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Teenage Workers Leading Recovery · 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. The labor market continues
• 0:23
  Speaker 1: to improve. The job's claims numbers today continues to show
• 0:27
  Speaker 1: a week over week improvement. How about those teens. It's
• 0:30
  Speaker 1: you know, at the end of the school year, kids
• 0:33
  Speaker 1: entering the summer workforce. What's the marketplace like for them?
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  Speaker 1: Barry rid Holds, Bloomberg Opinion columnists and host of Masters
• 0:40
  Speaker 1: in Business on Bloomberg Radio is also founder, chairman and
• 0:43
  Speaker 1: chief investment officer rid Holds Wealth Management. He's got some
• 0:46
  Speaker 1: thoughts on that. So for all those teenagers, Barry, there's
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  Speaker 1: got to be lots of jobs out there, right, It's
• 0:51
  Speaker 1: just a question of what am I gonna get paid? Yeah,
• 0:54
  Speaker 1: there there are a ton of jobs there. And and
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  Speaker 1: when you look at teenage employment, especially the labor participation rate,
• 1:03
  Speaker 1: this is at a thirteen year high. Um. But it's
• 1:07
  Speaker 1: way down. There's this really interesting generational story that's taken
• 1:12
  Speaker 1: place pretty much over the past thirty years. The labor
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  Speaker 1: teen participation rate has fallen, and and I argue that
• 1:22
  Speaker 1: it's fallen as minimum wage lagged behind things like inflation
• 1:29
  Speaker 1: or productivity, or corporate profits or executive comp and at
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  Speaker 1: a certain point, teenagers say, wait, in pre crisis, pre
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  Speaker 1: in two thousand seven, you want to pay me five
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  Speaker 1: dollars in fifteen cents an hour before you know FICA
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  Speaker 1: and and taxes. Most kids just turned around and say
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  Speaker 1: it's not worth it to do that. And you could
• 1:53
  Speaker 1: see that reflected in the participation right now. Funny thing,
• 1:56
  Speaker 1: the minimum wage went up in O eight oh nine
• 1:59
  Speaker 1: and twenty ten, and not coincidentally, from at seven and
• 2:03
  Speaker 1: a quarter and up, which is a bump from where
• 2:06
  Speaker 1: it was. The labor participation rate of teenagers started to
• 2:11
  Speaker 1: tick up. And here's the craziest thing. Unlike most other
• 2:16
  Speaker 1: participation rates, it's now higher than it was pre pandemic.
• 2:21
  Speaker 1: So maybe the kids are bored, they want to get
• 2:23
  Speaker 1: out of the house, They're tired of looking at mom, dad, brother, sister,
• 2:27
  Speaker 1: and say, let me, let me just see a change
• 2:29
  Speaker 1: of pace. But all of this just keeps coming back
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  Speaker 1: to wages. Wages are table stakes. If you can't offer
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  Speaker 1: a competitive wage, your your potential pool of applicants are
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  Speaker 1: going to be tiny. And I mentioned the Pittsburgh Gazette
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  Speaker 1: article about an ice cream parlor that doubled their wages
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  Speaker 1: from seven to fifteen dollars. Usually they put on an
• 2:52
  Speaker 1: air they get two or three applicants. At fifteen an hour,
• 2:56
  Speaker 1: they got a thousand applicants. So wages are every thing
• 3:01
  Speaker 1: the kids, no, right, I actually, to be honest, Barry,
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  Speaker 1: when I was a kid, my parents were just like,
• 3:05
  Speaker 1: you're getting a job. It wasn't really my choice. You know.
• 3:09
  Speaker 1: It was like I had to do something I wasn't
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  Speaker 1: allowed to not you could see that in that participation, right, Listen,
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  Speaker 1: I had a paper out when I was twelve. I
• 3:17
  Speaker 1: was mowing lawns and shoveling snow at fourteen, fifteen, sixteen,
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  Speaker 1: And by the time I got to college, you know,
• 3:24
  Speaker 1: I was waiting tables and and tending bar or short
• 3:27
  Speaker 1: order chefs way back when. But that's a generational thing,
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  Speaker 1: and five ten fifteen, let's say, ten fifteen years ago,
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  Speaker 1: that wasn't what the standard was it's get an internship,
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  Speaker 1: work on your extracurricular activities, get into a better college,
• 3:47
  Speaker 1: get get into a better um internship program, and first job.
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  Speaker 1: The focus shifted away from earning a living then to
• 3:56
  Speaker 1: what are you going to do over the lifetime earnings?
• 3:59
  Speaker 1: You can see, Barry, what do you think I mean?
• 4:03
  Speaker 1: We're seeing anecdotal evidence of wages on the lower end
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  Speaker 1: of the hiring pool, whether it's McDonald's going to thirteen
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  Speaker 1: bucks or you know, Amazon, you know, going to fifteen
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  Speaker 1: dollars here is that just anecdotal or does that really
• 4:18
  Speaker 1: signify this, you know, pulling up the bottom of the
• 4:22
  Speaker 1: wage scale. It's a good question because very I gotta
• 4:26
  Speaker 1: I gotta point out, you know, we haven't really seen
• 4:29
  Speaker 1: wage inflation at all. If you look over the last decades, right, everything,
• 4:33
  Speaker 1: the price of everything rises butt wages. So so here's
• 4:36
  Speaker 1: the here's the issue you're referring to, and it plays
• 4:40
  Speaker 1: into both wages and inflation. We have a tendency for
• 4:47
  Speaker 1: wage prices to be sticky, and then at a certain
• 4:52
  Speaker 1: point it becomes clear that wages are insufficient and you
• 4:57
  Speaker 1: get this reset higher. So instead of seeing like an
• 5:00
  Speaker 1: annualized increase in wage inflation. You sort of get this
• 5:04
  Speaker 1: reset up and then it goes plateaus for a while,
• 5:07
  Speaker 1: and you could tell that wages are moving higher, not
• 5:12
  Speaker 1: because of the BLS or Census data, but my favorite
• 5:16
  Speaker 1: data point is the quits rate. The people with full
• 5:20
  Speaker 1: time jobs who are saying to their bosses audio smoas
• 5:24
  Speaker 1: and moving on because there are better opportunities at higher wages.
• 5:30
  Speaker 1: And if your boss won't give you a raise, someone
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  Speaker 1: else will. And so the flip side of why can't
• 5:36
  Speaker 1: I hire people becomes why can't I retain people? For
• 5:41
  Speaker 1: the hiring. I keep saying wages are table stakes, but
• 5:45
  Speaker 1: if you want to keep people, it's more than just wages.
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  Speaker 1: It's some sort of path to equity, profit participation, benefits
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  Speaker 1: for oh one k things like that. And as we've
• 5:58
  Speaker 1: seen over the past year, are you have to give
• 6:00
  Speaker 1: people some freedom and control over their working circumstances. Ours
• 6:05
  Speaker 1: we got and we got down to the we got
• 6:08
  Speaker 1: down to the two minute mark, which means I gotta
• 6:10
  Speaker 1: ask you about Ferrari. I speak. It's a new job, right.
• 6:15
  Speaker 1: They got a new guy as CEO. He comes from
• 6:18
  Speaker 1: wait for it, st micro Electronics. Ferrari, the new guy
• 6:24
  Speaker 1: they hired run Ferrari deals with like touch screen interactivity.
• 6:28
  Speaker 1: What the heck? Let me let me break this down really,
• 6:32
  Speaker 1: really easily, so that even you can understand it. Tesla
• 6:38
  Speaker 1: doesn't make cars, they make computers that move, and Ferrari
• 6:43
  Speaker 1: has recognized that and said, we have been building so
• 6:48
  Speaker 1: much electronics into our all, all of the traction, control,
• 6:53
  Speaker 1: over the management, management, all of the which tire is
• 6:56
  Speaker 1: going to get, how much power it for vector and
• 7:00
  Speaker 1: how much time, how many times a second, how many
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  Speaker 1: hundreds of times a second? Are we gonna adjust that
• 7:06
  Speaker 1: that the electronics become even more important than your favorite
• 7:12
  Speaker 1: V twelve and ps. If you think Ferrari is going
• 7:16
  Speaker 1: to be internal combustion engine forever, I got some bad
• 7:19
  Speaker 1: news for you, Matt. They will eventually go to the faster,
• 7:25
  Speaker 1: greener e V and the only thing they're gonna miss
• 7:29
  Speaker 1: is the wonderful sound that comes out of those four
• 7:32
  Speaker 1: chrome pipes at the back. I don't either, Paul. We're
• 7:38
  Speaker 1: gonna buy old Ferrari's. Me and Barry are gonna be
• 7:41
  Speaker 1: on bring a Trailer dot com while the rest of
• 7:44
  Speaker 1: you are driving brand new electronic whiz kid cars and uh,
• 7:48
  Speaker 1: while we still probably won't be able to afford them.
• 7:50
  Speaker 1: Great talking to Barry ittt Holtz. As always, this is Bloomberg.
• 7:58
  Speaker 1: Now President has revoked the Trump era bands on TikTok
• 8:05
  Speaker 1: and we chat we chat in the United States of America.
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  Speaker 1: Jim Anderson, CEO of Social Flow, is here UM to
• 8:12
  Speaker 1: talk with us a little bit about this. And we
• 8:14
  Speaker 1: also want to point out here at Bloomberg we use
• 8:17
  Speaker 1: social Flow. It's a platform used by Bloomberg for social
• 8:20
  Speaker 1: media purposes. So just full disclosure there, we have another
• 8:24
  Speaker 1: relationship with Jim. Um, let's get to the TikTok and
• 8:27
  Speaker 1: we chat what what were the bands like and what
• 8:31
  Speaker 1: does this um revocation mean? I mean kids were still
• 8:37
  Speaker 1: using TikTok and we chat in the United States, right, oh,
• 8:41
  Speaker 1: without a doubt. And to be clear, this was never
• 8:43
  Speaker 1: about TikTok or or we chat chat. It was about
• 8:46
  Speaker 1: the US and China relationship. And you know, President Trump
• 8:49
  Speaker 1: issues his executive order he said that Bike Dance had
• 8:52
  Speaker 1: to sell TikTok and there were various suitors. If you
• 8:55
  Speaker 1: remember Microsoft, the Oracle, We're going to buy it. But
• 8:57
  Speaker 1: remember the Chinese government ultimately had to approve that sale.
• 9:01
  Speaker 1: And that always seemed wildly unlikely. You know, so really
• 9:04
  Speaker 1: this is less about regulation of big tech and more
• 9:07
  Speaker 1: about the U. S. Relationship with China expressed through big
• 9:10
  Speaker 1: tech A Jim. It's the expectation not in Silicon Valley,
• 9:14
  Speaker 1: that Biden administration will in fact dial down the rhetoric
• 9:20
  Speaker 1: in terms of maybe some of the regulatory concerns about
• 9:23
  Speaker 1: big tech that we're really starting to ramp up during
• 9:27
  Speaker 1: towards the end of the Trump presidency. Yeah, for sure,
• 9:30
  Speaker 1: dialing down the rhetoric. I mean, it doesn't take too
• 9:33
  Speaker 1: much of an expert a server to to look and
• 9:35
  Speaker 1: see that. You know, President Biden governs in a very
• 9:38
  Speaker 1: different fashion than President Trump did. But I wouldn't, you know, confuse,
• 9:42
  Speaker 1: you know, dial down rhetoric with a lack of substance.
• 9:44
  Speaker 1: I think there's really something still quite substantive here, and
• 9:48
  Speaker 1: that's because the U. S. China relationship and competitive nature
• 9:52
  Speaker 1: of that relationship is still very very much in place.
• 9:55
  Speaker 1: So the fact that he revoked the executive order in
• 9:57
  Speaker 1: some ways was inevitable because it was a fairly dubious
• 10:01
  Speaker 1: executive order. I think the subsequent court filings and all
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  Speaker 1: suggested that there was a long battle to be had
• 10:06
  Speaker 1: with that executive order. So rather than fight a losing battle,
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  Speaker 1: I think he just decided quite quite understandably to just
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  Speaker 1: revoke it. But you know that that doesn't mean this
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  Speaker 1: is over. I think there's still a substantial and legitimate
• 10:19
  Speaker 1: concern about a Chinese company owning data about U. S
• 10:23
  Speaker 1: citizens and that's not gone away. Yeah. That, well, that
• 10:27
  Speaker 1: definitely hasn't gone away. And we see other concerns around.
• 10:30
  Speaker 1: For example, the peace cable UM I think, is just
• 10:34
  Speaker 1: reaching the southern coast of France and Google isn't going
• 10:38
  Speaker 1: to use it, Amazon is not going to use it.
• 10:41
  Speaker 1: How is this all gonna work out? Because no doubt
• 10:45
  Speaker 1: Huawei shares data with the Chinese government if they have
• 10:49
  Speaker 1: to write, I would assume some US big US tech
• 10:53
  Speaker 1: companies probably do the same with US. Yeah. Well, and
• 10:56
  Speaker 1: that's a great point too, because we were seeing you know,
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  Speaker 1: situations where people are you know, being compelled under court
• 11:02
  Speaker 1: order to provide data and the companies will fight it, etcetera.
• 11:05
  Speaker 1: So you know, two different you know ideologies that work there.
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  Speaker 1: One is very you know, authoritarians and the other is
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  Speaker 1: is more of a democracy or a public So I
• 11:14
  Speaker 1: don't know that I can give you an answer to that,
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  Speaker 1: But I will say that this is just one of
• 11:18
  Speaker 1: many battles we're going to see. And the thing that
• 11:21
  Speaker 1: my mind makes it so unique is just how wildly
• 11:24
  Speaker 1: popular TikTok continues to be. I mean it it is
• 11:27
  Speaker 1: red hot. It's got the attention of young people. Um,
• 11:30
  Speaker 1: it's proven quite difficult for competitors to harness the same
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  Speaker 1: level of creativity. So you might think that, oh, TikTok
• 11:36
  Speaker 1: is is doomed. You know, it's a bit of a
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  Speaker 1: strong statement, but you know, with all of this regulatory
• 11:41
  Speaker 1: overhang and concern about presidential executive orders, you might think
• 11:45
  Speaker 1: that it's not relevant. But in many ways, TikTok is
• 11:48
  Speaker 1: more relevant than ever too young people who who quite
• 11:50
  Speaker 1: honestly don't really care about the geopolitical political implications. They
• 11:53
  Speaker 1: just like a fun app. So what do you think
• 11:55
  Speaker 1: the future is for TikTok. It's still owned by Byte Dance, right,
• 11:59
  Speaker 1: I mean, is this think they could spun out or
• 12:01
  Speaker 1: I p O somewhere or again, as you mentioned, it's
• 12:04
  Speaker 1: just become so popular. Yeah, I think it depends on
• 12:07
  Speaker 1: whether the Chinese government ultimately would like to harvest the
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  Speaker 1: economic value or use it to make a political point,
• 12:15
  Speaker 1: and my guess is um that they're not, you know,
• 12:18
  Speaker 1: sort of eager to just harness a couple of billion
• 12:20
  Speaker 1: dollars of economic excited. Maybe more than a couple of
• 12:22
  Speaker 1: billion if the I POD or spun it out to
• 12:24
  Speaker 1: another owner. I mean, it could be worth tens of
• 12:27
  Speaker 1: billions of dollars. But the Chinese government's got lots of money.
• 12:30
  Speaker 1: I'm not sure they say necessarily want to say, hey,
• 12:32
  Speaker 1: let's let's just get tens of billions. I think they
• 12:35
  Speaker 1: want to continue to use their position and the stay
• 12:38
  Speaker 1: their their effective control over an asset's so popular in
• 12:42
  Speaker 1: the U. S as as more of a geopolitical chip.
• 12:44
  Speaker 1: So I would expect this to continue. And ultimately there
• 12:46
  Speaker 1: may very well be something that comes out of the
• 12:48
  Speaker 1: Biden administration that actually forces the same thing that President
• 12:52
  Speaker 1: Trump was trying to do at the time, which is
• 12:53
  Speaker 1: to force a divestiture. That wouldn't surprise me at all. Well,
• 12:56
  Speaker 1: and the Biden administration could put some pressure itself on
• 12:59
  Speaker 1: our own big social media platforms. Right, just got about
• 13:02
  Speaker 1: ten seconds here, Jim, Oh, yeah, and that will continue, right.
• 13:06
  Speaker 1: Antitrust and privacy are the two big dimensions there, and
• 13:09
  Speaker 1: those are not going away Facebook, Punch and center on
• 13:12
  Speaker 1: those all right. Jim, thanks so much for joining us.
• 13:14
  Speaker 1: We always appreciate chatting with you. Getting the latest from
• 13:18
  Speaker 1: some of the big tech platforms out there, and again
• 13:21
  Speaker 1: good news for TikTok for sure. Jim Anderson, CEO of
• 13:24
  Speaker 1: Social Flow, joining us here and again looking at the
• 13:27
  Speaker 1: markets again. Still you know Hire today and led by
• 13:31
  Speaker 1: the NASTAC one hundred. That's up seven tenths of one percent,
• 13:34
  Speaker 1: So a little bit of a move into those tech
• 13:36
  Speaker 1: names we are seeing again. Lots of economic data. This
• 13:41
  Speaker 1: morning's CPI came in a little bit higher than expected,
• 13:44
  Speaker 1: stoking some concerns about inflation into this market place. Let's
• 13:49
  Speaker 1: check in with Chris Zacarelli. He's the chief investment officer
• 13:52
  Speaker 1: for Independent Advisers Alliance Today about seven billion dollars in
• 13:56
  Speaker 1: assets under management. Chris, thanks so much for joining us here.
• 14:00
  Speaker 1: You've got the economic data this morning. Did that make
• 14:03
  Speaker 1: you think that this FED is likely to begin tapering
• 14:07
  Speaker 1: sooner rather than later. Well, the FET is definitely considering
• 14:12
  Speaker 1: tapering at some point, and with the FED meeting next
• 14:15
  Speaker 1: next week, we're we're thinking now is the time to
• 14:17
  Speaker 1: start positioning for that. So whether they start the communication
• 14:20
  Speaker 1: process for tapering next week or potentially more likely in
• 14:23
  Speaker 1: August during the Jackson Whole symposium, we know they're going
• 14:26
  Speaker 1: to be talking about tapering very shortly, and so I
• 14:30
  Speaker 1: think looking at these inflation numbers, clearly the FAT has
• 14:32
  Speaker 1: to be watching what's happened the last couple of months.
• 14:35
  Speaker 1: They've been communicating pretty effectively that they're going to look
• 14:38
  Speaker 1: through a lot of these inflation numbers. So I don't
• 14:40
  Speaker 1: know that this morning's print is necessarily going to change
• 14:42
  Speaker 1: their game plan. But for all those people who think
• 14:45
  Speaker 1: inflation is going to be transitory and not sticky, as
• 14:48
  Speaker 1: we continue to see these prints every single month, it's
• 14:51
  Speaker 1: got at least put some doubt in your mind and
• 14:53
  Speaker 1: take away a little bit of that conviction. So I think,
• 14:55
  Speaker 1: if anything, that would be the one change at the
• 14:57
  Speaker 1: margin that that I would expect out of today's now words,
• 15:00
  Speaker 1: Let's say, what does transitory look like? It's transitory like um,
• 15:04
  Speaker 1: three to six months, or is transitory like a year
• 15:07
  Speaker 1: or two? You know in our in our minds, transitory
• 15:11
  Speaker 1: would be less than a year. I think you asked
• 15:13
  Speaker 1: that question of of a hundred people, and you'll get
• 15:15
  Speaker 1: close to a hundred answers. I think everyone has has
• 15:17
  Speaker 1: their own range of what transitory is. I think a
• 15:20
  Speaker 1: FED is deliberately been vague about what transitory means in
• 15:23
  Speaker 1: order to give themselves a little bit more room to
• 15:25
  Speaker 1: work with. But if anything, they've said time and again
• 15:28
  Speaker 1: that they're willing to allow inflation to run a little
• 15:31
  Speaker 1: bit hotter hotter than they normally would. They're much more
• 15:34
  Speaker 1: focused on the labor part of their dual mandate than
• 15:36
  Speaker 1: they are in the price stability part of their two
• 15:38
  Speaker 1: dual mandate. So for our mind, if we see these
• 15:41
  Speaker 1: types of prints going over the course of more than
• 15:43
  Speaker 1: six months, that would definitely be a concern to us.
• 15:46
  Speaker 1: It's possible to FED would let that run a little
• 15:48
  Speaker 1: bit longer. But the longer the definition of transitory, the
• 15:51
  Speaker 1: longer we're going to be in this this state of flux.
• 15:54
  Speaker 1: And I think the more volatility that that um brings
• 15:57
  Speaker 1: to the situation, which is which is why they need
• 15:59
  Speaker 1: to really kind of button that up. All right, Chris,
• 16:01
  Speaker 1: giving that background, where are you guys doing some work today?
• 16:04
  Speaker 1: Where do you see some opportunities? So for us, an
• 16:08
  Speaker 1: interesting area is still the financials. So whether that's the
• 16:11
  Speaker 1: regional banks or the larger money sending money money center banks.
• 16:15
  Speaker 1: The financials are really showing some weakness from a technical
• 16:18
  Speaker 1: point of view, but from evaluation point of view, there's
• 16:20
  Speaker 1: they're still cheap to where they've been historically. So we
• 16:23
  Speaker 1: think within the financials, if the economy continues to do
• 16:26
  Speaker 1: well and interest rates they anchored, financials should do okay.
• 16:30
  Speaker 1: And I think we're going to see some buying opportunities
• 16:32
  Speaker 1: in the next few months within financials as people continue
• 16:36
  Speaker 1: to see interest rates being very staying stuck very low. However,
• 16:40
  Speaker 1: if interest rates start going higher again, that's great for financials.
• 16:43
  Speaker 1: So we think financials are are well priced. We think
• 16:46
  Speaker 1: there's some weakness at least in terms of the technicals.
• 16:48
  Speaker 1: So I pick your spots, and I think you're gonna
• 16:50
  Speaker 1: see some financials go on sale. But we see that
• 16:53
  Speaker 1: as heads you do okay, tales you do very well,
• 16:56
  Speaker 1: and so we like the risk rewards set up at
• 16:58
  Speaker 1: least within within that end street. So again thinking about
• 17:04
  Speaker 1: some opportunities here, you know, again the concern is that
• 17:07
  Speaker 1: the FED is going to need to raise rates here. Um,
• 17:12
  Speaker 1: given that scenario, are there parts of the market that
• 17:16
  Speaker 1: you just think you're gonna be really rocked when and
• 17:19
  Speaker 1: if that happens, well, if interest rates start going higher,
• 17:23
  Speaker 1: and again that's more likely to be at the ten
• 17:26
  Speaker 1: year or third year range, we're gonna see longer term
• 17:28
  Speaker 1: insestrates move higher through through the market. Tapering is one
• 17:31
  Speaker 1: way that could happen, and and a shift and sentiment
• 17:34
  Speaker 1: is another way. As far as short term rates, with
• 17:36
  Speaker 1: the when the Fed will begin raising, I think most
• 17:38
  Speaker 1: people believe that's a year or two out at the earliest,
• 17:41
  Speaker 1: even as inflation starts to heat up. So we think
• 17:43
  Speaker 1: if longer term interest rates go higher again through either
• 17:46
  Speaker 1: taper discussions or just because the bond market changes the
• 17:49
  Speaker 1: narrative for how how high they think rates will will
• 17:52
  Speaker 1: go in the future and how much economic growth and
• 17:54
  Speaker 1: inflation rates higher. We think technology shares and high price
• 17:59
  Speaker 1: price to earn shares are are the parts of the
• 18:01
  Speaker 1: market that are are most vulnerable in that case, and
• 18:04
  Speaker 1: so those those are areas of the market i'd be
• 18:06
  Speaker 1: careful on. You want to right size your positions in
• 18:08
  Speaker 1: those longer duration stocks, so to speak. You know that, um,
• 18:13
  Speaker 1: the narrative that this is a very dangerous moment for
• 18:16
  Speaker 1: central banks has really gained a lot of pace. Um.
• 18:19
  Speaker 1: We heard that from Andy Haldane, chief economists at the
• 18:23
  Speaker 1: Bank of England. We have heard Martin folkirts Land down,
• 18:26
  Speaker 1: Peter Hooper at Deutsche Bank saying, you know, inflation could
• 18:29
  Speaker 1: be more than just transitory and uh. Bill Dudley wrote
• 18:32
  Speaker 1: for Bloomberg Opinion that the problem with this is this
• 18:35
  Speaker 1: overheating is that when it's time to turn around, the
• 18:39
  Speaker 1: Fed's gonna have to raise rates quickly, more quickly than
• 18:44
  Speaker 1: people are ready for, and faster and uh and higher
• 18:47
  Speaker 1: than people may be ready for, and that could bring
• 18:49
  Speaker 1: about a full blown recession. It's like a turn on
• 18:52
  Speaker 1: a dime kind of situation. Is that a concern you
• 18:55
  Speaker 1: think that's gaining a lot more traction. I don't know
• 18:59
  Speaker 1: that has gained as extraction as it should. It's a
• 19:01
  Speaker 1: concern that we share. We are also in that camp that, um.
• 19:04
  Speaker 1: The idea that the FED is going to play this
• 19:06
  Speaker 1: perfectly keep inflation in check while the economy reopens, I
• 19:10
  Speaker 1: think is a is a stretch. And I think for
• 19:13
  Speaker 1: all those people who are keeping interest rates as low
• 19:15
  Speaker 1: as they are buying that tenure today and keep knocking
• 19:18
  Speaker 1: down those rates, that's a big article of faith from
• 19:21
  Speaker 1: from our point of view, and one that we don't
• 19:22
  Speaker 1: have as much conviction and as clearly a lot of
• 19:25
  Speaker 1: bond market investors have. We think there's a really big
• 19:28
  Speaker 1: difference between uh an extraordinary amount of quantitative easing, which
• 19:32
  Speaker 1: was done after the global financial crisis. Sure M two
• 19:35
  Speaker 1: can jump up astronomically, but as long as the velocity
• 19:38
  Speaker 1: of money collapses, you can get away with so much
• 19:41
  Speaker 1: quantitative easing without seeing a lot of inflation. But what's
• 19:44
  Speaker 1: different this time around is we've got so much fiscal
• 19:46
  Speaker 1: stimulus in addition to the monetary stimulus, and that's something
• 19:49
  Speaker 1: we're surprised that the market is not seemed to not
• 19:52
  Speaker 1: be taking into consideration the idea of putting trillions of
• 19:55
  Speaker 1: dollars into the hands of consumers, especially those lower income consumers,
• 20:00
  Speaker 1: we're much more likely to spend it. We think that's
• 20:02
  Speaker 1: where the risk lies. It's not that we have so
• 20:04
  Speaker 1: much quantitative easing. It is that we have quantitative easing
• 20:06
  Speaker 1: on top of trillions of dollars a fiscal stimulus. And
• 20:09
  Speaker 1: I'm not the only person who's who's making this point.
• 20:12
  Speaker 1: I think there are others who are starting to talk
• 20:14
  Speaker 1: about it. But if I think that narrative is the
• 20:16
  Speaker 1: one that I haven't seen really take off, and I'm
• 20:18
  Speaker 1: surprised about it, I would think, And that much fiscal
• 20:21
  Speaker 1: stimulus on top of monetary stimulus is why inflation is
• 20:25
  Speaker 1: much more of a risk than it ever was in
• 20:29
  Speaker 1: two thousand nine, two thousand ten, and even into the
• 20:31
  Speaker 1: Taper chance. Chris, have a valuation here again setting new
• 20:37
  Speaker 1: highs in this marketplace. Yes, earnings have been very good
• 20:41
  Speaker 1: for the past couple of quarters. How do you view evaluation?
• 20:44
  Speaker 1: Is that a concern for you and for this market?
• 20:47
  Speaker 1: I think where the market's price right now, at least
• 20:50
  Speaker 1: using the SMPI as a proxy, you have to be
• 20:54
  Speaker 1: aware that that valuations are elevated now. I think within
• 20:58
  Speaker 1: the SMP five you have to look at kind of
• 21:00
  Speaker 1: the the index composition, and because so much of the
• 21:03
  Speaker 1: index is heavily weighted towards technology and communication shares, a
• 21:08
  Speaker 1: lot of those companies are businesses that are that deserve
• 21:12
  Speaker 1: those valuations. So I think evaluation in and of itself
• 21:15
  Speaker 1: is not a concern for us, but it's something that
• 21:17
  Speaker 1: we're keeping in mind. It's definitely a necessary condition, all right, Chris,
• 21:20
  Speaker 1: thanks so much for joining us. Chris Scarelly, chief investment
• 21:23
  Speaker 1: officer for Independent Advisor Alliance. Let's get over now to
• 21:29
  Speaker 1: Ted Swimmer, head of Corporate Finance and Capital Market at
• 21:33
  Speaker 1: Citizens speak Capital Markets at Citizens, because we had um
• 21:37
  Speaker 1: first off, Ted, really interesting no doubt from the SEC
• 21:44
  Speaker 1: yesterday that Gary Gensler has instructed his staff to well
• 21:47
  Speaker 1: make markets work better is the broad order, But UM
• 21:52
  Speaker 1: talking really to to his staff about market makers and um,
• 21:59
  Speaker 1: you know, buying fund thos. What do you think about
• 22:01
  Speaker 1: the changes we should see? Well, thank first of all,
• 22:05
  Speaker 1: thanks for having me this morning. We're seeing some very
• 22:08
  Speaker 1: positive fund flows in the businesses that we're working on.
• 22:12
  Speaker 1: We're seeing a lot of investor demand. Loan and bond
• 22:15
  Speaker 1: side of the businesses seem to be taking off. We
• 22:19
  Speaker 1: feel like the markets are incredibly accommodative now for future
• 22:23
  Speaker 1: for transactions in the second half of the year. First
• 22:26
  Speaker 1: half of the year has been very aggressive already, but
• 22:29
  Speaker 1: not a ton of new business coming in, not a
• 22:32
  Speaker 1: ton of new l B O s or acquisition related deals.
• 22:35
  Speaker 1: But we're feeling like the pipelines are building rapidly in
• 22:38
  Speaker 1: the second half of the year and we think the
• 22:40
  Speaker 1: markets will be very accommodated for it. So what are
• 22:44
  Speaker 1: some sectors ted that you're seeing some of the activity.
• 22:46
  Speaker 1: And again I think just from the public equity markets,
• 22:49
  Speaker 1: a lot of investors have been piling into some of
• 22:51
  Speaker 1: the cyclical areas of the market that will benefit from reopening.
• 22:55
  Speaker 1: What are you seeing from the corporate finance, the capital markets,
• 22:58
  Speaker 1: the UH specialized loan market. What are you seeing there
• 23:00
  Speaker 1: in terms of sector demand so so far in the
• 23:03
  Speaker 1: first half of year. That UH, the debt markets, which
• 23:06
  Speaker 1: tend to be more backwards looking and forwards looking. UH,
• 23:10
  Speaker 1: we saw a lot of deals in the healthcare and
• 23:11
  Speaker 1: tech markets, given that those markets were not as much
• 23:14
  Speaker 1: affected by the COVID environment last year, So revenues and
• 23:18
  Speaker 1: EPO DOC continue to improve, making a very very easy
• 23:23
  Speaker 1: to do debt transactions in those markets. As we see
• 23:25
  Speaker 1: the second a half year picking up and earnings picking
• 23:28
  Speaker 1: up in more of the cyclicals, I will see more
• 23:31
  Speaker 1: cyclical deals done in the second half of the year,
• 23:33
  Speaker 1: but the first half of the year has really been
• 23:34
  Speaker 1: dominated more by technology and healthcaretil related transactions. Do you
• 23:40
  Speaker 1: have any concerns about inflation. I mean, we're starting to
• 23:43
  Speaker 1: hear some big names in economics voice concerns about the
• 23:47
  Speaker 1: possibility that it may not be transitory. We we do
• 23:52
  Speaker 1: have some I mean it's it's not an overwhelming concern,
• 23:55
  Speaker 1: but we're in the companies that we bank, we're starting
• 23:57
  Speaker 1: to see inflation take off. We're started a few all
• 24:00
  Speaker 1: the consumer pinch a little bit on the inflation side
• 24:03
  Speaker 1: of the business. From an inflation perspective. Uh you know,
• 24:08
  Speaker 1: the bond market has seen some gets seems to get
• 24:11
  Speaker 1: concerned about inflation and then papers off, and because there's
• 24:13
  Speaker 1: still so much demand on that side of the market.
• 24:16
  Speaker 1: I think it's out there. I think, well, I think
• 24:18
  Speaker 1: our bank thinks it's going to hit at some point.
• 24:21
  Speaker 1: It's not an immediate concern, but looking out tools to
• 24:24
  Speaker 1: eighteen months, I certainly think it's going to be part
• 24:26
  Speaker 1: of the discussion on everything we're doing. Talk to us
• 24:29
  Speaker 1: just real quickly about private equity ted kind of are
• 24:32
  Speaker 1: they driving deal flow out there and kind of the
• 24:35
  Speaker 1: small mid market part of the market. Absolutely, private equity
• 24:41
  Speaker 1: is becoming, not becoming, is the dominant force in the
• 24:45
  Speaker 1: upper middle markets uh D fifty million dollar eve dot
• 24:49
  Speaker 1: type transactions. We're seeing a lot of private equities obviously
• 24:53
  Speaker 1: stay on the sidelines from a new business perspective last year,
• 24:57
  Speaker 1: and that market is hot right now. From from both
• 25:01
  Speaker 1: the selling perspective, we're seeing a number of p sell
• 25:03
  Speaker 1: some firms, but the main buyer out there is the
• 25:07
  Speaker 1: PE market. A number of middle market companies we're seeing
• 25:11
  Speaker 1: wanting to sell. Given I think they looked over the
• 25:13
  Speaker 1: precipice last year during COVID, got nervous see the potential
• 25:17
  Speaker 1: change in the capital gains tax next year, and I
• 25:20
  Speaker 1: think they want to They want to have a liquidity event,
• 25:22
  Speaker 1: and private equities the dominant buyer. The debt markets are
• 25:26
  Speaker 1: certainly whether it's private BED or public BET is certainly
• 25:28
  Speaker 1: accommodated or those transactions to occur. And I think we'll
• 25:32
  Speaker 1: see the second half of the year dominated by by
• 25:35
  Speaker 1: eminent by private equity snatching up opportunities. Obviously, we saw
• 25:39
  Speaker 1: a couple of those deals announced last week, and uh,
• 25:43
  Speaker 1: I think we'll see that as a continuing trend through
• 25:45
  Speaker 1: the third and fourth quarter of this year. Hey, Ted,
• 25:48
  Speaker 1: thanks so much for joining us. We really appreciate you
• 25:50
  Speaker 1: taking the time. They're giving us some thoughts on the
• 25:52
  Speaker 1: capital markets there, uh remain hot, likely to get even
• 25:56
  Speaker 1: hotter in the second half of the year, says Mr
• 25:58
  Speaker 1: Swimmer Ted Swimmer, head of Corporate Finance and Capital Markets
• 26:01
  Speaker 1: at Citizens. Good to get a sense of kind of
• 26:03
  Speaker 1: how things are going out there in the deal flow.
• 26:06
  Speaker 1: We've seen some big, big deals, obviously strategic M and
• 26:09
  Speaker 1: A transactions, but small and mid market also doing well
• 26:12
  Speaker 1: and very active. Thanks for listening to the Bloomberg Markets podcast.
• 26:16
  Speaker 1: You can subscribe and listen to interviews of Apple Podcasts
• 26:20
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 26:24
  Speaker 1: on Twitter at Matt Miller, three pt on Fall Sweeney.
• 26:28
  Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You
• 26:30
  Speaker 1: can always catch us worldwide at Bloomberg Radio