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Markets, The Fed, And Credit Suisse (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. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast Why. I read something
• 0:21
  Speaker 1: a couple of days ago on the Bloomberg terminal that
• 0:23
  Speaker 1: really got my attention. The author said, hey, we are
• 0:27
  Speaker 1: or we're very close into recession already, but he says
• 0:30
  Speaker 1: that's not all bad news. While growth slows, the FED
• 0:34
  Speaker 1: will take notice and any pause and raid hikes will
• 0:37
  Speaker 1: be a boon to risk assets. That got my attention.
• 0:40
  Speaker 1: I said, we gotta get this guy on the air.
• 0:42
  Speaker 1: Vince Signarella, global macro strategist for bloom blerg Bloomberg News
• 0:46
  Speaker 1: joint us. I will note working from home, he has
• 0:48
  Speaker 1: lost forever, his Metro North past, his you know, subway tokens,
• 0:53
  Speaker 1: no nothing. It's interesting to see the juxtaposition because you
• 0:57
  Speaker 1: have so much respect for Vince and his halls. Um,
• 1:01
  Speaker 1: we were talking about the night he sent out the
• 1:03
  Speaker 1: story on the other hand, you feel like he's phoning
• 1:06
  Speaker 1: it in as someone who's working from home. He's one
• 1:09
  Speaker 1: of the few people that I believe it's one of
• 1:11
  Speaker 1: the few people. Yeah, I'm generally a not a fan
• 1:14
  Speaker 1: of work from home, but there are some people that
• 1:16
  Speaker 1: have earned it, and Vince Signarella has earned the ability
• 1:19
  Speaker 1: to work from home, and plus he's got a great
• 1:21
  Speaker 1: set up. Vince, talk to us about the Chicago FED
• 1:24
  Speaker 1: National Activity Index. What did we see? Yeah, you know,
• 1:27
  Speaker 1: it is one of the most overlooked indexes because people
• 1:30
  Speaker 1: don't really understand it because it just kind of hovers
• 1:32
  Speaker 1: around zero um and it's not sort of fused to
• 1:36
  Speaker 1: the hundred that a lot of indexes are. So where
• 1:38
  Speaker 1: you see, you know, confidence indexes at just the or
• 1:41
  Speaker 1: below signaling recession. People don't really know what to do
• 1:44
  Speaker 1: with the Chicago Fed. But on a quarterly basis, it
• 1:47
  Speaker 1: is such a great indicator of g d P and
• 1:50
  Speaker 1: when it sustains below zero, and it's just dip below zero,
• 1:54
  Speaker 1: so it's a little too soon to tell. We need
• 1:56
  Speaker 1: a few readings below zero for sure, but if we
• 1:59
  Speaker 1: get them a few months and it stays below zero
• 2:02
  Speaker 1: on that quarterly basis, it's basically signaling a recession. And
• 2:06
  Speaker 1: you know, when you look at some of the numbers,
• 2:08
  Speaker 1: you know the Atlanta is calling second quarter growth at
• 2:11
  Speaker 1: minus one point six and such. You put it all together, um,
• 2:16
  Speaker 1: it very much looks like we're already in a recession.
• 2:18
  Speaker 1: And when you see the White House trying to walk
• 2:20
  Speaker 1: it back and trying to change the definition of the recession,
• 2:23
  Speaker 1: makes you feel like you know you're there. And I
• 2:25
  Speaker 1: think the final shot off for me yesterday when Janet Yellen,
• 2:29
  Speaker 1: Secretary Yelling called for a press conference on Thursday. When
• 2:33
  Speaker 1: we get the GDP numbers on Thursday morning, if I
• 2:37
  Speaker 1: had to roll the dice, I'd say she's doing that
• 2:39
  Speaker 1: because she wants to try to walk back the fact
• 2:42
  Speaker 1: that we're going to see a second negative growth number,
• 2:45
  Speaker 1: um and and try to talk the market out of
• 2:47
  Speaker 1: the fact that we're in a recession. So so we
• 2:50
  Speaker 1: I mean, the Atlanta Fed shows the second quarter was contraction.
• 2:55
  Speaker 1: The first quarter we know was also a contraction. Nonetheless,
• 2:58
  Speaker 1: unemployment at three and a half percent and nominal GDP
• 3:03
  Speaker 1: in double digits. Um, how do you how do you
• 3:07
  Speaker 1: put those things together? Well, unemployment first of all, as
• 3:10
  Speaker 1: a lagging indu theater so it's going to take about
• 3:12
  Speaker 1: two or six months where it could catch up, and
• 3:14
  Speaker 1: I think it will. UM. I think is you know,
• 3:16
  Speaker 1: if the Fed keeps things going UM and keeps pushing
• 3:19
  Speaker 1: the interest rate environment. I mean, look at home sales
• 3:22
  Speaker 1: this morning, dropped precipitously and for one of the first
• 3:25
  Speaker 1: times we've seen home sales fall in both the South
• 3:27
  Speaker 1: and that's where Florida and Miami has been leading, and
• 3:30
  Speaker 1: in the Northeast, which has been residient to higher mortgage rates,
• 3:35
  Speaker 1: and a big drop in both of those areas. And
• 3:38
  Speaker 1: you know, that's where the average consumer feels. Well. The
• 3:41
  Speaker 1: average consumer isn't attached to the stock market. They're attached
• 3:45
  Speaker 1: to their home, and when home prices start to fall,
• 3:48
  Speaker 1: consumers feel poorer and the confidence drops and spending drops, etcetera, etcetera.
• 3:53
  Speaker 1: So my point is, I think the Feds already done
• 3:57
  Speaker 1: a substantial effort to try to slow inflation. They're gonna
• 4:00
  Speaker 1: go seventy five basis points today because it's baked in
• 4:03
  Speaker 1: and they'll lose credibility if they don't. UM. But I
• 4:06
  Speaker 1: don't think they need to be too aggressive going forward.
• 4:08
  Speaker 1: I think they need to let this play out. It
• 4:11
  Speaker 1: takes at least six months for monetary policy to work
• 4:15
  Speaker 1: its way through the system, and they're not giving it
• 4:17
  Speaker 1: enough time. If they go like, you know, hell bent
• 4:20
  Speaker 1: without waiting for it to do something and and giving
• 4:23
  Speaker 1: the consumer and opportunity to react, all right, So then
• 4:27
  Speaker 1: if the seventy five basis points is baked in today
• 4:30
  Speaker 1: as the market is implying, I guess it comes down
• 4:33
  Speaker 1: to kind of trying to read the tea leaves of
• 4:35
  Speaker 1: the tone of the body language of FED Chairman Pal.
• 4:37
  Speaker 1: We have Michael McKee uh from Bloomberg down there in
• 4:41
  Speaker 1: d C today will tend the press conference. What are
• 4:44
  Speaker 1: you looking for from FED Chairman Pal? What message do
• 4:47
  Speaker 1: you think he should deliver? You know, I know he's
• 4:51
  Speaker 1: going to say that we're still pushing this because we
• 4:53
  Speaker 1: still need to find inflation. Inflation is at very high levels. Um,
• 4:57
  Speaker 1: we don't want to you know, we don't want to
• 5:00
  Speaker 1: back off and lose control of this. I mean to me,
• 5:03
  Speaker 1: it's a policy error because they're just reacting to the
• 5:05
  Speaker 1: value when they call the transitory. What I would love
• 5:09
  Speaker 1: to hear him say is that we're you know, we're
• 5:11
  Speaker 1: doing this to try to get FED funds rate. You know,
• 5:14
  Speaker 1: close to the three to three and a half percent level,
• 5:16
  Speaker 1: which is where we think inflation is going to come
• 5:19
  Speaker 1: back to eventually, and that from this point forward, while
• 5:23
  Speaker 1: we will be potentially raising rates to get to that
• 5:26
  Speaker 1: three and a three and a half percent, we want
• 5:28
  Speaker 1: to see how the economy reacts and what the data
• 5:31
  Speaker 1: show us. And if there's a sustained drop in inflation
• 5:34
  Speaker 1: over the next three months, that's going to effect September's
• 5:38
  Speaker 1: policy decision, not just let's just raise another seventy five
• 5:42
  Speaker 1: basis points in hell and high water are what the
• 5:45
  Speaker 1: economy and doesn't want inflation numbers. Do they ditch forward guidance?
• 5:51
  Speaker 1: I don't think they will. Um. They've been relying on
• 5:53
  Speaker 1: that so much, and realistically I wish they would. Um.
• 5:57
  Speaker 1: You know. I remember being at a at a money
• 5:59
  Speaker 1: market here talk with fed's Bullard and he said, I
• 6:03
  Speaker 1: don't know why you guys keep calling higher interest rates,
• 6:06
  Speaker 1: and I sort of raised my hand and went, it's
• 6:08
  Speaker 1: in your bloody dot plot if you would if you
• 6:12
  Speaker 1: don't point it out in your dot plot, and that
• 6:14
  Speaker 1: that's the forward guide. It's the market to reacting on.
• 6:16
  Speaker 1: So I'd love to see the forward guidance go away
• 6:19
  Speaker 1: and and markets trade the way they once did is
• 6:22
  Speaker 1: based on their their own thoughts of where they think
• 6:25
  Speaker 1: things things are going, and it would be helpful. I
• 6:28
  Speaker 1: feel like it would be helpful. Also, then you could
• 6:30
  Speaker 1: use the market as an input right in terms of
• 6:33
  Speaker 1: reaction to economics. Otherwise the markets are just reacting to
• 6:37
  Speaker 1: what they expect from the Fed. Vincinerello, global macro strategist
• 6:42
  Speaker 1: for Bloomberg News joining us read his stuff I highly
• 6:45
  Speaker 1: recommended on the Bloomberg terminal. He's making a case that yeah,
• 6:48
  Speaker 1: maybe we're in a recession, but that just means the
• 6:50
  Speaker 1: FED can be a little cautious and that's good for
• 6:52
  Speaker 1: risk assets. Well, my good friends like Credit Suisse, they're
• 7:02
  Speaker 1: replacing their CEO Thomas Gotstein. Got Stein, thank you very much.
• 7:08
  Speaker 1: Who was the reason I'm going to ask you from work?
• 7:11
  Speaker 1: So he's resigning after a two year tenure mark by scandal,
• 7:14
  Speaker 1: turmoil and huge losses Shownalie Bassett, I get that right. Yes,
• 7:20
  Speaker 1: that's not where my expertise lies. All morning long, I've
• 7:24
  Speaker 1: heard people say, Gottstein, you're not the first, and you
• 7:26
  Speaker 1: won't be the scot Stein. If it's an e I
• 7:30
  Speaker 1: in German it's always I and also Stein means stone,
• 7:34
  Speaker 1: so it's never Steen unless the person came to America
• 7:37
  Speaker 1: through l Well, anyways, he's on his way out. He's
• 7:39
  Speaker 1: on his way out. Who's coming in a corner? Did
• 7:42
  Speaker 1: I say that correctly? Yes? Okay, pretty much. He is
• 7:46
  Speaker 1: going to be taking over his chief executive officer of Remember,
• 7:49
  Speaker 1: this is a bank that has lost about of its
• 7:53
  Speaker 1: stock market value this year. This is a tiny bank
• 7:56
  Speaker 1: these days. It's fifteen billion dollars in market a TENCNY
• 8:00
  Speaker 1: little zombie. Teen little zombie. It's got it's it's also
• 8:03
  Speaker 1: got results out. The worst trading performance this century is
• 8:09
  Speaker 1: how Donald Griffin of Bloomberg puts it, which is, you know,
• 8:11
  Speaker 1: it sounds dramatic, and it is because again their macro
• 8:14
  Speaker 1: had been going on. But other European banks are able
• 8:17
  Speaker 1: to hold up some results, but they're also zombies. By
• 8:19
  Speaker 1: the way, can we just rewind for a second. You care, Paul,
• 8:22
  Speaker 1: You care about Credit Sweets because you used to work
• 8:26
  Speaker 1: for the correct CB. You listen, guys, Credit Sweez is
• 8:29
  Speaker 1: still one of the biggest wealth managers in the world,
• 8:31
  Speaker 1: and so to kind of chip away at this firm
• 8:35
  Speaker 1: is a really interesting thing. You have Morgan Stanley interesting
• 8:38
  Speaker 1: and during wealth management of City Group trying to get bigger,
• 8:41
  Speaker 1: and wealth management you have, and both of those firms
• 8:43
  Speaker 1: have huge investment banks already. Well did you think about
• 8:45
  Speaker 1: Credit sweee is just a few years ago? Like my
• 8:47
  Speaker 1: account has been with Credit Swiss ever since I worked there.
• 8:50
  Speaker 1: They got out of the US wealth management business just
• 8:53
  Speaker 1: when Morgan Stanley and everybody else was ramping looked around,
• 8:58
  Speaker 1: like why would you get out of a business that
• 9:00
  Speaker 1: has low capital allocation steady returns only Credit Swiss wood Well,
• 9:05
  Speaker 1: not not because they wanted to. They had regulatory issues
• 9:08
  Speaker 1: here in the United States which really pushed them out
• 9:10
  Speaker 1: of the United States. And so if you look at
• 9:12
  Speaker 1: what's happened over the last couple of decades here for
• 9:17
  Speaker 1: Credit Swiss is a series of regulatory issues, um and
• 9:21
  Speaker 1: mishaps with major clients, most recently Archagos and Green Cell.
• 9:25
  Speaker 1: Remember it was just before the pandemic that they were
• 9:27
  Speaker 1: ramping up their trading business. They were hiring from major
• 9:32
  Speaker 1: rivals across Wall Street, both and trading and investment banking.
• 9:36
  Speaker 1: Sale and I don't know the Swiss politics about you
• 9:39
  Speaker 1: might know of UBS and Credit Swiss ever getting together
• 9:42
  Speaker 1: because yeah, that's for no other reason, just to get bigger. Well,
• 9:47
  Speaker 1: then you leave Switzerland with one major bank, right right,
• 9:50
  Speaker 1: So it's a complicated question. I think the Swiss government
• 9:53
  Speaker 1: is always liked the two. They wanted to protect the two,
• 9:55
  Speaker 1: which is why they have such strict capital requirements out
• 9:58
  Speaker 1: of Switzerland, some of the toughest in the world. And
• 10:01
  Speaker 1: you look at it now and the question about Credit
• 10:03
  Speaker 1: Sweets getting bought to save it is a real question.
• 10:06
  Speaker 1: The question is whether the UBS merger makes sense or
• 10:09
  Speaker 1: whether a different company like a Deutsche Bank or a
• 10:12
  Speaker 1: Morgan Stanley, which is not all that likely from all
• 10:16
  Speaker 1: of my reporting over the years, but it's something that
• 10:19
  Speaker 1: is pan European making more sense for from the Credit
• 10:21
  Speaker 1: Sweez People talk about it a lot, but I think
• 10:23
  Speaker 1: you're right, not gonna happen. The Swiss government does not
• 10:26
  Speaker 1: want that to happen. They want to keep them. They
• 10:28
  Speaker 1: want to keep two banks. Look, you don't want to
• 10:30
  Speaker 1: be reliant on one, as the German UH natural gas
• 10:34
  Speaker 1: situation illustrates. You don't want to be relying on one
• 10:37
  Speaker 1: supplier um And also cross border European bank mergers just
• 10:43
  Speaker 1: not gonna happen right now. That could happen eventually, but
• 10:45
  Speaker 1: probably not another nation picking up credit st banks do
• 10:49
  Speaker 1: turn around. Look at Deutsche Bank for example, they shrunk
• 10:52
  Speaker 1: to grow and now they're at a place where they're
• 10:54
  Speaker 1: performing better and trading and investment banking they're taking on
• 10:58
  Speaker 1: less risk. That is what Credit wants to do. Listen,
• 11:00
  Speaker 1: it's such an interesting thing because this business model change
• 11:02
  Speaker 1: has been talked about for as long as I've been
• 11:04
  Speaker 1: on the beat. This is nine years that you know,
• 11:06
  Speaker 1: UBS has made this change capital light trading desks for
• 11:11
  Speaker 1: the most part, only having investment banking to serve the
• 11:14
  Speaker 1: wealth clients. And that's what Credit Swiss now wants to do.
• 11:17
  Speaker 1: Now can they pull it off as they're losing so
• 11:20
  Speaker 1: much talent? That's the question, all right, what do we
• 11:23
  Speaker 1: know about this? Ulric Kerner Kerner our Bloomberg's Marion Halfdemeyer
• 11:29
  Speaker 1: calls him a fixer, so he has he has a
• 11:34
  Speaker 1: reputation for being technical, decisive, remember credits. We's just presented
• 11:37
  Speaker 1: a plan to investors under Thomas Scott Stegn. We were
• 11:41
  Speaker 1: talking about it um about the way they would move forward.
• 11:44
  Speaker 1: So can he create a more precise laser sharp playbook?
• 11:50
  Speaker 1: Here and her reporting is interesting. I mean, he's just
• 11:52
  Speaker 1: a formal former US UBS. Guy Kerner, who is currently
• 11:57
  Speaker 1: Credit Swiss as asset management has spent twenty years at
• 12:00
  Speaker 1: the largest Swiss firms, UBS and Credit Swiss, and the
• 12:03
  Speaker 1: musical chairs between UBS and Credit Swiss is consistently interesting, right, interesting,
• 12:08
  Speaker 1: So all right, it's more change at Credit Swiss. I
• 12:11
  Speaker 1: guess that's yeah. And God's tigned, by the way, just
• 12:13
  Speaker 1: came in at the beginning of the pandemic right February.
• 12:17
  Speaker 1: He wasn't responsible for our ark goes, he wasn't responsible
• 12:20
  Speaker 1: for green sill. But it's like every quarter there's a
• 12:23
  Speaker 1: profit warning. He just can't turn it around. Why didn't
• 12:25
  Speaker 1: he just do a kitchen sink thing and get it
• 12:27
  Speaker 1: all out of the way. I think that's the hope now, yeah,
• 12:30
  Speaker 1: for sure. Alright, Just you know, you think about Swiss banking,
• 12:34
  Speaker 1: you want to think stability, and you don't necessarily get that.
• 12:38
  Speaker 1: I like, I like to think secrecy too, but they
• 12:40
  Speaker 1: don't do that anymore. You'd like to think that, like
• 12:41
  Speaker 1: the Born Identity, that that kind of stuff is a great,
• 12:44
  Speaker 1: great scene and I mean obviously an awesome movie. I
• 12:47
  Speaker 1: also like that you think about art I think about
• 12:52
  Speaker 1: you know, secret money stashes and all that kind of
• 12:55
  Speaker 1: good stuff, and you know international intrigue. It is fed Day,
• 13:03
  Speaker 1: but that's a big day here at that Bloomberg. It's
• 13:05
  Speaker 1: like Draft Day for ESPN. True if Draft Day were
• 13:08
  Speaker 1: once a month. Yeah, exactly. So we're all in, and
• 13:10
  Speaker 1: we're all in. That means we get Danielle di Martino
• 13:13
  Speaker 1: booth here in our Bloomberg Interactive Broker studio. Danielle CEO
• 13:16
  Speaker 1: and chief strategists at Quill Intelligence also spent some time
• 13:19
  Speaker 1: at the Federal Reserve and some don't town down in
• 13:23
  Speaker 1: Texas or something big, the big book. I love the title,
• 13:26
  Speaker 1: will still love the title of your book, fed up exactly.
• 13:29
  Speaker 1: That kind of gets you there, all right. Lots of
• 13:32
  Speaker 1: ECO data on their terminal E c O go for
• 13:35
  Speaker 1: you kids out there with the Bloomberg terminal. One of
• 13:37
  Speaker 1: the things that just jumped out of as Danielle pointed
• 13:39
  Speaker 1: out as he was coming into the studio, pending home
• 13:41
  Speaker 1: sales month on month minus eight point six percent. Census
• 13:46
  Speaker 1: was minus one percent. Housing had been such an economic stalwart,
• 13:52
  Speaker 1: daniel What about the year over year depending home minus
• 13:56
  Speaker 1: ninth YEP minus twenty Louise census were did you sell
• 14:00
  Speaker 1: your house? You bought you. I've bought my house that
• 14:02
  Speaker 1: literally the top of the market. The only thing that
• 14:05
  Speaker 1: makes me feel okay is that I've got a decent
• 14:07
  Speaker 1: mortgage rate and you're gonna be there for twenty years.
• 14:10
  Speaker 1: You did notice in the retail inventories data that auto
• 14:12
  Speaker 1: and auto parts drove the train there at three the
• 14:16
  Speaker 1: car is coming, I hope. So from from your mouth
• 14:20
  Speaker 1: to Mary Mary Barry, Mary Barry yesterday warned about economic
• 14:23
  Speaker 1: conditions weakening. I just wanted the one chip they need
• 14:27
  Speaker 1: for my Silverado. Put it in the truck and then
• 14:30
  Speaker 1: ship it to me. That's all I want. So what
• 14:32
  Speaker 1: does the housing data? What does the eco data? Danielle
• 14:34
  Speaker 1: kind of tell you. So, look housing, since we're actually
• 14:37
  Speaker 1: talking about the two sectors that lead economies consistently, in
• 14:41
  Speaker 1: and out of expansions and contractions, housing and autos always
• 14:45
  Speaker 1: take the lead. Those are just the rules of ECO
• 14:47
  Speaker 1: one oh one. Because housing has tentacles, right, It affects consumption,
• 14:51
  Speaker 1: If it affects what you put in houses, it affects
• 14:54
  Speaker 1: your sentiment. If you start hearing people who have been
• 14:56
  Speaker 1: all excited my house price is going up this much,
• 14:57
  Speaker 1: blah blah blah. Now they're like my house price way up.
• 15:00
  Speaker 1: My my property taxes are through the roof, and sales
• 15:03
  Speaker 1: are cratering, so you're not as happy anymore. You're not
• 15:05
  Speaker 1: going to buy as much stuff. So it has ripple
• 15:08
  Speaker 1: effects throughout the rest of the economy. And I think
• 15:10
  Speaker 1: that that's what we need to be paying attention to.
• 15:12
  Speaker 1: Outside of the spike down that we saw during during COVID,
• 15:15
  Speaker 1: this is the lowest data that we've seen since after
• 15:18
  Speaker 1: the financial crisis, after the housing bubble burst. By the way,
• 15:21
  Speaker 1: my my property taxes, I could put my kid through Harvard. Yes,
• 15:25
  Speaker 1: with my property taxes. It's insane. But you're going to
• 15:28
  Speaker 1: see property tax foreclosures for older Americans on fixed incomes
• 15:33
  Speaker 1: own their homes right terrifying and and I I know
• 15:36
  Speaker 1: so many people now have been trying to sell their
• 15:38
  Speaker 1: houses but they can't because nobody can get our wants
• 15:41
  Speaker 1: to get a mortgage for six percent at these prices,
• 15:44
  Speaker 1: and financing is falling through, and new home sales you're
• 15:48
  Speaker 1: hearing about cancelations with every single home home. Speaking of cancelations,
• 15:53
  Speaker 1: I really want to get to forward guidance. The Fed
• 15:55
  Speaker 1: decides today, and yes it's every month, but it's really
• 15:59
  Speaker 1: more excitingly lead than it had been for a while. Um,
• 16:02
  Speaker 1: not only do we expect seventy five basis points, maybe
• 16:05
  Speaker 1: even a hundred, but they could ditch forward guidance. Is
• 16:09
  Speaker 1: that a possibility? It's like taken away the pacifier. Yeah,
• 16:13
  Speaker 1: it really is. I mean and and as I was
• 16:15
  Speaker 1: saying before we went on the air, to me, this
• 16:17
  Speaker 1: indicates a lower strike price on the FED poot and
• 16:21
  Speaker 1: it means to me that that markets are going to
• 16:23
  Speaker 1: be much more reactionary because they're going to assume that
• 16:25
  Speaker 1: the FED is going to be much more reactionary to
• 16:27
  Speaker 1: the data rather than like one ludes. So because that
• 16:31
  Speaker 1: forward guidance implies, it implies a calmness no matter what happens.
• 16:36
  Speaker 1: And this is what we plan to do, and we're
• 16:39
  Speaker 1: gonna stick to our word, or we're gonna follow leg
• 16:41
  Speaker 1: guard down the rabbit hole and get rid of it. Daniel.
• 16:44
  Speaker 1: Earlier in the show we had it. We had a
• 16:45
  Speaker 1: trader type on and he was kind of making the
• 16:48
  Speaker 1: trading call that you know, recession, if we're not in it,
• 16:52
  Speaker 1: we're darned close to it. And that's going to give
• 16:54
  Speaker 1: reason for the FED to be more cautious going forward.
• 16:57
  Speaker 1: That's a positive for risk assets. That was his trading call.
• 17:00
  Speaker 1: That's the FED put. Okay, how does that's the assumption
• 17:03
  Speaker 1: that the FED put is intact? And we get any
• 17:06
  Speaker 1: sense of that today from so I need to pay attention.
• 17:09
  Speaker 1: I still think off course, so but I have to
• 17:12
  Speaker 1: pay atten well basically, But it's not popular. But I
• 17:14
  Speaker 1: think Powell is determined to push through in September. Yeah,
• 17:17
  Speaker 1: because going against this is his desire not to be
• 17:22
  Speaker 1: and Arthur Burns repeat exactly, he would rather be a
• 17:26
  Speaker 1: Paul Volker exactly. That was always his idol. He loved,
• 17:31
  Speaker 1: loves Paul Volker. Who doesn't don't didn't We all love
• 17:35
  Speaker 1: Paul Volker? But the giant to the extent that he
• 17:39
  Speaker 1: can without breaking credit, and you have not seen this
• 17:42
  Speaker 1: massive gapping out in how yield spreads to indicate distresses
• 17:46
  Speaker 1: like systemic watch out to the extent he doesn't break credit.
• 17:49
  Speaker 1: I think he keeps going. I think Powell keep I
• 17:52
  Speaker 1: think he goes on September twenty one. So what do
• 17:54
  Speaker 1: you think a terminal rate? We're talking about four? I
• 17:56
  Speaker 1: heard we've been Tryinhart was saying he thinks five percent
• 18:01
  Speaker 1: or more. An unemployment at six percent, now that's an outlier.
• 18:04
  Speaker 1: Pending home sales down, you're over your I don't think so. Okay,
• 18:08
  Speaker 1: not happening. It'll break the economy. Two and a half
• 18:11
  Speaker 1: broke the economy before the crisis. So what do you think? Three?
• 18:16
  Speaker 1: And I think we may get to a three handle.
• 18:18
  Speaker 1: But again, we've got two trillion dollars more in corporate
• 18:21
  Speaker 1: debt than we had last time he attempted this. While cute,
• 18:26
  Speaker 1: nobody's talking about quantitative tightening, it's still going on, it
• 18:30
  Speaker 1: still ramping up. It's oh my gosh. The conspiracy theorists
• 18:33
  Speaker 1: on my Twitter feed are making me nuts. Look, there
• 18:36
  Speaker 1: are two dates in which treasuries mature, fifteen of the
• 18:39
  Speaker 1: month and the last day of the month. So if
• 18:42
  Speaker 1: if there's kind of some some kind of noise in
• 18:44
  Speaker 1: between some week, it's because treasuries didn't mature. Get over it.
• 18:47
  Speaker 1: What's your Twitter handle? By the way, at DeMartino booth,
• 18:50
  Speaker 1: Now you're gonna send more crazy social media. I look
• 18:55
  Speaker 1: at I'm looking at euro dollar futures um and to
• 19:00
  Speaker 1: see what the market thinks the Fed is going to do.
• 19:02
  Speaker 1: And I've been pointed this direction by Kevin Muir. The
• 19:05
  Speaker 1: macro tourists love his stuff. Um, he sees a peek
• 19:09
  Speaker 1: or euro dollar future show as a peek at around
• 19:11
  Speaker 1: three e D and then they come right back down
• 19:14
  Speaker 1: in twenty three and twenty four. Is that what we're
• 19:16
  Speaker 1: going to see? It depends on who Powell is. That's
• 19:19
  Speaker 1: the FED put, right, that is the Fed put, and
• 19:22
  Speaker 1: markets are anticipating that already. That's what we're seeing in
• 19:25
  Speaker 1: the stock market right now. They're anticipating that rates are
• 19:27
  Speaker 1: coming down in twenty three and quickly. And you think
• 19:31
  Speaker 1: maybe not so much. Just look, there's a midterm election
• 19:35
  Speaker 1: in front of us, there really is, and there's no
• 19:37
  Speaker 1: fiscal relief coming. And Powell really does want to prove
• 19:40
  Speaker 1: his his medal. He wants to take back his reputation.
• 19:44
  Speaker 1: He wants to undo the transitory sin. But does he
• 19:47
  Speaker 1: want to make sure that the Democrats don't get too
• 19:50
  Speaker 1: slaughtered in the mid terms? I mean, last check, he's
• 19:53
  Speaker 1: a Republican, so yeah, so, and he's like the only
• 19:56
  Speaker 1: one on the whole board, and he wants to prove
• 19:59
  Speaker 1: he's got the veto the ultimate detail power. He wants
• 20:01
  Speaker 1: to exert his his his his control over his board,
• 20:05
  Speaker 1: and I think he is Wow, alright, good stuff. I
• 20:08
  Speaker 1: mean we get Danielle DiMartino booth In Studio brings the
• 20:10
  Speaker 1: A game every time. Well, and it's an incredibly dramatic time, right,
• 20:15
  Speaker 1: I'm like, oh my gosh, every bit of data, very
• 20:17
  Speaker 1: exciting economic geeks, interest rate geeks, we got them here.
• 20:21
  Speaker 1: Daniel D. Martino, Booths CEO and chief strategist at quill
• 20:24
  Speaker 1: In Intelligence, joining us life here in our Bloomberg Interactive
• 20:26
  Speaker 1: Broker studio. The FED released two pm Wall Street Time
• 20:30
  Speaker 1: press conference two thirty Wall Street Time. Of course, Bloomberg's
• 20:33
  Speaker 1: complete coverage starting at one thirty pm Wall Street Time.
• 20:37
  Speaker 1: We cover it because it's important. So it's kind of
• 20:44
  Speaker 1: mid June. We've had interest rates pullback really substantially when
• 20:47
  Speaker 1: I got the tenure down at two point seven six percent.
• 20:49
  Speaker 1: We've had the S and P five you know, rally
• 20:52
  Speaker 1: abound eight percent during that time, and so you know,
• 20:55
  Speaker 1: kind of dumb money like me, I'm saying, do I
• 20:58
  Speaker 1: buy this thing? Is it a dead cat bounce? What
• 21:00
  Speaker 1: do I do here? And I know other people are
• 21:03
  Speaker 1: out there like me asking those questions, and hopefully Katerina Simonetti,
• 21:07
  Speaker 1: who's a senior vice president and private wealth adviser for
• 21:10
  Speaker 1: Morgan Stanley, has some some answers there. So, Katarina, how
• 21:13
  Speaker 1: are you when you talk to your clients, how are
• 21:14
  Speaker 1: you kind of framing this year today, which has been
• 21:17
  Speaker 1: brutal but a little bit of a bounce here over
• 21:20
  Speaker 1: the last month or so. Well, thank you for having
• 21:23
  Speaker 1: me on the show, And you're right, we're looking for
• 21:26
  Speaker 1: any type of source for optimism that we can find.
• 21:31
  Speaker 1: As much as we want to believe that this is
• 21:33
  Speaker 1: the start of the market recovery, most likely this is
• 21:37
  Speaker 1: just a bear market rally because what we need to
• 21:40
  Speaker 1: see is we need to see significant earnings revisions, lower inflation,
• 21:44
  Speaker 1: and the actual pivot and sad strategy before we can
• 21:48
  Speaker 1: get excited about this rally. And we don't think that
• 21:50
  Speaker 1: we're quite there yet, so for now, we're staying defensive.
• 21:54
  Speaker 1: We prefer defensive sectors like healthcare, like utilities, like consumer states,
• 22:00
  Speaker 1: than reads to the growth sectors, as difficult as it
• 22:03
  Speaker 1: might be, because we all know that investors love their
• 22:06
  Speaker 1: growth stocks. We have this love affair with the growth sector.
• 22:10
  Speaker 1: It's exciting sector. It's something that we all love to own.
• 22:13
  Speaker 1: But for now, our recommendation to our clients, to the
• 22:18
  Speaker 1: investors is to stay defensive and to get through the
• 22:21
  Speaker 1: end of this year, which most likely is going to
• 22:23
  Speaker 1: bring significant further volatility. As we know, continue with the
• 22:28
  Speaker 1: team yearnings. Yeah, we've we've really seen the rotation into value,
• 22:33
  Speaker 1: although recently UM in terms of E t F flows
• 22:36
  Speaker 1: growth has picked back up again. Um, what what is
• 22:39
  Speaker 1: it gonna take, Katarina, because Vince Ignarella here at Bloomberg
• 22:43
  Speaker 1: has pointed out a lot of UM leading indicators show
• 22:48
  Speaker 1: that we could be in or at least headed for
• 22:51
  Speaker 1: very soon a recession and at that point he thinks
• 22:55
  Speaker 1: the FED has to at least stop, but maybe even
• 22:58
  Speaker 1: turn around, and that's good risk assets. Well, absolutely, it
• 23:03
  Speaker 1: seems that the equity market is looking ahead to the
• 23:06
  Speaker 1: said pivot. The question is at what point isn't going
• 23:09
  Speaker 1: to come? And what we're dealing with right now is
• 23:12
  Speaker 1: major fears of recession at least, you know, most of
• 23:15
  Speaker 1: the the individual investors are convinced that we're going to
• 23:19
  Speaker 1: get in in recession of some kind, whether it's going
• 23:22
  Speaker 1: to be deep or shallow recession. You know, we are
• 23:25
  Speaker 1: in the environment over the historically unprecedented inflation levels that
• 23:30
  Speaker 1: we have not seen, you know, for many, many years,
• 23:33
  Speaker 1: and this is definitely, you know, a contributing factor to
• 23:36
  Speaker 1: the said decision to continue raising rates. We're dealing the
• 23:40
  Speaker 1: bowl over labor markets, ongoing to a political risk. There
• 23:44
  Speaker 1: are a lot of things that are hitting this market
• 23:46
  Speaker 1: all at the same time. And this is not to
• 23:48
  Speaker 1: say that there's no end in sight. You know, we
• 23:51
  Speaker 1: just are having difficult time getting excited about the growth
• 23:55
  Speaker 1: at this point, you know, with this type of inflation
• 23:58
  Speaker 1: ary pressures and need to general read additional extra income
• 24:02
  Speaker 1: were investors to compensate for high inflation. So, Katarina, you know,
• 24:07
  Speaker 1: a lot of retail investors and investors just in general
• 24:11
  Speaker 1: have kind of been you know, kind of weaned on
• 24:13
  Speaker 1: this sixty forty uh portfolio. But boy, this year that
• 24:17
  Speaker 1: got you nowhere because you've got you know, bond returns
• 24:20
  Speaker 1: double digit declines and returns and performance that we've never
• 24:24
  Speaker 1: seen in some of the corporate bond and even the
• 24:26
  Speaker 1: treasury sectors in the bond market. Are you getting a
• 24:30
  Speaker 1: sense that you just kind of kind of throw up
• 24:32
  Speaker 1: your hands and start buying them here? The sixty portfolio
• 24:36
  Speaker 1: has been a stable for many years, and we think
• 24:40
  Speaker 1: that it's going to continue being a stable We just
• 24:42
  Speaker 1: have to revise our expectations for what we can actually
• 24:46
  Speaker 1: earn and portfolio like this UM. And when it comes
• 24:49
  Speaker 1: to bonds, yes, I think that that we have to
• 24:52
  Speaker 1: be very particular in in what kind of bond sectors
• 24:55
  Speaker 1: we're looking at. We have to you know, it's kind
• 24:58
  Speaker 1: of gravitate to first quality. But there are a tremendous
• 25:01
  Speaker 1: amount of buying opportunities in the bond markets right now
• 25:04
  Speaker 1: as bonds you know, are looking to recover a set
• 25:07
  Speaker 1: of stocks, uh and uh, you know, we can't give
• 25:10
  Speaker 1: up on them. And you know, I think that that
• 25:11
  Speaker 1: it was a bit of a wake up pole and
• 25:13
  Speaker 1: a shock to a lot of retail investors seeing their
• 25:16
  Speaker 1: bonds port folios decline as much as they did. But
• 25:19
  Speaker 1: we're encouraging them to stay with their uh sixty foot models,
• 25:24
  Speaker 1: if bests where they're at, but take a really hard
• 25:28
  Speaker 1: and close look at the quality of bonds that they
• 25:30
  Speaker 1: own within these portfolios because it's going to make all
• 25:33
  Speaker 1: the difference in the world. So so you're you're just
• 25:38
  Speaker 1: looking at UM, investment grade and government securities because a
• 25:42
  Speaker 1: lot of people have reached out for higher yield bonds recently,
• 25:47
  Speaker 1: well their investment grade, their government securities, but also you
• 25:50
  Speaker 1: know they're preferred. There's ideals. We just need to make
• 25:54
  Speaker 1: sure that the allocation of these the fixed income access classes,
• 25:58
  Speaker 1: but then the folios that are appropriate because you know,
• 26:02
  Speaker 1: we want to a lot of investors are not realizing
• 26:04
  Speaker 1: that they're taking on some extra risks by incorporating some
• 26:08
  Speaker 1: of the the lower quality bonds in the portfolio. And
• 26:13
  Speaker 1: this is the time because everything is down, the the
• 26:16
  Speaker 1: bond market has been hit, you know, just so significantly
• 26:20
  Speaker 1: more than we have seen in many many years, you know,
• 26:22
  Speaker 1: so they are buying opportunities where we can pick up
• 26:25
  Speaker 1: some of the higher quality fixed income and improve the
• 26:28
  Speaker 1: overall quality of the portfolio by doing so. Um And
• 26:33
  Speaker 1: when it comes to yield, of course, you know, the
• 26:36
  Speaker 1: high yields and preferred make a significant difference. But we
• 26:39
  Speaker 1: can also look at the non six income access classes
• 26:42
  Speaker 1: and bond alternatives like reads for example. You know, we
• 26:46
  Speaker 1: we um incorporate the the higher yielding equities in the
• 26:52
  Speaker 1: portfolios in order to to kind of just just balance
• 26:55
  Speaker 1: of the risks that we're seeing in six income. All right,
• 26:58
  Speaker 1: good stuff, there as all Is. Katerina Simonettie Katarina is
• 27:02
  Speaker 1: a senior vice president private wealth adviser with our good
• 27:05
  Speaker 1: friends over at Morgan Stanley Teva Pharmaceuticals t e v A.
• 27:12
  Speaker 1: The stock is up big today. The company struck a
• 27:15
  Speaker 1: deal with US state and local governments to pay more
• 27:18
  Speaker 1: than four billion dollars to settle thousands of lawsuits. So
• 27:22
  Speaker 1: stock reacting positively to that. Uh. Fortunately today we have
• 27:25
  Speaker 1: car Sholtz with us, the CEO of Teva Pharmaceuticals Core.
• 27:29
  Speaker 1: Thanks so much for taking the time here. I love
• 27:31
  Speaker 1: for you to kind of put into context. Uh, this
• 27:34
  Speaker 1: um I guess agreement, this deal with US state and
• 27:37
  Speaker 1: local governments, gives us a sense of what it entails. Yeah,
• 27:41
  Speaker 1: so it's a thing that's been long in the works,
• 27:44
  Speaker 1: she could say. So, we've been negotiating for a long time,
• 27:47
  Speaker 1: and the deal basically in jails that we'll be paying
• 27:50
  Speaker 1: over a thirteen year period money to the states and subdivisions,
• 27:55
  Speaker 1: money that they can use to help people suffering from
• 27:58
  Speaker 1: substance abuse, and will also be contributing product which is
• 28:03
  Speaker 1: in this case generic version of knock and spray, which
• 28:06
  Speaker 1: you can use to save people if they have an
• 28:09
  Speaker 1: overdose situation, So those two elements will be contributing, and
• 28:14
  Speaker 1: it's something we've negotiated for a long time and we're happy,
• 28:18
  Speaker 1: happy to see this resolution and move forward from here. Well,
• 28:22
  Speaker 1: why is the opioid pandemic um solely affecting the United States?
• 28:29
  Speaker 1: I was living in Germany for the past five years
• 28:32
  Speaker 1: and we didn't hear about any opioid overdoses or addictions there. Yeah,
• 28:38
  Speaker 1: so that's a good question. I think that the main
• 28:40
  Speaker 1: reason is that in most European countries, including Germany for instance,
• 28:44
  Speaker 1: you have a national driven healthcare system which encompasses all
• 28:50
  Speaker 1: doctors in the system and all patients, all the whole population,
• 28:55
  Speaker 1: and there's a very easy, strict way to control any
• 28:59
  Speaker 1: script it's written, any script that's received by anybody. So
• 29:04
  Speaker 1: if you're a person who needs opioids because you have pain,
• 29:08
  Speaker 1: either because you have had an operation, or you're maybe
• 29:12
  Speaker 1: terminally cancer or whatever situation, then it's very easy for
• 29:15
  Speaker 1: society to keep check on which patient gets which prescription
• 29:19
  Speaker 1: from which doctor. And that basically means that the whole
• 29:22
  Speaker 1: control system for many years, last twenty thirty years, in
• 29:26
  Speaker 1: most European countries have been very strict and easy to implement,
• 29:31
  Speaker 1: whereas in the United States, where we have private healthcare
• 29:35
  Speaker 1: and where it's much more dispersed and where there's less
• 29:39
  Speaker 1: central control in terms of databases and so on on,
• 29:42
  Speaker 1: in the prescription, it has been more of a challenge
• 29:45
  Speaker 1: to control. Take. On top of that that, the access
• 29:50
  Speaker 1: to illegal drugs in the US is much much higher
• 29:54
  Speaker 1: than it is in most European countries. The access to
• 29:57
  Speaker 1: illegal fence ail meth and fedomin and fedoman on in
• 30:00
  Speaker 1: the US is of course very very problematic because so
• 30:05
  Speaker 1: easy to get access to either food the internet, you know,
• 30:08
  Speaker 1: just buying it online, or food invitation that comes in
• 30:12
  Speaker 1: from China, Mexico, Colombians on coor what do you think about, uh,
• 30:17
  Speaker 1: you know, after we've been through this pandemic, I'm gonna
• 30:20
  Speaker 1: say we've been through it because now you know, seventy
• 30:23
  Speaker 1: eight year old man can get COVID and uh, you know,
• 30:26
  Speaker 1: barely feel it for five days and he's back in
• 30:28
  Speaker 1: the oval office with no problems. How do you see
• 30:31
  Speaker 1: it from from your vantage point? So my company, Tea,
• 30:36
  Speaker 1: we are, you know, a really company, and we were
• 30:39
  Speaker 1: there together with the Israeli government with the very first
• 30:43
  Speaker 1: wave of vaccinations very early on. So Chever actually organized
• 30:48
  Speaker 1: orchestrated the whole distribution and setting up the vaccination programs
• 30:54
  Speaker 1: go with these really government, and that worked very well,
• 30:59
  Speaker 1: and I think it's who as President Biden said that
• 31:02
  Speaker 1: vaccination and booster shots are very important, especially for the
• 31:07
  Speaker 1: elderly part of the population. I say the plus fifty
• 31:10
  Speaker 1: years of age myself, I've been vaccinated and I've had
• 31:14
  Speaker 1: three boosters. I've been you could say I've been vaccinated
• 31:18
  Speaker 1: with the fighter bion take vaccine four times, and I
• 31:22
  Speaker 1: think it makes sense, and I do believe that it
• 31:25
  Speaker 1: doesn't keep you away from getting COVID again. You can
• 31:28
  Speaker 1: see ready to get it again, but it does reduce
• 31:31
  Speaker 1: dramatically the symptoms you get. And we have to remember
• 31:35
  Speaker 1: that this is a cold virus. This is like getting
• 31:38
  Speaker 1: a cold in a way. It's just a severe cold,
• 31:40
  Speaker 1: and you keep getting a cold a normal code. You
• 31:43
  Speaker 1: can get that every second year. You get it one
• 31:45
  Speaker 1: year because it mutates. So I think the same thing
• 31:47
  Speaker 1: will happen here. But we will gradually build up natural
• 31:50
  Speaker 1: immunity by getting it, and we can boost that then
• 31:54
  Speaker 1: with getting vaccination shots. And we just got to be
• 31:59
  Speaker 1: careful to take care of the vulnerable population. How important
• 32:04
  Speaker 1: is pax slovid core And I think, if I'm not mistaken,
• 32:07
  Speaker 1: you will also make um a generic version of pax
• 32:10
  Speaker 1: sloved Is that correct? We will, of course make that
• 32:13
  Speaker 1: as soon as we allowed to. I don't think we
• 32:15
  Speaker 1: allowed to do it in the US right now because
• 32:18
  Speaker 1: it's patented, but we have sort of the teamed up
• 32:23
  Speaker 1: with the originator and said that we would like to
• 32:25
  Speaker 1: manufacture it for those parts of the world where it's
• 32:28
  Speaker 1: being made available despite the patents, so speak the cord.
• 32:34
  Speaker 1: Now that the opioid issue from a litigation perspective is
• 32:37
  Speaker 1: largely behind the company, what do you think investors are
• 32:40
  Speaker 1: focusing on or what should they be focusing on? And
• 32:43
  Speaker 1: as they take a look at your company, I think
• 32:45
  Speaker 1: they should focus more on the fundamentals, which are that
• 32:48
  Speaker 1: we are the leading generic company in the world with
• 32:51
  Speaker 1: a fantastic portfolio, and we're building a very strong pipeline
• 32:55
  Speaker 1: and very strong business and bissimilars and biosimilars whill keep
• 32:58
  Speaker 1: on growing significant over the next ten years. And then
• 33:02
  Speaker 1: we have a long and strong tradition in neuroscience and
• 33:07
  Speaker 1: in munology where we have had you know, one of
• 33:09
  Speaker 1: the best products in MS in the world, one of
• 33:12
  Speaker 1: the first good products for Parkinson's disease, and we're doing
• 33:16
  Speaker 1: research in executive those areas. We have projects now on
• 33:19
  Speaker 1: project that potentially can be very addictive Parkinson's disease, and
• 33:24
  Speaker 1: all the projects where we use the immune system to
• 33:26
  Speaker 1: five cancer. So I would say that combination is quite unique.
• 33:31
  Speaker 1: And because we have this combination of doing bio pharmaceuticals
• 33:34
  Speaker 1: and biosin US, then we know how to do it,
• 33:37
  Speaker 1: but we also know how to sell them in this marketplace.
• 33:40
  Speaker 1: All right, course, Schultz, thank you so much for joining us. Really,
• 33:43
  Speaker 1: I appreciate you taking the time. It's Core Schultz, CEO
• 33:46
  Speaker 1: of Teva Pharmaceuticals stock today on the resolution of their
• 33:50
  Speaker 1: litigation for the opioid crisis. Thanks for listening to the
• 33:57
  Speaker 1: Bloomberg Markets podcast. You can see subscribe and listen to
• 34:01
  Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer.
• 34:05
  Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three,
• 34:10
  Speaker 1: pt on Fall Sweeney I'm on Twitter at pt Sweeney.
• 34:12
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 34:15
  Speaker 1: Bloomberg Radio.