Wall Street Titans Warn of the Next Big Risks

You can also listen to our radio show at two pm Eastern Time on the Bloomberg Radio or watch us on YouTube search Bloomberg Clovel News. Well. About nine months after the arrival of vaccines, dozens of countries have yet

to reach ten percent of their populations. It's a milestone seen as crucial in narrowing the worldwide gap and access to him in European countries with lower vaccination rates can see a surge in COVID nineteen infections, hospitalizations and deaths over the next two months that according to the European Center for Disease Prevention at CONTROL. It's not easy, all right.

Once again, for our daily COVID update, Elizabeth Stewart Professor of American Health at the Johns Hopkins Bloomberg School of Public Health. Another member of the Hopkins team that we lean on to get us through and understand everything and all things COVID night teen and she joins us on the phone in Washington, d c Um Elizabeth, good to have you here with us. Among the headlines that keep coming, what is it that you think we should be paying the most attention to. It's great to be here, Thanks

for talking with me today. I think we see some good news on the horizon. Cases are plateauing or even going down in many places, and there's hopes that the vaccine is going to be available for kids under twelve in the next you know, couple of months. But I think we have to be careful not to let down our guards. As we've learned throughout the sandemic, we're not out of the woods yet, and so we need to

sort of stay vigilant. Okay, what are those things that we need to do to stay vigilant, because I've known I'm definitely not acting the same way that I acted when I wasn't vaccinated. Yeah, I think the key thing is still avoiding indoor gatherings, especially without masks, and and in large groups, keeping an eye on sort of trying to maintain contact with people who are vaccinated, being careful again if it's going to be a large group that

might not be vaccinated. I think people with kids under twelve also have very different considerations, and for them, again sort of the core masks, keeping distance, and any of the adults, anyone overage twelves who can be vaccinated really should get vaccinated, and that can really help keep even the younger kids safe. Well, so let's talk about that. I mean, I'm lucky enough to have a kid who's old enough that she's been able to get the vaccine.

Tim has a little one who hasn't been vaccinated. So what is your thoughts advice to parents, many of which are vaccinated, but their younger kids are not, and increasingly there in daycare or they're back in school. You know, how do we manage that in the best way? Yeah, it's it's something many of us are struggling with. I think keeping an eye on reducing the risk as much as you can, but without sort of sacrificing the essential

activities that these kids need. So I've been very happy to see schools really opening this fall, many of them are implementing the mitigation strategies that they should be in terms of masks and ventilation. One thing that I think I would put on people's radar screen are the role of rapid tests, and I think they've been underutilized. I think all households should have some in their cabinet to

pull out when a kid has a sniffle. I think schools should be using them more to kind of track infections and sort of just keep an eye on who has symptoms and and do a really quick fifteen minute test which can be quite accurate to see who might actually be infectious. I try to go and get these, and I have several times going to drug stores in my neighborhood. They're sold out. It's a major problem everywhere. They were available more so over the summer, but after

me and has increased this fall. I agree, him, shaking his head. I was actually at a drugs, a drug store in my neighborhood, and the guys said, our truck is coming in today. I will put one aside for you. And I went back later and he said the truck had none on there. I'm so sorry, Like that's what people are doing in my neighborhood in Brooklyn. Yes, I think that's happening in a lot of places. The federal government, I think is working, I hope is working on art

to increase supply. Um. But I think that's really what we need to focus on, is increasing supply, increasing access, because I think that rapid tests are going to be a key tool that's really going to help us keep this under control. Right, We've talked about we had no playbook, We didn't really have a tool kit at the beginning of this, but we increasingly do. And it sounds like this those rapid tests should be part of it. If you can get them, yeah, if you can get them, yeah, exactly.

All right, Elizabeth Stewart, thank you so much, Professor of American Health at Johns Hopkins Bloomberg School of Public Health, of course, supported by Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropy. She is joining us or was joining us on the phone from the Nation's capital. Look, the alternative to not having rapid tests in your home is going to an urgent care clinic and standing around

a bunch of people and waiting. It's why in the beginning, if we thought we maybe wanted to get a test. My husband and I were like, before we were vaccinated, I don't want to go and stand with people who think they might have COPI, especially when it was often long lines and long waits. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich on

Bloomberg Radio. So in its sites an initial public offering and as such, Patreon and I saying it right, Patreon Patreon or Patreon Patreon, all right, thank you, Joel Weber. They're investing in original programming in the face of growing competition. So let's get right to this story. You know, with us is Bloomberg Business Week editor Joel Webber and someone who's been following the beginning of the story now the transformation of this company is Bloomberg News Entertainment reporter Lucashaw.

He's on the phone in l A. What I'm just thinking. It's like, like Lucas starts out the piece, everybody is trying to get on the bandwagon that Patreon created. Joe, they literally created it. You know, this is like the company that basically helped facilitate people to be like you can you can just straight up ask people for money online, just say, hey, would you like to donate money to

my people? And people will give it to you. And and you know, when when that first happened, I was like, wait, what there's like this is like a company that's doing this like and and Business Week had covered it forever, and then the pandemic happened, and then it's like everybody realized this was a business opportunity and then you could do it in many different ways. And then I think that's um, you know, basically caused Patreon to realize, hey, we were way ahead of this and we know what

we're doing. And now it's like, okay, if we're gonna go go public, you know, how do we how do we distinguish ourselves? So so, Lucas, what's the plan. The plan is to get a lot more people using Patreon uh through this enticement where they're going to you know, offer too fun uh podcast, a video series, what have you, um and hope that the more people go use it, the more the revenue grows. And then there's also a design or to make Patreon a little bit more of

a destination. You know, for most of its existence, it's been this layer in between. You know, you are a YouTube or you're a Twitter streamer, you're a podcaster, but you use Patreon to kind of monetize your most art and fans. Now they want people if they're going to see that that podcast that they pay for, the video series they pay for, maybe they'll do so on Patreon. Can they compete with the biggest players out there, even if they're the original the the O g s on this?

I mean, look, Twitter allows tipping, you can directly pay for creators through sub stack. You know, I think that the odds of them competing as a media destination are pretty low, and that's why you see the CEO Jack CONTI stress that they're not trying to compete head to head with YouTube because pretty much anyone who's tried to

do that other than TikTok has failed. Um. I do think that they can continue to exist as this and b to be business in between, because one thing that that they offer is an ability to sort of work

across all of these different sites. So if you're someone who is both a podcaster but you also upload a video of your podcast YouTube and maybe you also want aid followers on Twitter, you can centralize it in one place, and so as long as some of these other sites don't cut off Patreon, I think it can because this market is so big, it's going to keep growing. They're going to be a lot of people who do it

and a lot of people who win. And you know, maybe maybe they don't just want to charge people on YouTube because you tend to charge your fans for multiple things, not just for one thing. Hey, Lucas, how do creators see Patreon? Because there's a line in your story about Conti and how he has always described the company as

creator first. Do creators feel that way? Is there something special or different that they feel like they get with this versus going to some of the bigger platforms that probably have deeper pockets and can do a lot more. He has the creators that we spoke with view Patreon very sa aforably, Perhaps I'm surprising link is peop always spoke with it. Are those making money using the service

and using their different tools? I think people like the average creator likes that there is an independent company that is allowing them to make money and so that they're not to beholden to one of these tech giants. But there are a number of people who don't use Patreon or don't charge fans in any way. And I think one of the keys for Patreon is getting more of

those people to use it. That can be you know, there's a desire I think have some of these A list celebrities thinking about using Patreon, But some of those those celebrities are are still uncomfortable with the idea of asking fans for direct donations. You know, there's a difference between Will Smith asking people to pay him five dollars a month and some YouTuber. If the average person knows that Will Smith has a lot of money and might

not like that idea. But Patreon wants more people to get over some of that concern because that's that's really a key to their business. Everybody can just be asking for money for anything. Um So, which, how does how do investors feel when Patreon asked them for money? It seems right now pretty good. I mean Patreon went from being worth one point two billion in September of last year to being worth more more than four billion just a few months ago, so they more than tripled in

less than a year. That is certainly tied up in this this rush around the creator economy and what the pandemic has wrought. You know, it's hard to know how you know, if this is a case where people just got over enthusiastic or not um but there is just a ton of money flooding into this space. There third party estimates saying that the creator economy is now at

twenty billion dollar business, maybe even more than that. Uh and and Jack County at least feels good enough that he says he's not selling uh and and his he's not spacking his desires to go public in a more traditional way. Okay, more fun question. In doing your research on on Patreon, what were your favorite UH causes that you that you either found and discovered or you know,

old favorites. You know, the biggest category this is this, I apologize because this might not be the kind of the fund quirky answer you're looking for, But the biggest category to me that feels like it really works on Patreon is podcasting, because that's that's an industry that is almost entirely ad supported. The ad market is still is growing, but still relatively small, and you have these people who host the shows and their fans feel a strong personal

connection with it, and so there is. I think there's there's a willingness to contribute and fund and so a lot of these podcasters can make as much, if not more money from Patreon than they would from the traditional podcast marketplace. And I think that's one of the keys to this is you look across the Internet and a lot of the kind of the creators are making money off relatively low CPM kind of call or just low

rate advertising. YouTubers, you can only make it if you reach a lot of money, if you reach huge scale. Same podcasting, You've got this whole middle class of creator that really needs support from their fans to make it work. Um and and podcasting is one I think Patreon has just had a ton of success. Yeah, and certainly an alternative to the model that's out there when it comes to podcast. Imagine, like the key to the new middle class is just asking for money. Like it's actually kind

of jeeus. Like you can see it. You know, if you could facilitate this, and all you needed to do is be able to you know, hey, subscribe and actually have like you know, a way to actually facilitate that. It's it's there's hope, there's hope. I know what we're all going to be doing later on I don't know, Carol, I gotta reminds me the fact that nobody's tipped to yet on Twitter, Carol, that hasn't happened. All Right, we

gotta run. Lukashaw check it out his story and the upcoming issue Bloomberg Business Week, Entertainment reporter of Bloomberg News. This is the Big Take, the best of Bloomberg's in depth original reporting from around the globe. Well, we have to make sure we do. As the Economy covers, is what cup The data kind of broken down a bit. It's fun to becoming more and more expensive, maybe looking

at for fifteen billion dollars for the entry levels. There's been ways of immigration that have faced a lot of resistance, a lot of color behind the scenes in a great untold story. How did Bezos really come out on top? As the cover says, Jeff wins, he always seems to win the Big Take on Bloomberg Radio. You are listening to Bloomberg Business Week Carl Master along with Tim Stenovik at Bloomberg Headquarters in New York City. So the Bloomberg

Big Take. It's also the most read story on the Bloomberg Today it is about the Wall Street Titans warnings of the next big risks for investors. So our Bloomberg News Wall Street reporter Shinelli Boss she caught up with the founder of our investment Management, Kathy Would. She talked with the chief economic advisor of Alians at Bloomberg pinion contributor Muhammad al Aaron, and also Googenham Investments chairman Scott Minors. So let's kick things off and see what some of

them had to say. Let's start with our investment CEO Cathy Wood. She says, not inflation, but deflation. That's her biggest concern. There are companies who thought the world would never change and have been catering to short term shareholders who wanted that extra penny or two in earnings and so got it by having the company's leverage up and take more debt and shrink the number of shares UH.

And they've also been um focused on dividends. UH. They are probably settled with products and services that will become obsolete because of the record breaking amount of innovation taking place today, and in order to service their debt, they are going to have to cut price, says UH, and move those Uh, those goods and services that are on their way out anyway. So I am concerned about that, and I think there's going to be a lot of

confusion around it as well. That's our investment CEO Cathy would on the risks she sees from deflation now onto our next risk. In the view from Guggenheim Chairman and chief Investment Officers, Scott Minored, when it comes to risks for the global financial system, his main concern is tied to hackers targeting global payments systems. Let's take the thing that bothers me about something like the global payment system is I don't think anyone's focused on it. And this

really takes a high degree of international cooperation. It takes a real macro look, meaning there needs to be somebody or some group of people who who are looking at how everything interconnects and and where the potential vulnerabilities are. I think there's stage um this is in the world of the unthinkable, and so therefore, um, you know, I've used this phrase before. There's a cognitive dissidence around it,

which is to talk about this idea. The consequences are so dire that immediately people just sort of moved on to say, well, that will never happen, right, and so it's uh, I think there's there's a real vulnerability that would certainly freak out the world in the markets. That of course with Koggenheim chairman and chief investment officers Scott married right, we talk about security, especially when it comes to our financial world. Yeah, all of these so diverse

with what their big risks are exactly. All Right, lastly, let's see what's concerning and on the mind of Alian's economic advisor, Bloomberg opinion columnist at Muhammad al Arian. When it comes to long term risks for global markets, Arian says, rising inequality. That's really his primary concern. I think the thing that worries me to most is inequality, both within

and across countries. And it's something that the financial markets puts aside as a social problem, not really an economic or financial problem, and we risk seeing the issue of inequality gather momentum. COVID has already been the great unequalizer, but rather than go back to where we've come from, we are now creating the dynamics inequality to worsen and to assume greater importance in disrupting all sorts of things

in our society. But the one thing that worries me even more than that, and I'm already worried about income, and what's inequality is the inequality of opportunity. We know what COVID did to people who had no WiFi at home, who had no computers. We know that school districts, public schools, listen, lost touch with a lot of their students. And these students risk not only becoming unemployed, but unemployable, which means a lost generation of young people. And that, of course,

was a Mohammad l Arian. He's Alliance's economic advisor. He's also a Bloomberg opinion columnist. And you can get more on all of this to another risks facing the market side. It's a big take. It's on the Bloomberg terminal at Bloomberg dot com, so check it out. Some really thoughtful ideas,

really thoughtful, and also each one is so different. It is I thought, it's really fascinating, and we're going to talk about this through you know, throughout the when our Bloomberg TV friends join us a little after the close of trading to call it beyond the Bell. Beyond the Bell. I know, oh, I know, but the idea of what Cathy Wood is talking about, because there's so much concern about inflation right now, and she's saying, no, that is

not what you have to be concerned about. Deflation is what's going to happen, and it's going to be caused by these disruptive companies, and of course disruptive companies that she's invested in. I think it's fascinating because a lot of things are changing how we do it. Think about the pandemic, and healthcare has been one of those areas that's been slow to change. We know it. We still have to fill out for you know, we all talked

about this massive man database. We're concerned about privacy. I get it, But during the pandemic, things in terms of the medical world took a big step forward in terms of embracing the virtual world. Yeah, I mean I still can't get those you know, rapid COVID tests, but that supply chain problems, the inequality, inequalities though around the world, it's something we hear from global central bankers, it's something

we hear from global leaders. That's a big problem because we have seen in the pandemic again exacerbated that that people are not sharing in in the wealth creation equally around the globe, and what happens if that doesn't if it continues to get worse, it turns into this cycle as l Arian was describing, where people cannot actually improve their own stations in life, and they cannot pull themselves up by their bootstraps, as you know, many had hoped

would happen in developing markets. And he said, you know too, when it comes to consumption and economic growth. He writes that the rich capture more income and more wealth, they spend less of it, and that the poor tend to consume more. And so how does this all trickle down essentially in turn of momentum, if you will, in growth around the world. So I guess we'll have to see.

We're gonna talk a little bit more about this. But I love when we can get these kind of big macro conversations three different people and see what's on their minds and what's got mind said to about security and hacking. It's a huge time and I think it just becomes a bigger and bigger concern going forward. Again. Check that out at Bloomberg dot com. I'm roc yeah, but you let me drive. Oh no, no, no, no, this is not a toy home, all right, please, I'll do the

right gravels I want to dry. It's good question, good drive. This is the Drive to the Clothes on Bloomberg Radio. Listen to you. Just about ten minutes left in today's trading session. We are definitely off our best levels of the session. Taking another lay down in the last I would say about half an hour or so, one point four percent lower on the DAD would start from Charlie, the biggest decline on a percentage basis, and the SMP still down about nine tents of NAZAC just down about

two tents of percent. So let's get to it. Drive to the Clothes with Jana. Janna Barton is equity portfolio manager and Director of Specialty Solutions at Eaton Vance, and she joins us once again on the phone from Boston. Janna, great to have you back on the show with us. Here we are end of the quarter, end of the month. This is the first mixed quarter and eight for u S stocks, the first down month on the SP five since January. Help us look backward but also look forward.

Good afternoon. I seem to have quite timing with you guys every time out on the air. It's like a sea of red. But let's see if we can turn this around. Um, I think you know the most important thing is Q three is almost in the books, as you said, in volatility, and these mini rotations seem to be the only constant we've got vixed up almost this quarter you had a bit of a reversal from here. Today you've got growth leading a little bit. You had

a little bit for everyone. Financials were, defensives are up um and a mix of everything else. I think the most important takeaway is one short term is murkye. You got to think long term as an investor, not a trader. And that's when it becomes apparent that equities, particularly US equities, remain the place to be. That you have to always be long term. Yes you do, that's how you make money.

But I do wonder, But I do also wonder. And I know, you know, we all talk about you can't time the market and so and so forth, But there is a point do you think that it makes sense as an investor to maybe say, all right, if I look at the S and P five hundred so far this year, let me just pull it up on the Bloomberg we're up fift we were up a little bit more before the decline that we saw in September. Do I say not a bad year? Uh, and just say I can take some money off the table in case

there's some pullback, just even on valuation concerns. Um, What do you say to investors who must pose that argument to you at some point? I think, Carol, you bring up a really fair point, which is the fact of the matter is nine months. Uh. Here we are nine months out of twelve, when we've already done what usually SMP does in a matter of twelve months. In fact, you're probably ahead of the long term average of ten percentage points or so. That being said, I think there's

still value in the market. How do you assess value? I think you look at earnings yield, which is the inverse of what we're expecting, uh, in terms of profitability for SMP five constituents, and that's nearing five percentage points cash flow yield in excess of four percent. Why is that important? Well, all eyes are on ten year treasuries that are at one point five percent, which means you're if you're in fixed income instruments, your real rate of

return is negative with inflationary pressures. UM, you know, certainly passing through two percent and higher. So you look at value and you are absolutely correct. Valuations a stretch, which is why you have to go to areas of the market that have lagged or are selling at a discount. And there's plenty of that. Okay, Well, let's talk about those areas the market. What are some areas of the market to keep an eye on those that you say

have lagged UM. Healthcare continues to be an area of the market that I think is an opportunity, particularly for those looking for the next year. Again, it lagged the market by about two and forty basis points here to date, it's trading at about sixteen point eight times, which is

nearly discount. You've got earnings and revenue growth, and you have a really nice hybrid exposure of defense with pharma and growthier errors of the market like healthcare equipment and supplies, which will should do well irrespective of the backdrop on the macro level. Well, it's interesting that you say that.

I'm going to probably bring this up in our discussion with our TV colleagues in just a few minutes, but healthcare stocks are Bailey lipshelts putting out and say they're on pace for the worst months since the pandemic began back in February. So we have seen a pullback in these names in a big way. So healthcare, what what else? What do you say to the big tech argument? There's been concerns as rates go higher, worries about future cash

flow at these peese. You know they're already trading on you know what we get from them, uh in the future. Having said that we are increasingly a big tech economy, great point. I think the fact is, well, tech is a percentage of the overall market, is now the biggest slice of the pie, and excess of thirty percentage points. The fact is it's it's heading higher. And I think when people talk about tech, they sort of do it

in homogeneous form. But there's so many dimensions to tech, right even when we talk about software, security, the enablement of this digital world that we find ourselves in. I think the fact that networking, five G, cloud computing, cybersecurity, semiconductors, they will remain a key solution to the world that we will be living in five to ten years from today.

So to me, I would say it remains an area of focus, particularly for long term oriented investor that has seen the sector underperform multi both have compressed, particularly within the hardware equipment area. I think it's an opportunity inflation transient in some parts, and someone will be with us for a while. Okay, expand on that, where do you think it will be with us for a while? I think wage inflation obviously is a I do. I mean, you know, once you give somebody raise, you can't really

take it from them. And you've got the big guys like the Amazons that are paving the wave for I see that, But I also see you know, Apple offering thousand dollar bonuses and those are one time bonuses that don't necessarily come back, right, Yeah, good point. I think there will be pockets of sort of transitory and it depends on what your time frame is, you know. I think if it's within three or six months, then I think most of the things that we're living with will

be with us for a while. If it's longer than that, I think you'll have a full cycle to kind of digest and readjust where you are. Sort of long term average has been um But I bring up the other side of the equation, which is I'm sure you guys have talked quite a bit about which are the supply chain issues right right? Um, things that unfortunately even the corporates are telling us are not just a two issue.

They will be with us for three and perhaps beyond that that's a little bit longer term and not so transitory or longer transitory if you can even say that. Jana Barton, thanks so much, really uh good to get some time with you, Equity portfolio manager, director of Specialty Solutions at EAT Advance on the phone from Boston. And that's going to be I think a big issue, the

supply chain issues. We saw, you know, China looking to acquire energy at at any cost, essentially to make sure that they've got what they need for their citizens and to be able to manufacture and do other things. You do wonder the fight for commodities is that what we're going to be facing for some years, fight for lots of things and how does that play out and what we see in terms of goods and services, I mean, look no further than the problems that Nike's facing back

more same it in the retail stories today. 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