1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,560 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,479 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,919 Speaker 1: at Bloomberg dot com slash podcast. Well, as we said, 7 00:00:21,960 --> 00:00:25,400 Speaker 1: tomorrow is Sinko to Mile, a big day. We're the 8 00:00:25,440 --> 00:00:28,639 Speaker 1: tequila business, so we are very fortunate today to be 9 00:00:28,640 --> 00:00:30,800 Speaker 1: able to talk about the tequila business, in the spirits business. 10 00:00:30,840 --> 00:00:34,680 Speaker 1: And welcome Jenna Facton, co founder of Tara Montic Tequila. Jenna, 11 00:00:34,840 --> 00:00:37,120 Speaker 1: thanks so much for joining us here talk to us 12 00:00:37,120 --> 00:00:42,800 Speaker 1: about your tequila and the brand. It's great to meet 13 00:00:42,840 --> 00:00:46,400 Speaker 1: you guys and chat with you today. Yeah, the care 14 00:00:46,440 --> 00:00:51,159 Speaker 1: amount of tequila we launched right when the pandemic was starting. 15 00:00:51,200 --> 00:00:55,200 Speaker 1: We launched towards the end of March. And as an entrepreneur, 16 00:00:55,600 --> 00:00:58,360 Speaker 1: you're in a situation where you think, wow, what do 17 00:00:58,440 --> 00:01:02,840 Speaker 1: you do now? But our business partner, partner and Fearless 18 00:01:02,840 --> 00:01:06,520 Speaker 1: founder GWayne, we call him dj Um. He said he 19 00:01:06,640 --> 00:01:10,440 Speaker 1: you know, he he had been working on this and 20 00:01:10,440 --> 00:01:14,399 Speaker 1: then wanting to do this for years. He grew up 21 00:01:14,440 --> 00:01:17,560 Speaker 1: with a family who loved tequila and it was very 22 00:01:17,640 --> 00:01:20,840 Speaker 1: much for him, UM one of those things that was 23 00:01:20,880 --> 00:01:24,720 Speaker 1: about bringing people together, whether it was good times or bad. 24 00:01:24,760 --> 00:01:27,520 Speaker 1: He said, in his family, like if um, someone had 25 00:01:27,560 --> 00:01:29,760 Speaker 1: just gotten a promotion, the family would crack open the 26 00:01:29,800 --> 00:01:32,360 Speaker 1: tequila and have a drink. But also if you know 27 00:01:32,480 --> 00:01:36,479 Speaker 1: someone unfortunately passed away, they brought them together as well. 28 00:01:36,520 --> 00:01:38,240 Speaker 1: And so he said, you know what, let's just go 29 00:01:38,319 --> 00:01:42,280 Speaker 1: at it in a really soft, quiet manner. UM. But 30 00:01:42,480 --> 00:01:46,800 Speaker 1: obviously anything but happened, and the consumer just really lashed 31 00:01:46,800 --> 00:01:51,320 Speaker 1: onto Tara Monta tequila UM for many different reasons during 32 00:01:51,320 --> 00:01:54,480 Speaker 1: the pandemic, and we had an incredible record breaking first year. 33 00:01:54,760 --> 00:01:58,040 Speaker 1: Well our director Ken Fellow, who says it's very smooth, 34 00:01:58,160 --> 00:01:59,960 Speaker 1: He says, it's it's quite good. I haven't had a 35 00:02:00,080 --> 00:02:02,720 Speaker 1: chance to try it yet, but I love tequila and 36 00:02:03,240 --> 00:02:05,960 Speaker 1: I love the rock. What's it like working with DJ? 37 00:02:06,080 --> 00:02:09,679 Speaker 1: He's so committed to everything that he does. I don't 38 00:02:09,680 --> 00:02:11,880 Speaker 1: know if that would drive you crazy or if it's 39 00:02:11,919 --> 00:02:16,000 Speaker 1: a benefit. Who doesn't love him? What you see is 40 00:02:16,080 --> 00:02:20,919 Speaker 1: really what you get. He is so interested in the 41 00:02:21,000 --> 00:02:23,280 Speaker 1: business and he was really committed to say, I want 42 00:02:23,320 --> 00:02:25,600 Speaker 1: to understand it, I want to find out about it 43 00:02:25,639 --> 00:02:28,400 Speaker 1: before I do anything, and I want to do it 44 00:02:28,560 --> 00:02:32,760 Speaker 1: the right way, and so it it doesn't drive you crazy. 45 00:02:32,800 --> 00:02:37,040 Speaker 1: You just have such incredible appreciation for someone who is 46 00:02:37,120 --> 00:02:40,680 Speaker 1: so busy, but he is. You feel like he's constantly 47 00:02:40,680 --> 00:02:44,720 Speaker 1: working on the terremount of business and he ensured that 48 00:02:44,760 --> 00:02:49,240 Speaker 1: he went down to Mexico really studied it. Um worked 49 00:02:49,400 --> 00:02:53,040 Speaker 1: really closely with our Mexican family partners to develop this. 50 00:02:53,320 --> 00:02:58,160 Speaker 1: He is all in and he's engaged every single day. Jenna, 51 00:02:58,200 --> 00:02:59,720 Speaker 1: I'd love to get a sense of you know, this 52 00:03:00,040 --> 00:03:02,240 Speaker 1: years industry for you guys launching right in mid of 53 00:03:02,240 --> 00:03:05,600 Speaker 1: a pandemic. Good planning there, but the spirits industry just 54 00:03:06,440 --> 00:03:09,840 Speaker 1: really took off in for obvious reasons. I guess then 55 00:03:09,880 --> 00:03:12,760 Speaker 1: you're going up against Clooney, Yeah, exactly. How do you 56 00:03:12,760 --> 00:03:15,720 Speaker 1: think about the business kind of going forward? Yeah, it's 57 00:03:15,720 --> 00:03:20,240 Speaker 1: really interesting. You're totally right. Spirits was up over in 58 00:03:20,280 --> 00:03:24,520 Speaker 1: the last year. Um. What's interesting is tequila dollar sales 59 00:03:24,520 --> 00:03:27,760 Speaker 1: were up over fifty three in the last year. So 60 00:03:27,840 --> 00:03:32,280 Speaker 1: this there's just this real shift and consumer behavior away 61 00:03:32,360 --> 00:03:38,320 Speaker 1: from say the older spirits such as vodka into something 62 00:03:38,360 --> 00:03:41,640 Speaker 1: that is more flavorable and interesting, and consumers really are 63 00:03:41,680 --> 00:03:45,080 Speaker 1: carrying about providence and how something's made. And I think 64 00:03:45,200 --> 00:03:49,360 Speaker 1: for us, for Tara Mona, that is we're really excited 65 00:03:49,360 --> 00:03:52,680 Speaker 1: about that because when people ask questions about it, we 66 00:03:52,800 --> 00:03:58,000 Speaker 1: have just such a really authentic, handcrafted story. Um that 67 00:03:58,400 --> 00:04:02,600 Speaker 1: really people excite people. And of course, um, there's a 68 00:04:02,600 --> 00:04:07,000 Speaker 1: new campaign. I've seen Dwyane make guawk on his Instagram 69 00:04:07,000 --> 00:04:10,280 Speaker 1: account and and now that a restaurants are reopening, you 70 00:04:10,320 --> 00:04:13,520 Speaker 1: have a campaign where you get people involved in social 71 00:04:13,560 --> 00:04:17,640 Speaker 1: and you pay them back for their avocado dip. Yeah. 72 00:04:17,960 --> 00:04:21,359 Speaker 1: Obviously during the pandemic, it was a conversation constantly with 73 00:04:21,480 --> 00:04:24,159 Speaker 1: DJ and the team, and he was saying, how do 74 00:04:24,320 --> 00:04:28,520 Speaker 1: we help out when hospitality is such an important part 75 00:04:28,520 --> 00:04:32,160 Speaker 1: of our economy And so we all felt like the 76 00:04:32,200 --> 00:04:35,160 Speaker 1: time was right to really encourage people to come back 77 00:04:35,200 --> 00:04:38,440 Speaker 1: into their restaurants however they safely, however they feel safe 78 00:04:38,480 --> 00:04:41,920 Speaker 1: about it, whether it's take out, dine in, dine outside. 79 00:04:42,360 --> 00:04:45,679 Speaker 1: And so he said, let's let's go at this really hard, 80 00:04:46,000 --> 00:04:49,600 Speaker 1: use his incredible social media reach that your reference um 81 00:04:49,760 --> 00:04:52,920 Speaker 1: to encourage people to go out there. So um, right now, 82 00:04:53,200 --> 00:04:55,760 Speaker 1: it was started May one, and everyone can still take 83 00:04:55,800 --> 00:04:58,840 Speaker 1: advantage of it through Sko to Mayo, which is tomorrow 84 00:04:58,960 --> 00:05:04,000 Speaker 1: through May fifth. Um and they go out to any 85 00:05:04,080 --> 00:05:07,200 Speaker 1: restaurant that serves Tara Mona Tequila, they order a tamana 86 00:05:07,760 --> 00:05:12,440 Speaker 1: and they will get their guacamali reimbursed by the Rocks. 87 00:05:12,560 --> 00:05:14,960 Speaker 1: Or take a picture on the Rock. You take a 88 00:05:14,960 --> 00:05:18,560 Speaker 1: picture eating your guawk drinking your terramana, post it on 89 00:05:18,720 --> 00:05:21,400 Speaker 1: Glack on the Rock dot com and Dwayne pays you 90 00:05:21,440 --> 00:05:25,560 Speaker 1: back for your guac order. Fascinating business and we wish you, 91 00:05:25,560 --> 00:05:28,400 Speaker 1: of course, the best of luck. Jennafagnen there Um co 92 00:05:28,600 --> 00:05:33,960 Speaker 1: founded ter Mona Taramana Tequila with Dwayne the Rock Johnson. 93 00:05:34,040 --> 00:05:37,040 Speaker 1: I've been making his pancake recipe, which I also found 94 00:05:37,160 --> 00:05:45,159 Speaker 1: on Instagram. Let's continue our discussion of the cryptocurrency market. 95 00:05:45,200 --> 00:05:46,919 Speaker 1: I guess today you could sum it up on the 96 00:05:46,960 --> 00:05:50,200 Speaker 1: word of volatility. I'm looking at Bitcoin. It's off four 97 00:05:50,279 --> 00:05:55,120 Speaker 1: percent today. Bucks now trades at four thousand, five hundred dollars. Yet, 98 00:05:55,279 --> 00:05:58,880 Speaker 1: when I got over to Etherem symbol uh tickers x 99 00:05:58,920 --> 00:06:03,400 Speaker 1: eat Etherium Ethereum, thank you very much. Ethereum setting all 100 00:06:03,440 --> 00:06:06,960 Speaker 1: time high again today. Matt Up another thirty four points 101 00:06:06,960 --> 00:06:10,400 Speaker 1: thirty three thowy two. So going both ways here, let's 102 00:06:10,400 --> 00:06:13,080 Speaker 1: get a clear view of what is going on. We 103 00:06:13,160 --> 00:06:15,600 Speaker 1: welcome Gregg King, CEO of Osprey Funds. So, Greg, when 104 00:06:15,640 --> 00:06:19,080 Speaker 1: you see divergence in the crypto market like we see 105 00:06:19,160 --> 00:06:24,800 Speaker 1: today with Ethereum and Bitcoin, does that tell you anything? Yeah, 106 00:06:24,839 --> 00:06:27,440 Speaker 1: it tells me that we're in what they're calling all season. 107 00:06:27,880 --> 00:06:31,000 Speaker 1: So this happened last time around, the big bull run 108 00:06:31,080 --> 00:06:35,719 Speaker 1: with Bitcoin, bitcoins, the biggest, you know, the oldest crypto, 109 00:06:35,839 --> 00:06:37,720 Speaker 1: that's what most people think of when they think about 110 00:06:37,760 --> 00:06:40,480 Speaker 1: crypto UM, and it leads the way. It's led the 111 00:06:40,760 --> 00:06:43,880 Speaker 1: way this time in this bull market where it crossed 112 00:06:43,880 --> 00:06:46,880 Speaker 1: its all time previous all time high that had been 113 00:06:46,920 --> 00:06:50,880 Speaker 1: in place for about a thousand days in background Thanksgiving Um. 114 00:06:50,960 --> 00:06:53,720 Speaker 1: But I think it's it's giving up leadership to Ethereum, 115 00:06:53,839 --> 00:06:57,920 Speaker 1: the second biggest crypto out there and all the other 116 00:06:58,000 --> 00:07:01,280 Speaker 1: coins that people like to call all coins um, and 117 00:07:01,320 --> 00:07:05,520 Speaker 1: I think the reasons for that are legitimate. Ethereum is 118 00:07:05,520 --> 00:07:09,240 Speaker 1: the backbone for DFI, for n f T S, for 119 00:07:09,320 --> 00:07:11,840 Speaker 1: a lot of the innovation that's happening in the crypto space, 120 00:07:12,400 --> 00:07:14,920 Speaker 1: and people are coming to recognize that the fact that 121 00:07:14,960 --> 00:07:17,680 Speaker 1: people like Mark Cuban are tweeting about it, that that 122 00:07:17,800 --> 00:07:20,960 Speaker 1: helps the drive awareness as well. So it doesn't surprise 123 00:07:21,000 --> 00:07:24,080 Speaker 1: me to see that divergence. And frankly I liked it 124 00:07:24,120 --> 00:07:27,680 Speaker 1: because it's uh um. It shows that crypto is not 125 00:07:27,800 --> 00:07:30,720 Speaker 1: just one big monolithic block. There's different things going on. 126 00:07:30,800 --> 00:07:33,880 Speaker 1: Bitcoin is one thing, Etherium is another, and it goes 127 00:07:33,920 --> 00:07:37,280 Speaker 1: on from there. You know, it's quite cool um the 128 00:07:37,360 --> 00:07:41,400 Speaker 1: diversity and there are different use cases and they're set 129 00:07:41,480 --> 00:07:44,520 Speaker 1: up differently. Ethereum doesn't have the scarcity that bitcoin does, 130 00:07:44,640 --> 00:07:48,760 Speaker 1: right bitcoin um no more than twenty one million bitcoins 131 00:07:48,800 --> 00:07:52,080 Speaker 1: will ever be mined, but there's no cap on ethereum. 132 00:07:52,120 --> 00:07:57,000 Speaker 1: Does that make it worth less? Well, it's just about 133 00:07:57,080 --> 00:07:59,200 Speaker 1: the rate of that inflation, which I think the way 134 00:07:59,240 --> 00:08:02,920 Speaker 1: they've set it up is done somewhat reasonably, and it's 135 00:08:03,000 --> 00:08:07,440 Speaker 1: it's really about the supply demand dynamic and whether uh 136 00:08:07,600 --> 00:08:10,840 Speaker 1: supply of coins would outstrip demand, in which case that 137 00:08:10,880 --> 00:08:14,560 Speaker 1: would of course be problematic for the price overall. But 138 00:08:14,920 --> 00:08:19,200 Speaker 1: with the potential use cases for ethereum starting to um, 139 00:08:19,280 --> 00:08:21,600 Speaker 1: you know, just thinking back through or four years, these 140 00:08:21,640 --> 00:08:24,000 Speaker 1: were twinkles in the eye of a lot of people, 141 00:08:24,000 --> 00:08:25,720 Speaker 1: a lot of people talked about a lot of ideas, 142 00:08:26,240 --> 00:08:28,760 Speaker 1: but now these are real projects and real values being 143 00:08:28,800 --> 00:08:32,800 Speaker 1: exchanged and traded. In the DeFi space, you have the 144 00:08:32,800 --> 00:08:35,400 Speaker 1: whole non fungible tokens n f T s or people 145 00:08:35,440 --> 00:08:38,280 Speaker 1: are trading around digital arts and things like that. So 146 00:08:38,320 --> 00:08:41,160 Speaker 1: they're actually use cases and and many of them, most 147 00:08:41,240 --> 00:08:44,400 Speaker 1: of them are built on the Ethereum network. I gotta 148 00:08:44,440 --> 00:08:46,440 Speaker 1: say to me, n f T S makes even less 149 00:08:46,480 --> 00:08:51,400 Speaker 1: sense than coin. I mean, why do I care if 150 00:08:51,480 --> 00:08:55,079 Speaker 1: you buy the n f T of a Lebron Dunk 151 00:08:55,160 --> 00:08:58,640 Speaker 1: whatever that is. When I can watch the Lebron Dunk 152 00:08:58,760 --> 00:09:01,960 Speaker 1: on YouTube all day long for free, I can't get 153 00:09:02,000 --> 00:09:05,080 Speaker 1: my head around it. Yeah, I'm started with you on 154 00:09:05,120 --> 00:09:08,199 Speaker 1: that one, um, But but don't mistake that for kind 155 00:09:08,240 --> 00:09:11,600 Speaker 1: of the only potential outcome for what an n f 156 00:09:11,640 --> 00:09:14,960 Speaker 1: T is. Right. N f T just means a non 157 00:09:15,000 --> 00:09:18,400 Speaker 1: fungible token. It means there's a finite supply of them, 158 00:09:18,400 --> 00:09:22,120 Speaker 1: and they represent certain things. So if you're tokenizing real estate, 159 00:09:22,160 --> 00:09:25,760 Speaker 1: if you're tokenizing other assets that need a better way 160 00:09:25,800 --> 00:09:29,840 Speaker 1: to be exchanged digitally and trustlessly, those two would be 161 00:09:29,960 --> 00:09:31,679 Speaker 1: n f T s. So so I'm sort of with 162 00:09:31,760 --> 00:09:35,720 Speaker 1: you on on you know, token izing random movie clip 163 00:09:35,920 --> 00:09:39,040 Speaker 1: or something. I was never a baseball card collector either 164 00:09:40,160 --> 00:09:43,319 Speaker 1: or an art collector, but you know, different strokes or 165 00:09:43,320 --> 00:09:45,440 Speaker 1: different folks. So I think that's the one of the 166 00:09:45,480 --> 00:09:51,079 Speaker 1: easier applications UM to kind of gain some foothold in 167 00:09:51,120 --> 00:09:55,319 Speaker 1: the retail mindset, especially when you have sports stars and 168 00:09:55,320 --> 00:09:59,800 Speaker 1: and all those kinds of celebrities endorsing them. So greg 169 00:09:59,800 --> 00:10:02,560 Speaker 1: A to get a sense of who's buying these things 170 00:10:02,559 --> 00:10:06,280 Speaker 1: when we talk about bitcoin or ethereum, is it. Yeah, 171 00:10:06,280 --> 00:10:08,520 Speaker 1: I'd love to get a sense of retail versus more 172 00:10:08,679 --> 00:10:13,080 Speaker 1: institutional What what do you know about that? Well, again, 173 00:10:13,160 --> 00:10:15,960 Speaker 1: it's sort of cascades down. I think Bitcoin at this 174 00:10:16,040 --> 00:10:18,760 Speaker 1: point is really getting a serious look by a lot 175 00:10:18,800 --> 00:10:21,800 Speaker 1: of institutional investors. We don't have to you know, look 176 00:10:21,960 --> 00:10:25,120 Speaker 1: very far to see, you know, whether it's announcements by 177 00:10:25,480 --> 00:10:28,640 Speaker 1: insurance companies or Fortune five companies that are putting it 178 00:10:28,640 --> 00:10:33,200 Speaker 1: on balance sheet. Uh. Bitcoin is is moving definitely into 179 00:10:33,240 --> 00:10:37,680 Speaker 1: the institutional space, as is ethereum. I think where UM 180 00:10:37,880 --> 00:10:42,240 Speaker 1: retail investors are more involved is around the byproducts UM 181 00:10:42,720 --> 00:10:45,439 Speaker 1: of these other tokens and f t s and things 182 00:10:45,480 --> 00:10:49,920 Speaker 1: like that. But again, even that space is sort of barbelled, right, 183 00:10:49,960 --> 00:10:54,000 Speaker 1: because you'll have um, let's call them retail investors, just 184 00:10:54,000 --> 00:10:56,439 Speaker 1: just self starters, people who are digging around the space 185 00:10:56,480 --> 00:10:59,120 Speaker 1: and understand this and are following what's going on. But 186 00:10:59,280 --> 00:11:04,400 Speaker 1: you also have extremely smart money, uh Silicon Valley vcs 187 00:11:04,440 --> 00:11:06,600 Speaker 1: that are buying up some of these assets as well, 188 00:11:06,720 --> 00:11:09,600 Speaker 1: So you really have it's kind of the middle of 189 00:11:09,640 --> 00:11:14,160 Speaker 1: the spectrum. The more cautious, the kind of the pension funds, uh, 190 00:11:14,240 --> 00:11:18,520 Speaker 1: the institutional investors that are managing public money, mutual funds, 191 00:11:18,520 --> 00:11:21,080 Speaker 1: those types, those are the people that I think are 192 00:11:21,080 --> 00:11:25,400 Speaker 1: going to be last to participate. It's funny, you know, 193 00:11:25,520 --> 00:11:30,600 Speaker 1: last week the European Investment Bank issued its first digital 194 00:11:30,640 --> 00:11:36,920 Speaker 1: bond on ethereum, and it's so I mean, at this point, um, 195 00:11:37,160 --> 00:11:39,600 Speaker 1: no one cares. Right. That would have ten years ago 196 00:11:39,800 --> 00:11:42,240 Speaker 1: that would have been headlines galore. We would have been 197 00:11:42,240 --> 00:11:44,680 Speaker 1: covering a wall to wall for a week. It would 198 00:11:44,679 --> 00:11:47,000 Speaker 1: have been just insane to think about. And now it 199 00:11:47,120 --> 00:11:52,599 Speaker 1: seems so normal when the European Investment Bank issues a 200 00:11:53,040 --> 00:11:56,320 Speaker 1: digital bond on ethereum that it doesn't no one bats 201 00:11:56,320 --> 00:11:59,360 Speaker 1: an eyebrow. So the question is does this become is 202 00:11:59,400 --> 00:12:01,600 Speaker 1: this just normal part of life now or does it 203 00:12:01,640 --> 00:12:03,720 Speaker 1: go away? Does it become I hate to say the 204 00:12:03,760 --> 00:12:06,600 Speaker 1: toolip fad because that didn't even really happen that way, 205 00:12:06,600 --> 00:12:08,800 Speaker 1: But does it does it become a big bubble that 206 00:12:08,880 --> 00:12:13,120 Speaker 1: we all regret like Bill Bottoms in ten years. No, No, 207 00:12:13,120 --> 00:12:16,000 Speaker 1: no chance of that happening. In my opinion. Um, this 208 00:12:16,080 --> 00:12:18,320 Speaker 1: is this is here to stay. It's just a question 209 00:12:18,360 --> 00:12:20,280 Speaker 1: of how much is it going to continue to morph 210 00:12:20,400 --> 00:12:24,960 Speaker 1: and evolve. Take Ethereum for example, it's it's basically software, right, 211 00:12:25,040 --> 00:12:27,920 Speaker 1: So for the European Central Bank to say we're issuing 212 00:12:27,920 --> 00:12:31,400 Speaker 1: a bond digitally, nobody would care about that. The question 213 00:12:31,480 --> 00:12:33,800 Speaker 1: is just who owns the software? You know? So maybe 214 00:12:33,800 --> 00:12:37,920 Speaker 1: they in the prior world they would use IBM software. 215 00:12:38,000 --> 00:12:41,480 Speaker 1: Now they're using a decentralized software that we call etherium. 216 00:12:41,880 --> 00:12:43,960 Speaker 1: So I think it is getting normalized and I think 217 00:12:43,960 --> 00:12:46,960 Speaker 1: that's a good thing. Alright, Very cool to have some 218 00:12:47,000 --> 00:12:48,720 Speaker 1: time with you, Greg, Thanks so much for joining us. 219 00:12:48,720 --> 00:12:52,600 Speaker 1: He is the chief executive officer of Osprey Funds talking 220 00:12:52,640 --> 00:12:56,880 Speaker 1: to us about digital currencies, digital networks just becoming a 221 00:12:56,920 --> 00:13:03,080 Speaker 1: normal way of doing business. This is bloom work. Let's 222 00:13:03,080 --> 00:13:06,600 Speaker 1: bring in Ira Jersey's our chief US rate strategist at 223 00:13:06,640 --> 00:13:11,199 Speaker 1: Bloomberg Intelligence and ira UM. Today we're actually seeing some 224 00:13:11,240 --> 00:13:13,320 Speaker 1: bond buying at least in the tenure right now, the 225 00:13:13,360 --> 00:13:16,040 Speaker 1: yield down to one fifty six fifty eight. But I 226 00:13:16,040 --> 00:13:18,240 Speaker 1: saw an interesting story on the terminal when I woke 227 00:13:18,320 --> 00:13:22,800 Speaker 1: up this morning that the Treasury has quadrupled the amount 228 00:13:22,800 --> 00:13:25,120 Speaker 1: of money it's gonna need this month in order to 229 00:13:25,200 --> 00:13:28,160 Speaker 1: pay for the stimulus to over a trillion dollars. Are 230 00:13:28,160 --> 00:13:32,360 Speaker 1: we going to see mad issuance UM? So, no, is 231 00:13:32,360 --> 00:13:35,520 Speaker 1: the simple answer, and and that that's from their original 232 00:13:35,640 --> 00:13:39,120 Speaker 1: estimate back in February that the market was expecting pretty 233 00:13:39,160 --> 00:13:41,800 Speaker 1: close to what they announced. They announced the net borrowing 234 00:13:41,840 --> 00:13:45,160 Speaker 1: of four hundred and sixty three billion dollars for for 235 00:13:45,240 --> 00:13:48,920 Speaker 1: the current UM fiscal quarter, and that was compared to 236 00:13:49,200 --> 00:13:51,360 Speaker 1: our four seventy five, and a lot of other people 237 00:13:51,360 --> 00:13:53,760 Speaker 1: had four hundred four five. So it's right in the 238 00:13:53,880 --> 00:13:56,960 Speaker 1: range of what most of us were expecting, you know, 239 00:13:57,040 --> 00:14:00,000 Speaker 1: after we got the one point nine trillion dollar fiscal statement. 240 00:14:00,160 --> 00:14:04,440 Speaker 1: So ironically, the Treasury Department is still issuing so much 241 00:14:04,520 --> 00:14:09,320 Speaker 1: debt um that they probably won't have to um increase 242 00:14:09,400 --> 00:14:12,960 Speaker 1: any of their UM any of their coupon issuance right now, 243 00:14:13,400 --> 00:14:15,679 Speaker 1: probably for the next year, and believe it or not, 244 00:14:16,240 --> 00:14:18,040 Speaker 1: next year they might actually be able to cut it, 245 00:14:18,120 --> 00:14:21,000 Speaker 1: which is something that maybe a lot of people didn't 246 00:14:21,000 --> 00:14:24,600 Speaker 1: think was possible just a couple of months ago. Alright, 247 00:14:24,840 --> 00:14:27,160 Speaker 1: you know, the discussion that we're hearing in the marketplace 248 00:14:27,200 --> 00:14:30,840 Speaker 1: here is centering around inflation more and more, and the 249 00:14:30,920 --> 00:14:34,080 Speaker 1: concerns are, Okay, we see inflation whether we look at 250 00:14:34,080 --> 00:14:38,080 Speaker 1: commodities or you know, other parts of uh, the economy. 251 00:14:38,200 --> 00:14:41,200 Speaker 1: The question simply is is it transitory as per Federal 252 00:14:41,240 --> 00:14:44,680 Speaker 1: Reserve Chairman Pow or is it something more? What are 253 00:14:44,720 --> 00:14:47,440 Speaker 1: you looking at to get a feel for that? Yeah, 254 00:14:47,480 --> 00:14:50,360 Speaker 1: so I'm looking deeply at some of the components of 255 00:14:51,040 --> 00:14:54,360 Speaker 1: the consumer Price Index and the PC deflator, which are 256 00:14:54,400 --> 00:14:57,800 Speaker 1: the two kind of primary consumer price gages that that 257 00:14:57,880 --> 00:15:00,760 Speaker 1: we look at. And what you see is your right ball. 258 00:15:00,840 --> 00:15:03,760 Speaker 1: You see things like goods prices going up. I mean, 259 00:15:03,760 --> 00:15:05,920 Speaker 1: you just saw that we have a record trade deficit, right, 260 00:15:05,960 --> 00:15:08,040 Speaker 1: Those numbers came out just a few minutes ago, and 261 00:15:08,080 --> 00:15:10,280 Speaker 1: that suggests that you know, we are importing a lot, 262 00:15:10,360 --> 00:15:13,720 Speaker 1: but those are goods, right, and in the US, only 263 00:15:13,760 --> 00:15:17,280 Speaker 1: about of what we spend money on our goods. It's 264 00:15:17,280 --> 00:15:19,000 Speaker 1: just that there are prices that you see when you 265 00:15:19,040 --> 00:15:21,000 Speaker 1: go into a food store, you go to Staples, or 266 00:15:21,040 --> 00:15:22,880 Speaker 1: you go to you know, home depot, or you go 267 00:15:22,920 --> 00:15:25,040 Speaker 1: to your mom and pop shop at the corner, so 268 00:15:25,080 --> 00:15:29,080 Speaker 1: you see those prices regularly. But we consume services and 269 00:15:29,080 --> 00:15:32,760 Speaker 1: and a lot of those services are not provided by 270 00:15:32,840 --> 00:15:35,400 Speaker 1: big companies that are gonna have earnings calls and talk 271 00:15:35,440 --> 00:15:38,960 Speaker 1: about how their import input prices are going up. So 272 00:15:39,080 --> 00:15:41,120 Speaker 1: so it's the mom and pop places that I think 273 00:15:41,120 --> 00:15:44,800 Speaker 1: where we miss a lot in the financial markets that 274 00:15:44,880 --> 00:15:47,440 Speaker 1: are going to be holding inflation down. So you look 275 00:15:47,480 --> 00:15:52,040 Speaker 1: at at core services, so that services excluding energy and food, 276 00:15:52,520 --> 00:15:57,160 Speaker 1: and inflation there has halved what it was in so 277 00:15:57,400 --> 00:16:00,760 Speaker 1: you're talking about a really big slowdown in price growth 278 00:16:00,760 --> 00:16:05,960 Speaker 1: of services, whereas goods prices have gone significantly higher. So 279 00:16:05,680 --> 00:16:10,280 Speaker 1: so this this dynamic, if it, if it persists, is 280 00:16:10,400 --> 00:16:13,680 Speaker 1: going to be um, you know, maybe keep inflation lower 281 00:16:13,720 --> 00:16:17,480 Speaker 1: than than the market is currently expecting. That's fascinating. I mean, listen, 282 00:16:17,480 --> 00:16:19,960 Speaker 1: Paul and I have had a number of guests on recently, 283 00:16:19,960 --> 00:16:23,720 Speaker 1: IRA from the northeast and UM from the south as well. 284 00:16:23,760 --> 00:16:26,320 Speaker 1: I think someone from Myrtle Beach in a hotel, somebody 285 00:16:26,320 --> 00:16:29,360 Speaker 1: in a restaurant chain in Florida. They all told us 286 00:16:29,400 --> 00:16:32,440 Speaker 1: they can't get employees. So clearly a lot of those 287 00:16:32,440 --> 00:16:35,600 Speaker 1: services haven't opened up yet, right, They haven't opened back 288 00:16:35,720 --> 00:16:39,680 Speaker 1: up yet, um. And I wonder if those figures will 289 00:16:39,720 --> 00:16:43,360 Speaker 1: hold once they finally convince people, you know, the unemployment 290 00:16:43,360 --> 00:16:47,200 Speaker 1: benefits run out in September UM to come to come 291 00:16:47,200 --> 00:16:49,640 Speaker 1: into work. And if they're gonna have to pay them 292 00:16:49,680 --> 00:16:51,920 Speaker 1: more to do that, then they're gonna have to raise prices, 293 00:16:51,920 --> 00:16:55,840 Speaker 1: won't they. Well, they probably will, and and maybe compressed 294 00:16:55,880 --> 00:16:58,520 Speaker 1: their margins a little bit to keep those prices competitive. 295 00:16:58,960 --> 00:17:00,960 Speaker 1: I think it's it's not a or will we get 296 00:17:01,040 --> 00:17:03,840 Speaker 1: inflation that gets to two percent for an extended period 297 00:17:03,880 --> 00:17:06,520 Speaker 1: of time. I think, like you mentioned it, it's a 298 00:17:06,560 --> 00:17:09,680 Speaker 1: matter of timing, right, So if we can't open back 299 00:17:09,760 --> 00:17:12,560 Speaker 1: up until October. But but remember it's not just all 300 00:17:12,560 --> 00:17:15,200 Speaker 1: of a sudden week flick a switch and everyone gets 301 00:17:15,240 --> 00:17:18,880 Speaker 1: rehired on October one because unemployment benefits went out. Right now, 302 00:17:18,920 --> 00:17:20,639 Speaker 1: it takes you six months to ramp up. You have 303 00:17:20,680 --> 00:17:23,160 Speaker 1: to train these people you now have, you know, maybe 304 00:17:23,200 --> 00:17:26,280 Speaker 1: new staff that weren't with you before and then so, 305 00:17:26,280 --> 00:17:28,720 Speaker 1: so it's a matter of how long it takes for 306 00:17:29,359 --> 00:17:33,080 Speaker 1: those services prices and and the input prices for services 307 00:17:33,119 --> 00:17:35,200 Speaker 1: to feed through, which is all wages. By the way, 308 00:17:35,200 --> 00:17:37,600 Speaker 1: it's wages is the only thing that really matters for 309 00:17:37,600 --> 00:17:40,399 Speaker 1: for service prices. Um. So, So I can see it 310 00:17:40,400 --> 00:17:43,879 Speaker 1: in say three US getting to a sustained two wish 311 00:17:43,920 --> 00:17:46,720 Speaker 1: percent inflation level. But that means for the FED is 312 00:17:46,760 --> 00:17:49,199 Speaker 1: that they can they'll be able to afford to be 313 00:17:49,320 --> 00:17:54,240 Speaker 1: patient until we see um that sustained two wish percent 314 00:17:54,400 --> 00:17:58,399 Speaker 1: wage UH inflation growth, because you have UH sustained wage 315 00:17:58,400 --> 00:18:01,400 Speaker 1: growth and that takes a long time defeat through the system. 316 00:18:01,520 --> 00:18:03,320 Speaker 1: Um and and but I think it will. It's just 317 00:18:03,359 --> 00:18:04,920 Speaker 1: a matter of you know, are we getting a little 318 00:18:04,920 --> 00:18:06,679 Speaker 1: ahead of ourselves here thinking that we're going to have 319 00:18:06,720 --> 00:18:09,399 Speaker 1: three percent inflation for the next two years? I don't think. So. 320 00:18:10,320 --> 00:18:13,080 Speaker 1: We didn't get to talk about the fourth May, the 321 00:18:13,119 --> 00:18:15,760 Speaker 1: fourth May, the fourth peak with you always just just 322 00:18:16,440 --> 00:18:19,520 Speaker 1: here a podcast. You're talking about star Wars. Yeah, we're 323 00:18:19,520 --> 00:18:22,320 Speaker 1: talking about Star Wars. We're streaming. We talked about streaming 324 00:18:22,320 --> 00:18:25,879 Speaker 1: with Ethan Rogan often about from b I about the 325 00:18:25,920 --> 00:18:28,400 Speaker 1: future of streaming, and then I get on a nerd 326 00:18:28,400 --> 00:18:30,440 Speaker 1: out with a couple of my other BI colleagues talking 327 00:18:30,440 --> 00:18:33,199 Speaker 1: about the Star Wars franchise of great stuff. For me, 328 00:18:33,320 --> 00:18:35,760 Speaker 1: the first three movies are the only ones still, the 329 00:18:35,840 --> 00:18:38,200 Speaker 1: only ones that I really enjoy. I don't know if 330 00:18:38,280 --> 00:18:39,920 Speaker 1: have you have you not seen? Have you not seen 331 00:18:40,000 --> 00:18:43,680 Speaker 1: Rogue One? Rogue One is I have, but it's not Empire. 332 00:18:43,760 --> 00:18:46,920 Speaker 1: Don't get in any case. In any case, uh, Ira, 333 00:18:47,040 --> 00:18:49,040 Speaker 1: thanks very much. I'm gonna check out the podcast as well. 334 00:18:49,040 --> 00:18:51,119 Speaker 1: You can get that on SoundCloud or anywhere that you 335 00:18:51,160 --> 00:18:53,959 Speaker 1: listen to find your your podcast. Ira Jersey is our 336 00:18:54,000 --> 00:19:01,880 Speaker 1: chief US rate strategists. This is Bloomberg. Well, this US 337 00:19:01,960 --> 00:19:05,560 Speaker 1: economy is certainly beginning the reopening phase. We're starting to 338 00:19:05,600 --> 00:19:07,320 Speaker 1: see that in a lot of the economic data come 339 00:19:07,320 --> 00:19:09,520 Speaker 1: out in terms of durable goods orders, in terms of 340 00:19:09,560 --> 00:19:13,359 Speaker 1: personal income. Uh and certainly the Federal Reserve is doing 341 00:19:13,400 --> 00:19:15,560 Speaker 1: its part as well as fiscal stidulus that's gonna lay 342 00:19:15,560 --> 00:19:17,639 Speaker 1: of the land of this economy. We do that with 343 00:19:17,640 --> 00:19:20,760 Speaker 1: the Edward Price, former British trade official and current political 344 00:19:20,880 --> 00:19:24,560 Speaker 1: economy adjunct professor at n y U. Edward thanks so 345 00:19:24,640 --> 00:19:28,280 Speaker 1: much for joining us here Again. The Fed met last 346 00:19:28,359 --> 00:19:32,400 Speaker 1: week talking about continued lower for longer, but there are 347 00:19:32,520 --> 00:19:36,159 Speaker 1: some persistent concerns creeping into this marketplace about inflation and 348 00:19:36,200 --> 00:19:40,480 Speaker 1: that it might not be as transitory as the FED believes. 349 00:19:41,240 --> 00:19:45,280 Speaker 1: What's your view there, thanks, guys. So honestly, I have 350 00:19:45,400 --> 00:19:49,879 Speaker 1: absolutely no idea. I'm confused, right, I'm confused, and I 351 00:19:49,920 --> 00:19:52,600 Speaker 1: think that's because the FED wants me to be confused 352 00:19:52,720 --> 00:19:55,120 Speaker 1: and wants us to be confused. You're right to point 353 00:19:55,119 --> 00:19:58,359 Speaker 1: to that contradiction. Um. And what's happening is we're seeing 354 00:19:58,359 --> 00:20:01,320 Speaker 1: this incredible shift in money terry policy, add the FED 355 00:20:01,720 --> 00:20:05,119 Speaker 1: towards this new approach called the Flexible Average Inflation targeting 356 00:20:05,320 --> 00:20:08,199 Speaker 1: or FAITH right now, you know, you read through and 357 00:20:08,200 --> 00:20:10,199 Speaker 1: you look at it, and it says FATE is a 358 00:20:10,200 --> 00:20:14,639 Speaker 1: commitment to let inflation actually run above target before rate hikes, 359 00:20:15,160 --> 00:20:18,160 Speaker 1: which is a big change from from the forecasting culture, 360 00:20:18,880 --> 00:20:21,960 Speaker 1: a big change in the practice of economics. Um, and 361 00:20:22,040 --> 00:20:25,960 Speaker 1: maybe something that sounds sensible. But look, I said, I'm confused. Why. Well, 362 00:20:25,960 --> 00:20:30,080 Speaker 1: it's also very strange because FATE redefines the two percent 363 00:20:30,160 --> 00:20:33,119 Speaker 1: inflation target as an average, right, So how do you 364 00:20:33,119 --> 00:20:35,680 Speaker 1: do that? You say, if inflation is below two percent 365 00:20:35,800 --> 00:20:38,560 Speaker 1: in any first period, it should be above two percent 366 00:20:38,680 --> 00:20:41,600 Speaker 1: in any second period. UM. Now, apart from the fact 367 00:20:41,600 --> 00:20:43,959 Speaker 1: that that kind of moves away from the stable prices 368 00:20:44,000 --> 00:20:46,520 Speaker 1: fixation that central banks have had from years, it's also 369 00:20:46,640 --> 00:20:49,399 Speaker 1: very very vague, and that means, I think, in my opinion, 370 00:20:49,480 --> 00:20:52,840 Speaker 1: the policy is a deliberate injection of uncertainty. Nobody knows 371 00:20:52,840 --> 00:20:55,000 Speaker 1: how long that second period will be. Are we looking 372 00:20:55,040 --> 00:20:57,920 Speaker 1: at data that suggests the recovery or are we looking 373 00:20:57,920 --> 00:21:00,359 Speaker 1: at this framework. It's it's really not clear. Well, and 374 00:21:00,400 --> 00:21:03,359 Speaker 1: this takes us back to it wasn't long ago that 375 00:21:03,400 --> 00:21:06,080 Speaker 1: there was no inflation target, right. That uncertainty has been 376 00:21:06,119 --> 00:21:10,879 Speaker 1: with the FED forever. That's right, and we've done almost 377 00:21:10,880 --> 00:21:13,280 Speaker 1: too well on for guidance. And I think the problem 378 00:21:13,359 --> 00:21:15,800 Speaker 1: now is that fate may well end up pitting the 379 00:21:15,840 --> 00:21:19,239 Speaker 1: credibility of the FED against its mandate, right, or at 380 00:21:19,280 --> 00:21:21,600 Speaker 1: least against one part of the FED mandate, which is 381 00:21:21,760 --> 00:21:25,480 Speaker 1: the aforementioned stable prices UM. So you know thought experiment, right, 382 00:21:25,680 --> 00:21:28,320 Speaker 1: Let's say the FED does achieve something like two percent 383 00:21:28,440 --> 00:21:31,960 Speaker 1: for whatever a sustained period means, and you're right to say, look, 384 00:21:31,960 --> 00:21:34,800 Speaker 1: we're already seeing some inflation, but maybe that's superficial. So 385 00:21:34,920 --> 00:21:37,320 Speaker 1: let's say we get into this good place that fate 386 00:21:37,359 --> 00:21:40,360 Speaker 1: suggests we can. That good place is where the problems 387 00:21:40,359 --> 00:21:42,840 Speaker 1: start because, on the one hand, right the FED has 388 00:21:42,880 --> 00:21:45,600 Speaker 1: to say, look, we promised to run above two percent 389 00:21:45,680 --> 00:21:47,879 Speaker 1: to some period, so now we have to run above 390 00:21:48,040 --> 00:21:51,880 Speaker 1: two percent to keep our promise. Um. That protects your credibility, 391 00:21:51,920 --> 00:21:54,800 Speaker 1: but it damages stable prices. Now, on the other hand, 392 00:21:54,880 --> 00:21:57,280 Speaker 1: if the FED says, oh, look, just kidding, we've achieved 393 00:21:57,359 --> 00:22:00,440 Speaker 1: two percent, maybe it's time to abandon fate. Maybe it's 394 00:22:00,720 --> 00:22:03,399 Speaker 1: time to start thinking about the future rate hikes. That 395 00:22:03,520 --> 00:22:06,919 Speaker 1: protects they will prices, but it damagees credibility. UM. So 396 00:22:07,040 --> 00:22:08,920 Speaker 1: that's the fork in the word I'm talking about. That's 397 00:22:08,920 --> 00:22:14,120 Speaker 1: why I'm confused. All right. It's fascinating, to say the least. 398 00:22:14,160 --> 00:22:17,840 Speaker 1: And it just takes me back to Ben Bernankee. If 399 00:22:17,840 --> 00:22:20,440 Speaker 1: you remember ten years ago, was on sixty Minutes and 400 00:22:20,520 --> 00:22:23,600 Speaker 1: he said we're not worried about inflation. We can deal 401 00:22:23,640 --> 00:22:26,360 Speaker 1: with that, no problem, and everyone seems to take him 402 00:22:26,359 --> 00:22:29,000 Speaker 1: at his word on that. I'm sure they can deal 403 00:22:29,040 --> 00:22:32,480 Speaker 1: with it. But the no problem part is, um is 404 00:22:32,520 --> 00:22:34,920 Speaker 1: the part I think that you have to think about. 405 00:22:35,400 --> 00:22:39,199 Speaker 1: Kenneth fed easily tackle inflation if it comes on too strong, 406 00:22:39,320 --> 00:22:44,360 Speaker 1: and then you know what happens to the markets. So yes, 407 00:22:44,440 --> 00:22:47,280 Speaker 1: the fight contacted inflation is it wants to um, it 408 00:22:47,320 --> 00:22:50,200 Speaker 1: can it can do what Paul Folker did famously, right, 409 00:22:50,280 --> 00:22:53,360 Speaker 1: But if it does that, that's going to rail exactly 410 00:22:53,359 --> 00:22:55,720 Speaker 1: against everything that it's been saying it wants to do, 411 00:22:56,240 --> 00:22:59,560 Speaker 1: particularly with the labor markets. So you know, Banankee was 412 00:22:59,640 --> 00:23:01,240 Speaker 1: very calm, infident. You had a lot of reasons to 413 00:23:01,240 --> 00:23:04,320 Speaker 1: be very confident at that time. Um, But there's always 414 00:23:04,359 --> 00:23:06,360 Speaker 1: an element of uncertainty. And I think if you look 415 00:23:06,400 --> 00:23:09,359 Speaker 1: at what Powell was saying at Jackson Hole recently, there's 416 00:23:09,400 --> 00:23:12,720 Speaker 1: more of a confession as to uncertainty. So that makes 417 00:23:12,760 --> 00:23:15,920 Speaker 1: the fact that fate is a departure from Ford guidance. 418 00:23:16,000 --> 00:23:18,040 Speaker 1: If I was being cheeky, I might describe it as 419 00:23:18,040 --> 00:23:22,240 Speaker 1: Ford misguidance very very interesting, right, Yeah, it's very interesting 420 00:23:22,280 --> 00:23:26,040 Speaker 1: that the central bankers have to introduce some kind of uncertainty. 421 00:23:26,640 --> 00:23:29,320 Speaker 1: And you know the other famous meme in central banking is, 422 00:23:29,320 --> 00:23:33,120 Speaker 1: of course married druggies. Whatever it takes, that was right, 423 00:23:33,200 --> 00:23:36,119 Speaker 1: that was Ford guidance, that was confident. But that's because 424 00:23:36,160 --> 00:23:38,040 Speaker 1: Gergi didn't think he was going to have to back 425 00:23:38,040 --> 00:23:40,800 Speaker 1: out of it. Right. He was promising not just right, 426 00:23:40,920 --> 00:23:43,639 Speaker 1: he was promising not just a large scale of minitary intervention, 427 00:23:43,880 --> 00:23:46,760 Speaker 1: but also a direction. So you know, last week Pal 428 00:23:46,800 --> 00:23:49,880 Speaker 1: said something like, as long as it takes um Ford 429 00:23:49,880 --> 00:23:52,080 Speaker 1: guidance isn't dead in the sense that he's still promising 430 00:23:52,080 --> 00:23:54,320 Speaker 1: the conditions. But at the same time, he's not going 431 00:23:54,359 --> 00:23:56,200 Speaker 1: to tell you when he's going to stop. Edward, it 432 00:23:56,800 --> 00:23:58,280 Speaker 1: wasn't long enough. I hope I can't get you on 433 00:23:58,320 --> 00:24:00,639 Speaker 1: for longer next time you join us. Edward Price, former 434 00:24:01,160 --> 00:24:04,200 Speaker 1: British trade official, currently a political economy adjunct at n 435 00:24:04,320 --> 00:24:07,359 Speaker 1: y U. Thanks for listening to the Bloomberg Markets podcast. 436 00:24:07,760 --> 00:24:10,960 Speaker 1: You can subscribe and listen to interviews of Apple Podcasts 437 00:24:11,080 --> 00:24:15,000 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 438 00:24:15,040 --> 00:24:19,240 Speaker 1: on Twitter at Matt Miller three. On Fall Sweeney, I'm 439 00:24:19,240 --> 00:24:21,880 Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can 440 00:24:21,920 --> 00:24:24,120 Speaker 1: always catch us worldwide at Bloomberg Radio.