Cisco Buys Splunk for $28 Billion

Bloomberg Intelligence Senior Technology Analyst Woo Jin Ho reports on Cisco Systems agreeing to buy Splunk in a deal valued at about $28 billion, representing its biggest acquisition yet and a massive push into software and artificial intelligence-powered data analysis. Frank Sorrentino, CEO at ConnectOne Bank, discusses what Fed policy means for banks and small businesses. Dr. William Moss, Professor of Epidemiology at Johns Hopkins Bloomberg School of Public Health, shares his thoughts on the recent roll out of Pfizer and Moderna booster vaccines. Tara Nathan, Founder and Leader of Mastercard Community Pass, talks about transforming the delivery of social services in remote communities in Africa and South Asia. Bloomberg Businessweek Editor Joel Weber and Bloomberg News Global Economy Reporter Enda Curran share the details of Enda's Businessweek Magazine story The Fed’s Dream of a Soft Landing Is Facing a Triple Threat. And we Drive to the Close with Hilary Kramer, CIO at Kramer Capital Research.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan. 

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Episode Transcript

Speaker 1 (00:01):
This is Bloomberg Business Wait inside from the reporters and
editors who bring you America's most trusted business magazine, plus
global business finance and tech news. The Bloomberg Business Week
Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Speaker 2 (00:18):
Hey takes kind of pointing out there's a great writing
and story on that Cisco Splunk deal today. It says
the deluge of data.

Speaker 3 (00:25):
I got to give Charlie Pellett the credit here. He's
the one who told us this.

Speaker 2 (00:28):
He did. Charlie like sick.

Speaker 3 (00:30):
He's left, but I think we love you Charlie.

Speaker 2 (00:32):
Well, Charlie, we love you all right. So, if the
daylus of data in the modern world is increasingly overwhelming,
Splunk claims to have been ready for it for twenty years.
The company's name reflects the act of burrowing deep down
into the earth to explore caves, the adventure of data splunking.
And so Charlie, of course just talked about this. We're
talking about this because Cisco did its biggest ever deal

(00:53):
and it bought Splunk.

Speaker 3 (00:54):
Twenty eight billion dollars for a company that was started
by three friends back in two thousand and three. The
co founder and ex chief CEO of Yahoo, drawing on
his past or should say ex chief executive officer, drawing
on his past building search engines at Yahoo.

Speaker 2 (01:09):
We just talked with him.

Speaker 3 (01:09):
Yeah, it's really cool.

Speaker 2 (01:10):
It's a very cool company.

Speaker 3 (01:12):
Right yeah.

Speaker 2 (01:13):
Does it make sense for Cisco?

Speaker 4 (01:14):
I don't know.

Speaker 3 (01:15):
Cisco shares her down more than three point nine percent
right now?

Speaker 2 (01:17):
All right, so let's get into it. Because they're pay
one hundred and fifty seven dollars a share in cash,
thirty one percent premium to spunks closing price yesterday, and
the purchase represents roughly ten percent of Cisco's market value.
That feels like a lot with us. Is Bloomberg Intelligence
Senior Technology Alice wu Jinho. He's down Zoom from BI
headquarters in Princeton, New Jersey. Wugen, thank you for being

(01:37):
back with us. You described the deal as the moby
Dick of deals that's been talked about for quite some time.
Tell us more and what it means for Cisco.

Speaker 5 (01:46):
Sure, so, I think you characterize it fairly well.

Speaker 4 (01:49):
Right.

Speaker 5 (01:50):
This blog actually borrows really deep and trying to fairly
understand an enterprise's data. If you think about where all
the data traffic flows through it has to go through
a one of Cisco's boxes. So Cisco is trying to
help their users and customers better understand the data that
goes through their boxes. And now they can monetize the

(02:10):
information that goes to their boxes buyers, plug deal.

Speaker 3 (02:13):
Okay, So explain what that means for, you know, someone
like me. Carol's also I can think in this campcter,
she's looking like, Okay, what's going on here?

Speaker 2 (02:21):
Well, why does Cisco need this? Is it just a
case of making everything more secure? And that's crucial?

Speaker 5 (02:27):
Well, it's it's all about network visibility, right, I don't
know what is going through point A to point B
if they're good guys, are bad guys.

Speaker 4 (02:35):
Going in point A to point b?

Speaker 5 (02:38):
Or even something a little bit more benign, such as
how much YouTube is going through my network or how
much social media is going through my network? And you
want to better.

Speaker 2 (02:51):
Doing this before? Forgive me for interrupting, but wasn't Cisco
doing this before? Wujin or no?

Speaker 5 (02:56):
They were?

Speaker 4 (02:57):
They are, okay, right?

Speaker 5 (02:59):
The issue is is that they just they want to
better understand the better data traffic patterns that are going there.

Speaker 4 (03:06):
Now.

Speaker 5 (03:06):
Now the challenge for Cisco has been is how do
they make a software deal large enough or the software
business large enough to make it more meaningful as part
of the business transformation. And that's one of the reasons
why they made this deal. It's it was a business
decision as much as a technology decision.

Speaker 3 (03:24):
How do you explain this price? This is quite the premium,
thirty one percent premium to the closing price on Wednesday,
one hundred and fifty seven dollars a share, ten percent
roughly of Cisco's market value. Cisco shares down close to
four percent right now. How do you explain the deal size?

Speaker 5 (03:38):
Well, I'm actually quite comfortable with the deal size. Get
if we walk away from the actual twenty eight billion
dollars on the largest deal that Cisco's ever made. Cisco
rarely does large software acquisitions. They've made small software acquisitions
and try to tuck it in. What they've learned is
that it hasn't been successful in driving what they want

(03:59):
to do on the recurring revenue side. They needed to
pay up a software evaluation and if you look at
if you will look at traditional software M and A metrics,
this Splunk is going at six times forward sales and
faster growth. Software companies typically go anywhere between eight times
to twelve times sales, So you know, you're getting a

(04:21):
lot of good value from the sense of recurring revenue base,
which is something that Cisco has been trying to trying
to grow over the last couple of years. And you're
getting different with Plunked. You're getting a high margin software
revenues and you're getting that from splunk And you know,
one of the things one of the reasons why Cisco
could not get into the software business was because everything
was just so darn expensive back in the pandemic days.

(04:44):
And now they found the window with evaluations coming down.

Speaker 3 (04:46):
So explains the share price reaction from Cisco right now.
And granted we're having a down day across the board
for tech companies, not that much, but not very much.

Speaker 5 (04:56):
Yeah, yeah, fair question. So so was running the math
and it's actually the deal is going to be deluded
for the first year by about two to three percent,
So that's going to that's going to explain that a
little bit. That's one number two. You know, when I
was listening to the conference call earlier this morning, I
think some of the analysts wanted a faster growth software

(05:18):
company with more modern network architecture. The one criticism about
Splunk is that they still cater to the legacy older
technology and making that transition to modern clouds and and
it's a slog right. These these transitions don't happen overnight.
These are multi year transitions. But for Cisco that's okay

(05:40):
because they still have a lot of customers on older
technologies also trying to make this move to the modern cloud. So,
you know, Splunk will give them a little bit more growth,
faster growth, about about one hundred two hundred basis points,
and they get the software that they want, you know.
I mean, if we look at it from a growth perspective,

(06:02):
Splunk is growing at around twelve percent based on Contensus
forecast at Cisco is growing at one percent next year,
a steady state five percent. So it's a win win
for both companies.

Speaker 2 (06:13):
Do we need to see Splunk CEO Gary Steele stay
with the company. Is that crucial important in your view?

Speaker 4 (06:22):
In the interim?

Speaker 5 (06:23):
Yes, If we think about where Splunk is going to
sit in the Cisco ecosystem, we're talking about roughly eight
percent of total revenue, and it's going to be five
times the existing software revenue the observisibility piece, right, So
they'll need somebody to help manage the integrations I suspect,

(06:47):
and also help the Cisco salesforce who will need to
wrap up really quickly on selling the Plunk products.

Speaker 2 (06:54):
I know you don't say to our audience. Yeah, this
means it's the reason to buy or sell Cisco. But
does it make Cisco a more attractive company? Because I
think they've been working in a transformation of sorts and
maybe trying to be more relevant.

Speaker 5 (07:08):
Right, and and thanks thanks for that disclaimer. The one thing,
the one thing that I can say is that what
I've noticed from other hardware companies that have made this
transition from perpetual sales to recurring revenue sales, that should
that could drive evaluation expansion, multiple expansion because of the

(07:30):
reliability of cash flow.

Speaker 6 (07:32):
MM.

Speaker 3 (07:33):
Do you think Cisco's done making acquisitions for a while.

Speaker 6 (07:37):
Oh?

Speaker 5 (07:37):
I don't think they're done making acquisitions.

Speaker 4 (07:40):
You know.

Speaker 5 (07:43):
What I've what I do think they'll do is try
to digest Blunk and make several smaller acquisitions around it,
whether it's adding more semiconductor technology or some hardware technology,
or or even more software technology. But maybe in the
one hundred of millions instead of the billions.

Speaker 2 (08:02):
But this is one that moves the financial needle correct
for the company, for Cisco and building some business exactly.

Speaker 5 (08:09):
So if we think about it from a software revenue perspective,
I said, it's five times there. They're five times the
size of their existing enterprise software base. But the overall
software mix is now going to go to roughly about
thirty five percent of total sales. And that's a good thing.

Speaker 2 (08:30):
Hey really quickly forgot totally spaced fifteen seconds. Any regulatory
problems with this one really quickly.

Speaker 5 (08:36):
Nope, very little China business. It's going to go through
one percent overlap.

Speaker 4 (08:42):
No issues.

Speaker 3 (08:43):
That was quick as can. You shall receive nope.

Speaker 2 (08:46):
You listen, man, I love it, Love it. Bloomberg Intelligence
senior technology analyst. We didn't joining us on zoom from
BI headquarters in Prince, New Jersey, Wojdin, Thank you so much.
And as to mention, Cisco shares under pressure, no surprise,
though often as the acquirer, it's also in a down market.

Speaker 1 (09:01):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern Listen on
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Speaker 2 (09:27):
All right, we are going to take it to the bank.
We're going to take it to a bank CEO who's
going to give us some clarity. My fingers crossed in
terms of what's going on. We're definitely seeing the effects
of the FED move. We just talked about it. But
let's get right to our guests.

Speaker 3 (09:38):
Yeah, very please start back with us founder, chairman and
CEO of Connect One Bank, Frank Sorrentino. Connect One Bank
has about two dozen locations in New York, New Jersey,
and Florida, and Frank joins us this afternoon from New
York City. Frank, good to have you with us. I
don't know to what extent you were able to catch
the tail end of our conversation there where it kind
of gave away all the questions that I wanted to
ask you, but I want to dive right into it.

Speaker 6 (09:58):
I mean, thank you, thank you for that preview.

Speaker 3 (10:01):
Yeah, no problem, But we do love it when you join
us because you guys have such a great read on
the economy. So let's start big picture here. What are
you seeing right now? In September of twenty twenty three,
when the markets are in turmoil, rates are high. Give
us an idea of what you're seeing at your locations
around the country.

Speaker 6 (10:18):
Look, I think there's some anxiety relative to the direction
of interest rates. I do think that what we saw
and heard yesterday is that rates are going to be
at these levels for at least the foreseeable future, the
next couple of quarters. And I think that there needs
to be some clarity about the direction of rates. People
are holding back doing things because they think maybe rates

(10:41):
will be lower. Other folks are concerned if rates are
going to go higher. And so the idea that the
Fed pretty much said, we're sort of where we are
and we're probably going to stay here for a while,
I think gives a little bit of clarity to the
environment that we're in. The vast majority of our clients
and our business owners are still optimistic. They're still doing transactions.

(11:07):
You know, builders are still building, developers are still developing.
There's still a lot of opportunity in the market. Everybody
still has a job. Everybody's comfortable that they're going to
keep their job or that they can move to a
different job. And I think that level of optimism continues
as we move forward. There is now a cost of
money that has to be imputed in every transaction, and

(11:29):
I heard a little bit about that before, and I
think that's really the important part. People can still do things,
you just have to include what is going to be
the cost of the transaction to do with.

Speaker 3 (11:39):
Okay, so are people are still Are people still taking
out mortgages?

Speaker 6 (11:42):
Yes, people are still taking out mortgages despite what you're
you know what what was said before. I think people
are still buying homes. We are woefully under built in
this country, and certainly in this market where some one
point five million homes short. And so every builder that
we represent when they put product on the market today,

(12:04):
it's selling, and so I'm very optimistic about that. Rentals
are still staying strong. Every project that we've gotten behind
relative to financing in the multifamily space is renting up
as soon as it's completed.

Speaker 1 (12:18):
Wow.

Speaker 6 (12:19):
So a lot of good indications out there, all right.

Speaker 2 (12:23):
The devil's in details, and sometimes it's like nanometers that
gives you an idea of maybe a new trend being built. So, Frank,
are you seeing any signs of softness stress? Concerns, defaults,
maybe you know terms being renegotiated. Give us an idea,
because again, the devil is going to be in those
small minute details for us to kind of figure out

(12:45):
if we start to see a change.

Speaker 6 (12:47):
Look, we've certainly seen that our group of clients are
being much more thoughtful about various projects, transactions, or business
opportunities because because of that added cost of financing and
so the volume of things is certainly down. I can
definitely report to you that. And so we're seeing that

(13:10):
not just hear connect one, but we're seeing that across
the industry. Lending for the most part has slowed down
quite a bit, and that will make its way through
the economy, which is something which the FED is actually
engineered to happen. So we are seeing a level of
people thinking about things in a very different way, adding
that cost of funding, thinking about whether or not certain

(13:31):
things make sense and things there are things that made
sense in a zero interest rate environment or a two
percent interest rate environment that don't make sense today off
the table. Look, any transaction that you would look at,
even a builder who's going to develop a project today,
the cost of money requires that project to have a

(13:52):
different outcome, a different sales price, a different rental pro forma,
and certain projects don't pencil out, others do, and the
ones that do, there's money available for them, and they're
continuing to move ahead and do those things.

Speaker 3 (14:07):
Frank, give us an update on deposits. I mean, we're
in an environment I've said at you know, a dozen
times today where money market funds are yielding over five percent.
You've got some high interest savings accounts at some upstart
banks that are yielding close to five percent. I think
City has some sort of promo at five point five
percent for six months if you put like, you know,
one hundred grand over there or something. It's like, what

(14:28):
are deposits looking like for you guys right now?

Speaker 6 (14:30):
So again, you know, we're mostly a commercial institution, and
so we cater to the vast majority of businesses and
small businesses, and we are seeing deposits tightening up a bit.
People have a little bit less liquidity on their balance
sheets today, and that's what's causing the competition, again engineered
by the FED. All the qualitative easing that was brought

(14:52):
to market in twenty twenty is now being let out
of the economy through qualitative tightening and so there's less
deposits to go around. Deposits are the fuel for banks
to make loans, and so there's heightened competition amongst banks,
amongst non banks, money market funds, all the various actors

(15:14):
that you mentioned before. That's driving up that cost to
banks and a benefit to individuals who are either opening
accounts or investing money, and that's having an impact on
the economy as well. So yes, we could get into
an economics lesson here. Where M two declined for the
first time a few months ago, it has flattened out recently.

(15:39):
I do believe the FED is going to take their
foot off the accelerator pedal there a little bit and
allow some additional liquidity in the system so they don't
break anything, and so we do have a soft landing.
But I do believe that competition for deposits, which I
think is the question you asked, is going to continue
for the foreseeable future.

Speaker 2 (15:57):
Hey, Frank, remind us is it sixty percent of your
portfolio commercial? I know you said most you're really commercial
is about some.

Speaker 6 (16:03):
Percentage commercial small businesses all different types of businesses in
and around the New York metro.

Speaker 2 (16:08):
So I am curious how much of that portfolio, of
those portfolio of loans is coming due anytime soon and
is going to have to reap potentially at higher rates.
And are you seeing any stranger stresses in that portfolio.

Speaker 6 (16:20):
Yeah, it's a it's a fairly small amount that come
doe every quarter or even on an annual basis. We
have a fair amount of fixed loans. We also have
loans that reprice obviously on a variable rate basis. With
the underwriting that we've done here at Connect One Bank,
we've always included an interest rate shock and so the

(16:41):
vast majority of the loans as they're coming do or
well within that well within those parameters relative too.

Speaker 2 (16:47):
So no calls from small businesses saying hey listen, Frank,
are to your team and saying we're having a little
bit of a tough time. We need we need some
help here. We've been with banking with you for years.
What are you going to do for me?

Speaker 6 (16:58):
Well, I will tell you that everyone is making the call, okay,
but the question is are they really struggling or not.
We're seeing, you know, at the same time that we're
seeing interest rates go up, we've also seen inflation push
up the pricing of everything. So if we look at
restaurant receipts, they're up, maybe not because of more people
seated there, but we're seeing that the average price per
meal has gone up. If we look at rent roll incomes,

(17:21):
they're up because rents have gone up, so that there
has been a move up and pricing for everything. And
I think that's important for people to keep in mind.
It's not just the interest rate component that has driven
up the price of the right thing.

Speaker 4 (17:37):
A new stream also gone up.

Speaker 3 (17:39):
Yeah, you talk to landlords and you know they're saying
the price of insurance has shot up so much that
they've got to raise the rent in a commensurate way,
and they.

Speaker 6 (17:47):
Are raising the rents right. We're seeing rents across the
New York metro market are up somewhere in the thirty
thirty range over the last two and a half to
three years.

Speaker 3 (17:56):
Frank, we only got thirty seconds left. You have a
branch in West Beach, and you have branches throughout New
York and New Jersey. Where's the economy strongest right now?
Based on your branches?

Speaker 6 (18:06):
I still say the New York metro market. Don't you
know anyone who tries to discount that market. Don't bet
against New York. Florida is doing really well for us
at Connect one, but don't bet against the New York market.

Speaker 2 (18:17):
Got a word to describe the economy right now and
just got ten seconds. I still think it's robust, robust,
all right, right, listen, we were looking forward to talking
with you. It's like the perfect guest the day after
the FED. Frank Sarentino, b while Founder and CEO of
Connect One Bank on zoom in New York City.

Speaker 7 (18:35):
This is Bloomberg.

Speaker 1 (18:41):
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Speaker 2 (19:00):
All right, So the rollout of the latest COVID vaccines,
they are underway beginning. I believe last Friday you got
Pfizer Maderna recommended for those six months and older. So
we wanted to really kind of get I know, people
who are going out and getting them, but we wanted
to get some clarification for everybody about the latest strain
in the vaccines and kind of what we should be doing.

Speaker 3 (19:19):
Tim very pleased to have with us. Doctor William Moss,
Professor of Epidemiology at the Johns Hopkins at Bloomberg School
of Public Health that is supported by Michael R. Bloomberg,
Founder of Bloomberg LP man at Bloomberg Philanthropy. He's also
executive director of the International Vaccine Access Center. Doctor Moss
joins us on Zoom from Baltimore. Good to have you
with us. I was surprised last week to see the

(19:41):
news from the vaccine makers saying that they expect twenty
four percent uptake for this vaccine the COVID won at least,
which is actually higher than it was in previous boosters.
What do you make of that number?

Speaker 8 (19:54):
Yes, thanks Tim for having me. I mean it's disappointing
but probably realistic. We know that of individuals who receive
the primary series, only seventeen percent overall receive the by
veil and booster. That proportion was much higher in the
highest risk group, which is a good thing in those

(20:14):
older than sixty five years of age, but was still
only about forty three percent. So unfortunately, I think people
have gotten tired. There's a lot of misinformation about the
COVID nineteen vaccines, and so I think that probably is
a realistic expectation. I hope we do better than that.

Speaker 3 (20:35):
Do people who are not in high risk groups actually
need to get vaccinated against COVID nineteen.

Speaker 8 (20:42):
Yes, it's an important question to ask, and I think
are There are three reasons why people would want to
get these updated COVID nineteen vaccines. You know, the first
is to prevent illness in themselves. And we know that
within the month after vaccination, when antibiote levels are highest,

(21:03):
people are really protected against getting infection, or if they
do get infect they get a very mild disease. We
know that that protection against severe disease, particularly hospitalization and death,
lasts much longer months, even perhaps a year or longer.
So the first reason is to get protected against disease,
and even in individuals who are younger and healthy, it

(21:27):
can be very disrupting to have a severe, you know,
an illness that puts you in bed for several days,
you miss work, you miss school. The second reason is
that there's increasing evidence that the vaccines can prevent long
COVID and so even individuals who have mild infection, can
go on to get long COVID, which is a complex
disease with multi different, multiple different signs and symptoms. The

(21:51):
third reason is to protect those around you from getting
infection or getting severe disease, particularly those who are most
vulnerable and also infants younger than six months of age
who aren't eligible for vaccination.

Speaker 2 (22:04):
So doctor Moss, is it a yes, yes, and yes,
go get it? Essentially?

Speaker 8 (22:10):
I think so I can understand and that there is
some controversy about this, you know, particularly you know, let's
say children six six years to seventeen years of age
healthy and particularly if they've had the primary vaccine vaccination
series or if they've had COVID before, they're going to
have immunity. They're a very low risk of severe disease.

(22:33):
But I think you know, what this updated COVID vaccine
does is that it targets the omicron variants that have
been circulating recently. We know there's cross reactivity and cross
protection from laboratory work against the current circulating strains. So
I would say I would say it is yes, yes, yes,
and yes. But I can understand why people are asking questions,

(22:54):
particularly young young people who are who are healthy.

Speaker 2 (22:57):
All right, there is there a certain group that you
should say absolutely, yes, you shouldn't even hesitate.

Speaker 8 (23:04):
Yes, for sure, you know older adults, and where you
draw that line is somewhat arbitrary. But you know, people
are going with sixty five years and older, they're going
to be at highest risk of severe disease, hospitalization, and death,
even if they've had a prior vaccination. There at higher risk,
particularly those older than seventy five years of age, and

(23:26):
obviously those with underlying medical conditions that play placed them
at high risk, particularly those who are who are you know,
suppressed for various reasons.

Speaker 3 (23:35):
What about kids? Should kids get the vaccine? I mean
I got to tell you. Before the vaccine was available
half my son was three, so he wasn't able to
get it. He ended up getting a last September at
the vaccine. But before he got the vaccine, he got COVID.
When my whole family got COVID, he basically had a
fever for a half hour and then was totally fine
after that.

Speaker 8 (23:55):
Yes, I mean, I mean so obviously the CDC recommended
these up data COVID vaccines for children six months of
age and older. And uh, you know it will provide
additional protection. Again, as we were saying, they're they're young.
Uh uh, you know, young children, children who are otherwise healthy,

(24:17):
who've been received the primary series before, they're definitely at
lower risk. So you know, we want to prioritize those
who are at higher risk, but I think everyone can
potentially benefit. We we have seen children hospitalized. I've seen
children hospitalized you know who otherwise Well, it's rarer. The risk,

(24:39):
you know, the probability of that is much smaller, there's
no doubt about that. But there there is a risk
never nevertheless, and these updated COVID vaccines can provide protection.

Speaker 3 (24:49):
What's more important if you could only get one of
these vaccines for a kid, the flu vaccine or the
COVID vaccine.

Speaker 8 (24:55):
Yeah, that's a that's an interesting question. And uh, you know,
it's hard to predict a little bit what the epidemiology
is going to be in this coming season. You know,
the risk of long COVID, I think is an important one. Also,
children have had before with COVID nineteen, a multi inflammy

(25:18):
inflammatory syndrome that can also be quite debilitating. So in
my mind, you know, some of the some of the
adverse events or at impact of the disease may be
worse with covid, but it's that's a hard trade off.

Speaker 2 (25:34):
Crip well. Having said that, so then what about flu
covid RSV vaccine for kids? What do you choose?

Speaker 8 (25:42):
Yeah, so the RSV vaccines that were just recently authorized
and recommended are really for adults older than sixty years
of age, so they're the ones who are going to
be eligible for the for the two new RSV vaccines.
That decision, the way it's kind of written by the
CDC is that it should be done in consultation with

(26:02):
the physician, where there where there's a discussion about the risk,
the benefits and or pros and cons of that. So
for children it will be a decision of UH, you
know COVID and UH an influenza vaccine. And you know,
I think it's quite easy when when a person goes
to to get one vaccine to get both. All experts

(26:26):
recommend you know, that they could be given simultaneously, the
COVID and the influenza vaccines. So I would I would
recommend that everyone get both.

Speaker 2 (26:36):
I think my husband might have done a trifecta. I'm
not quite sure.

Speaker 3 (26:39):
For him, he should get a sticker you can?

Speaker 2 (26:42):
Can you do it? And is it okay to do
it all in one shot? No pun intended?

Speaker 8 (26:47):
Yeah, I think you know, there's we We don't really
there's not a lot of evidence of administering the new
RSV vaccines with other vaccines, and particularly with the COVID
vaccine and influenza. I don't see any theoretical reason why
you couldn't do it, but I know some experts are
saying to space them out. And one way to kind

(27:07):
of think about it is, you know, what are the
infections that we're seeing now, what are the infections that
are likely to you know, come sooner. We are seeing
RSV cases now, not as much influenza, so maybe get
the RSV earlier, But we want people to get the
COVID vaccine and the influenza vaccines probably by mid October latest.

Speaker 3 (27:28):
All right, are you markam mccount I emailed the doctor yesterday, Yeah,
to ask about the kids. You know, it's like, when
do we go in to get the flu vaccine? Is
it too early to do that? And he wrote back, no,
it's not too early anytime before October, especially with our
youngest who's just over six months. She's now eligible for flu,
but she has to get a vaccine, a flu vaccine
booster after four weeks, so you have to spread it

(27:49):
apart by four weeks.

Speaker 2 (27:52):
Well, doctor Moss, you really gave us some things to
think about in some clarify clarity clarification. Excuse me. So
was so appreciated, Doctor Bill Moss. He's Professor of Epidemiology
at Johns Hopkins Bloomberg School of Public Health, of course,
supported by Michael R. Bloomberg founder, Bloomberg LP and Bloomberg Philanthropy.
He's also doctor Moss that is executive director of the
International Vaccine Access Center. So, man, he's like the guru.

Speaker 3 (28:14):
You know what's good is when you take your kids
to the pediatrician. Sometimes you can get a fluid shot
there too. They'll give you the kids they have them.

Speaker 4 (28:20):
I do it.

Speaker 3 (28:21):
Yeah.

Speaker 1 (28:22):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern on Bloomberg Radio,
the Bloomberg Business App and YouTube. You can also listen
live on Amazon Alexa from our flagship New York station,
Just Say Alexa, playing Bloomberg eleven thirty.

Speaker 2 (28:41):
What's Really Been interesting this week is you know, we've
been talking about it. The You and General Assembly has
been in session this week alongside New York Climate Week,
which means we've had some really cool people hanging out
with us, catching up with companies and institutions that are
working on the world's most significant issues.

Speaker 3 (28:56):
To him, Yeah, one of those people is Tara Nathan,
founder and leader of MasterCard Community Pass. It's a digital
platform that enables the delivery of what it calls critical
services to remote, frequently offline communities. She joined us on
Zoom in New York City. Good to have you with
us this afternoon.

Speaker 9 (29:13):
Thank you for having me.

Speaker 3 (29:15):
Okay, so, explain what exactly you guys are doing at
MasterCard with Community Pass, who it's reaching, and how you
choose those locations.

Speaker 9 (29:22):
Sure, so, I mean around the globe, in many communities,
across Africa, across India, Southeast Asia, and even frankly in
Latin America. In our own backyard there is there are
billions of people who live in communities that are completely
offline at best in the best of circumstances, they'll have

(29:44):
intermittent mobile connectivity, often no power at all. And what
that means is that these are communities that frankly, are
precluded from getting access to basic services that you and
I take for granted, things like access to car, things
like the ability to make a digital transaction, the ability

(30:04):
to purchase something online, right, and so billions of people
around the globe lack, you know, the capability to do this,
and so Community Paths seeks to solve for this, provides
the digital infrastructure in these communities to reach people where
they're at.

Speaker 2 (30:24):
You know, it's interesting, Tara, and you head to your
website and you guys remind us that there's one point
seven billion people in the world that do not have
a bank account, something we all take for granted, right,
but you know most people are a lot of people
do not, and then you've got almost half of the
world today struggling to meet their basic needs, whether it's food, education,
basic healthcare. It's something that Tim and I we look

(30:45):
for guests to talk about, you know, what's going on
in the broader world, the developing world, because it's very different,
certainly to what we experience here in New York City,
although there are people whos struggling here, also in major cities,
certainly in developed world as well. But tell us about
how long you guys have around and the impact you
have had.

Speaker 9 (31:03):
Sure, well, actually I'll just build on the point that
you make. I mean, we talk about your right financial
inclusion and sort of the billions that lack access to
something like a bank account. I think it would be
maybe a surprise to some of your listeners that there
are billions. There's over a billion people on this globe
who lack access to something as fundamental as an identity.

(31:23):
So imagine what that means. It means you and I
have multiple identities in our wallets. Right, We've got a school, idea,
work ID, you've got a bank ID, you've got several
credit cards, hopefully they're all MasterCards. You've got several you know,
you've got all kinds of identification. There are over a
billion people around the globe who lack something as simple
as the ability to say, my name is Tara Nathan,

(31:46):
I live at this street and this is what I'm
entitled to. And if you want to think about a
digital identity, that number can be north of three point
four to three and a half billion people. Right, So
when you think about where we look to focus our efforts,
it's really in those communities it's the communities where there

(32:08):
is no access to a foundational identity, a digital identity,
and where the communities predominantly are transacting in offline communities.
You know, these are communities typically where people are farmers,
small holder farmers, so they maybe have a hector or

(32:29):
two hectors of land, right, isn't the.

Speaker 3 (32:33):
So I just we don't have a ton of time,
so I want to I just want to get a
couple a couple more questions. But I'm wondering about mobile
phones and technology. And you know, we've talked a lot
this week about leap frogging technology because you know, you
can go to places now with satellite technology, with mobile
phone technology, and you can have your bank on your
mobile phone. So weren't mobile phones supposed to to fix this?

(32:54):
And doesn't you know and even even flip phones.

Speaker 2 (32:57):
Right, And we've been talking about this for years, yea
this idea like yeah, right, Like there's a lot of
phone companies.

Speaker 3 (33:03):
Phone companies are increasingly you know, you have places in
Africa where phone companies are doing banking.

Speaker 9 (33:09):
Yeah, no, You're spot on, And there are there's a
I think when you look at mobile banking and you
look at mobile phones they've done a great job I
think at leap frogging and giving many communities access to
to to banking services, et cetera. And yet still there
are billions that I talk about who are still left,
you know, disconnected and without access to the most fundamental

(33:29):
service like an access to a credit or a bank account,
or health services, education markets, et cetera.

Speaker 2 (33:36):
I guess what I guess we would love to get too,
is is what is it? Are we making progress? Tell
us about what you guys have been doing and maybe
getting people so that they do have the identity they
can be part of this system. And I'm curious about
where it's working or is it a lot of women?
You know, I remember with micro loans, doing tons of
stories twenty twenty five years ago about you know, a

(33:58):
small amount of money would be given to a woman
because it made a difference in a family's lives life.
If you will, so just a little bit about kind
of the progress you have made and what it tells you.

Speaker 9 (34:10):
We're making great progress. I'd say, Look, we started I mean,
we started out less than I'd say, you know, three
to four years ago, we're already crossing We've crossed three
point eight million. We're coming on four million users on
the platform. And when I say a four million users,
what I'm talking about is again a small holder farmer.
Talk about what the benefit is somebody who earns a

(34:31):
dollar or two dollars a day. That's the person we're
trying to service here, and what we're doing is we're
getting her access. In many markets, the majority of these
farmers are actually our women, and we're giving her access
to five dollars of credit because she's now connected digitally
to a bank. We're giving her five dollars of credit

(34:51):
so she can purchase seeds to plant them, to purchase fertilizer,
to purchase pesticides, so that she can increase her productivity
of her land, which is very important you know, sort
of in the climate and the sustainability conversations we're having
now in Ungum, and we're doubling her income and I
think that's the impact that we're trying to do. We're
trying to look at how can digital technology make that

(35:14):
small holder farmer get paid more and faster so that
she can include, you know, expand and increase her sort
of economic outlook.

Speaker 3 (35:22):
Are you know, I hear what you're doing and the
sort of like cryptosceptic and comes out in men. There's
going to be a crypto element, I mean, because the
crypto people say, hey, blockchain fixes all this. Are you
guys leveraging blockchain tech at all?

Speaker 2 (35:36):
And just got about twenty five seconds?

Speaker 9 (35:39):
Okay, Look, the technology is not the hard part here, right,
So whether you talk about crypto or blockchain or whatever.

Speaker 2 (35:47):
What we're really doing.

Speaker 9 (35:48):
The hard part of what we're doing is building the
ecosystem that serves this farmer, and that is crowding in
the buyers and the input manufacturers and the bankers and
the ag techs and the health text That's the difficult
work that we're doing. So we're out in about six
markets now around the globe, like I said, crossing four
million users and crowding in all these actors to service

(36:08):
this small hold of plumb.

Speaker 2 (36:09):
Well, Tara look forward to hearing more updates in the
future and appreciate time. And I know it is a
busy week for you all. Tarnet Nathan, she's founder and
leader of MasterCard Community Pass joining us on Zoom in
New York City. This is Bloomberg. So do you think

(36:37):
that's Bed's dreaming a little bit when it comes to
a soft landing. They're definitely not their base case no,
But are they drinking a little bit of the kool aid?

Speaker 4 (36:47):
Look?

Speaker 3 (36:47):
They only have so much that's in their control, I guess.
So there's a lot happening right now.

Speaker 2 (36:52):
Former US Treasury Secretary Larry Summer is telling the host
of Bloomberg TV's Wall Street Week, David Weston, that the
FED has got the memo and caught the soft landing bug.

Speaker 3 (36:59):
The US central big policymakers are too optimistic with their
latest set of economic projections and are at risk of
being surprised by both faster inflation and weaker growth than
they anticipate.

Speaker 2 (37:08):
Which is why this story about the Fed's dream of
a soft landing facing a triple threat definitely caught our attention.
We talked about it earlier with our TV colleagues in
our simulcast. It is a most read story in The Bloomberg.
It's in the new issue of BusinessWeek, now out on newsstands,
online at Bloomberg dot com, slash BusinessWeek on the Bloomberg.
So let's get to it. Bloomberg News Global Economy Reporter
and a current with us on zoom in our Washington

(37:30):
DC Bureau and the editor of Bloomberg Business Wee Child Weber.
Here in our Bloomberg Interactive Broker studio, the Grimlins are
out in full force. I'm just going to tell you.

Speaker 7 (37:37):
Yeah, warning, I could take a little bit more aerosmith though,
Like that was that was a good start. That was
a good start.

Speaker 4 (37:43):
Yeah.

Speaker 7 (37:44):
So yeah, look, this was a really important week and
this soft landing that the FED has wanted to pull
off like it look for a moment, like it might happen.
Where does this stand?

Speaker 4 (37:58):
Didn't it? Yeah?

Speaker 10 (38:00):
So, look, things have been a bit giddy in DC
for the past few weeks. Right, The data has been
very good. The economy is in much better shape than
anyone's thought. But now there's the kind of feeling just
when you thought it was safe, we have this unprecedented
auto strike in Michigan, which really has significant potential for disruption.
You potentially have the government going to shut down that's
probably expected.

Speaker 4 (38:19):
In a few weeks.

Speaker 10 (38:20):
And of course you have students now repaying those loans
they that had been kind of on hold for the
last several years due to the pandemic that's going to
hit their consumer income. So it's kind of a triple
threat has suddenly come out of nowhere. You know, just
when you thought it was safe that the US had
pulled off is unlikely self landing. We've got these potentially
serious head winds now and it's causing some people maybe
to pause a little bit on some of the a
as I say, some of those giddiest expectations that were

(38:42):
going around.

Speaker 7 (38:43):
Okay, So which of those three threats is potentially the
most serious for the for the Fed's ability to pull
this off.

Speaker 4 (38:53):
It's got to be the car strike.

Speaker 10 (38:55):
So if that goes full pedal to the floor, so
to speak, you're talking about obviously your potential about a
major hit to unemployment. You could even see the monthly
payrolls number turn negative on.

Speaker 4 (39:07):
The one hand.

Speaker 10 (39:08):
On the other hand, it would obviously really complicate the
supply chain story just when car prices, at least new
car prices and US car prices are coming off. The
boil a bit obviously will have potentially inflatory impact there,
and so much so in fact, that if we do
have a full bore or auto strike, you could be
talking about a negative quarter or fourth quarter for growth
for the economy. So the auto strike is front and center.

(39:32):
And then of course you have the government strike. People
take different views on how that might play out, but
it would have certainly in your term impact. And then
of course there's a student only payment, which obviously impacts people,
saying the disposed to lincome they have lifts men.

Speaker 2 (39:46):
And I have to say that one of the numbers
that stood out in your story is, you know, to
remind everybody that there's about fifteen hundred striking UAW workers
right now, but if it goes to the entire UAW
UAW excuse me, it's one hundred and fifty thousand members,
that's significant. And then, as you say, the trickle down
into supply chain problems. People can't cars, you know, get cars.

(40:09):
So what are economists how are they kind of strategizing
around the potential impact of this all.

Speaker 10 (40:18):
They're gaming it out. I mean a lot will depend
on how these scenarios play out. As we say, maybe
the union strike remains somewhat targeted, so to speak, and
maybe they reach a deal in the near term and
the economic damage is limited. But the longer it goes
on and the broader that strike gets, then more material
that hit will be to the economy. No question about it.

(40:39):
It's a bit it's a kind of similar story for
the government shutdown. People say, oh, look, a government shut
down for a few days won't have that much of
an impact. But given their polarized things are in Washington,
if it remains shut down for quite a while, starts
the impact flow of economic data, starts the impact consumer
and business sentiment that will have any impact as well.
And by the way, the other point that we flick
at is don't forget what's happening with oil. Prime is

(41:00):
at the moment as well, all heading back towards a
hundred dollars a barrow. Some talk could go even higher
than that. That's inflation on the one hand, but of
course the other hand, it's the taxing consumers as well,
So that's going to be a clear factor. So as
I say, just when you thought it was safe that
the US had pulled off, is very likely soft landing.
Suddenly there's quite a few headwinds on the horizon heading
into the end of the year.

Speaker 7 (41:20):
Okay, so if we've got this many headwinds, how likely
is lanning? And what do we call it?

Speaker 3 (41:27):
You haven't even mentioned all the headwinds either.

Speaker 2 (41:29):
See high Joe's voice like that.

Speaker 10 (41:34):
I think, look, the odds are for now right here,
and now the others are still on for there's a
lot of soft landing than no landing, right because the
US economy is in great shape, and obviously nobody's advocating
in recession, and nobody wants to see significant job losses,
and so far fed and managed get inflation well off
the ball without doing that. But we're there's a there's

(41:56):
a view now that they're going into the really hard model.
Things get much more complicated from here, like, for example,
do they choose to raise industrates again at how will
that flow down to people who live you know, munthpi
mounting credit cards? How to flow down to small businesses
who have a lot of variable rate loans? For example,
the household sector on fixed rate loans aren't overly impacted,
but there is a part of the business and a
consumer world that will be getting hurt. So we're getting

(42:18):
into complicated part of this now. Raising rates when inflation
was running away, it's kind of a no brainer, but
it gets a lot trickier from here.

Speaker 3 (42:25):
What about the restart end of student loan payments next month?

Speaker 4 (42:29):
It's going to hurt.

Speaker 10 (42:30):
It's definitely going to hurt I mean, there's a view
that perhaps that will be quite staggered. You know, not
everyone who has a student loan will start paid immediately.
It'll be sort of grandfather over time, so to speak.
But the columns will say to you, that's taking a
lump out of people's pockets right at the time when
everything else is already expensive with the inflation storry, with
the indus rate story, so it's going to hurt consumption.

Speaker 3 (42:51):
But well, sorry is there is there also, though, the
view that if people are spending more money paying back
these loans, then they're not spend as much money on
services and goods, so actually it's not inflationary.

Speaker 10 (43:06):
Sure, I mean for the student loan repayment you're talking
about like to hit the consumption, hit the growth, because
you just have less money in your pocket if you're
paying back alone. I mean, our economists and along here
makes a point that if it wasn't for the militarium
on the student loan repayments, all of the right hikes
of twenty twenty two would already be having a much
bigger pinch on that part of the economy.

Speaker 7 (43:26):
Yeah, okay, okay, wait, so how do we how does
Powell feel about.

Speaker 1 (43:34):
All of this?

Speaker 10 (43:37):
They seem to feel pretty Look, yeah, he's listening. I
think he's I think he's a scenting being. You heard yesterday.
I mean he Look, he made the point yesterday. He
was very got maybe a little bit prickly when he's
getting questioned about the whole soft landing story, but he
made it clear that it's their objective. He didn't understand

(43:57):
any viral headlines yesterday about the FED doesn't want to soft.
He's he wants to do everything he can, and that's
why they're going to be very careful, careful from here,
as we dubbed him in our top live blog yesterday,
and mister careful, he doesn't.

Speaker 4 (44:08):
Want he knows he's going to get more complicated in.

Speaker 10 (44:10):
Here, and he doesn't he knows he has a chance
of pulling off a very lucky soft landing, and that's
why the FED had been careful. But if I've just
at one point, our economist and a wong random numbers,
and she noted that since since the nineteen eighties, that
every time there's been consensus for the US to pull
off soft landing, it's been followed by a recession.

Speaker 4 (44:29):
So that's that's the damn part of this.

Speaker 2 (44:32):
It's like, have a great evening, everybody say, it's six
minutes for ended to cheer us up. What don't you
feel like as soon as everybody's on board with okay,
we've got a soft landing, wait, bad news exactly like
as soon as everybody jumps all on board. So you know,
it's interesting. Jim Bowler talked with our Mike McKee and
he thinks rates need to rise further because he's concerned

(44:55):
about strong growth. And I keep wondering, is there though,
then the chance listening to what you're saying in about
these you know this trifecta of risks and that ultimately
the FED does overdo it and we get a hard landing.

Speaker 10 (45:09):
So they're cyllinder territory where they feel they have to
push boring costs higher. Right, Because you know, there was
a bit of a little bit of a scare on
the most recent inflation data going in the wrong direction.
There's a feeling among econments that, you know, what happens
if we do get a real abs of the inflation
story that it does rebounds that have FED are not
declaring mission accomplished and you know, even if they don't

(45:31):
hike rates again, what they are saying is they're certainly
not going to be cutting rates anytime soon, right if
you look at the forecast that they put out yesterday,
In fact, they're going to be keeping rates up towards
that in the high fours at least for you know,
for the next several years anyway. So yeah, like I
keep saying from the beginning, it's going to get a
lot more complicated from here now, because if you have

(45:52):
a situation where the growth is slowing but inflation is
still sticky, and the FED can't bring down interest rates,
that's going to make a soft landing all the harder.

Speaker 2 (46:00):
I ask you, though, could it be below trend growth?
And then it kind of doesn't feel so great? So
you know, maybe, you know, do technically get this recession?

Speaker 10 (46:10):
Yeah, I mean people talk about rolling recessions. Me and
Ediardenny up in Boston, who coined the bond visual anity term.
He's talking about some person of the economy or already
in recession.

Speaker 4 (46:20):
It just doesn't show.

Speaker 10 (46:20):
Up in the aggregate data, right, So maybe parts of
manufacturing sector for example. But on the other hand, though,
you know, you see retail analysts saying the holiday shopping
season is still going to be very strong. They're not
seeing any sort of a pullback from consumers.

Speaker 4 (46:33):
So it is a good news story for the US
right now.

Speaker 10 (46:36):
You have to be very clear and that it's remarkable
that it's gotten this far despite all the expectations and
despite what the FED have done, raising and straights by
over five percentage points. That's unprecedented, you know, over just
over a year long period, and things have held up
very well, and so it's a it's a good news story.

Speaker 4 (46:54):
I'm just here until you dropped that little.

Speaker 2 (46:58):
Eight.

Speaker 1 (46:59):
So when are we going to know? I?

Speaker 7 (47:02):
You know what the next when's your next draft?

Speaker 3 (47:05):
To he just he just finished this one?

Speaker 10 (47:09):
Who do seem to be kind of an omen of
doom since I arrived in the US, by the way,
with several of my pieces. But no, I think over
the next six months we're going to get a clearer
picture and how things are going because you know, you've
got all these near term headwinds. We'll see how that
works out. We'll see where the inflation story goes. We'll
see if industrates have to go up again. You turn
into new year, then where's oil gone? Or how's a

(47:32):
global economy going. I think if you know the earlier
with the next year, we'll probably decide the self landing story.

Speaker 3 (47:37):
Okay, And there's still some stuff that could go right though.
Maybe the auto strike gets averted the worst of it.
Maybe maybe it's only its first know things could get
worse tomorrow, but they could get better before, you know,
than in the next government doesn't shut down. Maybe the
government doesn't shut and figure it out. Yeah, and I
know now that I'm saying this out loud, I'm like, Okay,

(47:59):
last happen, But what's the what's the flip side of
this argument that you make?

Speaker 10 (48:04):
And no, all of that could be true, right and yeah, yeah,
but but you know, one thing to think about is
whatever deal comes out of the auto workers strike, right,
we'll set a precedent for all of the other smaller
businesses and that supply chain. All those workers in the

(48:26):
autosply channel be going wait a minute. The guys on
the plant down the road are getting paid x y
z now and they're having their conditions x y z.
There's a feeling that this will have a multiplier effect
for other you know, factories, So there might be an
infacial story out of it. But look to your point
thinks things could sill go well those scenarios we've talked about,
it might play out on the upside, and the Infatian
story might continue to receive the way it husband, which

(48:46):
has been very good. And then broadly speaking, yes, the
US continues to be in that goldilocks position that is
into next year.

Speaker 3 (48:52):
Notice Joel, how I didn't say maybe we won't have
to pay back our student loans. Yeah, because there are
some things that are certain in life going to be.

Speaker 7 (49:01):
I think we're gonna be writing about this a lot yet.
And I think how these three things evolved. I think
I think we're in for a little bit of pain here,
So you know, I wanted to just bring it back
to that. How is this going to show up for
for consumers? Do you think in depth?

Speaker 10 (49:21):
Keep and eye this holiday shopping season. It will be
interesting to see if if the FED does go ahead
with another right hug on this side of Thanksgiving our
Christmas time does not really start to hurt consumers who
they start pulling, pulling their spending, that would be a
really important signal. I think so far they've held up
pretty well on the way that is so watch that
and also keep an eye on the global backdrop. You know,

(49:41):
China's in the fun because we know maybe it's botting out,
but it hasn't been a great year for Europe is
certainly under pressure, the big industrial economies of Germany for example.

Speaker 4 (49:50):
All of that's not a.

Speaker 10 (49:51):
Good demand story for the US either, so you know
there's a domestic story, and and keep an eye on
what's going on around the rest of the world as well.

Speaker 2 (49:58):
Hey, listen, dark and telling us that wealthy dinners are
already trading down a cheaper wine.

Speaker 3 (50:04):
Because they spend all their money in Europe over the summer.

Speaker 2 (50:06):
So we're already seeing pressure on the pocketbook. And thank
you so much. We so appreciated Bloomberg News Global Economy
reporter and a current joining us on zoom in or
Washington DC Bureau. Of course, the editor of Bloomberg Business Week,
Jill Weber, here in our studio self landing.

Speaker 3 (50:21):
What do you think, Joel, looking unlikely? I mean, look
at the markets today, look at the markets this.

Speaker 2 (50:28):
Week, and people are talking even higher right in terms
of the rate and environment. Yeah, that maybe we haven't
topped out on that two year all right, guys, it
is in the new issue of Bloomberg Business Week. Check
it out on newsstands online at Bloomberg dot com, sized
Business Weekend on the Bloomberg terminal.

Speaker 1 (50:47):
Mark Journal.

Speaker 4 (50:51):
How about you let me drive?

Speaker 2 (50:53):
No, no, no.

Speaker 1 (50:55):
Honey, please, I'll do the gravel.

Speaker 4 (50:59):
I want to.

Speaker 10 (51:02):
It's a good question, good time.

Speaker 1 (51:07):
This is the drive to the globe. Well, I'm on
Bloomberg Radio.

Speaker 2 (51:13):
I just look at through her rite through here on
the Bloomberg We've got stocks falling to their lowest since June.
I got the ten year yields climbing, latest reading on
the labor market, reinforcing the case for the FEDS higher
for longer stance s and P five hundred right now,
as Charlie mentioned, down about one and a half percent
tim all major US equity benchmarks breaking below their one
hundred day moving averages, seen as a bear signal by

(51:35):
some technical analysts. So there it is, folks.

Speaker 3 (51:38):
You know what looks pretty good right now?

Speaker 2 (51:40):
That looks pretty good?

Speaker 3 (51:40):
Money market funds that yield over five percent.

Speaker 2 (51:42):
Ex I don't know. Why wouldn't you write, why wouldn't
you exactly? Well, let's see what Hillary Kramer has to say.
She's back with us. She's CIO at Kramer Capital Research.
He's here in our Bloomberg Interactive Brokers studio. Great to
have you back with us. Why wouldn't you just throw
everything in a money market right now and just don't
worry about like just take the risk off the table
and just go all in.

Speaker 11 (52:02):
Well, I have to say that you really do want
to keep your powder dry, and it is an opportunity
here the notes I sent early this morning where I
think a lot more optimistic than as the market started
to unfold today and I saw the bond market, you know,
leading stocks lower and stocks in general are really weak,
and it's really about earning season and interesting it's the banks,

(52:25):
especially the regional banks. These depositors are drying up, and
that's one of the data points we were looking at
this afternoon.

Speaker 2 (52:31):
We used to love US Bank Corp.

Speaker 11 (52:33):
I love it like we won't teach it.

Speaker 3 (52:35):
Right now, we're actually going to be speaking in just
a few minutes with the founder, chairman and CEO of
Connect One Bank, Frank Sorrentino. We love talking to him
because regional banks are just a great read on the
US economy. He can tell us, he can answer that
question our depositor is actually fleeing for yield interest high
yielding interest accounts.

Speaker 2 (52:53):
And I just want to mention the KRE, the regional
bank ETF. It's down about twenty six twenty seven percent
year today.

Speaker 11 (52:59):
Yeah, and it made even more than that because we're
just talking about depositors. What about credit quality? What about origination? Okay,
like it's going to take a long time to get
from seven and a half percent mortgages down to back
like four percent mortgages. It doesn't just happen.

Speaker 2 (53:12):
Over by banks.

Speaker 11 (53:14):
Right now, I would not be looking at the banks.
We're going to really look to the banks to see
what they have to say and what kind of color
they give us on the market when they start to
report earnings.

Speaker 4 (53:24):
Uh.

Speaker 11 (53:24):
And then I mean just think about something like restaurants.
Restaurant like cracker barrel used to be a go to stock.
It's in the toilet. I mean, there's just no other
way to put it.

Speaker 2 (53:32):
Well, so how do you what's the conviction you have
in a market like this? We keep talking about what's
going on with the treasury trade, and we're talking about
what the ten year back to levels we saw in
six oh seven o seven actually and this just before
like everything started to come undone in the Great Financial Crisis.
I keep saying, it doesn't feel like the Great Financial Crisis,
but it does feel like there's a lot of ifs

(53:52):
out there. So I don't know what's the conviction you
can have in this market. It can buy or not buy.

Speaker 11 (53:58):
Well, there's conviction always to buy to some extent, and
that's where portfolio management obviously comes into play and making
sure that you pick your points go in slowly, but
there are still opportunities out there. Yesterday's earnings, go I
thought that General Mills, you know, looked really good. It
was it twenty percent off of its highs from the year.
So some of these food stocks look pretty good. We've

(54:21):
seen some stocks that fundamentally are good but have had
issues like three m you know, with their big lawsuit
that they just sell.

Speaker 2 (54:28):
That means stock pickers market.

Speaker 11 (54:30):
Oh totally, it's a stock pickers market.

Speaker 4 (54:32):
Now.

Speaker 11 (54:33):
That being said, so many investors, including some of the
large smart investors, don't realize the extent to which these
Magnificent seven have just simply been up because everyone buys
ETFs and that's why Apple and Microsoft and Amazon continue
to rise and even today. I think Microsoft was up
actually a little bit middle of the day. Where is
it right now? It's probably about even on the day.

(54:55):
Apple was doing okay, and that's because there is still that.

Speaker 2 (54:59):
Microsoft stuff that one quarter of a percentage was up
about one point four percent earlier in the day, and
there we go.

Speaker 11 (55:03):
That's pretty good.

Speaker 2 (55:05):
I think hit me out here, because like if I
bought Nvidia in January and of one hundred and eighty
two percent, I'm pretty happy.

Speaker 3 (55:12):
It's not bad, Carol.

Speaker 2 (55:12):
I was my brother's Yeah, I bought it back in
twenty twenty. I was reading about my good for you, buddy,
I'm and he's like, I'm really happy. So I'm just wondering, well,
you know, I can't really like continue stock so easily
do this, Yes, exactly. So I'm just like, I hear,
I don't know what is this? What your clients tell us,

(55:34):
what they are doing and what they are concerned about,
or what kind of calls you're getting from the folks
that you that you either help manage money or give
advice to.

Speaker 11 (55:43):
They're sitting on their hands and many of them are
looking to sell. They're looking to liquidate. Remember, we have
a very different demographic today where the next generation, whether
it be lower middle or upper class, the parents you know,
are paying for those that are, you know, young adults,
and there's a need for liquidity. There's a need for
money that we didn't used to have in a previous time.

(56:06):
But as a stock pickers market, like we've had his stock,
I still think people so that sounds to be very bearish,
but it's bearished. But remember the FED is going to
come in and save the day. They're gonna slash rates.

Speaker 2 (56:21):
I thought Jay Powell was really clear yesterday that he
might even tighten another quarter percentage point. But at the
minute higher pirate anchor higher for lunch. But then you
think he's just over You think he's over optimistic. Who
thought he is? Former US Treasury Secretary of Larry Summers
thinks that basically the FED is you know, drinking the
soft landing kool aid.

Speaker 11 (56:43):
The Federal Reserve is playing trying to play mine. David Weston,
that is, FED is playing playing mind games. I thought
it was very interesting. I thought Powell was just so
vague yesterday. It was very disappointing to hear him not
want to really answer the questions. And the Q and

(57:03):
a the way he should have. But what we will
see is we're going to see maybe a little bit
of a bounce up, but I think we're going to
see the market come back down. We're going to have,
you know, like a drawdown that could be five to
seven percent over two or three day.

Speaker 3 (57:18):
Period rival what we saw last October.

Speaker 4 (57:21):
And then and then he.

Speaker 11 (57:22):
Comes in and that's when we see that because he's
overdone it.

Speaker 3 (57:25):
But when he says he's data dependent, he's not watching
the S and P five hundred labor markets.

Speaker 2 (57:29):
Still say we got another exactly.

Speaker 3 (57:31):
And the cpis you know PCE is not to two percent, right.

Speaker 11 (57:35):
Okay, well that's something else that's interesting, Carol. You just
brought up the labor market. As soon as we see
some layoffs start to happen, that's when the consumer becomes undone.
That's when all bets are off and that market starts.
We could see it between now and December thirty one.
I mean, I think that there might be some there

(57:55):
might be some gearing up. You know, we saw Amazon
what tiring two hundred and fifty thousand employees.

Speaker 3 (58:00):
Then hour as an average wage, that's a lot of money.

Speaker 11 (58:03):
Right, But AI technology many of those jobs has really
taken a lot of the a lot of people out
of the market. We know the finance, we know we
know that the financial We know that the financial industry
is really in dire straits right now and is actively

(58:24):
laying off regardless of what we hear. We hear it
in little bits and pieces. But there aren't those jobs
out there. But the consumer, the consumer is really going
to get nervous. Look Home deepo and Lows. Here's another proof.
Home deeple and Lows doing terribly today. That's proof that
everyone knows you're not going to move a house in
a seven and a half percent mortgage environment.

Speaker 2 (58:45):
We're just not going to it.

Speaker 11 (58:46):
And it's not even worth trying to fix up your
house to sell.

Speaker 1 (58:52):
We're doing.

Speaker 4 (58:53):
You are.

Speaker 2 (58:56):
Looking and they're like, there's not no inventory. Hillary Kramer,
Kramer Capital Research.

Speaker 4 (59:01):
Be wel. Thank you.

Speaker 1 (59:18):
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