Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: pm Eastern Time on Bloomberg Radio, or watch us on
Speaker 1: YouTube search Bloomberg Global News. Well, it feels like the
Speaker 1: market story the past week has been about the bond market.
Speaker 1: Noticeable news and momentum. Uh, definitely in the tenure of
Speaker 1: the past week or so. Shorter end of the note
Speaker 1: are shorter end, I should say of the yield curve today,
Speaker 1: as two year treasure yields rose to their highest since March,
Speaker 1: of traders increasingly pricing in the prospect of the Fed
Speaker 1: tapering its bond purchases soon. Investors, you all know this.
Speaker 1: They watched and listen closely. Today's both US Treasury Secretary
Speaker 1: Janet Yellen and FED Chair J pal both up on
Speaker 1: Apple Hill testifying before Senate panel. Powell using the opportunity
Speaker 1: to once again reiterate specific plans for tapering. We had
Speaker 1: set a test for beginning to taper those purchases of
Speaker 1: substantial further progress towards our set story goals. We haven't
Speaker 1: met that yet, but as I mentioned, I think we've
Speaker 1: all but met it. Met it. On the path that
Speaker 1: we're looking at, we would continue to add accommodation not
Speaker 1: subtracted for until well into the middle of next year.
Speaker 1: And we think that's appropriate given the Given the strength
Speaker 1: of the economy, um the test for raising interest rates
Speaker 1: is substantially higher and definitely what we heard last week
Speaker 1: right from FED Chair J. Powell. Right now, you've got
Speaker 1: the tenure with the yield of one fifty two to
Speaker 1: your note with the yield of point three zero. Let's
Speaker 1: get to it and take a look at what's going
Speaker 1: on in the rate markets. Shooting us right now? Is
Speaker 1: Ira Jersey, Bloomberg Intelligence Chief US interest rates strategist on
Speaker 1: the phone in New Jersey. There's lots of people weighing in,
Speaker 1: as you know, Ira, when it comes to what's going
Speaker 1: on in the treasury trade. How do you see it?
Speaker 1: Why have we seen this move up? Yeah? We it's
Speaker 1: basically the trend that started after UM last Thursday, when
Speaker 1: we started to get substantial Fed speak that you know,
Speaker 1: said basically unequivocably that hey, we're going to be tapering.
Speaker 1: And then the question becomes how soon after taper will
Speaker 1: the FED start to hike interest rates? Now, um, you know,
Speaker 1: there's a lot of debate around that, and obviously you
Speaker 1: just heard that snippet from Chair Powell reiterating what he
Speaker 1: started to say back in in August at Jackson Hole,
Speaker 1: and that's that they want to wait until they make
Speaker 1: even way more progress to before they start hiking interest rates.
Speaker 1: So so I think the trade that you've been seeing
Speaker 1: the last couple of days is really saying, Okay, the
Speaker 1: FED is going to taper and then they're gonna let
Speaker 1: inflation run a little hot for longer maybe than they
Speaker 1: have during past cycles because of their new monetary policy
Speaker 1: framework that they've also been touting. And that means that
Speaker 1: you should get a steeper yield curve. Now, how steeper guts?
Speaker 1: That's uh, that's something that we're we're analyzing very closely
Speaker 1: right now. Is it just that the Fed got more
Speaker 1: specific and we can kind of start marking the calendar
Speaker 1: a little bit, especially when it comes to tapering. That's why. Yeah,
Speaker 1: that's exactly right. I think that's part of it. The
Speaker 1: other the other is and this was kind of the
Speaker 1: big change that kind of was glossed over and not
Speaker 1: paid too much attention to. But just the time frame
Speaker 1: that Chair Powell mentioned, and that's basically that if they
Speaker 1: start in November, so they'll announce that November meeting, and
Speaker 1: we think the following week is when they'll actually start
Speaker 1: to cut purchases. If they do that at fifteen billion
Speaker 1: dollars a month for UM, that starting in November, they
Speaker 1: will be done in June. So that means that that
Speaker 1: maybe that's a little bit faster than some people had anticipated,
Speaker 1: including us. I mean, we we thought that the taper
Speaker 1: a little bit slower than that, UM, But but that
Speaker 1: means that, you know, basically they're taking out all of
Speaker 1: this bond buying and and there is a flow effect,
Speaker 1: right like you can imagine that with the Fed being
Speaker 1: in there buying a billion, two billion, three billion dollars
Speaker 1: of treasuries every day, that that has a that flow
Speaker 1: has an effect on the market. In particular, it means
Speaker 1: that that dealers, so you know, the go betweens between
Speaker 1: different investors, that kind of are the shock absorber of
Speaker 1: the market. These dealers don't have to hold any inventory
Speaker 1: right now because they can always just sell that inventory
Speaker 1: to the Federal Reserve. That won't be the case a
Speaker 1: year from now when the Fed's done buying, So that
Speaker 1: is going to have some price effect on the market.
Speaker 1: I'm wondering what when you look at rates right now, Ira,
Speaker 1: is there anything you can say about whether in general
Speaker 1: investors feel optimistic or pessimistic about the economy. Yeah, generally speaking,
Speaker 1: I think you can say that they're they're not pessimistic. UM,
Speaker 1: I wouldn't say that they're necessarily optimistic, but they're not
Speaker 1: as they're not very pessimistic right now as they were
Speaker 1: a couple of a couple of weeks ago when everyone
Speaker 1: was really worried about Delta. People were worried that there
Speaker 1: was going to be more significant slowdown than we seem
Speaker 1: to be getting. You know, it's it's kind of interesting
Speaker 1: because we're seeing data right now. You know that the
Speaker 1: Consumer Confident say that they came out that UM, that
Speaker 1: that might suggest that you're seeing a little bit of
Speaker 1: a slowing in the economy, but maybe it's not as
Speaker 1: dramatic as the market was fearing a month ago when
Speaker 1: we hit those kind of cycle loads of of about
Speaker 1: one point one percent on ten year treasury yield. So
Speaker 1: we're you know, we're almost we're forty two bases points
Speaker 1: higher than that now and and I think we're going
Speaker 1: even a little bit higher than that. Um, So I
Speaker 1: do think that the market isn't particularly optimistic, but it's
Speaker 1: also you know, willing to admit that, hey, maybe the
Speaker 1: economy is going to continue to chug along here, and
Speaker 1: there's not a lot of reason to buy um, to
Speaker 1: buy the risk free asset because, um, we're not going
Speaker 1: to see inflation go down to one and a half percent,
Speaker 1: We're not going to see a complete rollover in the
Speaker 1: employment situation, at least not right now. And I are
Speaker 1: there are high rates than there are high rates. I mean,
Speaker 1: everybody remembers when you know people were paying what mortgage rates,
Speaker 1: you know, several decades ago. So even with this move up,
Speaker 1: what what kind of move does this have potentially on
Speaker 1: economic growth or Yeah, And speaking to what Tim said,
Speaker 1: is that this is really about, Hey, folks, things are
Speaker 1: getting quote unquote more normal. Well so from economic activity,
Speaker 1: probably not a ton and primarily because the household balance
Speaker 1: sheet is way better today than it was the last
Speaker 1: time interest rates shot up higher. You know in last
Speaker 1: year when you wound up seeing interest rates go from
Speaker 1: about one and a half percent all the way up
Speaker 1: to three percent. So now we're we're in a situation
Speaker 1: where households UM have a lot of savings, they've paid
Speaker 1: down a lot of debt, so there's not this big
Speaker 1: impetus to refinance mortgages and to UM and and you
Speaker 1: know now it's like, hey, can we find a house
Speaker 1: to buy? So there's even not a lot of UM.
Speaker 1: You know, there's not a lot of of leveraged activity
Speaker 1: going on right now. That's going that means that you know,
Speaker 1: another forty basis points in ten ure yields is going
Speaker 1: to slow down, Uh, the economy substantially. A lot of
Speaker 1: businesses UM had hedge data. Actually a lot of people
Speaker 1: had bought what's called rate locks, So basically they were
Speaker 1: saying when we were near one percent, like hey, I
Speaker 1: want to lock in this tenure yield now because I
Speaker 1: want to refinance some debt in early two so that
Speaker 1: economic activity won't feed through. So so it only is
Speaker 1: over a very long period of time that you know,
Speaker 1: rates at this level will really have a big economic impact.
Speaker 1: I love talking with you, great perspective. Our Jersey chief
Speaker 1: US Interest Rate Strategies at Bloomberg Intelligence joining us on
Speaker 1: the phone from New Jersey. Perspective. I like it. I
Speaker 1: do too. This is Bloomberg Radio. White House COVID nineteen
Speaker 1: coordinator saying today the booster campaign is off to a
Speaker 1: quote strong start, with more than four d thousand Americans
Speaker 1: getting an additional dose at pharmacies last week, and then
Speaker 1: Tim Fiser and BioNTech coming a step closer to bringing
Speaker 1: their vaccine to school age kids in the United States.
Speaker 1: That can't come soon enough. Meanwhile, here in New York,
Speaker 1: New York Governor Kathy Hokel saying a COVID nineteen vaccine
Speaker 1: mandate for health workers that went into effect this week
Speaker 1: it actually is working to boost vaccination rates. In Japan
Speaker 1: is going to lift a state of emergency this week
Speaker 1: as infections recede. Dare I say a little bit of
Speaker 1: good news, Yeah, a little bit of good news, And
Speaker 1: I think that is also playing out. We heard that
Speaker 1: from think some of our market observers when it comes
Speaker 1: to thoughts about the economic outlook. Dr Iman Ubi Abuse
Speaker 1: aid excuse me, Dr Iman Abuse. She's CEO and co
Speaker 1: foundering Incredible Health. Uh, someone we've reached out to throughout
Speaker 1: the pandemic here with our daily check on COVID. Her company,
Speaker 1: by the way, connects hospitals with nurses and other healthcare workers.
Speaker 1: So great person to talk to with us once again
Speaker 1: on the phone in San Francisco. Dr Abuse, Good to
Speaker 1: have you back here on Bloomberg. How are you and
Speaker 1: how are your team's doing and are they all getting
Speaker 1: vaccinated that booster shot? Yeah, thank you so much for
Speaker 1: having me today. Uh and yeah, I mean vaccinations are
Speaker 1: definitely under way. I mean our team, specifically, our our
Speaker 1: tech team, UH that's running the Incredible Health marketplace is
Speaker 1: not getting boosters yet. We are not on the on
Speaker 1: the list, you know. I think it's for over sixty
Speaker 1: five first and high risk individuals UM. And you know,
Speaker 1: from what we're hearing, healthcare workers aren't um, you know,
Speaker 1: lining up yet to get the booster vaccines. And we
Speaker 1: can definitely out more about why that is. Well, let's
Speaker 1: let's talk a little bit about what you're seeing on
Speaker 1: the platform, because I know that you serve health systems
Speaker 1: and that make up fift of hospital beds in Texas
Speaker 1: and California to states with a very large number of
Speaker 1: hospitals and hospital beds. What are you hearing from the
Speaker 1: hospitals in terms of capacity and how it is stretched currently? Yeah,
Speaker 1: I mean it varies by state. We operate in twenty
Speaker 1: states right now, and for for our clients that are
Speaker 1: in Florida in Texas, like, yeah, it's it's a very
Speaker 1: tough situation right now where they are running out of
Speaker 1: beds and more importantly running out of staff right. So, uh,
Speaker 1: these are these are hospitals that are pretty chronically understaffed.
Speaker 1: They don't have enough nurses and uh this delt recent
Speaker 1: delta wave has made things more even more challenging. Um,
Speaker 1: and so they are scrambling to retain their nurses as
Speaker 1: as well as hire them. How many people are leaving
Speaker 1: the industry and just saying I'm done? Um, So what
Speaker 1: we're seeing isn't so the annual turno. So, so that's
Speaker 1: nurses leaving, you know, quitting their jobs or changing jobs.
Speaker 1: Before the pandemic was around eighteen percent, so that one
Speaker 1: one in five. That number has now gone up to
Speaker 1: about twenty one and a half percent during the pandemic,
Speaker 1: and a big, big portion of that increase from eight
Speaker 1: percent to twenty one and a half percent has come
Speaker 1: from nurses that have permanently left the industry. So that
Speaker 1: includes nurses that took advantage of early retirement or who
Speaker 1: have just been completely burnt out and fatigue and just
Speaker 1: you know, left the profession completely. But you know, at
Speaker 1: the same time, we do see statistics about healthcare and
Speaker 1: future healthcare professionals who have been inspired during this time.
Speaker 1: When will we start to see those folks who enrolled
Speaker 1: in school hit the workforce because they did see some
Speaker 1: pretty high numbers last year. Yeah, absolutely, there have been
Speaker 1: record numbers of applicants. You're absolutely correct. But there's a
Speaker 1: there's a critical bottleneck in that. Uh, nursing schools, for example,
Speaker 1: don't have the faculty or the capacity to train more.
Speaker 1: So there's a lot lots of applicants on waitlists and
Speaker 1: and and able waiting to get in. But but but
Speaker 1: the nursing schools themselves can't handle more capacity. Right now, Yeah,
Speaker 1: it just feels like we are being squeezed, the labor market,
Speaker 1: the supply chains, everything. UM. Good to check in with you.
Speaker 1: Stay safe, uh, and we look forward to talking with
Speaker 1: you again. Dr Iman abuse A, she's co founder and
Speaker 1: chief executive officer of Incredible Health, joining us once again
Speaker 1: on the phone from San Francisco. And so you know,
Speaker 1: they're all about connecting hospitals to nursing talents. So she
Speaker 1: has been on the front line since day one of
Speaker 1: the pandemic. And you are just looking at me like
Speaker 1: there are just constraints everywhere. As soon as she said
Speaker 1: that they're having trouble getting the actual you know, instructors,
Speaker 1: the nurse just to teach these students, I just thought
Speaker 1: to myself, weird, this is a story we were hearing
Speaker 1: in every part of the supply chain, in every industry.
Speaker 1: A colleague, give me mind just of ours really just
Speaker 1: came up and said to that he knows he's talking
Speaker 1: about a friend of his works in an industry. And
Speaker 1: again it's a consumer product, a brand you would know,
Speaker 1: and they're like they can't find the materials they need
Speaker 1: to make their products. So we are feeling squeezes and
Speaker 1: hearing about squee is everywhere. We're talking cars. We're talking
Speaker 1: cars behind the scenes, having some fun here. Cars. As
Speaker 1: we know, Tim, they were in big demand during the pandemic,
Speaker 1: new cars, used cars, any cars, Yeah, they certainly were.
Speaker 1: In fact, Kyle Stock found somebody who was able to
Speaker 1: get a used car and sell it back for more
Speaker 1: than the person actually bought it for, so making money
Speaker 1: off buying a car. Car flipping. All right, let's talk
Speaker 1: more about it. Bloomberg News senior writer Kyle Stock with
Speaker 1: us on the phone from Hopewell, New Jersey, and aside
Speaker 1: us business, we get it or Joe Webber Inner Interactive
Speaker 1: broker Studio. Jill was all that cars during the pandemic.
Speaker 1: Still is. It feels like still is. And I thought
Speaker 1: it was really interesting about the story was just sort
Speaker 1: of just to see how prevalent um online reselling of
Speaker 1: cars has become. I mean, obviously it's like you're doing
Speaker 1: everything on your phone, want to do even more. Also,
Speaker 1: I don't know if you've ever used Craigslist. Kind of
Speaker 1: a nightmare. Uh So, so Kyle walk us through how
Speaker 1: this uh marketplace fight has evolved during the pandemic. Up. Yeah, yeah,
Speaker 1: it's a crowd of startups, not unlike you know, what
Speaker 1: we saw with mattresses and razors and all this other
Speaker 1: stuff going online. UM. They've figured, let's disrupt cars UM
Speaker 1: and they've been at it a few years and they've
Speaker 1: been going strong and growing impressively. But the pandemic was
Speaker 1: really sort of a shift change in consumer psyche and
Speaker 1: behavior that UM really gave them a boost. What's interesting
Speaker 1: now is that in part they're thriving, and they're still thriving,
Speaker 1: but now it's about the chip shortage. You know, analog
Speaker 1: bricks and mortar car dealers are having trouble just getting
Speaker 1: vehicles to buy, even use vehicles. They're getting into bidding
Speaker 1: wars on these auction sites and this crowd of startups
Speaker 1: because they're so good at selling cars directly to consumers,
Speaker 1: they're also really good at buying cars directly to consumers,
Speaker 1: so they haven't had the inventory challenges that much of
Speaker 1: the industry have. Space this year does do al so
Speaker 1: Carbona I want to talk specifically about them because they
Speaker 1: have these amazing like pinball, machine gunball machine style things.
Speaker 1: Been with a coin, right, and and there's a big coin.
Speaker 1: Have you put the coin into the machine col Yeah,
Speaker 1: a big cartoon coin. I mean it's a gimmick and
Speaker 1: it's a billboard, and it's you know, basically a parking
Speaker 1: garage George facility. But you know they need all those things,
Speaker 1: so they put it all in one thing. And we're
Speaker 1: talking about it. It's like you wake up with the
Speaker 1: middle of night, you're hungry, you get some chips, and
Speaker 1: you're like, I feel like buying a car. Let me
Speaker 1: take my big coin and go down to the cravat
Speaker 1: carbona machine. Um. It is really upending though, how we
Speaker 1: think about car buying. And I gotta tell you, if
Speaker 1: we get rid of sorry dealers, if we can kind
Speaker 1: of squeeze the dealers out, and in some ways you
Speaker 1: are getting that. Yeah, it's really I mean, I don't
Speaker 1: think you're getting a better deal. You might be getting
Speaker 1: a word steal in some ways, but it's a you know,
Speaker 1: it's a simple transaction, and you know they've done all
Speaker 1: this other stuff. You know, you can get your financing,
Speaker 1: you can get your warranties. You know there's all this
Speaker 1: other blocking and tackling around the transaction. You know, it
Speaker 1: doesn't have to be that difficult. You don't have to
Speaker 1: be in a crappy waiting room for five hours if
Speaker 1: you know what you want and and kind of so
Speaker 1: when you when you think about where this market police
Speaker 1: could go and like, i mean part of this is
Speaker 1: driven by chips also, right, Like it's there's just such
Speaker 1: a shortage. I mean there's a shortage of everything and
Speaker 1: the shortage of chips. There are shortage of new cars.
Speaker 1: What what do you think this marketplace kind of fight
Speaker 1: ends up looking like you know, once normality returns, whenever
Speaker 1: that happens, I don't not say. Well, what's really interesting
Speaker 1: is you know the big dealership groups that have you know,
Speaker 1: car lots all over the country. You know, during the pandemic,
Speaker 1: they were like, we're going to go back to normal.
Speaker 1: We got we can do digital, but people still want
Speaker 1: to come to the car lot. Now they're saying, hey,
Speaker 1: we are digital platform is great. It's really growing. We're
Speaker 1: buying cars online from people. They're doing the same business
Speaker 1: model as carbon and they're saying we can do all
Speaker 1: that as well. Um, and are you abili some of
Speaker 1: them can do it better because they already have all
Speaker 1: these dealerships that are full of mechanics and people that
Speaker 1: can recondition these cars. Um. So it's not going away
Speaker 1: it's kind of snowballing. What's interesting is you know the
Speaker 1: Craigslift transaction which is like twenty million cars a year,
Speaker 1: or Facebook marketplace, you choose, you choose it. Um, that
Speaker 1: stuff is going to go away because it's not it's
Speaker 1: not a great experience anyways. And you know Uncle Jimmy's
Speaker 1: car lot, That's what I was going to ask about,
Speaker 1: because yeah, well but that's a that's a in a
Speaker 1: lot of parts of America. That's where people do by
Speaker 1: their use cars and traditional all my siblings like, that's
Speaker 1: where my dad would go to the the score a lot.
Speaker 1: Those days coming to a to an end, I think
Speaker 1: those guys are gonna have a tough time. Um. You know,
Speaker 1: there are services out there that will you know, sort
Speaker 1: of stand up and online marketplace for those guys, or
Speaker 1: you know, they can certainly sell cars online and Cargurus
Speaker 1: or some of these other sites that the democratizing the
Speaker 1: Internet a little bit. But if they don't have the
Speaker 1: chop um, if they don't have the I t um
Speaker 1: sort of intelligence to evolve, they're gonna get squeezed out
Speaker 1: or or acquired. That's what I was going to ask you, Kyle,
Speaker 1: is there gonna be consolidation. Sounds like there's a lot
Speaker 1: of players doing similar things and that there might be
Speaker 1: some power if a few of them line up together.
Speaker 1: Should we anticipate that? Yes? Absolutely. Um. You know, the
Speaker 1: retail auto industry in this country is incredibly fragmented, Like
Speaker 1: the biggest player has like two or three percent of
Speaker 1: the market. Um, that's CarMax, um if I if I
Speaker 1: recall correctly, So there's a ton of room for for
Speaker 1: M and A and people to tie up. And then again,
Speaker 1: you know the used car markets forty million cars a
Speaker 1: year and like I said, about half of those are
Speaker 1: just peer to peer. Um, so yeah it things are
Speaker 1: going to change very quickly. So, Kyle, the little confession
Speaker 1: since we last spoke, I think, was that I actually
Speaker 1: happened to use carbona to sell that old Super U
Speaker 1: remember that one? Yeah, Yeah, and I went and I
Speaker 1: went Tesla, I got I got him on the one
Speaker 1: you did, Okay, Yeah, so I think that, but you
Speaker 1: made money right it was It basically was a wash
Speaker 1: where I was able to like buy the super right
Speaker 1: before the pandemic you and then was like wait a second,
Speaker 1: I could upgrade and get as much as I paid
Speaker 1: for it and like why wouldn't you write and like that.
Speaker 1: And the beauty of these apps is like the carbona
Speaker 1: thing is like, you know, you just put it in
Speaker 1: and that tells you what your number is. And then
Speaker 1: if you don't like the number, like try again next
Speaker 1: week and maybe it goes up right because there's a
Speaker 1: short pitch. They basically it's like a game. They've gamified it.
Speaker 1: I think in this way that makes you if you know,
Speaker 1: if you're dreaming about maybe even not having a car,
Speaker 1: it's like, wow, somebody will show up and take this
Speaker 1: thing away and give me, give me money. That sounds great.
Speaker 1: I love it. I love it. I want to deal
Speaker 1: with the riff raff from Craigslift. Sign me up. Put
Speaker 1: the coin in. He put the coin in exactly. Hey, Kyle,
Speaker 1: great stuff. Always appreciate checking in with you, Kyle Stock.
Speaker 1: He's senior correspondent Bloomberg News. Check out his story the
Speaker 1: upcoming issue of Bloomberg Business Week. Joe Webber buying cars cars.
Speaker 1: Who he's doing this Southside? I'll give you a right
Speaker 1: that was a no editor of Bloomberg Business Week. You
Speaker 1: are listening to Bloomberg right now. This is the big
Speaker 1: take the best of Bloomberg's in depth original reporting from
Speaker 1: a run the globe. Well, we actually make sure we do,
Speaker 1: as the economy covers is what cut the data kind
Speaker 1: of broken down a bit. It's fun to becoming more
Speaker 1: and more expensive to be looking at the shipping billion
Speaker 1: dollars for the re entry levels, ways of immigration that
Speaker 1: have faced a lot of resistance, a lot of color
Speaker 1: behind the scenes in a great untold story. How did
Speaker 1: Bezos really come out on top? It's the cover, says
Speaker 1: Jeff Wins. He always seems to win the Big Take
Speaker 1: on Bloomberg Radio, and it's also among our most read
Speaker 1: stories on the Bloomberg Today. It is the Bloomberg Big Take.
Speaker 1: It's one story that you need to have on your
Speaker 1: radar today. It's about the one country on Earth that
Speaker 1: puts more breakfasts on kitchen tables tim than any other.
Speaker 1: Joining us now is Leslie Patton, consumer reporter at Bloomberg News.
Speaker 1: Leslie joins us on the phone from Chicago. This is
Speaker 1: one of those stories less of that I read, and
Speaker 1: I think to myself, we don't actually know where everything
Speaker 1: comes from that we consume, and we have to be
Speaker 1: reminded that we are one. We are one society that
Speaker 1: is all connected around the world, and what happens in
Speaker 1: bill kind of serious implications around the world. Yes, that's right.
Speaker 1: I think a lot of people really think of coffee
Speaker 1: when you think of Brazil, right, so you you know,
Speaker 1: if you're drinking coffee in the morning, there's a decent
Speaker 1: chance at least some of it came from Brazil. But
Speaker 1: what about other things we don't We don't even know
Speaker 1: about orange juice, sugar, corn and soy that's that's used
Speaker 1: as animal feed. Yeah, it's so much stuff. Orange juice
Speaker 1: was another one that I was like, really, I didn't
Speaker 1: know that. I always think of like Florida or I
Speaker 1: don't know. They've caught me in here. Um there's a
Speaker 1: quote in here that really jumped out at me. Um Leslie.
Speaker 1: The world is on a very dangerous path. And this
Speaker 1: is from a meteorologist at Brazil's Natural Disaster Monitoring an
Speaker 1: alert center talked to us a little bit more about
Speaker 1: what you guys found in this reporting, right, So, I
Speaker 1: think a lot of it is The scariest part is
Speaker 1: the unknown. So we're we're dealing with these issues of
Speaker 1: rising global temperatures. I don't think you know that that
Speaker 1: we have hard data on that, and then we're seeing
Speaker 1: more and more episodes of this extreme weather, drought, bloods
Speaker 1: um frost in areas that don't normally get that. It's
Speaker 1: it's wiping out crops, and I think we just don't
Speaker 1: know yet what the ultimate impact could be if things
Speaker 1: don't improve with with basically, I think you can boil
Speaker 1: it down to climate change, but we're already seeing some
Speaker 1: of those some of those consequences play out. The cost
Speaker 1: of coffee, the cost of other raw materials, and the
Speaker 1: cost of food for many people in the world. It's
Speaker 1: going up and it hits a lot of people really hard. Yes, absolutely,
Speaker 1: I've written about this phenomenon to just over the summer,
Speaker 1: is that globally, food inflation is on the rise. It's
Speaker 1: you know, it's not only people think of maybe it's
Speaker 1: driven by the the pandemic and people stocking up ensure.
Speaker 1: That may be a part of it, but even before that,
Speaker 1: you know, we have these issues of rising global temperatures,
Speaker 1: you know, eliminating some of our food and and that issue.
Speaker 1: From what I've seen and what you can read in
Speaker 1: the story, it's getting worse. And like you said, it's
Speaker 1: it's already, it's already happening. It's here now. So I
Speaker 1: guess some maybe are listening Leslie, and they're thinking, Okay, yep,
Speaker 1: we're having some extreme problems right now. We know about
Speaker 1: the supply chain disruptions, the pandemic, people not going to work,
Speaker 1: maybe production levels are down, or we can't get stuff
Speaker 1: shipped from point A to point b um. But I
Speaker 1: do hear you loud and clear that you're also talking
Speaker 1: about climate change. How much, though, is some of that
Speaker 1: pandemic disruption? How much of it though, is really climate change?
Speaker 1: And folks, this is where we are today and it's
Speaker 1: only going to get worse unless we do something different. Yeah,
Speaker 1: I mean, I think that's right. It is the pandemic,
Speaker 1: but it's also this this climate change. I think that's
Speaker 1: probably the biggest portion of it. That's been going on
Speaker 1: for some time and people have been talking about it,
Speaker 1: But of course the pandemic is a little more top
Speaker 1: of mind, right because that's newer, So people are maybe
Speaker 1: a little more quick to blame it on the pandemic
Speaker 1: and some of these supply chain disruptions that they say
Speaker 1: are temporary, but you know, with these rising global temperatures
Speaker 1: that that does not appear to be temporary, right, right.
Speaker 1: And it's also if I think about team like producers,
Speaker 1: maybe they shift or or are buying shifts right because
Speaker 1: the seasonality. But you know, it's Brazil, it's Chili, it's Argentina,
Speaker 1: it's the United States, it's Mexico, it's Russia, my home state,
Speaker 1: which is running out of water. And this is a
Speaker 1: state that provides so much agricultural output to many parts
Speaker 1: of the United States and in parts of the world.
Speaker 1: And I wonder, Leslie, what ends up happening here because
Speaker 1: we can't reverse this. It's I mean, I don't want
Speaker 1: to say we can't, but I'm not optimistic about it. Uh.
Speaker 1: And but I wonder, do we have to move food
Speaker 1: production to other parts of the world that haven't hit
Speaker 1: been hit as hard by climate change yet? Yeah? And
Speaker 1: I think again, that's something that's already happening. Like I've
Speaker 1: seen instances of things that used to be farmed in
Speaker 1: southern or kind of like mid California area moving to
Speaker 1: northern California or even you know, Oregon or Washington State
Speaker 1: because it's it's not as hot there anymore. And maybe
Speaker 1: the drought situation isn't as bad there, so I think,
Speaker 1: you know at that point, that's that's happening absolutely in
Speaker 1: terms of pricing. Are we increasingly seeing producers just have
Speaker 1: to up pricing because the supplied demand equation is kind
Speaker 1: of forcing them to and they just can't write it
Speaker 1: out because it may not change anytime soon unfortunately. Yes,
Speaker 1: I mean, I think I think the inflation factor is
Speaker 1: here at least for a while. Um, maybe the inflation
Speaker 1: rate starts to decrease, but but we still have this
Speaker 1: inflation right, and it doesn't appear to be temporary because
Speaker 1: wages are going up. We can look across the labor
Speaker 1: market and see that that pay for people has going up.
Speaker 1: And you can't just, you know, decrease someone's pay after
Speaker 1: you've raised their wages in a wearer house or a
Speaker 1: chicken flaughtering plant or wherever it is. That it doesn't
Speaker 1: work that way. All right, We're gonna leave it on that.
Speaker 1: It is the Bloomberg Big Take on this Tuesday, Leslie Patton,
Speaker 1: thank you so much, consumer reporter at Bloomberg News, talking
Speaker 1: about what's going on in Brazil. But that is just
Speaker 1: indicative of the food inflation that we are really increasingly
Speaker 1: seeing in lots of other places around the world. Check
Speaker 1: out this story at Bloomberg dot com. Also on the
Speaker 1: Bloomberg Terminal again, Today's big take ruined Brazil harvest, sparks,
Speaker 1: food inflation everywhere. We have been watching and talking about
Speaker 1: shares of Wells Fargo stockdown about two point three percent today.
Speaker 1: That's after losing about three quarters of a percent yesterday's
Speaker 1: trading was down there tim more than five percent. Feels
Speaker 1: like every day. I shouldn't say that, but it's been
Speaker 1: several years where there have been problems coming out about
Speaker 1: Wells Fargo in their operations, and we learned about another
Speaker 1: one yesterday. For the second time in a month, Wells
Speaker 1: fargoes Judy shareholders sold at stock over regulatory and legal
Speaker 1: troubles after the d o J slapped the firm with
Speaker 1: a thirty seven million dollar fine on Monday. Joining us
Speaker 1: now is Hannah Levitt, finance reporter for Bloomberg News. She
Speaker 1: joins us on the phone from New York City. Hannah,
Speaker 1: take us into this. This the latest challenge that Wells
Speaker 1: Fargo had with with regulators. Yes, so thanks for having me. Um.
Speaker 1: They settled with the Justice Department yesterday for overcharging clients
Speaker 1: perform exchange transactions. And um that's a problem that came
Speaker 1: to light in so a few years ago. It was
Speaker 1: one of the many things that merged across business lines
Speaker 1: after the fake accounts revelation. UM So they were find
Speaker 1: thirty seven million by the DJ and also paid clients
Speaker 1: thirty five million to make them whole. UM. So, you know,
Speaker 1: this is one of the things that's been out there,
Speaker 1: and it's you know, with the settlement kind of closing
Speaker 1: the door on it. Um and and it's worth you know,
Speaker 1: making the distinction between that and the stuff we saw
Speaker 1: a couple of weeks ago. And is this another one?
Speaker 1: For give me, I'm quick, just catching up to speed
Speaker 1: here in terms of just looking at the story. Did
Speaker 1: they again? I always find it fascinating, can that when
Speaker 1: you've got companies come out pay millions of dollars in
Speaker 1: fine but admit no wrongdoing. Yeah, I mean, and they've
Speaker 1: they've done you know, they've had various settlements over over
Speaker 1: the years that of UM gone you know further into
Speaker 1: that or not UM and so, yeah, but I mean,
Speaker 1: I think it's important to note that the behavior highlighted
Speaker 1: in this one took place between UM, and that's before
Speaker 1: the current management team was there. So Charlie Sharf, the
Speaker 1: current CEO, took over in that job in twenty nineteen,
Speaker 1: and he joined from the outside after two CEOs resigned UM,
Speaker 1: you know, during these scandals, and has brought in a
Speaker 1: management team that largely is also from the outside. Do
Speaker 1: you get the feeling that they're still coming through operations
Speaker 1: to see if there's any other surprises out there or
Speaker 1: other problems with with a firm that, like a lot
Speaker 1: of financial institutions right are often promoting within, bringing people
Speaker 1: up through the ranks, and they're sometimes as a result,
Speaker 1: there's a culture that's created that maybe somehow is permissive
Speaker 1: of some of these behaviors or or or does it
Speaker 1: maybe notice things as quickly. Yeah, So, I mean the biggest,
Speaker 1: the biggest regulatory thing that UM that Wells has in
Speaker 1: place as far as investors are concerned, is the asset
Speaker 1: cap and that is a federal reserve order preventing them
Speaker 1: from growing beyond their side at the end of UM.
Speaker 1: So that can be really restrictive, and as part of that,
Speaker 1: they really have to overhaul UM operations and controls and
Speaker 1: things like that, and so that's still in placed. UM.
Speaker 1: So you know that's definitely worth noting. UM. But what
Speaker 1: when one really sharp took over he did, um, you know,
Speaker 1: conduct really deep dives into the business lines, UM, and
Speaker 1: they sold a couple and he said that he spends
Speaker 1: you know, almost all of his time on regulatory work.
Speaker 1: So what do investors need to know? Because it does
Speaker 1: seem like even though this was telegraphed, they did. It
Speaker 1: did catch some investors by surprise because we saw shares
Speaker 1: of Wells Fargo move lower on the day before ultimately
Speaker 1: settling down just dis fractionally. They fell as much as
Speaker 1: three point seven percent yesterday. And what caught him off guard?
Speaker 1: What do investors need to to kind of be buckled
Speaker 1: up for? And it is up this year, so it's
Speaker 1: been on a tear. Yeah, so it took a m
Speaker 1: We took a quick dip yesterday and then bounced back
Speaker 1: and then it's down today. I think, as of a
Speaker 1: few minutes ago, was the second worst performer in the
Speaker 1: KBW Bank Index. UM. So you know, I think I
Speaker 1: think the thing for investors and uh, you know analysts
Speaker 1: have written notes and said as much in the past
Speaker 1: twenty four hours is that UM people are a bit
Speaker 1: jittery when it comes to Wells Fargo when they see
Speaker 1: UM headline and stories that are related to regulatory things,
Speaker 1: just because it has been at this point half a
Speaker 1: decade of you know, it really was UM over five
Speaker 1: years ago that the fake account scandal first emerged. There's
Speaker 1: just been a really long time, right, Exactly does the
Speaker 1: street in general, do big investors seem to feel like
Speaker 1: Charlie schaff is doing all the right things that need
Speaker 1: to be and the necessary things that need to be
Speaker 1: done at that company? I mean, like you just said,
Speaker 1: the stock is up fifty some per cents this year,
Speaker 1: so I think that that is a yes. Yeah, there's
Speaker 1: no cells on it either. Fifteen buys, twelve holds. What
Speaker 1: are you watching out as you continue to cover this company?
Speaker 1: What are the kind of key metrics that you think
Speaker 1: investors should be watching maybe over the next six or
Speaker 1: twelve months. Yeah, that's a great question. So you know,
Speaker 1: there are a lot of these kind of outstanding UM issues.
Speaker 1: So you know, as you as you probably recall, when
Speaker 1: the fake accounts issue came out, then problems multiplied really
Speaker 1: flee across the line. So there were problems in auto
Speaker 1: and mortgage and you know FX as we're seeing a
Speaker 1: different things. So I'm looking at, um you know the
Speaker 1: extent which they work through some of these things, and um,
Speaker 1: you know the extent to which they don't. All right,
Speaker 1: good stuff. UM, thank you so much, really appreciate it.
Speaker 1: Hannah Levit, she's our Bloomberg News Finance reporter on the
Speaker 1: phone in New York City. The latest on Wells Fargo
Speaker 1: and as we did talk about shares, Uh, they are
Speaker 1: lowered down about two point eight percent, but again they
Speaker 1: have been on a tear up more than so far
Speaker 1: this year. I'm broc a journal now, but you let
Speaker 1: me drive, No, no, no, please, I'll do the righting vel.
Speaker 1: I want to drive, just drives the questions trying to
Speaker 1: the Globe Bomber radio. We are ten minutes away from
Speaker 1: the closing bell, and we are seeing the selling pick up.
Speaker 1: We've taken another leg down going back to our loads
Speaker 1: of the session, as you heard Charlie mentioned, down two
Speaker 1: percent on the S and P five hundred Dow Jones
Speaker 1: Industrial average, a decline a five hundred eighty three points,
Speaker 1: down one point seven percent, NASDAC taking the biggest hit
Speaker 1: on a percentage basis of those three down two point
Speaker 1: eight percent for decline a four twenty one points. Let's
Speaker 1: get to it. The Drive to the Close with Jimmy Lee,
Speaker 1: founder and CEO at the Wealth Consulting Group. They're an
Speaker 1: independent wealth management r I, a registered investment advisory firm.
Speaker 1: They've got about two billion in assets under management. And
Speaker 1: Jimmy joins us on the phone in Las Vegas. If
Speaker 1: you were a betting man, Jimmy Lee, would you be
Speaker 1: betting that we are on our way to a technical
Speaker 1: correction at this point? More moved down when it comes
Speaker 1: to the equity trade or not. Well, thanks for having
Speaker 1: me on your show, and I am in Las Vegas,
Speaker 1: but I don't spend too much time on the gambling
Speaker 1: tables into casinos. So I would say that, Um, from
Speaker 1: the sell off that we're seeing today, it's broad based. UM.
Speaker 1: I believe that we're going to see a little bit
Speaker 1: of buying on this dip. Um could we get to
Speaker 1: a ten percent range? Possibly, if we don't get some
Speaker 1: follow through on maybe some buying on this dip, certainly
Speaker 1: we can get there. But I believe that around the
Speaker 1: ten percent range would get heavy, heavy buying. So I
Speaker 1: still believe that even though that the buying the dip
Speaker 1: sounds like a tired trading strategy, I still think it's
Speaker 1: the right thing to do. Why is that, Well, I
Speaker 1: think that it's really tough to fight to fed. We've
Speaker 1: got a lot of money out there. I think that certainly,
Speaker 1: while there's a lot of big ering going on in Congress,
Speaker 1: we're still we're gonna get some more money, um into
Speaker 1: the economy, maybe a little bit more through businesses this time.
Speaker 1: I think we'll get some sort of infrastructure bill, and
Speaker 1: when the spending bill finally gets passed, it's going to
Speaker 1: provide more liquidity. And today I know that the idea
Speaker 1: of not passing okay a build for the spending budget
Speaker 1: is in the news and and you know, um, I
Speaker 1: heard Secretary Yellen talk about how dramatic it would be
Speaker 1: for the economy and the markets that that didn't happen.
Speaker 1: And but we've seen this happen before, so I think
Speaker 1: the playbook has been written. And um, I think the
Speaker 1: politicians hopefully will get their stuff together and it will
Speaker 1: create more, you know, more liquidity to continue this bull
Speaker 1: market that I believe we're in to move up in rates.
Speaker 1: How do you see it? And that has certainly been
Speaker 1: one of our big market stories. Over the past week.
Speaker 1: We have seen significant moves Right now that tenure yield
Speaker 1: with the yield of one point fifty three almost one
Speaker 1: fifty four, just below it shorter end of the yel curve.
Speaker 1: We did see some movement on that today right now
Speaker 1: yielding point three zero. Is it because of inflation concerns?
Speaker 1: Is it because of optimism over the economy recovering. Is
Speaker 1: it about more and more central banks around the world
Speaker 1: learning more hawkish, or all of the above. I think
Speaker 1: it's a little bit of all the above, But generally
Speaker 1: inflation is the news of the day, and uh I
Speaker 1: actually believe that we could see one point seven five
Speaker 1: or higher before the end of the year. Is that
Speaker 1: is that just because of inflation? Are also economic recovery?
Speaker 1: I think part of it will be, or most of
Speaker 1: it will be inflation concerns and whether whether or not
Speaker 1: it truly is transitory or if it's more of a
Speaker 1: longer term issue to deal with. I think there are
Speaker 1: a lot of people that believe it's a longer term
Speaker 1: issue that we're gonna have to deal it with, and so,
Speaker 1: but I believe that's a short term I think the
Speaker 1: rise in interest rates will be more of a short
Speaker 1: term thing, meaning that the inflation fear is going to
Speaker 1: be in the news a lot over the next several months.
Speaker 1: But I think as uh, you know, hopefully as the
Speaker 1: supply situation helps out a little bit, and um, you know,
Speaker 1: we see a little bit more of a balance in
Speaker 1: the economy and maybe controlling a little bit a little
Speaker 1: bit better control on on on wages. Um, you know,
Speaker 1: right now, I think companies still have pricing power, and
Speaker 1: so in most industries, I think that the consumers end
Speaker 1: up paying more, and so I truly do believe we
Speaker 1: have inflation. But you know, longer term, am I convinced
Speaker 1: that we've got the phenomentals in place for a lot
Speaker 1: of growth once we get past this pandemic time arizon.
Speaker 1: I'm not sure about that. And so there are you know,
Speaker 1: certain investors out there. Kathy would obviously is very popular
Speaker 1: to listen to these days, but I've got to give
Speaker 1: her a little bit of credibility in the sense that
Speaker 1: I'm not convinced that we're in the super high growth
Speaker 1: mode forever. I don't. I don't. I'm not sure if
Speaker 1: that's the case now. I disagree with buying into maybe
Speaker 1: you know, valuations of companies that are trading at skyrocket
Speaker 1: numbers and continuing to bet that they can hit lights
Speaker 1: out every single quarter. I'm a little cautious of that,
Speaker 1: but I still believe that liquidity is feeling the markets,
Speaker 1: especially the equity markets, be very cautious. As a textincom investor,
Speaker 1: what you're doing going forward, especially for the next few months.
Speaker 1: What about you, immy, if you've got some cash on
Speaker 1: the on the able right now, how would you be
Speaker 1: positioning portfolios? We're buying and um certainly we're trying to
Speaker 1: buy more into sectors that we think benefit from rising
Speaker 1: insrust rates. But the other thing that I believe is
Speaker 1: that the value trade, in the cyclical trade, I think
Speaker 1: we've got a leg up more another leg up before
Speaker 1: the sentence um once the delta variant and COVID situation
Speaker 1: continues to improve. And if you think about six months out,
Speaker 1: you think about, you know, in the developed world, how
Speaker 1: much of the world's gonna be vaccinated and how that's
Speaker 1: going to relate to you know, you know, businesses the
Speaker 1: opening and certain industries benefiting for that. So you know,
Speaker 1: like for certain sectors like the airlines. I'm not sure
Speaker 1: business travel is gonna come back right away, right because
Speaker 1: a lot of companies are looking at the stavings from
Speaker 1: not having to spend so many, so much money on
Speaker 1: business travel. And I think work from home is here
Speaker 1: to stay to some degree, right, So I think that's
Speaker 1: going to be affected. But maybe other other industries such
Speaker 1: as you know, cruise lines and things that might benefit
Speaker 1: from this resurgence. Again, I think we'll see when consumers
Speaker 1: start spending. I truly believe that as we get onto
Speaker 1: the wintertime, the consumer is gonna lead us to new
Speaker 1: market highs well. And we're definitely seeing, you know, Carnival.
Speaker 1: It has been on a tear a little bit lower today,
Speaker 1: but it's been up I think one to three four
Speaker 1: five or so four or five days in a row
Speaker 1: as they're getting more ships out to see. In fact,
Speaker 1: it was up about three seven yesterday. Hey Jimmy, we've
Speaker 1: got to run, but thanks for weighing in. Jimmy Lee,
Speaker 1: founder and chief executive officer at the Wealth Consulting Group Registered,
Speaker 1: all right, I should say, and uh an independent wealth
Speaker 1: management firm joining us on the phone from Las Vegas.
Speaker 1: Thanks for listening to Bloomberg Business Week. Download the podcast
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