WEBVTT - Nvidia Sales Grow So Fast That Wall Street Can’t Keep Up

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Business

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<v Speaker 1>Wait inside from the reporters and editors who bring you

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<v Speaker 1>America's most trusted business magazine, plus global business, finance and

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<v Speaker 1>tech news. The Bloomberg Business Week Podcast with Carol Messer

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<v Speaker 1>and Tim Stenebek from Bloomberg Radio.

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<v Speaker 2>We're going to stay with Nvidia. Charlie setting us up

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<v Speaker 2>really well. It is down about three days in a row,

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<v Speaker 2>not about it is down three days in a row.

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<v Speaker 2>That is confirmed, done, and it's a drop of about

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<v Speaker 2>twelve percent, so putting it past that ten percent threshold

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<v Speaker 2>that represents a correction on track to wipe out about

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<v Speaker 2>four hundred billion dollars, pushing its market cap below three

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<v Speaker 2>trillion dollars. I was thinking about our weekend last week,

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<v Speaker 2>how we said largest market cap, most valuable company. Then

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<v Speaker 2>it went back, So it was kind of that back

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<v Speaker 2>and forth, if you will.

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<v Speaker 3>Okay, but for context here, it still is up one

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<v Speaker 3>hundred and forty four percent so far this year of

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<v Speaker 3>stock in the s and P five hundred at shares

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<v Speaker 3>trading for roughly twenty three times the companies projected sales

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<v Speaker 3>over the next twelve months.

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<v Speaker 2>Carol right, but as our team writes Tim, there's a

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<v Speaker 2>problem with the evaluation in the age of the AI boom.

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<v Speaker 2>No one can really figure out what the chip makers

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<v Speaker 2>revenues are actually going to be. Not the Wall Street

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<v Speaker 2>analysts covering Nvidia or Nvidia execs themselves again our Bloomberg

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<v Speaker 2>team reporting that out. So how our investors supposed to

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<v Speaker 2>calculate whether or not the shares are expensive or not.

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<v Speaker 2>So here to help us tackle that question and really

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<v Speaker 2>get once again to the fundamental story that is Nvidia

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<v Speaker 2>is Bloomberg Inte Intelligence Senior Semiconductor analyst Cujohn Sabani. He

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<v Speaker 2>is with us from San Francisco. Cujonkundon, It's good to

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<v Speaker 2>have you here.

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<v Speaker 4>We do talk with you a.

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<v Speaker 2>Lot about Nvidia and the fundamental story. Remind us of

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<v Speaker 2>that and how you see it fundamentally, what is Nvidia

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<v Speaker 2>and the outlook for this company?

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<v Speaker 5>And I want to bring back to sort of the numbers,

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<v Speaker 5>right like, whenever we are deviating, whether it's a hype

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<v Speaker 5>or not, look at the numbers. Going back to sort

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<v Speaker 5>of end of twenty twenty two, early twenty twenty three,

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<v Speaker 5>when chad GPD really came alive in the world. If

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<v Speaker 5>you look at Nvidia's numbers, right it had about per

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<v Speaker 5>quarter revenue of about seven billion, approximately ten cents of earnings.

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<v Speaker 5>This is when the first time they started to see

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<v Speaker 5>their data center revenue from which is all the AI

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<v Speaker 5>really jump fast forward to right now, most recent the

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<v Speaker 5>revenues have increased ford x EPs has increased about seven

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<v Speaker 5>seven and a half x, and as of today, the

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<v Speaker 5>market cap from that point, which was five hundred billion

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<v Speaker 5>sort of six x. So if you look at the

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<v Speaker 5>numbers there is really it was really a fundamental driven story.

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<v Speaker 5>So that at least should help sort of clarify some

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<v Speaker 5>of these high versus reality and fundamentals, whether it justifies

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<v Speaker 5>or not.

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<v Speaker 3>Okay, well, speaking of justification, a lot of people talk

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<v Speaker 3>about the idea of Nvidia having this nobody else is

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<v Speaker 3>doing what it's able to do when it comes to

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<v Speaker 3>building the hardware that all these companies need to train

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<v Speaker 3>their AI models on. Kun John, So, I'm wondering about

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<v Speaker 3>when you think about projecting revenues from a Bloomberg intelligence

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<v Speaker 3>analyst perspective here, how are you projecting revenues out over

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<v Speaker 3>the next few quarters, over the next few years. How

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<v Speaker 3>are you thinking about.

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<v Speaker 5>That yeah, I mean similar to most Seals head handlers.

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<v Speaker 5>We have also struggled to get to the right number

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<v Speaker 5>every quarter for them, and they keep on beating in raising.

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<v Speaker 5>There's a few factors. Year one, as you must have

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<v Speaker 5>heard this so many times, they continue to remain supply constraints,

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<v Speaker 5>so that's difficult for us to know right like how

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<v Speaker 5>much supply will come up and how much they can execute.

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<v Speaker 5>And second, we keep looking at the spending pattern of

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<v Speaker 5>their largest customers. I mean, look in twenty twenty four,

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<v Speaker 5>their largest hyper scale and cloud customers have already publicly

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<v Speaker 5>announced that they are going to increase their CAPEX by

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<v Speaker 5>forty percent year over year. And now there's even more

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<v Speaker 5>than that. There's the Tier two cloud providers, the AI

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<v Speaker 5>cloud providers, and enterprise spending coming on. So we try

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<v Speaker 5>to keep a close eye to see if there is

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<v Speaker 5>any signs of demand slowing, which we don't see at

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<v Speaker 5>this point.

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<v Speaker 2>What's the replacement cycle for chips for nvideo, like how

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<v Speaker 2>long do they last? How long will they upgrade? You know,

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<v Speaker 2>and video talks about kind of the upgrade cycle being

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<v Speaker 2>pretty quick one. So I'm just curious. I'm curious. So

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<v Speaker 2>these companies that are the big spenders and that are

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<v Speaker 2>building it out. Are they going to have to replace

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<v Speaker 2>their N video chips? I don't know, every six months,

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<v Speaker 2>twelve months, two years, I don't know.

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<v Speaker 5>Yeah, that would be a good answer. When if you

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<v Speaker 5>are in a normalized cycle for any chip like you

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<v Speaker 5>are in CPUs or for handsets. The challenge right now

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<v Speaker 5>is every all of the customers are just rushing to

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<v Speaker 5>get most powerful chips they can get their hands on

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<v Speaker 5>and continue building. So we have to wait and reach

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<v Speaker 5>a digestion phase where they sort of reach a normalized

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<v Speaker 5>spending period and they start thinking about, Okay, now I'm

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<v Speaker 5>going to refresh my older AI chips. So right now,

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<v Speaker 5>I think the replacement cycle is really short, even if

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<v Speaker 5>you want to call it a replacement cycle. And as

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<v Speaker 5>they come out with the newer black Well chips, their

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<v Speaker 5>newer Gray Shopper, you know, two hundred ceries, customers are

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<v Speaker 5>just picking them up and trying to put in as

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<v Speaker 5>fust as possible. Because the the biggest gating factor right now

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<v Speaker 5>in upgrading these AI serversus power. So every new chip

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<v Speaker 5>brings a lot more TCO, a lot more power per

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<v Speaker 5>performance efficiencies.

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<v Speaker 3>John, we can't let you go without asking you about

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<v Speaker 3>potential competition here in the space. It's something we ask

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<v Speaker 3>Ian King a lot about who else out there is

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<v Speaker 3>doing something at least on the development side that could

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<v Speaker 3>get close to in video. What's your perspective there, I.

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<v Speaker 5>Mean on the merchants silicon it's the only other name

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<v Speaker 5>viable contender there is AMD, which we've talked about multiple times. Again,

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<v Speaker 5>they are also sub but look, the system software more

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<v Speaker 5>than in media has even with a good GPU solution,

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<v Speaker 5>it's very hard to beat that. On the other end,

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<v Speaker 5>there's the competition from the A six providers like the

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<v Speaker 5>broadcoms not competing directly with in Nvidia's GPU right now,

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<v Speaker 5>but I think in the long term it is going

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<v Speaker 5>to eat into the wallet share and the dollars spend

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<v Speaker 5>that its customers would be spending on in Vidia GPUs versus.

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<v Speaker 2>All right, Kunjhon, I know you don't recommend stocks and

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<v Speaker 2>so on and so forth, but this three day route

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<v Speaker 2>that we've seen that has wiped off about ten percent

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<v Speaker 2>more than ten percent off and Vidia. It's in your view,

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<v Speaker 2>not because the fundamental story is coming undone. Maybe it's,

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<v Speaker 2>you know, for who knows what reason, but it's not

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<v Speaker 2>because fundamentally and Vidia is falling apart.

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<v Speaker 5>Definitely not. We don't see any fundamental flags right now,

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<v Speaker 5>especially over the last week.

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<v Speaker 2>All right, well, said Bloomberg Intelligence Senior semi conductor Alice

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<v Speaker 2>kun John Sabani joining us from San Francisco.

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<v Speaker 3>Well, from the Nvidia narrative to one about the US

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<v Speaker 3>rate environment, and to another. One of the most read

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<v Speaker 3>stories on the Bloomberg today. It's about how, just as

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<v Speaker 3>optimism is growing among investors that are rallying, US treasuries

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<v Speaker 3>is about to take off, one key indicator in the

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<v Speaker 3>bond market is flashing a worrying sign for anyone thinking

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<v Speaker 3>about piling in.

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<v Speaker 2>Yep, let's get into it with Bloomberg News Economics editor

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<v Speaker 2>Molly Smith in studio, also with us as Bloomberg Intelligence

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<v Speaker 2>Chief US Interest rates strategist Ira Jersey. IRA's out there

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<v Speaker 2>at BI headquarters in Princeton, New Jersey. I feel like

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<v Speaker 2>I keep thinking of lost in space, warning, warning, warning,

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<v Speaker 2>and if you're too young to understand, google it. All right, treasuries,

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<v Speaker 2>I know what you're talking about. No, no, no, no,

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<v Speaker 2>I'm just kidding, all right, So treasuries are the customer

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<v Speaker 2>raising their losses for the year guys, signs finally emerging

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<v Speaker 2>that inflation the labor market are both truly cooling. All right,

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<v Speaker 2>let me start with you. Trader's betting that may be

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<v Speaker 2>enough for the Fed to start cutting your test rates

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<v Speaker 2>as soon as September. Is that what we're seeing right now.

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<v Speaker 6>Well, that is what the market's pricing.

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<v Speaker 7>I actually suspect that the Fed will wind up waiting

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<v Speaker 7>until sometime after the election to start its cutting cycle.

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<v Speaker 7>But that's certainly why you've seen this rally. It's not

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<v Speaker 7>because of supply, right. We actually get quite a lot

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<v Speaker 7>of supply the next couple of days.

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<v Speaker 6>But the.

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<v Speaker 7>Fundamentals will still matter to the risk appetite for treasury securities.

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<v Speaker 7>They're still the most liquid, safest asset in the world.

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<v Speaker 7>So when you have people who think that the economy

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<v Speaker 7>is going to be going to be slipping and people,

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<v Speaker 7>you know, want to just find a safe haven, they're

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<v Speaker 7>still going to find treasuries.

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<v Speaker 3>Okay, So let's talk a little bit about this idea

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<v Speaker 3>that's raised in this article by our own Liz McCormick.

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<v Speaker 3>The growing view that markets and that the economy is

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<v Speaker 3>so called neutral rate, the theoretical level of borrowing costs

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<v Speaker 3>that neither stimulates nor slows growth. Is actually much higher

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<v Speaker 3>than policymakers are currently projecting, the idea that we are

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<v Speaker 3>going to be high for longer or high for forever. Ara,

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<v Speaker 3>what are you seeing when it comes to that front.

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<v Speaker 7>Yeah, this has been something that people in the market

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<v Speaker 7>have been talking about for years, you know, basically since

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<v Speaker 7>twenty twenty two and the inflation scare. It's you know,

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<v Speaker 7>if the neutral rate used to be, say one percent,

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<v Speaker 7>it's probably meaningfully higher than that today because we have,

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<v Speaker 7>you know, significant shifts in the fundamentals of the economy.

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<v Speaker 7>Not to mention the fact that we do have additional

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<v Speaker 7>you know, pressures on trade flows and the like.

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<v Speaker 6>You no longer have the.

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<v Speaker 7>Globalization keep it to keep prices low for certain items.

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<v Speaker 7>So the general consensus among almost every market participant is

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<v Speaker 7>that it is higher than what it was for the

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<v Speaker 7>last decade.

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<v Speaker 6>The question is how high, right, is.

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<v Speaker 7>It a two and a half percent more or less

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<v Speaker 7>where the Fed thinks, or is it more like three

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<v Speaker 7>and a half percent.

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<v Speaker 6>There are a lot of people who believe that that's

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<v Speaker 6>the case.

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<v Speaker 7>Now, I actually think my view is that it is

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<v Speaker 7>closer to two and a half percent than it is

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<v Speaker 7>to three and a half or four.

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<v Speaker 6>But you know the.

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<v Speaker 7>Fact that a large part of the market and many

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<v Speaker 7>market participants think that it might be somewhat higher. Maybe

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<v Speaker 7>the FED can only cut interest rates by one hundred

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<v Speaker 7>and fifty or two hundred basis points to get to neutral,

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<v Speaker 7>will you know, will matter? And that is in a

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<v Speaker 7>lot of people's market narratives.

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<v Speaker 2>Molly, come on in.

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<v Speaker 8>Yeah, I mean there are definitely Fed officials too, for

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<v Speaker 8>what it's worth, who will say that the longer term

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<v Speaker 8>neutral rate or what we call an economic circle our star.

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<v Speaker 8>If you want to get a little wonky with the jargon,

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<v Speaker 8>there is that they will even say themselves that they

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<v Speaker 8>probably think that rate is higher than one it used

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<v Speaker 8>to be. But I mean, Ira just want to clarify

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<v Speaker 8>this with you too, that our star is not necessarily

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<v Speaker 8>the terminal rate here, right, I mean, those could be

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<v Speaker 8>two different numbers of where the FED cuts to in

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<v Speaker 8>this cycle versus the longer neutral rate over time.

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<v Speaker 6>Yeah, that's that's right, Molly.

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<v Speaker 7>So if you think about where no one really knows

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<v Speaker 7>where our star is, right, it does. You can't know

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<v Speaker 7>at x ante because the fact is that the economy moves.

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<v Speaker 7>There's a lot of moot changes that will happen over

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<v Speaker 7>the next two three five years for determining you.

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<v Speaker 6>Know, where is the is our star?

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<v Speaker 7>So you know, if let's say that our star is

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<v Speaker 7>three percent right, just as a number, then presumably in

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<v Speaker 7>a weak economic scenario, the Fed Reserve will cut to

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<v Speaker 7>below that number in order to try to stimulate the economy.

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<v Speaker 6>But again, no one really knows exactly where our star is.

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<v Speaker 7>Our store in the nineteen eighties was much different than

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<v Speaker 7>our store in the nineteen sixties or nineteen fifties, and

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<v Speaker 7>that we can empirically know because we have economic evidence

0:11:02.080 --> 0:11:04.120
<v Speaker 7>of where both short.

0:11:03.960 --> 0:11:05.800
<v Speaker 6>Term interistrates were and long term interistrates.

0:11:06.040 --> 0:11:08.240
<v Speaker 7>The other thing that I think is missed by a

0:11:08.240 --> 0:11:11.880
<v Speaker 7>lot of these discussions about our star is that the

0:11:12.880 --> 0:11:16.400
<v Speaker 7>financial system and the way that we fund is meaningfully

0:11:16.400 --> 0:11:18.880
<v Speaker 7>different now than it even was ten years ago or

0:11:18.920 --> 0:11:22.600
<v Speaker 7>even twenty years ago. No one funds, no corporation funds,

0:11:22.679 --> 0:11:25.720
<v Speaker 7>was short term debt anymore. This doesn't happen, right, so

0:11:26.080 --> 0:11:28.040
<v Speaker 7>is our star where the FED funds rate. That's going

0:11:28.120 --> 0:11:31.440
<v Speaker 7>to have a much different effect on a corporate business

0:11:31.440 --> 0:11:33.760
<v Speaker 7>and capex and I like today than it did twenty

0:11:33.800 --> 0:11:36.360
<v Speaker 7>five years ago when twenty five or thirty percent of

0:11:36.440 --> 0:11:39.360
<v Speaker 7>industrial debt was short term debt that was going to

0:11:39.400 --> 0:11:42.199
<v Speaker 7>be affected almost immediately by what the FED did.

0:11:42.200 --> 0:11:42.880
<v Speaker 6>It's a really good.

0:11:42.800 --> 0:11:44.480
<v Speaker 4>Point just to build on that a bit.

0:11:44.520 --> 0:11:46.880
<v Speaker 8>I believe it was Adrianna Kugler, a FED governor who

0:11:46.920 --> 0:11:49.200
<v Speaker 8>was speaking last week or she was kind of alluding

0:11:49.200 --> 0:11:51.719
<v Speaker 8>to this as well in saying that, you know, our

0:11:51.800 --> 0:11:55.280
<v Speaker 8>star is not what dictates monetary policy. It like to

0:11:55.320 --> 0:11:57.439
<v Speaker 8>Iver's point, you know, like this is just like I

0:11:57.600 --> 0:11:59.560
<v Speaker 8>want to say, like imaginative, but it's really just more

0:11:59.600 --> 0:12:02.440
<v Speaker 8>of like a concept, like in theory rather than in practice.

0:12:02.440 --> 0:12:05.040
<v Speaker 8>And like what's more useful for policy makers is how

0:12:05.080 --> 0:12:08.800
<v Speaker 8>to understand how restrictive policy is right now in the

0:12:08.800 --> 0:12:11.600
<v Speaker 8>short term, rather than estimating the neutral rate of interest

0:12:11.760 --> 0:12:12.480
<v Speaker 8>in the long term.

0:12:12.520 --> 0:12:15.200
<v Speaker 2>Well to that, I mean, the FED has aggressively raised

0:12:15.240 --> 0:12:17.200
<v Speaker 2>rates in the last year. We know that right before

0:12:17.240 --> 0:12:20.440
<v Speaker 2>stopping the growth. US growth has not fallen off a cliff.

0:12:21.320 --> 0:12:22.839
<v Speaker 2>US jobs market. I know there's a little bit of a

0:12:22.920 --> 0:12:25.640
<v Speaker 2>debate out there, but it still seems tight, which makes

0:12:25.679 --> 0:12:29.280
<v Speaker 2>one wonder, molly if the FED policy is not restrictive

0:12:29.440 --> 0:12:31.840
<v Speaker 2>enough right now and suggests that the neutral rate needs

0:12:31.840 --> 0:12:32.600
<v Speaker 2>to be higher.

0:12:32.880 --> 0:12:34.920
<v Speaker 8>And then you also have the camp though, who's arguing

0:12:34.960 --> 0:12:37.720
<v Speaker 8>that monetary policy acts with long and variable legs.

0:12:38.480 --> 0:12:42.240
<v Speaker 4>Well, just to throw that out there, but we all

0:12:42.280 --> 0:12:42.680
<v Speaker 4>want to know.

0:12:43.360 --> 0:12:46.280
<v Speaker 8>But no, that's exactly it, though, right, And that's exactly why,

0:12:46.320 --> 0:12:49.080
<v Speaker 8>like you are, you're also wondering too, just like of

0:12:49.120 --> 0:12:52.360
<v Speaker 8>the efficacy of policy in general, and like the transmission method,

0:12:52.440 --> 0:12:55.040
<v Speaker 8>and like, do we have an economy that's just structurally

0:12:55.120 --> 0:12:58.679
<v Speaker 8>more resistant to higher interest rates now than we did

0:12:58.880 --> 0:13:01.960
<v Speaker 8>in past tightening cycle? That's also a possibility. And you

0:13:02.000 --> 0:13:05.160
<v Speaker 8>look at like the percentage of homesit that are mortgage free,

0:13:05.320 --> 0:13:08.080
<v Speaker 8>and you know, people who maybe are not relying as

0:13:08.160 --> 0:13:10.160
<v Speaker 8>much on credit cards, and like these ways that would

0:13:10.200 --> 0:13:14.360
<v Speaker 8>actually like affect consumers more directly, and it's clearly not

0:13:14.520 --> 0:13:16.920
<v Speaker 8>showing up in more clear signs of stress in those

0:13:16.920 --> 0:13:17.760
<v Speaker 8>parts of the economy.

0:13:17.840 --> 0:13:19.760
<v Speaker 2>I wrote, let me just what happened to the neutral

0:13:19.800 --> 0:13:21.000
<v Speaker 2>rate during the vulgar era?

0:13:22.480 --> 0:13:26.080
<v Speaker 7>Well, so the neutral rate was probably much higher, right,

0:13:26.200 --> 0:13:29.080
<v Speaker 7>was probably more like six or seven percent. But part

0:13:29.120 --> 0:13:31.640
<v Speaker 7>of that was that there was much structurally higher inflation.

0:13:31.800 --> 0:13:34.960
<v Speaker 7>And to one of Molly's points, you know the the

0:13:35.480 --> 0:13:38.480
<v Speaker 7>you know how those long and variable lags of monetary

0:13:38.520 --> 0:13:39.760
<v Speaker 7>policy are going to affect things.

0:13:39.800 --> 0:13:41.880
<v Speaker 6>Goes back to what I was saying.

0:13:41.720 --> 0:13:45.880
<v Speaker 7>Earlier about who has the debt, what sectors are doing well.

0:13:46.200 --> 0:13:49.000
<v Speaker 7>If you look at inflation today, inflation right now is

0:13:49.080 --> 0:13:52.719
<v Speaker 7>driven almost one hundred percent by services, which is two factors, right,

0:13:52.720 --> 0:13:55.719
<v Speaker 7>It's housing services and then non housing services, right, But

0:13:56.400 --> 0:14:00.800
<v Speaker 7>the non housing service part of the economy is not

0:14:01.000 --> 0:14:03.880
<v Speaker 7>affected by debt. Most people don't borrow money to start

0:14:03.920 --> 0:14:06.760
<v Speaker 7>services businesses or to expand services businesses.

0:14:07.040 --> 0:14:08.400
<v Speaker 6>They use cash on hand.

0:14:08.760 --> 0:14:10.839
<v Speaker 7>So the thing is is that you're not going to

0:14:10.840 --> 0:14:13.160
<v Speaker 7>see a significant slowdown now. It's much different than the

0:14:13.240 --> 0:14:17.640
<v Speaker 7>nineteen seventies or nineteen eighties when companies were levering themselves

0:14:17.720 --> 0:14:22.000
<v Speaker 7>and borrowed a lot of money in order to invest

0:14:22.000 --> 0:14:25.200
<v Speaker 7>in their businesses and expand that's just not the case today.

0:14:25.640 --> 0:14:28.760
<v Speaker 7>So the fact is is that we've shifted a significant

0:14:28.800 --> 0:14:31.720
<v Speaker 7>amount of the way that the economy functions, where interest

0:14:31.800 --> 0:14:35.080
<v Speaker 7>rates are more at least in my opinion, are much

0:14:35.120 --> 0:14:38.000
<v Speaker 7>more of a sentiment kind of indicator as opposed to

0:14:38.400 --> 0:14:41.880
<v Speaker 7>having real effects on the economy, just because of the

0:14:41.920 --> 0:14:46.600
<v Speaker 7>structural shifts and how we do business today versus previous generations.

0:14:46.640 --> 0:14:50.400
<v Speaker 3>Okay, so on this, Molly, I'm curious about the reads

0:14:50.440 --> 0:14:52.120
<v Speaker 3>we get later this week when it comes to the

0:14:52.120 --> 0:14:55.800
<v Speaker 3>Fed's preferred gauge of underlying inflation. What's expected here and

0:14:55.840 --> 0:14:57.360
<v Speaker 3>how could this sort of change the outlook?

0:14:57.600 --> 0:15:00.360
<v Speaker 8>Yeah, so it's probably going to be another favorable inflation print.

0:15:00.400 --> 0:15:03.240
<v Speaker 8>I think most economists are penciling in just a one

0:15:03.320 --> 0:15:07.360
<v Speaker 8>tenth increase in the core PCEE inflation gauge. So that

0:15:07.400 --> 0:15:10.680
<v Speaker 8>would be I think the smallest since November and pretty

0:15:10.680 --> 0:15:14.160
<v Speaker 8>consistent with what we saw from the CPI and PPI

0:15:14.280 --> 0:15:17.280
<v Speaker 8>reports a couple of weeks ago. So I mean, look,

0:15:17.320 --> 0:15:19.120
<v Speaker 8>I think like it's I know, we talked about this

0:15:19.200 --> 0:15:21.280
<v Speaker 8>last time too. I still find it just amazing how

0:15:21.360 --> 0:15:24.120
<v Speaker 8>quickly the narrative has changed in terms of how we're

0:15:24.160 --> 0:15:26.960
<v Speaker 8>thinking about inflation here. That we had like the three

0:15:27.000 --> 0:15:29.320
<v Speaker 8>horrible prints at the beginning of the year, we had

0:15:29.520 --> 0:15:31.640
<v Speaker 8>one month that came in as expected, and now one

0:15:31.640 --> 0:15:33.680
<v Speaker 8>month it's better than expected, and all of a sudden,

0:15:33.720 --> 0:15:36.160
<v Speaker 8>inflation has resumed its downward trend. I'm not saying I

0:15:36.200 --> 0:15:39.080
<v Speaker 8>necessarily disagree with that, but it's just amazing how we

0:15:39.280 --> 0:15:41.760
<v Speaker 8>have just we have really just kind of gone back

0:15:41.800 --> 0:15:45.120
<v Speaker 8>to being fully optimistic that inflation is pretty much going

0:15:45.160 --> 0:15:45.680
<v Speaker 8>down again.

0:15:45.880 --> 0:15:48.440
<v Speaker 2>Yeah, it's pretty fascinating something we've talked about. Listen, both

0:15:48.480 --> 0:15:50.200
<v Speaker 2>of you, thank you so much, really setting the right

0:15:50.240 --> 0:15:52.720
<v Speaker 2>tone in terms of this week and what we are

0:15:52.720 --> 0:15:55.680
<v Speaker 2>focusing on. Bloomberg News Economics editor Molly Smith and Bloomberg

0:15:55.720 --> 0:15:58.840
<v Speaker 2>Intelligence Chief US interest rates strategist Ira Jersey.

0:16:00.000 --> 0:16:03.400
<v Speaker 1>We're listening to the Bloomberg Business Week podcast. Catch us

0:16:03.440 --> 0:16:06.680
<v Speaker 1>live weekday afternoons from two to five pm. Easter Listen

0:16:06.720 --> 0:16:08.880
<v Speaker 1>on Apple card Play and then brout Auto with a

0:16:08.920 --> 0:16:13.120
<v Speaker 1>Bloomberg business act or wants us live on YouTube.

0:16:13.480 --> 0:16:17.119
<v Speaker 2>Well, jeff yass not a household name, a libertarian, a billionaire,

0:16:17.160 --> 0:16:21.360
<v Speaker 2>a Wall Street veteran, obsessive poker player, big investor in

0:16:21.560 --> 0:16:23.560
<v Speaker 2>the parent of TikTok as well, Tim, Yeah.

0:16:23.360 --> 0:16:26.080
<v Speaker 3>We're talking about the company called byte Dance. He's a

0:16:26.080 --> 0:16:29.640
<v Speaker 3>former never trumper who's recently become an okay, fine, might

0:16:29.680 --> 0:16:33.360
<v Speaker 3>as well be trumper, So writes Bloomberg's Anie Masa in

0:16:33.400 --> 0:16:35.040
<v Speaker 3>a story that is among our most read on the

0:16:35.080 --> 0:16:37.800
<v Speaker 3>Bloomberg Terminal. It is today's big take on the Bloomberg

0:16:37.880 --> 0:16:40.720
<v Speaker 3>Terminal and at Bloomberg dot Com slash big take. Annie

0:16:40.720 --> 0:16:43.080
<v Speaker 3>Masa is Bloomberg News wealth reporter. She joins us here

0:16:43.520 --> 0:16:47.440
<v Speaker 3>in the studio jeff yass okay, so he oversees Susquehanna

0:16:47.440 --> 0:16:50.000
<v Speaker 3>International as you right, it's a trading from burrow deep

0:16:50.040 --> 0:16:51.680
<v Speaker 3>in the machinery of modern finance.

0:16:52.400 --> 0:16:53.360
<v Speaker 6>He's a poker player.

0:16:53.960 --> 0:16:57.680
<v Speaker 3>He wrote about options for his thesis in college. Why

0:16:57.720 --> 0:16:58.920
<v Speaker 3>are we talking about him right now?

0:16:58.920 --> 0:16:59.160
<v Speaker 1>Though?

0:16:59.560 --> 0:17:01.920
<v Speaker 9>The reason, and he's in the news so much recently,

0:17:02.280 --> 0:17:04.200
<v Speaker 9>is he's a huge political donor.

0:17:04.280 --> 0:17:06.840
<v Speaker 4>There are two things. He's a huge political donor.

0:17:07.160 --> 0:17:09.080
<v Speaker 9>He kind of soared to the top of the list

0:17:09.119 --> 0:17:12.040
<v Speaker 9>of biggest individual donors for much of this year in

0:17:12.080 --> 0:17:15.080
<v Speaker 9>the twenty twenty four election cycle. And then the second

0:17:15.080 --> 0:17:18.680
<v Speaker 9>thing is that he is a major investor in an

0:17:18.680 --> 0:17:22.240
<v Speaker 9>app that most of us have heard of, TikTok or

0:17:22.359 --> 0:17:26.480
<v Speaker 9>the byte Edance, which might be familiar to a lot

0:17:26.520 --> 0:17:30.960
<v Speaker 9>of listeners. So for those two reasons, he this kind

0:17:31.000 --> 0:17:35.119
<v Speaker 9>of stealthy, you know, veil of secrecy that he's spent

0:17:35.160 --> 0:17:38.199
<v Speaker 9>his entire career enjoying has been blown up in the

0:17:38.200 --> 0:17:38.680
<v Speaker 9>past year.

0:17:39.560 --> 0:17:44.800
<v Speaker 2>What's more important his political aspect or the TikTok or

0:17:44.880 --> 0:17:47.840
<v Speaker 2>is just that it's both of those things combined.

0:17:47.480 --> 0:17:48.679
<v Speaker 4>They're a bit wrapped together.

0:17:48.920 --> 0:17:52.800
<v Speaker 9>So he is a major libertarian, and one of the

0:17:52.840 --> 0:17:55.160
<v Speaker 9>things that I wrote about in the story is his

0:17:55.320 --> 0:17:59.760
<v Speaker 9>kind of conversion when he was younger to like libertarian

0:17:59.760 --> 0:18:02.199
<v Speaker 9>as and how at various points in his life he

0:18:02.280 --> 0:18:08.400
<v Speaker 9>called on Milton Friedman personally for advice and has kind

0:18:08.400 --> 0:18:09.120
<v Speaker 9>of built his.

0:18:09.320 --> 0:18:12.160
<v Speaker 4>Whole career and reputation that way.

0:18:12.520 --> 0:18:15.840
<v Speaker 9>So he's always been a big donor to libertarian causes.

0:18:15.960 --> 0:18:18.560
<v Speaker 9>But as far as politics go, and as far as

0:18:18.640 --> 0:18:22.879
<v Speaker 9>TikTok and Trump go, this perfect storm happened in the

0:18:22.920 --> 0:18:28.040
<v Speaker 9>past year where he came on people's radars for having

0:18:28.080 --> 0:18:31.000
<v Speaker 9>been such an investor in TikTok, and then this flip

0:18:31.000 --> 0:18:33.800
<v Speaker 9>flop that Trump did in terms of tick in terms

0:18:33.800 --> 0:18:38.080
<v Speaker 9>of TikTok and banning TikTok also kind of pinged people's radars,

0:18:38.520 --> 0:18:39.199
<v Speaker 9>like why is.

0:18:39.200 --> 0:18:41.000
<v Speaker 4>He doing this? We'll have the two had a conversation,

0:18:41.400 --> 0:18:41.840
<v Speaker 4>that's right.

0:18:41.920 --> 0:18:44.160
<v Speaker 9>So there was this moment where they had a conversation

0:18:44.560 --> 0:18:49.560
<v Speaker 9>at a big Club for Growth event in not at

0:18:49.600 --> 0:18:50.040
<v Speaker 9>mar Lago.

0:18:50.119 --> 0:18:52.080
<v Speaker 4>It was at the Breaker's hotel. The other.

0:18:53.800 --> 0:18:58.320
<v Speaker 9>Maybe more of stately yeah cousin, but you know, ten

0:18:58.359 --> 0:19:04.200
<v Speaker 9>minutes away and so this conversation happened, and you know,

0:19:04.359 --> 0:19:07.600
<v Speaker 9>Jeff Yass's camp says that they did not discuss TikTok.

0:19:08.200 --> 0:19:14.120
<v Speaker 9>But subsequently Trump, you know, has come out in favor

0:19:14.280 --> 0:19:17.360
<v Speaker 9>of keeping TikTok on the phones of all Americans, And

0:19:17.440 --> 0:19:22.320
<v Speaker 9>subsequently Jeff has come out and said he will not

0:19:22.480 --> 0:19:26.479
<v Speaker 9>donate money to Trump directly, but he supports him in

0:19:26.520 --> 0:19:27.600
<v Speaker 9>the twenty twenty four election.

0:19:27.720 --> 0:19:30.440
<v Speaker 3>A big flip flop for the former president who during

0:19:30.440 --> 0:19:33.960
<v Speaker 3>his administration tried to get TikTok to divest its American

0:19:34.040 --> 0:19:37.439
<v Speaker 3>assets back in twenty twenty. We'll get to more of that,

0:19:37.440 --> 0:19:39.240
<v Speaker 3>but I want to talk about your reporting process for

0:19:39.280 --> 0:19:42.280
<v Speaker 3>this anny. Who did you speak to, who did you

0:19:42.359 --> 0:19:45.360
<v Speaker 3>not speak to, and talk a little bit about how

0:19:45.359 --> 0:19:46.520
<v Speaker 3>you reported out this piece.

0:19:46.800 --> 0:19:50.000
<v Speaker 9>Sure, without going through the entire list of names, it

0:19:50.080 --> 0:19:52.119
<v Speaker 9>was a long line of the people I spoke to.

0:19:52.520 --> 0:19:55.320
<v Speaker 4>I did kind of try and get into.

0:19:55.960 --> 0:19:59.480
<v Speaker 9>People who've worked at Susquehanna or worked there, you know,

0:19:59.560 --> 0:20:04.480
<v Speaker 9>friends of Jeff's. He has now gathered so much attention

0:20:04.560 --> 0:20:08.000
<v Speaker 9>that there are activist groups that are organizing local campaigns

0:20:08.040 --> 0:20:11.520
<v Speaker 9>in Pennsylvania where they're showing up and you know, protesting

0:20:11.560 --> 0:20:16.240
<v Speaker 9>outside the office or events, So I talked to those people.

0:20:16.400 --> 0:20:19.440
<v Speaker 9>So I just tried to canvass locally in Pennsylvania because

0:20:19.440 --> 0:20:23.720
<v Speaker 9>he is the richest man in Pennsylvania and donates a

0:20:23.720 --> 0:20:27.840
<v Speaker 9>lot to politics at the local level as well as

0:20:27.880 --> 0:20:29.240
<v Speaker 9>well as the Wall Street component.

0:20:29.359 --> 0:20:31.920
<v Speaker 2>Does he when he donates to politics is at both

0:20:31.920 --> 0:20:32.679
<v Speaker 2>sides of the aisle?

0:20:33.280 --> 0:20:39.280
<v Speaker 9>No, it's it's really too conservative causes. He will donate

0:20:39.359 --> 0:20:42.880
<v Speaker 9>in some cases, but his most major spending is for republic.

0:20:42.920 --> 0:20:44.840
<v Speaker 2>I think what's interesting about this story, and you write this,

0:20:44.960 --> 0:20:47.679
<v Speaker 2>a billionaire flip flopping for Donald Trump is nothing new, right,

0:20:47.720 --> 0:20:50.080
<v Speaker 2>We are increasingly seeing that as we get closer to

0:20:50.119 --> 0:20:54.560
<v Speaker 2>the November election. So no judge, but why single out Jeff? Yeah, yes,

0:20:54.720 --> 0:20:57.720
<v Speaker 2>And what did you want to know in all these

0:20:57.800 --> 0:21:00.760
<v Speaker 2>conversations that you had that you really painted redible picture

0:21:01.160 --> 0:21:03.440
<v Speaker 2>of this guy from kind of being a little kid

0:21:03.520 --> 0:21:04.520
<v Speaker 2>to where he is now.

0:21:04.920 --> 0:21:06.359
<v Speaker 4>Yeah, I wanted to know.

0:21:06.640 --> 0:21:10.800
<v Speaker 9>Basically, My unifying question was this is this is someone

0:21:10.800 --> 0:21:14.840
<v Speaker 9>who focuses a lot at a professional level on decision making,

0:21:14.880 --> 0:21:17.400
<v Speaker 9>which might sound a little bit basic, but he kind

0:21:17.440 --> 0:21:20.280
<v Speaker 9>of built this whole company, as you said earlier, on

0:21:20.359 --> 0:21:24.600
<v Speaker 9>poker and decision and rational decision making and poker. So

0:21:24.720 --> 0:21:26.400
<v Speaker 9>I was trying to really suss out.

0:21:26.440 --> 0:21:27.480
<v Speaker 4>Okay, so if this.

0:21:27.560 --> 0:21:30.720
<v Speaker 9>Is the moment in which he's you know, going publicly

0:21:30.760 --> 0:21:33.359
<v Speaker 9>on record and saying that he supports Trump over Biden,

0:21:34.600 --> 0:21:38.639
<v Speaker 9>it for you know, these purposes. This year, I was

0:21:38.680 --> 0:21:40.639
<v Speaker 9>trying to get inside his head as much as I

0:21:40.680 --> 0:21:45.520
<v Speaker 9>could without talking to him about why he's making that

0:21:45.600 --> 0:21:51.200
<v Speaker 9>decision now. And so he's he like the bet he's making,

0:21:51.400 --> 0:21:54.000
<v Speaker 9>the bet he's making, Yeah, the bet he's making exactly

0:21:54.080 --> 0:21:57.080
<v Speaker 9>and what matters to him. So of course TikTok matters

0:21:57.520 --> 0:22:00.440
<v Speaker 9>a great deal to him. You know, he's worth forty

0:22:00.480 --> 0:22:02.960
<v Speaker 9>seven billion dollars, but about a third of that comes

0:22:02.960 --> 0:22:07.000
<v Speaker 9>from this stake, this early stake that his company took

0:22:07.080 --> 0:22:09.520
<v Speaker 9>in TikTok. So that's a piece of it, but there

0:22:09.520 --> 0:22:13.480
<v Speaker 9>are other dimensions to it. He's a huge supporter of

0:22:13.880 --> 0:22:18.439
<v Speaker 9>this kind of controversial program of school vouchers, So we

0:22:18.560 --> 0:22:20.920
<v Speaker 9>get into that quite a bit in the story, and

0:22:21.400 --> 0:22:24.320
<v Speaker 9>that is something that's very much in line with Trump's

0:22:24.359 --> 0:22:27.040
<v Speaker 9>former Education secretary of Batsy Davos is a major supporter

0:22:27.080 --> 0:22:28.240
<v Speaker 9>of school of voucher programs.

0:22:28.359 --> 0:22:30.480
<v Speaker 3>One thing that I really liked about this story was

0:22:30.520 --> 0:22:33.919
<v Speaker 3>the history of Susquehanna and how the firm came to be.

0:22:34.000 --> 0:22:36.040
<v Speaker 3>And you write in the piece Anny that it's even

0:22:36.080 --> 0:22:38.960
<v Speaker 3>though it's a financial firm and a lot of financial

0:22:39.640 --> 0:22:41.760
<v Speaker 3>it's you know, essentially considered part of the financial elite.

0:22:41.840 --> 0:22:44.119
<v Speaker 3>This is not something that's on Wall Street. This is

0:22:44.160 --> 0:22:47.600
<v Speaker 3>not you know, a guy who has homes right outside

0:22:47.600 --> 0:22:49.639
<v Speaker 3>of New York City and commutes into New York City.

0:22:49.680 --> 0:22:52.040
<v Speaker 3>This is this is Pennsylvania that we're talking about here.

0:22:52.080 --> 0:22:54.720
<v Speaker 3>Talk a little bit about the location of the firm

0:22:54.800 --> 0:22:57.679
<v Speaker 3>and who he's had in his inner circle, what they've

0:22:57.720 --> 0:23:00.640
<v Speaker 3>gone and done since they joined the firm and left

0:23:00.640 --> 0:23:02.480
<v Speaker 3>the firm, and sort of what you learned there.

0:23:02.840 --> 0:23:06.160
<v Speaker 9>Yeah, so Susquehanna is based in a kind of unusual

0:23:06.240 --> 0:23:11.440
<v Speaker 9>place for a big Wall Street firm. It's based in Balakinwood, Pennsylvania,

0:23:11.760 --> 0:23:15.560
<v Speaker 9>which is a suburb of Philadelphia. And the reason that

0:23:15.600 --> 0:23:17.959
<v Speaker 9>they were in Philadelphia to begin with, he got started

0:23:17.960 --> 0:23:21.000
<v Speaker 9>trading options. Options are what kind of built the foundation

0:23:21.080 --> 0:23:24.200
<v Speaker 9>of this entire company in Philly.

0:23:24.720 --> 0:23:27.360
<v Speaker 4>But as I write this story, you know, he.

0:23:29.160 --> 0:23:33.720
<v Speaker 9>Not a huge fan of taxes, so he's always optimizing

0:23:35.040 --> 0:23:38.520
<v Speaker 9>for tax purposes, and by moving from the like, it's

0:23:38.600 --> 0:23:42.800
<v Speaker 9>pretty clear that is something that's how people describe him.

0:23:44.000 --> 0:23:46.000
<v Speaker 3>Libertarian doesn't necessarily love taxes.

0:23:46.160 --> 0:23:47.960
<v Speaker 2>I mean the Club for Growth, right, this group that

0:23:48.000 --> 0:23:50.000
<v Speaker 2>he supports, did you say it's an anti tax political

0:23:50.040 --> 0:23:51.240
<v Speaker 2>advocacy group right, and.

0:23:51.359 --> 0:23:55.040
<v Speaker 9>Rationally, Yeah, I could accurately be described as an anti tax.

0:23:55.119 --> 0:23:57.320
<v Speaker 4>Some would say he really hates texts. Yeah, I mean

0:23:57.880 --> 0:23:59.879
<v Speaker 4>all sorts of all sorts of people would tell you that.

0:24:00.000 --> 0:24:01.280
<v Speaker 4>I'm sure Jeff would tell you that too.

0:24:01.320 --> 0:24:04.320
<v Speaker 9>But anyway, so he moved the company from Philadelphia to

0:24:04.400 --> 0:24:09.800
<v Speaker 9>balakan Wood. Even that marginal little move, you know, saved money,

0:24:10.280 --> 0:24:15.840
<v Speaker 9>you know, was savings on taxes. So you're tucked away absolutely,

0:24:15.880 --> 0:24:20.320
<v Speaker 9>absolutely absolutely, but like you're tucked away outside of the

0:24:20.440 --> 0:24:22.439
<v Speaker 9>kind of fray of Wall Street.

0:24:23.080 --> 0:24:27.240
<v Speaker 4>And they started with options.

0:24:26.760 --> 0:24:30.359
<v Speaker 9>But they've expanded to all sorts of different stuff anything

0:24:30.359 --> 0:24:32.280
<v Speaker 9>you can think of, really, stocks, bonds.

0:24:32.080 --> 0:24:33.760
<v Speaker 4>Crypto swift.

0:24:34.080 --> 0:24:41.280
<v Speaker 9>Yeah, they like event contracts, yeah, all of this, and lottery,

0:24:41.320 --> 0:24:46.080
<v Speaker 9>insurance kind of policies, all sorts of those things. So

0:24:46.080 --> 0:24:48.480
<v Speaker 9>so that is something particular to the firm. And they

0:24:48.480 --> 0:24:51.680
<v Speaker 9>have this culture where they train you using poker techniques

0:24:51.720 --> 0:24:52.840
<v Speaker 9>and playing poker in Texas.

0:24:52.840 --> 0:24:55.280
<v Speaker 2>Hold on this is fascinating, right when he hires someone, right,

0:24:55.320 --> 0:24:57.080
<v Speaker 2>they actually are playing.

0:24:56.760 --> 0:24:59.919
<v Speaker 9>This, yeah, because they want to see how you make decisions.

0:25:00.040 --> 0:25:02.199
<v Speaker 9>How do you go about deciding what you know when

0:25:02.280 --> 0:25:04.679
<v Speaker 9>you're playing a hand whether to bet, check or fold.

0:25:05.240 --> 0:25:08.400
<v Speaker 9>And it actually doesn't matter as much do you win

0:25:08.520 --> 0:25:11.439
<v Speaker 9>or lose that hand because luck can factor in, But

0:25:11.480 --> 0:25:13.520
<v Speaker 9>did you make the right decision based.

0:25:13.240 --> 0:25:14.920
<v Speaker 4>On the probabilities?

0:25:15.840 --> 0:25:18.159
<v Speaker 9>And you know the players around the table, and they

0:25:18.160 --> 0:25:21.440
<v Speaker 9>want to know how you made those decisions. So yeah,

0:25:21.480 --> 0:25:26.840
<v Speaker 9>and so to your question, a lot of proprietary trading

0:25:26.920 --> 0:25:30.639
<v Speaker 9>firms that are now kind of giants on Wall Street.

0:25:31.680 --> 0:25:35.359
<v Speaker 9>The people who run those firms are often from Susquehanna.

0:25:34.920 --> 0:25:36.080
<v Speaker 3>Like a Jane Street for example.

0:25:36.200 --> 0:25:37.760
<v Speaker 4>Jane Street is the perfect example.

0:25:37.840 --> 0:25:40.399
<v Speaker 2>Yeah, but people want to know these people who are

0:25:40.440 --> 0:25:43.480
<v Speaker 2>kind of protesting against them. They want the public at

0:25:43.560 --> 0:25:46.800
<v Speaker 2>large want to like kind of say who he is, right,

0:25:46.800 --> 0:25:47.479
<v Speaker 2>They want to get it out.

0:25:47.480 --> 0:25:49.200
<v Speaker 4>They just get about thirty seconds left here, though.

0:25:49.280 --> 0:25:51.680
<v Speaker 9>They want people to know his name more, and they

0:25:51.680 --> 0:25:54.399
<v Speaker 9>are trying to work to combat his what they consider

0:25:54.440 --> 0:25:56.720
<v Speaker 9>outsize influence in their state, right.

0:25:56.520 --> 0:25:58.119
<v Speaker 2>Which is like you know, we talk about follow the

0:25:58.119 --> 0:26:01.200
<v Speaker 2>money with everything and anything, not alone, right, in terms

0:26:01.200 --> 0:26:06.480
<v Speaker 2>of big political donors. Exactly incredible story, so much detail,

0:26:07.040 --> 0:26:10.440
<v Speaker 2>another incredible piece of reporting. Annie, Thank you so much.

0:26:10.440 --> 0:26:13.200
<v Speaker 2>Anie Masa, she's well reporter at Bloomberg News. As we said,

0:26:13.400 --> 0:26:16.040
<v Speaker 2>this is among our most read stories on the Bloomberg

0:26:16.160 --> 0:26:18.680
<v Speaker 2>terminal as we speak. It's also the Bloomberg Big Take,

0:26:18.720 --> 0:26:20.720
<v Speaker 2>which you can find on the Bloomberg Terminal at Bloomberg

0:26:20.720 --> 0:26:23.600
<v Speaker 2>dot com slash Big Take, so definitely check it out.

0:26:24.960 --> 0:26:28.840
<v Speaker 1>You're listening to the Bloomberg Business Week podcast. Listen live

0:26:28.920 --> 0:26:32.080
<v Speaker 1>each weekday starting at two pm Eastern on applecar Play

0:26:32.160 --> 0:26:35.000
<v Speaker 1>and Android Auto with the Bloomberg Business App. You can

0:26:35.040 --> 0:26:38.280
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0:26:38.359 --> 0:26:41.200
<v Speaker 1>York station, Just say Alexa Play. Bloomberg.

0:26:41.240 --> 0:26:44.760
<v Speaker 3>Eleven thirty June is Pride Month, and all this month

0:26:44.800 --> 0:26:47.760
<v Speaker 3>Bloomberg Business Week is featuring of voices on topics related

0:26:47.760 --> 0:26:50.520
<v Speaker 3>to equality. You right, remember, just a couple of weeks ago,

0:26:50.600 --> 0:26:53.080
<v Speaker 3>we spoke to Sarah Kate Ellis. She's the CEO and

0:26:53.240 --> 0:26:57.160
<v Speaker 3>president over at GLAD. Catch that conversation in our weekend podcast.

0:26:57.200 --> 0:26:59.720
<v Speaker 3>By the way, according to GLAD a study they did

0:26:59.800 --> 0:27:03.440
<v Speaker 3>last last year, seventy percent of non LGBTQ people agree

0:27:03.440 --> 0:27:07.240
<v Speaker 3>that companies should publicly support and include the lgbt community

0:27:07.520 --> 0:27:10.640
<v Speaker 3>through practices like hiring, advertising, and sponsorship.

0:27:10.720 --> 0:27:12.400
<v Speaker 2>It was a great conversation, I feel like an eye

0:27:12.440 --> 0:27:15.480
<v Speaker 2>opening and some statistics she shared with us in terms

0:27:15.520 --> 0:27:18.359
<v Speaker 2>of acceptance, which is still an issue. She's been doing that,

0:27:18.400 --> 0:27:22.000
<v Speaker 2>Sara Kate Ellis it is for ten years, and yes, progress,

0:27:22.040 --> 0:27:23.680
<v Speaker 2>but there's a lot more to go when it comes

0:27:23.720 --> 0:27:24.879
<v Speaker 2>to acceptance more generally.

0:27:25.040 --> 0:27:27.680
<v Speaker 3>Yeah, no question, companies, for their part, have gotten more

0:27:27.720 --> 0:27:31.320
<v Speaker 3>outspoken in support of LGBTQ employees. Yet according to EY,

0:27:31.680 --> 0:27:34.199
<v Speaker 3>a majority of these companies, or of these employees at

0:27:34.240 --> 0:27:36.320
<v Speaker 3>these companies, they still feel that sharing parts of their

0:27:36.320 --> 0:27:38.359
<v Speaker 3>identity at work could hold them back.

0:27:38.440 --> 0:27:40.680
<v Speaker 2>So for more we're joined by Karen Torinight. She is

0:27:40.720 --> 0:27:44.200
<v Speaker 2>Global vice Chair of Diversity, Equity and Inclusiveness at EY,

0:27:44.320 --> 0:27:46.840
<v Speaker 2>and she's joining Tim and me from New York. Karen,

0:27:46.920 --> 0:27:50.240
<v Speaker 2>great to have you here with us. You know, talk

0:27:50.280 --> 0:27:52.000
<v Speaker 2>to us a little bit about what you are hearing

0:27:52.040 --> 0:27:57.159
<v Speaker 2>from companies when it comes to how members of the

0:27:57.240 --> 0:28:01.000
<v Speaker 2>LGBTQ community feel within those companies. I'm curious to about

0:28:01.040 --> 0:28:03.720
<v Speaker 2>EY and your own experiences. What you guys are seeing

0:28:03.720 --> 0:28:06.280
<v Speaker 2>when it comes to this sure absolutely.

0:28:06.320 --> 0:28:08.199
<v Speaker 10>First off, thank you very much for having me, and

0:28:08.240 --> 0:28:10.399
<v Speaker 10>thank you for highlighting this important topic.

0:28:11.280 --> 0:28:13.480
<v Speaker 11>I would say there's a few things happening.

0:28:14.720 --> 0:28:20.960
<v Speaker 10>One, you know, employees of all dimensions are actually, you know,

0:28:21.000 --> 0:28:24.640
<v Speaker 10>feeling greater pressures than they ever have, whether it be wars,

0:28:25.080 --> 0:28:30.000
<v Speaker 10>economic pressures, xenophobia, increase, political pressures, a whole host of.

0:28:29.920 --> 0:28:32.520
<v Speaker 11>Things all around the world. And we're certainly seeing that.

0:28:33.080 --> 0:28:36.320
<v Speaker 10>And I look at it as though employees are taking

0:28:36.320 --> 0:28:39.720
<v Speaker 10>and carrying an extra backpack with them to work each day.

0:28:40.320 --> 0:28:44.280
<v Speaker 10>And I would say our studies recently showed that not

0:28:44.360 --> 0:28:48.240
<v Speaker 10>only are our lgbt Q plus employees carrying a backpack,

0:28:48.280 --> 0:28:52.040
<v Speaker 10>but perhaps even a heavier backpack with them to work

0:28:52.080 --> 0:28:52.480
<v Speaker 10>each day.

0:28:52.480 --> 0:28:54.400
<v Speaker 11>And at EY and.

0:28:54.360 --> 0:28:57.640
<v Speaker 10>I believe at other companies too, you know, we feel

0:28:57.640 --> 0:28:59.680
<v Speaker 10>a piece of our job is to help lighten that

0:28:59.720 --> 0:29:03.200
<v Speaker 10>back pack a bit. And it is particularly concerning because

0:29:04.280 --> 0:29:08.480
<v Speaker 10>while employees rate workplaces as the second place most likely

0:29:08.560 --> 0:29:12.440
<v Speaker 10>to belong, second only to home, but more so than

0:29:12.440 --> 0:29:14.920
<v Speaker 10>their communities and their places of worship, et cetera.

0:29:15.720 --> 0:29:18.880
<v Speaker 11>You know, work is always not always a work. Workplace

0:29:18.960 --> 0:29:20.120
<v Speaker 11>is not always a walk in the park.

0:29:20.160 --> 0:29:24.320
<v Speaker 10>For LGBTQ plus employees, and to your point, three quarters

0:29:24.360 --> 0:29:26.640
<v Speaker 10>of them in a recent study that we did around

0:29:26.680 --> 0:29:29.960
<v Speaker 10>the world show that there really are what I would

0:29:29.960 --> 0:29:35.320
<v Speaker 10>call cautiously transparent, and they're not likely to necessarily share

0:29:35.360 --> 0:29:37.840
<v Speaker 10>their identity at work because they feel that it will

0:29:37.880 --> 0:29:41.360
<v Speaker 10>in fact hold them back and explain.

0:29:41.800 --> 0:29:44.600
<v Speaker 3>So, how do you explain that and sort of share

0:29:44.640 --> 0:29:48.440
<v Speaker 3>the differences that you find in the research for how

0:29:49.280 --> 0:29:53.400
<v Speaker 3>non LGBTQ employees feel about sharing those own personal details

0:29:53.400 --> 0:29:55.800
<v Speaker 3>at work. What's what's sort of the benchmark here?

0:29:56.480 --> 0:29:58.800
<v Speaker 11>Well, I think I think, look, you know, we do.

0:29:58.840 --> 0:30:02.360
<v Speaker 10>We do see from our studies that you know, all

0:30:02.400 --> 0:30:07.160
<v Speaker 10>employees are hesitant to share political affiliation, they're hesitant to

0:30:07.200 --> 0:30:11.480
<v Speaker 10>share religion at work. They can also be hesitant to

0:30:11.480 --> 0:30:13.120
<v Speaker 10>share other personal aspects.

0:30:13.160 --> 0:30:14.400
<v Speaker 11>So that is quite clear.

0:30:14.840 --> 0:30:18.400
<v Speaker 10>But it feels like from our studies that there's greater

0:30:18.600 --> 0:30:22.200
<v Speaker 10>barriers and our LGBTQ plus folks feel like they are

0:30:22.440 --> 0:30:25.360
<v Speaker 10>less likely to be sponsored, as an example, and they

0:30:25.400 --> 0:30:28.080
<v Speaker 10>tend to feel that they're over mentored, meaning that they

0:30:28.120 --> 0:30:32.120
<v Speaker 10>aren't endorsed for equitable assignments, or for visibility or for

0:30:32.280 --> 0:30:36.840
<v Speaker 10>opportunities similar to their non LGBTQ plus counterparts.

0:30:37.320 --> 0:30:41.120
<v Speaker 2>Karen, a wise person always says to me, but are

0:30:41.200 --> 0:30:44.040
<v Speaker 2>they right? Like, in other words, is it a feeling

0:30:44.360 --> 0:30:48.720
<v Speaker 2>or are they really not getting those juicy opportunities? Like

0:30:48.760 --> 0:30:51.360
<v Speaker 2>I am just curious. Right, there's a feeling and then

0:30:51.400 --> 0:30:53.600
<v Speaker 2>there's the reality. And it seems to me that the

0:30:53.640 --> 0:30:56.840
<v Speaker 2>reality is is that they're not getting those opportunities. What

0:30:56.880 --> 0:30:58.200
<v Speaker 2>do we know on that front?

0:30:58.480 --> 0:30:59.800
<v Speaker 11>Well, I think there's a few things.

0:31:00.160 --> 0:31:02.840
<v Speaker 10>Not all LGBTQ plus employees are out at work, so

0:31:02.880 --> 0:31:06.560
<v Speaker 10>it isn't necessarily something that you can measure as easily

0:31:06.800 --> 0:31:10.720
<v Speaker 10>as you can, for example, gender identity, which people tend.

0:31:10.520 --> 0:31:12.160
<v Speaker 11>To be a bit more forthcoming about.

0:31:12.560 --> 0:31:14.840
<v Speaker 10>So that that's one piece, So you don't actually have

0:31:14.960 --> 0:31:15.800
<v Speaker 10>all the data.

0:31:15.960 --> 0:31:18.880
<v Speaker 11>The other pieces, I think you have to be able

0:31:18.960 --> 0:31:19.840
<v Speaker 11>to explain.

0:31:19.960 --> 0:31:23.000
<v Speaker 10>Do you have the policies, are you making for a

0:31:23.160 --> 0:31:26.880
<v Speaker 10>respectful and safe workplace for everyone?

0:31:27.800 --> 0:31:29.240
<v Speaker 11>Do you offer role models?

0:31:29.240 --> 0:31:31.320
<v Speaker 10>And I'll give you an example, because it is an

0:31:31.360 --> 0:31:34.440
<v Speaker 10>important piece for people to not only have affinity with

0:31:34.560 --> 0:31:39.000
<v Speaker 10>peers and other colleagues and allies, but it's also really important.

0:31:39.040 --> 0:31:41.280
<v Speaker 10>We've heard the old adage you can't be what you

0:31:41.320 --> 0:31:44.000
<v Speaker 10>can't see, you know, you know, I would say speak

0:31:44.040 --> 0:31:46.920
<v Speaker 10>for EHY that you know, we're no stranger to having

0:31:47.000 --> 0:31:50.960
<v Speaker 10>diverse leadership, and it's really important for us to have

0:31:51.400 --> 0:31:54.880
<v Speaker 10>out LGBTQ plus leadership and we do at the country

0:31:54.960 --> 0:31:57.960
<v Speaker 10>levels on our management committees, on our boards, on our

0:31:58.480 --> 0:32:03.040
<v Speaker 10>senior clients serving capacity, and that really really makes a

0:32:03.120 --> 0:32:05.920
<v Speaker 10>difference so that people can see, yes, you can advance,

0:32:06.320 --> 0:32:09.320
<v Speaker 10>you can advance to the highest levels within an organization.

0:32:09.840 --> 0:32:12.520
<v Speaker 10>And I think that's particularly important, especially when people are

0:32:12.600 --> 0:32:18.240
<v Speaker 10>seeing the workplaces around them actually retracting in some capacity

0:32:18.320 --> 0:32:19.920
<v Speaker 10>or feels like they're retracting.

0:32:20.520 --> 0:32:22.560
<v Speaker 3>So how would you advise companies, because at the end

0:32:22.560 --> 0:32:24.960
<v Speaker 3>of the day, that's what EI does. EI advises companies.

0:32:24.960 --> 0:32:27.160
<v Speaker 3>They have a roster of clients. You tell them best

0:32:27.200 --> 0:32:30.560
<v Speaker 3>practices when it comes to certainly to all aspects of business.

0:32:30.800 --> 0:32:34.040
<v Speaker 3>How do you advise companies to shift at work given

0:32:34.160 --> 0:32:35.680
<v Speaker 3>what you found in your research.

0:32:36.120 --> 0:32:38.040
<v Speaker 10>Yeah, I think there's a few things. Ton at the

0:32:38.120 --> 0:32:41.560
<v Speaker 10>top is critical, meaning you have to have ironclad support

0:32:41.600 --> 0:32:44.560
<v Speaker 10>for your commitment in this area. And that doesn't mean

0:32:44.600 --> 0:32:47.960
<v Speaker 10>you have to do everything perfect because none of us do. However,

0:32:48.040 --> 0:32:51.160
<v Speaker 10>you have to be authentic and not just during pride months,

0:32:51.160 --> 0:32:54.280
<v Speaker 10>which can vary around the world, meaning twelve months out

0:32:54.320 --> 0:32:57.840
<v Speaker 10>of the year that you have consistent commitment and tone

0:32:57.880 --> 0:33:02.480
<v Speaker 10>at the top accountability holding yourselves responsible for that also

0:33:02.560 --> 0:33:05.960
<v Speaker 10>pretty un sexy things, Carolyn tim Lake policies, you know,

0:33:06.000 --> 0:33:09.600
<v Speaker 10>but that showed employees that regardless of where you work,

0:33:10.600 --> 0:33:14.160
<v Speaker 10>like at EUY, we will offer you a safe and

0:33:14.280 --> 0:33:17.720
<v Speaker 10>respectful environment and that is our commitment. The other thing

0:33:17.760 --> 0:33:20.400
<v Speaker 10>that you can do, which tends to be a little harder,

0:33:20.520 --> 0:33:23.320
<v Speaker 10>is making sure that your systems are equitable, and that

0:33:23.400 --> 0:33:26.640
<v Speaker 10>your pay equity systems are equitable, your promotion systems.

0:33:26.880 --> 0:33:30.120
<v Speaker 11>And then the last thing that many companies you know.

0:33:30.080 --> 0:33:32.160
<v Speaker 10>I see around the world that do a nice job

0:33:32.240 --> 0:33:37.120
<v Speaker 10>of this is offer affinity groups and those you know,

0:33:37.160 --> 0:33:40.520
<v Speaker 10>those are not a LGBTQ plus strategy, but they're a

0:33:40.600 --> 0:33:44.600
<v Speaker 10>huge enhancement. For example, we have them in seventy seven

0:33:44.640 --> 0:33:47.920
<v Speaker 10>countries and we have you know, thousands of employees that

0:33:48.000 --> 0:33:51.560
<v Speaker 10>belong to these networks, and that offers people not only

0:33:52.440 --> 0:33:56.560
<v Speaker 10>role models, but it offers them the ability to share

0:33:56.640 --> 0:33:59.440
<v Speaker 10>and have voice and have voice to leadership, so that

0:33:59.480 --> 0:34:01.680
<v Speaker 10>it goes in two ways, not just with.

0:34:01.680 --> 0:34:03.360
<v Speaker 11>Each other but up through management.

0:34:03.400 --> 0:34:06.640
<v Speaker 10>And we've found that to be really, really helpful in

0:34:06.720 --> 0:34:10.280
<v Speaker 10>guiding our level of authenticity in this place, in showing

0:34:10.320 --> 0:34:11.520
<v Speaker 10>our support.

0:34:11.440 --> 0:34:13.719
<v Speaker 2>And I you know, always one of the things that

0:34:13.719 --> 0:34:16.240
<v Speaker 2>comes up, whether it's affinity groups or just groups overall,

0:34:16.320 --> 0:34:18.800
<v Speaker 2>Like what you want is everybody to be a part

0:34:18.880 --> 0:34:20.840
<v Speaker 2>of the whole, right, and you want to be careful

0:34:20.840 --> 0:34:24.439
<v Speaker 2>about not dividing everything up and keeping people, yes, into

0:34:24.480 --> 0:34:26.360
<v Speaker 2>a group where they feel supported, but you want to

0:34:26.360 --> 0:34:28.800
<v Speaker 2>make sure that that group then is you know, certainly

0:34:28.920 --> 0:34:33.440
<v Speaker 2>a part of the bigger, broader organization. So is there

0:34:33.440 --> 0:34:35.960
<v Speaker 2>an understanding of that, because sometimes I think companies will

0:34:35.960 --> 0:34:38.560
<v Speaker 2>set up a group or something and then it's like, okay, done,

0:34:38.560 --> 0:34:40.759
<v Speaker 2>we did it. Like you, we're helping out a group, right,

0:34:40.880 --> 0:34:42.680
<v Speaker 2>the importance is making sure that they're a part of

0:34:42.719 --> 0:34:43.080
<v Speaker 2>the whole.

0:34:43.960 --> 0:34:46.520
<v Speaker 10>Yes, absolutely, And you don't want to be an isolated group.

0:34:46.880 --> 0:34:49.360
<v Speaker 10>So there could be some benefits of course to having

0:34:50.200 --> 0:34:53.120
<v Speaker 10>you know, a similar topic and a similar concern or

0:34:53.160 --> 0:34:56.320
<v Speaker 10>things that you're working through. Absolutely, but you need allies

0:34:56.360 --> 0:34:58.480
<v Speaker 10>in that, regardless of the demographic group.

0:34:58.800 --> 0:35:01.200
<v Speaker 11>But to your point, you also need to you know,

0:35:01.239 --> 0:35:01.880
<v Speaker 11>you're not You're not.

0:35:02.280 --> 0:35:06.400
<v Speaker 10>This is not about fixing lgbt Q plus employees. This

0:35:06.480 --> 0:35:09.440
<v Speaker 10>is about fixing environments and making sure that environments are

0:35:09.440 --> 0:35:13.400
<v Speaker 10>as equitable as possible. So another example that you could

0:35:13.480 --> 0:35:17.960
<v Speaker 10>consider to do is inclusive leadership behavior types of training

0:35:18.000 --> 0:35:22.520
<v Speaker 10>which doesn't focus on people's beliefs necessarily focuses on how

0:35:22.520 --> 0:35:24.719
<v Speaker 10>they behave in a workplace and how they could be

0:35:24.760 --> 0:35:28.000
<v Speaker 10>a most inclusive colleague and team member uh to to

0:35:28.160 --> 0:35:30.919
<v Speaker 10>all of their employees. And we found that that that's

0:35:30.920 --> 0:35:35.160
<v Speaker 10>been very beneficial to us in inclusion overall and belonging

0:35:35.200 --> 0:35:36.320
<v Speaker 10>overall for everyone.

0:35:36.560 --> 0:35:38.399
<v Speaker 2>All Right, gott to leave it there, hey, Karen, thank

0:35:38.400 --> 0:35:40.640
<v Speaker 2>you so much. Karen tour Night, she's global vice chair

0:35:40.680 --> 0:35:43.799
<v Speaker 2>of Diversity, Equity and Inclusiveness over at EY joining us

0:35:44.040 --> 0:35:46.040
<v Speaker 2>on this Monday in New York.

0:35:47.120 --> 0:35:49.400
<v Speaker 11>A brother, maule.

0:35:50.760 --> 0:35:53.439
<v Speaker 12>A journal, Now about you let me drive?

0:35:53.960 --> 0:35:59.040
<v Speaker 5>No no, no, no, honey, please out do the riding gravel.

0:36:00.200 --> 0:36:00.960
<v Speaker 2>I want to try.

0:36:00.960 --> 0:36:04.920
<v Speaker 10>It's a good question, good.

0:36:04.880 --> 0:36:11.440
<v Speaker 1>Time, This is good drive to the globe. Do well

0:36:11.520 --> 0:36:14.320
<v Speaker 1>by Ja Don on Bloomberg Radio.

0:36:14.600 --> 0:36:16.959
<v Speaker 2>All right, everybody, just about eighteen minutes to go until

0:36:16.960 --> 0:36:19.520
<v Speaker 2>we wrap up the trade on this Monday. Our Alexandra

0:36:19.719 --> 0:36:22.759
<v Speaker 2>Semanova writing the U Stock Market pouncing from one all

0:36:22.840 --> 0:36:25.280
<v Speaker 2>time high to the next, but below the surface. She says,

0:36:25.320 --> 0:36:29.440
<v Speaker 2>a uh waning share of stocks is participating in the

0:36:29.480 --> 0:36:32.560
<v Speaker 2>advanced spelling potential troublehead for equity. So tim, she writes,

0:36:32.600 --> 0:36:35.320
<v Speaker 2>bifurcation between the S and P five hundred performance and

0:36:35.360 --> 0:36:38.000
<v Speaker 2>breath has reached one of the worst levels in three decades,

0:36:38.360 --> 0:36:41.279
<v Speaker 2>according to Bloomberg Intelligence data, the only two times since

0:36:41.360 --> 0:36:44.080
<v Speaker 2>nineteen ninety five it's been as extreme as now came

0:36:44.120 --> 0:36:47.160
<v Speaker 2>before drawdowns for US stocks. O. Great, something to think

0:36:47.200 --> 0:36:47.480
<v Speaker 2>about it.

0:36:47.520 --> 0:36:52.520
<v Speaker 3>That's really good introduction. Introductory remarks, I should say for

0:36:52.560 --> 0:36:55.880
<v Speaker 3>our next guest. Emily Roller was co chief investment strategist

0:36:55.880 --> 0:37:00.560
<v Speaker 3>at John Hancock Investment Management. And that's because Emily, you

0:37:00.600 --> 0:37:02.880
<v Speaker 3>say that, hey, it's been a good run. That's the

0:37:02.880 --> 0:37:06.319
<v Speaker 3>good news. The bad news is likely to start to

0:37:06.400 --> 0:37:08.840
<v Speaker 3>mean that bad news for markets soon. So it's not

0:37:08.880 --> 0:37:10.879
<v Speaker 3>going to be like, you know, bad news is good news.

0:37:10.920 --> 0:37:13.200
<v Speaker 3>It's like bad news is actually going to be bad news.

0:37:13.680 --> 0:37:16.240
<v Speaker 3>What is the evidence for the shift that you write about?

0:37:17.840 --> 0:37:20.239
<v Speaker 12>Yeah, so thanks for having me this afternoon. So we

0:37:20.360 --> 0:37:23.120
<v Speaker 12>are seeing the labor market shift. You know, you look

0:37:23.120 --> 0:37:25.200
<v Speaker 12>at some of the data that's come out as of late,

0:37:25.320 --> 0:37:28.120
<v Speaker 12>you know, initial claims rising over the last couple of

0:37:28.120 --> 0:37:31.680
<v Speaker 12>weeks certainly isn't great news. We're finding that it's harder

0:37:31.719 --> 0:37:34.120
<v Speaker 12>to get a new job after you lose one. Job.

0:37:34.239 --> 0:37:37.080
<v Speaker 12>Switching is not resulting in wage gains the way that

0:37:37.120 --> 0:37:40.279
<v Speaker 12>it has previously. So we're watching closely for this next

0:37:40.320 --> 0:37:44.759
<v Speaker 12>jobs report to see signs that that picture may deteriorate more.

0:37:44.800 --> 0:37:47.640
<v Speaker 12>We're also seeing inflation slowing right now. That's a great

0:37:47.680 --> 0:37:50.960
<v Speaker 12>thing because we have to remember that inflation was awesome

0:37:51.040 --> 0:37:53.880
<v Speaker 12>for corporate profits, especially for companies with a lot of

0:37:53.920 --> 0:37:57.040
<v Speaker 12>pricing power that could pass that along. It actually resulted

0:37:57.600 --> 0:38:01.200
<v Speaker 12>in record revenue growth. But that inflation impulse is fading

0:38:01.280 --> 0:38:03.319
<v Speaker 12>now and we're seeing it in things like used car

0:38:03.440 --> 0:38:06.759
<v Speaker 12>prices falling. We're seeing retailers actually start to make cuts.

0:38:06.800 --> 0:38:09.960
<v Speaker 12>There's a few articles on Bloomberg today talking about fast

0:38:09.960 --> 0:38:14.000
<v Speaker 12>food chains actually starting to cut prices here. Even so

0:38:14.040 --> 0:38:15.719
<v Speaker 12>we're seeing at the high end, we're seeing it at

0:38:15.719 --> 0:38:18.040
<v Speaker 12>the low end, you know. Of course, housing is that

0:38:18.160 --> 0:38:21.480
<v Speaker 12>last piece of the inflation picture that's really critical here.

0:38:21.560 --> 0:38:24.880
<v Speaker 12>Housing is a huge component of CPI, and even though

0:38:24.880 --> 0:38:27.240
<v Speaker 12>we're starting to see some cracks in the housing market,

0:38:27.320 --> 0:38:30.800
<v Speaker 12>things like housing sentiment we saw last week are slowing

0:38:31.080 --> 0:38:35.800
<v Speaker 12>building permits, new housing starts slowing. House prices are still up.

0:38:36.080 --> 0:38:39.200
<v Speaker 12>They're up six percent nearly on a year over year basis,

0:38:39.239 --> 0:38:42.759
<v Speaker 12>which is pretty remarkable and shows the resilience of the

0:38:42.760 --> 0:38:45.439
<v Speaker 12>housing market. So we need to see that inflation data

0:38:45.520 --> 0:38:50.279
<v Speaker 12>come down on the shelter front in order to see

0:38:50.280 --> 0:38:53.120
<v Speaker 12>the FED start to cut. But remember when inflation's slowing,

0:38:53.160 --> 0:38:56.880
<v Speaker 12>that also means growth is slowing, margins are compressing, and

0:38:56.960 --> 0:38:59.239
<v Speaker 12>corporate earnings are going to come down. So a long

0:38:59.280 --> 0:39:01.640
<v Speaker 12>way of saying that this bad news ultimately is not

0:39:01.680 --> 0:39:03.800
<v Speaker 12>going to be great for corporate profits.

0:39:04.760 --> 0:39:07.800
<v Speaker 2>Right, we also have FED Bank of San Francisco President

0:39:07.800 --> 0:39:10.280
<v Speaker 2>Mary Daly. She's warning the US labor market is nearing

0:39:10.320 --> 0:39:13.760
<v Speaker 2>an inflection point where further slowing could mean higher employment.

0:39:13.800 --> 0:39:16.120
<v Speaker 2>That's our news story right on the Bloomberg. At the

0:39:16.160 --> 0:39:19.319
<v Speaker 2>same time, Tim and I talked at the beginning of

0:39:19.360 --> 0:39:23.319
<v Speaker 2>our broadcast about our Liz McCormick story about how long

0:39:23.360 --> 0:39:26.600
<v Speaker 2>can high rates last? Bond markets say maybe forever, So

0:39:26.960 --> 0:39:29.560
<v Speaker 2>I do wonder about what that means for the investment environment.

0:39:29.600 --> 0:39:32.720
<v Speaker 2>So tie it all together. First of all, real quickly

0:39:32.840 --> 0:39:37.000
<v Speaker 2>recession or no recession then or earnings recession or no recession.

0:39:37.040 --> 0:39:38.000
<v Speaker 2>What are you expecting.

0:39:39.160 --> 0:39:42.840
<v Speaker 12>We do see that a contraction ultimately unfolding, just the

0:39:42.840 --> 0:39:45.360
<v Speaker 12>way it always has. We think there'll be some type

0:39:45.360 --> 0:39:48.480
<v Speaker 12>of liquidity event or financial accident in the face of

0:39:48.520 --> 0:39:51.919
<v Speaker 12>a higher cost of capital, which happens every time some

0:39:52.000 --> 0:39:56.120
<v Speaker 12>sort of over levered or lower quality player will get exposed.

0:39:56.160 --> 0:39:58.600
<v Speaker 12>We'll have a contraction. Or maybe it's simply the unemployment

0:39:58.640 --> 0:40:01.680
<v Speaker 12>rate rising, is margins compressed due to that higher cost

0:40:01.719 --> 0:40:04.719
<v Speaker 12>of capital and slower revenue growth, And by the way,

0:40:04.760 --> 0:40:07.239
<v Speaker 12>that means it's a great environment to pick up the

0:40:07.320 --> 0:40:10.480
<v Speaker 12>income that's available in high quality bond. You just nailed

0:40:10.480 --> 0:40:12.400
<v Speaker 12>it when you talked about the fact that bonds just

0:40:12.480 --> 0:40:16.160
<v Speaker 12>haven't really sniffed this out yet. They haven't sniffed out

0:40:16.160 --> 0:40:19.120
<v Speaker 12>lower growth and lower inflation, and bonyards are still up

0:40:19.120 --> 0:40:21.200
<v Speaker 12>on the year. Remember we started the year with the

0:40:21.200 --> 0:40:24.239
<v Speaker 12>ten year treasury yield sitting at three eighty eight. We're

0:40:24.280 --> 0:40:27.080
<v Speaker 12>right around four twenty four right now, So we've seen

0:40:27.080 --> 0:40:29.600
<v Speaker 12>this backup in bon yields. That to us is creating

0:40:29.640 --> 0:40:33.240
<v Speaker 12>a really attractive entry point. If you see inflation slowing,

0:40:33.480 --> 0:40:36.080
<v Speaker 12>if you see growth slowing, Now maybe it doesn't move

0:40:36.080 --> 0:40:38.640
<v Speaker 12>into straight line, but you can get paid to wait.

0:40:39.080 --> 0:40:42.360
<v Speaker 12>High quality bonds are offering five to six percent income,

0:40:43.080 --> 0:40:45.640
<v Speaker 12>and that is close to the highest levels they've been

0:40:45.840 --> 0:40:48.680
<v Speaker 12>over the past twenty years. So bonds are miths priced

0:40:49.680 --> 0:40:52.120
<v Speaker 12>to us in an environment where we do eventually see

0:40:52.120 --> 0:40:53.280
<v Speaker 12>a contraction unfolding.

0:40:53.680 --> 0:40:55.879
<v Speaker 3>What do you see the tenure doing in the next

0:40:55.880 --> 0:40:56.719
<v Speaker 3>few months.

0:40:58.120 --> 0:41:00.160
<v Speaker 12>Yeah, I mean we think it made. It'll chop up

0:41:00.200 --> 0:41:04.160
<v Speaker 12>around before it eventually falls if there is some type

0:41:04.160 --> 0:41:08.920
<v Speaker 12>of oh great question. So you know, on average, if

0:41:08.960 --> 0:41:13.000
<v Speaker 12>you look at the past few bed cutting cycles, the

0:41:13.080 --> 0:41:15.680
<v Speaker 12>ten year treasury yield falls on average about two and

0:41:15.760 --> 0:41:17.920
<v Speaker 12>a half percent from peak to trough. So that is

0:41:17.960 --> 0:41:20.760
<v Speaker 12>a big drop. Say we peaked, you know, right around

0:41:20.760 --> 0:41:23.239
<v Speaker 12>five percent. That brings us down to a two or

0:41:23.239 --> 0:41:25.640
<v Speaker 12>three handle on the ten year treasure yield once we

0:41:25.680 --> 0:41:28.040
<v Speaker 12>get through the economic contraction. So if you're a big

0:41:28.080 --> 0:41:32.400
<v Speaker 12>fan of bond math, that is a really attractive return

0:41:32.880 --> 0:41:35.640
<v Speaker 12>from a duration standpoint, and then you get to add

0:41:35.680 --> 0:41:37.840
<v Speaker 12>the income back in. So I think you could potentially

0:41:37.880 --> 0:41:41.319
<v Speaker 12>even see double digit returns across areas like the ten

0:41:41.400 --> 0:41:44.040
<v Speaker 12>year treasury yield in that contraction environment.

0:41:44.320 --> 0:41:47.239
<v Speaker 2>So are you saying, really what investors need to be

0:41:47.280 --> 0:41:50.719
<v Speaker 2>thinking right now is much more fixed income exposure at

0:41:50.719 --> 0:41:52.600
<v Speaker 2>this point and not equity exposure.

0:41:53.760 --> 0:41:56.239
<v Speaker 12>We still like equity exposure of Carol, And it's a

0:41:56.360 --> 0:41:59.879
<v Speaker 12>very unpopular story to be talking about fixed income because

0:41:59.880 --> 0:42:02.279
<v Speaker 12>it's certainly hasn't worked as well as just owning that

0:42:02.320 --> 0:42:05.400
<v Speaker 12>one big stock and kind of letting it ride. I

0:42:05.480 --> 0:42:08.920
<v Speaker 12>do still think there's opportunities in equities. The challenge is

0:42:08.920 --> 0:42:12.600
<v Speaker 12>the starting point. So stocks are trading it elevated multiples.

0:42:12.600 --> 0:42:15.040
<v Speaker 12>If you look at the US tech sector, it's trading

0:42:15.040 --> 0:42:19.840
<v Speaker 12>at thirty one times forward earnings right now, and that

0:42:19.960 --> 0:42:21.960
<v Speaker 12>is the highest since we were coming down from the

0:42:22.000 --> 0:42:25.239
<v Speaker 12>tech bubble in the late nineteen nineties. Now there's an

0:42:25.239 --> 0:42:29.520
<v Speaker 12>old saying that valuations are not a catalyst. There probably

0:42:29.560 --> 0:42:31.800
<v Speaker 12>needs to be some shift in the macro regime. We

0:42:31.880 --> 0:42:35.600
<v Speaker 12>need to see earnings across technology companies falter and frankly

0:42:35.640 --> 0:42:38.920
<v Speaker 12>they haven't. And the tech sectors got the best earnings

0:42:38.960 --> 0:42:41.440
<v Speaker 12>across all S and P five hundred sectors. So the

0:42:42.400 --> 0:42:45.440
<v Speaker 12>fundamental case for owning tech stocks is there. It's just

0:42:45.480 --> 0:42:48.480
<v Speaker 12>the valuations are looking awfully egregious to us. So we

0:42:48.560 --> 0:42:51.120
<v Speaker 12>want to own them, but we want to diversify by

0:42:51.200 --> 0:42:53.839
<v Speaker 12>looking at places like US mid cap stocks, which are

0:42:53.880 --> 0:42:57.560
<v Speaker 12>trading at the deepest discount to their large cap counterparts

0:42:57.640 --> 0:43:00.880
<v Speaker 12>in the late nineteen nineties. They benefit from an overweight

0:43:00.880 --> 0:43:03.799
<v Speaker 12>to high quality industrial. So there's other areas to be

0:43:03.880 --> 0:43:06.440
<v Speaker 12>in equity, but we like bonds to do some more

0:43:06.440 --> 0:43:08.400
<v Speaker 12>heavy lifting and portfolio and we just want.

0:43:08.239 --> 0:43:10.240
<v Speaker 3>To end with an equity. In the last thirty seconds,

0:43:10.560 --> 0:43:12.919
<v Speaker 3>shares of en Video down six percent, more than twelve

0:43:12.960 --> 0:43:15.560
<v Speaker 3>percent over the last three days. Four hundred billion dollars

0:43:15.600 --> 0:43:18.040
<v Speaker 3>in market cap just gone poof. How are you watching it?

0:43:18.160 --> 0:43:21.319
<v Speaker 12>Yeah, I can't remember a time when one stock ever

0:43:21.440 --> 0:43:24.000
<v Speaker 12>meant this much to the market. It's so remarkable. I

0:43:24.000 --> 0:43:25.920
<v Speaker 12>mean it was it's up one hundred and fifty percent.

0:43:26.280 --> 0:43:29.080
<v Speaker 12>You're to day two hundred percent over the one year period.

0:43:29.160 --> 0:43:32.279
<v Speaker 12>So I think it's certainly makes sense to expect some

0:43:32.400 --> 0:43:35.200
<v Speaker 12>type of pullback in this name, but it's it's incredibly

0:43:35.680 --> 0:43:39.279
<v Speaker 12>you know, it's it's amazing how important this one name

0:43:39.320 --> 0:43:41.040
<v Speaker 12>has been to the broad market. Again, it's a high

0:43:41.120 --> 0:43:44.600
<v Speaker 12>quality stock, great balance sheet, lots of cash, but the

0:43:44.880 --> 0:43:46.040
<v Speaker 12>multiple is pretty extended.

0:43:46.120 --> 0:43:46.200
<v Speaker 10>Ye.

0:43:46.560 --> 0:43:49.879
<v Speaker 2>Mirrors are Kunjan Sabani at Bloomberg Intelligence, who basically said

0:43:49.920 --> 0:43:52.360
<v Speaker 2>It's a fundamentally driven story. Whether you look at revenues,

0:43:52.400 --> 0:43:55.799
<v Speaker 2>EPs or market cap, you know it really, at least

0:43:55.840 --> 0:43:58.640
<v Speaker 2>from his perspective, makes an awful lot of sense. Emily Hey,

0:43:58.680 --> 0:44:01.040
<v Speaker 2>Thank you so much. Emily Roll and co. Chief Investment

0:44:01.080 --> 0:44:05.600
<v Speaker 2>Strategies at John Hancock Investment Management, joining us in Boston.

0:44:06.239 --> 0:44:10.880
<v Speaker 1>This is the Bloomberg Business Week podcast, available on Apple, Spotify,

0:44:11.000 --> 0:44:14.720
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0:44:14.760 --> 0:44:18.360
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0:44:18.400 --> 0:44:21.719
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0:44:21.800 --> 0:44:24.839
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0:44:24.960 --> 0:44:26.920
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