1
00:00:00,800 --> 00:00:04,040
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

2
00:00:04,040 --> 00:00:06,920
Speaker 1: my co host Matt Miller. Every business day, we bring

3
00:00:06,960 --> 00:00:11,520
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

4
00:00:11,560 --> 00:00:15,600
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

5
00:00:15,600 --> 00:00:18,479
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

6
00:00:18,480 --> 00:00:21,360
Speaker 1: at Bloomberg dot com slash podcast. You know, we are

7
00:00:21,440 --> 00:00:24,280
Speaker 1: on top of this crypto space here on this show,

8
00:00:24,640 --> 00:00:29,440
Speaker 1: and it's becoming clearer and clearer that some regulation is

9
00:00:29,520 --> 00:00:31,400
Speaker 1: coming to the world of crypto. Let's get some more

10
00:00:31,400 --> 00:00:34,280
Speaker 1: color on that. Mary Beth Buchanan, President of the America's

11
00:00:34,320 --> 00:00:37,920
Speaker 1: and global Chief Legal Officer Mercal Science. Mary Beth, it

12
00:00:38,040 --> 00:00:40,960
Speaker 1: just feels like the drumbeat is really beginning to pound

13
00:00:41,080 --> 00:00:44,320
Speaker 1: here for regulation of what is a growing crypto market.

14
00:00:44,360 --> 00:00:47,720
Speaker 1: Gary Ginstler, a new ahead of the SEC certainly making

15
00:00:47,840 --> 00:00:51,639
Speaker 1: some comments there. How do you think this will kind

16
00:00:51,640 --> 00:00:55,560
Speaker 1: of really evolve over time? You know, I think there's

17
00:00:55,600 --> 00:00:58,640
Speaker 1: been a lot of really great news in the cryptocurrency

18
00:00:58,640 --> 00:01:02,120
Speaker 1: space in the last few weeks, and as crypto continues

19
00:01:02,680 --> 00:01:05,920
Speaker 1: to grow and have mass adoption, not just in the

20
00:01:06,000 --> 00:01:09,520
Speaker 1: US but across the globe, regulators are taking a much

21
00:01:09,560 --> 00:01:12,639
Speaker 1: closer look at it, and they're looking at many different

22
00:01:12,680 --> 00:01:17,040
Speaker 1: aspects from stable coins to defy U two. Uh, you

23
00:01:17,080 --> 00:01:19,720
Speaker 1: know new expected guidance coming out today. From the fat

24
00:01:19,720 --> 00:01:22,880
Speaker 1: of it's it's an exciting time. But I agree with

25
00:01:22,920 --> 00:01:28,280
Speaker 1: you that additional regulation will be coming. So it's interesting

26
00:01:28,880 --> 00:01:32,800
Speaker 1: to think about Gary Gensler regulating this space. Is bitcoin

27
00:01:32,840 --> 00:01:38,760
Speaker 1: of security? No, I think that Gary Gensler is certainly

28
00:01:39,800 --> 00:01:44,040
Speaker 1: in a great position to understand the cryptocurrency markets as

29
00:01:44,040 --> 00:01:46,839
Speaker 1: he's been teaching at an m I T. The SEC

30
00:01:46,959 --> 00:01:49,960
Speaker 1: has been pretty clear that bitcoin is not a security

31
00:01:50,080 --> 00:01:53,160
Speaker 1: and so I don't think that there's any danger that

32
00:01:53,320 --> 00:01:57,680
Speaker 1: this is going to change in the near future. So,

33
00:01:58,200 --> 00:02:02,120
Speaker 1: Mary Beth, the US just this department created a National

34
00:02:02,320 --> 00:02:08,040
Speaker 1: Cryptocurrency Enforcement Team. That sounds ominous, what is that? Yeah,

35
00:02:08,120 --> 00:02:12,320
Speaker 1: the the Cryptocurrency Enforcement Team that was announced in early

36
00:02:12,360 --> 00:02:15,600
Speaker 1: October by the Deputy Attorney General is an effort by

37
00:02:15,919 --> 00:02:19,000
Speaker 1: many different components of the Department of Justice to come

38
00:02:19,040 --> 00:02:24,160
Speaker 1: together and to really attack one of the latest plagues

39
00:02:24,200 --> 00:02:29,359
Speaker 1: in the crypto space, which is ransomware attacks. Ransomware attacks

40
00:02:29,400 --> 00:02:34,120
Speaker 1: have gone up a hundred and fifty in compared to

41
00:02:34,880 --> 00:02:37,960
Speaker 1: so this task force is going to help root out

42
00:02:38,200 --> 00:02:43,359
Speaker 1: those who would use cryptocurrency to try to attack and

43
00:02:43,680 --> 00:02:48,000
Speaker 1: strangle businesses in the US and throughout the globe. What

44
00:02:48,320 --> 00:02:53,679
Speaker 1: you've been involved in the digital space for quite a while, now, um,

45
00:02:53,800 --> 00:02:55,919
Speaker 1: what can be done? You know when I whenever I

46
00:02:55,960 --> 00:02:58,760
Speaker 1: see a ransomware attack, I always think that's silly because

47
00:02:58,760 --> 00:03:03,440
Speaker 1: it's not an anonymous UM transaction. We know that it's

48
00:03:03,480 --> 00:03:06,440
Speaker 1: going to wallets, we know which wallets it's trading in,

49
00:03:06,720 --> 00:03:09,440
Speaker 1: but those wallets aren't attached to names, right, So what

50
00:03:09,520 --> 00:03:16,720
Speaker 1: can be done in order to really attack the ransomware

51
00:03:17,480 --> 00:03:21,040
Speaker 1: UM actors? We're going to need to see a lot

52
00:03:21,080 --> 00:03:27,080
Speaker 1: of collaboration between cryptocurrency exchanges, UM, blockchain analytics companies like

53
00:03:27,160 --> 00:03:32,320
Speaker 1: Marble Science, and the government. Recently, or rather later in

54
00:03:32,560 --> 00:03:37,360
Speaker 1: late summer, the Justice Department called the industry together and

55
00:03:37,400 --> 00:03:39,880
Speaker 1: shared with us some of the information that they've been

56
00:03:39,960 --> 00:03:43,760
Speaker 1: learning with recent ransomware attacks, and we shared with the

57
00:03:43,760 --> 00:03:46,960
Speaker 1: government some information that we've been learning. So I think

58
00:03:47,000 --> 00:03:51,160
Speaker 1: that through this this collaboration information sharing, we're going to

59
00:03:51,200 --> 00:03:55,800
Speaker 1: be able to stop stop these attackers before they can

60
00:03:55,840 --> 00:04:00,280
Speaker 1: find additional victims. So, you know, maybe about a lot

61
00:04:00,280 --> 00:04:03,920
Speaker 1: of folks are saying that this the crypto space really

62
00:04:04,720 --> 00:04:08,600
Speaker 1: needs regulation, if for no other reason than for it

63
00:04:08,680 --> 00:04:12,040
Speaker 1: to be validated and for its development and for more investment.

64
00:04:12,880 --> 00:04:14,280
Speaker 1: How do you think this is going to play out?

65
00:04:14,320 --> 00:04:18,400
Speaker 1: Is this something that our government currently has a capability

66
00:04:18,440 --> 00:04:21,560
Speaker 1: to regulate? It just feels like so much is new

67
00:04:21,600 --> 00:04:24,839
Speaker 1: about crypto and the knowledge level isn't anywhere where it

68
00:04:24,880 --> 00:04:30,120
Speaker 1: needs to be. I think most of the private sector

69
00:04:30,920 --> 00:04:35,159
Speaker 1: crypto companies want regulation, um, but but they want clear

70
00:04:35,200 --> 00:04:38,080
Speaker 1: regulation and they want to have a voice in creating it.

71
00:04:38,600 --> 00:04:41,560
Speaker 1: Right now, we do have a patchwork of regulations in

72
00:04:41,600 --> 00:04:44,440
Speaker 1: the United States. We have different agencies that are looking

73
00:04:44,480 --> 00:04:48,760
Speaker 1: at different aspects of how cryptocurrency operates. There may be

74
00:04:48,800 --> 00:04:52,320
Speaker 1: a few spaces where we're still seeing the absence of

75
00:04:52,360 --> 00:04:54,840
Speaker 1: some regulation, and what we need to do, I think,

76
00:04:54,960 --> 00:04:59,880
Speaker 1: is identify where there's a vacuum and create a reasonable

77
00:05:00,040 --> 00:05:03,160
Speaker 1: set of rules that make sense to make sure that

78
00:05:03,440 --> 00:05:06,760
Speaker 1: we're addressing all aspects of the crypto space. I mean,

79
00:05:06,839 --> 00:05:09,400
Speaker 1: what you do, or at least part of what you do,

80
00:05:09,680 --> 00:05:15,160
Speaker 1: is you help financial companies, government entities. As you were saying, um,

81
00:05:16,120 --> 00:05:21,680
Speaker 1: crypto companies prevent attacks, prevent you know, getting ripped off, Basically,

82
00:05:22,560 --> 00:05:24,839
Speaker 1: if I'm an investor, my main concern is where do

83
00:05:24,880 --> 00:05:26,560
Speaker 1: I hold this stuff? If I put a million or

84
00:05:26,560 --> 00:05:29,200
Speaker 1: two million into crypto, I want somebody I can trust

85
00:05:29,880 --> 00:05:33,119
Speaker 1: UM custoding that asset. Are we in a place where

86
00:05:33,880 --> 00:05:37,599
Speaker 1: there there is a safe and trustworthy place for me

87
00:05:37,640 --> 00:05:44,200
Speaker 1: to put those assets. There are a number of extremely

88
00:05:44,600 --> 00:05:49,760
Speaker 1: UM well respected custodians that are holding cryptocurrency today, and

89
00:05:49,800 --> 00:05:54,240
Speaker 1: those custodians are regulated. UM. They are utilizing the latest

90
00:05:54,279 --> 00:05:58,040
Speaker 1: technology to monitor their transactions, to know who they're doing

91
00:05:58,040 --> 00:06:00,760
Speaker 1: business with. And there are there are any options out

92
00:06:00,760 --> 00:06:04,480
Speaker 1: there today from the traditional crypto custodian and even to

93
00:06:04,640 --> 00:06:12,360
Speaker 1: certain US banks that are UM launching crypto custody services. Alright,

94
00:06:12,480 --> 00:06:15,040
Speaker 1: very cool to get some time with you, Mary Beth Hope,

95
00:06:15,080 --> 00:06:17,200
Speaker 1: but I hope we can get you back because UM,

96
00:06:17,320 --> 00:06:19,680
Speaker 1: it seems to me mercle Science as a wealth of

97
00:06:19,680 --> 00:06:22,600
Speaker 1: information that I think our clients would like to hear

98
00:06:23,000 --> 00:06:26,200
Speaker 1: more about. Mary Beth Buchanan as President of the America's

99
00:06:26,279 --> 00:06:33,040
Speaker 1: and Global Chief Legal Officer for mercal Science. Now, let's

100
00:06:33,040 --> 00:06:35,280
Speaker 1: bringing David Cudlow right now. He's in the CEO and

101
00:06:35,320 --> 00:06:40,160
Speaker 1: chief investment strategist at Mainstay Capital Management. They've got three

102
00:06:40,279 --> 00:06:44,919
Speaker 1: point eight billion dollars and assets under management out of Michigan. David,

103
00:06:44,960 --> 00:06:46,839
Speaker 1: always great to get you on the horn. Thanks so

104
00:06:46,920 --> 00:06:51,240
Speaker 1: much for joining us. UM. Let's talk about it. Seems

105
00:06:51,400 --> 00:06:53,800
Speaker 1: it seems like there's so many headwinds. You've got the

106
00:06:53,800 --> 00:06:58,160
Speaker 1: supply chain constraints. You've got a labor shortage, we have

107
00:06:58,440 --> 00:07:02,680
Speaker 1: inflation that looks more than transitory whatever that means, and

108
00:07:03,360 --> 00:07:08,000
Speaker 1: now um abudding energy crisis. Should I be worried as

109
00:07:08,040 --> 00:07:13,320
Speaker 1: an equities investor? Hey, good morning, Yeah, And I would

110
00:07:13,560 --> 00:07:17,640
Speaker 1: add to that that we have, uh, consumer sediment has

111
00:07:18,040 --> 00:07:22,080
Speaker 1: been falling. Uh confidence in the economy has been falling.

112
00:07:22,280 --> 00:07:25,640
Speaker 1: And you know, if we look at the GDP numbers

113
00:07:25,680 --> 00:07:29,840
Speaker 1: as forecasted by the Atlanta UM Atlanta fed their GDP

114
00:07:29,920 --> 00:07:33,480
Speaker 1: down numbers, they've fallen over the past few months from

115
00:07:33,520 --> 00:07:36,680
Speaker 1: close to seven percent projection for third quarter GDP down

116
00:07:36,720 --> 00:07:40,760
Speaker 1: to zero point five percent, dangerously close to a quarter

117
00:07:40,760 --> 00:07:43,960
Speaker 1: of contraction, although consensus estimates for GDP are quite a

118
00:07:43,960 --> 00:07:48,200
Speaker 1: bit higher round for the third quarter. So, yeah, we

119
00:07:48,320 --> 00:07:52,600
Speaker 1: have all these headwinds, uh that are that are coming

120
00:07:52,640 --> 00:07:59,000
Speaker 1: towards I think first and foremost is the the probability.

121
00:07:59,240 --> 00:08:02,000
Speaker 1: What most people think that the said will start to

122
00:08:02,080 --> 00:08:05,160
Speaker 1: taper before the end of the year, and that doesn't

123
00:08:05,160 --> 00:08:09,160
Speaker 1: mean eliminating liquidity the providing, but start to taper and

124
00:08:09,360 --> 00:08:11,600
Speaker 1: scale it back. And then they're talking about interest rates

125
00:08:12,400 --> 00:08:15,240
Speaker 1: um rising as as soon as the middle of next year,

126
00:08:15,280 --> 00:08:17,800
Speaker 1: which we we don't think will happen. But you know,

127
00:08:17,880 --> 00:08:21,120
Speaker 1: with that on the positive side, as we have just

128
00:08:21,480 --> 00:08:26,480
Speaker 1: stellar corporate earnings in this year, and as liquidity is

129
00:08:26,560 --> 00:08:29,640
Speaker 1: taken out of the system and we come back to fundamentals,

130
00:08:29,640 --> 00:08:33,040
Speaker 1: we look at fundamentals for the market, uh, specifically priced

131
00:08:33,040 --> 00:08:36,080
Speaker 1: to earnings ratios. UH, they're very, very good. They've actually

132
00:08:36,080 --> 00:08:38,720
Speaker 1: come down through the year because earnings have been so good.

133
00:08:39,240 --> 00:08:41,200
Speaker 1: We set a record in the first quarter, or second

134
00:08:41,200 --> 00:08:43,160
Speaker 1: best in the second, and we expect the third best

135
00:08:43,240 --> 00:08:48,280
Speaker 1: quarter here in the third quarters. It's easy comparisons because

136
00:08:48,280 --> 00:08:51,400
Speaker 1: of COVID, but it's also because corporations are just have

137
00:08:51,520 --> 00:08:53,600
Speaker 1: just got good balance sheets that have done really good

138
00:08:53,600 --> 00:08:57,600
Speaker 1: in this recovery from COVID and going forward. So on

139
00:08:57,720 --> 00:08:59,800
Speaker 1: that side of the equation the most important thing because

140
00:08:59,800 --> 00:09:02,360
Speaker 1: in a long term that's what stocks should be priced on.

141
00:09:02,400 --> 00:09:05,720
Speaker 1: His earnings. You know, we're just looking at incredible earnings

142
00:09:05,720 --> 00:09:09,400
Speaker 1: and profit margins in and and really going you know,

143
00:09:09,440 --> 00:09:12,120
Speaker 1: going forward to the fourth quarter as well, David, I

144
00:09:12,160 --> 00:09:13,920
Speaker 1: look at the w T I crewed a north of

145
00:09:14,320 --> 00:09:19,600
Speaker 1: eighty barrel. Have I missed the energy trade? No, I

146
00:09:19,600 --> 00:09:22,680
Speaker 1: don't think so. Um, I don't think so at all.

147
00:09:22,760 --> 00:09:25,320
Speaker 1: I mean, it's our favorite sector for the second half

148
00:09:25,320 --> 00:09:27,400
Speaker 1: of this year. Are are still our favorite sectors coming

149
00:09:27,400 --> 00:09:31,600
Speaker 1: into the fourth quarter is energy And you know, we

150
00:09:31,600 --> 00:09:35,040
Speaker 1: we we look around the world at what's going on. Um.

151
00:09:35,120 --> 00:09:37,400
Speaker 1: The OPEC hasn't helped out on the oil front. We've

152
00:09:37,400 --> 00:09:40,520
Speaker 1: got another meeting next month. We'll see what happens. But

153
00:09:41,320 --> 00:09:46,000
Speaker 1: it is, you know, a function of uh, this recovery,

154
00:09:46,120 --> 00:09:49,480
Speaker 1: this robust recover we've had around the world from COVID,

155
00:09:49,559 --> 00:09:53,240
Speaker 1: and economies are expanding their demanding more energy. There's been

156
00:09:53,880 --> 00:09:57,800
Speaker 1: significant when we look we look at renewables, right the

157
00:09:57,800 --> 00:10:01,000
Speaker 1: the emphasis has been on renewables, you know, for good reasons.

158
00:10:01,040 --> 00:10:04,800
Speaker 1: You know, we all want renewable, sustainable energy. But but

159
00:10:04,960 --> 00:10:07,240
Speaker 1: you know that right now in the US that makes

160
00:10:07,320 --> 00:10:14,280
Speaker 1: up about of our energy supply, there's still about that

161
00:10:14,360 --> 00:10:18,280
Speaker 1: comes from fossil fuels. In China that's even higher. So

162
00:10:18,600 --> 00:10:21,440
Speaker 1: you know, we we have the natural gas issues in

163
00:10:22,200 --> 00:10:27,120
Speaker 1: in Europe and UH and globally we have actually have

164
00:10:28,000 --> 00:10:31,480
Speaker 1: coal burning plants that are being fired back up or

165
00:10:31,559 --> 00:10:36,480
Speaker 1: increasing production. UH. We had we have expecting coal to

166
00:10:36,520 --> 00:10:40,120
Speaker 1: be at the highest level of use UH in this

167
00:10:40,240 --> 00:10:45,120
Speaker 1: country since and that's because of switches from l en

168
00:10:45,160 --> 00:10:47,920
Speaker 1: G or natural gas to to coal because of the

169
00:10:47,920 --> 00:10:51,000
Speaker 1: short supplies. So I think the energy trade has further

170
00:10:51,080 --> 00:10:53,120
Speaker 1: to go, and I think that it makes sense for

171
00:10:53,120 --> 00:10:56,120
Speaker 1: investors to be to have it to still continue to

172
00:10:56,120 --> 00:10:58,959
Speaker 1: have exposure there. What do you think about the rates

173
00:10:59,240 --> 00:11:03,560
Speaker 1: moves that we've seen recently, David that UM two years

174
00:11:03,600 --> 00:11:06,920
Speaker 1: regardless of region were sold off drastically. At the beginning

175
00:11:06,920 --> 00:11:09,880
Speaker 1: of the week, we've seen a curve flattening and we're

176
00:11:09,920 --> 00:11:12,800
Speaker 1: looking at a tenuere US treasure yield right now one

177
00:11:12,880 --> 00:11:18,080
Speaker 1: sixty six, whereas a month ago was one. Yeah, and

178
00:11:18,160 --> 00:11:23,160
Speaker 1: from a low of of of around just under one nineteen,

179
00:11:23,679 --> 00:11:27,320
Speaker 1: we've had a significant rise UM. You know. I think

180
00:11:27,320 --> 00:11:31,400
Speaker 1: that's a function somewhat of a reaction to what the

181
00:11:31,440 --> 00:11:34,839
Speaker 1: Fed has been trying to UH send signals on on

182
00:11:35,000 --> 00:11:40,080
Speaker 1: their policy. UH. Certainly, the the pullback in the market

183
00:11:40,120 --> 00:11:42,480
Speaker 1: I think was a response to that increased rates because

184
00:11:42,480 --> 00:11:44,559
Speaker 1: we've seen that, right, We saw that in the first quarter,

185
00:11:44,840 --> 00:11:47,280
Speaker 1: we had a similar spike in rates of about seventy

186
00:11:47,280 --> 00:11:51,120
Speaker 1: basis points. The market market sold off, especially what we

187
00:11:51,160 --> 00:11:55,520
Speaker 1: consider long duration equities like tech and gross stocks um

188
00:11:55,600 --> 00:11:59,280
Speaker 1: and we've seen that again here. Uh. What's interesting now though,

189
00:11:59,360 --> 00:12:01,960
Speaker 1: is rates of need to move higher. We've seen the uh,

190
00:12:02,360 --> 00:12:05,080
Speaker 1: the market's rebound. I think that's you know, we're looking

191
00:12:05,080 --> 00:12:08,120
Speaker 1: at us again a strong earning season once again, only

192
00:12:08,360 --> 00:12:10,800
Speaker 1: you know, we've got maybe ten percent of companies that reported,

193
00:12:11,080 --> 00:12:14,640
Speaker 1: but they're coming in uh, some mixed reports, but overall,

194
00:12:15,480 --> 00:12:18,959
Speaker 1: we've got about eight percent of companies beating expectations. So

195
00:12:19,000 --> 00:12:23,360
Speaker 1: that's that's helped the market rates continualize. And it's typically

196
00:12:23,360 --> 00:12:25,679
Speaker 1: if it's a slow rise as a function of an

197
00:12:25,679 --> 00:12:29,600
Speaker 1: expanding autonomy, we would live with that. When they spike

198
00:12:29,960 --> 00:12:32,520
Speaker 1: or when they go up because of concerns about inflation,

199
00:12:33,120 --> 00:12:35,960
Speaker 1: that's going to be a problem, which inflation is probably

200
00:12:35,960 --> 00:12:39,400
Speaker 1: our biggest issue relative to start all right, David, David,

201
00:12:39,400 --> 00:12:41,600
Speaker 1: thank you so much for joining us. Really appreciated. David Coula,

202
00:12:41,679 --> 00:12:46,440
Speaker 1: CEO and chief investment Strategies at main Stay Capital. Let's

203
00:12:46,480 --> 00:12:52,960
Speaker 1: talk now about the leading Economic Indicators, the Leading Index

204
00:12:53,640 --> 00:12:55,960
Speaker 1: from the Conference Board right now, and what that's saying

205
00:12:56,120 --> 00:12:58,760
Speaker 1: about the economy. In order to do that, we bring

206
00:12:58,800 --> 00:13:01,480
Speaker 1: in autumn on ozel Drop. He's the director of Economic

207
00:13:01,559 --> 00:13:06,640
Speaker 1: Research and Global Research share at the Conference Board. If

208
00:13:06,679 --> 00:13:10,640
Speaker 1: you type in eco US on your Bloomberg terminal, you

209
00:13:10,679 --> 00:13:14,520
Speaker 1: can see the Leading Index came out at slightly disappointing

210
00:13:14,640 --> 00:13:17,440
Speaker 1: zero point two percent. We were looking for zero point

211
00:13:17,520 --> 00:13:20,960
Speaker 1: four percent and the previous month had been zero point

212
00:13:21,160 --> 00:13:25,520
Speaker 1: nine percent. So, Ottoman, thanks for joining us. Why the disappointment?

213
00:13:27,000 --> 00:13:30,319
Speaker 1: Good morning, good to be here. So, um, the the

214
00:13:30,920 --> 00:13:34,959
Speaker 1: zero point two percent is less than expected, but just

215
00:13:35,200 --> 00:13:37,800
Speaker 1: keep it in perspective that that is still a good

216
00:13:37,880 --> 00:13:42,160
Speaker 1: positive number. Uh. It continues a rising trend in the

217
00:13:42,400 --> 00:13:45,839
Speaker 1: Leading Index, but it is a little bit slower um

218
00:13:46,320 --> 00:13:49,479
Speaker 1: and a big reason for that this month in September

219
00:13:50,160 --> 00:13:54,720
Speaker 1: was the large negative contribution to the index from housing

220
00:13:54,800 --> 00:14:00,320
Speaker 1: residential construction UM and some softening and consumer confidence also

221
00:14:00,480 --> 00:14:04,280
Speaker 1: contributed to that. But all in all, the majority of

222
00:14:04,440 --> 00:14:08,320
Speaker 1: the Leading Index components have been rising six out of ten,

223
00:14:09,040 --> 00:14:12,360
Speaker 1: so that still points to still a healthy expansion in

224
00:14:12,440 --> 00:14:15,599
Speaker 1: the Earth economy. So Ottoman, what do you make of

225
00:14:15,720 --> 00:14:18,079
Speaker 1: the labor market out there. We've still got a lot

226
00:14:18,200 --> 00:14:20,600
Speaker 1: of people that are not in this labor force despite

227
00:14:20,680 --> 00:14:25,040
Speaker 1: the you know, very high number of job postings. Is

228
00:14:25,120 --> 00:14:28,680
Speaker 1: this a permanent new reality for the US labor market

229
00:14:28,760 --> 00:14:32,640
Speaker 1: that just fewer people are going to be working? You know,

230
00:14:32,760 --> 00:14:37,120
Speaker 1: I think the global pandemic has really caused a lot

231
00:14:37,200 --> 00:14:41,400
Speaker 1: of disruption in labor markets in many sectors across uh,

232
00:14:41,520 --> 00:14:45,040
Speaker 1: the Earth economy. And now UM, you know, we're dealing

233
00:14:45,120 --> 00:14:49,560
Speaker 1: with the delta variant that's creating more headwinds. UH. It's

234
00:14:49,680 --> 00:14:53,000
Speaker 1: keeping a lot of people on the sidelines because of

235
00:14:53,160 --> 00:14:57,840
Speaker 1: you know, concerns about getting sick and you know, staying

236
00:14:57,840 --> 00:15:01,080
Speaker 1: out of the labor force. UM. I think UM in

237
00:15:01,160 --> 00:15:05,200
Speaker 1: the future that will um eventually settle down. Uh. The

238
00:15:05,320 --> 00:15:09,160
Speaker 1: economy growth rates are you know settling down, uh to

239
00:15:09,280 --> 00:15:12,880
Speaker 1: our new expansion trajectory. And we're all getting used to,

240
00:15:13,120 --> 00:15:16,920
Speaker 1: you know, living with this. We're learning how to you know,

241
00:15:17,080 --> 00:15:22,080
Speaker 1: work and shop. UM and UH. I think as things normalize,

242
00:15:22,360 --> 00:15:25,800
Speaker 1: we'll see labor markets, you know, going back to the

243
00:15:26,360 --> 00:15:31,320
Speaker 1: trends that we have been seeing before the pandemic. UM

244
00:15:31,560 --> 00:15:34,640
Speaker 1: and UH, you know that was really going back to

245
00:15:34,920 --> 00:15:39,480
Speaker 1: lower unemployment rates and even labor shortages. So well, we

246
00:15:39,640 --> 00:15:43,440
Speaker 1: have labor shortages now, right, I mean one of the

247
00:15:43,480 --> 00:15:49,480
Speaker 1: big problems is companies can't hire enough people. Yeah, so

248
00:15:50,000 --> 00:15:54,040
Speaker 1: I think there there are probably two factors underlying those, right.

249
00:15:54,200 --> 00:15:57,680
Speaker 1: What one is uh the sort of the course of

250
00:15:57,920 --> 00:16:01,680
Speaker 1: the pandemic with the delta there and and people, um,

251
00:16:01,960 --> 00:16:05,760
Speaker 1: you know, not being willing to work, um, in especially

252
00:16:05,840 --> 00:16:09,120
Speaker 1: in in person services, so uh not being able to

253
00:16:09,200 --> 00:16:15,280
Speaker 1: find the workers because of that low uh labor force participation. UM.

254
00:16:15,600 --> 00:16:19,760
Speaker 1: But there's also underlying all of this. The context is

255
00:16:20,280 --> 00:16:25,920
Speaker 1: UM this longer term demographic changes in the US population, UM,

256
00:16:26,120 --> 00:16:31,840
Speaker 1: the aging population, the retirement of the baby boomers, so

257
00:16:32,160 --> 00:16:37,880
Speaker 1: all of those are really um leading to a smaller

258
00:16:38,520 --> 00:16:42,880
Speaker 1: pool of labor supply that's available. And uh, that's the

259
00:16:43,160 --> 00:16:46,720
Speaker 1: larger context that we're operating in Alama Boomer And I'm

260
00:16:46,760 --> 00:16:48,960
Speaker 1: working and I'll continue to work for why I think

261
00:16:49,040 --> 00:16:52,320
Speaker 1: so so Automan also, Dron, thank you so much for

262
00:16:52,680 --> 00:16:55,160
Speaker 1: joining us a director of economic research and global research

263
00:16:55,280 --> 00:16:58,600
Speaker 1: chair at the conference score conference board. Again, the leading

264
00:16:58,640 --> 00:17:01,040
Speaker 1: economic indicator for the month of September came in at

265
00:17:01,120 --> 00:17:04,320
Speaker 1: zero point two Consensus was for zero point four percent.

266
00:17:04,400 --> 00:17:07,320
Speaker 1: We had a revision as well. For the prior month

267
00:17:07,359 --> 00:17:09,040
Speaker 1: it was zero point nine percent growth and that was

268
00:17:09,080 --> 00:17:12,920
Speaker 1: revised down slightly uh to zero point eight percent, but

269
00:17:13,040 --> 00:17:16,359
Speaker 1: still positive. And it'll be really interesting to see how

270
00:17:16,400 --> 00:17:22,280
Speaker 1: this labor market continues to evolve post pandemic. You know.

271
00:17:22,400 --> 00:17:26,880
Speaker 1: One of the more fascinating economic aspects of this pandemic,

272
00:17:26,960 --> 00:17:29,600
Speaker 1: and they fledgedly recovery, is a changing labor market. We've

273
00:17:29,600 --> 00:17:32,800
Speaker 1: got still five or six main folks that are out

274
00:17:32,960 --> 00:17:34,959
Speaker 1: of the labor force, yet there are more than ten

275
00:17:35,040 --> 00:17:38,600
Speaker 1: million job openings at the moment. It's just that mixed

276
00:17:38,680 --> 00:17:42,480
Speaker 1: mixed mash. Mixed mash is really kind of interesting here.

277
00:17:42,920 --> 00:17:44,760
Speaker 1: How will it develop? Law On next guest has some

278
00:17:44,840 --> 00:17:48,040
Speaker 1: thoughts on that the radically changing labor market. Barry rid Hults,

279
00:17:48,040 --> 00:17:50,760
Speaker 1: founder of rid Hult's Wealth Management, Bloomberg opinion columnists, and

280
00:17:50,800 --> 00:17:53,800
Speaker 1: the host of Masters in Business. So, Barry, what do

281
00:17:53,880 --> 00:17:57,040
Speaker 1: you make of this labor market here? UM seems to

282
00:17:57,119 --> 00:18:00,560
Speaker 1: be a little bit different than what we had pre pandemic. Yeah,

283
00:18:00,600 --> 00:18:03,200
Speaker 1: it certainly is. A number of things have changed, and

284
00:18:03,280 --> 00:18:05,920
Speaker 1: we we've talked about this on the air about how

285
00:18:06,480 --> 00:18:10,720
Speaker 1: a lot of workers UM took advantage of the past

286
00:18:10,800 --> 00:18:15,280
Speaker 1: eighteen months and having lots of cash in their bank

287
00:18:15,320 --> 00:18:19,159
Speaker 1: accounts due to the generosity of the Cares Act. And

288
00:18:19,320 --> 00:18:22,840
Speaker 1: they you know, they up skilled, they got certified, they

289
00:18:22,920 --> 00:18:26,520
Speaker 1: got degrees, and for a lot of dead end jobs.

290
00:18:26,600 --> 00:18:28,960
Speaker 1: And there are really four industries that have run into

291
00:18:28,960 --> 00:18:34,199
Speaker 1: a lot of trouble, hospitality, food service, most particularly UM

292
00:18:34,480 --> 00:18:36,720
Speaker 1: and they've you know, Elvis has left the building. They

293
00:18:36,920 --> 00:18:40,680
Speaker 1: they're no longer participating in those careers. And I think

294
00:18:40,760 --> 00:18:42,840
Speaker 1: what we're starting to see, and I wrote about this

295
00:18:42,920 --> 00:18:46,040
Speaker 1: about six months ago, is that the balance of power

296
00:18:46,480 --> 00:18:50,080
Speaker 1: is shifting. And it's you know, we see these regular

297
00:18:50,119 --> 00:18:54,159
Speaker 1: oscillations from capital to labor and back well, capital had

298
00:18:54,200 --> 00:18:57,880
Speaker 1: the upper hand since the nineteen eighties. It's shifting back

299
00:18:58,000 --> 00:19:03,359
Speaker 1: to the direction of labor. So one of the cool

300
00:19:03,440 --> 00:19:06,600
Speaker 1: things about this, maybe not for employers, but for employees,

301
00:19:06,680 --> 00:19:09,480
Speaker 1: is that they're going to get paid more. Um. You know,

302
00:19:09,640 --> 00:19:13,400
Speaker 1: whenever we talked to somebody who runs a hotel chain

303
00:19:13,760 --> 00:19:16,639
Speaker 1: or restaurants, they always say, I can't get anybody come

304
00:19:16,680 --> 00:19:18,080
Speaker 1: in here. And I always say, well, why don't you

305
00:19:18,160 --> 00:19:21,520
Speaker 1: just double their salary. I'm sure they'll show up. Is

306
00:19:21,600 --> 00:19:25,040
Speaker 1: that going to lead to a price wage spiral? Though?

307
00:19:25,600 --> 00:19:27,480
Speaker 1: Is that going to lead to inflation that sticks around.

308
00:19:27,920 --> 00:19:31,960
Speaker 1: Um So, So first you have to look at the

309
00:19:32,119 --> 00:19:35,200
Speaker 1: context and and and look more than just the past

310
00:19:35,280 --> 00:19:39,080
Speaker 1: six months, by just about any measure, when we look

311
00:19:39,160 --> 00:19:41,719
Speaker 1: at wages at the bottom half of the pay scale,

312
00:19:42,240 --> 00:19:47,440
Speaker 1: for the past thirty years, they have lagged just about everything,

313
00:19:47,640 --> 00:19:51,520
Speaker 1: just about every measure. They've lagged inflation, they've lagged productivity,

314
00:19:51,640 --> 00:19:55,960
Speaker 1: they've lagged corporate profits, they've lagged c suite compensation, which

315
00:19:56,040 --> 00:20:01,400
Speaker 1: certainly has been fairly robust for the past few decades.

316
00:20:01,560 --> 00:20:04,919
Speaker 1: And so this is less of a hey, we're driving

317
00:20:05,000 --> 00:20:08,840
Speaker 1: inflation forward, and more of a this is a reset.

318
00:20:09,000 --> 00:20:11,359
Speaker 1: This is a catch up for wages that really have

319
00:20:11,520 --> 00:20:14,720
Speaker 1: been far too low. And when you have an economy

320
00:20:15,400 --> 00:20:20,639
Speaker 1: that's operating at pretty close to full capacity, well, guess what.

321
00:20:20,800 --> 00:20:27,920
Speaker 1: At a certain point, um, a limited commodity has pricing power.

322
00:20:28,040 --> 00:20:31,840
Speaker 1: And in this case, that limited commodity commodity is labor.

323
00:20:33,320 --> 00:20:37,800
Speaker 1: Barry continue on the labor discussion. Three days a week, hybrid.

324
00:20:38,240 --> 00:20:41,200
Speaker 1: It just feels right now that that's where, at least

325
00:20:41,240 --> 00:20:44,200
Speaker 1: in the US, this market is going to. Do you

326
00:20:44,280 --> 00:20:46,720
Speaker 1: think that's the case, It's a good bad do we care?

327
00:20:47,680 --> 00:20:52,520
Speaker 1: So again, another really fascinating topic with a lot of

328
00:20:52,600 --> 00:20:57,040
Speaker 1: moving pieces. So so first let's talk about the hybrid workforce,

329
00:20:57,160 --> 00:21:02,040
Speaker 1: but also within that context bring in challenging and hiring

330
00:21:02,280 --> 00:21:05,920
Speaker 1: and and and inflationary wage. Bush and I have to

331
00:21:06,119 --> 00:21:11,600
Speaker 1: start by pointing out productivity is so important in this space.

332
00:21:12,440 --> 00:21:16,680
Speaker 1: The big surprise from the work from home has been

333
00:21:17,240 --> 00:21:21,560
Speaker 1: not only was it not a drop in productivity. When

334
00:21:21,600 --> 00:21:24,560
Speaker 1: you look at the go to Fred look at productivity numbers,

335
00:21:24,920 --> 00:21:28,160
Speaker 1: it's tripled over the past on an hourly output basis

336
00:21:28,680 --> 00:21:31,560
Speaker 1: over the past eighteen months. That that's a massive, massive

337
00:21:32,359 --> 00:21:36,240
Speaker 1: um increase. That's a that's a huge change from remember

338
00:21:36,400 --> 00:21:39,960
Speaker 1: Robert Solo famously equipped. You can see the computer age everywhere,

339
00:21:40,040 --> 00:21:43,159
Speaker 1: but in the productivity statistics, well, here we are a

340
00:21:43,400 --> 00:21:48,440
Speaker 1: generation later from when he said that productivity is going

341
00:21:48,520 --> 00:21:53,000
Speaker 1: up tremendously. So first, huge juge offset of inflation. If

342
00:21:53,040 --> 00:21:56,080
Speaker 1: you're paying people more but you're getting more output from them,

343
00:21:56,359 --> 00:22:00,400
Speaker 1: it's not inflationary. It's essentially a push. Now the allene

344
00:22:00,680 --> 00:22:04,879
Speaker 1: is having that work its way downstream. Two bars and

345
00:22:05,040 --> 00:22:10,120
Speaker 1: restaurants and hotels and frontline healthcare providers. In a lot

346
00:22:10,240 --> 00:22:14,440
Speaker 1: of those fields, you're not seeing the same sort of

347
00:22:15,119 --> 00:22:20,360
Speaker 1: productivity increase, except where people have made those investments in technology.

348
00:22:20,520 --> 00:22:23,720
Speaker 1: So you go to a restaurant and the waiter isn't

349
00:22:23,760 --> 00:22:27,240
Speaker 1: writing down your order, they're using an iPad and you're

350
00:22:27,240 --> 00:22:29,400
Speaker 1: not even getting a menu. You're just using your phone

351
00:22:29,480 --> 00:22:33,320
Speaker 1: to scan that that QR code on the table. Those

352
00:22:33,400 --> 00:22:36,400
Speaker 1: sort of things gradually show up to the bottom line.

353
00:22:36,680 --> 00:22:39,439
Speaker 1: They make things more productive, quicker better. You know, if

354
00:22:39,520 --> 00:22:43,080
Speaker 1: restaurants have a faster turnover, they're they're seeing more people,

355
00:22:43,119 --> 00:22:46,639
Speaker 1: they're they're making more revenue starting serving more meals. So

356
00:22:47,040 --> 00:22:50,399
Speaker 1: maybe you'll start to see productivity gains there. But white

357
00:22:50,480 --> 00:22:55,480
Speaker 1: collar workers productivity gains have been spectacular. Verry got an

358
00:22:55,480 --> 00:22:58,119
Speaker 1: important question. I'm moving back to New York in just

359
00:22:58,280 --> 00:23:02,160
Speaker 1: a couple of months. I gotta reportedly one one year

360
00:23:02,200 --> 00:23:08,480
Speaker 1: old daughter and a um three point eight leader flat

361
00:23:08,560 --> 00:23:13,720
Speaker 1: six in a stick shiftsion and baby seat in the

362
00:23:13,880 --> 00:23:16,159
Speaker 1: in the back of that. I think, so what my

363
00:23:16,320 --> 00:23:18,800
Speaker 1: my thought is this, I would love to give it

364
00:23:18,840 --> 00:23:20,239
Speaker 1: to her. I met a guy the other day who

365
00:23:20,320 --> 00:23:24,160
Speaker 1: had a nice going to give the eleven well when

366
00:23:24,240 --> 00:23:26,760
Speaker 1: she's older. I met a guy the other day. He

367
00:23:26,840 --> 00:23:28,600
Speaker 1: was with his dad. He was seventeen with his dad

368
00:23:28,640 --> 00:23:31,080
Speaker 1: when he bought the car that he now drives. And

369
00:23:31,920 --> 00:23:34,439
Speaker 1: but I'm I'm moving back. Freight rates are like twenty

370
00:23:35,080 --> 00:23:40,160
Speaker 1: thousand for for container and use car prices are soaring.

371
00:23:41,480 --> 00:23:43,560
Speaker 1: Do I let go of it before I come home?

372
00:23:43,880 --> 00:23:45,600
Speaker 1: So my daughter is gonna live in a sea of

373
00:23:45,680 --> 00:23:47,960
Speaker 1: self driving electric cars. It's gonna be pretty cool for

374
00:23:48,440 --> 00:23:51,919
Speaker 1: this very very simple question. Is this an air cooled

375
00:23:52,000 --> 00:23:56,280
Speaker 1: nine eleven or a later war No, it's so hit

376
00:23:56,400 --> 00:23:58,879
Speaker 1: that bit. You can sell that, take the profit and

377
00:23:59,000 --> 00:24:02,360
Speaker 1: then go by yourself for a car that will continue

378
00:24:02,400 --> 00:24:05,159
Speaker 1: to appreciate. Minivan stick Now, well that you don't need

379
00:24:05,200 --> 00:24:07,440
Speaker 1: a minivan in New York. You can uber wherever you're going.

380
00:24:07,560 --> 00:24:10,080
Speaker 1: But if you want to give your daughter a nine eleven,

381
00:24:10,760 --> 00:24:13,320
Speaker 1: give her something that that's going to be worth something

382
00:24:13,359 --> 00:24:19,560
Speaker 1: in twenty years. You know, water cooled modern Porsche. They're

383
00:24:19,680 --> 00:24:22,399
Speaker 1: great today, but you know ten years from now that

384
00:24:22,640 --> 00:24:25,560
Speaker 1: that's gonna be pure electric. So go back to what

385
00:24:25,680 --> 00:24:29,040
Speaker 1: is it p Give her an air cooled nine eleven

386
00:24:29,320 --> 00:24:31,720
Speaker 1: and she'll teach her to drive a stick and she'll

387
00:24:31,760 --> 00:24:34,600
Speaker 1: be a happy camper. I like it. Yeah, I'll go

388
00:24:34,760 --> 00:24:38,560
Speaker 1: before that, because then the last air cold I don't

389
00:24:38,600 --> 00:24:41,119
Speaker 1: like the way the head headlights were so slanty. I

390
00:24:41,200 --> 00:24:43,159
Speaker 1: like the nine six four because I'm a child of

391
00:24:43,200 --> 00:24:45,879
Speaker 1: the eighties, you know. That's the look for me, not

392
00:24:46,000 --> 00:24:51,479
Speaker 1: the Turbo, just a simple maybe even an earlier eighties Carrera.

393
00:24:52,160 --> 00:24:54,680
Speaker 1: Barry rid Holt's always great to have you on Bloomberg

394
00:24:54,760 --> 00:24:58,760
Speaker 1: Opinion contributory. He runs rid Hole twelfth Management, and he

395
00:24:58,880 --> 00:25:02,080
Speaker 1: writes a blog is well called The Big Picture. This

396
00:25:03,280 --> 00:25:07,119
Speaker 1: is Bloomberg. Thanks for listening to the Bloomberg Markets podcast.

397
00:25:07,520 --> 00:25:10,680
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts

398
00:25:10,880 --> 00:25:14,760
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm

399
00:25:14,800 --> 00:25:18,159
Speaker 1: on Twitter at Matt Miller nineteen seventy three. Put on

400
00:25:18,280 --> 00:25:21,320
Speaker 1: ball Sweeney. I'm on Twitter at pt Sweeney. Before the podcast.

401
00:25:21,400 --> 00:25:23,880
Speaker 1: You can always catch us worldwide at Bloomberg Radio.