1
00:00:00,800 --> 00:00:04,040
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

2
00:00:04,040 --> 00:00:06,920
Speaker 1: my co host Matt Miller. Every business day, we bring

3
00:00:06,960 --> 00:00:11,520
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

4
00:00:11,560 --> 00:00:15,600
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

5
00:00:15,640 --> 00:00:18,479
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

6
00:00:18,480 --> 00:00:22,599
Speaker 1: at Bloomberg dot com slash podcast. Well, Matt, you know,

7
00:00:22,680 --> 00:00:24,560
Speaker 1: as you know, this is not my first rodeo. I've

8
00:00:24,600 --> 00:00:26,680
Speaker 1: been around this block a couple of times. I thought

9
00:00:26,720 --> 00:00:29,840
Speaker 1: I kind of knew everything that's kind of worth knowing.

10
00:00:29,920 --> 00:00:32,800
Speaker 1: But I learned something new today that you can grow

11
00:00:33,080 --> 00:00:36,400
Speaker 1: a diamond in a lab. Did you know that? Oh? Yes,

12
00:00:36,600 --> 00:00:40,200
Speaker 1: I had no idea where. Ye man, it's just amazing. Fortunately,

13
00:00:40,200 --> 00:00:42,680
Speaker 1: we've got a great guest to talk to us about

14
00:00:42,720 --> 00:00:45,680
Speaker 1: this growing business. A Miss Shaw, president of a l

15
00:00:45,760 --> 00:00:49,440
Speaker 1: TR created Diamonds, joins us on the phone. I Miss again,

16
00:00:49,479 --> 00:00:52,360
Speaker 1: I learned something new today. Tell me how you grow

17
00:00:52,440 --> 00:00:58,760
Speaker 1: a diamond in a lab. A diamonds grown in a

18
00:00:58,880 --> 00:01:04,280
Speaker 1: high tech labar tree in an enclosed chamber, and it

19
00:01:04,400 --> 00:01:08,040
Speaker 1: starts from a diamond. If you think of a thin

20
00:01:08,360 --> 00:01:12,480
Speaker 1: slice of a diamonds thes a hair um that is

21
00:01:12,880 --> 00:01:18,560
Speaker 1: placed in a chamber that is pressurized with temperatures in

22
00:01:18,600 --> 00:01:23,080
Speaker 1: the range of about degrees center centigrade about two thousand

23
00:01:23,080 --> 00:01:29,160
Speaker 1: degrees fahrenheit, and a combination of propriety gases that contained

24
00:01:29,240 --> 00:01:36,480
Speaker 1: pure carbon are being exposed. Carbon bonds with the slice,

25
00:01:36,600 --> 00:01:42,800
Speaker 1: which is a lattice of carbon on the diamond, growing

26
00:01:42,880 --> 00:01:47,880
Speaker 1: the diamond into a larger crystal. In about six hundred hours,

27
00:01:48,840 --> 00:01:52,440
Speaker 1: you have a type two way which is among the

28
00:01:52,480 --> 00:01:56,920
Speaker 1: two percent of the world's pure as diamonds born in

29
00:01:57,000 --> 00:02:00,920
Speaker 1: this chamber. So how expensive is it to do that then,

30
00:02:01,160 --> 00:02:05,480
Speaker 1: compared to, you know, just mining a diamond. I think

31
00:02:05,520 --> 00:02:11,399
Speaker 1: from the perspective of technology worsus mining um. The first

32
00:02:11,480 --> 00:02:13,919
Speaker 1: round of technology is very expensive, just like every other

33
00:02:14,000 --> 00:02:18,760
Speaker 1: industry was. Over a period of time. The economy of

34
00:02:19,200 --> 00:02:24,720
Speaker 1: volume and improved technology gives consumer almost a fifty better

35
00:02:24,800 --> 00:02:28,760
Speaker 1: value and that's where we have already achieved. All right,

36
00:02:28,840 --> 00:02:32,440
Speaker 1: So the technology is there, are you selling any of

37
00:02:32,480 --> 00:02:35,919
Speaker 1: these times? Do we have a market price? Talk to

38
00:02:36,000 --> 00:02:41,240
Speaker 1: us about that the commercials. Yeah, absolutely, So we entered

39
00:02:41,240 --> 00:02:45,280
Speaker 1: the marketplace in two thousand sixteen. Our first retail fit

40
00:02:45,320 --> 00:02:48,959
Speaker 1: out was that one of Berkshire had to store in Omaha.

41
00:02:49,360 --> 00:02:53,000
Speaker 1: I mean the last five years, the overall category has

42
00:02:53,040 --> 00:02:58,919
Speaker 1: grown to almost two billion dollars UM. The simplest weight

43
00:02:59,000 --> 00:03:02,040
Speaker 1: to the comprices is if an Earth's Mind diamond was

44
00:03:02,600 --> 00:03:07,120
Speaker 1: five thousand dollars for a one carrot, but the same prize,

45
00:03:07,560 --> 00:03:10,080
Speaker 1: you would almost get a fifty larger diamond at one

46
00:03:10,120 --> 00:03:15,440
Speaker 1: point five carrot. And how difficult is it to tell

47
00:03:15,440 --> 00:03:18,160
Speaker 1: the difference? I mean, can you know the experts in

48
00:03:18,280 --> 00:03:21,400
Speaker 1: I don't know where they are Antwerp or Street or whatever.

49
00:03:21,440 --> 00:03:24,160
Speaker 1: Can they Can they look at one of these diamonds

50
00:03:24,240 --> 00:03:28,240
Speaker 1: and an earth Mind diamond and tell the difference instantly?

51
00:03:30,080 --> 00:03:33,680
Speaker 1: Actually not, because a diamond is a diamond irrespective of

52
00:03:33,720 --> 00:03:39,280
Speaker 1: how it's grown. You would need is meter to tell

53
00:03:39,320 --> 00:03:42,920
Speaker 1: the difference between these two diamonds. Alright, So I think

54
00:03:42,960 --> 00:03:46,280
Speaker 1: about a big retail chain like Pandora. Are they selling

55
00:03:46,280 --> 00:03:49,119
Speaker 1: your diamonds or are they selling diamonds that are lab

56
00:03:49,160 --> 00:03:54,440
Speaker 1: grown diamonds? I guess uh. Pandora has just recently entered

57
00:03:54,520 --> 00:03:59,280
Speaker 1: into the lab grown diamond category. UM labgown diamond category

58
00:03:59,360 --> 00:04:02,040
Speaker 1: is expanding. The very high pace is the growthy year

59
00:04:02,120 --> 00:04:06,480
Speaker 1: over a year is in triple digit and because of

60
00:04:06,520 --> 00:04:12,120
Speaker 1: the value it's offering the consumer briant from accessory to find.

61
00:04:12,200 --> 00:04:16,360
Speaker 1: Jewelry are starting to enter the category, but your products

62
00:04:16,360 --> 00:04:18,800
Speaker 1: are I'm thinking of your products on a higher price

63
00:04:18,880 --> 00:04:21,960
Speaker 1: level than a Pandora, than the average take the price

64
00:04:21,960 --> 00:04:27,240
Speaker 1: at Pandora. Yes, we currently operate in the larger from

65
00:04:27,240 --> 00:04:30,200
Speaker 1: a one character four character price point, so we would

66
00:04:30,240 --> 00:04:35,200
Speaker 1: be almost a few times of the Pandora price point. Okay,

67
00:04:35,279 --> 00:04:39,920
Speaker 1: So I go into a diamond store. I feel like

68
00:04:40,200 --> 00:04:42,520
Speaker 1: this isn't widely lone or maybe it's just me. I'm

69
00:04:42,520 --> 00:04:44,480
Speaker 1: not haven't been in the diamond market. Dude, did you

70
00:04:44,480 --> 00:04:48,479
Speaker 1: not see blood diamonds? I did not, Leonardo DiCaprio, it

71
00:04:48,560 --> 00:04:52,800
Speaker 1: was awesome, and like, so here's the deal. The kids

72
00:04:52,960 --> 00:04:58,200
Speaker 1: are unhappy, a justifiably so. I mean, you know, there's

73
00:04:58,200 --> 00:05:01,799
Speaker 1: a lot of ethical and moral concerns with earth mind diamonds.

74
00:05:01,880 --> 00:05:05,240
Speaker 1: That's why this is such a great solution, is um.

75
00:05:05,839 --> 00:05:08,280
Speaker 1: And I just wonder how much of the market are

76
00:05:08,279 --> 00:05:11,000
Speaker 1: you going to take with with lab grown diamonds As

77
00:05:11,040 --> 00:05:13,279
Speaker 1: more and more people say, look, it's just as good

78
00:05:13,360 --> 00:05:17,280
Speaker 1: or maybe better, and bigger is always better. So um,

79
00:05:17,279 --> 00:05:19,360
Speaker 1: I'd rather have this than a diamond that I'm not

80
00:05:19,440 --> 00:05:23,520
Speaker 1: really sure about the origin of Yeah, if you think

81
00:05:23,520 --> 00:05:27,320
Speaker 1: about it today, if you and it's an environmentally and

82
00:05:27,360 --> 00:05:31,000
Speaker 1: a socially conscious product, the product that's made above the

83
00:05:31,120 --> 00:05:36,000
Speaker 1: ground in sophisticated labs. And the important part is it's

84
00:05:36,040 --> 00:05:40,880
Speaker 1: actually a finer quality diamond. And then when you look

85
00:05:40,920 --> 00:05:43,240
Speaker 1: from the prize val, it's like you're getting something better

86
00:05:43,400 --> 00:05:47,279
Speaker 1: for less. In terms of how much market place this

87
00:05:47,320 --> 00:05:50,440
Speaker 1: will cover over the next decade. From two billion dollars,

88
00:05:50,440 --> 00:05:53,800
Speaker 1: we're looking at about fifteen billion dollars in the next

89
00:05:53,839 --> 00:05:58,040
Speaker 1: ten years. What is also more interesting is the overall

90
00:05:58,080 --> 00:06:01,240
Speaker 1: diamond in diamonds come to the market each here is

91
00:06:01,240 --> 00:06:04,200
Speaker 1: about twenty billion dollars, so you can see that the

92
00:06:04,279 --> 00:06:07,240
Speaker 1: consumption is going to grow. Also, it opens a much

93
00:06:07,279 --> 00:06:09,839
Speaker 1: more bigger market space. I think that's the bigger part,

94
00:06:10,880 --> 00:06:13,800
Speaker 1: aspirations are not going to be achievable because people can

95
00:06:13,839 --> 00:06:19,200
Speaker 1: afford more diamonds. What is the diamond industry? What's been

96
00:06:19,279 --> 00:06:26,480
Speaker 1: a response from the mind years. I think, like every industry,

97
00:06:26,520 --> 00:06:28,480
Speaker 1: and I think yours you must have seen this more

98
00:06:28,560 --> 00:06:32,159
Speaker 1: than meat. The manhoods always take it with hard feelings.

99
00:06:33,680 --> 00:06:37,679
Speaker 1: Nobody likes their customers to change their taste or choice

100
00:06:38,240 --> 00:06:42,120
Speaker 1: and nobody likes the midstream to change what is happening forever.

101
00:06:42,520 --> 00:06:46,640
Speaker 1: It happened with cars, it happened with every consumer product.

102
00:06:46,640 --> 00:06:48,960
Speaker 1: But at the end of the day, the consumer makes

103
00:06:49,000 --> 00:06:51,520
Speaker 1: the decision. What's the marketing like now? I mean, I

104
00:06:51,560 --> 00:06:54,760
Speaker 1: can imagine if I said diamonds are a girl's best friend.

105
00:06:54,880 --> 00:06:57,280
Speaker 1: I think my wife might slap me. It just seems

106
00:06:57,320 --> 00:06:59,760
Speaker 1: like a sexist thing to say. On the other hand,

107
00:07:00,080 --> 00:07:03,600
Speaker 1: she loves diamonds, right, and I don't care about them,

108
00:07:03,640 --> 00:07:08,839
Speaker 1: So what's the marketing play? The marketing play is a

109
00:07:08,960 --> 00:07:12,080
Speaker 1: larger and more beautiful diamond for the same money. I'll

110
00:07:12,120 --> 00:07:14,200
Speaker 1: put it this way. If you had to get your

111
00:07:14,240 --> 00:07:16,720
Speaker 1: wife a one carrot diamond, and you went to a

112
00:07:16,760 --> 00:07:20,560
Speaker 1: store with her, and she would have a one carrot

113
00:07:20,560 --> 00:07:23,640
Speaker 1: on a finger or a pendem internet and she would

114
00:07:23,640 --> 00:07:27,440
Speaker 1: have a one point larger and you were paying the

115
00:07:27,480 --> 00:07:30,720
Speaker 1: same amount of money. You would be happy. But think

116
00:07:30,720 --> 00:07:32,800
Speaker 1: about how much more happier she's going to be well,

117
00:07:32,840 --> 00:07:34,840
Speaker 1: And she would be happy about the social aspect of

118
00:07:34,880 --> 00:07:36,680
Speaker 1: it as well, because I don't think she's comfortable with

119
00:07:36,720 --> 00:07:41,280
Speaker 1: the you know, the possibility that the diamonds she wants

120
00:07:41,440 --> 00:07:44,680
Speaker 1: could have caused so many people, so much pain. It's

121
00:07:44,720 --> 00:07:47,920
Speaker 1: such a fascinating story. Miss thanks so much for joining

122
00:07:48,000 --> 00:07:50,160
Speaker 1: us and as Shaw there, President A. L. T R.

123
00:07:50,800 --> 00:08:00,000
Speaker 1: Created diamonds. Let's talk taxation, global taxation and the corporate

124
00:08:00,160 --> 00:08:03,480
Speaker 1: minimum attacks. To dive into that, we welcome Mimi's song,

125
00:08:03,600 --> 00:08:06,200
Speaker 1: Chief Economists for Cross Border Solutions Me me, thanks so

126
00:08:06,320 --> 00:08:09,400
Speaker 1: much for joining us here. Just give us a background here.

127
00:08:09,480 --> 00:08:11,840
Speaker 1: Where are we? I know there's a lot of discussion here.

128
00:08:11,880 --> 00:08:15,000
Speaker 1: Where are we with a corporate minimum tax on a

129
00:08:15,080 --> 00:08:20,200
Speaker 1: global basis? Well, we've we've already seen that the G

130
00:08:20,320 --> 00:08:23,720
Speaker 1: seven has met to come to at least this consensus

131
00:08:23,760 --> 00:08:27,160
Speaker 1: lot of framework of what that global minimum taxation would

132
00:08:27,200 --> 00:08:31,560
Speaker 1: look like. And based on that, we've even had a

133
00:08:31,640 --> 00:08:34,880
Speaker 1: hundred and thirty countries come to the table and agree

134
00:08:34,920 --> 00:08:38,280
Speaker 1: that this makes sense and everybody is willing to negotiate,

135
00:08:38,320 --> 00:08:41,120
Speaker 1: which is a huge step towards trying to get to

136
00:08:41,160 --> 00:08:46,280
Speaker 1: this global minimum taxation. So is it a minimum uh

137
00:08:46,559 --> 00:08:50,839
Speaker 1: tax rate? Or I mean in the US, for example, um,

138
00:08:50,840 --> 00:08:55,160
Speaker 1: the corporate tax rate is and a lot of companies

139
00:08:55,240 --> 00:08:57,520
Speaker 1: end up not paying any taxes at all? Is that

140
00:08:57,559 --> 00:09:01,360
Speaker 1: still going to happen when it drops to fifteen? So

141
00:09:01,480 --> 00:09:04,720
Speaker 1: the the idea here, and the reason for these proposals

142
00:09:04,800 --> 00:09:09,160
Speaker 1: is ultimately such that corporations can no longer take advantage

143
00:09:09,160 --> 00:09:14,400
Speaker 1: of those tax arbitract situations and establish these elaborate schemes

144
00:09:14,640 --> 00:09:16,880
Speaker 1: where they don't pay any taxes at all. So this

145
00:09:17,040 --> 00:09:21,120
Speaker 1: idea of you know, profit being untaxable, and so that

146
00:09:21,280 --> 00:09:24,600
Speaker 1: this is what the the global community is coming together

147
00:09:24,880 --> 00:09:28,240
Speaker 1: to try to mitigate. They want to they want to

148
00:09:28,320 --> 00:09:31,280
Speaker 1: tax corporations. They want to make sure that corporations are

149
00:09:31,280 --> 00:09:34,960
Speaker 1: paying their fair shared taxes in the right locations. And

150
00:09:35,080 --> 00:09:38,600
Speaker 1: under the proposal there, it gets a little bit complicated,

151
00:09:38,640 --> 00:09:43,000
Speaker 1: but essentially there's two aspects of it. Number one, the

152
00:09:43,080 --> 00:09:47,640
Speaker 1: aspect that companies need to you know, companies operating in

153
00:09:47,679 --> 00:09:52,080
Speaker 1: this digital economy because of the antiquated tax rules, they're

154
00:09:52,120 --> 00:09:57,480
Speaker 1: not being taxed because in in the right countries, because

155
00:09:57,520 --> 00:10:01,079
Speaker 1: those countries don't have the taxing rights of the idea

156
00:10:01,080 --> 00:10:04,560
Speaker 1: of taxation historically was based on brick and mortar structures,

157
00:10:04,679 --> 00:10:07,880
Speaker 1: and now that's no longer the case. They're redefining what

158
00:10:08,120 --> 00:10:11,520
Speaker 1: that taxation right looks like. And then on top of that,

159
00:10:11,880 --> 00:10:14,720
Speaker 1: they're going to be applying this concept of a minimum

160
00:10:14,760 --> 00:10:19,400
Speaker 1: taxation where a company headquartered in a certain location. There

161
00:10:19,440 --> 00:10:23,320
Speaker 1: is the global tax you know, the global effective tax

162
00:10:23,440 --> 00:10:26,560
Speaker 1: rates should be at this minimum rate right where everybody

163
00:10:26,559 --> 00:10:30,240
Speaker 1: has to taste the proposal somewhere around fifteen percent at

164
00:10:30,240 --> 00:10:32,760
Speaker 1: this point, but of course all those details have yet

165
00:10:32,800 --> 00:10:36,679
Speaker 1: to be finalized. God, this so complicated, man, it's I mean,

166
00:10:36,679 --> 00:10:41,040
Speaker 1: it's already complicated classes right. I love the There is

167
00:10:41,080 --> 00:10:43,920
Speaker 1: a letter circulating Donald Rumsfeld's into the I R S

168
00:10:43,960 --> 00:10:46,480
Speaker 1: where he said, like, I've looked at this, I've got

169
00:10:46,520 --> 00:10:49,640
Speaker 1: a college degree, I've had accountants look at it, and

170
00:10:50,000 --> 00:10:51,800
Speaker 1: even my wife looked it over, and we still have

171
00:10:51,840 --> 00:10:55,920
Speaker 1: no idea if this is right. Um, I was going

172
00:10:56,000 --> 00:10:58,720
Speaker 1: to say, the tax is like hundreds and hundreds of

173
00:10:58,760 --> 00:11:02,480
Speaker 1: pages long, and it just create It's even more complicated

174
00:11:02,600 --> 00:11:06,240
Speaker 1: because it's layers on layers on top of you know,

175
00:11:06,360 --> 00:11:09,120
Speaker 1: tax code. Right, it's just building upon something instead of

176
00:11:09,240 --> 00:11:12,280
Speaker 1: building the house from scratch. I mean, is this just

177
00:11:12,320 --> 00:11:16,360
Speaker 1: the way politicians like like it? Is this? You know

178
00:11:16,440 --> 00:11:20,240
Speaker 1: how you know salaried professionals making a hundred seventies six

179
00:11:20,240 --> 00:11:23,000
Speaker 1: thousand dollars a year end up being multi multi millionaires

180
00:11:23,080 --> 00:11:28,319
Speaker 1: or is there any possibility of the tax code being simplified.

181
00:11:30,000 --> 00:11:33,240
Speaker 1: You know, that's that's that's that's a difficult question to answer.

182
00:11:33,280 --> 00:11:36,120
Speaker 1: I think everyone would love simplification of the tax code.

183
00:11:36,120 --> 00:11:39,200
Speaker 1: But I think it's nearly impossible to go back to

184
00:11:39,320 --> 00:11:42,920
Speaker 1: that state, right, because like I said, it's it's it's

185
00:11:42,920 --> 00:11:45,920
Speaker 1: actually of thousands of pages of tax code. I mean

186
00:11:46,360 --> 00:11:50,040
Speaker 1: that that that just is so complicated that trying to

187
00:11:50,120 --> 00:11:53,040
Speaker 1: start over from scratch is going to be nearly impossible.

188
00:11:53,080 --> 00:11:55,800
Speaker 1: And so now it's just a matter of you know,

189
00:11:56,120 --> 00:12:00,320
Speaker 1: it's trying to fix what what is some you know,

190
00:12:00,920 --> 00:12:03,640
Speaker 1: you know it will be interesting, Mami. One of the reasons, right,

191
00:12:03,679 --> 00:12:09,559
Speaker 1: is that we try and incentivize behavior with UM tax deductions. Well,

192
00:12:09,600 --> 00:12:11,760
Speaker 1: we no longer be able to do that if there's

193
00:12:11,800 --> 00:12:16,000
Speaker 1: a minimum rate. Well, so this that's that's an interesting

194
00:12:16,080 --> 00:12:19,640
Speaker 1: question because the minimum rate is one aspect of taxation,

195
00:12:19,760 --> 00:12:23,720
Speaker 1: but that incentive there are other tax incentives, tax credits

196
00:12:23,760 --> 00:12:27,800
Speaker 1: that will that will actually help to bolster and continue

197
00:12:27,840 --> 00:12:32,160
Speaker 1: to UM sort of bring in investment and innovation. Right,

198
00:12:32,240 --> 00:12:34,480
Speaker 1: So R and D tax credits, which is another section

199
00:12:34,760 --> 00:12:38,880
Speaker 1: of the tax code beyond this this just overall effective

200
00:12:38,920 --> 00:12:41,720
Speaker 1: tax rate. And so the interplay between all of these

201
00:12:41,760 --> 00:12:49,480
Speaker 1: different aspects of taxation. It's just really complicated, and no,

202
00:12:49,679 --> 00:12:52,120
Speaker 1: it is really I was just thinking, Paul, we should

203
00:12:52,160 --> 00:12:56,679
Speaker 1: do a podcast on taxation. It would be fun, it

204
00:12:56,720 --> 00:12:59,000
Speaker 1: would be fun for us, and we'd have mania on.

205
00:12:59,200 --> 00:13:01,640
Speaker 1: But I don't know if anybody would click on a

206
00:13:01,720 --> 00:13:05,120
Speaker 1: taxation podcast any case. Mimi, thanks very much for joining us.

207
00:13:05,160 --> 00:13:07,480
Speaker 1: Great to have you. Mimi Song, chief economists at Cross

208
00:13:07,520 --> 00:13:12,640
Speaker 1: Border Solutions. Let's bring in now Steve Wyatt, his chief

209
00:13:12,640 --> 00:13:16,440
Speaker 1: investment strategist at b Okay Financial. They have ninety two

210
00:13:16,640 --> 00:13:20,160
Speaker 1: billion dollars in assets under management, and Steve, maybe you

211
00:13:20,160 --> 00:13:22,840
Speaker 1: can help shut us, help us shed some light on

212
00:13:23,480 --> 00:13:26,520
Speaker 1: what's going on in treasuries right now. We're looking at

213
00:13:26,559 --> 00:13:30,600
Speaker 1: a yield of only one thirty sixty two and the

214
00:13:30,679 --> 00:13:36,079
Speaker 1: real yield is below one full percent. Why our investors

215
00:13:36,120 --> 00:13:39,600
Speaker 1: buying bonds after the fed's hawk ish turn and amidst

216
00:13:39,760 --> 00:13:43,079
Speaker 1: taper talk. Yeah, so, good morning, Matthew. Thank you for

217
00:13:43,120 --> 00:13:45,240
Speaker 1: the opportunity to be here, and I really appreciate you

218
00:13:45,280 --> 00:13:48,160
Speaker 1: starting off with such an easy question like that. Uh.

219
00:13:49,080 --> 00:13:51,559
Speaker 1: It's uh, it truly is something that has somebody that

220
00:13:51,640 --> 00:13:54,840
Speaker 1: started their career in two under a Paul Boker Fed

221
00:13:54,920 --> 00:13:57,960
Speaker 1: as in the bond market, you look at what's happening

222
00:13:58,000 --> 00:14:01,040
Speaker 1: and it's a it's it's a bit of a head scratcher.

223
00:14:01,320 --> 00:14:04,720
Speaker 1: I think that in the end we can talk about

224
00:14:04,760 --> 00:14:09,600
Speaker 1: the distortion of quantitative easing is is causing in today's

225
00:14:09,840 --> 00:14:13,400
Speaker 1: you know, on the domestic market, uh, the impact of

226
00:14:13,520 --> 00:14:16,960
Speaker 1: what's happening from a global standpoint. But I think if

227
00:14:17,000 --> 00:14:18,640
Speaker 1: you just have to look at the shape of the

228
00:14:18,720 --> 00:14:21,400
Speaker 1: yield curve and what's happened since the Fed came out

229
00:14:21,480 --> 00:14:26,000
Speaker 1: and gave some indication that there was some disagreement on

230
00:14:26,040 --> 00:14:28,600
Speaker 1: the f O m C about when the interest rates

231
00:14:28,640 --> 00:14:31,800
Speaker 1: may need to rise, and the response to that, This

232
00:14:32,000 --> 00:14:35,200
Speaker 1: flattening of the yield curve, to me, is a pretty

233
00:14:35,240 --> 00:14:38,640
Speaker 1: strong cautionary statement on the part of the bond market

234
00:14:39,400 --> 00:14:41,800
Speaker 1: that the Fed, as much as we want them to

235
00:14:41,880 --> 00:14:47,080
Speaker 1: be able to get back to a normal monetary policy,

236
00:14:47,160 --> 00:14:49,680
Speaker 1: we want our economy to be able to operate without

237
00:14:49,720 --> 00:14:53,840
Speaker 1: the level of extraordinary monetary accommodation that we have today.

238
00:14:54,040 --> 00:14:56,080
Speaker 1: I think the bond markets send in a signal to

239
00:14:56,120 --> 00:14:58,440
Speaker 1: the Fed that they better be very careful about how

240
00:14:58,480 --> 00:15:03,160
Speaker 1: they do that and how how important their communication process

241
00:15:03,240 --> 00:15:06,640
Speaker 1: between now and then is going to be Steve. A

242
00:15:06,640 --> 00:15:09,400
Speaker 1: big part of the inflation discussion is obviously wages, and

243
00:15:09,400 --> 00:15:13,240
Speaker 1: we got some the Jolts data this morning. Still a

244
00:15:13,400 --> 00:15:15,400
Speaker 1: lot of job openings out there. We had a pretty

245
00:15:15,440 --> 00:15:20,520
Speaker 1: good jobs number last week, but still, um, it's tough

246
00:15:20,560 --> 00:15:23,480
Speaker 1: to make a call for inflation if there's still uh,

247
00:15:23,520 --> 00:15:27,080
Speaker 1: you know, a lot of folks that are not employed. Yeah,

248
00:15:27,120 --> 00:15:29,240
Speaker 1: and look, I think it's going to be important one

249
00:15:29,240 --> 00:15:32,760
Speaker 1: of the uh you know, one of the important topics

250
00:15:32,760 --> 00:15:34,520
Speaker 1: that we're looking at, kind of the trends that we're

251
00:15:34,560 --> 00:15:36,120
Speaker 1: looking at between now and the end of the year

252
00:15:36,120 --> 00:15:38,800
Speaker 1: as we think about our outlook for the economy. How

253
00:15:38,840 --> 00:15:42,000
Speaker 1: the labor force unfolds from its current position is going

254
00:15:42,040 --> 00:15:45,320
Speaker 1: to be a key metric. It's so important as we

255
00:15:45,400 --> 00:15:50,479
Speaker 1: think about how we move from a stimulus based recovery

256
00:15:51,000 --> 00:15:55,280
Speaker 1: to a more private sector driven expansion that can last

257
00:15:55,360 --> 00:15:58,400
Speaker 1: for a longer period of time. What did we have

258
00:15:58,440 --> 00:16:00,560
Speaker 1: a hard John say that we're now up to nine

259
00:16:00,600 --> 00:16:04,160
Speaker 1: point to one million job openings, were still seven million

260
00:16:04,280 --> 00:16:07,840
Speaker 1: something jobs short of where we were in the economy

261
00:16:07,880 --> 00:16:10,800
Speaker 1: before we went into the pandemic. So there's clearly this

262
00:16:10,880 --> 00:16:13,880
Speaker 1: huge gap. It's not like there's a I think for

263
00:16:14,000 --> 00:16:17,080
Speaker 1: job seekers. It's not like there's a fear of missing out.

264
00:16:17,280 --> 00:16:19,920
Speaker 1: There's a lot of jobs out there. I think the

265
00:16:19,960 --> 00:16:23,720
Speaker 1: reasons why the labor market has been slow to respond

266
00:16:23,800 --> 00:16:27,200
Speaker 1: or complex, but we anticipate that is going to change

267
00:16:27,240 --> 00:16:29,240
Speaker 1: over time that we think that there is going to

268
00:16:29,440 --> 00:16:32,840
Speaker 1: we're gonna see steady improvement. I would not be surprised

269
00:16:32,880 --> 00:16:35,800
Speaker 1: to see non farm payroll gains of over a million

270
00:16:36,320 --> 00:16:39,280
Speaker 1: UH in a couple of months as we moved between

271
00:16:39,280 --> 00:16:41,760
Speaker 1: now and the end of the year. And there other

272
00:16:41,800 --> 00:16:44,000
Speaker 1: reason that's so important is that's going to play such

273
00:16:44,000 --> 00:16:48,040
Speaker 1: a big part and how the FED approaches their monetary

274
00:16:48,080 --> 00:16:51,600
Speaker 1: policy because they keyed in on the labor market right

275
00:16:51,720 --> 00:16:55,640
Speaker 1: or wrong, agree or disagree whether or not monetary policy

276
00:16:55,680 --> 00:16:59,680
Speaker 1: is the right tool to help solve the labor markets problems.

277
00:16:59,800 --> 00:17:03,160
Speaker 1: That what the FED has focused on, and that's what

278
00:17:03,240 --> 00:17:05,919
Speaker 1: we think is going to drive monetary policy from a

279
00:17:05,960 --> 00:17:12,160
Speaker 1: longer term perspective. In terms of investments, Steve Um Bloomberg's

280
00:17:12,200 --> 00:17:14,760
Speaker 1: Danni Burger put a chart out this morning that I

281
00:17:14,800 --> 00:17:19,440
Speaker 1: thought was interesting showing that the US Economic Surprise Index.

282
00:17:19,640 --> 00:17:21,520
Speaker 1: You know many banks have these, but Bloomberg has its

283
00:17:21,560 --> 00:17:24,320
Speaker 1: own U s ECO Surprise Index fell to the lowest

284
00:17:24,359 --> 00:17:29,880
Speaker 1: level since June of not still positive, but it's not

285
00:17:30,680 --> 00:17:33,000
Speaker 1: it's just barely positive. And I wonder if that means,

286
00:17:33,320 --> 00:17:35,800
Speaker 1: you know, most of the recovery, most of the growth

287
00:17:35,800 --> 00:17:39,720
Speaker 1: ahead of us is already priced in. Well, there's part

288
00:17:39,720 --> 00:17:41,239
Speaker 1: of that, and I think the other part of that

289
00:17:41,320 --> 00:17:43,399
Speaker 1: is whether or not we're at this peak growth. And

290
00:17:43,440 --> 00:17:46,800
Speaker 1: it's like the second derivative problem. It's still positive, but

291
00:17:46,840 --> 00:17:50,640
Speaker 1: not as positive as it was correct and so we

292
00:17:50,720 --> 00:17:53,800
Speaker 1: kind of think we're right at that peak stimulus, the

293
00:17:53,880 --> 00:17:58,560
Speaker 1: impact of monetary policy easing, the fiscal stimulus that occurred,

294
00:17:58,600 --> 00:18:02,159
Speaker 1: which was material and really frankly puts US in a

295
00:18:02,240 --> 00:18:05,600
Speaker 1: different position than we've been in past periods. We I think,

296
00:18:05,640 --> 00:18:07,760
Speaker 1: for all of us in this business, we have to

297
00:18:07,800 --> 00:18:10,240
Speaker 1: be humble enough to say that as we look forward,

298
00:18:10,280 --> 00:18:12,600
Speaker 1: there's a lot we just don't know. If we think

299
00:18:12,640 --> 00:18:16,040
Speaker 1: about where we were twelve months ago and the conversations

300
00:18:16,080 --> 00:18:19,440
Speaker 1: that we're having today versus then uh, it's a lot better.

301
00:18:19,560 --> 00:18:22,040
Speaker 1: The risk that I think we're facing today are more

302
00:18:22,080 --> 00:18:25,159
Speaker 1: manageable than they would have been had we not taken

303
00:18:25,200 --> 00:18:28,640
Speaker 1: some of those steps. But our thought as we look

304
00:18:28,720 --> 00:18:33,920
Speaker 1: forward is what's next is somewhat less monetary accommodation, somewhat

305
00:18:34,040 --> 00:18:39,840
Speaker 1: less fiscal accommodation, somewhat slower economic growth, still positive, but

306
00:18:39,880 --> 00:18:42,639
Speaker 1: we're not going to do what's the Atlanta FA GDP

307
00:18:42,800 --> 00:18:46,080
Speaker 1: now and X ten ten eleven for the second quarter.

308
00:18:46,480 --> 00:18:48,600
Speaker 1: We're not going to see earning's growth at the same

309
00:18:48,680 --> 00:18:51,679
Speaker 1: level that we've seen, but still going to be positive

310
00:18:51,920 --> 00:18:53,920
Speaker 1: and uh, and that's still going to be an environment

311
00:18:53,920 --> 00:18:57,000
Speaker 1: where we can look for the economy to expand and

312
00:18:57,640 --> 00:19:01,000
Speaker 1: job growth to remain positive. All right, Steve, great to

313
00:19:01,000 --> 00:19:04,119
Speaker 1: get your thoughts. Really appreciate you dropping by with some insight.

314
00:19:04,200 --> 00:19:07,480
Speaker 1: Steve Wyatt, I said, is chief investment strategist to be

315
00:19:07,520 --> 00:19:12,520
Speaker 1: okay financially about ninety two billion dollars of assets under management,

316
00:19:12,680 --> 00:19:15,520
Speaker 1: and UM, you know, I think, if anything, this is

317
00:19:15,560 --> 00:19:18,960
Speaker 1: the time when you really need expert advice. I mean,

318
00:19:19,040 --> 00:19:22,919
Speaker 1: this is a very sensitive market. Is it priced to perfection?

319
00:19:23,040 --> 00:19:26,280
Speaker 1: Are there still opportunities out there? Um? I don't know

320
00:19:26,320 --> 00:19:29,360
Speaker 1: about you, but I need some guidance. And that's why

321
00:19:29,400 --> 00:19:37,160
Speaker 1: we talked to experts like Steve. This is Bloomberg bringing

322
00:19:37,240 --> 00:19:40,680
Speaker 1: Naomi Nick. She's a corporate influence reporter for Bloomberg News.

323
00:19:40,720 --> 00:19:43,760
Speaker 1: She joins us on the phone from Washington, d C. Naomi. Uh,

324
00:19:44,080 --> 00:19:48,040
Speaker 1: your story here about Amazon's really interesting. Here, just refresh

325
00:19:48,119 --> 00:19:50,280
Speaker 1: our memory here kind of how did this play out?

326
00:19:50,600 --> 00:19:52,680
Speaker 1: I guess it was a couple of years ago when

327
00:19:52,720 --> 00:19:58,240
Speaker 1: this big contract was being awarded, a Jedi contract, Jedi contract, Yes,

328
00:19:58,960 --> 00:20:03,480
Speaker 1: potentially you know out UM awarded the Jedi contract, which

329
00:20:03,720 --> 00:20:06,600
Speaker 1: is a which was a contract that would have given

330
00:20:07,000 --> 00:20:10,200
Speaker 1: the winner ten billion dollars up to ten billion dollars

331
00:20:10,200 --> 00:20:14,520
Speaker 1: over a decade to be the Pentagon's sort of big

332
00:20:14,560 --> 00:20:19,399
Speaker 1: cloud services provider. That project got a lot of pushback

333
00:20:19,520 --> 00:20:23,080
Speaker 1: from industry in Cooling Oracle, Microsoft, and IBM, who all

334
00:20:23,160 --> 00:20:26,560
Speaker 1: thought the deal was tailor made for Amazon because it

335
00:20:26,600 --> 00:20:30,440
Speaker 1: has already won a similar deal from the CIA. Uh.

336
00:20:30,560 --> 00:20:33,800
Speaker 1: Fast forward a couple of years and the Pentagon gives

337
00:20:33,800 --> 00:20:39,240
Speaker 1: it to Microsoft Amazon who saying the reason Microsoft got

338
00:20:39,240 --> 00:20:44,000
Speaker 1: it is because of President Donald Trump. Uh and um.

339
00:20:44,080 --> 00:20:46,920
Speaker 1: And then you know, now depending on saying okay, we're

340
00:20:46,920 --> 00:20:50,359
Speaker 1: going to just abandon the project altogether because Trumps is

341
00:20:50,359 --> 00:20:55,160
Speaker 1: the idea, right, Yeah. Essentially that that that Trump hatd

342
00:20:55,280 --> 00:20:57,800
Speaker 1: Bezos because you know, if you in the Washington Posts,

343
00:20:57,880 --> 00:21:01,200
Speaker 1: and Trump was making a lot of that publicly at

344
00:21:01,200 --> 00:21:04,159
Speaker 1: the time, questioning the fairness of the project, which was

345
00:21:04,240 --> 00:21:07,840
Speaker 1: unusual for a sitting president to do in a procament

346
00:21:07,960 --> 00:21:11,960
Speaker 1: like this. I have to say, the story is amazing.

347
00:21:12,200 --> 00:21:15,159
Speaker 1: I mean I woke up at three o'clock in the morning,

348
00:21:15,400 --> 00:21:18,040
Speaker 1: checked my Bloomberg and read this story and was like,

349
00:21:18,080 --> 00:21:21,639
Speaker 1: oh my god, it's there's so much drama. Um. So

350
00:21:21,680 --> 00:21:24,120
Speaker 1: the Jedi contract one of the things I found interesting.

351
00:21:24,240 --> 00:21:26,320
Speaker 1: It was going to be what a tenuere deal? Right,

352
00:21:26,400 --> 00:21:29,120
Speaker 1: but they said three and a half years later, all

353
00:21:29,200 --> 00:21:33,879
Speaker 1: that technology is basically obsolete Naomi, So now they're gonna

354
00:21:33,880 --> 00:21:37,040
Speaker 1: do what is it a five year deal? Um? And

355
00:21:37,119 --> 00:21:40,560
Speaker 1: I guess we're expecting it to just become obsolete near

356
00:21:40,600 --> 00:21:43,239
Speaker 1: the end of the contract. Why don't they just do

357
00:21:43,320 --> 00:21:46,120
Speaker 1: these every year? You know? Eventually I guess there will

358
00:21:46,119 --> 00:21:49,000
Speaker 1: be a tiny little clouds um everywhere and it will

359
00:21:49,000 --> 00:21:52,720
Speaker 1: be on the blockchain. But what what's the idea? So

360
00:21:52,880 --> 00:21:56,320
Speaker 1: the new contract, um, one of the biggest changes is

361
00:21:56,320 --> 00:21:58,760
Speaker 1: the Pentagon is saying we're going to give this contract

362
00:21:58,800 --> 00:22:01,800
Speaker 1: to multiple company these, which is what industry has been

363
00:22:01,840 --> 00:22:05,800
Speaker 1: planning for all along. And yet the main cont industry

364
00:22:05,840 --> 00:22:14,160
Speaker 1: outside of Microsoft, right, um. And so yeah, it's gonna

365
00:22:14,200 --> 00:22:17,399
Speaker 1: be over the course of five years. We're expecting it

366
00:22:17,480 --> 00:22:21,159
Speaker 1: to be in the billions UM and there right now

367
00:22:21,200 --> 00:22:24,040
Speaker 1: are saying, we know that Amazon and Microsoft are eligible

368
00:22:24,119 --> 00:22:25,960
Speaker 1: for this. We're planning to talk to some of the

369
00:22:25,960 --> 00:22:29,440
Speaker 1: other tech companies like IBM, an Oracle, and Google to

370
00:22:29,480 --> 00:22:32,480
Speaker 1: see if they're also eligible for this UM and if

371
00:22:32,480 --> 00:22:34,960
Speaker 1: they are, they can submit a proposal. But this is

372
00:22:35,000 --> 00:22:38,680
Speaker 1: expected to be like a bridge contract, and the depending

373
00:22:38,720 --> 00:22:40,840
Speaker 1: on is saying, you know, we're transitioning to the cloud,

374
00:22:41,240 --> 00:22:43,920
Speaker 1: and another five years they'll have maybe an even more

375
00:22:44,000 --> 00:22:49,240
Speaker 1: robust contract UH to award to some of the players.

376
00:22:49,960 --> 00:22:55,640
Speaker 1: What has been the response for Microsoft Microsoft was, I mean, look,

377
00:22:55,680 --> 00:22:59,280
Speaker 1: Microsoft was in a tough position. Amazon had actually filed

378
00:22:59,280 --> 00:23:03,399
Speaker 1: a lawsuit right that was against uh Microsoft win of

379
00:23:03,440 --> 00:23:07,480
Speaker 1: the contract, and so that the Microsoft was facing the

380
00:23:07,520 --> 00:23:10,280
Speaker 1: prospect that Amazon was going to drag this thing out

381
00:23:10,320 --> 00:23:14,080
Speaker 1: in court. Meanwhile, Microsoft at the time had to stop

382
00:23:14,119 --> 00:23:16,920
Speaker 1: doing any work with the Pentagon. So in some ways,

383
00:23:17,000 --> 00:23:21,679
Speaker 1: this this deal provides some resolution to Microsoft to actually

384
00:23:21,680 --> 00:23:24,760
Speaker 1: get started on doing some of the work. But obviously

385
00:23:24,920 --> 00:23:27,879
Speaker 1: it's what's the baby, and so they're getting less money.

386
00:23:27,920 --> 00:23:33,560
Speaker 1: So they offered somewhat optimistic comments public comments, which I expected. Yeah,

387
00:23:33,560 --> 00:23:35,680
Speaker 1: they're supportive as long as they keep getting paid. One

388
00:23:35,680 --> 00:23:38,480
Speaker 1: of the my takeaways was, how does the Pentagon not

389
00:23:38,640 --> 00:23:43,199
Speaker 1: have its own cloud? Shouldn't like DARPA have invented the

390
00:23:43,240 --> 00:23:47,000
Speaker 1: sweetest cloud for the Pentagon to have, And especially as

391
00:23:47,200 --> 00:23:50,440
Speaker 1: we were seeing like Cozy Bear. If a hacker group

392
00:23:50,480 --> 00:23:55,040
Speaker 1: called cozy Bear can get into your databases, um, how

393
00:23:55,080 --> 00:23:58,960
Speaker 1: are you gonna guard more confidence in Amazon and Microsoft

394
00:23:58,960 --> 00:24:01,320
Speaker 1: than I do the US government? Yeah? But if it's not,

395
00:24:01,560 --> 00:24:05,080
Speaker 1: it's not just Amazon, it's gonna be Microsoft and Amazon

396
00:24:05,160 --> 00:24:08,320
Speaker 1: and maybe Oracle and IBM and a longer change, it's

397
00:24:08,359 --> 00:24:11,000
Speaker 1: gonna have a weak link. Like I just I just

398
00:24:11,040 --> 00:24:13,480
Speaker 1: think it's such an amazing story. Naomi, thanks so much

399
00:24:13,520 --> 00:24:16,280
Speaker 1: for joining us on this. It'll be one we continue

400
00:24:16,359 --> 00:24:19,240
Speaker 1: to cover for sure. Naomi Mix and Matt Day wrote

401
00:24:19,240 --> 00:24:22,000
Speaker 1: the most recent story. Check it out on the Amazon ticker.

402
00:24:22,800 --> 00:24:25,920
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can

403
00:24:25,920 --> 00:24:29,719
Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever

404
00:24:29,800 --> 00:24:33,479
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

405
00:24:33,720 --> 00:24:37,560
Speaker 1: at Matt Miller three on false Sweeney, I'm on Twitter

406
00:24:37,600 --> 00:24:40,440
Speaker 1: at pt Sweeney before the podcast. You can always catch

407
00:24:40,520 --> 00:24:42,040
Speaker 1: us worldwide at Bloomberg Radio