Latest / Bloomberg Intelligence / BlackRock's Tighe Likes Trade: Swap Treasuries for TIPS (Audio)

Transcript

BlackRock's Tighe Likes Trade: Swap Treasuries for TIPS (Audio) · Bloomberg Intelligence

• 0:02
  Speaker 1: Global business news twenty four hours a day. If Bloomberg
• 0:06
  Speaker 1: dot Com the radio plus mobile LAP and on your radio,
• 0:09
  Speaker 1: this is a Bloomberg Business Flash from Bloomberg World Handquarters.
• 0:13
  Speaker 1: I'm Charlie Pellet. The Dow is lower, the SMP five
• 0:17
  Speaker 1: hundred index and nez Dack both advancing right now, SMP
• 0:21
  Speaker 1: up a point, Nestack oup ten, Dow Industrials down thirteen,
• 0:25
  Speaker 1: SMP stalling just below the twenty one hundred level. Brent
• 0:28
  Speaker 1: crude pairing gains after topping fifty dollars of barrel for
• 0:32
  Speaker 1: the first time in six months. Brent crude right now
• 0:35
  Speaker 1: forty barrel, down seven tenths of one percent. West Texas
• 0:39
  Speaker 1: Intermediate thirty four a dropped there of point four percent,
• 0:43
  Speaker 1: Gold down three fifty the ounce to twelve twenty a
• 0:45
  Speaker 1: drop of three tenths of one percent, the tenure of
• 0:48
  Speaker 1: ten thirty seconds that yield one point eight three percent.
• 0:51
  Speaker 1: I'm Charlie Pellet, and that's a Bloomberg Business Flash. It's
• 0:57
  Speaker 1: time now for the e t F Report, brought to
• 0:59
  Speaker 1: you by Van Eck Vectors et f S. Expect more
• 1:02
  Speaker 1: from your muni's target tax exempt income by maturity and
• 1:05
  Speaker 1: credit quality. All with low cost ETFs. Visit vaneck dot
• 1:09
  Speaker 1: com slash Muni van Eck access the opportunities. That's go
• 1:14
  Speaker 1: to Katherine Cowdery for the e t F report. The
• 1:17
  Speaker 1: Bank of Japan is taking an innovative approach to quantitative easing.
• 1:21
  Speaker 1: It's using e t F s. The Bank of Japan
• 1:23
  Speaker 1: now owns fifty nine percent of all the e t
• 1:26
  Speaker 1: F sets in Japan. Bloomberg Intelligence analist Eric Altuna says
• 1:29
  Speaker 1: that b o J turned to e t s after
• 1:32
  Speaker 1: exhausting other more traditional forms of asset purchases. Now what's
• 1:36
  Speaker 1: interesting is the last round of buying they did were
• 1:39
  Speaker 1: products that they basically custom made with a asset manager
• 1:42
  Speaker 1: there um. In fact, SMP was one of the index writers.
• 1:45
  Speaker 1: They basically said, look, if we're gonna buy e t s,
• 1:47
  Speaker 1: we want to buy e t s the track companies
• 1:50
  Speaker 1: that are you know, investing in the human capital, physical
• 1:53
  Speaker 1: capital like you know, capital expenditures. According to bel tunis
• 1:56
  Speaker 1: that b o J is using its e t F
• 1:57
  Speaker 1: purchases to send a strong message to Japanese companies to
• 2:01
  Speaker 1: spend their money on people and capital instead of financial engineering.
• 2:05
  Speaker 1: It's trying to eliminate some of the worst side effects
• 2:08
  Speaker 1: of que including corporate cash hoarding, wage stagnation, and income inequality.
• 2:13
  Speaker 1: That's your Bloomberg ETFF report. I'm Catherine Cowdery. You're listening
• 2:18
  Speaker 1: to Taking Stock with Kathleen Hayes and Pin Fox on
• 2:21
  Speaker 1: bloom Bird Radio. So what do you do with your money?
• 2:25
  Speaker 1: As May often comes to a close. We've heard people
• 2:29
  Speaker 1: tell us this week that two stocks are pretty much
• 2:32
  Speaker 1: fully valued. We know bond yields are low and prices
• 2:35
  Speaker 1: are pretty high. We've heard some people say, hey, maybe
• 2:37
  Speaker 1: real estate is not a bad place to be. We're
• 2:39
  Speaker 1: gonna put this question now to Heather loomas tie market
• 2:43
  Speaker 1: strategists for Black Rocks Family Office, foundations and endowments, to
• 2:49
  Speaker 1: get our sense of where things are and where they're heading.
• 2:51
  Speaker 1: Welcome back, Good to CEO. So of where shall we start?
• 2:57
  Speaker 1: Bottom line? You are dealing with very interesting universe of investors, right,
• 3:03
  Speaker 1: so you're getting a window into hopes, fears, what where
• 3:07
  Speaker 1: people think it might be good to go. Where are
• 3:09
  Speaker 1: you seeing the most interest now, Heather? Right, the most
• 3:13
  Speaker 1: interests we're seeing right now is in private market opportunities.
• 3:18
  Speaker 1: When you think about the public market landscape, and I
• 3:20
  Speaker 1: know black Rock recently came out and said for a
• 3:23
  Speaker 1: sixty forty stock bond blend, you could expect something close
• 3:28
  Speaker 1: to three percent for the next three to five years.
• 3:31
  Speaker 1: That number is shocking to a lot of family offices,
• 3:34
  Speaker 1: especially endowments and foundations, which actually have outflows which they
• 3:38
  Speaker 1: need to take care of. Family offices have been earning
• 3:42
  Speaker 1: a good amount of money and how they accumulated it
• 3:44
  Speaker 1: for a while, and so they have an internal rate
• 3:47
  Speaker 1: of return expectation. So into that environment, people are looking
• 3:52
  Speaker 1: to the asset classes which haven't been bit up by
• 3:54
  Speaker 1: central banks by the massive inflows which we're seeing across
• 3:59
  Speaker 1: the globe. Is quantitative easing, and monetary policy continues into
• 4:04
  Speaker 1: places where they can extract value, extracting a liquidity premium,
• 4:08
  Speaker 1: and everyone's sitting on cash. Not just to be clear here,
• 4:12
  Speaker 1: if you're going to earn an estimated three percent return
• 4:14
  Speaker 1: on an annual basis, aren't you just earning the return
• 4:17
  Speaker 1: in order to pay the fees to have someone get
• 4:19
  Speaker 1: you that three percent in the first place? That is
• 4:22
  Speaker 1: going to become so essentially important because if you think
• 4:26
  Speaker 1: of that three percent is before taxes, before fees. If
• 4:30
  Speaker 1: you are paying something like fifty basis points to have
• 4:33
  Speaker 1: your assets managed in a six to seven percent return environment.
• 4:37
  Speaker 1: When that becomes three, that number is a lot more important.
• 4:41
  Speaker 1: So absolutely to your point. When we're talking um with
• 4:46
  Speaker 1: our kind of you know, billion or even our billionaire
• 4:48
  Speaker 1: family offices, they're saying what exactly are we paying. They're
• 4:53
  Speaker 1: looking at all of their active managers on a line
• 4:56
  Speaker 1: by line basis and saying, we are only going to
• 4:59
  Speaker 1: be paying for active management when it is giving us
• 5:02
  Speaker 1: outside returns absent that we must control the bottom line.
• 5:06
  Speaker 1: It's kind of like, you know, into tough times for
• 5:09
  Speaker 1: equity markets. You know, when you don't beat on the
• 5:12
  Speaker 1: top line, you know, how do you make your earnings growth?
• 5:14
  Speaker 1: You cut costs. So let's look at equities because the
• 5:17
  Speaker 1: earning season was not so hot, and more and more
• 5:21
  Speaker 1: people have said, well, you can probably make some money
• 5:24
  Speaker 1: in stocks. More people are saying mid to high single digits.
• 5:27
  Speaker 1: If you're lucky, then it's like we used to have
• 5:29
  Speaker 1: a couple of years ago double digit gains. But you
• 5:32
  Speaker 1: have to be more selective in terms of the companies
• 5:35
  Speaker 1: you invest in as opposed tos just behind the market.
• 5:38
  Speaker 1: What are you doing, what are you advising your clients
• 5:39
  Speaker 1: to do yes, Um, and and that was you. You're
• 5:42
  Speaker 1: you hit the nail on the head. You need to
• 5:44
  Speaker 1: be thinking about the actual corporations which you are owning.
• 5:49
  Speaker 1: We UM are seeing some value in the dividend grower space,
• 5:54
  Speaker 1: so so paying dividends, growing dividends, clean balance sheets, with
• 5:59
  Speaker 1: the ability to grow those dividends, so kind of an
• 6:02
  Speaker 1: organic level of dividend growth embedded in some of those companies.
• 6:07
  Speaker 1: You You're going to need to be very selective going
• 6:09
  Speaker 1: into this time period because you know, as we've seen now,
• 6:12
  Speaker 1: equit price to earning multiples with flat returns for the year.
• 6:17
  Speaker 1: This is this is a harder game going forward. In
• 6:20
  Speaker 1: your conversation with the representatives of these family offices and foundations,
• 6:25
  Speaker 1: do you get the impression that they're excited about investing
• 6:28
  Speaker 1: their money? Were they just looking for the return? There
• 6:30
  Speaker 1: used to be a day in which people were excited
• 6:33
  Speaker 1: about specific companies. Oh I've got to buy Apple because
• 6:36
  Speaker 1: I'm so thrilled. Is that going away? And they just
• 6:39
  Speaker 1: want to look at the number? Now? UM, I'm laughing
• 6:43
  Speaker 1: a little bit because you're right, some of that excitement
• 6:46
  Speaker 1: has been replaced with um, how can you do this
• 6:50
  Speaker 1: for less, and I just want to know if I'm
• 6:52
  Speaker 1: beating the averages let's say exactly when they hear okay,
• 6:55
  Speaker 1: so we're going to earn less with more volatility. It's
• 6:58
  Speaker 1: almost like, you know, this is the environment and we're
• 7:02
  Speaker 1: all going to be working with it. But it's it's
• 7:03
  Speaker 1: it's not a great one to be in. Certain things
• 7:07
  Speaker 1: have excited family offices over the years. Those are private
• 7:11
  Speaker 1: direct deals. Those still excite family offices. That in many
• 7:16
  Speaker 1: cases is where principles have made their wealth over time,
• 7:22
  Speaker 1: and it's still very interesting place to do business. Non
• 7:26
  Speaker 1: syndicated parts of the market. UM where you're looking at
• 7:30
  Speaker 1: unique deals which tends not to be correlated to public
• 7:33
  Speaker 1: equity and fixed income markets. That's still exciting. There are
• 7:37
  Speaker 1: places to which which um tied to people's passions, so
• 7:42
  Speaker 1: the impact space, renewable energy, things like that, where there
• 7:47
  Speaker 1: is an intersection for what they want to see in
• 7:50
  Speaker 1: the world going forward, and they can also make an
• 7:53
  Speaker 1: investment return in that call at seven to eight nine
• 7:56
  Speaker 1: percent range. Those are things which get people excited in
• 8:00
  Speaker 1: today's market. Uh, fix income. A lot of time that
• 8:05
  Speaker 1: space didn't you and you're still in that space. Just
• 8:08
  Speaker 1: you're just look at all the markets. More broadly, Uh,
• 8:11
  Speaker 1: we have a story today on the Bloomberg about what
• 8:14
  Speaker 1: a two billion dollar corporate bond bender. I mean, corporations
• 8:17
  Speaker 1: are issuing debt like crazy. Do you see value in
• 8:21
  Speaker 1: that space? And if so, we're um. We have gone
• 8:25
  Speaker 1: neutral on corporate credit um and not to differentiate a
• 8:29
  Speaker 1: view where we were more positive going into the beginning
• 8:32
  Speaker 1: of the year. We think that you're not going to
• 8:35
  Speaker 1: experience price return from here for the for the foreseeable
• 8:40
  Speaker 1: time period until we change that view, and you're going
• 8:42
  Speaker 1: to be dependent to bonding income. Uh. There are also
• 8:46
  Speaker 1: risks corporate balance sheet risk out there, leverage, business model risks,
• 8:51
  Speaker 1: and so from that standpoint, UM, we this would not
• 8:56
  Speaker 1: be our top recommendations to clients to think about the
• 8:59
  Speaker 1: corporate bonds space today. We would urge them to think
• 9:02
  Speaker 1: about different places to find that yield, to find that return,
• 9:05
  Speaker 1: and those are what those kinds of private, non syndicated
• 9:08
  Speaker 1: deals that you're talking about something you know, but for
• 9:10
  Speaker 1: for family offices, we could even just take it even
• 9:13
  Speaker 1: even more basic. Communis are still okay. You know, the
• 9:16
  Speaker 1: immunity treasury ratios look good. We're seeing good demand in
• 9:20
  Speaker 1: this space. Picking credits, just like the question on equities
• 9:24
  Speaker 1: is still critical even in a high quality space. So
• 9:27
  Speaker 1: we like munis. But then yes, as we say, alternative
• 9:30
  Speaker 1: sources where you could pick up an income stream which
• 9:34
  Speaker 1: isn't correlated, which has some tax benefits. That in the
• 9:38
  Speaker 1: private space, if you're willing to give up liquidity, can
• 9:40
  Speaker 1: be very interesting in terms of so you're so, so
• 9:44
  Speaker 1: get credit your neutral there? You do like munies. Does
• 9:48
  Speaker 1: anybody have any reason invest in treasury these days besides
• 9:50
  Speaker 1: foreign central banks and people just want to grab some
• 9:52
  Speaker 1: yield in a world of negative bond yields. I mean,
• 9:54
  Speaker 1: we see it at the very short end where people
• 9:56
  Speaker 1: are just holding them as a cash proxy. Um, they're saying,
• 9:59
  Speaker 1: you know, we want to keep some dry powder in
• 10:01
  Speaker 1: case we see some market volatility. Everyone is still waiting
• 10:04
  Speaker 1: for the next you know, two thousand and eight, two
• 10:06
  Speaker 1: thousand nine to come, and that's still very real in
• 10:09
  Speaker 1: the lives. So we see that there. But at the margin,
• 10:11
  Speaker 1: what we've been saying, for people who are natural holders
• 10:14
  Speaker 1: of treasuries and that's a position for them, think about
• 10:16
  Speaker 1: swapping that into tips. You know, we're deflation is no
• 10:20
  Speaker 1: longer something that we're worried about. We're not ready to
• 10:23
  Speaker 1: say that we're in an inflationary environment, but it's certainly
• 10:26
  Speaker 1: not dead. Thanks very much for coming in and spending
• 10:29
  Speaker 1: time with us. Interesting. Heather Loomas Tie is the managing
• 10:32
  Speaker 1: director and market strategist for Family Office, Foundations and Endowments
• 10:37
  Speaker 1: at black Rock. Thanks very much for coming in. Thank you.
• 10:40
  Speaker 1: This is taking Stock on Bloomberg. I'm PIM Fox my
• 10:43
  Speaker 1: co host Kathleen Hayes. Kathy, We're gonna take everyone through
• 10:46
  Speaker 1: to the clothes and uh, I think that we're going
• 10:49
  Speaker 1: to take a look at maybe Dollar Tree stores. You
• 10:51
  Speaker 1: know that they are up more than thirteen percent today
• 10:53
  Speaker 1: after that earnings report. I want to take a look
• 10:56
  Speaker 1: at Costcoe. PIM, that's another one that's leaving higher, Yes,
• 11:00
  Speaker 1: by more than three and a half percent. We're gonna
• 11:02
  Speaker 1: take you through to the clothes right here on Bloomberg Radio.