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US Consumer Sentiment Falls, Bump Stock Ban Tossed · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: The market moving event of the morning is University of
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  Speaker 2: Michigan Sentiment. It is one of my favorite indicators. It's
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  Speaker 2: definitely my desert island indicator. This is the preliminary read
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  Speaker 2: for June, and you're looking at the index sixty five
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  Speaker 2: point six. That's a seven month low, current conditions, low
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  Speaker 2: expectations falling one, your inflation expectations rising to three point three.
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  Speaker 2: Joanneshu is the University of Michigan Surveys of Consumers Director
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  Speaker 2: and she joins us. Now, Joanne, what led this decline?
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  Speaker 3: I think we need to look back one more month
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  Speaker 3: to really understand what's going on. Between April and May,
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  Speaker 3: consumer sentiment dropp about ten ten percent, and between May
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  Speaker 3: and June it's essentially flat. Yes, it's a little lower
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  Speaker 3: between June than May, but really it's within this margin
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  Speaker 3: of era and we should interpret that as no change.
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  Speaker 3: But what happened this month was that compared to last month,
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  Speaker 3: consumers were getting rared that labor markets were starting to weekend.
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  Speaker 3: They were worried that interest rates were not moving in
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  Speaker 3: the right direction, and that the inflation slowed down wasn't
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  Speaker 3: really happening high and fast enough. And that's exactly how
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  Speaker 3: consumers continue to feel right now. Those concerns remain in place,
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  Speaker 3: and consumers don't really see a material change in the
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  Speaker 3: economy between last month and this month.
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  Speaker 4: Joe, and it seems like again, inflation. We hear it
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  Speaker 4: in you know, some of the political polling that we see,
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  Speaker 4: and we see it in you know, some of the
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  Speaker 4: other I think surveys that we see. It's still a big,
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  Speaker 4: big issue for consumers. Even if the rate of inflation
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  Speaker 4: is slowing, those higher pricing levels are really problematic, aren't they.
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  Speaker 3: That's absolutely right. The share of consumers that are telling
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  Speaker 3: us that high prices are eroding their living standards remains
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  Speaker 3: quite high, and in fact, it did go up between
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  Speaker 3: May and June. However, consumers have noticed that inflation has slowed,
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  Speaker 3: and that bears out in the inflation expectations that that
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  Speaker 3: have come down quite dramatically over the last two years
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  Speaker 3: and even in the last last six months or so. However, consumers,
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  Speaker 3: you know, aren't really sure that inflation is going to
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  Speaker 3: continue decelerating at at a pace that they would like.
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  Speaker 3: And you know, there are aspects of inflation that continue
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  Speaker 3: to be really troublesome, in particular the cost of housing
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  Speaker 3: and insurance. These are things that are going to continue
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  Speaker 3: to weigh on consumers even if gas prices come down,
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  Speaker 3: our food prices come gas prices come down, and food
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  Speaker 3: inflation comes down.
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  Speaker 2: Now, of course it has happened though before the FED
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  Speaker 2: meeting this week, when we sort of got more insight
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  Speaker 2: into the dot plot and sort of whatever cuts we
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  Speaker 2: may get, would consumers feel materially different maybe on your
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  Speaker 2: second read based off of that or No.
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  Speaker 3: It's possible that they may feel different at the end
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  Speaker 3: of the month, but I wouldn't necessarily interpret any change
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  Speaker 3: between now and the final reading as attributable to uh,
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  Speaker 3: the FED policy announcements and the FOMC meeting consequences. You know,
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  Speaker 3: consumers aren't really paying attention to that. What they will
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  Speaker 3: pay attention to is, you know, if if they're starting
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  Speaker 3: to feel some relief as they are working through their budgets,
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  Speaker 3: and if they are starting to see any sort of
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  Speaker 3: positive developments or continued strength and labor markets. The big
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  Speaker 3: deterioration in labor market expectations that began in May, you know,
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  Speaker 3: was on the heels of some weakening jobs reports, and
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  Speaker 3: and so we'll we'll see what consumers experiences are like
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  Speaker 3: through the rest of the month.
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  Speaker 4: Very good, Joanne, Thank you so much for joining us.
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  Speaker 4: Juan Shoe, She's a Surveys of Consumers director at the
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  Speaker 4: University of Michigan. Not just good football players, but good
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  Speaker 4: economists as well. So that's we like at the u
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  Speaker 4: University of Michigan.
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  Speaker 2: Joining us now, Harold Krent. He is a professor of
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  Speaker 2: law at Chicago Kank College of Law, the author of
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  Speaker 2: the book Presidential Powers. Harold, we appreciate you jumping on
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  Speaker 2: with us. So the news, of course is a bumstock
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  Speaker 2: ban is tossed out by the Supreme Court walk us
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  Speaker 2: through what you know, what you've seen, and your reaction.
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  Speaker 5: Yeah, I mean, I think your discussion of it was
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  Speaker 5: right on point. There was a nineteen thirty four statute
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  Speaker 5: called the National Firearms Act, which bans machine guns, and
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  Speaker 5: so the question is whether this altered semi automatic shotgun
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  Speaker 5: a machine gun. It does in many ways because it
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  Speaker 5: fires automatically. However, it looks different and it's trigger mechanism
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  Speaker 5: is slightly different in terms of how many times you
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  Speaker 5: have to press it before you can shoot a large
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  Speaker 5: number of shots. So it functions identically to a machine gun,
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  Speaker 5: though it works slightly differently. And so the Bureau of Alcohol, Firearms,
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  Speaker 5: and Tobacco is the agency in charge of regulating guns
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  Speaker 5: in our federal system, and it has changed its mind
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  Speaker 5: about whether a bump stock is equivalent to a machine
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  Speaker 5: gun or not. Originally it's said that it was distinct
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  Speaker 5: from a machine gun, and so it did not outlaw
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  Speaker 5: use of the bump stock under the National Firearms Act.
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  Speaker 5: But after the Las Vegas tragedy, as you suggested, it
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  Speaker 5: was indeed the agency under the Trump administration which had
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  Speaker 5: a fresh look and on the qualities and characteristics of
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  Speaker 5: this bump stock and said, you know, because it functions
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  Speaker 5: so similarly to a machine gun, we are going to
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  Speaker 5: classify it as a machine gun and therefore consider it
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  Speaker 5: banned under the Act. And the six ' three conservative
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  Speaker 5: majority basically was not persuaded and red machine gun in
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  Speaker 5: that sort of narrow context, gave no deference to the
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  Speaker 5: agency whatsoever, and concluded therefore that a bump stock was
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  Speaker 5: not a machine gun and therefore the agency had overset
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  Speaker 5: its bounds in trying to ban it.
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  Speaker 4: So, Professor, I know we're just minutes into this, but
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  Speaker 4: I mean, what are the practical ramifications of this decision today?
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  Speaker 5: Well, if we want to ban bump stocks, it has
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  Speaker 5: to be from Congress. Congress is only then. I don't
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  Speaker 5: think that there would be an issue under the Second Amendment.
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  Speaker 5: Obviously somebody could raise it, but I think, you know,
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  Speaker 5: grenades and machine guns are not the kind of usual
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  Speaker 5: weapons that were around at the founding, and so therefore
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  Speaker 5: presumably they can be banned by Congress, but they can't
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  Speaker 5: be through an act of an administration. It has to
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  Speaker 5: be from our elected representatives themselves.
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  Speaker 2: Do we learn anything about how the court voted and
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  Speaker 2: what the opinion looks like in relation to the other
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  Speaker 2: gun case that is on the docket for.
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  Speaker 5: Them, I don't think so. I don't think there any
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  Speaker 5: kind of seeds or any kind of clues about what's
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  Speaker 5: going to happen in Raheemi, which you know, I agree
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  Speaker 5: is far more controversial case. But this is sort of
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  Speaker 5: a you know, if you look at this case from
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  Speaker 5: on high, it's sort of remarkable, right, I mean, a
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  Speaker 5: bumpstock converts a shotgun into something that is automatically firing
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  Speaker 5: and has the same characteristics as a machine gun. And
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  Speaker 5: if we can ban machine guns because we don't think
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  Speaker 5: that's needed for you know, hunting or any other kind
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  Speaker 5: of lawful use of a weapon, then I don't understand.
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  Speaker 5: It sort of defies belief that six of our justices
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  Speaker 5: rejected an agency decision under the Trump administration that have
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  Speaker 5: classifies these bump stocks as converting a shotgun into a
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  Speaker 5: machine gun.
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  Speaker 4: So, Professor, how rare or unusual are six to three
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  Speaker 4: decisions like this in terms of party lines being so
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  Speaker 4: you know, rigidly followed. How do you think about that?
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  Speaker 4: Just in the history of the Supreme Court?
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  Speaker 5: Yeah, And I don't have great statistics going back in
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  Speaker 5: terms of the set sort of you know, conservative liberal
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  Speaker 5: fissures within the Supreme Court. But we've certainly seen periods
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  Speaker 5: of time where the voting structures are comparable to this,
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  Speaker 5: where there is a block on one side and a
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  Speaker 5: block on the other, and only in the cases are
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  Speaker 5: more interesting, of course, when their decides come together or
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  Speaker 5: they have sort of innovative decisions that bridge the gap
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  Speaker 5: and you can get a majority of liberal conservative together.
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  Speaker 5: So it does reflect the fact that there's polarization. There's
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  Speaker 5: question about it, and the six ' three is you know,
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  Speaker 5: obviously was true on the Dodds case and the abortion
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  Speaker 5: case and many others, and we'll continue to see that.
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  Speaker 5: There was another case deciding today that had to do
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  Speaker 5: with the rights of immigrants to get a second hearing
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  Speaker 5: at an asylum and it was not a major case
• 9:19
  Speaker 5: on the asylum law because they had to do with how
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  Speaker 5: defective the notice was for a defective notice for a hearing,
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  Speaker 5: whether or not they should be allowed if it's defective
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  Speaker 5: to have another notice for a hearing before they're reported.
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  Speaker 5: But once again sixth to be split. So it's not
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  Speaker 5: surprising and I think we're going to see more of
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  Speaker 5: these and with the next twenty or so opinions that
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  Speaker 5: are to come.
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  Speaker 2: When you take a look at the rest of the
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  Speaker 2: docket for the Supreme Court, what are you focused on
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  Speaker 2: most in terms of how what it will tell you
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  Speaker 2: either about the court makeup or the ramifications.
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  Speaker 5: Well, to me, and since I do focus on the
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  Speaker 5: administrative law of how set that this court is to
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  Speaker 5: dismantle our traditional notion of what administrative agencies are and
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  Speaker 5: how administrations can regulate the environment and regulate the business sector.
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  Speaker 5: Those there are at least three extremely important cases that
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  Speaker 5: are pending, and they have the seeds in them of
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  Speaker 5: radically reshaping how our government works, because if you take
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  Speaker 5: away the powers of these governing administrative agencies, there'll be
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  Speaker 5: a lot less regulation. And a lot less regulation can mean, obviously,
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  Speaker 5: in most people, more pollution, more practices by businesses that
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  Speaker 5: hurt individuals, and that's what is really gaining my focus.
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  Speaker 4: So, Professor here, presumably does the Supreme Court do they
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  Speaker 4: care how the public views them? Or are they really
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  Speaker 4: just pure independent, they're there for life type of thing.
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  Speaker 5: You know, it's a great question. I think that Careen
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  Speaker 5: once one way, I mean Chief Justice Roberts in particular
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  Speaker 5: has been known for trying to shore the institutional respect
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  Speaker 5: of the Court. But a lot of the members of
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  Speaker 5: the Court, and obviously it's if you want to name names.
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  Speaker 5: I mean, it's no secret that Alido in particular is
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  Speaker 5: that the view that I have power. I don't know
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  Speaker 5: how long I'm going to have this power. This is
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  Speaker 5: a unique moment in history where we can really contribute
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  Speaker 5: to the rearranging the way the government works. And he'll
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  Speaker 5: do that and it doesn't care at all about what
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  Speaker 5: people think of him. So I think there is a
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  Speaker 5: split amongst the and I think Justice Barrett is probably
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  Speaker 5: with Chief Justice Roberts so that they do care about
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  Speaker 5: the institutional legitimacy of the court. But there are some
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  Speaker 5: members of the Court who just want to take the
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  Speaker 5: moment in the sun and use the power to the
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  Speaker 5: best way they can to shape America in their image.
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  Speaker 3: Right.
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  Speaker 2: Well, we really appreciate your incident analysis here for us.
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  Speaker 2: Harold Krentt, he's professor of law at Chicago Kent College
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  Speaker 2: of Law and author of the book Presidential Powers. Again,
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  Speaker 2: that breaking news that in a six 't three vote
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  Speaker 2: along ideological lines, the Supreme Court voted a criminal prohibition
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  Speaker 2: put in place by the Trump administration to ban bump
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  Speaker 2: stocks is thrown out. That bam tossed out by the
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  Speaker 2: Supreme Court.
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  Speaker 4: Let's get to Tesla back in the news again. It
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  Speaker 4: looks like our good friend Elon Musk is going to
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  Speaker 4: get that pay reward that he believes and now his
• 12:38
  Speaker 4: shareholders believe that he deserves. David Waltz joins us Detroit
• 12:42
  Speaker 4: Bureau chief for Bloomberg News. David talk to us about
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  Speaker 4: what this pay package is from Tesla for Elon Muskin
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  Speaker 4: and kind of what does it mean for the company.
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  Speaker 6: So that this was a big package negotiated in bombing
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  Speaker 6: stock stock options going back I think twenty eighteen. And
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  Speaker 6: the controversy is that shareholders said that this is a
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  Speaker 6: rubber stand board put in place by Elon. They didn't
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  Speaker 6: really have a great view into what they were getting.
• 13:09
  Speaker 6: So spurred a bunch of lawsuits, and Delaware Chancery Court
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  Speaker 6: ruled in the shareholder's favor it's expected to be under appeal,
• 13:18
  Speaker 6: but shareholders approved it, and so that really complicates things
• 13:21
  Speaker 6: as we get into the appeal that shareholders who feel
• 13:24
  Speaker 6: aggrieved are going to go into court saying that they
• 13:27
  Speaker 6: didn't know what they were getting and it's not a
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  Speaker 6: good deal, even though the majority of shareholders who hold
• 13:33
  Speaker 6: the stock now approved the deal. The other thing that
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  Speaker 6: they passed is that Tesla will change its domicile to Texas,
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  Speaker 6: where the headquarters already is more business friendly laws there.
• 13:45
  Speaker 6: And so if Tesla wins its appeal, or even if
• 13:51
  Speaker 6: they lose it, Elon and the board could just create
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  Speaker 6: another similar pay package for him in tex Is under
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  Speaker 6: Texas law, and then it would probably start this cycle
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  Speaker 6: all over again, but it would be in a different
• 14:04
  Speaker 6: court that could be more friendly to the company and
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  Speaker 6: to Elon Musk. So you know this, this is far
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  Speaker 6: from over, this whole fight over the pay package. What
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  Speaker 6: it does mean for a near term right now is
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  Speaker 6: the shareholders are endorsing Elon Musk and they're saying, we
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  Speaker 6: you know, this is the guy we want to stick with.
• 14:22
  Speaker 6: Wind loser draw on the legal actions.
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  Speaker 2: So are we done talking about it now? Like I mean,
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  Speaker 2: are we done?
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  Speaker 6: Well, what else does it mean for Tesla? You know
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  Speaker 6: the bigger issues I think for this company?
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  Speaker 2: Well sure, but now I know the bigger issues. But
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  Speaker 2: before we move on, like in terms of the pay
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  Speaker 2: package drama, that book has closed.
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  Speaker 6: No, it's far from closed because the Delaware so Tesla
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  Speaker 6: appealed the judge's ruining. So there's going to be another
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  Speaker 6: round of litigation on this thing, and who knows how
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  Speaker 6: far it could go. Now that's what I mean. Let's
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  Speaker 6: suppose the shareholders win and Elon doesn't get his pay
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  Speaker 6: package because the court overturns it. What would probably happen
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  Speaker 6: is the Tesla board would come up with another similar package,
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  Speaker 6: so it would be an all new one, maybe of
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  Speaker 6: similar value structure. However you want to do it for
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  Speaker 6: Elon Musk, but they would do it now that the
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  Speaker 6: company is domiciled in Texas. They'd do it under Texas law.
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  Speaker 6: The fact that they changed their domicile the Texas doesn't
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  Speaker 6: matter for this lawsuit because the pay package was done
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  Speaker 6: when Texas was a Delaware or Tesla was a Delaware corporation,
• 15:34
  Speaker 6: and so the pay package, what the board did, and
• 15:37
  Speaker 6: the litigation involved is all done under Delaware law Testya's
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  Speaker 6: leaving Delaware. Elon's taken a couple of his companies, including X,
• 15:45
  Speaker 6: out of Delaware, and he's all, he doesn't like being regulated,
• 15:49
  Speaker 6: he doesn't like the laws there, so he's left. He's
• 15:51
  Speaker 6: even going to send them a cake with a parting
• 15:54
  Speaker 6: shot that he's leaving Delaware. But so if you, you know,
• 15:58
  Speaker 6: even if you you have this next round of litigation,
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  Speaker 6: even if the shareholders win, they could just come up
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  Speaker 6: with another package that rewards him and you could have
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  Speaker 6: this fight all over again. So many more chapters to
• 16:09
  Speaker 6: go in the pay package dispute. Who care? Yeah?
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  Speaker 2: So okay, you were trying to then talk about the
• 16:15
  Speaker 2: broader industry and I made you go into the lawsuit again.
• 16:19
  Speaker 2: So how do they tie together?
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  Speaker 6: Well, what the shareholders are basically saying is despite the
• 16:26
  Speaker 6: fact that that Tesla as a growth company has kind
• 16:29
  Speaker 6: of stalled out, they still believe Elon Musk is the
• 16:32
  Speaker 6: guy to take them there. And the challenge that he
• 16:35
  Speaker 6: faces now to deliver on Tesla still being a tech company,
• 16:39
  Speaker 6: still being a growth company, is you do either have
• 16:42
  Speaker 6: to recharge so to speak. They're electric vehicle sales and
• 16:45
  Speaker 6: they've stalled out for a number of reasons, particularly in
• 16:47
  Speaker 6: the US. One is the cars are old and kind
• 16:50
  Speaker 6: of stale. They all have the same look to them
• 16:53
  Speaker 6: and they haven't freshened it up. The Modelsques looked the
• 16:55
  Speaker 6: same for twelve years now, and everything else is sort
• 16:57
  Speaker 6: of a derivative of that stylistically. And then there's just
• 17:00
  Speaker 6: a lot more competition. You have four General motors BMW,
• 17:03
  Speaker 6: Mercedes very aggressive in the US, and you have the
• 17:07
  Speaker 6: Chinese ev makers in China in Europe very aggressive as well.
• 17:12
  Speaker 6: So he's got a lot more competition than he had
• 17:15
  Speaker 6: a few years ago on all these markets, so it's
• 17:17
  Speaker 6: tougher to get growth, which is why he's moving to this.
• 17:19
  Speaker 6: We're an autonomous vehicle AI company and we'll see what
• 17:23
  Speaker 6: happens in August when they show us that. But that's
• 17:26
  Speaker 6: going to be a tough one. I mean, you've got
• 17:28
  Speaker 6: crews and you've got Weimo out there for years now
• 17:30
  Speaker 6: trying to show that they can develop robotexti's and it's
• 17:33
  Speaker 6: it's really tough to make that work. But that's what's
• 17:36
  Speaker 6: going to con and shareholders that it's a tech company.
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  Speaker 4: All right, David, thank you so much. We appreciate that.
• 17:41
  Speaker 4: As always David Welsch, Detroit bureau chief for Bloomberg News,
• 17:44
  Speaker 4: giving us the latest update on our good friend Elon
• 17:47
  Speaker 4: Musk and Tesla working towards getting that pay package passed
• 17:52
  Speaker 4: form fifty six billion dollars. That gets your attention.
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  Speaker 2: the botto market, you're seeing a continued bid into the
• 18:41
  Speaker 2: bar market. Is it the FED is it safe haven.
• 18:43
  Speaker 2: There are lots of different theories out there as well,
• 18:46
  Speaker 2: but over the whole week so far, the tenure is
• 18:48
  Speaker 2: down twenty two basis points. That's a pretty solid move,
• 18:51
  Speaker 2: So we want to get more on that with Pria
• 18:53
  Speaker 2: Israe Fixed and Come portfolio manager JP Morgan Asset Management.
• 18:57
  Speaker 2: She joins us. Now, Pria, I think Barclays came out
• 19:00
  Speaker 2: and said, like, look, it's gone too far, like like
• 19:03
  Speaker 2: we want to store it here a little bit. This
• 19:05
  Speaker 2: buying move has gone too far. What do you think?
• 19:08
  Speaker 7: I don't agree.
• 19:09
  Speaker 8: I mean, I think there's been a perfect storm the
• 19:12
  Speaker 8: last couple of weeks. Growth is slowing, inflation is finally decelerating.
• 19:16
  Speaker 8: I think we can put that first quarter high inflation
• 19:19
  Speaker 8: prints behind us. We realize that was an outlier, not
• 19:22
  Speaker 8: the start of a reacceleration. So you have growth and
• 19:25
  Speaker 8: inflation both slowing. You know, I think the market is
• 19:28
  Speaker 8: really pricing for growth to slow down to a little
• 19:30
  Speaker 8: below potential, but we don't know, you know, the jury
• 19:33
  Speaker 8: is out there. Plus we have this political risk which
• 19:36
  Speaker 8: is out there, and we're heading into an illiquid summer.
• 19:39
  Speaker 8: I mean next week itself, we have a holiday in
• 19:41
  Speaker 8: the middle of the week. I think people are getting
• 19:44
  Speaker 8: nervous about the carry trade online and that's what we've
• 19:46
  Speaker 8: seen a little bit this week.
• 19:48
  Speaker 7: So I'm not sure it's done.
• 19:49
  Speaker 8: I would not be selling into this, but you know,
• 19:52
  Speaker 8: particularly when it comes to treasuries, I actually think people
• 19:54
  Speaker 8: who've been positioned for a soft landing, which we have been,
• 19:57
  Speaker 8: we've been owning high quality spread product, risky assets. I
• 20:01
  Speaker 8: think actually owning some treasuries is a good hedge because
• 20:04
  Speaker 8: there is really only one safe haven asset in a
• 20:07
  Speaker 8: world wide inflation is declining, and that's still treasuries, and
• 20:10
  Speaker 8: we're not pricing.
• 20:11
  Speaker 7: In that much.
• 20:11
  Speaker 8: We're still above, you know, north of four percent on
• 20:14
  Speaker 8: the tenure. So I actually think you're supposed to own
• 20:17
  Speaker 8: those hedges. You're supposed to have liquid assets alongside any
• 20:21
  Speaker 8: of those soft landing traits that you have on.
• 20:23
  Speaker 4: What is a high quality spread product.
• 20:28
  Speaker 8: So I'm glad you asked that because it is across
• 20:30
  Speaker 8: the you know, whether it's investment rate, credit, high yield.
• 20:33
  Speaker 8: I think they're parts of high yield that I would
• 20:35
  Speaker 8: say are high quality securitize credit.
• 20:38
  Speaker 7: So within the ABS C MBS sector.
• 20:41
  Speaker 8: So I think you dig in, you look at what
• 20:42
  Speaker 8: the companies or structures. You know, what is that money
• 20:46
  Speaker 8: being used for if there's good cash flow. We looked
• 20:48
  Speaker 8: at some of these single family rental you know there
• 20:51
  Speaker 8: it's a business model where you're earning cash flow based
• 20:53
  Speaker 8: on people paying rent, which we know that rent.
• 20:57
  Speaker 7: You know, rents are are high.
• 20:59
  Speaker 8: So I think making sure you know the business model
• 21:02
  Speaker 8: there's free cash flow, there's no releveraging of the company
• 21:06
  Speaker 8: or the structure. I think owning that in a diversified way,
• 21:09
  Speaker 8: so we own you know, IG credit, so investment grate credit,
• 21:13
  Speaker 8: high yield credit, securitize credit.
• 21:15
  Speaker 7: I think that's what we would call.
• 21:17
  Speaker 8: You know, most of them in the index, many of
• 21:19
  Speaker 8: them not in the aggregate index.
• 21:21
  Speaker 7: So these would be bonds where.
• 21:23
  Speaker 8: You're earning that spread for the fact that you're taking
• 21:27
  Speaker 8: on some credit risks, some less liquidity risk, that's what
• 21:30
  Speaker 8: you're giving up, but you're picking up that spread because
• 21:33
  Speaker 8: corporate fundamentals are still very, very strong, and so that's
• 21:37
  Speaker 8: what we're That's why we still like high quality spread
• 21:40
  Speaker 8: product because this is not like other times when there's
• 21:43
  Speaker 8: been a lot of leveraging up or companies are not
• 21:46
  Speaker 8: doing the right thing with their money. I think as
• 21:48
  Speaker 8: long as you dig in, you realize what you're buying.
• 21:50
  Speaker 8: There's a lot of opportunity within fixed income here.
• 21:53
  Speaker 2: So it's just to be clear, it's it's credit risk,
• 21:55
  Speaker 2: but it's calculated credit risk. But duration risk is a
• 21:59
  Speaker 2: no no.
• 22:00
  Speaker 8: Now I think it's now it's getting to levels where
• 22:04
  Speaker 8: duration risk is attractive to I know, we might be
• 22:07
  Speaker 8: disappointed with the FED. The FED sort of moved to
• 22:09
  Speaker 8: one cut this year. I think the Fed has a
• 22:11
  Speaker 8: little bit of PTSD from what happened earlier this year
• 22:15
  Speaker 8: where they signal rate cuts by June and then we
• 22:18
  Speaker 8: get three months of very strong inflation numbers, and so
• 22:21
  Speaker 8: I think the FED is very much data dependent.
• 22:24
  Speaker 7: But I think owning some duration, owning some five.
• 22:26
  Speaker 8: Year treasuries or ten year treasuries is attractive because you know,
• 22:30
  Speaker 8: I mean, we can debate whether the first cut is
• 22:32
  Speaker 8: in September or December. But let's look at total amount
• 22:34
  Speaker 8: of cuts the market is pricing in the end point
• 22:37
  Speaker 8: after all these cuts to be three seventy five. The
• 22:41
  Speaker 8: Fed's own estimate for long run DOT is two seventy five.
• 22:44
  Speaker 7: There's one hundred basis points spread.
• 22:46
  Speaker 8: I think in a soft landing, the Fed's cutting to
• 22:48
  Speaker 8: three percent, so there's room for rates to decline in
• 22:52
  Speaker 8: that five to ten year part of the curve in
• 22:54
  Speaker 8: a hard landing. So if things slow down more, the
• 22:57
  Speaker 8: FED has told us they're going to be aggressive. They're
• 22:59
  Speaker 8: going to cut much more more than that neutral rate.
• 23:01
  Speaker 8: So I think owning duration risk can I've been nervous
• 23:04
  Speaker 8: around duration risk while inflation was high. I think we
• 23:07
  Speaker 8: take a lot of comfort with some of the inflation numbers.
• 23:09
  Speaker 8: We're getting the totality of the data. We just slowing down,
• 23:13
  Speaker 8: you know, inflation expectations being anchored the inflation data itself
• 23:16
  Speaker 8: telling you it's really shelter and auto insurance. So if
• 23:20
  Speaker 8: the inflation fear can be put a little bit in
• 23:22
  Speaker 8: the rear view mirror, I think owning some duration risk here,
• 23:25
  Speaker 8: particularly as we're going into an illiquid environment where some
• 23:29
  Speaker 8: of the growth data is showing signs of cracking, I
• 23:33
  Speaker 8: think you should own some duration risk as well.
• 23:35
  Speaker 7: Some fives intense April.
• 23:36
  Speaker 4: Let's say I'm a analyst at JPMorgan Asset Management and
• 23:40
  Speaker 4: cover you know, the cable, the high yield, the telecommunications
• 23:43
  Speaker 4: sector in the highyield space. If I commit to your
• 23:46
  Speaker 4: office and say I love this industry. I think you
• 23:48
  Speaker 4: should be buying some of these cable and telecom bonds.
• 23:51
  Speaker 4: Do you care about calls like that or do you
• 23:53
  Speaker 4: just buy credit metrics, ratings metrics, that kind of thing.
• 23:57
  Speaker 4: How are you in terms of giving some way to
• 24:00
  Speaker 4: certain industries.
• 24:02
  Speaker 8: Yeah, so, I think in general we like to overweight industries,
• 24:07
  Speaker 8: you know, utilities which have the whole electrification or anything
• 24:11
  Speaker 8: linked to AI. So I think we think of industries
• 24:14
  Speaker 8: that are sort of growth industries, industries of the future,
• 24:18
  Speaker 8: versus those that are not. So I think we'll do
• 24:20
  Speaker 8: that work. But then you have to look at valuation
• 24:23
  Speaker 8: at some point if a company is still going to
• 24:26
  Speaker 8: be around. I mean there are cable companies will tell
• 24:28
  Speaker 8: you which may not seem like they're the companies of
• 24:31
  Speaker 8: the future, but they have solid cash flow, they have
• 24:35
  Speaker 8: plans to reduce some of that leverage, and we own
• 24:37
  Speaker 8: some of those in our funds.
• 24:39
  Speaker 7: And then we look at valuation. Where are those.
• 24:41
  Speaker 8: Spreads and if they're you know, there might be double B,
• 24:44
  Speaker 8: single B. There are certainly some cable companies in that range.
• 24:48
  Speaker 8: It can offer value. I think what you'd want to
• 24:51
  Speaker 8: think about is diversifying those forms of return particularly we're
• 24:55
  Speaker 8: going into an election time period where there will be
• 24:57
  Speaker 8: wider dispersion, So I actually think I would listen carefully,
• 25:01
  Speaker 8: ask the questions, understand what the company's plans are for
• 25:05
  Speaker 8: the debt that they're raising, where are levels? And I
• 25:08
  Speaker 8: think there's value even in a sector which you might
• 25:10
  Speaker 8: say have structural challenges, before we let you go.
• 25:14
  Speaker 2: I just want to end on Europe because, as I
• 25:15
  Speaker 2: was mentioning, the CAC forty is down three percent. You
• 25:17
  Speaker 2: are seeing a bin to the bond market over in Europe.
• 25:20
  Speaker 2: But it's been a really tough week for France and
• 25:23
  Speaker 2: the spread is really blowing out between France and German tenure.
• 25:27
  Speaker 2: Is there a trade here for you?
• 25:28
  Speaker 7: You know? Not yet.
• 25:31
  Speaker 8: I still think there's a washout that's happening. I mean
• 25:33
  Speaker 8: the periphery, whether it was France so Italy. We're very
• 25:36
  Speaker 8: consensus long carry trades. But at some point I have
• 25:41
  Speaker 8: to think we're not talking about France leaving the Eurozone,
• 25:43
  Speaker 8: so at some point we'd want to dip in. I
• 25:45
  Speaker 8: think closer to the election, I will say I hesitate
• 25:49
  Speaker 8: trading political risk. It's impossible to really trade it by
• 25:52
  Speaker 8: very binary risks, but at some point I think if
• 25:55
  Speaker 8: those spreads widen out another twenty thirty basis points, I
• 25:59
  Speaker 8: think we can start to leg into it. I wouldn't
• 26:02
  Speaker 8: bet the farm on it, because again, you know political risk,
• 26:05
  Speaker 8: and we saw this for so many years in the
• 26:07
  Speaker 8: European crisis.
• 26:08
  Speaker 7: It's difficult and things can a little.
• 26:11
  Speaker 8: Bit spill out of control as people de risk. But
• 26:14
  Speaker 8: I think the fundamentals are still strong. Let's see, even
• 26:17
  Speaker 8: if you get the worst case scenario from a market standpoint,
• 26:21
  Speaker 8: will they deliver and will they talk about as much
• 26:24
  Speaker 8: spending that is being talked about. I think there's a
• 26:26
  Speaker 8: campaign season and then what actually gets done. So I
• 26:29
  Speaker 8: think we look at details, we look at.
• 26:31
  Speaker 7: Poles and at some point, but I think we were
• 26:33
  Speaker 7: still in the early innings.
• 26:35
  Speaker 2: Afterwhid and pretty it's fair enough and that's what we
• 26:36
  Speaker 2: saw over in Italy with Georgia Maloney. It wasn't as
• 26:39
  Speaker 2: bad as everyone was worried about. Pria Israel fixed and
• 26:41
  Speaker 2: come Portfolio Manager, JP Morgan, Asset Management.
• 26:46
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 26:50
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• 26:53
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• 26:56
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• 27:00
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• 27:04
  Speaker 4: Well for the month of June, Folks, Bloomberg Radio is
• 27:06
  Speaker 4: committed to bringing you segments and guests focus on the
• 27:09
  Speaker 4: topic of equality.
• 27:10
  Speaker 6: Earlier in the.
• 27:11
  Speaker 4: Week, guest host just met and I spoke with Yin Maguire,
• 27:14
  Speaker 4: President and CEO of the National Minority Supplier Development Council.
• 27:18
  Speaker 4: We first asked her to talk to us about where
• 27:20
  Speaker 4: we are in this country in terms of implementing diversity.
• 27:24
  Speaker 9: There is a surge in litigation as a part of
• 27:29
  Speaker 9: very ideological, well funded, and well coordinated effort among a
• 27:36
  Speaker 9: small group of organizations that are completely out of a
• 27:40
  Speaker 9: step with the vast majority of Americans. We have a
• 27:48
  Speaker 9: thought leadership partner called Public Private Strategies Institute. They commissioned
• 27:55
  Speaker 9: Mourning Console study that a few months ago, and the
• 28:00
  Speaker 9: study found that majority of corporate senior executives across all
• 28:06
  Speaker 9: political affiliations that support the diversity initiative. They believe that
• 28:14
  Speaker 9: diversity initiatives played a critical role in the success of
• 28:20
  Speaker 9: their companies. For example, seventy five percent of them self
• 28:25
  Speaker 9: described as conservatives. Seventy seven percent described themselves as a
• 28:32
  Speaker 9: moderates and eighty nine percent our liberals, and all of
• 28:35
  Speaker 9: them recognizing the positive contribution of diversity initiatives to their
• 28:42
  Speaker 9: business performance. And so these lawsuits really are part of
• 28:47
  Speaker 9: larger strategies to constrain the ability of business leaders to
• 28:52
  Speaker 9: make decisions for the benefits of their companies. And you know,
• 28:58
  Speaker 9: I came to this country with the one suitcase and
• 29:01
  Speaker 9: one thousand dollars to pursue my American dream, and because
• 29:04
  Speaker 9: I believe America supposed to be a place that one
• 29:11
  Speaker 9: has a freedom to achieve, has a freedom to earn,
• 29:15
  Speaker 9: and has freedom to make decisions, and has freedom to prosper.
• 29:20
  Speaker 9: And so we're seeing an organized movement to stifle that freedom.
• 29:26
  Speaker 4: Do you think this is mostly political driven or is
• 29:29
  Speaker 4: it shareholder saying I'm just not sure you've proven to
• 29:32
  Speaker 4: me that it's in the best interest of me as
• 29:34
  Speaker 4: a shareholder to pursue diversity.
• 29:37
  Speaker 9: I think it's a political driven and it's an ideological movement.
• 29:43
  Speaker 9: We have, you know, NMSCC made up hundreds of thousands
• 29:47
  Speaker 9: of corporations, and so we have a daily dialogue with
• 29:52
  Speaker 9: corporate executives and they believe in the value of diversities.
• 29:59
  Speaker 9: Sometime people don't like the words the E and I,
• 30:02
  Speaker 9: so then let's find the new words, you know.
• 30:06
  Speaker 8: But the.
• 30:08
  Speaker 9: Outcome of the diversity initiative is yielding positive business results.
• 30:15
  Speaker 9: It's a good just good for the business.
• 30:18
  Speaker 10: When you're talking about the American dream and then also
• 30:21
  Speaker 10: corporate America, some of the strides that have been made,
• 30:24
  Speaker 10: but still some pitfalls there. Where did those pitfalls stand?
• 30:28
  Speaker 10: Because you were talking about the litigations, Where are those
• 30:31
  Speaker 10: issues and why are there those litigations, what are they
• 30:33
  Speaker 10: involved in?
• 30:34
  Speaker 9: So the litigation, as I shared earlier, is a really ideological,
• 30:40
  Speaker 9: well organized effort to block the participation for underserved group
• 30:49
  Speaker 9: into our economic lives.
• 30:51
  Speaker 7: And it's not new.
• 30:54
  Speaker 9: So the attack on diversity and opposition to economic equity
• 30:59
  Speaker 9: has been there for a very long time. But if
• 31:02
  Speaker 9: you look at data and effects, it says otherwise. You know,
• 31:07
  Speaker 9: it's very different from what you're hearing in the media.
• 31:10
  Speaker 7: Right.
• 31:11
  Speaker 9: So, for example, McKenzie's and the company reported that companies
• 31:17
  Speaker 9: that are more culturally diverse, actually they're yield I think
• 31:23
  Speaker 9: thirty seven percent more profitability than average companies and diverse
• 31:29
  Speaker 9: suppliers who we serve, and they actually provide in the
• 31:35
  Speaker 9: range of, you know, a little less than nine percent
• 31:38
  Speaker 9: cost savings compared to average companies. They realize about three
• 31:42
  Speaker 9: to seven percent procurement savings. So there are tremendous economic
• 31:47
  Speaker 9: value for diversity initiatives in corporate America.
• 31:51
  Speaker 10: What about minority businesses.
• 31:53
  Speaker 9: So the minority businesses, they are ready to compete every day.
• 32:01
  Speaker 9: We work with them to certify them, to develop them,
• 32:06
  Speaker 9: to connect them to opportunities, relationships and a capital. And
• 32:12
  Speaker 9: we have businesses, you know, they started as a startup,
• 32:16
  Speaker 9: a small business and and they grew to be a
• 32:19
  Speaker 9: mid size and to large sized businesses. And we have
• 32:24
  Speaker 9: businesses out there. Forcus example, one of our certified mbes
• 32:29
  Speaker 9: actually helped design and build finance Liguardi Airport. I was
• 32:34
  Speaker 9: I was walking through the Loguardia Airport right, yes, under
• 32:39
  Speaker 9: the construction.
• 32:39
  Speaker 10: Over the last decade, I.
• 32:40
  Speaker 9: Used to avoid Loguarda airport, but since the reconstruction by
• 32:44
  Speaker 9: our mbes, like, I actually want to fly to logard right.
• 32:48
  Speaker 10: I don't want everyone to know though, because it's so
• 32:50
  Speaker 10: easy to get there from my apartment.
• 32:52
  Speaker 7: Yes, it's easier, right.
• 32:55
  Speaker 9: We have mbes there are design and building natural gas
• 33:00
  Speaker 9: power plants, and so they're definitely contributing to our economy
• 33:05
  Speaker 9: every single day. And actually, we're releasing the twenty twenty
• 33:10
  Speaker 9: three Minority Business Economic Impact Study, and you're going to
• 33:15
  Speaker 9: see some of the reports come out. I'm very pleased
• 33:19
  Speaker 9: to share the NMSDC certified Minority owned businesses generated about
• 33:24
  Speaker 9: three hundred sixty three billion dollar in annual revenue, and
• 33:29
  Speaker 9: that is five hundred and fifty billion dollar economic output,
• 33:33
  Speaker 9: two million jobs, and one hundred and forty nine billion
• 33:37
  Speaker 9: dollar in wages. And if we continue that trend, that
• 33:44
  Speaker 9: we can actually reach a trillion dollar goal for NMSDC
• 33:49
  Speaker 9: certified mbs by twenty thirty and that's one point five
• 33:53
  Speaker 9: trillion dollar economic output and four million jobs.
• 33:57
  Speaker 4: So I know you and other advuracyads recently sent a
• 34:00
  Speaker 4: letter to Fortune five hundred companies advocating for DEI. What's
• 34:04
  Speaker 4: been the response to that letter? Any follow up?
• 34:07
  Speaker 9: Yes, I'm very proud to stand with eleven other CEOs
• 34:13
  Speaker 9: of a broad range of business organizations representing Black, Asian, Latino, woman, LGBTQ,
• 34:22
  Speaker 9: disability venter owned businesses. We represent seventy plus percent American
• 34:28
  Speaker 9: and we wrote open letter to Fortune five hundred company
• 34:32
  Speaker 9: CEOs really share with them the business cases for diversity,
• 34:36
  Speaker 9: and I really encouraged them to continue to invest in
• 34:40
  Speaker 9: the initiatives and it has been tremendously positive and in fact,
• 34:45
  Speaker 9: working ongoing dialogue with them, continue to share best practices
• 34:50
  Speaker 9: and problem solving. In fact, I was with a Fortune
• 34:54
  Speaker 9: five hundred company CEO and talking about you know, people
• 34:58
  Speaker 9: just need to stop debating on the term and the
• 35:02
  Speaker 9: words and with the feelings, and we just need to
• 35:06
  Speaker 9: understand why corporations are doing it and why they are
• 35:10
  Speaker 9: doing it. And corporations just need more choices of suppliers,
• 35:15
  Speaker 9: including inclusion of diverse suppliers so they can build rezilient
• 35:20
  Speaker 9: supply chain. And a corporation is going to need more
• 35:23
  Speaker 9: diverse talents so they can build product services to diverse
• 35:29
  Speaker 9: customer base. Right, so it's really a pure simple business,
• 35:34
  Speaker 9: good business.
• 35:35
  Speaker 1: Yep.
• 35:35
  Speaker 8: All right.
• 35:35
  Speaker 4: That was Ying Maguire, President and CEO of the National
• 35:38
  Speaker 4: Minority Supplier Development Council, talking about diversity in the workforce
• 35:43
  Speaker 4: in the economy and she represents these suppliers all throughout
• 35:46
  Speaker 4: the country.
• 35:47
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• 35:55
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• 36:02
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• 36:05
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