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Boeing Names New CEO, Fed Meeting · Bloomberg Intelligence

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Speaker 2: They cover two thousand companies and one hundred and thirty
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Speaker 2: industries worldwide. And one of them that I bug all
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Speaker 2: the time is George Ferguson Bloomberg Intelligence Senior Aerospace, Defense
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Speaker 2: and Airlines analysts. I stalked him yesterday over Airbus because
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Speaker 2: we have a CEO on TV and I was like, George,
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Speaker 2: I need more questions than just Hey, what's up with space?
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Speaker 2: What's up with Boeing is now the better question for today.
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Speaker 2: So Boeing now appointing Kelly Ortberg as its new chief
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Speaker 2: executive officer of the stock is up by about three
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Speaker 2: and a half percent. He is a retired veteran of
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Speaker 2: the aviation industry. He is an engineer by training. Is
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Speaker 2: this the guy that Boeing needs, George?
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Speaker 3: Is he?
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Speaker 1: Not?
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Speaker 4: So sure? I think it's the guy that Boeing needs
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Speaker 4: for a small period of time, right because he was
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Speaker 4: already retired, right, he has you know, he's a great
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Speaker 4: career in aerospace working at Colins, help him put Collins
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Speaker 4: into RTX, I mean, a great experience. He's sixty four,
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Speaker 4: So my guess is he doesn't have a lot of
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Speaker 4: runway to work at Boeing. I think it'd have been
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Speaker 4: nicer to see a CEO that could have put I
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Speaker 4: don't know, five seven, ten years into Boeing. But look,
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Speaker 4: I think the job is very difficult, and so I
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Speaker 4: think it's going to take a lot out of the
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Speaker 4: next CEO. And so maybe this is an interim as
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Speaker 4: they continue to develop internal candidates for the job. Maybe
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Speaker 4: it's very pretty difficult to recruit somebody into this job
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Speaker 4: right now. Could be an interim because of that as well.
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Speaker 4: So again, you know, the strong aerospace background at the
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Speaker 4: component at the you know, parts maker level, but doesn't
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Speaker 4: look like someone's going to be around for the next
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Speaker 4: five seven years, all.
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Speaker 5: Right, George, All right, So that's the CEO, how about
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Speaker 5: on the fundamentals here and looking at the second quarter
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Speaker 5: negative adjusted free cash slow four point three billion dollars.
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Speaker 5: You can't like that. Talk to us about kind of
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Speaker 5: the cash flow, that dynamics and what they need to do.
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Speaker 4: So we kind of expected that four point three billion
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Speaker 4: dollars to be Really honest, I'm not totally sure why
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Speaker 4: the stock is up. I don't think it's Kelly because
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Speaker 4: Kelly News started the day out and bowing an anchors
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Speaker 4: up about one so post earnings were up. You know
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Speaker 4: we've done this pop. I mean, you know, we heard
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Speaker 4: from CFO Brian West during the call. He told us
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Speaker 4: Burn was going to be pretty strong in three Q two,
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Speaker 4: and then some the analysts tried to box him in
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Speaker 4: on what Burn was going to be for the year.
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Speaker 4: One said would be closer to five billion or ten billion.
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Speaker 4: He said he was, and I think his quote somebody,
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Speaker 4: I'm not smart enough to tell you at this time.
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Speaker 4: So there's just a lot of variability right now. Look,
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Speaker 4: Boeing has to keep taking inventory, taking ship sets from
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Speaker 4: their supplier base to keep their supplier base in business
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Speaker 4: while they ramp up builds. And they had some good
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Speaker 4: commentaries and builds. They talked about the factory kind of
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Speaker 4: putting out twenty ish I think was the number, and
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Speaker 4: I think total deliveries in the thirty ish range for
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Speaker 4: seven thirty sevens rising to thirty eight shutting down those
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Speaker 4: shadow factories. It's the factories that they have, the inventoried airplanes,
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Speaker 4: a lot of seven three sevens, some seven eight sevens
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Speaker 4: in shutting them down by the end of the year.
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Speaker 4: That was I think great commentary. You know, we got
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Speaker 4: to the commentary about what's going to go on with
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Speaker 4: the union negotiations. Those are coming up in September. Dave
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Speaker 4: Calhoun kind of told us he I think wasn't totally
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Speaker 4: focused on that right now, or didn't have couldn't give
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Speaker 4: us puts and takes there. That's incredibly important. Right, So
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Speaker 4: if we get into a situation where the union shuts
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Speaker 4: this company down in September, the cash burn this year
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Speaker 4: looks looks horrible. Their back going to capital markets looking
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Speaker 4: for a bond raise, which I think everybody on the
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Speaker 4: bond side is scared to death about because they don't
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Speaker 4: want to see a fall to investment grade. Or they're
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Speaker 4: going to the equity side, which the equity guys don't
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Speaker 4: want to hear about, right, is there? That's called that's dilution,
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Speaker 4: you know, so I think again. Commentary was good around
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Speaker 4: deliveries and things like that, but a lot of variability coming,
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Speaker 4: you know here around this cash flow burn and it's
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Speaker 4: super important.
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Speaker 6: All right. George, thanks so much for joining us. We
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Speaker 6: appreciate it as always.
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Speaker 5: George Ferguson, Senior Aerospace, Defense and Airlines Anols Bloomberg Intelligence
4:44
Speaker 5: from Princeton, New Jersey.
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Speaker 2: So it's fed day. Everyone's pumped for it. What is
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Speaker 2: Ja Powell gonna say? Are they going to signal September?
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Speaker 2: What is it gonna look like? We're gonna break it
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Speaker 2: all down? For you with Danielle de Martino, Booth's CEO
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Speaker 2: and chief strategist for QI Research. She joins us in
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Speaker 2: the radio studio right now, all right, Danielle, what do
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Speaker 2: you think?
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Speaker 3: Like, what are we gonna get?
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Speaker 7: I think we're gonna I'm actually gonna go with Anna
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Speaker 7: Wong's kind of take on where this is gonna go.
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Speaker 7: She and I are thinking in a similar act. We
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Speaker 7: get to meet in person tonight. But I think he's
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Speaker 7: still going to couch his dubbishness. I think he's going
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Speaker 7: to signal September. But I think he's gonna signal September softly.
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Speaker 3: What does that mean? Is he gonna whisper it?
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Speaker 5: Like?
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Speaker 3: What is that He's.
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Speaker 7: Still going to say that they're data dependent. He's still
5:56
Speaker 7: going to say that there is the chance that there
5:59
Speaker 7: is a reacceleration in the CPI in inflation metrics, base
6:04
Speaker 7: effects kick in in the second half of this year.
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Speaker 7: That make it a little bit harder to see continued
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Speaker 7: declines in the inflation. On the other hand, you know,
6:14
Speaker 7: looking at real time inflation metrics, a bunch of bond
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Speaker 7: traders a long time ago introduce me to true inflation
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Speaker 7: TRU and that hit one point five one percent today,
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Speaker 7: the lowest reading that we've had in the post pandemic era.
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Speaker 7: They gave me the raw data back to twenty twelve.
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Speaker 7: It's got a zero point ninety seven correlation with headline CPI.
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Speaker 7: We see where this is going to me at least.
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Speaker 7: I think the greatest risk, because there's this huge seven
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Speaker 7: week gulf in between today's meeting and September eighteenth, is
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Speaker 7: that there's a policy err in the making.
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Speaker 5: So you say the highest odds is that there is
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Speaker 5: a policy error. Is that another way of saying the
6:51
Speaker 5: fits behind the curve They should have already been cutting.
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Speaker 7: I think that's what we're saying. I think that that's
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Speaker 7: what ADP is saying. I think that's what the Employment
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Speaker 7: Cost Index, the Fed's preferred measure of wage inflation, is saying,
7:03
Speaker 7: we saw a big step down there. Intel Match, nerd Wallet.
7:09
Speaker 7: Those are the three job cuts that were announced yesterday.
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Speaker 7: It seems as if most companies, when they're announcing earnings
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Speaker 7: are continuing to say until we see stronger revenue growth,
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Speaker 7: we're going to keep cutting headcount. So that's disinflationary.
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Speaker 2: So because you're here, I get ibs from people who
7:30
Speaker 2: are listening to the show, Thank you so much, so well.
7:34
Speaker 2: One of the questions is, and it goes back to
7:35
Speaker 2: the bomb market and we're obviously seeing some steady buying
7:38
Speaker 2: come in, particularly in the back end. Where do you
7:41
Speaker 2: think we end the year when it comes to the tenure?
7:43
Speaker 2: If we're treading right now at four point nine, we're
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Speaker 2: below all the moving averages, like we've had a healthy
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Speaker 2: move to the downside a yields.
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Speaker 7: We have, And we saw kind of this resistance at
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Speaker 7: four point one four in the tenure for some time,
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Speaker 7: and now we've broken below that and I think that
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Speaker 7: it's it's not a stretch to sit that there's going
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Speaker 7: to be a three handle. The question is is the
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Speaker 7: year end south of three point five percent on the tenure?
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Speaker 7: And again it's going to be a gauge of the
8:09
Speaker 7: magnitude of the Fed's policy error. If they have to
8:13
Speaker 7: come rushing in in September with a half percentage point
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Speaker 7: rate cut, that could easily spook the markets.
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Speaker 5: So what does the FED do when they start, So
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Speaker 5: let's still say they did they start in September, then
8:27
Speaker 5: what did they do they do it every other That's.
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Speaker 7: A great question because we saw these kind of unusual pauses.
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Speaker 3: It's not normal to.
8:34
Speaker 7: See pauses in a hiking or a cutting cycle, at
8:38
Speaker 7: least in FED history.
8:39
Speaker 6: Of course we're seeing it.
8:40
Speaker 7: In other parts of the world. But history tells us
8:43
Speaker 7: that once the Fed gets going, they keep going. And
8:46
Speaker 7: that means two days after election. Right, the November FMC
8:49
Speaker 7: is highly unusual. It's a Wednesday Thursday meeting, so that
8:52
Speaker 7: they're not meeting on Tuesday.
8:54
Speaker 8: Election day.
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Speaker 7: But it's very feasible that we see another rate cut
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Speaker 7: two days after the election.
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Speaker 3: What happens to the curve?
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Speaker 6: I we will.
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Speaker 7: Certainly it will be interesting to see if the curve
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Speaker 7: does not fully uninvert before the FED cuts rates, which
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Speaker 7: would be again unusual.
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Speaker 3: But we don't normally talk about rates are coming down.
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Speaker 7: Uh, it would be because they're all coming down.
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Speaker 2: Everything's coming down with the fronts coming down fast. Indeed,
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Speaker 2: even though it still had it's had a pretty chunky
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Speaker 2: move to begin with.
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Speaker 3: But still but.
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Speaker 7: Again, if you start to factor in, I remember when
9:28
Speaker 7: they were raising rates that Powell said unusually large rate hikes.
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Speaker 7: That like took me back to the Princess Bride rodents
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Speaker 7: of unusually large size. But it'll be interesting to see
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Speaker 7: if we have unusually large rate cuts.
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Speaker 5: All right, Danielle, you did some time at the Dallas FED,
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Speaker 5: and I'm looking at.
9:44
Speaker 7: Something sounds like I did like time at an instag time.
9:48
Speaker 6: And now you're free.
9:50
Speaker 5: You used to have something down there called the Dallas
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Speaker 5: FED Manufacturing Uncertainty Index.
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Speaker 6: That's pretty cool. What does it tell you? What are
9:57
Speaker 6: some of the recent data telling me?
9:58
Speaker 9: There?
9:58
Speaker 6: You always come up with data sets that.
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Speaker 7: I've never We are seeing unprecedented levels of uncertainty. Hats
10:06
Speaker 7: off to Emily Kerr and her team at the Dallas FED.
10:08
Speaker 7: They introduced kind of a National Association of Credit Manager's
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Speaker 7: Index type of question in their most recent survey that
10:15
Speaker 7: came out on Monday. People are not paying their bills.
10:18
Speaker 7: I mean companies are not paying their bills and accounts
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Speaker 7: receivable are being stretched out. So there these are kind
10:24
Speaker 7: of credit managers signs that hey, there's real distress and
10:29
Speaker 7: it's harder to get credit, which we've been hearing right
10:31
Speaker 7: from from smaller businesses especially.
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Speaker 2: Is it sector specific in what you're seeing or is
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Speaker 2: it just maybe like how big those companies are.
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Speaker 7: What was interesting about this, the introduction of these new
10:42
Speaker 7: types of questions is that they ask manufacturers, servicers, and retailers,
10:46
Speaker 7: and it was retailers that were seeing the greatest degree
10:49
Speaker 7: of distress.
10:50
Speaker 6: All right, So okay, remember.
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Speaker 7: This is the eighth largest economy in the world and
10:54
Speaker 7: the eighth largest exporting exporting nation in the world.
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Speaker 6: Texas a Texandalone, it is.
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Speaker 2: And then to that point, like there's a huge amount
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Speaker 2: of products that get shipped out, right.
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Speaker 7: Like that's why it's the largest exporting nation, larger than California.
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Speaker 3: Yeah, and it has a huge like medical department.
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Speaker 7: Like we we you know, twenty thirty years ago you
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Speaker 7: could say that we were an energy centric economy in Texas.
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Speaker 7: That's no longer the case, very diversified.
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Speaker 5: But you're staying with us, right the United States? You guys, Yes, okay, good,
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Speaker 5: There is checking everyone.
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Speaker 3: That's not their grid.
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Speaker 7: There is secession talk, you know, wants a republic, but
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Speaker 7: I think we're staying with the country.
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Speaker 2: Is that data set though at all distorted by hurricanes
11:37
Speaker 2: et cetera that you saw, No?
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Speaker 7: Actually actually no. And that was again what was so
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Speaker 7: fascinating was that it was so broad based across service,
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Speaker 7: across the service sector, across across the manufacturing sector, and
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Speaker 7: across the retail sector, and again that they do some
11:54
Speaker 7: really really good research as well, that that front runs
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Speaker 7: the Senior Loan Officer Survey on a national level, and
12:00
Speaker 7: that's also showing that it's very difficult to access credit
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Speaker 7: right now.
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Speaker 6: You believe we're actually in a recession? Is that correct?
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Speaker 10: I do?
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Speaker 7: I do, and Anna Wanta actually kind of agree. She
12:10
Speaker 7: also thinks that net job cuts began last October. What's
12:16
Speaker 7: fascinating is that when we got the revision out last
12:19
Speaker 7: week from the Buer of Labor Statistics, it's said, in
12:22
Speaker 7: its assumption about business deaths, we know what business births
12:26
Speaker 7: were with the birth death adjustment, we still have yet
12:29
Speaker 7: to have them report business debts. Their assumption was that
12:33
Speaker 7: small businesses became additive, that fewer small businesses died in
12:39
Speaker 7: the fourth quarter, when actually we saw small business closings
12:44
Speaker 7: rise appreciably from the third to the fourth quarter. The
12:47
Speaker 7: risk is the reason I'm going into these details. The
12:49
Speaker 7: risk is that we see a second quarter of negative
12:53
Speaker 7: of negativity in job creation, job net job losses. If
12:58
Speaker 7: you see that for six months, because the bearer of
13:00
Speaker 7: has already said we lost one hundred and ninety two
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Speaker 7: thousand jobs in the third quarter of twenty twenty three.
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Speaker 7: If that stretches to being six months in a row,
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Speaker 7: the National Bureau of Economic Research, the Business Cycle Dating Committee,
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Speaker 7: they're going to have a hard time saying six months
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Speaker 7: of job losses doesn't constitute recession.
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Speaker 2: So when we get the jobs number on Friday, how
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Speaker 2: do I look at that number then? Because obviously, like
13:21
Speaker 2: the headline print is going to be up right, but
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Speaker 2: you're saying that on a net basis, like what am I?
13:25
Speaker 3: What's not going out again?
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Speaker 7: I mean, Powell said it himself at the last FMC
13:30
Speaker 7: that payrolls are overstated. And if you get a number
13:34
Speaker 7: that was originally four hundred and ninety four thousand after
13:38
Speaker 7: the revisions that we hear from the BLS, but after
13:41
Speaker 7: the census comes in and gives us actual headcounts from companies,
13:43
Speaker 7: and that four hundred and ninety four with a plus
13:45
Speaker 7: sign in front of it turns into negative one hundred
13:47
Speaker 7: and ninety two thousand. That's it's a significant amount of
13:52
Speaker 7: download divisions, which my mentor at the Dallas Fed told me,
13:55
Speaker 7: you always see at inflection points.
13:58
Speaker 6: How long do you think this recession will be?
14:00
Speaker 5: Because it feels like it's almost a bifurcated economy. A
14:03
Speaker 5: lot of folks will say, I'm not feeling anything.
14:05
Speaker 7: I know, we have a super I mean it's like
14:07
Speaker 7: super K Yes, super K shaped economy. Okay, I mean,
14:10
Speaker 7: think about how many people at the top of the
14:12
Speaker 7: k or feeling the benefits of having gotten five and
14:15
Speaker 7: a half percent on their cash for this long and
14:18
Speaker 7: yet we're hearing that inflation is becoming more problematic for
14:22
Speaker 7: the lower income earners. And what that is a sign
14:24
Speaker 7: up is again what we saw with the employment cost
14:26
Speaker 7: Index today. It's that wages are increasingly not keeping up
14:29
Speaker 7: with the cost of living.
14:30
Speaker 2: So it's not just the FED today, you know, most
14:33
Speaker 2: of the Fed. But we got the BOJ finally hiking rates. Indeed,
14:36
Speaker 2: the press are looking back to totally we get the
14:39
Speaker 2: BOE tomorrow.
14:40
Speaker 3: The ECB's already delivered one cut.
14:43
Speaker 2: Do you think that how do you think that cycle
14:46
Speaker 2: will all play out in terms of I mean, the
14:49
Speaker 2: majority of them are cutting, right, but they're gonna cut
14:51
Speaker 2: differently in a different times and the boj's hiking.
14:53
Speaker 3: Has this all play out?
14:55
Speaker 7: You know, it's interesting that you bring this up because
14:58
Speaker 7: there is so much disparity, right now across the pond,
15:02
Speaker 7: we unexpectedly saw Germany fall back into recession a few
15:04
Speaker 7: days ago. Nobody was expecting that. You know, they're the
15:07
Speaker 7: speaking of exporting nations, the other world's third largest export
15:11
Speaker 7: and it's a reflection of China exactly. So the breadth
15:15
Speaker 7: of the global recession. When you say, okay, Asia's in recession, Okay,
15:19
Speaker 7: Germany's in recession, Okay, the United States is in recession.
15:22
Speaker 7: That changes how aggressively each individual central bank can behave.
15:27
Speaker 7: And when the FED finally does go on September the eighteenth,
15:31
Speaker 7: then the rest of the world will end.
15:33
Speaker 6: Up falling in line. Daniel thank you so much for
15:35
Speaker 6: joining us. Really appreciate it.
15:36
Speaker 5: As always, Danielle di Martino Booth for a little bit
15:38
Speaker 5: extended period here on FED Day. She is the CEO
15:41
Speaker 5: and chief strategistic QI Research based in Dallas, Texas, but
15:45
Speaker 5: we got her here in our Bloomberg and nar Actor
15:47
Speaker 5: Brokers studio today. My stat was, you know, Texas eighth
15:50
Speaker 5: largest exporting and comment's pretty cool.
15:52
Speaker 3: Yeah, really really cool.
15:53
Speaker 2: And that's not even counting I mean, Louisiana also is
15:55
Speaker 2: exporting facilities, but that's not counting all the new facilities
15:58
Speaker 2: that trying and build too.
15:59
Speaker 3: In terms of exports and stuff. Obviously I'm talking Allen.
16:02
Speaker 2: G and oil exports. But still, oh, no surprise, sir Shacker.
16:04
Speaker 2: I know that's surprising to Paul's.
16:05
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Speaker 5: YouTube dot Com search Bloomberg Podcast and that's where you
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Speaker 5: will find us. All right, Kamala Harris has wiped out
16:34
Speaker 5: Donald Trump's lead across seven battleground states as the vice
16:37
Speaker 5: president rides a wave of enthusiasm young, young Black and
16:41
Speaker 5: Hispanic voters. That's according to the latest Bloomberg News Morning
16:45
Speaker 5: Console holds some pretty big news there for on the
16:47
Speaker 5: political front. Here, let's check you in with Lard Davison,
16:49
Speaker 5: Bloomberg Politics editor. She joins us here via zoom Laura.
16:53
Speaker 5: This seems like a pretty good start in terms of
16:56
Speaker 5: momentum for Vice President Kamala Harris.
16:59
Speaker 6: What are some of the key takeaways from this pole?
17:02
Speaker 10: Yeah, so this pole we've been doing since last October
17:05
Speaker 10: in all of the seven swing states that are expected
17:07
Speaker 10: to decide the election, and this is the best that
17:10
Speaker 10: the Democratic challenger to Trump has ever done.
17:13
Speaker 3: You know, this is the first time we.
17:14
Speaker 6: Have polled Harris.
17:15
Speaker 10: It's a statistical tie essentially between the two candidates. She's
17:18
Speaker 10: technically up one percentage point, but that's within the margin
17:21
Speaker 10: of air. The other key takeaway here is that black voters,
17:24
Speaker 10: young voters, Hispanic voters are much more likely to vote
17:28
Speaker 10: now that Harris is on the ticket. So this is,
17:30
Speaker 10: you know, been something that that the Trump campaign has
17:32
Speaker 10: created their strategy around of trying to get you know,
17:35
Speaker 10: pull away at the margins and black voters some Hispanic support.
17:38
Speaker 10: But this would indicate that perhaps the tides are shifting
17:40
Speaker 10: in Harris's favor on that front.
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Speaker 2: Well, that was sort of one of my questions too.
17:43
Speaker 2: Are these voters that are switching or are they new
17:46
Speaker 2: voters that are swinging these polls.
17:49
Speaker 10: So we don't yet know totally what that is based
17:52
Speaker 10: on how the poll works, but what we see is
17:54
Speaker 10: that voters who are unsure if they're going to vote,
17:56
Speaker 10: are now saying they're much more likely that they're going
17:58
Speaker 10: to vote. So these may be people who voted in
18:00
Speaker 10: twenty who were not enthused by either candidate, who are
18:03
Speaker 10: going to stay at home, or people who maybe have
18:04
Speaker 10: never voted. But you know, a turnout election is expected
18:09
Speaker 10: to help Harris on this front versus Trump. You know,
18:12
Speaker 10: the Trump folks were you know, sort of hoping to
18:14
Speaker 10: pull away, particularly black men, Hispanic men. But you know,
18:18
Speaker 10: we're not hoping to see a big surgeon turnout that
18:20
Speaker 10: you know, really helped Biden in twenty twenty and could
18:23
Speaker 10: potentially help Harris in twenty four.
18:25
Speaker 5: Or you know, as a former Wall Street person, I
18:28
Speaker 5: tend to follow the money. And Vice President Kamala Harris
18:32
Speaker 5: has had a pretty good run here in the last
18:34
Speaker 5: week or so raising money. Do we know where that
18:36
Speaker 5: money's coming from.
18:37
Speaker 10: Yeah, so, her campaign says they've raised about two hundred
18:40
Speaker 10: million dollars and that's in the first week or so
18:41
Speaker 10: of the campaign. This is largely from small dollar donors.
18:45
Speaker 10: These are people who are going and giving online and
18:47
Speaker 10: you know, increments of you know, anywhere from you know,
18:49
Speaker 10: just a couple of dollars to you know, up to
18:50
Speaker 10: a couple thousand dollars. We've also know that her super pac,
18:54
Speaker 10: this is the group that can accept money and unlimited amounts,
18:56
Speaker 10: has gotten one hundred and fifty million in commitments since
18:59
Speaker 10: By has dropped out of the race. These big dollar donors,
19:02
Speaker 10: people who give millions of dollars, had decided to withhold
19:05
Speaker 10: a bunch of contributions, you know, in order to sort
19:07
Speaker 10: of pressure Biden to get off of the ticket. So
19:10
Speaker 10: now that money is coming back into the fore just
19:12
Speaker 10: for you know, kind of some in comparison here of
19:14
Speaker 10: Harris when she inhibit inherited the Biden campaign accounts that
19:18
Speaker 10: had about one hundred million dollars. Since then, she's raised
19:20
Speaker 10: another two hundred million dollars. So these are really big sums.
19:23
Speaker 2: How much of this could be also attributed just to momentum,
19:25
Speaker 2: as in, when you have the RNC, the candidate gets
19:28
Speaker 2: a boost, the DNC provides a boost. This is an
19:31
Speaker 2: unprecedented moment in political history, so no doubt the candidate
19:35
Speaker 2: would get a boosted.
19:36
Speaker 10: Yes, and the timing year is all really interesting because
19:38
Speaker 10: of course Biden just dropped out two days after the RNC,
19:41
Speaker 10: So Trump was expecting to see a big polling boost
19:43
Speaker 10: coming out of that. Of course, just a week prior
19:45
Speaker 10: that had been the assassination attempt leaving the RNC. Republicans
19:48
Speaker 10: were very confident about their chances, and you know, even
19:51
Speaker 10: Republican operatives were saying one of the things they needed
19:53
Speaker 10: to be conscious of is that they weren't over confident.
19:56
Speaker 10: Of course, that all switched, you know, just a couple
19:58
Speaker 10: of days later. What the Trump team is saying is, look,
20:00
Speaker 10: this is a Harris honeymoon. This is a surgeon momentum
20:03
Speaker 10: that will just be a flash in the pan and
20:05
Speaker 10: won't last until November. That's really what what we'll be
20:08
Speaker 10: looking for in the next couple weeks. If you know,
20:09
Speaker 10: is she able to maintain both this fundraising edge as
20:12
Speaker 10: well as his polling edge, or do we revert to
20:14
Speaker 10: where you know, the Biden Trump race was just with
20:17
Speaker 10: Harris on the ticket in a couple of weeks.
20:19
Speaker 6: How about debates?
20:20
Speaker 5: Are Biden, I'm sorry, Kamala Harris and mister Trump are
20:24
Speaker 5: they get a debate?
20:24
Speaker 6: And if so, when and how many times?
20:27
Speaker 10: This is a really big question. So Trump and Biden
20:30
Speaker 10: had agreed to a second debate on September tenth, that
20:32
Speaker 10: was on ABC News. It's very unclear if that is
20:35
Speaker 10: going to happen. Harris has said she wants to do it.
20:37
Speaker 10: Trump has, you know, suggested that he probably will end
20:40
Speaker 10: up debating her, but has thrown a couple wrenches in
20:42
Speaker 10: the system. He says he doesn't really like ABC's called
20:44
Speaker 10: them fake news and said he'd prefer someone like Fox
20:46
Speaker 10: News to host debate. He's also said he doesn't need
20:49
Speaker 10: to debate because he's already well known and people knows
20:51
Speaker 10: what he stands for, and he doesn't, you know, feel
20:53
Speaker 10: a need to do this. This is going to be
20:55
Speaker 10: an ongoing negotiation. There's also the question of what there'll
20:57
Speaker 10: be a VP debate. Trump and Biden had all also
21:00
Speaker 10: agreed to do one, you know, before the switch up
21:02
Speaker 10: and the race. You know, Harris is still in the
21:04
Speaker 10: process of naming her VP, so we may hear more
21:06
Speaker 10: about that in the coming weeks.
21:08
Speaker 2: What do we make about the situation in Israel and
21:11
Speaker 2: how that polls, how that is polling for Kamala.
21:15
Speaker 3: Harris, because clearly there's a huge section.
21:18
Speaker 2: Of voters that is very unhappy of what's happening in
21:20
Speaker 2: Gaza right that we're maybe not voting in all for
21:23
Speaker 2: President Biden, but are they coming back in now?
21:27
Speaker 3: Do we know anything along those lines.
21:29
Speaker 6: Yeah, So, what this.
21:30
Speaker 10: Poll shows is that people who are very concerned about
21:32
Speaker 10: the Israel Gaza war, and particularly young voters for whom
21:35
Speaker 10: this is a bigger issue, are more likely to vote
21:37
Speaker 10: for Harris. She's taken a softer tone on this. She's
21:41
Speaker 10: been more sympathetic to the human humanitarian situation in Palestine,
21:44
Speaker 10: and is you know, just doesn't have quite the same
21:46
Speaker 10: negatives on this issue that Biden does.
21:48
Speaker 6: You know.
21:49
Speaker 10: One of the things, you know, particularly just with the
21:50
Speaker 10: you know, events of the of late of you know,
21:52
Speaker 10: kind of there being more unrest in the Middle East,
21:55
Speaker 10: is you know that the Biden administration is still pushing
21:58
Speaker 10: for a ceasefire. Harris is still pushing for a he's fire.
22:00
Speaker 10: Democrats really want this to be an issue that is
22:03
Speaker 10: working towards a resolution versus, you know, an issue that's
22:06
Speaker 10: flaring up, particularly as students go back to college campuses
22:08
Speaker 10: in a couple of weeks. They don't want to see
22:10
Speaker 10: the protests that we saw last spring.
22:12
Speaker 5: Did the Republicans have Buyer's remorse for JD Vance. I'm
22:15
Speaker 5: seeing some reporting all along those lines.
22:18
Speaker 10: Yes, there's there's a lot of conversations on that, even
22:20
Speaker 10: on a Bloomberg television mc mulvaney, who's a Trump ally,
22:22
Speaker 10: came on earlier this week and said, no, they're not
22:25
Speaker 10: looking to replace JD.
22:27
Speaker 3: Vance.
22:27
Speaker 10: But of course if you're being asked about this, this
22:29
Speaker 10: means that this is at least a conversation that is circulating.
22:32
Speaker 10: You know, Dvance has had a rough rollout, you know,
22:34
Speaker 10: just in about the you know, two weeks or so
22:36
Speaker 10: that he's been on the ticket. You know, some past
22:39
Speaker 10: comments he's made, you know, sort of degrading childless cat
22:43
Speaker 10: ladies have come up. He has had had some jokes
22:46
Speaker 10: on the campaign trail that have come across as crass
22:48
Speaker 10: and haven't really landed. So this is a conversation that's
22:51
Speaker 10: happening on the upon those sort of Republican you know, elite,
22:55
Speaker 10: the mainstream Republican class, but isn't really reaching the Trump campaign.
22:58
Speaker 10: They have continued to say JD is our guy and
23:00
Speaker 10: we're going to stick by him.
23:02
Speaker 2: Is there an equivalent for single cat ladies for single men?
23:06
Speaker 7: Like?
23:06
Speaker 3: Is that single men dog owners?
23:07
Speaker 9: Like?
23:08
Speaker 2: I'm actually I'm not trying to be funny. I'm genuinely
23:11
Speaker 2: curious bachelors.
23:13
Speaker 6: But that's that's a whole different.
23:14
Speaker 3: But that's okay, Like that's a different vibe.
23:17
Speaker 2: But like if you're forty five and you have a
23:19
Speaker 2: dog and then live at home and not married, that's
23:21
Speaker 2: still funny.
23:22
Speaker 10: Maybe a gamer would be the equivalent a gamer.
23:25
Speaker 2: Okay, okay, so childless cat ladies versus gamers. It gets complicated,
23:29
Speaker 2: all right, Okay, Hey, Laurd, thanks lot, We really appreciate it.
23:31
Speaker 2: The poll was really interesting to kind of comb through there.
23:34
Speaker 2: Lord Davison, a political editor for Bloomberg News joining us
23:37
Speaker 2: from Washington, d C. They also made the great point
23:41
Speaker 2: in the article that a lot of what President Trump
23:43
Speaker 2: is very good at is putting down opponents. But having
23:47
Speaker 2: that with Kamala Harris is very difficult when you're also
23:50
Speaker 2: trying to draw over women and you're trying to draw
23:52
Speaker 2: over African Americans.
23:53
Speaker 6: Yep, tough one.
23:54
Speaker 5: And I don't remember growing up that Swing States literally
23:59
Speaker 5: decided election.
24:00
Speaker 6: You don't even go to the other found the same thing.
24:03
Speaker 6: But it's back in the day. I thought California manored
24:06
Speaker 6: New York manor Texas. I mean, now, if you're not
24:08
Speaker 6: in those swing states. You're not going to see the candidates.
24:11
Speaker 2: I don't think yeah, which is also interesting when you
24:12
Speaker 2: talk about the VP and sort of obviously Peepoota Jeedge
24:15
Speaker 2: has the most exposure because he's already in the White House.
24:18
Speaker 3: But that was interesting.
24:20
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
24:24
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24:27
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24:31
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24:34
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
24:39
Speaker 5: It is FED Day. We will hear from the feed
24:41
Speaker 5: at two o'clock. Press conference of two thirty. Bloomberg's coverage
24:43
Speaker 5: begins at one thirty. Tom Keen, Lisa A. Bromwitz, John
24:47
Speaker 5: Farrell Bring it to you. Jeffrey Cleveland joins us here.
24:50
Speaker 5: He's a chief economist a Payden and Regal joining us
24:53
Speaker 5: via La.
24:54
Speaker 6: Via that Zoom technology thing.
24:57
Speaker 5: Jeff, what do you expect from the Federal Reserve today?
24:58
Speaker 5: A lot of folks are saying attention to maybe the
25:01
Speaker 5: tone as it relates to September.
25:03
Speaker 6: What are you looking for?
25:05
Speaker 11: Well, Paul, Happy fed Day, beautiful day here in Los Angeles.
25:08
Speaker 3: So excited this guy, I know, yeah, I think.
25:11
Speaker 11: This is a great day for the Fed to set
25:13
Speaker 11: up for a potential cut in September. They don't need
25:17
Speaker 11: to rush into anything, though. I don't think there's an
25:21
Speaker 11: urgent need to rush rates. We saw very to cut rates.
25:25
Speaker 11: We saw very strong second quarter growth. I think the
25:28
Speaker 11: labor market is still doing pretty well, so there's no
25:30
Speaker 11: urgent need. But you know, if inflation continues to cool
25:35
Speaker 11: like we saw in the PCEE data for the month
25:38
Speaker 11: of June, then it's possible by September we will get
25:41
Speaker 11: a rate cut. So I think, you know, setting up
25:43
Speaker 11: that possibility, keeping their options open, and then maybe pushing
25:48
Speaker 11: back a little bit on market expectations if you earlier
25:51
Speaker 11: this week, I looked through the end of next year,
25:53
Speaker 11: so the end of twenty twenty five, and there were
25:56
Speaker 11: around seven cuts price did. So that's that's more than
26:01
Speaker 11: a fine tuning operation. That would be you know, more
26:04
Speaker 11: of a rate I would.
26:05
Speaker 8: Call slashing operation.
26:07
Speaker 11: So maybe pushing back against the longer term price.
26:10
Speaker 2: Well to that point, I mean, the two year yield
26:13
Speaker 2: is down forty basis points for this month, a huge move,
26:17
Speaker 2: and I'm betting that a lot of that happened after
26:20
Speaker 2: July eleventh, was when we got that CPI number.
26:22
Speaker 3: So if J.
26:23
Speaker 2: Powells sort of becomes a little bit more balanced or
26:26
Speaker 2: tries to have a message that's more balanced, here, what's
26:30
Speaker 2: going to happen in the front end of the bomb market?
26:32
Speaker 11: You know, we think so we think we're in a
26:34
Speaker 11: soft landing, and that you know, so the scenario we're in,
26:37
Speaker 11: we'll be in the soft landing over the next.
26:39
Speaker 6: Six to twelve months or so.
26:40
Speaker 11: So in that environment, I think moderately lower treasury yields
26:45
Speaker 11: makes sense. Two year yields, five year yields, seven tens,
26:48
Speaker 11: what have you. So that makes sense on the short
26:51
Speaker 11: term basis, though I think the market is far too.
26:54
Speaker 8: Confident over this September cut.
26:57
Speaker 11: You know, you can be in a soft landing and
26:58
Speaker 11: cuts arrived later, probably in the short term. In your
27:02
Speaker 11: scenario where you know, chair pal pushes back a little bit,
27:06
Speaker 11: we will see some upward pressure on to year yields.
27:09
Speaker 11: Another candidate for some maybe some upward pressure would be
27:12
Speaker 11: Friday's jobs report. We get a decent jobs number, but also,
27:16
Speaker 11: you know, we've been watching the last few months.
27:18
Speaker 8: The unemployment rate REAP up. It's possible the unemployment.
27:22
Speaker 11: Rate will tick down this Friday, and you know that
27:24
Speaker 11: will pour some cold.
27:27
Speaker 8: Water on these sort of bearish calls about the Fed.
27:30
Speaker 8: You know, it needs to do something now.
27:31
Speaker 11: The economy is weakening and that could have impact on
27:34
Speaker 11: two year treasury yields.
27:35
Speaker 5: And Jeffery Alex and I had one of those discussions
27:38
Speaker 5: earlier today with Danielle di Martino Booth, who feels like
27:41
Speaker 5: this Yeo's economy is already in a recession if you
27:43
Speaker 5: really take a look at the real time data and
27:46
Speaker 5: that the Fed needs to they're actually behind the curve.
27:49
Speaker 6: They should have already been cutting.
27:51
Speaker 5: How do you respond to that when when you hear
27:52
Speaker 5: that amongst investors.
27:54
Speaker 11: To two, GDP grew two point eight percent quarter to
27:57
Speaker 11: quarter annualized on a year on year basis, it was
28:00
Speaker 11: three percent. The consumer continues to be solid. The unemployment
28:04
Speaker 11: rate as creeped up, it's still below that's four percent.
28:06
Speaker 8: That's very low.
28:07
Speaker 11: Historically, initial claims for unemployment insurance layoffs pretty good reliable
28:11
Speaker 11: indicator of whether we're in a recession or not. Very
28:14
Speaker 11: low still, So you know, I, you know, and I've
28:17
Speaker 11: been hearing this story for probably eight quarters. Now, I
28:20
Speaker 11: think since twenty twenty two, people said, you know, if
28:23
Speaker 11: the Fed starts high King, they're going to pull the
28:25
Speaker 11: rug out of the economy, of out from under the economy, Paul,
28:29
Speaker 11: It just hasn't happened.
28:30
Speaker 4: Right.
28:30
Speaker 8: The economy keeps going well.
28:31
Speaker 2: But here's the problem, right, is that it's a case
28:34
Speaker 2: shape economy where the lower and middle income houses are
28:39
Speaker 2: getting continually squeezed and the upper income are enjoying five
28:42
Speaker 2: percent on their treasury bills. So with that, I mean,
28:46
Speaker 2: I know that that's nothing unusual necessarily within the economy,
28:49
Speaker 2: but does that put a little bit more pressure then
28:52
Speaker 2: on the Fed?
28:54
Speaker 11: Well, I think if you're the Fed, you are looking
28:56
Speaker 11: at inflation. It has moderated, especially in the last two months,
29:00
Speaker 11: similar to what we saw maybe in the second half
29:02
Speaker 11: of last year.
29:03
Speaker 8: If that continues, you're.
29:05
Speaker 11: You could very easily alex be back to two point
29:08
Speaker 11: two to two point three percent year on year core
29:11
Speaker 11: PCE sometime next summer, which is close to target.
29:14
Speaker 8: So that's good.
29:15
Speaker 11: At the same time, the unemployment rate has crept up,
29:18
Speaker 11: so they don't want to just be restrictive stick at
29:21
Speaker 11: five point fifty for the foreseeable future.
29:24
Speaker 8: So there.
29:25
Speaker 11: They are aware of that, and you know, I think
29:28
Speaker 11: that's a good argument for fine tuning the FED funds, Right,
29:30
Speaker 11: you don't need to be at five to fifty If
29:32
Speaker 11: inflation's at two point three and the unemployment rates creeping up, Now,
29:36
Speaker 11: do you need to slash back to two and a
29:38
Speaker 11: half percent or three percent?
29:39
Speaker 8: Probably not either. It's more of a fine tuning operation.
29:43
Speaker 11: I might have mentioned it on this show before, but
29:45
Speaker 11: you know, like the mid to late nineties is more
29:48
Speaker 11: of the historical analog, if you will, for what I
29:52
Speaker 11: sort of envision. The Fed did cut a few times
29:54
Speaker 11: in there, but growth continued throughout that period.
29:58
Speaker 8: Stocks did well, you know, bonds did well well. So
30:00
Speaker 8: it was a good environment.
30:02
Speaker 5: So overall, in terms of the consumer, how do you
30:04
Speaker 5: feel like the consumers faring out there?
30:07
Speaker 11: I think, you know, for me, job growth continues, you
30:11
Speaker 11: have more people working, they're still earning wages, although wages
30:15
Speaker 11: have you know, cooled off a little bit to about
30:17
Speaker 11: four percent year on year. With what we're seeing in
30:19
Speaker 11: the ECI data, it's inconsistent what we've been seeing in
30:21
Speaker 11: average hourly earnings. But it's really income growth that drives
30:26
Speaker 11: the consumer and consumer spending and that is that is
30:28
Speaker 11: still holding up through the latest set of data. We'll
30:31
Speaker 11: get an update on that on Friday, But I think
30:33
Speaker 11: that's really key. Separate from that, Paul, you can think
30:36
Speaker 11: about household net worth still looks pretty good. We still
30:39
Speaker 11: think households have savings. If you look at household debt
30:42
Speaker 11: service as a share of their disposable income, those ratios
30:46
Speaker 11: are still.
30:46
Speaker 8: Quite low, even though rates have prepped up.
30:49
Speaker 11: So all in all, I think the consumer is in decent,
30:51
Speaker 11: decent shape. Still all right, let's oh no, no, sorry, gohad.
30:55
Speaker 2: I was gonna say, before you go, before we let
30:56
Speaker 2: you go, what would be the question you'd ask Jay
30:58
Speaker 2: Powell if you're in the presser?
31:01
Speaker 8: Well, I would ask him, hey, what you know?
31:02
Speaker 6: You think?
31:03
Speaker 8: What do you think about the unemployment rate rise?
31:05
Speaker 11: We've gone from you know, three point four percent last spring,
31:08
Speaker 11: we're now four point one.
31:10
Speaker 8: How concerning is that to you?
31:12
Speaker 11: How much does that wane on you in terms of
31:14
Speaker 11: the decisions you will make. I might also ask him, Hey,
31:17
Speaker 11: the market thinks you're definitely cutting in September.
31:20
Speaker 8: What would what is the one thing that would really
31:22
Speaker 8: change your view?
31:23
Speaker 1: Is it?
31:23
Speaker 11: I think it would be core PCEE you know, coming
31:26
Speaker 11: in month to month, hotter in the next couple of months,
31:27
Speaker 11: choppy inflation.
31:28
Speaker 8: But I think that's a worthwhile ask.
31:31
Speaker 3: All right, thanks so much.
31:32
Speaker 2: We really appreciate it, and I would love it if
31:34
Speaker 2: you went into a press room. It's like, hey, Jay,
31:36
Speaker 2: tell me about this, all right. Jeffrey Cleveland, Chief economist
31:39
Speaker 2: over Opinion regal super appreciate that.
31:43
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32:01
Speaker 5: You're listening to Bloomberg Intelligence, Alex Steel, Paul Swiney live
32:04
Speaker 5: here in our Bloomberg you know, active broadcast studio. All right,
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33:08
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33:10
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Speaker 12: a system of things that make us a great company.
33:53
Speaker 12: And we have a service business that's a third of
33:56
Speaker 12: our company that's performing extremely well. In the second quarter,
34:02
Speaker 12: our service business was up mid teens from a growth perspective,
34:06
Speaker 12: and we have a culture that's you know, we believe
34:09
Speaker 12: in challenging what's possible and innovating for a sustainable world.
34:13
Speaker 2: So based on that, it's great to chat with you.
34:15
Speaker 2: By the way, I love love talking to you, because
34:18
Speaker 2: you have such a great read on the residential and
34:20
Speaker 2: commercial businesses. Basically, if a commercial HVAC unit and a
34:24
Speaker 2: near term residential HVAC unit, and of course that's heating, ventiletion,
34:29
Speaker 2: air and cooling, where's the strength, where's the growth, where
34:33
Speaker 2: are the weak points?
34:35
Speaker 12: Yeah, I'll start with residential. We had a very strong
34:38
Speaker 12: quarter in the second quarter. Our revenue was up mid
34:41
Speaker 12: teens I'm sorry, low teens, but that our residential business.
34:47
Speaker 12: For the prior I'll say, you know, three quarters had
34:50
Speaker 12: really been struggling with a refrigerant change that wasn't clear.
34:55
Speaker 12: That's been clarified. It was really struggling with excess inventory
34:59
Speaker 12: kind of a hangover from the COVID days that was
35:02
Speaker 12: in the channel. Those both correct it, and we're off
35:06
Speaker 12: to a very warm start to the cooling season, which
35:09
Speaker 12: should have us all concerned for a different reason as
35:12
Speaker 12: the climate continues to increase in temperature. But I would
35:16
Speaker 12: tell you that it's a very strong start of the year,
35:19
Speaker 12: so very strong and residential, our commercial business really broad
35:23
Speaker 12: based growth. You know, certainly the high growth verticals like
35:27
Speaker 12: data centers. We do very very well in our education
35:31
Speaker 12: or in healthcare, but we had broad based growth in
35:35
Speaker 12: the Americas. We track fourteen different verticals and we were
35:39
Speaker 12: hard pressed to find a vertical that we were not
35:42
Speaker 12: strong in. So it was just it was a very
35:45
Speaker 12: strong quarter for trained Technology. I'm very proud of what
35:47
Speaker 12: the team's been able to accomplish.
35:50
Speaker 5: Yeah, I'm reading the Bloomberg Intelligence research note on your earnings.
35:53
Speaker 5: North America's sixteen percent organic growth was much greater than
35:57
Speaker 5: the ten percent consensus.
35:59
Speaker 6: What drove that.
36:01
Speaker 12: Yeah, really two things. Our residential business perform better. Okay,
36:04
Speaker 12: we thought that was going to be you know, in
36:06
Speaker 12: the beginning of the year, we thought our residential business
36:08
Speaker 12: would below single digits. We came in you know, low
36:11
Speaker 12: teams in the quarter, so we significantly outdrove that. And
36:15
Speaker 12: then our commercial HVAC business just continues to operate at
36:19
Speaker 12: a very high level. And like I said, services was
36:23
Speaker 12: up in the high teens actually in the Americas, and
36:27
Speaker 12: their equipment business just continues to exceed our customers' expectations.
36:32
Speaker 12: So very strong quarter. You know, I was listening to
36:35
Speaker 12: your show earlier. You were talking about sustainability, and you know,
36:40
Speaker 12: I would tell you that Trained Technologies, our purpose is
36:43
Speaker 12: built around sustainability. And what people are talking about right
36:48
Speaker 12: now as you're hearing a lot about, you know, how
36:51
Speaker 12: much power is going to have to be generated to
36:54
Speaker 12: meet the demand that's coming. And you'll hear a lot
36:57
Speaker 12: about data centers using a lot of the electricity. What
37:00
Speaker 12: nobody is talking about is the amount of power that's
37:03
Speaker 12: being generated that's being wasted. And I would tell you
37:06
Speaker 12: we call it demand side management, and we know because
37:09
Speaker 12: we've done hundreds of thousands of energy audits and buildings
37:13
Speaker 12: that most buildings operate about thirty percent inefficiently. So just
37:16
Speaker 12: think if we could solve that problem, and if we
37:19
Speaker 12: can make buildings perform the way they were designed, or
37:22
Speaker 12: assets performed the way they're designed. Just think about the
37:25
Speaker 12: amount that we could save and the energy that's being
37:28
Speaker 12: produced and which was obviously has a trickle effect to
37:30
Speaker 12: the carbon footprint. So that's what train technology is all about.
37:33
Speaker 12: People always ask me, where do you see the growth
37:35
Speaker 12: coming from. It's going to be on the demand side,
37:37
Speaker 12: management side.
37:38
Speaker 2: Hey, did we really appreciate it? Definitely come back. I
37:41
Speaker 2: know you got to run, but we appreciate your time
37:43
Speaker 2: today when you're in the city, come in and tell
37:45
Speaker 2: us more about it, you know. And I'm also curious
37:47
Speaker 2: as to those customers are think willing to pay up
37:49
Speaker 2: for it we got last morning to talk about.
37:51
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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38:00
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38:10
Speaker 2: Let's get back to the market Shaw, We just go
38:12
Speaker 2: back to ETFs, talk about it.
38:13
Speaker 6: Growth business. Jennifer Crancio Joints is here. She's global head
38:16
Speaker 6: of distribution for TCW.
38:18
Speaker 5: Let's Trust Company of the West, Los Angeles. Space used
38:21
Speaker 5: to be a huge plan of mine.
38:22
Speaker 6: They loved me. She joins us here in our Bloomberg
38:25
Speaker 6: Interactive Brokers studio.
38:27
Speaker 5: Jennifer, I mean, the money just keeps flowing to you guys,
38:31
Speaker 5: and it's just unbelievable how your market is growing, the
38:34
Speaker 5: ETF market. Where's some of the money going now? Are
38:37
Speaker 5: folks looking for income? Are they looking for special situations?
38:41
Speaker 5: What are they looking for these days?
38:42
Speaker 9: Yeah? From a TCW perspective, people know us for fixed
38:45
Speaker 9: income and so we have a developed set of equity
38:48
Speaker 9: ETFs now. But we launched the first fixed income ETF recently.
38:52
Speaker 9: And the ticker because that's you know, that's what we
38:54
Speaker 9: do in ETFs is flex or FLXR. But Flexer and
38:58
Speaker 9: strategies like it are giving you return in the fixed
39:02
Speaker 9: income portfolio, but they're also giving you very consistent income.
39:05
Speaker 9: And if you think about how to actually construct a portfolio,
39:08
Speaker 9: equities can be volatile market market, money market funds and rates.
39:13
Speaker 9: They will go down eventually, and so we see a
39:15
Speaker 9: lot of investors looking for products that are giving you return,
39:19
Speaker 9: but they're also giving you this consistent income.
39:22
Speaker 3: This might be a really silly question. Are these actively
39:24
Speaker 3: managed ETFs or are these boring? Not boring, I mean
39:27
Speaker 3: just passive ETFs. We ad TCW.
39:29
Speaker 9: We have one index CTF, and everything else we do
39:32
Speaker 9: is active. So our view on portfolios right now is
39:35
Speaker 9: there's a lot of uncertainty in the market, and particularly
39:38
Speaker 9: when it comes to fixed income and bonds, we think
39:41
Speaker 9: active management is the way to go. We can make
39:44
Speaker 9: a lot of choices about how to both manage your
39:47
Speaker 9: risk and optimize return and in the case of a
39:49
Speaker 9: product like flexible income, optimize income at the same time.
39:53
Speaker 9: So we think active is the way to go in
39:56
Speaker 9: the current market.
39:57
Speaker 5: And what's issuing about your met west flexible income It
40:00
Speaker 5: was a mutual fund, so you convert a mutual fund
40:03
Speaker 5: into an ETF.
40:05
Speaker 6: Why do that?
40:07
Speaker 9: Advisors like to invest in portfolio managers that have a
40:10
Speaker 9: long track record. They want to know that the team's
40:12
Speaker 9: been around and together and been making these choices on
40:15
Speaker 9: risk and return for a very long time. So at
40:17
Speaker 9: TCW we have an excellent fixed income team. They've managed
40:20
Speaker 9: this particular strategy for six years with very high performance
40:24
Speaker 9: versus peers, and so in this case, it's logical for
40:27
Speaker 9: us to take that great track record and simply flip
40:29
Speaker 9: it into an ETF vehicle.
40:31
Speaker 2: This might be also silly question, but if the Fed
40:33
Speaker 2: starts cutting rates, does the appeal of an actively managed
40:37
Speaker 2: fixingcome ETF become less because we're no longer going to
40:40
Speaker 2: be at five percent like money market fund rates for example.
40:42
Speaker 3: Well, I think it's.
40:43
Speaker 9: We're not going to be at zero either, And so
40:45
Speaker 9: the way that we would think about it is, if
40:46
Speaker 9: you're moving through time for years ahead of us, there
40:50
Speaker 9: really is an opportunity to be active to drive return
40:53
Speaker 9: in the fixed income part of the portfolio. And frankly,
40:56
Speaker 9: from an income perspective, people need to keep up with inflation,
40:58
Speaker 9: so inflation's down somewhat. But from a price perspective, particularly
41:03
Speaker 9: aging population, if everyone's living till ninety or one hundred
41:06
Speaker 9: years old, there are a lot of portfolios where the
41:09
Speaker 9: regular repeatable income and in the case of flexible income,
41:12
Speaker 9: it's say seven percent yield. So as money markets go down,
41:16
Speaker 9: we're actively able to manage to a higher income target.
41:20
Speaker 5: All right, you guys in the ETF business. I understood
41:23
Speaker 5: the passive ETFs. I got that whole story in the cost.
41:26
Speaker 5: Then you guys brought in active ETFs. I'm like, wait
41:29
Speaker 5: a minute, I think active. I think managers, analyst overhead costs.
41:35
Speaker 5: So is an active we managed ETFs cheaper than a mutual.
41:38
Speaker 3: Fund in some cases? In some cases they will be.
41:41
Speaker 3: In some cases maybe they won't be.
41:43
Speaker 9: So in this case with flexible income, we actually brought
41:45
Speaker 9: the cost down because we see the demand from an
41:48
Speaker 9: ETF perspective, and we think the fund is going to grow,
41:51
Speaker 9: and so we were able to take an active product
41:53
Speaker 9: that is a forty basis point fee, But that forty
41:56
Speaker 9: basis point fee is actually lower than when we were
41:58
Speaker 9: managing it in a mutual fee, and that brings real
42:01
Speaker 9: value to clients.
42:02
Speaker 6: How about to you guys, Well.
42:03
Speaker 9: For us, we're building a business and we think that
42:06
Speaker 9: there's real demand for products like the one that we're
42:08
Speaker 9: talking about today, and so as that product grows, it's
42:12
Speaker 9: a great business for us to be able to serve
42:14
Speaker 9: clients with a product that can really scale and grow
42:16
Speaker 9: in assets under management.
42:18
Speaker 2: Jennifer, before you were at TCW, you were the CEO
42:22
Speaker 2: of Engine Number one. TCW acquired that part of the
42:25
Speaker 2: firm's business back in October of twenty twenty three. I'm
42:28
Speaker 2: an oil nerd, so I think Engine number one and
42:31
Speaker 2: I'm thinking, oh, the really successful shareholder push on Exon
42:35
Speaker 2: to get three members on their board, to really push
42:38
Speaker 2: for climate change.
42:39
Speaker 3: Can you walk me through all of that.
42:42
Speaker 9: Yeah. So, from an end to Number one perspective, we
42:44
Speaker 9: saw an opportunity in the market where people were investing
42:47
Speaker 9: in energy transition or transformation, either not investing in holding
42:51
Speaker 9: index funds or investing in private equity. So a lot
42:54
Speaker 9: of what we did at Endine number one was build
42:56
Speaker 9: a public market products. Exon was a big part of that,
42:59
Speaker 9: still a big holding in one of the funds that
43:01
Speaker 9: came over to TCW, which is another ETF net Z
43:05
Speaker 9: And the idea there is that we are going through
43:08
Speaker 9: an energy transition over many decades to come, and so
43:12
Speaker 9: in the case of working with Exon, helping Exon realize
43:15
Speaker 9: they could optimize their business and capital allocation to not
43:18
Speaker 9: waste money in the out years but take advantage of
43:20
Speaker 9: what was happening in the next ten years. And that
43:23
Speaker 9: kind of that work has added a lot of value
43:26
Speaker 9: to everybody that has held exon over this period. And
43:29
Speaker 9: at TCW we still manage this Energy Systems Transition Fund,
43:32
Speaker 9: So to that.
43:33
Speaker 2: Point, I mean that was also when energy transition and
43:37
Speaker 2: green and climate were so the pendulum was swinging very
43:40
Speaker 2: much one way, and the pendulum is swinging back the
43:42
Speaker 2: other way. Are you guys noticing anything not TCW on that.
43:46
Speaker 9: Well, we're at TCW are probably one of the leaders
43:49
Speaker 9: in looking at companies from an underlying risk and reward
43:53
Speaker 9: perspective across climate and governance for example. So we're a
43:58
Speaker 9: leader in that. That's a big part of our business
44:00
Speaker 9: in Europe. In the US, people may not want to
44:02
Speaker 9: buy products that are value screened, but we still do
44:06
Speaker 9: the work so that we're doing the work so that
44:08
Speaker 9: if there's a company that's mispriced based on a climate
44:11
Speaker 9: risk or mistakes on the governance side, we understand that
44:15
Speaker 9: and that's information that goes up to our fundamental portfolio
44:18
Speaker 9: managers and it's just another way we're adding alpha for clients.
44:21
Speaker 5: Interesting, So we're from the ECF business for TCW.
44:25
Speaker 6: What's next for you guys? Where's the area focus?
44:27
Speaker 12: Is?
44:27
Speaker 6: It continued on the fixed income front.
44:29
Speaker 9: It is for sure continuing on the fixing come front.
44:31
Speaker 9: So we have a set of equity product tool buildt
44:33
Speaker 9: to that over time.
44:35
Speaker 3: Excuse me.
44:36
Speaker 9: But on the fixed income side, we've got flexible income
44:38
Speaker 9: out in the market now and we've filed for another
44:42
Speaker 9: four to five products that may be out as soon
44:44
Speaker 9: as the end of the year. Because what we see
44:46
Speaker 9: is people want the best solution in fixed income portfolio construction.
44:50
Speaker 9: And so what we do is active managers, whether it's
44:52
Speaker 9: in the CLO market, secured bank loans, high yield, we
44:57
Speaker 9: think we can deliver very attractive and more competitive then
45:00
Speaker 9: other people are out there today, return and risk profiles,
45:04
Speaker 9: and so we look forward to launching those ETFs shortly.
45:06
Speaker 2: Can I go back to climate for a second, Oh, Paul,
45:08
Speaker 2: hate me here. You mentioned that you are helping to
45:11
Speaker 2: judge climate risk. Can you pass it on to the managers?
45:14
Speaker 2: How do you How do you judge climate risk for
45:16
Speaker 2: a company?
45:17
Speaker 3: It's different for every company I know, and so how
45:19
Speaker 3: do you do it?
45:19
Speaker 1: Yeah?
45:19
Speaker 9: I mean so, so the way we the way we
45:21
Speaker 9: do it is look at look at each company at
45:24
Speaker 9: an underlying data level. So if a company is in
45:26
Speaker 9: the energy sector, you know, what are they doing about
45:29
Speaker 9: capital allocation in old world energy? What are they doing
45:33
Speaker 9: to approve or green up in other areas? So we're
45:37
Speaker 9: looking at that, and then across most large companies, we're
45:40
Speaker 9: looking at water use, electrification, the goals that they're setting,
45:44
Speaker 9: and then measuring the progress that they're making against those goals.
45:47
Speaker 9: So we don't look at it in a carbon footprint only.
45:50
Speaker 9: We look at it as a sort of transformation transition.
45:54
Speaker 9: How are they planning, how will they beat their competitors
45:56
Speaker 9: effectively in doing a better job as we move through
45:59
Speaker 9: time and we move through the transition.
46:01
Speaker 6: So cool, I don't want.
46:03
Speaker 5: To how you invest in energy companies, because I would
46:05
Speaker 5: be do I want my companies going green now or
46:07
Speaker 5: just waiting?
46:08
Speaker 2: Well, that's part of the problem is that if you're
46:09
Speaker 2: a big energy company like or if you're an investor,
46:12
Speaker 2: you really only want to own one because you can't
46:14
Speaker 2: own a bunch for that exact reason, and you can't
46:16
Speaker 2: go to shareholders or your investors and say, hey, I
46:18
Speaker 2: have a boltload of energy companies. So then that begs
46:21
Speaker 2: the question, how do you choose which means bigger is better?
46:23
Speaker 2: And then hence forth the next Sun Chevron kind of
46:26
Speaker 2: thing that's that's what I keep hearing shayby next on
46:28
Speaker 2: earnings out Friday, So very exciting. This is great, Jennifer,
46:32
Speaker 2: thank you so much. It was wonderful to meet you.
46:34
Speaker 2: A big fan of Katie Kotch also who's the CEO
46:36
Speaker 2: of TCW, so it's great to get you in the studio.
46:38
Speaker 2: Come back anytime at Jennifer Grancio a global head of
46:41
Speaker 2: distribution over at TCW, normally based in La so.
46:44
Speaker 3: We're very lucky to have her here.
46:46
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