WEBVTT - Crypto Regulation, Supply Chain Constraints, Labor 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 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.360 at Bloomberg dot com slash podcast. You know, we are 0:00:21.440 --> 0:00:24.280 on top of this crypto space here on this show, 0:00:24.640 --> 0:00:29.440 and it's becoming clearer and clearer that some regulation is 0:00:29.520 --> 0:00:31.400 coming to the world of crypto. Let's get some more 0:00:31.400 --> 0:00:34.280 color on that. Mary Beth Buchanan, President of the America's 0:00:34.320 --> 0:00:37.920 and global Chief Legal Officer Mercal Science. Mary Beth, it 0:00:38.040 --> 0:00:40.960 just feels like the drumbeat is really beginning to pound 0:00:41.080 --> 0:00:44.320 here for regulation of what is a growing crypto market. 0:00:44.360 --> 0:00:47.720 Gary Ginstler, a new ahead of the SEC certainly making 0:00:47.840 --> 0:00:51.639 some comments there. How do you think this will kind 0:00:51.640 --> 0:00:55.560 of really evolve over time? You know, I think there's 0:00:55.600 --> 0:00:58.640 been a lot of really great news in the cryptocurrency 0:00:58.640 --> 0:01:02.120 space in the last few weeks, and as crypto continues 0:01:02.680 --> 0:01:05.920 to grow and have mass adoption, not just in the 0:01:06.000 --> 0:01:09.520 US but across the globe, regulators are taking a much 0:01:09.560 --> 0:01:12.639 closer look at it, and they're looking at many different 0:01:12.680 --> 0:01:17.040 aspects from stable coins to defy U two. Uh, you 0:01:17.080 --> 0:01:19.720 know new expected guidance coming out today. From the fat 0:01:19.720 --> 0:01:22.880 of it's it's an exciting time. But I agree with 0:01:22.920 --> 0:01:28.280 you that additional regulation will be coming. So it's interesting 0:01:28.880 --> 0:01:32.800 to think about Gary Gensler regulating this space. Is bitcoin 0:01:32.840 --> 0:01:38.760 of security? No, I think that Gary Gensler is certainly 0:01:39.800 --> 0:01:44.040 in a great position to understand the cryptocurrency markets as 0:01:44.040 --> 0:01:46.839 he's been teaching at an m I T. The SEC 0:01:46.959 --> 0:01:49.960 has been pretty clear that bitcoin is not a security 0:01:50.080 --> 0:01:53.160 and so I don't think that there's any danger that 0:01:53.320 --> 0:01:57.680 this is going to change in the near future. So, 0:01:58.200 --> 0:02:02.120 Mary Beth, the US just this department created a National 0:02:02.320 --> 0:02:08.040 Cryptocurrency Enforcement Team. That sounds ominous, what is that? Yeah, 0:02:08.120 --> 0:02:12.320 the the Cryptocurrency Enforcement Team that was announced in early 0:02:12.360 --> 0:02:15.600 October by the Deputy Attorney General is an effort by 0:02:15.919 --> 0:02:19.000 many different components of the Department of Justice to come 0:02:19.040 --> 0:02:24.160 together and to really attack one of the latest plagues 0:02:24.200 --> 0:02:29.359 in the crypto space, which is ransomware attacks. Ransomware attacks 0:02:29.400 --> 0:02:34.120 have gone up a hundred and fifty in compared to 0:02:34.880 --> 0:02:37.960 so this task force is going to help root out 0:02:38.200 --> 0:02:43.359 those who would use cryptocurrency to try to attack and 0:02:43.680 --> 0:02:48.000 strangle businesses in the US and throughout the globe. What 0:02:48.320 --> 0:02:53.679 you've been involved in the digital space for quite a while, now, um, 0:02:53.800 --> 0:02:55.919 what can be done? You know when I whenever I 0:02:55.960 --> 0:02:58.760 see a ransomware attack, I always think that's silly because 0:02:58.760 --> 0:03:03.440 it's not an anonymous UM transaction. We know that it's 0:03:03.480 --> 0:03:06.440 going to wallets, we know which wallets it's trading in, 0:03:06.720 --> 0:03:09.440 but those wallets aren't attached to names, right, So what 0:03:09.520 --> 0:03:16.720 can be done in order to really attack the ransomware 0:03:17.480 --> 0:03:21.040 UM actors? We're going to need to see a lot 0:03:21.080 --> 0:03:27.080 of collaboration between cryptocurrency exchanges, UM, blockchain analytics companies like 0:03:27.160 --> 0:03:32.320 Marble Science, and the government. Recently, or rather later in 0:03:32.560 --> 0:03:37.360 late summer, the Justice Department called the industry together and 0:03:37.400 --> 0:03:39.880 shared with us some of the information that they've been 0:03:39.960 --> 0:03:43.760 learning with recent ransomware attacks, and we shared with the 0:03:43.760 --> 0:03:46.960 government some information that we've been learning. So I think 0:03:47.000 --> 0:03:51.160 that through this this collaboration information sharing, we're going to 0:03:51.200 --> 0:03:55.800 be able to stop stop these attackers before they can 0:03:55.840 --> 0:04:00.280 find additional victims. So, you know, maybe about a lot 0:04:00.280 --> 0:04:03.920 of folks are saying that this the crypto space really 0:04:04.720 --> 0:04:08.600 needs regulation, if for no other reason than for it 0:04:08.680 --> 0:04:12.040 to be validated and for its development and for more investment. 0:04:12.880 --> 0:04:14.280 How do you think this is going to play out? 0:04:14.320 --> 0:04:18.400 Is this something that our government currently has a capability 0:04:18.440 --> 0:04:21.560 to regulate? It just feels like so much is new 0:04:21.600 --> 0:04:24.839 about crypto and the knowledge level isn't anywhere where it 0:04:24.880 --> 0:04:30.120 needs to be. I think most of the private sector 0:04:30.920 --> 0:04:35.159 crypto companies want regulation, um, but but they want clear 0:04:35.200 --> 0:04:38.080 regulation and they want to have a voice in creating it. 0:04:38.600 --> 0:04:41.560 Right now, we do have a patchwork of regulations in 0:04:41.600 --> 0:04:44.440 the United States. We have different agencies that are looking 0:04:44.480 --> 0:04:48.760 at different aspects of how cryptocurrency operates. There may be 0:04:48.800 --> 0:04:52.320 a few spaces where we're still seeing the absence of 0:04:52.360 --> 0:04:54.840 some regulation, and what we need to do, I think, 0:04:54.960 --> 0:04:59.880 is identify where there's a vacuum and create a reasonable 0:05:00.040 --> 0:05:03.160 set of rules that make sense to make sure that 0:05:03.440 --> 0:05:06.760 we're addressing all aspects of the crypto space. I mean, 0:05:06.839 --> 0:05:09.400 what you do, or at least part of what you do, 0:05:09.680 --> 0:05:15.160 is you help financial companies, government entities. As you were saying, um, 0:05:16.120 --> 0:05:21.680 crypto companies prevent attacks, prevent you know, getting ripped off, Basically, 0:05:22.560 --> 0:05:24.839 if I'm an investor, my main concern is where do 0:05:24.880 --> 0:05:26.560 I hold this stuff? If I put a million or 0:05:26.560 --> 0:05:29.200 two million into crypto, I want somebody I can trust 0:05:29.880 --> 0:05:33.119 UM custoding that asset. Are we in a place where 0:05:33.880 --> 0:05:37.599 there there is a safe and trustworthy place for me 0:05:37.640 --> 0:05:44.200 to put those assets. There are a number of extremely 0:05:44.600 --> 0:05:49.760 UM well respected custodians that are holding cryptocurrency today, and 0:05:49.800 --> 0:05:54.240 those custodians are regulated. UM. They are utilizing the latest 0:05:54.279 --> 0:05:58.040 technology to monitor their transactions, to know who they're doing 0:05:58.040 --> 0:06:00.760 business with. And there are there are any options out 0:06:00.760 --> 0:06:04.480 there today from the traditional crypto custodian and even to 0:06:04.640 --> 0:06:12.360 certain US banks that are UM launching crypto custody services. Alright, 0:06:12.480 --> 0:06:15.040 very cool to get some time with you, Mary Beth Hope, 0:06:15.080 --> 0:06:17.200 but I hope we can get you back because UM, 0:06:17.320 --> 0:06:19.680 it seems to me mercle Science as a wealth of 0:06:19.680 --> 0:06:22.600 information that I think our clients would like to hear 0:06:23.000 --> 0:06:26.200 more about. Mary Beth Buchanan as President of the America's 0:06:26.279 --> 0:06:33.040 and Global Chief Legal Officer for mercal Science. Now, let's 0:06:33.040 --> 0:06:35.280 bringing David Cudlow right now. He's in the CEO and 0:06:35.320 --> 0:06:40.160 chief investment strategist at Mainstay Capital Management. They've got three 0:06:40.279 --> 0:06:44.919 point eight billion dollars and assets under management out of Michigan. David, 0:06:44.960 --> 0:06:46.839 always great to get you on the horn. Thanks so 0:06:46.920 --> 0:06:51.240 much for joining us. UM. Let's talk about it. Seems 0:06:51.400 --> 0:06:53.800 it seems like there's so many headwinds. You've got the 0:06:53.800 --> 0:06:58.160 supply chain constraints. You've got a labor shortage, we have 0:06:58.440 --> 0:07:02.680 inflation that looks more than transitory whatever that means, and 0:07:03.360 --> 0:07:08.000 now um abudding energy crisis. Should I be worried as 0:07:08.040 --> 0:07:13.320 an equities investor? Hey, good morning, Yeah, And I would 0:07:13.560 --> 0:07:17.640 add to that that we have, uh, consumer sediment has 0:07:18.040 --> 0:07:22.080 been falling. Uh confidence in the economy has been falling. 0:07:22.280 --> 0:07:25.640 And you know, if we look at the GDP numbers 0:07:25.680 --> 0:07:29.840 as forecasted by the Atlanta UM Atlanta fed their GDP 0:07:29.920 --> 0:07:33.480 down numbers, they've fallen over the past few months from 0:07:33.520 --> 0:07:36.680 close to seven percent projection for third quarter GDP down 0:07:36.720 --> 0:07:40.760 to zero point five percent, dangerously close to a quarter 0:07:40.760 --> 0:07:43.960 of contraction, although consensus estimates for GDP are quite a 0:07:43.960 --> 0:07:48.200 bit higher round for the third quarter. So, yeah, we 0:07:48.320 --> 0:07:52.600 have all these headwinds, uh that are that are coming 0:07:52.640 --> 0:07:59.000 towards I think first and foremost is the the probability. 0:07:59.240 --> 0:08:02.000 What most people think that the said will start to 0:08:02.080 --> 0:08:05.160 taper before the end of the year, and that doesn't 0:08:05.160 --> 0:08:09.160 mean eliminating liquidity the providing, but start to taper and 0:08:09.360 --> 0:08:11.600 scale it back. And then they're talking about interest rates 0:08:12.400 --> 0:08:15.240 um rising as as soon as the middle of next year, 0:08:15.280 --> 0:08:17.800 which we we don't think will happen. But you know, 0:08:17.880 --> 0:08:21.120 with that on the positive side, as we have just 0:08:21.480 --> 0:08:26.480 stellar corporate earnings in this year, and as liquidity is 0:08:26.560 --> 0:08:29.640 taken out of the system and we come back to fundamentals, 0:08:29.640 --> 0:08:33.040 we look at fundamentals for the market, uh, specifically priced 0:08:33.040 --> 0:08:36.080 to earnings ratios. UH, they're very, very good. They've actually 0:08:36.080 --> 0:08:38.720 come down through the year because earnings have been so good. 0:08:39.240 --> 0:08:41.200 We set a record in the first quarter, or second 0:08:41.200 --> 0:08:43.160 best in the second, and we expect the third best 0:08:43.240 --> 0:08:48.280 quarter here in the third quarters. It's easy comparisons because 0:08:48.280 --> 0:08:51.400 of COVID, but it's also because corporations are just have 0:08:51.520 --> 0:08:53.600 just got good balance sheets that have done really good 0:08:53.600 --> 0:08:57.600 in this recovery from COVID and going forward. So on 0:08:57.720 --> 0:08:59.800 that side of the equation the most important thing because 0:08:59.800 --> 0:09:02.360 in a long term that's what stocks should be priced on. 0:09:02.400 --> 0:09:05.720 His earnings. You know, we're just looking at incredible earnings 0:09:05.720 --> 0:09:09.400 and profit margins in and and really going you know, 0:09:09.440 --> 0:09:12.120 going forward to the fourth quarter as well, David, I 0:09:12.160 --> 0:09:13.920 look at the w T I crewed a north of 0:09:14.320 --> 0:09:19.600 eighty barrel. Have I missed the energy trade? No, I 0:09:19.600 --> 0:09:22.680 don't think so. Um, I don't think so at all. 0:09:22.760 --> 0:09:25.320 I mean, it's our favorite sector for the second half 0:09:25.320 --> 0:09:27.400 of this year. Are are still our favorite sectors coming 0:09:27.400 --> 0:09:31.600 into the fourth quarter is energy And you know, we 0:09:31.600 --> 0:09:35.040 we we look around the world at what's going on. Um. 0:09:35.120 --> 0:09:37.400 The OPEC hasn't helped out on the oil front. We've 0:09:37.400 --> 0:09:40.520 got another meeting next month. We'll see what happens. But 0:09:41.320 --> 0:09:46.000 it is, you know, a function of uh, this recovery, 0:09:46.120 --> 0:09:49.480 this robust recover we've had around the world from COVID, 0:09:49.559 --> 0:09:53.240 and economies are expanding their demanding more energy. There's been 0:09:53.880 --> 0:09:57.800 significant when we look we look at renewables, right the 0:09:57.800 --> 0:10:01.000 the emphasis has been on renewables, you know, for good reasons. 0:10:01.040 --> 0:10:04.800 You know, we all want renewable, sustainable energy. But but 0:10:04.960 --> 0:10:07.240 you know that right now in the US that makes 0:10:07.320 --> 0:10:14.280 up about of our energy supply, there's still about that 0:10:14.360 --> 0:10:18.280 comes from fossil fuels. In China that's even higher. So 0:10:18.600 --> 0:10:21.440 you know, we we have the natural gas issues in 0:10:22.200 --> 0:10:27.120 in Europe and UH and globally we have actually have 0:10:28.000 --> 0:10:31.480 coal burning plants that are being fired back up or 0:10:31.559 --> 0:10:36.480 increasing production. UH. We had we have expecting coal to 0:10:36.520 --> 0:10:40.120 be at the highest level of use UH in this 0:10:40.240 --> 0:10:45.120 country since and that's because of switches from l en 0:10:45.160 --> 0:10:47.920 G or natural gas to to coal because of the 0:10:47.920 --> 0:10:51.000 short supplies. So I think the energy trade has further 0:10:51.080 --> 0:10:53.120 to go, and I think that it makes sense for 0:10:53.120 --> 0:10:56.120 investors to be to have it to still continue to 0:10:56.120 --> 0:10:58.959 have exposure there. What do you think about the rates 0:10:59.240 --> 0:11:03.560 moves that we've seen recently, David that UM two years 0:11:03.600 --> 0:11:06.920 regardless of region were sold off drastically. At the beginning 0:11:06.920 --> 0:11:09.880 of the week, we've seen a curve flattening and we're 0:11:09.920 --> 0:11:12.800 looking at a tenuere US treasure yield right now one 0:11:12.880 --> 0:11:18.080 sixty six, whereas a month ago was one. Yeah, and 0:11:18.160 --> 0:11:23.160 from a low of of of around just under one nineteen, 0:11:23.679 --> 0:11:27.320 we've had a significant rise UM. You know. I think 0:11:27.320 --> 0:11:31.400 that's a function somewhat of a reaction to what the 0:11:31.440 --> 0:11:34.839 Fed has been trying to UH send signals on on 0:11:35.000 --> 0:11:40.080 their policy. UH. Certainly, the the pullback in the market 0:11:40.120 --> 0:11:42.480 I think was a response to that increased rates because 0:11:42.480 --> 0:11:44.559 we've seen that, right, We saw that in the first quarter, 0:11:44.840 --> 0:11:47.280 we had a similar spike in rates of about seventy 0:11:47.280 --> 0:11:51.120 basis points. The market market sold off, especially what we 0:11:51.160 --> 0:11:55.520 consider long duration equities like tech and gross stocks um 0:11:55.600 --> 0:11:59.280 and we've seen that again here. Uh. What's interesting now though, 0:11:59.360 --> 0:12:01.960 is rates of need to move higher. We've seen the uh, 0:12:02.360 --> 0:12:05.080 the market's rebound. I think that's you know, we're looking 0:12:05.080 --> 0:12:08.120 at us again a strong earning season once again, only 0:12:08.360 --> 0:12:10.800 you know, we've got maybe ten percent of companies that reported, 0:12:11.080 --> 0:12:14.640 but they're coming in uh, some mixed reports, but overall, 0:12:15.480 --> 0:12:18.959 we've got about eight percent of companies beating expectations. So 0:12:19.000 --> 0:12:23.360 that's that's helped the market rates continualize. And it's typically 0:12:23.360 --> 0:12:25.679 if it's a slow rise as a function of an 0:12:25.679 --> 0:12:29.600 expanding autonomy, we would live with that. When they spike 0:12:29.960 --> 0:12:32.520 or when they go up because of concerns about inflation, 0:12:33.120 --> 0:12:35.960 that's going to be a problem, which inflation is probably 0:12:35.960 --> 0:12:39.400 our biggest issue relative to start all right, David, David, 0:12:39.400 --> 0:12:41.600 thank you so much for joining us. Really appreciated. David Coula, 0:12:41.679 --> 0:12:46.440 CEO and chief investment Strategies at main Stay Capital. Let's 0:12:46.480 --> 0:12:52.960 talk now about the leading Economic Indicators, the Leading Index 0:12:53.640 --> 0:12:55.960 from the Conference Board right now, and what that's saying 0:12:56.120 --> 0:12:58.760 about the economy. In order to do that, we bring 0:12:58.800 --> 0:13:01.480 in autumn on ozel Drop. He's the director of Economic 0:13:01.559 --> 0:13:06.640 Research and Global Research share at the Conference Board. If 0:13:06.679 --> 0:13:10.640 you type in eco US on your Bloomberg terminal, you 0:13:10.679 --> 0:13:14.520 can see the Leading Index came out at slightly disappointing 0:13:14.640 --> 0:13:17.440 zero point two percent. We were looking for zero point 0:13:17.520 --> 0:13:20.960 four percent and the previous month had been zero point 0:13:21.160 --> 0:13:25.520 nine percent. So, Ottoman, thanks for joining us. Why the disappointment? 0:13:27.000 --> 0:13:30.319 Good morning, good to be here. So, um, the the 0:13:30.920 --> 0:13:34.959 zero point two percent is less than expected, but just 0:13:35.200 --> 0:13:37.800 keep it in perspective that that is still a good 0:13:37.880 --> 0:13:42.160 positive number. Uh. It continues a rising trend in the 0:13:42.400 --> 0:13:45.839 Leading Index, but it is a little bit slower um 0:13:46.320 --> 0:13:49.479 and a big reason for that this month in September 0:13:50.160 --> 0:13:54.720 was the large negative contribution to the index from housing 0:13:54.800 --> 0:14:00.320 residential construction UM and some softening and consumer confidence also 0:14:00.480 --> 0:14:04.280 contributed to that. But all in all, the majority of 0:14:04.440 --> 0:14:08.320 the Leading Index components have been rising six out of ten, 0:14:09.040 --> 0:14:12.360 so that still points to still a healthy expansion in 0:14:12.440 --> 0:14:15.599 the Earth economy. So Ottoman, what do you make of 0:14:15.720 --> 0:14:18.079 the labor market out there. We've still got a lot 0:14:18.200 --> 0:14:20.600 of people that are not in this labor force despite 0:14:20.680 --> 0:14:25.040 the you know, very high number of job postings. Is 0:14:25.120 --> 0:14:28.680 this a permanent new reality for the US labor market 0:14:28.760 --> 0:14:32.640 that just fewer people are going to be working? You know, 0:14:32.760 --> 0:14:37.120 I think the global pandemic has really caused a lot 0:14:37.200 --> 0:14:41.400 of disruption in labor markets in many sectors across uh, 0:14:41.520 --> 0:14:45.040 the Earth economy. And now UM, you know, we're dealing 0:14:45.120 --> 0:14:49.560 with the delta variant that's creating more headwinds. UH. It's 0:14:49.680 --> 0:14:53.000 keeping a lot of people on the sidelines because of 0:14:53.160 --> 0:14:57.840 you know, concerns about getting sick and you know, staying 0:14:57.840 --> 0:15:01.080 out of the labor force. UM. I think UM in 0:15:01.160 --> 0:15:05.200 the future that will um eventually settle down. Uh. The 0:15:05.320 --> 0:15:09.160 economy growth rates are you know settling down, uh to 0:15:09.280 --> 0:15:12.880 our new expansion trajectory. And we're all getting used to, 0:15:13.120 --> 0:15:16.920 you know, living with this. We're learning how to you know, 0:15:17.080 --> 0:15:22.080 work and shop. UM and UH. I think as things normalize, 0:15:22.360 --> 0:15:25.800 we'll see labor markets, you know, going back to the 0:15:26.360 --> 0:15:31.320 trends that we have been seeing before the pandemic. UM 0:15:31.560 --> 0:15:34.640 and UH, you know that was really going back to 0:15:34.920 --> 0:15:39.480 lower unemployment rates and even labor shortages. So well, we 0:15:39.640 --> 0:15:43.440 have labor shortages now, right, I mean one of the 0:15:43.480 --> 0:15:49.480 big problems is companies can't hire enough people. Yeah, so 0:15:50.000 --> 0:15:54.040 I think there there are probably two factors underlying those, right. 0:15:54.200 --> 0:15:57.680 What one is uh the sort of the course of 0:15:57.920 --> 0:16:01.680 the pandemic with the delta there and and people, um, 0:16:01.960 --> 0:16:05.760 you know, not being willing to work, um, in especially 0:16:05.840 --> 0:16:09.120 in in person services, so uh not being able to 0:16:09.200 --> 0:16:15.280 find the workers because of that low uh labor force participation. UM. 0:16:15.600 --> 0:16:19.760 But there's also underlying all of this. The context is 0:16:20.280 --> 0:16:25.920 UM this longer term demographic changes in the US population, UM, 0:16:26.120 --> 0:16:31.840 the aging population, the retirement of the baby boomers, so 0:16:32.160 --> 0:16:37.880 all of those are really um leading to a smaller 0:16:38.520 --> 0:16:42.880 pool of labor supply that's available. And uh, that's the 0:16:43.160 --> 0:16:46.720 larger context that we're operating in Alama Boomer And I'm 0:16:46.760 --> 0:16:48.960 working and I'll continue to work for why I think 0:16:49.040 --> 0:16:52.320 so so Automan also, Dron, thank you so much for 0:16:52.680 --> 0:16:55.160 joining us a director of economic research and global research 0:16:55.280 --> 0:16:58.600 chair at the conference score conference board. Again, the leading 0:16:58.640 --> 0:17:01.040 economic indicator for the month of September came in at 0:17:01.120 --> 0:17:04.320 zero point two Consensus was for zero point four percent. 0:17:04.400 --> 0:17:07.320 We had a revision as well. For the prior month 0:17:07.359 --> 0:17:09.040 it was zero point nine percent growth and that was 0:17:09.080 --> 0:17:12.920 revised down slightly uh to zero point eight percent, but 0:17:13.040 --> 0:17:16.359 still positive. And it'll be really interesting to see how 0:17:16.400 --> 0:17:22.280 this labor market continues to evolve post pandemic. You know. 0:17:22.400 --> 0:17:26.880 One of the more fascinating economic aspects of this pandemic, 0:17:26.960 --> 0:17:29.600 and they fledgedly recovery, is a changing labor market. We've 0:17:29.600 --> 0:17:32.800 got still five or six main folks that are out 0:17:32.960 --> 0:17:34.959 of the labor force, yet there are more than ten 0:17:35.040 --> 0:17:38.600 million job openings at the moment. It's just that mixed 0:17:38.680 --> 0:17:42.480 mixed mash. Mixed mash is really kind of interesting here. 0:17:42.920 --> 0:17:44.760 How will it develop? Law On next guest has some 0:17:44.840 --> 0:17:48.040 thoughts on that the radically changing labor market. Barry rid Hults, 0:17:48.040 --> 0:17:50.760 founder of rid Hult's Wealth Management, Bloomberg opinion columnists, and 0:17:50.800 --> 0:17:53.800 the host of Masters in Business. So, Barry, what do 0:17:53.880 --> 0:17:57.040 you make of this labor market here? UM seems to 0:17:57.119 --> 0:18:00.560 be a little bit different than what we had pre pandemic. Yeah, 0:18:00.600 --> 0:18:03.200 it certainly is. A number of things have changed, and 0:18:03.280 --> 0:18:05.920 we we've talked about this on the air about how 0:18:06.480 --> 0:18:10.720 a lot of workers UM took advantage of the past 0:18:10.800 --> 0:18:15.280 eighteen months and having lots of cash in their bank 0:18:15.320 --> 0:18:19.159 accounts due to the generosity of the Cares Act. And 0:18:19.320 --> 0:18:22.840 they you know, they up skilled, they got certified, they 0:18:22.920 --> 0:18:26.520 got degrees, and for a lot of dead end jobs. 0:18:26.600 --> 0:18:28.960 And there are really four industries that have run into 0:18:28.960 --> 0:18:34.199 a lot of trouble, hospitality, food service, most particularly UM 0:18:34.480 --> 0:18:36.720 and they've you know, Elvis has left the building. They 0:18:36.920 --> 0:18:40.680 they're no longer participating in those careers. And I think 0:18:40.760 --> 0:18:42.840 what we're starting to see, and I wrote about this 0:18:42.920 --> 0:18:46.040 about six months ago, is that the balance of power 0:18:46.480 --> 0:18:50.080 is shifting. And it's you know, we see these regular 0:18:50.119 --> 0:18:54.159 oscillations from capital to labor and back well, capital had 0:18:54.200 --> 0:18:57.880 the upper hand since the nineteen eighties. It's shifting back 0:18:58.000 --> 0:19:03.359 to the direction of labor. So one of the cool 0:19:03.440 --> 0:19:06.600 things about this, maybe not for employers, but for employees, 0:19:06.680 --> 0:19:09.480 is that they're going to get paid more. Um. You know, 0:19:09.640 --> 0:19:13.400 whenever we talked to somebody who runs a hotel chain 0:19:13.760 --> 0:19:16.639 or restaurants, they always say, I can't get anybody come 0:19:16.680 --> 0:19:18.080 in here. And I always say, well, why don't you 0:19:18.160 --> 0:19:21.520 just double their salary. I'm sure they'll show up. Is 0:19:21.600 --> 0:19:25.040 that going to lead to a price wage spiral? Though? 0:19:25.600 --> 0:19:27.480 Is that going to lead to inflation that sticks around. 0:19:27.920 --> 0:19:31.960 Um So, So first you have to look at the 0:19:32.119 --> 0:19:35.200 context and and and look more than just the past 0:19:35.280 --> 0:19:39.080 six months, by just about any measure, when we look 0:19:39.160 --> 0:19:41.719 at wages at the bottom half of the pay scale, 0:19:42.240 --> 0:19:47.440 for the past thirty years, they have lagged just about everything, 0:19:47.640 --> 0:19:51.520 just about every measure. They've lagged inflation, they've lagged productivity, 0:19:51.640 --> 0:19:55.960 they've lagged corporate profits, they've lagged c suite compensation, which 0:19:56.040 --> 0:20:01.400 certainly has been fairly robust for the past few decades. 0:20:01.560 --> 0:20:04.919 And so this is less of a hey, we're driving 0:20:05.000 --> 0:20:08.840 inflation forward, and more of a this is a reset. 0:20:09.000 --> 0:20:11.359 This is a catch up for wages that really have 0:20:11.520 --> 0:20:14.720 been far too low. And when you have an economy 0:20:15.400 --> 0:20:20.639 that's operating at pretty close to full capacity, well, guess what. 0:20:20.800 --> 0:20:27.920 At a certain point, um, a limited commodity has pricing power. 0:20:28.040 --> 0:20:31.840 And in this case, that limited commodity commodity is labor. 0:20:33.320 --> 0:20:37.800 Barry continue on the labor discussion. Three days a week, hybrid. 0:20:38.240 --> 0:20:41.200 It just feels right now that that's where, at least 0:20:41.240 --> 0:20:44.200 in the US, this market is going to. Do you 0:20:44.280 --> 0:20:46.720 think that's the case, It's a good bad do we care? 0:20:47.680 --> 0:20:52.520 So again, another really fascinating topic with a lot of 0:20:52.600 --> 0:20:57.040 moving pieces. So so first let's talk about the hybrid workforce, 0:20:57.160 --> 0:21:02.040 but also within that context bring in challenging and hiring 0:21:02.280 --> 0:21:05.920 and and and inflationary wage. Bush and I have to 0:21:06.119 --> 0:21:11.600 start by pointing out productivity is so important in this space. 0:21:12.440 --> 0:21:16.680 The big surprise from the work from home has been 0:21:17.240 --> 0:21:21.560 not only was it not a drop in productivity. When 0:21:21.600 --> 0:21:24.560 you look at the go to Fred look at productivity numbers, 0:21:24.920 --> 0:21:28.160 it's tripled over the past on an hourly output basis 0:21:28.680 --> 0:21:31.560 over the past eighteen months. That that's a massive, massive 0:21:32.359 --> 0:21:36.240 um increase. That's a that's a huge change from remember 0:21:36.400 --> 0:21:39.960 Robert Solo famously equipped. You can see the computer age everywhere, 0:21:40.040 --> 0:21:43.159 but in the productivity statistics, well, here we are a 0:21:43.400 --> 0:21:48.440 generation later from when he said that productivity is going 0:21:48.520 --> 0:21:53.000 up tremendously. So first, huge juge offset of inflation. If 0:21:53.040 --> 0:21:56.080 you're paying people more but you're getting more output from them, 0:21:56.359 --> 0:22:00.400 it's not inflationary. It's essentially a push. Now the allene 0:22:00.680 --> 0:22:04.879 is having that work its way downstream. Two bars and 0:22:05.040 --> 0:22:10.120 restaurants and hotels and frontline healthcare providers. In a lot 0:22:10.240 --> 0:22:14.440 of those fields, you're not seeing the same sort of 0:22:15.119 --> 0:22:20.360 productivity increase, except where people have made those investments in technology. 0:22:20.520 --> 0:22:23.720 So you go to a restaurant and the waiter isn't 0:22:23.760 --> 0:22:27.240 writing down your order, they're using an iPad and you're 0:22:27.240 --> 0:22:29.400 not even getting a menu. You're just using your phone 0:22:29.480 --> 0:22:33.320 to scan that that QR code on the table. Those 0:22:33.400 --> 0:22:36.400 sort of things gradually show up to the bottom line. 0:22:36.680 --> 0:22:39.439 They make things more productive, quicker better. You know, if 0:22:39.520 --> 0:22:43.080 restaurants have a faster turnover, they're they're seeing more people, 0:22:43.119 --> 0:22:46.639 they're they're making more revenue starting serving more meals. So 0:22:47.040 --> 0:22:50.399 maybe you'll start to see productivity gains there. But white 0:22:50.480 --> 0:22:55.480 collar workers productivity gains have been spectacular. Verry got an 0:22:55.480 --> 0:22:58.119 important question. I'm moving back to New York in just 0:22:58.280 --> 0:23:02.160 a couple of months. I gotta reportedly one one year 0:23:02.200 --> 0:23:08.480 old daughter and a um three point eight leader flat 0:23:08.560 --> 0:23:13.720 six in a stick shiftsion and baby seat in the 0:23:13.880 --> 0:23:16.159 in the back of that. I think, so what my 0:23:16.320 --> 0:23:18.800 my thought is this, I would love to give it 0:23:18.840 --> 0:23:20.239 to her. I met a guy the other day who 0:23:20.320 --> 0:23:24.160 had a nice going to give the eleven well when 0:23:24.240 --> 0:23:26.760 she's older. I met a guy the other day. He 0:23:26.840 --> 0:23:28.600 was with his dad. He was seventeen with his dad 0:23:28.640 --> 0:23:31.080 when he bought the car that he now drives. And 0:23:31.920 --> 0:23:34.439 but I'm I'm moving back. Freight rates are like twenty 0:23:35.080 --> 0:23:40.160 thousand for for container and use car prices are soaring. 0:23:41.480 --> 0:23:43.560 Do I let go of it before I come home? 0:23:43.880 --> 0:23:45.600 So my daughter is gonna live in a sea of 0:23:45.680 --> 0:23:47.960 self driving electric cars. It's gonna be pretty cool for 0:23:48.440 --> 0:23:51.919 this very very simple question. Is this an air cooled 0:23:52.000 --> 0:23:56.280 nine eleven or a later war No, it's so hit 0:23:56.400 --> 0:23:58.879 that bit. You can sell that, take the profit and 0:23:59.000 --> 0:24:02.360 then go by yourself for a car that will continue 0:24:02.400 --> 0:24:05.159 to appreciate. Minivan stick Now, well that you don't need 0:24:05.200 --> 0:24:07.440 a minivan in New York. You can uber wherever you're going. 0:24:07.560 --> 0:24:10.080 But if you want to give your daughter a nine eleven, 0:24:10.760 --> 0:24:13.320 give her something that that's going to be worth something 0:24:13.359 --> 0:24:19.560 in twenty years. You know, water cooled modern Porsche. They're 0:24:19.680 --> 0:24:22.399 great today, but you know ten years from now that 0:24:22.640 --> 0:24:25.560 that's gonna be pure electric. So go back to what 0:24:25.680 --> 0:24:29.040 is it p Give her an air cooled nine eleven 0:24:29.320 --> 0:24:31.720 and she'll teach her to drive a stick and she'll 0:24:31.760 --> 0:24:34.600 be a happy camper. I like it. Yeah, I'll go 0:24:34.760 --> 0:24:38.560 before that, because then the last air cold I don't 0:24:38.600 --> 0:24:41.119 like the way the head headlights were so slanty. I 0:24:41.200 --> 0:24:43.159 like the nine six four because I'm a child of 0:24:43.200 --> 0:24:45.879 the eighties, you know. That's the look for me, not 0:24:46.000 --> 0:24:51.479 the Turbo, just a simple maybe even an earlier eighties Carrera. 0:24:52.160 --> 0:24:54.680 Barry rid Holt's always great to have you on Bloomberg 0:24:54.760 --> 0:24:58.760 Opinion contributory. He runs rid Hole twelfth Management, and he 0:24:58.880 --> 0:25:02.080 writes a blog is well called The Big Picture. This 0:25:03.280 --> 0:25:07.119 is Bloomberg. Thanks for listening to the Bloomberg Markets podcast. 0:25:07.520 --> 0:25:10.680 You can subscribe and listen to interviews with Apple Podcasts 0:25:10.880 --> 0:25:14.760 or whatever podcast platform you prefer. I'm Matt Miller. I'm 0:25:14.800 --> 0:25:18.159 on Twitter at Matt Miller nineteen seventy three. Put on 0:25:18.280 --> 0:25:21.320 ball Sweeney. I'm on Twitter at pt Sweeney. Before the podcast. 0:25:21.400 --> 0:25:23.880 You can always catch us worldwide at Bloomberg Radio.