Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovik. We're here every day bringing
Speaker 1: you the latest news from the world to business and finance,
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Speaker 1: Searched Bloomberg clovel News. Well, Katie, I mentioned some of
Speaker 1: the virus headlines, but we do like to do an
Speaker 1: update about where things stand. With numbers cases passed in
Speaker 1: the globe, about two hundred twenty three million deaths have
Speaker 1: exceeded six four point six million. More than five point
Speaker 1: six three billion doses of the vaccine have been administered.
Speaker 1: Let's check in now, as we do each and every week,
Speaker 1: with Dr Ian lust Beder, clinical Professor of Medicine at
Speaker 1: n y U Langnes Medical Center. He joins us on
Speaker 1: the phone from New York City. Dr LUs Beder, How
Speaker 1: are you on this Friday afternoon? Great Tim and Katie,
Speaker 1: Happy Friday. Lots of COVID news every day, it seems, yeah,
Speaker 1: And look, I think it's fair to say we're going
Speaker 1: to continue to be doing this Friday check in with
Speaker 1: you and focusing on COVID for quite a while, because
Speaker 1: it does seem like we continue to get relentless news
Speaker 1: about the spread of the delta variant. And I do
Speaker 1: wonder to what extent you think that the President's vaccine
Speaker 1: mandate that he announced yesterday for companies with more than
Speaker 1: one employees have to get vaccinated or face weekly tests,
Speaker 1: to what extent do you think that will put an
Speaker 1: end to the spread of the virus? You know, I
Speaker 1: think there are are a few challenges with the with
Speaker 1: the vaccine mandate. On On the good side, or the
Speaker 1: good news is that at least sevent of Americans have
Speaker 1: had at least one vaccine, over fifty have had two vaccines. Um,
Speaker 1: we also know that vaccines really have been very helpful
Speaker 1: in reducing severe disease, and you know, masks are certainly
Speaker 1: helpful as well, So we definitely are making some progress.
Speaker 1: The challenge really is how to get um everyone on board,
Speaker 1: and I think that's going to be very difficult. I'm
Speaker 1: not sure the vaccine mandate UM is going to be
Speaker 1: that helpful for several reasons. One is, by the time
Speaker 1: this sort of set up in a regulatory fashion and
Speaker 1: you know, potentially enforced, it's going to be a number
Speaker 1: of months down the line, and probably this delta wave
Speaker 1: that we're seeing will likely be over sometime in the
Speaker 1: next few months. UM, So you're sort of risking political
Speaker 1: capital and and uh, maybe polarization for really an unclear benefit.
Speaker 1: And I think a number of people may feel that,
Speaker 1: you know, letting um, having businesses incentivized too for the
Speaker 1: health of their own employees, maybe the best thing local
Speaker 1: districts and businesses really decide. I think the idea of
Speaker 1: vaccination is very helpful. Uh. The challenges will you alienate people?
Speaker 1: There are some studies that suggest of the about you know,
Speaker 1: twenty five to repercent of unvaccinated population, at that thirty
Speaker 1: of them say the reason they're not doing it is
Speaker 1: they don't trust the government. The other percent is concerned
Speaker 1: about side effects. So I think we need credibility. I
Speaker 1: think we need to reassure people to some degree about
Speaker 1: side effects and reassure people that there are no ulterior
Speaker 1: motives to slowly kind of chip away at that population
Speaker 1: that's been somewhat resistant. I'm not sure mandates are going
Speaker 1: to be, how effective it's going to be, and how
Speaker 1: long it will take to really get that in place.
Speaker 1: And so that's an interesting point about the holdouts that
Speaker 1: are still unvaccinated that you know, in your view, reassurance
Speaker 1: would work better. But I'm curious, you know, let's talk
Speaker 1: about carrots and sticks, because this vaccine mandate clearly it's
Speaker 1: a stick. And Tim and I were just talking about
Speaker 1: airlines imposing fines on maskless passengers. I'm curious, how, in
Speaker 1: your view, are we going to see more things like this,
Speaker 1: like penalties and fines when it comes to getting people
Speaker 1: to mask up or get vas versus uh, you know,
Speaker 1: the administration or companies actually taking a more reassuring route.
Speaker 1: You know, I think scientific data is always helpful, and
Speaker 1: believe it or not, we don't have randomized control trials.
Speaker 1: You know, we've been battling this for two years or
Speaker 1: more um and we don't really have randomized control trials
Speaker 1: about masks. And so when we talk about kids or
Speaker 1: you know, the benefits of masks and schools and so forth.
Speaker 1: We over the past two years could have done really
Speaker 1: big studies and made some determinations. So I think we're
Speaker 1: relying on data from another number of other countries, and
Speaker 1: many of them don't even require masks. But I think
Speaker 1: individual businesses can do um set guidelines for what they want,
Speaker 1: and an airline if they publish this is, you know,
Speaker 1: our requirements, you have to show your vaccine card or
Speaker 1: wear a mask during the flight. I think it's really
Speaker 1: within their right to do it. I think it would
Speaker 1: be more helpful if we had these studies already up
Speaker 1: so we can show people how effective it is. But
Speaker 1: it's certainly within the right to do it, and I
Speaker 1: think for short flights for a couple of hours, it's
Speaker 1: very reasonable to do. You know, when you're talking about
Speaker 1: people on five or six hour flights to remain master
Speaker 1: or kids, that's going to be tough to enforce in
Speaker 1: the middle of a you know, six hour flight. What
Speaker 1: about when it comes to the role that school boards
Speaker 1: and in school districts take, because we learned yesterday at
Speaker 1: Los Angeles is saying that all students twelve and older
Speaker 1: must be fully vaccinated by January ten. Uh, students need
Speaker 1: a lot of vaccines already. There are vaccine requirements at
Speaker 1: different ages, for for different schooling. I'm wondering why you
Speaker 1: make of this one, Dr LUs Better completely right, you know, Tim,
Speaker 1: We even mandate, which I disagree with, hepatitis B vaccines
Speaker 1: before you know, kids really start school. That's to reduce
Speaker 1: the incidents of potentially sexually transmitted disease. And you know
Speaker 1: these it can be twelve years before a kid or
Speaker 1: more before kids are even exposed. So I do think, um, uh,
Speaker 1: it is reasonable to require vaccines or a number of
Speaker 1: vaccines required before school. But I think if we had
Speaker 1: safety data, more safety data, and more efficacy data, people
Speaker 1: would be a lot happier to be on board with that,
Speaker 1: And I think we need to accumulate that and really
Speaker 1: reassure people. It should, over time, really reduce COVID in
Speaker 1: the schools, but I think parents would want to be
Speaker 1: reassured about it. You know again, I think a lot
Speaker 1: of COVID is going to be over before all this
Speaker 1: gets enforced over the next few months. Dr Ian LUs Beda,
Speaker 1: we unfortunately have to leave it there. Thank you so
Speaker 1: much as you do each and every week for joining
Speaker 1: us on this Friday. Dr LUs Beta is clinical professor
Speaker 1: of medicine at n y U Langnes Medical Center. He
Speaker 1: joins us on the phone from New York City. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, it is
Speaker 1: the big story of the day when it comes to
Speaker 1: tech companies and indeed Apple stock taking ahead as a
Speaker 1: result of court ordering that Apple can no longer force
Speaker 1: developers to use in app purchases. This the culmination of
Speaker 1: the Apple Epic games battle with us. Now for the
Speaker 1: latest is Mark German, technology reporter at Bloomberg News. He
Speaker 1: joins us on the phone from Los Angeles. Mark, how
Speaker 1: big of a deal is this for Apple? This is
Speaker 1: a multibillion dollar per year deals for Apple. This set
Speaker 1: up major changes to the app store will where Apple
Speaker 1: will have to allow all apps, including games, to steer
Speaker 1: or have the option to steer users to complete transactions
Speaker 1: outside of the inept purchase ecosystem, which would save developers
Speaker 1: and obviously take that out of Apple's pocket. Mark, what
Speaker 1: does that look like for a user? For somebody who
Speaker 1: has been making an app purchases. How how much of
Speaker 1: a burden is going to be put on the user
Speaker 1: to actually go somewhere else to make this payment. Is
Speaker 1: it just gonna be easier to pay Apple. So there's
Speaker 1: a big question that remains. Will Apple require developers to
Speaker 1: offer both in app purchase and allow them to also
Speaker 1: steer at the same time, So our developer is going
Speaker 1: to be allowed to steer users without offering I a P.
Speaker 1: In the past, Apple has made these concessions while silver
Speaker 1: quiring I P to give the user choice. I'd imagine
Speaker 1: that's going to be the case, and I'd imagine there's
Speaker 1: still going to be some users who are going to
Speaker 1: use I a P for the convenience. And there's also
Speaker 1: going to be some developers who are not going to
Speaker 1: build external payment systems that could cost them a few
Speaker 1: percentage points and a bunch of convenience as well. And
Speaker 1: so Mark, let's broaden this out here, because you said
Speaker 1: this is a multibillion dollar a year deal for Apple.
Speaker 1: That's a bunch of money. But what does it mean
Speaker 1: for the other tech giants out there? I mean, is
Speaker 1: this just the start of a wave of antitrust actions
Speaker 1: against some of these tech giants or what are you expecting? Yeah,
Speaker 1: I think what we want to say is here that
Speaker 1: this is probably going to impact Google's ruling. Right there
Speaker 1: is Google trotal epic going. You know, it's going to
Speaker 1: be happening across the next year into and it's going
Speaker 1: to be very important for UH, you know, the ruling
Speaker 1: and there to take something to account this Apple ruling.
Speaker 1: I'm not sure this impact Amazon or Facebook, but definitely
Speaker 1: look for the seven impact from the Facebook or the
Speaker 1: Google situation next year. One thing that is interesting to
Speaker 1: see is the way that companies that have made UH
Speaker 1: or pushed back against what Apple has been doing for years. Spotify,
Speaker 1: for example, higher by more than two percent. Netflix on
Speaker 1: a daylight today, where the broader market is lower, is
Speaker 1: higher today by more than a percentage point. What does
Speaker 1: it mean for those companies that have long complained about
Speaker 1: this what they call its hole on the app store highway?
Speaker 1: This has already been done already, right like Apple last
Speaker 1: week that it would allow Netflix and Spotify and other
Speaker 1: media apps to bypass this. So there's no news here
Speaker 1: for those developers. The stock still live in higher though
Speaker 1: I don't know why it clear really the traders aren't
Speaker 1: reading our articles. This already happened a week ago, So
Speaker 1: no difference, no difference for these companies. It's just the
Speaker 1: gaming companies that are affected because Apple exempted gaming. No, no,
Speaker 1: there's no difference. Apple already did this a week ago.
Speaker 1: There's no difference. No differences is that it's for games. Okay,
Speaker 1: that is very helpful context Hopefully up traders on the
Speaker 1: terminal click. But I do I am curious, Mark. We
Speaker 1: know that Apple is going to appeal this decision. Do
Speaker 1: they have any shot? And I mean, how far could
Speaker 1: this go? You know, I don't know. I just spoke
Speaker 1: to their general counsel who was noncommittal on appealing the decision.
Speaker 1: So it's unclear yet. They say this is a resounding victory,
Speaker 1: a giant victory, and they're very happy with the ruling.
Speaker 1: So it's unclear what they're gonna do. They probably knew
Speaker 1: they were going to have to do this anyways, that's
Speaker 1: why they did it last week. Just in the last
Speaker 1: forty five seconds we have with you, Mark, do you
Speaker 1: think it's I mean, what does your gut tell you
Speaker 1: about Apple saying this is a victory? I mean, I
Speaker 1: think they're right they were ruled to not being a novel.
Speaker 1: They were ruled to not having anti trust issues. They
Speaker 1: simply have to expand a decision they made a week
Speaker 1: ago to games. They already did it for spotifying Netflix,
Speaker 1: so there's not a lot happening here. They're also going
Speaker 1: to get about I don't know, four or five million
Speaker 1: dollars with an m from for lost revenue. It's like
Speaker 1: a tiny amount of money for the company Mark whom
Speaker 1: cooked by a new car, right, just a little bit
Speaker 1: of money. So yeah, overall it's a big one for Apple.
Speaker 1: Mark German, it's always great to chat everything Apple with you.
Speaker 1: We really appreciate you taking the time, Mark German, technology
Speaker 1: reporter for Bloomberg News. He joins us on the phone
Speaker 1: from Los Angeles. This is Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well,
Speaker 1: Poulti Group, the paint maker Sherwin Williams, and also the
Speaker 1: paint maker PPG Industries all slashing their outlooks this week
Speaker 1: as a result of higher input costs and inflationary pressures.
Speaker 1: Brooke Sutherland is Bloomberg Opinion columnist and she writes about
Speaker 1: it for bloom Opinion. Also joining us is Bloomberg Business
Speaker 1: We Get in Control Webber. He's on the access line
Speaker 1: from Brooklyn, Joel. I thought that these issues were transitory.
Speaker 1: I keep hearing about these higher prices being transitory, and
Speaker 1: I'm wondering to what extent it's going to continue, Uh,
Speaker 1: to be a challenge to these industrial companies. Depends who
Speaker 1: you're listening to, I think, um, because I think the
Speaker 1: companies themselves, Um. And this goes just beyond industrials too.
Speaker 1: I've been saying that they don't always think it's gonna
Speaker 1: be transitory. Um. But what I thought was significant about
Speaker 1: this is just how quickly things are beginning to change.
Speaker 1: And and Brooke does a great job of outlining this
Speaker 1: in our story. Um that you know what we saw
Speaker 1: a couple of months ago. It's really quickly changed and
Speaker 1: we're seeing that. Um, we'll continue to see that and earning.
Speaker 1: So so Brooke walk us through what's changed and how
Speaker 1: it's manifesting itself in the data. I mean, I think
Speaker 1: you really summed it up well. But it's just been
Speaker 1: so quick. I mean, you have to remember it was
Speaker 1: just July that we heard from a lot of these
Speaker 1: companies giving their most recent earnings updates, and things are
Speaker 1: just moving so quickly, um, you know, particularly with with
Speaker 1: some of the raw material inflations, but then also with
Speaker 1: some of these shortages that are just really getting to
Speaker 1: the point where manufacturers cannot find a way around them.
Speaker 1: But I thought one striking data point was PPG, which
Speaker 1: is a paintmaker, said that raw material inflation was running
Speaker 1: seventy million dollars higher in the third corder than what
Speaker 1: it anticipated in July. And keep in mind it was
Speaker 1: already factoring in a pretty significant headwind from rising costs
Speaker 1: in July. And so you know that really just studs
Speaker 1: underscores that business moving faster than anticipated and not getting better.
Speaker 1: And so for transitory or not, I mean, how much
Speaker 1: pricing power do these industrial companies like PPG, like Sherwan
Speaker 1: Williams actually have. I mean, are they able to pass
Speaker 1: at least some of these costs to their customers? Are
Speaker 1: they just having to eat this themselves? Now, they do
Speaker 1: have a good amount of seeing power, and I would
Speaker 1: say even more so in this current period. You're not
Speaker 1: really hearing about any pushback to price increases yet with
Speaker 1: the keyword being yet, but they are being, you know,
Speaker 1: generally able to push through pretty significant price increases to
Speaker 1: try to keep up with the rising costs. And I
Speaker 1: think that's because customers understand what's happening. I mean, all
Speaker 1: you have to do is look at the headlines and
Speaker 1: see reports everywhere about you know, various different kinds of
Speaker 1: inflation and shortages, and so customers understand. But there is
Speaker 1: a breaking point to this. So what is it that's
Speaker 1: that What is it that's driving the cost increases? Brooke?
Speaker 1: Is it? Is it any one thing more than another.
Speaker 1: We've heard so much about container shipping prices going up.
Speaker 1: We've also heard about raw material prices going up. There is,
Speaker 1: of course the cost of getting employees off the sidelines
Speaker 1: and making sure they're coming into work. And we've talked
Speaker 1: to CEO after CEO who said that they've had to
Speaker 1: raise price, raise wages as a result of that. What
Speaker 1: is it that's driving these price increases and these these
Speaker 1: higher input costs. I think it's everything that you just mentioned,
Speaker 1: And I think you know that's what makes so difficult,
Speaker 1: and that it's not just one thing, it's not one
Speaker 1: product that you can't find right now that you're having
Speaker 1: to pay up for it. It's almost everything. Um. And
Speaker 1: then you know, with logistics costs rising, labor costs rising,
Speaker 1: raw material costs rising, you're you're really starting to feel
Speaker 1: the pinch. And one comment I thought was really interesting
Speaker 1: was we did a video interview with the Union Pacific
Speaker 1: CEO with a team of Bloomberg reporters and editors, and
Speaker 1: he was talking about inflation pressures from janitorial services between
Speaker 1: their office buildings and people who mow their laws and
Speaker 1: their employee healthcare costs. This is a railroad. Those are
Speaker 1: that's not its main business. But these are major companies
Speaker 1: that employ you know, hundreds, if not thousands of people,
Speaker 1: and they rely on a lot of these ancillary services.
Speaker 1: And so there are the big ones that we talked about,
Speaker 1: raw materials, labor, logistics, but there are also these other
Speaker 1: sort of backed or inflationary pressures that these companies have
Speaker 1: to deal with, even if it's not their primary industry
Speaker 1: or business. So do you just not mow the lawn? Brook?
Speaker 1: Is that the big takeaway there? Maybe? I mean, I
Speaker 1: guess save some water, right, I don't know, maybe you
Speaker 1: can say a few pennies there, But I mean I
Speaker 1: think you know, these companies have been incredibly creative about
Speaker 1: managing supply chain pressures UM and and coming up with
Speaker 1: ways to keep costs down. I mean, I'm talking about
Speaker 1: re routing ships, but also redesigning products. UM. You know,
Speaker 1: I talked as a Honeywall supply chain chief a few
Speaker 1: weeks ago, and and they've redesigned some of their sensors
Speaker 1: to get around the semiconductor shortage. But there is only
Speaker 1: so much of that that you can do, especially when
Speaker 1: things are moving as quickly as they are right now.
Speaker 1: And I think that's the period that we're getting into,
Speaker 1: and you might really start to see these supply chain
Speaker 1: challenges and inflation and raw materials and logistics really start
Speaker 1: to take a bite out of earnings in the third quarter.
Speaker 1: So when you when you're talking to the CEOs that
Speaker 1: you talked to and and sort of attempting to understand
Speaker 1: where where things are aheaded Brook, I'm really curious, is
Speaker 1: this are they viewing this is like, you know, the
Speaker 1: new normal, which you know is going to be September
Speaker 1: and now is maybe January and if that if right?
Speaker 1: Or are they just recognizing that we're entering a new
Speaker 1: dynamic and these are really permanent changes in that that
Speaker 1: the sooner that they come to more permanent solutions, the better.
Speaker 1: I do think it's a bit of a moving target.
Speaker 1: I mean, I think people were optimistic, um, you know,
Speaker 1: in sort of the earlier part of the summer, that
Speaker 1: some of these headwinds would clear or at least not
Speaker 1: be quite as strong as what we're seeing right now
Speaker 1: in the fall, and that is obviously not the case.
Speaker 1: I mean, g E put out a statement earlier this
Speaker 1: seek talking about pressures that it's tating it's health care
Speaker 1: business from uh limited availability of workers and parts, and
Speaker 1: they don't expect you know, the operating environment to get
Speaker 1: much easier until you know, the midpoint of two and
Speaker 1: so we are talking about a pretty significant timeline here.
Speaker 1: I will say, you know, a lot of the manufacturing
Speaker 1: CEOs who have been in this business for a while,
Speaker 1: they have seen raw material inflation go up and down
Speaker 1: significantly over the course of their careers, and most of
Speaker 1: them would tell you some of those price increases are
Speaker 1: probably not going to be permanent, that there will be
Speaker 1: some actility they're um tied to you know, weather events,
Speaker 1: tied to the reopening effects on the economy. But I
Speaker 1: think what's really sticky in manufacturing is wages. Once you
Speaker 1: increase wages, it is hard to take those back down. Um.
Speaker 1: And so you know, I think that that is where
Speaker 1: they're getting a little bit nervous. I guess in terms
Speaker 1: of how this plays out over the long term. Well,
Speaker 1: I want to build on that, because that's what's fascinating
Speaker 1: to me that if we did see uh, companies really
Speaker 1: have to raise their wages, that's how inflation kind of
Speaker 1: gets built in. So, I mean, how have these companies
Speaker 1: been approaching that? I mean, have they been offering sort
Speaker 1: of one time perks. Are you actually starting to see
Speaker 1: some of these companies uh, sort of capitulate and actually
Speaker 1: boost wages. You are seeing them wages wages. I mean,
Speaker 1: I guess they will say there's a little bit of
Speaker 1: a divide between, you know, the companies that complain about
Speaker 1: labor shortages and the companies that are willing to rage wages.
Speaker 1: Excuse me, um, you know where you're not quite some
Speaker 1: of the companies that really go out of their way
Speaker 1: to make their workers like they're part of the community.
Speaker 1: They try to treat them like human beings, They pay
Speaker 1: them good wages. They're not complaining as much about labor shortageance.
Speaker 1: They're still feeling the pain here. But you know, I
Speaker 1: do think there is a little bit of that in
Speaker 1: terms of, you know, what kind of culture do you
Speaker 1: want to create? Because we also did just come out
Speaker 1: of the other side of a pandemic heater. We have
Speaker 1: e s G is a big phenomenon, and you have
Speaker 1: investors getting, you know, increasingly attuned into what do workers
Speaker 1: want um and so I think that's definitely part of
Speaker 1: the narrative here. Brooks Outherland is Bloomberg Opinion columnists. She
Speaker 1: covers industrials and more. Also joining us Bloomberg Business Week
Speaker 1: editor Joel Weber. He's on the access line from Brooklyn,
Speaker 1: and big thank you to both of you for taking
Speaker 1: the time. Check out Brooks article available at Bloomberg dot
Speaker 1: com and of course on the Bloomberg terminal. It's called
Speaker 1: the earnings Crunch is Getting Real. This is Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich
Speaker 1: from Bloomberg Radio. Well. One way that lawmakers proposed to
Speaker 1: pay for the one trillion dollar infrastructure buil the Senator
Speaker 1: approved last month is by imposing tax reporting requirements for
Speaker 1: cryptocurrency brokers. It's the way that stockbrokers report their customer
Speaker 1: sales to the I r S. It could open the
Speaker 1: way for tighter regulation of cryptocurrency, and that's something that
Speaker 1: the Biden administration is moving toward as it also pushes
Speaker 1: for tax compliance. Let's get into it with Dnnelle Dixon,
Speaker 1: CEO and executive director at Stellar Development Foundation, a nonprofit
Speaker 1: organization that uses blockchain to unlock the world's economic potential
Speaker 1: by making money more fluid, markets more open, and people
Speaker 1: more empowered. Denniel joins us on the phone from California. Adult,
Speaker 1: It's great to have you on the show. Uh, this
Speaker 1: was a very contentious part of the infrastructure bill, and
Speaker 1: I'm I'm wondering, I'm wondering what your thoughts are on it. Yeah,
Speaker 1: it certainly became so it was really fun for us
Speaker 1: to see the influence that we could have from the
Speaker 1: blockchain and crypto space. Uh, and for us just to
Speaker 1: really engage with policymakers. But in the end, I mean
Speaker 1: the languages with the languages, so it didn't change, but
Speaker 1: it was really fun to be able to engage and
Speaker 1: to to try to really create that educational opportunity I
Speaker 1: run with these policy makers and so donell this bill.
Speaker 1: I know it was roundly criticized by the crypto industry
Speaker 1: for being too broad. Can so can you walk us
Speaker 1: through exactly what was the language that got crypto advocates
Speaker 1: so upset? I mean, what was the biggest point of
Speaker 1: contention there? Yeah, so, I think it was the definition
Speaker 1: of broker. So that was defined as any person who,
Speaker 1: for consideration, is responsible for regulator regularly providing any service
Speaker 1: effectuating transfers of digital assets on behalf of another person.
Speaker 1: And so the argument and the concern was that there
Speaker 1: are many players in the space that run, for example,
Speaker 1: validators that just validate transactions on uh, working on blockchains,
Speaker 1: but they don't actually have access to any informations that
Speaker 1: traditional brokers would, and they don't act as brokers. Uh.
Speaker 1: So there was just concerned that this was very, very
Speaker 1: broad language with technology that's very new and maybe not
Speaker 1: widely understood. If you could write the regulation or write
Speaker 1: the legislation, what would you want it to say. It's
Speaker 1: a great question. I think that the regulation itself should
Speaker 1: just have exclusions in it at the very least to
Speaker 1: talk about these that they think about blockchain more itself
Speaker 1: as infrastructure, and think about these providers that are allowing
Speaker 1: and helping these transactions just to progress that they actually
Speaker 1: are excluded from the bill, for example, like validators and
Speaker 1: folks who run notes. There was language that was proposed
Speaker 1: that we were comfortable with and that we actually you
Speaker 1: know that that it didn't ultimately make it through UM,
Speaker 1: but it would really just be excluding and making clear
Speaker 1: that it's not actually trying to go after these true
Speaker 1: infrastructure providers that are just helping blockchain to operate. And
Speaker 1: so we've seen some efforts to try to change the language.
Speaker 1: Last month, there actually was an amendment that would change
Speaker 1: the reporting rules, but that was blocked by the Senate.
Speaker 1: So I'm curious, what's the pass forward from here. Well,
Speaker 1: I think that this actually created a really great opportunity
Speaker 1: for us because it showed that, first of all, there
Speaker 1: is this large constituency that policy makers are willing to
Speaker 1: engage with and listen to. And I think that the
Speaker 1: pass forward is to create those open dialogues before you
Speaker 1: get to the language of the bill. I think that
Speaker 1: it's crucial to engage with long lawmakers to discuss this,
Speaker 1: the use cases and the roles for different participants and
Speaker 1: that's bringing industry experts and policy makers together, and so
Speaker 1: that's what we're really focused on doing. Now. Which policymakers
Speaker 1: can you single out for us that that really seemed
Speaker 1: to get it well? I think that there are many.
Speaker 1: I can't single out any particular prob Like, you know,
Speaker 1: we actually had some that supportive language that we wanted
Speaker 1: to bring to the table. But most importantly, I think
Speaker 1: it's that when you actually understand how the technology operates
Speaker 1: and what we're trying to do here, I think that
Speaker 1: you know, you'll understand that the definition of broker doesn't
Speaker 1: and shouldn't cover some of these players that don't have
Speaker 1: access to that type of information and frankly have no
Speaker 1: relationships to any of the participants who are making these transactions.
Speaker 1: So I think it's really it's it's all the senators
Speaker 1: and the members of how the House that we need
Speaker 1: to really engage with, but it's also the regulatory agencies
Speaker 1: that were really focused on participating with and engaging with.
Speaker 1: I think some of them understand what the technology does,
Speaker 1: but they don't have a knowledge of what the use
Speaker 1: cases can do and what it can and the value
Speaker 1: that that can bring to their constituents. So it's a
Speaker 1: lot of work for us to do in the US,
Speaker 1: but I think it's actually really good work. And I
Speaker 1: think that, you know, once we demonstrate that excluding their
Speaker 1: own constituents from this really useful and valuable services that
Speaker 1: are offered through blockchain, they're going to want to be
Speaker 1: a part of it and there, and we're going to
Speaker 1: be able to help them to get there. And so
Speaker 1: Dannell's stepping back a little bit. It definitely feels over
Speaker 1: the past few months that regulators have started to circle crypto,
Speaker 1: whether it's the US Congress with the Infrastructure bill or
Speaker 1: just the SEC this week cracking down on coin Base
Speaker 1: and really investigating their proposed lending product. I'm curious, what
Speaker 1: do you think is on the radar next? And we
Speaker 1: have just about thirty seconds here. Well, I think that
Speaker 1: what a lot of a lot of focus right now
Speaker 1: is on the decentralized finance space, and so I think
Speaker 1: that we're going to see we just have to provide
Speaker 1: a lot more education around that. I want us to
Speaker 1: be able to demonstrate the value of this technology neutral
Speaker 1: opportunity that we have and that's made in the open
Speaker 1: and valuable to everyone. So I think we need to
Speaker 1: focus on a lot of different areas. But that's I
Speaker 1: think that the next target space. Daniel Dixon is CEO
Speaker 1: and executive director of Stellar Development Foundations. She joins us
Speaker 1: on the phone from California. Stellar Development Foundation is a
Speaker 1: nonprofit organization that uses blockchain to unlock the world's economic
Speaker 1: potential by making money more fluid, markets more open, and
Speaker 1: people more empowered. Journal now, but you let me drive?
Speaker 1: Oh no, no, no no, all right, please the vel I
Speaker 1: don't want to drive. Drive baby question. This is the
Speaker 1: Drive to the Close community. Thanks, we'll drying us down
Speaker 1: on Bloomberg Radio. Yes, indeed, it is time for the
Speaker 1: Drive to the Close. We are just about ten minutes
Speaker 1: away from the market closed on this shortened of trading week.
Speaker 1: It's Friday, September one. We are seeing red across the
Speaker 1: board right now. Stops taking into a leg lower as
Speaker 1: we do get to the end of the session. Let's
Speaker 1: get into it though with Ryan Dietrich, chief market strategist
Speaker 1: at LPL Financially, joins us on the phone from Charlotte,
Speaker 1: North Carolina. Ryan, great to have you back on the show.
Speaker 1: Really glad to have you on a daylight today where
Speaker 1: we are expecting to see a fifth day of consecutive
Speaker 1: declines on the SMP five hundred, and I'm wondering, from
Speaker 1: a technical analysis perspective, what signal that's sending you. Yeah, Tim,
Speaker 1: thanks for having me back. But you're right, guys, we're
Speaker 1: looking at again a five day losing streak. But I
Speaker 1: was just looking into it. Is it something to really
Speaker 1: be worried about? Now here's what you need to know.
Speaker 1: The last five days the SMPS down about one point
Speaker 1: four percent. All right, that's the smallest five day losing
Speaker 1: streaks since one way back in um October of And
Speaker 1: you think about it like this. Last year we saw
Speaker 1: thirty five single days with the worst return than we've
Speaker 1: seen the previous five days. So put a bow on this. Yes,
Speaker 1: down five days in a row is gonna be the headlines.
Speaker 1: But to us it looks like a normal consolidation. That
Speaker 1: it is September, the worst months of the year. You know,
Speaker 1: there's there's some different factors there, but after more four
Speaker 1: percent rally off those lows since March, maybe just some
Speaker 1: seasonal weakness is happening. And again it's relatively contained. We're
Speaker 1: not overly right now. So this guy is not falling.
Speaker 1: Keep things into perspective. Is that what you're saying. Yeah,
Speaker 1: we've been trying to say that for a while. I think,
Speaker 1: you know, I think there's always scary things to look at.
Speaker 1: I mean, and trust me, the worries are out there.
Speaker 1: You've got the delta concerns, the recent obviously economic data
Speaker 1: is not doing that great. What's going on with Washington?
Speaker 1: What's going on to said, we understand a lot of
Speaker 1: the concerns, um, but the bottom line is just look
Speaker 1: at those earning season. We just had record earning season. Um.
Speaker 1: You know, earnings are up twenty six above the peak
Speaker 1: back in en So yes, stocks are close to all
Speaker 1: time highs. Earnings are also at all time highs and
Speaker 1: growing still really really nicely. So there's worries, don't get
Speaker 1: us wrong, but you know, this bull market looks alive
Speaker 1: and well, but it's in it with you feel like
Speaker 1: a broken record saying this market is one higher because
Speaker 1: the economy is still strong. Um, we still feel that way,
Speaker 1: and we still think there's time to go with this
Speaker 1: bull market. So Ryan, we're coming off of a record
Speaker 1: earning season. We also saw record p p I this morning.
Speaker 1: I mean, if you look at the Producer Price Index
Speaker 1: for the prior month, it was way above forecasts out
Speaker 1: a series high. How are you thinking about inflation here?
Speaker 1: How does that factor in to what you're saying this
Speaker 1: still strong economy. Yeah, Katie, I mean that's a great
Speaker 1: question because clearly that's the headline. If you look at
Speaker 1: the core pp I was a little bit lower, but
Speaker 1: still things are more expensive. I mean it's five dollars
Speaker 1: get a gallon of milk, at least three dollars to
Speaker 1: fill you know, per per gallon to fill up your car.
Speaker 1: So people are feeling that there's no doubt about it.
Speaker 1: But when we look at what's the market saying, is
Speaker 1: the market truly worried about inflation? And when we see
Speaker 1: things like the tenure yield well off the one seventy
Speaker 1: one level from you know, back in late March, we
Speaker 1: see copper well off, the highs, lumber off the highs,
Speaker 1: break evens are well off their recent highs from a
Speaker 1: few months ago, it's inflation is there, but it doesn't
Speaker 1: appear like the market is extremely worried. It's hard for
Speaker 1: us to be goal just flatline bucks an ounce and
Speaker 1: not be soaring. If the market was worried about inflation,
Speaker 1: and I just want to cut you. I just want
Speaker 1: to cut you off there because you you gave us
Speaker 1: a lot of data and which I just want to
Speaker 1: know the single signal that those things you just mentioned said,
Speaker 1: what are they? Yeah, the market is not as worried
Speaker 1: about inflation as I think the as a media, A
Speaker 1: lot of people are the likelihood that inflation terms of
Speaker 1: nineteen seventies style spiral the stock market, and I'm sorry,
Speaker 1: just the market in general. Market participants are not voting
Speaker 1: on that. When you see a tenure yieldsill over on
Speaker 1: one thirty, it's hard for us to believe that. And
Speaker 1: so Ryan, I'm glad that you brought up break evens
Speaker 1: and they they've definitely cooled a little bit from their
Speaker 1: you know, decade plus highs. If we look at tenure
Speaker 1: break evens, the long term inflation outlook, though, it looks
Speaker 1: kind of sticky. I mean, it's not at the very
Speaker 1: peak anymore, but it's really just bounced back and forth
Speaker 1: in this range. I wish I could show our listeners
Speaker 1: a chart because it is amazing. I mean, what does
Speaker 1: that say to you that, Okay, maybe we're not seeing
Speaker 1: an inflationary spiral. But it seems to suggest that inflations
Speaker 1: is going to stick around at an elevated level for
Speaker 1: at least a while. Excellent point. You know, we had
Speaker 1: barely two percent in inflation for like the whole decade,
Speaker 1: right then COVID happened and the economy came back, all
Speaker 1: the supply chain issues. It's likely that we'll see you know,
Speaker 1: maybe three or three and a half percent inflation for
Speaker 1: a year or two. I mean, that's not historically abnormal inflation,
Speaker 1: just when we lived in a two percent inflation world
Speaker 1: for so long. It's clearly higher, but again it's not
Speaker 1: that inflation that we saw in the late seventies and
Speaker 1: early eighties. So I think it's a very key concept.
Speaker 1: You mentioned break even. It's a little interesting. Let's go
Speaker 1: around the globe here. Break evens over in Germany and
Speaker 1: Europe are actually breaking up to some of the highest
Speaker 1: levels UK I think the thirteen year high, Germany's multi
Speaker 1: year highs as well. So there are some more inflationary
Speaker 1: expectations starting to show up across the seas over in Europe.
Speaker 1: Now what exactly does all that mean? Listen, that's to
Speaker 1: be a more difficult conversation. But we're seeing more inflationary
Speaker 1: worries overseas, we're just not quite seeing them here in
Speaker 1: the US. So you said that we'll see three to
Speaker 1: three point five percent inflation for for a year or two.
Speaker 1: Is that transitory to you? A year or two? Uh? Well,
Speaker 1: not a good question. We all thought transitory in the beginning,
Speaker 1: like three of six months. But I think we've all
Speaker 1: are transitory means to sticking around a little bit more.
Speaker 1: But when you had the worst you know, recession of
Speaker 1: our lifetime and the way the economy opened up with
Speaker 1: supply chain issues, um, you know, it just it's still
Speaker 1: feels to us like a little bit higher inflation is okay.
Speaker 1: But again it's it's just not that runaway. And maybe
Speaker 1: that is the new I hate to say this is
Speaker 1: a new normal, but maybe you know three three and
Speaker 1: happened three to three and a half inflation for a
Speaker 1: couple of years is is a little more normal. And
Speaker 1: again that's kind of a long term average of inflation
Speaker 1: if you think about it. I mean, you look at
Speaker 1: unemployment and inflation, the misery index, right, um, you know
Speaker 1: that's right around ten percent. That's actually the long term
Speaker 1: average of where inflation and unemployment have been historically going
Speaker 1: back fifty years, so it's um a lot of ways
Speaker 1: to look at it. But again, inflation, just to us,
Speaker 1: is not quite the concern, and if it was, we
Speaker 1: don't need to stock market me doing this good and
Speaker 1: we don't think you know, those commodities and industrial medals
Speaker 1: are probably a lot higher if the market were truly
Speaker 1: worried about inflation. Okay, so inflation maybe it's not a concern.
Speaker 1: How do you position your portfolio around on that? I mean,
Speaker 1: are you going into more duration sensitive sectors or what
Speaker 1: looks attractive to you right now? Yeah? Well, on the yeah,
Speaker 1: on the fixed income side of things, we we have
Speaker 1: shortened up duration. We think there is likely coming higher rates.
Speaker 1: We've got the tenure yield we think can be up
Speaker 1: around one seventy five by the end of this year.
Speaker 1: Of course, i'll impact bonds which trade inversely with with
Speaker 1: higher rates, So we like mortgage backed securities which are
Speaker 1: not quite as impacted by higher rates. Um. Now that's
Speaker 1: the fixed income side of things. But on the other side,
Speaker 1: and we do like the cyclicals, the financials, industrials, materials,
Speaker 1: the early cycle plays along with small caps. Historically early
Speaker 1: economic cycle of growth do better, fully aware they started
Speaker 1: the year off gangbusters. In the last three or four
Speaker 1: months have struggled, But we really do think we could
Speaker 1: see another fourth quarter rally like we did last year
Speaker 1: in some of those areas. Do not forget last year, guys,
Speaker 1: the rustle two thousand small caps in twenty five percent,
Speaker 1: an all time record fourth quarter last year. To me,
Speaker 1: small caps have just been consolidating um most of this year,
Speaker 1: and we think that that that leadership from the cypical
Speaker 1: value area likely will take the baton before all is
Speaker 1: sudden done. Ryan Dietrich, chief market strategist at LPL Financial.
Speaker 1: We're gonna have to leave it there. Thank you so
Speaker 1: much for taking the time. We really appreciate you joining
Speaker 1: us on the phone from Charlotte, North Carolina's Thanks for
Speaker 1: listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
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