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US hiring falling short of forecast in August downward revisions to the prior two months, a development likely to fuel ongoing debate over how much the FED should cut interest rates. Here are the numbers, non farm payrolls rising by one hundred and forty two thousand last month. The three month average is at the lowest since mid twenty twenty. The unemployment rate, though edged down to two down to four point two percent. It's the first decline in five months,
reflecting reversal in temporary layoffs. In remarks after the release of the jobs numbers, FED Governor Chris Waller said the latest batchup data quote requires action, adding that he would advocate for front loading rate cuts if that is appropriate. We got a great roundtable on what you need to know about the latest data and what it means for the FED and the economy. We got with us in the Bloomberg Studio, Michael McKee's Bloomberg News International Economics and
Policy correspondent. Also Sophia Carney Letterman, senior economists for FAHN. She joins us from New York. Mikes, you reminded us yesterday this was the most important payrolls report since the last payrolls report. It did come in shy of the media and forecast in that Bloomberg survey of forecasters. Does front loading rate cuts mean fifty basis points in September?
I don't think so, okay.
I think what Chris Waller was saying is that he's open to doing more in later meetings if the data come in that way. Because there's not a lot of data between now and September eighteenth that would convince you one way or another. So I think the Fed's default
at twenty five basis points. The numbers came out today without giving you any reason to really move away from that, and so because we're not getting a strong signals of fifty at this point, I think that twenty five is probably the best guess.
Sophia, let's bring you in here. What's your reaction to the jobs report and do you still think that the FED will only cut twenty five basis points.
Yeah, thanks so much for having me. I got to totally agree. You know, we are still in the twenty five basis point camp. You know, that's sort of what the FED has been teeing up. And I think exactly what you heard from Waller this morning suggested that should subsequent data. That's the term that he used. He said, it's subsequent data, so it's increased weakness in the labor market.
He'd be prepared to make a bigger cut. But to us, that suggests that that means future employment reports, if you see either further weakening, that that might encourage the FED to go more than twenty five. So we are looking at twenty five basis points at September. That's what we thought before this employment report today, and that's what we still think will expect to see in a couple of weeks from the Fed.
Hey, Mike, help us understand the unemployment rate going down. What exactly does that reflect? This in the month of August.
Well, it's sort of a payback for what we saw in July where it went up because a number of things reversed themselves. We had a much smaller rise in the labor force. We had more people hired than were let go. In the household survey, we also saw things like the number of people who were on temporary layoff, which had boomed in July and contributed to the rise of the unemployment rate.
That fell back.
So you'd say this was a decline for all the right reasons. And it's one reason that the Fed doesn't feel a sense of urgency about this, because it's not suggesting that all of a sudden, people are losing a lot of jobs.
Companies are getting rid of people.
This really tracks with what we saw in the Beige Book of companies aren't hiring, but they're not firing people either.
So then, Mike, how do you square the reaction that we're seeing in the bond market with yields fallowing off Traders pricing in for that fifty basis point cut in September.
Well, they're not really pricing fifty anymore. They've kind of moved it down back down to twenty five, because I think the reality is set in that the Fed is not setting us up for fifty, but we are seeing yields fall because basically, you've had confirmation not only in the numbers, but in what Waller and John Williams have said, joining the crowd of people who've said we're going to
cut rates at the next meeting. So you're seeing that reaction there, and people are anticipating that the FED is going to be moving the short end lower and that's caused.
The yield curve to uninvert.
We'll see if it stays that way, but at this point it's kind of a natural reaction.
I don't know why equities are.
Doing what they're doing, but if I mean, you're the person who covers that, if.
You can ever explain to me why, well, Fortunately Abigail Dolittle is coming in in just a few minutes and she's going to help explain the equity market reaction. So if yeah, I do want to go back to you to get an understanding of what type of data we could see maybe over the next few weeks to change your view that the FED well, actually, in less than two weeks could cut rates by more than twenty five
basis points. What would you need to see? What would the FED need to see to convince them between now and then?
You know, I don't think that there's really that much time and that much data that's going to come out in the next two weeks that really could necessarily push the needle. I mean, the really big thing would be next Wednesday CPI report, Right, I don't think that you're going to see anything really unexpected there. I think you're going to continue to see progress towards two percent inflation that we've been seeing, and so that I think won't
be something that could push the needle. If there was an incredible upward surprise and inflation, maybe, but I don't
think so, right. I think between now and the September eighteenth meeting, we kind of have the majority of the data, and then you also factor in the FED blackout period starts tonight, so we won't hear comments from any FED officials, and we've heard from the Howell FED for this whole tightening cycle that they've been very communicative ahead of time, and so I don't think they would want a surprise market,
So we don't have a ton more data. That being said, I think the further meetings, the November the December, it totally becomes data dependent, and a lot of it's going to be that focus on the employment side. Right. The employment report is yet again like it used to be pre pandemic. The big market driver inflation has sort of fallen to the wayside now that it's doing what it's supposed to do well.
We may not be getting a lot of data between now and then, but we're at least getting quite a few FED speakers today thud A Reserve Bank of New York President John Williams said it's now appropriate for the FED to reduce interest rates given progress on lowering inflation and a cooling in the labor market. Here's what he said in a speech prepared for an event held by the Council on Foreign Relations in New York.
The current restrictive stance of monetary policy has been effective in restoring balance to the economy and in bringing inflation down. With the economy now and ecuopoise and inflation on a path to two percent, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate.
Okay, that was Federaliserve Bank of New York President John Williams Equipoise, Mike McKee. We're always parsing the words that we hear from J. Powell and other Federal Reserve officials. This is this is one that I haven't heard.
He's just showing off.
I mean, it's arriving in the sports car and you know, spinning around as you arrive. Equipoise basically means in balance, and he's talking about the labor market is and inflation are in balance now, so we're we're in equipoise.
Uh.
It's not even what I would call FED or economics nerd word or code word. It's just a fancy way of saying in balance.
So don't read too much into it.
Don't read too much into it.
I think he just wanted to be clever and get some attention and have people like you.
Asked what I was gonna say, Emily, it's working because I'm talking about it.
Yeah, exactly, I'm impressed.
Thank you. Hey, go ahead, Emily.
I know you're gonna think, oh, well, I was just gonna I wanted to pivot to the inflation report because now we have this, I guess signal that the FED isn't as focused on that part of their mandate. So then, how Mike are you thinking about the data that we're going to get next week on inflation? Doesn't move the needle at.
All, doesn't move the needle.
I think Sophie's right that at this point, when you look at what's forecast, it's basically no change from what we saw in July. Headline goes down some on base effects, but it doesn't tell you that things are getting worse. And all of the Fed officials who've spoken recently in including Waller and Williams today say we don't think we're
going to get inflation out of the labor market. So at this point it's just kind of confirming that they can go ahead with what they're doing, and I think we move away from it being the indicator every month.
We'll stick with jobs. I'll see you guys October fourth.
But it's not going to be inflation unless there's some sort of surprise, especially with the oil prices going down now, who knows.
Hey, Sophia, I want to give you the last word here. Is it fair for j Powell to declare victory at this point?
Was this?
Is this a soft landing? Has the plane been landed?
Oh that's a tough question. I think it's too soon to declare victory, but I do think the window for a soft landing is there. We are definitely slowing. The US economy is definitely slowing, right, Hiring is slowing. But sort of what John Williams said, right, reducing the restriction right now is definitely the right thing to do, with Swaller saying as well. So I think it's too soon to take a victory lap, but I think they can still hold their breath and maybe they can.
All Right, A big thank you to both of you. Michael McKee, Bloomberg News International Economics and Policy correspondent. Here in our studio, Sophia Carney, a Letterman Senior economist. Over at FHN.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on card Play and then broud Otto with a Bloomberg Business act or wants us live on YouTube.
Well, we are all in on the implications of this morning's payroll's number, non farm payrolls rising by one hundred and forty two thousand last month, the three month average at the lowest going back to mid twenty twenty. That unemployment rate did edge down the four point two percent. It was the first decline in five months, reflecting a reversal in temporary layoffs. Somebody who's got a great view
of the labor market as Becky Frankowitz. She's chief commercial Officer and president of North America over at Manpower Group. It's a company that sources and manages talent and manages employees for more than four hundred thousand clients. Becky joins US from Milwaukee. Becky hiring was weighed down by job losses in manufacturing, retail, trade, information, education, and healthcare, boosted headcount by the least since going back to twenty twenty two.
Does this match what you're seeing at Manpower Group?
Yeah, so, I'd say Tim, it's another example of what we're calling the great waiting game. We have employers waiting to do big hiring until they see some proof of economic improvement. And we see employees waiting to change jobs because the quick rate held waiting has changed jobs until they get proof that the economy is proving. And so both sides have a waiting game. The other thing I would say is this, while it's less than we expected, Tennis isn't a bad report, but the revisions in July
month over month, it's an improvement. It's definitely not a blockbuster, But I would say another indication of everyone's just holding it's quite stable out there.
You talk about this waiting game, what would be the catalyst that would then propel employers to start hiring more extensively than they are right now.
Emily, I asked that all the time to leaders across our country, and I hear two things. One, the Fed's decision in September is pivotal, very very important to employers to give them a proof point, not a forecast, not a suggestion of improvement, but a proof point that things are going to improve. So that's important. And we're also increasingly hearing companies, you know, wanting to wait and see
what happens with the presidential election. So I would say on the employer side, definitely, the first position is the FED decision in September.
What are companies waiting for with the presidential election?
I e.
What decisions are they holding off on? And how would a Harris administration differ from a Trump administration in terms of how they're thinking about hiring.
Yes, the second part of that's not my air of expertise, but I definitely can address the first part of it in terms of why are they waiting on this. It is another signal of uncertainty to you know, American companies. They want to know what is going to happen in the future. They want to answer the question you're asking, how is this going to look different under either administration? But this holding spending on the sidelines tim isn't new.
We've seen capital expenditures really being held waiting for big tech investments. I would say, now we're starting to see, you know, the surprise. You know, I like to look at the good in the report, the surprise and the report and the watchouts. You know, the good in the report is relatively steady. Unemployment, wages, workforce participation, a little movement, but relatively steady. The surprise is the way work is getting done is changing now. Is this long term short term?
I don't know, but I can tell you that those working or holding part time jobs increased to seven point nine percent. It's the highest percentage we've had since October of twenty twenty one. And back to your question on what are employers waiting on. They're looking for flexibility while they're waiting, and so they're looking for part time workers, bringing in new talent, those who are retired those who are doing caregiving and need flexibility, and employees also waiting.
As mentioned, they're looking for some reassurance in their income and they're also looking for flexibility. So that was one of the surprises in this report that hasn't really been been talked about, and I have you others.
So, Becky, when I look at the gains in this report for wages, we saw pay gains beat forecast, average hourly earnings rising zero point four percent compared with a point three percent median estimate. From your view, do you feel like workers feel like those wage increases are enough? Is that helping them kind of combat higher interest rates and higher inflation? Do they feel like they are seeing those wages kind of keep up with the rise in inflation.
Yeah, Emily, they answered, that's definitely not. But again that's not new. So when you hear me saying stability, it's also stability of mindset, Like zero point four percent versus point three percent. When we're looking at you know, inflation starting to starting to level off, we're still seeing that talent is sitting tied. They're a little anxious about making any big moves. Again, they're they're waiting as well, but
we've seen a real change in wage composition. So during the cry, we were paying significant increases for people who would change jobs. In fact, it hit about sixteen percent increase versus on average at the time, it was about seven percent for job stayers. Now we're seeing it back to pre pandemic levels where we're seeing job stayers get anywhere from three to five percent and job movers get
anywhere from six eight percent. And so that's really stabilized as well, and so we're not really incenting people to make moves, whether it's through wages or whether it's through new job offers.
FED certainly likes to see data like that, Becky, because it means that wages aren't going up, and it means that it's you know, FED friendly in terms of inflation. I do wonder about what other normalization you're seeing at Manpower Group, because this idea of this imbalance has that has been here in the wake of COVID. I think it's still is still there for in a lot of different places. Where else are you seeing a normalization at TIM?
I just had this discussion yesterday with one of the big CEOs in our country and asked me the question from a permanent employer angle, which is, hey, is talent shortage gone, is it's stabilizing. Talent shortage is still here and likely will extend and expand as we start seeing those investments come off the sidelines, mainly into tech. And you know, all companies are tech companies. I'm not just talking about the Googles and the Microsofts of the world.
The number one higher of AI and those kind of skills is actually a bank and capital one, and so
all companies are tech companies. But what we're seeing is there's this pent up demand for these specialty skills, and right now employers are moving talent around to fill gaps versus bringing in those net new skills, and so talent shortage is here and it's going to even you know, be a bigger consideration as we go forward, is we see those tech investments happen and the need for skills that have been talking about for you know, years now or year and a half at least, those will actually
come to come to reality.
Well, what are those skills that are actually needed? Because we've been having this discussion quite a bit over the last few months about the role that AI will in this and the idea that Okay, well, people who were told to go learn to code, some of those folks might be out of a job because these lms can do a pretty good job coding themselves. What are you seeing as the jobs that will actually be needed in the coming years.
Yeah, so, Tim, you asked me in the right horizon, the coming years, I don't see. You know, business developers, coders, they're still in the top three jobs open in the country today, software developers. That's still a very important skill. As you look out and AI starts to take hold. It's less than two percent of total jobs in demand by the way AI machine learning jobs in the country today,
but as we look out it will accelerate. And those the skills around capability for analytical assessment, you know, the neatest one I think of these prompt engineers because basically that's a fancy word for saying, ask the computer the right question in the right way. And so this idea around natural language models and how do I ask a question? Those will be very accessible jobs, which you know, to your point, the coders, they're not going away tomorrow. They'll
evolve into something as well. But I think the accessibility of tech will really come into play as we look across the horizon. But I think the other kind of interesting thing that we're seeing as we go through the summer is you heard me talk before about this cost conscious consumer that's really driving consumption in our country. What we saw and what we're seeing in real time, we saw it starting with the jobs report, but we see
what's happening today. We're seeing really a decline in those retail segments big hires, great clips that I talk about frequently, Walmart starting to see decline in their open jobs. And at the same time, we're seeing an increase now in registered nurses, which you know has been depressed, but also in mental health support. So we're seeing new entrants in
the top twenty five hires. A company honestly I hadn't heard of called LifeStance is now moved in the top twenty five hores and it's a mental health support company. So we're seeing a change in the composition, yes, on the specialized skills that you ask about, but also on the general skills in the economy today, which is you know, good news.
I actually did want to talk a little bit more about the composition of what kinds of jobs are being added when you look at the jobs report that we just got. Job growth was led by construction and healthcare, while manufacturing jobs saw declines. And I wanted to know, what does that tell you about the trajectory of the US economy.
Yeah, so, you know, I said, I like to talk about the good, the surprise, and the watchouts. My number one watch out, Emily, is what's happening in manufacturing. Specifically, we saw what the numbers were on durable goods that was down. That has broad reaching supply chain considerations. So that's one of my watchouts. I am pleased to see the resurgence of health again. Registered nurses have been quite
volatile coming out of the crisis. In fact, a lot of declines now not net declines, but declines month over month. Given the surge and demand, we're seeing that start to come back. And again there's a whole new segment of healthcare that's truly emerging, which is mental heal health support, which really truly gave birth coming out of the crisis.
Before we let you go, Becky, we have about a minute left. Are we in a recession or approaching a recession?
I don't believe that. I believe we're in a bit of an air pocket. You know, we get encouraged and then we hit an air pocket and we come back down a little bit. And so I do not believe we're heading into a recession. We're also not heading into a resurgence, tim and so I think we're going to see a bit of steady as she goes. I'll also be watching what the FED does mid September in hopes that jump starts some of the spending that's on the sidelines.
Are we heading into a normalization?
I would say right now, the indications are we're heading into a fairly steady state. You know, with these levels, I don't know if anyone would call that normalization, but I would say we're not seeing big surges or again big layoffs either. We're seeing fairly steady steadiness at every corner.
Okay, steady as she goes Becky Frankowitz, she is Chief commercial Officer and President at North America for a Manpower Group. Reminder, they source and manage employees for more than four hundred thousand clients, So we always like to check in with her on these payrolls day because they have a great view of what's going on around the country when it comes to hiring and firing.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa Play Bloomberg eleven thirty. Well.
Next guest has a great view of global commerce. He runs companies that have more than two dozen ships in the ocean that transport at any given moment things like wheat, corn, steel, copper, oil, coal, and more all around the world. Stamatis Santanas is the chairman and CEO of the publicly held ship owner Senior g Maritime traded on the NASDAC under ship, as well as the CEO of the publicly traded shipping company Maritime UNS. I did ticker us e A. Stomatis here in the
Bloomberg Interactive Brokers Studio. Welcome, how are you?
Thank you very well and thank you for having me. It's yeah pleasure to be here.
Thanks for joining us. I want to start with the economy because you have an understanding of what's moving where and when. How would you describe the global economy right now.
Well, it's not in such a bad shape as everybody is saying. I mean, it's it's it's it's actually quite good. I mean we see the United States, you know, running at very good growth trades. China has always been into plane. We do a lot of China trades because China is important, a lot of iron ore and coal that we transported to them. And it's it's not in bad shape at all. I mean we feel that, you know, the the economic global is doing quite well. I cannot say the same
for Europe. I mean, you know, Europe has been lagging a lot, but as far as the US and China is concerned, I'm pretty bullish.
Do you see the lagging continuing in Europe?
Well, yes, because the biggest victim of you know, the Russia Ukraine War has been Europe actually from its energy needs. So unfortunately Europe, it's going to take a while before we see early bound. And also in Europe we have this political instability. You have all these governments changing all the time, and you know that doesn't create any vote of confidence as to what the growth rate is going to be. If you have so many political instability in a.
Place, you know, I want to get to geopolitics, but first I want to also zoom out on the shipping industry, because I'm sure shipping has been front and center for you whole career, but for many of us, it really came into focus during the pandemic. We were talking about supply chain snarls, prices for shipping costs just absolutely skyrocketing. Do you think now where we are in twenty twenty four, would you call this a normalization of the industry.
Well, yes and no. I mean that's actually a great point. Shipping came into focus during the pandemic where suddenly people realized that they cannot get the product's goods you know that they were used to in the supermarkets or you know, whatever they buy it from. So unfortunately, you know, shipping came into play with all these disruptancies you know that happened globally. Yes, we have things stabilized since the pandemic a lot, but there's still a lot of disruption. And
that is a result of the Red Sea. As you know, you have the hoodies they're bombing ships all the time. You know, you have the Resian invasion into Ukraine, and that has disrupted the European energy market a lot, So you still have a lot of disruptions. Panama Canal, that was a big disruptor because of the reduced rains and
the water levels, is now coming back into normality. But you still have a lot of global disruptions unfortunately, and it's going to continue to be like that for the immediate future, I believe.
Is that why we're seeing just over the last few months, the cost of moving a shipping container increasing so much. I mean, we don't hear about that as much as we did during the supply chain snarl of the pandemic, But why are we seeing costco up in recent months.
Well, that's a great question, and that happens mostly because of the Red Sea closure. I mean, you know, when you cannot access Europe and you need more ships to take the commodities from let's say, Chime.
That's been happening, that's been more than a year.
It's been at a year. But that creates like a backlock. It's like the accordion effect. I mean, you don't notice it in the beginning, but you know, over a course of like three because you have the stock right, things are being you know, stocked up in places and warehouses. But once you have the real disruptions, and disruptions last a bit longer than the year that you mentioned before, then it starts to bite. And unfortunately, you know, we
have conflicting interests. I mean, shipping freight rates usually go higher when you have disruptions, and you know, I'm proud to say I'm not so proud to say that. Unfortunately, we want normality and we want things to be cheaper for the consumers, but you know, you always have something going on.
I also want to talk about stocks here. There's a number of dry bulk shipping stocks that have really done well with the last year. I'm looking at an ETF the breakwere Breakwave dry bulk Shipping ETF taker bd R Y over the last year has returned over one hundred and ten percent. Does that momentum continue?
The answer is yes. And our stock, which is ship, is highly correlated to BDRY because we tend to follow the bigger ships of the dry bull vessels. So what we do is that we transport araw materials from the production areas into the places where they turn into steel
or aluminum. So we're very critical in the global logistics saying, because you know, if you look at infrastructure globally, whether that is in the United States or Africa, or Europe or the Middle East, you need steel still is something that you cannot replace very easily. I mean, you can argue about oil, and that's whether that's going to be replaced by natural gas and stuff is still it's kind of difficult to replace, you know, a very critical component in infrastructure.
Right stimatus. Let's talk politics a little bit, because certainly front and center for US as we enter the final stretch of the presidential campaign, and I imagine you're watching it very closely given that you hear a lot about tariffs, especially from former President Trump, who says he wants to bring back and increase tariffs US on goods coming from certain countries. How do you look at this as from your position to CEO of a shipping company.
In order to have the tariffs make any sense, you need to have things produced in your country or in countries that are your allies. How do you put like stell tariffs when fifty six percent of the global still production comes from China. You don't see any blast furnace, you know, production of steel, anything being built in Europe or the United States, Right, it just doesn't happen. So the world still is highly relied and on the Chinese steel. So no matter how many steel tariffs you put on
or ev tariffs, things will still find its way. You just make it more expensive for the consumers. I don't agree with tariffs so much. I mean only when you have that competition, and only if there is any dumping takes place. But in this particular event, you know, you don't produce still here, it's a given production. You need additional steel, not just in the United States but also in Europe. So it's going to find its way to the consumer. It's only going to be more expensive, and that's bad.
How do these tariffs help with congestion at all or do they make that worse?
Well, congestion is mostly word driven and weather driven. Yah, So tariffs do not create any you know, big congestion effect on anything. Congestion is always a problem in our trade because ships get congested in areas and that creates a lot of backlog and makes things again more expensive. But it's mostly word driven, like you know, Russia, Ukraine
and the Middle East, and weather driven. You know, when you have a typhoon or a cyclone or a hurricane or something that creates congestion in areas.
You're the CEO of two publicly traded companies. From a shareholder perspective, how do you make sure that you're giving enough time to different companies?
Well, thank you. Both companies are quite similar, so the management company is consolidated into one that provides management services for both companies, and the philosophy, the investment philosophy of each company is completely different. Synergy, for example, owns a pure play fleet of cape sized vessels.
Cape size. Remind everyone what that is.
Cape size is the largest conventional ship that transports iron or coal and box side. That's about one hundred and eighty thousand tons of cargo cutting capacity and it's about one thousand feet long, so it's like three hundred yards. It's a big ship, and we have twenty of those,
so we're quite big in what we do. So Synergy is mostly buy and hold and generates a very significant return and it's a cash flow thing that we distribute to our shareholders and we have increased our dividends substantially. United Maritime is we buy, hold and sell. So when we find the opportunity to buy an asset low. We buy it, we keep it, and then we sell it and we usually you know, we have been very successful in creating some amazing profits in both companies.
Should note that U S Energy shares this year. Ship is the checker up about thirty four percent animially.
Performing markets and the S and P five hundred. In the lead up to the show, Tim said that we were going to discuss how ports are becoming pawns in geopolitics. Talk a little bit about that in the last couple of minutes that we have.
Well, it's about infrastructure. You know, there are not sufficient ports in the worser world to accommodate all these additional changes in energy. I mean, for example, Europe was reliant on the natural gas coming from Russia in the form of pipelines. That doesn't exist anymore. You need to create the infrastruck to bring in natural gas through the poord facilities and make it into distributed into the households. How
are you going to do that? I mean, the infrasexual was not in place, and people have been pushing the cant down the road a lot in infrasection because they were reliant on things that were like thirty or fifty years old, like these pipelines in Europe, and the same thing happens in the United States. People do not accommodate for that.
Very briefly, one minute left. Concerns about your out especially with regard to the Panama Canal. We saw some issues there earlier this year. How are you thinking about that?
It has recovered a lot, So I'm not so concerned about a lot. It's recovered lot. I'm not so concerned about Panama. I'm concerned about that at sea. The sea will continue to be critical and it affects the United States a lot because you export a lot of coal to India, for example, from Baltimore. Now those ships need to go around the Cape of Good Hope. You need twenty to thirty percent more ships to do that. You know,
it's critical. So I'm more concerned about that at sea, you know, both from a safety as well as the you know, the energy infrastruction.
The Stematis Santanas chairman and CEO of senor Get Maritime and also the CEO of the poly traded shipping company Maritime United joining us here in the Bloomberg Interactive Brokers studio.
You're listening to the Bloomberg Business Week podcast. Catch US live weekday afternoons from two to five pm Eastern Listen on Apple card Play and then brout Auto with a Bloomberg Business act or watch US Live on YouTube.
Well, as I was preparing for this story, I producer Elizabeth asked if I'd ever placed a bet on a sport, have you, Emily?
I have not.
You have not.
I was I was technically under the athletic department in college, so there were a lot of strict rules around like what we could.
But I think now you're I have no idea.
Actually, but now.
I'm not really interested in that because aren't there some rules around Bloomberg journalists.
Oh maybe I shouldn't tell people. Then what I found out really cautious. Yeah, I am too.
We were just talking about how all I buy is the S and P five hundred.
Well that makes sense. I mean we're allowed to buy index funds. That's like the only thing we can buy. Another colleague, though, who shall remain nameless, said that she placed a bet last night. Check out this bet that she did. She did a multi leg same game parlay on last night's Ravens Chiefs game. She put down a whopping fifty cents. It would have netted her a few hundred dollars if she won.
Who was this.
I'm not going to tell you she didn't win. Okay, she did not win, but fifty cents down the train. That said, the proliferation of mobile betting apps like FanDuel and DraftKings, plus betting kiosks at stadiums across the country have made it so that even small bets make for big business. The US sports gambling industry has seen more than two hundred and twenty billion dollars wagered in the five years since the Supreme Court essentially legalized what was
long in underground aspect of fandom. Claire Valentine is Bloomberg News personal finance reporter. She writes about how financial advisors are on high alert. She joins us from New York City. Claire, good to have you with us. What are financial advisors telling you about the two hundred and twenty billion dollars that's been wagered over the last five years. What are they seeing from their clients.
Well, they're telling me that they're really worried, you know, maybe not their clients in particular, but just about sort of the industry as a whole where so many people can bet money so easily. We're seeing these mobile apps and these usually young people, a lot of male that are able to just sort of bet money at the touch of a button, and it's become such an intrinsic part of watching games that is just exploding and growing continuously.
Claire, you've written a lot about retail investors buying anything from crypto to meme stocks. How much of this trend now of these people using their maybe pandemic savings to bet is just another example of the fact that those savings still exist and that there is still some liquidity in the market here in a propensity to spend.
I think you're right that it's all kind of tied together. There's sort of been this gamification of trading and investing. You know, it's fun, it's easy, it's quick and flashy, and people are able to sort of have this community around it. And I think it's the same thing with sports betting. It's taking this activity watching sports that people love to do and then combining it with the ability to sort of have some skin in the game and
bet money on it. And you know, I think it's a great question about how This leads to questions about the consumer health and how much money people have to spend. I think it's a really interesting gauge into the average American consumer right now, and definitely we're seeing people still have the money to make some of these bets.
You talk to some folks who've been placing bets. What did you find in general about the people you spoke to who are actually spending money on these apps.
Yeah, what was really striking to me was just how these people are sort of justifying it to themselves. You know, they're saying, oh, it's just five dollars here and there. You know, it's five dollars for a game, it's ten dollars here. Feels like a really low amount of money. But then you sort of add that all together and you think about how many football games there are in the fall, and it starts to become kind of worrisome. Just to consider also the fact that most people lose
their bets and they lose money. So it's pretty striking to me how the mentality is sort of around this and sort of the justifications of it.
The financial advisors you spoke to, what was the advice that they're giving to their clients. Did you speak to advisors who don't want anyone, you know, betting or I'm wondering if there's maybe a safer way to participate in sports gambling.
You know, I think financial advice would always rather their clients not gamble than gamble. But I think, you know, it sort of relates to what a lot of advisors say about stock trading. It's like, Okay, if you're gonna you want to bet some money on you know, meme stocks, cool, just make sure it's only a set amount, that you don't go over that amount, that you think of it as you know, fun money, discretionary spending and not part of a long term investment strategy. And I think it's
the same here. You know, I don't think anyone's saying you shouldn't sports bet at all, but it's just continually having that sort of check and making sure you're not going over your budget.
I'm certainly interested to keep following this in c Emily, whether or not we're going to start to see pushback in the coming years. You always do here when these products and services are advertised, that you know, if you have a gambling addiction, called this number and here the resources that the state offers, so certainly interesting to see this. Take Claire Valentine, Bloomberg News Personal Finance reporter, joining us from New York City.
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All right, it's time for the drive to the clothes and now. Yes, it is three forty and this has been a brutal week in the market.
Time to close the market, time to close.
Let's shut it down, shut it down. We're joined now by Lauren san Filipo in the Bloomberg Interactive Broker Studio, senior investment strategist for Merrill and Bank of America Private Bank. Help us understand what is going on in stocks right now, because we are poised for the worst week in the S and P five hundred since the Regional Banking christ Is in March of last year.
Yeah, let's close it out right. I think that makes sense. The labor market jobs report, I'm sure you guys have been talking about this all day right. In our view, this is a cooling. This isn't a labor market that's
really stalling out. I don't think much has fundamentally fundamentally changed since the beginning of August, so that's important to note, right, It's just been a little bit of positioning, just what I'm seeing in semiconductors as the example, and textually selling off taking on the chin.
Is this what the FED wants to see? I'm not talking about the market reaction because we're told the FED has a dual mandate, and then that mandate doesn't include the equity market. But is this what the FED wants to see when it comes to the labor market.
I think so, and I think this gives them more reason to cut by twenty five basis points. That is our base case. I know those odds have been oscillating today between twenty five and fifty, but again we're in that twenty five basis point camp. I think the inflation print that's going to come out on the eighteenth, it's
not time to call the all clear. I actually think on inflation, and it wasn't It was only what two months ago when we got inflation print that actually triggered a massive rotation in markets.
Yeah, we're actually set to get CPI next week on the eleventh, and that's set according to economists surveyed by Bloomberg, thirty two of them two point six percent. And again it's not the preferred measure of inflation Emily, but that's a two point six is getting closer to two?
Yeah, I mean I'm wondering, you know, when you think about the August that we had, there was some fear that that sell off was the beginning of a broader unwinding in markets. Do you agree with that framing, especially now that we're getting this data that the Fed kind of likes and kind of is pointing to more of a soft landing, Right, I think.
All that data actually probably bolsters the case for a soft landing. We saw basically at the beginning, right, some chop around, some mechanical yen care trade. For sure, it was a growth scare at best. And then I think we got a revised Q two GDP report that told you actually the consumer was in better shape than initially thought, and a GDP at for Q two at three percent that's very healthy. The Atlanta Fed GDP for Q three
now is saying two percent. I mean, again, this is a moderation in growth, but this is by no means a recession, and we think the FED is embarking on a non recessionary cutting.
Cycle, So non recessionary cutting cycle. You don't think we're in a recession or headed to a recession.
No, And I don't think that there's a lot of data out there to sort of suggest that, right, particularly dating that data that's leading and not lagging like we saw today with the jobs market.
So then where are you finding opportunities in this market?
So unfortunately this takes a little extra leg room here, but I do think you have to look under the index under sectors, right, It's tough to make broad sector calls in this environment, like, for example, industrials would not be a sector right now now that I would be recommending or overweighting. But I still like the aerospace and defense industry, right, and I think there's a lot of legs there. So unfortunately, this is about quality, This is
about earnings growers. In Q two, we saw for earnings, we saw five out of eleven sectors growing their earnings by double digits. I mean that's earnings, that's broadening so I'm tracking earnings into Q three to see sort of where we see opportunity.
Have clients been calling this week?
Yes, and then they tell you how much they have in cash, because it's almost like a I told you so a moment A little bit, right. I mean, there's a lot of uncertainty out there, and that's what I'm hearing from clients.
So they do have a lot of cash and they're ready to jump on opportunities when they see the time is right. Do they feel like things are still too high right now?
Unfortunately, there are a lot of clients that think there's more to come on this like downside pull back, just given the confluence of issues that.
We have ahead of us, right, do you think there's more downside to come?
I think, you know, we could definitely see more of this pullback. I mean there's all the election cycle in front of us. We have a debate next week and again CPI who knows where that's sort of gonna bring. So yeah, I do think that there could be more to this pullback.
Do you do anything particular in portfolios to prepare for the election, because I think it was yesterday we were talking to Abigail Doolittle, who was pointing out that when you look at the Vicks futures curve, which is getting into a little wonky territory, but it looked like traders were not really bracing for a lot of volatility around the election, and so that could be seen as maybe an underppreciated risk.
I mean, maybe we're pulling forward some of that uncertainty too. This has been an unusual election cycle. But when it comes to portfolios, I mean, we're thinking about corporate profits, the sort of that underlying strength, and that's really the
north Star policies. We're not going to start positioning portfolios sort of around where we think candidates are going, but we are thinking about gridlock or not, and it's just getting the polling just getting tighter, particularly in the swing states.
Good luck or not is more important to you than who's in the White House.
Yeah, you know, just in terms of what the market's looking for, I think the market would be more nervous about like a Republican or Democratic.
Suite then the policies actually get done, correct you. Okay, Lauren, thanks so much for joining us. Thank you here in the studio too. Always good to see you. Laurence and Filippo, senior investment strategist for Merril and Bank of America Private Bank.
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