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A Look At Crypto, Markets, The Latest From Washington · 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. Ben Slaven joins us
• 0:22
  Speaker 1: right now, Global head of e t F speaking of
• 0:25
  Speaker 1: UM and Assets Serving Servicing it B n Y Melon
• 0:29
  Speaker 1: speaking of out of n y c UM. They've got
• 0:32
  Speaker 1: two point three trillion dollars of assets under management. Ben,
• 0:35
  Speaker 1: thanks so much for joining us. UM, you know, more
• 0:39
  Speaker 1: and more I conflate the world of e t f
• 0:43
  Speaker 1: s with the crypto world. I know that's not really fair,
• 0:46
  Speaker 1: but UM, we do have uh recently hyped new pro
• 0:52
  Speaker 1: shares Bitcoin e t F as well as Greatcoins, Great
• 0:56
  Speaker 1: Scales conversion of its Bitcoin trust into an e t F.
• 0:59
  Speaker 1: What do you think about the two worlds colliding here? Well,
• 1:04
  Speaker 1: we've seen quite a bit of convergence. UM. As you noted,
• 1:07
  Speaker 1: Bitcoin ETFs made a dramatic entrance into the e t
• 1:11
  Speaker 1: F market, so it was really another milestone for the
• 1:15
  Speaker 1: e t F industry, democratizing yet another asset class, and
• 1:19
  Speaker 1: so it gives investors a new option for those seeking
• 1:23
  Speaker 1: exposure to cryptocurrencies, in this case bitcoin, and clearly there's
• 1:28
  Speaker 1: pent up demand um. And you can see this convergence
• 1:31
  Speaker 1: starting to happen to some degree here in real time,
• 1:35
  Speaker 1: where the product that launched first set the all time
• 1:38
  Speaker 1: record of fastest e t F to a billion dollars,
• 1:41
  Speaker 1: did it in two days, ironically topping the previous record holder,
• 1:45
  Speaker 1: which was Gold Physical Goal g l D back in
• 1:48
  Speaker 1: two thousand four, which did it in three And clearly
• 1:52
  Speaker 1: investors are not only preferring this access to crypto, but
• 1:57
  Speaker 1: certainly doing so in the e t F structure. Um.
• 2:00
  Speaker 1: You know, as witnessed by the trading volume and the
• 2:02
  Speaker 1: demand we've seen for the products. So ben give us
• 2:06
  Speaker 1: a sense of how the Gray Stale as it converts
• 2:08
  Speaker 1: from a trust to an e t F, how that
• 2:10
  Speaker 1: will differ from the pro shares Bitcoin e TV Well,
• 2:14
  Speaker 1: there are two very different things. So you know, Gray
• 2:18
  Speaker 1: Scale obviously has been around for a while and they
• 2:22
  Speaker 1: announced their intent to convert to an e t F
• 2:26
  Speaker 1: and Gray Scales Bitcoin Trust holds the underlying bitcoin UM.
• 2:32
  Speaker 1: But in the case of the pro shares product and
• 2:35
  Speaker 1: the other future space products, we saw another one UM
• 2:39
  Speaker 1: launched by a firm called Valkyrie, and there are more
• 2:41
  Speaker 1: behind it. Are investing in futures and there are some
• 2:44
  Speaker 1: very important differences that investors need to be aware of
• 2:48
  Speaker 1: in terms of how they work and the risks and
• 2:50
  Speaker 1: the returns they will receive. But most importantly, the futures
• 2:53
  Speaker 1: et s don't hold Bitcoin, they hold a future, and
• 2:57
  Speaker 1: there are costs to roll that futures contract, especially when
• 3:02
  Speaker 1: like we have now, the futures curves slopes upward and
• 3:06
  Speaker 1: there's a cost. So there will be some differences in
• 3:08
  Speaker 1: how those products track UM, you know, compared to a
• 3:12
  Speaker 1: physical product UM. That's correct, UM, the bitcoin products will
• 3:19
  Speaker 1: work very similar to the other products that investors UM
• 3:22
  Speaker 1: and ETF investors know like U s O or U
• 3:25
  Speaker 1: n G that are doing the same, but they're holding
• 3:28
  Speaker 1: oil and gas in those cases. And the problem is
• 3:30
  Speaker 1: you can you know the underlying asset. You can invest
• 3:34
  Speaker 1: in both, and the convergence can be huge, like after
• 3:39
  Speaker 1: even a year, right, correct, And that is something that's
• 3:44
  Speaker 1: hard to predict, driven by markets, and it will directly
• 3:48
  Speaker 1: depend on the slope of the futures curve. UM, So
• 3:52
  Speaker 1: it is a variable that investors need to be aware of,
• 3:55
  Speaker 1: and certainly we've seen that in other markets, um, where
• 3:59
  Speaker 1: you know similar Um, you know, similar things have happened. Ben,
• 4:02
  Speaker 1: do you think the regulators will get to the point
• 4:04
  Speaker 1: where there can be a straight up e t F
• 4:07
  Speaker 1: with the underlying coin as opposed to the futures. Well,
• 4:12
  Speaker 1: I mean, certainly, the SEC allowed the pro shares product
• 4:17
  Speaker 1: to launch, and you know, they got comfortable really for
• 4:20
  Speaker 1: a couple of reasons. One was the nine Act regulatory scheme,
• 4:25
  Speaker 1: which has common to most mutual funds. And second, they
• 4:29
  Speaker 1: were able to get comfortable with exchange listed futures because
• 4:32
  Speaker 1: they're regulated. And also it means that the e t
• 4:35
  Speaker 1: F itself doesn't hold the underlying bitcoin. So certainly there's
• 4:39
  Speaker 1: going to be, um, some work to be done to
• 4:43
  Speaker 1: be able to get the SEC comfortable to allow ets
• 4:47
  Speaker 1: to hold the bitcoin directly. So we're going to look
• 4:50
  Speaker 1: for that evolution to occur to make sure those investor
• 4:54
  Speaker 1: protections are in place. Um. You know, again, before the
• 4:57
  Speaker 1: SEC would get comfortable with those approvals. By the way,
• 5:00
  Speaker 1: what was the pandemic like for E t F investing
• 5:05
  Speaker 1: for the world of E t F s. You know,
• 5:06
  Speaker 1: before the pandemic, I would sometimes go to these conferences
• 5:11
  Speaker 1: UM for big E t F providers like Vanguard for example,
• 5:17
  Speaker 1: and noticed that the growth was just amazing. And because
• 5:20
  Speaker 1: the kids right invest a lot of times through BTF,
• 5:24
  Speaker 1: they prefer passive which is why I think of Vanguard
• 5:27
  Speaker 1: UM investing UM or they can do kind of active
• 5:30
  Speaker 1: investing with different ets. Is it did Did growth continue
• 5:35
  Speaker 1: like that throughout the pandemic? We've seen phenomenal growth, in fact,
• 5:40
  Speaker 1: record setting growth for the industry as well as on
• 5:43
  Speaker 1: our platform at being Y so right now, UM, we
• 5:47
  Speaker 1: just hit one trillion in influence into e tfs globally
• 5:53
  Speaker 1: UM a little more than seven billion of that coming
• 5:56
  Speaker 1: in the US, which is shattering the all time records.
• 5:59
  Speaker 1: We saw record setting and again we're seeing that here
• 6:03
  Speaker 1: in one so the flow has been incredible UM. But
• 6:08
  Speaker 1: we're also seeing a trend UM with new product development
• 6:13
  Speaker 1: UM slowly shift away from passive towards actively managed strategies.
• 6:18
  Speaker 1: And that is something we're seeing pick up UM in
• 6:22
  Speaker 1: terms of you know, those products you know, accelerating with
• 6:26
  Speaker 1: both the new new that are new products that are
• 6:28
  Speaker 1: coming to market as well as the assets, and that's
• 6:31
  Speaker 1: something I expect to continue. But certainly the passive ETFs
• 6:35
  Speaker 1: have a big lead on active so there's quite a
• 6:37
  Speaker 1: bit of ground for for those new products to make
• 6:39
  Speaker 1: up given where the markets at today. Hey Man, thanks
• 6:43
  Speaker 1: so much for joining us. We really appreciate it. Ben Slaven,
• 6:46
  Speaker 1: Global Head of ets and Assets Servicing at b n
• 6:48
  Speaker 1: Y Melan. I mean, you have, you know, a couple
• 6:51
  Speaker 1: of these, the two fast growing areas that seems of finance,
• 6:54
  Speaker 1: which is one e t S and two crypto makes
• 6:58
  Speaker 1: sense to pend together. It's like peanut butter and chocolate, right,
• 7:01
  Speaker 1: exactly right. So it'll be interesting to see, you know,
• 7:03
  Speaker 1: how many more come on the heels of the pro
• 7:05
  Speaker 1: shares et F and then now the Gracesdale UH conversion
• 7:09
  Speaker 1: from a trust into an ETF. How many more will
• 7:11
  Speaker 1: come down the pike. Yeah, and it'll be interesting to
• 7:14
  Speaker 1: also see how this affects the price of the underlying
• 7:18
  Speaker 1: right if more institutional investors and this is the big
• 7:21
  Speaker 1: bet that a lot of his bitcoin and crypto investor making,
• 7:24
  Speaker 1: that it'll become more adopted, not only institutionally, but just
• 7:27
  Speaker 1: become a part of people's portfolios. Looking at bitcoin here
• 7:32
  Speaker 1: up about nine tenths of one. Let's get to the
• 7:39
  Speaker 1: big crypto story that seemingly everybody has been reading today
• 7:43
  Speaker 1: and talking about at the water cooler. Wall Street is
• 7:45
  Speaker 1: a masking a crypto army and paying up for recruits.
• 7:49
  Speaker 1: Z Song wrote this with Cat Doherty, and we have
• 7:52
  Speaker 1: Cat here in the Interactive Broker studio with us. So Cat,
• 7:55
  Speaker 1: I think it's really interesting because I've been covering bitcoin
• 7:59
  Speaker 1: since first breached a thousand dollars and it was I
• 8:02
  Speaker 1: did it kind of a fun two week piece where
• 8:04
  Speaker 1: I only spent bitcoin, I didn't spend any US dollars.
• 8:08
  Speaker 1: And then I was a while ago when that wasn't
• 8:10
  Speaker 1: a thing right now that nobody else was, well, there
• 8:13
  Speaker 1: were there were some like there was a grocery store
• 8:15
  Speaker 1: in green Point and there was a bar down in
• 8:18
  Speaker 1: Murray Hill and I wore plaid blazers and it was fun,
• 8:22
  Speaker 1: you know, but it wasn't that serious, and of course
• 8:25
  Speaker 1: all the real Wall Street guys kind of pooh poohed
• 8:28
  Speaker 1: the story. Now there, I guess hiring these crypto kids
• 8:31
  Speaker 1: who at the time we're like CouchSurfing paper millionaires and uh,
• 8:35
  Speaker 1: and now are the only ones to know what they're
• 8:37
  Speaker 1: doing that's right. And we're also seeing folks that are
• 8:41
  Speaker 1: in these financial like traditional financial roles that are getting
• 8:45
  Speaker 1: recruited to exclusively focus on crypto. So you have you
• 8:49
  Speaker 1: have both. It's not just the CouchSurfing millennials youngers that
• 8:55
  Speaker 1: are getting hired to go to these banks. The banks
• 8:57
  Speaker 1: are also acknowledging, hey, look, we have clients that are
• 9:01
  Speaker 1: asking us what's going on. We need answers, So they
• 9:04
  Speaker 1: are building teams that can bring the knowledge. And I
• 9:09
  Speaker 1: think that goes both ways. It's it's not just going
• 9:11
  Speaker 1: from the outside. In fact, often you need the institutional background.
• 9:16
  Speaker 1: You need someone that knows how to work in a
• 9:20
  Speaker 1: corporate job. You can't just go out and and and
• 9:23
  Speaker 1: find someone who's never been in an office setting before.
• 9:26
  Speaker 1: So you get somebody like um, like a Mike mcgloane
• 9:30
  Speaker 1: who was at S and P, who was at a
• 9:33
  Speaker 1: B n UM and now is working for US and
• 9:35
  Speaker 1: Bloomberg Intelligence and knows everything about crypto exactly um. And
• 9:40
  Speaker 1: you also have just folks that have been working I
• 9:43
  Speaker 1: I spoke with the lead at Bank of America who's
• 9:47
  Speaker 1: building the team, and he has just this this desire
• 9:52
  Speaker 1: this this hunger for knowledge, to learn more and more
• 9:55
  Speaker 1: about crypto. So he's been in a traditional research role
• 9:59
  Speaker 1: and now he's tasked with building a team that is
• 10:03
  Speaker 1: exclusively about crypto. But it's it goes beyond just crypto.
• 10:08
  Speaker 1: It's how does crypto touch all of these other sectors
• 10:12
  Speaker 1: that Bank of America already covers. So his pitch to
• 10:16
  Speaker 1: me was that our clients are asking, Okay, maybe I
• 10:20
  Speaker 1: don't want to get involved in a cryptocurrency, but I
• 10:24
  Speaker 1: do realize that this is starting to touch the industries
• 10:27
  Speaker 1: that I invest in, whether it's like energy or or others,
• 10:30
  Speaker 1: really anything. UM there's there's no escaping how crypto is
• 10:35
  Speaker 1: bleeding into traditional finance. And so these banks are saying, Okay,
• 10:40
  Speaker 1: with that acknowledgment, we're going to need to get the experts.
• 10:43
  Speaker 1: We're going to need to come up with the answers
• 10:45
  Speaker 1: and the research that can serve our client base. And
• 10:48
  Speaker 1: I think JP Morgan's one of my favorite examples. They're hiring,
• 10:52
  Speaker 1: their gearing up their trading desk, yet their CEO, Jamie Diamond,
• 10:56
  Speaker 1: as recently as last month, called bitcoin worthless. It is
• 11:00
  Speaker 1: funny to see how the leaders view crypto UM and
• 11:05
  Speaker 1: then the the action right, um, because they're not always aligned.
• 11:10
  Speaker 1: That's a good example. Um. But I would just say
• 11:13
  Speaker 1: that even if there's the belief, um from a CEO
• 11:17
  Speaker 1: or even like the leader of the research team at
• 11:21
  Speaker 1: these banks that's saying, oh, we don't want to specifically,
• 11:25
  Speaker 1: you know, jump into bitcoin, or maybe there's hesitation. Well,
• 11:28
  Speaker 1: there's also the acknowledgment of Okay, if you have again clients,
• 11:32
  Speaker 1: people that are asking or you're having to answer these questions.
• 11:36
  Speaker 1: You can't just say, oh, sorry, we're ignoring this entirely,
• 11:40
  Speaker 1: and you can go ask someone else. Well, that's how
• 11:42
  Speaker 1: you that's how you lose business. So there's there's that answer.
• 11:45
  Speaker 1: I mean, this is really in some ways it demonstrates
• 11:48
  Speaker 1: what a good leader Jamie Diamond can be because he
• 11:51
  Speaker 1: has his personal opinion and he also runs the bank
• 11:55
  Speaker 1: and uh, he's you know, he says that you could say,
• 11:57
  Speaker 1: it's not worthless. Takes two people to make a market, right, Um,
• 12:01
  Speaker 1: how much cat are people getting to to move right now?
• 12:05
  Speaker 1: Because this is tight, This is a tight labor market.
• 12:09
  Speaker 1: People are already getting big bumps to move jobs. Right,
• 12:12
  Speaker 1: So it depends on how senior role we're talking about, Um,
• 12:15
  Speaker 1: for for the more senior roles like research trading heads,
• 12:18
  Speaker 1: that could be a premium as much as fifty UM,
• 12:22
  Speaker 1: but others their salary increases. It ferries as you know
• 12:26
  Speaker 1: you you would expect. UM. We we saw some increases
• 12:30
  Speaker 1: from the data that we were given UM of about
• 12:33
  Speaker 1: nine in new roles versus their previous roles. So I
• 12:37
  Speaker 1: think it all depends on the person, their experience level. UM.
• 12:40
  Speaker 1: Also how committed these UH institutional firms financial firms are
• 12:46
  Speaker 1: to to really spending the money and getting the talent.
• 12:50
  Speaker 1: Where are they getting these people from depends. We talked
• 12:54
  Speaker 1: to UH a lot of people that were at like
• 12:57
  Speaker 1: a black Rock or UM Brookfield, or or at at
• 13:03
  Speaker 1: a traditional bank like a JP Morgan Bank of America UM.
• 13:08
  Speaker 1: And then we also spoke with a lot of folks
• 13:10
  Speaker 1: that have gone over to crypto firms. Some of them
• 13:15
  Speaker 1: you could consider startups, some of them are crypto like
• 13:18
  Speaker 1: hedge funds UM. So it's going both ways, and I
• 13:22
  Speaker 1: think that is the tension that I'm interested in tracking
• 13:25
  Speaker 1: next because as Wall Street is looking to to gain
• 13:29
  Speaker 1: that talent, they're also losing that talent to the crypto farms. Yeah. Absolutely, UM,
• 13:34
  Speaker 1: it's almost like the banks versus fin techs, especially if
• 13:38
  Speaker 1: most of the fintech start to dabble in crypto or
• 13:41
  Speaker 1: already are doing it. Cat Doorty helped to write that story.
• 13:44
  Speaker 1: It's a huge hit on the Bloomberg terminal. Wall Street
• 13:47
  Speaker 1: is amassing a crypto army. Now, I want to get
• 13:51
  Speaker 1: back to politics, but bring it from Glasgow to Washington
• 13:55
  Speaker 1: in the sense and talk about the what do they
• 13:58
  Speaker 1: call it? The it was? It was a framework, framework, framework,
• 14:03
  Speaker 1: President Biden's framework one point seven five trillion dollar framework,
• 14:08
  Speaker 1: although over ten years, is starting to gather some steam.
• 14:12
  Speaker 1: Congressional Tax reporter Laura Davidson joins us out of DC
• 14:15
  Speaker 1: to talk about UM when we can expect a vote?
• 14:18
  Speaker 1: I guess that's what everyone wants to know. When is
• 14:21
  Speaker 1: this thing actually gonna happen? Laura, that's a real good question.
• 14:25
  Speaker 1: House leaders were hoping that they could do something, you know,
• 14:28
  Speaker 1: as soon as this week. That's a super ambitious timeline.
• 14:31
  Speaker 1: Over the weekends. They were thinking they might be able
• 14:32
  Speaker 1: to vote on Tuesday again tomorrow. UM. The bill is
• 14:35
  Speaker 1: not yet written. There's still not agreement on some of
• 14:37
  Speaker 1: the big pieces like drug pricing UM as well as
• 14:40
  Speaker 1: you know, some of some of the other their pay
• 14:42
  Speaker 1: for wars. So it's really unclear when there's going to
• 14:45
  Speaker 1: be a vote there. Also, are you know a lot
• 14:46
  Speaker 1: of political considerations here. Uh, you need to have both
• 14:49
  Speaker 1: the moderates and progressives on board with the entire bill. Uh.
• 14:53
  Speaker 1: And this is something that really could be you know,
• 14:55
  Speaker 1: weeks if not months away. Unbelievable. So, Laura, I mean,
• 14:59
  Speaker 1: what's the and here you think about a one point
• 15:01
  Speaker 1: seven five trillion. That's not a lot to the you know,
• 15:04
  Speaker 1: the Matt Miller's in the world, but that's a big
• 15:06
  Speaker 1: number to me. However, it's well down from what the
• 15:11
  Speaker 1: Biden administration initially asked, what's the what we need in
• 15:16
  Speaker 1: terms of America to invest in infrastructure? You don't, Yeah,
• 15:19
  Speaker 1: I'm not sure what the right number is, but it's
• 15:21
  Speaker 1: certainly below what I think the administration really wanted. Does
• 15:25
  Speaker 1: this suggest that the administration will kind of take whatever
• 15:28
  Speaker 1: deal they can get at this point? Yeah, And this
• 15:31
  Speaker 1: is really the political reality of only having you know,
• 15:33
  Speaker 1: a you know, three four seat majority in the House
• 15:35
  Speaker 1: as well as uh, you know, basically having no room
• 15:37
  Speaker 1: for air in the Senate. Is they you know, couldn't
• 15:40
  Speaker 1: get all the things that the administrator should want it.
• 15:42
  Speaker 1: You know, when you look at the plans that Biden
• 15:43
  Speaker 1: put out in the spring, you know that was something
• 15:46
  Speaker 1: like maybe six trillion, maybe even more of spending that
• 15:48
  Speaker 1: he was outlining there. Um, that got curtailed back to
• 15:52
  Speaker 1: three point five trillion in the deal that was reached
• 15:53
  Speaker 1: earlier this year. And now you know, cut in half
• 15:56
  Speaker 1: again one point seven five trillion. There's you know, the
• 15:58
  Speaker 1: five and fifty billion dollars worth of infrastructure spending. Uh,
• 16:02
  Speaker 1: this is the heart infrastructure, you know, things like roads
• 16:05
  Speaker 1: and bridges and airports approved in the Senate earlier this year.
• 16:07
  Speaker 1: And now the kind of the second piece that they're
• 16:09
  Speaker 1: figuring out is, you know, how much you spent on
• 16:11
  Speaker 1: things like education and childcare and health care. And that's
• 16:14
  Speaker 1: looking like you know, if it's one point seven five
• 16:17
  Speaker 1: is going to be the top number there. And I
• 16:19
  Speaker 1: guess this is the important distinction, Laura, because I had
• 16:23
  Speaker 1: lunch with the Republican lobbyists last week who was saying,
• 16:28
  Speaker 1: we need a lot more than two or three or
• 16:32
  Speaker 1: four trillions spent on infrastructure in the US to be competitive.
• 16:35
  Speaker 1: But he was thinking of infrastructure as what's in the
• 16:39
  Speaker 1: first bill and not appreciating what's in this bill. Um,
• 16:43
  Speaker 1: in terms of you know, the label infrastructure, what are
• 16:46
  Speaker 1: people in Washington calling this They're really you know, they've
• 16:50
  Speaker 1: been calling it the social infrastructure or the human infrastructure bill.
• 16:53
  Speaker 1: That's kind of in the branding. You hear Democrats say
• 16:55
  Speaker 1: a lot of things, you know, that housing is infrastructure
• 16:57
  Speaker 1: or childcare is infrastructure, the idea that these things are
• 17:00
  Speaker 1: all you know, key tenants that support the economy. But
• 17:04
  Speaker 1: the definition of infrastructure has been sort of running joke
• 17:06
  Speaker 1: in Washington this year is that it's really not been
• 17:08
  Speaker 1: you know, kind of what has traditionally been thought about
• 17:10
  Speaker 1: as infrastructure but really expanded to include a lot of things. Um,
• 17:13
  Speaker 1: you know that you kind of do have a you know,
• 17:15
  Speaker 1: kind of infrastructure proponent, things like renewable energy and uh,
• 17:18
  Speaker 1: you know, job training that sort of thing, as well
• 17:20
  Speaker 1: as you know, kind of a whole host of democratic priorities. So,
• 17:25
  Speaker 1: you know, I'm not really sure who I need to
• 17:26
  Speaker 1: be focusing on Laura over these you know, this next
• 17:29
  Speaker 1: week or several weeks about like who's going to really
• 17:31
  Speaker 1: get this thing done. I'm not sure it's the President,
• 17:34
  Speaker 1: is it Pelosi, is it mansioned is mean, who do
• 17:38
  Speaker 1: I need to be focusing on here. So there's a
• 17:41
  Speaker 1: couple of key players here, and these are really the
• 17:42
  Speaker 1: parties that are they're not yet satisfied with the bill.
• 17:46
  Speaker 1: One that's Cinema and Mansion, and they have not come out.
• 17:49
  Speaker 1: They came out and sort of expressed general, um, you know,
• 17:52
  Speaker 1: warmness that there was you know, progress and that a
• 17:54
  Speaker 1: deal was being made, but they didn't actually endorse that
• 17:57
  Speaker 1: framework that the President put out last week. So that's
• 18:00
  Speaker 1: those are two parties to watch if you know what
• 18:01
  Speaker 1: do they need to get fully on board. The other
• 18:04
  Speaker 1: person here on the other sub spectrum is is Senator
• 18:06
  Speaker 1: burn Sanders if he wants to make sure there's something
• 18:08
  Speaker 1: done on drug pricing that was not in the bill.
• 18:10
  Speaker 1: There were lots of negotiations over the weekend to try
• 18:13
  Speaker 1: to come up with some sort of field to lower
• 18:15
  Speaker 1: the cost of prescription drugs. We'll see if that can
• 18:18
  Speaker 1: make it in. Um. The other big thing, and this
• 18:20
  Speaker 1: is you know, sort of on a whole different playing field,
• 18:23
  Speaker 1: but it's the state and local tax deduction. A lot
• 18:27
  Speaker 1: of members, particularly in the House you know, representing areas
• 18:29
  Speaker 1: New York, New Jersey, want to make sure that an
• 18:31
  Speaker 1: expansion of that tax credit, that that tax deduction is
• 18:34
  Speaker 1: in there if it wasn't in the framework. But House
• 18:36
  Speaker 1: leaders have pledged they'll get in and they pretty much
• 18:38
  Speaker 1: have to if they want to get that bill out
• 18:39
  Speaker 1: of the chamber. And this has to be again something
• 18:42
  Speaker 1: that they can agree on in a bipartisan way. Surely
• 18:45
  Speaker 1: Republicans UM want that tax deduction to be expanded as well,
• 18:51
  Speaker 1: So this bill actually doesn't have to be bipartisan at all.
• 18:54
  Speaker 1: Democrats are pushing it through in a way that they
• 18:56
  Speaker 1: only need Democratic votes, but they basically need every Democrat
• 19:00
  Speaker 1: uh to vote guest for it. The by part the
• 19:02
  Speaker 1: infrastructure build that kind of the roads and bridges build,
• 19:05
  Speaker 1: that was a bipartisan effort, but the social infrastructure build,
• 19:08
  Speaker 1: this is just a partisan Democrats only UM approach. So
• 19:12
  Speaker 1: you and you actually you know, so you have It's
• 19:14
  Speaker 1: really easy for Republicans right now because they're in the opposition,
• 19:16
  Speaker 1: you're in the minority. They can just criticize the build.
• 19:18
  Speaker 1: They don't actually have to to vote for anything. All right, Laura,
• 19:21
  Speaker 1: thank you so much for joining us. We just appreciate
• 19:23
  Speaker 1: getting your updates. Laard Davison, Congressional tax reporter for Bloomberg News.
• 19:30
  Speaker 1: Let's get back to the UH. Well, I guess he
• 19:33
  Speaker 1: was talking about the markets, but let's focus more in
• 19:35
  Speaker 1: on the market. Right now, we have Veronica Willis with
• 19:37
  Speaker 1: US Investment Strategy Analysis UH Analysts, I should say, from
• 19:42
  Speaker 1: Wells Fargo Investment Institute out of St. Louis. And in
• 19:46
  Speaker 1: terms of what's important, Veronica in good morning, thanks for
• 19:49
  Speaker 1: joining us for markets today. It seems like tech is
• 19:53
  Speaker 1: really showing how much power. Big tech is showing how
• 19:56
  Speaker 1: much power it has. How do you feel about the
• 19:59
  Speaker 1: UH mega cap names? Good morning, and thank you for
• 20:04
  Speaker 1: having me on. You know, with tech, we've seen that
• 20:09
  Speaker 1: they're you know, overshooting their earnings expectations and the earning
• 20:12
  Speaker 1: season has been really good for those tech companies so far,
• 20:16
  Speaker 1: and that's really helped to bolster the markets over the
• 20:19
  Speaker 1: last week or so, with those big tech names really
• 20:23
  Speaker 1: doing well and really helping with market performance. There's such
• 20:27
  Speaker 1: a heavy weighting and a lot of these US market
• 20:29
  Speaker 1: u US equity indexes, big moves in those particular companies
• 20:34
  Speaker 1: tend to move the market as well. Veronica, were you
• 20:38
  Speaker 1: know a good ways through this third quarter earning season? Um,
• 20:42
  Speaker 1: what do you takeaways. Um, the takeaways are that even
• 20:47
  Speaker 1: though some consumer competence type of data that came out
• 20:51
  Speaker 1: over the last quarter started to weaken a little bit
• 20:53
  Speaker 1: from the recovery that we saw from that, consumers are
• 20:57
  Speaker 1: still spending. And so it's always always got to be
• 21:00
  Speaker 1: careful about that confidence measure. While consumers might not be
• 21:04
  Speaker 1: so confident they're spending patterns are somewhat indicating otherwise, where
• 21:10
  Speaker 1: a lot of these companies are able to report these
• 21:12
  Speaker 1: earnings that have beat expectations or earnings that are doing
• 21:15
  Speaker 1: well because consumers are still comfortable and spending money. And
• 21:19
  Speaker 1: so I think that that's the biggest takeaway from the
• 21:21
  Speaker 1: earning season here, where a lot of these companies in
• 21:26
  Speaker 1: the entertainment and sort of the discretionary types of companies
• 21:29
  Speaker 1: are still doing well because consumers are still really comfortable spending. Yeah,
• 21:34
  Speaker 1: we saw also savings rates sore for a second during
• 21:37
  Speaker 1: the lockdown. Of course, you can't really spend money very
• 21:41
  Speaker 1: well for a while, but there's still above historical estimates
• 21:46
  Speaker 1: in the US, I think about nine percent historically at
• 21:49
  Speaker 1: least in recent you know, in recent decades we've seen
• 21:52
  Speaker 1: about seven and change. Do you expect consumers to spend
• 21:55
  Speaker 1: off the rest of that or are we in a
• 21:58
  Speaker 1: new paradigm. I think that as we kind of entered
• 22:03
  Speaker 1: the holiday shopping season, we can start to see some
• 22:05
  Speaker 1: of that coming down. But it might be that we've
• 22:08
  Speaker 1: seen a shift in how people view saving. What they've
• 22:13
  Speaker 1: experienced might have changed how they view making sure that
• 22:18
  Speaker 1: they've got that safety net, and so we could see
• 22:20
  Speaker 1: some kind of elevated levels of savings. But the holiday
• 22:23
  Speaker 1: season will be um really crucial in determining whether that's
• 22:28
  Speaker 1: a short term or a long term type of shift. Hey, Ronica,
• 22:32
  Speaker 1: we just had the big tech names report earnings last week.
• 22:35
  Speaker 1: Generally good, good numbers, all the relatives. You know, some
• 22:38
  Speaker 1: folks had some concerns about some of the social media
• 22:40
  Speaker 1: companies numbers. But do I stick with big tech those
• 22:43
  Speaker 1: names as great top line growth stories, or do I,
• 22:47
  Speaker 1: you know, kind of go with the folks that are
• 22:49
  Speaker 1: been saying, Hey, you need to be in that more
• 22:51
  Speaker 1: cyclical trade, that reopening trade. Where are you telling your
• 22:55
  Speaker 1: clients to think about opportunities going forward. We've definitely made
• 22:59
  Speaker 1: a shift towards those more cyclical sectors because that's what
• 23:03
  Speaker 1: we think will perform the best at the point that
• 23:06
  Speaker 1: we are in the economy. The we've had such an
• 23:10
  Speaker 1: impressive run up with tech that sometimes you worry about
• 23:15
  Speaker 1: just feeding more into that, and you know, we still
• 23:18
  Speaker 1: like tech as a sector. We're neutral there. So we're
• 23:21
  Speaker 1: recommending for our clients to have kind of a market
• 23:24
  Speaker 1: waiting in that sector, which is still pretty significant, and
• 23:27
  Speaker 1: so you're still going to benefit from those tech companies,
• 23:30
  Speaker 1: but we don't want our clients to over extend themselves
• 23:33
  Speaker 1: in that particular area because we do think that those
• 23:35
  Speaker 1: cyclical sectors will do really well. So when you look
• 23:40
  Speaker 1: at UM two and try and factor in what inflation
• 23:45
  Speaker 1: is going to be, like, which side of the transitory
• 23:49
  Speaker 1: argument do you fall on? UM We think that inflation
• 23:53
  Speaker 1: will remain elevated through two. Looking out a little further,
• 23:58
  Speaker 1: you know, past two a little murdeer, but we do
• 24:02
  Speaker 1: think that those rates are going to remain elevated through
• 24:05
  Speaker 1: the rest of this year and next year, and then
• 24:08
  Speaker 1: maybe after next year we'll have some more clarity and
• 24:11
  Speaker 1: expect that to trend a little bit more towards the
• 24:14
  Speaker 1: averages that we've been seeing pre pandemic. But we do
• 24:17
  Speaker 1: think that, you know, those inflation numbers are going to
• 24:19
  Speaker 1: be elevated through this year and next. Veronica got w
• 24:22
  Speaker 1: t I crude oil pushing a gallon. Have I missed
• 24:26
  Speaker 1: the energy trade? I think that energy could remain elevated.
• 24:33
  Speaker 1: I don't think that you have missed the trade. I
• 24:37
  Speaker 1: think it's expected to still perform well with prices at
• 24:40
  Speaker 1: current levels, even if prices don't continue to move higher. Um,
• 24:44
  Speaker 1: if you're looking at energy types of stocks. With oil itself,
• 24:48
  Speaker 1: it's so dependent on what would happen in the supply
• 24:51
  Speaker 1: and demand side, So there are a lot of uncertainties.
• 24:54
  Speaker 1: If more supply starts to come online, that could really
• 24:59
  Speaker 1: push the price down lower. But what we're seeing is
• 25:03
  Speaker 1: that really strong demand for crude oil and for its
• 25:06
  Speaker 1: refined products like gasoline, heating oil and those other types
• 25:10
  Speaker 1: of things, and so that kind of pushes the prices higher,
• 25:14
  Speaker 1: and so you could see it kind of range bound
• 25:16
  Speaker 1: around the current levels right now. All Right, Matt's had
• 25:20
  Speaker 1: a good run with with it. He's been playing bitcoin,
• 25:22
  Speaker 1: I've been playing w t I crude Dude. President Biden's
• 25:24
  Speaker 1: motorcade had more than eighty five cars in it this morning. Nice,
• 25:28
  Speaker 1: there's demand for you, all right, Ronica. Willis Investment strategy
• 25:30
  Speaker 1: channels for Walls Fargo. Thank you so much. Thanks for
• 25:33
  Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
• 25:36
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 25:40
  Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
• 25:44
  Speaker 1: Miller three. On False Sweeney, I'm on Twitter at pt Sweeney.
• 25:48
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 25:51
  Speaker 1: Bloomberg Radio