1 00:00:01,800 --> 00:00:04,440 Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm 2 00:00:04,480 --> 00:00:07,280 Speaker 1: Bloomberg Quick Takes Tim Stanovik. We're here every day bringing 3 00:00:07,320 --> 00:00:09,799 Speaker 1: you the latest news from the world to business and finance, 4 00:00:09,840 --> 00:00:13,640 Speaker 1: plus technology, politics, economics, all purtnising the power of Business 5 00:00:13,680 --> 00:00:17,119 Speaker 1: Week reporters and editors, not to mention our journalists and 6 00:00:17,120 --> 00:00:20,000 Speaker 1: analysts in more than one twenty countries. You can download 7 00:00:20,040 --> 00:00:23,239 Speaker 1: Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot Com. 8 00:00:23,440 --> 00:00:25,200 Speaker 1: You can also listen to our radio show at two 9 00:00:25,200 --> 00:00:27,880 Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on 10 00:00:27,920 --> 00:00:32,240 Speaker 1: YouTube search Bloomberg Clovel News. Let's get right to our guest. 11 00:00:32,280 --> 00:00:35,360 Speaker 1: Lucky for us, he's back again. Andy Kurtzig's founder and 12 00:00:35,560 --> 00:00:39,400 Speaker 1: CEO of Just Answer. Just Answer. It's based in San Francisco. 13 00:00:39,560 --> 00:00:42,760 Speaker 1: It helps connect people with experts for professional advice. Uh. Andy, 14 00:00:42,800 --> 00:00:44,360 Speaker 1: it's good to chat with you again. We talked to 15 00:00:44,360 --> 00:00:46,600 Speaker 1: you just a few weeks ago. Because you have such 16 00:00:46,600 --> 00:00:50,720 Speaker 1: a large portion of your your staff in Ukraine, two 17 00:00:50,840 --> 00:00:53,880 Speaker 1: hundred plus employees in Ukraine, I just want to start 18 00:00:53,920 --> 00:00:55,400 Speaker 1: with how how are they doing right now and what 19 00:00:55,440 --> 00:00:59,240 Speaker 1: are they doing well? So they're all live and uh 20 00:00:59,280 --> 00:01:01,200 Speaker 1: and doing as well they could possibly be doing in 21 00:01:01,240 --> 00:01:04,080 Speaker 1: the situation that we're in. So all of our preparations 22 00:01:04,080 --> 00:01:05,880 Speaker 1: have paid off. We've been asking to keep them all 23 00:01:05,880 --> 00:01:08,520 Speaker 1: safe and so far it's working. And you in your 24 00:01:08,520 --> 00:01:11,280 Speaker 1: notes you said that six of them are currently fighting, 25 00:01:11,360 --> 00:01:14,920 Speaker 1: and those who are fighting are still being paid a salary. Yeah, 26 00:01:14,959 --> 00:01:17,080 Speaker 1: so what we what we promised to them even before 27 00:01:17,120 --> 00:01:19,639 Speaker 1: the war started, when we thought that this might happen, 28 00:01:19,760 --> 00:01:22,120 Speaker 1: was we'd pay them fifty percent of their salary in 29 00:01:22,160 --> 00:01:24,039 Speaker 1: addition to the sellary and they get for being in 30 00:01:24,040 --> 00:01:26,560 Speaker 1: the military, and then we guarantee their jobs when they 31 00:01:26,600 --> 00:01:28,720 Speaker 1: come back, because hey, and if we can take a 32 00:01:28,760 --> 00:01:31,119 Speaker 1: step back, um, and we're grateful that you've given us 33 00:01:31,120 --> 00:01:34,360 Speaker 1: some time. What are you here, I mean, it's hard 34 00:01:34,360 --> 00:01:36,920 Speaker 1: for any of us, UM, I think in terms of 35 00:01:36,959 --> 00:01:38,760 Speaker 1: some of the atrocities that we're seeing in some of 36 00:01:38,760 --> 00:01:41,039 Speaker 1: the news coverage of what's going on in Ukraine right now. 37 00:01:41,280 --> 00:01:44,440 Speaker 1: What are you hearing, um from your team members who 38 00:01:44,440 --> 00:01:48,880 Speaker 1: are on the ground in Ukraine. I'm hearing pretty much 39 00:01:48,880 --> 00:01:51,120 Speaker 1: what you're seeing in the news, which is it's dreadful. 40 00:01:51,200 --> 00:01:54,480 Speaker 1: It's terrible. I mean the that that seeing the bodies 41 00:01:54,840 --> 00:01:58,960 Speaker 1: and the torture and the reality now that they've taken 42 00:01:58,960 --> 00:02:03,320 Speaker 1: back some of their territories near Kiev is just awful, 43 00:02:03,520 --> 00:02:07,000 Speaker 1: I mean, and they're horrified for those who the rest 44 00:02:07,000 --> 00:02:09,040 Speaker 1: of the world is. For those that have stayed on 45 00:02:09,080 --> 00:02:13,079 Speaker 1: the ground um and decided not to leave Ukraine, why 46 00:02:13,200 --> 00:02:18,160 Speaker 1: is that, Well, so a few reasons. I mean. So 47 00:02:18,240 --> 00:02:21,320 Speaker 1: we have of the two eight now employees that we 48 00:02:21,360 --> 00:02:23,880 Speaker 1: have in Ukraine, thirty nine of them have We've been 49 00:02:23,919 --> 00:02:27,480 Speaker 1: able to get them out, but the rest either they 50 00:02:27,520 --> 00:02:30,400 Speaker 1: can't get out because of there are men between eighteen 51 00:02:30,440 --> 00:02:32,280 Speaker 1: and sixties, it's against the law for them to leave 52 00:02:32,320 --> 00:02:35,920 Speaker 1: the country. And then we've got people that that you know, 53 00:02:35,919 --> 00:02:39,080 Speaker 1: maybe their spouse or their their family members are stuck 54 00:02:39,080 --> 00:02:40,480 Speaker 1: there and so they don't want to leave either. So 55 00:02:40,600 --> 00:02:42,840 Speaker 1: some of the women are staying by the side of 56 00:02:42,919 --> 00:02:46,160 Speaker 1: the men that are forced to stay in Ukraine. And 57 00:02:46,160 --> 00:02:48,120 Speaker 1: then we've even got like what the woman that leads 58 00:02:48,120 --> 00:02:52,120 Speaker 1: their office in Ukraine, her son just turned eighteen, so 59 00:02:52,160 --> 00:02:54,240 Speaker 1: he can't leave, and so she's not leaving her son behind. 60 00:02:55,440 --> 00:02:57,760 Speaker 1: What's the message that that you want to send to 61 00:02:58,919 --> 00:03:01,760 Speaker 1: other people? And still can Valley other Americans who are 62 00:03:01,840 --> 00:03:05,760 Speaker 1: here in the United States and really just just watching 63 00:03:05,760 --> 00:03:07,680 Speaker 1: this play out. I mean, I think a lot of 64 00:03:07,680 --> 00:03:10,800 Speaker 1: people have this feeling that well, Okay, the government is 65 00:03:10,800 --> 00:03:12,800 Speaker 1: doing what it can do. There's only so much I 66 00:03:12,800 --> 00:03:17,760 Speaker 1: can do. You know. The first thing is that this 67 00:03:17,840 --> 00:03:22,560 Speaker 1: suspects all of us. This is not some small skirmish 68 00:03:22,600 --> 00:03:26,920 Speaker 1: in Eastern Europe. This is about democracy and about freedom 69 00:03:26,960 --> 00:03:29,280 Speaker 1: and East versus West. This is everything that we worried 70 00:03:29,280 --> 00:03:33,400 Speaker 1: about during the Cold War. It's actually happening now. And 71 00:03:33,639 --> 00:03:35,360 Speaker 1: you know, this aspects all of us, and so we 72 00:03:35,400 --> 00:03:39,080 Speaker 1: all need to do our part to help. You know, Andy, 73 00:03:39,200 --> 00:03:41,400 Speaker 1: I do wonder too. And obviously you're doing everything and 74 00:03:41,440 --> 00:03:44,040 Speaker 1: anything you can to help UM your team that are 75 00:03:44,040 --> 00:03:48,440 Speaker 1: there in Ukraine. How do you though our audience, a 76 00:03:48,480 --> 00:03:51,880 Speaker 1: business investing audience as well, obviously caring though about the 77 00:03:51,960 --> 00:03:55,960 Speaker 1: humanitarian aspect. But when you look at the market over 78 00:03:56,000 --> 00:03:59,840 Speaker 1: in Europe, you know, will this ultimately lead to kind 79 00:03:59,840 --> 00:04:03,960 Speaker 1: of business rethink about exposure, whether it's in Ukraine, whether 80 00:04:04,000 --> 00:04:07,160 Speaker 1: it's Russia, Like, how what's what's the what is it 81 00:04:07,320 --> 00:04:11,000 Speaker 1: the longer lasting UM strategy that stays with us because 82 00:04:11,040 --> 00:04:14,880 Speaker 1: of this? Yeah, so we've already seen lots of companies 83 00:04:15,480 --> 00:04:19,000 Speaker 1: boycotting Russia. And hopefully more will continue to do that. 84 00:04:19,800 --> 00:04:24,800 Speaker 1: And you know, as this goes on, what my hope 85 00:04:24,960 --> 00:04:27,920 Speaker 1: is that companies will not just think about boycotting Russia 86 00:04:27,960 --> 00:04:31,080 Speaker 1: but also buying Ukrainian goods and services. I mean, this 87 00:04:31,120 --> 00:04:34,880 Speaker 1: war is about you know, Russians aggression and bombs and tanks, 88 00:04:34,880 --> 00:04:37,880 Speaker 1: but it's also about the economy and sanctions, and we 89 00:04:37,920 --> 00:04:41,400 Speaker 1: can all do a part to help the Ukrainian side 90 00:04:41,400 --> 00:04:43,920 Speaker 1: of this. And so that's what just Answers trying to do, 91 00:04:44,000 --> 00:04:47,039 Speaker 1: and I hope any other companies will do it as well. Andy, 92 00:04:47,040 --> 00:04:49,320 Speaker 1: you and your family are actually planning to go to 93 00:04:49,480 --> 00:04:52,400 Speaker 1: the border of Ukraine. This is a mission to deliver 94 00:04:52,520 --> 00:04:56,720 Speaker 1: medical aid, body armor, laptops and more. Um, you're taking 95 00:04:56,720 --> 00:05:00,120 Speaker 1: your kids. Why why is this important to you? Well, so, 96 00:05:00,200 --> 00:05:02,479 Speaker 1: when my family and I got together a few weeks 97 00:05:02,480 --> 00:05:04,719 Speaker 1: ago and we're deciding what we wanted to do for 98 00:05:04,760 --> 00:05:07,440 Speaker 1: spring break. You know, normally we would go to Hawaii, 99 00:05:07,440 --> 00:05:10,960 Speaker 1: where my mom lives and we love. We just couldn't 100 00:05:11,000 --> 00:05:14,200 Speaker 1: bear to go somewhere fun for spring break when our 101 00:05:14,760 --> 00:05:18,160 Speaker 1: friends and colleagues and the people of Ukraine are suffering 102 00:05:18,200 --> 00:05:21,120 Speaker 1: so much. And so we got together, the family, and 103 00:05:21,160 --> 00:05:25,120 Speaker 1: we decided that we wanted to go and help. Is 104 00:05:25,160 --> 00:05:27,480 Speaker 1: there a message in terms of the governments that are 105 00:05:27,520 --> 00:05:29,880 Speaker 1: out there who have already imposed a lot of certainly 106 00:05:29,920 --> 00:05:32,720 Speaker 1: economic and business sanctions, as you mentioned, a lot of 107 00:05:32,760 --> 00:05:36,760 Speaker 1: companies pulling out. Um, what more do you think should 108 00:05:36,760 --> 00:05:39,839 Speaker 1: be done at this point? Well, I mean they should 109 00:05:39,839 --> 00:05:42,599 Speaker 1: continue to escalate the sanctions. They should continue to send 110 00:05:43,520 --> 00:05:51,200 Speaker 1: military equipment and and any humanitarian supplies as well. So 111 00:05:51,520 --> 00:05:53,360 Speaker 1: there's a lot more to be done. I mean, they've 112 00:05:53,360 --> 00:05:55,200 Speaker 1: got a lot of people in Ukraine that are ready 113 00:05:55,200 --> 00:05:58,279 Speaker 1: and willing to fight, but they need the the supplies 114 00:05:58,320 --> 00:06:01,800 Speaker 1: in order to maintain the this war and too and 115 00:06:01,839 --> 00:06:05,840 Speaker 1: to beat back Russia and for democracy. They're fighting for 116 00:06:05,880 --> 00:06:08,480 Speaker 1: our democracy just as much as their own. And the 117 00:06:08,680 --> 00:06:10,960 Speaker 1: less less bit of time with you just about thirty 118 00:06:10,960 --> 00:06:14,000 Speaker 1: seconds left. What's your message to to other CEOs who 119 00:06:14,200 --> 00:06:17,880 Speaker 1: have employees in Ukraine right now or thinking about hiring 120 00:06:17,880 --> 00:06:21,920 Speaker 1: in Ukraine? As we know it's a huge tech hip. Absolutely, 121 00:06:21,920 --> 00:06:23,360 Speaker 1: I think that I think they should go for it. 122 00:06:23,400 --> 00:06:25,800 Speaker 1: I mean, we we had some offers outstanding when the 123 00:06:25,839 --> 00:06:28,200 Speaker 1: war started. We've honored those offers. We've actually hired a 124 00:06:28,200 --> 00:06:30,599 Speaker 1: few more people since the war started. You know, We're 125 00:06:30,640 --> 00:06:32,760 Speaker 1: trying to support the economy as much as we can 126 00:06:32,839 --> 00:06:35,600 Speaker 1: and and hiring people there is one of the best 127 00:06:35,600 --> 00:06:38,080 Speaker 1: things we can do. You know, Unfortunately most of the 128 00:06:38,160 --> 00:06:42,240 Speaker 1: Ukrainian economy is crippled right now. Right trucking business or 129 00:06:42,240 --> 00:06:45,120 Speaker 1: a warehouse or you know, chocolate company, whatever it is, 130 00:06:45,160 --> 00:06:48,240 Speaker 1: you're probably not operating. But I can kind of operate, 131 00:06:48,360 --> 00:06:50,599 Speaker 1: and so we're able to support that we have to run. 132 00:06:50,640 --> 00:06:53,039 Speaker 1: We wish you well, um safety on your journey, and 133 00:06:53,080 --> 00:06:56,000 Speaker 1: your family are well as well. Andy Kurtzik of Just Answer. 134 00:06:56,360 --> 00:06:59,880 Speaker 1: You're listening to Bloomberg Business Week with Carol Measure and 135 00:07:00,080 --> 00:07:04,440 Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. All right, 136 00:07:04,520 --> 00:07:05,880 Speaker 1: for those of you even sticking around, we're going to 137 00:07:05,920 --> 00:07:08,840 Speaker 1: finally do the great reveal. Almost almost the story is 138 00:07:08,880 --> 00:07:11,560 Speaker 1: among the most read on the Bloomberg today and it 139 00:07:11,600 --> 00:07:14,600 Speaker 1: involves probably the most followed individual on Wall Street. We're 140 00:07:14,600 --> 00:07:18,960 Speaker 1: talking about Jamie Diamond, the JP Morgan Chase CEO and 141 00:07:19,360 --> 00:07:21,880 Speaker 1: board chair. Is that with his annual letter he's calling 142 00:07:21,880 --> 00:07:24,840 Speaker 1: for more sanctions on Russia, expresses pity for the Fed 143 00:07:24,880 --> 00:07:27,080 Speaker 1: as well, says, hey, they got a tough task ahead 144 00:07:27,080 --> 00:07:29,400 Speaker 1: of them. Hanna Levitt is finance reporter for Bloomberg Near. 145 00:07:29,480 --> 00:07:32,320 Speaker 1: She joins us on the phone from New York City, Hannah, 146 00:07:32,480 --> 00:07:34,760 Speaker 1: what is the before we get to the details here, 147 00:07:35,120 --> 00:07:37,520 Speaker 1: what is the change in tone of this year's letter 148 00:07:37,600 --> 00:07:41,320 Speaker 1: versus last year's letter? Hey, guys, thanks for having me. Um. 149 00:07:41,400 --> 00:07:44,840 Speaker 1: The last year's letter, if you remember, gave a pretty 150 00:07:44,960 --> 00:07:49,760 Speaker 1: rosy outlook. It was, you know, Jamie was saying this 151 00:07:49,800 --> 00:07:52,480 Speaker 1: boom could run into three. He was saying, you know, 152 00:07:52,800 --> 00:07:56,280 Speaker 1: everything could add up to a Goldilocks moment um. And 153 00:07:56,360 --> 00:07:59,600 Speaker 1: so it's definitely a change in tone when you know, 154 00:07:59,600 --> 00:08:01,520 Speaker 1: in the four four pages of the letter this year, 155 00:08:01,560 --> 00:08:04,800 Speaker 1: he's you know, really breaking down all these massive issues 156 00:08:04,840 --> 00:08:07,880 Speaker 1: that we're facing globally at the moment. Well, and so 157 00:08:07,960 --> 00:08:10,720 Speaker 1: among those massive issues is of course the war. Talk 158 00:08:10,760 --> 00:08:12,200 Speaker 1: to us a little bit more about what he said 159 00:08:12,240 --> 00:08:16,040 Speaker 1: about the Russian war and invasion of Ukraine. Yeah, so 160 00:08:16,080 --> 00:08:19,360 Speaker 1: he called for increasing sanctions UM in whatever way security 161 00:08:19,360 --> 00:08:23,040 Speaker 1: experts recommend. And he also said that he's not worried 162 00:08:23,120 --> 00:08:26,320 Speaker 1: about JP Morgan's exposure to Russia, but that it could 163 00:08:26,320 --> 00:08:29,600 Speaker 1: cost the firm a billion over time UM and that 164 00:08:29,680 --> 00:08:32,160 Speaker 1: the firm continues to look for secondary impacts are on 165 00:08:32,200 --> 00:08:33,960 Speaker 1: the globe. And that's something that we've heard a lot 166 00:08:34,400 --> 00:08:37,840 Speaker 1: in recent weeks, is that, you know, even if a 167 00:08:37,880 --> 00:08:41,640 Speaker 1: firm may not have a huge impact right now, um, 168 00:08:41,679 --> 00:08:44,440 Speaker 1: you know, it's kind of tv D on what could 169 00:08:44,440 --> 00:08:46,520 Speaker 1: happen six months from now or what what kind of 170 00:08:46,600 --> 00:08:49,040 Speaker 1: you know, how it will impact companies and countries and 171 00:08:49,320 --> 00:08:52,600 Speaker 1: what impacts that will end up having having on these things. 172 00:08:52,800 --> 00:08:54,680 Speaker 1: And a billion dollars is a lot of money to 173 00:08:54,720 --> 00:08:56,920 Speaker 1: a lot of people, but over an extended period of 174 00:08:56,920 --> 00:09:00,120 Speaker 1: time to you know, the bank with the most assets 175 00:09:00,160 --> 00:09:04,800 Speaker 1: in the United States. Uh, is it is that a lot? Uh? 176 00:09:04,880 --> 00:09:12,360 Speaker 1: No revenue projected for this year, right, it's a lot. Yeah. 177 00:09:12,400 --> 00:09:14,720 Speaker 1: Well so then when he says that, though, it's a 178 00:09:14,760 --> 00:09:18,080 Speaker 1: reminder that you know, when you're thinking about either the 179 00:09:18,120 --> 00:09:21,760 Speaker 1: financial markets or economic growth, like little bits and pieces 180 00:09:21,760 --> 00:09:24,040 Speaker 1: of things though from different places, whether it's the war, 181 00:09:24,200 --> 00:09:28,400 Speaker 1: whether it's inflation, whether it's supply strain constraints or they 182 00:09:28,400 --> 00:09:33,520 Speaker 1: were supply chain constraints. All of this though, it's important, right, Hannah, 183 00:09:33,760 --> 00:09:35,840 Speaker 1: because I'm curious how you see it that it can 184 00:09:35,880 --> 00:09:41,760 Speaker 1: add up to significant eating into economic growth. Yeah, for sure. 185 00:09:41,800 --> 00:09:44,000 Speaker 1: I Mean one of his key points was about the 186 00:09:44,120 --> 00:09:47,600 Speaker 1: energy crisis, which you know has been obviously influenced by 187 00:09:47,640 --> 00:09:51,000 Speaker 1: the War Ukraine. Um. But it's exacerbating inflation. So that's 188 00:09:51,000 --> 00:09:54,160 Speaker 1: just one of the examples of where we're seeing, um. 189 00:09:54,200 --> 00:09:57,280 Speaker 1: You know, these big issues all being interconnected. Um. And 190 00:09:57,320 --> 00:10:01,480 Speaker 1: he called for the US increasing energ reproduction and also 191 00:10:01,520 --> 00:10:05,000 Speaker 1: getting more lergy to Europe immediately um and and wrote 192 00:10:05,000 --> 00:10:06,720 Speaker 1: a bit about how he doesn't view it as mutually 193 00:10:06,720 --> 00:10:09,280 Speaker 1: exclusive with longer term clean energy goals, which I also 194 00:10:09,320 --> 00:10:12,680 Speaker 1: thought was interesting. Okay, let's get to monetary and fiscal policy, 195 00:10:12,880 --> 00:10:15,160 Speaker 1: and I'm wondering about his comments with regard to the 196 00:10:15,160 --> 00:10:18,920 Speaker 1: FED and what the FED has ahead of it in 197 00:10:19,040 --> 00:10:22,520 Speaker 1: order to get inflation under control. Yeah, for sure. UM. Well, 198 00:10:22,559 --> 00:10:24,640 Speaker 1: he said he does not envy the FED for what 199 00:10:24,640 --> 00:10:27,520 Speaker 1: it has to do. Um. But you know, really his 200 00:10:27,559 --> 00:10:30,680 Speaker 1: point was that in hindsight, all the fislan monetary stinglass 201 00:10:30,720 --> 00:10:35,960 Speaker 1: in one was probably too much for too long. Um. 202 00:10:36,040 --> 00:10:38,080 Speaker 1: And so he's predicting that the FED could raise rates 203 00:10:38,080 --> 00:10:41,240 Speaker 1: more than the market currently expects or is pricing in 204 00:10:41,520 --> 00:10:43,480 Speaker 1: and you know, if they get it right, there could 205 00:10:43,520 --> 00:10:46,640 Speaker 1: be years of growth still, but the process will cause 206 00:10:46,640 --> 00:10:49,240 Speaker 1: a lot of volatility either way. Um, and it's definitely 207 00:10:49,559 --> 00:10:53,160 Speaker 1: challenging and the whole thing listen, this is your world, um, Hannah. 208 00:10:53,559 --> 00:10:56,080 Speaker 1: You know, and Jamie Diamond, you know, when he speaks, 209 00:10:56,080 --> 00:10:57,760 Speaker 1: we kind of sit up a little straighter and take 210 00:10:57,800 --> 00:10:59,599 Speaker 1: notice of it. And it certainly he's always among the 211 00:10:59,600 --> 00:11:02,520 Speaker 1: most on the Bloomberg. I do think he thinks about 212 00:11:02,559 --> 00:11:06,480 Speaker 1: his words because he knows, um, that people do listen 213 00:11:06,559 --> 00:11:09,320 Speaker 1: to what he says, you know, pretty closely. What was 214 00:11:09,360 --> 00:11:14,320 Speaker 1: the most stark thing for you? Um? I think for 215 00:11:14,400 --> 00:11:17,319 Speaker 1: me reading it just kind of the the tone change 216 00:11:17,360 --> 00:11:20,079 Speaker 1: that we talked about at the beginning, um, compared with 217 00:11:20,200 --> 00:11:22,040 Speaker 1: last year, and it's not you know, he still did 218 00:11:22,080 --> 00:11:24,640 Speaker 1: say that, like the economy is in good shape, consumers 219 00:11:24,640 --> 00:11:28,000 Speaker 1: and companies are still in the US, you know, flushed 220 00:11:28,000 --> 00:11:29,920 Speaker 1: with cash for the most part. But it wasn't like 221 00:11:29,920 --> 00:11:32,280 Speaker 1: he was saying everything is terrible by any means. Um. 222 00:11:32,360 --> 00:11:36,360 Speaker 1: But you know, his his outlining of the challenges ahead 223 00:11:36,840 --> 00:11:38,960 Speaker 1: don't really start to me to begin anything on whether 224 00:11:39,000 --> 00:11:41,840 Speaker 1: he's going to stay there longer. What's his deal? Girl? 225 00:11:42,400 --> 00:11:47,640 Speaker 1: More years? Always hashtag five more years? Um, exactly, Hannah, 226 00:11:47,679 --> 00:11:49,760 Speaker 1: thank you so much. Really appreciated Hannah of it. She's 227 00:11:49,800 --> 00:11:51,760 Speaker 1: financial reporter at Bloomberg News. As we said, this is 228 00:11:51,800 --> 00:11:53,600 Speaker 1: among our most read on the Bloomberg has been all 229 00:11:53,679 --> 00:11:57,480 Speaker 1: day on this Monday. There is the big reveal when 230 00:11:57,480 --> 00:11:59,600 Speaker 1: people when he talks, people listen. But I think it's 231 00:11:59,600 --> 00:12:01,800 Speaker 1: interesting at tone right, and we keep hearing about a 232 00:12:01,800 --> 00:12:04,920 Speaker 1: lot more negative tone out there in terms of the outlook. Yeah, 233 00:12:04,960 --> 00:12:06,840 Speaker 1: I think that's a real fair characterization. A lot has 234 00:12:06,920 --> 00:12:10,439 Speaker 1: changed in just a year. Yeah, exactly. This is Bloomberg 235 00:12:10,520 --> 00:12:14,200 Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim 236 00:12:14,240 --> 00:12:18,559 Speaker 1: Stenovic on Bloomberg Radio Opening day for Major League Baseball 237 00:12:18,640 --> 00:12:20,520 Speaker 1: it's happening later on this weekend. With that in mind, 238 00:12:20,520 --> 00:12:23,280 Speaker 1: Bloomberg Business Week tapping into who are the real winners 239 00:12:23,320 --> 00:12:25,800 Speaker 1: already of the season. We'll give you a hand. It's 240 00:12:25,880 --> 00:12:28,280 Speaker 1: not the players at this point. Joel Weber is editor 241 00:12:28,320 --> 00:12:30,400 Speaker 1: at Bloomberg Business Week. He's with us in the Bloomberg 242 00:12:30,440 --> 00:12:33,839 Speaker 1: Interactive Brokers studio. Ben Writer is a freelance contributor. He's 243 00:12:33,840 --> 00:12:36,040 Speaker 1: also the author of astro Ball, The New Way to 244 00:12:36,080 --> 00:12:39,080 Speaker 1: Win It All. He's a freelance contributor Bloomberg Business Week. 245 00:12:39,160 --> 00:12:41,080 Speaker 1: He's his story is featured in the current issue of 246 00:12:41,080 --> 00:12:43,760 Speaker 1: Business Week magazine. It's available on newsstands, on the Bloomberg 247 00:12:43,800 --> 00:12:46,560 Speaker 1: and at Bloomberg dot com slash Business Week. So, Joel, 248 00:12:46,600 --> 00:12:48,560 Speaker 1: they've got the most powerful union when it comes to 249 00:12:48,600 --> 00:12:53,240 Speaker 1: pro sports. Why are their salaries falling? Though franchise values 250 00:12:53,280 --> 00:12:57,239 Speaker 1: continue to go higher, they can't quite win the negotiation 251 00:12:57,360 --> 00:13:00,160 Speaker 1: and in like a real, real meaningful way. And and 252 00:13:00,200 --> 00:13:03,200 Speaker 1: obviously the lockout was something that um got all of 253 00:13:03,200 --> 00:13:06,320 Speaker 1: our attention. And there's this labor element to it that 254 00:13:06,360 --> 00:13:10,199 Speaker 1: I was really captivated by. Ben being a long time 255 00:13:10,600 --> 00:13:13,679 Speaker 1: sports illustrated writer. Also, in addition to the book that 256 00:13:13,720 --> 00:13:17,120 Speaker 1: you mentioned, he's uh hosted a podcast called The Edge 257 00:13:17,360 --> 00:13:20,360 Speaker 1: UM and I basically you know, got him on the 258 00:13:20,360 --> 00:13:23,839 Speaker 1: phone with um Max Chafkin colleague and said, you know what, 259 00:13:23,840 --> 00:13:25,600 Speaker 1: what do you want to write about baseball? And I 260 00:13:25,640 --> 00:13:29,319 Speaker 1: think you know he did this step back story. This 261 00:13:29,400 --> 00:13:31,400 Speaker 1: is Opening day week, right, if you want to go 262 00:13:31,400 --> 00:13:34,000 Speaker 1: watch baseball, it's finally going to start. And what been 263 00:13:34,040 --> 00:13:37,360 Speaker 1: really I thought, this iscinctly summed up, was that the players, 264 00:13:38,040 --> 00:13:40,800 Speaker 1: you know, you can root for millionaires or billionaires first 265 00:13:40,800 --> 00:13:43,320 Speaker 1: of all, and the owners are the billionaires and the 266 00:13:43,320 --> 00:13:46,280 Speaker 1: players are the millionaires. UM. So sympathies might lie a 267 00:13:46,320 --> 00:13:48,840 Speaker 1: little bit more with the players at this point. But 268 00:13:48,840 --> 00:13:51,679 Speaker 1: but really, um, they did not come out with the 269 00:13:51,760 --> 00:13:55,760 Speaker 1: upper hand here, did they been. No, they didn't. And 270 00:13:55,880 --> 00:13:59,280 Speaker 1: let's be clear, this is a hard thought labor negotiation, 271 00:13:59,400 --> 00:14:03,679 Speaker 1: a nine nine day lockout. The players union were resolute, 272 00:14:04,200 --> 00:14:08,040 Speaker 1: they had solidarity, and they did emerge with some games. 273 00:14:08,120 --> 00:14:13,480 Speaker 1: You know, the minimum salary for players went up quite significantly. Um, 274 00:14:13,800 --> 00:14:16,439 Speaker 1: But overall, this is a case in which the owners 275 00:14:16,920 --> 00:14:20,400 Speaker 1: maintained the upper hand in a business that, despite everything 276 00:14:20,440 --> 00:14:24,520 Speaker 1: you've heard about baseball's decline, is booming. Revenues exceeded ten 277 00:14:24,600 --> 00:14:29,320 Speaker 1: billion dollars in twenty nineteen, while player salaries went down. 278 00:14:29,400 --> 00:14:32,560 Speaker 1: The medium salaries declined from one point six million in 279 00:14:33,000 --> 00:14:37,760 Speaker 1: fifteen to one point one five million in one This 280 00:14:37,880 --> 00:14:41,000 Speaker 1: was the economic This is the economic landscape that the 281 00:14:41,040 --> 00:14:44,120 Speaker 1: players were contending with as they were negotiating this new 282 00:14:44,200 --> 00:14:48,600 Speaker 1: labor agreement. Um, they did gain some concessions, but on 283 00:14:48,680 --> 00:14:51,920 Speaker 1: the overall landscape, the owners held strong. You know, the 284 00:14:51,960 --> 00:14:54,520 Speaker 1: economics of this been Let's just break it down a 285 00:14:54,560 --> 00:14:58,000 Speaker 1: little bit, because there's there's the upper echelon of player 286 00:14:58,200 --> 00:15:01,080 Speaker 1: who's doing great. No matter what you're in your out. 287 00:15:01,400 --> 00:15:04,480 Speaker 1: Those marquee players are are getting bigger and bigger contracts, 288 00:15:04,560 --> 00:15:08,760 Speaker 1: But what about the rest of it of the league? Right? Well, 289 00:15:08,800 --> 00:15:12,680 Speaker 1: everybody sees the big contracts, right. Major League Baseball has 290 00:15:13,280 --> 00:15:17,840 Speaker 1: ten players with guaranteed contract exceeding three hundred million dollars 291 00:15:17,840 --> 00:15:20,760 Speaker 1: in value. Make no mistakes, these are some of the 292 00:15:20,920 --> 00:15:24,760 Speaker 1: largest contracts for any athlete in the world. But the 293 00:15:24,840 --> 00:15:29,040 Speaker 1: vast maturity of the player body is not doing so well. 294 00:15:29,200 --> 00:15:32,760 Speaker 1: More than half the league operates on the minimum salary, 295 00:15:33,160 --> 00:15:37,360 Speaker 1: which was five seventy thousands there about last year. That 296 00:15:37,480 --> 00:15:40,520 Speaker 1: was the lowest among major sports. And teams are getting 297 00:15:40,560 --> 00:15:43,800 Speaker 1: smarter and smarter. They know that it is beneficial to 298 00:15:43,840 --> 00:15:46,960 Speaker 1: them to pay superstars more and where every year, but 299 00:15:47,120 --> 00:15:51,040 Speaker 1: keep the majority of their teams to those minimum salary players. 300 00:15:51,440 --> 00:15:54,720 Speaker 1: That helps to suggest why that media has fallen and 301 00:15:54,800 --> 00:15:58,400 Speaker 1: also why the average salaries fallen as well. Okay, so 302 00:15:58,480 --> 00:16:02,520 Speaker 1: let's talk about Bob rob Manfred h a central figure 303 00:16:02,680 --> 00:16:06,160 Speaker 1: in this. The Commissioner of Baseball, a Harvard trained labor lawyer, 304 00:16:06,480 --> 00:16:09,680 Speaker 1: served as the chiefs. The league's chief negotiated for several 305 00:16:09,680 --> 00:16:11,920 Speaker 1: collective bargaining agreements going all the way back to two 306 00:16:11,920 --> 00:16:14,880 Speaker 1: thousand two. Where does he come into all this? Right? 307 00:16:14,960 --> 00:16:17,240 Speaker 1: A lot of people think that the commissioner is, you know, 308 00:16:17,320 --> 00:16:21,560 Speaker 1: an impartial figure, right, operating for the best interest of 309 00:16:21,600 --> 00:16:24,000 Speaker 1: the sport as a whole. That's not true in any 310 00:16:24,040 --> 00:16:27,960 Speaker 1: professional sport. He works at the pleasure of the team owners. 311 00:16:28,040 --> 00:16:31,960 Speaker 1: In baseball's case, the thirty team owners. That's really whose 312 00:16:32,000 --> 00:16:35,920 Speaker 1: interests Rob Manfred was representing, and he's always represented them 313 00:16:36,320 --> 00:16:40,520 Speaker 1: very well, and it's not a constituency with uniform interest. 314 00:16:40,880 --> 00:16:44,240 Speaker 1: You have some owners like Steven Cohen of the Mets, 315 00:16:44,520 --> 00:16:46,920 Speaker 1: who is the wealthiest owner in the league, and he 316 00:16:46,960 --> 00:16:48,880 Speaker 1: wants to spend whatever he wants to spend. His tirole 317 00:16:48,960 --> 00:16:51,000 Speaker 1: is gonna be two undred and fifty million dollars this year. 318 00:16:51,440 --> 00:16:53,000 Speaker 1: You have a lot of owners that don't want to 319 00:16:53,000 --> 00:16:55,840 Speaker 1: spend at all or as little as possible. One of 320 00:16:55,880 --> 00:16:59,440 Speaker 1: the problems structurally in baseball is that spending on your 321 00:16:59,440 --> 00:17:02,040 Speaker 1: team has been decoupled from profit. You can turn the 322 00:17:02,200 --> 00:17:05,479 Speaker 1: very handsome profits uh not spending a lot and not 323 00:17:05,600 --> 00:17:08,120 Speaker 1: winning at all. So you have four teams this year 324 00:17:08,320 --> 00:17:11,160 Speaker 1: who are going to be spending about forty million dollars 325 00:17:11,480 --> 00:17:14,960 Speaker 1: or less on salary. To do the math, you know 326 00:17:15,040 --> 00:17:17,400 Speaker 1: that that's a fraction of what some of the higher 327 00:17:17,400 --> 00:17:20,480 Speaker 1: spending teams are. These are the interest that Manfred had 328 00:17:20,520 --> 00:17:26,080 Speaker 1: to represent these negotiating uh sessions, and clearly he satisfied 329 00:17:26,320 --> 00:17:29,520 Speaker 1: all of them because the owners came away, in my opinion, 330 00:17:29,640 --> 00:17:32,840 Speaker 1: very well. Then how did it go over with in 331 00:17:32,880 --> 00:17:37,040 Speaker 1: the middle of negotiations, when Manfred was practicing his golf swing, 332 00:17:37,720 --> 00:17:40,359 Speaker 1: How did that go over with players? Right? Well, this 333 00:17:40,440 --> 00:17:43,560 Speaker 1: is a very tense negotiation. This is the second longest 334 00:17:43,640 --> 00:17:46,960 Speaker 1: labor stoppage in the history of the league, second after 335 00:17:47,000 --> 00:17:52,720 Speaker 1: only the horrible strike of Rob. Manfred was about to, 336 00:17:53,040 --> 00:17:55,720 Speaker 1: you know, do something that is very serious. You know 337 00:17:55,720 --> 00:17:58,520 Speaker 1: it's a lot of people, which is to actually cancel games. 338 00:17:58,600 --> 00:18:01,520 Speaker 1: Like no matter how nasty negotiat Asian get, the cancelation 339 00:18:01,560 --> 00:18:03,919 Speaker 1: of regular season games is kind of a bridge that 340 00:18:03,960 --> 00:18:08,960 Speaker 1: nobody wants to cross. An Associated Press photographer captured him practicing, 341 00:18:09,080 --> 00:18:12,800 Speaker 1: practicing his golf swing and the string taining stadium the 342 00:18:12,960 --> 00:18:15,960 Speaker 1: day that he was going to cancel those games. Clearly, 343 00:18:16,119 --> 00:18:19,640 Speaker 1: no matter how brought these things got, Rob Manfred remains 344 00:18:19,720 --> 00:18:24,040 Speaker 1: in control and confidence, and he had every reason too, 345 00:18:24,119 --> 00:18:26,199 Speaker 1: because the fact is, no matter how bad in the 346 00:18:26,200 --> 00:18:28,479 Speaker 1: industry is the whole cancel games would have been for 347 00:18:28,520 --> 00:18:32,520 Speaker 1: all parties. The players have much less capacity when push 348 00:18:32,600 --> 00:18:35,480 Speaker 1: comes to show to withstand that and the potential lots 349 00:18:35,480 --> 00:18:38,480 Speaker 1: of salaries than the far wealthier owners. All right, So 350 00:18:38,520 --> 00:18:40,879 Speaker 1: what's the likelihood that anything changes in the near future, 351 00:18:40,880 --> 00:18:44,399 Speaker 1: Because it's not like you know, sports contracts with media, 352 00:18:44,560 --> 00:18:48,000 Speaker 1: I mean especially baseball, they're doing just fine. So there's 353 00:18:48,040 --> 00:18:50,040 Speaker 1: still a lot of money coming into this, you know, 354 00:18:50,440 --> 00:18:53,040 Speaker 1: sport if you will. So what's the likelhood anything changes 355 00:18:53,040 --> 00:18:56,760 Speaker 1: for players more broadly? Well, you know this, this collective 356 00:18:56,760 --> 00:19:00,520 Speaker 1: bargaining agreement tarrell last for five years, a long time. 357 00:19:00,600 --> 00:19:04,480 Speaker 1: We're we have five years of labor peace quote unquote ahead. 358 00:19:04,720 --> 00:19:07,880 Speaker 1: As Gene Orza, who is a long time players union 359 00:19:07,920 --> 00:19:12,480 Speaker 1: official told me, collective bargaining produces incremental change, it doesn't 360 00:19:12,520 --> 00:19:16,880 Speaker 1: produce a revolution. Did the players win some incremental change 361 00:19:16,880 --> 00:19:20,840 Speaker 1: in this deal? Yes, especially for those minimum salary guys 362 00:19:20,920 --> 00:19:24,199 Speaker 1: who really might never be millionaires, whose careers have no 363 00:19:24,280 --> 00:19:27,720 Speaker 1: guarantees as far as their longevity, they will be better compensated. 364 00:19:27,760 --> 00:19:32,240 Speaker 1: But as far as the big structural things that tilts 365 00:19:32,440 --> 00:19:35,880 Speaker 1: toward the owner's advantage, no, that's not gonna change anytime soon. 366 00:19:36,080 --> 00:19:42,000 Speaker 1: So who wins Opening day? Owners? You know, it seems 367 00:19:42,080 --> 00:19:45,680 Speaker 1: like the owners always wins and they swart the negotiations. 368 00:19:46,160 --> 00:19:48,000 Speaker 1: So yeah, I think we have to talk this one 369 00:19:48,040 --> 00:19:50,080 Speaker 1: up to the owners. The players put up a very 370 00:19:50,080 --> 00:19:52,720 Speaker 1: good fight. They didn't make some gains, but you know, 371 00:19:52,880 --> 00:19:54,760 Speaker 1: it's another one for the owners, something we already know 372 00:19:54,840 --> 00:19:59,040 Speaker 1: about the season. Yeah, I was gonna say, might not. Hey, 373 00:19:59,119 --> 00:20:01,040 Speaker 1: Ben writer, it's a great read. Thank you so much, 374 00:20:01,040 --> 00:20:04,719 Speaker 1: freelance contributor. Check out his book Astro Ball joining us 375 00:20:04,720 --> 00:20:05,879 Speaker 1: on the phone in New York, and of course or 376 00:20:05,920 --> 00:20:07,879 Speaker 1: thanks to Joe Webber. He's the editor of Bloomberg Business 377 00:20:07,880 --> 00:20:10,639 Speaker 1: Week magazine. This story in the current issue. Find it 378 00:20:10,680 --> 00:20:12,960 Speaker 1: on the Bloomberg and also at Bloomberg dot com. A 379 00:20:13,119 --> 00:20:15,200 Speaker 1: really great read. Go pick up the issue now. Check 380 00:20:15,200 --> 00:20:17,119 Speaker 1: it out at Bloomberg dot com and of course on 381 00:20:17,160 --> 00:20:19,800 Speaker 1: the Bloomberg terminal. This is Bloomberg Radio and this is 382 00:20:19,840 --> 00:20:25,000 Speaker 1: Business Week. Roy. How about you let me drive? Oh no, no, no, 383 00:20:25,240 --> 00:20:31,200 Speaker 1: who's home? All right? Please? I'll do vels. I want 384 00:20:31,200 --> 00:20:39,119 Speaker 1: to drive. It's a good question, good drive. This is 385 00:20:39,160 --> 00:20:45,479 Speaker 1: the drive to the closed on Bloomberg Radio. All height 386 00:20:45,480 --> 00:20:48,680 Speaker 1: folks were just about ten minutes away from the closing bell, 387 00:20:48,880 --> 00:20:51,320 Speaker 1: and we have seen some buying, certainly in the last 388 00:20:51,320 --> 00:20:54,160 Speaker 1: half hour hour of trading, so we are pretty much 389 00:20:54,160 --> 00:20:56,400 Speaker 1: hovering near our best levels of this session. So let's 390 00:20:56,440 --> 00:20:58,840 Speaker 1: get to it. Let's get to the drive to the 391 00:20:58,880 --> 00:21:00,879 Speaker 1: clothes and with us right now. Back with us is 392 00:21:00,920 --> 00:21:03,760 Speaker 1: Alan Zaffron, who's founding partner and co CEO at I 393 00:21:03,840 --> 00:21:05,960 Speaker 1: e Q Capital. He's with us once again on the 394 00:21:05,960 --> 00:21:09,359 Speaker 1: phone from Foster City, California. Hey, Alan, nice to have 395 00:21:09,480 --> 00:21:12,600 Speaker 1: you back here on Bloomberg Radio. How are you and 396 00:21:12,840 --> 00:21:15,720 Speaker 1: how do you think the markets are doing? Hey, Carol 397 00:21:15,800 --> 00:21:18,280 Speaker 1: is doing great, Thank you? Do you? And Tim? How 398 00:21:18,359 --> 00:21:21,800 Speaker 1: the markets doing. I think they're trying to reconcile all 399 00:21:21,840 --> 00:21:26,359 Speaker 1: the risks inflation Ukraine. Uh. Not clear about what the 400 00:21:26,400 --> 00:21:28,879 Speaker 1: inflation does to earnings growth rates going forward. But you 401 00:21:28,920 --> 00:21:32,439 Speaker 1: know what we're actually seeing even today a semblance of 402 00:21:32,520 --> 00:21:34,960 Speaker 1: light because you know, when we start talking about the 403 00:21:35,000 --> 00:21:38,680 Speaker 1: yield curve being inverted, here's the interesting thing. When a 404 00:21:38,760 --> 00:21:40,760 Speaker 1: two year bond is yielding you as much or more 405 00:21:40,800 --> 00:21:44,359 Speaker 1: than a tenure bond, it's telling you that the tenor 406 00:21:44,440 --> 00:21:46,440 Speaker 1: bond you'll probably isn't going to go up much more, 407 00:21:46,520 --> 00:21:49,440 Speaker 1: if at all, it's signaling to you that's going to 408 00:21:49,560 --> 00:21:51,760 Speaker 1: raise rates to the point that it's going to either 409 00:21:51,800 --> 00:21:56,040 Speaker 1: stop inflation or sadly put the economy and recession. Let's 410 00:21:56,040 --> 00:21:59,000 Speaker 1: hope the former, not the latter. But this is the 411 00:21:59,080 --> 00:22:03,359 Speaker 1: hint well, and that box up sex because the interest 412 00:22:03,440 --> 00:22:06,800 Speaker 1: rates are the people are saying rates just probably aren't 413 00:22:06,840 --> 00:22:09,200 Speaker 1: likely going to go that much more. On the long end, 414 00:22:09,480 --> 00:22:13,080 Speaker 1: I can now buy long duration growth stocks, so it's interesting. 415 00:22:13,200 --> 00:22:16,800 Speaker 1: What's interesting about that too, And we've been focusing on Okay, oh, 416 00:22:16,840 --> 00:22:18,439 Speaker 1: what the longer end is telling us is that the 417 00:22:18,440 --> 00:22:20,840 Speaker 1: Fed is gonna have to start cutting rates because there's 418 00:22:20,880 --> 00:22:23,560 Speaker 1: gonna be problems in the economy. But is there that 419 00:22:23,720 --> 00:22:28,320 Speaker 1: possibility that the Fed gets it just right in terms 420 00:22:28,359 --> 00:22:31,600 Speaker 1: of policy and rate moves, that it doesn't do anything 421 00:22:31,640 --> 00:22:35,080 Speaker 1: to over stimulate growth or slow it down too much. 422 00:22:35,480 --> 00:22:37,280 Speaker 1: Is it possible that we can kind of get back 423 00:22:37,280 --> 00:22:40,720 Speaker 1: to that lower for longer scenario even with a higher 424 00:22:40,800 --> 00:22:43,439 Speaker 1: rate strategy, it's still gonna be pretty low historically. But 425 00:22:43,880 --> 00:22:48,159 Speaker 1: what's what's your betting that the Fed gets this just right? 426 00:22:48,160 --> 00:22:49,920 Speaker 1: Because it sounds like it's pretty tricky for the FED 427 00:22:49,960 --> 00:22:53,360 Speaker 1: to do that. My my betting is the said does 428 00:22:53,400 --> 00:22:56,480 Speaker 1: get it just right, and I'll tell you why. Um. 429 00:22:56,520 --> 00:22:59,680 Speaker 1: First of all, through a long term investor, eventually things reconcile, 430 00:22:59,800 --> 00:23:02,640 Speaker 1: thing go up into the right and companies grow the profits. 431 00:23:02,680 --> 00:23:05,720 Speaker 1: But secondly, we all know even once the curve inverts, 432 00:23:06,200 --> 00:23:08,640 Speaker 1: it takes twenty four to thirty months before you see 433 00:23:08,640 --> 00:23:11,760 Speaker 1: equity prices peak and actually go into recession on average. 434 00:23:11,840 --> 00:23:14,840 Speaker 1: And see, you have plenty of time to figure out 435 00:23:14,840 --> 00:23:17,160 Speaker 1: whether or not you think the market's going to peak 436 00:23:17,200 --> 00:23:19,280 Speaker 1: or not. And it turns out if you look in 437 00:23:19,600 --> 00:23:22,320 Speaker 1: eight of the last night said tightening cycles, stop, some 438 00:23:22,359 --> 00:23:25,280 Speaker 1: people haven't went up knock down during the tightening now 439 00:23:25,320 --> 00:23:27,960 Speaker 1: didn't go up as much ten percent per year. You 440 00:23:28,000 --> 00:23:29,960 Speaker 1: go back to two and you look at the last 441 00:23:30,000 --> 00:23:32,520 Speaker 1: nine tightening cycles, stocks were up on eight of them. 442 00:23:32,600 --> 00:23:34,800 Speaker 1: The place you want to avoid, obviously, or it was, 443 00:23:35,320 --> 00:23:38,560 Speaker 1: was long term bonds because they're sensitive to rates, and 444 00:23:38,600 --> 00:23:41,800 Speaker 1: particularly now when interest rates are so darn loan bonds 445 00:23:41,840 --> 00:23:44,200 Speaker 1: to begin with, the risk reward still isn't that compelling. 446 00:23:44,240 --> 00:23:48,040 Speaker 1: But stocks, you've got earnings growth estimates if anything going up. 447 00:23:48,600 --> 00:23:51,439 Speaker 1: And so this year's decline has been driven by the 448 00:23:51,520 --> 00:23:55,240 Speaker 1: multiple going down greater than the fact earnings estimates actually 449 00:23:55,280 --> 00:23:58,520 Speaker 1: have still been going up a bit. So I'm still 450 00:23:58,520 --> 00:24:00,640 Speaker 1: betting on equity so the wrong and but I'm also 451 00:24:00,680 --> 00:24:02,639 Speaker 1: betting on the said, may it well, it may in 452 00:24:02,680 --> 00:24:05,000 Speaker 1: fact get it just right. And that's what I think 453 00:24:05,040 --> 00:24:07,399 Speaker 1: the bond curve is telling you is there's only so 454 00:24:07,440 --> 00:24:11,199 Speaker 1: many tightenings that economy cantolerate. Alan what happens before the 455 00:24:11,280 --> 00:24:14,200 Speaker 1: long run? Though, what does that path look like with 456 00:24:14,280 --> 00:24:17,080 Speaker 1: the US equity market? And I asked, because you know, 457 00:24:17,440 --> 00:24:19,560 Speaker 1: we are only about four and a half percent off 458 00:24:19,600 --> 00:24:22,720 Speaker 1: of all time highs right now, but it's been a 459 00:24:22,840 --> 00:24:25,760 Speaker 1: rocky It was a rocky first quarter, and uh we 460 00:24:25,840 --> 00:24:28,400 Speaker 1: see us we saw quite the recovery in the last 461 00:24:28,440 --> 00:24:32,919 Speaker 1: two weeks. Yeah, I think what what's going on right 462 00:24:32,920 --> 00:24:35,119 Speaker 1: now is I think you're watching a market which is 463 00:24:35,160 --> 00:24:38,040 Speaker 1: still trying to get its head around what the implications 464 00:24:38,040 --> 00:24:41,600 Speaker 1: are of all these cross dynamics. But you know, recognize 465 00:24:42,160 --> 00:24:46,000 Speaker 1: valuations have driven so selected software stocks have fallen out 466 00:24:46,040 --> 00:24:48,600 Speaker 1: to their average valuations of the last five years. So 467 00:24:48,680 --> 00:24:52,840 Speaker 1: this whole um argument stocks over valued, stocks overvalued. I 468 00:24:52,880 --> 00:24:56,240 Speaker 1: don't think they're overvalued anymore. And so you know, crisis 469 00:24:56,280 --> 00:24:59,240 Speaker 1: begets opportunity. There are certainly selected stocks that I'll pick 470 00:24:59,240 --> 00:25:02,399 Speaker 1: on the growth stock in a market that is going 471 00:25:02,440 --> 00:25:05,680 Speaker 1: to struggle with long term secular growth. Fine companies that 472 00:25:05,720 --> 00:25:09,560 Speaker 1: can persistently grow earnings regardless of the economic environment still 473 00:25:09,600 --> 00:25:11,520 Speaker 1: willn't be winners, and so in the market hands you 474 00:25:11,600 --> 00:25:15,200 Speaker 1: that opportunity and drives valuations down, those are the names 475 00:25:15,200 --> 00:25:17,360 Speaker 1: out of the rubble that you want to start picking at, 476 00:25:17,520 --> 00:25:20,280 Speaker 1: along with the large big camp winners, which clear they 477 00:25:20,280 --> 00:25:22,639 Speaker 1: have held up. So I think the short run is 478 00:25:22,800 --> 00:25:24,680 Speaker 1: you know, you have a little bit more of stock selection, 479 00:25:24,720 --> 00:25:27,360 Speaker 1: but I would tell you growth is likely to continued 480 00:25:27,359 --> 00:25:29,720 Speaker 1: out pulform value in the long run, that's not going 481 00:25:29,760 --> 00:25:32,879 Speaker 1: to change. But because we've seen longer term yields also 482 00:25:32,960 --> 00:25:38,240 Speaker 1: moving up, is there some expectation that that's some confidence 483 00:25:38,359 --> 00:25:42,360 Speaker 1: maybe about growth, but also a danger that eventually it'll 484 00:25:42,400 --> 00:25:45,240 Speaker 1: crimp growth in equity valuations, which is I think something 485 00:25:45,240 --> 00:25:47,359 Speaker 1: similar to what are John Author is writing about this 486 00:25:47,560 --> 00:25:51,160 Speaker 1: what we saw back in two thousand seven. Well, first 487 00:25:51,160 --> 00:25:53,480 Speaker 1: of all, John Author's a plug rint He's a fabulous writer, 488 00:25:53,600 --> 00:25:56,600 Speaker 1: so I welcome people read his writings on Bloomberg. But 489 00:25:57,520 --> 00:25:59,879 Speaker 1: what we would argue is obviously you want to look 490 00:25:59,880 --> 00:26:02,760 Speaker 1: at selected names, but as a generalization, there are a 491 00:26:02,760 --> 00:26:04,800 Speaker 1: lot of comings that have a durability in the revenue 492 00:26:04,800 --> 00:26:09,160 Speaker 1: streams and licensing models that people renew payments, and in fact, 493 00:26:09,560 --> 00:26:13,159 Speaker 1: if if you're in a modestly inflationary environment, these can 494 00:26:13,200 --> 00:26:14,800 Speaker 1: go up, just like rents can go up on real 495 00:26:14,880 --> 00:26:17,520 Speaker 1: estate alongside rates going up. So if the drop in 496 00:26:17,600 --> 00:26:19,960 Speaker 1: valuation is driven exclusively by rates and not by the 497 00:26:19,960 --> 00:26:23,240 Speaker 1: business model itself, it's the actual costs of the business 498 00:26:23,880 --> 00:26:26,159 Speaker 1: haven't gone a materially or can be passed on fully 499 00:26:26,240 --> 00:26:29,080 Speaker 1: to the customers, those businesses are going to flourish. It's 500 00:26:29,080 --> 00:26:31,840 Speaker 1: the businesses that are over leveraged and are very dependent 501 00:26:31,840 --> 00:26:34,760 Speaker 1: on economic growth that will indeed struggle in that rising 502 00:26:34,840 --> 00:26:37,320 Speaker 1: rate environment and will continue to struggle Allen one thing 503 00:26:37,359 --> 00:26:38,399 Speaker 1: I would say, you sound like you have a lot 504 00:26:38,400 --> 00:26:40,280 Speaker 1: of conviction and confidence, and you've seen a lot of 505 00:26:40,320 --> 00:26:43,600 Speaker 1: market cycles. But I feel like, man, no one would 506 00:26:43,640 --> 00:26:46,480 Speaker 1: have set us up. This is not what we're expecting 507 00:26:46,480 --> 00:26:49,400 Speaker 1: in December, and I feel like the carpet got pulled 508 00:26:49,400 --> 00:26:51,040 Speaker 1: out from under us in a lot of ways. Even 509 00:26:51,080 --> 00:26:53,080 Speaker 1: though a lot of folks are saying, you know, we're 510 00:26:53,080 --> 00:26:56,520 Speaker 1: getting overvalue. We're getting overvalued. But the war, the continue 511 00:26:56,560 --> 00:27:00,639 Speaker 1: move in inflation, people rethinking global energy supplies. What is 512 00:27:00,680 --> 00:27:02,440 Speaker 1: the big caveat to what you're saying? And only got 513 00:27:02,440 --> 00:27:07,119 Speaker 1: about twenty thirty seconds here. Uh COVID created an additional 514 00:27:07,280 --> 00:27:11,040 Speaker 1: four trillion dollars of cash sitting on bank balance sheets. 515 00:27:11,040 --> 00:27:14,000 Speaker 1: So Ukraine high inflation interest rates to the market and 516 00:27:14,040 --> 00:27:17,920 Speaker 1: all can do is fallen peak the valley. That's telling 517 00:27:17,960 --> 00:27:19,680 Speaker 1: me there's a ton of money on the sidelines ready 518 00:27:19,680 --> 00:27:22,200 Speaker 1: to support this market, along with a strong dynamic US 519 00:27:22,240 --> 00:27:26,160 Speaker 1: econmudists growing. So don't sell the US short, stay long 520 00:27:26,240 --> 00:27:29,040 Speaker 1: term oriented, stay on your goals, but don't don't neglect 521 00:27:29,080 --> 00:27:31,320 Speaker 1: the fact of love capital just aiming to get into 522 00:27:31,320 --> 00:27:33,480 Speaker 1: this market at any kind of debt. It's still pretty 523 00:27:33,480 --> 00:27:36,639 Speaker 1: slashy out there when it comes to liquidity. All right, Allan, 524 00:27:36,680 --> 00:27:39,359 Speaker 1: thank you so much, Alan Zaffron, he is founding partner 525 00:27:39,359 --> 00:27:41,920 Speaker 1: in co c I O at co CEO excuse me 526 00:27:41,960 --> 00:27:45,520 Speaker 1: at i e Q Capital. Thanks for listening to Bloomberg 527 00:27:45,520 --> 00:27:49,200 Speaker 1: Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg 528 00:27:49,280 --> 00:27:51,120 Speaker 1: dot com, and you can also listen to our radio 529 00:27:51,160 --> 00:27:53,720 Speaker 1: show at two pm Eastern on Bloomberg Radio or watch 530 00:27:53,840 --> 00:27:56,120 Speaker 1: us on YouTube. Search to Bloomberg Global News