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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily

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Speaker 1: we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Daniel

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Speaker 1: Foss joined us from loomas Sales, their vice chairman and

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Speaker 1: truly someone who invented the modern bond business. Dan Foss,

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Speaker 1: you are the one that told us to forget about yield.

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Speaker 1: By depressed price bonds, there will be credit improvement and

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Speaker 1: the bonds will appreciate for total return. You can't do

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Speaker 1: that anymore, can you. Well, um, that's right, But all

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Speaker 1: I can do is agree with what you just said

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Speaker 1: to Um. It's a tough road to whole right now

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Speaker 1: in the bod world. Uh, you can make some money.

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Speaker 1: You can ride the old curve at too short end. UM.

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Speaker 1: I don't recommend it, but you can. You can buy

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Speaker 1: a slice of each of the new high yield coming

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Speaker 1: out and you've got some yield. UM. Or you can

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Speaker 1: be a bit smarter about it and you can say, well,

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Speaker 1: I'm not going to buy a slice of each one

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Speaker 1: of them, but I'm going to buy the ones I

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Speaker 1: like and try to keep my maturities entirely short. And

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Speaker 1: then people say to me, and they said, well, that's

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Speaker 1: all well and good Dan, but you know, I just

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Speaker 1: can't raid a seven the yelder and the portfolios to

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Speaker 1: me and a half. And so what do you expect

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Speaker 1: us to do about this? Get rid of you? And

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Speaker 1: I said, well, I don't like it to get rid

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Speaker 1: of me, but I have to be honest with you

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Speaker 1: and tell you it's that type of the old environment.

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Speaker 1: And uh so if you're discounting at seven um and

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Speaker 1: the yields you're getting our three or poor even, uh,

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Speaker 1: you've got a problem. And I can't solve that one

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Speaker 1: for you. Uh. Now, last year we were lucky. Prices

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Speaker 1: went up some more, the total return looks nice, and

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Speaker 1: people say, geez, that's really very nice. You've done it again,

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Speaker 1: and you say, uh, huh, listen, that was luck and

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Speaker 1: by this time, uh, you know, the marketers will never

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Speaker 1: let you in another meeting. But that's the reality of

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Speaker 1: life down I want to jump in, if that's okay.

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Speaker 1: So I want to talk about the experience through the

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Speaker 1: last few cycles, beyond just what we've gone through in

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Speaker 1: the last twelve months, but over the last couple of decades.

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Speaker 1: What is it about the way we recover and roll

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Speaker 1: over through these cycles that leads to lower highs on

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Speaker 1: a ten year bond yield and lower lows each and

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Speaker 1: every time, each and every time? What's going gone down?

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Speaker 1: What's that dynamic? And do we repeat that in this

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Speaker 1: recovery about to go through as well? Well? Number one,

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Speaker 1: I don't know the future. Number two, Um, I think

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Speaker 1: what we're in right now, Jonathan is in a period

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Speaker 1: of rather low rates for quite a period of time. Now.

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Speaker 1: I am not in the camp that say they are

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Speaker 1: down they're going to stay down in the US. And

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Speaker 1: I don't think we're going through the popular praise these

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Speaker 1: days the Japanification of inflation in the markets. I don't

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Speaker 1: buy that. And but maybe it will happen. I doubt it.

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Speaker 1: That's a whole different world there, uh. I think what

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Speaker 1: we're in right now is an excess of liquidity finding

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Speaker 1: its way into the bondom market. Now, there are a

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Speaker 1: couple of indicators. If you look at what's happening with

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Speaker 1: the E t f s for example, you look at

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Speaker 1: you know, say, oh, cheapers, the highli T s Uh,

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Speaker 1: they're not really growing anymore. A matter of fact, it's

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Speaker 1: seemed as reported to have flattened out. O. Um, that's

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Speaker 1: one indication. And then you look at what the new

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Speaker 1: issues coming out are being used for. Um, a good

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Speaker 1: chunk of them are being used to refinance the older ones.

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Speaker 1: You're bringing down your coupons to adjust to the you

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Speaker 1: know that smart financial management. Uh. And Uh, the underlying

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Speaker 1: fundamentals on a lot of the issuers on some are

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Speaker 1: are quite good. On many more, Uh, they're de degree

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Speaker 1: and so here you have a floppier credit environment, you

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Speaker 1: have lower yields. Yeah. And and basically this goes to

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Speaker 1: the point that you made recently dead in an interview

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Speaker 1: with Bloomberg News, where you said there's no outstanding value

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Speaker 1: in the fixed income markets. And I'm wondering, Dan, as

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Speaker 1: one of the fathers of the bond market as we

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Speaker 1: know it today, where do you go if there is

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Speaker 1: no outstanding value in the fixed income market. Well, you

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Speaker 1: do what you did, and I'm going to go back

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Speaker 1: in history. You do what you did at a little

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Speaker 1: different level of yield in the sixties. You start to

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Speaker 1: work with the old curve and and your patient. But

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Speaker 1: it's easier to see immunity. See if you were running

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Speaker 1: Ammuni portfolio, you'd say, oh good, I'm going to buy

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Speaker 1: the five year and I'm going to roll it back

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Speaker 1: out after two years have gone by or three years whatever.

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Speaker 1: That was a pretty steady positive curve. Corporates are are different,

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Speaker 1: and there's a spread between bidden ask, but if you

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Speaker 1: stick to the higher quality and work with the old curve,

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Speaker 1: you can be adding some value, not a lot. And

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Speaker 1: then you watch for the occasional anomaly anomaly um and

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Speaker 1: on the credit side, and they do come along, not

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Speaker 1: many and not big, and they don't last long, but

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Speaker 1: you can find them. But the one thing I discourage

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Speaker 1: people from doing is saying, well, listen, uh, this economic

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Speaker 1: rebound is going to be ferocious and everything is going

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Speaker 1: to be back to normal. Well maybe that will happen.

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Speaker 1: I hope so. I sure hope so. But I wouldn't

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Speaker 1: bet that way, and I would not bet against the

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Speaker 1: return of inflation because I think Milton Friedman had some

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Speaker 1: things right. And when you follow the growth of them too,

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Speaker 1: and the rate that it's growing at, or use any

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Speaker 1: other procts that you want, go look at the stock

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Speaker 1: market where there is excess liquidity, and it is in

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Speaker 1: this system and we and the FED is caught because

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Speaker 1: we are fighting a war right now against the pandemic.

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Speaker 1: And and that's the case. Everybody has to get in

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Speaker 1: and support the work. Don't forgive me for jumping and said,

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Speaker 1: if you can, fantastic to catch out with you. Thank

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Speaker 1: for giving us some of your time, and don't be

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Speaker 1: a stranger. Don't leave us so long. Next time down

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Speaker 1: fuss that of limits sales. Lori Kelvisine is at RBC

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Speaker 1: Capital Markets and they've got a really, really, really interesting

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Speaker 1: exercise they go through every earning season called transcript tagging. Laurie,

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Speaker 1: what's transcript tagging? And what have you learned? So basically

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Speaker 1: transcript tagging. As we go through on my team all

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Speaker 1: of the earnings called transcripts of SMP five companies. It's

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Speaker 1: a pretty manual, labor intensive process and we just frankly

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Speaker 1: want to see what companies are talking about. UM. We

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Speaker 1: try to gauge the tone. We look at what they're

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Speaker 1: saying on things like cash, the outlook, the tone. Actually

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Speaker 1: the surprised me wasn't as robust as I thought it

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Speaker 1: would be. So we know that companies are coming in

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Speaker 1: and beating left and right on numbers, But when they're

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Speaker 1: talking about the forward outlook, they're really kind of two camps.

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Speaker 1: There's one that's expressing some optimism over the vaccine rollout,

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Speaker 1: and there's a second that's been really pushing the narrative

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Speaker 1: of things are still uncertain. Um, so it's it wasn't

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Speaker 1: as biased towards kind of that bullish look at the

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Speaker 1: vaccine rollout as I would have thought. Talked to me

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Speaker 1: about the performance post earnings, Laurie, what's the takeaway? So

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Speaker 1: this is something else that's really been interesting. You know,

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Speaker 1: depending on what which day you update the data, but

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Speaker 1: about half of companies that have posted results so far

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Speaker 1: in this reporting season have gone down one percent or

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Speaker 1: more in the one day trading session after the results.

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Speaker 1: Now that stat's gotten a little bit better as we've

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Speaker 1: gone through reporting season, but I think it's a testament

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Speaker 1: to how high expectations were coming into this reporting season.

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Speaker 1: So kind of this, you know, kind of one mediocre, Yeah,

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Speaker 1: maybe things will get better, we don't really know. That's

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Speaker 1: not cutting it and you're not seeing one is some

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Speaker 1: ss really go up in a meaningful way. I've been

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Speaker 1: trying to work out. Just sorry to jump in. I've

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Speaker 1: been trying to work out where the spot on the

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Speaker 1: calendar is where a lot of this starts to manage

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Speaker 1: just a little bit more, because I think some people

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Speaker 1: are still quite forgiving of any downside surprises, whether it's

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Speaker 1: the earnings or the negative economic data, because they're hoping,

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Speaker 1: believing things get better in the future. What's the test

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Speaker 1: state for you? The test date for me is going

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Speaker 1: to be April. And the reason I say that is

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Speaker 1: we're going to kind of get out of this year

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Speaker 1: ahead outlook season. We'll start to hear the early reporters,

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Speaker 1: you know, kind of talk about what the full year

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Speaker 1: outlook really is. And also stocks have been marching along

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Speaker 1: the two thousand recovery path, and if you look back

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Speaker 1: at that history, April is when you did get a

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Speaker 1: pull back in the market of significant size. And we

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Speaker 1: also have pointed out that about ten months into recovery

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Speaker 1: trades post recession, you do typically get a big bout

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Speaker 1: of consolidation, and we've seen this over the last three

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Speaker 1: economic cycles. So you know that April time frame is

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Speaker 1: perhaps when we will finally get that pullback a lot

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Speaker 1: of people have been looking for before that LORI. Next

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Speaker 1: week in Washington, d C. We're gonna be getting those

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Speaker 1: hearings about what happened with game Stop and AMC and

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Speaker 1: some of these other big share moves that we saw

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Speaker 1: that really were attributed to retail but had a lot

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Speaker 1: of other institutional players. How much does this affect your focus,

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Speaker 1: which is small caps and the indexes that track these

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Speaker 1: kinds of shares. I mean, how big of a concern

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Speaker 1: is it that this type of activity could wildly distort

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Speaker 1: both returns as well as money allocation if it persists.

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Speaker 1: So it's a great question, and I have, you know,

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Speaker 1: kind of two critical thoughts here is one. I don't

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Speaker 1: think retail investor participation and some of the less liquid

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Speaker 1: names in small cap is necessarily a bad thing. Of course,

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Speaker 1: we want it done in a way that's not bringing

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Speaker 1: excess at risk upon those individuals. Um But you know,

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Speaker 1: I think that the door has been opened to some extent.

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Speaker 1: So unless the regulators really kind of come in and

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Speaker 1: close it down, and I don't think they will, you know,

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Speaker 1: I think retail is probably here to stay and keep

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Speaker 1: fishing in the small cap pond for a while. Second thing, though,

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Speaker 1: I would tell you from an institutional community perspective. UM,

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Speaker 1: there was no one more unhappy about this Reddit issue

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Speaker 1: to start the year small cap value managers, and the

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Speaker 1: reason why was that they did not own the kinds

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Speaker 1: of names like GameStop that retail was going after, and

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Speaker 1: it created big performance holes in their benchmark. If you

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Speaker 1: look at the last week of January, only nine percent

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Speaker 1: of small cap value managers beat their benchmark. They were

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Speaker 1: not willing to go in and buy these stocks, but

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Speaker 1: they were definitely curious to know if everyone else was.

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Speaker 1: So this raises a really interesting question, Laurie. If it's

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Speaker 1: not going away, how do they play this? Do they

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Speaker 1: start following Reddit and just going along with the crowd. Well, look,

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Speaker 1: I think that we have just sort of an inherent

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Speaker 1: problem and active management, which is that you know, even

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Speaker 1: value managers, everyone's kind of got these quality biases and

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Speaker 1: has sort of veered over to the same side of

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Speaker 1: the quality trade, and these kind of lower quality names

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Speaker 1: UM have really kind of been ignored, you know, are

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Speaker 1: sort of orphans in the market so to speed. And

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Speaker 1: I think we just need to recognize that this kind

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Speaker 1: of situation where everybody in the institutional community is going

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Speaker 1: to sit on the same side of the boat. It

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Speaker 1: is just not going to be allowed to exist. And

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Speaker 1: definitely so they do need to fish more in that

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Speaker 1: side of the pond. I think I've missed you until

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Speaker 1: I've really missed you. What John, what she just said

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Speaker 1: there is extraordinarily important. I mean, this is the act

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Speaker 1: of do you buy passive small cap? Do you buy

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Speaker 1: an active? It's important, Laurie, it's been a long long time.

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Speaker 1: Can we do a shout out to baby Emmett? How

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Speaker 1: is baby Emmett? Baby Emmett is great. He just got

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Speaker 1: his first tooth and he's sleeping through the nights, so

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Speaker 1: he's been baby. Did he get any bumble shares? Oh

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Speaker 1: my god, no no, but my five year old did

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Speaker 1: try to talk me into letting him trade some stocks. Laurie,

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Speaker 1: I'm sure I'm not alone. Wall Streets missed you. Welcome back.

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Speaker 1: It's going to catch up of OURBC capital markets. Just

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Speaker 1: fantastic research. What we knowing for certain here team surveillance,

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Speaker 1: folks on radio until elevision is a fancy guy in

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Speaker 1: a fancy suit with a fancy bow tie. We'll go

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Speaker 1: get a second vaccination. At eleven am this morning, the

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Speaker 1: national disgrace that we have is a distribution pretty much

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Speaker 1: is for the fancy people. Dwight Evans is living this

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Speaker 1: in Philadelphia. He is a Democrat from Pennsylvania, where thrilled

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Speaker 1: he could join us this morning. You know, Congressman Evans,

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Speaker 1: and it's a disgrace the way we've distributed the vaccine.

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Speaker 1: The key word here is fast. What do you need

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Speaker 1: from President Biden and Congress so that we fast distribute

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Speaker 1: the vaccine to all who need it. There's no question

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Speaker 1: that the programs started started as a failure at this

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Speaker 1: particular point. But I believe President Biden and we're working

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Speaker 1: together to address those issues. There is no question as

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Speaker 1: senior citizens, the essential workers, people of color are having

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Speaker 1: a very difficult that I'm giving access to the program

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Speaker 1: and that is wrong. So we us changed that, and

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Speaker 1: I believe that we're moving in the right direction. And

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Speaker 1: I think it's clear we ultimately around April should get

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Speaker 1: in the right place. Tell us in the trenches of

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Speaker 1: your legislation, what we're doing about educating people and particularly

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Speaker 1: people that don't have an acute science background. We seem

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Speaker 1: to be so far behind. How do we educate and

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Speaker 1: again educate fast? Well, there's no question that you know,

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Speaker 1: you know, there's no use I can talk about what

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Speaker 1: has happened in the past, but we need to talk

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Speaker 1: about the future. There's no question right around this particular much.

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Speaker 1: It's been a year that we have faced this pandemic

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Speaker 1: and this global pandemic, and it's not that we created.

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Speaker 1: It's a question of how it's been managed. So we

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Speaker 1: can need to point fingers that we can find a

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Speaker 1: pathway to address it. I believe that the President United States,

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Speaker 1: in conjunction with the House and the Senate as a partnership,

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Speaker 1: does the attempt need to address this pandemic. So Congressman,

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Speaker 1: let's talk about the future, and let's talk about the

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Speaker 1: current stimulus plan. When you discuss with fellow Democrats what

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Speaker 1: to approve, how big to go, how much? Are people

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Speaker 1: talking about the political will to follow it up with

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Speaker 1: an infrastructure spending bill, as Joe Biden will be talking

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Speaker 1: about today in Washington, d C. Well, you go by

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Speaker 1: the chairman of the Feather Reserve. You said a long

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Speaker 1: time ago that we need to go big, and we

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Speaker 1: need to go bold, and right now is a very

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Speaker 1: appropriate time because you look at the aspect of barring.

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Speaker 1: Barring is very low and very appropriate. So those tools

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Speaker 1: are available. So I believe that we have to use

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Speaker 1: all the tools that are available, and I believe that

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Speaker 1: people are ready, they are ready for a type of change.

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Speaker 1: We've gotta build it back better. So we have to

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Speaker 1: crush the virus of coruss that first and foremost. Secondly,

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Speaker 1: make the necessary fatigue event, reopen our schools, reinvest in

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Speaker 1: our infrastructure, work with our small businesses. These are all

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Speaker 1: the things that we have to do. So it's not easy,

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Speaker 1: but we can do it well. But but you believe that,

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Speaker 1: and a lot of people do believe that a part

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Speaker 1: of the Democratic Party, but even among the Democrats, there

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Speaker 1: is some disagreement about how big to go and how

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Speaker 1: much to follow this up with, and the idea that

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Speaker 1: Republicans are getting a little bit more concerned about the

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Speaker 1: debt pile. I mean, how concerned are you that if

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Speaker 1: you pass a big and bold stimulus package right now,

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Speaker 1: it will withdraw any political support for getting that infrastructure

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Speaker 1: spending done that you're saying is crucial. Well, I think

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Speaker 1: it's important to understand that in the House, we just

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Speaker 1: had a hearing uh in their Ways and Means Committee,

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Speaker 1: and the chairman of the committee is very confident in

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Speaker 1: terms of where we are. We understand the concerns that people,

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Speaker 1: but we realize this is something we can do. We

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Speaker 1: cannot afford not to do it, so we have to

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Speaker 1: take that. Actually, I believe that we're in the majority

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Speaker 1: in the Senate and with the houseworking together that I

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Speaker 1: think that you will see a new, different day. So

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Speaker 1: I'm very optimistic that we can achieve this. Joy Evans

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Speaker 1: tell us the the the forward motion of the Congressional

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Speaker 1: Black Caucus. It has been a four year challenge, without question,

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Speaker 1: I think anybody of any political persuasion can agree on that.

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Speaker 1: Tell us about the new effort by a Congressional Black

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Speaker 1: Caucus in Congress. Well, you know, um Joyce Baby from

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Speaker 1: Ohio is the new chairperson. Fact, she's on the Financial

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Speaker 1: Service Committee. I work very closely it being on the

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Speaker 1: ways and means committed. So I share with you with

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Speaker 1: a leadership taking place of Karen Bass from California, that

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Speaker 1: she will not miss a step. You have some very

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Speaker 1: good new members, new blood, new energy, who are ready

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Speaker 1: to take this challenge on. So, in spite of what

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Speaker 1: a lot of people said, I believe that the Congressional

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Speaker 1: Black Caucus ready for this challenge. Congressman Waved love to

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Speaker 1: have you back, saying please stay close. That would be

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Speaker 1: a stranger to this program. Congressman Wide Evan's that wank.

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Speaker 1: Diane Swart joins from Grant Thorton. Just wonderful about calibrating

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Speaker 1: the pulse of that equation. Why I will see plus

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Speaker 1: I plus G plus n x, Diane Swark? Right now,

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Speaker 1: the mystery to me is a persistent six five g

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Speaker 1: d P and we get out into Q one, maybe

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Speaker 1: into Q two, and then there's a mystery. What is

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Speaker 1: your clarity on Q three and Q four of this year? Well,

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Speaker 1: certainly the hope is that we see this unleashed pent

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Speaker 1: up demand lift us even higher and get to the

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Speaker 1: end of the year. Ours is a little bit more

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Speaker 1: muted because the multipliers, we think are more muted on

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Speaker 1: services coming back than they are on goods coming back.

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Speaker 1: This is a very unique reset and where you do

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Speaker 1: unleashed pen up demand. But how many times do you

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Speaker 1: eat up out in a day? How many haircuts do

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Speaker 1: you get to make up for what we lost? So

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Speaker 1: it's a different kind of unleashed pen up demand. But

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Speaker 1: we could easily see the strongest year since nine four.

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Speaker 1: That is important as we go into two thousand twenty two.

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Speaker 1: What's also important is how do we manage the virus.

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Speaker 1: I mean, we're talking about not eradicating the virus, but

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Speaker 1: managing it so that it's not a significant part of

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Speaker 1: our everyday lives. But that process of going from eradicating

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Speaker 1: her community just flipping a switch, to managing the virus

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Speaker 1: is a very different economic equation as well, in terms

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Speaker 1: of how fast we can ramp up all showing up

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Speaker 1: at big theaters and sporting events in crowds and congregating

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Speaker 1: in the way many of us would like to dance swank.

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Speaker 1: We spoke with Heidi Sheerholes out of your University of

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Speaker 1: Michigan the other day. She is expert, expert expert on

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Speaker 1: the dearth of jobs that job GEP that we have

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Speaker 1: with a aren't economy? Do we close that job? Get Yeah,

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Speaker 1: it's a great question. One of the things we're really

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Speaker 1: worried about it in Heidi is as well, She's great

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Speaker 1: at this is the dichotomy between high wage jobs have

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Speaker 1: come back and in fact, in some sectors they're reporting

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Speaker 1: labor market shortages. Of course, we all know that anyone

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Speaker 1: doing anything with their house right now cannot find a

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Speaker 1: skilled carpenter. But beyond that, you've got in the low

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Speaker 1: wage sector jobs that are being replaced by automation and digitation.

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Speaker 1: Even thinking about things like the peloton and doing fitness

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Speaker 1: and home that allows one person to personally train a

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Speaker 1: lot of people. Reduces the cost of some of these

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Speaker 1: inflation fears I think are overstated, but it also reduces

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Speaker 1: some jobs that might be coming back otherwise. Also cashiers,

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Speaker 1: anything that can be automated in terms of getting out

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Speaker 1: of a store, not having that extra touch, and the

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Speaker 1: world we manage the virus rather than just contain it.

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Speaker 1: All of those things mean it's going to be even

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Speaker 1: harder for some of these workers that have been displaced

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Speaker 1: to come back without reskilling. And that's before we get

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Speaker 1: to the last educational component of We've now got many

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Speaker 1: low wage household suffering, not only our math scores suffering,

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Speaker 1: which need in person care and elementary schools, but low

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Speaker 1: wage household suffering dropouts not getting access to online education,

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Speaker 1: and it really is exacerbating inequalities and diminishing that labor poort.

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Speaker 1: Going forward, Let's pick up on that word inequality. There

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Speaker 1: the structural issues. Let's talk about some of the cyclical

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Speaker 1: slack this feed has been conditioned to understand. Now, Chairman

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Speaker 1: pal chair yelling, now, Secretary yelling. They need to run

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Speaker 1: this a whole lot longer to really reduce and eradicate

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Speaker 1: any cyclical slack that is left. They learned that in

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Speaker 1: the last cycle. They're applying that conditioning to this cycle.

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Speaker 1: And Dan, I wonder how difficult this is going to

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Speaker 1: be to calibrate, because if the Federal Reserve is committed

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Speaker 1: to doing that, then as a market participant, I'm committed

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Speaker 1: to allocating to risk assets as well. So how on

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Speaker 1: earth do you close that gap if monetary policy is

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Speaker 1: one of the tools you're using to do it. Yeah,

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Speaker 1: it's really Monetary policy is such a crude tool on this,

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Speaker 1: and I think fiscal policy is so much better at

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Speaker 1: removing the hurdles to inequality. We're gonna need summer schools

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Speaker 1: to make up for some of this inequality. We're gonna

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Speaker 1: need to re engage students that have dropped out of

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Speaker 1: college twice the pace they've dropped out in households earning

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Speaker 1: less than seventy five thousand dollars a year. So all

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Speaker 1: of that requires more fiscal policy than monetary policy, and

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Speaker 1: monetary policy kind of running that, you know, sort of

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Speaker 1: and you allude to it, Yes, low rates for a

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Speaker 1: long time if you overshoot what you thought was full employment.

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Speaker 1: And Powell has really embraced this idea to run the

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Speaker 1: economy hot, to bring in more of those workers that

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Speaker 1: are now most damaged, narrow that gap between the black

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Speaker 1: unemployment rate and the white unemployment rate, in particular, looking

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Speaker 1: at different employment to population ratios, trying to think of

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Speaker 1: this much more nuanced um in terms of what is

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Speaker 1: full employment. Well, that's only one tool, but that's a

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Speaker 1: really crude tool. And we also know the New York

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Speaker 1: Fed has done a study that in fact, you know,

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Speaker 1: running the economy hot with low rates also exacerbates inequality

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Speaker 1: and wealth and that's something that we have to deal

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Speaker 1: with as well. So I think that's the hard part.

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Speaker 1: Getting the economy hot is also still an unknown. All

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Speaker 1: these people worried about inflation out there. It we could

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Speaker 1: see a flare of inflation, but to have the kind

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Speaker 1: of wage push inflation we saw, say in the nineteen seventies,

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Speaker 1: overlaid with the opeque inflation we saw in the nineteen

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Speaker 1: seventies of stag inflation back then. Research suggests that of

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Speaker 1: wages in the U. S economy were tied to a

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Speaker 1: cost of living increase that was well and beyond any

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Speaker 1: union contracts out there. Remember my dad would come home

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Speaker 1: with this extra cola increase as a GM executive back

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Speaker 1: in the late seventies and be excited that he got

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Speaker 1: that extra bonus in addition to his races he was getting.

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Speaker 1: That's not the world we live in today, and I

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Speaker 1: think people the context of inflation is very different than

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Speaker 1: it once. What which brings in the fifteen dollar minimum

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Speaker 1: wage debate which is being had in Washington, d c.

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Speaker 1: Right whether or not to include that in the stimulus plan.

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Speaker 1: A lot of people saying just take it out, it's

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Speaker 1: a hot potato. The CBO, which is a nonpartisan group

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Speaker 1: that took a look at this, found that it would

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Speaker 1: lead to fewer jobs, but it would reduce the amount

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Speaker 1: of poverty in the economy. What's your view, I mean,

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Speaker 1: do you think that it would help generate the kind

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Speaker 1: of income growth, boost to inflation, boost economic prosperity to

431
00:24:23,040 --> 00:24:28,399
Speaker 1: raise this or would it actually harm it? Well, it

432
00:24:28,480 --> 00:24:30,800
Speaker 1: really is. This is a much more nuanced debate, and

433
00:24:30,880 --> 00:24:33,440
Speaker 1: one of the things I do think the evidence on

434
00:24:33,560 --> 00:24:36,640
Speaker 1: minimum wage has really shifted a lot of economist views

435
00:24:36,640 --> 00:24:38,959
Speaker 1: on it. It didn't destroy as many jobs over that

436
00:24:39,000 --> 00:24:41,280
Speaker 1: period of time. It's almost a one for one, not

437
00:24:41,440 --> 00:24:43,920
Speaker 1: quite a million people taken out a poverty, a million

438
00:24:43,960 --> 00:24:46,200
Speaker 1: and a half jobs loss. If some of those jobs

439
00:24:46,200 --> 00:24:48,720
Speaker 1: were no longer people working two jobs, that's a good thing.

440
00:24:49,160 --> 00:24:51,480
Speaker 1: But the more nuanced view of it that I think

441
00:24:51,560 --> 00:24:54,400
Speaker 1: is really important is places where you know you're trying

442
00:24:54,400 --> 00:24:59,000
Speaker 1: to bring up small companies back online, small business back online.

443
00:24:59,280 --> 00:25:02,680
Speaker 1: While large chain is already moving to fifteen dollars an hour,

444
00:25:02,960 --> 00:25:08,199
Speaker 1: they're effectively accelerating the consolidation and diminishing the dynamism of

445
00:25:08,200 --> 00:25:10,760
Speaker 1: the U. S economy and making it very hard for

446
00:25:10,800 --> 00:25:15,280
Speaker 1: these smaller restaurants, smaller business, and smaller retailers to compete.

447
00:25:15,480 --> 00:25:17,960
Speaker 1: And although I embrace the minimum wage and think that

448
00:25:18,000 --> 00:25:20,840
Speaker 1: it can lift the fortunes of many and it is

449
00:25:20,880 --> 00:25:23,680
Speaker 1: a phase in process, I think we need to think

450
00:25:23,680 --> 00:25:25,560
Speaker 1: of it as much more nuanced touff, how do we

451
00:25:25,760 --> 00:25:28,680
Speaker 1: help those companies that have a harder time coming back

452
00:25:28,720 --> 00:25:32,320
Speaker 1: online after being just hammered by the pandemics. So in

453
00:25:32,359 --> 00:25:34,880
Speaker 1: the context of where we're at. I do think it's

454
00:25:34,880 --> 00:25:36,880
Speaker 1: important to talk about a minimum wage, but I also

455
00:25:36,880 --> 00:25:39,360
Speaker 1: think you need to think about what kind of consolidation.

456
00:25:39,400 --> 00:25:41,400
Speaker 1: What are small business is going to need to do

457
00:25:41,720 --> 00:25:44,320
Speaker 1: to be able to embrace that minimum wage in a

458
00:25:44,320 --> 00:25:47,720
Speaker 1: way that's most productive for the US economy, and that's

459
00:25:47,880 --> 00:25:50,879
Speaker 1: much harder. We know that large chains, large fast food

460
00:25:50,880 --> 00:25:54,480
Speaker 1: restaurants in particular, pass along the increases of the minimum wage,

461
00:25:54,640 --> 00:25:57,440
Speaker 1: not in job cuts, but in higher prices. It's a

462
00:25:57,480 --> 00:26:00,359
Speaker 1: step function. It's not something that we can't absorb or

463
00:26:00,400 --> 00:26:02,159
Speaker 1: but I think we need to think about how do

464
00:26:02,280 --> 00:26:05,360
Speaker 1: smaller companies that want to come back online deal with

465
00:26:05,600 --> 00:26:08,439
Speaker 1: this in the areas where the minimum wages the lowest,

466
00:26:08,440 --> 00:26:12,520
Speaker 1: So Diana, Given how nuanced this is and how disproportionately

467
00:26:12,600 --> 00:26:15,120
Speaker 1: the big companies and the small companies have been affected

468
00:26:15,720 --> 00:26:18,920
Speaker 1: by the current economic backdrop, what are you proposing? I mean,

469
00:26:18,920 --> 00:26:21,920
Speaker 1: do you see a place for universal income? What is

470
00:26:22,119 --> 00:26:27,560
Speaker 1: the sort of transmission mechanism to even out the playing field? Well,

471
00:26:27,600 --> 00:26:30,880
Speaker 1: I think one of the transmission mechanisms we've already talked about.

472
00:26:30,880 --> 00:26:32,960
Speaker 1: You know, increased cashier jobs are not going to be

473
00:26:33,000 --> 00:26:35,720
Speaker 1: as necessary. We've seen restaurants move online a lot of

474
00:26:35,840 --> 00:26:37,800
Speaker 1: ordering is going to be done before you even show

475
00:26:37,840 --> 00:26:39,720
Speaker 1: up at the restaurant. You could imagine now, So it's

476
00:26:39,720 --> 00:26:42,160
Speaker 1: going to be reduced need for weight staff in different ways,

477
00:26:42,160 --> 00:26:44,200
Speaker 1: and the weight staff is going to provide different kinds

478
00:26:44,200 --> 00:26:48,000
Speaker 1: of um roles. And they did pre pandemic. So there's

479
00:26:48,080 --> 00:26:49,720
Speaker 1: that issue out there, and I think one of the

480
00:26:49,760 --> 00:26:51,520
Speaker 1: things we still need to get to, and it gets

481
00:26:51,520 --> 00:26:55,480
Speaker 1: to investment in infrastructure, but it's restorative policies. Everything from

482
00:26:55,640 --> 00:26:58,480
Speaker 1: year round schooling to catch up on what we've lost.

483
00:26:58,760 --> 00:27:01,920
Speaker 1: We're gonna need retrain programs. We're gonna need training programs

484
00:27:01,960 --> 00:27:05,160
Speaker 1: to allow people to move up in wage group. What

485
00:27:05,200 --> 00:27:07,600
Speaker 1: we've seen in the past is middle wage earners have

486
00:27:07,760 --> 00:27:10,120
Speaker 1: lost their jobs and then taking a low wage job.

487
00:27:10,400 --> 00:27:13,119
Speaker 1: We've seen low age job workers take another low wage

488
00:27:13,200 --> 00:27:15,560
Speaker 1: job when they lost their job. Now we're talking about

489
00:27:15,600 --> 00:27:18,680
Speaker 1: reducing the number of low age jobs out there, and

490
00:27:18,720 --> 00:27:21,159
Speaker 1: that's something that I think we have to offset with

491
00:27:21,240 --> 00:27:25,800
Speaker 1: fiscal policy that includes training, that includes more investment in

492
00:27:26,160 --> 00:27:28,960
Speaker 1: community colleges, all of those kinds of things that allows

493
00:27:29,000 --> 00:27:32,239
Speaker 1: people to make this transition to a higher wage and

494
00:27:32,359 --> 00:27:34,480
Speaker 1: more productive wage in a world that's going to be

495
00:27:34,520 --> 00:27:38,080
Speaker 1: more technologically savvy. We've been. A pandemic has been an

496
00:27:38,080 --> 00:27:41,880
Speaker 1: accelerant in our embrace of technology. We've learned to use

497
00:27:41,920 --> 00:27:44,760
Speaker 1: things that we're in existence that we didn't. Even my

498
00:27:44,840 --> 00:27:47,360
Speaker 1: husband now knows how to use the Universal remote. That's

499
00:27:47,359 --> 00:27:52,280
Speaker 1: a big Stummily, that's a big that's a really big

500
00:27:52,320 --> 00:27:57,080
Speaker 1: stick accelerated, but you know, these are things. It's accelerated

501
00:27:57,080 --> 00:28:00,359
Speaker 1: that shift. But also in accelerating that shifted excel a rated.

502
00:28:00,440 --> 00:28:02,919
Speaker 1: You know, we now have gig workers delivering stuff to us.

503
00:28:02,960 --> 00:28:05,199
Speaker 1: That's a very different kind of job than some of

504
00:28:05,200 --> 00:28:08,119
Speaker 1: these low workers had. That's got even less um security

505
00:28:08,160 --> 00:28:09,919
Speaker 1: on it. So I think we really need to be

506
00:28:10,000 --> 00:28:13,640
Speaker 1: thinking holistically and it's going to require fiscal policy as well.

507
00:28:14,000 --> 00:28:18,040
Speaker 1: Dance Swunk quite simply one of the best. Thank you,

508
00:28:26,840 --> 00:28:31,080
Speaker 1: Michael Nathanson Moffa Nathanson, Senior Research Analysts on what we

509
00:28:31,160 --> 00:28:34,360
Speaker 1: have wrought, what we've learned through the pandemic. Michael, you've

510
00:28:34,400 --> 00:28:38,760
Speaker 1: been what I'm gonna call constructive on Disney, but you

511
00:28:38,800 --> 00:28:42,560
Speaker 1: were not an uber Bowl. What surprised you about the

512
00:28:42,640 --> 00:28:48,080
Speaker 1: Disney Plus? What was the lessons learned from Disney Plus? Well,

513
00:28:48,160 --> 00:28:51,720
Speaker 1: I'll tell you what lessons learned Disney Plus have been

514
00:28:52,240 --> 00:28:55,200
Speaker 1: the adoption hasn't much stronger in the first year than

515
00:28:55,280 --> 00:28:57,160
Speaker 1: we ever imagined. And I remember a couple years ago

516
00:28:57,200 --> 00:29:00,320
Speaker 1: fighting with clients about how big could be. But it's

517
00:29:00,360 --> 00:29:02,440
Speaker 1: literally been a double triple what we thought it was,

518
00:29:02,640 --> 00:29:05,480
Speaker 1: you know, two years ago, right, and and and it

519
00:29:05,520 --> 00:29:07,760
Speaker 1: could have been the pandemic, but also could be just

520
00:29:07,920 --> 00:29:11,320
Speaker 1: great execution on Disney. And I give the company a

521
00:29:11,320 --> 00:29:14,600
Speaker 1: ton of credit because they took this challenge on head

522
00:29:14,600 --> 00:29:18,160
Speaker 1: on and they've executed so well against it. So there's

523
00:29:18,160 --> 00:29:20,920
Speaker 1: a question here of whether there's a broader lesson that

524
00:29:21,000 --> 00:29:23,120
Speaker 1: perhaps there's more room to grow and there are more

525
00:29:23,160 --> 00:29:27,560
Speaker 1: subscription subscription streams, uh that consumers are willing to have

526
00:29:27,720 --> 00:29:30,160
Speaker 1: if we see the same kind of growth at Netflix

527
00:29:30,280 --> 00:29:32,680
Speaker 1: that we now see at Disney Plus. And then some

528
00:29:33,400 --> 00:29:36,479
Speaker 1: is there some takeaway, some broader takeaway about the future

529
00:29:36,520 --> 00:29:39,440
Speaker 1: of streaming and the potential profitability there that's making you

530
00:29:39,480 --> 00:29:43,560
Speaker 1: reassess your calls. Well, that's that's a good question. We're

531
00:29:43,560 --> 00:29:46,720
Speaker 1: trying to figure out how much of the adoption of

532
00:29:46,760 --> 00:29:48,760
Speaker 1: past year has been due to the pandemic. You know,

533
00:29:48,800 --> 00:29:51,080
Speaker 1: I listened to you guys and earlier that Thoma has

534
00:29:51,120 --> 00:29:54,320
Speaker 1: been stuck at home so often, and and the question

535
00:29:54,400 --> 00:29:58,200
Speaker 1: is when we start opening up back to normal, will

536
00:29:58,240 --> 00:30:01,440
Speaker 1: there be a bit of a state on on streaming adoption.

537
00:30:01,480 --> 00:30:04,680
Speaker 1: But with that said, I think what we're seeing, and

538
00:30:04,720 --> 00:30:06,360
Speaker 1: this is a question you guys I was asking me,

539
00:30:06,400 --> 00:30:10,680
Speaker 1: is you're seeing court cutting, you know, remain really problematic.

540
00:30:11,200 --> 00:30:15,040
Speaker 1: Consumers are finding surplus from court cutting, and they're taking

541
00:30:15,040 --> 00:30:18,080
Speaker 1: that surplus and the's spending it on streaming services. And

542
00:30:18,120 --> 00:30:20,760
Speaker 1: that's going to continue for a long time. UM. I

543
00:30:20,800 --> 00:30:22,920
Speaker 1: think of anything, the rethought for us, this has been

544
00:30:22,920 --> 00:30:25,240
Speaker 1: true for our Netflix work as well, has been the

545
00:30:25,280 --> 00:30:30,280
Speaker 1: adoption overseas inter nationally of streaming. You know, historically there's

546
00:30:30,320 --> 00:30:33,840
Speaker 1: not been a huge market for television outside the US

547
00:30:33,880 --> 00:30:36,480
Speaker 1: pay TV, but this has changed things and they're more

548
00:30:36,520 --> 00:30:40,360
Speaker 1: adoption overseas than we ever thought. Michael, there's a lot

549
00:30:40,400 --> 00:30:42,080
Speaker 1: to unpack there. I want to pick up on one

550
00:30:42,080 --> 00:30:44,200
Speaker 1: point you were talking about this idea of how much

551
00:30:44,440 --> 00:30:46,480
Speaker 1: this is just due to the pandemic and how much

552
00:30:46,520 --> 00:30:51,440
Speaker 1: this has longer lasting trend implications. What are the streaming

553
00:30:51,480 --> 00:30:55,120
Speaker 1: services replacing if not for the cable cord that would

554
00:30:55,120 --> 00:30:58,360
Speaker 1: have been their pandemic or not well, Lisa, you know,

555
00:30:59,320 --> 00:31:03,240
Speaker 1: people look at consumer spending on entertainment. Clearly, not going

556
00:31:03,320 --> 00:31:07,320
Speaker 1: to theaters is is a major class savings. Not not

557
00:31:07,480 --> 00:31:11,120
Speaker 1: buying package media what's left of it, maybe even not

558
00:31:11,200 --> 00:31:14,160
Speaker 1: going to entertainment like sports or theme parks. Right, so,

559
00:31:14,200 --> 00:31:17,920
Speaker 1: if you look at consumer spending, you know, the shutdown

560
00:31:18,000 --> 00:31:20,240
Speaker 1: of options out of the home, it gets created a

561
00:31:20,320 --> 00:31:23,440
Speaker 1: huge surplus for consumers. Michael, we didn't have jan because

562
00:31:23,480 --> 00:31:25,120
Speaker 1: we want to talk to you about sell side. The

563
00:31:25,160 --> 00:31:28,040
Speaker 1: fact is Taylor Riggs is buried in a PhD course

564
00:31:28,120 --> 00:31:30,560
Speaker 1: in M and A and she said, get Nathan sent

565
00:31:30,720 --> 00:31:32,440
Speaker 1: on so you can give me an a plus. Let's

566
00:31:32,440 --> 00:31:37,240
Speaker 1: do it, Michael. Right now, her exercises who Apple should buy?

567
00:31:37,560 --> 00:31:41,360
Speaker 1: Can Apple buy Netflix? Is that? Why would Apple would

568
00:31:41,360 --> 00:31:46,680
Speaker 1: that cash flow want to buy Netflix. Apple should not

569
00:31:46,720 --> 00:31:49,800
Speaker 1: buy Netflix because Netflix has a radio achieved the dream.

570
00:31:49,840 --> 00:31:54,960
Speaker 1: Apple should buy HBO and Warner you know, and Warner

571
00:31:55,000 --> 00:31:59,120
Speaker 1: Brothers out of a T and T because that dream

572
00:31:59,160 --> 00:32:03,760
Speaker 1: has not been realized. As you basically need Apples balance

573
00:32:03,800 --> 00:32:08,600
Speaker 1: sheet into Apples Apple's distribution globally. Right, so you can

574
00:32:08,640 --> 00:32:11,920
Speaker 1: take an asset like HBO, Max and Warner Brothers and

575
00:32:12,000 --> 00:32:15,640
Speaker 1: turbocharge it and rather than pay Netflix. That upside you

576
00:32:15,680 --> 00:32:17,920
Speaker 1: can create yourself. And that's what I would do if

577
00:32:17,920 --> 00:32:21,440
Speaker 1: I was Apple. Culturally, can they do it? As you know, Michael,

578
00:32:21,520 --> 00:32:26,440
Speaker 1: this is critical see Fox Disney. Culturally. Could Apple deal

579
00:32:26,680 --> 00:32:31,080
Speaker 1: with the Hollywood of Warner HBO? Well, it's Tom's a

580
00:32:31,080 --> 00:32:35,560
Speaker 1: great question. So far, questions Taylor Riggs continue, Thank you,

581
00:32:37,360 --> 00:32:41,240
Speaker 1: it's so Taylor. The so far, the two of the

582
00:32:41,400 --> 00:32:44,520
Speaker 1: three winners and streaming have built it themselves, right, There's

583
00:32:44,560 --> 00:32:49,440
Speaker 1: been no Hollywood acquisition itself built. The issue that Apple

584
00:32:49,480 --> 00:32:52,800
Speaker 1: faces is that they're they're lagging. They really are, that

585
00:32:52,920 --> 00:32:55,520
Speaker 1: we are. Survey works shows them to be really in

586
00:32:55,560 --> 00:32:57,600
Speaker 1: six with the seventh place right now. So they need

587
00:32:57,640 --> 00:33:00,800
Speaker 1: to do something to get in the game, and I

588
00:33:00,840 --> 00:33:03,760
Speaker 1: think they don't have the time to build to buy.

589
00:33:03,880 --> 00:33:06,160
Speaker 1: That's what I would take. Taylor writes in to say

590
00:33:06,200 --> 00:33:08,920
Speaker 1: thank you very much for that advice, and she does

591
00:33:08,960 --> 00:33:11,640
Speaker 1: plan to get an A plus. There is a question though,

592
00:33:11,880 --> 00:33:14,360
Speaker 1: with the cash piles and some of big text balance

593
00:33:14,400 --> 00:33:15,840
Speaker 1: sheet and the idea that they all want to get

594
00:33:15,840 --> 00:33:19,280
Speaker 1: into entertainment, especially the apples of the world, and now

595
00:33:19,360 --> 00:33:21,160
Speaker 1: of course Amazon has already been in. It has a

596
00:33:21,160 --> 00:33:24,280
Speaker 1: big footprint at what point does M and A raise

597
00:33:24,360 --> 00:33:27,680
Speaker 1: concerns from an antitrust standpoint in Washington, d C. Given

598
00:33:27,720 --> 00:33:31,320
Speaker 1: the current administration. That's a good question. I don't think

599
00:33:31,360 --> 00:33:33,640
Speaker 1: we will see any of our companies we cover, Facebook

600
00:33:33,640 --> 00:33:38,360
Speaker 1: and Google or Alphabet buying um company that close to

601
00:33:38,400 --> 00:33:41,720
Speaker 1: their core business. I think of Apple buys a video

602
00:33:41,760 --> 00:33:45,000
Speaker 1: company or Amazon does it would be just to to

603
00:33:45,160 --> 00:33:48,680
Speaker 1: compete more broadly in video and maybe drive again consumer

604
00:33:48,760 --> 00:33:53,400
Speaker 1: surplus by creating better, better products. So that doesn't worry

605
00:33:53,480 --> 00:33:56,600
Speaker 1: me as much as you know, Google buying Twitter, which

606
00:33:56,640 --> 00:34:00,280
Speaker 1: won't happen, or Facebook buying Pinterest, which won't happened, right,

607
00:34:00,320 --> 00:34:02,760
Speaker 1: So I think they really need to stay out of

608
00:34:02,760 --> 00:34:05,800
Speaker 1: their lanes, dude, to do emin at this point. Michael

609
00:34:05,880 --> 00:34:09,200
Speaker 1: Nathanson brilliant, Really really appreciate it. Taylor riggsuns are loving

610
00:34:09,239 --> 00:34:12,760
Speaker 1: as well. Michael Nathanson with motht Nathanson, some real smart

611
00:34:12,800 --> 00:34:17,040
Speaker 1: discussion there. Thanks for listening to the Bloomberg Surveillance podcast.

612
00:34:17,400 --> 00:34:22,360
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

613
00:34:22,480 --> 00:34:26,800
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

614
00:34:26,920 --> 00:34:30,799
Speaker 1: Keane before the podcast, you can always catch us worldwide.

615
00:34:31,239 --> 00:34:32,320
Speaker 1: I'm Bloomberg Radio,