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Transcript

A Deep Dive Into Markets And Investing · 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. All right, let's talk
• 0:22
  Speaker 1: middle markets, and we love to chat with Lawrence Golob,
• 0:26
  Speaker 1: CEO of Golob Capital about middle markets. You know, how
• 0:30
  Speaker 1: are the middle markets doing? How are some of the
• 0:31
  Speaker 1: small midsized companies doing. We always here about in these
• 0:34
  Speaker 1: earning seasons some of the bigger companies. But let's take
• 0:36
  Speaker 1: a look at what the middle market is doing. Lawrence,
• 0:39
  Speaker 1: thanks so much for joining us here. I know you
• 0:41
  Speaker 1: guys are out with a new report looking at the
• 0:44
  Speaker 1: middle market of this economy. What are some of the
• 0:46
  Speaker 1: key takeaways that you guys found great, very happy to
• 0:50
  Speaker 1: be here, Thanks for having me. Gall of Capital is
• 0:53
  Speaker 1: one of the largest lenders to medium sized businesses in
• 0:56
  Speaker 1: the United States, and we put together this report to
• 0:59
  Speaker 1: look at actual monthly results from the early months in
• 1:02
  Speaker 1: a quarter to see what's going on in the real
• 1:05
  Speaker 1: US economy, not projections, not conjecture. So our report is
• 1:11
  Speaker 1: based on UH, the actual results from July and August,
• 1:15
  Speaker 1: on revenue and on profitability. And what we see almost
• 1:20
  Speaker 1: across the board is a booming degree of growth, booming
• 1:25
  Speaker 1: growth and revenue, booming growth and profits. Very few one
• 1:29
  Speaker 1: but not many warning signs UH and and this is
• 1:33
  Speaker 1: one of the strongest periods of growth we've ever seen.
• 1:36
  Speaker 1: Hang On, you say there's one warning sign, Well, we
• 1:40
  Speaker 1: have in the aggregate about growth rate and revenue, about
• 1:45
  Speaker 1: growth rate and profits, but not in industrials. Industrial profits
• 1:50
  Speaker 1: are down. We're seeing margin contraction, and that margin contraction
• 1:55
  Speaker 1: is especially alarming because revenue is still growing. I think
• 2:00
  Speaker 1: we're seeing the impacts of UH declining productivity, of inflation
• 2:05
  Speaker 1: in cost components. We're seeing the impact of shipping and
• 2:11
  Speaker 1: logistic issues. In contrast to that. On the consumer side,
• 2:16
  Speaker 1: consumer margins have been exploding up almost fiftuh in in
• 2:21
  Speaker 1: this period, and I say it's a warning side for
• 2:24
  Speaker 1: industrials because eventually those margin issues may start migrating over
• 2:30
  Speaker 1: to other industry areas. So, Lawrence, you mentioned the supply chain,
• 2:34
  Speaker 1: and we're hearing that from companies across the board on
• 2:37
  Speaker 1: a global scale. Even Apple had to take down their
• 2:40
  Speaker 1: iPhone sales forecast due to supply chain issues. I would
• 2:43
  Speaker 1: think from middle market me don't have the buying clout
• 2:47
  Speaker 1: in the marketplace that might be even more pronounced. What
• 2:50
  Speaker 1: are you hearing my My message to listeners is do
• 2:56
  Speaker 1: your Christmas shopping now. Grinches for Halloween and he's not leaving,
• 3:03
  Speaker 1: and he may not even be leaving for Christmas. Of two. Yes,
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  Speaker 1: middle market companies that can't hire their own ships have
• 3:12
  Speaker 1: certain disadvantages over some of the big box or or
• 3:17
  Speaker 1: internet retailers. But fundamentally, what's going on is we have
• 3:22
  Speaker 1: an excess of demand. Now that's good. People want to
• 3:25
  Speaker 1: buy things, but we've pumped five trillion dollars of fiscal
• 3:29
  Speaker 1: stimulus into the economy and nothing's going to change that.
• 3:34
  Speaker 1: We have a lot of buyers chasing fewer goods than exist.
• 3:40
  Speaker 1: I think that the the supply chain issues will vary
• 3:45
  Speaker 1: from sector to sector, but you're going to see in
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  Speaker 1: why areas of consumer products this Christmas something similar to
• 3:53
  Speaker 1: the toilet paper effect we saw when COVID first hit.
• 3:57
  Speaker 1: That people are going to see some stock outs than
• 4:00
  Speaker 1: other people are gonna try and really load up, and
• 4:04
  Speaker 1: the stockouts are going to be worse than fundamentally called
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  Speaker 1: for it. I really have concerns about the degree of
• 4:11
  Speaker 1: consumer disappointment coming this Christmas. It's going to be a big,
• 4:15
  Speaker 1: big Christmas for gift cards. It's not the great the
• 4:18
  Speaker 1: greatest time to try and ship in nine eleven and
• 4:22
  Speaker 1: a garage full of Yukati's back from Germany to New York.
• 4:25
  Speaker 1: What about the labor um shortages that we've been hearing
• 4:28
  Speaker 1: so much about. Isn't that a concern as well? Sure
• 4:32
  Speaker 1: it is, and it's a puzzle. We're down five million
• 4:35
  Speaker 1: jobs from before covid uh and you would have thought
• 4:40
  Speaker 1: there'd be, you know, a fair amount of demand for
• 4:44
  Speaker 1: those jobs. But it's not just it's not just non
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  Speaker 1: managerial labor. It's across the board. Consulting firms are having
• 4:54
  Speaker 1: trouble hiring. NBA's entry level jobs for college graduates are
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  Speaker 1: going begging. It's a little bit peculiar to to really
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  Speaker 1: get to the bottom of. And it also emboldens everybody
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  Speaker 1: who's got a job that they don't love to think
• 5:10
  Speaker 1: about moving somewhere else. One of the statistics that came
• 5:13
  Speaker 1: out and we're seeing this in our portfolio companies. Is
• 5:17
  Speaker 1: that that employee turnover at all different levels is going up.
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  Speaker 1: That's a whack to productivity. It's great that wages and
• 5:27
  Speaker 1: UH compensation are going up. That's good for Americans, it's
• 5:30
  Speaker 1: good for American families. But it has to go hand
• 5:34
  Speaker 1: in hand with productivity or drives more inflation. Lawrence, where
• 5:39
  Speaker 1: are you, guys, goal of capital, looking to invest your capital?
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  Speaker 1: Put your money to work. So we're very we're very
• 5:51
  Speaker 1: excited about industrial businesses that have control over their supply chains.
• 5:55
  Speaker 1: We have proved a deal just two days ago, for example,
• 5:58
  Speaker 1: after a lot of work and a deep live company
• 6:01
  Speaker 1: that manufactures inputs for other manufacturing processes. But we established
• 6:07
  Speaker 1: for ourselves that their supplies are domestic in the United States,
• 6:11
  Speaker 1: that they're raw materials are shipped by train and truck,
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  Speaker 1: and that there's not a lot of commodity price wings.
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  Speaker 1: Take that same business with inputs coming from Asia, where
• 6:21
  Speaker 1: you have the risk that COVID could spring back up
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  Speaker 1: in Asia, You've got the risk of shipping costs, you've
• 6:27
  Speaker 1: got the risk of international commodities, and it would have
• 6:30
  Speaker 1: been a very different picture. We do a lot of
• 6:33
  Speaker 1: investing in business to business software companies where the projects
• 6:38
  Speaker 1: where the software is designed to improve productivity, and that
• 6:41
  Speaker 1: plays into a lot of the themes we just finished
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  Speaker 1: talking about, like shortages of skilled labor, tremendous high returns
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  Speaker 1: on investment, in efficiency, inefficiency driven capex through through technology
• 7:00
  Speaker 1: through software. I think something we've seen and that our
• 7:04
  Speaker 1: report is is giving good news about is in the
• 7:06
  Speaker 1: healthcare field, where actually healthcare services companies have been doing
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  Speaker 1: a good job of controlling their labor costs, of of
• 7:13
  Speaker 1: not letting their labor costs get out of whack with
• 7:16
  Speaker 1: increases in productivity. That's actually quite a bullish thing, something
• 7:19
  Speaker 1: that we haven't seen in some prior cycles. So we
• 7:22
  Speaker 1: haven't seen the inflation hit the health care sector yet,
• 7:26
  Speaker 1: and that's an area we continue to look at very favorably.
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  Speaker 1: All Right, well, great talking to you. Thanks so much
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  Speaker 1: for joining us, Lawrence. Always great to get your insight.
• 7:36
  Speaker 1: Lawrence called there from gold Capital, one of the biggest
• 7:40
  Speaker 1: lenders to the middle market in America, talking to us
• 7:44
  Speaker 1: about um the economics of middle market business right now
• 7:49
  Speaker 1: and giving us his outlook as well. This is Bloomberg.
• 7:55
  Speaker 1: Let's bring in liz Anne Saunders. Now she is chief
• 7:58
  Speaker 1: investment strategist Charles Schwab and um, you know they have
• 8:03
  Speaker 1: trillions of dollars and assets under management, so good to
• 8:06
  Speaker 1: listen to what she has to say, Lizzie, And let
• 8:08
  Speaker 1: me first get your take on the CPI five point
• 8:10
  Speaker 1: four percent year over year growth. It's the fastest we've
• 8:14
  Speaker 1: seen since two thousand eight. Is inflation a concern? Uh, well, sure,
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  Speaker 1: and I think it's it's being reflected in more volatility
• 8:21
  Speaker 1: in the market. There's lots of other risks that have
• 8:24
  Speaker 1: manifested themselves in in some of the weakness we've seen recently,
• 8:27
  Speaker 1: but inflation is clearly one of them. And although we're
• 8:32
  Speaker 1: not seeing kind of an ongoing huge month over month, sirte,
• 8:36
  Speaker 1: we're staying at very elevated levels and I think that
• 8:40
  Speaker 1: that has become a risk factor for the market and
• 8:42
  Speaker 1: really puts the FED, I think, in a bit of
• 8:45
  Speaker 1: a pickle because they would certainly concede that supply chain
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  Speaker 1: bottlenecks as a driver of inflation is not something solved
• 8:52
  Speaker 1: by tighter monetary policy. So uh, it's the uncertainty around
• 8:57
  Speaker 1: monetary policy response is is elevating as well. Lauzanne given
• 9:02
  Speaker 1: that the CPI number. Give us your thoughts about stagflation.
• 9:06
  Speaker 1: It's something a lot a lot of people have had
• 9:08
  Speaker 1: to go to Google and figuring out what stagflation is,
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  Speaker 1: because it's not something we're just gonna talked about for
• 9:13
  Speaker 1: a while. You as the kid of kids, So what
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  Speaker 1: are your thoughts there, Lausanne? Well, I think of it
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  Speaker 1: almost stagflation with the lower case, since stagflation with an
• 9:22
  Speaker 1: upper case s Clearly we're in um stagflation lowercase version
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  Speaker 1: right now, given that we're in an environment where growth
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  Speaker 1: expectations are rolling over. GDP now has gone from you know,
• 9:35
  Speaker 1: six point three to one point three in the last
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  Speaker 1: few months. At the same time, elevating inflation is remaining elevated.
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  Speaker 1: But the kind of systemic wage price spiral environment that
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  Speaker 1: went on for years in the midst from the mid
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  Speaker 1: seventies to the early eighties, was driven by a lot
• 9:53
  Speaker 1: of forces that are or at least not yet in
• 9:56
  Speaker 1: place here. It was a very different structure in terms
• 9:58
  Speaker 1: of the labor market, greater munization, productivity was quite weak,
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  Speaker 1: which is clearly not the case right now. We're not
• 10:06
  Speaker 1: seeing systemic wage increases. But maybe most important, and this
• 10:09
  Speaker 1: is the more esoteric thing to to watch for is
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  Speaker 1: that what what feeds an environment like the nineties seventies
• 10:17
  Speaker 1: has a lot to do with psychology. The psyche changes it.
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  Speaker 1: It gives workers and and even companies a feeling of
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  Speaker 1: power in terms of either being able to ask for
• 10:27
  Speaker 1: consistently higher wages, consistently being able to pass higher costs on.
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  Speaker 1: So it's sort of the psyche changes and the and
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  Speaker 1: the power um is created, and that's where the spiral
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  Speaker 1: kicks in. And I don't think we're there yet, but um,
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  Speaker 1: it's certainly something to watch for. We are, though, in
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  Speaker 1: um extremely cash rich environment. Luzan, And I know I've
• 10:52
  Speaker 1: been talking to you about so much cash on the
• 10:55
  Speaker 1: sideline for over a decade now, but it's getting a
• 10:59
  Speaker 1: little ridicut you list. I mean, I was thinking you
• 11:02
  Speaker 1: had two trillion and assis under management, and you have
• 11:04
  Speaker 1: more like seven and a half trillion dollars and assets
• 11:08
  Speaker 1: under management. There's a lot of money out there, yes
• 11:11
  Speaker 1: and no. So I think sometimes the math is done
• 11:15
  Speaker 1: incorrectly if you look if you're talking about, you know,
• 11:19
  Speaker 1: cash on the sidelines, so to speak, within uh sort
• 11:23
  Speaker 1: of the investor sphere. If you look at the amount
• 11:27
  Speaker 1: of money and money market funds. Yes, the level is
• 11:30
  Speaker 1: very high, at about four and a half trillion dollars,
• 11:33
  Speaker 1: but relative to the value of the stock market, it's
• 11:36
  Speaker 1: less than ten percent, which is at the very low
• 11:39
  Speaker 1: end of the historical range. If you're talking about cash
• 11:42
  Speaker 1: in the economy, that household tool using say the savings rate, Yes,
• 11:46
  Speaker 1: it's it's nine percent or so, which is above the
• 11:49
  Speaker 1: seven and a half or so recent average. But that's
• 11:53
  Speaker 1: down about the way from the liquidity driven spike of
• 11:59
  Speaker 1: last year to where it is now. And we can't
• 12:02
  Speaker 1: assume that we're going to go back down to historic averages.
• 12:06
  Speaker 1: We can stabilize area, we don't know whether households are
• 12:10
  Speaker 1: going to want to keep a bit more of a
• 12:13
  Speaker 1: savings cushion, So we just can't assume that we go
• 12:16
  Speaker 1: all the way back to the long term norm. So
• 12:19
  Speaker 1: I'm not sure that argument is as strong if you
• 12:23
  Speaker 1: look at sort of relative numbers rate of change versus.
• 12:27
  Speaker 1: We do see, though, in some assets, a lot of speculation, right,
• 12:32
  Speaker 1: I mean the fact that a string of code that
• 12:35
  Speaker 1: makes up a bitcoin is worth almost sixty thou dollars.
• 12:40
  Speaker 1: I get that there are believers out there, and I
• 12:43
  Speaker 1: love a good fad, but it's a little bit crazy, right, Well,
• 12:46
  Speaker 1: I think it's going on in lots of other nontraditional
• 12:49
  Speaker 1: assets classes, the meme stocks, heavily shorted tech, nonprofitable bankruptcy companies, stacks,
• 12:56
  Speaker 1: crypto and uh yeah, there there's not a lot of
• 13:01
  Speaker 1: fundamental basis for what's happening. The only bright sort of
• 13:05
  Speaker 1: news about all that is that heightened speculative froth has
• 13:09
  Speaker 1: been more concentrated in those non traditional areas. Then, and say,
• 13:14
  Speaker 1: you know the leadership names within an index like the SMP,
• 13:17
  Speaker 1: and that's I think what is very different today versus
• 13:21
  Speaker 1: say period where the speculative froth was concentrated in the
• 13:26
  Speaker 1: leadership names in the benchmark indexes of the SMP in
• 13:29
  Speaker 1: the AZTEC In just about thirty seconds, what's the area
• 13:33
  Speaker 1: that you're focusing on right now in terms of this market.
• 13:36
  Speaker 1: I think you want to if you're if you're a
• 13:39
  Speaker 1: stock picker, you want to be focused on quality. I
• 13:42
  Speaker 1: think quality is going to reign in terms of leadership
• 13:44
  Speaker 1: in these very uncertain times. I also think you really
• 13:48
  Speaker 1: want to take advantage of the discipline of rebalancing given
• 13:51
  Speaker 1: the massive leadership rotational swings that we're seeing I think
• 13:54
  Speaker 1: that is probably the most beneficial discipline right now that
• 13:58
  Speaker 1: investors can employ what is a much trickier market environment. Luzianne,
• 14:02
  Speaker 1: thank you so much for joining us. We always appreciate
• 14:04
  Speaker 1: getting your thoughts and wisdom. Lazanne Saunders, she's a chief
• 14:07
  Speaker 1: investment strategist for Charles Schwab and again assets under management
• 14:11
  Speaker 1: for Charles Schwab uh seven point five trillion with eight
• 14:16
  Speaker 1: t so just extraordinary there. Now let's bring in Hondres Pairson.
• 14:23
  Speaker 1: He's the chief investment officer of Global fixed Income over
• 14:27
  Speaker 1: at now Vene and you must be honors a a
• 14:31
  Speaker 1: dinner guest in high demand right now as everybody kind
• 14:35
  Speaker 1: of freaks out about inflation and we start to see
• 14:38
  Speaker 1: rates finally rise, the tenuere um getting up to one sixty.
• 14:43
  Speaker 1: Now it's back down to one fifty five, but still, um,
• 14:47
  Speaker 1: there's actual movement here. What do you make of it? Yeah?
• 14:51
  Speaker 1: Thanks for having me on um. Yeah, there was so
• 14:54
  Speaker 1: many exciting times, a lot of a lot of crosscurrents
• 14:56
  Speaker 1: that's still playing to earn the fixing come markets. And
• 15:00
  Speaker 1: we just released our que for outlook report and we're
• 15:03
  Speaker 1: still we're still quite constructive for the rest of the year,
• 15:06
  Speaker 1: particularly when we look at the kind of the credit
• 15:08
  Speaker 1: parts of fixed income, we still think there are some
• 15:11
  Speaker 1: opportunities for this reflation trade to continue. And at the
• 15:15
  Speaker 1: core we still take some comfort here that you know,
• 15:18
  Speaker 1: COVID cases, hospital rates are declining, and economic gride growth
• 15:22
  Speaker 1: is holding up quite well, and certainly supply side issues
• 15:27
  Speaker 1: is something that we're keeping a close eye on, but
• 15:30
  Speaker 1: we do expect that to ease over time, and then
• 15:33
  Speaker 1: finding inflation you know, obviously top of mind today. Um,
• 15:37
  Speaker 1: we still continue to think it's it's going to not
• 15:40
  Speaker 1: be fully transitory, but manageable and not too problematical markets.
• 15:45
  Speaker 1: So that all in all kind of keeps us in
• 15:47
  Speaker 1: a in a quieter positive light and quite constructive for
• 15:51
  Speaker 1: the rest of the year. Well, Andrews were you know,
• 15:53
  Speaker 1: the growth is certainly still very good, although we are
• 15:56
  Speaker 1: past peak growth, but a lot of investors are concerned
• 15:59
  Speaker 1: that we're and add our near peak valuation. So where
• 16:03
  Speaker 1: do you see opportunities, I guess in your world, Yeah,
• 16:08
  Speaker 1: I mean, certainly growth is expected to slow down when
• 16:12
  Speaker 1: so some of the imp numbers come out to speak obviously,
• 16:15
  Speaker 1: but it's still you know, global rates close to six
• 16:18
  Speaker 1: percent for this year and for twenty two sort of
• 16:22
  Speaker 1: five percent. That's still very healthy in our minds. So
• 16:25
  Speaker 1: we're even kind of talking about how the markets are
• 16:29
  Speaker 1: more or less priced um sort of for reality, not
• 16:33
  Speaker 1: price for for perfection. And we look at fundamentals being
• 16:38
  Speaker 1: quite strong. Again, I mentioned economy growing um and earning
• 16:42
  Speaker 1: school for corporation is very healthy. So what we what
• 16:45
  Speaker 1: we're focusing in on right now for opportunities is basically
• 16:48
  Speaker 1: basically sort of looking at corporate credit risk, preferring that
• 16:52
  Speaker 1: over the governments and mortgages. We like lower quality over
• 16:56
  Speaker 1: higher quality. In other words, were comfortable dipping down and
• 17:00
  Speaker 1: to the lower rated kind of opportunities. We still kind
• 17:03
  Speaker 1: of prefer shorter duration over longer duration. We do expect
• 17:06
  Speaker 1: rates to be grinding higher and for the rest of
• 17:08
  Speaker 1: the year, but all in all a view is uh,
• 17:12
  Speaker 1: it's really more of a coupon clipping kinter top environment
• 17:15
  Speaker 1: more or less a income carry kind of play. So
• 17:20
  Speaker 1: we're comfortable reaching for a little bit of yield and
• 17:22
  Speaker 1: certainly what spread levels are not exciting. We are comfortable
• 17:26
  Speaker 1: going after acid classes like laverge loans, preferred securities, certain
• 17:32
  Speaker 1: parts of the emerging market, so again kind of going
• 17:35
  Speaker 1: after that credit part. The plus sectors of fixed in
• 17:38
  Speaker 1: commerces are preferred approach at this point. And you know,
• 17:42
  Speaker 1: we hear similar um a sentiment from Howard Marks right
• 17:46
  Speaker 1: now as well. You're not then at all worried about
• 17:50
  Speaker 1: a wave of defaults. Even though people are talking stagflation.
• 17:55
  Speaker 1: No one's really talking about the economic economic growth grinding
• 17:59
  Speaker 1: to a halder or been coming close to contracting. No,
• 18:03
  Speaker 1: we're we're we're not worried about that at this point.
• 18:06
  Speaker 1: And the learning's growth again for corporations very healthy. The
• 18:10
  Speaker 1: faults have been coming down to record levels. Expect to
• 18:13
  Speaker 1: be below one percent for for this year kind of
• 18:16
  Speaker 1: one in a quarter, one and a half or two
• 18:18
  Speaker 1: thousand twenty two. You know, rating agencies obviously have some
• 18:22
  Speaker 1: influence in the fixed income space, and they have been
• 18:24
  Speaker 1: upgrading their ratings significantly more than we're seeing downgrades, and
• 18:29
  Speaker 1: and all in all, you know, start plaction. Obviously, it's
• 18:32
  Speaker 1: a topic that that you hear a lot about right now.
• 18:34
  Speaker 1: Our view is that with again economic growth being as
• 18:38
  Speaker 1: healthy as it is right now, um, that's really not
• 18:42
  Speaker 1: the top of mind on our end. So you know,
• 18:45
  Speaker 1: we cannot come back to the fact that we're seeing
• 18:47
  Speaker 1: healthy growth all in all, supply chains obviously being a
• 18:52
  Speaker 1: bit concerning and taken longer to kind of play through
• 18:55
  Speaker 1: than I think most everybody was expecting, but the demand
• 19:00
  Speaker 1: remains very, very strong, and we think that's going to
• 19:02
  Speaker 1: be addressed over time. And as I mentioned, inflation is
• 19:06
  Speaker 1: mostly going to be transitory in our minds. So so
• 19:09
  Speaker 1: all in all, I think staculations, you know, it's really
• 19:12
  Speaker 1: not a concern of ours, and defaults continues to be
• 19:14
  Speaker 1: very low. So the fundamentals continue to be to be
• 19:18
  Speaker 1: very strong here if you take kind of step back
• 19:20
  Speaker 1: and try to ignore, you know, many of the cross
• 19:23
  Speaker 1: currents that we're dealing with, and that's why we remain
• 19:26
  Speaker 1: quite constructive, particularly on the credit side of fixing. Coman Andrews.
• 19:30
  Speaker 1: You mentioned emerging markets. Talk to us about China. Hear
• 19:33
  Speaker 1: lots of changes there from our governmental regulatory perspective. How
• 19:37
  Speaker 1: do you you China? Yeah, China, it's certainly, you know,
• 19:42
  Speaker 1: top of mind for for all investors at this point,
• 19:44
  Speaker 1: and you know, key focus of the past few weeks,
• 19:47
  Speaker 1: particularly around the everground kind of type ongoing uncertainty. You know,
• 19:53
  Speaker 1: I would say, you know, we we still are quite
• 19:57
  Speaker 1: constructive in China overall. It's particularly to look at the
• 20:00
  Speaker 1: sovereign kind of have level of Chinese government. Lawns were
• 20:03
  Speaker 1: actually quite we quite like them. We're not too concerned
• 20:06
  Speaker 1: about that. If anything, you know, a little bit of
• 20:09
  Speaker 1: a flight to safety there and our mind. Um, you know,
• 20:12
  Speaker 1: it could be quite attractive and there is diversification and
• 20:16
  Speaker 1: not quite as correlated to other parts of the fixed
• 20:21
  Speaker 1: income space. So you know, certainly from the sovereign side,
• 20:24
  Speaker 1: require comfortable. On the corporate side, you know, we we're
• 20:28
  Speaker 1: keeping of our clothes eye am that we prefer to
• 20:31
  Speaker 1: take a little bit of await and see to make
• 20:33
  Speaker 1: sure that we get a little bit of a better
• 20:35
  Speaker 1: feel for how they're going to be handled. Ever grand
• 20:37
  Speaker 1: but um, there's still a lot of moving parts in that. Okay, Anders,
• 20:41
  Speaker 1: thank you so much for joining us. We always appreciate
• 20:43
  Speaker 1: getting your global perspective. And Parson, chief investment Officer of
• 20:47
  Speaker 1: Global fixed Income for Nouvine, another big, huge asset manager
• 20:51
  Speaker 1: one point to trillion dollars in assets under management. Well
• 20:55
  Speaker 1: more coming up. This is Bloomberg Markets. Good morning. Looking
• 21:02
  Speaker 1: at the markets here, kind of mixed obviously as we
• 21:04
  Speaker 1: head into the teeth of this third quarter earnings. Next year,
• 21:08
  Speaker 1: it looks like tax rates are going up, and what
• 21:10
  Speaker 1: does that mean for individual investors now is they think
• 21:13
  Speaker 1: about their portfolio. Let's check in with Dan Griffin. He's
• 21:16
  Speaker 1: senior vice president and director of Wealth Strategy at Huntington's
• 21:19
  Speaker 1: Private Bank based in North Canton, Ohio, the great state
• 21:23
  Speaker 1: of Ohio. Dan, thanks so much for joining us again
• 21:25
  Speaker 1: here talk to us about taxes. It appears at taxes
• 21:29
  Speaker 1: are going up. We don't know by how much. So
• 21:32
  Speaker 1: when you talk to your clients, what do you tell
• 21:35
  Speaker 1: them about taxes and tax planning. Well, glad to be here,
• 21:38
  Speaker 1: Matt and Paul, and thanks for having me. It's a
• 21:41
  Speaker 1: it's a great question. It's a wonderful thing to be
• 21:44
  Speaker 1: able to go into another year end here with a
• 21:46
  Speaker 1: little bit of frantic ear end planning. As everyone remembers
• 21:49
  Speaker 1: last year, we were in a similar situation as we
• 21:52
  Speaker 1: can think back to people's concern over what was going
• 21:55
  Speaker 1: to happen with the potential flip in the Senate and
• 21:57
  Speaker 1: we didn't know what was going to happen there, and
• 21:59
  Speaker 1: I fear that we're kind of in the same position
• 22:01
  Speaker 1: right now. So what we're telling people is be prepared,
• 22:04
  Speaker 1: make sure you've got good advisers in place, make sure
• 22:06
  Speaker 1: you've got a plan in place, and make sure that
• 22:08
  Speaker 1: you're prepared to be flexible around what could be any
• 22:11
  Speaker 1: number of responses from Washington that could happen. Is there
• 22:14
  Speaker 1: anything you can do to limit your your income hit
• 22:20
  Speaker 1: to taxes? I mean, obviously, if you've got money after
• 22:23
  Speaker 1: income taxes lying around, you can put it into muni's
• 22:26
  Speaker 1: and there a number of other things. But in terms
• 22:29
  Speaker 1: of a salaried woman or man, is there anything besides
• 22:34
  Speaker 1: an IRA that can be done? Oh? Sure. I think
• 22:37
  Speaker 1: for a lot of people, what you might want to
• 22:38
  Speaker 1: be thinking about would be obviously reductions in this year
• 22:42
  Speaker 1: and then reductions in the future. The folks that were
• 22:45
  Speaker 1: most concerned about and that we're working hardest to advocate for,
• 22:48
  Speaker 1: are the people who are going to end up in
• 22:50
  Speaker 1: that highest bracket position. And ironically a lot of our
• 22:53
  Speaker 1: clients think that they're in the highest tax bracket, but
• 22:56
  Speaker 1: they're not. So that's one of the first things to
• 22:58
  Speaker 1: think about is even with the proposals that are on
• 23:00
  Speaker 1: the table, there are many people who aren't going to
• 23:03
  Speaker 1: be affected. It's probably only about nine hundred thousand households
• 23:07
  Speaker 1: in the United States that are actually paying taxes at
• 23:10
  Speaker 1: the highest brackets. So the first thing that we suggest
• 23:13
  Speaker 1: to people is, let's make sure that you're affected. There
• 23:15
  Speaker 1: are plenty of folks around the country club tables who
• 23:18
  Speaker 1: complain about being in the highest tax brackets and may
• 23:21
  Speaker 1: not actually be there, and so that's the first thing,
• 23:23
  Speaker 1: is feeling feeling out whether or not your tax providers
• 23:26
  Speaker 1: can put you in that position. So that's one of
• 23:28
  Speaker 1: the first things that we do. Dan, We're going into
• 23:31
  Speaker 1: this third quarter earning season a lot of folks saying
• 23:34
  Speaker 1: this is really critical for the market. How do you
• 23:36
  Speaker 1: feel about these markets here? Are you concerned about valuation
• 23:40
  Speaker 1: or are you still kind of all in for your clients. No,
• 23:44
  Speaker 1: we're still uh cautiously optimistic. I think we're in a
• 23:49
  Speaker 1: position where we are still investing post recession with a
• 23:52
  Speaker 1: real recognition that there's going to be some inflation risks.
• 23:56
  Speaker 1: You know. In the position I'm in, I get to
• 23:58
  Speaker 1: talk to a lot of business owners as they go
• 24:00
  Speaker 1: through the process. Um, you all mentioned earlier the challenges
• 24:03
  Speaker 1: associated with UH with working making sure they can get
• 24:07
  Speaker 1: enough stuff and making sure they can get enough people
• 24:10
  Speaker 1: supply chain is a big, big question mark for a
• 24:12
  Speaker 1: lot of people, and so substitution is a big one.
• 24:15
  Speaker 1: And with substitution, whether it's UM substituting technology for labor
• 24:20
  Speaker 1: or different technology itself or different products, with that substitution
• 24:24
  Speaker 1: comes new opportunities. And so I think that's a reason
• 24:27
  Speaker 1: to be optimistic. What do you think in terms of UM,
• 24:31
  Speaker 1: what we got, in terms of what the markets got
• 24:36
  Speaker 1: left in it? I mean, we've had a great run
• 24:38
  Speaker 1: already and now they're all these headwinds popping up. People
• 24:40
  Speaker 1: are worried about inflation. The term stagflation is being thrown
• 24:43
  Speaker 1: around regardless of how we want to define it. Um,
• 24:47
  Speaker 1: do we still have room to run in this SMPY.
• 24:52
  Speaker 1: We think the answer is yes. And again, the opportunity
• 24:55
  Speaker 1: to talk to small businesses throughout the Midwest shows us
• 24:58
  Speaker 1: that a lot of businesses are to you to be
• 25:00
  Speaker 1: cautiously optimistic, not that there aren't headwinds, but that they
• 25:04
  Speaker 1: can get through those headwinds and potentially get to a
• 25:07
  Speaker 1: place that's even better. We're seeing that even if people say,
• 25:10
  Speaker 1: you know what, I'm not able to continue my business.
• 25:12
  Speaker 1: I'm gonna sell it, but I'm going to sell it
• 25:14
  Speaker 1: to people that I know we're going to be able
• 25:16
  Speaker 1: to take it to a different level. And so though
• 25:18
  Speaker 1: all though people are definitely recognizing the challenges that exist
• 25:22
  Speaker 1: out there, that we still hear optimism at the at
• 25:25
  Speaker 1: the ground level, and I think that that's justified, all right, Dan,
• 25:29
  Speaker 1: So it's interesting here where do you see some opportunities here?
• 25:33
  Speaker 1: I mean a lot of folks are worried about evaluation.
• 25:35
  Speaker 1: Are you kind of looking for value or you looking
• 25:38
  Speaker 1: for growth or maybe geez, growth at a reasonable price.
• 25:42
  Speaker 1: We're doing both. I think what's been really interesting, both
• 25:45
  Speaker 1: on the tax planning standpoint and on the investing standpoint,
• 25:49
  Speaker 1: is that we've been a lot more strategic about talking
• 25:52
  Speaker 1: to our clients about taking advantages of what what are
• 25:56
  Speaker 1: smaller dips in the market. So even in a day
• 25:58
  Speaker 1: like today where it looks like the market might be
• 26:00
  Speaker 1: down just a bit, is that a time to talk
• 26:02
  Speaker 1: about doing things like roth conversions or even doing some
• 26:06
  Speaker 1: some investing in the right places or rebalancing to take
• 26:09
  Speaker 1: advantage of those I think that's the hard part is
• 26:12
  Speaker 1: instead of waiting for big chunks when the market drops
• 26:15
  Speaker 1: to do things, we're looking to make little marginal changes
• 26:19
  Speaker 1: on the edges, which ultimately is the path to success.
• 26:22
  Speaker 1: All Right, Dan, thanks so much for joining us. Always
• 26:24
  Speaker 1: a pleasure talking to you. Dan Griffith is senior vice
• 26:28
  Speaker 1: president and the director of Wealth Strategy for the Huntington's
• 26:31
  Speaker 1: Private Bank. Um. I guess I should disclose that I
• 26:35
  Speaker 1: bank with Huntington's and so does my entire family because
• 26:39
  Speaker 1: we're from the great state of Ohio. You know, Ohio
• 26:41
  Speaker 1: State University. Yeah, I'm sure Dan is a fan of
• 26:45
  Speaker 1: the Ohio State buck Eyes and uh. Just the idea
• 26:50
  Speaker 1: of being able to to to move back and live
• 26:53
  Speaker 1: in a country where you can watch football every weekend.
• 26:56
  Speaker 1: It's just it's it's enough to draw me back, you know. Yeah,
• 26:59
  Speaker 1: we gotta get back here with Although the housing markets
• 27:01
  Speaker 1: still a little tight met yeah, well, you know, um,
• 27:06
  Speaker 1: I hope it loosens up a little bit. I do
• 27:08
  Speaker 1: see that inflation is um is in places like used
• 27:13
  Speaker 1: cars and fuel, and you don't see it as much
• 27:17
  Speaker 1: right now in uh, in previously owned homes. So we
• 27:21
  Speaker 1: can we can just hope that over the next few
• 27:23
  Speaker 1: months that market calms down a little bit. This is Bloomberg.
• 27:27
  Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
• 27:31
  Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever
• 27:34
  Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 27:38
  Speaker 1: at Matt Miller three. Put on fal Sweeney I'm on
• 27:42
  Speaker 1: Twitter at pt sweeney Before the podcast. You can always
• 27:45
  Speaker 1: catch us worldwide at Bloomberg Radio