Bloomberg Businessweek Weekend: June 26th 2026

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1:27Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. Bloomberg Business Week Daily with Carol Masser and Tim Stenevek on Bloomberg Radio. Hi, everyone. Welcome to the weekend edition of Bloomberg Business Week. This past week, the financial world marked the loss of Federal Reserve Chairman Alan Greenspan, who passed away at the age of 100, prompting a deep reflection on his immense economic legacy and decades of market influence.

2:17His passing happened at the start of what turned out to be a volatile week for global markets. Meantime, geopolitical tension is still top of mind. As fast-moving, ever-changing U.S.-Iran negotiations aimed at cementing a final peace deal to end the war take shape. For all the important details on these developing stories, head on over to Bloomberg.com and always check out the Bloomberg Terminal. With that in mind, this hour we bring a deep look at the macro market backdrop, AI, monetary policy via the Fed, and also the legacy of the late former Fed chair, Alan Greenspan. Plus the latest global phenomenon that's driving billions of dollars into unregulated markets.

2:52From Silicon Valley and online fitness communities, the obsession with peptides has triggered a black market boon. More on that a little later. It's a great Businessweek story. All of that to come, we do begin with a comprehensive market and macroeconomic check-in. For that, we leaned on Jim Caron, who is Chief Investment Officer of Portfolio Solutions at Morgan Stanley Investment Management. We covered a lot with Jim, but of course, Carol, we had to start on the life and legacy of Alan Greenspan. He was a legend. So I, you know, if we put this in perspective, and I think it's very important to have context around this, he started his position as chair in 1987.

3:28He ended in 2006. That's a 19 year period. So for most people, that's a large chunk of their career. I started in the business in 91, 92. That's all I knew for 14 or 15 years of the starting point of my career. He was somebody that was not going to be challenged easily by other members of the Fed. It's whatever he said went, and that was it. But he also did a bunch of different things. He changed things at the Fed in the sense that he made it a lot more transparent, if I could say those words. So the way the Fed operated, And we take this for granted today that you find out on Wednesday at 2 o 'clock what the Fed's decision was, and we all go to work.

4:13Prior to Greenspan, it was Volcker. And what happened at about 4.15, 4.10 on a Thursday afternoon, you got money supply data. Based on what the money supply data was, that was the change in policy. You had to figure it out. Nobody told you if it was 25 or 50 basis points. You were guessing. And you were trying to analyze and figure out what that was. So what Greenspan started to introduce through communications and things like that was what today we take for granted was absolutely monumental and groundbreaking as far as saying, hey, by the way, we just hiked or cut 25 basis points and that's all it is.

4:52Is it too much, though? Like, would some say it's gone too far? So there's been iterations. Like, there's pre-Greenspan and then there's post-Greenspan, right? So what happened in the 19 years subsequent, from 2006, say, to 2026, what we've had now is Bernanke, Yellen, and Powell. They've all followed effectively the Greenspan mode, but they added on to it. Now, clearly, Bernanke had a very special situation in the financial crisis. He had to do enhanced communications and things of that nature. I think that what is it too much today in terms of communication? I'm going to say that it is a bit because what the Fed is trying to do is they're trying to telegraph and televise too much such that they're actually directing and dictating how the markets should think about things, as opposed to what Warsh said, which is let the markets figure it out.

5:52I mean, so the way I think about Kevin Warsh— So we're being managed? Well, I mean, you know, the way I think about Kevin Warsh, if I'm going to put him in this period of time from 1987 to 2026, I'm going to say that what Warsh is trying to do is bring us back to the period that was pre-Ben Bernanke. So it was Greenspan in the 1990s. So very similar economic setup, too. Big CapEx cycle. Big productivity boom, you know, that we're going through. And I think what Warsh is trying to do is bring us back to that period where he lets the markets assess what monetary policy ought to be, as opposed to what Greenspan did.

6:29Greenspan was the guy that really started to come in, because Volcker and everybody else just looked at money supply, M1, M2. They were, you know, very, very much, that's what they did. Greenspan was the one who started saying, you know, we should think about GDP growth and the labor market and inflation. And let's talk about inflation anchoring and all of these various things. Things that we think of today is very common. It was very uncommon at the time. So I'd say let's give Kevin Warsh an opportunity. This is his moment in history. He wants to remake the Fed, but this isn't groundbreaking what I think Warsh is trying to do.

7:01I think he's just getting back to a period that looks more like the 1990s. So it's fair to say you see a hint or more of Alan Greenspan in Kevin Warsh today. Yeah, I do. Now, whenever you compare somebody to somebody who was a legend and somebody just starting out, that's always a very, very difficult. We'll see how Warsh does. It's going to be a long journey and a long road ahead. But I think on paper, conceptually, what Kevin Warsh is trying to do is get the Fed back to a much more narrow focus. Not as narrow as the Volcker Fed, which was just money supply. But something that's a little more growth, inflation outlook, jobs market, but let's ease up on the communications.

7:48I think he's really just going back to a 1990s Greenspan model right now. And that's my perspective. And a lot of people weren't even around in the 90s in this business practicing, right? So they don't really have a good perspective on this. It wasn't chaos. It was fine. You know, you just have to get used to the new, there's a new sheriff in town. What's the downside of kind of where we are and what we expect from today's Fed? I think the downside is that there's a lot of mission creep with the Fed, right? So now we have to put this in context as well. Prior to the financial crisis, we had this much more narrow remit.

8:22This is what Greenspan kind of created. I mean, he opened it up more transparency. Then Bernanke kicked the door wide open. He had to. We had a financial crisis. We had interest policy. We had QE. We had policy rates at zero. So we had to find a way to communicate policy to the markets. I totally get it. But what happens is that once the Fed starts to have this mission creep and they start to be asked to do more and more, even from a regulatory standpoint, or even the Fed was being asked, what's your policy on climate, things like that, this is not what the Fed's job is. The Fed, and according to Kevin Warsh, should color in a very, very narrow set of lines and stick to what their job is.

9:02Under Volcker, it was money supply. But what if the economy has gotten more complicated? Climate change is an issue. Companies have to think about it, you know, because it is ultimately going to impact their bottom line. But does it affect the dual mandate, I guess some might say? Well, it might because people can't work. You can extrapolate, right? So what Warsh is basically saying is, don't ask me that question. That is an elected official's job to do. My job is Kevin Warsh, right? if you're Kevin Warsh, if you're the chair of the Fed, is to, is price stability and full employment and to really focus on the price stability component.

9:39But don't you sometimes need, okay, I'm going to get into trouble, by needing a figure that's not political. But we understand that politics has certainly crept its way, Jim, into the U.S. Central Bank. But I think there are times we look at the Fed share, even if there is a political backdrop, as being kind of a voice of reason on all of these major issues that will impact economic growth globally, will impact corporate bottom lines. Like, is it not important to have that voice of reason? It is absolutely important to have a voice of reason. But in a position like that, in the way that I believe that Warsh interprets it, is that it's a very narrow remit.

10:18And one of the things that he said is that the Fed should have absolute independence on a narrow set of items. Everything else, this is not, this is what the Fed is, and this is not what the Fed does. And I think keeping that very, very clear and setting these boundaries, right? You know, we all have to set boundaries, right? You know, this is a very important aspect of things. Is like, look, don't ask me these questions. I mean, these aren't questions that are for Kevin Warsh, right? You know, so that's what he's basically saying. And what he says ultimately is that the Fed can do its job better if it's just doing the job that it was tasked to do, but is not being asked to solve all these other problems.

10:55In the words of Jay Powell, we'll stick to our knitting is what he said over and over again. So it just reminds me of, of that sort of go-to for him. So, so what does all this mean for, for rates under a Warsh regime? So there's a pretty clear, yeah, it was in the market in a very clear way. Well, yeah. So, so I, I have a, I have a very out of consensus view on this. Okay. Okay. So I, I actually think Warsh was more dovish than what the markets thought. Okay. So I, I know what he said in, in a traditional interpretation. So markets got it wrong. I think so. Okay. So, so effectively under a Bernanke, a Yellen and a Powell, if that's your mindset and say, look, traditionally, if I think about what war said, and I use that framework, Bernanke, Yellen and Powell, then yes, he was absolutely very hawkish, right?

11:44You know, So there's no question. But I think if you read between the lines and listen to what he's really saying, what he's saying is that he's going to create these task forces in terms of like, so how do we think about the data? So if you were to ask me a week ago, two weeks ago, what is the Fed's most favored measure of inflation? I'd say core PCE. That's the Fed's favored measure of inflation. Today, I don't know what it is. I don't know what the task force is going to say that it is. Is it year over year PCE? Or is it month over month? or is it three months over? This is what the task force is going to figure out.

12:16So the market, I think, for the next six months until this task force gets this all done, is going to be very confused as to what the inputs are to the Fed's large-scale policy model, which is what they call the FERBUS model, Federal Reserve Bank of the U.S. model. And what Warsh is doing is he's not saying I'm going to change the model. What he's saying is I want to look at different inputs. I want to think about productivity differently. Kevin Warsh is a supply side economist, he's going to start to create a lot of supply side indicators to inform him as opposed to the more traditional demand side components of the economy and those indicators.

12:58This is in my career, and I've been doing this since, you know, 91 92. So about 34 years is the most monumental shift that I've seen take place. I inherited Greenspan. When I started, Greenspan was there. That's all I knew. This is a major shift. And I think that people are underestimating how monumental of a shift this is and where they're going to get it wrong is by applying what they've learned over the last 25, 30 years under a Greenspan to then say, oh, well, this is how I would interpret this. I think the rules are, the ground is shifting. Not the rules of change, but the ground is shifting.

13:33So good that it's shifting? Good that we kind of take a look at a system that we've been kind of moving along for a long time. Well, I mean, you know, changes happen, right? So Greenspan changed it, right, when he came in because he felt, and you mentioned yourself, the economy has changed, right? So when we look at labor data and labor statistics, I think the data has been challenged for the last five years. The non-farm payroll data, for me, used to be the sun rose and set on the non-farm payroll data for most of my career. Last five years, not very informative. if weekly jobless claims were a bit better.

14:06So I think there's a lot of challenge to the data. That was Jim Caron, Chief Investment Officer of Portfolio Solutions at Morgan Stanley Investment Management. Coming up, we continue with Jim Caron. We zero in on the Fed's inflation battle and whether that elusive 2 % target is still realistic. You're listening to Bloomberg Business Week. This is Bloomberg.

14:27What if data didn't sit still? What if intelligence moved with us? not buried in reports, but activated in real time, where lives are being shaped, where decisions are being made. It all starts with a question. Where is the potential? Cotality turns data into clarity, intelligence into insight, insight into action. Because when intelligence moves, we all move forward. Cotality, intelligence beyond bounds. 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.

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16:29Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. This is Bloomberg Business Week Daily with Carol Masser and Tim Stenevek on Bloomberg Radio. Welcome back to the weekend edition of Bloomberg Business Week. We continue our conversation with Jim Caron. He's chief investment officer of Portfolio Solutions over at Morgan Stanley Investment Management. We kicked off this part of our discussion by zeroing in on the central bank's inflation mandate, specifically whether that elusive 2 % inflation target is still achievable in this economic climate or if the Fed is chasing a moving target.

17:08Here's Jim Caron. In the 90s, we didn't really get to 2 % as a target either. We didn't even really have the target of 2 % at that time, which is another thing. So maybe, as I'm saying, as Kevin Warsh is kind of going back to the 90s, maybe we should think about the target. Is it more of a range or is it a specific point target? And the other thing that I think is going to be very, very different is that the way that the traditional way over the last 25 years or so that we thought about controlling inflation was to adjust the jobs market, right? So if inflation is running too hot. This is the irrational exuberance.

17:45How do you control inflation? You kill the jobs market, you create a recession, you get the unemployment rate up, you get prices back down, and you tamp down inflation. What Warsh is saying is that if you're in this period of higher productivity, then lower levels of unemployment, so an unemployment rate that, say, falls from 4.3 to 3.8 or something like that, doesn't necessarily mean that it's going to be inflationary if it's because you're getting higher productive growth. That's a very supply side view of the world. And basically saying that if industry is creating more efficiencies, that doesn't necessarily create a higher inflation rate.

18:25So a lot is changing. And, you know, it's a lot of people should really just, you know, when they speak to say, look, I'm not really sure, but what I think is as opposed to being so definitive. So I'm keeping a very open mind about all of this. Does AI completely change everything that we're talking about? Possibly. Possibly. You know, I mean, I think the issues with AI that I have in economic forecasting is that it's kind of just going to look at the survey data. It's going to look at the available data sets that are out there, unless you train it to look at specific things. I just mean from productivity perspective.

19:01Oh, yeah. That's what I mean. A hundred percent. Yeah, yeah. I see what you're saying. Yeah, not on the data analysis, but just on productivity and what it does to this economy. So in my view, it does. Right. So I think the productivity, I think you're going to get a lot. I think you can get higher levels of growth and lower levels of unemployment. But if it's more productive because AI is becoming more efficient, it's going to be a positive. So when we think about AI, people think about it in terms of profit margins. Right. And today, the way they think about it is it reduces costs. So more AI, less junior analysts, higher unemployment rate.

19:37And that's kind of the negative view of AI. I don't think it's going to work that way. I think what we're going to see is you're going to have more AI. It's going to create more demand. It's the Jevon's paradox, right? Where when something becomes cheaper, you demand more of it, which is what I think AI is going to do. You'd have more people asking critical questions of this tool called AI. and we're going to be judging the results of these things. And ultimately, if you get better, more efficient decisions and higher productivity, these are the companies that actually use this. These are the winners.

20:12There's a lot of creative destruction here. There are going to be winners and losers. Yeah, I agree. Do you think that that means that some of the companies we talk about nonstop could be a possible loser down the road? Yeah, absolutely. Right? So it's all about adapting. And it's looking at companies that can actually use this tool very efficiently. So right now, there's a big productivity gap between the way that we evaluate this. We're just in the infancy of all this stuff, right? So if you ask any individual person, hey, do you use AI? Yes, I do. Are you more productive because you use it?

20:45Yes, I am. Okay, now go ask the CEO of that company. If your employee is 30 % more productive, are your profits 30 % higher? And they're going to say, I don't think so. Not yet. Over time, that gap, that productivity gap is going to narrow relative to the individual being more productive and the company becoming more productive. Companies right now don't quite know how to use this tool efficiently or effectively. But I think the concern that a lot of people have is that, well, maybe when an employee leaves, that employee doesn't need to be replaced by headcount. and and it's the margins that where you'll see and fewer people producing the same amount of work great for shareholders not so great for those folks with jobs yeah it could be right so so my take on it is that the real the real power of a powerful user of ai is somebody who can ask really good, creative, insightful questions.

21:51So the work that, you know, whether it's software, programmers, engineers that create a lot of the software, a lot of that work is going to get displaced, I think. But the people asking the questions, the more creative questions that come in that try to solve problems, I think that doesn't go away. And then you have to judge it, you have to interpret it, and then you have to apply it. And I think that's where the job growth is actually going to be. So maybe that liberal arts education. 100%. Hey, 100%. Talking to a Bowdoin guy here and a Colby guy here. So we're getting along right now. Yes, exactly.

22:26A barter girl here. But I think about that a lot. Like learning how to ask the right question. And we keep talking about this too. It's not these basic, simple questions. It's really complicated, smart, thoughtful questions. The critical thinking that you develop when you're writing those papers late at night That now AI is writing for you, unfortunately. So the kids aren't learning how to do it. Well, think about it. I mean, like, you know, you may not be able to code, but you can ask a lot of really good questions. Right. So there you go. I mean, and if you can ask really good questions, well, don't worry about it.

22:56The machine's going to code for you. Exactly. If you have a vision for something. Right. Because you have an analytical mind. Right. You have an idea for creating something. You no longer need to find that person to code for you. You can get Claude Code or Codex from OpenAI to do it for you. So Albert Einstein said that the true measure of intelligence is imagination. It's not all these hard technicals. It's as if you're very imaginative. That's actual intelligence. I'll go with Albert Einstein on this one. Yeah. It makes us think, you know, there are people who have been writing things about, you know, you have to give your mind, your brain kind of a moment to think, right?

23:30Some space to think rather than kind of nonstop, either on a computer or on your phone and thinking things through. when it comes to the spend that we see nonstop. And we've been talking a lot about SpaceX now tapping the debt market. I don't know. How do you work that into the investment narrative? Is it smart? Do we get nervous? Well, I mean, things are going to go in cycles. There's no question about this. So there is a large spend right now. And everybody's going to ask the question, is the juice worth the squeeze, right? We're spending a lot of money. Are we going to get the profits? Or is this going to happen?

24:06I think it will. It's going to happen over time, but it has to be an enterprise solution, meaning that companies, corporate America, is who's going to build data centers in space, for example. It's going to be the need from business that says, hey, I've got a whole team of people that I just hired, and they're using this AI engine, this AI tool, creating agents nonstop, and their productivity is off the charts. We need to do more of this. it's an enterprise solution that's going to actually create the profitability. And, and I don't think we're, I don't think we're close to it yet because right now you're asking CEOs like, Oh, so is this profitable?

24:46Like, yeah, I think it is. I mean, they're not quite sure how to measure it. Well, the flip side of that is some, some CFOs pulling back on, on those tokens because they're not necessarily seeing the ROI. Uber, for example, expensive. Yeah. Yeah. Yeah. It's a cost, it's a cost component, but like anything else, you know, tokenization is, is going to get commoditized. It's going to become cheaper. Um, do you remember like, Oh, don't print in color, right? You can't print in color because of ink was more, nobody really says that anymore. Right. You know? So I think it's one of these things that it's like, you know, I think it's going to get cheaper.

25:20What did I tell you, Carol, when I started working here six years ago, I was like, I like working here cause they don't count how many pages you print in color as opposed to where I used to work. And they're like, do not print in color or do not print at all. Yeah, exactly. Just read off of it. You know, it's funny when we talk and I feel like, I mean, we don't know what the timeframe is here, do we? We really don't. We're taking it day by day, week by week, month by month in terms of just kind of watching how this, you know, evolves. But what I do find interesting, and you mentioned ROI, like our conversations have evolved a lot more to talk about that when we're talking about artificial intelligence.