Latest / Bloomberg Intelligence / The Fed, ETFs, Inflation, and Obesity Drugs (Podcast)

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The Fed, ETFs, Inflation, and Obesity Drugs (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.
• 0:05
  Speaker 2: Every business day we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moving news.
• 0:14
  Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
• 0:21
  Speaker 3: There are certain sites you just never thought you'd see.
• 0:23
  Speaker 3: Jess again.
• 0:24
  Speaker 1: You kind of the pandemic change the world in so
• 0:27
  Speaker 1: many different ways, and one of the ways has just
• 0:30
  Speaker 1: been this whole work from home phenomena. And so many
• 0:34
  Speaker 1: people have been so successful working from home that productivity
• 0:38
  Speaker 1: is as good or better than it ever was.
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  Speaker 4: I know how bullish you are though about in office.
• 0:43
  Speaker 1: No, I think it's I think this whole work from
• 0:44
  Speaker 1: home things a scam, but it is the way of
• 0:46
  Speaker 1: the world that I have to adapt.
• 0:48
  Speaker 3: And Mike's listening. I'm coming back after exactly all right.
• 0:53
  Speaker 1: Vinceignerella joins us here. He is our one of our
• 0:56
  Speaker 1: go to voices on the market. Seed joints us here
• 0:58
  Speaker 1: on O Bloomberg Interactive Studio and Vince, we've got the FED.
• 1:02
  Speaker 3: Coming today here.
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  Speaker 1: What are you hearing in the marketplace about you know,
• 1:06
  Speaker 1: what the market expects and kind of where we go
• 1:09
  Speaker 1: from here.
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  Speaker 5: The market is looking for a skip, we don't really
• 1:13
  Speaker 5: call it a pause, is a skip because the July
• 1:15
  Speaker 5: meeting is still on the table. I said, July rate
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  Speaker 5: hikes still on the table. There's a hawkish bent or
• 1:22
  Speaker 5: a hawkish lean is what we're expecting in the statements.
• 1:25
  Speaker 5: But a few of the guys I talked to, and
• 1:27
  Speaker 5: I think their rights are perhaps looking for a little
• 1:31
  Speaker 5: bit more hawkish than I think the market's going to expect.
• 1:34
  Speaker 5: I think, you know, for their credibility purposes, and that's
• 1:37
  Speaker 5: been a huge thing for Powell to try to regain
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  Speaker 5: the credibility they lost with the transient inflation story. That
• 1:46
  Speaker 5: even with the skip, he really needs to lay the
• 1:49
  Speaker 5: hammer down and say, essentially, core inflation is not getting
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  Speaker 5: down to the two percent goal anywhere near as quickly
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  Speaker 5: as they'd like it to.
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  Speaker 4: So we have the statement at two pm, then we
• 1:59
  Speaker 4: get the economic projections and the dot plots before we
• 2:02
  Speaker 4: hear from the man himself, j palettes to thirty what
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  Speaker 4: are you looking for in the dot plots?
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  Speaker 5: In particular, to be perfectly honest, with you. I hate
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  Speaker 5: the dot plots.
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  Speaker 6: Dots.
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  Speaker 5: They are the biggest joke I have ever seen.
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  Speaker 4: Well, they also get altered, so obviously changed.
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  Speaker 5: Sotquently I was, I was out of lunch with a
• 2:21
  Speaker 5: bullet and he basically said, why are you guys pricing
• 2:24
  Speaker 5: this in? And I said, it's because of your.
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  Speaker 3: Bloody dot plots.
• 2:27
  Speaker 7: They're telling us where it's going. And he goes, oh,
• 2:30
  Speaker 7: don't see, that's just those are just estimates. They change
• 2:33
  Speaker 7: all the time, and so you know, people do look
• 2:36
  Speaker 7: at them. I guess you have to take them seriously personally,
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  Speaker 7: I don't.
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  Speaker 4: Bullard is a non voting member, but such an influential voice,
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  Speaker 4: and he had said in the last couple of weeks
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  Speaker 4: how he was expecting there to be at least two
• 2:48
  Speaker 4: more even if they are two more great hikes, even
• 2:51
  Speaker 4: if there was a pause at this point. Do you
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  Speaker 4: think that's likely with maybe just giving some of the
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  Speaker 4: inflation data obviously yesterday CPI coming cool with an expect.
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  Speaker 5: I hope not to more. Actually I hope not even
• 3:00
  Speaker 5: one more. And you're you're absolutely right. He isn't an
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  Speaker 5: influential voice, but he is a non member, and I
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  Speaker 5: think from what I'm hearing from the voting members so far.
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  Speaker 5: Perhaps the most interesting thing I should say about what
• 3:11
  Speaker 5: this decision we should see later is any dissensions. I
• 3:17
  Speaker 5: have a full expectation that this isn't going to be
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  Speaker 5: something to oh, that there's going to be some dissenters
• 3:23
  Speaker 5: in there, and those dissenters will be people who basically
• 3:26
  Speaker 5: wanted a rate hike. There are a couple in there.
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  Speaker 4: So Oxford Economics actually had some great data that they
• 3:32
  Speaker 4: crunch that a FED governor hasn't dissented since two thousand
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  Speaker 4: and five, so most more likely it would be a president.
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  Speaker 4: So they were looking at either Neil Kashkari Lori Logan
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  Speaker 4: as a couple of them. Members's interesting, Yeah.
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  Speaker 1: All right, So what are they when you talk to
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  Speaker 1: the traders out there, Vincent? Are they figuring price cuts
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  Speaker 1: later this year or this is twenty four event?
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  Speaker 5: Do you think I think they're liking him later this year?
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  Speaker 5: I don't think they're going to get them again. Going
• 3:55
  Speaker 5: back to the Powell credibility issue, I think he needs
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  Speaker 5: to at least totally line keep the markets on their
• 4:02
  Speaker 5: toes that you know, inflation would have to do something
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  Speaker 5: drastic moving lower before we would see any cuts this year,
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  Speaker 5: or if we would see a recession, It'd be really
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  Speaker 5: hard to believe a FED would keep rates higher for longer.
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  Speaker 5: If we were in some sort of a recession, it'd
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  Speaker 5: have to they'd have to bow to it. But I
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  Speaker 5: think it would be a very, very small and gradual
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  Speaker 5: move because I think he'd be worried more of anything
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  Speaker 5: for a repeat of stagflation, and so he's going to
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  Speaker 5: be on the tough side if he comes out in
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  Speaker 5: any way saying the word pause today, you're probably gonna
• 4:34
  Speaker 5: see one of the most explosive rallies you've seen in
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  Speaker 5: a long time.
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  Speaker 4: So even if the dots suggest in twenty twenty four that,
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  Speaker 4: like we had seen in the past, that there should
• 4:45
  Speaker 4: be some cuts there, it's still tricky, right, just given
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  Speaker 4: what you were saying, with the backdrop of how much
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  Speaker 4: these things can flip flow.
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  Speaker 5: Yeah, And I think it's more the analysts and strategists
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  Speaker 5: who are looking for cuts and traders looking for cuts
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  Speaker 5: rather than the FED officials. So I think the dot plot,
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  Speaker 5: if anything, is going to go against what's being priced
• 5:02
  Speaker 5: into the swap market right now. But again, it's such
• 5:06
  Speaker 5: it's such a waffly kind of changing environment with the
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  Speaker 5: dot plots that you know it could come together at
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  Speaker 5: any time.
• 5:14
  Speaker 1: Do you still feel like or does a market still
• 5:15
  Speaker 1: feel like vince that this FED is behind the curve
• 5:20
  Speaker 1: in terms of just dealing with inflation, and it just
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  Speaker 1: kind of the where the market is.
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  Speaker 5: I mean behind the curve in the sense that they're
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  Speaker 5: too aggressive.
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  Speaker 1: Yeah, I mean that they were too late coming into
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  Speaker 1: it dealing with it they were, or maybe they were
• 5:32
  Speaker 1: too late tapering, they were too late tightening, they were
• 5:35
  Speaker 1: too late.
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  Speaker 5: And now kind of I think the way the market's
• 5:39
  Speaker 5: looking at it, the way I would look at it is,
• 5:41
  Speaker 5: you know, realistically, and this isn't a political statement, the
• 5:47
  Speaker 5: reason why we have inflation is because of fiscal policy.
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  Speaker 5: Monetary policy is not very good at fixing fixed fiscal policy.
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  Speaker 5: I won't say errors, but abundance. We say, So, what's
• 5:59
  Speaker 5: really neat at this time is some pullback on the
• 6:02
  Speaker 5: fiscal front, which most likely not going to see and
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  Speaker 5: so the FED has to try to fix it with
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  Speaker 5: what tools they have, but they're they're not very effective
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  Speaker 5: against fiscal policy.
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  Speaker 4: You add a really interesting column that was on the
• 6:15
  Speaker 4: terminal recently about how US consumer appears to be in trouble,
• 6:19
  Speaker 4: but good news for bond bulls. Tell us more about that.
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  Speaker 5: You know, you're always hearing this about the consumers doing well,
• 6:25
  Speaker 5: and it's definitely something going on in the real estate
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  Speaker 5: market for sure, especially in the Northeast, but in general,
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  Speaker 5: all of the savings that were gained from a pandemic
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  Speaker 5: fiscal policy are gone. Disposable income is dropping, and you're
• 6:43
  Speaker 5: seeing revolving credits sore, and all of that speaks to
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  Speaker 5: a consumer that's now borrowing to spend, and there's an
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  Speaker 5: endgame to that. Where it is I wish I knew,
• 6:55
  Speaker 5: but there's always an endgame to that. There's only so
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  Speaker 5: much they can borrow. And if you see the FED
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  Speaker 5: start to raise requirements on banks for loan portfolios, you're
• 7:04
  Speaker 5: going to see the banks pull back on that credit.
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  Speaker 5: And when the banks pull back on credit, clearly you're
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  Speaker 5: going to see some impact on spending. And I just
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  Speaker 5: think the consumer is getting a little bit more tapped
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  Speaker 5: out than perhaps some of the optimistic people think, and
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  Speaker 5: that probably falls into where the recession potentially comes from.
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  Speaker 4: Where are some of those red flags and some of
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  Speaker 4: the loans. When it comes to the credit, you were
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  Speaker 4: talking about.
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  Speaker 5: One of the things that I would look at is
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  Speaker 5: the credit card companies. So we've seen very good earnings,
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  Speaker 5: very good profits coming from the likes of MasterCard, Visa
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  Speaker 5: an American Express. When that turns, I think then you're
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  Speaker 5: really looking at where consumers are getting in trouble, whether
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  Speaker 5: it be through default rates or simply just not spending,
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  Speaker 5: and therefore the earnings of those companies just don't show up.
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  Speaker 3: Unemployment.
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  Speaker 1: Where do you think that kind of goes over the
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  Speaker 1: next six to twelve months. Are we going to get
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  Speaker 1: to like a four percent number.
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  Speaker 5: I don't know where we're going to get to an
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  Speaker 5: in exact rate, but I'll tell you there's a trick
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  Speaker 5: to this employment and jobs number that I think which
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  Speaker 5: the FED is missing is the Joel's number.
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  Speaker 8: In particular.
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  Speaker 5: So during the pandemic, what you've saw where a lot
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  Speaker 5: of companies buying ads on Indeed, et cetera, those websites
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  Speaker 5: for job postings, and they were posting a lot more
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  Speaker 5: jobs that they really needed in anticipation of potentially losing
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  Speaker 5: staff because of the pandemic. Those are annual contracts, and
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  Speaker 5: those contracts are rolling off, so they're not likely to
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  Speaker 5: be buying the same size of ads that they did
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  Speaker 5: in the past, and they'll probably be just a little
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  Speaker 5: bit easier on posting. So I think the job posting
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  Speaker 5: is going to go down, the Joel state is going
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  Speaker 5: to go down, and with that will get a little
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  Speaker 5: bit more realistic employment number because when you buy these
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  Speaker 5: contracts to post jobs, they're not per job, they're just
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  Speaker 5: per year, and so you can post as many as
• 8:43
  Speaker 5: you want and over post and that makes it look
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  Speaker 5: like there's a lot more I think it makes it
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  Speaker 5: look like there's a lot more job openings that they
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  Speaker 5: really are.
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  Speaker 3: Okay, Yeah, that's really interesting.
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  Speaker 1: Yeah, that's interesting because the Jolts data is something and
• 8:54
  Speaker 1: it usually ran in between four and six million and
• 8:56
  Speaker 1: still up around ten me and it makes you think about, geez,
• 8:59
  Speaker 1: that's a tightly Hey, Vince, don't be a stranger.
• 9:02
  Speaker 8: Vin.
• 9:02
  Speaker 1: Soon you mound his way back to the Bloomberg Interactor
• 9:05
  Speaker 1: Broker studio and.
• 9:06
  Speaker 5: He will find his way out exactly.
• 9:10
  Speaker 3: Little FaceTime doesn't hurt anybody.
• 9:14
  Speaker 9: You're listening to the team Ken's our live program Bloomberg
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• 9:24
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• 9:28
  Speaker 1: Just met in Paul Sweeney here in our Bloomberg Interactor
• 9:30
  Speaker 1: Broker's studio. We want to get to the story, the update,
• 9:34
  Speaker 1: the latest reporting on former President Donald Trump and his
• 9:37
  Speaker 1: legal challenges, and of course there's no one better to
• 9:39
  Speaker 1: do that with than Tim O'Brien. Tim is a senior
• 9:42
  Speaker 1: executive editor for Bloomberg Opinion, and Tim is the author
• 9:46
  Speaker 1: of the book Trump Nation, The Art of Being the
• 9:49
  Speaker 1: Donald in two thousand and five, the Definitive Biography of
• 9:52
  Speaker 1: Donald Trump. So there's no one that knows this story
• 9:55
  Speaker 1: in this individual better than Tim.
• 9:57
  Speaker 3: Tim, thanks so much for joining us. We know you're
• 9:59
  Speaker 3: traveling here, but I'd.
• 10:00
  Speaker 1: Love to just get your perspective on We've had so
• 10:03
  Speaker 1: many legal issues with this president before and during and
• 10:07
  Speaker 1: after now his presidency. How important? How significant is this?
• 10:13
  Speaker 1: Are these federal charges here?
• 10:18
  Speaker 10: Well, Paul, I think they're extremely significant because it's a
• 10:21
  Speaker 10: clarifying moment. I think that there's been this myth around
• 10:27
  Speaker 10: former President Trump that he can't really be touched by
• 10:30
  Speaker 10: the law, that it's target holds him accountable. But the
• 10:33
  Speaker 10: reality is throughout his entire career before going into the
• 10:38
  Speaker 10: White entering the White House, he's never had major federal
• 10:42
  Speaker 10: investigations surrounding him, and now he does. And there's some
• 10:48
  Speaker 10: very robust state investigations that are also targeting him. But
• 10:52
  Speaker 10: as it pertains to this specific case, it is one
• 10:56
  Speaker 10: of the I think things that are very very difficult
• 10:59
  Speaker 10: for him to hint and with is the fact pattern.
• 11:01
  Speaker 10: This is not a complex narrative to explain to a journey.
• 11:05
  Speaker 10: He took documents allegedly that he was not entitled to take,
• 11:09
  Speaker 10: and he obstructed justice when the federal government came looking
• 11:12
  Speaker 10: for them, and his own video cameras that mar A
• 11:16
  Speaker 10: Lago recorded this. The testimony that the federal government put
• 11:20
  Speaker 10: in the indictment comes from Trump's own staff and from
• 11:23
  Speaker 10: his own lawyers. So it's a very tough case and
• 11:28
  Speaker 10: I think it's consequential, and I think that he I
• 11:31
  Speaker 10: don't think he's prepared for it. I don't think he
• 11:33
  Speaker 10: has the legal talent surrounding him to adequately defend him
• 11:38
  Speaker 10: right now against the case like this, So there could
• 11:41
  Speaker 10: be a rough ride to have for him.
• 11:43
  Speaker 4: Tim set the scene for us after yesterday when Trump
• 11:46
  Speaker 4: lefts a courtroom what do we need to know from
• 11:49
  Speaker 4: this moving forward?
• 11:53
  Speaker 10: Well, yesterday was pretty undramatic. I think, you know, from
• 11:56
  Speaker 10: all accounts, it was pretty in and out. He sat silently,
• 12:01
  Speaker 10: the federal government and Jack Smith didn't make much of
• 12:05
  Speaker 10: a show of anything, and they process things and he
• 12:09
  Speaker 10: left the courtroom. I think going forward, there's one more
• 12:12
  Speaker 10: process hearing with a second magistrate judge, and then the
• 12:17
  Speaker 10: trial begins with Judge Cannon, and I think there's you know,
• 12:21
  Speaker 10: she's a Trump appoint There's been questions about whether or
• 12:24
  Speaker 10: not she is going to run up their process in
• 12:27
  Speaker 10: her courtroom, given the fact that she owes her job
• 12:31
  Speaker 10: to the president. She also gets to decide even if
• 12:36
  Speaker 10: a jury finds him guilty, she gets to decide how
• 12:38
  Speaker 10: severe his sentence will be. I think his maximum exposure
• 12:43
  Speaker 10: on almost all of the counts is ten years, and
• 12:47
  Speaker 10: there's one count that it has a maximum possible prison
• 12:52
  Speaker 10: sentence for twenty years. I doubt we'll see any sentencing,
• 12:56
  Speaker 10: even if it wasn't a possibly friendly judge go to
• 13:01
  Speaker 10: the full amount here. But that that dynamic, I think
• 13:05
  Speaker 10: how the government presents its evidence, how the jury interprets it,
• 13:09
  Speaker 10: and then how the judge decide to sentence him. Is
• 13:12
  Speaker 10: are the next steps? And all he can do is
• 13:14
  Speaker 10: try to mount an effective defense, which has already done
• 13:17
  Speaker 10: a little bit publicly saying that he was entitled to
• 13:20
  Speaker 10: roose documents and he did nothing wrong.
• 13:23
  Speaker 1: So, tim based upon kind of your knowledge and your reporting,
• 13:27
  Speaker 1: is this trial h is it going to happen or
• 13:31
  Speaker 1: is there going to be a plea agreement? And if
• 13:32
  Speaker 1: it does happen, how quickly? There's a lot of moving
• 13:36
  Speaker 1: parts here.
• 13:39
  Speaker 10: Well, you know, if there's gonna be a pre agreement,
• 13:41
  Speaker 10: it's you're going to have to agree to a settlement
• 13:44
  Speaker 10: that satisfies the federal government. And previous cases the government takes,
• 13:50
  Speaker 10: you know, these kinds of cases seriously. He is alleged
• 13:54
  Speaker 10: taken documents, exposed the vulnerabilities the US military had nuclear
• 14:00
  Speaker 10: she puts in some of them, and, by the government's account,
• 14:04
  Speaker 10: compromise national security. We have a voteload of previous cases
• 14:09
  Speaker 10: in which the charges events of here, and the defendants
• 14:11
  Speaker 10: have gone to jail for the equivement for doing that.
• 14:14
  Speaker 10: So if they try to do a plea agreement, it
• 14:17
  Speaker 10: will be very interesting to see what the components of
• 14:19
  Speaker 10: that are. And Trump at this point might be wise
• 14:22
  Speaker 10: to try to do that, but I just don't know.
• 14:26
  Speaker 10: I think the second piece what you'll see here is
• 14:29
  Speaker 10: that he will take his argument to the streets, and
• 14:31
  Speaker 10: I'm concerned about the possibility of violence because he is
• 14:35
  Speaker 10: not someone who goes gently into that good night. He
• 14:37
  Speaker 10: is not going to if he has found guilty. I
• 14:40
  Speaker 10: think he was going to be going to encourage his
• 14:42
  Speaker 10: supporters to be heard. And that's another dynamic that I
• 14:45
  Speaker 10: think we'll have to watch very carefully.
• 14:47
  Speaker 4: How long could the trial.
• 14:49
  Speaker 6: Last for.
• 14:52
  Speaker 10: Well, Jack Smith thinks that he wants a speedy trial,
• 14:55
  Speaker 10: and I think they're going to try to move this
• 14:58
  Speaker 10: along as quickly as they can. I don't think they're
• 15:00
  Speaker 10: going to try to spend months and months presenting evidence.
• 15:04
  Speaker 10: The federal government, particularly the Justice Department, did not by
• 15:07
  Speaker 10: clinging cases during presidential election primary season goes in the
• 15:13
  Speaker 10: full force in January. That's new territory too. I don't
• 15:16
  Speaker 10: think they're going to want to trying him come next spring,
• 15:20
  Speaker 10: so I think you're going to see this move along
• 15:22
  Speaker 10: pretty quickly. The other thing to remember is there's another
• 15:25
  Speaker 10: investigation of the Justice Department involved January sixth, and the
• 15:29
  Speaker 10: possibility that Trump incided and insurrection and tried to intrigue
• 15:35
  Speaker 10: with the electoral count procedures. And that's a trickier case,
• 15:39
  Speaker 10: I think for them to bring the course. I think
• 15:42
  Speaker 10: from a strategic standpoint, they were smart to go first
• 15:44
  Speaker 10: with them are allowed o case, but they still have
• 15:47
  Speaker 10: that one left to unfurrow, and you have to see
• 15:50
  Speaker 10: what happens with that one too.
• 15:51
  Speaker 1: Hey, Tim, let's fast forward a little bit to the election.
• 15:56
  Speaker 1: Any sense of how this might play during the election.
• 16:01
  Speaker 10: Well, I mean, this just throws such a wild card up.
• 16:03
  Speaker 10: So here we know that after Alvin Bragg in Manhattan
• 16:07
  Speaker 10: BA and guided Trump for financial for financial fraud in
• 16:12
  Speaker 10: an electoral fraud in New York. It helped Trump with
• 16:16
  Speaker 10: his base, and I think more generally with Republican voters
• 16:20
  Speaker 10: who aren't part of his base, which are the ones
• 16:22
  Speaker 10: he needs to amount of successful national election. I think
• 16:27
  Speaker 10: he will probably be any other Republican in the primary
• 16:29
  Speaker 10: season right now. I don't think he can win a
• 16:32
  Speaker 10: general election unless he gets moderate and moderate Republicans in
• 16:36
  Speaker 10: an independent And that first case, you know, people felt
• 16:41
  Speaker 10: that drag was being unfair to the former president, and
• 16:44
  Speaker 10: the polls indicated that that gave him an electoral base.
• 16:48
  Speaker 10: It will be interesting to see how Republican voters respond
• 16:52
  Speaker 10: to this case. I think this is a much more muscular,
• 16:55
  Speaker 10: clear cut base. I think what you know, the risure
• 16:59
  Speaker 10: occurred is much more damning yep. And there's not a
• 17:02
  Speaker 10: lot of nebulous nips around it. So we'll have to
• 17:06
  Speaker 10: see how that plays outs too.
• 17:08
  Speaker 3: All right, Tim, thank you so much for joining us.
• 17:09
  Speaker 1: Tim O'Brien, he's a senior executive editor for Bloomberg Opinion.
• 17:14
  Speaker 1: He's also the author of Trump Nation, The Art of
• 17:17
  Speaker 1: Being the Donald. He published that in two thousand and five,
• 17:21
  Speaker 1: held as a definitive biography of Donald Trump.
• 17:23
  Speaker 3: So Tim has a.
• 17:24
  Speaker 1: Real good insight into Donald Trump the person as well
• 17:28
  Speaker 1: as the politician as well.
• 17:31
  Speaker 9: You're listening to the tape. Can's our live program Bloomberg
• 17:34
  Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 17:38
  Speaker 9: tune in app, Bloomberg dot Com, and.
• 17:40
  Speaker 8: The Bloomberg Business App.
• 17:41
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• 17:44
  Speaker 9: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
• 17:50
  Speaker 1: All right, let's get right to our next guest in studio,
• 17:53
  Speaker 1: which she gets an extra start joining Gegos joins Is.
• 17:56
  Speaker 1: She's a co founder of Bond Blocks. She co found
• 17:59
  Speaker 1: a bond blog in twenty twenty one, and as the
• 18:02
  Speaker 1: name would imply, it's an ETF firm that focuses on bonds. Jinna,
• 18:07
  Speaker 1: thanks so much for joining us. So, I mean the
• 18:09
  Speaker 1: reality join is I can go with a two year treasure,
• 18:12
  Speaker 1: we can get four point sixty two percent. I mean
• 18:15
  Speaker 1: there's actually income and fixed income these days, right, Yeah.
• 18:18
  Speaker 11: We like to say the income's back in fixed income,
• 18:20
  Speaker 11: and we really are encouraging investors to take a look
• 18:23
  Speaker 11: and think about repositioning in their portfolios now because of everything.
• 18:26
  Speaker 6: That's happened over the last year.
• 18:27
  Speaker 11: Of most areas in fixed income, yields have doubled since
• 18:30
  Speaker 11: twenty twenty two.
• 18:32
  Speaker 4: It's interesting because you see so much money plowing into
• 18:34
  Speaker 4: money market funds and other corners of the market when
• 18:36
  Speaker 4: obviously you can yield five percent or more at this point.
• 18:40
  Speaker 4: What do you think is the dynamic changing there between say,
• 18:43
  Speaker 4: post the housing crisis, where you couldn't yield that amount
• 18:46
  Speaker 4: whereas now. Is it not just a defensive posturing. Is
• 18:49
  Speaker 4: it also just because of what investors can yield at
• 18:51
  Speaker 4: this point?
• 18:52
  Speaker 6: Yeah?
• 18:52
  Speaker 11: So we have to remember the fundamentals of fixed income,
• 18:55
  Speaker 11: and that the total return of fixed income includes the
• 18:57
  Speaker 11: yield on the income side of your coupon pay plus
• 19:00
  Speaker 11: the return of the asset itself. And with these yields,
• 19:04
  Speaker 11: like they're really providing a lot of cushion for volatility
• 19:07
  Speaker 11: that's still in the market is still we view is
• 19:10
  Speaker 11: going to persist through the rest of the year, and
• 19:12
  Speaker 11: so you don't want to forget that. You know, it's
• 19:14
  Speaker 11: not just about being defensive. It's about taking action in
• 19:17
  Speaker 11: your portfolio to get great total return relative to other
• 19:20
  Speaker 11: asset classes right now, and fixing them can provide that
• 19:23
  Speaker 11: to you with a lot a lot less volatility relative
• 19:26
  Speaker 11: to other asset.
• 19:27
  Speaker 6: Types, even equity. Well, this bid for cash is.
• 19:30
  Speaker 12: So interesting because you look at money market funds right now.
• 19:32
  Speaker 12: Mutual funds so not quite as cool as ETFs, but
• 19:35
  Speaker 12: still there's five point five trillion in them.
• 19:38
  Speaker 6: Money is still growing. At the same time, you.
• 19:40
  Speaker 12: Also have sort of the spiritual opposite going on, where
• 19:43
  Speaker 12: people are chasing tech, they're chasing AI and those growth
• 19:46
  Speaker 12: of your names.
• 19:47
  Speaker 6: So it's been.
• 19:47
  Speaker 12: Interesting to see those two opposite approaches build up at
• 19:52
  Speaker 12: the same time.
• 19:52
  Speaker 6: And when you think about money market funds, When you think.
• 19:55
  Speaker 12: About cash like instruments on the ETF side, when does
• 19:59
  Speaker 12: that money come out? What would be the catalyst to say, Okay,
• 20:04
  Speaker 12: you know, I can sit in here and clip coupons,
• 20:05
  Speaker 12: but maybe it's time to venture out.
• 20:07
  Speaker 4: Yeah.
• 20:07
  Speaker 11: I think last year's flows were just exactly that there's
• 20:09
  Speaker 11: people sort of hiding out or on the sidelines, trying
• 20:12
  Speaker 11: to figure out when they're going to come back into
• 20:14
  Speaker 11: risk askets or when they're going to come back into
• 20:16
  Speaker 11: the market. And in terms of when, I think what
• 20:18
  Speaker 11: we've been telling folks is you probably shouldn't be waiting
• 20:22
  Speaker 11: for everything.
• 20:23
  Speaker 6: To settle through the end of the year.
• 20:24
  Speaker 11: Yes, there's more volatility, Yes we have still the potential
• 20:27
  Speaker 11: for recession coming up. But it's interesting you say that
• 20:31
  Speaker 11: because I think there's some data that when you look
• 20:33
  Speaker 11: at ETF flows still you're not seeing people rush back
• 20:36
  Speaker 11: into equities, even though there's really attractive yields in I'm sorry,
• 20:41
  Speaker 11: really attractive returns in places like technology. Actually, I think
• 20:44
  Speaker 11: the flows are a little a little opposite of what
• 20:47
  Speaker 11: you would intuitively think that people are running into them
• 20:50
  Speaker 11: through through the et apps. The same is true in
• 20:52
  Speaker 11: categories in fixed income where you have these really big
• 20:56
  Speaker 11: yields with sort of you would think relative risk, but
• 20:59
  Speaker 11: you know something like a triple C which is yielding
• 21:02
  Speaker 11: over thirteen percent, or even WC even double B is
• 21:05
  Speaker 11: that you know, almost eight percent, and people just aren't
• 21:09
  Speaker 11: grabbing those opportunities.
• 21:11
  Speaker 6: For their portfolios.
• 21:12
  Speaker 11: Now, we think by bomb blocks, we try to show
• 21:15
  Speaker 11: people the relative value amongst all this different places in
• 21:18
  Speaker 11: the fixed income offering so that they can take action.
• 21:22
  Speaker 11: So we really think there's a call to action to
• 21:24
  Speaker 11: reposition your portfolios now. But you're right, I think the
• 21:28
  Speaker 11: flows into money markets are still saying people are waiting
• 21:31
  Speaker 11: for more information, and we just think fixing income provides
• 21:35
  Speaker 11: more opportunity.
• 21:36
  Speaker 4: Now, something I've been watching pretty closely is the CFTC
• 21:40
  Speaker 4: data that we get on Fridays and looking at how
• 21:42
  Speaker 4: much investors are shorting the treasury market, whether we're talking
• 21:45
  Speaker 4: about the two year, the ten year. The speculative futures
• 21:47
  Speaker 4: net positioning has been at a record when we're looking
• 21:49
  Speaker 4: at these bonds when it's so extreme, because typically investors
• 21:53
  Speaker 4: would do that in anticipation that bonds would or if
• 21:55
  Speaker 4: you're looking at yields, those would move higher. Do you
• 21:58
  Speaker 4: think there would be any sort of opposite effect there
• 22:00
  Speaker 4: when you see positioning so extreme to where yields could
• 22:03
  Speaker 4: potentially fall when you have those kind of bets placed
• 22:06
  Speaker 4: on that, our.
• 22:07
  Speaker 11: View is that yields are going to be higher for longer,
• 22:09
  Speaker 11: like we are at. We had some good numbers last
• 22:12
  Speaker 11: year yesterday in terms of you know, inflation and four
• 22:14
  Speaker 11: percent number, but at the same time, like the Fed
• 22:18
  Speaker 11: still has a two percent goal and going from four
• 22:21
  Speaker 11: to two is going to be pretty difficult. So I
• 22:23
  Speaker 11: don't we just don't see that pivot, even though there's
• 22:26
  Speaker 11: a lot of interesting volume activity around all the markets.
• 22:31
  Speaker 11: On the short side, I would say that our view is,
• 22:33
  Speaker 11: you know, there's a there's still more to process.
• 22:36
  Speaker 6: Can we get into the weeds here? Do you guys
• 22:37
  Speaker 6: mind take it away straight into the weeds?
• 22:40
  Speaker 12: Okay, let's talk specifically about ETFs, because obviously bond Blocks's
• 22:44
  Speaker 12: business is sort of carving up the bond ETF market
• 22:48
  Speaker 12: into you know, sectors, into duration specific funds.
• 22:52
  Speaker 6: And if we look at, you know, what your most
• 22:54
  Speaker 6: successful products are.
• 22:55
  Speaker 12: We have x h l F, which is six month
• 22:58
  Speaker 12: target duration leave that launched in September, right, and you know,
• 23:03
  Speaker 12: you're closing in on eight hundred million dollars in a U,
• 23:06
  Speaker 12: which is impressive. And then at the same time, I
• 23:09
  Speaker 12: mean there's products such as t bill, which recently launched
• 23:12
  Speaker 12: that is specifically three month treasury bills. And then Blackrock
• 23:16
  Speaker 12: also has a suite of products they're ebond suite, which
• 23:19
  Speaker 12: is also really narrowly focused on different duration and it's
• 23:23
  Speaker 12: interesting to see all of this money coming into these
• 23:27
  Speaker 12: duration specific funds. So I'm just hoping you can talk
• 23:30
  Speaker 12: me through where that demand is coming from, who is
• 23:33
  Speaker 12: using these ETFs, and how should these ETFs be used
• 23:38
  Speaker 12: for the bomb blocks products.
• 23:39
  Speaker 11: Our clients are really using them for duration management to
• 23:43
  Speaker 11: control the interestate risk they have in their portfolios, and
• 23:46
  Speaker 11: we have seen some really compelling use cases in this
• 23:50
  Speaker 11: last two or three months. In this last quarter, as
• 23:53
  Speaker 11: we entered into the debt crisis, we saw clients move
• 23:56
  Speaker 11: out of the short short ultra short side and a
• 23:59
  Speaker 11: little bit out of the curve one, two, three year
• 24:02
  Speaker 11: because they were trying to avoid any of the you know,
• 24:05
  Speaker 11: very short term settling maturities in very very short treasury products.
• 24:11
  Speaker 11: Once the dust cleared some set we saw the clients
• 24:14
  Speaker 11: kind of move back in so I think what's really
• 24:16
  Speaker 11: interesting is that these are tools for interest rate risk
• 24:21
  Speaker 11: management and duration management, and we're seeing that it's not
• 24:24
  Speaker 11: just that I'm going to hide out in cash for
• 24:25
  Speaker 11: a while because I'm not sure what I want to do.
• 24:27
  Speaker 11: People are using them to add to their portfolios, to
• 24:29
  Speaker 11: manage their viewpoint over what kind of duration they want
• 24:33
  Speaker 11: to add.
• 24:34
  Speaker 6: Or subtract from their portfolio.
• 24:35
  Speaker 11: And it's great to see also some hits on the
• 24:38
  Speaker 11: longer side too, So there's just people have the opportunity
• 24:41
  Speaker 11: to say, like, you know what, I'm going to seven
• 24:44
  Speaker 11: the belly of the curve.
• 24:45
  Speaker 6: You know, there's a little bit of a.
• 24:48
  Speaker 11: I'll get myself out a bit, not all the way
• 24:51
  Speaker 11: out to ten and twenty, but yeah, I think they're
• 24:52
  Speaker 11: really being precise with their viewpoints week to week.
• 24:57
  Speaker 4: Yeah.
• 24:57
  Speaker 12: And if I you know, if I'm worried about I'm
• 25:00
  Speaker 12: trying to manage my duration risk, my interest rate risk,
• 25:02
  Speaker 12: I mean, why do that through one of these products,
• 25:05
  Speaker 12: through an ETF versus just going into the actual.
• 25:08
  Speaker 11: Securities, you know, buying a portfolio of securities actually, for
• 25:13
  Speaker 11: any investor or any investment management firm is a lot
• 25:18
  Speaker 11: of work. You have to have the teams that you
• 25:20
  Speaker 11: know either on the credit side, you have analysts, you
• 25:23
  Speaker 11: have research even back office in middle office operations to
• 25:27
  Speaker 11: make sure things are settling into your accounts correctly. And
• 25:30
  Speaker 11: we were just talking about this in a different form
• 25:33
  Speaker 11: actually here at Bloomberg.
• 25:34
  Speaker 6: It's hard to do.
• 25:35
  Speaker 11: ETFs give you that exact exposure with one trade, one click,
• 25:41
  Speaker 11: settles in your account. It's very simple for asset managers
• 25:44
  Speaker 11: and investment managers to use them for these precise exposures.
• 25:47
  Speaker 11: Our premise is there isn't enough of them in fixed income.
• 25:51
  Speaker 11: You could do a lot in equities. You can get
• 25:53
  Speaker 11: any kind of brick factor you want in a ETF
• 25:54
  Speaker 11: in equities, and there just isn't enough in fixed income.
• 25:57
  Speaker 6: So you buy an ETF for it.
• 25:59
  Speaker 11: It's convenience, it's simplicity, they're low costs. They're great management
• 26:04
  Speaker 11: tools for investors.
• 26:06
  Speaker 4: We only have about a minute left, but I was
• 26:08
  Speaker 4: curious about in the ETF space, where would you shy
• 26:12
  Speaker 4: away from. We talked about the opportunities there were whatevers.
• 26:15
  Speaker 4: Do you not like.
• 26:17
  Speaker 11: That's a I guess that's a very personal question.
• 26:19
  Speaker 4: Forever I use more client specific.
• 26:24
  Speaker 11: It's very client specific because with the way you should view.
• 26:28
  Speaker 11: ETFs are tools, tools to build portfolios, tools.
• 26:31
  Speaker 6: To express your view.
• 26:32
  Speaker 11: And the important thing about the ETF offering is that
• 26:34
  Speaker 11: there is enough tools for you.
• 26:36
  Speaker 6: To do that with.
• 26:38
  Speaker 11: There's new types of products you can get access to
• 26:40
  Speaker 11: managers inactive and so I wouldn't shy away from anything
• 26:44
  Speaker 11: in ETFs because it's it's the premise of the ETF
• 26:47
  Speaker 11: offering is to help investors action their ideas and take
• 26:51
  Speaker 11: action in these markets. So there probably isn't an area
• 26:54
  Speaker 11: to to to avoid. I mean, we do see obviously
• 26:58
  Speaker 11: the dangers of increased altility, and we don't we don't
• 27:01
  Speaker 11: know exactly what kind of liquidity is coming out of
• 27:04
  Speaker 11: the system, but you know, again, to be able to
• 27:07
  Speaker 11: make those trades week over week with ETFs, that's what
• 27:09
  Speaker 11: investors are coming.
• 27:10
  Speaker 13: To them for.
• 27:12
  Speaker 3: Hey, Joanna, thank you so much for joining us.
• 27:13
  Speaker 1: Really appreciate it as always having you here in a
• 27:16
  Speaker 1: Bloomberg Interactive Broker studio.
• 27:17
  Speaker 3: Joining Diego's co founder of bond Blocks.
• 27:20
  Speaker 4: I think that was a good business decision, great round table.
• 27:23
  Speaker 1: Well I just stepped back toront of him. I can
• 27:25
  Speaker 1: step back and let the smart people have the floor.
• 27:27
  Speaker 1: So that was great appreciate Katie Greifeld sitting in with us.
• 27:31
  Speaker 8: You're listening to the team.
• 27:33
  Speaker 9: Ken's a our live program, Bloomberg Markets weekdays at ten
• 27:36
  Speaker 9: am Eastern.
• 27:37
  Speaker 8: On Bloomberg dot Com, the iHeartRadio.
• 27:39
  Speaker 9: App and the Bloomberg Business App, or listen on demand
• 27:42
  Speaker 9: wherever you get your podcasts.
• 27:47
  Speaker 1: Just meant in and Paul Sweene here in the Bloomberg
• 27:49
  Speaker 1: Interactive Broker Studio.
• 27:50
  Speaker 3: We've had some smart guests here.
• 27:51
  Speaker 4: Today, we have and they're going to continue coming with
• 27:54
  Speaker 4: especially with our next guests.
• 27:55
  Speaker 1: Exactly all right. He's a pretty smart dude. That's why
• 27:57
  Speaker 1: we kind of have him back. I usually can follow
• 28:00
  Speaker 1: what he's saying. Sometimes I have to google some things.
• 28:02
  Speaker 1: But Jay Haffield joins us. He's a CEO, founder and
• 28:04
  Speaker 1: portfolio manager for Infrastructure Capital Advisors. Jay, I know you
• 28:08
  Speaker 1: guys at Infrastructure Capital Advisors.
• 28:11
  Speaker 3: You fall inflation. You track this thing, right, and so
• 28:14
  Speaker 3: does the FED.
• 28:16
  Speaker 1: What do you tell us about how you track inflation
• 28:18
  Speaker 1: and kind of what your work is telling you guys?
• 28:21
  Speaker 14: Thanks Paul. So, the key element is to think of
• 28:26
  Speaker 14: three separate buckets of inflation, so you have leading indicators.
• 28:30
  Speaker 14: The key one there is oil prices, which we know well,
• 28:33
  Speaker 14: and housing prices, okay, and that if you just looked
• 28:36
  Speaker 14: at those two and tried to explain the seventies, that
• 28:38
  Speaker 14: would explain over one hundred percent of the inflation during
• 28:41
  Speaker 14: the seventies.
• 28:42
  Speaker 3: So that was the real problem, which was a good decade.
• 28:44
  Speaker 14: Right, this is a real problem. The FED has learned
• 28:47
  Speaker 14: a lot of lessons that we don't think are accurate
• 28:49
  Speaker 14: about why that occurred, like stopping and starting entrenched. We
• 28:53
  Speaker 14: don't believe in any of that. In fact, we believe
• 28:55
  Speaker 14: Volker made a big mistake raising rates too high. So
• 28:58
  Speaker 14: those are leading indicators. Current indicators are today's a good
• 29:01
  Speaker 14: day to talk about it. PPI Real Time and CPI
• 29:05
  Speaker 14: desh r is are index. Other people have either arguably
• 29:08
  Speaker 14: copied it or we copy them. There's no We're not
• 29:10
  Speaker 14: an index company center tracked that. But so all that
• 29:14
  Speaker 14: is is just looking at that leading indicator housing and
• 29:17
  Speaker 14: then stickating into the index and then the deeply unfortunately,
• 29:20
  Speaker 14: the deeply lagging indicators are what the FED follows. So
• 29:24
  Speaker 14: in fact, the worst is core PCE because Core, what
• 29:31
  Speaker 14: the FED doesn't really focus on is that high headline
• 29:36
  Speaker 14: bleeds into core. In fact, you can see this during
• 29:38
  Speaker 14: the seventies, so they are going to probably be very
• 29:43
  Speaker 14: hawkish today, or at least somewhat hawkish. They're going to
• 29:46
  Speaker 14: keep talking about raising rates because they're focused on that
• 29:48
  Speaker 14: core measure, even though it's highly lagged and it's going
• 29:51
  Speaker 14: to drop. It's just going to take a little while.
• 29:53
  Speaker 14: So we've and we've had this view almost since July
• 29:57
  Speaker 14: last year when inflation peaked, and we've been looking forward
• 30:00
  Speaker 14: to this time of the year because this is the
• 30:03
  Speaker 14: Fed's almost always a year behind. So they're starting to
• 30:05
  Speaker 14: figure out by pausing, and we think they'll pause next
• 30:09
  Speaker 14: in July as well. But so those are the those
• 30:11
  Speaker 14: three buckets are critical, and that's why we think the
• 30:13
  Speaker 14: FED is fundamentally flawed, because they're looking at the wrong bucket.
• 30:17
  Speaker 4: What is your expectations this afternoon from FED chair Jerom Powell.
• 30:23
  Speaker 14: Thanks, Jess, Well, you know he has a stellar track
• 30:27
  Speaker 14: record of tanking the market during press conferences, so i'd
• 30:31
  Speaker 14: hate to bet against that. The only mitigating factor you
• 30:34
  Speaker 14: mentioned Mike Wilson, who just reiterated his target. We just
• 30:39
  Speaker 14: we raised our target. It's kind of a little bit
• 30:42
  Speaker 14: of a bogus target. It's forty five hundred to five thousand.
• 30:45
  Speaker 14: But the reason for that is we have data that
• 30:47
  Speaker 14: supports forty five hundred. The five thousand is just we've observed,
• 30:51
  Speaker 14: you know, partly or I've observed being an investment banker,
• 30:55
  Speaker 14: there's a tendency for hot markets to get overvalued. Like
• 30:59
  Speaker 14: right now, we think that AI companies are probably undervalued,
• 31:03
  Speaker 14: but they're going to get overvalued, so we don't know
• 31:05
  Speaker 14: how much. It seems like five thousands of a pretty good
• 31:08
  Speaker 14: target or limit to that. But so we're quite bullish
• 31:12
  Speaker 14: about the market, whether we pull back today, maybe even
• 31:15
  Speaker 14: pull back through mid July, but we're bullish in mid
• 31:17
  Speaker 14: July because you have earnings. Most companies are doing well,
• 31:20
  Speaker 14: not just tech companies. We think the market will broaden
• 31:24
  Speaker 14: out some of the things that we traffic in more heavily,
• 31:26
  Speaker 14: like preferred stocks and dividend stocks will do better. So
• 31:32
  Speaker 14: we're bullish for the year. Whether I would say, if
• 31:35
  Speaker 14: I had to bet, it's for sixty forty that you know,
• 31:38
  Speaker 14: the market will be lower today just because of the
• 31:41
  Speaker 14: Powell having to placate the hawks.
• 31:44
  Speaker 4: To Jay's point, the S and P five hundred has
• 31:46
  Speaker 4: dropped on FED Day five of the last six meetings.
• 31:50
  Speaker 3: Is that right?
• 31:50
  Speaker 8: Here we go?
• 31:51
  Speaker 3: All right, we got it. That's a track record.
• 31:53
  Speaker 8: Jay, if you ever.
• 31:54
  Speaker 1: Had this discussion about inflation and policy with anybody from
• 31:57
  Speaker 1: the FED, because we're going.
• 32:00
  Speaker 14: To set it up, Okay, No, I'd be happy to
• 32:03
  Speaker 14: debate them, but I will say that we're I think
• 32:05
  Speaker 14: we have a leading market share of criticizing the FED
• 32:07
  Speaker 14: over the last two years.
• 32:09
  Speaker 8: We have a pretty good pr firmt.
• 32:10
  Speaker 14: So you can go check that good because we literally
• 32:12
  Speaker 14: we were talking about it coming in. We were trying
• 32:15
  Speaker 14: to contact reporters in March of twenty one because again
• 32:19
  Speaker 14: we follow oil prices they were skyrocketing. We follow housing
• 32:22
  Speaker 14: prices skyrocketing. We didn't have CPI dash are, but PPI
• 32:26
  Speaker 14: printed at ten percent in January of twenty one, and
• 32:30
  Speaker 14: the FED a year over a year later was saying
• 32:33
  Speaker 14: is transitory. PPI is again a real time indicator, Like
• 32:36
  Speaker 14: if PPI is going up, you're almost certain that CPI
• 32:41
  Speaker 14: will follow, So I think that it would. It's just
• 32:44
  Speaker 14: useful this conversation is going on. There was a Wall
• 32:47
  Speaker 14: Street Journal editorial this morning that the Fed's methodology is
• 32:51
  Speaker 14: just fundamentally flawed, including the two percent target. Two percent
• 32:55
  Speaker 14: targets way too low, huge enemy of the middle class.
• 32:58
  Speaker 14: There's strong evidence that it made the financial crisis way worse.
• 33:02
  Speaker 14: And so these issues need to be drawn out because
• 33:04
  Speaker 14: everybody treats the FED like they're sort of, you know,
• 33:07
  Speaker 14: some sort of god, and you can't. I mean, politicians
• 33:10
  Speaker 14: aren't allegedly not supposed to talk about it, and they
• 33:12
  Speaker 14: have like four hundred PhDs, but they can make bad mistakes.
• 33:17
  Speaker 14: Having a PhD means you're an expert in writing, you know,
• 33:20
  Speaker 14: research papers, not running the FED.
• 33:22
  Speaker 1: All right, So give all that you mentioned preferred stocks.
• 33:26
  Speaker 1: I don't hear that nearly enough in this duty studio.
• 33:29
  Speaker 1: Why do you guys are why are you favoring some
• 33:32
  Speaker 1: preferred stocks right these days? And why should investors consider preferreds?
• 33:36
  Speaker 14: Well, we are kind of evangelical about preferreds because what's
• 33:41
  Speaker 14: great about them they are good credits. They have load
• 33:43
  Speaker 14: default rates abou zero point three percent on average for
• 33:45
  Speaker 14: listed we do the twenty five dollars listed preferreds. They're
• 33:49
  Speaker 14: issued by good public companies who care about their credit,
• 33:52
  Speaker 14: but they're owned by retail and they tend to get
• 33:55
  Speaker 14: sold off way too hard during downturns. So, for instance,
• 33:58
  Speaker 14: right now, you look at any credit quality of preferreds,
• 34:02
  Speaker 14: they're cheap to high yield by about twenty five to
• 34:04
  Speaker 14: thirty basis points. And right now, like the answer to
• 34:07
  Speaker 14: your prior conversation about why, because you might ask, well,
• 34:10
  Speaker 14: why when just buy the short term ETFs that the
• 34:14
  Speaker 14: other the firm before me was here, Well, the reason
• 34:17
  Speaker 14: is you can right now with preferred you can get
• 34:20
  Speaker 14: equity type upside with fixed income risk. So they're trading
• 34:24
  Speaker 14: roughly our funds at nineteen, which is roughly par value
• 34:27
  Speaker 14: par values twenty five, so you get potential for appreciation
• 34:30
  Speaker 14: at twenty five. But meanwhile, and our fund yields a
• 34:34
  Speaker 14: lot because we look for more like double B crossover credits,
• 34:37
  Speaker 14: so yields about ten, so you get ten to weight.
• 34:40
  Speaker 14: It's not super volatile right now. It can become volatile
• 34:43
  Speaker 14: and then you get upside, and it's a good hedge
• 34:46
  Speaker 14: because we're pretty bullish on tech stocks, but most retail
• 34:49
  Speaker 14: investors have way too many tech stocks and no income
• 34:52
  Speaker 14: and fix this is going to be less volatile, certainly
• 34:55
  Speaker 14: less volatile than Nvidia and high beta stocks, so we
• 34:58
  Speaker 14: think it's a good alternative. The answer why, maybe you
• 35:01
  Speaker 14: don't want to go in and get five right now
• 35:03
  Speaker 14: for sure, because you can get ten and then maybe
• 35:06
  Speaker 14: you know twenty or thirty of upside potential, So preferreds
• 35:10
  Speaker 14: you should also sell them at par by the way,
• 35:13
  Speaker 14: which hopefully you don't have me on, you know, in
• 35:15
  Speaker 14: the year and they're all part and I have to say,
• 35:16
  Speaker 14: oh yeah, I said you should sell them all but
• 35:19
  Speaker 14: you know, to get ready for like the next crisis,
• 35:21
  Speaker 14: next freak out. And during seven oh eight they went
• 35:24
  Speaker 14: to like ridiculously low levels and we made a ton
• 35:27
  Speaker 14: of money buying cheap referreds back then.
• 35:29
  Speaker 4: And to your point when you're talking about PPI, we
• 35:31
  Speaker 4: watched the CPI PPI spread very closely, so you would
• 35:36
  Speaker 4: have seen that obviously improving dramatically when it comes to
• 35:39
  Speaker 4: the input prices before obviously consumer prices. I mean, how
• 35:42
  Speaker 4: does that do you think bode well when it comes
• 35:44
  Speaker 4: to corporate margins when that obviously is a key component
• 35:47
  Speaker 4: of that and obviously in turn stock prices.
• 35:50
  Speaker 8: Yeah.
• 35:50
  Speaker 14: So I mean we tend to and I think this
• 35:53
  Speaker 14: is why we differ a fair amount from Morgan Stanley,
• 35:56
  Speaker 14: is that we don't focus as much on margins because really,
• 36:02
  Speaker 14: if you analyze and I learned this doing utilities. Almost
• 36:04
  Speaker 14: all earnings growth comes from reinvestment and utilities. It's just
• 36:09
  Speaker 14: a tautology because it's regulated. But so a utility with
• 36:12
  Speaker 14: a fifty percent payout ratio always grows at five because
• 36:15
  Speaker 14: they only grow from retaining earnings. So most companies, like McDonald's,
• 36:20
  Speaker 14: wherever they grow because they return earnings and actually open
• 36:24
  Speaker 14: new McDonald's, like an existing McDonald's, margins is going to
• 36:28
  Speaker 14: be relatively flat. So I do think that that's a
• 36:31
  Speaker 14: bit of a challenge, but I think that Morgan Stilling's
• 36:33
  Speaker 14: overstated it and we're more open. This year's has been
• 36:36
  Speaker 14: pressured and we're about two twenty on the S ANDP.
• 36:39
  Speaker 14: But actually next year's earnings, which is what our targets
• 36:42
  Speaker 14: based on, has been holding up well, in fact even
• 36:44
  Speaker 14: going up, so now it's two forty two. So we
• 36:48
  Speaker 14: to your point to be this year, we think is
• 36:49
  Speaker 14: going to be challenging and next year will be more normal.
• 36:52
  Speaker 14: And then also you just get the growth from AI
• 36:54
  Speaker 14: and from retained earnings. So I think it's easy to
• 36:57
  Speaker 14: be too bearishit about the stock market because people don't
• 36:59
  Speaker 14: realize that arithmetic of the reinvestment producing kind of automatic growth.
• 37:06
  Speaker 4: Wow, great stuff.
• 37:08
  Speaker 1: As always, a body continues to come in here. He
• 37:10
  Speaker 1: hasn't figured it out yet. Jay Hatfield. He's the CEO,
• 37:13
  Speaker 1: founder and portfolio manager at Infrastructure Capital Management Lots. I
• 37:17
  Speaker 1: learn new stuff every time he comes in here, and
• 37:19
  Speaker 1: we love having him in here on days when there's
• 37:21
  Speaker 1: going to be some big news in.
• 37:22
  Speaker 3: Today's one of those.
• 37:23
  Speaker 4: Yeah, it's flag day exactly. Price target that he has
• 37:26
  Speaker 4: forty five hundred.
• 37:27
  Speaker 6: Ye'll take that five hundred.
• 37:29
  Speaker 3: Yeah, like the five thousand and one. I'll stick with that.
• 37:32
  Speaker 1: Jay Haffield, CEO, founder and portfolio manager for Infrastructure Capital Advisors.
• 37:36
  Speaker 9: You're listening to the tape cansur live program Bloomberg Markets
• 37:40
  Speaker 9: weekdays at ten am Eastern on Bloomberg Radio, the tune
• 37:43
  Speaker 9: in app, Bloomberg dot Com, and the.
• 37:45
  Speaker 8: Bloomberg Business App.
• 37:46
  Speaker 9: You can also listen live on Amazon Alexa from our
• 37:49
  Speaker 9: flagship New York station, just say Alexa playing Bloomberg eleven thirty.
• 37:54
  Speaker 1: All right, let's switch giers and talk about the pharma space,
• 37:58
  Speaker 1: biotech and really with a focus on anti obesity drugs,
• 38:03
  Speaker 1: and you just think about the opportunity there in terms
• 38:05
  Speaker 1: of market size, just extraordinate. There are a lot of
• 38:07
  Speaker 1: big players in there, so we want to get to
• 38:08
  Speaker 1: the latest and see what's happening there. So we go
• 38:11
  Speaker 1: to one Mikey Shaw, senior industry analyst at Bloomberg Intelligence.
• 38:15
  Speaker 1: He is live at his desk, I can tell you,
• 38:17
  Speaker 1: at the Bloomberg headquarters in Queen Victoria Street, in the
• 38:20
  Speaker 1: center of the city of London.
• 38:22
  Speaker 3: No better place to be in Mikey Shaw. Now he's
• 38:25
  Speaker 3: in the office.
• 38:26
  Speaker 1: Unlike like Sam Fazeldi, who just mails it in from France,
• 38:29
  Speaker 1: Mike's there every day, grinding it. We appreciate it. Mikey,
• 38:32
  Speaker 1: thanks so much for joining us here. Talk to us
• 38:34
  Speaker 1: about the market for anti obesity drugs. Give us a
• 38:38
  Speaker 1: sense of how big this market is and the kind
• 38:41
  Speaker 1: of the growth profile.
• 38:43
  Speaker 15: Sure, I mean, just a reminder, when we look at
• 38:45
  Speaker 15: the market in terms of patient population, it could be
• 38:48
  Speaker 15: three times larger than diabetes. So when we look at
• 38:51
  Speaker 15: the target population in the US one hundred and forty
• 38:53
  Speaker 15: million sufferers in the US six hundred and fifty million globally,
• 38:57
  Speaker 15: and if left untreated, we think that could go to
• 39:00
  Speaker 15: you know, that could double by twenty thirty to about
• 39:02
  Speaker 15: one point two billion. And what's you know, when we
• 39:05
  Speaker 15: look at the number of patients that are medically treated,
• 39:08
  Speaker 15: the proportion is load, so there's kind of a significant runway,
• 39:12
  Speaker 15: you know, for these drug makers which are active in
• 39:14
  Speaker 15: the space. And then you know, we published an update
• 39:18
  Speaker 15: to our market model a couple of days ago, and
• 39:21
  Speaker 15: we think that you know, looking at marketed drugs and
• 39:24
  Speaker 15: drugs in phase three at the moment, we think that
• 39:26
  Speaker 15: that market could go to forty four billion dollars in
• 39:29
  Speaker 15: twenty thirty. That's an eighteen fold increase on the twenty
• 39:34
  Speaker 15: twenty two levels. And then we see two dominant players,
• 39:37
  Speaker 15: so Novo Nordisk Eli Lilie with the fifty four percent
• 39:41
  Speaker 15: share and a forty six percent share respectively in twenty thirty,
• 39:45
  Speaker 15: and then pipeline drugs well drugs in the early to
• 39:48
  Speaker 15: midsday pipeline could represent upside to that potential view you.
• 39:52
  Speaker 4: Talked about the big players in the space with Lily
• 39:54
  Speaker 4: Novo break it down on both sides of the spectrum.
• 39:57
  Speaker 4: As far as what it comes to whether there are
• 40:00
  Speaker 4: free here when it comes to those entire obesity drugs
• 40:03
  Speaker 4: that they have in the pipeline.
• 40:05
  Speaker 15: I mean, ultimately, what we've seen in terms of you know,
• 40:07
  Speaker 15: obese medications is you know, prior to the launch of WEGOV,
• 40:12
  Speaker 15: the effectiveness of these treatments was relatively I want to
• 40:16
  Speaker 15: say low, but sub ten percent weight loss. WE'REGOV across
• 40:19
  Speaker 15: its PASE three trials showed eighteen percent up to eighteen
• 40:22
  Speaker 15: percent weight loss, and then Lily's to zeppetide, which should
• 40:25
  Speaker 15: get approved by the end of the year, showed more
• 40:28
  Speaker 15: than twenty percent weight loss. So what these two drugs
• 40:31
  Speaker 15: have done the second generation of medicines, They've really raised
• 40:34
  Speaker 15: the facy bar in this in this treatment space. And
• 40:38
  Speaker 15: then we see that tussle in terms of innovation continuing
• 40:41
  Speaker 15: with Novos. Basically, it's got a drug called Kagari Semma
• 40:46
  Speaker 15: in its FACE three pipeline and it's targeting twenty five
• 40:49
  Speaker 15: percent weight loss with that particular product.
• 40:53
  Speaker 1: Now that I mean, those are I was going to
• 40:55
  Speaker 1: ask you kind of what is the efficacy of these drugs,
• 40:57
  Speaker 1: I mean, and what are these you know, farmer comings,
• 41:00
  Speaker 1: what are they kind of promising their patients?
• 41:03
  Speaker 15: I mean in terms of I mean most of the
• 41:05
  Speaker 15: patients when we look at the trials, they're going off
• 41:07
  Speaker 15: baseline weight of you know, ninety five kilograms to one
• 41:10
  Speaker 15: hundred kilograms and.
• 41:12
  Speaker 3: What we pounds for the rest of the world.
• 41:16
  Speaker 15: The pounds conversion I'm not sure about.
• 41:20
  Speaker 3: All right, go ahead, let's google.
• 41:24
  Speaker 15: So I mean, you know, as I said earlier, Lily
• 41:25
  Speaker 15: showed Lily's basically shown the best efficacy to date with
• 41:29
  Speaker 15: the zepptide, and that showed upwards of twenty percent weight loss,
• 41:32
  Speaker 15: so it's kind of a significant it's a significant fac
• 41:36
  Speaker 15: And when we look at bariatric surgery, which is obviously invasive, costly,
• 41:41
  Speaker 15: you know, that's associated with twenty five percent weight loss plus.
• 41:45
  Speaker 15: So you know, with this new innovation, you're really narrowing
• 41:47
  Speaker 15: that gap between you know, therapeutics and surgery. And what's
• 41:52
  Speaker 15: going to be key for this market is going to be,
• 41:55
  Speaker 15: you know, getting pairs on site. Traditionally, you know, probably
• 41:58
  Speaker 15: because of the ficacy or they of prior treatments, it's
• 42:01
  Speaker 15: been an out of pocket market. So we hope that's
• 42:04
  Speaker 15: going to change. And what's key to making that change
• 42:06
  Speaker 15: is going to be outcomes data. So the effects that
• 42:10
  Speaker 15: weight loss have on kind of cardiovasclet en points such
• 42:12
  Speaker 15: as cardiovasca death, heart attacks, et cetera. And we should
• 42:15
  Speaker 15: see the first outcomes data midyear for Novo and noticeable
• 42:19
  Speaker 15: go VI. We think that's gonna read out positive and
• 42:24
  Speaker 15: hopefully that should kind of.
• 42:25
  Speaker 13: Break down the access hurdles faced by some.
• 42:28
  Speaker 4: Patients when it comes to companies like Ela Lilly trying
• 42:31
  Speaker 4: to move toward this fast track approval. What kind of
• 42:35
  Speaker 4: dangerous could be there?
• 42:38
  Speaker 13: I think in terms of, you know, the fast track
• 42:40
  Speaker 13: approval In terms of clinically, I think, you.
• 42:46
  Speaker 15: Know, they've done they still needed two trials to file.
• 42:50
  Speaker 15: What they did was they you know, they've had a
• 42:52
  Speaker 15: rolling submission, so the first phase three data set came out,
• 42:58
  Speaker 15: they then had their discussions with the sk FDA. The
• 43:01
  Speaker 15: second Phase three data set came out, and that enables
• 43:04
  Speaker 15: them to kind of complete the filing in sorry, it
• 43:10
  Speaker 15: should enable them to complete filing by mid mid year,
• 43:13
  Speaker 15: mid year, which would enable them approval by the end
• 43:16
  Speaker 15: of the year. So in terms of kind of data sets,
• 43:18
  Speaker 15: they're still submitting the same amount of data to support
• 43:24
  Speaker 15: to support approval. It's just that they've kind of done
• 43:27
  Speaker 15: it in they've just done it in a quicker manner, right.
• 43:32
  Speaker 13: They haven't had to.
• 43:32
  Speaker 15: Wait for the second trial trial to report before being
• 43:37
  Speaker 15: able to file, So.
• 43:39
  Speaker 1: You know, obviously they've invested a lot of money in
• 43:43
  Speaker 1: but these companies in coming up with these therapeutics, what's
• 43:45
  Speaker 1: the I guess the risk of the generics coming in
• 43:49
  Speaker 1: and kind of impacting the profitability.
• 43:52
  Speaker 15: I mean, we don't see generics coming in until you know,
• 43:57
  Speaker 15: you know, twenty thirty post twenty third See, so I
• 44:01
  Speaker 15: believe you know that these drugs are.
• 44:03
  Speaker 13: Protected by patents.
• 44:05
  Speaker 15: We've got a litigation analysis that's done a deep dive
• 44:08
  Speaker 15: into all these passives called Tish Walker, and I believe
• 44:11
  Speaker 15: she's you know, she thinks that WEGOV could remain unpatent
• 44:14
  Speaker 15: until twenty thirty eight.
• 44:16
  Speaker 13: I believe the Lily.
• 44:19
  Speaker 15: To zeppatide pattern is you know, somewhere somewhere around that
• 44:23
  Speaker 15: time point as well. So there's significant you know, these
• 44:26
  Speaker 15: drugs should remain free of generic competition for a significant time.
• 44:32
  Speaker 4: As far as when it comes to the timetable, what's
• 44:34
  Speaker 4: next in the immediate future that you're keeping your eye.
• 44:38
  Speaker 15: On with this, So in terms of catalysts, use players approvals,
• 44:43
  Speaker 15: you know, as I mentioned earlier, Goovy outcomes data that's
• 44:46
  Speaker 15: due mid year. To Zeppetite approval should happen by year end,
• 44:50
  Speaker 15: and then we should see oral seg side which there's
• 44:54
  Speaker 15: an oral GLP one, so an oral product that should
• 45:00
  Speaker 15: get approved in twenty twenty four and that could really
• 45:03
  Speaker 15: open up the market. So we did a survey of
• 45:06
  Speaker 15: one hundred prescribers, and there's a clear need for oral therapies,
• 45:10
  Speaker 15: especially in the primary care setting where you know, doctors
• 45:13
  Speaker 15: are often short on time they may want to avoid
• 45:16
  Speaker 15: the complex titration strategies of some of the injectable.
• 45:21
  Speaker 13: Treatments on market at the moment, such as We'll.
• 45:24
  Speaker 1: Go be So, Mike, you're just looking at your research
• 45:26
  Speaker 1: report here, which is awesome. By the way, Novo Nordesk
• 45:31
  Speaker 1: and Eli Lilly vuying for leadership. You say, is this
• 45:33
  Speaker 1: kind of a dwopoly here or more farmer companies going
• 45:37
  Speaker 1: to come here? More providers are going to come in
• 45:38
  Speaker 1: here and try to compete for this space.
• 45:40
  Speaker 15: I mean in terms of how the market's going to
• 45:42
  Speaker 15: play out, I mean we think it's going to be
• 45:44
  Speaker 15: similar to the JLP one class in diabetes. So Novo
• 45:47
  Speaker 15: Lily dominating, They're going to drive the innovation in the
• 45:50
  Speaker 15: space and continue on that tussle. But you know, given
• 45:54
  Speaker 15: the size of the indication, there's room for other entrants
• 45:57
  Speaker 15: these might include pfizor Zealand and and I'll say also
• 46:01
  Speaker 15: and all of them have got drugs in mid ear
• 46:05
  Speaker 15: least amid stage sevelopment.
• 46:07
  Speaker 6: It's interesting.
• 46:08
  Speaker 4: I'm looking at how Bank of America recently actually boosted
• 46:11
  Speaker 4: their price target on Eli li Lad of five hundred
• 46:13
  Speaker 4: dollars is actually trading around four hundred and forty four
• 46:15
  Speaker 4: dollars right now. But this is based on the obesity
• 46:18
  Speaker 4: drug demand.
• 46:19
  Speaker 8: Yeah.
• 46:20
  Speaker 3: And I mean, and Mikey, this is I mean, the US.
• 46:23
  Speaker 1: Is really from you know, unfortunately leading the way in
• 46:26
  Speaker 1: terms of cases, aren't aren't we?
• 46:30
  Speaker 15: Yeah, I think the presidence in the US is high.
• 46:33
  Speaker 15: China is obviously a big market as well, but when
• 46:36
  Speaker 15: we look at you know, numbers in general, I think
• 46:39
  Speaker 15: the presidence of the disease is on the on the
• 46:41
  Speaker 15: rise everywhere.
• 46:42
  Speaker 3: Yep, all right, all right, Mikey Shaw, folks.
• 46:45
  Speaker 1: He I'm gonna say, Mikey, you were like one of
• 46:47
  Speaker 1: our first analysts we ever hired to be I like
• 46:50
  Speaker 1: fourteen or fifteen years ago, and I see him on zoom, Folks.
• 46:54
  Speaker 3: He's actually got some gray hair.
• 46:56
  Speaker 1: I mean, he was a kid when we hired him,
• 46:59
  Speaker 1: and now he works along with san Fazelli, and they
• 47:02
  Speaker 1: just do outstanding work covering the farmer space in the
• 47:05
  Speaker 1: biotech space.
• 47:06
  Speaker 3: Mikey is well known in the city of London.
• 47:08
  Speaker 1: For with institutional investors and with the companies he owned,
• 47:11
  Speaker 1: so we appreciate getting a few minutes of his time.
• 47:12
  Speaker 1: Mike Schai is his senior Industry and also at Bloomberg Intelligence,
• 47:16
  Speaker 1: based in our London office.
• 47:17
  Speaker 3: So good stuff there. It's a great report, very detailed.
• 47:20
  Speaker 3: Check it out on the Bloomberg terminal.
• 47:22
  Speaker 1: Bigo gets you to all the Bloomberg Intelligence research and
• 47:26
  Speaker 1: some top notch stuff there coming from a healthcare team.
• 47:29
  Speaker 9: You're listening to the tape Cat's are live program Bloomberg
• 47:32
  Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 47:35
  Speaker 9: tune in app, Bloomberg dot Com, and.
• 47:37
  Speaker 8: The Bloomberg Business App.
• 47:39
  Speaker 9: You can also listen live on Amazon Alexa from our
• 47:41
  Speaker 9: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
• 47:48
  Speaker 1: Just met and Paul Sweene here in the Bloomberg Interactive
• 47:50
  Speaker 1: Brokers studio.
• 47:51
  Speaker 6: Really excited for our next guest.
• 47:53
  Speaker 3: I'm always excited to chat with Gina Martin Adams.
• 47:55
  Speaker 1: He's a chief equity strategist for Bloomberg Intelligence. Gina, thanks much,
• 48:00
  Speaker 1: thanks for joining us here. I'm just looking at my
• 48:01
  Speaker 1: Russell What is it two thousand chart? Man, it's how
• 48:05
  Speaker 1: to move over the last couple of days and this
• 48:08
  Speaker 1: month and this month.
• 48:09
  Speaker 3: Yeah, exactly what what's going on? Well?
• 48:12
  Speaker 16: I think part of it is the FED. Part of
• 48:16
  Speaker 16: it is finally regting to the point where the FED
• 48:18
  Speaker 16: is looking likely to pause. Maybe it's just a skip,
• 48:21
  Speaker 16: but it is pretty close to a pause, and FED
• 48:24
  Speaker 16: tightening packages of the past have certainly dampened the outlook
• 48:27
  Speaker 16: for small cap stocks. Part of it is also the
• 48:30
  Speaker 16: earning cycle. You know, we do appear to be in
• 48:34
  Speaker 16: the worst of the worst of the earning cycle right now.
• 48:36
  Speaker 16: With an improvement going forward into twenty twenty four, small
• 48:40
  Speaker 16: caps revenues are finally expected to recover into twenty twenty four.
• 48:43
  Speaker 16: So to the degree that investors are getting some visibility
• 48:47
  Speaker 16: into a recovery process emerging for small caps, that may
• 48:51
  Speaker 16: be driving some of it, and certainly we see that
• 48:53
  Speaker 16: with some of the more suppressed areas of small caps.
• 48:56
  Speaker 16: Part of it is in the banking crisis, which really
• 48:59
  Speaker 16: weighs on small cap stocks, does appear to be increasingly
• 49:03
  Speaker 16: in the past. So certainly there's a lot of hesitancy
• 49:06
  Speaker 16: with respect to that call. It's not as profound a
• 49:09
  Speaker 16: drag on sentiment for small caps as it was in March.
• 49:13
  Speaker 16: And then generally, I think it's just large caps have
• 49:15
  Speaker 16: performed so well they're dragging the overall market a bit higher.
• 49:18
  Speaker 16: Sort of investors are starting to capitulate to the idea
• 49:22
  Speaker 16: that maybe the worst for equity performance is in the past.
• 49:26
  Speaker 4: And as you know, Gina, investors watch small caps very
• 49:30
  Speaker 4: closely because typically they'll bottom before larger caps, do you.
• 49:34
  Speaker 4: I know, various points last year they were holding up
• 49:36
  Speaker 4: better than their larger counterparts. But to your point, we
• 49:39
  Speaker 4: saw some of that, especially in the smaller cap spiece
• 49:41
  Speaker 4: pressured which was going on with the banking stresses. What
• 49:44
  Speaker 4: do you think small caps are telling us moving forward
• 49:47
  Speaker 4: as far as the direction of the stock market.
• 49:50
  Speaker 16: Yeah, and they're confirming large cap gains. Finally, I mean,
• 49:53
  Speaker 16: it's very intriguing when you look at the small caps charts.
• 49:56
  Speaker 16: Small caps actually bottomed all the way back in June
• 49:58
  Speaker 16: of last year. They never made low lows, but they've
• 50:01
  Speaker 16: sort of failed to spring higher even though they did
• 50:05
  Speaker 16: create a bottom and sort of traded sideways at large
• 50:09
  Speaker 16: they really weren't springing higher until more recently when they
• 50:12
  Speaker 16: finally appear to be breaking out. I mean they sprung
• 50:14
  Speaker 16: a little bit from October to January, then got overbought.
• 50:18
  Speaker 16: You know, some big sentiment swing happened in small caps.
• 50:23
  Speaker 16: Now we're starting to see a little bit of recovery again.
• 50:26
  Speaker 16: I think those January peaks are pretty consequential to watch
• 50:29
  Speaker 16: for the small cap index. But you know, I look
• 50:32
  Speaker 16: at small caps as a confirming signal. Usually when all
• 50:35
  Speaker 16: stocks are rising, small caps are confirming large caps, you've
• 50:38
  Speaker 16: got a much healthier market than when, you know, just
• 50:42
  Speaker 16: large caps are a rising alone. So what we're seeing
• 50:45
  Speaker 16: is a confirmation of the breakout in large caps that
• 50:48
  Speaker 16: occurred in the latter part of May now occurring in
• 50:51
  Speaker 16: small caps as well.
• 50:53
  Speaker 1: You know, it's Fed day When the likes the surveillance
• 50:57
  Speaker 1: stars like Tom Yes, you know, and and Lisa Brommins
• 51:01
  Speaker 1: sticking around in the afternoon. You know it's Fed day
• 51:03
  Speaker 1: because they have got to come up on one thirty
• 51:05
  Speaker 1: with a big show.
• 51:05
  Speaker 3: And guess who darkens the door here? We're excited about it.
• 51:08
  Speaker 17: I mean, Gina Martin Adams knows.
• 51:09
  Speaker 3: It'll move the mark I know, and it's.
• 51:11
  Speaker 17: All there is to it, and it's going to be interesting.
• 51:14
  Speaker 17: We've got a great set of guests today. Randall Krasner
• 51:17
  Speaker 17: will lead us off to the former governor, without question,
• 51:19
  Speaker 17: the nation's lead financial analyst. But but there'll be more
• 51:24
  Speaker 17: And is you and I talked about earlier, Paul, there's
• 51:26
  Speaker 17: a huge mystery here, and particularly first, I mean Gina.
• 51:30
  Speaker 17: Martin Adams told me Apple's trading at a pe of
• 51:32
  Speaker 17: thirty and it's like a pink sheet stock.
• 51:37
  Speaker 1: So I mean, Gina, I mean, you know Tom's here,
• 51:40
  Speaker 1: he's working hard, he's working late, same with Lisa Bromins.
• 51:42
  Speaker 3: We don't no idea where John Pharaoh is. But what
• 51:45
  Speaker 3: are you looking for, Gina? On on this FED day?
• 51:49
  Speaker 16: I think everyone's kind of looking for the same. Is
• 51:52
  Speaker 16: it a pause or is going to confirm a pause?
• 51:55
  Speaker 16: Or are they going to talk about a skip? I
• 51:56
  Speaker 16: think is the first thing that everyone's looking for. If
• 51:58
  Speaker 16: they confirm a pause, do they then start to address
• 52:01
  Speaker 16: the balance sheet? Is the second thing to look for.
• 52:05
  Speaker 16: I do think we want to watch for their language
• 52:07
  Speaker 16: around inflation and their comfort level with respect to the
• 52:10
  Speaker 16: inflation trajectory. You know, the difference between a pause and
• 52:14
  Speaker 16: the skip. We could be underestimating how meaningful that is.
• 52:18
  Speaker 16: The skip this late in a rate high cycle. It
• 52:20
  Speaker 16: is very rare. There have only been two times in
• 52:24
  Speaker 16: which the FED since nineteen seventy has embarked upon a
• 52:28
  Speaker 16: rate hike cycle, then skipped at the very end of
• 52:30
  Speaker 16: it for just one month, then hiked again, and then
• 52:33
  Speaker 16: was done. And the market performance following those two instances
• 52:37
  Speaker 16: has been very different. So in nineteen eighty nine the
• 52:40
  Speaker 16: market greeted that sort of FED hike trajectory pretty kindly.
• 52:46
  Speaker 16: In two thousand they tried it again, and the stock
• 52:48
  Speaker 16: market obviously did very poorly following that. But typically pauses
• 52:53
  Speaker 16: are very good for stocks. I mean, the average gain
• 52:55
  Speaker 16: following a pause as long as that pause lasts at
• 52:58
  Speaker 16: least three months after or a rate hike cycle is
• 53:01
  Speaker 16: about eight percent over three months. So if we get
• 53:03
  Speaker 16: the confirmation of a pause, we could have a continuation
• 53:07
  Speaker 16: of the momentum that has emerged in stocks. But I'm
• 53:09
  Speaker 16: a little worried about this idea of a skip.
• 53:12
  Speaker 10: A skip is.
• 53:13
  Speaker 16: Unusual, as I said, and also creates pretty variable results
• 53:17
  Speaker 16: for the equity market. So That's what I'm watching most carefully, Gina.
• 53:20
  Speaker 4: This argument about breadth in the market. Obviously we had
• 53:23
  Speaker 4: just talked about the strength and small caps. We're seeing
• 53:26
  Speaker 4: it broaden out this month. When you're looking in the
• 53:27
  Speaker 4: S and P five hundred with materials, industrials, other more
• 53:30
  Speaker 4: sickle corners of the market. What do you need to
• 53:32
  Speaker 4: see to give you more conviction that this breath is
• 53:35
  Speaker 4: growing and not narrowing to these obviously more coherent when
• 53:38
  Speaker 4: you're talking about these kind of big growth and technology.
• 53:40
  Speaker 16: Stocks, yeah, we have seen them in the market broaden.
• 53:44
  Speaker 16: I mean, frankly, I think that much of the commentary
• 53:46
  Speaker 16: around the narrow breath of the market is just way
• 53:49
  Speaker 16: over emphasizing narrow breath as a factor. What we find
• 53:53
  Speaker 16: is narrow breaths more than often actually is a signal
• 53:57
  Speaker 16: that will broaden to the rest of the market. It's
• 53:59
  Speaker 16: not a word some sign that stocks are overdone or
• 54:03
  Speaker 16: we're going to get some sort of crash following narrow breath.
• 54:06
  Speaker 16: It's not a particular profound signal that said, I do
• 54:11
  Speaker 16: like a market that has broad participation. You now got
• 54:14
  Speaker 16: about sixty percent of S and P five hundred stocks
• 54:16
  Speaker 16: trading above their two internay moving average. We love to
• 54:18
  Speaker 16: see that above fifty percent to confirm that the market
• 54:21
  Speaker 16: has entered a new bull phase. I think the more
• 54:24
  Speaker 16: participation you have from sectors and the leadership of cyclicals
• 54:27
  Speaker 16: relative to defensives is very consistently a strong signal for
• 54:32
  Speaker 16: the durability of a rally. The fact that consumer discretionary stocks,
• 54:36
  Speaker 16: for instance, are outperforming staples and have been all year.
• 54:39
  Speaker 16: The fact that utilities are underperforming the rest of the
• 54:42
  Speaker 16: market and have been all year. Those are consistent signals
• 54:45
  Speaker 16: of longer term performance or a longer term, more durableble
• 54:50
  Speaker 16: trend emerging in the equity market. And so the broader
• 54:53
  Speaker 16: the market games are, the more comfortable I think the
• 54:56
  Speaker 16: investor base gets with sort of dipping in the water.
• 55:01
  Speaker 16: I think we do need to get passed a lot
• 55:02
  Speaker 16: of this recession chatter before we can get too excited
• 55:05
  Speaker 16: about it. But nonetheless it's a positive sign.
• 55:09
  Speaker 3: Yes, that sound you hear, Gina, is Tom Keane dipping
• 55:12
  Speaker 3: his toe in.
• 55:15
  Speaker 17: I got the paper ticket out. I think I'm going
• 55:17
  Speaker 17: to do an odd lot. I don't think I could
• 55:19
  Speaker 17: stretch you up a hundred shares, you know, I'm thinking
• 55:22
  Speaker 17: something safe, like you know Bank of New York or
• 55:24
  Speaker 17: remember the safe dominion Mityell. I'll go on, give me
• 55:27
  Speaker 17: the d e as at first purchase.
• 55:30
  Speaker 3: So Gina tell us about earning's risk in this market.
• 55:33
  Speaker 1: We talked to some guests earlier who you know, called
• 55:36
  Speaker 1: that out is still a potential risk out there.
• 55:39
  Speaker 16: Look, I think that we've been talking about earnings risk
• 55:42
  Speaker 16: for so long that eve analysts haven't embedded an expectation
• 55:45
  Speaker 16: for recession into their estimates, and we should really be
• 55:48
  Speaker 16: ashamed of ourselves. I mean, I think that's really been
• 55:50
  Speaker 16: the story all year. Is we got to a point
• 55:54
  Speaker 16: in twenty twenty two where we were pricing in the
• 55:57
  Speaker 16: equity market just really terrible conditions emerging on the earning stream.
• 56:01
  Speaker 16: And what companies have proven so far this year is
• 56:05
  Speaker 16: those things are not as bad as the analysts had anticipated.
• 56:09
  Speaker 16: Analysts are still marking down their expectations, believe it or not,
• 56:12
  Speaker 16: but they're not marking them down as fast as they
• 56:14
  Speaker 16: were six months ago, eight months ago, nine months ago,
• 56:16
  Speaker 16: and so the result is net positive for equities. I
• 56:19
  Speaker 16: think that we're just in this space right now where
• 56:22
  Speaker 16: our expectations were so grim by the end of twenty
• 56:26
  Speaker 16: twenty two that it was almost impossible for companies not
• 56:29
  Speaker 16: to beat those expectations, and I think that that's going
• 56:31
  Speaker 16: to be the case for at least the next quarter
• 56:33
  Speaker 16: or two, where expectations are already very grim. We're already
• 56:39
  Speaker 16: seeing companies start to show some margin stability. So last week,
• 56:43
  Speaker 16: last year's really weak players that had too many employees
• 56:50
  Speaker 16: and we're overlaiden with cost pressures. They're starting to show
• 56:53
  Speaker 16: some improvement. And on the other hand, you've got some
• 56:56
  Speaker 16: deteriorating companies in the S and P five hundred, but
• 56:59
  Speaker 16: are earnings and P five hundred, but they're being overwhelmed
• 57:02
  Speaker 16: by the improvements at large.
• 57:03
  Speaker 1: All right, Gina, thanks as always, aways appreciate getting a
• 57:06
  Speaker 1: fe minutes of your time. Jean Martin Adams, chief Acorty
• 57:08
  Speaker 1: strategist at Bloomberg Intelligence, and Tom, you guys, you and
• 57:11
  Speaker 1: Lisa are going on at one thirty Bloomberg Radio and
• 57:13
  Speaker 1: TV going to walk us through kind of what we're
• 57:15
  Speaker 1: gonna get from this.
• 57:16
  Speaker 17: It's going to be interesting to see the statement, obviously
• 57:19
  Speaker 17: in Michael McKee's interpretation of it, but I think the
• 57:21
  Speaker 17: press conference will be really extraordinary. I had the surveillance
• 57:25
  Speaker 17: NAP I gotta go.
• 57:25
  Speaker 8: Back to makeup.
• 57:26
  Speaker 3: Yeah, exam, we need to work. A little work needs me.
• 57:29
  Speaker 9: I look a little peak it.
• 57:31
  Speaker 3: All right, Tom Ky, thanks so much for stopping by.
• 57:34
  Speaker 9: You're listening to the tape cans are live program Bloomberg
• 57:37
  Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 57:41
  Speaker 9: tune in app, Bloomberg dot Com.
• 57:43
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• 57:44
  Speaker 9: You can also listen live on Amazon Alexa from our
• 57:47
  Speaker 9: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
• 57:53
  Speaker 3: Let's check in with Jeff Phipps.
• 57:55
  Speaker 1: He's a portfolio manager in trading strategists at Picton Mahoney
• 57:58
  Speaker 1: Asset Management. Jeff, again, it's a frust down here in
• 58:03
  Speaker 1: the United States. It's Flag Day, but for folks that
• 58:06
  Speaker 1: also follow the markets, it's it's FED Day as well.
• 58:09
  Speaker 3: What do you expect from the US Federal Reserve today?
• 58:12
  Speaker 1: And how's that kind of influencing kind of how you
• 58:14
  Speaker 1: guys are allocating capital these days.
• 58:18
  Speaker 18: Thanks for the question and happy to be on. So
• 58:21
  Speaker 18: I mean, short term, I think, yes, there are solid
• 58:24
  Speaker 18: reasons here for a FED pause today. That is a
• 58:27
  Speaker 18: fairly consensus view. I do think that you know, there
• 58:31
  Speaker 18: was there was enough in yesterday's CPI to think that
• 58:35
  Speaker 18: the particularly on core services, if we do think about
• 58:41
  Speaker 18: rents and as having a leg I do think that
• 58:45
  Speaker 18: it's you know, likely that the median dots are most
• 58:48
  Speaker 18: likely to move up, say twenty five basis points for
• 58:50
  Speaker 18: the end of the year from the last update back
• 58:52
  Speaker 18: in March, probably not fifty at this point, that's a possibility.
• 58:57
  Speaker 18: I think though that the big picture, though, is probably
• 59:00
  Speaker 18: probably more important here, particularly as we move into the
• 59:03
  Speaker 18: second half. So this FED meeting is probably going to
• 59:06
  Speaker 18: be a pause, which is consensus, but I think the
• 59:09
  Speaker 18: bigger picture is really becoming more front and center.
• 59:13
  Speaker 4: As we head into the second half of the year.
• 59:15
  Speaker 4: How are you positioning.
• 59:18
  Speaker 18: Well, I think when we think about the second half,
• 59:21
  Speaker 18: and you know, I think we have to think about
• 59:24
  Speaker 18: how we got here as well. We have a lot
• 59:28
  Speaker 18: of moving parts right now for the FED to try
• 59:32
  Speaker 18: to manage. We have this economic resilience across DM economies
• 59:37
  Speaker 18: coming from a.
• 59:38
  Speaker 8: Number of sources.
• 59:39
  Speaker 18: We have a pretty substantial fiscal expansion that's been going
• 59:43
  Speaker 18: on this year and we'll continue next year in the
• 59:46
  Speaker 18: year after, and we also do have we are entering
• 59:50
  Speaker 18: we are about fifteen months from the beginning of the
• 59:52
  Speaker 18: hike cycle, So we're going to be in a window
• 59:56
  Speaker 18: in the second half where historically more of those impacts
• 1:00:00
  Speaker 18: start to play out. And second, and we also have
• 1:00:02
  Speaker 18: a large treasury issue in schedule to refinance the the
• 1:00:07
  Speaker 18: t g A, and then that is a few analogs
• 1:00:09
  Speaker 18: for what's about to happen. So you know, I I
• 1:00:13
  Speaker 18: do think that as we move into that second half
• 1:00:18
  Speaker 18: where where the FED is probably going to be in
• 1:00:20
  Speaker 18: a in a bit of a weight and see mode.
• 1:00:22
  Speaker 18: And and we can make the case that if you
• 1:00:25
  Speaker 18: if you you know that one of the measures of
• 1:00:27
  Speaker 18: FED likes to look at is is a real rate
• 1:00:31
  Speaker 18: version of of the FED rate. So if you look
• 1:00:34
  Speaker 18: at FED fund rate and you and you back out
• 1:00:37
  Speaker 18: some FORWD inflation expectation, it's approaching three percent, it's two
• 1:00:41
  Speaker 18: point eight two point nine percent, and that is a
• 1:00:44
  Speaker 18: pretty high number historically. So I think what the FED
• 1:00:49
  Speaker 18: needs to do today and they probably will try, is
• 1:00:51
  Speaker 18: to maintain a a forward set of expectations towards tightness
• 1:00:57
  Speaker 18: that will in theory, in their maybe be able to
• 1:01:02
  Speaker 18: to mitigate how how forward expectations for inflation react.
• 1:01:08
  Speaker 1: So you know, the FED has stated Jeff that obviously
• 1:01:11
  Speaker 1: that they are their number one goal here is to
• 1:01:13
  Speaker 1: fight inflation. It looks like they're kind of doing it.
• 1:01:16
  Speaker 1: Looking at the CPI print and the PPI print seems
• 1:01:19
  Speaker 1: like it's kind of working.
• 1:01:20
  Speaker 3: What do you think.
• 1:01:22
  Speaker 8: I don't disagree. I think there's more work to do
• 1:01:25
  Speaker 8: on CORE.
• 1:01:26
  Speaker 18: I mean, if CORE is annuallyzing uh, you know four
• 1:01:28
  Speaker 18: and a half five percent, that that number is still
• 1:01:30
  Speaker 18: too high. I think there is still the understanding that
• 1:01:35
  Speaker 18: that the variable the variable legs are are indeed variable,
• 1:01:40
  Speaker 18: and that will take some time to play out. The
• 1:01:43
  Speaker 18: one thing I'd say though, is that the uh, the
• 1:01:47
  Speaker 18: ability for them to have a high level of confidence
• 1:01:50
  Speaker 18: in terms of forward expectations for inflation not becoming embedded,
• 1:01:55
  Speaker 18: because historically that can create a more entrenched expectation for inflation.
• 1:02:00
  Speaker 18: It can make policy makers jobs much more difficult. So overall,
• 1:02:06
  Speaker 18: I think that they they are getting some work done
• 1:02:10
  Speaker 18: on headline and energy has a lot to do with
• 1:02:12
  Speaker 18: that and that and that has been positive from the
• 1:02:16
  Speaker 18: perspective of their policy interacting with with the economy. But
• 1:02:20
  Speaker 18: I I do think they are they are, you know,
• 1:02:22
  Speaker 18: wary of the fact that you know what happens. If
• 1:02:25
  Speaker 18: if there is some exogynoist shock in the next six
• 1:02:28
  Speaker 18: to nine months that does move energy prices higher, that
• 1:02:31
  Speaker 18: would that would reduce that that real rate of of
• 1:02:34
  Speaker 18: of on FED funds and would be a would be
• 1:02:37
  Speaker 18: a potential concern.
• 1:02:38
  Speaker 4: What range of inflation do you need to see get
• 1:02:41
  Speaker 4: to where you're more comfortable. Obviously we have the c
• 1:02:43
  Speaker 4: p I, but then there's the Fed Preferred Measure of
• 1:02:46
  Speaker 4: Inflation with PCE.
• 1:02:48
  Speaker 8: Right right.
• 1:02:49
  Speaker 18: I think that there's a couple of measures that that
• 1:02:52
  Speaker 18: that that matters, as PC is one of them. As
• 1:02:55
  Speaker 18: you mentioned, I think a real a real rate sort
• 1:03:00
  Speaker 18: of sort of in the on a one year basis,
• 1:03:03
  Speaker 18: if we're using the inflation swaps as a as as
• 1:03:07
  Speaker 18: a tool to back out to relate, it's something something
• 1:03:10
  Speaker 18: above two and a half percent is important. And then
• 1:03:13
  Speaker 18: on on core, I do think we need to see,
• 1:03:16
  Speaker 18: you know, if if we're at if we're annualizing at
• 1:03:19
  Speaker 18: a at a four and a half percent core or
• 1:03:21
  Speaker 18: somewhere thereabouts in two or three months, I don't think
• 1:03:25
  Speaker 18: that's going to be acceptable for the FAT. I think
• 1:03:27
  Speaker 18: we need to start UH to see core UH annualizing
• 1:03:31
  Speaker 18: it at a rate that that has that has a
• 1:03:33
  Speaker 18: three handle over the next few months, and that and
• 1:03:38
  Speaker 18: that is something that that that you know, is also
• 1:03:40
  Speaker 18: going to be highly watched by this market as well.
• 1:03:43
  Speaker 3: All Right, Jeff, thanks so much for joining us there.
• 1:03:44
  Speaker 1: Jeff Phipps, portfolio manager and trading strategist at Picton Mahoney
• 1:03:49
  Speaker 1: Asset Management. That up there in Ontario, Yeah, yeah, in Toronto,
• 1:03:53
  Speaker 1: So good stuff up there. So I mean again, we're
• 1:03:55
  Speaker 1: gonna hear you know, in uh a little bit of
• 1:03:57
  Speaker 1: time here, We're going to get that statement from the
• 1:03:59
  Speaker 1: FED at two m Wall Street time, and then the
• 1:04:02
  Speaker 1: press conference at two thirty.
• 1:04:03
  Speaker 4: Dots at two o'clock.
• 1:04:06
  Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
• 1:04:09
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
• 1:04:13
  Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 1:04:17
  Speaker 2: at Matt Miller nineteen seventy three.
• 1:04:19
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• 1:04:21
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 1:04:24
  Speaker 1: Bloomberg Radio