Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovik. We're here every day bringing
Speaker 1: you the latest news from the world to business and finance,
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Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Clovel News. Let's get right to our guest.
Speaker 1: Lucky for us, he's back again. Andy Kurtzig's founder and
Speaker 1: CEO of Just Answer. Just Answer. It's based in San Francisco.
Speaker 1: It helps connect people with experts for professional advice. Uh. Andy,
Speaker 1: it's good to chat with you again. We talked to
Speaker 1: you just a few weeks ago. Because you have such
Speaker 1: a large portion of your your staff in Ukraine, two
Speaker 1: hundred plus employees in Ukraine, I just want to start
Speaker 1: with how how are they doing right now and what
Speaker 1: are they doing well? So they're all live and uh
Speaker 1: and doing as well they could possibly be doing in
Speaker 1: the situation that we're in. So all of our preparations
Speaker 1: have paid off. We've been asking to keep them all
Speaker 1: safe and so far it's working. And you in your
Speaker 1: notes you said that six of them are currently fighting,
Speaker 1: and those who are fighting are still being paid a salary. Yeah,
Speaker 1: so what we what we promised to them even before
Speaker 1: the war started, when we thought that this might happen,
Speaker 1: was we'd pay them fifty percent of their salary in
Speaker 1: addition to the sellary and they get for being in
Speaker 1: the military, and then we guarantee their jobs when they
Speaker 1: come back, because hey, and if we can take a
Speaker 1: step back, um, and we're grateful that you've given us
Speaker 1: some time. What are you here, I mean, it's hard
Speaker 1: for any of us, UM, I think in terms of
Speaker 1: some of the atrocities that we're seeing in some of
Speaker 1: the news coverage of what's going on in Ukraine right now.
Speaker 1: What are you hearing, um from your team members who
Speaker 1: are on the ground in Ukraine. I'm hearing pretty much
Speaker 1: what you're seeing in the news, which is it's dreadful.
Speaker 1: It's terrible. I mean the that that seeing the bodies
Speaker 1: and the torture and the reality now that they've taken
Speaker 1: back some of their territories near Kiev is just awful,
Speaker 1: I mean, and they're horrified for those who the rest
Speaker 1: of the world is. For those that have stayed on
Speaker 1: the ground um and decided not to leave Ukraine, why
Speaker 1: is that, Well, so a few reasons. I mean. So
Speaker 1: we have of the two eight now employees that we
Speaker 1: have in Ukraine, thirty nine of them have We've been
Speaker 1: able to get them out, but the rest either they
Speaker 1: can't get out because of there are men between eighteen
Speaker 1: and sixties, it's against the law for them to leave
Speaker 1: the country. And then we've got people that that you know,
Speaker 1: maybe their spouse or their their family members are stuck
Speaker 1: there and so they don't want to leave either. So
Speaker 1: some of the women are staying by the side of
Speaker 1: the men that are forced to stay in Ukraine. And
Speaker 1: then we've even got like what the woman that leads
Speaker 1: their office in Ukraine, her son just turned eighteen, so
Speaker 1: he can't leave, and so she's not leaving her son behind.
Speaker 1: What's the message that that you want to send to
Speaker 1: other people? And still can Valley other Americans who are
Speaker 1: here in the United States and really just just watching
Speaker 1: this play out. I mean, I think a lot of
Speaker 1: people have this feeling that well, Okay, the government is
Speaker 1: doing what it can do. There's only so much I
Speaker 1: can do. You know. The first thing is that this
Speaker 1: suspects all of us. This is not some small skirmish
Speaker 1: in Eastern Europe. This is about democracy and about freedom
Speaker 1: and East versus West. This is everything that we worried
Speaker 1: about during the Cold War. It's actually happening now. And
Speaker 1: you know, this aspects all of us, and so we
Speaker 1: all need to do our part to help. You know, Andy,
Speaker 1: I do wonder too. And obviously you're doing everything and
Speaker 1: anything you can to help UM your team that are
Speaker 1: there in Ukraine. How do you though our audience, a
Speaker 1: business investing audience as well, obviously caring though about the
Speaker 1: humanitarian aspect. But when you look at the market over
Speaker 1: in Europe, you know, will this ultimately lead to kind
Speaker 1: of business rethink about exposure, whether it's in Ukraine, whether
Speaker 1: it's Russia, Like, how what's what's the what is it
Speaker 1: the longer lasting UM strategy that stays with us because
Speaker 1: of this? Yeah, so we've already seen lots of companies
Speaker 1: boycotting Russia. And hopefully more will continue to do that.
Speaker 1: And you know, as this goes on, what my hope
Speaker 1: is that companies will not just think about boycotting Russia
Speaker 1: but also buying Ukrainian goods and services. I mean, this
Speaker 1: war is about you know, Russians aggression and bombs and tanks,
Speaker 1: but it's also about the economy and sanctions, and we
Speaker 1: can all do a part to help the Ukrainian side
Speaker 1: of this. And so that's what just Answers trying to do,
Speaker 1: and I hope any other companies will do it as well. Andy,
Speaker 1: you and your family are actually planning to go to
Speaker 1: the border of Ukraine. This is a mission to deliver
Speaker 1: medical aid, body armor, laptops and more. Um, you're taking
Speaker 1: your kids. Why why is this important to you? Well, so,
Speaker 1: when my family and I got together a few weeks
Speaker 1: ago and we're deciding what we wanted to do for
Speaker 1: spring break. You know, normally we would go to Hawaii,
Speaker 1: where my mom lives and we love. We just couldn't
Speaker 1: bear to go somewhere fun for spring break when our
Speaker 1: friends and colleagues and the people of Ukraine are suffering
Speaker 1: so much. And so we got together, the family, and
Speaker 1: we decided that we wanted to go and help. Is
Speaker 1: there a message in terms of the governments that are
Speaker 1: out there who have already imposed a lot of certainly
Speaker 1: economic and business sanctions, as you mentioned, a lot of
Speaker 1: companies pulling out. Um, what more do you think should
Speaker 1: be done at this point? Well, I mean they should
Speaker 1: continue to escalate the sanctions. They should continue to send
Speaker 1: military equipment and and any humanitarian supplies as well. So
Speaker 1: there's a lot more to be done. I mean, they've
Speaker 1: got a lot of people in Ukraine that are ready
Speaker 1: and willing to fight, but they need the the supplies
Speaker 1: in order to maintain the this war and too and
Speaker 1: to beat back Russia and for democracy. They're fighting for
Speaker 1: our democracy just as much as their own. And the
Speaker 1: less less bit of time with you just about thirty
Speaker 1: seconds left. What's your message to to other CEOs who
Speaker 1: have employees in Ukraine right now or thinking about hiring
Speaker 1: in Ukraine? As we know it's a huge tech hip. Absolutely,
Speaker 1: I think that I think they should go for it.
Speaker 1: I mean, we we had some offers outstanding when the
Speaker 1: war started. We've honored those offers. We've actually hired a
Speaker 1: few more people since the war started. You know, We're
Speaker 1: trying to support the economy as much as we can
Speaker 1: and and hiring people there is one of the best
Speaker 1: things we can do. You know, Unfortunately most of the
Speaker 1: Ukrainian economy is crippled right now. Right trucking business or
Speaker 1: a warehouse or you know, chocolate company, whatever it is,
Speaker 1: you're probably not operating. But I can kind of operate,
Speaker 1: and so we're able to support that we have to run.
Speaker 1: We wish you well, um safety on your journey, and
Speaker 1: your family are well as well. Andy Kurtzik of Just Answer.
Speaker 1: You're listening to Bloomberg Business Week with Carol Measure and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. All right,
Speaker 1: for those of you even sticking around, we're going to
Speaker 1: finally do the great reveal. Almost almost the story is
Speaker 1: among the most read on the Bloomberg today and it
Speaker 1: involves probably the most followed individual on Wall Street. We're
Speaker 1: talking about Jamie Diamond, the JP Morgan Chase CEO and
Speaker 1: board chair. Is that with his annual letter he's calling
Speaker 1: for more sanctions on Russia, expresses pity for the Fed
Speaker 1: as well, says, hey, they got a tough task ahead
Speaker 1: of them. Hanna Levitt is finance reporter for Bloomberg Near.
Speaker 1: She joins us on the phone from New York City, Hannah,
Speaker 1: what is the before we get to the details here,
Speaker 1: what is the change in tone of this year's letter
Speaker 1: versus last year's letter? Hey, guys, thanks for having me. Um.
Speaker 1: The last year's letter, if you remember, gave a pretty
Speaker 1: rosy outlook. It was, you know, Jamie was saying this
Speaker 1: boom could run into three. He was saying, you know,
Speaker 1: everything could add up to a Goldilocks moment um. And
Speaker 1: so it's definitely a change in tone when you know,
Speaker 1: in the four four pages of the letter this year,
Speaker 1: he's you know, really breaking down all these massive issues
Speaker 1: that we're facing globally at the moment. Well, and so
Speaker 1: among those massive issues is of course the war. Talk
Speaker 1: to us a little bit more about what he said
Speaker 1: about the Russian war and invasion of Ukraine. Yeah, so
Speaker 1: he called for increasing sanctions UM in whatever way security
Speaker 1: experts recommend. And he also said that he's not worried
Speaker 1: about JP Morgan's exposure to Russia, but that it could
Speaker 1: cost the firm a billion over time UM and that
Speaker 1: the firm continues to look for secondary impacts are on
Speaker 1: the globe. And that's something that we've heard a lot
Speaker 1: in recent weeks, is that, you know, even if a
Speaker 1: firm may not have a huge impact right now, um,
Speaker 1: you know, it's kind of tv D on what could
Speaker 1: happen six months from now or what what kind of
Speaker 1: you know, how it will impact companies and countries and
Speaker 1: what impacts that will end up having having on these things.
Speaker 1: And a billion dollars is a lot of money to
Speaker 1: a lot of people, but over an extended period of
Speaker 1: time to you know, the bank with the most assets
Speaker 1: in the United States. Uh, is it is that a lot? Uh?
Speaker 1: No revenue projected for this year, right, it's a lot. Yeah.
Speaker 1: Well so then when he says that, though, it's a
Speaker 1: reminder that you know, when you're thinking about either the
Speaker 1: financial markets or economic growth, like little bits and pieces
Speaker 1: of things though from different places, whether it's the war,
Speaker 1: whether it's inflation, whether it's supply strain constraints or they
Speaker 1: were supply chain constraints. All of this though, it's important, right, Hannah,
Speaker 1: because I'm curious how you see it that it can
Speaker 1: add up to significant eating into economic growth. Yeah, for sure.
Speaker 1: I Mean one of his key points was about the
Speaker 1: energy crisis, which you know has been obviously influenced by
Speaker 1: the War Ukraine. Um. But it's exacerbating inflation. So that's
Speaker 1: just one of the examples of where we're seeing, um.
Speaker 1: You know, these big issues all being interconnected. Um. And
Speaker 1: he called for the US increasing energ reproduction and also
Speaker 1: getting more lergy to Europe immediately um and and wrote
Speaker 1: a bit about how he doesn't view it as mutually
Speaker 1: exclusive with longer term clean energy goals, which I also
Speaker 1: thought was interesting. Okay, let's get to monetary and fiscal policy,
Speaker 1: and I'm wondering about his comments with regard to the
Speaker 1: FED and what the FED has ahead of it in
Speaker 1: order to get inflation under control. Yeah, for sure. UM. Well,
Speaker 1: he said he does not envy the FED for what
Speaker 1: it has to do. Um. But you know, really his
Speaker 1: point was that in hindsight, all the fislan monetary stinglass
Speaker 1: in one was probably too much for too long. Um.
Speaker 1: And so he's predicting that the FED could raise rates
Speaker 1: more than the market currently expects or is pricing in
Speaker 1: and you know, if they get it right, there could
Speaker 1: be years of growth still, but the process will cause
Speaker 1: a lot of volatility either way. Um, and it's definitely
Speaker 1: challenging and the whole thing listen, this is your world, um, Hannah.
Speaker 1: You know, and Jamie Diamond, you know, when he speaks,
Speaker 1: we kind of sit up a little straighter and take
Speaker 1: notice of it. And it certainly he's always among the
Speaker 1: most on the Bloomberg. I do think he thinks about
Speaker 1: his words because he knows, um, that people do listen
Speaker 1: to what he says, you know, pretty closely. What was
Speaker 1: the most stark thing for you? Um? I think for
Speaker 1: me reading it just kind of the the tone change
Speaker 1: that we talked about at the beginning, um, compared with
Speaker 1: last year, and it's not you know, he still did
Speaker 1: say that, like the economy is in good shape, consumers
Speaker 1: and companies are still in the US, you know, flushed
Speaker 1: with cash for the most part. But it wasn't like
Speaker 1: he was saying everything is terrible by any means. Um.
Speaker 1: But you know, his his outlining of the challenges ahead
Speaker 1: don't really start to me to begin anything on whether
Speaker 1: he's going to stay there longer. What's his deal? Girl?
Speaker 1: More years? Always hashtag five more years? Um, exactly, Hannah,
Speaker 1: thank you so much. Really appreciated Hannah of it. She's
Speaker 1: financial reporter at Bloomberg News. As we said, this is
Speaker 1: among our most read on the Bloomberg has been all
Speaker 1: day on this Monday. There is the big reveal when
Speaker 1: people when he talks, people listen. But I think it's
Speaker 1: interesting at tone right, and we keep hearing about a
Speaker 1: lot more negative tone out there in terms of the outlook. Yeah,
Speaker 1: I think that's a real fair characterization. A lot has
Speaker 1: changed in just a year. Yeah, exactly. This is Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stenovic on Bloomberg Radio Opening day for Major League Baseball
Speaker 1: it's happening later on this weekend. With that in mind,
Speaker 1: Bloomberg Business Week tapping into who are the real winners
Speaker 1: already of the season. We'll give you a hand. It's
Speaker 1: not the players at this point. Joel Weber is editor
Speaker 1: at Bloomberg Business Week. He's with us in the Bloomberg
Speaker 1: Interactive Brokers studio. Ben Writer is a freelance contributor. He's
Speaker 1: also the author of astro Ball, The New Way to
Speaker 1: Win It All. He's a freelance contributor Bloomberg Business Week.
Speaker 1: He's his story is featured in the current issue of
Speaker 1: Business Week magazine. It's available on newsstands, on the Bloomberg
Speaker 1: and at Bloomberg dot com slash Business Week. So, Joel,
Speaker 1: they've got the most powerful union when it comes to
Speaker 1: pro sports. Why are their salaries falling? Though franchise values
Speaker 1: continue to go higher, they can't quite win the negotiation
Speaker 1: and in like a real, real meaningful way. And and
Speaker 1: obviously the lockout was something that um got all of
Speaker 1: our attention. And there's this labor element to it that
Speaker 1: I was really captivated by. Ben being a long time
Speaker 1: sports illustrated writer. Also, in addition to the book that
Speaker 1: you mentioned, he's uh hosted a podcast called The Edge
Speaker 1: UM and I basically you know, got him on the
Speaker 1: phone with um Max Chafkin colleague and said, you know what,
Speaker 1: what do you want to write about baseball? And I
Speaker 1: think you know he did this step back story. This
Speaker 1: is Opening day week, right, if you want to go
Speaker 1: watch baseball, it's finally going to start. And what been
Speaker 1: really I thought, this iscinctly summed up, was that the players,
Speaker 1: you know, you can root for millionaires or billionaires first
Speaker 1: of all, and the owners are the billionaires and the
Speaker 1: players are the millionaires. UM. So sympathies might lie a
Speaker 1: little bit more with the players at this point. But
Speaker 1: but really, um, they did not come out with the
Speaker 1: upper hand here, did they been. No, they didn't. And
Speaker 1: let's be clear, this is a hard thought labor negotiation,
Speaker 1: a nine nine day lockout. The players union were resolute,
Speaker 1: they had solidarity, and they did emerge with some games.
Speaker 1: You know, the minimum salary for players went up quite significantly. Um,
Speaker 1: But overall, this is a case in which the owners
Speaker 1: maintained the upper hand in a business that, despite everything
Speaker 1: you've heard about baseball's decline, is booming. Revenues exceeded ten
Speaker 1: billion dollars in twenty nineteen, while player salaries went down.
Speaker 1: The medium salaries declined from one point six million in
Speaker 1: fifteen to one point one five million in one This
Speaker 1: was the economic This is the economic landscape that the
Speaker 1: players were contending with as they were negotiating this new
Speaker 1: labor agreement. Um, they did gain some concessions, but on
Speaker 1: the overall landscape, the owners held strong. You know, the
Speaker 1: economics of this been Let's just break it down a
Speaker 1: little bit, because there's there's the upper echelon of player
Speaker 1: who's doing great. No matter what you're in your out.
Speaker 1: Those marquee players are are getting bigger and bigger contracts,
Speaker 1: But what about the rest of it of the league? Right? Well,
Speaker 1: everybody sees the big contracts, right. Major League Baseball has
Speaker 1: ten players with guaranteed contract exceeding three hundred million dollars
Speaker 1: in value. Make no mistakes, these are some of the
Speaker 1: largest contracts for any athlete in the world. But the
Speaker 1: vast maturity of the player body is not doing so well.
Speaker 1: More than half the league operates on the minimum salary,
Speaker 1: which was five seventy thousands there about last year. That
Speaker 1: was the lowest among major sports. And teams are getting
Speaker 1: smarter and smarter. They know that it is beneficial to
Speaker 1: them to pay superstars more and where every year, but
Speaker 1: keep the majority of their teams to those minimum salary players.
Speaker 1: That helps to suggest why that media has fallen and
Speaker 1: also why the average salaries fallen as well. Okay, so
Speaker 1: let's talk about Bob rob Manfred h a central figure
Speaker 1: in this. The Commissioner of Baseball, a Harvard trained labor lawyer,
Speaker 1: served as the chiefs. The league's chief negotiated for several
Speaker 1: collective bargaining agreements going all the way back to two
Speaker 1: thousand two. Where does he come into all this? Right?
Speaker 1: A lot of people think that the commissioner is, you know,
Speaker 1: an impartial figure, right, operating for the best interest of
Speaker 1: the sport as a whole. That's not true in any
Speaker 1: professional sport. He works at the pleasure of the team owners.
Speaker 1: In baseball's case, the thirty team owners. That's really whose
Speaker 1: interests Rob Manfred was representing, and he's always represented them
Speaker 1: very well, and it's not a constituency with uniform interest.
Speaker 1: You have some owners like Steven Cohen of the Mets,
Speaker 1: who is the wealthiest owner in the league, and he
Speaker 1: wants to spend whatever he wants to spend. His tirole
Speaker 1: is gonna be two undred and fifty million dollars this year.
Speaker 1: You have a lot of owners that don't want to
Speaker 1: spend at all or as little as possible. One of
Speaker 1: the problems structurally in baseball is that spending on your
Speaker 1: team has been decoupled from profit. You can turn the
Speaker 1: very handsome profits uh not spending a lot and not
Speaker 1: winning at all. So you have four teams this year
Speaker 1: who are going to be spending about forty million dollars
Speaker 1: or less on salary. To do the math, you know
Speaker 1: that that's a fraction of what some of the higher
Speaker 1: spending teams are. These are the interest that Manfred had
Speaker 1: to represent these negotiating uh sessions, and clearly he satisfied
Speaker 1: all of them because the owners came away, in my opinion,
Speaker 1: very well. Then how did it go over with in
Speaker 1: the middle of negotiations, when Manfred was practicing his golf swing,
Speaker 1: How did that go over with players? Right? Well, this
Speaker 1: is a very tense negotiation. This is the second longest
Speaker 1: labor stoppage in the history of the league, second after
Speaker 1: only the horrible strike of Rob. Manfred was about to,
Speaker 1: you know, do something that is very serious. You know
Speaker 1: it's a lot of people, which is to actually cancel games.
Speaker 1: Like no matter how nasty negotiat Asian get, the cancelation
Speaker 1: of regular season games is kind of a bridge that
Speaker 1: nobody wants to cross. An Associated Press photographer captured him practicing,
Speaker 1: practicing his golf swing and the string taining stadium the
Speaker 1: day that he was going to cancel those games. Clearly,
Speaker 1: no matter how brought these things got, Rob Manfred remains
Speaker 1: in control and confidence, and he had every reason too,
Speaker 1: because the fact is, no matter how bad in the
Speaker 1: industry is the whole cancel games would have been for
Speaker 1: all parties. The players have much less capacity when push
Speaker 1: comes to show to withstand that and the potential lots
Speaker 1: of salaries than the far wealthier owners. All right, So
Speaker 1: what's the likelihood that anything changes in the near future,
Speaker 1: Because it's not like you know, sports contracts with media,
Speaker 1: I mean especially baseball, they're doing just fine. So there's
Speaker 1: still a lot of money coming into this, you know,
Speaker 1: sport if you will. So what's the likelhood anything changes
Speaker 1: for players more broadly? Well, you know this, this collective
Speaker 1: bargaining agreement tarrell last for five years, a long time.
Speaker 1: We're we have five years of labor peace quote unquote ahead.
Speaker 1: As Gene Orza, who is a long time players union
Speaker 1: official told me, collective bargaining produces incremental change, it doesn't
Speaker 1: produce a revolution. Did the players win some incremental change
Speaker 1: in this deal? Yes, especially for those minimum salary guys
Speaker 1: who really might never be millionaires, whose careers have no
Speaker 1: guarantees as far as their longevity, they will be better compensated.
Speaker 1: But as far as the big structural things that tilts
Speaker 1: toward the owner's advantage, no, that's not gonna change anytime soon.
Speaker 1: So who wins Opening day? Owners? You know, it seems
Speaker 1: like the owners always wins and they swart the negotiations.
Speaker 1: So yeah, I think we have to talk this one
Speaker 1: up to the owners. The players put up a very
Speaker 1: good fight. They didn't make some gains, but you know,
Speaker 1: it's another one for the owners, something we already know
Speaker 1: about the season. Yeah, I was gonna say, might not. Hey,
Speaker 1: Ben writer, it's a great read. Thank you so much,
Speaker 1: freelance contributor. Check out his book Astro Ball joining us
Speaker 1: on the phone in New York, and of course or
Speaker 1: thanks to Joe Webber. He's the editor of Bloomberg Business
Speaker 1: Week magazine. This story in the current issue. Find it
Speaker 1: on the Bloomberg and also at Bloomberg dot com. A
Speaker 1: really great read. Go pick up the issue now. Check
Speaker 1: it out at Bloomberg dot com and of course on
Speaker 1: the Bloomberg terminal. This is Bloomberg Radio and this is
Speaker 1: Business Week. Roy. How about you let me drive? Oh no, no, no,
Speaker 1: who's home? All right? Please? I'll do vels. I want
Speaker 1: to drive. It's a good question, good drive. This is
Speaker 1: the drive to the closed on Bloomberg Radio. All height
Speaker 1: folks were just about ten minutes away from the closing bell,
Speaker 1: and we have seen some buying, certainly in the last
Speaker 1: half hour hour of trading, so we are pretty much
Speaker 1: hovering near our best levels of this session. So let's
Speaker 1: get to it. Let's get to the drive to the
Speaker 1: clothes and with us right now. Back with us is
Speaker 1: Alan Zaffron, who's founding partner and co CEO at I
Speaker 1: e Q Capital. He's with us once again on the
Speaker 1: phone from Foster City, California. Hey, Alan, nice to have
Speaker 1: you back here on Bloomberg Radio. How are you and
Speaker 1: how do you think the markets are doing? Hey, Carol
Speaker 1: is doing great, Thank you? Do you? And Tim? How
Speaker 1: the markets doing. I think they're trying to reconcile all
Speaker 1: the risks inflation Ukraine. Uh. Not clear about what the
Speaker 1: inflation does to earnings growth rates going forward. But you
Speaker 1: know what we're actually seeing even today a semblance of
Speaker 1: light because you know, when we start talking about the
Speaker 1: yield curve being inverted, here's the interesting thing. When a
Speaker 1: two year bond is yielding you as much or more
Speaker 1: than a tenure bond, it's telling you that the tenor
Speaker 1: bond you'll probably isn't going to go up much more,
Speaker 1: if at all, it's signaling to you that's going to
Speaker 1: raise rates to the point that it's going to either
Speaker 1: stop inflation or sadly put the economy and recession. Let's
Speaker 1: hope the former, not the latter. But this is the
Speaker 1: hint well, and that box up sex because the interest
Speaker 1: rates are the people are saying rates just probably aren't
Speaker 1: likely going to go that much more. On the long end,
Speaker 1: I can now buy long duration growth stocks, so it's interesting.
Speaker 1: What's interesting about that too, And we've been focusing on Okay, oh,
Speaker 1: what the longer end is telling us is that the
Speaker 1: Fed is gonna have to start cutting rates because there's
Speaker 1: gonna be problems in the economy. But is there that
Speaker 1: possibility that the Fed gets it just right in terms
Speaker 1: of policy and rate moves, that it doesn't do anything
Speaker 1: to over stimulate growth or slow it down too much.
Speaker 1: Is it possible that we can kind of get back
Speaker 1: to that lower for longer scenario even with a higher
Speaker 1: rate strategy, it's still gonna be pretty low historically. But
Speaker 1: what's what's your betting that the Fed gets this just right?
Speaker 1: Because it sounds like it's pretty tricky for the FED
Speaker 1: to do that. My my betting is the said does
Speaker 1: get it just right, and I'll tell you why. Um.
Speaker 1: First of all, through a long term investor, eventually things reconcile,
Speaker 1: thing go up into the right and companies grow the profits.
Speaker 1: But secondly, we all know even once the curve inverts,
Speaker 1: it takes twenty four to thirty months before you see
Speaker 1: equity prices peak and actually go into recession on average.
Speaker 1: And see, you have plenty of time to figure out
Speaker 1: whether or not you think the market's going to peak
Speaker 1: or not. And it turns out if you look in
Speaker 1: eight of the last night said tightening cycles, stop, some
Speaker 1: people haven't went up knock down during the tightening now
Speaker 1: didn't go up as much ten percent per year. You
Speaker 1: go back to two and you look at the last
Speaker 1: nine tightening cycles, stocks were up on eight of them.
Speaker 1: The place you want to avoid, obviously, or it was,
Speaker 1: was long term bonds because they're sensitive to rates, and
Speaker 1: particularly now when interest rates are so darn loan bonds
Speaker 1: to begin with, the risk reward still isn't that compelling.
Speaker 1: But stocks, you've got earnings growth estimates if anything going up.
Speaker 1: And so this year's decline has been driven by the
Speaker 1: multiple going down greater than the fact earnings estimates actually
Speaker 1: have still been going up a bit. So I'm still
Speaker 1: betting on equity so the wrong and but I'm also
Speaker 1: betting on the said, may it well, it may in
Speaker 1: fact get it just right. And that's what I think
Speaker 1: the bond curve is telling you is there's only so
Speaker 1: many tightenings that economy cantolerate. Alan what happens before the
Speaker 1: long run? Though, what does that path look like with
Speaker 1: the US equity market? And I asked, because you know,
Speaker 1: we are only about four and a half percent off
Speaker 1: of all time highs right now, but it's been a
Speaker 1: rocky It was a rocky first quarter, and uh we
Speaker 1: see us we saw quite the recovery in the last
Speaker 1: two weeks. Yeah, I think what what's going on right
Speaker 1: now is I think you're watching a market which is
Speaker 1: still trying to get its head around what the implications
Speaker 1: are of all these cross dynamics. But you know, recognize
Speaker 1: valuations have driven so selected software stocks have fallen out
Speaker 1: to their average valuations of the last five years. So
Speaker 1: this whole um argument stocks over valued, stocks overvalued. I
Speaker 1: don't think they're overvalued anymore. And so you know, crisis
Speaker 1: begets opportunity. There are certainly selected stocks that I'll pick
Speaker 1: on the growth stock in a market that is going
Speaker 1: to struggle with long term secular growth. Fine companies that
Speaker 1: can persistently grow earnings regardless of the economic environment still
Speaker 1: willn't be winners, and so in the market hands you
Speaker 1: that opportunity and drives valuations down, those are the names
Speaker 1: out of the rubble that you want to start picking at,
Speaker 1: along with the large big camp winners, which clear they
Speaker 1: have held up. So I think the short run is
Speaker 1: you know, you have a little bit more of stock selection,
Speaker 1: but I would tell you growth is likely to continued
Speaker 1: out pulform value in the long run, that's not going
Speaker 1: to change. But because we've seen longer term yields also
Speaker 1: moving up, is there some expectation that that's some confidence
Speaker 1: maybe about growth, but also a danger that eventually it'll
Speaker 1: crimp growth in equity valuations, which is I think something
Speaker 1: similar to what are John Author is writing about this
Speaker 1: what we saw back in two thousand seven. Well, first
Speaker 1: of all, John Author's a plug rint He's a fabulous writer,
Speaker 1: so I welcome people read his writings on Bloomberg. But
Speaker 1: what we would argue is obviously you want to look
Speaker 1: at selected names, but as a generalization, there are a
Speaker 1: lot of comings that have a durability in the revenue
Speaker 1: streams and licensing models that people renew payments, and in fact,
Speaker 1: if if you're in a modestly inflationary environment, these can
Speaker 1: go up, just like rents can go up on real
Speaker 1: estate alongside rates going up. So if the drop in
Speaker 1: valuation is driven exclusively by rates and not by the
Speaker 1: business model itself, it's the actual costs of the business
Speaker 1: haven't gone a materially or can be passed on fully
Speaker 1: to the customers, those businesses are going to flourish. It's
Speaker 1: the businesses that are over leveraged and are very dependent
Speaker 1: on economic growth that will indeed struggle in that rising
Speaker 1: rate environment and will continue to struggle Allen one thing
Speaker 1: I would say, you sound like you have a lot
Speaker 1: of conviction and confidence, and you've seen a lot of
Speaker 1: market cycles. But I feel like, man, no one would
Speaker 1: have set us up. This is not what we're expecting
Speaker 1: in December, and I feel like the carpet got pulled
Speaker 1: out from under us in a lot of ways. Even
Speaker 1: though a lot of folks are saying, you know, we're
Speaker 1: getting overvalue. We're getting overvalued. But the war, the continue
Speaker 1: move in inflation, people rethinking global energy supplies. What is
Speaker 1: the big caveat to what you're saying? And only got
Speaker 1: about twenty thirty seconds here. Uh COVID created an additional
Speaker 1: four trillion dollars of cash sitting on bank balance sheets.
Speaker 1: So Ukraine high inflation interest rates to the market and
Speaker 1: all can do is fallen peak the valley. That's telling
Speaker 1: me there's a ton of money on the sidelines ready
Speaker 1: to support this market, along with a strong dynamic US
Speaker 1: econmudists growing. So don't sell the US short, stay long
Speaker 1: term oriented, stay on your goals, but don't don't neglect
Speaker 1: the fact of love capital just aiming to get into
Speaker 1: this market at any kind of debt. It's still pretty
Speaker 1: slashy out there when it comes to liquidity. All right, Allan,
Speaker 1: thank you so much, Alan Zaffron, he is founding partner
Speaker 1: in co c I O at co CEO excuse me
Speaker 1: at i e Q Capital. Thanks for listening to Bloomberg
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