WEBVTT - Disney, Markets, Hilton, and Kellogg (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple podcast or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.079 at Bloomberg dot com slash podcast. I want to get 0:00:22.120 --> 0:00:25.520 over right now to Keith Rogan Nathan. She is our 0:00:25.720 --> 0:00:30.480 US media analyst for Bloomberg Intelligence. And of course we've 0:00:30.480 --> 0:00:32.519 got to talk more about what's going on with Disney. 0:00:32.560 --> 0:00:35.400 It's a big move today, and as Abigail points out, 0:00:35.640 --> 0:00:38.000 um it's a big move in general. Kind of are 0:00:38.040 --> 0:00:41.400 they winning this issue with Nelson Pelts or have they 0:00:41.520 --> 0:00:45.360 both won? Everyone's a winner, Githa, what do you think? Yeah? 0:00:45.440 --> 0:00:47.839 I agree, I think everyone is a winner. I mean 0:00:47.960 --> 0:00:50.920 a Pell's got what he wanted, uh, which is, you know, 0:00:51.000 --> 0:00:53.560 the stock price moved higher. And I think it's you know, 0:00:53.680 --> 0:00:55.400 just kind of even though it's a somewhat of an 0:00:55.480 --> 0:00:58.279 I think an unwelcome distraction for Disney when they had 0:00:58.280 --> 0:01:00.200 so much going on. It really kind of up to 0:01:00.360 --> 0:01:02.760 Bob Iger on his does and and forced him to 0:01:02.880 --> 0:01:05.320 kind of come up with the plan that he did, 0:01:05.920 --> 0:01:09.280 which he articulated yesterday, really kind of putting them now 0:01:09.319 --> 0:01:12.720 on that path to to sustainable earnings growth and profitability 0:01:12.760 --> 0:01:15.039 in the streaming business, two things that you know, investors 0:01:15.120 --> 0:01:18.440 really wanted to see very badly. Also striking to me 0:01:18.520 --> 0:01:21.320 about the earnings picture, specifically that you're seeing a pretty 0:01:21.360 --> 0:01:24.520 decent rebound in Parks in their parks business as opposed 0:01:24.520 --> 0:01:27.200 to a miss on their subscriber business. Talk to us 0:01:27.240 --> 0:01:29.640 about that divergence. It doesn't feel like we can call 0:01:29.720 --> 0:01:33.720 Disney and Media tech company anymore. I agree, pretty. I mean, 0:01:33.880 --> 0:01:36.479 if you look at just their operating results from from 0:01:36.560 --> 0:01:40.000 what they posted yesterday, hundred percent of their operating income 0:01:40.080 --> 0:01:42.320 now comes from the parks division. So I feel like 0:01:42.480 --> 0:01:47.160 it Parks still continues to be such a yes, a 0:01:47.280 --> 0:01:50.840 hundred percent. Um. You know, all of their operating income 0:01:50.960 --> 0:01:53.559 is generated by Parks because you know, whatever the linear 0:01:53.640 --> 0:01:57.640 networks were generating in operating income that was offset by 0:01:57.680 --> 0:02:01.000 the losses and the streaming division. Um, so Media really 0:02:01.200 --> 0:02:04.920 is net zero for them at this point. Um, and 0:02:05.040 --> 0:02:07.320 so everything is Sparks, and I feel like it is 0:02:07.800 --> 0:02:11.160 somewhat miss uh. I don't want to say misunderstood, but 0:02:11.200 --> 0:02:15.079 definitely underappreciated because it is such a big part of 0:02:15.240 --> 0:02:18.239 their profit equation. And what we're seeing is not just 0:02:18.360 --> 0:02:21.240 the comeback in parks, right, but we're seeing the sustained momentum. 0:02:21.480 --> 0:02:24.600 So you're looking at attendance, it was up eleven You 0:02:24.639 --> 0:02:27.440 look at a capita spending that was up last year, 0:02:27.520 --> 0:02:30.320 it was up over pre pandemic levels. But even if 0:02:30.360 --> 0:02:33.480 you look at the fiscal first quarter, it was again 0:02:33.600 --> 0:02:36.119 up about you know, eight percent or so, so again 0:02:36.200 --> 0:02:39.200 steady growth. And if you just look at US park 0:02:39.480 --> 0:02:43.679 margins thirty, I mean this was record high margins. So 0:02:44.400 --> 0:02:46.520 really they are you know, I want to say, firing 0:02:46.560 --> 0:02:49.160 on all cylinders, whether it's you know, revenue growth, whether 0:02:49.240 --> 0:02:52.720 it's extracting efficiencies in terms of costs um so Parks 0:02:52.800 --> 0:02:56.400 definitely is is just such uh you know, alliance share 0:02:56.440 --> 0:02:59.560 of the profits there for them at Disney. If I listen, 0:03:00.200 --> 0:03:01.800 I feel like they're leaving some money on the table 0:03:01.840 --> 0:03:05.239 because if I get HBO streaming, I get everything that 0:03:05.440 --> 0:03:09.560 HBO offers, or when I get Netflix or Amazon Prime, 0:03:09.760 --> 0:03:12.639 I get all of the products they offer over the 0:03:12.760 --> 0:03:17.040 box with my little app. But ESPN. If I get 0:03:17.400 --> 0:03:21.079 ESPN Plus, then I get like Division three softball and 0:03:21.240 --> 0:03:24.959 maybe some Ivy League quidditch games. Like, why is it 0:03:25.080 --> 0:03:28.120 that I can't get all of ESPN without having to 0:03:28.240 --> 0:03:31.640 fork out money that I'm that I'm unwilling to pay 0:03:32.160 --> 0:03:36.800 for some stupid old school cable package. Yeah, this is 0:03:36.880 --> 0:03:40.520 really the conundrum really for for Disney and for actually 0:03:40.560 --> 0:03:42.240 the whole media industry. Man, and you bring up a 0:03:42.320 --> 0:03:45.600 really good point. They are not able to go in 0:03:46.360 --> 0:03:49.600 or or I should say, all in on streaming when 0:03:49.600 --> 0:03:53.560 it comes to ESPN, just because ESPN really defines the 0:03:53.680 --> 0:03:58.160 linear TV bundle. So if ESPN or when ESPN makes 0:03:58.240 --> 0:04:01.960 that complete shift to uming, uh, that's pretty much the 0:04:02.080 --> 0:04:04.680 depth of the traditional TV bundle as we know it, 0:04:04.760 --> 0:04:07.480 because all of the sports rights, all of the content, 0:04:08.080 --> 0:04:11.040 you know, is with that linear ESPN networking. Remember, it 0:04:11.120 --> 0:04:13.360 still throws out about three and a half four billion 0:04:13.440 --> 0:04:16.560 dollars in cash flow year after years. So this is 0:04:16.600 --> 0:04:19.599 really a very important part of the profit story for them, 0:04:19.960 --> 0:04:21.760 or at at least it has been. It is going 0:04:21.800 --> 0:04:23.440 to be a diminishing part of it, but it has 0:04:23.520 --> 0:04:25.440 been for a long time, and they don't want to 0:04:25.480 --> 0:04:29.159 do anything to exacerbate card cutting because there still is value. 0:04:29.160 --> 0:04:32.599 I mean, even if it's generating lower IBADA, it's still 0:04:32.720 --> 0:04:35.280 throwing out cash and that that's important for business, at 0:04:35.360 --> 0:04:38.440 least for the businesses, especially when you know streaming is 0:04:38.480 --> 0:04:42.240 still um in a loss making phase. But couldn't they 0:04:42.480 --> 0:04:44.720 I mean, I would pay twenty hours a month if 0:04:44.760 --> 0:04:48.560 I could see real ESPN streaming and not have to 0:04:48.720 --> 0:04:51.320 buy a cable bundle for it. Do they make more 0:04:51.400 --> 0:04:55.120 than that on an so on a cable bundle, They're 0:04:55.200 --> 0:05:00.880 making about twelve dollars per subscriber. So so they had 0:05:00.960 --> 0:05:03.080 to do this, they had to take baby steps here, 0:05:03.120 --> 0:05:05.599 and they already did that. So they have the ESPN too, 0:05:05.880 --> 0:05:08.680 I'm sorry, the ESPN Plus product, which is you know, 0:05:08.720 --> 0:05:11.640 which really has all the non market content as you 0:05:11.839 --> 0:05:16.440 should be called n Yeah, yeah, good point, but it's 0:05:16.480 --> 0:05:18.840 all you know, the tier two sports. Uh. And the 0:05:18.920 --> 0:05:20.880 reason they can't get the n F, you can't get 0:05:20.920 --> 0:05:23.600 the NFL or you know, the the NBA or the 0:05:23.720 --> 0:05:26.520 MLB is because they want you to come back to 0:05:26.720 --> 0:05:30.280 the traditional TV package because they're they're still asking distributors 0:05:30.360 --> 0:05:33.800 to pay that twelve dollar fee per subscriber. UM. So 0:05:33.880 --> 0:05:35.760 it's gonna be interesting. I mean pricing is going to 0:05:35.839 --> 0:05:38.440 be the biggest sticking point when it comes to that, 0:05:39.000 --> 0:05:41.159 you know, streaming product. Where are they going to price 0:05:41.480 --> 0:05:45.320 ESPN plus? You know, our customers used at twenty dollars. 0:05:45.520 --> 0:05:47.480 I mean, I don't know how many customers would be 0:05:47.520 --> 0:05:50.120 willing to pay twenty dollars. So that is really something 0:05:50.160 --> 0:05:52.080 that they need to evalue it very closely. But I 0:05:52.160 --> 0:05:55.560 think just with them kind of separating out ESPN as 0:05:55.760 --> 0:05:58.800 as a segment by itself kind of definitely paved the 0:05:58.839 --> 0:06:00.760 way for them to do something much strategic with it, 0:06:00.839 --> 0:06:03.280 either you know, a spin a sale or or that 0:06:03.440 --> 0:06:06.320 big bush into streaming, maybe combining it with supports betting. 0:06:06.720 --> 0:06:09.280 We have to wait and watch. I have betting drives 0:06:09.360 --> 0:06:11.880 viewership for sure. Keith, thanks so much for joining us. KEITHA. 0:06:12.080 --> 0:06:15.919 Royan Nathan. There are US media analysts for Bloomberg Intelligence 0:06:15.960 --> 0:06:21.960 walking us through what's going on with Disney. We've all 0:06:22.040 --> 0:06:24.560 heard about quiet quitting, and surely it's on the rise 0:06:24.880 --> 0:06:27.600 now in bonus season. If you don't get what you 0:06:27.680 --> 0:06:30.920 want and you can't get a raise, you're less likely 0:06:31.000 --> 0:06:32.760 to quit your job, but you might as well just 0:06:32.880 --> 0:06:37.600 not give up anymore. UM. Quiet hiring is a term 0:06:37.640 --> 0:06:41.000 I've never heard before until now, and that's why we're 0:06:41.000 --> 0:06:43.400 gonna bring in Emily Rose, Senior director of Research at 0:06:43.560 --> 0:06:47.480 Gartner um n y I C ticker I T for 0:06:47.600 --> 0:06:50.800 Gartner if you want to check out the business there. Emily, 0:06:50.839 --> 0:06:54.839 thanks so much for joining us. What is quiet hiring 0:06:56.640 --> 0:07:00.120 so quiet hiring is how organizations are addressed in the 0:07:00.160 --> 0:07:03.440 fact that we've got a massive talent shortage while also 0:07:03.640 --> 0:07:09.040 some economic uncertainty by using the talent they have in 0:07:09.200 --> 0:07:15.040 house or contractors to add get the skills they need 0:07:15.080 --> 0:07:18.240 where they need the most without adding full time headcount. 0:07:21.600 --> 0:07:27.400 So they so they they're outsourcing, well, it could be 0:07:27.480 --> 0:07:30.440 outsourcing UM, but usually what we're actually seeing is a 0:07:30.520 --> 0:07:33.320 lot more of Okay, this part of the business is 0:07:33.360 --> 0:07:36.760 incredibly important to us. We're going to move talent over 0:07:36.840 --> 0:07:39.160 to make it happen. UM. You've seen examples from the 0:07:39.160 --> 0:07:42.280 airline industry where anyone who has an office job is 0:07:42.360 --> 0:07:44.920 being paid extra to take a shift as a bag 0:07:45.000 --> 0:07:49.480 of chandler Um or if it's not operational priorities, it 0:07:49.560 --> 0:07:52.640 might be strategic priorities. To say a business decides we 0:07:53.080 --> 0:07:56.360 desperately need data scientists. We know the hiring kinmeline for 0:07:56.440 --> 0:08:00.720 them is maybe nine months long or longer. So rather 0:08:00.840 --> 0:08:03.720 than cut our goals for the year and say we're 0:08:03.760 --> 0:08:05.240 just not going to meet them because we couldn't get 0:08:05.280 --> 0:08:07.400 the talent we need, We're going to go take some 0:08:07.720 --> 0:08:10.360 analysts from HR and Marketing who have some of the 0:08:10.400 --> 0:08:13.040 skills that we need and move them over and have 0:08:13.240 --> 0:08:15.360 them do some of the data science work and then 0:08:15.480 --> 0:08:18.400 either upskill them, maybe run them through a quick boot camp, 0:08:19.120 --> 0:08:21.760 or redesign the work a little bit so that either 0:08:21.840 --> 0:08:24.200 a contractor or someone else with the organization can do 0:08:24.280 --> 0:08:28.240 the parts of the role. But we can't do contractors. 0:08:28.800 --> 0:08:32.320 That's the thing I understand the bringing in contract work 0:08:32.400 --> 0:08:35.920 that makes sense and nothing new, um is are we 0:08:36.000 --> 0:08:38.120 in an environment where people are scared to add to 0:08:38.200 --> 0:08:43.360 headcount for you know Wall Street reasons. You don't see 0:08:43.520 --> 0:08:46.520 stocks jump when you add seven thousand people. You do 0:08:46.679 --> 0:08:49.439 see stocks jump when you cut seven thousand people. Is 0:08:49.520 --> 0:08:53.559 that why they might want to do this quietly? Exactly? 0:08:53.679 --> 0:08:56.559 So this is essentially a response to the fact that 0:08:57.120 --> 0:09:00.800 Wall Streets watching, Your stakeholders are watching and and not 0:09:01.080 --> 0:09:06.520 wanting to have massively high labor costs just skyrocket at 0:09:06.600 --> 0:09:10.559 this particular point in time, but also the fact that 0:09:10.679 --> 0:09:13.000 the work still needs to get done. So does that 0:09:13.080 --> 0:09:16.839 shop up in something like the seventeen thousand jobs we 0:09:16.960 --> 0:09:19.640 were got reported on on Friday. Is that something that's 0:09:19.960 --> 0:09:21.400 showing up in the data or is this kind of 0:09:21.480 --> 0:09:25.720 a great spot or a blind spot for the labor economy. Um, 0:09:25.880 --> 0:09:28.600 So this is something that you might not necessarily see 0:09:28.840 --> 0:09:32.560 in the job's numbers, because if someone's moving internally, um, 0:09:32.840 --> 0:09:35.559 it doesn't necessarily look like a job was added, but 0:09:36.679 --> 0:09:40.719 they are affecting that. Assuming that this goes well for 0:09:40.840 --> 0:09:44.160 someone and they're able to perform in the role, they're 0:09:44.200 --> 0:09:46.560 going to be more likely to stay at the organization 0:09:46.640 --> 0:09:48.839 and maybe move upwards, which is going to then, of 0:09:48.960 --> 0:09:52.360 course keep them from hopefully joining the labor market and 0:09:52.480 --> 0:09:55.640 going to another organization and raise their pay. Right because 0:09:55.679 --> 0:09:59.199 if I'm middle management but also a baggage handler, I'm 0:09:59.200 --> 0:10:01.679 going to want more me for that. You know, if 0:10:01.720 --> 0:10:04.240 I'm an analyst, but now I'm a data scientist, I 0:10:04.320 --> 0:10:08.040 feel like we deserve a bump. Yes, especially because data 0:10:08.040 --> 0:10:11.600 scientists are notoriously well paid compared to your typical HR 0:10:11.679 --> 0:10:16.839 marketing analyst. So this is somewhere where organizations have to 0:10:17.080 --> 0:10:19.240 see the that side of the coin. It's not enough 0:10:19.240 --> 0:10:20.760 to say we're gonna move you over because it's a 0:10:20.760 --> 0:10:24.679 strategic priority. So that's quiet hiring to pay people, So 0:10:24.840 --> 0:10:29.040 that's quiet hiring. Emily, what is the extremely loud hiring 0:10:29.200 --> 0:10:31.920 that we saw last Friday. What's going on with this 0:10:32.040 --> 0:10:35.080 labor market where we just continue to add more jobs 0:10:35.600 --> 0:10:39.560 than expected even as the Fed tries to raise rates 0:10:39.640 --> 0:10:43.439 and tighten financial conditions, and we see a florry of 0:10:43.600 --> 0:10:45.640 pink slips coming out of the West Coast and the 0:10:45.679 --> 0:10:50.439 Magic Kingdom. Yeah, so I can't speak to specific organizations, 0:10:50.559 --> 0:10:54.360 but in general with these layoffs, they're actually strikingly as 0:10:54.400 --> 0:10:56.280 difficult as they might be for the people going through 0:10:56.360 --> 0:11:00.679 them and their colleagues who are left behind, they are 0:11:00.679 --> 0:11:03.520 a small percentage of the workforce and so they make 0:11:03.559 --> 0:11:06.559 a lot of news, but they don't actually have a 0:11:06.720 --> 0:11:10.199 massive impact on a lot of our jobs numbers. And 0:11:10.679 --> 0:11:12.760 what we are seeing is that and the reason the 0:11:12.840 --> 0:11:14.760 jobs numbers are going up is pointing to that talent 0:11:15.040 --> 0:11:19.079 shortage that's driving quiet hiring, which is people desperately need 0:11:19.160 --> 0:11:22.559 talent and are constantly adding it. But what about the 0:11:22.600 --> 0:11:27.320 intangibles here, things like more sickly, unlimited sick days, more 0:11:27.400 --> 0:11:32.120 vacation time, whatever. The other intangibles are that a lot 0:11:32.160 --> 0:11:34.920 of these unions, for example, are really pushing for or 0:11:34.960 --> 0:11:37.920 how do you even factor that in so creating Those 0:11:37.920 --> 0:11:42.400 are actually great examples of how an organization might go 0:11:42.520 --> 0:11:45.960 about compensating someone or a group of people that they're 0:11:46.000 --> 0:11:49.480 moving over when they don't necessarily have the budget to 0:11:49.600 --> 0:11:52.680 do a massive compensation change. Maybe it's a one time bonus, 0:11:52.760 --> 0:11:57.280 maybe it's more flexibility, maybe it's more um pto. Whatever 0:11:57.400 --> 0:12:00.439 it is, you have to compensate people. As you value 0:12:00.480 --> 0:12:03.679 them enough to move them over, you're gonna want to 0:12:03.760 --> 0:12:08.199 keep them. But does that then have the same effect like, 0:12:08.320 --> 0:12:10.880 for example, is there a tradeoff then like I will 0:12:10.960 --> 0:12:13.880 be willing to take less pay as as Matt brings 0:12:14.000 --> 0:12:17.280 up if you give me these added benefits. Is there 0:12:17.280 --> 0:12:20.160 a way to see that trade off? Oh? Absolutely, And 0:12:20.200 --> 0:12:22.679 you can actually quantify it, so you can look at 0:12:22.720 --> 0:12:26.360 something and say, Dave pto is worth this much in salary, 0:12:26.600 --> 0:12:28.520 both in terms of what people are actually able to 0:12:28.920 --> 0:12:31.000 willing to trade off, so how they perceive it, and 0:12:31.120 --> 0:12:33.480 also what is the dollar value to the organization love 0:12:33.520 --> 0:12:38.600 to see that equation. Let's talk about raises and bonuses, UM, 0:12:39.080 --> 0:12:41.760 you know, beyond Wall Street, just generally in the American economy, 0:12:41.800 --> 0:12:46.959 as so many people are hired, um, and as we 0:12:47.040 --> 0:12:52.440 see so much UH inflation, employees are gonna want bumps. 0:12:52.559 --> 0:12:54.680 But I guess employers are going to be a little 0:12:54.679 --> 0:12:58.959 bit worried about the possible recession that that we're heading into, 0:12:59.280 --> 0:13:02.360 so there is likely to want to give those boosts 0:13:02.440 --> 0:13:05.840 to salary. What what are you seeing? We are seeing 0:13:06.080 --> 0:13:10.800 that the annual raise, particularly if it's the cost of 0:13:10.880 --> 0:13:13.280 living as opposed to a merit raise, is less than 0:13:13.320 --> 0:13:16.200 the current state of inflation in general. But of course 0:13:16.440 --> 0:13:19.280 accepting if there's a a union agreement that requires it 0:13:19.360 --> 0:13:22.599 to be tagged to annual inflation rates UM. So we 0:13:22.720 --> 0:13:26.920 are seeing that, And then associated with that is the 0:13:27.040 --> 0:13:30.440 lower that rate is UM, the more likely that organization 0:13:30.520 --> 0:13:33.599 is to see turnover. What does that then? Is that 0:13:33.880 --> 0:13:37.120 equivalent across all sectors? Are you seeing that or even 0:13:37.160 --> 0:13:40.720 the concept of quiet hiring more predominant in certain parts 0:13:40.760 --> 0:13:44.800 of the economy. So I would say that quiet hiring 0:13:44.880 --> 0:13:47.839 is a little bit less predominant right now in some 0:13:48.040 --> 0:13:51.040 of the larger tech organizations that are having layoffs because 0:13:51.080 --> 0:13:54.959 they are obviously dealing with a slightly different situation than 0:13:55.040 --> 0:13:58.679 a talent shortage. But for most organizations, we see this 0:13:58.800 --> 0:14:00.760 a lot. It's in some ways it's a little bit 0:14:00.840 --> 0:14:05.240 easier to do on site with on site workers. But 0:14:05.400 --> 0:14:07.240 we see this for desk based workers, we see this 0:14:07.360 --> 0:14:11.719 for deathless workers. We see this across industries. Where it's 0:14:11.760 --> 0:14:15.360 easier to do is where you have multiple business units. 0:14:15.840 --> 0:14:18.360 So say you can move someone when you decide to 0:14:18.400 --> 0:14:20.600 d prioritize a business unit, you can move people to 0:14:20.720 --> 0:14:24.040 the business unit you've prioritized. It's a little bit harder 0:14:24.280 --> 0:14:28.960 if you're extremely small as an organization. So coming back 0:14:29.000 --> 0:14:31.960 to the office, you mentioned desk less or desk spake 0:14:32.360 --> 0:14:35.480 space workers. Um is coming back to the office. I 0:14:35.560 --> 0:14:37.520 mean everyone's going to have to do or have we 0:14:37.680 --> 0:14:39.840 entered a new normal where a lot of people are 0:14:39.840 --> 0:14:42.360 going to work from home multiple days a week. I 0:14:42.480 --> 0:14:45.000 just wonder, because you know, if we do hit a recession, 0:14:45.040 --> 0:14:47.080 I've heard a lot of people say that's when companies 0:14:47.120 --> 0:14:51.600 are going to make people come back. They can try. Um, 0:14:52.000 --> 0:14:54.600 what we've seen is that that has not worked. So 0:14:55.000 --> 0:14:56.840 saying you're going to come back to the office. Here 0:14:56.880 --> 0:14:57.960 the days of the week we want to see you. 0:14:58.080 --> 0:15:01.840 Is they're very few situations where I've talked to clients 0:15:01.880 --> 0:15:06.640 about this and they've said it's going great. And part 0:15:06.680 --> 0:15:08.880 of it is that you have to actually explain now 0:15:09.880 --> 0:15:12.280 why someone should be coming into the office if they 0:15:12.320 --> 0:15:17.560 don't need to, and recognizing that actually by working remotely, 0:15:17.600 --> 0:15:22.000 they're saving on their transportation costs, their lunches, all of 0:15:22.040 --> 0:15:24.720 the different wear and tear on their clothing, and there 0:15:25.840 --> 0:15:28.320 their car or however they're getting into the office. All 0:15:28.360 --> 0:15:30.040 of these little things that add up, and also the 0:15:30.080 --> 0:15:33.000 convenience in many cases of working from home. So if 0:15:33.040 --> 0:15:35.680 you want to bring people into the office, one you 0:15:35.760 --> 0:15:38.200 may need to actually compensate them even more to get 0:15:38.240 --> 0:15:41.280 them there. But also you're gonna want to design those 0:15:41.560 --> 0:15:45.600 in office days very intentionally so that you're actually giving 0:15:45.640 --> 0:15:47.640 people a reason to want to be there. So rather 0:15:47.760 --> 0:15:50.440 than come into the office and do exactly what you're 0:15:50.440 --> 0:15:52.880 doing at home, just because we think it would be 0:15:52.960 --> 0:15:55.640 really nice if you somehow saw other people who you 0:15:55.720 --> 0:15:57.480 may not see because they may not have the same 0:15:57.560 --> 0:16:01.160 in office day as you. They need the actually organizations 0:16:01.200 --> 0:16:02.960 need to be saying when you're in the office, this 0:16:03.120 --> 0:16:05.160 is what we want from you. Here's how we've planned 0:16:05.160 --> 0:16:07.120 your day so that you will get these experiences we're 0:16:07.160 --> 0:16:10.160 looking for. All Right, Emily, great having on the program. 0:16:10.240 --> 0:16:12.200 Thanks so much for joining us. These topics I think 0:16:12.240 --> 0:16:16.200 are interesting too. Very many people for for for for 0:16:16.360 --> 0:16:22.120 some obvious reasons. Let's get over to Mike Vogel, saying 0:16:22.280 --> 0:16:24.920 right now he joins us from Cap Trust, where he's 0:16:25.000 --> 0:16:29.400 chief investment officer and managing director. Mike, what do you 0:16:29.520 --> 0:16:32.320 think of this rally that we've seen from the October lows. 0:16:32.600 --> 0:16:37.480 I'm hearing a growing chorus of warnings from you know, 0:16:37.720 --> 0:16:41.760 very traditionally conservative parts of Wall Street. Yeah, it's a 0:16:41.800 --> 0:16:44.400 great question. Matt it Crety, thanks for having on. I 0:16:44.520 --> 0:16:46.520 think I think the issue is, you know, you're just 0:16:46.520 --> 0:16:49.360 talking about the recession and the inverted yield curve. You know, 0:16:49.440 --> 0:16:53.800 there's pretty much everything is pointing towards slower economic output 0:16:54.240 --> 0:16:58.120 coming for the rest of this year except for employment. Right, 0:16:58.200 --> 0:17:01.000 We've we've every time the eeld curves and lay inverted, 0:17:01.080 --> 0:17:04.120 we've had a recession, but we've never had a recession 0:17:04.160 --> 0:17:05.960 with employment this strong. So which one of those two 0:17:06.040 --> 0:17:08.200 is gonna win out. That's that's the battle on Wall 0:17:08.240 --> 0:17:12.119 Street today as we're talking, um, you know, the the rally, 0:17:12.240 --> 0:17:13.800 we think is a little bit of a knee jerk 0:17:13.840 --> 0:17:17.040 reaction from from just a you know, horrible, no good, 0:17:17.160 --> 0:17:19.520 very bad year last year and twenty two. And as 0:17:19.560 --> 0:17:21.440 a result, we've we've seen you know, the sort of 0:17:21.480 --> 0:17:25.480 the January effect on steroids a little bit. Um. We're 0:17:26.080 --> 0:17:29.280 we're we're of the belief that inflation is peaked, the 0:17:29.320 --> 0:17:32.280 Federal Reserve isn't going to be as aggressive as as 0:17:32.680 --> 0:17:35.159 um you know, we sort of thought that were going 0:17:35.240 --> 0:17:36.960 to be three or four months ago, and I think 0:17:37.000 --> 0:17:39.840 you're seeing that in the equity markets. But um, we 0:17:40.040 --> 0:17:43.280 we still believe that at some point, weaker earnings, softer 0:17:43.440 --> 0:17:47.080 economic growth, and and um high valuations are going to 0:17:47.200 --> 0:17:49.760 end up causing some problems and ingestion for the market 0:17:49.840 --> 0:17:52.119 this year. So we're just trying to be really patient 0:17:52.320 --> 0:17:54.880 and spick our spots when we want to add. But why, 0:17:55.119 --> 0:17:58.920 but why do we see you know, if we're seeing 0:17:58.960 --> 0:18:03.239 all these um, you know, bad signs in the data. Um, 0:18:03.320 --> 0:18:06.760 in terms of economic growth, why do we see such 0:18:06.920 --> 0:18:10.920 huge games and hiring. Well, that's that's exactly the dilemma. 0:18:11.200 --> 0:18:14.080 We've never seen this before. And you know, we're having 0:18:14.119 --> 0:18:16.359 we're having a discussion in our offices this morning about 0:18:16.400 --> 0:18:19.240 about this very things like what what has changed about 0:18:19.240 --> 0:18:21.639 the employment picture? Maybe it's the fluidity or lack of 0:18:21.720 --> 0:18:23.760 friction and employment. You can go, Hey, if you lose 0:18:23.800 --> 0:18:25.359 your job, you can go become an uber driver by 0:18:25.400 --> 0:18:28.119 four o'clock that afternoon. Right, There's there's the there's the 0:18:28.200 --> 0:18:30.840 ability to bounce around and move. We've had we've had 0:18:30.920 --> 0:18:34.560 people leaving the job market on on sort of different 0:18:34.680 --> 0:18:37.720 in a different end, right, the demographic spectrum. The older 0:18:37.760 --> 0:18:40.960 workers have left, uh in a lot of ways. Is 0:18:41.040 --> 0:18:42.720 there something different? I don't think we have an answer 0:18:42.760 --> 0:18:45.320 to this. We're just positing the question. Is there something 0:18:45.440 --> 0:18:49.440 different about the about the employment market in today's world 0:18:49.600 --> 0:18:53.639 that is changing the to use a technical word, the 0:18:53.680 --> 0:18:56.359 Phillips curve that the federal reserve uses, right, are we 0:18:56.440 --> 0:18:59.880 going to see a recession while employment stays high? We're 0:19:00.000 --> 0:19:02.000 are we going to see employments say high and pull 0:19:02.080 --> 0:19:04.080 us out and not allow us to go into recession? 0:19:04.480 --> 0:19:06.359 All of those things are on the table, and and 0:19:06.680 --> 0:19:08.920 and you know, for for people who are simply saying, 0:19:09.240 --> 0:19:11.240 you know, this is a one directional market. Now the 0:19:11.320 --> 0:19:14.159 Feds cut rates, and we're gonna the Feds going to 0:19:14.200 --> 0:19:16.720 cut rates, and and you know, the long term part 0:19:16.760 --> 0:19:19.080 of the curves is much lower now, and therefore you 0:19:19.119 --> 0:19:21.639 can bid up prices on the equity markets. We we 0:19:21.760 --> 0:19:25.400 just think that's that's just not how it's gonna play. Cratty. 0:19:25.400 --> 0:19:27.800 I've always loved the idea that if you lose your job, 0:19:28.200 --> 0:19:31.480 that's a recession. If I lose my job, that's a depression. 0:19:31.600 --> 0:19:37.080 But if neither one of us loses our jobs, Mike, 0:19:37.240 --> 0:19:41.080 let's apply all of those great questions to uh, the 0:19:41.520 --> 0:19:45.560 the market here. I mean, Matt started off this segment 0:19:45.640 --> 0:19:47.800 by talking about this two tons in version. Do you 0:19:47.840 --> 0:19:49.680 put any stock in it? Do you believe that this 0:19:49.840 --> 0:19:51.880 is still the signal it was, say ten years ago. 0:19:53.920 --> 0:19:56.840 Let's be clear, right, it's really it's really simple to 0:19:57.320 --> 0:20:01.159 get causality reversed. Um, it's not yield curve that causes 0:20:01.200 --> 0:20:03.719 a recession. It's a signal of some things that are 0:20:03.720 --> 0:20:06.800 going on in the markets that mostly the federal reserve 0:20:06.880 --> 0:20:10.960 tightening interest rates, that that has historically has led to recession. 0:20:11.040 --> 0:20:13.960 So don't you know don't confuse causality here. They're they're 0:20:14.080 --> 0:20:17.760 very often temporal or contemporaneous, so it's it's important to 0:20:18.359 --> 0:20:20.639 keep that clear. Just because we were in an in 0:20:20.680 --> 0:20:22.680 an inverted yield curve doesn't mean that we're gonna go 0:20:22.720 --> 0:20:24.520 in recession. It just means the FED has been aggressive 0:20:24.520 --> 0:20:26.960 because we had this a bout of inflation. It's also 0:20:27.040 --> 0:20:29.439 hard to separate out the impact of COVID that we've had. 0:20:29.520 --> 0:20:32.680 We've never been through this cycle before. We're still dealing 0:20:32.800 --> 0:20:35.440 with the ripples and after effects of COVID, you know, 0:20:35.520 --> 0:20:37.600 the COVID, the COVID rock that was thrown into the 0:20:37.680 --> 0:20:40.840 pond here is still creating big waves and and and 0:20:41.720 --> 0:20:45.280 having impact on labor markets and on on on inflation 0:20:45.359 --> 0:20:47.760 and so on. So that that is all that is 0:20:47.800 --> 0:20:51.640 all playing out, and our jobs market participants and analysis 0:20:51.800 --> 0:20:53.920 just sort of sorts through that and come up with 0:20:53.960 --> 0:20:56.800 our best estimate for where we might play where this 0:20:56.920 --> 0:21:00.359 might play out. But again, you don't need to look 0:21:00.359 --> 0:21:03.960 any further than we've we've you know, recessions have been 0:21:04.119 --> 0:21:07.000 have been signaled every time by an inverted yield curve, 0:21:07.520 --> 0:21:10.120 and we've never had a recession when employments this strong, 0:21:11.520 --> 0:21:15.040 which which of those two immovable forces are gonna are 0:21:15.080 --> 0:21:17.800 going to be proved to be movable? Right? So what 0:21:17.920 --> 0:21:20.239 do you do as an investor right now? I mean, 0:21:20.440 --> 0:21:23.200 if you're building a portfolio for say a new client 0:21:23.280 --> 0:21:25.000 comes in with a million bucks, where do you where 0:21:25.000 --> 0:21:27.479 do you put it? Yeah? Well, let let me give 0:21:27.520 --> 0:21:29.280 you a little context. So last year we were we 0:21:29.359 --> 0:21:31.800 were in really good shape. We were we felt super 0:21:31.840 --> 0:21:34.479 smart and super confident and super smug about about how 0:21:34.520 --> 0:21:37.080