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All right, everybody, yeah, the working man man the fed for.
I'm getting so many viewers and listeners are getting in touch with me right now.
So are you sure you want to do this story?
Well?
No, I mean about hot desking too, Oh and hot desking.
Yeah, Fabio f CerPA wrote in and said that he had to google it. So I think, you know, not everybodyho knows what hot desking is.
I actually didn't.
I had never heard of it until the pandemic, Caro, when my wife was like, you know, she's like, we're hot desking at work.
I've never heard the expression never. Okay, so sharing desks, I've heard that yet.
But they but it was different during the pandemic. What they were doing was they wanted to make sure that people who were coming into the office weren't close to other people. So they had certain days when some people came in, other days others came in. So it's like, okay, you're hot desking. You're using this desk that somebody, you know, somebody else typically uses.
In the nineteen nineties, IBM Business, a business unit, said they did something called hotelling, like this idea of kind of the same thing I guess of sharing desks. And then there's a naval practice of hot racking, where sailors on different ships share the same bunk. So there's history here. There's history. All right, all right, we're tabling that. Let's talk about the economy. As we said, as you heard from the music working men and women. That is very
true of all things involved with the FED. FED speakers out in full force. FED Chair at J. Powell today say in the Central Bank must be willing to think beyond the complex mathematical simulations it traditionally uses to forecast the economy. There's a method to the mag I guess, so who knew? And this is at a conference where the Fed's research and statistics. You know, he didn't say much. He's going to make some comments tomorrow where he might be able to have more time to express his views.
It's going to be a panel to him on monetary policy challenges.
Yeah.
Chair Powell and his FED colleagues continued to remind us the goal is still two percent inflation, and yet, as Bloomberg opinion columnists Connor Sen writes today, the FED needs to forget about inflation and focus on that other part of its dual mandate, which is jobs. Connor joins us now to explain he's also the founder of Peachtree Creek Investments. He joins us on zoom from Atlanta. Connor, we love it when you join us. Thanks for joining us this afternoon.
So why do you argue that you know, at least when it comes to you know what the Fed, the Fed's dual mandate, it's time to put inflation in the rear view, which the FED has been so focused on for the last two years, and now focus on jobs.
So the real shift in the past six months in the data is that the unemployment rate has risen by a half percent and is now at three point nine percent, ahead of the fed's year end target or goal forecast of three point eight percent. And so for the first time, really since this whole inflation panic kicked up, we now have to worry about inflate to employment in a way we haven't before. And so the employment mandate coming back into the picture changes the calculus for the FED.
Go through it though, Really I love this. The unemployment rate at three point nine percent in October, slightly above the feds end twenty twenty three forecast of three point eight percent. But what you note is it has risen fifty base his point since April, an exceptional move for a healthy economy. Sometimes it feels like fifty bases points maybe wasn't a lot, but it is a big move.
Correct, Yeah, exactly when you saw this sort of magnitude of move. Over the past twenty years, it's typically as the economy was heading into recession.
Okay, son, can we make that jump though?
Forgive me tim? Can we make that jump though so quickly? Just because that move? I mean, I feel like this has been an environment where you know, fool me once recession, fool me twice recession, and it doesn't Things don't happen. So can you really make that jump because of this move and the unemployment rate.
I don't think we're heading into recession, but it's the kind of thing where the FED it's sort of what do you think the FED will do with the data? And they have to at least weigh the fact that in the past this sort of unemployment trend has often
led to recession. And at a time when they know that inflation has come down, it's not at two percent, but it's been coming down, and they see unemployment taking up, it's now not out of the possibility that unemployment could tip the economy into recession over the next six or nine months, and that has to sh shift the way they think about policy.
What if Connor and these are dreaded words, this time is different.
And I think it is because you look at sort of the bullwhip is the term we've used for a lot of things, where job opening has came down two million, but we had so many that it was fine, And hiring rates are down, labor market churn is down. This is probably part of the same dynamic, but you can't be sure. And as I pointed out in my column, over the past six months, a million people have joined the labor force and the unemployment levels were risen by
eight hundred thousand. So even though we've had all this great growth, it's not really converting into job growth.
Can you explain that dynamic here? How more people join in the labor force, how some of them are They're not necessarily sitting on the sidelines, they're just not finding.
A job right And it's not like the million people who have joined the labor force are unemployed. There's just a lot of churn in the economy one hundred and fifty million workers or so. But it just shows that the growth we've seen is due to productivity growth, not rapid hiring, not rapid labor demand. And if you're fed, you think we've achieved our labor market mandate. Fed Governor Waller said yesterday that labor market balance is in a pretty good place, and not those exact words, but my
guess is that's the view of committee. And if the labor market's now in a good place, well, they were worried for a while that the labor market was what was kicking up inflation, and they shouldn't be worried about that anymore.
Can you go to also, folks, this is an education right now for everybody watching and listening. Aggregate weekly payroll growth. Talk to us about this metric as well and what it tells us.
Sure, So what that calculates is the number of workers times how many hours they work, times what their wages are, and so it's sort of a rough aggregate for just worker incomes. And that's now only grown five percent over the past year, which is basically what it did in the twenty tens. So that number was really high last year, and that was a reason to believe that the labor market was driving inflation, and that's no longer concerned.
So interesting, So listen, we've got you know, Jay Powell on top. I'm thinking about you know, I don't know. He obviously didn't say much today, but he didn't have much opportunity to say, but we do anticipate he might have some more time to express his views. Tomorrow it's going to be a panel of monetary policy challenges. Do you think I mean, do you feel like they're starting to talk more about the labor market. I don't feel that way. I feel like they're pretty comfortable with it.
But what would you look for maybe J. Powell and company to start talking about or maybe what they should be talking about.
Well, they like to change their communication iteratively. They're not going to go from we're looking to hike too, we're looking to cut in two weeks. That's not what they do barring the economy collapsing. So this month, what I would look for is just them talking about the labor market being back in balance. That to me would be the key that all of a sudden they're going to
focus more on employment. The employment mandate is the risk management there is very different than the inflation side, and I would look for them potentially in December to not hike and sort of be open minded about where policy could go in twenty twenty four. And I think the bond market is starting to sniff that out a little bit.
But you don't even think just open minded you think that we could see some serious rate cuts by the FED next year. I mean, the market on the last FED meeting jumped the idea of a cut. They moved it from July expectations to the June to June. So what does serious rate cuts mean in your view?
And when I think we'll get insurance cuts or surgical cuts something like that where they'll say if we cut two or three times, that would uninvert the yeld curve, which a lot of banks would like, and that would sort of if there's negative momentum in the labor market, that would maybe cut that off, get housing going a little bit again, and just make them feel at ease that they haven't overtightened. And as again inflations come down,
the labor markets and balanced. So maybe we don't need FED funds at five and a quarter to five and a half anymore. Maybe more like four and a half would accomplish what the Fed's looking to do.
But Connor, in the past, you know, the FED has thought that it's gotten inflation under control and then a few months later inflation is reded. It's ugly head again, what data would you point to right now to say, okay, well, the worst of inflation is behind us.
So first you again, the labor market is no longer sort of driving. That's what the FED will think. You look at what's going on in Shelter, and we know that there's a lag between sort of market rents, what people who are signing least today are paying, and sort of how it's calculated in CPI, So we know that's going to be very benign over the next year really
because of the lags in that. The dynamic that the FED was looking at was this core services X housing measure of inflation, which they thought was the labor sort of component. But again, if the labor market's in balance, then that shouldn't be a driver either going forward. And so there's just nothing that they could point to that they would believe that inflation should still be a problem. And it's the FED likes have changed the way they
think about things. This power Fed anyway, and they have the opportunity now to do so.
Connor, it does sound like what you're arguing too for is that the FED be a little bit more preemptive in this before the labor market falls apart, and it's something much more serious.
Right, they did this in nineteen eighty five. They even paled it in twenty nineteen, arguably where they cut rate seventy five basis points, even though we saw job growth throughout. And it's just a sort of acknowledgement that policy doesn't need to be as tight as it was the spring, and it's they're still going to call this restrictive policy, just not as restrictive as it's been.
Interesting, So would you suggest to the audience here who are watching and listening that just focus on the labor market now you've been a little bit more for cues about what kind of comes next.
Definitely the labor market data and how the FED talks about it.
All right, Really fun to check in with you. Bloomberg Opinion columnist Connerson writing about this today. He's the founder of Peachtree Creek Investments, and you can certainly check out his story and more from Bloomberg Opinion on the Bloomberg and at Bloomberg dot com slash Opinion. I've got to say, opinion columns always kind of a must read for me.
Yeah, that's where we got a Javier Bloss's story a little earlier about the economic indicators.
Known as lubricants.
Yeah, opin go also on the Bloomberg terminal and.
Bobby Gosh yesterday. Yeah, I mean it's just really good stuff.
And yes, they got great they got great stuff.
Perspective on kind of our world. We got a lot of perspectives coming up on our world, investment world and world at large, including Middle East conflict, also Ukraine, Russia, the connection. What we need to keep in mind. All right, everybody, just getting started on this Wednesday. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
In Yeah, all right, folks. As we said, we are still in the midst of some earnings in this quarterly season. Disney continuing to be up about two point two percent in the after hours. We'll continue to track that and Take two, which had quite a day to day on expectations of the next Grand Theft auto release, although we don't know when coming across with their earnings. In Stock, which rallied today is just down about one percent in the aftermarket all right, let's get to as we said,
earnings sures of H and R Block. They were down more than five percent at one point today following earnings last night. First quarter US assisted tax prep revenue that was a beat. Company said it still sees fiscal rev of about three point five to three billion to five point fifty nine billion versus an estimate of three point fifty six billion. They did reaffirm their full year outlook and the stock roughly up him about thirteen percent year to date.
Well with more on the quarter, the outlook in the overall business. We got back with us Jeff Jones, he's president and CEO of H and R Block. He joins us once again on Zoom from Kansas City, Missouri.
Jeff, good to have you back with us. How are you.
I'm doing great, Great to talk with you, guys.
Hey, we're going to get to the quarter that was and the quarter that is in just a second. But we love talking to you because you have a good idea of the consumer. You of course know what they're earning. Give us an idea of what you're thinking and what you're seeing with the economy right now.
You know, the timing is actually really great. We're not economists, as you know, but I do think we have a real front row seat on what's happening given the twenty million people we serve, we simply call them hardworking Americans, and we just released our third annual report we call the Outlook on American Life. We basically look at all
the anonymized data from tax returns. I like to think of it as a financial fingerprint or financial DNA, and we're seeing some really interesting trends in what you would call middle America. I think the first thing that we see is inside what we call middle America are actually two different groups, the millennial middle and the boomer middle.
And even though they're demographically different, you know, they have some similar views about what they're feeling right now financially, and what we hear from them is they see that the inflation that we're all dealing with has essentially wiped out their wage gains. And both of those groups are telling us that they feel like they're struggling, and it doesn't matter if you're young or old. That mindset and that feeling is the same among both of the groups.
So that's a continuation because into September you shared I think it was September. Maybe it was with our Bloomberg team that the same thing that you saw the consumer this year struggling. This was American's earning around forty thousand dollars desperate for their tax refunds this past spring. We're not in prime tax filing season, Jeff. But you still feel like that struggling idea. You're still seeing that.
Well, yes, and for two different reasons. When we spoke last time, it was what we were seeing in the business at that moment, and people's desire to get their refund early, obviously looking for every dollar possible. This is different data. This is looking at the tax return data anonymized for millions of filers and then interviewing over a thousand of them, So it is different data. The theme remains the same. I think a couple of other interesting
things though. I mean, whether you're millennial or boomer, what we see is that they're both finding ways to cope and manage. We see in our data that millennials are working two jobs at a higher rate than ever before, they're more likely than others to buy on credit, and boomers are pushing out retirement. They tell us they're postponing those big purchases, so you know, they have the same mindset about their financial state, but both are finding ways to manage and cope.
What about gen X, I asked, because you know gen X is the is the generation between boomers and millennials. And I feel I'm not part of gen X. I'm a millennial, but I do feel like gen X is really having a moment right now. A lot of the executives we speak to our members of gen X. A lot of the people making the decisions, not necessarily politicians, are gen X. How are they faring?
You know, I'm a gen xer. I certainly am not in this category that we're talking about here, but when we look at that data, I think the similarities remain true. You know. So Pew defines Middle America as forty five thousand to one hundred and forty five thousand dollars, but most of this audience make under eighty thousand dollars a year,
whether you're millennial or Gen X or boomer. And so it's this common idea that you know, through the pandemic coming into twenty two, people did see some wage gains, but inflation is offset it. So now they're trying to find ways to cope and getting two jobs. Buying on credit, using buy now, pay later, or postponing big purchases is
the way to cope. It's interesting. I just saw the NRF data forecasting holiday sales, and as I recall, they forecasted three to four percent sales growth, which was the lowest growth in about four years. When I understand that and look at the data we're seeing, it makes sense people are cautious. They're really struggling to figure out how to deal with this economic reality and think about their mindset.
I love this fact. Millennials sixty seven percent of the ones that we see believe that next year will be better, but boomers sixty six percent of them believe their situation will remain the same or get worse. I don't know if that's the wisdom of age or the naivety of youth, but their behaviors are similar, but their mindsets are very different.
But could it be because some of the boomers, many of the boomers now are on fixed incomes whereas millennials are still in their prime earning years.
It could be, for sure, and we definitely see that dynamic. But because they're pushing out retirement later and later, less and less of them are on the same fixed income because struggling to get to that life stage.
Yeah, that's pretty interesting. I feel like it so meshes Jeff with the environment that we've been in where it doesn't feel like all the data falls in line and tells one narrative. It just kind of, you know, goes in different directions. Having said that recession no recession? Would you you know, do you make the call with your team?
I knew as an executive you've got a plan for multiple scenarios, but do you more often you know, or amp up the talk about recession either next year or how do you how do you describe it?
You know, I've been consistent on this that we don't see hard recession now. The new dynamics are the geopolitical landscape, obviously war. Those are new dynamics and we're not sure what to make about that and how it will translate to our business in this country. But we've consistently seen the consumer need money, need money faster, seeing strain in their life, but finding ways to get by. And when
you put those things together, you know, job growth remains good. Obviously, companies now are dealing with the fact that our vacancy rates are lower than ever, so people aren't leaving. So the data is conflicting. But we don't sit here today and forecast recession.
So what does it mean? What does all this mean for your business? I mean people pay taxes whether or not they're feeling optimistic or pessimistic about their finances. People pay taxes whether or not there's a recession. What does all this mean for your business?
There are two things that we deliver that the consumer desperately needs. Value and transparency. And so you're absolutely right. In our tax business it is a legal obligation. But in our spruce financial product or in our small business services where small businesses may be doing less service, that's where it impacts this. And so we think all the time about the value for price paid, and we think about being as transparent with as we can with the consumer.
They know what they're buying, they know what they're paying, and they're getting expertise to help them along the way. That's how we respond when we know the consumer gets struck.
But having said that, because that's one thing, we only have about thirty seconds left here. That strategy of building out your business bookkeeping bank products, other services. You know, that small business community. How would you describe the small business how they are doing right now? And forgive me, Jeff, only about thirty seconds.
In simple terms about the same way. Most small businesses are micro businesses zero to nine employees. In a lot of ways, they are consumers and live like consumers. So I would say in simple terms about like the consumer. So struggling a little bit, struggling a little bit, you know, still seeing business, different sectors performing differently. That's probably too detailed for now.
Okay, really appreciate it. Bewhile Jeff Jones, President and CEO of H and R Block on zoom from Kansas City, Missouri. Joining us here on Bloomberg Business Week.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Well.
As the current issue of Bloomberg BusinessWeek reminds us from Wall Street to the World Bank, one risk towers above all, and that is geopolitical. We know Israel has talked about its troops entering the middle of Gaza's main city as they continue their offensive against Hamas EU commissioned President Ursula Vanderline weighing in saying Israel will have to leave Gaza eventually. And then, of course, Tim, there's the war between Russia and Ukraine.
Yeah, well into its second year, almost its third year. Ukraine President Zelenski welcoming a decision by the European Unions Executive arm Tobacco start to membership talks with Kiev, pledging to continue work to develop state institutions. A lot for the world to manage. And we've got a great.
Guest, Carol Angela Stemp back with US, senior fellow at Brookings and City, author of Putin's World, former national intelligence officer for Russian and Eurasia. She worked at the US State Department. She's back with US on Zoom from Washington. Angela, thank you, thank you, thank you. Is the world making what feels like a mistake, and to some extent it feels like they're forgetting about the Russian war in Ukraine.
Well, certainly the conflict in the Middle East has diverted attention from the war in Ukraine, but that war goes on. Just today, Russia destroyed a I guess it was a Liberian flagged ship in the port of an Odessa, killing the pilot. It's been attacking the Ukrainian infrastructure. The Ukrainians are fighting valiantly back, but the war seems to be
at this moment in a dynamic stalemate. And the Ukrainians, you know, continued to need assistance from the West, particularly from the United States, and of course that's up for question at the moment.
It is up for question, But so far the United States has pledged and given quite a bit of aid to the Ukrainians. Are you concerned? I mean, I guess if you were a decision maker in Washington, would you how much would you like? What would you need to see in order for you to say, Okay, that's enough aid for Ukraine.
Well, I think we have to continue supporting them. If we don't send them more assistance and more weapons, it's going to be much harder for them to push back against the Russians. I think they'll be probably somewhat of a lot in the fighting in the winter, even though some of these attacks will go on but we know that in the spring the fighting will start up again, and we need to equip the Ukrainians so that they can continue to try and push back the Russians.
But if it's a stalemate, then what's the motivation for And forgive me, because we're talking about you know, we have to remember this is people, This is people. Yeah, but a lot of that gets lost, I think in the conversation when members of Congress are talking about budgets and there's a lot of tension with providing aid to Ukraine, and there has been for more than two years at this point, how do lawmakers justify continuing to send it if it's just a continued stalemate.
Well, first of all, it's in our national interest not to have Russia win this war. If Russia succeeds in someding Ukraine, that's not where Russia is going to stop. It'll probably set its sites for the West, including possibly if you read some of the things that were published today written by the former president Medvedive, it sites on Poland, and the US doesn't want you know, we don't have any boots on the ground there. Our men and women
aren't dying for this. But it's in our interest to make sure that we don't get sucked into another even bigger war in Europe if we don't support Ukraine, you know, as it fights back well.
And this is where you know, we so wanted to have you back because it was understandably you understand why in the past month we have shifted our focus. It feels like as a world, you know, how much stress can we geopolitically focus on. Both situations are dire and important, but we have shifted to what's going on between Israel and Hamas at this point. But I wanted you to come back on for us to understand Vladimir Putin and
what his goals are here. With what he is trying to do, it doesn't necessarily stop with Ukraine, correct.
That's correct. I mean he's first of all, believes that he can wait this out. The war will go on in twenty twenty four. Russia has more men that it can send as canon fodder than Ukraine does. It has a three times of population, and they're getting you know, ammunition now from North Korea. We know that they're getting
drones from Iran. So he wants to wait this out and hope that someone es the White House in twenty twenty five, who will say enough, we don't want to support Ukraine anymore, or that they'll be Ukraine fatigue maybe in some European countries. So he's waiting for West and resolved to collapse, which it remarkably hasn't yet. But his again, his goals don't stop at Ukraine. There might be a pause, he wouldn't, you know, Russia wouldn't immediately then turn its
sights on another country. But in the longer run, as long as he's in power, and he's running for reelection next year, and he will surely get re elected. As long as he's in power, those aims I think aren't going to change.
So he has enough men. Does he have enough money? I mean, can he break his country? Vladimir Putin in his fight his conquest of Ukraine?
He has enough money? I mean, the Russians are still making money on selling oil and gas. You know, despite all of the sanctions and everything, they are making money from the hydrocarbon sales. Their economy is set to grow, predicted to grow in fact, I think by about two percent next year. They've recovered a bit and the economy is doing better than it was before. So they can continue this fight.
That's what's so surprising to me. I mean, we spoke to you Angela early on in the and we've been speaking to you throughout the conflict. But the general consensus was this was going to be quick, and it's been anything but quick. How do you think this war ends as we approach the third year?
Right?
Well, it's you know, this is the sixty four thousand dollars question that everyone is asking. I mean, at some point it might be that both sides recognize that neither of them are going to achieve their full aims, and
that they do sit down and negotiate. That's still what we want to avoid is another frozen conflict, which is to have some kind of agreement but which is really only temporary, and an agreement that would involve Ukraine unless it makes more progress territorial it would territorially, it would lose some more territory. That might end the fight. You could have a ceasefire, you could end the fighting, but that's not a longer term solution to this.
You know, the.
You know, the desired solution would be obviously for Russia to withdraw its troops and to renounce the you know, territorial claims on these areas that it claims to have annexed but which it doesn't fully control. But that may take much longer. So it probably would be you know, in the short run at least some kind of a ceasefire and a temporary solution to this. A longer term solution is much harder to envisag.
Yeah, you do wonder if even in some kind of resolution ceasefire, any territory win on the behalf of Russian President Vladimir Putin is just going to incite him to continue on his quest. So, Angela, thank you so much. As we said, a lot going on geopolitically, but we do want to draw everyone's attention to what is still going on in this now what to almost three year Russian war invasion of Ukraine, and it does feel like it's at.
A critical point, but it's stillmate too.
It's stillmate as well, exactly all right, angelistat Brookings, thank you so much.
If you're listening to the Bloomberg Business Week podcast, catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
Thought you be thinking you could be a Muster Lincoln if you only had a brain.
If I had a brain, I don't know if you have a brain.
It depends on selling yourself.
Ends of the day.
In the hour cover of the new issue of Bloomberg Business Week also relates to a new podcast by our team, Elon Inc. Elon Musk is getting ready for what could be the most consequential launch of his career. It isn't rocket science, something we just talked about about going on to Mars with our author Kelly Wiener Smith. No, it's brain surgery.
Yeah, must company, Neuralink is seeking a volunteer for its first clinical trial. Is the cover of a Bloomberg Business Week with more we got Bloomberg BusinessWeek editor Joel Weber and a Bloomberg Business Week features writer Ashley Vance joining us this afternoon.
Joel, I want to.
Start with you Neuralink. We've heard a lot about it, we haven't seen it in action very much. There's a reason for us trying to do with these in Yeah, with these chips and planet why what.
Is the reason?
Well, you can't touch a head, a human's head until you know you get FDA approval, which Neuralink now has, so in the very near future, the company is going to actually start implanting devices in humans. And Ashley Vance has had an unprecedented front row as Neuralink has been developing this technology. Ashley take us inside the company. I mean, Elon is known for doing bold things that you know,
break open whole new industries. But this is sort of a test of of Elon in a whole new way, now, right it.
Is, you know, I mean, this is a guy we've seen with SpaceX, with Tesla. You know, they've accomplished incredible things, but they've had some pretty severe bumps along the way. SpaceX blew up its first three rockets. Tesla it took about a decade to figure out how to mass produce cars. And we're talking about brain implants here. This is something that really can't go wrong on the first go round.
It's Neuralink is one, as we point out in the story of now dozens upon dozens of companies that are looking to do brain implants, spinal implants, mostly to help people in pretty dire circumstances paralyzed stroke als.
Things like that.
So but you know, really this is the start of a very exciting field. Neuralink is as ambitious as ever with Elon's companies, but as a lot on the line with this first trial.
So how does neuralinks device and approach differ from the other competitors who have a little bit of a head start. They'd already had FDA approval and have been doing human implants. So what's going to distinguish the neuralink approach.
Yeah, I mean there's a few things that the other companies. Yes, they've done amazing stuff. They're in bodies. I've been to Switzerland seen paralyzed people walking again with the spinal implant. The biggest difference here is it's full Elon. You know, this implant is more powerful than the others by about a thousand times.
It's much smaller.
The other devices require you to have like a separate battery pack, a separate computing system that amplifies signals that's usually implanted in someone's body. With Neuralink, they're going to cut a tiny hole out of somebody's skull, put have a robot do the surgery that puts these electrodes, these electronic threads.
Into somebody's brain, and then the computing.
Part the computing part, the battery, the amplifier, all of that goes into that hole in the skull and then fits flush with your head and your skin goes over. You can't even really tell you've had it. And so it's this more powerful implant. It's miniaturized, and it has the robot to try and turn this from like a one off type laboratory experiment into something that's repeatable.
So walk us through what the timeline looks like like where they are now and what's gonna hopefully transpire for what they're trying to accomplish.
Yeah, so the last time I was there was just about six weeks ago in Austin where the company is moving a lot of its headquarters and so they're already you know, thousands of people and sort of signed up to get this implant, and now they're going through these applications to try to find the ideal candidate. Hopefully someone that's that's it is going to be someone who's paralyzed but is otherwise kind of young and overall healthy, and this could happen within you know, it sounds like it's
going to be within the next couple of months. They've already identified a hospital in Arizona, which is where this is likely to take place, and and so it's just trying right now, they're just finding the exact right candidate for this first trial.
Where actually does this kind of fall on the Elon Musk spectrum of priorities right now? Given that he has a SpaceX Tesla x slash, Twitter, the boring company Neuralink, nine Kids.
X AI, don't forget XAI, which you know got announced over the weeksa thank you.
But where where? Like how is he?
I mean, this is a guy you know, well Ashley, Like where does this fall in his list of things that he wants to do, like and he wants to be part of his legacy.
It's pretty high up there.
I mean he you know, all his companies always come with this we're going to save humanity kind of trapping, and this this fits into that. When it was first presented to the public, I mean, he went straight for the AI sci fi We're gonna download Spanish and Kung Fu into our brains and and this this was going to be for everybody. Billions of people would get the
same plant. You know, it's much clearer now that for the foreseeable future, this is to help people in sort of dire circumstances, and so he takes that mission pretty seriously. It's interesting he is not at Neuralink on anything like a day to day basis. I mean he shows up in my experience like once a month and gets these kind of debriefs on what's going on. And the company's essentially run by like a triumvirate of people.
So, you know, one of the things you've you've been to the Neuralink facilities in Silicon Valley, talked to us about that. They also have operation in Austin. I'm just curious about, you know, what you've seen, what you've learned, any of the conversations you've had with Elon about this.
Yeah, and you got to see Elon, you know, basically at work with the team at Neuralink. What was that like?
I saw them with the team, I saw them with the primates. You know, so in Fremont. In Fremont is where most of the primate research has taken place to date, and so for the last three years I kind of hung out with the same group of seventeen monkeys in there.
You know, on one hand, the office is kind of standard.
It has people sitting at desks and working on their robot prototypes.
And things like that.
But then there is this animal care facility, and just to let people know, I mean, you're in there with seventeen monkeys and at any given time, three or four of them have a laptop that's been wheeled to like the front of their cage, and they're playing video games in many cases just with their mind their things, thinking what they want to do in this video game, moving a cursor onto a onto a tile, tracing letters on the screen, and just doing that by thinking about it
with the implant going to this computer.
It is wild. It's sort of hard to try to convey this in words.
It's like one of those things that you experience and it's it's hard to get across, which just how strange it is.
But but you think of people right who don't have that ability and are paralyzed. If they could potentially have that capability going forward, that's pretty dramatic and life change.
Absolutely.
Yeah, just to make it clear, I mean, the initial goal with this right is to be able to think words that then go into a text message or a WhatsApp message, so you're.
Communicating with your loved ones.
You're communicating about your wants and needs and with the outside world.
And the other goal is to be able.
To move a cursor around a computer screen and a very fluid fashion. And you know, as any of us can imagine, I mean, just having access to a computer unlocks you know, so many things that you can do.
And so I mean, this.
Is it is like borderline miraculous type technology.
So to that end, what what are the sort of the use cases that the company sees the implant being able to solve in the in the short term and then a longer term And like how big of a you know, growth pattern could they see based on the amount of interest they've had from from people who have said that they're willing to get an implant.
Yeah, you know, in the short term, nereal Link is building off like decades of research here, so people have had the ability to think a couple words at a time, to click yes or no on a screen. But with this extra horsepower, you know, they want it to be where you're you're thinking words almost as fast as as one of us could type on a computer today. So that's kind of the near term goal, being able to navigate.
On the screen.
They also have a spinal plant that they're working on that would be paired with his brain implant, and the goal there is to restore movement in limbs and also feeling in limbs where you kind of short circuit or create a circuit really between your spine and the brain and from there, I mean, it moves. You know, I
can talk about very futuristic stuff. It would be far off, but it's things like improving your hearing, improving your site and kind of you know, just anything that your brain controls, which is a lot.
How promising, Ashley is this? I mean, are we going to start seeing in your estimation, in your opinion, will we start seeing the big healthcare companies try to get their hands on this type of technology.
You know, if you look at the traditional device makers that do things like deep brain stimulation for epilepsy and things like that, it's been a very very slow moving field where a device gets made, comes out of a research laboratory, and hardly gets advanced.
Things have totally changed though.
I mean Neural again is one of at least thirty six other companies working on products in this field. So this thing, this whole field has moved from academia to hundreds upon hundreds of millions of dollars coming in from venture capitalists, and so I try not to get people's hopes up too much because we don't really know exactly how this is going to play out, if the products
are going to live up to their potential. But there's such an explosion of interest here, and in my experience of seeing people with the spinal implants, you know, it's encouraging. I mean, this is even even in the limited forms of the technology right now, it's life changing for people who get these implants, and so if we're anywhere close to the hype, it will be a dramatic next ten or fifteen years.
So actually, another element that I think you do a really great job of exploring in the story is that in all the companies that Elon has, at some point he ends up kind of touching a race. FDA is a regulator that he hasn't had to interact with yet. But there are some commonalities in some of the scenes in the stories kind of show that how does what's the experience been with neuralink and the whole regulation side of this particular space.
Yeah, I mean, if I'm totally honest, I've been reporting this story for a long time, in part waiting for them to get FDA approval, and there were times when I thought that actually would not happen. You know, they have this very dramatic robot doing this very dramatic surgery with a new implant. So they submitted fifteen thousand pages of documents to the FDA to prove out their technology. It was an arduous process. Elon was all the Elon
you could expect during this. You know, I saw some meetings where people said, look, the FDA said you can do this one surgery, but you can't do another one for a year, to which Elon replied unacceptable. And then it obviously goes back of the team to try and
address address this. And you know, Elon has this philosophy really that obviously you push regulators to the edge, and as we talk about in the story, like he's seeing with SpaceX in the rockets, it's kind of you launch it and you show them the FAA that the rocket works, and then you get to launch again. And so the hope here is you put this in someone's brain, the human who can communicate, you know, the monkeys can't tell
us what this experience is like. But this human will be able to and Elon's hope is the human says it's revolutionary and the FDA lets them keep going.
Well, it's pretty incredible. And I got to say he's a controversial figure, but I would never rule him out on anything. This is the cover of the new issue. It's also part of the new podcast Elon Inc. We kid, it's true, but it's Elon's world and we are largely living in and Jill Webber and of course Ashley Vance. It's also the cover story of the new issue of Bloomberg Business.
Week, a journal.
How about you let me drive?
Oh no, no, no, no, who's going to drive?
Alright, please, I'll do the gravel?
Wait, I want to drive.
It's a good question.
Good.
This is the drive to the Globe.
Doing well by around on Bloomberg Radio.
All right, everybody, we've got just about seventeen and a half minutes left in the Wednesday trade. Carol Master along with Tim Stanovik live here at Bloomberg Headquarters, uh and in our Bloomberg Interactive Brokers studio. You know, call it meth in terms of the equity trade, right.
Yeah, but the s and p is in the greens so or boy, I know, but it's going to notch another another consecutive day of winds.
So maybe well, yeah, tybe, we.
Do have, Yeah, we do have. What you say, seven seventeen minutes to go, A lot can happen, right, We're data.
Dependent, We are data dependent. A lot of treasury oxygen's happening as well. Let's see what Leo Kelly has to say about it, all of it. He's founder in sy Inverden's Capital Advisors back with us. He has owned Zoom from Hunt Valley, Maryland. Leo, good to be talking with you once again. This environment, it's an interesting one. Last week the FED meeting, many investors read that as a very dubvish FED. Do you think the US Central Bank is done when it comes to rates raising rates?
No, absolutely not.
And I think you might have on the head the secret to what's happening in the market. I think everybody's looking at seventeen minute increments anymore, you know, as we think about what's happening in the economy as a whole. The FED gave just enough language for the markets to get optimistic and for the folks that I think have really been let's just say rooting for an outcome, and what I've known after being in this market for a few decades, when you're rooting for an outcome, that's a problem.
The reality is is there's still too much money in the system. M two is still up a thirty plus percent over a two and a half three year period, and because of that, inflation's going to be just incredibly persistent. What the FED has also said is it's still going to be tough to get to two percent. And the FED knows that with all the money in the system, if they as they ease back at all, inflation is
going to keep coming back. So I think the Fed's doing exactly what they had to do, react to the to the geopolitical moment, pause, give just enough language to let the market calm down, and then they'll get back to it next year.
Does that mean the market will not be calm when the Fed gets back to it.
I think we're going to keep seeing what we're seeing, what we keep hearing as folks are trying to figure out this market. This market is two years old, right, We're still in a bear market from January of twenty two, and we haven't really come out of that bear market yet, and this is an interest rate bear market. We're in process of working through this. So I think the market's going to continue what it did. FED gets active again, rates go up, and the market is going to struggle.
We hold a lot of cash on our portfolios more than normal. We're loving this five percent and we're holding on because we think we're going to get some significant volatility, and when we do, we're ready to put that cash to work. I think on the backside of this, there's going to be the end of this, finally, this interest rate rise bear market, and we can get out of this and have some opportunity in front of us.
Okay, so what's going to prompt you to put money back into the market. I mean five percent is great, but if you look at the S and P five hundred, I mean that's up, you know, three and a half percent just in the last five days.
Yeah, well, I guess is it. It's up, but it's up off of you know, a dip, right, All it did was go down and go back up. The other thing about the SP five hundred this year, the equal weight S top five hundred is basically break even this year. You know, again, we've got a few stocks that are driving this whole market broadly. The market is really pretty ho hum this year, and if you look from January first, twenty two this year, stocks are down. They still haven't
come out of this. So the five percent looks fine. I agree with you, though at one point the five percent is meaningless if when we do get volatility, we've put that to work. I think there's an opportunity here to make money in some volatility. What will cause us to do that, It's pretty simple valuation right now, and we still have a consumer slowing down, we have confidence shrinking, we have an ism that now recorded it's twelfth straight
month in contraction. Rates are still high. There's still a lot here to kind of grind through to get to the other side.
LEO.
So we're down still about four percent four and a half percent from the late July high on the S and P five hundred. All right, so we're still a
bit lower. But I mean, is it not low enough that you find enough interesting equity opportunities, especially among the large caps at this point, that you'd like to see a little bit more fluff come out of the market, or is this an opportunity where you need to start thinking about maybe kind of buying an anticipation of what comes, perhaps maybe rate cuts next year, which it seems like that momentum is growing again, although as you said, the FED is still on its inflation fight.
Yeah, Carol, I think that's a great question. There's a couple pieces to unpack there. First of all, again, I still think we're in this interest rates higher market. I think the surprise could be higher faster and inflation coming back up and surprising folks, if you look at the ten year it has made higher lows and higher highs through this whole process, and every time it starts to go back to that higher low, everyone's convinced the Fed's done and this is going to pull back in the
market's rally. But that is not what has happened. Consistently. It is ratcheted higher again. You may remember from our prior conversations we think this is the beginning of a secular bear market in bonds, which takes a long time to work through. Now in that they're cyclical bull markets, which is helpful relative to the other part of your question. No, we don't think it's advantageous right now to put money at the market. We don't think the valuations are cheap enough.
As I said, we're coming off of that that high were the broad market really hasn't done much of anything, and the tech stocks are pulling back from frothy highs. So I don't think it's quite time yet. But I will also say Carol, that depends on where you are as an investor. Where we are is neutral in our in our equity weightings, meaning an equal weight. We're not overweight, We're not underweight. We are underweight some of the overpriced areas,
like some of the growth areas. We think there's some value international, we think there's some value forming in small cap, we may not be there yet. And we're underweight bonds because we still think rates go higher. So we're very short in our fixed income portfolio, where neutral in our equities, overweight cash, and we still love private investing. We think there's opportunity there.
In thirty seconds, what's the opportunity in privates right now?
Well, I think private credit looks interesting. I'm a little nervous how hot it's getting right people are running to it. But for some time, we've been doing this for a few years and making great yields. The other area that's always good in private investing is good old fashioned businesses in the private markets are not trading at the market multiples we're seeing in the public markets, So if you do your due diligence, you can go in there and find great companies to invest in.
That.
Again, I think the economy is going to be okay coming out of what is soon to be a recession.
On the other side of that, all right, listen always funding check in with you. Leo Kelly, founder and CEO of Verdance Capital Advisor, is fun and informative on zoom from Hunt Valley, Maryland.
This is the Bloomberg Business Week podcast. I've a little Apple, Spotify and anywhere else you get your podcast. Listen live weekday afternoons from Treaties six Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal