WEBVTT - Silicon Valley Is Listening To Your Intimate Moments0- 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul Swinge you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits, each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.160 at Bloomberg dot com. We were going to talk with 0:00:20.200 --> 0:00:23.400 Austin Carr, who is a Bloomberg technology reporter next and 0:00:23.440 --> 0:00:25.840 he was going to talk about a story Silicon Valley 0:00:25.920 --> 0:00:29.240 is listening to your most intimate moments. But then we 0:00:29.360 --> 0:00:33.639 found out that Austin's fiancee's name is Alexa, and so 0:00:33.760 --> 0:00:37.600 he is the unicorn that has an Alexa and has 0:00:37.680 --> 0:00:42.880 that horrible dissonance between your soon to be wife's name 0:00:43.159 --> 0:00:47.240 and and the device. How do you function? It's difficult? Um, 0:00:47.280 --> 0:00:49.840 You know that I would say that oftentimes it's unclear 0:00:49.880 --> 0:00:53.000 who I'm talking to, the speaker or my soon topee wife, 0:00:53.479 --> 0:00:56.080 but the speaker often thinks I'm talking to it or her. 0:00:56.680 --> 0:00:58.240 But that actually gets to the heart of the story. 0:00:58.280 --> 0:01:01.520 In this week's issue of the Street, if you don't 0:01:01.560 --> 0:01:05.360 might be pivoting there, uh in that there's accidental triggers 0:01:05.360 --> 0:01:07.440 that happen all the time. If you have a device 0:01:07.480 --> 0:01:09.720 like an Amazon Echo or a Google Home or an 0:01:09.760 --> 0:01:13.320 Apple HomePod, or use Siri um and these recordings are 0:01:13.319 --> 0:01:16.200 submitted to these companies servers and from there, what you 0:01:16.280 --> 0:01:18.880 might not know is they're actually sometimes transcribed by a 0:01:18.959 --> 0:01:22.759 vast network of human listeners to help improve speech recognition 0:01:22.760 --> 0:01:24.800 on these services. This is one of the big privacy 0:01:25.200 --> 0:01:27.840 issues that really we're we're covering in the story. In 0:01:27.840 --> 0:01:31.240 addition to the relationship with my So, what are some 0:01:31.319 --> 0:01:34.640 examples of some of the content I guess our conversation 0:01:34.760 --> 0:01:37.560 that's been picked up and transcribed by these humans? Absolutely, 0:01:37.600 --> 0:01:39.080 I mean, you know, one of the fascinating things. We 0:01:39.160 --> 0:01:42.560 spoke to dozens of contractors everywhere from Ireland to India 0:01:42.640 --> 0:01:44.760 who work on these these programs or have worked on 0:01:44.800 --> 0:01:47.680 them for Apple and Google and Amazon, and it's really 0:01:47.680 --> 0:01:51.000 fascinating and also quite alarming. Some of them described instances 0:01:51.000 --> 0:01:54.880 where they often heard recordings of children sharing personal information 0:01:54.920 --> 0:01:58.080 like phone numbers or street addresses. They overheard couples engaging 0:01:58.080 --> 0:02:01.040 in sexual activity, They heard very of information is happening 0:02:01.040 --> 0:02:03.360 in your your kitchen and bedroom. And I'd say overall, 0:02:03.400 --> 0:02:07.280 they just felt incredibly uncomfortable doing this type of audio transcription, 0:02:07.440 --> 0:02:09.079 so much so that they compared it to something out 0:02:09.120 --> 0:02:12.160 of y On one hand, I get it, you know, 0:02:12.200 --> 0:02:15.359 you don't want someone hearing some things that you might 0:02:15.400 --> 0:02:17.840 say at home or do at home. On the other hand, 0:02:18.000 --> 0:02:20.760 does anyone care? I mean in terms of if someone 0:02:21.200 --> 0:02:24.240 you know in another country or across the sea is 0:02:24.280 --> 0:02:27.440 listening to someone that they don't know do something that 0:02:27.639 --> 0:02:31.960 is inherent to animals, then why why does it matter? Well? 0:02:32.000 --> 0:02:34.360 I think that's the stance that the tech companies really 0:02:34.400 --> 0:02:37.040 took when they set up these systems, which is really interesting, 0:02:37.320 --> 0:02:39.600 um that they basically spent the last couple of years 0:02:39.680 --> 0:02:43.359 being very heavily scrutinized for having privacy issues and collecting 0:02:43.360 --> 0:02:45.320 more data. And this is sort of the next level 0:02:45.360 --> 0:02:47.720 of that data collection. This is voice or audio or 0:02:47.720 --> 0:02:50.360 sonic surveillance in a lot of ways. Uh, And that 0:02:50.440 --> 0:02:54.280 audio was being rerouted to again these data associates who 0:02:54.280 --> 0:02:56.760 are transcribing this material. And the big question is not 0:02:56.840 --> 0:02:58.680 just whether or that's that's ethical, but whether or not 0:02:58.720 --> 0:03:01.600 they properly disclosed it to their customers. You might not 0:03:01.680 --> 0:03:04.000 think it was that significant of an issue, or perhaps 0:03:04.040 --> 0:03:06.160 you don't share that many intimate things if you're talking 0:03:06.160 --> 0:03:08.640 to these devices. I know you mentioned you guys use 0:03:08.720 --> 0:03:12.080 these devices that your your houses too, But the larger 0:03:12.160 --> 0:03:14.920 question is whether even customers knew this was happening. And 0:03:14.919 --> 0:03:17.440 I think that's a really significant privacy issue. So so, 0:03:17.560 --> 0:03:20.079 what are kind of some of the legal ramifications here. 0:03:20.120 --> 0:03:23.880 Do I have an expectation to privacy that extends to 0:03:24.080 --> 0:03:27.079 these devices and I'm guessing that might be different different 0:03:27.080 --> 0:03:29.400 parts of the world. Yeah, I mean, technically you did 0:03:29.400 --> 0:03:32.560 agree to opt into these services, or at least we're 0:03:32.560 --> 0:03:35.480 automatically optimated when you you sign up for let's say, 0:03:35.920 --> 0:03:38.640 at your Apple iPhone. You know, there's those broad terms 0:03:38.640 --> 0:03:41.440 and conditions, which again I'm sure very few people read. 0:03:41.600 --> 0:03:44.640 But somewhere in those they did disclose that Apple could 0:03:44.720 --> 0:03:47.280 use the audio that you submit and collect the recordings 0:03:47.280 --> 0:03:50.040 in order to quote, you know, improve or enhance series 0:03:50.040 --> 0:03:53.200 speech recognition. But they didn't explicitly say that humans might 0:03:53.240 --> 0:03:55.200 be listening to this. I think the assumption that was 0:03:55.840 --> 0:03:59.680 robots were doing the vast majority of these uh, you know, requests, 0:04:00.000 --> 0:04:01.800 and that's what tech companies say that a lot of 0:04:01.800 --> 0:04:05.160 these requests are handled without human input, but they really 0:04:05.200 --> 0:04:07.600 should have disclosed that humans were the ones. That we're 0:04:07.640 --> 0:04:09.080 doing a lot of this work as well. You know, 0:04:09.200 --> 0:04:12.280 millions of recordings per year they're transcribing um and so 0:04:12.320 --> 0:04:15.720 they've updated their terms and conditions to reflect that, which 0:04:15.760 --> 0:04:18.080 is sort of a major disclaimer now that they hadn't 0:04:18.120 --> 0:04:20.800 done that before and perhaps should have. So let's talk 0:04:20.839 --> 0:04:23.240 about what you're gonna do about your soon to be 0:04:23.320 --> 0:04:25.560 wife's name. How is that? How are you going to 0:04:25.640 --> 0:04:27.840 deal with that? You know, I mean, so far we've 0:04:28.400 --> 0:04:33.640 I would say, Amazon is getting better with associate disassociated fance. 0:04:33.720 --> 0:04:35.479 It's not going to change her name. I guess one 0:04:35.480 --> 0:04:38.200 of them will have to, but yeah, no, we will 0:04:38.200 --> 0:04:41.440 say there there is an option for the Amazon Echo 0:04:41.520 --> 0:04:44.080 to change it to respond to Amazon or Echo. For 0:04:44.120 --> 0:04:46.039 some reason, we haven't done that, And I would say 0:04:46.040 --> 0:04:49.400 that sort of captures the broad approached privacy issues that 0:04:49.400 --> 0:04:53.120 that tech companies. But I would say that that's really 0:04:53.160 --> 0:04:54.799 what a lot of you know, there's a few research 0:04:55.080 --> 0:04:59.200 study recently that found that about six of UH user 0:04:59.240 --> 0:05:03.279 surveyed had very major you know serious privacy concerns about 0:05:03.279 --> 0:05:05.320 these devices. At the same time, about a quarter of 0:05:05.360 --> 0:05:07.240 Americans have them in their homes, so there is that 0:05:07.320 --> 0:05:10.039 scuge disparity. And and that's exactly that gets the heart 0:05:10.040 --> 0:05:12.320 of it right, is that people, if they're worried about it, 0:05:12.560 --> 0:05:15.320 they do have an option of not buying it and 0:05:15.400 --> 0:05:17.680 not installing it in their home. So there's sort of 0:05:17.680 --> 0:05:20.680 a question when does it become something more, When is 0:05:20.720 --> 0:05:23.440 it an invasion that goes beyond just you know, you 0:05:23.440 --> 0:05:25.880 can vote with your feet or with your money basically, 0:05:26.240 --> 0:05:28.359 and and to that same extent, you know, what is 0:05:28.360 --> 0:05:31.640 the threshold for companies to collect this data is that, hey, 0:05:31.720 --> 0:05:33.520 we can collect it so long as we're improving it 0:05:33.560 --> 0:05:35.919 for our services or could one day we use it 0:05:35.920 --> 0:05:39.080 for targeted advertising or researcher We talked to just reminded 0:05:39.160 --> 0:05:41.520 us how much information we disclose in these recordings. If 0:05:41.520 --> 0:05:43.880 a baby is crying in the background of a recording, 0:05:44.000 --> 0:05:47.120 they could just they could technically refer that infer that 0:05:47.160 --> 0:05:48.840 you have a family. If you ask a lot of 0:05:48.920 --> 0:05:51.120 questions about football, they think you're a fan of the NFL. 0:05:51.360 --> 0:05:53.880 So you can see how these could build behavior profiles 0:05:54.400 --> 0:05:56.760 for you in the Future. Austin Carr, thank you so 0:05:56.839 --> 0:06:00.000 much for joining us. Fascinating story. Austin to the technology 0:06:00.040 --> 0:06:02.839 Order for Bloomberg News, joining us on Bloomberg Interactive Broker Studio. 0:06:03.000 --> 0:06:05.440 Austin story is featured in the upcoming issue of Bloomberg 0:06:05.440 --> 0:06:07.560 Business Week magazine. You can read it now on the 0:06:07.560 --> 0:06:11.719 Bloomberg and at Bloomberg dot com. Full disclosure, I am 0:06:11.760 --> 0:06:14.080 not that great at programming these things. My ten year 0:06:14.120 --> 0:06:17.720 old son programmed by Alexa to call him lord, and 0:06:17.760 --> 0:06:19.720 so now I have to hear that all the time. 0:06:21.360 --> 0:06:39.480 The chance you've been transcribers the FED meets today, most 0:06:39.480 --> 0:06:42.039 likely it will be boring. That is certainly what they hope, 0:06:42.200 --> 0:06:44.800 but it does study tone going in when it comes 0:06:44.839 --> 0:06:47.640 to trying to figure out what credit returns will look like. 0:06:47.720 --> 0:06:49.680 Jell would we'd joining us now to talk about that 0:06:50.000 --> 0:06:52.400 Head of fixed income in senior portfolio manager at BEMO 0:06:52.520 --> 0:06:55.800 Global Asset Management, overseeing two hundred and sixty billion dollars. 0:06:56.240 --> 0:06:58.200 She's normally based in Miami, but she wanted to see 0:06:58.200 --> 0:07:00.840 what snow looked like, so she came up here to 0:07:01.160 --> 0:07:04.320 our Interactive broker studios. Janelle, I want to start with 0:07:06.000 --> 0:07:09.440 excuse me the outlook for when it comes to credit. 0:07:09.840 --> 0:07:13.080 Investment grade debt is poised for its best annual return 0:07:13.520 --> 0:07:16.640 since two thousand and nine. How much further can it 0:07:16.720 --> 0:07:19.040 go up? Over fourteen percent this year? I think it's 0:07:19.080 --> 0:07:21.920 somewhat remarkable when we look at the total returns um 0:07:22.120 --> 0:07:25.720 we are still very constructive on credit, even with valuations 0:07:25.760 --> 0:07:28.080 where they're at going into two thousand and twenty, and 0:07:28.160 --> 0:07:30.600 a lot of this comes back to the positioning the 0:07:30.680 --> 0:07:33.040 FED accommodation, what we've seen out of earnings, and some 0:07:33.120 --> 0:07:35.560 of the opportunities that exist within some of the specific 0:07:35.640 --> 0:07:38.680 quality buckets. It's interesting here you're still constructive on investment 0:07:38.760 --> 0:07:40.760 grade debt. A lot of folks that we talked to 0:07:40.840 --> 0:07:44.400 are saying, boy, we're so far into this economic cycle. 0:07:44.880 --> 0:07:47.000 You know, might be too late, we might start seeing 0:07:47.040 --> 0:07:50.080 some concerns about credit quality or something along those lines. 0:07:50.240 --> 0:07:52.840 What's kind of the foundation for your view going to 0:07:53.600 --> 0:07:54.920 you are a couple of different things. I think one 0:07:54.960 --> 0:07:56.520 of the things is this year there's been a lot 0:07:56.520 --> 0:07:58.840 of concern about triple bs in particular, but as we 0:07:58.920 --> 0:08:01.880 look at the ratio of grades versus downgrades in and 0:08:02.000 --> 0:08:04.560 out of high yield, it's actually five to one, so 0:08:04.600 --> 0:08:07.720 we've actually seen credit quality moving higher. And the other 0:08:07.800 --> 0:08:10.960 thing is, I think earning surprised flat overall for the year, 0:08:11.040 --> 0:08:14.440 but fairly resilient considering some of the pressures um and 0:08:14.480 --> 0:08:17.520 then with the expectation for earnings growth of ten percent 0:08:17.640 --> 0:08:20.160 next year, even if we see that moderate, it should 0:08:20.200 --> 0:08:23.320 be overall supportive of credit quality. So the emphasis is 0:08:23.400 --> 0:08:27.040 on investment grade over high yield, you say, and yet 0:08:27.200 --> 0:08:29.800 spreads are pretty tight. The extra yel that investors earn 0:08:30.000 --> 0:08:33.000 over benchmark rates is about the lowest since last March 0:08:33.080 --> 0:08:36.000 and more than a year. Uh. And we're also looking 0:08:36.080 --> 0:08:38.200 at sort of a questionable outlook in terms of how 0:08:38.320 --> 0:08:41.199 much further the Fed will cut. What's going to be 0:08:41.320 --> 0:08:46.640 driving the returns spread compression or benchmark rates going lower. 0:08:47.480 --> 0:08:49.520 So I think a little bit of both. Anger outlook 0:08:49.600 --> 0:08:51.880 is that rates are really fairly range bound in here, 0:08:51.960 --> 0:08:53.679 so it's largely going to come from the carry of 0:08:53.760 --> 0:08:56.280 credit as well as some additional tightening. I think what 0:08:56.400 --> 0:08:59.240 gets overlooked when we think about overall, what's the what's 0:08:59.240 --> 0:09:00.959 the option of just that spread of the index of 0:09:01.040 --> 0:09:03.960 a hundred, is really that dispersion that takes place within 0:09:04.120 --> 0:09:06.680 investment grade. And it's interesting if you move the seven 0:09:06.760 --> 0:09:08.920 notches from a triple A credit to a high triple B, 0:09:09.360 --> 0:09:11.240 you pick up less than you move to go from 0:09:11.280 --> 0:09:13.480 a high triple B to a low triple B credit. 0:09:13.840 --> 0:09:16.720 And so low triple B credit at one eighty double 0:09:17.040 --> 0:09:19.520 the yield of the ten year treasury, there's some interesting 0:09:19.600 --> 0:09:22.559 opportunities that have been overlooked for US though. This is 0:09:22.559 --> 0:09:26.000 about allocating within and not just to credit quality, and 0:09:26.120 --> 0:09:28.199 we do acknowledge where we are in the cycle. So 0:09:28.360 --> 0:09:32.520 Janelle Um, your title is global asset management ahead of 0:09:32.520 --> 0:09:35.760 global asset management globally. How are you guys thinking about 0:09:35.760 --> 0:09:40.240 allocation of your capital into Yeah, I think we are UM. 0:09:40.559 --> 0:09:43.120 We we still continue to favor the US in terms 0:09:43.200 --> 0:09:46.600 of the resilience of the overall economy UM in terms 0:09:46.640 --> 0:09:48.760 of valuations. When we go back to that, there are 0:09:48.840 --> 0:09:52.160 some interesting opportunities as we move down to the lower 0:09:52.200 --> 0:09:55.080 quality spectrum and especially an emerging market debt. Considering our 0:09:55.200 --> 0:09:58.559 rate outlook going forward, we like a flexible approach. We 0:09:58.559 --> 0:10:02.040 think you shouldn't all become completely incorporates UM, and we 0:10:02.360 --> 0:10:05.079 think that you've got to go again allocating within and 0:10:05.200 --> 0:10:08.440 not just two specific quality buckets. There was a survey 0:10:08.520 --> 0:10:11.520 that Bloomberg did of global investors that found that the 0:10:11.679 --> 0:10:16.040 consensus is that emerging market assets will outperform developing market 0:10:16.280 --> 0:10:18.800 developed market ones next year. Do you agree? So? I 0:10:18.880 --> 0:10:21.000 think part of this is just the carry where you're 0:10:21.000 --> 0:10:24.200 starting from. So you're starting from a yield that's significantly higher, 0:10:24.480 --> 0:10:27.000 and so you have that perpetual income component that supports it. 0:10:27.080 --> 0:10:30.240 So if risk stays flat, there's still an opportunity there. 0:10:30.440 --> 0:10:32.840 This is so interesting, Paul. It's sort of this idea 0:10:33.160 --> 0:10:36.599 that as long as there's nothing major that happens in 0:10:36.640 --> 0:10:39.880 the macroeconomic backdrop, which seems to be the consensus right now, 0:10:40.640 --> 0:10:42.679 it's just a carry game. So anything that gives you 0:10:42.760 --> 0:10:45.520 a dividend or anything that gives you interest, uh, is 0:10:45.559 --> 0:10:47.600 going to be pretty good. Yeah, And that kind of suggests, 0:10:47.600 --> 0:10:49.640 you know, kind of the mid single digit kind of 0:10:49.720 --> 0:10:52.560 return environment. So let's say it is FED day, Janelle, 0:10:52.600 --> 0:10:55.439 Let's get your thoughts on what you expect to hear 0:10:55.679 --> 0:10:57.880 from the FED and from Chairman Pal today. What is 0:10:57.920 --> 0:11:01.240 your expectations so as far the move today, as far 0:11:01.320 --> 0:11:04.720 as policy consistent with consensus, we don't expect any change 0:11:04.760 --> 0:11:06.880 in terms of rates. I think the part of policy 0:11:06.880 --> 0:11:09.679 they'll be focused on is really the forward guidance, and 0:11:09.800 --> 0:11:11.600 we'll see that both in the dots as well as 0:11:11.640 --> 0:11:14.200 the communication. I think what we're looking for is an 0:11:14.280 --> 0:11:17.200 update in terms of economic projections and also what happens 0:11:17.240 --> 0:11:19.040 if we look at the floor of the dots currently, 0:11:19.120 --> 0:11:21.679 it's really where policy is, and so how do those 0:11:21.760 --> 0:11:24.439 converge over time and how do they still keep the 0:11:24.480 --> 0:11:27.440 optionality to be able to act in an additional way 0:11:27.480 --> 0:11:29.960 of required. What do you see so far in terms 0:11:30.000 --> 0:11:33.280 of twenty predictions by some of your competitors that you 0:11:33.440 --> 0:11:38.400 think is totally wrong? Um, I think, just uh, well, 0:11:38.520 --> 0:11:41.640 we we've seen the recession um piece come down a 0:11:41.760 --> 0:11:44.040 lot um, you know, Honestly, I think that there's going 0:11:44.080 --> 0:11:46.800 to be a tremendous recovery in some of the deepest 0:11:46.840 --> 0:11:49.199 segments of high yield. I think that's one of the 0:11:49.240 --> 0:11:51.880 pieces of the market that's really surprised, and we actually 0:11:51.920 --> 0:11:54.240 see it in both emerging market debt and high yield 0:11:54.280 --> 0:11:57.720 this year. So Triple Cees returned five percent, investment grade 0:11:57.760 --> 0:12:00.920 corporates fourteen high yield as a whole bull digits and 0:12:01.000 --> 0:12:03.400 so there's definitely been pockets that have been left out 0:12:03.400 --> 0:12:05.839 as we've kind of gotten later in the cycle and 0:12:05.960 --> 0:12:08.360 we've seen this fallout, and so I think this is interesting. 0:12:08.640 --> 0:12:11.360 Am I hearing that you think that the shale patch 0:12:11.400 --> 0:12:15.199 will recover, that the energy idea is a good one 0:12:15.280 --> 0:12:18.080 to take that risk. My hearing that we think there 0:12:18.120 --> 0:12:22.080 are select there are select opportunities. Energy has been under 0:12:22.080 --> 0:12:24.760 tremendous pressure this year and that's definitely contributed to both 0:12:24.800 --> 0:12:28.040 I G and and high yield returns, But there are opportunities. 0:12:28.679 --> 0:12:30.640 Joe Woodward, thank you so much for joining us. We 0:12:30.679 --> 0:12:33.760 appreciate you're making a check up from Sunny Miami here 0:12:33.800 --> 0:12:36.120 to New York. Janelle Woodward is ahead of fixed income 0:12:36.360 --> 0:12:39.600 and senior portfolio manager for BEMO Global Asset Management. Think 0:12:39.600 --> 0:12:42.760 about two dred and sixty billion dollars under management joining 0:12:42.840 --> 0:13:01.319 us here in our Bloomberg and Director Brooker studio. So 0:13:01.440 --> 0:13:04.679 people are all looking to to try to figure out 0:13:04.760 --> 0:13:07.679 what is the outlook for benchmark rates, but also uh 0:13:07.920 --> 0:13:10.960 for business outlook, which is actually deteriorated over the year 0:13:11.160 --> 0:13:15.040 despite ongoing confidence among consumers. Joining us now Frank Sarantino, 0:13:15.360 --> 0:13:18.400 chief executive officer of Connect One Bank and Frank I 0:13:18.480 --> 0:13:21.160 want to start there. Since you do extend so many 0:13:21.280 --> 0:13:25.319 loans to businesses and commercial lenders, what has this sentiment 0:13:25.480 --> 0:13:28.680 been like over the past few months. So, good morning 0:13:28.720 --> 0:13:30.800 and thanks for having me again. And yet I think, 0:13:31.240 --> 0:13:34.959 you know, our clients are actually a little have a 0:13:35.000 --> 0:13:37.280 little bit of trepidation about, you know, what's going on 0:13:37.320 --> 0:13:39.760 in the marketplace. And so they have this sense that 0:13:39.880 --> 0:13:42.959 the economy is doing well, interest rates are low, the 0:13:43.160 --> 0:13:46.839 environment is good. Um, but there's this just sense, this 0:13:47.000 --> 0:13:50.000 wall of worry that everyone seems to be climbing today. 0:13:50.200 --> 0:13:53.240 And you know, I'm not sure it's it should be 0:13:53.440 --> 0:13:57.240 that way, but it certainly is impacting decisions going forward 0:13:57.280 --> 0:14:00.439 about expansion and capital and deployment of capital and whatnot. 0:14:00.600 --> 0:14:03.640 So your customers, you're borrowing customers are small and midsized 0:14:03.679 --> 0:14:07.800 businesses in the metro New York area. UM, So are 0:14:07.880 --> 0:14:11.360 they concerned about big issues like global trade? Or is 0:14:11.400 --> 0:14:14.120 it just that maybe the labor market is so tight 0:14:14.200 --> 0:14:17.679 I can't find people to build my stuff for going 0:14:17.800 --> 0:14:19.760 my stores. But so, you know, it's fascinating. I've actually 0:14:19.800 --> 0:14:21.920 written about this and and I talk about it a lot. 0:14:22.000 --> 0:14:25.040 I tell people stop reading the news, you know, like 0:14:25.200 --> 0:14:30.040 focus on what's really going on? And no, but no. 0:14:30.160 --> 0:14:33.000 But you know, when you start thinking about all all 0:14:33.080 --> 0:14:35.480 the all that's in the news, all that you get 0:14:35.560 --> 0:14:39.880 from Twitter, all that you get you know, from various sources. Um, 0:14:40.480 --> 0:14:42.440 you know, people start worrying more than I think they 0:14:42.520 --> 0:14:44.440 need to. And then when they look at their actual 0:14:44.560 --> 0:14:47.520 environment and where they're functioning, uh, they see a lot 0:14:47.600 --> 0:14:49.640 of strength. And actually, one of the issues you just 0:14:49.760 --> 0:14:52.520 raised was what was this concept of being able to 0:14:52.640 --> 0:14:54.840 hire to fill all the positions you have? That is 0:14:54.880 --> 0:14:57.880 the number one concern we have today is that people 0:14:57.960 --> 0:15:00.080 can't fill all the positions they have opened today? And 0:15:00.240 --> 0:15:02.920 is it a salary issue? In other words, if they 0:15:02.960 --> 0:15:04.800 just jack up the prices, they would be able to 0:15:04.840 --> 0:15:06.720 find the talent. So for a while, I think it 0:15:06.840 --> 0:15:08.440 was that, and I think we are seeing some wage 0:15:08.480 --> 0:15:11.600 inflation coming into the marketplace, which would be a good thing. Um, 0:15:11.680 --> 0:15:13.680 But today, I don't care what you pay, you can't 0:15:13.760 --> 0:15:18.840 it's it's becoming difficult to hire, to hire to fill positions. 0:15:19.160 --> 0:15:21.400 And I believe this fact is accurate. I think it's 0:15:21.440 --> 0:15:25.600 we're at the highest level of people voluntarily leaving jobs. 0:15:26.240 --> 0:15:28.520 So that's a good sign for the economy. But there's 0:15:28.560 --> 0:15:31.120 a dark side to that. We can't fill all the 0:15:31.200 --> 0:15:33.600 open positions. So so what are some of the areas 0:15:33.800 --> 0:15:37.320 of borrowers that are maybe active right now or maybe 0:15:37.360 --> 0:15:39.840 even some that are kind of pulling back a little bit. So, 0:15:40.000 --> 0:15:43.400 you know, I think for our manufacturers and people that 0:15:43.480 --> 0:15:46.800 are in service businesses, UM, they've got basically a green 0:15:46.880 --> 0:15:49.040 light ahead of them. There's a lot going on in 0:15:49.120 --> 0:15:51.960 the economy. There's a lot of efficiencies. Technology is really 0:15:52.520 --> 0:15:56.280 changing the face of business today in a positive way. 0:15:56.360 --> 0:15:58.080 And those are good things, and those are creating really 0:15:58.160 --> 0:16:01.280 great jobs in the economy. Um, you know, in the 0:16:01.640 --> 0:16:04.920 in the construction and real estate trades. You know, certainly 0:16:04.960 --> 0:16:06.480 here in the New York metro market and that's where 0:16:06.480 --> 0:16:09.720 Connect one Bank is located. Uh, there's been some there's 0:16:09.720 --> 0:16:12.000 been some headwinds, whether it's the rent you know, the 0:16:12.080 --> 0:16:16.520 rent regulation that came into into place in New York City. Uh, 0:16:16.840 --> 0:16:19.280 the the length of time it takes to get something 0:16:19.320 --> 0:16:21.800 approved from his zoning perspective. You know, these things are 0:16:21.920 --> 0:16:25.000 are dampeners on the economy. We need more housing, we 0:16:25.120 --> 0:16:27.880 need places for people to live. Uh, there is definitely 0:16:27.920 --> 0:16:31.160 a shortage of that. The replacement of new homes in 0:16:31.200 --> 0:16:34.680 the United States is at near and all time low. Uh. 0:16:34.880 --> 0:16:37.360 So there's a lot of pent up demand for product, 0:16:37.520 --> 0:16:40.080 but there's a lot of policies that are that are 0:16:40.200 --> 0:16:42.880 that are hindering that. I'm so glad that Frank Sorrentino 0:16:43.040 --> 0:16:45.320 is here today because we can talk about the intersection 0:16:45.760 --> 0:16:49.560 of these theoretical aspects of the market, like the yield curve, 0:16:49.760 --> 0:16:52.400 and talk about the tangibles of how that actually affects 0:16:52.440 --> 0:16:55.960 the bottom line when you're extending loans to these businesses, 0:16:56.040 --> 0:16:58.960 to the commercial real estate developers and lenders. I'm just 0:16:59.040 --> 0:17:02.360 trying to understand and your profit margins and how much 0:17:02.720 --> 0:17:05.200 uh you know, I change in the yield curve affects that. 0:17:05.640 --> 0:17:08.240 What's that been like? So for us, it's been a challenge. 0:17:08.560 --> 0:17:11.440 Uh certainly for the last year or two. Uh the 0:17:11.560 --> 0:17:15.000 yield curve is definitely tightened. It's gotten close to inverted, 0:17:15.040 --> 0:17:18.200 if not slightly inverted. UM low interest rates on the 0:17:18.280 --> 0:17:20.639 long end, actually you're good for the economy, right. We 0:17:20.840 --> 0:17:26.040 we see that UM people are investing in capital intensive businesses, 0:17:26.040 --> 0:17:28.840 whether that's real estate or others because of low interest rates. 0:17:28.840 --> 0:17:32.000 So you gotta hand it to the Fed they've almost 0:17:32.160 --> 0:17:35.760 in my opinion, flawlessly manage the economy over the last 0:17:35.880 --> 0:17:39.840 number of years. UM. I think they might have gotten 0:17:39.880 --> 0:17:42.720 a little ahead of themselves with short term rates earlier 0:17:42.760 --> 0:17:44.440 in the year, where they were raising maybe a little 0:17:44.480 --> 0:17:47.959 bit too quickly, and but again, let's hand it to them, 0:17:48.040 --> 0:17:51.800 they reverse course and have brought rates probably about where 0:17:51.800 --> 0:17:53.880 they should be. And we're seeing a neutral stance today, 0:17:53.960 --> 0:17:55.920 and I think everyone expects we're going to see a 0:17:56.000 --> 0:17:59.040 neutral stance going forward from here for the foreseeable future. 0:17:59.400 --> 0:18:02.960 Frank word, you know, ten plus years into this economic cycle, 0:18:03.000 --> 0:18:05.960 and I know some UH investors when they look at 0:18:05.960 --> 0:18:08.320 the credit markets, had a little concerned about credit quality. 0:18:08.960 --> 0:18:11.000 And when you look at your portfolio, how's the credit 0:18:11.119 --> 0:18:15.280 quality right now trending? So when you look across excuse me, 0:18:15.320 --> 0:18:18.040 the entire industry, you know, we've we've probably never seen 0:18:18.119 --> 0:18:21.440 a better stretch of time relative to credit quality for 0:18:21.560 --> 0:18:26.240 all financial institutions. UH. As I look out, I don't 0:18:26.320 --> 0:18:29.000 see a whole lot that's going to change that. Short 0:18:29.119 --> 0:18:33.520 term again, interest rates are low, liquidity is there, people 0:18:33.600 --> 0:18:38.480 can refinance. UM, jobs are strong and getting stronger. Wages 0:18:38.520 --> 0:18:41.800 are on the increase, So really you know, most of 0:18:41.920 --> 0:18:46.600 the factors that sort of put negative pressure on credit 0:18:46.720 --> 0:18:49.440 quality just aren't there right now. So where are you 0:18:49.480 --> 0:18:54.280 looking to expand? Well, connect one UM since its inception 0:18:54.400 --> 0:18:58.000 has been pretty much a New York metro market bank. UM. 0:18:58.480 --> 0:19:01.199 You know, parts of northern New Jersey, all around New 0:19:01.280 --> 0:19:04.000 York City. We believe this is the greatest market in 0:19:04.080 --> 0:19:06.560 the country. And this is exactly where we want to be. 0:19:06.880 --> 0:19:10.800 But as far as size and scale, is there an 0:19:10.800 --> 0:19:14.520 advantage to being mid sized or smaller or or do 0:19:14.560 --> 0:19:17.200 you see an advantage of getting bigger? So I would 0:19:17.240 --> 0:19:21.040 tell you today that size, in my opinion, does matter. 0:19:21.359 --> 0:19:24.600 I know that's cliche, but UM today the biggest thing 0:19:24.640 --> 0:19:26.800 and this is not just for banking, this is probably 0:19:26.880 --> 0:19:30.879 for all businesses. Technology is no longer something that's a 0:19:31.040 --> 0:19:34.520 wow thing anymore. It is part of what your business 0:19:34.560 --> 0:19:36.920 needs to be. And the more money you can invest 0:19:36.960 --> 0:19:38.919 in technology, the more efficient you can get, I think, 0:19:38.960 --> 0:19:40.520 the better you can be in your and whatever your 0:19:40.560 --> 0:19:43.040 business is. And that holds true for connect One Bank 0:19:43.160 --> 0:19:46.000 and so size and I want to spend more of 0:19:46.040 --> 0:19:47.919 our revenue on technology. Yeah, And that's kind of one 0:19:47.920 --> 0:19:50.280 of the things we hear about quickly when we see 0:19:50.359 --> 0:19:52.440 when we whenever we hear at bank buying another bank, 0:19:52.480 --> 0:19:54.240 they say, we gotta get bigger, got to get scale 0:19:54.240 --> 0:19:56.720 because this technology spend is so great. So how does 0:19:56.760 --> 0:19:59.800 a small, smaller bank deal with that technology investment requirement? 0:20:00.080 --> 0:20:02.399 We have to get bigger, as you you know, as 0:20:02.440 --> 0:20:06.359 I'm sure you've seen. We we completed an acquisition UH 0:20:06.680 --> 0:20:09.320 in January of two thousand nineteen. We're about to close 0:20:09.359 --> 0:20:14.160 on one UH in January. UH so we've grown probably 0:20:14.240 --> 0:20:17.800 between those two thirty five in size. And part of 0:20:17.840 --> 0:20:21.320 that rationale is taking out costs, and not taking out 0:20:21.400 --> 0:20:24.400 costs to save money, but taking out costs to reinvest 0:20:24.480 --> 0:20:27.600 it in in better technology, more efficient ways of doing business. 0:20:27.960 --> 0:20:30.400