Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanobek. We're here every day bringing
Speaker 1: you the latest news from the world of business and finance,
Speaker 1: plus technology, politics, economics, all furnessing the power of Business
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Speaker 1: can download Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg
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Speaker 1: at two pm Eastern Time on Bloomberg Radio or watch
Speaker 1: us on YouTube search Bloomberg Global News. We're talking about
Speaker 1: some of the COVID headlines. I always like to remind
Speaker 1: everyone about the COVID cases. The global COVID cases count
Speaker 1: topping two hundred thirty seven point nine million, deaths tim
Speaker 1: exceeding four point eight million, and then we've got more
Speaker 1: than six and a half billion COVID vaccine shots given
Speaker 1: at the same time. Here in the United States, we
Speaker 1: are seeing a steady decline of cases from at least
Speaker 1: a peak this time around last month, where cases are
Speaker 1: down under one hundred thousand a day on average, which
Speaker 1: still is too many, but it's going in the right direction. Right.
Speaker 1: The trend line really important. So let's see what Dr
Speaker 1: Ian los Peter has to say about a clinical professor
Speaker 1: of medicine at n y U Landgown. We check in
Speaker 1: with him every week. He joins us on the phone
Speaker 1: in New York City, Ian, how are you doing well? Thanks,
Speaker 1: Carol and Tim. Happy Monday. I hope you guys are
Speaker 1: safe and sound. Yeah, same for you. Um, I don't
Speaker 1: know what's top of mind for you when it comes
Speaker 1: to COVID in the vaccine today. So we're definitely seeing
Speaker 1: a lot of patients asking about the third booster shot,
Speaker 1: and certainly that's approved for fiser for people who are
Speaker 1: older or immuno compromised. We're waiting really to expand that,
Speaker 1: and certainly we're waiting to hear from the FDA and
Speaker 1: CDC on booster shots for MADERNA and J and J.
Speaker 1: The water is a little muddied because Scandinavia has had
Speaker 1: some concerns about younger people with maderna because there is
Speaker 1: a small incident, small but definite incidents of some myocarditis
Speaker 1: and paracardis what is so interesting. Dr los Bader is
Speaker 1: my brother who's in his mid thirties and lives in Seattle.
Speaker 1: He works at a school. He qualified and got a
Speaker 1: booster over the weekend UH Fiser booster. But people here
Speaker 1: in New York, for example, who might you know, might
Speaker 1: be twenty years older than him, aren't yet clear for
Speaker 1: a booster. So there's not really guidance that's coming from
Speaker 1: the federal government about what to do. Right, We're hoping
Speaker 1: for a little more guidance. A little more guidance would
Speaker 1: be useful. And I think part of the reason that
Speaker 1: there is unclear guidance is there's a lot in the
Speaker 1: UH in the salad. You know, we certainly know that
Speaker 1: older people are higher risk, and there are certain groups
Speaker 1: I mean, we're compromised and people with diabetes, hypertension, obesity,
Speaker 1: and so forth that can benefit. And we know from
Speaker 1: the data in Israel that the vaccines, the Fiser vaccine
Speaker 1: certainly has had less um effectiveness over time, that basically, UH,
Speaker 1: your antibody levels dropped, and that at least for a
Speaker 1: short time after a third vaccine, the antibodies go up
Speaker 1: significantly and the benefit goes up significantly. We don't have
Speaker 1: really long term data, how you know, we think that
Speaker 1: that will create a more durable response. So there's a
Speaker 1: lot of data to kind of crunch, especially with young
Speaker 1: people obviously, the benefit versus potential risk. Most of my
Speaker 1: patients who are older or immuno compromised who have had
Speaker 1: FISER are either getting a booster shot around this time
Speaker 1: or I've told them that I think it's reasonable to
Speaker 1: do that. Well, it's interesting too, you know, after our conversation, Um,
Speaker 1: I think it was our conversation that we had in
Speaker 1: terms of who should get the boosters, and I talked about,
Speaker 1: you know, Tim and I are getting ready to do
Speaker 1: some traveling to the West coast. I'm getting ready to
Speaker 1: do some traveling for work out of the country, and
Speaker 1: I did look into boosters and it seems to be
Speaker 1: and I am someone who doesn't want to jump the
Speaker 1: line until they say it's ready, um, but they seem
Speaker 1: to be very much monitoring when you got your last shot,
Speaker 1: and you can't do it before six months from your
Speaker 1: shot at least. That's you know what I'm I'm hearing
Speaker 1: from hospitals and so on. If you try to, you know,
Speaker 1: kind of do something on an app Um, is that
Speaker 1: the right way we should go about it, or if
Speaker 1: you can get a booster. I mean we hear stories
Speaker 1: Tim and I and people just walking into a pharmacy
Speaker 1: and getting it, So both are true. Uh, usually people
Speaker 1: are well protected. After six months, we're really not seeing
Speaker 1: a real diminution in antibody levels. And certainly people who
Speaker 1: do get COVID, you know, in that range. Um, usually
Speaker 1: you're not very sick at all, they'll have a mild cold,
Speaker 1: but certainly over six months or if you're compromised in
Speaker 1: the benefit really outweighs that. There are a number of
Speaker 1: patients who are cutting the line. And uh, you know,
Speaker 1: this is why it's somewhat confusing. We've got a group
Speaker 1: of people who are very aggressive and and the pharmacies
Speaker 1: really don't have the resources to double check are you
Speaker 1: really I mean compromised you because you don't order it,
Speaker 1: you can just go into the pharmacy. Obviously, there are
Speaker 1: you know, with Southern Border and so forth, a number
Speaker 1: were people coming in who we don't even know their
Speaker 1: status and potentially either infected or could be infected. So
Speaker 1: you've got all these groups of people, some who were
Speaker 1: very worried and trying to be fully vaccinated and and
Speaker 1: some not so really what I would say, if you've
Speaker 1: had your vaccine within six months, your odds of a
Speaker 1: problem are very low, and there's no reason why if
Speaker 1: you're traveling and uh, you feel that you're not feeling well,
Speaker 1: you get a test, get a swab. Monotone lantibodies are available. Uh,
Speaker 1: they're really Hopefully the Mark drug will be approved soon,
Speaker 1: So there really are options if when you're traveling you think,
Speaker 1: oh my gosh, I'm feeling well, that's a really good point. Well,
Speaker 1: speaking of the of Mark's COVID I want to touch
Speaker 1: on astra Zenica just in the last minute that we have,
Speaker 1: because the company's antibody cocktail was effective at preventing mild
Speaker 1: or moderate COVID infections from worsening in a study that
Speaker 1: bolsters the drug maker's ambitions for the product. Just in
Speaker 1: the last thirty seconds we have with you, Dr LUs Bader,
Speaker 1: how do you see us moving from a prevention to
Speaker 1: you a treatment as we can turn the corner on
Speaker 1: at least this part of the pandemic. You know, well,
Speaker 1: we we have to view this is three legs of
Speaker 1: the stool, you know, mitigation methods and prevention methods. I
Speaker 1: think certainly vaccines are reasonable. We do need to come
Speaker 1: up with some pills, and overall health will protect you
Speaker 1: to some degree. I'm not sure giving people antibodies passive antibodies, UH,
Speaker 1: to prevent disease would make sense unless you're a household contact.
Speaker 1: If you're in the household, you've been vaccinated. Someone is sick, Okay,
Speaker 1: Perhaps then it makes sense to say, let's check the
Speaker 1: spread by giving antibodies before someone gets sick. Um. I
Speaker 1: think we need more data on that. Hey got ten seconds.
Speaker 1: Dr Less better, what's the non COVID question you get
Speaker 1: most asked right now? Uh? People are afraid about screening.
Speaker 1: Shall I get my colonoscopy? Shall I get my mammograms?
Speaker 1: Its face? People will have to be tested before they
Speaker 1: do that. Gotta gotta run. Dr e LUs better take
Speaker 1: us out to the ball game, where we will increasingly
Speaker 1: see changes in attempts and even robot umps to fix
Speaker 1: baseball's board and problem to him. Joining us now is
Speaker 1: Joel Webber, editor at Bloomberg Business Week. He's with us
Speaker 1: in the Bloomberg Interactive Broker Studio. Also joining us is
Speaker 1: Ira Bootleg, Global business reporter for Bloomberg News. Joining us
Speaker 1: on the phone, from New Jersey Joel Baseball has got
Speaker 1: a problem when it comes to speed and when it's
Speaker 1: come to action. What are they doing about it? Well,
Speaker 1: it's been a theme for years now, UM and and
Speaker 1: there have been many attempts at it um. But what
Speaker 1: IRA's story really looks at is this little test case
Speaker 1: that they have in UM in a league that is
Speaker 1: called the Atlantic League. And it is literally where um
Speaker 1: MLB will kind of like try a ton of different
Speaker 1: stuff just to see if it helps make the games
Speaker 1: a little bit more exciting. Now they can't and they
Speaker 1: can't make things look like you know, last night Red
Speaker 1: Sox game, but they can actually kind of institutional license stuff.
Speaker 1: And interestingly enough, the players aren't unionized, so they can't
Speaker 1: really resist. So Ira, what what kind of kool aid
Speaker 1: has been forced upon the Atlantic League players? Uh, it's
Speaker 1: been a grab bag. They started in ten. Last season
Speaker 1: was called off because of the pandemic, so it really
Speaker 1: got going this year. But they have allowed pitch hitters
Speaker 1: to try to steal first base on any count when
Speaker 1: the ball get by the catcher. They have made the
Speaker 1: bases three inches bigger, eighteen inches by eighteen instant of
Speaker 1: fifteen by fifteen, they have perhaps the two biggest ones
Speaker 1: are an automated ball strike system or robot pump where
Speaker 1: they called ball and strike call is delivered to the
Speaker 1: human umpire's ear. Uh, and it's a Doppler radar that
Speaker 1: actually establishes the strike zone. And and they this year
Speaker 1: they moved the pitching rubber back by one foot from
Speaker 1: the sort of sacred sixty six inches to six six
Speaker 1: inches for the last couple of months. But did it help,
Speaker 1: did anything? Yeah, they are seeing some stuff work. So
Speaker 1: there's like stealing first base. Nobody wanted to try it
Speaker 1: because they wanted to just to test their luck in
Speaker 1: there at bat um. But the other stuff is showing
Speaker 1: modest effects of the kind they're looking for because they
Speaker 1: don't want it to be jarring. You know, there's stuff
Speaker 1: they said they could have done, like making the ball bigger,
Speaker 1: or adding players on the field or you know there's
Speaker 1: or taking a player off the field that you could do,
Speaker 1: but they don't want to bastardize the game. So they
Speaker 1: are uh seeing modest effects in the bigger bases. And
Speaker 1: and so far, moving the pitching mound back has actually
Speaker 1: raised contact rates and batting averages, which is really what
Speaker 1: they're after. They want more plays where fielders and base
Speaker 1: runners have to move. Um. So that's that, and they
Speaker 1: want to speed the game up. So there's also pure
Speaker 1: mountain visits, which is something the Major League Baseball took
Speaker 1: from the Atlantic League. That whole rule where have to
Speaker 1: finish in eating our phase three batters that started in
Speaker 1: the Atlantic and moved to the major leagues. And the
Speaker 1: idea is to find more stuff like that that helps
Speaker 1: at the margins. Did anyone yell at a robot um
Speaker 1: this year? So my favorite piece of all this is
Speaker 1: ranked by Ala, the former Minnesota Twins pitcher is now
Speaker 1: a pitching coach in the Atlantic League at the High
Speaker 1: Point Rockers, and he hates all of this and um.
Speaker 1: He was the first person ever thrown out for arguing
Speaker 1: with the robot arm. Back in first game that he
Speaker 1: had with it, he went ballistic when it issued a
Speaker 1: five pitch walk and the umpire said that, you know,
Speaker 1: I would talk to him that the umpire from that night,
Speaker 1: and he said, you know, he was yelling at me,
Speaker 1: and I said, look, what do you want me to do?
Speaker 1: You know, I'm trying to do my job here. And
Speaker 1: then I didn't satisfy Yola, so he had to throw
Speaker 1: him out of the game. So, yeah, there're but a
Speaker 1: lot of the fans actually don't need to notice another
Speaker 1: umpire talk to you said, there are some who are savvy,
Speaker 1: and they will hackle him by saying, change the batteries
Speaker 1: or uh, you know, call tech support. But but for
Speaker 1: the most part of fans don't actually seem to notice
Speaker 1: because if you're not looking for it's very hard to see. Well,
Speaker 1: and let's get to the reason why all of this
Speaker 1: is happening. I mean, I remember watching games with my
Speaker 1: dad growing up, and you know, they were certain length.
Speaker 1: They've gotten really long, and I mean play is slow,
Speaker 1: and when you're competing with you know, everybody's eyeball, especially
Speaker 1: a younger generation, you know, who are used to fast
Speaker 1: moving stuff and quick videos and so on and so forth. Um,
Speaker 1: baseball's pretty boring. They got to worry about their future audience. Yeah,
Speaker 1: it's a really interesting case because nothing really changed about
Speaker 1: the game. It's just the way the game was played.
Speaker 1: They basically figured out with this moneyball revolution that your
Speaker 1: best hope as a hitter was to focus on a
Speaker 1: home run or a walk, because if you hit it
Speaker 1: in the field. You never know, you know, there's a
Speaker 1: lot of random luck involved in a home run was
Speaker 1: an automatic, you know, way to score and and for pictures, similarly,
Speaker 1: your best hope was to avoid contact and to stry
Speaker 1: to strike people out. So everybody got obsessed with the
Speaker 1: three what they call true outcomes, the walk, the home run,
Speaker 1: the strikeout, and those are all plays on which basically
Speaker 1: nobody runs anywhere. Um And so now you've got, you know,
Speaker 1: second basement. You can hit forty home runs and everyone's
Speaker 1: trying to hit a home run almost every bat, and
Speaker 1: the game just kind of grinds to a halt. And
Speaker 1: they've got a situation now where it's four minutes between
Speaker 1: batted ball events as they call them. The strikeout rate
Speaker 1: is like twice as high as it used to be
Speaker 1: forty years ago. So that is what they're trying to fix.
Speaker 1: They're trying to figure out how to reincentivized players to
Speaker 1: try things that have gone out of fashion. So what's
Speaker 1: in it for the Atlantic League? Because obviously, you know,
Speaker 1: there's there's maybe an incentive from a fans perspective that
Speaker 1: I don't have to agonize through a longer game. But
Speaker 1: but you know what, why would a team do this.
Speaker 1: The Atlantic League is really interesting because it coincided with
Speaker 1: baseball restructuring all of its minor leagues and getting rid
Speaker 1: of a bunch of affiliates, cutting down in the number
Speaker 1: of players the teams can carry in their farm systems,
Speaker 1: and creating these things they called partner leagues, which the
Speaker 1: Atlantic League is one of them, and they are basically
Speaker 1: a kind of extra auxiliary labor waiting. These are independent
Speaker 1: baseball players, but there's a regular way for minor league
Speaker 1: or for major league teams to buy talent from them. Uh.
Speaker 1: And so what happened in The biggest thing that they
Speaker 1: got was just data about all of their players because
Speaker 1: there's this track Man device tracking every batted ball, every
Speaker 1: throne ball, which is what they used to do the
Speaker 1: robot humps. They now have a huge stream of data
Speaker 1: about all the players because they put one of these
Speaker 1: track Man devices into every ballpark, So the teams all
Speaker 1: know everything about their players. But more importantly for the players,
Speaker 1: major league scouts don't have to show up to see this.
Speaker 1: They can see everything about the spin rate of some
Speaker 1: Atlantic League picture just by you know, checking in on
Speaker 1: that data stream. So it's advertising for the players. It's
Speaker 1: also advertising for the league. You know, writers like myself
Speaker 1: and others come poking around because they're interested in this,
Speaker 1: and it raises the profile of the Atlantic League. So
Speaker 1: if we think about the Atlantic League as a test
Speaker 1: case or as a way to experiment with these new changes,
Speaker 1: where does the collective bargaining agreement that MLB has with
Speaker 1: the players union come into Actually think about what kind
Speaker 1: of changes could be adopted by the MLB. Yeah, that's
Speaker 1: a really interesting thing because you've got really poor relations
Speaker 1: right now between players, the players union, and the league.
Speaker 1: And this is mainly to do with nothing with the
Speaker 1: rule changes. It's with pay money, of course, and and
Speaker 1: that's the collective bargaining agreement expires in December, and everybody
Speaker 1: expects these negotiations to be really difficult, and I think
Speaker 1: the way the rule changes will play into that is
Speaker 1: that it will become leverage for the players. You know,
Speaker 1: they will be able to say if you want us
Speaker 1: to change our working conditions in this way, and that
Speaker 1: you need to do things that increase the pot of
Speaker 1: money or even this. You know, there's a good chance
Speaker 1: that the National League will adopt a designated hitter this
Speaker 1: coming year. And I think that is partly about just
Speaker 1: creating jobs for veteran sluggers who can't play in the
Speaker 1: field anymore. So I think that's the kind of way
Speaker 1: this will run. And you put out that the sports
Speaker 1: betting industry is really pouring a lot of money into
Speaker 1: all the league's sports leagues that are out there. Um
Speaker 1: Imra Boodway, thank you so much. Great to hear from
Speaker 1: your global business reporter ut Bloomberg News. Check out his
Speaker 1: story in the upcoming issue of Bloomberg Business Week. Told
Speaker 1: Webber editor Bloomberg Business Week. Here in our interactive broker studio,
Speaker 1: this is Bloomberg Radio. This is the Big Take, the
Speaker 1: best of Bloomberg's in depth, original reporting from around the globe.
Speaker 1: We're running on a financial system that's running on old technology.
Speaker 1: We're seeing host places reach fresh record ties. What unfolds
Speaker 1: in mid terms we will no doubt see again in
Speaker 1: the next presidential election. The Big Take on Bloomberg Radio
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Speaker 1: slash I m S. All right, so let's get to
Speaker 1: the Bloomberg Big Take. It is among our most read
Speaker 1: stories on the Bloomberg and it has to do with
Speaker 1: what five triters, five traders, excuse me, or telling us
Speaker 1: about how you survive in this crazy, disrupted market world.
Speaker 1: So let's get to it with our own Shinnelli Bossi.
Speaker 1: She is Wall Street reporter at Bloomberg News. She's in
Speaker 1: her interactive broker studio. It is a disrupted world, absolutely,
Speaker 1: and we spoke to people five of us around the world,
Speaker 1: from people that manage tens of millions of dollars to
Speaker 1: hundreds of billions of dollars, and there were some similarities Carol,
Speaker 1: for example, all of these people are thinking about innovation,
Speaker 1: for example, what is crypto doing to descript the markets?
Speaker 1: They're thinking about volatility, and they're very honest in terms
Speaker 1: of knowing that they're going to lose sometimes and so
Speaker 1: knowing how to lose is what I felt was a
Speaker 1: key quality of a trader as we talked to so
Speaker 1: many of them around the world and really dove into
Speaker 1: their day to day I love it. You spoke to
Speaker 1: the crypto trader, the veteran, the quant the distressed asset trader,
Speaker 1: and the credit trader, and I'm wondering who surprised you emotionally.
Speaker 1: I mean, I'm a little biased because I did the
Speaker 1: credit trader one this guy, so John Zito. I asked
Speaker 1: Christine Harper, the Markets magazine editor. I was like, can
Speaker 1: we please do John Zito? Because I had heard about
Speaker 1: him throughout the entire crisis. He was the guy at
Speaker 1: Apollo that was putting billions of dollars into work in
Speaker 1: places like Airbnb or just in credit markets as they
Speaker 1: were at their lows. And you know he also, I
Speaker 1: mean he was really into Defy and so he was
Speaker 1: not the crypto trader. But yet I found myself in
Speaker 1: a similar conversation as my colleagues around the world, who
Speaker 1: was talking to the crypto trader in Sydney managing thirty
Speaker 1: eight million dollars. Well, and it's interesting too, because I mean,
Speaker 1: you know, when you think about what's going on in
Speaker 1: this world, and I think about you guys having to
Speaker 1: kind of whittle it down to five people talked to
Speaker 1: us little bit more though about about your choice here
Speaker 1: in terms of making the pitch to Christine and saying,
Speaker 1: we've got to include this guy. Yeah, my guy was
Speaker 1: the most institutional so John Zito manages three thirty billion dollars,
Speaker 1: and Christine was very intent on making sure we had
Speaker 1: a lot of diversity based on where in the world
Speaker 1: they are, are what they traded. So we had equities,
Speaker 1: we had um debt, and we had a crypto of course,
Speaker 1: and you know Oliver talk the crypto trader, was twenty
Speaker 1: years old. You know John Zito now is you know,
Speaker 1: well into his forties, manages at thirty billion dollars. And
Speaker 1: you know, Jess had a daughter during he actually while
Speaker 1: in the middle of the crisis while he was trading
Speaker 1: those assets, so that was kind of another fun fact
Speaker 1: about him. And so you know, this this diversity of
Speaker 1: thinking was really important and what what was the thread?
Speaker 1: Many of them woke up at different times to trade
Speaker 1: different assets. You know, some woke up late. John woke
Speaker 1: up at five thirty am. But again that comfort with
Speaker 1: losing and also the precision, right, I mean, the thing
Speaker 1: that John was so frustrated about ken of in the
Speaker 1: world more largely is a alpha's harder to come by.
Speaker 1: He's in the credit world, so you know it's not
Speaker 1: he says, he actually doesn't trade much at all anymore.
Speaker 1: He they mostly originate loans, and when markets really blow out,
Speaker 1: that's when they step in. Don't trade just to trade.
Speaker 1: That is Keane number one. Number two is analyzed and
Speaker 1: hold off, step away. And also, you know he said
Speaker 1: they were analyzing hundreds of securities line by line, day
Speaker 1: by day. And so that precision in terms of finding
Speaker 1: out what you can know and what you can't know,
Speaker 1: is such an important aspect of trading. And again this
Speaker 1: is relevant now because we're thinking about all these day
Speaker 1: traders entering the market. So what is the difference between
Speaker 1: a day trader and a professional trader? I don't know anymore.
Speaker 1: It's true, Hey, I'm wondering about their outlook, and you know,
Speaker 1: if there's anything that ties them together about the way
Speaker 1: that they think we are headed as a as a
Speaker 1: global economy. Yeah, I mean I think so I talk
Speaker 1: spoke to the distress No, I spoke to the credit
Speaker 1: trader who happens to trade and distress sometimes. And then
Speaker 1: Rebecca Chuen Wilkins spoke to a distressed asset trader as well.
Speaker 1: And this idea of volatility. So everybody agrees that the
Speaker 1: federal reserve support not just over the last year, but
Speaker 1: over the last ten years has not just disrupted but
Speaker 1: distorted markets. And so now going into this next era
Speaker 1: knowing that you know either you know what could happen next?
Speaker 1: Is the Federal Reserve support more fragile now that they
Speaker 1: have exhausted so many resources. That's a big theme too.
Speaker 1: But you do wonder write if there is I think
Speaker 1: about that a lot since the financial crisis, and is
Speaker 1: there an understanding that if things fall apart in whatever
Speaker 1: way X y Z, that the Fed another central banks
Speaker 1: will always be there to backstop everything and to what extent?
Speaker 1: You know, the fell The Fed fell short of propping
Speaker 1: up equity markets. But there was a point if you
Speaker 1: guys remember Scott Minored was asking, you know, well the
Speaker 1: Fed start buying stocks. I mean, that's how do you
Speaker 1: guys remember it just a couple of months ago, now
Speaker 1: that we were in the real, dull drums of it,
Speaker 1: and you know, the market participants are feeding off of
Speaker 1: you know, this idea of moral hazard where the Fed
Speaker 1: will step in when things get bad. But the thing
Speaker 1: is it's marginal. The more they step in, the less
Speaker 1: effective it could be. Well, and it's on you know,
Speaker 1: you were asking about kind of threads and that you're
Speaker 1: so good about doing that, But I do wonder. I
Speaker 1: think we're all trying to figure out what's next, and
Speaker 1: I do feel like that there's a consensus, certainly among
Speaker 1: the guests that we talked about that more volatility like nobody.
Speaker 1: I think there's optimism optimism out there, but there's also
Speaker 1: like we're going to see more swings just because we're
Speaker 1: gonna go from again a lot of support that to
Speaker 1: the FED eventually easing off and probably other central banks.
Speaker 1: We've already seen that. Yeah, it's interesting because on one hand,
Speaker 1: volatility is scary for our markets, but it's also a
Speaker 1: perfect storm for traders. They make money when there is
Speaker 1: vol There are volatile markets, and there used to be
Speaker 1: a sense that in the past the VIX above twenties
Speaker 1: starts to get choppy for markets, things like equity offerings
Speaker 1: really like exciting things for investors to be involved in.
Speaker 1: Now this is a beyond the scope of the story,
Speaker 1: but my sources say VIX at twenty five, that's the
Speaker 1: new level that you start to get a little scared,
Speaker 1: but maybe it'll be okay. Like that is crazy that
Speaker 1: you can sustain a proper ip with a VIX at five.
Speaker 1: It's just exactly a new world. And if I'm not
Speaker 1: saying cryptos here to stay, um defies a central central
Speaker 1: and just in about fifteen seconds, unfortunately, yeah, he defies
Speaker 1: different than crypto. But they're all acknowledging that they need
Speaker 1: to wake up to these changes. And you know, Wall
Speaker 1: Street better catch on. I'm going to squeeze again. Fifteen seconds,
Speaker 1: y k are, We're gonna talk about a little bit
Speaker 1: more with one of our huge change, huge right, long
Speaker 1: time telegraph, but that we are seeing the new guards
Speaker 1: start to turn over. It's like the next generation rising.
Speaker 1: So good, so good, so good. Shinnali, thank you so much.
Speaker 1: She covers all things Wall Street. It really crosses so
Speaker 1: many different things that are going on in our finance world.
Speaker 1: She's Bloomberg News Wall Street reporter here in studio, big news. Uh,
Speaker 1: and really I think it might still be our most
Speaker 1: read story on the Bloomberg. Has to do with two
Speaker 1: kingpins behemoths. I can't speak yourself per relative in the
Speaker 1: private equity space. We're talking about Henry Cravis and his
Speaker 1: cousin George Roberts, quintessential dealmakers who have dominated global private
Speaker 1: equity for almost half a century. Tim they are seating
Speaker 1: their leadership roles at kk are they're making away for
Speaker 1: handpicked successors, essentially the next generation. Yeah, watershed moment for
Speaker 1: private equity, at least according to our next guest, Brian Schapota,
Speaker 1: a Bloomberg opinion columnists who covers debt markets. Brian, give
Speaker 1: us your take on on this big news coming out
Speaker 1: of the private equity world, because it also comes at
Speaker 1: a time where we're seeing other huge private equity firms
Speaker 1: make big transitions as well. Yeah, KKR was really the
Speaker 1: one to watch though when you think about the big
Speaker 1: private equity firms, Carlisle had already made it, made its move.
Speaker 1: You had Apollo that was sort of a forced decision
Speaker 1: um with Leon black and the controversy around him and
Speaker 1: his ties to Jeffrey Epstein. Blackstone meanwhile still under Stephen Schwartzman.
Speaker 1: So KKR obviously the k and one of the Kays
Speaker 1: and the R are now stepping down. So it was
Speaker 1: kind of seen as as the real, the real interesting
Speaker 1: one because they thought of the firm of nineteen seventy six,
Speaker 1: they've been at it for four and a half decades,
Speaker 1: so there was some question about, Okay, when are these
Speaker 1: guys going to you know, PA paved the way, paved
Speaker 1: the runway for the next generation, and now we're seeing it.
Speaker 1: It's interesting to write considering what we've already seen in
Speaker 1: private equity. Was this a case of the guys getting older,
Speaker 1: they had to do something, They could lose talent if
Speaker 1: they didn't soon do something. In terms of officially putting
Speaker 1: successors in place? What was what? What are you hearing?
Speaker 1: What are you thinking? What's your observations here? Yeah, I
Speaker 1: think that was definitely a part of it. I mean,
Speaker 1: there was a lot of speculation about, Okay, if there
Speaker 1: is no move to have new CEOs step in for them,
Speaker 1: whether people would ultimately go elsewhere and try their hand elsewhere. Um.
Speaker 1: So this this suggests that, you know, things are moving
Speaker 1: as as there as they were planning. Um, the succession
Speaker 1: plan was started a few years ago, but there wasn't
Speaker 1: really a ton of movement on that front until until
Speaker 1: obviously now. So now the question is going to be,
Speaker 1: you know, whether they're ready for the future. And just
Speaker 1: the massive side of these private equity firms actually wrote
Speaker 1: that even hard to call them private equity firms anymore,
Speaker 1: because private equally is just such a small part of
Speaker 1: what they do, especially you know, you look over to
Speaker 1: Apollo and they've done with a theme and it's just
Speaker 1: it's incredible. They're they're they're massive, They're like I went
Speaker 1: back to look at the the Acid under Management and
Speaker 1: they're just huge. So Brian, talk a little bit about
Speaker 1: how private equity. I mean, it's hard to say it's
Speaker 1: shifted because it's this is private equity right under under
Speaker 1: these two guys at KKR UM. How has it shifted
Speaker 1: though in recent years and how has it changed in
Speaker 1: recent years? Yeah, I mean there's definitely been a push
Speaker 1: to have some more stable capital coming in um. Apollo
Speaker 1: really pioneered this with It's a theme deal. They ultimately
Speaker 1: went ahead and did purchase of it earlier this year,
Speaker 1: and basically all the others have had to follow suits.
Speaker 1: So they're looking for ways that they can continue to
Speaker 1: generate steadied returns rather than have to take all of
Speaker 1: this money that they have. I mean, combined a Polo, Blackstone, Carlisle,
Speaker 1: KKR well over half a trillion dollars in assets under management.
Speaker 1: I mean, they don't want to have to go chasing
Speaker 1: all these private equity deals that might not pan out
Speaker 1: if you start to really uh go after things that
Speaker 1: are that are a little too risky. Um. So they
Speaker 1: want to find a stable source of capital to supplement
Speaker 1: what they do best, which is which is fine attractive
Speaker 1: private equity opportunities and buyouts. Well that's the other thing, right,
Speaker 1: the bread and butter PE business. I mean, there's so
Speaker 1: much money out there, there's so much of PE money
Speaker 1: and other investment money kind of chasing similar targets. And
Speaker 1: you do wonder how that becomes a little bit tired
Speaker 1: to be doing that, getting too competitive, and then the
Speaker 1: prices that you may be having to pay pay up
Speaker 1: for because there is so much competition for you know,
Speaker 1: a limited amount of targets. Yeah, I mean that's kind
Speaker 1: of what's what's just ended up happening here with institutions
Speaker 1: and wealthy individuals. They've said, Okay, I can get basically
Speaker 1: nothing in fixed income when adjusted for inflation. UM, I
Speaker 1: could buy public equities. They're very pricey right now, it
Speaker 1: looks like we're seeing them coming off the record highs.
Speaker 1: So so where do you go? You know, you call
Speaker 1: your you call your private equity firm, and you try
Speaker 1: to see if you can get some returns of that way. Um,
Speaker 1: but to your point between private equity, between private credit,
Speaker 1: there's a lot of money chasing all of these strategies
Speaker 1: right now. So everyone's trying to scale up and and
Speaker 1: deploy capital at you know, two billion dollars, three billion
Speaker 1: dollars at a time, just to just to get a
Speaker 1: lot of money out there and put it to work.
Speaker 1: So help us look forward for this new generation of
Speaker 1: leaders in private equity, especially at KKR, what do the
Speaker 1: next thirty or forty years look like? Oh? Man, Um,
Speaker 1: I mean right now? I mean, I think we're seeing
Speaker 1: a real inflection point and a transition point within private equity,
Speaker 1: where like I said, it's not just going to be
Speaker 1: the typical deals that you saw from the previous generation
Speaker 1: that made kk are famous Barbarian to the gate are
Speaker 1: garon Orbisco. Um, It's not going to be that for
Speaker 1: these guys. It's going to be whether they continue to
Speaker 1: build out this asset management practice into something that's large
Speaker 1: and sustainable. And I think you're going to see more
Speaker 1: of a push towards retail and individual investors. I think
Speaker 1: that's the next frontier, and you just figure out how
Speaker 1: they can get more stable sources of money and being
Speaker 1: able to lock up more capital from from retail investors, individuals. Um,
Speaker 1: I think there's another another avenue that they're going to explore,
Speaker 1: Crevice and Robert. So they're not going anywhere just quickly.
Speaker 1: Oh yeah, No, they're They're still gonna have their hands
Speaker 1: and and things. But they won't be CEOs anymore. They'll
Speaker 1: be executive chairman. Yeah, they'll be They'll be around, is
Speaker 1: my guest. Um, Thanks Brian, Really great perspective on a
Speaker 1: big big news here. Brandon to pot Bloomberg opinion columnist
Speaker 1: writer and you can check out more of his work
Speaker 1: on the Bloomberg Terminal also at Bloomberg dot com. But
Speaker 1: it is an interesting moment in time where these well
Speaker 1: known names who've created this private equity space, and really
Speaker 1: KKR was at the forefront we heard Brian mentioned it.
Speaker 1: But Steve, Steve Schwartzman, he's still at Blackstone, right. I
Speaker 1: mean these are firm so identified with individuals exactly. But
Speaker 1: but he's got to be looking like, you know what
Speaker 1: I have to do. I'm road mac journal. Yeah, but
Speaker 1: you let me drive nor home, Honny, please, I'll ravel,
Speaker 1: lets me I want to drive, just drive baby. The
Speaker 1: questions drying yea this is the drive to the globe. COMU. Thanks,
Speaker 1: we'll drying us dawn on Bloomberg Radio. Alright, folks, just
Speaker 1: about ten minutes left in today's trading session. Bit of
Speaker 1: a wacky one again, coming on the heels of that
Speaker 1: Friday trade. Rady Watts so delighted to have back with
Speaker 1: US chief investment strategist over at O'Neil Global Advisors once
Speaker 1: again on the phone in Miami. Randy, nice to have
Speaker 1: you here. Kind of watching the trade. We were higher
Speaker 1: than we've moved off those levels. I called it a
Speaker 1: wacky tra eight, but I feel like it was the
Speaker 1: same way was it on Friday with the jobs report.
Speaker 1: What is it interesting about the market trade to you
Speaker 1: right now? What are some of the internals that you
Speaker 1: think are worth noting? Hi, Carol, Tim, great to be back.
Speaker 1: Hope all as well in New York. I would say,
Speaker 1: when we look at the market technically, we're five weeks
Speaker 1: in the consolidation. We're really looking for the recent lows
Speaker 1: on the SMP to hold around. I believe we probably
Speaker 1: have several more weeks here until we regain some more
Speaker 1: comfortable footing and the market can move above the fifty
Speaker 1: d M A. We'd really like to see the market
Speaker 1: retake that fifty day moving average on good volume until
Speaker 1: we started, until we start to get more bullish. And
Speaker 1: I think what's going to determine that is really how
Speaker 1: earning season goes. Everyone knows it's going to be a
Speaker 1: good earning season. Earnings are forecasts for the SMP for
Speaker 1: this Q three results, But I think what really matters
Speaker 1: is how is forward guidance both in terms of revenues,
Speaker 1: but more particularly in terms of margins and profits? Right exactly,
Speaker 1: you're here. That's like literally, Carol and I were talking
Speaker 1: about this during the break. We do this, We do this,
Speaker 1: you know, cross platform coverage with our TV crew, and
Speaker 1: we all kind of bring different things about the market
Speaker 1: trade and we're both all both like, it's just about
Speaker 1: earnings and what we get, right Tim, Yeah, that's exactly right, Randy,
Speaker 1: And I'm wondering where you're looking specifically. Okay, we want
Speaker 1: to talk margins, but what are you concerned about? Are
Speaker 1: you concerned about higher input costs or you concerned about
Speaker 1: higher labor costs? Are you're concerned about rising price of oil?
Speaker 1: Right now? Yes? Yes, and yes, I would say all
Speaker 1: of the above. I would say, really really two things.
Speaker 1: I'm concerned about input costs, which are both materials as
Speaker 1: well as labor. You know, labor has been running up.
Speaker 1: We saw that last week on the average hourly earnings numbers.
Speaker 1: But I'm also worried about demand destruction in that when
Speaker 1: prices go up and people can't find something they want
Speaker 1: to buy, sometimes they find a substitute. For example, you
Speaker 1: can't find a new car you like, so you buy
Speaker 1: a used car. That means you're probably not in the
Speaker 1: market for a new car next year. And I'm also
Speaker 1: worried about maybe sometimes you miss that demand window and
Speaker 1: in the year from now, that person doesn't want a
Speaker 1: new car at all. So I'm worried a little bit
Speaker 1: about that and how that's going to play out in
Speaker 1: the fourth quarter, especially, you know, how much of that
Speaker 1: lack of product is going to hit the holiday season.
Speaker 1: You know, it's interesting that you say that too, what
Speaker 1: about things like and I'm always curious about sentiment indicators,
Speaker 1: maybe above and beyond the traditional market, and that has
Speaker 1: something to do with consumer confidence. Danny Blanche Flowers Ever
Speaker 1: at Dartmouth, former member of the Bank of England. When
Speaker 1: it comes to policy setting and He wrote about how
Speaker 1: he's been tracking and and UM a colleague of consumer sentiment,
Speaker 1: and that how that typically precludes a recession, and that
Speaker 1: we're already seeing that. That says that maybe we're already
Speaker 1: in a recession. What about something like consumer sentiment? Does
Speaker 1: that factor in it all? UH into your your market
Speaker 1: thinking here, Randy, I think consumer sentiment is clearly being
Speaker 1: hit by by inflation. Inflation is much bigger than than
Speaker 1: people thought it was going to be, and as I've
Speaker 1: said before in your program, I really question how transitory
Speaker 1: it's going to be, particularly in two areas labor rates
Speaker 1: and rents. Those tend to be pretty sticky. If you
Speaker 1: look at consumer inflation expectations from the recent University of
Speaker 1: Michigan UH consumer expectations pull. People are now looking for
Speaker 1: about three percent going forward. That's the highest it's been
Speaker 1: in the last eight years. And the bond market has
Speaker 1: taken note of this. If you look at the five
Speaker 1: year five five year forward break even inflation rate, according
Speaker 1: to Bloomberg, that's now that two point three six percent,
Speaker 1: So that's getting close to that sort of two and
Speaker 1: a half level where it hasn't been for a long time.
Speaker 1: So this kind of low inflation world we had from
Speaker 1: two thousand and fourteen to two now maybe starting to
Speaker 1: break and I think that's starting to hurt consumer sentiment.
Speaker 1: I think with regards the economy, they're real key on
Speaker 1: the economy is going to be how much stimulus is
Speaker 1: coming out of Washington. That's unclear right now. If we
Speaker 1: get a ton the economy is probably gonna be pretty
Speaker 1: strong next year. If we don't, I worry that by
Speaker 1: the time we get to the second half of next year,
Speaker 1: we could really be talking about a mark slowing from
Speaker 1: where we are today. What do you what are you
Speaker 1: concerned about when it or are you concerned about the
Speaker 1: Fed raising interest rates at any any point in the
Speaker 1: near future. Is from Golden Sacks saying, Hey, we don't
Speaker 1: think that's going to happen until the year three because
Speaker 1: the economic growth in the US just isn't gonna be
Speaker 1: there to warrant it. I'm not concerned about the FED
Speaker 1: raising rates as long as they stick stick to the
Speaker 1: guide path. But they've really told everyone, which is we're
Speaker 1: gonna We're gonna start the taper in the fourth quarter
Speaker 1: of this year. That's going to take us ten to
Speaker 1: twelve months we're gonna finish in the fourth quarter and
Speaker 1: next year, and then we're gonna start to raise rates.
Speaker 1: So we're really not going to raise rates till late
Speaker 1: in the year of two or the beginning of three.
Speaker 1: And that's what the bond market is set up for.
Speaker 1: I think as long as that's what happens, the market's fine.
Speaker 1: I think if the Fed deviates meaningfully from that, that
Speaker 1: could cause a surprise, and that could cause a dislocation
Speaker 1: worrisome in terms of stocks hitting new fifty two week
Speaker 1: highs versus fifty two week lolows. I mean, is there
Speaker 1: something along that line that also gives us an idea
Speaker 1: of what investors are thinking maybe where we go from here. Well,
Speaker 1: I think one measure I prefer to look at is
Speaker 1: actually the percentage of the SMP that's trading above it's
Speaker 1: fifty day that numbers down to thirty. That's a that's
Speaker 1: a pretty weak number. I do think we maybe have
Speaker 1: a couple more weeks of of rough sledding, but I
Speaker 1: do think the elements are set up for a year
Speaker 1: end rally, which is, you know, get get the dead
Speaker 1: ceiling raised possible. Some of these bills working their way
Speaker 1: through the House pass in terms of infrastructure and reconciliation,
Speaker 1: we have an okay earning season. I think that could
Speaker 1: be really give you the recipe for a strong year
Speaker 1: end rally, and so I do. I am still optimistic
Speaker 1: that we're going to finish the year better than we
Speaker 1: are right now in terms of absolute levels. And then
Speaker 1: I think next year is is it's really going to
Speaker 1: come down to what happens to inflation and race. Well, Randy,
Speaker 1: I don't know if I've spoken to someone who's as
Speaker 1: optimistic as you are about Washington at all in recent
Speaker 1: in recent months, you think all that can happen before
Speaker 1: the end of the year. I think there's a lot
Speaker 1: of pressure to get something done. I think eventually that
Speaker 1: the Democrats are likely to feel that some kind of
Speaker 1: reconciliation bill is better than nothing. And I do think
Speaker 1: there's sentiment to pass the infrastructure bill, and I think, uh,
Speaker 1: this recent economics data, like the recent jobs report, which
Speaker 1: was disappointing, might give a little more emphasis to getting
Speaker 1: something done. So I would be personally surprised if nothing
Speaker 1: gets passed. Hey, just quickly, um Brandy, I don't know
Speaker 1: what if you've technically looked at what's going on in
Speaker 1: the energy space. We know that that has certainly been
Speaker 1: one of the standouts this year. I think the top
Speaker 1: performing group, certainly in the major industry group in the
Speaker 1: SNP five. Just quickly seconds here, uh by not avoid
Speaker 1: what would you say? I think energy is strong, It's
Speaker 1: made a turn, but with oil now in the dollar range,
Speaker 1: I think it's a little bit extended right now. I
Speaker 1: would look for it to pull back and probably buy
Speaker 1: that pullback. But I do think higher energy prices are
Speaker 1: gonna be something we're gonna be dealing with over the
Speaker 1: next year. So equity plays and energy interesting. Uh we
Speaker 1: like the sector again, financials and energy. I've had such
Speaker 1: big moves in the last kind in the last couple
Speaker 1: of weeks that I feel like the stocks are kind
Speaker 1: of set up for a pullback on this earning seven season,
Speaker 1: even the results are good because expectations are so high.
Speaker 1: But I think that might provide investors actually an entry
Speaker 1: point into both of those groups. Got it. Always learn
Speaker 1: a lot, Hey, be well, stay safe. Frandy Watts, chief
Speaker 1: Investment Strategies at O'Neil Global Advisors, with us on the
Speaker 1: phone in Miami. Thanks for listening to Bloomberg Business Week.
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