Flying Objects, Super Bowl Ads, Yield Curve, and NYC (Podcast)

at Bloomberg dot com slash podcast. Let's get to this balloon business, because you know, how is at Colorado in the Rocky Mountains ten eleven twelve looking did you see any I did not see any balloons, and I can't imagine. It's good to be in the balloon business these days. Mc mulroy, co founder of the Lobo Institute, joins us.

He's a former Deputy Assistant Secretary of Defense for the Middle East at the US Department of Defense, former Power Military Operations officer at this thing called the c I A. I'm not sure what those guys are up to. Uh. And he was a marine for a very very long time, so we thank him for service. Hey, Mick, what is up with these balloons? Is this always been a thing,

but now we're just kind of hearing about it. It's a it to be with you guys, balloons have you know, ever since we had them have been used in some capacity to collect intelligence. Those goes back World War One all the way until today obviously, but you know, now we're shooting down these haven't been identified yet, these objects. Some of those might simply be weather balloons. But um, you know, we won't know until we get to these

remote sites and be able to collect and study the debris. Um. So, after such a long stint at the C, I a mick, when did you start there? Um? Are there aliens? Well? I came right after nine eleven, so I was kind of focused on the kind of terrorism issue, not the extra dress real issue. So I don't know. I know that there are people. Obviously we're taking it more serious. We are studying as uh. Pentagon has an office that's now looking at what these um anomalies are. You know,

so I don't want to make a decision. Was only kidding, but I assume that these unidentified flying objects are like college experiments that have just floated away. It seems so much more likely, right And um, now that you think about it, if we haven't been looking you know, above sixties seventy uh feet, then maybe there is just a bunch of debris floating around there, just like there's a

lot of space debris. Yes, absolutely, Yeah. Talking specifically about these objects that we've been shooting down in the last few days, I don't think there's any extraterrestrial thing about them. I think this is likely either it is a Chinese surveillance balloon it's a smaller size that they're using to try to probe our defenses, or these things may being

up there and we just haven't seen them. Now that we're looking closer, now that we have a signature based on the on the on following the balloon that went all the way across the United States, which might have been able to find tune our radar so that we can see these type of things. It doesn't mean that these these are all new. It could be these these uh weather balloons. We just don't know. Until we get to the debris and do an analysis, we should withhold judgment.

But if it is the Chinese and it looks like to me a deliberate provocation to the United States, So, Mike, I mean, we have satellites, lots of satellites. I'm assuming China has lots of satellites, aren't satellites better than balloons? I mean, isn't balloons so last century? Last on an early part of the last century. So that is what the common belief is that they Chinese have our satellites and as you might imagine, most of them are focused on the United States, so they can collect a lot

of this information via their satellite program. But these balloons, they are steerable, they seem to be able to log or over areas. They're closer to the ground, so they can collect signals intelligence. So there is an advantage to having both platforms because you can't do that with satellites. They just simply can't just sit right over, say Maelstrom Airbase where I am in Montana and stare at our I C B M silos. This balloon could do that and did do that. So that's uh, that's a concern

to us. We have to be able to defend ourselves from collection of this type of really sensitive information. It would be great, um if we were ready to defend ourselves, but it seems like what we'd like to do is take a week to think about it first. You know, we spotted this uh alleged spy balloon when it was over Alaska and then waited until it got to the Carolinas to shoot it down. Doesn't that seem to you

a little bit stupid? I mean, if they're collecting intelligence, um, we let them have everything they could get and then stop them when they got back to the ocean. Yeah, that's a really good point. I mean, if you're if you're asking me, I want to advise the president to

shoot it down as soon as we saw it. I don't know that we did see it until it was actually this was just my speculation until it was down in the comminentally United States, and then the military decided either it was too dangerous to shoot down over populated area or they saw and this has been reported that

they stopped transmitting information back to China. So the US military and intelligence community may have wanted to let it go since it wasn't um sending information back to be able to collect on what it was doing and how it did interesting, and then we shot it down right after it got finished. But the Chinese, if it's true that they didn't transmit anything, never got the intelligence they collected because that went to the bottom of the ocean, and we are currently trying to get that up and

analyze it. Mico, what does this mean about just or that doesn't mean anything, or what does it mean about US China? You know relations here over the last to ten days here, So we're we're hitting a pretty uh substantial law. Quite frankly, I don't think it's been my knowledge this way until before we normalize relations in nineteen seventy nine. So, but these things do happen. We collect intelligence on all our adversaries, they collect intelligence on us.

We try to prevent them from collect intelligence on us just like they do. It's it is what nations do. Um. It has caused a diplomatic riff. Secretary blinking is canceled, is or postponed at least is tripped there. But I do think it's important for both countries to realize that we're completely intertwined on so many things. Were both superpowers, if you will, and we have to maintain diplomatic direct communications. Like the idea that they didn't answer Secretary Austin's call

our Secretary defense is really irresponsible. We need to make sure that nothing leads to a broader conflict that neither country, uh would one? Right? All right, man, great stuff, good to check in with you on this evolving story. Mc mulroy. He's a co founder of the Lobo Institute. A lot

of experience and all the power military stuff. Former power Military Operations officer at c I, A former U. S. Marine Infantry officer, and former Deputy Assistant Secretary of Defense for the Middle East at the U. S. Department of Defense. So broad range of experienced. Sara trying to the bottom of kind of this balloon issue which has kind of comeing become a top story over the last week or so. How important is it? Uh, you know, how concerned should

we be? What does it mean for the future or even the immediate future international relationship between the U. S. And China. So we'll continue to monitor the reporting. They're looking at the markets here SMP up one half of one per cent. We'll love more coming up. This is Bloomberg. But it was a big night for the Kansas City Chiefs. A big night. I think we're gonna find out for America, for America, big night for Fox who the broadcast, right,

So we'll get the ratings later today. I'm sure they're gonna be pretty pretty darn good. Question is how big a night was it for advertisers who put some big, big money to work. Seven million dollars for a thirty second spot. Mark Douglas, President and CEO of Mountain Joints, is here Mark again for advertisers, this is the biggest day of the year for a lot of these folks. They put up huge money to reach what is a huge audience. What are there you takeaways? Um, well, there

were a lot of good ads. I mean, I think there are a few people going, Um, why did we do that? Because you watch a few of the ads and you're like, um, who approved that exactly? And then spend seven million dollars on top of it to area? So how much is seven million dollars for like a minute long spot or um? And just you know, five years ago was two million dollars, you know. So it's just amazing the inflation. And again the second was such a spectacle for me, having just come back from living

in Berlin for the past six years. I'm not used to this kind of patriotism him. But then it's patriotism on steroids. And then it's almost like a parody of patriotism. It's like a circus making fun of how patriotic they are. It was pretty crazy, but I guess that's just where we are. Well, the NFL knows how to put on a good show. I was at last year's Super Bowl, and you know, I got Doctor Dre, I got Snoop Dog. The halftime show was the game basically last year. So well,

we Re was apparently very good this year. Yeah, she put on a good show. She played all the hits and no one was complaining at all. And she she she's not afraid of heights. It was like practically the stadium,

even with child. All right, so let me first get your take on how the game went, because I've heard a lot of complaints this morning that officials are deciding, you know, the outcome with calls that are kind of penny any Yeah, that that the call, and right before the last score, you know, they scored a field goal, and you know, the official I don't think there was a hole there, you know, when that's not a sports talk show, But I don't think that the defensive corner

actually held the running back and that basically and created the game that basically, I mean Kansas City was already pretty close to the goal. Wasn't like they weren't going to be able to kick a field goal, but they brought got him a lot too. By the way, I was rooting for Kansas City only because I think, well, Philadelphia fans are the worst fans in the league. I mean,

they're worse than Ohio State fans. And then, um, my favorite, one of my favorite commercials of all time is the Snickers commercial when the ground staff is doing the end zone in Kansas City and they accidentally right Kansas City chefs. They forget the eye. Well, I think I think all New Yorkers agree they don't like the Phillies, but you know they lit the Empire State Building and their colors

just a few weeks that it's kind of crazy. So Mark, I mean, you buying a thirty second spot for seven million dollars, it's just a monster's premium to what you would ordinarily pay. Is there when you I mean you're in this business, there a payoff? Is there a payoff? Is there a payback? I mean, if you're trying, if you're in I think there's this fine line between your brand that people are starting to know but don't fully

know yet, and this is your moment. And when I look at a lot of ads, I thought that there was an ad for pop Corners which was a take on Breaking Bad, So there there to give a real quick description on the ad. They're basically in the trailer and they have devised this new chip to eat and it's better than drugs. And the ad ends they're out in the desert doing a deal for these pop these pop chips. I beg popcorners. I wouldn't have known about

that project otherwise. And I'm probably gonna try it when I go to the supermarket. I'm gonna buy it back. And I think I'm gonna try prime. I never heard about that, but apparently the kids, it's all the rage. It's like a sports drink. I don't know if it's any different from Gatorade or uh whatever any of the new ones are. But they got a lot of advertising terday and apparently they're already huge on social Yeah for sure.

And then I think the whole night. Um, A lot of the best ads were remakes of like shows from the two thousands and nineties, so there was, you know, basically we just talked about Breaking Bad. There was like John Travolta to the musical ads, which was pretty funny. Um, the clueless like Alicia Silverstone basically and looking exactly the same and shout out to that film. I don't know if either of you guys have read Jane Austen's novel, but that's basically a redo of Emma. Ok yeah, so

what a what a good film that it was? Okay that clueless And I lived in l A. So you know, I kind of as a matter of fact, while John Travolta was singing and dancing, I actually think I recognized the street in Los Angeles was on filming that. So what about this, I mean, as more and more programming goes to streaming services, what do you think the NFL is going to do with the rights to the big rights for the NFL, like during the season, the you know,

obviously the playoffs, then of course the Super Bowl. Well, you know, that's interesting. There's been people who moved all over America and if I think basically streaming fits right into that if you want, I remember when I moved from New York City where I grew up, to California. At the time, I was a huge Giants fan, New York Giants fans, and like you couldn't really watch them anymore. You can do that now on direct TV, but it's so much better on streaming and you can watch it

at any time. Of course you want to watch it live. So I think the NFL is really adepted just adapting and streaming just fits right in. It actually brings me back to Disney. You know, last couple weeks you've been talking about, um, the House of Mouse because uh, the CEO came back and they had earnings. And with ESPN, I feel like they're leaving so much money on the table because I'm not gonna get cable just to get ESPN.

But I also ESPN Plus should be called ESPN My this like, it doesn't have anything, So why can't I stream that? I would pay them twenty five dollars a month if I had all the content. Yeah, I mean ESPN is actually a really good example of how basically just using the Internet you can basically reproduce a TV network. And so there's so much good sports content not on the ESPN that I think they have a lot of

people like why do I need to watch ESPN? And they have to adapt, and I agree with you, they haven't done a great job, and it's it's a huge opportunity. They have the brand they have the following and and it needs to happen. So there's so much change on the Super Bowl streaming, you know, advertising, it's all changing, and I think it's huge opportunities for everyone. Thirty seconds Mark, anything to slow this NFL jugging out down in terms of just ratings. I mean, they had some issues a

few years ago, but man, they seem to be just dominant. Well, Ryan, and you know, Ryan Reynolds is trying with Wrexham. Maybe we can get a few more soccer fans. So I think that works way better in Scotland. And here I was gonna say, I'll watch Ryan's content, but not if it's if I have to watch soccer exactly. That's right. I forgot about that. He's big over there. Well all right, yeah, Mark,

we're going to let you go. Mark Douglas, President CEO of of Mountain, joining us live here on our Bloomberg Interact a broker studio, just kind of getting a breakdown a little bit of the the day after of the Super Bowl. Uh, we're gonna get some ratings later today from Nielsen for the Fox Network. Presumably those numbers are gonna be pretty darn impressive, and that's what advertisers are paying up for again.

Seven million dollars for thirty second spot is a huge premium um, but a lot of those advertisers they think it's worth it more. Coming up this is Bloomberg, all right, I'm looking at my Bloomberg terminal. I got my two year, ten year thing on the bond stuff. I mean it's inverted. It's been inverted for a long time. And there's somebody out there who thinks that this is kind of a

big deal. His name is Cam Harvey, uh, Professor Finance at the Fucal School of Business at Duke University, and he's kind of the go to person on this from a research perspective, being one of the leaders on this whole topic of looking at the yield curve and Camp I, I you know, full disclosure, I may have been on the Duke golf course when you talked about this way back in the day, so I might have missed it a little bit. I was known to do that back in my FUCAL days. UM, talk to us about kind

of how you're looking at this yield curve. What is it telling us? What do you think the FETE is taking away from this? So it's complicated. Uh So the yield curve predicts economic growth, and indeed that was my dissertation in six at the University of Chicago. UM. It's got a great track record for forecasting recessions. So eight of the last eight and then since I published my dissertation, it's four be four with no false signals, and now

it's inverted. And essentially when I look at this, UM, I see the model that I proposed, a very simple model and with only one thing that you look at, and that's the difference between the tenure yield and the three months a treature Bill yielled And I think that this time around it's giving a false signal. The three months ten years spread is uh way inverted, right, I

mean negative one and one basis points. I can understand, UM, and we've talked about this before that now that we all know about it, since since you published UM, you know, that changes the equation a little bit because all market participants under you know, are expecting something or they know what they should or could expect when they see this inversion. UM. I can understand that if it was only a slight inversion, but since it's such a big inversion, doesn't that raise

red flags? So it is a pretty substantial inversion. So I totally agree with you, But again, you need to look at the bigger picture here, and every single business cycle is different, and this one has a number of things that I think, uh, contrasted with other sort of business cycles. UH. And one thing that is really unusual is the excess demand for labor, where we've got like ten million job openings and one point eight job openings

for every person that's unemployed. Like that is just really unusual. And that means that even if we do slow down, and I actually believe that we will slow down, but dodge a hard landing. So when we slow down, uh, there is enough capacity to absorb those that are laid off, and that kind of dulls the blow of the slow economy. And what do you say about people kind of expecting looking at the indicator and the changes behavior. That's what

we've been seeing. So we see this deeply inverted yield curve. We see companies proactively taking measures to trim uh some of their workforce to put them in a stronger position when we do go into slower growth. They don't need to do anything drastic. And I think that that's overall good for the economy. So people are looking at it,

they take it seriously. That's interesting. So so basically, you know, a few decades back you said, look, here's a signal, UM that shows us, uh that this outcome is is approaching. And now that everyone knows about it, companies say, hey, Cam, Harvey publishes paper and he's been right the last few times. So now that we see this signal, let's make changes to avoid this outcome. Yeah, exactly. So it's called risk management. And it's not just businesses, but I think consumers too.

This indicators in their face and with the eight out of eate record, um, you take it seriously. And that means you don't uh borrow on your credit card to take a vacation at this point because you want to be careful. So all of this feeds into behavior, this risk management, and again the indicator is giving a correct signal in my opinion, in terms of slower growth. But I do think that we can dodge a recession, assuming the Federal Reserve doesn't mess it up. So that kind

of goes to my next question, Cam. I mean, you know, we have a lot of ECO data this week we've what do you think the Federal Reserve should do over its next couple of meetings, Well, they should pause, and indeed they should have paused last time. So inflation over the last six months is running at less than two percent annualized. Right. So uh, if you look at the key drivers of inflation, a third of the c p I and four percent of the personal consumption and expenditure,

a deflator is linked to shelter. And we've already seen what's happened to shelter. We've got rents going down, housing prices going down, housing starts permits down, so that is definitely cooled. It will take a while to work its way through into the inflation rate, but I think that the time to pause is now, and that they continue to raise. Every single time they do this, they heighten the probability pushing us into a hard landing recession, and

that's completely unnecessary. Hey, can let's switch gears a little bit. I know in addition to all your someone will work on the yield curve and the FED, you've also done a lot of work and research on crypto. Um i'd love to get I'm just looking a bitcoin here, that's just kind of my go to on my screen here it's back up above pushing tys per token UM. So

that's recovered. When people come up to you in a cocktail party and ask you your opinion on crypto, give us that level of discussion about how you think about it. So the way I look at it is the crypto is not just bitcoin, uh, it is a whole ecosystem, and it is a way to potentially rebuild our financial system whereby we can greatly reduce transactions costs, we can do many things that we couldn't do before. UH. And this idea of tokenizing all stocks, all bonds, all assets

is very very attractive. So this builds potentially new companies, the so called web three revolution that's happening right now, and it shouldn't be just focused on bitcoin or doge coin. That this is very diverse, and much of what's happening is below the radar screen. The financial system that we've got essentially hasn't changed that much in a hundred years. There's no reason that it should take two days to settle a stock transaction. That should be something that happens instantly.

But there's a thick layer of middle people that makes some money from all of these delays well also transfers, I should point out can that people uh you know, modern consumers still like reverse ability. I don't know what the official word is that in business school talk, but you know, if you uh send someone money with um, you know uh venmo or what's the one ze zell um, it happens instantly. That's great, but you can never get

it back. So if you're scammed or if you decide you want to reverse it, you can do that with a normal bank. You can do that with like three day settlement, but you can't do it with an instant transfer. Yeah, so it's definitely true. So they're always trade offs here. So there's costs, there's benefits, and within the crypto space, everything is final, so you need to be very careful if you're sending something to somebody, um that you're sending

into the right person. And uh, if you're receiving something like some goods, then you need to make sure there's some sort of escrow system whereby your money is transferred into escrow until you're satisfied with the good So so again this is again a technology that essentially gets rid of the commercial banking infrastructure makes things much easier to deal with much faster. It's a technology of financial inclusion. Also,

you just need a mobile phone and you're banked. So so I do think it's a big deal, and I do think that it's largely below the radar, and and and what it does is it changes the way that we interact on the Internet. Also, we're super easy to be paid or to pay. You don't need to worry about the banks um because of the time. But we'll get back on that for sure. Cam Harvey, Professor Finance

at Duke University. This is Bloomberg. What happens when Florida and Texas blacklist Wall Street's largest municipal bond underwriters because of their support for environmental, social and governance practice. Our next guest has the answer to that, Matt Winkler. He is the editor in chief emeritus for Bloomberg News. Hecky is the founder of Bloomberg News way back in the day. Matt, thanks for joining us here in our Bloomberg Interactive Broker studio.

So again, what happens to states like Florida and Texas that bands And he's really big underwriters because of their stance on e s G and I guess other political stuff. Great to be with you. Florida and Texas right now, which you have perfect triple A ratings, are paying uh. In Florida's case, record spreads over inferior California in the market. That's what's happening since two Uh. Well, there are a

number of reasons. But if you exclude, for example, say four banks that you've heard of, City Group, Goldman, Sachs, JP, Morgan, and Bank America, which account for of all municipal underwriting over the past four years, if you exclude them from your routine dead underwritings, it stands to reason that you may suffer at least a little liquidity and maybe worse than that. So that's uh, that's a start. Um. But when you exclude underwriters in general, you're taking away an

opportunity to get the lowest rates the highest prices. It's called petitive bidding, and it's uncompetitive. It's interesting because to me it seems like it's part of a broader trend, maybe funded by all the fiscal spending that we've gotten.

We saw a study in the UK that shows each household paid an extra thousand pounds because of Brexit now we're seeing a study with there's a FED economist that you site and a u PEN professor saying that Texas, for example, paid an extra five million and change because of because they shunned banks that they see as unfriendly to gunmakers. Yeah, well, it's not a bad analogy. I

hadn't thought of it that way. But in the case of Brexit, as you bring up, Uh, so much of EU trade is with the UK, or was before Brexit, and now that the UK doesn't have access to that trade at least the way it did, it's paying a

much higher cost as a result. So similarly, with respect to Florida and Texas, they're excluding, you know, banks that willingly want to compete to give Texas and Florida rate payers, if you like citizens, the lowest possible rate, and their governors and legislatures are saying, no, uh, we don't want you to participate because these banks advocate for gun safety.

Because these banks acknowledge the importance of gun safety. I wouldn't say their lobbyists so much, it's just that their policies are we don't believe that people with an unlimited supply of weapons should go into elementary schools and cavalierly murder children. The banks are saying, you know, we should have gun safety laws that protect against that. Texas specifically says, if you take that view, we consider that hostile to the firearms industry. We're going to exclude you from underwriting

our bonds. The real question should be among all of us is why are Florida and Texas citizens paying so much more than California. I mean, if we're all capitalists here, how come nobody's asking that question? So I guess, just from the perspective of I guess the governor's feel and the other elected officials in these states feel like it's popular from a political perspective that, if you know, it's hard to explain them paying more slightly higher yield on

the municipal bond across the state. It's hard to explain that concept visa v Maybe the political benefits of saying, hey, we're standing up to some of these quote unquote woke establishments or entities, Well, they're actually doing the very thing they're accusing the banks of. They're actually saying, because of our ideology, we're gonna get in way of the free market. We're going to deprive our voters from getting the best possible rates because we think our ideology is superior to

everybody else's. That's essentially it. Uh. And what is their ideology? They don't believe in diversity and exclusion and inclusion. Okay. Uh. And we're talking about Florida State where fifty years ago very racist policies prevailed. In Texas pretty much the same thing. Okay, So these are these are states that formally enslaved people and barely got past it just fifty years ago. Has there been any change in the political climate since you've

alda since the murder of so many children in that school? Um, has there been any shift? And we just passed, you know, a gun control law, so that gives you some indication that public sentiment shifted. And if you look at polls, which is always a risky proposition, but if you do look at polls, most Americans favor gun safety laws. That's a popular position. Okay, that's not controversial. What are the big investment banks you mentioned Bank of America, you know,

City and in a couple other golden sacks. What are they? I'm sure their bankers want to make be in these deals and get paid and do all that kind of stuff. But what's been the banks response? Are they're trying to work with these states or are they just acknowledging that

we have a difference. These banks, by the way, like Bloomberg, have employees and have customers, and like Bloomberg, their customers and their employees believe in diversity and inclusion, believe in justice, believe in equality, believe in all kinds of things that come under this uh three letter thing called E s G, where sustainability is probably the central pillar of it, which is climate change is the biggest threat to all of us, and these banks are very mindful of that, and they're

doing everything they can to try try. Is the right word be accommodative of sustainability. Um, So there's a lot of company here. Remember E s G is the convergence of people's preferences in public policy. It's what around the world, what recreasingly people want because they want to figure out how do we not harm ourselves going forward? Has that been borne out also by the investment data I mean um for example, inflos into E t f s or performance of E s G assets. Okay, so we're talking

about assets of thirty five trillion dollars. Okay, that's the so called E s G pool of money that we're talking about as um you know, and that has happened, as I said, because around the world, this is where investment is increasingly going. UM. It's something that people want to do. It's not imposed upon them. They want to do it. And this is where both Texas and Florida cynically uh try to uh mislead because what they're arguing against is something that people want, not something that's being

imposed upon them. It bears repeating that California only has a double A credit rating, UM, and yet pays less in interest than triple A credit rated Texas. I mean, it's just mind blowing to me, like twenty basis points correct. So we talked about Florida and Texas, and those are two huge states. Of course, are there other states that

are looking to follow Texas and Florida. Interns. Look pretty much, if you like, every red state is got something going that is specifically opposed to uh E s G. Whether it's actually been enacted or it's in progress. Uh. We're talking about at least half a dozen states already that are following Florida and so we see data like this, is there a pushback within Florida, within within Texas when they see data like you've brought up in your column

today about the incremental cost. Well, it's probably too early to say, because our profession isn't writing the headline. Why are the citizens of Florida and Texas paying more on their borrowing when lower rated California is paying a lot less? Yeah, that's not a recurring headline. All right, interesting, all right, great stuff. Really appreciate it. Matt Winkler, uh with his he's a emeritus editor guy at Bloomberg's a founder. Have you founded anything there? You founded anything? I mean, but

he's a founder. This Saturday, to take New Jersey Transit into the city to go see a Portland Nets game, train was packed standing room only Todayturday on Saturday, people coming in to see shows, games, restaurants, party, whatever's today. I get on the train for my Monday commute. It was basically meaning the conductor that was it. Nobody coming into work on Monday's, probably Fridays, and who knows what else. That's called hybrid working. The question is what's it costing

the city of New York. Unfortunately, that is the subject of the Bloomberg Big Take Story of the day. You know these big Take stories really deeply researched and extraordinarily well written, real deep dives into these things. Uh, today we have Donna Bore Actually he's a senior reporter for Bloomberg Industry Group co wrote this article. Here, Donna, what's this remote work this hybrid work model? What's it costing Manhattan? A whopping twelve point four billion dollars um? It's sort

of amazing, right, yeah, a year per um, so per worker. Uh. We we ended up working with UM researchers out of the Work from Home UM Research Group and Jose Maria Berrero, who is a finance professor at Mexico's Institute Technological Autonomo and has been part of this team. He basically helped us to to figure out what this this giant whopping number was. So there's a Work from Home Research group. Did they ever come into the office. I suspect that they do. So this is what how do you calculate

the costs? Hears this just me not buying, uh, you know, a lunch sandwich on Monday's and Fridays and kind of add all that up and everything. Yeah, so so what happened and and and what Jose's uh that this was exclusive data that was provided to Bloomberg News. Essentially, what they did is they've been working UM and tracking work from home habits uh and and trend lines for quite

quite some time. And so in they had a survey that they asked participants, Hey, so what did you actually spend in on meals, shopping, entertainment UM near the workplace? And you know, they've been tracking this research long enough that they know that this trend line for work from home has really become permanent right there. At a moment, just even in the last year, there was a sense of like, oh, this is stickiness, but actually work from home is sort of a permanent phenomenon UM. And in

Manhattan that's about thirty less. So people are coming in about three and a half days a week according to their research, and so they were able to scale what people were spending back in twenty nineteen UM to what it is, you know, based on a three and a

half day work week. And so what they found was Manhattan was leading across twelve major cities, and per worker they were spending four thousand, six D sixty one dollars less per year, which is added all together with you know inward commuters and those that are residents in Manhattan that are working there, um a really giant number. So my first thought is where's that money going? I mean, are consumers banking it? Are they spending you know money at a launch place in Summit, New Jersey or you

know Scarsdale, New York? Um? Are are they looking at entertainment options outside of the city. What's who are the winners if New York is the loser? Yeah, I mean there there are a couple of things going on here, right. So you know, throughout doing this reporting, I mean we definitely tried to look at was there a displacement of the economic shift of spending, right if you weren't coming into Manhattan where you then spending greater amounts you know,

in your neighborhood or in the outer boroughs. I think we all saw that once the pandemic hit, people moved outwards, right, they left the they left, um, the island of Manhattan. Um. What our reporting has shown, and we used a wide range of data sources trying to quantify this, is that you really do see a significant uptick um in you know, bookings for you know, dining out, retail spending, um, you know, and so forth, really in different parts of Brooklyn and

the Bronx outside of Manhattan. Manhattan is really lagged um when it comes to consumer spending. The thing that we couldn't answer because this is also fluid, right, We were just now getting a sense of like what the real impact is is that you can see how much Manhattan is losing, but it's much harder to quantify what the outer boroughs are actually gaining as a result of this.

You can look at um sales tax revenue and you can see an uptick there, but it's gonna take some time for us to really get a sense of the full economic impact and how much has shifted. So, Donna, you have some great data in this uh, in this story, as usual in these big take stories, and one I liked was just kind of Manhattan office workers are returning, just not every day, and you have some foot traffic data percentage of you know, kind of normal traffic through

a lot of famous buildings in New York City. Thirty rockeffell Or Plaza, two VC Street where I used to work back in the day, two Park Avenue, and the bottom line is it's like on a good day. I mean, when you talk to these companies, are I mean, are we ever gonna go back? Or is this really the new normal? Yeah? I think this really is the new normal.

And you can see that, you know, even though companies have tried to impose work from home um sorry, you know, in person work policies, is that it's it's really not working. I think that because of the lasting effect of the pandemic, people's behavior, both when it comes to spending and how

they live has really become UM entrenched. And so you know, we talked to a bunch of people UM doing field work, you know, getting a sense of what their weekly routines are these days, and everyone really wants to work from home on a on a Friday. It's you know, it's part of like an extension of of a long weekend. They can log off a little bit earlier, and so you can really see it in the data that you know,

Friday's especially UM office attendance like tanks. What's interesting is um Linley Lynn, who helped us analyze a lot of this data. You know, really a lot of these trends are an exceleration of what was already happening. Um, you know, consumer spending was already you know a little bit down on Mondays and Fridays to begin with. Um, people came in a little bit less you know on those days,

trying to have longer weekends. But really the pandemic has just accelerated all of that, and I think that business districts are now having to wrestle with what do we do next? What does it mean for the infrastructure, for the rail and roads. Yeah, I mean the fewer, fewer commuters, fewer people like foot traffic, um coming into Manhattan. Obviously it's going to translate into you know, less tax revenue,

less fair revenue. Um. You end up having you know, fewer dollars in the coffer that you know eventually end up impacting just the vitality and the economic recovery of the city. Right if you have less tax revenue coming in, whether it's like personal income tax because people have decided that they don't want to they don't need to work in Manhattan anymore, they can work elsewhere, or less US revenue, you know, there's uh, it hurts, big, big, big story,

big big numbers as well. Remote work is costing in Manhattan more than twelve billion dollars a year. That's a big Take story. You can find out a Bloomberg dot Com slash a Big Take or ni Space Big Take go on the Bloomberg terminal. Donna Barak one of the reporters joining us here to bring us that story. She's a senior reporter. Not here from home today. Why not? You can do it. It's a Monday. The kids are doing it. This is Bloomberg. Thanks for listening to the

Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller, three pt on Fall Sweey, I'm on Twitter at pt Sweeney. Before the podcast. You can always catch us worldwide at Bloomberg Radio