1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,280 Speaker 1: at Bloomberg dot com slash podcast. Talk about two thousand 7 00:00:22,239 --> 00:00:25,560 Speaker 1: and eight. It was obviously the kickoff to the Great 8 00:00:25,600 --> 00:00:28,840 Speaker 1: Financial Crisis. It was a horrible year for a lot 9 00:00:28,880 --> 00:00:32,159 Speaker 1: of investors, but not for our next guest, Phil Tays, 10 00:00:32,280 --> 00:00:34,520 Speaker 1: managed to keep his head above water or just barely 11 00:00:34,600 --> 00:00:38,000 Speaker 1: right two thousand eight, UH Tays was down just three percent. 12 00:00:38,080 --> 00:00:42,159 Speaker 1: The rest of the market was down forty one percent. Um. 13 00:00:42,200 --> 00:00:46,360 Speaker 1: He did just as well, maybe better. He returned money 14 00:00:46,400 --> 00:00:50,199 Speaker 1: in two thousand and the benchmark lost thirteen percent UH 15 00:00:50,320 --> 00:00:52,440 Speaker 1: in the beginning of the pandemic. He was also smart 16 00:00:52,520 --> 00:00:55,200 Speaker 1: enough to get out right away in March and to 17 00:00:55,280 --> 00:00:57,440 Speaker 1: get back in until mid April. He joins US Now 18 00:00:57,520 --> 00:01:02,240 Speaker 1: Phil Tays, he runs Tay's asset management. Phil, how do 19 00:01:02,360 --> 00:01:07,000 Speaker 1: you manage? How do you navigate these choppy waters? Um? 20 00:01:07,040 --> 00:01:11,520 Speaker 1: It's been two is awful as well. Um, how was 21 00:01:11,560 --> 00:01:14,160 Speaker 1: the year for you and what are you doing in Yeah, 22 00:01:14,200 --> 00:01:16,920 Speaker 1: so two is a pretty good year for us on 23 00:01:16,959 --> 00:01:19,399 Speaker 1: a relative basis. People don't like relative to returns. They'll 24 00:01:19,440 --> 00:01:22,040 Speaker 1: they like absolute returns, but only people who didn't lose 25 00:01:22,080 --> 00:01:25,479 Speaker 1: money don't like relative terms. Right, so we lost less. 26 00:01:26,200 --> 00:01:28,720 Speaker 1: But what what we do is, as a core principle, 27 00:01:28,840 --> 00:01:31,319 Speaker 1: is we try to create ways to people for people 28 00:01:31,319 --> 00:01:35,039 Speaker 1: to be in markets, participate in financial asset appreciation, but 29 00:01:35,160 --> 00:01:38,520 Speaker 1: address the contingency that they may go down. And I 30 00:01:38,560 --> 00:01:41,680 Speaker 1: think that's what's so fascinating about this marketplace is that 31 00:01:42,000 --> 00:01:44,760 Speaker 1: Gene Fama, with his oppressive amount of data that support 32 00:01:44,840 --> 00:01:49,040 Speaker 1: the efficient market hypothesis, suggest that you should always be 33 00:01:49,080 --> 00:01:51,520 Speaker 1: invested no matter what. What that does is it creates 34 00:01:51,520 --> 00:01:55,440 Speaker 1: amazing contrarian plays, right because if the entire world thinks 35 00:01:55,440 --> 00:01:58,520 Speaker 1: that you should be fully invested at thirty times earnings, 36 00:01:58,600 --> 00:02:01,000 Speaker 1: and it's pretty is that markets are going to go 37 00:02:01,040 --> 00:02:03,160 Speaker 1: down at some point, then if you create a mechanism 38 00:02:03,640 --> 00:02:07,120 Speaker 1: uh to de risk, that is helpful. So what what 39 00:02:07,280 --> 00:02:09,720 Speaker 1: is it? You're probably looking for more detail. What we 40 00:02:09,760 --> 00:02:11,480 Speaker 1: do is we have two ways of hedging against risk. 41 00:02:11,520 --> 00:02:13,919 Speaker 1: One is trend following algorithms, that just move us out 42 00:02:13,919 --> 00:02:15,919 Speaker 1: of the way. In the beginning parts of declines have 43 00:02:15,960 --> 00:02:18,680 Speaker 1: been pretty liable, reliable historically. We've been doing it since 44 00:02:18,919 --> 00:02:21,920 Speaker 1: nineties six, as you pointed out, so it's you know, 45 00:02:21,919 --> 00:02:23,880 Speaker 1: it's got a good track record. But we also use 46 00:02:23,960 --> 00:02:26,920 Speaker 1: options and creative ways to both use options to hedge 47 00:02:26,960 --> 00:02:29,840 Speaker 1: but also figure out ways to pay for those options. Nice. 48 00:02:30,120 --> 00:02:31,919 Speaker 1: So what is your go to hedge at the moment? 49 00:02:31,960 --> 00:02:33,920 Speaker 1: I felt like in twenty two was you buy the dollar, 50 00:02:33,960 --> 00:02:37,320 Speaker 1: you buy commodities, You were set, what what's the hedge? Well, 51 00:02:37,400 --> 00:02:40,120 Speaker 1: so ours is less complicated than you might imagine. We're not. 52 00:02:40,160 --> 00:02:43,680 Speaker 1: What we're not doing is creating complex head hedge fund strategies. 53 00:02:43,720 --> 00:02:47,520 Speaker 1: What we are doing is just investing in conventional types 54 00:02:47,560 --> 00:02:51,000 Speaker 1: of things stocks and bonds, high yeld bonds, UH and 55 00:02:51,080 --> 00:02:53,799 Speaker 1: the way we hedge right now, we're actually almost fully 56 00:02:53,800 --> 00:02:57,079 Speaker 1: allocated right bonds. Stocks and bonds have been moving up 57 00:02:57,120 --> 00:02:59,919 Speaker 1: decently this year. We're back in the markets, but we're 58 00:03:00,160 --> 00:03:02,959 Speaker 1: very close where a hair trigger away where if the 59 00:03:03,000 --> 00:03:05,680 Speaker 1: market turns lower it penetrates our target cell level for 60 00:03:05,720 --> 00:03:08,120 Speaker 1: at least our trend following algorithms will scale out of 61 00:03:08,120 --> 00:03:11,000 Speaker 1: the markets and we'll go to sometimes investment grade bonds, 62 00:03:11,000 --> 00:03:13,280 Speaker 1: but if bonds are getting battered as well, will be 63 00:03:13,320 --> 00:03:16,480 Speaker 1: fully in cash instruments. Yeah, I mean, we UM have 64 00:03:16,560 --> 00:03:18,280 Speaker 1: seen a little bit of a turnaround. The last couple 65 00:03:18,320 --> 00:03:20,440 Speaker 1: of days under the SP five came in below it's 66 00:03:20,440 --> 00:03:23,600 Speaker 1: two day moving average, and we snapped a bunch of 67 00:03:23,600 --> 00:03:26,079 Speaker 1: winning streaks that we've seen. Also warnings from some big, 68 00:03:26,360 --> 00:03:29,520 Speaker 1: big investors. Howard Marks was on with Romaine Bostic the 69 00:03:29,560 --> 00:03:32,680 Speaker 1: other night and said he thinks it's the possibly the 70 00:03:32,840 --> 00:03:35,760 Speaker 1: end of the junk rally, or at least we're UM 71 00:03:35,760 --> 00:03:39,040 Speaker 1: fully priced there. Yeah, so fairly priced, fairly valued. You know, 72 00:03:39,200 --> 00:03:41,200 Speaker 1: if you look at the downturns we've seen since the 73 00:03:41,200 --> 00:03:44,000 Speaker 1: financial crisis, including the financial crisis, they've lasted as long 74 00:03:44,040 --> 00:03:46,520 Speaker 1: as sixteen months. I would guess that the market place 75 00:03:46,560 --> 00:03:49,360 Speaker 1: as a whole just has this sense that it's over, 76 00:03:49,640 --> 00:03:52,080 Speaker 1: that the downturn is over. We've had a you know, 77 00:03:52,160 --> 00:03:56,240 Speaker 1: a twelve month horrible market for both asset chlorasset classes. 78 00:03:56,720 --> 00:03:59,280 Speaker 1: But I think the thing that is a real challenge 79 00:03:59,280 --> 00:04:01,880 Speaker 1: for most investor terms and that vast majority of people 80 00:04:01,920 --> 00:04:05,600 Speaker 1: listening to this show, is that it's not over. And really, 81 00:04:05,960 --> 00:04:09,720 Speaker 1: if you have a big percent decline. Without a long duration, 82 00:04:10,040 --> 00:04:12,360 Speaker 1: it doesn't matter that much as long as you don't sell. 83 00:04:12,560 --> 00:04:15,040 Speaker 1: But once you start to stretch out to two years 84 00:04:15,160 --> 00:04:18,760 Speaker 1: or three years, people that need to take uh income 85 00:04:18,880 --> 00:04:20,880 Speaker 1: from assets, and that includes bonds of course, where the 86 00:04:20,920 --> 00:04:23,599 Speaker 1: people have losses start to be negatively affected. So if 87 00:04:23,640 --> 00:04:26,040 Speaker 1: you ask what gets you back in the workforce when 88 00:04:26,080 --> 00:04:28,320 Speaker 1: you're retired when you don't want to be, it's that 89 00:04:28,520 --> 00:04:31,920 Speaker 1: multi year declient. So I think, you know, looking at 90 00:04:32,040 --> 00:04:35,640 Speaker 1: valuations in the stock market, h just looking at all 91 00:04:35,640 --> 00:04:40,080 Speaker 1: of the challenges, one of them being global debt, and 92 00:04:40,120 --> 00:04:42,080 Speaker 1: you know, and you're you're just talking about the fact 93 00:04:42,080 --> 00:04:44,720 Speaker 1: that everyone's so focused on this binary question about what 94 00:04:44,760 --> 00:04:46,919 Speaker 1: the Fed is going to do. I think it's because 95 00:04:47,120 --> 00:04:49,839 Speaker 1: it really matters, and there's a lot more risk in 96 00:04:49,880 --> 00:04:53,440 Speaker 1: the marketplace in their historically. I mean also because you know, 97 00:04:54,200 --> 00:04:56,719 Speaker 1: we could be looking at an absolute see change. I 98 00:04:56,760 --> 00:05:01,800 Speaker 1: make fun of crittious youth because a I'm Elis and 99 00:05:02,560 --> 00:05:05,200 Speaker 1: she's smarter than everybody else, So you got to pick 100 00:05:05,320 --> 00:05:08,520 Speaker 1: something right. But the last time we had interest rates 101 00:05:08,560 --> 00:05:12,000 Speaker 1: above zero, she was on juice boxes and snack of us. 102 00:05:12,480 --> 00:05:17,360 Speaker 1: You know, it's been it's been a solid generation of 103 00:05:18,240 --> 00:05:22,320 Speaker 1: extraordinary monetary policy, and now are we just back to 104 00:05:22,640 --> 00:05:25,719 Speaker 1: something that none of us is really used to anymore. Well, 105 00:05:25,760 --> 00:05:28,120 Speaker 1: it's interesting as you say that, it sounds like, oh, 106 00:05:28,120 --> 00:05:30,080 Speaker 1: we're gonna get back to normal, But I don't think 107 00:05:30,080 --> 00:05:32,680 Speaker 1: there's a normal right now, because if you think about 108 00:05:32,680 --> 00:05:36,640 Speaker 1: where when were we lasted a hundred times depth of 109 00:05:36,680 --> 00:05:39,520 Speaker 1: GDP on a on a fiscal debt level in the 110 00:05:39,600 --> 00:05:43,159 Speaker 1: United States back in back in after World War Two? Right, Well, 111 00:05:43,200 --> 00:05:46,600 Speaker 1: what was the GDP growth following that? Around eight percent 112 00:05:46,680 --> 00:05:50,080 Speaker 1: a year for two decades. So we have these sort 113 00:05:50,080 --> 00:05:54,560 Speaker 1: of existential crises, these things that are really fascinating things 114 00:05:54,560 --> 00:05:58,120 Speaker 1: to think about, but potentially perilous to live through. That 115 00:05:58,160 --> 00:06:01,159 Speaker 1: are gonna be with us. We're gonna have to, you know, 116 00:06:01,320 --> 00:06:04,440 Speaker 1: fight our way through. And so I think that it 117 00:06:04,520 --> 00:06:09,320 Speaker 1: pays to start to think unconventionally, start to think about Okay, yeah, 118 00:06:09,480 --> 00:06:11,920 Speaker 1: Gene Fama is right, Normally you should just stay invested 119 00:06:11,920 --> 00:06:14,040 Speaker 1: in the markets. But how can we address and this 120 00:06:14,120 --> 00:06:16,840 Speaker 1: is everyone just wants to bet on the optimistic scenario, right, 121 00:06:16,880 --> 00:06:19,880 Speaker 1: just stay invested, conventional portfolio, But how can we address 122 00:06:19,880 --> 00:06:22,560 Speaker 1: the contingency that one of two things happens that could 123 00:06:22,600 --> 00:06:25,120 Speaker 1: both happen together. First, the rate could continue to go 124 00:06:25,200 --> 00:06:27,840 Speaker 1: higher and we have more persistent inflation. You know inflation 125 00:06:27,880 --> 00:06:29,440 Speaker 1: in the United States If you look back in the 126 00:06:29,520 --> 00:06:32,640 Speaker 1: last three episodes of the last hundred years, it lasted 127 00:06:32,680 --> 00:06:36,000 Speaker 1: between four and nine years, not twelve months, right, So 128 00:06:36,200 --> 00:06:38,400 Speaker 1: we could have more persistent inflation, higher rates, which is 129 00:06:38,400 --> 00:06:40,840 Speaker 1: caused bonds to lose. And also that we could test 130 00:06:40,880 --> 00:06:42,640 Speaker 1: the loads and break a lot lower in the stock market. 131 00:06:42,720 --> 00:06:45,840 Speaker 1: So don't bet on that, but address the contingency of that. Well, 132 00:06:45,880 --> 00:06:47,720 Speaker 1: you're speaking about the credit market earlier, and I want 133 00:06:47,720 --> 00:06:49,479 Speaker 1: to circle back to that, because if you are worried 134 00:06:49,480 --> 00:06:52,279 Speaker 1: about the risk and the recession, it doesn't feel like 135 00:06:52,279 --> 00:06:54,320 Speaker 1: credit markets are really pricing then in when you're looking 136 00:06:54,320 --> 00:06:57,080 Speaker 1: at spreads on the surface, I mean investment graines spreads 137 00:06:57,080 --> 00:06:59,320 Speaker 1: for our audience, on downturns, you usually go about two 138 00:06:59,360 --> 00:07:01,640 Speaker 1: hundred bases means we're nowhere near there. Even on high 139 00:07:01,720 --> 00:07:04,159 Speaker 1: yield eight dred to a thousand basis points, again we 140 00:07:04,160 --> 00:07:07,120 Speaker 1: are nowhere near there. So pretty this is the same 141 00:07:07,200 --> 00:07:09,960 Speaker 1: imaginary friend we've had for the past year, which is 142 00:07:10,000 --> 00:07:14,040 Speaker 1: the FED pivot, right, uh, And so everyone still I mean, 143 00:07:14,080 --> 00:07:17,600 Speaker 1: we started out no inflation, then transient inflation, now inflation, 144 00:07:17,640 --> 00:07:19,600 Speaker 1: and all along the way we were not thinking the 145 00:07:19,600 --> 00:07:21,720 Speaker 1: FED RUC is gonna be raising rates as much as 146 00:07:21,760 --> 00:07:24,800 Speaker 1: they have. So it's really just the same story played 147 00:07:24,800 --> 00:07:27,880 Speaker 1: out in three where everyone's assuming the Fed's are not 148 00:07:27,920 --> 00:07:29,400 Speaker 1: going to act as much as they are, but then 149 00:07:29,440 --> 00:07:32,720 Speaker 1: they do, and then we potentially realize the consequences. I'm 150 00:07:32,800 --> 00:07:35,920 Speaker 1: keeping that one imaginary friend is the FED pivot. I 151 00:07:35,920 --> 00:07:40,800 Speaker 1: love that you started, by the way, the Behavioral Investing Institute, 152 00:07:40,960 --> 00:07:43,880 Speaker 1: and we've been talking for a couple of days now 153 00:07:43,920 --> 00:07:46,120 Speaker 1: pretty seriously about the consumer. Because the big banks were 154 00:07:46,120 --> 00:07:49,080 Speaker 1: at with earnings right so we're all watching savings rates, 155 00:07:49,360 --> 00:07:53,000 Speaker 1: banking balances, credit card usage. What do you think about 156 00:07:53,000 --> 00:07:56,840 Speaker 1: the US consumer right now? It's pretty strong every kind 157 00:07:56,880 --> 00:07:59,760 Speaker 1: of behavior right now, the investor behavior, consumer behavior as 158 00:07:59,840 --> 00:08:03,360 Speaker 1: a whole, a whole another ball of wax right right. 159 00:08:03,360 --> 00:08:06,200 Speaker 1: And I think that's a good indicator that that maybe 160 00:08:06,240 --> 00:08:09,840 Speaker 1: markets haven't bottomed. I mean, when when you've got lines 161 00:08:09,880 --> 00:08:12,560 Speaker 1: around the corner for fifteen dollar salads and you know, 162 00:08:12,800 --> 00:08:16,600 Speaker 1: everything else seems to be durable good for big big 163 00:08:16,640 --> 00:08:20,240 Speaker 1: goods purchases are still pretty impressive. I think it indicates 164 00:08:20,280 --> 00:08:23,480 Speaker 1: that the mindset of bear market or crash or recession 165 00:08:23,520 --> 00:08:26,320 Speaker 1: has not set in. And that means probably once people 166 00:08:26,320 --> 00:08:29,120 Speaker 1: realize that it may, that'll be a negative for markets. 167 00:08:29,360 --> 00:08:33,360 Speaker 1: All Right, you have, I guess founded a new holiday. 168 00:08:33,400 --> 00:08:35,559 Speaker 1: How do you how do you put this into words? 169 00:08:35,600 --> 00:08:42,120 Speaker 1: You have established um and inaugural National Investment Risk Management Day. 170 00:08:42,320 --> 00:08:46,160 Speaker 1: What what are you trying to do increase financial literacy? Well, 171 00:08:47,120 --> 00:08:49,480 Speaker 1: it started out as our head of education and Training, 172 00:08:49,559 --> 00:08:52,120 Speaker 1: Dan Coleman, came up with the idea, it's actually on 173 00:08:52,160 --> 00:08:55,960 Speaker 1: my birthday, which was yesterday birthday, thank you or happy 174 00:08:56,000 --> 00:08:59,200 Speaker 1: after birthday? You have to say after birthtor like anyway, 175 00:08:59,320 --> 00:09:02,439 Speaker 1: So and and we it was sort of a an 176 00:09:02,480 --> 00:09:06,760 Speaker 1: austere suggestion that the investors should look at their portfolios 177 00:09:06,800 --> 00:09:09,080 Speaker 1: and address risk. And we were talking to our PR 178 00:09:09,120 --> 00:09:11,760 Speaker 1: team and I said, let's let's let's make this fun. 179 00:09:12,360 --> 00:09:14,079 Speaker 1: And what I what we did is I rewrite the 180 00:09:14,080 --> 00:09:17,520 Speaker 1: press release myself. And it became like, oh my god, 181 00:09:17,600 --> 00:09:20,600 Speaker 1: what are we doing? And so now every year we're 182 00:09:20,600 --> 00:09:22,680 Speaker 1: going to try to address what are the three stupidest 183 00:09:22,720 --> 00:09:25,640 Speaker 1: investment ideas we've had. I'm gonna I'm gonna tweet out 184 00:09:25,960 --> 00:09:28,400 Speaker 1: the press release for you. Phil taste from TAS Asset Management. 185 00:09:28,400 --> 00:09:35,359 Speaker 1: Great having on the program, we've heard, you know, layoffs 186 00:09:35,440 --> 00:09:39,920 Speaker 1: coming out of Microsoft and for layoffs coming out of Amazon. Um, 187 00:09:40,000 --> 00:09:44,160 Speaker 1: what's the furniture wayfair? There you go? So tons of 188 00:09:44,200 --> 00:09:47,280 Speaker 1: these West Coast companies. Let's bring an Aora Runna right now. 189 00:09:47,280 --> 00:09:50,839 Speaker 1: He covers tech for Bloomberg Intelligence. Don what what are 190 00:09:50,880 --> 00:09:53,000 Speaker 1: we seeing in tech? Is it fair to say that 191 00:09:53,040 --> 00:09:55,720 Speaker 1: this is the beginning of a wave of layoffs. I 192 00:09:55,720 --> 00:09:57,320 Speaker 1: don't know if it's a beginning or be out of 193 00:09:57,320 --> 00:09:59,480 Speaker 1: the middle eanning. But you know, if you look at 194 00:09:59,520 --> 00:10:02,440 Speaker 1: it over the last three to five years, a lot 195 00:10:02,440 --> 00:10:04,320 Speaker 1: of these companies have you know, some of them have 196 00:10:04,400 --> 00:10:06,480 Speaker 1: doubled their head counts, some of them have gone even 197 00:10:06,640 --> 00:10:09,240 Speaker 1: you know, more than that. And that was driven by 198 00:10:09,320 --> 00:10:11,280 Speaker 1: a lot of demand that we saw in the pandemic. 199 00:10:11,600 --> 00:10:13,720 Speaker 1: But if we see this year, take spending is going 200 00:10:13,800 --> 00:10:16,240 Speaker 1: to slow down. Cloud businesses are going to slow down. 201 00:10:16,600 --> 00:10:18,760 Speaker 1: And then if you want to maintain your margins and 202 00:10:18,880 --> 00:10:21,880 Speaker 1: be you know, have the right size UM I would 203 00:10:21,920 --> 00:10:24,480 Speaker 1: say workforce, you will see some layoffs. So you know, 204 00:10:24,600 --> 00:10:27,440 Speaker 1: let's say the case of Microsoft, five percent decline in 205 00:10:27,480 --> 00:10:29,840 Speaker 1: head count is not that big of a deal when 206 00:10:29,840 --> 00:10:32,480 Speaker 1: you've doubled your head count in five years, But then 207 00:10:32,520 --> 00:10:35,600 Speaker 1: what happens when is this kind of a a scenario 208 00:10:35,640 --> 00:10:38,040 Speaker 1: where it's one step backwards in terms of headcount only 209 00:10:38,040 --> 00:10:41,320 Speaker 1: to kind of release the valve for the next few years. 210 00:10:41,400 --> 00:10:42,680 Speaker 1: Is that kind of the way to look at this. 211 00:10:43,000 --> 00:10:45,040 Speaker 1: It will a lot will depend on what kind of 212 00:10:45,080 --> 00:10:47,120 Speaker 1: demand we see next year or what kind of rebound 213 00:10:47,120 --> 00:10:49,200 Speaker 1: will see. Now, if there is a lack of demand, 214 00:10:49,240 --> 00:10:51,040 Speaker 1: then you're not going to see massive hiding going in. 215 00:10:51,160 --> 00:10:54,240 Speaker 1: But if the demand comes back like we expect it will, 216 00:10:54,559 --> 00:10:56,800 Speaker 1: you're going to see a massive acceleration and by our 217 00:10:57,240 --> 00:10:59,640 Speaker 1: hiding at that point. Because there is a very strong 218 00:10:59,720 --> 00:11:03,200 Speaker 1: quote lation of revenue growth and employee growth, it's usually 219 00:11:03,440 --> 00:11:05,480 Speaker 1: you know, very close to one to one or point 220 00:11:05,480 --> 00:11:11,000 Speaker 1: one to point nine. But what especially at Apple sauce um, 221 00:11:11,040 --> 00:11:15,800 Speaker 1: they are sorry alphabet, they are not only laying off 222 00:11:16,080 --> 00:11:18,440 Speaker 1: six and a half percent of their workforce. We saw 223 00:11:18,520 --> 00:11:21,800 Speaker 1: reports on CNBC the other day that they're pushing out 224 00:11:21,840 --> 00:11:27,560 Speaker 1: bonuses um and this is pretty harsh. I mean, normal people, 225 00:11:27,720 --> 00:11:31,160 Speaker 1: even if you're not supposed to rely on bonuses as 226 00:11:31,160 --> 00:11:33,520 Speaker 1: a way to cover living expenses. So if you all 227 00:11:33,520 --> 00:11:35,679 Speaker 1: of us shudden say in the middle of January. Hey, 228 00:11:35,920 --> 00:11:37,719 Speaker 1: we know you're used to getting your whole bonus now, 229 00:11:37,760 --> 00:11:39,160 Speaker 1: but we're only going to give you part of it 230 00:11:39,240 --> 00:11:41,400 Speaker 1: and the rest of it in two months. That screws 231 00:11:41,480 --> 00:11:44,560 Speaker 1: up a lot of people's uh, you know, bill paying abilities. 232 00:11:44,960 --> 00:11:46,839 Speaker 1: You would only do that if you were in some 233 00:11:46,920 --> 00:11:49,599 Speaker 1: kind of trouble, wouldn't you. Um, they didn't generate a 234 00:11:49,600 --> 00:11:53,960 Speaker 1: lot of free cash flow a b unlike Amazon's you know, 235 00:11:54,080 --> 00:11:57,080 Speaker 1: workers in vade houses. The people who work at Google 236 00:11:57,120 --> 00:11:59,600 Speaker 1: are not struggling. They make a lot of fair point, 237 00:11:59,600 --> 00:12:02,640 Speaker 1: fair point. I mean, there probably are some people who 238 00:12:02,640 --> 00:12:05,680 Speaker 1: don't make a ton. They're not all programs. I'm fairly 239 00:12:05,960 --> 00:12:09,920 Speaker 1: fairly confident that the average compensation throughout the ecosystem is 240 00:12:09,960 --> 00:12:13,760 Speaker 1: way over you know, three d four thousand dollars over there. Well, 241 00:12:13,760 --> 00:12:15,680 Speaker 1: hopefully they don't have too many kids in private schools. 242 00:12:15,880 --> 00:12:21,400 Speaker 1: I don't know, man, four hundred thousand still, so so 243 00:12:21,480 --> 00:12:23,360 Speaker 1: let me let me back up. Let's say go three 244 00:12:23,400 --> 00:12:25,920 Speaker 1: to four years. These the tech workers have had a 245 00:12:26,000 --> 00:12:29,439 Speaker 1: bonanza over the last several years, from stock options to 246 00:12:29,800 --> 00:12:32,800 Speaker 1: really high raises because of the shortage of labor. And 247 00:12:32,840 --> 00:12:35,760 Speaker 1: I can assure you, right now even for almost every 248 00:12:35,800 --> 00:12:40,319 Speaker 1: category in technology. If you break down database administrator, software engineers, 249 00:12:40,720 --> 00:12:44,520 Speaker 1: um AI developers, all of them are in massive demand 250 00:12:44,600 --> 00:12:47,360 Speaker 1: right now. So other industries out there, you know, whether 251 00:12:47,400 --> 00:12:51,080 Speaker 1: it's energy, industries, manufacturing, anywhere, They're going to be hired 252 00:12:51,080 --> 00:12:54,959 Speaker 1: without a problem. This rings a lot of bells when 253 00:12:54,960 --> 00:12:56,000 Speaker 1: it comes to and you might not be able to 254 00:12:56,000 --> 00:12:57,800 Speaker 1: answer this, but tell me if this is in the discourse. 255 00:12:57,840 --> 00:13:00,360 Speaker 1: Here are people talking about things like immigration when it 256 00:13:00,360 --> 00:13:03,240 Speaker 1: comes to hiring right now. I mean, I'm thinking, like 257 00:13:03,280 --> 00:13:06,320 Speaker 1: my parents tech boom of the nineties here going into 258 00:13:06,360 --> 00:13:10,600 Speaker 1: computer engineering, what happens when that immigration standard is up, 259 00:13:11,080 --> 00:13:13,160 Speaker 1: dropped down or made more complicated. So I did a 260 00:13:13,160 --> 00:13:16,200 Speaker 1: big report six seven years ago, um, you know about 261 00:13:16,400 --> 00:13:19,000 Speaker 1: the restrictive immigration policy and what it would do and 262 00:13:19,000 --> 00:13:22,080 Speaker 1: one of Trumpian policy that Biden really hasn't turned around. Yeah, 263 00:13:22,240 --> 00:13:24,520 Speaker 1: I I was surprised at that. And you know, one 264 00:13:24,520 --> 00:13:26,880 Speaker 1: of my predictions was Canada is going to really benefit 265 00:13:26,920 --> 00:13:29,480 Speaker 1: from it. And we have seen a massive boom of 266 00:13:29,520 --> 00:13:33,160 Speaker 1: immigrants and for that matter, a massive tech center near 267 00:13:33,160 --> 00:13:35,800 Speaker 1: Mississauga because of that, because of a lot of the 268 00:13:35,800 --> 00:13:40,120 Speaker 1: immigrants going there and creating development centers for software companies. 269 00:13:40,280 --> 00:13:42,600 Speaker 1: But let me assure you this thing. You know, from 270 00:13:42,600 --> 00:13:46,360 Speaker 1: a tech unemployment rate, we are still way past full employment. 271 00:13:46,640 --> 00:13:48,920 Speaker 1: This you know, if if you have added let's say 272 00:13:48,920 --> 00:13:51,199 Speaker 1: for Microsoft case, I'll tell you, in the last five 273 00:13:51,280 --> 00:13:54,320 Speaker 1: years they've added hundred thousand people, letting go of ten 274 00:13:54,360 --> 00:13:56,920 Speaker 1: thousand people is not that big of a deal in 275 00:13:56,960 --> 00:14:00,520 Speaker 1: my view. All right, Well, hopefully those ten thousand people 276 00:14:00,559 --> 00:14:02,760 Speaker 1: see it the same way because sound our push up. 277 00:14:02,800 --> 00:14:06,000 Speaker 1: Pish I is taking full responsibility and he apologized, and 278 00:14:06,040 --> 00:14:08,240 Speaker 1: I just can't imagine this generates a lot of positive 279 00:14:08,240 --> 00:14:11,280 Speaker 1: sentiment towards him running the company. You know, even if 280 00:14:11,280 --> 00:14:14,560 Speaker 1: you're making four a thousand, if you've got three kids 281 00:14:14,720 --> 00:14:17,120 Speaker 1: and you've got a ten dollar mortgage, I mean, I 282 00:14:17,160 --> 00:14:19,960 Speaker 1: realize you're living large, but it's still kind of hurty. Yeah, 283 00:14:20,000 --> 00:14:23,280 Speaker 1: children are expensive. All right, We're gonna continue to talk 284 00:14:23,320 --> 00:14:26,200 Speaker 1: about the layoffs on the West coast. They're really global 285 00:14:26,320 --> 00:14:30,520 Speaker 1: layoffs as well as the winning quarter that Netflix had. 286 00:14:30,520 --> 00:14:36,280 Speaker 1: The stock is up again six percent. Let's bring in 287 00:14:36,400 --> 00:14:40,400 Speaker 1: right now. Are Bloomberg Intelligence analyst Punham Goyle joins us 288 00:14:40,680 --> 00:14:44,560 Speaker 1: see a senior analyst for e commerce as well as 289 00:14:44,720 --> 00:14:48,920 Speaker 1: ath leisure and off price retail. That is a hell 290 00:14:48,960 --> 00:14:50,600 Speaker 1: of a round up there. And then Man Deep saying 291 00:14:50,640 --> 00:14:54,200 Speaker 1: senior analyst for tech companies. He covers all those tech 292 00:14:54,240 --> 00:14:59,000 Speaker 1: companies that touch the consumer like Apple, sauce. Man Deep, 293 00:14:59,080 --> 00:15:01,960 Speaker 1: let me start with you, uh these layoffs from Google, 294 00:15:02,280 --> 00:15:04,160 Speaker 1: and I want to get your take also on the 295 00:15:04,240 --> 00:15:06,480 Speaker 1: kind of I feel like suspicious name change. I know 296 00:15:06,520 --> 00:15:09,440 Speaker 1: it's been years now, but I still haven't forgiven them 297 00:15:09,440 --> 00:15:12,840 Speaker 1: for it. What do you think? Well, so look at 298 00:15:13,000 --> 00:15:16,520 Speaker 1: how much these companies have grown in terms of employee 299 00:15:16,520 --> 00:15:20,200 Speaker 1: based Google or Alphabet, for example, has added about fifty 300 00:15:20,760 --> 00:15:24,760 Speaker 1: employees in the last two years. Now. Granted they were 301 00:15:24,840 --> 00:15:27,400 Speaker 1: growing out of you know, the top line growth was 302 00:15:27,520 --> 00:15:32,320 Speaker 1: also north of and they're operating profits also doubled in 303 00:15:32,400 --> 00:15:35,320 Speaker 1: this period. The question that you have to ask the 304 00:15:35,320 --> 00:15:38,840 Speaker 1: management right now is what were they forecasting in terms of, 305 00:15:38,920 --> 00:15:42,000 Speaker 1: you know, future growth. And I think that's where all 306 00:15:42,160 --> 00:15:45,200 Speaker 1: these large tech companies got it wrong, in terms of 307 00:15:45,400 --> 00:15:48,640 Speaker 1: just you know, what is the projected top line growth. 308 00:15:48,680 --> 00:15:52,320 Speaker 1: And in the case of Alphabet specifically, it's the search 309 00:15:52,400 --> 00:15:57,160 Speaker 1: business that subsidizes everything else, whether it's cloud, YouTube, their 310 00:15:57,240 --> 00:16:02,000 Speaker 1: hardware ambitions, and none of those other segments actually is 311 00:16:02,080 --> 00:16:05,480 Speaker 1: close to being profitable barring maybe YouTube and and so 312 00:16:05,640 --> 00:16:09,800 Speaker 1: that's where I think they're realizing that search is obviously maturing, 313 00:16:10,200 --> 00:16:12,680 Speaker 1: and we have all sorts of problems with the digital 314 00:16:12,680 --> 00:16:16,200 Speaker 1: ad environment right now, and they just can't maintain that 315 00:16:16,440 --> 00:16:20,360 Speaker 1: profitable growth anymore. And I think I mean again, in 316 00:16:20,440 --> 00:16:23,320 Speaker 1: terms of the head count, it's still twelve thousand versus 317 00:16:23,440 --> 00:16:25,760 Speaker 1: fifty thousand they have added in the last two years. 318 00:16:25,760 --> 00:16:28,760 Speaker 1: But it just goes to show that this period, if 319 00:16:28,760 --> 00:16:32,920 Speaker 1: you look back, was unprecedented in terms of tech hiring. Yeah, 320 00:16:33,000 --> 00:16:36,440 Speaker 1: well man, deep it's interesting to find that this this 321 00:16:36,520 --> 00:16:39,280 Speaker 1: tech story just continues to unravel at a time when 322 00:16:39,520 --> 00:16:42,480 Speaker 1: almost the share prices are almost rewarded by it, and 323 00:16:42,640 --> 00:16:44,800 Speaker 1: and it really comes down to a question of cost efficiency. 324 00:16:44,800 --> 00:16:46,880 Speaker 1: Of course, we do feel for the folks who are 325 00:16:47,440 --> 00:16:49,360 Speaker 1: getting laid off, of course, but I want to fold 326 00:16:49,360 --> 00:16:51,280 Speaker 1: in the retail side of the story as well. Putam 327 00:16:51,320 --> 00:16:53,840 Speaker 1: Goyle also joins us from Bloomberg Intelligence, because it's not 328 00:16:53,920 --> 00:16:56,720 Speaker 1: just Alphabet that came out with this news. Wayfair also 329 00:16:56,760 --> 00:16:59,240 Speaker 1: announced job cuts and put them I wonder, is it 330 00:16:59,360 --> 00:17:02,120 Speaker 1: the same dynamic in the retail space that made is 331 00:17:02,160 --> 00:17:04,399 Speaker 1: talking about in the tech space a little bit of 332 00:17:04,440 --> 00:17:05,960 Speaker 1: it is the same. You know, if you look back 333 00:17:06,000 --> 00:17:08,040 Speaker 1: to Wayfare than the number of employees they had in 334 00:17:08,440 --> 00:17:11,320 Speaker 1: eighteen it was about twelve thousand, and as of the 335 00:17:11,400 --> 00:17:14,760 Speaker 1: latest ten cakes about sixteen and a half thousand, So 336 00:17:14,920 --> 00:17:17,680 Speaker 1: definitely yet you know, a big step up and employees 337 00:17:17,680 --> 00:17:20,480 Speaker 1: and as they scale back roughly seventeen hundred and fifty 338 00:17:20,520 --> 00:17:24,040 Speaker 1: employees now it's just really a measure to get cost 339 00:17:24,119 --> 00:17:28,000 Speaker 1: back in line. All retailers across the board are struggling 340 00:17:28,000 --> 00:17:32,720 Speaker 1: to drive profitability as sales have come off following pandemic boom, 341 00:17:32,840 --> 00:17:35,760 Speaker 1: especially for Wayfare where you know, the home is where 342 00:17:35,800 --> 00:17:39,080 Speaker 1: people invested at the peak of the pandemic, that's where 343 00:17:39,119 --> 00:17:42,239 Speaker 1: your funds went, and Wayfare benefited from that. And as 344 00:17:42,280 --> 00:17:45,280 Speaker 1: all that pulls back, even though they are in a 345 00:17:45,359 --> 00:17:48,560 Speaker 1: secular shift where they will benefit from the move from 346 00:17:48,640 --> 00:17:52,080 Speaker 1: stores to online, sales have dwindled and now the move 347 00:17:52,160 --> 00:17:54,520 Speaker 1: is towards profitability. So for them to get to their 348 00:17:54,560 --> 00:17:58,399 Speaker 1: goal of IBADA neutral this year, UM, they needed to 349 00:17:58,400 --> 00:18:00,800 Speaker 1: cut these costs. They had to cut a billion and 350 00:18:00,880 --> 00:18:03,600 Speaker 1: a half dollars roughly, and half of that is through 351 00:18:03,640 --> 00:18:07,399 Speaker 1: the employee cuts. Well, stick with that story because I 352 00:18:07,520 --> 00:18:09,199 Speaker 1: almost wondered, and Mandy, if I'll get to you in 353 00:18:09,200 --> 00:18:11,960 Speaker 1: just a moment, but I almost wonder how much of 354 00:18:12,040 --> 00:18:15,640 Speaker 1: these layoffs are really some sort of dynamic of one 355 00:18:15,640 --> 00:18:19,240 Speaker 1: step backwards to kind of be cost efficient in the 356 00:18:19,280 --> 00:18:23,199 Speaker 1: short term only to kind of prepare for mass hiring 357 00:18:23,280 --> 00:18:25,439 Speaker 1: as we talked about a new economic expansion. Do you 358 00:18:25,480 --> 00:18:27,640 Speaker 1: see that dynamic playing out in the retail space over 359 00:18:27,680 --> 00:18:30,159 Speaker 1: the next couple of years now for rightfare, because if 360 00:18:30,200 --> 00:18:32,280 Speaker 1: you look at the composition of their cost cuts to 361 00:18:32,320 --> 00:18:36,600 Speaker 1: the seventeen and fifty employees that they talked about cutting today, 362 00:18:36,680 --> 00:18:39,960 Speaker 1: the bulk of that is in corporate so um. You know, 363 00:18:40,000 --> 00:18:42,760 Speaker 1: you can argue that when they weren't in their peak 364 00:18:42,920 --> 00:18:45,239 Speaker 1: growth mode, which was largely you know, they went from 365 00:18:45,280 --> 00:18:48,280 Speaker 1: one point three billion dollars in revenue to five billion 366 00:18:48,320 --> 00:18:54,320 Speaker 1: dollars in twenty seventeen seventeen, and now they're approaching about 367 00:18:54,359 --> 00:18:58,000 Speaker 1: twelve to thirteen billion dollars, so massive growth. But the 368 00:18:58,080 --> 00:19:02,880 Speaker 1: hiring that they're pulling back isn't at the warehouse level largely, 369 00:19:03,000 --> 00:19:04,879 Speaker 1: it's it's our corporate right. If you think about the 370 00:19:04,960 --> 00:19:07,240 Speaker 1: number of employees that they're letting go up, So I 371 00:19:07,320 --> 00:19:12,639 Speaker 1: don't I don't think that we will have another massive increase, 372 00:19:13,400 --> 00:19:17,440 Speaker 1: especially also as retailers and brands are largely right now 373 00:19:17,480 --> 00:19:21,000 Speaker 1: looking at automation to help alleviate some of these growing costs. 374 00:19:21,040 --> 00:19:25,480 Speaker 1: You know, wages are rising, rents are rising, transportation expenses, shipping, 375 00:19:25,520 --> 00:19:29,400 Speaker 1: everything is up um in multiple folds. So I think 376 00:19:29,440 --> 00:19:32,040 Speaker 1: they'll just be looking at automation more as they continue 377 00:19:32,040 --> 00:19:34,520 Speaker 1: to grow the business to save costs. Man, deep, is 378 00:19:34,560 --> 00:19:37,560 Speaker 1: there risk um that some of these at least some 379 00:19:37,640 --> 00:19:39,440 Speaker 1: of these companies and we've got a list now too 380 00:19:39,480 --> 00:19:41,760 Speaker 1: long for me to mention of tech companies that are 381 00:19:41,760 --> 00:19:45,320 Speaker 1: coming cutting you know, double digit thousands of jobs. Is 382 00:19:45,320 --> 00:19:48,119 Speaker 1: there a risk that things go better than expected and 383 00:19:48,119 --> 00:19:50,600 Speaker 1: they have to turn around and hire back again after 384 00:19:50,680 --> 00:19:55,280 Speaker 1: having tarnished their reputations. I don't think so. I think 385 00:19:55,359 --> 00:19:59,520 Speaker 1: this is a sort of you know, downturn where clearly 386 00:20:00,000 --> 00:20:02,720 Speaker 1: in hindsight, there was a pull forward both in terms 387 00:20:02,800 --> 00:20:06,600 Speaker 1: of growth and profitability, and that's why these companies ended 388 00:20:06,680 --> 00:20:10,280 Speaker 1: up in this position where they overhired. So in my mind, 389 00:20:10,400 --> 00:20:13,879 Speaker 1: even if we have a shallow recession or slow down 390 00:20:14,080 --> 00:20:17,560 Speaker 1: and things rebound, they have learned their lesson and I 391 00:20:17,640 --> 00:20:20,199 Speaker 1: doubt they're gonna do it again in terms of, you know, 392 00:20:20,240 --> 00:20:23,479 Speaker 1: the hiring spree they went on, in terms of you know, 393 00:20:23,560 --> 00:20:26,920 Speaker 1: just the talent wars that transpired, and and now it's 394 00:20:26,960 --> 00:20:29,480 Speaker 1: the same with layoffs. Every company is doing it the 395 00:20:29,520 --> 00:20:32,360 Speaker 1: same way they hired all these people. So I don't 396 00:20:32,359 --> 00:20:34,960 Speaker 1: think we're going to see a return of that anytime soon. 397 00:20:35,280 --> 00:20:38,560 Speaker 1: Mandy thirty seconds here very quickly. Do you see the 398 00:20:38,600 --> 00:20:41,960 Speaker 1: stock market or do you share prices really benefiting from 399 00:20:42,119 --> 00:20:45,080 Speaker 1: more and more of these layoffs. Well, so they will 400 00:20:45,200 --> 00:20:47,920 Speaker 1: come out of this downturn. I don't know how long 401 00:20:47,960 --> 00:20:51,439 Speaker 1: this is gonna be much stronger, and the businesses that 402 00:20:51,520 --> 00:20:54,960 Speaker 1: do survive again, not every company is gonna be in 403 00:20:54,960 --> 00:20:57,520 Speaker 1: the same position as they were before, but the ones 404 00:20:57,640 --> 00:21:00,880 Speaker 1: they do survive and they're competitive of motives in tech, 405 00:21:01,200 --> 00:21:04,199 Speaker 1: will be a more profitable down the line, all right, 406 00:21:04,240 --> 00:21:08,240 Speaker 1: Man Deep saying senior analysts for technology at Bloomberg Intelligence 407 00:21:08,600 --> 00:21:11,679 Speaker 1: and uh Punum Goyle as well, senior analysts for e 408 00:21:11,720 --> 00:21:14,480 Speaker 1: commerce at Leisure and off price Retail, but really kind 409 00:21:14,480 --> 00:21:17,119 Speaker 1: of techy there as well from b I great to 410 00:21:17,160 --> 00:21:19,680 Speaker 1: have both of you on the program. What today for 411 00:21:19,680 --> 00:21:24,240 Speaker 1: for tech for West Coast firms acting globally in terms 412 00:21:24,320 --> 00:21:27,720 Speaker 1: of UM, their layoffs, in terms of their head counts. 413 00:21:27,720 --> 00:21:30,040 Speaker 1: A lot of them with massive head counts. Amazon has 414 00:21:30,080 --> 00:21:32,359 Speaker 1: a two million people working for him, and a lot 415 00:21:32,359 --> 00:21:35,480 Speaker 1: of them with big cuts in percentage terms UM. Alphabet 416 00:21:35,520 --> 00:21:39,920 Speaker 1: cutting six percent of its workforce. We're gonna continue talking 417 00:21:39,920 --> 00:21:43,480 Speaker 1: about these markets were on an up trend. This is Bloomberg. 418 00:21:47,960 --> 00:21:50,480 Speaker 1: We've been talking a lot this week about the reopening 419 00:21:50,640 --> 00:21:56,159 Speaker 1: of China, especially as it relates to commodities. Remember the 420 00:21:56,200 --> 00:21:59,760 Speaker 1: dream I had at the beginning of the week creating yeah, 421 00:21:59,760 --> 00:22:01,520 Speaker 1: I had. I had this dream that I was at 422 00:22:01,520 --> 00:22:04,080 Speaker 1: a diner with Jeff Curry from Goldman Sachs and we 423 00:22:04,080 --> 00:22:09,480 Speaker 1: were pitching some investors on commodities because his story I 424 00:22:09,520 --> 00:22:12,440 Speaker 1: thought was so good, or his premise that the reopening 425 00:22:12,440 --> 00:22:16,640 Speaker 1: of China plus a not not so bad economic outlook 426 00:22:16,680 --> 00:22:18,840 Speaker 1: in Europe plus a slowdown in the FED would just 427 00:22:18,960 --> 00:22:21,400 Speaker 1: drive commodities prices higher. I lived through this in two 428 00:22:21,440 --> 00:22:23,879 Speaker 1: thousand seven, two thousand and eight, I saw, you know, 429 00:22:23,960 --> 00:22:27,080 Speaker 1: oil go up to one of barrel for West Texas 430 00:22:27,080 --> 00:22:29,800 Speaker 1: Intermediate and it was pretty amazing. I want to bring 431 00:22:29,800 --> 00:22:33,040 Speaker 1: in Nick stat Miller right now. He is the head 432 00:22:33,080 --> 00:22:36,520 Speaker 1: of Global product over at Medley Advisors and he joins 433 00:22:36,560 --> 00:22:39,560 Speaker 1: us now in the Bloomberg Interactive Broker Studio. Nick, what's 434 00:22:39,600 --> 00:22:43,679 Speaker 1: your take on having had a lot of experience internationally 435 00:22:44,240 --> 00:22:47,479 Speaker 1: um in the Middle East, watching what goes on in 436 00:22:47,560 --> 00:22:50,080 Speaker 1: Asia on the China reopening, what does this mean for 437 00:22:50,119 --> 00:22:54,600 Speaker 1: global markets? Well, thanks, Matt. We're actually a bit more 438 00:22:54,600 --> 00:22:57,119 Speaker 1: optimistic than the consensus. We think full your growth in 439 00:22:57,200 --> 00:22:59,600 Speaker 1: China is actually going to come in north of five percent, 440 00:22:59,640 --> 00:23:02,679 Speaker 1: which is a higher than the market consensus. But this 441 00:23:02,800 --> 00:23:04,800 Speaker 1: is going to be a different kind of recovery than 442 00:23:04,840 --> 00:23:07,720 Speaker 1: what you've seen in China in previous times. You mentioned 443 00:23:07,720 --> 00:23:10,800 Speaker 1: the post GFC recovery in China, which was very infrastructure 444 00:23:10,880 --> 00:23:14,879 Speaker 1: lad an investment from government spending. But China actually already 445 00:23:14,880 --> 00:23:17,720 Speaker 1: did a lot of infrastructure stimulus last year and they're 446 00:23:17,760 --> 00:23:20,720 Speaker 1: unlikely to repeat that. And the housing market is getting 447 00:23:20,720 --> 00:23:23,159 Speaker 1: slightly better but coming in on a pretty low base. 448 00:23:23,520 --> 00:23:25,440 Speaker 1: But it's going to be consumption that's going to lead 449 00:23:25,480 --> 00:23:29,280 Speaker 1: this one, which is very different. Chinese consumers have of 450 00:23:29,320 --> 00:23:32,520 Speaker 1: GDP and excess savings right now, and as that economy 451 00:23:32,560 --> 00:23:35,560 Speaker 1: opens up, we really look for a Chinese consumer demounts 452 00:23:35,560 --> 00:23:37,720 Speaker 1: to grow quite a bit. Well, there's I think a 453 00:23:37,760 --> 00:23:39,920 Speaker 1: couple of things that we shouldn't lose sight of. One 454 00:23:40,000 --> 00:23:43,960 Speaker 1: is that not everybody expected China to cancel COVID zero 455 00:23:44,080 --> 00:23:47,399 Speaker 1: so quickly and so soon. Um, so that's kind of 456 00:23:47,400 --> 00:23:50,359 Speaker 1: a surprise to investors or it has been, you know, 457 00:23:50,680 --> 00:23:53,240 Speaker 1: now a two month old surprise. But also they have 458 00:23:53,400 --> 00:23:58,760 Speaker 1: been working hard to build up this Belt and Roads initiative, uh, 459 00:23:58,920 --> 00:24:05,280 Speaker 1: you know, based priming trading partners, especially in Europe and Africa, Europe, 460 00:24:05,280 --> 00:24:08,439 Speaker 1: the Middle Eastern Africa. What kind of dividends is that 461 00:24:08,480 --> 00:24:11,199 Speaker 1: going to pay as they open up. Well, on the 462 00:24:11,240 --> 00:24:14,760 Speaker 1: domestic side, I think that, you know, it did catch 463 00:24:14,760 --> 00:24:17,240 Speaker 1: a lot of people off surprise by surprise, and our 464 00:24:17,320 --> 00:24:20,200 Speaker 1: China analysts says that this was, you know, largely due 465 00:24:20,240 --> 00:24:23,280 Speaker 1: to some domestic pressures, and so rather than trying to 466 00:24:23,320 --> 00:24:26,359 Speaker 1: flatten the curve, they're basically just steepening the curve on 467 00:24:26,400 --> 00:24:28,600 Speaker 1: COVID and saying, let everybody get it and let's reopen 468 00:24:28,640 --> 00:24:31,760 Speaker 1: and move on. So that's the domestic story. On the 469 00:24:31,880 --> 00:24:35,159 Speaker 1: foreign story, you know, the Belton Road initiative has has 470 00:24:35,200 --> 00:24:37,720 Speaker 1: hit a lot of snags over the years, and especially 471 00:24:37,800 --> 00:24:41,440 Speaker 1: right now, you have several African countries deep in distress, 472 00:24:41,560 --> 00:24:44,040 Speaker 1: and then Pakistan and Sri Lanka, who are also pretty 473 00:24:44,080 --> 00:24:49,159 Speaker 1: big beneficiaries, having some serious problems with their death sustainability. 474 00:24:49,560 --> 00:24:51,800 Speaker 1: So it's probably going to be a pretty bumpy road, 475 00:24:51,840 --> 00:24:54,520 Speaker 1: I would say, in terms of China's foreign investments and 476 00:24:54,920 --> 00:24:57,359 Speaker 1: sort of reaping those long term dividends, at least in 477 00:24:57,400 --> 00:24:59,200 Speaker 1: the short term. I don't think that they're going to 478 00:24:59,280 --> 00:25:01,000 Speaker 1: see a lot of benefit fit from the Belton Road 479 00:25:01,200 --> 00:25:04,160 Speaker 1: investments that they've made. Well, one of the I want 480 00:25:04,160 --> 00:25:06,320 Speaker 1: to go back to Matt's dream here slash the street 481 00:25:06,359 --> 00:25:08,280 Speaker 1: call from Jeff Curry. One of the reasons he's so 482 00:25:08,320 --> 00:25:12,000 Speaker 1: bullish on this commodity supercycle that he he says is 483 00:25:12,000 --> 00:25:14,560 Speaker 1: going to come is this idea that he's comparing the 484 00:25:14,640 --> 00:25:17,680 Speaker 1: Chinese reopening specifically something similar that we saw in two 485 00:25:18,040 --> 00:25:20,639 Speaker 1: two thousand nine, this kind of massive stimulus package we 486 00:25:20,680 --> 00:25:23,000 Speaker 1: saw back then. Is that a fair comparison to make. 487 00:25:23,000 --> 00:25:26,440 Speaker 1: Are we expecting Chinese demand, domestic demand to really come 488 00:25:26,480 --> 00:25:30,760 Speaker 1: to that level? Well, I think the story is again 489 00:25:30,800 --> 00:25:33,439 Speaker 1: the consumption led by the excess savings, the fact that 490 00:25:33,480 --> 00:25:35,840 Speaker 1: you have, you know, the Chinese consumers who just haven't 491 00:25:35,880 --> 00:25:37,800 Speaker 1: been able to travel or do a lot of things 492 00:25:37,880 --> 00:25:39,800 Speaker 1: that they wanted to. So one of the places you're 493 00:25:39,800 --> 00:25:42,240 Speaker 1: probably going to see a big pickup in demand is 494 00:25:42,280 --> 00:25:44,040 Speaker 1: in jet fuel. And there are a lot of interesting 495 00:25:44,080 --> 00:25:46,960 Speaker 1: proxy traits that our clients have been looking at to 496 00:25:47,080 --> 00:25:49,480 Speaker 1: play reopening in China. One of them is to go 497 00:25:49,520 --> 00:25:53,560 Speaker 1: along that TI bought because of increased tourism into Thailand. 498 00:25:54,040 --> 00:25:58,119 Speaker 1: Thailand opens and Chinese consumers start getting out again. UM. 499 00:25:58,160 --> 00:26:00,600 Speaker 1: But in terms of the other metals, I think because 500 00:26:00,640 --> 00:26:03,040 Speaker 1: infrastructure is going to be less a part of this 501 00:26:03,119 --> 00:26:05,920 Speaker 1: recovery than once you've seen back in two thousand and 502 00:26:05,960 --> 00:26:09,520 Speaker 1: eight and two thousand nine, it's probably not an immediate 503 00:26:09,560 --> 00:26:12,840 Speaker 1: fillip to some of the industrial commodities UM in the 504 00:26:12,880 --> 00:26:15,000 Speaker 1: same way that it was in the past. But there 505 00:26:15,040 --> 00:26:16,919 Speaker 1: are some you know, over the mediums from over the 506 00:26:16,960 --> 00:26:19,240 Speaker 1: next decade, there's some other reasons to be quite excited 507 00:26:19,240 --> 00:26:21,800 Speaker 1: about copper and some other commodities. But I don't think 508 00:26:21,840 --> 00:26:23,879 Speaker 1: it's the China reopening story this year that does it. 509 00:26:24,160 --> 00:26:28,240 Speaker 1: So how do you model something like that if your 510 00:26:28,400 --> 00:26:31,320 Speaker 1: numbers are still perhaps a little bit confusing when it 511 00:26:31,359 --> 00:26:33,000 Speaker 1: comes to the death rate, when it comes to the 512 00:26:33,000 --> 00:26:35,359 Speaker 1: case counts coming out of China, how do you model 513 00:26:35,400 --> 00:26:39,560 Speaker 1: a timeline. It's it's not easy, is the short answer. 514 00:26:39,640 --> 00:26:43,359 Speaker 1: But I think you know around what actually happens with 515 00:26:43,440 --> 00:26:46,399 Speaker 1: consumer confidence in China, because that's a big problem. You 516 00:26:46,400 --> 00:26:48,720 Speaker 1: have lockdowns and then you have sort of self imposed 517 00:26:48,720 --> 00:26:52,000 Speaker 1: isolation where people don't want to travel because they're afraid 518 00:26:52,200 --> 00:26:56,359 Speaker 1: of catching COVID. Our China analysts seems to think that 519 00:26:56,440 --> 00:26:58,680 Speaker 1: because it's just been such a long time and people 520 00:26:58,680 --> 00:27:01,439 Speaker 1: have been so cooped up, and the Chinese government are 521 00:27:01,480 --> 00:27:03,800 Speaker 1: really trying to push that confidence, and that this will 522 00:27:03,840 --> 00:27:07,000 Speaker 1: probably happen a lot faster than some of the reopenings 523 00:27:07,000 --> 00:27:09,520 Speaker 1: in the West dead and that you'll see a quicker 524 00:27:09,560 --> 00:27:13,560 Speaker 1: return to normal consumer patterns. It almost feels like something 525 00:27:13,600 --> 00:27:15,520 Speaker 1: we saw, I want to say, in the UK actually 526 00:27:15,520 --> 00:27:17,280 Speaker 1: when everyone was so cooped up there, like you know what, 527 00:27:17,320 --> 00:27:21,080 Speaker 1: we're just going to go out and revenge, revenge travel 528 00:27:21,480 --> 00:27:23,239 Speaker 1: sort of. But it came it came from the came 529 00:27:23,240 --> 00:27:25,000 Speaker 1: from the government as well, right there, like all right, 530 00:27:25,000 --> 00:27:27,520 Speaker 1: we're done. Yeah, well even before they let the rest 531 00:27:27,520 --> 00:27:31,760 Speaker 1: of the populations. What about the FED, which is such 532 00:27:31,800 --> 00:27:35,440 Speaker 1: an important part of you know, the global picture. There 533 00:27:35,480 --> 00:27:37,639 Speaker 1: seems to be kind of a binary bet either you 534 00:27:37,720 --> 00:27:39,560 Speaker 1: believe that the FED is going to raise rates and 535 00:27:39,600 --> 00:27:42,639 Speaker 1: hold them high, or you think they're going to have 536 00:27:42,800 --> 00:27:45,720 Speaker 1: to cut or won't even be able to get to 537 00:27:45,800 --> 00:27:48,120 Speaker 1: five all of Jeff, goodluck. What do you think over 538 00:27:48,119 --> 00:27:51,040 Speaker 1: at Medley, Well, our house view is that the FED 539 00:27:51,160 --> 00:27:53,200 Speaker 1: is going to get at least to five and probably 540 00:27:53,200 --> 00:27:56,120 Speaker 1: five in a quarter. Uh And you know, we take 541 00:27:56,160 --> 00:27:59,120 Speaker 1: the FED at their word, and all the FED officials 542 00:27:59,119 --> 00:28:02,480 Speaker 1: have uniformly said that they don't anticipate to ease this year. 543 00:28:03,040 --> 00:28:06,480 Speaker 1: We think the most likely condition if they do go 544 00:28:06,560 --> 00:28:09,080 Speaker 1: back on that would be a significant deterioration in the 545 00:28:09,160 --> 00:28:13,040 Speaker 1: labor market. But despite you know, inflation coming down and 546 00:28:13,160 --> 00:28:16,040 Speaker 1: you know, bad retail sales, bad industrial production numbers out 547 00:28:16,040 --> 00:28:18,919 Speaker 1: of the US, the labor market still looks really strong. 548 00:28:18,960 --> 00:28:21,440 Speaker 1: So I think we're quite a ways away from seeing 549 00:28:21,440 --> 00:28:24,200 Speaker 1: a labor market that's weak enough that the FED might 550 00:28:24,520 --> 00:28:28,399 Speaker 1: uhum contradict themselves and end up cutting this year. So 551 00:28:28,480 --> 00:28:30,679 Speaker 1: we're looking for rates to stay at five or higher 552 00:28:30,920 --> 00:28:32,720 Speaker 1: end to the end of twenty three. Yeah, we We've 553 00:28:32,800 --> 00:28:37,160 Speaker 1: We've gotten some pretty depressing news out of the specific 554 00:28:37,320 --> 00:28:41,640 Speaker 1: companies today, um Alphabet cutting six percent of its workforce 555 00:28:41,880 --> 00:28:44,840 Speaker 1: this week. You know, Microsoft cutting five percent of its workforce, 556 00:28:44,920 --> 00:28:49,000 Speaker 1: Amazon laying off eighteen thousand people, But you don't see that, 557 00:28:50,160 --> 00:28:52,680 Speaker 1: uh in the labor market data yet. Three and a 558 00:28:52,680 --> 00:28:55,560 Speaker 1: half percent unemployment, more than ten million job openings, and 559 00:28:55,560 --> 00:28:57,320 Speaker 1: the jolts. When when do we start to see that 560 00:28:57,360 --> 00:29:00,120 Speaker 1: come in? I think it's gonna be a while. And 561 00:29:00,480 --> 00:29:02,560 Speaker 1: you know, the big tech companies and a few of 562 00:29:02,560 --> 00:29:05,040 Speaker 1: the big banks have been making headlines because of these 563 00:29:05,120 --> 00:29:08,440 Speaker 1: job cuts, but it seems for the time being to 564 00:29:08,560 --> 00:29:11,160 Speaker 1: be rather limited to just a couple of sectors. And 565 00:29:11,200 --> 00:29:13,240 Speaker 1: then you talk to people and a lot of services 566 00:29:13,280 --> 00:29:16,440 Speaker 1: industries and there's you know, just constantly talking about how 567 00:29:16,440 --> 00:29:19,320 Speaker 1: hard it is to find still get employees. Yeah. So 568 00:29:19,360 --> 00:29:21,720 Speaker 1: if the aggregate, it doesn't really look like a job 569 00:29:21,760 --> 00:29:24,560 Speaker 1: market where people are really worried about losing their job. 570 00:29:24,640 --> 00:29:27,680 Speaker 1: By the m Live question of the day, do you 571 00:29:27,760 --> 00:29:32,040 Speaker 1: see evidence of a wage price spiral? No, that's what 572 00:29:32,120 --> 00:29:34,280 Speaker 1: I thought. I thought that's an easy question to answer, 573 00:29:34,320 --> 00:29:35,680 Speaker 1: But that was did you see it pretty? That was 574 00:29:35,720 --> 00:29:38,320 Speaker 1: their question. I didn't see the question, but I I 575 00:29:38,560 --> 00:29:40,080 Speaker 1: also don't see it. I have to agree with you 576 00:29:40,080 --> 00:29:42,200 Speaker 1: on that one, because they're coming down. Yeah. And also 577 00:29:42,320 --> 00:29:46,440 Speaker 1: I mean We've seen wages rise clearly, Um, you know, 578 00:29:46,480 --> 00:29:48,760 Speaker 1: more than they have in the past, but they haven't 579 00:29:48,800 --> 00:29:53,160 Speaker 1: those increases haven't even kept up with inflation. Yeah. Absolutely, Um, 580 00:29:53,320 --> 00:29:54,640 Speaker 1: we think we have about a minute left with you. 581 00:29:54,640 --> 00:29:57,000 Speaker 1: I've got to talked about to you about lot am here. 582 00:29:57,680 --> 00:30:01,040 Speaker 1: I want to know how you play for the Argentina. 583 00:30:01,200 --> 00:30:03,880 Speaker 1: Is it worth having exposure right now? Given the geo 584 00:30:03,880 --> 00:30:07,800 Speaker 1: political uncertainty there well, particularly in Brazil, there's been a 585 00:30:07,800 --> 00:30:11,280 Speaker 1: lot of turbulence around uh Lula taking office and of 586 00:30:11,280 --> 00:30:14,320 Speaker 1: course the storming of the of the capital by a 587 00:30:14,400 --> 00:30:19,160 Speaker 1: Bosonaro supporters. UM also some concerns that Lula might take 588 00:30:19,160 --> 00:30:23,920 Speaker 1: a more populous tact with economic management. But our Brazil 589 00:30:23,960 --> 00:30:26,960 Speaker 1: analysts thinks that these worries are a bit more a 590 00:30:26,960 --> 00:30:29,040 Speaker 1: bit overblown, and then over the next few months we're 591 00:30:29,080 --> 00:30:32,120 Speaker 1: going to see more orthodox policies out of Lula's new team. 592 00:30:33,040 --> 00:30:35,840 Speaker 1: So we we have a fundamentally constructive view on Brazil 593 00:30:35,920 --> 00:30:38,480 Speaker 1: at the moment, especially if you get a nice pickup 594 00:30:38,480 --> 00:30:41,240 Speaker 1: to oil and some other commodities in the coming year. 595 00:30:42,200 --> 00:30:46,640 Speaker 1: Argentina has always been sort of a difficult distress case, 596 00:30:46,680 --> 00:30:48,479 Speaker 1: and we were talking about this at the break and 597 00:30:48,520 --> 00:30:51,600 Speaker 1: I I just find it very hard to believe that 598 00:30:51,880 --> 00:30:54,360 Speaker 1: a new government in Argentina later this year is just 599 00:30:54,520 --> 00:30:57,040 Speaker 1: magically going to be able to solve all their debt problems. 600 00:30:57,040 --> 00:30:59,040 Speaker 1: So I'm a bit more cautious there than i am 601 00:30:59,040 --> 00:31:01,480 Speaker 1: in some of the other countries the region. Alright, great 602 00:31:01,520 --> 00:31:03,320 Speaker 1: to have you on the program. Thank you so much 603 00:31:03,720 --> 00:31:07,120 Speaker 1: for coming into the Bloomberg Interactive Broker studio. Always great 604 00:31:07,120 --> 00:31:09,960 Speaker 1: when we can live. Nick stat Miller, um there. He 605 00:31:10,120 --> 00:31:15,240 Speaker 1: is the head of Global product over at Medley Advisors. 606 00:31:16,120 --> 00:31:18,560 Speaker 1: We did just get that news from the Wall Street Journal, 607 00:31:18,560 --> 00:31:22,240 Speaker 1: the Federal Reserve probing Goldman's consumer business. It is moving 608 00:31:22,320 --> 00:31:24,720 Speaker 1: the market, by the ways, The shares of Goldman Sachs 609 00:31:24,760 --> 00:31:27,520 Speaker 1: to Denise's point, down about two point two. It was 610 00:31:27,600 --> 00:31:29,760 Speaker 1: higher earlier in the session, by the way, Coming on 611 00:31:29,800 --> 00:31:31,120 Speaker 1: a day that you're seeing a lot of green on 612 00:31:31,120 --> 00:31:33,200 Speaker 1: the screen in the market, who better to break it 613 00:31:33,240 --> 00:31:35,040 Speaker 1: all down and give us some context than our very 614 00:31:35,040 --> 00:31:37,800 Speaker 1: own Wall Street correspondent, Only Bassik right here in studio, 615 00:31:38,160 --> 00:31:40,040 Speaker 1: walk us through the context here. What do we need 616 00:31:40,080 --> 00:31:42,680 Speaker 1: to know? So a few months ago we ourselves reported 617 00:31:42,720 --> 00:31:46,120 Speaker 1: that the FED had questions about this consumer business operation 618 00:31:46,160 --> 00:31:49,280 Speaker 1: at Goldman Sachs. Now, the Wall Street Journal is reporting 619 00:31:49,360 --> 00:31:53,920 Speaker 1: that the probe itself has concerns around proper monitoring and 620 00:31:53,960 --> 00:31:57,080 Speaker 1: control systems inside that consumer business. Now, listen, when we 621 00:31:57,080 --> 00:31:59,160 Speaker 1: think about Marcus, when we think about the broader consumer 622 00:31:59,160 --> 00:32:02,440 Speaker 1: business over Goldman Sacks, we have not yet really thought 623 00:32:02,480 --> 00:32:06,320 Speaker 1: about it in terms of any potential compliance and audit functions. Listen. 624 00:32:06,320 --> 00:32:08,640 Speaker 1: Goldman is a massive bank with some of the like 625 00:32:08,720 --> 00:32:12,320 Speaker 1: the most you know, impressive lawyers in the world. Right. 626 00:32:12,880 --> 00:32:15,520 Speaker 1: But um, when we did think about Marcus and consumer 627 00:32:15,680 --> 00:32:18,000 Speaker 1: really the problems that have been pretty public, and David 628 00:32:18,040 --> 00:32:22,080 Speaker 1: Solomon said this himself as I grew too fast, too soon. Uh, 629 00:32:22,120 --> 00:32:25,040 Speaker 1: and it came at the expense of execution. So you know, 630 00:32:25,360 --> 00:32:29,640 Speaker 1: really the procution or compliance, well, that execution and that's 631 00:32:29,640 --> 00:32:34,040 Speaker 1: the thing, that execution of compliance, execution of profitability of 632 00:32:34,040 --> 00:32:36,920 Speaker 1: the business. So that's why the compliance issue here raised 633 00:32:36,920 --> 00:32:38,760 Speaker 1: by the Wall Street Journal and the Federal Reserve here, 634 00:32:38,800 --> 00:32:42,960 Speaker 1: according to their reporting, is that the compliance, audit and 635 00:32:43,080 --> 00:32:45,640 Speaker 1: legal functions that that would be separate from a lot 636 00:32:45,640 --> 00:32:48,920 Speaker 1: of the markets reporting we've been doing. It is interesting 637 00:32:49,280 --> 00:32:53,680 Speaker 1: that the FED is reviewing this business as Goldman is 638 00:32:53,760 --> 00:32:56,720 Speaker 1: kind of winding it down because it's not like you know, 639 00:32:56,760 --> 00:32:59,360 Speaker 1: at first, I thought, oh, they have seen the error 640 00:32:59,400 --> 00:33:02,520 Speaker 1: in their way days. Um, not that I know as 641 00:33:02,600 --> 00:33:06,480 Speaker 1: much about you uh, you know about it as as nothing. 642 00:33:06,560 --> 00:33:09,080 Speaker 1: I know as much about it as you do. You know, 643 00:33:09,160 --> 00:33:11,560 Speaker 1: you're all over this story. Um, you know, I just 644 00:33:11,600 --> 00:33:14,600 Speaker 1: read your reporting. But it does seem it did seem 645 00:33:14,640 --> 00:33:16,880 Speaker 1: like at first they were just closing this down because 646 00:33:16,880 --> 00:33:19,200 Speaker 1: it wasn't a profitable business. It wasn't a great idea. 647 00:33:19,240 --> 00:33:21,560 Speaker 1: Alison Williams has been against it since day one, and 648 00:33:21,560 --> 00:33:25,840 Speaker 1: she's our chief banks analyst for Bloomberg Intelligence. On the 649 00:33:25,880 --> 00:33:30,920 Speaker 1: other hand, um, it is interesting that the FED is 650 00:33:30,920 --> 00:33:33,800 Speaker 1: reviewing this because it may be a different motivation for 651 00:33:33,880 --> 00:33:36,440 Speaker 1: them to wind down the business. Maybe they've had problems 652 00:33:36,480 --> 00:33:41,200 Speaker 1: there that we weren't aware of. Listen, they have an 653 00:33:41,200 --> 00:33:42,640 Speaker 1: investor day in a couple of weeks here at the 654 00:33:42,720 --> 00:33:45,680 Speaker 1: end of February. But I would say that you have 655 00:33:45,800 --> 00:33:48,040 Speaker 1: to think about, you know, the other problems that Marcus 656 00:33:48,080 --> 00:33:50,000 Speaker 1: has had. You said, winding down the business. You have 657 00:33:50,040 --> 00:33:52,760 Speaker 1: to understand very importantly, they're not winding down the whole business. 658 00:33:53,000 --> 00:33:55,520 Speaker 1: They're winding down certain parts of the business, particularly the 659 00:33:55,520 --> 00:33:58,720 Speaker 1: Marcus Lending business. Another interesting part of that business is 660 00:33:58,720 --> 00:34:01,000 Speaker 1: how they get rid of that port folio of loans. 661 00:34:01,080 --> 00:34:02,920 Speaker 1: Is it just to wind down? Do they look to 662 00:34:03,040 --> 00:34:06,960 Speaker 1: sell those loans? How does this current probe impact that. 663 00:34:07,360 --> 00:34:10,080 Speaker 1: Remember this is an era under the Biden administration where 664 00:34:10,080 --> 00:34:14,600 Speaker 1: we're seeing massive, massive crackdowns on the big banks, big concerns, 665 00:34:14,719 --> 00:34:17,560 Speaker 1: lots of big fines from different regulatory agencies. We have 666 00:34:17,640 --> 00:34:19,880 Speaker 1: Michael Barr stepping up as a supervision chair over at 667 00:34:19,880 --> 00:34:22,800 Speaker 1: the Federal Reserve. The heat is on for all the banks, 668 00:34:22,880 --> 00:34:24,799 Speaker 1: and so that's kind of why when you see the 669 00:34:25,000 --> 00:34:29,560 Speaker 1: review Englment's consumer operations, it being a concerning thing because 670 00:34:29,600 --> 00:34:31,480 Speaker 1: you know that the regulators are coming down hard. But 671 00:34:31,560 --> 00:34:33,600 Speaker 1: the point I'm making here is that the whole consumer 672 00:34:33,600 --> 00:34:36,360 Speaker 1: business is not winding down. There are still pieces left, 673 00:34:36,640 --> 00:34:39,319 Speaker 1: and so how does this impact that go forward plan 674 00:34:39,680 --> 00:34:42,680 Speaker 1: when one of the top priorities for David Solomon from 675 00:34:42,719 --> 00:34:45,520 Speaker 1: his own mouth is to make that unit profiti profitable. 676 00:34:46,000 --> 00:34:48,960 Speaker 1: So that's the Wall Street perspective. Let's bring in uh 677 00:34:49,040 --> 00:34:52,680 Speaker 1: senior litigation analysts for Bloomberg Intelligence, Elliot Stein on kind 678 00:34:52,680 --> 00:34:57,080 Speaker 1: of the legal perspective of this. Elliot, your initial take, Well, 679 00:34:57,080 --> 00:34:59,799 Speaker 1: it's still pretty early you know, to know exactly what 680 00:34:59,880 --> 00:35:02,400 Speaker 1: the and on. But I think, you know, the concern 681 00:35:02,520 --> 00:35:05,960 Speaker 1: probably is that in the way uh you know, the 682 00:35:06,040 --> 00:35:09,520 Speaker 1: c STV is cracked down on the Wells Fargo and 683 00:35:09,719 --> 00:35:13,400 Speaker 1: you know before that we saw occ fines against City 684 00:35:13,440 --> 00:35:16,759 Speaker 1: Bank all related to retail operations. You know, I think 685 00:35:16,760 --> 00:35:19,520 Speaker 1: the concern here is, you know what, what's the magnitude 686 00:35:20,000 --> 00:35:23,239 Speaker 1: of what they said is looking at um, But it's 687 00:35:23,239 --> 00:35:27,600 Speaker 1: still very early to say, you know, I would say that, um, 688 00:35:27,640 --> 00:35:30,680 Speaker 1: you know, just it's the concern is that there's going 689 00:35:30,719 --> 00:35:33,080 Speaker 1: to be some sort of like acid cap imposed that 690 00:35:33,280 --> 00:35:36,920 Speaker 1: you know, well spargo has to suffer through, is suffering through. Um. 691 00:35:37,160 --> 00:35:39,520 Speaker 1: You know, it doesn't seem like it would escalate to 692 00:35:39,880 --> 00:35:42,279 Speaker 1: that level based on what we've seen so quick. But 693 00:35:42,280 --> 00:35:44,320 Speaker 1: again it's still very early and we don't have a 694 00:35:44,360 --> 00:35:48,360 Speaker 1: complete picture. What is Elliott Just generally the problem that 695 00:35:48,400 --> 00:35:51,440 Speaker 1: regulators have with these consumer businesses, what what are they 696 00:35:51,520 --> 00:35:56,600 Speaker 1: doing wrong with regards to consumer That's not sitting right 697 00:35:56,600 --> 00:36:00,920 Speaker 1: with Washington. Yeah, Well, you know what we saw with 698 00:36:01,160 --> 00:36:04,680 Speaker 1: Wells and City was that you know, um that you know, 699 00:36:04,840 --> 00:36:10,040 Speaker 1: consumers brought complaints to the bank. Um. You know those 700 00:36:10,040 --> 00:36:14,200 Speaker 1: complaints were not um, addressed properly. But there's just not 701 00:36:14,880 --> 00:36:18,960 Speaker 1: enough robust compliance to SERMOS monitoring systems to make sure 702 00:36:19,040 --> 00:36:23,360 Speaker 1: that that consumers are protected. And and you know we 703 00:36:23,400 --> 00:36:26,360 Speaker 1: saw that with the Worlds Fargo penalty and again with 704 00:36:26,600 --> 00:36:29,000 Speaker 1: the City Bank penalty a couple of years before that. 705 00:36:29,600 --> 00:36:31,920 Speaker 1: But do you know of any concerns that consumers have 706 00:36:32,040 --> 00:36:38,040 Speaker 1: brought with regards to Goldman, Sachs, Marcus, the Apple card um, 707 00:36:38,080 --> 00:36:43,799 Speaker 1: with that consumer part of the business. I haven't seen it, um, 708 00:36:43,840 --> 00:36:46,040 Speaker 1: you know, And like I said, you know that that's 709 00:36:46,080 --> 00:36:49,000 Speaker 1: the kind of stuff that that we may get more 710 00:36:49,080 --> 00:36:52,240 Speaker 1: reporting on and then we'll have a better sense. Um. 711 00:36:52,280 --> 00:36:55,319 Speaker 1: You know. One thing I haven't done, but that's been 712 00:36:55,360 --> 00:36:57,279 Speaker 1: me I'll do after this call is you know, the 713 00:36:57,320 --> 00:37:01,520 Speaker 1: CFTD does keep a uh a database of complaints, so 714 00:37:02,160 --> 00:37:04,880 Speaker 1: and you can usually see, um, you know, which companies 715 00:37:04,920 --> 00:37:08,200 Speaker 1: were named in them. So UM, you know, I may 716 00:37:08,239 --> 00:37:10,759 Speaker 1: take a look at that, um. But again this is 717 00:37:10,800 --> 00:37:14,840 Speaker 1: the Federal Reserve. Although you know, Bloomberg News did report 718 00:37:15,320 --> 00:37:17,719 Speaker 1: um I think a few months ago that that this yes, 719 00:37:17,800 --> 00:37:23,520 Speaker 1: tob is also looking at Goldman with respect to cedit cards. Um. 720 00:37:23,600 --> 00:37:25,560 Speaker 1: And but it was also reported in that article. You 721 00:37:25,560 --> 00:37:28,960 Speaker 1: know that Goldman is is cooperating with those that investigation, 722 00:37:29,040 --> 00:37:32,880 Speaker 1: and I assume they're cooperating extensively with the feed investigation 723 00:37:32,880 --> 00:37:37,000 Speaker 1: as well, so that will also help any potential fall that. Yeah, 724 00:37:37,080 --> 00:37:40,480 Speaker 1: I mean, I think that CFPB investigation that Goldman had 725 00:37:40,480 --> 00:37:43,080 Speaker 1: disclosed last summer is an interesting and important this idea 726 00:37:43,160 --> 00:37:45,240 Speaker 1: that and remember this is a separate set of issues 727 00:37:45,320 --> 00:37:48,719 Speaker 1: from the Federal Reserve. We said, that's audit, that is compliance, 728 00:37:48,920 --> 00:37:52,279 Speaker 1: but the CFPB it reports to remind listeners. That's the 729 00:37:52,280 --> 00:37:55,080 Speaker 1: Consumer Financial Protection Bureau that was set up in the 730 00:37:55,080 --> 00:37:57,160 Speaker 1: wake of the financial crisis. You mean, that's not an 731 00:37:57,239 --> 00:38:01,560 Speaker 1: ordinary acronym these days, I think to give everybody the acronyms, 732 00:38:01,719 --> 00:38:03,800 Speaker 1: will you call if you have a problem with a bank? 733 00:38:04,120 --> 00:38:08,080 Speaker 1: Your bank? And so that that organization really spearheaded by 734 00:38:08,120 --> 00:38:10,120 Speaker 1: Elizabeth Warren in the wake of the financial crisis. As 735 00:38:10,120 --> 00:38:14,480 Speaker 1: you say, um, they're investigating, according to Goldman's disclosure last summer, 736 00:38:15,160 --> 00:38:18,960 Speaker 1: how the bank resolves bills, refunds cardholders, advertises its cards. 737 00:38:19,280 --> 00:38:21,719 Speaker 1: I think another interesting thing that this happened years ago, 738 00:38:21,719 --> 00:38:23,719 Speaker 1: but I want to point it out still is that 739 00:38:23,760 --> 00:38:25,960 Speaker 1: there was a lot of questions and because it's not 740 00:38:26,000 --> 00:38:28,399 Speaker 1: the first time, of course, that the consumer business has 741 00:38:28,400 --> 00:38:30,960 Speaker 1: come under pressure. I don't know if you remember we 742 00:38:31,000 --> 00:38:33,000 Speaker 1: broke a couple of years ago about the question of 743 00:38:33,000 --> 00:38:37,279 Speaker 1: any potential discriminate oratory practices there with the technology. They 744 00:38:37,280 --> 00:38:40,239 Speaker 1: were cleared of that, um, but you know, this is 745 00:38:40,280 --> 00:38:42,479 Speaker 1: definitely a business that has come under pressure over time. 746 00:38:42,640 --> 00:38:47,480 Speaker 1: All right. Elliott Steinum are legal analyst Bloomberg Intelligence, UH 747 00:38:47,600 --> 00:38:50,799 Speaker 1: Legal Analysts, and Snelly Bassik are Chief Wall Street correspondent. 748 00:38:50,840 --> 00:38:52,759 Speaker 1: Thanks very much for joining us on this breaking news 749 00:38:52,800 --> 00:38:59,200 Speaker 1: the FED looking into goldman Sacks consumer business. Thanks for 750 00:38:59,200 --> 00:39:02,759 Speaker 1: listening to the Bloomer Markets podcast. You can subscribe and 751 00:39:02,800 --> 00:39:06,840 Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform 752 00:39:06,920 --> 00:39:10,200 Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt 753 00:39:10,280 --> 00:39:13,600 Speaker 1: Miller y three and on Fall Sweeney I'm on Twitter 754 00:39:13,640 --> 00:39:16,439 Speaker 1: at pt Sweeney. Before the podcast, you can always catch 755 00:39:16,560 --> 00:39:18,360 Speaker 1: us worldwide at Bloomberg Radio.