Recession Warnings Mount for U.S. Economy

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. The U S economy is starting to show some signs of strain under the weight of decades high inflation and climbing interest rates, raising the risk of a downturn. Bloomberg News Economics reporter Rich Miller writes about this today, Rich joining us from our Washington at d C bureau. Rich, good to have you with us.

Um what we see, what's happening with the financial markets, But if you look beyond those, where are you starting to see weakness in the economy. Yeah. I want to just make sure that we we understand that you know that the economy still has some you know, strong points, but but there are like cracks showing in that sort of strong facade. UM. Consumers are starting to take on

more debt. I mean they're faced with you know, uh decades high inflation, having to share out more money for um, food, gasoline. So consumers are staking taking on more debts. So that's a sign that there of some strain the UM. Small businesses are also UM turning gloomier UM. Last month, according to a DP the accounting firm, small businesses actually uh uh so their payroll shrink. That was partly because um, they don't feel they can keep keep on raising wages

and therefore having trouble getting workers. And then, lastly, the housing market, which is kind of on the front line of the Fed's efforts to slow the economy. We've seen mortgage rates grow up at the at the fastest page for quite a some time, and and and and some signs of slowing down in the sort of frenetic housing market that we've had. And rich I mean, from the fetes perspective, would they be viewing these as cracks in the economy or merely just signs that maybe the economy

is starting to cool. Uh, they're probably the ladder. They're probably sort of welcoming some signs that things are are are cooling down, and uh that's what they want to do. But you know, it's uh, what is it, Uh three little bears right, not to Goldie GOLDI lots, you can't you know, it's it's it's it's a fine line, right, you know. Uh, it's the same saying could be said

at what we've seen in the stock market. They made very clear that they wanted to get financial conditions tighter, and that that meant they wanted uh, you know, tacitly. They we're saying, we wanted to see stock prices lower, and they've certainly gotten that, but they don't want to you know, they don't want to see them go so low that people get really discouraged and you know, stop buying and we get thrown into recessions. So it's, you know,

they're walking a very very fine line here. So so what do you need to see to prove to you that the Fed can pull this off, that the economy will be you know, in the words of Goldilocks just right, or in the words of of J. Powell, perhaps a softish landing softish landing, right right, uh, or some people say a semi hard landing. But but anyway, um um,

I guess the key is going to be inflation. I think, um um, they're the Fed is still sort of hoping, praying that you know, a good portion of the inflation we're seeing is due to the so called supply side. And you know, if inflation starts this signs abusing, then they won't have to raise rates quite as high high as as as they might have to, and that would increase the chances they'll pull off what, as you say,

the softish landing. They've already almost sort of given up on a soft landing where you know, everything is perfect and you know, inflation comes down but unemployment doesn't go up. But it seems now the softish landing means, well, we're going to get some a little bit of pain in the economy and probably in the jobs market, but we

won't get a recession. Well let's let's dig in on that, because, I mean, the consensus coming into this year among economists was that we were going to see a slowdown, a cool down, not necessarily a contraction. What is the balance of views right now when you look across the landscape. What are economy economists saying about the possibility now of a recession in the coming years. I think then the clear consensus is that we're going to avoid a recession.

But the when you when you ask people about about what are the risks around your so called baseline forecast, the risks that we're going to have a recession are are rising. A survey that Bloomberg did within the last couple of weeks of a broad range of economists, I want to say about more than fifty economists showed that, you know, they expected a thirty percent chance of a

recession within the next year. But that was up from like, uh fifteen percent of those uh thirty That was up from fifteen percent, say at the beginning of the year. So the consensus is still we're you know, we're going to avoid a recession, but the trends are not in the right direction. The number of people that the the risks that people assigned to the possibility recession arising, and

actually growth forecasts are coming down. Bank of America today cut its growth forecast for the fourth quarter of next year too under a half percent, which is pretty riouslee close to zero or negative. So Rich, just in the last thirty seconds that we have with you very briefly,

um Cane. You know, it's it's interesting because it's like we think about this from the perspective of FETE officials, when you think about it from the perspective of of people, but uh, what happens when people pull back because they're concerned about spending, Like it becomes self fulfilling in just fifteen seconds. Yeah, I mean that that that confidences is a key, key key keeping here and if confidence breaks

and the economy will probably go into recession. It's just like you talked about yesterday, Katie with the self fulfilling properity, Rich Miller, this is a great piece. Check it out on the Bloomberg terminal. Riches economics reporter for Bloomberg News, joining us from our d C bureau. Rich, thanks so much. You're listening to Bloomberg Business Week on Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg

Quick Takes Tim Stinovic on Bloomberg Radio. Well, the Port of Long Beach moved nine point three eight million containers in one that's set a record. Then came a record January, then came a record February, then came a record March, and then came a record April. What's the rest of the year looked like, especially as China lifts lockdowns. Well, Mario Cordero is the executive director at the Port of Long Beach. He joins us on the phone from Long Beach, California. Mario,

how are you, How are you? Thank you? Thank you for the Yeah, it's it's really good to have you with us. So, so what does what is May looking like? And are we going to be seeing year over year records every month this year? Well, we're certainly seeing an uptick in terms of the cargo growth here at the prolonge that you've reference. We've had a record April and for that matter, for the first four months record numbers.

As to what the rest of the year it looks like, I think in the next couple of months we're going to continue put an uptick, given that we're entering a peak season which ordinarily starts around July, and by that I mean the cargo that comes in preparation for the fall holiday season. And then as to the last quarter of the year, I think that remains to be seen, but definitely because of the lockdown and slowed down that we've seen in China, that is the zero COVID policy

that they've implemented there. I think we're gonna have a domino effect once China ramps up, and you're gonna see that cargo coming again in some kind of a searge. Well, let's talk about the domino effect. You know, how are how is the Port of Long Beach going to try to prevent the congestion that we saw in one as

we entered this peak season. What a good news is a result of the engagement of the White House, more specifically the White House Envoy, we've had for several months weekly calls for two or three times a week to address the various congestion issues. So I can represent to you that there's a full court press to address some of the issues that we're at the more serious level in the fall. And on one very positive metric, you know, in January this year, we had a hundred nine vessels

off the coast. That number now is around thirty two. So I think, well, we're still gonna have some challenges. As you have probably know, every gate, every major gate with United States have the same challenge is given the import search here and the issues involving the disruption of global supply chain. However, I believe we're going to be in a better position to address some of the issues

that really surfaced at a very high level a year ago. Maria, what about when it comes to labor, because last week saw the start of crucial labor talks between the dock worker union and employers, but with both parties saying that they expect cargo to keep moving until an agreement as which reach, do just give us an indication of how these talks are going well. As you may know, I'm

not privy to the talks that I'm not in the room. However, uh, in my view, given h the engagement with the parties throughout this process of stakeholder engagement prior to the negotiations, I'm optimistic that the parties will reach their differences or resolved differences in the reasonable period of time. I mean, the fact of the matter is that here at this port complex, the largest in the nation that is between Pearl Long Beach and Pearl Los Angeles, we moved an

excess of twenty million containers. So and large part is because of the productivity that labor has had. So I don't expect any slowdown with regard to the productivity on the part of labor. Well, can you talk about what contingencies you have in place to prevent that slowdown, I mean, shoulder an agreement not be reached. Well, I think the good news is what we've been able to do during this crisis. As one example, extended gate hours, you know,

to keep the fluidity of the cargo moving. You know, some of these terminals have a weekend hours. Our terminal t t I, we have a seven pilot project, uh and of course the same on the part of Los Angeles. So I think we have implemented measures to again make sure that we keep some fluidity in the movement of cargo. So and with that, we've also identified land in terms of at the Acrede where this card was being moved

off the terminals. So again I I don't expect to slow down by labor, and I think for us we are certainly better prepared to address any type of scenaria, and maybe we were a year ago. So I think that's the good news in terms of what we're seeing

addressing all the issues relevant to the movement of cargo here. Hey, Mario, We've talked to CEOs at some companies over the last few months, and they've told us that one of the ways they've dealt with poor congestion at the ports of Los Angeles and Long Beach is to actually go and use other ports uh north of you, and then also completely other other ports on the other side of the country.

What are you doing to avoid losing market share? Well, I think this has been an ongoing dynamic for several years, that is the loss of incremental market share here at the West coast, more specifically at the largest nation, largest port of conflict. Now you know other gateways be a New York to Jersey, Savannah, Charleston, Houston, They've all done a great job in uplifting their respective infrastructure. So certainly

we are very concussant that shippers have a choice. On the other hand, I think that this gateway here is the most is the gateway most approximate the most important trade reason to this country to the USA, which is Asia. And at the end of the day, we could move that container to Chicago to the Midwest faster than any direct service to the go for to the East. That

dynamic will continue. I think our partnership with the railroads and the substitut discussions when we're having with them to make sure we keep competitive well well again in my opinion, uh remain we will remain competitive. Now again, I want to say one thing that if you look at these other gateways, I mean just in the news this week, it's very briefly ten seconds go ahead, and then news this week the congestion is happening in New York and New Jersey. So this is a dynamic every major gateways.

Addressing Mario Cordero, executive director at the Port of Long Beach, This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stenovic on Bloomberg Radio. Well. According to the World Health Organization, the coronavirus pandemic has directly and indirectly killed nearly fifteen million people around the world. So how do we prevent the next pandemic? It's the question of a new book by Brian Bremner, Global Business Executive

Editor here at Bloomberg News. He argues that it hinges on better understanding the billions of tiny pathogens circulating in nature. Brian Bremner is Global Business Executive Editor. He joins us on the phone from London. Joel Weber is the editor at bloom of Bloomberg business Week. He joins us on the access line from Brooklyn. This story is featured in the new issue of Business Week magazine. It's available on newsstands, on the Bloomberg terminal, and at Bloomberg dot com slash

business Week. So, Joel, why are why are these teeny tiny invisible things so crucial to understand? Yeah, they're not invisible. You just gotta go super super small invisible. To me, it's the naked eye right there, you go? Right? Ok. So, so the microbe is sort of the thing that that Brian and went went long on here. And in addition to this remarks in the magazine, it's subject of his book,

Man Versus Microbe. If you're a close watcher of Business Week, you may remember those words because in the very very very early days of the pandemic, right as we started to appreciate how big of a story this was gonna be, Uh, Brian and I talked and and he spilled up what became a very early cover story for us with the similar line Man versus microbe and as the pandemic went along, and Brian helped oversee so much of Bloomberg News is amazing coverage. Um. He got in urge to to pursue

it as a book. And what I find fascinating about this is really how future orientated this idea is. Um. We're talking about virus. Obviously when we talk about um uh, covid um virus is one of many different microbes there there, and they are out there. We we've and our understanding of microbes is so limited. But and that's kind of where his reporting goes. UM and Al turn it up to him, Brian, what we are making progress uh, scientifically on this front um almost it feels now like probably

daily right, But where where could things go? Well, it's it's a really interesting time because we're kind of in the third year of the pandemic. But the COVID pandemic is coincided with kind of a big transformation in biology. It's you know, we're now applying technologies like AI, big data analytics, automation and Crisper Genie editing technology. So we're now at a point where we can redesign the source code for for microbes and a lot of biological systems.

And the reason that's important in the context of how do we get better at pandemic management is that this this crisis has taught us that if you let any kind of pathogen scale up into population centers, it's really game over. And this this pandemic are our battle with the with the virus really kind of ended in in March of when the hotspots around the world, you know,

took off. And the reason is is that when you get to a certain scale, we tend to, you know, experience social disorder and we're on our back legs and we have to kind of make very very tough choices between saving lives and letting our economies collapse. And we don't want to be in that position, so we've tried.

I think the answer if you talk to people who are who are devoting their careers to this, is that we've got to take this battle to the molecular level, and that means building a biosurveillance system that allows us to kind of track these pathogens really early when they're kind of circular circulating around nature and in animal communities, and then try to disrupt them or at least manage the you know, the outbreaks much earlier in the process

before you kind of have that societal impact. Well, Brian, the challenge there is, you write in this excerpt of your new book Man Versus Microbe, what will it take to win, is that as humans were not really wired to react to risks that that we can't see or feel in the here and now. So, so how do

we change that wiring? Well, it's difficult because you know, you're right, I mean, we're just you know, are The way we evolved was just to see a clear and present danger threats, you know, the snake slithering through the grass, or the you know, the car that jumps the media

and and oncoming traffic and things like that. Biological events are slow moving, they're infrequent, and what it's what's happened if you look at the history of of infectious disease outbreaks, is that we get caught in this pattern of you know, panicking, freaking out, responding, rushing, you know, healthcare responses, and then when the crisis you know, passes, we kind of moved

back into this position of studied in action. And the reason we can't do that any longer is that the cadence of these infectuous disease outbreaks this century have been increasing, and the reasons are for multi you know, fascinated. I mean, one big one is that humanity is just kind of encroaching on natural habitats. As we know, our mega cities take off in our industry, which is livestock intensive, keeps

you know, expanding. So again we need to use our best technologies and build a surveillance system, you know, at the microbe level. We kind of have to take the contest to them rather than letting them kind of run wild in our populations owners, and and we we end up with these terrible situations where you know, Um, Brian, I'm I'm curious. Um uh. Some some buzzwords, uh have cameos in the excerpt, Um, but I'm really genuinely curious about how AI factors into this because what you're talking

about here, the data sets are are obviously enormous. UM, and how is AI playing out in terms of how we could potentially meet meet the challenge that the microbe is presented. Yeah, when you talk to people in the worlds of biology and computer science, they're very excited about the possible applications of of AI and drug discovery. You know, just like mathematics was a very powerful descriptive language for physics less century. A lot of people think AI is

going to help us decode the complexity of biology. And why is that, Well, so much of biology is becoming digital. You know, we're now out building these pretty big bio banks. When people you know, genetically sequence of microbe or a cell or complex of cells, that all gets stored away in databases that AI programs can kind of rifle through.

And you know, one of the most dramatic examples of that was just happened a few years ago at m I T. We're synthetic biologist James Collins and his team used an AI program to rifle through like a hundred million chemical compounds. Gave them some instructions about what kind of antibiotic they might be interested in, and the program found it, and they found a structurally unique uh antibody antibiotic that they nicknamed Heels, you know, the creepy computer

from two thousand and one. Brian, We're gonna have to leave it there just very quickly five seconds. Optimistic or pessimistic after writing this book, I'm optimistic optimistic there it is. Brian Bramer Global Business executive editor his new book out Man Versus Microbe What Will It Take to Win? Also joined by Joe Webber, the editor of Bloomberg Business Week. This is Bloomberg. You're listening to Bloomberg Business Week with

Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, bitcoin is down nearly from its highs back in November. Terry us D and Luna have collapsed. We've covered that closely here over the last two weeks. What's it looking like when it comes to crypto at least in venture capital? For that, we turned to Rob Frasca, managing partner at Cosmo Ventures. It's a venture capital fund. It's tokenized to invest in early stage blockchain projects and opportunities. Rob, how

are you. I'm doing great? How are you? We're doing well? I mean, you know, it is a bear market, but it is Friday. It is Friday, so yes, there's a silver lining to everything right arm this weekend? We are. Well, you're somebody who's seen You're somebody who's seen quite a few market cycles, and I'm wondering how you're viewing this specifically right now in your world, not in the world of public equities, but in the in the world of blockchain. Yeah.

So I'm an early dot com guy. I get a budget companies through the whole kind of dot com life cycle. H took one public, took another one um and sold it. Uh. And so I you know, when I look at what's happening here, it's it's very similar. You know, tech grows exponentially, and generally what winds up happening in tech is there's

a lot of excitement. Uh. And there's there and and that excitement of the promise of a new technology, people jump in and then you kind of get a little bit of over exuberance, uh, you know around that tech, and it tends to go a little bit beyond what it's promises at that moment. And you know, uh, you can't get caught up in kind of the short term volatility.

If you really believe in a new technology, you really believe in what the capabilities are and the value creation it's going to be, Uh, then you've got to take a longer term focus. So I think that, you know, I always we invest in blockchain. We believe that blockchain is really I actually think it's bigger than the Internet. Itself. I think it's the single about Yeah, I had a single. Uh well, you know, when you think about the early days of the Internet, right, what was it all about.

It was all about kind of peer to peer content, right, all of a sudden, anybody could create a content and publish it. And now we've got a world where everybody's a content creator, right, And and I did a company in that in that space. And then you think about the second phase of the Internet, it was kind of the decentralization or the peer to peer of communication. And then kind of the third phase was the decentralization of commerce.

Now anybody can sell anything to anybody. And the one the one thing in our world that's still kind of centralized is is trust. Right. We use banks, we use brokers, Our entire society is based on this kind of concept of centralized trust, and and and and and it's it's a problem when you kind of connect those central institutions of trust to a network world like the Internet, right, become kind of hacker targets. Right. So what blockchain does

is it kind of solves that problem. It decentralizes trust. And so all of a sudden, we're kind of creating this whole new peer to peer financial layer, and the ramifications of that are just massive. They're just absolutely massive. Cap Yeah, I was just gonna say, I mean, the pitch I here for things like Web three point oh, is that it's going to combine the blockchain and the Internet. That basically you're going to put the Internet on the blockchain. Do you, I mean, is that your view of it

as well? Are you investing along that thesis? Absolutely along that thesis. We're all in on this, um, you know. I, like I said, I'm a dot com guy and always tell my partners, I said, man, we've seen this movie before several times. We've been in this movie as entrepreneurs, and we we sort of know how it ends. Uh and and so I do believe that I think that what web three really is is the promise of the

decentralization of everything. You know, the whole n f T craze. Right, everybody's talking about n f T S and they talk about these pictures and and all that stuff, right, you know, JPEGs, It's like it's like digital Beatie dats right for me. For me, the reason why I'm excited about n f T S is is really what it's about is the decentralization of digital rights. It's kind of like royalty management. It's digital rights management, and that has profound effects on society. Right,

So it's not so much about the artwork itself. It's the fact that now, all of a sudden, I can use technology to kind of manage those royalties. So for for our perspective, we're all in. We invest in this space, and um, it's hard not to get caught up in this kind of short term volatility. Right when you see what's going on, You're like, holy cow, Right, I was up, Rob. We only have a minute left, so I want to make sure to get this in sure. We talked earlier

this week toils That Chapman. Her big take story here at Bloomberg was about it belt the belt tightening that we're seeing in Silicon Valley. You're not in Silicon Valley, You're in Boston, but you do have more than twenty portfolio companies. I'm wondering what you're telling them about this decline that we're seeing right now. What you are you telling them to hold off on hiring, to freeze hiring. What are you saying? Yeah, look, ultimately this is global, Uh,

This is absolutely global. It's way beyond Silicon Valley. Uh, this is this is a total global phenomena. Anytime you have a down term in the market, you have to be prudent. You've got to tell the entrepreneurs that are running these businesses, you know, cash is king. Make sure you understand that you've got runaway and that you can deliver. Uh. So,

you know, it would be irresponsible to not say that. However, I do believe that this is the early early inning of blockchain, and so I think there's a lot of room to grow here. Only ten percent of the world is really using us, which means there's nine of the world yet to come online, which means a lot of growth is still there. Um, So just deal with the short term volatility, but really you've got to look at

the long term prospect of this. Rob Frasca, managing partner Cosmo Ventures, robbed this afternoon joining us on the phone from Boston. It's a tokenized venture capital fund that invest in early stage at blockchain startups. You're listening to Bloomberg Business Week on Bloomberg Radio. I'm brother journal Yeah, but you let me drive. Oh no, no, no, no no, honey, please, I'll do I want to drive? It's good question. This is the drive to the close up on Bluebird Radio.

Well stocks getting a bid as we drive to the clothes. We are just about ten minutes away from the clothes here. Office session lows. The SMP five hundred down three tenths of one percent, the Nasdaq Composit down eight tenths of one per cent. Let's get ready to it with Alan Zaffron, the founding partner and co CEO at I e Q Capital, Alan joining us once again on the phone from Foster City, California. Alan, good to have you back with us. How are you? I'm doing great? Ten. Great to be on with you

and Katie today. It's a good day to have you on because I'm curious about your take on on the economy and the markets. Is the sky falling temporarily? If falling? Um, I think the challenges We've got really bad sentiment in the market. But bad sentiment doesn't create a market bottom, and even lower valuations were now trading at value multiple below the average on the SMP five Learned Index if you believe current earnings estimates, but valuations don't create bottoms either.

It creates a bottom in the market is when the spot finally the economy bottoms, or when the FED finally decides to go from tightening to loosening, and there's no

evidence yet we're at either point, so we're funny. Spot sentiment is terrible right now, so we're we're ready for a bear market rally, but it's still probably a bear market rally until such time as there's evidence the economy that's very close to a bottom or the Fed is ready to go from tightening to go back to a more looser policy, and that that could be a while.

That could be a while, given where inflation is alan So I'm wondering which one happens first, And what's the sign that that you'll see that the that the economy

has at a bottom. Well, if you're looking for the economy bottom is going to take a lot because ultimately, when you're getting towards the bottom of economical like the leading indicators and what you're I want to see more far from new orders improving, relative inventories being built up, or you're gonna see earning revision going up on companies not down, or you're gonna see credit spreads narrowing, or you're gonna see long term body fields rising because they've

been falling over the last couple of weeks in a slowdown the economy that we are in the midst of, or about to see it's going to take a well to see that again, or you're eventually going to see, um, other evidence of economic activity. We have to go through this economic slowdown, which stock prices have already front and run. Stock prices have gone down. It company hasn't really slowed

down yet, and it's about to, isn't. It's interesting to hear you say that you know that's already priced in stocks. I mean when you look across other asset classes, do you think that it's also priced when he looks at things like treasuries, when you look at the credit markets, Um, you know, the reality is we're priced in. If this is your run of the mill correction. On average, if you look at the set of corrections that have taken place since nineteen eighty, the average decline to the SMPS

about seventeen percent. However, talking about a full on recession driven bear market, the average client peaked the valley. So the problem what's going right now is the dispersion of estimates among analysts and alster about what is the earnings outlook is incredibly high. It's you're an all time record high because there's so much uncertainty as to what impacts the inflation that we've seen will have a profit margins, and now why we're getting these rampant movements up and down.

It's also what makes for bear market rallies. We've already seen two significant rallies, while following history is in a guide. We'll see several more before we get through all this volatility. And so I think it's a little different. Two years ago we have the most rapid decline in Musa to another twenty following also the most rapid recovery of a bear market. Because he has a federal government and the subtle reserved story, a massive amount of money in the economy,

it won't happen this time. And so as much as I'd like to hope that we were to happen, I think what's going to happen this time. This is a recalibration of where valuation should be. But it's going to take longer to get back up to where we were because he can't count on government and subtle reserved stimulus to proctice economy up as quickly as it did from two years ago, and people like me suffer from recency memory. I remember what it was like two years ago and

think it's going to pop right back up. It's going to take a while this time. So when people are not going to get that stimulus, So when should people If if people have cash to deploy, when should they start deploying that cash? Well, I think I think you have to begin to be a buyer anytime you're at a long term investor, when you're down on the SMP and close down on the nasdack, if you're taking a long term you, I think it's landish is not to begin to dollar cop an average into the weakness. The

question is how bad could it get? Just to give you give you a sense. Okay, we're trading right now at about sixteen and a half times current conventional estimates for two thousand twenties for US, we're current estimates are around now twelve months board. If you see the market should trade, it's at its average multiple last twenty five years.

We're already at fair value. The problem is if you think the earnings drop and you want to lower that multiple to where multiples trade in recessions, and there's a wide dispersion. Call it anywhere from believing or not as low as eight as much as twenty times earnings. Let's call it fourteen fifteen times lower earnings. I can't make an argument you're gonna get down to about thirty s ANDP.

That's another percent down from here that would get you down top the bottom, which conveniently is exactly what's in March two. Uh. If you believe that to be true, that's a pretty bad case. You're really hitting earnings by about ten percent from already here, which would mean inflation stays around, probably as deeply as most bears would believe. I think you don't know if it's going to get

that bad. And markets are ripe for rallies at any moment in time, and if you miss the rally, you know you missed those handful of days when we finally snapped back, and you've missed the move. You get to start dollar cost averaging. But depending on how barish you are, you're dollar cost averaging slowly down either under on the INDO. If it gets out there's no resturants, it will possible

your bottom here. But if you really bearish, you start to bear a bitch and new ability to go slowly because if you want to make a bear case, you know, go down to fourteen times reduced learnings and you're down like two D. And so if everyone wants to know how deep is this going to be? How long can it? Laughs? No one knows because nobody at this moment can understand the impact of China shutting down its economy due to COVID concerns screwing up the supply chain and the implications

for inflation, which are implications for profits. That certainty is the problem to your point that you know, no one can really know how deep this is going to go. I have a sort of philosophical question. I mean, is there any way to distinguish at this moment a bear market rally from a true rally or is that just impossible to know without hindsight? I mean, it's largely the ladder, um,

it's largely the ladder. It's usually what happens. Is the problem with that is you're trying to forecast future fundamentals and the speed of which they show up, and you can't really do so. So I think it's impossible to discern one from the other. All right, Alan, we only got a minute left, but just briefly give us your ideas of where you're deploying capital right now, because I know that you see that you say that cash and

traditional fixed income are the least attractive asset classes. So yes, So, first of all, if you're an inflationary environment, I think still owning short duration income generating inflation sensitive assets like rates or even private rates or private senior secured floating rate lending makes tremendous sense because their inflation sensitive assets

that will do well in an inflationary environment. Secondly, if you're looking at stocks, avoid the high beta stocks, high the deep cyclical stocks, because if the economy is going to weaken, the weakness and the earnings are gonna be

most rampant in those cyclical and highly leveraged names. Look for stocks that have high operating margins, high interest rate coverages, high returns on assets, and relatively consistent revenue streams with low volatility, high quality companies at this point in the cycle. Alan Zafron, founding partner and co CEO and I EQ Capital, Allen joining us once again on the phone from Foster City, California.

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