Wall Street Tempers Bonus Expectations In Pandemic Year

Bloomberg in the past eight hours. It's about Wall Street bonuses and how once again, those big Wall Street firms are kind of reminding their employer employees, I should say, really specifically traders to kind of temper back their expectations when it comes to those bonus checks. So let's get into it with her own Lenan new And she is FINANCEI reporter at Bloomberg News. She's with us on the phone in New York City. Uh Nan, no surprise that

this is your most read story on the Bloomberg. You know, but I feel like these bonus stories and a tempering of expectations have been trickling out over the last month or so. What's up with it? Especially in a year where Trader did really well for these firms, Thanks Carol. Yeah, the traders really crushed it this year, and obviously that's maybe a function also of the markets being so wild

and volatile as well. So um, you know, there's a little bit of credit to the traders for doing well, but also you know, the environment was just better for them. So um. Even though some of the banks really recorded sort of huge, huge jumps in trading revenue, it seems like this year, you know, the banks are going to be a little bit more prudent, a little bit more cautious,

and not not make those big payouts. We're hearing, you know from messaging from across the street that looks some big performers will get compensated, but others, um will not or you know, will be disappointed. All right, I just want to know what those discussions are, like, Lennan, Like, is it like the big bosses like send a little email around or the big boss tells the boss right under it just to like tell your team it's not going to be as rosy as you thought. Like, how

does it play out on Wall Street? Um? Well, I don't think much of it happens by email, but probably not a kind of it's a telegraphing, right, it's a signaling effect. You know. We we heard about a manager at Bank of America who had a kind of Sunday Sunday afternoon call with his teams kind of trying to manage expectations. And that's really important here because you don't want people going into you know, Jan said, thinking they're going to get at race in their bonus and then

get zero. Right. Yeah, you know, it's a it's a really kind of important signaling mechanism that happens that towards your end. And also there are a few test balloons as well. You know, if they send out some messages and um, you know people are up in arms, then managers can go back to say the board or the executive committee and say, look, you know I need more and it's a bigger pot for my for my guys. So, um,

it is a negotiation process. So we want to make that clear there there are still negotiations taking places, not all completely baked yet they're always is wiggle room right? Hey? Is it different though for fixed income versus equities versus you know, different asset classes when it comes to those bonuses this year, I'm assuming it usually is but I'm wondering if this year is any different. Yeah, I think most what we're hearing is that fixed income is going

to do better UM. And again this is varies depending on the strength of the bank UM and where their skill sets are. But it sounds to me like the fixed income groups are going to um get more than their equities trading counterparts. UM. So that's the general tone. But again that is going to very bank to bank

and death to death. This is going to be an unusual year in which the performance and the comp is going to be very very um you know, kind of varied among the banks because of just the strange the strangeness is pandemic and the performance. Listen, I love in your story. There's a quote from City Group CEO Mike Corbett UM who's on his way out. UM. But he says, we've got to be mindful of our returns and our shareholders.

We've got to be mindful of our environment that we're in and the many challenges that are out there for people in certain businesses. At the same time, he said, you know, we've got to be competitive in our industry. Uh. So it is interesting thing. I feel like it was

this way Lennon. After the financial crisis, there was a real sensitivity out there, um about what was going on across the nation, and it was a tempering back of holiday parties, it was a tempering back of you know, big time spending by executives at you know, financial front, Like there was just a mood reset. And I do feel like that is also going on here on Wall Street. Is that fair to say? Is that also at play here?

I definitely think so, particularly for the banks that have large consumer divisions, like City Group or a Bank of America JP Morgan. It's not a good look when so much of the country is suffering from pandemic and from economic strains to then start paying you know, huge huge bonuses to traders um. Obviously, some of these will be publicly reported by the New York government as well in New York City, so you know, we will have aggregate numbers.

And so I think the banks are very sensitive to the fact that if they make huge trader payouts, um, eventually they may face the scorn of republic during such a difficult time. So I think, uh, you know, there's also an excuse to be cindy as well. Right at the same time, if I'm a trader, and I brought in a ton of money. Five biggest US investment banks on pace for their first a hundred billion dollar year for trading revenue in more than decade. I gotta say

I might be like, are you kidding me? I'm just gonna say, yeah. I mean, I think I think that's a general trader mortality. You have a huge year, you always want more. Um. And I think the rock stars, to be frank, will be compensated this year. UM. But again, maybe not all of the rock stars, and maybe they're not going to set as much as they expect. Yeah. That tempering of expectations. Interesting stuff and as we said, the most read story on the Bloomberg in the past

eight hours, So Lennon good stuff. Lenan new In, uh financi reporter at Bloomberg News on the phone from New York City. You can check her out on Twitter at Lennon T. New In. That's l A N A n h t N g U y e N. Always good stuff from her. This column among the Bloomberg opinion pieces, definitely uh standing out. It's called the Shes Session. How it's very real in particular for minority women and It's written by Louisa Blanco. She is professor of public policy

at Pepperdine University. She specializes in economic development, international economics, and the financial well being of minorities in the United States. So my guess is she has had a busy year and a lot to write about. Luisa joining us on the phone from Malibu, California. Professor Blanco, nice to have you here on Bloomberg. You know, I've had this conversation with uh, some different CEOs, including Verizon Business CEO Tammy Irwin,

about how this pandemic is disproportionately impacting women. But as you say, and so smartly and rightfully, so you drill down even further, we are seeing again a distinction between white women and minority women in terms of the impact. Talked to us about that. If you would, thank you so much for bloom Show today, some of my insights and work and this very appreciate invitations. Um so yes.

So I think you know, when I hear people talking about the sheet session, I realized that, well, you know, well, it is true. It aggregates all women, right and at the end of the day, you know, women, uh, minority women have a different experience right, and especially when it comes to the to the labor market and um to here. You know, when we look at minority women, um, there are several reasons why you know, they are doing worse when it comes to employment and and being part of

the labor force. And it is because, um, we we see that minority women are more likely to work on sectors that have been directly affected by lockdowns and stay out ward orders so and and less likely to tell a work. So that's one of the first reasons. And the other reason is that minority women are more exposed

to COVID nineteen and more likely to get thick. And then another very important reason is that even different family circumstances, actually being part of the labor force has been more difficult for minority women because they need to take care of children. With the closure of childcare and childcare censors and the schools, right, um, taking care of children has

become very important. Yeah, you know, this is where in a world where we have so many data points, right, But if you look at data on the macro level, maybe it doesn't it tells you a broad theme or broad story. But as you start to drill down, then you really understand what's going on, and I think drilling down into the data of is going to be so important, especially as we try to address some of the inequalities,

the inequities that are out there in society. So you talk about you know, family arrangements, taking care of the family, being you know, exposed to certain jobs where you can't do them from home, and having to make a choice between taking care of your family or you know, continue doing work. So I think, here we embark on a

new year, a new administration. Um, we have a vice presidental act who is a minority, and you know, hopefully we'll fold in all of her experiences as well when it comes to policy, at least it will be you know, she'll have a seat at the table. So what do we need to do as policymakers to address some of these issues so that they're not forgotten once we get on the other side of COVID. Yeah, thank you for

bringing that right up. I feel like, you know, we hear all the time about the problem, and that's where I'm getting tired. You know, we hear about all these data showing these these parties, and it's overwhelming, and it's stuff. It is painful, right, and I'm glad that you jump right away into the solutions. I really appreciate that because when I wrote the off it, I say, you know, I want to talk about the problem, but i really want to spend time on the solutions because I'm tired

of just hearing people talking about the problem, right right. So, um, so yeah, I think you know, as the new administration comescened, you know, what it is important is that we addressed uh, these labor market disparities, and and we need to be very strategic because the longer we weighed, the more problematic it will be. So we economists always worry about long term unemployment because we know that the longer people stay out out of the labor market, uh, the more their

skills at trophy right, and then also self confidence. Right. So, so I think, you know, for the new administration, it is very important that we addressed, especially um, the child care challenges that minority women are facing these days. UM. So to do these, you know, we really need to be focusing on the safe reopening of the schools and

access to child care. And to do these, you know, first we need to establish testing and safety measures for schools and child care centers so that they you know, kids can go back to school safely, and and and and parents and go back to work, especially models, and we need Uh. I think what's very important as we're talking about you know, vaccines and and you know, thankfully we we have that as a hope, right, we need to set priority for vaccines for teachers and support staff

and chald care workers. I think that's that's crucial as we're trying to decide you know, who who gets the vaccines as they come in UM. And then I think, you know, another important area that we really need to be spending resources is to invest in outreach to encourage vaccine of septance. And how problematic is that? We said, like, I do think about it's really remarkable. And I even was talking with UM members, the head of a medical network,

with all of doctors. Basically you know that the skepticism going into this that there needed to be some convincing So UM, I do wonder how problematic this could ultimately be for minority women and they are ability to bounce back faster. Yes, I think, you know, the issue of vaccine hesitancy is very important and that's something we need to get our hands right on right now. Because otherwise if we wait, it is just we're gonna miss the opportunity. Right.

So a thing with minorities, there is a there is a lack of tactics of reliable information, right especially you know, information that can be language and cultural appropriate. Um. Then there itself so dis mistrust right so on the government, especially in the last couple of years. Right. Um, So we have big barriers when it comes to vaccine acceptance.

And I think that, um, you know, we and I was going to mention, you know, all these efforts that I'm talking about, you know, establishing testing measures, vaccines for teachers and then also vaccine acceptance. I mean, um, what we need to make sure right that our efforts are focusing places proportions of lower income minority students. Right. Um. So I've seen you know, working on and I already

be touching to some people because I worry about these issues. Yeah, listen, it's it's it's important as we you know, really dig into how do we come back here and come back stronger and make sure nobody has left out. So these these propositions and proposals that you're really putting out there, um, make a lot of sense. And for things certainly for the for the administration to consider. Hey, Louisa, thank you

so much. Professor Louisa Blanco, Professor of public policy at Pepperdine University, joining us on the phone from Malibu, California. You know, it's funny how headline shifts so dramatically because it's just a few weeks ago that we were talking about what will become known as the largest cybersecurity attack

in the United States. And recent memory has to do with those suspected Russian hackers breaching the internal networks of at least two customers, including the US government, UH, several agencies within the US government, also private companies and a cybersecurity firm. And we continue to find out more about this. Heck, let's get into it though with Steve Groman. He is senior vice president, chief Technology officer of at McAfee. He joins us on the phone from Plano, Texas. Steve, nice

to have you here on Bloomberg Radio. It's interesting go back even a few years, and I feel like we had a conversation on air several times a day that dealt with cybersecurity issues and it kind of got pushed back. Uh, certainly in a year like when we had so many other things on our mind and then solar winds happens and then we're all reminded that man, we have huge still cyber risks out there. Hey, hey, Carol, thanks for

having me. This really was a wake up call that hit us right at the end of and it is unlike anything we've ever seen before, you know, as as you know, we've seen major cyber incidents throughout the last few years, whether you go back to the Sony hack by North Korea or we saw major worms such as back in want to cry, impacted businesses across the globe.

But what makes this so unique, and in many ways I almost think of this as a cyber pearl harbor, is it gives the Russian or the suspected Russian actors what we call hands on keyboard access to a large number of very important US government as well as private private sector UH organizations, really all at the same time. And that's something that we haven't yet seen. Well, so explain that for us a little bit more, Steve. When you say a keyboard um attack, what does that mean?

It sounds to me like it gives them access like if I was sitting down to any of those systems in front of the keyboard and had the access. But explain it and this isn't my world, that your world, so explain what the significance of that is. That's exactly right. So think of it as it creates a virtual connection between a human cyber attacker sitting somewhere around the world into one of these very sensitive U S organizations where they can look for assets of opportunity to steal or

look for systems of opportunity to implant malware. And because it's being executed by a human as opposed to a preprogrammed UH playbook, it can make on the fly decisions to ratchet up the lethality of the attack or to identify assets that are much more valuable from an espionage perspective UH than And something like want to Cry that we saw in which was more analogous to it's like a dumb bomb where it ran the same code everywhere that it landed and we knew exactly the damage it did.

In this case Department of State. You might have a Russian actor feeling very different information from Department of Energy, and every organization that's going to be a little bit different. Well, what's interesting too, is do you think this was a Solar Winds problem, Because let's remind everybody, it was, you know, a supply chain attack or a third party attack. That's how it's been described. The initial target, right, wasn't the US government or some of those other institutions, but one

of its software suppliers. So shame on UM Solar Winds, shame on the U S Government for maybe not being more careful with its supply chain. What is the lesson to be learned here? And just got about a minute or so, so, so the main lesson is that there's no single thing that we can count on in order to defend our environments. We need good defensive technology. We need to scrutinize our suppliers, We need to have well trained people operating our cybersecurity defense. It's it's a little

bit like driving a car safely. You want to have the right technology seatbelt, air bags, any lock breaks, but but you also have to pay attention to what you're doing or else you can still get into an accident and making sure that you have all of those components. It's something that will have to look at more broadly across the industry. Yeah, I do wonder just quickly too. I mean, just what happened here? Right? I mean we all know that these problems are out there. We've got

to be careful. I just is it just somebody a major screw up or something more significant, because I know Solar Winds, you know, has come out and said listen, we were warning people of some lack of security. And again sorry just about thirty seconds. Yeah, it comes down to we all need to up our game. Aim. So software suppliers need to scrutinize their development process, the way that they're operating UH their own environments so they don't become the avenue for UH Nation States or or other

cybercriminals even to get into environments through legitimate software. Every legitimate software maker needs to up their game. All right, good stuff, Hey, Steve, thank you so much. Steve Groban, he's a senior vice president chief Technology officer at McAfee. He is joining us on the phone from Plano, Texas. I want to talk a little bit more about the trade today with a guest who's got some specific thoughts

when it comes to the global airline industry. Frank Holmes is with US CEO and Chief Investment Officer at US Global Advisors investors excuse me, US Global Investors with some five thirty four million dollars in assets under management, and he joins us on the phone from San Antonio, Texas. Frank, nice to have you back here on Bloomberg Video. So, um, let's talk about the airline industry. I think they are

just counting down the days. So there are a lot more flyers and passengers and consumers ready to get on planes, but it's going to be at least a few more months before we get to even something close uh to normal. How do you see it? And where our investors kind of positioning money right now? What are you seeing in terms of trends. Well, one of the first things that just to add to the data points you gave JETS E t F is a three big in dollar E t F now, um, and you mentioned five million. That

was just the mutual funds. The E t s are are bigger today and that's been a phenomena for the mutual fund industry as a shift has gone to ETS just has been a phenomena since March when it hit thirty five million dollars and growing to three billion dollars in this forward looking everyone's forward looking on this of

anticipating in twelve months. So what happened after every other crisis that we've had in the past thirty years, and the airline's industry seems to bounce back within twelve months. So we've seen a lot of money come into the airlines through the jets as a product, which I think is most fascinating betting. And then on this weekend we had one point three million tourists one point three million, even with record uh COVID negative numbers. So people are moving.

Business is not moving like, it's not booming yet. It's going to take a while. Everyone's zooming when it comes to business transactions, but tourism is up substantially. The major airlines are rerouting their rather than going through a hub, They're going NonStop from Pennsylvania, New York to smaller cities rapdown to Florida. Uh same thing we're seeing Southwest go from Phoenix rapdown to Cobble St. Lucas. So help me

out kind of where I mean. Listen, this is you can't market time, but it is about timing the market here when it comes to when you think you know truly air travel gets back to normal. It's the same thing for the hospitality industry. I mentioned Carnival before we got going. It's you know, everybody's trying to kind of make their best guess. We know things will as dark as they may feel now and make it a little

bit darker as we get into January. Um that because of the vaccine, we have started to kind of map at our playbook for getting back to normal. But again it's a timing issue. So at this point you don't think it's too early to put money to play here. When it comes to those big airline industries. I mean, which if you look at them individually, Dealta still downcent

this year. United is down fifty percent this year. You know, I could kind of go on, you can right across the board and if the economy gets back to where it was, America flying two million people a day total was two point seven million people seven thousand coming in for Asia, Latin America in Europe, but two million people flying a day. As we saw that drop down to nineties tho in April. The busiest airport in the world at that time was an Anchorage a Lass shipping medical

equipment to North American and Europe. It's all changed and it's all improving. And I think you have to be optimistic and take a look at the G twenty countries. What they're sort of MMT is called modern monetary theory of printing money. But they're all doing it collectively. It's not one country is the valuing the country's currency against another. They're all doing collectively to fight this Third World war called Corvette. And and that is basically showing up in

faith and hope in the economy. Well. And the thing is, though, listen, this is contingent on you know, I just saw another headline. I think it was Chili, uh coming up and finding you know, the first case of Chili announcing its first patient with a new strain of COVID nineteen. I mean, this is an angle that maybe we weren't already for, Frank and I do wonder we'll have to watch and see where it goes. The expectations are at least we've heard early on that the current COVID nineteen vaccine will

take care of these variants. But it's just a reminder that it's going to take a while force to completely feel you know, comfortable maybe about moving around in the world and more importantly, Business travelers a smaller percentage of airline passengers, but they are typically twice as lucrative. Right, they contribute so much, maybe as much as of an

airline's profits. That's going to take a little bit longer, so we're gonna have to be patient to see maybe that impact when it comes to the airline's bottom Linees just got about thirty seconds here. Well, the big part we forget is that all these additional fees have been charging, and they can ramp those up for tourist traveling as they get back and push back to one point five million people flying a day, getting that in the five thousand of business travel that can come later because they

made up so much money. Ancillary fees were massive, and they're bet on those. Yeah, Listen, airlines have gotten so good at charging us for everything. Hey, Frank Colmes, thank you so much. Have a happy New Year's CEO, chief investment officer at US Global Investors, on the phone from San Antonio, Texas. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn.

I'm on Twitter at Bonnie Quinn and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio