KKR's Founders Exit Co-CEO Roles

dot Com. You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. We're talking about some of the COVID headlines. I always like to remind everyone about the COVID cases. The global COVID cases count topping two hundred thirty seven point nine million, deaths tim exceeding four point eight million, and then we've got more than six and a half billion COVID vaccine shots given

at the same time. Here in the United States, we are seeing a steady decline of cases from at least a peak this time around last month, where cases are down under one hundred thousand a day on average, which still is too many, but it's going in the right direction. Right. The trend line really important. So let's see what Dr Ian los Peter has to say about a clinical professor of medicine at n y U Landgown. We check in with him every week. He joins us on the phone

in New York City, Ian, how are you doing well? Thanks, Carol and Tim. Happy Monday. I hope you guys are safe and sound. Yeah, same for you. Um, I don't know what's top of mind for you when it comes to COVID in the vaccine today. So we're definitely seeing a lot of patients asking about the third booster shot, and certainly that's approved for fiser for people who are

older or immuno compromised. We're waiting really to expand that, and certainly we're waiting to hear from the FDA and CDC on booster shots for MADERNA and J and J. The water is a little muddied because Scandinavia has had some concerns about younger people with maderna because there is a small incident, small but definite incidents of some myocarditis and paracardis what is so interesting. Dr los Bader is my brother who's in his mid thirties and lives in Seattle.

He works at a school. He qualified and got a booster over the weekend UH Fiser booster. But people here in New York, for example, who might you know, might be twenty years older than him, aren't yet clear for a booster. So there's not really guidance that's coming from the federal government about what to do. Right, We're hoping for a little more guidance. A little more guidance would be useful. And I think part of the reason that there is unclear guidance is there's a lot in the

UH in the salad. You know, we certainly know that older people are higher risk, and there are certain groups I mean, we're compromised and people with diabetes, hypertension, obesity, and so forth that can benefit. And we know from the data in Israel that the vaccines, the Fiser vaccine certainly has had less um effectiveness over time, that basically, UH, your antibody levels dropped, and that at least for a short time after a third vaccine, the antibodies go up

significantly and the benefit goes up significantly. We don't have really long term data, how you know, we think that that will create a more durable response. So there's a lot of data to kind of crunch, especially with young people obviously, the benefit versus potential risk. Most of my patients who are older or immuno compromised who have had FISER are either getting a booster shot around this time or I've told them that I think it's reasonable to

do that. Well, it's interesting too, you know, after our conversation, Um, I think it was our conversation that we had in terms of who should get the boosters, and I talked about, you know, Tim and I are getting ready to do

some traveling to the West coast. I'm getting ready to do some traveling for work out of the country, and I did look into boosters and it seems to be and I am someone who doesn't want to jump the line until they say it's ready, um, but they seem to be very much monitoring when you got your last shot, and you can't do it before six months from your shot at least. That's you know what I'm I'm hearing

from hospitals and so on. If you try to, you know, kind of do something on an app Um, is that the right way we should go about it, or if you can get a booster. I mean we hear stories Tim and I and people just walking into a pharmacy and getting it, So both are true. Uh, usually people are well protected. After six months, we're really not seeing a real diminution in antibody levels. And certainly people who

do get COVID, you know, in that range. Um, usually you're not very sick at all, they'll have a mild cold, but certainly over six months or if you're compromised in the benefit really outweighs that. There are a number of patients who are cutting the line. And uh, you know, this is why it's somewhat confusing. We've got a group of people who are very aggressive and and the pharmacies really don't have the resources to double check are you really I mean compromised you because you don't order it,

you can just go into the pharmacy. Obviously, there are you know, with Southern Border and so forth, a number were people coming in who we don't even know their

status and potentially either infected or could be infected. So you've got all these groups of people, some who were very worried and trying to be fully vaccinated and and some not so really what I would say, if you've had your vaccine within six months, your odds of a problem are very low, and there's no reason why if you're traveling and uh, you feel that you're not feeling well,

you get a test, get a swab. Monotone lantibodies are available. Uh, they're really Hopefully the Mark drug will be approved soon, So there really are options if when you're traveling you think, oh my gosh, I'm feeling well, that's a really good point. Well, speaking of the of Mark's COVID I want to touch on astra Zenica just in the last minute that we have, because the company's antibody cocktail was effective at preventing mild or moderate COVID infections from worsening in a study that

bolsters the drug maker's ambitions for the product. Just in the last thirty seconds we have with you, Dr LUs Bader, how do you see us moving from a prevention to you a treatment as we can turn the corner on at least this part of the pandemic. You know, well, we we have to view this is three legs of the stool, you know, mitigation methods and prevention methods. I think certainly vaccines are reasonable. We do need to come up with some pills, and overall health will protect you

to some degree. I'm not sure giving people antibodies passive antibodies, UH, to prevent disease would make sense unless you're a household contact. If you're in the household, you've been vaccinated. Someone is sick, Okay, Perhaps then it makes sense to say, let's check the spread by giving antibodies before someone gets sick. Um. I think we need more data on that. Hey got ten seconds. Dr Less better, what's the non COVID question you get

most asked right now? Uh? People are afraid about screening. Shall I get my colonoscopy? Shall I get my mammograms? Its face? People will have to be tested before they do that. Gotta gotta run. Dr e LUs better take us out to the ball game, where we will increasingly see changes in attempts and even robot umps to fix baseball's board and problem to him. Joining us now is Joel Webber, editor at Bloomberg Business Week. He's with us in the Bloomberg Interactive Broker Studio. Also joining us is

Ira Bootleg, Global business reporter for Bloomberg News. Joining us on the phone, from New Jersey Joel Baseball has got a problem when it comes to speed and when it's come to action. What are they doing about it? Well, it's been a theme for years now, UM and and there have been many attempts at it um. But what IRA's story really looks at is this little test case that they have in UM in a league that is

called the Atlantic League. And it is literally where um MLB will kind of like try a ton of different stuff just to see if it helps make the games a little bit more exciting. Now they can't and they can't make things look like you know, last night Red Sox game, but they can actually kind of institutional license stuff. And interestingly enough, the players aren't unionized, so they can't really resist. So Ira, what what kind of kool aid has been forced upon the Atlantic League players? Uh, it's

been a grab bag. They started in ten. Last season was called off because of the pandemic, so it really got going this year. But they have allowed pitch hitters to try to steal first base on any count when the ball get by the catcher. They have made the bases three inches bigger, eighteen inches by eighteen instant of fifteen by fifteen, they have perhaps the two biggest ones are an automated ball strike system or robot pump where they called ball and strike call is delivered to the

human umpire's ear. Uh, and it's a Doppler radar that actually establishes the strike zone. And and they this year they moved the pitching rubber back by one foot from the sort of sacred sixty six inches to six six inches for the last couple of months. But did it help, did anything? Yeah, they are seeing some stuff work. So there's like stealing first base. Nobody wanted to try it because they wanted to just to test their luck in

there at bat um. But the other stuff is showing modest effects of the kind they're looking for because they don't want it to be jarring. You know, there's stuff they said they could have done, like making the ball bigger, or adding players on the field or you know there's or taking a player off the field that you could do, but they don't want to bastardize the game. So they

are uh seeing modest effects in the bigger bases. And and so far, moving the pitching mound back has actually raised contact rates and batting averages, which is really what they're after. They want more plays where fielders and base runners have to move. Um. So that's that, and they want to speed the game up. So there's also pure mountain visits, which is something the Major League Baseball took

from the Atlantic League. That whole rule where have to finish in eating our phase three batters that started in the Atlantic and moved to the major leagues. And the idea is to find more stuff like that that helps at the margins. Did anyone yell at a robot um this year? So my favorite piece of all this is ranked by Ala, the former Minnesota Twins pitcher is now a pitching coach in the Atlantic League at the High Point Rockers, and he hates all of this and um.

He was the first person ever thrown out for arguing with the robot arm. Back in first game that he had with it, he went ballistic when it issued a five pitch walk and the umpire said that, you know, I would talk to him that the umpire from that night, and he said, you know, he was yelling at me, and I said, look, what do you want me to do? You know, I'm trying to do my job here. And then I didn't satisfy Yola, so he had to throw

him out of the game. So, yeah, there're but a lot of the fans actually don't need to notice another umpire talk to you said, there are some who are savvy, and they will hackle him by saying, change the batteries or uh, you know, call tech support. But but for the most part of fans don't actually seem to notice because if you're not looking for it's very hard to see. Well, and let's get to the reason why all of this

is happening. I mean, I remember watching games with my dad growing up, and you know, they were certain length. They've gotten really long, and I mean play is slow, and when you're competing with you know, everybody's eyeball, especially a younger generation, you know, who are used to fast moving stuff and quick videos and so on and so forth. Um, baseball's pretty boring. They got to worry about their future audience. Yeah, it's a really interesting case because nothing really changed about

the game. It's just the way the game was played. They basically figured out with this moneyball revolution that your best hope as a hitter was to focus on a home run or a walk, because if you hit it in the field. You never know, you know, there's a lot of random luck involved in a home run was an automatic, you know, way to score and and for pictures, similarly, your best hope was to avoid contact and to stry

to strike people out. So everybody got obsessed with the three what they call true outcomes, the walk, the home run, the strikeout, and those are all plays on which basically nobody runs anywhere. Um And so now you've got, you know, second basement. You can hit forty home runs and everyone's trying to hit a home run almost every bat, and the game just kind of grinds to a halt. And they've got a situation now where it's four minutes between

batted ball events as they call them. The strikeout rate is like twice as high as it used to be forty years ago. So that is what they're trying to fix. They're trying to figure out how to reincentivized players to try things that have gone out of fashion. So what's in it for the Atlantic League? Because obviously, you know, there's there's maybe an incentive from a fans perspective that I don't have to agonize through a longer game. But but you know what, why would a team do this.

The Atlantic League is really interesting because it coincided with baseball restructuring all of its minor leagues and getting rid of a bunch of affiliates, cutting down in the number of players the teams can carry in their farm systems, and creating these things they called partner leagues, which the Atlantic League is one of them, and they are basically a kind of extra auxiliary labor waiting. These are independent baseball players, but there's a regular way for minor league

or for major league teams to buy talent from them. Uh. And so what happened in The biggest thing that they got was just data about all of their players because there's this track Man device tracking every batted ball, every throne ball, which is what they used to do the robot humps. They now have a huge stream of data about all the players because they put one of these track Man devices into every ballpark, So the teams all

know everything about their players. But more importantly for the players, major league scouts don't have to show up to see this. They can see everything about the spin rate of some Atlantic League picture just by you know, checking in on that data stream. So it's advertising for the players. It's also advertising for the league. You know, writers like myself and others come poking around because they're interested in this,

and it raises the profile of the Atlantic League. So if we think about the Atlantic League as a test case or as a way to experiment with these new changes, where does the collective bargaining agreement that MLB has with the players union come into Actually think about what kind of changes could be adopted by the MLB. Yeah, that's a really interesting thing because you've got really poor relations right now between players, the players union, and the league.

And this is mainly to do with nothing with the rule changes. It's with pay money, of course, and and that's the collective bargaining agreement expires in December, and everybody expects these negotiations to be really difficult, and I think the way the rule changes will play into that is that it will become leverage for the players. You know, they will be able to say if you want us to change our working conditions in this way, and that you need to do things that increase the pot of

money or even this. You know, there's a good chance that the National League will adopt a designated hitter this coming year. And I think that is partly about just creating jobs for veteran sluggers who can't play in the field anymore. So I think that's the kind of way this will run. And you put out that the sports betting industry is really pouring a lot of money into all the league's sports leagues that are out there. Um Imra Boodway, thank you so much. Great to hear from

your global business reporter ut Bloomberg News. Check out his story in the upcoming issue of Bloomberg Business Week. Told Webber editor Bloomberg Business Week. Here in our interactive broker studio, this is Bloomberg Radio. This is the Big Take, the best of Bloomberg's in depth, original reporting from around the globe. We're running on a financial system that's running on old technology. We're seeing host places reach fresh record ties. What unfolds in mid terms we will no doubt see again in

the next presidential election. The Big Take on Bloomberg Radio Bloomberg Business Week is brought to you by SEI Crises bring out the best in people, character, community partnership. Together as one, SEI go to se i C dot com slash I m S. All right, so let's get to the Bloomberg Big Take. It is among our most read stories on the Bloomberg and it has to do with what five triters, five traders, excuse me, or telling us about how you survive in this crazy, disrupted market world.

So let's get to it with our own Shinnelli Bossi. She is Wall Street reporter at Bloomberg News. She's in her interactive broker studio. It is a disrupted world, absolutely, and we spoke to people five of us around the world, from people that manage tens of millions of dollars to hundreds of billions of dollars, and there were some similarities Carol, for example, all of these people are thinking about innovation, for example, what is crypto doing to descript the markets?

They're thinking about volatility, and they're very honest in terms of knowing that they're going to lose sometimes and so knowing how to lose is what I felt was a key quality of a trader as we talked to so many of them around the world and really dove into their day to day I love it. You spoke to the crypto trader, the veteran, the quant the distressed asset trader, and the credit trader, and I'm wondering who surprised you emotionally. I mean, I'm a little biased because I did the

credit trader one this guy, so John Zito. I asked Christine Harper, the Markets magazine editor. I was like, can we please do John Zito? Because I had heard about him throughout the entire crisis. He was the guy at Apollo that was putting billions of dollars into work in places like Airbnb or just in credit markets as they were at their lows. And you know he also, I mean he was really into Defy and so he was

not the crypto trader. But yet I found myself in a similar conversation as my colleagues around the world, who was talking to the crypto trader in Sydney managing thirty eight million dollars. Well, and it's interesting too, because I mean, you know, when you think about what's going on in this world, and I think about you guys having to kind of whittle it down to five people talked to us little bit more though about about your choice here in terms of making the pitch to Christine and saying,

we've got to include this guy. Yeah, my guy was the most institutional so John Zito manages three thirty billion dollars, and Christine was very intent on making sure we had a lot of diversity based on where in the world they are, are what they traded. So we had equities, we had um debt, and we had a crypto of course, and you know Oliver talk the crypto trader, was twenty years old. You know John Zito now is you know,

well into his forties, manages at thirty billion dollars. And you know, Jess had a daughter during he actually while in the middle of the crisis while he was trading those assets, so that was kind of another fun fact about him. And so you know, this this diversity of thinking was really important and what what was the thread? Many of them woke up at different times to trade different assets. You know, some woke up late. John woke

up at five thirty am. But again that comfort with losing and also the precision, right, I mean, the thing that John was so frustrated about ken of in the world more largely is a alpha's harder to come by. He's in the credit world, so you know it's not he says, he actually doesn't trade much at all anymore. He they mostly originate loans, and when markets really blow out, that's when they step in. Don't trade just to trade. That is Keane number one. Number two is analyzed and

hold off, step away. And also, you know he said they were analyzing hundreds of securities line by line, day by day. And so that precision in terms of finding out what you can know and what you can't know, is such an important aspect of trading. And again this is relevant now because we're thinking about all these day traders entering the market. So what is the difference between a day trader and a professional trader? I don't know anymore.

It's true, Hey, I'm wondering about their outlook, and you know, if there's anything that ties them together about the way that they think we are headed as a as a global economy. Yeah, I mean I think so I talk spoke to the distress No, I spoke to the credit trader who happens to trade and distress sometimes. And then Rebecca Chuen Wilkins spoke to a distressed asset trader as well.

And this idea of volatility. So everybody agrees that the federal reserve support not just over the last year, but over the last ten years has not just disrupted but distorted markets. And so now going into this next era knowing that you know either you know what could happen next? Is the Federal Reserve support more fragile now that they have exhausted so many resources. That's a big theme too.

But you do wonder write if there is I think about that a lot since the financial crisis, and is there an understanding that if things fall apart in whatever way X y Z, that the Fed another central banks will always be there to backstop everything and to what extent? You know, the fell The Fed fell short of propping up equity markets. But there was a point if you guys remember Scott Minored was asking, you know, well the

Fed start buying stocks. I mean, that's how do you guys remember it just a couple of months ago, now that we were in the real, dull drums of it, and you know, the market participants are feeding off of you know, this idea of moral hazard where the Fed will step in when things get bad. But the thing is it's marginal. The more they step in, the less effective it could be. Well, and it's on you know, you were asking about kind of threads and that you're

so good about doing that, But I do wonder. I think we're all trying to figure out what's next, and I do feel like that there's a consensus, certainly among the guests that we talked about that more volatility like nobody. I think there's optimism optimism out there, but there's also like we're going to see more swings just because we're gonna go from again a lot of support that to the FED eventually easing off and probably other central banks.

We've already seen that. Yeah, it's interesting because on one hand, volatility is scary for our markets, but it's also a perfect storm for traders. They make money when there is vol There are volatile markets, and there used to be a sense that in the past the VIX above twenties starts to get choppy for markets, things like equity offerings really like exciting things for investors to be involved in.

Now this is a beyond the scope of the story, but my sources say VIX at twenty five, that's the new level that you start to get a little scared, but maybe it'll be okay. Like that is crazy that you can sustain a proper ip with a VIX at five. It's just exactly a new world. And if I'm not saying cryptos here to stay, um defies a central central and just in about fifteen seconds, unfortunately, yeah, he defies different than crypto. But they're all acknowledging that they need

to wake up to these changes. And you know, Wall Street better catch on. I'm going to squeeze again. Fifteen seconds, y k are, We're gonna talk about a little bit more with one of our huge change, huge right, long time telegraph, but that we are seeing the new guards start to turn over. It's like the next generation rising. So good, so good, so good. Shinnali, thank you so much. She covers all things Wall Street. It really crosses so many different things that are going on in our finance world.

She's Bloomberg News Wall Street reporter here in studio, big news. Uh, and really I think it might still be our most read story on the Bloomberg. Has to do with two kingpins behemoths. I can't speak yourself per relative in the private equity space. We're talking about Henry Cravis and his cousin George Roberts, quintessential dealmakers who have dominated global private equity for almost half a century. Tim they are seating their leadership roles at kk are they're making away for

handpicked successors, essentially the next generation. Yeah, watershed moment for private equity, at least according to our next guest, Brian Schapota, a Bloomberg opinion columnists who covers debt markets. Brian, give us your take on on this big news coming out of the private equity world, because it also comes at a time where we're seeing other huge private equity firms

make big transitions as well. Yeah, KKR was really the one to watch though when you think about the big private equity firms, Carlisle had already made it, made its move. You had Apollo that was sort of a forced decision um with Leon black and the controversy around him and his ties to Jeffrey Epstein. Blackstone meanwhile still under Stephen Schwartzman. So KKR obviously the k and one of the Kays

and the R are now stepping down. So it was kind of seen as as the real, the real interesting one because they thought of the firm of nineteen seventy six, they've been at it for four and a half decades, so there was some question about, Okay, when are these guys going to you know, PA paved the way, paved the runway for the next generation, and now we're seeing it. It's interesting to write considering what we've already seen in

private equity. Was this a case of the guys getting older, they had to do something, They could lose talent if they didn't soon do something. In terms of officially putting successors in place? What was what? What are you hearing? What are you thinking? What's your observations here? Yeah, I think that was definitely a part of it. I mean, there was a lot of speculation about, Okay, if there is no move to have new CEOs step in for them,

whether people would ultimately go elsewhere and try their hand elsewhere. Um. So this this suggests that, you know, things are moving as as there as they were planning. Um, the succession plan was started a few years ago, but there wasn't really a ton of movement on that front until until obviously now. So now the question is going to be,

you know, whether they're ready for the future. And just the massive side of these private equity firms actually wrote that even hard to call them private equity firms anymore, because private equally is just such a small part of what they do, especially you know, you look over to Apollo and they've done with a theme and it's just it's incredible. They're they're they're massive, They're like I went back to look at the the Acid under Management and

they're just huge. So Brian, talk a little bit about how private equity. I mean, it's hard to say it's shifted because it's this is private equity right under under these two guys at KKR UM. How has it shifted though in recent years and how has it changed in recent years? Yeah, I mean there's definitely been a push to have some more stable capital coming in um. Apollo

really pioneered this with It's a theme deal. They ultimately went ahead and did purchase of it earlier this year, and basically all the others have had to follow suits. So they're looking for ways that they can continue to generate steadied returns rather than have to take all of this money that they have. I mean, combined a Polo, Blackstone, Carlisle, KKR well over half a trillion dollars in assets under management.

I mean, they don't want to have to go chasing all these private equity deals that might not pan out if you start to really uh go after things that are that are a little too risky. Um. So they want to find a stable source of capital to supplement what they do best, which is which is fine attractive private equity opportunities and buyouts. Well that's the other thing, right, the bread and butter PE business. I mean, there's so much money out there, there's so much of PE money

and other investment money kind of chasing similar targets. And you do wonder how that becomes a little bit tired to be doing that, getting too competitive, and then the prices that you may be having to pay pay up for because there is so much competition for you know, a limited amount of targets. Yeah, I mean that's kind of what's what's just ended up happening here with institutions and wealthy individuals. They've said, Okay, I can get basically

nothing in fixed income when adjusted for inflation. UM, I could buy public equities. They're very pricey right now, it looks like we're seeing them coming off the record highs. So so where do you go? You know, you call your you call your private equity firm, and you try to see if you can get some returns of that way. Um, but to your point between private equity, between private credit, there's a lot of money chasing all of these strategies

right now. So everyone's trying to scale up and and deploy capital at you know, two billion dollars, three billion dollars at a time, just to just to get a lot of money out there and put it to work. So help us look forward for this new generation of leaders in private equity, especially at KKR, what do the next thirty or forty years look like? Oh? Man, Um,

I mean right now? I mean, I think we're seeing a real inflection point and a transition point within private equity, where like I said, it's not just going to be the typical deals that you saw from the previous generation that made kk are famous Barbarian to the gate are garon Orbisco. Um, It's not going to be that for these guys. It's going to be whether they continue to build out this asset management practice into something that's large and sustainable. And I think you're going to see more

of a push towards retail and individual investors. I think that's the next frontier, and you just figure out how they can get more stable sources of money and being able to lock up more capital from from retail investors, individuals. Um, I think there's another another avenue that they're going to explore, Crevice and Robert. So they're not going anywhere just quickly. Oh yeah, No, they're They're still gonna have their hands and and things. But they won't be CEOs anymore. They'll

be executive chairman. Yeah, they'll be They'll be around, is my guest. Um, Thanks Brian, Really great perspective on a big big news here. Brandon to pot Bloomberg opinion columnist writer and you can check out more of his work on the Bloomberg Terminal also at Bloomberg dot com. But it is an interesting moment in time where these well known names who've created this private equity space, and really KKR was at the forefront we heard Brian mentioned it.

But Steve, Steve Schwartzman, he's still at Blackstone, right. I mean these are firm so identified with individuals exactly. But but he's got to be looking like, you know what I have to do. I'm road mac journal. Yeah, but you let me drive nor home, Honny, please, I'll ravel, lets me I want to drive, just drive baby. The questions drying yea this is the drive to the globe. COMU. Thanks, we'll drying us dawn on Bloomberg Radio. Alright, folks, just

about ten minutes left in today's trading session. Bit of a wacky one again, coming on the heels of that Friday trade. Rady Watts so delighted to have back with US chief investment strategist over at O'Neil Global Advisors once again on the phone in Miami. Randy, nice to have you here. Kind of watching the trade. We were higher than we've moved off those levels. I called it a wacky tra eight, but I feel like it was the same way was it on Friday with the jobs report.

What is it interesting about the market trade to you right now? What are some of the internals that you think are worth noting? Hi, Carol, Tim, great to be back. Hope all as well in New York. I would say, when we look at the market technically, we're five weeks in the consolidation. We're really looking for the recent lows

on the SMP to hold around. I believe we probably have several more weeks here until we regain some more comfortable footing and the market can move above the fifty d M A. We'd really like to see the market retake that fifty day moving average on good volume until we started, until we start to get more bullish. And I think what's going to determine that is really how earning season goes. Everyone knows it's going to be a

good earning season. Earnings are forecasts for the SMP for this Q three results, But I think what really matters is how is forward guidance both in terms of revenues, but more particularly in terms of margins and profits? Right exactly, you're here. That's like literally, Carol and I were talking

about this during the break. We do this, We do this, you know, cross platform coverage with our TV crew, and we all kind of bring different things about the market trade and we're both all both like, it's just about earnings and what we get, right Tim, Yeah, that's exactly right, Randy, And I'm wondering where you're looking specifically. Okay, we want to talk margins, but what are you concerned about? Are you concerned about higher input costs or you concerned about

higher labor costs? Are you're concerned about rising price of oil? Right now? Yes? Yes, and yes, I would say all of the above. I would say, really really two things. I'm concerned about input costs, which are both materials as well as labor. You know, labor has been running up. We saw that last week on the average hourly earnings numbers. But I'm also worried about demand destruction in that when prices go up and people can't find something they want

to buy, sometimes they find a substitute. For example, you can't find a new car you like, so you buy a used car. That means you're probably not in the market for a new car next year. And I'm also worried about maybe sometimes you miss that demand window and in the year from now, that person doesn't want a

new car at all. So I'm worried a little bit about that and how that's going to play out in the fourth quarter, especially, you know, how much of that lack of product is going to hit the holiday season. You know, it's interesting that you say that too, what about things like and I'm always curious about sentiment indicators, maybe above and beyond the traditional market, and that has something to do with consumer confidence. Danny Blanche Flowers Ever

at Dartmouth, former member of the Bank of England. When it comes to policy setting and He wrote about how he's been tracking and and UM a colleague of consumer sentiment, and that how that typically precludes a recession, and that we're already seeing that. That says that maybe we're already in a recession. What about something like consumer sentiment? Does that factor in it all? UH into your your market thinking here, Randy, I think consumer sentiment is clearly being

hit by by inflation. Inflation is much bigger than than people thought it was going to be, and as I've said before in your program, I really question how transitory it's going to be, particularly in two areas labor rates and rents. Those tend to be pretty sticky. If you look at consumer inflation expectations from the recent University of Michigan UH consumer expectations pull. People are now looking for about three percent going forward. That's the highest it's been

in the last eight years. And the bond market has taken note of this. If you look at the five year five five year forward break even inflation rate, according to Bloomberg, that's now that two point three six percent, So that's getting close to that sort of two and a half level where it hasn't been for a long time. So this kind of low inflation world we had from two thousand and fourteen to two now maybe starting to break and I think that's starting to hurt consumer sentiment.

I think with regards the economy, they're real key on the economy is going to be how much stimulus is coming out of Washington. That's unclear right now. If we get a ton the economy is probably gonna be pretty strong next year. If we don't, I worry that by the time we get to the second half of next year, we could really be talking about a mark slowing from

where we are today. What do you what are you concerned about when it or are you concerned about the Fed raising interest rates at any any point in the near future. Is from Golden Sacks saying, Hey, we don't think that's going to happen until the year three because the economic growth in the US just isn't gonna be there to warrant it. I'm not concerned about the FED raising rates as long as they stick stick to the

guide path. But they've really told everyone, which is we're gonna We're gonna start the taper in the fourth quarter of this year. That's going to take us ten to twelve months we're gonna finish in the fourth quarter and next year, and then we're gonna start to raise rates. So we're really not going to raise rates till late in the year of two or the beginning of three. And that's what the bond market is set up for. I think as long as that's what happens, the market's fine.

I think if the Fed deviates meaningfully from that, that could cause a surprise, and that could cause a dislocation worrisome in terms of stocks hitting new fifty two week highs versus fifty two week lolows. I mean, is there something along that line that also gives us an idea of what investors are thinking maybe where we go from here. Well, I think one measure I prefer to look at is actually the percentage of the SMP that's trading above it's

fifty day that numbers down to thirty. That's a that's a pretty weak number. I do think we maybe have a couple more weeks of of rough sledding, but I do think the elements are set up for a year end rally, which is, you know, get get the dead ceiling raised possible. Some of these bills working their way through the House pass in terms of infrastructure and reconciliation, we have an okay earning season. I think that could be really give you the recipe for a strong year

end rally, and so I do. I am still optimistic that we're going to finish the year better than we are right now in terms of absolute levels. And then I think next year is is it's really going to come down to what happens to inflation and race. Well, Randy, I don't know if I've spoken to someone who's as optimistic as you are about Washington at all in recent in recent months, you think all that can happen before the end of the year. I think there's a lot

of pressure to get something done. I think eventually that the Democrats are likely to feel that some kind of reconciliation bill is better than nothing. And I do think there's sentiment to pass the infrastructure bill, and I think, uh, this recent economics data, like the recent jobs report, which was disappointing, might give a little more emphasis to getting something done. So I would be personally surprised if nothing

gets passed. Hey, just quickly, um Brandy, I don't know what if you've technically looked at what's going on in the energy space. We know that that has certainly been one of the standouts this year. I think the top performing group, certainly in the major industry group in the SNP five. Just quickly seconds here, uh by not avoid what would you say? I think energy is strong, It's made a turn, but with oil now in the dollar range,

I think it's a little bit extended right now. I would look for it to pull back and probably buy that pullback. But I do think higher energy prices are gonna be something we're gonna be dealing with over the next year. So equity plays and energy interesting. Uh we

like the sector again, financials and energy. I've had such big moves in the last kind in the last couple of weeks that I feel like the stocks are kind of set up for a pullback on this earning seven season, even the results are good because expectations are so high. But I think that might provide investors actually an entry point into both of those groups. Got it. Always learn a lot, Hey, be well, stay safe. Frandy Watts, chief Investment Strategies at O'Neil Global Advisors, with us on the

phone in Miami. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Sarah to Bloomberg Global News