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Speaker 1: This is Bloomberg Business. Wait inside from the reporters and

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Speaker 1: editors who bring you America's most trusted business magazine, plus

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Speaker 1: global business finance and tech news. The Bloomberg Business Week

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Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

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Speaker 2: We're justking a great little conversation with Jenny Sorain here

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Speaker 2: in our studio ahead of her story because it is

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Speaker 2: among the most right on the Bloomberg. It's also the

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Speaker 2: Bloomberg Big Take. It's about the hot money that is

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Speaker 2: scorching regional bank profits after they were losing lots of deposits.

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Speaker 2: So let's get into it. The who, what, where and

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Speaker 2: why with us is Bloomberg News Finance reporter Jenny Sorain

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Speaker 2: in our Bloomberg Interactive Brokers studio. So great story, Thank you,

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Speaker 2: amazing story. So tell us what's going on and what

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Speaker 2: is hot money?

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Speaker 3: So hot money is the word that regulators like to

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Speaker 3: call broker deposits. And these are basically deposits that banks

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Speaker 3: get whenever they use a third party to go out

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Speaker 3: and a deposits for them. The reason that regulators don't

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Speaker 3: like them is, you know, these brokers are typically connecting

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Speaker 3: these banks with wealthy individuals, big corporations that are just

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Speaker 3: looking for a better rate on their cash, and so

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Speaker 3: that means as soon as a better rate comes along,

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Speaker 3: this money is quick to depart. So regulators really do

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Speaker 3: view it as kind of a more risky way to

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Speaker 3: fund yourself. And on top of that, it's a lot

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Speaker 3: more expensive than the kind of core deposits banks you

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Speaker 3: know have relied on for so long.

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Speaker 4: Why do I mean, I've been thinking about this since

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Speaker 4: last night, so I read your story and it's been

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Speaker 4: on top of my mind. For one thing, because I'm

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Speaker 4: already angry about the FHLB story, right, But then I

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Speaker 4: was thinking about broker deposits and how exactly do they work.

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Speaker 4: On the one hand, it seems they could be very

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Speaker 4: simple and benign, right like my bank offers certificates of

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Speaker 4: deposit where I get very high interest rates if I

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Speaker 4: promise to keep the money locked up there for a

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Speaker 4: long time.

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Speaker 5: But that's different from a broker deposit, isn't it.

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Speaker 3: So in some cases, a broker deposit can be a

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Speaker 3: certificate of deposit. It all depends on if there's like

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Speaker 3: a third party kind of sitting in between you and

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Speaker 3: the bank and so there's these networks that will connect,

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Speaker 3: like I said, like wealthy individuals or big corporations to

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Speaker 3: all these regional banks that are in need of more liquidity.

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Speaker 3: And so that's that's really I think the kind that

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Speaker 3: that regulators don't like because there's not that like direct

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Speaker 3: relationship that a consumer would have with the bank, and

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Speaker 3: so they don't feel anything about moving their money. And

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Speaker 3: you're right that it is really good for consumers. I mean,

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Speaker 3: this is a way for folks to get the rate

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Speaker 3: that they should be getting probably on their cash. But

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Speaker 3: for the banks, it's it's really expensive. It's really you know,

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Speaker 3: pinging their profits, putting pressure on them. And so it's

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Speaker 3: sort of a yeah, a tale of two cities, as

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Speaker 3: it were.

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Speaker 2: How much more expensive is it?

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Speaker 3: I mean, over the last year, interest expenses have risen

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Speaker 3: twelvefold and.

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Speaker 4: As a result, and that's putting it lightly by the way,

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Speaker 4: because a lot of banks that like me and Carroll

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Speaker 4: probably use banks that we're paying less well less than

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Speaker 4: one percent inflation, right, it's right interest, and these broker

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Speaker 4: deposits are probably paying five percent plus the banks need

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Speaker 4: to give the broker a cut.

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Speaker 3: Yeah, yeah, so these yeah, exactly, So this is you know,

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Speaker 3: around five percent is kind of the going rate these days.

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Speaker 3: And yeah, I mean a year ago, most banks weren't

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Speaker 3: paying anything like, well well below one percent on core deposits.

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Speaker 3: So these are much more expensive. Interest expenses are going up.

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Speaker 3: You've already heard from a number of regional bank executives

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Speaker 3: warning that, you know, the profits that we thought we

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Speaker 3: were going to have this year, that's not looking likely anymore.

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Speaker 2: Can I ask you something, our is private credit loaning money?

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Speaker 2: Do we know if private lenders are actually loaning money?

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Speaker 3: I think so for the most part, this is really

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Speaker 3: you know, the cash that a company has on its

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Speaker 3: balance sheet. They and for the past year have probably

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Speaker 3: been hearing, you know, us talking about interest rates going

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Speaker 3: up a lot, and they were earning less than one

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Speaker 3: percent on that cash. And so now they've kind of

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Speaker 3: woken up. They've realized, hey, I'm getting charged more for

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Speaker 3: my loans. I need to be making more of my deposits.

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Speaker 3: And so you're just seeing a lot of these customers

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Speaker 3: finally kind of wake up and say I need to

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Speaker 3: make more. On top of that, we had three regional

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Speaker 3: banks fail, you know, at the start of the year,

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Speaker 3: and so anybody who was sitting on large piles of

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Speaker 3: uninsured cash. We're also like, I need to find a

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Speaker 3: network that allows me to get more insurance on this cash.

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Speaker 2: So you know what I'm saying, right, those private credit funds,

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Speaker 2: Like I'm just curious if they're taking some of their

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Speaker 2: funds and throwing it in a bank for a little

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Speaker 2: bit and then just pulling it when they want.

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Speaker 3: It, that's a great Actually, that's a really good question.

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Speaker 3: I don't know, it's because it's like.

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Speaker 2: I guarantee like five percent. Yeah, it's for like a

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Speaker 2: month or two, right, Yeah, truly, if they haven't put

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Speaker 2: it to work, that's very good. So next story exactly.

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Speaker 4: So I wonder if regulators are going to crack down,

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Speaker 4: and maybe not on broker deposits, because, as you point out,

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Speaker 4: they've been around for a while, regulators don't love them,

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Speaker 4: but they haven't done anything about them yet. On the

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Speaker 4: other hand, we're just now seeing the light shone on

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Speaker 4: the FHLB issue, and we're right ahead of an election year,

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Speaker 4: so it seems like the perfect time to crack down

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Speaker 4: on this like one hundred year old institution.

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Speaker 3: Yeah. I think the bigger way that we'll see crackdown

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Speaker 3: is like I think First Republic is actually a really

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Speaker 3: good example where they didn't get seized and you know,

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Speaker 3: ultimately fail because of some big rush on deposits. It

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Speaker 3: was more of a slow bleed and they were replacing

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Speaker 3: that slow bleed with these more expensive forms of funding.

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Speaker 3: And so ultimately, when regulators sees them, they were like,

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Speaker 3: you know, this has everything to do with the fact

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Speaker 3: that your borrowing costs have gone up in such a

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Speaker 3: manner that you were no longer you're structurally unprofitable, and

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Speaker 3: you're no longer able to operate in a safe and

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Speaker 3: sound manner. And so I think you'll start to see regulators,

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Speaker 3: you know, really taking that seriously and saying, you know,

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Speaker 3: if you've had to backfill this you know, you know,

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Speaker 3: slow and steady decline and deposits with these more expensive

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Speaker 3: forms of funding, we're going to take notice and we're

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Speaker 3: gonna you know, show So you.

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Speaker 5: Think they're gonna shut down.

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Speaker 3: More banks, I hesitant to say that. I think more

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Speaker 3: banks are aware that that is that's the risk here, Yeah, exactly,

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Speaker 3: that's what That's what I think is this next phase

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Speaker 3: of the regional bank turmoil is you know, we're not

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Speaker 3: seeing these big sudden rush on deposits anymore. It's really

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Speaker 3: this slow bleed that is more worrisome in a way

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Speaker 3: and could honestly affect a lot more lenders.

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Speaker 2: Well, one of the things I loved in your story

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Speaker 2: is you talked I guess it was specifically somebody quoted

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Speaker 2: the chief financial officer at Western Alliance, I guess about

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Speaker 2: current liquidity. I mean, are we not getting a clear

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Speaker 2: picture of the bank's liquidity picture as a result because

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Speaker 2: of this, money can be yanked very quickly.

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Speaker 3: I think that's what regulators fear, and that's they actually

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Speaker 3: do have really stringent rules around broker deposits that they're

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Speaker 3: not viewed as favorably as like the typical core deposit

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Speaker 3: that a bank will have, and so that's why regulators

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Speaker 3: have long hated them. You don't get broker deposit numbers

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Speaker 3: and earnings. You get them in call reports weeks later.

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Speaker 3: Even the data that we based our story off of

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Speaker 3: this is all first quarter data, and really this was

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Speaker 3: an issue only in the last two weeks of the

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Speaker 3: first quarter. So even now it's just the tip of

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Speaker 3: the iceberg really coming out, and I think the second

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Speaker 3: quarter data that we get in the coming weeks and months,

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Speaker 3: that's going to be a lot more worrisome.

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Speaker 5: So, I mean it makes sense. I'm from Ohio, my

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Speaker 5: whole family is from there. You always have views.

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Speaker 4: Huntington Bank or Park National or one of these you know,

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Speaker 4: local regional banks, and we're unlikely to move our money

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Speaker 4: out of there because it's part of who we are,

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Speaker 4: right But these broker deposits, how likely are they to

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Speaker 4: shift from one bank to another.

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Speaker 5: Or be polled?

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Speaker 3: So some of the hope is that because more folks

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Speaker 3: are doing this because they want more FDIC insurance on

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Speaker 3: their deposits, the hope is actually that they wouldn't need

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Speaker 3: to move as much because as long as you know,

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Speaker 3: whatever regional bank is still offering five percent, even if

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Speaker 3: that person can get five point two percent by you

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Speaker 3: know moving, really they're there for the FDIC insurance and

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Speaker 3: so it should be fine. But we really don't know.

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Speaker 3: I mean, this is kind of a new era where

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Speaker 3: it's a lot easier to move your money than it

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Speaker 3: ever has been before. I mean, that was one of

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Speaker 3: the big issues we saw with Silicon Valley Bank. So

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Speaker 3: a lot of exactly on your phone and it's you know,

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Speaker 3: hundreds of thousands of dollars move. So it's just it's

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Speaker 3: hard to know. And I think that's also why regulators

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Speaker 3: have so much anxiety around this issue, is you really

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Speaker 3: don't know what consumer behavior will be like, given how

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Speaker 3: much tech has evolved since the last crisis.

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Speaker 2: Jenny, about forty five seconds left here. So with more

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Speaker 2: earnings just around the corner, we've already gotten warnings as

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Speaker 2: you guys, as you write in your story about from

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Speaker 2: M and TV, from Columbia Financial, from Fifth Third Bank Corps,

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Speaker 2: should we expect that there could be some not so

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Speaker 2: great earnings releases in that in the next round of

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Speaker 2: quarterly earnings. I'm just thinking about for our audience who's

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Speaker 2: thinking about investing and maybe have been looking at this space.

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Speaker 3: I think yes, I mean, I think a lot of

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Speaker 3: these regional banks have already started to kind of prepare

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Speaker 3: investors for this new reality. But I think we'll hear

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Speaker 3: a lot more comments like that in the coming weeks

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Speaker 3: as banks kind of come to terms of the fact

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Speaker 3: that they might have set guidance in January that you know,

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Speaker 3: wasn't anticipating a bank crisis in March, and you know,

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Speaker 3: further rate hikes, and so I think You're going to

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Speaker 3: see a lot more kind of you know, honesty and

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Speaker 3: transparency from these bank executives as they realized the extent

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Speaker 3: of the problem.

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Speaker 2: Hot money. What's the matter is.

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Speaker 5: Fifth Third Bank Corps Latin for?

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Speaker 6: What?

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Speaker 5: Is it like the Marine Corps?

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Speaker 7: Did I say it again?

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Speaker 2: I always say in a core corp? All Right, I

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Speaker 2: can't help it. It's like this hang in my head,

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Speaker 2: fifth Third Big Court.

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Speaker 5: This has been going on for twenty years. Jack, Yeah,

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Speaker 5: I do don't.

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Speaker 2: Yeah, I know. It's you know, just some things you

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Speaker 2: just got to accept. Yeah, what I am Jenny Sarying,

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Speaker 2: great story. It's a Bloomberg big take. It is among

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Speaker 2: our most read on the Bloomberg.

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Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us

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Speaker 1: live weekday afternoons from three to six Eastern Listen.

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Speaker 7: On Bloomberg dot com, the iHeartRadio app, and the Bloomberg

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Speaker 7: Business App, or watch us live on YouTube.

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Speaker 8: A little bit.

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Speaker 2: You used to just that movie, No, not The Bodyguard.

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Speaker 2: There's actually a movie like on her.

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Speaker 5: No, it's actually well done.

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Speaker 2: It's really well done. Anyway, I digree The Biggest Little Farm.

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Speaker 2: I haven't seen that yet.

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Speaker 5: You should see that.

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Speaker 2: Have you seen air, Yes, have you seen the what's

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Speaker 2: going on with treasury yields today?

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Speaker 5: Yeah? Very cool?

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Speaker 4: I mean fourteen basis point jump right in the ten

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Speaker 4: year yield and Bill Dudley out with the column saying

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Speaker 4: he thinks the ten year should be about four and

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Speaker 4: a half percent rather than what are we looking at

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Speaker 4: right now?

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Speaker 5: Three eighty four?

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Speaker 2: Uh yeah, I think so, I just head it up there,

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Speaker 2: let me just pull it up. But bun got a

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Speaker 2: ten yere at three eighty five? Is that what you're

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Speaker 2: looking at the tenure? Yeah? Three hundy five? All right,

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Speaker 2: So let's see because we, as we said, swap markets

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Speaker 2: now indicating you know, we're looking at what two rate

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Speaker 2: hikes by the Fed by year end. So let's try

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Speaker 2: to make some sense out of it with us. Lucky

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Speaker 2: for us in studios Ben Emmons, he's senior portfolio manager,

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Speaker 2: head of fixed income over the wealth management firm New

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Speaker 2: Edge Wealth, and he's here, as we said in our

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Speaker 2: Blue Work Interactive Brokers Studio.

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Speaker 9: Hello, Hello, Hi Carol, it's great to meet you.

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Speaker 2: It's nice to meet you. I've heard a lot about you.

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Speaker 5: Hi, thank you.

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Speaker 2: So make sense of today's moves? Is this logical? Is

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Speaker 2: this where we should be and in terms of what

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Speaker 2: we're seeing along the Treasury curve.

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Speaker 9: Yeah, I think it's logical, and there's actually two reasons why.

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Speaker 9: So obviously the GDP data surprise. But you know, as

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Speaker 9: Matth was starting the segment off the bally of the curve, underperformance.

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Speaker 5: That tends to happen.

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Speaker 9: The ball mar could recognized strong growth. The five year

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Speaker 9: part sells off the most. That's I think if very

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Speaker 9: logical reaction. The auto reaction is that Powell overnight puts

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Speaker 9: in a speech that there could be two or more

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Speaker 9: rate hikes. That really caught a lot of people's attention

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Speaker 9: because he endorsed the dop lot the day before in

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Speaker 9: the Penelt and Cintra saying it could be more rate

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Speaker 9: hikes meaning I'm saying what the forecast is showing you.

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Speaker 9: But if you say two or more, if you look

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Speaker 9: at that dop lot, anything beyond where the median is,

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Speaker 9: which is five point six two five percent, are those

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Speaker 9: three little dots on the top that are.

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Speaker 2: Six to six and quarter percent different?

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Speaker 5: Huge difference.

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Speaker 9: So the bomb marker is edging here a bit about Okay,

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Speaker 9: we're getting core PC tomorrow, which, by the way, Powell

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Speaker 9: also floated in the speech saying likely to be four

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Speaker 9: point seven percent, which is the number that forecasts tomorrow.

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Speaker 9: You know, that's too high inflation, and with the growth

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Speaker 9: number today being this strong, means that inflation like that

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Speaker 9: stays high, and that means yes that maybe not only

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Speaker 9: two high rate hydred may have to be more. I

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Speaker 9: think that's the reaction to it.

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Speaker 4: So what do you think about the underlying economy though, Ben?

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Speaker 4: I mean, we got some good numbers today on the economy, but.

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Speaker 5: They're very backwards looking.

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Speaker 4: Right, we're talking about first quarter GDP and personal consumption.

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Speaker 4: First quarter core PCE in fact, was revised down. Does

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Speaker 4: the economy look good to you here or do we

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Speaker 4: need to see earnings to really judge that.

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Speaker 9: You do need to see earnings to judge it. And

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Speaker 9: there it's corporate profits, right, we were at least too and

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Speaker 9: they were down for the first quarter. So there's one

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Speaker 9: one I guess, softness in the economy. But what stood

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Speaker 9: out to me that number was that the housing market

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Speaker 9: is coming through the data. You know, the fixed structures

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Speaker 9: is one component was actually much higher. So it does

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Speaker 9: tell you that rates are not finding everywhere. You know,

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Speaker 9: it's footprints in order to slow the economy truly down.

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Speaker 9: We would have otherwise had a number that would have

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Speaker 9: not been this two percent or so, it would have

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Speaker 9: been downside surprise. So I think backward looking data. But

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Speaker 9: it is an economy that's on his feet and resilient

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Speaker 9: and that's the worst right and therefore growing stronger than potential.

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Speaker 2: Then could we theyll get potentially what you know, like

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Speaker 2: a rolling recession. We saw housing take a hit, go

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Speaker 2: back what a few months, go back last year right

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Speaker 2: as rates started to tick higher. So could we that

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Speaker 2: at this point people like I got to buy a

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Speaker 2: house or something. Could we see that there's just going

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Speaker 2: to be different parts of the economy so that it

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Speaker 2: won't be felt so severely.

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Speaker 9: Yeah, because if you if you could say no, yeah,

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Speaker 9: I don't like to say that, but you probably have

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Speaker 9: a good point. You know, we come out of a

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Speaker 9: pandemic and we're getting a big inventory correction first, then

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Speaker 9: it spills over to the housing market. Then we're seeing

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Speaker 9: an auto is a big correction, and then we probably

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Speaker 9: see at some point that the travel leisure chector will

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Speaker 9: slow down. It's going to be no, it's sound unstatable

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Speaker 9: to mend but it's going to taper off at some points.

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Speaker 9: And obviously we have seen on the manufacturing side quite contraction,

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Speaker 9: but it doesn't feel the traditional Mber recession definition really

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Speaker 9: because we haven't seen unemployment rate going up so quick

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Speaker 9: so fast that it makes you really wonder like, Okay,

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Speaker 9: we're having a lot of layoff announcements, we're having layoffs,

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Speaker 9: but it having no really material impact on widespread unemployment.

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Speaker 9: I think that's the key missing agreement.

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Speaker 5: So is the issue.

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Speaker 4: You know, corporations are sufficiently financed better than they have

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Speaker 4: been in the recent past, and households have bigger bank deposits,

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Speaker 4: people have you know, thirty year fixed interest, fixed rate mortgages.

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Speaker 4: So basically these long and variable effects are taking even

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Speaker 4: longer to make a difference.

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Speaker 9: Yeah, and maybe not what you ate us said that

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Speaker 9: it takes twenty five years like in Japan, but it's

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Speaker 9: definitely taking longer because in an air off QE actually

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Speaker 9: generate all the benefits you just describe math. You know,

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Speaker 9: if you have, indeed companies that have been able to

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Speaker 9: refinance their debt at double the maturity that they had

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Speaker 9: pre financial crisis, if you have corporate sorry households that

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Speaker 9: are better positioned in terms of savings and bound sheet.

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Speaker 9: Why I had only a cover more than two thirds

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Speaker 9: of the economy. So interstrates will take time to work

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Speaker 9: through the system. Interstates will take time also to actually

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Speaker 9: change people's behavior ultimately. I think that's the other part

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Speaker 9: of it. You know, we haven't seen really a significant

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Speaker 9: change of Oh I'm looking at treasury yields now over

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Speaker 9: five percent, say I'm going to really pair back and

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Speaker 9: to sit at home and say if that's not really

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Speaker 9: what was happening.

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Speaker 2: And we've actually seen money coming into the equity markets.

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Speaker 9: Right, people are comfortab with the last one.

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Speaker 2: Let me ask you something in terms of the Fed's

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Speaker 2: dual mandate. Right, you've got inflation, and you've got the

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Speaker 2: jobs market. Might have fed as much as we are, Like,

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Speaker 2: I don't know if they're going to get back to

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Speaker 2: two percent. Might the FED more likely have to abandon

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Speaker 2: in terms of more weakness and pain in the job

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Speaker 2: market because maybe there's just demographics going on. I've had

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Speaker 2: family members who would have been still working, but you know,

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Speaker 2: at the pandemic hit and they're like, you know, I'm

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Speaker 2: going to go in an early retirement. I keep hearing

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Speaker 2: stories about you know, companies wanting to bring back older

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Speaker 2: workers because teenagers aren't taking jobs and so on and

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Speaker 2: so forth that they used to. Is there we don't

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Speaker 2: have immigration like an aging of the population. Is there

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Speaker 2: a chance that demographically there are some macro forces going

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Speaker 2: on that are going to keep a tight labor market

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Speaker 2: going for longer?

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Speaker 9: Have you take a very simple metric of the labor

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Speaker 9: force participation rate, you're looking at that twenty year history.

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Speaker 9: You're seeing the blow that happened in two thousand and

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Speaker 9: eighth of yes, big fall in that labor force participation

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Speaker 9: because people were sidelined and did not come back into

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Speaker 9: the labor force and then being either discouraged or early retirement.

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Speaker 9: And we had the same blow again in twenty twenty,

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Speaker 9: only that labor force participation rates went down just as

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Speaker 9: much like interust rates went down, same with so with

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Speaker 9: big trough pig trough. So it will take a lot

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Speaker 9: to get more and more people back into labor force.

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Speaker 9: In other words, current rage is running somewhere three and

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Speaker 9: a half four and a half percent range. We'd have

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Speaker 9: to probably double to get people really pulled back in.

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Speaker 9: And then there's still groups of people that say, like

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Speaker 9: you know what, I got enough money to retire. I

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Speaker 9: don't want to go back into this, and I think

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Speaker 9: this economy could become way too cyclical or I'm uncertain

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Speaker 9: about it, or I have other things to do and

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Speaker 9: I don't want to want to.

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Speaker 2: Work, so it could stay strong, Yes, I.

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Speaker 9: Think so, I think if we're dealing with a demographic

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Speaker 9: effect that we've had in Japan, Yeah, only Japan has

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Speaker 9: you know, at least ten years ahead of us with them.

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Speaker 4: So the Fed has to then keep raising rates, and

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Speaker 4: you know, by Dudley's math, we could see treasuries hit

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Speaker 4: four and a half percent on the tenure. At what

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Speaker 4: point do you say, okay, now I want to lock

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Speaker 4: in these rates.

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Speaker 9: Yeah, you know, one that we do get a decisive

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Speaker 9: change in that core inflation number. Right, So if the

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Speaker 9: core PC number tomorrow and subsequent months shows really decline

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Speaker 9: and never getting more more confident like okay, fat, you

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Speaker 9: are winning this game, You're going to bring that infratirate

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Speaker 9: indeed down.

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Speaker 5: Then you want to buy treasuries. You do want to

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Speaker 5: buy a treasure. At what point do you start to

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Speaker 5: go out further out on the curve.

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Speaker 9: So what happens then is that as that core number

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Speaker 9: starts to decline, the yucur starts to steepen, right, the

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Speaker 9: two yield starts to decline, and that that is the

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Speaker 9: moment to do that. That's actually when you want to

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Speaker 9: extend from short maturity bonds to low maturity bonds, because

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Speaker 9: you're going to not only getting the price return and

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Speaker 9: out of long term bonds, but so the real return

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Speaker 9: because if inflation starts to decline, even if normally yields

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Speaker 9: to decline, you're getting a better real return.

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Speaker 2: So then do we see money coming out of the

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Speaker 2: equity side of things at that at that point.

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Speaker 9: So I think that the yukur of inversion not having

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Speaker 9: an impact on the stock market is interesting. Right the

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Speaker 9: stock market set like at least this year, that is

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Speaker 9: the case. Stock market says like okay, restrictive policy is

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Speaker 9: sufficient that it brings that infrati rate gradually down, means

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Speaker 9: that profit margins don't collapse, and means that not all

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Speaker 9: the pricing power all of a sudden gets sucked down

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Speaker 9: and therefore the equity market doesn't get a factored so

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Speaker 9: much by that inverted you curve that, which I think

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Speaker 9: signals this really type policy to get infation and a

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Speaker 9: glidepath down. But if you think of the of the

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Speaker 9: the switch that we're probably going to see in the

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Speaker 9: future in the fixed income market, if you're getting able

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Speaker 9: we call bulls deepening, meaning the two yields has a

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Speaker 9: really decline much faster than the tenure yield. That's a

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Speaker 9: signal of real economic weakness. I think that's a signal

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Speaker 9: of fat You have to indeed start truly pivoting and

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Speaker 9: moving to a different policy stance that would I think

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Speaker 9: be taking negative better stubmre But.

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Speaker 5: Is I mean pals has years out?

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Speaker 2: Do you agree?

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Speaker 5: Yeah, so that's interesting.

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Speaker 2: Quickly we got twenty Yeah, so if you.

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Speaker 9: Believe that you're not going to hit the target until

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Speaker 9: twenty twenty five, you're going to stay in this very

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Speaker 9: type policy inverted you curve and therefore we may not

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Speaker 9: see much change at this point and therefore you cannot

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Speaker 9: exten duration so easily as you see today.

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Speaker 5: What I'm just glad we had that.

440
00:19:55,119 --> 00:19:59,639
Speaker 2: In day I know we talk about thank you, Thank you,

441
00:19:59,680 --> 00:20:02,440
Speaker 2: gl pleasure. Ben Emin's senior portfolio manager, head of fixed

442
00:20:02,440 --> 00:20:05,280
Speaker 2: income over at New Edge Wealth. Here in our interactive

443
00:20:05,280 --> 00:20:08,199
Speaker 2: broker studio, I'm Carol Master along with Matthew Miller, and

444
00:20:08,240 --> 00:20:10,160
Speaker 2: you are listening and watching Bloomberg Radio.

445
00:20:12,840 --> 00:20:16,400
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us

446
00:20:16,440 --> 00:20:20,440
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,

447
00:20:20,640 --> 00:20:23,920
Speaker 1: the Bloomberg Business App and YouTube. You can also listen

448
00:20:24,040 --> 00:20:27,120
Speaker 1: live on Amazon Alexa from our flagship New York station.

449
00:20:27,560 --> 00:20:30,359
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

450
00:20:32,280 --> 00:20:35,800
Speaker 2: All right, Well, Bloomberg recently releasing some data from Provident Bank.

451
00:20:36,040 --> 00:20:38,119
Speaker 2: They did a national survey, Matt and they found sixty

452
00:20:38,119 --> 00:20:40,679
Speaker 2: seven percent of small to medium sized business owners and

453
00:20:40,760 --> 00:20:43,880
Speaker 2: execs believe a recession is likely in twenty twenty three.

454
00:20:43,920 --> 00:20:46,000
Speaker 2: And I got to say, you run a small business,

455
00:20:46,040 --> 00:20:46,639
Speaker 2: it ain't easy.

456
00:20:47,400 --> 00:20:48,240
Speaker 5: Yeah, No, for sure.

457
00:20:48,280 --> 00:20:53,360
Speaker 4: It's really especially with credit conditions tightening. You know, if

458
00:20:53,400 --> 00:20:55,000
Speaker 4: you can't get alone and you have to go to

459
00:20:55,040 --> 00:20:56,960
Speaker 4: private credit, you're going to have to pay more for that.

460
00:20:57,280 --> 00:21:00,600
Speaker 4: We've talked about and one of the biggest problems I

461
00:21:00,640 --> 00:21:04,480
Speaker 4: think for small business owners is not access to capital.

462
00:21:05,119 --> 00:21:06,119
Speaker 5: I would guess labor.

463
00:21:06,440 --> 00:21:08,800
Speaker 4: You know, finding people to hire, depending on what you're

464
00:21:08,840 --> 00:21:11,320
Speaker 4: doing on this issue can be a huge issue.

465
00:21:11,359 --> 00:21:12,760
Speaker 2: That's why a lot of them are actually being very

466
00:21:12,760 --> 00:21:15,480
Speaker 2: flexible with working conditions right now. But even harder I

467
00:21:15,520 --> 00:21:18,800
Speaker 2: think from the get go is finding funding to start

468
00:21:18,840 --> 00:21:21,119
Speaker 2: one in the first place. And our next guest knows

469
00:21:21,160 --> 00:21:23,439
Speaker 2: about that a lot. We're delighted to have with us.

470
00:21:23,480 --> 00:21:26,359
Speaker 2: Elizabeth Gore, president and CEO of Hello Alice it's a

471
00:21:26,440 --> 00:21:32,000
Speaker 2: free platform designed for and buy small business owners, and

472
00:21:32,040 --> 00:21:34,119
Speaker 2: she joins us on Zoom in San Francisco, designed for

473
00:21:34,240 --> 00:21:36,159
Speaker 2: and buy small business owners. I don't know that I've

474
00:21:36,160 --> 00:21:36,919
Speaker 2: read that so well.

475
00:21:36,800 --> 00:21:38,360
Speaker 5: So I understood it perfectly.

476
00:21:38,920 --> 00:21:42,879
Speaker 2: I'm not understanding anything on this Friday. No, it's Thursday, Elizabeth.

477
00:21:42,960 --> 00:21:44,520
Speaker 2: Nice to have you here with Matt and me.

478
00:21:44,920 --> 00:21:45,120
Speaker 4: Great.

479
00:21:45,680 --> 00:21:46,520
Speaker 8: That sounded good to me.

480
00:21:46,800 --> 00:21:48,399
Speaker 2: Tell us about what you guys are up to and

481
00:21:48,440 --> 00:21:49,760
Speaker 2: how you got here and how.

482
00:21:49,680 --> 00:21:52,919
Speaker 8: It all Startedly, we're very proud of Hello Wallis to

483
00:21:52,960 --> 00:21:56,919
Speaker 8: be the largest community serving small business owners. We have

484
00:21:56,960 --> 00:22:00,000
Speaker 8: one point three million small business owners who are acts

485
00:22:00,320 --> 00:22:04,360
Speaker 8: capital on our platform and most importantly, really understanding their

486
00:22:04,400 --> 00:22:05,480
Speaker 8: financial health.

487
00:22:07,160 --> 00:22:10,960
Speaker 5: All right. So are they healthy right now?

488
00:22:11,960 --> 00:22:14,600
Speaker 8: That's a great question, you know. I have both the

489
00:22:14,720 --> 00:22:18,600
Speaker 8: sense of optimism but also a stark reality check. We

490
00:22:18,640 --> 00:22:21,240
Speaker 8: have five times the amount of businesses right now launching

491
00:22:21,240 --> 00:22:24,160
Speaker 8: in our country than the last twenty years. So both

492
00:22:24,240 --> 00:22:26,720
Speaker 8: with folks coming out of COVID and wanting more flexibility,

493
00:22:27,080 --> 00:22:29,720
Speaker 8: and then also the amount of layoffs that folks decide well,

494
00:22:29,760 --> 00:22:31,760
Speaker 8: you know, and I'm going to pursue my dream. Finally,

495
00:22:33,000 --> 00:22:36,120
Speaker 8: there is a lot of businesses opening. Additionally, we have

496
00:22:36,720 --> 00:22:39,720
Speaker 8: mostly women and people of color launching those businesses, which

497
00:22:39,760 --> 00:22:43,480
Speaker 8: is very exciting. The reality check I have is getting

498
00:22:43,640 --> 00:22:45,800
Speaker 8: access to capital in the first twenty four months of

499
00:22:45,800 --> 00:22:50,119
Speaker 8: that business is very hard, particularly getting loans, and so

500
00:22:50,280 --> 00:22:54,680
Speaker 8: most small business owners are relying on operational credit, which

501
00:22:54,760 --> 00:22:57,080
Speaker 8: can also be very challenging, particularly if you think of

502
00:22:57,160 --> 00:22:59,040
Speaker 8: women who've been in the care economy who don't have

503
00:22:59,080 --> 00:23:02,600
Speaker 8: access to get credit history US veterans coming home without

504
00:23:02,640 --> 00:23:06,080
Speaker 8: credit history. So our job at Halo Wallis is ensure

505
00:23:06,480 --> 00:23:09,440
Speaker 8: they get that equable access to credit that they need.

506
00:23:09,880 --> 00:23:11,200
Speaker 2: Well, that's a really good point.

507
00:23:11,320 --> 00:23:13,520
Speaker 4: How do is care economy a phrase that I didn't

508
00:23:13,680 --> 00:23:14,520
Speaker 4: know what is that?

509
00:23:15,560 --> 00:23:17,880
Speaker 8: So if you really look at women who stepped away

510
00:23:17,880 --> 00:23:21,800
Speaker 8: from the workforce to take care of their children, take

511
00:23:21,840 --> 00:23:26,080
Speaker 8: care of elder care, their community around them, they're in COVID.

512
00:23:26,359 --> 00:23:28,359
Speaker 8: There was a big step back with women in the

513
00:23:28,400 --> 00:23:30,960
Speaker 8: workforce or running their own business. It was a real

514
00:23:31,000 --> 00:23:33,840
Speaker 8: necessity during COVID. So if you think of that two

515
00:23:33,880 --> 00:23:37,560
Speaker 8: to three year gap maybe and their credit history, it

516
00:23:37,600 --> 00:23:39,840
Speaker 8: has an impact of what they can apply for now.

517
00:23:40,520 --> 00:23:42,679
Speaker 2: Yeah, that's really worsome. And we saw that, right, I

518
00:23:42,680 --> 00:23:46,119
Speaker 2: think Elizabeth, we thought the pandemic was going to be

519
00:23:46,359 --> 00:23:49,560
Speaker 2: kind of freeing for women, right, this flexibility of being

520
00:23:49,600 --> 00:23:51,080
Speaker 2: able to work at home, and then all of a

521
00:23:51,119 --> 00:23:53,480
Speaker 2: sudden it was like, yeah, you can, but you'll just

522
00:23:53,520 --> 00:23:55,200
Speaker 2: got to take care of the kids and your mom

523
00:23:55,240 --> 00:23:56,639
Speaker 2: and your dad or your grandparents.

524
00:23:56,640 --> 00:23:56,720
Speaker 7: Like.

525
00:23:56,760 --> 00:23:59,320
Speaker 2: It was a lot placed on women and it really

526
00:23:59,359 --> 00:24:03,160
Speaker 2: put I think a lot out of them in terms

527
00:24:03,200 --> 00:24:06,480
Speaker 2: of being able to either pursue their careers or start

528
00:24:06,480 --> 00:24:08,600
Speaker 2: a business. So tell us, first of all, where do

529
00:24:08,720 --> 00:24:11,280
Speaker 2: you guys get your funding to help others?

530
00:24:12,040 --> 00:24:16,080
Speaker 8: Absolutely so, at Hello Allis we run a thirty million

531
00:24:16,080 --> 00:24:20,040
Speaker 8: dollar grant program that comes from both government philanthropy as

532
00:24:20,080 --> 00:24:25,919
Speaker 8: well as enterprise companies. We also distribute credit and secured credit.

533
00:24:26,320 --> 00:24:29,240
Speaker 8: That is our own program at Hello Wallis in partnership

534
00:24:29,280 --> 00:24:32,760
Speaker 8: with MasterCard. And then we're also working very hard on

535
00:24:32,840 --> 00:24:35,920
Speaker 8: equitable loan access, so we have a loan center here

536
00:24:35,960 --> 00:24:39,920
Speaker 8: with ninety two lenders. We follow the lender's bill of

537
00:24:40,000 --> 00:24:42,720
Speaker 8: rights to make sure that there's no predatory lending and

538
00:24:42,760 --> 00:24:46,359
Speaker 8: that ranges from banks to CDFI's And now we are

539
00:24:46,440 --> 00:24:50,879
Speaker 8: launching a significant fund that is also helping small business

540
00:24:50,920 --> 00:24:54,760
Speaker 8: owners put forth collateral. If they don't have that credit history,

541
00:24:55,680 --> 00:24:58,119
Speaker 8: then they will need to actually access some kind of

542
00:24:58,160 --> 00:25:01,160
Speaker 8: credit enhancing tool to make sure that they can apply

543
00:25:01,440 --> 00:25:02,639
Speaker 8: for traditional credit.

544
00:25:02,880 --> 00:25:05,679
Speaker 2: Community Development Financial Institutions fund A head to look up

545
00:25:05,760 --> 00:25:08,840
Speaker 2: CDFIs in terms of that they're out there, sorry, head

546
00:25:08,880 --> 00:25:10,240
Speaker 2: to check, Thank you Google, I get it.

547
00:25:10,280 --> 00:25:15,280
Speaker 4: So is I mean you go beyond just giving money, right,

548
00:25:15,680 --> 00:25:19,200
Speaker 4: you also educate and help people with I just wonder

549
00:25:19,240 --> 00:25:21,760
Speaker 4: what the biggest problem is for these businesses once they

550
00:25:21,960 --> 00:25:27,080
Speaker 4: get over the funding hurdle, the initial funding, what problems

551
00:25:27,119 --> 00:25:27,800
Speaker 4: are they facing?

552
00:25:28,720 --> 00:25:33,080
Speaker 8: So I can't underscore I can't skip over access to capital,

553
00:25:33,119 --> 00:25:36,760
Speaker 8: by the way, just being the number one problem for

554
00:25:36,840 --> 00:25:40,600
Speaker 8: these business owners. And again, whether that's credit, whether it's loans,

555
00:25:40,720 --> 00:25:44,320
Speaker 8: whatever that may be, once that does happen, and actually

556
00:25:44,600 --> 00:25:48,199
Speaker 8: their financial acumen is really important. So what is my

557
00:25:48,400 --> 00:25:51,760
Speaker 8: business health? Could not be a more important topic for

558
00:25:51,800 --> 00:25:53,760
Speaker 8: all of us in this country to talk about right now,

559
00:25:54,080 --> 00:25:57,679
Speaker 8: most small business owners are very good at providing that

560
00:25:57,800 --> 00:26:01,720
Speaker 8: pet care, being your child care provider, or that coffee

561
00:26:01,720 --> 00:26:04,719
Speaker 8: shop or that art that they're selling. Most of us

562
00:26:04,760 --> 00:26:06,840
Speaker 8: do not have business degrees. So what we do at

563
00:26:06,840 --> 00:26:10,320
Speaker 8: Hello Wallis is provide a business health score, which is

564
00:26:10,359 --> 00:26:13,080
Speaker 8: super easy. It lets you come in fill out a

565
00:26:13,119 --> 00:26:16,040
Speaker 8: specific survey on everything from you know, what is your

566
00:26:16,080 --> 00:26:19,280
Speaker 8: credit to your cash flow situation, and we really help

567
00:26:19,359 --> 00:26:23,600
Speaker 8: you navigate that business plan and understand your financial health.

568
00:26:23,640 --> 00:26:25,640
Speaker 8: Just because you have the money in the bank, how

569
00:26:25,680 --> 00:26:29,560
Speaker 8: are you spending it? You talked about employees, When can

570
00:26:29,600 --> 00:26:32,560
Speaker 8: I approachally hire that first fte? How am I paying

571
00:26:32,640 --> 00:26:36,960
Speaker 8: my taxes? So we really equate access to capital and

572
00:26:37,040 --> 00:26:38,800
Speaker 8: financial health together.

573
00:26:39,240 --> 00:26:41,280
Speaker 2: And is that really the key to success? I always

574
00:26:41,280 --> 00:26:44,160
Speaker 2: think about it because we talk often about the number

575
00:26:44,200 --> 00:26:46,080
Speaker 2: of people who start small businesses and then they don't

576
00:26:46,080 --> 00:26:48,800
Speaker 2: work out. Is it the access to capital the number

577
00:26:48,840 --> 00:26:51,639
Speaker 2: one thing that keeps somebody going or is it you know,

578
00:26:51,920 --> 00:26:54,440
Speaker 2: as Matt was talking about, and you were talking about

579
00:26:54,480 --> 00:26:57,639
Speaker 2: financial acumen or financial literacy and understanding kind of all

580
00:26:57,640 --> 00:26:59,600
Speaker 2: the things and just got about thirty seconds left here.

581
00:27:00,160 --> 00:27:03,400
Speaker 8: Yeah, financial literacy is the number one so we again

582
00:27:03,480 --> 00:27:05,879
Speaker 8: we say your business financial health is more important than

583
00:27:05,960 --> 00:27:08,720
Speaker 8: even accessing that capital. The number one place to get

584
00:27:08,760 --> 00:27:11,840
Speaker 8: capital is from your customers, from those receipts, So that

585
00:27:12,000 --> 00:27:12,880
Speaker 8: is really critical.

586
00:27:13,480 --> 00:27:15,440
Speaker 2: All Right, we're gonna leave it there. Hey listen, thank

587
00:27:15,440 --> 00:27:17,520
Speaker 2: you so much of a great holiday weekend. Elizabeth Gore.

588
00:27:17,560 --> 00:27:19,760
Speaker 2: She's present in CEO of Hello Alice. If you want

589
00:27:19,760 --> 00:27:23,560
Speaker 2: to find out more, you can find them on the

590
00:27:23,640 --> 00:27:26,040
Speaker 2: net the internet. Hello Alice dot.

591
00:27:25,920 --> 00:27:29,359
Speaker 5: Com, Twitter at Twitter is hellolics dot com? Right or sorry,

592
00:27:29,440 --> 00:27:30,760
Speaker 5: Twitter is at Hello Alice.

593
00:27:30,880 --> 00:27:33,600
Speaker 2: Yeah, i'd say, but yeah, if you just google Hello Alice,

594
00:27:33,600 --> 00:27:34,840
Speaker 2: you'll find it. It's really interesting.

595
00:27:34,920 --> 00:27:35,120
Speaker 10: Now.

596
00:27:35,240 --> 00:27:37,040
Speaker 2: I always think about it because we did see a

597
00:27:37,040 --> 00:27:40,879
Speaker 2: lot of people starting small businesses during the pandemic. But

598
00:27:40,960 --> 00:27:43,000
Speaker 2: you just wonder, you know, how they're doing and what

599
00:27:43,040 --> 00:27:44,640
Speaker 2: they need. But kew things.

600
00:27:44,680 --> 00:27:46,800
Speaker 5: The amount of new businesses started. She said that in

601
00:27:46,840 --> 00:27:47,840
Speaker 5: the last what twenty.

602
00:27:47,680 --> 00:27:49,199
Speaker 2: Years, a lot. It's a lot.

603
00:27:49,400 --> 00:27:49,719
Speaker 1: All right.

604
00:27:49,720 --> 00:27:51,920
Speaker 2: You are listening and watching Bloomberg Business Week Carol Meser

605
00:27:52,080 --> 00:27:54,920
Speaker 2: along with Matthew Miller. It is Thursday, This is BusinessWeek.

606
00:27:54,960 --> 00:27:55,920
Speaker 2: This is Bloomberg Radio.

607
00:27:58,359 --> 00:28:01,919
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us

608
00:28:01,960 --> 00:28:05,320
Speaker 1: live weekday afternoons from three to six Eastern Listen on

609
00:28:05,359 --> 00:28:09,399
Speaker 1: Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app,

610
00:28:09,680 --> 00:28:20,760
Speaker 1: or watch us live on YouTube.

611
00:28:21,400 --> 00:28:24,960
Speaker 2: Oh yeah, there are there are folks out there taking

612
00:28:24,960 --> 00:28:28,000
Speaker 2: the money and running. When you hear that, you know,

613
00:28:28,160 --> 00:28:31,600
Speaker 2: the Heist Issue. It's just it's here everybody. It's happening

614
00:28:31,640 --> 00:28:33,600
Speaker 2: for the last five years. It's a double issue Bloomberg

615
00:28:33,600 --> 00:28:36,640
Speaker 2: Business Week. We look forward to it. It's stories of intrigue, thievery,

616
00:28:36,760 --> 00:28:41,040
Speaker 2: scheme scams, good guys and bad guys, and it's really

617
00:28:41,160 --> 00:28:43,360
Speaker 2: just great summer reads. And Matt and I have been

618
00:28:43,360 --> 00:28:46,120
Speaker 2: funny looking at having had some fun looking over the issue.

619
00:28:46,200 --> 00:28:48,520
Speaker 2: So let's get an overview of the Heist Issue. It

620
00:28:48,600 --> 00:28:51,280
Speaker 2: is on newsstands, online at Bloomberg dot com, Slash BusinessWeek,

621
00:28:51,280 --> 00:28:53,800
Speaker 2: and of course on the Bloomberg terminals. So let's get

622
00:28:53,800 --> 00:28:56,560
Speaker 2: to it with Bloomberg BusinessWeek Features editor Jeremy Keener on

623
00:28:56,640 --> 00:28:59,400
Speaker 2: zoom in New York City. Hi, Jeremy, also the editor

624
00:28:59,400 --> 00:29:01,400
Speaker 2: of Bloomberg Busin this week, til weber right here in

625
00:29:01,400 --> 00:29:05,320
Speaker 2: our Bloomberg Interactive Broker's studio. This is a fun issue.

626
00:29:05,560 --> 00:29:08,680
Speaker 6: Oh, it's one of my favorites of the year and

627
00:29:08,720 --> 00:29:13,280
Speaker 6: we go cover to cover In in heist, there are

628
00:29:14,200 --> 00:29:19,400
Speaker 6: you know, sortied tales, there are cliffhangers, there are ongoing mysteries.

629
00:29:20,560 --> 00:29:23,080
Speaker 6: There are bank rubbers who are bad guys, or a

630
00:29:23,160 --> 00:29:25,640
Speaker 6: bank rubbers who are maybe not bad guys. It's got

631
00:29:25,680 --> 00:29:29,000
Speaker 6: it all. Jeremie Keane puts it all together. We wrote

632
00:29:29,040 --> 00:29:32,320
Speaker 6: these stories out over the course of a week. We've

633
00:29:32,360 --> 00:29:34,960
Speaker 6: still got a little bit more to give you tomorrow, which.

634
00:29:34,800 --> 00:29:36,680
Speaker 5: I say it is like, so.

635
00:29:36,800 --> 00:29:38,840
Speaker 6: If BusinessWeek kind of shark week, this is it.

636
00:29:38,960 --> 00:29:39,880
Speaker 5: I think it's so cool.

637
00:29:39,920 --> 00:29:42,440
Speaker 4: And but the thing is, when I first thought about it,

638
00:29:42,560 --> 00:29:44,800
Speaker 4: when I first heard the concept, I thought cool because

639
00:29:44,840 --> 00:29:46,840
Speaker 4: I want to someday be part.

640
00:29:46,680 --> 00:29:47,800
Speaker 5: Of a heist, right.

641
00:29:48,160 --> 00:29:50,480
Speaker 4: I think we all you might regret that we all

642
00:29:50,520 --> 00:29:53,080
Speaker 4: sort of do. But some of these thieves are really

643
00:29:53,160 --> 00:29:55,520
Speaker 4: bad people. Like we talked about one of the stories

644
00:29:55,560 --> 00:29:59,320
Speaker 4: yesterday made me very angry, like who steals benefits from

645
00:29:59,320 --> 00:30:00,760
Speaker 4: the poorest people in America?

646
00:30:00,920 --> 00:30:01,160
Speaker 1: Sad?

647
00:30:01,240 --> 00:30:06,160
Speaker 6: Right, Yeah, And what feels really challenging about that one

648
00:30:06,240 --> 00:30:08,920
Speaker 6: is all it would take is the government to put

649
00:30:08,920 --> 00:30:11,880
Speaker 6: a little chip in a card and it would protect

650
00:30:12,040 --> 00:30:14,160
Speaker 6: But because it's still a swipe and we all know

651
00:30:14,200 --> 00:30:17,920
Speaker 6: how vulnerable those ATM cards can be. Like some of

652
00:30:17,920 --> 00:30:20,080
Speaker 6: the most vulnerable people don't have anybody having their back.

653
00:30:20,160 --> 00:30:24,520
Speaker 6: So the stories go in many, many, many different directions.

654
00:30:24,680 --> 00:30:27,600
Speaker 6: Like I said before, Jeremy Keene is the architect of

655
00:30:27,640 --> 00:30:31,000
Speaker 6: the issue and decide what goes what's not in the issue.

656
00:30:31,320 --> 00:30:34,320
Speaker 6: One little fun fact, I know you read this one already.

657
00:30:35,440 --> 00:30:39,320
Speaker 6: Jeremy did a story wrote for almost a year now. Jeremy,

658
00:30:39,320 --> 00:30:41,920
Speaker 6: you've been working on this thing, right, put put a

659
00:30:41,960 --> 00:30:45,720
Speaker 6: filter in place to basically track all the crazy weird

660
00:30:45,760 --> 00:30:50,600
Speaker 6: stuff that has been stolen since our last heist issue

661
00:30:50,600 --> 00:30:53,800
Speaker 6: a year ago. Jeremy, what was your single favorite thing

662
00:30:54,240 --> 00:30:54,960
Speaker 6: on that list?

663
00:30:56,120 --> 00:30:57,880
Speaker 11: I think that would have to be the eight foot

664
00:30:58,360 --> 00:31:01,920
Speaker 11: statue of Gary the gorilla was stolen from a garden

665
00:31:02,000 --> 00:31:05,880
Speaker 11: center in Scotland. And one of the nice things when

666
00:31:05,920 --> 00:31:09,640
Speaker 11: you drink, you drill down into the into these news

667
00:31:09,680 --> 00:31:11,560
Speaker 11: of the weird type stories, and one of the things

668
00:31:11,560 --> 00:31:14,480
Speaker 11: that's great is there's always additional little nuggets that are great.

669
00:31:14,520 --> 00:31:16,880
Speaker 11: And one of my favorite things about that one was

670
00:31:16,880 --> 00:31:19,600
Speaker 11: was after police asked people to call in with tips,

671
00:31:19,600 --> 00:31:22,400
Speaker 11: people were saying, oh, I spotted this eight foot gorilla

672
00:31:22,480 --> 00:31:26,440
Speaker 11: statue going down the highway, and they pointed out that

673
00:31:26,480 --> 00:31:29,280
Speaker 11: in fact, it was Gary's twin brother that was made

674
00:31:29,280 --> 00:31:32,880
Speaker 11: by the same company, but not Gary. Gary remains missing.

675
00:31:33,040 --> 00:31:36,320
Speaker 5: What about the Morgue, Oh yeah.

676
00:31:36,160 --> 00:31:39,320
Speaker 11: That's I mean, that's really quite a story. That's that's ongoing.

677
00:31:39,320 --> 00:31:41,160
Speaker 11: In fact, I think one of some of the main

678
00:31:41,200 --> 00:31:44,520
Speaker 11: people were just just pleaded not guilty in court a

679
00:31:44,520 --> 00:31:48,600
Speaker 11: couple of days ago. This was that Harvard Medical School.

680
00:31:49,520 --> 00:31:54,480
Speaker 11: The main morgue manager has been accused by the government

681
00:31:54,520 --> 00:31:58,719
Speaker 11: of running a trafficking ring in cadaver parts, allegedly selling

682
00:31:58,760 --> 00:32:02,560
Speaker 11: them to to other people who are using them. In

683
00:32:02,560 --> 00:32:07,400
Speaker 11: one case, the allegation is in in I think art

684
00:32:07,520 --> 00:32:10,160
Speaker 11: might be a strong word for it, but some pretty

685
00:32:10,240 --> 00:32:12,720
Speaker 11: grim crafts.

686
00:32:12,720 --> 00:32:14,760
Speaker 5: And hey, one man's trash is another man's treasure.

687
00:32:15,320 --> 00:32:18,480
Speaker 2: Law and order for you know episode, it's really cool.

688
00:32:18,480 --> 00:32:20,000
Speaker 6: So I'm going to do a thing here. One of

689
00:32:20,040 --> 00:32:22,320
Speaker 6: the things I'm going to link this story another story.

690
00:32:22,320 --> 00:32:22,840
Speaker 5: You ready for this?

691
00:32:23,000 --> 00:32:30,400
Speaker 6: Yes, there was an Oscar Mayer wienermobile that lost a part. Matt,

692
00:32:30,400 --> 00:32:32,640
Speaker 6: do you know what part it lost? It was stolen

693
00:32:32,680 --> 00:32:33,200
Speaker 6: by thieves.

694
00:32:33,440 --> 00:32:34,320
Speaker 5: I'm the steering wheel.

695
00:32:34,440 --> 00:32:36,280
Speaker 6: It was the catalytic converter.

696
00:32:36,640 --> 00:32:39,960
Speaker 5: Ah, Yes, because of the platinum and palladium.

697
00:32:39,440 --> 00:32:42,520
Speaker 6: Inside, so they got that whole patch continued on to

698
00:32:42,680 --> 00:32:45,920
Speaker 6: its scheduled event. I'm going to link this story to

699
00:32:46,400 --> 00:32:51,920
Speaker 6: another one that was all about catalytic converter thefts, and

700
00:32:51,960 --> 00:32:54,520
Speaker 6: we went big on this one. It's one of the

701
00:32:54,520 --> 00:32:59,560
Speaker 6: longest stories we've ever published, and definitely in the HIGST

702
00:32:59,600 --> 00:33:01,800
Speaker 6: issue by I just.

703
00:33:01,760 --> 00:33:03,960
Speaker 4: Tell you quickly, we don't call it the Oscar Mayer

704
00:33:04,000 --> 00:33:05,080
Speaker 4: Wiener Mobile anymore.

705
00:33:05,240 --> 00:33:07,840
Speaker 5: Oh it's been there's a new politically correct name.

706
00:33:07,920 --> 00:33:11,440
Speaker 4: It's I think they really They renamed it the Frank Mobile.

707
00:33:11,480 --> 00:33:18,040
Speaker 6: Okay, well, yes, yeah, so the Frankmobile lost its catalytic converter.

708
00:33:18,160 --> 00:33:20,560
Speaker 6: That relates directly to this other story we did. We

709
00:33:20,600 --> 00:33:23,640
Speaker 6: have for the past couple of years keep seeing these

710
00:33:23,680 --> 00:33:26,640
Speaker 6: headlines about all these catalytic converter thefts that have been

711
00:33:26,640 --> 00:33:29,480
Speaker 6: happening across the country, and the parking lot after parking

712
00:33:29,520 --> 00:33:33,280
Speaker 6: lot thieves were going in saws alls, climbing under vehicles,

713
00:33:33,640 --> 00:33:36,120
Speaker 6: removing catalytic converters. And it turns out that was all

714
00:33:36,160 --> 00:33:40,400
Speaker 6: because there are rare earths inside the catalytic converter that

715
00:33:40,480 --> 00:33:44,280
Speaker 6: could be basically reprocessed, and thieves were making thousands of

716
00:33:44,360 --> 00:33:48,080
Speaker 6: dollars off of them, based on the model, could be

717
00:33:48,400 --> 00:33:51,760
Speaker 6: much more lucrative than others. What Evan showed wasn't just

718
00:33:51,800 --> 00:33:54,760
Speaker 6: the trees that this had been happening in one off's

719
00:33:54,760 --> 00:33:57,240
Speaker 6: all over the place. There's a forest of a story here.

720
00:33:57,760 --> 00:34:01,719
Speaker 6: Tulsa Police Department brought down half a billion dollar crime

721
00:34:01,800 --> 00:34:05,840
Speaker 6: ring that was built on your catalytic converters. I don't

722
00:34:05,840 --> 00:34:08,480
Speaker 6: know for sure if the frankmobiles ended up there or not.

723
00:34:08,560 --> 00:34:12,000
Speaker 6: That didn't affect into that narrative. But Jeremy, what was

724
00:34:12,040 --> 00:34:14,280
Speaker 6: so impressive to you about about that story?

725
00:34:15,160 --> 00:34:17,960
Speaker 11: Well, it was not just you know, first of all,

726
00:34:18,600 --> 00:34:22,200
Speaker 11: it seems like almost every everybody you know knows somebody

727
00:34:22,280 --> 00:34:25,759
Speaker 11: who's had the converter off their car stolen because they've

728
00:34:25,800 --> 00:34:28,600
Speaker 11: become so valuable over the past five or so years,

729
00:34:28,680 --> 00:34:32,799
Speaker 11: maybe longer. But it was also really fascinating to see

730
00:34:32,800 --> 00:34:36,040
Speaker 11: the kind of illicit supply chain and the way that

731
00:34:36,080 --> 00:34:41,280
Speaker 11: it ran, you know, through supposedly this a chop shop

732
00:34:41,280 --> 00:34:44,360
Speaker 11: in New Jersey and then and then carrying on too

733
00:34:44,440 --> 00:34:46,200
Speaker 11: Asia and possibly in Japan.

734
00:34:46,280 --> 00:34:49,200
Speaker 6: I believe it was was it is like a scene

735
00:34:49,200 --> 00:34:52,279
Speaker 6: out of remember the show Fargo. Yes, it's like a

736
00:34:52,320 --> 00:34:56,800
Speaker 6: whole season of Fargo baked into this magazine article. For you, Jemy,

737
00:34:56,800 --> 00:34:59,239
Speaker 6: what was another favorite of yours.

738
00:34:58,920 --> 00:35:03,759
Speaker 11: Of articles in the Yeah, I think certainly one of

739
00:35:03,800 --> 00:35:07,040
Speaker 11: the ones that stands out is the sneaker story that

740
00:35:07,040 --> 00:35:11,200
Speaker 11: that also went live today that looked at what what

741
00:35:11,280 --> 00:35:17,200
Speaker 11: looked what looks like something like a Ponzi scheme for sneakers,

742
00:35:17,440 --> 00:35:26,279
Speaker 11: almost the you know the yes they they essentially we

743
00:35:26,320 --> 00:35:29,440
Speaker 11: had somebody who is taking options bets on sneakers. So

744
00:35:29,480 --> 00:35:32,200
Speaker 11: when a when a coveted sneaker was about to be

745
00:35:32,239 --> 00:35:34,759
Speaker 11: released four months down the road, one of the big

746
00:35:34,760 --> 00:35:38,040
Speaker 11: shoe companies made an announcement. This is Michael Malexa Day

747
00:35:38,080 --> 00:35:41,040
Speaker 11: of Zade Kicks had a business where he'd say, okay,

748
00:35:41,080 --> 00:35:44,319
Speaker 11: we can place your orders now. This is how much

749
00:35:44,400 --> 00:35:47,359
Speaker 11: we'll charge you, and in four or five months, we'll

750
00:35:47,400 --> 00:35:49,720
Speaker 11: send you your shoes at the price, at a price

751
00:35:49,760 --> 00:35:53,200
Speaker 11: that you know might be about what the company is

752
00:35:53,239 --> 00:35:56,160
Speaker 11: selling them for. But because sneakers are now resold and

753
00:35:56,200 --> 00:35:58,600
Speaker 11: their values go up depending on how hot they are,

754
00:35:58,800 --> 00:36:01,040
Speaker 11: if you can lock in a good price early on,

755
00:36:01,400 --> 00:36:03,400
Speaker 11: you're going to be pretty excited. So he was selling

756
00:36:03,440 --> 00:36:07,680
Speaker 11: people these pre sales and eventually he reached a shoe

757
00:36:07,719 --> 00:36:10,760
Speaker 11: that was so hot as the Air Jordan cool Grade eleven.

758
00:36:10,800 --> 00:36:16,000
Speaker 11: I believe that that they couldn't. He had so many

759
00:36:16,120 --> 00:36:18,600
Speaker 11: orders that it was going to be impossible to fill them,

760
00:36:18,680 --> 00:36:21,799
Speaker 11: and the whole business came crashing down. He himself had

761
00:36:21,840 --> 00:36:24,320
Speaker 11: to what basically went to the US attorney and said,

762
00:36:25,239 --> 00:36:28,120
Speaker 11: you know, I'm in over my head, and he.

763
00:36:28,160 --> 00:36:30,520
Speaker 2: Went into hiding for a while, right yeah, I.

764
00:36:30,440 --> 00:36:31,760
Speaker 11: Mean because he was look ahead.

765
00:36:31,840 --> 00:36:33,600
Speaker 6: So many people mad at him, and we do not

766
00:36:33,880 --> 00:36:36,960
Speaker 6: want to mess with sneaker sneakerheads want their Air Jordans,

767
00:36:37,400 --> 00:36:39,719
Speaker 6: and when they don't get them, they get very mad.

768
00:36:39,760 --> 00:36:42,920
Speaker 6: So what's interesting about this one is he had like

769
00:36:43,080 --> 00:36:47,439
Speaker 6: sixty thousand boxes worth of shoes, right Jeremy, and they're

770
00:36:47,480 --> 00:36:48,960
Speaker 6: in the process of liquidating them.

771
00:36:48,960 --> 00:36:49,200
Speaker 5: Still.

772
00:36:49,200 --> 00:36:52,000
Speaker 6: The trial he got postponed actually to see how much

773
00:36:53,000 --> 00:36:55,799
Speaker 6: they can actually make off his inventory that he did have.

774
00:36:56,840 --> 00:36:59,720
Speaker 11: He's in bankruptcy proceedings and they have a receiver who's

775
00:36:59,760 --> 00:37:03,680
Speaker 11: sent like going through the warehouse getting basically recovering as

776
00:37:03,760 --> 00:37:05,279
Speaker 11: much value as it can. You can buy some of

777
00:37:05,320 --> 00:37:07,520
Speaker 11: the sneakers on eBay, So.

778
00:37:07,440 --> 00:37:09,560
Speaker 6: I'll mention the other one that I like, you're ready

779
00:37:09,600 --> 00:37:10,080
Speaker 6: for this one.

780
00:37:10,160 --> 00:37:12,279
Speaker 4: I'm amazed by the way just keep they go for

781
00:37:12,320 --> 00:37:13,399
Speaker 4: such a high amount of money.

782
00:37:13,440 --> 00:37:15,680
Speaker 5: They're such cheap, kind of trashy.

783
00:37:15,760 --> 00:37:17,440
Speaker 2: We've been playing on stock x a little bit.

784
00:37:17,600 --> 00:37:20,480
Speaker 5: Anyway, how scare you? I mean, look, some sneakers are

785
00:37:20,520 --> 00:37:21,360
Speaker 5: very cool. I'm not saying that.

786
00:37:21,400 --> 00:37:24,240
Speaker 4: I'm just saying they're very inexpensive to make and often

787
00:37:25,040 --> 00:37:27,400
Speaker 4: sewn together by like kids in Malaysia, I know.

788
00:37:27,480 --> 00:37:28,920
Speaker 5: So it's unbelievable.

789
00:37:28,920 --> 00:37:30,319
Speaker 6: Did they go for tow But then as you learned

790
00:37:30,360 --> 00:37:32,680
Speaker 6: an air you know, my son steps into them and

791
00:37:32,719 --> 00:37:33,920
Speaker 6: they go to a different place.

792
00:37:34,000 --> 00:37:37,120
Speaker 2: Right, So that was a great, great, great movie.

793
00:37:37,440 --> 00:37:39,880
Speaker 6: Okay, So the other story that I just while we

794
00:37:39,880 --> 00:37:42,520
Speaker 6: were talking about the heist issue cover to cover beat

795
00:37:42,560 --> 00:37:44,839
Speaker 6: reads We're trying to steal your summer here. The other

796
00:37:44,880 --> 00:37:47,040
Speaker 6: one I will bring up that we also published today

797
00:37:47,080 --> 00:37:48,320
Speaker 6: is about the Rhino.

798
00:37:49,200 --> 00:37:52,880
Speaker 5: Yeah, but this is another one that's just bad people

799
00:37:53,760 --> 00:37:54,720
Speaker 5: do this kind of stuff.

800
00:37:54,760 --> 00:37:58,359
Speaker 6: Well, okay, so the rhino is now worth more dead

801
00:37:58,680 --> 00:38:01,080
Speaker 6: than alive because of the value of its horn, which

802
00:38:01,120 --> 00:38:04,919
Speaker 6: gets can get about forty thousand bucks in the black market.

803
00:38:05,520 --> 00:38:06,680
Speaker 5: All this trade is illegal.

804
00:38:07,440 --> 00:38:10,520
Speaker 6: So the effort that we write about in the story

805
00:38:11,120 --> 00:38:15,960
Speaker 6: is the good guys tranquilize rhinos in Africa now, many

806
00:38:16,000 --> 00:38:19,480
Speaker 6: of which are in Kruger National Parks South Africa. Tranquilize

807
00:38:19,480 --> 00:38:22,440
Speaker 6: them and then actually take a chainsaw and remove the

808
00:38:22,520 --> 00:38:26,240
Speaker 6: horn rhinos. Okay, turns out horn just like your fingernail.

809
00:38:26,239 --> 00:38:28,840
Speaker 6: It's going to grow back. Takes about five years to

810
00:38:28,880 --> 00:38:30,960
Speaker 6: do so, and in that time you can keep the

811
00:38:31,040 --> 00:38:35,480
Speaker 6: rhino alive because it's not enticing a poacher.

812
00:38:35,239 --> 00:38:37,399
Speaker 2: Right versus poachers who were just killed them, right for them.

813
00:38:37,280 --> 00:38:40,400
Speaker 6: To just let it go exactly. So pretty frightening stuff

814
00:38:40,880 --> 00:38:44,520
Speaker 6: to think about how endangered the African rhino is now

815
00:38:44,880 --> 00:38:49,200
Speaker 6: become because of the interest in poaching, but also this

816
00:38:49,360 --> 00:38:51,680
Speaker 6: you know, unexpected effort. And the story goes through a

817
00:38:51,719 --> 00:38:55,400
Speaker 6: lot of different characters who are all wrapped up in this,

818
00:38:55,440 --> 00:39:00,200
Speaker 6: from the people who have gigantic reserves. To even keep

819
00:39:00,200 --> 00:39:02,799
Speaker 6: them runing alive, they have to have security forces and

820
00:39:02,840 --> 00:39:04,560
Speaker 6: so that's part of the reason why it's so expensive.

821
00:39:04,800 --> 00:39:07,440
Speaker 2: I'm always curious, Jeremy, And forgive me, I think I

822
00:39:07,440 --> 00:39:09,040
Speaker 2: said Keener at the beginning, but I'm just having a

823
00:39:09,080 --> 00:39:11,920
Speaker 2: Friday Bran Jeremy Kean, So what is this? That's my

824
00:39:12,000 --> 00:39:15,120
Speaker 2: nickname Okay, so I'm just going to think, so, what's

825
00:39:15,280 --> 00:39:17,560
Speaker 2: what's the process when you guys are putting this together.

826
00:39:17,680 --> 00:39:19,920
Speaker 2: I think I've talked to Joel about it in the past,

827
00:39:19,920 --> 00:39:21,959
Speaker 2: but I mean I can imagine just the stories coming

828
00:39:22,000 --> 00:39:24,359
Speaker 2: at you guys, because it's just such a cool way

829
00:39:24,400 --> 00:39:26,440
Speaker 2: of telling a story. I feel like each one is

830
00:39:26,440 --> 00:39:28,200
Speaker 2: cinematic in its own right.

831
00:39:28,840 --> 00:39:32,399
Speaker 11: Absolutely, And you know, some of it is not long

832
00:39:32,440 --> 00:39:34,600
Speaker 11: after we put the last one to bed we start

833
00:39:34,640 --> 00:39:38,120
Speaker 11: thinking about, Okay, an idea will come in. Maybe we

834
00:39:38,160 --> 00:39:39,640
Speaker 11: know it's going to take four or five months to

835
00:39:39,680 --> 00:39:42,359
Speaker 11: report out, and right there, okay, great, let's lock it in.

836
00:39:42,400 --> 00:39:44,600
Speaker 11: And it's you know, it's an issue where we have

837
00:39:44,800 --> 00:39:46,799
Speaker 11: a lot of great people at Bloomberg News who are

838
00:39:46,800 --> 00:39:49,720
Speaker 11: working on, you know, different stories and finance and crypto

839
00:39:49,960 --> 00:39:54,200
Speaker 11: in supply chain thefts that that come our way, that

840
00:39:54,200 --> 00:39:56,319
Speaker 11: that we think this is a great enterprise story. We

841
00:39:56,360 --> 00:39:58,120
Speaker 11: want to go along on it and go deep. Maybe

842
00:39:58,120 --> 00:39:59,920
Speaker 11: there's a video component, you know, so that kind of

843
00:40:00,040 --> 00:40:02,719
Speaker 11: landing happens as we go along. It's also one that

844
00:40:02,800 --> 00:40:06,200
Speaker 11: freelance contributors often are eager to work on because crime

845
00:40:06,280 --> 00:40:09,200
Speaker 11: stories are there's really a lot of fun material to

846
00:40:09,239 --> 00:40:13,920
Speaker 11: dig into sometimes or just dramatic material. And you know,

847
00:40:13,960 --> 00:40:16,600
Speaker 11: the other thing is, even just as I've been gathering

848
00:40:17,280 --> 00:40:21,040
Speaker 11: a little quirky stories for for that one spread that

849
00:40:21,120 --> 00:40:24,640
Speaker 11: we talked, we talked about off the top, other ideas

850
00:40:24,680 --> 00:40:27,760
Speaker 11: come out that that could be longer, you know, longer

851
00:40:27,800 --> 00:40:29,960
Speaker 11: features that we might want to assign down the road.

852
00:40:30,000 --> 00:40:31,399
Speaker 11: So it's something that we, you know, we start thinking

853
00:40:31,440 --> 00:40:33,640
Speaker 11: about year round, and we think about different formats that

854
00:40:33,680 --> 00:40:35,360
Speaker 11: we can do things that we have a great comic

855
00:40:35,560 --> 00:40:39,000
Speaker 11: in this issue and it's right breakdown about a jewelry

856
00:40:39,080 --> 00:40:41,080
Speaker 11: heist in Los Angeles, so.

857
00:40:41,120 --> 00:40:43,799
Speaker 6: So much much in the in the in the heist

858
00:40:43,880 --> 00:40:47,160
Speaker 6: week that we live through here, we look forward to

859
00:40:47,160 --> 00:40:49,000
Speaker 6: this one like it's truly like do you.

860
00:40:49,000 --> 00:40:52,160
Speaker 4: Worry about glorifying some heists to kind of encourage people

861
00:40:52,200 --> 00:40:52,719
Speaker 4: to want to do it?

862
00:40:52,760 --> 00:40:57,920
Speaker 6: But I think about so okay, counterpoint here. Another story

863
00:40:58,000 --> 00:41:02,359
Speaker 6: that we published today is about this bank robbing Brazilian

864
00:41:02,560 --> 00:41:06,080
Speaker 6: gang called the PCC that came out of prison, right

865
00:41:06,320 --> 00:41:09,880
Speaker 6: and it is truly like a story out of the

866
00:41:09,920 --> 00:41:12,880
Speaker 6: movie Heat or something like it. And they're actually inspired

867
00:41:12,960 --> 00:41:16,640
Speaker 6: by Hollywood films and that's how it informed sort of

868
00:41:16,680 --> 00:41:19,640
Speaker 6: how they go about doing what they do. I'm gonna

869
00:41:19,640 --> 00:41:21,279
Speaker 6: say that those are more on the bad guys skill.

870
00:41:21,680 --> 00:41:25,120
Speaker 6: There's also an interesting bank robbing story from Lebanon where

871
00:41:25,160 --> 00:41:27,719
Speaker 6: people are stealing back the money that they put in

872
00:41:27,760 --> 00:41:29,800
Speaker 6: the bank and can't get out because of capital country

873
00:41:29,840 --> 00:41:33,160
Speaker 6: for Dad's operation. There you go. So it's a very

874
00:41:33,200 --> 00:41:36,560
Speaker 6: grey area and I, you know, enjoyed giving you these

875
00:41:36,600 --> 00:41:38,960
Speaker 6: stories so that you can steal your summer with a

876
00:41:39,000 --> 00:41:39,680
Speaker 6: bunch of ice stories.

877
00:41:40,040 --> 00:41:44,880
Speaker 2: Where's the van, Where's the van? Joe Webber, Jeremy Keane.

878
00:41:45,040 --> 00:41:47,719
Speaker 2: It is an incredible issue. It always is. It's the

879
00:41:47,800 --> 00:41:50,800
Speaker 2: heist issue. It's a double issue on newstands tomorrow, online

880
00:41:50,800 --> 00:41:54,080
Speaker 2: at Bloomberg dot com and on the Bloomberg terminal. Thanks guys,

881
00:41:59,360 --> 00:41:59,920
Speaker 2: a journal.

882
00:42:01,080 --> 00:42:02,080
Speaker 4: No, how about you let me drive?

883
00:42:02,360 --> 00:42:04,359
Speaker 5: Oh no, no, no, no, who's going to drive?

884
00:42:05,440 --> 00:42:05,800
Speaker 3: Honey?

885
00:42:05,920 --> 00:42:07,839
Speaker 5: Please, I'll do the driving, gravels.

886
00:42:08,239 --> 00:42:09,640
Speaker 6: Let's mate, I want to try it.

887
00:42:10,120 --> 00:42:12,800
Speaker 4: Try it's a good question.

888
00:42:16,600 --> 00:42:19,200
Speaker 1: This is the drive to the Globes.

889
00:42:18,719 --> 00:42:19,480
Speaker 9: Dot com for me.

890
00:42:19,560 --> 00:42:23,000
Speaker 1: I think we'll buy an I'm on Bloomberg Radio.

891
00:42:23,080 --> 00:42:26,040
Speaker 2: All right, everybody, we've got just under eighteen minutes left

892
00:42:26,040 --> 00:42:28,600
Speaker 2: in today's trading session. Time to get to it. Carol

893
00:42:28,640 --> 00:42:31,160
Speaker 2: Mester along with Matthew Miller in for Tim Stanovich, as

894
00:42:31,200 --> 00:42:33,759
Speaker 2: you know here on Bloomberg Business Week with us as

895
00:42:33,760 --> 00:42:36,160
Speaker 2: Sonya Meskin, she just walked in our studio. She's head

896
00:42:36,160 --> 00:42:39,560
Speaker 2: of US Macro at bny Mail and Investment Management here

897
00:42:39,600 --> 00:42:42,279
Speaker 2: in our Bloomberg Interactive Brokers studio on a day where

898
00:42:42,600 --> 00:42:44,319
Speaker 2: stocks aren't doing a whole heck of a lot, What

899
00:42:44,520 --> 00:42:47,319
Speaker 2: really is the stories, what's going on when it comes

900
00:42:47,320 --> 00:42:49,040
Speaker 2: to the treasury curve and what we're seeing in the

901
00:42:49,080 --> 00:42:52,760
Speaker 2: move up in yields. Sonya, you do look at big

902
00:42:52,880 --> 00:42:55,640
Speaker 2: US macro stories what it means for the investment environment.

903
00:42:55,960 --> 00:42:58,000
Speaker 2: So what do you make of this move up in yields?

904
00:42:58,239 --> 00:43:00,320
Speaker 10: Yeah, you know, it makes a lot of sense to me. Atally,

905
00:43:00,440 --> 00:43:03,840
Speaker 10: I would say it's consistent with our view of potential

906
00:43:03,920 --> 00:43:08,040
Speaker 10: upside in inflation remaining still at least in core. And

907
00:43:08,120 --> 00:43:11,759
Speaker 10: I think that the Central bank talk, both from the

908
00:43:11,760 --> 00:43:15,680
Speaker 10: Federal Reserve officials today and the ECB are consistent with

909
00:43:15,760 --> 00:43:17,000
Speaker 10: the move higher in yields.

910
00:43:17,400 --> 00:43:19,520
Speaker 4: Did you see Bill Dudley's piece today? He wrote for

911
00:43:19,840 --> 00:43:23,200
Speaker 4: Bloomberg Opinion and said he thinks treasuries should be about

912
00:43:23,239 --> 00:43:25,720
Speaker 4: four and a half percent in the I guess medium

913
00:43:25,800 --> 00:43:32,040
Speaker 4: term because of well a few reasons, the premium should

914
00:43:32,080 --> 00:43:34,920
Speaker 4: be higher. Inflation he thinks is going to be two

915
00:43:35,000 --> 00:43:38,480
Speaker 4: percent or more in the future, and the FED has

916
00:43:38,520 --> 00:43:40,440
Speaker 4: to keep raising rates again.

917
00:43:40,480 --> 00:43:42,880
Speaker 10: That makes a lot of sense, the term premium that

918
00:43:42,880 --> 00:43:45,280
Speaker 10: has been suppressed quite a bit in the previous cycle,

919
00:43:45,560 --> 00:43:49,000
Speaker 10: but of course now uncertainty around inflation remains elevated, and

920
00:43:49,040 --> 00:43:52,280
Speaker 10: we see it not just in the market based measures,

921
00:43:52,280 --> 00:43:55,480
Speaker 10: we also see it in survey based measures. For example,

922
00:43:55,560 --> 00:44:00,520
Speaker 10: the Michigan Consumer Survey, inflation expectations are quite dispersed, a

923
00:44:00,600 --> 00:44:02,719
Speaker 10: bit more so than in the previous business cycle. And

924
00:44:02,760 --> 00:44:05,080
Speaker 10: I think that's very consistent with what Bill Dudley said

925
00:44:05,080 --> 00:44:06,160
Speaker 10: about the term premium.

926
00:44:06,239 --> 00:44:08,680
Speaker 5: And oh, way, did you work for Bill Dudley before?

927
00:44:08,840 --> 00:44:09,160
Speaker 3: Correct?

928
00:44:09,360 --> 00:44:11,319
Speaker 5: Okay, I thought I knew you were at the New

929
00:44:11,400 --> 00:44:13,520
Speaker 5: York Fed. I didn't know when it was so.

930
00:44:13,680 --> 00:44:15,560
Speaker 10: But I do agree with him independently of how we

931
00:44:15,640 --> 00:44:16,360
Speaker 10: worked for him.

932
00:44:17,160 --> 00:44:18,880
Speaker 5: Not just agreeing with her former boss.

933
00:44:19,280 --> 00:44:20,680
Speaker 10: Perhaps he actually got this from me.

934
00:44:22,719 --> 00:44:25,759
Speaker 2: Well, what's the risk then, in terms of financial assets?

935
00:44:26,080 --> 00:44:28,600
Speaker 10: I think the risk is really frankly inequities, and I

936
00:44:28,640 --> 00:44:31,640
Speaker 10: think I'd be quite cautious about and very mindful of

937
00:44:31,719 --> 00:44:35,680
Speaker 10: equity selection process here, because higher term premium and higher

938
00:44:35,719 --> 00:44:39,200
Speaker 10: real rates are not necessarily equity's friend unless we can,

939
00:44:39,239 --> 00:44:42,759
Speaker 10: of course, maintain very healthy rates of real growth. Right.

940
00:44:42,800 --> 00:44:45,160
Speaker 2: What if we get that soft landing right and we

941
00:44:45,200 --> 00:44:48,200
Speaker 2: don't see some kind of significant recession either deeper wide.

942
00:44:49,400 --> 00:44:52,640
Speaker 4: You know, we had GDP for the first quarter revised

943
00:44:52,719 --> 00:44:55,400
Speaker 4: up to two percent today. That's exactly big revision. We

944
00:44:55,400 --> 00:44:57,239
Speaker 4: were looking at one point three percent. I know it's

945
00:44:57,239 --> 00:44:59,040
Speaker 4: backward looking, but still it's kind of exciting.

946
00:44:59,160 --> 00:45:01,840
Speaker 10: It's actually really exciting given where stocks war and where

947
00:45:01,880 --> 00:45:05,160
Speaker 10: expectations for the recession were in the certain fourth quarters

948
00:45:05,200 --> 00:45:07,439
Speaker 10: of last year. Remember what stocks were doing then, Yeah,

949
00:45:07,520 --> 00:45:09,279
Speaker 10: and then instead of getting a recession, we've got a

950
00:45:09,320 --> 00:45:10,719
Speaker 10: pretty healthy GDP print, right.

951
00:45:10,719 --> 00:45:12,319
Speaker 4: I mean, I was talking to Jess Mattin about this

952
00:45:12,360 --> 00:45:15,200
Speaker 4: today from our stocks team, and she has been pointing

953
00:45:15,200 --> 00:45:16,680
Speaker 4: out to Carol on me over the last few days,

954
00:45:16,920 --> 00:45:19,640
Speaker 4: we thought earnings were going to drop eight percent and

955
00:45:19,760 --> 00:45:20,719
Speaker 4: change in Q one.

956
00:45:20,880 --> 00:45:23,160
Speaker 5: Now they didn't. They fell but only three percent.

957
00:45:23,360 --> 00:45:25,719
Speaker 4: And now we're about to get into Q two earning season,

958
00:45:25,760 --> 00:45:27,680
Speaker 4: and we're looking for earnings to drop another eight percent

959
00:45:27,800 --> 00:45:32,160
Speaker 4: if we have another you know, big beat that like

960
00:45:32,200 --> 00:45:34,279
Speaker 4: we did before, I mean, maybe this will be a

961
00:45:34,360 --> 00:45:35,000
Speaker 4: soft landing.

962
00:45:35,200 --> 00:45:37,360
Speaker 10: I do think that there may be a disconnecting fact

963
00:45:37,360 --> 00:45:40,640
Speaker 10: between what the old the negativity that's been priced by

964
00:45:41,239 --> 00:45:44,480
Speaker 10: analysts formally into earnings expectations, and what the market is

965
00:45:44,480 --> 00:45:45,640
Speaker 10: actually pricing in right now.

966
00:45:45,920 --> 00:45:49,080
Speaker 2: But do you have faith in consumers that they keep spending,

967
00:45:49,640 --> 00:45:52,680
Speaker 2: idea they're going to be hurt maybe because of higher

968
00:45:52,719 --> 00:45:55,560
Speaker 2: school payments or just things still costing a lot and

969
00:45:55,600 --> 00:45:59,160
Speaker 2: making choices. Ex are cheaper now, ex are cheaper well

970
00:45:59,400 --> 00:46:03,719
Speaker 2: siter loans for both, but they've also had a lot

971
00:46:03,719 --> 00:46:05,719
Speaker 2: of money thrown at them post pandemic, and we keep

972
00:46:05,800 --> 00:46:08,280
Speaker 2: talking about okay, home balance sheets are still pretty strong,

973
00:46:08,400 --> 00:46:09,960
Speaker 2: but does that still continue.

974
00:46:10,080 --> 00:46:12,200
Speaker 10: That's a big question yes, because the consumer is really

975
00:46:12,239 --> 00:46:15,960
Speaker 10: propelling all of this. It's a huge tailwind to potential

976
00:46:16,000 --> 00:46:18,960
Speaker 10: you know, issues with across banks and credit, et cetera.

977
00:46:19,400 --> 00:46:21,600
Speaker 2: I think that are you guys making a bet yet

978
00:46:21,600 --> 00:46:23,320
Speaker 2: on why the consumers start to fall apart.

979
00:46:23,920 --> 00:46:27,920
Speaker 10: We're expecting the consumer to potentially soften when the excess

980
00:46:27,920 --> 00:46:30,600
Speaker 10: savings run out, which have been sturdier I think than.

981
00:46:30,520 --> 00:46:31,840
Speaker 2: People had feared as well.

982
00:46:32,400 --> 00:46:35,760
Speaker 10: But we also think that look most of the segments

983
00:46:35,760 --> 00:46:38,440
Speaker 10: where excess savings have run out or close to our

984
00:46:38,760 --> 00:46:44,480
Speaker 10: segments with there's lower I think wages are technically lower.

985
00:46:44,520 --> 00:46:47,920
Speaker 10: These are lower skilled potential workers, but that's also where

986
00:46:48,200 --> 00:46:50,879
Speaker 10: we have the tightest labor markets in a long time

987
00:46:51,000 --> 00:46:53,040
Speaker 10: and where wage growth has been the most robust.

988
00:46:53,480 --> 00:46:55,879
Speaker 4: Usually real conflicting data around the consumer, right because there's

989
00:46:55,880 --> 00:47:00,360
Speaker 4: still over a trillion dollars in excess savings. On the

990
00:47:00,360 --> 00:47:03,120
Speaker 4: other hand, they're putting consumers are putting a lot more

991
00:47:03,160 --> 00:47:06,960
Speaker 4: on credit cards. We're starting to see delinquencies, especially in.

992
00:47:06,880 --> 00:47:08,040
Speaker 5: The auto loan area.

993
00:47:08,360 --> 00:47:11,920
Speaker 4: So I don't know what I need to have on

994
00:47:11,960 --> 00:47:15,160
Speaker 4: my dashboard, But what do you look at to sort

995
00:47:15,160 --> 00:47:16,440
Speaker 4: of gauge the health of the consumer.

996
00:47:16,640 --> 00:47:18,799
Speaker 10: I think credit cards are that you mentioned are really

997
00:47:18,840 --> 00:47:21,160
Speaker 10: really important area to look at. And if you guys

998
00:47:21,160 --> 00:47:23,840
Speaker 10: looked at the Streuss test, the bank stress test results

999
00:47:23,840 --> 00:47:26,200
Speaker 10: they came into it today, credit cards were one of

1000
00:47:26,239 --> 00:47:29,040
Speaker 10: the major areas of risk, and I think that that's

1001
00:47:29,360 --> 00:47:31,920
Speaker 10: a very good gauge to look at going forward. Now,

1002
00:47:31,920 --> 00:47:34,000
Speaker 10: of course, the delinquencies are coming off with very very

1003
00:47:34,000 --> 00:47:37,200
Speaker 10: low levels, and it's very difficult to say, well, when

1004
00:47:37,320 --> 00:47:40,200
Speaker 10: is this going to tip over? And potentially tip over

1005
00:47:40,320 --> 00:47:42,400
Speaker 10: into a recessionary kind of levels.

1006
00:47:43,280 --> 00:47:45,279
Speaker 2: But yeah, that's a good area to look at. What

1007
00:47:45,360 --> 00:47:47,239
Speaker 2: might we be missing or what is the thing that

1008
00:47:47,239 --> 00:47:49,320
Speaker 2: when you guys sit down with your team and say, okay,

1009
00:47:49,480 --> 00:47:51,360
Speaker 2: you know, we think we've got it, but don't forget

1010
00:47:51,360 --> 00:47:52,920
Speaker 2: to keep a watching this is it regionals?

1011
00:47:53,280 --> 00:47:53,440
Speaker 1: Is it?

1012
00:47:53,480 --> 00:47:54,719
Speaker 2: As you said, the credit card debt?

1013
00:47:54,760 --> 00:47:55,239
Speaker 5: What is it?

1014
00:47:55,320 --> 00:47:59,200
Speaker 10: I think it's private credit actually, because that's an area

1015
00:47:59,200 --> 00:48:01,480
Speaker 10: where there's less pop look data available and it's very

1016
00:48:01,520 --> 00:48:02,960
Speaker 10: hard to triangular what's going on there.

1017
00:48:03,000 --> 00:48:05,839
Speaker 2: What specifically are you concerned about? We are kind of

1018
00:48:06,040 --> 00:48:06,560
Speaker 2: in on that.

1019
00:48:06,760 --> 00:48:09,160
Speaker 10: Well, that may be an unknown unknown In fact, right,

1020
00:48:09,520 --> 00:48:13,080
Speaker 10: everyone was very concerned about CIRE earlier this year. The

1021
00:48:13,280 --> 00:48:16,480
Speaker 10: issue with cre is that it's it may it's not

1022
00:48:16,600 --> 00:48:19,200
Speaker 10: as obviously as big as the mortgage business was in

1023
00:48:19,200 --> 00:48:21,279
Speaker 10: two thousand and eight in terms of commercial real estate.

1024
00:48:21,320 --> 00:48:23,040
Speaker 10: You're talking yeah, yeah, commercial real estate.

1025
00:48:23,080 --> 00:48:23,480
Speaker 2: Sorry.

1026
00:48:24,160 --> 00:48:26,280
Speaker 10: But on the other hand, there may be other areas

1027
00:48:26,280 --> 00:48:30,759
Speaker 10: that are where there's even less publicly available data that

1028
00:48:30,800 --> 00:48:33,160
Speaker 10: are still within private credit and some of.

1029
00:48:33,200 --> 00:48:36,600
Speaker 4: The what exactly is the concern because people have been

1030
00:48:36,640 --> 00:48:39,640
Speaker 4: getting in big time to private credit, and I guess

1031
00:48:39,719 --> 00:48:43,160
Speaker 4: the problem is the loans that they made prior to

1032
00:48:43,200 --> 00:48:46,080
Speaker 4: this interest rate rise. Those are floating rate loans, so

1033
00:48:46,120 --> 00:48:50,239
Speaker 4: they're the borrowers are maybe going to go bust on mass?

1034
00:48:50,360 --> 00:48:51,000
Speaker 5: Is that the worry?

1035
00:48:51,480 --> 00:48:53,040
Speaker 10: I think that maybe one of the worry. Yes, I

1036
00:48:53,080 --> 00:48:54,960
Speaker 10: would agree with that. I think that a lot of

1037
00:48:55,000 --> 00:49:00,400
Speaker 10: the private credit intermediors and credit providers may act actually

1038
00:49:00,480 --> 00:49:05,440
Speaker 10: have fairly robust processes in place to protect themselves against

1039
00:49:05,480 --> 00:49:08,480
Speaker 10: the media default, and they can potentially turn out lending.

1040
00:49:08,800 --> 00:49:12,280
Speaker 10: But who can and who can't is a difficult question.

1041
00:49:12,719 --> 00:49:17,160
Speaker 2: So like real estate top tier, probably okay, everybody below

1042
00:49:17,160 --> 00:49:19,400
Speaker 2: it maybe not so much. Same thing for private credit

1043
00:49:19,600 --> 00:49:22,200
Speaker 2: top tier, where the screening process is really clean and

1044
00:49:22,719 --> 00:49:25,920
Speaker 2: top top ranked, probably okay, but there might be some

1045
00:49:25,960 --> 00:49:28,240
Speaker 2: other problem. Is it systemic the problems?

1046
00:49:28,560 --> 00:49:31,360
Speaker 10: Well, that's another big question, right, How systemic would it

1047
00:49:31,400 --> 00:49:34,960
Speaker 10: be if it were to actually tip over into you know,

1048
00:49:35,040 --> 00:49:36,080
Speaker 10: crisis type levels?

1049
00:49:37,239 --> 00:49:37,719
Speaker 2: Done?

1050
00:49:37,920 --> 00:49:39,240
Speaker 5: Yeah, it's pretty exciting.

1051
00:49:39,440 --> 00:49:43,239
Speaker 4: I mean, I hope obviously that this doom doesn't happen, right,

1052
00:49:43,320 --> 00:49:43,960
Speaker 4: I don't want.

1053
00:49:43,800 --> 00:49:44,239
Speaker 5: To see that.

1054
00:49:45,000 --> 00:49:48,759
Speaker 4: But it's it's so opaque, you know, we don't get

1055
00:49:48,800 --> 00:49:52,040
Speaker 4: the data that we need to feel comfortable in private credit.

1056
00:49:51,880 --> 00:49:54,160
Speaker 2: Exactly exactly well, it's the whole thing with the higher

1057
00:49:54,200 --> 00:49:56,000
Speaker 2: rate environment, the higher we go right, as we talked

1058
00:49:56,000 --> 00:49:57,839
Speaker 2: about that, as the water goes out, you find out, right,

1059
00:49:57,880 --> 00:50:00,359
Speaker 2: But who doesn't have on screening trunks how.

1060
00:50:00,280 --> 00:50:02,200
Speaker 5: It goes I think that's what it is. I can't

1061
00:50:02,239 --> 00:50:03,680
Speaker 5: remember every Core corp.

1062
00:50:05,239 --> 00:50:07,960
Speaker 2: This was fine, Come back soon, Sonya Mescid, she's head

1063
00:50:07,960 --> 00:50:10,960
Speaker 2: of US Macrover at bny Mellon Investment Management. In studio.

1064
00:50:12,120 --> 00:50:16,759
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,

1065
00:50:16,880 --> 00:50:20,600
Speaker 1: and anywhere else you get your podcast. Listen live weekday

1066
00:50:20,640 --> 00:50:24,240
Speaker 1: afternoons from three to six Eastern on Bloomberg dot com,

1067
00:50:24,280 --> 00:50:27,600
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

1068
00:50:27,680 --> 00:50:30,719
Speaker 1: You can also watch us live every weekday on YouTube

1069
00:50:30,840 --> 00:50:33,080
Speaker 1: and always on the Bloomberg journalone