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Speaker 2: And let's get more on housing store Paul us Economists
Speaker 2: with Bloomberg Economics. It joins us now. So those mortgage apps,
Speaker 2: let's start there for a second, up eleven percent. So
Speaker 2: talk to about the refinancing that we saw here, because
Speaker 2: I gotta say refinancing with a six handle. That does
Speaker 2: surprise me. I thought we would have waited until we
Speaker 2: got a lease down to the fives.
Speaker 3: It's interesting. So there are folks who just had to
Speaker 3: buy homes, they had to make moves for jobs, They
Speaker 3: had to end up taking out mortgages over seven percent,
Speaker 3: and those folks now have the opportunity to refly, right,
Speaker 3: I mean, mortgage rates are now down about one hundred
Speaker 3: and fifty basis points from the high post COVID even
Speaker 3: just in the last month, or down about thirty basis points.
Speaker 3: So for folks who bought a home because they had
Speaker 3: to post COVID, there is some more enthusiasm about refinancing
Speaker 3: if you unpack mortgage backed securities. Though overall, and this
Speaker 3: is totally to your points, Alex, the average rate being
Speaker 3: paid on existing homes, the average rate being paid by
Speaker 3: homeowners is still a touch under four percent, so there
Speaker 3: is still more room to run for refinancing. This I
Speaker 3: think is probably, you know, just a little bit of
Speaker 3: enthusiasm for folks who had to take out those long
Speaker 3: term mortgages when rates were significantly higher than they are today.
Speaker 4: It's interesting because we were just talking about KB Home.
Speaker 4: Even though it's down today. Xhb's the ETF that tracks
Speaker 4: the home building index, it's still up trading around records,
Speaker 4: up around twenty eight percent year to date to outpacing
Speaker 4: the broader SMP five hundred. But Bank of America actually
Speaker 4: was talking about how in the three months before and
Speaker 4: after the Fed cuts rates, homebuilder stocks have outperformed the
Speaker 4: S and P five hundred and three of the last
Speaker 4: five period. So wondering what particular level when it comes
Speaker 4: to say mortgage rates, when you're because you're obviously covering
Speaker 4: this very closely, do you feel like you'll see more
Speaker 4: consumers come back in to try to refinance.
Speaker 3: So it's a little bit tricky when you're thinking about
Speaker 3: home builders versus when you're thinking about refinancing, right, because
Speaker 3: you have a few different dynamics that are at play.
Speaker 3: For people like people like Alex or people like me
Speaker 3: who have low mortgage rates that are locked in, you're
Speaker 3: not gonna end up seeing a rush to refinancing.
Speaker 2: You know, we saw a rate to move is quite high.
Speaker 3: Your hurdle rate, well, your hurdle rate to move is
Speaker 3: like close to four yeah, right, So there's still a
Speaker 3: a there's still a ton of room to run if
Speaker 3: you think about home builders though, because nobody's rushing to refinance,
Speaker 3: because nobody's rushing to move if they're an existing homeowner
Speaker 3: because they've locked in that low rate, there is room
Speaker 3: for home builders to sort of fill the gap for
Speaker 3: new households that are being formed, young people who are
Speaker 3: trying to buy their first home.
Speaker 4: And like lack of inventory that was such a big
Speaker 4: problem even before COVID, but then was exacerbated so much
Speaker 4: that obviously that they were able to pick up that
Speaker 4: side of it.
Speaker 3: Extraordinary lack of inventory, especially for existing homes for sale.
Speaker 3: The thing that I find shocking, and you'll probably have
Speaker 3: more color on this. For home builders in particular, there
Speaker 3: is still just a massive inventory of new homes new
Speaker 3: construction and units that are currently under construction that are
Speaker 3: available for sale. I mean levels unseen since early two
Speaker 3: thousand and eight, when housing was obviously frothy. So that's
Speaker 3: one thing that we have. These two forces that are
Speaker 3: diverging for new homebuilders. One is just this earth of
Speaker 3: existing homes for sale, but you do have this mounting
Speaker 3: inventory of new homes for sale that I think is
Speaker 3: going to keep home prices new home prices under pressure
Speaker 3: for quite some time.
Speaker 2: Which also spakes a question like the transmission policy mechanism
Speaker 2: from the FED, when you have sort of these structural
Speaker 2: issues that have nothing to do with what the FED
Speaker 2: actually does, and that's an interesting sort of dynamic.
Speaker 3: There was an early there was a question, maybe it
Speaker 3: was in the March press conference JPL March press conference
Speaker 3: following the FOMC meeting, where somebody asked, they said, look,
Speaker 3: you cut rates to the bone during COVID, everybody refines
Speaker 3: sub four percent, and now the transmission of monetary policy
Speaker 3: while you're trying to tighten rates is really really slow.
Speaker 3: Do you regret doing that? And he basically said, no regrets,
Speaker 3: but yeah, I mean interest rate policy has been moving
Speaker 3: very very slowly through the real economy. Housing is the
Speaker 3: number one sector for monetary policy and rates policy to
Speaker 3: move into the real economy. Instead, you're seeing communication tools
Speaker 3: moving into financial markets actually really quickly. The second somebody
Speaker 3: shows their hand just a little bit, you see a
Speaker 3: monster move in two your eelds, for example. So different
Speaker 3: policy tools moving at different speeds into different parts of
Speaker 3: the economy.
Speaker 2: It's really interesting. All right, Thank you so much, Stewart,
Speaker 2: appreciate it. Stuart Paul Us economists with Bloomberg Economics.
Speaker 4: On that.
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Speaker 2: I want to take a moment here and get dive
Speaker 2: into geopolitics to take a look at what's happening with
Speaker 2: Israel and Hesbela. Israel stepping up its heaviest air attacks
Speaker 2: on Hesbela targets in Lebanon since two thousand and six,
Speaker 2: after shooting down the first missile ever fired by the
Speaker 2: militant group at Tel Aviv. Joining us now in studio
Speaker 2: is Bobby Gosh, Bloomberg News Senior editor. Bobby, can you
Speaker 2: walk us through the sequence of events in the recent
Speaker 2: week that got us here and what things you're looking
Speaker 2: at over the next day forty eight twenty four hours.
Speaker 5: Yeah, it started, you remember with those those pages that
Speaker 5: went off, the thousands of pages exploded, most of them
Speaker 5: belonging to hesbe law operatives and fighters. The suspicion is
Speaker 5: that Israel was responsible for them. Israel as neither confirmed
Speaker 5: nor denied it, which is there very much in the
Speaker 5: Israeli m A. The following day there was a whole
Speaker 5: bunch of walkie talkies, again many of them belonging to
Speaker 5: Hisbellah commanders and fighters, that went off. Israel also then
Speaker 5: began targeted attacks against top level Hisbella commanders, the types
Speaker 5: of people who would be very important in the event
Speaker 5: of an all out war between Hesbellah and Israel. Simultaneously,
Speaker 5: Israel has been essentially attacking targets across its borders with Lebanon,
Speaker 5: specifically targeting missile bases, rocket launching facilities. It's all designed
Speaker 5: to reduce Hisbellah's ability to strike at Israeli targets. Israel
Speaker 5: says that the objective is to allow Israelis who had
Speaker 5: been living close to the border and who for many
Speaker 5: months now were forced to leave their homes. It's that
Speaker 5: this entire campaign is designed to allow those Israelis to
Speaker 5: go back to their homes and live in relative peace.
Speaker 5: But depending on how you want to look at it,
Speaker 5: this can also seem like an attempt to soften up
Speaker 5: Hezbelah for a larger campaign by Israel, whether that is
Speaker 5: a ground campaign or a campaign from the air. It
Speaker 5: can't give that impression.
Speaker 4: What has the Biden administration said about these latest earstrikes?
Speaker 4: Because I know that Joe Biden just gave his final
Speaker 4: address to the UN General Assembly this week.
Speaker 5: Well, the Biden administration for months and months now has
Speaker 5: been saying pretty much the same thing. On the one hand,
Speaker 5: it continuously repeats the chiboulette that Israel has a right
Speaker 5: to defend itself as it does, but at the same
Speaker 5: time it says that Israel should not escalate tensions in
Speaker 5: the region with its neighbors, and it has been warning
Speaker 5: against the risk of a larger war that will draw
Speaker 5: in Iran, which is Hisbella's main patron, which might draw
Speaker 5: in the United States. The problem is, of course, that
Speaker 5: all of that rhetoric from the Biden administration does not
Speaker 5: seem to be moving the needle. Prime Minister Natanya, who
Speaker 5: of Israel, seems to be operating on his own agenda,
Speaker 5: pursuing his own interests and paying almost no heed at
Speaker 5: all to the American president, which is not a good
Speaker 5: look for the United States.
Speaker 2: Well, I thought it was so interesting because as we
Speaker 2: were President Biden was speaking yesterday at the UN, we
Speaker 2: were also getting headlines on the terminal about Netanyahu and
Speaker 2: some things saying he was saying that was not peace
Speaker 2: and unity and ending the.
Speaker 4: War in Gaza.
Speaker 2: So it was very striking. What do you think, how
Speaker 2: do you think the election impacts this in terms of
Speaker 2: what Hesbal and Israel are thinking with six weeks to
Speaker 2: kind of go.
Speaker 5: Well, there's a school of thought in Israel and in
Speaker 5: some quarters in this country that Bibi Natnia was holding
Speaker 5: out for the election, that he's not going to change
Speaker 5: tech until there's an election. Until there's a new president
Speaker 5: in the United States. And according to this school of thought,
Speaker 5: he's betting on Donald Trump to return to the to
Speaker 5: the presidency on the assumption that Donald Trump will be
Speaker 5: more permissive and allow him a freer hand. I don't
Speaker 5: buy that, for one thing, more permissive than what It's
Speaker 5: not like Biden has really been restraining that Yahoo, There's
Speaker 5: only been rhetorical attempts at restraining him. That that's not working.
Speaker 5: And also I don't think necessarily that Donald Trump wants
Speaker 5: to come to the office with a major conflict in
Speaker 5: the Middle East to deal with. Remember, the big part
Speaker 5: of his message to his voter base is America first.
Speaker 5: The United States should not get involved too much in
Speaker 5: foreign affairs, should get out of the old conflicts, particularly
Speaker 5: in the Middle East. So if that is indeed bb
Speaker 5: Netniaho's calculus that Donald Trump would be better for him
Speaker 5: than Biden, I think he may have to calculate again.
Speaker 2: Such a pleasure to talk to you. You are always
Speaker 2: such a great reporter and you definitely help paint a
Speaker 2: picture for us. Bobby Goes Bloomberg, new senior editor, joining
Speaker 2: us on the latest between Hesbula Israel, as well as Goza.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on fo Cardplay and then
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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
Speaker 2: I'm Alex d alongside Jun Tuck Gerndis Menon. Paul Sweeni
Speaker 2: is off today. This is Bloomberg Intelligence Radio and we
Speaker 2: are broadcasting to live from Interactive Broker Studio right here
Speaker 2: in Midtown Manhattan where Gridlock reigns. Want to get a
Speaker 2: take on the market.
Speaker 4: Here.
Speaker 2: Nothing's going on, so it's a good time to kind
Speaker 2: of recalibrate. What do you do as yields kind of
Speaker 2: come down the back end, though still stays a little
Speaker 2: bit higher. How do you position yourself for that when
Speaker 2: tech also is still outperforming. Nancy Dowd, a private wealth
Speaker 2: advisor at Americpriz Financial and CEO of Opus, joins us
Speaker 2: now to discuss her take on the markets. Nancy, we've
Speaker 2: sort of gotten through a seminal moment with the Fed.
Speaker 2: How do you need to rethink what your portfolio looks like?
Speaker 6: So it was a big surprise.
Speaker 7: We all bet on a quarter of a point cut,
Speaker 7: but I guess the FED decided to frontload the rate cuts,
Speaker 7: although overall the plan is still the same is to
Speaker 7: you know, to get to a certain target or by
Speaker 7: three percent by midyear twenty twenty six. So it was
Speaker 7: a bit of an enigma as to why they front
Speaker 7: loaded this rate cut, But in digging deeper in the details,
Speaker 7: the justification really had to do largely with the inflation
Speaker 7: numbers not being quite where they really want them to be,
Speaker 7: at least two out of the three that they watch,
Speaker 7: and also the employment numbers are weakening, and that gave
Speaker 7: a little bit of concern to the FED, so they
Speaker 7: just cut more aggressively. So now this is what we're
Speaker 7: dealing with. And I think the biggest impact was mortgage
Speaker 7: mortgage applications. I think that's probably the biggest impact in
Speaker 7: the last two weeks.
Speaker 4: So what do you think the playbook is as far
Speaker 4: as what you're advising clients to buy, what you're advising
Speaker 4: them to sell, because traditionally, I mean, every rate cutting
Speaker 4: cycle can be very different, but normally you would see
Speaker 4: safe for instance, bond proxy sectors like utilities outperform and
Speaker 4: tech underperform. The first six months after rate cut. But
Speaker 4: you've already had sectors like utilities taking off a lot
Speaker 4: of that's tied to the AI store and this sector
Speaker 4: is the second best performer in the S and P
Speaker 4: five hundred so far this year. So where do you
Speaker 4: put your money.
Speaker 7: Well, if you're fully invested, clearly stay the course. But
Speaker 7: I think that the reaction over the last six weeks
Speaker 7: and certainly over the last two weeks is way overdone
Speaker 7: in the stock market, and I would err on the
Speaker 7: side of caution that I think we are probably due
Speaker 7: for a pullback or even a correction or more. It
Speaker 7: wouldn't be so unreasonable at this time because it's this
Speaker 7: is just overdone.
Speaker 4: So would you use them to add to you know,
Speaker 4: use that as a buying opportunity.
Speaker 7: Well, yeah, absolutely, that's the best time because longer term
Speaker 7: prospects obviously are very good. So if there is this
Speaker 7: correction or pull back, it's a grand opportunity to buy
Speaker 7: in or rebalanced, reconsolidate how you're allocated according to your
Speaker 7: timeframe and your risk tolerance. But certainly the sectors that
Speaker 7: you mentioned are very attractive. You know, defensive stocks will
Speaker 7: be a good play right now, such as materials, industrials, utilities.
Speaker 7: The big enigma really is energy. You know, I still
Speaker 7: look into energy, but the big enigma has been why,
Speaker 7: with all the geopolitical risk that we are experiencing, and
Speaker 7: more and more so in the last week or so,
Speaker 7: why energy is down. That's a enigma, but I would
Speaker 7: I would still buy it.
Speaker 2: When you take a look at, say, if you don't
Speaker 2: get the draw down, one part of that story is like, hey,
Speaker 2: there's over six million dollars sitting in money market funds
Speaker 2: that belong somewhere. Does it go into the equity market,
Speaker 2: does it go into the bond market? Do you think
Speaker 2: that that is part of this story that we're going
Speaker 2: to see?
Speaker 7: Well, clearly, broader diversification is highly indicated at this time.
Speaker 7: When you're too concentrated in one sector, you feel the
Speaker 7: volatility and the pullback will be felt significantly more, especially
Speaker 7: in the technology sector because that tends to be significantly
Speaker 7: more volatile. But diversification is very good right now, especially
Speaker 7: in the fixed income side, still maintaining shorter durations because
Speaker 7: it's still very iffy with the rate cuts. And I
Speaker 7: do believe that the geopolitical risk is just being ignored
Speaker 7: and is not factored into the market, and when that
Speaker 7: does happen, it could be significant.
Speaker 4: I know that you've previously used a four percent inflation
Speaker 4: assumption in your financial plans the past few decades. I'm
Speaker 4: sure just given where the dynamic inflation was prior to COVID,
Speaker 4: maybe your clients didn't appreciate it as fully until recent years.
Speaker 4: But with inflation have been closer to that two percent target.
Speaker 4: How does that impact how you construct your portfolio models.
Speaker 4: Is that something that you'll still include or are you
Speaker 4: going to adjust that now?
Speaker 7: No, I will not be adjusting it because by using
Speaker 7: a more conservative inflation rate it has really helped my
Speaker 7: clients achieve their outcomes much better. Because remember, you know,
Speaker 7: the overall inflation rate is not the same as the
Speaker 7: day to day inflation rate. I'm talking about food, gas, electricity,
Speaker 7: and heat, which is these are the non negotiables of
Speaker 7: everyday living. You may give up buying, going to go
Speaker 7: around out to eat, to travel, or discretionary spending, but
Speaker 7: you're never going to give up food, gas, and electricity.
Speaker 7: So these are the things that matter the most, and
Speaker 7: in fact, those are the things that go up the
Speaker 7: most over the last three to four decades that I've
Speaker 7: been advising clients.
Speaker 2: All right, thank you very much, and see we really
Speaker 2: appreciate Nancy Dawd joining US private wealth advisor at Maryripri's
Speaker 2: Financial and CEO of Opus. On the markets.
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Speaker 2: This is Bloomberg Intelligence Radio. We cover all the top
Speaker 2: news in business, economics and finance. And right now in
Speaker 2: New York City, what's happening is you have the You
Speaker 2: and General Assembly, and you have Climate Week. So the
Speaker 2: benefit is we get a lot of companies now coming
Speaker 2: in that are involved in the energy transition. Then we
Speaker 2: get to talk to them about the really cool stuff
Speaker 2: that they're doing. And one of them is a company
Speaker 2: called a MSc. Now you just look at a chart
Speaker 2: of its market cap. Over the last five years, it
Speaker 2: went for about two hundred million dollars to now almost
Speaker 2: a billion dollars. It's been a tremendous rise.
Speaker 4: It stocks up one hundred and sixteen percent year to date.
Speaker 2: What does it do? I'm not really sure. It's called
Speaker 2: American Superconductor Corporation or CEO is here to break it
Speaker 2: all down for us. Dan McGann joining us. All right, Daniel,
Speaker 2: what do you guys do? Break it down?
Speaker 8: We basically provide resiliency equipment for the grid. Today, we
Speaker 8: help bring more renewables onto the grid and we have
Speaker 8: a nascent business that's starting to grow pretty rapidly supporting
Speaker 8: ships in the fleet to protect them from harm's way.
Speaker 2: So do you like make the stuff that helps a
Speaker 2: solar farm plug into the grid?
Speaker 8: Are you like we're the big equipment that sits on
Speaker 8: the grid that allows that power to be able to
Speaker 8: come on and make sure it harmonizes with the grid
Speaker 8: in the way that the grid can accept it and
Speaker 8: take it.
Speaker 2: There's been a shortage of this stuff, right, like a
Speaker 2: huge backlog and shortage of the stuff that you make.
Speaker 8: Yeah, we just had a record quarter where we delivered
Speaker 8: new orders about one hundred and twenty seven million. Just
Speaker 8: to put it in context, we're about one hundred and
Speaker 8: forty six for the entire year. We grew last quarter
Speaker 8: thirty percent versus the year ago period, and we just
Speaker 8: guide it for thirty percent growth quarter on quarter, so
Speaker 8: we're kind of hitting it out of the park on
Speaker 8: all levels right now.
Speaker 4: And you've also made some recent acquisitions. I read about
Speaker 4: how and WL. It's a private company based in New
Speaker 4: Jersey that provides power supplies in industrial and military customers.
Speaker 4: But then also you're getting into the wind turbine electrical
Speaker 4: control systems with some recent deals as well. So how
Speaker 4: much do you expect those types of deals to help
Speaker 4: bolster your revenue growth moving forward?
Speaker 8: Yeah, we think that the backlog continues to grow. I
Speaker 8: think we went up from about one forty last quarter
Speaker 8: to about one sixty for the twelve month backlog. Total
Speaker 8: backlog for all time is even higher than probably two
Speaker 8: hundred or so, so we're in well positioned to kind
Speaker 8: of grow quarter on quarter here. That's what we just
Speaker 8: updated our guidance for the current quarter, which we'll end
Speaker 8: here in a week or so, and we think we're
Speaker 8: well positioned. I mean, the past year has been fantastic
Speaker 8: for us. We went from being really excited about reaching
Speaker 8: thirty million per quarter on a revenue basis to now
Speaker 8: we just goid it to fifty, So the business is
Speaker 8: really taking off. It's very healthy, and then the backlog
Speaker 8: is very deep along all product lines.
Speaker 2: What's the biggest constraint that you have in delivering the
Speaker 2: key product that everyone needs to then connect.
Speaker 3: To the grid.
Speaker 8: I think if you'd asked me that question a couple
Speaker 8: of years ago, I would say supply chain was part
Speaker 8: of it, just to be able to deal with the speed.
Speaker 8: Now it's really we're scaling, we're scaling production, we're hiring,
Speaker 8: So it's really typical type business challenges on how do
Speaker 8: you manage that growth and how do you remain effective
Speaker 8: for your customers as you grow?
Speaker 4: And what are some of the top questions or concerns
Speaker 4: you're actually hearing from your customers at this point. What
Speaker 4: do you think that tells us about the direction of
Speaker 4: the economy.
Speaker 8: I think the good signs we've seen as we've seen
Speaker 8: lead times on our pum drop, so our lead times
Speaker 8: at one point we're approaching eighteen months on some products,
Speaker 8: and now we have stuff today we're delivered in four
Speaker 8: or five six months. So wow, the demand is growing
Speaker 8: and the demand for products sooner is growing as well,
Speaker 8: and that's really a competitive vantage for us. In the market.
Speaker 4: Do you have a better way to move electrons? I
Speaker 4: mean the name implies, you know, superconductors.
Speaker 8: So at the heart of what we do, particularly on
Speaker 8: the ship business, is about superconductors. So we move electricity
Speaker 8: in a much better way.
Speaker 4: But you've got to keep that really cold.
Speaker 8: For super cold. Yeah, we do that as well. So
Speaker 8: that's part of our scope and what we that's very cool.
Speaker 8: We do a fully integrated system for the US Navy
Speaker 8: and we just got a contract nexcess to seventy five
Speaker 8: million dollars for the Royal Canadian Navy, so we're going
Speaker 8: to be on Canadian ships as well, and that's all superconductor.
Speaker 4: So with better lead times, is that just due to
Speaker 4: the supply constraints with the chain just they're not as
Speaker 4: bad as they would have been.
Speaker 8: Because they're not as bad, we've done more to be
Speaker 8: able to plan what we're seeing as customers not buying
Speaker 8: a few, but buying many, which allows us to be
Speaker 8: able to better plan our production and be able to
Speaker 8: plan our supply. So part of our growth has been
Speaker 8: larger projects, larger orders, and multiple units of the same type,
Speaker 8: which has been great for us for our business.
Speaker 2: So let's Broughden out for a second. We've had a
Speaker 2: couple of AI data centers and energy deals. Amazon went
Speaker 2: the way of like, here's my own little power center
Speaker 2: that I'm going to use and connect directly to it.
Speaker 2: Microsoft went more of the way, Hey, we're going to
Speaker 2: buy contracts from Constellation Energy. Constellation Energy is going to
Speaker 2: re up at one of its nuclear facilities and connect
Speaker 2: that to the grid. How do you foresee these partnerships
Speaker 2: moving forward and how does that affect you guys?
Speaker 8: I think it affects us because the rising tide lifts
Speaker 8: all boats. There's a huge investment in making the grid
Speaker 8: more resilient. There's more demand, be it from data, be
Speaker 8: it from AI. We see a huge potential boom coming
Speaker 8: for us because we provide power control solutions for semiconductor fabs.
Speaker 8: There's a huge move in our country to reshore that capability.
Speaker 8: Each of the chip makers I think individually of an
Speaker 8: so at least twenty billion dollars a capital investment in
Speaker 8: new fabs, and that's all going to benefit for us
Speaker 8: as well, because we're building the substation level equipment. These
Speaker 8: are big pieces of equipment. They're ten twenty some cases
Speaker 8: sixty tons they're like big mobile home type size, which
Speaker 8: we love.
Speaker 2: A little confidence it all gets built because even Intel
Speaker 2: had to pair back some of those plans.
Speaker 8: Yeah, they build a fraction of it. It's going to
Speaker 8: be a home run for us. So I know, you
Speaker 8: know what people talked about. We have a play in
Speaker 8: electric vehicles and hybrid vehicles because we supply the power
Speaker 8: control equipment for the people that make the feedstocks that
Speaker 8: go into those. I think that if we're even able
Speaker 8: to get to a fraction and what people hope and desire,
Speaker 8: I think it's a It's a big deal for our business.
Speaker 2: So what's next?
Speaker 4: Any other potential acquisitions you want to maybe tell us
Speaker 4: about it.
Speaker 8: We have a lot of people that approach us. We've
Speaker 8: done over a few year period here, we've done a
Speaker 8: number of acquisitions. They've all worked really, really well. You know,
Speaker 8: we focus on good people with a good product, so
Speaker 8: you know, we find that there's a lot of inbound
Speaker 8: traffic our ways. You know, would this be a good
Speaker 8: fit for where we are. We think we can continue
Speaker 8: to grow organically and in organically the business. We have
Speaker 8: a wonderful platform globally to be able to sell. We
Speaker 8: have a great brand in the market and we want
Speaker 8: to continue to leverage that. Really, at the end of
Speaker 8: the day, we want to serve what our customers need
Speaker 8: and try to be there ahead of them before they
Speaker 8: really need it.
Speaker 2: All right, Daniel, we really appreciate it. Thank you so
Speaker 2: much for stopping by. Daniel McGahn amsc CEO joining US
Speaker 2: American super Conductor. It's a great name, it is.
Speaker 4: I was looking at the A in our function in
Speaker 4: the terminal there's three buys A zero hold zero cells
Speaker 4: right now.
Speaker 2: I mean, when you have the broader thesis, it's hard
Speaker 2: to kind of find ourselves there at the end of
Speaker 2: the day. I think it just depends also on where
Speaker 2: we go, say with the presidential election. That's obviously a
Speaker 2: conversation that percolates right now during Climate Week. If we
Speaker 2: get a different administration, like a Trump administration, does all
Speaker 2: of this wind up changing. I mean, many are going
Speaker 2: to say no, because the jobs are already in Republican states.
Speaker 2: For example, there's a great piece out from Jennifer Dooley
Speaker 2: that sort of looks at that shows that a lot
Speaker 2: of the jobs at of from clean energy are in
Speaker 2: Republican states.
Speaker 4: Yeah, it's really fascinating to see kind of where this
Speaker 4: is headed. But what a run for the stock, over
Speaker 4: one hundred percent gain here to date.
Speaker 1: Yeah, you're listening to the Bloomberg Intelligence Podcast. Catch us
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Speaker 2: All right, well, let's get more on this nep and
Speaker 2: market here. Alex Steel just mentioned John Tucker Bloomberg Intelligence
Speaker 2: Radio Michael Kugino as president and portfolio manager at the
Speaker 2: Permanent Portfolio family of funds, to discuss the latest on
Speaker 2: the market. So there's really nothing happening today under the hood.
Speaker 2: There's some fun stuff. You are seeing a sell off
Speaker 2: in the bond market, so this is a great time
Speaker 2: to talk about the individual stocks. Michael, that float your boat.
Speaker 9: He good morning, Alex. We're pretty diversified with respect to
Speaker 9: our equity holdings. I mean, when you look at the
Speaker 9: stock market, the S and P five hundred today, it's
Speaker 9: rating about what twenty one twenty two times earnings earnings
Speaker 9: yield about four and a half, four and three quarters
Speaker 9: percent as compared to the Fed funds rate right now
Speaker 9: with the Feds move last week of roughly four seventy.
Speaker 6: Five five percent.
Speaker 9: So you have this rough earnings yield equivalent, and it
Speaker 9: becomes a question of what kind of an investor are you.
Speaker 9: Are you growth oriented in which case it's a reasonable
Speaker 9: return for equities plus you get the growth kicker, or
Speaker 9: if you're more conservative, you want to take that sort
Speaker 9: of interest yield and not take on a lot of risks.
Speaker 9: So for us, we actually own both. We're in bonds
Speaker 9: and we're in stocks. On the equity side, we have
Speaker 9: a diversified approach. Like I mentioned, names that come to
Speaker 9: mind would be a Lockheed Martin and aerospace and defense,
Speaker 9: a costco in terms of retail, Freeport Macmaran in terms
Speaker 9: of copper and natural resources, and a mix of energy
Speaker 9: which has been beaten down lately with Chevron and Exxon
Speaker 9: on the integrated side, and then some smaller, uh, you know,
Speaker 9: producers as well. Then we do have technology. We're an investor,
Speaker 9: you know, we're an investor in video and meta and
Speaker 9: so you can see that's not one theme playing there.
Speaker 4: You mentioned stocks and bonds. Another area that I know
Speaker 4: that you had exposure to you earlier this year was
Speaker 4: gold and it's had a banner year if you looked
Speaker 4: at those spot prices up more than twenty percent. So
Speaker 4: obviously on the back of those record highs there with
Speaker 4: ray cup bets and a week er dollar. Earlier this year,
Speaker 4: you had around twenty percent target weight in gold. Do
Speaker 4: you still have a weight like that and what's your
Speaker 4: highest asset class as far as what your current holding is.
Speaker 9: Yeah, our weighting right now, our target remains around twenty percent,
Speaker 9: but were slightly overweight our target. We're probably a little
Speaker 9: less than almost twenty three percent gold, and that speaks
Speaker 9: to again being diversified. We see the gold market as
Speaker 9: being a long term positive. Even with the run up
Speaker 9: all the I would say there may be some profit
Speaker 9: taking and consolidation. Investors may want to wait for a
Speaker 9: better entry point. However, if you're a long term investor,
Speaker 9: when you look at the landscape out there right now,
Speaker 9: the FED being done and cutting on the interest rate cycle,
Speaker 9: likely that's better for real returns and it reduces the
Speaker 9: opportunity cost of investing in gold versus earnings yielding investments.
Speaker 6: You look at geopolitical risk all over the world.
Speaker 9: You look at the development of alternative currency payment systems
Speaker 9: around the world to the US dollar. You look at
Speaker 9: the US dollar declining after almost really multi decade highs,
Speaker 9: and you look at a general fear or malaise with
Speaker 9: respect to economic growth worldwide, and all these things add
Speaker 9: up to a good environment for an investor to have
Speaker 9: something in gold as a portfolio enhancer or a protector.
Speaker 2: When you talked about the portfolio and the mix and
Speaker 2: all that, is there still value in just ta bill
Speaker 2: and chill and when does that narrative change.
Speaker 9: Well, you know, for our cash and cash equivalents, that's
Speaker 9: exactly what we're doing. There are opportunities with gyields coming
Speaker 9: with rates coming down, there.
Speaker 6: Are opportunities to incrus duration.
Speaker 9: We're doing that very selectively in our portfolio, but for
Speaker 9: our shorter term cash needs for liquidity and even as
Speaker 9: part of our diversified approach, we're still taking that. You know,
Speaker 9: now it's five percent versus five and a half, and
Speaker 9: it may them down a little bit further, but you're
Speaker 9: still talking, you know, risk free earnings.
Speaker 6: I don't think the Fed's gonna cut that drastically, you.
Speaker 9: Know, in the next year, year and a half or
Speaker 9: so all the way down to you know, three percent,
Speaker 9: three and a half percent the terminal rate.
Speaker 6: I think they ought to maintain a sort of.
Speaker 9: Slight tight bias personally, so you're still getting risk free
Speaker 9: money for your cash, you know, at worse three and
Speaker 9: a half percent, maybe in the fours, maybe closer to five.
Speaker 9: And so as part of a diversified approach, it makes
Speaker 9: sense for us if you're an if you're an investor,
Speaker 9: that that's the only thing you're doing. I think you
Speaker 9: may be selling yourself short unless you're very, very risk urse.
Speaker 9: I think you can make more by being more broadly
Speaker 9: diversified in a number of different areas.
Speaker 4: What about when it comes to the reed side of
Speaker 4: things in the equity market, when you have reads coming down,
Speaker 4: what's your broader outlook for real estate and do you
Speaker 4: own those corner of the market with those stocks.
Speaker 9: Yeah, we do own some reads, and I probably should
Speaker 9: have mentioned that is one of our asset classes that
Speaker 9: we focus on. And you are right that with rates
Speaker 9: coming down, reads generally are attractive in that environment, and
Speaker 9: so I see that as being a good long term
Speaker 9: area as well. And we're spread out among a number
Speaker 9: of different industry subsectors within real estate, and so I
Speaker 9: think the one thing you do have to be careful
Speaker 9: of a little bit here in reachs would be the
Speaker 9: balance sheets. Even though it appears that the markets may
Speaker 9: have sidestepped the big credit crisis due to a major
Speaker 9: refinancing of some of the debt at these higher yielding
Speaker 9: debt deals, especially if rates are coming down, I think
Speaker 9: you still need to focus on the balance sheet to
Speaker 9: make sure your companies are not unduly exposed.
Speaker 6: To credit risk. That you know, so asset quality is
Speaker 6: something you always look at.
Speaker 9: It reads anyway, So no nothing new here, but investors
Speaker 9: should be careful in that part of the red sector.
Speaker 2: Hey, Michael, super appreciate it. Thank you so much. Michael Cougino,
Speaker 2: President portfolio Manager, Permanent Portfolio Family of Funds.
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Speaker 4: One.
Speaker 2: Other story that really caught my eye today was about
Speaker 2: colleges and how basic other some higher education systems here
Speaker 2: in the US. It is crazy, right, like Kinston so expensive,
Speaker 2: they compete Harvard the whole thing. But apparently other universities
Speaker 2: now like Northeastern, are trying to tap a Wall Street
Speaker 2: playbook so they can rival Ivy's on admissions. This obviously
Speaker 2: caught everybody's eye. It's one of the top reading stories
Speaker 2: on the Bloomberg terminal. Francesca Maglione is personal finance and
Speaker 2: higher education reporter and she joins us now in the
Speaker 2: Bloomberg Interactive broker's studio. Okay, can you just walk us
Speaker 2: through the premise here?
Speaker 10: Yeah. So, Northeastern University has been known for years as
Speaker 10: a commuter school mostly attended by local students, and since
Speaker 10: twenty eleven they've kind of been expanding their brand. They
Speaker 10: now have fourteen campuses across the world, with three campuses abroad.
Speaker 10: What we thought was interesting is that since twenty nineteen
Speaker 10: they've been buying up other strugglings schools, kind of tapping
Speaker 10: in that private equity playbook and m and a. Yeah,
Speaker 10: like they've been merging with They've merged with three different
Speaker 10: schools so far and kind of embedded the Northeastern brand
Speaker 10: on these schools. And now can offer to students like, hey,
Speaker 10: you can study for a semester in California, you can
Speaker 10: do a semester in New York. And this is very
Speaker 10: different from those schools like Princeton and Harvard, which just
Speaker 10: want to stay small and delete. They want to expand
Speaker 10: their brand as much as they can.
Speaker 4: Because there's a lot of schools, especially in the South
Speaker 4: where I'm from, where you had a lot of magnet
Speaker 4: schools and then satellite schools, whether it was like the
Speaker 4: University of Texas or Texas A and M, so you'd
Speaker 4: have not just the main campuses, say in Austin, Texas,
Speaker 4: you had ones in SA Dallas and outside of that.
Speaker 4: So I'm wondering, is this is there a particular playbook
Speaker 4: when it comes to kind of like them and a
Speaker 4: type of feel it comes to something like this, or
Speaker 4: is there different not apples and apples.
Speaker 10: I guess yeah, I guess. What's interesting with the Northeastern
Speaker 10: is that Higher rid is going through a very hard time.
Speaker 10: There's a lot of smaller schools that are closing all
Speaker 10: over the US, and so Northeastern is growing at a
Speaker 10: time when all these other college are shrinking. Colleges are
Speaker 10: competing for students. The number of students across the US
Speaker 10: is going to drop by ten percent, the number of
Speaker 10: students going.
Speaker 4: To college, and so why what's the driver there?
Speaker 10: It's just a demographic cliff and the costs and it's
Speaker 10: extremely expensive as well. COVID was really bad for the
Speaker 10: college enrollment numbers as well. And so Northeastern is kind
Speaker 10: of growing at a time when all these other schools
Speaker 10: are shrinking. And when looking for schools, they want valuable
Speaker 10: real estate. The latest acquisition that they have is in
Speaker 10: New York. Now they have three buildings in Manhattan.
Speaker 2: Did they buy Marymount or was this part of Yes.
Speaker 10: They don't call it buying because.
Speaker 2: Still has its own brand.
Speaker 10: They just like swallow their liabilities and their assets. There's
Speaker 10: no exchange of money that changes hands.
Speaker 2: Is it working? Like, yeah, is this playbook actually helping Northeastern? Yeah,
Speaker 2: it's working.
Speaker 10: Northeastern last year had almost one hundred thousand students apply
Speaker 10: to their university. They've seen their enrollment increase by fifteen
Speaker 10: percent since twenty nineteen, and they've gone from being just
Speaker 10: a local, little known brand to being known worldwide.
Speaker 7: Does it.
Speaker 2: Does it help? But part of the college thing is
Speaker 2: like the experience, right, Like you go there and you
Speaker 2: live there, like maybe you take a semester abroad or something,
Speaker 2: but like you stay there and it feels a little
Speaker 2: weird and disjointed, and then all of a sudden be
Speaker 2: like you're here, and then you're there, and then you're there.
Speaker 10: Yeah, for sure. That's one of the things that Northeastern
Speaker 10: will say is changing within higher ed and that's why
Speaker 10: they've been successful in this moment. They think that students
Speaker 10: no longer or some students no longer want to, you know,
Speaker 10: spend four years in one place with a small community,
Speaker 10: and they're looking to get new experiences and be more
Speaker 10: practical in terms of their four years. How can this
Speaker 10: translate into career after college and things like that. So
Speaker 10: that's another way that they're different from other colleges.
Speaker 4: Are there other potential universities or colleges that are eyeing
Speaker 4: this type of model and they may try to do
Speaker 4: and replicate something similar.
Speaker 10: Yeah, for sure. Northeastern told us that they've heard from
Speaker 10: almost fifty schools that have reached out kind of interesting
Speaker 10: and either merging with them or learning about their business model.
Speaker 10: We saw that Vanderbilt has now a campus in Florida.
Speaker 10: That's kind of a school that's trying to do something
Speaker 10: a little similar, not at the scale that Northeastern is
Speaker 10: doing it, but there's a lot of schools watching what
Speaker 10: they're doing right now.
Speaker 2: Yeah, so is what they're doing also though different from
Speaker 2: that Marymount thing, Like I can still go to Marymount here,
Speaker 2: say in New York City versus Northeastern, and then I
Speaker 2: go spend a semester in California.
Speaker 10: Yes, so the Merrymount is part of their whole plan.
Speaker 2: Okay, so that that is part Right now, they're.
Speaker 10: Still Marymount because the merger was just announced, but eventually
Speaker 10: it'll be Marymount at Northeastern or whatever brand they decide
Speaker 10: to go with.
Speaker 2: Ye, so then I can go to Northeastern and then
Speaker 2: be like I'm gonna spend a year in New York
Speaker 2: going in to Marymount. Yes, okay, yeah, yeah, that's just
Speaker 2: so interesting. It's just such a different college like experience.
Speaker 2: I would think that you go to college, you learn
Speaker 2: how to like be by yourself, do laundry by yourself,
Speaker 2: debt by yourself, to brink beer by yourself, and then
Speaker 2: like that's it, not like jet setting off to different locations,
Speaker 2: you know, Frantessca, thanks that it was a really great piece,
Speaker 2: really appreciated. Francesca Maglione, personal finance and higher education reporter
Speaker 2: at Joining Us.
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