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Mayoral Candidate Eric Adams On The Future Of NYC · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. All right, want to
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Speaker 1: treat today in our Bloomberg Interactive Broker studio. Today we
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Speaker 1: have Eric Adams, New York City mayor candidate, and he's
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Speaker 1: got a day job too, he's Brooklyn Borough President. He
0:30
Speaker 1: joins us here in studio. Mr Adams, thank you so
0:33
Speaker 1: much for joining us. We really appreciate you taking the time. Um,
0:36
Speaker 1: you know, you still have a general election to go,
0:38
Speaker 1: but let's make the assumption that you per that you
0:42
Speaker 1: win that election. What is job one for you? And
0:46
Speaker 1: you're a new administration of public safety? We we have
0:50
Speaker 1: to be safe. I stated this over and over again.
0:53
Speaker 1: The prerequisite to prosperities, public safety and justice. I must
0:58
Speaker 1: allow New Yorkers to know that they're going to be
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Speaker 1: safe on our their subway system when they returned back
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Speaker 1: to their offices. Our individuals that go to restaurants are
1:09
Speaker 1: not going to be robbed like we saw a few
1:12
Speaker 1: days ago while they sit down and have dinner. This
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Speaker 1: city must be safe for tourism to return and for
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Speaker 1: businesses to grow and thrive. How do we do that
1:22
Speaker 1: or how does a city do that? Is it simply
1:25
Speaker 1: numbers more cops, better train cops, better deployment of cops.
1:29
Speaker 1: How do we do that? It's a combination. Uh, the
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Speaker 1: bad guys are watching the good people of this city
1:35
Speaker 1: squabble with each other over technical aspects and how we police.
1:41
Speaker 1: So I'm going to hit reset with my police officers
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Speaker 1: and let them know I have their backs. But I'm
1:47
Speaker 1: also going to send aloud message that if you don't
1:50
Speaker 1: respect the nobility of public protection, you can't serve in
1:53
Speaker 1: my agency. And We're going to reintroduce ourselves to the
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Speaker 1: men and women who are protecting us. Yeah, I saw.
2:01
Speaker 1: I was back in New York, um where I'm from,
2:03
Speaker 1: actually went to PS for kindergarten. I was back in
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Speaker 1: New York in July and Um I was hanging out
2:10
Speaker 1: on Street and Lex waiting for an uber. I saw
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Speaker 1: a group of people riding stolen motorcycles past a few
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Speaker 1: squad cars. Not none of the police moved a finger.
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Speaker 1: I turned around. Somebody was selling drugs right behind me.
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Speaker 1: The police clearly could see it, not doing anything about it.
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Speaker 1: How do you motivate a police force that is just
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Speaker 1: seemingly given up, and that's true. You motivate them by
2:36
Speaker 1: letting them know that one of their own will be
2:40
Speaker 1: moving into the position of ensuring that they get to
2:43
Speaker 1: support they need to get there to do their jobs.
2:46
Speaker 1: And you're right, I've witnessed it as well, just a
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Speaker 1: hands off approach to dealing with those quality of life issues,
2:55
Speaker 1: and that's not acceptable a city as diverse and as
2:58
Speaker 1: large as New York is in parative that we have
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Speaker 1: a set of standards and how do we expect to
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Speaker 1: treat our neighbors. I've watched a group of people on
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Speaker 1: a t v s driving up to down the sidewalk
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Speaker 1: of by Fifth Avenue in Manhattan, New Prospect in Central Park.
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Speaker 1: We can't have a city of disorder. We can do
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Speaker 1: it without heavy handedness. But at the same time, we
3:24
Speaker 1: need to create a standard of expectations in our city. Alright,
3:28
Speaker 1: some stratums you when you came into the Bloomberg in
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Speaker 1: the Bloomberg headquarters here on Election toon Avenue and fifty
3:34
Speaker 1: eight Street. You might have seen that in this block
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Speaker 1: between fifty eight and fifty nine Street on Electionington, every
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Speaker 1: storefront was vacant and pre pandemic. They were thriving with
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Speaker 1: some seemingly big box stores as well as some local retailers.
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Speaker 1: How do we bring business back to How do we
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Speaker 1: reopen New York City? How do we bring business back
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Speaker 1: to New York City? One thing I have been doing
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Speaker 1: for the last two and a half three years, having
3:59
Speaker 1: focused with business leaders and finding out how do we
4:03
Speaker 1: do just that? And I was alarmed to discover how
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Speaker 1: too expensive, to bureaucratic, and too difficult it is to
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Speaker 1: do business in the empire state. We were a city
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Speaker 1: where we build empires. But cities are made up of agencies,
4:22
Speaker 1: and if those agencies are in the way of building empires,
4:26
Speaker 1: we would never be able to allow it to happen.
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Speaker 1: This is a city that is vibrating with ten million dreams. Uh,
4:35
Speaker 1: those dreams are about to wake up, and they're going
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Speaker 1: to wake up because I'm going to create a city
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Speaker 1: that is open for business, where we're going to you
4:46
Speaker 1: utilize our agencies and our manpower to make sure businesses
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Speaker 1: are here. We're going to attract them with incentives. We're
4:53
Speaker 1: going to encourage them to developing out of boroughs. We're
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Speaker 1: going to build out the pipeline of talent so that
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Speaker 1: we can filled the jobs that are available. Right now,
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Speaker 1: no one wants to do business in this city because
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Speaker 1: we have been defined as a business enemy city instead
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Speaker 1: of a business friendly city. It is too expensive and
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Speaker 1: I think, uh for residents as well. I say this
5:17
Speaker 1: as a free market capitalist, and I'm sure that almost
5:21
Speaker 1: all of our listeners and most of our clients also
5:25
Speaker 1: believe in free markets. On the other hand, if you're
5:29
Speaker 1: you know, a family of three or four or five,
5:33
Speaker 1: and you're working middle class job in New York, there's
5:36
Speaker 1: no way you can afford an apartment big enough for
5:39
Speaker 1: the family. How do you do? How do you deal
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Speaker 1: with that? As mayor? Well, clearly we have decimated the
5:45
Speaker 1: middle class in this city. There are a lot of
5:47
Speaker 1: incentives for low income and high income, but we forgot
5:51
Speaker 1: the backbone of our city. And I believe the backbone
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Speaker 1: is that teacher and accountant. Uh that backbone. Believe it
5:59
Speaker 1: in odd is even the fast food workers. We were
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Speaker 1: successfully getting them to receive a fifteen dollar minimum wage. Uh,
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Speaker 1: you have a husband and wife. They are moved into
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Speaker 1: an area where the city is unaffordable. And so we
6:13
Speaker 1: must reinvest in the Mitchell Llama style programs that we had,
6:18
Speaker 1: in the officer teacher next door programs that we had
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Speaker 1: where we incentivized people to be able to not only
6:25
Speaker 1: rent approaches. And then we should look at our affordable
6:28
Speaker 1: housing program and look at some form of affordable housing
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Speaker 1: with ownership in that affordable housing. How do we carry
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Speaker 1: it out so people can start owning and building equity
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Speaker 1: in the city that they love. So we must ensure
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Speaker 1: the areas that government can control, such as rent. We
6:47
Speaker 1: must ensure that we have a cross section based on
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Speaker 1: income bands of low income, middle income New Yorker is
6:54
Speaker 1: so that they can stay in the city that they love. Uh.
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Speaker 1: Mr Adams talked to us about infrastructure. We've um, you know,
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Speaker 1: the subways and just general infrastructure in this city challenge.
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Speaker 1: We just have the recent um, you know, the remnants
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Speaker 1: from the Hurricane Ida, you know, putting a crimp into
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Speaker 1: the subway system for about twenty four hours. How do
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Speaker 1: you think about infrastructure in this city? Great question of
7:16
Speaker 1: you know, we need to be honest with ourselves. We
7:19
Speaker 1: screwed up the planet and we didn't do it in
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Speaker 1: one day. We did it over years of improper treating
7:26
Speaker 1: of the planet. So we're not going to fix this instantly.
7:30
Speaker 1: We must have an intervention plan and a prevention plan,
7:34
Speaker 1: prevention other long term things. Every new sewer project we
7:38
Speaker 1: should build it with a one hundred year outlook of
7:42
Speaker 1: canna withstand the water levels and the changes in our environment.
7:47
Speaker 1: We need to look at how do we learn how
7:49
Speaker 1: to live with water UH, And there's some amazing programs
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Speaker 1: that are taking place globally. I'm getting ready to take
7:55
Speaker 1: a trip to the Netherlands so I could look at
7:58
Speaker 1: some of the things that they're doing. But then we
8:00
Speaker 1: need intervention right now. Mother Nature is not going to
8:04
Speaker 1: wait for us to build out our sewer systems, so
8:07
Speaker 1: we need to have early warning systems, identified those basement
8:11
Speaker 1: apartments and give people the proper escape routes, investing legalizing
8:17
Speaker 1: some of the units. UH build large retaining pools of
8:22
Speaker 1: We could use some of our open spaces to build
8:24
Speaker 1: large retaining pools to deal with water spill off, spill
8:28
Speaker 1: off and to hold the water into we did with
8:31
Speaker 1: the emergency situation of something they're doing in Hoboken right
8:35
Speaker 1: now where they're building basketball courts over retaining pools. So
8:39
Speaker 1: we have to think differently and embrace the concept that
8:43
Speaker 1: are coming from the experts who we have been meeting with.
8:46
Speaker 1: But there must be a two pronged attack, both intervention
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Speaker 1: and prevention. Have you got any um, you know, think
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Speaker 1: differently solutions to the congestion, the traffic, the double parking.
8:59
Speaker 1: You know, it's always been an issue with New York,
9:01
Speaker 1: but cities around the world are coming up with other
9:04
Speaker 1: ideas and ways to fight it. I'm a congestion pricing guy.
9:08
Speaker 1: I believe in it. I believe the concept is important.
9:10
Speaker 1: Is similar to what London has done many years ago.
9:16
Speaker 1: I think it's important that we do so. But I
9:18
Speaker 1: also believe we need to incentivize truck deliveries. A lot
9:22
Speaker 1: of our congestion is coming from deliveries. We need to
9:25
Speaker 1: start delivering at night, and I think if we incentivize that,
9:29
Speaker 1: we can get a lot of the deliveries done. Uh.
9:32
Speaker 1: And then we need to use alternative methods of transportation. UH.
9:37
Speaker 1: That's everything from the scooters, uh, the you know, the
9:40
Speaker 1: mopas I've visited many countries bike use. When I'm in
9:45
Speaker 1: China or in other parts of the globe, people are
9:47
Speaker 1: using non cars to get around for those who can
9:51
Speaker 1: do so. And not only does it encourage a greater
9:55
Speaker 1: level of mobility diversity, but it does it also deals
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Speaker 1: with the congestion because this congestion is not sustainable in
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Speaker 1: the city. Too much is lose, is lost doing business
10:06
Speaker 1: in the city because you're stuck in traffic somewhere. And
10:08
Speaker 1: then we must create a first rate transportation system. I'm
10:12
Speaker 1: gonna train user, I have a metro card. We create
10:16
Speaker 1: a safe, first rate transportation system, people will utilize our
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Speaker 1: subways and buses. Inequality. As this city builds back, reopens,
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Speaker 1: how do we ensure it reopens and builds back for everyone.
10:28
Speaker 1: It's so true. That is a real problem we have
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Speaker 1: in the city. Uh, the inequalities that we're witnessing is
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Speaker 1: leading to the lack of prosperity for so many New
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Speaker 1: Yorkers and it's just on so many levels. We must
10:41
Speaker 1: do so, and it's not going to be done in
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Speaker 1: the first four years. What I must do, if I'm
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Speaker 1: fortunate enough to become the mayor, is to build the
10:49
Speaker 1: foundation that other mayors can build on. Uh. The inequalities
10:53
Speaker 1: is to go to the source. Number one education. We
10:56
Speaker 1: need to deal with children with special needs and learning
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Speaker 1: disability tease. One study showed that over thirty of our
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Speaker 1: prison population a place like uh like Texas, we're dyslexic.
11:09
Speaker 1: We don't just do dyslexia screening in our city. UM
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Speaker 1: learning disabilities. Uh, you see, fifty five percent of the
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Speaker 1: inmates a rich is a dealing with learning disabilities. So
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Speaker 1: one way of ending inequalities is to focus on education
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Speaker 1: so people can have the opportunities they deserved. Eric Adams,
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Speaker 1: thank you so much for joining us. We really appreciate
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Speaker 1: your time. Eric Adams, New York City Mayoral. Kennedy in
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Speaker 1: Brooklyn Borough President joining us here in our Bloomberg Interactive
11:33
Speaker 1: Broker studio. I want to bring in Megan Horneman, director
11:39
Speaker 1: of portfolio Strategy Advertence Capital Advisors, about two point six
11:43
Speaker 1: billion dollars in assets under management, located in Hunt Valley, Maryland,
11:48
Speaker 1: just outside the Charms City of Baltimore. Megan, thanks so
11:50
Speaker 1: much for joining us here. You know, let's turn to
11:53
Speaker 1: earnings here, evaluation and some of the old time fundamental
11:57
Speaker 1: stuff here we've had some really good earnings over the
11:59
Speaker 1: past several quarters, but some economic concerns you know, from
12:02
Speaker 1: the delta variant and so on, or maybe causing some
12:05
Speaker 1: people to question some of the earnings essments out there
12:07
Speaker 1: for ACQUES three and four. How do you think about
12:10
Speaker 1: that in potential risk for this market. Yes, I think
12:14
Speaker 1: we we've likely seen that peak in the earnings growth rate.
12:19
Speaker 1: We probably saw that this year, and now there's just
12:21
Speaker 1: a little bit more uncertainty because people had come into
12:24
Speaker 1: the third quarter with such heightened expectations for economic growth
12:28
Speaker 1: and now a lot of the data has been mixed.
12:30
Speaker 1: I mean you can see that even just by looking
12:32
Speaker 1: at the City Group Economic Surprise Index that's deeply in
12:36
Speaker 1: negative territory. Um. I know, we got some some positive
12:39
Speaker 1: news from the consumer, but it is on the backup
12:42
Speaker 1: some downward revisions to the prior month. And then as
12:45
Speaker 1: as mentioned, the consumer confidence is still relatively weak. So
12:48
Speaker 1: I think you're going to see some estimates coming down,
12:50
Speaker 1: not just from the earnings perspective, but also from the
12:53
Speaker 1: economic growth perspective as well. We have our own economic
12:58
Speaker 1: Surprise Index as L and a really cool page that
13:03
Speaker 1: you can pull it up with e C s U.
13:05
Speaker 1: Paul just in case you're on right now is the
13:09
Speaker 1: command and obviously, UM it matches up with Megan with
13:14
Speaker 1: the city surprise in Dex we've seen you can you
13:17
Speaker 1: can if you click on the chart on e C
13:19
Speaker 1: S you go, you can blow up the surprise index. Um,
13:22
Speaker 1: look look at or zoom into what we've seen happen
13:26
Speaker 1: over the last I don't know, UM, I guess six months.
13:29
Speaker 1: It hit a high in April May and has come
13:33
Speaker 1: down now into pretty extreme negative territory. Um does this
13:38
Speaker 1: opera opportunities you think, Megan, I don't think quite yet.
13:43
Speaker 1: I think there's still is some more there's some other
13:45
Speaker 1: things in the market that keep us a little hesitant. Um,
13:48
Speaker 1: we have some dry powder, we have cash in portfolios
13:51
Speaker 1: that we're waiting to put to work. We're still optimistic
13:54
Speaker 1: long term, but in the very near term, I think
13:56
Speaker 1: there's still some other risks that we have to digest.
13:59
Speaker 1: Whether it's from the political standpoint. Um, there's going to
14:01
Speaker 1: be a lot of noise just over the next next
14:03
Speaker 1: couple of months, the Federal Reserve next week evaluation. Still
14:08
Speaker 1: even with the modest you know, weakness we've seen here
14:11
Speaker 1: and I say very modest. Keep in mind, the smps
14:14
Speaker 1: only down about two um. This isn't really a pullback
14:17
Speaker 1: that we're seeing here, um. But the valuations still look
14:20
Speaker 1: a little bit stretched here. And do you expect to
14:22
Speaker 1: pull back? Do you expect that we've been hearing so
14:24
Speaker 1: many warnings of maybe there's a ten even fiftcent pullback
14:28
Speaker 1: to come. I think that there is chance for this
14:31
Speaker 1: to continue to get for us to go a bit
14:33
Speaker 1: weaker from here. I can't pinpoint exactly whether it'll be
14:35
Speaker 1: ten or fifteen percent, but I think we're well overdue
14:38
Speaker 1: for at least a minimum of five percent correction. We
14:41
Speaker 1: haven't even pullback. We haven't even had that this year yet. Megan,
14:45
Speaker 1: where are you suggesting your clients allocate their equity portfolios.
14:48
Speaker 1: Is it more than the growth, typical growth kind of
14:51
Speaker 1: portfolio and that has worked so well for a decade
14:54
Speaker 1: or more, or is it some of the more cyclical
14:56
Speaker 1: trades that might be more sensitive to maybe you know,
14:59
Speaker 1: you know, rising in flay, shouldn't reopening economy, that type
15:01
Speaker 1: of thing. Yeah, we we have a little bit of
15:04
Speaker 1: both in our portfolios, but we definitely have more of
15:07
Speaker 1: the value til given our view that we think the
15:10
Speaker 1: cyclical trade has room to go. And also we think
15:13
Speaker 1: that interest rates are going to go higher from here.
15:15
Speaker 1: I think that everybody knows that. But I think interest
15:18
Speaker 1: rates right now just aren't justified where they are looking
15:21
Speaker 1: at long term ten thirty year treasure yields, that's just
15:24
Speaker 1: not justifiable. And when you're talking about the FED tapering,
15:28
Speaker 1: those types of things will weigh on those expensive, you know,
15:32
Speaker 1: growth types of stock, so we have more of a
15:34
Speaker 1: value till here in the US you expect a serious taper.
15:39
Speaker 1: I think you're gonna get the first um, you know,
15:42
Speaker 1: a solid suggestion about it um in the meeting next week.
15:46
Speaker 1: I think you'll start to see the actual taper or
15:48
Speaker 1: taping taking place before the end of this year, probably
15:50
Speaker 1: in the in the November meeting. But I think we're
15:53
Speaker 1: probably going to kind of get us through this debt
15:56
Speaker 1: ceiling that we have at the end of this month.
15:57
Speaker 1: I don't think you're gonna get a firm commitment of
15:59
Speaker 1: its starting next week. I think it'll probably be in
16:02
Speaker 1: November or December, and then they'll have that continue to
16:05
Speaker 1: taper through the all of next year and they'll continue
16:09
Speaker 1: to say, you know, interest rates and tapering are not
16:11
Speaker 1: tied together, so the interest rate hikes are still aways off. Megan,
16:15
Speaker 1: do you get a lot of incoming calls from your
16:17
Speaker 1: clients about crypto and if so, what do you tell them? Uh? No,
16:23
Speaker 1: We've been UM pretty vocal and some of our publications
16:27
Speaker 1: about the crypto market UM that we at this time
16:30
Speaker 1: we're not investing in in the cryptocurrency market or any
16:33
Speaker 1: of the other crypto type of investments. There's still this
16:37
Speaker 1: is such a um the crypto market and all of
16:40
Speaker 1: these other crypto coins and things. But this is a
16:43
Speaker 1: very new UM kind of experiment trying to look at
16:47
Speaker 1: at things. Is using this as some sort of a
16:49
Speaker 1: uh form of tender. But I just don't think that
16:52
Speaker 1: at this time that it really warrants us investing in it.
16:55
Speaker 1: It's way too violatble for our clients, just doesn't have
16:57
Speaker 1: a place in client portfolios. We don't leave it's going
17:00
Speaker 1: to take over any kind of the regular you know,
17:03
Speaker 1: the US dollar or anything from a currency perspective and regulation.
17:07
Speaker 1: I think it's the biggest risk that you're going to
17:08
Speaker 1: see in the crypto market. Could really take the wind
17:11
Speaker 1: out of the sales here and then also just spark
17:13
Speaker 1: volatility and that's just not something that we that we
17:16
Speaker 1: find profit find a good place for portfolios. Megan, thanks
17:21
Speaker 1: so much for joining us. Great to get your take
17:22
Speaker 1: and I hope we can get you back on the
17:24
Speaker 1: program soon. Megan Hornum and their director of portfolio Strategy
17:27
Speaker 1: at Verden's Capital Advisers out of Hunt Valley, Maryland, where
17:31
Speaker 1: they have about two point six billion dollars of assets
17:34
Speaker 1: under management. Earlier I said we're gonna bring in Morgan
17:39
Speaker 1: Stanley's global chief economist, Seth Carpenter, and we've got him
17:42
Speaker 1: on the line right now. Seth, great to have you
17:46
Speaker 1: with us. Um. I guess the overriding question is what
17:50
Speaker 1: does the global economy look like right now after a
17:54
Speaker 1: big spike in the delta variant? Is it rolling over?
17:58
Speaker 1: Are we reopening again? It's your view. Yeah, it's great
18:02
Speaker 1: that it's great to be on with with both of you,
18:04
Speaker 1: So thank you for having me. You know, in the
18:07
Speaker 1: medium term where we're pretty constructive and then there are
18:10
Speaker 1: a bunch of asterisks to talk about downside risks, but
18:12
Speaker 1: you sort of nailed it with the delta variant being there.
18:16
Speaker 1: So what have we seen. We've seen a clear deceleration,
18:18
Speaker 1: but there was always going to be a bit of
18:20
Speaker 1: a deceleration once we got past the surge and growth
18:23
Speaker 1: from reopening and settled into something you know, more medium
18:26
Speaker 1: term and sustainable. So we still feel like we'll see
18:30
Speaker 1: the slowdown, but it will be sustained. What's driving that,
18:34
Speaker 1: I mean, look at global trade for example, trade and
18:36
Speaker 1: consumer good sort of exploded out and brought us back
18:39
Speaker 1: to pre COVID levels. We're seeing now trading capital goods
18:41
Speaker 1: in a CAPEX cycle. What could get in the way, though,
18:44
Speaker 1: is if DELTA is not as contained as we think,
18:47
Speaker 1: So as you implied and as we think, you know,
18:49
Speaker 1: we're peaking with delta, it should be subsiding. And if
18:52
Speaker 1: that's the case, then we should see continued, you know,
18:54
Speaker 1: reasonably strong growth from consumers globally, not just in the US.
18:59
Speaker 1: And the part of global trade that's lower than pre
19:02
Speaker 1: COVID levels is trade and services, especially tourism, and if
19:06
Speaker 1: travel restrictions keep getting lifted, you know, we should see
19:08
Speaker 1: that coming back as well. Seth, I'm a logistics geek
19:12
Speaker 1: here and I'm just fascinated by it, by this global
19:15
Speaker 1: supply chain UH challenges out there, and it's affecting all
19:19
Speaker 1: types of companies and industries. We hear that, then they're
19:22
Speaker 1: quarterly conference calls. Um, how does that impact your global
19:26
Speaker 1: economic outlook if we can't get goods to where they
19:29
Speaker 1: need to be in a timely fashion. Uh so, yeah,
19:33
Speaker 1: I think I think you're right to focus on it.
19:34
Speaker 1: And I think the even more sort of nerdy part
19:38
Speaker 1: of it is that there are non linear implications here.
19:40
Speaker 1: It's not as though there's a producer that has a
19:43
Speaker 1: supplier and if that supplier has trouble, then we have
19:46
Speaker 1: a supply chain issue. It's the fact that they are producers,
19:48
Speaker 1: many of them, who have suppliers, and those suppliers have
19:51
Speaker 1: suppliers and those suppliers of suppliers as well. And so
19:55
Speaker 1: when a country somewhere has a COVID case flare up
19:58
Speaker 1: and there are these very intense restrictions, but in place
20:01
Speaker 1: to limit things, you can get a disruption that just
20:05
Speaker 1: spreads out in a very rapid way. So you know,
20:08
Speaker 1: we're trying to monitor those sorts of things as well
20:10
Speaker 1: as we can. We turn to our colleagues, whore the
20:12
Speaker 1: equity analysts who cover specific firms. This general feedback we're
20:16
Speaker 1: getting as things have got past their worst for supply
20:19
Speaker 1: chain's disruptions and they're gradually getting better. You can look
20:21
Speaker 1: at some of the p M I type surveys and
20:24
Speaker 1: look at how long the delivery delays are, and does
20:28
Speaker 1: also give you the impression that we got past worse
20:31
Speaker 1: than things are slowly starting to normalize by no means
20:34
Speaker 1: good right now, but hopefully starting to heal. And so
20:37
Speaker 1: again it with that is the baseline view that the
20:39
Speaker 1: supply chains are going to get fixed over time. You've
20:43
Speaker 1: got to feel pretty good as a baseline, But we
20:45
Speaker 1: have seen flare ups time and again, and and so
20:48
Speaker 1: I think again you don't want to get too complacent
20:51
Speaker 1: and just assume that everything's on a steady path back
20:54
Speaker 1: to normal. Well, I'm sure that UM J. Powell and
20:58
Speaker 1: Christine Leguard would agree with you. Nonetheless, it doesn't really
21:01
Speaker 1: seem like all these asset purchases are doing that much.
21:06
Speaker 1: Should they be wrapping this stuff up? Is it time
21:08
Speaker 1: to taper? Yeah? Well, I mean I think just listening
21:12
Speaker 1: to the FED commentary themselves, the answer is yes. And
21:15
Speaker 1: so Powell and the rest of the committee has said
21:18
Speaker 1: that tapering this year is their baseline view, and so
21:22
Speaker 1: I see no reason to disagree with them. You know,
21:24
Speaker 1: our view is slightly more probability on December than the November,
21:29
Speaker 1: whereas November is clearly from my perspective, market consensus. You know,
21:34
Speaker 1: the last um CPI report, the last retail sales report,
21:38
Speaker 1: the last jobs report have shown us that forecasting and
21:41
Speaker 1: current circumstances is even harder than usual, and so I
21:43
Speaker 1: think that favor is slightly more patient fed to accumulate,
21:46
Speaker 1: you know, two more jobs report before tapering instead of
21:49
Speaker 1: just the one that they're going to get at the
21:52
Speaker 1: November meeting. But nevertheless, it seems like they're set to
21:54
Speaker 1: start tapering. I think the ECB is a little trickier
21:57
Speaker 1: they're President le Guard said in her press conference. You know,
22:01
Speaker 1: the lady isn't tapering and trying to draw a big
22:05
Speaker 1: distinction between the PEP, the emergency QUEI program versus the
22:10
Speaker 1: app ongoing QUI program. You know, our the Morgan Stanley
22:15
Speaker 1: European Economics team expects, uh as the PEP program is
22:21
Speaker 1: tapered down, the APP program gets more flexible and actually
22:24
Speaker 1: picks up a little bit um. You know, is that constructive?
22:28
Speaker 1: You asked you they be wound down. I think the
22:29
Speaker 1: challenge that the ECB has to confront is where inflation
22:32
Speaker 1: expectations are for them and how how low they are.
22:35
Speaker 1: Their own forecasts have inflation coming back down well below
22:38
Speaker 1: two percent, you know, one and a half percent or
22:40
Speaker 1: so in coming years. That for them, I think is
22:43
Speaker 1: the key struggle if they ever want to get their
22:46
Speaker 1: inflation rate back up to their two percent target. And
22:48
Speaker 1: I think that from from the CBS perspective, is the
22:51
Speaker 1: real reason to keep going with their QUI program is
22:55
Speaker 1: to try to support those inflation expectations. So that's how
22:58
Speaker 1: coordinated are the global central banks these days? As again
23:03
Speaker 1: this is a global issue, like you know, we haven't
23:06
Speaker 1: really seen before. How coordinated are they? Should they be
23:09
Speaker 1: more coordinated? How do you view it? Yeah? So, um,
23:14
Speaker 1: it's interesting. So it spent fifteen years doing central banking
23:17
Speaker 1: at the FED, and one thing that always happens is
23:20
Speaker 1: lots of communication. Coordination where they actually take actions together
23:23
Speaker 1: is quite rare. And I think now we're actually in
23:26
Speaker 1: a place where there's meaningful divergence that's starting to happen.
23:30
Speaker 1: And I think right now that divergence is between e
23:32
Speaker 1: M central banks and d M central banks in general.
23:35
Speaker 1: And then as we get into next year and beyond,
23:36
Speaker 1: it will be divergence between the ECB on the one
23:39
Speaker 1: hand and other developed market central banks. And what I
23:42
Speaker 1: mean here is, you know, inflation, the inflation surges is global.
23:47
Speaker 1: It's likely to be transitory. But a lot of e
23:50
Speaker 1: m UH central banks are saying, we can't rely on
23:53
Speaker 1: anchored inflation expectations given the performance of inflation in recent decades,
23:58
Speaker 1: so they have to be a little bit more active
24:00
Speaker 1: to the high inflation. Until we're seeing, for example, Latan
24:03
Speaker 1: central banks shifting to a hawkish stance UH in contrast
24:09
Speaker 1: to where the d M central banks are UM and
24:13
Speaker 1: I think you know that makes sense. They also have
24:14
Speaker 1: to react to the market starting to say, wow, the
24:16
Speaker 1: Fed's gonna start to taper, and after that, at some point,
24:18
Speaker 1: the Fed's gonna start to hike, and they have to
24:20
Speaker 1: worry about depreciation possibly exascerbating inflation. Fast forward to next
24:25
Speaker 1: year when we see the Bank of England the Bank
24:27
Speaker 1: of Canada starting to tighten policy, and then we think
24:30
Speaker 1: the FED actually raises rates in the middle of three
24:34
Speaker 1: that's going to be very different than the ECB with
24:36
Speaker 1: their inflation outlook. I think they're in trouble if they
24:39
Speaker 1: have any communication missteps and inflation expectations go lower, not higher.
24:45
Speaker 1: You know, if you push our European econ economics team
24:48
Speaker 1: and you say when when is the ECB gonna hike?
24:50
Speaker 1: They they say, well, I'd say you had five but
24:54
Speaker 1: with the risk to never, because you know, I'm an economist.
24:58
Speaker 1: We forecast, but how good is the forecast? Exactly? All right,
25:02
Speaker 1: set thank you so much for joining us. To really
25:04
Speaker 1: appreciate your time. Seth Carpenter, Global chief economist for Morgan Stanley.
25:08
Speaker 1: Joining us now we are truly global. We not only
25:17
Speaker 1: cover what happens in New York, but we also cover
25:19
Speaker 1: what happens outside of Detroit. Let's go to David Diets
25:21
Speaker 1: right now. Sorry, some in New Jersey, David, and some
25:24
Speaker 1: in New Jersey. It is a booming outdoor dining capital
25:28
Speaker 1: of New Jersey. Yeah, I don't know how I I
25:31
Speaker 1: was thinking of something else anyway. David Deets joins us
25:34
Speaker 1: managing Principal and senior portfolio strategist at Peapack Private Wealth Management.
25:39
Speaker 1: We've got about ten billion dollars of assets under management,
25:42
Speaker 1: so not that far off from New York. David, what
25:44
Speaker 1: did you think about the our interview with the next mayor.
25:48
Speaker 1: I mean, how important is uh is New York to
25:50
Speaker 1: Summit New Jersey. Well, it's critical, I think. I mean
25:55
Speaker 1: I would say that the residents Summit New Jersey have
25:59
Speaker 1: historically commun it it into New York. Now we'll see,
26:02
Speaker 1: of course, in this post pandemic world, whether there's a
26:05
Speaker 1: little bit more permanent remote working. But uh, the somewhat
26:09
Speaker 1: depends on New York and and our real estate prices
26:12
Speaker 1: go up as New York real estate prices go up.
26:14
Speaker 1: So whatever is good for New York is gonna be
26:15
Speaker 1: good for Summer. And David, I just so you know,
26:18
Speaker 1: I hopped on New Jersey Transit from Summer today and
26:20
Speaker 1: make my way into New York. To everybody, trains are
26:23
Speaker 1: more packed. I will say they're much more crowded than
26:26
Speaker 1: they were even a couple of weeks ago. So it
26:28
Speaker 1: looks like people slowly are coming back to work. So David,
26:30
Speaker 1: is your day job is looking at these markets here
26:33
Speaker 1: and trying to get a sense of where the next
26:36
Speaker 1: six to twelve months are. I'm a valuation guy, you know,
26:41
Speaker 1: I'm a little more than a little I'm a lot
26:43
Speaker 1: concerned with valuation here. Yes, I know the ten years,
26:46
Speaker 1: you know, one point three eight percent, But still this
26:49
Speaker 1: is a big multiple. How do you think about evaluation? Yeah,
26:52
Speaker 1: so evaluation is critical, of course, because we all know
26:55
Speaker 1: that the more you pay, the lower is going to
26:57
Speaker 1: be your returns. But I guess I would pushed back
27:00
Speaker 1: just a little bit insofar as UM your key valuation
27:04
Speaker 1: metric perhaps is what you can uh earn in terms
27:08
Speaker 1: of alternatives like putting your money in a CD, like
27:11
Speaker 1: buying a ten year treasury. It we've got historic lows
27:13
Speaker 1: on those levels. Indeed, the yield on the SMP five
27:16
Speaker 1: hundred is about comparable with that yield on attain your treasury.
27:20
Speaker 1: Now ten your treasury payout is going to be locked
27:23
Speaker 1: in for the next ten years. Historically, dividends move up
27:26
Speaker 1: two to ten percent each year. So if people put
27:29
Speaker 1: a gun to my head and say, Dave, where am
27:30
Speaker 1: I going to make more money over the next ten years?
27:32
Speaker 1: Was with the dividend payout on stocks going up and
27:35
Speaker 1: presumably asset prices moving up as well, it seems to
27:39
Speaker 1: tilt pretty well in favor of fixed income. Of course,
27:42
Speaker 1: there's not going to be a straight line. One other
27:44
Speaker 1: thing I point out is, remember, uh, Matt, you know
27:47
Speaker 1: five companies at the very top of the SMP five
27:50
Speaker 1: hundred account for of the overall waiting of that market.
27:54
Speaker 1: That index, okay, and those are the ones that, for example,
27:57
Speaker 1: Microsoft trying to get thirty three times earnings if you
27:59
Speaker 1: strip is out. Although it's not a cheap market, is
28:02
Speaker 1: certainly more reasonably priced. Well, some stocks are cheap. Some
28:06
Speaker 1: uh industries or regions have taken a hit. I noticed
28:10
Speaker 1: that some of your ideas wells Fargo taken a beating lately,
28:13
Speaker 1: Exxon as well, I share as large cap China. Is
28:16
Speaker 1: the idea that the bad news you think is has
28:19
Speaker 1: passed on these Well, you know, we we do like
28:24
Speaker 1: to buy things that you know, have solid valuations but
28:27
Speaker 1: are a little bit out of favor. So let's look
28:29
Speaker 1: at China for a moment. Here. You know, the China
28:31
Speaker 1: Large cap et F is down thirty seven since March.
28:36
Speaker 1: So if the if the concern is we're at nosbley
28:39
Speaker 1: valuations China maybe the antidote. Of course, that doesn't mean
28:42
Speaker 1: things are going to turn around. But the more I
28:44
Speaker 1: look at it, and I was certainly heartened by the
28:46
Speaker 1: fact that they injected about fourteen billion dollars of reserves
28:49
Speaker 1: in the past twenty four hours into the economy. It
28:53
Speaker 1: doesn't make any sense for the second largest economy if
28:57
Speaker 1: it wants to be a true geopolito, well power to
29:00
Speaker 1: kneecap that private sector. It just doesn't really make sense.
29:03
Speaker 1: Now there's a lot of noises here, but to destroy
29:05
Speaker 1: the value of companies like Ali Baba in ten cent, well,
29:08
Speaker 1: what do they really get out of that? Yeah, it's
29:11
Speaker 1: been an extraordinarily difficult time for those stocks there, and
29:15
Speaker 1: it just kind of highlights, you know, the whole quote
29:17
Speaker 1: unquote China risk uh that people always had in the
29:20
Speaker 1: back of their mind. But boys are coming to roost here. Uh.
29:23
Speaker 1: David back closer to home with the U S stocks here,
29:26
Speaker 1: do I go reopening cyclical small caps or do I
29:29
Speaker 1: stick with my big cab growthy Amazon, Apples, Google's kind
29:33
Speaker 1: of things? Well, certainly you want to beat the first
29:36
Speaker 1: of five. But I share the concern we started conversation
29:39
Speaker 1: with that our evaluations are an issue. So I valuations
29:43
Speaker 1: are an issue. You've got to be cautious with Microsoft,
29:45
Speaker 1: You've gotta be cautious with for example, Amazon, and and
29:48
Speaker 1: we like for example financial services. We think that five
29:52
Speaker 1: years now, interest rates will be higher as inflation picks up,
29:55
Speaker 1: as the economy picks up, and loan demand goes up,
29:58
Speaker 1: and you know, the financial services companies are so well
30:00
Speaker 1: poised to benefit from that because the price of their
30:03
Speaker 1: key product, loans will will go up. Historically, they're not
30:07
Speaker 1: trading much above what they've normally traded in the last
30:10
Speaker 1: twenty years in terms of relative to book value. The
30:12
Speaker 1: one word, oh did I I think you might have
30:18
Speaker 1: lost David Diets. I thought it was me for a second.
30:22
Speaker 1: Maybe there's probably some problems, you know, in the summit,
30:25
Speaker 1: maybe the phone issues out there and someone off the
30:26
Speaker 1: check on that. When we get home. We didn't even
30:28
Speaker 1: get to get to bud. Yes, I mean, I mean
30:31
Speaker 1: we didn't. You know, it's t Bush. He likes Anheuser
30:33
Speaker 1: Busch as well, which I wanted to ask about now.
30:36
Speaker 1: It's shocking if you pull up the chart right bud
30:39
Speaker 1: uh the ticker b U D obviously, and the beer
30:41
Speaker 1: um has risen this year up to eighty dollars a share,
30:46
Speaker 1: but it's now back down at fifty seven, and I
30:49
Speaker 1: wonder why that is. I mean, we're people drinking more
30:53
Speaker 1: bud at home, and you think when they go out
30:56
Speaker 1: to the bars in the reopening trade, they're gonna be
30:58
Speaker 1: ordering um, you know, yava or Vosh diner becks something
31:04
Speaker 1: a little bit more high brow. Or is the idea
31:07
Speaker 1: that the delta variant has stopped people from going out
31:10
Speaker 1: and ordering a bud at the ballpark. Here's what I
31:12
Speaker 1: think it is. I think it's the hard seltzer thing.
31:16
Speaker 1: It's a fat. It's gone. It's over the white claw
31:19
Speaker 1: every oh and Anheuser Bush makes. It's not You're right,
31:22
Speaker 1: they don't just make beer. They make that stuff. What's
31:24
Speaker 1: for the whole industry. It's for the whole industry. And
31:26
Speaker 1: that was kind of that was one of the really
31:28
Speaker 1: near term growth drivers for um, you know, the malt
31:32
Speaker 1: liquor business, if you will, kind of the beer business
31:35
Speaker 1: over the last couple years of these hard seltzer So
31:37
Speaker 1: it was kind of like the wine coolers of our day. So,
31:40
Speaker 1: but it was a fat. It reminded me of Zema.
31:44
Speaker 1: When I was in high school, there was there was
31:47
Speaker 1: a malt liquor beverage called Zema. I remember that it
31:50
Speaker 1: was clear and absolutely delicious. Really you didn't drink that,
31:56
Speaker 1: did you? Well? I did when I was fifteen. Um,
31:59
Speaker 1: but obviously a else aren't down and that's the same
32:01
Speaker 1: with the hard Seltzer. Right, we got David Diet's back.
32:03
Speaker 1: Let me David just asked you quickly about Anheuser Busch.
32:06
Speaker 1: Why has it been hit so hard coming from eight
32:09
Speaker 1: down to fifty seven? And why do you like it? Sure?
32:12
Speaker 1: Absolutely so we like it because when you talk about beer,
32:16
Speaker 1: you know it's got. UM is one of the largest
32:18
Speaker 1: consumer products companies in the world. It's got like ten
32:21
Speaker 1: of the twenty largest brands. So why is it off
32:25
Speaker 1: from the start of the summer. I think several things.
32:27
Speaker 1: One is UM busting beer, which is big on the
32:31
Speaker 1: hard Seltzer and not very disappointing continuing trend in in
32:36
Speaker 1: hart Seltzer, So the whole category were sold off, but
32:39
Speaker 1: of course we know, but there's a lot more than
32:41
Speaker 1: the hard Seltzer. Second, of course, there is concerned about
32:44
Speaker 1: this surging dollar UM and of course so much of
32:47
Speaker 1: their revenues come in from overseas. That's not helpful. And
32:50
Speaker 1: of course the big difference between the start of the
32:51
Speaker 1: summer and now is the continuing delta variant issues, and
32:56
Speaker 1: so much of their business comes in from the emerging markets.
32:59
Speaker 1: There's real questions, says delay in the reoining great, but
33:02
Speaker 1: I thank you very longer term for you. You'll do well. Yeah,
33:05
Speaker 1: all right, David. Thanks, I'm glad we got you back
33:06
Speaker 1: in for that. David Dietz talking to us there from
33:09
Speaker 1: Peapack Private Wealth Management. Thanks for listening to the Bloomberg
33:12
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
33:15
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
33:20
Speaker 1: I'm on Twitter at Matt Miller. Yet on Fall Sweeney
33:25
Speaker 1: I'm on Twitter at pt Sweeney before the podcast. You
33:27
Speaker 1: can always catch us worldwide at Bloomberg Radio