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Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm

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Speaker 1: Bloomberg Quick Takes Tim Stanobek. We're here every day bringing

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Speaker 1: you the latest news from the world of business and finance,

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Speaker 1: plus technology, politics, economics, all partnising the power of Business

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Speaker 1: Week reporters and editors, not to mention our journalists and

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Speaker 1: analyst in more than one and twenty countries. You can

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Speaker 1: download Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot com.

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Speaker 1: You can also listen to our radio show at two

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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on

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Speaker 1: YouTube search Bloomberg Global News. Well. This story, it is

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Speaker 1: the Bloomberg Big Take. It is also one of the

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Speaker 1: most read stories on the Bloomberg Today. It's a story

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Speaker 1: that's been two years in the making about how free

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Speaker 1: checking accounts actually haven't really lived up to their name,

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Speaker 1: costing consumers ever eight billion dollars. That's real money, it

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Speaker 1: really is, and it's real profits for the companies. Jenny

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Speaker 1: Seraine is the reporter on the story. She's Finance reporter

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Speaker 1: for Bloomberg Near She's with us right now in the

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Speaker 1: Bloomberg Interactive Broker Studio. Jenny I want to repeat this

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Speaker 1: because it's it's such an astounding statistic to me. Customers

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Speaker 1: who pay overdraft fees again and the again are responsible

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Speaker 1: for over half the profits from mass market consumer checking

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Speaker 1: accounts at the biggest US lenders. I thought these companies

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Speaker 1: were trying to get rid of these fees because the

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Speaker 1: upstart banks are offering accounts without them. Yeah. I think

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Speaker 1: that's honestly sort of what drove us uh down this

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Speaker 1: line of reporting and into this story. Um, we've seen

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Speaker 1: time and time again big banks making announcements. You've got City,

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Speaker 1: You've got Capital One, you know, saying we're getting rid

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Speaker 1: of overdrive fees. Bank of America, JP, Morgan, They've all

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Speaker 1: announced something along the lines of we're distancing ourselves from

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Speaker 1: this practice. But UM, it's true for the industry as

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Speaker 1: a whole that really these fees are what allows them

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Speaker 1: to offer free checking accounts to you know, wealthier Americans

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Speaker 1: who maintain a certain balance and and um, and it's

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Speaker 1: really these fees that allow them to do that. So

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Speaker 1: UM really wanted to dive in and kind of put

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Speaker 1: a number on a lot of this stuff that we

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Speaker 1: hear so much about. And UM, it was really just

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Speaker 1: an interesting practice and diving into this data. I feel

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Speaker 1: like going to the story Jenny, and then it's like

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Speaker 1: and the gap just gets wider and why there? Yeah,

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Speaker 1: I think it's interesting because we hear so much time

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Speaker 1: and time again from these banks about UM wanting to

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Speaker 1: solve for inequities and finance wanting to do more for

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Speaker 1: UM lower income Americans, and I think this is a

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Speaker 1: really tangible way that we've seen them maybe flounder a bit,

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Speaker 1: and so I think it'll be interesting. You know, Washington

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Speaker 1: is paying really close attention to this issue, Regulators, lawmakers,

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Speaker 1: consumer advocates alike, really making a lot of noise, and

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Speaker 1: so I think we're going to see a lot of

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Speaker 1: movement here, especially in the coming months and quarters. How

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Speaker 1: much of this is about regulators making movement versus the

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Speaker 1: upstart banks that I mentioned, these so called neo banks

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Speaker 1: coming after the customers who are the ones who are overdrafting. Yeah, No,

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Speaker 1: I think it's a great point. The fin techs for

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Speaker 1: sure have a place here, and I think the banks

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Speaker 1: actually they point more often to competition being what's driving

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Speaker 1: them on this versus the you know, Senator Elizabeth Warren's

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Speaker 1: and Maxine Waters of the world. And so I think, um,

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Speaker 1: they definitely point a competition from these up starts, and

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Speaker 1: they really were the first to kind of push the thing,

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Speaker 1: push the banks on overdraft fees. UM. They also, you know,

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Speaker 1: one of the really unique things that those guys do is, UM,

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Speaker 1: instead of waiting, you know, if Bloomberg pays our our paychecks,

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Speaker 1: for instance, if they send that money on a Tuesday,

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Speaker 1: we might not get it until Friday. What a lot

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Speaker 1: of these upstarts have done is said, Okay, as soon

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Speaker 1: as we get the notification from your employer that they've

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Speaker 1: sent you your paycheck, UM, that will be in your account.

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Speaker 1: And so they're actually looking for ways to avoid the

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Speaker 1: overdraft fee ever coming. So where a lot of these

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Speaker 1: other banks are like, oh, if you if you overdrafted,

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Speaker 1: will you know, lower the fee or we'll give you

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Speaker 1: like a fifty dollar cushion, UM, these upstarts are actually saying,

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Speaker 1: you know what, no, that's not enough. Let's just like

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Speaker 1: get them their money faster. For folks living paycheck to paycheck,

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Speaker 1: that's what matters, UM. And so wait, wait not benefit

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Speaker 1: on the flow exactly exactly, um exactly. And so I

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Speaker 1: think that's where these upstarts have gotten you know, their

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Speaker 1: their nimble, they're fast and wall streets paying attention. Can

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Speaker 1: we just break it down. It's a great chart ONMA

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Speaker 1: and and just great kind of interactive I feel like, uh,

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Speaker 1: in terms of the media, that's part of this story.

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Speaker 1: But overdraft fees in terms of the biggest banks, we're

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Speaker 1: talking about one point to bill for JP Morgan, one

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Speaker 1: million for City, nine for P and C, one point

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Speaker 1: one for b of A, one point four for Wells Fargo.

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Speaker 1: I mean this is real money. Yeah, no, and a

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Speaker 1: lot of what they've announced in recent months in terms

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Speaker 1: of you know, distancing themselves for the from this practice,

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Speaker 1: that's real money too. So they are giving up revenue

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Speaker 1: here are they how much? Though? Like how much do

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Speaker 1: they get penalized by people who forfeit? Right? Our problems

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Speaker 1: are problem accounts basically. No, it's a good point. I

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Speaker 1: think what the banks like to say is there's a

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Speaker 1: cost of providing overdraft. This isn't you know, a free

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Speaker 1: service that for them, and and people do you know

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Speaker 1: overdraft and never make good on that loan essentially, and

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Speaker 1: so they have to account for that when they're setting

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Speaker 1: up these programs. Um. I think what consumer advocates say,

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Speaker 1: is you know, does it really need to be thirty dollars?

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Speaker 1: You know, does it really need to be when someone's

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Speaker 1: already literally out of money, that you're charging them thirty

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Speaker 1: dollars on top of the already tough situation they've clearly

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Speaker 1: found themselves in. Um So, I think that's going to

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Speaker 1: be a big, big piece of this. But um but,

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Speaker 1: you know, no think it is real money that they're

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Speaker 1: giving up. And I do think what will be interesting

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Speaker 1: is a lot of banks, as they move away from overdraft,

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Speaker 1: they're saying, oh, well, there's this other account we now

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Speaker 1: have that instead of charging over draft fees, it comes

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Speaker 1: with the five to ten dollar monthly fee, and so

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Speaker 1: you could just sign up for that instead. Um So,

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Speaker 1: I think we'll see a rise in those accounts. I

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Speaker 1: think a lot of consumers will say, you know what,

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Speaker 1: I don't want this, you know, privilege of overdrafting. I'm

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Speaker 1: I'm done. I just want out, and and they'll choose

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Speaker 1: to pay those monthly fees instead. Really powerful story. Lots

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Speaker 1: of examples of people who have been affected by this.

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Speaker 1: Check out the story by Jenny Seraine and others on

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Speaker 1: our finance team. Jenny's finance reporter for Bloomberg News and

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Speaker 1: Caroll another really good one to lead to read online

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Speaker 1: because great interactive elements on it, showing you know, in

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Speaker 1: terms of like padding profits and over draft fees is

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Speaker 1: a portion of non interest income. And no joke, it

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Speaker 1: took a couple of years to put this story together, yes, yeah,

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Speaker 1: and just a long one coming and just to show

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Speaker 1: the amount of reporting in time that was put into

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Speaker 1: bringing this story to life. So it is definitely a must. Rey, Jenny,

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Speaker 1: thank you. This is Bloomberg Business Week with Carol Messer

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Speaker 1: and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We've

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Speaker 1: been watching shares of coin based Global because they are

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Speaker 1: once again under pressure in today's session alone. We're looking

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Speaker 1: at the stock down right now nineteen percent, so we're

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Speaker 1: talking about I think an eighty percent or eight percent

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Speaker 1: plus decline this year. Company facing a US probe into

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Speaker 1: whether it improperly let Americans trade digital assets that should

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Speaker 1: have been registered as securities. According to those, I think

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Speaker 1: it's like about three people familiar with the matter. Yeah.

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Speaker 1: Max Chafkin is a columnist for Bloomberg Business Week. He's

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Speaker 1: also the author of the book that can try in

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Speaker 1: Peter Tiel and Silicon Valley's Pursuit of Power. He joins

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Speaker 1: us right now on the phone from Queen's. Max has

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Speaker 1: got a great column. You can read it on the

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Speaker 1: Bloomberg and at bloomberg dot com slash of Business Week,

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Speaker 1: all about what coin based has been doing. When it

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Speaker 1: comes to these you know, so called I want to

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Speaker 1: call them s coins. Okay, that's what I'm gonna call them, Carol, Max,

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Speaker 1: make us back to September. No, I'm not going to

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Speaker 1: do that. A lot of people, I think would who

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Speaker 1: don't necessarily play in the crypto space, would would recognize

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Speaker 1: coin base because they got a lot of attention almost

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Speaker 1: two years ago when the company's CEO came out in

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Speaker 1: the wake of activism by employees and supported the Black

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Speaker 1: Lives Matter movement. What happened. Yeah, So we've had two

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Speaker 1: things that have happened over the last couple of years

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Speaker 1: with coin based. As the kind of crypto markets had booms,

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Speaker 1: this company has moved kind of closer into the kind

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Speaker 1: of center of the the cultural right guys, and as they

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Speaker 1: as the company approached a direct listing last year, one

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Speaker 1: of which is that the company kind of embraced. Uh.

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Speaker 1: This is kind of like culture war thing. It. It

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Speaker 1: basically told its employees that they couldn't you know, protests

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Speaker 1: in favor of Black Lives Matter, which one a lot

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Speaker 1: of um praise from kind of you know, right wing

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Speaker 1: types um uh you know who are sort of into

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Speaker 1: that kind of thing. And at the same time, um,

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Speaker 1: the company was sort of making some some pretty significant

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Speaker 1: changes to its business to allow more of these kind

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Speaker 1: of lightly traded they're sometimes called alt coins if you

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Speaker 1: want a clean for these. These are basically, um, you know,

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Speaker 1: it's like the crypto equivalent of a penny stock. So

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Speaker 1: so some of them, you know, of course are are

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Speaker 1: are legitimate. Some of them have sort of gone nowhere. Um.

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Speaker 1: But what has happened, um over the last year or

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Speaker 1: so is that coin Base went from being you know,

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Speaker 1: kind of seen as a relatively sober minded, you know,

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Speaker 1: one of the more um, you know conservative of the

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Speaker 1: crypto and exchanges insofar as that's possible, to kind of

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Speaker 1: embracing a more um edgy, you know, confrontational pose with regulators. UM.

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Speaker 1: Part of that is this kind of like cultural component.

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Speaker 1: Part of it is listing lots and lots more of

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Speaker 1: these um alt coins UM probably most famously dozed, which

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Speaker 1: is like a joke cryptocurrency that that the company added

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Speaker 1: UM in May. So I do wonder, like I think

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Speaker 1: about this in so many different ways as I think

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Speaker 1: about going back to the tech bubble and you know,

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Speaker 1: and then there are analysts out there pumping things basically

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Speaker 1: that you know, they didn't really believe in those financials

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Speaker 1: behind closed doors. But I also think about, you know,

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Speaker 1: the crypto world, it's like this freewheeling. It feels like

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Speaker 1: to some extent like let's figure this out UM. And

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Speaker 1: then there's like, what's the responsibility of these companies to investors,

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Speaker 1: you know, in terms of what they are offering up

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Speaker 1: like you know, buy or beware? Like who's responsible at

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Speaker 1: this point? Yeah? Absolutely, Colindys has done some of that. UM.

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Speaker 1: The thing that happened to this company is that, you know,

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Speaker 1: as I said, it followed initially Coinny says a long history.

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Speaker 1: You know, it's been around I think for almost ten years,

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Speaker 1: backed by some of the biggest names in tech. UM.

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Speaker 1: What happened is that it sort of fell behind the

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Speaker 1: ball on these kind of lesser known currencies. So you

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Speaker 1: have this sort of meme stock moment happened, and and competitors,

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Speaker 1: most notably Binance uh, basically distinguished themselves by allowing a

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Speaker 1: lot more different securities or sorry, we're not I guess

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Speaker 1: we're not allowed to call them securities because because that's

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Speaker 1: kind of coin business whole position. But um uh, these

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Speaker 1: different digital assets and coin base kind of in this

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Speaker 1: frenzy to catch up, I think, basically allowed a lot

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Speaker 1: more of these things on. And that's kind of where

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Speaker 1: they find themselves today, where you have, um, you have

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Speaker 1: this Department of Justice uh arrest of a former coin

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Speaker 1: based employee who's you know, accused of basically insider trading um.

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Speaker 1: And then you have the sec saying that some of

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Speaker 1: these tokens that we're being traded are in fact unlicensed securities.

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Speaker 1: The upshot of that is that you know, the sec

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Speaker 1: is is you know, maybe suggesting or interested in the

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Speaker 1: question of whether or not coin bases operating a you know,

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Speaker 1: unlicensed security change, which would be really bad for the business,

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Speaker 1: which is why you know, we've seen the stock price

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Speaker 1: collapse today. And I guess the question is is it

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Speaker 1: a security? I mean, is it is it insider trading? Max?

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Speaker 1: Because as you know, I think back to when the

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Speaker 1: Amazon announcement happened for for Queens, Uh, there was there

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Speaker 1: were a lot of reports about Amazon employees having brought

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Speaker 1: up real estate in Queens ahead of that, and people

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Speaker 1: are saying, well, it's not really you know, insider trading

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Speaker 1: because you know, we don't look at real estate in

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Speaker 1: that way. And I'm wondering if if we're looking at

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Speaker 1: you know, all coins in that way. Well, and that's

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Speaker 1: certainly the position of coin Base, you know, they they've

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Speaker 1: put out after these these UM complaints drop the d

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Speaker 1: o J one in the SEC one. And it's important

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Speaker 1: to say that coin Base has not itself been named

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Speaker 1: in any of these complainants. You know, they're not charged,

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Speaker 1: they haven't been sued UM. And although you know Bloomberg

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Speaker 1: has reported on this, you know investigation, you know, the

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Speaker 1: SEC hasn't taken any UM formal action UM. Their position,

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Speaker 1: the company's position is that it doesn't list securities. These

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Speaker 1: things are digital assets UM and and therefore you know

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Speaker 1: it's it's in full compliance UM. There has been a

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Speaker 1: lot of ambiguity over the last a few years where

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Speaker 1: where you know, where it hasn't been clear what exactly

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Speaker 1: the ethic is going to do what you know is

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Speaker 1: a security, what isn't a security? And again we've seen

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Speaker 1: coin bas and some of these other players adopts maybe

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Speaker 1: what you might think of as um more aggressive poses.

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Speaker 1: As far as that question, I guess I was wondered too, Max, like,

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Speaker 1: if we find out that there's some internal conversations, you know,

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Speaker 1: basically to the extent of, yeah, we don't really think

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Speaker 1: this is anything, but we gotta put it on our

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Speaker 1: platform because if we don't, somebody else's, like you do

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Speaker 1: wonder like what's the responsibility of a company and its

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Speaker 1: leaders and they maybe they don't believe in something, but

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Speaker 1: at the same time they know investors are interested in it. Right,

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Speaker 1: And this has kind of been something I think has

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Speaker 1: been kind of whispered about in in crypto circles, but

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Speaker 1: maybe not said publicly until these um you know, to

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Speaker 1: build This happened last week, which is that you know,

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Speaker 1: there are a lot of assets on coin base that

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Speaker 1: are you know, pretty obscure, right, they're not. It's not

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Speaker 1: like bitcoin and ethereum. It's it's things like pot call,

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Speaker 1: which is a you know, social network for pets, right,

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Speaker 1: lightly traded um and you know you can buy it somepoinment,

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Speaker 1: and and there's a question about what when you when

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Speaker 1: you when you invest in that token, what exactly are

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Speaker 1: you doing? And I think the the kind of coin

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Speaker 1: based position, right is that you're buying a you know,

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Speaker 1: you're not buying a security. You're buying some kind of

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Speaker 1: token that's going to be useful in this company. But

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Speaker 1: I think that, you know, the reality is a lot

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Speaker 1: of people who are transacting in these digital assets are

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Speaker 1: are basically gambling, right and and and then so there's

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Speaker 1: a question about whether or not that should be regulated.

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Speaker 1: And then there's also a question of whether or not,

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Speaker 1: you know, there's even a problem with that. You know,

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Speaker 1: maybe you know people are going to take take take

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Speaker 1: these risks and and maybe it's not a problem. Maybe

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Speaker 1: there's gonna be a lot of innovation along the way.

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Speaker 1: So certainly lots for the SEC and regulators to kind

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Speaker 1: of work through. Max. When you were doing the reporting

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Speaker 1: for this column, what was the favorite alt coin that

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Speaker 1: you found? I don't want to say favorite, but you

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Speaker 1: know what was prohaps the most surprising? I mean to me,

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Speaker 1: you know, does is still and I know it's a

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Speaker 1: satiated answer, it's still the one that I keep coming

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Speaker 1: back to because it was literally founded as a joke.

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Speaker 1: I mean, you know that it was not ever meant

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Speaker 1: to be an asset, It was not ever meant to

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Speaker 1: have any um, you know, any specific utility, and it

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Speaker 1: just kind of clucked on a life of its own

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Speaker 1: thanks to Elon Musk and meet stock traders. And then

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Speaker 1: you're in a situation where this kind of otherwise pretty

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Speaker 1: sober minded company feels like it's got to offer a

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Speaker 1: mean coin to its investors. Another. Oh, Ellen, apparently haven't

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Speaker 1: heard of the steno, which is really cool in certain circles.

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Speaker 1: All Right, Max Chafkin over Bloomberg Business Week, a columnist.

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Speaker 1: This is Bloomberg. You're listening to Bloomberg Business Week with

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Speaker 1: Carol Messer and Bloomberg Quick Takes. Tim Stenovic on Bloomberg Radio.

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Speaker 1: You know the FEDS interest rate hikes, they are kind

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Speaker 1: of wearing at their welcome in the bond markets. We've

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Speaker 1: seen a measure of the yield curve that Cher J.

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Speaker 1: Palace highlighted as a recession indicator, sending out a warning message.

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Speaker 1: We're talking about the difference between rates where three month

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Speaker 1: bills are now where they will be in eight team

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Speaker 1: months that's tumbled about nine basis points in like the

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Speaker 1: biggest monthly decline in data starting in We keep watching

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Speaker 1: these relationships and what's happening, so essentially flashing warning signals

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Speaker 1: about a recession. Right, Yeah, we've seen some inversion. Right. Um,

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Speaker 1: so we know the Fed's got a bit of a

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Speaker 1: conundrum yanked down inflation with aggressive rate hikes without creating

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Speaker 1: a recession. That's not easy. Let's get into it with

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Speaker 1: Dr Stephen Skanky, chief economic advisor at keel Point, also

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Speaker 1: a former US Treasury and White House National Security Council

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Speaker 1: staff member. We love it when Steve joins us ahead

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Speaker 1: of FED meanings to give us an idea of what

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Speaker 1: to look for. Doctor Skanky, how are you. I'm doing well,

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Speaker 1: thanks to him. Thanks for having me on. It's always

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Speaker 1: great to be with you and Carol. Yeah, well it's

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Speaker 1: it's always great when you join us, um, and it

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Speaker 1: also means that you know we got we got the

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Speaker 1: FED chair coming tomorrow when you join us. So before

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Speaker 1: we get to what to watch for, I want to

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Speaker 1: go to Carol's point about recession concerns, because that's something

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Speaker 1: that we're certainly going to listen to from J. Powell.

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Speaker 1: But what are you watching right now in terms of

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Speaker 1: how you're thinking about the health of the economy. Well,

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Speaker 1: the health of the economy is actually pretty pretty good. Obviously,

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Speaker 1: growth is declining, but when you look at just some

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Speaker 1: of the fundamentals, first quarter, second quarter industrial production up

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Speaker 1: for all those five percent, a little better than six

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Speaker 1: percent respectively. Unemployment is is below where we started the year.

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Speaker 1: We've averaged more than four hundred thousand new jobs each

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Speaker 1: month since the beginning of the year. Those are all

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Speaker 1: strong indicators. You know, to be honest, if if this

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Speaker 1: is a recession, uh, it's a sort of condition that

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Speaker 1: we wouldn't mind having from time to time. I was

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Speaker 1: just gonna say, yeah, I'll take this kind of recession

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Speaker 1: going forward. I mean, but you know what exactly right? Well,

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Speaker 1: but Steve, you know what's crazy? Like Tim and I

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Speaker 1: scratch your head. And we do this with our TV

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Speaker 1: colleagues when we talk about the markets and kind of

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Speaker 1: the contrasting views about what's going on, it just feels conflicting.

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Speaker 1: Whether it's Walmart talking to on their numbers, or McDonald's

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Speaker 1: able to pass higher prices along or UNI leave are

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Speaker 1: being able to pass higher prices along, and you know,

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Speaker 1: consider sentiment and confidence numbers coming down. I'm not quite

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Speaker 1: sure how to read. Is it just the reset of

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Speaker 1: our world post pandemic, although the pandemic isn't over. Is

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Speaker 1: that what's going on and that's why it's so weird.

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Speaker 1: I think that's a good part of it, Carol, I

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Speaker 1: think you've just sort of put your finger right on

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Speaker 1: the nose of it. Um. Concers are you know, all

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Speaker 1: of the confidence and sentiment servation that they're just glump

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Speaker 1: and get their balance sheets are stronger than ever, they

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Speaker 1: continue to spend their outlook for inflation six and twelve

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Speaker 1: months out continues to come down. All positive indicators. But

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Speaker 1: when you look at what we've had well over the

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Speaker 1: last twelve and a half years, but even just over

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Speaker 1: the last three years, uh eighteen percent, thirty percent And

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Speaker 1: if so, if you've been looking at your four old

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Speaker 1: one K over the last three years, being down twenty

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Speaker 1: three and a half percent by mid July is is

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Speaker 1: a real joke. Um, it just feels awful. H Many

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Speaker 1: people have even compared it to being worse than the

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Speaker 1: financial crisis that we had in two thousand and eight,

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Speaker 1: two thousand and nine, when in unemployment with double digit

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Speaker 1: just all that doesn't make sense to sing, right, I mean,

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Speaker 1: think about where we were just over two years ago.

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Speaker 1: I mean we had what an spirol that in one

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Speaker 1: was up twenty close for the year, and we knew

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Speaker 1: that that was mega performance, Yes it was, but we

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Speaker 1: got it again in we got in one. We got

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Speaker 1: it in twenty nineteen, right, and even in which was

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Speaker 1: weird because of the shutdown from the pandemic, the sp

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Speaker 1: was still up eighteen percent for the year. So we're

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Speaker 1: gonna watch a couple of you know, it's an interesting

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Speaker 1: week where we obviously have the FED meeting UM steve

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Speaker 1: this week, and that's obviously their focus tomorrow. But then

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Speaker 1: after that FED meeting, we're going to get a reading

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Speaker 1: on second quarter GDP the first right, and UM, we're

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Speaker 1: concerned about you know what that might tell us about

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Speaker 1: recession not recession. We're going to get the PC eight

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Speaker 1: PC cores, which are also key. Uh. Someone also talked

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Speaker 1: about employment cost index. That's going to be really key

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Speaker 1: whether we're continuing to see wage pressure. I guess what

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Speaker 1: should we really be focusing on to give us a

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Speaker 1: true indication of kind of where this economy is headed.

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Speaker 1: The numbers coming down on Thursday would be really instructive

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Speaker 1: because we'll we'll see what the components of GDP growth

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Speaker 1: are for the second quarter. UH. And A and a

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Speaker 1: big interest is where we ended up with net exports.

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Speaker 1: That that's just the big swing here. UH. The the

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Speaker 1: Atlanta GDP now is is still showing down one and

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Speaker 1: a half one point six percent for the second quarter

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Speaker 1: analyzed rate. But when you when you go through and

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Speaker 1: you you calculate sort of from the bottom up with

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Speaker 1: what consumers are doing, business investment which is negative, government

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Speaker 1: which is is neutral, and then you come to net exports,

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Speaker 1: and the best estimate is that net exports are are

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Speaker 1: up between one and one point two percent, And if

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Speaker 1: that turns out to be the case, then you're going

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Speaker 1: to have positive second quarter growth. But if there's something

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Speaker 1: that really is different about that, and in fact we

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Speaker 1: do end up with a negative number, it will be

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Speaker 1: really important to figure out why is that is that?

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Speaker 1: Because that's an indicators Why is that such an important one? Well,

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Speaker 1: because uh, COVID, the shutdown and supply change, the belief

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Speaker 1: that my chains are improving, we'll all be reflected in

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Speaker 1: what the actual numbers are a lot of this is

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Speaker 1: UH information the flag that's not real time, So give

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Speaker 1: end up a negative GDP growth number. The important thing

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Speaker 1: is to figure out what, Okay, what happened here is

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Speaker 1: the problem the economy that's that's giving us that number?

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Speaker 1: What what was it? What was it? Something crazy? And

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Speaker 1: inventories that's happened as a result of better supply chain

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Speaker 1: deliveries from China. So it'll to be honest, it will

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Speaker 1: really be in the in the weeds, UH to figure

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Speaker 1: out what's going to have upen because whatever the top

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Speaker 1: line number, that's that's what the markets and the policy

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Speaker 1: makers and the general clobe will go with. I think

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Speaker 1: it's really important to keep mind think the FED raises

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Speaker 1: by quarters of the set, which I think everyone believes

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Speaker 1: that they will. That puts US now at the neutral

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Speaker 1: rate of interest, which is J Powell said in UH

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Speaker 1: in his fresh conference after the last meeting, I want

428
00:22:30,920 --> 00:22:34,080
Speaker 1: to move to the new porative interests at which the

429
00:22:34,200 --> 00:22:38,160
Speaker 1: pet's policy is neither a commendative nor restrictive, because from

430
00:22:38,240 --> 00:22:42,399
Speaker 1: that point forward, any increase in interest rates puts US

431
00:22:42,440 --> 00:22:45,960
Speaker 1: in restrictive territory. And so what is the narrative that

432
00:22:46,080 --> 00:22:49,240
Speaker 1: the FED is going to about what they're gonna do next?

433
00:22:49,880 --> 00:22:52,280
Speaker 1: Is it too okay, we've arrived at a new rate

434
00:22:52,280 --> 00:22:54,480
Speaker 1: of interests, now we're going to wait to see or

435
00:22:54,680 --> 00:22:57,240
Speaker 1: is it you really need to do more of this

436
00:22:57,359 --> 00:23:01,240
Speaker 1: to move into restrictive charactory which talking to Dr Stephen Skanky,

437
00:23:01,320 --> 00:23:04,560
Speaker 1: chief economic advisor at keel Point, also former US Treasury

438
00:23:04,600 --> 00:23:07,879
Speaker 1: and White House National Security Council staff member, Doctor Skinky,

439
00:23:08,160 --> 00:23:10,879
Speaker 1: if you could ask the FED chair one question tomorrow,

440
00:23:10,960 --> 00:23:17,760
Speaker 1: what would it be? Um, it would be how much

441
00:23:17,840 --> 00:23:20,359
Speaker 1: do you think they need to raise interest rates to

442
00:23:21,320 --> 00:23:27,720
Speaker 1: uh squeeze out inflation this year? And then uh that

443
00:23:27,840 --> 00:23:29,720
Speaker 1: that would be the question. I'd also want to know

444
00:23:30,200 --> 00:23:33,040
Speaker 1: where are they going to start? Which the markets general?

445
00:23:33,160 --> 00:23:35,280
Speaker 1: Are they to? What is going to happen beginning to

446
00:23:36,320 --> 00:23:37,679
Speaker 1: when did you say when they're they're gonna when are

447
00:23:37,720 --> 00:23:42,280
Speaker 1: they gonna stop? What? What? What? What are the how

448
00:23:42,359 --> 00:23:44,159
Speaker 1: much are they going to racist? And then where are

449
00:23:44,240 --> 00:23:50,880
Speaker 1: they going to start? Right? General belief that will happen

450
00:23:51,000 --> 00:23:57,320
Speaker 1: sometime in just because of the overshoot on the restrictive side, Uh,

451
00:23:57,760 --> 00:24:01,840
Speaker 1: that may happen to squeeze Yeah, I'm gonna say, is

452
00:24:01,880 --> 00:24:05,560
Speaker 1: the tone I feel like the negative tone. The drum beat,

453
00:24:05,640 --> 00:24:07,560
Speaker 1: to me feels a lot stronger than it has in

454
00:24:07,640 --> 00:24:10,919
Speaker 1: a while. Um, So, I feel like it's not too

455
00:24:11,000 --> 00:24:13,359
Speaker 1: early to to think about the FED stopping or when

456
00:24:13,400 --> 00:24:15,080
Speaker 1: it starts to come. We're starting to hear that a lot.

457
00:24:15,119 --> 00:24:19,400
Speaker 1: I mean, Vince Cignarella talking about that for weeks. Yeah, exactly. Um, Steve,

458
00:24:19,480 --> 00:24:22,400
Speaker 1: thank you so much. Dr Steven Skanky, chief economic advisor

459
00:24:22,480 --> 00:24:24,320
Speaker 1: at kill Point, former U S. Treasury and White House

460
00:24:24,400 --> 00:24:34,320
Speaker 1: National Security Council staff member. I'm journal now, but you

461
00:24:34,400 --> 00:24:39,600
Speaker 1: let me drive, no, no, no, please, I'll do the

462
00:24:39,640 --> 00:24:45,640
Speaker 1: bride gravels. I want to drive. It's a good question.

463
00:24:50,400 --> 00:24:57,280
Speaker 1: Ride to the clothes on radio TikTok, everybody. Just about

464
00:24:57,760 --> 00:25:01,080
Speaker 1: twelve eleven minutes left today's trading the session. We're bouncing around,

465
00:25:01,119 --> 00:25:02,960
Speaker 1: but we are just off our loads of the session,

466
00:25:03,080 --> 00:25:05,280
Speaker 1: really taking out the chin is uh the now Zack

467
00:25:05,320 --> 00:25:07,520
Speaker 1: which is down more than two percent, Charlie talking about that,

468
00:25:07,640 --> 00:25:10,399
Speaker 1: and we are getting ready for some big tech results,

469
00:25:10,440 --> 00:25:13,280
Speaker 1: and we're talking about the parent of Google Alphabet as

470
00:25:13,320 --> 00:25:15,880
Speaker 1: well as Microsoft, both of those names. Microsoft down about

471
00:25:15,920 --> 00:25:17,920
Speaker 1: three percent. Ahead of that, Google's down about two point

472
00:25:17,960 --> 00:25:21,200
Speaker 1: six percent, Carol. We also got Chipole, which is just

473
00:25:21,320 --> 00:25:24,280
Speaker 1: a little bit lower. We'll see a food prices margins, like,

474
00:25:24,520 --> 00:25:26,359
Speaker 1: how are they doing point right? And how are they

475
00:25:26,400 --> 00:25:28,359
Speaker 1: doing in terms of demand. Let's get into it with

476
00:25:28,440 --> 00:25:31,760
Speaker 1: Bill Page, senior portfolio manager at Essex Investment Management, and

477
00:25:31,800 --> 00:25:34,040
Speaker 1: Bill this afternoon joining us on the phone from Boston. Bill,

478
00:25:34,080 --> 00:25:37,680
Speaker 1: how are you good? Jim McCarroll, Great to be with you. Yeah,

479
00:25:37,920 --> 00:25:39,600
Speaker 1: great to have you with us. Okay, So is is

480
00:25:39,640 --> 00:25:41,240
Speaker 1: today's I mean, I mean, I think you know we've

481
00:25:41,280 --> 00:25:42,920
Speaker 1: been having this debate over the last ten days or so.

482
00:25:43,040 --> 00:25:45,119
Speaker 1: What's more important when it comes to this week? Is

483
00:25:45,160 --> 00:25:47,680
Speaker 1: it companies and their earnings reports and the commentary we're

484
00:25:47,680 --> 00:25:49,400
Speaker 1: getting from them, or is what we hear from FED

485
00:25:49,480 --> 00:25:54,520
Speaker 1: chair J Powell tomorrow. Well, we're here at Essex, UM

486
00:25:54,720 --> 00:25:57,879
Speaker 1: we're focused on really pretty focused at my portfolio. So

487
00:25:57,920 --> 00:26:01,000
Speaker 1: I would say for us, it's about the companies. We're

488
00:26:01,040 --> 00:26:05,359
Speaker 1: we're sort of about UM ten through our earning season.

489
00:26:06,000 --> 00:26:09,480
Speaker 1: For the companies in our portfolios, we're focused on clean energy,

490
00:26:09,560 --> 00:26:13,119
Speaker 1: clean tech, and so we're you know, not as as

491
00:26:13,160 --> 00:26:16,600
Speaker 1: far long as we are in a well, I was

492
00:26:16,640 --> 00:26:18,679
Speaker 1: looking at performance. I mean, so far year to date,

493
00:26:18,720 --> 00:26:21,600
Speaker 1: you're down about but I like a longer term perspective.

494
00:26:21,640 --> 00:26:23,680
Speaker 1: So if I take it back to three years, you

495
00:26:23,760 --> 00:26:26,800
Speaker 1: guys have been returning on average annually more than eleven percent,

496
00:26:26,920 --> 00:26:30,600
Speaker 1: putting it into the eighty first percentile in comparison to

497
00:26:30,680 --> 00:26:33,920
Speaker 1: your peers, according to Bloomberg Data. So you know, we

498
00:26:34,119 --> 00:26:36,600
Speaker 1: constantly and Bill you probably have heard this and been

499
00:26:36,640 --> 00:26:39,560
Speaker 1: asked about it a million times about investors who are

500
00:26:39,600 --> 00:26:41,879
Speaker 1: maybe looking to think about e s G. When E

501
00:26:42,040 --> 00:26:43,840
Speaker 1: s G you can really measure it, you know, our

502
00:26:43,920 --> 00:26:48,159
Speaker 1: clean environment, like really invest in companies that are perhaps

503
00:26:48,320 --> 00:26:52,200
Speaker 1: doing good and actually there's performance as well. It doesn't

504
00:26:52,280 --> 00:26:54,760
Speaker 1: seem like it's as much of a trade off as

505
00:26:54,840 --> 00:26:58,080
Speaker 1: it used to be when you really have transparency on

506
00:26:58,200 --> 00:27:01,399
Speaker 1: some of these names. Yeah, what's it. There's been a

507
00:27:01,440 --> 00:27:04,159
Speaker 1: lot of obviously headlines around e s G. What is

508
00:27:04,200 --> 00:27:05,879
Speaker 1: the E s G? How do you define it? And

509
00:27:06,160 --> 00:27:09,479
Speaker 1: you know, our focus is really on solutions, so companies

510
00:27:09,520 --> 00:27:12,879
Speaker 1: that are providing solutions to the world's greatest challenges, and

511
00:27:13,080 --> 00:27:16,159
Speaker 1: we're focused mostly on small and MidCap companies. And when

512
00:27:16,240 --> 00:27:18,840
Speaker 1: you think about clean energy, we define it more broadly

513
00:27:18,920 --> 00:27:22,240
Speaker 1: across nine themes, so from water all the way through

514
00:27:22,320 --> 00:27:25,440
Speaker 1: to renewable energy, offshore, wind, etcetera. So a lot of

515
00:27:25,480 --> 00:27:28,760
Speaker 1: these companies are older line industrial companies that are really

516
00:27:29,200 --> 00:27:32,399
Speaker 1: um moving into new end markets, leveraging their core I

517
00:27:32,520 --> 00:27:36,640
Speaker 1: p SO water companies that are working on metering, electric

518
00:27:37,160 --> 00:27:40,520
Speaker 1: utility companies, so services that can help electric utilities manage

519
00:27:40,600 --> 00:27:43,720
Speaker 1: all the disruption for you know, electrons and what's happening

520
00:27:43,760 --> 00:27:46,480
Speaker 1: with our grid and the need for resiliency, etcetera. So

521
00:27:47,359 --> 00:27:50,080
Speaker 1: we're we're finding kind of nuts involved right of what's

522
00:27:50,080 --> 00:27:53,400
Speaker 1: going on. Well, it's really so when you think about

523
00:27:53,400 --> 00:27:56,440
Speaker 1: clean tech, it's really been around for twenty five years

524
00:27:56,480 --> 00:27:59,439
Speaker 1: and listed markets, and now we're in this new realm.

525
00:27:59,520 --> 00:28:02,520
Speaker 1: I think saluations were a little ahead themselves back in

526
00:28:03,880 --> 00:28:07,240
Speaker 1: but we saw as you are following, too many listings

527
00:28:07,280 --> 00:28:09,280
Speaker 1: of companies that should have gone should not have gone

528
00:28:09,320 --> 00:28:12,520
Speaker 1: public and sort of last eighteen months. But now it's, uh,

529
00:28:12,720 --> 00:28:16,600
Speaker 1: you know, valuations have come down significantly and the fundamental

530
00:28:16,760 --> 00:28:20,719
Speaker 1: drivers for for clean tech are stronger than ever. Well,

531
00:28:20,800 --> 00:28:22,879
Speaker 1: let's talk about some of those because I think what

532
00:28:23,320 --> 00:28:25,720
Speaker 1: interests me so much about what you what you work

533
00:28:25,800 --> 00:28:29,240
Speaker 1: on is the idea that you know, a lot of

534
00:28:29,320 --> 00:28:32,840
Speaker 1: these companies are really reliant on governments and I wonder

535
00:28:33,440 --> 00:28:36,240
Speaker 1: what you see in terms of progress here, not just

536
00:28:36,320 --> 00:28:38,680
Speaker 1: in the US, but around the world for these opportunities,

537
00:28:38,720 --> 00:28:40,600
Speaker 1: for these companies if if they're in a space that's

538
00:28:40,880 --> 00:28:42,600
Speaker 1: somewhat slow moving. I mean, look at how long this

539
00:28:42,680 --> 00:28:46,680
Speaker 1: energy transition is taking. Well, it's interesting. I mean when

540
00:28:46,720 --> 00:28:49,800
Speaker 1: you think about the legacy of fossil fuel assets power

541
00:28:49,880 --> 00:28:53,680
Speaker 1: global economies. You know, fossil fuels have been driving you know,

542
00:28:53,880 --> 00:28:58,520
Speaker 1: our economies for almost a century. So when you think about, um,

543
00:28:59,040 --> 00:29:01,520
Speaker 1: the clean technol oologies that were discovered in some cases

544
00:29:01,600 --> 00:29:05,040
Speaker 1: thirty years ago, we're not really in the early days

545
00:29:05,120 --> 00:29:08,120
Speaker 1: of this transition. If you think about net new energy

546
00:29:08,680 --> 00:29:12,440
Speaker 1: additions to the global grid, um, you know, renewables added

547
00:29:12,480 --> 00:29:18,120
Speaker 1: more than than coal last year. Was the combined energy

548
00:29:18,720 --> 00:29:22,760
Speaker 1: supply of renewables last year, so much higher up year

549
00:29:22,760 --> 00:29:25,320
Speaker 1: of a year. So on the so tim on the

550
00:29:25,480 --> 00:29:30,200
Speaker 1: on the government incentive side, that's a bit of a misperception,

551
00:29:30,480 --> 00:29:31,960
Speaker 1: I guess. I guess what I'm saying is like we're

552
00:29:32,000 --> 00:29:34,880
Speaker 1: still seeing stories about you know, the grid melting down

553
00:29:35,120 --> 00:29:39,800
Speaker 1: in Texas, you know, two years after that tragedy exactly,

554
00:29:39,840 --> 00:29:42,400
Speaker 1: and so what we so when we look at global

555
00:29:42,400 --> 00:29:45,760
Speaker 1: first of over global and then we assess government incentives.

556
00:29:46,240 --> 00:29:50,200
Speaker 1: One thing we look at is what's happening on tariff structures,

557
00:29:50,320 --> 00:29:54,280
Speaker 1: feed in tariffs, governments, sport um in relation of other drivers,

558
00:29:54,320 --> 00:29:57,000
Speaker 1: and the most important driver, one that eclipses all is

559
00:29:57,160 --> 00:30:02,000
Speaker 1: does the technology work is a commercially viable on the grid? Yes, indeed,

560
00:30:02,080 --> 00:30:04,800
Speaker 1: I mean our electrical grid. We're still leveraging technology that's

561
00:30:04,840 --> 00:30:06,760
Speaker 1: a century old, but I don't think it's really coming

562
00:30:06,800 --> 00:30:08,960
Speaker 1: to before. But if you look at what some of

563
00:30:08,960 --> 00:30:11,840
Speaker 1: the larger utilities have been doing the last several months,

564
00:30:12,000 --> 00:30:15,600
Speaker 1: is they've been finally starting to invest in the grid

565
00:30:15,680 --> 00:30:18,200
Speaker 1: and that helps some of the companies in our portfolio

566
00:30:18,880 --> 00:30:22,440
Speaker 1: help with grid resiliency, in managing electrons. When you put

567
00:30:22,520 --> 00:30:25,520
Speaker 1: in bi directional charging for electric cars, which is happening

568
00:30:25,840 --> 00:30:28,600
Speaker 1: at a faster pace, solar panels on the roofs in

569
00:30:28,840 --> 00:30:33,840
Speaker 1: battery storage, we you have more disruption, more electrons that

570
00:30:33,920 --> 00:30:36,760
Speaker 1: need to be managed by utilities. And this is for instance,

571
00:30:36,800 --> 00:30:39,240
Speaker 1: one of our companies, is I tron providing any good

572
00:30:39,320 --> 00:30:43,640
Speaker 1: value proposition? Is they really is we digitize our grid

573
00:30:44,040 --> 00:30:46,800
Speaker 1: um The amount of data that the utilities need to

574
00:30:46,880 --> 00:30:48,800
Speaker 1: manage is much greater, and obviously they need to bring

575
00:30:48,880 --> 00:30:52,080
Speaker 1: electrons to their customers at a time when it's getting

576
00:30:52,120 --> 00:30:55,040
Speaker 1: harder to do so with As you said, Tim, Uh,

577
00:30:55,200 --> 00:30:58,520
Speaker 1: you know severe weather and welcomes, right, And that's ticker

578
00:30:58,600 --> 00:31:01,320
Speaker 1: I tron is I t r I. It's based uh

579
00:31:02,080 --> 00:31:06,680
Speaker 1: in Washington. Stocks down about so far this year. But

580
00:31:06,880 --> 00:31:08,560
Speaker 1: that is a name that plays into what you've just

581
00:31:08,600 --> 00:31:10,400
Speaker 1: been talking about. I want to I just want to

582
00:31:10,520 --> 00:31:13,120
Speaker 1: draw everyone's attention to another name that you like the

583
00:31:13,200 --> 00:31:16,560
Speaker 1: tickers E R I I. It's called Energy Recovery, based

584
00:31:16,640 --> 00:31:19,880
Speaker 1: in California. It's downe about five percent so far this year,

585
00:31:19,920 --> 00:31:22,920
Speaker 1: but the last three full years stock is up two

586
00:31:23,440 --> 00:31:28,880
Speaker 1: nineteen percent. Tell us about this because this has salinization

587
00:31:29,000 --> 00:31:33,160
Speaker 1: excuse me UM in terms of seawater and filtering it

588
00:31:33,240 --> 00:31:35,680
Speaker 1: out to produce fresh water. We see that a lot

589
00:31:35,720 --> 00:31:37,720
Speaker 1: in the Caribbean. But you but this is a company

590
00:31:37,760 --> 00:31:39,320
Speaker 1: that also plays big time in the Middle East, and

591
00:31:39,400 --> 00:31:43,000
Speaker 1: that has to do with energy, right exactly. So when

592
00:31:43,040 --> 00:31:46,040
Speaker 1: you think about UM Energy Recovery, it's not a well

593
00:31:46,480 --> 00:31:49,680
Speaker 1: known R followed name. And so it's all about harvest

594
00:31:49,680 --> 00:31:52,560
Speaker 1: being fluid slow in a plant. Right. So they've got

595
00:31:52,960 --> 00:31:55,960
Speaker 1: they've got the bulk of the market share for what's

596
00:31:56,000 --> 00:31:59,479
Speaker 1: known as UH S w R O so seawater verse

597
00:31:59,560 --> 00:32:02,600
Speaker 1: OSMO is energy recovery. So when you think about a

598
00:32:02,680 --> 00:32:05,920
Speaker 1: large deesel plant, UM, the greatest input cost is energy,

599
00:32:06,480 --> 00:32:10,320
Speaker 1: and so their technology can lower the operating costs for

600
00:32:10,400 --> 00:32:13,360
Speaker 1: deesel plant by over. And then when you think about

601
00:32:13,360 --> 00:32:16,200
Speaker 1: what's happening in the Middle East, over the water supply

602
00:32:16,360 --> 00:32:20,440
Speaker 1: is possible water I, meaning it is all deesel and

603
00:32:20,600 --> 00:32:24,440
Speaker 1: over that is going to agriculture. So they can't operate

604
00:32:24,480 --> 00:32:27,360
Speaker 1: the Middle East their economies without deesel and so UH

605
00:32:27,440 --> 00:32:30,680
Speaker 1: e R I has got a lock on global UH

606
00:32:31,600 --> 00:32:35,120
Speaker 1: energy recovery technology for decail plants. But then they're moving

607
00:32:35,720 --> 00:32:40,560
Speaker 1: into industrial water treatment and so industrial water treatment regulations

608
00:32:40,760 --> 00:32:43,800
Speaker 1: are increasing in the emerging markets. And there's also a

609
00:32:43,880 --> 00:32:46,840
Speaker 1: need UM as we deploy obviously more on shoring of

610
00:32:46,920 --> 00:32:50,760
Speaker 1: semi conductor manufacturing here in the US, for US to

611
00:32:50,880 --> 00:32:54,320
Speaker 1: have really cheaper methodologies and ways to treat our water.

612
00:32:54,880 --> 00:32:58,440
Speaker 1: And so that's another way. It's equally um UH lowering

613
00:32:58,440 --> 00:33:01,960
Speaker 1: the input costs for commercial facilities. This is early on

614
00:33:02,120 --> 00:33:04,640
Speaker 1: for them, this new end market UM. And the other

615
00:33:04,680 --> 00:33:08,760
Speaker 1: one is refrigeration that we're UM we're phasing out hfc's

616
00:33:08,840 --> 00:33:14,560
Speaker 1: refrigerants that are incredibly uh hurtful to to uh the

617
00:33:15,680 --> 00:33:18,959
Speaker 1: climate change. It's over a hundred times more CEO two

618
00:33:19,000 --> 00:33:23,520
Speaker 1: intensive than regular greenhouse gases. So refrigerants is another areay're

619
00:33:23,560 --> 00:33:25,880
Speaker 1: moving to, too, right, and that's certainly where the regulatory

620
00:33:25,920 --> 00:33:28,800
Speaker 1: side of things can you know, kind of require companies

621
00:33:28,840 --> 00:33:31,600
Speaker 1: around the globe, uh necessary to do it. Hey, Bill,

622
00:33:31,680 --> 00:33:35,320
Speaker 1: we do have to run unfortunately, but this was fascinating interesting,

623
00:33:35,400 --> 00:33:37,800
Speaker 1: So come back soon. Bill Page, senior portfolio manager at

624
00:33:37,880 --> 00:33:41,360
Speaker 1: Essex Investment Management, on the phone from Boston. As we mentioned,

625
00:33:41,520 --> 00:33:45,840
Speaker 1: his parent tree Essex Environmental Opportunities. Fun UM has an

626
00:33:45,840 --> 00:33:48,440
Speaker 1: averageannal gain over the last three years of about eleven,

627
00:33:48,880 --> 00:33:53,280
Speaker 1: so putting it in the one percentile. Thanks for listening

628
00:33:53,320 --> 00:33:56,800
Speaker 1: to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,

629
00:33:56,920 --> 00:33:59,080
Speaker 1: or Bloomberg dot com, and you can also listen to

630
00:33:59,120 --> 00:34:01,680
Speaker 1: our radio show It to pm Eastern on Bloomberg Radio,

631
00:34:01,800 --> 00:34:08,239
Speaker 1: or watch us on YouTube search Bloomberg Global News. H