Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Lee. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg
Speaker 1: dot com, and of course, on the Bloomberg terminal. Mark
Speaker 1: upon it joined US now Banks America Security's head of
Speaker 1: US Right Strategy mark substantial further progress that awards were
Speaker 1: all interested in. The FED won't define them. Are we
Speaker 1: done yet? I don't think we're there yet, but I
Speaker 1: agree with you. I think they're gonna be the three
Speaker 1: most important words for financial markets over the next quarter
Speaker 1: or two. It's substantial further progress and that holds the
Speaker 1: key to determining when the FED will begin to slow
Speaker 1: their asset purchases, which will eventually pave the way for
Speaker 1: them to potentially raise interest rates. That the FED hasn't
Speaker 1: told us what substantial for the progress means. We believe
Speaker 1: that it likely means a labor market that is back
Speaker 1: to pre COVID levels. The FED has been reiterating that
Speaker 1: we're in an eight million job hole um. That's the
Speaker 1: level of employment where we are today versus where we
Speaker 1: were pre pandemic. But we anticipate a lot of progress
Speaker 1: in closing that whole and in filling that hole over
Speaker 1: the next few months. We anticipate essentially million job growth
Speaker 1: months over the next several months, and we believe that
Speaker 1: that will allow for the FED to assess that we
Speaker 1: are making substantial for the progress. Likely by the end
Speaker 1: of the year that will have been achieved, and we
Speaker 1: anticipate that the FED will begin to signal that they're
Speaker 1: moving in that direction um to agree that there has
Speaker 1: been substantial for the progress by the summer or the
Speaker 1: early fall. We're sort of thinking, you know, August Jackson
Speaker 1: Hole or potentially September f o MC for when we
Speaker 1: could see a shift in the timing for when asset
Speaker 1: purchases will begin to be withdrawn. That will be clear.
Speaker 1: I don't think that this withdrawal will start until Q
Speaker 1: one of next year, but the FED will start sending
Speaker 1: the signal over the summer. You took away my next question,
Speaker 1: because that's what I was going to ask, what the
Speaker 1: actual type would look like and when it would be executed,
Speaker 1: So mark up build on that. Just the sequencing some
Speaker 1: words you use this will pave the way for rat
Speaker 1: increases the sequence. That is it that obvious that that
Speaker 1: will be the next step in the imminent future. Well,
Speaker 1: that's what the FED has told us recently. So this
Speaker 1: week they started focusing a little bit more on what
Speaker 1: the path for accommodation withdrawal will look like. They stressed
Speaker 1: the tapering of asset purchases will happen before they begin
Speaker 1: to raise interest rates. Now, we think that they ideally
Speaker 1: want to complete that taper. They want to stop buying
Speaker 1: before they raise rates UM, and that's still gonna be
Speaker 1: some time away. We think that the taper process will
Speaker 1: likely be a year or so uh, and that they
Speaker 1: won't start raising rates until at some point in three
Speaker 1: we think the latter half of UM. So it's gonna
Speaker 1: be a long path to get there. But what the
Speaker 1: market's going to care about is when the Fed starts
Speaker 1: to signal that it is moving in that direction, because
Speaker 1: the market is very quickly going to extrapolate from a
Speaker 1: FED that is cutting its asset purchases or at least
Speaker 1: setting the stage for that UM and then extrapolating rate
Speaker 1: hikes at some point in the future off of that mark.
Speaker 1: What I'm hearing from you is higher rates ahead. What
Speaker 1: I hear from everyone, almost everyone, higher rates ahead. Looking
Speaker 1: here at ten year yields, they are lower. They're aggressively
Speaker 1: lower on the week compared to the past a few weeks.
Speaker 1: What gives? Yeah, So, look, you're you're exactly right. Really
Speaker 1: since the start of the second quarter, since the start
Speaker 1: of April, we're down about twenty basis points on the
Speaker 1: ten year um, and frankly, it has been a bit
Speaker 1: of a surprise, especially given the very robust economic data
Speaker 1: that we have seen. You're at good retail sales report,
Speaker 1: solid cp I and incredibly strong employment report earlier this month.
Speaker 1: So why we think that it's essentially three factors that
Speaker 1: are driving it. One, we're starting to see some pockets
Speaker 1: of demand from foreign investors and asset managers, especially with
Speaker 1: equities at all time highs. Too, we think that there's
Speaker 1: been likely a technical squeeze here some short positions that
Speaker 1: got squeezed in the move and are now covering. And Three,
Speaker 1: we also think that there's just an incredible amount of
Speaker 1: cash outstanding. The amount of reserves in the banking system
Speaker 1: has grown a hundred billion dollars since April, it's grown
Speaker 1: almost a quarter or twenty just this year, so we've
Speaker 1: seen a lot more cash in the banking system and
Speaker 1: that's looking for a home. This also coincides with stimulus
Speaker 1: checks that have been paid out and investors and recipients
Speaker 1: of those stimulus checks that suggest, at least to the
Speaker 1: New York Fed, of that money is going to be
Speaker 1: invested and saved and that's finding its way into financial assets.
Speaker 1: So to some extent, this is a rally where everything
Speaker 1: is rich ining right, Rates are declining, equities are reaching
Speaker 1: all time hime. We know what's happening with crypto and
Speaker 1: other alternative assets. All of the those are appreciating, and
Speaker 1: so we do think that the rates market is a
Speaker 1: beneficiary of some of that that's pushing rates lower. Now, importantly,
Speaker 1: what we see in the rates move is that it's
Speaker 1: really all real rate lead, where the majority of it
Speaker 1: is real rate lead. That's an easing of financial conditions. Um.
Speaker 1: We also anticipate that this will likely be temporary and
Speaker 1: short lived. Fundamentals will trump here and fundamentals are going
Speaker 1: to be incredibly strong over the remainder of this year.
Speaker 1: So we've been encouraging clients take this opportunity this little
Speaker 1: rate rally and reset your shorts because this will not
Speaker 1: likely persist. The economy is gonna be really strong, Inflation
Speaker 1: is gonna start to pick up, and the Fed will
Speaker 1: begin to change their tune. And as all of those
Speaker 1: things happen, rates are gonna move higher. Mark with some
Speaker 1: conviction of the end that looking forward to the conversation
Speaker 1: through the rest of this year, market pound of that
Speaker 1: of bankf America Securities, the head of US rights strategy,
Speaker 1: and let's talk about the addlies we can do that
Speaker 1: with that, I'm back a cab at Sadia Reese Search analyst. Colle,
Speaker 1: there's three worlds right now in your world. We've got
Speaker 1: the business world, We've got international travel, and then we've
Speaker 1: got leisure. And they all look different, don't they Can
Speaker 1: you just walk through them one by one? Yes, good
Speaker 1: morning and thanks for having me team. Um So, business
Speaker 1: travel is kind of a tale of two businesses one
Speaker 1: or maybe three. A one is small and medium sized
Speaker 1: companies that have never really left. Those folks. They're the
Speaker 1: folks who need revenue, so they are traveling. Then there's
Speaker 1: corporate business and that hasn't come back yet maybe a
Speaker 1: little bit, but in general, if you're a big corporation,
Speaker 1: sales tend to come to you, you don't have to
Speaker 1: go out and get them. And then there's conferences, which
Speaker 1: I noticed are starting to come back. I'm going to
Speaker 1: one this weekend in aviation conference that starts um I
Speaker 1: think Monday, and then um World of Concrete is apparently
Speaker 1: the first conference in June that's returning to Las Vegas,
Speaker 1: so that's coming back. So that's the business side. Then
Speaker 1: you have the international. There's again two different worlds. One
Speaker 1: is our hemisphere where I think as Americans are getting vaccinated,
Speaker 1: they feel more comfortable traveling, so they're going to the Caribbean.
Speaker 1: They're going they're going to beach destinations and mountains and
Speaker 1: outdoor things, Latin American beach destinations, Mexico um I mentioned
Speaker 1: the Caribbean, and a lot of the big resort hotels
Speaker 1: are making it very easy for Americans to test before
Speaker 1: they go back to the United States because we still
Speaker 1: have to test even if you're vaccinated before you come back,
Speaker 1: and the airports are doing the same, so that makes
Speaker 1: it relatively easy. And then there's Europe, which is I
Speaker 1: think four to six months behind us, and then Asia
Speaker 1: which is probably a year behind us. I don't see
Speaker 1: Asia coming back really until um two at the earliest,
Speaker 1: and even Europe fourth quarter or maybe. And then there's leisure,
Speaker 1: domestic leisure, and I think domestic leisure is at least
Speaker 1: nine of the way back. And I think those million
Speaker 1: and a half people we see traveling every day roughly
Speaker 1: somewhere between a million two a million five UM. I
Speaker 1: think about a million UM, I would think all about
Speaker 1: a hundred and fifty or two hundred thousand of them
Speaker 1: our leisure. And I know right it's it's pretty amazing
Speaker 1: that people feel really comfortable traveling, and as they get vaccinated,
Speaker 1: they're doing things you I was listening to you guys
Speaker 1: talk about, you know, going back to restaurants and stuff. Um. Yeah.
Speaker 1: I mean if I got vaccinated and I'm out of
Speaker 1: my two week window from because I got you know,
Speaker 1: the one vaccine with two shots, then why am I
Speaker 1: still in Paradise prison. Why can't I go out and
Speaker 1: start my next I said, my next normal as supposed
Speaker 1: to reclaiming my life. But why can I start doing
Speaker 1: the things that I used to do before I got
Speaker 1: locked down? Yeah, Helene, I gotta say it is almost
Speaker 1: trying to make us feel bad for being at work
Speaker 1: and not on those Caribbean beaches and the fantastic destinations
Speaker 1: that you're talking about. A lot of people want to
Speaker 1: go places. There's a question about the airline and whether
Speaker 1: they can meet demand given how many people they have
Speaker 1: to bring back into the offices and bring back to
Speaker 1: their airplanes. I know that Delta had an issue with
Speaker 1: not having enough pilots, not having enough flight attendants, and
Speaker 1: they had to cancel flights. Are you hearing difficulties around
Speaker 1: this and with respect to that, are they raising some
Speaker 1: of the wages in response? Um. So there's a lot
Speaker 1: of questions in there. And one of the issues Delta had,
Speaker 1: and I don't know that this is an excuse, but
Speaker 1: it's what they said, is that, UM, a lot of
Speaker 1: their pilots were able to get vaccinated, and the FAA
Speaker 1: doesn't let you fly within forty eight hours of getting vaccinated,
Speaker 1: so they had to cancel flights. You would just think
Speaker 1: they would have timed that a little bit better so
Speaker 1: it didn't happen over Easter weekend. UM. As far as
Speaker 1: wage rates, I want to tackle that because I think
Speaker 1: it's really important. The Big Three airlines American, Delta, and
Speaker 1: United all have open pilot contracts, and um, we think
Speaker 1: wages at the starting level or definitely going to go up.
Speaker 1: I'm not a hundred percenter in that wages at the
Speaker 1: top end will go up more than a few dollars
Speaker 1: an hour. But when the pandemic hit really hard a
Speaker 1: year ago, and it was exactly a year ago that
Speaker 1: traffic bottom depth at eighty seven eighty five thousand a
Speaker 1: day level, and I said, we're now back to a
Speaker 1: million five. Um, the airlines worked with their employees to
Speaker 1: try to get anybody who was thinking about retiring between say,
Speaker 1: to think about retiring. Last year, some of the airlines
Speaker 1: worked with their people to cut hours so they didn't
Speaker 1: have to furlough as many people. I mean, one thing
Speaker 1: to consider for pilots, it's always last in, first out,
Speaker 1: which means they would have had to furlough a lot
Speaker 1: of pilots at the lower end of the pay skill
Speaker 1: and at the lesser seniority level, versus keeping those pilots
Speaker 1: and asking older pilots who were kind of sixty two
Speaker 1: to sixty five, well, mandatory retirement ages sixty five anyway,
Speaker 1: But pilots in their sixties to think about retiring earlier,
Speaker 1: working few hours to keep more people on the peril
Speaker 1: so that when we recover, we're ready to rock and
Speaker 1: roll as opposed to having issues. As you know, I'm
Speaker 1: hearing there are issues in some other service sectors. Well,
Speaker 1: they're rocking and rolling for some of these airlines right now.
Speaker 1: Helloeen fantastically catch out with you. You're not just an analyst.
Speaker 1: I know how much you care about this industry as well,
Speaker 1: and it's good to see it back on its feet.
Speaker 1: He line back of the cam and senior research analysts.
Speaker 1: Let's bring in Stephen Stanley. I must pay upon chief economists. Stephen,
Speaker 1: what a week. We can take a deep breath and
Speaker 1: move on to the weekend. Soon. You'll take on the
Speaker 1: data so far this week, Stephen. Sure, well, pretty much
Speaker 1: every high profile March economic indicator has been far stronger
Speaker 1: than expected, going all the way back to the I
Speaker 1: M and employment numbers in the prior week. But certainly
Speaker 1: the retail sales numbers yesterday and now the housing starts
Speaker 1: numbers today. I think in some ways it was a
Speaker 1: perfect storm in March, because February you had the bad weather,
Speaker 1: particularly as it released to how starts, which would have
Speaker 1: depressed a lot of the February data. And I think
Speaker 1: March for housing starts at least was a catch up
Speaker 1: based on the weather. But certainly the market, the housing
Speaker 1: market continues to be extremely strong and builders are going
Speaker 1: to be uh playing catch up for a long time.
Speaker 1: So you know, the more starts they can get under
Speaker 1: their belts, the better it is for the market. Stephen One,
Speaker 1: try if this recovery has just been how quickly things
Speaker 1: have move in As an economist, how difficult do you
Speaker 1: find to get just to keep up? Yeah, you have
Speaker 1: to be nimble. I mean usually when you're doing your
Speaker 1: GDP tracking estimates, they might move by one or two
Speaker 1: or three tenths when a particular number comes out. But
Speaker 1: you get a number like retail sales yesterday, and all
Speaker 1: of a sudden you're revising by one to three percentage
Speaker 1: points depending on what your forecast was going in. And
Speaker 1: I think, um, you know, that's something that that I
Speaker 1: think relates to the FED as well, because the Fed
Speaker 1: has this thought in their head that they're going to
Speaker 1: be able to move very slowly and just kind of
Speaker 1: you know, inch their way back toward normal and policy.
Speaker 1: But If the economy continues to gain ground at the
Speaker 1: speed that we're seeing right now, then things may play
Speaker 1: out quite a bit differently. Among the economic mysteries of
Speaker 1: the week has been bank earnings and the lack of
Speaker 1: loan demand. A lot of banks and executives they're saying
Speaker 1: this is actually a good thing. It's because there's so
Speaker 1: much cash that people are spending that and paying down
Speaker 1: their debt so to be that much more ready to
Speaker 1: spend later on. Do you view it the same way
Speaker 1: or are there are signs of caution within the lack
Speaker 1: of loan demand now? I think it's the function of
Speaker 1: the fact that people are people, and corporations at this
Speaker 1: point are very flush. I mean, the household sector has
Speaker 1: been has gotten three rounds of rebate checks, very generous
Speaker 1: unemployment benefits, and if you look at the personal income
Speaker 1: numbers and the savings rate, there's no reason for people
Speaker 1: to borrow. The only reason that people are going to
Speaker 1: have the borrow really is as you as you mentioned before,
Speaker 1: is is home mortgages. On the corporate side is kind
Speaker 1: of the same thing. We saw this blowout in UH
Speaker 1: corporate bond issues last year and into into this year,
Speaker 1: and I think most companies are are pretty flushed with
Speaker 1: cash right now and sitting on that cash and waiting
Speaker 1: to deploy it. So there's really not much need for
Speaker 1: a lot of borrowing at this point, except for you know,
Speaker 1: specific sectors like home mortgages and maybe you know, student
Speaker 1: loans and a few other things. So how do you determine, Stephen,
Speaker 1: if we've got enough momentum to keep this pace of
Speaker 1: spending up, perhaps on a credit line rather than just
Speaker 1: using cash beyond the next two quarters or whatever it
Speaker 1: is to to wear down some of this cash. Well,
Speaker 1: there are various numbers that you can look at. Obviously,
Speaker 1: the savings rate comes out every month. The FED puts
Speaker 1: out quarterly data on um, you know, household financial assets
Speaker 1: and and things like that, and those data indicate that
Speaker 1: that consumers are just flush right now, a lot of money.
Speaker 1: And that was even before this latest round of rebate checks.
Speaker 1: So I think it's going to take a while for
Speaker 1: consumers to plow through that stockpile. And I think they've
Speaker 1: been saving up to do all the fun stuff that
Speaker 1: we haven't been able to do for the last year.
Speaker 1: Travel and uh, you know, go out to events, uh
Speaker 1: and things like that, and so I think there's certainly
Speaker 1: going to be kind of this one off, you know,
Speaker 1: blowout period where people are you know, everybody's trying to
Speaker 1: take a vacation at the same time, everybody's trying to
Speaker 1: go to the same concerts and ball games and all
Speaker 1: the rest. Uh. And then once the dusk starts to settle,
Speaker 1: we'll see where we are at that point. Seven, We've
Speaker 1: got to talk about the shift in the reaction function
Speaker 1: of the FET, the shift in the framework. It's a
Speaker 1: framework that would have been perfect for the previous cycle,
Speaker 1: would have made a load of sense. Does it make
Speaker 1: sense for this one? Well, you know, I think it
Speaker 1: all depends on how inflation plays out, right, because they
Speaker 1: what they've said basically is they want to wait to
Speaker 1: see the whites of the eyes of inflation. And again,
Speaker 1: I mean, the FET has conceded that we're going to
Speaker 1: get this uh short term pop in prices. But then
Speaker 1: they think things are gonna you know, go right back
Speaker 1: into place add or below two um. If inflation gets
Speaker 1: well above their target and stays there for more than
Speaker 1: a few months, then I think, you know, at that point,
Speaker 1: the react the new reaction function probably looks a lot
Speaker 1: like the old one would have. UM, if inflation remains
Speaker 1: very benign, then I think they're gonna be extremely devish
Speaker 1: and wait a long time. But they may or may
Speaker 1: not have that luxury, depending on how prices behave Stephen,
Speaker 1: can we call it the weekend? Now? Are we done?
Speaker 1: I think we've done? Absolutely? Absolutely, thank you. I'm still here.
Speaker 1: Thank you, Stephen Stanley. So are you? John Economist? Just
Speaker 1: getting people on site? Okay, great, you're gonna throw off
Speaker 1: your mike. We're done. Daniel Tannon bound joys it now.
Speaker 1: Oliver Wyman, partner in a head of America's Anti financial
Speaker 1: crime unit. I'm curious from your perspective, Dan, of whether
Speaker 1: these sanctions were harsh and unexpected or perhaps too light
Speaker 1: given some of the potential allegations here. Thanks Lisa, and
Speaker 1: as as Nick Wattams and others reported last week, these
Speaker 1: sanctions were known to be coming in response to the
Speaker 1: solar winds hack and election meddling, and as described other
Speaker 1: malign activities by Russia. UM, I think what these sanctions
Speaker 1: looked like, We're a bit unclear coming into the announcement
Speaker 1: yesterday in terms of how severe they would be. It's
Speaker 1: pretty clear that this was a proper opening salvo and
Speaker 1: no attempt for a knockout punch. Also, these sanctions were
Speaker 1: quite explicitly responsive to just the hacking issues. You still
Speaker 1: have nord stream to lingering out there. You still have
Speaker 1: issues related to Alexi of only, as well as the
Speaker 1: Russian military build up on the Ukrainian border. So there's
Speaker 1: still a whole other range of issues that the U
Speaker 1: s could begin to push harder against on Russia. And
Speaker 1: I think this was just the warning shot. Well, and
Speaker 1: you certainly saw that in markets. I mean, you're seeing
Speaker 1: a bounce back today in the ruble uh now gaining
Speaker 1: versus the dollar. People seemed unfazed when it came to
Speaker 1: even sovereign debt, even though you did get a bar
Speaker 1: from some of the banks engaging with these securities what
Speaker 1: could potentially disrupt markets. That seems like a realistic escalation
Speaker 1: between the US and with with Russia. Yeah, And I
Speaker 1: think we've seen an evolution of securities trading related activity
Speaker 1: restriction since with the beginning of some of the dead
Speaker 1: and equity restrictions after CRIMEA was annexed by Russia. What
Speaker 1: we saw yesterday and again a build up after nine
Speaker 1: sanctions that restricted trading in non rubal denominated sovereign debt
Speaker 1: um is really this is only impacting primary market trade,
Speaker 1: So secondary market trades on Russian sovereign debt be it
Speaker 1: in euro be it in rouble are still permissible on
Speaker 1: the secondary market, and I think Treasury knew that this
Speaker 1: would have a muted impact, not kind of an adverse issue,
Speaker 1: similar to when the Oligarch sanctions were dropped in twenty
Speaker 1: eighteen and you saw a brief destabilization of the aluminum industry.
Speaker 1: So I think certainly you could touch upon greater restrictions
Speaker 1: and access to capital more broadly if you expand to
Speaker 1: the secondary market. I think it's very clear that the
Speaker 1: touch of just the primary market was only going to
Speaker 1: have a very limited response. Dan, I want to zoom
Speaker 1: out a little bit and go to something that Jeanie's
Speaker 1: Aino is talking about earlier, as she talked about politics
Speaker 1: and this President Biden, both domestically and now from a
Speaker 1: foreign policy perspective, she said that the bidens are very different,
Speaker 1: whether they're dealing with local issues or international ones. What's
Speaker 1: been your takeaway so far? Given his stance versus the Kremlin,
Speaker 1: given his stance with Iran, given his stance with China,
Speaker 1: I think there's been a very measured response to all
Speaker 1: of the issues that you've just described, whether it's North Korea,
Speaker 1: whether it's China, whether it's Iran, and certainly with Russia.
Speaker 1: On day one, the President announced the top the bottom
Speaker 1: review of the existing sanctions portfolio that had been in
Speaker 1: place for the last twenty plus years in the US
Speaker 1: to really understand the productivity the unforeseen consequences. I think
Speaker 1: the team that's been assembled at State Treasury and the
Speaker 1: National Security Apparatus have been experienced from the Bush and
Speaker 1: Obama administration, some from the Trump administration, and they know
Speaker 1: how to look around the corner to see the unforeseen,
Speaker 1: constantly unanticipated consequences. That being said, I think the market
Speaker 1: is still nervous. Friends of mine in multinational f i'es um,
Speaker 1: they're doing the analysis to see how these type of
Speaker 1: moves will ruin their days, much like some of the
Speaker 1: Chinese security restrictions ruined their Christmas break in December. Well,
Speaker 1: one reason why I love speaking with you, Dan is
Speaker 1: because you do have this bird's eye view in what
Speaker 1: companies are thinking in their risk offices in terms of
Speaker 1: charting at some sort of strategy, how do they get
Speaker 1: ahead of different administrations, and what's their main concern right
Speaker 1: now at the Biden administration about where the potential sanctions
Speaker 1: could come, where they could potentially be restricted going forward.
Speaker 1: So I think where what we see with this administration
Speaker 1: is certainly less unpredictability than what we've been seeing over
Speaker 1: the last four years. In particular, I think if you
Speaker 1: see some of the appointees of the Biden administration, them
Speaker 1: coming from a more mature sanctions and national security regime
Speaker 1: of the path, they know how to engage with institutions.
Speaker 1: So for some of these significant moves, um, you'll see
Speaker 1: Treasury reaching out the institutions in advance so they can
Speaker 1: prepare of them. Um. We saw this with Libya a
Speaker 1: number of years ago, where banks were notified in advance.
Speaker 1: So I think the institutions I work with take comfort
Speaker 1: that they know there's a certain maturity and how the
Speaker 1: Biden administration approaches these issues and there's not going to
Speaker 1: be certain knee jerk reactions that really disrupt the reaction
Speaker 1: in any sort of unforeseen way. There's also a question
Speaker 1: though internationally and Dan, I know this is sensitive and
Speaker 1: it might be uh something you don't want to weigh
Speaker 1: in on, but there was a fascinating story about how
Speaker 1: international banks are losing market share and some of the
Speaker 1: biggest Asian markets, whether it's in China, whether it's in India,
Speaker 1: and this has to do with the close relationship of
Speaker 1: local firms with the governments as well as restrictions that
Speaker 1: have been placed on them. How concerned are your clients
Speaker 1: about that, about pushback and a lack of competitive advantage
Speaker 1: overseas bringing them more closely to the domestic economy. I'm
Speaker 1: living and breathing this issue almost every day. I think
Speaker 1: you've seen China respond with certain counter sanctions that essentially
Speaker 1: create a significant conflict of law issue for global banks
Speaker 1: operating in the U S and China, and essentially it's
Speaker 1: forcing choice. You've already seen some global banks have picked
Speaker 1: China as they've repositioned senior leadership into Hong Kong and
Speaker 1: Greater China area. So I didn't see a lot of
Speaker 1: nervousness for how China could react to try and replicate
Speaker 1: some of what the US has done to bring foreign
Speaker 1: institutions um to really bend the knee towards the US.
Speaker 1: I think now you have a real threat to that
Speaker 1: going forward if China tries to exert those authorities they've
Speaker 1: granted themselves. Does this nervousness represent itself as retrenchment or
Speaker 1: is it simply just weariness. I think it's weariness, although
Speaker 1: you are seeing potential moves of retrenchment as the business
Speaker 1: has looked to organize themselves going forward, do you see
Speaker 1: some banks essentially split off their business in China as
Speaker 1: its own standalone entity and essentially split the rest of
Speaker 1: the organization around the world to keep it more operationally manageable. Um,
Speaker 1: there's a lot of different contingency plannings that are happening
Speaker 1: across a lot of large lobos right now. Dan, when's
Speaker 1: the next time you're getting on an airplane and going overseas?
Speaker 1: I I do not know, but I think my family
Speaker 1: is ready for me to do it quite soon. I
Speaker 1: think that goes for all of us. Daniel Tannebaum, thank
Speaker 1: you so much for being with us of Oliver Wyman,
Speaker 1: a partner and ahead of America's anti financial crime. Let's
Speaker 1: turn to the issue of race and pay. When it
Speaker 1: comes to social media. Anyone can get famous on TikTok,
Speaker 1: YouTube or Instagram, or maybe anyone solver tone of anyone,
Speaker 1: but it's a lot easier to make a living there
Speaker 1: if you're white. Bloombers, we need a young In collaboration
Speaker 1: with Bloomberg, Quicktake explores how marketers are under paying black
Speaker 1: influencers while simultaneously pushing black lives matter in this Bloomberg
Speaker 1: Radio special report. When I first started on TikTok, it
Speaker 1: was already a big talk about how much the biggest
Speaker 1: influencer on the app was making at the time. Comparing
Speaker 1: that to what I was getting off for it, I
Speaker 1: could tell. Twenty two year old Sydney McCrae is an
Speaker 1: influencer and choreographer. She's known widely for creating a viral
Speaker 1: dance to Megan the Stallion sex positive club banger Captain Hook.
Speaker 1: McCray noticed a pay gap in the industry as soon
Speaker 1: as she first started making beauty tutorials on YouTube about
Speaker 1: a year ago, and after the viral post where she
Speaker 1: explained her dance step by step, the popular videos attracted
Speaker 1: more than four hundred thousand likes within weeks of posting.
Speaker 1: Many of TikTok's top stars performed their versions of McRae's choreography,
Speaker 1: also helping the song soar in popularity. Then in April,
Speaker 1: Megan the Stallion herself joined in and McCray started gaining
Speaker 1: followers by the thousands. Now she has one point one
Speaker 1: million TikTok followers and she's verified. But she and other
Speaker 1: black digital content creator said, none of that talent or
Speaker 1: impact ma better in the multibillion dollar global market for
Speaker 1: brand endorsements on social media. As a content creator, seeing
Speaker 1: all of the things that we can do for an
Speaker 1: artist or a company, in receiving such little pay for
Speaker 1: our artistic creations, it was a slap in the face. Really, boy,
Speaker 1: that's why your hairline going tobacco your net. Then there's
Speaker 1: influencer in sketch comic Kinney Knox, who started posting videos
Speaker 1: on the now defunct six second video app Vine. The
Speaker 1: twenty two year old followers swelled to one point six million,
Speaker 1: and he became one of the top creators on the app.
Speaker 1: Yet he did not get any offers for brand deals,
Speaker 1: but he noticed his non black peers who didn't have
Speaker 1: as many followers or activity as him, did get work
Speaker 1: with the big brands. It was weird because it was like,
Speaker 1: I'm going viral with every video, but no company is
Speaker 1: even looking my way. When it comes to twenty five
Speaker 1: year old land and Moss, this influencer and actor once
Speaker 1: had a huge brand deal with a couple of other
Speaker 1: influencers on the same contract. I come to find out
Speaker 1: that they had made like devil of what I was making,
Speaker 1: and one of them had way less followers of me.
Speaker 1: It was just weird to me that he had made
Speaker 1: more money than me with less followers. And then to
Speaker 1: think about like what I was originally offered, Like what
Speaker 1: do they offer him? He sums up the influencer pay
Speaker 1: gap like this. Racism isn't exclusive to a certain field,
Speaker 1: and so even when you have new fields like the
Speaker 1: influencer industry, it's gonna make its way in there too,
Speaker 1: mccraine mas said Knox Tell Bloomberg Quick Take. White influencers
Speaker 1: have reposted their work or stolen their ideas which then
Speaker 1: went viral on those accounts, but they the original creators,
Speaker 1: got no credit. People take advantage of like black creatives
Speaker 1: like this trend and it's all fun and then so
Speaker 1: on profits off something that a black creator started and
Speaker 1: then they get praise and fame, and you know, and
Speaker 1: when that's just the piece of us and it doesn't
Speaker 1: stop there. These influencers say they have to be extra
Speaker 1: careful about what they say, where, how they look, what
Speaker 1: causes they support, so they won't offend any of the brands. Meanwhile,
Speaker 1: they say they're white peers get away with more explicit
Speaker 1: posts with merely a slap on the wrist from big brands.
Speaker 1: One of the reasons why it's been such a difficult
Speaker 1: experience for many black creators is because traditionally, in Hollywood,
Speaker 1: racial biases have tended to flow from the top. Executives
Speaker 1: hire white directors and producers, who in turn work with
Speaker 1: white casting agents who cast white actors. Whenever black talent
Speaker 1: is considered, it's often for roles or projects that specifically
Speaker 1: require it. Social media companies have often promoted diversity initiatives,
Speaker 1: but in practice they're not much different. Inter summer twenty,
Speaker 1: when the police killing of George Floyd forced America into
Speaker 1: a racial reckoning and sparked an international Black Lives Matter movement,
Speaker 1: brands gained a strong desire to work with black influencers,
Speaker 1: and black talent managers started getting more calls for their
Speaker 1: black creators. Knox interpreted those moves this way, I appreciate
Speaker 1: the brands working with the black creators and starting to
Speaker 1: go in that direction, but it wasn't a trend that
Speaker 1: they wanted to work when more black creators because they
Speaker 1: felt guilty. Knox Masson McRae are hoping for a more
Speaker 1: equitable influencer industry going forward. What I hope to see
Speaker 1: change in the industry is the black creatives get the
Speaker 1: credit that we deserve, genuine appreciation for Black creators, not
Speaker 1: just when it's convenient, and even playing field when it
Speaker 1: comes to creators of all colors, specifically black creators, giving
Speaker 1: them that same energy that they're giving the white creators.
Speaker 1: And they're hoping hashtag higher Black Creatives is not just
Speaker 1: a trend or relegated to the diversity section, but baked
Speaker 1: into the culture of brands in New York. I'm really
Speaker 1: to young Bloomberg Dio, thank you so much for anita
Speaker 1: really important issue at a time of transformation socially over
Speaker 1: that a lot of people have been hoping for and
Speaker 1: waiting for. This is the Bloomberg Surveillance Podcast. Thanks for listening.
Speaker 1: Join us live weekdays from seven to ten am Eastern
Speaker 1: on Bloomberg Radio and on Bloomberg Television. Each day from
Speaker 1: six to nine am for insight from the best in economics, finance, investment,
Speaker 1: and international relations. And subscribe to the Surveillance podcast on
Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course, on
Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg.