Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hey takes kind of pointing out there's a great writing
Speaker 2: and story on that Cisco Splunk deal today. It says
Speaker 2: the deluge of data.
Speaker 3: I got to give Charlie Pellett the credit here. He's
Speaker 3: the one who told us this.
Speaker 2: He did. Charlie like sick.
Speaker 3: He's left, but I think we love you Charlie.
Speaker 2: Well, Charlie, we love you all right. So, if the
Speaker 2: daylus of data in the modern world is increasingly overwhelming,
Speaker 2: Splunk claims to have been ready for it for twenty years.
Speaker 2: The company's name reflects the act of burrowing deep down
Speaker 2: into the earth to explore caves, the adventure of data splunking.
Speaker 2: And so Charlie, of course just talked about this. We're
Speaker 2: talking about this because Cisco did its biggest ever deal
Speaker 2: and it bought Splunk.
Speaker 3: Twenty eight billion dollars for a company that was started
Speaker 3: by three friends back in two thousand and three. The
Speaker 3: co founder and ex chief CEO of Yahoo, drawing on
Speaker 3: his past or should say ex chief executive officer, drawing
Speaker 3: on his past building search engines at Yahoo.
Speaker 2: We just talked with him.
Speaker 3: Yeah, it's really cool.
Speaker 2: It's a very cool company.
Speaker 3: Right yeah.
Speaker 2: Does it make sense for Cisco?
Speaker 4: I don't know.
Speaker 3: Cisco shares her down more than three point nine percent
Speaker 3: right now?
Speaker 2: All right, so let's get into it. Because they're pay
Speaker 2: one hundred and fifty seven dollars a share in cash,
Speaker 2: thirty one percent premium to spunks closing price yesterday, and
Speaker 2: the purchase represents roughly ten percent of Cisco's market value.
Speaker 2: That feels like a lot with us. Is Bloomberg Intelligence
Speaker 2: Senior Technology Alice wu Jinho. He's down Zoom from BI
Speaker 2: headquarters in Princeton, New Jersey. Wugen, thank you for being
Speaker 2: back with us. You described the deal as the moby
Speaker 2: Dick of deals that's been talked about for quite some time.
Speaker 2: Tell us more and what it means for Cisco.
Speaker 5: Sure, so, I think you characterize it fairly well.
Speaker 4: Right.
Speaker 5: This blog actually borrows really deep and trying to fairly
Speaker 5: understand an enterprise's data. If you think about where all
Speaker 5: the data traffic flows through it has to go through
Speaker 5: a one of Cisco's boxes. So Cisco is trying to
Speaker 5: help their users and customers better understand the data that
Speaker 5: goes through their boxes. And now they can monetize the
Speaker 5: information that goes to their boxes buyers, plug deal.
Speaker 3: Okay, So explain what that means for, you know, someone
Speaker 3: like me. Carol's also I can think in this campcter,
Speaker 3: she's looking like, Okay, what's going on here?
Speaker 2: Well, why does Cisco need this? Is it just a
Speaker 2: case of making everything more secure? And that's crucial?
Speaker 5: Well, it's it's all about network visibility, right, I don't
Speaker 5: know what is going through point A to point B
Speaker 5: if they're good guys, are bad guys.
Speaker 4: Going in point A to point b?
Speaker 5: Or even something a little bit more benign, such as
Speaker 5: how much YouTube is going through my network or how
Speaker 5: much social media is going through my network? And you
Speaker 5: want to better.
Speaker 2: Doing this before? Forgive me for interrupting, but wasn't Cisco
Speaker 2: doing this before? Wujin or no?
Speaker 5: They were?
Speaker 4: They are, okay, right?
Speaker 5: The issue is is that they just they want to
Speaker 5: better understand the better data traffic patterns that are going there.
Speaker 4: Now.
Speaker 5: Now the challenge for Cisco has been is how do
Speaker 5: they make a software deal large enough or the software
Speaker 5: business large enough to make it more meaningful as part
Speaker 5: of the business transformation. And that's one of the reasons
Speaker 5: why they made this deal. It's it was a business
Speaker 5: decision as much as a technology decision.
Speaker 3: How do you explain this price? This is quite the premium,
Speaker 3: thirty one percent premium to the closing price on Wednesday,
Speaker 3: one hundred and fifty seven dollars a share, ten percent
Speaker 3: roughly of Cisco's market value. Cisco shares down close to
Speaker 3: four percent right now. How do you explain the deal size?
Speaker 5: Well, I'm actually quite comfortable with the deal size. Get
Speaker 5: if we walk away from the actual twenty eight billion
Speaker 5: dollars on the largest deal that Cisco's ever made. Cisco
Speaker 5: rarely does large software acquisitions. They've made small software acquisitions
Speaker 5: and try to tuck it in. What they've learned is
Speaker 5: that it hasn't been successful in driving what they want
Speaker 5: to do on the recurring revenue side. They needed to
Speaker 5: pay up a software evaluation and if you look at
Speaker 5: if you will look at traditional software M and A metrics,
Speaker 5: this Splunk is going at six times forward sales and
Speaker 5: faster growth. Software companies typically go anywhere between eight times
Speaker 5: to twelve times sales, So you know, you're getting a
Speaker 5: lot of good value from the sense of recurring revenue base,
Speaker 5: which is something that Cisco has been trying to trying
Speaker 5: to grow over the last couple of years. And you're
Speaker 5: getting different with Plunked. You're getting a high margin software
Speaker 5: revenues and you're getting that from splunk And you know,
Speaker 5: one of the things one of the reasons why Cisco
Speaker 5: could not get into the software business was because everything
Speaker 5: was just so darn expensive back in the pandemic days.
Speaker 5: And now they found the window with evaluations coming down.
Speaker 3: So explains the share price reaction from Cisco right now.
Speaker 3: And granted we're having a down day across the board
Speaker 3: for tech companies, not that much, but not very much.
Speaker 5: Yeah, yeah, fair question. So so was running the math
Speaker 5: and it's actually the deal is going to be deluded
Speaker 5: for the first year by about two to three percent,
Speaker 5: So that's going to that's going to explain that a
Speaker 5: little bit. That's one number two. You know, when I
Speaker 5: was listening to the conference call earlier this morning, I
Speaker 5: think some of the analysts wanted a faster growth software
Speaker 5: company with more modern network architecture. The one criticism about
Speaker 5: Splunk is that they still cater to the legacy older
Speaker 5: technology and making that transition to modern clouds and and
Speaker 5: it's a slog right. These these transitions don't happen overnight.
Speaker 5: These are multi year transitions. But for Cisco that's okay
Speaker 5: because they still have a lot of customers on older
Speaker 5: technologies also trying to make this move to the modern cloud. So,
Speaker 5: you know, Splunk will give them a little bit more growth,
Speaker 5: faster growth, about about one hundred two hundred basis points,
Speaker 5: and they get the software that they want, you know.
Speaker 5: I mean, if we look at it from a growth perspective,
Speaker 5: Splunk is growing at around twelve percent based on Contensus
Speaker 5: forecast at Cisco is growing at one percent next year,
Speaker 5: a steady state five percent. So it's a win win
Speaker 5: for both companies.
Speaker 2: Do we need to see Splunk CEO Gary Steele stay
Speaker 2: with the company. Is that crucial important in your view?
Speaker 4: In the interim?
Speaker 5: Yes, If we think about where Splunk is going to
Speaker 5: sit in the Cisco ecosystem, we're talking about roughly eight
Speaker 5: percent of total revenue, and it's going to be five
Speaker 5: times the existing software revenue the observisibility piece, right, So
Speaker 5: they'll need somebody to help manage the integrations I suspect,
Speaker 5: and also help the Cisco salesforce who will need to
Speaker 5: wrap up really quickly on selling the Plunk products.
Speaker 2: I know you don't say to our audience. Yeah, this
Speaker 2: means it's the reason to buy or sell Cisco. But
Speaker 2: does it make Cisco a more attractive company? Because I
Speaker 2: think they've been working in a transformation of sorts and
Speaker 2: maybe trying to be more relevant.
Speaker 5: Right, and and thanks thanks for that disclaimer. The one thing,
Speaker 5: the one thing that I can say is that what
Speaker 5: I've noticed from other hardware companies that have made this
Speaker 5: transition from perpetual sales to recurring revenue sales, that should
Speaker 5: that could drive evaluation expansion, multiple expansion because of the
Speaker 5: reliability of cash flow.
Speaker 6: MM.
Speaker 3: Do you think Cisco's done making acquisitions for a while.
Speaker 6: Oh?
Speaker 5: I don't think they're done making acquisitions.
Speaker 4: You know.
Speaker 5: What I've what I do think they'll do is try
Speaker 5: to digest Blunk and make several smaller acquisitions around it,
Speaker 5: whether it's adding more semiconductor technology or some hardware technology,
Speaker 5: or or even more software technology. But maybe in the
Speaker 5: one hundred of millions instead of the billions.
Speaker 2: But this is one that moves the financial needle correct
Speaker 2: for the company, for Cisco and building some business exactly.
Speaker 5: So if we think about it from a software revenue perspective,
Speaker 5: I said, it's five times there. They're five times the
Speaker 5: size of their existing enterprise software base. But the overall
Speaker 5: software mix is now going to go to roughly about
Speaker 5: thirty five percent of total sales. And that's a good thing.
Speaker 2: Hey really quickly forgot totally spaced fifteen seconds. Any regulatory
Speaker 2: problems with this one really quickly.
Speaker 5: Nope, very little China business. It's going to go through
Speaker 5: one percent overlap.
Speaker 4: No issues.
Speaker 3: That was quick as can. You shall receive nope.
Speaker 2: You listen, man, I love it, Love it. Bloomberg Intelligence
Speaker 2: senior technology analyst. We didn't joining us on zoom from
Speaker 2: BI headquarters in Prince, New Jersey, Wojdin, Thank you so much.
Speaker 2: And as to mention, Cisco shares under pressure, no surprise,
Speaker 2: though often as the acquirer, it's also in a down market.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business app,
Speaker 1: or want us live on YouTube.
Speaker 2: All right, we are going to take it to the bank.
Speaker 2: We're going to take it to a bank CEO who's
Speaker 2: going to give us some clarity. My fingers crossed in
Speaker 2: terms of what's going on. We're definitely seeing the effects
Speaker 2: of the FED move. We just talked about it. But
Speaker 2: let's get right to our guests.
Speaker 3: Yeah, very please start back with us founder, chairman and
Speaker 3: CEO of Connect One Bank, Frank Sorrentino. Connect One Bank
Speaker 3: has about two dozen locations in New York, New Jersey,
Speaker 3: and Florida, and Frank joins us this afternoon from New
Speaker 3: York City. Frank, good to have you with us. I
Speaker 3: don't know to what extent you were able to catch
Speaker 3: the tail end of our conversation there where it kind
Speaker 3: of gave away all the questions that I wanted to
Speaker 3: ask you, but I want to dive right into it.
Speaker 6: I mean, thank you, thank you for that preview.
Speaker 3: Yeah, no problem, But we do love it when you join
Speaker 3: us because you guys have such a great read on
Speaker 3: the economy. So let's start big picture here. What are
Speaker 3: you seeing right now? In September of twenty twenty three,
Speaker 3: when the markets are in turmoil, rates are high. Give
Speaker 3: us an idea of what you're seeing at your locations
Speaker 3: around the country.
Speaker 6: Look, I think there's some anxiety relative to the direction
Speaker 6: of interest rates. I do think that what we saw
Speaker 6: and heard yesterday is that rates are going to be
Speaker 6: at these levels for at least the foreseeable future, the
Speaker 6: next couple of quarters. And I think that there needs
Speaker 6: to be some clarity about the direction of rates. People
Speaker 6: are holding back doing things because they think maybe rates
Speaker 6: will be lower. Other folks are concerned if rates are
Speaker 6: going to go higher. And so the idea that the
Speaker 6: Fed pretty much said, we're sort of where we are
Speaker 6: and we're probably going to stay here for a while,
Speaker 6: I think gives a little bit of clarity to the
Speaker 6: environment that we're in. The vast majority of our clients
Speaker 6: and our business owners are still optimistic. They're still doing transactions.
Speaker 6: You know, builders are still building, developers are still developing.
Speaker 6: There's still a lot of opportunity in the market. Everybody
Speaker 6: still has a job. Everybody's comfortable that they're going to
Speaker 6: keep their job or that they can move to a
Speaker 6: different job. And I think that level of optimism continues
Speaker 6: as we move forward. There is now a cost of
Speaker 6: money that has to be imputed in every transaction, and
Speaker 6: I heard a little bit about that before, and I
Speaker 6: think that's really the important part. People can still do things,
Speaker 6: you just have to include what is going to be
Speaker 6: the cost of the transaction to do with.
Speaker 3: Okay, so are people are still Are people still taking
Speaker 3: out mortgages?
Speaker 6: Yes, people are still taking out mortgages despite what you're
Speaker 6: you know what what was said before. I think people
Speaker 6: are still buying homes. We are woefully under built in
Speaker 6: this country, and certainly in this market where some one
Speaker 6: point five million homes short. And so every builder that
Speaker 6: we represent when they put product on the market today,
Speaker 6: it's selling, and so I'm very optimistic about that. Rentals
Speaker 6: are still staying strong. Every project that we've gotten behind
Speaker 6: relative to financing in the multifamily space is renting up
Speaker 6: as soon as it's completed.
Speaker 1: Wow.
Speaker 6: So a lot of good indications out there, all right.
Speaker 2: The devil's in details, and sometimes it's like nanometers that
Speaker 2: gives you an idea of maybe a new trend being built. So, Frank,
Speaker 2: are you seeing any signs of softness stress? Concerns, defaults,
Speaker 2: maybe you know terms being renegotiated. Give us an idea,
Speaker 2: because again, the devil is going to be in those
Speaker 2: small minute details for us to kind of figure out
Speaker 2: if we start to see a change.
Speaker 6: Look, we've certainly seen that our group of clients are
Speaker 6: being much more thoughtful about various projects, transactions, or business
Speaker 6: opportunities because because of that added cost of financing and
Speaker 6: so the volume of things is certainly down. I can
Speaker 6: definitely report to you that. And so we're seeing that
Speaker 6: not just hear connect one, but we're seeing that across
Speaker 6: the industry. Lending for the most part has slowed down
Speaker 6: quite a bit, and that will make its way through
Speaker 6: the economy, which is something which the FED is actually
Speaker 6: engineered to happen. So we are seeing a level of
Speaker 6: people thinking about things in a very different way, adding
Speaker 6: that cost of funding, thinking about whether or not certain
Speaker 6: things make sense and things there are things that made
Speaker 6: sense in a zero interest rate environment or a two
Speaker 6: percent interest rate environment that don't make sense today off
Speaker 6: the table. Look, any transaction that you would look at,
Speaker 6: even a builder who's going to develop a project today,
Speaker 6: the cost of money requires that project to have a
Speaker 6: different outcome, a different sales price, a different rental pro forma,
Speaker 6: and certain projects don't pencil out, others do, and the
Speaker 6: ones that do, there's money available for them, and they're
Speaker 6: continuing to move ahead and do those things.
Speaker 3: Frank, give us an update on deposits. I mean, we're
Speaker 3: in an environment I've said at you know, a dozen
Speaker 3: times today where money market funds are yielding over five percent.
Speaker 3: You've got some high interest savings accounts at some upstart
Speaker 3: banks that are yielding close to five percent. I think
Speaker 3: City has some sort of promo at five point five
Speaker 3: percent for six months if you put like, you know,
Speaker 3: one hundred grand over there or something. It's like, what
Speaker 3: are deposits looking like for you guys right now?
Speaker 6: So again, you know, we're mostly a commercial institution, and
Speaker 6: so we cater to the vast majority of businesses and
Speaker 6: small businesses, and we are seeing deposits tightening up a bit.
Speaker 6: People have a little bit less liquidity on their balance
Speaker 6: sheets today, and that's what's causing the competition, again engineered
Speaker 6: by the FED. All the qualitative easing that was brought
Speaker 6: to market in twenty twenty is now being let out
Speaker 6: of the economy through qualitative tightening and so there's less
Speaker 6: deposits to go around. Deposits are the fuel for banks
Speaker 6: to make loans, and so there's heightened competition amongst banks,
Speaker 6: amongst non banks, money market funds, all the various actors
Speaker 6: that you mentioned before. That's driving up that cost to
Speaker 6: banks and a benefit to individuals who are either opening
Speaker 6: accounts or investing money, and that's having an impact on
Speaker 6: the economy as well. So yes, we could get into
Speaker 6: an economics lesson here. Where M two declined for the
Speaker 6: first time a few months ago, it has flattened out recently.
Speaker 6: I do believe the FED is going to take their
Speaker 6: foot off the accelerator pedal there a little bit and
Speaker 6: allow some additional liquidity in the system so they don't
Speaker 6: break anything, and so we do have a soft landing.
Speaker 6: But I do believe that competition for deposits, which I
Speaker 6: think is the question you asked, is going to continue
Speaker 6: for the foreseeable future.
Speaker 2: Hey, Frank, remind us is it sixty percent of your
Speaker 2: portfolio commercial? I know you said most you're really commercial
Speaker 2: is about some.
Speaker 6: Percentage commercial small businesses all different types of businesses in
Speaker 6: and around the New York metro.
Speaker 2: So I am curious how much of that portfolio, of
Speaker 2: those portfolio of loans is coming due anytime soon and
Speaker 2: is going to have to reap potentially at higher rates.
Speaker 2: And are you seeing any stranger stresses in that portfolio.
Speaker 6: Yeah, it's a it's a fairly small amount that come
Speaker 6: doe every quarter or even on an annual basis. We
Speaker 6: have a fair amount of fixed loans. We also have
Speaker 6: loans that reprice obviously on a variable rate basis. With
Speaker 6: the underwriting that we've done here at Connect One Bank,
Speaker 6: we've always included an interest rate shock and so the
Speaker 6: vast majority of the loans as they're coming do or
Speaker 6: well within that well within those parameters relative too.
Speaker 2: So no calls from small businesses saying hey listen, Frank,
Speaker 2: are to your team and saying we're having a little
Speaker 2: bit of a tough time. We need we need some
Speaker 2: help here. We've been with banking with you for years.
Speaker 2: What are you going to do for me?
Speaker 6: Well, I will tell you that everyone is making the call, okay,
Speaker 6: but the question is are they really struggling or not.
Speaker 6: We're seeing, you know, at the same time that we're
Speaker 6: seeing interest rates go up, we've also seen inflation push
Speaker 6: up the pricing of everything. So if we look at
Speaker 6: restaurant receipts, they're up, maybe not because of more people
Speaker 6: seated there, but we're seeing that the average price per
Speaker 6: meal has gone up. If we look at rent roll incomes,
Speaker 6: they're up because rents have gone up, so that there
Speaker 6: has been a move up and pricing for everything. And
Speaker 6: I think that's important for people to keep in mind.
Speaker 6: It's not just the interest rate component that has driven
Speaker 6: up the price of the right thing.
Speaker 4: A new stream also gone up.
Speaker 3: Yeah, you talk to landlords and you know they're saying
Speaker 3: the price of insurance has shot up so much that
Speaker 3: they've got to raise the rent in a commensurate way,
Speaker 3: and they.
Speaker 6: Are raising the rents right. We're seeing rents across the
Speaker 6: New York metro market are up somewhere in the thirty
Speaker 6: thirty range over the last two and a half to
Speaker 6: three years.
Speaker 3: Frank, we only got thirty seconds left. You have a
Speaker 3: branch in West Beach, and you have branches throughout New
Speaker 3: York and New Jersey. Where's the economy strongest right now?
Speaker 3: Based on your branches?
Speaker 6: I still say the New York metro market. Don't you
Speaker 6: know anyone who tries to discount that market. Don't bet
Speaker 6: against New York. Florida is doing really well for us
Speaker 6: at Connect one, but don't bet against the New York market.
Speaker 2: Got a word to describe the economy right now and
Speaker 2: just got ten seconds. I still think it's robust, robust,
Speaker 2: all right, right, listen, we were looking forward to talking
Speaker 2: with you. It's like the perfect guest the day after
Speaker 2: the FED. Frank Sarentino, b while Founder and CEO of
Speaker 2: Connect One Bank on zoom in New York City.
Speaker 7: This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business app, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station.
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: All right, So the rollout of the latest COVID vaccines,
Speaker 2: they are underway beginning. I believe last Friday you got
Speaker 2: Pfizer Maderna recommended for those six months and older. So
Speaker 2: we wanted to really kind of get I know, people
Speaker 2: who are going out and getting them, but we wanted
Speaker 2: to get some clarification for everybody about the latest strain
Speaker 2: in the vaccines and kind of what we should be doing.
Speaker 3: Tim very pleased to have with us. Doctor William Moss,
Speaker 3: Professor of Epidemiology at the Johns Hopkins at Bloomberg School
Speaker 3: of Public Health that is supported by Michael R. Bloomberg,
Speaker 3: Founder of Bloomberg LP man at Bloomberg Philanthropy. He's also
Speaker 3: executive director of the International Vaccine Access Center. Doctor Moss
Speaker 3: joins us on Zoom from Baltimore. Good to have you
Speaker 3: with us. I was surprised last week to see the
Speaker 3: news from the vaccine makers saying that they expect twenty
Speaker 3: four percent uptake for this vaccine the COVID won at least,
Speaker 3: which is actually higher than it was in previous boosters.
Speaker 3: What do you make of that number?
Speaker 8: Yes, thanks Tim for having me. I mean it's disappointing
Speaker 8: but probably realistic. We know that of individuals who receive
Speaker 8: the primary series, only seventeen percent overall receive the by
Speaker 8: veil and booster. That proportion was much higher in the
Speaker 8: highest risk group, which is a good thing in those
Speaker 8: older than sixty five years of age, but was still
Speaker 8: only about forty three percent. So unfortunately, I think people
Speaker 8: have gotten tired. There's a lot of misinformation about the
Speaker 8: COVID nineteen vaccines, and so I think that probably is
Speaker 8: a realistic expectation. I hope we do better than that.
Speaker 3: Do people who are not in high risk groups actually
Speaker 3: need to get vaccinated against COVID nineteen.
Speaker 8: Yes, it's an important question to ask, and I think
Speaker 8: are There are three reasons why people would want to
Speaker 8: get these updated COVID nineteen vaccines. You know, the first
Speaker 8: is to prevent illness in themselves. And we know that
Speaker 8: within the month after vaccination, when antibiote levels are highest,
Speaker 8: people are really protected against getting infection, or if they
Speaker 8: do get infect they get a very mild disease. We
Speaker 8: know that that protection against severe disease, particularly hospitalization and death,
Speaker 8: lasts much longer months, even perhaps a year or longer.
Speaker 8: So the first reason is to get protected against disease,
Speaker 8: and even in individuals who are younger and healthy, it
Speaker 8: can be very disrupting to have a severe, you know,
Speaker 8: an illness that puts you in bed for several days,
Speaker 8: you miss work, you miss school. The second reason is
Speaker 8: that there's increasing evidence that the vaccines can prevent long
Speaker 8: COVID and so even individuals who have mild infection, can
Speaker 8: go on to get long COVID, which is a complex
Speaker 8: disease with multi different, multiple different signs and symptoms. The
Speaker 8: third reason is to protect those around you from getting
Speaker 8: infection or getting severe disease, particularly those who are most
Speaker 8: vulnerable and also infants younger than six months of age
Speaker 8: who aren't eligible for vaccination.
Speaker 2: So doctor Moss, is it a yes, yes, and yes,
Speaker 2: go get it? Essentially?
Speaker 8: I think so I can understand and that there is
Speaker 8: some controversy about this, you know, particularly you know, let's
Speaker 8: say children six six years to seventeen years of age
Speaker 8: healthy and particularly if they've had the primary vaccine vaccination
Speaker 8: series or if they've had COVID before, they're going to
Speaker 8: have immunity. They're a very low risk of severe disease.
Speaker 8: But I think you know, what this updated COVID vaccine
Speaker 8: does is that it targets the omicron variants that have
Speaker 8: been circulating recently. We know there's cross reactivity and cross
Speaker 8: protection from laboratory work against the current circulating strains. So
Speaker 8: I would say I would say it is yes, yes, yes,
Speaker 8: and yes. But I can understand why people are asking questions,
Speaker 8: particularly young young people who are who are healthy.
Speaker 2: All right, there is there a certain group that you
Speaker 2: should say absolutely, yes, you shouldn't even hesitate.
Speaker 8: Yes, for sure, you know older adults, and where you
Speaker 8: draw that line is somewhat arbitrary. But you know, people
Speaker 8: are going with sixty five years and older, they're going
Speaker 8: to be at highest risk of severe disease, hospitalization, and death,
Speaker 8: even if they've had a prior vaccination. There at higher risk,
Speaker 8: particularly those older than seventy five years of age, and
Speaker 8: obviously those with underlying medical conditions that play placed them
Speaker 8: at high risk, particularly those who are who are you know,
Speaker 8: suppressed for various reasons.
Speaker 3: What about kids? Should kids get the vaccine? I mean
Speaker 3: I got to tell you. Before the vaccine was available
Speaker 3: half my son was three, so he wasn't able to
Speaker 3: get it. He ended up getting a last September at
Speaker 3: the vaccine. But before he got the vaccine, he got COVID.
Speaker 3: When my whole family got COVID, he basically had a
Speaker 3: fever for a half hour and then was totally fine
Speaker 3: after that.
Speaker 8: Yes, I mean, I mean so obviously the CDC recommended
Speaker 8: these up data COVID vaccines for children six months of
Speaker 8: age and older. And uh, you know it will provide
Speaker 8: additional protection. Again, as we were saying, they're they're young.
Speaker 8: Uh uh, you know, young children, children who are otherwise healthy,
Speaker 8: who've been received the primary series before, they're definitely at
Speaker 8: lower risk. So you know, we want to prioritize those
Speaker 8: who are at higher risk, but I think everyone can
Speaker 8: potentially benefit. We we have seen children hospitalized. I've seen
Speaker 8: children hospitalized you know who otherwise Well, it's rarer. The risk,
Speaker 8: you know, the probability of that is much smaller, there's
Speaker 8: no doubt about that. But there there is a risk
Speaker 8: never nevertheless, and these updated COVID vaccines can provide protection.
Speaker 3: What's more important if you could only get one of
Speaker 3: these vaccines for a kid, the flu vaccine or the
Speaker 3: COVID vaccine.
Speaker 8: Yeah, that's a that's an interesting question. And uh, you know,
Speaker 8: it's hard to predict a little bit what the epidemiology
Speaker 8: is going to be in this coming season. You know,
Speaker 8: the risk of long COVID, I think is an important one. Also,
Speaker 8: children have had before with COVID nineteen, a multi inflammy
Speaker 8: inflammatory syndrome that can also be quite debilitating. So in
Speaker 8: my mind, you know, some of the some of the
Speaker 8: adverse events or at impact of the disease may be
Speaker 8: worse with covid, but it's that's a hard trade off.
Speaker 2: Crip well. Having said that, so then what about flu
Speaker 2: covid RSV vaccine for kids? What do you choose?
Speaker 8: Yeah, so the RSV vaccines that were just recently authorized
Speaker 8: and recommended are really for adults older than sixty years
Speaker 8: of age, so they're the ones who are going to
Speaker 8: be eligible for the for the two new RSV vaccines.
Speaker 8: That decision, the way it's kind of written by the
Speaker 8: CDC is that it should be done in consultation with
Speaker 8: the physician, where there where there's a discussion about the risk,
Speaker 8: the benefits and or pros and cons of that. So
Speaker 8: for children it will be a decision of UH, you
Speaker 8: know COVID and UH an influenza vaccine. And you know,
Speaker 8: I think it's quite easy when when a person goes
Speaker 8: to to get one vaccine to get both. All experts
Speaker 8: recommend you know, that they could be given simultaneously, the
Speaker 8: COVID and the influenza vaccines. So I would I would
Speaker 8: recommend that everyone get both.
Speaker 2: I think my husband might have done a trifecta. I'm
Speaker 2: not quite sure.
Speaker 3: For him, he should get a sticker you can?
Speaker 2: Can you do it? And is it okay to do
Speaker 2: it all in one shot? No pun intended?
Speaker 8: Yeah, I think you know, there's we We don't really
Speaker 8: there's not a lot of evidence of administering the new
Speaker 8: RSV vaccines with other vaccines, and particularly with the COVID
Speaker 8: vaccine and influenza. I don't see any theoretical reason why
Speaker 8: you couldn't do it, but I know some experts are
Speaker 8: saying to space them out. And one way to kind
Speaker 8: of think about it is, you know, what are the
Speaker 8: infections that we're seeing now, what are the infections that
Speaker 8: are likely to you know, come sooner. We are seeing
Speaker 8: RSV cases now, not as much influenza, so maybe get
Speaker 8: the RSV earlier, But we want people to get the
Speaker 8: COVID vaccine and the influenza vaccines probably by mid October latest.
Speaker 3: All right, are you markam mccount I emailed the doctor yesterday, Yeah,
Speaker 3: to ask about the kids. You know, it's like, when
Speaker 3: do we go in to get the flu vaccine? Is
Speaker 3: it too early to do that? And he wrote back, no,
Speaker 3: it's not too early anytime before October, especially with our
Speaker 3: youngest who's just over six months. She's now eligible for flu,
Speaker 3: but she has to get a vaccine, a flu vaccine
Speaker 3: booster after four weeks, so you have to spread it
Speaker 3: apart by four weeks.
Speaker 2: Well, doctor Moss, you really gave us some things to
Speaker 2: think about in some clarify clarity clarification. Excuse me. So
Speaker 2: was so appreciated, Doctor Bill Moss. He's Professor of Epidemiology
Speaker 2: at Johns Hopkins Bloomberg School of Public Health, of course,
Speaker 2: supported by Michael R. Bloomberg founder, Bloomberg LP and Bloomberg Philanthropy.
Speaker 2: He's also doctor Moss that is executive director of the
Speaker 2: International Vaccine Access Center. So, man, he's like the guru.
Speaker 3: You know what's good is when you take your kids
Speaker 3: to the pediatrician. Sometimes you can get a fluid shot
Speaker 3: there too. They'll give you the kids they have them.
Speaker 4: I do it.
Speaker 3: Yeah.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.
Speaker 2: What's Really Been interesting this week is you know, we've
Speaker 2: been talking about it. The You and General Assembly has
Speaker 2: been in session this week alongside New York Climate Week,
Speaker 2: which means we've had some really cool people hanging out
Speaker 2: with us, catching up with companies and institutions that are
Speaker 2: working on the world's most significant issues.
Speaker 3: To him, Yeah, one of those people is Tara Nathan,
Speaker 3: founder and leader of MasterCard Community Pass. It's a digital
Speaker 3: platform that enables the delivery of what it calls critical
Speaker 3: services to remote, frequently offline communities. She joined us on
Speaker 3: Zoom in New York City. Good to have you with
Speaker 3: us this afternoon.
Speaker 9: Thank you for having me.
Speaker 3: Okay, so, explain what exactly you guys are doing at
Speaker 3: MasterCard with Community Pass, who it's reaching, and how you
Speaker 3: choose those locations.
Speaker 9: Sure, so, I mean around the globe, in many communities,
Speaker 9: across Africa, across India, Southeast Asia, and even frankly in
Speaker 9: Latin America. In our own backyard there is there are
Speaker 9: billions of people who live in communities that are completely
Speaker 9: offline at best in the best of circumstances, they'll have
Speaker 9: intermittent mobile connectivity, often no power at all. And what
Speaker 9: that means is that these are communities that frankly, are
Speaker 9: precluded from getting access to basic services that you and
Speaker 9: I take for granted, things like access to car, things
Speaker 9: like the ability to make a digital transaction, the ability
Speaker 9: to purchase something online, right, and so billions of people
Speaker 9: around the globe lack, you know, the capability to do this,
Speaker 9: and so Community Paths seeks to solve for this, provides
Speaker 9: the digital infrastructure in these communities to reach people where
Speaker 9: they're at.
Speaker 2: You know, it's interesting, Tara, and you head to your
Speaker 2: website and you guys remind us that there's one point
Speaker 2: seven billion people in the world that do not have
Speaker 2: a bank account, something we all take for granted, right,
Speaker 2: but you know most people are a lot of people
Speaker 2: do not, and then you've got almost half of the
Speaker 2: world today struggling to meet their basic needs, whether it's food, education,
Speaker 2: basic healthcare. It's something that Tim and I we look
Speaker 2: for guests to talk about, you know, what's going on
Speaker 2: in the broader world, the developing world, because it's very different,
Speaker 2: certainly to what we experience here in New York City,
Speaker 2: although there are people whos struggling here, also in major cities,
Speaker 2: certainly in developed world as well. But tell us about
Speaker 2: how long you guys have around and the impact you
Speaker 2: have had.
Speaker 9: Sure, well, actually I'll just build on the point that
Speaker 9: you make. I mean, we talk about your right financial
Speaker 9: inclusion and sort of the billions that lack access to
Speaker 9: something like a bank account. I think it would be
Speaker 9: maybe a surprise to some of your listeners that there
Speaker 9: are billions. There's over a billion people on this globe
Speaker 9: who lack access to something as fundamental as an identity.
Speaker 9: So imagine what that means. It means you and I
Speaker 9: have multiple identities in our wallets. Right, We've got a school, idea,
Speaker 9: work ID, you've got a bank ID, you've got several
Speaker 9: credit cards, hopefully they're all MasterCards. You've got several you know,
Speaker 9: you've got all kinds of identification. There are over a
Speaker 9: billion people around the globe who lack something as simple
Speaker 9: as the ability to say, my name is Tara Nathan,
Speaker 9: I live at this street and this is what I'm
Speaker 9: entitled to. And if you want to think about a
Speaker 9: digital identity, that number can be north of three point
Speaker 9: four to three and a half billion people. Right, So
Speaker 9: when you think about where we look to focus our efforts,
Speaker 9: it's really in those communities it's the communities where there
Speaker 9: is no access to a foundational identity, a digital identity,
Speaker 9: and where the communities predominantly are transacting in offline communities.
Speaker 9: You know, these are communities typically where people are farmers,
Speaker 9: small holder farmers, so they maybe have a hector or
Speaker 9: two hectors of land, right, isn't the.
Speaker 3: So I just we don't have a ton of time,
Speaker 3: so I want to I just want to get a
Speaker 3: couple a couple more questions. But I'm wondering about mobile
Speaker 3: phones and technology. And you know, we've talked a lot
Speaker 3: this week about leap frogging technology because you know, you
Speaker 3: can go to places now with satellite technology, with mobile
Speaker 3: phone technology, and you can have your bank on your
Speaker 3: mobile phone. So weren't mobile phones supposed to to fix this?
Speaker 3: And doesn't you know and even even flip phones.
Speaker 2: Right, And we've been talking about this for years, yea
Speaker 2: this idea like yeah, right, Like there's a lot of
Speaker 2: phone companies.
Speaker 3: Phone companies are increasingly you know, you have places in
Speaker 3: Africa where phone companies are doing banking.
Speaker 9: Yeah, no, You're spot on, And there are there's a
Speaker 9: I think when you look at mobile banking and you
Speaker 9: look at mobile phones they've done a great job I
Speaker 9: think at leap frogging and giving many communities access to
Speaker 9: to to banking services, et cetera. And yet still there
Speaker 9: are billions that I talk about who are still left,
Speaker 9: you know, disconnected and without access to the most fundamental
Speaker 9: service like an access to a credit or a bank account,
Speaker 9: or health services, education markets, et cetera.
Speaker 2: I guess what I guess we would love to get too,
Speaker 2: is is what is it? Are we making progress? Tell
Speaker 2: us about what you guys have been doing and maybe
Speaker 2: getting people so that they do have the identity they
Speaker 2: can be part of this system. And I'm curious about
Speaker 2: where it's working or is it a lot of women?
Speaker 2: You know, I remember with micro loans, doing tons of
Speaker 2: stories twenty twenty five years ago about you know, a
Speaker 2: small amount of money would be given to a woman
Speaker 2: because it made a difference in a family's lives life.
Speaker 2: If you will, so just a little bit about kind
Speaker 2: of the progress you have made and what it tells you.
Speaker 9: We're making great progress. I'd say, Look, we started I mean,
Speaker 9: we started out less than I'd say, you know, three
Speaker 9: to four years ago, we're already crossing We've crossed three
Speaker 9: point eight million. We're coming on four million users on
Speaker 9: the platform. And when I say a four million users,
Speaker 9: what I'm talking about is again a small holder farmer.
Speaker 9: Talk about what the benefit is somebody who earns a
Speaker 9: dollar or two dollars a day. That's the person we're
Speaker 9: trying to service here, and what we're doing is we're
Speaker 9: getting her access. In many markets, the majority of these
Speaker 9: farmers are actually our women, and we're giving her access
Speaker 9: to five dollars of credit because she's now connected digitally
Speaker 9: to a bank. We're giving her five dollars of credit
Speaker 9: so she can purchase seeds to plant them, to purchase fertilizer,
Speaker 9: to purchase pesticides, so that she can increase her productivity
Speaker 9: of her land, which is very important you know, sort
Speaker 9: of in the climate and the sustainability conversations we're having
Speaker 9: now in Ungum, and we're doubling her income and I
Speaker 9: think that's the impact that we're trying to do. We're
Speaker 9: trying to look at how can digital technology make that
Speaker 9: small holder farmer get paid more and faster so that
Speaker 9: she can include, you know, expand and increase her sort
Speaker 9: of economic outlook.
Speaker 3: Are you know, I hear what you're doing and the
Speaker 3: sort of like cryptosceptic and comes out in men. There's
Speaker 3: going to be a crypto element, I mean, because the
Speaker 3: crypto people say, hey, blockchain fixes all this. Are you
Speaker 3: guys leveraging blockchain tech at all?
Speaker 2: And just got about twenty five seconds?
Speaker 9: Okay, Look, the technology is not the hard part here, right,
Speaker 9: So whether you talk about crypto or blockchain or whatever.
Speaker 2: What we're really doing.
Speaker 9: The hard part of what we're doing is building the
Speaker 9: ecosystem that serves this farmer, and that is crowding in
Speaker 9: the buyers and the input manufacturers and the bankers and
Speaker 9: the ag techs and the health text That's the difficult
Speaker 9: work that we're doing. So we're out in about six
Speaker 9: markets now around the globe, like I said, crossing four
Speaker 9: million users and crowding in all these actors to service
Speaker 9: this small hold of plumb.
Speaker 2: Well, Tara look forward to hearing more updates in the
Speaker 2: future and appreciate time. And I know it is a
Speaker 2: busy week for you all. Tarnet Nathan, she's founder and
Speaker 2: leader of MasterCard Community Pass joining us on Zoom in
Speaker 2: New York City. This is Bloomberg. So do you think
Speaker 2: that's Bed's dreaming a little bit when it comes to
Speaker 2: a soft landing. They're definitely not their base case no,
Speaker 2: But are they drinking a little bit of the kool aid?
Speaker 4: Look?
Speaker 3: They only have so much that's in their control, I guess.
Speaker 3: So there's a lot happening right now.
Speaker 2: Former US Treasury Secretary Larry Summer is telling the host
Speaker 2: of Bloomberg TV's Wall Street Week, David Weston, that the
Speaker 2: FED has got the memo and caught the soft landing bug.
Speaker 3: The US central big policymakers are too optimistic with their
Speaker 3: latest set of economic projections and are at risk of
Speaker 3: being surprised by both faster inflation and weaker growth than
Speaker 3: they anticipate.
Speaker 2: Which is why this story about the Fed's dream of
Speaker 2: a soft landing facing a triple threat definitely caught our attention.
Speaker 2: We talked about it earlier with our TV colleagues in
Speaker 2: our simulcast. It is a most read story in The Bloomberg.
Speaker 2: It's in the new issue of BusinessWeek, now out on newsstands,
Speaker 2: online at Bloomberg dot com, slash BusinessWeek on the Bloomberg.
Speaker 2: So let's get to it. Bloomberg News Global Economy Reporter
Speaker 2: and a current with us on zoom in our Washington
Speaker 2: DC Bureau and the editor of Bloomberg Business Wee Child Weber.
Speaker 2: Here in our Bloomberg Interactive Broker studio, the Grimlins are
Speaker 2: out in full force. I'm just going to tell you.
Speaker 7: Yeah, warning, I could take a little bit more aerosmith though,
Speaker 7: Like that was that was a good start. That was
Speaker 7: a good start.
Speaker 4: Yeah.
Speaker 7: So yeah, look, this was a really important week and
Speaker 7: this soft landing that the FED has wanted to pull
Speaker 7: off like it look for a moment, like it might happen.
Speaker 7: Where does this stand?
Speaker 4: Didn't it? Yeah?
Speaker 10: So, look, things have been a bit giddy in DC
Speaker 10: for the past few weeks. Right, The data has been
Speaker 10: very good. The economy is in much better shape than
Speaker 10: anyone's thought. But now there's the kind of feeling just
Speaker 10: when you thought it was safe, we have this unprecedented
Speaker 10: auto strike in Michigan, which really has significant potential for disruption.
Speaker 10: You potentially have the government going to shut down that's
Speaker 10: probably expected.
Speaker 4: In a few weeks.
Speaker 10: And of course you have students now repaying those loans
Speaker 10: they that had been kind of on hold for the
Speaker 10: last several years due to the pandemic that's going to
Speaker 10: hit their consumer income. So it's kind of a triple
Speaker 10: threat has suddenly come out of nowhere. You know, just
Speaker 10: when you thought it was safe that the US had
Speaker 10: pulled off is unlikely self landing. We've got these potentially
Speaker 10: serious head winds now and it's causing some people maybe
Speaker 10: to pause a little bit on some of the a
Speaker 10: as I say, some of those giddiest expectations that were
Speaker 10: going around.
Speaker 7: Okay, So which of those three threats is potentially the
Speaker 7: most serious for the for the Fed's ability to pull
Speaker 7: this off.
Speaker 4: It's got to be the car strike.
Speaker 10: So if that goes full pedal to the floor, so
Speaker 10: to speak, you're talking about obviously your potential about a
Speaker 10: major hit to unemployment. You could even see the monthly
Speaker 10: payrolls number turn negative on.
Speaker 4: The one hand.
Speaker 10: On the other hand, it would obviously really complicate the
Speaker 10: supply chain story just when car prices, at least new
Speaker 10: car prices and US car prices are coming off. The
Speaker 10: boil a bit obviously will have potentially inflatory impact there,
Speaker 10: and so much so in fact, that if we do
Speaker 10: have a full bore or auto strike, you could be
Speaker 10: talking about a negative quarter or fourth quarter for growth
Speaker 10: for the economy. So the auto strike is front and center.
Speaker 10: And then of course you have the government strike. People
Speaker 10: take different views on how that might play out, but
Speaker 10: it would have certainly in your term impact. And then
Speaker 10: of course there's a student only payment, which obviously impacts people,
Speaker 10: saying the disposed to lincome they have lifts men.
Speaker 2: And I have to say that one of the numbers
Speaker 2: that stood out in your story is, you know, to
Speaker 2: remind everybody that there's about fifteen hundred striking UAW workers
Speaker 2: right now, but if it goes to the entire UAW
Speaker 2: UAW excuse me, it's one hundred and fifty thousand members,
Speaker 2: that's significant. And then, as you say, the trickle down
Speaker 2: into supply chain problems. People can't cars, you know, get cars.
Speaker 2: So what are economists how are they kind of strategizing
Speaker 2: around the potential impact of this all.
Speaker 10: They're gaming it out. I mean a lot will depend
Speaker 10: on how these scenarios play out. As we say, maybe
Speaker 10: the union strike remains somewhat targeted, so to speak, and
Speaker 10: maybe they reach a deal in the near term and
Speaker 10: the economic damage is limited. But the longer it goes
Speaker 10: on and the broader that strike gets, then more material
Speaker 10: that hit will be to the economy. No question about it.
Speaker 10: It's a bit it's a kind of similar story for
Speaker 10: the government shutdown. People say, oh, look, a government shut
Speaker 10: down for a few days won't have that much of
Speaker 10: an impact. But given their polarized things are in Washington,
Speaker 10: if it remains shut down for quite a while, starts
Speaker 10: the impact flow of economic data, starts the impact consumer
Speaker 10: and business sentiment that will have any impact as well.
Speaker 10: And by the way, the other point that we flick
Speaker 10: at is don't forget what's happening with oil. Prime is
Speaker 10: at the moment as well, all heading back towards a
Speaker 10: hundred dollars a barrow. Some talk could go even higher
Speaker 10: than that. That's inflation on the one hand, but of
Speaker 10: course the other hand, it's the taxing consumers as well,
Speaker 10: So that's going to be a clear factor. So as
Speaker 10: I say, just when you thought it was safe that
Speaker 10: the US had pulled off, is very likely soft landing.
Speaker 10: Suddenly there's quite a few headwinds on the horizon heading
Speaker 10: into the end of the year.
Speaker 7: Okay, so if we've got this many headwinds, how likely
Speaker 7: is lanning? And what do we call it?
Speaker 3: You haven't even mentioned all the headwinds either.
Speaker 2: See high Joe's voice like that.
Speaker 10: I think, look, the odds are for now right here,
Speaker 10: and now the others are still on for there's a
Speaker 10: lot of soft landing than no landing, right because the
Speaker 10: US economy is in great shape, and obviously nobody's advocating
Speaker 10: in recession, and nobody wants to see significant job losses,
Speaker 10: and so far fed and managed get inflation well off
Speaker 10: the ball without doing that. But we're there's a there's
Speaker 10: a view now that they're going into the really hard model.
Speaker 10: Things get much more complicated from here, like, for example,
Speaker 10: do they choose to raise industrates again at how will
Speaker 10: that flow down to people who live you know, munthpi
Speaker 10: mounting credit cards? How to flow down to small businesses
Speaker 10: who have a lot of variable rate loans? For example,
Speaker 10: the household sector on fixed rate loans aren't overly impacted,
Speaker 10: but there is a part of the business and a
Speaker 10: consumer world that will be getting hurt. So we're getting
Speaker 10: into complicated part of this now. Raising rates when inflation
Speaker 10: was running away, it's kind of a no brainer, but
Speaker 10: it gets a lot trickier from here.
Speaker 3: What about the restart end of student loan payments next month?
Speaker 4: It's going to hurt.
Speaker 10: It's definitely going to hurt I mean, there's a view
Speaker 10: that perhaps that will be quite staggered. You know, not
Speaker 10: everyone who has a student loan will start paid immediately.
Speaker 10: It'll be sort of grandfather over time, so to speak.
Speaker 10: But the columns will say to you, that's taking a
Speaker 10: lump out of people's pockets right at the time when
Speaker 10: everything else is already expensive with the inflation storry, with
Speaker 10: the indus rate story, so it's going to hurt consumption.
Speaker 3: But well, sorry is there is there also, though, the
Speaker 3: view that if people are spending more money paying back
Speaker 3: these loans, then they're not spend as much money on
Speaker 3: services and goods, so actually it's not inflationary.
Speaker 10: Sure, I mean for the student loan repayment you're talking
Speaker 10: about like to hit the consumption, hit the growth, because
Speaker 10: you just have less money in your pocket if you're
Speaker 10: paying back alone. I mean, our economists and along here
Speaker 10: makes a point that if it wasn't for the militarium
Speaker 10: on the student loan repayments, all of the right hikes
Speaker 10: of twenty twenty two would already be having a much
Speaker 10: bigger pinch on that part of the economy.
Speaker 7: Yeah, okay, okay, wait, so how do we how does
Speaker 7: Powell feel about.
Speaker 1: All of this?
Speaker 10: They seem to feel pretty Look, yeah, he's listening. I
Speaker 10: think he's I think he's a scenting being. You heard yesterday.
Speaker 10: I mean he Look, he made the point yesterday. He
Speaker 10: was very got maybe a little bit prickly when he's
Speaker 10: getting questioned about the whole soft landing story, but he
Speaker 10: made it clear that it's their objective. He didn't understand
Speaker 10: any viral headlines yesterday about the FED doesn't want to soft.
Speaker 10: He's he wants to do everything he can, and that's
Speaker 10: why they're going to be very careful, careful from here,
Speaker 10: as we dubbed him in our top live blog yesterday,
Speaker 10: and mister careful, he doesn't.
Speaker 4: Want he knows he's going to get more complicated in.
Speaker 10: Here, and he doesn't he knows he has a chance
Speaker 10: of pulling off a very lucky soft landing, and that's
Speaker 10: why the FED had been careful. But if I've just
Speaker 10: at one point, our economist and a wong random numbers,
Speaker 10: and she noted that since since the nineteen eighties, that
Speaker 10: every time there's been consensus for the US to pull
Speaker 10: off soft landing, it's been followed by a recession.
Speaker 4: So that's that's the damn part of this.
Speaker 2: It's like, have a great evening, everybody say, it's six
Speaker 2: minutes for ended to cheer us up. What don't you
Speaker 2: feel like as soon as everybody's on board with okay,
Speaker 2: we've got a soft landing, wait, bad news exactly like
Speaker 2: as soon as everybody jumps all on board. So you know,
Speaker 2: it's interesting. Jim Bowler talked with our Mike McKee and
Speaker 2: he thinks rates need to rise further because he's concerned
Speaker 2: about strong growth. And I keep wondering, is there though,
Speaker 2: then the chance listening to what you're saying in about
Speaker 2: these you know this trifecta of risks and that ultimately
Speaker 2: the FED does overdo it and we get a hard landing.
Speaker 10: So they're cyllinder territory where they feel they have to
Speaker 10: push boring costs higher. Right, Because you know, there was
Speaker 10: a bit of a little bit of a scare on
Speaker 10: the most recent inflation data going in the wrong direction.
Speaker 10: There's a feeling among econments that, you know, what happens
Speaker 10: if we do get a real abs of the inflation
Speaker 10: story that it does rebounds that have FED are not
Speaker 10: declaring mission accomplished and you know, even if they don't
Speaker 10: hike rates again, what they are saying is they're certainly
Speaker 10: not going to be cutting rates anytime soon, right if
Speaker 10: you look at the forecast that they put out yesterday,
Speaker 10: In fact, they're going to be keeping rates up towards
Speaker 10: that in the high fours at least for you know,
Speaker 10: for the next several years anyway. So yeah, like I
Speaker 10: keep saying from the beginning, it's going to get a
Speaker 10: lot more complicated from here now, because if you have
Speaker 10: a situation where the growth is slowing but inflation is
Speaker 10: still sticky, and the FED can't bring down interest rates,
Speaker 10: that's going to make a soft landing all the harder.
Speaker 2: I ask you, though, could it be below trend growth?
Speaker 2: And then it kind of doesn't feel so great? So
Speaker 2: you know, maybe, you know, do technically get this recession?
Speaker 10: Yeah, I mean people talk about rolling recessions. Me and
Speaker 10: Ediardenny up in Boston, who coined the bond visual anity term.
Speaker 10: He's talking about some person of the economy or already
Speaker 10: in recession.
Speaker 4: It just doesn't show.
Speaker 10: Up in the aggregate data, right, So maybe parts of
Speaker 10: manufacturing sector for example. But on the other hand, though,
Speaker 10: you know, you see retail analysts saying the holiday shopping
Speaker 10: season is still going to be very strong. They're not
Speaker 10: seeing any sort of a pullback from consumers.
Speaker 4: So it is a good news story for the US
Speaker 4: right now.
Speaker 10: You have to be very clear and that it's remarkable
Speaker 10: that it's gotten this far despite all the expectations and
Speaker 10: despite what the FED have done, raising and straights by
Speaker 10: over five percentage points. That's unprecedented, you know, over just
Speaker 10: over a year long period, and things have held up
Speaker 10: very well, and so it's a it's a good news story.
Speaker 4: I'm just here until you dropped that little.
Speaker 2: Eight.
Speaker 1: So when are we going to know? I?
Speaker 7: You know what the next when's your next draft?
Speaker 3: To he just he just finished this one?
Speaker 10: Who do seem to be kind of an omen of
Speaker 10: doom since I arrived in the US, by the way,
Speaker 10: with several of my pieces. But no, I think over
Speaker 10: the next six months we're going to get a clearer
Speaker 10: picture and how things are going because you know, you've
Speaker 10: got all these near term headwinds. We'll see how that
Speaker 10: works out. We'll see where the inflation story goes. We'll
Speaker 10: see if industrates have to go up again. You turn
Speaker 10: into new year, then where's oil gone? Or how's a
Speaker 10: global economy going. I think if you know the earlier
Speaker 10: with the next year, we'll probably decide the self landing story.
Speaker 3: Okay, And there's still some stuff that could go right though.
Speaker 3: Maybe the auto strike gets averted the worst of it.
Speaker 3: Maybe maybe it's only its first know things could get
Speaker 3: worse tomorrow, but they could get better before, you know,
Speaker 3: than in the next government doesn't shut down. Maybe the
Speaker 3: government doesn't shut and figure it out. Yeah, and I
Speaker 3: know now that I'm saying this out loud, I'm like, Okay,
Speaker 3: last happen, But what's the what's the flip side of
Speaker 3: this argument that you make?
Speaker 10: And no, all of that could be true, right and yeah, yeah,
Speaker 10: but but you know, one thing to think about is
Speaker 10: whatever deal comes out of the auto workers strike, right,
Speaker 10: we'll set a precedent for all of the other smaller
Speaker 10: businesses and that supply chain. All those workers in the
Speaker 10: autosply channel be going wait a minute. The guys on
Speaker 10: the plant down the road are getting paid x y
Speaker 10: z now and they're having their conditions x y z.
Speaker 10: There's a feeling that this will have a multiplier effect
Speaker 10: for other you know, factories, So there might be an
Speaker 10: infacial story out of it. But look to your point
Speaker 10: thinks things could sill go well those scenarios we've talked about,
Speaker 10: it might play out on the upside, and the Infatian
Speaker 10: story might continue to receive the way it husband, which
Speaker 10: has been very good. And then broadly speaking, yes, the
Speaker 10: US continues to be in that goldilocks position that is
Speaker 10: into next year.
Speaker 3: Notice Joel, how I didn't say maybe we won't have
Speaker 3: to pay back our student loans. Yeah, because there are
Speaker 3: some things that are certain in life going to be.
Speaker 7: I think we're gonna be writing about this a lot yet.
Speaker 7: And I think how these three things evolved. I think
Speaker 7: I think we're in for a little bit of pain here,
Speaker 7: So you know, I wanted to just bring it back
Speaker 7: to that. How is this going to show up for
Speaker 7: for consumers? Do you think in depth?
Speaker 10: Keep and eye this holiday shopping season. It will be
Speaker 10: interesting to see if if the FED does go ahead
Speaker 10: with another right hug on this side of Thanksgiving our
Speaker 10: Christmas time does not really start to hurt consumers who
Speaker 10: they start pulling, pulling their spending, that would be a
Speaker 10: really important signal. I think so far they've held up
Speaker 10: pretty well on the way that is so watch that
Speaker 10: and also keep an eye on the global backdrop. You know,
Speaker 10: China's in the fun because we know maybe it's botting out,
Speaker 10: but it hasn't been a great year for Europe is
Speaker 10: certainly under pressure, the big industrial economies of Germany for example.
Speaker 4: All of that's not a.
Speaker 10: Good demand story for the US either, so you know
Speaker 10: there's a domestic story, and and keep an eye on
Speaker 10: what's going on around the rest of the world as well.
Speaker 2: Hey, listen, dark and telling us that wealthy dinners are
Speaker 2: already trading down a cheaper wine.
Speaker 3: Because they spend all their money in Europe over the summer.
Speaker 2: So we're already seeing pressure on the pocketbook. And thank
Speaker 2: you so much. We so appreciated Bloomberg News Global Economy
Speaker 2: reporter and a current joining us on zoom in or
Speaker 2: Washington DC Bureau. Of course, the editor of Bloomberg Business Week,
Speaker 2: Jill Weber, here in our studio self landing.
Speaker 3: What do you think, Joel, looking unlikely? I mean, look
Speaker 3: at the markets today, look at the markets this.
Speaker 2: Week, and people are talking even higher right in terms
Speaker 2: of the rate and environment. Yeah, that maybe we haven't
Speaker 2: topped out on that two year all right, guys, it
Speaker 2: is in the new issue of Bloomberg Business Week. Check
Speaker 2: it out on newsstands online at Bloomberg dot com, sized
Speaker 2: Business Weekend on the Bloomberg terminal.
Speaker 1: Mark Journal.
Speaker 4: How about you let me drive?
Speaker 2: No, no, no.
Speaker 1: Honey, please, I'll do the gravel.
Speaker 4: I want to.
Speaker 10: It's a good question, good time.
Speaker 1: This is the drive to the globe. Well, I'm on
Speaker 1: Bloomberg Radio.
Speaker 2: I just look at through her rite through here on
Speaker 2: the Bloomberg We've got stocks falling to their lowest since June.
Speaker 2: I got the ten year yields climbing, latest reading on
Speaker 2: the labor market, reinforcing the case for the FEDS higher
Speaker 2: for longer stance s and P five hundred right now,
Speaker 2: as Charlie mentioned, down about one and a half percent
Speaker 2: tim all major US equity benchmarks breaking below their one
Speaker 2: hundred day moving averages, seen as a bear signal by
Speaker 2: some technical analysts. So there it is, folks.
Speaker 3: You know what looks pretty good right now?
Speaker 2: That looks pretty good?
Speaker 3: Money market funds that yield over five percent.
Speaker 2: Ex I don't know. Why wouldn't you write, why wouldn't
Speaker 2: you exactly? Well, let's see what Hillary Kramer has to say.
Speaker 2: She's back with us. She's CIO at Kramer Capital Research.
Speaker 2: He's here in our Bloomberg Interactive Brokers studio. Great to
Speaker 2: have you back with us. Why wouldn't you just throw
Speaker 2: everything in a money market right now and just don't
Speaker 2: worry about like just take the risk off the table
Speaker 2: and just go all in.
Speaker 11: Well, I have to say that you really do want
Speaker 11: to keep your powder dry, and it is an opportunity
Speaker 11: here the notes I sent early this morning where I
Speaker 11: think a lot more optimistic than as the market started
Speaker 11: to unfold today and I saw the bond market, you know,
Speaker 11: leading stocks lower and stocks in general are really weak,
Speaker 11: and it's really about earning season and interesting it's the banks,
Speaker 11: especially the regional banks. These depositors are drying up, and
Speaker 11: that's one of the data points we were looking at
Speaker 11: this afternoon.
Speaker 2: We used to love US Bank Corp.
Speaker 11: I love it like we won't teach it.
Speaker 3: Right now, we're actually going to be speaking in just
Speaker 3: a few minutes with the founder, chairman and CEO of
Speaker 3: Connect One Bank, Frank Sorrentino. We love talking to him
Speaker 3: because regional banks are just a great read on the
Speaker 3: US economy. He can tell us, he can answer that
Speaker 3: question our depositor is actually fleeing for yield interest high
Speaker 3: yielding interest accounts.
Speaker 2: And I just want to mention the KRE, the regional
Speaker 2: bank ETF. It's down about twenty six twenty seven percent
Speaker 2: year today.
Speaker 11: Yeah, and it made even more than that because we're
Speaker 11: just talking about depositors. What about credit quality? What about origination? Okay,
Speaker 11: like it's going to take a long time to get
Speaker 11: from seven and a half percent mortgages down to back
Speaker 11: like four percent mortgages. It doesn't just happen.
Speaker 2: Over by banks.
Speaker 11: Right now, I would not be looking at the banks.
Speaker 11: We're going to really look to the banks to see
Speaker 11: what they have to say and what kind of color
Speaker 11: they give us on the market when they start to
Speaker 11: report earnings.
Speaker 4: Uh.
Speaker 11: And then I mean just think about something like restaurants.
Speaker 11: Restaurant like cracker barrel used to be a go to stock.
Speaker 11: It's in the toilet. I mean, there's just no other
Speaker 11: way to put it.
Speaker 2: Well, so how do you what's the conviction you have
Speaker 2: in a market like this? We keep talking about what's
Speaker 2: going on with the treasury trade, and we're talking about
Speaker 2: what the ten year back to levels we saw in
Speaker 2: six oh seven o seven actually and this just before
Speaker 2: like everything started to come undone in the Great Financial Crisis.
Speaker 2: I keep saying, it doesn't feel like the Great Financial Crisis,
Speaker 2: but it does feel like there's a lot of ifs
Speaker 2: out there. So I don't know what's the conviction you
Speaker 2: can have in this market. It can buy or not buy.
Speaker 11: Well, there's conviction always to buy to some extent, and
Speaker 11: that's where portfolio management obviously comes into play and making
Speaker 11: sure that you pick your points go in slowly, but
Speaker 11: there are still opportunities out there. Yesterday's earnings, go I
Speaker 11: thought that General Mills, you know, looked really good. It
Speaker 11: was it twenty percent off of its highs from the year.
Speaker 11: So some of these food stocks look pretty good. We've
Speaker 11: seen some stocks that fundamentally are good but have had
Speaker 11: issues like three m you know, with their big lawsuit
Speaker 11: that they just sell.
Speaker 2: That means stock pickers market.
Speaker 11: Oh totally, it's a stock pickers market.
Speaker 4: Now.
Speaker 11: That being said, so many investors, including some of the
Speaker 11: large smart investors, don't realize the extent to which these
Speaker 11: Magnificent seven have just simply been up because everyone buys
Speaker 11: ETFs and that's why Apple and Microsoft and Amazon continue
Speaker 11: to rise and even today. I think Microsoft was up
Speaker 11: actually a little bit middle of the day. Where is
Speaker 11: it right now? It's probably about even on the day.
Speaker 11: Apple was doing okay, and that's because there is still that.
Speaker 2: Microsoft stuff that one quarter of a percentage was up
Speaker 2: about one point four percent earlier in the day, and
Speaker 2: there we go.
Speaker 11: That's pretty good.
Speaker 2: I think hit me out here, because like if I
Speaker 2: bought Nvidia in January and of one hundred and eighty
Speaker 2: two percent, I'm pretty happy.
Speaker 3: It's not bad, Carol.
Speaker 2: I was my brother's Yeah, I bought it back in
Speaker 2: twenty twenty. I was reading about my good for you, buddy,
Speaker 2: I'm and he's like, I'm really happy. So I'm just wondering, well,
Speaker 2: you know, I can't really like continue stock so easily
Speaker 2: do this, Yes, exactly. So I'm just like, I hear,
Speaker 2: I don't know what is this? What your clients tell us,
Speaker 2: what they are doing and what they are concerned about,
Speaker 2: or what kind of calls you're getting from the folks
Speaker 2: that you that you either help manage money or give
Speaker 2: advice to.
Speaker 11: They're sitting on their hands and many of them are
Speaker 11: looking to sell. They're looking to liquidate. Remember, we have
Speaker 11: a very different demographic today where the next generation, whether
Speaker 11: it be lower middle or upper class, the parents you know,
Speaker 11: are paying for those that are, you know, young adults,
Speaker 11: and there's a need for liquidity. There's a need for
Speaker 11: money that we didn't used to have in a previous time.
Speaker 11: But as a stock pickers market, like we've had his stock,
Speaker 11: I still think people so that sounds to be very bearish,
Speaker 11: but it's bearished. But remember the FED is going to
Speaker 11: come in and save the day. They're gonna slash rates.
Speaker 2: I thought Jay Powell was really clear yesterday that he
Speaker 2: might even tighten another quarter percentage point. But at the
Speaker 2: minute higher pirate anchor higher for lunch. But then you
Speaker 2: think he's just over You think he's over optimistic. Who
Speaker 2: thought he is? Former US Treasury Secretary of Larry Summers
Speaker 2: thinks that basically the FED is you know, drinking the
Speaker 2: soft landing kool aid.
Speaker 11: The Federal Reserve is playing trying to play mine. David Weston,
Speaker 11: that is, FED is playing playing mind games. I thought
Speaker 11: it was very interesting. I thought Powell was just so
Speaker 11: vague yesterday. It was very disappointing to hear him not
Speaker 11: want to really answer the questions. And the Q and
Speaker 11: a the way he should have. But what we will
Speaker 11: see is we're going to see maybe a little bit
Speaker 11: of a bounce up, but I think we're going to
Speaker 11: see the market come back down. We're going to have,
Speaker 11: you know, like a drawdown that could be five to
Speaker 11: seven percent over two or three day.
Speaker 3: Period rival what we saw last October.
Speaker 4: And then and then he.
Speaker 11: Comes in and that's when we see that because he's
Speaker 11: overdone it.
Speaker 3: But when he says he's data dependent, he's not watching
Speaker 3: the S and P five hundred labor markets.
Speaker 2: Still say we got another exactly.
Speaker 3: And the cpis you know PCE is not to two percent, right.
Speaker 11: Okay, well that's something else that's interesting, Carol. You just
Speaker 11: brought up the labor market. As soon as we see
Speaker 11: some layoffs start to happen, that's when the consumer becomes undone.
Speaker 11: That's when all bets are off and that market starts.
Speaker 11: We could see it between now and December thirty one.
Speaker 11: I mean, I think that there might be some there
Speaker 11: might be some gearing up. You know, we saw Amazon
Speaker 11: what tiring two hundred and fifty thousand employees.
Speaker 3: Then hour as an average wage, that's a lot of money.
Speaker 11: Right, But AI technology many of those jobs has really
Speaker 11: taken a lot of the a lot of people out
Speaker 11: of the market. We know the finance, we know we
Speaker 11: know that the financial We know that the financial industry
Speaker 11: is really in dire straits right now and is actively
Speaker 11: laying off regardless of what we hear. We hear it
Speaker 11: in little bits and pieces. But there aren't those jobs
Speaker 11: out there. But the consumer, the consumer is really going
Speaker 11: to get nervous. Look Home deepo and Lows. Here's another proof.
Speaker 11: Home deeple and Lows doing terribly today. That's proof that
Speaker 11: everyone knows you're not going to move a house in
Speaker 11: a seven and a half percent mortgage environment.
Speaker 2: We're just not going to it.
Speaker 11: And it's not even worth trying to fix up your
Speaker 11: house to sell.
Speaker 1: We're doing.
Speaker 4: You are.
Speaker 2: Looking and they're like, there's not no inventory. Hillary Kramer,
Speaker 2: Kramer Capital Research.
Speaker 4: Be wel. Thank you.
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live weekday
Speaker 1: afternoons from three to six Eastern on Bloomberg dot Com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business App.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal,