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Debt Limit Latest, Gen Z Financial Independence · 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.
0:05
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
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0:21
Speaker 1: Pretty group to Paul Sweeney here in the Bloomberg Interactive
0:23
Speaker 1: Brooker's Studio, Gretty just feels like with the debt ceiling
0:27
Speaker 1: issue essentially put to bed, we still got a couple
0:30
Speaker 1: more moves to go. Seems like focus is back on
0:33
Speaker 1: some of the macroeconomic issues out there and some of
0:35
Speaker 1: the economic data points, starting with nonfarm payrolls tomorrow.
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Speaker 3: Yeah, payrolls, and you got the labor numbers in terms
0:43
Speaker 3: of kind of wages. Then you have the Chinese growth
0:45
Speaker 3: numbers that are weighing on the markets a lot. Not
0:47
Speaker 3: to mention an additional FED hike.
0:49
Speaker 4: Where did that.
0:50
Speaker 3: Relief rally go that we were supposed to get? That
0:52
Speaker 3: seems to be exactly how this is playing out.
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Speaker 1: All right, Let's check in with someone who kind of
0:57
Speaker 1: follows this stuff as well. Doctor Lori to Murray, President
1:01
Speaker 1: of the Committee on Economic Development from the Conference Board. Laurie,
1:06
Speaker 1: thanks so much for joining us here. What are you
1:09
Speaker 1: focusing on here, because a lot of folks are really
1:11
Speaker 1: trying to put all the crosswinds together and get a
1:14
Speaker 1: sense of maybe where this fet is going, where this
1:16
Speaker 1: economy is going. What are the data points that you're
1:18
Speaker 1: looking at?
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Speaker 4: Okay, well, the first and foremost, Paul, the most important
1:24
Speaker 4: data point is the one we just crossed last night,
1:26
Speaker 4: which was the House passage of this bill. So it's
1:30
Speaker 4: important to recognize that that we have just avoided a
1:34
Speaker 4: major economic catastrophe. So data point one, we avoided an
1:39
Speaker 4: economic catastrophe. So we can go back and reset and
1:43
Speaker 4: look at the economy. And we're still expecting at the
1:46
Speaker 4: Conference Board a short, short and shallow recession that will
1:50
Speaker 4: likely end by the end of the year. But there's
1:52
Speaker 4: a luxury to be able to say that, because again,
1:55
Speaker 4: as they said, last night's vote was really significant and
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Speaker 4: historic for the economy this year and going forward.
2:02
Speaker 3: So doctor, just to build on that the nitty gritty
2:05
Speaker 3: of this bill, as we talked about fiscal spending caps
2:07
Speaker 3: for the next two years, I think so January first,
2:11
Speaker 3: twenty twenty five, which, by the way, Paul, the new president,
2:14
Speaker 3: is going to have a real, really horrible first day
2:17
Speaker 3: in the office or first day of the year. I
2:19
Speaker 3: have to say, but doctor, talk to us about kind
2:22
Speaker 3: of the nitty gritty of the bill in the context
2:24
Speaker 3: of staring down a recession in terms of the budget.
2:27
Speaker 4: Did we do good here? Oh, it is definitely a victory.
2:32
Speaker 4: It is a victory for America, and it's a victory
2:35
Speaker 4: consequently for the world, given the role that the American
2:38
Speaker 4: economy plays in the world. The accomplishments are we have
2:44
Speaker 4: held spending at the twenty twenty three levels. We're looking
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Speaker 4: at the next two years of only one percent increase.
2:52
Speaker 4: The CBO the Congressional Budget Office says over ten years
2:56
Speaker 4: will actually saved one point five trillion dollars. This is
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Speaker 4: really significant progress, but I want to underscore that it's
3:04
Speaker 4: really only affecting fifteen percent of the budget. We're at
3:08
Speaker 4: thirty one point four trillion dollars in debt and going up.
3:12
Speaker 4: It suspends the debt limit for those two years, doesn't
3:14
Speaker 4: set another cap, and fortunately it also puts a cap
3:19
Speaker 4: on spending for the next two years. But what we
3:22
Speaker 4: have to look at is that this is only on
3:23
Speaker 4: the non discretionary, on the discretionary non defense spending, so
3:28
Speaker 4: that's fifteen percent of the budget. We have a lot
3:30
Speaker 4: more to do here. Congress and the administration have a
3:33
Speaker 4: lot of work ahead of them if we're going to
3:35
Speaker 4: move towards fiscal health. But this is a very very
3:39
Speaker 4: important first step.
3:40
Speaker 1: So, I mean, it all kind of ties in, you know,
3:43
Speaker 1: to the national debt here and that larger discussion here.
3:48
Speaker 1: What's your view of that and maybe how should our
3:51
Speaker 1: government view this our growing national debt, you know, to
3:55
Speaker 1: what degree does it really need to be addressed aggressively?
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Speaker 4: So the bottom line here is debt really matters, and
4:02
Speaker 4: it's become an even more important issue with inflation because
4:07
Speaker 4: as we are dealing with inflation, and the Conference Board
4:10
Speaker 4: doesn't expect inflation to go away anytime soon. In terms
4:14
Speaker 4: of these rates that we have now, we're hoping to
4:19
Speaker 4: see them hold and possibly come down, but inflation is
4:22
Speaker 4: not going to go away right now. In terms of
4:25
Speaker 4: the budget, the servicing the debt now is costing as
4:30
Speaker 4: much as defense, which is about eight hundred plus billion dollars.
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Speaker 4: That's just debt servicing so that's having a major impact
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Speaker 4: on how we are spending or can spend their national
4:41
Speaker 4: dollars to meet both their defense and non defense NEETs
4:44
Speaker 4: as a nation. So that in and of itself makes
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Speaker 4: it absolutely extremely important that we deal with this overwhelming
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Speaker 4: explosion of debt in terms of particularly the debt ratio
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Speaker 4: to GDP, which is now our debt ratio is equal
5:03
Speaker 4: to GDP instead one hundred percent.
5:06
Speaker 3: In terms of kind of the work requirements with some
5:09
Speaker 3: of those social programs, Medicaid, Medicare, et cetera, any read
5:14
Speaker 3: through on kind of fiscal spending from that perspective, we
5:17
Speaker 3: know that was one of the sticking points in the deal.
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Speaker 4: So I just want to want to point out that
5:23
Speaker 4: Medicare and Medicaid were not included in the work requirements.
5:28
Speaker 4: Work requirements are really the Food program and the Temporary
5:32
Speaker 4: Assistance for Needy Families program. And while the requirements have expanded,
5:38
Speaker 4: particularly in terms of the age that has covered, the
5:41
Speaker 4: age has been raised to fifty five years old for
5:44
Speaker 4: the SNAP program, there have been exemptions, and so it's
5:48
Speaker 4: going to take veterans homeless have been exempted from these
5:55
Speaker 4: work requirements. So it's going to take a little bit
5:57
Speaker 4: of budget maneuvering and analysis to figure route whether it's
6:01
Speaker 4: a save or it's actually going to cost more. Right
6:04
Speaker 4: now quick analysis, most analysts are seeing it as a wash.
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Speaker 1: We're speaking with doctor Lorii Esposito Murray, President the Committee
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Speaker 1: for Economic Development for the Conference Board. So doctor Murray,
6:17
Speaker 1: I mean, I guess the political reality is this debt
6:21
Speaker 1: ceiling limit in some of the spending issues, the budget
6:24
Speaker 1: kind of kicked down the road, kicked the can down
6:27
Speaker 1: the road for a couple of years. But I guess
6:29
Speaker 1: from markets perspective, that's probably the best we could have
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Speaker 1: hoped for.
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Speaker 4: You know, it is the best we could have hoped for.
6:35
Speaker 4: But it also is a pretty good start. Is it
6:40
Speaker 4: is a bipartisan vote three fourteen to one seventeen. You
6:43
Speaker 4: had one hundred and forty nine Republicans in the House
6:46
Speaker 4: voting for this bill. It's an incredible accomplishment for Speaker McCarthy,
6:51
Speaker 4: who just a couple of months ago we saw go
6:54
Speaker 4: through a fifteen vote series before it could become speaker.
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Speaker 4: He's really destrating leadership in the House and also demonstrating
7:05
Speaker 4: with his Republican colleagues that Republicans can actually govern, which
7:09
Speaker 4: I think is really significant in terms of the Republican Party,
7:13
Speaker 4: in terms of the Speaker's leadership.
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Speaker 3: So doctor, let's step away from from the debt story
7:18
Speaker 3: for a moment to talk about these recessionary calls. The
7:21
Speaker 3: consensus seems to be that by the end of this
7:24
Speaker 3: year we will have a recession on our hands in
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Speaker 3: the US shallow deep consensus of shallow right now, what
7:31
Speaker 3: would change that point of view?
7:34
Speaker 4: Well, according to the conference board where we're looking at
7:38
Speaker 4: it is that it will be short in a shallow
7:40
Speaker 4: recession by the end of the year, likely by the
7:42
Speaker 4: end of the year. The main drivers of the recession
7:45
Speaker 4: or inflation and high interest rates. So dealing with inflation
7:49
Speaker 4: is absolutely critical in terms of tempering that recession and
7:57
Speaker 4: coming out of it.
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Speaker 1: On to that end, I mean, I guess a reasonable
8:03
Speaker 1: call could be made that, you know, with the variable
8:05
Speaker 1: lag long and variable lag, that the Fed should in
8:08
Speaker 1: fact pause here for a while. That five hundred and
8:10
Speaker 1: twenty five basis points is enough to kind of cool inflation.
8:15
Speaker 1: Are you in that camp that they should pause and
8:17
Speaker 1: see how things shake out? O.
8:19
Speaker 4: Well, we're expecting them to pause in terms of the
8:24
Speaker 4: hike in either probably in June, but then expecting one
8:30
Speaker 4: or more twenty five basis point hikes later on the summer.
8:34
Speaker 3: Should we be get all worried about treasury issuance now
8:37
Speaker 3: that seem to be one of the concerns in the
8:39
Speaker 3: lead up to as this deal was getting figured out.
8:44
Speaker 3: How do we view the treasury?
8:47
Speaker 4: So, you know, one of event is really important here
8:50
Speaker 4: in terms of this agreement and the whole death ceiling
8:53
Speaker 4: debate in general, is you know, given the significant and
8:58
Speaker 4: dominant role that the US economy plays in the global economy,
9:02
Speaker 4: and the importance of treasury securities being a safe haven
9:07
Speaker 4: which also underpins our economy. You know, again coming back
9:11
Speaker 4: to this deal, coming back to the fact that it
9:13
Speaker 4: looks like that if this this is going to get
9:16
Speaker 4: through the Senate and on the President's desk in time
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Speaker 4: for the X date of June fifth, it's it's so
9:23
Speaker 4: important in terms of our credibility and Treasury's credibility globally
9:30
Speaker 4: that we maintain that role and Treasury securities maintained that
9:33
Speaker 4: role in the global economy.
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Speaker 1: All right, Our thanks to doctor Lori Esposito Murray, President
9:38
Speaker 1: Committee for Economic Development for the Conference Board talking about
9:42
Speaker 1: getting this debt deal done and getting it, as doctor
9:46
Speaker 1: Esposita Murray said, getting it through the Senate presumably in
9:49
Speaker 1: the next day or two, and then on the President's
9:52
Speaker 1: desk and you know by Saturday, right, yeah, I mean
9:54
Speaker 1: it's you know, it's cutting it close here. But again
9:57
Speaker 1: that's where it seems to be now, and the expectation
10:01
Speaker 1: is it should get through the Senate fairly quickly without
10:03
Speaker 1: much drama, and then of course the President has indicated
10:07
Speaker 1: that he will sign it. So that's kind of kind
10:10
Speaker 1: of where we are. And again up to that June
10:11
Speaker 1: fifth or sixth, kind of New X date, if you will,
10:14
Speaker 1: then when the US will run out of money presumably,
10:17
Speaker 1: so good news there.
10:19
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10:33
Speaker 1: It seems like since China's reopened, Curtty, a lot of
10:36
Speaker 1: US CEO's have been making a way to China to
10:39
Speaker 1: kind of check in on things. Tim Cook from Apple
10:41
Speaker 1: and just this week you had Jamie Diamond, JP Morgan
10:44
Speaker 1: Chase elon Musk was there trying to get a sense
10:47
Speaker 1: of where that economy is, where that market is in
10:50
Speaker 1: terms of opportunity. So we want to get some insight.
10:53
Speaker 1: We go to Brendan Ahearn, CIO of Crane Shares, does
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Speaker 1: a lot of work in China with the markets there. Brenda,
11:00
Speaker 1: this accelerated China reopening is I don't know it. It's good.
11:05
Speaker 1: It's We've got a lot of CEOs making their way
11:08
Speaker 1: back over to China to kind of reignite some discussions here.
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Speaker 1: How do you view China right now as a economic
11:15
Speaker 1: player and as a potential partner trading partner with the US.
11:21
Speaker 6: Yeah, yeah, I'm point out of NA Video's Jensen Huang
11:25
Speaker 6: mentioned that he'll be visiting China next month. We don't
11:28
Speaker 6: have the exact dates, but joined Jamie Diamond, Elon Musk,
11:32
Speaker 6: Franklin Templeton, a whole host of executives. But yeah, I
11:35
Speaker 6: think we're you're seeing a reopening economy that is growing
11:41
Speaker 6: incrementally incrementally slowly. Some of the historical drivers of China's economy,
11:48
Speaker 6: export driven manufacturing, has been barely lacklustered due to the
11:54
Speaker 6: global economy slowing. You also have their property market has
11:59
Speaker 6: been very lackluster that historically see a lot of infrastructure stimulus,
12:03
Speaker 6: are not seeing it, which really leads the domestic consumption story,
12:09
Speaker 6: which really requires consumer confidence to build. And we are
12:14
Speaker 6: seeing those green shoots. It just it's happening slower, and
12:18
Speaker 6: investors want to see policy makers step on that stimulus
12:22
Speaker 6: gas pedal.
12:24
Speaker 3: Well, Brendan, speaking of that stimulus gas pedal, where does
12:26
Speaker 3: the PBOC stand in all this? I feel like one
12:29
Speaker 3: of the highlights of the last couple of years has
12:30
Speaker 3: been this divergence between most of the world's central banks
12:35
Speaker 3: and then the PBOC going in the opposite direction. Do
12:38
Speaker 3: we see some sort of whatever the opposite of a divergences, convergence, convergence.
12:43
Speaker 6: Do we see a convergence? You know, you know unlikely
12:48
Speaker 6: that that China's your central banks, your great great observation,
12:52
Speaker 6: just you know, you see central banks globally following the
12:55
Speaker 6: FED higher the pbocs going the opposite direction, you know,
13:00
Speaker 6: and that's led you know c n H right now,
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Speaker 6: China's offshore Ambia seven eleven so off versus the dollar,
13:10
Speaker 6: and and I think that's where you see them incrementally easing.
13:15
Speaker 6: You know, we're very likely we'll see a bank reserve
13:19
Speaker 6: requirement ratio cut, potentially the loan prime rate or the
13:24
Speaker 6: intra bank lending rate cut next month. It's just more
13:28
Speaker 6: of you know, investors are kind of in a you know,
13:31
Speaker 6: show me now, you know, you know, I kind of
13:33
Speaker 6: called it the where's the beef? You know, you know,
13:36
Speaker 6: they're getting anxious, and capital is flowing within Asia, within
13:41
Speaker 6: em in the short run to areas like Japan to India,
13:46
Speaker 6: just because they're you know, gotten very impatient on policy
13:50
Speaker 6: support from the PBOC and the central government.
13:53
Speaker 1: So Brendan on the consumer side of the economy, talk
13:56
Speaker 1: to us about the unemployment in China, particularly team unemployment.
14:00
Speaker 1: We know that we've heard that continues to be stubbornly high.
14:03
Speaker 1: And what does that tell you?
14:06
Speaker 6: Yeah, you know, if you think about young, younger people,
14:11
Speaker 6: you know, I have to describe it that way as
14:13
Speaker 6: as as I get older, but recent college graduates, you
14:17
Speaker 6: know a lot of these folks end up working in
14:19
Speaker 6: the service sector that you know, could be hotels, could
14:23
Speaker 6: be restaurants, airlines, and you know, et cetera. So so
14:28
Speaker 6: you know, you had with the removal of zero COVID
14:32
Speaker 6: COVID run rampant in China in the latter part of
14:36
Speaker 6: Q four of last year the beginning of Q one
14:39
Speaker 6: of this year, so that that really weighed on a
14:42
Speaker 6: lot of this service sector jobs. And as domestic travel
14:48
Speaker 6: has picked up, you're seeing you know, you had Air China.
14:51
Speaker 6: You know they're hiring one thousand new flight attendants. You know,
14:55
Speaker 6: as people start traveling more domestically, your hotels going to
15:00
Speaker 6: need more people. So so that the US unemployment I
15:03
Speaker 6: think will slowly come down. It's just it's it's just
15:08
Speaker 6: in the short run it is quite high because of
15:11
Speaker 6: the knock on effect of COVID running rampant, the effect
15:15
Speaker 6: on the consumer.
15:16
Speaker 1: Brandy. We started this discussion noting how so many high
15:18
Speaker 1: profile US CEO's ranking the way to China over the
15:21
Speaker 1: last several weeks. Reality is China investible? I mean what
15:26
Speaker 1: I if I can I go to my board and
15:27
Speaker 1: say we need to build a plant in China or
15:30
Speaker 1: make big investments, multi year investments in China. I just
15:33
Speaker 1: don't know what the government is going to do.
15:37
Speaker 6: Well is that the US government or the Chinese government.
15:40
Speaker 6: I think that's that's probably little boat a little bit
15:43
Speaker 6: of both. And and I think I think, you know, uh,
15:47
Speaker 6: these flurry of executives and and and and you've seen
15:50
Speaker 6: it from European executives as well. You know, a whole
15:54
Speaker 6: host of Europeans actually been in China year to date.
15:58
Speaker 6: You know, business people are getting on airplanes and meeting,
16:01
Speaker 6: having meals with one another. The politicians aren't. And I
16:06
Speaker 6: think you know, during COVID, you know, you had COVID babies,
16:11
Speaker 6: but you also had COVID divorces. And the US China
16:14
Speaker 6: political relationship has very much frayed due to a lack
16:18
Speaker 6: of travel diplomatically if you think about. You know, China's
16:22
Speaker 6: Commerce secretary just met with Gina Romando and US Trade
16:26
Speaker 6: rep side just last week. He's the first senior Chinese
16:31
Speaker 6: official to visit the United States in four years. At
16:36
Speaker 6: the same time, no senior US official has been in
16:40
Speaker 6: China in four years. So I think hopefully the politicians
16:44
Speaker 6: can take a lead from what we're seeing from the
16:47
Speaker 6: corporate world, which is these two economies are very very
16:52
Speaker 6: entwined with one another.
16:54
Speaker 3: Well, Brendan and our in our last minute or so here,
16:56
Speaker 3: let's take step back. We have a listener question asking
17:00
Speaker 3: about when the market views views a pause or potentially
17:04
Speaker 3: a cut state side in the US as a negative.
17:08
Speaker 3: Given you your financial expertise, talk to us about your
17:11
Speaker 3: view on that.
17:13
Speaker 6: For US, I mean, I think the you know, the
17:16
Speaker 6: the viewing increasingly as you do you have this June
17:19
Speaker 6: hike or not or certainly July. You know, I you know,
17:22
Speaker 6: Larry Fink of Blackrock obviously has a tremendous insights. You know,
17:26
Speaker 6: he thought that you had June July and we're done.
17:29
Speaker 6: So I think I think that could be for non
17:32
Speaker 6: US investors, EM investors, China investors. The dollar strength has
17:37
Speaker 6: been such a headwind and if we get you know,
17:40
Speaker 6: one or two done, get a bit of a pause,
17:43
Speaker 6: I think it brings brings a lot of potential for
17:46
Speaker 6: the dollar to maybe weaken a little bit, which would
17:49
Speaker 6: be a great tail wind for our investments in emerging
17:52
Speaker 6: markets in China.
17:53
Speaker 1: All right, Brendan, thank you so much for joining us
17:56
Speaker 1: Brendan to hearn see io of Crane Shares, giving us
17:59
Speaker 1: a little overview of what's happening in China here as
18:02
Speaker 1: they continue to reopen from a very severe COVID lockdown,
18:07
Speaker 1: and now a lot of the US and other and
18:10
Speaker 1: European CEOs making the way to China to see you
18:12
Speaker 1: kind of get a first hand look at the business
18:15
Speaker 1: environment in China these days as it relates to their
18:18
Speaker 1: businesses and potentially future investment. So Elon Musk was there
18:22
Speaker 1: this week. Jamie Diamond, JPMorgan Chase was there. They had
18:25
Speaker 1: a big, big investor conference there, so perhaps a little
18:28
Speaker 1: falling there.
18:29
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18:48
Speaker 1: I want to get right to our next guest, David Diets.
18:51
Speaker 1: He's managing principal and senior portfolio manager at Peepack Private
18:54
Speaker 1: Wealth Management. David, thanks so much for joining us here.
18:58
Speaker 1: Looks like we're going to get this debt ceiling done,
19:00
Speaker 1: so I guess that removes one worry for the market here.
19:04
Speaker 1: What do you think the market should be focusing on
19:07
Speaker 1: and going forward.
19:09
Speaker 7: I think one thing that the market is focusing on
19:11
Speaker 7: now is not just that we're getting agreement on suspending
19:15
Speaker 7: the debt gap ceiling, but the implications of how that
19:18
Speaker 7: agreement was reached, not only where there's no new spending,
19:23
Speaker 7: but basically the current administration's promise of raising taxes and
19:27
Speaker 7: d in corporations from twenty one percent to twenty eight
19:30
Speaker 7: percent the wealthy is from thirty seven to thirty nine
19:32
Speaker 7: and six seems to have gone completely off the board
19:36
Speaker 7: and seems to be iced until after the next presidential election.
19:39
Speaker 7: I don't think investors at first Blush were focusing on that. Increasingly,
19:43
Speaker 7: I think that is a very important issue that people
19:46
Speaker 7: are now starting to take note.
19:48
Speaker 8: What does that look like then? In terms of the trade,
19:51
Speaker 8: One thing that I've been thinking about a lot is
19:53
Speaker 8: downside to the dollar.
19:54
Speaker 9: What else should I.
19:55
Speaker 7: Be thinking about, Well, you know, the other thing is
19:58
Speaker 7: probably you know, lower interest rates and so forth, because
20:02
Speaker 7: if there's no new spending, that's a bit deflationary. And
20:05
Speaker 7: the other risk, of course for investors going forward is
20:08
Speaker 7: if we do, as many indicators seem to suggest, go
20:11
Speaker 7: into a recession mild or otherwise, we cannot expect any
20:15
Speaker 7: fiscal stimulus to help get us out of that. And
20:18
Speaker 7: so as a result, I think that coupled with some
20:21
Speaker 7: lower inflation readings I'm starting to detect here, plus less
20:25
Speaker 7: fiscal firepower, interest rates could start to roll over at TAD.
20:30
Speaker 1: So we're going to have the Fed on June fourteenth
20:33
Speaker 1: kind of let us know where they are with their rates.
20:36
Speaker 1: Are you looking for them to pause? Pivot? What are
20:40
Speaker 1: you looking for?
20:42
Speaker 7: So what I think has really juiced its rally today
20:46
Speaker 7: is just this week there's been a complete flip between
20:49
Speaker 7: expectations for a hike to now expectations for a pause
20:52
Speaker 7: or a skip or whatever you want to call it.
20:55
Speaker 7: And I think what's really important here is, although the
20:58
Speaker 7: labor market is staying wrong, when you start looking at
21:02
Speaker 7: more leading indicators. So for example, we saw the seventh
21:06
Speaker 7: month in a row down on the manufacturing index, important
21:10
Speaker 7: index of course of producer prices encompassed in that also down,
21:15
Speaker 7: and of course unit labor growth costs coming down. You
21:18
Speaker 7: know your labor numbers are your most lagging indicator, but
21:21
Speaker 7: the more forward looking indicators suggests less and less price pressure. Now,
21:25
Speaker 7: mind you, all eyes will be on tomorrow's May jobless numbers.
21:30
Speaker 7: That could change all the betting. But increasingly it seems
21:33
Speaker 7: like the Fed is starting to get the job done,
21:35
Speaker 7: and we really should look for a pause or skip
21:37
Speaker 7: or whatever you want to call.
21:38
Speaker 8: It, and just to go even more micro than that.
21:41
Speaker 8: In your note you mentioned advanced auto parts. What does
21:45
Speaker 8: the advanced autopart story tell you about how the FEDS
21:49
Speaker 8: impact with ray hikes has been going.
21:54
Speaker 7: So certainly, to look at it a little bit more broadly,
21:57
Speaker 7: we're seeing a number of retailers, where that be Target,
22:00
Speaker 7: whether that be Macy's, whether that be some of the
22:03
Speaker 7: dollar stores, that seem to have really reduced their forecast
22:07
Speaker 7: in coming in overall with results that are less than expected.
22:12
Speaker 7: Of course, you know the disaster the jury yesterday was
22:15
Speaker 7: Advanced Autoparts. It's hard to tell down nearly forty percent
22:19
Speaker 7: from where it was at the start of the week,
22:21
Speaker 7: whether that is company specific or has bigger implications for
22:25
Speaker 7: the whole economy. We saw some of its competitors, for example,
22:28
Speaker 7: genuine Parts also declined too, so it's hard to know.
22:32
Speaker 7: I guess one thing that one takeaway, of course, is
22:35
Speaker 7: don't believe every analyst out there, because they all had
22:38
Speaker 7: it wrong. And now they're rushing this morning to mark
22:40
Speaker 7: down their forecasts and so forth. And I guess they
22:42
Speaker 7: saw something with a thirty five percent decline, seventy percent
22:45
Speaker 7: slash in profits and seventy percent plus slash and dividends
22:49
Speaker 7: that they didn't like.
22:51
Speaker 1: So, David, you know, it just seemed like just a
22:54
Speaker 1: couple of weeks ago, we're all concerned about the banking
22:57
Speaker 1: situation in this country, the banking system. I guess they
23:00
Speaker 1: were certainly past any panic kind of phase. Are there
23:03
Speaker 1: any banks out there that maybe got thrown out with
23:06
Speaker 1: the bath water?
23:08
Speaker 7: So I think there's more risk forward the banks going forward. Obviously,
23:12
Speaker 7: when you have these super high short term interest rates,
23:15
Speaker 7: it does give an incentive to move out of your
23:17
Speaker 7: traditional deposits and into a money marketer or treasury. Having
23:21
Speaker 7: said that, I do believe that there are a number
23:24
Speaker 7: of banks that we've looked at which have been going
23:26
Speaker 7: around for almost two centuries and is sticking to their
23:29
Speaker 7: knitting and they're just too cheap. When we will suggested
23:32
Speaker 7: in financial Group is starting in eighteen twenty eight, had
23:35
Speaker 7: a nice footprint in the Northeast. You're trading at about
23:39
Speaker 7: half a book value, is off by nearly fifty percent
23:42
Speaker 7: since early February six and a half percent dividend, four
23:46
Speaker 7: times free cash flow. It seems like they've been through
23:49
Speaker 7: these ups and downs over nearly two hundred years. They'll
23:52
Speaker 7: get through this. In the meantime, I think that that
23:55
Speaker 7: low market price doesn't send you to diversify and take
23:57
Speaker 7: a look at something like citizens First.
24:00
Speaker 8: I want to talk to you about the AI rally
24:02
Speaker 8: as well. I'm talking to the CEO of C three
24:05
Speaker 8: AI later today, so I'm being a little bit selfish
24:08
Speaker 8: and using my time with you to ask about that.
24:10
Speaker 8: Talk to me about what your big question is about
24:14
Speaker 8: the hype around AI. Is it warranted?
24:18
Speaker 7: Certainly, AI has the potential to revolutionize everything we do.
24:23
Speaker 7: You know, it is kind of like Google Search on steroids,
24:26
Speaker 7: So I love that. Here's the thing, though, one is
24:29
Speaker 7: a lot of companies have been doing similar stuff for
24:31
Speaker 7: the last decade. Only now are they starting to highlight
24:34
Speaker 7: it because they're getting so many questions about it in
24:37
Speaker 7: a pop in their stock price. And the other thing
24:39
Speaker 7: from an investing point of view is you always want
24:42
Speaker 7: to be cautious about paying up to ridiculous levels for
24:47
Speaker 7: the hype, because of course AI is going to be
24:50
Speaker 7: more expensive than traditional search. Everyone in the world is
24:53
Speaker 7: going to be jumping into the space and of course
24:56
Speaker 7: we haven't seen the government regulation. The government's still trying
24:59
Speaker 7: to figure out what is this mean and to the
25:01
Speaker 7: extent invade privacy or has the tendency to mislead people,
25:05
Speaker 7: They're going to come down hard. I think Italy has
25:07
Speaker 7: already banned it, so that's another thing investors have to
25:09
Speaker 7: watch where. I think one nice thing about today's rally
25:12
Speaker 7: is we saw C three AI. It was down big
25:15
Speaker 7: time early. This morn has come back a little bit.
25:16
Speaker 7: I still slowly, just down double digits, suggesting that people
25:19
Speaker 7: are now looking beyond the hype and looking at other
25:22
Speaker 7: areas of the market. They have some value now after
25:25
Speaker 7: kind of a mute in May for most of the
25:28
Speaker 7: rank and file in the market.
25:29
Speaker 1: All right, David, thanks so much again for joining us.
25:31
Speaker 1: Always appreciate getting some of your thoughts. That's David Deets.
25:34
Speaker 1: He's a managing principle and senior portfolio manager at Pepeck
25:37
Speaker 1: Private Wealth Management. Always with some nice, clear and concise messaging.
25:41
Speaker 5: There, you're listening to the team. Ken's our Line program
25:46
Speaker 5: Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com,
25:50
Speaker 5: the iHeartRadio app, and the Bloomberg Business app. Or listen
25:53
Speaker 5: on demand wherever you get your podcasts.
25:57
Speaker 1: Well, we're talking about you know, Macy's and some of
25:59
Speaker 1: the other retail as we're seeing over the last at
26:01
Speaker 1: several days and kind of getting to the strength of
26:04
Speaker 1: the consumer out there, and that is a big, big
26:07
Speaker 1: issue for obviously the markets and for the federal reservers.
26:10
Speaker 1: I think about what to do with this economy with
26:12
Speaker 1: these interest rates. So to get a sense of kind
26:14
Speaker 1: of where we are with the consumer, maybe focusing on
26:16
Speaker 1: gen z and the millennials, we talked to Christina Roman.
26:20
Speaker 1: She's a consumer education and advisory manager at Experience. Christina,
26:25
Speaker 1: thanks so much for joining us here. When we think
26:27
Speaker 1: about some of the younger folks out there, the gen Z,
26:31
Speaker 1: the millennials, how are they financially right now coming out
26:35
Speaker 1: of the pandemic? Where are they right now?
26:39
Speaker 9: Absolutely thank you for having me. Well, what we found
26:42
Speaker 9: We recently did a survey of how millennials and gen
26:45
Speaker 9: Zers are faring in the current economy because we know
26:48
Speaker 9: that they're going to be the biggest drivers of spending
26:51
Speaker 9: and we wanted to get a better understanding of their
26:54
Speaker 9: personal finance and credit knowledge. And what we found is
26:57
Speaker 9: that seventy percent of consumers as though the current environment
27:01
Speaker 9: is hurting their ability to be financially independent. But as
27:05
Speaker 9: a result of that, we're seeing this trend where consumers
27:08
Speaker 9: are becoming more focused on their personal financial health and
27:12
Speaker 9: seeking out trusted resources for personal finance information. So they're
27:16
Speaker 9: really looking inward because there are so many factors that
27:20
Speaker 9: they can't control and they want to better understand how
27:23
Speaker 9: to manage their personal finance.
27:25
Speaker 8: So a big part of what you do, Christina, if
27:27
Speaker 8: I'm correct, is reach young people where they are on
27:31
Speaker 8: social media with that finance education. Is that right? Yes,
27:35
Speaker 8: So talk to me about what that strategy for you
27:38
Speaker 8: has looked like. I'm a big finance TikToker. I make
27:42
Speaker 8: a lot of those TikTok videos about personal finance advice.
27:46
Speaker 8: What do you see that works and what do you
27:48
Speaker 8: see that you think is not helpful for young people
27:52
Speaker 8: looking to beef up their financial futures?
27:55
Speaker 9: Yeah, you know, I think also it's important to know
27:58
Speaker 9: that we're at a point where information can be consumed anywhere, right.
28:02
Speaker 9: So we've been working We've had a credit chat program
28:05
Speaker 9: that we've managed on Twitter for more than ten years,
28:09
Speaker 9: and you know, we've branched out into live conversations as well,
28:14
Speaker 9: and consumers want you to be human. They want to
28:17
Speaker 9: know that you're there for them, and so one one
28:21
Speaker 9: tactic that we deployed was at taking their questions and
28:25
Speaker 9: just answering them very honestly, and I think this is
28:29
Speaker 9: really important. What is highlighted for us is that consumers
28:33
Speaker 9: they don't know everything that we think that they know
28:36
Speaker 9: about credit and knowledge is power. You know, not everyone
28:40
Speaker 9: grew up in a household where money and personal finance
28:43
Speaker 9: topics were freely discussed and financial literacy courses were not
28:47
Speaker 9: often you know, required in school. I know that was
28:50
Speaker 9: my experience growing up. We didn't often talk about money
28:53
Speaker 9: in the household, and oftentimes navigating finances kind of felt
28:58
Speaker 9: like trial by fire. But this focus on financial literacy
29:02
Speaker 9: and financial education really helps consumers to navigate their financial
29:07
Speaker 9: lives and make decisions that can set them up for success.
29:10
Speaker 9: Which is you know why we believe in financial power
29:14
Speaker 9: for all and we make ourselves available on Instagram, Twitter, Facebook,
29:22
Speaker 9: you know, just LinkedIn. All of these sources are a
29:25
Speaker 9: great opportunity for us to share the incredible resources that
29:28
Speaker 9: we have available to help consumers learn how to manage
29:31
Speaker 9: their credit. We have our Asked Experience blog, which answers
29:35
Speaker 9: just about every question a consumer could possibly have about
29:38
Speaker 9: credit and personal finance, and we share these resources via
29:42
Speaker 9: our chats and our social media initiatives.
29:45
Speaker 1: Hey, Christina, I have about particularly for some of the
29:48
Speaker 1: younger folks out there, the millennials, the Gen Z student debt.
29:51
Speaker 1: It's such a big part of their financial life, more
29:54
Speaker 1: so than maybe my generation. What are the biggest issues
29:58
Speaker 1: that you year about from your clients and kind of
30:01
Speaker 1: what is your general advice.
30:05
Speaker 9: Regarding student debt. I think it's just it's really important
30:09
Speaker 9: for consumers to make sure that they know the terms
30:13
Speaker 9: of the loans that they're taking on, not taking on
30:16
Speaker 9: more than they actually need, because I think it's that
30:20
Speaker 9: some consumers when they are applying for student loans, they
30:24
Speaker 9: actually take on more than they actually need and they
30:27
Speaker 9: don't realize that all of that's going to have to
30:29
Speaker 9: be paid at the end. So it's important to do
30:34
Speaker 9: your research when you're taking on your debt, and then
30:36
Speaker 9: when it comes time to pay your student loan debt,
30:40
Speaker 9: contact your lenders, get an understanding of what the payment
30:44
Speaker 9: options are, how you can best manage that you know,
30:48
Speaker 9: do you have a grace period, because some students when
30:51
Speaker 9: they graduate from college, they may have a bit of
30:54
Speaker 9: a grace period before they have to start paying that off,
30:56
Speaker 9: and that just gives them the opportunity to look for
30:59
Speaker 9: a job or to cure a job that they can
31:01
Speaker 9: then use to help to pay that loan off. So
31:04
Speaker 9: it's really important to know the terms of any loan
31:07
Speaker 9: that you're taking on. To contact your lenders, and if
31:10
Speaker 9: you're having trouble paying your student loan debt back now,
31:13
Speaker 9: right now we are in a pause, but once that
31:16
Speaker 9: starts back up, if you don't feel like you're in
31:17
Speaker 9: a position where you can immediately start to pay it back,
31:21
Speaker 9: contact your lenders as student as possible, because that can help.
31:25
Speaker 9: That can help them to help maybe create a plan
31:27
Speaker 9: for you so that you can feel more confident when
31:30
Speaker 9: you start to resume your payment.
31:32
Speaker 8: Yeah, Golden had a note this morning, by the way,
31:34
Speaker 8: that Paul I thought you'd like this that the unpausing
31:37
Speaker 8: of student loan debt is going to add to add
31:40
Speaker 8: to consumer spending and inflation. So that's a bad news
31:44
Speaker 8: bearers for the FED moment. But going back to the
31:46
Speaker 8: personal finance advice that you provide move a little later
31:50
Speaker 8: in life for me. The people you speak with who
31:53
Speaker 8: have paid off their student loans, they have a little
31:55
Speaker 8: bit of savings and they're not sure what to do
31:57
Speaker 8: with it. What questions are they asking you about where
32:00
Speaker 8: to put their money right now? Are they concerned about
32:03
Speaker 8: keeping all of their savings at a bank given some
32:05
Speaker 8: of the issues that we've seen in the banking sector.
32:09
Speaker 9: I can't honestly speak to that. I haven't seen that personally.
32:12
Speaker 9: We haven't received questions about that. Most of the questions
32:15
Speaker 9: that we receive typically are focused on credit and how
32:20
Speaker 9: consumers can best set themselves up for success when managing
32:23
Speaker 9: their credit. In personal finance, how.
32:26
Speaker 1: About residential real estate. That's a big part of people's
32:29
Speaker 1: net worth historically in this country, but again a lot
32:33
Speaker 1: of folks you're finding a challenging now, particularly that interest
32:35
Speaker 1: rates have gone up. How do you kind of think
32:38
Speaker 1: about real estate when you need to talk to your customers.
32:41
Speaker 9: When we talk to customers, you really focus more so
32:44
Speaker 9: on achieving the best possible interest rate to get I mean,
32:48
Speaker 9: I'm sorry, achieving the best possible credit score to qualify
32:51
Speaker 9: for the best interest rate. Because we know that your
32:54
Speaker 9: credit score is going to directly impact your loan terms,
32:57
Speaker 9: and achieving the best possible interest rate will help to reduce,
33:02
Speaker 9: you know, the amount that you're going to have to
33:03
Speaker 9: pay over the lifetime of that loan. So we really
33:07
Speaker 9: advise consumers to begin to look at your credit report
33:10
Speaker 9: about three to six months ahead of making any real
33:14
Speaker 9: estate or planning to make any real estate purchase. And
33:17
Speaker 9: you can do that, you know, via our free credit
33:20
Speaker 9: monitoring app. We offer the Experience Credit Report and the
33:23
Speaker 9: FICO Score where consumers can begin to monitor their credit
33:27
Speaker 9: to get a understanding of what's in their credit history.
33:30
Speaker 9: And also not to make any major purchases before you
33:34
Speaker 9: plan to enter in the real estate market because that
33:37
Speaker 9: could affect your credit, which could then impact your interest rate,
33:40
Speaker 9: and this is not the time where you want to
33:42
Speaker 9: impact your interest rate negatively.
33:45
Speaker 8: Final thirty seconds here, what would you say is the
33:48
Speaker 8: biggest mistake that you see the folks you work with make.
33:53
Speaker 9: I think the biggest mistake that we see is as
33:59
Speaker 9: far as it's like just not informing consumers enough that
34:03
Speaker 9: they have the power to check their credit reports and
34:06
Speaker 9: their credit scores. I think there's so many misconceptions about
34:10
Speaker 9: credit and we get asked this Austen, and so it's
34:14
Speaker 9: really important to check your credit report as often as
34:17
Speaker 9: you can. This is not going to impact your credit
34:19
Speaker 9: score negatively, and it will catch you up for success,
34:22
Speaker 9: you know, when you're ready to make a milestone purchase.
34:25
Speaker 1: Christina, thanks so much for joining us. Really appreciate getting
34:28
Speaker 1: the benefit of some of your thoughts and analysis there.
34:31
Speaker 1: Christina Roeman, consumer education and advocacy manager at Experience. I'm
34:36
Speaker 1: working with folks, particularly some of the younger folks out there,
34:38
Speaker 1: to kind of manage their financial situation.
34:41
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
34:45
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
34:48
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
34:52
Speaker 2: at Matt Miller nineteen seventy three and on.
34:55
Speaker 1: Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
34:58
Speaker 1: you can always catch us World at Bloomberg Radio.