Market Pullback and Alan Greenspan's Legacy

Summary

Bloomberg Surveillance Podcast Summary

Episode: Market Pullback and Alan Greenspan's Legacy
Date: June 23, 2026
Hosts: Tom Keene, Paul Sweeney
Special Guests: Phil Camporeale (JP Morgan), Ellen Frazier (Baringa Partners), Gary Gensler (Former SEC Chair), William Dudley (Former NY Fed President)

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Overview

In this episode, Bloomberg Surveillance examines the recent market pullback, the resilience of the U.S. economy, shifting inflation dynamics, and the evolving regulatory and financial landscape. Central to the discussion is a deep dive into the legacy of former Federal Reserve Chairman Alan Greenspan, exploring his impact on financial markets and regulatory frameworks. The episode also touches upon the current state of energy markets, mega IPO activity, and the transformative role of artificial intelligence (AI) in the economy.

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Key Segments and Insights

1. JP Morgan’s Mid-Year Review: Market Trends and Asset Allocation

Guest: Phil Camporeale, Chief Investment Strategist, JP Morgan Wealth Management
[01:55 – 08:33]

• Debate within JP Morgan:

  • The most debated topic in JP Morgan's mid-year review is the Federal Reserve's stance over the next 6–12 months, with internal splits over whether the Fed will hold rates or if sticky inflation will force further hikes.
  • “It had to be the Federal Reserve over the next six to twelve months...there’s still a camp that believes this inflation could be a little bit stickier, that would have to force them to move…But I will say…the 10 year treasury rate today right now is lower than where they came out last Wednesday when they were supposedly hawkish.” — Phil Camporeale [02:18]

• Peak Rates and Inflation:

  • JP Morgan believes the economy has seen "peak rates, peak inflation," driven by declines in oil and gas prices and a resilient U.S. consumer.
  • “If you can get the US Consumer right, you can get all of your asset allocation.” — Phil Camporeale [03:34]

• Sector Rotation and Financials:

  • Financials, despite a negative year-to-date, show potential due to inflection in earnings, attractive buybacks/dividends, and expected loan growth driven by consumer strength.
  • “That’s the relative value opportunity, Tom, that we’re looking for.” — Phil Camporeale [05:42]

• Fixed Income Considerations:

  • The 10-year Treasury is expected to hover around 4.5–4.6% at year-end; with low yields on cash and savings, investors are encouraged to move beyond cash into short-duration credit.
  • “You could throw a dart at any asset class this year and beat 52 basis points.” — Phil Camporeale [06:27]

• Earnings and Valuation:

  • Despite fears every earnings season, the S&P 500 delivers strong results, with the P/E ratio lower today than at the year's start, supporting a bullish outlook.
  • “Kind of the opposite of a bubble…earnings have completely dominated the total return…It’s a pretty nice fundamental story combined with the valuation.” — Phil Camporeale [07:52]

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2. Energy Markets: Petroleum Prices and Infrastructure Recovery

Guest: Ellen Frazier, Partner, Baringa Partners
[11:13 – 14:18]

• Return to Normal in Petroleum Markets:

  • The hope is for a regime shift from elevated prices back to normalcy, but ongoing geopolitical risks and infrastructure damage complicate this.
  • “Let’s be real about it. There’s quite a rocky road ahead…But trending in the right direction is the overall summary.” — Ellen Frazier [11:30]

• Infrastructure Damage and Rebuilding Capacity:

  • Early conflict caused significant damage to key oil and gas infrastructure, with some sites requiring years to restore; however, the region is considered resourceful and incentivized to rebuild rapidly.
  • “They have significant assets behind them and significant incentives to get that oil back on the water…they will get it done, at quite an interesting pace.” — Ellen Frazier [13:38]

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3. Alan Greenspan’s Legacy and Lessons for Central Banking

Guests: Gary Gensler (Former SEC Chair), William Dudley (Former NY Fed President)
[17:05 – 41:32]

Gary Gensler on Greenspan and Market Structure

[17:05 – 29:50]

• Collaboration and Critique:

  • Greenspan was a “dedicated economist” and public servant, deeply knowledgeable in markets but too trusting of market self-correction, which contributed to the 2008 financial crisis.
  • “He had too much of a trust…in them to right themselves when there were imbalances and there were big imbalances.” — Gary Gensler [19:43]

• Mega IPOs (SpaceX, AI firms):

  • The current wave of "mega IPOs" and massive AI investments signals both market enthusiasm and potential risks—echoes of Greenspan’s 1990s era are evident.
  • “Overall equity markets…are funding this big burst of infrastructure build and AI – $750 billion this year, up threefold in just two years. But…there’s an equal and better chance that six months from now we look back and we say…you see a downward pressure on not just SpaceX, but the whole market.” — Gary Gensler [21:25]

• Valuation Inflation in AI:

  • AI is seen as the most transformative technology since the internet, with the financial sector possibly overextending in infrastructure build, risking a historical “reckoning.”
  • “We get an over-enthusiastic financial market support and then at some point we build so much infrastructure we have a reckoning.” — Gary Gensler [23:10]

• Regulatory Framework for AI:

  • Emphasizes the need for “responsible AI,” promoting public goods, privacy, fairness, and resisting the temptation to let competition trump all regulation.
  • “When algorithms are making decisions on our behalf…who gets health care, who gets a job…that it’s important that they are accurate.” — Gary Gensler [27:45]

• On Bitcoin and Sentiment Trading:

  • Cautions retail investors to be wary of trading on sentiment rather than fundamentals, comparing crypto to meme stocks.
  • “You have to be very careful that you’re not trading just on sentiment.” — Gary Gensler [25:12]

• IPO Structure and Lockups:

  • Notes how changes in index inclusion (notably the NASDAQ 100) and venture capital lockups can drive volatility and selling pressure post-IPO.
  • “There’s going to be a lot of selling pressure, too, as these lockups come off.” — Gary Gensler [26:36]

Dudley on Greenspan & Current Fed Regime

[33:18 – 41:32]

• Greenspan’s Legacy:

  • Celebrated for his data-driven approach, ability to update forecasts, and political acumen; his major flaw was underestimating the importance of financial regulation.
  • “He was going from the data to the decision making rather than from the model…That’s why sometimes, when the world changed, he got it right before anyone else did.” — William Dudley [34:12]

• Comparison with Today’s Fed:

  • Today’s regulatory regime is much stronger, though there's ongoing pressure to deregulate. Dudley warns not to “throw the baby out with the bathwater.”
  • “We have a much more robust regulatory regime…I think means that the financial system fundamentally is stronger than it was back then.” — William Dudley [35:34]

• Fed Communication and Transparency:

  • New Chairman Kevin Warsh’s move to scrap “forward guidance” is seen as risky if transparency about the Fed’s reaction function is also lost.
  • “The Federal Reserve needs to set monetary policy, not financial markets…transparency…is very helpful.” — William Dudley [37:18]

• Disinflation Narrative and Policy Outlook:

  • Expect disinflation in the near term due to falling oil and gas prices, but underlying price pressures (chip prices, strong labor market) remain.
  • Questions whether monetary policy is genuinely restrictive, as unemployment remains low even after years of steady policy.
  • “If monetary policy isn’t restrictive, then why do you need to cut rates?” — William Dudley [39:54]

• Labor Market as a Key Indicator:

  • Labor data remains the most important variable for assessing further policy action.
  • “If the economy is strong enough to keep payrolls growing…that’s going to continue to push the Fed…to tighten monetary policy.” — William Dudley [40:44]

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Notable Quotes and Moments

• Phil Camporeale on earnings season:

  • “Nine days before the end of every single quarter, everybody has a Bart Simpson cow about earnings…Omg, we’re all going to die.” [07:28]

• Ellen Frazier, on resilience and rapid rebuilding in the Middle East:

  • “They will get it done, you know, at quite an interesting pace.” [13:38]

• Gary Gensler, on Greenspan’s big flaw:

  • “He had too much of a trust…in them to right themselves when there were imbalances and there were big imbalances.” [19:43]

• William Dudley, on regulatory lessons:

  • “I think the only really blind spot was really [Greenspan’s] views about financial stability and regulation…cleaning up after the fact is not always the right approach.” [34:12]

• Gary Gensler, on AI and financial markets:

  • “We get an over-enthusiastic financial market support and then at some point we build so much infrastructure we have a reckoning.” [23:10]

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Timestamps for Key Segments

• JP Morgan market, inflation, and asset allocation: 01:55–08:33
• Petroleum market and Middle East energy recovery: 11:13–14:18
• Gary Gensler on Alan Greenspan, market cycles, and AI: 17:05–29:50
• William Dudley on Greenspan’s legacy and today’s Fed: 33:18–41:32

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Final Thoughts

This episode provides valuable, data-driven insight for investors and economists seeking to understand market dynamics post-peak inflation, the future role of AI, and what can be learned from Alan Greenspan’s tenure for both central banking and regulatory strategy. The discussions are rich with market anecdotes, macroeconomic detail, and historical perspective, making it an essential listen (or read) for those invested in current and future U.S. financial trends.

Transcript

[Tom Keene]

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[Tom Keene]

Joining us right now Phil with JP Morgan as well. Your mid year review. You got to be coming out with 50, 60, 70 pages. What's the paragraph that you most debated about? You get 20 people in a room. What was that single paragraph on page 32 where there was JP Morgan collegial debate?

[Phil Camporeale]

It had to be the Federal Reserve over the next six to 12 months. I mean there's still a camp for us that believe that it's a Federal Reserve that's going to be on hold. And then there's still a camp that believes that this inflation could be a little bit stickier, that would have to force them to move and that has asset allocation implications. Tom But I will say there's been so much headline around how much Is their price to move? Nine of the 18 last week believed that they should be moving rates higher. I keep going back though to the fact that this market via the ten year note, which I think is the most important rate on the whole yield curve, has given the Federal Reserve a vote of confidence in terms of them achieving their price stability mandate. The 10 year treasury rate today right now is lower than where they came out on last Wednesday when they were supposedly hawkish. Now they moved the two year note up for sure. But again, I think the 10 year note is the most important rate on the curve. And then the volatility of that rate, the move index is back to where we were before Iran. And if you think about capital market activity, confidence, even the housing market, low volatility on the ten year note, I think is a really good backdrop for taking risk.

[Paul Sweeney]

Bulls out there will suggest that we've seen peak rates, peak inflation.

[Phil Camporeale]

Yes.

[Paul Sweeney]

Are you in that camp?

[Phil Camporeale]

We are. So we believe primarily from the fact that we sit here today on June 23rd and oil prices are around $75 and they got as high as 100. Gas prices were up at $4.50. They're now down at about $3.90. So that move alone, Paul, leads us to believe that we saw a peak. Now, could there be some stickiness in service sector inflation? Sure. I mean, that's why the Federal Reserve easing policy like they thought they were three months ago. But I think that's okay. Service sector inflation is okay if it's emblematic of a resilient consumer. And Paul, as you know, the US consumer is the most important thing to get. Right. If you can get the US Consumer right, you can get all of your asset allocation.

[Paul Sweeney]

Right. Just filled up the Vespa over the weekend. $3.87 for both gallons. Two gallons. That's going to take me for the rest of the summer.

[Gary Gensler]

Exactly.

[Paul Sweeney]

So what are we doing here, Phil, as to maybe kind of asset allocation here as we think back, you know, the back half of the year here?

[Phil Camporeale]

Yeah. So, Paul, we still believe in the trade, irrespective of what's happening in places like Korea overnight. I keep going back to that stat that there's a 30% increase in the supply for semiconductor chips and a 70% increase in the demand. Right. That's economics one, that those earnings we think are sustainable. But at the same time, one of the things that's becoming front and center is a sector that's actually negative year to date, that little sector called financials. Okay, so financials for US Three things really point us that way in terms of the asset allocation and the rotation. The first, inflection in earnings. Second is a buyback and a dividend story that looks really unique. And then the third goes back to the consumer as I just mentioned, loan growth. And if we're putting geopolitics in the rearview mirror, okay, that's one of the assumptions we have to make here. That then gives, you know, that loan growth story.

[Tom Keene]

This is a Galen Greenspan 1970s. How is loan growth?

[Phil Camporeale]

How is loan growth? Yeah, so in terms of what the

[Tom Keene]

growth, the overall economy. I mean it's such an old school thing to say is there demand for loans?

[Phil Camporeale]

Yeah, so that we think that there is going to be incremental demand for loans because the US consumer stays afloat. That's, that's what it comes down to. So if they're demanding that. And again this goes Back to the 10 year note. This goes back to the volatility of rates, capital markets activity happens when people aren't nervous about moves higher in rates. So Tom, if we're of the view, peak rates, peak inflation in the second quarter and that means you can see some incremental loan growth into the back half of the year in a sector that again is negative year to date. So that's the relative value opportunity, Tom, that we're looking for.

[Paul Sweeney]

What are we doing in the fixed income market here? I can sit in a two year and get four spot two on a two year Treasury. I mean do I take credit risk above and beyond that?

[Phil Camporeale]

Yeah, so that's a really good question. We think that the 10 year note probably settles at the end of the year around 4.5 to 4.6%. So basically where we are today, the real problem for me is people believing that they're getting the risk free rate, the federal funds rate in their checking accounts, savings accounts and money market funds. Paul, the average yield on checking, savings and money markets in this country is 52 basis points. Right, 52 basis points. You could throw a dart at any asset class this year and beat 52 basis points. So within fixed income, again, if we, if we saw peak rates, we saw peak inflation in the second quarter extending out of cash into anything. You mentioned the two year note. Okay, even, even, even short duration credit makes sense.

[Tom Keene]

I'm looking at Cathay Pacific just out folks. This is the giant Hong Kong. I had a huge affiliation with them years ago when I used to go there all the time. Paul, Cathay Pacific to cut fuel surcharges for flights. July, really?

[Paul Sweeney]

Okay.

[Tom Keene]

I mean that's disinflation. The micro data where this keeps going. And to me, Phil, it's a calendar item. We mentioned this with Robert Teeter. I'm sorry, nine days before the end of every single quarter, everybody has a Bart Simpson cow about earnings and revenues. It's not CFA sophisticated, but it's a calendar item. Omg, we're all going to die. That's the basic idea.

[Phil Camporeale]

Yeah. So that's, that's 100% the case. By the way, speaking of earnings, Tom, six straight quarter of double digit earnings. Yeah, it's like the opposite of you model that again that going forward we do have double digit earnings growth into 27, but six straight quarters. We're not modeling, we're not modeling that, Tom. But it's kind of the opposite of a bubble. Like if I just look at the S&P 500 P E ratio, it's lower today than where we were coming into the year. Earnings have completely dominated the total return on both the index level as well as the information technology level. So it's pretty nice fundamental story combined with the valuation. So we have to match those two things up to be bullish on the market.

[Tom Keene]

Phil Camporiel, Chief Investment Strategist, J.P. morgan Wealth Management. Stay with us. More from Bloomberg Surveillance coming up after this. When your options are limited, so are your opportunities. At cboe, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions. CBOE helps investors diversify, manage risk and stay ahead of whatever the market does next. CBOE Life is better. With options, your investments could be too. There are risks associated with CBO company products. Review the disclosures and [e-mail] USDisclaimers so there's a lot of noise about AI. But time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions.

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[Tom Keene]

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[Tom Keene]

Joining us, Ellen Frazier, a partner in energy expert Baringa Partners out of the United Kingdom. Ellen, can you just say simply, we remove the peak in petroleum prices and we have a new regime now of getting back to normal?

[Ellen Frazier]

Yeah, certainly that. That would be the hope. I think. There is so much economic and political pressure to make sure from all sides, frankly, that the strait stays open and all of the trade flows get back to Norma. Certainly the markets are pricing in an expectation that we're getting back to some level of normal. Let's be real about it. There's quite a rocky road ahead. We've seen that in the last couple of weeks. We've seen that persistently over the last few months around a deal or no deal, straight open or straight not. And it's really critical that we get back to reliable flows given where stock levels are more generally, but trending in the right direction, I think, is the overall summary.

[Paul Sweeney]

Ellen, what do we know about damage done to some of the energy infrastructure in that part of the world?

[Ellen Frazier]

Yeah, the energy infrastructure damage was quite early on in the conflict. So we saw Rasla fan taking a hit. We saw some other facilities taking a hit. Even actually the Saudi pipeline took a hit at one point as well. And that Saudi pipeline being quite important because it's one of the key routes out of the strait. Should the actual strait be closed, it's an overland pipeline into the Red Sea offers a bit of an alternative flow. Some of those areas of damage will be relatively easy to get restored and there will have been activity on that already some of them, however, and certainly, you know, the Ras Lafan timings they quoted when it first happened, three to five years to get that facility back up and running. Now every bit of pressure, economic pressure and political pressure will be on them to get that up and running more quickly. So that three to five year timeline is probably worst case scenario. But there's absolutely, absolutely no doubt there has been some structural damage and that will take time to get back to normal.

[Tom Keene]

Well, within all your knowledge founded in physics at Manchester, Alan, can you say that we underestimate their ability to rebuild and heal and frankly to do new projects as well? I mean, basically the history of these people is when they have to build something, they get it done, don't they?

[Ellen Frazier]

That's exactly right. You know, a very, very resourceful set of nations over there and frankly, they have significant assets behind them and they have significant incentives to get that oil back on the water, get the gas back on the water and all of the other products that have been impacted as well. And they can pour resource into it and they're happy to buy resource from elsewhere as well. We've seen that, you know, even just simple things like the World cup, the amount of effort that went into building the infrastructure in very short time, sometimes with some negative consequences in terms of human rights, et cetera. But you know, they will get it done, you know, at quite an interesting pace.

[Tom Keene]

Alan, thank you for the brief. Alan Frazier with us from Baringa Partners. Stay with us. More from Bloomberg Surveillance coming up after this.

[Bloomberg Host/Producer]

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[Paul Sweeney]

for the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public

[Tom Keene]

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You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Tom Keene]

We now commence a three hour interview. Gary Gensler joins us now. He's a former chairman of the securities Exchange Commission, a modest tenure of duty at Goldman Sachs as well and critically long ago and far away writing legislation. Sarbanes Oxley is is well, well, well over 20 years ago. Gary, I've been dying to talk to you. I read all the wonderful comments on this life of Alan Greenspan and I get the criticism about interest rate dynamics in 20052006 and that. But I'm going to go to a guy that you have a nodding acquaintance with, one S. Johnson up at mit. I've quoted this many times folks. Simon Johnson and his magisterial 13 bankers. The SEC, not Gensler's SEC. Final rule alternative Net Capital requirements for Broker dealers that are part of consolidated supervised entities August 20, 2004 Gary Gensler we can criticize Chairman Greenspan, but he had a lot of help in screwing us up into the financial crisis, didn't he?

[Gary Gensler]

Well, there is a broad miss I don't know how else to say it. Policymakers across the spectrum. And the American public paid the price we exported, by the way, that crisis around the globe. But in terms of Alan himself, I worked with them closely in the late 1990s, actually met Alan in the 1980s at a wonderful dinner at Larry and Billy Tisch's house in the mid-1908. And Alan was a dedicated economist, a dedicated public servant. And look, Tom, none of us get everything right. And yes, in those key years going into that crisis, there was too much leverage being built up in the housing market, too much leverage being built up in the financial markets.

[Tom Keene]

One final question and Chairman Greenspan, just as Paul and I feel the news flow right now, Gary Gensler is just so important. He was, in my estimate, a market economist. I love what Greg Yip said, more accountant than theorist. Do we need more central bankers steeped in trucking data in Nebraska? I mean, do we need a more of a tinge of Alan Greenspan in our future economist types?

[Gary Gensler]

Well, I'll tell you the other thing about Alan. Having worked closely with him for three or four years, maybe not as closely as others, he also was really steeped in the financial market. So there's all sorts of different types of economists. And we've had leaders of the Federal Reserve that were lawyers, We've had leaders of the Federal Reserve that have come from all sorts of places. William McChesney Martin, famously from the 1950s and 60s had run the New York Stock Exchange. Alan understood markets. He as a young guy used to trade futures in the old Chicago mercantile type of futures markets. And I remember conversations with Alan about futures in the 1990s. And then when I took the role at the Commodity Futures Trading Commission, Alan and I would sometimes get on the phone and he said, well, this is how futures markets really work and this is how energy markets and he begin to the backwardization of the markets. That was remarkable about Alan. I think he had a sense of financial markets. He had too much of a trust though in them to right themselves when they were were imbalances and there were big imbalances. He navigated during the Internet enthusiasm, but he didn't quite navigate that on the housing markets.

[Tom Keene]

Paul Sweeney, you get lucky. You have Gary Gensler on in moments to go across the Bloomberg is a five tranche space X benchmark debt offering. Perfect timing.

[Paul Sweeney]

Gary, we're at a time here in the markets here where we're getting just these mega IPOs, SpaceX, they went public and we've got anthropic and OpenAI. Does that send a signal to you and to others about where we are in this market cycle?

[Gary Gensler]

Well, I think so. You use the word signal, I use the word tell. Simon Johnson, who you mentioned earlier. He and I do this podcast and we just put one out on the mega IPOs just this morning on power and consequences. And I think the overall equity markets, like Alan Greenspan's 1990s Equity Markets is funding this big burst of infrastructure build and AI $750 billion this year, up threefold in just two years. And to scale that that's about 2 1/2% of our gross domestic product. And so then you have like space that go public and maybe anthropic and OpenAI, we'll see. I think that's somewhat of a tell. Google raising 85 billion and the markets have to digest this. And then there's valuation questions at 100, 140 times revenues without earnings. So this will all sort out. But it also might be that six months from now we look back, it was fine, but there's an equal and better chance that six months from now we look back and we say as all those venture capitalists and sovereign wealth funds start selling those shares, that you see a downward pressure on not just SpaceX but the whole market.

[Paul Sweeney]

You're up there at MIT, Gary, and as I understand there's some pretty good engineers and computer geeks up there as well. What is kind of your understanding? What's the understanding up there at mit? Just about AI today? Because initially we in the marketplace we just said let's just buy the chips. But there's more to it than that. Market seems to be trying to discern some winners and losers. How do you guys think about that?

[Gary Gensler]

Look, there's thousands of remarkable research scientists and faculty here, so I can speak for just maybe myself. And I think AI is the most transformative technology of our times. But we've had this before. If you go back over the last 200 years, from canals to the Internet to this, and what happens, and Ray Dalio talks about this too, we get an over enthusiastic financial market support and then at some point we build so much infrastructure we have a reckoning. And I think that's what you learn from history, is that we tend to have reckonings. Now, is it a calamitous reckoning like with railroads in the 1870s where we had disastrous recessions? Is there reckoning like after the 1920s we had a big boom on electrification, mostly in utilities, or is it like the Internet where you have a modest reckoning, still a recession, and that's so AI is transformative. One last thing, Paul. I think of it a little bit like a parlay bat. You know those prediction markets, you have to have two things. You have to have AI hyperscalers and OpenAI be able to build the revenues. Right now, they don't have the revenues. And two, you need to build productivity in the economy enough for the capital markets to overlook all the disruption, all the companies that are going to be disrupting value with a success.

[Tom Keene]

That's why we continue with Gary Gensler, the former chairman of the securities Exchange Commission. His commitment to Sloan, where he's won a couple like student trophies.

[Paul Sweeney]

Is that right?

[Tom Keene]

I didn't fall asleep in his class.

[Gary Gensler]

Trophy does a wonderful time. You're too kind.

[Tom Keene]

He does a wonderful podcast with Simon Johnson. I want to go. Two questions are very quickly. A lot of people went retail on bitcoin and they enjoyed buying at 100 or 110. What do you say to the retail crew that have losses in bitcoin?

[Gary Gensler]

Look, markets both trade on sentiment and fundamentals. And the challenge for those purchasers are. Is what are the fundamentals? We were just talking about that, as with Space X, but there's a real business there. I mean, Elon Musk has built a real business. It's just a question of where do you value it here? The ebb and flow of any purchaser of Bitcoin has to think, all right, what are the real use cases? And particularly to be even more careful with the rest of that asset class crypto. It's like meme stocks. You have to be very careful that you're not trading just on sentiment.

[Tom Keene]

I'll refrain from editorializing here for Tom Keene. I've got a chart from Jeff Jacobson. Thank you, zerohedge, for this, Gary Gensler. To me, it's manipulated. They do an IPO, which is 5% of the Space X float. They tranch it out August 11th, 21st, September 10th, September 25th, they get 50% of the stock out. October 10th, they finally get out to 60% of the stock out December 9th. Is it just a manipulation of folding the trend, the stock into the public in a way that keeps the fervor up? It doesn't seem like the old days where a company went public.

[Gary Gensler]

Well, so here's the other thing. NASDAQ made an accommodation in how they do their index, the NASDAQ 100. And once there's 30% of that stock outstanding, which might happen as soon as mid August after the earnings release. Once that happens, the entire free float is counted into the indexes, which put out Elon's 42%, 58% might fold into the indexes, and then there's a buy. But here's the other side. I caught the great rebalancing. All those venture capitalists and sovereign wealth funds, they're going to want to take risk off the page. I mean, Tom, they're not going to want to just leave their profits in and say, let's go for more. They got to take, you know, a third, a half, maybe three quarters of the risk off the page. And so there's going to be a lot of selling pressure, too, as these lockups come off.

[Paul Sweeney]

Gary, as we think about the continued rollout of AI across the economy, what do you think the regulatory framework should be going forward?

[Gary Gensler]

Look, I think with any great technology, society adapts and says, listen, there's public goods and we have to promote them. We call it responsible AI. I started doing work on this 7 years ago and tried to move the ball on that, even at the securities and Exchange Commission. I think the most it's happening is at the States about protecting people against bias, protecting people's privacy, of course, the accuracy of it. But when the algorithms are making decisions on our behalf, who gets health care, who gets a job, who gets credit, that it's important that they are accurate. And I think that right now this current president is more into, let's just support a competition with China. Let's, you know, as they say, just take off the regulatory guardrails. And yet I think society is reacting and starting to say, what about my kids? What about addiction? What about the use of this? What about my lost job potential? Maybe. And so it'll be a very interesting next several years, years. In terms of the politics of all

[Tom Keene]

this, Paul, what's it like working with Simon Johnson? I mean, I've known him for years, we're quite close, etc. But I'm not in the trenches where Gensler has to walk in the room with the Nobel Laureate. What's it like working?

[Gary Gensler]

He's Johnson, it's. It's fabulous. He's a very gracious colleague. He's got a fertile mind. I mean, his mind just. I mean, how did he come up with those ideas in the 1990s, working with Jerome Acemoklo and Jim Roberts Robinson that led to that Nobel Prize? But it's a remarkable collaboration. Sometimes we in the classroom have to make room for each of us. And he's a remarkable chalkboard teacher as well. This is a secret of his, but he loves being at the chalkboard and summarizing things and then bringing students into that conversation. Here at mit, Stanley Fisher has a great story.

[Tom Keene]

Gary of Samuelson was so angry at his incompetence that he ripped the chalk out of Stanley Fisher's head and threw it across the room. Some of them, some of the intensity. At the Massachusetts Institute of Technology, their next podcast will be how to Fix the Red Sox. Gary Gensler is a former chairman of the sec, and we greatly appreciate a remembrance for the life of Alan Greenspan. Stay with us. More from Bloomberg Surveillance coming up after this.

[Paul Sweeney]

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[Tom Keene]

William Dudley is a different Fed president, yes, of the New York Fed in all but far more. He built Goldman Sachs economics with Ed McKelvey and the rest of young Jana Hatzius at the time. Bill Dudley joins us this morning. To me, Bill Dudley and the phrase I've always used this chart, paragraph, chart and it was a people like Hyman and Yardeni at CJ Lawrence. It was the Bear Stearns combine with Malpassant writing. But more than anyone, it was Goldman Sachs chart, paragraph, chart. Alan Greenspan loved that. At the end of the day he was a market economist, weaned data. Do we have anyone that can be like Alan Greenspan in our future or was he a one off in the history of our economics?

[William Dudley]

Well, the future takes up a long potential time so I'm sure we'll see someone similar to Greenspan in the future. But you're right, he was a different, a type of Fed chairman because not only was he very knowledgeable about economics, but he wasn't academic. And so he was basically going from the data to the decision making rather than from the model to the decision making. And so sometimes when the world changed, he got it right before anybody else did. The best example, of course was the late 1990s when there was the Spike 3 Boom and Queenspan held off on tightening machine seat. So I think he was, you know, an exceptional, exceptional chairman in both in terms of his understanding of economics, his openness to data, his willingness to, you know, change his mind and update his, his forecast. I think the only really, you know, blind spot was really his views about financial stability and regulation. His view is always, you know, can't identify bubbles in real time. So all we can do is clean up after the fact. And obviously the great financial crisis showed that cleaning up after the fact is it's not always the right approach.

[Tom Keene]

Well, to get into your excellence at Berkeley and to say okay, it is about the regulation decision Are we making the same mistakes today that the critics say were made in 05 and 06?

[William Dudley]

I don't see the same kind of problems. Number one, in terms of, you know, the market having a lot of assumptions that will ultimately turn out to be wrong. I mean, if you look at 2006, 2007, there was all things, these, these assumptions, triple H, CDOs are safe, housing markets can never decline on a national basis. You know, you know, there were just a lot of assumptions that turned out subprime lending is not risky. All those assumptions turned out to be dramatically wrong. So I think, you know, I think there's risk to financial stability today, obviously in the non bank financial sector. But the other thing is we have a much more robust regulatory regime. I know, I know we're in the process of dismantling that to a degree. I think it's important that we don't throw the baby out with the bathwater. But, you know, we did learn a lot of good lessons from the financial crisis that I think means that the financial system fundamentally is stronger than it was back then.

[Paul Sweeney]

Putting all that together, Bill, what do you think the legacy is for Mr. Greenspan? With our little bit of hindsight here?

[William Dudley]

I think he's obviously going to go down in history as a great central banker. Also go down as someone who was really politically adept. I mean, he navigated through Democratic and Republican and administrations really well and didn't have the kind of conflicts that a lot of other central bankers have run into, like Jay Powell for example. So I think that combination of, you know, good economic intuition, reliance on data, ability to navigate through Washington really well, it's pretty special. I just wish he'd done a little bit better on the financial stability regulatory side. If he did that, he'd sort of get straight as.

[Paul Sweeney]

Let's fast forward it to today, Mr. Walsh. We did hear from Kevin Walsh last week for the first time as Chairman of the Fed. What were your takeaways?

[William Dudley]

Well, I think the big takeaway is, number one, that it's going to be a different regime under Kevin Wash. So the regime change that he promised is in the process of happening. You can just tell it right off the bat with very much shortened statement. I think the. And getting rid of Ford guidance I think is completely appropriate. But I'm pretty nervous about his view about not communicating at all about how the Fed is likely to react if the economic circumstances change. This reliant on the market's views to sort of guide policy, I think is a mistake. The Federal Reserve needs to set monetary policy, not financial markets. And if you're relying on the markets, how do you make the decision? Markets basically don't price to what they think the Fed should do. They price to what the Fed what they think the Fed will do. So if you're relying on the market, you're sort of. You have this indeterminacy about what you should do. So I think. So I think that's a mistake. I think, you know, I think transparency, I think is very helpful in terms of the conduct of monetary policy because you do want markets to think along with the Fed when, you know, strong economic report comes out. You want the markets to reprice in terms of their expectation about the monetary policy path. But to do that, well, you need good communication markets to understand the Fed's monetary policy reaction function. So I think the risk here is Kevin is throwing out the baby with the bathwater. I have no problem getting rid of Ford guy, but don't throw out information about the Fed's monetary policy reaction function at the same time. And I think he did that at the press conference because he was asked very explicitly what would cause you to want to tighten monetary policy. And he really wouldn't answer the question. I mean, obviously an obvious answer would be if inflation stays longer for higher than I expect, then we'll obviously have to tighten monetary policy. Or if the economy is stronger than we expect, then obviously I'll revise up my estimate of a neutral monetary policy policy. But he refused to answer those questions. And I think that's maybe okay for the first press conference, but I don't think that can be sustained over time.

[Tom Keene]

Dudley fired up. That's what we're saying right now. William Dudley with us, and we continue, the former president of the New York Fed. You sit there, Bill, all fired up, and everybody knows I agree with you on this. I mean, to be polite about it, the heritage of your shop called Goldman Sachs and how this is carried the this forward is a disinflation narrative is the big shock after this war with West Texas Intermediate A7149. So I could get with constructive news a69 handle here. Are we prepared, Bill Dudley, for the disinflation narrative that could come?

[William Dudley]

Well, there is going to be a disinflation narrative really next month, right away, when we get the PC and CPI data for June, because obviously oil prices and gasoline prices have come down this month. But I think that you have to look in the broader context. What's the pressure on resources more broadly? We still have A lot of price pressures, like for example chip prices have going up really rapidly. And I think that, I think the fundamental question really for the monetary policy outlook is the question is monetary policy actually restrictive today? And my own personal view is that there's not much evidence of that. I mean, we've had the monetary policy at this setting or tighter for three years, yet we're still at an unemployment rate consistent with full employment. So if monetary policy isn't restrictive, then why do you need to cut rates?

[Paul Sweeney]

What's the next data point, Bill, that you think the market should really be focusing on?

[William Dudley]

I think the labor market is really important here. I mean, I think if the economy is strong enough to keep the payrolls growing like the pace they've done over the last few months, the unemployment rates flat to declining, you know that that's going to, that's going to continue to push the Fed in the direction of thinking that they need to tighten monetary policy. I don't, you know, I'm a little uncertain about, you know, how fast monetary policy is, tightens likely to occur and, or what that probability is because it's not clear how much commitment Kevin Warsh has to actually doing it. I mean the talk is cheap, of course, everybody's in favor of price stability. But the question is what are you actually prepared to do to achieve that outcome? And I don't think we really know that at this point. I mean he couldn't, you couldn't have obviously, obviously said the opposite. I'm not in favor of price stability. So it's not really clear that there's a lot of content in that statement.

[Tom Keene]

Just valuable. Thank you so much Bill Dudley. With us, the former President New York Fed in remembrance of the life of Alan Greenspan.

[Bloomberg Host/Producer]

This is the Bloomberg Surveillance podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 7 to 10am Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

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