WEBVTT - Teremana Tequila: A Record Breaking First Year 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.919 at Bloomberg dot com slash podcast. Well, as we said, 0:00:21.960 --> 0:00:25.400 tomorrow is Sinko to Mile, a big day. We're the 0:00:25.440 --> 0:00:28.639 tequila business, so we are very fortunate today to be 0:00:28.640 --> 0:00:30.800 able to talk about the tequila business, in the spirits business. 0:00:30.840 --> 0:00:34.680 And welcome Jenna Facton, co founder of Tara Montic Tequila. Jenna, 0:00:34.840 --> 0:00:37.120 thanks so much for joining us here talk to us 0:00:37.120 --> 0:00:42.800 about your tequila and the brand. It's great to meet 0:00:42.840 --> 0:00:46.400 you guys and chat with you today. Yeah, the care 0:00:46.440 --> 0:00:51.159 amount of tequila we launched right when the pandemic was starting. 0:00:51.200 --> 0:00:55.200 We launched towards the end of March. And as an entrepreneur, 0:00:55.600 --> 0:00:58.360 you're in a situation where you think, wow, what do 0:00:58.440 --> 0:01:02.840 you do now? But our business partner, partner and Fearless 0:01:02.840 --> 0:01:06.520 founder GWayne, we call him dj Um. He said he 0:01:06.640 --> 0:01:10.440 you know, he he had been working on this and 0:01:10.440 --> 0:01:14.399 then wanting to do this for years. He grew up 0:01:14.440 --> 0:01:17.560 with a family who loved tequila and it was very 0:01:17.640 --> 0:01:20.840 much for him, UM one of those things that was 0:01:20.880 --> 0:01:24.720 about bringing people together, whether it was good times or bad. 0:01:24.760 --> 0:01:27.520 He said, in his family, like if um, someone had 0:01:27.560 --> 0:01:29.760 just gotten a promotion, the family would crack open the 0:01:29.800 --> 0:01:32.360 tequila and have a drink. But also if you know 0:01:32.480 --> 0:01:36.479 someone unfortunately passed away, they brought them together as well. 0:01:36.520 --> 0:01:38.240 And so he said, you know what, let's just go 0:01:38.319 --> 0:01:42.280 at it in a really soft, quiet manner. UM. But 0:01:42.480 --> 0:01:46.800 obviously anything but happened, and the consumer just really lashed 0:01:46.800 --> 0:01:51.320 onto Tara Monta tequila UM for many different reasons during 0:01:51.320 --> 0:01:54.480 the pandemic, and we had an incredible record breaking first year. 0:01:54.760 --> 0:01:58.040 Well our director Ken Fellow, who says it's very smooth, 0:01:58.160 --> 0:01:59.960 He says, it's it's quite good. I haven't had a 0:02:00.080 --> 0:02:02.720 chance to try it yet, but I love tequila and 0:02:03.240 --> 0:02:05.960 I love the rock. What's it like working with DJ? 0:02:06.080 --> 0:02:09.679 He's so committed to everything that he does. I don't 0:02:09.680 --> 0:02:11.880 know if that would drive you crazy or if it's 0:02:11.919 --> 0:02:16.000 a benefit. Who doesn't love him? What you see is 0:02:16.080 --> 0:02:20.919 really what you get. He is so interested in the 0:02:21.000 --> 0:02:23.280 business and he was really committed to say, I want 0:02:23.320 --> 0:02:25.600 to understand it, I want to find out about it 0:02:25.639 --> 0:02:28.400 before I do anything, and I want to do it 0:02:28.560 --> 0:02:32.760 the right way, and so it it doesn't drive you crazy. 0:02:32.800 --> 0:02:37.040 You just have such incredible appreciation for someone who is 0:02:37.120 --> 0:02:40.680 so busy, but he is. You feel like he's constantly 0:02:40.680 --> 0:02:44.720 working on the terremount of business and he ensured that 0:02:44.760 --> 0:02:49.240 he went down to Mexico really studied it. Um worked 0:02:49.400 --> 0:02:53.040 really closely with our Mexican family partners to develop this. 0:02:53.320 --> 0:02:58.160 He is all in and he's engaged every single day. Jenna, 0:02:58.200 --> 0:02:59.720 I'd love to get a sense of you know, this 0:03:00.040 --> 0:03:02.240 years industry for you guys launching right in mid of 0:03:02.240 --> 0:03:05.600 a pandemic. Good planning there, but the spirits industry just 0:03:06.440 --> 0:03:09.840 really took off in for obvious reasons. I guess then 0:03:09.880 --> 0:03:12.760 you're going up against Clooney, Yeah, exactly. How do you 0:03:12.760 --> 0:03:15.720 think about the business kind of going forward? Yeah, it's 0:03:15.720 --> 0:03:20.240 really interesting. You're totally right. Spirits was up over in 0:03:20.280 --> 0:03:24.520 the last year. Um. What's interesting is tequila dollar sales 0:03:24.520 --> 0:03:27.760 were up over fifty three in the last year. So 0:03:27.840 --> 0:03:32.280 this there's just this real shift and consumer behavior away 0:03:32.360 --> 0:03:38.320 from say the older spirits such as vodka into something 0:03:38.360 --> 0:03:41.640 that is more flavorable and interesting, and consumers really are 0:03:41.680 --> 0:03:45.080 carrying about providence and how something's made. And I think 0:03:45.200 --> 0:03:49.360 for us, for Tara Mona, that is we're really excited 0:03:49.360 --> 0:03:52.680 about that because when people ask questions about it, we 0:03:52.800 --> 0:03:58.000 have just such a really authentic, handcrafted story. Um that 0:03:58.400 --> 0:04:02.600 really people excite people. And of course, um, there's a 0:04:02.600 --> 0:04:07.000 new campaign. I've seen Dwyane make guawk on his Instagram 0:04:07.000 --> 0:04:10.280 account and and now that a restaurants are reopening, you 0:04:10.320 --> 0:04:13.520 have a campaign where you get people involved in social 0:04:13.560 --> 0:04:17.640 and you pay them back for their avocado dip. Yeah. 0:04:17.960 --> 0:04:21.359 Obviously during the pandemic, it was a conversation constantly with 0:04:21.480 --> 0:04:24.159 DJ and the team, and he was saying, how do 0:04:24.320 --> 0:04:28.520 we help out when hospitality is such an important part 0:04:28.520 --> 0:04:32.160 of our economy And so we all felt like the 0:04:32.200 --> 0:04:35.160 time was right to really encourage people to come back 0:04:35.200 --> 0:04:38.440 into their restaurants however they safely, however they feel safe 0:04:38.480 --> 0:04:41.920 about it, whether it's take out, dine in, dine outside. 0:04:42.360 --> 0:04:45.679 And so he said, let's let's go at this really hard, 0:04:46.000 --> 0:04:49.600 use his incredible social media reach that your reference um 0:04:49.760 --> 0:04:52.920 to encourage people to go out there. So um, right now, 0:04:53.200 --> 0:04:55.760 it was started May one, and everyone can still take 0:04:55.800 --> 0:04:58.840 advantage of it through Sko to Mayo, which is tomorrow 0:04:58.960 --> 0:05:04.000 through May fifth. Um and they go out to any 0:05:04.080 --> 0:05:07.200 restaurant that serves Tara Mona Tequila, they order a tamana 0:05:07.760 --> 0:05:12.440 and they will get their guacamali reimbursed by the Rocks. 0:05:12.560 --> 0:05:14.960 Or take a picture on the Rock. You take a 0:05:14.960 --> 0:05:18.560 picture eating your guawk drinking your terramana, post it on 0:05:18.720 --> 0:05:21.400 Glack on the Rock dot com and Dwayne pays you 0:05:21.440 --> 0:05:25.560 back for your guac order. Fascinating business and we wish you, 0:05:25.560 --> 0:05:28.400 of course, the best of luck. Jennafagnen there Um co 0:05:28.600 --> 0:05:33.960 founded ter Mona Taramana Tequila with Dwayne the Rock Johnson. 0:05:34.040 --> 0:05:37.040 I've been making his pancake recipe, which I also found 0:05:37.160 --> 0:05:45.159 on Instagram. Let's continue our discussion of the cryptocurrency market. 0:05:45.200 --> 0:05:46.919 I guess today you could sum it up on the 0:05:46.960 --> 0:05:50.200 word of volatility. I'm looking at Bitcoin. It's off four 0:05:50.279 --> 0:05:55.120 percent today. Bucks now trades at four thousand, five hundred dollars. Yet, 0:05:55.279 --> 0:05:58.880 when I got over to Etherem symbol uh tickers x 0:05:58.920 --> 0:06:03.400 eat Etherium Ethereum, thank you very much. Ethereum setting all 0:06:03.440 --> 0:06:06.960 time high again today. Matt Up another thirty four points 0:06:06.960 --> 0:06:10.400 thirty three thowy two. So going both ways here, let's 0:06:10.400 --> 0:06:13.080 get a clear view of what is going on. We 0:06:13.160 --> 0:06:15.600 welcome Gregg King, CEO of Osprey Funds. So, Greg, when 0:06:15.640 --> 0:06:19.080 you see divergence in the crypto market like we see 0:06:19.160 --> 0:06:24.800 today with Ethereum and Bitcoin, does that tell you anything? Yeah, 0:06:24.839 --> 0:06:27.440 it tells me that we're in what they're calling all season. 0:06:27.880 --> 0:06:31.000 So this happened last time around, the big bull run 0:06:31.080 --> 0:06:35.719 with Bitcoin, bitcoins, the biggest, you know, the oldest crypto, 0:06:35.839 --> 0:06:37.720 that's what most people think of when they think about 0:06:37.760 --> 0:06:40.480 crypto UM, and it leads the way. It's led the 0:06:40.760 --> 0:06:43.880 way this time in this bull market where it crossed 0:06:43.880 --> 0:06:46.880 its all time previous all time high that had been 0:06:46.920 --> 0:06:50.880 in place for about a thousand days in background Thanksgiving Um. 0:06:50.960 --> 0:06:53.720 But I think it's it's giving up leadership to Ethereum, 0:06:53.839 --> 0:06:57.920 the second biggest crypto out there and all the other 0:06:58.000 --> 0:07:01.280 coins that people like to call all coins um, and 0:07:01.320 --> 0:07:05.520 I think the reasons for that are legitimate. Ethereum is 0:07:05.520 --> 0:07:09.240 the backbone for DFI, for n f T S, for 0:07:09.320 --> 0:07:11.840 a lot of the innovation that's happening in the crypto space, 0:07:12.400 --> 0:07:14.920 and people are coming to recognize that the fact that 0:07:14.960 --> 0:07:17.680 people like Mark Cuban are tweeting about it, that that 0:07:17.800 --> 0:07:20.960 helps the drive awareness as well. So it doesn't surprise 0:07:21.000 --> 0:07:24.080 me to see that divergence. And frankly I liked it 0:07:24.120 --> 0:07:27.680 because it's uh um. It shows that crypto is not 0:07:27.800 --> 0:07:30.720 just one big monolithic block. There's different things going on. 0:07:30.800 --> 0:07:33.880 Bitcoin is one thing, Etherium is another, and it goes 0:07:33.920 --> 0:07:37.280 on from there. You know, it's quite cool um the 0:07:37.360 --> 0:07:41.400 diversity and there are different use cases and they're set 0:07:41.480 --> 0:07:44.520 up differently. Ethereum doesn't have the scarcity that bitcoin does, 0:07:44.640 --> 0:07:48.760 right bitcoin um no more than twenty one million bitcoins 0:07:48.800 --> 0:07:52.080 will ever be mined, but there's no cap on ethereum. 0:07:52.120 --> 0:07:57.000 Does that make it worth less? Well, it's just about 0:07:57.080 --> 0:07:59.200 the rate of that inflation, which I think the way 0:07:59.240 --> 0:08:02.920 they've set it up is done somewhat reasonably, and it's 0:08:03.000 --> 0:08:07.440 it's really about the supply demand dynamic and whether uh 0:08:07.600 --> 0:08:10.840 supply of coins would outstrip demand, in which case that 0:08:10.880 --> 0:08:14.560 would of course be problematic for the price overall. But 0:08:14.920 --> 0:08:19.200 with the potential use cases for ethereum starting to um, 0:08:19.280 --> 0:08:21.600 you know, just thinking back through or four years, these 0:08:21.640 --> 0:08:24.000 were twinkles in the eye of a lot of people, 0:08:24.000 --> 0:08:25.720 a lot of people talked about a lot of ideas, 0:08:26.240 --> 0:08:28.760 but now these are real projects and real values being 0:08:28.800 --> 0:08:32.800 exchanged and traded. In the DeFi space, you have the 0:08:32.800 --> 0:08:35.400 whole non fungible tokens n f T s or people 0:08:35.440 --> 0:08:38.280 are trading around digital arts and things like that. So 0:08:38.320 --> 0:08:41.160 they're actually use cases and and many of them, most 0:08:41.240 --> 0:08:44.400 of them are built on the Ethereum network. I gotta 0:08:44.440 --> 0:08:46.440 say to me, n f T S makes even less 0:08:46.480 --> 0:08:51.400 sense than coin. I mean, why do I care if 0:08:51.480 --> 0:08:55.079 you buy the n f T of a Lebron Dunk 0:08:55.160 --> 0:08:58.640 whatever that is. When I can watch the Lebron Dunk 0:08:58.760 --> 0:09:01.960 on YouTube all day long for free, I can't get 0:09:02.000 --> 0:09:05.080 my head around it. Yeah, I'm started with you on 0:09:05.120 --> 0:09:08.199 that one, um, But but don't mistake that for kind 0:09:08.240 --> 0:09:11.600 of the only potential outcome for what an n f 0:09:11.640 --> 0:09:14.960 T is. Right. N f T just means a non 0:09:15.000 --> 0:09:18.400 fungible token. It means there's a finite supply of them, 0:09:18.400 --> 0:09:22.120 and they represent certain things. So if you're tokenizing real estate, 0:09:22.160 --> 0:09:25.760 if you're tokenizing other assets that need a better way 0:09:25.800 --> 0:09:29.840 to be exchanged digitally and trustlessly, those two would be 0:09:29.960 --> 0:09:31.679 n f T s. So so I'm sort of with 0:09:31.760 --> 0:09:35.720 you on on you know, token izing random movie clip 0:09:35.920 --> 0:09:39.040 or something. I was never a baseball card collector either 0:09:40.160 --> 0:09:43.319 or an art collector, but you know, different strokes or 0:09:43.320 --> 0:09:45.440 different folks. So I think that's the one of the 0:09:45.480 --> 0:09:51.079 easier applications UM to kind of gain some foothold in 0:09:51.120 --> 0:09:55.319 the retail mindset, especially when you have sports stars and 0:09:55.320 --> 0:09:59.800 and all those kinds of celebrities endorsing them. So greg 0:09:59.800 --> 0:10:02.560 A to get a sense of who's buying these things 0:10:02.559 --> 0:10:06.280 when we talk about bitcoin or ethereum, is it. Yeah, 0:10:06.280 --> 0:10:08.520 I'd love to get a sense of retail versus more 0:10:08.679 --> 0:10:13.080 institutional What what do you know about that? Well, again, 0:10:13.160 --> 0:10:15.960 it's sort of cascades down. I think Bitcoin at this 0:10:16.040 --> 0:10:18.760 point is really getting a serious look by a lot 0:10:18.800 --> 0:10:21.800 of institutional investors. We don't have to you know, look 0:10:21.960 --> 0:10:25.120 very far to see, you know, whether it's announcements by 0:10:25.480 --> 0:10:28.640 insurance companies or Fortune five companies that are putting it 0:10:28.640 --> 0:10:33.200 on balance sheet. Uh. Bitcoin is is moving definitely into 0:10:33.240 --> 0:10:37.680 the institutional space, as is ethereum. I think where UM 0:10:37.880 --> 0:10:42.240 retail investors are more involved is around the byproducts UM 0:10:42.720 --> 0:10:45.439 of these other tokens and f t s and things 0:10:45.480 --> 0:10:49.920 like that. But again, even that space is sort of barbelled, right, 0:10:49.960 --> 0:10:54.000 because you'll have um, let's call them retail investors, just 0:10:54.000 --> 0:10:56.439 just self starters, people who are digging around the space 0:10:56.480 --> 0:10:59.120 and understand this and are following what's going on. But 0:10:59.280 --> 0:11:04.400 you also have extremely smart money, uh Silicon Valley vcs 0:11:04.440 --> 0:11:06.600 that are buying up some of these assets as well, 0:11:06.720 --> 0:11:09.600 So you really have it's kind of the middle of 0:11:09.640 --> 0:11:14.160 the spectrum. The more cautious, the kind of the pension funds, uh, 0:11:14.240 --> 0:11:18.520 the institutional investors that are managing public money, mutual funds, 0:11:18.520 --> 0:11:21.080 those types, those are the people that I think are 0:11:21.080 --> 0:11:25.400 going to be last to participate. It's funny, you know, 0:11:25.520 --> 0:11:30.600 last week the European Investment Bank issued its first digital 0:11:30.640 --> 0:11:36.920 bond on ethereum, and it's so I mean, at this point, um, 0:11:37.160 --> 0:11:39.600 no one cares. Right. That would have ten years ago 0:11:39.800 --> 0:11:42.240 that would have been headlines galore. We would have been 0:11:42.240 --> 0:11:44.680 covering a wall to wall for a week. It would 0:11:44.679 --> 0:11:47.000 have been just insane to think about. And now it 0:11:47.120 --> 0:11:52.599 seems so normal when the European Investment Bank issues a 0:11:53.040 --> 0:11:56.320 digital bond on ethereum that it doesn't no one bats 0:11:56.320 --> 0:11:59.360 an eyebrow. So the question is does this become is 0:11:59.400 --> 0:12:01.600 this just normal part of life now or does it 0:12:01.640 --> 0:12:03.720 go away? Does it become I hate to say the 0:12:03.760 --> 0:12:06.600 toolip fad because that didn't even really happen that way, 0:12:06.600 --> 0:12:08.800 But does it does it become a big bubble that 0:12:08.880 --> 0:12:13.120 we all regret like Bill Bottoms in ten years. No, No, 0:12:13.120 --> 0:12:16.000 no chance of that happening. In my opinion. Um, this 0:12:16.080 --> 0:12:18.320 is this is here to stay. It's just a question 0:12:18.360 --> 0:12:20.280 of how much is it going to continue to morph 0:12:20.400 --> 0:12:24.960 and evolve. Take Ethereum for example, it's it's basically software, right, 0:12:25.040 --> 0:12:27.920 So for the European Central Bank to say we're issuing 0:12:27.920 --> 0:12:31.400 a bond digitally, nobody would care about that. The question 0:12:31.480 --> 0:12:33.800 is just who owns the software? You know? So maybe 0:12:33.800 --> 0:12:37.920 they in the prior world they would use IBM software. 0:12:38.000 --> 0:12:41.480 Now they're using a decentralized software that we call etherium. 0:12:41.880 --> 0:12:43.960 So I think it is getting normalized and I think 0:12:43.960 --> 0:12:46.960 that's a good thing. Alright, Very cool to have some 0:12:47.000 --> 0:12:48.720 time with you, Greg, Thanks so much for joining us. 0:12:48.720 --> 0:12:52.600 He is the chief executive officer of Osprey Funds talking 0:12:52.640 --> 0:12:56.880 to us about digital currencies, digital networks just becoming a 0:12:56.920 --> 0:13:03.080 normal way of doing business. This is bloom work. Let's 0:13:03.080 --> 0:13:06.600 bring in Ira Jersey's our chief US rate strategist at 0:13:06.640 --> 0:13:11.199 Bloomberg Intelligence and ira UM. Today we're actually seeing some 0:13:11.240 --> 0:13:13.320 bond buying at least in the tenure right now, the 0:13:13.360 --> 0:13:16.040 yield down to one fifty six fifty eight. But I 0:13:16.040 --> 0:13:18.240 saw an interesting story on the terminal when I woke 0:13:18.320 --> 0:13:22.800 up this morning that the Treasury has quadrupled the amount 0:13:22.800 --> 0:13:25.120 of money it's gonna need this month in order to 0:13:25.200 --> 0:13:28.160 pay for the stimulus to over a trillion dollars. Are 0:13:28.160 --> 0:13:32.360 we going to see mad issuance UM? So, no, is 0:13:32.360 --> 0:13:35.520 the simple answer, and and that that's from their original 0:13:35.640 --> 0:13:39.120 estimate back in February that the market was expecting pretty 0:13:39.160 --> 0:13:41.800 close to what they announced. They announced the net borrowing 0:13:41.840 --> 0:13:45.160 of four hundred and sixty three billion dollars for for 0:13:45.240 --> 0:13:48.920 the current UM fiscal quarter, and that was compared to 0:13:49.200 --> 0:13:51.360 our four seventy five, and a lot of other people 0:13:51.360 --> 0:13:53.760 had four hundred four five. So it's right in the 0:13:53.880 --> 0:13:56.960 range of what most of us were expecting, you know, 0:13:57.040 --> 0:14:00.000 after we got the one point nine trillion dollar fiscal statement. 0:14:00.160 --> 0:14:04.440 So ironically, the Treasury Department is still issuing so much 0:14:04.520 --> 0:14:09.320 debt um that they probably won't have to um increase 0:14:09.400 --> 0:14:12.960 any of their UM any of their coupon issuance right now, 0:14:13.400 --> 0:14:15.679 probably for the next year, and believe it or not, 0:14:16.240 --> 0:14:18.040 next year they might actually be able to cut it, 0:14:18.120 --> 0:14:21.000 which is something that maybe a lot of people didn't 0:14:21.000 --> 0:14:24.600 think was possible just a couple of months ago. Alright, 0:14:24.840 --> 0:14:27.160 you know, the discussion that we're hearing in the marketplace 0:14:27.200 --> 0:14:30.840 here is centering around inflation more and more, and the 0:14:30.920 --> 0:14:34.080 concerns are, Okay, we see inflation whether we look at 0:14:34.080 --> 0:14:38.080 commodities or you know, other parts of uh, the economy. 0:14:38.200 --> 0:14:41.200 The question simply is is it transitory as per Federal 0:14:41.240 --> 0:14:44.680 Reserve Chairman Pow or is it something more? What are 0:14:44.720 --> 0:14:47.440 you looking at to get a feel for that? Yeah, 0:14:47.480 --> 0:14:50.360 so I'm looking deeply at some of the components of 0:14:51.040 --> 0:14:54.360 the consumer Price Index and the PC deflator, which are 0:14:54.400 --> 0:14:57.800 the two kind of primary consumer price gages that that 0:14:57.880 --> 0:15:00.760 we look at. And what you see is your right ball. 0:15:00.840 --> 0:15:03.760 You see things like goods prices going up. I mean, 0:15:03.760 --> 0:15:05.920 you just saw that we have a record trade deficit, right, 0:15:05.960 --> 0:15:08.040 Those numbers came out just a few minutes ago, and 0:15:08.080 --> 0:15:10.280 that suggests that you know, we are importing a lot, 0:15:10.360 --> 0:15:13.720 but those are goods, right, and in the US, only 0:15:13.760 --> 0:15:17.280 about of what we spend money on our goods. It's 0:15:17.280 --> 0:15:19.000 just that there are prices that you see when you 0:15:19.040 --> 0:15:21.000 go into a food store, you go to Staples, or 0:15:21.040 --> 0:15:22.880 you go to you know, home depot, or you go 0:15:22.920 --> 0:15:25.040 to your mom and pop shop at the corner, so 0:15:25.080 --> 0:15:29.080 you see those prices regularly. But we consume services and 0:15:29.080 --> 0:15:32.760 and a lot of those services are not provided by 0:15:32.840 --> 0:15:35.400 big companies that are gonna have earnings calls and talk 0:15:35.440 --> 0:15:38.960 about how their import input prices are going up. So 0:15:39.080 --> 0:15:41.120 so it's the mom and pop places that I think 0:15:41.120 --> 0:15:44.800 where we miss a lot in the financial markets that 0:15:44.880 --> 0:15:47.440 are going to be holding inflation down. So you look 0:15:47.480 --> 0:15:52.040 at at core services, so that services excluding energy and food, 0:15:52.520 --> 0:15:57.160 and inflation there has halved what it was in so 0:15:57.400 --> 0:16:00.760 you're talking about a really big slowdown in price growth 0:16:00.760 --> 0:16:05.960 of services, whereas goods prices have gone significantly higher. So 0:16:05.680 --> 0:16:10.280 so this this dynamic, if it, if it persists, is 0:16:10.400 --> 0:16:13.680 going to be um, you know, maybe keep inflation lower 0:16:13.720 --> 0:16:17.480 than than the market is currently expecting. That's fascinating. I mean, listen, 0:16:17.480 --> 0:16:19.960 Paul and I have had a number of guests on recently, 0:16:19.960 --> 0:16:23.720 IRA from the northeast and UM from the south as well. 0:16:23.760 --> 0:16:26.320 I think someone from Myrtle Beach in a hotel, somebody 0:16:26.320 --> 0:16:29.360 in a restaurant chain in Florida. They all told us 0:16:29.400 --> 0:16:32.440 they can't get employees. So clearly a lot of those 0:16:32.440 --> 0:16:35.600 services haven't opened up yet, right, They haven't opened back 0:16:35.720 --> 0:16:39.680 up yet, um. And I wonder if those figures will 0:16:39.720 --> 0:16:43.360 hold once they finally convince people, you know, the unemployment 0:16:43.360 --> 0:16:47.200 benefits run out in September UM to come to come 0:16:47.200 --> 0:16:49.640 into work. And if they're gonna have to pay them 0:16:49.680 --> 0:16:51.920 more to do that, then they're gonna have to raise prices, 0:16:51.920 --> 0:16:55.840 won't they. Well, they probably will, and and maybe compressed 0:16:55.880 --> 0:16:58.520 their margins a little bit to keep those prices competitive. 0:16:58.960 --> 0:17:00.960 I think it's it's not a or will we get 0:17:01.040 --> 0:17:03.840 inflation that gets to two percent for an extended period 0:17:03.880 --> 0:17:06.520 of time. I think, like you mentioned it, it's a 0:17:06.560 --> 0:17:09.680 matter of timing, right, So if we can't open back 0:17:09.760 --> 0:17:12.560 up until October. But but remember it's not just all 0:17:12.560 --> 0:17:15.200 of a sudden week flick a switch and everyone gets 0:17:15.240 --> 0:17:18.880 rehired on October one because unemployment benefits went out. Right now, 0:17:18.920 --> 0:17:20.639 it takes you six months to ramp up. You have 0:17:20.680 --> 0:17:23.160 to train these people you now have, you know, maybe 0:17:23.200 --> 0:17:26.280 new staff that weren't with you before and then so, 0:17:26.280 --> 0:17:28.720 so it's a matter of how long it takes for 0:17:29.359 --> 0:17:33.080 those services prices and and the input prices for services 0:17:33.119 --> 0:17:35.200 to feed through, which is all wages. By the way, 0:17:35.200 --> 0:17:37.600 it's wages is the only thing that really matters for 0:17:37.600 --> 0:17:40.399 for service prices. Um. So, So I can see it 0:17:40.400 --> 0:17:43.879 in say three US getting to a sustained two wish 0:17:43.920 --> 0:17:46.720 percent inflation level. But that means for the FED is 0:17:46.760 --> 0:17:49.199 that they can they'll be able to afford to be 0:17:49.320 --> 0:17:54.240 patient until we see um that sustained two wish percent 0:17:54.400 --> 0:17:58.399 wage UH inflation growth, because you have UH sustained wage 0:17:58.400 --> 0:18:01.400 growth and that takes a long time defeat through the system. 0:18:01.520 --> 0:18:03.320 Um and and but I think it will. It's just 0:18:03.359 --> 0:18:04.920 a matter of you know, are we getting a little 0:18:04.920 --> 0:18:06.679 ahead of ourselves here thinking that we're going to have 0:18:06.720 --> 0:18:09.399 three percent inflation for the next two years? I don't think. So. 0:18:10.320 --> 0:18:13.080 We didn't get to talk about the fourth May, the 0:18:13.119 --> 0:18:15.760 fourth May, the fourth peak with you always just just 0:18:16.440 --> 0:18:19.520 here a podcast. You're talking about star Wars. Yeah, we're 0:18:19.520 --> 0:18:22.320 talking about Star Wars. We're streaming. We talked about streaming 0:18:22.320 --> 0:18:25.879 with Ethan Rogan often about from b I about the 0:18:25.920 --> 0:18:28.400 future of streaming, and then I get on a nerd 0:18:28.400 --> 0:18:30.440 out with a couple of my other BI colleagues talking 0:18:30.440 --> 0:18:33.199 about the Star Wars franchise of great stuff. For me, 0:18:33.320 --> 0:18:35.760 the first three movies are the only ones still, the 0:18:35.840 --> 0:18:38.200 only ones that I really enjoy. I don't know if 0:18:38.280 --> 0:18:39.920 have you have you not seen? Have you not seen 0:18:40.000 --> 0:18:43.680 Rogue One? Rogue One is I have, but it's not Empire. 0:18:43.760 --> 0:18:46.920 Don't get in any case. In any case, uh, Ira, 0:18:47.040 --> 0:18:49.040 thanks very much. I'm gonna check out the podcast as well. 0:18:49.040 --> 0:18:51.119 You can get that on SoundCloud or anywhere that you 0:18:51.160 --> 0:18:53.959 listen to find your your podcast. Ira Jersey is our 0:18:54.000 --> 0:19:01.880 chief US rate strategists. This is Bloomberg. Well, this US 0:19:01.960 --> 0:19:05.560 economy is certainly beginning the reopening phase. We're starting to 0:19:05.600 --> 0:19:07.320 see that in a lot of the economic data come 0:19:07.320 --> 0:19:09.520 out in terms of durable goods orders, in terms of 0:19:09.560 --> 0:19:13.359 personal income. Uh and certainly the Federal Reserve is doing 0:19:13.400 --> 0:19:15.560 its part as well as fiscal stidulus that's gonna lay 0:19:15.560 --> 0:19:17.639 of the land of this economy. We do that with 0:19:17.640 --> 0:19:20.760 the Edward Price, former British trade official and current political 0:19:20.880 --> 0:19:24.560 economy adjunct professor at n y U. Edward thanks so 0:19:24.640 --> 0:19:28.280 much for joining us here Again. The Fed met last 0:19:28.359 --> 0:19:32.400 week talking about continued lower for longer, but there are 0:19:32.520 --> 0:19:36.159 some persistent concerns creeping into this marketplace about inflation and 0:19:36.200 --> 0:19:40.480 that it might not be as transitory as the FED believes. 0:19:41.240 --> 0:19:45.280 What's your view there, thanks, guys. So honestly, I have 0:19:45.400 --> 0:19:49.879 absolutely no idea. I'm confused, right, I'm confused, and I 0:19:49.920 --> 0:19:52.600 think that's because the FED wants me to be confused 0:19:52.720 --> 0:19:55.120 and wants us to be confused. You're right to point 0:19:55.119 --> 0:19:58.359 to that contradiction. Um. And what's happening is we're seeing 0:19:58.359 --> 0:20:01.320 this incredible shift in money terry policy, add the FED 0:20:01.720 --> 0:20:05.119 towards this new approach called the Flexible Average Inflation targeting 0:20:05.320 --> 0:20:08.199 or FAITH right now, you know, you read through and 0:20:08.200 --> 0:20:10.199 you look at it, and it says FATE is a 0:20:10.200 --> 0:20:14.639 commitment to let inflation actually run above target before rate hikes, 0:20:15.160 --> 0:20:18.160 which is a big change from from the forecasting culture, 0:20:18.880 --> 0:20:21.960 a big change in the practice of economics. Um, and 0:20:22.040 --> 0:20:25.960 maybe something that sounds sensible. But look, I said, I'm confused. Why. Well, 0:20:25.960 --> 0:20:30.080 it's also very strange because FATE redefines the two percent 0:20:30.160 --> 0:20:33.119 inflation target as an average, right, So how do you 0:20:33.119 --> 0:20:35.680 do that? You say, if inflation is below two percent 0:20:35.800 --> 0:20:38.560 in any first period, it should be above two percent 0:20:38.680 --> 0:20:41.600 in any second period. UM. Now, apart from the fact 0:20:41.600 --> 0:20:43.959 that that kind of moves away from the stable prices 0:20:44.000 --> 0:20:46.520 fixation that central banks have had from years, it's also 0:20:46.640 --> 0:20:49.399 very very vague, and that means, I think, in my opinion, 0:20:49.480 --> 0:20:52.840 the policy is a deliberate injection of uncertainty. Nobody knows 0:20:52.840 --> 0:20:55.000 how long that second period will be. Are we looking 0:20:55.040 --> 0:20:57.920 at data that suggests the recovery or are we looking 0:20:57.920 --> 0:21:00.359 at this framework. It's it's really not clear. Well, and 0:21:00.400 --> 0:21:03.359 this takes us back to it wasn't long ago that 0:21:03.400 --> 0:21:06.080 there was no inflation target, right. That uncertainty has been 0:21:06.119 --> 0:21:10.879 with the FED forever. That's right, and we've done almost 0:21:10.880 --> 0:21:13.280 too well on for guidance. And I think the problem 0:21:13.359 --> 0:21:15.800 now is that fate may well end up pitting the 0:21:15.840 --> 0:21:19.239 credibility of the FED against its mandate, right, or at 0:21:19.280 --> 0:21:21.600 least against one part of the FED mandate, which is 0:21:21.760 --> 0:21:25.480 the aforementioned stable prices UM. So you know thought experiment, right, 0:21:25.680 --> 0:21:28.320 Let's say the FED does achieve something like two percent 0:21:28.440 --> 0:21:31.960 for whatever a sustained period means, and you're right to say, look, 0:21:31.960 --> 0:21:34.800 we're already seeing some inflation, but maybe that's superficial. So 0:21:34.920 --> 0:21:37.320 let's say we get into this good place that fate 0:21:37.359 --> 0:21:40.360 suggests we can. That good place is where the problems 0:21:40.359 --> 0:21:42.840 start because, on the one hand, right the FED has 0:21:42.880 --> 0:21:45.600 to say, look, we promised to run above two percent 0:21:45.680 --> 0:21:47.879 to some period, so now we have to run above 0:21:48.040 --> 0:21:51.880 two percent to keep our promise. Um. That protects your credibility, 0:21:51.920 --> 0:21:54.800 but it damages stable prices. Now, on the other hand, 0:21:54.880 --> 0:21:57.280 if the FED says, oh, look, just kidding, we've achieved 0:21:57.359 --> 0:22:00.440 two percent, maybe it's time to abandon fate. Maybe it's 0:22:00.720 --> 0:22:03.399 time to start thinking about the future rate hikes. That 0:22:03.520 --> 0:22:06.919 protects they will prices, but it damagees credibility. UM. So 0:22:07.040 --> 0:22:08.920 that's the fork in the word I'm talking about. That's 0:22:08.920 --> 0:22:14.120 why I'm confused. All right. It's fascinating, to say the least. 0:22:14.160 --> 0:22:17.840 And it just takes me back to Ben Bernankee. If 0:22:17.840 --> 0:22:20.440 you remember ten years ago, was on sixty Minutes and 0:22:20.520 --> 0:22:23.600 he said we're not worried about inflation. We can deal 0:22:23.640 --> 0:22:26.360