This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Maddie, we've gone wow almost this whole week without talking much about bitcoin.
I mean, I can't believe you've been able to do it, Tim.
I know, well, I've been saving it for this afternoon because it's our weekly segment where we talk about cryptocurrencies. Very please right now to have Mni Bali joining us. He's the co founder and CEO of Trust Machines, also the co founder of Stacks. When he joins us via zoom, could have you with us this AFTERNOONI but I'm on your website for Trust Machines, and what you promised to
do is build a decentralized economy on bitcoin. I think what people understand about bitcoin and cryptocurrency is how we can use it as a currency. But I don't think a lot of people understand how you can build build on it. What do you mean by that?
Yeah?
Absolutely, thanks thanks for having me. So I think if if bitcoin is money.
So what we're talking about is building the entire financial infrastructure and financial markets around it. And we've actually seen early signs of that in other ecosystems like Etherium and Solana. But Bitcoin happens to be the largest handbook, the most durable, the most recognizable brand, and I think it's sort of like surprising so far we haven't seen more financial infrastructure builds.
Are bitcoin itself like, who what would you think that should be built on it? Right now?
I think the things that come to minds first of all, are decentilized exchanges. Obviously, you know, we know about coinbase, and we've seen the ftx blow up out. So if things are decent lized, if people can just trade in a decentilized way, that that that's really good. Even bringing stable coins to Bitcoin. Most of the stable coins like tether and USDC right now they're issues around aterium and some other change and they're not really working on the
Bitcoin rails. And I think bringing several coins to bitcoin building lending protocols. Again, we saw things like blog five blow up, So if there were decent lized lending protocols directly built on top of Bitcoin, I think people could have really benefited from tact.
When you think about the trade of bitcoin, it seems like it's losing its mojo a little bit. Right When we look at it year to date, we're not seeing as much of the volatility that you usually see when it comes to bitcoin. It's gone eight trading sessions as of today without a one percent move. What does that tell you? Are you concerned at all about bitcoin as kind of an asset class.
So this is my.
Third beer market, right, and I think this is probably the most pleasant bit market that I've been through. So I consider as being a bear market, I think given for a bear market, this is actually a pretty good trading market to be in. Things are including that, and I think I would be just looking forward to the bigcoin hobbing, which is scheduled for April next year. I think historically, again this is how the market has been working.
No guarantee it will work like that in the future, but historically around the bigcoin hobbing is when you know markets pick up, there's a lot more excitement, and because it's just it's just the market dynamics, the supply of bigcoin goes down even more, and I think I think people get more interested in it.
Well, what's interesting. What's interesting though, when it comes to what markets are more interested in, is that we have this really cool word search function on the terminal. If you want to nerd out with me for a second, I do.
I don't know what you're talking about, and it looks great.
Well, you can do DS go to document search, but smarter people than me just write it up for me. So I don't even have to use the function, to be honest. But one of the reports from this week looks at how Barbie Mentions outbeat Bitcoin for mentions on the terminal this week. So and that's the second week in a row that that's happened, by the way, So what does that tell you? Does bitcoin have a pr problem? Do they need to become a Barbenheimer to get back into the zeitgeist here?
Yeah?
So I think I'll go back to this four year cycle theory. Right, So we see these spikes, the coin basically does a ten x or so, right in terms of number of view users. In the first cycle, we went to like one million users, then ten and depending on how you count, maybe the last one will get included to Warner. So I think the interest goes down as well. But this is a time for billers, right.
So this is something I've seen over and over that companies and developers who really believe in the technology, they basically catch up on things during this bear market cycle.
Right.
So a lot of great products get built, a lot of people were basically building for the next years. They get their work done, and then the next wave of interest comes. So I think you're definitely in a bear market.
What are you seeing filter right now?
Yeah, So some of the things that I'm really excited about is bigcoin L two's. If you look at Ethereum, something like a two hundred and fifty billion dollar market, and it has a fifty to sixty billion dollar L two markets. L twos are these layer twos that are built on top of Atherium. They helped it scale, they bring more users and applications to it, and for the first time, I'm seeing more of that happening on bigcoin, which is absolutely critical.
So you mentioned a SAX project.
I'm a co creator of SAX is a bitcoin L two that helps sort of like bring more applications or being able to just do like cheap and fast bitcoin transfers.
They will happen on.
The L twos and not on the L one, and I think these are still maturing and more on the bitcoin side.
But some pretty pretty exciting stuff happened.
Given that we're still in what you describe as a bear market or you know what others described as a crypto winter, are you seeing interest around the space?
Just cool?
I mean, Maddie brought this up about Barbie versus bitcoin, but are you having trouble finding employees? A couple of years ago, what we were talking about was, hey, these are all people leaving Wall Street to go where crypto firms. Yes.
So I think the one interesting dynamic of what happens during the bear market is bitcoin dominance actually goes out. So some people who track the bigcoin dominance it's actually at the highest right now, which just means the market cap or bitcoin versus all the other assets. So in some ways it actually becomes easier to hire for bigcoin companies because people get more burnt by all the others assets, right, they might be riskier or you know, there might be
you know, alsos in theferious people behind those projects. Where bitcoin is this neutral, truly decentralized grassroots movement, and people gravitate towards that a little bit more. This is within the industry, but broadly speaking, yes, I think it's not
the it's not the crazy times. But sometimes it's also a really good filter because now you're not getting the mercenaries, You're actually getting more mission driven people, people who actually believe in decentralization, who believe that building these asset systems is actually a good thing.
So I've always enjoyed the bear market. It's I think the signal to noise where it should actually IMPROVESE a lot.
There's a lot more signal in the market and softer as they go away.
I think they're going to AI these days, and that's the word.
This is that signal or noise in AI, though.
I think I think as as a computer scientist, I'm definitely interested in a lot of the breakthroughs that have happened recently. I wasn't a believer like five years ago, but I've seen some some some really good stuff come out. But again, it's like the overhyping of something and people just jumping on the bandwag and stuff that we need to be a little.
Bit careful of.
Hey, what's it going to take Menie to get crypto out of this winter.
I think I am a firm believer in bitcoin. First, I think the rest of the industry is sort of like attached to it. Bitcoin has a clear product market fit. I mean, we're seeing the turbulence in the financial markets. We're seeing inflation just go.
Through the roof throughout the world. Like I think, it's not not not just in the United States.
Like I have my parents who live in Pakistan, and whenever I send dollars to them, a dollar is worth like three x more just in the last two years then what it used to do. So people are feeling the pain, they're feeling inflation, and they're realizing what a hard asset means, what you know, a goldbacked currency couild have meant. And I think bitcoin is sort of like
the best best thing out there. And what happens is whenever interesting bitcoin goes up, then there is a long tale of everything else that sort of like picks up on it.
Right.
So I feel like if you believe in bitcoin, if you think the world needs a better money, and bitcoin is the best money invented so far, and it's it's almost like an open source thing, right, There's a technology that's out of the box very hard to stop. So I think when bitcoin rises, everything else is going to advise with it.
All Right, Well, we're going to have to leave it there on this Friday. I mean, thank you so much for joining us. We need all the co founder and chief executive officer of Trust Machines. I should mention you're also the co founder of Stacks coming on to talk crypto with us for our weekly crypto segment.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
That Job's report, We've been talking about it all day, Tim, because you know I have a little something for everyone.
Right.
You've got the job growth remaining steady, non form payrolls climbing slightly less than forecast, potentially a victory for the Fed there, but the bad news for them wages still going up.
Hey, that's good news for us.
That's good news for us, Tim, and hopefully for our listeners here. So joining us to discuss and kind of suss out the top line takeaway here for us is Julia Pollock. She's the chief economist of Zip Recruiter, and Julia, it's great to have you on again here. I'm trying to figure out how to read the good and the
bad news of this report. So just in terms of putting it into historical context for me, would you say this is the first report we've gotten that puts US back to pre pandemic levels and vibes.
Yeah, this is pretty much in line with a pre pandemic rate of job growth. But I would say on wage growth, I don't think this is all worrying news for the Fed and on the inflation front, because the work week has actually become shorter over the past year.
Average weekly hours, average weekly earnings have only risen three point five percent, even though average hourly earnings have risen four point four percent, So that three point five percent weekly wage growth is completely consistent with the FEDS two percent inflation. And then the data we got earlier this week on productivity also suggests that high wage growth is sustainable because productivity is rising.
Julia, we love talking to you because on zip recruiter you have a great insight into the types of jobs people are looking for and the types of jobs people are applying for. Michael McKee, international Economics and Policy correspondent, was in here a little earlier and he was saying, there's a little bit of debate about Okay, people just not hiring at the same rate that they were hiring out earlier, or people just not wanting to work at the same rate that they were wanting to work out earlier.
What are you seeing on your platform, Well.
Job seekers have come back, and we've seen job seeker engagement on jobs rising sixty nine percent over the year. So it's not that workers are not available and not ready to work. Although many employers say that while they can find entry level workers quite easily, they're struggling to find people with specific credentials and qualifications. And they're also struggling to find people with five to ten or ten to fifteen years of experience. So quality is still a tricky, tricky issue.
For why is that?
It's hard to know? One issue is that many older workers left during the pandemic and they have not returned, and they've taken a huge amount of skill and knowledge with them. Many industries are also finding that the talent pipeline has sort of run dry. Fewer workers are majoring, say, in accounting. It's just not such an exciting, appealing career anymore for young people who would rather be in tech or in social media or blogging or goodness knows what.
So exactly right, wellies, And it's so interesting.
I want to pick up on that because we were talking with Mike McKee, as Tim said about how the biggest job loss category in this print was in management. We're starting to see, at least in the data, that companies are kind of hoarding that lower skilled, cheaper, more affordable labor and getting rid of their higher level employees that cost them a little bit more. So help me understand where you're seeing that you're seeing less people with more skills out there available to be employed.
Yeah, so it's a challenging situation for employers. We're also seeing employers move away from their sort of excessive reliance during the pandemic on contract workers and temporary help agency staff, and they're shifting from those temporary recruitment strategies is like signing bonuses to more long term workforce management policies. We're seeing a large increase in the share of job hostings on zip recruiter that offer health insurance and that offer
retirement plans, and that's a good sign to me. It suggests that employers are actually hiring in house staff and trying to find ways not just to get them in the door, but to keep them there and keep them happy.
What about getting employees to the office. We've spoken to you several times over the past few years, Trulia about listings that show hybrid work or remote work. There's been a lot of discussion, at least here in New York City about getting workers back to the office, and also from companies such as Amazon and more tech companies like Apple as well. What are you seeing on the platform?
So remote listings have mostly plateaued in most industries, although there are several industries where they have declined recently, like in customer service. There are some where they continue to rise, like in consulting financial services. So it really is a mix, and companies are carefully weighing the trade offs the cost savings, the recruitment benefits, the retension benefits. Some studies show a decline and attrition of thirty five percent, which dramatically lowers
your turnover costs. So there are huge benefits from remote work, but one needs to do it right so that one doesn't lose mentorship and collaboration.
Well, we know that remote work is one of the things contributing to that attrition and people switching jobs. I'm curious about pay when it comes to switching jobs, because we know from the ADP report earlier this week that you do stand to gain on the wage front when you switch jobs. You're getting about a ten percent increase in wages as opposed to six percent when you stay
in the job that you currently have. What are you seeing on your platform when it comes to the ability for workers to get higher salaries if they are kind of job hopping around.
So the majority of job switches is still getting pretty substantial wage increases, but the share who are increasing their wages when they switch is actually going down. Part of that is a matter of choice. So workers are prepared to give up pay in order to get remote work. They're prepared to give up about eight to ten percent of their pay because remote work saves you time and money.
That's a lot to give up for remote work.
You have to think about what We'll go ahead, Julia.
Yeah, but if you gained seventy minutes a day that you would have spent commuting, and if you save five thousand dollars a year on transportation costs, it can really make up for it.
And then seventeen minutes a day, Yeah.
You have children and you spend a lot of time in the car, and you have to pay for child's care, you know, for that during that commute, and you sit there in the car feeling like, how on Earth am I doing this? Wasting my life when I could be with my kids and I'm paying for child care on top of it. Those kinds of savings are not just financial savings, but they're psychic cost savings as well.
I feel like I'm getting triggered here by you saying those things, But it's true. I mean I spend I spend about forty five minutes round trip commuting from my apartment.
Wait, but ten say the thing you said earlier about productivity and the return to work.
This is interesting, Julia. We have a story out on the Bloomberg about a study that economists at MIT and UCLA did that shows that people are less productive at home by about eighteen percent. These are new hires, and they did experiment new hires in India, but they did talk to somebody for the article who said, you know what, these people might be less productive if they're at home,
but the company may save money on real estate. So if the company's not spending the money on real estate, it's okay to have these lower productivity workers.
So the real estate savings are actually a small piece of the pie because in most companies, in most companies today in the United States, in knowledge industries, your biggest cost is your people. And when you can recruit people across the country from lower cost places, you can get talent much more tea. And then if they're prepared to do the job and stay there for longer without big wage increases because they're so happy and they enjoy the work life balance that they've got, you you can save
and have reduced wage growth pressure as well. So there are lots of reasons to sort of balance the productivity and cost savings benefits. Then the evidence on productivity is mixed. There are plenty of studies that show productivity gains, like studies of customer support agents that found that they gained an additional day a week of productivity because they made many more calls during times when they would otherwise have been commuting.
Julia ten seconds here. What type of employee is having the easiest time finding work right now?
Healthcare the industry is on a tear. It's gained enormous numps of jobs for eighteen straight months.
Now, well, we got a great story on healthcare coming up a little later today with John Tazzi during the five o'clock hour. It's about the changing relationships that employers have with the health insurance that they're paying so much money to ensure their workers. Julia Pollock really appreciate you taking the time, chief economist at Zipper Corder Recruiter, joining us on the July Jobs Reporting All things employment.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter 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 play Bloomberg eleven thirty.
There's a little something for everyone in the jobs data today. But we think so much tim when we get the job's data about how the Fed's going to respond, which can make the good news seem like bad news. Right, more jobs in pay means the FED raises rates, but of course that's bad news for anyone looking to buy a home. But then we think, okay, less jobs, the FED may cool off, but then there are fewer jobs. You got to remember that that's bad news for people too.
So we wanted to focus today on the people impacted by these numbers and the data that we talk about so often. So right now we're specifically going to focus on the Hispanic population when it comes to that data, and we've got a great guests here to discuss, Javier Palomar as the president and CEO of the US Hispanic Business Council. On Javier, great to have you. Thank you
so much for coming on with us. When you look at the data from today, we're seeing that for black workers, the labor force participation rate did tick slightly higher, and the same was true for the unemployment rate when it comes to Hispanic workers as well. But I'm curious, what was your biggest takeaway from the data today.
Well, I mean, if you look at the numbers, you know, let me begin by saying first of all that I want to thank you for having American small business's voice on this. The United States Hispanic Business Council is a leading advocate for our nation's four point five million Hispanic on firms in this country that collectively contribute over eight hundred billion dollars to the American economy.
We watch these numbers very carefully, as you can imagine.
You know, one hundred and eighty seven thousand jobs is not exceptional, but it's what was predicted as it relates specifically to the Hispanic market.
You know, when you look at where the majority of the growth.
Happened, it was construction, healthcare, wholesale services, things of that nature. And when you look at Hispanic employment and where Hispanics are, there's a concentration of employees that are Hispanic descent. Those happen to be the sectors. So while the numbers specifically when you're looking at Hispanic may not be great, we're very enthused about what we've seen. The numbers for us overall are on track, and so you know, I think that you know, better days are are ahead of us.
But certainly the numbers today, I mean to hit the projections.
What are you hearing from the businesses on the ground, from these millions of people who you represent at the United States Hispanic Business Council, The millions of businesses.
What are they saying, Well, you know, the market is tight, it has been tight for some time.
When you say the market is tight, are you referring to the labor market.
Absolutely.
Absolutely, It's really about attracting the kind of worker you need, the employee you need, and then retaining that employee. And particularly in some segments obviously, as you can imagine construction and agriculture, it is a very difficult time just to keep you know, their labor force at a level at
which they need. But if you look at Hispanic employment, the state of Hispanic employment according to the Department of Labor, between the years twenty twenty and twenty thirty, a little over seventy nine percent of the net new workers entering the American workforce will be of Hispanic percent.
So think about that for just a minute.
Almost eighty percent of net new workers between the year twenty twenty and twenty thirty will be Hispanics. So this bodes well for a community that continues to grow and continues to want to do nothing more than to contribute to this nation that we love so much. The puts in takes, you know, from a month to month basis, you know, it's going to change. There's going to be some puts and takes, and some days are better than others.
But the net of it is that Hispanic employment is doing a live is doing is alive and well in the American economy, and we're thrilled to what we're seeing overall.
Yeah, and Hispanic employment, to your point, is contributing about eight hundred billion dollars to the American economy when you just look at Hispanic owned businesses in the United States.
I'm curious, when you think about legislation from Washington, what do you think would be and I see you laughing a little bit there, what do you think would be kind of the single biggest thing that you would hope that legislators in Washington would understand in order to help continue the growth that we're already seen in these numbers, that eight hundred billion dollar number that you cite for us.
You know that that's an insightful question and if I could figure that one out, medisine. But the reality of it is, we have a Congress, we have elected officials that appear to be really disjointed from the reality of the marketplace. But with that said, there are some bright spots some glimmers of hope. I was just with Kirsten Cinema last week. I did an hour long question and answer session with her. And the reason I was so keen on going to sit with her.
And talking to her.
Here is a woman who was the major proponent of the Infrastructure Investment in Jobs Act. She was also a key player in the debt negotiations and saw to it that permitting was embedded into the negotiations. Now, why do we care about those two things? If you look at the infrastructure in this nation, First of all, we rank I believe, seventeenth globally, while we're the while we're the
wealthiest nation on the globe. That's simply unacceptable. But if you look at the industries that fall under that broad umbrella of infrastructure, are the construction, transportation, wholesale manufacturing, or Hispanics employed construction manufacturing. So here's an individual that wasn't looking at it necessarily from a Hispanic perspective, but was clear minded in terms of what American small business needs.
And if you do right by American small business, by default, you're doing right by Hispanic owned businesses and Hispanic entrepreneurs in this country.
Hey, one thing I wanted to touch on you with on with you, Javier, is child labor in this country and what the Labor Department has recently found some kids as young as thirteen actually working illegally in really terrible conditions. Talk to me about what you at the US Hispanic Business counselor doing about that, and what the reaction from Washington has been. You know, I hear about these stories and I think to myself, this is twenty twenty three.
How are their kids illegally working in meat packing plants in the US.
Yeah, listen, you're talking to a former migrant farm worker English as a second language.
Kid.
I know the conditions that field laborers are working in. I've lived that and is deplorable. Things have gotten better since I was there, but it is a very very difficult environment. I mean, you're working some up to some down in the heat, in the rain, in the snow, it doesn't matter.
And you're right.
The Labor Department found forty four hundred cases of children working across a variety of industries throughout the United States. That's a forty four percent increase from last year. They've levied over six and a half million dollars in penalties. That's an eighty seven percent increase over last year. And while we sympathize with those industries that need the labor, we believe in commerce, of course, but commerce with a conscience and child labor is undeniably wrong, it's undeniably evil.
We are America. We can do better than this, We should do better than this. With that in mind, I've been busy all week talking about this, actually, and so I'm glad you asked it, Tim, Bless you for that. But with that, there's another stark reality that we have to deal with at the USHBC, and that is that industries that rely on immigrant labor i e. Construction and agriculture, I mean agriculture alone, seventy three percent of the workforce
in agriculture is of immigrant background. And so there is an environment where over the last decade, technically in our agricultural sector has had a labor shortage. And here's a stark reality. Every year we lose ten million tons of that goes unharvested. Ten million tons, not ten million pounds, ten million tons.
Approached that goes unharvested.
So you can imagine the strain on the agricultural sector and of course we represent that sector as well.
So Javier, just because we only have a minute left with you, tell me what is one thing that you wish would be done to specifically address the problem that you're talking about right now when it comes to farming.
You know, there is a piece of legislation called the Dignity Act that, of all things, is being proposed by a Republican Florida woman named Maria Elvirus Alazar and a Texas woman Democrat named Veronica Escobar.
It is all about making sure that we have the.
Protections that are appropriate and that are that are right for all people working in America, certainly for children. The Dignity Act, that's something we should really be looking at as a nation.
All right, Javier, thank you so much. This is a great conversation and we're definitely going to have to have you back because we could have kept it going. Really appreciate you for coming on this Friday afternoon, Javier Palomarrez joining US President and CEO of the US Hispanic Business Council to talk about those jobs numbers and the work that needs to still be done. For this conversation following those jobs numbers from this morning.
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Stock now lower after spending much the day higher. That reversal thanks to Apple moving lower, adding to its losses. Apple down right now about four point six percent. But let's talk big picture here. Get an idea for what's going on, not just today but with the macroeconomic picture and especially after that jobs report, how things are looking for the Fed's September meeting. Very pleased to add with us. Leo Kelly, founder and CEO at Vernon's Capital Advisors, joining
us this afternoon on zoom from Hunt Value, Maryland. Leo, good to have you back with us. How are you I am?
Well, thanks, it's good to be back. I always enjoy the Bloomberg Radio show.
Oh well, we love it when you join us. So happy Friday, and yeah, thanks again for coming on the program. What are you looking at on a day where we get a jobs report that kind of has a little bit for everyone, but we're still seeing some weakness in the equity market as a result of some of those megacap tech companies lagging.
Yeah.
I think what we're starting to see is that as the market reaches higher and higher levels, it continues to be priced for perfection, and it continues that that razor thin line of perfection is just getting tighter and tighter, and so the market is going to start to as it discerns through various different pieces of information, does this mean the Fed's going to keep raising? Does this mean
we're out of the woods recession on recession? I think we're in one of those periods where we're so optimistic right now that the market just wants everything to be good news, and so just slight, just slight concerns are really going to have a negative impact on the market.
What's this like concern of today?
Is it?
Is it Apple's iPhone miss?
Yeah?
I think it's Apple's iPhone miss. I Also, again, I think we were expecting Apple to just blow the cover off the pace.
It does that every time.
Everything is priced. But that's where that's where the market's priced, whether it's Apple or it's a market as a whole. Remember this week, we've gone down earlier in the week, we saw a great ADP jobs number, but just before that we had the ISM numbers come out, and the forward looking jobs number for ISM was horrible. It was one of the worst readings since twenty twenty. I think this is indicative of the moment we're in. There's a
lot of capital still slashing around the system. When M two, money supply went up forty percent in two years, and we just haven't gotten the money out of the system. So you're getting these mixed readings where sometimes the economy looks strong and we're ready to take off, and then the next report you say, oh my goodness, we might be in a recession by the fourth quarter. So the market, I think, is going to be volatile here. And remember seasonally we're heading into a rough spot.
Eddie Ardini said today that we are not in a rolling recession, We're in a rolling recovery.
Would you agree with that, Well, I think we're.
We're in an earnings recession, and yet stocks have gone higher. Remember most of the games here have been pe expansion, not earnings expansion. I do think when we look, the Fed is going to get what it wants. Inflation is starting to slow down, but if they take their foot off the accelerator, even a little bit, inflation is going to come roaring back. And what that tells me is that this hope that the FED is going to stop and we're going to get a thrust in the economy.
I think you have to be very very cautious with that.
Why are you thinking that the FED should not lay their foot off the gas here, given that we are still seeing such strong consumer spending, we're still seeing strong wages, strong jobs data.
Well, we're seeing we're also seeing some weakening. So as I said, ism the jobs information was actually not too good, and that's forward looking. We're seeing credit card debt expand dramatically. We're seeing delinquency rates go up, we're seeing the banks starting to take loan loss reserves, and we still haven't seen the impact of what we're seeing consistently in the surveys of tightening credit conditions at banks and commercial real estate. So right now, just to give you an idea, we're
neutral in our equity position. We're neutral, and that speaks to where we are. I can point to ten things that would make you concern about the economy, and you could point back with ten that make it look pretty good. And what that speaks to is exactly what we've been talking about on this program for a few years, and that is, when you flood the system with trillions of dollars artificially, you create an economic anomaly, the greatest economic
anomaly in history. And the result of that is you're going to get these these very confusing periods whereas we unwind the anomaly, the information's not going to make a lot of sense. We think this is a more cautionary environment. And by the way, you're getting five percent on your short treasury. Yeah, so it's not like you're not getting anything, you know, it's just now it's not the time to go chase tech, go chase the high priced stuff and
overweight your portfolio. Doesn't make sense after a run like we've just.
Had, When does it make sense to deploy new cash inte equities? When does it make sense to move that cash that's earning five percent in a money market fund equity?
Well, you just hit you just hit the point square on. Look at the rate of return and the risk adjuster return. So let's take the SMP it's twenty times earnings. If we invert that right and we take one twentieth Right, that's a quarter. So we're gonna make you know. A ten pe is ten percent, Okay, a twenty pe is five percent, And so we're getting five percent on stocks with growth. By the way, so pick an earnings growth
number a percent with the economy, that's your rate of return. Well, if we're getting five percent on risk free assets, the question is is there enough of a risk premium in those stocks to take that risk? And I would tell you you have to be very careful. I would also say that there's two different markets at the moment. Remember ten stocks are about thirty forty percent of the return of the market this year, so it's a narrow advance.
So you've got this one group of stocks, which by the way, everybody's chasing, where actually the pes are astronomically higher, which means the rate of returns are lower versus this cash. So there is a place to put money. Small capsule, interesting value looks, interesting international develop looks, interesting emerging markets are starting to come up. You have to just be very discerning of your evaluations.
How do you defend staying on the sidelines though to clients and not even you specifically, but how would you advise that defense because we have seen the Nasdaq up what in the first half of this year? How do you not get into this magnificent seven?
Well again, I think I think you just hit you just really hit a home a point. Right, we're neutral, and yet to clients that feels like we're on the sidelines.
Yea.
And that even the language of saying, hey, just be neutral and it's okay to hold five percent treasuries and be underweight let's say long term bonds, which we are, that feels that feels somehow we're on the sidelence.
We're not.
That's called prudent long term asset management, right, it's called long term strategy. I guess the question is if we were to look back in time nineteen ninety nine, two thousand, two thousand and seven, two thousand and eight, nineteen seventy one going into seventy two to fifty to fifty crash, Right, as we look back in time, everyone would say, hey, I want to sell when the markets are strong and be smart, and I want to buy when markets are
down and be smart. And yet, because we're human beings, we continue to do the opposite.
Because we don't know when markets are up or down unless we have a crystal ball, or can you travel in time or.
You use valuation, use fundamental valuation right. It walks you through the process and you have to have a long term perspective and not be thinking short term. It's really simple. And my point of view is this. I'm not suggesting you leave the market, or you stand on the sidelines, or you try to grab some traumatic moment to put it in. I'm saying, with the markets run as far as it has with evaluations, why be overweight?
Leo Kelly, we love it when you join us, founder and CEO of Verdan's Capital Advisors on the on the Zoom from Hunt Valley, Maryland. Have a great afternoon, Leo, have a great weekend. We'll talk to you next time. You're listening to Bloomberg Business Week.
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