Latest / Bloomberg Intelligence / Europe, Equities, And Bonds (Podcast)

Transcript

Europe, Equities, And Bonds (Podcast) · 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. Big big day in Frankfurt, Germany.
• 0:23
  Speaker 1: Tay and for Europe, uh, the ECB raising its benchmark
• 0:27
  Speaker 1: R fifty basis points. So no longer negative interest rates
• 0:30
  Speaker 1: in Europe. That's big. Um boy, it's been a long
• 0:34
  Speaker 1: long time exactly. I'm looking at the euro here trading
• 0:38
  Speaker 1: up just a little bit. But let's dig into it
• 0:39
  Speaker 1: a little bit. We can do that with me. Have
• 0:41
  Speaker 1: a cousin Euro Area economists for Bloomberg Economics, Geneva Zerk
• 0:46
  Speaker 1: somewhere over there in Switzerland. Um, pretty cool, Mayva. Thanks
• 0:50
  Speaker 1: so much for joining us here. Busy, busy day for
• 0:53
  Speaker 1: Christine Lagarde. What are your takeaways from what we've seen
• 0:56
  Speaker 1: and heard so far this uh today in Europe? Kay? Thanks?
• 1:01
  Speaker 1: So yeah, it's a big thing. Indeed, this fifty basis
• 1:04
  Speaker 1: points to bigger HIGs than we were expecting having plans
• 1:08
  Speaker 1: because the judge that their TPI, their transmission protection instrument,
• 1:12
  Speaker 1: was told enough to allow a bigger move to tame inflation,
• 1:17
  Speaker 1: which is again surprised on the web side in June
• 1:19
  Speaker 1: after they published their latest forecast. So the big focus
• 1:22
  Speaker 1: at the moment in the area and at East is
• 1:25
  Speaker 1: really on current inflation and trying to get handled on
• 1:29
  Speaker 1: this regnant place inflation pressures. Now the big question is
• 1:33
  Speaker 1: how good will be the anti fragmantation to these tp
• 1:36
  Speaker 1: I uh, it's good that they've agreed on something, but
• 1:39
  Speaker 1: of course it is all steel subject to really the
• 1:44
  Speaker 1: discretion of the governing counties or some parts of it,
• 1:47
  Speaker 1: in particular as taking the fiscal sustainability of the government
• 1:51
  Speaker 1: or the country, the surf reign that would need to
• 1:53
  Speaker 1: receive the support, and also deciding when to activate when
• 1:58
  Speaker 1: the increasing spread on warm kids which would be subject
• 2:01
  Speaker 1: to discrestion. And we are not sure how and when
• 2:04
  Speaker 1: they can be activated. And I would say that a
• 2:06
  Speaker 1: political crisis in Italy probably doesn't think figure on the
• 2:10
  Speaker 1: list of rational or rehaysms why they could activateing wait,
• 2:14
  Speaker 1: why we we always maybe it's like a NonStop constant
• 2:18
  Speaker 1: political crisis in Italy that should always figure into every
• 2:21
  Speaker 1: central bankers list. So, as Christine god said during the briefing,
• 2:28
  Speaker 1: this is really to address unwarranted market fact notation that
• 2:32
  Speaker 1: is not country specific, so some sort of his conversion mechanism, uh,
• 2:37
  Speaker 1: which he said that they already have a mechanism. They
• 2:40
  Speaker 1: already have a tool it's called OMT to adviss country
• 2:43
  Speaker 1: specific predomination is So that's really if it's a political
• 2:47
  Speaker 1: crisis in theory, it would be difficult for the governing
• 2:50
  Speaker 1: country to activate the tool. So we see how that happens.
• 2:54
  Speaker 1: But they have defined the criteria. It's quite it's still
• 2:56
  Speaker 1: a relative debate. As I said, a lot of discussion.
• 2:59
  Speaker 1: We would you know, um pretty GUPTO was just in
• 3:02
  Speaker 1: here talking about the possibility of another sovereign debt crisis
• 3:06
  Speaker 1: because of the blo out and spreads. I think we're
• 3:08
  Speaker 1: probably well, we're currently pretty pretty pretty safe in that respect,
• 3:13
  Speaker 1: but we could get there. That's the trajectory. Is this
• 3:16
  Speaker 1: ECB equipped to deal with that kind of thing? It's
• 3:22
  Speaker 1: it's one more tool than they didn't have before. It's
• 3:24
  Speaker 1: just much more difficult than it was when they first
• 3:27
  Speaker 1: launched to empty and when they first because at that
• 3:30
  Speaker 1: time it was easy for them to buy a lot
• 3:32
  Speaker 1: of government debt because it was serving at the same
• 3:34
  Speaker 1: time the support like the monetary podity direction to increase
• 3:39
  Speaker 1: in fation on the market fragmentation aspects. So it's much
• 3:43
  Speaker 1: more challenging now. It's good that they are in producing
• 3:46
  Speaker 1: a new a new tool, but it will it will
• 3:49
  Speaker 1: still be subject to a lot of debates on the government.
• 3:52
  Speaker 1: But they could have raised rates much. They could have
• 3:54
  Speaker 1: raised rates a long time ago. And I realized that,
• 3:57
  Speaker 1: you know, um, the FED also out inflation to get
• 4:02
  Speaker 1: ahead of it, and and so did um the Bank
• 4:05
  Speaker 1: of England. You used to advise Her Majesty's Treasury there.
• 4:10
  Speaker 1: Why why is the ECB, you know, the last to
• 4:14
  Speaker 1: raise Why why didn't they act sooner? They had a
• 4:18
  Speaker 1: different inflation problems. They still have a different inflation problem. Uh,
• 4:22
  Speaker 1: most of the inflation in et needs to due to
• 4:25
  Speaker 1: energy and food crisis, so out of their control to
• 4:28
  Speaker 1: a large extent. It's also that actually we've seen a
• 4:31
  Speaker 1: lot of stating in market conditions at the market rates
• 4:36
  Speaker 1: for your area, actually more so than in the US,
• 4:40
  Speaker 1: at least initially, um, just without changing the rates. So
• 4:45
  Speaker 1: they have already. There has been already a lot of
• 4:46
  Speaker 1: stating they didn't pace sooner because they had to exhibit
• 4:50
  Speaker 1: the asset purchases. Um, they had to make sure actually
• 4:53
  Speaker 1: they had the high schools in place. But it doesn't
• 4:56
  Speaker 1: mean that they are. They don't need to do as
• 4:59
  Speaker 1: much as the just said. All right, maybe thank you
• 5:03
  Speaker 1: so much for joining us. May have a cousin euro
• 5:06
  Speaker 1: Area economist for Bloomberg Economics. I want to bring our
• 5:12
  Speaker 1: good friend, Ed Price. He's a senior fellow, a former bidtish,
• 5:16
  Speaker 1: a trade official, senior fellow at n y U. Lots
• 5:18
  Speaker 1: going on in Europe. We've been covering it all day.
• 5:20
  Speaker 1: Matt's been up since the before the crack of dawn.
• 5:23
  Speaker 1: Lot's going on with the e c B. Let's start there.
• 5:26
  Speaker 1: ECB raising their benchmarks, connected all connected, fifty basis points um.
• 5:32
  Speaker 1: That's in the face of slowing European economic growth, energy crises.
• 5:36
  Speaker 1: There are so many cross currents for our friends over
• 5:39
  Speaker 1: in Europe. I think that's right. And um, you know
• 5:42
  Speaker 1: what does the ECB want to do? It kind of
• 5:44
  Speaker 1: wants to do two things. It wants to kill inflation
• 5:47
  Speaker 1: and it wants to not kill the European economy. Right,
• 5:50
  Speaker 1: so if you if you say, well, look, you know,
• 5:52
  Speaker 1: fifty is quite a lot. It's not enough if you
• 5:54
  Speaker 1: want to stop inflation. And again we talked about this
• 5:58
  Speaker 1: a lot, but I don't know what you do, like
• 6:00
  Speaker 1: what is the answer to that? But fifty also can't
• 6:02
  Speaker 1: kill an economy, right, they they're just fifty basis points.
• 6:05
  Speaker 1: That's now, Let's remember they're very very low. There's still
• 6:09
  Speaker 1: below whatever our star it is, whatever you think it is,
• 6:12
  Speaker 1: it's definitely more than fifty, right, it's definitely one fifty.
• 6:14
  Speaker 1: I mean I would personally say there's no such thing
• 6:16
  Speaker 1: as our star because you've got that m just our
• 6:19
  Speaker 1: star the natural rate of interest right, So like yeah, right,
• 6:22
  Speaker 1: so like this is this is one of the more
• 6:25
  Speaker 1: voodoo aspects of economy. But it's basically whatever your guess is,
• 6:29
  Speaker 1: and it's probably better equipped to make a guess than
• 6:32
  Speaker 1: you or I at a level of level of interest
• 6:36
  Speaker 1: rates that is not enough to not high enough to
• 6:39
  Speaker 1: slow the economy, but not low enough to spur it forward.
• 6:42
  Speaker 1: So just neutral. Yeah, And you're like, you know, you're
• 6:45
  Speaker 1: doing things like searching for what the output gap is,
• 6:47
  Speaker 1: and you've got your army of economists, and it's a guess.
• 6:50
  Speaker 1: And I'd go further than let's say it probably doesn't exist,
• 6:53
  Speaker 1: because if you want to look after financial markets, whatever
• 6:56
  Speaker 1: our star is, it's probably quite low. And then if
• 6:58
  Speaker 1: you want to look after inflation get rid of that problem,
• 7:00
  Speaker 1: it's probably higher. Um. So there's probably no such thing
• 7:03
  Speaker 1: as all start. I'm going to look at my Twitter
• 7:05
  Speaker 1: later to see what happens to me after saying that. Um. Right,
• 7:09
  Speaker 1: so here here in the States, fed trum of Powell
• 7:12
  Speaker 1: raises rates sevent five basis points. It's a New York, Kuai, California,
• 7:17
  Speaker 1: doesn't really matter um vs VI those different states. But
• 7:22
  Speaker 1: it's not the same thing in the East New York,
• 7:25
  Speaker 1: Hawaii and California. I'll make a ton of money. Yes,
• 7:28
  Speaker 1: how about our good friend. Maybe maybe it matters to
• 7:30
  Speaker 1: the states that take all of our money all of
• 7:32
  Speaker 1: our money. So let's bring that analogy to Europe and Italy.
• 7:37
  Speaker 1: So talk to us about how, you know how what
• 7:41
  Speaker 1: it's the what Christine the Guard has to balance when
• 7:43
  Speaker 1: she's in this rate moving scenario when you have different countries,
• 7:49
  Speaker 1: different economic development. So it's a really good point. So okay,
• 7:53
  Speaker 1: so borrowing costs You're right, in the US don't matter
• 7:56
  Speaker 1: as much as in the your area, and they don't
• 8:00
  Speaker 1: matter as much because the spread in the area between
• 8:02
  Speaker 1: you know, Tenia borring costs in Italy and Germany is
• 8:04
  Speaker 1: as we've said before, essentially an indicator of whether the
• 8:07
  Speaker 1: Euro can exist. So the e CBS obviously sitting there thinking,
• 8:12
  Speaker 1: we don't want to introduce a an X upper bound
• 8:16
  Speaker 1: for Italy, at which point it won't be able to
• 8:19
  Speaker 1: function as a government, won't be able to function as
• 8:20
  Speaker 1: a state, and we'll have to leave the Euro Area
• 8:23
  Speaker 1: because that would be extremely bad. So, by the way,
• 8:26
  Speaker 1: you've also got this threat that Russia is going to
• 8:28
  Speaker 1: cut off the gas, and you know, there's projections that
• 8:31
  Speaker 1: Italy would have a five percent contraction and so on.
• 8:33
  Speaker 1: So I think the CBS thinking about these really deep
• 8:36
  Speaker 1: structural currency related issues at the same time as in
• 8:40
  Speaker 1: public and on the surface of things, talking in the
• 8:42
  Speaker 1: normal language of macroeconomics, and it's so tough to deal
• 8:46
  Speaker 1: with the gas issues at the same time as they're
• 8:49
  Speaker 1: dealing with their persistent lack of a government. Again, they've
• 8:54
  Speaker 1: had sixty seven governments and seventy five years. Is that
• 8:57
  Speaker 1: the number? Good Lord it's nuts. So but that's just
• 9:01
  Speaker 1: how it is in Italy, and frankly, the ECB should
• 9:04
  Speaker 1: be prepared for that, um, you know, because it happens
• 9:08
  Speaker 1: so often. But it's a very difficult time to see
• 9:11
  Speaker 1: spreads widen, and I wonder how far the spread could
• 9:15
  Speaker 1: go before it causes, um, a sovereign debt crisis. The
• 9:20
  Speaker 1: last one we saw was pretty difficult. That took Mario
• 9:22
  Speaker 1: drag to get out of. He's kicking off this one.
• 9:25
  Speaker 1: He's kicking off this one. That's very good. You need
• 9:27
  Speaker 1: that on a T shirt. Um, whatever, it doesn't take. Yeah,
• 9:30
  Speaker 1: I mean, I think the problem is that we don't know.
• 9:32
  Speaker 1: But we don't know what that level is. We've been
• 9:35
  Speaker 1: obsessed for years as policy makers and economists with this
• 9:38
  Speaker 1: thing called the lower bound, which apparently zero. It's not
• 9:42
  Speaker 1: wink wink, but apparently zero. Right. Um, But then there's
• 9:45
  Speaker 1: there's obviously to your point, that there's this upper bound
• 9:47
  Speaker 1: somewhere at which at which point sovereigns and and presumably
• 9:51
  Speaker 1: corporates and others are going to hit the wall. So
• 9:53
  Speaker 1: we don't know. Um, could be three hundred, fifty, could
• 9:57
  Speaker 1: be four hundred, It could be But then of course
• 10:01
  Speaker 1: the only way to find out is to get there, right,
• 10:03
  Speaker 1: So do you really want to get there? No? And
• 10:05
  Speaker 1: that and that's something that's that's my question is if
• 10:09
  Speaker 1: we have another crisis, or maybe I say, when we
• 10:12
  Speaker 1: have another euro crisis, does that push the European Union
• 10:17
  Speaker 1: towards a breakup as it looked like was going to
• 10:19
  Speaker 1: happen in two thousand eleven, or does it bring the
• 10:21
  Speaker 1: European Union closer together? Did they say enough of this?
• 10:24
  Speaker 1: You are to what paulse when he said about how
• 10:26
  Speaker 1: the USA hands it, Let's do it like that and
• 10:28
  Speaker 1: federalize everything. I think we are. I think you're absolutely
• 10:31
  Speaker 1: right federalized. I think that right now we're in the
• 10:34
  Speaker 1: articles of confederation stage. If you're making the analogy with
• 10:37
  Speaker 1: the US, and my money is on the European Union
• 10:40
  Speaker 1: in your area becoming the same thing, getting serious, getting
• 10:44
  Speaker 1: that German money into some sort of fiscal mechanism whatever
• 10:48
  Speaker 1: it is. Um And by the way, there are a
• 10:50
  Speaker 1: lot of indicators that this is kind of happening due
• 10:53
  Speaker 1: to external pressures anyway. I mean, we said last time
• 10:55
  Speaker 1: I was on the Germans are rearming. That's incredible. So
• 10:58
  Speaker 1: my my suggestion to you is that within ten years
• 11:01
  Speaker 1: we'll see the United States of Europe de facto, if
• 11:03
  Speaker 1: not the jury, if they put together a bill of rights.
• 11:06
  Speaker 1: They got to be careful when writing the Second Amendment.
• 11:08
  Speaker 1: You watch your punctuation, try and make yourself clear. What
• 11:12
  Speaker 1: do you mean, right, A well regulated militia, Right, I mean,
• 11:16
  Speaker 1: there's aspects of the Second Amendment that are pretty awesome.
• 11:19
  Speaker 1: Come on, so maybe we should we should send them
• 11:21
  Speaker 1: over a suggested draft with a fewer commas, maybe real
• 11:25
  Speaker 1: quicked the UK? I know it's hot over there. I
• 11:27
  Speaker 1: know the folks are you know, really dealing with that.
• 11:29
  Speaker 1: But just from an economic perspective, how are things in
• 11:32
  Speaker 1: the UK these days? Well, I mean, if you if
• 11:34
  Speaker 1: you look at some of the projections, three GDP growth
• 11:38
  Speaker 1: goes down to zero, so you guys know about finance,
• 11:41
  Speaker 1: zero is a bad number. So there's definitely some sort
• 11:44
  Speaker 1: of head winds going on there. But look, I'm hopeful
• 11:46
  Speaker 1: that there's going to be a period of structural reform
• 11:49
  Speaker 1: and that Britain will essentially do what it did in
• 11:51
  Speaker 1: the eighties under Thatcher and go through some sort of
• 11:54
  Speaker 1: self inflicted shock but then come out, you know, past
• 11:58
  Speaker 1: the curve ahead of the curve on globalization as a result.
• 12:00
  Speaker 1: Um so we'll have to see. I don't know, but
• 12:02
  Speaker 1: the headline is bad, but medium term good, alright, good stuff.
• 12:06
  Speaker 1: I mean, lots of news coming out of Europe. We've
• 12:08
  Speaker 1: been uh trying to stay on top of it today
• 12:12
  Speaker 1: at Price senior fellow at n y U and a
• 12:14
  Speaker 1: former British trade of Fisher. We love getting his thoughts
• 12:17
  Speaker 1: on economics, particularly coming out of Europe, coming out of
• 12:20
  Speaker 1: the UK and again today the e C B uh,
• 12:24
  Speaker 1: you know, being a little bit surprised in the market
• 12:25
  Speaker 1: a little bit clearly with a fifty point increase in
• 12:29
  Speaker 1: their base borrowing rate uh FED coming up July. That's
• 12:34
  Speaker 1: kind of where all eyes are now as we think
• 12:36
  Speaker 1: about these markets and where rates are going visa v
• 12:39
  Speaker 1: this economy, this this Bloomberg. All right, we got rates rising.
• 12:46
  Speaker 1: We've had a brutal first half of the year across
• 12:49
  Speaker 1: the fixed income specter spectrum, and that includes high yield.
• 12:53
  Speaker 1: And we talked high yield. We talk Ken Monahan, co
• 12:55
  Speaker 1: director of high Yield at a munday US. He joins
• 12:58
  Speaker 1: us in our Bloomberg Interact a broker studio. Ken, thanks
• 13:01
  Speaker 1: so much for joining us. Declining corporate bond index first
• 13:06
  Speaker 1: half of the year. We've never seen that, have we.
• 13:08
  Speaker 1: You know, it's been a miserable, miserable year thus far
• 13:11
  Speaker 1: in ext income And it's not just how yield but
• 13:13
  Speaker 1: how you'll certainly take it on the chin. So uh,
• 13:17
  Speaker 1: If from an equities perspective, and obviously Paul and I
• 13:20
  Speaker 1: have grown up kind of plain ventil equities, I would
• 13:22
  Speaker 1: say that's time to go in there and buy. I mean,
• 13:25
  Speaker 1: there is legit blood in the streets, to paraphrase possibly
• 13:29
  Speaker 1: Benjamin Graham. Um, is that not the case for everybody else? Well?
• 13:33
  Speaker 1: I I think it is, and it's gonna be at
• 13:36
  Speaker 1: some point. But I think right now what people are
• 13:38
  Speaker 1: concerned about is is the FED gonna tip us over
• 13:41
  Speaker 1: into a recession or we're gonna eke this through with
• 13:43
  Speaker 1: the maybe modest growth that probably is subpar. And I
• 13:47
  Speaker 1: think that that's the big question. If we go into recession,
• 13:49
  Speaker 1: people are concerned that spreads will back out further and
• 13:52
  Speaker 1: bond prizes will drop further. If we don't, then maybe
• 13:55
  Speaker 1: it's an attractive by right now. All right, So if
• 13:59
  Speaker 1: we wanted to dip bar tow in the high yield space,
• 14:02
  Speaker 1: I still have a specter that I might have a
• 14:04
  Speaker 1: recession sometimes in my investment outlook of the next couple
• 14:08
  Speaker 1: of years. So does that suggests that I really try
• 14:10
  Speaker 1: to just focus on the highest quality or do I
• 14:13
  Speaker 1: still try to reach for some better yield. You know,
• 14:16
  Speaker 1: it's interesting if you look, Paul, at the beginning of
• 14:18
  Speaker 1: this year, when people's major concern with rates duration was
• 14:23
  Speaker 1: driving the market, so double bees underperformed and single bees
• 14:26
  Speaker 1: and triple c's outperformed. That shifted in May when it
• 14:29
  Speaker 1: became clear that the concerns about inflation were more significant
• 14:34
  Speaker 1: and the Fed really had to get its act together.
• 14:36
  Speaker 1: Then we started to see double bees fade and single
• 14:38
  Speaker 1: bees and triple c is underperformed. And that's where we
• 14:41
  Speaker 1: are right now. Single bees are a little under the
• 14:42
  Speaker 1: double b sector. We would suggest you're probably pretty safe
• 14:45
  Speaker 1: and most double bees right now. If you type in
• 14:48
  Speaker 1: D I S go and then UM, you click the
• 14:54
  Speaker 1: button historical charts instead of just the spaghetti of numbers
• 14:58
  Speaker 1: that you see there UM number of distress bonds traded
• 15:01
  Speaker 1: distress issuers. We've spiked up again, not as high as
• 15:04
  Speaker 1: we were in March of UM. But where are we going?
• 15:08
  Speaker 1: Where are we going on? This chart. Well, I think
• 15:10
  Speaker 1: from our perspective, the good news is if we have
• 15:13
  Speaker 1: a recession, it's likely to be a pretty mild one.
• 15:15
  Speaker 1: And and I'm not sure we're going to have a recession,
• 15:17
  Speaker 1: but you know, there are some out there suggesting that
• 15:19
  Speaker 1: defaults could hit ten percent by twenty four, which is
• 15:22
  Speaker 1: like a great financial crisis level. Correct. And I think
• 15:25
  Speaker 1: that's a ridiculous number if you're looking at it from
• 15:27
  Speaker 1: a bottom up basis, and you're looking at the individual
• 15:29
  Speaker 1: sectors and trying to figure out what's going to hit
• 15:31
  Speaker 1: the fan. It's kind of hard to get to that
• 15:33
  Speaker 1: kind of number when you do look at uh, look
• 15:36
  Speaker 1: at it from bottoms up and and and study the
• 15:38
  Speaker 1: individual sectors. What do you like? Well, I think you
• 15:40
  Speaker 1: know that there are sectors out there that are pretty safe.
• 15:43
  Speaker 1: Cable is largely safe. We would suggest that you've got
• 15:46
  Speaker 1: sectors money, the healthcare sector is safe. Um, we would
• 15:49
  Speaker 1: suggest that much of telecom is pretty safe. And energy,
• 15:53
  Speaker 1: which has really been you know, a big bankruptcy candidate,
• 15:56
  Speaker 1: and in previous years particularly, a lot of them got
• 15:59
  Speaker 1: pulled down in each twenty that's obviously got the winded.
• 16:02
  Speaker 1: It's back right now. Is a T T A high
• 16:04
  Speaker 1: yield spiritus at investment grade. Well I noticed the A T. Yeah, hard,
• 16:08
  Speaker 1: but it's it's still investment grade. And they've been very
• 16:11
  Speaker 1: protective of that investment grade rating because they've got a
• 16:14
  Speaker 1: lot of financing to do, because I know they took
• 16:16
  Speaker 1: their free cash flow down a couple of billion dollars
• 16:18
  Speaker 1: their outlook and I'm just I'm just reaching out to
• 16:20
  Speaker 1: some you know, bond and als saying how bad is this?
• 16:23
  Speaker 1: Is this for A T T? But it certainly was unexpected.
• 16:25
  Speaker 1: That's the type of thing when you think about telecommon cable.
• 16:27
  Speaker 1: They're good free cash flow stories until they're not because
• 16:31
  Speaker 1: there's a lot of operating leverage there right there is.
• 16:32
  Speaker 1: And I think but I think we've been we've been
• 16:34
  Speaker 1: thinking that they're going to maintain that investment grade rating.
• 16:37
  Speaker 1: I gotta talk with my colleagues post todays, obviously, but
• 16:40
  Speaker 1: I think that our our our thought with that would
• 16:42
  Speaker 1: remain the same. Yeah, boy, A T and T big
• 16:44
  Speaker 1: big news out of their stocks down a big. Ken Monahan,
• 16:47
  Speaker 1: thanks so much for joining us. Ken Monahan's a co
• 16:49
  Speaker 1: director of High Yield for a Mundi US and like me,
• 16:54
  Speaker 1: a former UH player at Solomon Brothers. Where you are
• 16:58
  Speaker 1: Solomon Brothers alumni along with some other guy. Yeah, yeah,
• 17:01
  Speaker 1: is he's sitting right over there. I think he's sitting
• 17:02
  Speaker 1: right over there in the good seats. So we appreciate it.
• 17:11
  Speaker 1: All right, Let's check in with Barry red Holt's post
• 17:13
  Speaker 1: of Masters in Business, uh Chairman and chief investment Officer
• 17:16
  Speaker 1: Red Holts Wealth Management. Barry, let's start with if you
• 17:19
  Speaker 1: don't mind Europe, we've kind of had a European focused today,
• 17:22
  Speaker 1: the ECB, Mario draggy stepping down. Um, we've got you know,
• 17:28
  Speaker 1: gas coming back on or not so coming back on,
• 17:31
  Speaker 1: lots of issues coming out of Europe today. As a
• 17:34
  Speaker 1: fund manager here in the US, how do you kind
• 17:37
  Speaker 1: of put that into perspective? Well, I'm excited. I'm excited
• 17:41
  Speaker 1: about the euro parody and do some traveling overseas with
• 17:45
  Speaker 1: a very strong dollar. That's that's pretty uh impressive. But look,
• 17:51
  Speaker 1: you know, Europe is following the United States and they're
• 17:56
  Speaker 1: raising rates because we're raising rates. They have inflation of inflation.
• 18:02
  Speaker 1: It's a global economy. It's very challenging to treat one
• 18:07
  Speaker 1: part of the developed world very differently from another. Uh.
• 18:12
  Speaker 1: So you know, we We've just finished a ten year
• 18:16
  Speaker 1: or twelve year period of US out performance versus Europe.
• 18:21
  Speaker 1: I'm waiting for that wheel, that cycle to change. So far,
• 18:25
  Speaker 1: we're seeing no signs it's gonna happen anytime soon. UM.
• 18:30
  Speaker 1: As a US investor or, your clients, who are I
• 18:33
  Speaker 1: assume mostly investors with US, how much how important is
• 18:38
  Speaker 1: it to follow you know, the latest new government in
• 18:41
  Speaker 1: Italy or Rischi Sunac versus liz Trust and the UK
• 18:46
  Speaker 1: or UM, you know the Russian gas situation. How much
• 18:51
  Speaker 1: does it matter to to U S investors? Well, if
• 18:54
  Speaker 1: you want to be an informed individual, it certainly doesn't
• 18:58
  Speaker 1: hurt to know what's going on in the con tent
• 19:01
  Speaker 1: in the continent. But generally speaking, as an investor, all
• 19:05
  Speaker 1: that stuff is noise and meaningless. You're buying broad assets,
• 19:10
  Speaker 1: so you have a diversified portfolio and you're really just
• 19:14
  Speaker 1: not paying attention to the day to day stuff. How
• 19:18
  Speaker 1: many governments has Italy had and since World War Two?
• 19:23
  Speaker 1: I mean, it's a full time job tracking Italian politics.
• 19:28
  Speaker 1: So why does does any US based investor, other than
• 19:34
  Speaker 1: to be a well rounded, wealth informed individual have to
• 19:39
  Speaker 1: track the specifics of what's happening there. It's it's not
• 19:42
  Speaker 1: crucial to them, all right. What I thought was interesting
• 19:45
  Speaker 1: out of the earnings news flow today it was a
• 19:48
  Speaker 1: T and T stuck getting crushed. Now they Barry called
• 19:52
  Speaker 1: out some of their clients not paying their phone bill. Man,
• 19:57
  Speaker 1: that says something about the consumer. I well, those kinds
• 20:03
  Speaker 1: of things. We've seen some credit card delinquencies tick up.
• 20:07
  Speaker 1: We've seen it always starts in the worst of the
• 20:11
  Speaker 1: automobile loans. So like housing, there's subprime loans and there's
• 20:16
  Speaker 1: sub subprime loans. The differences. If you have the weakest credit,
• 20:22
  Speaker 1: a car company is going to install literally a kill switch,
• 20:26
  Speaker 1: and if you stop making payments, they shut the car
• 20:29
  Speaker 1: and they go get it. They know exactly where it is.
• 20:31
  Speaker 1: So around the edges we're seeing these things tick up.
• 20:36
  Speaker 1: It's not significant yet. It's certainly not a weight oh nine.
• 20:40
  Speaker 1: But you pay attention to the ebbs and flows of
• 20:42
  Speaker 1: these because you want to know is the household in
• 20:46
  Speaker 1: good shape or are they dealing with financial pressures that
• 20:51
  Speaker 1: could affect consumer spending, corporate revenues and profits. And the
• 20:55
  Speaker 1: other question is, um how are companies deploying capital or
• 21:00
  Speaker 1: are they starting to put up barriers as well. We've
• 21:04
  Speaker 1: had a number of concerning uh job cut stories, starting
• 21:09
  Speaker 1: with the kind of Apple may cut jobs in some
• 21:12
  Speaker 1: units next year Scoop at the beginning of the week.
• 21:14
  Speaker 1: But now we've got Um, Microsoft, Google, Lift, even Ford
• 21:20
  Speaker 1: plans to cut eight thousand jobs. I mean, I'm desperately
• 21:25
  Speaker 1: trying to buy any car I see on the lot.
• 21:28
  Speaker 1: Why are they cutting jobs now? So Ford is a
• 21:31
  Speaker 1: different case and the technology companies. Ford specifically said they're
• 21:35
  Speaker 1: going to reduce some headcount in order to be able
• 21:38
  Speaker 1: to fund further expansion of their ev production and sales.
• 21:43
  Speaker 1: So Ford is moving into the future as aggressively as
• 21:47
  Speaker 1: they can. When you look at Google, Apple, Microsoft, Amazon,
• 21:51
  Speaker 1: go town the list six months ago, they were desperate
• 21:54
  Speaker 1: to hire people, and arguably we're over hiring people. We're
• 22:00
  Speaker 1: basically anybody who could father a Mira and and had
• 22:03
  Speaker 1: the qualifications was offered a job at a certain point.
• 22:08
  Speaker 1: Doesn't take a whole lot of economic slowing for these
• 22:12
  Speaker 1: large corporations to look and say, all right, we're good
• 22:16
  Speaker 1: for now. Let's catch our breath, let's digest these these
• 22:21
  Speaker 1: new hires, get people integrated into their jobs, and see
• 22:24
  Speaker 1: if that solves the employee shortfall that everybody's been dealing
• 22:30
  Speaker 1: with for the past couple of years. Alright, Baty all
• 22:33
  Speaker 1: I know about the car businesses. Matt still waiting for
• 22:35
  Speaker 1: Chevy Silverado. I think it's still stuck in Mexico. I
• 22:38
  Speaker 1: think it's still stuck in Mexico. I can't get any
• 22:40
  Speaker 1: updates on this except the chips then, exactly exactly. It's
• 22:45
  Speaker 1: missing chips, that's all I know. And it's sitting on
• 22:48
  Speaker 1: a lot outside the factory with like thousands and thousands
• 22:51
  Speaker 1: of other trucks. And that's on a first name basis
• 22:52
  Speaker 1: with the CEO Afford. You'd think he could get this GM.
• 22:59
  Speaker 1: I want to marry as well and Mark. I haven't
• 23:01
  Speaker 1: called them on this issue. I might have to call
• 23:03
  Speaker 1: him one half. All right, Barry, thanks so much for
• 23:05
  Speaker 1: joining us. Barry rid Hilts, host of Masters in Business,
• 23:09
  Speaker 1: chairman and chief investment officer Ridholt's Wealth Management. Thanks for
• 23:15
  Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
• 23:19
  Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
• 23:23
  Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
• 23:26
  Speaker 1: Miller three on False Sweeney, I'm on Twitter at pt
• 23:30
  Speaker 1: Sweeney before the podcast. You can always catch us worldwide
• 23:33
  Speaker 1: at Bloomberg Radio