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Still a Long Way to Maximum Employment · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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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
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. I want to get
0:21
Speaker 1: over to Jeffrey Cleveland right now. He's a principal and
0:24
Speaker 1: chief economist at Payden and Rival, and he's got um
0:28
Speaker 1: some real intelligence for us on the U S JAS
0:30
Speaker 1: market and how it relates to the FED. First, I
0:33
Speaker 1: want to talk about the Triple Crown of open water swimming. Jeffrey,
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Speaker 1: you have completed a swim across the English Channel, the
0:41
Speaker 1: Catalina Channel, and you've swum the entire distance around the
0:44
Speaker 1: island of Manhattan. What compels you to join this elite club.
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Speaker 1: I think only forty people have done it well. I
0:53
Speaker 1: think it's one of those things if you're a swimmer
0:55
Speaker 1: in college and you're not quite as fast as you know,
0:58
Speaker 1: say Caleb Drestle or or Michael Phelps you, you look
1:01
Speaker 1: for stuff to do after college, and I took up
1:03
Speaker 1: ocean swimming, did a bunch of swims in the San
1:06
Speaker 1: Francisco Bay actually, and then you know, in the ocean
1:09
Speaker 1: swimming community, it's really you know, it's like climbing Everest, uh,
1:13
Speaker 1: you know, swimming across the English Channel. So that's that's
1:15
Speaker 1: kind of something that you want to check off your
1:17
Speaker 1: bucket list. So I once I did that, I realized
1:20
Speaker 1: that there was any more exclusive club, which was the
1:23
Speaker 1: Triple Crown. People have done all three of those. So
1:25
Speaker 1: I felt like I had to swim from Catalina back
1:27
Speaker 1: to l A and then and then around the Great
1:29
Speaker 1: Island of Manhattan. Only forty people in the world have
1:32
Speaker 1: done it. We're talking in the history of the world
1:34
Speaker 1: have done this. So it's a pretty exclusive club and
1:38
Speaker 1: very impressive. I just wanted to hit on that so
1:41
Speaker 1: our listeners know. I mean, obviously you've done a lot
1:44
Speaker 1: of other stuff, but that's huge. Um, all right, let's
1:46
Speaker 1: get to the Jobs Report and the FED, because in
1:50
Speaker 1: your view, we're still a long way from maximum unemployment.
1:54
Speaker 1: We know this FED is focused on that and they
1:56
Speaker 1: have an outcomes outcome based frame in place. So does
2:02
Speaker 1: that mean, um, you don't think we're gonna see what
2:06
Speaker 1: tapering so soon? Um, and certainly not rate hikes either. Yeah,
2:13
Speaker 1: here's the context I would give you. This morning, we
2:15
Speaker 1: got eight d fifty thou jobs added for June that
2:18
Speaker 1: beat the consensus. Yet, as you know to ten, your
2:21
Speaker 1: treasury yield are a little bit lower in fact yield
2:23
Speaker 1: across the curve or lower today. So um, it's a
2:26
Speaker 1: bit of a head scratcher. But I think the context
2:29
Speaker 1: that matters is that even if we add eight hundred
2:32
Speaker 1: and fifty thousand jobs per month going forward, we're still
2:35
Speaker 1: a long way to anything that I would describe this
2:38
Speaker 1: maximum employment. Probably takes another year or so to get
2:42
Speaker 1: back to pre COVID levels on total employment. So we'll
2:46
Speaker 1: get there. We're moving in the right direction. It's very
2:47
Speaker 1: good news, but it's still gonna I think, fall short
2:50
Speaker 1: in a year's time from from maximum employment. And you
2:54
Speaker 1: know a little hints of that today, right you had
2:56
Speaker 1: the the unemployment rate take up a little bit to
2:57
Speaker 1: five point nine percent, so that's um, it's a bit disappointing.
3:01
Speaker 1: And then there's no progress on labor force participation, so
3:05
Speaker 1: it's it's possibly to get a year from now, we're
3:07
Speaker 1: still not at maximum employment. So I think, you know,
3:11
Speaker 1: calls for rate hike are are really really premature. That's
3:15
Speaker 1: the biggest consideration tapering. You know, the FED is trying
3:18
Speaker 1: very hard to separate tapering from hiking. I think they've
3:22
Speaker 1: done a pretty good job of doing that. There's two
3:24
Speaker 1: different decisions. We do think they will start to tapor
3:28
Speaker 1: beginning in Q one of two, but it's it's for me,
3:32
Speaker 1: the big question for the markets, whether it's the Bob
3:34
Speaker 1: market or whether it's equities, is you know, when did
3:37
Speaker 1: that first rate hike arrive a couple weeks ago? There
3:39
Speaker 1: is some concerning it. We might arrive in two. I
3:42
Speaker 1: think the data today tells you now that's uh at
3:46
Speaker 1: the earliest. Well, that last f O MC meeting, Jeffrey,
3:49
Speaker 1: there's some focus on the dot plots. Is that where
3:52
Speaker 1: the focus should be? I don't think so. I think
3:55
Speaker 1: the dots are distraction. You know, I've been a long
3:57
Speaker 1: time critic of these dots. I've been saying, drop the
4:00
Speaker 1: dot plot. It's it's you know, those figures are interesting,
4:05
Speaker 1: but they're submitted before the meeting. They're not the topic
4:08
Speaker 1: of conversation at the meeting, and they're not a policy outcome.
4:12
Speaker 1: Of the meeting, and I think it provides a lot
4:15
Speaker 1: of fodder, you know, a permanent employment clause for for
4:18
Speaker 1: FED watchers such as myself of course, so and a
4:21
Speaker 1: great screen on a Bloomberg terminal, which is good, exactly great,
4:24
Speaker 1: great screen, But I don't think it tells you a
4:27
Speaker 1: whole lot. I think if you're an investor, you shouldn't
4:29
Speaker 1: look too much at what policymakers have in terms of
4:32
Speaker 1: their dots for for a rate hike. Say, you should say,
4:35
Speaker 1: when are we going to reach maximum employment? And then
4:37
Speaker 1: you should ask, okay, at that time we read when
4:39
Speaker 1: we reach maximum employment, are we gonna do we have
4:43
Speaker 1: sustainable two percent inflation? Those are the two things that
4:46
Speaker 1: will determine whether the rate hike occurs, and so our
4:49
Speaker 1: conclusion is we won't have maximum employment before you know,
4:52
Speaker 1: maybe the end of two or after, so that kind
4:55
Speaker 1: of rules out a rate hike before that. Great to
4:58
Speaker 1: get your views, Jeffrey, thanks to much for joining us.
5:01
Speaker 1: Jeffrey Cleveland is chief economist and a principle at Payden
5:04
Speaker 1: and Regal. Talking to us about the Job's report and
5:07
Speaker 1: the FED. I want to bring in now Leonid Burjitsky.
5:12
Speaker 1: He writes, for Bloomberg Opinion, and his latest story, Dark
5:15
Speaker 1: Markets Can Be a geopolitical force, talks about um cyber
5:20
Speaker 1: hacking and the blame game that we've all seen kind
5:25
Speaker 1: of carefully played between Presidents Biden and Putin at their
5:31
Speaker 1: last summit. Most recently, um, uh, there was a German
5:36
Speaker 1: banking system hack that has been blamed, at least by
5:41
Speaker 1: German the German press on Russian hackers, state Russian hackers.
5:46
Speaker 1: They even say in the Builds Tongue, which is the
5:48
Speaker 1: most widely read paper here, Leonid. I've actually been wondering
5:51
Speaker 1: about this for a long time. Is it really fair
5:53
Speaker 1: for us to say, um, definitively that these hack attacks
5:59
Speaker 1: are from eight backed Russian criminals just because they are
6:03
Speaker 1: in Russia. I mean, if we blamed every US criminal
6:07
Speaker 1: on the US government, um, you you have a lot
6:10
Speaker 1: of problems in Washington, d C. As well. Yeah. Well,
6:13
Speaker 1: there's this major difference between Russia and the US. Russia
6:17
Speaker 1: is increasingly a police state, and not many things happened
6:23
Speaker 1: there without the government's explicit or implicit consent, especially if
6:28
Speaker 1: they're um, you know, big projects. Uh. For example, the
6:36
Speaker 1: column that you mentioned UM talks about Guibro hydra uh
6:42
Speaker 1: dark marketplace for mostly drugs, but also fake papers and
6:48
Speaker 1: stuff like that. It's a silk road. Yeah. Well again
6:55
Speaker 1: there's a difference silk road uh to the west. As
6:59
Speaker 1: a law hyper has been around since two thousands fifteen.
7:03
Speaker 1: Uh and it's got an annual turnover of more than
7:07
Speaker 1: a billion dollars in cryptocurrency, So it's a it's a
7:12
Speaker 1: pretty noticeable project. Uh. And uh you know, it is
7:19
Speaker 1: the place where if you want to buy drugs in Moscow,
7:22
Speaker 1: that is where you go. Uh. So it's it's kind
7:26
Speaker 1: of impossible to ignore. It's sort of the elephant in
7:29
Speaker 1: the room. Uh. And the you know, things like that
7:35
Speaker 1: cannot really operates in Russia without some sort of protection
7:41
Speaker 1: from above. Uh. And you know that is the difference
7:45
Speaker 1: with the US, where you can you know, build a
7:49
Speaker 1: larger wizard project and not uh have corrupt officials protecting
7:57
Speaker 1: or supporting it in some way. So it and I
8:00
Speaker 1: guess that's one of the questions I think a lot
8:02
Speaker 1: of people have is when they think about the Russian
8:05
Speaker 1: I guess influence or role of the government in these
8:09
Speaker 1: hacking Is it support per se or is it just
8:12
Speaker 1: simply turning a blind eye well, turning a blind eye
8:18
Speaker 1: is a form of support, right it is. But I
8:21
Speaker 1: don't know if there's anything more overt Uh Well, uh,
8:26
Speaker 1: for one thing, whoever is protecting these uh, these businesses
8:32
Speaker 1: and the entire infrastructure, the entire ecosystem that has uh
8:37
Speaker 1: grown up around them for money woundering, for uh, providing
8:43
Speaker 1: worked engineers and to other you know, lots of other people.
8:49
Speaker 1: It's a huge ecosystem. And uh, if the you know,
8:56
Speaker 1: if somebody in the government is turning a blind eye,
9:00
Speaker 1: that person or or those persons are highly personally interested
9:05
Speaker 1: and probably you know, getting part of the parts of
9:08
Speaker 1: the profits in exchange. So that is one, uh sort
9:14
Speaker 1: of one thing that you can't really ignore. The other
9:19
Speaker 1: one is the geopolitical angle. H If the hackers and
9:25
Speaker 1: if these illicit operations hit the West and not Russian targets,
9:31
Speaker 1: then basically this at least coincides with the direction of
9:37
Speaker 1: official policy, and there's less of a reason for the government,
9:43
Speaker 1: the Kremlin, you know, the authorities to go after them.
9:46
Speaker 1: They're actually seen as doing something useful for the motherland. Well,
9:51
Speaker 1: and also I don't think they could expect due process
9:54
Speaker 1: necessarily if they were to hit Russia. Just like, Um,
9:58
Speaker 1: you know, Chinese criminals probably shy away from hitting out
10:02
Speaker 1: against the party. Do they have the same you know,
10:08
Speaker 1: is there is there the same tacit support of crime
10:12
Speaker 1: like this in China? Oh? I, Um, I wouldn't really
10:17
Speaker 1: know about China Russians, you know where I'm from. Uh,
10:23
Speaker 1: that's uh, that's how it kind of works there. If
10:27
Speaker 1: the targets that are hit by criminals are also targets
10:32
Speaker 1: that are hostile to the government, the government shouldn't really
10:38
Speaker 1: be expected to come down hard on these criminals. So Lena,
10:44
Speaker 1: give us a sense of what the policy of the
10:47
Speaker 1: United States has been to this to this point and
10:51
Speaker 1: maybe how it needs to change. Well, the US government, UM,
10:57
Speaker 1: it's kind of it has to walk a fine line.
11:01
Speaker 1: It can't say you know, you can't tell putting directly. Uh,
11:05
Speaker 1: you know, someone in your entourage or you personally are
11:10
Speaker 1: on the take and and like protecting. Uh, these are
11:14
Speaker 1: wiggled businesses for payment. Uh you know what. The the
11:18
Speaker 1: only thing that they can say, and they've been actually
11:21
Speaker 1: doing it quite correctly under Biden. They've been saying, you know,
11:27
Speaker 1: these people operate from your territory. They seem to enjoy
11:30
Speaker 1: some kind of protection. And you know that's not a
11:33
Speaker 1: good thing. I doubt that the US government can do
11:39
Speaker 1: more than that in the sort of in the public space. Uh.
11:44
Speaker 1: The other thing it can do is um, uh you know,
11:48
Speaker 1: is fight back and step up the defenses of important infrastructure.
11:59
Speaker 1: I wanted to ask you about something. I was going
12:01
Speaker 1: to say completely different, Leonard, But I don't know how
12:05
Speaker 1: far off George Orwell is from what we're seeing here.
12:10
Speaker 1: And I ask you because you recently authored a Russian
12:13
Speaker 1: translation of UM, the British author's masterpiece. Uh, what are
12:21
Speaker 1: you seeing? I mean he Orwell famously UM modeled his
12:25
Speaker 1: novel after Stalinist Russia. What are the differences between what
12:31
Speaker 1: we see there and Putinist Russia well like or doesn't
12:38
Speaker 1: exactly model uh Oceania UM on Stalin's Russie was sort
12:45
Speaker 1: of your UM, you know, a combination of different autalitarian regimes.
12:50
Speaker 1: There were elements of Nazi Germany UM and actually elements
12:56
Speaker 1: of UM, you know, wartime influence in in the in
13:01
Speaker 1: those descriptions UM, but U and and because it is
13:09
Speaker 1: that way and there's no like specific model there, you
13:15
Speaker 1: can obviously, you know, find lots of similarities with other
13:21
Speaker 1: authoritarian governments, including the current Russian one. Obviously, the you know,
13:28
Speaker 1: the sort of the um, the hostility towards the outside
13:34
Speaker 1: world is very similar to what we're all described. Uh.
13:39
Speaker 1: And the sort of siege mentality UM and the lack
13:43
Speaker 1: of basically a lack of written rules is one other.
13:49
Speaker 1: Um sort of certainly brother right well yeah, yeah, the
13:58
Speaker 1: well big brother is uh sort of a guy with
14:03
Speaker 1: many faces and uh yeah, one face. Leonardst Sky, thank
14:08
Speaker 1: you so much for joining us. Lena is colmunist for
14:11
Speaker 1: Bloomberg Opinion based in Berlin. Right now, I want to
14:17
Speaker 1: talk more about work. Tom Gimble joins us. He's a
14:20
Speaker 1: founder and CEO of the LaSalle Network. It's one of
14:23
Speaker 1: the leading staffing and recruiting firms in the country. And
14:27
Speaker 1: good morning to you. Thanks for joining us. Tom. Let
14:30
Speaker 1: me first ask you about your reaction to the numbers. UM,
14:34
Speaker 1: what do you think, eighty thou Are we gonna keep
14:37
Speaker 1: seeing numbers like this? Yeah? I think it's great. I
14:40
Speaker 1: think well, you know, we saw today was numbers of
14:44
Speaker 1: recent college graduates from May entering the workforce in June
14:48
Speaker 1: and getting hired. We still saw pandemic recovery in the
14:52
Speaker 1: service and hospitality industry, meaning with warmer weather and restaurants opening.
14:57
Speaker 1: But even though there's a huge shortage of labor, there's
15:00
Speaker 1: still a lot of people finding jobs. And so you've
15:03
Speaker 1: got those two things coming together for the numbers. And so,
15:06
Speaker 1: you know, my feeling is even if it would have
15:09
Speaker 1: been below estimates at six fifty or five hundred thousands,
15:12
Speaker 1: it's still a win. Estimates are just that estimates. But
15:15
Speaker 1: anytime we're we're adding over a half million new jobs,
15:18
Speaker 1: it's a good thing, all right. Tom. When you talk
15:22
Speaker 1: to your clients and they're talking about their hiring processes,
15:25
Speaker 1: we've heard lots of stories about how a lot of
15:27
Speaker 1: companies are unable to find workers. What do you think
15:32
Speaker 1: are the primary reasons that that's the case. So our
15:37
Speaker 1: firm works with venture capital BAK firms. We work with
15:40
Speaker 1: private equity owned companies and publicly traded companies, and what
15:43
Speaker 1: we see in the marketplace is companies are in high
15:47
Speaker 1: demand of people, and we do all white collar positions,
15:51
Speaker 1: even though some of our clients may also hire for
15:53
Speaker 1: blue collar rolls and on the lower level positions. The
15:58
Speaker 1: increased unemployment company station from the federal government is for
16:01
Speaker 1: sure a hindrance the companies finding people. On the flip side,
16:06
Speaker 1: we've got people that have relocated, uh due to remote
16:10
Speaker 1: work due to the pandemic, and have left where jobs
16:13
Speaker 1: are and have gone to other areas in warmer states,
16:16
Speaker 1: southern areas, and it's left a lot of vacancies in
16:19
Speaker 1: the northern part of the country. And I think once
16:22
Speaker 1: we see the economy kind of settled down post pandemic.
16:26
Speaker 1: I don't mean settled down like in a bad way,
16:28
Speaker 1: but settled down that people aren't worried about the pandemic anymore,
16:32
Speaker 1: We're going to start seeing those positions get built. Where
16:36
Speaker 1: are you seeing um less growth than you anticipated? One
16:41
Speaker 1: of the interesting things, Tom, which is why I ask
16:45
Speaker 1: that we've noticed, is that a lot of industries, for example,
16:48
Speaker 1: airlines have been able to boost production UM closer to
16:53
Speaker 1: pre pandemic levels without boosting hiring. And I guess that's
16:58
Speaker 1: because they have a lot of automation in place that
17:01
Speaker 1: they brought forward. Are you seeing that in other industries
17:03
Speaker 1: as well? Well? I don't know and not you know,
17:06
Speaker 1: I know what the data says to an extent, but
17:08
Speaker 1: I'm not sure if I agree with that on the
17:10
Speaker 1: airline when the numbers aren't where they were pre feel you, Yeah,
17:13
Speaker 1: I feel you, because they could they could just at
17:17
Speaker 1: the higher occupancy level. Ye ye, right, so they weren't
17:21
Speaker 1: running efficiently before, or they haven't fired as many people
17:24
Speaker 1: and so they don't need to rehire. I know data.
17:27
Speaker 1: I agree with Mark Twain, you know, um, I can't
17:29
Speaker 1: remember the exact quote, but something about lies. In any case,
17:32
Speaker 1: we do see though, technology, you know, being brought forward
17:36
Speaker 1: to automate a lot of positions that you know used
17:38
Speaker 1: to require humans. Yes and no, we're we're doing it.
17:42
Speaker 1: You know, like you go to a baseball game now
17:44
Speaker 1: and instead of having as many vendors they're having, you
17:47
Speaker 1: can order it on your phone and food will be
17:49
Speaker 1: delivered to you. Right, it's a technology innovation. The difference
17:53
Speaker 1: is you're waiting three or four innings to get the
17:55
Speaker 1: food and there still aren't as many people doing the job,
17:59
Speaker 1: and you're not it in your food when you're one
18:01
Speaker 1: it and you're unhappy. So we're what companies are doing
18:04
Speaker 1: is they're using technology to compensate, but in some ways
18:08
Speaker 1: it's not giving you the same level of service as
18:11
Speaker 1: you get from having full unemployment full employment, So it's
18:15
Speaker 1: a it's a band aid, it's not a cure. And
18:17
Speaker 1: we're years away from being at the point where people
18:19
Speaker 1: are going to accept technological advances in lieu of having
18:24
Speaker 1: people to actually do the job. So to kind of
18:27
Speaker 1: follow up on that, there's still i think the number
18:29
Speaker 1: seven or eight million folks that are still out of
18:31
Speaker 1: work relative to prior to the pandemic. What's the elok
18:35
Speaker 1: for those folks. Do you think we're gonna get all
18:36
Speaker 1: them back into the workforce and perhaps you know over
18:39
Speaker 1: what time period? Well, those real questions there and number one,
18:42
Speaker 1: do they want to be in the workforce? Number two
18:45
Speaker 1: did they overvalue their worth when they got out of
18:47
Speaker 1: the workforce? And number three are they ready to take
18:50
Speaker 1: the jobs that are available versus what they want? You know,
18:53
Speaker 1: I'm the CEO of a hundred million dollar company. If
18:56
Speaker 1: I lost my job tomorrow and I only wanted to
18:58
Speaker 1: be the CEO of a hundred million dollar company, there
19:01
Speaker 1: might not be a job available for man might take
19:03
Speaker 1: a job at a startup or at a five million
19:05
Speaker 1: dollar company, and that might be an extreme, But if
19:08
Speaker 1: you look at somebody who was an accountant and they
19:10
Speaker 1: lost their job and they can't find a job as
19:12
Speaker 1: an accountant, maybe they weren't a very good one and
19:14
Speaker 1: they've got to go look at it. The infrastructure bill
19:17
Speaker 1: is gonna get passed, hopefully in the third quarter, and
19:19
Speaker 1: when that happens, there's gonna be tens of thousands, hundreds
19:23
Speaker 1: of thousands of jobs working on infrastructure, and people are
19:26
Speaker 1: gonna have to pivot and adjust. But the jobs are
19:28
Speaker 1: out there for anybody who wants one. Where are you
19:31
Speaker 1: seeing the biggest gains in terms of UH pay? I've
19:35
Speaker 1: noticed lately that all the banks are boosting their pay
19:38
Speaker 1: for junior analysts. Of course, not everybody can slide into
19:41
Speaker 1: those positions that easily. But are you seeing other industries
19:45
Speaker 1: where you know, just everyone's competing by by raising wages quickly. Yeah.
19:51
Speaker 1: The reason you're seeing it in banks is because the
19:53
Speaker 1: so much dry powder on the sidelines that deals are
19:56
Speaker 1: being done, So banks need to hire as many people
19:59
Speaker 1: as they can and to make sure that they're getting
20:01
Speaker 1: the market while it's hot. And you know, historically they
20:04
Speaker 1: don't have a hard time of downstizing when they need
20:07
Speaker 1: to either. Where we're seeing growth continually needs to be
20:10
Speaker 1: less in industry and more in skill sets. So we're
20:14
Speaker 1: seeing a ton of back office accounting and finance professionals
20:17
Speaker 1: at all types of companies, manufacturing technology, distribution service firms.
20:23
Speaker 1: We're seeing a ton of sales people, which is a
20:25
Speaker 1: great sign because that means companies are planning for longer
20:28
Speaker 1: term growth and they want more sales people to be
20:30
Speaker 1: able to do that for the foreseeable future. And then,
20:33
Speaker 1: as always, we're seeing technology that the biggest and most
20:36
Speaker 1: interesting role is human resources never took a hit during
20:40
Speaker 1: the recession, which is a huge surprise based on the
20:43
Speaker 1: most two recent recessions, and HR continues to be an
20:46
Speaker 1: area that companies are hiring for and one that terrifies me.
20:50
Speaker 1: Terrified of HR. If I see that HR on on
20:54
Speaker 1: my office phone, I'm I'm not picking up. Tom, thanks
20:57
Speaker 1: so much for joining us. Pleasure having you eight to
21:00
Speaker 1: get your insight. As always, Tom Gimball, founder and CEO
21:03
Speaker 1: of the Sound Network. Checking with Chad Obiad. He's a
21:07
Speaker 1: director of investment management and hunting in private bank seven
21:11
Speaker 1: billion dollars under management. Chad, when you see a disclosure part,
21:17
Speaker 1: do I need to do any disclosure here? I don't know,
21:20
Speaker 1: do you? It's my bank, it's your bank? There you go,
21:23
Speaker 1: it's the Bank of Matt Millard. There should get dat
21:26
Speaker 1: of Ohio. There should be a tagline the Bank of
21:29
Speaker 1: Matt Miller Bloomberg Television and makes them to change it. Chad.
21:31
Speaker 1: Let's ask them to change it, Chad. What what what
21:34
Speaker 1: do you make of that job's number we saw this morning?
21:37
Speaker 1: What does it mean for your economic outlook? Yeah? So
21:40
Speaker 1: certainly seeing that many people get back to work is
21:43
Speaker 1: good news, right, eight fifty thousand, well ahead of expectations,
21:47
Speaker 1: really good, But there's still some mixed messaging in the data.
21:50
Speaker 1: You saw the unemployment numbers tick up a bit. So
21:54
Speaker 1: as we continue to look through this data, is it
21:56
Speaker 1: enough to move the Fed? I think the general takeaway
21:59
Speaker 1: here is probably not. But from our general thesis, we
22:04
Speaker 1: still think the Fed starts to taper on the MBS side,
22:08
Speaker 1: that the bond purchases part of their asset purchases later
22:12
Speaker 1: this year. So, um, how much tapering do you think?
22:16
Speaker 1: I mean, I don't know how out of consensus that
22:19
Speaker 1: is at this point, Chad, it looks like, um, the
22:22
Speaker 1: economy is certainly humming along, and lord knows mortgage backed
22:25
Speaker 1: securities doesn't need any more support. So how much how
22:29
Speaker 1: much tapering do you expect, well, so we think the
22:32
Speaker 1: lion's share of the tapering would come from that NBS
22:34
Speaker 1: side for the rest of look for the Treasury side
22:38
Speaker 1: to start picking up early in two. We even saw
22:42
Speaker 1: the I m F this this morning coming out and
22:45
Speaker 1: saying that they're expecting some degree of tapering from US
22:49
Speaker 1: FED early in that first half of two. So to
22:53
Speaker 1: your point, I think we're in with consensus. We'll see
22:56
Speaker 1: if any of the additional data points change our perspective
23:00
Speaker 1: on that, and of course July as well as the
23:05
Speaker 1: symposium in Jackson holl will definitely be on our radar
23:08
Speaker 1: to see if the FED has any additional commentary. You know,
23:12
Speaker 1: we did get a bit of a hawkish stance, or
23:14
Speaker 1: at least interpretation of a hawkish stance at this last meeting.
23:18
Speaker 1: We'll see if their commentary changes that as well. Chat
23:21
Speaker 1: I'm looking at the again, the ten year one point
23:24
Speaker 1: four or four percent. Where do you go? Where is
23:28
Speaker 1: hunting in private bank going for yield these days? Yeah,
23:31
Speaker 1: that's a challenge, particularly for our Huntington's clients that are
23:35
Speaker 1: looking for income, and as we think about where to
23:38
Speaker 1: generate income, the bond market is really challenging and In fact,
23:42
Speaker 1: we've been overweight equities in the majority of our portfolios
23:46
Speaker 1: and looking for sources of yield in the equity markets.
23:50
Speaker 1: We've also been using things like preferreds and reads to
23:53
Speaker 1: gain some additional yield out of our portfolios. So, uh,
23:59
Speaker 1: well to yield are we talking about as someone as
24:02
Speaker 1: someone to act as your portfolios right? So, so the
24:06
Speaker 1: yield is going to be dependent on a number of variables, timeframe,
24:10
Speaker 1: targeted allocations, those types of things. So it is client dependent.
24:14
Speaker 1: We work very closely with our clients. We have portfolio
24:16
Speaker 1: managers and advisors throughout our footprint looking for those specific
24:20
Speaker 1: needs of our clients. But generally speaking, our positioning and
24:25
Speaker 1: this is playing into some of that income theme has
24:28
Speaker 1: been a post recessionary stance for our clients. Came into
24:31
Speaker 1: the year with this idea of a post recessionary stance. Lately,
24:34
Speaker 1: we've been adding to some of our inflation hedges though,
24:37
Speaker 1: so think precious metals again, those real estate ideas. We've
24:42
Speaker 1: been doing that on a global scale, and we've also
24:44
Speaker 1: been adding some tips. So again post recessionary positioning, inflation
24:49
Speaker 1: hedges starting to present themselves in our portfolio. The other
24:52
Speaker 1: thing that we're doing, and we think it's a good
24:55
Speaker 1: idea for investors to think about this, and you could
24:58
Speaker 1: see this value to growth growth of value rotation going
25:01
Speaker 1: on as well. As part of this theme, it's prudent
25:05
Speaker 1: to think about trimming and adding to parts of your
25:08
Speaker 1: portfolio that are performing well, maybe underperforming in this keep
25:11
Speaker 1: that balance, keep that acknowledgment of what your overall target is,
25:16
Speaker 1: and and think about trimming and adding throughout the rest
25:19
Speaker 1: of this year. All right, So you know that that
25:22
Speaker 1: brings up two questions for me, and I've got literally
25:25
Speaker 1: hundreds of dollars with you there, so thank you. First
25:30
Speaker 1: of all, how many other people are in my situation
25:32
Speaker 1: who have moved to cash here? How many people are
25:36
Speaker 1: holding dry powder? Because we hear so much about the
25:38
Speaker 1: cash on the sidelines, there is a lot of cash
25:42
Speaker 1: on the sidelines. And this is one of those areas
25:46
Speaker 1: that we focus on with our clients to really talk
25:48
Speaker 1: about what your long term goals are and it becomes
25:51
Speaker 1: less about today's market prices to farrows market prices, but
25:55
Speaker 1: what are you truly saving and investing four and if
25:58
Speaker 1: it's five, ten years out, whatever the time frame might
26:01
Speaker 1: be for your situation, we're recommending dollar cost averaging here.
26:05
Speaker 1: We recognize that we have some things on the horizon
26:09
Speaker 1: that may influence markets. We have an earning season with
26:11
Speaker 1: high expectations coming, we still have fiscal policy decisions yet
26:15
Speaker 1: to be made, we have monetary policy decisions yet to
26:18
Speaker 1: be made, and we still have an ongoing pandemic. So
26:22
Speaker 1: we're fans of dollar cost averaging into markets and staying
26:26
Speaker 1: broadly diversified here. I also want to ask for a
26:29
Speaker 1: little bit more specificity in terms of inflation hedges, because
26:33
Speaker 1: this is something Paul and I talked about with people
26:35
Speaker 1: a lot. Um. Are you still looking at the traditional
26:40
Speaker 1: inflation hedges golden tips or do you see people doing
26:45
Speaker 1: uh new and exciting things anything more complex or I mean,
26:50
Speaker 1: I know bitcoin is too volatile to think about in
26:52
Speaker 1: that way, but are there other uh moves that people
26:55
Speaker 1: are making these days. So generally for our public mark,
27:00
Speaker 1: it's we're looking at those traditional hedges, right, um, so tips,
27:04
Speaker 1: gold real estate. We think those still have as they
27:09
Speaker 1: historically have, have some benefit some hedge to inflation. In
27:14
Speaker 1: the private markets, there's some things going on there where
27:16
Speaker 1: people are maybe getting a little more exotic. But for
27:19
Speaker 1: us at our core. We're a fiduciary manager. We're a
27:24
Speaker 1: bank here in the Midwest, and so our approach has
27:27
Speaker 1: been to use some of the traditional asset classes, use
27:30
Speaker 1: the idea of asset allocation again, trimming and adding the
27:34
Speaker 1: newer potential stores of value or hedging against inflation. Things
27:39
Speaker 1: like cryptocurrency still not in our portfolios, although we are
27:43
Speaker 1: continuing to evaluate those alright, Chad. Looking over on the
27:47
Speaker 1: equity side of the ledger, there's been a little bit
27:50
Speaker 1: of a push pull between the the folks that have favored,
27:52
Speaker 1: you know, those growth names that have worked so well
27:54
Speaker 1: for so many investors, the Amazons, the Apples of the world,
27:58
Speaker 1: and those that have really, you know, embraced this I
28:01
Speaker 1: guess uh kind of rotation trade into some of the
28:04
Speaker 1: more cyclical sectors. How do you guys view the the
28:07
Speaker 1: equity side, yep. So for our equity portfolios, we really
28:11
Speaker 1: do focus a lot on staying balanced between those two disciplines.
28:15
Speaker 1: We we don't typically make aggressive calls to overweight growth
28:20
Speaker 1: or value. Naturally, coming in with a post recessionary trade,
28:24
Speaker 1: we're favoring a little bit of that value space. We're
28:28
Speaker 1: still looking at quality companies, those that are having good
28:31
Speaker 1: quality earnings growth. So the earning season this time around
28:36
Speaker 1: will be very important to us as well as thinking
28:38
Speaker 1: about the comparing comparables for the rest of this year.
28:41
Speaker 1: So growth versus value for US is a little bit
28:44
Speaker 1: of the conversation, but it's more about the individual companies,
28:47
Speaker 1: their ability to perform, their ability to meet expectations. And
28:52
Speaker 1: with that said, what what we have done is we've
28:55
Speaker 1: broadened out our equity exposures. So it's not just large
28:58
Speaker 1: cap domestic equity that we're using. We've been using mid
29:01
Speaker 1: and small steps as well, and more recently we saw
29:05
Speaker 1: some value in international developed so that's an area on
29:08
Speaker 1: the equity side that we actually have been adding to.
29:11
Speaker 1: We think that theme of particularly Europe being a couple
29:14
Speaker 1: of months behind the US in their response and their reopening,
29:18
Speaker 1: we think that provides an opportunity for our clients. What
29:22
Speaker 1: do you got going on for the fourth of July?
29:24
Speaker 1: Chad is Ohio? Is Ohio all back and opened up?
29:28
Speaker 1: Are you guys ready to rock and roll? There? You know?
29:31
Speaker 1: We we are pretty much open. I think folks are
29:34
Speaker 1: feeling really exuberant about being back to some level of
29:38
Speaker 1: normalcy here in Ohio, and I have to tell you.
29:41
Speaker 1: We're a baseball family. So my high school aged boys
29:44
Speaker 1: are playing baseball all weekend and I'm looking forward to
29:47
Speaker 1: being in a baseball field. Reds of the Tribe. We're
29:50
Speaker 1: a tribe family. Oh God, I miss Ohio. I tell you,
29:54
Speaker 1: paul is got to be one of the greatest states
29:56
Speaker 1: in the nation. I'm gonna say, I'm gonna take yeah.
30:00
Speaker 1: I mean, I feel like at least eight presidents are
30:03
Speaker 1: from Ohio. I've had this argument before with um Brian
30:06
Speaker 1: Sullivan at CNBC, who's from Virginia. I think Ohio has
30:11
Speaker 1: the most presidents of any state because there's one I
30:14
Speaker 1: can't remember who moved from Virginia to Ohio. But I
30:17
Speaker 1: feel like if you chose Ohio as your place to die,
30:20
Speaker 1: that's almost as good as your place of birth. Chad,
30:23
Speaker 1: great talking to you. Thanks so much for joining us.
30:25
Speaker 1: Chat Aviat there. He is the director of investment management
30:28
Speaker 1: over at Huntington's Private Bank. Thanks for listening to the
30:31
Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews
30:35
Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm
30:40
Speaker 1: Matt Miller. I'm on Twitter at Matt Miller three on
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Speaker 1: fal Sweeney. I'm on Twitter at pt Sweeney Before the podcast,
30:47
Speaker 1: you can always catch us worldwide at Bloomberg Radio