Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
Speaker 1: you the latest news from the world to business and finance,
Speaker 1: plus technology, politics, economics, all partnising the power of Business
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Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. Tim. Uh, you know that
Speaker 1: one headline for the World Health Organization about a macron
Speaker 1: won't be the last variant um, but you do you know,
Speaker 1: you're reminded that this thing is gonna linger, hopefully get easier,
Speaker 1: but linger hopefully. Look and we've talked to people about this,
Speaker 1: and we're gonna talk more about this. But the idea
Speaker 1: of going from a pandemic to endemic and the idea
Speaker 1: that amcron could be uh that maybe look here here
Speaker 1: in New York City, the COVID nineteen waves is slowing.
Speaker 1: Cases and hospitalizations are dropping. Dramatically from a peak in
Speaker 1: early January and remaining concentrated among those who are unvaccinated. Carol, Right,
Speaker 1: but now we're hearing also about animals South Africa, Hong Kong,
Speaker 1: Like there's some concerns about that. All right, it's never
Speaker 1: adult day when it comes to COVID. Hey, let's bring
Speaker 1: in our guest, Dr Tom McGinn. He's executive vice president
Speaker 1: of Physician Enterprise of a Common Spirit Health. They've got
Speaker 1: more than a thousand sights in some twenty ones Uh cities.
Speaker 1: Excuse me, in twenty one states, I should say. Uh.
Speaker 1: They are a massive team and they see a lot.
Speaker 1: And he's back with us on the phone in New
Speaker 1: York City, Dr McGinn. Nice to have you here with
Speaker 1: Tim and myself. How are you and what are you seeing?
Speaker 1: Great to be back and good to talk to you again. UM. Well,
Speaker 1: I don't think we're seeing anything different than what you're
Speaker 1: currently saying. I do think, Um, as you go across
Speaker 1: the country, you can see the cases, particularly in the
Speaker 1: East coast, because you've been stating here in New York
Speaker 1: and Maryland, New Jersey. The number of cases are obviously
Speaker 1: starting to turn down, which is good news. The tough
Speaker 1: news is obviously that hostializations are in other areas picking
Speaker 1: up as this virus moves across the country. So we
Speaker 1: have pockets in areas where we're seeing a little downturn,
Speaker 1: but we have pockets where we're probably at the beginning
Speaker 1: of this inflection. We think we're gonna beat all our
Speaker 1: prior records in the original January phase, the dells a
Speaker 1: way we're gonna We're gonna definitely be in terms of hospitalizations.
Speaker 1: We're going to probably peek over all the prior quote
Speaker 1: unquote records, which is difficult with staffing right now. I
Speaker 1: think that's that's the combination that we're all struggling with.
Speaker 1: So yeah, I mean it's it's obviously not just the
Speaker 1: healthcare industry, but it puts it in sharp relief when
Speaker 1: you know the doctors who have and and and nurses
Speaker 1: who've been doing this for close to two years are
Speaker 1: just under such strain that it's difficult to you know,
Speaker 1: find a place in in in certain hospitals. Hey, Dr McGinn,
Speaker 1: I'm wondering because you have such a unique view of
Speaker 1: what's happening in different parts of the country in more
Speaker 1: than twenty states. How would you characterize the people who
Speaker 1: are hospitalized right now? What can you tell us about
Speaker 1: who's hospitalized you has been vACC needed and boosted versus
Speaker 1: who isn't. Yeah, that's a very good question. I mean
Speaker 1: it's pretty well delineated. Um, I mean the number is
Speaker 1: a little bit very but I would say anywhere from
Speaker 1: six of those admitted are unvaccinated, probably closer and in
Speaker 1: some places, and we do have, um, you know some
Speaker 1: of this. We don't know the number. I think it's
Speaker 1: an interesting question of the incidental COVID, which is kind
Speaker 1: of a misleading term. So example of you know, Mr Smith,
Speaker 1: a young man comes in with an ankle fracture and
Speaker 1: needs to be seeing. They swap and he's positive, so
Speaker 1: he's not very cost of COVID, so he's incidentally diagnosed.
Speaker 1: We don't know what that number looks like. Uh, and
Speaker 1: that could be anywhere from a couple of percentage points,
Speaker 1: you know, maybe it's a ten percent. Now you still
Speaker 1: have to isolate them, you still have to have protection.
Speaker 1: It's still very complicated to manage those patients. But in
Speaker 1: some ways they're not a traditional COVID case. So predominantly
Speaker 1: unvaccinated people are getting admitted to the hospitals. The remainder
Speaker 1: are going to be those with comorbidities that you know, obesity, diabetes, hypertension,
Speaker 1: and cortivascular disease, et cetera. Dr Wicked, I do wonder too,
Speaker 1: are you saying cases where you guys and your teams
Speaker 1: and your emergency room staff are having to make decisions
Speaker 1: because there's just the systems are overloaded and you maybe
Speaker 1: can't have someone come in because maybe it's not because
Speaker 1: of COVID, but for some other reason, you just can't
Speaker 1: let them in because you just don't have the capacity.
Speaker 1: You know, we haven't reached that point. Thank Thankfully, that
Speaker 1: is not something that's happening. The choices that were currently facing,
Speaker 1: and again this is very particular to you different cities
Speaker 1: and different prevalences of the disease that's occurring, is whether
Speaker 1: we can we have to shut down other procedures that
Speaker 1: we do, some of them, you know, are potentially life
Speaker 1: life saving. Maybe we have to have patients go to
Speaker 1: another site for certain things. Some some of our hospitals
Speaker 1: have had to you know, shift out of their elective procedures.
Speaker 1: Sometimes we've had to pull physicians or nurses or advanced
Speaker 1: care providers out of ambilatory sites to come in and
Speaker 1: help cover. So there is an impact, but it's sort
Speaker 1: of an indirect impact. But no one is ever getting
Speaker 1: turned away in the sense that it could not get care.
Speaker 1: But we are pulling things away from other you know,
Speaker 1: you know, resources, the elective procedures for example. Not everyone,
Speaker 1: I'm saying, in small pockets that's happened. What are you
Speaker 1: telling the world at large? I mean, Tim and I
Speaker 1: have had guests on who basically have said, you're all
Speaker 1: going to get this. I'm home because I've had a
Speaker 1: positive rapid and my PCR came back negative. I don't
Speaker 1: have any symptoms. I'm pretty sure it was, you know,
Speaker 1: just a false positive. But nonetheless we're being careful, um,
Speaker 1: which is the right thing to do. But it reminded
Speaker 1: me that if it's not now, it's it's probably just
Speaker 1: a matter of time. Is that the way we need
Speaker 1: to look at it? Well, I would say, well, first
Speaker 1: and foremost, I would say, we all just need to
Speaker 1: just just really focus on doing all the smart things
Speaker 1: because of our hospitals and our health care workers and
Speaker 1: everyone involved in this, we need to do what we can.
Speaker 1: Just just stem this tide. I'm a little nervous with
Speaker 1: all the messaging. Oh this is the waves are coming down,
Speaker 1: and all to that effect. We need to continue to
Speaker 1: get vaccinated boosted. We need to get the influenza shot,
Speaker 1: which is picking up across the United States. We're now
Speaker 1: seeing young children get admitted for influenza and what we
Speaker 1: predicted the over a year ago, the twin demic is
Speaker 1: happening now. And if we all don't get the flu shot,
Speaker 1: we're going to have some struggles there. Will we all
Speaker 1: end up getting it? You know? I don't. I don't
Speaker 1: think so, but you know, certainly a large percentage of
Speaker 1: us will will will have eventually gotten this. But to me,
Speaker 1: that's not the important question. The question is, right now,
Speaker 1: what can we all do? Don't wear a cloth mask,
Speaker 1: by the way, no one should wear a cloth Please
Speaker 1: stop the madness. All right, We're gonna leave it on
Speaker 1: that note, And that's a good piece of advice. Dr
Speaker 1: Tom McGain over Common Spirit Health E V of Physician Enterprise.
Speaker 1: We appreciate his input. Turning us on the phone in
Speaker 1: New York City, this is Bloomberg Business Week with Carol
Speaker 1: Masser and Bloomberg Quick Takes Tim Stinovic on Boomberg Radio. So, Tim,
Speaker 1: I think about you know, we worry about inflation, we
Speaker 1: worry about central banker policy missteps, we worry about slowing
Speaker 1: anconemic growth and earnings. And then you've got m and
Speaker 1: a record year last year, and those big blockbuster transactions
Speaker 1: they continue. I thought you were gonna say you worry about,
Speaker 1: you know, large technology companies going out of alone. Apparently
Speaker 1: not where you're worried. We are, of course, talking about
Speaker 1: the huge news today Microsoft buying Activision Blizzard, the game publisher,
Speaker 1: and a sixty billion dollar game deal, if approved by
Speaker 1: regulators A key key phrase here, would create the third
Speaker 1: largest game publisher in the world. So let's bring in
Speaker 1: Anara Grana. He is senior analyst of software and I
Speaker 1: T Services at Bloomberg Intelligence. He's on the phone from
Speaker 1: Chicago Onoraga. Heard you on surveillance this morning breaking this
Speaker 1: down as it was, you know, being or crossing. Um,
Speaker 1: are you surprised? Does this make sense? Oh? It does
Speaker 1: make a lot of sense. But I was surprised at
Speaker 1: the same time, only because you know, as you said,
Speaker 1: this is not the season for large, large deals, just
Speaker 1: because the regulators are taking a look at this very closely,
Speaker 1: which is why the surprise is more so the size
Speaker 1: of it and the timing. But you know, the content
Speaker 1: side of it makes a lot of sense. And as
Speaker 1: I think I mentioned that in a couple of places before,
Speaker 1: we expected the gaming content wars to have begun many
Speaker 1: many years ago, and it's just taken a long time
Speaker 1: for them to pan out. So why does the content
Speaker 1: side make sense? Is it specifically for the Xbox platform
Speaker 1: and the newest version of the cloud service that Xbox offers,
Speaker 1: the subscription service that it offers to two people for
Speaker 1: fifteen bucks a month. Or is this about mobile? Is
Speaker 1: it about getting getting onto mobile devices and Microsoft finally
Speaker 1: being able to do that. I think it's all of
Speaker 1: the above. Think about it the same thing. What's happening
Speaker 1: on the Netflix and the Disney arena. The company, the
Speaker 1: distribution channel or how you get the content is going
Speaker 1: to be you know, irrelevant later on whether you see
Speaker 1: the you know, the movie on on the phone or
Speaker 1: through any other leads. But having the content is the
Speaker 1: most important parts. So if you have the biggest screaming franchise,
Speaker 1: then whether you sell that through virtual reality device or
Speaker 1: through excuse me, question, so it doesn't matter. Hey, un
Speaker 1: a RUG, do do regulators have have an issue with this?
Speaker 1: Is that something that investors should be concerned about. I
Speaker 1: think that's the biggest season because you know, that's possibly
Speaker 1: the reason I think with the stocks on date about
Speaker 1: if you two points something, um, I think that remains
Speaker 1: the biggest concern, un RUG. One thing I'm curious about
Speaker 1: Bobby Cootech of Activision Microsoft in Activision, I think it's
Speaker 1: safe to say they're different kinds of companies, and I
Speaker 1: just do wonder, you know, how much of what Activision
Speaker 1: is in terms of its culture, it's types of management,
Speaker 1: it's crucial to keep it to some extent, or do
Speaker 1: you think it just doesn't matter independent, you know, in
Speaker 1: terms of how much it gets integrated into Microsoft. You know,
Speaker 1: that was a big question we had this morning as well,
Speaker 1: and although he was on the call this morning, we
Speaker 1: have since then read that once the dealers closed, he
Speaker 1: will not be part of the company. So I think
Speaker 1: that's a very good thing because one of the things
Speaker 1: we had also said before was when this news broke up,
Speaker 1: the Activation is issues. Um Phil Spencer, Microsoft Gaming CEO
Speaker 1: was very vocal and against it, so we were. You know,
Speaker 1: initially when the first deal break broke out, we were
Speaker 1: surprised that he still remains with the company, but you know,
Speaker 1: in subsequent releases we have heard that he will leave.
Speaker 1: All right, So the question that that I have is
Speaker 1: what other gaming companies are in play now? That if
Speaker 1: regulators approved this and we see the stock reacting for
Speaker 1: competitors like e A and UH, you know among others,
Speaker 1: you be soft, who's in play now? I think all
Speaker 1: of them are in play. I mean it's going to
Speaker 1: be a question of but the question is who's going
Speaker 1: to buy them. I mean, it is going to be
Speaker 1: easier for Amazon or Apple, on Facebook or Google to
Speaker 1: go out and buy so movise companies. I think it's
Speaker 1: going to be tougher for them. I think Microsoft has
Speaker 1: so far evaded the scrutiny of the regulators just because
Speaker 1: you know, they don't have that level of I guess
Speaker 1: a lens on them as some of the other companies too.
Speaker 1: All right, well, we'll be certainly watching out for that
Speaker 1: aspect of this deal. Um Anna rog, thank you so much.
Speaker 1: Good to catch up. Annaa Grana. He's senior analyst of
Speaker 1: Software and I T Services at Bloomberg Intelligence on the
Speaker 1: phone from Chicago. But it's going to be a group
Speaker 1: that's on our radar this year, Tim, Yeah, it certainly is.
Speaker 1: And Microsoft devating regulators right at least for the last
Speaker 1: couple of decades. They have some history there. You're listening
Speaker 1: to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes.
Speaker 1: Tim Stinovic on Bloomberg Radio. Well. Bloomberg business Week continuing
Speaker 1: to report on the real estate world and its lack
Speaker 1: of diversity and inclusion, and in the upcoming issue of
Speaker 1: the magazine it's out later this week, a story about
Speaker 1: the progressive real estate firm Redfinn that's facing accusations of discrimination. Tim.
Speaker 1: You can also find the story online the stories by
Speaker 1: Peter Robeson and Noah bou Hire. Peter robe us In
Speaker 1: as Projects and Investigations reporter for Bloomberg News. He joins
Speaker 1: us on the phone from Seattle, as does Joel Webber,
Speaker 1: editor at Bloomberg Business Week. He joins us on the
Speaker 1: access line from Brooklyn. Joel. I think a lot of
Speaker 1: people in New York City they know, you know, they
Speaker 1: know about the New York City serves street Street Easy
Speaker 1: and the New York City specific services. And we've talked
Speaker 1: a lot about Zillo. For the uninitiated, redfin what is
Speaker 1: it huge huge provider UM And basically, if you're anywhere
Speaker 1: else uh in the country and or concluded UM, you know,
Speaker 1: the chances are when you when you go UH to
Speaker 1: list your home, like Redfinn could be a place that
Speaker 1: UM you consider UM. And one of the things that
Speaker 1: that they've done is really had a Mid American offering.
Speaker 1: But as Peter and uh No, his reporting goes into UM,
Speaker 1: there's still these vestiges that the real estate industry industry
Speaker 1: specifically kind of runs up against, and racial elements are
Speaker 1: are continue to just be a really problematic one and
Speaker 1: that that is basically the subject the lawsuit that Redfin
Speaker 1: has been involved with. So so Peter break it down
Speaker 1: for us, what are the what are the two sides
Speaker 1: fighting over sure. So so redfin um it appears to
Speaker 1: to most people browsing on on the web to be
Speaker 1: much like Zillo, that it's a place where you can
Speaker 1: get homeless things and valuations. But Redfin is also a
Speaker 1: huge broker. It's the fifth largest real estate broker in
Speaker 1: the country, and Redfinn has a very very organized way
Speaker 1: of collecting leads of of people who want to either
Speaker 1: list or their home or buy a home through redfin
Speaker 1: and they categorize these leads based on the value UH
Speaker 1: that UH is that that that sale or purchase is
Speaker 1: going to provide in each market, which they've used as
Speaker 1: a way to manage their workforce. They have a certain
Speaker 1: number of agents in each city, and they're in certain
Speaker 1: parts of the of each city. Um so, so they
Speaker 1: argue that this is simply a way of organizing their business. UH.
Speaker 1: The lawsuit brought by fair housing groups towards the end
Speaker 1: of UH pointed out that, according to their studies, redfin
Speaker 1: is is much more likely to not provide its best
Speaker 1: service to homes that are in predominantly non white neighborhoods.
Speaker 1: So that's what the fight is about. And and no,
Speaker 1: and I also talked to many current former red Fan
Speaker 1: employees and some of those people said that they had
Speaker 1: had concerns over the years about how much service Redfan
Speaker 1: is providing to minority neighborhoods. So at issues you do wonder,
Speaker 1: you know, Peter, in terms of is it just a
Speaker 1: case of a company maximizing profit and they're you know,
Speaker 1: organizing their organization to to maximize the most out of
Speaker 1: their resources, or are they discriminating based on what you
Speaker 1: guys found out And there's so much detail in the story.
Speaker 1: What's going on or what are you seeing? Redfin argues
Speaker 1: that that this is with within their their right, so
Speaker 1: this is legally permitted, that that they're applying a neutral
Speaker 1: basis That price is a neutral basis um to decide you.
Speaker 1: But what the fair housing groups are arguing is that
Speaker 1: that's also a gating practice, that instead of taking each
Speaker 1: lead as they come in, they're they're assigning each lead
Speaker 1: based on value. And UH, it is not resolved yet.
Speaker 1: The two sides say they have a framework for resolving
Speaker 1: the suit. It's partly going to come down to the data,
Speaker 1: and there's not agreement on the data between the two sides.
Speaker 1: The fair housing groups contend that the data shows uh
Speaker 1: that people in minority neighborhoods are less likely to get
Speaker 1: good service. Redfin claims that more recently, which is after
Speaker 1: the period of the suit, UH, that their data is
Speaker 1: showing that, uh, they're not discriminating against people by race.
Speaker 1: So Peter, let's talk a little bit more about REDFINN
Speaker 1: because UH, if if you know anything about the company,
Speaker 1: some of these developments might come as something of the surprise, right, Yes,
Speaker 1: that that's um part of what really drew us to
Speaker 1: the story because Redfinn and its CEO Glenn Kelman have
Speaker 1: an extremely progressive reputation in the industry, and and Dave
Speaker 1: cultivated that. Glenn Kellman well before George Floyd's murder was
Speaker 1: he hosted a symposium on race and real estate, and
Speaker 1: he's spoken out against unconscious bias. He's uh, he's increased
Speaker 1: the training for unconscious bias after the Black Lives Matter protests.
Speaker 1: Um he uh created new rules to reward managers based
Speaker 1: on diversity and hiring. Um so so uh. That's partly
Speaker 1: what's so interesting about this suit is that even a
Speaker 1: company that beliefs and everything right uh can run into issues.
Speaker 1: We we the the opening example in the story was
Speaker 1: about a house on the South side of Chicago that's
Speaker 1: worth eight seven thousand, which at the time we looked
Speaker 1: at Redmond was not offering its best service. However, at
Speaker 1: the same time of a house in a phenominantly white
Speaker 1: suburb of Glencoe, it was actually a condo, which is
Speaker 1: value for twenty less was being offered Redfin's best service.
Speaker 1: Uh So, so that that's that's the type of discrepancies
Speaker 1: and disparities that uh we looked at and which are
Speaker 1: so alarming to these fair housing groups. So if if
Speaker 1: we step back from even that one, you know, Peter,
Speaker 1: the ultimate theme here and you guys touched on this
Speaker 1: in in some prior reporting as well, is basically, uh,
Speaker 1: minorities have been locked out of a lot of the
Speaker 1: wealth creation that real estate has afford. So so what
Speaker 1: when you just step back and think about what all
Speaker 1: of your reporting on this topic is means, like, how,
Speaker 1: how are we getting anywhere better? Have there been any improvements?
Speaker 1: There may be some improvements to come out of this suit.
Speaker 1: I Uh we had looked in the past that the
Speaker 1: Realtors Association which apologized for made a formal public apology
Speaker 1: for for decades of past racist behavior. Uh there is
Speaker 1: more awareness in the industry and that seems to be
Speaker 1: helping um and perhaps out of this. You know, one
Speaker 1: person that we talked to said that, uh, you know,
Speaker 1: redlining is a has been a part of the real
Speaker 1: estate industry, and we don't want to have redlining in
Speaker 1: the age of algorithms. So this is the moment to
Speaker 1: not let history repeat itself. But it's a great point
Speaker 1: about here You've got a CEO who you feel like
Speaker 1: has been on it and doing the right thing, and
Speaker 1: then to see that you know there are problems there too.
Speaker 1: So it is just a reminder of how deep, um
Speaker 1: the problems are embedded in our system. Um. Great story
Speaker 1: and appreciate you spending some time with us. Bloomberg News
Speaker 1: p and I reporter Peter rubuson with us on the phone,
Speaker 1: and Seattle of course along with Bloomberg Business we get
Speaker 1: it or Jill Weber on the access line in Brooklyn.
Speaker 1: Catch that story. It will be in the upcoming issue
Speaker 1: of Bloomberg Business Week on news stands later this week.
Speaker 1: Find it online at Bloomberg dot com and also on
Speaker 1: the Bloomberg terminal. The the opening anecdote here is really powerful,
Speaker 1: the idea that a more expensive apartment in in in
Speaker 1: a non white area you can't get the services that
Speaker 1: you get for a less expensive home in a predominantly
Speaker 1: white suburb. I love though this series to Tim that,
Speaker 1: and I think Joel tapped into this. It's like, so
Speaker 1: much of wealth creation is about property for Americans, and
Speaker 1: so if there's any kind of holding back on that
Speaker 1: that's going to impact a family's ability, of minority family's
Speaker 1: ability and abilities to maybe creates some wealth. You're listening
Speaker 1: to Bloomberg Radio. This is Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio.
Speaker 1: We've talked about one of the biggest stories of the day.
Speaker 1: That is, of course Microsoft buying Activision Blizzard and nearly
Speaker 1: sixty billion dollar all cash deal. The other big one
Speaker 1: has of course to do with Goldman Sacks. We're in
Speaker 1: the midst of bank earnings right now, and we did
Speaker 1: hear from Goldman Sacks early in the day equity traders
Speaker 1: posting a decline in the fourth quarter. Revenue from the
Speaker 1: trading operation slits seven percent and equities business declined eleven
Speaker 1: But compensation and benefits, that is what we've all got
Speaker 1: our eyes on. Does feel like Tim and a big way.
Speaker 1: We're getting a reset from the reset from the big banks.
Speaker 1: You heard it from the Morgan and the others last week,
Speaker 1: and I feel like we're getting more from Goldman. Well,
Speaker 1: let's get well, let's get a little bit of insight
Speaker 1: from Shanelli bassk Wall Street reporter for Bloomberg News. I
Speaker 1: checked when I was reading this morning what time Shanali
Speaker 1: got in, because I was like, Okay, it's bank earnings week.
Speaker 1: It means she's getting in at five am. She's still
Speaker 1: here to hang out with us, and we're very grateful
Speaker 1: for that. Shinali. What do we need to know from
Speaker 1: from Goldman Sacks? We've had a few hours to digest it. Yeah,
Speaker 1: there's some sticker shock when it comes to how much
Speaker 1: compensation is rising on Wall Street. And when I spoke
Speaker 1: to the co founder of Carlisle today, you know, what
Speaker 1: he really says is that this is defying gravity. But
Speaker 1: at the same time you have this thirty jumping compensation expenses.
Speaker 1: That's the rise you saw in Goldman's revenue, and you
Speaker 1: saw that jump the bigger in percentage terms, more than
Speaker 1: double what you saw JP Morgan. But JP Morgan's overall
Speaker 1: cost of compensation benefits is much higher because they just
Speaker 1: have such a large work for us across the United States.
Speaker 1: So the thing I have to say to you guys
Speaker 1: that a lot of people are missing is it's not
Speaker 1: just compensation costs that are rising for the banks. There's
Speaker 1: technology costs and marketing costs. Pay is variable. In a
Speaker 1: bad year, you don't get a big bonus, so that
Speaker 1: can change in a heartbeat. Okay here, okay, I totally
Speaker 1: get it. But we heard the same similar things from
Speaker 1: Jamie Diamond last week when it came to pay right.
Speaker 1: And the other part of the Shanali that I'm wondering
Speaker 1: is doesn't this also in the long run when you
Speaker 1: when you pay to actually keep and retain employees, doesn't
Speaker 1: that actually I don't want to say even out, but
Speaker 1: it ends up being a good thing in the long
Speaker 1: run because it's really expensive to lose people. It's expensive
Speaker 1: to lose people, and and actually that was part of
Speaker 1: the cost. If you talk to GP Morgan, their CFO
Speaker 1: actually said that attrition was part of that compensation cost.
Speaker 1: So yes, it's absolutely expensive to lose people. At the
Speaker 1: end of the day, it's going to come down to
Speaker 1: market share. If they are winning on the top line,
Speaker 1: then it's okay to pay people as as long as
Speaker 1: they are winning on the top line, rewarding and masters
Speaker 1: all of the above. So what really kind of spooked
Speaker 1: people today is that some of these booming businesses the
Speaker 1: last couple of years are going to start to moderate
Speaker 1: equity trading revenue. It came in eleven percent lower. And
Speaker 1: that's that's for a firm that is actually it had
Speaker 1: done better than it's a bitter than JP Morgan, but
Speaker 1: in more revenue in stock trading the JP Morgan. So
Speaker 1: tomorrow for Morgan Stanley, which is also experiencing a severe
Speaker 1: stock declined today, the bar is very high for that
Speaker 1: stock trading business because if that revenue also starts to
Speaker 1: come down, and more importantly, they don't beat Golden Sacks.
Speaker 1: Morgan Stilling has been the number one stock trading firm
Speaker 1: for years. It's a problem because then you're paying people
Speaker 1: and you're not necessarily getting a market share as well,
Speaker 1: so shid only. What's happening is it increased competition from fintech,
Speaker 1: Like I'm trying to understand the businesses where there may
Speaker 1: be seeing some numbers not as uppeat as that they've been.
Speaker 1: What's going on. Is it just greater com petition alternatives
Speaker 1: out there for the big banks or what's going on.
Speaker 1: There's a few things going on. One is that competition.
Speaker 1: If you think about it, if you're a trader, what
Speaker 1: is the calculus you're making yes, looking for a tech
Speaker 1: from a crypto from whatever, but really or working for
Speaker 1: a hedge fund. And if you work for a hedge
Speaker 1: fund or private equity firm, they're typically smaller than a
Speaker 1: big bank that has capital requirements, it has regulatory things
Speaker 1: to deal with, it has many more people to pay.
Speaker 1: But if you work for a smaller firm, you're not
Speaker 1: giving all that money back to a big bank. You're
Speaker 1: keeping more of it for yourself. So you know if
Speaker 1: if in a couple of weeks the boutique banks are
Speaker 1: going to report earnings, and we already know from early
Speaker 1: indications that some of those compensation jumps are well above
Speaker 1: what we see at Goldman's Acts. Interesting. So, okay, so
Speaker 1: we've had a handful of the bank's report. Um, what
Speaker 1: are we learning about not just the state of banks,
Speaker 1: which we've talked about, but the state of the economy
Speaker 1: because they give us an insight into how the consumer
Speaker 1: is and how healthy they can see ris how's the
Speaker 1: American consumer? What have we learned? It's a really interesting
Speaker 1: question because we don't see credit rising as quickly as
Speaker 1: we would expect. Then you throw in some other questions
Speaker 1: about interest rates that nobody seems to want to answer,
Speaker 1: are you going to take out a mortgage at a
Speaker 1: higher interest rate? And so it's a complicated question, but
Speaker 1: we haven't gotten clear answers from bankers about that. They
Speaker 1: say that the economy is healthy, but then investors equally say,
Speaker 1: you know, and we're talking about David Rubinstein today, the
Speaker 1: Carlisle co founder, that a correction is also possible. You
Speaker 1: look at Muhammad Alarian too, and he also asked a
Speaker 1: question on Bloomberg opinion column today, at what point do
Speaker 1: the Fed policies start to catch up with financial conditions
Speaker 1: and financial conditions start tightening? We you're hearing there from investors,
Speaker 1: is anywhere between tighter conditions and negative conditions? Yeah, that
Speaker 1: and that is certainly going to be something that the
Speaker 1: big banks we'll be watching and so only watching for
Speaker 1: some kind of impaction. Only thank you so much. We
Speaker 1: know it's been a long day, but we really appreciate
Speaker 1: your input. I always appreciate her notes that she sends
Speaker 1: out in the morning. That gives me instant analysis about
Speaker 1: all of these financial firms and their reporting. Hey, we're
Speaker 1: not done by the way Bank of America on Yana
Speaker 1: Morgan Stanley as well. Yeah, some big ones right, uh,
Speaker 1: and we'll look for what they have to say with
Speaker 1: the mirrors what we've been hearing. Or you're listening to
Speaker 1: Blueboard Business Week and this is Bombard Radio. Yeah, but
Speaker 1: you let me drive? Oh no, no, no no, no, oh please,
Speaker 1: I'll do the riding gravels. I want to drive. It's
Speaker 1: good question. D This is the drive to the clothes
Speaker 1: well up on Bluebird Radio, and everybody, let's get to it.
Speaker 1: We've got just about ten minutes left in today's trading session,
Speaker 1: once again seeing selling pressure on Wall Street, in particular
Speaker 1: among those names. As we heard from Charlie, you've got
Speaker 1: the NASA down about two point four percent. So to
Speaker 1: let's get to our market, guests, there's kind of nowhere
Speaker 1: to hide even you know, the major industry groups. Right now.
Speaker 1: Energy is higher, but but barely, with financials leading the
Speaker 1: decliners down more than two point three percent. Marcy McGregor
Speaker 1: is senior investment strategist at Bank America Private Bank. She
Speaker 1: joined us on the phone from New York City. Marcy,
Speaker 1: how are you. I'm great, Thanks for having me. Hey,
Speaker 1: help us understand just how we should and how our
Speaker 1: audience should think of a day like today, Abigail do
Speaker 1: Little from Bloomberg Markets earlier in the day shared with
Speaker 1: us this pretty mind boggling staff in the NAZDAC right
Speaker 1: now is on pace for its worst month since March
Speaker 1: of and right now as a month, it's down about
Speaker 1: seven point one percent. In March finished the month down
Speaker 1: ten point one percent, so we're not even off of it.
Speaker 1: It's not looking like a good month so far. Yeah,
Speaker 1: and we've been paying I think for two it's a
Speaker 1: year where we're gonna have volatility, especially around the bed
Speaker 1: right all anyone wants to talk about as the FED
Speaker 1: and in play Asian and it's going to feel like
Speaker 1: a bit of a grind, even though we think ultly
Speaker 1: equities move higher from here. But the pain we're seeing
Speaker 1: I think even those big growth non earners, and that's
Speaker 1: likely to continue. But the big story, of course is
Speaker 1: FED rate heights, and believe it or not, energy and tech.
Speaker 1: We prefer kind of mega tech, big, more defensive text,
Speaker 1: but that's that's Those are the two sectors that actually
Speaker 1: lead three months into right hyps and then in the
Speaker 1: three to six months after, so I think it's a
Speaker 1: market searching for leadership. Ultimately, I think energy and financials
Speaker 1: win that battle. But that's not quite what we're seeing today. Well,
Speaker 1: and let's not forget I mean, we still have at
Speaker 1: this point economic growth. We will still have earnings growth,
Speaker 1: just not the blockbuster numbers that we've seen. Marcy right
Speaker 1: in the past. Here, I totally agree. I think what
Speaker 1: the market cares about is peak earnings, not peak earnings growth.
Speaker 1: And I don't think peak earnings two story may not
Speaker 1: even be a twenty three story because I think strong
Speaker 1: nominal GDP growth, which we certainly have, is can to
Speaker 1: continue to be a tailin for corporate profits this year.
Speaker 1: Is there concern though that? And this is something Tim
Speaker 1: and I have talked a lot about the magazine Business
Speaker 1: Withek magazine has covered it a lot about a policy
Speaker 1: misstep by the U S Central Bank other central banks
Speaker 1: that have an impact on global economic growth and maybe
Speaker 1: redirect our thinking when it comes to the opportunities this year.
Speaker 1: It's absolutely a risk. And if you think about two
Speaker 1: months ago, I would have shared that I thought the
Speaker 1: FED was getting further and further behind the curve. Now
Speaker 1: I see that risk is being more balanced in terms
Speaker 1: of devilish and the hawkish risk. The FED seems to
Speaker 1: be getting more serious about taking a bite out of inflation,
Speaker 1: but now you have global monetary policy diverging. So I
Speaker 1: do think we have to acknowledge that inflation is certainly sticky.
Speaker 1: It raises the pressure on the FED. We're seeing it
Speaker 1: flow down and growth. I think because the omicron right now,
Speaker 1: that seems to move in two month waves around the world.
Speaker 1: But you have a FED with persistent price pressure, Um,
Speaker 1: they need to address it. I think the risk is
Speaker 1: they could kind of overcorrect, but I think that's not
Speaker 1: where we are today, but we have to acknowledge it's
Speaker 1: the risk for sure corection look like, you know, I
Speaker 1: think that what the market is anticipating right now is
Speaker 1: the first rate hike in March, and we get four
Speaker 1: this year. But we have to remember there's six meetings,
Speaker 1: six f O MC meetings after March, so every month
Speaker 1: the market is going to be parsing every single word
Speaker 1: and looking for a policy adjustment. I think the risk
Speaker 1: is that the FED doesn't communicate well. UM so far,
Speaker 1: I have to say Pal and Sied leadership has done
Speaker 1: a really good job. You know, while the market is volatile,
Speaker 1: we're not seeing an overreaction to what is a pretty
Speaker 1: stunning pivot from the FED. So I think the biggest
Speaker 1: risk right now with miscommunication, But so far I have
Speaker 1: to give the FED good grades on that. Having said that,
Speaker 1: you know, Marcy, there's a lot of talk at this
Speaker 1: point about the FED is maybe way behind the curve
Speaker 1: um Doctor Henry Kaufman, the original Dr Doom sitting down
Speaker 1: with our Eric Shatzker. We talked about it on Friday,
Speaker 1: and the concern is, you know that maybe this FED
Speaker 1: doesn't have the nerve or the comfort to do something
Speaker 1: like a Paul Volker did that was very unpopular or
Speaker 1: seemingly to raise rates in a high inflationary environment, but
Speaker 1: it was the right thing to do. Is there are
Speaker 1: there conversations that you guys are having at your firm
Speaker 1: about that. So I think what we all have to
Speaker 1: get afflimated to is lets the pain of a FED
Speaker 1: policy error and maybe the idea that the correct policy
Speaker 1: to really take a bite out of inflation in itself
Speaker 1: could be painful. And I think with a market expecting
Speaker 1: a rate hike in March, I do think the FED
Speaker 1: will move ahead with that. It seems to be shortsighted
Speaker 1: if they didn't, since the markets already acclimated to that view.
Speaker 1: So I think they're going to move ahead. I mean,
Speaker 1: we saw in the most recent FOM minutes they're already
Speaker 1: talking about quantitative tightening to two years last time from
Speaker 1: the first FED rate hike, and we think you get
Speaker 1: the first step towards QT later this year. So the
Speaker 1: Feds moving in the right direction. But the correct policy
Speaker 1: may be painful itself and could potentially cause a mid
Speaker 1: cycle flow down. We don't see the recession risk and
Speaker 1: we don't see it in the curve either. Curve kind
Speaker 1: of treading water right now. If it stays that way,
Speaker 1: I think it's telling us that they're not overly the
Speaker 1: market's not overly concerned about a policy error, but the
Speaker 1: correct dose of policy may itself be painful. Okay, So
Speaker 1: a handful of earnings coming up this week, Marcy, just
Speaker 1: in the last minute that we have with you includes Alcoha,
Speaker 1: United Airlines, Intuitive Surgical, Netflix, Bank of America, United Health Group,
Speaker 1: just to name a few. What should we be looking for?
Speaker 1: I mean, I'm thinking pricing pressure, right, I'm thinking wage pressure. Um,
Speaker 1: what are you going to be looking for? It's all
Speaker 1: about wage pressure this week and real wages have not
Speaker 1: kept up with inflation, and real wages haven't kept up
Speaker 1: with corporate profits. That's why we've seen companies protector margins
Speaker 1: so effectively. I think if we look out to next week,
Speaker 1: you're going to see more cyclical industries joined the earnings party.
Speaker 1: I think the cyclicals dis quarter are likely to report
Speaker 1: revenue above the AVERAGEES and P level, So I think
Speaker 1: that's gonna be a positive story. But it's all about
Speaker 1: wage pressure. That's going to be a story all year,
Speaker 1: I think, and looking at companies that can pass through
Speaker 1: those higher prices to a strong consumer. Right, higher wages,
Speaker 1: but then right, you got to put that against inflation
Speaker 1: and how much does that eat into those wage increases. Hey, Marcy,
Speaker 1: thank you so much. Marcy McGregor. She's senior investment strategist
Speaker 1: I think of America Private banked him on the phone
Speaker 1: in New York City. Thanks for listening to Bloomberg Business Week.
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