May Jobs Report, Crypto, and a Look at M&A

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. Let's talk about the monthly Jost Report, talking about Yes exactly, U S employers hiring at a robust clip in the month of May, wage gains holding firms suggesting the economy continues to power forward as a FED raises interest rates at a steep pace to tame red hot inflation. Is Mike McKee said, good report. FED should be happy. Susan Arthur is the chief executive

officer of Career Builder. Susan joins us on the phone from Philadelphia. Good to have you with us, Susan, do you agree with our own International Economics and Policy correspondent. There's almost nothing in this report that that would make the FED unhappy. Hey, thanks for having me on getting Yes, I would agree, there's not too much to be unhappy about. Um, we are pacing about eight hundred thousand jobs under pretty pandemic, so obviously the continued growth here is is restoring us

to almost to pre pandemic levels. All Right, you sound kind of worn out. Is it just the flow of news? Is it that things are rough out there? Like? How how would you assess the job market kind of compared to pre pandemic compared to the I mean it's listen, to be fair, I'm exhausted, and we've got an alcohol guest at the end of the show and they're not sharing any alcoholic us. So I'm pretty pretty ticked off right now. It's almost like this is like, actually true, Carol,

I mean, you're you're, you're. She's showing all our cards and being very real. Susan, I really am no, But to be fair, tell us give us an assessment because the job market is so important to what happened, especially when we have so many big banks. Uh CEO is talking about recession, not session. How do you see it, Yeah,

I would say so. So under the numbers, the big movers are what we've been hearing, right, We're moving from consumer goods to services, with the biggest gainers being leisure, hospitality, professional and business services. What we see in our data and the pulling we do with job seekers UM is there's still an incredible number of employed people in an

active search process. So while you know, lots of people are employed, and we like the unemployment rate level and the progress would participation rate, more fifty five year olds came back to work this month, there are still a lot of people looking to make a change. So that's a good thing, right, That's a good and and and I mean it's interesting to because your your point about being exhausted. The other thing we got our most recent pulling data is UM two thirds of people would choose

money versus an additional week off. That did surprise me considering sort of some of the burnout going on, right, UM. But of the people looking for work, the younger generations or to make moves, the younger generations are looking at twice the rate of the older generations, literally twice the rate. UM. Lots of people prioritizing money first, followed by a flexible schedule and remote work. So those trends are holding and gaining. Um. So when we think about what's going to change over

this period, who's going to make moves? Where are they going to go? Where? Associate with growth in sectors? I would expect a lot more movement of the younger generations, and that it isn't about culture or purpose, it is money and flexibility will help us connect to this to what it says about the economy and what happens in an economy where workers feel like they have that choice, they have that ability to move, doesn't that manifest itself

in higher wages and a higher quit rate? I would expect the higher quit rate to hold, whether or not the wage growth. I mean, I think that's by point two percent um the months, uh is you know, obviously to take down a little bit from last last year, but I mean from last months. But obviously there are outliers in that. If you look at leisure and hospitality significantly about pre pandemic levels. So I think you know,

people are still going to jump. It isn't always going to be for money, but there's gonna be competitive pressure on the employer employers for sure, Susan, I think what you were saying is so fascinating about this whole idea

of people prioritizing money first. I had a fascinating conversation with an Uber driver yesterday and trying to buy a home, talking about mortgage rates, talking about costs um talking about what it costs to fill up his tank over a hundred dollars, and just being like this is really rough,

searching for baby formula like this is real. This is America talking and saying how difficult it is, and when it comes down to it, you want to make sure you have enough money to to you know, put a home, a roof over your family and feed them agreed in Like, you know, if we went back pre pandemic, I would expect our trending in the younger generation. Job secret to lead with purpose, to lead with advancement, to a lead

with alignment to company culture. Those things are moving further down and folks are focused on you know, food and water here um followed by flexibility because that is there's a lot of people doing gig work. There's a lot of people in their side hustle, so flexibility thing isn't just that people like remote work, It's that they're needing to optimize their time and the economics of their time. If you had to assess the outlook for the rest of the year, recession, no recession. You know, I hope

we have solid indicators here that mean we're going to land. Okay. Um, But to be determined is that a is that a just intense seconds a cynical to be determined pessimistic? Now not pessimistic. I mean, I just think there is incredible growth out here and a lot of good work and innovation going on. So, you know, not pessimistic or syncle at all. Hopeful. I guess that I love it. You're real. I'm in a real mega get real mood uh and mode today. So Susan, thank you so much. Have a

good and safe weekend. Be well. Susan Arthur, She's chief executive officer Career Builder understand sees what's going on in the job market firsthand. Hurting us on the phone from Philadelphia. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Hey, Um, certainly.

One of the big business stories of one was that record round of M and A deals last year, and at the end of last year, bankers were telling Bloomberg there were no signs of slowing, and then of course two happened, bringing in it with it lots of financial market volatility and different macro values and outlooks, and yet we are still seeing deals getting announced and getting done. To him, let's get into it with Chris bloom he's the head of leveraged finance at a BNP. Perrybody joins

us on the phone from Massachusetts. Chris, how are you. I'm good, Thanks, how are you? We're doing well. So exactly a month ago, the three of us were at the Milk and Institute Global Conference. You've participated in the panel on global M and A about chasing records. A lot has changed in the markets just in the last month. Give us an update from an M and A perspective and what you're seeing. Yeah, No, that's a great it's

a great topic. And I think that the panel that we had out there was actually, you know, very very interesting in terms of the outlook for the rest of two thousand twenty two. I think we talked about that. You know, we had quite a bit of agreement that the we thought the market might rebound as we headed into the back half of the year. We have seen transactions still getting announced, and really I think the big

thing that we need to look at is volatility. You know, at the end of the day, in order to to actually agree on valuations for assets, you need to see volatility mitigate. You need to see the credit markets then stabilized so that the cost of capital you know, becomes known as as companies looked to be on assets or sponsors looked to been on assets. So I think that as we see volatility continuing to be relatively high in the equity markets and the debt markets, it makes it harder.

But we are still we are seeing deals, you know, begin begin to be announced again, you know, albeit you know, definitely definitely not at the base probably thought are they different types of deals? Though? You know from the perspective that everybody says to keep an eye on, you know, our our own M and A reporters here say keep an eye on private equity right now, because that's where you're going to be seeing a lot of deals. Are you seeing a different type of deal in this environment.

We are we are and again the core part of my my job is running our our financial sponsor business and our leverage finance business. So we have we have seen. You know, private equity investors love downturns in the equity

markets because it creates opportunity from evaluation perspective. And while the cost of capital has gone up quite a bit when you see interest rates rising like this, you know, at the end of the day, especially if you're looking at sectors like tech or healthcare, you know, while those valuations have gone down, when you're treating at fifteen twenty times, you know, finance at six to seven, you know, maybe it's six times now versus was seven times before because

of that higher pricing on the debt. That's not necessarily making that investment decision. So the downtake evaluations does create opportunities for pH shops in order to take businesses private. So I think we're seeing a little bit more of that. So, okay, are we on track for another record here or that's not likely? Definitely not gonna I don't think it's gonna be another record here. I mean, you are seeing some you know, large cap M and A being announced. You

saw a broad coom announced a very large transaction recently. However, you know, the just the volatility in the markets. I would say it's continued, you know. I think we all were talking, you know, exactly a month ago, beginning of May. That's continued. We're in the in early June. You know, volumes are down in both that and equity. So I think, you know, I would say a record dear, No, you know, will the year round out, you know, with with a

solid back half, that is definitely still possible. How do you watch the VIX, Chris, because you know, we have some of our reports and even the New York Stock Exchange President referring to certain levels of the VIX as a point when you'll see M and A R I p O S. Yeah, No, it's a great question. So I think when you're over thirty, it's very difficult to see any type of financing actions in the financing markets, as well as any type of settling out in in UM in M and A. When you're below twenty, I

think that makes things, you know, feasible. Right now. We were over thirty for for you know, during the period we had very heavy equity market polatility a week and a half ago. You were over thirty for a few days. You know, we're now sitting at six for the last few days. If you see a dip back below twenty, I think a lot of things become more possible. We've seen the high O bond market open up just this week. You know, we had a four point seven billion dollar

day on Wednesday. There was there was was just five billion printed the entire month of May. Yeah, it's very different, very different. Hey, one thing I want to ask, so, are you not busy on the weekends? Are you and your team not busy on the weekends? Can? We are definitely busy on the weekends, you know it just in terms of Look, we've all got risk portfolios that we're managing,

and there are deals in the pipeline. There were there were you know, I saw an article today talking about the fact that you know, we've got roughly thirty billion of of you know, sort of death financings in the in the lb O market that needs to come in the next couple of months. So, you know, we're always looking at the positions that we have on and the commitments that we have on and if if we need uh and if we need anything else. We've got always got the elon musk to send something out that all

running around there. It is um. Having said that, if you had to pick an area where you think we will see a more active area of deal flow, is it some of those beaten down sector? Is it health? Is it? What? Just quickly, I think it's Look, I think I think you're going to seek health. Healthcare and tech continue to be areas of opportunity because you can get outside returns as a private equity firm because of

the growth in those sectors. You know, with by putting to work a very large amount of equity, so you know, the equity checks and those deals are usually a high percentage of the capitalization, and so you can put put

a lot of money to work there. I think that you'll you'll see industrials will become more and more interesting because you know, at the end of the day, you know, businesses with good hard assets, and when you see sort of the high high sort of valued assets kind of treading down, you know, businesses with good hard assets could be attractive. Got it, We get energy, We gotta run. Chris, have a great weekend. Chris bloom over at BnB, Parry

Bot joining us right here on Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well in our weekly crypto segment. An investor and content creator in the space back with us has been Armstrong. He has founder a bit boy Crypto and the YouTube channel that goes by the same name. A self proclaimed crypto millionaire. I think that's how we described him last night. He joins us

on the phone in Atlanta. Ben, It's good to have you back with us. How are you. I'm doing great today. Are you guys doing well? I look Bitcoin really seeming rage bound right now. It's under thirty thousand dollars according to the latest on the Bloomberg terminal. Uh. When do you think we'll see a bottom here? That is a

great question. I think we're looking at one of two scenarios. Uh, there is a scenario that exists to where you know, we call it the false top theory that basically November, the top of sixty nine thousand was actually a false top. It was really kind of an over exaggerated deadcap bounce. We really look back at April is really actually being the true top. Uh, there's a lot of indicators to kind of point to that. Obviously, retail sentiment was the

highest at that point. If that's the case, then we could expect to see a bottom for a bitcoin in the next month, you know, maybe maybe even over the next ten days, as things look very bad in the markets right now. Um, but most likely what we've seen traditionally in with bitcoin is a bottom in November after

the mid term elections. So we're really targeting, you know, kind of the end of November beginning of December, and I think that will kind of line up with a lot of the larger kind of macroeconomic problems that we're having right now that don't really seem to be slowing down. But and here's my problem with the cryptocurrency where all this I don't know what fundamentals to measure it against, Like if you give me a hard asset or could you say fundamentals When it comes to crypto, we don't

do fundamentals. Yeah, I don't know if you know this, Carol, But there there's no earnings for a bitcoin and flows. Hence my confusion and problem with So how do I, like you say, Okay, could you know midterms? We could bottom at like, how do you say that, because what are you basing it on? Well? What when I said that? So we're looking at two separate kind of issues here. Uh. Number one, we do have fundamentals for bitcoin. They're they're what we call on chained metrics. So you can kind

of look at the hash rate of bitcoins. Traditionally up until about the last year, you know, generally, when the hash rate has been at the highest, the bitcoin price has been at the highest. We have seen that change a little bit recently. You can also look at you know, things we call the os the s O p R, which is like kind of how over the long term

people are holding onto bitcoins. We've got a lot of different measurements that have to do with addresses and wallet and ales and transactional activity that you can kind of measure, and you can look and see connections between price and

those generally, but also when are they reliable indicators? Are they going to create long term cyclical historical cycles that I can kind of analyze in ten years that are going to make sense or is it like so many people who come out of air who say, listen, this is like the Internet in the really early days. So get ready for some craziness, of course, and I mean really that's that's what we're seeing, is that the hash rate has traditionally been an indicator, but it isn't working

right now. So I think we really have got to get a lot more time under our belt to be able to connect those on chain metrics to the price. But what we do have is the history of the bitcoin price and how it follows what we call the having cycle. Every four years, we've seen bitcoin do almost exactly the same thing, hit all time highs every four years, hit all time or hit new bottoms of bear markets

every four years. And this is based of the having which last one occurred in next one occurred in four years. Why is it four years, Well, it's it's about three years eleven months technically, because it's two hundred and ten thousand blocks for bitcoin is actually the distance between the havings, so it's so far it's worked out to approximately every four years um. So it's coated into bitcoin to cut the production in half every four years, or every two

hundred and ten thousand blocks. So but of course the average person making conceptualize, you know, two hundred and ten thousand blocks for bitcoin, so it's just easier to say every four years. It's kind of a layman's term that that we use. So Bitcoin is pretty much always followed that same path, and if it follows that same path again throughout the rest of this bear market, like it has the previous two bear markets, then that would probably

indicate a bottom sometime around November. Okay, I want to move past this. Carol's still making sense of it, so am I? Are you satisfied? Carol? No, but you go ahead. I consider you the expert in until Let's not get ahead of ourselves here. And Armstrong is the expert founder of Biboy Crypto. That's why we have him on the phone. Uh, Ben, I want to talk crypto winter here because we're just getting a host of bad news we're hearing from. Uh

What the latest is? Among the latest, of course, is coin based pausing hiring and then also resending some offers coming after Robin and layoffs and layoffs at coins the fundamental. I understand that there's a fundamental and the Gemini yesterday announcing layoffs. Um, are we in a crypto winter? Oh? We are certainly in a crypto winner. I mean, I don't think there's any any debate about that. Uh. And

like I said before, it's predictable crypto winner. I mean last year, even we were having high prices, we were predicting this year we were going to go through this. And every four years you see the same thing where people say it's going to be different this time, it's too much adoption, there's it's two mainstream, and yet we always continue to see the same bear bear winter play out.

I think when you're looking at them cutting jobs, I'm not sure this is as connected to crypto is it is just connected the overall job market and the general economy. I mean, we look at Tesla, they said they were gonna be laying off ten percent of their employees a salaried you should say salaried. We later learned say that again salaried employees, not just not contractors. So it changes the equation a little bit, just a little bit, but it's still ten percent of those contractor workers. So they

are showing a pullback. So I think connecting necessarily the layoffs at Jim and I to UH in the hiring freezer coin based the crypto, it isn't as relevant and it's to the larger, you know market, I would say in general. You know, we've got the jobs report today. It looks very strong, and that's actually bad for the economy. Is you know that means uh, you know, inflation still running rampant. It's not really pulling back yet. You know, don't expect any of the tightenings to ease up anytime soon.

I think it's one gonna get worse. And I think this is having effec on all businesses. We gotta run. Hey, good to check in with you. Ben now, I'm strong. He's found her a bit boy crypto on the phone from Atlanta. You're listening to Bloomberg Business Week. I still don't understand this is Bloompark Journal. Yeah, but you let me drive? Oh no, no, no no, no, all right, please, I'll do the brivels I want to drive. It's a good question. This is the drive to the clothes don

on Bluebird Radio. All right, we've got just about ten and a half minutes left in today's trading session, folks. We're getting ready to wrap up what's been a shortened trading weekle though you're not already, I know, but it feels like kind of a month of trading. I don't know how you all are feeling. Um, so let's get to it. Yeah. Jonathan Waite is fund manager and senior equity analyst. He co manages the Frost Growth Equity Fund at Frost Investment Advisers. He joins us on the phone

from San Antonio, Texas. Jonathan, how are you good? How are you doing? We're good, We're good. We're trying to make sense of everything that's happening. On the one hand, you got Elon Musk and Jamie Diamond and Jane Fraser in the list of sense there's a problem companies, companies warning us. Then we get this, you know, hotter than expected jobs report earlier today. That's kind of saying, wait a second, hiring, still firing on all cylinders. Help us

make sense of it? Well, I think at the end of the day, when you know, everybody's thrown around the R word recession, that, um, it's important to note that it's there's a psychological, you know, element to it. That there's a thought that you know, if if somebody else has stopped hiring or freezing, you know, or laying off people, that I got to do it too, and so there can be a little bit of a group think that

could be detrimental to the economy. But for the time being, you know, most of the numbers we've seen have been, you know, fairly healthy, but maybe a few yellow flags of signs of things slowing a bit. So whether or not that you know, it becomes worse or some full blown recession remains to be seen. You know what's interesting too, is when everybody starts to freak out a little bit, is is that our Gina Martin Adams Jonathan reminds us

that we're not seeing an earnings recession. It's a moderation of expectations. Earning still growing, the pace of that growth is slowing, and yes, things have the tone has certainly moderated, um, but she said, margins are still rising, but analysts are reducing their expectations. That's kind of where we are. And I guess the question is do things moderate to the point where there is no growth and we're recession and it's it's a lot more painful. How do you see

and how do you make investment decisions based on that outlook? Yeah? Well, okay, so let's start with the first quarter. We're going to see a negative g D. We already saw a negative GDP print. You know, the second quarter estimates keep moving down. The question though from here is what about the second half and of investors, I think that the recession hits at least by the end of next year. So it's very much consensus already that we're going to have a

recession somewhere in there. So, um, you know where where where we shake out? As we look at you know, at a typical recession, you're going to see excesses, right, what are the excesses we're seeing this time. Well, it's monetary stimulus, it's fiscal stimulus, and both of those they're taking the punch bowl away at the same time just as things are starting to slow down. So you know, we're we're a little cautious there. We think there could be it will be a rough go trying to get

to that soft landing. It's not impossible, but it could be a little rough time to get there. Um. You know, we're we are seeing a bit slowing down on the you know, we did see a good job number, but we are seeing the tech companies um freezing hirings and job cuts. Um, you know, seeing credit spreads move up a bit, and you know, had a very brief um yield curve and version consumer confidence going down a bit.

So with some yellow flags that we're watching, I want to tomp in because you actually co manage the Frost Growth Equity Fund, which you're today's down UM. But we know everything's been are largely be eaten up here five years. You are on average annually more than a game, putting you in the seventy seven percentile according to Bloomberg Data. So you've done, you know, well, the names in your fund, though,

we'd like a who's who? I feel like I've Corporate America, Microsoft, Apple, Amazon, Alphabet, MasterCard, Visa, Home depot Um. Do you regret some of those holdings? Do you hold onto them? Because how do you think about some of these names? Now, well, let's put it in the context. Right, You've had several years of those leading the crew, you know, the entire market up, and so it was inevitable that value stocks would have their day again, right, And so we've seen that shift to

UM out of a lot of those growth names. This year, we've seen move towards defensive names, especially in the second quarter. And so I said, the market zigs and zags. There there will be a time that you know, Amazon will come back in favor, UM that you know Google and digit advertising will come back. So we we feel like we have good names to own through the cycle. You know, we're long term investors and we like to own these

names through UM. You know, as long as we feel like that there's that they have secular growth and strength, we're fine holding it through cyclical swings. So you haven't gotten rid of any of them, paired back or anything. We will trade around some of those names, but by and large, we've we've stuck with. How are you thinking about Tesla? It's your seventeenth biggest holding, just under two

percent of the portfolio. It's been all over the place lately. Yeah, we're kind of under wait versus the bench and versus some of the peers. We own it. Probably don't like it as much as some of those, but but we do like UM the E v UM, that market. We do like where the mix of new autos is moving. UM. It's he's a very controversial figure. I'm not going to argue with that. UM got that right, and he's got a lot on his plate right now. You're talking, Yeah, Okay,

just making sure who else are you talking about? Who are you thinking about? No, I'm just making you know you didn't say the name. So, um, if you have new money to commit, where do you put it and how patient do you have to be for it to show some kind of significant performance? You put it in the growth stocks. Baby, Hey, wait a minute, I don't know. You can't say that growth stocks. You put it in the growth so so well, look, I think there's a there's a time in which the growth stocks will will

come back. And growth has you know, through various recessions done well and sell downs where you get typical cyclical stocks will get will sell down even more in a draw down. So so there will be a scarcity of growth when you get GDP slowing down, and so you will eventually have people gravitating back to names that have a like I said, a long term secular growth story, and those are the names that we like to invest in. Ten seconds, when do you think those come back? Look

back half of the back half of this year. Like I said, it's going to be the Fed holds the keys. That's gonna be path depending on what they do. We think that at some point in time they're going to have to back off. And I think that once, um, once we get a clearer picture of what they're going to do, um and frankly, once we get a little bit of bottom out of some of the frogginess and these high valuation stocks, and I think that's a great time to get back in the girl stop. All right,

we gotta run, Jonathan, Thanks so much. Jonathan Waite, he senior equity analys and Frost Investment Advisors, joining us on the phone from San Antonio. 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 search Bloomberg Global News