Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanibek. We're here every day bringing
Speaker 1: you the latest news from the world of business and finance,
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Speaker 1: You can also listen to our radio show at two
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Speaker 1: YouTube search Bloomberg Clobal News. We are live from the
Speaker 1: Gaylord Texan Convention Center in Dallas, Texas, at the B
Speaker 1: and Y Melon Perging Inside Conference. Two thousand members of
Speaker 1: the financial advice community gathered here. There are a lot
Speaker 1: of them gathered around us. It's all about learning, inspiration, networking.
Speaker 1: I've got two perfect guests to talk about some of
Speaker 1: the key topics. Jim Crowley is CEO of B and
Speaker 1: y Mail and Persing. Emily Schlausser is CEO of B
Speaker 1: and y Mail and Pershing and uh. Last time I
Speaker 1: think we talked in person, all of us was back
Speaker 1: in twenty nineteen. We've done some things. Virtually. Where are
Speaker 1: we in terms of the environment, Jim, let's start with
Speaker 1: you in terms of what's top of mind for everybody
Speaker 1: right now. First of all, thanks for being here. It's
Speaker 1: great to see you in person. Tin, Thanks for having us.
Speaker 1: The top of mind is just being back. That's how
Speaker 1: I started off our remarks today. Just being back in
Speaker 1: your room. The energy felt incredible. It's just wonderful beat
Speaker 1: to see all of our clients back here in the
Speaker 1: room and just engage network with them. So that's top
Speaker 1: of mind for me. Yeah, have it for you, Emily.
Speaker 1: I'll build on that. Of course, being back, and then
Speaker 1: I think just you know, last time I think we
Speaker 1: talked for the virtual that was like, okay, what's it
Speaker 1: like working from home? Right? That was top of mine. Right.
Speaker 1: The top of mind is not having to talk about
Speaker 1: that anymore. Although we are certainly focused on future of
Speaker 1: work and how we can have a bit of a hybrid,
Speaker 1: but I think also just the focus on digital and
Speaker 1: so we're really focused on our interfaces, our experiences, bringing
Speaker 1: consumer grade technology to our investors, our advisors. So that's
Speaker 1: a lot of what we're featuring here at the conferences.
Speaker 1: It was well, I want to bring Tim in. Come
Speaker 1: on and Tim, guys, I'm looking forward to seeing you
Speaker 1: tomorrow after my flight arrives late tonight. Jim, I want
Speaker 1: to go back to you because you've said that you
Speaker 1: know you're focused on being back, and I know that
Speaker 1: being back comes with a host of challenges as well.
Speaker 1: As the world does open up and people start to
Speaker 1: travel more. We're in an inflationary environment right now, and
Speaker 1: I'm wondering from your perspective, how you're dealing with those
Speaker 1: challenges when you look across the macroeconomic planscape. What's top
Speaker 1: of mind for you? Yeah, what's stop my mind? Tim,
Speaker 1: Thanks for the question. A couple of things. One, UM,
Speaker 1: I've been on the road, like I think many other
Speaker 1: executives for the less several months, visiting offices. UM to
Speaker 1: encourage people to come back into the office. First of all,
Speaker 1: we're in this new environment. Are they coming back? They
Speaker 1: are coming back slowly. UM. And the way that I
Speaker 1: think about it, Tim mc carroll is, I think the
Speaker 1: value proposition for an employee to want to come back
Speaker 1: to the office has to be greater than the value
Speaker 1: that they feel and belief from working from home, and
Speaker 1: that is the magic that we have to create. We
Speaker 1: have to be able to demonstrate that there's real value
Speaker 1: to have a questional interaction and to feel the culture
Speaker 1: and to no one understand what it's like to to
Speaker 1: learn and understand what we all do as as a
Speaker 1: company together. So I do think we're better together right
Speaker 1: than being a far apart. One thing I wanted to
Speaker 1: ask you, and I was from a far watching you
Speaker 1: interview the former CEO of PepsiCo, Indra Nui, who I've talked.
Speaker 1: She's pretty incredible and she's now helping other companies. Right
Speaker 1: when it comes to leadership, leadership has been tested in
Speaker 1: a big way in the last couple of years. It's
Speaker 1: going to continue to be tested as we moved to
Speaker 1: a new normal. Um, tell us a bit about the
Speaker 1: conversation and which up to out in terms of her advice,
Speaker 1: maybe yeah, um, so many great nuggets. One of the
Speaker 1: things that she talks about is the future of work
Speaker 1: and the importance of flexibilities. So while I agree with Jim,
Speaker 1: being back together feel so good and it's a really
Speaker 1: important part of developing the fabric of our organizations, there
Speaker 1: is also a critical notion of allowing for flexibility, allowing
Speaker 1: for the families of our employees to really be more
Speaker 1: front and center in terms of how we think about
Speaker 1: the future of work, so that people can kind of
Speaker 1: lean into their careers while not pushing having to push
Speaker 1: their families aside, and not having to make so many
Speaker 1: of those hard choices. You know what I love about that? Yeah,
Speaker 1: And I want to I just want to jump in
Speaker 1: because Emily, I love I love that I've actually yeah,
Speaker 1: especially especially this week. And you know what's great is
Speaker 1: I'm you know, a lot of my friends have young kids,
Speaker 1: and it's the end of the year. They're going and
Speaker 1: catching end of the year school plays and end of
Speaker 1: the year graduations right now, and there seems to be
Speaker 1: this new acceptance in the professional world that these types
Speaker 1: of things are are okay to do as long as
Speaker 1: you do get your work done. And Emily, I wasn't
Speaker 1: seeing this, you know, before the pandemic. Does this shift?
Speaker 1: Does this Is this shift permanent? I hope it is.
Speaker 1: I hope it is, and I think it will be.
Speaker 1: I think it has to be. Certainly, as we've seen
Speaker 1: the labor market titan, it is incumbent on employers to
Speaker 1: make sure that we are really providing the experiences for
Speaker 1: the people who work for us that want they make
Speaker 1: them want to stay in the workforce. Um, so I
Speaker 1: think it has to be. You know, one of the
Speaker 1: things that Indra has observed in her time having been
Speaker 1: retired post pandemic is she's you know, driving around and
Speaker 1: seeing at three o'clock all these parents meeting their kids
Speaker 1: off the bus and they're just taking ten minutes out
Speaker 1: of their day working from home to go greet their
Speaker 1: kids as they come home from school. And what a
Speaker 1: special moment that previously no one in the professional world
Speaker 1: really had. It almost wasn't acceptable, and it wasn't It
Speaker 1: wasn't acceptable, especially for women, especially for women. Sorry, go ahead,
Speaker 1: Now it's encouraged. Yeah, and that is encouraged, and now
Speaker 1: everyone is understanding of what that means, what this new
Speaker 1: hybrid work environment means. Well, this is important as I
Speaker 1: think about all of the folks here who are thinking
Speaker 1: about their staffing for the future, right and what they
Speaker 1: need be thinking about. And I'm assuming that this is
Speaker 1: why they're trying to figure out do I need to
Speaker 1: continue to have to offer this flexibility going forward to
Speaker 1: attract that new breed younger generation of finance professionals. Absolutely, Yeah,
Speaker 1: you absolutely have to. In fact, I talked about it
Speaker 1: on the main stage earlier today, the idea of what
Speaker 1: we need to do to keep great talent, what we
Speaker 1: need to do to coach great talent, what we need
Speaker 1: to do attract great talent. And at that point, exactly,
Speaker 1: we're not gonna be able to attract great talent to
Speaker 1: our organization or to any work team unless we have
Speaker 1: that flexibility built in. Yeah, Jim has really spent a
Speaker 1: lot of time no good, And I was just gonna say,
Speaker 1: we spent a lot of time listening to our employees
Speaker 1: and really listening to what's important to them. And these
Speaker 1: are the things that really make a huge moment. I
Speaker 1: mean it's ten minutes and it really changes the day.
Speaker 1: You know, they always say about a conversations, those moments
Speaker 1: where you don't constantly think about what you're gonna ask next,
Speaker 1: but just let it breathe and listen, and listening is
Speaker 1: just so powerful. I do have to ask you, though,
Speaker 1: an extreme volatility that we've seen, are we being minded
Speaker 1: in this environment? I'm I'm curious what you're hearing from
Speaker 1: everybody that you know rethinking that you know, volatility, a
Speaker 1: bit of it, a fair amount of it is normal,
Speaker 1: like in our environment, it is normal, but not what
Speaker 1: many of the people in our workforce today have ever experienced.
Speaker 1: All right, so this hasn't been the case for the
Speaker 1: last ten years, and now we haven't and it's I
Speaker 1: think really important that we have again. It's one of
Speaker 1: the reasons why being in the office sometimes have the
Speaker 1: opportunity to bring young talent and experienced talent together to
Speaker 1: start of work through the challenges of volatility. Are you
Speaker 1: recommend go ahead? No, please? Now, I was gonna say
Speaker 1: it's it's a good reminder. I mean, this is the
Speaker 1: third year in a row where we've had really outstanding
Speaker 1: moments where we've said, wow, you know that this volatility
Speaker 1: feels incredible, but then at that point it no longer
Speaker 1: is right exactly exactly. If I think we're going to
Speaker 1: look back at this era the last few years and
Speaker 1: just understand that we were pivoting onto so many different
Speaker 1: points and I think coming out strong. And now we've
Speaker 1: got some music. This is all the key notes over
Speaker 1: they must say, um, thank you both, really appreciate. We're
Speaker 1: looking forward to tomorrow and all the conversations. We're gonna
Speaker 1: have good luck with everything, and thank you so much.
Speaker 1: Of course, we've been talking with Jim Crowley CEO B
Speaker 1: and Y mel And Persing and Emily Schlauser CEOO B
Speaker 1: and Y mel And Persing. You're listening to Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic
Speaker 1: on Bloomberg Radio. My from the Gaylord Texas Convention Center
Speaker 1: in Dallas, Texas at the b N Y mel And Perging.
Speaker 1: Inside conference, there are several thousand members of the financial
Speaker 1: advice community. They are here. They're coming out of sessions,
Speaker 1: they're coming out of key notes. Uh. And it's all
Speaker 1: about learning, inspiration, networking and really understanding kind of the
Speaker 1: next set of trends. And we're gonna have some conversations
Speaker 1: from there as well. And I've also got a Dallas cowboy,
Speaker 1: or at least somebody in a costume of walking around
Speaker 1: to as not a costume, Carol, it's Texas. You know,
Speaker 1: it's probably a real cowboy. It's a real cowboy. It's
Speaker 1: a real cowboy. Uh. Interestingly enough, Uh, you know, I
Speaker 1: think it's interesting. I think there's so much going on
Speaker 1: certainly in the big macro picture, right and the FED
Speaker 1: and also global central banks. We didn't even get to
Speaker 1: talk about that emergency meeting by the e c B
Speaker 1: this morning. So so much going on and just getting settled,
Speaker 1: and because he's had a busy day already and we're
Speaker 1: delighted to have with them. With us is Ben Harrison.
Speaker 1: He's cohead of Wealth Solutions at B and Y Melon Pershing.
Speaker 1: On site here at B and Y Melon Pershing's inside
Speaker 1: twenty two conference. We do have um oh, actually coming
Speaker 1: into the picture. Do you want to come on over
Speaker 1: the Dallas Cowboy? Oh? Look, that is a real cowboy, Susie.
Speaker 1: I wasn't kidding. I don't know if he's got any
Speaker 1: financial advice. I don't know. Are you upbeat? Is the
Speaker 1: glass half full? The glass half empty? Uh? Not? All right,
Speaker 1: we gotta do a little bit of an interview. We're
Speaker 1: gonna talk about the financial community. But good, good to
Speaker 1: see you. All right, we'll see you. Gotta get a microphone,
Speaker 1: Carol on the cowboy. All right, let's get to Ben here.
Speaker 1: So Ben, how are you and what's top of mind
Speaker 1: right now? And I think about all of the investment
Speaker 1: advisors that you are talking to and try to address
Speaker 1: at the event this year. Sure, well, thanks for being here.
Speaker 1: So and I actually just came off of a panel
Speaker 1: session and we talked about the future of financial advice
Speaker 1: and wealth management. Covered a lot of a lot of
Speaker 1: ground and thinking about that younger generation, thinking about the
Speaker 1: younger generation, and actually here at Insight, we have a
Speaker 1: couple of really cool experiences for the next generation. We've
Speaker 1: got a student center where we have around here. Yeah,
Speaker 1: we have over uh twelve universities participating, over sixty five
Speaker 1: students that are enrolled in CFP programs focused on financial planning.
Speaker 1: They're going to come into this profession and be that
Speaker 1: next generation of leadership. We also have a next Leadership
Speaker 1: Forum that we're hosting for advisory firms to send their
Speaker 1: next gen leaders. We've got a cohort of those individuals
Speaker 1: that we meet with on a regular time, sometimes in person,
Speaker 1: sometimes remotely. But it's great to be back in person here.
Speaker 1: It's great to have be back in person. Tim. Come
Speaker 1: on into the conversation. Tim, my co host, is going
Speaker 1: to be joining us tomorrow. He's actually at Zoo, but
Speaker 1: you'll hear him in your ear. Okay, Ben, good to
Speaker 1: have you with us, Thanks for joining us. I'm wondering
Speaker 1: what the younger generation is looking for. What are the
Speaker 1: differences in attracting the next group of talent, Like, what
Speaker 1: do you have to do differently to make sure that
Speaker 1: they thrive in the industry? You really have to give
Speaker 1: him a purpose, right, it's um it's a different industry
Speaker 1: and it's a different um uh you know, challenge for
Speaker 1: all of us to think about how we can recruit
Speaker 1: new talent into this market. Uh. And it's such a
Speaker 1: rewarding profession. Actually, you get to spend time with people,
Speaker 1: You get to impact their lives, You get to uh
Speaker 1: really get very deep in terms of uh into the
Speaker 1: minds of what makes people tick and moves them. And
Speaker 1: if you think about financial planning and financial advice, it's
Speaker 1: really less about the money and more about how people
Speaker 1: feel about the impact of their lives. So so I
Speaker 1: think that you need to draw young people in by
Speaker 1: sharing that it's not all about uh money in sales
Speaker 1: and what we'll like in the in the past. Right,
Speaker 1: what's what's top of mind? I was video press release
Speaker 1: att yesterday about Insight, and it quoted you saying the
Speaker 1: next generation of talent has the power to reshape our industry.
Speaker 1: What did we all get ready for in terms of
Speaker 1: that reshaping? Yeah, actually, it's uh, it's interesting that the
Speaker 1: financial services marketplace actually has a better perception now than
Speaker 1: we've had in the past. But we still have a
Speaker 1: lot of work to do in order to change the demographics.
Speaker 1: If still I mean we're investing in the next gen
Speaker 1: and also in diversity, equity and inclusion, and if you
Speaker 1: look around at the participants at the conference, it's still
Speaker 1: doesn't look the way that we want it to. Um.
Speaker 1: So uh, the next gen leaders can really focus on
Speaker 1: being very intentional about what the workplace of the future
Speaker 1: looks like, how to serve clients in a new and
Speaker 1: innovative way. Uh, what their fellow coworkers are gonna look like,
Speaker 1: and and diversity of perspective and diversity of of background,
Speaker 1: and how they can really uh change and reshape the
Speaker 1: way reimagine, as we're saying here at Insight, what what
Speaker 1: the industry looks like. Well, I feel like this all
Speaker 1: fits into a panameny to more about the future of money.
Speaker 1: So looking forward to it, um technology tell me about
Speaker 1: the role of technology, whether it's defy, whether it's blockchain.
Speaker 1: How do you think about it? Well, technology should at
Speaker 1: Technology is so critical to the way in which advice
Speaker 1: is delivered. And we've seen a an evolution of technology
Speaker 1: really over the last several years. And in the last decade,
Speaker 1: we've seen so many finn tech companies, wealth tech companies
Speaker 1: come into the space, uh in really giving tools for
Speaker 1: advisors to be able to scale their business, to be
Speaker 1: able to serve their clients much more effectively. And if
Speaker 1: you think about what we've just gone through, uh in
Speaker 1: the last um two years during the pandemic, it's really
Speaker 1: accelerated the digitization and the way in which investors are
Speaker 1: comfortable engaging with their financial professionals in terms of e
Speaker 1: signature and you know, a paperless environment. We we declared
Speaker 1: here at Insight we're going paper free in twenty three.
Speaker 1: Don't look at my papers, papers all over the desk
Speaker 1: care beause we got to clean that up a little bit.
Speaker 1: But are you serious? Is that? Where is that where
Speaker 1: we're going? Oh? Absolutely, uh? In terms of the way
Speaker 1: in which uh, the entire UH financial advice spectrum is
Speaker 1: going to be uh you know, invested in and evolve
Speaker 1: over time. Is really we're gonna go to a paper
Speaker 1: free environment. Now, Uh, there's gonna be a need for
Speaker 1: tools and solutions to be able to have that all
Speaker 1: digital right, to be able to have a collaborative experience
Speaker 1: with an advisor and investor. But we're going to get there,
Speaker 1: all right. Just got about twenty seconds here at Metaverse.
Speaker 1: Do you think about that? Is that something realistically that
Speaker 1: everybody has to be talking about, Maybe not for tomorrow
Speaker 1: or five years from now, but maybe a little bit longer. Well, look,
Speaker 1: we're doing this interview with one person remote, one person here. Uh,
Speaker 1: that's a very uh, and we've gone there during the
Speaker 1: pandemic where clients are on zooms, we are able to
Speaker 1: instead of flying all over the country, we're able to
Speaker 1: meet with our clients on a very regular basis. But
Speaker 1: nothing replaces an in person meeting either. But you're right,
Speaker 1: but it does give us another tool to play with
Speaker 1: Ben Harrison over at B and Y mel and Persian.
Speaker 1: Thank you. This is Bloomberg Business Week with Carol Masser
Speaker 1: and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. It
Speaker 1: is all about the FED. You know that the latest
Speaker 1: decision now nearly two and a half years old, and
Speaker 1: you can find this next story online of Bloomberg dot
Speaker 1: COM's Business Week, also on the Bloomberg terminal. Tim It's
Speaker 1: how the FED has tried to protect main Street main
Speaker 1: Street specifically, and now how everyone as a result may suffer.
Speaker 1: Ed Harrison, his senior markets editor at Bloomberg News. He
Speaker 1: joins us on the phone from Washington. Check out his story.
Speaker 1: It's available on the Bloomberg Terminal and at bloomberg dot
Speaker 1: com slash Business this week, it's called the FED tried
Speaker 1: to protect main Street. Now everyone may suffer? And I
Speaker 1: want to I want to start with the the headline there.
Speaker 1: What do you how historically has the FED tried to
Speaker 1: protect main Street and why is that not necessarily working
Speaker 1: right now? Well, actually, the Fed hasn't and and by
Speaker 1: the way, thank you Caroline, Tim, good to talk to you. Um,
Speaker 1: they haven't really tried historically to protect the main Street,
Speaker 1: at least for the last forty years. What happened is
Speaker 1: that in the seventies, when we had our last inflation shot,
Speaker 1: there was a dreaded wage price spiral that people believe
Speaker 1: Paul Vocal was able to stamp out. And since then
Speaker 1: they've sort of, you know, preemptively hyped rates at the
Speaker 1: end of every cycle, and so people who are just
Speaker 1: getting onto the employment ladder at the end of cycles
Speaker 1: were stopped out, you know, they were left behind. And
Speaker 1: then we had the Great Financial Crisis, which was a
Speaker 1: trauma for everyone, and we had to bailout for Wall Streels.
Speaker 1: So there was a sense in which the FED actually
Speaker 1: wasn't working for the Main Street And they've changed that
Speaker 1: approach to become more inclusive. Their staff and has become
Speaker 1: more inclusive. They've tried to lengthen business cycles on purpose
Speaker 1: in order to make it more inclusive, but unfortunately they
Speaker 1: ran into the buzz Stoll called inflation. Right, So, I mean,
Speaker 1: I love how your story reads, to be quite honest
Speaker 1: with you. You know that in terms of what happened
Speaker 1: during the financial crisis, right, I mean Wall Street was
Speaker 1: protected for the most part, minus leaning in a few
Speaker 1: other firms. Um, but Main Street felt it felt it
Speaker 1: so severely. Uh, it does feel, you know a bit
Speaker 1: different this time around. How do we need to kind
Speaker 1: of think about maybe the fet approach right now? And
Speaker 1: we just got a lot from J. Powell and Company,
Speaker 1: you know, just a few hours ago. Yeah, I think
Speaker 1: his overriding message is this is that if we don't
Speaker 1: get inflation under control, it doesn't benefit anyone, especially those
Speaker 1: who are most been because not only is it hurting
Speaker 1: people in terms of not being able to afford things,
Speaker 1: but it also means that the cycle can't be longer.
Speaker 1: You can't have a long business cycle that is more inclusive,
Speaker 1: that gets the participation rate up. So if he's to
Speaker 1: achieve what he needs to do, he needs to act now,
Speaker 1: uh so that in the future this won't be a problem.
Speaker 1: So to what extent does the FET actually have the
Speaker 1: tools to do that? These are famously blunt instruments, And
Speaker 1: as we heard from Doug Cioca over at Cavar Capital Partners,
Speaker 1: given the supply constraints that are leading to high inflation,
Speaker 1: we're helping contribute to high inflation when it comes to
Speaker 1: the supply chain, when it comes to high energy prices.
Speaker 1: What power does the FED have to do this? Well,
Speaker 1: it was interesting to listen to j Pal talk about it.
Speaker 1: He was quite honest and say that they don't have
Speaker 1: h all of the tools. You know, obviously they can't
Speaker 1: work against the flash shop. They can't make more computer
Speaker 1: chips around clogged four, they can't pump more oil. Uh.
Speaker 1: The only thing they can do in this particular instance
Speaker 1: is get uh supply and and demand and balanced by
Speaker 1: crimping demand. That's essentially what they're doing. And he's soft
Speaker 1: pedaling that policy by saying, look, we have the Jolkes
Speaker 1: data which says that there are so many um jobs
Speaker 1: out there that we can just reduce the number of
Speaker 1: jobs that the supply of jobs then as opposed to
Speaker 1: the supply of labor, then we can get a nice
Speaker 1: balance there. I thought that was a very good earner
Speaker 1: praise on his part. Is that something we can do though,
Speaker 1: because I mean from the perspective of of you know,
Speaker 1: interest rates and how I'm going to fill up my
Speaker 1: my tank right to what extent do higher interest rates
Speaker 1: lead me to not drive somewhere or lead me to
Speaker 1: not use energy in my home? Well, I think it's
Speaker 1: gonna be very difficult, because, you know, it sounds good
Speaker 1: at the aggregate level, but when you break it down
Speaker 1: to where people actually need jobs and where companies need employees, uh,
Speaker 1: you get you get a breakdown there. And I think
Speaker 1: that we're already seeing on two fronts a breakdown in
Speaker 1: terms of employment and in terms of business investments. If
Speaker 1: you looked at the business investment numbers that came out. Uh,
Speaker 1: the d DP now figure went down to zero point
Speaker 1: zero percent, showing that they're looking for a contraction in
Speaker 1: business investment in Q two and then jobless claims are
Speaker 1: are up forty five thousands on average over the last
Speaker 1: two months. Yeah, I think it's really significant. You know,
Speaker 1: I was thinking about that in terms of here's our
Speaker 1: supply chains, our problems right ed and you know, many
Speaker 1: ways the energy situation right refining, like we need to
Speaker 1: increase capacity, we need to make these investments, and yet
Speaker 1: companies aren't doing it. And this is where the FED
Speaker 1: can't necessarily help ease the supply chain constraints. Uh, if
Speaker 1: companies aren't willing to kind of either amp up production.
Speaker 1: And so to me once again into reminder, inflation is
Speaker 1: going to stick around for a lot longer. And that's
Speaker 1: a lot of pain on Main Street. Just got about
Speaker 1: twenty five seconds. Yeah, and I think that that is
Speaker 1: a big problem. And you know, there's when you think
Speaker 1: about the oil patch, their scarred by the shail bust,
Speaker 1: and I think that the investors want the money. So really,
Speaker 1: the FED between a rough and hardcore. Yeah, if anybody
Speaker 1: knows about booms and bust, right, Tim, It's like the
Speaker 1: energy um as well. Hey, Ed, thank you so much.
Speaker 1: A really important and relevant story. He is Bloomberg New
Speaker 1: Senior Markets Editor Edward Harrison on the phone from Washington,
Speaker 1: d C. Find this story online of Bloomberg dot com
Speaker 1: slash Business Weekend on the Bloomberg Right. But it's just
Speaker 1: it's tricky, even fed chief Ja Pali say, and this
Speaker 1: inflation stuff, it's tricky. This is Bloomberg Road Journal now.
Speaker 1: But you let me drive, no, no, no, please, I'll
Speaker 1: do the riding revels. I want to drive. It's good question.
Speaker 1: This is the drive to the clothes communing well, Brian
Speaker 1: Dawn on Bloomberg Radio. Yes, indeed, everybody, we are driving
Speaker 1: to the close. Just about thirteen minutes on a big
Speaker 1: bed day. We are. I am live from the Gaillard
Speaker 1: Texas Texas Convention Center in Dallas, Texas. We are at
Speaker 1: the b and Y Melon Purge inside conference. Two thousand
Speaker 1: members and financial advice community all gathering here for the
Speaker 1: first time in person after two years of course shut
Speaker 1: down doing it virtually because of the pandemic. It's all
Speaker 1: about learning, inspiration and network and We've got some great
Speaker 1: conversations Tim set up over the next couple of days. Yeah,
Speaker 1: we certainly do. Carol. I'm gonna be joining you there
Speaker 1: tonight after the program. Here. My question for you is
Speaker 1: how hot is it. It's pretty hot, it's pretty steamy,
Speaker 1: it's pretty humid. I have family and Texas into Houston
Speaker 1: a few times. You've got to get used to the humidity.
Speaker 1: It's humid. It's gonna be great for your hair, buddy.
Speaker 1: I'm just warning you. All right, let's let's let's get
Speaker 1: to because it's been a big day, a monumental day,
Speaker 1: and it's interesting. It does seem, as we heard from Charlie,
Speaker 1: the markets taking it in strides. So let's get Tim
Speaker 1: to the drive to the close. Duck Sioka is chief
Speaker 1: executive officer and partner at Covar Capital Partners. They've got
Speaker 1: we're a billion dollars in assets under management. Doug joining
Speaker 1: us on the phone from Leewood, Kansas. Doug. The headline
Speaker 1: basis point increase from J. Powell on the Federal Reserve,
Speaker 1: the biggest hikes in the range is now one point
Speaker 1: five percent to one point seven five percent. When it
Speaker 1: comes to the Fed funds, right. I think the big
Speaker 1: headline though, is that he does not expect moves of
Speaker 1: this size to be common. What are your takeaways? Yeah,
Speaker 1: thank you, Samon Hi Carroll. I thought Paul did a
Speaker 1: great job for today, right. I think he came across
Speaker 1: as right, justifiably more confident in his outlook and his
Speaker 1: path of policy pursued, which makes sense to me. They're
Speaker 1: further down the line of policy transition. They have certainly
Speaker 1: more substantive data on which to base their decisions. And
Speaker 1: right that quote that you just mentioned him do not
Speaker 1: expect moves of this size to be common? Um, I
Speaker 1: think that, Plus he mentioned soft landing is now based
Speaker 1: upon factors largely out of their control. A really important
Speaker 1: points to others that I wrote down. One, our guidance
Speaker 1: is still credible, but it is always conditional. And lastly,
Speaker 1: and this is probably doesn't need to be said, but
Speaker 1: often is forgotten, We're going to react to incoming data, right,
Speaker 1: and in at some point right the market or or
Speaker 1: investors will view the FEDS or what they are right.
Speaker 1: They are a reactionary, data driven policy setting committee, and
Speaker 1: we need to stop trying to game actions based upon
Speaker 1: intermeding communications that the Board of Governors is happy to dispose,
Speaker 1: dispose the spouse when they're on there speaking tours. Doug Cioca,
Speaker 1: Doug Cioca, Like, we know this, right, I mean, how
Speaker 1: many times does the FED need to tell us, especially
Speaker 1: in this environment, Hey folks, it's meeting to meeting, And
Speaker 1: how stupid are we that we don't realize it because
Speaker 1: we're all looking for new trend lines and it's it's
Speaker 1: not this straight move to the new next trend line,
Speaker 1: if you will. So like, I don't know, I guess
Speaker 1: it's interesting. I just think I think the FED has
Speaker 1: to go in every meeting and really look at currently
Speaker 1: their their their hand of cards, if you will. And
Speaker 1: that's kind of what I think it was, was a
Speaker 1: Gina smile Eker. I was writing some notes and I
Speaker 1: was watching. I can't remember who asked the question, but
Speaker 1: it was like why the change in terms of like
Speaker 1: what role did he have specifically Monday in moving the
Speaker 1: markets in a different direction? He talked about that CPI
Speaker 1: print On Friday, he talked about inflation expectations. They're gonna
Speaker 1: look up at all the data right right up to
Speaker 1: that last minute. Absolutely, and again that's why it's almost
Speaker 1: um a waste of energy to try to allocate capital
Speaker 1: around these intermeding moves. Particularly and this was this was
Speaker 1: different today, but particularly when the Board of Governors is
Speaker 1: part of a consensus, right, and and you're part of
Speaker 1: a consensus, and then you speak in terms that are
Speaker 1: taking different, uh, sort of opposing views to what the
Speaker 1: kitty decided upon and wanted upon, which within which you're
Speaker 1: a voting member. So the only voting member I would
Speaker 1: hear from between now and July twenty seventh is Ester
Speaker 1: Joint And I guess we're because she dissented, right, And
Speaker 1: I guess I'm sitting smack dab in the middle of
Speaker 1: the sid the most doublish district here in Kansas City,
Speaker 1: and it would be really fascinating to get her counterpoint
Speaker 1: to can senses that could be very effective. Do you
Speaker 1: think she do you think she dissented because she was
Speaker 1: worried about the Fed's credibility and she was worried about
Speaker 1: the FED committing two basis points being off the table
Speaker 1: at the last meeting, and that was the concern. Because
Speaker 1: I was really surprised to see her dissent as well. Yeah, yeah,
Speaker 1: I think that's a great question, Tim and that that
Speaker 1: would we actually would love to hear from her, like
Speaker 1: what was the catalyst behind the dissenting vote? You know,
Speaker 1: I think the FED has credibility, right, I know that
Speaker 1: that has been a turn that's been bantered about of
Speaker 1: late in one of the credibility of better the effectuality
Speaker 1: if you look at what has happened to the mortgage market,
Speaker 1: if you look at what has happened to financial conditions,
Speaker 1: if you look at the w I R P on
Speaker 1: Bloomberg to understand that the the mod that the the
Speaker 1: ever changing terminal rate expectations, the set is having an influence.
Speaker 1: So I think they've always had credibility. What they are
Speaker 1: not as prescient, nor are they designed to be so,
Speaker 1: But for some reason, the market has imposed this power
Speaker 1: that they don't possess upon them. Then when we react,
Speaker 1: when we're gonna and we're disappointed it. So, how does
Speaker 1: the FED to thread the needle in terms of bringing
Speaker 1: down inflation still holding on those two percent expectations without
Speaker 1: really giving a timeline. But how does the FED to
Speaker 1: thread the needle bringing down inflation without bringing on a recession? Yeah,
Speaker 1: it's challenging, right, and I think they would be the
Speaker 1: first to admit that they can only do what they
Speaker 1: can do, right, and what they can do is manufacturers
Speaker 1: slowdown to where consumption has impediments and thereby impacts purchasing patterns.
Speaker 1: What they cannot do is control the impact of the
Speaker 1: externalities that are courtesy of the war in Eastern Europe
Speaker 1: and COVID lockins in in China right now, and the
Speaker 1: influence of these externalities on the market is we see
Speaker 1: it right now, it's pretty asymmetric. Right. If there is
Speaker 1: any flaw I'm sorry, any thaw in Eastern Europe with
Speaker 1: Russian Ukraine or any loosening of the lockdown, we think
Speaker 1: it stands to have a more positive influence on the
Speaker 1: capital markets and actually gives the said cover to get
Speaker 1: away with some of what now look to be more
Speaker 1: restrictive type of activity because of the demand destruction element
Speaker 1: of it. And it's gonna be far better if we
Speaker 1: see some thought versus if there isn't one, because I
Speaker 1: think that's what the market is already trying to factor in.
Speaker 1: As it said, could be actually hiking rates into a
Speaker 1: cooling economy. So how much is within the FEDS control
Speaker 1: given there are all these externalities, Yeah, I mean I mean,
Speaker 1: if you said percentage wise, tim at this point, I
Speaker 1: think that it's maybe fifty left of what can be
Speaker 1: done right, and I think that's what needs to be
Speaker 1: factored in a little bit more carefully by the market.
Speaker 1: And as much as we've talked about the stock market
Speaker 1: and its rip higher based upon the interpretation of the
Speaker 1: fed's posture, the real move right today has been in
Speaker 1: the credit markets posts press conference. Right, we actually saw
Speaker 1: an inversion of tens and thirties earlier today that is realigned.
Speaker 1: We've seen a widening out of about twelve basis points
Speaker 1: in twos and tens, so for the first time while
Speaker 1: we've seen a bull steepening that's transpired. That in my
Speaker 1: opinion is FED that the the respect that they're longing
Speaker 1: for what had been pulled forward last week and money
Speaker 1: in two day this week is now unwinding a little
Speaker 1: bit with the expectation that they're doing all they can.
Speaker 1: So when they say we look carefully at why inflation
Speaker 1: proved persistent and then talk about this uncertain environment, but
Speaker 1: I mean, I think we're all scratching our heads dug
Speaker 1: about why we are in this predicament. Like we understand
Speaker 1: some of it in the supply chain and the pandemic,
Speaker 1: but for it to continue to go on, Um, your
Speaker 1: thoughts about that and how investors have to look at
Speaker 1: it now? Yeah, I think the FED is flying a
Speaker 1: little bit Soil Carroll domestically because they don't have a
Speaker 1: lot of fiscal policy cover. And I know it's it's
Speaker 1: silly to go back with revisionist history even try to
Speaker 1: be um, you know, money morning quarterback with the benefit
Speaker 1: of hindsight. But I do think that right there were
Speaker 1: just far too big of a percentage of the deficit,
Speaker 1: that of the definiti of the percentage of GDP, and
Speaker 1: we have historical precedent for that, and we went way passed.
Speaker 1: And I get it was well meeting with p PP
Speaker 1: in the first couple rounds of intervention post COVID, but
Speaker 1: it kept going right and maybe we just underestimated just
Speaker 1: how effective the influence and positivity the science was going
Speaker 1: to be on getting people to re engage in the
Speaker 1: economy and starting to see us coming out of a
Speaker 1: very dormant state. But I do I just do feel
Speaker 1: like there was far too much on the fiscal policy
Speaker 1: side on a percentage of GDP that was that represented
Speaker 1: that definite spending. I mean, did the FED really need
Speaker 1: to be supporting the mortgage market six months ago? No,
Speaker 1: my goodness now And again easy to say in hindsight,
Speaker 1: but I think that's the part where now they are
Speaker 1: flying blind because policy is very unpopular to say we're
Speaker 1: not continue to spend. We need to ask them about
Speaker 1: investors to him, what do they do now? Yeah, I
Speaker 1: mean that's the question. We only have thirty seconds left, Doug,
Speaker 1: what's an investor to do? Okay, well, real quick, because you,
Speaker 1: the three of us have shared kind of the wit
Speaker 1: and wisdom of Ted lasted together before. Right, So here's
Speaker 1: another pertinent quote from from Ted. Right, there are two
Speaker 1: buttons we like to say of our capital that we
Speaker 1: never hit and this was Ted last. So you don't
Speaker 1: hit panic and you don't hit snows. So you cannot
Speaker 1: snooze on this market. Volatility offers way too many opportunities
Speaker 1: for tactical reallocation, where that's growth to value lesson to
Speaker 1: higher quality spread product communities. You have to be uber attentive.
Speaker 1: And then the last thing we cannot do, and certainly
Speaker 1: what our clients not want us to do is panic.
Speaker 1: Stay committed to your long term plan based objectives and
Speaker 1: be opportunistic right when prices availed opportunities that we think
Speaker 1: offer very good long term expected returns. Yeah. I don't
Speaker 1: want to be a cheerleader for the market, but markets
Speaker 1: go up, markets go down, and we just have to
Speaker 1: remember and understand some of the fundamentals, uh, and structural
Speaker 1: things that are going on right now. Doug, thank you
Speaker 1: so much. Dog Cioca of Cavaur Capital Partners US so
Speaker 1: great to have you here with us. Thanks for listening
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