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Private Credit, The Circuit, Jobless Claims, and Ukraine (Podcast) · 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.
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Speaker 2: Every business day, we bring you interviews from CEOs, market pros,
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Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
0:17
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
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Speaker 1: If I were to come back and do another career
0:23
Speaker 1: on Wall Street, I would think about private credit. I'm
0:26
Speaker 1: telling you, man, the money going there and it's just
0:30
Speaker 1: extraordinary and some of them, and there's so many smart
0:32
Speaker 1: people out there doing private credit. And I was credit
0:35
Speaker 1: trained by the Chase Manhattan Bank, so I know credit
0:37
Speaker 1: as well as anybody. Our next guest knows it pretty
0:40
Speaker 1: well too. Right to check in with Raj Donda. He's
0:42
Speaker 1: a partner and global head of wealth management at Aris
0:44
Speaker 1: Wealth Management.
0:45
Speaker 3: Rag thanks so much for joining us here here at Bloomberg.
0:49
Speaker 1: Talk to us about private credit at Aris, because I
0:52
Speaker 1: knew you guys just lost launched a pretty big fund.
0:55
Speaker 4: Yeah, I'm happy to And I think what's unique about
0:59
Speaker 4: Aris is we've been doing this as longer, longer than
1:01
Speaker 4: anyone else. The firm was founded as a private credit
1:04
Speaker 4: shop in nineteen ninety seven, and that track record and
1:08
Speaker 4: the breath of the team has really helped us capitalize
1:12
Speaker 4: on the exponential growth in private credit that you mentioned.
1:17
Speaker 4: When you see the volatility in the public markets, the
1:20
Speaker 4: highly correlated assets, it really drives people, particularly who want
1:26
Speaker 4: to be defensive today.
1:28
Speaker 5: To the asset class within private credit.
1:30
Speaker 4: Direct lending is a particular sweet spot of the firm,
1:33
Speaker 4: and based on your background to Chase, you can appreciate
1:36
Speaker 4: that origination is a key driver and a differentiator. We
1:43
Speaker 4: lend to three four thousand companies and have a lot
1:46
Speaker 4: of insight into the real economy that positions us well
1:52
Speaker 4: really across the firm, but in particular helps us build
1:56
Speaker 4: very diverse portfolios within the direct lending and private credit business.
2:01
Speaker 6: About your clients are these more high net worth individuals.
2:05
Speaker 4: So Areas manages about three hundred and sixty billion of
2:07
Speaker 4: client assets, both institutional clients and high net worth individuals.
2:15
Speaker 4: The firm delivers both traded and non traded opportunities to participate,
2:22
Speaker 4: particularly for high net worth individuals, and the growth is
2:28
Speaker 4: certainly coming both as the largest institutions globally want to
2:32
Speaker 4: have a higher allocation to private credit. Maybe they were,
2:35
Speaker 4: you know, an eight or ten percent allocation. They want
2:37
Speaker 4: to take that to a fifteen or twenty. It's the
2:41
Speaker 4: high net worth individual where they really didn't have access
2:44
Speaker 4: and so maybe they had a four or five percent
2:46
Speaker 4: allocation to the private markets. That allocation could double triple
2:51
Speaker 4: in the next five years, and that's where we see
2:53
Speaker 4: a lot of growth.
2:54
Speaker 1: You know, I probably just became more fully aware of
2:57
Speaker 1: the growth of private credit, maybe just in the last
2:59
Speaker 1: four or five years. And they're the pitch that made
3:02
Speaker 1: sense to me was you're not gett any yield out
3:04
Speaker 1: there in the marketplace. You come to private credit, I'll
3:06
Speaker 1: get you yield. Well, now I can park myself in
3:09
Speaker 1: two and a half year treasury. I mean, to your treasury,
3:11
Speaker 1: you get four and a half percent. So does private
3:13
Speaker 1: credits still have that pitch that we have superior yield?
3:19
Speaker 4: So private credit adds something even beyond that. It offers
3:23
Speaker 4: a steady stream of income and that's crucial. But it's
3:26
Speaker 4: floating rate. Ninety to ninety five percent of the assets
3:30
Speaker 4: the loans are floating rate. So in the last year
3:32
Speaker 4: and a half with this with ten consecutive rate increases
3:36
Speaker 4: and a five hundred base point move in the risk
3:38
Speaker 4: free rate. The base rate is higher, and private credit
3:41
Speaker 4: has benefited from that. You also see banks lending less,
3:47
Speaker 4: and so firms like areas can have real pricing power
3:52
Speaker 4: in the markets and it allows us to earn higher spreads.
3:57
Speaker 3: And higher fees for our clients.
3:59
Speaker 4: So we think, if you know, private equity started the
4:05
Speaker 4: growth in alternatives twenty thirty years ago, and private real
4:09
Speaker 4: estate played a key role in uncorrelated income maybe in
4:13
Speaker 4: the last five or six years, the exponential growth for
4:16
Speaker 4: private credit going forward is right in front of us
4:19
Speaker 4: because it's floating rate, it's uncorrelated. These are double digit
4:23
Speaker 4: returns now you're able to earn and you're senior in
4:26
Speaker 4: the capital structure. It's a defensive play, but particularly with
4:31
Speaker 4: an aging population, really valuable, and to.
4:33
Speaker 6: Paul's point when he was talking about yields, obviously investors
4:36
Speaker 6: being able to get a very.
4:37
Speaker 7: Different portion of that.
4:39
Speaker 6: When you think about what it was like coming out
4:40
Speaker 6: of the housing crisis, and especially compared to the last
4:43
Speaker 6: decade or so in not having say four or five
4:45
Speaker 6: percent or even higher type yield there, what's your view
4:48
Speaker 6: as far as we do have that fed meeting next week,
4:50
Speaker 6: even if they do potentially pause or signal that are
4:53
Speaker 6: you expecting if yields continue to stay elevated, if the
4:56
Speaker 6: FED just kind of coast there before cutting rates, does
4:59
Speaker 6: that still bring in investors because yields would potentially still
5:02
Speaker 6: be a little bit elevated until potentially whenever we would
5:05
Speaker 6: see cuts at some point.
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Speaker 4: So the hallmark of the private markets, in private credit
5:11
Speaker 4: in particular, is that it's flexible, long duration capital. And
5:15
Speaker 4: so when the FED is uh, you know, meeting to
5:19
Speaker 4: meeting making decisions about rate policy, it's on our minds
5:23
Speaker 4: and and the firm is very aware of the macro,
5:25
Speaker 4: but we focus on the micro and we focus on
5:28
Speaker 4: credit quality. And so yes, of course the FED meeting
5:33
Speaker 4: will will bring another set of questions around has the
5:37
Speaker 4: terminal rate? Have we achieved a terminal rate? Have we
5:40
Speaker 4: have we settled at at at at a level that
5:43
Speaker 4: allows more buyers and sellers.
5:45
Speaker 3: In the public or private markets. We'd like to see that.
5:48
Speaker 5: But even if.
5:49
Speaker 4: There's still concern around when and where the FED lands,
5:53
Speaker 4: it remains an opportunity to source.
5:59
Speaker 3: Attractive opportunity.
6:00
Speaker 4: You know, the companies stay private much longer than they
6:04
Speaker 4: ever used to, and so the companies that we work
6:08
Speaker 4: with middle markets companies, we also finance assets, whether they're
6:12
Speaker 4: infrastructure or real estate, and so the breadth of the
6:17
Speaker 4: of the private credit market has really given us so
6:21
Speaker 4: many places to be that we keep an eye on
6:24
Speaker 4: the FED meetings, but our real focus is originating attractive
6:28
Speaker 4: opportunities that today banks are less likely to do.
6:32
Speaker 3: Talk to us about credit quality.
6:33
Speaker 1: Here borrowers have seen their variable rate borrowings just skyrocket
6:38
Speaker 1: with the again the five hundred paces point increasing rates
6:42
Speaker 1: that you mentioned. What are you guys seeing in your
6:44
Speaker 1: portfolio in terms of credit quality, So we we look
6:49
Speaker 1: closely at it, of course, off over across a broad
6:52
Speaker 1: number of names. In fact, in our corporate portfolio after
6:56
Speaker 1: the first quarter we reported eight percent EBIT DOUG growth
7:00
Speaker 1: amongst the portfolio companies just a year ago that.
7:03
Speaker 3: We lend to.
7:04
Speaker 4: So the cash flow is there. But I think ultimately
7:10
Speaker 4: these rate hikes are a mechanism to de lever the economy,
7:15
Speaker 4: and it's doing just that. So the rate is higher,
7:19
Speaker 4: the debt services higher, so the quantum of debt comes down,
7:23
Speaker 4: and we're very happy to be lending to companies and
7:29
Speaker 4: against assets that will take on less debt but pay
7:32
Speaker 4: a higher rate. So it's really a better position than
7:36
Speaker 4: it would have been prior to the move in rates.
7:39
Speaker 4: And you know, there will be some stresses that come
7:42
Speaker 4: out of the sharp move in rates, and we take
7:44
Speaker 4: a very granular, bottoms up look at the credit quality.
7:51
Speaker 5: Areas has you.
7:53
Speaker 4: Know, across this direct lending platform since two thousand and
7:56
Speaker 4: four delivered at twelve percent IRR with really negligible default
8:02
Speaker 4: and losses.
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Speaker 5: So we're pretty proud of that.
8:05
Speaker 6: We really have about twenty seconds left, but we're the
8:08
Speaker 6: hottest areas within private credit right now.
8:11
Speaker 4: Well, so I mentioned that within private credit, direct lending
8:14
Speaker 4: is an area that we're as active as anyone and
8:19
Speaker 4: as long a tenure as anyone. I also think in
8:23
Speaker 4: alternative credit, we're seeing significant demand from institutional and high
8:28
Speaker 4: net worth clients. They want to have exposure to some
8:32
Speaker 4: of the assets that they can use to finance attractive opportunities.
8:37
Speaker 4: So direct lending, alternative credit, those are key areas that
8:40
Speaker 4: we see a lot of interest in.
8:42
Speaker 3: Roger, thanks so much for joining us. Really appreciate it.
8:44
Speaker 1: Roger Donde, he's a partner in global head of wealth
8:46
Speaker 1: management at Areas Wealth Management, talking a lot about private credit,
8:50
Speaker 1: and as Roger mentioned, they've been in that business a
8:52
Speaker 1: long time and it just again I've been on Wall
8:54
Speaker 1: Street for thirty years and to see the growth of
8:55
Speaker 1: this business for me just appreciating it over the last
8:59
Speaker 1: you know, five plus.
9:00
Speaker 3: Years, it's just been extraordinary.
9:01
Speaker 1: So a great it's where a lot of capital is
9:04
Speaker 1: going to private credit, so we like to pay attention
9:06
Speaker 1: to that.
9:08
Speaker 8: You're listening to the teenth Ken's Are Live program Bloomberg
9:12
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot com,
9:15
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9:18
Speaker 8: on demand wherever you get your podcast.
9:23
Speaker 1: I was down the last few days down in Orlando
9:26
Speaker 1: at the bny Mellon Insight conference and bring all their
9:30
Speaker 1: ras together, and I'll tell you what I say that
9:32
Speaker 1: to Maria Property, which was it was a great property
9:34
Speaker 1: down there in Orlando. I was talking to some of
9:36
Speaker 1: the people at the hotel packed hotel pre pandemic levels.
9:41
Speaker 1: I was talking to the event people at BNY Mellon.
9:44
Speaker 1: This was the biggest attendancy that they've had. So it
9:47
Speaker 1: seems like people are I'm not sure where it is,
9:49
Speaker 1: but it feels.
9:50
Speaker 3: Like it's backed. So let's go to plane was packed.
9:52
Speaker 3: Plane was packed.
9:53
Speaker 1: I mean I just saw George Ferguson from Bloomberg Intelligence
9:55
Speaker 1: go buy, so I gave him some primary research there
9:58
Speaker 1: that the plane back was packed.
10:00
Speaker 3: Brian Egger joints us here in New York.
10:02
Speaker 6: Here.
10:02
Speaker 1: He's a senior gaming and lodging analysts with Bloomberg Intelligence.
10:05
Speaker 1: He's been doing this stuff for a long time. So
10:07
Speaker 1: Brian talk to us about kind of the global lodging business.
10:10
Speaker 1: Where are we kind of visa v twenty nineteen.
10:13
Speaker 9: So for global lodging, I mean for most geographies, we
10:16
Speaker 9: were really back above where we were in twenty nineteen
10:20
Speaker 9: in terms of revenue available room. That was true for
10:22
Speaker 9: the first quarter. What's notable is that that's in RevPAR
10:26
Speaker 9: just forever for those for those in the know and
10:30
Speaker 9: you know. So basically, we see luxury hotels catching up
10:33
Speaker 9: with kind of the limited service that led the group
10:36
Speaker 9: out of the pandemic. And at the same time, Asia
10:39
Speaker 9: is kind of catching up with other regions too as
10:42
Speaker 9: cross border travel resumes.
10:44
Speaker 6: So what does that tell us if we're seeing that
10:46
Speaker 6: improvement there in the luxury space as far as how
10:49
Speaker 6: that relates to the economy.
10:51
Speaker 9: I mean from a consumer usure discretion or spending perspective,
10:55
Speaker 9: the economy for now is quite strong. Not only do
10:57
Speaker 9: we see that in terms of luxury hotel bookings and demand,
11:01
Speaker 9: but even in the cruise line sector, which I follow.
11:03
Speaker 9: Related to this, we've seen very very strong bookings, particularly
11:06
Speaker 9: for North American consumers. So you know, there's always a
11:09
Speaker 9: risk of a second half slow down or recession. We're
11:11
Speaker 9: wary of that, but generally speaking, at least through like
11:14
Speaker 9: the first quarter, first half, the leisure discretionary consumer spending
11:18
Speaker 9: has remained.
11:19
Speaker 1: Quite robust, all right, So for the hotels, and I
11:22
Speaker 1: guess it kind of goes to the you know, the
11:24
Speaker 1: airlines as well, which we talk about with George ferguson
11:28
Speaker 1: leisure versus business. Where are we kind of in that
11:31
Speaker 1: mix for the hotels us to be pre pandemic.
11:33
Speaker 9: Yeah, first time period, I would say that individual leisure
11:36
Speaker 9: travel was really ahead of called individual business travel. That
11:40
Speaker 9: took a little longer, but now that's so called transiit
11:43
Speaker 9: or individual business travel or customer is also coming back.
11:47
Speaker 9: And I think also big change too is we seem
11:49
Speaker 9: to be a point where group bookings, this is group
11:51
Speaker 9: business demand in places like Las Vegas, one of your favorites,
11:54
Speaker 9: YEP is really back at pretty much a pre pandemic clip,
11:59
Speaker 9: So you know, there's like always risks of a slow down,
12:01
Speaker 9: but you know groups and group gatherings are are back
12:05
Speaker 9: in the fray.
12:06
Speaker 6: What's your take when it comes to you, because you
12:08
Speaker 6: were talking about the cruise liners in particular, so we
12:11
Speaker 6: always think about those names like Carnival Royal, Norwegian. I
12:15
Speaker 6: don't qualanyed chat about have you been on the.
12:20
Speaker 3: Business though?
12:22
Speaker 6: Are we seeing their sales getting closer to that twenty
12:25
Speaker 6: nineteen peak as far as seeing a rebound there in
12:28
Speaker 6: that sort of space and segment with the consumer.
12:30
Speaker 9: Yes, So I think at least if you look at
12:32
Speaker 9: the consensus viewpoint, the street, if you will, expects twenty
12:35
Speaker 9: twenty three sales for Carnival Royal in the region to
12:38
Speaker 9: be about twelve percent higher than they were in twenty nineteen.
12:41
Speaker 9: Now the margins are still wagging that pre pandemic benchmark somewhat,
12:46
Speaker 9: but we're certainly getting back there. And the big catass,
12:49
Speaker 9: of course, was that the fleet was based. The fleets
12:52
Speaker 9: were basically shuttered for the duration of the pandemic, but
12:58
Speaker 9: started to ring in state service last year and now
13:00
Speaker 9: they are back in full capacity.
13:02
Speaker 3: Talk to us about labor. I was thinking about this yesterday.
13:05
Speaker 1: I'm sitting there doing my show in this huge convention
13:08
Speaker 1: hall and there's you know, thousands of people there milling about,
13:12
Speaker 1: and there were also a ton of Marriott employees who
13:15
Speaker 1: were cleaning the you know, setting up for the meals,
13:18
Speaker 1: cleaning the tables, doing I mean, just a.
13:20
Speaker 3: Swarm of them, which was good to see.
13:23
Speaker 1: Is that indicative that the hotels are doing a little
13:26
Speaker 1: bit better with the labor situation?
13:27
Speaker 9: Yeah, I think, you know, it comes up certainly anecdotally
13:30
Speaker 9: across the travelature space that hotels that labor markets remained tight.
13:36
Speaker 9: Certainly there's been some wage pressure, cost pressures that the
13:39
Speaker 9: companies are mindful of the effects of inflation, labor and otherwise.
13:43
Speaker 9: At the same time, of course, pricing has been quite
13:45
Speaker 9: strong too, so we see some ability to affect cost
13:48
Speaker 9: increases with pricing gains and your rev par increases in
13:52
Speaker 9: the watching sector as well as yields in the crew sector.
13:54
Speaker 6: Whatever we think about some of these travel and leisure
13:58
Speaker 6: related type stocks, especially with China's reopening last fall, that
14:01
Speaker 6: really gave a boost and supported those stocks. Is that
14:05
Speaker 6: rally sort of fizzling out now or do you think
14:07
Speaker 6: we have another leg higher one stocks maybe pull back
14:10
Speaker 6: a little bit from here in that particular segment of
14:12
Speaker 6: the market.
14:12
Speaker 9: I mean, Wet'll say what you mentioned China.
14:14
Speaker 5: What's notable about China.
14:15
Speaker 9: Is that certainly the unwinding of the of the zero
14:18
Speaker 9: COVID regime, they will definitely helped travel. To date, what
14:22
Speaker 9: we have seen is that domestic in country uh stays
14:25
Speaker 9: in hotels there and related revenue have been a bit stronger,
14:29
Speaker 9: let's say, than inbound tourism and tourism that relies on
14:33
Speaker 9: people coming into the country. But that being said, you know,
14:35
Speaker 9: we're definitely moving in the right direction.
14:38
Speaker 3: All right, my favorite, let's switch over to gaming Kotai strip.
14:43
Speaker 3: That's kind of like, yes, it is awesome over there.
14:48
Speaker 1: Do I assume that that Chinese anybody wants to go
14:51
Speaker 1: to the Macaw can go or are they still so?
14:53
Speaker 9: The travel restrictions have been being unwound and have been lifted,
14:57
Speaker 9: and that makes a big difference. Now bear in mind
14:59
Speaker 9: and Macau all that VIP the junket business that you
15:03
Speaker 9: like to pay pize Paul that you know the credit,
15:06
Speaker 9: there's been a basically a band since December of twenty
15:09
Speaker 9: twenty one on junket credit extension. However, the mass market
15:13
Speaker 9: and VIP direct quadering has definitely come back, and you know,
15:17
Speaker 9: it's very much been constrained by travel restrictions and visa requirements,
15:21
Speaker 9: but as that loosens up, we are seeing the mass
15:23
Speaker 9: market there are definitely coming back with you know, certainly
15:27
Speaker 9: levels approaching pre bendemic levels, not there yet but getting there.
15:30
Speaker 6: Thinking about those casino operators like Win Results for instance,
15:34
Speaker 6: Win Resorts in Las Vegas stands, those actually were down
15:37
Speaker 6: a little bit pre market and a little bit under
15:39
Speaker 6: pressure because Jefferies did downgrade some of those from hole
15:41
Speaker 6: to buy. Thinking that some of the bounce back that
15:43
Speaker 6: we saw when we were just talking about Macaw and
15:46
Speaker 6: the recovery there kind of maybe that's a little bit
15:48
Speaker 6: fizzled out there. But what particular when we're thinking about
15:51
Speaker 6: more on the gaming front and particular names that you
15:53
Speaker 6: think could support and be maybe moving higher from this point, Oh, I.
15:57
Speaker 9: Mean to speak about it very generally. You know, the
15:59
Speaker 9: the UI gaming consumer has been pretty strong Vegas. I
16:03
Speaker 9: think it's currently been back and it's the same thing.
16:05
Speaker 9: It's true of regional markets. You know, there was a
16:07
Speaker 9: period where regional and drive to markets were leading Vegas.
16:11
Speaker 9: Now Vegas is demonstrably back and doing quite well. I mean,
16:15
Speaker 9: there may be a point where some perceive that much
16:19
Speaker 9: of that good news has been baked in, but you know,
16:21
Speaker 9: with that for others to determine. But overall, I mean,
16:23
Speaker 9: we're at a favorable point barring some significant slow down
16:27
Speaker 9: related to a weaker comedy, which is always possible.
16:29
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16:33
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16:37
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16:40
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16:49
Speaker 3: So we talked to TFS. We always like to check
16:52
Speaker 3: out of a Manda Rebello.
16:53
Speaker 1: She's head of Extractor Sales US on shore at DWS Group. Amanda,
16:58
Speaker 1: good to see you here live here in Bloomberg HQ.
17:02
Speaker 1: Talk to us about what's the ETF that you guys
17:05
Speaker 1: are working on now that you guys are most positive
17:07
Speaker 1: on right now because it just seems like from you
17:09
Speaker 1: guys and from so many others are just coming at you,
17:12
Speaker 1: you know, a million at a time.
17:13
Speaker 7: Well, Paul, thanks for inviting me. Great to see you.
17:16
Speaker 7: As always, we are speaking.
17:19
Speaker 10: A lot about dividends, so we've actually just put out
17:21
Speaker 10: a new note this morning about dividends. I think that
17:23
Speaker 10: even with the suspending of the debt ceiling until January
17:27
Speaker 10: twenty twenty five, there's still so much uncertainty in the market,
17:31
Speaker 10: and we feel that if you're on the fence just
17:33
Speaker 10: by dividend stocks, but high quality ones, and so we're
17:37
Speaker 10: very busy talking to our clients about h DEEF in particular,
17:40
Speaker 10: which is our International High Dividend Yield Equity ETF, and
17:45
Speaker 10: also linked to that as well HDOOR, which is the
17:47
Speaker 10: AQUI universe, so also incorporating em as well. Given up
17:51
Speaker 10: where cash is yielding at the moment, you know, none
17:54
Speaker 10: of us are really paid to sit on cash. We
17:57
Speaker 10: need to think about where to invest in. So we
17:59
Speaker 10: think that looking at high quality, sustainable dividend pays is
18:03
Speaker 10: really the way to go. European equities, International Equities EQUI
18:07
Speaker 10: Universe is always going to be yielding more than us equities.
18:11
Speaker 10: So if you look at the S and P five hundred,
18:13
Speaker 10: for example, typically yielding about one point five to one
18:15
Speaker 10: point seven percent, eurostocks fifty is usually yielding something between
18:20
Speaker 10: three point five to four point five percent, and then
18:22
Speaker 10: if you take a dif focused strategy on that kind
18:25
Speaker 10: of universe, then you're able to get something like four
18:28
Speaker 10: point eight to even five point three if you start
18:30
Speaker 10: looking at the em contingent as well.
18:33
Speaker 6: Talk to us about where you're seeing the flows at
18:35
Speaker 6: this point, I mean you bring up dividend payers. Is
18:38
Speaker 6: that we're we're seeing it.
18:39
Speaker 10: Yeah, that's definitely been one of the strongest errors for
18:42
Speaker 10: investor demand, which has been demonstrated with inflows.
18:45
Speaker 7: We're really grateful for that.
18:47
Speaker 10: We do also see some clients still wanting to take
18:49
Speaker 10: some positions as well in China too, so we've seen yeah, interesting, right,
18:54
Speaker 10: So I think that there's those investors who still have
18:58
Speaker 10: a long term view on China. They still think about,
19:02
Speaker 10: you know, the long term goals of the party. And
19:06
Speaker 10: I think, just to be very honest, I think a
19:09
Speaker 10: lot of people just thinking and you take money away
19:11
Speaker 10: from US equities even though there's been this kind of
19:14
Speaker 10: fomo kind of sentiment at the moment with US equities,
19:18
Speaker 10: and we still see a rally even though there's uncertainty,
19:21
Speaker 10: just thinking that that's maybe the next place to be
19:23
Speaker 10: going at the end of the day, second largest economy
19:26
Speaker 10: in the world. We still see some clients who think
19:27
Speaker 10: it's underweight, not just in the EM universe, but also
19:30
Speaker 10: in the in the global equities AQUI universe too.
19:34
Speaker 6: So what is it about US equities in particular that
19:37
Speaker 6: we're seeing, even though we're seeing when we're looking at
19:39
Speaker 6: the border stock market right and flirting with a potential
19:42
Speaker 6: Beard toritory with the S and P five hundred, what
19:44
Speaker 6: is it that investors are still skeptical about when we're
19:46
Speaker 6: thinking about the flows in the US equities.
19:48
Speaker 10: Yeah, I think that there's still a lot of kind
19:49
Speaker 10: of what if. So, you know, really the focus for
19:52
Speaker 10: us at DWS when we look at US equities with
19:55
Speaker 10: this extension is thinking about kind of the broader fiscal
19:58
Speaker 10: health of the US and so also we've got the
20:02
Speaker 10: election as well coming up to I think these kind
20:06
Speaker 10: of events that will throw the catch amongst the pigeons.
20:09
Speaker 7: When we think about the death.
20:13
Speaker 6: I always go back to that, let's go back it's unpacked.
20:18
Speaker 3: The throwing the catch amongst the pigeons, throwing the cat
20:21
Speaker 3: amongst the period.
20:22
Speaker 7: So imagine.
20:26
Speaker 6: I can't wait to awesome.
20:31
Speaker 1: All right, So if I do want international equities and
20:34
Speaker 1: I'm thinking dividend strategy, you guys have any h D
20:37
Speaker 1: E F.
20:38
Speaker 3: Is that the one I want to the one?
20:39
Speaker 7: Yes?
20:39
Speaker 10: And if you're braver, why not h D A W
20:42
Speaker 10: which also includes em equities?
20:44
Speaker 1: Okay, so you guys have Okay, so you have ETFs
20:47
Speaker 1: for there, so that tracks you know, I guess European
20:50
Speaker 1: high dividend exactly.
20:52
Speaker 3: Yeah, all right, interesting, all right? How about value?
20:56
Speaker 1: Some folks are saying, you know, we've had the big
20:59
Speaker 1: sevens X stacks kind of just run up here in
21:01
Speaker 1: the US market accounting for all of more than all
21:04
Speaker 1: of the performance for the SPX, that maybe some of
21:07
Speaker 1: the small and mid cap stocks, that there's a lot
21:08
Speaker 1: of value out there. How do you guys think about that?
21:11
Speaker 7: We're on the same page.
21:12
Speaker 10: So growth, you know, had a really strong decade and
21:16
Speaker 10: then we saw this pivot already starting last year, but
21:19
Speaker 10: we think it continues at least into Q four this
21:21
Speaker 10: year across European equities, because we think European equities are
21:25
Speaker 10: quite undervalue, just given that there also a warmer winter
21:29
Speaker 10: than any of us expected. The oil price spikes, especially
21:34
Speaker 10: the link with Russian energy, didn't hurt companies quite as
21:38
Speaker 10: much as we expected. And then on the US side
21:40
Speaker 10: as well, we also think value is making sense too.
21:42
Speaker 10: So also we've been speaking to our clients a lot
21:45
Speaker 10: about SMPV, which is our ESG SMP five hundred value ETF.
21:50
Speaker 10: And then additionally we've been speaking about Quark QAARP, which
21:53
Speaker 10: is quality at a reasonable price, basically quality and value combined.
21:57
Speaker 6: We only have about a minute left. Actually we're go
21:59
Speaker 6: one longer we can go.
22:02
Speaker 7: Let's keep it going.
22:03
Speaker 6: It in aristocrats, Yes, what stands out to.
22:06
Speaker 10: You, What I like about divviden aristocrats is that you
22:10
Speaker 10: can take like a much more concentrated portfolio. So we've
22:13
Speaker 10: got the fifteen hundred universe with SMPD and then we're
22:19
Speaker 10: actually taking eighty two stocks and then not all financials.
22:22
Speaker 10: So I think what's important to always think about with
22:25
Speaker 10: divpairs is sector kind of relativity, so you end up
22:29
Speaker 10: not having sector biases that come just because you know,
22:33
Speaker 10: financials are always paying dividends, utilities are always paying dividends
22:37
Speaker 10: ETFs at the end of the day, are always about diversification,
22:40
Speaker 10: So you want to have stop diversification as well as
22:43
Speaker 10: sector diversification.
22:44
Speaker 1: All right, if I want some I guess if I
22:48
Speaker 1: want to go ESG. Now I'm not sure ESG is
22:51
Speaker 1: still a thing. It feels like it's losing momentum here
22:54
Speaker 1: in the US. I've been told by great authority that
22:56
Speaker 1: it is still a huge thing in Europe for European investors.
23:01
Speaker 1: What do you guys have if I want to get
23:03
Speaker 1: ESG kind of analysis will win into my.
23:06
Speaker 10: Investments, So I would say SMPE. So it's just ESG,
23:10
Speaker 10: SMP five hundred. And the way that we look at
23:13
Speaker 10: that is the stocks in the five hundred universe SMP
23:16
Speaker 10: they have great data in their organization and they basically
23:20
Speaker 10: pick the winners in each sector. So you can still
23:22
Speaker 10: have sector neutrality, but you're picking the top fifty percent
23:25
Speaker 10: of each of the sectors. And that's a really strong
23:29
Speaker 10: fun because actually a lot of the criticism about ESG
23:32
Speaker 10: is are you giving up returns? In actual fact, this
23:34
Speaker 10: one outperformed, like you know, the competitor just book standard
23:38
Speaker 10: SMP five hundred ETFs. But then also you saw reduction
23:43
Speaker 10: in volatility as well. I think the outperformance year to
23:47
Speaker 10: date has been about twenty seven basis points, and then
23:51
Speaker 10: the reduction in volatility was around fifty basis points, so
23:54
Speaker 10: slightly increased sharp ratio two. And governance is interesting at
23:58
Speaker 10: the moment right because we will see some police defaulting,
24:01
Speaker 10: you know, for the remainder of the cycle. Governance schools
24:04
Speaker 10: help us to sometimes identify who are potentially most liable
24:08
Speaker 10: to be exposed to that.
24:09
Speaker 6: When we talk about dividend pairs, especially these US multinational
24:12
Speaker 6: companies saying as staples sector, like these food conglomerate giants
24:16
Speaker 6: when we think about Campbell, Soup and some general mills.
24:19
Speaker 6: They're starting to see some pullback there in the consumer
24:22
Speaker 6: as far as the price pressures there. But I'm wondering,
24:24
Speaker 6: especially when it comes to companies that derive a big
24:26
Speaker 6: portion of the revenue overseas, with staples it's about a
24:29
Speaker 6: quarter of that. Do you think that essentially, if the
24:31
Speaker 6: dollar continues, maybe we see a bigger pullback there with
24:34
Speaker 6: the FED easing that could potentially support some of those
24:37
Speaker 6: quarters of the market.
24:38
Speaker 7: Yeah.
24:38
Speaker 10: So cws's forecast for euro dollar for the next twelve
24:42
Speaker 10: months is at approximately one point one two percent. We
24:46
Speaker 10: think that there's still kind of some value adds within
24:50
Speaker 10: all sectors for like US providers to then export to Europe.
24:55
Speaker 10: So that's okay. I'm not too much of an expert.
24:58
Speaker 10: We can ask Dave Biangko, but I think sentiment on
25:00
Speaker 10: our site is that, you know, there's a lot of
25:03
Speaker 10: very strong European consumer staples names already, like Nesley and
25:07
Speaker 10: so forth, so perhaps less reliance on US names for
25:12
Speaker 10: this sector.
25:12
Speaker 3: All right, Amanda, thank you so much for stopping by.
25:14
Speaker 3: I really appreciate it.
25:15
Speaker 1: Amanda Rabello, she is our go to for ETF. She's
25:18
Speaker 1: head of Xtracker Sales US on shore at DWS Group.
25:23
Speaker 8: You're listening to the team Ken's are Live program Bloomberg
25:26
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot Com,
25:30
Speaker 8: the iHeartRadio app and the Bloomberg Business App, or listen
25:33
Speaker 8: on demand wherever you get your podcasts.
25:37
Speaker 3: Switch gears.
25:38
Speaker 6: Just let's talk, yes, hech and when you want to
25:40
Speaker 6: talk tech, I'm excited.
25:41
Speaker 3: Where do you go?
25:42
Speaker 1: I go out to Silicon Valley and I can talk
25:44
Speaker 1: to this person out there who knows everything about everything
25:48
Speaker 1: in the valley. Emily Chank joins us.
25:53
Speaker 7: You all are too kind.
25:55
Speaker 1: I mean, it's just so much is going on out there.
25:57
Speaker 1: And Emily, You've got a new show premiering ten night
26:00
Speaker 1: called The Circuit tell Us about that.
26:03
Speaker 11: Yes, indeed, Well, you know, as you know, Paul, I've
26:06
Speaker 11: been anchoring Bloomberg Technology for twelve years, every day in
26:09
Speaker 11: the chair covering Silicon Valley. Hence how you introduced me.
26:14
Speaker 11: And I just had this desire to go deeper and longer.
26:16
Speaker 11: You know, tech is complicated and the people making these
26:19
Speaker 11: decisions are changing the lives of billions and billions of people.
26:22
Speaker 7: So I wanted to get out in the field.
26:24
Speaker 11: I wanted to do more long form, have extended conversations,
26:27
Speaker 11: meet people where they are, so we are you know,
26:30
Speaker 11: for example, at Brian Cheskey's home in San Francisco, we
26:32
Speaker 11: go to meet a whistleblower in Santa Fe. We go
26:35
Speaker 11: to interview Natalie Bortman at a women's soccer game in
26:38
Speaker 11: La Like, how cool is that? And tonight we actually
26:42
Speaker 11: have the co founders of Twitter, Av Williams, who opens
26:45
Speaker 11: up about Elon Musk for the first time.
26:47
Speaker 1: Yes, and you just published on Bloomberg just hit the
26:49
Speaker 1: Bloomberg termin I'm seeing there sir, he feels I mean,
26:53
Speaker 1: he's got some remorse here.
26:54
Speaker 3: He's sad about this.
26:55
Speaker 11: He uses the word sad, yeah, you know, and he
26:58
Speaker 11: says he's surprised even himself when he felt that way
27:01
Speaker 11: when the deal went through. And you know, if anyone
27:05
Speaker 11: has followed Twitter's history, there's been so much drama over
27:08
Speaker 11: the years, so many changing of the guards. And he
27:10
Speaker 11: was pushed out, and Jack came in, and Jack was
27:12
Speaker 11: pushed out, and Di Costelo came in, and then Jack
27:14
Speaker 11: came back and now Elon and so you know, there
27:19
Speaker 11: is a lot of blood on the floor, so to speak.
27:22
Speaker 7: And this new chapter I think isn't.
27:24
Speaker 11: What perhaps Jack Dorsey thought it would be when he
27:27
Speaker 11: brought in Elon Musk. And if Williams puts it this way, look,
27:30
Speaker 11: I thought it would be interesting. I was excited to
27:33
Speaker 11: watch and see what happens. But even though he's brilliant,
27:37
Speaker 11: you can't be brilliant on everything. And I don't think
27:40
Speaker 11: he's gotten this quite right.
27:43
Speaker 6: Right. How frequently will we be able to see these
27:45
Speaker 6: interviews every.
27:46
Speaker 7: Week on Bloomberg Television.
27:48
Speaker 11: You can watch it at ten o'clock, but also you
27:50
Speaker 11: can download the Bloomberg Gap on your smart TV, which
27:52
Speaker 11: I just did a week ago.
27:53
Speaker 7: It's right next to HBO.
27:55
Speaker 11: New episodes drop every Thursday, eight pm Eastern on the app,
27:59
Speaker 11: and you can also streaming on Bloomberg dot com and
28:01
Speaker 11: the Companion podcast where you can hear extended conversations. You're amazing.
28:05
Speaker 11: Radio colleagues have helped me to opinion podcasts, and I'm
28:08
Speaker 11: so grateful.
28:09
Speaker 3: That's what the kids are doing. Today's podcasting.
28:11
Speaker 1: All right, So what's the feeling, Emily. You've been out
28:13
Speaker 1: in the valley for such a long time, you know,
28:14
Speaker 1: all the players. What's the feeling out there?
28:16
Speaker 3: Now? These days we had, you know, some banking prices
28:19
Speaker 3: to keep being right right in their backyard. What's the
28:23
Speaker 3: feeling out there?
28:24
Speaker 7: You know, everyone's a little down.
28:27
Speaker 11: I mean, we've had hundreds of thousands of people laid
28:29
Speaker 11: off in tech at this point. However, the overwhelming message
28:33
Speaker 11: that I got is that the party's not over.
28:36
Speaker 7: You know, the lights have turned on.
28:38
Speaker 11: People are still figuring things out, but the dance floor
28:40
Speaker 11: is open for business, and people are still optimistic that
28:43
Speaker 11: innovation is going to happen no matter what. For example, AI,
28:47
Speaker 11: everyone's really excited about that. I go to meet legendary
28:50
Speaker 11: venture capitalist Bill Gurley in Austin, Texas, and he.
28:53
Speaker 7: Says, this is bad. This is going to last for
28:55
Speaker 7: a few years.
28:55
Speaker 11: But I actually love investing in this environment when there's
28:58
Speaker 11: not this massive hype cycle happening and it's quiet and
29:01
Speaker 11: people leave because they think there's no opportunity to be had.
29:04
Speaker 11: But this is when you can actually put a bet
29:06
Speaker 11: down early and it'll.
29:08
Speaker 7: Play out over years.
29:10
Speaker 11: So you know a new era is taking shape. I
29:13
Speaker 11: would say it's an era of austerity. We're gonna have
29:16
Speaker 11: less free sushi and smoothies. And I remember my first
29:20
Speaker 11: visit to the Google cafeteria where there were just rows
29:22
Speaker 11: and rows of all different kinds of food. Things are changing,
29:26
Speaker 11: Belts are tightening, but that doesn't mean that innovation is
29:29
Speaker 11: gonna die.
29:30
Speaker 6: When you're speaking to some of these big names, when
29:32
Speaker 6: it comes to these executive type players, what is they're
29:34
Speaker 6: thinking as far as worthy economy is headed.
29:38
Speaker 11: I think they're worried for sure. The thing is, nobody
29:42
Speaker 11: knows how long the downturn is gonna last. And I
29:45
Speaker 11: say downturn. I just booked a uber CEO dar Kajrashahi
29:48
Speaker 11: today as well, and he said the downturn that hasn't
29:50
Speaker 11: happened yet, So I know we're you know, we're still
29:52
Speaker 11: warning about it. Layoffs are happening, but an actual downturn
29:56
Speaker 11: hasn't happened yet. So if and when that does happen,
29:59
Speaker 11: the expectation is that it'll last a little while. But
30:02
Speaker 11: folks are doubling down, you know, trimming the fat, if
30:06
Speaker 11: you will, making cuts, re establishing their priorities to move
30:10
Speaker 11: forward in a new leaner era.
30:13
Speaker 1: What do you think, just from the technology industry perspective,
30:17
Speaker 1: what do you think is the future of San Francisco.
30:19
Speaker 1: Like for twenty years when I had friends from Europe saying, Hey,
30:23
Speaker 1: I'm coming over there with my family for a couple
30:24
Speaker 1: of weeks and we're doing New York and we're gonna
30:26
Speaker 1: do maybe Florida. I said, you have to carve out
30:28
Speaker 1: four or five days for San Francisco.
30:30
Speaker 3: A day or two in town a day or two,
30:32
Speaker 3: and nap a day or two.
30:33
Speaker 1: You know, in Silicon Valley for example, some of those
30:36
Speaker 1: beautiful towns like pap Palo Alto. What is the future
30:39
Speaker 1: of What are your companies that you cover there? What
30:42
Speaker 1: did they think about San Francis?
30:43
Speaker 7: Well, you know, I love San Francisco too.
30:45
Speaker 11: That is my home, and it hasn't recovered as quickly
30:47
Speaker 11: as the rest of the country is the rest of
30:49
Speaker 11: the world.
30:50
Speaker 7: The other day, I was walking down the street.
30:51
Speaker 11: I saw a raccoon on the sidewalk at eleven AM
30:54
Speaker 11: and the raccoon.
30:55
Speaker 7: Was like, this is my sidewalk. I belong here.
31:00
Speaker 11: And so I think San Francisco's just recovering more slow
31:03
Speaker 11: than you have. A lot of these companies that are
31:04
Speaker 11: really struggling to get workers back to the office right still.
31:07
Speaker 11: I think that's gonna change over time. The CEOs I'm
31:10
Speaker 11: talking to, for example, Dara Kasrashai, the CEO of Uber,
31:13
Speaker 11: they're asking people to come back three days a week.
31:15
Speaker 11: Employees don't love it, but eventually they're gonna do it,
31:19
Speaker 11: and I think it's just going to take more time.
31:22
Speaker 11: Everyone's worried about talent, and especially in Silicon Valley, where
31:25
Speaker 11: you know, top engineers are so sought after. But at
31:28
Speaker 11: a certain point the balance of power is going to
31:30
Speaker 11: shift back to employers, and I think we're starting to
31:33
Speaker 11: see that with the economy.
31:34
Speaker 6: You brought up cost cutting. Obviously that's been so big,
31:37
Speaker 6: especially in the tech and growth space. When you're speaking
31:40
Speaker 6: with executives, do they feel like most of that pain
31:42
Speaker 6: has passed or should we expect more cost cutting to
31:44
Speaker 6: come in particular segments of tech.
31:46
Speaker 11: I think there will be more cost cutting, you know.
31:48
Speaker 11: I think valuations are coming down. They're still coming down.
31:51
Speaker 11: Some companies that have raised haven't had to do their
31:53
Speaker 11: downround yet because they have had money in the bank.
31:56
Speaker 11: And when they have to raise money again, that's when
31:58
Speaker 11: you know, it's all reality is gonna hit and they're
32:01
Speaker 11: going to say, oh my gosh, we have to cut
32:03
Speaker 11: some things. And I think people are just reevaluating, and
32:07
Speaker 11: you know everyone's doing it differently. You know, Metas on
32:09
Speaker 11: its third layoff right, which is tough. And what's hard
32:12
Speaker 11: there is, you know, you start to lose the trust
32:15
Speaker 11: of employees when they can't be sure if they have
32:18
Speaker 11: a job right and morale is low, nobody knows what
32:21
Speaker 11: they're supposed to be working on. And so I think
32:24
Speaker 11: it's it's not just what companies do, but how they
32:27
Speaker 11: do it that is going to define how strong they
32:30
Speaker 11: are in the future.
32:31
Speaker 1: So if I have a great new idea and I
32:36
Speaker 1: go to sand Hill Road, which is the you know
32:38
Speaker 1: where you get all the venture capital smart money in
32:41
Speaker 1: Silicon Valley?
32:43
Speaker 3: Can I get? Would I be able to track?
32:44
Speaker 1: Some investors are still appetite for financing and risk and
32:48
Speaker 1: new ideas and new technologies.
32:50
Speaker 11: There are still venture capital firms open for business on
32:53
Speaker 11: sand Hill Road. That said, you know, there are all
32:55
Speaker 11: these new accelerators in the.
32:57
Speaker 7: Bay Area and around the world.
32:59
Speaker 11: There's a lot of different ways to get money, and
33:03
Speaker 11: they're still investing. In fact, there's a lot of capital
33:05
Speaker 11: built up that people raised in the good times that
33:07
Speaker 11: they need to deploy. And in fact, investors are having
33:10
Speaker 11: a tough time figuring out where to put that money.
33:13
Speaker 11: So there is money to be had for great ideas,
33:15
Speaker 11: and of course you know, you have to find that
33:18
Speaker 11: one investor that's willing to bet on you.
33:21
Speaker 7: But the cycle is going to continue. If history is any.
33:24
Speaker 11: Indication, the cycle of Silicon Valley will go on.
33:28
Speaker 6: Speaking of those cost cutting efforts, we were talking about
33:31
Speaker 6: meta Facebook when it first started its tranches of big
33:35
Speaker 6: job cuts back in November. If you look at its
33:37
Speaker 6: stocks since then, up over one hundred and eighty percent. Obviously,
33:40
Speaker 6: these costcuts so painful when you think of people who
33:42
Speaker 6: are losing their jobs. But when you think from the
33:44
Speaker 6: investor perspective, even beyond that salesforce, some other companies that
33:48
Speaker 6: have had to go through this this year also seeing
33:50
Speaker 6: their stocks rewarded. Do you think we'll continue to see
33:52
Speaker 6: that on the investors side.
33:53
Speaker 11: I think time will tell, because we're all wondering what
33:58
Speaker 11: where Mark Zuckerberg is really right doubled? Is he going
34:00
Speaker 11: to keep pursuing this metaverse idea. Is it going to
34:04
Speaker 11: be you know, more of a focus on Instagram and WhatsApp?
34:06
Speaker 11: What's gonna happen with the blue app? I think there's
34:09
Speaker 11: a lot when you look at the stock price, there's
34:12
Speaker 11: a lot that you don't see, you know. I talk
34:13
Speaker 11: to a lot of Meta employees and former Meta employees
34:16
Speaker 11: who say, this isn't the year of efficiency, this is
34:19
Speaker 11: the year of inefficiency.
34:20
Speaker 7: We don't know what we're supposed to be doing.
34:22
Speaker 11: I'm actually sitting around all day trying to wait, waiting
34:25
Speaker 11: to see if I get cut, if my colleagues are
34:27
Speaker 11: getting cut. And that's a really difficult position. And so
34:30
Speaker 11: I it's almost a tale of two cities. You know,
34:32
Speaker 11: investors might like what they see on the P and L,
34:35
Speaker 11: but over time we'll see if Mark Zuckerberg can really
34:39
Speaker 11: get people to follow him again.
34:41
Speaker 3: Yep, yep, all right, talk to us again about the circuit.
34:44
Speaker 3: This premiere's premiere.
34:45
Speaker 11: Tonight, Yes, eight eight pm on the Bloomberg App. I
34:48
Speaker 11: know this is confusing, but you know, on your smart
34:51
Speaker 11: tv download the Bloomberg app. It looks beautiful and also
34:54
Speaker 11: ten pm Eastern on Bloomberg Television and also be on
34:57
Speaker 11: Bloomberg dot com. It's on demand, It'll be on YouTube tomorrow.
35:00
Speaker 11: You know, there's a lot of different ways.
35:02
Speaker 7: You can watch it.
35:02
Speaker 11: And we you know, we're going out to talk to
35:04
Speaker 11: a variety of different kinds of people.
35:05
Speaker 3: I think it's a perfect excited well.
35:07
Speaker 1: It's always a great time in Silicon Valy because there's
35:08
Speaker 1: always so much change. But now it's not just the
35:11
Speaker 1: same old story, which is everything's great.
35:13
Speaker 6: Right.
35:13
Speaker 1: You got to put some perspective out there for it,
35:15
Speaker 1: and I think that's probably what a lot of your
35:17
Speaker 1: viewers are going to be looking for. It says perspective
35:19
Speaker 1: on it in an industry that, you know how some headwinds.
35:21
Speaker 7: Times are changing.
35:22
Speaker 11: No more free kombucha and lattes.
35:24
Speaker 7: Okay, but don't go home.
35:26
Speaker 3: Very good.
35:26
Speaker 1: I'mly chrying. Thank you so much for joining us here
35:29
Speaker 1: right here in New York, and again.
35:30
Speaker 6: So excited I got to me her in person. I
35:33
Speaker 6: was zero to you in honor.
35:35
Speaker 1: All over Silicon Valley of the Circuit premieres tonight, as
35:38
Speaker 1: em we said, on a variety of platforms.
35:40
Speaker 8: You're listening to the tape Cat's are live program Bloomberg
35:43
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, tune
35:47
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35:50
Speaker 8: You can also listen live on Amazon Alexa from our
35:53
Speaker 8: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
36:00
Speaker 1: Also, we need to hear at the Bloomberg invest conference
36:02
Speaker 1: at the Bloomberg HQ in Midtown Manhattan. Just this is
36:06
Speaker 1: great because you just look at the really smart people
36:09
Speaker 1: kind of just everywhere, back and forth, and everyone's always saying, hey,
36:12
Speaker 1: let's grab this person. See what they got to say
36:14
Speaker 1: that With Joe Mazzola, we grabbed him Managing director of
36:18
Speaker 1: Trader Education at Charles Schwab. So, Joe, whenever we have
36:21
Speaker 1: you or one of your colleagues from Charles Schwab on it,
36:23
Speaker 1: all I think is you guys, see everything you have
36:26
Speaker 1: a good jillion customers out there all over the world,
36:29
Speaker 1: with a good jillion dollars in assets under management?
36:32
Speaker 3: What are you telling?
36:33
Speaker 1: What's what's kind of the message going at to Schwab
36:34
Speaker 1: clients these days about the market? It seems like, boy,
36:37
Speaker 1: if you don't know an Apple or Amazon, you're kind
36:39
Speaker 1: of grasping straws here.
36:41
Speaker 12: So interesting you bring that up. You know, we do
36:43
Speaker 12: attitudinal and behavioral studies, So attitudinal study we do a
36:48
Speaker 12: quarterly survey with with our traders, kind of asking him
36:51
Speaker 12: what they see in the market right now, a little
36:54
Speaker 12: bit more bearish than they were in Q one.
36:56
Speaker 9: Uh.
36:57
Speaker 8: A lot of it.
36:57
Speaker 12: A lot of it I think has to do with
36:59
Speaker 12: the rally we've seen in tech. They're starting to pair
37:01
Speaker 12: some of those positions in terms of some of the
37:04
Speaker 12: behavioral studies. You know, we've seen them pairing positions in
37:08
Speaker 12: Vidia in a MD and are they missing you know,
37:11
Speaker 12: some of the rally that's you know, that'll that'll be seen,
37:14
Speaker 12: you know, well, we'll see how that plays out. But
37:17
Speaker 12: with a lot of the tech names in Vidia, a
37:19
Speaker 12: m D, Microsoft, they are starting to pair back some
37:21
Speaker 12: of those and maybe adding a little bit more to
37:23
Speaker 12: what they would consider some value at this point. Be
37:26
Speaker 12: at Bank of America, they're looking at Ford some of
37:28
Speaker 12: the stocks that maybe have underperformed.
37:30
Speaker 5: In Q one.
37:30
Speaker 6: Would that be more specific toward retail investors?
37:33
Speaker 12: Yeah, absolutely interesting.
37:35
Speaker 6: And so what does that tell us then if you
37:37
Speaker 6: see that happening in retail versus what we're trying to
37:39
Speaker 6: counteract with what's happening, to say with hedge funds and
37:41
Speaker 6: more institutional investors.
37:43
Speaker 12: Well, here's what I would say. I think a lot
37:44
Speaker 12: of it has to do with kind of the education
37:46
Speaker 12: that our retail investors have, and and I want to
37:48
Speaker 12: promote that a little bit because I think it's important.
37:51
Speaker 12: What we do is we talk to them about different
37:53
Speaker 12: ways of you know, risk allocations. I'm here for an
37:56
Speaker 12: options panel, so we talked about options quite a bit,
37:59
Speaker 12: and you know, we look at ways for we provide
38:02
Speaker 12: ways for our clients to educate themselves. We have videos,
38:05
Speaker 12: we have course work, we have all that stuff available
38:07
Speaker 12: to them, and a lot of them take advantage of it.
38:09
Speaker 12: They really do. So when they see moves in the
38:11
Speaker 12: market like this are kind of you know, counterintuitive to
38:14
Speaker 12: a certain extent. When you've got basically five stocks that
38:16
Speaker 12: are making up twenty five percent of the S and
38:18
Speaker 12: P five hundred market cap. They look at that and
38:20
Speaker 12: they say, hmm, you know, there's a potential maybe for
38:23
Speaker 12: us to kind of roll out of some of those names,
38:25
Speaker 12: look for some value on the other side, maybe some
38:28
Speaker 12: stocks that hadn't done as well. I think a lot
38:31
Speaker 12: of it just has to do with the risk management
38:32
Speaker 12: that we teach.
38:33
Speaker 1: So options, futures and options. That's something that I don't know.
38:37
Speaker 1: I've been in the Wall street for thirty years. I'm
38:39
Speaker 1: still not comfortable that whole concept of futures and options.
38:42
Speaker 1: So how do you guys educate the clients at Schwab
38:45
Speaker 1: about that part of the market.
38:47
Speaker 12: Yeah, I mean we tend to look at premium selling
38:50
Speaker 12: type strategies. We keep them away from naked calls, don't.
38:55
Speaker 12: We don't like unlimited risk, right, Everything we do is
38:57
Speaker 12: risk to find. We talk a lot about spreads. The
39:00
Speaker 12: things I'm going to talk about today on the panel
39:01
Speaker 12: is this idea of when you do have some of
39:04
Speaker 12: these high performing tech names you know that are trading,
39:08
Speaker 12: you know, multiple levels where they haven't traded before, and
39:11
Speaker 12: get you get certain times in the market where what
39:14
Speaker 12: we call call skew is bid so much that people
39:17
Speaker 12: are kind of reaching for these calls, right, they're basically
39:20
Speaker 12: paying up normally than what they would normally pay for
39:22
Speaker 12: these relative to kind of what they would pay for
39:24
Speaker 12: the protection. You get some you get some times like
39:27
Speaker 12: that where it gives you an opportunity as an investor,
39:29
Speaker 12: as a trader, take advantage of that. So we would
39:31
Speaker 12: talk about maybe selling call spreads into something like that,
39:33
Speaker 12: or if you're long the stock, maybe buying put spreads
39:36
Speaker 12: or buying collars as a way to kind of hedge
39:38
Speaker 12: some of that downside, especially if you've had those big
39:40
Speaker 12: moves in some of those names.
39:41
Speaker 6: What are you seeing on the options front heading into
39:43
Speaker 6: the FED meeting.
39:44
Speaker 12: With the positioning Well, so, interestingly enough, heading into the
39:49
Speaker 12: debt ceiling debate, we saw a lot of protection buying
39:53
Speaker 12: from the institutional side, right, And was.
39:55
Speaker 6: That because it was cheaper to buy protection?
39:57
Speaker 12: Yeah, but they bid it up pretty good, and they
39:58
Speaker 12: bid it up. So one of the things that we
40:00
Speaker 12: got a skew. Right, we looked at the put versus
40:02
Speaker 12: a call, we saw the skew levels to levels we
40:04
Speaker 12: haven't seen it in about two years. So there was
40:05
Speaker 12: a lot of a lot of buying of the protection
40:07
Speaker 12: and then as soon as you know, they wait at
40:09
Speaker 12: the eleventh hours as they always do, and as soon
40:11
Speaker 12: as the announcement came out, a lot of that, a
40:13
Speaker 12: lot of that premium came out of the markets, and
40:15
Speaker 12: that's why we're seeing, you know, a sub fourteen dix
40:17
Speaker 12: at this point. I think heading into the June announcement,
40:20
Speaker 12: we haven't started to see as much of the protection buying.
40:23
Speaker 12: At this point, we might see that a little bit more.
40:25
Speaker 12: I think I would keep an eye on the July announcement.
40:28
Speaker 12: I think that there's a little bit more volatility involved there.
40:30
Speaker 6: So if people missed out on some of the rally
40:32
Speaker 6: that we've seen this year, are they trying to still
40:35
Speaker 6: maybe shield some of their defensive positioning, but then try
40:37
Speaker 6: to write out any sort of upside that they could
40:39
Speaker 6: have potentially leading into these different meetings, whether it's next
40:42
Speaker 6: week or the FED meeting in July.
40:43
Speaker 12: Well, I'll tell you, I think a lot of that
40:44
Speaker 12: has happened in the last week or so. I mean,
40:47
Speaker 12: just look at kind of the internals, kind of underneath
40:49
Speaker 12: the surface. I thought yesterday was a fascinating day. I
40:51
Speaker 12: really did. You had, you know, the SMP was down
40:55
Speaker 12: down minimal, but you had the advanced decline line that
40:58
Speaker 12: was up. So basically what you saw this big rotation
41:01
Speaker 12: out of some of those big megacaf texts into some
41:03
Speaker 12: of these value stocks that people are starting to scoop
41:06
Speaker 12: up a little bit. I mean, look at the look
41:07
Speaker 12: at the rustle's done the last last couple days. It's
41:09
Speaker 12: pushed up into a couple of months high.
41:11
Speaker 6: So it's up about seven percent this month.
41:13
Speaker 12: Absolutely big mosting.
41:14
Speaker 1: Okay, all right, so ess and I can't go an
41:17
Speaker 1: hour on the show without somebody or something saying talking
41:21
Speaker 1: to us about AI. And when we just we have
41:22
Speaker 1: to be all over. I have I wouldn't know AI
41:25
Speaker 1: if I tripped over. But apparently everybody feels like the
41:28
Speaker 1: play is in Vidia. So when you get like a
41:30
Speaker 1: crazy vinitiy is a great company. It's been a great
41:33
Speaker 1: company for a long time, but it's now been bit
41:35
Speaker 1: up in trading evaluations, and I don't think even the
41:37
Speaker 1: Invidia bulls can can really stomach what do you see
41:40
Speaker 1: across your trading platform, whether it's people trying to hedge
41:43
Speaker 1: some of that, or maybe just people trying to maybe
41:45
Speaker 1: take a little bit more risk and buy some options
41:47
Speaker 1: to try to take advantage of what are you seeing
41:49
Speaker 1: around a name like that.
41:49
Speaker 12: That's that's one of the names that we're talking about,
41:51
Speaker 12: that inflated call skew right where you're really starting to see, uh,
41:55
Speaker 12: some people reach for some of some of those call premiums.
41:59
Speaker 12: I look at that is, you know, if let's say
42:01
Speaker 12: I was long the stock, I would take advantage of that,
42:02
Speaker 12: maybe sell some calls into that position. I think, you know,
42:06
Speaker 12: if you're long the stock, that gives you the opportunity
42:07
Speaker 12: to kind of reduce some of that downside. Or the
42:10
Speaker 12: other way you could look at this is would be
42:12
Speaker 12: something with like a collar, right, and you know we're
42:14
Speaker 12: going to talk about this on the panel, this idea
42:16
Speaker 12: of a put spread collar as opposed to just a
42:19
Speaker 12: traditional collar, because what the put spread collar does, since
42:21
Speaker 12: it's actually a cheaper way than actually buying the put
42:24
Speaker 12: out right by itself, you know, kind of reduces that debit.
42:26
Speaker 12: It allows you to sell a call that's a little
42:28
Speaker 12: bit higher up and gives you opportunity to get a
42:30
Speaker 12: little bit more upside on the stock. If you think
42:32
Speaker 12: that's going to continue to rally.
42:34
Speaker 6: Talk to us about the Vicks below fourteen. Yes, what's happening.
42:39
Speaker 12: So, I mean it's from from my perspective. I think
42:42
Speaker 12: if you look at the implied ball relative to the
42:45
Speaker 12: realized ball, it makes sense.
42:47
Speaker 3: Right.
42:48
Speaker 12: Think back to twenty two. What happened In twenty two
42:50
Speaker 12: everybody bought protection and what happened The market grinded down
42:53
Speaker 12: slowly and they lost money on the hedge, so they
42:56
Speaker 12: lost money on the on the stock, and they lost
42:57
Speaker 12: money in the head. They didn't want to do that
42:59
Speaker 12: this year. What's happening is, even though it does seem
43:02
Speaker 12: like it's cheap, I mean what three year levels in
43:05
Speaker 12: terms of how much it's pulled back, you're still looking
43:08
Speaker 12: at a market where the imply volatility exceeds the realized
43:12
Speaker 12: volatility until that changes. I think that's probably the pattern. Plus,
43:17
Speaker 12: remember we're heading into the summertime, guys. I mean the
43:19
Speaker 12: summertime is usually kind of the duldrums internity of volatility.
43:22
Speaker 6: When everyone talks about the hallmarks that you need to
43:24
Speaker 6: see with capitulation, obviously the VIX gets thrown in there.
43:27
Speaker 6: I mean the highest at certain points, whether it was
43:28
Speaker 6: the last year briefly earlier back in March, we saw
43:31
Speaker 6: it briefly in your day above thirty. But do we
43:34
Speaker 6: actually have to see the VIC spike higher in order
43:36
Speaker 6: to kind of have that capitulation type moment or do
43:38
Speaker 6: you think things are a little bit different. I mean,
43:40
Speaker 6: I don't want to say this time around because everyone says,
43:42
Speaker 6: don't say that.
43:43
Speaker 12: Sure, Sure, My personal opinion is that I think if
43:46
Speaker 12: the VIX can get back above eighteen, you'll start to
43:48
Speaker 12: see some more people get a little bit more interested
43:50
Speaker 12: in hedging. It's kind of an inverse relationship. Sometimes you
43:55
Speaker 12: would think that at these levels, right, you see the
43:57
Speaker 12: hedgers coming because it's a cheaper way to do it.
43:59
Speaker 12: But I think they're way for maybe that signal, that
44:01
Speaker 12: signal that hey, we finally got above this eighteen level,
44:03
Speaker 12: which we've had a hard time getting above from a
44:05
Speaker 12: resistance standpoint. You get above that level, that shows us
44:08
Speaker 12: there's some volatility back in the market, and that gives
44:11
Speaker 12: you the opportunity to kind of trade that volatility.
44:14
Speaker 1: Joe, you're based out in the West coast. I am,
44:16
Speaker 1: so you come all the way east. You get off
44:17
Speaker 1: the plane. I brought it, You brought this. I mean,
44:20
Speaker 1: you guys are kind of used to this.
44:22
Speaker 3: Every once in a while.
44:22
Speaker 12: We get it every three years, Paul.
44:24
Speaker 3: Yeah, and this is new to us.
44:25
Speaker 6: This, this is brand new dealing with something I haven't seen.
44:29
Speaker 6: We don't see this in Texas either.
44:30
Speaker 12: No, and remember we pay up for this stuff too, right,
44:33
Speaker 12: So yeah, talk about implied volatility?
44:36
Speaker 1: Oky, real quick, third thirty seconds you're on this, Penelty.
44:38
Speaker 1: What are you guys focusing on on this panel?
44:39
Speaker 12: Yeah, basically we're going to look at how retail and
44:41
Speaker 12: then institutional investors use options as a way to enhance
44:45
Speaker 12: income and then also kind of hedge portfolios.
44:47
Speaker 6: Alex and Manova on my team is actually moderating that panel,
44:50
Speaker 6: so everyone should tune into that.
44:51
Speaker 1: Yeah, check out that out and again, you know, we'll
44:52
Speaker 1: just plug that again because I mean, there's a lot
44:55
Speaker 1: of smart people here in Eternal. Customers can watch and
44:57
Speaker 1: listen live to our Bloomberg invest efforts on Live Go.
45:01
Speaker 1: You can also check out highlights from the Bloomberg invest
45:04
Speaker 1: conference on your Bloomberg Talks podcast feed, available anywhere you
45:08
Speaker 1: get your podcasts.
45:10
Speaker 8: You're listening to the tape. Cat's are live program Bloomberg
45:13
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
45:16
Speaker 8: tune in app Bloomberg dot Com and the Bloomberg Business app.
45:20
Speaker 8: You can also listen live on Amazon Alexa from our
45:22
Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
45:29
Speaker 1: We got some just awesome people kind of walking through
45:31
Speaker 1: here for the Bloomberg invest conference, and we grabbed another one. Yes,
45:34
Speaker 1: Mike Rogers, retired four star admiral for the US Navy.
45:38
Speaker 1: Also a proud Auburn.
45:40
Speaker 5: Tiger or Eagle baby.
45:43
Speaker 3: All right, Admiral, thanks so much for joining us here.
45:46
Speaker 3: I want to talk about Ukraine.
45:48
Speaker 1: Is there any credible military officer that could have gone
45:52
Speaker 1: up to mister Putin, you know, a year ago, and said, oh,
45:55
Speaker 1: we can do this easy. We're just gonna waltz right
45:57
Speaker 1: into KEIV, just give us a week. Is there any
46:00
Speaker 1: credible officer that could have done that in good conscience?
46:03
Speaker 5: Well, look, I'm not on the inside of the Russian
46:05
Speaker 5: military closer than we are now.
46:08
Speaker 13: Clearly, both his military and Putin himself. I think Miskale
46:12
Speaker 13: miscalculated in two important dimensions. Number One, they overestimated their
46:15
Speaker 13: own capabilities, but perhaps most importantly, they grossly underestimated Ukraine's capacity,
46:21
Speaker 13: but also their will. Yeah, I think their view was
46:24
Speaker 13: will penetrate the border. We'll move in very visible presence.
46:27
Speaker 13: We will awe them, shock them, Hey, they will just wilt.
46:30
Speaker 13: That clearly has not happened. And we're sixteen months now
46:33
Speaker 13: into a conflict that most people thought was two days.
46:35
Speaker 5: Or going to be two weeks or less.
46:37
Speaker 6: Talk to about this latest counter offensive in Ukraine, obviously
46:41
Speaker 6: to ows the Russian military.
46:43
Speaker 13: So you have seen Ukraine assimilate or acquire a set
46:47
Speaker 13: of new weapons, new capabilities. They've spent several months training
46:50
Speaker 13: on those, integrating them into the Ukrainian military. Now we'll
46:54
Speaker 13: see how they apply them, if you will, in an
46:56
Speaker 13: offensive on the battlefield.
46:57
Speaker 5: It's likely to start the very immediate near term.
47:01
Speaker 13: That the situation with the dam perhaps has complicated some
47:04
Speaker 13: things from the planning perspective and certainly from a humanitarian
47:08
Speaker 13: most importantly from humanitarian perspective.
47:10
Speaker 5: But we'll see. The challenge to me is I could
47:14
Speaker 5: well be wrong, but.
47:15
Speaker 13: My sense sixteen months into this conflict is that neither
47:18
Speaker 13: side has enough military capacity to deliver a knock up blow.
47:22
Speaker 13: Defining a knock up blow is either, in the case
47:25
Speaker 13: of Ukraine, driving the Russians totally out of Ukrainian territory
47:28
Speaker 13: to include Crimea, which is the Ukrainian stated political objective
47:31
Speaker 13: here or on the case of the Russians being able
47:35
Speaker 13: to not only sustain their current holdings, but quite frankly,
47:38
Speaker 13: you can see they've kind of given up on the
47:40
Speaker 13: offensive from a significant perspective. They're into incremental gains of
47:44
Speaker 13: where they are very different dynamic than sixteen months ago.
47:47
Speaker 13: But the sad thing is because neither side seems to
47:49
Speaker 13: have the ability to generate overwhelming advantage, that means to
47:54
Speaker 13: me is a high likelihood this conflict continues for some
47:57
Speaker 13: significant period of time. I define that is, hey, I
48:00
Speaker 13: don't think this is going to end by the end
48:02
Speaker 13: of the years, is, of example, six months.
48:04
Speaker 6: From it, So the timetable much longer than we could
48:06
Speaker 6: just catch I suspected.
48:08
Speaker 5: Now I hope I'm wrong. I always remind people.
48:10
Speaker 13: Look, if you study history, conflicts, generally in under three
48:13
Speaker 13: scenarios or some combinations these three, one side manages to
48:17
Speaker 13: achieve a significant kind of battlefield advantage, and either the
48:21
Speaker 13: one that's on the wrong end of that says, hey,
48:23
Speaker 13: we need to stop this because they're kicking our butt
48:25
Speaker 13: on the battlefield. The second is political pressure on the
48:29
Speaker 13: primary belligerents Russia or Ukraine gets to the point where
48:32
Speaker 13: they feel, look politically, our population, the domestic pressures, we
48:35
Speaker 13: need to stop this. Neither of these nations, Russia or
48:38
Speaker 13: Ukraine is currently under any domestic pressure internally, any meaningful
48:44
Speaker 13: pressure to stop this. And the third scenario, if you
48:47
Speaker 13: look at history, some outside party historically it might have
48:51
Speaker 13: been the United Nations, It might have been a nation
48:53
Speaker 13: that is supplying the primary con combatants Russia Ukraine with
48:58
Speaker 13: arms or capabilities. In this scenario, that would be China
49:00
Speaker 13: for Russia, US EU, NATO for Ukraine. None of those
49:04
Speaker 13: outside parties right now are applying pressure really on the
49:07
Speaker 13: combatants to stop this. So it leads me to believe
49:10
Speaker 13: unless one of those three dynamics change, and it doesn't
49:12
Speaker 13: look like they're going to change in the air interim,
49:14
Speaker 13: we're likely to see this protracted kind of conflicts.
49:18
Speaker 1: Sadly, how decisive, if at all, will be the introduction
49:22
Speaker 1: of fix wing aircraft that you know American F sixteens
49:26
Speaker 1: to the Ukrainians.
49:28
Speaker 5: Right, Look, will it provide additional capacity and capability? Yes?
49:32
Speaker 13: Is it in and of itself likely to lead to
49:34
Speaker 13: something that is so destabilizing it it helps lead Ukraine's
49:39
Speaker 13: ability to.
49:39
Speaker 5: Drive the Russians out. I doubt it.
49:42
Speaker 13: I think we're in the situation where there's no one
49:45
Speaker 13: particular weapons system or technology that if the Ukraine, if
49:50
Speaker 13: Ukraine had it, it would end the conflict.
49:52
Speaker 5: I just don't see it that way.
49:53
Speaker 13: It's their ability to bring together multiple kind of capacities.
49:56
Speaker 13: Remember among the things they've been asking for that the
49:58
Speaker 13: US has said, Hey, look, we're little concerned about this,
50:01
Speaker 13: that could be destabilizing. They have talked for a long
50:03
Speaker 13: time now about get US weapons that allow us to
50:05
Speaker 13: project to actually to deliver firepower, destructive capability deeper into Russia.
50:11
Speaker 5: Hey, look, if we want to drive them out of Ukraine, we.
50:14
Speaker 13: Need to go after the infrastructure that they're using in
50:16
Speaker 13: Russia itself to support them. And we also potentially need
50:18
Speaker 13: to look at how might we break the will of
50:20
Speaker 13: the Russian public here, much like you see the Russians
50:23
Speaker 13: doing with the airstrikes, cruise missiles, et cetera, into Kievan
50:27
Speaker 13: other cities within Ukraine.
50:29
Speaker 6: Vladimir putin what are you watching for? When it comes
50:31
Speaker 6: to the risks of what he could potentially do. Obviously
50:34
Speaker 6: a lot of unknownes there.
50:36
Speaker 13: Look, he can always opt to escalate. Escalate either in intensity,
50:41
Speaker 13: apply a lot more resources. He could choose to escalate
50:45
Speaker 13: in terms of expanding this geographically. Hey, this conflict if
50:48
Speaker 13: you will, and moves beyond just Ukraine. He could potentially
50:53
Speaker 13: expand this into other domains, think about cyber think about space.
50:56
Speaker 5: I think where we are right now.
50:58
Speaker 13: I think Putin has come to the conclusion expanding this
51:01
Speaker 13: significantly is probably not in their best interest. So they've
51:04
Speaker 13: tended to be a little bit more measured outside of
51:06
Speaker 13: the specifics of the ground kind of conflict that we're
51:09
Speaker 13: seeing and the strikes and other things. I in no
51:12
Speaker 13: way I am trying to minimize that. And for the
51:13
Speaker 13: men and women in Ukraine, Wow, this is imagine living
51:16
Speaker 13: in a society where.
51:18
Speaker 5: You've got missile strikes every night.
51:20
Speaker 13: Now you're starting to see a couple during the day
51:22
Speaker 13: where infrastructure like dams, power generation, you know, are being destroyed,
51:27
Speaker 13: where your transportation infrastructure is a target, and where there's
51:30
Speaker 13: just random missile strikes, random weapons being fired into key
51:35
Speaker 13: even other places where you just don't know what's going
51:38
Speaker 13: to happen in a typical day. That is not Boy,
51:42
Speaker 13: that's a painful experience. I wouldn't want anybody to do.
51:45
Speaker 1: Is there any reasonable scenario strategy that the Ukrainians could
51:49
Speaker 1: undertake where they could in fact achieve all the military
51:53
Speaker 1: games push Russia out of all that? I mean, is
51:57
Speaker 1: there any reasonable way they could do that?
52:00
Speaker 13: Look, I think that that's a tough challenge, given the
52:02
Speaker 13: current level of resources they have, given the fact that
52:05
Speaker 13: quite frankly, remember that there's also pressure on them in
52:08
Speaker 13: some ways, with nations saying look, we want to support you,
52:11
Speaker 13: but we don't want this to escalate, don't want this
52:14
Speaker 13: to become broader.
52:15
Speaker 5: Because of that, Ukraine is in some ways trying to
52:18
Speaker 5: walk a fine line here. It clearly wants to.
52:20
Speaker 13: Achieve its stated objective of driving the Russian forces out
52:23
Speaker 13: of Ukraine and territory. On the other hand, it is
52:25
Speaker 13: mindful that its primary backers are also telling it we
52:29
Speaker 13: got to do this in a way that doesn't create
52:31
Speaker 13: a worse situation that broadens it.
52:33
Speaker 5: That's not an insignificant challenge. If you're in Keiev, I suspect.
52:36
Speaker 6: We only have about forty second we know here we go.
52:40
Speaker 6: What is the next immediate thing that you're keeping your
52:42
Speaker 6: eye on when it comes to all of is unfolding.
52:45
Speaker 13: Number one, to these new weapons that Ukraine is receiving.
52:48
Speaker 13: Think about some of the tanks, think about some of
52:50
Speaker 13: the armored vehicles, think about aircraft. Does that change the dynamic?
52:54
Speaker 5: Number one?
52:54
Speaker 13: Number two, do you see any weakening in the political
52:58
Speaker 13: cohesion in the West commitment to Hey, we're going to
53:01
Speaker 13: keep these sanctions on? Number three, the current sanctions clearly
53:04
Speaker 13: haven't achieved the desired effect. Not saying they don't have impact,
53:07
Speaker 13: but that the desired intent was, Hey, look, this is
53:09
Speaker 13: going to create enough pain that Putin's gonna side he
53:11
Speaker 13: wants to leave. Do we see additional sanctions coming on?
53:13
Speaker 13: And the last thing that I would be looking for,
53:16
Speaker 13: are there any indications of increased internal pressure for Putin.
53:21
Speaker 5: Or indications that Putin has come to the conclusion.
53:24
Speaker 13: That the situation is starting to destabilize, Because remember, the
53:27
Speaker 13: biggest thing I think in the back of his mind
53:29
Speaker 13: is this idea of regime change.
53:31
Speaker 5: Hey, is somehow he under pressure to be removed?
53:34
Speaker 14: All right?
53:34
Speaker 1: Admiral Mike Rogers, thanks so much for joining US four
53:37
Speaker 1: star Admiral US Naval. We appreciate getting your insights.
53:39
Speaker 8: You're listening to the tape cans are live program Bloomberg
53:43
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53:46
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53:50
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53:58
Speaker 1: All right, let's talk about the economy here. You know
54:01
Speaker 1: a lot of cross currents out there. We had job
54:03
Speaker 1: schemes came in a.
54:04
Speaker 3: Little bit higher. But we want to talk to the economy.
54:06
Speaker 1: Our go to voice such a go to go to voices, Annawang,
54:10
Speaker 1: chief FiOS Economists with Bloomberg Economists, way over educated.
54:13
Speaker 3: I won't even go into the whole thing, but we
54:15
Speaker 3: get the benefit of it here.
54:16
Speaker 1: So and what are the key things you're looking for
54:20
Speaker 1: here to cage where this economy is going to go
54:22
Speaker 1: over the next six to twelve months.
54:24
Speaker 3: Where should we be focusing our time?
54:25
Speaker 14: Yeah, we actually just published a piece on the Terminal
54:28
Speaker 14: yesterday about showing that Greenspan's two favorite economic indicators, railcar
54:34
Speaker 14: loadings and car boxes shipments, actually showed a significant plunge
54:40
Speaker 14: in in orders in demand and in fact, the railcar
54:45
Speaker 14: loadings plunged by sixteen percent on the three months moving average,
54:50
Speaker 14: and that is the lowest since two thousand and nine September.
54:54
Speaker 14: So I would say that these leading indicators, because seriously,
54:57
Speaker 14: these two are the the you know, utmost leading indicators
55:01
Speaker 14: out of everything that we see is flagging quite a
55:04
Speaker 14: serious softening ahead.
55:06
Speaker 6: People were taking a close side. Obviously it's Thursday we
55:08
Speaker 6: get the initial jobless claims readings. We did see it
55:11
Speaker 6: above two hundred and sixty thousand, rising to the heights
55:13
Speaker 6: in October of twenty twenty one. When it comes to
55:15
Speaker 6: some of these labor datas, is that sort of the
55:17
Speaker 6: last shoot to drop? Is that more obviously a lagging indicator,
55:21
Speaker 6: And if so, where do you rather look to get
55:23
Speaker 6: more of a headway as far as this is what
55:25
Speaker 6: the economy is telling us at this point.
55:26
Speaker 14: Yeah, So the labor market certainly is.
55:29
Speaker 7: The laggiest, the last drop with all the degrees, and
55:37
Speaker 7: if you.
55:38
Speaker 14: Plug it into a fancy econometric model, it will show
55:42
Speaker 14: that the lags of the feed's monetary policy is actually
55:45
Speaker 14: the longest for a labor market. It takes about twenty
55:48
Speaker 14: four months.
55:49
Speaker 3: For it to hit.
55:51
Speaker 6: So I could still see another possibly close to twelve months.
55:54
Speaker 7: It's just very slow.
55:55
Speaker 14: However, it is the most important one because if people
55:58
Speaker 14: don't have income, then they will reduce spending. So once
56:01
Speaker 14: this hit, the shoe is very like big, it really
56:04
Speaker 14: hits the economy. So in terms of today, I think
56:07
Speaker 14: there was a lot of chatter about how to take
56:10
Speaker 14: whether to take the jobless claims jump seriously, that we
56:13
Speaker 14: have been burned by the Massachusetts fraud. But I think
56:17
Speaker 14: there's a good reason to take this seriously because the
56:20
Speaker 14: jump is coming from Ohio. And I was just as
56:23
Speaker 14: I just mentioned, Greenspan's favorite indicator is railcar loadings, and
56:28
Speaker 14: Ohio is actually an intermodal node in the United States,
56:32
Speaker 14: and it's consistent within the Baise book. The Cleveland District
56:35
Speaker 14: in Ohio reported a freight recession.
56:38
Speaker 7: So that's there's a probable.
56:40
Speaker 14: Cost to to why this jobless claim jumped.
56:43
Speaker 1: Bloomberg Economics, what's the recession call coming out of your your.
56:48
Speaker 14: Folks, we are we have been at Q three recession
56:51
Speaker 14: this year for a year, and we haven't changed because
56:54
Speaker 14: you've got.
56:55
Speaker 6: This she's got this model thing amazing because the ECFC
56:58
Speaker 6: function of the terminal, it's all as you know, all
57:01
Speaker 6: of these things. It's always all over the place. If
57:02
Speaker 6: you look quarter over quarter, there's just slight contraction five
57:07
Speaker 6: tens of a percent for the third quarter, four tens
57:09
Speaker 6: of a percent for the fourth quarter. But if you
57:11
Speaker 6: look yearly, not there. It seems like coming into this year,
57:14
Speaker 6: as you know, everybody was expecting some sort of downturn.
57:17
Speaker 6: Is this possibly maybe we just see more of a
57:20
Speaker 6: slower low growth environment than sort of this recession that
57:22
Speaker 6: everyone is trying to predict.
57:24
Speaker 14: I think at this point, whether there's a recession or not,
57:27
Speaker 14: it's not very important for investors because it's so highly anticipated.
57:31
Speaker 14: It's it's really whether this will be longer this even
57:35
Speaker 14: if it's a slow growth, but it's not a recession,
57:38
Speaker 14: but if it persists for three or four years, it's
57:40
Speaker 14: a problem, right, And if it turns out to be
57:43
Speaker 14: a deep plunge, if the green span indicators it's representative
57:47
Speaker 14: of the wider economy, which I don't think it is.
57:49
Speaker 14: I mean, it's mostly focused on goods. But if it is,
57:52
Speaker 14: then it's going to be a deep, deep recession. And
57:55
Speaker 14: some market participants are indeed pricing in a deep recession,
57:59
Speaker 14: like the bonds, bonds, fixed income traders. If you look
58:03
Speaker 14: at the distribution of bets on the FED rate hikes,
58:08
Speaker 14: it's really bimoldal You have one camp that's seeing like
58:10
Speaker 14: significant and deep recession, there's another camp that sees no lending,
58:14
Speaker 14: and we're sort of in the middle. So so yeah,
58:17
Speaker 14: I think what's important is whether there's a drawn out
58:20
Speaker 14: low growth period because the FED had to keep rates
58:23
Speaker 14: higher for longer, or whether there's a really really deep plunge.
58:27
Speaker 3: A deep plunge when I got everybody who's got a
58:29
Speaker 3: job has a job.
58:30
Speaker 6: Consumer spending too, those numbers, what is that telling us
58:33
Speaker 6: at this point?
58:34
Speaker 14: Well, I think the consumer spending did experience a little
58:37
Speaker 14: bit of a renaissance in January and February.
58:39
Speaker 7: But let me go back to Green Spans.
58:45
Speaker 14: Indicator is saying that there's a significant plunge since.
58:48
Speaker 6: The SVB collapse.
58:49
Speaker 14: So I think a lot of this tightening and lags
58:52
Speaker 14: to monetary policy. There is a basis for that, like
58:56
Speaker 14: auto loans default. Right, you're we are now hearing more
58:59
Speaker 14: murmur ofault. These people are paying over ten percent for car,
59:03
Speaker 14: they're monthly payments over a thousand dollars.
59:05
Speaker 6: They just have their monthly credit data.
59:07
Speaker 8: I believe this.
59:08
Speaker 14: That's right, And the lacks of monetary policy is also
59:12
Speaker 14: pretty long for the credit channel, which is through bank tightening.
59:17
Speaker 14: Banks with draw on credit because the credit risk is
59:20
Speaker 14: getting worse as the economy goes into a slow growth period.
59:24
Speaker 14: So to your point, if there's no recession, but we
59:26
Speaker 14: have very slow growth for for or four years, default
59:29
Speaker 14: rates will rise and that's where the tightening, the credit
59:33
Speaker 14: tightening on the economy will feed on each other and
59:38
Speaker 14: generate more downward pressure on all.
59:40
Speaker 1: Right, A lot of folks will say the FED was
59:41
Speaker 1: late to the party and now they're late to leave
59:45
Speaker 1: in terms of cutting rates. Do you think that's the case?
59:47
Speaker 1: Have they gone too far? Is keeping rates this level
59:51
Speaker 1: too long a real risk problem?
59:53
Speaker 14: I guess my view on this has been very clear.
59:56
Speaker 14: I think the risk for them is under tightening. Okay,
1:00:00
Speaker 14: k For I think the data in the next two
1:00:02
Speaker 14: months might might seem to contradict my view because I
1:00:06
Speaker 14: think the CPI data could fall to three percent by
1:00:10
Speaker 14: in the June report.
1:00:11
Speaker 6: So when we get they're reading next Tuesday, right, it's.
1:00:13
Speaker 14: Gonna drop precipitously because of a negative based effect. So
1:00:18
Speaker 14: by their July meeting at the FOMC, they will have
1:00:20
Speaker 14: in their hand a June CPI report with your over
1:00:23
Speaker 14: year headline of almost three percent. So at that point
1:00:26
Speaker 14: I think a lot of people in the market will
1:00:28
Speaker 14: be like, the Fed is done and shouldn't.
1:00:34
Speaker 3: This all right? Eawan, Thank you so much for joining us.
1:00:36
Speaker 3: Appreciate getting great thoughts as always. Yep, as always.
1:00:40
Speaker 1: Uh getting her hair on site in the Bloomberg Interactive
1:00:43
Speaker 1: Brokers studio which has been out moved up to the
1:00:45
Speaker 1: sixth floor.
1:00:46
Speaker 3: By all the link Yeah, by all the foods. We
1:00:48
Speaker 3: appreciate that. The Bloomberg invest Conference.
1:00:54
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