Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: we bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Daniel
Speaker 1: Foss joined us from loomas Sales, their vice chairman and
Speaker 1: truly someone who invented the modern bond business. Dan Foss,
Speaker 1: you are the one that told us to forget about yield.
Speaker 1: By depressed price bonds, there will be credit improvement and
Speaker 1: the bonds will appreciate for total return. You can't do
Speaker 1: that anymore, can you. Well, um, that's right, But all
Speaker 1: I can do is agree with what you just said
Speaker 1: to Um. It's a tough road to whole right now
Speaker 1: in the bod world. Uh, you can make some money.
Speaker 1: You can ride the old curve at too short end. UM.
Speaker 1: I don't recommend it, but you can. You can buy
Speaker 1: a slice of each of the new high yield coming
Speaker 1: out and you've got some yield. UM. Or you can
Speaker 1: be a bit smarter about it and you can say, well,
Speaker 1: I'm not going to buy a slice of each one
Speaker 1: of them, but I'm going to buy the ones I
Speaker 1: like and try to keep my maturities entirely short. And
Speaker 1: then people say to me, and they said, well, that's
Speaker 1: all well and good Dan, but you know, I just
Speaker 1: can't raid a seven the yelder and the portfolios to
Speaker 1: me and a half. And so what do you expect
Speaker 1: us to do about this? Get rid of you? And
Speaker 1: I said, well, I don't like it to get rid
Speaker 1: of me, but I have to be honest with you
Speaker 1: and tell you it's that type of the old environment.
Speaker 1: And uh so if you're discounting at seven um and
Speaker 1: the yields you're getting our three or poor even, uh,
Speaker 1: you've got a problem. And I can't solve that one
Speaker 1: for you. Uh. Now, last year we were lucky. Prices
Speaker 1: went up some more, the total return looks nice, and
Speaker 1: people say, geez, that's really very nice. You've done it again,
Speaker 1: and you say, uh, huh, listen, that was luck and
Speaker 1: by this time, uh, you know, the marketers will never
Speaker 1: let you in another meeting. But that's the reality of
Speaker 1: life down I want to jump in, if that's okay.
Speaker 1: So I want to talk about the experience through the
Speaker 1: last few cycles, beyond just what we've gone through in
Speaker 1: the last twelve months, but over the last couple of decades.
Speaker 1: What is it about the way we recover and roll
Speaker 1: over through these cycles that leads to lower highs on
Speaker 1: a ten year bond yield and lower lows each and
Speaker 1: every time, each and every time? What's going gone down?
Speaker 1: What's that dynamic? And do we repeat that in this
Speaker 1: recovery about to go through as well? Well? Number one,
Speaker 1: I don't know the future. Number two, Um, I think
Speaker 1: what we're in right now, Jonathan is in a period
Speaker 1: of rather low rates for quite a period of time. Now.
Speaker 1: I am not in the camp that say they are
Speaker 1: down they're going to stay down in the US. And
Speaker 1: I don't think we're going through the popular praise these
Speaker 1: days the Japanification of inflation in the markets. I don't
Speaker 1: buy that. And but maybe it will happen. I doubt it.
Speaker 1: That's a whole different world there, uh. I think what
Speaker 1: we're in right now is an excess of liquidity finding
Speaker 1: its way into the bondom market. Now, there are a
Speaker 1: couple of indicators. If you look at what's happening with
Speaker 1: the E t f s for example, you look at
Speaker 1: you know, say, oh, cheapers, the highli T s Uh,
Speaker 1: they're not really growing anymore. A matter of fact, it's
Speaker 1: seemed as reported to have flattened out. O. Um, that's
Speaker 1: one indication. And then you look at what the new
Speaker 1: issues coming out are being used for. Um, a good
Speaker 1: chunk of them are being used to refinance the older ones.
Speaker 1: You're bringing down your coupons to adjust to the you
Speaker 1: know that smart financial management. Uh. And Uh, the underlying
Speaker 1: fundamentals on a lot of the issuers on some are
Speaker 1: are quite good. On many more, Uh, they're de degree
Speaker 1: and so here you have a floppier credit environment, you
Speaker 1: have lower yields. Yeah. And and basically this goes to
Speaker 1: the point that you made recently dead in an interview
Speaker 1: with Bloomberg News, where you said there's no outstanding value
Speaker 1: in the fixed income markets. And I'm wondering, Dan, as
Speaker 1: one of the fathers of the bond market as we
Speaker 1: know it today, where do you go if there is
Speaker 1: no outstanding value in the fixed income market. Well, you
Speaker 1: do what you did, and I'm going to go back
Speaker 1: in history. You do what you did at a little
Speaker 1: different level of yield in the sixties. You start to
Speaker 1: work with the old curve and and your patient. But
Speaker 1: it's easier to see immunity. See if you were running
Speaker 1: Ammuni portfolio, you'd say, oh good, I'm going to buy
Speaker 1: the five year and I'm going to roll it back
Speaker 1: out after two years have gone by or three years whatever.
Speaker 1: That was a pretty steady positive curve. Corporates are are different,
Speaker 1: and there's a spread between bidden ask, but if you
Speaker 1: stick to the higher quality and work with the old curve,
Speaker 1: you can be adding some value, not a lot. And
Speaker 1: then you watch for the occasional anomaly anomaly um and
Speaker 1: on the credit side, and they do come along, not
Speaker 1: many and not big, and they don't last long, but
Speaker 1: you can find them. But the one thing I discourage
Speaker 1: people from doing is saying, well, listen, uh, this economic
Speaker 1: rebound is going to be ferocious and everything is going
Speaker 1: to be back to normal. Well maybe that will happen.
Speaker 1: I hope so. I sure hope so. But I wouldn't
Speaker 1: bet that way, and I would not bet against the
Speaker 1: return of inflation because I think Milton Friedman had some
Speaker 1: things right. And when you follow the growth of them too,
Speaker 1: and the rate that it's growing at, or use any
Speaker 1: other procts that you want, go look at the stock
Speaker 1: market where there is excess liquidity, and it is in
Speaker 1: this system and we and the FED is caught because
Speaker 1: we are fighting a war right now against the pandemic.
Speaker 1: And and that's the case. Everybody has to get in
Speaker 1: and support the work. Don't forgive me for jumping and said,
Speaker 1: if you can, fantastic to catch out with you. Thank
Speaker 1: for giving us some of your time, and don't be
Speaker 1: a stranger. Don't leave us so long. Next time down
Speaker 1: fuss that of limits sales. Lori Kelvisine is at RBC
Speaker 1: Capital Markets and they've got a really, really, really interesting
Speaker 1: exercise they go through every earning season called transcript tagging. Laurie,
Speaker 1: what's transcript tagging? And what have you learned? So basically
Speaker 1: transcript tagging. As we go through on my team all
Speaker 1: of the earnings called transcripts of SMP five companies. It's
Speaker 1: a pretty manual, labor intensive process and we just frankly
Speaker 1: want to see what companies are talking about. UM. We
Speaker 1: try to gauge the tone. We look at what they're
Speaker 1: saying on things like cash, the outlook, the tone. Actually
Speaker 1: the surprised me wasn't as robust as I thought it
Speaker 1: would be. So we know that companies are coming in
Speaker 1: and beating left and right on numbers, But when they're
Speaker 1: talking about the forward outlook, they're really kind of two camps.
Speaker 1: There's one that's expressing some optimism over the vaccine rollout,
Speaker 1: and there's a second that's been really pushing the narrative
Speaker 1: of things are still uncertain. Um, so it's it wasn't
Speaker 1: as biased towards kind of that bullish look at the
Speaker 1: vaccine rollout as I would have thought. Talked to me
Speaker 1: about the performance post earnings, Laurie, what's the takeaway? So
Speaker 1: this is something else that's really been interesting. You know,
Speaker 1: depending on what which day you update the data, but
Speaker 1: about half of companies that have posted results so far
Speaker 1: in this reporting season have gone down one percent or
Speaker 1: more in the one day trading session after the results.
Speaker 1: Now that stat's gotten a little bit better as we've
Speaker 1: gone through reporting season, but I think it's a testament
Speaker 1: to how high expectations were coming into this reporting season.
Speaker 1: So kind of this, you know, kind of one mediocre, Yeah,
Speaker 1: maybe things will get better, we don't really know. That's
Speaker 1: not cutting it and you're not seeing one is some
Speaker 1: ss really go up in a meaningful way. I've been
Speaker 1: trying to work out. Just sorry to jump in. I've
Speaker 1: been trying to work out where the spot on the
Speaker 1: calendar is where a lot of this starts to manage
Speaker 1: just a little bit more, because I think some people
Speaker 1: are still quite forgiving of any downside surprises, whether it's
Speaker 1: the earnings or the negative economic data, because they're hoping,
Speaker 1: believing things get better in the future. What's the test
Speaker 1: state for you? The test date for me is going
Speaker 1: to be April. And the reason I say that is
Speaker 1: we're going to kind of get out of this year
Speaker 1: ahead outlook season. We'll start to hear the early reporters,
Speaker 1: you know, kind of talk about what the full year
Speaker 1: outlook really is. And also stocks have been marching along
Speaker 1: the two thousand recovery path, and if you look back
Speaker 1: at that history, April is when you did get a
Speaker 1: pull back in the market of significant size. And we
Speaker 1: also have pointed out that about ten months into recovery
Speaker 1: trades post recession, you do typically get a big bout
Speaker 1: of consolidation, and we've seen this over the last three
Speaker 1: economic cycles. So you know that April time frame is
Speaker 1: perhaps when we will finally get that pullback a lot
Speaker 1: of people have been looking for before that LORI. Next
Speaker 1: week in Washington, d C. We're gonna be getting those
Speaker 1: hearings about what happened with game Stop and AMC and
Speaker 1: some of these other big share moves that we saw
Speaker 1: that really were attributed to retail but had a lot
Speaker 1: of other institutional players. How much does this affect your focus,
Speaker 1: which is small caps and the indexes that track these
Speaker 1: kinds of shares. I mean, how big of a concern
Speaker 1: is it that this type of activity could wildly distort
Speaker 1: both returns as well as money allocation if it persists.
Speaker 1: So it's a great question, and I have, you know,
Speaker 1: kind of two critical thoughts here is one. I don't
Speaker 1: think retail investor participation and some of the less liquid
Speaker 1: names in small cap is necessarily a bad thing. Of course,
Speaker 1: we want it done in a way that's not bringing
Speaker 1: excess at risk upon those individuals. Um But you know,
Speaker 1: I think that the door has been opened to some extent.
Speaker 1: So unless the regulators really kind of come in and
Speaker 1: close it down, and I don't think they will, you know,
Speaker 1: I think retail is probably here to stay and keep
Speaker 1: fishing in the small cap pond for a while. Second thing, though,
Speaker 1: I would tell you from an institutional community perspective. UM,
Speaker 1: there was no one more unhappy about this Reddit issue
Speaker 1: to start the year small cap value managers, and the
Speaker 1: reason why was that they did not own the kinds
Speaker 1: of names like GameStop that retail was going after, and
Speaker 1: it created big performance holes in their benchmark. If you
Speaker 1: look at the last week of January, only nine percent
Speaker 1: of small cap value managers beat their benchmark. They were
Speaker 1: not willing to go in and buy these stocks, but
Speaker 1: they were definitely curious to know if everyone else was.
Speaker 1: So this raises a really interesting question, Laurie. If it's
Speaker 1: not going away, how do they play this? Do they
Speaker 1: start following Reddit and just going along with the crowd. Well, look,
Speaker 1: I think that we have just sort of an inherent
Speaker 1: problem and active management, which is that you know, even
Speaker 1: value managers, everyone's kind of got these quality biases and
Speaker 1: has sort of veered over to the same side of
Speaker 1: the quality trade, and these kind of lower quality names
Speaker 1: UM have really kind of been ignored, you know, are
Speaker 1: sort of orphans in the market so to speed. And
Speaker 1: I think we just need to recognize that this kind
Speaker 1: of situation where everybody in the institutional community is going
Speaker 1: to sit on the same side of the boat. It
Speaker 1: is just not going to be allowed to exist. And
Speaker 1: definitely so they do need to fish more in that
Speaker 1: side of the pond. I think I've missed you until
Speaker 1: I've really missed you. What John, what she just said
Speaker 1: there is extraordinarily important. I mean, this is the act
Speaker 1: of do you buy passive small cap? Do you buy
Speaker 1: an active? It's important, Laurie, it's been a long long time.
Speaker 1: Can we do a shout out to baby Emmett? How
Speaker 1: is baby Emmett? Baby Emmett is great. He just got
Speaker 1: his first tooth and he's sleeping through the nights, so
Speaker 1: he's been baby. Did he get any bumble shares? Oh
Speaker 1: my god, no no, but my five year old did
Speaker 1: try to talk me into letting him trade some stocks. Laurie,
Speaker 1: I'm sure I'm not alone. Wall Streets missed you. Welcome back.
Speaker 1: It's going to catch up of OURBC capital markets. Just
Speaker 1: fantastic research. What we knowing for certain here team surveillance,
Speaker 1: folks on radio until elevision is a fancy guy in
Speaker 1: a fancy suit with a fancy bow tie. We'll go
Speaker 1: get a second vaccination. At eleven am this morning, the
Speaker 1: national disgrace that we have is a distribution pretty much
Speaker 1: is for the fancy people. Dwight Evans is living this
Speaker 1: in Philadelphia. He is a Democrat from Pennsylvania, where thrilled
Speaker 1: he could join us this morning. You know, Congressman Evans,
Speaker 1: and it's a disgrace the way we've distributed the vaccine.
Speaker 1: The key word here is fast. What do you need
Speaker 1: from President Biden and Congress so that we fast distribute
Speaker 1: the vaccine to all who need it. There's no question
Speaker 1: that the programs started started as a failure at this
Speaker 1: particular point. But I believe President Biden and we're working
Speaker 1: together to address those issues. There is no question as
Speaker 1: senior citizens, the essential workers, people of color are having
Speaker 1: a very difficult that I'm giving access to the program
Speaker 1: and that is wrong. So we us changed that, and
Speaker 1: I believe that we're moving in the right direction. And
Speaker 1: I think it's clear we ultimately around April should get
Speaker 1: in the right place. Tell us in the trenches of
Speaker 1: your legislation, what we're doing about educating people and particularly
Speaker 1: people that don't have an acute science background. We seem
Speaker 1: to be so far behind. How do we educate and
Speaker 1: again educate fast? Well, there's no question that you know,
Speaker 1: you know, there's no use I can talk about what
Speaker 1: has happened in the past, but we need to talk
Speaker 1: about the future. There's no question right around this particular much.
Speaker 1: It's been a year that we have faced this pandemic
Speaker 1: and this global pandemic, and it's not that we created.
Speaker 1: It's a question of how it's been managed. So we
Speaker 1: can need to point fingers that we can find a
Speaker 1: pathway to address it. I believe that the President United States,
Speaker 1: in conjunction with the House and the Senate as a partnership,
Speaker 1: does the attempt need to address this pandemic. So Congressman,
Speaker 1: let's talk about the future, and let's talk about the
Speaker 1: current stimulus plan. When you discuss with fellow Democrats what
Speaker 1: to approve, how big to go, how much? Are people
Speaker 1: talking about the political will to follow it up with
Speaker 1: an infrastructure spending bill, as Joe Biden will be talking
Speaker 1: about today in Washington, d C. Well, you go by
Speaker 1: the chairman of the Feather Reserve. You said a long
Speaker 1: time ago that we need to go big, and we
Speaker 1: need to go bold, and right now is a very
Speaker 1: appropriate time because you look at the aspect of barring.
Speaker 1: Barring is very low and very appropriate. So those tools
Speaker 1: are available. So I believe that we have to use
Speaker 1: all the tools that are available, and I believe that
Speaker 1: people are ready, they are ready for a type of change.
Speaker 1: We've gotta build it back better. So we have to
Speaker 1: crush the virus of coruss that first and foremost. Secondly,
Speaker 1: make the necessary fatigue event, reopen our schools, reinvest in
Speaker 1: our infrastructure, work with our small businesses. These are all
Speaker 1: the things that we have to do. So it's not easy,
Speaker 1: but we can do it well. But but you believe that,
Speaker 1: and a lot of people do believe that a part
Speaker 1: of the Democratic Party, but even among the Democrats, there
Speaker 1: is some disagreement about how big to go and how
Speaker 1: much to follow this up with, and the idea that
Speaker 1: Republicans are getting a little bit more concerned about the
Speaker 1: debt pile. I mean, how concerned are you that if
Speaker 1: you pass a big and bold stimulus package right now,
Speaker 1: it will withdraw any political support for getting that infrastructure
Speaker 1: spending done that you're saying is crucial. Well, I think
Speaker 1: it's important to understand that in the House, we just
Speaker 1: had a hearing uh in their Ways and Means Committee,
Speaker 1: and the chairman of the committee is very confident in
Speaker 1: terms of where we are. We understand the concerns that people,
Speaker 1: but we realize this is something we can do. We
Speaker 1: cannot afford not to do it, so we have to
Speaker 1: take that. Actually, I believe that we're in the majority
Speaker 1: in the Senate and with the houseworking together that I
Speaker 1: think that you will see a new, different day. So
Speaker 1: I'm very optimistic that we can achieve this. Joy Evans
Speaker 1: tell us the the the forward motion of the Congressional
Speaker 1: Black Caucus. It has been a four year challenge, without question,
Speaker 1: I think anybody of any political persuasion can agree on that.
Speaker 1: Tell us about the new effort by a Congressional Black
Speaker 1: Caucus in Congress. Well, you know, um Joyce Baby from
Speaker 1: Ohio is the new chairperson. Fact, she's on the Financial
Speaker 1: Service Committee. I work very closely it being on the
Speaker 1: ways and means committed. So I share with you with
Speaker 1: a leadership taking place of Karen Bass from California, that
Speaker 1: she will not miss a step. You have some very
Speaker 1: good new members, new blood, new energy, who are ready
Speaker 1: to take this challenge on. So, in spite of what
Speaker 1: a lot of people said, I believe that the Congressional
Speaker 1: Black Caucus ready for this challenge. Congressman Waved love to
Speaker 1: have you back, saying please stay close. That would be
Speaker 1: a stranger to this program. Congressman Wide Evan's that wank.
Speaker 1: Diane Swart joins from Grant Thorton. Just wonderful about calibrating
Speaker 1: the pulse of that equation. Why I will see plus
Speaker 1: I plus G plus n x, Diane Swark? Right now,
Speaker 1: the mystery to me is a persistent six five g
Speaker 1: d P and we get out into Q one, maybe
Speaker 1: into Q two, and then there's a mystery. What is
Speaker 1: your clarity on Q three and Q four of this year? Well,
Speaker 1: certainly the hope is that we see this unleashed pent
Speaker 1: up demand lift us even higher and get to the
Speaker 1: end of the year. Ours is a little bit more
Speaker 1: muted because the multipliers, we think are more muted on
Speaker 1: services coming back than they are on goods coming back.
Speaker 1: This is a very unique reset and where you do
Speaker 1: unleashed pen up demand. But how many times do you
Speaker 1: eat up out in a day? How many haircuts do
Speaker 1: you get to make up for what we lost? So
Speaker 1: it's a different kind of unleashed pen up demand. But
Speaker 1: we could easily see the strongest year since nine four.
Speaker 1: That is important as we go into two thousand twenty two.
Speaker 1: What's also important is how do we manage the virus.
Speaker 1: I mean, we're talking about not eradicating the virus, but
Speaker 1: managing it so that it's not a significant part of
Speaker 1: our everyday lives. But that process of going from eradicating
Speaker 1: her community just flipping a switch, to managing the virus
Speaker 1: is a very different economic equation as well, in terms
Speaker 1: of how fast we can ramp up all showing up
Speaker 1: at big theaters and sporting events in crowds and congregating
Speaker 1: in the way many of us would like to dance swank.
Speaker 1: We spoke with Heidi Sheerholes out of your University of
Speaker 1: Michigan the other day. She is expert, expert expert on
Speaker 1: the dearth of jobs that job GEP that we have
Speaker 1: with a aren't economy? Do we close that job? Get Yeah,
Speaker 1: it's a great question. One of the things we're really
Speaker 1: worried about it in Heidi is as well, She's great
Speaker 1: at this is the dichotomy between high wage jobs have
Speaker 1: come back and in fact, in some sectors they're reporting
Speaker 1: labor market shortages. Of course, we all know that anyone
Speaker 1: doing anything with their house right now cannot find a
Speaker 1: skilled carpenter. But beyond that, you've got in the low
Speaker 1: wage sector jobs that are being replaced by automation and digitation.
Speaker 1: Even thinking about things like the peloton and doing fitness
Speaker 1: and home that allows one person to personally train a
Speaker 1: lot of people. Reduces the cost of some of these
Speaker 1: inflation fears I think are overstated, but it also reduces
Speaker 1: some jobs that might be coming back otherwise. Also cashiers,
Speaker 1: anything that can be automated in terms of getting out
Speaker 1: of a store, not having that extra touch, and the
Speaker 1: world we manage the virus rather than just contain it.
Speaker 1: All of those things mean it's going to be even
Speaker 1: harder for some of these workers that have been displaced
Speaker 1: to come back without reskilling. And that's before we get
Speaker 1: to the last educational component of We've now got many
Speaker 1: low wage household suffering, not only our math scores suffering,
Speaker 1: which need in person care and elementary schools, but low
Speaker 1: wage household suffering dropouts not getting access to online education,
Speaker 1: and it really is exacerbating inequalities and diminishing that labor poort.
Speaker 1: Going forward, Let's pick up on that word inequality. There
Speaker 1: the structural issues. Let's talk about some of the cyclical
Speaker 1: slack this feed has been conditioned to understand. Now, Chairman
Speaker 1: pal chair yelling, now, Secretary yelling. They need to run
Speaker 1: this a whole lot longer to really reduce and eradicate
Speaker 1: any cyclical slack that is left. They learned that in
Speaker 1: the last cycle. They're applying that conditioning to this cycle.
Speaker 1: And Dan, I wonder how difficult this is going to
Speaker 1: be to calibrate, because if the Federal Reserve is committed
Speaker 1: to doing that, then as a market participant, I'm committed
Speaker 1: to allocating to risk assets as well. So how on
Speaker 1: earth do you close that gap if monetary policy is
Speaker 1: one of the tools you're using to do it. Yeah,
Speaker 1: it's really Monetary policy is such a crude tool on this,
Speaker 1: and I think fiscal policy is so much better at
Speaker 1: removing the hurdles to inequality. We're gonna need summer schools
Speaker 1: to make up for some of this inequality. We're gonna
Speaker 1: need to re engage students that have dropped out of
Speaker 1: college twice the pace they've dropped out in households earning
Speaker 1: less than seventy five thousand dollars a year. So all
Speaker 1: of that requires more fiscal policy than monetary policy, and
Speaker 1: monetary policy kind of running that, you know, sort of
Speaker 1: and you allude to it, Yes, low rates for a
Speaker 1: long time if you overshoot what you thought was full employment.
Speaker 1: And Powell has really embraced this idea to run the
Speaker 1: economy hot, to bring in more of those workers that
Speaker 1: are now most damaged, narrow that gap between the black
Speaker 1: unemployment rate and the white unemployment rate, in particular, looking
Speaker 1: at different employment to population ratios, trying to think of
Speaker 1: this much more nuanced um in terms of what is
Speaker 1: full employment. Well, that's only one tool, but that's a
Speaker 1: really crude tool. And we also know the New York
Speaker 1: Fed has done a study that in fact, you know,
Speaker 1: running the economy hot with low rates also exacerbates inequality
Speaker 1: and wealth and that's something that we have to deal
Speaker 1: with as well. So I think that's the hard part.
Speaker 1: Getting the economy hot is also still an unknown. All
Speaker 1: these people worried about inflation out there. It we could
Speaker 1: see a flare of inflation, but to have the kind
Speaker 1: of wage push inflation we saw, say in the nineteen seventies,
Speaker 1: overlaid with the opeque inflation we saw in the nineteen
Speaker 1: seventies of stag inflation back then. Research suggests that of
Speaker 1: wages in the U. S economy were tied to a
Speaker 1: cost of living increase that was well and beyond any
Speaker 1: union contracts out there. Remember my dad would come home
Speaker 1: with this extra cola increase as a GM executive back
Speaker 1: in the late seventies and be excited that he got
Speaker 1: that extra bonus in addition to his races he was getting.
Speaker 1: That's not the world we live in today, and I
Speaker 1: think people the context of inflation is very different than
Speaker 1: it once. What which brings in the fifteen dollar minimum
Speaker 1: wage debate which is being had in Washington, d c.
Speaker 1: Right whether or not to include that in the stimulus plan.
Speaker 1: A lot of people saying just take it out, it's
Speaker 1: a hot potato. The CBO, which is a nonpartisan group
Speaker 1: that took a look at this, found that it would
Speaker 1: lead to fewer jobs, but it would reduce the amount
Speaker 1: of poverty in the economy. What's your view, I mean,
Speaker 1: do you think that it would help generate the kind
Speaker 1: of income growth, boost to inflation, boost economic prosperity to
Speaker 1: raise this or would it actually harm it? Well, it
Speaker 1: really is. This is a much more nuanced debate, and
Speaker 1: one of the things I do think the evidence on
Speaker 1: minimum wage has really shifted a lot of economist views
Speaker 1: on it. It didn't destroy as many jobs over that
Speaker 1: period of time. It's almost a one for one, not
Speaker 1: quite a million people taken out a poverty, a million
Speaker 1: and a half jobs loss. If some of those jobs
Speaker 1: were no longer people working two jobs, that's a good thing.
Speaker 1: But the more nuanced view of it that I think
Speaker 1: is really important is places where you know you're trying
Speaker 1: to bring up small companies back online, small business back online.
Speaker 1: While large chain is already moving to fifteen dollars an hour,
Speaker 1: they're effectively accelerating the consolidation and diminishing the dynamism of
Speaker 1: the U. S economy and making it very hard for
Speaker 1: these smaller restaurants, smaller business, and smaller retailers to compete.
Speaker 1: And although I embrace the minimum wage and think that
Speaker 1: it can lift the fortunes of many and it is
Speaker 1: a phase in process, I think we need to think
Speaker 1: of it as much more nuanced touff, how do we
Speaker 1: help those companies that have a harder time coming back
Speaker 1: online after being just hammered by the pandemics. So in
Speaker 1: the context of where we're at. I do think it's
Speaker 1: important to talk about a minimum wage, but I also
Speaker 1: think you need to think about what kind of consolidation.
Speaker 1: What are small business is going to need to do
Speaker 1: to be able to embrace that minimum wage in a
Speaker 1: way that's most productive for the US economy, and that's
Speaker 1: much harder. We know that large chains, large fast food
Speaker 1: restaurants in particular, pass along the increases of the minimum wage,
Speaker 1: not in job cuts, but in higher prices. It's a
Speaker 1: step function. It's not something that we can't absorb or
Speaker 1: but I think we need to think about how do
Speaker 1: smaller companies that want to come back online deal with
Speaker 1: this in the areas where the minimum wages the lowest,
Speaker 1: So Diana, Given how nuanced this is and how disproportionately
Speaker 1: the big companies and the small companies have been affected
Speaker 1: by the current economic backdrop, what are you proposing? I mean,
Speaker 1: do you see a place for universal income? What is
Speaker 1: the sort of transmission mechanism to even out the playing field? Well,
Speaker 1: I think one of the transmission mechanisms we've already talked about.
Speaker 1: You know, increased cashier jobs are not going to be
Speaker 1: as necessary. We've seen restaurants move online a lot of
Speaker 1: ordering is going to be done before you even show
Speaker 1: up at the restaurant. You could imagine now, So it's
Speaker 1: going to be reduced need for weight staff in different ways,
Speaker 1: and the weight staff is going to provide different kinds
Speaker 1: of um roles. And they did pre pandemic. So there's
Speaker 1: that issue out there, and I think one of the
Speaker 1: things we still need to get to, and it gets
Speaker 1: to investment in infrastructure, but it's restorative policies. Everything from
Speaker 1: year round schooling to catch up on what we've lost.
Speaker 1: We're gonna need retrain programs. We're gonna need training programs
Speaker 1: to allow people to move up in wage group. What
Speaker 1: we've seen in the past is middle wage earners have
Speaker 1: lost their jobs and then taking a low wage job.
Speaker 1: We've seen low age job workers take another low wage
Speaker 1: job when they lost their job. Now we're talking about
Speaker 1: reducing the number of low age jobs out there, and
Speaker 1: that's something that I think we have to offset with
Speaker 1: fiscal policy that includes training, that includes more investment in
Speaker 1: community colleges, all of those kinds of things that allows
Speaker 1: people to make this transition to a higher wage and
Speaker 1: more productive wage in a world that's going to be
Speaker 1: more technologically savvy. We've been. A pandemic has been an
Speaker 1: accelerant in our embrace of technology. We've learned to use
Speaker 1: things that we're in existence that we didn't. Even my
Speaker 1: husband now knows how to use the Universal remote. That's
Speaker 1: a big Stummily, that's a big that's a really big
Speaker 1: stick accelerated, but you know, these are things. It's accelerated
Speaker 1: that shift. But also in accelerating that shifted excel a rated.
Speaker 1: You know, we now have gig workers delivering stuff to us.
Speaker 1: That's a very different kind of job than some of
Speaker 1: these low workers had. That's got even less um security
Speaker 1: on it. So I think we really need to be
Speaker 1: thinking holistically and it's going to require fiscal policy as well.
Speaker 1: Dance Swunk quite simply one of the best. Thank you,
Speaker 1: Michael Nathanson Moffa Nathanson, Senior Research Analysts on what we
Speaker 1: have wrought, what we've learned through the pandemic. Michael, you've
Speaker 1: been what I'm gonna call constructive on Disney, but you
Speaker 1: were not an uber Bowl. What surprised you about the
Speaker 1: Disney Plus? What was the lessons learned from Disney Plus? Well,
Speaker 1: I'll tell you what lessons learned Disney Plus have been
Speaker 1: the adoption hasn't much stronger in the first year than
Speaker 1: we ever imagined. And I remember a couple years ago
Speaker 1: fighting with clients about how big could be. But it's
Speaker 1: literally been a double triple what we thought it was,
Speaker 1: you know, two years ago, right, and and and it
Speaker 1: could have been the pandemic, but also could be just
Speaker 1: great execution on Disney. And I give the company a
Speaker 1: ton of credit because they took this challenge on head
Speaker 1: on and they've executed so well against it. So there's
Speaker 1: a question here of whether there's a broader lesson that
Speaker 1: perhaps there's more room to grow and there are more
Speaker 1: subscription subscription streams, uh that consumers are willing to have
Speaker 1: if we see the same kind of growth at Netflix
Speaker 1: that we now see at Disney Plus. And then some
Speaker 1: is there some takeaway, some broader takeaway about the future
Speaker 1: of streaming and the potential profitability there that's making you
Speaker 1: reassess your calls. Well, that's that's a good question. We're
Speaker 1: trying to figure out how much of the adoption of
Speaker 1: past year has been due to the pandemic. You know,
Speaker 1: I listened to you guys and earlier that Thoma has
Speaker 1: been stuck at home so often, and and the question
Speaker 1: is when we start opening up back to normal, will
Speaker 1: there be a bit of a state on on streaming adoption.
Speaker 1: But with that said, I think what we're seeing, and
Speaker 1: this is a question you guys I was asking me,
Speaker 1: is you're seeing court cutting, you know, remain really problematic.
Speaker 1: Consumers are finding surplus from court cutting, and they're taking
Speaker 1: that surplus and the's spending it on streaming services. And
Speaker 1: that's going to continue for a long time. UM. I
Speaker 1: think of anything, the rethought for us, this has been
Speaker 1: true for our Netflix work as well, has been the
Speaker 1: adoption overseas inter nationally of streaming. You know, historically there's
Speaker 1: not been a huge market for television outside the US
Speaker 1: pay TV, but this has changed things and they're more
Speaker 1: adoption overseas than we ever thought. Michael, there's a lot
Speaker 1: to unpack there. I want to pick up on one
Speaker 1: point you were talking about this idea of how much
Speaker 1: this is just due to the pandemic and how much
Speaker 1: this has longer lasting trend implications. What are the streaming
Speaker 1: services replacing if not for the cable cord that would
Speaker 1: have been their pandemic or not well, Lisa, you know,
Speaker 1: people look at consumer spending on entertainment. Clearly, not going
Speaker 1: to theaters is is a major class savings. Not not
Speaker 1: buying package media what's left of it, maybe even not
Speaker 1: going to entertainment like sports or theme parks. Right, so,
Speaker 1: if you look at consumer spending, you know, the shutdown
Speaker 1: of options out of the home, it gets created a
Speaker 1: huge surplus for consumers. Michael, we didn't have jan because
Speaker 1: we want to talk to you about sell side. The
Speaker 1: fact is Taylor Riggs is buried in a PhD course
Speaker 1: in M and A and she said, get Nathan sent
Speaker 1: on so you can give me an a plus. Let's
Speaker 1: do it, Michael. Right now, her exercises who Apple should buy?
Speaker 1: Can Apple buy Netflix? Is that? Why would Apple would
Speaker 1: that cash flow want to buy Netflix. Apple should not
Speaker 1: buy Netflix because Netflix has a radio achieved the dream.
Speaker 1: Apple should buy HBO and Warner you know, and Warner
Speaker 1: Brothers out of a T and T because that dream
Speaker 1: has not been realized. As you basically need Apples balance
Speaker 1: sheet into Apples Apple's distribution globally. Right, so you can
Speaker 1: take an asset like HBO, Max and Warner Brothers and
Speaker 1: turbocharge it and rather than pay Netflix. That upside you
Speaker 1: can create yourself. And that's what I would do if
Speaker 1: I was Apple. Culturally, can they do it? As you know, Michael,
Speaker 1: this is critical see Fox Disney. Culturally. Could Apple deal
Speaker 1: with the Hollywood of Warner HBO? Well, it's Tom's a
Speaker 1: great question. So far, questions Taylor Riggs continue, Thank you,
Speaker 1: it's so Taylor. The so far, the two of the
Speaker 1: three winners and streaming have built it themselves, right, There's
Speaker 1: been no Hollywood acquisition itself built. The issue that Apple
Speaker 1: faces is that they're they're lagging. They really are, that
Speaker 1: we are. Survey works shows them to be really in
Speaker 1: six with the seventh place right now. So they need
Speaker 1: to do something to get in the game, and I
Speaker 1: think they don't have the time to build to buy.
Speaker 1: That's what I would take. Taylor writes in to say
Speaker 1: thank you very much for that advice, and she does
Speaker 1: plan to get an A plus. There is a question though,
Speaker 1: with the cash piles and some of big text balance
Speaker 1: sheet and the idea that they all want to get
Speaker 1: into entertainment, especially the apples of the world, and now
Speaker 1: of course Amazon has already been in. It has a
Speaker 1: big footprint at what point does M and A raise
Speaker 1: concerns from an antitrust standpoint in Washington, d C. Given
Speaker 1: the current administration. That's a good question. I don't think
Speaker 1: we will see any of our companies we cover, Facebook
Speaker 1: and Google or Alphabet buying um company that close to
Speaker 1: their core business. I think of Apple buys a video
Speaker 1: company or Amazon does it would be just to to
Speaker 1: compete more broadly in video and maybe drive again consumer
Speaker 1: surplus by creating better, better products. So that doesn't worry
Speaker 1: me as much as you know, Google buying Twitter, which
Speaker 1: won't happen, or Facebook buying Pinterest, which won't happened, right,
Speaker 1: So I think they really need to stay out of
Speaker 1: their lanes, dude, to do emin at this point. Michael
Speaker 1: Nathanson brilliant, Really really appreciate it. Taylor riggsuns are loving
Speaker 1: as well. Michael Nathanson with motht Nathanson, some real smart
Speaker 1: discussion there. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keane before the podcast, you can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio,