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