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Jobs, Quantitative Tightening, And EVs (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. All right, let's talk
0:22
Speaker 1: about this labor number again. I thought it was pretty good.
0:25
Speaker 1: It came in a little bit better and expected unemployment
0:28
Speaker 1: rate ticked up, but we had some, you know, higher participation,
0:30
Speaker 1: which is something people have been talking about for a
0:32
Speaker 1: long time. Let's check in with our good friend Tom Gimble.
0:34
Speaker 1: He's a founder and CEO of LaSalle Network. Tom, and
0:38
Speaker 1: look pretty solid from my perspective. And I love to
0:40
Speaker 1: get your thoughts because you're talking to these companies every
0:43
Speaker 1: day about filling open slots. I feel like we're doing
0:47
Speaker 1: Groundhog Day every month, guys. I mean, three hundred and
0:50
Speaker 1: fifteen thousand jobs and participation rates up. What it shows
0:55
Speaker 1: is is that the ADP numbers are crazy. They don't
0:57
Speaker 1: know what they're doing. It shows that the economy me
1:00
Speaker 1: still strong and like the football season, the college football
1:04
Speaker 1: season that you omitted a few minutes ago. Correct, that
1:08
Speaker 1: starts tonight. Uh, we're kicking off the fall season, the
1:13
Speaker 1: last third of the year, with a great economy and
1:15
Speaker 1: a great jobs are board. The TCU horn Frogs are
1:18
Speaker 1: coming into Boulder, Colorado tonight to take along the Colorado.
1:21
Speaker 1: But I graduated ninety four. Boulder isn't what it was
1:26
Speaker 1: really how so? Well, I mean I was saying from football,
1:30
Speaker 1: from the economy, Boulders unbelievable and expensive. The football team.
1:35
Speaker 1: It never should have left the Big twelve. But that's
1:37
Speaker 1: the whole another time three So but um, this isn't
1:42
Speaker 1: really helpful in terms of lowering inflation though, tom is it?
1:46
Speaker 1: I mean, we did have a ton of job openings,
1:50
Speaker 1: but uh, well, we had a ton of job openings,
1:53
Speaker 1: were adding a ton of jobs. Average hour, early earnings
1:55
Speaker 1: are up more than five Um does that help bring
1:58
Speaker 1: down inflation? You know? Uh, it's funny. Uh, you go
2:04
Speaker 1: out for dinner and things maybe a little bit more
2:06
Speaker 1: expensive here and there. People want to say that we're
2:10
Speaker 1: in the mid nineteen seventies again, and we're not. Now
2:13
Speaker 1: there's a difference between this economy and every other that
2:17
Speaker 1: we've ever been in and and those differences are a
2:20
Speaker 1: it's truly a global world. Number two, we have a
2:23
Speaker 1: real supply chain shortage that we've never had in this
2:26
Speaker 1: country before. And number three, we're still feeling the after
2:29
Speaker 1: effects of a global pandemic. And people want to have
2:32
Speaker 1: A plus B equals C according to normal historical economics,
2:37
Speaker 1: and it's just not that way anymore. Tom When you
2:40
Speaker 1: talk to your clients, your companies that are looking to
2:42
Speaker 1: fill jobs, kind of give us a sense of what
2:44
Speaker 1: their biggest challenges are. Do they do they just have
2:47
Speaker 1: to pay more, Do they have to be touchy feely
2:50
Speaker 1: and have fun things in your office? What are some
2:52
Speaker 1: of the challenges that they really face and filling these openings.
2:56
Speaker 1: The number one challenge that every company is facing is
2:59
Speaker 1: they want to get their people in the office more
3:01
Speaker 1: than what they currently are, and they're afraid of turnover.
3:04
Speaker 1: And as long as unemployment as a record lows, even
3:07
Speaker 1: with a two tenths of a percent uptick today, as
3:10
Speaker 1: long as it's a record lows, they're afraid to do
3:12
Speaker 1: what they think is best for the business. And the
3:15
Speaker 1: only way that it's gonna turn is when unemployment really
3:18
Speaker 1: rises and you see it a four and a half
3:20
Speaker 1: five five and a half, which I don't see it
3:22
Speaker 1: happening in the near future, but that will eventually happen
3:25
Speaker 1: because everything runs in cycles, and then it'll go back
3:28
Speaker 1: and and we'll go through a cycle again. That's that's
3:30
Speaker 1: how things work. Well. The FED probably wants to see
3:32
Speaker 1: that as soon as possible. I know everyone's a macro
3:34
Speaker 1: tourist these days. Um, I'm very guilty of that. But
3:39
Speaker 1: doesn't this just give the FED ammunition to go seventy
3:42
Speaker 1: five and seventy five? It does, and and and I
3:46
Speaker 1: got news for you. That's what it should be doing,
3:48
Speaker 1: and it should have done it last year. And we
3:51
Speaker 1: need that because if we ever get into an air
3:53
Speaker 1: quotes real recession, we're gonna need that lever we're not
3:56
Speaker 1: in a real people say, oh, they're gonna kill the
3:59
Speaker 1: econo of he's doing great. What it shows is is
4:02
Speaker 1: the economy is so strong it can run when money
4:05
Speaker 1: isn't free. Isn't that the whole point? Yeah, well that's
4:08
Speaker 1: a great point actually, And um, that's something I haven't
4:11
Speaker 1: heard a lot of people saying lately. But you might
4:13
Speaker 1: as well build up a war chest. I know, that's
4:15
Speaker 1: not the primary reason to raise rates. But if that's
4:18
Speaker 1: a secondary effect, I'll take it. Wait wait wait wait
4:21
Speaker 1: wait wait wait wait, what do you mean it's not
4:23
Speaker 1: the primary reason we started raising the feed started raising
4:26
Speaker 1: interest rates before there was inflation, and everybody said it
4:29
Speaker 1: should have happened last year when there wasn't inflation. The
4:32
Speaker 1: primary reason to have interest rate inflation already inflation was
4:36
Speaker 1: already last year was the transitory debate, right. Last year was, dude.
4:40
Speaker 1: Last year was when housing prices started going insane. Last
4:43
Speaker 1: year was when you couldn't buy a car. Last year
4:45
Speaker 1: was when used cars cost more than new cars in
4:49
Speaker 1: supply chain issues, not because of inflation, because you couldn't
4:52
Speaker 1: get a car. It was a supply and demand issue,
4:55
Speaker 1: not an inflationary issue. Tom. If I go down to Austin, Texas,
4:59
Speaker 1: can I get job or in Florida, that's for everybody's flowing.
5:04
Speaker 1: Are the regional differences out there? Yeah, there's always regional differences.
5:08
Speaker 1: And I've said that on your show a million times.
5:10
Speaker 1: Is that the problem is is that we look at
5:12
Speaker 1: unemployment for the most part as a United States issue,
5:15
Speaker 1: and it's really, uh, it's very regionally driven and and
5:19
Speaker 1: the same with wages. Who cares what the wages are
5:22
Speaker 1: in New York City versus it's really what they are
5:24
Speaker 1: in Tulsa, Oklahoma. Right. I mean, we've got to figure
5:27
Speaker 1: out how to how to look at things more regionally
5:30
Speaker 1: and that will attract people. But we live in a
5:32
Speaker 1: world where people are so entitled. This isn't the seventeen hundred.
5:35
Speaker 1: People aren't gonna go out west for a job anymore.
5:38
Speaker 1: You are gonna leave Manhattan to go to work in
5:41
Speaker 1: Oklahoma when they know that the government's gonna bail him
5:44
Speaker 1: out to live in New York. It's right, He's right.
5:47
Speaker 1: You know, it's a shame job says only one day
5:50
Speaker 1: a month. Because we get have Tom on like you
5:51
Speaker 1: know much, we should take our show to him. Where
5:55
Speaker 1: is him? I don't know where he is in Chicago? Right? Okaga? Yeah?
5:57
Speaker 1: I guess all right, Tom Gimbell, he's a found in
5:58
Speaker 1: Cea of La Sound Network. That's right. Uh. And let's
6:01
Speaker 1: sell Network the one of the big staffing recruiting companies
6:03
Speaker 1: in the country. So Tom knows what he's talking about
6:06
Speaker 1: when it comes to how do you fill up these jobs?
6:11
Speaker 1: All right, let's get some more color on these jobs numbers.
6:14
Speaker 1: John Gollneck, vice president for a Deco, joins us, Hey, John,
6:18
Speaker 1: what's your takeaway from these jobs numbers today? Again a
6:21
Speaker 1: little bit better than expected, weaker than the prior month,
6:24
Speaker 1: but still pretty decent. Yeah, you know, I think, um,
6:28
Speaker 1: I think this is a good report. And the term
6:29
Speaker 1: said friendly, I think you guys are putting the right
6:31
Speaker 1: color on this right now. I think there's two things
6:33
Speaker 1: from this report that really stand out to me. Um. One,
6:37
Speaker 1: you know, the average hourly earnings month over month, we
6:40
Speaker 1: were expecting point four percent and it came in point
6:43
Speaker 1: three percent. And I think that wage deceleration. It's still
6:47
Speaker 1: growing but not not as not as hyper as it
6:50
Speaker 1: was before. Good point. I think that's said friendly. I
6:53
Speaker 1: think that's a thread friendly metric right well, in the
6:55
Speaker 1: sense that they want to bring inflation down, but um,
6:58
Speaker 1: it doesn't give them ammunition to hike. Maybe that's why
7:00
Speaker 1: that's a really good point. The other thing I mean,
7:02
Speaker 1: I guess is participation rate right right, participation rate is up,
7:07
Speaker 1: which drives unemployment rate a little bit. So even though
7:09
Speaker 1: that we've seen the unemployment rate at three point seven
7:11
Speaker 1: versus the three point five, the participation that we saw
7:14
Speaker 1: in the labor market was more than expected. It's not
7:16
Speaker 1: a one for one correlation on the math there, but
7:19
Speaker 1: there's a driving force. So for me overall, I look
7:23
Speaker 1: at the last three months. You know, we've averaged three
7:25
Speaker 1: seventy eight thousand jobs. I mean that that was a
7:28
Speaker 1: hundred and sixty four. I think the economy is resilient.
7:31
Speaker 1: We still have a lot of need out there for
7:33
Speaker 1: a lot of employers. Um. You know again, I think,
7:36
Speaker 1: like everybody else, I think the Fed is happy with
7:39
Speaker 1: this report. I think I'm hopeful that it's not a
7:41
Speaker 1: full seventy five and hopeful that it's a fifty. And
7:43
Speaker 1: then to your guys point, we wait for the next
7:45
Speaker 1: seven day. Have to come out John, because you've just
7:49
Speaker 1: answered that what was a big question mark over my head. Um,
7:52
Speaker 1: And it's really a reframing of my idea. What the
7:55
Speaker 1: Fed wants. Um, they really want at the end of
7:58
Speaker 1: the day to bring on a inflation down and they
8:02
Speaker 1: probably don't want to have to hike as much as
8:05
Speaker 1: they can. So um, a DECO is the biggest uh,
8:11
Speaker 1: you know, workforce placement, workforce solutions firm in the world.
8:16
Speaker 1: So um, maybe you can answer another conundrum that we've
8:19
Speaker 1: been struggling with. Here we're getting layoff announcements left and right,
8:23
Speaker 1: and not little ones, right, um, big or of whole
8:28
Speaker 1: workforce job cuts. And yet the JOLTS number was eleven
8:33
Speaker 1: point eight million job openings. I mean, almost a record
8:37
Speaker 1: high amount of job openings. How can you um put
8:41
Speaker 1: those two things together? Yeah, you know, I think it's
8:45
Speaker 1: there's a lot of things you have to look at
8:46
Speaker 1: in our economy, and you have to look at it
8:47
Speaker 1: from sector to sector. Right. You know, we saw we
8:50
Speaker 1: saw in July that you know, service based, hospitality, leisure.
8:54
Speaker 1: It was crazy highs ninety six July and only thirty
8:57
Speaker 1: one thousand this month. Wow, what a dip, right, Well,
9:00
Speaker 1: not really what a super spike. Right. People people are
9:02
Speaker 1: in the summertime season, they're getting some traveling done, They're
9:04
Speaker 1: getting some traveling done before the school season starts again.
9:07
Speaker 1: It makes sense a little bit more people are are
9:10
Speaker 1: are free to travel with you know, pandemic restrictions, um,
9:13
Speaker 1: and they want to get back out there. So that
9:14
Speaker 1: makes sense. But what we look at, that's that's really
9:17
Speaker 1: driving you know, retail. We saw huge retail layoff announcements.
9:20
Speaker 1: You know, when we saw Walmart announced plans. We saw
9:22
Speaker 1: some other folks, but we're still seeing a massive need.
9:26
Speaker 1: I can't go to I can't go to any storefront
9:28
Speaker 1: without seeing what we're hiring sign you know, hey, we're
9:30
Speaker 1: hiring key holders. We're looking for managers, assistant managers in
9:32
Speaker 1: retail um. The demand is huge because I think our
9:36
Speaker 1: workforce that used to fill these jobs, right, they were
9:40
Speaker 1: impacted in tremendously from COVID. Your servers, your bartenders, your waiters,
9:44
Speaker 1: You're people that relied on the tips business, right, the
9:47
Speaker 1: foot traffic. They had to find other ways in a
9:49
Speaker 1: gig economy. So so now returning back to that nine
9:53
Speaker 1: to five, you know, let me be in one place,
9:56
Speaker 1: let me let me punch a cock. There's a culture
9:58
Speaker 1: shift we're we're adjusting. So I think that's part of it,
10:01
Speaker 1: as as we look for more labor participation in that
10:04
Speaker 1: you know, sixteen to twenty two year bucket to fill
10:07
Speaker 1: some of these roles they're has historically been filled by
10:09
Speaker 1: them in the past. But what I'm most excited about,
10:11
Speaker 1: to be honest with you about about the job need
10:14
Speaker 1: and demand is there's there's a huge need in demand
10:17
Speaker 1: and manufacturing and supply chain logistics. When when when COVID
10:20
Speaker 1: impacted us and we were dependent on foreign goods man,
10:24
Speaker 1: that woke a lot of people up that we needed
10:26
Speaker 1: to research our manufacturing base here and and that's where
10:30
Speaker 1: we see continued demand fill in second third shifts. How
10:33
Speaker 1: do how do we get more participation there? So and
10:36
Speaker 1: so we solve that riddle. I think I think we're
10:38
Speaker 1: going to see some steam, you know, in this job's
10:41
Speaker 1: number for quite some time. That's good stuff, good numbers,
10:45
Speaker 1: good analysis. John Galnack, Chief Researcher VP at A DECO
10:49
Speaker 1: and a shout out to your former or your future job,
10:51
Speaker 1: I should say my future job as a great Oh,
10:55
Speaker 1: darn wright at Walmart, greaterer at Walmart. I'm gonna be
10:57
Speaker 1: a darn good one, and they've better be ready for
10:59
Speaker 1: me coming up in a few years. Bringing on our
11:03
Speaker 1: next guest, Kate to Shane, CEO of r g P
11:05
Speaker 1: r GPS Resources the Global Professionals. It's the operating arm
11:09
Speaker 1: of Resources Connections, which is a publicly traded company. Our
11:12
Speaker 1: GPS a ticker you can put into your Bloomberg terminal.
11:16
Speaker 1: I've got a six hundred sixty million market company based
11:19
Speaker 1: in Irvine, California. The stocks up about uh this year.
11:24
Speaker 1: The company provides consulting services a consert wide range of
11:28
Speaker 1: business issues. Okay, thanks so much for joining us here.
11:31
Speaker 1: You know, we had a pretty good jobs number today.
11:33
Speaker 1: I'd love to hear what your companies that you talked
11:36
Speaker 1: to and you consult with on the human resources from
11:40
Speaker 1: what's their biggest issue? Is it just getting bodies in
11:43
Speaker 1: the door, or are they even trying to still figure
11:46
Speaker 1: out the hybrid work thing. What are some of the
11:48
Speaker 1: big issues that you're hearing from your clients. Yeah, thanks
11:52
Speaker 1: for having me. I'm certainly happy to be here. So
11:54
Speaker 1: it's a multitude of issues. I think certainly the war
11:58
Speaker 1: for talent is still tight um. But as we're seeing
12:03
Speaker 1: um jobs increase and labor participation increase a little bit,
12:08
Speaker 1: that's good news. But I think going forward, one of
12:12
Speaker 1: the biggest issues is how are people working when they
12:16
Speaker 1: return to the workforce, And so that means is that
12:19
Speaker 1: hybrid um when do you work? How do you work?
12:22
Speaker 1: And building more flexibility and agility into workforce planning. Uh,
12:26
Speaker 1: those are the kind of discussions that we're really having
12:29
Speaker 1: with clients, especially in the face of recessionary worries. You know,
12:33
Speaker 1: how do you get work done in more creative ways?
12:37
Speaker 1: So you advise primarily financial firms, right, I mean finance accounting,
12:43
Speaker 1: and maybe I financing accounting right is our core because management.
12:49
Speaker 1: I've been thinking about this UM from the client perspective. Right,
12:53
Speaker 1: if I hire a finance firm, I'm gonna pay good
12:57
Speaker 1: money for their staff to do what I want when
12:59
Speaker 1: I on. I don't want their staff to be working
13:02
Speaker 1: from home. I don't want them to be taking off
13:03
Speaker 1: labor day weekend. I don't want them to be worried
13:05
Speaker 1: about work life balance. I just want them to do
13:07
Speaker 1: what I want when I want. So how do you, um,
13:11
Speaker 1: how do you square that with companies that are trying
13:15
Speaker 1: to like be kinder and gentler to their workforce. Well,
13:19
Speaker 1: I think we all have to recognize that the world
13:21
Speaker 1: of work is fundamentally changed post pandemic, and talent is
13:25
Speaker 1: really in the driver's seat. So I understand the perspective
13:28
Speaker 1: that you just shared, but really the world is different,
13:30
Speaker 1: and I think that what creative companies and what companies
13:35
Speaker 1: that are really thriving understand is that there isn't a
13:38
Speaker 1: black and white answer here. That you have to find
13:42
Speaker 1: a middle ground. That works both from a business perspective
13:46
Speaker 1: and from a talent perspective. And so there's a lot
13:49
Speaker 1: of creativity happening. There's a lot of work that's been
13:52
Speaker 1: delivered remotely, or we use a term borderless talent, meaning
13:56
Speaker 1: that we can better match in today's environment to the
14:00
Speaker 1: exact client need if a client is willing to be
14:03
Speaker 1: more creative about when, where, how that work gets done.
14:08
Speaker 1: Um So we might find the perfect financial professional for
14:12
Speaker 1: a client engagement, but that person might sit in Dublin
14:16
Speaker 1: UM or in London or in Atlanta. And so if
14:20
Speaker 1: a client's thinking can shift to say, I don't need
14:23
Speaker 1: them in the cubicle next door, it really opens the
14:27
Speaker 1: aperture of the talent availability. How do you think about
14:31
Speaker 1: I mean, Kate, I'm a little bit old school. I
14:34
Speaker 1: you know, I kind of came up on Wall Street
14:35
Speaker 1: where you really did put in the hours and then
14:37
Speaker 1: you built up that camaraderie and you built up your
14:39
Speaker 1: relationships um and still today at this later stage of
14:42
Speaker 1: my career, the relationships are are absolutely the most valuable
14:46
Speaker 1: thing I take away from my career. And I think
14:48
Speaker 1: a lot of people generally agree with that. But that
14:52
Speaker 1: seems like it might get lost here in this new
14:56
Speaker 1: hybrid world or work from home world. How do you
15:00
Speaker 1: think about that? How do your companies think about that? Well?
15:03
Speaker 1: I think that the balance is important, and so you know,
15:08
Speaker 1: we go back to the word hybrid, but I think
15:10
Speaker 1: it's a little of both. Um. There's certainly benefits to
15:13
Speaker 1: be UM found in collaboration learning. So what we're talking
15:18
Speaker 1: to clients about is spend those days in the office
15:22
Speaker 1: in really meaningful ways. Don't spend them on zoom calls
15:26
Speaker 1: or on individually oriented work. When you're in the office,
15:30
Speaker 1: be together, have learning moments, have collaboration sessions, and when
15:34
Speaker 1: you're not in the office, that's when you do your
15:36
Speaker 1: head down work, which we all have a lot of
15:38
Speaker 1: that as well. UM, So you need you need to
15:40
Speaker 1: learn to work differently, and and that I think will
15:44
Speaker 1: be the predominant UM path forward as we continue to
15:50
Speaker 1: recover in this economy, not all one way or the other.
15:54
Speaker 1: This is something that Paul and I talked about all
15:55
Speaker 1: the time because I'm convinced that a lot of that
15:58
Speaker 1: can be done in the can act really be done
16:00
Speaker 1: in the metaverse or whatever we're calling this world right now. UM,
16:05
Speaker 1: I could be wrong about that, but listen, I want
16:08
Speaker 1: to ask about your company. You have, at least from
16:10
Speaker 1: a stock perspective, trounced um, whatever benchmark index I want
16:15
Speaker 1: to put you up against. If I look over also
16:17
Speaker 1: any period over the last year, over the last two years,
16:20
Speaker 1: over the last five years, you've beaten the UM, SMP
16:24
Speaker 1: Small Cap Index, the Russell one thousand, two thousands, three thousand,
16:27
Speaker 1: the SMP five dred Um. What are you doing right?
16:31
Speaker 1: You think that investors appreciate we're taking care of our people.
16:35
Speaker 1: I mean we're really listening. We've we've become really a
16:38
Speaker 1: learning and a listening organization, and that's listening both to
16:42
Speaker 1: how companies need to get work done, especially around project
16:46
Speaker 1: orientation as they face transformation and disruption, and we're listening
16:50
Speaker 1: to people and how they want to be treated. I
16:52
Speaker 1: mean our core workforce UM Paul and Matt are experienced,
16:56
Speaker 1: hire diverse professionals who you know they're in the middle
17:01
Speaker 1: probably or later stages of their career, so they already
17:05
Speaker 1: know their work, they know their subject matter and their expertise,
17:10
Speaker 1: and they want to be appreciated and work with more flexibility, transparency,
17:15
Speaker 1: choice and control. And we're really giving the talent market
17:18
Speaker 1: what they want today and that's really helped us thrive.
17:21
Speaker 1: How about the industry, I mean, do you think more UM.
17:26
Speaker 1: You know, financial leaders who are you know, like Paul's age,
17:30
Speaker 1: are coming to you for help in this new world.
17:34
Speaker 1: They are because what we see. You know, twenty years ago,
17:37
Speaker 1: a large enterprise might have one transformation project going on
17:41
Speaker 1: at the same time one or two. Fast forward to today,
17:44
Speaker 1: transformation is happening everywhere in large organizations. So your transformation
17:49
Speaker 1: agenda works something like twenty to twenty five concurrent projects.
17:53
Speaker 1: No organization is staffed up for that much change, and
17:57
Speaker 1: so you need a trusted partner to say, can you
18:00
Speaker 1: bring the expertise in the additional bandwidth I need? And
18:03
Speaker 1: that's really where we play. We partner with our clients
18:06
Speaker 1: to co deliver on their transformation projects and a lot
18:10
Speaker 1: of them are related to UM finance systems, transactions, regulatory change, etcetera.
18:18
Speaker 1: So we're a perfect UM adjunct to the initiative business
18:23
Speaker 1: initiatives they're trying to accomplish. All right, Kate to Shane,
18:26
Speaker 1: thank you so much for joining us. We appreciate getting
18:29
Speaker 1: your perspective on the workforce, on the hiring environment, on
18:32
Speaker 1: the work environment still a work in progress for a
18:35
Speaker 1: lot of companies. Kate to Shane's CEO of r g P.
18:37
Speaker 1: I saw some news met over the last week or so, Goldman, Sachs, Morgan, Stanley,
18:41
Speaker 1: Jeffreys all talking tough. Yeah about this time, we mean it.
18:44
Speaker 1: After Labor Day. We want you guys back in the office.
18:47
Speaker 1: But I have to agree with Kate that it's a
18:50
Speaker 1: different It's going to be a different work environment that
18:53
Speaker 1: was pre pandemical. So yes, they want you to come
18:55
Speaker 1: in probably um three four five days a week, but
19:01
Speaker 1: not every single week. And they're willing to be more
19:04
Speaker 1: flexible than they were before. And they realized they can
19:06
Speaker 1: get a lot more done for cheaper than they could before.
19:08
Speaker 1: We'll see how that plays out, but certainly that's kind
19:10
Speaker 1: of where it appears to be moving. Good jobs day today.
19:16
Speaker 1: All right. We know our Federal Reserve is raising rates,
19:20
Speaker 1: but they're also engaging in something called quantitative tightening. I'm
19:23
Speaker 1: not really sure what that is. I don't really do
19:25
Speaker 1: that stuff for a living, but Kevin Mirror does. He's
19:27
Speaker 1: a prop trador for Windoor Capital h He's also the
19:30
Speaker 1: author of the Macro Tourist newsletter, and he's also a
19:33
Speaker 1: Bloomberg opinion contributor. And Kevin, I know you had a
19:35
Speaker 1: column out recently we say we shouldn't really fear QT.
19:39
Speaker 1: But first, for equity geeks like me, what is quantitative
19:44
Speaker 1: tightening and how's the FED doing it? Well? Good morning,
19:47
Speaker 1: paul Um. The quantity of tightening is the opposite of
19:49
Speaker 1: quantitative easing. Quantitative easing is when the Federal Reserve goes
19:53
Speaker 1: out and buys bonds or other assets for its balance sheet,
19:57
Speaker 1: basically putting money into this system and taking financial instruments out.
20:02
Speaker 1: Quantity of tightening would be the opposite, meaning that it
20:05
Speaker 1: shrinks its balance sheet and either by letting those bonds
20:09
Speaker 1: run off or extreme cases, actually selling those bonds. So
20:15
Speaker 1: should we be concerned that the Fed is talking about
20:18
Speaker 1: quantitative tightening and or just kind of what do we
20:20
Speaker 1: know about their policies and what do you think about QT? Well,
20:24
Speaker 1: first of all, the Fed's doing a lot more than
20:26
Speaker 1: talking about quantity of tightening. They've actually scheduled it, and
20:29
Speaker 1: they've so far they've agreed that they're going to let
20:31
Speaker 1: the balance sheet run off by forty seven and a
20:33
Speaker 1: half billion dollars per month, and they're increasing that to
20:37
Speaker 1: billion starting in September, and this is what the market
20:40
Speaker 1: is a little concerned about because that seems like a
20:43
Speaker 1: large number. And if we think about quantitative easing, quantitative
20:47
Speaker 1: easing was the process of putting money out into the
20:50
Speaker 1: system and trying to make things better, and it actually
20:53
Speaker 1: has the kind of the intended consequence of easing financial conditions.
20:58
Speaker 1: If we think the quantity of tightening, is you off
21:00
Speaker 1: us that we should expect that to tighten financial conditions,
21:03
Speaker 1: i e. Sen Stocks down. Unfortunately, there's a there's a
21:07
Speaker 1: lot more to this story, and that's kind of what
21:10
Speaker 1: the topic of my letter is. That it's not as
21:13
Speaker 1: easy as just taking the SMP five and superimposing the
21:17
Speaker 1: FEDS balance sheet on it and saying one one's going up,
21:20
Speaker 1: the other one's going you know, the smple follow and
21:23
Speaker 1: then when the FEDS balance sheet goes lower, that the
21:25
Speaker 1: SMP will follow it lower as well. So, Kevin, the
21:30
Speaker 1: size of this is what matters here when it comes
21:32
Speaker 1: to they've done this before, and that they've tried to
21:34
Speaker 1: at least a massive rate high cycle where they did
21:38
Speaker 1: try to pull back on quantitative easing, But this is
21:42
Speaker 1: only the second time that they've done it in the
21:44
Speaker 1: first time they tried. They didn't even do it completely.
21:47
Speaker 1: What are the odds they're actually successful in this operation?
21:51
Speaker 1: So creany are absolutely correct. The in the post g
21:55
Speaker 1: FC era, the Federal Reserve expanded their balance sheet from
21:58
Speaker 1: one trillion dollars to roughly four and they went to
22:02
Speaker 1: four and a half trillion, and they tried to go
22:04
Speaker 1: in and put the their the economy on a policy
22:07
Speaker 1: where they would shrink that and they only managed to
22:09
Speaker 1: get it back to three in three quarters before they
22:12
Speaker 1: had to halt the quantitative tightening, and that was for
22:15
Speaker 1: a variety of different factors. And that is why the
22:18
Speaker 1: market is very concerned about this quantitative tightening that the
22:22
Speaker 1: Fed's going to embark on down But I would contend
22:24
Speaker 1: that this is a much different situation than in when
22:29
Speaker 1: they tried to do quantitative tightening. And the main point
22:32
Speaker 1: that is often missed is that with the extraordinary amount
22:37
Speaker 1: of stimulus that the Federal Reserve did in the post
22:41
Speaker 1: COVID era, and it wasn't just the Federal Reserve, it
22:44
Speaker 1: was also the fiscal stimulus that it did. There is
22:48
Speaker 1: so much extra liquidity in the system that the Federal
22:51
Speaker 1: Reserve needs to engage in what's known as reverse repost,
22:55
Speaker 1: and reverse reposts are when they take the collateral, the
22:58
Speaker 1: high quality bond that are on their balance sheet and
23:01
Speaker 1: they go and lend it out into the market for
23:04
Speaker 1: a short period of time so that it soaks up
23:07
Speaker 1: some of the liquidity. Imagine that there's just so much
23:10
Speaker 1: money out there that if the Federal Reserve didn't do this,
23:13
Speaker 1: what what happened would be the target rate would fall
23:16
Speaker 1: below the interest rate that they're trying to set. So
23:19
Speaker 1: there's this overnight reverse repo has gone from zero a
23:23
Speaker 1: year ago to two point two trillion dollars. And that's
23:28
Speaker 1: just a function of how much liquidity is out there.
23:31
Speaker 1: And so when we think about this quantitative tightening and
23:33
Speaker 1: we think, oh Jesus, you know what, we're going from
23:35
Speaker 1: forty seven and a half billion to a month, it's
23:38
Speaker 1: sure sounds like a little big number. Well it's a
23:41
Speaker 1: big number, except that there's two point two trillion dollars
23:45
Speaker 1: of excess liquidity out there that the Fed is soap
23:48
Speaker 1: soaping up, soaking up every single night in reverse repos.
23:52
Speaker 1: And so when I think about what potentially could happen, Yes,
23:57
Speaker 1: there is a duration mismatch, meaning that the Federal Reserve
24:00
Speaker 1: doesn't own the exact same thing that the market players
24:03
Speaker 1: that are engaging in the reverse repos want, but in
24:06
Speaker 1: terms of the total amount of liquidity, they're having to
24:09
Speaker 1: soak up all this extra liquidity. So as they let
24:11
Speaker 1: their balance sheet run down, I suspect the reverse repo
24:15
Speaker 1: will also run down, off setting it good stuff. All right, Kevin,
24:19
Speaker 1: thank you for That's what I call inside baseball, that's
24:21
Speaker 1: the plumbing of the markets. Kevin m you're a prop
24:24
Speaker 1: trader for wind Or Capital. Talk about some quantitative tightening,
24:28
Speaker 1: it's uh, you know, it's critics pointing out it's something
24:30
Speaker 1: we don't experience in the marketplace that often. It does,
24:33
Speaker 1: It does happen, but not that often. It just seems
24:35
Speaker 1: like we've been talking about forever quantitative easning in the
24:39
Speaker 1: easy money conditions in the marketplace, and that is clearly
24:43
Speaker 1: changing here as we talked about the Fed raising interest rates.
24:46
Speaker 1: We heard from Jackson Hole last week they are on
24:49
Speaker 1: a tear there to fight inflation. All right, Let's talk
24:55
Speaker 1: electric vehicles and we're not. It's not just electric cars.
24:58
Speaker 1: We got trucks. They're on the way. I drove the
25:00
Speaker 1: four D F one fifty lightning and uh it's awesome.
25:05
Speaker 1: Matt read a story about boats, all kinds of stuff
25:09
Speaker 1: coming to the e V space. Regie's did you recr
25:13
Speaker 1: is an executive director for Auto and farm sectors at
25:16
Speaker 1: MA Hinder Group. He joined us talk about what they're doing.
25:19
Speaker 1: Regie's love to just know what you guys that group
25:21
Speaker 1: are doing in the e V space. Yeah, Well, first
25:24
Speaker 1: we thanks for having me on the show. It's a
25:26
Speaker 1: pleasure to be with you here this morning, and especially
25:30
Speaker 1: to talk about our electric plans. As you know, we
25:35
Speaker 1: are a leading SUV player in India actually number one
25:38
Speaker 1: by revenue, and as we look at the future, we
25:41
Speaker 1: believe that electric SUV's will be a significant part of
25:45
Speaker 1: that long term plan. So when we started thinking about
25:50
Speaker 1: where we should be headed from here, we thought, when
25:54
Speaker 1: we have planned for about any type percent of our
25:58
Speaker 1: volumes in a sus coming out of electric vehicles by
26:02
Speaker 1: around the eclic pointing seven, So we put together a
26:05
Speaker 1: plan to help us get that end of a electric
26:09
Speaker 1: sue vehicle volume in the ind in dostic market. In
26:12
Speaker 1: the beginning with talk to us about just kind of
26:15
Speaker 1: where India is right now in terms of the ev
26:18
Speaker 1: market here in the States, obviously, I'm sure you're where
26:21
Speaker 1: Tesla has led the way completely. But now we've got
26:24
Speaker 1: all the major global O E M s, you know,
26:26
Speaker 1: kind of throwing their hats into the ring. Talk to
26:28
Speaker 1: us about the Indian market, So so Paull. In India,
26:33
Speaker 1: the electric penetration at the moment is at a very
26:36
Speaker 1: nascent stage of evolution. We are seeing in much faster
26:41
Speaker 1: electric penetration and these small commercial vehicles, which is really
26:44
Speaker 1: the three wheeler space, and we have a strong presence
26:47
Speaker 1: there where are three wheeler electric vehicles have a market shot.
26:53
Speaker 1: And here the electric penetration is as high as ten
26:57
Speaker 1: percent and we are seeing it grow very rapidly month
26:59
Speaker 1: in month. The penetration, as I said, in the passenger
27:03
Speaker 1: vehicles space is still very small two to three. We
27:08
Speaker 1: are expecting this to grow very significantly over the next
27:11
Speaker 1: for five years, as a better technology comes into vehicles,
27:16
Speaker 1: as charging in fry improves, and of course evolving into
27:19
Speaker 1: consumer who is now inclined who adopt electric vehicles. The
27:26
Speaker 1: government in the Indian government is also putting a lot
27:28
Speaker 1: of emphasis on promoting electric vehicles, enabling electric vehicle conversion
27:35
Speaker 1: and have put in place several subsidies to enable that
27:40
Speaker 1: as well as investment linked incentives to promote investments in
27:45
Speaker 1: the electric working space. I know, Mahinder is you know,
27:48
Speaker 1: obviously a large player in any tractor business and that
27:51
Speaker 1: side of the vehicle business. How is the EV revolution
27:55
Speaker 1: going to impact that party? Think uh, Paul, So you know,
28:01
Speaker 1: like right he said, in the Indian market, we have
28:03
Speaker 1: a strong presence in the tractor business. Were number one
28:07
Speaker 1: one to send market share a very large volume, so
28:10
Speaker 1: we sell over three hundred thou tractors Elier in India.
28:13
Speaker 1: We also have a very good presence in North America
28:16
Speaker 1: and building a very strong brand and I think some
28:18
Speaker 1: of some of your listeners would have seen us on
28:21
Speaker 1: the NASCAR more recently doing very well there, so you
28:25
Speaker 1: know the brand is getting strong. We are a number
28:28
Speaker 1: three player in the less a hundred horse par segment.
28:31
Speaker 1: We think the electric part of the tractor business in
28:34
Speaker 1: North America will you know, evolve faster than it will
28:38
Speaker 1: in India. And the reason for that is in India,
28:41
Speaker 1: in mainstream agg applications typically you know, the tractors the
28:46
Speaker 1: prime mover for other implements and that means a very
28:49
Speaker 1: high talk or a backup talk, and that doesn't quite
28:52
Speaker 1: come as easily, uh, you know, with electric. But in
28:56
Speaker 1: North America where you know, in the smaller, let's one
29:00
Speaker 1: hundred horsepower segments, we see you know, law moving a
29:05
Speaker 1: you know application to the kind that we participate in
29:08
Speaker 1: with Google lifestyle ers. We think electric will follow the
29:12
Speaker 1: next two to four years. Talking about you know, one
29:15
Speaker 1: of the challenges logistically even here in the United States,
29:19
Speaker 1: as as more and more uh people go, electric is
29:22
Speaker 1: gonna be the charging station infrastructure. And there's just for
29:26
Speaker 1: a lot of parts this country, I just don't see
29:28
Speaker 1: it happening. You know, it's gonna take a big, big undertaking,
29:32
Speaker 1: and I would think it would be by orders of
29:34
Speaker 1: magnitude even more difficult. In India. How does how do
29:38
Speaker 1: you and other industry participants see the roll out the
29:41
Speaker 1: evolution of the charging infrastructure in India? Yeah, so you know,
29:47
Speaker 1: the government is committed the ball to create a charging
29:51
Speaker 1: and a lot of the fuel stations there's a road
29:55
Speaker 1: map to convert them into energy stations as we go forward.
30:00
Speaker 1: A lot of startups are getting in the space as
30:02
Speaker 1: well about what we're seeing as you know, the first
30:05
Speaker 1: stage adoption of the electric revolution India will happen a
30:09
Speaker 1: lot around private charging station. Okay, people in their house,
30:14
Speaker 1: either in their homes or your houses, or in housing
30:17
Speaker 1: complexes or at place of work would start moving into
30:22
Speaker 1: you know, private charging. And to begin with, we think
30:27
Speaker 1: that in the personal segment, electric penetration will happen with
30:31
Speaker 1: in those households who either have to just operate within
30:36
Speaker 1: a non operating circles like example, doctors going to their
30:40
Speaker 1: hospitals for work, you know, the nature movement is predictable.
30:44
Speaker 1: Or people with multi cards you know, who are less
30:47
Speaker 1: worried about range anxiety and hence less worried about charging
30:51
Speaker 1: in FRA. And which is why we think for the
30:53
Speaker 1: next four to five years at twenty percent penetration of
30:57
Speaker 1: this segment using electric is a reasonable assumption. Just to
31:03
Speaker 1: quick beyond that is one of the cycle. Just real quick,
31:07
Speaker 1: Just where are the non Indian manufacturers in India, the
31:11
Speaker 1: Volkswagons of the world and and and others? Are they
31:14
Speaker 1: in India in a big way in electric? H No,
31:19
Speaker 1: so actually not at all at the moment. So we
31:22
Speaker 1: have you know, quite significantly Tata and then we are
31:25
Speaker 1: launching revealing actually in the eighth and nine to September,
31:30
Speaker 1: which is the word ev day, A product called the
31:33
Speaker 1: actually Be four double which is a four point to
31:36
Speaker 1: meet a vehicle electric which we will launch. We interestingly
31:41
Speaker 1: do don't have a tie up or our in Glow
31:43
Speaker 1: platform with Volkswagon where we will be using the components
31:49
Speaker 1: from the enemy by platform, more specifically the battery, sales
31:53
Speaker 1: and the motors as a part of the Innglow platform
31:56
Speaker 1: on which will be building for the five universities. Great
32:00
Speaker 1: stuff for g Juror Car Executive director, Auto and farm
32:03
Speaker 1: sectors for Mahinda Group out of India. They are going
32:07
Speaker 1: electric like everybody else, it seems. Coming up balance of power.
32:10
Speaker 1: Joe Matthew sitting in for David Weston today. He'll drive
32:14
Speaker 1: the conversation forward. Thanks for listening to the Bloomberg Markets podcast.
32:21
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
32:25
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
32:29
Speaker 1: on Twitter at Matt Miller. P On Fall Sweeney I'm
32:33
Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
32:36
Speaker 1: always catch us worldwide at Bloomberg Radio