WEBVTT - June CPI, ETFs, Oil, And Crypto (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.480 at Bloomberg dot com slash podcast. We've been talking about 0:00:22.560 --> 0:00:27.400 four months. The Cow's e t F CEO w Z 0:00:27.800 --> 0:00:29.360 is the ticker, and a lot of people have been 0:00:29.360 --> 0:00:32.440 opting to get into this e t F concerned about inflation. 0:00:32.640 --> 0:00:34.760 We got a heck of an inflation print. Let's talk 0:00:34.800 --> 0:00:38.720 to Sean O'Hara. He um runs the Cow's e t 0:00:38.920 --> 0:00:42.040 F as president of Pacer E t F S. Sean, 0:00:42.560 --> 0:00:45.040 thanks so much for joining us. Give me first your 0:00:45.040 --> 0:00:48.599 reaction to this inflation print. Well, first off, thanks for 0:00:48.640 --> 0:00:51.640 having me, and thanks for telling everybody the cow story. 0:00:51.880 --> 0:00:54.680 I'm not shocked by the number. Um. I was speaking 0:00:54.720 --> 0:00:56.480 to some folks over the weekend and I had said 0:00:56.520 --> 0:00:59.040 I thought it would be a print over nine. You know, 0:00:59.080 --> 0:01:01.280 it's sort of a time issue, you know, towards the 0:01:01.360 --> 0:01:04.040 end of the month, you know, gasoline prices came down 0:01:04.080 --> 0:01:05.840 a little bit, and oil prices sort of fell a 0:01:05.880 --> 0:01:07.520 little bit earlier in the month. We're still were under 0:01:07.560 --> 0:01:10.559 some great, great deal of pressure. And I don't really 0:01:10.560 --> 0:01:12.600 feel that that that the inflation number is going to 0:01:12.720 --> 0:01:16.480 subside very much going forward, just because we haven't really 0:01:16.520 --> 0:01:20.000 addressed the supply side of the inflation equation. I know, 0:01:20.120 --> 0:01:23.440 the Fed, uh, you know, is really determined to just 0:01:23.520 --> 0:01:26.679 hammer down the economy to try to work on the 0:01:26.800 --> 0:01:28.840 demand side. But you know that in my view, that's 0:01:28.880 --> 0:01:31.920 just causing more pain to cure some pain. I'd rather 0:01:32.000 --> 0:01:34.319 see us be more focused on the supply side of this. 0:01:34.920 --> 0:01:36.840 I mean, I think that would take care of everything, 0:01:36.959 --> 0:01:39.120 and then we wouldn't necessarily be in this position where 0:01:39.160 --> 0:01:41.720 we have to continually worry about rates going up and 0:01:41.720 --> 0:01:45.240 and the FED being so committed to their path going forward. Well, 0:01:45.280 --> 0:01:49.360 and I've I've heard sean so many very smart people 0:01:49.600 --> 0:01:52.200 who made a lot of money in the past with 0:01:52.280 --> 0:01:56.800 growth companies, with startups, with tech. Who have you know, 0:01:56.880 --> 0:01:58.760 said to me in the last six months, you know what, 0:01:58.800 --> 0:02:00.480 I'm just looking to get into busines. This is that 0:02:00.560 --> 0:02:05.040 spin awful lot of cash. Um, Well, what's the connection there? Why? Why? Why? 0:02:05.080 --> 0:02:07.920 Are we seeing people make this switch? Now, it's a 0:02:08.000 --> 0:02:11.880 pretty simple equation. When you buy growth, you're buying future earnings, 0:02:11.919 --> 0:02:14.320 and when you buy companies that produce current cash, so 0:02:14.480 --> 0:02:18.079 you're getting a current return. So those future earnings must 0:02:18.120 --> 0:02:21.240 be discounted by inputs, and those inputs are inflation and 0:02:21.280 --> 0:02:23.519 interest rates, and so if I was going to buy 0:02:23.520 --> 0:02:26.800 a dollar's worth the future earnings UM, i'd have to 0:02:26.880 --> 0:02:29.200 discount that back and so that sort of trickles down 0:02:29.200 --> 0:02:31.840 into PE ratios. When you buy companies to give you 0:02:31.919 --> 0:02:35.680 a high current return on cash or on your investments, 0:02:35.919 --> 0:02:39.959 you're less bothered by the higher interest rates and higher 0:02:39.960 --> 0:02:43.480 inflation numbers. And so in an environment like this, what's 0:02:43.520 --> 0:02:46.160 going on really is that there's a shift in sentiment 0:02:46.600 --> 0:02:48.959 away from growth and towards companies that are giving you 0:02:49.000 --> 0:02:51.760 a much higher return. And that's because when we have 0:02:51.960 --> 0:02:54.799 rising interest rates and rising inflation and then god forbid, 0:02:54.840 --> 0:02:58.000 the threat of slowing earnings, PE multiples on the overall 0:02:58.040 --> 0:03:00.480 market have to contract, and that to where all of 0:03:00.520 --> 0:03:03.880 the big growth returns where in companies that had high pvs. 0:03:03.880 --> 0:03:05.800 And we're starting to see the pain of staying in 0:03:05.800 --> 0:03:08.960 that trade as opposed to repositioning your portfolio to get 0:03:08.960 --> 0:03:12.040 a high current return on your money that's less damaged 0:03:12.080 --> 0:03:15.120 by those higher input costs. So Sean, I understand that 0:03:15.160 --> 0:03:16.919 in principle, with the discount rate and all of that, 0:03:17.040 --> 0:03:19.680 that's why you see tech sensitive to so much of 0:03:19.680 --> 0:03:23.040 the yields picture. But I'm curious if that perhaps definition 0:03:23.120 --> 0:03:26.320 or that categories should change in that Tech perhaps isn't 0:03:26.360 --> 0:03:28.359 the growth play anymore, it's non defensive play anymore, and 0:03:28.440 --> 0:03:32.000 perhaps it's actually a value play, just given how much 0:03:32.040 --> 0:03:34.200 fundamentally it's become a part of our lives, but also 0:03:34.440 --> 0:03:37.200 how much fundamentally it's become a part of say even 0:03:37.240 --> 0:03:40.840 the SMP five. I'm curious, is there an argument to 0:03:40.960 --> 0:03:44.120 where say, a name like Apple is the new Coca Cola. 0:03:45.600 --> 0:03:47.880 There's definitely it's a great point. You know, if we 0:03:47.920 --> 0:03:49.960 look at the history on the cow zt F, We've 0:03:50.000 --> 0:03:52.120 owned Apple at different periods from points in time, but 0:03:52.200 --> 0:03:54.240 that's only when the price of the stock came down 0:03:54.760 --> 0:03:57.120 enough to warrant it having a high enough free cash 0:03:57.120 --> 0:03:59.920 flow yield. We own Meta in cows you know, that's 0:04:00.000 --> 0:04:02.080 a tech play. We've always had a little bit of 0:04:02.080 --> 0:04:05.400 a tech exposure, mostly on the chip side, like with 0:04:05.440 --> 0:04:08.880 a name like an Intel or even on IBM. I 0:04:08.920 --> 0:04:11.360 would be very very happy to see that happen. And 0:04:11.400 --> 0:04:13.760 that's sort of in the pattern if we look sort 0:04:13.760 --> 0:04:16.400 of historically at you know, the methodology that we've built 0:04:16.800 --> 0:04:19.200 is when you see these big reversals and you see 0:04:19.200 --> 0:04:22.320 peeps come down, high high quality names that would were 0:04:22.440 --> 0:04:25.560 growth names have a tendency from time to time to 0:04:25.600 --> 0:04:28.080 fall into our screen, and and so we would be 0:04:28.200 --> 0:04:30.840 very excited to see what you said happened. The thing 0:04:30.880 --> 0:04:34.160 you have to worry about is that how long that 0:04:34.160 --> 0:04:36.400 that transition is. You know, if you look at a 0:04:36.480 --> 0:04:39.920 Microsoft in the nineties that went nowhere for almost a decade, 0:04:40.360 --> 0:04:42.440 even though it was a profitable company, and that was 0:04:42.480 --> 0:04:44.520 because it was going from a regime or had a 0:04:44.600 --> 0:04:46.719 high p and their growth slowed enough to where they 0:04:46.720 --> 0:04:49.000 had to adjust to it. So I would expect to 0:04:49.000 --> 0:04:51.280 see some of that happening in the text basin. And 0:04:51.440 --> 0:04:54.240 by rebalancing the COWS portfolio on a quarterly basis and 0:04:54.320 --> 0:04:56.279 can attation to the free cash flow and free cash 0:04:56.320 --> 0:04:59.120 flow yield, we might actually avail ourselves as some of 0:04:59.120 --> 0:05:02.719 those opportunities. I see, you have a lot of healthcare holding. 0:05:02.680 --> 0:05:04.640 He's just got thirty seconds left, but I'm looking at 0:05:05.000 --> 0:05:10.200 Moderna here, Bristol Meyers Squib guilelead visor. Um, these healthcare 0:05:10.200 --> 0:05:14.520 businesses are just kind of recession proof. Is that the idea? Well, 0:05:14.520 --> 0:05:16.800 it's it's following the free cash flow. But you're you're 0:05:16.839 --> 0:05:20.719 actually correct on that. Healthcare as a sector has grown 0:05:20.760 --> 0:05:23.440 its earnings almost as fast as tech has, but their 0:05:23.440 --> 0:05:25.680 stock prices haven't gone up as much as their earnings. 0:05:25.680 --> 0:05:28.160 For as tech stock prices went up like two or 0:05:28.160 --> 0:05:30.040 two and a half times they're earning. So as a 0:05:30.600 --> 0:05:32.760 as a safety play, if you will, as a way 0:05:32.760 --> 0:05:36.279 to be less susceptible to pe contraction, healthcare looks like 0:05:36.480 --> 0:05:38.880 a great place to be because those stocks never got 0:05:38.960 --> 0:05:42.960 too expensive relative to their earnings and their free cash flow. Sean, 0:05:42.960 --> 0:05:44.920 thanks so much for joining us. Great talking to you 0:05:45.000 --> 0:05:48.400 and uh UM great to get the voice behind the 0:05:48.440 --> 0:05:50.159 e t F that we've been talking about here for 0:05:50.240 --> 0:05:52.600 so long. The cows e t F c o w 0:05:52.880 --> 0:05:55.000 Z one e t F of the Year from with 0:05:55.080 --> 0:05:58.720 Intelligence Mutual Fund and e F Awards last month, and 0:05:59.200 --> 0:06:00.640 it's one that we high it on our E t 0:06:00.880 --> 0:06:02.680 F show as well. So Sean we gotta get you 0:06:02.680 --> 0:06:04.840 on the E T F I Q show. Um that 0:06:04.880 --> 0:06:12.920 we run Monday's at one pm. Dream Team here while 0:06:12.960 --> 0:06:17.680 Paul Sweeney is out surfing and bonfires on the beach, 0:06:17.839 --> 0:06:20.839 He's at a lu ow and he's listening to the 0:06:20.920 --> 0:06:24.400 slide guitar. Man. I wish I was in why you 0:06:24.480 --> 0:06:28.000 right now? We should take a little Bloomberg Markets field trip. 0:06:28.279 --> 0:06:30.800 In the meantime, though, to do that field trip, we 0:06:30.839 --> 0:06:34.000 would have to get on a plane board it. Try 0:06:34.040 --> 0:06:36.800 to get to buy a ticket. Yeah, we have to. 0:06:37.480 --> 0:06:40.440 The flight would have to not be canceled, pack snacks 0:06:40.440 --> 0:06:42.200 because we don't want to pay. It would be expensive. 0:06:42.680 --> 0:06:47.320 You know, I can't fly economy. I'm six three and 0:06:47.400 --> 0:06:50.000 forty years old. So oh really see, I was gonna say, 0:06:50.000 --> 0:06:52.599 I can very easily fit into like, um, what's the 0:06:52.600 --> 0:06:56.240 cargo cabin below? I could do that if they would 0:06:56.279 --> 0:06:59.760 just decrease the air fare. Um. Maybe Peter McNally, our 0:06:59.800 --> 0:07:02.320 next guests, can help us with that prospect, especially on 0:07:02.279 --> 0:07:04.640 a data like today where we did get those Delta earnings. 0:07:04.760 --> 0:07:08.440 Peter McNally, the global lead of Industrials, Materials and Energy 0:07:08.800 --> 0:07:11.800 at Third Bridge, joins us and I should say my 0:07:11.960 --> 0:07:15.840 former employers. I'm extra excited about this guest. Peter, thank 0:07:15.880 --> 0:07:18.520 you as always for joining us. Well, Matt and I 0:07:18.560 --> 0:07:20.240 just put out a few suggestions. How are we going 0:07:20.280 --> 0:07:23.120 to afford airfare? And is that really an issue right now? 0:07:23.160 --> 0:07:26.160 Given everyone wants to travel, It's not like there's any 0:07:26.160 --> 0:07:31.760 shortage of demand. So what is wrong with these airline earnings? Well, Creedy, 0:07:32.400 --> 0:07:34.320 I think we'll be pretty sure that those costs are 0:07:34.360 --> 0:07:37.280 not coming down, you know, I mean there are three 0:07:37.320 --> 0:07:40.360 issues in there, all into related, right. It's capacity, it's 0:07:40.400 --> 0:07:44.440 the cruise, and it's the costs. And airlines would a 0:07:45.000 --> 0:07:47.280 more capacity if they could. They just can't get enough 0:07:47.320 --> 0:07:51.000 people to staff these plants. Now they've been aggressively hiring, 0:07:51.120 --> 0:07:55.160 but to pay people a lot more money to work 0:07:55.200 --> 0:07:57.240 on these plants. And you know, it's like it's like 0:07:57.280 --> 0:08:01.480 other industries, but even more so from what our experts 0:08:01.520 --> 0:08:04.960 have been seeing than uh than in other places. But 0:08:05.520 --> 0:08:07.240 you know, people who work in these airlines are making 0:08:07.280 --> 0:08:09.400 more money today than they were a year ago and 0:08:09.600 --> 0:08:13.200 what they were pre pandemic, and people costs for the 0:08:13.440 --> 0:08:16.880 single highest cost for you know, for any airline you know, anywhere. 0:08:17.000 --> 0:08:21.200 So while there is that demand Um, it's it hasn't 0:08:21.200 --> 0:08:23.560 been able to be met because we can't get enough 0:08:23.560 --> 0:08:26.600 planes with people, so they can't get enough planes out 0:08:26.600 --> 0:08:30.440 there to meet demand. But they also can't raise prices 0:08:30.600 --> 0:08:34.680 enough to um keep margins where they want them. Is 0:08:34.679 --> 0:08:40.360 that the case? Yes, yes, I mean, look, it's fundamentally 0:08:40.360 --> 0:08:44.440 a less profitable business than it was pre pandemic, but 0:08:44.800 --> 0:08:48.600 they're they're still making money. Um, we just probably would 0:08:48.600 --> 0:08:51.720 have expected a bit more, you know at this point. 0:08:51.760 --> 0:08:53.959 Some of that does have to do, you know, with 0:08:54.320 --> 0:08:56.560 the oil price, and some of it does have to 0:08:56.600 --> 0:08:59.240 do with the lag. Right, they're any people, you know, 0:08:59.320 --> 0:09:02.320 but the people have to be trained, so they're not 0:09:02.480 --> 0:09:07.560 necessarily generating revenue for these companies just yet. UM that 0:09:07.679 --> 0:09:10.640 will turn you know, in the future. And Delta's talking 0:09:11.440 --> 0:09:13.679 you know that in about a year's time they should 0:09:13.720 --> 0:09:17.600 be back to twenty nineteen levels of capacity. Now, that's 0:09:17.640 --> 0:09:21.080 not going to help anyone in in this summer's travel season, 0:09:21.160 --> 0:09:24.400 and you've seen all the delays and the cancelations of 0:09:24.480 --> 0:09:28.199 the results of of these shortages. But you know that's 0:09:28.240 --> 0:09:31.440 where we stand today. I mean, had they been able 0:09:31.480 --> 0:09:36.880 to really do something on prices because um, I recall 0:09:37.000 --> 0:09:40.200 flying out to see the Dead at Giant Stadium in 0:09:42.240 --> 0:09:44.040 from here, and then I went out to see the 0:09:44.120 --> 0:09:48.400 Dead at Giants Stadium in two thousand and fifteen from here, 0:09:48.520 --> 0:09:51.880 and my airfare was basically the same. You know, even 0:09:51.920 --> 0:09:54.600 though it was twenty years later. Have they been able 0:09:54.640 --> 0:09:58.720 to really move the needle on prices? Well, you know 0:09:58.880 --> 0:10:01.600 some of that twenty fifteen was one of the you know, 0:10:01.679 --> 0:10:04.320 the low years for fuel prices. You know that did 0:10:04.440 --> 0:10:08.439 that did have you know, have a factor um and 0:10:08.679 --> 0:10:11.480 you know, as you guys have you know discusses like 0:10:11.520 --> 0:10:14.480 you know, oil prices are are high, and they're probably 0:10:14.480 --> 0:10:17.840 going to be staying high, at least relative to history, 0:10:17.880 --> 0:10:21.120 according you know, according to our experts. But there's also 0:10:21.520 --> 0:10:24.920 a lot more competition, um, you know, particularly on the 0:10:25.040 --> 0:10:29.320 leisure side of the industry today. I look at this 0:10:29.440 --> 0:10:33.480 fight over spirit you know airlines. This is the ultimate 0:10:33.559 --> 0:10:36.800 low cost airline, you know that you have for a 0:10:36.880 --> 0:10:39.840 company like Delta where the upside is still yet to 0:10:39.880 --> 0:10:43.319 come as in the business and international side, and that's 0:10:43.360 --> 0:10:47.600 that's the big driver for them, for United for Americans, UM, 0:10:47.679 --> 0:10:49.760 So their market is going to be a little bit different, 0:10:49.760 --> 0:10:52.920 and those profits have been slower to come than what 0:10:53.000 --> 0:10:55.480 we've seen on the leisure side. But Peter, there's also 0:10:55.600 --> 0:10:57.920 a bunch of labor issues that play here. I think 0:10:58.000 --> 0:11:02.600 American airlines had increased their pilot salaries. I think Going 0:11:03.679 --> 0:11:08.679 United did the same. I think about four increase. Delta, 0:11:08.800 --> 0:11:11.480 Alaska Southwest correct me if I'm wrong, But they're still 0:11:11.520 --> 0:11:16.480 in negotiations. And that doesn't even take into account flight attendant, crew, 0:11:17.280 --> 0:11:20.120 baggage handlers. We know as an issue abroad in London, 0:11:20.160 --> 0:11:23.760 for example, even Heathrow now capping their passenger account to 0:11:23.800 --> 0:11:27.679 a hundred thousand labor is a major problem. Is this 0:11:27.800 --> 0:11:32.320 a problem that is solvable in the next two years? Well, 0:11:32.640 --> 0:11:34.920 you know, for a company like Delta, who you know 0:11:35.120 --> 0:11:38.560 is in negotiations with their their pilots now, it is, 0:11:39.160 --> 0:11:41.640 you know, our experts believe is a bit more managable. 0:11:41.720 --> 0:11:45.079 They've got a great balance sheet, it's well capitalized, plenty 0:11:45.120 --> 0:11:50.600 of plenty of liquidity, and they are profitable. The carriers 0:11:50.600 --> 0:11:52.920 that are going to struggle a bit, you know, in 0:11:52.960 --> 0:11:56.320 our view, or these regional carriers where they have seen 0:11:56.360 --> 0:12:00.199 their pilots poached by these major carriers and pilot it's 0:12:00.240 --> 0:12:03.040 like to fly new planes, you know, and and to 0:12:03.160 --> 0:12:07.160 the roots they want and that's usually not something that 0:12:07.240 --> 0:12:12.560 regional airlines are able to offer. So look, there is 0:12:13.160 --> 0:12:16.400 serious wage inflation in this, you know, in this industry, 0:12:16.440 --> 0:12:19.959 and it is leading to higher fairs. But you know, 0:12:20.000 --> 0:12:22.640 as we saw from the inflation data today, it doesn't 0:12:22.640 --> 0:12:26.640 seem like it's gonna be easy anytime soon. All right, Peter, 0:12:26.800 --> 0:12:29.840 thanks so much for joining us. Peter McNally, Uh there 0:12:30.040 --> 0:12:35.120 he is the lead analysts for Industrials over at Third 0:12:35.120 --> 0:12:38.440 Bridge talking to us about the airline story. Oh actually, wait, Peter, 0:12:38.520 --> 0:12:41.079 before you go, I gotta ask about Heathrow and rationing 0:12:41.160 --> 0:12:43.000 and is that the kind of thing that's going to 0:12:43.080 --> 0:12:48.240 happen at more airports. Well, I think we've seen you know, 0:12:48.520 --> 0:12:50.880 we've seen it from the airlines. He's even starting right, 0:12:50.920 --> 0:12:53.960 I mean, Delton got in front of this before July 0:12:54.080 --> 0:12:58.160 fourth weekend and trying to discourage people from taking the 0:12:58.200 --> 0:13:02.320 flights that they had booked. Um. Yes, they're going to 0:13:02.360 --> 0:13:07.439 be some airports that are just going to struggle, um 0:13:07.600 --> 0:13:09.720 with getting the right step and handling you know, all 0:13:09.760 --> 0:13:11.319 this demand. We've got a few more weeks left to 0:13:11.360 --> 0:13:13.880 go in the summer. Things should ease up in the 0:13:13.960 --> 0:13:17.920 fall on that front. Um. But it's tough all over 0:13:18.160 --> 0:13:20.800 on this industry, all right. I'm glad I got that 0:13:20.840 --> 0:13:23.280 in because I was shocked at that story yesterday. And 0:13:23.320 --> 0:13:25.760 the concern is that that spreads and we get rationing 0:13:25.800 --> 0:13:30.760 everywhere because of a shortage of not just flights, but uh, 0:13:30.800 --> 0:13:34.480 you know gas in Europe, electricity in Texas. I mean, 0:13:34.480 --> 0:13:36.680 it's all over the place. In any case, Peter, thanks 0:13:36.720 --> 0:13:40.040 so much for joining us. Peter McNally, they're global lead 0:13:40.520 --> 0:13:45.120 for industrial materials and energy. Over at the third bridge, 0:13:46.640 --> 0:13:50.440 we have an interesting move going on in markets, not 0:13:50.760 --> 0:13:53.520 anything like what we saw on June two, when inflation 0:13:53.559 --> 0:13:55.360 came out at eight point six percent. That was three 0:13:55.400 --> 0:13:59.360 tents of percent higher than the analysts estimate UM in 0:13:59.400 --> 0:14:03.079 a survey ducted by Bloomberg. At that time, the NASDAC, 0:14:03.200 --> 0:14:06.240 the big text docs dropped three and a half percent 0:14:06.440 --> 0:14:09.560 right away. Today we had a print at nine point 0:14:09.600 --> 0:14:12.640 one percent, also three tenths of a percent higher than 0:14:12.679 --> 0:14:15.840 the analysts estimate UM in a survey by Bloomberg. And 0:14:15.920 --> 0:14:19.760 yet the NASDAK is gaining. What's the difference. Matt Winkler 0:14:19.800 --> 0:14:21.760 is here, Bloomberg editor in chief Amertius to talk to 0:14:21.840 --> 0:14:25.480 us about why the market isn't tanking the way we 0:14:25.520 --> 0:14:29.160 saw it due last month, Matt, Matt Um, As you 0:14:29.240 --> 0:14:33.920 just said, just about everybody UH knows inflation as measured 0:14:33.920 --> 0:14:37.240 by the CPI is hovering at this forty year high 0:14:37.360 --> 0:14:40.880 and seemingly out of control. But when you look at 0:14:41.760 --> 0:14:49.840 combined in less conspicuous metrics on inflation, you see that consumers, economists, 0:14:49.880 --> 0:14:53.720 and investors all are in sync and they're anticipating a 0:14:53.760 --> 0:14:58.160 gradual return to stability and moderation. And that seems quite 0:14:58.160 --> 0:15:01.520 surprising obviously right now. But when you look at the 0:15:01.560 --> 0:15:05.200 data closely, you see that, for example, in the bond market, 0:15:05.640 --> 0:15:09.440 what we call to break even rates, UH, they actually 0:15:09.480 --> 0:15:16.240 plummeted on June and have stayed stayed at that level since. 0:15:16.440 --> 0:15:20.600 And then when you look at consumer behavior, consumers, even 0:15:20.640 --> 0:15:24.520 as pistomistic as they are, they're not UM struggling to 0:15:24.600 --> 0:15:27.880 make ends meet. Actually UH. If you look at personal income, 0:15:28.240 --> 0:15:33.080 for example, UM, it's higher than at any point prior 0:15:33.440 --> 0:15:38.120 to UH. And then when you go to economists and 0:15:38.160 --> 0:15:41.800 ask them what what are you seeing? They're all forecasting. 0:15:42.040 --> 0:15:45.280 And we you know, talk to dozens of economists and 0:15:45.320 --> 0:15:49.560 get their forecast quarterly. They're all seeing a moderation inflation too. 0:15:49.640 --> 0:15:52.440 So you put that all together, add to the fact 0:15:52.520 --> 0:15:56.000 that lumber is way down this year from its highs 0:15:56.640 --> 0:16:02.240 of twenty one. Same thing with copper. You mentioned or 0:16:02.280 --> 0:16:07.000 somebody mentioned oil and gasoline, and gasoline is actually down, 0:16:07.840 --> 0:16:10.840 uh to the level of April. So even the aggs, 0:16:10.880 --> 0:16:12.280 I mean, if you look at the chart, the eggs 0:16:12.320 --> 0:16:14.520 are down, the metals are down, the oils are down 0:16:14.600 --> 0:16:17.040 from their highs, and so that's why, I mean, this 0:16:17.080 --> 0:16:19.680 is obviously a backwards looking number to some extent. But 0:16:19.800 --> 0:16:22.040 I loved the point you made in your piece with Roger, 0:16:22.040 --> 0:16:25.520 which Robert Burgos made um in a piece this month 0:16:26.160 --> 0:16:29.120 that consumers spend three and a half percent of their 0:16:29.160 --> 0:16:33.520 disposable income I guess on gasoline, and that compares to 0:16:33.560 --> 0:16:36.840 a three point six percent average, which which drives with 0:16:37.160 --> 0:16:42.240 the higher personal income for it. And I was gonna say, Unfortunately, 0:16:42.800 --> 0:16:47.200 what happens too often when our profession is reporting on 0:16:47.280 --> 0:16:50.960 the economy is the context is missing. And I would 0:16:51.000 --> 0:16:54.640 say in the inflation narrative, a lot of it is 0:16:54.680 --> 0:16:57.200 driven by politics, of course, and that gets picked up 0:16:57.240 --> 0:17:00.720 right away because everybody's writing about politics, but the context 0:17:01.360 --> 0:17:03.840 of the economy and inflation is often missing, and that 0:17:04.240 --> 0:17:07.879 is definitely the case, UH with today's numbers. That you 0:17:07.880 --> 0:17:12.240 can look at the CPI as we are UH and 0:17:12.320 --> 0:17:14.240 draw a conclusion. But if you look at every other 0:17:14.320 --> 0:17:16.520 number that's related to the cp I and you look 0:17:16.560 --> 0:17:19.720 at what the FED looks at itself, the personal consumption 0:17:19.760 --> 0:17:24.800 Expenditure Index, that's three to four percentage points below the 0:17:24.880 --> 0:17:27.760 current CPI depending on when you look at it. Well, 0:17:27.760 --> 0:17:30.080 I think the key point that you made just moments 0:17:30.080 --> 0:17:32.320 ago was that people are still spending. I just got 0:17:32.320 --> 0:17:34.560 a text message from a friend in London. We're figuring 0:17:34.560 --> 0:17:36.720 out vacation dates and she said, I just looked at 0:17:36.760 --> 0:17:38.560 prices coming out of New York. Is it's going to 0:17:38.600 --> 0:17:41.040 be too expensive for you? And what I'm saying, I mean, yes, 0:17:41.119 --> 0:17:43.560 but I still want to take this trip. It's something 0:17:43.560 --> 0:17:45.640 that Greg McNally over at Third Bridge was talking about 0:17:45.640 --> 0:17:47.760 as well. It feels like you pull the trigger now 0:17:47.840 --> 0:17:49.399 right because you're afraid that prices are going to go 0:17:49.480 --> 0:17:53.960 higher later. I'm buying tickets for October for December, because 0:17:54.400 --> 0:17:58.159 isn't that something that happening. No, No, what you just 0:17:58.200 --> 0:18:02.040 described is that's to run right, that's the that's the 0:18:02.160 --> 0:18:10.280 runaway inflation scenario. And in fact, that uh stampede is 0:18:10.440 --> 0:18:14.879 that people think of to get something today because the 0:18:14.920 --> 0:18:17.080 price of it will be much higher tomorrow. It's just 0:18:17.160 --> 0:18:19.400 not showing up in the data. Is there any evidence 0:18:19.440 --> 0:18:22.359 that we're actually seeing demand destruction? We're talking about rationing, 0:18:22.400 --> 0:18:24.639 but I feel like it's skipping the step of demand destruction. 0:18:25.400 --> 0:18:28.720 We see some rationing. For example, the bitcoin miners have 0:18:28.800 --> 0:18:30.919 shut down their machines in Texas, but that's because the 0:18:30.920 --> 0:18:34.439 grid is weak, or heathrow um has ration the flights 0:18:34.480 --> 0:18:36.080 that they're gonna sell, but that's because they don't have 0:18:36.080 --> 0:18:38.560 the labor that they need. Well, there's a whole set 0:18:38.600 --> 0:18:44.640 of a store of goods and services um, but goods 0:18:44.680 --> 0:18:49.119 in particular like washing machines where the prices actually are 0:18:49.160 --> 0:18:52.719 not going inexorably higher UM. And you would expect that 0:18:52.760 --> 0:18:55.320 if we were having running, running away inflation, you would 0:18:55.320 --> 0:18:57.080 expect people to say, oh my god, I have to 0:18:57.119 --> 0:18:59.760 buy this now because the price a month from now 0:18:59.840 --> 0:19:01.600 is gonna be so much higher. And that's not really 0:19:01.640 --> 0:19:04.439 happening yet. It kind of about thirty seconds here kind 0:19:04.440 --> 0:19:07.240 of sounds like you're saying we're not in a vulcaresque moment? 0:19:07.480 --> 0:19:13.080 Would you agree? The seventies was extremely painful and that was, 0:19:13.240 --> 0:19:15.840 you know, a decade it's worth of, if you like, 0:19:16.920 --> 0:19:23.200 not inflation going straight up, but trending higher, ever higher. 0:19:23.240 --> 0:19:25.960 And we're talking only about a couple of years now, 0:19:26.160 --> 0:19:31.320 and so it's very Uh, if you will early in 0:19:31.320 --> 0:19:36.760 this cycle to say where where Paul Wolker was in well, 0:19:36.840 --> 0:19:41.320 I mean, if the Fed raises rates now points, it'll 0:19:41.400 --> 0:19:43.840 keep its credibility and the next inflation print we see 0:19:43.880 --> 0:19:48.800 should be much lower than nine. That would be welcome. 0:19:49.080 --> 0:19:52.600 All right. Matt Winkler, Bloomberg Editor in Chief emeritus, talking 0:19:52.640 --> 0:19:54.960 to us about inflation. You can check out his column 0:19:55.160 --> 0:19:58.640 on the Bloomberg terminal type n I Winkler Um. If 0:19:58.640 --> 0:20:00.760 you want to see it on the website, you'll see 0:20:00.760 --> 0:20:02.680 it there as well. Bloomberg dot com is the best 0:20:02.680 --> 0:20:12.479 way to access that. Now. Speaking of growing thriving business 0:20:12.520 --> 0:20:15.880 as we have involng here in Bloomberg, Interactive Broker Studios, 0:20:15.960 --> 0:20:19.200 chairman and CEO of Garrison Fathom and Uh, it's great 0:20:19.240 --> 0:20:22.639 talking to you. Um. We have you have a number 0:20:22.640 --> 0:20:27.080 of businesses that you incubate and grow and UM focused 0:20:27.080 --> 0:20:30.200 on in different areas. We want to talk about the crypto, 0:20:30.280 --> 0:20:33.640 the blockchain side of things. UM. Right now, what's your 0:20:33.680 --> 0:20:37.200 main focus when it comes to uh, you know, fintech 0:20:37.359 --> 0:20:40.000 or crypto? Right? Are man focus right now is really 0:20:40.080 --> 0:20:43.920 educating world leaders. We're establishing a global association to really 0:20:44.440 --> 0:20:47.680 educate lawmakers. And should we draw a fine line? I 0:20:47.760 --> 0:20:51.920 think the issue right now is that cryptocurrency, in my opinion, 0:20:52.359 --> 0:20:54.520 is practically a Ponzi scheme. Right, It's it's it's the 0:20:54.560 --> 0:20:57.840 greater good so and so, but it relies on on 0:20:57.840 --> 0:21:00.800 on the on the other persons and no offense. That's 0:21:00.800 --> 0:21:02.879 the next idiot to to pole on top of that, Right, 0:21:03.000 --> 0:21:06.480 no offense, You're an idiot. No offense, I said, no offense, 0:21:06.760 --> 0:21:09.280 right to pole on top of that, because there's no 0:21:09.359 --> 0:21:13.439 actual value being delivered on cryptocurrency. The real value is 0:21:13.440 --> 0:21:16.600 really blockchain and Web three, the actual technology and applications. 0:21:16.720 --> 0:21:20.160 Now explain Web three because not everyone knows exactly what 0:21:20.200 --> 0:21:24.000 Web three is. We hear the the phrase all the time. Yeah, 0:21:24.040 --> 0:21:25.800 I mean the Web three is pretty much the decentral 0:21:25.840 --> 0:21:29.000 light decentralization of the Internet, right, is the ability to 0:21:29.080 --> 0:21:31.960 be able to have your own control of the Internet 0:21:31.960 --> 0:21:34.520 and your own privacies, right, um, and your own chain. 0:21:34.640 --> 0:21:36.600 So that's really the important side. The web three and 0:21:36.640 --> 0:21:39.879 that's to us really brings value as well as blockchain 0:21:39.920 --> 0:21:41.760 because and and n f t s as well. The 0:21:41.800 --> 0:21:44.400 code for n f t s can be used for contracts. 0:21:44.440 --> 0:21:47.119 Blockchains can be used to make trading more efficient. But 0:21:47.480 --> 0:21:49.840 the cryptocurrency, I have to keep coming back to it. 0:21:50.160 --> 0:21:52.680 It has no value. It's a Ponzi scheme. We actually 0:21:52.720 --> 0:21:55.720 look into it and it actually delivers um to me, 0:21:55.920 --> 0:21:59.720 a very scary moment in history because consumers are getting 0:21:59.720 --> 0:22:02.879 off did negatively and we can't let this happen. A 0:22:02.880 --> 0:22:06.119 really good example is defy, right, Defy is the biggest 0:22:06.119 --> 0:22:08.919 and the latest thing. You look at defy. Our world 0:22:09.000 --> 0:22:12.280