1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Lee. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,280 Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 5 00:00:23,360 --> 00:00:29,600 Speaker 1: dot com, and of course, on the Bloomberg terminal. Mark 6 00:00:29,640 --> 00:00:31,880 Speaker 1: upon it joined US now Banks America Security's head of 7 00:00:31,960 --> 00:00:37,760 Speaker 1: US Right Strategy mark substantial further progress that awards were 8 00:00:37,800 --> 00:00:40,320 Speaker 1: all interested in. The FED won't define them. Are we 9 00:00:40,400 --> 00:00:43,080 Speaker 1: done yet? I don't think we're there yet, but I 10 00:00:43,120 --> 00:00:44,680 Speaker 1: agree with you. I think they're gonna be the three 11 00:00:44,760 --> 00:00:48,040 Speaker 1: most important words for financial markets over the next quarter 12 00:00:48,240 --> 00:00:51,440 Speaker 1: or two. It's substantial further progress and that holds the 13 00:00:51,520 --> 00:00:53,880 Speaker 1: key to determining when the FED will begin to slow 14 00:00:53,960 --> 00:00:57,120 Speaker 1: their asset purchases, which will eventually pave the way for 15 00:00:57,160 --> 00:01:00,280 Speaker 1: them to potentially raise interest rates. That the FED hasn't 16 00:01:00,280 --> 00:01:03,320 Speaker 1: told us what substantial for the progress means. We believe 17 00:01:03,480 --> 00:01:06,520 Speaker 1: that it likely means a labor market that is back 18 00:01:06,600 --> 00:01:09,720 Speaker 1: to pre COVID levels. The FED has been reiterating that 19 00:01:09,720 --> 00:01:12,600 Speaker 1: we're in an eight million job hole um. That's the 20 00:01:12,720 --> 00:01:14,920 Speaker 1: level of employment where we are today versus where we 21 00:01:14,920 --> 00:01:18,720 Speaker 1: were pre pandemic. But we anticipate a lot of progress 22 00:01:18,760 --> 00:01:21,600 Speaker 1: in closing that whole and in filling that hole over 23 00:01:21,600 --> 00:01:25,800 Speaker 1: the next few months. We anticipate essentially million job growth 24 00:01:25,880 --> 00:01:28,880 Speaker 1: months over the next several months, and we believe that 25 00:01:28,880 --> 00:01:31,000 Speaker 1: that will allow for the FED to assess that we 26 00:01:31,040 --> 00:01:34,520 Speaker 1: are making substantial for the progress. Likely by the end 27 00:01:34,560 --> 00:01:36,600 Speaker 1: of the year that will have been achieved, and we 28 00:01:36,640 --> 00:01:39,640 Speaker 1: anticipate that the FED will begin to signal that they're 29 00:01:39,680 --> 00:01:42,920 Speaker 1: moving in that direction um to agree that there has 30 00:01:42,959 --> 00:01:45,560 Speaker 1: been substantial for the progress by the summer or the 31 00:01:45,600 --> 00:01:49,520 Speaker 1: early fall. We're sort of thinking, you know, August Jackson 32 00:01:49,600 --> 00:01:52,480 Speaker 1: Hole or potentially September f o MC for when we 33 00:01:52,520 --> 00:01:55,720 Speaker 1: could see a shift in the timing for when asset 34 00:01:55,760 --> 00:01:58,640 Speaker 1: purchases will begin to be withdrawn. That will be clear. 35 00:01:58,680 --> 00:02:01,160 Speaker 1: I don't think that this withdrawal will start until Q 36 00:02:01,400 --> 00:02:03,760 Speaker 1: one of next year, but the FED will start sending 37 00:02:03,800 --> 00:02:06,640 Speaker 1: the signal over the summer. You took away my next question, 38 00:02:06,640 --> 00:02:08,000 Speaker 1: because that's what I was going to ask, what the 39 00:02:08,040 --> 00:02:10,120 Speaker 1: actual type would look like and when it would be executed, 40 00:02:10,160 --> 00:02:12,280 Speaker 1: So mark up build on that. Just the sequencing some 41 00:02:12,280 --> 00:02:14,799 Speaker 1: words you use this will pave the way for rat 42 00:02:14,919 --> 00:02:17,920 Speaker 1: increases the sequence. That is it that obvious that that 43 00:02:17,960 --> 00:02:22,639 Speaker 1: will be the next step in the imminent future. Well, 44 00:02:22,639 --> 00:02:24,960 Speaker 1: that's what the FED has told us recently. So this 45 00:02:25,000 --> 00:02:28,040 Speaker 1: week they started focusing a little bit more on what 46 00:02:28,160 --> 00:02:32,800 Speaker 1: the path for accommodation withdrawal will look like. They stressed 47 00:02:32,800 --> 00:02:35,680 Speaker 1: the tapering of asset purchases will happen before they begin 48 00:02:35,760 --> 00:02:38,480 Speaker 1: to raise interest rates. Now, we think that they ideally 49 00:02:38,520 --> 00:02:41,720 Speaker 1: want to complete that taper. They want to stop buying 50 00:02:42,320 --> 00:02:44,840 Speaker 1: before they raise rates UM, and that's still gonna be 51 00:02:44,919 --> 00:02:47,639 Speaker 1: some time away. We think that the taper process will 52 00:02:47,680 --> 00:02:50,280 Speaker 1: likely be a year or so uh, and that they 53 00:02:50,320 --> 00:02:53,680 Speaker 1: won't start raising rates until at some point in three 54 00:02:53,800 --> 00:02:57,280 Speaker 1: we think the latter half of UM. So it's gonna 55 00:02:57,320 --> 00:03:00,240 Speaker 1: be a long path to get there. But what the 56 00:03:00,280 --> 00:03:02,560 Speaker 1: market's going to care about is when the Fed starts 57 00:03:02,600 --> 00:03:05,320 Speaker 1: to signal that it is moving in that direction, because 58 00:03:05,360 --> 00:03:07,600 Speaker 1: the market is very quickly going to extrapolate from a 59 00:03:07,600 --> 00:03:10,480 Speaker 1: FED that is cutting its asset purchases or at least 60 00:03:10,520 --> 00:03:13,960 Speaker 1: setting the stage for that UM and then extrapolating rate 61 00:03:14,040 --> 00:03:16,760 Speaker 1: hikes at some point in the future off of that mark. 62 00:03:16,840 --> 00:03:19,360 Speaker 1: What I'm hearing from you is higher rates ahead. What 63 00:03:19,480 --> 00:03:23,000 Speaker 1: I hear from everyone, almost everyone, higher rates ahead. Looking 64 00:03:23,040 --> 00:03:26,239 Speaker 1: here at ten year yields, they are lower. They're aggressively 65 00:03:26,280 --> 00:03:29,160 Speaker 1: lower on the week compared to the past a few weeks. 66 00:03:29,480 --> 00:03:33,800 Speaker 1: What gives? Yeah, So, look, you're you're exactly right. Really 67 00:03:33,880 --> 00:03:36,320 Speaker 1: since the start of the second quarter, since the start 68 00:03:36,320 --> 00:03:38,800 Speaker 1: of April, we're down about twenty basis points on the 69 00:03:38,840 --> 00:03:42,000 Speaker 1: ten year um, and frankly, it has been a bit 70 00:03:42,000 --> 00:03:46,280 Speaker 1: of a surprise, especially given the very robust economic data 71 00:03:46,320 --> 00:03:49,200 Speaker 1: that we have seen. You're at good retail sales report, 72 00:03:49,440 --> 00:03:54,320 Speaker 1: solid cp I and incredibly strong employment report earlier this month. 73 00:03:54,600 --> 00:03:58,240 Speaker 1: So why we think that it's essentially three factors that 74 00:03:58,280 --> 00:04:00,760 Speaker 1: are driving it. One, we're starting to see some pockets 75 00:04:00,760 --> 00:04:04,240 Speaker 1: of demand from foreign investors and asset managers, especially with 76 00:04:04,240 --> 00:04:07,560 Speaker 1: equities at all time highs. Too, we think that there's 77 00:04:07,600 --> 00:04:11,320 Speaker 1: been likely a technical squeeze here some short positions that 78 00:04:11,440 --> 00:04:14,520 Speaker 1: got squeezed in the move and are now covering. And Three, 79 00:04:14,720 --> 00:04:16,920 Speaker 1: we also think that there's just an incredible amount of 80 00:04:16,960 --> 00:04:20,440 Speaker 1: cash outstanding. The amount of reserves in the banking system 81 00:04:20,520 --> 00:04:23,599 Speaker 1: has grown a hundred billion dollars since April, it's grown 82 00:04:23,640 --> 00:04:29,440 Speaker 1: almost a quarter or twenty just this year, so we've 83 00:04:29,480 --> 00:04:31,719 Speaker 1: seen a lot more cash in the banking system and 84 00:04:31,839 --> 00:04:35,000 Speaker 1: that's looking for a home. This also coincides with stimulus 85 00:04:35,080 --> 00:04:38,520 Speaker 1: checks that have been paid out and investors and recipients 86 00:04:38,520 --> 00:04:40,880 Speaker 1: of those stimulus checks that suggest, at least to the 87 00:04:40,880 --> 00:04:44,320 Speaker 1: New York Fed, of that money is going to be 88 00:04:44,360 --> 00:04:48,680 Speaker 1: invested and saved and that's finding its way into financial assets. 89 00:04:48,720 --> 00:04:51,720 Speaker 1: So to some extent, this is a rally where everything 90 00:04:51,800 --> 00:04:55,200 Speaker 1: is rich ining right, Rates are declining, equities are reaching 91 00:04:55,240 --> 00:04:57,520 Speaker 1: all time hime. We know what's happening with crypto and 92 00:04:57,640 --> 00:05:00,960 Speaker 1: other alternative assets. All of the those are appreciating, and 93 00:05:00,960 --> 00:05:03,919 Speaker 1: so we do think that the rates market is a 94 00:05:03,960 --> 00:05:08,520 Speaker 1: beneficiary of some of that that's pushing rates lower. Now, importantly, 95 00:05:08,839 --> 00:05:10,599 Speaker 1: what we see in the rates move is that it's 96 00:05:10,720 --> 00:05:13,480 Speaker 1: really all real rate lead, where the majority of it 97 00:05:13,560 --> 00:05:17,040 Speaker 1: is real rate lead. That's an easing of financial conditions. Um. 98 00:05:17,080 --> 00:05:19,960 Speaker 1: We also anticipate that this will likely be temporary and 99 00:05:20,040 --> 00:05:23,960 Speaker 1: short lived. Fundamentals will trump here and fundamentals are going 100 00:05:24,000 --> 00:05:26,800 Speaker 1: to be incredibly strong over the remainder of this year. 101 00:05:27,200 --> 00:05:30,480 Speaker 1: So we've been encouraging clients take this opportunity this little 102 00:05:30,520 --> 00:05:33,600 Speaker 1: rate rally and reset your shorts because this will not 103 00:05:33,720 --> 00:05:36,800 Speaker 1: likely persist. The economy is gonna be really strong, Inflation 104 00:05:36,880 --> 00:05:38,600 Speaker 1: is gonna start to pick up, and the Fed will 105 00:05:38,600 --> 00:05:40,680 Speaker 1: begin to change their tune. And as all of those 106 00:05:40,680 --> 00:05:43,760 Speaker 1: things happen, rates are gonna move higher. Mark with some 107 00:05:43,800 --> 00:05:45,800 Speaker 1: conviction of the end that looking forward to the conversation 108 00:05:45,839 --> 00:05:47,320 Speaker 1: through the rest of this year, market pound of that 109 00:05:47,560 --> 00:05:55,240 Speaker 1: of bankf America Securities, the head of US rights strategy, 110 00:05:56,600 --> 00:05:58,200 Speaker 1: and let's talk about the addlies we can do that 111 00:05:58,240 --> 00:06:00,920 Speaker 1: with that, I'm back a cab at Sadia Reese Search analyst. Colle, 112 00:06:01,520 --> 00:06:04,440 Speaker 1: there's three worlds right now in your world. We've got 113 00:06:04,720 --> 00:06:08,280 Speaker 1: the business world, We've got international travel, and then we've 114 00:06:08,320 --> 00:06:10,640 Speaker 1: got leisure. And they all look different, don't they Can 115 00:06:10,640 --> 00:06:13,320 Speaker 1: you just walk through them one by one? Yes, good 116 00:06:13,320 --> 00:06:17,039 Speaker 1: morning and thanks for having me team. Um So, business 117 00:06:17,080 --> 00:06:19,560 Speaker 1: travel is kind of a tale of two businesses one 118 00:06:19,720 --> 00:06:22,359 Speaker 1: or maybe three. A one is small and medium sized 119 00:06:22,400 --> 00:06:26,000 Speaker 1: companies that have never really left. Those folks. They're the 120 00:06:26,000 --> 00:06:29,240 Speaker 1: folks who need revenue, so they are traveling. Then there's 121 00:06:29,320 --> 00:06:32,520 Speaker 1: corporate business and that hasn't come back yet maybe a 122 00:06:32,520 --> 00:06:35,800 Speaker 1: little bit, but in general, if you're a big corporation, 123 00:06:36,080 --> 00:06:38,159 Speaker 1: sales tend to come to you, you don't have to 124 00:06:38,200 --> 00:06:41,479 Speaker 1: go out and get them. And then there's conferences, which 125 00:06:41,560 --> 00:06:43,599 Speaker 1: I noticed are starting to come back. I'm going to 126 00:06:43,680 --> 00:06:47,480 Speaker 1: one this weekend in aviation conference that starts um I 127 00:06:47,520 --> 00:06:51,760 Speaker 1: think Monday, and then um World of Concrete is apparently 128 00:06:51,839 --> 00:06:55,040 Speaker 1: the first conference in June that's returning to Las Vegas, 129 00:06:55,360 --> 00:06:58,720 Speaker 1: so that's coming back. So that's the business side. Then 130 00:06:58,800 --> 00:07:02,159 Speaker 1: you have the international. There's again two different worlds. One 131 00:07:02,200 --> 00:07:05,920 Speaker 1: is our hemisphere where I think as Americans are getting vaccinated, 132 00:07:05,920 --> 00:07:08,560 Speaker 1: they feel more comfortable traveling, so they're going to the Caribbean. 133 00:07:09,000 --> 00:07:12,200 Speaker 1: They're going they're going to beach destinations and mountains and 134 00:07:12,240 --> 00:07:17,800 Speaker 1: outdoor things, Latin American beach destinations, Mexico um I mentioned 135 00:07:17,800 --> 00:07:20,840 Speaker 1: the Caribbean, and a lot of the big resort hotels 136 00:07:20,880 --> 00:07:23,720 Speaker 1: are making it very easy for Americans to test before 137 00:07:23,720 --> 00:07:26,360 Speaker 1: they go back to the United States because we still 138 00:07:26,400 --> 00:07:28,960 Speaker 1: have to test even if you're vaccinated before you come back, 139 00:07:29,560 --> 00:07:31,920 Speaker 1: and the airports are doing the same, so that makes 140 00:07:31,920 --> 00:07:35,480 Speaker 1: it relatively easy. And then there's Europe, which is I 141 00:07:35,480 --> 00:07:38,360 Speaker 1: think four to six months behind us, and then Asia 142 00:07:38,440 --> 00:07:40,440 Speaker 1: which is probably a year behind us. I don't see 143 00:07:40,440 --> 00:07:46,680 Speaker 1: Asia coming back really until um two at the earliest, 144 00:07:46,840 --> 00:07:51,360 Speaker 1: and even Europe fourth quarter or maybe. And then there's leisure, 145 00:07:51,520 --> 00:07:55,559 Speaker 1: domestic leisure, and I think domestic leisure is at least 146 00:07:55,680 --> 00:07:59,239 Speaker 1: nine of the way back. And I think those million 147 00:07:59,280 --> 00:08:02,200 Speaker 1: and a half people we see traveling every day roughly 148 00:08:02,360 --> 00:08:05,560 Speaker 1: somewhere between a million two a million five UM. I 149 00:08:05,600 --> 00:08:09,000 Speaker 1: think about a million UM, I would think all about 150 00:08:09,000 --> 00:08:11,680 Speaker 1: a hundred and fifty or two hundred thousand of them 151 00:08:11,760 --> 00:08:16,600 Speaker 1: our leisure. And I know right it's it's pretty amazing 152 00:08:16,680 --> 00:08:20,480 Speaker 1: that people feel really comfortable traveling, and as they get vaccinated, 153 00:08:20,520 --> 00:08:22,760 Speaker 1: they're doing things you I was listening to you guys 154 00:08:22,840 --> 00:08:26,640 Speaker 1: talk about, you know, going back to restaurants and stuff. Um. Yeah. 155 00:08:26,680 --> 00:08:29,040 Speaker 1: I mean if I got vaccinated and I'm out of 156 00:08:29,040 --> 00:08:32,400 Speaker 1: my two week window from because I got you know, 157 00:08:32,440 --> 00:08:36,000 Speaker 1: the one vaccine with two shots, then why am I 158 00:08:36,040 --> 00:08:38,640 Speaker 1: still in Paradise prison. Why can't I go out and 159 00:08:38,720 --> 00:08:41,720 Speaker 1: start my next I said, my next normal as supposed 160 00:08:41,760 --> 00:08:44,920 Speaker 1: to reclaiming my life. But why can I start doing 161 00:08:44,960 --> 00:08:47,400 Speaker 1: the things that I used to do before I got 162 00:08:47,400 --> 00:08:50,319 Speaker 1: locked down? Yeah, Helene, I gotta say it is almost 163 00:08:50,400 --> 00:08:52,400 Speaker 1: trying to make us feel bad for being at work 164 00:08:52,440 --> 00:08:55,600 Speaker 1: and not on those Caribbean beaches and the fantastic destinations 165 00:08:55,600 --> 00:08:57,839 Speaker 1: that you're talking about. A lot of people want to 166 00:08:57,880 --> 00:09:00,520 Speaker 1: go places. There's a question about the airline and whether 167 00:09:00,559 --> 00:09:03,440 Speaker 1: they can meet demand given how many people they have 168 00:09:03,520 --> 00:09:06,120 Speaker 1: to bring back into the offices and bring back to 169 00:09:06,160 --> 00:09:08,560 Speaker 1: their airplanes. I know that Delta had an issue with 170 00:09:08,640 --> 00:09:12,040 Speaker 1: not having enough pilots, not having enough flight attendants, and 171 00:09:12,040 --> 00:09:16,120 Speaker 1: they had to cancel flights. Are you hearing difficulties around 172 00:09:16,120 --> 00:09:18,560 Speaker 1: this and with respect to that, are they raising some 173 00:09:18,640 --> 00:09:22,600 Speaker 1: of the wages in response? Um. So there's a lot 174 00:09:22,640 --> 00:09:26,320 Speaker 1: of questions in there. And one of the issues Delta had, 175 00:09:26,480 --> 00:09:30,080 Speaker 1: and I don't know that this is an excuse, but 176 00:09:30,160 --> 00:09:33,559 Speaker 1: it's what they said, is that, UM, a lot of 177 00:09:33,600 --> 00:09:37,040 Speaker 1: their pilots were able to get vaccinated, and the FAA 178 00:09:37,160 --> 00:09:40,079 Speaker 1: doesn't let you fly within forty eight hours of getting vaccinated, 179 00:09:40,120 --> 00:09:42,800 Speaker 1: so they had to cancel flights. You would just think 180 00:09:42,880 --> 00:09:44,800 Speaker 1: they would have timed that a little bit better so 181 00:09:44,880 --> 00:09:48,360 Speaker 1: it didn't happen over Easter weekend. UM. As far as 182 00:09:48,440 --> 00:09:50,559 Speaker 1: wage rates, I want to tackle that because I think 183 00:09:50,600 --> 00:09:54,040 Speaker 1: it's really important. The Big Three airlines American, Delta, and 184 00:09:54,160 --> 00:09:58,320 Speaker 1: United all have open pilot contracts, and um, we think 185 00:09:58,360 --> 00:10:00,880 Speaker 1: wages at the starting level or definitely going to go up. 186 00:10:00,960 --> 00:10:03,200 Speaker 1: I'm not a hundred percenter in that wages at the 187 00:10:03,240 --> 00:10:05,319 Speaker 1: top end will go up more than a few dollars 188 00:10:05,320 --> 00:10:08,840 Speaker 1: an hour. But when the pandemic hit really hard a 189 00:10:08,880 --> 00:10:11,000 Speaker 1: year ago, and it was exactly a year ago that 190 00:10:11,240 --> 00:10:14,600 Speaker 1: traffic bottom depth at eighty seven eighty five thousand a 191 00:10:14,679 --> 00:10:16,400 Speaker 1: day level, and I said, we're now back to a 192 00:10:16,440 --> 00:10:20,600 Speaker 1: million five. Um, the airlines worked with their employees to 193 00:10:20,720 --> 00:10:24,080 Speaker 1: try to get anybody who was thinking about retiring between say, 194 00:10:26,120 --> 00:10:29,480 Speaker 1: to think about retiring. Last year, some of the airlines 195 00:10:29,520 --> 00:10:31,960 Speaker 1: worked with their people to cut hours so they didn't 196 00:10:31,960 --> 00:10:34,400 Speaker 1: have to furlough as many people. I mean, one thing 197 00:10:34,480 --> 00:10:38,079 Speaker 1: to consider for pilots, it's always last in, first out, 198 00:10:38,600 --> 00:10:41,760 Speaker 1: which means they would have had to furlough a lot 199 00:10:41,840 --> 00:10:44,480 Speaker 1: of pilots at the lower end of the pay skill 200 00:10:44,760 --> 00:10:49,280 Speaker 1: and at the lesser seniority level, versus keeping those pilots 201 00:10:49,280 --> 00:10:52,760 Speaker 1: and asking older pilots who were kind of sixty two 202 00:10:52,840 --> 00:10:56,679 Speaker 1: to sixty five, well, mandatory retirement ages sixty five anyway, 203 00:10:56,679 --> 00:10:59,960 Speaker 1: But pilots in their sixties to think about retiring earlier, 204 00:11:00,040 --> 00:11:02,440 Speaker 1: working few hours to keep more people on the peril 205 00:11:03,080 --> 00:11:06,240 Speaker 1: so that when we recover, we're ready to rock and 206 00:11:06,360 --> 00:11:09,480 Speaker 1: roll as opposed to having issues. As you know, I'm 207 00:11:09,520 --> 00:11:12,320 Speaker 1: hearing there are issues in some other service sectors. Well, 208 00:11:12,360 --> 00:11:15,120 Speaker 1: they're rocking and rolling for some of these airlines right now. 209 00:11:15,120 --> 00:11:18,240 Speaker 1: Helloeen fantastically catch out with you. You're not just an analyst. 210 00:11:18,280 --> 00:11:20,360 Speaker 1: I know how much you care about this industry as well, 211 00:11:20,480 --> 00:11:21,880 Speaker 1: and it's good to see it back on its feet. 212 00:11:21,880 --> 00:11:24,600 Speaker 1: He line back of the cam and senior research analysts. 213 00:11:29,480 --> 00:11:32,960 Speaker 1: Let's bring in Stephen Stanley. I must pay upon chief economists. Stephen, 214 00:11:33,040 --> 00:11:35,040 Speaker 1: what a week. We can take a deep breath and 215 00:11:35,080 --> 00:11:37,160 Speaker 1: move on to the weekend. Soon. You'll take on the 216 00:11:37,240 --> 00:11:41,680 Speaker 1: data so far this week, Stephen. Sure, well, pretty much 217 00:11:41,720 --> 00:11:45,920 Speaker 1: every high profile March economic indicator has been far stronger 218 00:11:45,960 --> 00:11:47,760 Speaker 1: than expected, going all the way back to the I 219 00:11:48,040 --> 00:11:50,760 Speaker 1: M and employment numbers in the prior week. But certainly 220 00:11:50,760 --> 00:11:53,680 Speaker 1: the retail sales numbers yesterday and now the housing starts 221 00:11:53,760 --> 00:11:55,640 Speaker 1: numbers today. I think in some ways it was a 222 00:11:55,640 --> 00:11:58,480 Speaker 1: perfect storm in March, because February you had the bad weather, 223 00:11:58,520 --> 00:12:01,319 Speaker 1: particularly as it released to how starts, which would have 224 00:12:01,400 --> 00:12:03,320 Speaker 1: depressed a lot of the February data. And I think 225 00:12:03,320 --> 00:12:05,640 Speaker 1: March for housing starts at least was a catch up 226 00:12:06,040 --> 00:12:08,400 Speaker 1: based on the weather. But certainly the market, the housing 227 00:12:08,440 --> 00:12:11,360 Speaker 1: market continues to be extremely strong and builders are going 228 00:12:11,400 --> 00:12:13,600 Speaker 1: to be uh playing catch up for a long time. 229 00:12:13,720 --> 00:12:16,360 Speaker 1: So you know, the more starts they can get under 230 00:12:16,360 --> 00:12:19,080 Speaker 1: their belts, the better it is for the market. Stephen One, 231 00:12:19,120 --> 00:12:21,440 Speaker 1: try if this recovery has just been how quickly things 232 00:12:21,440 --> 00:12:23,560 Speaker 1: have move in As an economist, how difficult do you 233 00:12:23,600 --> 00:12:27,080 Speaker 1: find to get just to keep up? Yeah, you have 234 00:12:27,160 --> 00:12:29,760 Speaker 1: to be nimble. I mean usually when you're doing your 235 00:12:29,800 --> 00:12:32,480 Speaker 1: GDP tracking estimates, they might move by one or two 236 00:12:32,520 --> 00:12:34,640 Speaker 1: or three tenths when a particular number comes out. But 237 00:12:34,679 --> 00:12:36,640 Speaker 1: you get a number like retail sales yesterday, and all 238 00:12:36,640 --> 00:12:39,720 Speaker 1: of a sudden you're revising by one to three percentage 239 00:12:39,720 --> 00:12:41,760 Speaker 1: points depending on what your forecast was going in. And 240 00:12:41,800 --> 00:12:44,600 Speaker 1: I think, um, you know, that's something that that I 241 00:12:44,640 --> 00:12:46,840 Speaker 1: think relates to the FED as well, because the Fed 242 00:12:46,920 --> 00:12:48,760 Speaker 1: has this thought in their head that they're going to 243 00:12:48,800 --> 00:12:51,079 Speaker 1: be able to move very slowly and just kind of 244 00:12:51,559 --> 00:12:53,840 Speaker 1: you know, inch their way back toward normal and policy. 245 00:12:53,920 --> 00:12:56,320 Speaker 1: But If the economy continues to gain ground at the 246 00:12:56,360 --> 00:12:58,480 Speaker 1: speed that we're seeing right now, then things may play 247 00:12:58,520 --> 00:13:01,360 Speaker 1: out quite a bit differently. Among the economic mysteries of 248 00:13:01,400 --> 00:13:03,760 Speaker 1: the week has been bank earnings and the lack of 249 00:13:03,840 --> 00:13:07,079 Speaker 1: loan demand. A lot of banks and executives they're saying 250 00:13:07,120 --> 00:13:09,120 Speaker 1: this is actually a good thing. It's because there's so 251 00:13:09,200 --> 00:13:11,480 Speaker 1: much cash that people are spending that and paying down 252 00:13:11,480 --> 00:13:13,720 Speaker 1: their debt so to be that much more ready to 253 00:13:13,800 --> 00:13:16,440 Speaker 1: spend later on. Do you view it the same way 254 00:13:16,679 --> 00:13:18,880 Speaker 1: or are there are signs of caution within the lack 255 00:13:18,920 --> 00:13:22,640 Speaker 1: of loan demand now? I think it's the function of 256 00:13:22,640 --> 00:13:25,360 Speaker 1: the fact that people are people, and corporations at this 257 00:13:25,400 --> 00:13:28,280 Speaker 1: point are very flush. I mean, the household sector has 258 00:13:28,320 --> 00:13:32,760 Speaker 1: been has gotten three rounds of rebate checks, very generous 259 00:13:32,800 --> 00:13:35,880 Speaker 1: unemployment benefits, and if you look at the personal income 260 00:13:35,960 --> 00:13:39,079 Speaker 1: numbers and the savings rate, there's no reason for people 261 00:13:39,080 --> 00:13:40,640 Speaker 1: to borrow. The only reason that people are going to 262 00:13:40,720 --> 00:13:42,920 Speaker 1: have the borrow really is as you as you mentioned before, 263 00:13:43,000 --> 00:13:45,880 Speaker 1: is is home mortgages. On the corporate side is kind 264 00:13:45,880 --> 00:13:48,640 Speaker 1: of the same thing. We saw this blowout in UH 265 00:13:48,720 --> 00:13:52,120 Speaker 1: corporate bond issues last year and into into this year, 266 00:13:52,440 --> 00:13:54,760 Speaker 1: and I think most companies are are pretty flushed with 267 00:13:54,800 --> 00:13:57,400 Speaker 1: cash right now and sitting on that cash and waiting 268 00:13:57,400 --> 00:14:00,640 Speaker 1: to deploy it. So there's really not much need for 269 00:14:00,720 --> 00:14:03,760 Speaker 1: a lot of borrowing at this point, except for you know, 270 00:14:03,800 --> 00:14:06,679 Speaker 1: specific sectors like home mortgages and maybe you know, student 271 00:14:06,760 --> 00:14:09,319 Speaker 1: loans and a few other things. So how do you determine, Stephen, 272 00:14:09,559 --> 00:14:12,280 Speaker 1: if we've got enough momentum to keep this pace of 273 00:14:12,320 --> 00:14:15,120 Speaker 1: spending up, perhaps on a credit line rather than just 274 00:14:15,240 --> 00:14:18,480 Speaker 1: using cash beyond the next two quarters or whatever it 275 00:14:18,559 --> 00:14:22,800 Speaker 1: is to to wear down some of this cash. Well, 276 00:14:23,000 --> 00:14:25,320 Speaker 1: there are various numbers that you can look at. Obviously, 277 00:14:25,360 --> 00:14:28,280 Speaker 1: the savings rate comes out every month. The FED puts 278 00:14:28,280 --> 00:14:32,560 Speaker 1: out quarterly data on um, you know, household financial assets 279 00:14:32,560 --> 00:14:36,080 Speaker 1: and and things like that, and those data indicate that 280 00:14:36,080 --> 00:14:38,960 Speaker 1: that consumers are just flush right now, a lot of money. 281 00:14:38,960 --> 00:14:42,040 Speaker 1: And that was even before this latest round of rebate checks. 282 00:14:42,040 --> 00:14:44,280 Speaker 1: So I think it's going to take a while for 283 00:14:44,360 --> 00:14:47,360 Speaker 1: consumers to plow through that stockpile. And I think they've 284 00:14:47,360 --> 00:14:49,400 Speaker 1: been saving up to do all the fun stuff that 285 00:14:49,440 --> 00:14:51,120 Speaker 1: we haven't been able to do for the last year. 286 00:14:51,280 --> 00:14:54,520 Speaker 1: Travel and uh, you know, go out to events, uh 287 00:14:54,560 --> 00:14:56,640 Speaker 1: and things like that, and so I think there's certainly 288 00:14:56,640 --> 00:14:58,920 Speaker 1: going to be kind of this one off, you know, 289 00:14:59,120 --> 00:15:02,360 Speaker 1: blowout period where people are you know, everybody's trying to 290 00:15:02,360 --> 00:15:04,400 Speaker 1: take a vacation at the same time, everybody's trying to 291 00:15:04,440 --> 00:15:07,040 Speaker 1: go to the same concerts and ball games and all 292 00:15:07,080 --> 00:15:10,040 Speaker 1: the rest. Uh. And then once the dusk starts to settle, 293 00:15:10,040 --> 00:15:12,360 Speaker 1: we'll see where we are at that point. Seven, We've 294 00:15:12,360 --> 00:15:14,640 Speaker 1: got to talk about the shift in the reaction function 295 00:15:14,680 --> 00:15:16,800 Speaker 1: of the FET, the shift in the framework. It's a 296 00:15:16,880 --> 00:15:19,600 Speaker 1: framework that would have been perfect for the previous cycle, 297 00:15:19,680 --> 00:15:21,400 Speaker 1: would have made a load of sense. Does it make 298 00:15:21,480 --> 00:15:25,440 Speaker 1: sense for this one? Well, you know, I think it 299 00:15:25,520 --> 00:15:28,040 Speaker 1: all depends on how inflation plays out, right, because they 300 00:15:28,160 --> 00:15:30,000 Speaker 1: what they've said basically is they want to wait to 301 00:15:30,040 --> 00:15:32,120 Speaker 1: see the whites of the eyes of inflation. And again, 302 00:15:32,160 --> 00:15:33,840 Speaker 1: I mean, the FET has conceded that we're going to 303 00:15:33,920 --> 00:15:37,480 Speaker 1: get this uh short term pop in prices. But then 304 00:15:37,480 --> 00:15:40,080 Speaker 1: they think things are gonna you know, go right back 305 00:15:40,080 --> 00:15:44,920 Speaker 1: into place add or below two um. If inflation gets 306 00:15:45,080 --> 00:15:47,600 Speaker 1: well above their target and stays there for more than 307 00:15:47,640 --> 00:15:50,360 Speaker 1: a few months, then I think, you know, at that point, 308 00:15:50,400 --> 00:15:52,960 Speaker 1: the react the new reaction function probably looks a lot 309 00:15:53,000 --> 00:15:56,640 Speaker 1: like the old one would have. UM, if inflation remains 310 00:15:56,720 --> 00:15:58,800 Speaker 1: very benign, then I think they're gonna be extremely devish 311 00:15:58,840 --> 00:16:01,040 Speaker 1: and wait a long time. But they may or may 312 00:16:01,040 --> 00:16:03,640 Speaker 1: not have that luxury, depending on how prices behave Stephen, 313 00:16:03,680 --> 00:16:05,360 Speaker 1: can we call it the weekend? Now? Are we done? 314 00:16:05,400 --> 00:16:08,560 Speaker 1: I think we've done? Absolutely? Absolutely, thank you. I'm still here. 315 00:16:08,600 --> 00:16:12,560 Speaker 1: Thank you, Stephen Stanley. So are you? John Economist? Just 316 00:16:12,560 --> 00:16:16,440 Speaker 1: getting people on site? Okay, great, you're gonna throw off 317 00:16:16,440 --> 00:16:25,080 Speaker 1: your mike. We're done. Daniel Tannon bound joys it now. 318 00:16:25,200 --> 00:16:28,280 Speaker 1: Oliver Wyman, partner in a head of America's Anti financial 319 00:16:28,320 --> 00:16:31,720 Speaker 1: crime unit. I'm curious from your perspective, Dan, of whether 320 00:16:31,840 --> 00:16:36,000 Speaker 1: these sanctions were harsh and unexpected or perhaps too light 321 00:16:36,440 --> 00:16:41,240 Speaker 1: given some of the potential allegations here. Thanks Lisa, and 322 00:16:41,360 --> 00:16:45,080 Speaker 1: as as Nick Wattams and others reported last week, these 323 00:16:45,080 --> 00:16:48,200 Speaker 1: sanctions were known to be coming in response to the 324 00:16:48,240 --> 00:16:51,640 Speaker 1: solar winds hack and election meddling, and as described other 325 00:16:51,720 --> 00:16:55,920 Speaker 1: malign activities by Russia. UM, I think what these sanctions 326 00:16:56,000 --> 00:16:59,480 Speaker 1: looked like, We're a bit unclear coming into the announcement 327 00:16:59,560 --> 00:17:02,480 Speaker 1: yesterday in terms of how severe they would be. It's 328 00:17:02,520 --> 00:17:05,560 Speaker 1: pretty clear that this was a proper opening salvo and 329 00:17:05,880 --> 00:17:09,840 Speaker 1: no attempt for a knockout punch. Also, these sanctions were 330 00:17:10,320 --> 00:17:13,600 Speaker 1: quite explicitly responsive to just the hacking issues. You still 331 00:17:13,640 --> 00:17:16,679 Speaker 1: have nord stream to lingering out there. You still have 332 00:17:16,760 --> 00:17:19,159 Speaker 1: issues related to Alexi of only, as well as the 333 00:17:19,200 --> 00:17:22,560 Speaker 1: Russian military build up on the Ukrainian border. So there's 334 00:17:22,600 --> 00:17:25,280 Speaker 1: still a whole other range of issues that the U 335 00:17:25,400 --> 00:17:27,560 Speaker 1: s could begin to push harder against on Russia. And 336 00:17:27,600 --> 00:17:29,879 Speaker 1: I think this was just the warning shot. Well, and 337 00:17:29,920 --> 00:17:31,960 Speaker 1: you certainly saw that in markets. I mean, you're seeing 338 00:17:31,960 --> 00:17:34,640 Speaker 1: a bounce back today in the ruble uh now gaining 339 00:17:34,800 --> 00:17:37,560 Speaker 1: versus the dollar. People seemed unfazed when it came to 340 00:17:37,600 --> 00:17:40,240 Speaker 1: even sovereign debt, even though you did get a bar 341 00:17:40,480 --> 00:17:44,439 Speaker 1: from some of the banks engaging with these securities what 342 00:17:44,600 --> 00:17:48,879 Speaker 1: could potentially disrupt markets. That seems like a realistic escalation 343 00:17:49,200 --> 00:17:52,639 Speaker 1: between the US and with with Russia. Yeah, And I 344 00:17:52,680 --> 00:17:58,040 Speaker 1: think we've seen an evolution of securities trading related activity 345 00:17:58,080 --> 00:18:00,879 Speaker 1: restriction since with the beginning of some of the dead 346 00:18:00,920 --> 00:18:05,560 Speaker 1: and equity restrictions after CRIMEA was annexed by Russia. What 347 00:18:05,720 --> 00:18:09,240 Speaker 1: we saw yesterday and again a build up after nine 348 00:18:09,520 --> 00:18:14,359 Speaker 1: sanctions that restricted trading in non rubal denominated sovereign debt 349 00:18:14,880 --> 00:18:18,359 Speaker 1: um is really this is only impacting primary market trade, 350 00:18:18,480 --> 00:18:22,679 Speaker 1: So secondary market trades on Russian sovereign debt be it 351 00:18:22,800 --> 00:18:26,440 Speaker 1: in euro be it in rouble are still permissible on 352 00:18:26,480 --> 00:18:29,679 Speaker 1: the secondary market, and I think Treasury knew that this 353 00:18:29,720 --> 00:18:32,639 Speaker 1: would have a muted impact, not kind of an adverse issue, 354 00:18:33,040 --> 00:18:35,960 Speaker 1: similar to when the Oligarch sanctions were dropped in twenty 355 00:18:36,080 --> 00:18:39,680 Speaker 1: eighteen and you saw a brief destabilization of the aluminum industry. 356 00:18:40,080 --> 00:18:43,879 Speaker 1: So I think certainly you could touch upon greater restrictions 357 00:18:43,880 --> 00:18:46,240 Speaker 1: and access to capital more broadly if you expand to 358 00:18:46,280 --> 00:18:49,359 Speaker 1: the secondary market. I think it's very clear that the 359 00:18:49,400 --> 00:18:51,920 Speaker 1: touch of just the primary market was only going to 360 00:18:52,000 --> 00:18:55,000 Speaker 1: have a very limited response. Dan, I want to zoom 361 00:18:55,000 --> 00:18:56,679 Speaker 1: out a little bit and go to something that Jeanie's 362 00:18:56,680 --> 00:18:59,560 Speaker 1: Aino is talking about earlier, as she talked about politics 363 00:18:59,640 --> 00:19:02,960 Speaker 1: and this President Biden, both domestically and now from a 364 00:19:03,000 --> 00:19:06,679 Speaker 1: foreign policy perspective, she said that the bidens are very different, 365 00:19:06,680 --> 00:19:10,280 Speaker 1: whether they're dealing with local issues or international ones. What's 366 00:19:10,280 --> 00:19:13,520 Speaker 1: been your takeaway so far? Given his stance versus the Kremlin, 367 00:19:13,800 --> 00:19:17,400 Speaker 1: given his stance with Iran, given his stance with China, 368 00:19:17,720 --> 00:19:20,960 Speaker 1: I think there's been a very measured response to all 369 00:19:21,200 --> 00:19:24,159 Speaker 1: of the issues that you've just described, whether it's North Korea, 370 00:19:24,240 --> 00:19:28,440 Speaker 1: whether it's China, whether it's Iran, and certainly with Russia. 371 00:19:29,400 --> 00:19:32,080 Speaker 1: On day one, the President announced the top the bottom 372 00:19:32,119 --> 00:19:34,840 Speaker 1: review of the existing sanctions portfolio that had been in 373 00:19:34,880 --> 00:19:37,800 Speaker 1: place for the last twenty plus years in the US 374 00:19:37,880 --> 00:19:42,359 Speaker 1: to really understand the productivity the unforeseen consequences. I think 375 00:19:42,400 --> 00:19:44,760 Speaker 1: the team that's been assembled at State Treasury and the 376 00:19:44,840 --> 00:19:48,320 Speaker 1: National Security Apparatus have been experienced from the Bush and 377 00:19:48,359 --> 00:19:52,239 Speaker 1: Obama administration, some from the Trump administration, and they know 378 00:19:52,320 --> 00:19:54,480 Speaker 1: how to look around the corner to see the unforeseen, 379 00:19:54,600 --> 00:19:58,880 Speaker 1: constantly unanticipated consequences. That being said, I think the market 380 00:19:58,960 --> 00:20:02,959 Speaker 1: is still nervous. Friends of mine in multinational f i'es um, 381 00:20:03,000 --> 00:20:05,199 Speaker 1: they're doing the analysis to see how these type of 382 00:20:05,200 --> 00:20:07,280 Speaker 1: moves will ruin their days, much like some of the 383 00:20:07,359 --> 00:20:11,440 Speaker 1: Chinese security restrictions ruined their Christmas break in December. Well, 384 00:20:11,480 --> 00:20:13,240 Speaker 1: one reason why I love speaking with you, Dan is 385 00:20:13,280 --> 00:20:15,879 Speaker 1: because you do have this bird's eye view in what 386 00:20:16,000 --> 00:20:18,879 Speaker 1: companies are thinking in their risk offices in terms of 387 00:20:18,960 --> 00:20:21,760 Speaker 1: charting at some sort of strategy, how do they get 388 00:20:21,800 --> 00:20:25,640 Speaker 1: ahead of different administrations, and what's their main concern right 389 00:20:25,680 --> 00:20:29,000 Speaker 1: now at the Biden administration about where the potential sanctions 390 00:20:29,000 --> 00:20:32,119 Speaker 1: could come, where they could potentially be restricted going forward. 391 00:20:33,040 --> 00:20:35,640 Speaker 1: So I think where what we see with this administration 392 00:20:35,760 --> 00:20:38,919 Speaker 1: is certainly less unpredictability than what we've been seeing over 393 00:20:39,000 --> 00:20:42,240 Speaker 1: the last four years. In particular, I think if you 394 00:20:42,320 --> 00:20:45,680 Speaker 1: see some of the appointees of the Biden administration, them 395 00:20:45,720 --> 00:20:49,000 Speaker 1: coming from a more mature sanctions and national security regime 396 00:20:49,000 --> 00:20:52,280 Speaker 1: of the path, they know how to engage with institutions. 397 00:20:52,320 --> 00:20:55,720 Speaker 1: So for some of these significant moves, um, you'll see 398 00:20:55,920 --> 00:20:59,480 Speaker 1: Treasury reaching out the institutions in advance so they can 399 00:20:59,520 --> 00:21:01,680 Speaker 1: prepare of them. Um. We saw this with Libya a 400 00:21:01,760 --> 00:21:04,600 Speaker 1: number of years ago, where banks were notified in advance. 401 00:21:04,680 --> 00:21:07,480 Speaker 1: So I think the institutions I work with take comfort 402 00:21:07,720 --> 00:21:10,480 Speaker 1: that they know there's a certain maturity and how the 403 00:21:10,560 --> 00:21:13,800 Speaker 1: Biden administration approaches these issues and there's not going to 404 00:21:13,840 --> 00:21:17,000 Speaker 1: be certain knee jerk reactions that really disrupt the reaction 405 00:21:17,040 --> 00:21:20,639 Speaker 1: in any sort of unforeseen way. There's also a question 406 00:21:20,680 --> 00:21:23,000 Speaker 1: though internationally and Dan, I know this is sensitive and 407 00:21:23,000 --> 00:21:25,080 Speaker 1: it might be uh something you don't want to weigh 408 00:21:25,119 --> 00:21:27,760 Speaker 1: in on, but there was a fascinating story about how 409 00:21:27,800 --> 00:21:30,679 Speaker 1: international banks are losing market share and some of the 410 00:21:30,680 --> 00:21:34,000 Speaker 1: biggest Asian markets, whether it's in China, whether it's in India, 411 00:21:34,240 --> 00:21:36,679 Speaker 1: and this has to do with the close relationship of 412 00:21:36,760 --> 00:21:40,560 Speaker 1: local firms with the governments as well as restrictions that 413 00:21:40,600 --> 00:21:44,080 Speaker 1: have been placed on them. How concerned are your clients 414 00:21:44,160 --> 00:21:47,880 Speaker 1: about that, about pushback and a lack of competitive advantage 415 00:21:48,160 --> 00:21:52,440 Speaker 1: overseas bringing them more closely to the domestic economy. I'm 416 00:21:52,520 --> 00:21:55,720 Speaker 1: living and breathing this issue almost every day. I think 417 00:21:55,760 --> 00:21:59,600 Speaker 1: you've seen China respond with certain counter sanctions that essentially 418 00:21:59,640 --> 00:22:03,159 Speaker 1: create a significant conflict of law issue for global banks 419 00:22:03,200 --> 00:22:05,640 Speaker 1: operating in the U S and China, and essentially it's 420 00:22:05,680 --> 00:22:09,520 Speaker 1: forcing choice. You've already seen some global banks have picked 421 00:22:09,600 --> 00:22:13,399 Speaker 1: China as they've repositioned senior leadership into Hong Kong and 422 00:22:13,440 --> 00:22:16,600 Speaker 1: Greater China area. So I didn't see a lot of 423 00:22:16,640 --> 00:22:20,720 Speaker 1: nervousness for how China could react to try and replicate 424 00:22:20,800 --> 00:22:23,080 Speaker 1: some of what the US has done to bring foreign 425 00:22:23,119 --> 00:22:26,439 Speaker 1: institutions um to really bend the knee towards the US. 426 00:22:26,680 --> 00:22:28,640 Speaker 1: I think now you have a real threat to that 427 00:22:28,720 --> 00:22:32,240 Speaker 1: going forward if China tries to exert those authorities they've 428 00:22:32,240 --> 00:22:36,679 Speaker 1: granted themselves. Does this nervousness represent itself as retrenchment or 429 00:22:36,760 --> 00:22:40,760 Speaker 1: is it simply just weariness. I think it's weariness, although 430 00:22:40,800 --> 00:22:44,240 Speaker 1: you are seeing potential moves of retrenchment as the business 431 00:22:44,240 --> 00:22:47,080 Speaker 1: has looked to organize themselves going forward, do you see 432 00:22:47,080 --> 00:22:50,720 Speaker 1: some banks essentially split off their business in China as 433 00:22:50,720 --> 00:22:53,960 Speaker 1: its own standalone entity and essentially split the rest of 434 00:22:53,960 --> 00:22:58,120 Speaker 1: the organization around the world to keep it more operationally manageable. Um, 435 00:22:58,160 --> 00:23:01,240 Speaker 1: there's a lot of different contingency plannings that are happening 436 00:23:01,240 --> 00:23:04,320 Speaker 1: across a lot of large lobos right now. Dan, when's 437 00:23:04,320 --> 00:23:06,520 Speaker 1: the next time you're getting on an airplane and going overseas? 438 00:23:08,280 --> 00:23:10,439 Speaker 1: I I do not know, but I think my family 439 00:23:10,480 --> 00:23:12,239 Speaker 1: is ready for me to do it quite soon. I 440 00:23:12,280 --> 00:23:14,920 Speaker 1: think that goes for all of us. Daniel Tannebaum, thank 441 00:23:14,960 --> 00:23:16,800 Speaker 1: you so much for being with us of Oliver Wyman, 442 00:23:17,119 --> 00:23:26,040 Speaker 1: a partner and ahead of America's anti financial crime. Let's 443 00:23:26,080 --> 00:23:28,439 Speaker 1: turn to the issue of race and pay. When it 444 00:23:28,480 --> 00:23:31,320 Speaker 1: comes to social media. Anyone can get famous on TikTok, 445 00:23:31,400 --> 00:23:34,959 Speaker 1: YouTube or Instagram, or maybe anyone solver tone of anyone, 446 00:23:35,200 --> 00:23:36,760 Speaker 1: but it's a lot easier to make a living there 447 00:23:37,119 --> 00:23:39,639 Speaker 1: if you're white. Bloombers, we need a young In collaboration 448 00:23:39,680 --> 00:23:42,919 Speaker 1: with Bloomberg, Quicktake explores how marketers are under paying black 449 00:23:42,960 --> 00:23:47,840 Speaker 1: influencers while simultaneously pushing black lives matter in this Bloomberg 450 00:23:47,880 --> 00:23:53,080 Speaker 1: Radio special report. When I first started on TikTok, it 451 00:23:53,200 --> 00:23:55,439 Speaker 1: was already a big talk about how much the biggest 452 00:23:55,480 --> 00:23:58,560 Speaker 1: influencer on the app was making at the time. Comparing 453 00:23:58,600 --> 00:24:00,520 Speaker 1: that to what I was getting off for it, I 454 00:24:00,520 --> 00:24:03,800 Speaker 1: could tell. Twenty two year old Sydney McCrae is an 455 00:24:03,800 --> 00:24:08,240 Speaker 1: influencer and choreographer. She's known widely for creating a viral 456 00:24:08,359 --> 00:24:16,359 Speaker 1: dance to Megan the Stallion sex positive club banger Captain Hook. 457 00:24:16,920 --> 00:24:19,520 Speaker 1: McCray noticed a pay gap in the industry as soon 458 00:24:19,560 --> 00:24:23,000 Speaker 1: as she first started making beauty tutorials on YouTube about 459 00:24:23,040 --> 00:24:25,679 Speaker 1: a year ago, and after the viral post where she 460 00:24:25,760 --> 00:24:29,560 Speaker 1: explained her dance step by step, the popular videos attracted 461 00:24:29,600 --> 00:24:33,440 Speaker 1: more than four hundred thousand likes within weeks of posting. 462 00:24:33,600 --> 00:24:38,040 Speaker 1: Many of TikTok's top stars performed their versions of McRae's choreography, 463 00:24:38,240 --> 00:24:43,280 Speaker 1: also helping the song soar in popularity. Then in April, 464 00:24:43,320 --> 00:24:47,400 Speaker 1: Megan the Stallion herself joined in and McCray started gaining 465 00:24:47,480 --> 00:24:51,240 Speaker 1: followers by the thousands. Now she has one point one 466 00:24:51,320 --> 00:24:55,760 Speaker 1: million TikTok followers and she's verified. But she and other 467 00:24:55,800 --> 00:24:59,119 Speaker 1: black digital content creator said, none of that talent or 468 00:24:59,160 --> 00:25:03,159 Speaker 1: impact ma better in the multibillion dollar global market for 469 00:25:03,240 --> 00:25:07,520 Speaker 1: brand endorsements on social media. As a content creator, seeing 470 00:25:07,560 --> 00:25:10,200 Speaker 1: all of the things that we can do for an 471 00:25:10,320 --> 00:25:13,280 Speaker 1: artist or a company, in receiving such little pay for 472 00:25:13,359 --> 00:25:17,920 Speaker 1: our artistic creations, it was a slap in the face. Really, boy, 473 00:25:17,960 --> 00:25:20,760 Speaker 1: that's why your hairline going tobacco your net. Then there's 474 00:25:20,840 --> 00:25:24,760 Speaker 1: influencer in sketch comic Kinney Knox, who started posting videos 475 00:25:25,000 --> 00:25:28,760 Speaker 1: on the now defunct six second video app Vine. The 476 00:25:28,800 --> 00:25:32,640 Speaker 1: twenty two year old followers swelled to one point six million, 477 00:25:33,000 --> 00:25:35,480 Speaker 1: and he became one of the top creators on the app. 478 00:25:36,119 --> 00:25:39,440 Speaker 1: Yet he did not get any offers for brand deals, 479 00:25:39,920 --> 00:25:42,720 Speaker 1: but he noticed his non black peers who didn't have 480 00:25:42,800 --> 00:25:46,320 Speaker 1: as many followers or activity as him, did get work 481 00:25:46,400 --> 00:25:49,040 Speaker 1: with the big brands. It was weird because it was like, 482 00:25:49,080 --> 00:25:51,639 Speaker 1: I'm going viral with every video, but no company is 483 00:25:51,680 --> 00:25:54,880 Speaker 1: even looking my way. When it comes to twenty five 484 00:25:54,960 --> 00:25:59,720 Speaker 1: year old land and Moss, this influencer and actor once 485 00:25:59,800 --> 00:26:02,320 Speaker 1: had a huge brand deal with a couple of other 486 00:26:02,359 --> 00:26:05,600 Speaker 1: influencers on the same contract. I come to find out 487 00:26:05,640 --> 00:26:08,200 Speaker 1: that they had made like devil of what I was making, 488 00:26:08,480 --> 00:26:10,720 Speaker 1: and one of them had way less followers of me. 489 00:26:10,960 --> 00:26:12,960 Speaker 1: It was just weird to me that he had made 490 00:26:13,000 --> 00:26:15,320 Speaker 1: more money than me with less followers. And then to 491 00:26:15,359 --> 00:26:18,280 Speaker 1: think about like what I was originally offered, Like what 492 00:26:18,320 --> 00:26:21,480 Speaker 1: do they offer him? He sums up the influencer pay 493 00:26:21,560 --> 00:26:25,720 Speaker 1: gap like this. Racism isn't exclusive to a certain field, 494 00:26:25,800 --> 00:26:27,520 Speaker 1: and so even when you have new fields like the 495 00:26:27,560 --> 00:26:30,919 Speaker 1: influencer industry, it's gonna make its way in there too, 496 00:26:31,320 --> 00:26:35,640 Speaker 1: mccraine mas said Knox Tell Bloomberg Quick Take. White influencers 497 00:26:35,640 --> 00:26:39,240 Speaker 1: have reposted their work or stolen their ideas which then 498 00:26:39,320 --> 00:26:43,480 Speaker 1: went viral on those accounts, but they the original creators, 499 00:26:43,800 --> 00:26:47,800 Speaker 1: got no credit. People take advantage of like black creatives 500 00:26:47,840 --> 00:26:50,040 Speaker 1: like this trend and it's all fun and then so 501 00:26:50,160 --> 00:26:52,720 Speaker 1: on profits off something that a black creator started and 502 00:26:52,720 --> 00:26:55,480 Speaker 1: then they get praise and fame, and you know, and 503 00:26:55,520 --> 00:26:57,600 Speaker 1: when that's just the piece of us and it doesn't 504 00:26:57,640 --> 00:27:00,840 Speaker 1: stop there. These influencers say they have to be extra 505 00:27:00,920 --> 00:27:04,000 Speaker 1: careful about what they say, where, how they look, what 506 00:27:04,200 --> 00:27:08,720 Speaker 1: causes they support, so they won't offend any of the brands. Meanwhile, 507 00:27:08,840 --> 00:27:11,879 Speaker 1: they say they're white peers get away with more explicit 508 00:27:11,960 --> 00:27:15,520 Speaker 1: posts with merely a slap on the wrist from big brands. 509 00:27:16,200 --> 00:27:18,520 Speaker 1: One of the reasons why it's been such a difficult 510 00:27:18,600 --> 00:27:22,240 Speaker 1: experience for many black creators is because traditionally, in Hollywood, 511 00:27:22,640 --> 00:27:26,480 Speaker 1: racial biases have tended to flow from the top. Executives 512 00:27:26,560 --> 00:27:29,600 Speaker 1: hire white directors and producers, who in turn work with 513 00:27:29,680 --> 00:27:34,200 Speaker 1: white casting agents who cast white actors. Whenever black talent 514 00:27:34,359 --> 00:27:37,960 Speaker 1: is considered, it's often for roles or projects that specifically 515 00:27:38,000 --> 00:27:42,600 Speaker 1: require it. Social media companies have often promoted diversity initiatives, 516 00:27:42,720 --> 00:27:51,480 Speaker 1: but in practice they're not much different. Inter summer twenty, 517 00:27:51,600 --> 00:27:54,879 Speaker 1: when the police killing of George Floyd forced America into 518 00:27:54,920 --> 00:27:58,960 Speaker 1: a racial reckoning and sparked an international Black Lives Matter movement, 519 00:27:59,560 --> 00:28:02,880 Speaker 1: brands gained a strong desire to work with black influencers, 520 00:28:03,080 --> 00:28:06,120 Speaker 1: and black talent managers started getting more calls for their 521 00:28:06,119 --> 00:28:11,280 Speaker 1: black creators. Knox interpreted those moves this way, I appreciate 522 00:28:11,600 --> 00:28:14,280 Speaker 1: the brands working with the black creators and starting to 523 00:28:14,320 --> 00:28:17,320 Speaker 1: go in that direction, but it wasn't a trend that 524 00:28:17,400 --> 00:28:19,959 Speaker 1: they wanted to work when more black creators because they 525 00:28:20,040 --> 00:28:23,920 Speaker 1: felt guilty. Knox Masson McRae are hoping for a more 526 00:28:23,920 --> 00:28:27,600 Speaker 1: equitable influencer industry going forward. What I hope to see 527 00:28:27,680 --> 00:28:31,240 Speaker 1: change in the industry is the black creatives get the 528 00:28:31,359 --> 00:28:36,240 Speaker 1: credit that we deserve, genuine appreciation for Black creators, not 529 00:28:36,359 --> 00:28:39,840 Speaker 1: just when it's convenient, and even playing field when it 530 00:28:39,880 --> 00:28:44,280 Speaker 1: comes to creators of all colors, specifically black creators, giving 531 00:28:44,320 --> 00:28:47,600 Speaker 1: them that same energy that they're giving the white creators. 532 00:28:47,880 --> 00:28:51,080 Speaker 1: And they're hoping hashtag higher Black Creatives is not just 533 00:28:51,160 --> 00:28:55,120 Speaker 1: a trend or relegated to the diversity section, but baked 534 00:28:55,120 --> 00:28:58,760 Speaker 1: into the culture of brands in New York. I'm really 535 00:28:58,880 --> 00:29:01,760 Speaker 1: to young Bloomberg Dio, thank you so much for anita 536 00:29:01,920 --> 00:29:05,520 Speaker 1: really important issue at a time of transformation socially over 537 00:29:05,560 --> 00:29:07,320 Speaker 1: that a lot of people have been hoping for and 538 00:29:07,320 --> 00:29:11,760 Speaker 1: waiting for. This is the Bloomberg Surveillance Podcast. Thanks for listening. 539 00:29:12,120 --> 00:29:15,480 Speaker 1: Join us live weekdays from seven to ten am Eastern 540 00:29:15,720 --> 00:29:19,760 Speaker 1: on Bloomberg Radio and on Bloomberg Television. Each day from 541 00:29:19,800 --> 00:29:25,080 Speaker 1: six to nine am for insight from the best in economics, finance, investment, 542 00:29:25,240 --> 00:29:30,240 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 543 00:29:30,320 --> 00:29:34,120 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course, on 544 00:29:34,240 --> 00:29:38,400 Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg.