Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. So Russian President Vladimir Putin
Speaker 1: will bring a long laundry list of issues to talk
Speaker 1: about at his first summit with the US leader. We're
Speaker 1: talking about President Joe Biden that is happening in Geneva tomorrow,
Speaker 1: even as the Kremlin says there is a little chance
Speaker 1: for a breakthrough in relations. So we are expecting it, though,
Speaker 1: tim to be a long meeting. Yeah to the tune
Speaker 1: of four to five hours long. It is long, especially
Speaker 1: at the tail end of the European trips such as this. Well,
Speaker 1: joining now is Jordan Fabian White House correspondent at Bloomberg News,
Speaker 1: Jordan joins us on a phone from Washington, d C.
Speaker 1: Jordan's set expectations for us going into this For the
Speaker 1: United States, What is a win for Joe Biden, the
Speaker 1: Biden administration in the US. Well, I think the Biden
Speaker 1: administration is hoping for the President to send a tough
Speaker 1: message for Vladimir Putin That might not be enough to
Speaker 1: deter Putent from continuing his malign activities from you know,
Speaker 1: cyber hacking to less inter parens, but it might have
Speaker 1: a political benefit for Joe Biden here at home. He
Speaker 1: ran on taking a tougher line against the Kremlin, contrasting
Speaker 1: to Donald Trump's approach of trying to form a personal
Speaker 1: relationship and getting concessions out of the Russians that clearly
Speaker 1: didn't work. And so this meeting might just be entirely
Speaker 1: for domestic political consumption, because it seems hard to see
Speaker 1: any kind of breakthrough or or even any kind of
Speaker 1: concrete agreements coming out of this meeting Tomorrow. Hey, Jordan,
Speaker 1: understanding is there is no joint press conference after it,
Speaker 1: So that also kind of speaks to the idea that
Speaker 1: they're not expecting any big revelations or changes in this relationship.
Speaker 1: That's right, And each leader is going to do their
Speaker 1: own step for press conference. And what White House specials
Speaker 1: have told us is that they wanted to minimize the
Speaker 1: chances of some kind of surprise that Vladimir Putin somehow
Speaker 1: pulls cut some kind of stunt, or find some way
Speaker 1: to step on President Biden's message. How do you read
Speaker 1: into the length of this meeting four to five hours.
Speaker 1: I mean, in some cases it, you know, made some
Speaker 1: reporters here harken back to when Putin met Chancellor mercle
Speaker 1: and she brought her his dog, knowing that she was
Speaker 1: afraid of dogs. That's right. I mean there's a high problem,
Speaker 1: high possibility of some kind of stunt here. I mean
Speaker 1: Putin is a former catered key, should be operative, is
Speaker 1: known to kind of play mind games with this counterparts.
Speaker 1: And I also note that this is a four to
Speaker 1: five hour meeting with out any food. Apparently there's not
Speaker 1: gonna be any meals on the agenda, so possibility. Second,
Speaker 1: by the end of that, I'm just gonna say, if
Speaker 1: I'm president, I'm gonna put in my rider that I wanted,
Speaker 1: at least if I have a four to five hour meeting.
Speaker 1: So okay, So is it just a case of let's
Speaker 1: hope we walk away and things aren't worse than what
Speaker 1: they've been. What? What's the goal? What? You know? And
Speaker 1: I think about our Bloomberg audience who are making investments
Speaker 1: watching geopolitical discussions, intensions or lack thereof. I mean, what
Speaker 1: is it that an investment global investment audience maybe should
Speaker 1: be listening out for. Is it potentially reviving the Iran
Speaker 1: nuclear deal? What is it? Jordan's I think it's a
Speaker 1: couple of things. I mean, One, if I'm an investment perspective,
Speaker 1: I think the US and the buy administration in particular,
Speaker 1: wants some more predictability in the US Russia relationship. So
Speaker 1: you know, they want more open lines of communication. They want,
Speaker 1: you know, fewer dust stops, and they're gonna lay out
Speaker 1: where the President by is gonna lay out some areas
Speaker 1: where he says it's going to be a red line
Speaker 1: where the US might respond. And then also they're going
Speaker 1: to talk about ways they can work together. You name
Speaker 1: the I Ran a nuclear agreement is one. Officials have
Speaker 1: said that they're going to start talking about renewing this
Speaker 1: nuclear arms treaty called news Start, which is due to
Speaker 1: expire in So they're gonna try to find some areas
Speaker 1: for agreement, but those are obviously overshadowed by these big,
Speaker 1: huge areas where they're just vast disagreements. And what about
Speaker 1: when it comes to human rights and specifically dissent within
Speaker 1: the country of Russia and I speak, you know with
Speaker 1: the background of Alexei Navalni. He's in prison there, that's right.
Speaker 1: You know what best officials have told us that they
Speaker 1: view that as an issue that's on the table. So
Speaker 1: Biden has said repeatedly that he's gonna raise those kind
Speaker 1: of issues directly with Bladimir Putin. Uh. You know that's
Speaker 1: something that you know, Donald Trump said that he didn't
Speaker 1: directly raise a Putin. He was sort of putting those
Speaker 1: issues to the side in an effort to have some
Speaker 1: kind of grand bargain with Putain. Biden is thinking the
Speaker 1: opposite approach, confronting him over these issues. But again, you know,
Speaker 1: multiple presidents of try this approach. Your Barack Obama's works
Speaker 1: of you Bush, Bill Clinton and your lander recruiting has
Speaker 1: never changed his behavior. Uh, in the way that the
Speaker 1: US and the West would like so it's hard to
Speaker 1: see what would come of it, even though Biden is
Speaker 1: going to be delivering this message tomorrow. What's the China
Speaker 1: role in all of this? Well, it's interesting. You know,
Speaker 1: I think Russia has always had a bit of a
Speaker 1: contentious relationship with China, but I do think they're also
Speaker 1: wary of the US. Is their effort to kind of
Speaker 1: rally NATO and it's a good front China. I mean,
Speaker 1: I think they would they Russia is a place, Russia
Speaker 1: is a government that wants to kind of disrupt the West,
Speaker 1: and you know, maybe they view China as a useful
Speaker 1: foil in that regard. So you know, Is made some
Speaker 1: comments leading up for this meeting that he views this
Speaker 1: US that effort to try to get topper on China warily,
Speaker 1: and so I mean that could be something that he
Speaker 1: could raise the Biden. Of course, you have four or
Speaker 1: five hours is a lot of time. They could cover
Speaker 1: a lot of ground. Hey, twenty seconds left here is
Speaker 1: putting in touch with the former president Donald Trump. Do
Speaker 1: we know anything? Yeah, we haven't heard that at all,
Speaker 1: but I mean, and nothing with Donald Trump with surprises though,
Speaker 1: but possibly all right, Well, listen, great preview of the
Speaker 1: upcoming meeting. Really appreciate it. Jordan Fabian, Bloomberg News. White
Speaker 1: has correspondent on the phone from Washington, d C. What
Speaker 1: I'm not expecting a soccer ball to be gifted this
Speaker 1: time around, like we saw in Helsinki, Carrol, I wonder
Speaker 1: if he'll have like a thermos of coffee, Joe Biden,
Speaker 1: just in case, at least a bathroom break ours. This
Speaker 1: is Bloomberg Business Week with Carol Masser and Bloomberg Quick
Speaker 1: Takes Tim Stinovic on Bloomberg Radio. So Tim, nice to
Speaker 1: know things can change. We got some evidence of that today.
Speaker 1: You mentioned earlier the EU in the US agreeing to
Speaker 1: a five year trade truths involving the big aircraft manufacturers
Speaker 1: of the wealth. We're talking Bowing and Airbus, Brooks otherland
Speaker 1: Is deals in industrial columnists for Bloomberg Opinion. She joins
Speaker 1: us on the phone from New York City. Brook It's
Speaker 1: great to have you back on the show. Take us
Speaker 1: into the details here and and how big of a
Speaker 1: winness is not just for Boeing but for Airbus as well.
Speaker 1: It's really a win for both companies. I mean this
Speaker 1: has been going on for quite some time. I mean
Speaker 1: nearly twenty years at this point, and you know, it
Speaker 1: really put sort of kidding to the point where the
Speaker 1: fight was not helping anybody. UM. And you know, the
Speaker 1: the EU had made the same argument that the US
Speaker 1: had made against Airbus, against Boeing. UM. You know, both
Speaker 1: companies relied on some sort of state support to get
Speaker 1: these uh some of their planes developed. I mean, these
Speaker 1: are very expensive programs, they're very complicated, they take a
Speaker 1: very long time, UM, and so you know, it wasn't
Speaker 1: really helping anybody to keep pointing fingers when when you
Speaker 1: were doing some of the same things yourself essentially UM.
Speaker 1: And then especially you know, as you get into the pandemic,
Speaker 1: this stat really started to look like a pointless relic.
Speaker 1: I mean, you had government spending over backwards to really
Speaker 1: support both the airline and the aerospace manufacturing industry through
Speaker 1: the pandemic. And so you know, I just think that
Speaker 1: it's a good positive step forward for all involved. So, Broke,
Speaker 1: I want to kind of do a Blueberg cricket take
Speaker 1: with you. So the problem was there was this disagreement
Speaker 1: and this spat that went on, as you said, for
Speaker 1: twenty years, and it really was cumbersome in terms of
Speaker 1: the global aircraft market. I guess you could say, so,
Speaker 1: what first of all, why was it put in place
Speaker 1: to begin with? Well, it's sort of evolved in different
Speaker 1: um phases, I suppose over the course of the twenty years.
Speaker 1: So sort of at the heart of the US complaint
Speaker 1: had to do with the Airbus A three fifty and
Speaker 1: the now shuttered program for the AH three A d UM.
Speaker 1: The US accused the EU of essentially giving Airbus significant
Speaker 1: subsidies that allowed it to develop a their crash and
Speaker 1: really sort of break Boeing lock on the market. Um.
Speaker 1: So there was some thinking that the US just couldn't
Speaker 1: let this go because it just couldn't believe that it
Speaker 1: was no longer the only planemaker in the game. Um.
Speaker 1: The you of course countered that the US has done
Speaker 1: it's part to support Boeing over the years. Uh, and
Speaker 1: you know that they didn't really feel like the US
Speaker 1: had a ground to stand on here, and and it
Speaker 1: just sort of became very political and very drawn out. Um.
Speaker 1: And you know, when that is the nature of these things,
Speaker 1: they take a very long time to solve. But um,
Speaker 1: you know, in the end, I think probably the lawyers
Speaker 1: benefited the most from they always do. Um Brook China.
Speaker 1: Where does China come into this, because Airbus and Boeing
Speaker 1: have it do apperly when it comes to airplanes like this,
Speaker 1: at least for right now. I don't never forget. A
Speaker 1: few years ago, I was in Shanghai and I was
Speaker 1: driving to the airport in a taxi and I passed
Speaker 1: what looked like an airplane manufacturing facility similar to what
Speaker 1: you see if you fly into Seattle and you you know,
Speaker 1: drive into the city and you passed what Bowing is doing,
Speaker 1: and I realized this was for for COMAC, the Commercial
Speaker 1: Aircraft Corporation of China, essentially China's version of Bowing an airbus.
Speaker 1: How does this play into the agreement that was struck?
Speaker 1: So China is uh. There has been very clear that
Speaker 1: Komak is the priority, that they would like to have
Speaker 1: a commercial aerospace competitor to Boeing an airbus. They are
Speaker 1: not there yet. Um there, there's not really a plane
Speaker 1: that can rival um you know the seven thirty seven
Speaker 1: Max or you know the E three twenty. Those are
Speaker 1: really the marquee jets for Boeing and Airbus, and China
Speaker 1: can't do that yet. But they are clearly making this priority.
Speaker 1: They are investing a lot um. They clearly enjoyed being
Speaker 1: able to be the first ones to ground the Bowing
Speaker 1: seven thirty seven Max. Because you know, one of the
Speaker 1: big questions about Comac is whether it will be a
Speaker 1: space is what Boeing and Airbus can offer UM, and
Speaker 1: you know whether China has the reputation for safety and
Speaker 1: quality control necessary to you know, sell airplanes to the West,
Speaker 1: and so for them to stake that stand to be
Speaker 1: the first one to do so, I think was sort
Speaker 1: of a pivotal moment in their aerospace journey, if you will, UM.
Speaker 1: But like I said, they don't have a plane just yet.
Speaker 1: I think what you're worried about was Bowing an airbus.
Speaker 1: Is not necessarily whether Komak will start flying or will
Speaker 1: be sold to to Delta UM. But you know whether
Speaker 1: the Chinese airlines will predominantly choose Comac airplanes. And if
Speaker 1: you look at the future growth trajectory for planes, a
Speaker 1: significant chunk of that future demand is coming from China,
Speaker 1: UH and from other parts of Southeast Asia. So you know,
Speaker 1: Comac doesn't really need to win over Europe in the US,
Speaker 1: they need to be able to win over these these
Speaker 1: Chinese airlines. Um. And you know, especially if those airlines
Speaker 1: fly domestically, that that is an easy or hurdle to
Speaker 1: clear pay. Does it make sense that we're seeing a
Speaker 1: little bit of a pop in bowing today it's up
Speaker 1: about one percent airbus a d r s or just
Speaker 1: up about half a percent. But does it give some clarity,
Speaker 1: some ease if you know you're an investor in Boeing
Speaker 1: shares to some extent. I think it's helpful. I mean
Speaker 1: we've been trending in this direction for a while now.
Speaker 1: So in March, you know, the two sides agreed to
Speaker 1: suspend the terrorists that were put in place as a
Speaker 1: result of this UH dispute over aircraft subsidies. Um. While
Speaker 1: they've worked to an agreement, and so it's definitely a
Speaker 1: positive to get this cleared. I mean, the last thing
Speaker 1: Boeing needs right now is another reason not to buy
Speaker 1: airplanes from it. So, um, you know, it's it's certainly helpful.
Speaker 1: What about when it comes to resolving lingering trade wars
Speaker 1: that the United States has with many different areas of
Speaker 1: the world, and we only about thirty seconds broke sure,
Speaker 1: I mean I think it's definitely a positive step, and
Speaker 1: I think just the mere fact that we came to
Speaker 1: some sort of an agreement, and it is certainly a
Speaker 1: change from the Trump administration, where you know, they actually
Speaker 1: were raising the stakes and it's going an airbus dispute,
Speaker 1: and so to be sort of I guess taking a
Speaker 1: setbacks from the battle line and and focusing on cooperation
Speaker 1: and coming to agreements, I think only has to be
Speaker 1: interpreted as a positive sign. Now the steel and the
Speaker 1: womenum terrorists issues a little bit stickier, but we'll see.
Speaker 1: So why don't she's safe though, I hope for now. Okay,
Speaker 1: just getting priorities straight here, at least mine, I've been
Speaker 1: worried about stealing a luminium. I don't know where your
Speaker 1: head is, Tim Stanovic, good stuff, brook Thank you so much,
Speaker 1: Brooks Sutherland. She is deal with an industrial's columnist at
Speaker 1: Bloomberg Opinion on the phone in New York City. Check
Speaker 1: her out at b L s U T H on Twitter.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, the
Speaker 1: cover story this week. It's also Today's Bloomberg big take
Speaker 1: the story though, in the upcoming issue of Bloomberg business
Speaker 1: Week magazine, Airbnb spending millions of dollars tim to make
Speaker 1: nightmares go away. Joining us now is Joel Webber, editor
Speaker 1: of Bloomberg Business Week. He's here with us in the
Speaker 1: Bloomberg Interactive Broker's studio. Also, Olivia Carville, technology reporter at
Speaker 1: Bloomberg News, joins us from here in our Bloomberg New
Speaker 1: York City bureau. Joel, as soon as I started reading
Speaker 1: this story early this morning, I could not put it down.
Speaker 1: What who is on the safety team and the sort
Speaker 1: of first responders at Airbnb, and and what do they
Speaker 1: do when it comes to crisis management. I believe it's
Speaker 1: called the black box. So Olivia's story uh brought many
Speaker 1: things to light, um, one being that the real bedrock
Speaker 1: of Airbnb's business model is trust. You check into someone
Speaker 1: else's apartment sometimes or house, sometimes that person maybe occupying
Speaker 1: that same space or in a different room. Um. And
Speaker 1: the whole thing that makes the business work is is
Speaker 1: that you have trusted in this system. And what Olivia's
Speaker 1: reporting revealed was that oftentimes stays don't go well, and
Speaker 1: that could be uh more run of the mill things
Speaker 1: of like just a trash department, or it could go very,
Speaker 1: very very bad. And there have been cases a rape
Speaker 1: that was previously unreported that Olivia found out about, murders,
Speaker 1: violent crimes, and when that happens. There's a safety team
Speaker 1: that Airbnb has assembled around the world, um one hundred
Speaker 1: agents that basically the worst of the worst situations end
Speaker 1: up going to that group of people. And Olivia basically
Speaker 1: was the one that has revealed that this team exists,
Speaker 1: that they're under mental dress for all the different types
Speaker 1: of cases that they have to deal with, and that
Speaker 1: you know, this is the thing that for investors this
Speaker 1: company is now publicly traded, people haven't known that this
Speaker 1: is a dark side of this company in quite this way.
Speaker 1: UM So, so, Olivia, how about you bring us up
Speaker 1: to speed on on you know, how how you went
Speaker 1: about reporting such a remarkable story. It's sure, thanks so
Speaker 1: much for having me on. I feel like the story
Speaker 1: really the crux of it was to understand, you know,
Speaker 1: to get inside the safety team and to really get
Speaker 1: to the bottom of what happens inside to a B
Speaker 1: n B when things go wrong. Initially, when I started
Speaker 1: reporting this piece, it was about trying to find insiders
Speaker 1: at the company who would be willing to talk to
Speaker 1: me about the stress of the job and just the
Speaker 1: process of when something happens inside a listing, like a
Speaker 1: violent crime, and a call comes through to the Airbnb
Speaker 1: customer service rep, what actually happens, how does the company
Speaker 1: handle it, who does it get transferred through to, and
Speaker 1: what do they do about handling? You know, public image,
Speaker 1: reputational risk, brand risk. Given that Airbnb's entire business model
Speaker 1: really risks on that idea of trust between strangers to them,
Speaker 1: public image is just so crucially important too gross and revenue. So, Olivia,
Speaker 1: how does it work when things go wrong? And often
Speaker 1: issuell mentioned horribly wrong? Right, Well, it's it's a call
Speaker 1: is to come through to Airbnb related to anything concerning safety.
Speaker 1: So when I say that, I mean anything involving a child,
Speaker 1: ass of, human trafficking, drug trafficking, kidnappings, hostage scenarios, sexual assaults,
Speaker 1: rape cases, murder, anything that enters that kind of like
Speaker 1: significance of a real safety crisis. It will immediately be
Speaker 1: transferred through to an internal safety team of agents. And
Speaker 1: as Joel mentioned, the BnB has about a hundred of
Speaker 1: these agents based all around the world who are trained
Speaker 1: in trauma. You know, they specify and specialize in how
Speaker 1: to handle cases of trauma. Be a taught how to
Speaker 1: deal with suicidal ideation. Be are taught to know how
Speaker 1: to how to help talk with a sexual assault survivor
Speaker 1: and the best way to support her in that moment.
Speaker 1: And UM, for these safety agents, it's all about doing
Speaker 1: what they can to protect the individual in crisis, and
Speaker 1: also they do have a dual role to protect the
Speaker 1: company's public image. At the same time, Joel referred to
Speaker 1: the arrest that these safety agents experience. What is the
Speaker 1: toll it takes on them and how do they deal
Speaker 1: with it. A lot of the safety agents I talked
Speaker 1: to UM expressed vicarious trauma. They say that they suffer
Speaker 1: from PTSD from the job. I mean they willingly walk
Speaker 1: into it. They want to do this kind of trauma work,
Speaker 1: and I think it takes a certain person who's attracted
Speaker 1: to this particular role. A lot of them comes from
Speaker 1: backgrounds of emergency services work or even from the military.
Speaker 1: They've you know, as I see, had gone through a
Speaker 1: lot of trauma based care training. They have counselors on
Speaker 1: site to help this team. They have specialized call down
Speaker 1: rooms with dimmed lighting to help them answer those really
Speaker 1: tough calls. And for these agents, you know, when you
Speaker 1: handle a case of an individual who has been assaulted, raped,
Speaker 1: who has lost a loved one, maybe lost a child
Speaker 1: in a listing, you form a bond with the individual
Speaker 1: over the phone, and a lot of these safety agents
Speaker 1: walked about cases where they're still in touch with those
Speaker 1: families years after the crime has happened. You know, it
Speaker 1: stays with them. One safety agent I talked to handled
Speaker 1: a case of a missing person who just disappeared from
Speaker 1: a listing, and three years after that occurred, he was
Speaker 1: still googling that individual's name to see if there was,
Speaker 1: you know, if they were either found. So you can
Speaker 1: you can feel when you're talking to these individuals just
Speaker 1: a heavy personal toll it has on them, and you
Speaker 1: know how much they they care for the people that
Speaker 1: they're trying to help, but also how they were so
Speaker 1: torn when it came to their role in trying to
Speaker 1: keep these cases quiet or trying to do what they
Speaker 1: could to protect the company's public image at the same time.
Speaker 1: They really had to wrestle with that difficulty. And you know,
Speaker 1: the opening of The story is rooted in New York
Speaker 1: City in near Times Square on New Year's Eve, and
Speaker 1: there's a case that Olivia found in her reporting um
Speaker 1: that the company Airbnb, following this um uh, this rape,
Speaker 1: the survivor was paid seven million dollars um, which was
Speaker 1: you know, a huge number when you think about it, right,
Speaker 1: like a clearly very bad thing, but a huge number. Olivia.
Speaker 1: There's also a policy element to this because that case
Speaker 1: basically happened at almost the worst possible time for Airbnb,
Speaker 1: because of its battle with New York City. Can you
Speaker 1: talk about why New York has always been so important
Speaker 1: for Airbnb and why that case was so significant and
Speaker 1: forgive me, Olivia, you have to be quick. Just got
Speaker 1: about twenty seconds here, sure, I mean New York is
Speaker 1: one of airbnba's biggest market. The regulatory recipe was huge
Speaker 1: because it could lead to a Domino feat for the
Speaker 1: company needed to do what it could could to try
Speaker 1: and keep this case. Um, you know, to try and
Speaker 1: do what they could to handle this case is as
Speaker 1: well as they possibly could, knowing the potential regulatory rest
Speaker 1: of the incredible story. It's out on Twitter, it's at
Speaker 1: Bloomberg dot com and it's in the magazine the upcoming issue.
Speaker 1: Olivia Carvil who wrote it. Joe Webber, the editor of
Speaker 1: the magazine. Thank you. This is Bloomberg Business Week with
Speaker 1: Carol Masser and Bloomberg Quick Takes Tim Stinovik on Bloomberg Radio.
Speaker 1: So TikTok everyone, the policy setting arm of the US
Speaker 1: Federal Reserve. We're talking about the FMC. They're kicking off
Speaker 1: their two day meeting today. We are expected some changes.
Speaker 1: We are I'm we don't ye projections, but you know
Speaker 1: we're still waiting on headlines for tomorrow exactly. So let's
Speaker 1: see what Steven Skanky is expecting, his chief economic advisor
Speaker 1: at kill Point, former U S Treasury and White House
Speaker 1: National Security Council staff member based in Washington, D C.
Speaker 1: And that's exactly where we find him on this Tuesday.
Speaker 1: How are you. I'm great. Thanks, it's always going to
Speaker 1: be back to you. Well, it's great to have you here, Steve.
Speaker 1: So what are you expecting? We are, at least to
Speaker 1: our economics team and others are forecasting that that dot
Speaker 1: plot we're going to see some changes and that we'll
Speaker 1: get some expectations of interest rate changes in versus after
Speaker 1: I think that's a fair assessment. The the indicators are
Speaker 1: positive generally, which gives that confidence. But at the same time,
Speaker 1: you know, it is an excellent position to be able
Speaker 1: to do absolutely nothing and feel good about it. At
Speaker 1: this meeting, the the good employment number that the good
Speaker 1: jobs numbers UH for for May and April were positive
Speaker 1: but well below expectations. UH. The inflation number headline is
Speaker 1: a little bit of a surprise, but from April to
Speaker 1: May is down a little bit. And what it was
Speaker 1: from March to April, and when you when you look
Speaker 1: at where the impact is and what are the subcategories
Speaker 1: that that had the biggest change other than energy, it's
Speaker 1: things like used cars UH, rental car prices, whereas the
Speaker 1: food costs for people eating at home was up point
Speaker 1: seven percent year over year, housing up two point two
Speaker 1: percent year over year, medical care services at one point
Speaker 1: or five So so not something that threatens to build
Speaker 1: inflationary expectations. And I think that's that's what the FED
Speaker 1: sees here. So it sounds like you are somebody who's
Speaker 1: not concerned about inflation being persistent. It sounds like you're
Speaker 1: somebody who thinks that the data is pointing to this
Speaker 1: being transitory. Well, at this point, the biggest impact on
Speaker 1: pulling the index up has been in categories, say for energy, UH,
Speaker 1: that are largely transitory. Um, you can you can go
Speaker 1: to a number of the different categories when you when
Speaker 1: you're looking at what the BLS put out last Thursday
Speaker 1: and UH and really understand what it was that was
Speaker 1: going on. And that just provides confidence as to it
Speaker 1: not being something that's turning into a problem. Um, will
Speaker 1: will the fled FED revised it's a summary of economic projections,
Speaker 1: maybe to to notch it up a little bit for
Speaker 1: the year. I doubt it, just because there's no reason
Speaker 1: for them to do that. Yet. You don't think the
Speaker 1: dot plots Steve, You don't think they'll change it at all. Oh,
Speaker 1: I think they. I think they may change the dot
Speaker 1: plot a little bit, just because that's that's the nature
Speaker 1: of being together and trying to express some thought about
Speaker 1: what might be happening with the data that they're receiving.
Speaker 1: But we are still very much within that that window
Speaker 1: of of burning off twenty COVID low base effects, and
Speaker 1: so they don't want to seem concerned, but they certainly
Speaker 1: want to seem aware that was brilliant still in the
Speaker 1: window of burning off COVID low base effects. I mean,
Speaker 1: that's the point. I mean, you just look at the
Speaker 1: labor market, right, and it's over seven million jobs in
Speaker 1: the US that we still have to get back to
Speaker 1: get us to the point of being at pre pandemic levels.
Speaker 1: Look at it globally. I was looking at some numbers globally,
Speaker 1: and it's over seventy millions, some seventy five million jobs
Speaker 1: that are short of its pre crisis path. So that's
Speaker 1: a big one. The labor market. Steve well and and
Speaker 1: and Carol three and a half million fewer workers in
Speaker 1: the labor force. People of people who just went out
Speaker 1: for for a whole host of reasons, of course, but
Speaker 1: many of them related to COVID. Time to retire, felt
Speaker 1: greater exposure, not motivated by the wages that are that
Speaker 1: are being paid. You know, when the FED looks at this,
Speaker 1: uh um it, it wants to see wages rise. Uh
Speaker 1: and before they call the labor market tight, they want
Speaker 1: to see that the businesses are actually offering to pay
Speaker 1: higher wages and still people are not coming. So wait,
Speaker 1: let me ask you something on wages. Because Tim and
Speaker 1: I talked about this a lot. We've seen Chipotle and others.
Speaker 1: I mean, there are instances where wages are going up.
Speaker 1: Why is it that we are so dismissive of it?
Speaker 1: Is it because it's on the lower end of kind
Speaker 1: of the wage scale. I think that's part of it. Um.
Speaker 1: You know, when when we look at what people in
Speaker 1: the I'll just call it broadly hospitality restaurants, UH, lodging Uh,
Speaker 1: people who interact with the public in some way or another. Uh,
Speaker 1: they additionally have been paid lower wages and at wibble
Speaker 1: of the fifteen dollars an hour. And now is there's
Speaker 1: been pressure and publicity about several of the big companies saying, well,
Speaker 1: we're gonna pay people fifteen dollars an hour. We're just
Speaker 1: gonna step it up and do that. Uh. These other
Speaker 1: folks say, well, wait a minute, I'm not getting fifteen
Speaker 1: dollars an hour, and I'm really on the front line
Speaker 1: being exposed where this virus still tracks, and uh, I'm
Speaker 1: just not interested. I'll do something else. I'll wait out
Speaker 1: my unemployment benefits until they've fully run out. And and
Speaker 1: that that can happen really without causing alarm when you
Speaker 1: look at it from the FEDS perspective. But when you
Speaker 1: when you sort of just read the headline numbers, of course,
Speaker 1: that that attracts a lot of attention, and that's the
Speaker 1: sort of thing that that will generate some interest and
Speaker 1: maybe some adjustments to the doptments. Even just in ten seconds.
Speaker 1: What's the piece of data that that worries you, that
Speaker 1: says that inflation is not transitory, that we continue to
Speaker 1: see increases in in some of the basic core area Okay,
Speaker 1: the basic core areas. Dr Stephen Skanky, chief economic advisor
Speaker 1: at keel Point, also former U. S. Treasury and White
Speaker 1: House National Security Staff Council staff member, always great when
Speaker 1: he joins us. Thanks so much, Steve. I'm a journal Yeah,
Speaker 1: but you let me drive. Oh no, no, no, no, honey, please,
Speaker 1: I'll do the right revel. Excuse me, I want to drive,
Speaker 1: Just drive, baby questions trying. This is the drive to
Speaker 1: the globe that community well drying us radio. All right,
Speaker 1: just about ten and a half minutes left in today's
Speaker 1: trading session. We're bouncing around a little bit app here
Speaker 1: on this Tuesday. Let's get to it with Brad McMillan,
Speaker 1: chief investment officer at Commonwealth Financial Network. He is on
Speaker 1: the phone from Waltham, Massachusetts, approximately two hundred thirty two
Speaker 1: point five billion dollars in assets under management. Brad, good
Speaker 1: to have you back with us. Uh, what's on your
Speaker 1: radar today? Well, just watching the recovery continue. There's a
Speaker 1: lot of headlines, there's a lot of scary things, and
Speaker 1: right now I think the FED is going to be
Speaker 1: the next data point to drop. What are you expecting
Speaker 1: with that data point and what are you watching for tomorrow?
Speaker 1: I think they're gonna do nothing. And I think that
Speaker 1: for a couple of reasons. First of all, inflation is
Speaker 1: not going to be a problem. Yeah, we got headlines,
Speaker 1: but they'll pass. Employment is still a problem, and they've
Speaker 1: said that's what they're focused on. So hey, they have
Speaker 1: no reason to be they have no reason to the
Speaker 1: whole type, Well, that's what we just talked about. There's
Speaker 1: still more than seven million Americans out of work. If
Speaker 1: you take the global snapshot, there are more than seventy
Speaker 1: million Americans, I mean seventy million folks around the world
Speaker 1: that are out of work. And so that is to
Speaker 1: some extent an insurance policy that when it comes to
Speaker 1: monetary policy and policy overall, it's going to be stimulative
Speaker 1: and easy until we see those numbers correct or at
Speaker 1: least get closer. I think that's exactly right, Carol. And
Speaker 1: you know, I think one of the things out there
Speaker 1: is there's this huge problem is to disconnect with the
Speaker 1: with the labor market. There's a labor shortage. What's interesting
Speaker 1: is if you go when you look at the number
Speaker 1: of people who are out of the labor force but
Speaker 1: who want to get a job, that pretty much fills
Speaker 1: that labor gap. So we know what's going to happen,
Speaker 1: but we also know it's going to take some time.
Speaker 1: And that's what we That's what the bet is watching
Speaker 1: how long is it going to take? Brad? What what
Speaker 1: changes your mind? You say that you know inflation is
Speaker 1: not going to be a problem. Uh, employment is still
Speaker 1: a problem. What changes your mind and says that inflation
Speaker 1: is a problem. What's that data point? I think it's
Speaker 1: nothing but time. I mean, right now, if you look
Speaker 1: at the two year numbers as opposed to the one
Speaker 1: year numbers, we're still within the range. The one year
Speaker 1: numbers are the bounce back up and we're forgetting about
Speaker 1: to drop down during the early part of the pandemic.
Speaker 1: Now if that stays up once the year on year
Speaker 1: comparison start to normalize, that says we've got a bigger problem.
Speaker 1: But right now it doesn't look like that's going to happen.
Speaker 1: Some of the higher frequency stuff, lumber, for example, is
Speaker 1: already starting to roll over, and we're going to see
Speaker 1: that with most of the other stuff as well. Right lumber, copper,
Speaker 1: we've seen that as well. Uh. And and those are
Speaker 1: the kind of metrics, uh, that you really follow in
Speaker 1: terms of inflationary pressures because they can often be If
Speaker 1: they tend to stick, that's when you start to get
Speaker 1: a little bit nervous. So in this environment, then what
Speaker 1: do you advise investors to do? I mean, it's hard
Speaker 1: to kind of beat the US equity market. But having
Speaker 1: said that, we are seeing E t F flows increasingly.
Speaker 1: We've seen money flowing into Europe and e t s
Speaker 1: versus U S e t s because the US prices
Speaker 1: and valuations have gotten a little bit lofty. US valuations,
Speaker 1: if you look at it, are actually down a little
Speaker 1: bit on a forward earning spaces. Now they're still not cheap,
Speaker 1: don't get me wrong, but they pretty much held around
Speaker 1: twenty two and now they're about twenty one or thereabouts,
Speaker 1: because earnings are growing faster than expected and there's probably
Speaker 1: still some upside there. So I like emerging markets. I
Speaker 1: think they're going to catch up with US at some point.
Speaker 1: I like US markets developed, foreign markets not so much. UM, yes, specifically,
Speaker 1: what are you what are you referring to? I mean,
Speaker 1: can you can you be more specific with those markets
Speaker 1: that you're that you're excited about? I like the US,
Speaker 1: I like um India. India has had a terrible experience
Speaker 1: with the pandemic, but they just like the United States,
Speaker 1: their democracy, they will get through this. They'll have some resilience.
Speaker 1: So I think there's some opportunities there. I think if
Speaker 1: you look at some of the Southeast Asian economies, there
Speaker 1: are chances. You know, they are still going through the pandemic,
Speaker 1: but again, they supply the United States, so they're going
Speaker 1: to have a demand driven push once they get through
Speaker 1: the Once they get through the pandemic. Again, that's not
Speaker 1: going to happen immediately, but anybody who's in a position
Speaker 1: to benefit from the U s reopening once they get
Speaker 1: their own house in order, is going to do very well.
Speaker 1: Hey what about consumer discretionary My understanding is that is
Speaker 1: an area that you like, specifically some confidence and disposable
Speaker 1: income that's out there. Having said that, the retail sales
Speaker 1: numbers today, we did see a shift out of some
Speaker 1: of the things that people have been buying, like things
Speaker 1: for their home and the auto sector. So where within
Speaker 1: consumer discretionary brad do you find opportunity. I think you're
Speaker 1: gonna find a lot of people as they move back
Speaker 1: into the workforce. And I mentioned to all of the
Speaker 1: people were out of the workforce who are coming back,
Speaker 1: We're going to be going for small luxuries, you know.
Speaker 1: I think companies the cater to you know, the average person,
Speaker 1: we're going to do very well. I think companies that
Speaker 1: cater to the average shopper who's going to be coming back,
Speaker 1: who's going to have some discretionary income, we're going to
Speaker 1: do very well. I think main Street America retail is
Speaker 1: going to do very well. Main street retail. Because it's interesting.
Speaker 1: Someone was telling me anecdotally being at a mall in
Speaker 1: a northern New Jersey suburb and said the lines were
Speaker 1: just out of the boutiques like the Chanel boutique and
Speaker 1: the you know, the high end luxury is high end
Speaker 1: luxury something on your buying list as well. Yeah, I
Speaker 1: think when I when I talked about main Street, I
Speaker 1: think I'm talking about the average person, which would include malls,
Speaker 1: you know, So I think that's um. The average person
Speaker 1: has been sitting at home. They still have a lot
Speaker 1: of money set aside, and they want to go spend it,
Speaker 1: and they want to go have a good time. And
Speaker 1: part of that is shopping is an experience. When you
Speaker 1: say experience, I mean, are you thinking more about moving
Speaker 1: away from what we've had over the last sixteen months
Speaker 1: and the idea that we've gotten so used to shopping
Speaker 1: online and going back to what we were seeing before
Speaker 1: the pandemic when retailers and other other stores we're trying
Speaker 1: to create experiences that you couldn't get online. You think
Speaker 1: Americans are going to go back to that. I do
Speaker 1: think that there's a reason to go back to that.
Speaker 1: In fact, I think they have to go back to that,
Speaker 1: because if you can buy anything easily, wouldn't So, for example,
Speaker 1: if Walmart is competing against Amazon, what can Walmart offer
Speaker 1: that Amazon can't. Now you say that's not necessarily an experience,
Speaker 1: but it is an experience to go out to a shop.
Speaker 1: If you look at Target, same thing, what can they
Speaker 1: offer specifically that Amazon can't. And then of course at
Speaker 1: the high end you have the high end retailers, but
Speaker 1: you can create that experience at all levels, and I
Speaker 1: think increasingly you're seeing all retailers try and make that happen.
Speaker 1: So one place you would not want to be as
Speaker 1: an investor right now, one place I would not want
Speaker 1: to be as an investor right now. On the hot
Speaker 1: seat there, Brad, No, I think it's a great question. Um.
Speaker 1: I think I would say I would say some of
Speaker 1: the I would probably say crypto. There's been a lot
Speaker 1: of volutility out there, there's been a want of Um.
Speaker 1: It's basically a story asset, and my question is how
Speaker 1: much more good news can go out there? I mean,
Speaker 1: we I'm just not sure I see the upside from
Speaker 1: here from a sentiment point of view, I'm not sure
Speaker 1: where I see the marginal buyer. All Right, We're gonna
Speaker 1: leave it on that note. That's good to know, uh
Speaker 1: and great to get your perspective. Brad McMillan, Chief investment Officer,
Speaker 1: Commonwealth Financial Network, joining us on the phone from Waltham, Massachusetts.
Speaker 1: They've got roughly two two point five billion in asset
Speaker 1: it's under management. Thanks for listening to Bloomberg Business Week.
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