WEBVTT - Teenage Workers Leading Recovery 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 --> 0:00:15.560 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 --> 0:00:23.239 at Bloomberg dot com slash podcast. The labor market continues 0:00:23.360 --> 0:00:27.120 to improve. The job's claims numbers today continues to show 0:00:27.200 --> 0:00:30.880 a week over week improvement. How about those teens. It's 0:00:30.920 --> 0:00:33.280 you know, at the end of the school year, kids 0:00:33.680 --> 0:00:37.360 entering the summer workforce. What's the marketplace like for them? 0:00:37.400 --> 0:00:40.680 Barry rid Holds, Bloomberg Opinion columnists and host of Masters 0:00:40.720 --> 0:00:43.440 in Business on Bloomberg Radio is also founder, chairman and 0:00:43.520 --> 0:00:46.040 chief investment officer rid Holds Wealth Management. He's got some 0:00:46.080 --> 0:00:49.520 thoughts on that. So for all those teenagers, Barry, there's 0:00:49.600 --> 0:00:51.279 got to be lots of jobs out there, right, It's 0:00:51.280 --> 0:00:54.600 just a question of what am I gonna get paid? Yeah, 0:00:54.680 --> 0:00:57.000 there there are a ton of jobs there. And and 0:00:57.160 --> 0:01:02.680 when you look at teenage employment, especially the labor participation rate, 0:01:03.040 --> 0:01:07.480 this is at a thirteen year high. Um. But it's 0:01:07.480 --> 0:01:12.240 way down. There's this really interesting generational story that's taken 0:01:12.240 --> 0:01:16.160 place pretty much over the past thirty years. The labor 0:01:16.319 --> 0:01:21.679 teen participation rate has fallen, and and I argue that 0:01:22.360 --> 0:01:29.000 it's fallen as minimum wage lagged behind things like inflation 0:01:29.120 --> 0:01:33.440 or productivity, or corporate profits or executive comp and at 0:01:33.440 --> 0:01:38.400 a certain point, teenagers say, wait, in pre crisis, pre 0:01:38.520 --> 0:01:41.039 in two thousand seven, you want to pay me five 0:01:41.120 --> 0:01:46.160 dollars in fifteen cents an hour before you know FICA 0:01:46.400 --> 0:01:50.600 and and taxes. Most kids just turned around and say 0:01:50.600 --> 0:01:53.200 it's not worth it to do that. And you could 0:01:53.240 --> 0:01:56.160 see that reflected in the participation right now. Funny thing, 0:01:56.680 --> 0:01:59.000 the minimum wage went up in O eight oh nine 0:01:59.440 --> 0:02:03.440 and twenty ten, and not coincidentally, from at seven and 0:02:03.480 --> 0:02:06.560 a quarter and up, which is a bump from where 0:02:06.560 --> 0:02:11.280 it was. The labor participation rate of teenagers started to 0:02:11.320 --> 0:02:15.919 tick up. And here's the craziest thing. Unlike most other 0:02:16.840 --> 0:02:21.320 participation rates, it's now higher than it was pre pandemic. 0:02:21.440 --> 0:02:23.840 So maybe the kids are bored, they want to get 0:02:23.840 --> 0:02:26.760 out of the house, They're tired of looking at mom, dad, brother, sister, 0:02:27.280 --> 0:02:29.239 and say, let me, let me just see a change 0:02:29.240 --> 0:02:32.440 of pace. But all of this just keeps coming back 0:02:32.520 --> 0:02:37.000 to wages. Wages are table stakes. If you can't offer 0:02:37.040 --> 0:02:41.079 a competitive wage, your your potential pool of applicants are 0:02:41.080 --> 0:02:45.560 going to be tiny. And I mentioned the Pittsburgh Gazette 0:02:45.680 --> 0:02:49.359 article about an ice cream parlor that doubled their wages 0:02:49.400 --> 0:02:52.200 from seven to fifteen dollars. Usually they put on an 0:02:52.240 --> 0:02:56.120 air they get two or three applicants. At fifteen an hour, 0:02:56.360 --> 0:03:00.240 they got a thousand applicants. So wages are every thing 0:03:01.200 --> 0:03:04.120 the kids, no, right, I actually, to be honest, Barry, 0:03:04.120 --> 0:03:05.600 when I was a kid, my parents were just like, 0:03:05.639 --> 0:03:08.920 you're getting a job. It wasn't really my choice. You know. 0:03:09.120 --> 0:03:11.600 It was like I had to do something I wasn't 0:03:11.600 --> 0:03:15.639 allowed to not you could see that in that participation, right, Listen, 0:03:15.680 --> 0:03:17.840 I had a paper out when I was twelve. I 0:03:17.880 --> 0:03:22.040 was mowing lawns and shoveling snow at fourteen, fifteen, sixteen, 0:03:22.120 --> 0:03:24.880 And by the time I got to college, you know, 0:03:24.960 --> 0:03:27.760 I was waiting tables and and tending bar or short 0:03:27.840 --> 0:03:32.359 order chefs way back when. But that's a generational thing, 0:03:32.560 --> 0:03:36.200 and five ten fifteen, let's say, ten fifteen years ago, 0:03:36.840 --> 0:03:42.280 that wasn't what the standard was it's get an internship, 0:03:42.800 --> 0:03:47.040 work on your extracurricular activities, get into a better college, 0:03:47.120 --> 0:03:51.880 get get into a better um internship program, and first job. 0:03:52.360 --> 0:03:56.240 The focus shifted away from earning a living then to 0:03:56.520 --> 0:03:59.080 what are you going to do over the lifetime earnings? 0:03:59.120 --> 0:04:03.320 You can see, Barry, what do you think I mean? 0:04:03.360 --> 0:04:07.480 We're seeing anecdotal evidence of wages on the lower end 0:04:07.480 --> 0:04:11.080 of the hiring pool, whether it's McDonald's going to thirteen 0:04:11.160 --> 0:04:15.200 bucks or you know, Amazon, you know, going to fifteen 0:04:15.240 --> 0:04:18.919 dollars here is that just anecdotal or does that really 0:04:18.960 --> 0:04:22.840 signify this, you know, pulling up the bottom of the 0:04:22.839 --> 0:04:26.880 wage scale. It's a good question because very I gotta 0:04:26.960 --> 0:04:29.600 I gotta point out, you know, we haven't really seen 0:04:29.640 --> 0:04:33.080 wage inflation at all. If you look over the last decades, right, everything, 0:04:33.240 --> 0:04:36.760 the price of everything rises butt wages. So so here's 0:04:36.800 --> 0:04:40.760 the here's the issue you're referring to, and it plays 0:04:40.800 --> 0:04:47.080 into both wages and inflation. We have a tendency for 0:04:47.279 --> 0:04:51.719 wage prices to be sticky, and then at a certain 0:04:52.200 --> 0:04:57.080 point it becomes clear that wages are insufficient and you 0:04:57.120 --> 0:05:00.560 get this reset higher. So instead of seeing like an 0:05:00.600 --> 0:05:04.640 annualized increase in wage inflation. You sort of get this 0:05:04.720 --> 0:05:07.560 reset up and then it goes plateaus for a while, 0:05:07.920 --> 0:05:12.240 and you could tell that wages are moving higher, not 0:05:12.839 --> 0:05:16.239 because of the BLS or Census data, but my favorite 0:05:16.320 --> 0:05:20.200 data point is the quits rate. The people with full 0:05:20.200 --> 0:05:24.320 time jobs who are saying to their bosses audio smoas 0:05:24.560 --> 0:05:30.039 and moving on because there are better opportunities at higher wages. 0:05:30.080 --> 0:05:33.000 And if your boss won't give you a raise, someone 0:05:33.040 --> 0:05:36.640 else will. And so the flip side of why can't 0:05:36.640 --> 0:05:41.039 I hire people becomes why can't I retain people? For 0:05:41.200 --> 0:05:45.760 the hiring. I keep saying wages are table stakes, but 0:05:45.800 --> 0:05:49.280 if you want to keep people, it's more than just wages. 0:05:49.440 --> 0:05:54.760 It's some sort of path to equity, profit participation, benefits 0:05:55.200 --> 0:05:58.200 for oh one k things like that. And as we've 0:05:58.320 --> 0:06:00.880 seen over the past year, are you have to give 0:06:00.920 --> 0:06:05.479 people some freedom and control over their working circumstances. Ours 0:06:05.600 --> 0:06:08.840 we got and we got down to the we got 0:06:08.839 --> 0:06:10.640 down to the two minute mark, which means I gotta 0:06:10.720 --> 0:06:15.000 ask you about Ferrari. I speak. It's a new job, right. 0:06:15.040 --> 0:06:18.680 They got a new guy as CEO. He comes from 0:06:18.800 --> 0:06:23.960 wait for it, st micro Electronics. Ferrari, the new guy 0:06:24.120 --> 0:06:28.359 they hired run Ferrari deals with like touch screen interactivity. 0:06:28.400 --> 0:06:32.159 What the heck? Let me let me break this down really, 0:06:32.279 --> 0:06:37.960 really easily, so that even you can understand it. Tesla 0:06:38.080 --> 0:06:43.000 doesn't make cars, they make computers that move, and Ferrari 0:06:43.640 --> 0:06:47.920 has recognized that and said, we have been building so 0:06:48.040 --> 0:06:53.280 much electronics into our all, all of the traction, control, 0:06:53.400 --> 0:06:56.760 over the management, management, all of the which tire is 0:06:56.800 --> 0:07:00.920 going to get, how much power it for vector and 0:07:00.960 --> 0:07:02.920 how much time, how many times a second, how many 0:07:02.960 --> 0:07:05.840 hundreds of times a second? Are we gonna adjust that 0:07:06.400 --> 0:07:12.600 that the electronics become even more important than your favorite 0:07:12.680 --> 0:07:16.600 V twelve and ps. If you think Ferrari is going 0:07:16.680 --> 0:07:19.800 to be internal combustion engine forever, I got some bad 0:07:19.840 --> 0:07:24.280 news for you, Matt. They will eventually go to the faster, 0:07:25.720 --> 0:07:29.160 greener e V and the only thing they're gonna miss 0:07:29.200 --> 0:07:31.880 is the wonderful sound that comes out of those four 0:07:32.120 --> 0:07:38.880 chrome pipes at the back. I don't either, Paul. We're 0:07:38.880 --> 0:07:41.520 gonna buy old Ferrari's. Me and Barry are gonna be 0:07:41.600 --> 0:07:44.400 on bring a Trailer dot com while the rest of 0:07:44.440 --> 0:07:48.520 you are driving brand new electronic whiz kid cars and uh, 0:07:48.560 --> 0:07:50.600 while we still probably won't be able to afford them. 0:07:50.600 --> 0:07:55.320 Great talking to Barry ittt Holtz. As always, this is Bloomberg. 0:07:58.960 --> 0:08:04.640 Now President has revoked the Trump era bands on TikTok 0:08:05.160 --> 0:08:08.960 and we chat we chat in the United States of America. 0:08:09.040 --> 0:08:12.320 Jim Anderson, CEO of Social Flow, is here UM to 0:08:12.400 --> 0:08:14.440 talk with us a little bit about this. And we 0:08:14.480 --> 0:08:17.360 also want to point out here at Bloomberg we use 0:08:17.480 --> 0:08:20.920 social Flow. It's a platform used by Bloomberg for social 0:08:20.920 --> 0:08:24.120 media purposes. So just full disclosure there, we have another 0:08:24.160 --> 0:08:27.640 relationship with Jim. Um, let's get to the TikTok and 0:08:27.920 --> 0:08:31.320 we chat what what were the bands like and what 0:08:31.400 --> 0:08:37.240 does this um revocation mean? I mean kids were still 0:08:37.320 --> 0:08:41.199 using TikTok and we chat in the United States, right, oh, 0:08:41.240 --> 0:08:43.400 without a doubt. And to be clear, this was never 0:08:43.480 --> 0:08:46.400 about TikTok or or we chat chat. It was about 0:08:46.400 --> 0:08:49.560 the US and China relationship. And you know, President Trump 0:08:49.600 --> 0:08:52.240 issues his executive order he said that Bike Dance had 0:08:52.280 --> 0:08:55.280 to sell TikTok and there were various suitors. If you 0:08:55.320 --> 0:08:57.600 remember Microsoft, the Oracle, We're going to buy it. But 0:08:57.760 --> 0:09:01.200 remember the Chinese government ultimately had to approve that sale. 0:09:01.559 --> 0:09:04.959 And that always seemed wildly unlikely. You know, so really 0:09:04.960 --> 0:09:07.400 this is less about regulation of big tech and more 0:09:07.440 --> 0:09:10.400 about the U. S. Relationship with China expressed through big 0:09:10.480 --> 0:09:14.560 tech A Jim. It's the expectation not in Silicon Valley, 0:09:14.800 --> 0:09:20.079 that Biden administration will in fact dial down the rhetoric 0:09:20.160 --> 0:09:23.280 in terms of maybe some of the regulatory concerns about 0:09:23.880 --> 0:09:27.160 big tech that we're really starting to ramp up during 0:09:27.679 --> 0:09:30.800 towards the end of the Trump presidency. Yeah, for sure, 0:09:30.960 --> 0:09:33.440 dialing down the rhetoric. I mean, it doesn't take too 0:09:33.520 --> 0:09:35.720 much of an expert a server to to look and 0:09:35.760 --> 0:09:38.240 see that. You know, President Biden governs in a very 0:09:38.280 --> 0:09:41.800 different fashion than President Trump did. But I wouldn't, you know, confuse, 0:09:42.040 --> 0:09:44.880 you know, dial down rhetoric with a lack of substance. 0:09:44.960 --> 0:09:48.000 I think there's really something still quite substantive here, and 0:09:48.040 --> 0:09:52.840 that's because the U. S. China relationship and competitive nature 0:09:52.880 --> 0:09:55.240 of that relationship is still very very much in place. 0:09:55.360 --> 0:09:57.520 So the fact that he revoked the executive order in 0:09:57.559 --> 0:10:00.960 some ways was inevitable because it was a fairly dubious 0:10:01.040 --> 0:10:04.160 executive order. I think the subsequent court filings and all 0:10:04.240 --> 0:10:06.760 suggested that there was a long battle to be had 0:10:06.800 --> 0:10:10.520 with that executive order. So rather than fight a losing battle, 0:10:10.600 --> 0:10:14.000 I think he just decided quite quite understandably to just 0:10:14.040 --> 0:10:16.800 revoke it. But you know that that doesn't mean this 0:10:16.880 --> 0:10:19.480 is over. I think there's still a substantial and legitimate 0:10:19.480 --> 0:10:23.560 concern about a Chinese company owning data about U. S 0:10:23.600 --> 0:10:27.199 citizens and that's not gone away. Yeah. That, well, that 0:10:27.440 --> 0:10:30.880 definitely hasn't gone away. And we see other concerns around. 0:10:30.880 --> 0:10:33.920 For example, the peace cable UM I think, is just 0:10:34.000 --> 0:10:38.680 reaching the southern coast of France and Google isn't going 0:10:38.760 --> 0:10:40.640 to use it, Amazon is not going to use it. 0:10:41.880 --> 0:10:44.360 How is this all gonna work out? Because no doubt 0:10:45.160 --> 0:10:49.160 Huawei shares data with the Chinese government if they have 0:10:49.320 --> 0:10:52.960 to write, I would assume some US big US tech 0:10:53.000 --> 0:10:56.680 companies probably do the same with US. Yeah. Well, and 0:10:56.960 --> 0:10:59.240 that's a great point too, because we were seeing you know, 0:10:59.320 --> 0:11:02.440 situations where people are you know, being compelled under court 0:11:02.520 --> 0:11:05.000 order to provide data and the companies will fight it, etcetera. 0:11:05.080 --> 0:11:08.120 So you know, two different you know ideologies that work there. 0:11:08.160 --> 0:11:11.520 One is very you know, authoritarians and the other is 0:11:11.720 --> 0:11:14.480 is more of a democracy or a public So I 0:11:14.679 --> 0:11:16.480 don't know that I can give you an answer to that, 0:11:16.559 --> 0:11:18.760 But I will say that this is just one of 0:11:18.960 --> 0:11:20.880 many battles we're going to see. And the thing that 0:11:21.000 --> 0:11:23.679 my mind makes it so unique is just how wildly 0:11:24.080 --> 0:11:27.160 popular TikTok continues to be. I mean it it is 0:11:27.240 --> 0:11:30.400 red hot. It's got the attention of young people. Um, 0:11:30.440 --> 0:11:33.520 it's proven quite difficult for competitors to harness the same 0:11:33.640 --> 0:11:36.400 level of creativity. So you might think that, oh, TikTok 0:11:36.520 --> 0:11:38.640 is is doomed. You know, it's a bit of a 0:11:38.640 --> 0:11:41.640 strong statement, but you know, with all of this regulatory 0:11:41.720 --> 0:11:45.679 overhang and concern about presidential executive orders, you might think 0:11:45.720 --> 0:11:48.160 that it's not relevant. But in many ways, TikTok is 0:11:48.200 --> 0:11:50.360 more relevant than ever too young people who who quite 0:11:50.400 --> 0:11:53.680 honestly don't really care about the geopolitical political implications. They 0:11:53.760 --> 0:11:55.600 just like a fun app. So what do you think 0:11:55.640 --> 0:11:59.440 the future is for TikTok. It's still owned by Byte Dance, right, 0:11:59.440 --> 0:12:01.320 I mean, is this think they could spun out or 0:12:01.400 --> 0:12:04.800 I p O somewhere or again, as you mentioned, it's 0:12:04.840 --> 0:12:07.680 just become so popular. Yeah, I think it depends on 0:12:07.760 --> 0:12:11.120 whether the Chinese government ultimately would like to harvest the 0:12:11.160 --> 0:12:14.920 economic value or use it to make a political point, 0:12:15.000 --> 0:12:18.320 and my guess is um that they're not, you know, 0:12:18.400 --> 0:12:20.320 sort of eager to just harness a couple of billion 0:12:20.400 --> 0:12:22.360 dollars of economic excited. Maybe more than a couple of 0:12:22.400 --> 0:12:24.680 billion if the I POD or spun it out to 0:12:24.760 --> 0:12:27.199 another owner. I mean, it could be worth tens of 0:12:27.240 --> 0:12:30.120 billions of dollars. But the Chinese government's got lots of money. 0:12:30.120 --> 0:12:32.760 I'm not sure they say necessarily want to say, hey, 0:12:32.840 --> 0:12:35.160 let's let's just get tens of billions. I think they 0:12:35.200 --> 0:12:38.640 want to continue to use their position and the stay 0:12:38.800 --> 0:12:41.959 their their effective control over an asset's so popular in 0:12:42.000 --> 0:12:44.199 the U. S as as more of a geopolitical chip. 0:12:44.280 --> 0:12:46.559 So I would expect this to continue. And ultimately there 0:12:46.559 --> 0:12:48.839 may very well be something that comes out of the 0:12:48.840 --> 0:12:51.959 Biden administration that actually forces the same thing that President 0:12:52.000 --> 0:12:53.640 Trump was trying to do at the time, which is 0:12:53.640 --> 0:12:56.520 to force a divestiture. That wouldn't surprise me at all. Well, 0:12:56.559 --> 0:12:59.520 and the Biden administration could put some pressure itself on 0:12:59.559 --> 0:13:02.839 our own big social media platforms. Right, just got about 0:13:02.840 --> 0:13:06.160 ten seconds here, Jim, Oh, yeah, and that will continue, right. 0:13:06.320 --> 0:13:09.480 Antitrust and privacy are the two big dimensions there, and 0:13:09.520 --> 0:13:12.080 those are not going away Facebook, Punch and center on 0:13:12.120 --> 0:13:14.760 those all right. Jim, thanks so much for joining us. 0:13:14.800 --> 0:13:18.240 We always appreciate chatting with you. Getting the latest from 0:13:18.280 --> 0:13:20.480 some of the big tech platforms out there, and again 0:13:21.000 --> 0:13:24.880 good news for TikTok for sure. Jim Anderson, CEO of 0:13:24.920 --> 0:13:27.800 Social Flow, joining us here and again looking at the 0:13:27.840 --> 0:13:31.720 markets again. Still you know Hire today and led by 0:13:31.760 --> 0:13:34.160 the NASTAC one hundred. That's up seven tenths of one percent, 0:13:34.240 --> 0:13:36.200 So a little bit of a move into those tech 0:13:36.360 --> 0:13:41.840 names we are seeing again. Lots of economic data. This 0:13:41.880 --> 0:13:44.319 morning's CPI came in a little bit higher than expected, 0:13:44.760 --> 0:13:49.800 stoking some concerns about inflation into this market place. Let's 0:13:49.880 --> 0:13:52.400 check in with Chris Zacarelli. He's the chief investment officer 0:13:52.480 --> 0:13:56.640 for Independent Advisers Alliance Today about seven billion dollars in 0:13:56.760 --> 0:14:00.120 assets under management. Chris, thanks so much for joining us here. 0:14:00.240 --> 0:14:03.240 You've got the economic data this morning. Did that make 0:14:03.320 --> 0:14:06.920 you think that this FED is likely to begin tapering 0:14:07.240 --> 0:14:12.079 sooner rather than later. Well, the FET is definitely considering 0:14:12.160 --> 0:14:14.920 tapering at some point, and with the FED meeting next 0:14:15.040 --> 0:14:17.800 next week, we're we're thinking now is the time to 0:14:17.800 --> 0:14:20.720 start positioning for that. So whether they start the communication 0:14:20.760 --> 0:14:23.880 process for tapering next week or potentially more likely in 0:14:23.920 --> 0:14:26.840 August during the Jackson Whole symposium, we know they're going 0:14:26.920 --> 0:14:30.080 to be talking about tapering very shortly, and so I 0:14:30.080 --> 0:14:32.600 think looking at these inflation numbers, clearly the FAT has 0:14:32.640 --> 0:14:34.880 to be watching what's happened the last couple of months. 0:14:35.160 --> 0:14:38.040 They've been communicating pretty effectively that they're going to look 0:14:38.120 --> 0:14:40.320 through a lot of these inflation numbers. So I don't 0:14:40.360 --> 0:14:42.520 know that this morning's print is necessarily going to change 0:14:42.520 --> 0:14:45.200 their game plan. But for all those people who think 0:14:45.240 --> 0:14:48.520 inflation is going to be transitory and not sticky, as 0:14:48.560 --> 0:14:51.200 we continue to see these prints every single month, it's 0:14:51.200 --> 0:14:53.520 got at least put some doubt in your mind and 0:14:53.560 --> 0:14:55.560 take away a little bit of that conviction. So I think, 0:14:55.600 --> 0:14:57.680 if anything, that would be the one change at the 0:14:57.680 --> 0:15:00.200 margin that that I would expect out of today's now words, 0:15:00.280 --> 0:15:04.760 Let's say, what does transitory look like? It's transitory like um, 0:15:04.800 --> 0:15:07.200 three to six months, or is transitory like a year 0:15:07.280 --> 0:15:11.000 or two? You know in our in our minds, transitory 0:15:11.160 --> 0:15:13.560 would be less than a year. I think you asked 0:15:13.560 --> 0:15:15.800 that question of of a hundred people, and you'll get 0:15:15.800 --> 0:15:17.920 close to a hundred answers. I think everyone has has 0:15:17.960 --> 0:15:20.280 their own range of what transitory is. I think a 0:15:20.360 --> 0:15:23.120 FED is deliberately been vague about what transitory means in 0:15:23.240 --> 0:15:25.240 order to give themselves a little bit more room to 0:15:25.320 --> 0:15:28.640 work with. But if anything, they've said time and again 0:15:28.760 --> 0:15:31.640 that they're willing to allow inflation to run a little 0:15:31.640 --> 0:15:34.440 bit hotter hotter than they normally would. They're much more 0:15:34.440 --> 0:15:36.680 focused on the labor part of their dual mandate than 0:15:36.680 --> 0:15:38.440 they are in the price stability part of their two 0:15:38.600 --> 0:15:41.160 dual mandate. So for our mind, if we see these 0:15:41.200 --> 0:15:43.640 types of prints going over the course of more than 0:15:43.680 --> 0:15:46.160 six months, that would definitely be a concern to us. 0:15:46.240 --> 0:15:48.200 It's possible to FED would let that run a little 0:15:48.240 --> 0:15:51.640 bit longer. But the longer the definition of transitory, the 0:15:51.720 --> 0:15:53.960 longer we're going to be in this this state of flux. 0:15:54.000 --> 0:15:57.080 And I think the more volatility that that um brings 0:15:57.120 --> 0:15:59.120 to the situation, which is which is why they need 0:15:59.160 --> 0:16:01.400 to really kind of button that up. All right, Chris, 0:16:01.480 --> 0:16:04.360 giving that background, where are you guys doing some work today? 0:16:04.360 --> 0:16:08.200 Where do you see some opportunities? So for us, an 0:16:08.200 --> 0:16:11.080 interesting area is still the financials. So whether that's the 0:16:11.160 --> 0:16:15.160 regional banks or the larger money sending money money center banks. 0:16:15.680 --> 0:16:18.240 The financials are really showing some weakness from a technical 0:16:18.280 --> 0:16:20.880 point of view, but from evaluation point of view, there's 0:16:20.920 --> 0:16:23.920 they're still cheap to where they've been historically. So we 0:16:23.960 --> 0:16:26.720 think within the financials, if the economy continues to do 0:16:26.800 --> 0:16:30.520 well and interest rates they anchored, financials should do okay. 0:16:30.600 --> 0:16:32.520 And I think we're going to see some buying opportunities 0:16:32.560 --> 0:16:36.119 in the next few months within financials as people continue 0:16:36.160 --> 0:16:40.520 to see interest rates being very staying stuck very low. However, 0:16:40.560 --> 0:16:43.800 if interest rates start going higher again, that's great for financials. 0:16:43.840 --> 0:16:46.200 So we think financials are are well priced. We think 0:16:46.200 --> 0:16:48.479 there's some weakness at least in terms of the technicals. 0:16:48.480 --> 0:16:50.720 So I pick your spots, and I think you're gonna 0:16:50.720 --> 0:16:53.160 see some financials go on sale. But we see that 0:16:53.280 --> 0:16:56.560 as heads you do okay, tales you do very well, 0:16:56.600 --> 0:16:58.560 and so we like the risk rewards set up at 0:16:58.640 --> 0:17:04.000 least within within that end street. So again thinking about 0:17:04.080 --> 0:17:07.879 some opportunities here, you know, again the concern is that 0:17:07.920 --> 0:17:11.840 the FED is going to need to raise rates here. Um, 0:17:12.000 --> 0:17:16.639 given that scenario, are there parts of the market that 0:17:16.680 --> 0:17:18.960 you just think you're gonna be really rocked when and 0:17:19.040 --> 0:17:23.160 if that happens, well, if interest rates start going higher, 0:17:23.280 --> 0:17:25.920 and again that's more likely to be at the ten 0:17:26.000 --> 0:17:28.560 year or third year range, we're gonna see longer term 0:17:28.600 --> 0:17:31.560 insestrates move higher through through the market. Tapering is one 0:17:31.600 --> 0:17:33.960 way that could happen, and and a shift and sentiment 0:17:34.040 --> 0:17:36.119 is another way. As far as short term rates, with 0:17:36.160 --> 0:17:38.440 the when the Fed will begin raising, I think most 0:17:38.480 --> 0:17:41.000 people believe that's a year or two out at the earliest, 0:17:41.040 --> 0:17:43.600 even as inflation starts to heat up. So we think 0:17:43.640 --> 0:17:46.520 if longer term interest rates go higher again through either 0:17:46.600 --> 0:17:49.080 taper discussions or just because the bond market changes the 0:17:49.200 --> 0:17:52.440 narrative for how how high they think rates will will 0:17:52.480 --> 0:17:54.359 go in the future and how much economic growth and 0:17:54.400 --> 0:17:59.240 inflation rates higher. We think technology shares and high price 0:17:59.400 --> 0:18:01.800 price to earn shares are are the parts of the 0:18:01.800 --> 0:18:04.280 market that are are most vulnerable in that case, and 0:18:04.320 --> 0:18:06.040 so those those are areas of the market i'd be 0:18:06.119 --> 0:18:08.119 careful on. You want to right size your positions in 0:18:08.160 --> 0:18:12.960 those longer duration stocks, so to speak. You know that, um, 0:18:13.000 --> 0:18:16.600 the narrative that this is a very dangerous moment for 0:18:16.640 --> 0:18:19.680 central banks has really gained a lot of pace. Um. 0:18:19.720 --> 0:18:23.119 We heard that from Andy Haldane, chief economists at the 0:18:23.160 --> 0:18:26.280 Bank of England. We have heard Martin folkirts Land down, 0:18:26.280 --> 0:18:29.080 Peter Hooper at Deutsche Bank saying, you know, inflation could 0:18:29.119 --> 0:18:32.440 be more than just transitory and uh. Bill Dudley wrote 0:18:32.440 --> 0:18:35.359 for Bloomberg Opinion that the problem with this is this 0:18:35.560 --> 0:18:39.679 overheating is that when it's time to turn around, the 0:18:39.680 --> 0:18:43.800 Fed's gonna have to raise rates quickly, more quickly than 0:18:44.200 --> 0:18:47.920 people are ready for, and faster and uh and higher 0:18:47.960 --> 0:18:49.479 than people may be ready for, and that could bring 0:18:49.520 --> 0:18:52.199 about a full blown recession. It's like a turn on 0:18:52.240 --> 0:18:55.480 a dime kind of situation. Is that a concern you 0:18:55.520 --> 0:18:59.159 think that's gaining a lot more traction. I don't know 0:18:59.240 --> 0:19:01.359 that has gained as extraction as it should. It's a 0:19:01.359 --> 0:19:04.600 concern that we share. We are also in that camp that, um. 0:19:04.800 --> 0:19:06.440 The idea that the FED is going to play this 0:19:06.520 --> 0:19:10.720 perfectly keep inflation in check while the economy reopens, I 0:19:10.760 --> 0:19:13.359 think is a is a stretch. And I think for 0:19:13.440 --> 0:19:15.840 all those people who are keeping interest rates as low 0:19:15.880 --> 0:19:18.280 as they are buying that tenure today and keep knocking 0:19:18.280 --> 0:19:21.080 down those rates, that's a big article of faith from 0:19:21.080 --> 0:19:22.880 from our point of view, and one that we don't 0:19:22.920 --> 0:19:25.119 have as much conviction and as clearly a lot of 0:19:25.280 --> 0:19:28.000 bond market investors have. We think there's a really big 0:19:28.040 --> 0:19:32.040 difference between uh an extraordinary amount of quantitative easing, which 0:19:32.080 --> 0:19:35.200 was done after the global financial crisis. Sure M two 0:19:35.240 --> 0:19:38.200 can jump up astronomically, but as long as the velocity 0:19:38.200 --> 0:19:41.040 of money collapses, you can get away with so much 0:19:41.119 --> 0:19:43.960 quantitative easing without seeing a lot of inflation. But what's 0:19:44.040 --> 0:19:46.240 different this time around is we've got so much fiscal 0:19:46.280 --> 0:19:49.520 stimulus in addition to the monetary stimulus, and that's something 0:19:49.760 --> 0:19:52.679 we're surprised that the market is not seemed to not 0:19:52.760 --> 0:19:55.480 be taking into consideration the idea of putting trillions of 0:19:55.520 --> 0:19:59.960 dollars into the hands of consumers, especially those lower income consumers, 0:20:00.000 --> 0:20:02.560 we're much more likely to spend it. We think that's 0:20:02.560 --> 0:20:04.520 where the risk lies. It's not that we have so 0:20:04.600 --> 0:20:06.960 much quantitative easing. It is that we have quantitative easing 0:20:06.960 --> 0:20:09.679 on top of trillions of dollars a fiscal stimulus. And 0:20:09.720 --> 0:20:12.480 I'm not the only person who's who's making this point. 0:20:12.520 --> 0:20:14.040 I think there are others who are starting to talk 0:20:14.040 --> 0:20:16.359 about it. But if I think that narrative is the 0:20:16.359 --> 0:20:18.360 one that I haven't seen really take off, and I'm 0:20:18.400 --> 0:20:21.560 surprised about it, I would think, And that much fiscal 0:20:21.560 --> 0:20:25.760 stimulus on top of monetary stimulus is why inflation is 0:20:25.880 --> 0:20:29.080 much more of a risk than it ever was in 0:20:29.080 --> 0:20:31.840 two thousand nine, two thousand ten, and even into the 0:20:31.840 --> 0:20:37.320 Taper chance. Chris, have a valuation here again setting new 0:20:37.400 --> 0:20:41.400 highs in this marketplace. Yes, earnings have been very good 0:20:41.440 --> 0:20:44.040 for the past couple of quarters. How do you view evaluation? 0:20:44.119 --> 0:20:46.199 Is that a concern for you and for this market? 0:20:47.840 --> 0:20:50.560 I think where the market's price right now, at least 0:20:50.640 --> 0:20:53.919 using the SMPI as a proxy, you have to be 0:20:54.000 --> 0:20:58.040 aware that that valuations are elevated now. I think within 0:20:58.080 --> 0:21:00.679 the SMP five you have to look at kind of 0:21:00.680 --> 0:21:03.600 the the index composition, and because so much of the 0:21:03.640 --> 0:21:07.960 index is heavily weighted towards technology and communication shares, a 0:21:08.000 --> 0:21:12.119 lot of those companies are businesses that are that deserve 0:21:12.240 --> 0:21:15.439 those valuations. So I think evaluation in and of itself 0:21:15.520 --> 0:21:17.200 is not a concern for us, but it's something that 0:21:17.240 --> 0:21:20.920 we're keeping in mind. It's definitely a necessary condition, all right, Chris, 0:21:20.920 --> 0:21:23.080 thanks so much for joining us. Chris Scarelly, chief investment 0:21:23.080 --> 0:21:29.359 officer for Independent Advisor Alliance. Let's get over now to 0:21:29.560 --> 0:21:33.200 Ted Swimmer, head of Corporate Finance and Capital Market at 0:21:33.560 --> 0:21:37.840 Citizens speak Capital Markets at Citizens, because we had um 0:21:37.840 --> 0:21:43.800 first off, Ted, really interesting no doubt from the SEC 0:21:44.080 --> 0:21:47.720 yesterday that Gary Gensler has instructed his staff to well 0:21:47.800 --> 0:21:52.639 make markets work better is the broad order, But UM 0:21:52.680 --> 0:21:59.000 talking really to to his staff about market makers and um, 0:21:59.040 --> 0:22:01.400 you know, buying fund thos. What do you think about 0:22:01.400 --> 0:22:05.040 the changes we should see? Well, thank first of all, 0:22:05.040 --> 0:22:07.920 thanks for having me this morning. We're seeing some very 0:22:08.040 --> 0:22:11.119 positive fund flows in the businesses that we're working on. 0:22:12.400 --> 0:22:15.040 We're seeing a lot of investor demand. Loan and bond 0:22:15.080 --> 0:22:18.960 side of the businesses seem to be taking off. We 0:22:19.040 --> 0:22:23.040 feel like the markets are incredibly accommodative now for future 0:22:23.440 --> 0:22:26.480 for transactions in the second half of the year. First 0:22:26.480 --> 0:22:29.240 half of the year has been very aggressive already, but 0:22:29.400 --> 0:22:32.199