1 00:00:02,920 --> 00:00:07,280 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,960 --> 00:00:13,840 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 3 00:00:13,920 --> 00:00:16,599 Speaker 2: weekdays at ten am Eastern on Apple, card Play and 4 00:00:16,600 --> 00:00:19,600 Speaker 2: Android Auto with the Bloomberg Business App. Listen on demand 5 00:00:19,680 --> 00:00:23,400 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 6 00:00:25,000 --> 00:00:26,720 Speaker 3: Let's get more on the jobs out of here. Jonny 7 00:00:26,760 --> 00:00:31,280 Speaker 3: Biley is chief workforced Analyst over at employ Bridge. Employbridge 8 00:00:31,280 --> 00:00:34,120 Speaker 3: is the largest industrial staffing firm in the United States. 9 00:00:34,440 --> 00:00:36,239 Speaker 3: It's great to see you Joinny. We love having you 10 00:00:36,600 --> 00:00:38,680 Speaker 3: every job day to get the perspective. What was your 11 00:00:38,680 --> 00:00:39,479 Speaker 3: take on the numbers? 12 00:00:40,680 --> 00:00:43,640 Speaker 1: Well, certainly a lot stronger than I expected to see, 13 00:00:44,560 --> 00:00:48,360 Speaker 1: as many of us were surprised by the big number. 14 00:00:48,560 --> 00:00:53,840 Speaker 1: But you know, overall, I think, just as your last guest, 15 00:00:53,920 --> 00:00:56,040 Speaker 1: Vince was saying, you know, there is a little bit 16 00:00:56,040 --> 00:01:00,240 Speaker 1: of a disconnect between the establishment survey and the household survey, 17 00:01:00,600 --> 00:01:03,880 Speaker 1: you know, so overall, looking at the job growth, you know, 18 00:01:04,120 --> 00:01:05,520 Speaker 1: again we've talked about. 19 00:01:05,280 --> 00:01:06,080 Speaker 4: This in the past. 20 00:01:06,160 --> 00:01:10,360 Speaker 1: We're seeing some strong growth, certainly coming from the healthcare sector, 21 00:01:11,000 --> 00:01:16,840 Speaker 1: the government sector, leisure and hospitality. But in this report, 22 00:01:17,000 --> 00:01:20,640 Speaker 1: we really did see that the establishment survey had many 23 00:01:20,760 --> 00:01:25,039 Speaker 1: sectors across the board adding jobs, and I was very 24 00:01:25,080 --> 00:01:28,440 Speaker 1: happy to see that the professional and business service sector 25 00:01:29,000 --> 00:01:29,399 Speaker 1: kind of. 26 00:01:29,400 --> 00:01:32,160 Speaker 4: Bounced back because that had been very weak. 27 00:01:32,240 --> 00:01:35,840 Speaker 1: So we're seeing more of those white collar professional jobs 28 00:01:35,880 --> 00:01:40,200 Speaker 1: come back, specifically in the in the technical and scientific area. 29 00:01:41,200 --> 00:01:43,679 Speaker 5: Hey, Jonny Cute, I'd love to get your thoughts on 30 00:01:43,760 --> 00:01:46,520 Speaker 5: just kind of the impact that immigration, both legal and 31 00:01:46,520 --> 00:01:49,440 Speaker 5: more importantly illegal immigration, because that's where the numbers are. 32 00:01:50,000 --> 00:01:54,760 Speaker 5: How about the immigrants are impacting the labor market? 33 00:01:56,280 --> 00:02:00,480 Speaker 1: Well, you know, certainly we're seeing immigration over you know, 34 00:02:00,480 --> 00:02:02,960 Speaker 1: if you look at even you know, the past ten 35 00:02:03,040 --> 00:02:07,480 Speaker 1: to fifteen years, we're seeing an increasing percentage of our 36 00:02:07,640 --> 00:02:12,840 Speaker 1: overall labor force, you know, from foreign born workers, and 37 00:02:12,919 --> 00:02:17,040 Speaker 1: that is projected to certainly continue and it's actually helping 38 00:02:17,639 --> 00:02:22,040 Speaker 1: the overall job market. So that of course is specific 39 00:02:22,200 --> 00:02:27,440 Speaker 1: to the documented workers. You know, if we look at 40 00:02:27,600 --> 00:02:33,120 Speaker 1: illegal immigration, you know, the government is certainly trying to 41 00:02:34,200 --> 00:02:38,000 Speaker 1: work with the different states to get people documented so 42 00:02:38,040 --> 00:02:42,040 Speaker 1: they can get to work. What we are seeing, you know, 43 00:02:42,120 --> 00:02:45,440 Speaker 1: I know, in particular in New York, you know, there's 44 00:02:45,480 --> 00:02:49,040 Speaker 1: a tremendous amount of processing for these workers to get 45 00:02:49,080 --> 00:02:52,000 Speaker 1: them documented and then to get them to work. 46 00:02:52,639 --> 00:02:54,600 Speaker 4: But they most of them will be looking. 47 00:02:54,320 --> 00:02:58,800 Speaker 1: For those lower leveled, lower level jobs that don't really 48 00:02:58,840 --> 00:03:05,120 Speaker 1: require as much much you know, skills and experience, and unfortunately, 49 00:03:05,480 --> 00:03:08,840 Speaker 1: there's not a ton of those jobs out there, so 50 00:03:08,840 --> 00:03:11,880 Speaker 1: so that could have a big impact on unemployment in 51 00:03:11,919 --> 00:03:12,440 Speaker 1: the future. 52 00:03:13,520 --> 00:03:16,320 Speaker 3: So I guess if we were to read between all 53 00:03:16,360 --> 00:03:19,800 Speaker 3: of the lines, and if you're an economist looking at 54 00:03:20,040 --> 00:03:22,520 Speaker 3: the data, what is your read like, are we as 55 00:03:22,560 --> 00:03:26,400 Speaker 3: strong as a number say some survey datas? Uh say 56 00:03:26,680 --> 00:03:29,680 Speaker 3: data say something different? What do you what do you 57 00:03:29,760 --> 00:03:31,960 Speaker 3: believe like? What's your read on the ground. 58 00:03:33,200 --> 00:03:36,440 Speaker 1: So, you know, I don't know if many people would 59 00:03:36,520 --> 00:03:40,600 Speaker 1: like my answer, but I actually think that this headline 60 00:03:40,720 --> 00:03:45,440 Speaker 1: number is a bit misleading. I don't believe the job 61 00:03:45,520 --> 00:03:51,560 Speaker 1: market is as strong as the Establishment survey is saying. 62 00:03:51,680 --> 00:03:55,440 Speaker 1: I actually think the numbers in the household survey are 63 00:03:55,840 --> 00:03:59,760 Speaker 1: a bit more accurate. You know, we are seeing unemployment 64 00:04:00,080 --> 00:04:01,640 Speaker 1: pick up for the first time. 65 00:04:02,000 --> 00:04:05,400 Speaker 4: We saw four in front of the number. We also 66 00:04:05,560 --> 00:04:06,920 Speaker 4: saw that, you. 67 00:04:06,880 --> 00:04:10,320 Speaker 1: Know, not only are we seeing unemployment go up, but 68 00:04:10,320 --> 00:04:14,280 Speaker 1: but people are leaving the labor force and opting out 69 00:04:14,400 --> 00:04:17,320 Speaker 1: of the labor force. We saw some big, you know, 70 00:04:17,400 --> 00:04:20,880 Speaker 1: big numbers there and I'm just not you know. 71 00:04:20,920 --> 00:04:22,640 Speaker 4: On the front lines, I have to tell you. 72 00:04:22,680 --> 00:04:24,960 Speaker 1: And you know employ Bridge, as you mentioned, you know, 73 00:04:25,000 --> 00:04:29,440 Speaker 1: we focus on supply chain. We are certainly seeing more 74 00:04:29,600 --> 00:04:34,640 Speaker 1: people looking for work and unfortunately there are less jobs 75 00:04:34,720 --> 00:04:37,760 Speaker 1: to place them in. So I'm not saying it's a 76 00:04:37,920 --> 00:04:41,200 Speaker 1: terrible job market. I mean, there are still jobs out there, 77 00:04:41,560 --> 00:04:46,279 Speaker 1: but it certainly is a challenging and tough job market. 78 00:04:46,520 --> 00:04:49,560 Speaker 5: How about for recent college graduates. I mean, so that's 79 00:04:49,560 --> 00:04:52,680 Speaker 5: how a year when you ask me for a friend, No, yes, 80 00:04:52,760 --> 00:04:55,360 Speaker 5: exactly asking for a friend. So how about what's that 81 00:04:55,640 --> 00:04:56,320 Speaker 5: environment look like. 82 00:04:57,200 --> 00:05:02,240 Speaker 1: Yeah, I worry about recent college graduate. There's less opportunities 83 00:05:03,160 --> 00:05:04,800 Speaker 1: for them. We're seeing that. If you look at the 84 00:05:04,839 --> 00:05:09,000 Speaker 1: overall jolts, you know, job data, we're seeing a decline. 85 00:05:09,000 --> 00:05:12,760 Speaker 1: We're down to eight million you know jobs, job openings 86 00:05:12,800 --> 00:05:17,240 Speaker 1: out there, So less opportunities for them this year even 87 00:05:17,279 --> 00:05:20,880 Speaker 1: then last year. I will say, though, if they're going 88 00:05:20,960 --> 00:05:26,080 Speaker 1: into healthcare, there's a tremendous amount of job opportunities in 89 00:05:26,120 --> 00:05:30,680 Speaker 1: the healthcare sector, all different fields, all different types of positions. 90 00:05:31,200 --> 00:05:35,400 Speaker 1: That is one of the strongest areas. So scientific healthcare 91 00:05:36,400 --> 00:05:40,000 Speaker 1: continues to remain strong. But you know, We're seeing a lot, 92 00:05:40,560 --> 00:05:46,440 Speaker 1: a lot less in the financial sector. Consulting, even software 93 00:05:47,279 --> 00:05:49,719 Speaker 1: has declined. You know that used to be such a 94 00:05:49,839 --> 00:05:52,719 Speaker 1: hot skill. It still is a hot skill, but less 95 00:05:52,839 --> 00:05:57,000 Speaker 1: jobs available today than last year or the year prior. 96 00:05:57,880 --> 00:06:01,880 Speaker 3: So based on that, what are the wages like than 97 00:06:01,920 --> 00:06:05,320 Speaker 3: in the healthcare sector, Is that need for talent or 98 00:06:05,400 --> 00:06:08,840 Speaker 3: just humans reflected in wages also, or we still look 99 00:06:08,880 --> 00:06:11,400 Speaker 3: at like eight dollars people to get paid to take 100 00:06:11,440 --> 00:06:13,000 Speaker 3: care of you in your home, which like is not 101 00:06:13,040 --> 00:06:14,599 Speaker 3: a nice proposition for anybody. 102 00:06:15,720 --> 00:06:20,800 Speaker 1: Wages have gone up significantly and almost doubled from the 103 00:06:20,880 --> 00:06:23,840 Speaker 1: number of tites that you've quoted. So yeah, we've seen 104 00:06:24,360 --> 00:06:28,960 Speaker 1: you know, certainly since the pandemic, we've seen a lot 105 00:06:29,000 --> 00:06:34,160 Speaker 1: of movement in wages across the board, all sectors, you know, logistics, manufacturing, 106 00:06:34,760 --> 00:06:36,160 Speaker 1: but particular in healthcare. 107 00:06:36,279 --> 00:06:38,839 Speaker 4: They were some of the strongest. 108 00:06:39,480 --> 00:06:44,440 Speaker 1: Wage gains in twenty one and twenty two and twenty three. 109 00:06:44,680 --> 00:06:46,400 Speaker 1: But I would say right now we're seeing a little 110 00:06:46,400 --> 00:06:51,320 Speaker 1: bit more of stabilization. I'm not expecting big wage gains 111 00:06:51,360 --> 00:06:55,320 Speaker 1: moving forward. I think you'll see it just kind of stabilize. 112 00:06:56,040 --> 00:06:58,360 Speaker 1: But the wages have improved a lot over the last 113 00:06:58,400 --> 00:06:59,360 Speaker 1: few years. 114 00:06:59,320 --> 00:07:01,840 Speaker 5: Jenny, what are your clients or corporate clients saying about 115 00:07:02,000 --> 00:07:04,600 Speaker 5: kind of their policies for work from home, hybrid all 116 00:07:04,640 --> 00:07:06,719 Speaker 5: that kind of stuff where we kind of settled out 117 00:07:06,720 --> 00:07:07,320 Speaker 5: on that whole thing. 118 00:07:08,440 --> 00:07:10,600 Speaker 1: Yeah, you know, that is such a hot topic. It's 119 00:07:10,640 --> 00:07:12,000 Speaker 1: a it's a great question. 120 00:07:13,120 --> 00:07:13,520 Speaker 4: Certainly. 121 00:07:13,560 --> 00:07:16,880 Speaker 1: There are many jobs that it's it's not an option, right, 122 00:07:17,000 --> 00:07:19,040 Speaker 1: like the logistics manufacturing. 123 00:07:19,160 --> 00:07:22,560 Speaker 3: Oh, we know, we know, don't you know. 124 00:07:22,800 --> 00:07:24,400 Speaker 4: You know, for you have to be there. 125 00:07:25,000 --> 00:07:28,920 Speaker 1: So there's many jobs that really require you to be 126 00:07:29,520 --> 00:07:34,840 Speaker 1: in the office or be on site. But employers that 127 00:07:35,800 --> 00:07:39,840 Speaker 1: you know, have kind of taken the strategy of offering 128 00:07:39,920 --> 00:07:43,920 Speaker 1: more flexibility where they can because they know that workers 129 00:07:44,000 --> 00:07:47,559 Speaker 1: want that workers want flexibility in their schedules. They don't 130 00:07:47,640 --> 00:07:51,280 Speaker 1: mind going into the office, but maybe having like a 131 00:07:51,360 --> 00:07:55,360 Speaker 1: hybrid schedule is like the best, you know, where they 132 00:07:55,560 --> 00:07:59,240 Speaker 1: still get to collaborate with their you know, co workers 133 00:08:00,560 --> 00:08:02,960 Speaker 1: and then still have some flexibility maybe to work from 134 00:08:02,960 --> 00:08:04,720 Speaker 1: home for a few days. So that's where I see 135 00:08:04,800 --> 00:08:08,920 Speaker 1: kind of the trend as these hybrid schedules. But you know, 136 00:08:08,960 --> 00:08:11,400 Speaker 1: for many people's that's not an option and you kind 137 00:08:11,400 --> 00:08:13,640 Speaker 1: of have to come back to the office. 138 00:08:13,880 --> 00:08:16,920 Speaker 3: All right, Jenny. We really appreciate you. It's such great insight. 139 00:08:17,000 --> 00:08:21,200 Speaker 3: Jenny Bailey, chief workforce Analysts at employee Bridge. Again, they 140 00:08:21,400 --> 00:08:24,400 Speaker 3: hire a lot of industrial employees, so they really have 141 00:08:24,440 --> 00:08:26,840 Speaker 3: a pulse on what's happening within the US. Thank you 142 00:08:26,920 --> 00:08:28,440 Speaker 3: so much for joining us. 143 00:08:30,080 --> 00:08:33,959 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 144 00:08:34,040 --> 00:08:37,560 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 145 00:08:37,600 --> 00:08:40,760 Speaker 2: Auto with the Bloomberg Business. You can also listen live 146 00:08:40,840 --> 00:08:44,040 Speaker 2: on Amazon Alexa from our flagship New York station Just 147 00:08:44,080 --> 00:08:46,720 Speaker 2: say Alexa playing Bloomberg eleven thirty. 148 00:08:48,160 --> 00:08:50,400 Speaker 3: I'm Alex ste alongside at Paul Sweeney. This at Bloomberg 149 00:08:50,400 --> 00:08:52,560 Speaker 3: Intelligence Radio. We bring you all the top news and 150 00:08:52,600 --> 00:08:55,880 Speaker 3: finance and business through a lens of our Bloomberg Intelligence folks. 151 00:08:55,920 --> 00:08:57,840 Speaker 3: They cover two thousand companies and one hundred and thirty 152 00:08:57,880 --> 00:09:00,280 Speaker 3: industries around the world. We want to take you outside 153 00:09:00,280 --> 00:09:02,880 Speaker 3: Bloomberg Intelligence to get the read on the market and 154 00:09:03,200 --> 00:09:04,680 Speaker 3: investment and what do you do when you have a 155 00:09:04,720 --> 00:09:07,640 Speaker 3: day like today. David Deet's a senior investment strategist at 156 00:09:07,679 --> 00:09:11,680 Speaker 3: Pepack Private and he joins us now. So clearly we're 157 00:09:11,679 --> 00:09:14,160 Speaker 3: looking at a market reaction from the jobs that now 158 00:09:14,200 --> 00:09:16,880 Speaker 3: we're looking at flat equities despite the bond sell off. 159 00:09:17,280 --> 00:09:19,400 Speaker 3: What do you think about this market right now? 160 00:09:20,800 --> 00:09:21,960 Speaker 6: Sure? So absolutely. 161 00:09:21,960 --> 00:09:26,080 Speaker 7: We saw basically a divergent jobs report, and I think 162 00:09:26,200 --> 00:09:28,640 Speaker 7: as we're looking at the market right now, is really 163 00:09:28,880 --> 00:09:32,160 Speaker 7: better for the US worker, better for stocks, and it 164 00:09:32,200 --> 00:09:35,360 Speaker 7: is for fixed income. On the positive side, of course, 165 00:09:35,640 --> 00:09:38,960 Speaker 7: more jobs are created than expected, and ultimately, as we know, 166 00:09:39,600 --> 00:09:42,520 Speaker 7: you know, seventy percent of that economy is a consumer. 167 00:09:43,360 --> 00:09:46,200 Speaker 7: Not only are more jobs being created, but we saw 168 00:09:46,240 --> 00:09:50,000 Speaker 7: a nice tickof in terms of wage growth in the 169 00:09:50,480 --> 00:09:54,200 Speaker 7: last month. Indeed, a positive science in terms of real 170 00:09:54,240 --> 00:09:57,320 Speaker 7: wage growth, and so that's all good for spending, that's 171 00:09:57,360 --> 00:10:02,480 Speaker 7: good for corporate profits. Therefore, that's better than you would 172 00:10:02,480 --> 00:10:05,320 Speaker 7: think for stocks. I think that's why stocks are shaking 173 00:10:05,360 --> 00:10:07,520 Speaker 7: off some initial weakness there. 174 00:10:07,960 --> 00:10:10,160 Speaker 6: Having said that from fixed income. 175 00:10:09,880 --> 00:10:13,120 Speaker 7: Point of view, is not a positive because, of course, 176 00:10:13,520 --> 00:10:17,880 Speaker 7: it continues the narrative that inflation is sticky. Remember, wages 177 00:10:17,920 --> 00:10:21,160 Speaker 7: are such an important part of the overall inflation picture. 178 00:10:21,840 --> 00:10:24,720 Speaker 7: This four point one percent year over year, our target 179 00:10:24,840 --> 00:10:28,000 Speaker 7: is two. So that's unacceptable if you're a fixed income creator. 180 00:10:28,040 --> 00:10:31,000 Speaker 7: That's not acceptable for the FED. And so that's why 181 00:10:31,000 --> 00:10:34,360 Speaker 7: we're seeing bond sell off, stocks get back on their feet. 182 00:10:34,760 --> 00:10:38,079 Speaker 5: David, if there's some that are suggesting that this job's 183 00:10:38,120 --> 00:10:41,120 Speaker 5: report maybe even pushes out a rate cut till next year, 184 00:10:41,640 --> 00:10:44,240 Speaker 5: If that's in fact the case, can stocks work in 185 00:10:44,280 --> 00:10:44,920 Speaker 5: that environment? 186 00:10:45,840 --> 00:10:48,240 Speaker 7: Well, so, you know, at the end of the day, 187 00:10:48,880 --> 00:10:51,960 Speaker 7: as long as interest rates or the FED doesn't hike, 188 00:10:52,240 --> 00:10:54,800 Speaker 7: I think we're all right with stocks. I mean, at 189 00:10:54,800 --> 00:10:57,240 Speaker 7: the end of the day, you're buying stocks for earnings, 190 00:10:57,400 --> 00:11:00,640 Speaker 7: and we just saw great earnings report in Q one. 191 00:11:00,920 --> 00:11:03,520 Speaker 7: At the end of the quarter, the reports came in 192 00:11:03,559 --> 00:11:06,560 Speaker 7: almost doubled in what had been expected, and we see 193 00:11:06,600 --> 00:11:10,840 Speaker 7: that trend continuing for the rest of the year. So 194 00:11:11,400 --> 00:11:13,880 Speaker 7: right now, Fed Fund Future's quite frankly saying, is a 195 00:11:13,960 --> 00:11:16,800 Speaker 7: coin toss for what we see in September. The real 196 00:11:16,840 --> 00:11:18,439 Speaker 7: debate is now we're going to get one or we're 197 00:11:18,480 --> 00:11:18,839 Speaker 7: going to. 198 00:11:18,800 --> 00:11:22,760 Speaker 6: Get two rate cuts. 199 00:11:22,880 --> 00:11:25,400 Speaker 7: You know, from an investor's point of view, we urge 200 00:11:25,400 --> 00:11:29,040 Speaker 7: our clients not to overreact to just one metric. I mean, 201 00:11:29,320 --> 00:11:31,640 Speaker 7: jobs are great, but you know, we're talking about what 202 00:11:31,760 --> 00:11:35,280 Speaker 7: happened last month in stocks, and stock investors should be 203 00:11:35,280 --> 00:11:37,920 Speaker 7: focused on what's the outlook for the next six to 204 00:11:38,000 --> 00:11:41,520 Speaker 7: twelve months, and of course when it comes time to 205 00:11:41,840 --> 00:11:44,520 Speaker 7: the FED making decisions September, we're going to have several 206 00:11:44,559 --> 00:11:48,240 Speaker 7: more months of data under our belt. From a stock investor, 207 00:11:48,600 --> 00:11:54,360 Speaker 7: the worst situation is a recession. And of course there 208 00:11:54,400 --> 00:11:57,760 Speaker 7: was really no evidence in the jobs report today to 209 00:11:57,840 --> 00:12:00,439 Speaker 7: suggest that the overall economy was weakening. 210 00:12:00,760 --> 00:12:02,920 Speaker 3: So what's your top sector pick then? Based on all 211 00:12:02,920 --> 00:12:04,800 Speaker 3: that for the six to twelves. 212 00:12:04,800 --> 00:12:09,440 Speaker 7: You know, we like everything other than those top three 213 00:12:09,520 --> 00:12:12,120 Speaker 7: stocks which we're urging our clients to lighten up on, 214 00:12:12,160 --> 00:12:15,959 Speaker 7: which would be Nvidia, Microsoft, and Apple. 215 00:12:16,400 --> 00:12:18,320 Speaker 3: And is that just evaluation call though? 216 00:12:19,920 --> 00:12:20,880 Speaker 6: Absolutely so. 217 00:12:21,160 --> 00:12:24,080 Speaker 7: Small caps of course, if you strip out two small 218 00:12:24,120 --> 00:12:26,800 Speaker 7: caps in the Wrestle two thousand, that are very much 219 00:12:27,320 --> 00:12:30,520 Speaker 7: pushed forward because the AI height Wrestle two thousand is 220 00:12:30,600 --> 00:12:33,920 Speaker 7: down for the year. Historically, if you look long term, 221 00:12:34,160 --> 00:12:39,200 Speaker 7: small stocks have outperformed large caps. Is more room to grow. 222 00:12:39,520 --> 00:12:41,839 Speaker 7: We think they're very much out of favor. We would 223 00:12:41,880 --> 00:12:45,120 Speaker 7: just go with like an ETF that takes an index 224 00:12:45,160 --> 00:12:46,679 Speaker 7: approach to the Wrestle two thousand. 225 00:12:46,840 --> 00:12:48,840 Speaker 6: We think that might be the way to go. The 226 00:12:48,880 --> 00:12:50,000 Speaker 6: only reason where all. 227 00:12:49,920 --> 00:12:53,080 Speaker 7: Bets feet off if you see a very hard landing 228 00:12:53,120 --> 00:12:54,920 Speaker 7: in the economy but you know, the fact of the 229 00:12:55,000 --> 00:12:56,199 Speaker 7: matter is we. 230 00:12:56,120 --> 00:12:58,720 Speaker 6: Have still a FED foot underneath us. 231 00:12:58,760 --> 00:13:02,160 Speaker 7: So if we still weakening, if we do see further 232 00:13:02,240 --> 00:13:05,800 Speaker 7: weakening in the economy, that Fed will rush to the rescue. 233 00:13:05,840 --> 00:13:08,679 Speaker 7: So we think that the actually the small caps might 234 00:13:08,720 --> 00:13:11,080 Speaker 7: be an area to take some of your winnings from 235 00:13:11,080 --> 00:13:14,120 Speaker 7: those mag seven put them into the smaller fraud. 236 00:13:14,480 --> 00:13:16,880 Speaker 5: Hey, David, a lot of folks are suggesting, if you 237 00:13:16,920 --> 00:13:20,080 Speaker 5: want to get some value, that perhaps international is a 238 00:13:20,120 --> 00:13:22,640 Speaker 5: way to go, less tech waiting in some of the 239 00:13:22,760 --> 00:13:28,280 Speaker 5: European indexes, for example, how do you think that internationale. 240 00:13:26,960 --> 00:13:28,400 Speaker 6: We think that makes a whole lot of sense. 241 00:13:28,440 --> 00:13:30,920 Speaker 7: The dividend yields, for example, over in the continent are 242 00:13:30,920 --> 00:13:35,360 Speaker 7: almost double what they are here, valuations are much lower. 243 00:13:35,440 --> 00:13:38,240 Speaker 7: Yet their interest rates are even lower than they are here, 244 00:13:38,360 --> 00:13:41,360 Speaker 7: and so the difference between what you get and fixed 245 00:13:41,360 --> 00:13:43,200 Speaker 7: income and what you can get in terms of earning 246 00:13:43,360 --> 00:13:46,439 Speaker 7: yields and dividends on stocks much greater. We think that's 247 00:13:46,480 --> 00:13:49,640 Speaker 7: a nice opportunity. Of course, Japan has come back to 248 00:13:49,679 --> 00:13:51,920 Speaker 7: where it was in the nineteen eighties, and of course 249 00:13:51,960 --> 00:13:54,880 Speaker 7: the real sleeper could be China, which is, you know, 250 00:13:55,000 --> 00:13:57,199 Speaker 7: at close to a four to five year low here, 251 00:13:57,240 --> 00:13:59,600 Speaker 7: but we just saw a big tick up in exports 252 00:13:59,640 --> 00:14:02,880 Speaker 7: coming from in China. Remember, China's doing almost the exact 253 00:14:02,920 --> 00:14:05,760 Speaker 7: opposite of what our fed's doing here. We have restrictive 254 00:14:05,800 --> 00:14:08,800 Speaker 7: policies at least on the monetary side. When China they're 255 00:14:08,800 --> 00:14:12,160 Speaker 7: trying to press the accelerator down to lift the economy 256 00:14:12,240 --> 00:14:16,480 Speaker 7: out of their kind of pandemic and post pandemic meles 257 00:14:16,760 --> 00:14:20,400 Speaker 7: and so I think that could be a real tail 258 00:14:20,480 --> 00:14:23,359 Speaker 7: when they're they could have some of the best technology 259 00:14:23,400 --> 00:14:25,800 Speaker 7: in the world, but their tech companies are trading at 260 00:14:25,840 --> 00:14:28,840 Speaker 7: about half the valuation of what US tech companies are 261 00:14:28,840 --> 00:14:29,200 Speaker 7: training have. 262 00:14:30,080 --> 00:14:33,760 Speaker 3: What's interesting too, You like real estate, and Moody's said 263 00:14:33,760 --> 00:14:36,680 Speaker 3: at least six US regional banks have a substantial exposure 264 00:14:36,680 --> 00:14:39,120 Speaker 3: to commercial real estate loans, and they're at risk of 265 00:14:39,160 --> 00:14:41,920 Speaker 3: having their debt ratings downgraded. What do you like in 266 00:14:41,960 --> 00:14:44,120 Speaker 3: real estate? What do you not like? And how do 267 00:14:44,120 --> 00:14:45,960 Speaker 3: you kind of avoid this kind of headline? 268 00:14:46,880 --> 00:14:47,960 Speaker 6: Yeah, absolutely so. 269 00:14:48,200 --> 00:14:50,680 Speaker 7: In terms of real estate, what we're looking at is 270 00:14:50,960 --> 00:14:55,040 Speaker 7: what has now already reflected the concerns there. So let 271 00:14:55,040 --> 00:14:57,240 Speaker 7: me give you an example by virtue of Bunstock. We 272 00:14:57,400 --> 00:15:01,280 Speaker 7: like Boston properties there they have the commercial exposure, but 273 00:15:01,320 --> 00:15:05,600 Speaker 7: they're limiting themselves to the sixth cities in America where 274 00:15:05,600 --> 00:15:06,520 Speaker 7: people still. 275 00:15:06,280 --> 00:15:07,240 Speaker 6: Want to go there. 276 00:15:07,080 --> 00:15:10,200 Speaker 7: You're in New York's Bosses, Washington's the high end, and 277 00:15:10,280 --> 00:15:12,680 Speaker 7: then they have the high end properties there. The stock 278 00:15:12,800 --> 00:15:16,600 Speaker 7: is down by two thirds of where it was, so 279 00:15:16,840 --> 00:15:20,720 Speaker 7: obviously it's reflected a lot of damage there. But because 280 00:15:20,760 --> 00:15:23,440 Speaker 7: their free cash flow has stayed strong, they have never 281 00:15:23,520 --> 00:15:25,640 Speaker 7: cut that dividend. Now you've got a six point two 282 00:15:25,680 --> 00:15:28,320 Speaker 7: percent dividend, so you know, at the end of the day, 283 00:15:28,360 --> 00:15:31,320 Speaker 7: I don't think it's everyone loves commercial real estate. No, 284 00:15:31,440 --> 00:15:33,080 Speaker 7: we'll ever go back to the office. It's going to 285 00:15:33,120 --> 00:15:35,600 Speaker 7: be somewhere in between. So we're looking at those high 286 00:15:35,720 --> 00:15:40,000 Speaker 7: quality landlords that are publicly traded where the prices have 287 00:15:40,080 --> 00:15:41,600 Speaker 7: not reflected some bad news. 288 00:15:41,760 --> 00:15:42,680 Speaker 6: And sometimes you do. 289 00:15:42,720 --> 00:15:46,080 Speaker 7: Well by buying when things aren't rosy and then writing 290 00:15:46,200 --> 00:15:48,160 Speaker 7: and then waiting for the situation to turn around. 291 00:15:49,000 --> 00:15:52,400 Speaker 5: David, how about financials? People are still I think a 292 00:15:52,440 --> 00:15:55,080 Speaker 5: little leery about some of the banks in particular. 293 00:15:56,640 --> 00:15:59,760 Speaker 7: Yes, certainly that's what we heard from Moody's. I'm not 294 00:15:59,760 --> 00:16:02,480 Speaker 7: sure new news that some of their debt is on 295 00:16:02,880 --> 00:16:06,800 Speaker 7: credit watch for weakness in terms of commercial properties. A 296 00:16:06,840 --> 00:16:09,920 Speaker 7: lot of that, of course, has been reflected in the 297 00:16:09,960 --> 00:16:10,640 Speaker 7: stock prices. 298 00:16:10,680 --> 00:16:10,880 Speaker 6: You know. 299 00:16:10,920 --> 00:16:12,960 Speaker 7: At the end of the day, I do think that 300 00:16:13,000 --> 00:16:17,080 Speaker 7: there is a strong policy coming from watching to make 301 00:16:17,120 --> 00:16:20,480 Speaker 7: sure that this banking system stays strong. Remember, that's the 302 00:16:20,560 --> 00:16:24,120 Speaker 7: lifeline for a lot of smaller businesses in main street USA. 303 00:16:24,480 --> 00:16:29,120 Speaker 7: They can't tap publicly treated markets directly, and so I 304 00:16:29,160 --> 00:16:32,880 Speaker 7: think if we want to you know, grow this economy 305 00:16:33,080 --> 00:16:36,400 Speaker 7: and keep main street employed, we're going to have to 306 00:16:36,440 --> 00:16:39,960 Speaker 7: make sure that those smaller banks get the lifelines they need. 307 00:16:40,080 --> 00:16:42,240 Speaker 7: So that's going to be one reason why, of course 308 00:16:42,240 --> 00:16:44,880 Speaker 7: the FED is going to be probably more devish than 309 00:16:45,000 --> 00:16:47,640 Speaker 7: the inflation statistics might otherwise warnt. 310 00:16:47,960 --> 00:16:50,600 Speaker 3: And just to wrap up, you also like three M. 311 00:16:50,800 --> 00:16:52,960 Speaker 3: I'm kind of obsessed with three M. There's still a 312 00:16:52,960 --> 00:16:56,760 Speaker 3: big conglomerate. They're changing CEOs and they've really just like 313 00:16:56,840 --> 00:16:59,520 Speaker 3: stuck stuck in and said, like we're not spinning stuff off. Like, yes, 314 00:16:59,560 --> 00:17:01,480 Speaker 3: they make the beck of posts as sticky stuff, but that 315 00:17:01,560 --> 00:17:04,919 Speaker 3: sticky stuff goes everywhere in the world. Why do you 316 00:17:04,920 --> 00:17:05,840 Speaker 3: like three M. 317 00:17:06,280 --> 00:17:09,760 Speaker 7: Yeah, so this echoes general electric where you have an 318 00:17:09,760 --> 00:17:13,159 Speaker 7: industrial conglomerate which is way out of favor. They have 319 00:17:13,200 --> 00:17:16,880 Speaker 7: many different divisions. They were perhaps undermanaged, and of course 320 00:17:16,920 --> 00:17:18,600 Speaker 7: they had all sorts of litigation woes. 321 00:17:18,920 --> 00:17:20,040 Speaker 6: Now they've got. 322 00:17:19,760 --> 00:17:23,000 Speaker 7: A new man in there, mister Brown, they've already spun 323 00:17:23,040 --> 00:17:26,800 Speaker 7: off one of their divisions, Selventum. The stock is trading 324 00:17:26,880 --> 00:17:29,520 Speaker 7: at a big discount to the market and way off 325 00:17:29,560 --> 00:17:32,520 Speaker 7: where it was. We think that if the US dollar 326 00:17:32,640 --> 00:17:36,520 Speaker 7: softens a little bit, because there's such a big international trader, 327 00:17:37,560 --> 00:17:38,800 Speaker 7: that will benefit them. 328 00:17:39,040 --> 00:17:41,600 Speaker 6: Of Course, you know, people talk about innovation. 329 00:17:41,880 --> 00:17:45,640 Speaker 7: Six cents of every dollar that they generate goes back 330 00:17:45,640 --> 00:17:48,280 Speaker 7: into research and development. They're coming up with all sorts 331 00:17:48,320 --> 00:17:51,000 Speaker 7: of patents. So we think that, you know, here is 332 00:17:51,040 --> 00:17:54,760 Speaker 7: a situation just like what happened in ge New management, 333 00:17:54,960 --> 00:17:59,240 Speaker 7: rationalized things, perhaps do some corporate restructuring, and you could 334 00:17:59,280 --> 00:18:01,919 Speaker 7: see a stock rice that could outpace the S and 335 00:18:01,920 --> 00:18:04,560 Speaker 7: P five hundred going forward, and of course the dividend 336 00:18:04,640 --> 00:18:06,760 Speaker 7: is still much higher than the S and P five hundred. 337 00:18:06,800 --> 00:18:08,320 Speaker 5: All right, David, thank you so much for joining us. 338 00:18:08,320 --> 00:18:10,520 Speaker 5: Always appreciate getting a few minutes of your time. David Deets, 339 00:18:10,520 --> 00:18:12,960 Speaker 5: managing principle at pe PEC Private. 340 00:18:15,359 --> 00:18:19,240 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 341 00:18:19,320 --> 00:18:22,040 Speaker 2: weekdays at ten am Eastern on Apple car Playing and 342 00:18:22,160 --> 00:18:25,000 Speaker 2: Broun Auto with the Bloomberg Business App. Listen on demand 343 00:18:25,080 --> 00:18:29,400 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 344 00:18:30,480 --> 00:18:32,240 Speaker 5: You know, folks, how much we love these big take 345 00:18:32,280 --> 00:18:36,640 Speaker 5: stories coming out of Bloomberg newsaser super in depth reported 346 00:18:36,720 --> 00:18:40,560 Speaker 5: source stories at really some key key issues out there today. 347 00:18:40,600 --> 00:18:45,120 Speaker 5: Is know a different headline Wall Street's cr the commercial 348 00:18:45,119 --> 00:18:49,560 Speaker 5: real estate COLO machine is wiping out apartment investors. I 349 00:18:49,560 --> 00:18:52,440 Speaker 5: thought that was the safe part of the real estate market. 350 00:18:52,480 --> 00:18:54,720 Speaker 5: I thought we're all just worried about office but apartments 351 00:18:54,760 --> 00:18:58,639 Speaker 5: also seeing some damage as well. One of the reporters 352 00:18:58,680 --> 00:19:00,480 Speaker 5: on that story choices here in a bloom getteract to 353 00:19:00,480 --> 00:19:04,639 Speaker 5: Broker Studio, Sam Scott's Carpenter Bond market reporter for Bloomberg News, 354 00:19:04,760 --> 00:19:07,119 Speaker 5: Scott talk to us about what's going on in the 355 00:19:07,200 --> 00:19:09,320 Speaker 5: apartment real estate market. 356 00:19:10,240 --> 00:19:15,280 Speaker 8: Hi, good to be here, Thanks very much. So here's 357 00:19:15,320 --> 00:19:22,000 Speaker 8: what's happening. You have retail investors, ordinary people with with 358 00:19:22,200 --> 00:19:24,879 Speaker 8: the little they're you know, pretty wealthy people say you've 359 00:19:24,920 --> 00:19:27,880 Speaker 8: got around one million dollars of net worth, you can 360 00:19:27,920 --> 00:19:33,280 Speaker 8: take that money, you can invest in apartments. But this 361 00:19:33,400 --> 00:19:36,159 Speaker 8: is this is risky. People don't realize how risky this 362 00:19:36,320 --> 00:19:39,240 Speaker 8: is because when you put money into apartments in the 363 00:19:39,240 --> 00:19:42,800 Speaker 8: way that they're doing, you're actually getting leveraged behind the 364 00:19:42,800 --> 00:19:48,080 Speaker 8: scenes from Wall Street in the form of loans that 365 00:19:48,160 --> 00:19:54,639 Speaker 8: are packaged into ceries, clos or collateralized loan obligations for 366 00:19:54,680 --> 00:19:57,840 Speaker 8: a long time, for years, Actually this works really well. 367 00:19:57,920 --> 00:20:00,879 Speaker 8: Retail investors will make you a lot of money. But 368 00:20:00,960 --> 00:20:07,000 Speaker 8: that was because mainly apartment values were consistently climbing and 369 00:20:07,119 --> 00:20:09,479 Speaker 8: interest rates were going down. This is very good for 370 00:20:09,600 --> 00:20:13,680 Speaker 8: commercial real estate. Then that when the Fed started raising 371 00:20:13,720 --> 00:20:19,680 Speaker 8: interest rates, it started to go badly. The loan all 372 00:20:19,800 --> 00:20:26,639 Speaker 8: the leverage meant that the retail investors were exposed to 373 00:20:26,720 --> 00:20:31,359 Speaker 8: really big losses. So we talked to a retail investor 374 00:20:32,480 --> 00:20:37,399 Speaker 8: who lives in Yakima, Washington. She invested two hundred thousand 375 00:20:37,480 --> 00:20:40,359 Speaker 8: dollars and most of that is now gone. 376 00:20:41,080 --> 00:20:46,240 Speaker 3: So what is the problem? I mean, is it specifically 377 00:20:46,359 --> 00:20:51,080 Speaker 3: rent controlled apartments, is its luxury apartments, is its mid apartments? 378 00:20:51,480 --> 00:20:53,840 Speaker 3: Where is the issue in that? 379 00:20:54,520 --> 00:20:58,760 Speaker 8: This is we're talking here about multifamily apartments. It is 380 00:20:58,840 --> 00:21:01,360 Speaker 8: not you know, maybe some of it could be recontrolled. 381 00:21:01,400 --> 00:21:06,280 Speaker 8: Mostly it's just plain old apartment complexes full of renters, 382 00:21:06,840 --> 00:21:10,760 Speaker 8: and largely in the Sun Belt as well. The issue 383 00:21:10,960 --> 00:21:16,840 Speaker 8: is that the valuations of these properties are very sensitive 384 00:21:16,840 --> 00:21:21,320 Speaker 8: to interest rates, and when interest rates started going up, 385 00:21:21,359 --> 00:21:25,800 Speaker 8: the property values started going down. And a lot of 386 00:21:25,920 --> 00:21:30,679 Speaker 8: the companies that had bought this bought these things and 387 00:21:30,800 --> 00:21:35,040 Speaker 8: into which the retail investors had contributed money, suddenly they 388 00:21:35,040 --> 00:21:40,840 Speaker 8: couldn't afford their interest payments, and in some cases they 389 00:21:40,880 --> 00:21:42,919 Speaker 8: had to sell the properties, and when they sold them, 390 00:21:42,920 --> 00:21:45,960 Speaker 8: they sold them at a really big loss. I mean, 391 00:21:46,000 --> 00:21:48,399 Speaker 8: we know that apartment values have gone down about thirty 392 00:21:48,440 --> 00:21:53,200 Speaker 8: percent since their peak, and so when they had to sell, 393 00:21:53,240 --> 00:21:57,360 Speaker 8: they were selling out these huge losses and passing those 394 00:21:57,359 --> 00:22:01,400 Speaker 8: losses onto the retail investors. A lot of what made 395 00:22:01,480 --> 00:22:05,120 Speaker 8: these investments possible in many cases is because they were 396 00:22:05,280 --> 00:22:10,760 Speaker 8: borrowing money, taking out large loans from from mainly non 397 00:22:10,840 --> 00:22:15,200 Speaker 8: bank specialists on a Wall Street, and that provided the leverage, 398 00:22:15,720 --> 00:22:18,120 Speaker 8: and that is what exposed them to these big losses. 399 00:22:18,680 --> 00:22:21,399 Speaker 5: What are the I guess the apartment owners. What did 400 00:22:21,440 --> 00:22:24,439 Speaker 5: they do? I guess when when they have some I 401 00:22:24,440 --> 00:22:27,480 Speaker 5: guess when they're in their inability to pay interest or 402 00:22:27,480 --> 00:22:30,200 Speaker 5: pay principle, they just sell these apartments to try and 403 00:22:30,240 --> 00:22:31,400 Speaker 5: kind of rate raise cash. 404 00:22:31,680 --> 00:22:36,360 Speaker 8: Sometimes they get in a cash crunch. Yeah, they have 405 00:22:36,440 --> 00:22:42,200 Speaker 8: to pay interest and they but they don't have the cash. 406 00:22:42,680 --> 00:22:45,120 Speaker 8: So what can you do. You can go to your lender, 407 00:22:45,160 --> 00:22:50,840 Speaker 8: you can try to get an extension perhaps, or you 408 00:22:50,960 --> 00:22:54,280 Speaker 8: can sell to somebody that is willing to buy it, 409 00:22:54,320 --> 00:22:58,200 Speaker 8: even if it's at a big discount. In a couple 410 00:22:58,240 --> 00:23:01,640 Speaker 8: of the cases that where we talked to the retail investor, 411 00:23:02,200 --> 00:23:05,760 Speaker 8: the property and these are properties in Texas and Arizona 412 00:23:06,320 --> 00:23:09,680 Speaker 8: had to be sold at a very big discount. It 413 00:23:10,520 --> 00:23:14,040 Speaker 8: gave the owner cash, but it was not enough cash 414 00:23:14,560 --> 00:23:17,880 Speaker 8: to repay the money that the retail investors put in. 415 00:23:18,240 --> 00:23:21,640 Speaker 8: It wasn't enough cash. It was enough cash to repay 416 00:23:21,720 --> 00:23:23,600 Speaker 8: the debt from Wallstreet. And that's the thing. The debt 417 00:23:23,720 --> 00:23:26,560 Speaker 8: has to get repaid first. So when you sell it 418 00:23:26,600 --> 00:23:28,920 Speaker 8: a discount in this way, it's enough money to repay 419 00:23:28,960 --> 00:23:32,080 Speaker 8: the debt, it's not enough money to repay the retail investors. 420 00:23:32,720 --> 00:23:35,800 Speaker 3: So how many retail investors are getting affected by this, 421 00:23:35,960 --> 00:23:38,160 Speaker 3: and what are some of the total losses that we're 422 00:23:38,200 --> 00:23:41,080 Speaker 3: looking at, and is there any recourse for them. 423 00:23:41,400 --> 00:23:44,040 Speaker 8: It's really hard to know exactly how many people are 424 00:23:44,040 --> 00:23:48,520 Speaker 8: exposed to this. But we do know that the altogether 425 00:23:48,680 --> 00:23:53,360 Speaker 8: series clos is about an eighty billion dollar universe, So 426 00:23:53,520 --> 00:23:56,240 Speaker 8: I think it's fair to say that there's dozens of 427 00:23:56,680 --> 00:24:02,480 Speaker 8: billions of dollars of weeks. You know, I'm speculating a 428 00:24:02,520 --> 00:24:05,159 Speaker 8: little bit there. We don't have great data and exactly 429 00:24:05,160 --> 00:24:07,680 Speaker 8: how many retail investors are in this thing, but it's 430 00:24:07,720 --> 00:24:13,199 Speaker 8: a lot and is there recourse Well, a lot of 431 00:24:13,240 --> 00:24:17,000 Speaker 8: retail investors are waiting right now. So in this case, 432 00:24:17,160 --> 00:24:20,720 Speaker 8: the retail investor we talked to, she was exposed to 433 00:24:20,880 --> 00:24:25,040 Speaker 8: losses because the owners sold. But there's a lot of 434 00:24:25,080 --> 00:24:27,600 Speaker 8: other retail investors out there right now who are just waiting. 435 00:24:28,480 --> 00:24:32,160 Speaker 8: They're not getting cash distributions from the investments they've made. 436 00:24:33,040 --> 00:24:36,399 Speaker 8: They know that they could face losses down the road 437 00:24:36,640 --> 00:24:41,639 Speaker 8: when the owner has to sell. That moment has not 438 00:24:41,800 --> 00:24:46,360 Speaker 8: arrived yet. It could arrive later. Also, owners could perhaps 439 00:24:46,720 --> 00:24:50,639 Speaker 8: somehow recover, Apartment values could go back up again, interest 440 00:24:50,680 --> 00:24:53,240 Speaker 8: rates could go back down. It could give them an 441 00:24:53,280 --> 00:24:55,240 Speaker 8: off ramp down the road. But there's a lot of 442 00:24:55,320 --> 00:24:58,639 Speaker 8: retail investors out there right now who are just waiting 443 00:24:59,160 --> 00:25:00,800 Speaker 8: and they don't know what's going to happen to their money. 444 00:25:00,880 --> 00:25:02,840 Speaker 5: You know, the Apartment Reached that I know are very 445 00:25:02,880 --> 00:25:05,320 Speaker 5: savvy investors. They know how to value things, they know 446 00:25:05,359 --> 00:25:07,600 Speaker 5: how to put a proper capital structure on things so 447 00:25:07,640 --> 00:25:10,080 Speaker 5: they don't get in those cash crunches. But that's not 448 00:25:10,160 --> 00:25:14,080 Speaker 5: what's necessarily happening here. Noted from your reporting here firms 449 00:25:14,119 --> 00:25:17,880 Speaker 5: known as real estate syndicators. It sounds a little dicey 450 00:25:18,119 --> 00:25:18,359 Speaker 5: to me. 451 00:25:19,040 --> 00:25:20,560 Speaker 8: Yeah, it's a real state. 452 00:25:20,280 --> 00:25:25,200 Speaker 3: Syndications syndicator, not a bad word in financial syndicator. 453 00:25:25,240 --> 00:25:28,000 Speaker 8: And when we say syndicator in the way that we 454 00:25:28,119 --> 00:25:30,760 Speaker 8: use it in the story, we're talking about typically mid 455 00:25:30,880 --> 00:25:35,520 Speaker 8: size firms that are relatively young, they weren't around before 456 00:25:35,560 --> 00:25:40,520 Speaker 8: the Great Financial Crisis. They rely heavily on social media. 457 00:25:41,160 --> 00:25:46,200 Speaker 8: They have their own podcast shows to get the word 458 00:25:46,320 --> 00:25:52,440 Speaker 8: out about their investments. They talk about how good generally 459 00:25:53,000 --> 00:25:56,960 Speaker 8: multi family investing is. They play up the stories of 460 00:25:57,680 --> 00:26:01,040 Speaker 8: investors who've made a lot of money doing this. Uh, 461 00:26:01,080 --> 00:26:02,879 Speaker 8: that's how they get the word out. And they're on 462 00:26:03,080 --> 00:26:09,520 Speaker 8: there on YouTube. You know, they're out there and they're 463 00:26:09,560 --> 00:26:13,440 Speaker 8: they're saying invested with us. And part of what makes 464 00:26:13,480 --> 00:26:15,520 Speaker 8: it possible for them to do this is there was 465 00:26:15,560 --> 00:26:19,040 Speaker 8: a change in the Jobs Act during the Obama administration 466 00:26:19,560 --> 00:26:22,560 Speaker 8: that made it more possible to market these investments in 467 00:26:22,600 --> 00:26:23,480 Speaker 8: a more public way. 468 00:26:23,640 --> 00:26:25,600 Speaker 5: All right, so that seems like a good way. We're 469 00:26:25,600 --> 00:26:27,199 Speaker 5: gonna have this stop it there due to time, but 470 00:26:27,280 --> 00:26:30,600 Speaker 5: that people read the story, the Big Take story, Yeah, story, 471 00:26:30,640 --> 00:26:32,399 Speaker 5: because you learn a lot about kind of some of 472 00:26:32,400 --> 00:26:35,280 Speaker 5: the pitfalls out there in real estate and believe or not. 473 00:26:35,320 --> 00:26:36,920 Speaker 5: Just reading this story, I was like, boy, We've seen 474 00:26:36,920 --> 00:26:39,919 Speaker 5: this time and time again in different asset classes. 475 00:26:39,640 --> 00:26:41,160 Speaker 3: Just not with social media exactly. 476 00:26:41,160 --> 00:26:43,360 Speaker 5: Scott Carpenter, thanks for joining. Scott Carpenter is a bond 477 00:26:43,400 --> 00:26:45,800 Speaker 5: up market reporter for Bloomberg News. Check out the Big 478 00:26:45,840 --> 00:26:48,000 Speaker 5: Take story Bloomberg dot com slash Big Take, or you 479 00:26:48,000 --> 00:26:50,800 Speaker 5: can go on the terminal n I space Big Take 480 00:26:50,840 --> 00:26:52,440 Speaker 5: to get the stories. 481 00:26:54,040 --> 00:26:58,600 Speaker 2: Now on Bloomberg Intelligence. You needs in Focus with Joe Maisak. 482 00:27:00,520 --> 00:27:03,600 Speaker 5: All Right, folks, Today's Munies in Focus in Munis is 483 00:27:03,600 --> 00:27:05,879 Speaker 5: brought to you by Build American Mutual. Build American Mutual 484 00:27:05,920 --> 00:27:10,040 Speaker 5: ensures US municipal bonds that finance essential American infrastructure and 485 00:27:10,040 --> 00:27:13,879 Speaker 5: provides guaranteed income to improve any portfolio. Be part of 486 00:27:13,880 --> 00:27:17,760 Speaker 5: Building America invest in BAM BAM insured bonds. 487 00:27:17,920 --> 00:27:18,560 Speaker 3: I was late on them. 488 00:27:18,600 --> 00:27:20,560 Speaker 5: Sorry little later on that. Yeah right, sorry, we'll get 489 00:27:20,680 --> 00:27:22,920 Speaker 5: more time. I mean, I thought this guy was retiring, 490 00:27:22,960 --> 00:27:25,640 Speaker 5: but we can't get rid of him. He's still here. 491 00:27:26,080 --> 00:27:29,240 Speaker 5: He's still here. He's still doing all this municipal bond stuff. 492 00:27:29,240 --> 00:27:30,960 Speaker 5: I think he did the first municipal bond way back 493 00:27:30,960 --> 00:27:34,600 Speaker 5: in the Revolutionary War. He was back there. Covernet, Joe, 494 00:27:35,119 --> 00:27:37,520 Speaker 5: you're almost done this whole minicipal bond thing. But thank 495 00:27:37,600 --> 00:27:39,960 Speaker 5: you for not leaving before we had this whole mess 496 00:27:40,440 --> 00:27:43,840 Speaker 5: with the congestion pricing. I mean, I'm sending you down 497 00:27:43,840 --> 00:27:45,560 Speaker 5: a city hall and you can just fix it. 498 00:27:45,680 --> 00:27:48,080 Speaker 6: I mean, so what is madness? 499 00:27:48,200 --> 00:27:52,199 Speaker 5: So talks about how the I guess the pause of 500 00:27:52,320 --> 00:27:56,760 Speaker 5: congestion pricing im implementation, how that's impacting the missipal bond market. 501 00:27:56,840 --> 00:28:00,159 Speaker 9: No, what a disaster. What this is just ridiculous. You 502 00:28:00,160 --> 00:28:02,439 Speaker 9: know you were supposed to this was supposed to be 503 00:28:02,480 --> 00:28:05,600 Speaker 9: gained in a couple of weeks, and you know you 504 00:28:05,600 --> 00:28:08,239 Speaker 9: would have been able to bond off of this and 505 00:28:08,720 --> 00:28:12,720 Speaker 9: help the MTA out. But Governor Hokel all of a sudden, 506 00:28:12,960 --> 00:28:17,280 Speaker 9: uh just plays politics and what a disaster, and they're 507 00:28:17,520 --> 00:28:20,280 Speaker 9: you know, the legislature now is scrambling to come up 508 00:28:20,320 --> 00:28:24,800 Speaker 9: with some sort of revenue, you know, extra revenue for 509 00:28:24,840 --> 00:28:27,879 Speaker 9: the MTA, A billion dollars which is not easy to 510 00:28:27,920 --> 00:28:31,520 Speaker 9: find in your budget. So crazy crazy, this is nuts. 511 00:28:31,760 --> 00:28:34,520 Speaker 3: Let me let me ask the question. So, how would 512 00:28:34,600 --> 00:28:39,479 Speaker 3: you have sort of packaged the bonds from the congestion pricing? 513 00:28:39,560 --> 00:28:41,400 Speaker 3: Can you just connect those dots for me? 514 00:28:41,600 --> 00:28:44,000 Speaker 9: Oh? Sure, well, you know, you get the money comes 515 00:28:44,040 --> 00:28:48,560 Speaker 9: in fifteen dollars a car, and you see how that's operating, 516 00:28:48,560 --> 00:28:50,920 Speaker 9: and you see the revenue stream come in. And the 517 00:28:50,960 --> 00:28:54,200 Speaker 9: old axiom is you show me a revenue stream, and 518 00:28:54,240 --> 00:28:55,720 Speaker 9: I'll show you a bond isshoet. 519 00:28:55,600 --> 00:28:57,160 Speaker 3: Okay, and then the bonds will be backed down the 520 00:28:57,200 --> 00:28:57,800 Speaker 3: revenue stream. 521 00:28:57,840 --> 00:29:00,400 Speaker 9: And yes, the bonds are backed by the revenue stream. 522 00:29:00,440 --> 00:29:02,600 Speaker 9: And you could you know, get a multiple of that. 523 00:29:04,000 --> 00:29:06,600 Speaker 9: So that would have been very helpful the MTA. 524 00:29:06,640 --> 00:29:08,960 Speaker 6: And you know, this is really. 525 00:29:10,120 --> 00:29:16,000 Speaker 9: Most people think a short term thing, more of like 526 00:29:16,040 --> 00:29:21,080 Speaker 9: an temporary embarrassment, if you will. And in November, after 527 00:29:21,160 --> 00:29:25,560 Speaker 9: the elections, we might we might see it return. Liam 528 00:29:25,640 --> 00:29:30,360 Speaker 9: Denning had a nice interesting column today NYC balked, but 529 00:29:30,400 --> 00:29:34,440 Speaker 9: it can still lead on congestion fee and he said 530 00:29:34,440 --> 00:29:38,240 Speaker 9: there was a decent chance the suspension gets lifted once 531 00:29:38,600 --> 00:29:41,320 Speaker 9: the elections are out of the way, and Governor Hochal 532 00:29:41,360 --> 00:29:44,680 Speaker 9: herself doesn't face voters until twenty twenty six. 533 00:29:45,240 --> 00:29:48,320 Speaker 5: So here's how the math works. As Alex was mentioning, 534 00:29:49,360 --> 00:29:52,280 Speaker 5: the MTA was planning to borrow against the one billion 535 00:29:52,360 --> 00:29:56,240 Speaker 5: dollars in yearly congestion pricing revenue to help raise fifteen 536 00:29:56,360 --> 00:29:58,960 Speaker 5: billion to upgrade subway signals and tracks and all that 537 00:29:59,000 --> 00:30:00,840 Speaker 5: kind of stuff. So that's kind of the leverage there 538 00:30:00,960 --> 00:30:01,800 Speaker 5: in terms of you know. 539 00:30:01,840 --> 00:30:03,960 Speaker 9: Oh yeah, because you know it's over time. You know, 540 00:30:04,120 --> 00:30:07,160 Speaker 9: you're not going to sell over fifteen billion in one 541 00:30:07,240 --> 00:30:11,160 Speaker 9: year obviously. But speaking of billion dollar issues, thank you 542 00:30:11,200 --> 00:30:15,000 Speaker 9: for bringing that up. We have so far this year. 543 00:30:15,080 --> 00:30:18,120 Speaker 9: You know, in the communi market, billion dollar issues are 544 00:30:18,280 --> 00:30:23,240 Speaker 9: very unusual. Okay, they're rare, And so far this year 545 00:30:24,240 --> 00:30:27,520 Speaker 9: we've had twenty five twenty five mega deals of a 546 00:30:27,560 --> 00:30:32,200 Speaker 9: billion dollars or more and the record set in twenty 547 00:30:32,240 --> 00:30:35,520 Speaker 9: twenty is twenty six for the year, so we're going 548 00:30:35,560 --> 00:30:36,880 Speaker 9: to far surpass that. 549 00:30:37,200 --> 00:30:38,840 Speaker 3: So what do you make of that, Like, what's your 550 00:30:38,840 --> 00:30:39,360 Speaker 3: read on it? 551 00:30:39,520 --> 00:30:42,520 Speaker 9: Well, you know, the analysts have been saying, you know, 552 00:30:43,400 --> 00:30:49,600 Speaker 9: inflation has driven up costs of projects, so places have 553 00:30:49,640 --> 00:30:53,960 Speaker 9: to borrow more and for in two weeks. JFK, for 554 00:30:54,040 --> 00:30:57,840 Speaker 9: the Terminal one has a one point five billion dollar 555 00:30:57,840 --> 00:31:00,400 Speaker 9: issue planned, so we might be able to make that. 556 00:31:00,520 --> 00:31:03,600 Speaker 9: We might be able to say that the record is 557 00:31:04,480 --> 00:31:05,600 Speaker 9: by the time I retire. 558 00:31:05,840 --> 00:31:10,200 Speaker 5: Okay, very good. I love the minor league stadium business 559 00:31:10,240 --> 00:31:13,680 Speaker 5: out there because munismal bond market plays a role there. Right. 560 00:31:13,800 --> 00:31:18,600 Speaker 9: Oh man, we saw two minor league stadium deals in 561 00:31:18,680 --> 00:31:21,160 Speaker 9: one week. I think you know, we probably saw two 562 00:31:21,200 --> 00:31:25,240 Speaker 9: minor league stadium deals in the last year, but we had, 563 00:31:25,360 --> 00:31:28,480 Speaker 9: you know, both in one week, and the the most 564 00:31:28,520 --> 00:31:34,240 Speaker 9: recent one was for the Spartan Burgers Spartan Burgers, and yeah, 565 00:31:34,240 --> 00:31:36,440 Speaker 9: I think you know, I had kind of an interesting 566 00:31:37,040 --> 00:31:40,640 Speaker 9: little deal and it was federally taxable, so you had 567 00:31:40,960 --> 00:31:45,040 Speaker 9: over six percent coupons on that one or six percent coupon. 568 00:31:45,240 --> 00:31:47,600 Speaker 3: Well, actually, that just me circle back for a second 569 00:31:47,640 --> 00:31:49,240 Speaker 3: to the billion dollar bonds that we've seen. You said 570 00:31:49,280 --> 00:31:51,200 Speaker 3: twenty five really go at JFK one and a half, Like, 571 00:31:51,240 --> 00:31:54,760 Speaker 3: what's the takedown for that? But what's the takedown for that? 572 00:31:54,880 --> 00:31:56,440 Speaker 3: Is there a strong demand for that stuff? 573 00:31:57,680 --> 00:32:03,560 Speaker 9: Oh? We have seen blowout demand on deals this year, 574 00:32:04,120 --> 00:32:08,600 Speaker 9: demand for tax exemption. So far we have let's see, 575 00:32:08,600 --> 00:32:10,920 Speaker 9: I think it's about two hundred and five billion dollars 576 00:32:10,760 --> 00:32:14,760 Speaker 9: have been sold so far this year and not even 577 00:32:15,040 --> 00:32:17,000 Speaker 9: you know, we're not even done with the first half. 578 00:32:17,480 --> 00:32:20,880 Speaker 9: So we could very well see in the communi market. Again, 579 00:32:21,400 --> 00:32:25,560 Speaker 9: four hundred billion dollar deals are unusual, so we're certainly 580 00:32:25,560 --> 00:32:27,400 Speaker 9: going to see an excess to that. I would imagine 581 00:32:27,400 --> 00:32:29,880 Speaker 9: I wouldn't be surprised if we saw four hundred and 582 00:32:29,920 --> 00:32:33,479 Speaker 9: fifty billion, But of course I won't be able to 583 00:32:33,560 --> 00:32:38,600 Speaker 9: defend that. Blamed for that prediction ou. 584 00:32:38,640 --> 00:32:41,520 Speaker 5: To lower mean en right by the offices that used 585 00:32:41,520 --> 00:32:45,640 Speaker 5: to be for kid or Peabody on Hanover Square, Power 586 00:32:45,840 --> 00:32:49,000 Speaker 5: Power part of Lower Manhattan. Back in the day, there 587 00:32:49,040 --> 00:32:53,880 Speaker 5: is a is a classic bar Wall Street trader banker 588 00:32:53,960 --> 00:32:55,920 Speaker 5: bar Harry's on Hanover Square. 589 00:32:56,000 --> 00:32:57,960 Speaker 3: Oh I know Harry, Yeah, yeah, I used to work 590 00:32:58,000 --> 00:32:59,320 Speaker 3: down on Wall Street big time. 591 00:33:00,320 --> 00:33:00,560 Speaker 6: Joe. 592 00:33:00,760 --> 00:33:01,880 Speaker 5: What's Harry's a hand to square? 593 00:33:01,920 --> 00:33:02,280 Speaker 2: Me to you? 594 00:33:02,680 --> 00:33:06,280 Speaker 9: Oh Man? So you know a lot of I remember 595 00:33:06,360 --> 00:33:09,360 Speaker 9: getting a lot of stories in Harry's, believe it or not, 596 00:33:09,400 --> 00:33:14,400 Speaker 9: because it was primarily a Muni bond hangout. Which seemed 597 00:33:14,400 --> 00:33:15,200 Speaker 9: to me didn't know that. 598 00:33:15,520 --> 00:33:18,240 Speaker 3: Uh, and that like mean that all the MUNI people 599 00:33:18,280 --> 00:33:20,320 Speaker 3: who like it and talk about it go and chill there. 600 00:33:20,560 --> 00:33:22,360 Speaker 9: Yeah, they would, they would go there. And of course 601 00:33:22,440 --> 00:33:26,280 Speaker 9: now it's it's it's a sort of reconfigured. But there 602 00:33:26,320 --> 00:33:29,480 Speaker 9: was this big rectangular bar in the middle of the 603 00:33:29,560 --> 00:33:35,480 Speaker 9: room and uh, be surrounded like four and five deep 604 00:33:36,200 --> 00:33:40,680 Speaker 9: smoking because you know smoking was allowed. Then you know, 605 00:33:40,800 --> 00:33:43,680 Speaker 9: you just be listening to people bark about trades they 606 00:33:43,720 --> 00:33:47,520 Speaker 9: made that day. I remember I went to an especially 607 00:33:48,520 --> 00:33:52,360 Speaker 9: long lunch and I needed a I needed to get 608 00:33:52,440 --> 00:33:57,920 Speaker 9: a preliminary official statement for a as a matter of fact, 609 00:33:58,040 --> 00:34:00,960 Speaker 9: it was a billion dollar deal for a very small 610 00:34:01,040 --> 00:34:04,640 Speaker 9: Texas community, and of course the bonds were going to 611 00:34:04,680 --> 00:34:08,239 Speaker 9: be locked away in some investment vehicle and you know, 612 00:34:08,440 --> 00:34:12,280 Speaker 9: never really used and the irs not like that idea. 613 00:34:12,360 --> 00:34:14,440 Speaker 9: But I did get that document out of such a 614 00:34:14,520 --> 00:34:16,320 Speaker 9: launch at Harry's. It hand over square. 615 00:34:16,520 --> 00:34:19,279 Speaker 3: So it's important you need that stuff. But it has 616 00:34:19,320 --> 00:34:22,040 Speaker 3: a place in the MUNI bond market too, right, like 617 00:34:22,200 --> 00:34:24,840 Speaker 3: not just hanging out and chatting like is there a 618 00:34:24,880 --> 00:34:25,600 Speaker 3: bigger MUNI. 619 00:34:26,480 --> 00:34:30,440 Speaker 9: Well, we had the we used to have two mutifact 620 00:34:30,480 --> 00:34:35,319 Speaker 9: screens there as a matter of fact, and yeah, just 621 00:34:35,880 --> 00:34:38,160 Speaker 9: it's one of those places where everyone used to go 622 00:34:38,280 --> 00:34:41,359 Speaker 9: and then just chat about how you know, what's going on? 623 00:34:41,600 --> 00:34:42,120 Speaker 3: I love that. 624 00:34:42,719 --> 00:34:45,320 Speaker 8: When's the last day, June twenty eighth. 625 00:34:45,920 --> 00:34:46,600 Speaker 3: We're getting there. 626 00:34:46,680 --> 00:34:51,360 Speaker 5: So how many years Joe's retiring? So how many years 627 00:34:51,440 --> 00:34:53,880 Speaker 5: total in covering this municipal bond space? 628 00:34:54,040 --> 00:34:54,680 Speaker 9: Forty three? 629 00:34:55,000 --> 00:34:57,480 Speaker 5: Forty three years covering the municipal bond industry. 630 00:34:58,040 --> 00:35:00,399 Speaker 9: I'm not sure who's going to challenge that. 631 00:35:00,560 --> 00:35:02,080 Speaker 5: I don't know who's going to challenge it? And how 632 00:35:02,160 --> 00:35:03,799 Speaker 5: many years doing that at. 633 00:35:03,800 --> 00:35:05,080 Speaker 9: Bloomberg twenty five? 634 00:35:05,320 --> 00:35:05,600 Speaker 7: Wow? 635 00:35:05,800 --> 00:35:09,200 Speaker 5: Okay, So what's the biggest change in meuni bond market 636 00:35:09,239 --> 00:35:17,000 Speaker 5: from when you started? Well, and it's never going anywhere, yo, No. 637 00:35:18,160 --> 00:35:24,439 Speaker 9: You know, when I started, a fifty billion dollar year 638 00:35:25,280 --> 00:35:28,600 Speaker 9: was kind of the average, and now it's you know, 639 00:35:28,880 --> 00:35:33,840 Speaker 9: nearing four hundred billion a year, and that took quite 640 00:35:33,880 --> 00:35:39,120 Speaker 9: a while to get there. It's always been a you know, 641 00:35:39,160 --> 00:35:43,520 Speaker 9: a retail oriented market, but now you have a growth 642 00:35:43,560 --> 00:35:48,640 Speaker 9: of the separately managed accounts, you know, which is individuals, 643 00:35:48,680 --> 00:35:55,040 Speaker 9: but it's very professionals. You know, a lot of professional involvement. Boy, 644 00:35:55,360 --> 00:36:00,719 Speaker 9: and gosh, the earliest things we're covering were pay to 645 00:36:00,760 --> 00:36:04,719 Speaker 9: play at the municipal bond market, and the MSRB prohibited 646 00:36:05,600 --> 00:36:09,239 Speaker 9: pay to place. Underwriters can no longer give money to 647 00:36:09,480 --> 00:36:13,400 Speaker 9: issuers from whom they're soliciting a business. I think the 648 00:36:13,520 --> 00:36:15,719 Speaker 9: treasurers were very angry about that. 649 00:36:15,960 --> 00:36:16,160 Speaker 6: Yep. 650 00:36:16,239 --> 00:36:18,279 Speaker 5: I'm sure they were, all right, Joe, guess what. 651 00:36:18,800 --> 00:36:19,239 Speaker 9: That's it. 652 00:36:19,480 --> 00:36:22,600 Speaker 5: That's it. That's it this week. It's not it because 653 00:36:22,600 --> 00:36:24,319 Speaker 5: we got till June twenty eighth with you, so we 654 00:36:24,320 --> 00:36:27,120 Speaker 5: will get you on again, no doubt about that. Mark Maker. 655 00:36:27,840 --> 00:36:30,279 Speaker 5: Note of that, Joe Myisek. He is the editor of 656 00:36:30,280 --> 00:36:33,440 Speaker 5: Bloomberg Brief to cover all the minisional bonds markets, as 657 00:36:33,440 --> 00:36:36,840 Speaker 5: he's been doing it for forty three years. Yes, forty 658 00:36:36,920 --> 00:36:40,400 Speaker 5: three years. Holy cow. 659 00:36:40,760 --> 00:36:44,640 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 660 00:36:44,719 --> 00:36:48,240 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 661 00:36:48,280 --> 00:36:51,040 Speaker 2: Otto with the Bloomberg Business Act. You can also listen 662 00:36:51,160 --> 00:36:54,280 Speaker 2: live on Amazon Alexa from our flagship New York station 663 00:36:54,640 --> 00:36:57,400 Speaker 2: Just Say Alexa playing Bloomberg eleven thirty. 664 00:36:59,200 --> 00:37:01,440 Speaker 3: It's Bloomberg and Intelligence Radio. We bring you all the 665 00:37:01,440 --> 00:37:04,200 Speaker 3: top news and finance and economics and business through our 666 00:37:04,320 --> 00:37:07,160 Speaker 3: lens of Bloomberg Intelligence analysts. They cover two thousand companies 667 00:37:07,200 --> 00:37:10,040 Speaker 3: in one hundred and thirty industries worldwide, and for the 668 00:37:10,040 --> 00:37:13,200 Speaker 3: month of June, Bloomberg Radio is committed to bringing you 669 00:37:13,400 --> 00:37:16,640 Speaker 3: segments and guests that are focused on the topic of equality. 670 00:37:16,880 --> 00:37:20,080 Speaker 3: And today we're speaking with Laura Maudi. She's CEO and 671 00:37:20,160 --> 00:37:22,880 Speaker 3: co founder of Bobby. Laura, thank you so much for 672 00:37:23,000 --> 00:37:25,920 Speaker 3: joining us. We appreciate you being on this first segment 673 00:37:26,000 --> 00:37:27,840 Speaker 3: for us this month. What is Bobby. 674 00:37:29,400 --> 00:37:34,000 Speaker 10: Bobby is an organic pasture raised infant formula company and 675 00:37:34,440 --> 00:37:37,480 Speaker 10: we are raising the bar and quality of infant formula 676 00:37:37,480 --> 00:37:39,680 Speaker 10: here in the country. 677 00:37:39,920 --> 00:37:43,200 Speaker 5: So we talked to you during what we had a 678 00:37:43,239 --> 00:37:46,719 Speaker 5: shortage of infant baby formula. Can you remind us how 679 00:37:46,760 --> 00:37:49,520 Speaker 5: that all developed and how that came about and maybe 680 00:37:49,520 --> 00:37:50,680 Speaker 5: how that impacted your business? 681 00:37:52,040 --> 00:37:54,800 Speaker 10: Well, I think we can all remember. It happened overnight. 682 00:37:54,920 --> 00:37:57,600 Speaker 10: No one saw it coming. As a country, we weren't prepared. 683 00:37:57,719 --> 00:38:00,399 Speaker 10: Bobby itself, being a small company at the time, also 684 00:38:00,520 --> 00:38:05,040 Speaker 10: wasn't prepared. One company that was feeding over fifty percent 685 00:38:05,080 --> 00:38:08,080 Speaker 10: of babies born in the country had a contamination and 686 00:38:08,120 --> 00:38:10,080 Speaker 10: they had to close their doors, and when they did, 687 00:38:10,200 --> 00:38:14,920 Speaker 10: they weren't able to meet the supply needs. Of feeding 688 00:38:14,960 --> 00:38:18,760 Speaker 10: American babies, and overnight we saw out of stock rates 689 00:38:18,800 --> 00:38:22,640 Speaker 10: climb to around seventy percent, which essentially meant that American 690 00:38:22,719 --> 00:38:26,160 Speaker 10: families were driving town to town and in some situations, 691 00:38:26,160 --> 00:38:29,000 Speaker 10: state to state where there was only a third chance 692 00:38:29,000 --> 00:38:30,680 Speaker 10: of being able to find food to feed their baby. 693 00:38:31,000 --> 00:38:33,839 Speaker 3: So, what is the problem with infant formula that you're 694 00:38:33,840 --> 00:38:34,520 Speaker 3: trying to fix. 695 00:38:36,600 --> 00:38:40,480 Speaker 10: It's pretty simple. We need to be more resilient. Let 696 00:38:40,480 --> 00:38:42,080 Speaker 10: me give you a little bit of a mother's opinion 697 00:38:42,120 --> 00:38:45,360 Speaker 10: on this as well. I think the infant formula shortage, 698 00:38:45,400 --> 00:38:48,400 Speaker 10: a moment where we were not resilient enough to be 699 00:38:48,400 --> 00:38:51,200 Speaker 10: able to feed our next generation, was actually a bit 700 00:38:51,239 --> 00:38:54,040 Speaker 10: more symbolic in many ways of what's really broken in 701 00:38:54,080 --> 00:38:58,920 Speaker 10: the country. One might argue that our entire democracy is 702 00:38:59,000 --> 00:39:01,600 Speaker 10: only as strong is our ability to be able to 703 00:39:01,640 --> 00:39:05,880 Speaker 10: feed our babies, and we were not resilient in any way. 704 00:39:06,360 --> 00:39:10,040 Speaker 10: One facility went down and the entire industry fell to 705 00:39:10,080 --> 00:39:13,360 Speaker 10: its knees. What we need to see is more manufacturers, 706 00:39:13,960 --> 00:39:17,040 Speaker 10: more manufacturers in the heartland of America where we can 707 00:39:17,239 --> 00:39:19,799 Speaker 10: ensure that there's always enough supply to be able to 708 00:39:19,800 --> 00:39:22,600 Speaker 10: feed babies. Yeah, I think the way we do that 709 00:39:22,760 --> 00:39:25,560 Speaker 10: is incentivize more domestic manufacturing. 710 00:39:25,640 --> 00:39:28,640 Speaker 3: But aside from that, Laura, with Bobby, what is the 711 00:39:28,680 --> 00:39:31,799 Speaker 3: problem that you're trying to fix with the formula that's 712 00:39:31,800 --> 00:39:35,359 Speaker 3: so entrenched in our society today. 713 00:39:36,600 --> 00:39:38,360 Speaker 10: We need to be able to look at this essential 714 00:39:38,360 --> 00:39:42,319 Speaker 10: good as not just a necessary, but a necessary that's 715 00:39:42,400 --> 00:39:45,680 Speaker 10: extremely important in the development of our next generation. The 716 00:39:45,760 --> 00:39:49,080 Speaker 10: quality of what goes into that baby bottle, the nutrition 717 00:39:49,200 --> 00:39:52,640 Speaker 10: that we're giving again our babies and the next generation 718 00:39:53,400 --> 00:39:57,480 Speaker 10: is fundamental for their growth and development, and I think 719 00:39:57,520 --> 00:39:59,920 Speaker 10: we've ignored it for far too long. For the last 720 00:40:00,080 --> 00:40:04,120 Speaker 10: few decades. The same infant formula that you yourself was 721 00:40:04,200 --> 00:40:06,960 Speaker 10: drinking as a child is probably the same infant formula 722 00:40:06,960 --> 00:40:09,839 Speaker 10: that you're now buying for your own baby. Science as 723 00:40:09,880 --> 00:40:12,959 Speaker 10: a ball a very long time ago, and in every 724 00:40:12,960 --> 00:40:15,840 Speaker 10: other industry we've seen an evolution, and I think this 725 00:40:15,960 --> 00:40:19,279 Speaker 10: might be the last remaining industry we've seen this so. 726 00:40:19,880 --> 00:40:23,000 Speaker 5: Talked about, Laurie. We need more manufacturing and more diversified 727 00:40:23,040 --> 00:40:26,680 Speaker 5: manufacturing sourcing here in the US. What are you guys 728 00:40:26,680 --> 00:40:27,400 Speaker 5: doing on that front? 729 00:40:28,840 --> 00:40:31,359 Speaker 10: Well, not only did we go out and we made 730 00:40:31,360 --> 00:40:34,120 Speaker 10: a commitment that we were going to invest one hundred 731 00:40:34,160 --> 00:40:38,640 Speaker 10: million dollars into domestic manufacturing. We bought and we have 732 00:40:38,760 --> 00:40:42,919 Speaker 10: reinvested in a facility in the heartland in Ohio, and 733 00:40:43,200 --> 00:40:45,320 Speaker 10: that facility now has the ability to be able to 734 00:40:45,360 --> 00:40:48,720 Speaker 10: feed up to fifteen percent of babies born in the country. 735 00:40:49,160 --> 00:40:51,840 Speaker 10: But on top of that, we also worked very closely 736 00:40:51,880 --> 00:40:56,080 Speaker 10: with legislators to introduce the Infant Formula Made in America 737 00:40:56,120 --> 00:40:59,719 Speaker 10: Act this last month with Congress. And what did is 738 00:40:59,800 --> 00:41:05,200 Speaker 10: said mely allows is incentivizing more players like Bobby to 739 00:41:05,239 --> 00:41:07,719 Speaker 10: be able to break into the industry. It takes a 740 00:41:07,719 --> 00:41:09,520 Speaker 10: lot of capital and a lot of time, and we 741 00:41:09,560 --> 00:41:12,040 Speaker 10: need a lot of support from government officials to make 742 00:41:12,080 --> 00:41:15,720 Speaker 10: this happen. So hopefully if this bill gets past, which 743 00:41:15,760 --> 00:41:19,440 Speaker 10: is what I believe is a very bipartisan solution to 744 00:41:19,560 --> 00:41:21,600 Speaker 10: being able to not be in another shortage again. 745 00:41:22,320 --> 00:41:25,600 Speaker 3: And how did you come up with this idea? 746 00:41:25,760 --> 00:41:26,040 Speaker 6: Like what? 747 00:41:26,440 --> 00:41:29,279 Speaker 3: Like, yeah, did you come from Wall Street? Had you 748 00:41:29,400 --> 00:41:31,719 Speaker 3: always been an advocate of this? Like where did this 749 00:41:31,760 --> 00:41:32,960 Speaker 3: all come from? 750 00:41:33,600 --> 00:41:36,040 Speaker 10: Great question? Do not come from all? Forred, I didn't 751 00:41:36,040 --> 00:41:41,440 Speaker 10: even come from CpG infant formula at all. My background 752 00:41:41,480 --> 00:41:44,799 Speaker 10: is in tech before this, at Google and at Airbnb. 753 00:41:45,520 --> 00:41:48,240 Speaker 10: I had my first daughter while I was an executive 754 00:41:48,280 --> 00:41:51,880 Speaker 10: at Airbnb, and I experienced all the ups and downs 755 00:41:51,920 --> 00:41:55,680 Speaker 10: of parenthood, and one of many being the disappointment that 756 00:41:55,719 --> 00:41:58,920 Speaker 10: I wasn't able to exclusively breastfeed her, and when I 757 00:41:59,000 --> 00:42:02,880 Speaker 10: turned to infant formula, I felt I felt a feeling 758 00:42:02,920 --> 00:42:05,680 Speaker 10: I had never experienced before, that shame and guilt that 759 00:42:05,719 --> 00:42:07,440 Speaker 10: I wasn't able to give her what I thought was 760 00:42:07,480 --> 00:42:12,160 Speaker 10: so natural. And then, as you know, a business woman, 761 00:42:12,360 --> 00:42:14,800 Speaker 10: I was staring at the back of the can, going 762 00:42:15,160 --> 00:42:18,440 Speaker 10: we can do better. And that set me on a 763 00:42:18,480 --> 00:42:23,160 Speaker 10: crazy research journey to study what was best for my 764 00:42:23,320 --> 00:42:27,080 Speaker 10: baby and I I'm here now, eight years later, and 765 00:42:27,280 --> 00:42:30,799 Speaker 10: many more children. By the way, I just said, my 766 00:42:30,840 --> 00:42:33,560 Speaker 10: fourth kid, who is happily guzzling some Bobby. 767 00:42:33,760 --> 00:42:38,320 Speaker 5: Congratulations, Lauren, Laura. What's the risk that we have another 768 00:42:38,480 --> 00:42:43,120 Speaker 5: type of you know, supply shock here to supply to disruption? 769 00:42:43,360 --> 00:42:45,480 Speaker 5: Are we any better off today than we were before? 770 00:42:48,040 --> 00:42:50,040 Speaker 10: I get sad even trying to answer that, because I 771 00:42:50,040 --> 00:42:53,160 Speaker 10: don't believe. So. It's very easy to get complacent in 772 00:42:53,200 --> 00:42:55,879 Speaker 10: these moments when shelves are stocked, But when you look 773 00:42:55,920 --> 00:42:59,040 Speaker 10: at the reason that we got here, Have we introduced 774 00:42:59,040 --> 00:43:00,000 Speaker 10: many more manufacturs? 775 00:43:00,680 --> 00:43:00,759 Speaker 7: No? 776 00:43:02,040 --> 00:43:04,880 Speaker 10: Have we been incentivizing new players to break in and 777 00:43:04,920 --> 00:43:08,719 Speaker 10: break up the concentration. No, so I believe we're still 778 00:43:08,760 --> 00:43:12,000 Speaker 10: one bacteria away from this potentially happening again. And my 779 00:43:12,120 --> 00:43:14,280 Speaker 10: big call to action is that we just don't allow 780 00:43:14,400 --> 00:43:18,680 Speaker 10: complacency seeing shelves get stocked as a way to ignore 781 00:43:18,680 --> 00:43:22,880 Speaker 10: the real solution, which is, let's get this bill passed 782 00:43:23,400 --> 00:43:25,320 Speaker 10: and more manufacturers up and running. 783 00:43:26,080 --> 00:43:29,799 Speaker 3: What is this aside from money and funding, What is 784 00:43:29,800 --> 00:43:31,560 Speaker 3: the next step after we try and get this bill 785 00:43:31,600 --> 00:43:33,680 Speaker 3: passed that you're sort of looking at right now. 786 00:43:35,160 --> 00:43:39,319 Speaker 10: You know, I think it's culture change and so taking 787 00:43:39,360 --> 00:43:44,080 Speaker 10: a hard pivot from domestic manufacturing. We need to have 788 00:43:44,280 --> 00:43:46,880 Speaker 10: the level of respect that infant formula deserves, and not 789 00:43:46,960 --> 00:43:49,160 Speaker 10: just infant formula. I mentioned it was symbolic to so 790 00:43:49,200 --> 00:43:52,200 Speaker 10: many different things. What's broken in our society is that 791 00:43:52,640 --> 00:43:55,040 Speaker 10: the same government who says that you should be exclusively 792 00:43:55,080 --> 00:43:57,480 Speaker 10: breastfeeding is also telling mothers that they need to get 793 00:43:57,480 --> 00:44:00,440 Speaker 10: back to work immediately. We need to pass paid we 794 00:44:00,480 --> 00:44:02,960 Speaker 10: need to fix childcare. We need to be able to 795 00:44:02,960 --> 00:44:07,640 Speaker 10: support parents being parents in America. And if Bobby can 796 00:44:07,719 --> 00:44:11,520 Speaker 10: have any role in changing the culture by which it 797 00:44:11,600 --> 00:44:14,120 Speaker 10: means to have a baby in this country, then we're 798 00:44:14,120 --> 00:44:14,719 Speaker 10: doing our job. 799 00:44:14,800 --> 00:44:18,160 Speaker 3: How are you doing that? Just these kind of conversations. 800 00:44:18,239 --> 00:44:20,200 Speaker 3: Is it advertising, Like, how do you do that? 801 00:44:21,160 --> 00:44:23,480 Speaker 10: Yeah? I mean it's a lot. It's a lot of activism, 802 00:44:23,520 --> 00:44:25,640 Speaker 10: and I think I think it's a word that sometimes 803 00:44:25,719 --> 00:44:29,719 Speaker 10: gets overly used, but it's it's activism and the underlying 804 00:44:29,920 --> 00:44:31,839 Speaker 10: meaning of that is action. And we're taking a lot 805 00:44:31,840 --> 00:44:36,080 Speaker 10: of action by reaching out to our customers and the 806 00:44:36,080 --> 00:44:41,319 Speaker 10: public and saying sign sign this petition to be able 807 00:44:41,360 --> 00:44:44,839 Speaker 10: to get this bill pass, raise awareness on the black 808 00:44:44,920 --> 00:44:50,400 Speaker 10: maternal mortality crisis by putting our own brand dollars behind 809 00:44:50,480 --> 00:44:56,319 Speaker 10: raising awareness on this. We've recently won a few awards 810 00:44:56,480 --> 00:44:59,840 Speaker 10: for again not just marketing infant formula, but marketing the 811 00:45:00,080 --> 00:45:04,359 Speaker 10: issues around it. And I think if more companies again 812 00:45:04,480 --> 00:45:07,319 Speaker 10: can lean into fixing the systemic issues for why they 813 00:45:07,360 --> 00:45:10,360 Speaker 10: fundamentally exist and you get to change culture. 814 00:45:10,640 --> 00:45:12,520 Speaker 3: Hey, Laura, we gotta leave it there. I really enjoyed 815 00:45:12,560 --> 00:45:14,040 Speaker 3: talking to you. I wish Bobby was around when I 816 00:45:14,080 --> 00:45:17,200 Speaker 3: had my daughter almost ten years ago. Laura Mody Maudy, 817 00:45:17,480 --> 00:45:20,359 Speaker 3: CEO and co founder of Bobby, We're going to bring 818 00:45:20,440 --> 00:45:22,960 Speaker 3: you some of these great stories over the month of June. 819 00:45:23,080 --> 00:45:25,200 Speaker 3: That was just an fascinating conversation. 820 00:45:25,360 --> 00:45:27,560 Speaker 5: Yeah, well we first, at least I was introduced to 821 00:45:27,600 --> 00:45:28,680 Speaker 5: it during the shortage experience. 822 00:45:28,800 --> 00:45:33,759 Speaker 2: Dam This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 823 00:45:33,960 --> 00:45:37,600 Speaker 2: and anywhere else you'll get your podcasts. Listen live each weekday, 824 00:45:37,760 --> 00:45:40,719 Speaker 2: ten am to noon Eastern on Bloomberg dot com, the 825 00:45:40,840 --> 00:45:44,279 Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You 826 00:45:44,320 --> 00:45:47,480 Speaker 2: can also watch us live every weekday on YouTube and 827 00:45:47,640 --> 00:45:49,280 Speaker 2: always on the Bloomberg terminal