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Wishes For Big Rate Cuts Foiled By Strong Consumer · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge You,
0:05
Speaker 1: along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money, whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Time to check in with Bloomberg Opinion.
0:21
Speaker 1: We're joined by Bloomberg Opinion columnists Bob Burgess. He's an
0:24
Speaker 1: editor of Bloomberg Opinion, joining us here in our Bloomberg
0:27
Speaker 1: Interactive Broker studio. Bob, I think I speak for Lisa
0:30
Speaker 1: and most of our audience when I say, over the
0:32
Speaker 1: last two or three days, we've all had to brush
0:34
Speaker 1: up on the Repo market. What does it mean? Is
0:37
Speaker 1: it important? Do I care? So, Bob? Do I care
0:41
Speaker 1: about what's going on in the repo Market's been kind
0:43
Speaker 1: of scorely the last few days? Yes, and no. I
0:45
Speaker 1: think that um when people here that there's just locations
0:50
Speaker 1: going on in the Repo market, they have nightmares and
0:53
Speaker 1: flashbacks back to the financial crests, right, because this is
0:57
Speaker 1: one area that really royal markets. But there's a sense
1:03
Speaker 1: that was going on in the repo market now UH
1:06
Speaker 1: is much different than what happened back then. Now it's
1:10
Speaker 1: more of a technical move that we're seeing where you
1:14
Speaker 1: have a confluence events coming together that is pushing up
1:18
Speaker 1: these overnight borrowing costs. Back then, borrowing costs arising because
1:23
Speaker 1: banks didn't trust each other, which was a major problem.
1:27
Speaker 1: It's not really the reason why repo rates are rising
1:30
Speaker 1: right now. I guess that it gets to the heart
1:32
Speaker 1: of this real fear in markets right now. Will there
1:35
Speaker 1: be sort of a winning out of the global slowdown
1:39
Speaker 1: that will UH plunge a hole in the equity rally
1:43
Speaker 1: or will we see some sort of everything rally continue
1:46
Speaker 1: which we have been seeing. And I guess this is
1:48
Speaker 1: something you addressed in a recent column. We're talking about
1:50
Speaker 1: what markets need for this everything rally for bondstocks, currencies, commodities,
1:55
Speaker 1: everything to rally together. So what is it that they need?
1:58
Speaker 1: Right you know? This is one of those are years.
2:01
Speaker 1: You have the global stock market, the global bomb market,
2:04
Speaker 1: the global commodities market, and currency of returns all poised
2:07
Speaker 1: to deliver positive returns for the first time since two
2:12
Speaker 1: thousand ten Um Bank of America recently came out with
2:16
Speaker 1: their monthly survey of institutional clients, and they identify three
2:21
Speaker 1: things that would likely keep the as you put it,
2:25
Speaker 1: the everything rally going. One of those is German fiscal
2:28
Speaker 1: stimulus UH. The second is a fifty basis point rate
2:34
Speaker 1: cut from the Federal Reserve, and the third is Chinese
2:38
Speaker 1: infrastructure spending. But when you look at it, it looks
2:42
Speaker 1: like only two of those three things are likely to happen. Um.
2:47
Speaker 1: The Germans UM, instead of talking about borrowing UH to
2:52
Speaker 1: blow out his budget for infra, for phisical spending, it's
2:56
Speaker 1: actually talking about sticking with a balanced budget. UM. So
3:00
Speaker 1: the Germans are steer, So we're not gonna get any
3:02
Speaker 1: fiscal spending from the Germans. I'm not shocked at all.
3:05
Speaker 1: Nobody else I think should be shocked at all. As
3:07
Speaker 1: as as well UM. The second thing, the fifty basis
3:11
Speaker 1: point rate cut from the thread, is increasingly looking less
3:15
Speaker 1: likely by the hour. Um. You know, there's even a
3:19
Speaker 1: couple of strategies reports out over the past couple of days.
3:22
Speaker 1: I says, maybe the Fed shouldn't even cut rates, mainly
3:24
Speaker 1: because of the consumer is relatively strong in the US.
3:28
Speaker 1: You know, Brown Brothers Harriman is one firm that says,
3:30
Speaker 1: maybe the FED shouldn't cut rates. So a fifty basis
3:33
Speaker 1: point rate cut is definitely off the table. Might get
3:36
Speaker 1: twenty five basis point rate cut today. We'll see what
3:39
Speaker 1: they say about the outlook. The third point Chinese different
3:43
Speaker 1: structure spending that's actually happening. Um, you know, the Chinese
3:46
Speaker 1: recently introduced a proposal to allow local municipalities to sell
3:52
Speaker 1: bonds to increase your infrastructure. So the bottom line is
3:56
Speaker 1: the outlook for global risk assets seem to be dimming
3:59
Speaker 1: at the point. So, Bob, it is uh FED day today.
4:03
Speaker 1: It's not just REPO day, it's actually FED a rate
4:06
Speaker 1: decision day. If the FED were to come out with
4:09
Speaker 1: the you know, perhaps something less devilish, a little bit
4:11
Speaker 1: more Hawker saying, hey, the data is not is actually
4:14
Speaker 1: pretty solid. We're pretty good where we are. I'm not
4:17
Speaker 1: sure the markets are prepared for that. I would agree.
4:20
Speaker 1: I think the markets have been um have been anticipating
4:24
Speaker 1: a very devilish FED. But look at the housing starts
4:27
Speaker 1: data that came out to this morning. I mean, you know,
4:31
Speaker 1: the biggest monthly increase in housing starts since since two
4:34
Speaker 1: thousand seven, uh, consumer spending has been surprisingly strong. Uh
4:39
Speaker 1: So there are these metrics that suggest that the economy
4:42
Speaker 1: is doing pretty good. That said, we know from history
4:45
Speaker 1: that the consumers can lose confidence pretty quickly. If you
4:49
Speaker 1: look at every recession going back to at the very
4:52
Speaker 1: beginning of the recession is when the unemployment rate reached
4:56
Speaker 1: its bottom. Okay, so don't be fooled by a I
5:00
Speaker 1: want to employment rate saying the economy is strong. If
5:02
Speaker 1: companies feel that the outlook is getting dimmer, they'll start
5:06
Speaker 1: laying off workers, that unemployment rate will shoot up, and
5:10
Speaker 1: that's when you'll see consumers start pulling back. How much
5:12
Speaker 1: do you think that equity markets would sell off if
5:15
Speaker 1: the Fed indicate yes, they're going to cut twenty five
5:17
Speaker 1: bases points today, but going forward, who knows? You know,
5:22
Speaker 1: it's it's it's it's hard to say. But if you
5:24
Speaker 1: look at the rally this year in the U S
5:26
Speaker 1: stock market, the sp up, that's despite UM economists forecasting
5:33
Speaker 1: recession coming next year. That's despite strategists actually cutting their
5:38
Speaker 1: earnings estimates for this year. So how do you explain that? Well,
5:42
Speaker 1: the the only way you can explain the rally and
5:44
Speaker 1: the stock market this year is from ever lower interest rates. Right,
5:48
Speaker 1: simple discounted cash flow analysis suggests that you know future
5:53
Speaker 1: earnings are more valuable now when you assign a lower
5:55
Speaker 1: interest rate. If the Fed says maybe interest rates aren't
5:58
Speaker 1: going to be as low as and Wark is expecting,
6:01
Speaker 1: there's going to need to be a reprising Bob Bridgess,
6:04
Speaker 1: thank you so much for being with us. Bob Bridges
6:06
Speaker 1: as editor for Bloomberg Opinion, Joining us here in our
6:09
Speaker 1: Bloomberg Interactive Broker Studios. US home construction surged in August
6:26
Speaker 1: to the fastest pace since mid two thousand seven, showing
6:30
Speaker 1: ongoing strength and accelerating strength on the heels of lower
6:34
Speaker 1: mortgage rates. What does this mean for the United States
6:37
Speaker 1: housing market? Joining us here to discuss Melissa Reagan, head
6:40
Speaker 1: of US research for now Vina real Estate, which oversees
6:43
Speaker 1: a hundred and twenty five billion dollars of assets. Melissa
6:46
Speaker 1: joins us here in our Interactive Broker Studios to Melissa,
6:49
Speaker 1: can you just give us a sense of the increase
6:51
Speaker 1: in home construction? How do you see this sort of
6:54
Speaker 1: in the bigger picture and what's going on in how
6:57
Speaker 1: builders are responding to lower mortgage rates. Yeah, sure, absolutely,
7:01
Speaker 1: so I think the numbers are really strong. Housing starts
7:04
Speaker 1: up six point six percent year over year August twelve
7:07
Speaker 1: percent during the month. I really focus in on the
7:10
Speaker 1: multi family market and that was extremely strong as well,
7:13
Speaker 1: with it like four hundred and forty five thousand starts,
7:16
Speaker 1: And wasn't that kind of driving it was the apartment
7:19
Speaker 1: building like that. So the majorities driven by single family.
7:22
Speaker 1: So if he's in context of that, one point three
7:24
Speaker 1: six four million, uh nine and like nineteen was single family,
7:29
Speaker 1: and then the fot was was multi family. Um. So
7:34
Speaker 1: when you put in that context, I think a lot
7:35
Speaker 1: of it was driven by immigration in kind of the
7:39
Speaker 1: southern regions, and you think at the southeast southwest, that's
7:42
Speaker 1: where you saw a lot of really strong demand, and
7:44
Speaker 1: that's completely consistent with where you're seeing population in very
7:48
Speaker 1: strong levels of immigration. Right You've probably read the headlines
7:51
Speaker 1: population is actually falling in places like San Francisco, New York,
7:55
Speaker 1: UM to some extent l A. And I think this
7:57
Speaker 1: is a reflection of that and very strong to me
8:00
Speaker 1: and from multi family. Uh. Just as people still continue
8:03
Speaker 1: to want to rent, So is this strong housing market
8:07
Speaker 1: that we've been seeing. Is it just simply a function
8:09
Speaker 1: of everybody's got a job and mortgage rates are low
8:13
Speaker 1: and appear to be coming lower And are those the
8:15
Speaker 1: two main drivers? Partly? Right? So I look at it,
8:18
Speaker 1: that's definitely true. On the single family home starts angle
8:21
Speaker 1: of it. Uh morgates are low. But you also have
8:24
Speaker 1: to remember from that perspective, I think you need to
8:25
Speaker 1: put in context. You know, a single family starts peaked
8:30
Speaker 1: at like one point seven million right before the crisis, right,
8:33
Speaker 1: so this is so pretty low in a historical content
8:36
Speaker 1: from a peak perspective. From a multi family perspective, starts
8:40
Speaker 1: are actually I'm wouldna say historically high, but they've been
8:44
Speaker 1: elevated for a while. And that is definitely due to
8:47
Speaker 1: strong in migration demand for rentals, the millennials, you know,
8:52
Speaker 1: not being able to afford a home at this point.
8:54
Speaker 1: So he's all kind of one and the same, the
8:56
Speaker 1: homeownership versus the rental single family starts being down from
9:00
Speaker 1: their peak, It's it's all interrelated, so to speak. Well,
9:03
Speaker 1: uh So, Paul and I were in Nashville not so
9:05
Speaker 1: long ago, and I was struck by all of the
9:07
Speaker 1: construction cranes in downtown Nashville, which makes sense given the
9:11
Speaker 1: fact that a number of businesses are moving from places
9:13
Speaker 1: like New York to Nashville, and there certainly is outmigration
9:16
Speaker 1: from the bigger cities to places like Nashville. At what
9:19
Speaker 1: point is it over building, right? I mean, especially if
9:23
Speaker 1: there is somewhat of a downturn and the jobs remain
9:25
Speaker 1: in the big cities and some of these other ones
9:28
Speaker 1: do lose out like we saw in two thousand and
9:30
Speaker 1: eight and two thousand nine. Yeah, absolutely, I think. Listen,
9:33
Speaker 1: I think the big cities will They're not going anywhere,
9:36
Speaker 1: and so somebody who the headlines get a little overstated
9:38
Speaker 1: of population film and they try to make the same
9:40
Speaker 1: dramatic big cities are not going anywhere to the extent
9:44
Speaker 1: what I do think has happened in places like Nashville's.
9:46
Speaker 1: They have changed who they are from fifteen years ago.
9:49
Speaker 1: So Nashville and you can think of Charlotte, Raleigh, Austin
9:53
Speaker 1: all being in that same kind of category fifteen or
9:57
Speaker 1: twenty years ago did not have the vibrancy the people,
10:00
Speaker 1: the businesses, and today they do, and I think they
10:02
Speaker 1: will have staying power in a downturn in the next cycle.
10:07
Speaker 1: Um but yes, to the extent that you want to
10:09
Speaker 1: have a certain job, right, think about finance, that's that's
10:13
Speaker 1: largely going to still be in New York. So, you know,
10:16
Speaker 1: we're ten plus years into this economic cycle. So yet
10:21
Speaker 1: you know, the real estate, the consumer is still strong.
10:22
Speaker 1: How are you, Folcus at Novine on your real estate investments?
10:26
Speaker 1: How are you kind of positioning yourselves now? I mean,
10:28
Speaker 1: at some point this has all got to end. We
10:30
Speaker 1: you know, it's not that long ago that we still
10:33
Speaker 1: have the memories of the financial crisis and there in
10:35
Speaker 1: the real estate issues. So how are you guys positioning
10:37
Speaker 1: your portfolios? Yeah, I think at this point you realize
10:40
Speaker 1: you're you're late in the cycle. And I think that's
10:42
Speaker 1: just consensus at this point. We all we all know that.
10:44
Speaker 1: And so what we do is we think about the
10:46
Speaker 1: sectors we want to be in that we think will
10:48
Speaker 1: actually provide us with a protection in a downturn. So
10:51
Speaker 1: some of us have been more of the alternative property
10:53
Speaker 1: types which tend to still grow in a downturn. Alternative
10:57
Speaker 1: alternative Yeah, so when even so, you can think of
10:59
Speaker 1: self storage, or you can think of senior housing, or
11:01
Speaker 1: you can think of manufactured house at it things that
11:04
Speaker 1: that actually do pretty well in the downturn, just because
11:06
Speaker 1: of the demand drivers. At the same time, when you
11:08
Speaker 1: think about apartments or offices, industrial or retail, we just
11:12
Speaker 1: get more selective UM and we get really focused on
11:15
Speaker 1: making sure we're focused on high quality location. Price. Obviously
11:19
Speaker 1: UM is a factor in that as well, So you
11:22
Speaker 1: just narrow down the opportunity set and be you'd be
11:25
Speaker 1: more selective in the investment process. One thing I'm trying
11:28
Speaker 1: to understand is the amount of money getting raised for
11:32
Speaker 1: real estate funds at this point in the credit cycle.
11:35
Speaker 1: Because you're saying it's consensus, we're late cycle. Why is Blackstone,
11:38
Speaker 1: for example, raising an unprecedented amount of money for commercial
11:42
Speaker 1: real estate? Uh, and you see a whole other host
11:45
Speaker 1: of fund managers doing the same. Is this for now
11:48
Speaker 1: or is this for a downturn? I do think in
11:52
Speaker 1: some sense, if you're an investor who looks at it
11:54
Speaker 1: from a multi asset perspective, If you're an investor who
11:57
Speaker 1: has stocks, bonds, and then you think about real estate
11:59
Speaker 1: or real asset, what you think about is in a downturn,
12:02
Speaker 1: real estate or real assets can provide me with some
12:05
Speaker 1: pure diversification relative to my stocker bond portfolio. And I
12:09
Speaker 1: think there's a lot of that going on. And I
12:11
Speaker 1: think investors saying, hey, I've probably been under allocated to
12:14
Speaker 1: real estate real assets, you know, for probably twenty years now,
12:17
Speaker 1: and it's time to start helping that allocation, you know,
12:20
Speaker 1: to call it ten or fifteen percent of my portfolio.
12:22
Speaker 1: It's almost just a pure diversification play of nothing else.
12:25
Speaker 1: Is there any sense that the commercial or real estate
12:28
Speaker 1: or residential real estate market is overheating at all at
12:31
Speaker 1: the moment? Yeah, you know, there's been a lot of
12:34
Speaker 1: discussion about that for probably five years now. I would say,
12:38
Speaker 1: I mean really, um and and because people have seen
12:41
Speaker 1: the cranes in Nashville for more than five years now,
12:44
Speaker 1: and so you have a lot of those questions. The
12:46
Speaker 1: demand has kept up, So from an apartment perspective, you
12:50
Speaker 1: still have rents growing above inflation. Demand is there. You
12:54
Speaker 1: do see oversupply in certain pockets of the southern regions
12:58
Speaker 1: like a Dallas or a Houston. And um, but by
13:01
Speaker 1: and large, I would say supply de man have kept
13:03
Speaker 1: in sync, so really strong demand for apartments even with
13:07
Speaker 1: the supply just quickly here, which market do you see
13:10
Speaker 1: as having the most potential upside here in the US
13:14
Speaker 1: at this point. That's a great question. UM. We're really
13:18
Speaker 1: favoring some of the more tech driven markets. UM. You
13:21
Speaker 1: could think of San Francisco, l A, San Diego, Portland. UM.
13:25
Speaker 1: But we also like some of the southern regions too. UM.
13:27
Speaker 1: I still think there'd be good demand in migration in
13:30
Speaker 1: places like Nashville, UM, who have really changed their stripes
13:33
Speaker 1: of who they are as a city. Melissa Reagan, thank
13:36
Speaker 1: you so much for joining us. Melissa's the head of
13:38
Speaker 1: US research for Moving real Estate with about a hundred
13:42
Speaker 1: and twenty five billion dollars under management on the real
13:45
Speaker 1: estate side. She joins us here in our Bloomberg Interactor
13:48
Speaker 1: Broker studio. We saw again more evidence today with a
13:51
Speaker 1: new housing starts and new uh. You know, the real
13:53
Speaker 1: estate market in the US remains very solid. Well, it
14:14
Speaker 1: is FED day, but it's not your typical FED day.
14:16
Speaker 1: Instead of obsessing over what we might hear from the
14:19
Speaker 1: Fed this afternoon, we're talking about a little known part
14:21
Speaker 1: of the capital markets, and that is the overnight federal
14:24
Speaker 1: repo market. They get the latest. We welcome Hugh Nicola,
14:27
Speaker 1: Principal and head of fixed Income at gent Trust with
14:30
Speaker 1: about two billion dollars under management, and Alex Harris, Bond
14:32
Speaker 1: reporter for Bloomberg News, both joining us here in our
14:35
Speaker 1: Bloomberg Interactive Broker Studio. So Alex, let's start with you.
14:38
Speaker 1: Just give us the latest on what is going on
14:40
Speaker 1: with this three day story about the federal repo market. Um. Well,
14:45
Speaker 1: so it kind of had started building actually last Friday.
14:48
Speaker 1: You were starting to hear about withdrawals from the money
14:51
Speaker 1: market funds to cover that corporate tax payment. And then
14:54
Speaker 1: Monday everything kind of came to a head because you
14:56
Speaker 1: had collateral coming in and so from these treasury coupon
15:01
Speaker 1: auction settlements. Um. But then you know, there's some X
15:04
Speaker 1: factors and things that we're still trying to sort through.
15:06
Speaker 1: There were rumors flying around about you know, Saudi Arabia
15:09
Speaker 1: pulling cash out of the funding markets to shore you know,
15:12
Speaker 1: their liquidity after the attacks. You were you know, so
15:15
Speaker 1: I'm hearing a few different things, but ultimately that was
15:17
Speaker 1: sort of the crux of it is a supply demand
15:19
Speaker 1: and balance, and so you repo got really unstable, and
15:23
Speaker 1: with it, it just pulled all these other rates up,
15:26
Speaker 1: the security overnight financing rate, which regulators are looking at
15:29
Speaker 1: is sort of the air presumptive to Liebor shot up.
15:32
Speaker 1: And even today, you know, the setting for as of
15:35
Speaker 1: yesterday was five five point five percent. That was a
15:38
Speaker 1: two basis point move. And then more concerning is that
15:42
Speaker 1: the FED funds rate, the FEDS policy target rate moved
15:45
Speaker 1: out of the range. Today it's at two thirty and
15:48
Speaker 1: the FEDS benchmark range is two to two and a
15:51
Speaker 1: quarter percent. And that's more concerning here. And even though
15:54
Speaker 1: repo's starting to sort of normalize, things are calming down.
15:58
Speaker 1: What's what's more worrisome in long run is that the
16:01
Speaker 1: FED has lost control. It's the perception that the FED
16:04
Speaker 1: has lost control of the benchmark and of policy and
16:07
Speaker 1: the transmission mechanism. And so I think that's now what
16:10
Speaker 1: the meeting becomes today is you know what kind of
16:13
Speaker 1: steps is Jerome Powell on the FOMC gonna take here
16:16
Speaker 1: to kind of you know, help keep you know, the
16:19
Speaker 1: FED funds rate within its target range and keep things
16:22
Speaker 1: sort of under control and controlling the short term interest rates. Hugh,
16:25
Speaker 1: how are you viewing the rebot disruption of this week? So, um,
16:29
Speaker 1: first of all, thank you for having me here. Um
16:32
Speaker 1: I don't think uh in you know, in ah in summery,
16:36
Speaker 1: I don't think it's a huge deal, right, I mean,
16:38
Speaker 1: we need to worry about this market, right, I mean
16:40
Speaker 1: there is an important market for the financial industry, right,
16:42
Speaker 1: I mean, for it's a lifeblood essentially financing of the
16:46
Speaker 1: of the financial industry. So we've got to keep an
16:48
Speaker 1: eye on if there are issues with liquidity or if
16:50
Speaker 1: there's some break in the system. We need to know
16:52
Speaker 1: what's going on. But that being said, you know, this
16:55
Speaker 1: isn't a problem that the Fed isn't was unaware of.
16:58
Speaker 1: I mean they talked about essentially a repo facility and
17:00
Speaker 1: premier repo facility in UM in June, putting it in place.
17:04
Speaker 1: They knew that they were drawing down on access reserves
17:06
Speaker 1: over time. I mean that's been a long standing trend
17:09
Speaker 1: we've seen reserves coming down, So we knew reserves were
17:11
Speaker 1: leaving the system. Um So, I think the shock was
17:14
Speaker 1: just how dramatic it was. Right So um, as Alex mentioned,
17:18
Speaker 1: you had essentially the auctions that settled on Monday, you
17:20
Speaker 1: also had talked corporate tax payments, took a lot of
17:23
Speaker 1: money on the system, and suddenly you see reaper rates
17:26
Speaker 1: up eight. Just to be clear, as we talked about this,
17:29
Speaker 1: for people who don't know what repro rates are, aren't
17:32
Speaker 1: familiar with what we're actually talking about. It's basically banks
17:35
Speaker 1: offering treasuries other high quality securities. Uh, it's a sort
17:39
Speaker 1: of as collateral for cash from other firms, and basically
17:45
Speaker 1: because there wasn't enough cash on the balance sheets of
17:48
Speaker 1: these other firms, they were demanding a much bigger premium
17:52
Speaker 1: for that cash. Right, just to sort of lay this
17:55
Speaker 1: out there, to give people sense of what we're talking
17:56
Speaker 1: about exactly, it's a collateralized loan, right, So Okay, I mean,
18:01
Speaker 1: I think it's important to think about this because basically
18:03
Speaker 1: that's why people are talking about a cash crunch, because
18:06
Speaker 1: there was not enough physical cash on the balance sheets
18:09
Speaker 1: of other firms to make this a sort of seamless process, right,
18:13
Speaker 1: I mean that's yes, well, I mean, but the other
18:16
Speaker 1: issue is is that you also have to think about
18:18
Speaker 1: it from the collateral side that there is. You know,
18:20
Speaker 1: one of the takeaways from this is just there are
18:23
Speaker 1: just too many treasuries in the system, and this is
18:26
Speaker 1: a problem because treasuries pile of debt is only gonna grow.
18:30
Speaker 1: I don't see anything about deficit reductions. I don't see
18:33
Speaker 1: anything about debt reduction, Like that's only going to continue
18:36
Speaker 1: to grow. And that's why people are really now getting
18:38
Speaker 1: nervous about the fourth quarter, because treasury bill supply is
18:41
Speaker 1: going to resume its March higher treasuries cash buffer is
18:45
Speaker 1: going to continue to grow, and that actually pulls reserves
18:48
Speaker 1: out of the system. So, like you talked about, with this,
18:51
Speaker 1: you know, reserve scarcity level with the Fed, it becomes
18:54
Speaker 1: a bit more problematic because you're really hitting those precarious
18:57
Speaker 1: levels and that's what the market is really worried about
19:00
Speaker 1: going forward. So he does this affect your kind of
19:03
Speaker 1: overall investing view in any way, shape or form, or
19:06
Speaker 1: you kind of viewing everything the same way you did before?
19:10
Speaker 1: You know, I think the Fed, uh, we'll have a
19:13
Speaker 1: handle on this. I mean, we'll bound the scene announcement
19:15
Speaker 1: today on something um particularly with the meeting coming up
19:18
Speaker 1: later today. So no, I'm not worried. Uh right now,
19:23
Speaker 1: I'm not worried. It doesn't really affect us per se.
19:25
Speaker 1: How does this affect investors in general? It's essentially if
19:28
Speaker 1: this kind of panic bleeds into other markets, right, and
19:30
Speaker 1: then from other financial markets into the real economy. That's
19:34
Speaker 1: the worried. Um. I think we've got to handle on
19:36
Speaker 1: it right now. So no, not concerned at the moment.
19:38
Speaker 1: Are you buying bonds or do you think yields go lower?
19:42
Speaker 1: Well on this new I wouldn't. I'm not buying it's
19:44
Speaker 1: not in this but just in general, you know, Um,
19:48
Speaker 1: you know, I've been on the mind that you you
19:50
Speaker 1: buy dips because I think that it seems recently that
19:54
Speaker 1: you know that a lot of once first we had
19:56
Speaker 1: a lot of good news for bonds, trade war being
19:59
Speaker 1: good news for bonds, and then we had UH and
20:02
Speaker 1: then we had to sell off, we had some negative news.
20:03
Speaker 1: So it's difficult to see that this that the trade
20:06
Speaker 1: ward tweeting, et cetera won't continue and won't ramp up
20:08
Speaker 1: at some stage, and that you know, I like bonds.
20:11
Speaker 1: Hugh Nicola, thank you so much for being with us.
20:13
Speaker 1: Principle and had a fixed income at gen Trust, overseeing
20:16
Speaker 1: about two billion dollars. Of course he likes bonds. He
20:18
Speaker 1: focuses on fixed income, although it doesn't necessarily translate always.
20:21
Speaker 1: Alex Harris, thank you so much for being with us.
20:23
Speaker 1: Bloomberger News Bond reporter, explaining how the report market is
20:27
Speaker 1: kind of affecting everything right now. Well, diversity in the
20:46
Speaker 1: workplace continues to be a challenge for most industries, including
20:49
Speaker 1: the financial services industries. I think at the latest we
20:52
Speaker 1: welcome Tracy Davies. She's President of Money based in London,
20:56
Speaker 1: but joining us here in our Bloomberg Interactive Broker studio.
20:58
Speaker 1: So Tracy, thanks so much for joining us. And I've
21:01
Speaker 1: spent most of my career in the financial services industry,
21:03
Speaker 1: and I've seen the challenge of promoting and creating diversity
21:09
Speaker 1: in the workplace, and I know the industry tries very hard,
21:11
Speaker 1: has been doing it, you know what, I think a
21:13
Speaker 1: pretty good job. But still at the highest levels there's
21:16
Speaker 1: probably isn't the proper representation of women, for example, What
21:19
Speaker 1: do you think is going on in the financial services industry? Yeah, well,
21:22
Speaker 1: I think the financial services industry is not alone. There
21:25
Speaker 1: are there are many industries, and not a problem just
21:28
Speaker 1: for this industry. Um, it does seem to be a
21:30
Speaker 1: little off pace though compared to say some of the industries,
21:33
Speaker 1: like my industry in the media. If you look at
21:35
Speaker 1: the Lady stats, I think we've got in the US
21:37
Speaker 1: about the exact committees now women versus thirty now that
21:41
Speaker 1: we've gone through in the UK, so I think there
21:43
Speaker 1: is still I mean it's not fifty fifty, so there's
21:46
Speaker 1: still work to them. But you're right, there are a
21:48
Speaker 1: lot of companies making a lot of progress and I
21:50
Speaker 1: think that's really important and really exciting. So I think
21:52
Speaker 1: we are seeing a shift new and there's actually gonna
21:55
Speaker 1: be an emphasis on this at the at the Money
21:58
Speaker 1: conference focused on fintech and of the financial services. It's
22:02
Speaker 1: upcoming in October. Can you talk a little bit about that. Yeah,
22:05
Speaker 1: So we have a whole program dedicated to this called
22:09
Speaker 1: rise Up, which is about empowering women um and enabling
22:13
Speaker 1: them to the next step. There's a load of talented
22:15
Speaker 1: women out there. We run a program to accelerate. So
22:18
Speaker 1: we did this last year. It's our second year. Last
22:21
Speaker 1: year's cohort, thirty three percent have been promoted into more
22:25
Speaker 1: senior roles. So we see that as direct legacy of
22:28
Speaker 1: launching rise Up and inspiring and connecting them because what
22:31
Speaker 1: we do is we connect them to senior folk in
22:33
Speaker 1: the industry, senior mentors. This is a really important thing.
22:36
Speaker 1: So when we are seeing progress, that's interesting you talk
22:39
Speaker 1: about that the mentorship, and that's something that's very important
22:42
Speaker 1: for for everyone in all walks of life, was certainly
22:44
Speaker 1: in business. Do women have a particular challenge kind of
22:47
Speaker 1: creating those relationships and getting that kind of support. Yeah.
22:51
Speaker 1: I think what we see is not just financial services,
22:53
Speaker 1: but generally women I think spend less time invest in networks,
22:58
Speaker 1: and that's one of the really important things that we drive.
23:01
Speaker 1: We enable that network connection, but invest more time in
23:05
Speaker 1: building your network. I think there's a really interesting debate
23:08
Speaker 1: around sponsorship and networking and mentoring, and women seem to
23:12
Speaker 1: have less sponsors in organizations, and so I know that's
23:15
Speaker 1: a real focus from some organizations. Mentoring and sponsoring are different,
23:20
Speaker 1: um but we've seen great results, so we're super pleased.
23:23
Speaker 1: So let's talk a little bit about this conference in
23:25
Speaker 1: October being hosted by Money twenty. It's going to focus
23:29
Speaker 1: on financial technologies, and I think immediately of how well
23:33
Speaker 1: Square and Stripe and some of these other companies have
23:35
Speaker 1: done so far this year, I'm wondering, what do you
23:37
Speaker 1: think will be sort of the buzzword of the conference
23:40
Speaker 1: this year. Well, there's always a lot to talk about.
23:43
Speaker 1: I think there's a couple of really big ones that
23:46
Speaker 1: are standing out at the moment. So there's a we
23:49
Speaker 1: see there's a big focus on digital banking now in
23:52
Speaker 1: the in the US, so we've got CEOs of Chime
23:54
Speaker 1: and twenty six that's coming from Europe Grasshopper. So we're
23:58
Speaker 1: seeing a lot of the new banks, the neo banks,
24:00
Speaker 1: the digital banks. I think that's a big talking difference
24:03
Speaker 1: between a digital bank and a bank that has online presence.
24:06
Speaker 1: Well there are no branches and they're often very very
24:09
Speaker 1: digitally based and a based, so they don't have branches.
24:12
Speaker 1: Okay um. So the other big talking point is obviously
24:17
Speaker 1: the developments around Facebook and Calibra. We've announced last week.
24:21
Speaker 1: David Marcus is speaking, so I think that's going to
24:23
Speaker 1: be a big talking point. There's a lot of people
24:26
Speaker 1: interested to know what that's all about. So I think
24:28
Speaker 1: they're two really big talking points this year. And we
24:32
Speaker 1: do have Strike speaking as well, so we'll gabri it,
24:34
Speaker 1: we'll speak. So we just see constant innovation here in
24:38
Speaker 1: the US, but we do this around the world. You
24:40
Speaker 1: know this there is it is changing. We just see
24:43
Speaker 1: constant change coming through in a good way for the consumer.
24:45
Speaker 1: I think Lisa and I a couple of weeks ago
24:47
Speaker 1: spent some time at a fintech conference in Boston. We
24:51
Speaker 1: learned a lot. One of the things we we heard
24:53
Speaker 1: was that there is a lot of investment in technology
24:56
Speaker 1: in the financial services industry. We even you know, we're
24:58
Speaker 1: here from the government to access of on the JP
25:00
Speaker 1: Morgan's But how about some of the smaller midsize financial institutions.
25:04
Speaker 1: Are they at risk of not of kind of getting
25:06
Speaker 1: lost because they don't maybe have the capabilities to wherewithal
25:10
Speaker 1: to make the big technological invention investments. Yeah, I mean,
25:13
Speaker 1: I think I when we see companies of all scale,
25:16
Speaker 1: and it's one of the things that you see coming
25:17
Speaker 1: out of money tween twenties, people making those connections. So
25:20
Speaker 1: whether they're obviously there's a lot talked about the large companies,
25:23
Speaker 1: but you know a lot of the mid sized companies
25:26
Speaker 1: working with the right startups. So much about this industry
25:29
Speaker 1: is about partnerships and finding those partnerships. So it's exactly
25:31
Speaker 1: why money was created, so you can have the big,
25:34
Speaker 1: the small, the middle. That's what we do. You have
25:36
Speaker 1: over ten thousand people in Vegas in October and they're
25:39
Speaker 1: all they're working out who to work with. It's so
25:42
Speaker 1: I think there is as much opportunity. You think about
25:45
Speaker 1: who to work with, and you think about getting in
25:47
Speaker 1: a room and saying, you know, should we work together?
25:49
Speaker 1: It might work. I also think of consolidation and somebody
25:51
Speaker 1: coming and saying I want to buy you. How much
25:54
Speaker 1: more of that kind of activity do you expect. Yeah, well,
25:56
Speaker 1: there's been a lot of consolidation. I think the two
26:00
Speaker 1: This one was confirmed this morning, so you know, we
26:02
Speaker 1: do see there's been some consolidation in payments, but that's
26:05
Speaker 1: about getting global scale. This is a global industry. There's
26:08
Speaker 1: a lot of global opportunity out there. So we've seen
26:11
Speaker 1: some very big ones, um you know, so it's been
26:14
Speaker 1: quite a talking point this year. You know, M and
26:17
Speaker 1: A is a fact of life, so we may see
26:19
Speaker 1: some more, but we've seen some big ones in here.
26:21
Speaker 1: But it's about global scale because there's a really big
26:23
Speaker 1: global opportunity. Payments is a really hot sector. People want
26:26
Speaker 1: to be in it and they want global scale, and
26:28
Speaker 1: that's what the consolidation has been about. How important was
26:30
Speaker 1: it that Libra came into the marketplace in terms of
26:35
Speaker 1: maybe validating the whole blood chain or financially you know
26:39
Speaker 1: digital payments sound important? Was it? I think it's an
26:42
Speaker 1: important development. I think there's a lot of debate about it.
26:44
Speaker 1: I mean that debate is you know, it's only been
26:46
Speaker 1: announced quite recently, this development. There's a lot of interests
26:50
Speaker 1: from regulators. You've had the hearings here, So I think
26:53
Speaker 1: it's a big talking point. I think people are still
26:55
Speaker 1: trying to work their way through what does this mean,
26:57
Speaker 1: what's the impact going to be, etcetera, etcetera. So it's
26:59
Speaker 1: a big oaking point, although there is also a larger question,
27:02
Speaker 1: which is our crypto assets, cryptocurrency is going to be
27:05
Speaker 1: more into integral in the entire uh fintech world. Yeah,
27:10
Speaker 1: I mean that debate is going to run. It's going
27:13
Speaker 1: to be a big debate money. That's what we're there
27:15
Speaker 1: to do. You know, we we're in neutral platform. We
27:18
Speaker 1: make sure that this debate gets hosted, which is why
27:21
Speaker 1: having David Marcus speak money is very important to us.
27:25
Speaker 1: Thank you so much for being with us, really very
27:28
Speaker 1: Tracy Davies is joining as president of Money twenty twenty,
27:32
Speaker 1: which is going to be held in Las Vegas at
27:35
Speaker 1: the Venetian October seven through October. More than ten thou
27:40
Speaker 1: people have already registered fintech. As we've heard and Tracy mentioned,
27:44
Speaker 1: it is a very hot area. Payments, digital payments, fintech
27:49
Speaker 1: in general, uh, really attracting a lot of investor interest.
27:52
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
27:54
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
27:57
Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
28:00
Speaker 1: Twitter at pt Sweeney. I'm Lisa Abram Wohits. I'm on
28:03
Speaker 1: Twitter at Lisa Abram whits one. Before the podcast, you
28:06
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio