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Big Take: Wall Street Money Cannon Lures Junior Bankers · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. All right, Matt, I've
0:21
Speaker 1: got an inflation data point for you. When I started
0:24
Speaker 1: on Wall Street in nine six as an analyst to
0:26
Speaker 1: Pain Webber, the House of Pain, Mike Salary's twenty two thousand,
0:30
Speaker 1: five hundred dollars and now the kids are starting today
0:33
Speaker 1: a two hundred thousand, hundred, ten thousand dollars um. That's inflation.
0:38
Speaker 1: Let's bring in Street, not a not a Rodger, and
0:40
Speaker 1: he's a financial reporter for Bloomberg News. Joins us here
0:42
Speaker 1: in our Bloomberg Interactive Brokers studio. He's all vaxed up
0:46
Speaker 1: and ready to go, and he's got the big take
0:48
Speaker 1: story here. So sure, we've seen a lot of stories
0:51
Speaker 1: over the last several weeks how investment banks are really
0:54
Speaker 1: upping their pay for some of these entry level investment bankers.
0:59
Speaker 1: What's going on. Well, if you asked the junior bankers
1:02
Speaker 1: right now and the one thing that might please use,
1:04
Speaker 1: they will tell you that it is the house of
1:06
Speaker 1: pain all over watch right now, they're all bulking at
1:08
Speaker 1: these hundred plus our work weeks. COVID, of course, has
1:11
Speaker 1: made it a scenario where they're not in the same office,
1:14
Speaker 1: where they're all maybe in their parents basements, in small
1:18
Speaker 1: houses and tiny rooms, working like crazy. And we've had
1:22
Speaker 1: this moment through the course of this year. It all
1:24
Speaker 1: started with this leaked presentation out of Goldman SAX where
1:27
Speaker 1: a bunch of thirteen first year analysts complains about the
1:30
Speaker 1: rigors of their work life, and that seems to have
1:34
Speaker 1: let a match across the industry. Clearly, the report ricocheted
1:38
Speaker 1: around the industry because it resonated with so many folks,
1:42
Speaker 1: and the companies have come out and tried to respond.
1:44
Speaker 1: It started with words of sympathy. We moved on to
1:47
Speaker 1: pelotons and one time bonuses to outright races, and it
1:51
Speaker 1: seems that everyone has gravitated around this solution of more
1:56
Speaker 1: pay to ease everyone's spin. Why more pay instead of
2:00
Speaker 1: a fewer hours or um a better work life balance.
2:07
Speaker 1: To be honest, Matt the honest answer that that really
2:09
Speaker 1: will probably be because that's the easy solution. We have
2:13
Speaker 1: a former analyst at Goldman SAX who who left last year,
2:18
Speaker 1: who talks to us, and he talks to us about
2:19
Speaker 1: this idea that when he was working these crazy as
2:23
Speaker 1: that Goldman, he used to put on his headphones, blast
2:26
Speaker 1: up this fake rain noise on his on his headsets,
2:31
Speaker 1: going to the bathroom stalls, and just take these power naps.
2:33
Speaker 1: That's the only way he could cope with it. And
2:35
Speaker 1: he then left for another finance job, burnt out by
2:38
Speaker 1: the strain, and is now a blogger, and he says
2:41
Speaker 1: there are negative repercussions to that. It shows that the
2:44
Speaker 1: fact that everyone is moving towards pay is that it's
2:47
Speaker 1: very difficult to change in Paul and I were just
2:49
Speaker 1: talking about the sole idea that when you look at
2:52
Speaker 1: the culture right now compared to ten, twenty thirty years ago,
2:57
Speaker 1: not a lot of that has changed. If you're in
2:59
Speaker 1: your first year of your second years straight out of college,
3:02
Speaker 1: that grunt work is still the core of it. There
3:05
Speaker 1: are those who speaking out now and saying we're getting
3:07
Speaker 1: burned out by this. Something has to change. Whereas the
3:10
Speaker 1: successful folks in the industry will tell you you need
3:13
Speaker 1: to do this. This is your stepping stone to greater
3:16
Speaker 1: glory in this industry. And the payout truly is lavish
3:20
Speaker 1: and extraordinary relative to anything else you see in the outside.
3:24
Speaker 1: Would their pledges, this is what the this is what
3:26
Speaker 1: the pledges were like in the fraternity exactly. And you know,
3:29
Speaker 1: I'll tell you what it is different, Matt from you know,
3:31
Speaker 1: prior just and it's just it's simply the pandemic. I mean.
3:34
Speaker 1: One of the ways I got through, and I think
3:36
Speaker 1: a lot of my peers got through those those very
3:38
Speaker 1: difficult hours in the many weeks without a day off
3:41
Speaker 1: and all that kind of stuff, was that the camaraderie
3:43
Speaker 1: we had, you know, surrounded by fifty other analysts at
3:46
Speaker 1: pain Webber. We supported each other. All my friends were
3:48
Speaker 1: working in investment banks, so there's a support system there. Now,
3:52
Speaker 1: these kids are you know, isolated in many of them
3:54
Speaker 1: in their apartments, and I can't imagine having to deal
3:57
Speaker 1: with you know, kind of the pressure there. But sure
4:00
Speaker 1: doesn't seem like money is the answer to me. They
4:02
Speaker 1: got to figure out a way here too, as Matt
4:05
Speaker 1: was suggesting, kind of improved that work life balance, a
4:07
Speaker 1: little bit of order. But Paul, what was the answer
4:09
Speaker 1: back then? I mean you read um again the answer
4:12
Speaker 1: Matt Lavins columns. The answer. The answer was to get
4:16
Speaker 1: through it. You work through it, and eventually you become, um,
4:20
Speaker 1: you know, the big man on campus. And then you're
4:22
Speaker 1: not spending too much time in the office and you're
4:23
Speaker 1: getting paid millions exactly. And I think the the answer
4:27
Speaker 1: is you've got to get people back to the offices. Um.
4:29
Speaker 1: That would be if I were you know, because it's
4:32
Speaker 1: not really gonna be the pay I don't think so, Sree.
4:34
Speaker 1: Are we are we hearing from these companies that they're
4:38
Speaker 1: thinking maybe a little bit out out of the box
4:40
Speaker 1: maybe in terms of what to do here. Well, first,
4:42
Speaker 1: let me take the other side of the bed with
4:44
Speaker 1: the two of you, because I think what is perhaps
4:46
Speaker 1: different today relative to two or three decades back, is
4:50
Speaker 1: that the only road to paradise is not finance anymore. So,
4:54
Speaker 1: even if you have a long, hard, bumpy road to
4:55
Speaker 1: start with, you know that the payoff is going to
4:58
Speaker 1: be great a few years down the road. Now, if
5:01
Speaker 1: you're graduating from college, you have the lure of technology.
5:05
Speaker 1: They are in great demands, so that the cream of
5:08
Speaker 1: the crop, the top end of the talent pool is
5:11
Speaker 1: being attracted from all sorts of industries and they have
5:14
Speaker 1: the option of going into tech, They have the option
5:17
Speaker 1: of starting their own companies. You don't want to slave
5:19
Speaker 1: out two or three years as an analyst making slide
5:21
Speaker 1: decks and presentations. When you when you see a couple
5:24
Speaker 1: of young guys younger than three year old suddenly running
5:27
Speaker 1: a hundred billion dollar company. When they have that lure,
5:30
Speaker 1: banks have to do more than they have been doing
5:33
Speaker 1: to be able to get that best talent. It's a
5:36
Speaker 1: strong point so that basically there there are other ways
5:40
Speaker 1: to be master of the universe. You don't have to
5:42
Speaker 1: work for Goldman, Sachs Morgan Stanley, JP Morgan. You can
5:46
Speaker 1: go even live in California, which has got to be
5:49
Speaker 1: a better coast. I mean, you know, when I was
5:52
Speaker 1: in business school, it was literally for the finance people
5:54
Speaker 1: either went consulting or Wall Street. Now is shre is
5:57
Speaker 1: mentioning technology and the other thing. Yes, I serve on
6:01
Speaker 1: the board of the Business School with Duke. One of
6:03
Speaker 1: the big things when you talk about the curriculum that
6:04
Speaker 1: demand from students is for entrepreneurship. You know, and the
6:08
Speaker 1: Street was saying, so you know again the investment banks
6:11
Speaker 1: that the it's much more competitive, as you're saying, Street,
6:13
Speaker 1: So it's almost like money might not be the go
6:16
Speaker 1: to like it historically has been. Whenever, whenever there's a
6:19
Speaker 1: problem on Wall Street, you can just throw money at
6:21
Speaker 1: it and it solves itself. By the way through, what's
6:23
Speaker 1: the pay like there? If you go work for fintech,
6:25
Speaker 1: if you end up in California, Um, are they getting comparable?
6:29
Speaker 1: Are they also getting a hundred hundred ten thousand to
6:31
Speaker 1: start options? Yes, if you start off the base Bay,
6:36
Speaker 1: I would argue is probably comparable. The banks will tell
6:39
Speaker 1: you the Base Bay is not the full story. That's
6:41
Speaker 1: just the sticker price to get them in the door.
6:43
Speaker 1: Spend a year here and have a great year, much
6:46
Speaker 1: like they've had in te where the banks have been
6:49
Speaker 1: bathed in billions of dollars of extra profit. The bonuses
6:53
Speaker 1: can start to look pretty chunky. You could be starting
6:56
Speaker 1: to push one and that's a lot of money for
6:59
Speaker 1: some who's But at the same time, when you go
7:03
Speaker 1: to the West Coast and you think of, uh, the
7:06
Speaker 1: startup lend the Silicon Valley, the idea that your stock
7:10
Speaker 1: options may not have a ceiling. The idea that your
7:13
Speaker 1: company could be wors so much more if it just
7:17
Speaker 1: takes off. That has the kind of appeal and that's
7:20
Speaker 1: the kind of thing that the banks are fighting against
7:22
Speaker 1: right now. Plus you're wearing shorts and flip flops, so
7:27
Speaker 1: I mean, there's so many other bonuses. I would say
7:30
Speaker 1: probably to working out there. You're starting something, You're part
7:33
Speaker 1: of a movement. Um, it's sexy. Um. Yeah, and you're
7:37
Speaker 1: not in New York any case. Tree, thanks very much.
7:40
Speaker 1: It's a great story. I recommend everybody check it out.
7:42
Speaker 1: If you have a Bloomberg in front of you and
7:44
Speaker 1: I big take go to get all of our deep dives,
7:48
Speaker 1: and this is the latest. This is Bloomberg. I want
7:55
Speaker 1: to bring in Frank Robinski's a chief macro strategist for
7:58
Speaker 1: Eggon Asset Management have about foreigner and sixty four billion
8:02
Speaker 1: dollars in assets under management. They're located in charmed city
8:05
Speaker 1: that would be Baltimore, Maryland. Frank, I want to start
8:08
Speaker 1: with you. I'm just reading some of your work here.
8:10
Speaker 1: I'd love to get your thoughts on the labor economy. Um,
8:14
Speaker 1: because people are thinking about inflation and and you could
8:16
Speaker 1: argue inflation is really not going to be a big
8:18
Speaker 1: issue unless we get a you know, we get wage inflation.
8:21
Speaker 1: How do you kind of think about it yourself, Yes, exactly.
8:24
Speaker 1: Housing inflation is killing me, it is absolutely right, And
8:28
Speaker 1: and rental is getting crazy too as well over here
8:30
Speaker 1: in the States. Talk to us about kind of the
8:32
Speaker 1: labor market from your perspective. Sure, and thank you for
8:36
Speaker 1: having me, guys, great to be back. So one thing
8:38
Speaker 1: we're looking for is is a normalization in the labor
8:41
Speaker 1: market consistent with the normalization in the economy. And one
8:45
Speaker 1: one area where we haven't seen this as intering the watches.
8:48
Speaker 1: You look at the enormous numbers of job openings out there,
8:51
Speaker 1: and and that would historically you know that those are
8:54
Speaker 1: positively correlated with unemployment right as is a lot of people.
8:58
Speaker 1: You know, a lot of job opening you would expect
8:59
Speaker 1: on employment to to to be quite low. So if
9:02
Speaker 1: you go throughout time, you can chart that and it
9:04
Speaker 1: creates a curve. But what we've seen in this recovery
9:07
Speaker 1: is that curve is blown out, meaning given the enormous
9:10
Speaker 1: number of job openings, unemployment should be down in the
9:14
Speaker 1: threes and right now we're called, you know, five percent
9:17
Speaker 1: the headline, but if you're just for low participation, you're
9:19
Speaker 1: probably more in in in the sevens. So there's really
9:22
Speaker 1: been this kind of disconnect and something that we're when
9:25
Speaker 1: if we want to get a full normalization, we're expecting
9:28
Speaker 1: to see that that that curve kind of come back
9:30
Speaker 1: more to historical level. So right now, what that's saying is,
9:34
Speaker 1: you know there's some type of COVID related mismatch or
9:38
Speaker 1: or or you know something in the labor market from COVID.
9:41
Speaker 1: Uh that that's that, you know, as opposed to your
9:44
Speaker 1: kind of historical cycles. It's my favorite curve by the way. Um,
9:49
Speaker 1: you've got your Bell curve, you've got your Phillips curve,
9:51
Speaker 1: you know, but the beverage curve I think is the
9:54
Speaker 1: best one. And at some point, don't you have to
9:57
Speaker 1: see Paul and I talked to h business owners all
10:01
Speaker 1: the time and CEOs and ce os that just can't
10:05
Speaker 1: get enough people in chairs, can't get enough people to work,
10:10
Speaker 1: and they're having to raise um pay. I mean, we're
10:13
Speaker 1: we're gonna talk about a little bit later on Wall
10:15
Speaker 1: Street they're doing it as well. Um, don't you have
10:19
Speaker 1: to see wage inflation. Well, so if the demand for
10:24
Speaker 1: labors outstripping the supply in the long run, yes, right,
10:27
Speaker 1: But what the question is the supply of labor going
10:30
Speaker 1: to come back? And that's where when you look at
10:33
Speaker 1: you know, as we head into the fall, there's a
10:34
Speaker 1: couple issues that are going to be rectified that could
10:37
Speaker 1: create a big increase in the supply of labor. So
10:40
Speaker 1: you know that those being UM, you know, schools are
10:43
Speaker 1: largely going to be back in person, so you free
10:46
Speaker 1: up some potential labor in the parents that had to
10:47
Speaker 1: be home. You have the the exploration of enhanced Unemployment
10:51
Speaker 1: insurance UM, and then you also have your ongoing health concerns.
10:54
Speaker 1: And if you finally get a a FDA formal approval
10:58
Speaker 1: of one of the vaccines, you know that could would
11:00
Speaker 1: help the vaccination process. So as those things play out,
11:04
Speaker 1: you could see an unleashing of the the supply of labor,
11:08
Speaker 1: which you know, to your point, now, now you're supply demand,
11:11
Speaker 1: you know, it starts to become more balanced when it
11:13
Speaker 1: comes to labor, so we could actually start to you know,
11:16
Speaker 1: cool off the wage increases. I mean, right now, it's
11:18
Speaker 1: your point. We're trying to get people back into the
11:21
Speaker 1: labor force. Labor force participation is very low, but you know,
11:25
Speaker 1: as people, if they start to come back, especially in size,
11:28
Speaker 1: then it could start putting a cooling pressure on under
11:31
Speaker 1: the under those prices, on those wage increases. All right, Franks,
11:35
Speaker 1: So given that economic backdrop, that labor backdrop, how are
11:40
Speaker 1: you at at Egon kind of thinking about your allocation
11:43
Speaker 1: of capital here in terms of generating maximum returns? Certainly, well,
11:49
Speaker 1: we still think this is a very positive environment for
11:52
Speaker 1: assets that are lever to nominal growth, so mainly equities
11:55
Speaker 1: and low quality credit. Um, you know, were our forecast
11:59
Speaker 1: is we're gonna above trend growth for many quarters to come.
12:02
Speaker 1: And you know, maybe the it's you know, not six percent,
12:05
Speaker 1: but it's four percent. But again you know that that's
12:08
Speaker 1: real growth. But you think of nominal growth, so you
12:10
Speaker 1: add the inflation side to that. You know, we could
12:12
Speaker 1: have nominal growth in the high single digits for the
12:14
Speaker 1: next year and a half. And you look at at
12:17
Speaker 1: the quarterly earnings reports, just from the second quarter, even
12:20
Speaker 1: the first quarter as well, it's the same theme. Revenues
12:22
Speaker 1: are beating, margins are strong, and you're seeing enormous beats
12:26
Speaker 1: on the earnings line and hence the the earnings forecast
12:29
Speaker 1: continue to get taken up and we think, you know
12:31
Speaker 1: that that's been a big story for two thousand twenty one,
12:34
Speaker 1: but when we look into twenty two, we see that
12:36
Speaker 1: continuing and you look at the at the S and
12:38
Speaker 1: p of you know, call it to twenty now is
12:41
Speaker 1: is the consensus ballpark? You know that that we think
12:44
Speaker 1: that could easily be a two thirty thirty five numbers.
12:46
Speaker 1: So with that kind of earnings momentum, we think it's
12:49
Speaker 1: very positive for for the equity story. Have you ever
12:52
Speaker 1: seen anything like this? By the way, Frank, I mean
12:54
Speaker 1: you have uh pretty long career. You worked for spear
12:59
Speaker 1: Leads and Kellogg as a trader, right um, you've you've
13:01
Speaker 1: worked in Zurich, Switzerland, you worked for ubs Um and
13:05
Speaker 1: now you're an agon over the last twenty years, I
13:09
Speaker 1: just haven't seen this kind of appreciating market. It seems
13:12
Speaker 1: like we're just barreling headlong into a bubble. Well it's
13:20
Speaker 1: what I First of all, no, I haven't seen it.
13:22
Speaker 1: It seems like everything's been compressed right the whole cycle.
13:25
Speaker 1: You know, we've gone from the early cycle right into
13:27
Speaker 1: you know, mid cycle and it's only been in the
13:29
Speaker 1: little over a year, so you think of last cycle
13:32
Speaker 1: was over a decade, so things are being very compressed. Um.
13:35
Speaker 1: You know when you think of bubble as well, I
13:37
Speaker 1: think of kind of relative prices out there, and I think,
13:40
Speaker 1: you know, if you talk about a bubble with equities, well,
13:42
Speaker 1: but what's you know, part of the attraction or large
13:44
Speaker 1: attraction in the equity story is the lack of attraction
13:47
Speaker 1: on the fixed fixed income side. Right a ten year
13:50
Speaker 1: at you know, one thirty. I mean that's the the
13:52
Speaker 1: dividend yield on the SMP five hundred um, you know,
13:55
Speaker 1: without the upside. So you know, I kind of look
13:58
Speaker 1: at the relative game and say, well, you know, if
14:01
Speaker 1: you have to own assets, I mean you know, you
14:02
Speaker 1: you could on cash or gold like plants doing um.
14:06
Speaker 1: But to me, you know, there's still an attraction in
14:08
Speaker 1: that relative value game, uh, for for that equity story
14:12
Speaker 1: where cash flows are still growing at a very strong rate.
14:15
Speaker 1: Great talking to you, Frank, Thanks so much for your time.
14:17
Speaker 1: Frank Robinski their chief macro strategists aggon asset Management. I
14:23
Speaker 1: want to bring announce Todd Superman. He joins us from
14:25
Speaker 1: Superman Compliance Services. He is a founding principle there out
14:29
Speaker 1: of Philadelphia and UM Todd we when we when we
14:34
Speaker 1: talk about crypto, and there's been so much reporting on
14:38
Speaker 1: Gary Gensler and questions about how he would address you know,
14:43
Speaker 1: bitcoin and the entire crypto market. It strikes me that well,
14:48
Speaker 1: not only with crypto, but with a number of things.
14:51
Speaker 1: There's a lot of talk from the SEC, a lot
14:53
Speaker 1: of warnings, a lot of speeches, but not a lot
14:55
Speaker 1: of actual regulation. I can get my hands round. Yeah,
14:58
Speaker 1: I think that's right, um. I And hi guys, good,
15:01
Speaker 1: good to talk to you. Yeah, I think that's right. UM.
15:03
Speaker 1: But that's not unusual, and I'm not sure necessarily foretells
15:07
Speaker 1: what's going to happen or not happen. The s C
15:09
Speaker 1: does this, They start talking about issues, they mean public statements,
15:12
Speaker 1: a lot of speeches, they float some weather balloons or
15:14
Speaker 1: some trial lowser case and then and then, uh, they'll
15:17
Speaker 1: see what happens. UM. I think Gary guns are getting
15:20
Speaker 1: involved with UM. This idea of crypto exchanges have to
15:23
Speaker 1: do reporting for taxes is a start. At least the
15:27
Speaker 1: the SEC came out with a specific position. UM. And
15:29
Speaker 1: there's obviously been a lot of talk about whether or
15:31
Speaker 1: not the SEC is going to approve a bitcoin e
15:34
Speaker 1: t F, And there's a there's a whole backlog of
15:38
Speaker 1: of firms that have done filings there. That's kind of right.
15:41
Speaker 1: I wanted to go, Todd, give me a sense of
15:43
Speaker 1: where we are with a bitcoin e t F. It
15:46
Speaker 1: seems the demand is clearly there in the marketplace, but
15:51
Speaker 1: the regulators just aren't short. Just give us a lay
15:53
Speaker 1: of the land. Yeah, Well, first of all, there are
15:57
Speaker 1: there are crypto funds out there not registered with the SEC,
16:01
Speaker 1: but there's lots of ways you can invest in pool
16:04
Speaker 1: financial products throughout the world that have crypto exposure. Um,
16:09
Speaker 1: I think where the SC is gonna go, they're gonna
16:10
Speaker 1: prove something that they've already said that a closed end fund,
16:13
Speaker 1: not a mutual fund, a restricted redeemed redemption fund. You can.
16:17
Speaker 1: You can invest in crypto or a piece of encrypto.
16:19
Speaker 1: But there's a couple of ways looking as one investing
16:21
Speaker 1: in crypto directly like like directly in bitcoin, there's the
16:24
Speaker 1: firms there's funds and invest in bitcoin futures or other
16:27
Speaker 1: crypto futures, and then there's also firms out there that
16:30
Speaker 1: invest in companies that have exposure to cryptocurrency and not
16:35
Speaker 1: unlike you saw with the early cannabis funds. So they
16:37
Speaker 1: may not be actually crypto crypto currencies, but there they're
16:41
Speaker 1: firms that play in that marketplace. The SC is gonna
16:44
Speaker 1: do something on the open end side. They I think
16:45
Speaker 1: they have to. There's so much pressure building up and
16:48
Speaker 1: and the reality is there's so much demand for this.
16:50
Speaker 1: If the SC doesn't do it, someone else will. Another
16:53
Speaker 1: regulator will get involved, either in the United States but
16:55
Speaker 1: more likely, you know, off shore. This is gonna be
16:58
Speaker 1: a market that's gonna be big worldwide in the future.
17:01
Speaker 1: You know, maybe the you know, the British authorities will
17:03
Speaker 1: get involved and want to be the regulator of choice
17:05
Speaker 1: and then theyll on that market. So I think, yes,
17:07
Speaker 1: he's going to have to step in, and I think
17:09
Speaker 1: they will, all right. So that's the hot compliance UM
17:12
Speaker 1: issue that we've been talking about lately. Before that, it
17:15
Speaker 1: was UM all surrounding game stop and payment for order
17:20
Speaker 1: order flow. It seems to be something that I guess
17:23
Speaker 1: Joe six Pac thinks it's bad, or at least um
17:26
Speaker 1: Joe Congressman thinks it's bad. But as far as I
17:30
Speaker 1: can tell, having gone through the mechanics, um. As you know,
17:36
Speaker 1: and as deeply as I could, payment forward or flow
17:39
Speaker 1: seems to benefit the retail investors that Congress wants to
17:43
Speaker 1: protect it can um. I think the factual question is
17:48
Speaker 1: is it look retail investors, whether they be on the
17:53
Speaker 1: investment side or the brokerage side of the trading side,
17:56
Speaker 1: they're expensive to service. That is the That is a fact.
17:59
Speaker 1: And someone's got to get paid to service them. Right.
18:02
Speaker 1: So you know this idea that well the clearing brokers
18:06
Speaker 1: will pay back to people like Robin Hood money for
18:09
Speaker 1: the service and get get the trading. It seems seems
18:12
Speaker 1: like a great idea so long as the end client
18:16
Speaker 1: is at least not worse off than paying a straight
18:19
Speaker 1: up commission. So I think that question is an open right.
18:24
Speaker 1: I mean, that's right, that's right, which and I just
18:26
Speaker 1: wait more question because who's better off here? Are you
18:29
Speaker 1: better off paying a straight up commission and knowing what
18:30
Speaker 1: it is, or you better sort of paying a soft
18:33
Speaker 1: cost because your your execution isn't as great because there's
18:36
Speaker 1: pail and going back and forth. And I think as
18:38
Speaker 1: of now, I would say to a large extent, paying
18:41
Speaker 1: forward follows and more of a marketing gimmick than a
18:43
Speaker 1: true benefit to end clients. I do think it can
18:45
Speaker 1: be a benefit to end clients, but the question becomes,
18:49
Speaker 1: if there really is true benefit to the retail clients,
18:51
Speaker 1: someone's gonna have to pay for that, alright, Todd, So,
18:54
Speaker 1: Gary Geinstl of the new Sheriff on Wall Street, if
18:57
Speaker 1: you will, what do you think is kind of his
19:00
Speaker 1: top items on his agenda? Because you could argue he's
19:03
Speaker 1: got a very full plate here. Yeah, well you you've
19:07
Speaker 1: hit on two of them. You know, he's got a
19:08
Speaker 1: lot of pressure on crypto. I'm not sure that was
19:10
Speaker 1: his number one agenda going in, but it's only become
19:11
Speaker 1: the way. I think the game stop thing and paying
19:13
Speaker 1: forward flow got ahead of him. I don't think that
19:15
Speaker 1: was certainly a big issue before that. But you've got
19:17
Speaker 1: a lot of big issues. You've got things like regulation,
19:20
Speaker 1: best interest, suitability and uh and whether that's going to
19:23
Speaker 1: get revisited again. UM. You have things like uh UM,
19:28
Speaker 1: A lot of talk around how to regulate firms that
19:31
Speaker 1: hire sort of miscreant brokers and how they're going to
19:34
Speaker 1: regulate that um, and then the market making activity are
19:37
Speaker 1: they is he gonna go back on some of the
19:39
Speaker 1: stuff that Clayton did around credited investors and private placements.
19:42
Speaker 1: I think those are huge issues, um, that are facing
19:44
Speaker 1: the marketplace. So I and then of course we're all
19:47
Speaker 1: worried about you know, this market has been a bowl
19:50
Speaker 1: market for how many years? Um. You know, things get
19:52
Speaker 1: really kind of ugly, as we all know when when
19:54
Speaker 1: things go sideways, and and that's almost an inevitability of
19:57
Speaker 1: the question is when that's gonna happen. I think that's
19:59
Speaker 1: that's on his mind. Well, he's got to be cracking skulls,
20:02
Speaker 1: and I wonder we only got twenty seconds. But does
20:04
Speaker 1: he try and broaden the SEC's mandate naming everything that
20:09
Speaker 1: he can see a security? That's been his history. That
20:12
Speaker 1: was that was his history when he was at the CFTC.
20:15
Speaker 1: He tried to be very broad in his regulatory reach.
20:17
Speaker 1: And it's I like to say, regulators like to regulate.
20:21
Speaker 1: That's right. Everything's a nail if you're a carpenter. All right, Todd,
20:24
Speaker 1: Thanks very much, Todd. Superman there. He is the founding
20:27
Speaker 1: principle of Superman Compliance Services. He's got a twenty five
20:31
Speaker 1: year career on Wall Street UM as general counsel and
20:35
Speaker 1: representing people on the buy on the South side. So
20:37
Speaker 1: he's um great expert material for us on these issues.
20:42
Speaker 1: This is Bloomberg. Well, the Federal Reserve remains uh certainly
20:50
Speaker 1: on the front burner for these markets. We have the
20:52
Speaker 1: f O MC meetings. A minute released today to pim
20:56
Speaker 1: Wall Street Time and of Courts Jackson Hole get together
20:59
Speaker 1: Laton next week. Danielle di Martino, both CEO and director
21:02
Speaker 1: of intelligence for Quill Intelligence, also a former advisor to
21:06
Speaker 1: Dallas feder Reserve MNY Bloomberg opinion contributor Joints is here.
21:10
Speaker 1: Plus she's also author of the book fed Up, an
21:13
Speaker 1: Insider's take on why the Federal Reserve is bad for America.
21:18
Speaker 1: So we're gonna get a lot of fed speak over
21:19
Speaker 1: the next week or so. Danielle, what are you listening for? Well,
21:24
Speaker 1: I'm listening really too. I'm down to listening to two voices,
21:27
Speaker 1: that of J. Powell and the New York Feds John Williams.
21:31
Speaker 1: I would have added a third vice chair Clarata, but
21:34
Speaker 1: it seems that if they've buried him somewhere in a
21:35
Speaker 1: basis because we don't hear from him anymore. He was
21:38
Speaker 1: very big on inflation expectations triggering FED policy shifts. And
21:44
Speaker 1: now that we have indeed seen longer term inflation expectations
21:47
Speaker 1: pick up, Clarida is curiously quiet. Where do you see
21:51
Speaker 1: longer term inflation expectations? Because when I look at you,
21:54
Speaker 1: mish Um five to ten years, it's only three percent.
22:00
Speaker 1: Well yeah, but but remember three percent is a leap
22:03
Speaker 1: above where it used to be. Uh, and and three
22:07
Speaker 1: percent for FED policy would certainly not be a comfort
22:10
Speaker 1: zone and it wouldn't be within their flexible framework either
22:14
Speaker 1: if it was to get to three percent and Harper however,
22:18
Speaker 1: at that level, I guess that's really what I'm asking.
22:20
Speaker 1: That's really what I'm asking, Daniel, is three percent because
22:24
Speaker 1: I've seen three point one percent mentioned as the historical average.
22:28
Speaker 1: So um is three percent and expectations too high for
22:31
Speaker 1: the FED? I think, I think it is uh. And
22:34
Speaker 1: I think that that makes things very uncomfortable to the
22:36
Speaker 1: FED because they're extremely remiss to make a move right
22:40
Speaker 1: now because of what's happened subsequent to their meeting in July.
22:44
Speaker 1: And I of course refer to the slow down here.
22:46
Speaker 1: We saw this morning that that single family housing permits,
22:49
Speaker 1: which is the most leading indicator of residential real estate
22:52
Speaker 1: that's at a zero uh, you know, bio traffic. According
22:56
Speaker 1: to the National Association Homebuilders, that's a year low. Mortgage
22:59
Speaker 1: apple locations down in six of the last eight weeks
23:02
Speaker 1: for purchases. So the FED is seeing interest rate sensitive sectors,
23:06
Speaker 1: despite being at the zero bound, begin to slow. We've
23:09
Speaker 1: got auto sales slow three months running. So this is
23:12
Speaker 1: a very This is a very difficult situation because the
23:16
Speaker 1: last thing they want to do is indicate that they're
23:18
Speaker 1: tightening when the economy slowing. Yeah, it SENTI I looked
23:21
Speaker 1: at some of that data, Danielle. I was wondering, like
23:23
Speaker 1: on the real estate data, because I just sold my house,
23:26
Speaker 1: so paying attention to that stuff. There's just no supply
23:29
Speaker 1: of housing, so maybe that's a reason. And there's no cars,
23:33
Speaker 1: so maybe that's a reason that they're not selling cars.
23:35
Speaker 1: I mean, is this technical or or in fact showing
23:39
Speaker 1: some fundamental slowness? Do you think in this economy? I
23:43
Speaker 1: think that this is where the message gets really convoluted.
23:46
Speaker 1: And if you look at the if you look, for example,
23:50
Speaker 1: at at the sales per one thousand population in cars
23:56
Speaker 1: in July that was forty seven units per one thousand Americans.
23:59
Speaker 1: If you tell account below and the Great Recession, that's
24:03
Speaker 1: the lowest in the history of the series back. There's
24:06
Speaker 1: a good chance that we are at a point right
24:08
Speaker 1: now of having reached saturation in many of these higher
24:13
Speaker 1: end purchases. And that's what we're actually starting to hear
24:17
Speaker 1: from homebuilders and good friends with I V. Selman and
24:19
Speaker 1: what she's hearing from her homebuilders is that there's major
24:21
Speaker 1: pushback in terms of the desire to buy a home
24:24
Speaker 1: right now. It's not just a supply constraint story, especially
24:28
Speaker 1: as you see lumber prices come down, which will be
24:31
Speaker 1: a huge relief on the cost front. So are we
24:34
Speaker 1: going to see at some point of deflation in home prices.
24:40
Speaker 1: I think that I think as crazy as that notion
24:43
Speaker 1: would seem to be, Uh, there's certainly the risk out
24:46
Speaker 1: there because we've seen a run up to record levels
24:50
Speaker 1: of home price appreciation and again we're seeing serious pushback.
24:54
Speaker 1: Sticker shock was the word that was used most often
24:57
Speaker 1: when it when it comes to home prices. I was
24:59
Speaker 1: driving around a little town where I've been looking to
25:01
Speaker 1: buy a home, uh for two years now, and every
25:04
Speaker 1: single price said, every single for sale sign said price
25:07
Speaker 1: reduced I mean, this is this is the kind of
25:09
Speaker 1: ante data that makes you sit sit up and say,
25:11
Speaker 1: oh wait, the tightest turning. Every one of those signs
25:15
Speaker 1: in my town say under contract, and uh it's I
25:19
Speaker 1: think it's kind of regional there. But so for sure, dude,
25:22
Speaker 1: I was just back with you, Paul, looking around at
25:25
Speaker 1: houses in Bronxville. I couldn't find a decent three bedroom
25:29
Speaker 1: house for less than two million dollars. I mean, they
25:31
Speaker 1: were just the two million dollar houses were just boxes,
25:34
Speaker 1: dilapidated boxes. I couldn't metro believe it, Metro New York.
25:38
Speaker 1: It's it's just crazy. So Danielle, let's assume we we
25:41
Speaker 1: we do get to the point where the FED needs
25:43
Speaker 1: to taper, needs to think about rates. How will it
25:45
Speaker 1: actually look because it's been a while since a lot
25:49
Speaker 1: of us have kind of experienced this, So how is
25:51
Speaker 1: that actually gonna look to us? Well, if you if
25:54
Speaker 1: you can sip at the fact that Christopher Waller is
25:56
Speaker 1: a board member, right, last time we had a board
25:58
Speaker 1: members descent was Mark So I think it was two
26:00
Speaker 1: thousand to two thousand three, when Greenspan was in office.
26:03
Speaker 1: When you consider this, the skepticism and criticism from even
26:07
Speaker 1: on his board, you've got three voting members rotating and
26:10
Speaker 1: in January who are also would prefer to start with
26:14
Speaker 1: mortgage vestaturities tapering, because again, what's what we've seen in
26:17
Speaker 1: the home in the home market, that's what I would
26:19
Speaker 1: look to see, and very very slight level. I wouldn't
26:23
Speaker 1: look to Jackson Hole though, in defiance of what most
26:26
Speaker 1: servants are saying for Powell to give the signal, I
26:29
Speaker 1: think that that first signal might come more likely that
26:33
Speaker 1: second to last week of September with the next F
26:35
Speaker 1: one S meeting. I want to ask your take on
26:39
Speaker 1: the the infrastructure plan and the spending that the the
26:45
Speaker 1: US has gotten courts sort of numb to. Is there
26:48
Speaker 1: going to come a point when it's a problem spending
26:51
Speaker 1: you know, one to three four trillion dollars in a
26:54
Speaker 1: bill every year. You know, rates are so low it
26:58
Speaker 1: seems like it's a four portable to do it now.
27:02
Speaker 1: And that, of course is the theory, and that has
27:04
Speaker 1: been the theory since December fift eight when the Fed
27:08
Speaker 1: Reserve took the Fed funds right down to the zero bound.
27:11
Speaker 1: And boy have we borrowed like gangbusters since then. Based
27:14
Speaker 1: on that theory, based on that premise. Uh. But to
27:17
Speaker 1: answer your question, I think I think the pace that
27:20
Speaker 1: we're talking about spread out over eight years for some
27:23
Speaker 1: of the infrastructure spending plans that we've seen the Senate approved.
27:27
Speaker 1: I mean, that's not the stuff of nightmares. It's when
27:30
Speaker 1: you're giving out lots and lots of cash to households
27:33
Speaker 1: and running up real, honest to God's spending super super fast.
27:37
Speaker 1: That's when it gets problematic from an investor perspective. From
27:41
Speaker 1: from a foreign perspective, we saw foreign investors jumped right
27:45
Speaker 1: back into the treasury market in the latest month of
27:47
Speaker 1: data that we have, which shows that there's really not
27:50
Speaker 1: that much anxiety. But again, the United States remains the
27:53
Speaker 1: most attractive horse in the glue factory. Oh boy, but
27:57
Speaker 1: it's okay that we have all right, So I guess
28:00
Speaker 1: we're an athlete because we only have twenty seconds. But Danielle,
28:02
Speaker 1: it's always great talking to you. Thanks so much for
28:05
Speaker 1: joining us. Danielle DiMartino uh booth there from Quill Intelligence.
28:10
Speaker 1: He's the CEO and director of intelligence there. Of course,
28:13
Speaker 1: she's a former advisor of the Dallas Federal Reserve and
28:15
Speaker 1: also a Bloomberg Opinion contributor. When we're lucky, we get
28:18
Speaker 1: to have Danielle's opinion on our on our page. Type
28:23
Speaker 1: O P I N go for that. This is Bloomberg.
28:28
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
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Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever
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