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Markets, Retail, And Washington (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com Slash podcast. Looking at these markets
0:22
Speaker 1: as Nathan's just reporting, you know, hitting new Intra day
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Speaker 1: lows down one point six, the dallaf warnered fifty points.
0:29
Speaker 1: Let's bring in a professional and get a professional opinion
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Speaker 1: on what these markets are telling us. Here Mace McClean
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Speaker 1: see I O president and Managing director at Frost Investment
0:38
Speaker 1: Adviers Advisors. Uh proud graduate from the Ohio State University. Mace,
0:45
Speaker 1: thanks so much for joining us. I don't know why
0:46
Speaker 1: you guys always say the but I'll go with it. Um,
0:49
Speaker 1: what do you make of these markets over the last
0:51
Speaker 1: few days? Is this a little bear market rally kind
0:54
Speaker 1: of had its say, I would say, Jerome powege getting
0:59
Speaker 1: is best is shwis is that you know the financial
1:03
Speaker 1: conditions tightening with the sell off in the market. All right,
1:07
Speaker 1: So how pronounced I mean, I guess the question is
1:09
Speaker 1: they're gonna be out in Jackson Hole, and yes, Tom
1:11
Speaker 1: Keenan and surveillance team will be out in Jackson Hole
1:14
Speaker 1: as well. The surveillance golf stream is gassing up as
1:17
Speaker 1: we speak. Um, do you expect to get anything out
1:20
Speaker 1: of Jackson Hole this week or should we just wait
1:23
Speaker 1: for September? Well, I think this is you know, um
1:27
Speaker 1: terman Pal's chance to try to talk down the expectations
1:31
Speaker 1: of a pivot. As I said, the expectations that they
1:35
Speaker 1: would pivot and the rally in the market is really
1:38
Speaker 1: working against him, trying to tighten to nancural conditions. And
1:43
Speaker 1: so I think we're going to get a steady drum
1:45
Speaker 1: beat from uh the FED speakers that we will be
1:48
Speaker 1: um not seeing a pivot at anytime soon, but instead
1:51
Speaker 1: will be continuing to course towards rate increases. It doesn't
1:56
Speaker 1: matter who's been driving the rally. Are we worried about
2:00
Speaker 1: the retail menia coming back some sort repeat or are
2:04
Speaker 1: we okay with the fact that perhaps this rally has
2:06
Speaker 1: been on low volume. What's your take? Of course, it
2:10
Speaker 1: has been low volume in the summer trading, but we
2:13
Speaker 1: are continue to see that rotation reflet, which also reflects
2:16
Speaker 1: the rotation and consumer habits which we're you know, switching
2:20
Speaker 1: to services and out of products as we come out
2:24
Speaker 1: of the pandemic. So we're continuing to see that rotation.
2:28
Speaker 1: Um and uh, you know we have not seen I
2:30
Speaker 1: don't think solid leadership yet for the rally and the
2:34
Speaker 1: next leg up May Sorry are you You're based in
2:38
Speaker 1: San Antonio? Right? I am abundant Dallas today where it's flooding. Great. Well,
2:44
Speaker 1: I just assume anybody who this is my assumption to
2:47
Speaker 1: anybody who's from the state of Texas, they have a
2:50
Speaker 1: call on energy. So in oil, I'm looking at w
2:54
Speaker 1: T A crude oil here, we're down three, We're well
2:56
Speaker 1: below ninety barrel. Has oil has energy? Has that play
3:01
Speaker 1: played out? We don't think so. If we think that
3:06
Speaker 1: we're continuing to explore and invest in new energy fines
3:12
Speaker 1: at a rate that's slower than the rate we need
3:16
Speaker 1: to replace energy stores we're using, there's any sort of
3:20
Speaker 1: green energy transition is going to take multiple years. We're
3:23
Speaker 1: still going to need the crude and the natural gas,
3:27
Speaker 1: and right now we're under investing in that effort. So
3:31
Speaker 1: if we think that we're going to see energy stay
3:35
Speaker 1: in short supply for a number of years, and that
3:38
Speaker 1: we think that that play is has a long way
3:41
Speaker 1: to go. So let's stick with that. That idea that
3:44
Speaker 1: Paul was really getting out because it seemed like it
3:46
Speaker 1: wasn't too long ago where everyone was saying the best
3:49
Speaker 1: way to hedge your portfolio is to do one of
3:51
Speaker 1: two things, to either buy the dollar or you buy
3:54
Speaker 1: just a basket of commodities, basically because those were the
3:57
Speaker 1: two things that we're going up. At its core, though,
3:59
Speaker 1: that is a contrarian trade. The dollar and commodity should
4:02
Speaker 1: be moving opposite to each other. You talked about the
4:06
Speaker 1: commodities trade. I'm curious about the dollar trade. Are you
4:08
Speaker 1: concerned about a stronger dollar? I am concerned that the
4:14
Speaker 1: dollar may not may peek out here as we also
4:18
Speaker 1: see other monetary authorities around the world raise rates, we
4:23
Speaker 1: think that we may see a peek in the dollar
4:26
Speaker 1: at least leggling out. So I wouldn't bet uh strong
4:31
Speaker 1: that the dollar continues unabated in its current in trend
4:35
Speaker 1: that has been on. So Mace, we we just finished
4:38
Speaker 1: up Q two earnings here. They kind of came in
4:40
Speaker 1: a little bit better than expected. Maybe the expectations were
4:44
Speaker 1: pretty low going into the earning season. Here, did the
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Speaker 1: earning season change your view here? Change maybe your allocation
4:51
Speaker 1: change maybe some sectors you might be looking at. Not really,
4:56
Speaker 1: We've been um nibbling at tech chnology on the in
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Speaker 1: the downturns, and so we're about trying to buy high
5:05
Speaker 1: quality stocks, the pet the market being maybe a head
5:09
Speaker 1: of the FED pivot. Therefore we're you know, we're trading
5:11
Speaker 1: off today because people readjust when they think where rates
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Speaker 1: are going. But the economy is weakening, and so we
5:18
Speaker 1: think we get every day get a little bit closer
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Speaker 1: to that um that point where the Fed does stop
5:24
Speaker 1: raising rates and did market will get a lot more support. So, uh,
5:29
Speaker 1: we're more interested in the dips and buying high qualities
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Speaker 1: companies like the technology and growth stocks in week markets. Alright,
5:39
Speaker 1: buying the dips. That's what we like to hear particularly,
5:41
Speaker 1: is equity salesperson and equity trader, buy those dips. I'll
5:44
Speaker 1: go show you some more stock. Mace McCain ce io,
5:47
Speaker 1: President and managing director for Frost Investment Advisors. Boy, it's
5:55
Speaker 1: been a tough tough go for the folks in the
5:57
Speaker 1: fixed income. Biz, let's check in with one of those,
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Speaker 1: Andre skibahead of Blue Bay US fixed income that's at RBC,
6:04
Speaker 1: the Royal Bank account of Global Asset Management. Andre, thanks
6:06
Speaker 1: so much for joining us here. Help put into perspective
6:10
Speaker 1: what it's been like to be the head of US
6:13
Speaker 1: fixed income at a big Canadian bank when it's been
6:16
Speaker 1: just a brutal, brutal start to the year. Give us
6:19
Speaker 1: kind of what you've seen in the marketplace. Well, good morning. Um,
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Speaker 1: it definitely felt like being on the roller coaster ride
6:27
Speaker 1: and not a particularly enjoyable one. UH this year. Investors
6:32
Speaker 1: have not seen these kind of returns within UH fixed
6:37
Speaker 1: income for a long long time. So yes, it's been
6:41
Speaker 1: brutal indeed. Alright, so obviously concern about rising interest rates? Um,
6:48
Speaker 1: where do you think this Federal reserve is going to go?
6:52
Speaker 1: There are those that said, hey, September seventi five base
6:56
Speaker 1: points and then maybe even a pause. Um, how are
6:59
Speaker 1: you guys thinking about US federal Reserve? We think that
7:03
Speaker 1: Federal reserve will be very data dependent. Um, it's pretty
7:09
Speaker 1: clear that the market, including the Federal Reserve, struggled to
7:14
Speaker 1: get their handle around where inflation is heading from here,
7:19
Speaker 1: and that is the key question that we need answers
7:23
Speaker 1: for before we can determine how aggressive Federal Reserve needs
7:28
Speaker 1: to high grate going forward. What is clear is that
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Speaker 1: we have to go into restrictive territory, I tighten even
7:37
Speaker 1: more to start helping seeing inflation coming down more aggressively
7:44
Speaker 1: from here. But how far we need to go is
7:49
Speaker 1: really data dependent in the months ahead. So are you
7:54
Speaker 1: expecting anything of note here from Jackson hawayoming as the
7:58
Speaker 1: central bankers get together later this week. Well, in a way,
8:03
Speaker 1: Jackson Hole this time could be less eventful than in
8:07
Speaker 1: the previous years because FED is being honest in saying
8:11
Speaker 1: that we just need to watch the data and not
8:15
Speaker 1: everything is in their control at this point. So absolutely
8:20
Speaker 1: we would expect them to reaffirm the commitment to fighting inflation,
8:24
Speaker 1: to keep hiking rates, to pushing into restrictive territory. But
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Speaker 1: how far they need to go, uh, that will be
8:33
Speaker 1: very much framed framed in the context of incoming data.
8:37
Speaker 1: So we actually should look more to inflation print ahead
8:41
Speaker 1: rather than what we hear jackson Hole to determine direction
8:45
Speaker 1: of travel. So where are you guys at Blue Bay
8:50
Speaker 1: kind of placing your bets sharpening your pencils in the
8:55
Speaker 1: US fixed income business. So we think that when you
8:59
Speaker 1: look at government bond yields, three where tenure is trading
9:06
Speaker 1: right now, is roughly where we should be at this point.
9:10
Speaker 1: So we don't have a particularly strong view that levels
9:14
Speaker 1: should be meaningfully higher um than three for the tenure
9:21
Speaker 1: in credit. We find that after the market being too
9:27
Speaker 1: panicky earlier this summer and pricing in a deep procession
9:31
Speaker 1: too quickly, the rebound that we have seen in the
9:34
Speaker 1: recent weeks means that credit assets look okay, but they
9:40
Speaker 1: don't look crazy exciting after the rebound that we have
9:45
Speaker 1: just seen. So we're much more in this weight and
9:49
Speaker 1: see mode to determine what inflation does, what pedal reserve does,
9:54
Speaker 1: and how much of a slowdown we will experience in
9:58
Speaker 1: the US over the months ahead. So talk to us
10:02
Speaker 1: a little b about liquidity here. I mean, we're talking
10:04
Speaker 1: about financial conditions looking looser and looser, but treasury liquidity
10:07
Speaker 1: specifically has been a major issue. How worried are you
10:10
Speaker 1: about that? It's true that liquidity has been pretty thin
10:16
Speaker 1: uh in multiple episodes of of this market movement, and
10:22
Speaker 1: that applies both in the treasury space, but also broadly
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Speaker 1: in credit. UM, we think right now, given that we're
10:30
Speaker 1: in the second half of August, liquidity is never that great.
10:35
Speaker 1: But we look forward to market environment after Labor Day
10:40
Speaker 1: two assess the genuine level of underlying liquidity. So I
10:46
Speaker 1: thinks definitely are fluctuating from liquidity perspective, but neither are
10:52
Speaker 1: they horrible on a consistent basis. So sometimes we fear
10:58
Speaker 1: about liquidity too much, UM, But we will see how
11:02
Speaker 1: this evolves after labor Day. All right, Andre, good stuff.
11:06
Speaker 1: We appreciate you taking the time to talk fix and
11:09
Speaker 1: come with us. One of the stock stories that got
11:13
Speaker 1: my attention today was Adidas for Audi Das as the
11:16
Speaker 1: Europeans say, it announced the surprise departure of its chief
11:21
Speaker 1: executive officer. And this can't be a good time when
11:23
Speaker 1: they're dealing with what's going on in China, which is
11:25
Speaker 1: a huge supplier and end the market for them. But
11:28
Speaker 1: I want to get the latest on what's going on
11:30
Speaker 1: with Adidas and just the retail space. So who do
11:32
Speaker 1: we turn to? Put him? Goyle, senior analysts for e
11:35
Speaker 1: commerce at leisure and off price retail. Uh, that's a
11:38
Speaker 1: mouthful for Bloomberg Intelligence. She's been coming retail for ever.
11:42
Speaker 1: She was actually one of the very first hires at
11:46
Speaker 1: Bloomberg Intelligence back in two thousand nine, so she's been
11:48
Speaker 1: a rock here for Bloomberg's intelligence research operation. So putam,
11:54
Speaker 1: what do you say about Adida is here? Uh, Cosper
11:56
Speaker 1: Worsted stepping down? What's that mean? And what do you
11:59
Speaker 1: what do you take away from Yeah? Thankful? Um. I
12:02
Speaker 1: think you know it was actually by surprise. If contract
12:05
Speaker 1: doesn't end until so going out next year is we
12:10
Speaker 1: think likely a result of the weaker results that they've
12:12
Speaker 1: seen recently, some notably the execution in China. They had
12:16
Speaker 1: replaced their Chinese had earlier this year. And I think
12:21
Speaker 1: this just you know, follows onto that there results in
12:24
Speaker 1: the first quarter were very weak and guided that was
12:29
Speaker 1: largely China. We lost you there for a second. But
12:33
Speaker 1: let's go back to the China story, because I think
12:34
Speaker 1: that's so important. We're talking about a slowdown in the
12:37
Speaker 1: Chinese economy. We're also talking about potentially UM getting a
12:42
Speaker 1: lot more support in China. How does it translate to
12:45
Speaker 1: some of the issues that we're seeing when it comes
12:47
Speaker 1: to American exposure to China specifically. Yeah, I think I
12:52
Speaker 1: think for Adida specifically UM China. The issues are largely there,
12:57
Speaker 1: not even on the supplying anymore. And when you think
13:00
Speaker 1: about any company today that's investing in growth in China,
13:04
Speaker 1: whether it's Adidas or whether it's a Lemon or Nike,
13:07
Speaker 1: the struggles are all the same, so it's not relevant
13:09
Speaker 1: to just one company at home. Adidas has done very well. Actually,
13:14
Speaker 1: um They've seen the business grown nicely. They've stayed in
13:17
Speaker 1: the number two spot with Nike being the lead, and
13:20
Speaker 1: at that position, we think they were on pace to
13:22
Speaker 1: maintain per years. Where do we stand with inventories here?
13:28
Speaker 1: It sounds like you're at the Jersey shore. I would
13:30
Speaker 1: guess on the beach, but I want to see where
13:32
Speaker 1: do we standing with the inventories here? A lot of
13:34
Speaker 1: retailer's been talking about, you know, maybe they overbought and
13:36
Speaker 1: had a ton of inventory in the in the system
13:38
Speaker 1: and ano they're having to mark down prices to move inventory.
13:42
Speaker 1: Are we seeing that in the athletes are space with
13:44
Speaker 1: the Audi, Das and the Nikes of the world. Yeah,
13:46
Speaker 1: there's definitely more inventory in the retail marketplace across the board.
13:50
Speaker 1: It's true also in Adidas and at Nike, but the
13:53
Speaker 1: inventory situation is a little different. Where in North America
13:56
Speaker 1: they have the demand to support the elevated inventory his
14:00
Speaker 1: local inventory. In China they're having to mark down more,
14:03
Speaker 1: and somewhat in Europe as well. So I think it's
14:05
Speaker 1: a tale of two halfs really when you think about it,
14:07
Speaker 1: where there are pockets of areas in the business that
14:10
Speaker 1: are doing exceptionally well, but then there's a big part
14:13
Speaker 1: of the business, the growth part of the business, that's
14:15
Speaker 1: struggling and if we don't see signs of a recovery
14:18
Speaker 1: anytime soon. Put one of the big stories in the
14:22
Speaker 1: retail spaces, of course, been this build up of inventories.
14:24
Speaker 1: But what to me is so interesting is how quickly
14:27
Speaker 1: the market narrative on that inventory story has changed. Because
14:31
Speaker 1: I want to say, about a year ago or so,
14:33
Speaker 1: when we're talking about supply chain issues, a lot of
14:35
Speaker 1: these major retailers were shoring up their supply chains and
14:39
Speaker 1: having an inventory build up was a good thing. Now
14:42
Speaker 1: it seems to be such a massive negative. Do we
14:45
Speaker 1: ever see a market dynamic where we go back to
14:48
Speaker 1: the fact that an inventory build up is a good thing,
14:51
Speaker 1: given that the supply chain issues happen completely healed? Uh,
14:55
Speaker 1: you know, a lot of inventory is never a good
14:57
Speaker 1: thing in retail. You want to have the right supply
15:00
Speaker 1: with the right demand. What happened over the pandemic was
15:03
Speaker 1: I would say one time in nature. It was really
15:06
Speaker 1: a result of the pandemic. Or factories were shut down,
15:08
Speaker 1: there were transportation delayed, the report blockages. That's all now
15:13
Speaker 1: mitigated to a large extent. And do we ever go
15:16
Speaker 1: back to that situation. Hopefully not, But I think we're
15:19
Speaker 1: just going back into the normal retail cycle where retailers
15:22
Speaker 1: ordered too much and they mismatched demand and you have
15:24
Speaker 1: to mark things down. That's how retails operated for hundreds
15:27
Speaker 1: of years, and we're just back in that place again.
15:30
Speaker 1: Put them I've read something recently that says people are
15:34
Speaker 1: actually going back to the stores and the growth you're
15:37
Speaker 1: seeing and the bricks and order is pretty darn near
15:40
Speaker 1: where you're seeing on the e commerce side. Is this
15:42
Speaker 1: just a what are you seeing out there in terms
15:45
Speaker 1: of that kind of data? Well, you have to be
15:48
Speaker 1: careful when you look at the growth, right, Paul, because
15:50
Speaker 1: you're looking at two different growth comparisons. One for the
15:53
Speaker 1: online side, the growth looks more muted because you're off
15:55
Speaker 1: of very tough comparisons from a year with prior, whereas
15:59
Speaker 1: the reverse is true for the breaking mortar side. Now,
16:01
Speaker 1: I'd say the leveling field is pretty balanced. You're going
16:05
Speaker 1: to have people returning to stores. There's always going to
16:08
Speaker 1: be room for stores because people do need that last
16:10
Speaker 1: minute thing and they do enjoy shopping this certain extent. Still,
16:14
Speaker 1: though it's going to be more bounced, we see e
16:16
Speaker 1: commerce penetration rising. To keep in mind that it was,
16:21
Speaker 1: you know, below twenty percent just a few years ago,
16:24
Speaker 1: So there is still a step up in e commerce.
16:26
Speaker 1: But there is a place for stories too, you know.
16:28
Speaker 1: Putuma just came back from two weeks of vacation and
16:31
Speaker 1: I'm kind of counting down the months and when I
16:34
Speaker 1: can take another and I realized, you know, look, I've
16:36
Speaker 1: taken all my days off for the year. And I said, well,
16:38
Speaker 1: we only actually have four months of the year left,
16:41
Speaker 1: which means that maybe it's not too early start talking
16:43
Speaker 1: about the holiday season. Do you think it's too early
16:46
Speaker 1: talking about the holiday season and what should we be
16:48
Speaker 1: expecting in just a few months down the road on
16:50
Speaker 1: the retail space, I always think it's too early. When
16:53
Speaker 1: we started talking about one of those Halloween and stores.
16:57
Speaker 1: I see Halloween and stores when I go in right now,
16:59
Speaker 1: and Sammy not even over the January. I'm like, all right,
17:03
Speaker 1: when's Christmas? No? But I think you know clearly two
17:08
Speaker 1: ages all about the holidays, right, and I think it's
17:10
Speaker 1: all going to be dependent on inventory and the help
17:13
Speaker 1: of the consumer. We are at a point where the
17:15
Speaker 1: consumer has been spending, but largely the spund has shifted
17:18
Speaker 1: towards travel and experiences because that's where they had pent
17:22
Speaker 1: up demand. And on the other hand, inflation is curving
17:25
Speaker 1: spend of consumer staples of food and just um, really
17:29
Speaker 1: shifting towards those areas out of discretionary apparel sending. We
17:32
Speaker 1: saw that at Walmart, we saw that at Target. We've
17:35
Speaker 1: seen that across the board, even other retailers. They're citing
17:38
Speaker 1: that there is pressure on the low income consumer. That's
17:41
Speaker 1: the first sign of a recession. If you look back
17:44
Speaker 1: to prior recessions, the first consumer de fault is the
17:48
Speaker 1: low income consumer. And we're now seeing signs of slop.
17:51
Speaker 1: I don't know when we get into a recession, but
17:53
Speaker 1: early signs are there as we speak today. All Right,
17:56
Speaker 1: put them good stuff, we appreciate it. Put them goyal
17:58
Speaker 1: senior analysts covering all things retail for Bloomberg Intelligence. You know,
18:06
Speaker 1: my inbox this week end with the research from Wall
18:09
Speaker 1: Street was kind of cautious on the market. A lot
18:12
Speaker 1: of Wall Street folks are saying, all right, pause, hit
18:14
Speaker 1: the brakes here. We still got a fed raising rates.
18:17
Speaker 1: This rally in the market may need to take a pause. Uh.
18:21
Speaker 1: I remember the days when Wall Street analysts just said
18:23
Speaker 1: bye bye bye. Chanellie Basket, wall Street reporter for Bloomberg News,
18:26
Speaker 1: joins us here in our Bloomberg internactive broker's studio. So
18:29
Speaker 1: it feels like the streets a little bit more bearish,
18:31
Speaker 1: a little bit more cautious on this rally we've seen.
18:34
Speaker 1: Cautious is definitely the word that I would use, and
18:37
Speaker 1: I would think back to what had happened last week.
18:39
Speaker 1: We had talked to Greg Fleming, the CEO of Rockefeller,
18:41
Speaker 1: and he said that's where his clients are. I'd even
18:44
Speaker 1: look at more data. For example, you have liz Ane
18:46
Speaker 1: Saunders really pointing out here, that's uh. Los Ane Saunders
18:50
Speaker 1: of Schwab pointing out that hedge funds are not really
18:52
Speaker 1: letting go of short bets and that their net futures
18:55
Speaker 1: positioning for the SMP five hundred are near the lowest
18:58
Speaker 1: level since June. Money. That's an interesting thing to point out.
19:02
Speaker 1: And what else is happening when you look at options
19:04
Speaker 1: market SEEFTC data also shows sizeable and that short positioning
19:08
Speaker 1: in so for future. So that is the library replacement.
19:11
Speaker 1: So that is increasingly hawkish. I don't like that library
19:14
Speaker 1: replacement at all. The other day man loans on work
19:20
Speaker 1: for thirty five years live word, plus I have just
19:23
Speaker 1: the right guests for you to talk all day about.
19:26
Speaker 1: I don't think that's a I don't think that's a
19:28
Speaker 1: contrarian take though. I feel like it's pretty consensus. We want.
19:31
Speaker 1: This is like market plumbing. We'll get into the cooler funners.
19:34
Speaker 1: Radio audience is like, what's that? I like the geeky stuff,
19:39
Speaker 1: but listen. All of this is just to say that
19:42
Speaker 1: there are more expectations about a hawk is freed and
19:46
Speaker 1: conversely uh pressure on the stock market in light of that,
19:50
Speaker 1: plus more catalysts that are going into the fall. You
19:54
Speaker 1: look at a note that Guggenheim said out last week
19:57
Speaker 1: to clients as well, and the idea that docks have
20:00
Speaker 1: really been struggling with their two day moving average could
20:04
Speaker 1: mean deeper losses ahead for equities. And the point that
20:08
Speaker 1: I've been making all year is that for the marginal buyers,
20:11
Speaker 1: let's use hedge funds as one of the bigger examples here.
20:14
Speaker 1: Some of these hedge funds are down in the first
20:16
Speaker 1: half of the year. How much powder do they have
20:18
Speaker 1: on the sidelines to spend big in the second half
20:20
Speaker 1: of the year. They don't. It's the answer. Yeah, I
20:24
Speaker 1: got you. I think what's interesting And you brought this
20:28
Speaker 1: point up on the hedge funds story as well, because
20:31
Speaker 1: this is actually my chart of the day UM as
20:33
Speaker 1: well as that CFTC positioning really talks about how people
20:36
Speaker 1: have been more and more short on the SMP five hundred,
20:40
Speaker 1: even though you've seen the rally just kind of skyrocket
20:42
Speaker 1: were from the low. So it's interesting that hedge funds, though,
20:46
Speaker 1: are still kind of holding onto it. And they would
20:48
Speaker 1: argue that perhaps the rallies driven more by retail. We're
20:51
Speaker 1: smart money saying well, no, I don't believe in it,
20:53
Speaker 1: and it's smart money saying they don't believe in it,
20:56
Speaker 1: or are they afraid to dip in. I was talking
20:58
Speaker 1: to a big hedge fund manager last week and they
21:00
Speaker 1: were saying, listen, I just don't see a pitch that
21:02
Speaker 1: I can hit at yet, and I don't have enough
21:05
Speaker 1: conviction here. So even some of the smartest guys in
21:07
Speaker 1: the room are sitting there saying that you can look
21:09
Speaker 1: at the data both ways. You can. You you don't
21:11
Speaker 1: want to fight the rally. You lose money that way.
21:14
Speaker 1: You don't want to get into the rally because you
21:16
Speaker 1: could also lose money that way. And so that is
21:18
Speaker 1: the conundrum on Wall Street today. And so what you're
21:21
Speaker 1: setting up for is for the banking side of things.
21:24
Speaker 1: If you look at if volatility kind of stays low here,
21:27
Speaker 1: you can see some of the activity come back. Data underwriting,
21:30
Speaker 1: equity and writing all the things that we've lost all
21:32
Speaker 1: year that have made the bank's money uh m, and
21:35
Speaker 1: a advisory work once again. And that's the stuff that
21:39
Speaker 1: could really fuel Wall Street into the second half. If
21:41
Speaker 1: you have deals come back, you have merger are come back.
21:44
Speaker 1: If you have all these activists asking for split ups,
21:46
Speaker 1: you also have deals come back. So a little bit
21:49
Speaker 1: of calmness would be the hope for Wall Street for
21:52
Speaker 1: the second part of this year. I guess less than
21:54
Speaker 1: half of the year left. Um, but you know you
21:58
Speaker 1: were talking about it, Paul Pain still on a lot
22:01
Speaker 1: of corners on Wall Street, Credit Sweets being the poster
22:04
Speaker 1: child of that. A lot of banks also suffering a
22:06
Speaker 1: lot of losses. I mean Credit Swiss, my former employer.
22:09
Speaker 1: I worked there for a while. They just have management
22:12
Speaker 1: problems after management problem, aftter management problems in the stocks
22:15
Speaker 1: at you know, five h was five Swiss. Frank's yeah,
22:18
Speaker 1: just brutal um talking about hollowing out. As we put
22:23
Speaker 1: in our Bloomberg Big Take story, the investment bank kind
22:26
Speaker 1: of backing away from everything with the exception of advisory work,
22:30
Speaker 1: and so they really would not be an investment bank anymore.
22:34
Speaker 1: They would be I guess, just really a wealth advisor.
22:36
Speaker 1: I guess wealth advisor. And that's something that UBS has
22:38
Speaker 1: struggled with a long time. Remember the new CEO and
22:41
Speaker 1: a lot of new executives have come from UBS, and
22:45
Speaker 1: you're looking at a question of what that trading business
22:47
Speaker 1: looks like in the future. Can they take on more
22:50
Speaker 1: risk when Credit Swiss fade is facing a ratings downgrade.
22:54
Speaker 1: That swashbuckling world of trading, that high flying world has
22:58
Speaker 1: brought them billions of dollars in revenue, but in more
23:01
Speaker 1: recent quarters and years a lot of losses along with it.
23:05
Speaker 1: What's the government, the Swiss government saying about that? Can
23:08
Speaker 1: they allow one of their two national banks to really
23:11
Speaker 1: not be a investment bank? You don't need to get
23:14
Speaker 1: out completely if you take Deutsche Bank as an example.
23:17
Speaker 1: But they did was they really sold a big chunk
23:19
Speaker 1: of their prime brokerage business. They kept a lot of
23:22
Speaker 1: their fixed income trading business. And guess what where Credit
23:25
Speaker 1: sweez is trading at less than a third of their
23:27
Speaker 1: book value. Deutsche Bank is back to par Deutsche bankers
23:30
Speaker 1: trading at their book value. So they really recovered in
23:32
Speaker 1: a big way. So sometimes deep cuts can lead to
23:37
Speaker 1: a better future, as shown by Deutsche Bank. But again,
23:41
Speaker 1: what decisions are going on this new management team going
23:43
Speaker 1: to make today that really defines the future for a
23:45
Speaker 1: bank that started their roots in the eighteen hundreds. Yeah, so,
23:49
Speaker 1: I mean, you know Historic Bank here and Credit Swiss
23:51
Speaker 1: bought what was one of the U S historic banks,
23:54
Speaker 1: First Boston Corporation, uh, and then that combined Credit Swiss
23:57
Speaker 1: First Boston bought d L j u Lfkin and jen Red,
24:01
Speaker 1: another high quality investment bank. But despite those acquisitions, I
24:05
Speaker 1: mean they we were always a top five bank six
24:09
Speaker 1: you are in equity income m n a um. But
24:13
Speaker 1: you know they just can't get the profit side, the
24:15
Speaker 1: cost side of the business, uh right, and so then
24:18
Speaker 1: it results they have these big, big blow ups from
24:21
Speaker 1: time to time and a risk culture. Uh that's showing
24:23
Speaker 1: time and again to be problematic. So anyway, good news.
24:26
Speaker 1: They're lots of stuff on Wall Street as always as
24:28
Speaker 1: the bankers get back from the Hampton, instincts gonna be
24:30
Speaker 1: heating up. For Shinali Bastik. She is our Wall Street
24:33
Speaker 1: reporter joining us live on our Bloomberg Interactive Brokers studio.
24:39
Speaker 1: Pretty sure, I'm here, I'm just but we've got a
24:41
Speaker 1: guest in our studio, which we don't get very often
24:43
Speaker 1: from the falls of Washington, d C. And re Hoardern
24:47
Speaker 1: Washington corresponding for Bloomberg Televisions. We saw her wandering around
24:49
Speaker 1: and crazy, and I are like, let's grab her and
24:51
Speaker 1: get her in our studio here to get the latest emory.
24:54
Speaker 1: Thanks so much for joining us here. I don't really
24:57
Speaker 1: know where to go other than in August. It's August,
25:02
Speaker 1: but in d C. I know it's a lovely time
25:03
Speaker 1: of year down in Washington. Weatherwise, But elections are coming
25:07
Speaker 1: up here and is it me or is the narrative
25:10
Speaker 1: begun to change from not how bad is it going
25:13
Speaker 1: to be for the Democrats, but can they maybe pick
25:16
Speaker 1: up some ground there. They had a pretty good summer
25:20
Speaker 1: in the sense of getting some really high profile legislative
25:24
Speaker 1: goals over the finish line, the most recently which the
25:26
Speaker 1: president when this recess is over and everyone's kind of
25:30
Speaker 1: back to the grind and Washington is going to have
25:33
Speaker 1: this big almost party at the White House for getting
25:35
Speaker 1: over the very very smaller version of their billback Better
25:39
Speaker 1: but their Inflation Reduction Act, so they had that, They
25:42
Speaker 1: had gun legislation, they had something for veterans. They were
25:45
Speaker 1: able to get Congress to sign off on Sweden and
25:48
Speaker 1: Finland joining NATO, like these are really important measures, and
25:51
Speaker 1: they got it all done in the summer at the
25:53
Speaker 1: same time as gasolene prices were trickling down and that
25:56
Speaker 1: was the biggest issue for voters and that has really
26:00
Speaker 1: evaporated from the news headlines being every single day. So
26:05
Speaker 1: with that kind of gives them some breathing room going
26:08
Speaker 1: into this election that they can campaign on these gains.
26:12
Speaker 1: So I thought very interesting last week, Mitch McConnell, although
26:15
Speaker 1: he's back in his home state of Kentucky, the Senate
26:18
Speaker 1: rope leader, said, I think there's probably a greater likelihood
26:21
Speaker 1: the House flips, which independent analysts have said, flip from
26:24
Speaker 1: Democrat to Republic. But he says the Senate races are
26:27
Speaker 1: just different there. Statewide candidate quality has a lot to
26:31
Speaker 1: do with the outcome, and what he clearly is indirectly
26:34
Speaker 1: indirectly pointing to is some of these Senate candidates that
26:37
Speaker 1: have really been backed by the former president that don't
26:40
Speaker 1: have that usual level experience that you would see in
26:44
Speaker 1: some senators. Well, let's go from Washington to Tehran. We
26:48
Speaker 1: know that there are conversations right now happening with European
26:50
Speaker 1: leaders regarding the Iran deal. Do we see it coming back?
26:54
Speaker 1: It's just now, I would say, the same level of
26:56
Speaker 1: discussions it's always been. This deal has been on the table.
26:58
Speaker 1: The Iranians didn't say yes or no. They came back
27:01
Speaker 1: with the response. Now the Europeans are telling the Americans,
27:05
Speaker 1: we need a response from you, and they the Americans
27:08
Speaker 1: have said, we have had the same deal on the table.
27:10
Speaker 1: The Iranians can say yes or no. There's been the
27:12
Speaker 1: same issues of hurdles for the Iranians that have always
27:16
Speaker 1: stood in the way. One of them was the i
27:19
Speaker 1: r g C, the Islamic Revolutionary Guard. They want that
27:21
Speaker 1: off the terror list right now. The Iranians, the reporting
27:25
Speaker 1: that we've had for weeks is that potentially they're starting
27:27
Speaker 1: to maybe allow that to go ahead, and they're not
27:30
Speaker 1: going to make that the end all to be of
27:32
Speaker 1: the deal. But the one issue they do have is
27:34
Speaker 1: if a Republican president comes back in power, they want
27:37
Speaker 1: to make sure that this deal is safeguarded. And that's
27:40
Speaker 1: there's nothing the United States can do for that, right interesting,
27:43
Speaker 1: So keep an eye on that. So as folks do
27:46
Speaker 1: come back into Washington after the recess, what's on the
27:50
Speaker 1: legislative calendar do you think getting re elected? Getting re elected?
27:54
Speaker 1: That's it, right, I mean, it's yeah, it's it's a
27:58
Speaker 1: small amount of run on. How might put it this way,
28:02
Speaker 1: the abortion ruling from the Supreme Court. How will the
28:04
Speaker 1: Democratic Party do you anticipate them running on that using
28:07
Speaker 1: that as an issue. Well, they want to make sure
28:09
Speaker 1: that they are getting the word out to all of
28:14
Speaker 1: their constituents that this is something that one they want
28:17
Speaker 1: to put into law and go to Congress, but also
28:19
Speaker 1: that they don't want to see Republicans gaining power or
28:24
Speaker 1: individual candidates that are for abortion gaining this type of power.
28:29
Speaker 1: They will certainly run in that and you can see
28:31
Speaker 1: them already doing that with them spending in terms of
28:35
Speaker 1: donations and what you do see what we saw recently
28:39
Speaker 1: in Kansas with voters they are rejecting um more draconian
28:43
Speaker 1: measures on abortion, is that this is a live issue
28:47
Speaker 1: for the re member election. Everyone thought it was going
28:49
Speaker 1: to be inflation, and the Republicans are going to hammer
28:51
Speaker 1: the administration on that. They're already doing it in in the ads.
28:55
Speaker 1: But the Democrats will fight back on well, inflation, it's
28:59
Speaker 1: high here, as you mentioned earlier, it's high all over
29:02
Speaker 1: the world. We were able to get the administration's words,
29:05
Speaker 1: will be able to get gasoline prices down going into
29:08
Speaker 1: the winter months and the peak driving seasons of the summer.
29:10
Speaker 1: We have it down, and they are going to want
29:13
Speaker 1: to make sure that women, especially is hearing that to
29:16
Speaker 1: make sure that is their number one issue, not inflation.
29:19
Speaker 1: All right, So is this mid room election going to
29:22
Speaker 1: be a referendum on former President Trump and his ability
29:26
Speaker 1: to run for president i e. If his candidates that
29:30
Speaker 1: he backs here in these mid terms farewell, he will say, hey,
29:33
Speaker 1: maybe you know I still got it and I can
29:36
Speaker 1: make another run. It's an interesting question because we've seen
29:38
Speaker 1: already a number of former Trump or the former President's
29:43
Speaker 1: candidates he's chosen already, when most recently we saw that
29:46
Speaker 1: in Wyoming with Representative Chaining getting ousted from her seat.
29:51
Speaker 1: I think it will be depending on the individuals and
29:55
Speaker 1: what they're running for. Meaning maybe you'll see some representatives
29:58
Speaker 1: going to the House that the foreign president backed, but
30:01
Speaker 1: some of these senators that are running you have mement
30:05
Speaker 1: Oz in Pennsylvania, you have Blake Masters in Arizona. At
30:09
Speaker 1: the moment, their polls aren't faring as well, and these
30:13
Speaker 1: are going to be really big seats that the foreign
30:16
Speaker 1: president is going to want to see his candidates win.
30:20
Speaker 1: What's on President Biden's agenda? Do you think UM does
30:24
Speaker 1: even have any big trips planned, you know, back in
30:26
Speaker 1: the fall, because it seems like, you know, the world's
30:28
Speaker 1: kind of moved on from COVID. It seems like maybe
30:31
Speaker 1: I can take advantage of, you know, some of these
30:33
Speaker 1: travel opportunities to kind of so from now until the
30:36
Speaker 1: mid terms, he will likely focus all of his energy domestically.
30:41
Speaker 1: So already on Thursday, he's going to Maryland. This is
30:43
Speaker 1: gonna be like the kickoff of his push for the
30:45
Speaker 1: mid terms. Whether or not those candidates actually want the
30:49
Speaker 1: President United States to come campaign with him is another issue.
30:52
Speaker 1: Over the weekend, the Washington Post had a survey and
30:54
Speaker 1: it was more than sixty candidates in these very hot
30:57
Speaker 1: races um kind of saying they're either not asking the
31:01
Speaker 1: President to come or they're actively avoiding it. Basically, there's
31:05
Speaker 1: no welcome banner that they want because it's really more
31:08
Speaker 1: of a referendum for a lot of these people. For
31:10
Speaker 1: the Democrats, it's a referendum on the administration. But then
31:14
Speaker 1: after the mid terms, he set to go to the
31:16
Speaker 1: G twenty in Bali. Now they haven't announced that, but
31:18
Speaker 1: that is likely. The President has been doing his team,
31:20
Speaker 1: Shiji Ping's team is working together to maybe have their
31:24
Speaker 1: first meeting. Potentially that could be in November. The President
31:28
Speaker 1: will be in in Asia Pacific, so there's definitely going
31:31
Speaker 1: to be travel internationally, but that will happen only after
31:34
Speaker 1: the midterms. Everything is going to be right after Labor Day.
31:38
Speaker 1: It is going to be every headline, every inbox. Just
31:42
Speaker 1: prepare yourself some TV ads. I'm guessing all right. Anrie Hordern,
31:46
Speaker 1: Washington correspondent for Bloomberg Television. We're fortunate to have her
31:49
Speaker 1: in our Bloomberg Interact their Broker studio today, so that
31:51
Speaker 1: is a treat. Thanks for listening to the Bloomberg Markets podcast.
31:57
Speaker 1: You can subscribe and listen to interviews and Apple podcasts
32:01
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
32:05
Speaker 1: on Twitter at Matt Miller three. Pet On fall Sweeney
32:09
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
32:11
Speaker 1: can always catch us worldwide at Bloomberg Radio