WEBVTT - US Recession Call Trickier Than Ever 0:00:01.840 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.480 --> 0:00:06.840 Tim Stanevik. We're here every day bringing you the latest 0:00:06.840 --> 0:00:11.000 news from the world's of business and finance, clus technology, politics, economics, 0:00:11.039 --> 0:00:14.040 all harnessing the power of Business Week reporters and editors, 0:00:14.160 --> 0:00:17.000 not to mention our journalists and analyst in more than 0:00:17.040 --> 0:00:21.160 one twenty countries. You can download Bloomberg Business Week on iTunes, SoundCloud, 0:00:21.239 --> 0:00:23.320 or Bloomberg dot com. You can also listen to our 0:00:23.360 --> 0:00:26.119 radio show at two pm Eastern Time on Bloomberg Radio 0:00:26.280 --> 0:00:30.880 or stream us live on YouTube and Bloomberg dot Com. 0:00:30.920 --> 0:00:33.159 The Bloomberg Big Take Today a story in the upcoming 0:00:33.159 --> 0:00:35.839 new issue of Bloomberg Business Week, add on newstands tomorrow, 0:00:35.880 --> 0:00:38.879 already online at Bloomberg dot com slash business Week. It's 0:00:38.920 --> 0:00:41.919 also on the Bloomberg Terminal. The story Tim taps into 0:00:42.000 --> 0:00:45.360 how traditional economic indicators, well they can't predict the timing 0:00:45.840 --> 0:00:48.080 of a downturn, and then some of the newer forecasting 0:00:48.120 --> 0:00:50.360 methods they're just kind of untested. Yeah, this is why 0:00:50.400 --> 0:00:52.839 I calling us recession is trickier than ever before, especially 0:00:52.880 --> 0:00:55.000 with all the mixed signals that we're getting. It is 0:00:55.040 --> 0:00:57.400 just not easy. We hear over and over again, it's 0:00:57.400 --> 0:01:01.920 not easy from CFO was it's tough here with the story. 0:01:01.920 --> 0:01:05.440 We got Bloomberg News US econom reporter Katya Dmitrieva on 0:01:05.520 --> 0:01:07.880 zoom the in the ninety nine one studio and Bloomberg 0:01:07.880 --> 0:01:09.640 Bureau in Washington, d C. Along with the editor of 0:01:09.680 --> 0:01:12.600 Business Week, Joe Webber. He's here in the Bloomberg Interactive 0:01:12.600 --> 0:01:14.960 Broker's studio. Come on, Joel. I thought this was easy. 0:01:15.000 --> 0:01:16.080 I thought all you had to do was be the 0:01:16.160 --> 0:01:19.000 national view of economic research and you just, you know, say, 0:01:19.640 --> 0:01:21.360 look in your crystal ball. I thought that tells you 0:01:21.400 --> 0:01:24.240 exactly when the recession may or may not go. Yeah. 0:01:24.280 --> 0:01:26.520 And on top of that that no pressure for economist 0:01:26.600 --> 0:01:29.880 here because they've had some noteworthy misses. Uh, you know 0:01:30.000 --> 0:01:34.760 there's an inflation thing from GDPHO things. Yeah. So so really, 0:01:34.800 --> 0:01:37.680 what's what's happened here is this, Uh, there's been a 0:01:37.720 --> 0:01:41.320 proliferation of data. Everybody's got an opinion now, right, gad 0:01:41.360 --> 0:01:44.640 you and and what is the best we can come 0:01:44.720 --> 0:01:46.360 up with with how to figure out how to call 0:01:46.400 --> 0:01:52.880 a recession? Yeah, there's a lot of data. In addition 0:01:52.920 --> 0:01:56.080 to the traditional indicators, you also have all of the 0:01:56.160 --> 0:02:00.440 new ones. You know, everything from the open table restaurant 0:02:00.480 --> 0:02:04.760 reservations to h where people are flying and if they're flying, 0:02:04.800 --> 0:02:07.640 if they're coming back into the office, and then even 0:02:07.680 --> 0:02:10.520 things like plastic surgery. Some economists like to look at 0:02:10.560 --> 0:02:13.240 that as a gauge of sort of how much people 0:02:13.280 --> 0:02:17.240 are spending on things that are completely discretionary of the time. 0:02:17.760 --> 0:02:20.079 So you have a lot of stuff to look at. Um, 0:02:20.400 --> 0:02:25.959 And unfortunately, you know, unfortunately it's no easier this time 0:02:26.000 --> 0:02:30.200 around with this data than it was, for example, during 0:02:30.400 --> 0:02:33.639 the last recession or pre COVID I should say, twenty nineteen, 0:02:33.680 --> 0:02:36.360 when everyone was thinking, okay, we're due for a recession 0:02:37.440 --> 0:02:42.320 before times the PC pre COVID times. Um, you know, 0:02:42.520 --> 0:02:47.600 I think right now, Uh, there is some indication of stress. Um, 0:02:47.720 --> 0:02:50.520 there is some indication that things are slowing down. But 0:02:50.600 --> 0:02:53.480 the tricky thing is trying to figure out when you're 0:02:53.639 --> 0:02:57.160 piecing together all these different pieces of the economy. Um, 0:02:57.320 --> 0:02:59.600 is the image that you get that we're entering a 0:02:59.680 --> 0:03:02.680 reset shan or is it simply a renormalization and kind 0:03:02.680 --> 0:03:06.240 of a slowing down to something we might have seen 0:03:06.320 --> 0:03:11.400 in nineteen. So that's what's proving very difficult for for 0:03:11.440 --> 0:03:13.600 a lot of economists right now. I'm so glad we're 0:03:13.600 --> 0:03:15.120 talking to you right now. We we just spoke with 0:03:15.200 --> 0:03:19.360 Mario Cordero, who runs the Port of Long Beach, and 0:03:19.480 --> 0:03:21.880 he was saying that, um, you know, we kind of 0:03:21.880 --> 0:03:24.040 like tried to hold his feet to the fire and 0:03:24.240 --> 0:03:25.960 get him to say whether or not we're in a recession, 0:03:25.960 --> 0:03:27.240 whether or not he sees one coming. I mean, this 0:03:27.280 --> 0:03:28.960 is the guy who can look out his window and 0:03:29.000 --> 0:03:31.200 see the economic activity, you know, how many ships are 0:03:31.240 --> 0:03:33.639 lined up in the economic activity that's taking part. And 0:03:33.800 --> 0:03:36.200 he wouldn't. He was like, I'm on team soft landing, 0:03:36.200 --> 0:03:39.160 but he wasn't comfortable making a call. We said like 0:03:39.240 --> 0:03:40.640 yes or no, and he wouldn't do it. Yeah, he 0:03:40.640 --> 0:03:43.880 wouldn't do it, right, Yeah, you know, I mean that's 0:03:43.920 --> 0:03:45.880 the exact same experience that you're going to get with 0:03:45.920 --> 0:03:47.880 a lot of other economists right now. I mean, even 0:03:47.920 --> 0:03:51.080 Claudia Sam you know she created the some rule. Uh, 0:03:51.120 --> 0:03:53.160 this is sort of when you talk about art versus 0:03:53.200 --> 0:03:56.520 science and economy. This is pretty much as science as 0:03:56.520 --> 0:03:58.160 you can get. You know, It's a line on a 0:03:58.240 --> 0:04:01.520 chart attracts the on him ployment rate over time, compared 0:04:01.560 --> 0:04:04.120 to the sort of past twelve months unemployment rate, and 0:04:04.160 --> 0:04:08.520 it is very accurate in terms of predicting at a 0:04:08.520 --> 0:04:11.440 certain point. Okay, we've entered a recession, and yet even 0:04:11.480 --> 0:04:13.920 when I was chatting with her, she was saying, you know, 0:04:14.080 --> 0:04:16.960 I hope that it's wrong this time around. And there's 0:04:17.000 --> 0:04:20.360 a chance that it might be wrong this time around 0:04:20.400 --> 0:04:24.440 because the consumer outlook is still pretty strong and we 0:04:24.480 --> 0:04:27.960 haven't seen a lot of kind of impact negative impact 0:04:27.960 --> 0:04:31.760 in the labor market yet. Um. And again, I mean, 0:04:32.480 --> 0:04:36.039 we could enter a situation where consumer spending managers to 0:04:36.080 --> 0:04:38.680 hold up. Right. So, we saw the retail sales figures 0:04:38.960 --> 0:04:42.000 for the past few months pretty dismal, but we're coming 0:04:42.000 --> 0:04:44.919 off of that high, right, So um, we could enter 0:04:44.960 --> 0:04:47.359 a situation where companies have a bit more room to 0:04:47.360 --> 0:04:50.240 cut prices now, Um, now that the FED is kind 0:04:50.240 --> 0:04:53.039 of done its job and we're seeing inflation slow down 0:04:53.080 --> 0:04:55.640 a bit. Um, And then we could have consumers saying, Okay, 0:04:55.760 --> 0:04:57.640 I'm going to keep spending, maybe not like I did 0:04:57.680 --> 0:04:59.800 two years ago or a year ago, but you know, 0:04:59.839 --> 0:05:02.400 I gonna keep this economy going. Everyone's going to keep 0:05:02.400 --> 0:05:05.480 doing their part. Uh. So it's just still a big 0:05:05.560 --> 0:05:10.000 question mark words later, you know, twenty economists interviews later, 0:05:10.000 --> 0:05:13.359 and it's still to be I'll do my part. Um, 0:05:13.560 --> 0:05:16.960 So what about the yield curve, because that's then as 0:05:16.960 --> 0:05:21.120 you write a tried and true recession indicator, does it 0:05:21.240 --> 0:05:24.359 still hold as much weight as we've always thought or 0:05:24.440 --> 0:05:27.120 is it sort of slightly maybe less? And these other 0:05:27.200 --> 0:05:29.599 things kind of take into account, like what what's the 0:05:29.680 --> 0:05:36.720 new uh, you know, the new thinking on inverted yield curves? Yeah, 0:05:36.720 --> 0:05:39.440 the yield curve is a funny one people people love 0:05:39.480 --> 0:05:42.200 it and it's a great Um. It's a great indicator 0:05:42.320 --> 0:05:46.080 of what investors are thinking and whether they see kind 0:05:46.120 --> 0:05:49.600 of a recession down the road. And it's pretty straightforward. 0:05:50.120 --> 0:05:53.919 Um when sort of the short versus long term the 0:05:53.960 --> 0:05:56.600 curve inverts like it's a it's a signal. It's one 0:05:56.600 --> 0:05:59.120 signal of many signals. Um, But how does it compare 0:05:59.200 --> 0:06:03.560 with a drop in sales of men's underwear? Yeah? Yeah, 0:06:03.600 --> 0:06:06.039 I know, Alan Green's fans favored or used to be 0:06:06.080 --> 0:06:10.640 his favorite indicator. Um. You know, it's it's more accurate 0:06:10.680 --> 0:06:12.640 than a lot of other indicators. The thing. The thing 0:06:12.680 --> 0:06:16.440 with the yield curban version though, is that there could 0:06:16.440 --> 0:06:18.320 be a false positive. So we have in the nineteen 0:06:18.400 --> 0:06:21.120 sixties where the yield curve inverted and we didn't have 0:06:21.480 --> 0:06:25.040 a recession immediately afterwards. And we also had the yield 0:06:25.040 --> 0:06:29.040 curve inverting twice at least twice last year. And we're 0:06:29.080 --> 0:06:31.240 you know, I mean, you could talk to some economists, 0:06:31.240 --> 0:06:34.960 they'd argue, we're already in a recession, but we don't see, um, 0:06:35.040 --> 0:06:37.960 the traditional signs of a recession right this very second. 0:06:38.040 --> 0:06:41.360 So you could maybe even call call that a false positive. 0:06:41.520 --> 0:06:44.360 So with a lot of these indicators, like you really 0:06:44.400 --> 0:06:48.800 have to take them all together. So yield curve plus 0:06:48.839 --> 0:06:51.560 the som rule plus you know, for example, the Conference 0:06:51.600 --> 0:06:55.479 Boards leading Indicator index, which is weakening and flashing rend. 0:06:55.600 --> 0:06:57.280 It's going to wait for a year when everybody says, oh, 0:06:57.279 --> 0:07:03.719 guess what we were in all it already happened. Hey, listen, 0:07:04.080 --> 0:07:06.520 how does though there's a great sound bite in your 0:07:06.720 --> 0:07:09.440 in your story are a great quote about how this 0:07:09.480 --> 0:07:12.800 is the most traditional of traditional recessions in a couple 0:07:12.840 --> 0:07:15.000 of decades, right, the last two we know, right, we 0:07:15.080 --> 0:07:18.200 had the financial mailtdown, the housing crisis, that's one, and 0:07:18.200 --> 0:07:20.120 then you had a pandemic that shut down the economy 0:07:20.320 --> 0:07:23.200 thirty seconds left. It being traditional makes it easier or 0:07:23.200 --> 0:07:27.400 harder to call. It makes it just as hard to call. 0:07:27.440 --> 0:07:29.560 I mean, we're lucky this time and that right now 0:07:29.640 --> 0:07:32.000 we don't have a black Swan event, at least not 0:07:32.080 --> 0:07:34.200 yet fingers crossed like we did for the last two 0:07:34.320 --> 0:07:38.760 especially the last pandemic recession. UM. But it doesn't make 0:07:38.760 --> 0:07:40.760 it any easier. In fact, I would argue, what makes 0:07:40.760 --> 0:07:43.600 it harder because you're seeing, uh, you know, kind of 0:07:43.600 --> 0:07:46.120 a slowdown of demand, but you're also seeing these mixed 0:07:46.240 --> 0:07:50.280 signals of like positive things happening in the economy. So 0:07:50.640 --> 0:07:52.760 I would say it's it's just as hard as it 0:07:52.840 --> 0:07:56.800 was before. It's not easy calling a US recession. That's it. Um. 0:07:56.840 --> 0:07:59.680 What a great story and so relevant, certainly to all 0:07:59.720 --> 0:08:03.040 of our conversations we're having Katya Dmitreva. She is US 0:08:03.120 --> 0:08:05.880 economy reporter at Bloomberg News via zoom from Washington, d C. 0:08:06.320 --> 0:08:08.320 Thanks to her, along with Joell Webber, the editor of 0:08:08.320 --> 0:08:11.760 Bloomberg Business Week, this is Bloomberg Radio. You're listening to 0:08:11.840 --> 0:08:15.680 Bloomberg Business Week with Carol Messer and Tim Stenovic on 0:08:15.800 --> 0:08:18.400 Bloomberg Radio. We want to get to our next guest 0:08:18.440 --> 0:08:20.960 because our big take today a story in the upcoming 0:08:20.960 --> 0:08:23.520 issue of Bloomberg Business Week. It's talking about how traditional 0:08:23.560 --> 0:08:26.760 economic indicators can't predict the timing of a downturn. We keep, 0:08:27.120 --> 0:08:29.800 you know, talking about when a recession, what kind of recessions, 0:08:29.800 --> 0:08:31.640 so on and so forth. I think a great indicator 0:08:31.680 --> 0:08:34.120 has anything to do with transportation. Yeah. One indicator you 0:08:34.160 --> 0:08:35.800 could say that has often been relied on as a 0:08:35.800 --> 0:08:38.920 good gauge of economic health is anything to do with transport. Carol, 0:08:38.920 --> 0:08:40.400 and we're lucky to have back with us to that end. 0:08:40.480 --> 0:08:43.440 Mario Cordero, executive director at the Port of Long Beach, 0:08:43.559 --> 0:08:46.960 who joins us via zoom in Long Beach, California. Mario, 0:08:47.000 --> 0:08:49.280 good to have you with us. How are you well, 0:08:49.280 --> 0:08:51.760 Thank you, Thank you for the kind invitation. We'll talk 0:08:51.800 --> 0:08:54.160 to us about activity at the ports. Um. We've spoken 0:08:54.160 --> 0:08:56.120 to you a couple of times throughout the last two years. 0:08:56.600 --> 0:08:58.920 How many ships right an hour off the coast waiting 0:08:59.000 --> 0:09:03.680 to get in zero So we essentially have no vessel 0:09:03.720 --> 0:09:08.400 backup since back in November. So it's essentially a great 0:09:08.440 --> 0:09:12.040 success here in the largest complex for the United States 0:09:12.080 --> 0:09:14.240 here in terms of containerized cargo. Would you say that 0:09:14.320 --> 0:09:16.800 things are back to quote unquote normal as they were, 0:09:17.000 --> 0:09:20.600 you know before the pandemic. Well overall will be lard 0:09:20.640 --> 0:09:22.839 to the fluidity here in the Poor Long Beach, I 0:09:22.840 --> 0:09:26.600 would say is back to normal. Obviously. On the other hand, 0:09:26.640 --> 0:09:29.920 the nations supply chain, there's still some work ahead, but 0:09:30.040 --> 0:09:32.360 again far better than when we were a year ago. 0:09:32.520 --> 0:09:34.640 So tell us what changed. Is it that there's more 0:09:34.640 --> 0:09:37.680 truckers to pick up the goods off of ships, there's 0:09:37.720 --> 0:09:40.400 more workers to get the goods off of ships, or 0:09:40.440 --> 0:09:42.400 there's less ships coming in. I know that there's a 0:09:42.400 --> 0:09:44.760 lot of factors. We could look at what is different, 0:09:45.800 --> 0:09:48.000 what is a combination of factors, But I think the 0:09:48.200 --> 0:09:53.560 bottom line here with the economy is as we all know, uh, 0:09:53.640 --> 0:09:56.920 the imports that come into our nation's gateways, and the 0:09:57.000 --> 0:10:00.240 numbers reflect where we are in our economy. So the 0:10:00.280 --> 0:10:02.960 good news is, I think we're doing very well in 0:10:03.080 --> 0:10:07.120 terms of the surge that we had that we handled 0:10:07.160 --> 0:10:10.000 here twenty million containers at the St. Peter Bay complex 0:10:10.080 --> 0:10:13.280 that is together to Port Lammis, Los Angeles. So the 0:10:13.320 --> 0:10:15.920 economy has slowed, but I think we all have to 0:10:15.960 --> 0:10:19.800 agree that to a certain extent, it's an intention here 0:10:20.000 --> 0:10:23.839 given the Federal Reserve in their attempts to control the 0:10:23.840 --> 0:10:27.920 inflationary rate that we were experiencing in two. So part 0:10:27.920 --> 0:10:30.679 of that plane of action is to slow the economy 0:10:30.920 --> 0:10:35.040 and the holiday season. Though it was successful, it did, 0:10:35.440 --> 0:10:39.120 uh was lord in the expectation that some people thought, 0:10:39.679 --> 0:10:41.480 and so I think you're starting to see that the 0:10:41.480 --> 0:10:45.480 consumer demand is dissipating. And the other and last aspect 0:10:45.520 --> 0:10:48.480 to this is we had very, very high inventories in 0:10:48.480 --> 0:10:51.880 the fourth quota of two because of the cargo that 0:10:51.960 --> 0:10:56.079 was moved here from Asia ahead of time, given the 0:10:56.200 --> 0:10:59.439 surge and all the bottleneck issues that we were experiencing 0:10:59.440 --> 0:11:02.439 in you to write. We talked about that with companies, 0:11:02.520 --> 0:11:04.720 right They built up their inventories because they didn't want 0:11:04.720 --> 0:11:07.800 to be caught off guard and without goods that consumers want, 0:11:07.840 --> 0:11:09.520 and as a result, they didn't need to ship in 0:11:09.640 --> 0:11:12.280 new um. So that makes a lot of sense when 0:11:12.320 --> 0:11:15.960 you say that the economy has slowed. So the activity 0:11:16.000 --> 0:11:19.840 that you were seeing, U are the level of economic activity? 0:11:20.040 --> 0:11:23.040 Is its similar to what we saw just pre pandemic 0:11:23.600 --> 0:11:25.959 or is it below that level? Give us some more context. 0:11:26.040 --> 0:11:28.720 You're someone who understands the levels in and out different 0:11:28.720 --> 0:11:33.320 economic downs, you know, different economic cycles. So give us 0:11:33.320 --> 0:11:36.480 a more perspective and color. Thank you. We are getting 0:11:36.520 --> 0:11:40.920 to pre pandemic in many metrics. But keep in mind 0:11:40.960 --> 0:11:43.120 and when you look at the economy and the inflationary 0:11:43.240 --> 0:11:46.480 rate for you, for December, we're now at a six 0:11:46.520 --> 0:11:49.840 point five percent given the peak of what we were 0:11:49.840 --> 0:11:56.560 experiencing in the summer six what no, seven seven, I'm sorry, 0:11:56.559 --> 0:11:59.040 seven point one percent year to year in terms of 0:11:59.080 --> 0:12:03.920 the slationary rate, so you're talking about so that was 0:12:03.960 --> 0:12:07.040 in November and December we went down to six point 0:12:07.120 --> 0:12:09.080 five So when you look in terms of what that 0:12:09.200 --> 0:12:13.320 rate was in the height of the escalating inflationary issue 0:12:14.080 --> 0:12:17.920 of the utmost of nine. Again good metric in terms 0:12:17.920 --> 0:12:20.840 of again what the Federal Reserve is doing, asked to 0:12:20.920 --> 0:12:25.200 monetary policy. The second point to that is we could 0:12:25.240 --> 0:12:29.680 all agree how much the supply chain was part of 0:12:29.880 --> 0:12:33.040 the phraseology used by the Federal Reserve in terms of 0:12:33.120 --> 0:12:37.360 factors that were uh causing inflation. So they dead news 0:12:37.400 --> 0:12:40.040 at least for the supply chain. We are not high 0:12:40.040 --> 0:12:43.319 on the list anymore in terms of those inflationary factors. 0:12:43.320 --> 0:12:46.680 And I'm talking about supply chain disruption and of course 0:12:47.040 --> 0:12:50.520 transportation costs. You know, with regard to the West Coast, 0:12:50.600 --> 0:12:54.160 the transportation costs from Asia to the West Coast are 0:12:54.200 --> 0:12:58.400 now back to a normal type of setting. So again 0:12:58.559 --> 0:13:01.840 to your question, yes, we're seeing now is a semblance 0:13:01.840 --> 0:13:05.160 of normalization that is pre pandemic numbers here. Maybe it's 0:13:05.160 --> 0:13:08.000 a good thing that President Biden isn't visiting your port anymore, 0:13:08.040 --> 0:13:11.640 as he did, you know in June of last year, right, Yes, 0:13:11.800 --> 0:13:15.079 And I think credit to the White House emboy. Uh, 0:13:15.280 --> 0:13:18.360 first was John mccardi and now General Steam Alliance and 0:13:18.440 --> 0:13:21.480 bringing out the stakeholders together to try to address these 0:13:21.920 --> 0:13:24.880 various challenges we had here going back to the COVID 0:13:25.000 --> 0:13:29.040 nineteen impacts. We talked with Mario Cordero, executive director at 0:13:29.040 --> 0:13:31.719 the Port of Long Beach via Zoom in Long Beach, California. Mary. 0:13:31.800 --> 0:13:35.680 When you say transportation costs back to normal, is that 0:13:35.720 --> 0:13:40.640 though still inflated because there's still inflation in those numbers 0:13:40.800 --> 0:13:45.560 or no, Well, I think transportation costs back to normal. 0:13:45.679 --> 0:13:48.840 You know, we we had about a reduction of what 0:13:49.000 --> 0:13:53.360 that containerized cargo costs to bring the container from Asia 0:13:53.559 --> 0:13:55.960 to to to the West Coast. And I think in 0:13:56.040 --> 0:13:59.240 large part is the capacity question. Uh. You know, we 0:13:59.360 --> 0:14:02.320 have more a city here now. Uh. And of course 0:14:02.760 --> 0:14:08.880 the carriers are canceling sailings because of that diminished import number. 0:14:09.200 --> 0:14:11.559 And when I say diminished important numbers, not just a 0:14:11.679 --> 0:14:15.000 question of the West Coast, is diminished important number overall 0:14:15.120 --> 0:14:17.640 to the nation. But on the other hand of good news, 0:14:17.720 --> 0:14:21.320 if you ask any of these international carriers and UH 0:14:21.440 --> 0:14:25.200 and the American and the shipper, you know, bottom line, 0:14:25.560 --> 0:14:28.520 the market here is in the USA in terms of 0:14:29.520 --> 0:14:32.960 consumer demand. So despite the diminishment of that consumer demand, 0:14:33.800 --> 0:14:36.040 we are in a very good setting in terms of 0:14:36.840 --> 0:14:39.680 going back to pre pandemic numbers. Just in the last 0:14:39.680 --> 0:14:42.400 minute we have with you, Mario, any indication to you 0:14:42.440 --> 0:14:44.920 that we're going into a recession are already there, because 0:14:44.960 --> 0:14:47.160 some say that we could be like kind of right 0:14:47.160 --> 0:14:52.960 there right now. Well, I think you know, there are 0:14:53.000 --> 0:14:55.640 those who talk about a soft landing, and I'm in 0:14:55.720 --> 0:14:58.560 that category. And of course over those if you go 0:14:58.640 --> 0:15:02.520 back to the summer and spring two who were predicting 0:15:02.560 --> 0:15:06.880 a serious recession of a magnitude level, we're not there. 0:15:07.320 --> 0:15:09.000 So I think the good news is I think you're 0:15:09.000 --> 0:15:11.680 starting to see that number one. The important thing that 0:15:11.840 --> 0:15:15.920 CPI and the consumer Price Index is diminishing. And of course, 0:15:16.040 --> 0:15:19.400 on the other hand, with regard to the recessionary numbers, 0:15:19.720 --> 0:15:21.880 I think there's still a lot of optimism among the 0:15:21.920 --> 0:15:23.840 economists that we're not going to have the type of 0:15:23.880 --> 0:15:28.200 recession that some people fear. So the good news is, yes, 0:15:28.280 --> 0:15:30.960 there's a cycle here, and I think it's going to 0:15:31.040 --> 0:15:33.800 be a mild one, uh that we're going to go through. 0:15:33.840 --> 0:15:36.440 So hopefully, uh, we're all correct on that side of 0:15:36.480 --> 0:15:40.200 the column. So I look forward to a second half 0:15:40.240 --> 0:15:42.240 better than the first half. But yes or no, we're 0:15:42.240 --> 0:15:46.520 not there in a recession yet. Yes or no, Uh no, 0:15:46.720 --> 0:15:50.920 we're not there a serious recession. Mary Cardero, thank you 0:15:51.000 --> 0:15:53.520 so much, Executive director at the Port of Long Beach, 0:15:53.680 --> 0:15:57.560 joining us from California. This is Bloomberg. These sees Bloomberg 0:15:57.600 --> 0:16:02.560 Business Week with Carol Masair and Tim Stenebec on Bloomberg Radio. 0:16:03.280 --> 0:16:07.000 A story about how startups are getting created, are creating 0:16:07.720 --> 0:16:10.280 what they are doing, They're getting creative. I should say, 0:16:10.400 --> 0:16:13.600 when they are in the hunt for crash and for cash, 0:16:13.720 --> 0:16:17.080 catch by that it's Wednesday that these things happening. It's 0:16:17.160 --> 0:16:20.440 some day, just like they're getting creative. I'm getting creative. Um, 0:16:20.480 --> 0:16:23.000 but some of that creativity is raising eyebrows. Well, we 0:16:23.080 --> 0:16:25.840 got a great voice with us. He's quoted in this story, 0:16:26.040 --> 0:16:29.160 Ken Smith. He's from Next Round Capital Partners. He helped 0:16:29.200 --> 0:16:31.840 start up start ups obtained financing. He's with us right 0:16:31.840 --> 0:16:35.160 now in the Bloomberg Interactive Broker's studio. Ken. Good to 0:16:35.200 --> 0:16:37.360 have you with us. You know, as as we heard 0:16:37.480 --> 0:16:39.320 um Charlie going through the markets, you were telling us 0:16:39.360 --> 0:16:41.600 a little bit about you know, your impressions of Elon 0:16:41.720 --> 0:16:44.320 Musk and you know how he paid overpaid for tests 0:16:44.320 --> 0:16:47.840 for Twitter. Excuse me ahead of Tesla earnings this afternoon. Um, 0:16:47.920 --> 0:16:51.920 the environment has shifted so much just in the past year. 0:16:52.440 --> 0:16:54.160 What are you seeing in the work that you're doing 0:16:54.240 --> 0:16:56.680 when you're out there helping startups raise money? First, thank 0:16:56.680 --> 0:16:59.200 you for having me. It's a pleasure to be here. Um. Yeah, 0:16:59.280 --> 0:17:02.080 we're seeing an in ironment which is drastically shifted in 0:17:02.080 --> 0:17:06.240 the last twelve months. Particularly. I think UH investors obviously 0:17:06.280 --> 0:17:09.240 are kind of coming off a very very rosy scenario 0:17:09.320 --> 0:17:13.440 which was two thousand one, where multiples were sky high 0:17:13.440 --> 0:17:15.639 and people were paying for growth at any cost, And 0:17:15.680 --> 0:17:19.200 now we're back to fundamentals, as they say, and investors 0:17:19.200 --> 0:17:21.440 are really focused on when companies are gonna be profitable 0:17:21.480 --> 0:17:24.280 or they're gonna be cash break even, and and particularly 0:17:24.320 --> 0:17:27.080 what multiples are they paying now for that future growth 0:17:27.119 --> 0:17:30.160 given interest rate headwinds, the FED and a potential recession. 0:17:30.320 --> 0:17:33.359 So a smarter market today in terms of focusing on fundamentals, 0:17:33.359 --> 0:17:35.919 where it got a little stupid when there was so 0:17:36.000 --> 0:17:39.359 much cheap money, they got super crazy. Uh, some firms 0:17:39.359 --> 0:17:41.600 and I won't name names, we're doing you know, ten 0:17:41.640 --> 0:17:44.320 deals a week, right, How can you keep that pace 0:17:44.480 --> 0:17:47.760 and and really be doing serious diligence um on these companies? 0:17:48.320 --> 0:17:51.000 So what we're seeing now is really kind of a 0:17:51.119 --> 0:17:54.359 very much a pullback, very much focus on what's gonna 0:17:54.440 --> 0:17:56.879 work not only now but in several years from now, 0:17:56.960 --> 0:17:59.200 and durable business models. What I want to ask you, Kenny, 0:17:59.240 --> 0:18:01.199 is that in a market like this, does it create 0:18:01.280 --> 0:18:04.920 companies that will ultimately be your Google's, your Facebook's there, 0:18:04.960 --> 0:18:07.240 I say Twitter, you know, the companies that actually have 0:18:07.440 --> 0:18:11.119 longer legs and sustainability going forward because of the focus 0:18:11.119 --> 0:18:14.320 on fundamentals. Absolutely, you're going to see companies that really 0:18:14.440 --> 0:18:17.680 were sort of cash burning machines. That need adventure capital 0:18:17.840 --> 0:18:21.040 to continue growing, right, they could continue to feed losses. 0:18:21.040 --> 0:18:22.760 And a lot of the consumer models if you look 0:18:22.800 --> 0:18:25.080 back at Casper Mattresses, if you look at back at Lime, 0:18:25.200 --> 0:18:29.080 at Bird, these were ideas that just consumed massive amounts 0:18:29.080 --> 0:18:31.880 of money. The vcs had to continue funding at ever 0:18:31.960 --> 0:18:34.800 raising rounds and ever raising prices. And when that's working 0:18:34.840 --> 0:18:37.119 and money is cheap, it's great. You can run a 0:18:37.119 --> 0:18:38.880 business like that all day long. But when the month, 0:18:39.040 --> 0:18:41.639 when the tide goes out, as Warren Buffett says, you know, 0:18:41.760 --> 0:18:44.480 look out below, right, investors are just not willing to 0:18:44.480 --> 0:18:47.439 fund those losses indefinitely. So what's the environment that exists 0:18:47.520 --> 0:18:49.920 right now in the context of the new companies that 0:18:49.960 --> 0:18:52.040 are out there being created. Are we in a more 0:18:52.080 --> 0:18:55.240 normalized world of you know, I don't know, the nineteen 0:18:55.359 --> 0:18:59.240 nineties perhaps where we see interest rates not at zero? Right? 0:18:59.320 --> 0:19:02.320 So now we're I believe we're in the sort of 0:19:02.320 --> 0:19:05.600 two thousand nine period called two thousand twenty to two 0:19:05.640 --> 0:19:08.399 thousand eight for the venture capital IPO market where everything 0:19:09.119 --> 0:19:12.280 where everything ground to a halt, and two thousand seven 0:19:12.359 --> 0:19:16.480 was two thousand one. But but what came after that, 0:19:16.680 --> 0:19:18.280 it was like the best time ever to be a 0:19:18.359 --> 0:19:21.399 ventric right, and a lot of the venture capitalists hadn't 0:19:21.480 --> 0:19:23.600 seen a two thousand twenty two yet. Remember a lot 0:19:23.600 --> 0:19:25.359 of these firms got started in two thousand ten, two 0:19:25.359 --> 0:19:28.000 thousand eleven, two thousand twelve. All they knew was a 0:19:28.040 --> 0:19:30.080 bowl market. If you were an employee started working for 0:19:30.080 --> 0:19:31.879 a startup, you got all these options and all you 0:19:31.920 --> 0:19:33.760 saw them is go straight up, straight up, straight up, 0:19:34.000 --> 0:19:35.560 and you never sold a share, and you were the 0:19:35.560 --> 0:19:37.239 smartest person in the world because then if you had 0:19:37.280 --> 0:19:39.160 the I p O the lock up and you were rich, 0:19:39.240 --> 0:19:40.520 and that's all you had to do is just keep 0:19:40.560 --> 0:19:43.399 doing that over and over again. Now venture capitalists are 0:19:43.400 --> 0:19:45.160 starting to have to think like hedge fund managers, although 0:19:45.200 --> 0:19:47.160 they have to say, you know, Chime was a twenty 0:19:47.240 --> 0:19:49.600 five billion a year ago, and that was it a 0:19:49.640 --> 0:19:52.400 hundred times multiple, and now Chime is trading at ten 0:19:52.480 --> 0:19:55.479 billion and potentially it was public down the six billion. 0:19:55.920 --> 0:19:57.760 Should I have sold a lot a year ago? Do 0:19:57.800 --> 0:20:00.439 I need to start actually managing a portfolio? Because this 0:20:00.480 --> 0:20:02.760 whole buy and whole thing in the VC world isn't 0:20:02.760 --> 0:20:05.639 gonna work in every environment. They got lucky and it 0:20:05.720 --> 0:20:07.320 worked for a while, but it's just not gonna work 0:20:07.359 --> 0:20:09.680 in time one of those startup you know, so called 0:20:09.760 --> 0:20:12.800 neo banks. That's right, So what does this mean for 0:20:12.840 --> 0:20:16.040 startups who do need cash? I mean, Hmma Palmer who 0:20:16.040 --> 0:20:17.800 wrote this story, she's our hedge fund reporter here at 0:20:17.840 --> 0:20:21.480 Bloomberg News. She talked about how startups are having to 0:20:21.520 --> 0:20:23.639 be creative in terms of the hunt for cash. So 0:20:23.640 --> 0:20:25.600 what are you doing? What does that mean? And what 0:20:25.600 --> 0:20:27.640 do they have to promise or what they have to do? 0:20:28.280 --> 0:20:30.680 I think early stage startups if we defined the world 0:20:30.680 --> 0:20:33.919 by early stage, mid stage companies series C, Series D, 0:20:34.000 --> 0:20:36.320 and then late stage post series E, when you really 0:20:36.320 --> 0:20:38.280 have a business going on. I think a lot of 0:20:38.320 --> 0:20:40.440 what I was talking about in the article was companies 0:20:40.480 --> 0:20:44.200 that have already raised money. They have significant businesses going 0:20:44.240 --> 0:20:47.320