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This is Bloomberg Business Week. I'm Carol Masser

0:04

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Radio or watch us on YouTube search Bloomberg

0:29

Global News. The US job

0:31

growth in September slowest this year, signaling

0:34

a tempering of the labor market recovery, really

0:36

complicating that FED decision,

0:38

that next FED decision when it comes to scaling

0:41

back monetary support before the year under the little

0:43

many still think the FED will kind of

0:45

continue ahead. Here at the front row

0:47

seat on the US labor market and hiring trends

0:49

and metrics, we have a perfect gas. We do. Peter

0:51

Quigley, as president and CEO at

0:54

Kelly, joins us on the phone from Michigan.

0:56

Peter, it's great to talk to you, again, you

0:59

haven't really interesting role

1:01

because your firm has really

1:04

its finger on the pulse of what's happening when it comes

1:06

to labor because you provide staffing solutions

1:09

in many parts of the country. So I'm wondering

1:11

if this report was a surprise to you

1:13

or if you were expecting something that was really

1:15

going to miss and at this magnitude.

1:18

Well, I think the jobs report was disappointing

1:20

to those that expected a bounce due

1:23

to the expiration of the enhanced unemployment

1:25

benefits and schools reopening, but

1:27

that didn't materialize. UM.

1:29

But I tend to think of this as these

1:32

three months July, August and September

1:35

is the UH delta variant

1:37

book ends. So in July we

1:39

had outstanding

1:42

jobs report, but the survey was taken

1:44

before this spike, and in September

1:48

the converse, where we had a really disappointing

1:50

report. Um. But it was also

1:52

at the beginning of September when we were in

1:54

the midst of the spike. So I

1:56

was encouraged by the private

1:59

sector. Seventeen thousand not

2:01

overwhelming, but but decent um

2:04

because the big drag was in government payrolls.

2:06

Local education was a big drag um.

2:09

And this wasn't surprising to us because

2:11

we've seen major talent challenges in uh.

2:14

You know, we support fifteen thousand schools

2:16

across forty five states, and not

2:19

only there shortages of teachers,

2:21

but the entire education ecosystem,

2:24

so food service workers, custodians,

2:26

bus drivers, para educators, um.

2:29

So all of that led

2:32

us to believe that there was going to be some

2:34

some depression. UM.

2:37

Okay. So one of the things that we discussed, Peter,

2:39

is that the second half of

2:41

September, at least anecdotally, people

2:43

have talked about that which is not reflected

2:47

in the Job's report this morning,

2:49

that you are seeing signs of

2:51

more people going into jobs. What are

2:54

you seeing in the leader or what did you see

2:56

in the later half of September. Well,

2:59

the first thing I would say is there is no

3:01

change in the demand. So that's

3:03

the good news from the economy standpoint.

3:06

Demand is strong across all

3:08

of the industries we served. We

3:10

didn't see a I would say, a significant

3:13

uptick in the availability

3:15

of talent in the back half of September.

3:18

Um, it's it's anecdotal,

3:20

but um, we probably saw greater

3:23

inflows of talent in areas

3:26

where schools were fully reopened and

3:28

not under some kind of temporary

3:30

lockdown UM, and that I

3:32

think just speaks to the importance of

3:35

UM allowing UM

3:38

parents to get back to work. If anything was

3:40

concerning about the job's report, it was the

3:43

labor force participation rate

3:45

dropping because so many women and it was

3:47

all women that are leaving the workforce

3:50

in UH in droves. Yeah,

3:52

that among among the parts that certainly

3:55

got our attention. Peter, I'm

3:57

wondering what you think this means for the remainder

3:59

of the year and what you can tell us

4:01

right now, because you do have this unique insight

4:03

into what's happening real time when it comes

4:06

to your clients all over the United States. What can you

4:08

tell us about what you're seeing in October

4:11

as we do get past the delta variant. Well,

4:14

I think the UH the expected

4:16

bounds due to the reopening of schools and

4:18

and the UM exploration

4:21

of employment benefits, we'll

4:23

likely see that UM

4:25

materialized later in the year. Whether it's

4:27

October or November, I think remains

4:30

to be seen. UM. But as

4:33

well, the UM, the

4:36

supply chain issues that we're having, especially

4:38

around microchips, UM

4:40

as those begin to be sorted out, I

4:43

expect that there will be UM an

4:45

improving jobs picture. So you're saying,

4:47

Peter, that people shouldn't hold their breath too much

4:49

for even next month's jobs report because we

4:51

still could see the effect of the expanded

4:53

unemployment insurance as well as people

4:56

kids going back to school. Yeah, my sense

4:58

is it's gonna be coppy for probably

5:02

the remainder of the year. I think until

5:04

we get past the UH,

5:07

the delta variant and and you know,

5:09

other issues surrounding COVID. I

5:12

think it's going to be a little bit uncertain in the

5:14

labor markets because we don't really understand

5:17

why so many people are

5:19

staying on the sidelines as as opposed

5:21

to coming back to UH the plethora

5:24

of jobs as as you know, record number

5:26

of jobs across industries. UM.

5:29

So I think it's gonna be um

5:32

period of time probably into two

5:34

before we see some stabilization.

5:36

Peter just got about fifty

5:38

seconds left here. You talked about

5:41

women, and we two noticed UH

5:43

labor participation, women really leaving, and

5:45

we really thought the beginning of pandemic flexibility

5:47

and working was going to be helpful for women. We've

5:50

learned that's not the case. Um.

5:52

What are you hearing on the front that women

5:54

are leaving the workforce and they are not

5:56

coming back. Yeah, we're

5:59

hearing that. Um. And and largely

6:01

it's due to childcare or elder

6:03

care responsibilities. Um.

6:06

You know, if kids don't go to school or if they're

6:08

at home schooling. Um,

6:10

parents don't go to work if they can't work

6:12

remotely. And even then it adds

6:15

to a level of stress that makes

6:17

work intolerable at some point. So I

6:19

think this is a really serious issue that we

6:22

need to focus on to ensure that we get more

6:24

women back into the labor force.

6:27

Right. It really speaks to the heart of your organization, really

6:29

the creation of it way back when, Um,

6:31

Peter, thank you so much, Peter, quickly he's president. Cef

6:33

Kelly, I have to say, my sister got a college degree

6:36

years and years ago, um, to

6:39

get a job, how to get some secretarial

6:41

skills, went to Kelly, got a job

6:43

in the city, uh, and

6:45

ended up getting your masters and doing really really

6:48

well. So I can understand that path. How

6:50

it it helps. Look, it was called the Kelly Girl

6:52

Company at nineties and nineteen fifties.

6:54

You're listening to Bloomberg Business Week

6:57

with Carol Masser and Bloomberg Quick

6:59

Takes too Stovic on Bloomberg

7:02

Radio. We've been talking about Mark and their experimental

7:04

pill for COVID nineteen should

7:06

be accompanied by other treatments as soon

7:08

as they're available to cut the risk of drug resistance

7:11

that would limit its effectiveness. Welcome

7:13

Foundation director Jeremy

7:15

far saying that, Yeah,

7:18

this is a story that caught our attention because

7:20

of all the attention that Mark's experimental

7:22

pill for COVID nineteen got over the last

7:24

week. We saw mark stock rise starting

7:27

Friday as a result of it. Riley Griffin

7:29

is US healthcare reporter for Bloomberg News, and she joins

7:31

us now on the phone from New York City. So, so let's start

7:34

with with where things stand with regulators and Mark's

7:36

pill. What is it and what

7:38

is the well. I don't want to say promise because it hasn't

7:40

been fully approved by regulators rally, but what's it supposed

7:43

to do? Yeah, Mark's pill

7:45

is really important because what we don't

7:47

have today, um TIM, is a cheap

7:50

and effective pill that can be

7:52

prescribed to people who have contracted COVID. Right

7:54

now, the treatment landscape is rather barren.

7:57

You can get the mono quota antibodies which are

7:59

in an a few shin, or if you proceed

8:01

to the hospitalized setting, you might

8:04

get dexa meta zone,

8:06

a steroid or rem deservie. But

8:08

what we really want is something like Tamma

8:10

bloo, something that you can take from home, you

8:12

don't have to venture too far, and it will

8:15

stop COVID in its tracks, stop

8:17

that replication process. We've been

8:19

following Mark's pill four months now.

8:21

Actually had a feature in Business Week

8:24

back in spring about this very

8:26

concept um and now

8:28

we've got the data and it looks fairly promising.

8:31

But the question at hand um that

8:33

the director of the Welcome Foundation is posing,

8:35

is is it going to face drug resistance

8:38

like we've seen with some of those monoquona antibodies.

8:41

In the backtrack for a second, what is drug

8:43

resistance that occurs when

8:45

the virus and bacteria evolved

8:47

to blunt or defeat a drug mechanism

8:50

of attack, which is what we

8:52

don't want to have happened, right And this is

8:54

what's fearful right now. I feel

8:56

like we're in that Netherlands right now of

8:59

right to people who have had

9:01

vaccines or waiting, not all of his supply,

9:03

you know, can get boosters, and you're just wondering,

9:06

am I still safe? Is there going to be a Okay,

9:08

we're kind of dealing. We are dealing with the delta variant,

9:11

But is there going to be a variant that all of a sudden is going

9:13

to be like, yeah, fiser moderna vaccine

9:15

J and J vaccine not a problem.

9:18

Yeah, And and people are following that with vaccines.

9:21

But viruses are really wildly things.

9:24

They mutate to survive and we've always

9:26

seen this with anti virals in particular

9:29

um and so that's a question here.

9:32

But Mark I spoke with them just yesterday,

9:34

one of the leaders of developing

9:37

this pill, and he says the

9:39

bar for resistance with mona peer

9:41

of year the COVID pill is rather high.

9:43

He sees it as different from other

9:45

anti virunts in the past. Can can

9:47

it be changed in real time the

9:50

way that other treatments

9:53

or vaccines have been. At least

9:55

the hope has been that they can be changed and tweaked

9:57

with two help attack. Some

9:59

of these are potentially resistance.

10:02

So typically how companies

10:04

do this is they actually combine one

10:07

anti viral with another. You might have

10:09

heard the term cocktail to describe

10:12

a silly term, right, But it really

10:14

means you're combining more than one

10:16

thing, and together, Um,

10:18

you're combating resistance, and you might also be

10:21

encouraging greater levels of efficacy. But

10:23

that's not what Mark is claiming here. To

10:25

get a little wonky with you, guys, Um,

10:30

I like wanky too, he had

10:33

said to me. Nick Kurt Sunis, the senior

10:35

vice president of clinical research for infectious

10:37

Diseases and Vaccines at Mark, that

10:39

earlier experiments with other viruses

10:42

showed that the evolution of resistant

10:44

mutations was really rare with mulipure

10:46

beer. And another thing, the course

10:48

of treatment is short, meaning that

10:51

viruses get very few chances to evolve

10:53

into resistant forms during that

10:55

course. UM. And then the last

10:57

reason he shared with us was the drugs

10:59

met kind of mechanism of action.

11:02

To put it in as simple terms as I can,

11:05

the way manipeer of your works is by inducing

11:07

errors into the coronavirus's genetic

11:10

material. Those errors are

11:12

then replicated until the

11:14

virus is practically defunct.

11:17

And what Marcus found is that by

11:19

UM inducing those errors,

11:22

they're actually spread more or less randomly

11:24

throughout the viral genome, which again

11:26

means that the virus has fewer opportunities

11:29

to develop those mutant forms

11:31

that will overcome those errors,

11:34

and that in and of itself, he said, makes

11:36

resistance to manopere of your a tufting.

11:39

Only time will tell you know. That's that's marks

11:41

perspective right now. Um, And

11:43

they're not actively pursuing combinations.

11:45

But should we c say Fiser's

11:48

oral anti viral proved successful as

11:50

well, I'd be asking could

11:52

they combine the two together? Aren't

11:55

two better than one? Maybe

11:58

we've certainly seen that in meta history

12:00

and treatment history before. Um. Riley,

12:02

thank you so much, really clarified a lot

12:04

on that. Roley Griffin Cheese u S healthcare

12:06

report at Bloomberg News. Joining us on the phone

12:09

in New York City. This is

12:11

Bloomberg Business Week with Carol

12:13

Masser and Bloomberg Quick Takes Tim

12:15

Stenovic on Bloomberg Radio.

12:18

We do want to just rehash a former Win Resorts

12:20

executive and a private equity investor found guilty

12:22

in the first trial of parents accused of cheating

12:25

to get their children into elite

12:27

US universities. We're talking about varsity

12:29

blues. Uh and UH it looks like

12:31

the two of them are potentially facing

12:34

some jail time. Um.

12:36

Yeah, and you know what, it actually is a perfect segue

12:39

into our next story that talks

12:41

a lot about wealthy parents and what

12:43

wealthy parents are doing to help their kids,

12:45

uh afford homes, specifically

12:48

in New York City that weren't necessarily meant

12:50

for them exactly. It's in the new issue of Bloomberg

12:52

Business Week magazine. It's among the most right. We're not saying,

12:54

I think illegals being done, that

12:57

there's no parallel. I don't want to apply a parallel

12:59

that there is anything illegal. But it's time

13:01

just working on my segway, Carol. It's among

13:03

our most read on the Bloomberg Today's story about New

13:06

York City's real estate tax breaks that, as

13:08

Tim mentioned, have turned out to be a loophole for rich

13:10

kids. That tale and reality. Let's

13:12

get to it with Bloomberg News Financial Investigations

13:14

reporter Caleb Melby. He is on

13:16

the phone, he's hard working, he's in

13:19

St. Louis. Caleb, interesting

13:21

story. First of all, tell us about

13:23

this tax break and how

13:25

that's become a loophole for some Yeah.

13:28

Absolutely, this is a

13:30

program uh called the HDFC

13:33

cooperative program here in New

13:35

York that stands for Housing Development

13:38

Funded Corporation, a whole elpha

13:40

bit soup of a name. And what

13:43

happened in the in the nineties seventies

13:45

was, of course, you had white flight out of New

13:47

York, you had the financial crisis

13:49

in New York City, and you had the slum

13:51

lords who both stopped making repairs to

13:53

their buildings and stopped paying taxes.

13:56

UH. The government eventually

13:58

sees those buildings runpaid taxes, but

14:00

didn't want them to go back to the same landlords

14:02

for fear that the same thing would happen all over again.

14:05

So they looked to this um UH state

14:07

law that allowed them to create UH

14:09

cooperatives designed to

14:12

be low for low income

14:14

people, to provide income for low income people.

14:16

They turned these buildings over to

14:18

the former renters for two hundred fifty dollars

14:20

a unit um UH,

14:23

and it was kind of historic transfer

14:25

of wealth and property in New York City.

14:27

UM. But a lot of those people didn't

14:30

have money to repair their buildings either,

14:32

so the government created this tax break to try

14:34

to help them out in but

14:37

throughout time, nobody has really created

14:39

any stringent rules about

14:42

um what these units

14:44

can go for UM or

14:46

how much how much you can have in way of assets to

14:48

buy them. So they have these income limits

14:50

on them, but no asset limits. And

14:53

UH, that actually means there's kind of a perfect

14:55

buyer out there and the sort of person who would

14:58

love to live in Manhattan where a lot of these a are

15:00

uh, low income, high asset

15:03

Uh you know, children of

15:05

the affluent who are moving here to the city. Okay,

15:07

so let's say you are an aspiring you

15:10

know, fill in the blank, uh, and you moved to New York

15:12

City after graduating from college. You're

15:14

making you know, between thirty thousand and

15:16

fifty thousand dollars a year, scraping

15:19

by in a lot of cases, but not

15:21

really because you perhaps have access

15:24

to half a million dollars from

15:27

parents, from wealthy relatives

15:29

like you lay out in your story, you're kind

15:31

of the perfect fit to actually

15:33

buy one of these homes, and you're

15:35

getting it at a huge discount compared to uh

15:39

a house that doesn't have the limits. That's

15:41

exactly right, Timm, And you raise another good point,

15:44

which is that because some of these buildings still have some

15:46

level of financial distress, banks

15:48

won't lend to them. They can still be beautiful,

15:51

you know, lovely buildings, um that

15:53

have a little bit of debt on the books. But that means

15:55

you do need to have all cash, and they will sometimes

15:57

advertise themselves as all cash

15:59

all. So you can't take a mortgage out to get one

16:01

of these. Well, for

16:03

for the more stabilized ones, you can, but

16:06

in a lot of cases you can't.

16:08

And that's where you'll see them advertised. You must

16:10

make, as you say, something like less than sixty

16:13

dollars, but also have five dollars

16:15

cash or more on hand. It's, um,

16:18

it's quite an absurd situation.

16:21

Um as as this is unfolded

16:23

through history to our present moment. So

16:25

how many are taking advantage of you know,

16:27

to some extent gaming the system? Not illegal,

16:30

but it's certainly not getting to

16:33

the population that it was intended for. I mean,

16:35

right, this is for to help out those

16:37

that are lower income. Um.

16:40

How how how much has it been being gamed?

16:42

Basically? Yeah, So,

16:45

so the universe of these buildings is about

16:47

a thousand UM with about

16:49

seventeen or eighteen thousand units in them.

16:52

Uh, to give you an idea that

16:54

I mean, that's roughly twice the size

16:57

of Stevenson Town Peter Cooper

16:59

Village for our listeners in the New York

17:01

area, very big multi block

17:04

complex in the city, a lot of units,

17:06

but because they do offer such

17:08

tremendous protection against rising costs

17:10

in the city, even better than a rent stabilized

17:13

apartment, people do hold onto them

17:15

for a very very long time, and

17:17

so they do trade infrequently. But kind

17:19

of like how whenever home

17:22

cells and an up and coming neighborhood, and

17:24

it always tends to go in one direction, up

17:26

and up and up. Um, these buildings

17:28

are doing the same. Uh. And we're

17:30

seeing that again and again that even though these units

17:32

trade infrequently, for the ones on

17:35

the Upper West Side or Central Harlem

17:37

or the East Village, these neighborhoods

17:40

that in the seventies and eighties weren't places

17:42

everybody wanted to be, but are now much

17:45

more desirable places to be. You're seeing

17:47

more and more of these deals. So

17:49

what did the parents say, who did you talk to? I'm

17:52

curious about that, right, because that's who you really wanted to

17:54

talk to. Yeah,

17:57

yeah, I mean, um, I I talked

17:59

to it to one parent who um

18:01

you know, she she had been a lawyer

18:03

herself. Her husband had been a partner

18:06

and engineering firm, and they

18:08

had a daughter who was a

18:10

musician, and they were worried about her having an

18:12

even income being in the city,

18:14

but wanting to be in the city, so they you know,

18:17

the daughter was able to pay four

18:19

hundred thousand dollars cash for a

18:21

one bedroom on the fr West Side where she can

18:24

have rehearsals away from her roommates,

18:27

any roommates, and also not worry

18:29

about, you know, the very burdensome

18:31

housing costs that exist for most renters

18:34

or even owners in

18:36

in New York. Um and

18:38

I also talked to a lot of

18:41

musicians who have since become adults,

18:43

a couple of them that have actually transitioned

18:45

from being musicians into real estate

18:47

brokers specializing in exactly

18:50

these kinds of units. That one was a bass guitar

18:52

player, one was a jazz flutist. Um

18:55

and uh and talk to them about you

18:58

know, how this pro graham has unspooled

19:01

in a way that the city definitely

19:03

didn't didn't help well. Also seems like the rules

19:06

aren't hard and fast. I mean, you do share the example

19:08

of anecdotes of people printing out

19:10

you know, turbo tax tax returns that potentially

19:13

might not reflect a real income for somebody.

19:16

Yeah, and that's exactly right. So, and

19:19

every diminishing number of these buildings

19:21

has formal regulatory agreements

19:23

with the city. They may require that they actually

19:25

file documentation around the stuff, but the vast

19:28

majority of them, especially the more expensive

19:30

ones, no longer have any sort of regulatory

19:33

agreement, and the city has basically thrown

19:35

up its hand to try and regulate these at all. So

19:38

so to the extent that there are even income

19:40

caps on a lot of these these days, they're

19:42

essentially functioning on an honor

19:44

system. So it will continue. So it's going to just

19:46

continue. Twenty seconds left here. Um,

19:51

it's gonna be very hard to put this one back in the

19:53

bottle. You try, you try to put price caps

19:55

on these when there wasn't them before, you're going to

19:57

get law suits. And it's not clear that the city

20:00

wanted to do that. All right, Well, a very

20:02

interesting story in terms of what's

20:04

going on. Hey, Caleb, thank you. Caleb Melby, financial

20:06

investigations reporter of Bloomberg News

20:09

on the road in St. Louis, And

20:11

uh what I opened up my Twitter feed this

20:13

morning? And this was like the story that everybody was talking

20:16

about a lot of rage tweeting, was there.

20:18

Yeah, yeah, well understandably. So this

20:25

is Bloomberg Business Week with Carol

20:28

Masser and Bloomberg Quick Takes Tim

20:30

Stinovic on Bloomberg Radio.

20:34

So you are listening to Bloomberg Business Week on

20:36

this Friday, and this happens

20:39

to be also among one of our most read on

20:41

the Bloomberg. We were all talking about it, certainly

20:43

in our call It's a Store by Bloomberg. Simon Kennedy

20:45

and Timid notes that the US were already

20:48

in a recession based on consumer sentiment,

20:50

which is based on a new study

20:52

co authored by former Bank of England

20:54

policymaker Danny blanche Flower. He is professor

20:57

of economics at Dartmouth College, and he joins

20:59

us on the phone from Hanover, New Hampshire.

21:01

Danny, nice to have you back. How are you

21:04

are. I'm

21:06

actually teaching class again. It's great.

21:08

I know you're on campus. It's great.

21:10

I'm looking out of my office windows. Great. Um,

21:13

so what's going on here? We're already in a recession?

21:17

Well? Um. I called this earlier

21:19

in the week with my co author Alex

21:21

Bryson Um. I mean the issue here

21:23

is what actually can you use

21:26

to say something about a recession coming

21:28

before it hits. So the NBR

21:30

dating group tells you six to eight months to a year

21:32

later, the labor market data

21:35

tells you pretty much at the point that you turn

21:38

what can you use to predict it common?

21:40

And it turns out we can success now and the

21:42

new paper we show we successfully

21:44

predict every one of the last six recessions

21:46

beforehand. And essentially what we're

21:49

seeing today is almost identical to

21:51

what we saw in two thousand seven across

21:54

the whole economy and particularly across the eight

21:56

biggest states. These measures

21:58

of sentiment what do people think is happening?

22:01

Turned around May, and that

22:03

suggests that recession will probably start around

22:05

Christmas time. So the predictors

22:07

are almost exactly as they were in

22:10

two thousand seven. And this is how you can

22:12

predict every prior recession

22:14

to it. So these this prediction came

22:16

well before, obviously a couple of days

22:19

before the non farm perils, which didn't surprise

22:21

me, and I expect to see nonfarm payrolls

22:23

declining and probably going negatives

22:25

by negative by the end

22:27

of the year. Wow. That's certainly yeah.

22:29

I mean that that's the problem is obviously

22:31

the labor market data isn't giving us a

22:33

very good deer, but people don't seem to understand

22:35

what's going on. There's base and composition effect.

22:38

There's a couple of measures. If you go and look at total

22:40

compensation, that's up by one point nine percent,

22:43

and on the last month it's flat. And if

22:45

you go to hourly earnings using the

22:47

current population survey, that's down one

22:49

two percent if you take Q to two

22:52

thousand twenty one to Q two. So

22:55

there's a lot of indicators people have not been looking

22:57

at. And and the question is you

22:59

know what happened in two thousand seven and the previous

23:01

five and the answers these measures

23:04

told you six or nine months before

23:06

it was coming that this was happening in it and

23:08

people should look in our paper. It's remarkable

23:11

how comparable is

23:13

compared to and it's and in fact

23:16

there's a set of services and it's really about women. It

23:18

turns out that since the turn women

23:21

people in the Grants Thaunton service says if

23:24

they're forced to go back to the office, they won't

23:26

go, they'll quit. So for people in

23:30

the conference board. They say women say, especially

23:32

that they're very fearful of going back to

23:34

work. So I think that's what turns the delta

23:37

variants turn people so Danny

23:39

for people who don't follow this as closely as you do,

23:42

tell us the connection between how people

23:44

feel about sentiment, what what sentiment

23:47

is about the economy, and how that translates

23:49

into economic growth or spending. Yes,

23:51

so we've done a lot of work on this. The sentiment

23:54

is about you ask people what

23:56

do you think is going on? What do you think

23:58

is going on in your economy? Me, do you think

24:00

that the jobs are good? Do you think the economic

24:02

situation is good? And what do you expect

24:05

to happen? And so what we see in these

24:07

data from around the spring is

24:09

that anxiety in the United States rises.

24:12

People get more and more fearful, as I'd say, particularly

24:15

about delta. And the way to think

24:17

of this is if people are anxious,

24:20

if people fear that flowing is

24:22

coming, flowing is going to come, If people

24:24

think that's a recession coming, then a recession

24:26

comes. So these days are really crucial.

24:29

And every time this has happened before, that's

24:31

what followed it. And it appears to be

24:34

that the delta various and the thought that people

24:36

might have to go back to work has made them

24:38

incredibly anxious. And I think they're spending

24:40

patterns are going to change, and unless

24:42

we see some big change that

24:45

the fear of going back to work is

24:47

a big deal. And people say, well, I'll quit my job

24:49

if I have to, or our retire and that's

24:51

what we're seeing in the data. And you think that

24:53

stays with us much

24:56

longer or or does it? At some

24:58

point? Danny right at itself. I mean,

25:00

at some point we get beyond this fear. I

25:03

mean, I guess what I'm asking you is this going to be a protracted

25:05

recession or is this going to be kind of a hit? Yeah?

25:09

What a great question. I don't know. I mean, obviously

25:12

that the issue in each of these cases is when

25:14

do you go into it, how long is

25:16

it going to last? And how quickly

25:18

are you going to be able to persuade those fears.

25:21

So I think the answer is that if you can't, it's

25:23

going to go on for quite a long time. If

25:25

you can, and people become confident that

25:27

you know, the virus has been been solved,

25:29

it's ever everything's okay, that's

25:31

fine that it's appears in these days where people are

25:34

very worried about having to go back

25:36

to the work, having to stop doing remote

25:38

work. And I think that's the really big thing.

25:40

I mean, the other thing is we're talking. I mean, people have been

25:42

talking about the FED bit going to taper big

25:45

era. Should we not be doing that. That's exactly

25:47

mistake they made in a great recession. Didn't

25:49

spot it well? We know in these days

25:51

they told us in July oh seven they

25:53

were forecasting recession coming in December

25:56

seventh, and the FED even by September

25:58

eight havn't worked it out. So we should be very

26:01

fearful that the Fed will make an error

26:03

again. It's absolutely clear in these days the last

26:05

thing they should be doing is even thinking about taking

26:07

so nothing and nothing for what any

26:09

of the meetings this year in your view, Oh,

26:12

absolutely nothing. They should be thinking about whether

26:14

necessary, what they can do about further stimulus.

26:17

Yeah, I'm trying to think we've had We've had a discussion with

26:19

somebody else who said it's not going to be a case of pulling

26:21

back, but you know, reigniting some

26:23

of the stimulative measures. So Danny, if

26:25

the FED does indeed go through with its taper measures

26:28

later this year, and we

26:30

are indeed in a recession already. Help us paying a picture

26:32

for for what the U. S economy looks like in

26:34

a year. Well,

26:37

again, it's a very good question. I

26:39

mean, in a way, we're pretty good at getting to

26:41

the start. I mean, it's going to take a while

26:43

to get out of it. It's going to take a while for the

26:45

economy to pick back up. I mean,

26:47

I certainly think we're going to start to see unemployment

26:49

rates rising. Um that

26:51

that's the big story I think, and people being

26:54

you know, wages are going to be certainly going to wage

26:56

grow. It is certainly going to come down, and we're

26:58

going to have to start to think about something obviously,

27:00

the impact of the steamulus, the measures being discussed

27:03

in Congress. If you can get these infrastructure

27:05

builds and spending builds in place, that will

27:07

that will help to asuade this this negative

27:10

shots coming. I think you've got to persuade

27:12

people that they can go back to work safely.

27:15

Otherwise they're going to stop, they're gonna stop spending.

27:17

They're not going to go back to work, They're going to quit. And

27:19

that's the big deal. People are frightened, and

27:22

that's what's true in the data. People are

27:24

frightened. You do, dofully see that

27:26

that people are having a hard time, you

27:28

know, making sense of and clearly explaining

27:30

what's going on the labor market. Danny, thank

27:32

you so much. I'm glad you're back at campus, Stay safe,

27:34

and so glad to check in with you. Danny blanche Flower,

27:37

professor of economics at Dartmouth College

27:39

and former Bank of England policymaker.

27:41

That story you can find it too at Bloomberg dot

27:43

com. This is Bloomberg Business

27:46

Week with Carol Master and Bloomberg

27:48

Quick Takes. Tim Stenovich from Bloomberg

27:51

Radio. Well, let's talk more crypto

27:53

and joining us now to do that as Eric Irvin, the co

27:55

founder and chief investment officer of on Ramp

27:57

invest. Eric joins us on the phone from Sandy

28:00

go. On Rap Invest is a fintech company. What

28:02

does is it provides education and access to

28:05

people about crypto assets for financial

28:07

planners. Eric, I've I've been

28:09

talking a lot. We we do talk a lot about crypto. I've

28:11

been talking a lot about crypto on Quick Take stock

28:13

or or quick Take show that there's each day at noon Eastern

28:15

time. And one thing that I keep coming

28:18

back to is the idea that there

28:20

is so much confusion about

28:23

what a cryptocurrency is, what is

28:25

bitcoin versus blockchain, what ether

28:27

versus ethereum is? And I still

28:29

think there's so much room for the general consumer

28:31

to actually understand more

28:34

about the space. What are you guys doing at on ramp

28:36

invest to to raise awareness? Yeah,

28:39

and and it's funny that you mentioned that when I first

28:41

got got involved, that we call

28:43

it the rabbit hole where you know, first

28:46

you you start to dig in, and first you dismiss

28:48

it, and and then later on you

28:50

kick yourself for for dismissing it.

28:52

But but as you go deeper and deeper

28:54

into the rabbit hole, it's a completely new financial

28:57

system, right, And and so you can't just

29:00

take the conventional framework

29:03

of of what we know as as

29:05

an asset class and then just apply

29:08

it here, So you have to almost like learn everything

29:10

from scratch. So um,

29:12

So that's exactly what Invests is

29:15

doing is is just starting with the education.

29:17

We're educating financial advisors so

29:19

they can educate their clients about

29:22

what is a crypto asset, what's

29:24

the cryptocurrency? Like you say,

29:26

what's about big B bitcoin

29:29

versus little B bitcoin, the blockchain itself,

29:31

the network versus the token,

29:34

the trades on that network, and

29:36

and then just starting there and then starting

29:39

to open their eyes towards sorry, how does

29:41

it behave in a portfolio? And how can your

29:43

clients invest in? And what about the state planning

29:45

issues and all of those different assets.

29:47

When clients can actually own

29:50

an asset entirely themselves, they don't

29:52

have to necessarily have it at a custodian

29:55

so um so yeah, really, that's

29:57

that's the the idea behind un ramp a

29:59

cat to me. And then there's the

30:02

platform which gives people access

30:04

so that they can invest in the asset class

30:07

themselves or through I

30:09

have to jump in because I do find it interesting that even people

30:11

who have been writing stories,

30:14

doing lots of research, or you know,

30:16

my colleagues who are super smart and just people

30:19

you know, smart investors, are still

30:21

like, I don't quite get the scripto thing. So there is a

30:23

lot of education that needs to

30:25

be here. What seems to be the biggest thing, especially

30:27

when it comes to you know, our I as who have been so

30:30

used to you know, asset classes

30:32

that you know, we pretty much understand how this

30:34

works. For the most part, um

30:36

what seems to be, you know,

30:39

the typical training and the things that they need

30:41

to truly understand so that they can

30:43

represent it well to their

30:45

clients, especially in an environment where still

30:48

regulators are trying to figure it out. Yeah,

30:51

and and this is probably the first sset

30:53

class. I used to be a finance advisor many years

30:55

ago, and this is

30:57

probably the first st class that I can think of.

30:59

The clients know more about it than the

31:02

advisors. So the clients are coming to the advisor

31:04

asking them questions. And it's not

31:06

necessarily about the advisor getting educated so

31:09

that they can present why

31:11

why crypto makes sense or why

31:13

um it doesn't or you know, this

31:15

asset person is that it's really just what,

31:18

you know, how do they handle themselves as their

31:20

clients are bringing questions to the table.

31:22

And so that's that's one of the most interesting

31:25

pieces of this is, you know, this entire

31:27

ecosystem grew up outside of

31:29

the traditional financial system

31:31

and and no one ever thought that

31:33

it could become this two trillion

31:35

dollar asset class and now here we are. But

31:38

everything had to grow up outside and so

31:41

there's there's this chasm in between

31:43

stock exchange and the

31:46

crypto asthetic exchanges. Hence

31:48

that you know, like the demand for any ts

31:50

go go get that bitcoin, wrap it

31:52

up and bring it onto this exchange so I can

31:55

talk about it and I can buy it.

31:57

And that's um. That's really kind

31:59

of like the unique piece here is it's

32:01

more than an investment vehicle. It's

32:03

a whole tool we can use. Yeah,

32:06

we'll put on your financial advisor hat, put

32:08

it back on for a second, grab it off the off

32:10

the rack, and throw it back on. Because earlier

32:12

this week, our colleague Eric

32:15

Shatzker here spoke with Don Fitzpatrick, the

32:17

chief investment officer for George Soros's

32:19

family office. She said that crypto has quote

32:21

gone mainstream, and Eric came on our show and made the

32:23

point that institutional investors

32:25

are not ignoring crypto anymore, and they're

32:27

allocating a small portion, whether it's two percent

32:30

or five percent, what have you to cryptocurrency

32:32

translate that for the normal person and the normal

32:35

person's portfolio. Do you suggest that everybody

32:37

have a sliver of their assets

32:39

in crypto? Yeah,

32:42

I do, I personally do, and I and

32:44

I think the mass kind of bears it out as well. It

32:46

is. You know it's I kind

32:48

of talk about this rule of three where you

32:51

know no more than if you've never invested in it

32:53

and you don't understand it, then no more

32:55

than three percent of your kind of investible

32:57

net worth should to go into this and this is probably

33:00

like your liquid investible networth. And

33:02

then commit to three years, like,

33:04

don't touch it for three years before before

33:07

you do anything. And then if you can, because

33:09

it's so dang volatile dollar

33:11

cost average, so three percent of your discretionary

33:14

income that you can apply to it. And

33:16

if you can do that, then you'll probably

33:19

end up with a pretty good outcome. But even if

33:21

you don't, if you take take more of a like kind

33:23

of an institutional approach, a smaller

33:25

allocation like that because it is not correlated,

33:28

has meaningful benefits, especially

33:30

if you're rebalancing on a regular basis because

33:32

it's so volatile. Hey, listen,

33:34

we gotta run, Eric, Thank you so much and look forward

33:37

to checking with you again. Eric Irvin

33:39

uh Heaths, co founder, chief investment officer at

33:41

on Ramp invest with us from San Diego.

33:44

You're listening to Bloomberg. Mo.

33:49

Yeah, but you let me drive? Oh no, no, no,

33:51

no, this is not ain. Please,

33:58

I want to drive. It's

34:01

a good question. Good drive. This

34:06

is the Drive to the Globes on

34:11

Bluebird Radio. So just about ten

34:13

minutes left U in today's

34:15

trading session. It is time for the Drive

34:18

to the clothes. Let's get to it with Alan

34:20

Lance, a friend of the show, research

34:22

director at Lance Global dot com, President of allenby

34:24

Lance and Associates. He's back

34:27

with us on the phone from Toledo. You're

34:29

gonna explain the wackiness that we've

34:31

seen in the markets as of late. I'm

34:35

counting on you, Allen. How

34:37

are you it's been I'm doing well, thank

34:39

you. Uh yeah, it's been an amazing

34:41

market. I mean what we've seen is, you

34:43

know, a select group of bubbles

34:45

that have formed and and been popped

34:48

and and and then resurrected. You

34:50

saw that in the beginning of the year, you

34:52

know, with um the Spack in the Spack

34:54

Arena, and then the I P. O craze and

34:57

and uh we have the mega tech

34:59

name, the growth oriented names that last

35:02

month finally fall from grace

35:04

and and I think that's what we're going to see

35:07

in this type market. You know, big Bitcoin collapse

35:09

and now it's you know, pushing back up and

35:12

and you know it's good for the

35:14

investor, you know, I like these rotational

35:17

corrections. Um. You know,

35:19

we expected more volatility the second

35:21

half of one, and

35:23

that's what we're getting, even a greater variety

35:25

than than we even expected. Well, it's interesting

35:27

that you mentioned bitcoin, and we definitely have

35:29

seen a big move up this this week, and

35:31

it continued to trend higher. I mean, we went back up

35:33

above fifty thousand, just crossing the

35:35

bloomberg. The Body Administration weighing an executive

35:38

order executive order on cryptocurrencies

35:41

as part of an effort to set up the government wide approach

35:43

to the white hat classet classes. According

35:45

to people in the know, the proposed directive

35:48

would charge federal agencies to study

35:50

and offer recommendations on relevant

35:52

areas of crypto, touching on financial regulation,

35:54

economic innovation, and national security. According

35:57

to those in the know, So it

36:00

does feel like Alan, and I know we tend to talk

36:02

about much more traditional assets, but it does feel

36:04

like um, whether it's the SEC and Gary

36:07

Ginsler, whether it's j Powell in

36:09

a recent recent testimony up on

36:11

Capitol Hill, we do see

36:13

like regulators those we look to

36:15

for guidance increasingly kind of stepping

36:17

up and giving us some clarity, and they're

36:20

not going to ban it, and they're thinking about, Okay, how

36:22

do we regulate it? Yeah,

36:24

I think it's legitimizes the asset

36:26

and you know that's positive for the long term

36:28

and and that's why you see it moving up.

36:30

So you'll you'll still have the volatility. I mean

36:33

a lot of this even with natural gas prices.

36:35

It's short covering and what's going

36:37

on you know overseas, you know, so so

36:39

it's really hard to anticipate these

36:41

swings, especially the magnitude of them.

36:44

But well, do you do you invest

36:46

in crypto? Um?

36:48

No, No, we really haven't. Um,

36:50

you know, we've had some clients that wanted to get

36:53

involved and we bought for

36:55

them, you know, in the weakness, Uh

36:57

don't don't really chase. So we use our uh

37:00

you know, long term um, you know, defensive

37:03

type strategies into that. But for

37:05

our our average client, now we

37:08

we we really haven't. I'd rather buy

37:10

indirectly and in ways that

37:12

we think, you know, like the video and what

37:14

have you that can benefit but not

37:16

you know, betting solely on

37:18

you know, bitcoin or you know,

37:21

one one atht amongst amongst

37:24

that that that that whole vertical the so

37:26

called if you will pitch pitch for our picks

37:29

and shovels right of of of

37:32

the cryptocurrency boom. Hey, alan, um,

37:34

help us make sense of today's jobs report because

37:36

it's pretty much ahead scratch or a huge

37:38

miss coming in and under two hundred thousand when

37:41

economist survey by Bloomberg expected five hundred

37:44

thousand, the market not really knowing what to make of it.

37:46

It does it change things for the Fed? Um?

37:49

You know I think it it might

37:52

uh delay, you

37:54

know, it looked like that, you know, they might

37:56

do something, you know, more quickly than

37:59

what they're talking up the beginning of a year, you

38:01

know, with the latest FED meetings

38:03

and and you know it might get delayed. Obviously

38:05

they're gonna wait for more data

38:08

coming in. So you know, if that is a

38:10

trend, obviously, I I think

38:12

it will change. But you know it's

38:14

been again so volatile, just like the stock

38:16

market that um, you know, we'll

38:18

have to wait and see. Yesterday's

38:20

lumbers weren't weren't bad, and then today's

38:23

were you know totally um, you know, the

38:25

opposite, so so it's

38:27

a matter of I think they're gonna wait for more evidence,

38:29

all right. So it's tricky if I look at the SNP

38:31

five hundred names lower

38:35

higher, this is just some basic stats on the market

38:37

to unchanged. So we are seeing increasingly a

38:40

risk off trade. We've talked about that fifty day moving

38:42

average on the SNP five hundred, that trend line

38:44

moving lower. Even though we kind of moved uh

38:46

not kind of, we did move back above it. Um

38:49

people are making investment bets. There are

38:51

stocks that are gaining, their stocks that are losing. Where

38:54

would you be putting money right now? Allan, I

38:57

still think it's it's a matter

38:59

of being you know, just selecting the right

39:01

companies, companies that have a catalyst that it's

39:03

not yet recognized on Wall Street, you

39:06

know. And this way you can outpace the market,

39:08

you know, whether it's down or flat. I think it is going to

39:10

be challenging. So I know, last time we talked

39:12

about Ball Corp. And that's moved up,

39:14

and and we bought some

39:16

tech Resources, which is a copper

39:19

play, and and I like um real

39:21

assets. We bought Murk near

39:23

its lows and it's moved up, you know. With

39:26

with a catalyst. So I like

39:28

the biotech special situations.

39:30

Um, you know, I like uh

39:33

Tutor Parny, which is

39:35

uh TPC. Uh it's

39:37

an infrastructure play. But also

39:40

I think they're turning around some some problems

39:42

they had. So so if you get the infrastructure,

39:44

you've got that catalyst. If you don't, I think

39:47

the company specifically can can

39:49

be a special situation. And I think those are

39:51

the areas you really got to concentrate in

39:53

instead of just playing you know, the broad

39:56

market, which I think it's gonna be difficult the

39:58

second half the year and and uh, you

40:00

know it's gonna be flat flat the down

40:02

and you're going to see more days like today where you

40:04

just have to be in the right areas. So are you staying

40:07

in the right areas? Are you using this as an opportunity

40:09

to pull back your own hold things, build a little bit of cash

40:11

and wait for the market to move even lower. Yeah,

40:13

we've been raising cash this summer into

40:16

the strength, so we have used some of that

40:18

for September sell off. And and

40:20

if the market you know, continue to advance

40:22

and touch on new highs, you know, we'd

40:25

be pruning, especially areas that have done

40:27

you know, so well, and that's really paid off in

40:30

the long run, and I think it will continue to just

40:33

reduce risk when the markets are high and

40:35

and then uh, you know when there's panic

40:37

selling trying to accumulate quality.

40:39

Hey just quickly, just got about thirty seconds out. And there's

40:42

still though we've got some clarity

40:44

at a d C. But again we're we've got a new clock

40:46

ticking down to December. So it does feel like

40:48

in terms of those things that can create

40:51

some uncertainty in the market, there's still a bunch

40:53

out there for investors to have to deal with. Incredible

40:56

number of things out there, Carol. You

40:58

know, you've got rising interest rates, You've got you know

41:00

the situation which China, You've

41:03

got supply chain items. I mean,

41:05

it is a long list. And that's why you know,

41:07

the second half the year we said we're gonna see volatility

41:09

in both directions and just you know, all but down

41:12

and that you know, it's time to really be selective

41:14

and and take take some profits. And

41:17

and I don't think it's going to be

41:19

an error to raise cash in any

41:21

strength. I don't expect this to be a

41:23

two thousand, you know, eight nine, or but

41:27

I do expect it a difficult market, alright.

41:29

Listen. Always good to check in with you. Allen Lance.

41:31

He is Research director at Lance Global dot

41:33

com, President of allenby Lance and Associates.

41:37

Thanks for listening to Bloomberg Business Week. Download

41:39

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