1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,560 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,479 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,640 Speaker 1: at Bloomberg dot com slash podcast. Greig Jera, thank you 7 00:00:22,720 --> 00:00:25,080 Speaker 1: so much. We appreciate it. Well. Bank stocks are on 8 00:00:25,120 --> 00:00:26,520 Speaker 1: the move. I'm looking at some of the big money 9 00:00:26,520 --> 00:00:28,800 Speaker 1: center banks on a you today basis up anywhere from 10 00:00:28,840 --> 00:00:34,440 Speaker 1: fifteen to uh. Good moves for a long time beleaguered group. 11 00:00:34,600 --> 00:00:37,560 Speaker 1: Let's see what's moving this group. We talked to Mike Mayo, 12 00:00:37,640 --> 00:00:41,080 Speaker 1: of course, senior banking analysts at Wells Fargo, joining us 13 00:00:41,159 --> 00:00:43,639 Speaker 1: on the phone from New York. Mike, thanks so much 14 00:00:43,640 --> 00:00:46,440 Speaker 1: for joining us here. Nice move here for the banks. 15 00:00:46,600 --> 00:00:50,240 Speaker 1: Love to get your take on the group. Uh sure, 16 00:00:50,280 --> 00:00:52,800 Speaker 1: and thanks for having me on. I'd say we have 17 00:00:53,120 --> 00:00:56,520 Speaker 1: more confidence that banks are on the road again to 18 00:00:56,680 --> 00:01:01,280 Speaker 1: the pre pandemic returns evaluations they had before the last 19 00:01:01,400 --> 00:01:04,240 Speaker 1: year year and a half, and we think banks are 20 00:01:04,240 --> 00:01:08,040 Speaker 1: on the road to record efficiency. They're demonstrating resiliency through 21 00:01:08,080 --> 00:01:11,199 Speaker 1: this recession, and they're showing that this is not your 22 00:01:11,240 --> 00:01:14,959 Speaker 1: parents banking industry. I mean, it's night and day versus 23 00:01:15,000 --> 00:01:18,320 Speaker 1: the past recession. If you remember the last recession, the 24 00:01:18,319 --> 00:01:21,360 Speaker 1: global financial crisis, what a mess for for banks. I mean, 25 00:01:21,800 --> 00:01:24,600 Speaker 1: but instead of out of control credit costs, now you're 26 00:01:24,600 --> 00:01:29,440 Speaker 1: seeing banks actually release reserves for problem with credits. They 27 00:01:29,520 --> 00:01:32,960 Speaker 1: are still sobering times. Look, you have individuals and companies 28 00:01:33,240 --> 00:01:36,120 Speaker 1: you know, likely to go bankrupt having difficult times, but 29 00:01:36,160 --> 00:01:39,080 Speaker 1: it's just not as bad as expected, and banks have 30 00:01:39,160 --> 00:01:42,080 Speaker 1: gotten ahead of that. They're not being so Mike, They're 31 00:01:42,080 --> 00:01:46,039 Speaker 1: not being brazen and releasing reserves. You think they're genuine genuinely, 32 00:01:46,319 --> 00:01:50,480 Speaker 1: isn't such a huge risk of you know, cascading bankruptcies 33 00:01:50,520 --> 00:01:55,040 Speaker 1: that Joe Stiglitz was warning about last year. That's correct, 34 00:01:55,280 --> 00:01:58,200 Speaker 1: and banks have been pretty conservative. I mean, it was 35 00:01:58,240 --> 00:02:02,160 Speaker 1: the biggest build up of reserves for problem loans in 36 00:02:02,200 --> 00:02:04,640 Speaker 1: the history of banking in the first half of last year, 37 00:02:05,120 --> 00:02:08,680 Speaker 1: and in the fourth quarter they released only about you 38 00:02:08,720 --> 00:02:11,919 Speaker 1: know that, So you still have you know the other 39 00:02:12,840 --> 00:02:16,520 Speaker 1: of reserves to to you know, cushion against different losses 40 00:02:16,800 --> 00:02:19,880 Speaker 1: and another change versus the last recession, banks issued all 41 00:02:19,960 --> 00:02:23,359 Speaker 1: kinds of new equity to show up the balance sheets. 42 00:02:23,440 --> 00:02:27,160 Speaker 1: And now like literally as we speak, banks are allowed 43 00:02:27,200 --> 00:02:30,560 Speaker 1: to buy back their stock after the most stressful bed 44 00:02:30,600 --> 00:02:33,920 Speaker 1: stress tests in history in December. And then instead of 45 00:02:33,919 --> 00:02:38,000 Speaker 1: the big charges and mishaps and problems that banks caused, 46 00:02:38,680 --> 00:02:41,480 Speaker 1: now this time banks are more a part of the solutions. 47 00:02:41,560 --> 00:02:45,239 Speaker 1: So it's really uh, you know, I think reform school 48 00:02:45,280 --> 00:02:49,200 Speaker 1: worked for banks. You know, thank your regulators for you know, 49 00:02:49,639 --> 00:02:53,040 Speaker 1: making banks shape up and have more liquidity and capital 50 00:02:53,120 --> 00:02:56,240 Speaker 1: or resiliency. And and there's this, it's a very technical 51 00:02:56,280 --> 00:02:59,760 Speaker 1: phrase called level three assets. These are assets that are 52 00:03:00,240 --> 00:03:03,640 Speaker 1: hard to value and you you kind of value on 53 00:03:03,680 --> 00:03:06,560 Speaker 1: your own, UM. But you know, these level three assets 54 00:03:06,560 --> 00:03:11,600 Speaker 1: are down from the last recession. So that's just one 55 00:03:11,760 --> 00:03:14,480 Speaker 1: area of one example of how banks have really reduced 56 00:03:14,639 --> 00:03:18,519 Speaker 1: risk and showing much more sustainable results. And I'd say, 57 00:03:18,560 --> 00:03:21,400 Speaker 1: nowhere do you see this more than Bank of America. 58 00:03:21,440 --> 00:03:24,919 Speaker 1: Remember Bank of America was the poster child for mortgage 59 00:03:24,960 --> 00:03:29,160 Speaker 1: problems after they bought countrywide very ill time deal will 60 00:03:29,160 --> 00:03:31,480 Speaker 1: go down in history is one of the worst acquisitions 61 00:03:31,919 --> 00:03:35,480 Speaker 1: ever pursued by a bank. UM. But you know, our 62 00:03:35,880 --> 00:03:39,240 Speaker 1: view is that maybe because I read the book Sapience. 63 00:03:39,320 --> 00:03:42,839 Speaker 1: But ten thousand years ago was the agricultural revolution? Well, well, 64 00:03:42,840 --> 00:03:47,720 Speaker 1: Bank of America's has had its own personal agricultural revolution. 65 00:03:47,760 --> 00:03:51,200 Speaker 1: They've gone from hunter gatherers to farmers. In the past, 66 00:03:51,360 --> 00:03:53,800 Speaker 1: they would kind of hunt for a new mortgage or 67 00:03:53,920 --> 00:03:58,080 Speaker 1: gather a trade or season acquisition. And now they're like 68 00:03:58,200 --> 00:04:01,920 Speaker 1: farmers are cultivating relations ships, They're they're reading what they sew. 69 00:04:02,040 --> 00:04:05,320 Speaker 1: Are they do this year and year out? Much more disciplined, 70 00:04:05,560 --> 00:04:09,680 Speaker 1: sustainable than you've ever seen before, by the way, So 71 00:04:09,680 --> 00:04:12,400 Speaker 1: what are the crops that that matter most? In that case? 72 00:04:12,440 --> 00:04:14,480 Speaker 1: I mean, we've seen interest rates go off. That's good 73 00:04:14,480 --> 00:04:18,280 Speaker 1: for net interest margins, right, we have forecasts for volatility 74 00:04:18,400 --> 00:04:21,919 Speaker 1: continue and equities and FX so uh and obviously in 75 00:04:21,960 --> 00:04:25,440 Speaker 1: fixed income, so that's good for for trading and um 76 00:04:25,640 --> 00:04:28,120 Speaker 1: M and A. Everyone I talked to says this is 77 00:04:28,160 --> 00:04:30,680 Speaker 1: gonna be a better year for M and A as well. 78 00:04:30,800 --> 00:04:33,240 Speaker 1: And last year wasn't even that bad considering the pandemic. 79 00:04:33,400 --> 00:04:36,920 Speaker 1: What's the most important, Well, for I'm gonna give you 80 00:04:36,920 --> 00:04:40,160 Speaker 1: the general answer, and then that's specific. It's not you're 81 00:04:40,160 --> 00:04:42,320 Speaker 1: asking the question wrong. You're asking a question like it 82 00:04:42,360 --> 00:04:45,960 Speaker 1: was last century. What are the most important crops for 83 00:04:45,960 --> 00:04:49,000 Speaker 1: for banks? So at least like a bank American JP 84 00:04:49,120 --> 00:04:51,359 Speaker 1: Morgan and from the big banks now and the question 85 00:04:51,440 --> 00:04:54,560 Speaker 1: is what's the most important meal, What's the meal that's 86 00:04:54,560 --> 00:04:56,839 Speaker 1: going to satisfy the customers? More so, it's more of 87 00:04:56,880 --> 00:05:00,520 Speaker 1: a relationship approach as opposed to a product approach. Now, 88 00:05:00,720 --> 00:05:03,040 Speaker 1: I will answer your question of having said that there 89 00:05:03,080 --> 00:05:05,840 Speaker 1: are certain areas that are growing faster than others, and 90 00:05:05,920 --> 00:05:10,080 Speaker 1: capital markets are stronger for longer. You've heard uh, just 91 00:05:10,320 --> 00:05:15,160 Speaker 1: this morning. JP Morrigan's chief financial officer expects meniateuly stronger 92 00:05:15,240 --> 00:05:21,040 Speaker 1: trading year every year, meniately better investment banking year every year. Uh. 93 00:05:21,440 --> 00:05:25,920 Speaker 1: You've heard other banks UM say that the backlog for 94 00:05:26,080 --> 00:05:28,359 Speaker 1: mergers is that a record Goldman Sax has said that 95 00:05:28,720 --> 00:05:33,200 Speaker 1: record year to day um uh, equity underwriting and I 96 00:05:33,279 --> 00:05:37,360 Speaker 1: p O s So capital markets are are here for long, Mike. 97 00:05:37,600 --> 00:05:42,000 Speaker 1: That's really do do investors does the market Mike typically 98 00:05:42,000 --> 00:05:45,960 Speaker 1: play a similar multiple for capital markets earnings as they 99 00:05:45,960 --> 00:05:49,880 Speaker 1: do for the bread and butter net interest income earnings. No, 100 00:05:50,000 --> 00:05:51,760 Speaker 1: And that's that's a fair question. Like a lot of 101 00:05:51,800 --> 00:05:54,800 Speaker 1: times investors think of it as one time but these 102 00:05:54,839 --> 00:05:58,039 Speaker 1: are once again going back to the idea of a relationship, 103 00:05:58,440 --> 00:06:00,680 Speaker 1: and so you might be getting a doing a trade 104 00:06:00,720 --> 00:06:03,280 Speaker 1: with the customer one time and doing a little more 105 00:06:03,320 --> 00:06:06,440 Speaker 1: lending with them another time, and doing some prime brokers 106 00:06:06,560 --> 00:06:09,280 Speaker 1: a third time. But so that's why the steeper yield 107 00:06:09,279 --> 00:06:13,479 Speaker 1: curve that helps the net entrance margins and spread revenues 108 00:06:14,200 --> 00:06:16,680 Speaker 1: that's likely to stay around for a lot longer. So 109 00:06:16,760 --> 00:06:21,280 Speaker 1: the fact that you have the highest UH ten year 110 00:06:21,320 --> 00:06:25,600 Speaker 1: treasury yield in a year that is significant. As Bloomberg 111 00:06:25,640 --> 00:06:29,600 Speaker 1: reported yesterday, banks at a fourteen year high yesterday, and 112 00:06:29,680 --> 00:06:32,440 Speaker 1: part of that certainly is on the steeper yolk curve, 113 00:06:32,760 --> 00:06:35,839 Speaker 1: higher rates, and that certainly helps the bread and butter 114 00:06:36,200 --> 00:06:39,400 Speaker 1: traditional banking activities that banks have done, you know, for 115 00:06:39,400 --> 00:06:42,520 Speaker 1: the last couple of hundred years, um. So that you 116 00:06:42,560 --> 00:06:45,080 Speaker 1: get the spread revenues doing better at least for a 117 00:06:45,080 --> 00:06:48,360 Speaker 1: little longer, you get capital markets doing well. But underlying 118 00:06:48,400 --> 00:06:52,719 Speaker 1: all of this is technology, and technology is helping banks 119 00:06:52,760 --> 00:06:56,080 Speaker 1: to control costs like they've never done before. Going back 120 00:06:56,120 --> 00:06:59,240 Speaker 1: to the the Bank of America, Bank of America is a 121 00:06:59,320 --> 00:07:02,000 Speaker 1: digital bank banking leader. They're one of the best fintech 122 00:07:02,080 --> 00:07:06,560 Speaker 1: companies in the world. Um, they have over four thousand patents. 123 00:07:06,920 --> 00:07:10,080 Speaker 1: They had a record number of patent last year. And 124 00:07:10,400 --> 00:07:12,320 Speaker 1: you know, I I joke maybe they need to move 125 00:07:12,400 --> 00:07:15,600 Speaker 1: their headquarters from Charlotte to Silicon Valley to get more 126 00:07:15,600 --> 00:07:18,200 Speaker 1: credit for what they've been doing. But this is what 127 00:07:18,240 --> 00:07:21,160 Speaker 1: they've been doing behind the scenes, you know, before the pandemic. 128 00:07:21,320 --> 00:07:25,560 Speaker 1: During the pandemic, they've actually shined U through the pandemic 129 00:07:26,160 --> 00:07:30,640 Speaker 1: because digital banking usage has really accelerated as a result 130 00:07:30,680 --> 00:07:33,240 Speaker 1: of a change in customer behavior. So I don't know 131 00:07:33,280 --> 00:07:36,120 Speaker 1: if you were going into branches before, but certainly during 132 00:07:36,120 --> 00:07:39,480 Speaker 1: the pandemic, Uh, you and everybody else you know started 133 00:07:39,480 --> 00:07:41,960 Speaker 1: a youth digital banking a lot more so the laggards 134 00:07:42,120 --> 00:07:45,680 Speaker 1: I finally jumped on the digital banking fanwagon, and that 135 00:07:45,760 --> 00:07:50,480 Speaker 1: allows uh, the large banks to close more branches uh 136 00:07:50,520 --> 00:07:53,640 Speaker 1: as people use more digital banking and makes sense. So 137 00:07:53,680 --> 00:07:56,240 Speaker 1: I guess that's part of the problem here here, Mike. 138 00:07:56,280 --> 00:07:59,400 Speaker 1: I mean, I'm in Germany, which is you know, which is? 139 00:07:59,520 --> 00:08:02,239 Speaker 1: Initially I would ask the question about which is more important, 140 00:08:02,240 --> 00:08:04,400 Speaker 1: because you know, Christian Saving wanted to go a lean 141 00:08:04,520 --> 00:08:07,880 Speaker 1: on corporate banking and lending and phase out trading as 142 00:08:07,920 --> 00:08:10,040 Speaker 1: an important source of revenue. Now it's gone the other way. 143 00:08:10,320 --> 00:08:12,400 Speaker 1: I know you cover US banks and I see that 144 00:08:12,440 --> 00:08:16,120 Speaker 1: you have overweights on almost all of them, or more 145 00:08:16,160 --> 00:08:18,920 Speaker 1: than half, let's say, right, but only underweights on a couple. 146 00:08:19,560 --> 00:08:22,120 Speaker 1: What are the US banks doing right or what is 147 00:08:22,160 --> 00:08:25,840 Speaker 1: the setup that allows them to be stronger than than 148 00:08:25,920 --> 00:08:28,960 Speaker 1: Germany's banks or Europe's banks? Is it the technology piece? 149 00:08:29,240 --> 00:08:31,760 Speaker 1: Is it the fact that they're not as um that 150 00:08:31,800 --> 00:08:36,120 Speaker 1: they're not as the US isn't as overbanked. Well, I'll 151 00:08:36,160 --> 00:08:39,120 Speaker 1: start with the last global financial crisis, and the US 152 00:08:39,160 --> 00:08:44,719 Speaker 1: banking system certainly recapitalized stronger and faster. So if you 153 00:08:44,800 --> 00:08:48,400 Speaker 1: look at the level of capital of US banks, it's 154 00:08:48,440 --> 00:08:52,880 Speaker 1: it's stronger. The second thing would be, UH, cost control. 155 00:08:53,640 --> 00:08:58,640 Speaker 1: There's a greater flexibility of US banks to go ahead 156 00:08:58,840 --> 00:09:02,160 Speaker 1: and UH do what it takes to control costs. And 157 00:09:02,200 --> 00:09:07,000 Speaker 1: sometimes that does relate to personnel. UM, so the uh 158 00:09:07,160 --> 00:09:09,120 Speaker 1: you know, it's painful in the short term, but it 159 00:09:09,160 --> 00:09:12,079 Speaker 1: can allow for growth longer term. And I say the 160 00:09:12,200 --> 00:09:15,840 Speaker 1: third thing would be capital markets. And the US has 161 00:09:15,840 --> 00:09:19,800 Speaker 1: a deeper, wider capital markets then in Europe, and you've 162 00:09:19,800 --> 00:09:23,040 Speaker 1: seen the five largest US banks continue to gain share. 163 00:09:23,200 --> 00:09:26,560 Speaker 1: So that's City Group, Bank America, JP, Morgan Morgan, Stanley, 164 00:09:26,600 --> 00:09:29,600 Speaker 1: Goldman Sachs continue to gain share against the big European 165 00:09:29,679 --> 00:09:35,320 Speaker 1: players like UBS, Credits, REEF, HSBC, Barclays, and Deutsche Bank UM. 166 00:09:35,480 --> 00:09:38,480 Speaker 1: And so that's that's that's kind of across the board. 167 00:09:38,559 --> 00:09:41,960 Speaker 1: So I'd call it the differences the three fees of 168 00:09:42,440 --> 00:09:46,320 Speaker 1: capital costs and capital markets that are differentiating the US 169 00:09:46,360 --> 00:09:49,880 Speaker 1: banks versus the European banks. Hey, Mike, thanks so much 170 00:09:49,920 --> 00:09:51,960 Speaker 1: for joining us. We really appreciate getting your thoughts here. 171 00:09:51,960 --> 00:09:53,960 Speaker 1: A good move here for the banks. Great to get 172 00:09:54,000 --> 00:09:57,480 Speaker 1: your perspective. Mike Mayo, senior banking analysts at Wells Fargo Security. 173 00:10:00,200 --> 00:10:01,839 Speaker 1: We just heard a couple of stories about the real 174 00:10:01,920 --> 00:10:06,719 Speaker 1: estate market. It is hotting up, as the British say, um, 175 00:10:06,720 --> 00:10:09,240 Speaker 1: and let's bring in best Freeman to talk about this 176 00:10:09,280 --> 00:10:12,880 Speaker 1: for a second. She's the CEO of Brown Harris Stevens 177 00:10:12,960 --> 00:10:17,880 Speaker 1: in New York City. Best Um, I am shocked that 178 00:10:18,000 --> 00:10:21,600 Speaker 1: the market is getting so tight. Zillo is actually going 179 00:10:21,679 --> 00:10:25,760 Speaker 1: to offer people cash on five thousand homes if they want. 180 00:10:25,920 --> 00:10:28,679 Speaker 1: This estimate could be a little low, but it still 181 00:10:28,720 --> 00:10:31,440 Speaker 1: seems like, Um, that's the sign of a little bit 182 00:10:31,440 --> 00:10:35,000 Speaker 1: of froth. Yeah, I mean in New York City is 183 00:10:35,040 --> 00:10:37,800 Speaker 1: definitely what was the word you said, hawking up? I 184 00:10:37,920 --> 00:10:40,520 Speaker 1: like that, I might have cotton hotting they say, instead 185 00:10:40,520 --> 00:10:43,680 Speaker 1: of heating up, they say hotting up, it's hawking up. Well, 186 00:10:43,760 --> 00:10:46,480 Speaker 1: in New York City is definitely doing that. As far 187 00:10:46,520 --> 00:10:49,440 Speaker 1: as zillo AND's estimates, you know, in New York City, 188 00:10:49,760 --> 00:10:52,400 Speaker 1: that would not work. And we don't use that sort 189 00:10:52,440 --> 00:10:54,800 Speaker 1: of format because you really do need people in the 190 00:10:54,840 --> 00:10:57,600 Speaker 1: process because, as you know, New York City, for the 191 00:10:57,679 --> 00:11:00,800 Speaker 1: most part, the housing stock that you can purchase is 192 00:11:00,880 --> 00:11:04,200 Speaker 1: comprised of cooperatives, which require a human being to help 193 00:11:04,240 --> 00:11:07,199 Speaker 1: you walk through the process. So's estimates might work and 194 00:11:07,280 --> 00:11:09,280 Speaker 1: more like a team of human beings, right and some 195 00:11:09,440 --> 00:11:13,360 Speaker 1: lawyers exactly, it's a it's you know, you have to 196 00:11:13,640 --> 00:11:16,920 Speaker 1: give a financial portrait of who you are UM as 197 00:11:16,920 --> 00:11:20,280 Speaker 1: a corporation. So's estimates work in some places, but New 198 00:11:20,320 --> 00:11:23,679 Speaker 1: York City would not work. UM. But the market we're 199 00:11:23,840 --> 00:11:27,200 Speaker 1: very um optimistic because we had one of the strongest 200 00:11:27,280 --> 00:11:31,520 Speaker 1: januaries in five years for the luxury market for properties 201 00:11:31,520 --> 00:11:34,320 Speaker 1: over four million dollars. And so New York City is 202 00:11:34,360 --> 00:11:38,319 Speaker 1: starting to re emerge. UM and so we're feeling pretty 203 00:11:38,320 --> 00:11:41,520 Speaker 1: good about that. My financial portrait is more like a 204 00:11:41,600 --> 00:11:45,719 Speaker 1: crayon drawing, which is why, which is why I need 205 00:11:45,760 --> 00:11:49,640 Speaker 1: to work somewhere else. Best talk to us, you know, 206 00:11:50,520 --> 00:11:53,200 Speaker 1: there is this I'd love to get your thoughts best 207 00:11:53,200 --> 00:11:55,960 Speaker 1: on kind of this broader theme of Okay, maybe it's 208 00:11:55,960 --> 00:11:58,920 Speaker 1: not the death of New York, but New York is 209 00:11:58,960 --> 00:12:01,000 Speaker 1: not going to be post pandemic. What it was pre 210 00:12:01,080 --> 00:12:07,120 Speaker 1: pandemic in terms of commercial real estate, vibrancy, business, uh 211 00:12:07,720 --> 00:12:10,240 Speaker 1: participation in the city, and that is likely to spill 212 00:12:10,280 --> 00:12:13,920 Speaker 1: over to the residential market. How do you take that narrative? No, 213 00:12:14,080 --> 00:12:16,800 Speaker 1: I mean you're this is true. I mean we definitely 214 00:12:16,840 --> 00:12:19,760 Speaker 1: got hit very hard during the pandemic. We were shut down, 215 00:12:19,840 --> 00:12:21,880 Speaker 1: you know, urban centers were, but we were kind of 216 00:12:21,880 --> 00:12:25,679 Speaker 1: the epicenter, so you know, everything shut down, Broadway restaurants 217 00:12:25,720 --> 00:12:28,400 Speaker 1: and all of that. Um. But of course, when we 218 00:12:28,480 --> 00:12:31,080 Speaker 1: come back completely, we will be a different type of 219 00:12:31,080 --> 00:12:33,679 Speaker 1: New York. But I would argue a better type of 220 00:12:33,720 --> 00:12:37,640 Speaker 1: New York, um with different ideas and new creative thinking 221 00:12:37,679 --> 00:12:40,199 Speaker 1: and that sort of thing. But um, it's going to 222 00:12:40,320 --> 00:12:42,200 Speaker 1: take some time. I think there are a lot of 223 00:12:42,280 --> 00:12:46,240 Speaker 1: issues that we have to wrestle with one. Besides the 224 00:12:46,320 --> 00:12:50,440 Speaker 1: vaccine rollout, which is very important. UM crime, we have 225 00:12:50,600 --> 00:12:53,840 Speaker 1: to you know, make sure that we are addressing uh 226 00:12:54,640 --> 00:12:57,800 Speaker 1: crime and make sure it's a safe city and taxes. 227 00:12:57,920 --> 00:13:00,080 Speaker 1: You know, we do have some political headwinds here in 228 00:13:00,120 --> 00:13:02,680 Speaker 1: New York City. There's a lot of city council seats 229 00:13:02,679 --> 00:13:05,480 Speaker 1: that are coming up in June, uh, something like thirty 230 00:13:05,520 --> 00:13:08,000 Speaker 1: odd seats. You have the controllers race, the Mayor's race, 231 00:13:08,040 --> 00:13:11,440 Speaker 1: and so all of those things are really important for 232 00:13:11,480 --> 00:13:14,160 Speaker 1: the future of New York City. I'm not worried about 233 00:13:14,200 --> 00:13:16,200 Speaker 1: us bouncing back. People want to be here. It's the 234 00:13:16,200 --> 00:13:18,080 Speaker 1: best city in the world. But I think people need 235 00:13:18,120 --> 00:13:20,120 Speaker 1: to start to get involved and pay attention to the 236 00:13:20,120 --> 00:13:23,640 Speaker 1: political landscape, um because otherwise, you know, you're gonna have 237 00:13:23,679 --> 00:13:25,720 Speaker 1: a piano tear at tax for example, and that would 238 00:13:25,760 --> 00:13:29,640 Speaker 1: be very um detrimental to the city. So I grew 239 00:13:29,720 --> 00:13:32,800 Speaker 1: up on ninety answer damn in the seventies. Um, New 240 00:13:32,880 --> 00:13:36,360 Speaker 1: York to me looks incredibly safe. But I hear more 241 00:13:36,360 --> 00:13:38,760 Speaker 1: and more talk about crime. Is that really an issue 242 00:13:38,800 --> 00:13:42,640 Speaker 1: in Manhattan? You know, Look, it is an issue. It's 243 00:13:42,679 --> 00:13:45,600 Speaker 1: definitely picked up. Even the percentages show it, and the 244 00:13:45,640 --> 00:13:49,920 Speaker 1: subway ridership now I think is down se um, so 245 00:13:50,080 --> 00:13:53,079 Speaker 1: there is some of that, and you're seeing more homelessness 246 00:13:53,120 --> 00:13:56,240 Speaker 1: and that during the pandemic was you know, all over 247 00:13:56,280 --> 00:13:58,719 Speaker 1: the place. And that's really important because if we don't 248 00:13:58,760 --> 00:14:01,240 Speaker 1: have a safe city, we're not going to have sixty 249 00:14:01,240 --> 00:14:04,000 Speaker 1: million tourists a year and people who want to not 250 00:14:04,080 --> 00:14:07,160 Speaker 1: want to buy here. So crime is certainly an issue 251 00:14:07,440 --> 00:14:09,679 Speaker 1: and it needs to be addressed. And we need to 252 00:14:09,720 --> 00:14:13,800 Speaker 1: not have slogans like defund the police, because I don't 253 00:14:13,800 --> 00:14:16,360 Speaker 1: think that helps us. I think we want to you know, 254 00:14:16,480 --> 00:14:19,960 Speaker 1: work with the police and you know, uh maybe educate 255 00:14:20,040 --> 00:14:22,680 Speaker 1: the police and help the police. We want to protect 256 00:14:22,680 --> 00:14:25,320 Speaker 1: our citizens and have a very safe and vibrant city 257 00:14:25,440 --> 00:14:28,440 Speaker 1: as we have had in the past. So best that 258 00:14:28,480 --> 00:14:30,720 Speaker 1: the Bloomberg HQ here in New York is at fifty 259 00:14:30,720 --> 00:14:32,320 Speaker 1: eight and Lex And as we look out our window, 260 00:14:32,360 --> 00:14:35,720 Speaker 1: we see what I deem these silly towers that reached 261 00:14:35,760 --> 00:14:38,160 Speaker 1: to the sky. And a lot of that demand was 262 00:14:38,240 --> 00:14:41,720 Speaker 1: from international buyers, particularly China. Where is the international buyer 263 00:14:41,840 --> 00:14:44,400 Speaker 1: vis you know, as it relates to New York City. No, 264 00:14:44,520 --> 00:14:46,640 Speaker 1: I'm not seeing any of them, uh, you know, with 265 00:14:46,680 --> 00:14:51,440 Speaker 1: the travel restrictions and uh, a lot of other challenges. Politically, 266 00:14:51,680 --> 00:14:54,240 Speaker 1: we have not seen international buyers at all. In fact, 267 00:14:54,280 --> 00:14:57,440 Speaker 1: I was at a project yesterday and you know they 268 00:14:57,480 --> 00:15:00,720 Speaker 1: have had no international buyers and their own sold out. 269 00:15:01,240 --> 00:15:04,400 Speaker 1: Um so it's been mostly domestic what you're seeing lately 270 00:15:04,440 --> 00:15:06,960 Speaker 1: as of late. Um the purchasers here are all just 271 00:15:07,000 --> 00:15:09,480 Speaker 1: like from west coast to east coast or coming from 272 00:15:09,520 --> 00:15:11,800 Speaker 1: the south. I mean we're having a mixture. Um So, 273 00:15:11,840 --> 00:15:13,560 Speaker 1: I think it's gonna be a while before we see 274 00:15:13,600 --> 00:15:16,080 Speaker 1: that re emerge. What about the bourge out of New 275 00:15:16,160 --> 00:15:19,400 Speaker 1: York though, I mean, especially in the age of social distancing, 276 00:15:19,960 --> 00:15:24,160 Speaker 1: don't people want to have outdoor space? You know, um 277 00:15:24,680 --> 00:15:28,080 Speaker 1: three thousand square feet? I mean, isn't Isn't that what 278 00:15:28,280 --> 00:15:31,160 Speaker 1: they're looking for now? I mean that's you know, look, 279 00:15:31,320 --> 00:15:33,240 Speaker 1: you have to have a lot of money to be 280 00:15:33,240 --> 00:15:35,560 Speaker 1: able to afford three thousand square feet, and the a 281 00:15:35,560 --> 00:15:37,200 Speaker 1: lot of you know, the average New York who was 282 00:15:37,280 --> 00:15:39,560 Speaker 1: raising a family here, have kids going to school here, 283 00:15:39,920 --> 00:15:43,200 Speaker 1: they can't afford three thousand square feet. Um So they 284 00:15:43,240 --> 00:15:46,480 Speaker 1: are reimagining the space. Maybe they want a little outdoor, 285 00:15:46,600 --> 00:15:49,360 Speaker 1: maybe they want a home office. Um So people have 286 00:15:49,680 --> 00:15:53,040 Speaker 1: done that and undergone some changes, um and Brooklyn is 287 00:15:53,040 --> 00:15:56,040 Speaker 1: still doing extremely well because there's a lot of townhouse 288 00:15:56,040 --> 00:15:59,120 Speaker 1: inventory there. So you know, people have moved around a 289 00:15:59,120 --> 00:16:00,720 Speaker 1: little bit. But I right to have a lot of 290 00:16:00,720 --> 00:16:02,840 Speaker 1: friends who have moved and they want to there in 291 00:16:02,920 --> 00:16:06,960 Speaker 1: Palm Beach or Connecticut and they missed the city because 292 00:16:07,160 --> 00:16:10,320 Speaker 1: it's born in other places. Hey, best, thank you so 293 00:16:10,400 --> 00:16:12,640 Speaker 1: much for joining us once again. We always appreciate it. 294 00:16:12,680 --> 00:16:16,840 Speaker 1: Best Freedman, CEO, Brown, Howard Stevens, Greig Jerry, thank you 295 00:16:16,840 --> 00:16:19,720 Speaker 1: so much. We appreciate it. Well. Big big news coming 296 00:16:19,760 --> 00:16:23,240 Speaker 1: out of Australia as it relates to the digital news business. 297 00:16:23,280 --> 00:16:27,720 Speaker 1: Australia just passed a law making Facebook and Google actually 298 00:16:27,760 --> 00:16:31,640 Speaker 1: pay for the local news that is generated by operators 299 00:16:31,680 --> 00:16:35,280 Speaker 1: within Australian question is well other countries follow suit and 300 00:16:35,280 --> 00:16:37,280 Speaker 1: what does it mean for these big digital media companies. 301 00:16:37,520 --> 00:16:39,200 Speaker 1: For that answers to that, we go to Jim Manners 302 00:16:39,240 --> 00:16:41,600 Speaker 1: and he's the CEO of Social Flow based in New York. 303 00:16:41,960 --> 00:16:45,280 Speaker 1: UM full disclosure. Social Flow is a platform used by 304 00:16:45,280 --> 00:16:48,640 Speaker 1: Bloomberg for social media purposes. Jim, thanks so much for 305 00:16:48,720 --> 00:16:52,240 Speaker 1: joining us here. So it seems like a big deal 306 00:16:52,360 --> 00:16:56,680 Speaker 1: because todate Google Facebook, other digital players have generally received 307 00:16:56,720 --> 00:16:59,640 Speaker 1: their news at little to no costs. So what does 308 00:16:59,680 --> 00:17:02,960 Speaker 1: this mean? Yeah, it is big news and I think 309 00:17:02,960 --> 00:17:05,719 Speaker 1: it's a win for both parties. The Australian government who 310 00:17:05,760 --> 00:17:08,240 Speaker 1: has pushed more dollars the publishers and is able to 311 00:17:08,280 --> 00:17:10,360 Speaker 1: say that they took on big second one and that's 312 00:17:10,359 --> 00:17:13,000 Speaker 1: great for them. But Facebook made its point as well. 313 00:17:13,040 --> 00:17:15,879 Speaker 1: They preserved their right to just stand news content again 314 00:17:15,960 --> 00:17:19,160 Speaker 1: that they did very briefly in in this negotiation, rather 315 00:17:19,240 --> 00:17:22,119 Speaker 1: than submitting themselves to forced arbitration, and they made it 316 00:17:22,240 --> 00:17:25,320 Speaker 1: very clear to other countries around the world who were 317 00:17:25,320 --> 00:17:27,880 Speaker 1: watching very closely, that there's a point past which they're 318 00:17:27,920 --> 00:17:30,320 Speaker 1: not willing to go. So, you know, there aren't many 319 00:17:30,359 --> 00:17:32,680 Speaker 1: negotiations where you can you can claim both sides wind, 320 00:17:32,720 --> 00:17:35,040 Speaker 1: but this is one I think they did. So how 321 00:17:35,040 --> 00:17:38,760 Speaker 1: does this work? Um? In practice? I mean, if I 322 00:17:38,800 --> 00:17:46,160 Speaker 1: put a New York Times story on my Facebook page, um, 323 00:17:46,240 --> 00:17:48,840 Speaker 1: Facebook has to pay the New York Times to show 324 00:17:48,840 --> 00:17:52,840 Speaker 1: it to my uh to my friends. Well, actually, so 325 00:17:52,880 --> 00:17:57,040 Speaker 1: it's in Australia. This is fairly interesting. It's specifically Australian 326 00:17:57,119 --> 00:18:00,119 Speaker 1: media organizations. That's obviously what the Australian government's move is 327 00:18:00,160 --> 00:18:03,399 Speaker 1: interested in so you're talking about News Corporate Australia and 328 00:18:03,440 --> 00:18:06,679 Speaker 1: other big media companies. Facebook is effectively paying them a 329 00:18:06,720 --> 00:18:09,840 Speaker 1: licensing fee, and so what the law says is that 330 00:18:09,880 --> 00:18:13,240 Speaker 1: they have to reach some kind of licensing agreement working 331 00:18:13,280 --> 00:18:16,240 Speaker 1: with each other. And if they don't reach a licensing agreement, 332 00:18:16,280 --> 00:18:18,119 Speaker 1: that's where the requirements of the law kicked in. It 333 00:18:18,160 --> 00:18:20,159 Speaker 1: doesn't affect you as a user. It doesn't affect the 334 00:18:20,160 --> 00:18:22,480 Speaker 1: New York Times, you know here in the United States. 335 00:18:22,800 --> 00:18:24,719 Speaker 1: The real question though, as you said, is what are 336 00:18:24,800 --> 00:18:28,959 Speaker 1: other government's gonna do. And you can see EU and Canada, uh, 337 00:18:29,000 --> 00:18:32,320 Speaker 1: you know, being jurisdictions where they might follow the Australian approach. 338 00:18:32,320 --> 00:18:34,600 Speaker 1: I'm not so sure that that approach would fly here 339 00:18:34,600 --> 00:18:36,440 Speaker 1: in the United States. It's a little bit too much 340 00:18:36,520 --> 00:18:40,000 Speaker 1: government picking winners and well or Jim, does this Does 341 00:18:40,040 --> 00:18:43,080 Speaker 1: this mean that Australians are now going to have a 342 00:18:43,320 --> 00:18:48,480 Speaker 1: much bigger exposure to foreign media? No, I don't think 343 00:18:48,480 --> 00:18:50,840 Speaker 1: it does. Interestingly, you know what Facebook has said all 344 00:18:50,880 --> 00:18:53,760 Speaker 1: along is, you know, media companies choose to put their 345 00:18:53,760 --> 00:18:56,359 Speaker 1: content on Facebook, whether it be an Australian media company 346 00:18:56,440 --> 00:19:00,119 Speaker 1: or foreign media companies, They of course have algorithms that 347 00:19:00,200 --> 00:19:02,600 Speaker 1: can bubble content up or down, and we see that 348 00:19:02,640 --> 00:19:04,800 Speaker 1: all the time with our media clients. You know, the 349 00:19:04,840 --> 00:19:07,119 Speaker 1: reach rises in the reach balls. And that's been one 350 00:19:07,160 --> 00:19:09,560 Speaker 1: of the criticisms as well, is it's so unpredictable what 351 00:19:09,600 --> 00:19:13,200 Speaker 1: Facebook does. But there's nothing in this law that requires, 352 00:19:13,320 --> 00:19:15,560 Speaker 1: you know, that reach to be any higher. There are 353 00:19:15,680 --> 00:19:18,680 Speaker 1: some requirements of that disclosure of algorithms, and and those 354 00:19:18,720 --> 00:19:20,280 Speaker 1: don't think to be talked about a lot. I think 355 00:19:20,320 --> 00:19:22,600 Speaker 1: that's in practice gonna be a lot harder than what 356 00:19:22,640 --> 00:19:25,760 Speaker 1: they were hoping for in theory. So, Jimmy, is this 357 00:19:25,840 --> 00:19:29,959 Speaker 1: a risk to the economics of a Facebook, of a Google. 358 00:19:31,680 --> 00:19:33,679 Speaker 1: You would think it would be if it was uncapped. 359 00:19:33,720 --> 00:19:36,880 Speaker 1: You know, every company is going to be wildly reluctant 360 00:19:36,920 --> 00:19:39,120 Speaker 1: to take on an uncapped liability. And I think that's 361 00:19:39,119 --> 00:19:42,199 Speaker 1: what this forced arbitration looked a little bit like. But 362 00:19:42,440 --> 00:19:45,200 Speaker 1: they've gotten a lot of certainty here. They have preserved 363 00:19:45,240 --> 00:19:47,399 Speaker 1: their right to just walk away if the if the 364 00:19:47,440 --> 00:19:49,840 Speaker 1: stakes get too high or the cost get too high. 365 00:19:50,160 --> 00:19:52,600 Speaker 1: But Facebook made some news this morning, I think it 366 00:19:52,680 --> 00:19:54,280 Speaker 1: was they said they were going to commit more than 367 00:19:54,320 --> 00:19:57,160 Speaker 1: a billion dollars over three three years but I mean, 368 00:19:57,320 --> 00:19:59,879 Speaker 1: your Facebook is a seven and fifty billion dollar company. 369 00:20:00,040 --> 00:20:02,240 Speaker 1: This is very much a constant doing business. It's a 370 00:20:02,320 --> 00:20:05,359 Speaker 1: it's an acceptable cost for both Facebook and Google, and 371 00:20:05,400 --> 00:20:07,040 Speaker 1: I think as long as they can keep it in 372 00:20:07,080 --> 00:20:09,320 Speaker 1: the low billions of dollars, which sounds like a lot 373 00:20:09,320 --> 00:20:11,919 Speaker 1: of money, and it is. But the Facebook and Google, 374 00:20:11,960 --> 00:20:14,280 Speaker 1: you know, it's really not that much money. Except to 375 00:20:14,320 --> 00:20:17,119 Speaker 1: your point, Jim, this is only one country and others. 376 00:20:17,400 --> 00:20:20,280 Speaker 1: I mean, I'm in Berlin and I've had conversations with 377 00:20:20,359 --> 00:20:24,800 Speaker 1: Matthias Duffner, who runs Axel Springer Um. They published build 378 00:20:25,240 --> 00:20:29,600 Speaker 1: Uh newspaper, among many other publications. He has complained about 379 00:20:29,840 --> 00:20:34,280 Speaker 1: the fact that Facebook and Google use their content without 380 00:20:34,600 --> 00:20:38,239 Speaker 1: paying them for it. So does does Germany look at 381 00:20:38,240 --> 00:20:41,520 Speaker 1: this too? Does does the US look at this? Yeah? Well, 382 00:20:41,560 --> 00:20:45,000 Speaker 1: so definitely Germany and and more broadly the European Union 383 00:20:45,040 --> 00:20:46,800 Speaker 1: are going to look at this. I think that's probably 384 00:20:46,840 --> 00:20:50,639 Speaker 1: the jurisdiction that would be most likely to copy the 385 00:20:50,720 --> 00:20:54,720 Speaker 1: Australian approach, and perhaps Canada as well. I just don't 386 00:20:54,720 --> 00:20:57,400 Speaker 1: see that working in the US though. More practically, I mean, 387 00:20:57,400 --> 00:21:01,000 Speaker 1: you've got literally the government taking the role picking a 388 00:21:01,040 --> 00:21:05,200 Speaker 1: winner and a loser. In a commercial negotiation via for starbitration. 389 00:21:05,280 --> 00:21:07,720 Speaker 1: As polar rights as our politics are in the US, 390 00:21:07,960 --> 00:21:11,159 Speaker 1: and as as strong as some conservative beliefs are, is 391 00:21:11,200 --> 00:21:13,919 Speaker 1: that really a role that you want government playing. So 392 00:21:13,960 --> 00:21:17,320 Speaker 1: I don't see that approach applying here, but I very 393 00:21:17,359 --> 00:21:20,040 Speaker 1: much think that the European Union is watching closely and 394 00:21:20,119 --> 00:21:23,680 Speaker 1: may very well choose to follow Australia's approach. So, Jim, 395 00:21:23,720 --> 00:21:27,040 Speaker 1: you follow these, you know, the social media technology space closely. 396 00:21:27,320 --> 00:21:30,119 Speaker 1: What do you think the regulatory risk is for a 397 00:21:30,200 --> 00:21:32,880 Speaker 1: lot of these companies? You know, we've over the last 398 00:21:32,880 --> 00:21:34,600 Speaker 1: couple of years, we've seen CEOs of some of these 399 00:21:34,600 --> 00:21:37,439 Speaker 1: big tech companies hauled before Congress that testify about various 400 00:21:37,440 --> 00:21:39,560 Speaker 1: parts of their business. You know, we now have a 401 00:21:39,560 --> 00:21:43,840 Speaker 1: new administration in the White House. Um, what's the expectation 402 00:21:43,880 --> 00:21:46,840 Speaker 1: on Silicon Valley. Well, without a doubt, it's got to 403 00:21:46,880 --> 00:21:49,920 Speaker 1: be anti trust, right. The facebooks and Googles and Amazons 404 00:21:49,920 --> 00:21:52,879 Speaker 1: and Apples of the world are giant companies. I mean, 405 00:21:52,920 --> 00:21:56,360 Speaker 1: they are the standard oils of of this this century 406 00:21:56,440 --> 00:21:58,000 Speaker 1: and and this decade, or the A T and T 407 00:21:58,160 --> 00:21:59,919 Speaker 1: s if you want to go back to that, Um, 408 00:22:00,040 --> 00:22:03,200 Speaker 1: that analogy so clearly antitrust not just in the US, 409 00:22:03,280 --> 00:22:05,320 Speaker 1: but also in the EU for instance. It's got to 410 00:22:05,359 --> 00:22:07,760 Speaker 1: be a giant concern. And that leads to the point 411 00:22:07,800 --> 00:22:10,760 Speaker 1: this this Australian you know, sort of the debate and 412 00:22:10,920 --> 00:22:15,159 Speaker 1: negotiation UM is a commercial negotiation wrapped inside of a 413 00:22:15,160 --> 00:22:18,000 Speaker 1: public relations battle. I mean, there's a question about how 414 00:22:18,080 --> 00:22:21,240 Speaker 1: much money goes to who, and that's very important obviously 415 00:22:21,240 --> 00:22:24,320 Speaker 1: to the Australian media. But the larger point to Facebook 416 00:22:24,320 --> 00:22:27,600 Speaker 1: and Google is that public relations battle because ultimately that's 417 00:22:27,640 --> 00:22:34,040 Speaker 1: what affects the antitrust action from government. So I wonder 418 00:22:34,080 --> 00:22:38,199 Speaker 1: if then, uh, Facebook or Google could be broken up 419 00:22:38,320 --> 00:22:41,040 Speaker 1: When you say anti trust, that's what I think of. UM. 420 00:22:41,160 --> 00:22:44,440 Speaker 1: Is that a possibility? Yeah? I think it is, and 421 00:22:44,440 --> 00:22:46,919 Speaker 1: and that's probably the biggest concern. So let's think about this. 422 00:22:47,400 --> 00:22:51,000 Speaker 1: Facebook will start with them. They own Instagrams, they own 423 00:22:51,080 --> 00:22:54,199 Speaker 1: what'sab and so it wouldn't be hard to imagine some 424 00:22:54,280 --> 00:22:57,760 Speaker 1: kind of antitrust requirement that would force them to divest 425 00:22:57,880 --> 00:23:00,600 Speaker 1: one or both of these. Google and the stably owned 426 00:23:00,640 --> 00:23:03,680 Speaker 1: YouTube just to pick one example. They also have owned 427 00:23:03,840 --> 00:23:06,320 Speaker 1: what was formerly called Doubliclick, which powers a lot of 428 00:23:06,320 --> 00:23:09,680 Speaker 1: the advertising on Google and on YouTube. So there are 429 00:23:09,720 --> 00:23:13,160 Speaker 1: certainly elements of each company that you could imagine being 430 00:23:13,200 --> 00:23:17,320 Speaker 1: on the table in an antitrust type conversation. Obviously, neither 431 00:23:17,359 --> 00:23:19,359 Speaker 1: a company would be in favor of that divestiture. You 432 00:23:19,359 --> 00:23:21,480 Speaker 1: can expect them to battle consider place. But I don't 433 00:23:21,480 --> 00:23:24,280 Speaker 1: think that will unfold quickly. But over the next you know, 434 00:23:24,320 --> 00:23:27,920 Speaker 1: one to three years, might we see those kinds of discussions. 435 00:23:27,920 --> 00:23:31,040 Speaker 1: I think that's entirely possible. H M, thanks so much 436 00:23:31,040 --> 00:23:34,000 Speaker 1: for joining us. We appreciate it as always. Jim Anderson, 437 00:23:34,119 --> 00:23:36,919 Speaker 1: CEO of Social Flow, giving us his thoughts on what 438 00:23:36,960 --> 00:23:38,959 Speaker 1: we're seeing coming out of Australia from some little bit 439 00:23:38,960 --> 00:23:41,359 Speaker 1: of a increased regulation there as it relates to some 440 00:23:41,440 --> 00:23:44,360 Speaker 1: of that local news. And you know, Matt, I could 441 00:23:44,359 --> 00:23:47,000 Speaker 1: see the European Union probably thinking about this might be 442 00:23:47,040 --> 00:23:49,119 Speaker 1: an opportunity for us to maybe assert a little bit 443 00:23:49,119 --> 00:23:52,440 Speaker 1: of a control over our content. It's coming out of Germany. 444 00:23:52,680 --> 00:23:55,120 Speaker 1: You know, for the last ten years at Saint Paul, 445 00:23:55,480 --> 00:23:57,840 Speaker 1: you've been the person I go to when I'm when 446 00:23:57,880 --> 00:24:02,600 Speaker 1: I'm wondering about media properties. So what's your take on 447 00:24:02,600 --> 00:24:06,200 Speaker 1: Facebook and the possibility of a breakup. I don't think 448 00:24:06,200 --> 00:24:09,080 Speaker 1: that the breakup is likely, but I think it's the 449 00:24:09,240 --> 00:24:13,000 Speaker 1: in terms of any new deals. Uh, any anti competitive 450 00:24:13,040 --> 00:24:14,919 Speaker 1: behavior is going to be looked at very closely. So 451 00:24:14,960 --> 00:24:18,320 Speaker 1: I think the overall light touch that the U. S. 452 00:24:18,359 --> 00:24:21,200 Speaker 1: Tech industry has enjoyed over the last forty to fifty 453 00:24:21,240 --> 00:24:24,199 Speaker 1: years that I think on the margin is changing and 454 00:24:24,240 --> 00:24:29,760 Speaker 1: they need to be positioned for that. Oh man, you're 455 00:24:29,760 --> 00:24:31,919 Speaker 1: gonna get canceled if you call us that. That's not 456 00:24:32,400 --> 00:24:35,159 Speaker 1: got that's dangerous. UM. But I want to bring in 457 00:24:35,200 --> 00:24:39,200 Speaker 1: another boy right now. Barry rid Holds joins us UM 458 00:24:39,280 --> 00:24:41,840 Speaker 1: from what Holds Ridholes Wealth Management, also the host of 459 00:24:41,840 --> 00:24:46,240 Speaker 1: course of Masters in Business, the podcast that's grown so popular, 460 00:24:46,440 --> 00:24:49,879 Speaker 1: and Barry, I gotta start with one of what I 461 00:24:49,920 --> 00:24:52,840 Speaker 1: think is one of the most interesting stories UM. Today, 462 00:24:53,080 --> 00:24:57,400 Speaker 1: Deutsche Bank did a survey of, you know, potential recipients 463 00:24:57,440 --> 00:25:00,840 Speaker 1: of the four d and sixty five billion dollars indirect 464 00:25:00,920 --> 00:25:05,719 Speaker 1: stimulus that's expected to come soon thirty seven percent. So 465 00:25:05,760 --> 00:25:08,080 Speaker 1: they want to put it directly into stocks. And as 466 00:25:08,080 --> 00:25:14,000 Speaker 1: I watch game stock rise again today, I wonder, is this, uh, 467 00:25:14,240 --> 00:25:17,520 Speaker 1: you know, Charlie Munger has said this is a dirty business, 468 00:25:17,560 --> 00:25:19,639 Speaker 1: a dirty way to make money. It's gambling. Is this 469 00:25:19,680 --> 00:25:25,000 Speaker 1: a problem. Um. Well, there's two questions in there, one 470 00:25:25,080 --> 00:25:29,840 Speaker 1: about the stimulus of the second about um the gamification 471 00:25:30,640 --> 00:25:34,720 Speaker 1: of of trading apps. And so from the stimulus perspective, 472 00:25:35,200 --> 00:25:37,560 Speaker 1: we can't let the perfect be the enemy of the good. 473 00:25:38,040 --> 00:25:40,600 Speaker 1: We know that there's ten million people unemployed, there are 474 00:25:40,640 --> 00:25:44,680 Speaker 1: lots and lots of people underemployed. It's still going to 475 00:25:44,800 --> 00:25:48,120 Speaker 1: be a quarter or two before we can even hope 476 00:25:48,160 --> 00:25:51,000 Speaker 1: to beginning back to normal, and lots and lots of 477 00:25:51,000 --> 00:25:55,360 Speaker 1: people are finding themselves both food and healthcare and secure. 478 00:25:55,400 --> 00:25:59,520 Speaker 1: And this is to resolve some of that which will 479 00:25:59,680 --> 00:26:03,840 Speaker 1: resolve from the pandemic. So is it going to be perfect. No, 480 00:26:04,119 --> 00:26:08,720 Speaker 1: But that's the nature of federal government rescue plans is 481 00:26:08,800 --> 00:26:11,120 Speaker 1: there are always going to be people who don't deserve 482 00:26:12,080 --> 00:26:16,080 Speaker 1: what they get. I you know, those surveys are always terrible. 483 00:26:17,000 --> 00:26:22,080 Speaker 1: In my firm, we put people through a form of 484 00:26:22,119 --> 00:26:27,600 Speaker 1: a risk tolerance survey. It's almost pro former at advisory firms. 485 00:26:27,600 --> 00:26:30,080 Speaker 1: But all it ends up telling us is what the 486 00:26:30,160 --> 00:26:32,600 Speaker 1: markets done over the past couple of months. It doesn't 487 00:26:32,600 --> 00:26:36,200 Speaker 1: really give you insight. And so thirty percent of people 488 00:26:36,200 --> 00:26:38,560 Speaker 1: say they want to put some money into stocks. What 489 00:26:38,720 --> 00:26:41,720 Speaker 1: that tells us is not what their real intentions are, 490 00:26:42,320 --> 00:26:47,119 Speaker 1: but the fallmo surrounding recently rising markets and let the 491 00:26:47,200 --> 00:26:50,439 Speaker 1: market to take a fifteen or twenty dip and that 492 00:26:50,560 --> 00:26:55,320 Speaker 1: number will drop to far, far below thirty. Hey, Barry, 493 00:26:55,359 --> 00:26:58,160 Speaker 1: we just had Mike Mayo on bank analyst at Wells 494 00:26:58,200 --> 00:27:03,520 Speaker 1: Fargo Securities. Uh, you know, really constructive on the banking sector. 495 00:27:03,560 --> 00:27:07,359 Speaker 1: You know that interest margin improvement with the steepening of 496 00:27:07,359 --> 00:27:11,040 Speaker 1: the yield curving, really strong capital markets activity. What's your 497 00:27:11,080 --> 00:27:13,800 Speaker 1: take on the on the bank stocks? So so you 498 00:27:13,840 --> 00:27:17,280 Speaker 1: said the magic words, steepening of the yield curve. You know, 499 00:27:17,320 --> 00:27:19,720 Speaker 1: when you're a bank, you could borrow from the Fed 500 00:27:20,359 --> 00:27:23,040 Speaker 1: at FED funds rate and then lend it out at 501 00:27:23,080 --> 00:27:26,959 Speaker 1: prevailing rates. And people don't realize when all rates are 502 00:27:26,960 --> 00:27:29,120 Speaker 1: close to zero, there's not a whole lot of fat 503 00:27:29,200 --> 00:27:32,560 Speaker 1: there for banks to make a lot of money when 504 00:27:32,600 --> 00:27:35,919 Speaker 1: you look out on the other side of the valley 505 00:27:35,960 --> 00:27:38,960 Speaker 1: of the pandemic. Once we're all done sheltering in place 506 00:27:38,960 --> 00:27:44,359 Speaker 1: and working from home, which surely is sooner rather than later. 507 00:27:44,440 --> 00:27:47,880 Speaker 1: But even if some of the more conservetive estimates put 508 00:27:47,960 --> 00:27:51,560 Speaker 1: us in September October, well that's a couple of quarters 509 00:27:51,600 --> 00:27:55,679 Speaker 1: from now. I'm not in the inflation camp. Um. We 510 00:27:55,800 --> 00:27:59,440 Speaker 1: certainly should see in freely or we should see inflation 511 00:27:59,560 --> 00:28:04,040 Speaker 1: normal lies, and there'll be some transitory increases in prices. 512 00:28:04,080 --> 00:28:06,800 Speaker 1: There's a lot of spot shortages of goods as as 513 00:28:06,920 --> 00:28:11,399 Speaker 1: manufacturers start to ramp back up again. But you know, 514 00:28:11,480 --> 00:28:16,040 Speaker 1: all these factors are suggesting that there's a big, fat 515 00:28:17,240 --> 00:28:20,720 Speaker 1: change coming that's gonna very much accrue to the benefit 516 00:28:21,320 --> 00:28:25,640 Speaker 1: of banks from from the yield curve and improving economics 517 00:28:25,800 --> 00:28:30,359 Speaker 1: and just seeing that ten million unemployee start to head 518 00:28:30,400 --> 00:28:34,119 Speaker 1: back towards you know, a more normalized rates. As this 519 00:28:34,200 --> 00:28:38,120 Speaker 1: externality passes banks, I can I can buy banks doing 520 00:28:38,160 --> 00:28:40,480 Speaker 1: well because everything is going to go in their favor. 521 00:28:40,520 --> 00:28:45,440 Speaker 1: The yield curve, volatility is expected to remain or even 522 00:28:45,640 --> 00:28:48,640 Speaker 1: increase in risk assets, so they can trade a whole 523 00:28:48,680 --> 00:28:51,560 Speaker 1: bunch of stuff around and make money off of that too. 524 00:28:51,720 --> 00:28:54,920 Speaker 1: M and A is supposed to be strong again this year. UM. 525 00:28:54,960 --> 00:28:58,760 Speaker 1: I gotta take issue with the inflation called transitory. I 526 00:28:58,760 --> 00:29:01,280 Speaker 1: mean all the prices is that I see going up 527 00:29:01,320 --> 00:29:06,400 Speaker 1: on UM commodities, for example, copper and lumber and oil. 528 00:29:06,760 --> 00:29:10,120 Speaker 1: I can't imagine gold. I don't see it going up 529 00:29:10,120 --> 00:29:11,880 Speaker 1: and gold, but you don't. You don't need gold to 530 00:29:11,920 --> 00:29:15,760 Speaker 1: rebuild Texas, right, you don't need gold to um to 531 00:29:16,080 --> 00:29:19,760 Speaker 1: to triple or quadruple the ev fleet. Gold isn't necessary 532 00:29:19,800 --> 00:29:24,000 Speaker 1: to put in chargers. I mean, infrastructure spending isn't going 533 00:29:24,040 --> 00:29:28,360 Speaker 1: to be buying gold. I'm I might myself all of 534 00:29:28,400 --> 00:29:30,920 Speaker 1: this stuff barrier. It seems like we're gonna need more 535 00:29:31,000 --> 00:29:34,200 Speaker 1: of it. I mean, as governments are trillions and trillions 536 00:29:34,200 --> 00:29:38,560 Speaker 1: of dollars, they're gonna be buying copper with it. Absolutely so. 537 00:29:38,560 --> 00:29:42,000 Speaker 1: So you're coming out of a year plus of a 538 00:29:42,080 --> 00:29:46,960 Speaker 1: forced lockdown in all sorts of things that have normally 539 00:29:47,000 --> 00:29:50,440 Speaker 1: taking place. You you and you're starting we see spot 540 00:29:50,520 --> 00:29:54,360 Speaker 1: lumber shortages, and I'm the middle of a kitchen renovation 541 00:29:54,400 --> 00:29:58,160 Speaker 1: that was supposed to start March. I'm still a waiting 542 00:29:58,200 --> 00:30:01,120 Speaker 1: from my refrigerator doors to show up eight months later. 543 00:30:01,440 --> 00:30:05,200 Speaker 1: Like all these things are taking much longer because it's 544 00:30:05,240 --> 00:30:08,080 Speaker 1: hard to restart an economy after you lock it down 545 00:30:08,120 --> 00:30:12,520 Speaker 1: for a couple of months. That said, um, when when 546 00:30:12,520 --> 00:30:14,520 Speaker 1: you see all the different things that we're going to 547 00:30:14,560 --> 00:30:16,880 Speaker 1: be spending money on, that that's why I say say 548 00:30:16,920 --> 00:30:22,240 Speaker 1: this is transitory. Overall, for the past three decades, the 549 00:30:22,600 --> 00:30:29,320 Speaker 1: dominant economic inflation has been deflation. You have between technology 550 00:30:29,400 --> 00:30:33,680 Speaker 1: making the cost of digital goods cheaper, automation and and 551 00:30:33,840 --> 00:30:38,120 Speaker 1: logistics making the cost of physical goods cheaper, and then 552 00:30:38,320 --> 00:30:44,920 Speaker 1: global labor arbitrage making everything cheaper. Deflation is your background 553 00:30:45,400 --> 00:30:50,640 Speaker 1: um driver. With these periodic spasms of inflation. I wouldn't 554 00:30:50,640 --> 00:30:56,000 Speaker 1: be surprised to see a pop in inflation higher from 555 00:30:56,040 --> 00:30:58,520 Speaker 1: where we are, But it looks like it's going to 556 00:30:58,600 --> 00:31:02,640 Speaker 1: be transitory. It's not gonna take twenty years to rebuild Texas. 557 00:31:02,680 --> 00:31:05,320 Speaker 1: It will take a couple of years. Yes, there are 558 00:31:05,560 --> 00:31:09,360 Speaker 1: massive infrastructure needs in the United States, but those aren't 559 00:31:09,400 --> 00:31:12,920 Speaker 1: get it done by tuesdays and here and here. Germans 560 00:31:13,040 --> 00:31:15,360 Speaker 1: do spend decades rebuilding stuff. I mean it took us 561 00:31:15,560 --> 00:31:20,640 Speaker 1: two decades to build the Berlin Airport. So so generally speaking, 562 00:31:20,720 --> 00:31:25,560 Speaker 1: the US has moved from a infrastructure leader to a 563 00:31:25,800 --> 00:31:28,600 Speaker 1: giant laggard we we once were. The Look at the 564 00:31:28,640 --> 00:31:33,480 Speaker 1: Interstate highway system built under Eisenhower and how it's been 565 00:31:33,520 --> 00:31:37,280 Speaker 1: starved of maintenance funds, and it's bridges and tunnels and 566 00:31:37,360 --> 00:31:40,640 Speaker 1: rails and airports and go down the list. There is 567 00:31:40,800 --> 00:31:45,040 Speaker 1: nothing preventing the Biden administration from saying we want to 568 00:31:45,080 --> 00:31:50,760 Speaker 1: do a ten year, five trillion dollar infrastructure build funded 569 00:31:50,960 --> 00:31:53,680 Speaker 1: if they're smart, with fifty a hundred year bonds while 570 00:31:53,720 --> 00:31:56,640 Speaker 1: things are as cheap as they are now, and that 571 00:31:56,840 --> 00:32:00,920 Speaker 1: is not necessarily inflationary because it's it's gonna be over 572 00:32:00,960 --> 00:32:03,800 Speaker 1: a decade, and it's what we should have been doing 573 00:32:04,280 --> 00:32:07,000 Speaker 1: over the past thirty years. Maybe part of the deflation 574 00:32:07,080 --> 00:32:11,160 Speaker 1: we've been experiencing is our failure to do what most 575 00:32:11,160 --> 00:32:15,120 Speaker 1: countries countries do, which is take care of their infrastructure. 576 00:32:15,120 --> 00:32:18,600 Speaker 1: Will so beyond and so Barritt, hopefully there's some bipartisan 577 00:32:18,640 --> 00:32:21,720 Speaker 1: support for that. But as we think about inflation, you're 578 00:32:21,720 --> 00:32:23,920 Speaker 1: really not gonna have a meaningful inflation and in this 579 00:32:24,040 --> 00:32:27,760 Speaker 1: economy unless you get wages moving higher, and they were 580 00:32:27,840 --> 00:32:31,719 Speaker 1: starting to do like starting at yeah exactly, they were 581 00:32:31,720 --> 00:32:33,959 Speaker 1: starting to do that prior to the pandemic. What's your 582 00:32:34,000 --> 00:32:35,840 Speaker 1: view on kind of kind of the labor market and 583 00:32:35,840 --> 00:32:39,080 Speaker 1: wage growth, So so, you know, we've seen a really 584 00:32:39,120 --> 00:32:43,719 Speaker 1: interesting experiment take place, um both on the minimum wage 585 00:32:43,720 --> 00:32:48,480 Speaker 1: side but across the board. And I know it's one 586 00:32:48,960 --> 00:32:52,280 Speaker 1: but when you trace the history of what's taken place 587 00:32:52,760 --> 00:32:57,360 Speaker 1: with median wages in the US. We are still shockingly 588 00:32:58,200 --> 00:33:01,080 Speaker 1: feeling some of the effects of the Great Financial Crisis 589 00:33:01,120 --> 00:33:04,440 Speaker 1: of o O nine. We saw a number of people 590 00:33:04,520 --> 00:33:09,440 Speaker 1: lose their jobs and subsequently get different jobs that paid 591 00:33:09,520 --> 00:33:14,800 Speaker 1: substantially less. There is a massive underemployment issue in the 592 00:33:14,840 --> 00:33:18,280 Speaker 1: United States that we don't really talk about. And you're 593 00:33:18,320 --> 00:33:21,280 Speaker 1: not going to get the sort of wage push inflation 594 00:33:21,920 --> 00:33:25,720 Speaker 1: that was an epidemic in the seventies and what people 595 00:33:26,000 --> 00:33:29,680 Speaker 1: traditionally think of as one of the key drivers of inflation. 596 00:33:30,200 --> 00:33:33,120 Speaker 1: As long as twenty or thirty or maybe it's even 597 00:33:34,040 --> 00:33:38,080 Speaker 1: of the country is underemployed. You know, we're gonna we 598 00:33:38,200 --> 00:33:39,920 Speaker 1: got to leave it there. Unfortunately, because of time, we'll 599 00:33:39,960 --> 00:33:42,560 Speaker 1: get you back, certainly of very quickly. Bary rit Hults 600 00:33:42,640 --> 00:33:45,600 Speaker 1: of Bloomberk Opinion calumnists and founder and chairman, chief investment 601 00:33:45,600 --> 00:33:49,280 Speaker 1: officer of rit Hult's Wealth Management. Thanks for listening to 602 00:33:49,280 --> 00:33:52,800 Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to 603 00:33:52,840 --> 00:33:57,000 Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer. 604 00:33:57,400 --> 00:34:00,760 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Lern nineteen 605 00:34:00,800 --> 00:34:03,720 Speaker 1: seventy three on Fall Sweeney. I'm on Twitter at pt 606 00:34:03,840 --> 00:34:06,880 Speaker 1: Sweeney Before the podcast. You can always catch us worldwide 607 00:34:06,880 --> 00:34:07,760 Speaker 1: at Bloomberg Radio