Latest / Bloomberg Intelligence / Teremana Tequila: A Record Breaking First Year

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Teremana Tequila: A Record Breaking First Year · 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. Well, as we said,
• 0:21
  Speaker 1: tomorrow is Sinko to Mile, a big day. We're the
• 0:25
  Speaker 1: tequila business, so we are very fortunate today to be
• 0:28
  Speaker 1: able to talk about the tequila business, in the spirits business.
• 0:30
  Speaker 1: And welcome Jenna Facton, co founder of Tara Montic Tequila. Jenna,
• 0:34
  Speaker 1: thanks so much for joining us here talk to us
• 0:37
  Speaker 1: about your tequila and the brand. It's great to meet
• 0:42
  Speaker 1: you guys and chat with you today. Yeah, the care
• 0:46
  Speaker 1: amount of tequila we launched right when the pandemic was starting.
• 0:51
  Speaker 1: We launched towards the end of March. And as an entrepreneur,
• 0:55
  Speaker 1: you're in a situation where you think, wow, what do
• 0:58
  Speaker 1: you do now? But our business partner, partner and Fearless
• 1:02
  Speaker 1: founder GWayne, we call him dj Um. He said he
• 1:06
  Speaker 1: you know, he he had been working on this and
• 1:10
  Speaker 1: then wanting to do this for years. He grew up
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  Speaker 1: with a family who loved tequila and it was very
• 1:17
  Speaker 1: much for him, UM one of those things that was
• 1:20
  Speaker 1: about bringing people together, whether it was good times or bad.
• 1:24
  Speaker 1: He said, in his family, like if um, someone had
• 1:27
  Speaker 1: just gotten a promotion, the family would crack open the
• 1:29
  Speaker 1: tequila and have a drink. But also if you know
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  Speaker 1: someone unfortunately passed away, they brought them together as well.
• 1:36
  Speaker 1: And so he said, you know what, let's just go
• 1:38
  Speaker 1: at it in a really soft, quiet manner. UM. But
• 1:42
  Speaker 1: obviously anything but happened, and the consumer just really lashed
• 1:46
  Speaker 1: onto Tara Monta tequila UM for many different reasons during
• 1:51
  Speaker 1: the pandemic, and we had an incredible record breaking first year.
• 1:54
  Speaker 1: Well our director Ken Fellow, who says it's very smooth,
• 1:58
  Speaker 1: He says, it's it's quite good. I haven't had a
• 2:00
  Speaker 1: chance to try it yet, but I love tequila and
• 2:03
  Speaker 1: I love the rock. What's it like working with DJ?
• 2:06
  Speaker 1: He's so committed to everything that he does. I don't
• 2:09
  Speaker 1: know if that would drive you crazy or if it's
• 2:11
  Speaker 1: a benefit. Who doesn't love him? What you see is
• 2:16
  Speaker 1: really what you get. He is so interested in the
• 2:21
  Speaker 1: business and he was really committed to say, I want
• 2:23
  Speaker 1: to understand it, I want to find out about it
• 2:25
  Speaker 1: before I do anything, and I want to do it
• 2:28
  Speaker 1: the right way, and so it it doesn't drive you crazy.
• 2:32
  Speaker 1: You just have such incredible appreciation for someone who is
• 2:37
  Speaker 1: so busy, but he is. You feel like he's constantly
• 2:40
  Speaker 1: working on the terremount of business and he ensured that
• 2:44
  Speaker 1: he went down to Mexico really studied it. Um worked
• 2:49
  Speaker 1: really closely with our Mexican family partners to develop this.
• 2:53
  Speaker 1: He is all in and he's engaged every single day. Jenna,
• 2:58
  Speaker 1: I'd love to get a sense of you know, this
• 3:00
  Speaker 1: years industry for you guys launching right in mid of
• 3:02
  Speaker 1: a pandemic. Good planning there, but the spirits industry just
• 3:06
  Speaker 1: really took off in for obvious reasons. I guess then
• 3:09
  Speaker 1: you're going up against Clooney, Yeah, exactly. How do you
• 3:12
  Speaker 1: think about the business kind of going forward? Yeah, it's
• 3:15
  Speaker 1: really interesting. You're totally right. Spirits was up over in
• 3:20
  Speaker 1: the last year. Um. What's interesting is tequila dollar sales
• 3:24
  Speaker 1: were up over fifty three in the last year. So
• 3:27
  Speaker 1: this there's just this real shift and consumer behavior away
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  Speaker 1: from say the older spirits such as vodka into something
• 3:38
  Speaker 1: that is more flavorable and interesting, and consumers really are
• 3:41
  Speaker 1: carrying about providence and how something's made. And I think
• 3:45
  Speaker 1: for us, for Tara Mona, that is we're really excited
• 3:49
  Speaker 1: about that because when people ask questions about it, we
• 3:52
  Speaker 1: have just such a really authentic, handcrafted story. Um that
• 3:58
  Speaker 1: really people excite people. And of course, um, there's a
• 4:02
  Speaker 1: new campaign. I've seen Dwyane make guawk on his Instagram
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  Speaker 1: account and and now that a restaurants are reopening, you
• 4:10
  Speaker 1: have a campaign where you get people involved in social
• 4:13
  Speaker 1: and you pay them back for their avocado dip. Yeah.
• 4:17
  Speaker 1: Obviously during the pandemic, it was a conversation constantly with
• 4:21
  Speaker 1: DJ and the team, and he was saying, how do
• 4:24
  Speaker 1: we help out when hospitality is such an important part
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  Speaker 1: of our economy And so we all felt like the
• 4:32
  Speaker 1: time was right to really encourage people to come back
• 4:35
  Speaker 1: into their restaurants however they safely, however they feel safe
• 4:38
  Speaker 1: about it, whether it's take out, dine in, dine outside.
• 4:42
  Speaker 1: And so he said, let's let's go at this really hard,
• 4:46
  Speaker 1: use his incredible social media reach that your reference um
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  Speaker 1: to encourage people to go out there. So um, right now,
• 4:53
  Speaker 1: it was started May one, and everyone can still take
• 4:55
  Speaker 1: advantage of it through Sko to Mayo, which is tomorrow
• 4:58
  Speaker 1: through May fifth. Um and they go out to any
• 5:04
  Speaker 1: restaurant that serves Tara Mona Tequila, they order a tamana
• 5:07
  Speaker 1: and they will get their guacamali reimbursed by the Rocks.
• 5:12
  Speaker 1: Or take a picture on the Rock. You take a
• 5:14
  Speaker 1: picture eating your guawk drinking your terramana, post it on
• 5:18
  Speaker 1: Glack on the Rock dot com and Dwayne pays you
• 5:21
  Speaker 1: back for your guac order. Fascinating business and we wish you,
• 5:25
  Speaker 1: of course, the best of luck. Jennafagnen there Um co
• 5:28
  Speaker 1: founded ter Mona Taramana Tequila with Dwayne the Rock Johnson.
• 5:34
  Speaker 1: I've been making his pancake recipe, which I also found
• 5:37
  Speaker 1: on Instagram. Let's continue our discussion of the cryptocurrency market.
• 5:45
  Speaker 1: I guess today you could sum it up on the
• 5:46
  Speaker 1: word of volatility. I'm looking at Bitcoin. It's off four
• 5:50
  Speaker 1: percent today. Bucks now trades at four thousand, five hundred dollars. Yet,
• 5:55
  Speaker 1: when I got over to Etherem symbol uh tickers x
• 5:58
  Speaker 1: eat Etherium Ethereum, thank you very much. Ethereum setting all
• 6:03
  Speaker 1: time high again today. Matt Up another thirty four points
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  Speaker 1: thirty three thowy two. So going both ways here, let's
• 6:10
  Speaker 1: get a clear view of what is going on. We
• 6:13
  Speaker 1: welcome Gregg King, CEO of Osprey Funds. So, Greg, when
• 6:15
  Speaker 1: you see divergence in the crypto market like we see
• 6:19
  Speaker 1: today with Ethereum and Bitcoin, does that tell you anything? Yeah,
• 6:24
  Speaker 1: it tells me that we're in what they're calling all season.
• 6:27
  Speaker 1: So this happened last time around, the big bull run
• 6:31
  Speaker 1: with Bitcoin, bitcoins, the biggest, you know, the oldest crypto,
• 6:35
  Speaker 1: that's what most people think of when they think about
• 6:37
  Speaker 1: crypto UM, and it leads the way. It's led the
• 6:40
  Speaker 1: way this time in this bull market where it crossed
• 6:43
  Speaker 1: its all time previous all time high that had been
• 6:46
  Speaker 1: in place for about a thousand days in background Thanksgiving Um.
• 6:50
  Speaker 1: But I think it's it's giving up leadership to Ethereum,
• 6:53
  Speaker 1: the second biggest crypto out there and all the other
• 6:58
  Speaker 1: coins that people like to call all coins um, and
• 7:01
  Speaker 1: I think the reasons for that are legitimate. Ethereum is
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  Speaker 1: the backbone for DFI, for n f T S, for
• 7:09
  Speaker 1: a lot of the innovation that's happening in the crypto space,
• 7:12
  Speaker 1: and people are coming to recognize that the fact that
• 7:14
  Speaker 1: people like Mark Cuban are tweeting about it, that that
• 7:17
  Speaker 1: helps the drive awareness as well. So it doesn't surprise
• 7:21
  Speaker 1: me to see that divergence. And frankly I liked it
• 7:24
  Speaker 1: because it's uh um. It shows that crypto is not
• 7:27
  Speaker 1: just one big monolithic block. There's different things going on.
• 7:30
  Speaker 1: Bitcoin is one thing, Etherium is another, and it goes
• 7:33
  Speaker 1: on from there. You know, it's quite cool um the
• 7:37
  Speaker 1: diversity and there are different use cases and they're set
• 7:41
  Speaker 1: up differently. Ethereum doesn't have the scarcity that bitcoin does,
• 7:44
  Speaker 1: right bitcoin um no more than twenty one million bitcoins
• 7:48
  Speaker 1: will ever be mined, but there's no cap on ethereum.
• 7:52
  Speaker 1: Does that make it worth less? Well, it's just about
• 7:57
  Speaker 1: the rate of that inflation, which I think the way
• 7:59
  Speaker 1: they've set it up is done somewhat reasonably, and it's
• 8:03
  Speaker 1: it's really about the supply demand dynamic and whether uh
• 8:07
  Speaker 1: supply of coins would outstrip demand, in which case that
• 8:10
  Speaker 1: would of course be problematic for the price overall. But
• 8:14
  Speaker 1: with the potential use cases for ethereum starting to um,
• 8:19
  Speaker 1: you know, just thinking back through or four years, these
• 8:21
  Speaker 1: were twinkles in the eye of a lot of people,
• 8:24
  Speaker 1: a lot of people talked about a lot of ideas,
• 8:26
  Speaker 1: but now these are real projects and real values being
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  Speaker 1: exchanged and traded. In the DeFi space, you have the
• 8:32
  Speaker 1: whole non fungible tokens n f T s or people
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  Speaker 1: are trading around digital arts and things like that. So
• 8:38
  Speaker 1: they're actually use cases and and many of them, most
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  Speaker 1: of them are built on the Ethereum network. I gotta
• 8:44
  Speaker 1: say to me, n f T S makes even less
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  Speaker 1: sense than coin. I mean, why do I care if
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  Speaker 1: you buy the n f T of a Lebron Dunk
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  Speaker 1: whatever that is. When I can watch the Lebron Dunk
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  Speaker 1: on YouTube all day long for free, I can't get
• 9:02
  Speaker 1: my head around it. Yeah, I'm started with you on
• 9:05
  Speaker 1: that one, um, But but don't mistake that for kind
• 9:08
  Speaker 1: of the only potential outcome for what an n f
• 9:11
  Speaker 1: T is. Right. N f T just means a non
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  Speaker 1: fungible token. It means there's a finite supply of them,
• 9:18
  Speaker 1: and they represent certain things. So if you're tokenizing real estate,
• 9:22
  Speaker 1: if you're tokenizing other assets that need a better way
• 9:25
  Speaker 1: to be exchanged digitally and trustlessly, those two would be
• 9:29
  Speaker 1: n f T s. So so I'm sort of with
• 9:31
  Speaker 1: you on on you know, token izing random movie clip
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  Speaker 1: or something. I was never a baseball card collector either
• 9:40
  Speaker 1: or an art collector, but you know, different strokes or
• 9:43
  Speaker 1: different folks. So I think that's the one of the
• 9:45
  Speaker 1: easier applications UM to kind of gain some foothold in
• 9:51
  Speaker 1: the retail mindset, especially when you have sports stars and
• 9:55
  Speaker 1: and all those kinds of celebrities endorsing them. So greg
• 9:59
  Speaker 1: A to get a sense of who's buying these things
• 10:02
  Speaker 1: when we talk about bitcoin or ethereum, is it. Yeah,
• 10:06
  Speaker 1: I'd love to get a sense of retail versus more
• 10:08
  Speaker 1: institutional What what do you know about that? Well, again,
• 10:13
  Speaker 1: it's sort of cascades down. I think Bitcoin at this
• 10:16
  Speaker 1: point is really getting a serious look by a lot
• 10:18
  Speaker 1: of institutional investors. We don't have to you know, look
• 10:21
  Speaker 1: very far to see, you know, whether it's announcements by
• 10:25
  Speaker 1: insurance companies or Fortune five companies that are putting it
• 10:28
  Speaker 1: on balance sheet. Uh. Bitcoin is is moving definitely into
• 10:33
  Speaker 1: the institutional space, as is ethereum. I think where UM
• 10:37
  Speaker 1: retail investors are more involved is around the byproducts UM
• 10:42
  Speaker 1: of these other tokens and f t s and things
• 10:45
  Speaker 1: like that. But again, even that space is sort of barbelled, right,
• 10:49
  Speaker 1: because you'll have um, let's call them retail investors, just
• 10:54
  Speaker 1: just self starters, people who are digging around the space
• 10:56
  Speaker 1: and understand this and are following what's going on. But
• 10:59
  Speaker 1: you also have extremely smart money, uh Silicon Valley vcs
• 11:04
  Speaker 1: that are buying up some of these assets as well,
• 11:06
  Speaker 1: So you really have it's kind of the middle of
• 11:09
  Speaker 1: the spectrum. The more cautious, the kind of the pension funds, uh,
• 11:14
  Speaker 1: the institutional investors that are managing public money, mutual funds,
• 11:18
  Speaker 1: those types, those are the people that I think are
• 11:21
  Speaker 1: going to be last to participate. It's funny, you know,
• 11:25
  Speaker 1: last week the European Investment Bank issued its first digital
• 11:30
  Speaker 1: bond on ethereum, and it's so I mean, at this point, um,
• 11:37
  Speaker 1: no one cares. Right. That would have ten years ago
• 11:39
  Speaker 1: that would have been headlines galore. We would have been
• 11:42
  Speaker 1: covering a wall to wall for a week. It would
• 11:44
  Speaker 1: have been just insane to think about. And now it
• 11:47
  Speaker 1: seems so normal when the European Investment Bank issues a
• 11:53
  Speaker 1: digital bond on ethereum that it doesn't no one bats
• 11:56
  Speaker 1: an eyebrow. So the question is does this become is
• 11:59
  Speaker 1: this just normal part of life now or does it
• 12:01
  Speaker 1: go away? Does it become I hate to say the
• 12:03
  Speaker 1: toolip fad because that didn't even really happen that way,
• 12:06
  Speaker 1: But does it does it become a big bubble that
• 12:08
  Speaker 1: we all regret like Bill Bottoms in ten years. No, No,
• 12:13
  Speaker 1: no chance of that happening. In my opinion. Um, this
• 12:16
  Speaker 1: is this is here to stay. It's just a question
• 12:18
  Speaker 1: of how much is it going to continue to morph
• 12:20
  Speaker 1: and evolve. Take Ethereum for example, it's it's basically software, right,
• 12:25
  Speaker 1: So for the European Central Bank to say we're issuing
• 12:27
  Speaker 1: a bond digitally, nobody would care about that. The question
• 12:31
  Speaker 1: is just who owns the software? You know? So maybe
• 12:33
  Speaker 1: they in the prior world they would use IBM software.
• 12:38
  Speaker 1: Now they're using a decentralized software that we call etherium.
• 12:41
  Speaker 1: So I think it is getting normalized and I think
• 12:43
  Speaker 1: that's a good thing. Alright, Very cool to have some
• 12:47
  Speaker 1: time with you, Greg, Thanks so much for joining us.
• 12:48
  Speaker 1: He is the chief executive officer of Osprey Funds talking
• 12:52
  Speaker 1: to us about digital currencies, digital networks just becoming a
• 12:56
  Speaker 1: normal way of doing business. This is bloom work. Let's
• 13:03
  Speaker 1: bring in Ira Jersey's our chief US rate strategist at
• 13:06
  Speaker 1: Bloomberg Intelligence and ira UM. Today we're actually seeing some
• 13:11
  Speaker 1: bond buying at least in the tenure right now, the
• 13:13
  Speaker 1: yield down to one fifty six fifty eight. But I
• 13:16
  Speaker 1: saw an interesting story on the terminal when I woke
• 13:18
  Speaker 1: up this morning that the Treasury has quadrupled the amount
• 13:22
  Speaker 1: of money it's gonna need this month in order to
• 13:25
  Speaker 1: pay for the stimulus to over a trillion dollars. Are
• 13:28
  Speaker 1: we going to see mad issuance UM? So, no, is
• 13:32
  Speaker 1: the simple answer, and and that that's from their original
• 13:35
  Speaker 1: estimate back in February that the market was expecting pretty
• 13:39
  Speaker 1: close to what they announced. They announced the net borrowing
• 13:41
  Speaker 1: of four hundred and sixty three billion dollars for for
• 13:45
  Speaker 1: the current UM fiscal quarter, and that was compared to
• 13:49
  Speaker 1: our four seventy five, and a lot of other people
• 13:51
  Speaker 1: had four hundred four five. So it's right in the
• 13:53
  Speaker 1: range of what most of us were expecting, you know,
• 13:57
  Speaker 1: after we got the one point nine trillion dollar fiscal statement.
• 14:00
  Speaker 1: So ironically, the Treasury Department is still issuing so much
• 14:04
  Speaker 1: debt um that they probably won't have to um increase
• 14:09
  Speaker 1: any of their UM any of their coupon issuance right now,
• 14:13
  Speaker 1: probably for the next year, and believe it or not,
• 14:16
  Speaker 1: next year they might actually be able to cut it,
• 14:18
  Speaker 1: which is something that maybe a lot of people didn't
• 14:21
  Speaker 1: think was possible just a couple of months ago. Alright,
• 14:24
  Speaker 1: you know, the discussion that we're hearing in the marketplace
• 14:27
  Speaker 1: here is centering around inflation more and more, and the
• 14:30
  Speaker 1: concerns are, Okay, we see inflation whether we look at
• 14:34
  Speaker 1: commodities or you know, other parts of uh, the economy.
• 14:38
  Speaker 1: The question simply is is it transitory as per Federal
• 14:41
  Speaker 1: Reserve Chairman Pow or is it something more? What are
• 14:44
  Speaker 1: you looking at to get a feel for that? Yeah,
• 14:47
  Speaker 1: so I'm looking deeply at some of the components of
• 14:51
  Speaker 1: the consumer Price Index and the PC deflator, which are
• 14:54
  Speaker 1: the two kind of primary consumer price gages that that
• 14:57
  Speaker 1: we look at. And what you see is your right ball.
• 15:00
  Speaker 1: You see things like goods prices going up. I mean,
• 15:03
  Speaker 1: you just saw that we have a record trade deficit, right,
• 15:05
  Speaker 1: Those numbers came out just a few minutes ago, and
• 15:08
  Speaker 1: that suggests that you know, we are importing a lot,
• 15:10
  Speaker 1: but those are goods, right, and in the US, only
• 15:13
  Speaker 1: about of what we spend money on our goods. It's
• 15:17
  Speaker 1: just that there are prices that you see when you
• 15:19
  Speaker 1: go into a food store, you go to Staples, or
• 15:21
  Speaker 1: you go to you know, home depot, or you go
• 15:22
  Speaker 1: to your mom and pop shop at the corner, so
• 15:25
  Speaker 1: you see those prices regularly. But we consume services and
• 15:29
  Speaker 1: and a lot of those services are not provided by
• 15:32
  Speaker 1: big companies that are gonna have earnings calls and talk
• 15:35
  Speaker 1: about how their import input prices are going up. So
• 15:39
  Speaker 1: so it's the mom and pop places that I think
• 15:41
  Speaker 1: where we miss a lot in the financial markets that
• 15:44
  Speaker 1: are going to be holding inflation down. So you look
• 15:47
  Speaker 1: at at core services, so that services excluding energy and food,
• 15:52
  Speaker 1: and inflation there has halved what it was in so
• 15:57
  Speaker 1: you're talking about a really big slowdown in price growth
• 16:00
  Speaker 1: of services, whereas goods prices have gone significantly higher. So
• 16:05
  Speaker 1: so this this dynamic, if it, if it persists, is
• 16:10
  Speaker 1: going to be um, you know, maybe keep inflation lower
• 16:13
  Speaker 1: than than the market is currently expecting. That's fascinating. I mean, listen,
• 16:17
  Speaker 1: Paul and I have had a number of guests on recently,
• 16:19
  Speaker 1: IRA from the northeast and UM from the south as well.
• 16:23
  Speaker 1: I think someone from Myrtle Beach in a hotel, somebody
• 16:26
  Speaker 1: in a restaurant chain in Florida. They all told us
• 16:29
  Speaker 1: they can't get employees. So clearly a lot of those
• 16:32
  Speaker 1: services haven't opened up yet, right, They haven't opened back
• 16:35
  Speaker 1: up yet, um. And I wonder if those figures will
• 16:39
  Speaker 1: hold once they finally convince people, you know, the unemployment
• 16:43
  Speaker 1: benefits run out in September UM to come to come
• 16:47
  Speaker 1: into work. And if they're gonna have to pay them
• 16:49
  Speaker 1: more to do that, then they're gonna have to raise prices,
• 16:51
  Speaker 1: won't they. Well, they probably will, and and maybe compressed
• 16:55
  Speaker 1: their margins a little bit to keep those prices competitive.
• 16:58
  Speaker 1: I think it's it's not a or will we get
• 17:01
  Speaker 1: inflation that gets to two percent for an extended period
• 17:03
  Speaker 1: of time. I think, like you mentioned it, it's a
• 17:06
  Speaker 1: matter of timing, right, So if we can't open back
• 17:09
  Speaker 1: up until October. But but remember it's not just all
• 17:12
  Speaker 1: of a sudden week flick a switch and everyone gets
• 17:15
  Speaker 1: rehired on October one because unemployment benefits went out. Right now,
• 17:18
  Speaker 1: it takes you six months to ramp up. You have
• 17:20
  Speaker 1: to train these people you now have, you know, maybe
• 17:23
  Speaker 1: new staff that weren't with you before and then so,
• 17:26
  Speaker 1: so it's a matter of how long it takes for
• 17:29
  Speaker 1: those services prices and and the input prices for services
• 17:33
  Speaker 1: to feed through, which is all wages. By the way,
• 17:35
  Speaker 1: it's wages is the only thing that really matters for
• 17:37
  Speaker 1: for service prices. Um. So, So I can see it
• 17:40
  Speaker 1: in say three US getting to a sustained two wish
• 17:43
  Speaker 1: percent inflation level. But that means for the FED is
• 17:46
  Speaker 1: that they can they'll be able to afford to be
• 17:49
  Speaker 1: patient until we see um that sustained two wish percent
• 17:54
  Speaker 1: wage UH inflation growth, because you have UH sustained wage
• 17:58
  Speaker 1: growth and that takes a long time defeat through the system.
• 18:01
  Speaker 1: Um and and but I think it will. It's just
• 18:03
  Speaker 1: a matter of you know, are we getting a little
• 18:04
  Speaker 1: ahead of ourselves here thinking that we're going to have
• 18:06
  Speaker 1: three percent inflation for the next two years? I don't think. So.
• 18:10
  Speaker 1: We didn't get to talk about the fourth May, the
• 18:13
  Speaker 1: fourth May, the fourth peak with you always just just
• 18:16
  Speaker 1: here a podcast. You're talking about star Wars. Yeah, we're
• 18:19
  Speaker 1: talking about Star Wars. We're streaming. We talked about streaming
• 18:22
  Speaker 1: with Ethan Rogan often about from b I about the
• 18:25
  Speaker 1: future of streaming, and then I get on a nerd
• 18:28
  Speaker 1: out with a couple of my other BI colleagues talking
• 18:30
  Speaker 1: about the Star Wars franchise of great stuff. For me,
• 18:33
  Speaker 1: the first three movies are the only ones still, the
• 18:35
  Speaker 1: only ones that I really enjoy. I don't know if
• 18:38
  Speaker 1: have you have you not seen? Have you not seen
• 18:40
  Speaker 1: Rogue One? Rogue One is I have, but it's not Empire.
• 18:43
  Speaker 1: Don't get in any case. In any case, uh, Ira,
• 18:47
  Speaker 1: thanks very much. I'm gonna check out the podcast as well.
• 18:49
  Speaker 1: You can get that on SoundCloud or anywhere that you
• 18:51
  Speaker 1: listen to find your your podcast. Ira Jersey is our
• 18:54
  Speaker 1: chief US rate strategists. This is Bloomberg. Well, this US
• 19:01
  Speaker 1: economy is certainly beginning the reopening phase. We're starting to
• 19:05
  Speaker 1: see that in a lot of the economic data come
• 19:07
  Speaker 1: out in terms of durable goods orders, in terms of
• 19:09
  Speaker 1: personal income. Uh and certainly the Federal Reserve is doing
• 19:13
  Speaker 1: its part as well as fiscal stidulus that's gonna lay
• 19:15
  Speaker 1: of the land of this economy. We do that with
• 19:17
  Speaker 1: the Edward Price, former British trade official and current political
• 19:20
  Speaker 1: economy adjunct professor at n y U. Edward thanks so
• 19:24
  Speaker 1: much for joining us here Again. The Fed met last
• 19:28
  Speaker 1: week talking about continued lower for longer, but there are
• 19:32
  Speaker 1: some persistent concerns creeping into this marketplace about inflation and
• 19:36
  Speaker 1: that it might not be as transitory as the FED believes.
• 19:41
  Speaker 1: What's your view there, thanks, guys. So honestly, I have
• 19:45
  Speaker 1: absolutely no idea. I'm confused, right, I'm confused, and I
• 19:49
  Speaker 1: think that's because the FED wants me to be confused
• 19:52
  Speaker 1: and wants us to be confused. You're right to point
• 19:55
  Speaker 1: to that contradiction. Um. And what's happening is we're seeing
• 19:58
  Speaker 1: this incredible shift in money terry policy, add the FED
• 20:01
  Speaker 1: towards this new approach called the Flexible Average Inflation targeting
• 20:05
  Speaker 1: or FAITH right now, you know, you read through and
• 20:08
  Speaker 1: you look at it, and it says FATE is a
• 20:10
  Speaker 1: commitment to let inflation actually run above target before rate hikes,
• 20:15
  Speaker 1: which is a big change from from the forecasting culture,
• 20:18
  Speaker 1: a big change in the practice of economics. Um, and
• 20:22
  Speaker 1: maybe something that sounds sensible. But look, I said, I'm confused. Why. Well,
• 20:25
  Speaker 1: it's also very strange because FATE redefines the two percent
• 20:30
  Speaker 1: inflation target as an average, right, So how do you
• 20:33
  Speaker 1: do that? You say, if inflation is below two percent
• 20:35
  Speaker 1: in any first period, it should be above two percent
• 20:38
  Speaker 1: in any second period. UM. Now, apart from the fact
• 20:41
  Speaker 1: that that kind of moves away from the stable prices
• 20:44
  Speaker 1: fixation that central banks have had from years, it's also
• 20:46
  Speaker 1: very very vague, and that means, I think, in my opinion,
• 20:49
  Speaker 1: the policy is a deliberate injection of uncertainty. Nobody knows
• 20:52
  Speaker 1: how long that second period will be. Are we looking
• 20:55
  Speaker 1: at data that suggests the recovery or are we looking
• 20:57
  Speaker 1: at this framework. It's it's really not clear. Well, and
• 21:00
  Speaker 1: this takes us back to it wasn't long ago that
• 21:03
  Speaker 1: there was no inflation target, right. That uncertainty has been
• 21:06
  Speaker 1: with the FED forever. That's right, and we've done almost
• 21:10
  Speaker 1: too well on for guidance. And I think the problem
• 21:13
  Speaker 1: now is that fate may well end up pitting the
• 21:15
  Speaker 1: credibility of the FED against its mandate, right, or at
• 21:19
  Speaker 1: least against one part of the FED mandate, which is
• 21:21
  Speaker 1: the aforementioned stable prices UM. So you know thought experiment, right,
• 21:25
  Speaker 1: Let's say the FED does achieve something like two percent
• 21:28
  Speaker 1: for whatever a sustained period means, and you're right to say, look,
• 21:31
  Speaker 1: we're already seeing some inflation, but maybe that's superficial. So
• 21:34
  Speaker 1: let's say we get into this good place that fate
• 21:37
  Speaker 1: suggests we can. That good place is where the problems
• 21:40
  Speaker 1: start because, on the one hand, right the FED has
• 21:42
  Speaker 1: to say, look, we promised to run above two percent
• 21:45
  Speaker 1: to some period, so now we have to run above
• 21:48
  Speaker 1: two percent to keep our promise. Um. That protects your credibility,
• 21:51
  Speaker 1: but it damages stable prices. Now, on the other hand,
• 21:54
  Speaker 1: if the FED says, oh, look, just kidding, we've achieved
• 21:57
  Speaker 1: two percent, maybe it's time to abandon fate. Maybe it's
• 22:00
  Speaker 1: time to start thinking about the future rate hikes. That
• 22:03
  Speaker 1: protects they will prices, but it damagees credibility. UM. So
• 22:07
  Speaker 1: that's the fork in the word I'm talking about. That's
• 22:08
  Speaker 1: why I'm confused. All right. It's fascinating, to say the least.
• 22:14
  Speaker 1: And it just takes me back to Ben Bernankee. If
• 22:17
  Speaker 1: you remember ten years ago, was on sixty Minutes and
• 22:20
  Speaker 1: he said we're not worried about inflation. We can deal
• 22:23
  Speaker 1: with that, no problem, and everyone seems to take him
• 22:26
  Speaker 1: at his word on that. I'm sure they can deal
• 22:29
  Speaker 1: with it. But the no problem part is, um is
• 22:32
  Speaker 1: the part I think that you have to think about.
• 22:35
  Speaker 1: Kenneth fed easily tackle inflation if it comes on too strong,
• 22:39
  Speaker 1: and then you know what happens to the markets. So yes,
• 22:44
  Speaker 1: the fight contacted inflation is it wants to um, it
• 22:47
  Speaker 1: can it can do what Paul Folker did famously, right,
• 22:50
  Speaker 1: But if it does that, that's going to rail exactly
• 22:53
  Speaker 1: against everything that it's been saying it wants to do,
• 22:56
  Speaker 1: particularly with the labor markets. So you know, Banankee was
• 22:59
  Speaker 1: very calm, infident. You had a lot of reasons to
• 23:01
  Speaker 1: be very confident at that time. Um, But there's always
• 23:04
  Speaker 1: an element of uncertainty. And I think if you look
• 23:06
  Speaker 1: at what Powell was saying at Jackson Hole recently, there's
• 23:09
  Speaker 1: more of a confession as to uncertainty. So that makes
• 23:12
  Speaker 1: the fact that fate is a departure from Ford guidance.
• 23:16
  Speaker 1: If I was being cheeky, I might describe it as
• 23:18
  Speaker 1: Ford misguidance very very interesting, right, Yeah, it's very interesting
• 23:22
  Speaker 1: that the central bankers have to introduce some kind of uncertainty.
• 23:26
  Speaker 1: And you know the other famous meme in central banking is,
• 23:29
  Speaker 1: of course married druggies. Whatever it takes, that was right,
• 23:33
  Speaker 1: that was Ford guidance, that was confident. But that's because
• 23:36
  Speaker 1: Gergi didn't think he was going to have to back
• 23:38
  Speaker 1: out of it. Right. He was promising not just right,
• 23:40
  Speaker 1: he was promising not just a large scale of minitary intervention,
• 23:43
  Speaker 1: but also a direction. So you know, last week Pal
• 23:46
  Speaker 1: said something like, as long as it takes um Ford
• 23:49
  Speaker 1: guidance isn't dead in the sense that he's still promising
• 23:52
  Speaker 1: the conditions. But at the same time, he's not going
• 23:54
  Speaker 1: to tell you when he's going to stop. Edward, it
• 23:56
  Speaker 1: wasn't long enough. I hope I can't get you on
• 23:58
  Speaker 1: for longer next time you join us. Edward Price, former
• 24:01
  Speaker 1: British trade official, currently a political economy adjunct at n
• 24:04
  Speaker 1: y U. Thanks for listening to the Bloomberg Markets podcast.
• 24:07
  Speaker 1: You can subscribe and listen to interviews of Apple Podcasts
• 24:11
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 24:15
  Speaker 1: on Twitter at Matt Miller three. On Fall Sweeney, I'm
• 24:19
  Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
• 24:21
  Speaker 1: always catch us worldwide at Bloomberg Radio.