Vanguard Sours on Riskier Credit, Likes International Equities

of responsibility. And we're lucky to have Greg Davis. He's the chief investment officer for the Vanguard Group total assets under management. I'm sorry, I misspoke. Five point one trillion dollars. We have a five point one trillion dollar man in the office. Well, it's great to be here with you today. All right, Uh, let's let's let's let's do the sort of news stuff first and then we can get into some details because we want to get your thoughts on a lot of stuff. The jobs, the non farm payroll

report today, your your reaction, your thoughts. You know, it was slightly weaker than what we expected, but if you take into consideration the two month revisions of fifty nine thousand dollar fifty nine thousand jobs. We thought that was still a relatively strong report. You saw the unemployment rate ticked down slightly and the unemployment rate you six, tick down even more at seven point five percent. So overall,

we thought it was a solid report. And just real quick, do you care about the trade tensions or is it

all just noise at this point? You know, I think you have to pay attention to it, but I think at this point it's still early on and there is a lot of noise in that, and I think the market has really discounted just given the you know, conversations have been happening for the last several months that you still have to wait and see how it plays out over time, and the markets have actually held in pretty well given that attention. All right, so what are your

three top bets for this year? So when we think about for our for our active you know, active fixed income portfolios, again, what we've been trying to do is trying to be a bit more defensive when it comes to the credit space, given the fact that valuations when it comes to investment grade bonds and high yield are not as attractive if they were, you know, over the last ten years or so, so we think there's been

a lot of spread compression. We view that as a place for us to be slightly more defensive, and given where we are in terms of the economic cycle and what the Federal Reserve is doing, there's a risk that as the Fed goes to more restrictive policy in emerging markets, investment, grade and high yield will also all be impacted. From a negative standpoint, investors may have been complacent in getting double digit returns in the past, are they going to

have to readjust their thinking. Absolutely. If you look at where valuations are around the globe, I mean our our investment Strategy group has recently done are done their analysis in terms of expectations for the next ten years, and when you look at the US equity market, the expectations there are that you get a tenure annualized return of about three point nine percent. When we ran the same analysis five years ago, the expectation was closer to eight percent.

The reason it means a lot today is that we still think that outside of the US given valuations, that international equities actually offer more compelling value, and that the returns over the next ten years are gonna be somewhere in neighborhood about six and a half percent or so. So again, the you know, basically saying that investors need

to focus on international diversification. And the other thing I would point out is that the fact that yields have started to rise, cash treasuries, investment grade bonds are actually more of a compelling investment today than they were five years ago. So it's actually a a real competing force relative to equities in in certain cases. All right, now, let's get to the real issue. Let's talk about fees.

Let's talk about the fact that Fidelity is trying to be you, trying to beat you by being the first fund to offer zero fees basically free funds. And this made headlines earlier this week. So is Vanguard concerned that Fidelity is going to out Vanguard? Vanguard The way we think about it, Look, we have we have a mutual ownership structure, and you know, the way we see these

stories playing out, it's really the Vanguard effect. Right at the end of the day, Because of Vanguard's approach of continuing lowering fees for investors, we're seeing more and more competitors continuing to lower fees for their investors as well and for the overall marketplace. We think that's a good thing. But when you look at Vanguards specifically the average expense ratio across our entire complex, both index and active, at which of our funds are actually actively managed, our complex

wide expense ratios of love and basis points. And although we might have some competitors out there that use a lost leader strategy and reduce the costs in certain areas across the board, investors still get tremendous value by coming to Vanguard in our ownership structure. I just want you to go back to something that kind of alluded to, which is that investors are going to get going to have to get used to something different, meaning lower returns.

Do you find that people feel that they will be the exception to that, and as a result, they make mistakes because they don't want to scept average, They don't want to accept those single digit returns, so they go and do things that they don't have the experience or the knowledge to actually do with their money. You know, we we saw this, We saw this um you know, shortly after the financial crisis, when you had basically money market funds yielding zero, and you saw investors migrating out

taking on more risks. So they migrated out to the further end of the yelker. First it started with short term bonds and it was intermediate. Then it was a long end again just trying to find other places for yield. And then they started going deeper in terms of credit risk by going into you know, high yield, and then they started to expand it even further by going into bond like products. On the equity side, reads high dived

and yielding stocks. But the great thing now is that when you look at the valuations around around the marketplace, what you can see is that investors don't need to take as much risk anymore, at least at this point in time. You're not benefiting a lot taking on a lot of duration risk and taking on that interest rate exposure further out the curve because the curve is so flat. So you can avoid having some of that volatility by being more focused on the shorter end of to curve.

But for most investors, we would tell them to again look at the risk tolerance, have a balanced portfolio around the globe, both equities and fixed income, and make sure that they're continually rebalancing because some of these ratios can get out of line over time. So, given the fact that we're moving into a more volatile period, supposedly, Um, do you think that we've seen peak passive? No? You know, when you think about no, I don't think that's the case.

When you think about when you think about the value proposition at passive passive offers to investors is that they have they get they get a market return at a very low cost. And what it's been shown is that active managers really have a hard time in the long run out performing their benchmarks net of fees. And so in less active managers substantially substantially reduced their fees, they're gonna have a hard time in the long run beating

beating the indiceas. And that's going to continue to allow passive investing to be a very popular, you know, technique for for investors. Just quickly, what is more overvalue today?

Corporate bonds high yield or investment grade corporate bonds UM investment grade corporate bonds, if you look at where they are from the valuation perspective, there's somewhere around the fifteen percentile um from a spread perspective over the last ten year periods, so we'd say they're pretty deeply overvalued at

this point in time. I think what you have to really really be cognizant of is the fact that again, as the Federal Reserve keeps hiking interest rates and they get to that point where they start becoming restrictive in terms of economic growth, that part of the market is definitely going to be at risk for spread widing. So at what point will they be restrictive? I mean, people are widely expecting the Federal Reserve to raise rates in September. Are you expecting two rate hikes this year? And at

what point next year? How many rate hikes would be a mistake. So we're expecting we're expecting two rate hikes this year, both in September and December, and we're expecting somewhere in the neighborhood of two to three rate hikes next year. You know, by the time we get to the second half of next year, we could actually start approaching the restrictive territory. And the question becomes is there still enough momentum in the economy, both from a GDP

growth and an inflation and jobs perspective. That the FED keeps going and if that's the case, we may end up going too far. All right, So what are the chances of a downturn next year? I know a lot of people have been talking about possible recession. So in our expectations based upon our models are showing, you know, um, the probability of recession the next twelve months have gone

from about five percent up to ten. Now, what we're expecting towards the tail end, the tail end of twenty nineteen, if we're looking forward a year from there, we'd expect we'd expect that the recession rest starts to rise to something like thirty over the course of the next year. So I would take us through the end of today. We got the news that the Intercontinental Exchange plans to launch a regulated physical bitcoin futures contract and warehouse in November.

What's the conversation at Vanguard about cryptocurrencies and bitcoin? Then we're not fans of We're not fans of of of bitcoin. Um. We are very interested in the technology that underlies bitcoin in terms of blockchain and what it can do in terms of increasing efficiency when it comes to settling transaction,

receiving index data and things of that nature. But the concept of investing in bitcoin, we think that's a bit of a speculative bubble, all right, So the blockchain trend perhaps is not more hype than it is reality because there have been some studies at show that. No, we think there's real potential there in terms of increasing efficiencies

and uh. And again that's that The reason we're interested in that is because to the extent that can help us drive down costs even further, we think there's value there. So what about flows, what are you seeing there? And is there some divergence between institutional flows and individual flows right now? So we haven't seen a big divergence. UM

So this year, this was through June. UM we have taken in about a hundred billion in cash flow, and that's been broken up between I'd say about half of that was in US equities, with the in the equity market, with the majority of going into index products, and then we've had you know, fair flows the rest broken up between UM fixed income as well as money market. So money markets has really seen a lot of growth this year,

just given the fact that the curve is flattened so much. Right, the flows that you're talking about, the people look at the expense ratios first rather than the product. I think informed investors will always look at the expense ratio first. Um, you know, when when they've made the decision that they want to invest in the money market product or a actively managed fund, the expense ratio is something they always

take a look at. And especially in an environment where you're expecting returns whatnot, it's on the bond side, or even on the equity side to be somewhat muted relative to what we have experienced historically, expense ratios make a big difference. It's eating more and more of your returns if you're in a high cost product relative to a low cost product. Do you think we're ever going to see a fund that actually pays investors to invest with it.

You know, there's all kinds of marketing gimmicks, gimmicks, so I'm not sure. You know, maybe it's possible. I I don't know. I really don't know. I mean, like, do you think that if we're going to be close to zero for almost all funds in five years? I think

it's difficult to tell, but I would I would. I would expect that you will see this continued, this continued impact of you know, firms that have economies of scale will continue to lower prices, and the firms that are you know, higher cost producers will continue to struggle quickly. What's your biggest mistake you've made over the last twelve months. I would say we were probably as a firm, we're probably a bit slow when it comes to um a bit too early, i should say, when it comes to

reducing our exposure to investment grade credit. Again, we expected that spreadwood wide and not at some point in time, and we're a bit too early to a bit too early to that trade. UM. So i'd say that was probably a bit of a bit of a miss from mark perspective, but not a miss that you've seen a hundred billion dollars of influences here and that you are a five point one trillion dollar man. Greg Davis, thank you so much for being with us. It is such

a pleasure having in my pleasure. Greg Davis is Chief investment Officer at the Vanguard Group. Van's guards total assets under management five point one trillion dollars. It is an economy unto itself. China's u N is headed up for its worst weekly loss in its history, joining US now to talk about that. Some of the latest efforts out this morning from the PBOC to try to mitigate some of those losses is Steven England are Global head of G ten FX Research North American macro Strategy for Standard

Charter Bank. He is also a Bloomberg opinion columnist. Stephen, thank you so much for being with us. We really enjoy having you on. What's your take on the move that the PBOC, the People's Bank of China took this morning to try to how should we say this, I guess perhaps prevent people from speculating too much on the ones drop. UM. First, thank you for having me on. UM. I think what you're seeing is that the UH Chinese

act that markets have been increasingly under pressure. The equity market has been under performing, UH, not just the US equity market, but even neighboring Asian equity markets. UM. So it feels as if, UH, there's a perception that China is much more vulnerable to these trade tensions than say what's thought a month ago, or even or even two months ago. And that's translating into both weakness and equities

and weakness in the exchange rate. UM. What the Chinese authorities want, I think is one to keep money easy onshore because there's both an onshore market in continental China and an offshore market um outside of China. They want to keep monetary conditions easy on shore for domestic economic reasons because their their economy has been kind of wobbling a little bit, nothing dramatic, but not performing as well

as they would have wanted. At the same time, they don't want by keeping money easy on shore to encourage money to leave. So they're saying, look, if you if you want to UM do these transactions, you actually have to basically like post the margin and just keep it

on deposit with the PBOC. So it makes it harder and discourages the movement to capital from on shore to offshore, and in sometimes should mitigate the weakness in c n Y in c and Y and c n H. Stephen Anglader, we were listening earlier today to an interview with Larry Cudlow, Director of the National Economic Council. Larry Cutlow said he believes that China's currency is weakening and that it's a lousy investment. He also said that China's China has a

weak economy. Do you agree well, look, you know, I've I've been here long enough. I've seen the dollar at one sixty against the euro, and and you know now it's at one sixteen. So currency is weakened, currency strengths, And i'd say the Chinese, the Chinese economy, it's it's as I said before, it's disappointing. It's not doing as well as some people, you know, many people expected, but it's not in free falls by any means. It's just like,

you know, call it a bump. And I think the uncertainty, uncertainty about the parish is adding to some of the pressure. But it's not a crisis. It's it's uh, you know, it's it's an irritant. But in this way I would characterize it. So if it's an irritant, would this be

a good opportunity to invest in China? Well, you know, I think if you're investing in China, you're you're making a bet that the paraficies will be resolved in a kind of you know what most people expect to happen, which is that the US and China will have very low tariffs, and they'll keep on talking about intellectual property, which is a much more complicated issue. Um, if he believes that that's going to be the ultimate outcome, notwithstanding

the short term gyrations. UM. You know, China would be very interesting even you have, given how much it's sold off. But you know, you have to be clear that you have a strong view that this will be resolved in a way where we don't where everyone doesn't end up with tariffs on each other. Stephen, you've been covering the FX markets and engage with them for about two decades,

and you've seen a lot of different phases. Has it ever been harder to kind of understand the different winds at play that it is right now given the rhetoric and the tweets and and all of that mixed with a lot of easing, a lot of central bank intervention. Well, you know, i'd say, in as it's happening, it always seems hard. It's very very hard to know what the next one percent or five percent move on the dollar is going to be. UM, And I'd actually say it's

not much worse now. I think it's for many of us. The the political dimension, both the geopolitical and domestic political dimension, is UH an additional complication. But you know, you look at volatility in in FX markets as far from from being extreme. So I think it's it's something you just

adjust to. Stephen, taking a look at the dollar euro right now one nine pounds, sterling, one thirty yen one eleven, you think the dollar is going to continue to strengthen, you know, I think the dollar is strengthening on on um these power of concerns because it is behaving like

a safe haven. UM. I think investors have become you know, are flirting with the idea that US may actually have a good economy, notwithstanding the slope of the yield curve and some of the other questions that have been raised. And so I think that there's an emerging set more comfort with the U S economies and say there worth a month ago, two months ago, or six months ago. Um. So that's all all the positive, but I'd say overwhelmingly

the sentiments on Europe is so negative that Europe. You know, if Europe just holds its place, that will be a euro positive. So you know, again, the euro dollar story is one that you know, I don't think it's going to be the main story. The story could be how the euro and the dollar together do against the rest of the world UM, but you know, the usual sort of all the up or down against the euro UM. Yeah.

I don't think that's going to be a dramatic issue in in coming months because both of them have strength. All right, I'd love to get your view just real quick on what this means. If we are seeing dollar strength that will continue because people are realizing that the U. S economy is doing well, what does this mean for emerging markets? Well, you know it's going to be difficult for them, um, emerging markets. You know, again, there's there's been a sell off, certainly on the currency side, and

there certainly valuation is there. But the question is, you know, where's the sizzle? You know, what are you buying? You know, if if growth is coming primarily from the US, it's not very good intensive intensive, it's not very commodity is intensive. So you know, the question is what is going to sort of be the trigger to get people back into the emerging markets. And and again, valuation is very important at a certain point to get so cheap that they

can only go up. But I think you'd like to see some of you know, some indications that the economies are are stabilizing and surprising to the upside. Stephen just quickly, Does this mean that commodity based currencies will continue to weaken against the dollar? Yeah? I think you know, there's a structural story here, which is um, you know, we buy services on the margin. We don't. We don't buy all the intensive goods. You know, Europe is growing, but

they buy services as well. I think it's you know, there's a supplied demand balance, but serve an uphill battle for for the commodity producers, especially if China is looking soft. All right, we gotta leave it there. Stephen Englander is the global head of g TENX Research and North American macro Strategy for Standard Charter Bank, and he is also a Bloomberg opinion columnist. Will the explosion of money creation

catch up with the US economy? This is one of the most difficult questions of the moment, especially as the Federal Reserve continues to raise interest rates bit by bit to try to get to some normal level. To weigh into this, and very very happy to say we are going to be joined by a Mere Sufi, Professor of Economics and public Policy at Chicago's Booth School of Business. Uh, Mere, thank you so much for being with us. I'm super

I'm really I'm excited to hear your perspective. You wrote The House of Debt, which was widely thought to be a very accurate and interesting look at the explosion of debt leading to the financial crisis. You just posted an article that was published again, arise at household debt systematically predicts a decline in subsequent GDP growth. This was a line from the report Where are we now in terms of credit explosion and what does it say about growth

going forward? So one of the positive signs is that the household debt expansion during this recent cycle is not nearly as dramatic as what it was from two thousand two to two thousand and six. And that's mostly because, you know, most of household debt is associated with mortgages and housing and the boom we saw from two thousand

and two thousand seven, which is unprecedented in history. Nowadays we have more auto debt, more student debt, but just the magnitude of the increases is not nearly as large. So that's one positive sign um. I think generally we are at a point in the cycle where it seems like credit is very easily available for corporations, for firms, and for households, and that generally forecasts probably lower growth

going forward. But I don't think we're anywhere near where we were and say two thousand six or two thousand seven speak if you count a little bit about the debt of the government and what that does to financial markets. So in our research, we looked at forty countries going about back to about the nineteen sixties, and we actually don't find evidence that arise in government debt tends to predict financial crises or recessions with the same power as

right is in private debt. Why private debt, I mean both debt to non financial corporations and to households. So that seems to be one of the most more robust correlations, is the private debt predictability. Government debt doesn't seem to predict as well. What usually happens is there's a crisis caused by private debt expansion, and then the government debt goes up in response, and as we saw in Europe in two thousand ten and two thousand eleven, that can

often cause problems. But it's not the rise in government debt that generally causes uh Either financial crises or a slowdown in economic growth. So, just to sort of underscore this, household debt is really the best predictor. Explosion of household debt is the best predictor of the magnitude of the next downturn. Corporate debt a bit, but less so in government debt, not as much at all. That's right. That's right. And one of the nice things is we've actually seen

example since the publication of our book. UH, the you know economy in the world that had probably the most severe recession over the last five years was Brazil. In Brazil in two thousand, fifteen and sixteen, they had one of the worst recessions they've had on record. And in our view, it's unsurprising that in the decade before there was just a tremendous expansion of household debt, auto debt,

paid a loans, mortgage debt. Uh. And again I think that's one of the big reasons why Brazil had such a big downturn from two thousands fifteen and two thousand and sixteen. So I guess that this is really interesting to think about right now because you have banks like Goldman, Sachs and many others trying to ramp up consumer lending, and you're seeing credit card outstandings going up. Auto loans have been a robust area of lending for a while.

I'm just wondering, at what point do you start to get concerned that we're heading toward another uh sort of peak that could uh for tell some pain. Yeah, I mean, I've been looking at the data, especially in the auto market and the credit card market. As you point out, those are really the markets that seem hot um in terms of the willingness of creditors to provide more financing to consumers. Uh. There's a few questions about what the trigger would be that would cause those markets to suffer.

I've been thinking a little bit about a rise in gas prices. For example, if gas prices were to rise one or two dollars per gallon, you could imagine a lot of people with a lot of auto debt don't have much room to adjust, especially if you think about

drivers for uber and lyft. So it doesn't seem like a disaster's eminent to me, But I'm thinking about the kinds of economic shocks that would lead to a situation in which consumers have a difficult time paying back the interest payments and principle on those credit cards and auto loans and the rising gas prices is one that I kind of think of, And of course any labor income

shock to the economy would would be dangerous. In all of our research, there's usually some shock that you need in order to get the high household debt to then really have a bad effect on the economy. That collapse in house prices, for example in two thousand seven and eight, is really what happened. Then what effect does the deregulation

of financial industries have on the health of an economy. Well, one of the big points of our recent research is to show that deregulation in the long run, and there's a lot of research to support this, improve financial efficiency and improves the allocation of credit and growth of an economy. But in the short to medium runs, think about three to five years, it sometimes can basically amplify the business cycle.

That is, a deregulated banking sector kind of throws a bit more fuel on the fire during booms, and then subsequently oftentimes we see more severe recessions. The recession, for example, was preceded by a huge wave of deregulation in the banking sector that we argue in some of our research lead to an expansion of lending, especially to real estate and commercial real estate, which then made the recession of

one worse than it otherwise would have been. You know, one of the biggest explosions in debt and consumer debt of late has been really in the student loan area. And you know, one question I've had with a number of analysts is how much do people just simply ignore this because they're backed by the federal government, and how much people pay attention to this as as a potential

sort of fragile fragile node. That's a great point. I think the first point you made is quite important, and that most of that debt is being provided or back directly by the federal government. In that sense, there's not much of a risk that there's going to be a student debt default crisis that will precipitate a broader banking crisis or financial crisis. So in that sense, it's different than mortgage debt or auto debt or some of the

other markets that we worry more about. I think when we think about student debt, it's not so much the cyclical worries we have. It's more a longer run drag on consumption, especially for younger and say middle aged Americans who have a lot of student debt. And what does that mean about the overall US economy. It just seems like the US economy has a very hard time generating the kind of demand that is needed to sustain high growth.

And we either try to sustain that demand through more credit, truth through boosting the economy through lower you know, lower interest rates by the FED UM and now student debt to me, just is another drag that's going to make it harder in the long run for us to generate the kind of the kind of consumption that we need in order to sustain the economy. Just quickly, twenty seconds. Do non bank financial companies and the expansion of their

credit facilities amplify the business cycle? Yeah, One of the points of our recent research is really to look at the important role of non banks, especially during the two thousand to two thousand seven cycle. And now there's a lot of research in the academic sphere about you know, fintech and just how many, for example, mortgages are now

being originated by non traditional financiers. Think about Quicken and some of the other lenders and the fact that they're less regulated, the fact that they had less skin in the game, you know, is is something that that one wants to worry about, and we're thinking about the quality of those loans. Thank you very much, Amira Sufi, professor at the Chicago Boots School of bisin this thanks for listening. For more details about the job market, we turned to

Tom Gimbal. He is the chief executive of LaSalle Network. It is a national network for job placement. Tom, thanks very much for being with us. Can you explain why you we don't see wages rising as fast as many would like. Yeah. Absolutely. Number one, We're we're in a global economy, so it's not it's not as domesticated obviously as it used to be. So we're not competing against our neighbors in the cul de Sac or the High Rise for jobs. So we are competing against people in

in India, in China, in Latin America. And when you're doing that, and those companies, um are not at the same level of compensation and societally wise, you're gonna happy, but that are paid less. So it's not necessarily just that our economy is doing well. It's what labor can be acquired for so that is still a major issue.

So Tom just to push back a little bit, because we hear about shortages of certain types of workers, shortages of construction workers, of truck drivers, of plumbers and builders, and all sorts of industrial jobs here in the US. Would there not be a shortage if perhaps these these companies just offered more money. Unfortunately that's that's not the case.

And the reason being is look at truck drivers, where there there's a huge shortage and companies are willing to pay a lot more, but people don't want to be truck drivers. Now there's reasons behind that, where to drive a commercial truck over state lines you have to be at least twenty one years old. So you get people that don't get their college degree that's starting a career when they're eighteen and they're not going to make that shift.

We've also seen a situation due to the quote unquote gig economy where people are doing stuff that are are no skills required on non office jobs or construction jobs that are easier on the body, like being an uber driver, and that's taking people away. So now you've got where we really have gone from manufacturing and distribution economy to service economy. And so we're seeing that just paying more isn't going to do it unless you're targeting the right people.

And that's where businesses have to evolve, is where they're going to find the people, how they're targeting the people. And the most important thing that haven't been touched on in this economy is training and development to acquire and retain staff. Well, do uh do job applicants have the skills and the experience necessary for the jobs in growing areas like technology, healthcare, logistics. Yeah, and and there really is.

It's a tale of two economies, right. It's the blue collar economy we were just talking about, and then it's the white collar economy um of technology and sales and marketing. And that's where the discrepancy is. And so when you look at the long term unemployed, that number really didn't change in this report and hasn't for some time because

those folks they're they're out of this economy. They don't have the skills gap, are they Because of the skills gap, they can't get back in unless they move downstream into a lower level position or a blue collar job, and they don't want to. So what we have to do in the skills gap is figure out a more college graduates are going to get jobs than ever before, and

we're not seeing any slowdown in that area. And number two, if companies really need people to continue to grow profits and revenue and shareholder value, they need to spend more money in training and development. So one thing that I'm trying to understand is we focus on the average numbers that we get out, is how bifurcated is the market four jobs between sort of the top earners and the low earners. Are we seeing faster wage gains at the top of the income sphere of versus a lower one. Yeah,

I do believe that exists. And what ends up happening due to the ad vent of technology is that jobs on the lower end become easier due to the technology technologically advanced advancements. Right, So, so if due to the technological advances that people either have to continue to grow to grow their career, but if they stay at the same level, the jobs get easier, So they're not going

to get paid more for doing the same work. When you look at the executive level side, and why those salaries increase is because people are learning, growing and being promoted into those roles, and they're getting paid. Is their advancement and their skill set rises. It's not as simple to say people who make more money are going to grow faster. They're growing faster because they have the ability to make more money, and that gets lost in the equation.

It's not simply keep the low people oppressed and pay the rich people more. Is about what are they accomplishing and are they growing tom What accounts for the lack of summer jobs that are available for young people, Well, I think there's a variety of reasons. I think what you see a lot more happening is college kids and

high school kids want to do internships. So if you grow up in an area where you believe that you're going to go to college and have a white collar career, people want to start in that area is as soon as they can. And so what ends up happening is the hourly jobs, the delivering pizza, the retail jobs. Those end up going to lower income people who companies know we're going to be there. So there isn't as much

seasonality in summer work as there used to be. And I think a lot of this goes to the social mediazation of America. Is that when kids are seeing that on shark Tank and through Instagram of eight five year old kids that are making hundreds of thousands, millions of dollars at an early age, what do I need to do to get there as fast as possible? And that's not about taking an hourly job at the local retail store. No. Tom pim is talking about this. He has a daughter,

I have a son. We're both looking for them to go bring in their worth, right, he's nodding at me. I mean, I'm partially kidding, but actually I think that they would probably enjoy having the responsibility. Tom. Just going forward, I'm trying to figure out when people the thing that people tell talk about is the slack in the labor market. Are there more people who are on the sidelines who will get brought in as this labor market continues to improve.

What's your take on that. If you're on the sidelines in this economy, it's because you want to be on the sidelines. And I what I mean by that is you may not like the position that you can go and play in the game, but you can play good. Right, So doing the sports analogy, you may want to be a quarterback. But if the position that's open for you that the coach likes is a wide receiver. If you want to play in the game, be the wide receiver.

Don't complain that you're not the quarterback. And so the white collar analogy is you may have had a job doing accounting or finance. In this economy. If you can't get a job doing accounting and finance, then you're not good enough to be at it. So you've got to take a job at a lower level. Might be administrative, might be in a call center, might be blue collar. But if you want a job and you want to make money and you don't have one in this economy,

you're the problem. So then thirty seconds, if you're the if you're saying to these people, you're the problem. And there still is um a pretty low prior age participation rate relative to history. What's that all about about accountability? Right? So the participation rate of people is what happened during the recession in the in the thirties was people would they double up and have multiple families living in houses

and sell apples on the street for a dime. And what we had coming out of two thousand nine was an entitlement situation and people think the government's going to be there to support them. And today we're in a situation where there's a skills gap, yet there's a ton of jobs available. Blue collar and white collar people need to get off the couch and take get back in the game. There you go, Tom Kimball with some tough talk. Tom Gimbell, founder and chief executive officer for LaSalle Network

based in Chicago. Uh. He said just in some notes to us ahead of this that he has been in this business for more than twenty five years staffing and this is the best jobs market he has ever seen. So there's no excuse. If somebody doesn't have a job and wants to have a job, they should be able to get one. Thanks for listening to the Bloomberg n L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm

pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio