Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim Stenebec from Bloomberg Radio.
Speaker 1: All right, as you know, we just talked with our
Speaker 1: TV colleagues, Mike and myself day too. Have fed Chair J.
Speaker 1: Powell up on Capitol Hill what we got today, par
Speaker 1: for the course, Powell stressing the policymakers had not made
Speaker 1: up their minds on the size of their interest rate
Speaker 1: increase later this month and said it would hinge on
Speaker 1: incoming data on jobs and inflation. Mike, it sounds like
Speaker 1: data dependent to me. It really doesn't. What's fascinating is
Speaker 1: that's as honest as they can be about the situation, right,
Speaker 1: and they repeat it over and over again. Transparency with
Speaker 1: a capital tea. Yeah, but the market just wants that
Speaker 1: sort of certainty of where they are going to stop
Speaker 1: raising rates, and they just can't tell you right now.
Speaker 1: And I think, you know, if the story the market
Speaker 1: over the last year is not up down sideways, you know,
Speaker 1: you look at the recent PAS average over the last
Speaker 1: year it's it's basically where we are now. So all
Speaker 1: this file tell you all these up down days and
Speaker 1: dawns days, we market really hasn't going anywhere. All right,
Speaker 1: Let's see what are a former Bloomberg colleague, Lena Shlechiva,
Speaker 1: senior US economist at BNP Pariba, has to say about
Speaker 1: all of this. She joins us via zoom in New
Speaker 1: York City. Lena, it's so good to have you here
Speaker 1: with Mike and myself. All right, so we got Jay Powell.
Speaker 1: Day two, you got the Beige Book, you get another
Speaker 1: strong bunch of data points when it comes to the
Speaker 1: labor market. What was front and center for you today?
Speaker 1: I think you highlighted it. Carolin is so nice to
Speaker 1: be back with you guys. So you highlight it very clearly,
Speaker 1: you know, the fattest data dependent. But you know, Powell
Speaker 1: saw the market reaction to his testimony yesterday and he
Speaker 1: decided to repeat the same exact hawkish message today. And
Speaker 1: you know he qualified it a little bit that, well, yeah,
Speaker 1: it's data dependent. He wanted to stress that point. That
Speaker 1: was the only kind of caveat in today's remarks. But
Speaker 1: still the tone of the speech today was the same
Speaker 1: hawkish type of comments that he delivered yesterday, and I
Speaker 1: think it would be very difficult for the FIT to
Speaker 1: walk back from away from that hawkish message. It would
Speaker 1: take a really weak economic data for them to under
Speaker 1: deliver on what he seemed to have hinted in his
Speaker 1: prepared remarks. You know, and Yelena, obviously we're all biting
Speaker 1: our nails waiting for that main event of economic data
Speaker 1: on Friday, the jobs report ADPs Jobs report today, two
Speaker 1: hundred and forty two thousand private sector jobs. That Jolt's
Speaker 1: job openings was a little bit higher than expected ten
Speaker 1: point eight million openings. Are you bracing for another hot
Speaker 1: jobs number? So totality, in Powell's words, of employment data
Speaker 1: is telling us that the labor market remains extremely tight.
Speaker 1: And there's no question about it, whether you look at
Speaker 1: like some movements some near to movements in job openings
Speaker 1: or claims or anything else ADP, so all of it
Speaker 1: is telling us the same exact story. The labor market
Speaker 1: remains tight, and that is ahead of the Pyrol's report
Speaker 1: on Friday, so we are expecting another solid reading. We're
Speaker 1: slightly above consensus here at two forty, so we think
Speaker 1: we will see some reversal of weather related distortions that
Speaker 1: were very prominent in the January report. We estimate something
Speaker 1: like thirty percent of the number was driven by weather
Speaker 1: related distortions. But still, you know, February was still warm.
Speaker 1: I was like not wearing my warm clothes. Crazy, right,
Speaker 1: the Burgess game when the plants are coming up, right,
Speaker 1: can I ask you something? It's totality. Now the new
Speaker 1: transitory that we're going to parse over exactly what this
Speaker 1: new tea word means? And now the tea word right,
Speaker 1: So it does seem like that they keep repeating that sentence,
Speaker 1: but that's what it is. So they look at a
Speaker 1: whole bunch of different indicators, including wage growth. So that's
Speaker 1: another key story in the upcoming Perils report. On Friday,
Speaker 1: we will we are looking for some re acceleration of
Speaker 1: wage growth in the Perils Report in February. So if
Speaker 1: that comes to fruition, we may um. You know, that
Speaker 1: is going to be a very interesting story for the
Speaker 1: FED because Chair Powell specifically mentioned wages and wage growth
Speaker 1: in his testimony. It was right in the first few
Speaker 1: paragraphs that wage wage growth is it's great for workers.
Speaker 1: But when you know you look at it in terms
Speaker 1: of inflation and nominal wages, that's a different that could
Speaker 1: be a different story. So we don't want a significant
Speaker 1: re acceleration in nominal wages. And this is something that
Speaker 1: we may see on Friday. So that's gonna that If
Speaker 1: it is true, that would be another piece of a
Speaker 1: puzzle to persuade the Fed that they need to potentially
Speaker 1: go faster and stay in the restrictive territory for longer.
Speaker 1: You know, Yelena, I think one of the big sort
Speaker 1: of underappreciated issues for the market this year is everyone
Speaker 1: talks about, well, how high will the Fed increase interest rates?
Speaker 1: But the markets previously we're pricing in sort of a
Speaker 1: short term peak and that the Fed would probably be
Speaker 1: cutting rates this year. Now it seems like everyone's rethinking
Speaker 1: that and that, yeah, we might hit that peak rate,
Speaker 1: whether it's five and a half percent, six percent for
Speaker 1: Fed funds interest rate, but it's going to stay there
Speaker 1: longer than what the market had anticipated before. Where do
Speaker 1: you stand on that? How long will we sit at
Speaker 1: that peak rate? Do you think our newly released projections
Speaker 1: We just released a new global outlook just recently, so
Speaker 1: we don't see any cuts until next year. So it's
Speaker 1: really was the message from the Fed that they're very
Speaker 1: serious about staying there for longer. Is just that the
Speaker 1: market is adjusting to that as as you mentioned, So,
Speaker 1: I think it would really depend on the pace of
Speaker 1: inflation deceleration. So it's really easy to get to something
Speaker 1: like three to four percent in terms of inflation growth,
Speaker 1: but the trajector of disinflation from there and to the
Speaker 1: two percent inflation target is going to be very difficult
Speaker 1: to achieve and it might take some time. And that's
Speaker 1: why the FIT is clearly telling us we're going to
Speaker 1: stay there until the job is done. We're going to
Speaker 1: stay at it and keep at it and do whatever
Speaker 1: it takes to conquer inflation, which may need to for that,
Speaker 1: we may need to see rates higher for longer. So
Speaker 1: all right, so if that that could possibly happen. And
Speaker 1: then Yelena, looking at what's going on between the twos
Speaker 1: and tents right now, right above the spread more than
Speaker 1: a hundred basis points, does that mean yes, definitely recession.
Speaker 1: Does that also potentially mean recession deeper and longer? Well,
Speaker 1: recession has been the front and center of our outlook.
Speaker 1: We are sticking with our call unfortunately for a recession,
Speaker 1: and that we think is a necessary condition for inflation
Speaker 1: to come back at where it needs to be. So
Speaker 1: the path to so called soft blending is so narrow
Speaker 1: that it would be a miracle if that realizes. We
Speaker 1: all want that, but the reality is it may take
Speaker 1: us through a downturn to in order to achieve that.
Speaker 1: But what kind of a downturn? That's what I'm curious about.
Speaker 1: Is it deeper, is it wider? Yeah, potentially, yeah, something
Speaker 1: akin to the nineties recession. Probably not see recession. Yeah,
Speaker 1: well I remember the financial crisis recession. Probably not as
Speaker 1: severe as that, but still, you know, severe enough for
Speaker 1: a lot of Americans to feel the pain. But unfortunately,
Speaker 1: maybe a necessary condition for us to go back into balance.
Speaker 1: I wonder if that means grunge music will come back, Carol,
Speaker 1: if we're ready for that. But it gets possible, Elena. Obviously,
Speaker 1: the other big number on tap next week's CPI. I'm
Speaker 1: looking at the consensus estimate here for it to come
Speaker 1: down from six point four percent to six percent, core
Speaker 1: to come down from five point six to five point four.
Speaker 1: Where do you stand on that? What's your marker for
Speaker 1: next week's CPI report, So we think, you know, payrolls
Speaker 1: would be more crucial in terms of defining what the
Speaker 1: FAT does next. So CPI will probably decelerate. What we'll
Speaker 1: be looking at where services inflation is going. If that
Speaker 1: super core services inflation is sticking where it is, and
Speaker 1: we call it stick inflation. For that to go down,
Speaker 1: we need to see wages to decelerate. If that is
Speaker 1: still significant, that will reinforce the defense message. You know,
Speaker 1: what really struck us in the previous CPI report is
Speaker 1: the breadth of inflation gains. It was everywhere in the
Speaker 1: goods and the services you know categories, right, So I
Speaker 1: would personally be looking at the breadth oh for inflation games, Yelena,
Speaker 1: really fast twenty five seconds? Okay, hot labored market. What
Speaker 1: if we get a strong job's report but week CPI data,
Speaker 1: can the Fed be softer in their march move? Just quickly?
Speaker 1: What ten seconds is significant deceleration in wage precious, That's
Speaker 1: what we'll should be looking on at. That's that's what
Speaker 1: is important. Okay. Good to know, um always great to
Speaker 1: see you. We love you, Yelena Shaltiva, As we said,
Speaker 1: a former Bloomberg colleague, senior US economists at BNP Power.
Speaker 1: By joining us via zoom in New York City, you're
Speaker 1: listening to the Bloomberg Business Week Podcast. Catch us live
Speaker 1: week days from two to five pm Easter on Bloomberg Radio,
Speaker 1: The Bloomberg Business a Band you two. You can also
Speaker 1: listen live to our flagship New York station, Just Say
Speaker 1: Alexa Play Bloomberg eleven thirty. We have actually been talking
Speaker 1: with a lot of well known folks in the restaurant space, Ericape,
Speaker 1: Danielle Blue, John Tapper, Bar Rescue. One common denominator that
Speaker 1: they seem to all talk about and stress is the
Speaker 1: tight labor market and just having a hard time finding
Speaker 1: enough workers. Yeah. Absolutely, I mean a lot of competition
Speaker 1: for jobs out there, let's be honest, restaurant restaurants. Yeah,
Speaker 1: but they're not exactly known for their high wages and
Speaker 1: great benefits and stress free atmosphere. That is several good points,
Speaker 1: all right. So in keeping with that, and we did
Speaker 1: get a lot of laborer points, if you will, economic
Speaker 1: statistics today. This next story definitely jumps out at us.
Speaker 1: It's about how restaurants have come roaring back, pass post
Speaker 1: rolling back, post pandemic with everything they need, but staff.
Speaker 1: So let's get to it with Bloomberg News consumer reporter
Speaker 1: Leslie Patton. She joins us, she's on the phone from Chicago. Leslie,
Speaker 1: good to have you here with Mike and myself. So
Speaker 1: we do hear this a lot. Tell us what you
Speaker 1: found out in reporting your story. You know, it's interesting.
Speaker 1: We're seeing that demand is up. Everyone knows about. There's
Speaker 1: this Panus demand for dining happening. Chains are expanding quickly,
Speaker 1: looking to open new locations. But what kind of the
Speaker 1: problem is It's staff a lot of these people and
Speaker 1: you know what's different than in the past is that
Speaker 1: a lot of these food service employees have left the
Speaker 1: industry for good and did that over the course of
Speaker 1: its pandemic for a bunch of different reasons. Really, Leslie,
Speaker 1: I'm wondering, is it having an impact on their businesses?
Speaker 1: You know, are they missing out on sales because of this,
Speaker 1: or they haven't closed locations anything like that. Yeah, that's
Speaker 1: been happening during the pandemic, but three years later, it's
Speaker 1: still happening. And a lot of these big chains they
Speaker 1: don't like to explicitly say we're missing sales, but you
Speaker 1: can read between the lines a lot of them. At
Speaker 1: the big chains, they're still operating on reduced hours, so
Speaker 1: they're not open as long as they used to be
Speaker 1: during the pandemic, So maybe they aren't running that night shift.
Speaker 1: Maybe the dining rooms closed during certain times of the day.
Speaker 1: Dominos has said they still can't find enough delivery drivers,
Speaker 1: so it's taking longer to get each pizza to people's doors.
Speaker 1: So yes, all of that affects sales. I mean, how
Speaker 1: bad is it is it? Mom and pop? It sounds
Speaker 1: like you're telling us about some well known names, So
Speaker 1: how bad is it across the industry. It's harder for
Speaker 1: mom and pops, I think, overall, for the independence to
Speaker 1: find and keep workers in a lot of cases. But
Speaker 1: but we're hearing it from big chains too. I mean,
Speaker 1: Jack in the Box, it's still doing reduced hours, they're
Speaker 1: not open as much as they used to be, and
Speaker 1: all of this is happening. One important thing to keep
Speaker 1: in mind despite pretty big gains for wages. You know,
Speaker 1: it's funny, I'm thinking back Leslie to my own days
Speaker 1: working at Denny's as a teenager. One thing I always
Speaker 1: looked for to is that's great, that's free meal. You
Speaker 1: got on your shift is a nice perk at a restaurant,
Speaker 1: But I'm wondering are there perks like that? I mean,
Speaker 1: obviously probably a free meal is not enough to bring
Speaker 1: anyone back. But are these companies doing anything? Is there
Speaker 1: any anything they can do or that they're trying to
Speaker 1: do to attract workers? Yeah, I mean I think I
Speaker 1: think pay benefits those are the big ones, and they
Speaker 1: all are offering higher pay than they used to and
Speaker 1: in a lot of cases more benefits. One interesting thing
Speaker 1: I found talking to a Burger King and q Doba
Speaker 1: franchise e. He's in West Virginia in Ohio. He said
Speaker 1: that he started doing an extra two dollars an hour
Speaker 1: attendance bonus just to get people to show up for
Speaker 1: their shifts because he was having so many call outs
Speaker 1: and no shows. It definitely has helped. So, I mean,
Speaker 1: when it comes down to it, it's the money, right, Well,
Speaker 1: can you remind us you know in Mike's day, you
Speaker 1: know he'd go work for a restaurant, right or a franchise.
Speaker 1: I have a sister who worked at McDonald's. Like growing up,
Speaker 1: like these were jobs teenagers you know definitely saw it out.
Speaker 1: What's the typical labor pool for restaurants that they typically
Speaker 1: pull from. It is still somewhat of an entry level job.
Speaker 1: But I think you're right that that idea as restaurants
Speaker 1: of your first job as you go to the local
Speaker 1: McDonald's down the street and you get a job when
Speaker 1: you're sixteen. I think that idea has has kind of
Speaker 1: dissipated in a lot of ways. Right, So we're not
Speaker 1: seeing as many younger teenage workers. Maybe they have internships,
Speaker 1: or they're doing more after school activities that sort of thing.
Speaker 1: It's really the kind of millennial gen X generation that's
Speaker 1: working in restaurants these days. Can I just to follow though?
Speaker 1: What about immigrants? You know, and you know that typically
Speaker 1: that's often an entry job for folks who come into
Speaker 1: this country. Is that part of the problem. Yeah, I
Speaker 1: think that's part of it. You know, we saw fewer
Speaker 1: immigrants over the you know, the past what was it
Speaker 1: four or five years or something. I mean, the meat
Speaker 1: industry has called that out too, because the meat industry,
Speaker 1: the packing and slaughtering houses, they employ so many immigrants
Speaker 1: and they're really struggling for staff. And we're during the
Speaker 1: pandemic and during kind of the Trump presidency and ask
Speaker 1: because of stricter border controls. You know, Leslie, I sometimes
Speaker 1: I feel like a broken record because I feel like
Speaker 1: every economic markets discussion always reverts back to the topic
Speaker 1: of inflation, and I'm wondering, you know, this all sounds
Speaker 1: to me like we should expect higher prices from restaurants
Speaker 1: going forward. Have you has there been a lot of
Speaker 1: price increases? I mean, I know there's been some, but
Speaker 1: what is sort of the vibe there as far as
Speaker 1: the outlook for higher prices at restaurants? Great question, so
Speaker 1: that there have been a lot of price increases for
Speaker 1: restaurants over the past year or so, But at the
Speaker 1: same time, I think we can probably expect more because
Speaker 1: wages are continuing to be pressured. There's still a shortage
Speaker 1: of staff, which mean wages needs to go up further,
Speaker 1: which means many prices are going up further. This really
Speaker 1: doesn't give too much hope for the Fed's emphasis on
Speaker 1: kind of stamming inflation in that service sector. I mean,
Speaker 1: maybe the rate is coming down a little bit, but
Speaker 1: it certainly isn't over. Yeah, it does feed into that
Speaker 1: wage inflation and makes it stickier. What do you folks
Speaker 1: in the restaurant industry typically make and what kind of
Speaker 1: you know, increases have they been getting. I think on average,
Speaker 1: you know, a fast food cook is maybe around twelve
Speaker 1: or thirteen dollars. But a lot of states have have
Speaker 1: this kind of you know, fifteen dollars minimum wage. A
Speaker 1: lot of municipalities have moved to that, so it really
Speaker 1: varies across the country. I mean, still we're at this
Speaker 1: federal minimum wage of around seven bucks. So there's huge,
Speaker 1: huge discrepancies across the country in terms of what people
Speaker 1: are making. You know, in here, I'm in Chicago, I've
Speaker 1: seen restaurants put signs up saying they're hiring people starting
Speaker 1: at twenty dollars an hour. But that's certainly not the
Speaker 1: case in some more rural areas well. Twenty an hour.
Speaker 1: That's where I'm some of my kids care over. It's
Speaker 1: not too shabby. You know. Let's say, I remember a
Speaker 1: few years ago to the pandemic, some restaurants started trying
Speaker 1: to automate as much as the process as possible, that
Speaker 1: you know, ordering with touchscreens, that sort of thing. You know,
Speaker 1: there's even talk about well maybe you know, the cooking
Speaker 1: and preparation of the food could be automated. Where do
Speaker 1: you see that going? Is there? Obviously there's a greater
Speaker 1: motivation to automate as much as possible now, but are
Speaker 1: we seeing that play out at all in real life?
Speaker 1: It's going, it's happening, but it's slow going. It's the
Speaker 1: important thing to remember. And another thing, I mean, we're
Speaker 1: not going to have robots necessarily cooking all of our
Speaker 1: food in the next few years. I mean these are
Speaker 1: still largely very much people labor jobs. I mean we
Speaker 1: see kiosks and restaurants and fast food places sometimes, but
Speaker 1: when you think about it, when you go in, do
Speaker 1: you go to the kiosk or do you go to
Speaker 1: the register if there's someone standing there? I think nine
Speaker 1: times out of ten people go to the person. They
Speaker 1: don't go to the kiosk. So so there's movements there,
Speaker 1: but it's slow and it's you know, incremental. At this point,
Speaker 1: I gotta say it a pan era, I have no
Speaker 1: problem with using my app and then just running by
Speaker 1: and picking up or going in and using their kiosk
Speaker 1: and then you just pick it up. So I do
Speaker 1: wonder if at some point Leslie, these you know, these
Speaker 1: restaurant chains are going to have to do more automation,
Speaker 1: especially if this trend doesn't change. I mean it's not easy.
Speaker 1: It's long hours sometimes not great hours, and not great conditions,
Speaker 1: many would argue, and just got about twenty seconds here. Yeah, sure.
Speaker 1: I mean with with the apps, I think yes, that's
Speaker 1: a way to kind of like for restaurants to skip
Speaker 1: over these kiosks, and the pandemic has hardest to be
Speaker 1: more okay with ordering you know grub Hub, that sort
Speaker 1: of thing on an app. So yeah, I think that's right, Carol. Right,
Speaker 1: you go to an airport, right, you just see it's
Speaker 1: it's an iPad. Yeah, and all of a sudden somebody
Speaker 1: like brings you food. I'm waiting for the chat cheap
Speaker 1: pt element, Carol, Can you have what should I eat? Yeah?
Speaker 1: We're give me a new recipe for we're you know something,
Speaker 1: get up before you get on the plane. Leslie Patton
Speaker 1: a great story and really relevant Leslie Patton. She's consumer
Speaker 1: reporter at Bloomberg News. Joining us on the phone from Chicago.
Speaker 1: This is Bloomberg Business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: podcast with Carol Messer and Tim Stenebec from Bloomberg Radio.
Speaker 1: It is International Women's Day and we thought it made
Speaker 1: a lot of sense to check out how the Impact
Speaker 1: Shares YMCA Women's Empowerment ETF was doing the ETF celebrate
Speaker 1: its three year anniversary mic that happened last August. It's
Speaker 1: up on average annually nearly fifteen percent over the past
Speaker 1: three years. Top holdings we're talking about names you know
Speaker 1: and Vidia, Amazon, Apple, Meta, J and J and Moore.
Speaker 1: So let's get to it with us. Is Jill O'Donovan,
Speaker 1: adviser to Impact Share. She joins us via zoom from Chicago. Jeel,
Speaker 1: good to have you here with Mike and myself. How
Speaker 1: are you. I'm good, Thank you for having me. Well,
Speaker 1: tell us a little bit about the investment theory this
Speaker 1: ETF what it specifically can invest in and it attracts
Speaker 1: it index correct it does? It does so. The actual
Speaker 1: gender equity research is done by Equality out of the Netherlands,
Speaker 1: and that information is taken and given a morning Star
Speaker 1: who creates the Women's Empowerment Index, and then the fund
Speaker 1: is developed based on that index and the work of
Speaker 1: the y to WCA, and relation to this is as
Speaker 1: the impact partner. The y to WCA, as many people
Speaker 1: tend to not know, has been around for over one
Speaker 1: hundred and sixty years empowering women and working to eliminate
Speaker 1: racism throughout the United States, and because our focus is
Speaker 1: women's empowerment, we thought this was a great partnership. We
Speaker 1: provide a lot of the advice about what things do
Speaker 1: empower women in the workforce and looking at specifically the
Speaker 1: equiligue criteria and the way that those specific things really
Speaker 1: align with the that we've been doing for all these years.
Speaker 1: So what are some of the things that are screened for.
Speaker 1: Is I'm assuming representation of women on boards and c suites,
Speaker 1: that that sort of thing. Joe, Yes, that's that's one
Speaker 1: of the first tiers that we look at. There's four
Speaker 1: broad categories of the nineteen criteria, the first being gender
Speaker 1: balance and leadership in the workforce. Then we also consider
Speaker 1: equal compensation and work life balance as a category, policies
Speaker 1: promoting gender equity, and then in general overall commitment to
Speaker 1: women's empowerment and the transparency of the company and accountability.
Speaker 1: Um So, within each of those four there are some
Speaker 1: subset sectors. Obviously women on boards, which is a big,
Speaker 1: big topic right now, and as well as women in
Speaker 1: the C suite. But we died a little bit deeper
Speaker 1: and also look at women in senior management, the overall workforce.
Speaker 1: We look at the promotion and career development opportunities by
Speaker 1: comparing the senior management and workforce, and look at what
Speaker 1: companies are doing in those areas to really be able
Speaker 1: to advance women throughout their company, not just at the
Speaker 1: top levels. Hey, Jill, do you feel like you really
Speaker 1: it's transparent in terms of I mean, some of those
Speaker 1: are pretty obvious, right You can look at a board
Speaker 1: and understand how many women are there. But when you
Speaker 1: start talking about career development policies and so on, how
Speaker 1: do you really get a good grasp of what's going
Speaker 1: on in a company. They can say they're doing one thing,
Speaker 1: but that doesn't necessarily mean they're doing it right. Right
Speaker 1: on a high level, we rely on the research that
Speaker 1: equally is doing. But then when the YDWCI gets involved,
Speaker 1: we you know, we have a lot of interactions with
Speaker 1: some of these companies just based on the fact that
Speaker 1: they're corporate donors or corporate sponsors, just to individual YDWC
Speaker 1: is across the country and so we get to know
Speaker 1: the folks that work at these companies and we can
Speaker 1: help sort of guide them along the way on their
Speaker 1: journey for these to better themselves in these different area
Speaker 1: and they're receptive. UM so far. UM, you know, it's
Speaker 1: been it's been a slow process and UM. You know,
Speaker 1: we are a nonprofit SOUR our resources are fairly limited
Speaker 1: when it kinds of devoting a lot of energy to
Speaker 1: you know, really engage with the corporations. But we're building
Speaker 1: on that. UM. You know. One of the things we
Speaker 1: like to say is, you know, we we do a
Speaker 1: lot of work on the ground level preparing women for
Speaker 1: the marketplace, and we really see that there's an opportunity
Speaker 1: to prepare the marketplace for these women and so you know,
Speaker 1: we're shifting in that direction to you know, try to
Speaker 1: really use all levers that are available to us, um
Speaker 1: to advance the work that we're doing. You know, Chill,
Speaker 1: there's been a bit of a backlash recently from some
Speaker 1: very far right politicians about investing notions such as ESG
Speaker 1: and corporate programs for diversity, equity and inclusion. I'm wondering
Speaker 1: if that's um on your radar screen at all. You know,
Speaker 1: is it a risk for an ETF like this, say,
Speaker 1: if some states pension fund will be forbidden from from
Speaker 1: investing in this type of vehicle. How are you thinking
Speaker 1: about that that backlash? Yeah, absolutely, that's a concern. We
Speaker 1: like to think of ourselves as the true s in ESG.
Speaker 1: I mean, we are the social experts in these areas.
Speaker 1: We know what it takes to make these changes, you know,
Speaker 1: to advance women in the workplace. So we like to
Speaker 1: distinguish ourselves that way that it's not just you know,
Speaker 1: it's not just sort of greenwashing or women washing. You know,
Speaker 1: this is something that we bring these two worlds together,
Speaker 1: we can make real change. It is interesting because I
Speaker 1: do feel like, you know, Jill, that we kind of
Speaker 1: are having these conversations over and over again. My team
Speaker 1: knows because every time we're talking about this subject, I
Speaker 1: feel like when I kicked off my career a few
Speaker 1: years ago, many years ago, we were having these conversations
Speaker 1: about women and equity and gender balances, you know, as
Speaker 1: you see it and as you are having the conversations
Speaker 1: with companies and you know, working with the folks that
Speaker 1: are doing research on equity and gender equity. Are we
Speaker 1: making progress? We are, It's it's slow. You know, we
Speaker 1: didn't we didn't get to this place overnight. We're not
Speaker 1: going to fix it overnight. UM. It takes. It's a
Speaker 1: long road. And that's why, you know, after as we've
Speaker 1: been doing this work for over one hundred and sixty years,
Speaker 1: you know, really looking at ways to UM to use
Speaker 1: all of the resources that are available to us UM.
Speaker 1: You know, we see this as a very important impact tool, UM,
Speaker 1: a very important platform for us to be able to
Speaker 1: change the conversation, be in different rooms, you know, really
Speaker 1: talk to people, get them thinking about UM. As an employee,
Speaker 1: what can you be asking of your employer as a company,
Speaker 1: what can you be doing? Differently? As an investor, how
Speaker 1: can you be directing your funds to you know, companies
Speaker 1: that are doing the things you want them to you
Speaker 1: want them to do, and also for just general consumers UM,
Speaker 1: you know, make them aware of these things and how
Speaker 1: they can use their money to actually drive the work
Speaker 1: that which you are continue. Joe, I wonder is you know,
Speaker 1: is there any potential to be sort of an activist
Speaker 1: shareholder with this type of fund, you know, voting against
Speaker 1: firms proxy UH in proxy votes, you know, against policies
Speaker 1: that you're not happy with at a company. You know,
Speaker 1: is there any chance of that? Absolutely, and that you
Speaker 1: know that's one of the long term goals that we
Speaker 1: have to be able to be more activist investors UM
Speaker 1: as far as the shareholder proxy issues or the shareholder
Speaker 1: resolutions are concerned. Recently, Impact Shares file the shareholder resolution
Speaker 1: with Norfolk Southern about paid sick leave, and just I
Speaker 1: believe it was last week and that was based on
Speaker 1: the holdings that they have in the women FUNDUM and
Speaker 1: I believe in last week Norfolk Southern Reporter that they
Speaker 1: had negotiated with two unions and this was in direct
Speaker 1: response to the the UH the shareholders the sharehold proposal
Speaker 1: that Impact Shares had filed. Hey, Jill, I'm just gonna
Speaker 1: um and I'm just gonna push a little bit. But
Speaker 1: the why your et F, the women's empowerment ETF. If
Speaker 1: I look at some of the top holdings and video Amazon, Apple,
Speaker 1: x On, United Health, Meta, J and J. Procter, and
Speaker 1: Cable Comcast, all of them have men's CEOs. So I
Speaker 1: understand what you're saying in terms of progress, but I
Speaker 1: just feel like, you know, what is what is the
Speaker 1: conversation you're hearing about why we're not seeing more female CEOs.
Speaker 1: That's a very good question. UM. You know there was
Speaker 1: a time when the reason was, well, they're just they're
Speaker 1: just aren't any you know, they're they're just not quality candidates. UM.
Speaker 1: I think that conversation has changed. UM. I think it's
Speaker 1: one of those things that will just take time. UM
Speaker 1: and to be able to you know, have the It's
Speaker 1: one of the reasons in fact that we look at
Speaker 1: sort of this overall promotion and career development track UM,
Speaker 1: so that we have that sort of UM that pool
Speaker 1: to be creating and and and pulling from. UM. It
Speaker 1: is slow. It's very slow progress. And you know, with
Speaker 1: respect to the companies that are in the in the index,
Speaker 1: I know that there's you know, people can come up
Speaker 1: with issues for each of the different companies that you know,
Speaker 1: don't take different boxes UM. And it's we would love
Speaker 1: to see a time where each of the each of
Speaker 1: the holdings UM. Actually you know they're they're getting a
Speaker 1: grades across the board from actually on these different categories. UM.
Speaker 1: I actually have just released their most recent reports and
Speaker 1: UM it looks like, you know, even the best companies
Speaker 1: are still in the C plus category. UM, So you
Speaker 1: know it's it's going to take more time, but I
Speaker 1: think we are. You know, we're encouraged. We see a shift.
Speaker 1: Um in at least the last five years. I think
Speaker 1: it's been a lot bigger. That's a good thing. I'm
Speaker 1: gonna have to leave it on that note, Jill, thank
Speaker 1: you so much. Jill O'Donovan, advisor of Impact Shares. Joining
Speaker 1: us via zoom from Chicago. You're listening to the Bloomberg
Speaker 1: Business Week podcast cat Just Live weekdays from two to
Speaker 1: five pm Eastern on Bloomberg Radio The Bloomberg Business a
Speaker 1: band you Doo. You can also listen live to our
Speaker 1: flagship New York station, Just Say Alexa, play Bloomberg, E,
Speaker 1: Loove and Dirty. No doubt about it. Everybody's talking about it,
Speaker 1: jumping in. Just yesterday, Salesforces VCRM launched two hundred and
Speaker 1: fifty million dollars fun it's largest to date to invest
Speaker 1: in generative artificial intelligence startups. Bloomberg talked with Ken Griffin
Speaker 1: of Citadel. We talked about this too, how they are
Speaker 1: negotiating an enterprise wide license to use open Aiyes, chat
Speaker 1: GBT tool, I mean everybody, it's everywhere. It's amazing, and
Speaker 1: I mean, you know what, there's been hype around AI
Speaker 1: for years, but it's just really reached this Chriscendow. We
Speaker 1: kind of reminds me of when companies would just started
Speaker 1: adding blockchain to the name of recover dot comsccer dot com.
Speaker 1: So it's you know, it's hard not to imagine that
Speaker 1: maybe people get a little carried away with this. All right,
Speaker 1: so we want to talk about this, We want to
Speaker 1: talk about VC more broadly. We've got a perfect guest,
Speaker 1: Alison Baumgate. She's general partner at Sempervirens, where she invests
Speaker 1: in technology transforming companies in work, health and financial wellness.
Speaker 1: She is with us via Zoom in San Francisco. She's
Speaker 1: get a book out, Breaking into Venture, an outsider turned
Speaker 1: venture capitalist, shares how to take risks, create power, and
Speaker 1: build life changing wealth. Alison, Welcome, Welcome, Nice to have
Speaker 1: you here with us. First of all, we can start broadly,
Speaker 1: what is the environment today for investing in startups? Is
Speaker 1: it a good one? Today is actually the best time
Speaker 1: in recent history to invest in startups. The venture capital
Speaker 1: industry has gone through a lot of changes over the
Speaker 1: last several decades, but the best businesses tend to be
Speaker 1: built in recessions. And not that we're technically in a recession,
Speaker 1: but when you see a pullback, and it's a lot
Speaker 1: easier to determine which companies are actually building real value
Speaker 1: as opposed to just increasing their valuation, because there are
Speaker 1: a lot of investors around the table, and these are
Speaker 1: the times when it's easier to find that signal from
Speaker 1: the noise, you know, alsa it seems like a year
Speaker 1: or two ago there was so much buzz towards Crypto
Speaker 1: and Web three in the VC space. How's the vibe
Speaker 1: there for that now? Is it? You know? Is that
Speaker 1: all sort of gone away? Is is there any funding
Speaker 1: being done for crypto and Web three businesses these days?
Speaker 1: It's definitely cooled off significantly, and we've seen a lot
Speaker 1: of the excitement and the hype cycle around Crypto and
Speaker 1: Web three now moved toward AI in generative AI pre
Speaker 1: your point earlier. But what I think, it's what's really
Speaker 1: important for investors and entrepreneurs to understand, and is the
Speaker 1: reason why I wrote this book, is that venture capital
Speaker 1: is an industry that has hype cycle after a hype cycle,
Speaker 1: and that is inevitable, and so being able to understand
Speaker 1: how to navigate some of the some of that excitement
Speaker 1: and put it in context for yourself when you're deciding
Speaker 1: whether to take a job at a technology company, whether
Speaker 1: to invest in a technology company, whether it to start one.
Speaker 1: You have to be able to sift through that and
Speaker 1: understand how the industry works if you're going to figure
Speaker 1: out what to actually pay attention to. I love, let's
Speaker 1: go there. You said, you know, to figure out what's
Speaker 1: hype and what's not. What is hype in this environment?
Speaker 1: What's not AI not hype? I think everybody in venture
Speaker 1: agrees that AI is incredibly exciting. As you said, it's
Speaker 1: been around for a long time, but we've clearly crossed
Speaker 1: a threshold very recently where it can start to have
Speaker 1: some more exciting commercial applications. But again, the mission of
Speaker 1: this book is to try to open up the venture
Speaker 1: capital industry, make it apparent how it operates, what incentives
Speaker 1: are at stake, so that we can bring more types
Speaker 1: of people around the table. We're at a moment in
Speaker 1: time right now with AI where the business model behind
Speaker 1: some of its applications is going to determine who it affects,
Speaker 1: how it affects them, how it grows and change over time,
Speaker 1: and it's going to be affecting us for generations. And
Speaker 1: we need more types of perspectives, more types of people
Speaker 1: around the table talking about what business model makes the
Speaker 1: most sense, because it is the venture investors behind some
Speaker 1: of these companies that determine what the business models are
Speaker 1: and that has implications for society more broadly. So I
Speaker 1: think it's important that society is reflected in venture capital
Speaker 1: funds as well. Are you saying I mean to be fair, right,
Speaker 1: AI has been out there for a while, but we're
Speaker 1: taking into another level. Is it fair to say that
Speaker 1: we really don't know exactly how it's going to impact
Speaker 1: this and we're all kind of in this giant lab
Speaker 1: right now. Absolutely, That's the exciting thing about disruption is
Speaker 1: you just don't know exactly where it's going to go.
Speaker 1: But that's where the diversity of perspectives is really critical,
Speaker 1: you know. And alson the other obvious buzzworthy thing in
Speaker 1: VC was medical healthcare type of spaces after the pandemic?
Speaker 1: Is that where where does that stand now? Is there
Speaker 1: still a lot of buzz or hype around, you know,
Speaker 1: startups dealing with sort of COVID or the next virus
Speaker 1: that we have to worry about type of situation. We
Speaker 1: invest in digital healthcare, and COVID created a variety of
Speaker 1: catalysts for adoption of new technology in the space. You know,
Speaker 1: when we evaluate a business, we look at five t
Speaker 1: s in our diligence process. We look at technology, team terms,
Speaker 1: TAM and most importantly, timing. And there are a lot
Speaker 1: of great ideas that just have the wrong timing. But COVID,
Speaker 1: I think, unlocked a lot of reimbursement models, you know,
Speaker 1: made it possible to do virtual care, which has changed
Speaker 1: a lot of the landscape around healthcare. So I think
Speaker 1: we're still really excited about how that has disrupted the
Speaker 1: industry for the better. But there are a lot of
Speaker 1: businesses that we had that had that thought they had
Speaker 1: product market fit, but they actually had COVID market fit.
Speaker 1: And I think some of those are getting sorted out
Speaker 1: from the group now, you know, it takes sense. It's interesting.
Speaker 1: I'm thinking if folks are listening to you, right, and
Speaker 1: there's a lot of folks who come out with NBA's
Speaker 1: and they don't necessarily go to Wall Street anymore. If
Speaker 1: they do, it's kind of a touch and go, and
Speaker 1: then they go out to the venture capital world. Right,
Speaker 1: And I know, certainly think about your own experience, Right,
Speaker 1: you were at Goldman and you know here you are.
Speaker 1: But what I'm wondering is when you think about companies
Speaker 1: who are buying, maybe it's older line companies, Like I'm
Speaker 1: thinking about a weight watchers right that bought a telehealth provider.
Speaker 1: Yesterday we saw the stock sore on the news, Like, how,
Speaker 1: what is your advice to folks who are looking at
Speaker 1: kind of trying to figure out where to go? Is
Speaker 1: this an old line company, but they're doing some cool
Speaker 1: things that are innovative? How to innovative? Excuse me? So,
Speaker 1: how do you what's your advice on that? That's a
Speaker 1: lot of what we cover in the book, and of course,
Speaker 1: on its cover, it's geared toward anyone that wants to
Speaker 1: break into venture capital, but the concepts actually apply to
Speaker 1: any kind of career and figuring out where you want
Speaker 1: to place your bets. Right, if you take a job
Speaker 1: at a company, you're actually investing your time and your
Speaker 1: reputation with that company as well. So It is very
Speaker 1: similar to the venture model in that way, and a
Speaker 1: lot of what I encourage individuals to do, whether you're
Speaker 1: an entrepreneur, professional or a venture capitalist, is to do
Speaker 1: your homework and understand what exactly you're joining, what that
Speaker 1: looks like, and then what it means for you in
Speaker 1: the future. Does it open up more possibilities or will
Speaker 1: it shut off possibilities for you? So my advice is
Speaker 1: to surround yourself with people that can help you figure
Speaker 1: out what makes most sense and what's going on behind
Speaker 1: the curtain, because everybody knows how to tell a great story,
Speaker 1: but what really matters is who's pulling the strings and
Speaker 1: what kind of power they have and what that means
Speaker 1: for you. Yeah, Alison, you know, obviously the markets this
Speaker 1: year have been so laser focused on these surging interest rates.
Speaker 1: I'm wondering if does that have a chilling effect on
Speaker 1: early stage VC or not. You know, there's just so
Speaker 1: much dry powder that it doesn't really matter. Absolutely it
Speaker 1: has an impact. I mean, we're investing in growth businesses
Speaker 1: right and the cost of capital is a really big
Speaker 1: factor and how quickly companies can grow and how they're valued,
Speaker 1: and I think the current environment the compression multiples in
Speaker 1: the public markets is going to have the biggest impact
Speaker 1: on later stage companies that have raised a lot of
Speaker 1: capital already and have raised at valuations that were based
Speaker 1: on assumed revenue rates that they hadn't yet reached, and
Speaker 1: now the environment is different, and so that has a
Speaker 1: waterfall effect. But when it comes to investing at the
Speaker 1: very early stages, and you're investing in new companies that
Speaker 1: haven't raised a lot of capital, that haven't made those
Speaker 1: promises to their investors yet, now is an incredible time
Speaker 1: to do that because they have a clean slate and
Speaker 1: they don't have that baggaged dragging them back. So it
Speaker 1: actually creates an opportunity for new businesses to disrupt incumbents
Speaker 1: in a way that it might have been harder when
Speaker 1: capital was a moat. All right, well, great to check
Speaker 1: in with you. Allison bab Gate is general partner at Sempervirens.
Speaker 1: Joining us via Zoom from San Francisco. This is Bloomberg
Speaker 1: business Week inside from the reporters and editors who bring
Speaker 1: you America's most trusted business magazine, plus global business, finance
Speaker 1: and tech news. The Bloomberg Business Week Podcast with Carol
Speaker 1: Masser and Tim Stenebec from Bloomberg Radio. Roommchael a journal now,
Speaker 1: but you let me drive? Oh no, no, no, no,
Speaker 1: who's home? Honey? Please, I'll do the riding drivels. Let me.
Speaker 1: I want to drive. It's good question. This is the
Speaker 1: drive to the clothes. Do concomunic well, Briar Joga down
Speaker 1: on Bloomberg Radio. All right, everybody, just about seventeen and
Speaker 1: a half minutes left in today's trading session. Check this out,
Speaker 1: microcin some buying here in the last eighteen minutes of
Speaker 1: trading on the equity side. Mind you, we're still well
Speaker 1: off our best levels of the session, but you know
Speaker 1: we're up about a quarter of a percent on the nasdack. Yeah,
Speaker 1: THAT'SMP about flat five. You know someone's behind the tip,
Speaker 1: I guess. Yeah, it's kind of interesting to see. But
Speaker 1: a few more minutes left in the trade. On day
Speaker 1: two of J Powell tested testimony, some strong labor reports
Speaker 1: as well. So let's get to it. Let's get to
Speaker 1: our drive to the closed guests. Sonja Meskin is head
Speaker 1: of US Macro at bnymel And Investment Management, former senior
Speaker 1: financial expert at the IMF, also spent some six years
Speaker 1: at the New York FED working on analytics. Perfect guest
Speaker 1: to have us on this FED Wednesday and also on
Speaker 1: International Women's Day. She joins us via zoom in New
Speaker 1: York City, Sonia. So good to have you here with us.
Speaker 1: We are living an interesting time. Stuff coming at us.
Speaker 1: How do you make sense of the macro conditions of
Speaker 1: this market environment? Yeah, you know, it's indeed very very interesting,
Speaker 1: him say, with anticipated markets to be evolved all this year,
Speaker 1: that is exactly what has spared so far. I think
Speaker 1: there's certainly a tension in the macro data between the
Speaker 1: you know, the fat tightening, but also the underlying strength
Speaker 1: of the US economy, especially the US consumer, as inflation
Speaker 1: remains elevated, of course, but also does continue to decline
Speaker 1: within real incomes will actually be fairly solid this year,
Speaker 1: barring massive way of Senator recession. So certainly very very
Speaker 1: interesting times. I think the outlook for risk assets for
Speaker 1: me is quite uncertain. Area wait environment hanging on a second,
Speaker 1: Because you said you expected volatility, We're getting it. I've
Speaker 1: got a VIX it's below twenty. What's up with that?
Speaker 1: You know? I do think that there is certainly some
Speaker 1: optimism regarding the equity market, I think that investors are
Speaker 1: now pricing in to some extent, a more hawky shred.
Speaker 1: But on the other hand, the US economic resilience indicates
Speaker 1: that we might be able to withstand that. You know, Sonya.
Speaker 1: It seems like almost every day we see news about
Speaker 1: more big layoffs from the tech industry or even Wall Street.
Speaker 1: Yet I look at these job numbers that keep coming
Speaker 1: in today. The ADP employment number two hundred and forty
Speaker 1: two thousand jobs added in February, way higher than expected.
Speaker 1: That jolts job openings at ten point eight million. What
Speaker 1: explains this sort of disconnect between the anecdotal headlines about
Speaker 1: layoffs and how this labor market just continues to be
Speaker 1: so red hot according to the official numbers. Of course,
Speaker 1: I think there is some sexual rotation going on in
Speaker 1: the US economy as well. We saw the tech companies
Speaker 1: did vary very well during the pandemic because mobility was low,
Speaker 1: why people still had money to spend. Certainly those sectors
Speaker 1: hired quiet, you know, strongly. There was the finitely run
Speaker 1: up in crypto. It's all for example, those transtend to
Speaker 1: you know, not last permanently, and they're currently onlinding, but
Speaker 1: those are very specific sectors and we really haven't seen
Speaker 1: this the layoff spread to the rest of the economy.
Speaker 1: And what we're hearing instead from most sectors is that
Speaker 1: workers remain hard to source and that even if we
Speaker 1: do enter a recession, that labor hoarding is a real risk.
Speaker 1: So are you expecting another very strong jobs report on Friday?
Speaker 1: And you know that is that just another good news
Speaker 1: is bad news type of situation for equity markets. I
Speaker 1: think that you know, there was definitely some seasonality that
Speaker 1: boosted the numbers in January, but I do think the
Speaker 1: labor market is in fact quite strong, So I think
Speaker 1: we we'll see maybe not as as highway headline number
Speaker 1: on Friday, but we'll see a strong number. You know.
Speaker 1: It's interesting too, and folks much smarter than me, and
Speaker 1: I am thinking about our Neil data. Renaissance Macro sending
Speaker 1: out a note and he's like, remarkable that homebuilder and
Speaker 1: homebuilding stocks are holding up. He had mortgage rates increasing
Speaker 1: for a fourth week, the highest level since mid November.
Speaker 1: Mortgage bankers putting that out, and yet I'm looking at
Speaker 1: the group of homebuilder stocks up one point six percent.
Speaker 1: So we know, the Fed's going to continue raising rates.
Speaker 1: We're talking about maybe the possibility, good chance that we're
Speaker 1: going to have a recession. So again, how am I
Speaker 1: supposed to as an investor read that signal? Sonya, Well,
Speaker 1: I think the housing market is a very interesting market.
Speaker 1: There is certainly, you know, in the past, through of
Speaker 1: monetary policy to the real economy. The real estate sector,
Speaker 1: specifically residential real estate is one of those key sectors
Speaker 1: that gets you know, feels the monetary policy tightening. But
Speaker 1: that is a cyclical issue and it always falls against
Speaker 1: the structural background of what's going on in that sector.
Speaker 1: And what we're facing today is almost the opposite of
Speaker 1: what we were facing in two thousand and eight, two
Speaker 1: thousand and sevent, two thousand and eight, when um, you
Speaker 1: know race. You know, obviously the FED had been in
Speaker 1: a tightening cycle, but we really had access capacity in
Speaker 1: a sector. We had the froth that this time around
Speaker 1: we had encrypto, but then we had it in the
Speaker 1: housing sector in the US, which was obviously for the
Speaker 1: rest of the economy much more pervasive. Um, the stem around,
Speaker 1: we're having a structural shortage. We hadn't been building nearly
Speaker 1: as much as what you know, demand would be consistent
Speaker 1: with us to just apply to band once again out
Speaker 1: of balance in home building. And it's exactly exactly. And
Speaker 1: you know what actually ends up happening is that when
Speaker 1: those mortgage URIs get high, we still know sellers might
Speaker 1: not be as interested in selling it somewhat lower prices.
Speaker 1: But if you look at the run up in prices
Speaker 1: we've had since COVID, we've barely put it done to that.
Speaker 1: You know, Sonya, Everyone I talked to seems to say
Speaker 1: the same thing in that is, when the FED hikes
Speaker 1: rates aggressively, they tend to break something. And I'm wondering,
Speaker 1: it doesn't seem like anything's broken yet. Maybe you know
Speaker 1: market returns last year, but from the pure economic you
Speaker 1: know inputs, is anything breaking or where what would you
Speaker 1: look to sort of break first? I just got about
Speaker 1: thirty seconds of course, Well, I think that crypto is
Speaker 1: long area and where I've seen we're certainly seeing something there.
Speaker 1: You know, I would look at the private credit area.
Speaker 1: I do think things are fairly solid there overall. I
Speaker 1: think firms generally have turned out funding. But you know,
Speaker 1: the longer we staying in the high rate environment and
Speaker 1: the sooner we get towards a point where firms have
Speaker 1: to roll over debt, the more you're probably going to
Speaker 1: see some difficulty rolling over into the high rate environment. Well,
Speaker 1: it makes your job and our job really interesting, all
Speaker 1: of this stuff that's going on, Sonia, thank you so much,
Speaker 1: So appreciate it. Sonia Maska. She's head of US Macro
Speaker 1: at B and Y Mail and Investment Management, joining SB
Speaker 1: zoom in New York City. This is the Bloomberg Business
Speaker 1: Week podcast, available on Apple, Spotify, and anywhere else you
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Speaker 1: pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In,
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