solution and i think i i would be very willing to pay this because again remember we're talking about a hundred thousand families that is it because this wealth tax um would only hit point zero five percent of american families that means that if you're uh in the 99.95 david you wouldn't pay a cent more according to this proposal so in the normal course you'd say that it sounds like politically something very doable because there are very few people who would be affected some of those might not even be opposed to it but as a practical matter what are the politics is there really support for this particularly on both sides of the aisle here it is so supported it is unbelievably popular across the country with not just democrats not just independents but also with republicans and again it is this disparity right it is looking at these food lines across the country looking at people that are struggling to pay rent um and put food on the table and at the same time you've got 46 new billionaires created in the last year and 1.3 trillion dollars in additional wealth to the billionaires that were there before so i think there this is one of those proposals um frankly it's like the 15 minimum wage it is a very popular and populist proposal across the country you're giving a potential weapon to some republicans i'm not saying all to use the s word socialism but this is a form of socialism what do you say to that are you concerned about that possibility at all no um you know there almost every american president who has instituted any major change in the country um you know including roosevelt truman you name it every single one has been called a socialist and some of those programs like medicare and social security are the most popular programs we have today so i know that word is going to be thrown out all the time but uh this is a very fair proposal to say that if you are accumulating 50 million dollars in net worth to a to over a billion dollars in net worth then yeah you're gonna pay two cents on every dollar so that means you've still got by the way 98 cents left for whatever you want to do if you are that that ultra wealthy millionaire or billionaire but it means that you're just giving a little bit back to society so that we can get three trillion dollars over ten years and imagine what we could do with three trillion dollars we could fix our roads and bridges we could invest in rural broadband we could invest in child care we could invest in health there are so many things that we could do with that money to really level the playing field on a whole different level that was part of my interview with congresswoman pramila jayapal democrat of washington coming up we're going to discuss the outlook for u.s defense spending under president biden with douglas harned of sanford bernstein who thinks things may be looking up for the industry this is balance of power on bloomberg tv and radio [Music] [Music] this is balance of power on bloomberg television and radio i'm david weston for bloomberg first word news we go now to mark crumpton david thank you president being will announce what's being called an historic partnership in the fight against the coronavirus merck will help make johnson and johnson's new single shot vaccine that would be an unusual agreement between two fierce rivals and it could lead to a big increase in the supply of the vaccine even before the president's nearly two trillion dollar stimulus passes senate democrats are already planning for the next round ten of them have sent a letter to mr bryan urging him to make extensions of unemployment benefits automatic and to include recurring stimulus checks in his build-back better economic plan the signers include senate finance committee chairman ron wyden budget chair bernie sanders and the head of the banking committee shirt brown new york democrats are trying to figure out what to do in the wake of allegations against governor andrew cuomo state assemblyman ron kim tells bloomberg quick take lawmakers are quote building a consensus on removing the governor after three women accused him of inappropriate behavior i don't think he deserves the privilege of governing in new york state after he chose to abuse his power to not only cover up life and death information of nursing homes but now woman after woman are coming out accusing him of his abusive behavior we need to move the state forward and in order to do that i think he should step down governor cuomo issued a statement sunday saying his actions had been misinterpreted as what he described as an unwanted flirtation and that he was sorry quote to the extent anyone felt that way vernon jordan jr the civil rights movement pioneer who served as a close advisor to former president bill clinton has died jordan was also a business executive and attorney the former national urban league president was influential in american politics from his service in president lyndon johnson's civil rights conference to his position in leadership at the naacp vernon jordan was 85 years old global news 24 hours a day on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in over 120 countries i'm mark crumpton this is bloomberg and mark i have to say i knew vernon jordan i counted him as a friend and the world will not see his like again he was a towering figure in both washington and in new york during his time here he will be missed i want to turn now to defense spending every new administration raises questions about military spending and what it means for the defense industry and the demonstration is certainly no exception to that rule sanford bernstein has released a new note on defense industry stocks suggesting that the markets may be undervaluing them and we welcome now sanford bernstein senior analyst for aerospace and defense he is douglas harnett so doug thanks so much for being with us you have a compelling note out here saying we may be undervaluing it and it deals with a lot of things but let me start with the with the biden administration what we expect in terms of budgets what do we expect sure uh and thanks for having me if you look at the last year defense stocks have underperformed over the last year we thought this was a timely piece we have looked at defense and become more positive at current valuations and an aspect of that is just i think what you're getting at here is concerns that had been raised before the election that a biden administration plus democratic control of congress that those could weigh on defense stocks that part of this story we're not particularly concerned about and you can actually look at history which shows that democratic support of the defense budget is not that different than republican support of the defense budget and if you if you look at most of the indications including what uh president biden has said uh during certainly during the campaign what his new secretary of defense austin and his deputy secretary hicks have all talked about none of this indicates any significant cuts to the defense budget but not a lot of growth either kind of a stable flat budget going forward but there are nuances about it there are nuances in that we expect more spending on technology and perhaps less emphasis on force structure which is amount of equipment say number of planes vehicles ships troops etc more of a shift toward technology in this budget we know that president trump really touted the fact that he increased the defense budget you say it doesn't look good that president biden will cut it back but he won't but on the other hand he might not increase it as much president trump also was very proud of the fact that he was selling a lot of armament elsewhere remember that first trip overseas was to saudi arabia what do we think about sales overseas of defense equipment well i think that will that will continue there are some things that will be an issue and in particular offensive weapons to saudi arabia i think we can be fairly certain that those are off the table there'll be some changes to that what i would look at more here in looking at defense stocks is what's going on in the u.s and what's going on with the companies and we found historically that two two factors really can explain the performance of defense stocks for almost every year for the past 50 or 60 years and those are real growth in the defense budget u.s defense budget and second free cash flow yield spread versus the s p and we found historically that when you've got a spread that's above 300 basis points these stocks have tended to outperform and you saw that even in really down periods of the budget such as 2012-16 1990-95 so if you look at the situation today the budget appears to be flat not great not bad but the free capsule yield spread is now above 300 basis points versus the s p for the first time in more than six years and we think that's an indicator that it's a good time to look at these stocks they provide very solid stable free cash flow outlooks and as we discussed in the note they can be very interesting as a substitute for some fixed income investments in multi-asset funds for example you just pick up on that stable stream of cash that you talk about given the nature of contracting for a lot of this defense funding how far out can we look i mean how reliable is that stream of cash going forward some businesses are very very cyclical up and down this is very solid and that and that is because so much of the work they do is under long-term contracts and i would i would argue also compared to what we what we saw a long time ago 20 years ago or so i think the risk of significant issues such as huge cost overruns on fixed price contracts things like that that once upon a time really were an issue for these companies it's much smaller now because of the way contracts contracts are done i do think there's an important question here though and that's what they do with the cash so you're looking at free cash flow yields that can be up in the you know nine percent type level and i think it's important to look at how that is then how that translates basically into shareholder value because you're also seeing some acquisitions being done now and i would say a lot of those are getting mixed reviews and so i would i would want to see more come back to shareholders in the form of dividends and uh and buybacks okay doug thank you so much for being with us on your note there that's douglas harnett with samford bernstein coming up sifma president ken benson on sustainable finance sec nominee gary gensler's confirmation hearing and much more this is balance of power on bloomberg television and on radio [Music] this is balance of power on bloomberg television and radio i'm david we ton the first thing president biden did on coming to office was put the united states back into the paris climate accords and his administration certainly is addressing climate change extensively throughout the government the global financial markets association has worked with the boston consulting group to come up with a comprehensive plan for what the move away from greenhouse gas emissions would mean for the climate finance market and we welcome now the president of the gfma also by the way president of sifma is of course ken benson ken welcome it's good to have you here as i confess you i didn't read all 175 pages but i did read 25 or 30 pages of it this is quite a comprehensive report give us your top line about what you think we should take away from it sure thank you david i mean i think probably the top line issue is the report which we put together with the members of our global financial markets association group and bcg shows that in order to meet the goals of the paris accords the you're going to need to raise globally between three to five trillion dollars a year of new investment to make the transition particularly if you look at the we looked at sort of the ten big uh sectors that need to transition you think about things like steel and agriculture um across the globe so it's a big lift in terms of capital need that governments are going to need to leverage with the with the capital markets and so that's what we try to get to at the report the other thing i'd say is there are various parameters that need to be dealt with for instance there's still a need to have a common taxonomy of what is green what is brown and how does that apply across multiple jurisdictions and in addition uh things like uh disclosure issuer disclosure and again there are a bunch of different work streams in that area around the globe all well-intentioned but but we're going to need to have some consistency around around that and then there's the whole question that's really a policy maker question of how do you how do you rationalize the price of carbon because that will impact the incentive incentivizing capital uh to move into those areas let me pick up on one of those disclosure because that work stream as you called it might be going on even as we speak as gary gensler faces his confirmation hearing in washington do you expect do you want the sec to adopt rules requiring public companies to disclose the costs that they're imposing on the world from their carbon well what what we really want to see and we talk about this in the report is it is the need for a disclosure an issue or disclosure regime that's based that of where climate climate issues have a material impact uh just as you would have other material impacts in issue or disclosure today so we think that you can you know it's not something that needs to be recreating the wheel so much it's building on the disclosure regime that's in place today uh making it where it's it's based upon materiality uh that it is that is uniform uh across the industry and in addition and look i think the sec is going to move in this direction and in fact they already are i mean acting chair uh lee has already begun a review of the existing framework that the sec looked at back in 2010 but in the hearing today i haven't seen it all but what i saw look like nominee gensler uh it wants to move in that direction i think what's also important though is you have all of these different work streams uh global work streams through ngo and other organizations that are looking at this we really need to try iasb uh we really need to try and get to as common a a regime as we can around the globe that's an important point that you make in the report it's not enough for the united states whatever they do to do it by themselves it's got to be uniform around the globe given the fact that the climate issue is uniform what are the prospects of that the globe has a tendency to have a tough time coming together to agree on anything sure and i mean if you think about it you know we've got you know you know we have we have ifrs and gaap right but the uh but we have to remember particularly when you think about finance finance is global uh climate is global um investors are increasingly global and so as close as we can get to having at least a principles-based approach that can be adapted in different jurisdictions uh with common you know common set of principles common taxonomy that should make it easier so you mentioned the proper pricing of carbon is i believe the way you put it what does that look like who would price that and what would be the consequence well this is something we don't necessarily get into this as much in our report this is really a policy maker question but different jurisdictions at different prices uh have have in in their own in their own mandates have set different prices for carbon um and and again that's an area where uh really policy makers are going to have to decide do they want what sort of how do they want to do it do they want to come up with a different approach it's not as something for the industry to decide for the financial services industry at least so much as it is we think for policymakers whether it's you know uh you know different like cap and trade uh regimes that have been set up in europe or in different parts of the united states or whatever um but again you have you know different jurisdictions different markets twice carbon differently and and again you're going to need to get to a more uniform approach to that we believe so finally come back to how big the bed box is as a practical matter you said three to five trillion dollars a year needs to be invested we're very proud of the fact that there's more being invested than was before how far do we have to go can we get there because it's it's a big ask well i mean again we're talking over a 20-year basis you're right i mean that would be an eight to ten polled increase on the uh if you look at the amount of issuance today in the marketplace you know it's a it's a quarter of a quarter of a trillion dollar market in 2020 uh globally uh uh and i think again a smaller share in the us not notwithstanding the fact it's it's a growing market it's been growing at about 30 30 to 35 annual clip so that's good and increasing there's increasing investor demand i hear from uh you know our retail members that they're hearing from their clients that want to invest in this so there's a lot of work that needs to be done not just in terms of incentivizing capital but also coming up with the rules and the disclosures around it so it is something that that we think there's demand for um uh but it's got a lot of growth to go okay ken it's always great to talk about it's a fascinating report i really recommend it for everyone that's sifma president and ceo ken benson coming up bindiya vakil she is ceo of rizalink on the factors that caused the semiconductor shortage and the bite administration's efforts to fix that problem this is balance of power on bloomberg television and radio [Music] this is balance of power on bloomberg television and radio i'm david weston the chip shortage has reached a crisis level with the byte administration intervening to address what's gone wrong with the supply chain and how it might be fixed welcome now an expert in that supply chain bindiya vaquille is ceo of resilinc the leading provider of supply chain mapping services so bending thank you so much for being with us it's great to have an expert in this subject i must say i sort of woke up one day and felt like i discovered there's this huge shortage and in part because the auto manufacturer manufacturer's saying it's really going to cost us money we can't manufacture cars how did we get here yeah we just wrote about this in the harvard business review a couple of days ago described it as a ticking time bomb you know this has been building since last year and now we are looking at an extremely constrained environment it started with two big factory fires at japanese semiconductor plants one in july one in october then there were some labor strikes at trip making facilities in europe and then you combine that with the upheaval from covid we had fires in california record hurricane season winter storms the container issues that we have experienced container shortages and then we saw boeing 777 grounding which ground which affects air shipment capacity and just last week we heard that in taiwan there is a water shortage that is creating constrained water supplies which are very essential for way for fabrication assembly operations so it's a very interesting situation well and is it just a fluke i mean or were there fundamental underlying weaknesses in the supply chain because what you just described sounds like who could have predicted all those things would come together at one po time um the world of supply chain risk i have to say it is a constant thing there are in a given year resolute monitors over 300 factory fires alone add to that supply chain um risks due to hurricanes earthquakes labor strikes transportation issues and what you have is a situation in supply chain where normal is is disrupted now we have the blind administration saying we're going to get our arms around this we're going to start with information making sure we know what's going on something i think you may have some insight into in resolink is that the right first step absolutely in fact i would say the direction that the government is going with supply chain right now they first most critical they have called supply chain resilience a matter of national security this is the first thing that they needed to do and they have finally done it um understanding the supply chain landscape who the critical players are what are the global sites and regions that are critical to the supply chain this is the first step in helping us make informed decisions about what are those sources of constrained supply that we need to address where we need to hold back up supplies where we need to hold extra inventory and what it is that we need to do to avoid the similar problems that we experienced in ppe shortages last year that brought the healthcare industry to their knees so it's really critical and and mapping supply chains and understanding those global dependencies is the first step have we been spending too little on our supply chain because as i listen to you and as you talk about increased inventories increased capacity that sounds like money that we in fact we've been running it too tight a tolerance absolutely the first thing we did in the last 20 years is we went um overseas and globalized not the wrong thing to do you not only globalize your supply chain to take advantage of lower cost supplies you take advantage of emerging markets and the demand there as well but the problem is that we have a globally stretched supply chain that also embraced lean in a big way and just in time so we now stretch the supply chain and took all the buffer out and we failed to simultaneously provide any protection for all the things that as i mentioned constantly go wrong and for far too long supply chain risk has been a nice to have and i think that we're seeing firsthand what happens when those types of all things go that can go wrong have now gone wrong and this is what we are dealing with you mentioned globalization there are some people saying we need to invest and that includes perhaps the government helping to invest in more capacity on shore in the united states is that right aren't you in the united states i don't think so because again as i said um we have to ultimately everything we do has to be economically viable we not only have supply chains uh globally to take advantage of lower costs but also emerging markets and companies look for growth at the end of the day we are motivated by the profit motive what we need is to have supply chains that are that have a backup strategy a backup now thirty percent i will say thirty percent of suppliers have sites in the high tech industry where some amount of uh capacity can be brought up why is that not sixty percent seventy percent because then we can have a global supply chain and take advantage of the lower cost and be more resilient so coming into something that's near and dear to my heart what happened to the auto industry because i interviewed mary barrow just a couple weeks ago and they're projecting next year they're going to leave a lot of money on the table because they will have a shortage of chips why did the auto industry particularly get caught out here you know automakers need to recognize your supply chains now resemble a high-tech electronic product supply chain in that sector we have major players that have long-standing relationships with those suppliers and the high-tech industry has led the world in developing and embracing to a great degree some of the best in class supply chain practices some companies like ibm western digital micron they've been down the risk management journey for five six seven years now and others are there that that manage these suppliers very closely the automotive companies and others that use semiconductor devices they do not have the same level of capability and now they are competing not only with their competitors they're competing with these new players for inventory and capacity and they are formidable competitors i will say because they not only know where their parts come from they not only monitor their direct suppliers but they are supplier suppliers too okay thank you very much it's really fascinating it's great to have a true expert on it that's been dia vaqil she's the ceo of resolink they map actually supply chains around the world for some of the leading companies in the united states coming up balance of power will continue on bloomberg radio in our second hour we're going to talk to neil bradley executive vice president of the u.s chamber of commerce about that 15 minimum wage the u.s chamber of commerce has its point of view on whether it makes sense or not this is balance of power on 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