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 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple podcast or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,079 Speaker 1: at Bloomberg dot com slash podcast. I want to get 7 00:00:22,120 --> 00:00:25,520 Speaker 1: over right now to Keith Rogan Nathan. She is our 8 00:00:25,720 --> 00:00:30,480 Speaker 1: US media analyst for Bloomberg Intelligence. And of course we've 9 00:00:30,480 --> 00:00:32,519 Speaker 1: got to talk more about what's going on with Disney. 10 00:00:32,560 --> 00:00:35,400 Speaker 1: It's a big move today, and as Abigail points out, 11 00:00:35,640 --> 00:00:38,000 Speaker 1: um it's a big move in general. Kind of are 12 00:00:38,040 --> 00:00:41,400 Speaker 1: they winning this issue with Nelson Pelts or have they 13 00:00:41,520 --> 00:00:45,360 Speaker 1: both won? Everyone's a winner, Githa, what do you think? Yeah? 14 00:00:45,440 --> 00:00:47,839 Speaker 1: I agree, I think everyone is a winner. I mean 15 00:00:47,960 --> 00:00:50,920 Speaker 1: a Pell's got what he wanted, uh, which is, you know, 16 00:00:51,000 --> 00:00:53,560 Speaker 1: the stock price moved higher. And I think it's you know, 17 00:00:53,680 --> 00:00:55,400 Speaker 1: just kind of even though it's a somewhat of an 18 00:00:55,480 --> 00:00:58,279 Speaker 1: I think an unwelcome distraction for Disney when they had 19 00:00:58,280 --> 00:01:00,200 Speaker 1: so much going on. It really kind of up to 20 00:01:00,360 --> 00:01:02,760 Speaker 1: Bob Iger on his does and and forced him to 21 00:01:02,880 --> 00:01:05,320 Speaker 1: kind of come up with the plan that he did, 22 00:01:05,920 --> 00:01:09,280 Speaker 1: which he articulated yesterday, really kind of putting them now 23 00:01:09,319 --> 00:01:12,720 Speaker 1: on that path to to sustainable earnings growth and profitability 24 00:01:12,760 --> 00:01:15,039 Speaker 1: in the streaming business, two things that you know, investors 25 00:01:15,120 --> 00:01:18,440 Speaker 1: really wanted to see very badly. Also striking to me 26 00:01:18,520 --> 00:01:21,320 Speaker 1: about the earnings picture, specifically that you're seeing a pretty 27 00:01:21,360 --> 00:01:24,520 Speaker 1: decent rebound in Parks in their parks business as opposed 28 00:01:24,520 --> 00:01:27,200 Speaker 1: to a miss on their subscriber business. Talk to us 29 00:01:27,240 --> 00:01:29,640 Speaker 1: about that divergence. It doesn't feel like we can call 30 00:01:29,720 --> 00:01:33,720 Speaker 1: Disney and Media tech company anymore. I agree, pretty. I mean, 31 00:01:33,880 --> 00:01:36,479 Speaker 1: if you look at just their operating results from from 32 00:01:36,560 --> 00:01:40,000 Speaker 1: what they posted yesterday, hundred percent of their operating income 33 00:01:40,080 --> 00:01:42,320 Speaker 1: now comes from the parks division. So I feel like 34 00:01:42,480 --> 00:01:47,160 Speaker 1: it Parks still continues to be such a yes, a 35 00:01:47,280 --> 00:01:50,840 Speaker 1: hundred percent. Um. You know, all of their operating income 36 00:01:50,960 --> 00:01:53,559 Speaker 1: is generated by Parks because you know, whatever the linear 37 00:01:53,640 --> 00:01:57,640 Speaker 1: networks were generating in operating income that was offset by 38 00:01:57,680 --> 00:02:01,000 Speaker 1: the losses and the streaming division. Um, so Media really 39 00:02:01,200 --> 00:02:04,920 Speaker 1: is net zero for them at this point. Um, and 40 00:02:05,040 --> 00:02:07,320 Speaker 1: so everything is Sparks, and I feel like it is 41 00:02:07,800 --> 00:02:11,160 Speaker 1: somewhat miss uh. I don't want to say misunderstood, but 42 00:02:11,200 --> 00:02:15,079 Speaker 1: definitely underappreciated because it is such a big part of 43 00:02:15,240 --> 00:02:18,239 Speaker 1: their profit equation. And what we're seeing is not just 44 00:02:18,360 --> 00:02:21,240 Speaker 1: the comeback in parks, right, but we're seeing the sustained momentum. 45 00:02:21,480 --> 00:02:24,600 Speaker 1: So you're looking at attendance, it was up eleven You 46 00:02:24,639 --> 00:02:27,440 Speaker 1: look at a capita spending that was up last year, 47 00:02:27,520 --> 00:02:30,320 Speaker 1: it was up over pre pandemic levels. But even if 48 00:02:30,360 --> 00:02:33,480 Speaker 1: you look at the fiscal first quarter, it was again 49 00:02:33,600 --> 00:02:36,119 Speaker 1: up about you know, eight percent or so, so again 50 00:02:36,200 --> 00:02:39,200 Speaker 1: steady growth. And if you just look at US park 51 00:02:39,480 --> 00:02:43,679 Speaker 1: margins thirty, I mean this was record high margins. So 52 00:02:44,400 --> 00:02:46,520 Speaker 1: really they are you know, I want to say, firing 53 00:02:46,560 --> 00:02:49,160 Speaker 1: on all cylinders, whether it's you know, revenue growth, whether 54 00:02:49,240 --> 00:02:52,720 Speaker 1: it's extracting efficiencies in terms of costs um so Parks 55 00:02:52,800 --> 00:02:56,400 Speaker 1: definitely is is just such uh you know, alliance share 56 00:02:56,440 --> 00:02:59,560 Speaker 1: of the profits there for them at Disney. If I listen, 57 00:03:00,200 --> 00:03:01,800 Speaker 1: I feel like they're leaving some money on the table 58 00:03:01,840 --> 00:03:05,239 Speaker 1: because if I get HBO streaming, I get everything that 59 00:03:05,440 --> 00:03:09,560 Speaker 1: HBO offers, or when I get Netflix or Amazon Prime, 60 00:03:09,760 --> 00:03:12,639 Speaker 1: I get all of the products they offer over the 61 00:03:12,760 --> 00:03:17,040 Speaker 1: box with my little app. But ESPN. If I get 62 00:03:17,400 --> 00:03:21,079 Speaker 1: ESPN Plus, then I get like Division three softball and 63 00:03:21,240 --> 00:03:24,959 Speaker 1: maybe some Ivy League quidditch games. Like, why is it 64 00:03:25,080 --> 00:03:28,120 Speaker 1: that I can't get all of ESPN without having to 65 00:03:28,240 --> 00:03:31,640 Speaker 1: fork out money that I'm that I'm unwilling to pay 66 00:03:32,160 --> 00:03:36,800 Speaker 1: for some stupid old school cable package. Yeah, this is 67 00:03:36,880 --> 00:03:40,520 Speaker 1: really the conundrum really for for Disney and for actually 68 00:03:40,560 --> 00:03:42,240 Speaker 1: the whole media industry. Man, and you bring up a 69 00:03:42,320 --> 00:03:45,600 Speaker 1: really good point. They are not able to go in 70 00:03:46,360 --> 00:03:49,600 Speaker 1: or or I should say, all in on streaming when 71 00:03:49,600 --> 00:03:53,560 Speaker 1: it comes to ESPN, just because ESPN really defines the 72 00:03:53,680 --> 00:03:58,160 Speaker 1: linear TV bundle. So if ESPN or when ESPN makes 73 00:03:58,240 --> 00:04:01,960 Speaker 1: that complete shift to uming, uh, that's pretty much the 74 00:04:02,080 --> 00:04:04,680 Speaker 1: depth of the traditional TV bundle as we know it, 75 00:04:04,760 --> 00:04:07,480 Speaker 1: because all of the sports rights, all of the content, 76 00:04:08,080 --> 00:04:11,040 Speaker 1: you know, is with that linear ESPN networking. Remember, it 77 00:04:11,120 --> 00:04:13,360 Speaker 1: still throws out about three and a half four billion 78 00:04:13,440 --> 00:04:16,560 Speaker 1: dollars in cash flow year after years. So this is 79 00:04:16,600 --> 00:04:19,599 Speaker 1: really a very important part of the profit story for them, 80 00:04:19,960 --> 00:04:21,760 Speaker 1: or at at least it has been. It is going 81 00:04:21,800 --> 00:04:23,440 Speaker 1: to be a diminishing part of it, but it has 82 00:04:23,520 --> 00:04:25,440 Speaker 1: been for a long time, and they don't want to 83 00:04:25,480 --> 00:04:29,159 Speaker 1: do anything to exacerbate card cutting because there still is value. 84 00:04:29,160 --> 00:04:32,599 Speaker 1: I mean, even if it's generating lower IBADA, it's still 85 00:04:32,720 --> 00:04:35,280 Speaker 1: throwing out cash and that that's important for business, at 86 00:04:35,360 --> 00:04:38,440 Speaker 1: least for the businesses, especially when you know streaming is 87 00:04:38,480 --> 00:04:42,240 Speaker 1: still um in a loss making phase. But couldn't they 88 00:04:42,480 --> 00:04:44,720 Speaker 1: I mean, I would pay twenty hours a month if 89 00:04:44,760 --> 00:04:48,560 Speaker 1: I could see real ESPN streaming and not have to 90 00:04:48,720 --> 00:04:51,320 Speaker 1: buy a cable bundle for it. Do they make more 91 00:04:51,400 --> 00:04:55,120 Speaker 1: than that on an so on a cable bundle, They're 92 00:04:55,200 --> 00:05:00,880 Speaker 1: making about twelve dollars per subscriber. So so they had 93 00:05:00,960 --> 00:05:03,080 Speaker 1: to do this, they had to take baby steps here, 94 00:05:03,120 --> 00:05:05,599 Speaker 1: and they already did that. So they have the ESPN too, 95 00:05:05,880 --> 00:05:08,680 Speaker 1: I'm sorry, the ESPN Plus product, which is you know, 96 00:05:08,720 --> 00:05:11,640 Speaker 1: which really has all the non market content as you 97 00:05:11,839 --> 00:05:16,440 Speaker 1: should be called n Yeah, yeah, good point, but it's 98 00:05:16,480 --> 00:05:18,840 Speaker 1: all you know, the tier two sports. Uh. And the 99 00:05:18,920 --> 00:05:20,880 Speaker 1: reason they can't get the n F, you can't get 100 00:05:20,920 --> 00:05:23,600 Speaker 1: the NFL or you know, the the NBA or the 101 00:05:23,720 --> 00:05:26,520 Speaker 1: MLB is because they want you to come back to 102 00:05:26,720 --> 00:05:30,280 Speaker 1: the traditional TV package because they're they're still asking distributors 103 00:05:30,360 --> 00:05:33,800 Speaker 1: to pay that twelve dollar fee per subscriber. UM. So 104 00:05:33,880 --> 00:05:35,760 Speaker 1: it's gonna be interesting. I mean pricing is going to 105 00:05:35,839 --> 00:05:38,440 Speaker 1: be the biggest sticking point when it comes to that, 106 00:05:39,000 --> 00:05:41,159 Speaker 1: you know, streaming product. Where are they going to price 107 00:05:41,480 --> 00:05:45,320 Speaker 1: ESPN plus? You know, our customers used at twenty dollars. 108 00:05:45,520 --> 00:05:47,480 Speaker 1: I mean, I don't know how many customers would be 109 00:05:47,520 --> 00:05:50,120 Speaker 1: willing to pay twenty dollars. So that is really something 110 00:05:50,160 --> 00:05:52,080 Speaker 1: that they need to evalue it very closely. But I 111 00:05:52,160 --> 00:05:55,560 Speaker 1: think just with them kind of separating out ESPN as 112 00:05:55,760 --> 00:05:58,800 Speaker 1: as a segment by itself kind of definitely paved the 113 00:05:58,839 --> 00:06:00,760 Speaker 1: way for them to do something much strategic with it, 114 00:06:00,839 --> 00:06:03,280 Speaker 1: either you know, a spin a sale or or that 115 00:06:03,440 --> 00:06:06,320 Speaker 1: big bush into streaming, maybe combining it with supports betting. 116 00:06:06,720 --> 00:06:09,280 Speaker 1: We have to wait and watch. I have betting drives 117 00:06:09,360 --> 00:06:11,880 Speaker 1: viewership for sure. Keith, thanks so much for joining us. KEITHA. 118 00:06:12,080 --> 00:06:15,919 Speaker 1: Royan Nathan. There are US media analysts for Bloomberg Intelligence 119 00:06:15,960 --> 00:06:21,960 Speaker 1: walking us through what's going on with Disney. We've all 120 00:06:22,040 --> 00:06:24,560 Speaker 1: heard about quiet quitting, and surely it's on the rise 121 00:06:24,880 --> 00:06:27,600 Speaker 1: now in bonus season. If you don't get what you 122 00:06:27,680 --> 00:06:30,920 Speaker 1: want and you can't get a raise, you're less likely 123 00:06:31,000 --> 00:06:32,760 Speaker 1: to quit your job, but you might as well just 124 00:06:32,880 --> 00:06:37,600 Speaker 1: not give up anymore. UM. Quiet hiring is a term 125 00:06:37,640 --> 00:06:41,000 Speaker 1: I've never heard before until now, and that's why we're 126 00:06:41,000 --> 00:06:43,400 Speaker 1: gonna bring in Emily Rose, Senior director of Research at 127 00:06:43,560 --> 00:06:47,480 Speaker 1: Gartner um n y I C ticker I T for 128 00:06:47,600 --> 00:06:50,800 Speaker 1: Gartner if you want to check out the business there. Emily, 129 00:06:50,839 --> 00:06:54,839 Speaker 1: thanks so much for joining us. What is quiet hiring 130 00:06:56,640 --> 00:07:00,120 Speaker 1: so quiet hiring is how organizations are addressed in the 131 00:07:00,160 --> 00:07:03,440 Speaker 1: fact that we've got a massive talent shortage while also 132 00:07:03,640 --> 00:07:09,040 Speaker 1: some economic uncertainty by using the talent they have in 133 00:07:09,200 --> 00:07:15,040 Speaker 1: house or contractors to add get the skills they need 134 00:07:15,080 --> 00:07:18,240 Speaker 1: where they need the most without adding full time headcount. 135 00:07:21,600 --> 00:07:27,400 Speaker 1: So they so they they're outsourcing, well, it could be 136 00:07:27,480 --> 00:07:30,440 Speaker 1: outsourcing UM, but usually what we're actually seeing is a 137 00:07:30,520 --> 00:07:33,320 Speaker 1: lot more of Okay, this part of the business is 138 00:07:33,360 --> 00:07:36,760 Speaker 1: incredibly important to us. We're going to move talent over 139 00:07:36,840 --> 00:07:39,160 Speaker 1: to make it happen. UM. You've seen examples from the 140 00:07:39,160 --> 00:07:42,280 Speaker 1: airline industry where anyone who has an office job is 141 00:07:42,360 --> 00:07:44,920 Speaker 1: being paid extra to take a shift as a bag 142 00:07:45,000 --> 00:07:49,480 Speaker 1: of chandler Um or if it's not operational priorities, it 143 00:07:49,560 --> 00:07:52,640 Speaker 1: might be strategic priorities. To say a business decides we 144 00:07:53,080 --> 00:07:56,360 Speaker 1: desperately need data scientists. We know the hiring kinmeline for 145 00:07:56,440 --> 00:08:00,720 Speaker 1: them is maybe nine months long or longer. So rather 146 00:08:00,840 --> 00:08:03,720 Speaker 1: than cut our goals for the year and say we're 147 00:08:03,760 --> 00:08:05,240 Speaker 1: just not going to meet them because we couldn't get 148 00:08:05,280 --> 00:08:07,400 Speaker 1: the talent we need, We're going to go take some 149 00:08:07,720 --> 00:08:10,360 Speaker 1: analysts from HR and Marketing who have some of the 150 00:08:10,400 --> 00:08:13,040 Speaker 1: skills that we need and move them over and have 151 00:08:13,240 --> 00:08:15,360 Speaker 1: them do some of the data science work and then 152 00:08:15,480 --> 00:08:18,400 Speaker 1: either upskill them, maybe run them through a quick boot camp, 153 00:08:19,120 --> 00:08:21,760 Speaker 1: or redesign the work a little bit so that either 154 00:08:21,840 --> 00:08:24,200 Speaker 1: a contractor or someone else with the organization can do 155 00:08:24,280 --> 00:08:28,240 Speaker 1: the parts of the role. But we can't do contractors. 156 00:08:28,800 --> 00:08:32,320 Speaker 1: That's the thing I understand the bringing in contract work 157 00:08:32,400 --> 00:08:35,920 Speaker 1: that makes sense and nothing new, um is are we 158 00:08:36,000 --> 00:08:38,120 Speaker 1: in an environment where people are scared to add to 159 00:08:38,200 --> 00:08:43,360 Speaker 1: headcount for you know Wall Street reasons. You don't see 160 00:08:43,520 --> 00:08:46,520 Speaker 1: stocks jump when you add seven thousand people. You do 161 00:08:46,679 --> 00:08:49,439 Speaker 1: see stocks jump when you cut seven thousand people. Is 162 00:08:49,520 --> 00:08:53,559 Speaker 1: that why they might want to do this quietly? Exactly? 163 00:08:53,679 --> 00:08:56,559 Speaker 1: So this is essentially a response to the fact that 164 00:08:57,120 --> 00:09:00,800 Speaker 1: Wall Streets watching, Your stakeholders are watching and and not 165 00:09:01,080 --> 00:09:06,520 Speaker 1: wanting to have massively high labor costs just skyrocket at 166 00:09:06,600 --> 00:09:10,559 Speaker 1: this particular point in time, but also the fact that 167 00:09:10,679 --> 00:09:13,000 Speaker 1: the work still needs to get done. So does that 168 00:09:13,080 --> 00:09:16,839 Speaker 1: shop up in something like the seventeen thousand jobs we 169 00:09:16,960 --> 00:09:19,640 Speaker 1: were got reported on on Friday. Is that something that's 170 00:09:19,960 --> 00:09:21,400 Speaker 1: showing up in the data or is this kind of 171 00:09:21,480 --> 00:09:25,720 Speaker 1: a great spot or a blind spot for the labor economy. Um, 172 00:09:25,880 --> 00:09:28,600 Speaker 1: So this is something that you might not necessarily see 173 00:09:28,840 --> 00:09:32,560 Speaker 1: in the job's numbers, because if someone's moving internally, um, 174 00:09:32,840 --> 00:09:35,559 Speaker 1: it doesn't necessarily look like a job was added, but 175 00:09:36,679 --> 00:09:40,719 Speaker 1: they are affecting that. Assuming that this goes well for 176 00:09:40,840 --> 00:09:44,160 Speaker 1: someone and they're able to perform in the role, they're 177 00:09:44,200 --> 00:09:46,560 Speaker 1: going to be more likely to stay at the organization 178 00:09:46,640 --> 00:09:48,839 Speaker 1: and maybe move upwards, which is going to then, of 179 00:09:48,960 --> 00:09:52,360 Speaker 1: course keep them from hopefully joining the labor market and 180 00:09:52,480 --> 00:09:55,640 Speaker 1: going to another organization and raise their pay. Right because 181 00:09:55,679 --> 00:09:59,199 Speaker 1: if I'm middle management but also a baggage handler, I'm 182 00:09:59,200 --> 00:10:01,679 Speaker 1: going to want more me for that. You know, if 183 00:10:01,720 --> 00:10:04,240 Speaker 1: I'm an analyst, but now I'm a data scientist, I 184 00:10:04,320 --> 00:10:08,040 Speaker 1: feel like we deserve a bump. Yes, especially because data 185 00:10:08,040 --> 00:10:11,600 Speaker 1: scientists are notoriously well paid compared to your typical HR 186 00:10:11,679 --> 00:10:16,839 Speaker 1: marketing analyst. So this is somewhere where organizations have to 187 00:10:17,080 --> 00:10:19,240 Speaker 1: see the that side of the coin. It's not enough 188 00:10:19,240 --> 00:10:20,760 Speaker 1: to say we're gonna move you over because it's a 189 00:10:20,760 --> 00:10:24,679 Speaker 1: strategic priority. So that's quiet hiring to pay people, So 190 00:10:24,840 --> 00:10:29,040 Speaker 1: that's quiet hiring. Emily, what is the extremely loud hiring 191 00:10:29,200 --> 00:10:31,920 Speaker 1: that we saw last Friday. What's going on with this 192 00:10:32,040 --> 00:10:35,080 Speaker 1: labor market where we just continue to add more jobs 193 00:10:35,600 --> 00:10:39,560 Speaker 1: than expected even as the Fed tries to raise rates 194 00:10:39,640 --> 00:10:43,439 Speaker 1: and tighten financial conditions, and we see a florry of 195 00:10:43,600 --> 00:10:45,640 Speaker 1: pink slips coming out of the West Coast and the 196 00:10:45,679 --> 00:10:50,439 Speaker 1: Magic Kingdom. Yeah, so I can't speak to specific organizations, 197 00:10:50,559 --> 00:10:54,360 Speaker 1: but in general with these layoffs, they're actually strikingly as 198 00:10:54,400 --> 00:10:56,280 Speaker 1: difficult as they might be for the people going through 199 00:10:56,360 --> 00:11:00,679 Speaker 1: them and their colleagues who are left behind, they are 200 00:11:00,679 --> 00:11:03,520 Speaker 1: a small percentage of the workforce and so they make 201 00:11:03,559 --> 00:11:06,559 Speaker 1: a lot of news, but they don't actually have a 202 00:11:06,720 --> 00:11:10,199 Speaker 1: massive impact on a lot of our jobs numbers. And 203 00:11:10,679 --> 00:11:12,760 Speaker 1: what we are seeing is that and the reason the 204 00:11:12,840 --> 00:11:14,760 Speaker 1: jobs numbers are going up is pointing to that talent 205 00:11:15,040 --> 00:11:19,079 Speaker 1: shortage that's driving quiet hiring, which is people desperately need 206 00:11:19,160 --> 00:11:22,559 Speaker 1: talent and are constantly adding it. But what about the 207 00:11:22,600 --> 00:11:27,320 Speaker 1: intangibles here, things like more sickly, unlimited sick days, more 208 00:11:27,400 --> 00:11:32,120 Speaker 1: vacation time, whatever. The other intangibles are that a lot 209 00:11:32,160 --> 00:11:34,920 Speaker 1: of these unions, for example, are really pushing for or 210 00:11:34,960 --> 00:11:37,920 Speaker 1: how do you even factor that in so creating Those 211 00:11:37,920 --> 00:11:42,400 Speaker 1: are actually great examples of how an organization might go 212 00:11:42,520 --> 00:11:45,960 Speaker 1: about compensating someone or a group of people that they're 213 00:11:46,000 --> 00:11:49,480 Speaker 1: moving over when they don't necessarily have the budget to 214 00:11:49,600 --> 00:11:52,680 Speaker 1: do a massive compensation change. Maybe it's a one time bonus, 215 00:11:52,760 --> 00:11:57,280 Speaker 1: maybe it's more flexibility, maybe it's more um pto. Whatever 216 00:11:57,400 --> 00:12:00,439 Speaker 1: it is, you have to compensate people. As you value 217 00:12:00,480 --> 00:12:03,679 Speaker 1: them enough to move them over, you're gonna want to 218 00:12:03,760 --> 00:12:08,199 Speaker 1: keep them. But does that then have the same effect like, 219 00:12:08,320 --> 00:12:10,880 Speaker 1: for example, is there a tradeoff then like I will 220 00:12:10,960 --> 00:12:13,880 Speaker 1: be willing to take less pay as as Matt brings 221 00:12:14,000 --> 00:12:17,280 Speaker 1: up if you give me these added benefits. Is there 222 00:12:17,280 --> 00:12:20,160 Speaker 1: a way to see that trade off? Oh? Absolutely, And 223 00:12:20,200 --> 00:12:22,679 Speaker 1: you can actually quantify it, so you can look at 224 00:12:22,720 --> 00:12:26,360 Speaker 1: something and say, Dave pto is worth this much in salary, 225 00:12:26,600 --> 00:12:28,520 Speaker 1: both in terms of what people are actually able to 226 00:12:28,920 --> 00:12:31,000 Speaker 1: willing to trade off, so how they perceive it, and 227 00:12:31,120 --> 00:12:33,480 Speaker 1: also what is the dollar value to the organization love 228 00:12:33,520 --> 00:12:38,600 Speaker 1: to see that equation. Let's talk about raises and bonuses, UM, 229 00:12:39,080 --> 00:12:41,760 Speaker 1: you know, beyond Wall Street, just generally in the American economy, 230 00:12:41,800 --> 00:12:46,959 Speaker 1: as so many people are hired, um, and as we 231 00:12:47,040 --> 00:12:52,440 Speaker 1: see so much UH inflation, employees are gonna want bumps. 232 00:12:52,559 --> 00:12:54,680 Speaker 1: But I guess employers are going to be a little 233 00:12:54,679 --> 00:12:58,959 Speaker 1: bit worried about the possible recession that that we're heading into, 234 00:12:59,280 --> 00:13:02,360 Speaker 1: so there is likely to want to give those boosts 235 00:13:02,440 --> 00:13:05,840 Speaker 1: to salary. What what are you seeing? We are seeing 236 00:13:06,080 --> 00:13:10,800 Speaker 1: that the annual raise, particularly if it's the cost of 237 00:13:10,880 --> 00:13:13,280 Speaker 1: living as opposed to a merit raise, is less than 238 00:13:13,320 --> 00:13:16,200 Speaker 1: the current state of inflation in general. But of course 239 00:13:16,440 --> 00:13:19,280 Speaker 1: accepting if there's a a union agreement that requires it 240 00:13:19,360 --> 00:13:22,599 Speaker 1: to be tagged to annual inflation rates UM. So we 241 00:13:22,720 --> 00:13:26,920 Speaker 1: are seeing that, And then associated with that is the 242 00:13:27,040 --> 00:13:30,440 Speaker 1: lower that rate is UM, the more likely that organization 243 00:13:30,520 --> 00:13:33,599 Speaker 1: is to see turnover. What does that then? Is that 244 00:13:33,880 --> 00:13:37,120 Speaker 1: equivalent across all sectors? Are you seeing that or even 245 00:13:37,160 --> 00:13:40,720 Speaker 1: the concept of quiet hiring more predominant in certain parts 246 00:13:40,760 --> 00:13:44,800 Speaker 1: of the economy. So I would say that quiet hiring 247 00:13:44,880 --> 00:13:47,839 Speaker 1: is a little bit less predominant right now in some 248 00:13:48,040 --> 00:13:51,040 Speaker 1: of the larger tech organizations that are having layoffs because 249 00:13:51,080 --> 00:13:54,959 Speaker 1: they are obviously dealing with a slightly different situation than 250 00:13:55,040 --> 00:13:58,679 Speaker 1: a talent shortage. But for most organizations, we see this 251 00:13:58,800 --> 00:14:00,760 Speaker 1: a lot. It's in some ways it's a little bit 252 00:14:00,840 --> 00:14:05,240 Speaker 1: easier to do on site with on site workers. But 253 00:14:05,400 --> 00:14:07,240 Speaker 1: we see this for desk based workers, we see this 254 00:14:07,360 --> 00:14:11,719 Speaker 1: for deathless workers. We see this across industries. Where it's 255 00:14:11,760 --> 00:14:15,360 Speaker 1: easier to do is where you have multiple business units. 256 00:14:15,840 --> 00:14:18,360 Speaker 1: So say you can move someone when you decide to 257 00:14:18,400 --> 00:14:20,600 Speaker 1: d prioritize a business unit, you can move people to 258 00:14:20,720 --> 00:14:24,040 Speaker 1: the business unit you've prioritized. It's a little bit harder 259 00:14:24,280 --> 00:14:28,960 Speaker 1: if you're extremely small as an organization. So coming back 260 00:14:29,000 --> 00:14:31,960 Speaker 1: to the office, you mentioned desk less or desk spake 261 00:14:32,360 --> 00:14:35,480 Speaker 1: space workers. Um is coming back to the office. I 262 00:14:35,560 --> 00:14:37,520 Speaker 1: mean everyone's going to have to do or have we 263 00:14:37,680 --> 00:14:39,840 Speaker 1: entered a new normal where a lot of people are 264 00:14:39,840 --> 00:14:42,360 Speaker 1: going to work from home multiple days a week. I 265 00:14:42,480 --> 00:14:45,000 Speaker 1: just wonder, because you know, if we do hit a recession, 266 00:14:45,040 --> 00:14:47,080 Speaker 1: I've heard a lot of people say that's when companies 267 00:14:47,120 --> 00:14:51,600 Speaker 1: are going to make people come back. They can try. Um, 268 00:14:52,000 --> 00:14:54,600 Speaker 1: what we've seen is that that has not worked. So 269 00:14:55,000 --> 00:14:56,840 Speaker 1: saying you're going to come back to the office. Here 270 00:14:56,880 --> 00:14:57,960 Speaker 1: the days of the week we want to see you. 271 00:14:58,080 --> 00:15:01,840 Speaker 1: Is they're very few situations where I've talked to clients 272 00:15:01,880 --> 00:15:06,640 Speaker 1: about this and they've said it's going great. And part 273 00:15:06,680 --> 00:15:08,880 Speaker 1: of it is that you have to actually explain now 274 00:15:09,880 --> 00:15:12,280 Speaker 1: why someone should be coming into the office if they 275 00:15:12,320 --> 00:15:17,560 Speaker 1: don't need to, and recognizing that actually by working remotely, 276 00:15:17,600 --> 00:15:22,000 Speaker 1: they're saving on their transportation costs, their lunches, all of 277 00:15:22,040 --> 00:15:24,720 Speaker 1: the different wear and tear on their clothing, and there 278 00:15:25,840 --> 00:15:28,320 Speaker 1: their car or however they're getting into the office. All 279 00:15:28,360 --> 00:15:30,040 Speaker 1: of these little things that add up, and also the 280 00:15:30,080 --> 00:15:33,000 Speaker 1: convenience in many cases of working from home. So if 281 00:15:33,040 --> 00:15:35,680 Speaker 1: you want to bring people into the office, one you 282 00:15:35,760 --> 00:15:38,200 Speaker 1: may need to actually compensate them even more to get 283 00:15:38,240 --> 00:15:41,280 Speaker 1: them there. But also you're gonna want to design those 284 00:15:41,560 --> 00:15:45,600 Speaker 1: in office days very intentionally so that you're actually giving 285 00:15:45,640 --> 00:15:47,640 Speaker 1: people a reason to want to be there. So rather 286 00:15:47,760 --> 00:15:50,440 Speaker 1: than come into the office and do exactly what you're 287 00:15:50,440 --> 00:15:52,880 Speaker 1: doing at home, just because we think it would be 288 00:15:52,960 --> 00:15:55,640 Speaker 1: really nice if you somehow saw other people who you 289 00:15:55,720 --> 00:15:57,480 Speaker 1: may not see because they may not have the same 290 00:15:57,560 --> 00:16:01,160 Speaker 1: in office day as you. They need the actually organizations 291 00:16:01,200 --> 00:16:02,960 Speaker 1: need to be saying when you're in the office, this 292 00:16:03,120 --> 00:16:05,160 Speaker 1: is what we want from you. Here's how we've planned 293 00:16:05,160 --> 00:16:07,120 Speaker 1: your day so that you will get these experiences we're 294 00:16:07,160 --> 00:16:10,160 Speaker 1: looking for. All Right, Emily, great having on the program. 295 00:16:10,240 --> 00:16:12,200 Speaker 1: Thanks so much for joining us. These topics I think 296 00:16:12,240 --> 00:16:16,200 Speaker 1: are interesting too. Very many people for for for for 297 00:16:16,360 --> 00:16:22,120 Speaker 1: some obvious reasons. Let's get over to Mike Vogel, saying 298 00:16:22,280 --> 00:16:24,920 Speaker 1: right now he joins us from Cap Trust, where he's 299 00:16:25,000 --> 00:16:29,400 Speaker 1: chief investment officer and managing director. Mike, what do you 300 00:16:29,520 --> 00:16:32,320 Speaker 1: think of this rally that we've seen from the October lows. 301 00:16:32,600 --> 00:16:37,480 Speaker 1: I'm hearing a growing chorus of warnings from you know, 302 00:16:37,720 --> 00:16:41,760 Speaker 1: very traditionally conservative parts of Wall Street. Yeah, it's a 303 00:16:41,800 --> 00:16:44,400 Speaker 1: great question. Matt it Crety, thanks for having on. I 304 00:16:44,520 --> 00:16:46,520 Speaker 1: think I think the issue is, you know, you're just 305 00:16:46,520 --> 00:16:49,360 Speaker 1: talking about the recession and the inverted yield curve. You know, 306 00:16:49,440 --> 00:16:53,800 Speaker 1: there's pretty much everything is pointing towards slower economic output 307 00:16:54,240 --> 00:16:58,120 Speaker 1: coming for the rest of this year except for employment. Right, 308 00:16:58,200 --> 00:17:01,000 Speaker 1: We've we've every time the eeld curves and lay inverted, 309 00:17:01,080 --> 00:17:04,120 Speaker 1: we've had a recession, but we've never had a recession 310 00:17:04,160 --> 00:17:05,960 Speaker 1: with employment this strong. So which one of those two 311 00:17:06,040 --> 00:17:08,200 Speaker 1: is gonna win out. That's that's the battle on Wall 312 00:17:08,240 --> 00:17:12,119 Speaker 1: Street today as we're talking, um, you know, the the rally, 313 00:17:12,240 --> 00:17:13,800 Speaker 1: we think is a little bit of a knee jerk 314 00:17:13,840 --> 00:17:17,040 Speaker 1: reaction from from just a you know, horrible, no good, 315 00:17:17,160 --> 00:17:19,520 Speaker 1: very bad year last year and twenty two. And as 316 00:17:19,560 --> 00:17:21,440 Speaker 1: a result, we've we've seen you know, the sort of 317 00:17:21,480 --> 00:17:25,480 Speaker 1: the January effect on steroids a little bit. Um. We're 318 00:17:26,080 --> 00:17:29,280 Speaker 1: we're we're of the belief that inflation is peaked, the 319 00:17:29,320 --> 00:17:32,280 Speaker 1: Federal Reserve isn't going to be as aggressive as as 320 00:17:32,680 --> 00:17:35,159 Speaker 1: um you know, we sort of thought that were going 321 00:17:35,240 --> 00:17:36,960 Speaker 1: to be three or four months ago, and I think 322 00:17:37,000 --> 00:17:39,840 Speaker 1: you're seeing that in the equity markets. But um, we 323 00:17:40,040 --> 00:17:43,280 Speaker 1: we still believe that at some point, weaker earnings, softer 324 00:17:43,440 --> 00:17:47,080 Speaker 1: economic growth, and and um high valuations are going to 325 00:17:47,200 --> 00:17:49,760 Speaker 1: end up causing some problems and ingestion for the market 326 00:17:49,840 --> 00:17:52,119 Speaker 1: this year. So we're just trying to be really patient 327 00:17:52,320 --> 00:17:54,880 Speaker 1: and spick our spots when we want to add. But why, 328 00:17:55,119 --> 00:17:58,920 Speaker 1: but why do we see you know, if we're seeing 329 00:17:58,960 --> 00:18:03,239 Speaker 1: all these um, you know, bad signs in the data. Um, 330 00:18:03,320 --> 00:18:06,760 Speaker 1: in terms of economic growth, why do we see such 331 00:18:06,920 --> 00:18:10,920 Speaker 1: huge games and hiring. Well, that's that's exactly the dilemma. 332 00:18:11,200 --> 00:18:14,080 Speaker 1: We've never seen this before. And you know, we're having 333 00:18:14,119 --> 00:18:16,359 Speaker 1: we're having a discussion in our offices this morning about 334 00:18:16,400 --> 00:18:19,240 Speaker 1: about this very things like what what has changed about 335 00:18:19,240 --> 00:18:21,639 Speaker 1: the employment picture? Maybe it's the fluidity or lack of 336 00:18:21,720 --> 00:18:23,760 Speaker 1: friction and employment. You can go, Hey, if you lose 337 00:18:23,800 --> 00:18:25,359 Speaker 1: your job, you can go become an uber driver by 338 00:18:25,400 --> 00:18:28,119 Speaker 1: four o'clock that afternoon. Right, There's there's the there's the 339 00:18:28,200 --> 00:18:30,840 Speaker 1: ability to bounce around and move. We've had we've had 340 00:18:30,920 --> 00:18:34,560 Speaker 1: people leaving the job market on on sort of different 341 00:18:34,680 --> 00:18:37,720 Speaker 1: in a different end, right, the demographic spectrum. The older 342 00:18:37,760 --> 00:18:40,960 Speaker 1: workers have left, uh in a lot of ways. Is 343 00:18:41,040 --> 00:18:42,720 Speaker 1: there something different? I don't think we have an answer 344 00:18:42,760 --> 00:18:45,320 Speaker 1: to this. We're just positing the question. Is there something 345 00:18:45,440 --> 00:18:49,440 Speaker 1: different about the about the employment market in today's world 346 00:18:49,600 --> 00:18:53,639 Speaker 1: that is changing the to use a technical word, the 347 00:18:53,680 --> 00:18:56,359 Speaker 1: Phillips curve that the federal reserve uses, right, are we 348 00:18:56,440 --> 00:18:59,880 Speaker 1: going to see a recession while employment stays high? We're 349 00:19:00,000 --> 00:19:02,000 Speaker 1: are we going to see employments say high and pull 350 00:19:02,080 --> 00:19:04,080 Speaker 1: us out and not allow us to go into recession? 351 00:19:04,480 --> 00:19:06,359 Speaker 1: All of those things are on the table, and and 352 00:19:06,680 --> 00:19:08,920 Speaker 1: and you know, for for people who are simply saying, 353 00:19:09,240 --> 00:19:11,240 Speaker 1: you know, this is a one directional market. Now the 354 00:19:11,320 --> 00:19:14,159 Speaker 1: Feds cut rates, and we're gonna the Feds going to 355 00:19:14,200 --> 00:19:16,720 Speaker 1: cut rates, and and you know, the long term part 356 00:19:16,760 --> 00:19:19,080 Speaker 1: of the curves is much lower now, and therefore you 357 00:19:19,119 --> 00:19:21,639 Speaker 1: can bid up prices on the equity markets. We we 358 00:19:21,760 --> 00:19:25,400 Speaker 1: just think that's that's just not how it's gonna play. Cratty. 359 00:19:25,400 --> 00:19:27,800 Speaker 1: I've always loved the idea that if you lose your job, 360 00:19:28,200 --> 00:19:31,480 Speaker 1: that's a recession. If I lose my job, that's a depression. 361 00:19:31,600 --> 00:19:37,080 Speaker 1: But if neither one of us loses our jobs, Mike, 362 00:19:37,240 --> 00:19:41,080 Speaker 1: let's apply all of those great questions to uh, the 363 00:19:41,520 --> 00:19:45,560 Speaker 1: the market here. I mean, Matt started off this segment 364 00:19:45,640 --> 00:19:47,800 Speaker 1: by talking about this two tons in version. Do you 365 00:19:47,840 --> 00:19:49,680 Speaker 1: put any stock in it? Do you believe that this 366 00:19:49,840 --> 00:19:51,880 Speaker 1: is still the signal it was, say ten years ago. 367 00:19:53,920 --> 00:19:56,840 Speaker 1: Let's be clear, right, it's really it's really simple to 368 00:19:57,320 --> 00:20:01,159 Speaker 1: get causality reversed. Um, it's not yield curve that causes 369 00:20:01,200 --> 00:20:03,719 Speaker 1: a recession. It's a signal of some things that are 370 00:20:03,720 --> 00:20:06,800 Speaker 1: going on in the markets that mostly the federal reserve 371 00:20:06,880 --> 00:20:10,960 Speaker 1: tightening interest rates, that that has historically has led to recession. 372 00:20:11,040 --> 00:20:13,960 Speaker 1: So don't you know don't confuse causality here. They're they're 373 00:20:14,080 --> 00:20:17,760 Speaker 1: very often temporal or contemporaneous, so it's it's important to 374 00:20:18,359 --> 00:20:20,639 Speaker 1: keep that clear. Just because we were in an in 375 00:20:20,680 --> 00:20:22,680 Speaker 1: an inverted yield curve doesn't mean that we're gonna go 376 00:20:22,720 --> 00:20:24,520 Speaker 1: in recession. It just means the FED has been aggressive 377 00:20:24,520 --> 00:20:26,960 Speaker 1: because we had this a bout of inflation. It's also 378 00:20:27,040 --> 00:20:29,439 Speaker 1: hard to separate out the impact of COVID that we've had. 379 00:20:29,520 --> 00:20:32,680 Speaker 1: We've never been through this cycle before. We're still dealing 380 00:20:32,800 --> 00:20:35,440 Speaker 1: with the ripples and after effects of COVID, you know, 381 00:20:35,520 --> 00:20:37,600 Speaker 1: the COVID, the COVID rock that was thrown into the 382 00:20:37,680 --> 00:20:40,840 Speaker 1: pond here is still creating big waves and and and 383 00:20:41,720 --> 00:20:45,280 Speaker 1: having impact on labor markets and on on on inflation 384 00:20:45,359 --> 00:20:47,760 Speaker 1: and so on. So that that is all that is 385 00:20:47,800 --> 00:20:51,640 Speaker 1: all playing out, and our jobs market participants and analysis 386 00:20:51,800 --> 00:20:53,920 Speaker 1: just sort of sorts through that and come up with 387 00:20:53,960 --> 00:20:56,800 Speaker 1: our best estimate for where we might play where this 388 00:20:56,920 --> 00:21:00,359 Speaker 1: might play out. But again, you don't need to look 389 00:21:00,359 --> 00:21:03,960 Speaker 1: any further than we've we've you know, recessions have been 390 00:21:04,119 --> 00:21:07,000 Speaker 1: have been signaled every time by an inverted yield curve, 391 00:21:07,520 --> 00:21:10,120 Speaker 1: and we've never had a recession when employments this strong, 392 00:21:11,520 --> 00:21:15,040 Speaker 1: which which of those two immovable forces are gonna are 393 00:21:15,080 --> 00:21:17,800 Speaker 1: going to be proved to be movable? Right? So what 394 00:21:17,920 --> 00:21:20,239 Speaker 1: do you do as an investor right now? I mean, 395 00:21:20,440 --> 00:21:23,200 Speaker 1: if you're building a portfolio for say a new client 396 00:21:23,280 --> 00:21:25,000 Speaker 1: comes in with a million bucks, where do you where 397 00:21:25,000 --> 00:21:27,479 Speaker 1: do you put it? Yeah? Well, let let me give 398 00:21:27,520 --> 00:21:29,280 Speaker 1: you a little context. So last year we were we 399 00:21:29,359 --> 00:21:31,800 Speaker 1: were in really good shape. We were we felt super 400 00:21:31,840 --> 00:21:34,479 Speaker 1: smart and super confident and super smug about about how 401 00:21:34,520 --> 00:21:37,080 Speaker 1: well we did for clients because we were very conservative 402 00:21:37,119 --> 00:21:40,480 Speaker 1: and and and and you know, um expected the markets 403 00:21:40,480 --> 00:21:44,720 Speaker 1: of struggle. Um. Now, the problem is that same sense 404 00:21:44,800 --> 00:21:47,560 Speaker 1: of smugness has become a quickly of fear of missing 405 00:21:47,600 --> 00:21:50,200 Speaker 1: out because we're still conservatively positioned. So you know, full 406 00:21:50,320 --> 00:21:53,320 Speaker 1: full disclosure here, right, those who felt super smart last 407 00:21:53,359 --> 00:21:55,720 Speaker 1: year are feeling pretty stupid this year. And that's the 408 00:21:55,760 --> 00:21:58,520 Speaker 1: way Marcus work, of course. And and um, so the 409 00:21:58,840 --> 00:22:01,280 Speaker 1: question is in and I sort of sort of led 410 00:22:01,320 --> 00:22:04,159 Speaker 1: with this a bit a minute ago that while the 411 00:22:04,240 --> 00:22:09,120 Speaker 1: markets generating FOMO and it's gradually pulling people into the market, um, 412 00:22:09,800 --> 00:22:13,200 Speaker 1: we're we're still remaining fairly conservative on our We have 413 00:22:13,240 --> 00:22:14,879 Speaker 1: a we have a fairly high cash position, and are 414 00:22:14,880 --> 00:22:18,360 Speaker 1: all equity portfolios for example. Um And and we're we're 415 00:22:18,440 --> 00:22:20,439 Speaker 1: holding onto that because we just think we're gonna get 416 00:22:20,480 --> 00:22:22,879 Speaker 1: opportunity later in the year. We just think that at 417 00:22:22,920 --> 00:22:25,240 Speaker 1: some point, falling earnings and they are falling, right, the 418 00:22:25,359 --> 00:22:29,000 Speaker 1: estimates are coming down. Um. You know, the FED, the 419 00:22:29,080 --> 00:22:31,600 Speaker 1: Fed's work is probably mostly done. We'll see if they 420 00:22:31,640 --> 00:22:33,400 Speaker 1: get to five five and a quarter, maybe even five 421 00:22:33,440 --> 00:22:36,760 Speaker 1: and a half if employment stays high. But inflation seems 422 00:22:36,760 --> 00:22:40,520 Speaker 1: to have come off really hard. Um And and you 423 00:22:40,600 --> 00:22:43,359 Speaker 1: know that holds that whole mix, that holds stew is 424 00:22:43,400 --> 00:22:45,919 Speaker 1: gonna end up creating some air pockets in the markets 425 00:22:45,960 --> 00:22:48,879 Speaker 1: at some point. And and we we will likely, depending 426 00:22:48,920 --> 00:22:51,479 Speaker 1: on facts and circumstances, get more aggressive when we get 427 00:22:51,560 --> 00:22:53,800 Speaker 1: that chance. All right, Mike, thanks so much. Michael Olgising, 428 00:22:53,840 --> 00:22:57,320 Speaker 1: their chief investment officer and managing director at Cap Trust, 429 00:23:01,160 --> 00:23:04,159 Speaker 1: talk to us about some other earning stories. For example, 430 00:23:04,280 --> 00:23:07,280 Speaker 1: Kellogg came out today. Uh maker. I think of them 431 00:23:07,320 --> 00:23:11,639 Speaker 1: as the maker of corn flakes. Oh my god. Kayley 432 00:23:11,680 --> 00:23:14,040 Speaker 1: Lines is leaving the building right now. I'm watching, We're 433 00:23:14,080 --> 00:23:17,560 Speaker 1: watching out the Interactive broker studio. Kayley Lines is moving 434 00:23:17,640 --> 00:23:20,440 Speaker 1: to Washington, d C. Today was her last day in 435 00:23:20,520 --> 00:23:23,720 Speaker 1: the New York studio. This is really sad, guys. She 436 00:23:23,920 --> 00:23:26,920 Speaker 1: is a She is a like what is it a 437 00:23:27,119 --> 00:23:30,320 Speaker 1: super star? A Hallmark? I think of Bloomberg Television. Fun fact, 438 00:23:30,680 --> 00:23:32,800 Speaker 1: before I wasn't hired at Bloomberg, I called up Kayley 439 00:23:32,840 --> 00:23:34,200 Speaker 1: and I was like, Kayley, will help me with the 440 00:23:34,520 --> 00:23:36,960 Speaker 1: interview to get this job. And she did. From my 441 00:23:37,080 --> 00:23:39,399 Speaker 1: Charletsville dorm room at u v A. Right because it 442 00:23:39,600 --> 00:23:43,679 Speaker 1: gives you. And almost half of Bloomberg staff worldwide went 443 00:23:43,760 --> 00:23:45,840 Speaker 1: to u v A. It's just me. Did you go 444 00:23:45,920 --> 00:23:47,480 Speaker 1: to uv A too? I did not. I went to 445 00:23:47,560 --> 00:23:51,119 Speaker 1: Texas A. Wow, congratulations were going to a different college 446 00:23:51,119 --> 00:23:54,240 Speaker 1: and everyone else. All right, let's get back to Kellogg 447 00:23:54,560 --> 00:23:57,560 Speaker 1: corn flakes maker. Um, they came out with earnings today. 448 00:23:57,800 --> 00:24:01,280 Speaker 1: What do you see? Yeah, so it's sales actually rose 449 00:24:01,359 --> 00:24:04,040 Speaker 1: about twelve percent. So when you're thinking of Kellogg, you're 450 00:24:04,080 --> 00:24:09,040 Speaker 1: thinking rice, crispies, cereal, cheese at crackers. Um. It's also 451 00:24:09,560 --> 00:24:12,880 Speaker 1: has been raising its prices, similar to see these other 452 00:24:12,960 --> 00:24:16,240 Speaker 1: consumer goods makers to really offset these higher costs. But 453 00:24:16,359 --> 00:24:18,199 Speaker 1: that's something that is stuck out when you're looking at 454 00:24:18,320 --> 00:24:21,280 Speaker 1: these these companies right now that how they're continuing to 455 00:24:21,359 --> 00:24:24,240 Speaker 1: deal with it, some of them better more so than others. 456 00:24:24,400 --> 00:24:26,640 Speaker 1: But as far as when it comes to the package 457 00:24:26,720 --> 00:24:29,600 Speaker 1: good companies, that's been a big focus. And then something 458 00:24:29,640 --> 00:24:31,639 Speaker 1: I wanted to point out, Matt, because I know you 459 00:24:31,800 --> 00:24:34,000 Speaker 1: like to keep an eye on what happens with these 460 00:24:34,040 --> 00:24:37,119 Speaker 1: auto makers, a Tesla in particular. I mean, we already 461 00:24:37,160 --> 00:24:40,520 Speaker 1: had their earnings recently, but it actually it's stock has 462 00:24:40,560 --> 00:24:43,280 Speaker 1: doubled from its low that was touched in early January, 463 00:24:43,560 --> 00:24:46,240 Speaker 1: so it's basically up over a percent from its lows 464 00:24:46,320 --> 00:24:49,560 Speaker 1: last year. That stock actually had plunged sixty five percent. 465 00:24:50,160 --> 00:24:52,919 Speaker 1: A lot of that is on different optimism as far 466 00:24:53,040 --> 00:24:57,600 Speaker 1: as these uh Actually the Biden administration said it will 467 00:24:57,640 --> 00:25:01,840 Speaker 1: expand this newly revamped EV tax credit to allow SUVs 468 00:25:01,920 --> 00:25:04,520 Speaker 1: costing up to eighty thousand dollars to receive those types 469 00:25:04,520 --> 00:25:06,640 Speaker 1: of credits. But I know you focus a lot when 470 00:25:06,640 --> 00:25:09,000 Speaker 1: it comes to the automakers. So it's curious kind of 471 00:25:09,040 --> 00:25:12,840 Speaker 1: your thoughts on Tesla, what's going on there and this 472 00:25:12,960 --> 00:25:16,000 Speaker 1: big rebound obviously we've seen this year compared to what 473 00:25:16,119 --> 00:25:19,720 Speaker 1: had happened. The thing is, these are seven thousand, five 474 00:25:19,800 --> 00:25:22,480 Speaker 1: hundred dollar rebates for buying logri cars. So this is 475 00:25:22,680 --> 00:25:25,960 Speaker 1: a material amount of money for most consumers, right, and 476 00:25:26,000 --> 00:25:28,280 Speaker 1: if you're going to buy a car that costs you know, 477 00:25:28,480 --> 00:25:34,440 Speaker 1: forty fifty thousand dollars, that's a huge um. Yes, and 478 00:25:34,600 --> 00:25:38,720 Speaker 1: so uh, the government has been so slow to come 479 00:25:38,760 --> 00:25:41,760 Speaker 1: out with these rules. I want to buy a bmw 480 00:25:42,119 --> 00:25:44,240 Speaker 1: X five right now. They make a hybrid version of it, 481 00:25:44,400 --> 00:25:46,720 Speaker 1: and I'm just waiting to see if I'm really going 482 00:25:46,760 --> 00:25:49,000 Speaker 1: to be eligible, because the worst thing would be to 483 00:25:49,080 --> 00:25:50,879 Speaker 1: buy the car and then to find out from my 484 00:25:50,920 --> 00:25:52,760 Speaker 1: accountant at the end of the year or the beginning 485 00:25:52,800 --> 00:25:55,440 Speaker 1: next year, oh no, you're not eligible, and now the 486 00:25:55,520 --> 00:25:59,639 Speaker 1: car costs me sevent more. I think Tesla is going 487 00:25:59,720 --> 00:26:02,240 Speaker 1: through this same thing. Um. You know, a lot of 488 00:26:02,280 --> 00:26:04,560 Speaker 1: the even American carmakers, if they don't get the right 489 00:26:04,600 --> 00:26:09,520 Speaker 1: percentage of materials um in the battery from you know, 490 00:26:09,720 --> 00:26:12,840 Speaker 1: North American or US friendly nations, they're not going to 491 00:26:12,920 --> 00:26:14,920 Speaker 1: get the rebate. And so no one really knows what's 492 00:26:14,960 --> 00:26:17,000 Speaker 1: going on. So it's hugely important that we get that direction. 493 00:26:17,520 --> 00:26:20,720 Speaker 1: Jeff menton Uh from Texas and m thank you so 494 00:26:20,880 --> 00:26:22,919 Speaker 1: much for joining us. Also, she's in charge of stocks 495 00:26:22,960 --> 00:26:26,760 Speaker 1: coverage for Bloomberg News. Let's get to a couple of 496 00:26:27,119 --> 00:26:29,919 Speaker 1: socks stories right now. We talked about Kellogg a little bit, 497 00:26:30,040 --> 00:26:32,399 Speaker 1: and Jennet Jennifer Bartosh is going to join us on 498 00:26:32,520 --> 00:26:36,600 Speaker 1: that senior industry analyst UM for Bloomberg Intelligence. Also talk 499 00:26:36,640 --> 00:26:40,000 Speaker 1: a little bit about gaming and lodging because Hilton came 500 00:26:40,040 --> 00:26:45,160 Speaker 1: out beating estimates as well as resilient consumers and uh 501 00:26:45,800 --> 00:26:48,280 Speaker 1: paid up in an increase in corporate travel, pushed hotel 502 00:26:48,359 --> 00:26:51,879 Speaker 1: prices higher as well. Um, thanks so much for joining us. 503 00:26:52,440 --> 00:26:55,280 Speaker 1: Brian and jen Let's start with Hilton because we haven't 504 00:26:55,280 --> 00:26:58,359 Speaker 1: really really gone through the story yet. Brian, what is it? So? 505 00:26:58,560 --> 00:27:00,280 Speaker 1: You know, Hilton had a good quarter as well as 506 00:27:00,320 --> 00:27:04,359 Speaker 1: a pretty favorable outlook for next year going I should say, 507 00:27:04,400 --> 00:27:07,119 Speaker 1: for this year. Uh, you know, there's a little bit 508 00:27:07,160 --> 00:27:09,399 Speaker 1: of note of caution that they're accounting for the possibility 509 00:27:09,440 --> 00:27:12,520 Speaker 1: of a of a second half twenty three slow down. 510 00:27:12,560 --> 00:27:16,080 Speaker 1: Our economic recession doesn't stop them from having very nice 511 00:27:16,160 --> 00:27:19,000 Speaker 1: games and net rooms and and revenue per available room. 512 00:27:19,640 --> 00:27:22,720 Speaker 1: But overall, you know, pacing nicely both in terms of 513 00:27:22,800 --> 00:27:25,960 Speaker 1: both leisure and business travel. What does that that mean 514 00:27:26,119 --> 00:27:29,480 Speaker 1: for something like when we're talking about consumer and the 515 00:27:29,560 --> 00:27:32,960 Speaker 1: willingness to spend is Hilton basically telling us that we're 516 00:27:33,000 --> 00:27:37,280 Speaker 1: in the clear. I don't think they're saying necessarily were 517 00:27:37,280 --> 00:27:39,600 Speaker 1: in the clear. We've come a long way, particularly in 518 00:27:39,920 --> 00:27:42,600 Speaker 1: markets like the US and europri in terms of revenue 519 00:27:42,640 --> 00:27:45,320 Speaker 1: per rail room increasing. That's all acknowledging that if we 520 00:27:45,440 --> 00:27:48,480 Speaker 1: have economic slowdown in the second half, we could kind 521 00:27:48,520 --> 00:27:51,560 Speaker 1: of slow at the margin. Also from a global perspective, 522 00:27:51,560 --> 00:27:54,240 Speaker 1: Bear in mind, while I think the removal of travel 523 00:27:54,359 --> 00:27:57,680 Speaker 1: restrictions in China will eventually help in the short term, 524 00:27:57,840 --> 00:28:01,160 Speaker 1: you know, China revenue for available room still deeply underwater 525 00:28:01,720 --> 00:28:05,160 Speaker 1: relative to pre pandemic. Well, elso, mostly because the initial 526 00:28:05,200 --> 00:28:08,439 Speaker 1: effect of the relaxation of travel curse has been kind 527 00:28:08,480 --> 00:28:11,880 Speaker 1: of a new round of COVID nineteen outbreaks. Well, Jennifer, 528 00:28:12,200 --> 00:28:14,439 Speaker 1: hop on in here and give us a little bit 529 00:28:14,520 --> 00:28:17,120 Speaker 1: more insight on kind of your take on on all 530 00:28:17,119 --> 00:28:19,639 Speaker 1: of this, is that do you share that assessment that 531 00:28:19,720 --> 00:28:23,200 Speaker 1: this is maybe not the all clear signal. Well, I 532 00:28:23,280 --> 00:28:25,800 Speaker 1: think that we see a lot of mixed signals, and 533 00:28:25,880 --> 00:28:29,320 Speaker 1: it really depends on what group of consumers you're looking at. Um, 534 00:28:29,480 --> 00:28:31,720 Speaker 1: there is really a bifurcation in the in the US 535 00:28:31,760 --> 00:28:35,040 Speaker 1: consumer and so those that are more well off or 536 00:28:35,160 --> 00:28:38,040 Speaker 1: that are you know, involved with business travel UM, you know, 537 00:28:38,360 --> 00:28:41,080 Speaker 1: those those signals may be strong. UM. For those who 538 00:28:41,120 --> 00:28:43,600 Speaker 1: are at the lower end of the income spectrum, it's 539 00:28:43,640 --> 00:28:48,160 Speaker 1: still a complicated story. And food inflation in particular, along 540 00:28:48,240 --> 00:28:51,000 Speaker 1: with just overall higher cost of living has has really 541 00:28:51,080 --> 00:28:53,560 Speaker 1: crimped budgets and made people a lot more cautious about 542 00:28:53,880 --> 00:28:55,920 Speaker 1: where they're spending and how they're spending well. And you 543 00:28:55,960 --> 00:28:59,040 Speaker 1: can see that difference in the stocks right because Hilton 544 00:28:59,120 --> 00:29:01,280 Speaker 1: is up like twenty percent year to date. I know 545 00:29:01,360 --> 00:29:04,600 Speaker 1: we're only at the beginning of February, but Kellogg is 546 00:29:04,640 --> 00:29:07,280 Speaker 1: off five and a half percent year to date. Now 547 00:29:08,400 --> 00:29:11,200 Speaker 1: the picture looks different UM last year, right, Hilton had 548 00:29:11,240 --> 00:29:14,400 Speaker 1: a down year I think last year UM and Kellogg 549 00:29:14,480 --> 00:29:16,960 Speaker 1: had had a strong year last year. Jen, Why do 550 00:29:17,040 --> 00:29:21,200 Speaker 1: you see that bifurcation in terms of the stockments. But 551 00:29:21,480 --> 00:29:23,720 Speaker 1: when you when you're looking at the companies and the 552 00:29:23,840 --> 00:29:27,240 Speaker 1: space in which they play, UM, you know, the consumer 553 00:29:27,320 --> 00:29:31,240 Speaker 1: has gotten less and less tolerant of higher priced food 554 00:29:31,400 --> 00:29:34,479 Speaker 1: and so people at one point had pantries that were 555 00:29:34,600 --> 00:29:36,840 Speaker 1: overflowing with goods so that they could go and they 556 00:29:36,840 --> 00:29:39,600 Speaker 1: could select things at any given time to cook and prepare. 557 00:29:40,040 --> 00:29:43,040 Speaker 1: They're much more selective now. Pantry sizes in kitchens are 558 00:29:43,160 --> 00:29:46,040 Speaker 1: smaller UM, and people are being more selective about what 559 00:29:46,080 --> 00:29:48,560 Speaker 1: they're buying and trying to control that food spent because 560 00:29:48,600 --> 00:29:51,440 Speaker 1: of that high food inflation and the sense that prices 561 00:29:51,480 --> 00:29:55,160 Speaker 1: are just too high UM and so that's impacting these 562 00:29:55,200 --> 00:29:57,920 Speaker 1: package truth companies that didn't impact the retailers involved in 563 00:29:57,960 --> 00:30:01,120 Speaker 1: the space that such as the grocer's UM and companies 564 00:30:01,160 --> 00:30:04,880 Speaker 1: like Walmart and and her Target as well. We'll hop 565 00:30:04,920 --> 00:30:07,400 Speaker 1: back in here, um Brian and talk to us a 566 00:30:07,400 --> 00:30:09,240 Speaker 1: little bit about I guess the dynamic that gen is 567 00:30:09,240 --> 00:30:11,680 Speaker 1: talking about. She's talking about it from a commodity perspective, 568 00:30:12,040 --> 00:30:15,640 Speaker 1: but it feels like even a company like Hilton, for example, 569 00:30:15,720 --> 00:30:17,680 Speaker 1: even the travel companies are going to be dealing with 570 00:30:17,760 --> 00:30:19,960 Speaker 1: those margin pressures as well. Walk us with the numbers 571 00:30:20,000 --> 00:30:23,200 Speaker 1: on that. That's definitely been a concern, although there was 572 00:30:23,240 --> 00:30:25,560 Speaker 1: a comment on the Hilton earnings call which just ended 573 00:30:25,640 --> 00:30:28,400 Speaker 1: that they're seeing a little bit maybe some moderation and 574 00:30:28,520 --> 00:30:30,800 Speaker 1: some of the wage cost pressures of the tight labor market, 575 00:30:30,800 --> 00:30:33,800 Speaker 1: which may very well reflect what we see happening. For example, 576 00:30:33,840 --> 00:30:36,840 Speaker 1: in other sectors like retail, where maybe you know, some 577 00:30:36,960 --> 00:30:39,720 Speaker 1: staffing levels are being normalized after a kind of the 578 00:30:40,080 --> 00:30:43,800 Speaker 1: COVID demand impact. So if anything, although labor cost pressures 579 00:30:43,840 --> 00:30:47,400 Speaker 1: throughout the service industry remain an issue, we may see 580 00:30:47,400 --> 00:30:49,360 Speaker 1: a little bit of relief as in fact, you know, 581 00:30:49,520 --> 00:30:51,560 Speaker 1: there's a little bit of flak in terms of the 582 00:30:51,640 --> 00:30:54,320 Speaker 1: labor market. What's the outlook for these companies if we 583 00:30:54,400 --> 00:30:57,920 Speaker 1: hit a big recession. I imagine Brian um, fewer people 584 00:30:57,960 --> 00:30:59,960 Speaker 1: are going to check into Hilton it's a higher end 585 00:31:00,120 --> 00:31:03,120 Speaker 1: hotel obviously, and more people are going to be eating 586 00:31:03,160 --> 00:31:08,520 Speaker 1: corn flakes. I would agree with that. Yeah, Hilton has 587 00:31:08,680 --> 00:31:10,480 Speaker 1: you know, first part does have high and hotels that 588 00:31:10,520 --> 00:31:13,320 Speaker 1: also has a lot of kind of a comedy economy 589 00:31:13,480 --> 00:31:15,960 Speaker 1: and limited service brand, so they kind of played the 590 00:31:16,000 --> 00:31:17,920 Speaker 1: full spectrum of the market. You know, they are still 591 00:31:17,960 --> 00:31:22,040 Speaker 1: expecting revenue for eloping room to be up on average 592 00:31:23,560 --> 00:31:26,239 Speaker 1: three verses, so you're definitely looking for an up year, 593 00:31:26,600 --> 00:31:28,840 Speaker 1: but it's probably gonna come more from North American and 594 00:31:28,880 --> 00:31:32,520 Speaker 1: Europe than Asia, and there is factoring in the possibility 595 00:31:32,640 --> 00:31:36,360 Speaker 1: that the room rate uh support of all that growth 596 00:31:36,640 --> 00:31:39,120 Speaker 1: may slacken off a little bit in the second half 597 00:31:39,160 --> 00:31:41,000 Speaker 1: if we do have a recession, and they're allowing for 598 00:31:41,080 --> 00:31:43,560 Speaker 1: that possibility, but at least we go into the first half. 599 00:31:43,960 --> 00:31:46,200 Speaker 1: You know, certainly with the man conditions in North America 600 00:31:46,280 --> 00:31:49,520 Speaker 1: feeling quite favorable compared to where we were a year 601 00:31:49,560 --> 00:31:51,920 Speaker 1: or two back. I'm glad you mentioned the North America 602 00:31:52,240 --> 00:31:53,840 Speaker 1: piece of the equation because we have, of course, we're 603 00:31:53,840 --> 00:31:56,320 Speaker 1: covering Disney earnings for example, all rarning long and one 604 00:31:56,320 --> 00:31:59,320 Speaker 1: of the big stories there is the US versus International 605 00:31:59,360 --> 00:32:04,200 Speaker 1: component does about Hilton from an international perspective, So you know, 606 00:32:04,280 --> 00:32:07,040 Speaker 1: the trends really were were quite mixed. If you look 607 00:32:07,080 --> 00:32:10,280 Speaker 1: at the trends in the quarter just reported, you know, 608 00:32:10,320 --> 00:32:12,880 Speaker 1: the revenue prevailable room compared to let's say the four 609 00:32:12,960 --> 00:32:15,640 Speaker 1: Q nineteen before the pandemic, it was up eight percent 610 00:32:15,720 --> 00:32:19,400 Speaker 1: in the US, it was up to that benchmark in Europe, 611 00:32:19,440 --> 00:32:23,600 Speaker 1: but it was down in Asia, and that's because China 612 00:32:23,720 --> 00:32:26,680 Speaker 1: was down thirty seven percent. So again there's really some 613 00:32:27,160 --> 00:32:31,120 Speaker 1: quite significant disparities across regions. If you compare, for example, 614 00:32:31,560 --> 00:32:33,880 Speaker 1: the fourth quarter of twenty two to the fourth quarter 615 00:32:33,920 --> 00:32:38,160 Speaker 1: of jen what about um Kellogg, How do they look 616 00:32:38,160 --> 00:32:40,760 Speaker 1: when you divide them up by regions? I always think of, uh, 617 00:32:41,440 --> 00:32:43,480 Speaker 1: you know, corn flakes is North American product, but I 618 00:32:43,560 --> 00:32:46,000 Speaker 1: know that they sell that race Christy's and everything else 619 00:32:46,040 --> 00:32:49,080 Speaker 1: overseas as well. They do. And when you look at 620 00:32:49,080 --> 00:32:52,760 Speaker 1: the international portrait for for kellog Um, there are pockets 621 00:32:52,840 --> 00:32:55,720 Speaker 1: of very strong growth which include Latin America and parts 622 00:32:55,800 --> 00:33:01,360 Speaker 1: of they're emerging markets segment, especially in Africa and in Asia. UM. 623 00:33:01,480 --> 00:33:04,360 Speaker 1: The region that's most pressured out of their entire global 624 00:33:04,400 --> 00:33:06,560 Speaker 1: business right now is Europe UM. And part of that 625 00:33:06,760 --> 00:33:09,200 Speaker 1: is still stemming from uh, you know, issues related to 626 00:33:09,280 --> 00:33:12,760 Speaker 1: the Ukraine Russia war UM, but it's also that the 627 00:33:12,920 --> 00:33:16,040 Speaker 1: consumer in Europe has been pulling back faster than in 628 00:33:16,080 --> 00:33:18,640 Speaker 1: other regions, and so they're seeing that those customers are 629 00:33:18,720 --> 00:33:22,480 Speaker 1: even more stressed um than we're seeing in in areas 630 00:33:22,560 --> 00:33:24,800 Speaker 1: like the United States. All right, Jen, thanks so much 631 00:33:24,800 --> 00:33:28,840 Speaker 1: for joining us. Jen Bartasha is there from Bloomberg Intelligence 632 00:33:28,960 --> 00:33:32,600 Speaker 1: as well as Brian Egger also Bloomberg Intelligence. He covers 633 00:33:32,760 --> 00:33:38,080 Speaker 1: gaming and lodging for us. I want to get to 634 00:33:38,720 --> 00:33:42,240 Speaker 1: Matt Smith right now. He's an investment director at Ruffer 635 00:33:42,360 --> 00:33:45,440 Speaker 1: and he joins us here in our interactive broker studio, 636 00:33:45,560 --> 00:33:49,480 Speaker 1: even though he's normally a globe trotting master of the universe. 637 00:33:49,560 --> 00:33:52,280 Speaker 1: Why are you here, Matt In in New York right now? 638 00:33:53,120 --> 00:33:56,120 Speaker 1: I'm here as the manager of the fund we launched 639 00:33:56,160 --> 00:33:58,240 Speaker 1: for US clients at the beginning of last Yet, what 640 00:33:58,480 --> 00:34:02,280 Speaker 1: what's the fun focus on? So? Ruffer is a single 641 00:34:02,320 --> 00:34:06,720 Speaker 1: strategy firm. We are the biggest global macro fund you've 642 00:34:06,760 --> 00:34:10,920 Speaker 1: never heard of, at thirty two billion dollars. So this 643 00:34:11,120 --> 00:34:14,000 Speaker 1: fund follows our single strategy and makes it available to 644 00:34:14,160 --> 00:34:16,800 Speaker 1: US clients for the first time. What is that strategy? 645 00:34:16,920 --> 00:34:21,880 Speaker 1: Good question. We are looking to deliver positive absolute returns. 646 00:34:22,360 --> 00:34:27,080 Speaker 1: So isn't that what off helping? Well, there's a pretty 647 00:34:27,080 --> 00:34:29,360 Speaker 1: big focus on relative returns out there. We're trying to 648 00:34:29,440 --> 00:34:32,840 Speaker 1: not lose money. That's our primary goal, which seems almost 649 00:34:33,840 --> 00:34:38,000 Speaker 1: comically unambitious, But it turns out that if you can 650 00:34:38,080 --> 00:34:43,120 Speaker 1: do that and deliver decent returns on top, you will 651 00:34:43,200 --> 00:34:46,560 Speaker 1: compound pretty powerfully. So you're not still worried about a benchmark. 652 00:34:46,760 --> 00:34:49,440 Speaker 1: You're mainly worried about the zero bound. You don't want 653 00:34:49,440 --> 00:34:52,279 Speaker 1: to go below it. That's correct, That which means what 654 00:34:52,440 --> 00:34:54,880 Speaker 1: a lot less risk? I would imagine It means that 655 00:34:55,000 --> 00:34:59,600 Speaker 1: we start portfolio construction from the perspective of risk minimization 656 00:35:00,120 --> 00:35:02,919 Speaker 1: rather than return maximization, which is what most people would 657 00:35:02,960 --> 00:35:05,319 Speaker 1: would think to do. Okay, so you're a macro fund. 658 00:35:05,760 --> 00:35:08,279 Speaker 1: Where are you putting your money right now? So I 659 00:35:08,400 --> 00:35:10,680 Speaker 1: think you can break it down into three different places. 660 00:35:11,800 --> 00:35:14,800 Speaker 1: Are key structural trade, which I'm going to put in 661 00:35:14,880 --> 00:35:20,400 Speaker 1: the FED capitulation bucket, is that no central bank in 662 00:35:20,640 --> 00:35:25,520 Speaker 1: developed markets has got the political or popular mandate to 663 00:35:25,880 --> 00:35:29,880 Speaker 1: genuinely get rid of inflation. They are all having a go, 664 00:35:31,280 --> 00:35:34,720 Speaker 1: but we think when push comes to shove, the pain 665 00:35:35,000 --> 00:35:37,800 Speaker 1: of dealing with inflation is still much greater than the 666 00:35:37,880 --> 00:35:41,879 Speaker 1: pain of inflation itself, and that will take some time 667 00:35:41,960 --> 00:35:46,719 Speaker 1: until that changes. So what does the portfolio result of 668 00:35:46,800 --> 00:35:50,120 Speaker 1: that look like. It's an allocation to thirty and fifty 669 00:35:50,200 --> 00:35:54,920 Speaker 1: year US and UK inflation link bonds. So really what 670 00:35:55,040 --> 00:35:57,600 Speaker 1: we want is the inflation expectation which currently sits it 671 00:35:57,680 --> 00:36:04,040 Speaker 1: around too that the breaking and we think that that 672 00:36:04,200 --> 00:36:09,480 Speaker 1: reflects the market's belief in total FED credibility. And as 673 00:36:09,560 --> 00:36:13,200 Speaker 1: that gets called into questions as people think, okay, inflation 674 00:36:13,239 --> 00:36:14,480 Speaker 1: is not going to be two over the long term, 675 00:36:14,560 --> 00:36:17,160 Speaker 1: maybe it could be three or four, those assets should 676 00:36:17,160 --> 00:36:19,640 Speaker 1: should do pretty well. Did you hear David Rubenstein talking 677 00:36:19,680 --> 00:36:22,799 Speaker 1: to j Pale the other day. He was like, why 678 00:36:22,880 --> 00:36:26,239 Speaker 1: not three? Three seems good to me? Three doesn't seem 679 00:36:26,280 --> 00:36:28,440 Speaker 1: good to me. Two doesn't even seem good to me. 680 00:36:28,800 --> 00:36:31,600 Speaker 1: But I don't like inflation at all. But Rubenstein actually 681 00:36:31,760 --> 00:36:33,480 Speaker 1: asked that question right, He said, like, why are we 682 00:36:33,560 --> 00:36:35,640 Speaker 1: even shooting for two percent? Is that even a fair 683 00:36:35,719 --> 00:36:38,320 Speaker 1: global standard of how It's like, well, that's the standard, 684 00:36:38,840 --> 00:36:40,680 Speaker 1: he said. He said, why is it? And pal said 685 00:36:40,800 --> 00:36:43,480 Speaker 1: because it's the global standard. There wasn't a better answer 686 00:36:43,560 --> 00:36:46,319 Speaker 1: than that, just it is what it is. I think 687 00:36:47,200 --> 00:36:50,480 Speaker 1: one of the most entertaining dynamics is that Wall Street, 688 00:36:51,880 --> 00:36:56,040 Speaker 1: like cell side inflation expectations are totally in line with that, 689 00:36:56,360 --> 00:36:59,160 Speaker 1: and it looks a bit like one of the SpaceX 690 00:36:59,600 --> 00:37:03,120 Speaker 1: rocket endings. So you know, these SpaceX rockets come down 691 00:37:03,200 --> 00:37:07,200 Speaker 1: from the outer atmosphere and they land on a boat 692 00:37:07,239 --> 00:37:12,640 Speaker 1: perfectly Wall Street inflation expectations come down from twelve ten 693 00:37:12,760 --> 00:37:16,600 Speaker 1: eight down to two and they just sit there. And 694 00:37:17,680 --> 00:37:22,840 Speaker 1: I think if you go and YouTube failed SpaceX landings, 695 00:37:23,400 --> 00:37:24,840 Speaker 1: you've got a lot of hits. You know, there's a 696 00:37:24,920 --> 00:37:27,000 Speaker 1: lot of videos of when that went wrong. It seems 697 00:37:27,000 --> 00:37:30,520 Speaker 1: to us extremely unlikely that they will be able to 698 00:37:30,560 --> 00:37:33,319 Speaker 1: bring inflation down to two and it'll just stay there. 699 00:37:33,600 --> 00:37:37,799 Speaker 1: Can I ask the mechanics of these investments? Thirty two 700 00:37:37,880 --> 00:37:40,320 Speaker 1: billion dollars there's a lot of money, I mean for 701 00:37:40,440 --> 00:37:43,719 Speaker 1: me and pretty that's a lot, I guess in the 702 00:37:43,840 --> 00:37:48,000 Speaker 1: global treasuries market it's slightly less. But isn't there a 703 00:37:48,080 --> 00:37:52,040 Speaker 1: liquidity issue with that? Even that some in terms of 704 00:37:52,120 --> 00:37:57,719 Speaker 1: investing did the short answers? No? Uh, we play in 705 00:37:57,840 --> 00:38:03,279 Speaker 1: pretty liquid global asset classes. That affords us, you know, 706 00:38:03,360 --> 00:38:06,960 Speaker 1: plenty of room for maneuver. But I don't know. If 707 00:38:06,960 --> 00:38:10,759 Speaker 1: you remember Jeremy Irons in important call, he says you've 708 00:38:10,760 --> 00:38:14,480 Speaker 1: got to be either the fastest, the cleverest, or you've 709 00:38:14,480 --> 00:38:17,759 Speaker 1: got to cheat. Um, we are not going to be 710 00:38:17,840 --> 00:38:20,919 Speaker 1: the fastest, and we certainly don't cheat. I'm not saying 711 00:38:20,960 --> 00:38:22,440 Speaker 1: we're the cleverest. But what we try to do is 712 00:38:22,520 --> 00:38:25,440 Speaker 1: position in advance of where people want to end up, 713 00:38:25,600 --> 00:38:32,160 Speaker 1: so we're always prepared for bad market outcomes. That means 714 00:38:32,200 --> 00:38:38,719 Speaker 1: that liquidity normally historically has come to us at times 715 00:38:38,760 --> 00:38:42,040 Speaker 1: of crisis, rather than us chasing some different positioning that 716 00:38:42,120 --> 00:38:44,920 Speaker 1: we wish we had when things go wrong. I have 717 00:38:45,080 --> 00:38:49,040 Speaker 1: a listener question for for for Matt here, I was 718 00:38:49,120 --> 00:38:51,399 Speaker 1: told by my spies that you were speaking to John 719 00:38:51,480 --> 00:38:54,600 Speaker 1: Arthur's before you came to our studio and grace us 720 00:38:54,640 --> 00:38:57,160 Speaker 1: with your presence. He writes in and said John Arthur's 721 00:38:59,239 --> 00:39:02,279 Speaker 1: he was very famous for having written for the f 722 00:39:02,440 --> 00:39:05,799 Speaker 1: T for years and years years, very famous, full stop. 723 00:39:05,880 --> 00:39:08,200 Speaker 1: I think yes, that's fair, which is yeah. I kind 724 00:39:08,200 --> 00:39:10,760 Speaker 1: of pulled like a Madonna slash Mosis, thinking John Arthur's 725 00:39:10,760 --> 00:39:14,200 Speaker 1: everyone else who years. Anyways, he's asking what the pressure 726 00:39:14,320 --> 00:39:16,920 Speaker 1: from governments on inflation fighting could actually be. Is there 727 00:39:16,920 --> 00:39:24,880 Speaker 1: an analogy to Nixon leaving Breton Woods? In so Nixon 728 00:39:25,000 --> 00:39:27,319 Speaker 1: left putting you on spot Mat He always brings up 729 00:39:27,320 --> 00:39:31,320 Speaker 1: Bredon Woods, just for Nixon left Bredon Woods because he 730 00:39:31,360 --> 00:39:35,840 Speaker 1: couldn't hold the peg to gold because the the tightening 731 00:39:35,880 --> 00:39:38,600 Speaker 1: he would have needed to do to keep the dollar 732 00:39:38,680 --> 00:39:41,680 Speaker 1: on gold would have collapsed the U s economy, So 733 00:39:41,800 --> 00:39:46,000 Speaker 1: he chose an easier path of no gold peg and 734 00:39:46,800 --> 00:39:52,239 Speaker 1: inflation higher. Clearly, the US government today is not going 735 00:39:52,280 --> 00:39:55,160 Speaker 1: to repeg to gold. That would definitely lead to some 736 00:39:55,200 --> 00:39:59,000 Speaker 1: pretty bad economic outcomes quite quickly. Um, I don't think 737 00:39:59,040 --> 00:40:03,680 Speaker 1: they're going to be able to tighten significantly. Either they 738 00:40:03,719 --> 00:40:07,080 Speaker 1: are just going to continue solving problems with more spending, 739 00:40:08,080 --> 00:40:12,640 Speaker 1: and that's what leaves you with higher structural insertion. So 740 00:40:12,719 --> 00:40:16,000 Speaker 1: it's not just about the FED. I would have asked 741 00:40:16,040 --> 00:40:19,799 Speaker 1: about a Vulcar analogy, but that's only monetary policy, right, 742 00:40:19,920 --> 00:40:24,160 Speaker 1: and you're looking at this and a much more holistic way. 743 00:40:25,040 --> 00:40:27,200 Speaker 1: I do think that the FED is actually it's not 744 00:40:27,239 --> 00:40:29,399 Speaker 1: an irrelevance, but I think it's not where you should 745 00:40:29,440 --> 00:40:32,800 Speaker 1: be looking for. How to position your portfolio structure is 746 00:40:32,840 --> 00:40:37,040 Speaker 1: your time horizon. So we're trying to avoid losing money 747 00:40:37,120 --> 00:40:41,040 Speaker 1: on a rolling twelve months basis. But the way we 748 00:40:41,120 --> 00:40:44,560 Speaker 1: do that is to put in structural assets that we 749 00:40:44,640 --> 00:40:47,360 Speaker 1: think are critical for protecting capital and then kind of 750 00:40:47,520 --> 00:40:50,640 Speaker 1: encase them in other assets that allow to be agnostic 751 00:40:50,760 --> 00:40:55,040 Speaker 1: to timing. So short answer is we deliberately don't have one, 752 00:40:55,600 --> 00:40:58,239 Speaker 1: because predicting the future is easy so long as you 753 00:40:58,320 --> 00:41:01,000 Speaker 1: don't have to predict when the future is going to happen. 754 00:41:01,960 --> 00:41:05,160 Speaker 1: So um And and in terms of the FED being 755 00:41:05,840 --> 00:41:10,240 Speaker 1: say less relevant, Um, you don't look at the Vulcar 756 00:41:10,840 --> 00:41:15,000 Speaker 1: scenario and say that that FED was able to withstand 757 00:41:15,160 --> 00:41:19,720 Speaker 1: political pressures that were you know, ten x what Jerome 758 00:41:19,760 --> 00:41:22,799 Speaker 1: Pale if not a hundred x what Jerome Pale faces. Now, 759 00:41:23,440 --> 00:41:26,239 Speaker 1: it doesn't that that FED was enabled to do what 760 00:41:26,360 --> 00:41:31,320 Speaker 1: it did by political support. So everyone wants to be 761 00:41:31,440 --> 00:41:33,680 Speaker 1: volca in advance, right, every central banker would want to 762 00:41:33,719 --> 00:41:36,000 Speaker 1: run prudent monetary policy that you need a Reagan behind 763 00:41:36,080 --> 00:41:40,360 Speaker 1: you exactly. So after ten years of being fed up 764 00:41:40,400 --> 00:41:44,719 Speaker 1: with inflation uh V four, you had the Whip inflation. 765 00:41:44,800 --> 00:41:49,120 Speaker 1: Now the wind campaign didn't work. It was only after 766 00:41:49,239 --> 00:41:53,080 Speaker 1: the whole large sways that the voter base said, we're 767 00:41:53,120 --> 00:41:56,800 Speaker 1: really sick of this. We'd like to elect someone with 768 00:41:57,520 --> 00:42:01,520 Speaker 1: who's going to support or docks Montrey policy, supply side 769 00:42:01,520 --> 00:42:06,640 Speaker 1: reform hammed on both sides Atlantic Thatcher and Reagan. The 770 00:42:06,719 --> 00:42:10,480 Speaker 1: results were pretty clear. I don't see that right now. 771 00:42:11,960 --> 00:42:18,280 Speaker 1: The government in Europe is supporting people facing rising prices, 772 00:42:18,320 --> 00:42:21,840 Speaker 1: facing inflation with more money. In the US, it's the 773 00:42:21,920 --> 00:42:26,480 Speaker 1: same if you have a high gasoline price or heating bill. 774 00:42:26,960 --> 00:42:31,560 Speaker 1: You know the States are handing out stimulus. So yeah, 775 00:42:31,600 --> 00:42:34,240 Speaker 1: I saw the German inflation print was lower today because 776 00:42:34,560 --> 00:42:38,800 Speaker 1: Germany just picked up everybody's bills last which is not 777 00:42:39,000 --> 00:42:41,560 Speaker 1: really helpful right in the long run, works for a while, 778 00:42:41,640 --> 00:42:46,040 Speaker 1: but exactly in the long term. So that's why in 779 00:42:46,280 --> 00:42:47,960 Speaker 1: the long term you run out of other people's money. 780 00:42:47,960 --> 00:42:49,680 Speaker 1: Were you about to say that I was not, but 781 00:42:49,760 --> 00:42:52,840 Speaker 1: I should have been. That's I believe a British quote. 782 00:42:52,960 --> 00:42:56,799 Speaker 1: That's Margaret that you know it's it's for us. It's 783 00:42:56,800 --> 00:42:59,319 Speaker 1: a fantastic heads as well as a return seeking opportunity. 784 00:42:59,520 --> 00:43:02,640 Speaker 1: If INFLA expectations rise a lot, or people realize that 785 00:43:02,680 --> 00:43:09,520 Speaker 1: the FED doesn't have the political support to titan properly, 786 00:43:10,200 --> 00:43:14,280 Speaker 1: then it's premiuted to rise a lot in the bond market, 787 00:43:14,520 --> 00:43:18,839 Speaker 1: in the equity market, cross asset um, so for us 788 00:43:19,480 --> 00:43:22,759 Speaker 1: have some of that protection. There are some good return 789 00:43:22,800 --> 00:43:26,680 Speaker 1: opportunities out there, but for the most part, you know, 790 00:43:26,840 --> 00:43:30,799 Speaker 1: a five cent risk free rate is it's kind of competing. Matt. 791 00:43:30,880 --> 00:43:32,839 Speaker 1: It was great having in the studio. Thanks so much 792 00:43:32,880 --> 00:43:40,319 Speaker 1: for coming by, Matt Smith, investment director at Ruffer. Thanks 793 00:43:40,360 --> 00:43:43,799 Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe 794 00:43:43,840 --> 00:43:47,560 Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast 795 00:43:47,600 --> 00:43:51,120 Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at 796 00:43:51,200 --> 00:43:55,000 Speaker 1: Matt Miller three on Boll Sweeney, I'm on Twitter at 797 00:43:55,040 --> 00:43:57,880 Speaker 1: pt Sweeney before the podcast. You can always catch us 798 00:43:57,920 --> 00:44:00,279 Speaker 1: worldwide at Bloomberg Radio t