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Examining Markets, The Fed, Yields, And Tech At Work · 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
• 0:06
  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, it is
• 0:23
  Speaker 1: FED Day. Bloomberg Radio TV will have complete coverage this afternoon,
• 0:27
  Speaker 1: and it's uh, it's all about the tone of the
• 0:29
  Speaker 1: interest rate environment going forward that we're gonna be looking
• 0:32
  Speaker 1: for from this Fed Reserve Chairman. David Bianco, Chief Investment
• 0:36
  Speaker 1: Officer d w S Group joins us. David, I guess
• 0:39
  Speaker 1: you know the taperings is well I guess well discounted,
• 0:43
  Speaker 1: well understood by the market. What are you looking for
• 0:46
  Speaker 1: from Fed chairman Pal this afternoon? Good morning, thanks for
• 0:49
  Speaker 1: having me. It's FED Day, which is definitely an exciting
• 0:52
  Speaker 1: day here at THEWS and for all investment managers. What
• 0:56
  Speaker 1: we're going to be listening to is just thoughts on
• 1:00
  Speaker 1: on inflation, of course the transitory versus structural debate, but
• 1:04
  Speaker 1: also importantly what's the FED going to do? About it.
• 1:07
  Speaker 1: You know, our view is that inflation will decelerate over
• 1:10
  Speaker 1: the coming year from what has been very high levels.
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  Speaker 1: But even though inflation is decelerating, it's still very likely
• 1:18
  Speaker 1: going to be above the Fed's target, and therefore the
• 1:20
  Speaker 1: FED needs to start continuing to remove accommodation. We're gonna
• 1:24
  Speaker 1: hear about tapering today. Uh, the real question is what's
• 1:27
  Speaker 1: going to happen to overnight rates. Our view is there
• 1:30
  Speaker 1: still will not be a hike in overnight rates until
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  Speaker 1: the fourth quarter of next year. But let's hear. And
• 1:37
  Speaker 1: by the way, this is uh, this is a moment
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  Speaker 1: where we're gonna get to hear from from the FED chair.
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  Speaker 1: And after this there's gonna be a lot more. It's
• 1:45
  Speaker 1: gonna open the window to hearing whether we get the
• 1:48
  Speaker 1: renomination from the President for j. Powell or not. So
• 1:51
  Speaker 1: it's a it's when where we all want to hear
• 1:54
  Speaker 1: the current chairs mind thoughts, and before we get into
• 1:58
  Speaker 1: a little bit more of you know, political considerations about
• 2:01
  Speaker 1: the future leadership of the FED. The FED has nothing
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  Speaker 1: to do with the supply chain crisis or really even
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  Speaker 1: shipping um issues. The costs that come from that aren't
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  Speaker 1: anything the FED can control, but it does have a
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  Speaker 1: mandate for the labor market, and the labor shortage seems
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  Speaker 1: to be one of the things that people are pointing
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  Speaker 1: to more and more often, even beyond the chips and
• 2:24
  Speaker 1: ships issue. So what do we expect to hear from
• 2:27
  Speaker 1: the FED on that? We expect the FED to talk
• 2:29
  Speaker 1: about all of these issues, and the FED will rightly
• 2:32
  Speaker 1: point out that there has been an inflationary shock from
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  Speaker 1: the supply side related to the pandemic supply chains, and
• 2:39
  Speaker 1: also a little labor scarcity that is getting better but
• 2:42
  Speaker 1: getting better slowly. At the same time, the FED should
• 2:46
  Speaker 1: acknowledge that there's been monetary effects occurring here too. Cash
• 2:49
  Speaker 1: in circulation has jumped tremendously since the pandemic, in part
• 2:54
  Speaker 1: to fund the emergency fiscal policy response, and that was important,
• 2:58
  Speaker 1: but cash in circulation and even household deposits up a
• 3:02
  Speaker 1: lot since the pandemic started. The FED can't do anything
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  Speaker 1: and really shouldn't fight supply side inflation when it's you know,
• 3:10
  Speaker 1: when it's not something structural, But they need to acknowledge
• 3:13
  Speaker 1: that there is a demand side, and part of this
• 3:16
  Speaker 1: demand side, whether it be government spending or even just
• 3:19
  Speaker 1: households being flushed with cash. The Fed does have something
• 3:23
  Speaker 1: to do with that now, to keep all this cash
• 3:26
  Speaker 1: kind of on on ice and chilled rather than turning
• 3:29
  Speaker 1: into hotter money. Well, this is why you see short
• 3:32
  Speaker 1: term interest rates beginning to lift up. Where we've got
• 3:35
  Speaker 1: the two year year old at about it's gotten close
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  Speaker 1: to fifty basis points, three year yields at seventy basis points.
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  Speaker 1: The bottom market seems to be very confident that the
• 3:45
  Speaker 1: Fed is going to take actions to contain inflation um
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  Speaker 1: and and we believe that's gonna play out. Let's watch
• 3:51
  Speaker 1: and see what the you know, what leadership the FIT
• 3:53
  Speaker 1: is and what they say. Um. But there is still
• 3:57
  Speaker 1: inflation risk out there, and we want to protect again
• 4:00
  Speaker 1: those inflation risks. And our view is the best way
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  Speaker 1: to protect against inflation is simply to own the best
• 4:06
  Speaker 1: businesses you can. Out of all these concerns about inflation.
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  Speaker 1: Year to date, after years of this trend being persistent,
• 4:14
  Speaker 1: year to date, growth stocks are out performing in the
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  Speaker 1: SMP um and and and we believe that it's better
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  Speaker 1: to own businesses that are uh raising their productivity rather
• 4:25
  Speaker 1: than raising their price. David, are you share the concern
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  Speaker 1: that is held by some that perhaps this FED reserve
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  Speaker 1: is falling behind that the markets getting ahead of them,
• 4:34
  Speaker 1: and even some other central banks out there. Well not yet,
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  Speaker 1: you know, I mean tapering is probably gonna be announced today, um,
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  Speaker 1: and that is uh going to move out a little
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  Speaker 1: bit of a faster pace than most of us thought,
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  Speaker 1: say six months twelve months ago. The Fed we'll be
• 4:50
  Speaker 1: talking about how they're thinking about raising interest rates you
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  Speaker 1: probably late next year, so you know, they're using their
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  Speaker 1: communication tools. Well, all the bond market, as I said,
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  Speaker 1: it's beginning to move and do some you know, it's
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  Speaker 1: a little bit of you know, pulling back accommodation and
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  Speaker 1: reason to cost the capital uhs. The bond market is
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  Speaker 1: doing some work for the FED right now. And yeah,
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  Speaker 1: this is a tough thing that the FED is trying
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  Speaker 1: to wrestle with. What parts of inflation are really transitory
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  Speaker 1: and supply side shocks that will fade. And they'd be
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  Speaker 1: wrong if they were aggressively going to fight versus other
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  Speaker 1: things that might be more structural, like you know a
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  Speaker 1: lot of people have gotten into retirement uh since the pandemic,
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  Speaker 1: and you know, there may be more labor um difficulties
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  Speaker 1: in the future, and you know, the trade activity, import activity,
• 5:37
  Speaker 1: tariffs and so forth. These things are still you know,
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  Speaker 1: a challenge to uh TO to to keeping inflation low. Also,
• 5:43
  Speaker 1: when there is an emergency and you've got low interest rates,
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  Speaker 1: one of the best things that they can do is
• 5:48
  Speaker 1: to promise to keep interest rates low for a long time.
• 5:51
  Speaker 1: So they don't want to lose credibility either on keeping
• 5:55
  Speaker 1: rates low if they need to in an emergency. David,
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  Speaker 1: thanks so much for joining us. David Bianco there, chief
• 6:00
  Speaker 1: investment officer at DWS Group. This is Bloomberg Now. I
• 6:11
  Speaker 1: want to get out to Dr Mary. Dr Anne Marie
• 6:14
  Speaker 1: sastry Um. She joins us on the phone from ann Arbor,
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  Speaker 1: Michigan School. There. I believe it's a place I love
• 6:21
  Speaker 1: to go, especially around Thanksgiving to watch Ohio State the
• 6:26
  Speaker 1: Buckeyes beat the Wolverines, although I have to say it's
• 6:29
  Speaker 1: really depressing every time that happens. She's the CEO of
• 6:33
  Speaker 1: am a site, and she's gonna talk to us about
• 6:35
  Speaker 1: people getting back to work. I'm sure. First of all,
• 6:38
  Speaker 1: I'm joking a little bit with you about Anne Arbor.
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  Speaker 1: It's gorgeous. I absolutely love it there. Um, I'm sure
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  Speaker 1: people want to go back to work. Uh. There, but
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  Speaker 1: it seems like here in New York and out in
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  Speaker 1: London and over in Berlin, nobody's coming back to work.
• 6:51
  Speaker 1: What's happening. What's happening is that people are demanding greater flexibility.
• 6:56
  Speaker 1: And again, Paul and Mats, great to be with you
• 6:58
  Speaker 1: this morning in the stadium here in Anna is big
• 7:00
  Speaker 1: enough to hold lovers and haters so that you guys
• 7:02
  Speaker 1: can come and help economy. You can help the up economy. Uh. Yeah.
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  Speaker 1: That The reality is that people are demanding flexible work
• 7:09
  Speaker 1: because a lot of the notions that we had about
• 7:11
  Speaker 1: how work needs to be done have been upbended by
• 7:14
  Speaker 1: the pandemic. That people realize that, yes, the conduct of
• 7:17
  Speaker 1: business was possible online and that has led to greater
• 7:20
  Speaker 1: degrees of digitalization, not only because it's more efficient for
• 7:23
  Speaker 1: companies to deliver goods and services that way, but with
• 7:26
  Speaker 1: much of the logistics and most of the engineering, design,
• 7:29
  Speaker 1: etcetera going on online, but also that people appreciate it. Uh.
• 7:34
  Speaker 1: The stats are are telling. Thirty four percent of employees
• 7:37
  Speaker 1: say that they're more productive now than they were before
• 7:40
  Speaker 1: the pandemic, and over half of executives say that average
• 7:43
  Speaker 1: employee productivity has improved with online work, So so the
• 7:48
  Speaker 1: numbers bear it out. The numbers bear it out. And
• 7:50
  Speaker 1: you know, a lot of folks, as I'm sure you're
• 7:52
  Speaker 1: where in rear, are concerned about inflation, concerned about wage inflation.
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  Speaker 1: But again a lot of folks economists will say, don't
• 7:59
  Speaker 1: be so worried about it. Yes, Uh, nominal wages are
• 8:02
  Speaker 1: going up, but people are becoming more productive and so
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  Speaker 1: it's less of an issue in this economy. Do you
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  Speaker 1: think that's a longer term issue? I do, UH. And
• 8:14
  Speaker 1: when you look at the most valuable companies in the
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  Speaker 1: world and and what their models are, their models are
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  Speaker 1: fewer people with incredible productivity generating great high degrees of
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  Speaker 1: revenue per person um. If you look at the jobs available,
• 8:30
  Speaker 1: the BLS we're of Labor Statistics found that UH may
• 8:33
  Speaker 1: smashed every prior record. Nine point two million job openings
• 8:37
  Speaker 1: are available in the country. But the economy hasn't ground
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  Speaker 1: to a halt. Instead, we have fewer people doing more
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  Speaker 1: of the work. And what that means is that a
• 8:47
  Speaker 1: higher degree of training is required in order to allure
• 8:50
  Speaker 1: people back to the workforce and get people back working.
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  Speaker 1: But also people are adapting to digitalization strategies, meaning that
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  Speaker 1: they are using skills that they've learning college and they
• 9:01
  Speaker 1: need to be constantly upskilled. And when you look at
• 9:03
  Speaker 1: the data there again they tell the story in a
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  Speaker 1: very clear way. The vast majority of employees demand flexibility
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  Speaker 1: their work. And what we see is that scent of
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  Speaker 1: workers thinks that they will have to up skill in
• 9:16
  Speaker 1: order to stay economically viable. So these changes, these disruptions
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  Speaker 1: are changing the game for employers who find themselves needing
• 9:24
  Speaker 1: to to conduct more business digitally and for workers who
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  Speaker 1: need more skills. So I you know what, I absolutely
• 9:32
  Speaker 1: respect that workers want flexibility, um, and that remote work
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  Speaker 1: can be better for a lot of people. The problem
• 9:40
  Speaker 1: is the technology just doesn't seem there yet for every company,
• 9:44
  Speaker 1: right so UM this morning, for example, I was trying
• 9:47
  Speaker 1: to get in touch with a bunch of economists and
• 9:49
  Speaker 1: then with a bunch of tech people, and all over
• 9:52
  Speaker 1: Europe they all seem to be out of the office.
• 9:54
  Speaker 1: Then I had to try their cell phones try and
• 9:56
  Speaker 1: figure out their home phone number. I'm wondering if they forwarded, um,
• 10:00
  Speaker 1: you know, they're calls. It just doesn't seem like the
• 10:03
  Speaker 1: infrastructure is ready. Sass growth has been enormous, as you know,
• 10:09
  Speaker 1: and SAS companies have have kept the economy going. SASS
• 10:13
  Speaker 1: being software is a service, correct, yes, and an AMA
• 10:17
  Speaker 1: site my company is also a SAS business. We are
• 10:19
  Speaker 1: in the in the training space and so we happen
• 10:21
  Speaker 1: to know a little bit about this. We're Nasdaq a MST.
• 10:25
  Speaker 1: What we've discovered is is a course that people don't
• 10:28
  Speaker 1: want to fiddle or fool with three or four different
• 10:31
  Speaker 1: platforms in order to engage. They want to be able
• 10:34
  Speaker 1: to perform their work functions on one platform. They also
• 10:38
  Speaker 1: want to be served materials uh smartly. And if you
• 10:42
  Speaker 1: think about it for a second, if you think about
• 10:43
  Speaker 1: Spotify or you think about Netflix, nobody has to come
• 10:46
  Speaker 1: to your house to show you how to use those apps, right,
• 10:48
  Speaker 1: and so business apps need to become more user friendly.
• 10:51
  Speaker 1: The unit user experience needs to be streamlined. But in
• 10:55
  Speaker 1: the interim, people will use the tools they have now.
• 10:57
  Speaker 1: The companies that are going to be very successful are
• 11:00
  Speaker 1: going to be the companies that provide those softwares of
• 11:02
  Speaker 1: service tools that reduce the friction of business and the
• 11:06
  Speaker 1: companies that adopt those tools quickly. Dr Henry Sastry, thank
• 11:11
  Speaker 1: you so much for joining us to really appreciated. Uh
• 11:14
  Speaker 1: Dr Henry sasstry CEO of emassites on the phone from
• 11:18
  Speaker 1: an arbor, Michigan, Home of the Big House. UM, absolutely,
• 11:22
  Speaker 1: absolutely love the Big House. It is a game this year.
• 11:26
  Speaker 1: Wears it in an arbor, Columbus. I do not. I
• 11:29
  Speaker 1: assume it's in an arbor, because otherwise I'm going home
• 11:31
  Speaker 1: for thanks you. My brothers would have gotten me tickets
• 11:33
  Speaker 1: at the Horseshoe. The Big House is loud and it's
• 11:37
  Speaker 1: a lot of fun until, like I said, they lose.
• 11:39
  Speaker 1: Then everyone is super bummed out, which happens usually, which happens.
• 11:43
  Speaker 1: All right, let's see if they can turn it around
• 11:45
  Speaker 1: this year. Let's talk a little bit about what you
• 11:49
  Speaker 1: can get from fixed income in the world of high yield.
• 11:53
  Speaker 1: We have Brent Pink with US Global Co had of
• 11:56
  Speaker 1: high yielded Aviva Investors and I guess, um, you know,
• 12:01
  Speaker 1: the question is is the return worth the risk? Um?
• 12:07
  Speaker 1: And and some people, a lot of people have been
• 12:10
  Speaker 1: answering yes lately. What do you think you know? High
• 12:14
  Speaker 1: yield at four percent in historical context does not seem
• 12:17
  Speaker 1: like a lot. But we're also in an extremely low
• 12:20
  Speaker 1: default environment. The support that the economy got from the
• 12:24
  Speaker 1: Federal Reserve last year has really eliminated a lot of
• 12:27
  Speaker 1: the downside to high yield. So while yields from a
• 12:31
  Speaker 1: long term perspective look relatively low, there's also very few
• 12:35
  Speaker 1: alternatives in other asset classes you can get that sort
• 12:38
  Speaker 1: of income from. So we still think the asset classholds
• 12:41
  Speaker 1: of value for investors that are are income focused or
• 12:45
  Speaker 1: or looking for a steady stream of coupons going forward.
• 12:48
  Speaker 1: All right, Brent, how far out on the risk curve
• 12:50
  Speaker 1: are you guys going these days for returns? Because when
• 12:54
  Speaker 1: I was in the market four percent, we would have
• 12:56
  Speaker 1: kicked that down out of the room. Um, So if
• 12:59
  Speaker 1: you're looking for a return, how far down on the
• 13:02
  Speaker 1: curve are you guys going. Well, we play across the
• 13:05
  Speaker 1: capital structure, so we will go from triple B even
• 13:09
  Speaker 1: down to triple C. We think there's some pockets of
• 13:12
  Speaker 1: value right now. One of the most popular trades in
• 13:15
  Speaker 1: the market today are rising stars. So these are the
• 13:18
  Speaker 1: companies rated double B currently but on their way back
• 13:22
  Speaker 1: to triple B or investment grade rated. We think that
• 13:25
  Speaker 1: this is a very popular trade. So some of the
• 13:27
  Speaker 1: upside has been squeezed down already, but we do think
• 13:30
  Speaker 1: that there's a lot of momentum behind these rising stars
• 13:34
  Speaker 1: that will continue for the next two years. So we
• 13:37
  Speaker 1: think that's the particularly of interest. We also are seen
• 13:41
  Speaker 1: an increase in LBO activity that will bring a lot
• 13:46
  Speaker 1: of triple C rated bonds to the market. We think
• 13:49
  Speaker 1: you have to be very selective in this portion of
• 13:52
  Speaker 1: the high yeld market, but we do think there are
• 13:54
  Speaker 1: some interesting individual credit opportunities within that lower quality tire.
• 13:59
  Speaker 1: Well kind of economic cycle assumptions do you have to make? Well,
• 14:06
  Speaker 1: you know, right now you look at GDP consensus growth
• 14:11
  Speaker 1: estimate at four percent, and that's actually a really healthy
• 14:14
  Speaker 1: environment for high yield companies hw YOUELD bonds typically do
• 14:18
  Speaker 1: well when the economy is growing in positive territory but
• 14:22
  Speaker 1: not overly hot, and that's the environment where you really
• 14:27
  Speaker 1: get that restrictive or tightening FED policy that can dampen
• 14:31
  Speaker 1: down economic growth. So this is similar the sweet spot
• 14:34
  Speaker 1: for high yield here, this low but positive growth environment.
• 14:38
  Speaker 1: Brent in a new issue market, do you guys on
• 14:40
  Speaker 1: the buy side have any leverage or these When I
• 14:44
  Speaker 1: go to the covenant section of x y Z widget manufacturer,
• 14:48
  Speaker 1: it's basically just a couple of pages. Yeah, kind of
• 14:52
  Speaker 1: quality is certainly deteriorated over the years, and you're right,
• 14:55
  Speaker 1: the power kind of went to the issuers. But we
• 14:58
  Speaker 1: have seen some evidence of discipline from investors right now.
• 15:01
  Speaker 1: There's a few uh new issues on the on the
• 15:05
  Speaker 1: docket right now that that have struggled from a covenant standpoint,
• 15:10
  Speaker 1: but price where the investors and the issuers have not
• 15:15
  Speaker 1: come to terms. Um, maybe there's some creative structuring or
• 15:20
  Speaker 1: covenant agreements that can be met, but we are seeing
• 15:22
  Speaker 1: some signs of discipline from the market. It's not anything
• 15:25
  Speaker 1: goes at this point. So when do we get back
• 15:31
  Speaker 1: to a world where high yield is paying out seven
• 15:35
  Speaker 1: or eight or ten or twelve percent? I mean, seeing
• 15:39
  Speaker 1: three or four percent on high yield coupon is just nuts. Yeah,
• 15:44
  Speaker 1: it's kind of a misnomer to call it high yield
• 15:46
  Speaker 1: when it's only four percent. Really, I think the less
• 15:49
  Speaker 1: inflations at five because then you're getting nine really right, Yeah, Well,
• 15:54
  Speaker 1: you know, you could you could make the case the
• 15:56
  Speaker 1: real yield on on high yield right now is negative.
• 16:00
  Speaker 1: I think for yields to go back to seven, we're
• 16:04
  Speaker 1: really going to need to see an economic cycle were
• 16:07
  Speaker 1: significantly higher interest rates. Right now, spreads are credit spread
• 16:12
  Speaker 1: as about three hundred basis points above treasury, So if
• 16:15
  Speaker 1: you did see a meaningful increase in interest rates, you
• 16:18
  Speaker 1: would see that carry through to credit as well. Now,
• 16:22
  Speaker 1: for investors that are concerned about interstrate risk, high yield
• 16:26
  Speaker 1: historically has had a negative correlation to interst rate, So
• 16:29
  Speaker 1: it is one asset class within fixed income that historically
• 16:33
  Speaker 1: has been able to weather a rising rate environment. Bright
• 16:37
  Speaker 1: what's the sector you guys like the most right now? Well,
• 16:41
  Speaker 1: if you look at the pace of fundamental improvement, energy
• 16:44
  Speaker 1: is growing the fastest. We've had a significant recovery. We've
• 16:49
  Speaker 1: also cleansed a lot of the worst players in the
• 16:52
  Speaker 1: high yeld market through two thousand and fifteen, and early
• 16:57
  Speaker 1: during the pandemic we saw a lot of defaults within
• 16:59
  Speaker 1: the energy sector. So I think the credit quality there
• 17:02
  Speaker 1: is better than it was historically. It still offers a
• 17:06
  Speaker 1: premium to the overall market, and given the pace of
• 17:08
  Speaker 1: fundamental improvement, we do think that that is one sector
• 17:12
  Speaker 1: that we'll see uh a large amount of rising stars
• 17:15
  Speaker 1: over the next two years. So that's one particular area
• 17:18
  Speaker 1: of the market we find attractive today. All right, Brent,
• 17:21
  Speaker 1: thank you so much for joining us. We appreciate, always
• 17:24
  Speaker 1: love getting your perspective on the high old market as
• 17:27
  Speaker 1: high as it can possibly be. I guess at this
• 17:29
  Speaker 1: point it four percent again, like Matt say, not kind
• 17:32
  Speaker 1: of the old days. Seven eight nine, All right, Brent
• 17:35
  Speaker 1: fit Global, cohead of the high led biz at Aviva Investors,
• 17:38
  Speaker 1: joining us on the phone from New York, and again,
• 17:41
  Speaker 1: Um still thinks he sees some opportunity out there in
• 17:44
  Speaker 1: a high yield space. Credit spreads remain pretty tight, but
• 17:48
  Speaker 1: credit quality is surprisingly good given all the liquidity we've
• 17:52
  Speaker 1: gotten from the Federal Reserve and from fiscal stimulus, So
• 17:54
  Speaker 1: the credit quality has been pretty solid. They're good. Getting
• 17:58
  Speaker 1: his perspective on the high old market a little more
• 18:00
  Speaker 1: coming up, This is Bloomberg. Well these fed days. I
• 18:08
  Speaker 1: always need to know what am I supposed to look
• 18:10
  Speaker 1: out for in the release, what am I supposed to
• 18:13
  Speaker 1: focus in on the press conference? I'm not sure because
• 18:16
  Speaker 1: it kind of changes kind of period to period. But
• 18:18
  Speaker 1: Danielle de Martino booth absolutely on top of that, and
• 18:21
  Speaker 1: we're glad to have her here. Danielle de Martino both
• 18:23
  Speaker 1: CEO and chief strategist for quill Intelligence. Danielle, thanks so
• 18:26
  Speaker 1: much for taking a time on what I know is
• 18:28
  Speaker 1: a busy day for you. What should I be looking
• 18:31
  Speaker 1: out for from uh FEDS released today in the commentary? Well, um,
• 18:36
  Speaker 1: you know you're seeing, first of all, you're seeing rents
• 18:39
  Speaker 1: rise at the fastest pace since two thousand one in
• 18:42
  Speaker 1: the CPI. So we're no longer waiting to see the
• 18:45
  Speaker 1: whites of the eyes of housing inflation manifest in the
• 18:49
  Speaker 1: inflation data. It has past tense. That's a sticky form
• 18:52
  Speaker 1: of inflation. And we're obviously seeing that the port situation,
• 18:56
  Speaker 1: shipping freight, all of this is not going away anytime soon.
• 19:01
  Speaker 1: Unraveling this supply chain disaster is going to take time.
• 19:06
  Speaker 1: So I think investors are going to want to know,
• 19:08
  Speaker 1: how are you planning if inflation continues to accelerate from here,
• 19:12
  Speaker 1: How are you planning to do a hurry up taper?
• 19:15
  Speaker 1: What does your what? What? What? What? What does your
• 19:17
  Speaker 1: plan be on the taper such that you're going to
• 19:20
  Speaker 1: be able to get to raising interest rates more quickly?
• 19:23
  Speaker 1: And I think that that that is rightly the first
• 19:25
  Speaker 1: question that should be on investors mind. You know, the
• 19:29
  Speaker 1: labor issue seems to be even a bigger deal for
• 19:32
  Speaker 1: a lot of companies than UM Shipping and Supplies. We
• 19:37
  Speaker 1: had a story on Dear that even after UM the
• 19:41
  Speaker 1: company came back with bonuses a ten percent raised now
• 19:46
  Speaker 1: five percent and three years five percent in five years.
• 19:49
  Speaker 1: Even then the workers still said, no, we want more UM.
• 19:54
  Speaker 1: Is this at some point going to become a concern
• 19:56
  Speaker 1: for Jerome Powell? You know? This is Uh, this is
• 20:00
  Speaker 1: a huge issue and worker empowerment is a big deal
• 20:04
  Speaker 1: right now. Uh what is what? What's problematic for j.
• 20:08
  Speaker 1: Powell is that even though we saw a nice dead
• 20:11
  Speaker 1: cat bounce in auto sales yesterday, for the month of October,
• 20:16
  Speaker 1: they're down from eighteen point five million, eighteen point three
• 20:19
  Speaker 1: million in April to thirteen million in October. That's a
• 20:22
  Speaker 1: quick slowdown. We're seeing with this Zello business that all
• 20:26
  Speaker 1: of a sudden, you know that that homes are not
• 20:28
  Speaker 1: flying off shelves for any price. We're seeing the ability
• 20:32
  Speaker 1: for you know, to buy big ticket items. They're really
• 20:36
  Speaker 1: pushing back, and it's being led. If you look inside
• 20:39
  Speaker 1: the University of Michigan data, it's being led by the
• 20:41
  Speaker 1: highest income earners. Those who are account for sixty percent
• 20:45
  Speaker 1: of car sales just to give you one example. So
• 20:47
  Speaker 1: he Powell knows he's tightening into a slowing economy, and
• 20:52
  Speaker 1: he's probably betting that this worker empowerment movement is going
• 20:55
  Speaker 1: to subside at some point as the economy slows, and
• 20:58
  Speaker 1: it will. But at the moment, as you say, it
• 21:02
  Speaker 1: is very, very difficult for to be companies hiring or
• 21:07
  Speaker 1: dealing with union negotiations. Like howing me imagine what the
• 21:10
  Speaker 1: long long shore uh renegotiations is going to be on
• 21:14
  Speaker 1: in Long Beach End in Los Angeles come the end
• 21:17
  Speaker 1: of June. That could make things even I mean, it
• 21:20
  Speaker 1: could be a biblical union strike. Um. Well, I wondered,
• 21:24
  Speaker 1: how do they measure full employment? Because if we're not
• 21:27
  Speaker 1: there now, um, with the worker shortages that we're seeing,
• 21:32
  Speaker 1: with these huge wage increases that um the unions are
• 21:35
  Speaker 1: allowed to demand, then what is full employment gonna look like?
• 21:39
  Speaker 1: It's really hard to say. I think that there is
• 21:42
  Speaker 1: a lack of appreciation for the simple amount of money
• 21:45
  Speaker 1: that companies have thrown into I T. Spending, and that
• 21:49
  Speaker 1: means that the automation that we always knew was going
• 21:52
  Speaker 1: to arrive has been accelerated. So there's a good chance
• 21:56
  Speaker 1: that that we are already at full employment today, and
• 22:00
  Speaker 1: that there's going to be four million or some odds,
• 22:03
  Speaker 1: so four and a half million, four million jobs that
• 22:05
  Speaker 1: just don't come back. They've been automated out of existence.
• 22:08
  Speaker 1: We could be at full employment. We had millions retire
• 22:11
  Speaker 1: early as well. So it starts to become very problematic,
• 22:15
  Speaker 1: very fast. Danielle m about third thirty seconds. What's the
• 22:19
  Speaker 1: risk that federal the feder Reserve just is too late,
• 22:22
  Speaker 1: It just gets passed by either by the market or
• 22:24
  Speaker 1: by other central banks. I think that the FED is
• 22:27
  Speaker 1: already so far behind the curve it's not even a
• 22:29
  Speaker 1: discussion that could be had. I think most beneficials know it,
• 22:32
  Speaker 1: and that's why we haven't heard boo out of rich
• 22:34
  Speaker 1: clarative for so long. Interesting, all right, Daniel D. Martino
• 22:38
  Speaker 1: bou thank you so much for joining us. We always
• 22:40
  Speaker 1: appreciate its specially on FED day. Daniel D. Martino Boots,
• 22:44
  Speaker 1: CEO and chief Strategies at Quill Intelligence, former advisor at
• 22:48
  Speaker 1: the Dallas feder Reserve, which again is another great reason
• 22:51
  Speaker 1: why I we love to talk to her specifically on
• 22:54
  Speaker 1: these FED days. And she's also a Bluemerk opinion contributor.
• 22:57
  Speaker 1: So very very busy down there and so at it
• 23:00
  Speaker 1: again today. I guess is if Danielle is suggesting um inflation, inflation,
• 23:04
  Speaker 1: inflation is something that you know, I think investors are
• 23:07
  Speaker 1: gonna want to hear the Chairman's view on inflation and
• 23:11
  Speaker 1: how the FED is going to react. Yeah. Absolutely, Um,
• 23:15
  Speaker 1: it will be interesting to see, especially what the FED
• 23:19
  Speaker 1: can do if we are headed into a slowing economy,
• 23:21
  Speaker 1: you know, because um, the kind of inflation that we're seeing,
• 23:25
  Speaker 1: it doesn't look like monetary policy is going to be
• 23:28
  Speaker 1: able to to stop it. It's a different there are
• 23:30
  Speaker 1: different issues that are the roots. So uh, what can
• 23:34
  Speaker 1: Pale do other than keep um financial conditions? Yeah, uh
• 23:42
  Speaker 1: lacks for longer. Thanks for listening to the Bloomberg Markets podcast.
• 23:47
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• 23:50
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 23:54
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• 24:01
  Speaker 1: catch us worldwide at Bloomberg Radio. M