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The BOE's Plan, Alzheimer's Research, ETFs · 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. It's a dramatic intervention
• 0:21
  Speaker 1: to staaloff and imminent crash in the guilt market. My
• 0:24
  Speaker 1: pledging unlimited purchases along dated bonds. But isn't that kind
• 0:28
  Speaker 1: of a cross currents with Prime Minister list trust tax
• 0:31
  Speaker 1: cuts bill that was just recently announced kind of whip
• 0:35
  Speaker 1: sawing markets. Um, you know, over the last several days,
• 0:38
  Speaker 1: we want to get a little bit of perspective about
• 0:39
  Speaker 1: what's happening on the trading floors around the world. Vince
• 0:42
  Speaker 1: Cignarella joins his global macro strategist with Bloomberg News. Vince,
• 0:46
  Speaker 1: what do you make of what's coming out of our
• 0:48
  Speaker 1: good friends over in London quantitative easing? No, No, this
• 0:54
  Speaker 1: was all taken up basically because of the pension issued.
• 0:57
  Speaker 1: UH pensions have taken a beating on this moving bonds Uh,
• 1:01
  Speaker 1: there were some questions about liquidation and liquidity issues. So
• 1:06
  Speaker 1: the b if you really just stepped in to protect
• 1:08
  Speaker 1: the pension funds, um and as one treasury uh trade
• 1:13
  Speaker 1: or friend of mine st today is the b V
• 1:16
  Speaker 1: essentially engaging in yield curve control by another name, similar
• 1:20
  Speaker 1: to the Bank of Japan moves of later and you
• 1:24
  Speaker 1: could argue that that's realisted. What's going on. I'm looking
• 1:27
  Speaker 1: at the long end of the curve here down a
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  Speaker 1: hundred basis points in yield. Yesterday we went over five
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  Speaker 1: on the UK thirty year. Today we're under four. That
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  Speaker 1: kind of move um looks like panic. Well, you know
• 1:45
  Speaker 1: it's the it's the same situation. It is because the
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  Speaker 1: pension funds are out in the long end, so that's
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  Speaker 1: where the banking is playing. Um. It's almost an operation
• 1:54
  Speaker 1: twist if you will, um as to what they're doing
• 1:57
  Speaker 1: the stabilize the race situation. You know, what does it mean?
• 2:00
  Speaker 1: What does it mean? Vince? If you're a trader, If
• 2:02
  Speaker 1: you're a trader who bought the thirty year guilty yesterday,
• 2:06
  Speaker 1: I guess you're in pig heaven. But if you are short,
• 2:10
  Speaker 1: if you went short them yesterday, Um, you're closing up shop. Yeah, absolutely, no,
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  Speaker 1: that's this is uh, this is a very uh, this
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  Speaker 1: is a rip your face off kind of moves. Say
• 2:19
  Speaker 1: on the street, if you were if you decided you
• 2:22
  Speaker 1: were going to short that market yesterday. Um. But you know,
• 2:26
  Speaker 1: it's it's a little bit of you know, fiscal irresponsibility
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  Speaker 1: as to what was happening prior to today and what
• 2:32
  Speaker 1: the markets were spanking the pound and that market yesterday
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  Speaker 1: aggressively because they don't like what the what the the
• 2:40
  Speaker 1: fiscal policy is about cutting taxes and increasing spending, while
• 2:45
  Speaker 1: the Bank of England is talking about raising two bases
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  Speaker 1: points to try to fight installation. It's you've got the
• 2:50
  Speaker 1: Treasury Department and the and the Bank of England working
• 2:53
  Speaker 1: at odds, which is an almost emerging market kind of crisis.
• 2:57
  Speaker 1: You you've taken a cheap tank jeep ten country and
• 3:00
  Speaker 1: you've thrown it into em almost. I mean, how often
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  Speaker 1: in developed markets do um bond yields move one full
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  Speaker 1: percentage point in the space of like twenty minutes. Vince,
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  Speaker 1: are we highly highly a luxe Vince, are we gonna
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  Speaker 1: get parity with the pounds, sterling and dollar because the
• 3:19
  Speaker 1: pound hasn't exactly strengthened. We're at one oh six ninety
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  Speaker 1: seven right now. I think the currency is very much
• 3:25
  Speaker 1: in danger of a collapse. I think, you know, what
• 3:27
  Speaker 1: depends on on what the what the Bank of England
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  Speaker 1: does next. I mean, you know, the Bank of Thing
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  Speaker 1: and raising rights now to try to defend the pound
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  Speaker 1: is going to make situation worse. It's gonna look like
• 3:38
  Speaker 1: the Sorrows era where markets are going to see the
• 3:42
  Speaker 1: banket thing in a panic mode trying to protect Sterling,
• 3:45
  Speaker 1: trying to protect the currency by raising rates, and the
• 3:48
  Speaker 1: market is going to take that, you know, a bit
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  Speaker 1: between their teeth and see this as an opportunity to
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  Speaker 1: push them to see how far they can go, because
• 3:55
  Speaker 1: there's only so far they can raise rates to try
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  Speaker 1: to protect the pound. When you have more motgage rate
• 4:00
  Speaker 1: um mortgages uh going back to being marked up, and
• 4:05
  Speaker 1: you know what does that do to the consumer? You're
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  Speaker 1: giving them money in a tax cut, but then you're
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  Speaker 1: taking it away by higher mortgage rates. So it it's
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  Speaker 1: it's literally like throwing money into the fireplace. It just
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  Speaker 1: doesn't help you. I'll remind our listeners that you know
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  Speaker 1: here in the US, you get a thirty year fixed
• 4:21
  Speaker 1: mortgage in the UK. Often um the mortgage you get
• 4:25
  Speaker 1: us for less than ten years. So you I think
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  Speaker 1: there are one point eight million people in the UK
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  Speaker 1: who need to refy their mortgages this year. Still, Yeah,
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  Speaker 1: tough situation going from zero to you know, well maybe
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  Speaker 1: they had a three percent rate and now they're looking
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  Speaker 1: at like nine. So Vince, coming back to this side
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  Speaker 1: of the ocean, Federal Reserve, they look at all this
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  Speaker 1: global uncertainty, they look at kind of the instability coming
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  Speaker 1: out of Great Britain, one of our biggest partners. Does
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  Speaker 1: that influence them at all? Well, I think they have
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  Speaker 1: to keep this in mind because you have the same
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  Speaker 1: similar situation here in the US. You've seen the stock
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  Speaker 1: markets drop some what orse um, does that put pressure
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  Speaker 1: on US pension funds. It's very likely you're probably going
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  Speaker 1: to see another round of earnings that are are not
• 5:15
  Speaker 1: going to look too rosy because of the moving a dollar. Um.
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  Speaker 1: You know, I wouldn't be surprised if we took a
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  Speaker 1: run at one double ow and sterling that that would
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  Speaker 1: be you know, the curtain call, if you will, for
• 5:26
  Speaker 1: the global central banks or the G ten central banks.
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  Speaker 1: Uh to step in and do some coordinated intervention because
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  Speaker 1: part of the problem too it will stronger dollar, is
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  Speaker 1: that that that weekends. You know that that lessons prices
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  Speaker 1: on imports, um and and put potentially makes the inflation
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  Speaker 1: situation worse for than set suset as well. All Right,
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  Speaker 1: It's very interesting, and I also wonder if people on
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  Speaker 1: the wrong side of the trade have to sell treasuries,
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  Speaker 1: if energy importers have to sell treasuries, if the Bank
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  Speaker 1: of Japan has to sell treasuries, or the Finance ministry
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  Speaker 1: to show up their currency. All right, Vin Signarella, good stuff.
• 6:00
  Speaker 1: Appreciate a macro strategist for Bloomberg. Give us a sense
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  Speaker 1: of just kind of what he's hearing on the street
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  Speaker 1: from bond traders, currency traders, and you know a lot
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  Speaker 1: of uncertainty, particularly coming out of the UK with what's
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  Speaker 1: been happening over there over the past early three or
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  Speaker 1: four or five days, just putting a lot of uncertainty
• 6:16
  Speaker 1: into the markets. Let's check in with Katarina sem and Eddie.
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  Speaker 1: She's a senior VP at Morgan Stanley Private Wealth Management. Katarino,
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  Speaker 1: what are the phone calls that the incoming calls you're
• 6:29
  Speaker 1: getting from your clients, any any themes emerging to you
• 6:32
  Speaker 1: uh this year, Well, this has certainly been a challenging
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  Speaker 1: year and a challenging market, and investors are concerned and
• 6:40
  Speaker 1: the phone calls were getting uh, you know, just really
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  Speaker 1: you know, the vocalize this year that that investors are
• 6:48
  Speaker 1: you know, experiencing looking at their portfolios being down so much.
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  Speaker 1: And what has been unusual about earlier in the year
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  Speaker 1: is that it wasn't just the stocks that were down,
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  Speaker 1: at the stocks and bonds that were down. So investors
• 6:59
  Speaker 1: are looking for the guideline from us, you know, as
• 7:02
  Speaker 1: far as what they should do, and what we're recommending
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  Speaker 1: is above all to not fear cell because as easy
• 7:10
  Speaker 1: as it is to you know, to to be concerned about,
• 7:13
  Speaker 1: you know, all of the markets, you know, in our view,
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  Speaker 1: there is an end inside where nearing the end of it,
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  Speaker 1: the well they're they're they're absolutely could be, and sometimes
• 7:25
  Speaker 1: things are worse before they get better. And in our view,
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  Speaker 1: the biggest risk to the market are the earnings declining
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  Speaker 1: earnings and the earnings revisions that you know, we see
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  Speaker 1: ahead because the reality is that we're most likely going
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  Speaker 1: to have poor inflation remain high for some time market
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  Speaker 1: is already pricing in the interest rate increases, you know,
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  Speaker 1: but with earnings revisions that are not done yet. You know,
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  Speaker 1: this is that next leg down that we are expecting
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  Speaker 1: towards the end of the year. But this is again
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  Speaker 1: not to say that we are bearish in the long run,
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  Speaker 1: but I mean, we're looking for this. I think the
• 8:00
  Speaker 1: median is for two dollars a share SMP meeting SMPUM
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  Speaker 1: five hundred year end EPs. What are you what are
• 8:09
  Speaker 1: you looking for? Well, the question is you know what
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  Speaker 1: kind of recession we're going to get. I think the
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  Speaker 1: consensus is that we most likely are going to get
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  Speaker 1: the economic recession. And if it's going to be a
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  Speaker 1: mild recession, we probably are going to end the year
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  Speaker 1: at a sumwhere around thirty four hundred and the SMP.
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  Speaker 1: But if if it's more of a severe recession outcome,
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  Speaker 1: you know, we might be looking at three thousand, you know,
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  Speaker 1: And it's hard to predict these things because you know,
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  Speaker 1: of course, there is a certain amount of lag between
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  Speaker 1: the FED action and the desired outcome. And you know,
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  Speaker 1: the what we're all questioning right now is that truly
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  Speaker 1: going to be data dependent? You know, as we rely
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  Speaker 1: on them to be or will they react to the
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  Speaker 1: pressures of the market, you know, and continue tightening, you know,
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  Speaker 1: and as a result push us to the economic recession.
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  Speaker 1: All right, to have a programmed question here that I've
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  Speaker 1: written to myself that a couple of days um. And
• 9:01
  Speaker 1: this comes from a long time listener. I thought it
• 9:04
  Speaker 1: was very smart. He said, last year's inflation is transitory.
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  Speaker 1: Is this year's short and set and shallow recession? Um?
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  Speaker 1: What changes short and shallow? Too long and severe? What's
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  Speaker 1: what's that hinge on? Well? I think that that's where
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  Speaker 1: the risk or federal reserve overshooting or raising rates too much,
• 9:25
  Speaker 1: you know, because we're not seeing the desired reaction from
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  Speaker 1: the inflation. That's where that comes in, because we have
• 9:31
  Speaker 1: to allow some time between the rate hikes and an
• 9:35
  Speaker 1: inflation coming down, you know. But the the current economic environment,
• 9:39
  Speaker 1: you know, has so many pressures. The cost of doing businesses,
• 9:42
  Speaker 1: high profit margins are getting narrower. Consumers are reluctant to
• 9:46
  Speaker 1: spend money on most things outside of poor necessities, you know,
• 9:50
  Speaker 1: unless you know, you're looking at travel and entertainment, which
• 9:52
  Speaker 1: is like natural in the post COVID environment now. But
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  Speaker 1: this is really the you know, the time where negative
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  Speaker 1: earnings and re visions that we're expecting over the next
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  Speaker 1: couple of quarters take the central stage, because ultimately, once
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  Speaker 1: the earnings are revised, it will be possible for the
• 10:08
  Speaker 1: u S company to meet earnings and exceed earnings, which
• 10:11
  Speaker 1: is going to be the pivot that we're looking for
• 10:14
  Speaker 1: into the next bowl market. But we're not quite there yet.
• 10:18
  Speaker 1: So are you. If an investor comes to you with
• 10:20
  Speaker 1: new money, what do you do with it? Well, with
• 10:23
  Speaker 1: new money currently understanding the risks and understanding you know,
• 10:28
  Speaker 1: what is ahead of us. You know, we would dollar
• 10:31
  Speaker 1: cost average into the equity market. We definitely would recommend
• 10:34
  Speaker 1: staying invested, but we will pivot and lean towards the
• 10:37
  Speaker 1: defensive sectors. Sectors like healthcare, utilities, consumer staples, and reads
• 10:42
  Speaker 1: all given in paying stocks because income is extremely important
• 10:45
  Speaker 1: in this inflationary environment. You know. The other thing to
• 10:49
  Speaker 1: consider is relative to bonds, stocks are pretty expensive. But finally,
• 10:55
  Speaker 1: unlike earlier in this year, there is a little bit
• 10:57
  Speaker 1: of a safe haven in fixed income is actually in
• 11:00
  Speaker 1: short term high quality UM corporate bonds and treasuries. We
• 11:05
  Speaker 1: can get significant amount of yield in these sectors. And
• 11:09
  Speaker 1: you know, if there is an argument to be made
• 11:12
  Speaker 1: for a safer acid allocation while we get through this
• 11:16
  Speaker 1: challenging bolatile UH cycle in the market, you know that
• 11:20
  Speaker 1: that makes sense for a lot of investors here, all right,
• 11:22
  Speaker 1: Katerine and good stuff. Always appreciate getting your perspective, Katerina
• 11:25
  Speaker 1: semineity Uh, Senior VP at more Extantly Private Wealth Management. Well,
• 11:31
  Speaker 1: I've always said trading biotech stocks is a tough way
• 11:34
  Speaker 1: to make a living. You really have to be right.
• 11:38
  Speaker 1: I mean, if you're right, you make a lot of money,
• 11:39
  Speaker 1: but boy, if you're wrong, you'll lose a lot of money.
• 11:42
  Speaker 1: Here on these new drugs, today is a good day
• 11:45
  Speaker 1: for Biogen and it's Japanese partner ISI. Stocks are both surging.
• 11:49
  Speaker 1: At Biogen up about thirty six percent today. They had
• 11:52
  Speaker 1: some good news on one of their trials about one
• 11:55
  Speaker 1: of the Alzheimer's drugs. And to give us the latest
• 11:58
  Speaker 1: is Robert Langworth. He covers all things biotech healthcare for
• 12:01
  Speaker 1: Bloomberg News. Robert talked to us about what bio jen
• 12:05
  Speaker 1: and Isai are are are doing today, what they're drug
• 12:07
  Speaker 1: is and kind of what we learned today. Yeah, so
• 12:10
  Speaker 1: this is a trial I mean actually run by a
• 12:12
  Speaker 1: SI as I did this trial, in charge this trial
• 12:15
  Speaker 1: and did this trial. Uh it's in partnership with Biogen,
• 12:18
  Speaker 1: but as I was really running in biogeneral, I think
• 12:21
  Speaker 1: would get half of the profits as far as long
• 12:23
  Speaker 1: standing collaboration. But basically, this is a drug to remove amyloids,
• 12:28
  Speaker 1: this toxic protein for the brains Alzheimer's patients. And drug
• 12:32
  Speaker 1: company has been trying to do this uh uh for
• 12:36
  Speaker 1: many years and have tested all sorts of other drugs
• 12:38
  Speaker 1: to do this, and all the previous trials of other
• 12:42
  Speaker 1: drugs for amyloid of generating their mixed mixed results are
• 12:45
  Speaker 1: failed entirely in trials, so they've been working on years
• 12:48
  Speaker 1: and years with little success. You may remember that Biogen
• 12:51
  Speaker 1: itself had another drug that was actually approved called aji Helm.
• 12:55
  Speaker 1: It was actually approved in one of the most controversial
• 12:58
  Speaker 1: u S approvals and history uh and it was another
• 13:00
  Speaker 1: emoid drug with the and but then Medicare refused to
• 13:03
  Speaker 1: cover it because the results of that. Their trials are
• 13:05
  Speaker 1: kind of contradictory and no one could figure out whether
• 13:07
  Speaker 1: it worked or didn't work. So now this trial is
• 13:10
  Speaker 1: another amyloid lowering drug under the Biogen a side partnership.
• 13:14
  Speaker 1: But this one, as I said, aside was kind of
• 13:17
  Speaker 1: was was leading the charge on and this trial was
• 13:20
  Speaker 1: the first trial then emily lowering drug to show it
• 13:23
  Speaker 1: kind of a clearly uh clearly statistically positive effect and
• 13:28
  Speaker 1: slowing cognitive decline. Like I've heard it described as like
• 13:32
  Speaker 1: a plaque plaque on your brain. Yeah, there's kind of
• 13:34
  Speaker 1: a kind of four mittle plaques in the brain. No
• 13:37
  Speaker 1: one is exactly sure how they are toxic. It's thought
• 13:40
  Speaker 1: to be toxic. It's one of the leading kind of
• 13:41
  Speaker 1: theories of Alzheimer's. Uh everything about alzremers of controversial, but
• 13:45
  Speaker 1: this is kind of one of the leading theories. So
• 13:47
  Speaker 1: basically it appeared in this very big trial, this new
• 13:50
  Speaker 1: director show you know, a a small positive effect that
• 13:54
  Speaker 1: it appears to be kind of quite modest. It's like
• 13:56
  Speaker 1: zero point five, zero point four or five points from
• 13:59
  Speaker 1: the eight point scale. So they think the big debate
• 14:01
  Speaker 1: next is going to be like how clinically meaningful you know,
• 14:05
  Speaker 1: is this? But you know, everyone thinks this is enough
• 14:07
  Speaker 1: to get approval. Side question kind of why do they
• 14:10
  Speaker 1: give these drugs such bad names? Ad you helm was
• 14:13
  Speaker 1: the last one? What's this one? Called it's similarly unpronouncing. Well,
• 14:17
  Speaker 1: this is a generic name, is Lacannon, mab map stands
• 14:20
  Speaker 1: or monocola antibody. But but it's gonna get it. If
• 14:23
  Speaker 1: it's approved, it's going to get a brand name. And
• 14:25
  Speaker 1: we don't know what that's gonna be, so it could
• 14:27
  Speaker 1: be another incomprehensible brand name, you know, who knows. Is
• 14:30
  Speaker 1: that a strategy though? Is that part of the marketing strategy?
• 14:32
  Speaker 1: Like if you can't pronounce it and you can't remember
• 14:34
  Speaker 1: what it is, then you must think it's gonna work. Yeah,
• 14:38
  Speaker 1: I don't know where they come up with these names.
• 14:40
  Speaker 1: You know, drug companies lots, you know, like come up
• 14:43
  Speaker 1: with names, lots of xs and zs in them, you know.
• 14:46
  Speaker 1: And I think they've spent spent a lot of money
• 14:48
  Speaker 1: consultants to come up with the name. So how they
• 14:51
  Speaker 1: do it, that's just the mystery. So Robert, I see
• 14:55
  Speaker 1: this stock, this Biogen stock. It's a forty billion dollar
• 14:57
  Speaker 1: market cap stock. It's a thirty six day That tells
• 15:00
  Speaker 1: me that this is a breakthrough drug. But you're telling
• 15:04
  Speaker 1: me it's not really, or that there are a lot
• 15:06
  Speaker 1: of punters in in bio tech. I think, yeah, I guess,
• 15:10
  Speaker 1: I mean this move and the stock tells me that
• 15:12
  Speaker 1: this is radical, and it's not radical, is it. It's
• 15:15
  Speaker 1: a step along the way, so like so yeah, the
• 15:18
  Speaker 1: step along the way. But you know, they haven't had
• 15:21
  Speaker 1: really any clear cut steps all in the way, and
• 15:23
  Speaker 1: it stord of like, you know, all the steps aren't aborted.
• 15:28
  Speaker 1: So you know, this is like the first successful trial
• 15:30
  Speaker 1: disease felling trial. So in that sense, it's, you know,
• 15:33
  Speaker 1: a breakthrough in critical trials, you know, but whether there
• 15:37
  Speaker 1: was a patient, it's the medical breakthrough not not so clear. Well,
• 15:39
  Speaker 1: they said the they said the use of the drug
• 15:43
  Speaker 1: reduces the pace of cognitive decline in people with early
• 15:46
  Speaker 1: disease by t over eighteen months when compared to placebo.
• 15:51
  Speaker 1: That doesn't sound great, but it sounds better than nothing. Yeah,
• 15:55
  Speaker 1: it's kind of like, you know, better than nothing. It's
• 15:57
  Speaker 1: it's not so clear whether you know, you and the
• 16:00
  Speaker 1: patient of family would even detect the change in the difference.
• 16:03
  Speaker 1: I mean, you know, if you think about it, like,
• 16:05
  Speaker 1: you know, if you were going to decline, you know, yeah,
• 16:09
  Speaker 1: a hundred points in the scale, you're still going to
• 16:11
  Speaker 1: decline seventy three points in the scale. That's difference, so,
• 16:15
  Speaker 1: you know, but I guess they they're touting the possibility
• 16:18
  Speaker 1: that it over a longer period of time, it may
• 16:20
  Speaker 1: do even an even better job. Right. Um Um, They
• 16:24
  Speaker 1: say that the top line data as strong as it
• 16:26
  Speaker 1: can be with high statistical significance across all end points.
• 16:29
  Speaker 1: Data doesn't get much cleaner than this in biotech. That's
• 16:32
  Speaker 1: according to BEMO Capital Markets analyst Evan Seagerman. You know
• 16:36
  Speaker 1: that because you probably wrote the story. But um, yeah, so,
• 16:41
  Speaker 1: I mean, this is the first thing I read when
• 16:42
  Speaker 1: I woke up this morning. I looked over the headlines
• 16:45
  Speaker 1: and I picked this out because it's important to me
• 16:46
  Speaker 1: on a you know, personal level, and I think for
• 16:49
  Speaker 1: millions of people it's a huge issue. It's a horrible
• 16:52
  Speaker 1: disease that affects everybody in the family if one person
• 16:56
  Speaker 1: gets it. Yeah, no, it's a very difficult disease. You know,
• 16:58
  Speaker 1: the caregiver cost cost of this disease, you know, are
• 17:01
  Speaker 1: very very high. And this you know, this drug, you know,
• 17:04
  Speaker 1: it doesn't stop the decline. It only you know, slows
• 17:07
  Speaker 1: it close it somewhat. And and we don't know a
• 17:09
  Speaker 1: lot of these details. All we have right now is
• 17:11
  Speaker 1: really just a press release from the company. Is there
• 17:13
  Speaker 1: anything else, Robert, Is there a moon shot out there,
• 17:16
  Speaker 1: maybe something that attacks the disease differently than just removing
• 17:20
  Speaker 1: the plaque from your brain? Um? Is anyone working on
• 17:24
  Speaker 1: something that could be better? Yeah, So, coming are working
• 17:27
  Speaker 1: on lots of things. Now. One of the hopeful things
• 17:29
  Speaker 1: is that there's a much kind of broader array of
• 17:32
  Speaker 1: attempts doing different strategies to try to treat the disease. Now,
• 17:36
  Speaker 1: it's not all just focused on this one idea amyloid.
• 17:40
  Speaker 1: And you know, it seems, you know, clear a lot
• 17:42
  Speaker 1: of people are saying that, you know, we'll need to
• 17:44
  Speaker 1: make this ultimately more like cancer and attack it from
• 17:47
  Speaker 1: like three or four like different drugs at once, using
• 17:51
  Speaker 1: that attack three or four different mechanisms, because clearly, you know,
• 17:55
  Speaker 1: removing amyloidcase, this drug does a tremendous job at removing amyloid,
• 17:58
  Speaker 1: but what you get is this tony seven percent difference.
• 18:01
  Speaker 1: So it's clearly, you know, it seems to say that
• 18:03
  Speaker 1: that Emily's not the only thing where you're gonna have
• 18:05
  Speaker 1: to suggest go after multiple causes and over time, Robert,
• 18:11
  Speaker 1: just thirty seconds left in a post COVID world, is
• 18:13
  Speaker 1: it easier to get drugs approved or is it has
• 18:16
  Speaker 1: that changed at all? Um So you know there's no
• 18:19
  Speaker 1: fundamental change. I don't. I don't think in the in
• 18:21
  Speaker 1: the in the f days kind of approval strategy as
• 18:25
  Speaker 1: a result of COVID that I know of. But you know,
• 18:28
  Speaker 1: certainly the the neurology division that has been looking at
• 18:32
  Speaker 1: throughout s light the ones for all shimers. They you know,
• 18:35
  Speaker 1: they are you know, uh, it seems to me, you know,
• 18:38
  Speaker 1: taking an aggressive strategy and you know, and trying to
• 18:41
  Speaker 1: you know, get drugs approved. That show begins shows some
• 18:45
  Speaker 1: kind of a difference. You know, they approved the biogen
• 18:47
  Speaker 1: drug you know, based on bio mark is based on
• 18:49
  Speaker 1: emiloid loring alone. This one is the first one. This
• 18:52
  Speaker 1: one goes beyond that. It actually shows like a measurable
• 18:55
  Speaker 1: critical difference. But it's small, It's really small, all right, Robert, good,
• 18:58
  Speaker 1: good stuff. Thanks to that porting. We appreciate it, Robert Langreth.
• 19:04
  Speaker 1: I want to bring in our next guest, Alo Tero.
• 19:06
  Speaker 1: He's a portfolio manager at Armada E T F Advisors.
• 19:09
  Speaker 1: Uh and they've got a US read E T F
• 19:13
  Speaker 1: H A U S. Talking about the housing market. We
• 19:16
  Speaker 1: had some pending home sales today month on month was
• 19:19
  Speaker 1: down two percent. The consensus was for a decline at
• 19:22
  Speaker 1: one point five percent, but on a year on year basis,
• 19:24
  Speaker 1: that's how I like to look at it. UH came
• 19:26
  Speaker 1: in and minus twenty two and a half percent. So
• 19:29
  Speaker 1: looks like this housing market rolling over al. Thanks so
• 19:32
  Speaker 1: much for joining us here, talk to us about your
• 19:34
  Speaker 1: h A U S read E t F and kind
• 19:37
  Speaker 1: of kind of what you're trying to do with this
• 19:39
  Speaker 1: et F and then love to get also your over
• 19:42
  Speaker 1: you just kind of this where we are in this
• 19:43
  Speaker 1: housing market. Sure ture's a good good morning. Thanks so
• 19:47
  Speaker 1: much for having me. Yes, and our MADA et F
• 19:50
  Speaker 1: is a relatively newly formed U advisory firm. Houses are
• 19:55
  Speaker 1: first product. UH. We basically have background in UH, in
• 19:59
  Speaker 1: the read industry, in the into et F industry, and
• 20:03
  Speaker 1: then also in the direct real estate industry. And the
• 20:06
  Speaker 1: goal with with house was really UM and our founder
• 20:09
  Speaker 1: was looking at about two years ago and it was
• 20:12
  Speaker 1: looking for a residential red e t F UM UH
• 20:15
  Speaker 1: and he said, g one doesn't exist, maybe we need
• 20:18
  Speaker 1: to create one, and that's exactly what what he did,
• 20:21
  Speaker 1: and we launched a fund back in March, and again
• 20:24
  Speaker 1: it's residential read ets. So it's it is certainly housing
• 20:27
  Speaker 1: related to the extent that what goes on in the
• 20:31
  Speaker 1: residential read market that's multifamily, uh, single family rental manufactured
• 20:35
  Speaker 1: housing certainly a correlation there with the single family housing market. UM.
• 20:40
  Speaker 1: But again the goal here is to number one current income.
• 20:44
  Speaker 1: Number two hard assets, predictable cash flows, uh, you know,
• 20:48
  Speaker 1: attractive dividends that are are growing an attractive rate, strong
• 20:53
  Speaker 1: balance sheets, so lots of lots of good characteristics that
• 20:56
  Speaker 1: roll up into the residential read market. So what do
• 21:01
  Speaker 1: um the flows look like thus far? What are you
• 21:04
  Speaker 1: looking at in terms of assets under management? So where
• 21:09
  Speaker 1: we're tiny, guys. We we launched back in early March.
• 21:12
  Speaker 1: We have a couple of you know, uh several several
• 21:15
  Speaker 1: million dollars in the fund right now. We've launched into
• 21:18
  Speaker 1: a bit of a volatile environment. I think a lot
• 21:20
  Speaker 1: of folks that we're talking to like the like the
• 21:22
  Speaker 1: idea residential reaths uh you know at residential real estate
• 21:27
  Speaker 1: again broadly defined as I mentioned earlier and not just housing,
• 21:31
  Speaker 1: you know, has has been a favorite part of the
• 21:34
  Speaker 1: investment landscape at landscape for a very long time. UM. Again,
• 21:39
  Speaker 1: rent growth more recently has just been off the charts. Uh.
• 21:42
  Speaker 1: Certainly that's starting to moderate, and I think it's a
• 21:45
  Speaker 1: good thing. But as we look back over the last
• 21:48
  Speaker 1: you know, quarter, two quarters, and we talked to our
• 21:50
  Speaker 1: constituent companies, Uh, you know you hear the worst historic
• 21:54
  Speaker 1: getting tossed down a lot. We've we've had historic rent growth.
• 21:57
  Speaker 1: We've had occupancy levels and and tendant retention, resident retention
• 22:02
  Speaker 1: levels that have really just been off the charts, and
• 22:05
  Speaker 1: lots of lots of that house to have to do
• 22:07
  Speaker 1: with some of the structural change that have gone on
• 22:10
  Speaker 1: in the in the market of the last couple of years.
• 22:12
  Speaker 1: But we were continuously good demand for this product. I
• 22:16
  Speaker 1: can imagine if you'd launched at the beginning of UM,
• 22:20
  Speaker 1: you'd just be shoveling out cash, right, But uh, you
• 22:25
  Speaker 1: come in at a time, well basically at the peak,
• 22:28
  Speaker 1: right when I bought my house, you launched your house, UM,
• 22:33
  Speaker 1: and I feel like I got the very top price
• 22:35
  Speaker 1: I possibly could have paid, but I did at least
• 22:38
  Speaker 1: get a little rate. And now we're looking at mortgage
• 22:41
  Speaker 1: rates up over seven percent in some cases. UM, is
• 22:46
  Speaker 1: this do you think is this part of the problem
• 22:51
  Speaker 1: for house And do you have other products that you're
• 22:53
  Speaker 1: gonna that you're looking to launch around this second to
• 22:56
  Speaker 1: your answer second question, Yeah, we are looking at other
• 22:59
  Speaker 1: products touch launch around this, um, but think the heart
• 23:02
  Speaker 1: of the matter, you know, and as it relates to housing,
• 23:04
  Speaker 1: and and it's it's a long term investment. You long
• 23:07
  Speaker 1: term investment. You recently bought your house. You're gonna hopefully
• 23:10
  Speaker 1: be in there on average right right sitting you know,
• 23:12
  Speaker 1: you know, fifteen years or so they're about so it's
• 23:15
  Speaker 1: a long term investment. Obviously, historically, um HP a house
• 23:20
  Speaker 1: price appreciation has been inflationary plus so, so there there's
• 23:25
  Speaker 1: a hedge against inflation there. Um. You know, market timing
• 23:29
  Speaker 1: is always so so difficult, but we see an opportunity,
• 23:32
  Speaker 1: especially when you look at what's going on in the
• 23:34
  Speaker 1: housing market and as uh and and and as that
• 23:38
  Speaker 1: home prices have gone up so much that really tends
• 23:40
  Speaker 1: to also keep residents in apartments longer. And that's I
• 23:44
  Speaker 1: think one of the interesting things about what we're seeing
• 23:46
  Speaker 1: today in the rental market. Um, there's an affordability problem
• 23:51
  Speaker 1: with with home ownership today, and that affordability gap between
• 23:55
  Speaker 1: owning and renting makes it still a very attractive proposition
• 23:59
  Speaker 1: to rent, and we think that's a proposition that's going
• 24:02
  Speaker 1: to certainly last through the end of twenty two and
• 24:04
  Speaker 1: most likely into three as well. All Right, Al, good stuff.
• 24:08
  Speaker 1: I appreciate you coming on and talk to us about
• 24:10
  Speaker 1: the housing market here. Al oh Taro, portfolio manager of
• 24:14
  Speaker 1: Armada E. T F Advisors. Uh, looking at you know,
• 24:18
  Speaker 1: mortgage rates north of six percent and it's really really
• 24:21
  Speaker 1: headwinds for the real estate market after that surge during
• 24:24
  Speaker 1: the pandemic. Trust Company of the West the kids now
• 24:29
  Speaker 1: call it TCW. It's a monstrous money management firm out
• 24:33
  Speaker 1: on the West coast in Los Angeles. A lot of
• 24:35
  Speaker 1: really smart people in the equities and fixed income business.
• 24:38
  Speaker 1: The fixed income folks that we've talked to TCW from,
• 24:42
  Speaker 1: you know, over the last I don't know how long,
• 24:44
  Speaker 1: but you know many many quarters been really really conservative
• 24:47
  Speaker 1: in their outlooking. Boy have they been right? Uh here,
• 24:50
  Speaker 1: double digit declines and most fixed income businesses. Steve Kane
• 24:54
  Speaker 1: co c I O in General's portfolio manager with t
• 24:56
  Speaker 1: c W, joins us here today. Steve, the fix income
• 25:00
  Speaker 1: business is brutal. Nobody wants to talk to you guys
• 25:02
  Speaker 1: at cocktail parties. What do you do? What do you
• 25:05
  Speaker 1: do now? Good? What do you do now with your
• 25:08
  Speaker 1: feather reserve? Is just doubling down on raising these interest rates?
• 25:11
  Speaker 1: Well well, guys, actually, even in the good times when
• 25:14
  Speaker 1: bonds are doing well, no one wants to talk to it,
• 25:17
  Speaker 1: so that this environment is no different from that perspective.
• 25:21
  Speaker 1: Is it a buy now? Jeff Goodlock? I believe um
• 25:25
  Speaker 1: a tc w alum. He's been buying bonds over the
• 25:29
  Speaker 1: last couple of days, at least according to his Twitter,
• 25:31
  Speaker 1: but he says it's been partially painful. I guess until
• 25:35
  Speaker 1: you know, the last few hours. Yeah, yeah, and uh yeah,
• 25:39
  Speaker 1: I think we're seeing a lot more value in the market.
• 25:42
  Speaker 1: I'm you know, starting with the idea that fed tightening cycles.
• 25:45
  Speaker 1: You know where you were starting this conversation. They're never
• 25:48
  Speaker 1: fun there, you know, as I sort of joke with
• 25:51
  Speaker 1: some of our folks around here, you you don't know
• 25:53
  Speaker 1: they're over, But when you start to taste the bile
• 25:56
  Speaker 1: and the back of your throat, you know you're probably
• 25:58
  Speaker 1: getting close. And we're we're starting to get to that point. Um.
• 26:03
  Speaker 1: But yeah, it's been a brutal market. But you know,
• 26:06
  Speaker 1: when you talk about real rates in the mid one
• 26:08
  Speaker 1: percent level, and investment great bonds five and a half
• 26:11
  Speaker 1: plus percent, agency mortgages pushing six percent high yield almost
• 26:16
  Speaker 1: to ten. Uh, those start to look very attractive to us.
• 26:20
  Speaker 1: So we've you know, we've been scaling in. You know,
• 26:22
  Speaker 1: we're a little bit long duration. You know, we like
• 26:25
  Speaker 1: the rate environment. We're not firing all our bullets at
• 26:28
  Speaker 1: today's level. We think there could be more volatility, probably
• 26:30
  Speaker 1: will be in more pressure upward on rates before this
• 26:33
  Speaker 1: is all done. But yeah, we're seeing value. So what
• 26:36
  Speaker 1: do you do when you see like, uh thirty year
• 26:40
  Speaker 1: guilts yielding five do you start to kind of average
• 26:46
  Speaker 1: into that or are the markets too volatile to make
• 26:50
  Speaker 1: a call? Do you wait till things calm down? Well,
• 26:53
  Speaker 1: we actually got that one right, believe it or not,
• 26:55
  Speaker 1: that we we actually yesterday weighted in uh thirty year
• 27:00
  Speaker 1: agolts right around five percent and then we sold them today.
• 27:04
  Speaker 1: Nice thought. Are these long term buy and hold people?
• 27:08
  Speaker 1: What are you talking about? All the trades that went
• 27:10
  Speaker 1: the other way? But I'm happy to is the idea
• 27:13
  Speaker 1: that basically, when you when you make that much money,
• 27:16
  Speaker 1: you don't want to get greedy and you just cash in. Yeah, yeah,
• 27:19
  Speaker 1: there's a lot of volatility in the UK is certainly
• 27:22
  Speaker 1: not a an area where we have a lot of
• 27:26
  Speaker 1: confidence in the in the near term direction of where
• 27:28
  Speaker 1: things are heading. But when things get to extreme levels
• 27:32
  Speaker 1: like we saw, we know we weren't positive rates, we're
• 27:34
  Speaker 1: going to peek out there or there would be intervention.
• 27:37
  Speaker 1: That wasn't really the thesis, but the markets do push
• 27:40
  Speaker 1: back against policymakers at some point, and that will be
• 27:42
  Speaker 1: the case with the currency as well. Vigilantes they're back,
• 27:47
  Speaker 1: according to Eduard Denny. So see how about credit quality here?
• 27:52
  Speaker 1: You know, a lot of folks are saying we're either
• 27:53
  Speaker 1: intercession or certainly heading towards one and maybe be a
• 27:56
  Speaker 1: severe one. Your team's your analysts, you know, are they
• 28:01
  Speaker 1: really sharpening their pencils and kind of checking out all
• 28:04
  Speaker 1: the ratios to make sure that they're not overly exposed
• 28:08
  Speaker 1: to credit risk? Yeah, yeah, we are. I mean, I
• 28:11
  Speaker 1: think the area is to be very concerned about. I
• 28:14
  Speaker 1: think are anything that touches Europe given the degree of
• 28:18
  Speaker 1: stress that uh, you know that economy is can be
• 28:21
  Speaker 1: under with the energy crisis there here in the US. Um, yes,
• 28:25
  Speaker 1: we're definitely sharpening our pencils. There's areas of the market
• 28:29
  Speaker 1: regulated areas like banks that we think, you know, notwithstanding
• 28:33
  Speaker 1: the fact that banks typically do suffer a bit during recessions,
• 28:37
  Speaker 1: we think the banks are well positioned today, and so
• 28:39
  Speaker 1: there are areas in the investigrade market where we sharpen
• 28:42
  Speaker 1: the pencils. We've stressed. Uh, you know what what credits
• 28:46
  Speaker 1: will look like in a recession, even a severe one,
• 28:49
  Speaker 1: and feel very comfortable at for example, money Center Bank,
• 28:52
  Speaker 1: you know, senior debt of money Center banks north of
• 28:54
  Speaker 1: two basis points spread to treasuries. We think that's a
• 28:58
  Speaker 1: very attractive risk return. Notwithstanding a fairy fairly bearish outlook
• 29:03
  Speaker 1: for the economy, we would do we do think we're
• 29:05
  Speaker 1: we're heading for resush. Is it too bearish? Yeah? Druck
• 29:09
  Speaker 1: and Miller said he would be. I think he said
• 29:11
  Speaker 1: he would be shocked if there wasn't a recession by
• 29:14
  Speaker 1: the end of the year, is there, Uh, is high
• 29:16
  Speaker 1: yield then too risky right now? Yeah? Well, here's what
• 29:20
  Speaker 1: I would say about high yield. You know, as I mentioned,
• 29:21
  Speaker 1: you know, almost ten percent yield. If you could buy
• 29:25
  Speaker 1: your high yield today, put it in a drawer, you know,
• 29:27
  Speaker 1: go do a rumpel steel skin, fall asleep and wake
• 29:30
  Speaker 1: up in five years. You'd be happy you did that.
• 29:32
  Speaker 1: But HW yield doesn't you know, We're we're in a
• 29:34
  Speaker 1: mark to market world, total return world. In our sense
• 29:38
  Speaker 1: is that we haven't hit the wide and spreads on
• 29:40
  Speaker 1: high yield in this cycle at you know, fifty off
• 29:44
  Speaker 1: treasuries or a little north of that. We we think
• 29:46
  Speaker 1: there's material widening. We're adding a little bit, we're seeing
• 29:49
  Speaker 1: a little bit of opportunity, but we're saving our powder.
• 29:51
  Speaker 1: We do think, you know somewhere, you know, hundreds of
• 29:54
  Speaker 1: basis points wide to hear is where you start to
• 29:57
  Speaker 1: back up the truck. All right, good stuff, as always,
• 30:00
  Speaker 1: Steve Kane, co c Io and Generali's portfolio manager t
• 30:03
  Speaker 1: c W Investment Management. That meeting plus the Capitol Group
• 30:07
  Speaker 1: are your two anchor meetings when you go to Los
• 30:09
  Speaker 1: Angeles it Those are the ones that you build your
• 30:11
  Speaker 1: whole schedule around that. So you're going out there to
• 30:13
  Speaker 1: pitch your wears. TCW and Capitol Group. Thanks for listening
• 30:16
  Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
• 30:20
  Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer.
• 30:24
  Speaker 1: I'm Matt Miller, I'm on Twitter at Matt Miller. Three
• 30:29
  Speaker 1: pt on False Sweeney, I'm on Twitter at pt Sweeney.
• 30:31
  Speaker 1: Before the podcast. You can always catch us worldwide at
• 30:34
  Speaker 1: Bloomberg Radio