WEBVTT - PGIM COO: Minsky Moment For Climate Change Is Happening Now 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.640 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.599 at Bloomberg dot com slash podcast. Let's step away a 0:00:22.680 --> 0:00:26.040 little bit from fed speak and rates. Let's let's talk about, 0:00:26.480 --> 0:00:29.040 you know, some of the bigger, bigger trends, long term 0:00:29.040 --> 0:00:33.560 trends affecting investing longer term. 'm talking about climate change 0:00:33.600 --> 0:00:35.920 and our good friends at p JIM have some some 0:00:36.040 --> 0:00:39.159 good research out on that. Tim Er Hyatt, he's a 0:00:39.200 --> 0:00:42.120 chief operating officer for p JIM. PEJAM is a global 0:00:42.200 --> 0:00:46.520 investment management business of Prudential Financial one point five trillion 0:00:46.800 --> 0:00:51.960 with a t under management UH based in a researging Newark, 0:00:51.960 --> 0:00:54.840 New Jersey. Tamer. Thank you so much for joining us here. 0:00:55.120 --> 0:00:56.920 Talk to us about I know you guys are out 0:00:56.960 --> 0:01:01.560 with a recent report weathering climate change, opportunities and risk 0:01:02.000 --> 0:01:06.319 in an altered investment landscape. Climate change is such a 0:01:06.400 --> 0:01:10.240 huge issue on a global scale. There have political ramifications. 0:01:10.280 --> 0:01:13.679 How are you guys thinking about how that affects your 0:01:13.720 --> 0:01:18.319 investment paradigm. It's a it's a it's a great question, 0:01:18.560 --> 0:01:22.000 and you know, I really think it's it's long term. 0:01:22.040 --> 0:01:24.360 But with what we saw in Texas not very long 0:01:24.400 --> 0:01:27.360 ago and all the issues there, the sort of Minsky 0:01:27.480 --> 0:01:30.679 moment for climate change is happening around us with beginning 0:01:30.680 --> 0:01:34.400 to be priced in. And that's maybe our biggest pieceis 0:01:34.440 --> 0:01:37.840 that for all investors, whether they have an E. S 0:01:37.880 --> 0:01:40.880 G lens, but even if they don't, the data now 0:01:41.080 --> 0:01:44.480 this distinguished between winners and losers. Those will be on 0:01:44.560 --> 0:01:47.000 the right side of climate change and I'm making the 0:01:47.000 --> 0:01:50.600 evolution and those will be left behind as dinosaurs and 0:01:50.680 --> 0:01:55.440 stranded assets. And that increasingly every asset and every security 0:01:56.000 --> 0:01:59.160 will start having climate change externalities which have been there 0:01:59.200 --> 0:02:02.320 for you know, one group of people, but not reflected 0:02:02.320 --> 0:02:05.520 in market prices, increasingly reflected in market prices for but 0:02:05.960 --> 0:02:11.679 five different, very important reasons. So my question is we're 0:02:11.720 --> 0:02:14.480 all against climate change. Obviously, where can I make the 0:02:14.520 --> 0:02:18.360 most money on this? I mean, where are the opportunities 0:02:18.680 --> 0:02:22.360 that haven't already been uh, that are haven't already been 0:02:22.440 --> 0:02:27.120 crowded into? So I would say that two biggest areas 0:02:27.160 --> 0:02:30.680 are looking for places where climate change will actually impact 0:02:30.720 --> 0:02:34.839 a company's performance, but the markets haven't internalized it because 0:02:34.880 --> 0:02:37.960 they haven't utilized the data or seen the writing on 0:02:38.040 --> 0:02:40.360 the wall. And the two areas that give us examples 0:02:40.520 --> 0:02:46.000 is first, hidden risks in areas like semiconductors and pharmaceuticals. 0:02:46.080 --> 0:02:48.320 They seem like the in pristine areas, right a Swiss 0:02:48.320 --> 0:02:52.280 pharmaceutical company, a Taiwanese semi conductor company. But if you 0:02:52.280 --> 0:02:55.640 attract the supply chain back, you can separate between companies 0:02:55.639 --> 0:02:59.840 who have risk to medical manufacturing in India or semicon 0:03:00.040 --> 0:03:02.399 up to risk in Arizona where the water stress will 0:03:02.440 --> 0:03:05.480 really affect the manufacturing processes. And if you look back, 0:03:05.520 --> 0:03:08.480 you can start seeing which companies are much more immune 0:03:08.480 --> 0:03:11.680 to climate risk and therefore will perform better versus which 0:03:11.840 --> 0:03:14.760 that are not and will perform worse. Uh. And then 0:03:14.840 --> 0:03:17.040 the second area I would say is on the on 0:03:17.120 --> 0:03:20.240 the greener end of the brown fossil fuel industry. You know, 0:03:20.320 --> 0:03:21.880 not a lot of people have said, you know that 0:03:22.000 --> 0:03:25.400 divestment is a responsible investing strategy. I think there are 0:03:25.440 --> 0:03:27.840 some investors who are saying, I can actually now have 0:03:27.960 --> 0:03:31.000 the data to distinguish between companies like BP and Shell 0:03:31.360 --> 0:03:34.839 were maybe doing much more in evolving ensuring that don't 0:03:34.880 --> 0:03:38.280 become stranded acid versus energy companies that haven't made the 0:03:38.360 --> 0:03:41.360 transition that might die out as dinosaurs. The data now 0:03:41.360 --> 0:03:44.000 allows us to distinguish what we call the olive industries 0:03:44.240 --> 0:03:46.200 at the greener end of brand. And that is certainly 0:03:46.240 --> 0:03:49.720 another opportunity across the fossil field sector, which will be 0:03:49.760 --> 0:03:51.960 by the way, with us still at least twenty fifty 0:03:52.040 --> 0:03:54.880 we think about forty percent of energy consumption will come 0:03:54.920 --> 0:03:59.080 from possiblitives. Even then, despite meeting the parents agreement alright, 0:03:59.120 --> 0:04:02.280 time more. You know, here Bloomberg, we're all about data. 0:04:02.440 --> 0:04:06.080 If you can't measure it, you can't management and manage it. 0:04:06.160 --> 0:04:08.600 Is what the one of our our folks here at 0:04:08.600 --> 0:04:11.520 Bloomberg is fond of saying, talk to us about the 0:04:11.640 --> 0:04:14.840 data that you think investors and maybe even companies should 0:04:14.840 --> 0:04:17.120 be disclosing and focusing on what's the data that you 0:04:17.120 --> 0:04:20.600 guys really look at. So so there are about a 0:04:20.760 --> 0:04:23.880 range of data providers, of which Bloomberg is one, but 0:04:24.040 --> 0:04:26.800 you know, you use about five or six different providers. 0:04:27.160 --> 0:04:30.159 Obviously the most common one is stubbing emissions, but increasingly, 0:04:30.160 --> 0:04:32.080 and we have a really big real estate business, as 0:04:32.640 --> 0:04:36.599 you all know, Increasingly it's satellite data flood maps that 0:04:36.640 --> 0:04:39.880 are more frequently updated than kind of you know, official 0:04:39.920 --> 0:04:44.160 government map is storm stress. So on the real estate side, 0:04:44.160 --> 0:04:46.719 I would say real assets in general infrastructure, there's a 0:04:46.760 --> 0:04:49.240 lot of good data that allows us to make an 0:04:49.320 --> 0:04:52.080 environmental assessment and often that aligns to actually creating more 0:04:52.160 --> 0:04:55.440 value for our customers by understanding how we build resilience 0:04:55.480 --> 0:04:58.520 to that. On the public market side, stuff and bond 0:04:58.800 --> 0:05:01.160 there's a long journey still to do. The basic ubun 0:05:01.200 --> 0:05:03.640 emission data is there for large caps, but if you 0:05:03.720 --> 0:05:06.240 go into high yield, if you go into emerging markets, 0:05:06.240 --> 0:05:09.040 the big data gaps there. The good news is they're 0:05:09.080 --> 0:05:12.280 filling in quickly, so we'd encourage all investors to just 0:05:12.400 --> 0:05:14.839 keep tracking this, not on an annual basis, but every 0:05:14.839 --> 0:05:17.760 two three months. The data is enriching and demanding more 0:05:17.800 --> 0:05:22.000 transparency and accurate disclosures from the public sector companies will 0:05:22.040 --> 0:05:24.039 allow people to build in What is important not just 0:05:24.120 --> 0:05:26.839 for E s G investors but for every investor, which 0:05:26.880 --> 0:05:29.120 is look at climate as a risk and an opportunity 0:05:29.440 --> 0:05:32.240 as just part of your co integrated investment process and 0:05:32.279 --> 0:05:35.520 that's what we do across PGM. Alright, Timer, thanks very 0:05:35.600 --> 0:05:37.600 much for joining us. Pleasure having you on the program 0:05:37.920 --> 0:05:40.960 time or high at Chief operating officer a PGM talking 0:05:41.000 --> 0:05:44.680 to us about a Really, I mean, now it's almost 0:05:44.880 --> 0:05:50.800 generally accepted umah investment. Uh. It's part of that whole 0:05:50.800 --> 0:05:54.080 E s G movement that is becoming so so prevalent 0:05:54.600 --> 0:05:57.600 among institutional investors. Every factor is the word I was 0:05:57.640 --> 0:06:01.080 looking for. It's really one of the one of the factors. 0:06:01.120 --> 0:06:03.679 And I remember, I think it's just in the last 0:06:03.720 --> 0:06:06.880 couple of years become one because two or three years 0:06:06.920 --> 0:06:09.599 ago there were still question marks about the validity of 0:06:09.640 --> 0:06:13.600 investing UM through the prism of E s G. And 0:06:13.720 --> 0:06:16.040 now all of the big houses I mean, look, PJAM 0:06:16.080 --> 0:06:19.040 has one point eight trillion dollars UM, so they got 0:06:19.040 --> 0:06:20.840 a lot of weight behind it, and they're joined by 0:06:20.880 --> 0:06:25.400 a lot of other big players out there. Well, yes 0:06:25.440 --> 0:06:27.600 they we heard from FED Chairman J. Pal and I 0:06:27.600 --> 0:06:31.800 think the message was generally, uh, status quo lower for 0:06:31.960 --> 0:06:35.800 longer as it relates to rates, Yes, monitoring inflation, but 0:06:35.880 --> 0:06:39.799 not overly concerned yet rates today looking at the tenure 0:06:40.000 --> 0:06:44.400 it is trading it just almost one point seven three percent. 0:06:45.080 --> 0:06:47.400 We see a steeping in the year field curve as well. 0:06:47.440 --> 0:06:50.120 Let's get a update from a good friend of ours, 0:06:50.160 --> 0:06:54.160 Lindsay Pexas she's a chief economist for Steple, joining us 0:06:54.160 --> 0:06:56.480 on the phone from Chicago. Lindsay, thanks so much for 0:06:56.600 --> 0:07:00.479 joining us here. What was your takeaway from the comments 0:07:00.560 --> 0:07:04.479 from a Fed chair poal yesterday. Well, as you mentioned, 0:07:04.520 --> 0:07:06.800 the the policy announcement was very much in line with 0:07:06.880 --> 0:07:11.520 expectation rates unchanged as it purchases on a monthly basis unchanged. 0:07:11.760 --> 0:07:14.080 But when we look at what was released along with 0:07:14.160 --> 0:07:17.920 that policy announcement, the set or the summary of economic projections, 0:07:18.240 --> 0:07:21.560 it does appear as if the committee is increasingly optimistic. 0:07:21.640 --> 0:07:25.720 They lower their outlook for unemployments, they increased their outlook 0:07:25.760 --> 0:07:28.760 for growth and inflation. And yet when the chairman was 0:07:28.840 --> 0:07:33.560 pressed on this improved outlook, he continued to downplay the 0:07:33.640 --> 0:07:37.560 improvement and focus instead on some of the lingering risks 0:07:37.640 --> 0:07:40.720 and the lingering pain in some of the hardest hit 0:07:40.800 --> 0:07:43.960 sectors of the economy, so really highlighting some of the 0:07:44.040 --> 0:07:47.800 further need for recommendation when the forecast does seem to 0:07:47.800 --> 0:07:52.160 be painting a much brighter picture, which the market anticipated 0:07:52.440 --> 0:07:55.520 the FED would have started to indicate, uh, maybe taking 0:07:55.520 --> 0:07:57.720 the foot off the gas. So it was a little 0:07:57.720 --> 0:07:59.440 bit of talking out of both sides of the mouth 0:07:59.520 --> 0:08:02.560 from from the FED chairman yesterday. For first of all, lindsay, 0:08:02.600 --> 0:08:04.840 thank you very much for clearing that up for me. 0:08:05.200 --> 0:08:09.320 Cameron Cries talks about the feds SEP forecast and I 0:08:09.360 --> 0:08:13.360 was reading that like, what on earth is a SEP forecast? 0:08:13.520 --> 0:08:16.840 But um, that's why we have the experts like you 0:08:16.960 --> 0:08:21.760 on the program. How high do you think, um Bizarro 0:08:21.920 --> 0:08:26.840 Vulcar is willing to let inflation go before he moves 0:08:26.880 --> 0:08:30.360 away from zerp. I mean, uh, if we see four 0:08:30.440 --> 0:08:35.240 percent inflation, does Powell still say hang on, it's transitory, 0:08:35.280 --> 0:08:39.280 it'll go away, or does he do something with raids? Well, 0:08:39.280 --> 0:08:42.040 it really depends in the near term. The committee seems 0:08:42.080 --> 0:08:45.080 pretty convinced that any sort of bump up in the 0:08:45.160 --> 0:08:48.400 coming month through the summer is really a reflection of 0:08:48.440 --> 0:08:52.560 this reflation trade so as the low loads of fall 0:08:52.640 --> 0:08:55.640 out of the annual calculation. So they're looking at this 0:08:55.679 --> 0:08:58.640 as a temporary bump up, not an indication of longer 0:08:58.720 --> 0:09:01.880 term inflation. But even if we did cease the stained 0:09:02.000 --> 0:09:06.800 upward momentum and prices. The fed new framework allows the 0:09:07.600 --> 0:09:11.920 FED to allow inflation to run hot without forcing their hands. 0:09:11.920 --> 0:09:15.360 So essentially they're now looking at inflation through an average 0:09:15.440 --> 0:09:20.240 flexible target, meaning that we could actually see inflation run 0:09:20.280 --> 0:09:24.680 near three percent for the next several years, but still 0:09:24.720 --> 0:09:27.319 not exceed the FED longer term average of two percent. 0:09:27.440 --> 0:09:29.440 So there's a lot of wiggle room that the FED 0:09:29.480 --> 0:09:32.680 has now when it comes to their inflation mandates. Hey, Linda, 0:09:32.800 --> 0:09:34.400 you know and that we got another piece of economic 0:09:34.520 --> 0:09:36.760 data this morning on the you know, the jobs claims, 0:09:36.800 --> 0:09:39.840 and they came in higher than expected. They came in 0:09:40.200 --> 0:09:44.520 stubbornly high, seventy thousands. It just doesn't seem to see, 0:09:45.440 --> 0:09:48.679 you know, much improvement there. How concerned are you about 0:09:48.760 --> 0:09:50.600 the labor market? You know, I've heard a lot of 0:09:50.679 --> 0:09:53.439 positive sentiments from folks saying this thing is going to 0:09:53.480 --> 0:09:56.720 bounce back really quickly when when we reopened. What are 0:09:56.720 --> 0:09:59.640 your thoughts? Well, I don't think we can expect anything 0:09:59.679 --> 0:10:02.079 to bounced back quickly when we're talking about one of 0:10:02.120 --> 0:10:05.679 the worst recessionary scenarios for the US economy and history. 0:10:05.720 --> 0:10:08.840 But we certainly have taken big steps in the right direction. 0:10:09.280 --> 0:10:12.160 We have put roughly half of the twenty two million 0:10:12.200 --> 0:10:14.440 Americans that lost their job at the onset of the 0:10:14.440 --> 0:10:18.640 crisis back to a position of gainful employment. That being said, 0:10:18.640 --> 0:10:21.920 we're still talking about roughly ten million Americans out of work, 0:10:22.240 --> 0:10:25.280 So there still is a big gap between where we 0:10:25.320 --> 0:10:28.000 are and where we were prior to the pandemic. And 0:10:28.040 --> 0:10:29.680 I do think that's one of the points that share 0:10:29.720 --> 0:10:34.360 Paul was trying to uh really acknowledge yesterday when he 0:10:34.400 --> 0:10:37.640 talked about the six percent civilian unemployment rate, but the 0:10:37.679 --> 0:10:39.840 real rate that he feels in the labor market is 0:10:39.880 --> 0:10:42.880 closer to ten percent. So there still is a lot 0:10:42.920 --> 0:10:45.880 of linkering pain in the labor force, giving the Committee 0:10:45.920 --> 0:10:48.800 no incentive to act with any sense of immediacy to 0:10:48.840 --> 0:10:54.400 remove accommodation. It's interesting, what do you expect um say 0:10:54.520 --> 0:10:58.600 at year end in terms of the reopened economy and 0:10:58.800 --> 0:11:02.840 continued client continue you in claims well, I would expect 0:11:02.880 --> 0:11:06.440 for a further improvement in the labor market as the 0:11:06.480 --> 0:11:10.160 economy is further able to reopen, and we see this 0:11:10.240 --> 0:11:12.920 as businesses are are able to open their doors. Welcome 0:11:12.960 --> 0:11:16.200 back employees, welcome back to sumers. We are starting to 0:11:16.240 --> 0:11:18.679 see the cycle over of organic We see it in 0:11:18.720 --> 0:11:21.800 some states, right, Lindsay, I mean Florida is absolutely Florida 0:11:21.880 --> 0:11:24.680 is open for business. Yeah. Absolutely, And you see a 0:11:24.720 --> 0:11:27.800 big economy between the growth rate in Florida versus the 0:11:27.800 --> 0:11:31.600 growth rate in California. And yet arguably the case rates 0:11:32.000 --> 0:11:35.880 were not that different. Uh, And so there is a 0:11:35.960 --> 0:11:39.800 very different approach rate by faith and certainly those that 0:11:39.840 --> 0:11:42.760 are allowing businesses to return. Now that being said, there 0:11:42.800 --> 0:11:46.520 are some federal impediments that businesses are facing with the 0:11:46.640 --> 0:11:50.720 extension of these very generous unemployment benefits. Some small businesses 0:11:50.720 --> 0:11:54.640 they're saying they're having difficulty now reconnecting with employees even 0:11:54.679 --> 0:11:57.679 as they're trying to reopen. So again, nothing is easy. 0:11:57.760 --> 0:12:00.240 Nothing is a flip of Swich scenario. The U S 0:12:00.280 --> 0:12:02.920 economy is still struggling to get back to pre pandemic 0:12:03.000 --> 0:12:07.600 level real quickly. I just want to get twenty seconds, Lindsay. 0:12:07.880 --> 0:12:11.560 The stifle GDP outlook, well, we are looking for a 0:12:11.640 --> 0:12:15.800 very robust one when you're talking about trillions of dollars 0:12:15.800 --> 0:12:18.679 coming down the pipeline as well as the opportunity for 0:12:19.000 --> 0:12:22.840 trillions more as the Biden administration has expressed UH somewhere 0:12:22.880 --> 0:12:26.360 between two to four trillion a likelihood for additional infrastructure, health, 0:12:26.400 --> 0:12:29.440 and social programs. So we're looking for an annualized rate 0:12:29.520 --> 0:12:32.480 somewhere around five to six percent. Very cool wealth of 0:12:32.520 --> 0:12:36.120 information from you, Lindsay appreciated as always Lindsay PEXA their 0:12:36.160 --> 0:12:40.400 chief economist at stifle Uh. Paul I was just gonna 0:12:40.440 --> 0:12:42.600 point out, there's a really cool chart that Mike McKee 0:12:42.880 --> 0:12:48.680 put together showing initial jobless claims holding continually above the levels, 0:12:48.760 --> 0:12:52.080 the high levels that we hit in the Great Financial Crisis, 0:12:52.160 --> 0:12:55.480 and even back in two and that's seven seventy you quoted, 0:12:55.640 --> 0:12:58.440 is still above that level. So still a lot of 0:12:58.440 --> 0:13:05.280 pain in the labor market. This is Bloomberg Mixed mixed 0:13:05.360 --> 0:13:09.200 markets here today, a day after FETE Chairman Pal says, 0:13:09.760 --> 0:13:14.080 stay the course, lower rates for longer we have inflation. 0:13:14.640 --> 0:13:17.679 Uh in check. Let's get a sense of maybe some 0:13:17.800 --> 0:13:21.360 a longer term perspective on these markets. And we love 0:13:21.400 --> 0:13:23.640 to do that with our good friend Barry rid could 0:13:23.640 --> 0:13:27.280 be well, now, it's always upbeat with Barry Suns. He 0:13:27.440 --> 0:13:31.559 was always a half half full kind of guy. Bloomberg 0:13:31.600 --> 0:13:34.600 Opinion Columns, host of Masters in business on Bloomberg Rady. 0:13:34.600 --> 0:13:37.160 He's also the founder in chief investment officer Rid Holts 0:13:37.200 --> 0:13:40.480 Wealth Management. So Barry, let's step back here take a 0:13:40.559 --> 0:13:44.640 longer view. FETE chairman Pal says, basically, we got this. 0:13:45.520 --> 0:13:48.839 Did that come across to you yesterday? Never or less? 0:13:49.000 --> 0:13:52.720 I mean, I think the big error that everybody has 0:13:52.840 --> 0:13:56.600 come to accept following the Great Financial Crisis is that 0:13:56.640 --> 0:13:59.600 we let all the heavy lifting get done by the 0:13:59.640 --> 0:14:03.679 Federal Reserve without enough fiscal stimulus. It was it was 0:14:03.720 --> 0:14:08.040 too much monetary policy, not enough fiscal Now there's some 0:14:08.120 --> 0:14:12.240 pushback from some quarters that hey, it's too much fiscal uh. 0:14:12.280 --> 0:14:16.200 And Pal sort of said, you know, explicitly said, this 0:14:16.320 --> 0:14:19.240 is the right sort of task for an economy that 0:14:19.400 --> 0:14:22.600 is still limping along in many areas and still hasn't 0:14:22.640 --> 0:14:27.000 fully recovered from the financial crisis. This is about unemployment 0:14:27.240 --> 0:14:32.960 and underemployment, which is really important. You know what. Uh 0:14:33.200 --> 0:14:36.600 depresses me. I'm looking at um looking through your blog, Berry, 0:14:36.800 --> 0:14:39.320 and I always feel like I was born too late. 0:14:39.720 --> 0:14:42.120 You know. I wish I was a trader on the 0:14:42.120 --> 0:14:44.640 floor of the New York Stock Exchange in the eighties, 0:14:44.680 --> 0:14:48.120 Like I want to just front run the crowd and 0:14:48.200 --> 0:14:53.800 make money for nothing. But you're looking at annualized returns 0:14:53.840 --> 0:14:58.160 on equities and bonds across different generations. The baby boomers 0:14:58.200 --> 0:15:05.080 had it good. Gen Z is s o l that 0:15:05.240 --> 0:15:08.960 to say the very least well. First, the bigger picture 0:15:09.600 --> 0:15:14.200 takeaway from this is just how random so much in 0:15:14.240 --> 0:15:18.000 life is. The year you happen to be born has 0:15:18.040 --> 0:15:23.400 a really significant impact on how your portfolio does over time. 0:15:24.200 --> 0:15:27.920 I remember my parents buying a house in the late 0:15:27.960 --> 0:15:33.119 sixties early seventies and then selling it um just about 0:15:33.120 --> 0:15:36.320 twenty five years later for about ten x what they paid. 0:15:37.080 --> 0:15:41.040 You're not gonna get that sort of return today. And similarly, 0:15:41.640 --> 0:15:45.640 if you were a working stiff in the seventies and eighties, 0:15:45.680 --> 0:15:47.840 and you not that there were four oh one case 0:15:47.880 --> 0:15:50.960 in the seventies, but if you were saving and investing 0:15:51.000 --> 0:15:55.480 in the stock market, you got a huge je return 0:15:55.800 --> 0:16:00.120 over seven percent annualized versus what we've seen over the 0:16:00.160 --> 0:16:03.520 past twenty years. You know, the market was essentially flat 0:16:04.040 --> 0:16:08.120 from two thousand to two thousand and call at eleven plus. 0:16:08.120 --> 0:16:10.120 Back then, you got a pension, dude. I mean, my 0:16:10.360 --> 0:16:13.800 grandfather worked for General Motors after he got out of 0:16:13.800 --> 0:16:16.480 the air force, and he retired with you know, pay 0:16:16.560 --> 0:16:19.760 until he was dead, right, and and that you know, 0:16:20.200 --> 0:16:23.800 a big part of the impetus behind four O one 0:16:23.920 --> 0:16:26.040 case and and this is sort of unique to the 0:16:26.120 --> 0:16:30.600 United States, was that we have shifted a lot of 0:16:30.640 --> 0:16:36.440 what is normally governmental responsibilities onto corporations, um things like 0:16:36.520 --> 0:16:45.200 healthcare and retirement. In most Western democracies, industrialized economies, the 0:16:45.280 --> 0:16:48.960 government manages that it's their responsibility. It's not so I 0:16:49.400 --> 0:16:51.760 run a business, I take care of the health care 0:16:51.840 --> 0:16:53.920 for my my employees. We take care of there for 0:16:54.040 --> 0:16:56.720 oh one k. That's so unusual. The rest of the 0:16:56.720 --> 0:17:01.040 world doesn't do that. And trying to shift set away 0:17:01.280 --> 0:17:04.480 from I think that what you're pointing out is when 0:17:04.480 --> 0:17:08.840 we try to shift that away from corporations, it moved 0:17:09.359 --> 0:17:13.040 to individuals instead of moving to the government, which has 0:17:13.080 --> 0:17:16.159 created a giant doughnut for a lot of people. Meaning 0:17:16.640 --> 0:17:21.639 there's a big hole in about sev the retirement expectations 0:17:21.640 --> 0:17:24.920 out there where people are going to retire with vastly 0:17:25.040 --> 0:17:28.880 insufficient money. Although Barry, you know, go to go back 0:17:28.880 --> 0:17:31.760 to your chart. I'm looking at you know, baby boomers 0:17:31.800 --> 0:17:35.080 and Generation golf kids, they all had decent returns on 0:17:35.160 --> 0:17:38.520 stocks and bonds, but none of us have thought to 0:17:38.600 --> 0:17:41.840 buy an n f T of people, you know, none 0:17:41.880 --> 0:17:44.600 of us the gen Z kids, maybe they were all 0:17:44.680 --> 0:17:48.639 in bitcoin ten years ago. So maybe, but I don't think, 0:17:48.680 --> 0:17:50.800 you know what, there was a if you if you 0:17:50.920 --> 0:17:53.760 fast forward a few days in in on the blog 0:17:54.600 --> 0:17:57.960 at Dholtz dot com, you'll see the right up I did. 0:17:58.880 --> 0:18:02.040 Merrill Lynch, Brent America, b Mail Interest did this immense 0:18:02.160 --> 0:18:06.680 study on cryptoconcy in bitcoin, and one of their main 0:18:06.800 --> 0:18:11.160 takeaways was that the vast majority of holdings in bitcoins, 0:18:11.200 --> 0:18:15.640 something like two point four percentity accounts are responsible for 0:18:15.640 --> 0:18:19.480 for a huge chunk of the assets, far more concentrated 0:18:19.480 --> 0:18:22.320 than what we see in either stocks, bonds or real estate. 0:18:22.720 --> 0:18:27.160 So I don't think the millennials or or I don't 0:18:27.160 --> 0:18:29.560 know what they're gonna call the generation after them, I 0:18:29.560 --> 0:18:33.320 don't think they're holding enough bitcoin to fund their retirements 0:18:33.359 --> 0:18:38.040 fifty years from now. Yeah, you know, it's interesting. My 0:18:38.119 --> 0:18:41.200 kids are, you know, entering the workforce, and you know, 0:18:41.240 --> 0:18:42.760 one of the things I told them is, you know, 0:18:42.960 --> 0:18:45.159 just max out on your four one K and it 0:18:45.280 --> 0:18:48.120 really really really makes a difference. But boy, this low 0:18:48.200 --> 0:18:51.840 interest rate environment, this low return environment. I'm not sure 0:18:51.880 --> 0:18:55.480 that's enough anymore. Um Well, first of all, the low 0:18:55.520 --> 0:18:58.800 interest rate environment. Who knows how much longer that's gonna 0:18:58.840 --> 0:19:03.360 be here. Um we're already up to one seven. It's 0:19:03.359 --> 0:19:06.320 going to be a long time. Um Well, the Fed. 0:19:06.880 --> 0:19:11.600 Everybody forgets the Fed doesn't determine what bonds are yielding. 0:19:11.680 --> 0:19:15.600 They only determine the FED funds rate, which drives the 0:19:15.720 --> 0:19:19.520 shorter turn rates. It it's the market that determines what 0:19:19.680 --> 0:19:23.560 the yield um on the ten or thirty or if 0:19:23.560 --> 0:19:26.400 we're lucky, fifty and a hundred year bonds are. So 0:19:26.720 --> 0:19:29.520 I think what we're seeing with these rising rates is 0:19:29.680 --> 0:19:33.359 optimism about uh the economy on the other side of 0:19:33.359 --> 0:19:39.560 the pandemic. That doesn't necessarily translate automatically into higher stock gains. 0:19:39.560 --> 0:19:44.600 The correlation between GDP and and stocks are is surprisingly low. 0:19:45.000 --> 0:19:49.680 All that said, a good economy and expanding tax base, 0:19:50.359 --> 0:19:54.399 um innovation and new technology tends to lead to higher 0:19:54.440 --> 0:19:58.360 living standards and higher stock prices. I will say, also, Paul, 0:19:58.400 --> 0:20:00.560 if you can get your kids a job at Bloom, 0:20:00.600 --> 0:20:04.200 they get an employer match, so that's they're automatically making 0:20:04.200 --> 0:20:07.480 fifty returns. That's pretty sweet. Yeah, it's pretty sweet, and 0:20:07.720 --> 0:20:10.520 you know, be you gotta gotta get that savings mentality 0:20:10.560 --> 0:20:13.040 back out there into certainly one of the messages I'm 0:20:13.040 --> 0:20:15.880 trying to convey to my kids here as they enter 0:20:16.040 --> 0:20:18.720 their workforce, because boy, this low industrate environment, it's can 0:20:18.760 --> 0:20:21.520 be a tough environment to make money. Barry rick Hilt's 0:20:21.560 --> 0:20:24.800 founder of rick Holt's Wealth Management. He's also a Bloomberg 0:20:24.840 --> 0:20:28.720 Opinion columnist and of course, host of Master's in Business 0:20:28.840 --> 0:20:32.719 podcast on Bloomberg Radio. We always appreciate getting Barry's thoughts 0:20:33.119 --> 0:20:34.800 and I get talked to him about cars at all, 0:20:35.080 --> 0:20:36.680 which we kind of will do that next time. We'll 0:20:36.680 --> 0:20:38.119 do that. I want to do a whole show with 0:20:38.200 --> 0:20:40.920 Barry about cars. I feel like I think we could 0:20:40.920 --> 0:20:46.080 probably do that. All right, let's bring in Brian Shipata 0:20:46.240 --> 0:20:50.240 from our Bloomberg Opinion team. He's writing about the FEDS 0:20:50.640 --> 0:20:53.280 move or lack thereof yesterday. I guess a lot of 0:20:53.280 --> 0:20:57.960 people Brian were impressed by j Powell's press conference. I 0:20:58.560 --> 0:21:01.119 believe it was either m or John this morning that 0:21:01.160 --> 0:21:03.119 said it was the best job he's ever done in 0:21:03.160 --> 0:21:06.000 the press conference. Do you agree? I mean, I think 0:21:06.000 --> 0:21:09.520 he was just remarkably consistent, and for a good reason. 0:21:09.560 --> 0:21:12.800 I mean, he's basically just falls back on this framework 0:21:12.840 --> 0:21:15.600 that the FED has. Now every time anyone presses him 0:21:15.600 --> 0:21:18.000 on anything, he says, Look, we have laid out the 0:21:18.040 --> 0:21:19.880 conditions for what it will take for a rate hype. 0:21:19.880 --> 0:21:22.520 People keep asking why won't you high rates in twenty 0:21:22.560 --> 0:21:25.640 three He's like, there are reasons why. Um, you need 0:21:25.680 --> 0:21:28.600 to have a maximum employment, you need to have inflation 0:21:28.960 --> 0:21:31.159 that has reached two percent and is on track to 0:21:31.200 --> 0:21:34.360 moderately exceed two percent for some time. Those are the conditions. 0:21:34.480 --> 0:21:37.120 If we see those conditions, we will raise interest rates. 0:21:37.160 --> 0:21:38.960 If we don't, we're not going to It. Just kept 0:21:38.960 --> 0:21:42.199 repeating that over and over and and I tried to 0:21:42.200 --> 0:21:44.359 get the message across. I don't know if bond Trader 0:21:44.400 --> 0:21:47.840 has got it though. Yeah, Brian, it's it's I'm looking 0:21:47.880 --> 0:21:52.400 at the treasury market right here, the tenure treasury down seconds, 0:21:52.480 --> 0:21:55.640 pushing that yield up to one point seven four percent. Boy, 0:21:55.640 --> 0:21:57.840 it's been more than a year since we've seen that. 0:21:57.920 --> 0:21:59.760 And when I see moves in the bond market like that, 0:21:59.840 --> 0:22:03.959 I want to chat with either Lisa Bramwitz or you. So, Briant, 0:22:03.960 --> 0:22:07.760 is there a risk here that maybe the market will 0:22:08.080 --> 0:22:11.960 lead up. Mr Powell behind here. I mean, I think 0:22:12.040 --> 0:22:15.320 right now, what the market is suggesting is that we 0:22:15.359 --> 0:22:17.920 will get inflation. The markets growing content that there will 0:22:17.960 --> 0:22:20.800 be inflation, and that the SAID will see that inflation 0:22:21.119 --> 0:22:24.159 and the FED will be compelled to act. The Fed's 0:22:24.240 --> 0:22:26.199 not going to do anything that the FED is going 0:22:26.240 --> 0:22:28.960 to be reactive um, whereas the bond market is more 0:22:29.040 --> 0:22:31.959 forward looking right now, and they're suggesting that we are 0:22:31.960 --> 0:22:33.560 going to see inflation down the pipe. We are going 0:22:33.560 --> 0:22:37.000 to see robust growth and that's going to um ultimately 0:22:37.200 --> 0:22:39.840 cause rates to go up. But I think the thing 0:22:39.880 --> 0:22:42.800 that's missing here is that this is exactly what Jerome 0:22:42.840 --> 0:22:45.840 Powell and the FED want to see. They want everybody 0:22:45.840 --> 0:22:48.879 to be talking about inflation. They want Google searches for 0:22:48.920 --> 0:22:51.200 inflation to be the highest since two thousand eight, which 0:22:51.200 --> 0:22:54.360 apparently they are um because it's been so long since 0:22:54.359 --> 0:22:57.879 anybody's been worried about inflation, that the FED was worried 0:22:57.880 --> 0:22:59.720 that no one was worried about it, um and that 0:22:59.800 --> 0:23:01.760 that would that would keep them at the zero lower 0:23:01.760 --> 0:23:05.919 bound and prevent them from having flexibility to conduct monetary policy. 0:23:06.040 --> 0:23:08.200