ISM Manufacturing & the Burning Hot Economy

tim today and um again over the previous figure. What does this tell us about, you know, the reopening of the US economy. Good morning, Pol, morning Matt. So this is the fourth month over sixty man, We're we are burning hot. So this is the second highest pm I number that we've seen since May of o for and this number is better than any number that we saw in the nine run up that was probably one of the highest quality manufacturing run ups that we've had in

the last twenty year. So things are really off in very well, except we've got issues on the labor side. I mean, this number would have been stronger if if the employment number at our panelists companies would have been allowed to grow. And you know, clearly with the supply delivery number being as highed as they're struggling with still

attracting people back to the workforce. So it's all the whole issue now is people coming back to the workforce because there's plenty of demand there and plenty of backblog to work on. Talk to us about this supply chain. We know we keep hearing stories about how a lot of these manufacturers are finding trouble or having trouble finding the raw materials and on a timely basis, how's that impacting the numbers that you look at tim Well, we have a record lead time, so we've never had lead

times extended out this long ever. UH had many panelists comment about they've never been years in the businesses, They've never seen a combination of shortages, lead time extensions and price increases like they've seen over the last six or

nine months. So you know, if you peel the whole thing back, it's the supply community is having trouble getting people to response to work request to we we had my employment comments were companies trying to hire and of that said that they are having difficulty and hiring that's a really dramatic number. On the sentiment side, we had thirty six for every one person who was really positive about the future. That's I've never seen a number that high.

And from an employment standpoint, we have twelve people trying to hire with one person trying to a trip or freeze or hiring manpower style, so all really positive numbers here. The horizon looks very strong. This number would have been quite a bit higher if if our panelist companies could have hired more. You know, at the fifty point four fifty point nine number on the employment compared to all the others that we're getting closest to a sixty and

sixty five. That was the whole story. Inventories, the shelves are empty. Tim or is the hiring problem because they're not paying enough. I mean, um, you know, I'll do probably anything for you if you double my salary. But but obviously there are some things that I can't do because I don't know how to. Is it a skill issue or is it a wage issue? Well, it's competition.

So everybody has been paying more. They've been paying bonuses, they've been paying hazard pay, signing bonuses, referrals and they've been increasing wages to to attract more people. At some point you kind of cap out because this kind of imbalance in the labor market doesn't last forever for the wage increased us. So people are kind of saying, Okay, I've done as far as I can go. I'm not going to pay through the dollars an hour for a twenty dollar an hour job because I'm stuck with it.

I'd have to lay everybody off at the end of this thing to get back down to the right cost structure. So we're kind of frozen and you get the combination now. Though. The good thing is you get the summertime coming, so people know how to deal with their children in the summertime. The school issue is no longer an issue, so that's off the table. There's twenty states that have that have decided to suspend federal support on the unemployment side and

the special unemployment. I think that's a really good thing. There's a lot of states are trying to get people back to work and paying them. That sets up a conflict. Uh So, I think this thing is going to run with us though until the end of September, because we got thirty states that aren't withdrawing the federal support. So number one, you get the employment issue for the schooling issue going away. We're in the summertime. People know how

to take care of the kids in the summertime. It's no longer do when they go to class or not. And then the second thing here is that we're withdrawing that financial incentive for people to kind of debate about whether they should stay home or not. But there are still thirty states that are not doing that. So by the time we get to September October, this whole thing should kind of clear up. In the meantime, there's plenty

of work out there. There's plenty of business. We just need the people to come in to do it, all right, and thanks so much for joining us. Just some historic

numbers coming out on the other side of this. Again, there were historic going into it as we think about a year ago, and we're starting to see the flip side of that here, certainly from the manufacturing site extraordinary numbers, Tim Fury, chairman, the Manufacturing Business Survey for the Institute for Supply Management, and the numbers matter just you know, straordinary and the labors a key issues as we heard from Tim well, certainly as we begin to emerge from

this pandemic and the economic carnage caused by it. You just need to walk down Main Street USA around this country and you see so many vacant storefronts here and it becomes so apparent how small businesses were really impacted by this economic disruption and questions how will they recover on the other side of a. J. Demarto, he's had of commercial distribution at TD Bank. They have a small business survey and lots of cool information. Jay, thanks so

much for joining us here. Again, it seems like small businesses really bore the brunt of the economic disruption caused by the pandemic. How do they expect to recover here as we emerge on the other side, Well, you know, we we survey companies every year and um this year we surveyed seminar and fifty and it's always important to

remember how small some of these companies really are. There's thirty and small businesses in the US, and of them are sold props, so they're working for themselves by themselves and small business That thirty million is the largest segment of businesses in the US and of all businesses, so it tells you just out of the gate. Very many businesses are just you know, one person working for themselves, and of them have revenue less than a hundred thousand dollars,

so they're not they're not big. They don't have a lot of capital, and uh, you know, to get through a pandemic or whether a storm. We actually look at business closings and our survey results. They actually did pretty well, which shows some of the government programs had a good effect and they you know, tighten their belts and found other ways to accept payments and change their business lines and and uh, you know survive, which was huge. Do

we need, um the fiscal support to keep coming? You know, it was it was highly effective. If you think about P P P and particular, I think there were ow um you know, eight million or so loans done by the government. We a TD bank, We did um a hundred and thirty three thousand of them ourselves. We were top ten bank participating in it. And I found that, you know, people who took those loans um really needed them. Um you know, about a third of all companies in

the US took a loan, which is pretty incredible. So uh, you know, sixty of the people we surveyed said they were effective, and they also said they could be more effective by you know, getting more money. Um. The original loan amount was two and a half times one month of payroll expenses, so that anticipated the pandemic would probably last this summer. Last year, we all know when quite a bit longer. So that's you know, hence the program that came out this year kind of doubled down and

helped people out this year as well. So I do think overall they were effective. You know, small business closings we're seeing in our customer base and also just nationally UM really haven't gone up. I know you mentioned retail at the beginning of the segment. That was a hard hit segment clearly, as well as you know, hospitality, restaurants

and the like. But you know, construction, accounting, UM, a lot of those other industries that they did well, they thrived, So Jay, you know, again, as you walk down Main Street, USA, UM, you see some abandoned storefronts for businesses that went out of business. But the businesses that survived you see in their windows. Help want it talk to us about some of these small businesses. Are they able to hire the people they need to either reopen or or maybe grow.

You know, that has been a problem. UM. In our survey, all the businesses business owners are fairly optimistic. Uh, you know, for six percent said they're either going to grow revenue or stay the same. The way they're going to grow is by expanding hours or expanding products and services. Sing gonna expand hours. Over five percent say they want to expand products and services. That type of UM. You know, growth requires hiring that you mentioned, and you know, trying

to find employees now. And I'm hearing from all of our customers that it's a very tight labor market. So I wonder what you think of the possibility of inflation then being less than transient. Yeah, there's a lot of money in the system, you know, I mentioned p PP. We've seen a lot of was nut so right, I mean last week and and so there's more of it there too. You're right, UM, all kinding capital coming in, and we're seeing in our deposit accounts of our small

business customers and just business customers they're pretty inflated. So they should be in a good capital position, and a lot of them have applied for lines of credit or kind of backstop type of facilities. So yes, I think inflation and you see that much money in the system, and you know, labor rates are gonna have to go up to attract labor. And I know you guys have heard the statistics on things like you know, two by

fours and construction materials all highly inflated right now. All right, Jay, thanks so much for joining us. We really appreciate you coming on sharing some of the findings from the TD banks small business survey. Generally an optimistic crew, um, you know, the small business folks. J Demarto, he's had of commercial

distribution for TD Bank. When you think about small business owners, I think, by nature, um, you know, they're pretty optimistic crew, because they're putting a lot of capital risk of putting their welfare at risk. But we're starting to see more and more of these stores reopening and that's good to see across UH Middle America. Here on Main Street, Melding

and David Steamer, he is the CEO at Wave. Financial Wave was set up to bridge the divide between the traditional investment management business and crypto assets and they've gotten now, um what, five hundred million dollars in assets under management. David, I'm wondering who you're clients are. What's your client base look like? Yeah, all right, thanks for having me first. Um, yeah, it's a mix. We have a lot of high net worths, probably how about half our clients where we call crypto natives,

so they're most our networth of crypto. We do a lot of yield strategies for them, and I mean less kind of crypto native or less cryptognoledgeable. It's more access strategies, you know, get them, you know, bitcoin or other tokens, and then eventually putting yield strategies around us. David talked to us about the volatility we've seen in crypto really over the last month or so. I think that's kind

of for a lot of critics. It's given them some ammunition saying, you look at bitcoin and some of the others, the volatility there just takes away some of the legitimacy or calls into question some of the legitimacy as cryptos as an asset class. What are your views, Yeah, I mean what happened in the last month is and this is what's kind of been a cycle we've seen the last eight years. Is you know, a lot of crypto

originally was held in China. A lot of it's I've been kind of flowing out of China recently, which is what you know, it's kind of been rushing onto pushing the prices down. And every year, right around this time of year, China makes a bunch of announcements, some of which they follow through on somewhere they don't, which really affect the price. UM. As far as legitimacy of crypto, you know, it's a little bit of different question. Yes,

the volatility is scary when it's downside volatility. Obviously, when it's upside volatility, it's not that scart um, But it's this kind of nature of the asset. You know, it is part of why Wave focus is pretty heavily on yield strategies, Like we do a lot of derivative strategies for our clients UM to put you know, the futility is not neither good nor bad it by itself. You know, if you can leverage of alatility into certain ways, that's it's pretty powerful. Um. But yeah, it does spook a

lot of people. There was a lot of talking ets coming out in the next you know, in the US, uh, you know, approval by the sec and I think this little bout of alatility will probably have a negative impact on that will probably give them justification to continue to push that out. Nonetheless, we're talking about lines of code that over a decade have gone from being worth nothing to being worth forty tho bucks apiece. I mean, the growth is impressive. I'm wondering about your yield strategies. I've

been hearing more and more about this. Joe Wisenhal's podcast interviewed a yield farmer the other day. What what is that? Yeah, I mean, so these are really unique assets. So a lot of the world still can only think of like bitcoin as kind of a digital stock certificates, and it's it's actually a lot more than that. And it's it's fractionable. It's one's fractionable in the hundreds of millions. You can wrap them in certain other assets and take them into

like a centralized finance. Again, these are very dynamic assets. You know, most of the coins now we're staking coins, which is a you know, kind of different than the mining network. It's a way of registering your tokens to a network. But the fact that they yield nothing. David has been a criticism doesn't yield anything, you know, don't yield anything. People people always say that, just like they've always criticized gold for the same reason. Um, and I

get it. But you talk about yeld strategy, So what are what are yield strategies? Yeah, So there's a huge lack of liquidity in crypto, meaning in the sense of there's a lot of need for dollars. So you have cash now it's the odd of any currency, and you're willing to lend it into crypto, which is going to people that are like financy, mining equipment or you know, market usual headphones things like that. There's a really high yield upwards of a year, which obviously is not sustainable

long term, but it's a really nice yield UM. So you can lend cash into the markets. You can also lend the actual crypto assets. We do a lot of bitcoin lending for our clients. People want to borrow it to shortage or whatever. You know, you can get you know, you can rapid uneath and put in de fi. You can get up words of like six seven percent a year. It was just pretty material in this day and age.

I mean every year you have six or seven percent more bitcoin um so so it's pretty powerful strategies and that's kind of where we Wave was built to take advantage of. Um, Yeah, David, what's the next notable event that you need to see just in broad crypto, maybe just make a little bit more mainstream. What's what's the defining thing that you need to see next? And most of it comes down to regulation, I mean, I think,

which we're starting to see. There's been a lot of pronouncements recently, you know, for people that are die hard crypt of people like myself, like you don't really want to see the regulators way in. But for broad adoption,

and it's it's very powerful, you know. So eventually we will see SEC approved you know, bitcoin ETF and things like that, which I think will add a lot of adoption, just moves a lot of the barriers, also provide that umbrella of legitimacy to a lot of other users that you know, haven't spent ten years in misassa class and got comfortable with it. So so they'll be I think I think the regulators will lead the way on some

of these things. Now, I think it will take time. Right, we actually looked launching a bitcoin ets and have a lot of money on it and then stop spending money on it when it looked like it wasn't gonna happen for years, and we still don't know. I mean, everyone thought at bitcoin e ts in the US is like three to six months away for five years, all right, David, thanks so much for joining us. We really appreciate that, really fascinating stuff. David Seemur's the CEO of Wave Financial,

really all over that crypto space. It's you know, you feel like it's just very very much in its infancy, although it's been around for a while, and Matt, you've certainly been talking about it for a long time, but it just feels like it's in its infancy and there's just a tremendous amount of growth ahead of it. And the question is to what extent will it be regulated? Matt, I'm sure you've owned, you know, forever, the big tech names, the Amazon's, the Google's of facebooks, and you've just been

laughing all the way to the bank. But a lot of folks felt like they missed it and will there ever be an opportunity to get some of those hyper growth names again. While our next guest suggests maybe so, Vincent del Ward he's a global macro strategist for stone X and they just put out a report entitled Impossible Growth at an Unreasonable Price The sixty Next Amazons Vinca, thanks so much for joining us here. What's kind of the key takeaway from your most recent report about m

sixty next Amazons? Well, thanks for having me, Um. The key takeaway is that you know, we have a lot of excitement about growth and a certain very large GTF bedding on a on a bright future, Um, and it's it's possible. I mean, we saw it with the big text on the Magastons, that we see the x flory growth that surprises everybody. The question is how many of

these stocks can we expect to see? And what I did in this report is I projected the growth pass of the magathtock so Microsoft, Apple, Google, Um, Amazon, Yeah, and and discounted it to the present and founded the market is already pricing the scenario and more for sixty stocks. So either we were live in a bright future where we'll have trying cars and we live forever and we're longer have to work, or some of these names are

obscene me and observed me over value. Yeah. So your point is not that these are sixty stocks that you can make a killing on the way you would have with Amazon twenty years ago, but that it's just terribly unlikely. They're just so highly valued that people are gonna lose money on these what are the one are the biggest defenders here vincent um. So yeah, that that that is correct.

Uh The uh the way the stocks on priced today is that some of these stocks on precedent, even if we're projected the same growth stats as the Magat stocks, they would still lose money because they discount the future and even some more. Uh So most of that is in the healthcare sector specifically, is a biotech um and I can understand to some extent the approach. I mean,

this is the nature of biotech investing. Uh is you know, you just throw money at ideas and you know, you know that ninety are are going to you know, not not pan out, and you don't know which one is going to be the one that you know had the one x return. So that's that's just the investing model. The problem is wants to get to such a level of high valuations even finding that can lose is you know, world changing stock returning to the next Amazon would not

be enough to save the rest of their portfolios. You know, one of the interesting things um about Amazon to me, at least i'm watching it. You know since the beginning is the markets willingness to give Jeff Bezos and his management team carte blanche to take every potential penny of profit and reinvested in the business. So there were you know, many many many years when the stock was working extraordinarily well that there was no profits and the evaluation calls

is crazy. Now with with you know, the cloud and with their advertising business actually have some profits on the bottom line, But how do you explain that? Right? Right? I I think it is so much did you think the Amazon by the way, first of all, I mean the profits weren't there, but the free gastrow generation was pretty good. I mean you could see that. You know, um, the reason you know that the firm was growing very fast, and then that's why you know, everything had to be

brought back into the business. But the underlying of the business was was actually pretty good. Also, I was point that you know, this is suel Amazon. This is not true of the other magat stocks. I mean, you know, they were profitable failurely on. Yeah, that's that's that's a big difference between the maga, the old and the one

of the maga. And I'm talking about where if you look at the hyper growth stocks, uh, the stuff of the stoff that traded for more than ten times sale in the US, it really hasn't been any earnings uh for in aggregate at least uh for the last five years. If anything, I did a sunny experiment and I saw that they spent more about the same in stock based confrontation as they had earned over the last starve years. So um, again, it could be that they aren't want amazons.

I tend to think that Amazon really was an explored miracle. You had the management that was you know, visionary, You have fantastic execution, You had a you know the c P, a company that built the monopoly orger online trade. I mean, these things are not likely to we happen to happen against times in the mixtacade. Monopolies are so great when

you want to make money, right. Um. Without getting further into that assessment of Amazon, because it's dangerous obviously for for shareholders, what what what are some of the did you come across any of these moonshot stocks that aren't insanely over value. Do you see anything out there, Vincent that UM looks like it could pay off but isn't trading at ten x earnings ten x. I don't have the you know, expert, especially something like like biotech. Uh. I'm sure they will be. Uh they you know that

there will be some of these. I mean, I'm sorely bullish on on the future of healthcare and biotech, and I do think that this is where we are going to see the next Amazon. The thing is, I'm I'm not smart enough to know which one it will be. One thing though, that I would I would point is that UM the buying the sector as a whole in the hope or like, well, you know, I don't know what I'm getting some I'm just gonna buy a diversifyeddts and then I'm gonna try to hold as many as

possible and then you know how, we'll get it. By default, it's probably not going to work. Um, I rant I'll let you your words. Not buying. Uh. The question mark at the end of that, yes, well, if if we apport to see if it's the stem portray E complreaty Mons two thousand issue at Bob basically all the hypergole stocks in marshrew thousand, thinking okay, one of them is going to turn out. You would have been correct, like you would have bought indeed Amazon and Dad, which you

know have been a hundred dollars. But the problem is the stocks that mean a tiny fraction of your board for you at the time, um, Yahoo was four times larger than than Amazon. And what happens and then you all right, Vincent, thank you so much for joining us. Really fascinating report. Vincent Ward at Global macro Strategist at stone X with some really thought provoking work. 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 nine seventy three. Get on Ball Sweeney I'm on Twitter at kt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.