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IMF, Western Alliance, ETFs, and Kurodanomics · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
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. I was thunderstruck in
0:22
Speaker 1: your speech and what your world economic outlook says about
0:26
Speaker 1: a five year vision of the International Monetary Fund of
0:30
Speaker 1: growth from three point eight percent down to three percent,
0:34
Speaker 1: a twenty one percent decline in the five year vision,
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Speaker 1: are you modeling global recession? And dare I say global
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Speaker 1: recession for five years? What permodelink is a period of
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Speaker 1: slow growth that is being held back by a number
0:50
Speaker 1: of factors. One is not so dramatic. Some of the
0:55
Speaker 1: fuzz growing economies like China or South Korea are growing
1:00
Speaker 1: fast no more. But you would expect that there would
1:05
Speaker 1: be others to pick up the torch of strong growth
1:09
Speaker 1: and this is not happening. What is holding growth back
1:15
Speaker 1: are three groups of factors. First, low productivity. We have
1:21
Speaker 1: been struggling with this phenomenon before the pandemic and we
1:27
Speaker 1: continue to struggle with it. Second, it is fragmentation, the
1:35
Speaker 1: fact that the world economy does not enjoy the same
1:39
Speaker 1: impetus that comes from more to understand, we're going to
1:44
Speaker 1: spend this entire interview on trade for imitation. Give you
1:47
Speaker 1: the third point right now. And the third point is
1:50
Speaker 1: that countries that we would expect to add to growth
1:57
Speaker 1: from TM markets, low income country are in particularly difficult
2:03
Speaker 1: place because they have been innocent bystanders, repetitive shocks that COVID,
2:12
Speaker 1: Russia's invasion. The fact that the world ecolling me as
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Speaker 1: a whole, is now less able to support the weakest members.
2:23
Speaker 1: Why the piece divident is gone well, and we're through COVID,
2:27
Speaker 1: and it is a celebration of these meetings as we
2:30
Speaker 1: come beyond COVID, the assistance of you and other institutions
2:33
Speaker 1: in getting us beyond this pandemic. But you end your
2:37
Speaker 1: speech talking about the ropes that tie us together. The
2:40
Speaker 1: ropes between Washington and Beijing are afraid as you and
2:44
Speaker 1: I haven't seen from our youth. How does the IMF
2:48
Speaker 1: tie the ropes between Beijing and Washington back together? Where
2:53
Speaker 1: we see an opportunity to do better is to identify
2:59
Speaker 1: very proud practically areas where cooperation is a must. Climate
3:05
Speaker 1: change cannot be fought by individual countries. The criticality of
3:11
Speaker 1: adjusting to more supply security at the lowest possible cost,
3:20
Speaker 1: engaging on securing areas of the world that have become
3:26
Speaker 1: more fragile. It is in everybody's interest that we do
3:30
Speaker 1: not have more civil wars more comright, But in everybody's
3:34
Speaker 1: interest in the tone here and particularly in the Economist
3:38
Speaker 1: article of two or three days ago, is China doesn't
3:41
Speaker 1: want to participate. Now you've spoken your comments in your
3:45
Speaker 1: speech of the new practicality of the Premier of China,
3:49
Speaker 1: can you report that there's a new practicality out of
3:52
Speaker 1: Beijing to help us with those ropes. Tie together what
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Speaker 1: I hurt in our bilateral meeting, can also publicly from
4:01
Speaker 1: Premier Li Chang. Are three important messages. First, Chinese commitment
4:08
Speaker 1: to continue to open its economy for private investors from
4:16
Speaker 1: all over the world. Second, China's commitment to play a
4:23
Speaker 1: constructive role in multi lateral institutions, including the IMAN, and third,
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Speaker 1: Chinese commitment to support developing countries that are struggling with
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Speaker 1: high that levels for making them China, the major A
4:39
Speaker 1: major sore so important here and this goes to our
4:42
Speaker 1: en Rehardens conversation with the Speaker of the House last
4:45
Speaker 1: night in Los Angeles. But to take it away from
4:47
Speaker 1: the politics and go back to IMF one on one,
4:51
Speaker 1: the Chinese don't want to participate in the normal and
4:55
Speaker 1: historic IMF restructuring process. They don't want to exgeneration, they
5:00
Speaker 1: don't want to take a hair cut and bring down
5:02
Speaker 1: the interest rate. They don't even want to write down
5:04
Speaker 1: some of the debts that they were directly or indirectly
5:07
Speaker 1: involved in. I spoke to our Matthew Hill and Mozambique
5:10
Speaker 1: and Zambia today. Can Chinese help you with the challenges
5:15
Speaker 1: of Zambia. What I am very mindful of is that
5:21
Speaker 1: China has been very slow to recognize that multilateral debt
5:28
Speaker 1: restructuring requires China to play by the rules that are
5:34
Speaker 1: already established. It is now the time for China to
5:39
Speaker 1: demonstrate that they are capable of playing by these rules. Yes,
5:47
Speaker 1: we have had very slow process on that restructuring on Chat,
5:52
Speaker 1: but we have completed it. We have now initiated a
5:57
Speaker 1: debt restructuring for Zambia, and I got the assurances from
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Speaker 1: the Chinese premier that China would play its role. They're
6:07
Speaker 1: the largest creditor to Zambia for Zambia to move to
6:11
Speaker 1: a more reliable path. The same applies to Sri Lanka,
6:17
Speaker 1: where China has taken a commitment to play by the
6:21
Speaker 1: international rules. The same applies to Ghana, Tree Ekiopia. We
6:25
Speaker 1: have created, together with the World Bank and India as
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Speaker 1: G twenty Presidency, a new global sovereign that round table.
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Speaker 1: China is participating, They're they're part of it. They're participating
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Speaker 1: fully and they're participating constructively. Where we need to continue
6:47
Speaker 1: to engage with China is on how we can achieve
6:52
Speaker 1: the same result for countries in terms of shrinking that
6:56
Speaker 1: that level that China can implement meant domestically given their
7:02
Speaker 1: own internal domestic constraints. Direct haircut is the most straightforward way,
7:10
Speaker 1: but we can achieve the same shrinking of death through
7:15
Speaker 1: that reprofiling, in other words, extending by many more years
7:20
Speaker 1: the time of services trying to agree to that traditional methodology.
7:25
Speaker 1: They are not well. They have agreed in the case
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Speaker 1: of chat We are now working on having them agreeing
7:31
Speaker 1: in the case of Zambia. But look proof of the
7:34
Speaker 1: pudding is where it is in the meeting, so I
7:38
Speaker 1: can say we got reassurances from the Chinese leadership that
7:43
Speaker 1: they would play constructively. From now we need to eat
7:46
Speaker 1: the cake. Now we need to see China delivering on
7:48
Speaker 1: How urgent is it, as you said in your speech,
7:52
Speaker 1: as you start these spring meetings, this difficult climb. How
7:56
Speaker 1: urgent is it for President Biden to meet President to
8:01
Speaker 1: begin the path of practicality and the path towards the
8:06
Speaker 1: huge tensions that we have now to improve those tensions. Well,
8:09
Speaker 1: this is for the leadership of the of these two
8:12
Speaker 1: countries to decide. What I can say is that when
8:17
Speaker 1: there is so much tension between the two largest economies,
8:23
Speaker 1: then the innocent bystanders are being hurt. We calculated the
8:30
Speaker 1: economic impact of the taris US impulsed on China for
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Speaker 1: last year. This shrunk global growth by zero point four
8:43
Speaker 1: or you want to player, come on, it's a working
8:45
Speaker 1: paper the IMF and basically we're shrinking in Japan and
8:48
Speaker 1: Germany out of the global system. Right Well, now, this
8:52
Speaker 1: is this is a separate issue. I'm talking specifically about
8:55
Speaker 1: the tariffs. Okay, the taris that have been impulse they
9:01
Speaker 1: reduce global GDP because the impact of trade restrictions. We
9:08
Speaker 1: know it from I'm running out of time. Are gonna
9:11
Speaker 1: make some news. Are you suggesting that President Biden should
9:14
Speaker 1: eliminate or diminished the Trump tariffs? We think that getting
9:19
Speaker 1: on a path of less fragmentation in the world economy
9:25
Speaker 1: is good for everybody, including for middle class in the
9:29
Speaker 1: United States, because when we impose more costs, they trickled
9:37
Speaker 1: down and somebody pays. Who pays it is in the
9:42
Speaker 1: end consumers here, consumers everywhere. So less fragmentation in the
9:48
Speaker 1: world economy means the highest standard of living for people everywhere.
9:55
Speaker 1: You're listening to the Team Cancer ALIGNE program, Bloomberg Markets
9:59
Speaker 1: We Jason ten A m Eastern Bloomberg dot Com, the
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Speaker 1: r Heard radio app, and the Bloomberg Business app. We're
10:05
Speaker 1: listening on demand wherever you get your podcast. I want
10:10
Speaker 1: to talk about it. Now. We have an economist who
10:12
Speaker 1: has a PhD. Wow, that's big. I'm not that's University
10:17
Speaker 1: of Maryland. When you make the commitment for PhD, that
10:19
Speaker 1: is a huge commitment. I mean the masters I got
10:22
Speaker 1: my NBA is two years. I spent half of it
10:24
Speaker 1: on the golf course. But when you go to get
10:26
Speaker 1: a PhD. You know, that is a commitment. Uh some
10:30
Speaker 1: more rigorous than an MBA. It's a little bit more rigorous.
10:33
Speaker 1: Yeah some. I have chief economists at Core Lodgist Joints
10:36
Speaker 1: this year. We want to talk about the housing market here,
10:38
Speaker 1: so Selma, give us a sense here. We've had these
10:40
Speaker 1: rates move up dramatically. That didn't stop me from diving
10:43
Speaker 1: into the real estate market. Well, and then, as Critti
10:45
Speaker 1: pointed out, we've had rates then moved down dramatically. I
10:49
Speaker 1: mean the ten year was over four percent like what
10:52
Speaker 1: three weeks ago, and now we're at three twenty eight. Selma,
10:58
Speaker 1: is that like a concern? Um? Yes, Well, first of all,
11:04
Speaker 1: thank you very much for having me on the show. Um. Yeah,
11:07
Speaker 1: I mean we've we've been muddling through this transition in
11:10
Speaker 1: the housing market brought on by by Surgeon mortgage rates
11:14
Speaker 1: and and you know, we had a really miserable winter.
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Speaker 1: Homesales ended up with the thirty to forty percent lower
11:21
Speaker 1: activity at the end of the year than than at
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Speaker 1: the end of twenty twenty one. But now mortgages have
11:27
Speaker 1: come down from the November peak. You know, after picking
11:30
Speaker 1: seven at seven percent, mortgage rates have been. You know,
11:33
Speaker 1: they even came down to six percent, went up to
11:35
Speaker 1: six and a half, coming back down towards six percent.
11:39
Speaker 1: So um. You know, lower mortgage rates have definitely helped
11:42
Speaker 1: the home sales activity which has which was really really
11:45
Speaker 1: strong in the first couple of months of this year.
11:48
Speaker 1: And we are seeing is that the buyers are very
11:51
Speaker 1: very responsive to these low lower mortgage rates. Um and
11:54
Speaker 1: then as soon as mortgages start coming down, buyers jumped in.
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Speaker 1: It's the only problem really at this point is inventory
12:01
Speaker 1: that continues to be extremely scarce. And you know, the
12:05
Speaker 1: usually spring increase that we see for spring homebuying season,
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Speaker 1: it's just not there this time. Run well, and also
12:11
Speaker 1: the question, you know, why our rates coming down so quickly.
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Speaker 1: I mean, it's great to have lower mortgages, obviously more
12:17
Speaker 1: people can afford to buy a house, but if we're
12:20
Speaker 1: heading into a recession, that's got to concern you a little. Right.
12:24
Speaker 1: If you look at the World to interest rate probability
12:27
Speaker 1: page on the Bloomberg Terminal, which is how we calculate
12:31
Speaker 1: what markets are forecasting for the FED, there was a
12:34
Speaker 1: seventy percent chance of a rate hike at the beginning
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Speaker 1: of this week. Now it's only a forty four percent chance.
12:40
Speaker 1: So that means the market is really worried that the
12:44
Speaker 1: Fed is going to freak out a pause right right, absolutely,
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Speaker 1: And and that's actually reflected in the mortgage ry spread,
12:53
Speaker 1: you know it has. It's we've had one of the
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Speaker 1: most volatil years in terms of mortgage ry spread, and
13:00
Speaker 1: we ended the year at three hundred basis points. It's
13:03
Speaker 1: over the ten year treasury from thirty year fixed. You know,
13:07
Speaker 1: this is almost double that that, you know, the long
13:09
Speaker 1: term average of a five hundred and seventy based points.
13:12
Speaker 1: It has come down and now again over the last
13:15
Speaker 1: month or so, it has jumped back to closer to
13:18
Speaker 1: three hundred basis points. So he has mortgage right, volatility
13:21
Speaker 1: is huge, and I mean, imagine how difficult it is
13:24
Speaker 1: for potential homebuyers to plan in this environment because you
13:27
Speaker 1: don't know if you're going to be space six percent,
13:29
Speaker 1: if you're gonna bay seven percent. And for some folks
13:31
Speaker 1: that matters a lot in terms of how much they
13:33
Speaker 1: can afford. Well, I'm going to refinance my mortgage I
13:37
Speaker 1: just got into I'm gonna say twelve to eighteen months,
13:38
Speaker 1: and it's gonna have a four handle on the front.
13:40
Speaker 1: That's my prediction. So you got a floating rate, Well,
13:43
Speaker 1: we'll see about that. Yeah, we got some we got
13:44
Speaker 1: some work going on there in the mortgage market. So
13:47
Speaker 1: I'm gona talk to us about the regionality of what's
13:49
Speaker 1: going on out there in the housing market. Is it
13:51
Speaker 1: as simple as everybody's moving down to the sun belt
13:54
Speaker 1: and that's good, and everybody's moving out of the coastal cities.
13:58
Speaker 1: Is that kind of the story? Um, well, I don't
14:02
Speaker 1: know that it's as simple as that, but I mean
14:04
Speaker 1: that's actually what the data is reflecting at this point.
14:07
Speaker 1: You know, it's it's very the home price changes are
14:11
Speaker 1: varying so so much across the US. On the West coast,
14:16
Speaker 1: Mountain West, we've seen significant declines from last year's peaks,
14:20
Speaker 1: as much as ten to fourteen percent, so double digit declines.
14:25
Speaker 1: On the East coast, Southeast Texas, New England not as much.
14:31
Speaker 1: Home prices are down in very low single digits, up
14:34
Speaker 1: to down three percent, So there is huge variation. But
14:38
Speaker 1: I think it's really it's it's about affordability. You know,
14:42
Speaker 1: Mortgage rates really took a huge chunk of the purchase
14:45
Speaker 1: budget for buyers, so it's about affordability, it's about lack
14:49
Speaker 1: of inventory. The areas that are doing much better are
14:52
Speaker 1: areas that do have new construction activity where builders have
14:57
Speaker 1: been able to compensate buyers for that and mortgage rates.
15:01
Speaker 1: So it's it's about more than just um sunshine. Right, Yeah,
15:05
Speaker 1: it's taxes, It's all that kind of good stuff. Real
15:09
Speaker 1: quickly m thirty seconds. Some what's your expectation for where
15:13
Speaker 1: mortgage rates are going to go? Well, I think we're
15:17
Speaker 1: going to continue to see volatility in mortgage rates, but
15:20
Speaker 1: I think generally speaking, we're going to be uh driving
15:24
Speaker 1: a mortgagees are going to be coming lower. Um. You
15:27
Speaker 1: know when you look at the consensus forecast, it's all
15:30
Speaker 1: over the place. I mean, it's it's so uncertain and
15:33
Speaker 1: wide ranging. Um. I think generally speaking, uh, we expect
15:37
Speaker 1: mortgage rates to come below six percent by the end
15:40
Speaker 1: of the year. Um. Some expect still in that six
15:44
Speaker 1: percent handle, but but I think we're going to be
15:47
Speaker 1: drifting lower to five and a half. All right, SMA,
15:50
Speaker 1: thank you so much. I'm again I'm holding out for
15:53
Speaker 1: something with a four handle on it, So see what
15:54
Speaker 1: you can do for me. Some have she's a chief
15:57
Speaker 1: economist at a core logic coming up and just moments. Yeah,
16:01
Speaker 1: so I'm confused. Did you buy I actually asked, are
16:06
Speaker 1: you no? I haven't fixed or I have a fixed mortgage,
16:09
Speaker 1: but I'm gonna be financi that bad boy. Um oh,
16:11
Speaker 1: I see okay, yeah, okay. For a second, I suspected
16:14
Speaker 1: you just bought in cash and then you're waiting to no,
16:17
Speaker 1: I need that. I like the tax deduction. I didn't
16:19
Speaker 1: have that for a while. So you're listening to the
16:21
Speaker 1: tape Cancer Live program Bloomberg Markets weekdays at ten am
16:25
Speaker 1: Eastern on Bloomberg Radio tuning half, Bloomberg dot Com and
16:29
Speaker 1: the Bloomberg Business Half. You can also listen live on
16:32
Speaker 1: Amazon Alexa from our flagship New York station, Just say
16:35
Speaker 1: Alexa play Bloomberg eleven thirty. You know, cars for the
16:41
Speaker 1: American market designed and built more quickly. Now, absolutely, this
16:45
Speaker 1: is a journey, Matt, So it would not be from
16:47
Speaker 1: one day to the next. It's not gonna happen tomorrow.
16:50
Speaker 1: But I think by bringing digitalization engineering combined with the design,
16:55
Speaker 1: it will increase the amount of vehicles that we'll bring
16:59
Speaker 1: to the market, and it would decrease the amount of time.
17:02
Speaker 1: This would not be possible if we would not have
17:04
Speaker 1: the support from Bozai and in Germany. Yeah, I know
17:07
Speaker 1: that Oliver Bloom fully supports. They studied along with the board. Yeah,
17:10
Speaker 1: we have our non leads and we are also the
17:13
Speaker 1: bd W brand CEO, Tomas Schaeffer. So everybody's supporting the
17:17
Speaker 1: strategy that we need to get more responsibility for the
17:20
Speaker 1: design on the developer of the vehicles. She in the US.
17:23
Speaker 1: I was just down in Mexico and I saw down
17:26
Speaker 1: there some of the original bugs, right, and my heart
17:29
Speaker 1: flutters a little bit. It's such an iconic design. I
17:32
Speaker 1: grew up partially in Germany, so for me, the golf
17:36
Speaker 1: is almost synonymous with car. Right. My mother has pined
17:40
Speaker 1: for a Volkswagen bus for the better part of my life,
17:43
Speaker 1: and I'm old. Are these iconic nameplates gonna come back?
17:48
Speaker 1: I was worried when I heard the golf this may
17:50
Speaker 1: be the last generation of the Golf. Yeah, So going
17:52
Speaker 1: to your point, they will come back. I mean, we're
17:54
Speaker 1: going to maintain the DNA of the brand, the iconic products.
17:58
Speaker 1: For example, we are launching the ID bus in a
18:02
Speaker 1: couple of months here in the US. It will be
18:04
Speaker 1: a global launch. It will be in the beginning of June,
18:08
Speaker 1: and the launch of the product will be available in
18:11
Speaker 1: twenty twenty four. So this type of vehicles, iconic vehicles,
18:15
Speaker 1: we will preserve the DNA of the brand. Going forward,
18:19
Speaker 1: there will be a next gen golf. We're gonna still
18:21
Speaker 1: see a golf in twenty thirty. We're gonna maintain the
18:24
Speaker 1: DNA of the brand, probably a golf. I cannot guarantee you,
18:28
Speaker 1: but I guarantee you that the DNA of the brand
18:30
Speaker 1: of these iconic products will remain in Let means you, yes,
18:33
Speaker 1: have to buy your mother one as sure. Okay, so
18:38
Speaker 1: she's just getting on. So speaking of demand, what is
18:41
Speaker 1: your view on where the US is right now in
18:43
Speaker 1: terms of recessionary fears, et cetera. Yeah, So, first of all,
18:47
Speaker 1: let me tell you that on the first quarter of
18:49
Speaker 1: this year, the marker is growing nine percent, So despite
18:54
Speaker 1: the recession fears, despite inflation, and despite the interest rate
18:59
Speaker 1: the market, we mains strong and we have gained market
19:02
Speaker 1: share as VAW over the last three three months, so
19:06
Speaker 1: that's very positive. How strong nine percent market growth is
19:11
Speaker 1: very strong, I mean, and we grew almost ten percent,
19:14
Speaker 1: so I think that, Yeah, there's inflation pressure. There's interest
19:19
Speaker 1: rates obviously, particularly on the least. When the consumers go
19:22
Speaker 1: to the dealer and they see that the least has
19:24
Speaker 1: you know, almost double, he has an impact. But he
19:27
Speaker 1: has not slowed down the industry. Now. I think the
19:30
Speaker 1: FED has made really good decisions on increasing the indust
19:34
Speaker 1: rate to keep the interest rate under control. I think
19:36
Speaker 1: this strategy will pay off by the year end twenty
19:40
Speaker 1: twenty three, and I would expect that the interestry would
19:43
Speaker 1: start coming down slowly early next year. We've seen in
19:46
Speaker 1: the last couple of days a number of carmakers put
19:49
Speaker 1: out news about their own finance arms. Right, it's really
19:52
Speaker 1: important to have your own finance arm, especially in this
19:55
Speaker 1: kind of situation, a high prices, rising rates, How do
19:58
Speaker 1: you plan to finance your growth? So we do have
20:01
Speaker 1: estric customers, so we do have a bank here in
20:03
Speaker 1: the US, a very solid bank. But again it goes
20:08
Speaker 1: back to the products. So let me give you an
20:09
Speaker 1: example of the eighty four, which when we started manufacturer
20:12
Speaker 1: in Chatauga in the state of Tennessee last year, it's
20:15
Speaker 1: our first electric vehicle manufacturing in the US. Today, for
20:20
Speaker 1: the first three months, we're number four in the rankings
20:23
Speaker 1: in the electric vehicles. And then on top of that,
20:26
Speaker 1: we have a company called Electrify America which are charging stations,
20:30
Speaker 1: you know, three hundred charging stations, three thousand, five hundred superchargers.
20:34
Speaker 1: We're gonna duble that in two years. And the most
20:37
Speaker 1: important thing is that one percent of that comes from
20:40
Speaker 1: renewable energy. Yeah, and then we give the buyer of
20:44
Speaker 1: the i D four up to three years thirty minute
20:47
Speaker 1: charge for free, included in the package of a vehicle
20:50
Speaker 1: which starts around thirty nine thousand dollars. So when you're
20:53
Speaker 1: a consumer and you look at the total picture, you're
20:55
Speaker 1: an affordable I D four with three energy renewal energy
21:01
Speaker 1: for the next three years on, you have some financing options.
21:05
Speaker 1: On top of that, you had the IRD credit. That's
21:07
Speaker 1: a company package. All right, Pablo, thank you so much.
21:10
Speaker 1: I really appreciate it. Matt also appreciate having a set
21:13
Speaker 1: with me. Thank you for allowing me to come Pablo
21:16
Speaker 1: to see Volkswagen of America CEO and Bloomberg's Matt Miller.
21:21
Speaker 1: This is Bloomberg. You're listening to the Team Cancer Line
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Speaker 1: program Bloomberg Markets weekdays at ten am Eastering on Bloomberg
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21:33
Speaker 1: Business app. We're listening on demand wherever you get your podcast.
21:39
Speaker 1: All right, let's bring in Herman Chan. He covers the
21:41
Speaker 1: regional banks for Bloomberg Intelligence. He's been a busy, busy
21:44
Speaker 1: analyst over the last several weeks here, So Herman, I
21:49
Speaker 1: guess I'm just looking at Western Alliance. That's kind of
21:51
Speaker 1: the one of the banks I have on my screen
21:53
Speaker 1: to keep an eye on. Is maybe a potential at
21:56
Speaker 1: risk type of institution out there on the West coast.
21:59
Speaker 1: It's up five percent today. I don't know what to
22:01
Speaker 1: make of it. What are we hearing from some of
22:04
Speaker 1: these banks or are we just waiting for earnings to
22:06
Speaker 1: really get a sense of how their balanceies are, how
22:09
Speaker 1: their deposit levels are. Is that kind of where we are? Yeah?
22:12
Speaker 1: I heard the segment earlier in terms of Western Alliance
22:15
Speaker 1: and how they positioned themselves over the last couple of
22:17
Speaker 1: days in terms of their update and lack of the
22:20
Speaker 1: deposit disclosure. The disclosure that they subsequently came out with
22:25
Speaker 1: yesterday afternoon was actually pretty positive in the grand scheme
22:30
Speaker 1: of things. Deposits down and they finally gave that number.
22:36
Speaker 1: They didn't give that initial number in the in the
22:39
Speaker 1: Tuesday update, so that was a big consternation for them.
22:44
Speaker 1: Eleven percent pretty decent. I think some of the analysts
22:48
Speaker 1: were expecting something that was worse than that, So I
22:50
Speaker 1: think that's why you're seeing a bit of a relief
22:53
Speaker 1: rally from Western. Liane. If I'm a banker and I've
22:55
Speaker 1: got like Western in my name, I'm gonna I've probably
23:00
Speaker 1: lost deposits, or i got some kind of Silicon Valley
23:03
Speaker 1: name in my name, I'm losing deposits. Well, right, what
23:08
Speaker 1: do I do if I'm a banker? Do I literally
23:10
Speaker 1: get on the phone and call these people up and say,
23:12
Speaker 1: take your money back from JP Morgan Chase, from Bank
23:16
Speaker 1: of America wherever you put it, and bring it back.
23:18
Speaker 1: Is we're okay? Is that what I'm doing? Yeah, that's
23:20
Speaker 1: what you're doing. Uh, you're going, dude that listen, I
23:26
Speaker 1: give you a toaster. Although I'm perfectly happy with my bank,
23:30
Speaker 1: um full disclosure to bank, they have obviously no branches here,
23:35
Speaker 1: so it makes banking for me particularly difficult. Nonetheless, I
23:40
Speaker 1: have not changed my bank since I moved here from
23:42
Speaker 1: Ohio like thirty years ago. Right, I'm more likely to
23:46
Speaker 1: change my wife than my bank, right, I mean, it's
23:51
Speaker 1: just something people don't do, right. She doesn't listen to radio,
23:55
Speaker 1: so um, I just can't imagine that people would change
23:59
Speaker 1: their bank and then change back, right, unless I mean,
24:03
Speaker 1: I'm also maybe extraordinarily lazy and disorganized. But you're a
24:07
Speaker 1: super loyal customer that I'm sure Huntington is glad to
24:10
Speaker 1: have you. But some of these other institutions, specifically technology
24:15
Speaker 1: and startup companies, have had this heard mentality where they
24:19
Speaker 1: don't want to operate within a regional bank structure because
24:22
Speaker 1: they view them as less safe. So you've seen them
24:26
Speaker 1: jettison their deposits over to a larger, too big to
24:29
Speaker 1: fail banks. It's unfortunate, but the hope is that when
24:33
Speaker 1: things start to stabilize, and you've seen that a bit
24:35
Speaker 1: with SBB being acquired by for Citizens and the signature
24:41
Speaker 1: deal with New Your Community, it has quelled some of
24:44
Speaker 1: the concerns and specifically within regional banks that they are
24:48
Speaker 1: operating as as expected. So the hope is that the
24:54
Speaker 1: concern sort of goes away and then things can move
24:57
Speaker 1: back to normal and deposits can come back to the regionals. Yeah,
25:00
Speaker 1: because I think the greater or wider economic concern is, Hey,
25:04
Speaker 1: if regional bank A has lost deposits, that bank is
25:07
Speaker 1: less likely to lend to my new little store I
25:10
Speaker 1: want to open up on main Street and that could
25:12
Speaker 1: impact you know, growth, economic growth GDP in this in
25:16
Speaker 1: this country. I mean, when the banks report numbers, how
25:20
Speaker 1: do I get a gauge of whether that's happening, whether
25:22
Speaker 1: they're getting credit is a lot tougher than it used
25:25
Speaker 1: to be. Yeah, I think the analyst community will ask
25:28
Speaker 1: those questions and those the management teams will talk about
25:32
Speaker 1: that in terms of their guidance for long growth. The
25:34
Speaker 1: general expectation is that if funding costs and deposit costs
25:38
Speaker 1: are increasing because banks need to pay up to retain
25:41
Speaker 1: your deposits, and the availability of funding with deposits declining
25:47
Speaker 1: is weekend, then banks should have less appetite to land,
25:51
Speaker 1: and so credit underwriting will be tougher for for folks
25:56
Speaker 1: that are looking to borrow. So you're going to see
25:58
Speaker 1: hiring bar and costs, You're going to be tougher underwriting standards,
26:01
Speaker 1: and that all can trickle through the economy and deliver
26:05
Speaker 1: some slower GDP growth. As you mentioned, So is that
26:08
Speaker 1: something that you'll see in the numbers, or that's just
26:10
Speaker 1: you're going to hear in a commentary from the companies.
26:13
Speaker 1: You're not going to see it quite in the numbers yet.
26:16
Speaker 1: You'll see potentially slowing loan growth, But more in focus
26:21
Speaker 1: for us is the commentary and the guidance in terms
26:23
Speaker 1: of what loans will look like for the full year,
26:28
Speaker 1: and i'd expect those the guidance for that to come down. Generally,
26:32
Speaker 1: loans growth mirrors GDP growth, so you could potentially see
26:38
Speaker 1: that decline for at least the regionals because of all
26:41
Speaker 1: the funding issues that they're facing. When when is the
26:45
Speaker 1: tide going to turn so that these banks can make
26:48
Speaker 1: money like net interus margin money, old school bank banking money, right,
26:53
Speaker 1: So what we are expecting is that it's going to
26:57
Speaker 1: be tough for them because margins are tightening for for
27:01
Speaker 1: across the regional banks, space funding costs are rising and
27:04
Speaker 1: your loan yields aren't going to go up as fast,
27:06
Speaker 1: so you need a competition to raise They got to
27:11
Speaker 1: pay more right to depositors, so they got to pay
27:14
Speaker 1: more for depositors to keep them in the door. And
27:17
Speaker 1: what you need from a macro perspective is the FED
27:20
Speaker 1: to cut rate so they can lower their deposit costs
27:23
Speaker 1: by by cutting what they're paying out, So that that's
27:27
Speaker 1: what can drive margin expansion going forward. Number though, because
27:32
Speaker 1: you know now that investors that depositors, I'm sorry, have
27:36
Speaker 1: gotten used to actually making money, um by giving it
27:40
Speaker 1: to banks, and uh, they've gotten mobility right now, Depositors
27:46
Speaker 1: are like, oh, I can move my money out of
27:48
Speaker 1: bank A and into bank B. Um. They're going to
27:51
Speaker 1: be doing so with more frequency, right um, So it's
27:55
Speaker 1: going to be hard for banks to go back to
27:58
Speaker 1: getting you know, money for nothing. The good thing, at
28:02
Speaker 1: least from a bank perspective, is that you have a
28:04
Speaker 1: lot of price reactivity wants interest rates to do cuts.
28:07
Speaker 1: So the differential you mentioned banks can see their depositis
28:12
Speaker 1: go to other places where're focused on what's going on
28:15
Speaker 1: in the muddy market mutual fun complex, which is seeing
28:20
Speaker 1: very strong inflows over the past several weeks after the
28:22
Speaker 1: SBB fallouts. You know, the attractive of that sort of
28:27
Speaker 1: asset class world diminished once we see some FED rate cuts,
28:30
Speaker 1: so that differential should narrow and that's only going to
28:33
Speaker 1: be positive for the banks. So Herman if I'm a
28:36
Speaker 1: regional bank investorate. I might just mind banks in Texas
28:38
Speaker 1: and Florida and Nashville or something. Yeah, I think that's
28:42
Speaker 1: that's the right perspective. Folks that are in Middle America
28:46
Speaker 1: and Ohio, like Huntington, aren't going to be affected by
28:50
Speaker 1: the fallout with with SBB and signature. These are all
28:53
Speaker 1: sort of coastal markets in California and New York and
28:58
Speaker 1: so I'm sure out of the folks in Columbus probably
29:02
Speaker 1: haven't even heard of SBB. So that's actually a good thing,
29:05
Speaker 1: and we'd expect more stability from some of the smaller
29:08
Speaker 1: banks that operates in the Midwest or the southeast real quickly.
29:12
Speaker 1: There are worldly people in Columbus, Ohio, you know, Ohio
29:15
Speaker 1: State University. It's not like we're these provincial you know,
29:19
Speaker 1: We're not a town of farmers. We're pretty advanced. What's
29:22
Speaker 1: pretty advanced. We can play football. You can play football
29:25
Speaker 1: and get great all right, Herman Chen real quick scale
29:28
Speaker 1: one to ten. How's your experience at Penn State Back
29:30
Speaker 1: in the day, Penn State was great. Go Lion's got
29:33
Speaker 1: a great football team, gonna be potentially in the playoffs
29:36
Speaker 1: next year. So really looking forward to the seas ago
29:38
Speaker 1: like a little Penn State plug in their Hermit Chin
29:41
Speaker 1: senior analyte covers the regional banks in fintech for Bloomberg Intelligence.
29:45
Speaker 1: Proud graduate of the Penn State University. Here looking at
29:49
Speaker 1: the markets here, kind of unched here, not much a
29:51
Speaker 1: little bit of red on the tape, but not a
29:53
Speaker 1: whole lot going on. You're listening to the tape. Catch
29:56
Speaker 1: our line program Bloomberg Markets weekdays at ten am Eastern
30:00
Speaker 1: on Bloomberg Radio. Tune in ALF, Bloomberg dot Com and
30:03
Speaker 1: the Bloomberg Business ALF. You can also listen live on
30:06
Speaker 1: Amazon Alexa from our flagship New York station. Just say Alexa,
30:10
Speaker 1: play Bloomberg eleven thirty. Let's talk ETFs again, I mean
30:15
Speaker 1: again just in my career. This is one of the
30:18
Speaker 1: most amazing growth stories that I've seen in my career,
30:21
Speaker 1: just the growth of ETF some money coming out of
30:23
Speaker 1: mutual funds into ETFs, just extraordinary when you think about
30:27
Speaker 1: all the funds flows into ETFs. We welcome Amanda Robello.
30:31
Speaker 1: She's had a passive sales US on shore for DWS Group. Man.
30:35
Speaker 1: Thanks for joining us here on a Bloomberg Interactive Broker studio.
30:37
Speaker 1: You get a gold star today for showing up. It's
30:40
Speaker 1: more than we can say about most of our people here.
30:43
Speaker 1: But you guys recently announced the listening of X trackers
30:47
Speaker 1: MSCI USA Climate Action Equity ETF. Oh boy, what is that.
30:52
Speaker 1: That's a mouthful, that's a big one. Tell us about
30:54
Speaker 1: this ETF. Yeah, absolutely, thanks very much for KAM has
30:58
Speaker 1: the chance to do that. So it is tracking the
31:00
Speaker 1: MSCI USA Climate Action Index. And so what we're looking
31:05
Speaker 1: to do is with this product invest in US equities
31:10
Speaker 1: which are on a strong trajectory towards minimizing or reducing
31:14
Speaker 1: their carbon emissions. Have there any changes? I mean, MSCI
31:18
Speaker 1: recently said they're going to change their way they grade
31:21
Speaker 1: I guess other funds. Yeah, are they making changes to
31:26
Speaker 1: their index as well? So as far as we know,
31:28
Speaker 1: they're not making changes to their indices. The data universe
31:32
Speaker 1: is always evolving for them, so as they kind of
31:34
Speaker 1: update all of their individual data points and then this
31:36
Speaker 1: then feeds in when we have the index rebalances, which
31:39
Speaker 1: then get executed inside the funds. But great news, actually,
31:42
Speaker 1: I think in terms of them further enhancing their ESG
31:46
Speaker 1: rating methodology for funds. But I think this only helps
31:48
Speaker 1: investors more. Is ESG? I mean, it was such a
31:52
Speaker 1: huge draw for a while, and then there has been
31:56
Speaker 1: backlash recently, at least in the US. I'm not sure
32:00
Speaker 1: if it's backlash against ESG specifically, but against that as
32:04
Speaker 1: an investment product. Is it coming back? I mean, is
32:09
Speaker 1: it here this day? I think in the long run
32:12
Speaker 1: it is here to say, when we look at, you know,
32:14
Speaker 1: where markets are, I think maybe it's not at the
32:17
Speaker 1: forefront of investor's mind like it was before. They're more
32:20
Speaker 1: concerned with generating returns, generating yield, reducing volatility in their
32:25
Speaker 1: pose things should be aligned, though, Yeah, And the thing
32:27
Speaker 1: is actually, in reality they are. So I think that
32:30
Speaker 1: what we're seeing more and more is that clients start
32:33
Speaker 1: to use, especially that governance piece in ESG, for risk reduction,
32:37
Speaker 1: for drawdown reduction. So it's good. It's funny because actually
32:41
Speaker 1: we were just talking about this the due diligence sessions
32:44
Speaker 1: that we do with some of the largest investors globally. Beforehand,
32:47
Speaker 1: ESG would be like a little ten minutes segment in
32:50
Speaker 1: that kind of one day agenda, And now it's intrinsic
32:53
Speaker 1: and pretty much all of the different segments. Yeah, I
32:56
Speaker 1: want to follow on when Matt was going the pet
32:58
Speaker 1: Matt was going down because you know here in the
33:00
Speaker 1: US we have seen some pushback and I probed some
33:03
Speaker 1: of our European colleagues that are based in our London
33:07
Speaker 1: office and they say no, in Europe it is the
33:09
Speaker 1: ESG push is as strong as ever and if and
33:11
Speaker 1: they particularly called out Finland, Swedeland, you know, the Nordic countries.
33:16
Speaker 1: And I see here in your launch you had a
33:18
Speaker 1: big support from the fund in Finland talked to us
33:21
Speaker 1: about this h this etf you launch and in the
33:24
Speaker 1: investment by uh this Finish firm. Yeah. Sure, So we
33:30
Speaker 1: were working together with a very good client of US,
33:34
Speaker 1: il Marin and it's in the public domain and they are, um,
33:37
Speaker 1: you know, we've worked with them previously. We launched a
33:40
Speaker 1: fund for them four years ago, and with them and
33:44
Speaker 1: also with a number of the other large investors in
33:46
Speaker 1: Europe and also where the regulation is heading, everyone has
33:48
Speaker 1: become more kind of precise in terms of what EESG
33:51
Speaker 1: is going to mean for them. So then we further
33:54
Speaker 1: fine tune their exposure with this new product. I want
33:56
Speaker 1: to ask about your job, okay, um, the title head
34:01
Speaker 1: of passive sales. Yes, and your parents must be like,
34:04
Speaker 1: do you don't not do anything? I just around exactly,
34:07
Speaker 1: But no, to be more serious, active is getting so important, right,
34:13
Speaker 1: I mean we talk about that on the ETF show
34:15
Speaker 1: all the time. The interesting active has just really climbed. Um,
34:19
Speaker 1: can you take on that part of ETFs as well? Yeah,
34:23
Speaker 1: actually my job possible. My titles change is now extract
34:26
Speaker 1: of sales have refle But secondly, m yeah, you know
34:32
Speaker 1: what the beauty of the ETF wrapper is that is
34:35
Speaker 1: providing transparency access. You know, you don't need to think
34:38
Speaker 1: about setting up an account with the transfer agent. You
34:40
Speaker 1: can just buy things on exchange right with an ETF.
34:43
Speaker 1: So um, yeah, this trend and we strongly believe it
34:46
Speaker 1: at DWS as well that the mutual fund sadly is
34:49
Speaker 1: not as relevant as it used to be, but the
34:50
Speaker 1: ETF is exactly that's fantastic for you, right, I think
34:54
Speaker 1: of everyone. I wonder if we had a story in
34:56
Speaker 1: the Bloomberg today about assets going into you know, mutual
35:00
Speaker 1: funds and ultrashort treasury ETFs. I mean I think Barkley's
35:06
Speaker 1: expects one and a half trillion dollars of assets to
35:09
Speaker 1: go there in the next ten years or so. What
35:12
Speaker 1: kind of flows are you seeing and you know, is
35:16
Speaker 1: there any future for the mutual fund? I mean, I
35:18
Speaker 1: guess it still has a place in four o one ks,
35:21
Speaker 1: but everyone is turning to an ETF. Yeah, we do
35:24
Speaker 1: still think that there's a time and the face for that.
35:26
Speaker 1: Some clients don't need to pay, don't need to have liquidity,
35:29
Speaker 1: They might have favorable share classes, for example, which are
35:32
Speaker 1: cheaper so they don't need to pay for all of
35:34
Speaker 1: the benefits. And then definitely from some tax consideration wrapper
35:37
Speaker 1: consideration perspectives, it's still relevant. But I think for those
35:40
Speaker 1: clients that you want to be more tactical and also
35:44
Speaker 1: just it's very It seems to be much easier as
35:46
Speaker 1: well to launch GTF, so we have way more exposures
35:49
Speaker 1: than you do on the mutual fund side. Choice is
35:51
Speaker 1: provided there. But also as the markets are moving, when
35:54
Speaker 1: we think that we're in this kind of part of
35:56
Speaker 1: the cycle that we've not seen for around fifteen years,
35:58
Speaker 1: right that then what was needed in the last fifteen
36:01
Speaker 1: years is not what's needed for the next fifteen years necessarily,
36:04
Speaker 1: So I would imagine that even more ETFs get launched
36:06
Speaker 1: two and we see in terms of trends like a
36:11
Speaker 1: lot of searching for yields. So probably our most popular
36:14
Speaker 1: fund this year has been our HDF product. It's international
36:17
Speaker 1: equity dividends, So international equities typically yield more than the
36:22
Speaker 1: SMP stocks kind of for four and a half percent
36:25
Speaker 1: versus one point five two percent, and then if you
36:28
Speaker 1: then look at a dividend focused strategy on that asset class,
36:31
Speaker 1: then that's even more juice around five point two percent.
36:34
Speaker 1: So what's your pipeline look like? I mean, you don't
36:37
Speaker 1: even have to imagine, you probably know if more ets, well,
36:42
Speaker 1: we're definitely going to How does twenty three look like?
36:44
Speaker 1: I mean, because twenty twenty two was a huge year
36:47
Speaker 1: for bringing ETFs to market, I don't know if it's
36:50
Speaker 1: even reasonable to expect to match that again. So we're
36:54
Speaker 1: going to be keeping busy this year. Definitely, we're hoping
36:56
Speaker 1: to launch ten new funds. Thematics is an area that
37:00
Speaker 1: we think is really important in the market. So I think,
37:03
Speaker 1: you know, it's you can look at sectors, but also
37:05
Speaker 1: maybe thematics are better tool for tapping into broader megatrends,
37:10
Speaker 1: and I think especially where we are in the market
37:12
Speaker 1: at the moments good at buying opportunities for those kinds
37:14
Speaker 1: of things. Additionally, as well, we have some strong active
37:17
Speaker 1: strategies on our DWS side and so look to bring
37:21
Speaker 1: them into the ETF wrapper. Two. Also thinking as well
37:25
Speaker 1: about kind of shorter dated fixed income as well, and
37:28
Speaker 1: then I would say the last block of where we're
37:31
Speaker 1: building is going to be going further down the yield
37:35
Speaker 1: trend like for fixed income. So breaking news here, I
37:39
Speaker 1: know exactly you stuck coming. I mean, there's so many
37:42
Speaker 1: ETFs out there for you guys at DWS. What's kind
37:45
Speaker 1: of a minimum size that you want to have? I
37:48
Speaker 1: see like this on this one you just launched. You
37:50
Speaker 1: had two billion come in on the first day, which
37:52
Speaker 1: is just monstrous. But what's kind of a minimum It's
37:55
Speaker 1: worth your time. So I think the intention is always
37:59
Speaker 1: to have a fund that by the end of twelve
38:00
Speaker 1: months is going to be a billion or more. But
38:03
Speaker 1: depending on the on the exposure, it's not always easy
38:09
Speaker 1: to get that day one investment. Others are maybe more
38:11
Speaker 1: relevant trends for like a more retail kind of investor,
38:14
Speaker 1: and so you need to get ticket by ticket by
38:17
Speaker 1: your investors in your tfs. Typically we're very lucky that
38:21
Speaker 1: we are basically doing business with everyone, so retail platforms, wirehouses, IBDs,
38:27
Speaker 1: ria's other asset managers, pension fund sovereign wealth funds. When
38:34
Speaker 1: you have a big institutional interest DW, when does this
38:36
Speaker 1: train end? I mean, it's been how long has the
38:39
Speaker 1: ETF business been on this trajectory and how long is
38:42
Speaker 1: it going to continue? Do you think? I think that's
38:44
Speaker 1: a great question to ask. I think we need to
38:46
Speaker 1: we can't be complacent. So I think things that we
38:48
Speaker 1: start to think about as well at DWS is the
38:51
Speaker 1: ETFs did so well because they are a great way
38:53
Speaker 1: to invest in something quickly. Right. Blockchain technology is also
38:57
Speaker 1: very interesting when you start to think about, for example,
39:01
Speaker 1: operational aspects of the Ledger and everything, tokenization, valization of assets,
39:05
Speaker 1: and so on. So expect some things here from I mean,
39:08
Speaker 1: let me put the question this way. I have an
39:10
Speaker 1: ETF show right now. It's a weekly program at one
39:13
Speaker 1: pm on my invitation. You are invited, for sure, But
39:17
Speaker 1: the thing is should we make it? Should we make
39:20
Speaker 1: it a full hour? Should we should we make it
39:22
Speaker 1: an everyday show? In the future? Is that going to
39:25
Speaker 1: be the case. I think the frequency will be important yeah. Um,
39:30
Speaker 1: we see yeah, because we see more and more types
39:34
Speaker 1: of investors using them now as well. It's not just
39:36
Speaker 1: about the AUM, it's also about who's using them as well.
39:40
Speaker 1: I don't think I own an EF. Are you sure
39:43
Speaker 1: you don't. I don't know if the check because you
39:45
Speaker 1: also have probably fun managers working for you that use
39:48
Speaker 1: ETFs as part of their strategy. It's an important part
39:51
Speaker 1: of building your portfolio in a lot of cases. I'll
39:54
Speaker 1: take a look. I got the app. I'll take a
39:55
Speaker 1: look to see what I got there. I got a
39:57
Speaker 1: lot of New Jersey municipals. John t Her over there,
40:00
Speaker 1: he's laughing. I want to I want a bond ETF
40:03
Speaker 1: that's in the market for that, so you can have
40:06
Speaker 1: many time infrastructure MEUNI so cash back to menis there
40:10
Speaker 1: you go see. Amanda Robello, thanks so much for joining us.
40:12
Speaker 1: Amanda Rebello, her title now is Head of xtrack Sales
40:17
Speaker 1: US on Shore, Head of x Tracker Sales on Shore
40:21
Speaker 1: US on shore US on Shore at DWS Group and
40:24
Speaker 1: RVNU is the ticker she pointed out for you, John,
40:26
Speaker 1: that's the X Trackers Municipal Infrastructure Revenue Bond Fund. You're
40:31
Speaker 1: listening to the tape cancer Live program Bloomberg Markets weekdays
40:35
Speaker 1: at ten am Eastern on Bloomberg Radio, the tune in app,
40:38
Speaker 1: Bloomberg dot Com, and the Bloomberg Business App. You can
40:41
Speaker 1: also listen live on Amazon Alexa from our flagship New
40:44
Speaker 1: York station, Just say Alexa play Bloomberg eleven thirty. So
40:50
Speaker 1: newscooking out at Japan the back of Japan Governor Kuroda.
40:54
Speaker 1: He is stepping aside. It served two terms ten years
40:57
Speaker 1: in total. What does this mean for Japan? What does
41:01
Speaker 1: it mean for the global economy? To get a sense
41:03
Speaker 1: of that, we walk in Kathleen. Hey, she is the
41:05
Speaker 1: host of Bloomberg News. She joins us here in our
41:08
Speaker 1: Bloomberg Interactive Broker studios. So she gets a gold star
41:11
Speaker 1: for showing up, not phoning it in, Kathleen. So big
41:14
Speaker 1: changes for Japan. What does that mean for Japan? What
41:18
Speaker 1: does that mean for kind of the global market? Well,
41:21
Speaker 1: you know, the Bank of Japan is there's there's the
41:25
Speaker 1: big three of global central banks, and that's a Federal Reserve,
41:28
Speaker 1: European Central Bank, and the Bank of Japan. And remember, uh,
41:32
Speaker 1: that's Japan with one hundred and twenty people, one hundred
41:35
Speaker 1: five million people, is still the third largest economy in
41:38
Speaker 1: the world. Okay, so, and and it's uh, it's it's investors,
41:43
Speaker 1: you know, uh send a lot of capital out of
41:45
Speaker 1: the country. They attract a lot of the capital in
41:48
Speaker 1: Japan is quietly powerful on that stage. They have been
41:53
Speaker 1: through a long period of abeonomics, which became corononomics. Abe,
41:59
Speaker 1: of course, the one of the most long serving successful
42:02
Speaker 1: prime ministers in Japan's history recently deceased, started to see
42:06
Speaker 1: in the last year and Governor Krota two terms. He's
42:10
Speaker 1: the longest serving boj governor in there one hundred forty
42:13
Speaker 1: year history. So we're it's, you know, a crux. We're
42:17
Speaker 1: at a point, maybe not a turning point. He got
42:19
Speaker 1: the yield curve control, which is kind of the main
42:24
Speaker 1: thing I think that markets, maybe people participants that don't
42:28
Speaker 1: know as much about the bankas fan as you. That's
42:29
Speaker 1: that's what they kind of grasp onto as the thing
42:32
Speaker 1: that could change. Right well, they do. And remember when
42:36
Speaker 1: Krota Abe came back in office in twenty twelve and
42:39
Speaker 1: twenty thirteen, there was a he dragged in Kuroda or got,
42:43
Speaker 1: you know, to stimulate the economy. The previous governor had
42:46
Speaker 1: been slow to do that. Cautious. No, he wanted quota
42:50
Speaker 1: to fire it up. So they did quantitative and qualitative easing.
42:54
Speaker 1: They said, where're gonna get to two percent inflation within
42:58
Speaker 1: as soon as we could, And then they said within
43:00
Speaker 1: two years fast forward. Things went up and down. Uh,
43:03
Speaker 1: and in it was twenty sixteen when inflation had been
43:07
Speaker 1: rising but mostly oil prices, and it started falling back again.
43:11
Speaker 1: That's where they came up. They they had an almost
43:13
Speaker 1: an all night meeting on a forty five vote, they
43:15
Speaker 1: put in yield curve control and that's when they tied
43:19
Speaker 1: the ten year j JGB to to zero and then
43:23
Speaker 1: and gave it a little bit of a range on
43:25
Speaker 1: both sides. And over time they kind of had to
43:27
Speaker 1: pull that out, but they bought trillions and trillions of
43:31
Speaker 1: yen to keep their ten year JGB anchored. I was
43:34
Speaker 1: gonna say, does anybody else own jgbs besides the Bank
43:37
Speaker 1: of Japan, Well, they own something like ninety percent of
43:40
Speaker 1: the ten year jgbs and over fifty percent of all
43:42
Speaker 1: the outstanding government bonds. Well, hey, it's it's it's like
43:47
Speaker 1: what a quantitative easing by the FED and the European
43:50
Speaker 1: Central Bank taken to like a whole other level. Has
43:54
Speaker 1: it worked well there there's kind of a two percent
43:57
Speaker 1: plus inflation now, but is it going to stay there?
44:00
Speaker 1: But not because of that, right having nothing to do,
44:03
Speaker 1: the whole world is facing rising inflation. I mean, yeah,
44:07
Speaker 1: they've only gotten there without doing anything very lately. Will
44:11
Speaker 1: you never know for sure? Will we if they if
44:14
Speaker 1: they did absolutely nothing, Because they did, they did get
44:17
Speaker 1: Japan up to about consistently above zero Okay, not in deflation.
44:22
Speaker 1: And you're right now a lot of the gain has
44:23
Speaker 1: been in commodity prices, but right now they're almost a
44:26
Speaker 1: four percent. They're starting to pull back a bit. But no,
44:28
Speaker 1: this is a big deal for the rest of the
44:29
Speaker 1: world because if the Japanese have already started repatritating some
44:33
Speaker 1: of their bonds from overseas, and if they continue to
44:36
Speaker 1: do that, they this is going to be a major
44:40
Speaker 1: upward pressure potentially on global bond deals. And they have Sorry,
44:45
Speaker 1: I just have a million questions. I love getting you
44:47
Speaker 1: in the studio because we hardly ever gets talked to you.
44:51
Speaker 1: I wonder about how much treasuries do the Japanese own.
44:56
Speaker 1: They used to be a huge holder of US debt right, well, yeah,
44:59
Speaker 1: and they still own a lot. And I wonder about
45:01
Speaker 1: what happens if yield control is a way they're going
45:03
Speaker 1: to go away from yield control? Are you gonna do
45:04
Speaker 1: it slowly? Okay? The way there is the new Bank
45:07
Speaker 1: of Japan governor. Right. He's at the Bank of Japan
45:11
Speaker 1: from nineteen ninety eight to two thousand and five. He
45:14
Speaker 1: at the time was one of the few when they
45:17
Speaker 1: decided to cut rates when they shouldn't have. Who voted
45:19
Speaker 1: a race rates I should say, voted against it. So
45:21
Speaker 1: here you got this man an academic over the years,
45:23
Speaker 1: knows everybody. He's about seventy. He's been around for a
45:26
Speaker 1: long time. I think the bet right now is eventually
45:30
Speaker 1: he'll have to do something and they may start signing them.
45:32
Speaker 1: But they're not going to move around right away. So
45:36
Speaker 1: I mean, what do people think of yended? This ten
45:39
Speaker 1: year career for Krota? Did he do a good job?
45:41
Speaker 1: Will you miss him? You interviewed him a lot. Well,
45:44
Speaker 1: oh yeah, I'm a fan. Um he will people miss him?
45:49
Speaker 1: I think? Or was he successful? Well? We had a poll,
45:54
Speaker 1: had a pole I think fifty six percent said he
45:57
Speaker 1: was a success and forty four percent saying no, and
46:00
Speaker 1: the people say no, it's it's your argument, okay that uh,
46:06
Speaker 1: well you didn't. The yeld curve control and all that
46:08
Speaker 1: didn't really get you sustainably there. But I would say, look,
46:12
Speaker 1: if he's leaving office with inflation at coming down to
46:15
Speaker 1: about three percent year over yere from four percent with
46:18
Speaker 1: the boj at his last outlook update on the economy
46:23
Speaker 1: and inflation saying well, it's going to be one point
46:25
Speaker 1: nine percent by the end of the year, and then
46:26
Speaker 1: it's but you know that's two percent. Okay, that's a
46:29
Speaker 1: rounding area, you guys. So he leaves office with two
46:31
Speaker 1: percent inflation. The Shuntel the spring wage negotiations, who do
46:34
Speaker 1: that every year, came out on the stronger side, not
46:37
Speaker 1: super strong, but strong enough to give a sense, well,
46:39
Speaker 1: maybe there's there's a shift, a shift in the country
46:43
Speaker 1: where the companies are realizing they have to pay people more.
46:48
Speaker 1: The people are are wanting to see all that. They're
46:52
Speaker 1: they're ready for a little more inflation, right, And that
46:54
Speaker 1: was his biggest One of his biggest obstacles was deflationary mindset.
46:59
Speaker 1: Japanese don't want to pay more for anything. That's their culture, seriously,
47:03
Speaker 1: but now that seems so shifted to It's the biggest
47:07
Speaker 1: problem though, is getting out of it, Getting out of
47:09
Speaker 1: ye curve control when you own so many bonds? How
47:12
Speaker 1: do you do that gracefully? And oh and another big
47:14
Speaker 1: one more thing I forgot to throw in politics. They've
47:16
Speaker 1: got a big budget deficit ruling Democratic party there there
47:20
Speaker 1: there are a lot of old aubeonomics people and two
47:24
Speaker 1: hundred and sixty four percent of GDP or something like that,
47:29
Speaker 1: and so not surprising a lot of politicians. Hey, don't
47:32
Speaker 1: get away from yel curve control too quickly. We don't
47:35
Speaker 1: want our financing costs to go up. So that's another
47:38
Speaker 1: thing go and wait is going to have to face.
47:40
Speaker 1: But I think it's pretty much inevitable that they'll be
47:42
Speaker 1: gradual adjustments. They'll go from point five on either side
47:46
Speaker 1: of zero, and they'll gradually widen that out to get
47:49
Speaker 1: a more a kind of a gradual shift that the
47:52
Speaker 1: rest of the world financial markets can deal with, can
47:55
Speaker 1: deal with, all right, Kathleen Hasty, great stuff, Thank you
47:57
Speaker 1: very much for coming into our Bloomberg Interactive studio. Kathleen Hayes,
48:01
Speaker 1: a host of Bloomberg next time. Later, we should have
48:03
Speaker 1: Kathleen off for like a half hour because I have
48:05
Speaker 1: a million still half a million. Yeah, you guys make
48:08
Speaker 1: me think. My god, see, there's really challenging. That's exactly good.
48:11
Speaker 1: Stove all right, Kathleen, thanks so much for joining us here.
48:15
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
48:18
Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever
48:22
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
48:26
Speaker 1: at Matt Miller nineteen seventy three. I'm fall Sweeney. I'm
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Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
48:32
Speaker 1: always catch us worldwide at Bloomberg Radio