WEBVTT - Activision CEO, First Republic, Earnings, and Stock Picks 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.080 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.239 --> 0:00:23.680 Let's bring in some smart people here to talk rage, 0:00:23.800 --> 0:00:26.079 to talk banks, to talk to you know, where things 0:00:26.079 --> 0:00:28.440 are going here, Ira Jersey, He's a chief EOS interest 0:00:28.480 --> 0:00:31.800 rates strategist. He's phoning it in and I love that 0:00:31.920 --> 0:00:35.640 about him. From somewhere in Jersey, Herman Chan in the 0:00:35.640 --> 0:00:39.160 Bloomberg Interactive Brooker's studio. So, Ira, you know, I typed 0:00:39.200 --> 0:00:42.159 in FED go into my terminal, and I see we 0:00:42.240 --> 0:00:46.000 got a FED meeting on May third, give us a preview. 0:00:47.200 --> 0:00:47.480 Yeah. 0:00:47.479 --> 0:00:50.680 So, after today's GDP report, which showed, you know, slightly 0:00:51.440 --> 0:00:56.960 higher than expected inflation data, I think that that Wednesday's 0:00:55.960 --> 0:00:59.640 FED is definitely gonna Hi. I think that that's almost 0:00:59.680 --> 0:01:02.360 a gift. And I think the question now is under 0:01:02.360 --> 0:01:05.800 what circumstances might they go further? Because we still have 0:01:06.560 --> 0:01:08.679 some of these concerns, and I'm sure we've talked about 0:01:08.680 --> 0:01:12.800 this with Herman about credit potentially starting to contract in 0:01:13.120 --> 0:01:16.200 a pretty meaningful way and that could have serious effects 0:01:16.200 --> 0:01:18.959 on the economy in the second half of the year 0:01:19.000 --> 0:01:22.120 and going into twenty four. So I do suspect that 0:01:22.200 --> 0:01:24.119 this might be the last hike. It's not a given 0:01:24.240 --> 0:01:26.680 that'll be the last hike, but I do think that 0:01:27.040 --> 0:01:29.319 the FED is much closer to being done than they 0:01:29.319 --> 0:01:30.839 are to continue hiking. 0:01:32.000 --> 0:01:33.280 So, you know, hermit hanging. 0:01:33.280 --> 0:01:35.920 Can I correct myself because I was far off the 0:01:35.959 --> 0:01:39.160 average US home price and immediately got a couple of 0:01:39.400 --> 0:01:42.760 listener emails. Oh good, Okay, But so I did actually 0:01:42.760 --> 0:01:45.160 put it into being and Bing tells me that the 0:01:45.200 --> 0:01:47.840 average US home price varies depending on the source and 0:01:47.880 --> 0:01:50.840 the type of measurement used, but the medium home median 0:01:51.160 --> 0:01:54.000 home sales price, which is the middle point of all transactions, 0:01:54.200 --> 0:01:56.560 is reported to be between three hundred and twenty one 0:01:56.600 --> 0:01:59.640 thousand and four hundred and forty thousand dollars as of 0:01:59.680 --> 0:02:00.600 twenty two. 0:02:00.800 --> 0:02:02.080 And then and then they gave me. 0:02:02.600 --> 0:02:05.800 Four sources that they used, which is I love this 0:02:05.920 --> 0:02:07.600 new chat search function. 0:02:08.480 --> 0:02:09.760 It's I mean, I just think it's cool. 0:02:09.800 --> 0:02:13.480 Because they give you pretty decent answers and then they 0:02:13.600 --> 0:02:15.639 source so so I can dig in if I want 0:02:15.639 --> 0:02:19.040 to know. But yeah, so between three twenty and four 0:02:19.160 --> 0:02:22.600 forty three seventy it's still far lower than sixteen million. Yes, 0:02:22.680 --> 0:02:24.680 it's right, it is. So I guess our good friends 0:02:24.760 --> 0:02:26.519 on hampsons are not necessary. Let me let me ask 0:02:26.520 --> 0:02:29.000 Herman Chance. So, Herman, how were these mortgage products? First 0:02:29.000 --> 0:02:31.119 of all, thank you for giving us some of your time. 0:02:31.200 --> 0:02:33.600 I know how in demand you are. Herman Chand covers 0:02:33.600 --> 0:02:36.280 regional banks for us at Bloomberg Intelligence Inteligence and is 0:02:36.280 --> 0:02:40.200 now the most famous person in the building. What what 0:02:40.240 --> 0:02:43.079 were the mortgage products? I know I flubbed that as well, 0:02:43.120 --> 0:02:46.560 But was it you get interest only rate for ten 0:02:46.680 --> 0:02:49.560 years and then you trip into a normal thirty year 0:02:49.600 --> 0:02:50.480 fixed mortgage. 0:02:50.639 --> 0:02:54.560 Usually it's the io period. It's just only period either 0:02:54.639 --> 0:02:58.320 five years or ten years, and then you wouldn't go 0:02:58.680 --> 0:03:01.799 to a normal interest rate. You would refinance that loan 0:03:01.840 --> 0:03:05.600 again and then do another loan, maybe the same sort 0:03:05.639 --> 0:03:08.760 of product, but then start the start the interest only 0:03:08.840 --> 0:03:10.000 period all over again. 0:03:10.680 --> 0:03:13.280 All right, So Herman, just looking at these banks, Paul, 0:03:13.280 --> 0:03:14.560 did you get that kind of rate? When you bought 0:03:14.600 --> 0:03:17.480 your I did not your lat Jersey state on the 0:03:17.560 --> 0:03:20.360 Jersey Shore, No I did. I did not. Unfortunately, apparently 0:03:21.520 --> 0:03:24.919 so Herman, I'm done with FRC. I'm done. 0:03:25.160 --> 0:03:27.480 I mean, dude, Ben Emmon said said out a note 0:03:28.080 --> 0:03:30.799 last night or two nights ago, saying that FA flight 0:03:30.919 --> 0:03:32.280 is now a huge problem for them. 0:03:32.520 --> 0:03:35.040 So I think, what flight financial advisor flight? 0:03:35.120 --> 0:03:38.800 So basically they lost one hundred billion dollars of assets 0:03:38.800 --> 0:03:40.560 in Q one and then they said in their call 0:03:40.600 --> 0:03:44.000 in which they took no Q and a deposit, flight 0:03:44.120 --> 0:03:46.640 was only one point seven percent in April. So I thought, oh, 0:03:46.640 --> 0:03:49.960 that's right, that's tapering down to nothing. But I think 0:03:50.040 --> 0:03:52.880 after the huge stock crash two days ago, a lot 0:03:52.880 --> 0:03:55.800 of financial advisors or those who are still left, said listen, 0:03:55.800 --> 0:03:58.760 I'm gonna take all my clients, all their assets, and 0:03:58.800 --> 0:04:01.320 we're going to Morgan Stanley, We're going to JP Morgan, 0:04:01.440 --> 0:04:02.320 We're going to Goldmansax. 0:04:02.400 --> 0:04:02.920 They're leaving. 0:04:03.240 --> 0:04:05.640 That's the risk that all the productive folks at the 0:04:05.640 --> 0:04:10.840 Biggs now try to find greener pastures. The earnings released 0:04:11.080 --> 0:04:15.040 earlier in the week had mentioned that of the financial 0:04:15.040 --> 0:04:19.920 advisors that had left prior to earnings, they represented less 0:04:19.960 --> 0:04:22.200 than twenty percent of assets in their management, but you 0:04:22.240 --> 0:04:24.960 can presume that that number is only growing by the day. 0:04:26.120 --> 0:04:28.039 I'm talking soccer with you. I have had enough of you two. 0:04:28.120 --> 0:04:29.640 I mean, we're gonna have a fed on, you know, 0:04:29.720 --> 0:04:32.279 May third, and I'll raise twenty five basis points and 0:04:32.600 --> 0:04:35.200 we'll get you then, to read the tea leaves so 0:04:35.400 --> 0:04:38.479 man City for one over arsenal John Farrell's telling me 0:04:38.520 --> 0:04:40.560 I had to make time on my day yesterday to 0:04:40.600 --> 0:04:43.080 watch that. Of course I did not. What did you 0:04:43.120 --> 0:04:43.560 take away? 0:04:44.720 --> 0:04:47.520 I actually have not seen that. I tried to avoid 0:04:47.520 --> 0:04:48.560 watching Manchester City. 0:04:48.880 --> 0:04:49.520 Really why is that? 0:04:50.520 --> 0:04:54.320 You know, evil empire kind of stuff? The because I 0:04:54.320 --> 0:04:57.120 support a team that that is their arch enemy. 0:04:57.480 --> 0:04:58.680 Who do you support? Who's your team? 0:04:59.200 --> 0:04:59.240 So? 0:04:59.720 --> 0:05:02.360 Why support Afton Villa in the Premier League? 0:05:02.400 --> 0:05:05.080 But okay, now, why do you now, as an ugly American, 0:05:05.200 --> 0:05:07.400 how do we pick teams to follow? 0:05:07.600 --> 0:05:07.680 Like? 0:05:07.720 --> 0:05:10.159 How did you pick Aston Villa? I couldn't pick that. 0:05:10.480 --> 0:05:12.520 I have a well, I had a close connection. So 0:05:12.560 --> 0:05:15.279 I did a postgraduate degree at the University of Birmingham 0:05:15.440 --> 0:05:18.479 in the Midlands of England, and Afton Villa was the 0:05:18.480 --> 0:05:21.840 closest Premier League team to where I was so so 0:05:22.000 --> 0:05:24.800 this was back in nineteen ninety three, ninety four, and 0:05:24.839 --> 0:05:28.200 when I was there, we you know, I went to 0:05:28.279 --> 0:05:30.359 like eight or nine matches, and so I just became 0:05:30.400 --> 0:05:33.039 a Villa supporter. People would say like, hey, Liverpool's come 0:05:33.040 --> 0:05:34.800 into town, let's go to Villa Park to watch a match. 0:05:34.839 --> 0:05:37.239 And I just wanted so many matches. I became a supporter. 0:05:37.560 --> 0:05:40.520 That's how it happens. Man. Yeah, very cool, the ugly 0:05:40.560 --> 0:05:43.400 American in England. I actually heard last night. 0:05:43.279 --> 0:05:47.080 A very cool interview Carol Masser had on Alexis Ohanian. 0:05:47.200 --> 0:05:50.480 I don't think that's too far off the beaten bank 0:05:50.600 --> 0:05:53.839 rates path. But Alexis o'hanian, who of course made his 0:05:53.920 --> 0:05:56.920 money I think originally from Reddit, but he's super rich 0:05:56.960 --> 0:06:01.400 from other stuff. Married to married Divinus william Serena Serena Williams. 0:06:01.400 --> 0:06:01.640 Sorry. 0:06:02.480 --> 0:06:08.719 He he bought women's soccer team in Los Angeles, Angel City. 0:06:08.880 --> 0:06:11.640 I think or went in to start it right, and 0:06:12.120 --> 0:06:15.039 he was saying the coolest the coolest part of what 0:06:15.080 --> 0:06:16.560 he was saying, I should say, is that he didn't 0:06:16.600 --> 0:06:18.960 do it because now he has a wife and a daughter, 0:06:19.120 --> 0:06:21.760 and all of a sudden, like he realizes the importance 0:06:21.800 --> 0:06:26.360 of equity equality, gender equality, but because he looked at 0:06:26.480 --> 0:06:29.840 their Twitter following and the deals they were getting as 0:06:29.880 --> 0:06:34.080 individual players, the popularity of these women, So many people 0:06:34.080 --> 0:06:35.359 are interested in what they had to say and are 0:06:35.400 --> 0:06:38.800 paying money for their the goods that they're selling. And 0:06:38.839 --> 0:06:40.960 he said the collective value of the team was far 0:06:41.120 --> 0:06:44.880 less than even one player. Yeah, you know, interesting. Yeah 0:06:44.880 --> 0:06:46.960 for him, he said, it's a huge business opportunity. And 0:06:47.000 --> 0:06:49.640 he also bought a little piece for his now five 0:06:49.760 --> 0:06:53.400 year old daughter. She's the youngest sports own owner in America. 0:06:53.600 --> 0:06:55.960 All Right, I were real quick third thirty seconds, twenty 0:06:56.040 --> 0:06:59.160 five basis points on the third. Are we done then? 0:07:00.200 --> 0:07:00.400 Yeah? 0:07:00.640 --> 0:07:03.640 I think we very well. Maybe, but obviously, if we 0:07:03.720 --> 0:07:06.279 keep on getting inflation data that creeps higher and higher, 0:07:06.800 --> 0:07:09.640 it's possible that they go another twenty five in June. 0:07:09.680 --> 0:07:12.960 But I think after that that they'll be done because 0:07:13.120 --> 0:07:14.840 the Fed is worried about going too far and they 0:07:14.840 --> 0:07:17.520 don't want to plunge the economy into a recession. 0:07:17.960 --> 0:07:20.640 All right, Ira Jersey, he's our guy on the rates. 0:07:20.760 --> 0:07:22.680 I mean, we'll talk to him next week. Of course, 0:07:22.680 --> 0:07:24.640 we'll see what this Federal Reserve is going to do again. 0:07:24.880 --> 0:07:27.720 Twenty five basis points kind of priced in IRA Jersey, 0:07:27.800 --> 0:07:29.920 Chief US and straight strategist. Thank you so much, Herman 0:07:30.000 --> 0:07:32.920 Chan in the studio. This man does not mail it in, 0:07:33.000 --> 0:07:35.680 he does not phone it in. He's at his post 0:07:35.760 --> 0:07:39.240 every day and he's been very widely needed here over 0:07:39.240 --> 0:07:41.080 the past month and a half as we try to 0:07:41.160 --> 0:07:44.200 navigate some of the turmoil, some of the stress in 0:07:44.400 --> 0:07:46.960 the banking system, particularly on some of these regional banks. 0:07:47.520 --> 0:07:50.280 And we also have the credit Swiss ubs thing, so 0:07:50.320 --> 0:07:52.640 there's been some challenges there in the banking space and 0:07:52.640 --> 0:07:55.360 that's spoop the market a little bit. So we're appreciative 0:07:55.600 --> 0:07:57.360 of getting Herman's expertise. 0:07:59.120 --> 0:08:02.960 You're listening to the Ken's Our Line program Bloomberg Markets 0:08:03.000 --> 0:08:06.080 weekdays at ten am Eastern on Bloomberg dot com, the 0:08:06.160 --> 0:08:09.320 iHeartRadio app and the Bloomberg Business App, or listen on 0:08:09.360 --> 0:08:11.480 demand wherever you get your podcasts. 0:08:13.160 --> 0:08:16.000 All right, let's be honest, folks. Bond Guy screwed up 0:08:16.080 --> 0:08:19.600 bad last year. I mean, double digit declients everywhere across 0:08:19.640 --> 0:08:21.480 the fixed income space. But they're making up for it 0:08:21.480 --> 0:08:24.640 a little bit here. In twenty twenty three, the Bloomberg 0:08:24.920 --> 0:08:29.320 u US Aggregatortal return value unheedged index whatever that is, 0:08:29.320 --> 0:08:31.280 is up three point four to six percent year to date, 0:08:31.320 --> 0:08:33.480 so that's pretty good. So let's bring in George Bori. 0:08:33.520 --> 0:08:36.000 He's a chief investment strategist covering fixed income space for 0:08:36.040 --> 0:08:39.160 all Spring Global Advisors, who are located just outside of 0:08:39.200 --> 0:08:41.319 Lovely Milwaukee, Wisconsin, but he's based here in New York. 0:08:41.760 --> 0:08:43.880 He joins us here in our Bloomberg Interactive Broker Study. 0:08:43.920 --> 0:08:45.680 We appreciate you coming in, George. You get a gold 0:08:45.679 --> 0:08:48.600 star for showing up and not phoning it in. Talk 0:08:48.640 --> 0:08:51.800 to us about the difference between this year to date 0:08:52.120 --> 0:08:53.720 and what you guys had to do with last year. 0:08:54.400 --> 0:08:56.960 Yeah, well, good morning, thanks for having me on the show. 0:08:57.640 --> 0:08:58.800 We're a very different. 0:08:58.480 --> 0:09:01.559 Point in the economic cycle. You know, the Fed's obviously 0:09:01.880 --> 0:09:06.080 much more advanced in terms of rate tightening, and although 0:09:06.120 --> 0:09:09.960 we continue to see, you know, some ongoing inflation pressures. 0:09:09.960 --> 0:09:12.200 What we like to say is, you know, inflation's off 0:09:12.240 --> 0:09:16.040 the boil, but it's still still pretty hot and coming down. 0:09:16.400 --> 0:09:17.640 So you need it to come down. 0:09:17.720 --> 0:09:19.760 So you think, then we're set up for one more 0:09:19.800 --> 0:09:22.720 hike and then hold. I mean that's pretty much consensus. 0:09:23.040 --> 0:09:26.360 But if we have financial stability, assuming we don't have 0:09:26.400 --> 0:09:29.920 a banking industry and crisis. I can't imagine why the 0:09:29.960 --> 0:09:32.800 Fed would hold at you know, still between five and 0:09:32.880 --> 0:09:35.560 six percent of sticky inflation. 0:09:36.400 --> 0:09:39.400 Now today's data makes it tricky, and you know, I 0:09:39.440 --> 0:09:42.640 think the bias is to move to a pause, but 0:09:43.160 --> 0:09:45.800 you know, they don't have the all clear. They certainly 0:09:45.840 --> 0:09:49.320 don't have the cover to do it without some risk. 0:09:49.400 --> 0:09:52.840 And so you know, yes, raising rates one more time 0:09:52.960 --> 0:09:56.400 certainly makes sense. You know, we need to see in 0:09:57.120 --> 0:10:00.360 FED funds rate above the level of core inflation. At 0:10:00.360 --> 0:10:02.520 that point, you know, the Fed can be a little 0:10:02.520 --> 0:10:05.160 bit more disciplined, but we're simply not there yet, and 0:10:05.200 --> 0:10:08.440 with core inflation showing some signs of moving up, that 0:10:08.480 --> 0:10:09.559 may keep pressure on them. 0:10:09.600 --> 0:10:11.000 Yeah, we're at four point nine percent. 0:10:11.040 --> 0:10:13.000 The core PCEE quarter of a quarter came in at 0:10:13.000 --> 0:10:15.440 four point nine percent today, so we were looking for 0:10:15.480 --> 0:10:19.920 four point seven percent. Yeah, that's going the wrong direction essentially. 0:10:20.160 --> 0:10:22.880 Yeah, all right, So George, I'm not sure if you 0:10:22.920 --> 0:10:25.199 can't keep a job or you just like working all 0:10:25.200 --> 0:10:28.400 over Wall Street JP Morgan Ubs Securities, Wells Farger. You've 0:10:28.400 --> 0:10:30.840 been doing is for a long time. Where are you, guys? 0:10:31.400 --> 0:10:33.160 Given where we are in cycle. Given where we are 0:10:33.240 --> 0:10:36.240 with the FED, where are you guys at offspring thinking 0:10:36.280 --> 0:10:38.280 about the best opportunities at fixed income right here? 0:10:38.320 --> 0:10:40.360 So these were all tactical moves, just to be very 0:10:41.559 --> 0:10:44.640 self initiated, not firm initiated, at least not yet. 0:10:44.720 --> 0:10:46.120 So hopefully that continues. 0:10:46.920 --> 0:10:50.080 But I think if I've learned anything over thirty plus years, 0:10:50.120 --> 0:10:53.440 you know, as a fixed income investor, income matters. You know, 0:10:53.480 --> 0:10:56.079 that's ninety plus percent of your return as you move 0:10:56.120 --> 0:10:59.840 through time, and your best forward looking indicator or predictor 0:10:59.880 --> 0:11:03.079 of returns is just your simple starting yield. So beginning 0:11:03.080 --> 0:11:05.360 of the year, yields are pretty high. You know, that 0:11:05.480 --> 0:11:08.319 was sort of a good entry point from our perspective 0:11:08.720 --> 0:11:12.960 to certainly make a meaningful move into fixed income. You know, 0:11:13.040 --> 0:11:15.520 as the year has unfolded, you know, with all these 0:11:15.559 --> 0:11:19.079 sort of conflicting economic signals and really sort of the 0:11:19.360 --> 0:11:24.080 reminder that yields are relatively high, adding duration to your 0:11:24.120 --> 0:11:28.320 portfolio is effectively the kicker. That's really where you're gonna 0:11:28.400 --> 0:11:32.440 get a little bit of extra return in the portfolio. 0:11:32.600 --> 0:11:35.160 And we've seen that so far year to date. As 0:11:35.200 --> 0:11:37.760 you mentioned the ag up, you know, let's call it 0:11:37.800 --> 0:11:40.320 three and a half percent year to date. That's pretty 0:11:40.360 --> 0:11:43.760 good by bond in bond terms for three months or 0:11:43.840 --> 0:11:47.120 four months of effort. And so to the extent, you know, 0:11:47.320 --> 0:11:50.440 expectations are that number could probably double over the course 0:11:50.480 --> 0:11:54.079 of the year. You know, seven percent return doesn't necessarily 0:11:54.160 --> 0:11:57.920 earn back everything from last year, but gets you, you know, 0:11:58.200 --> 0:12:00.760 almost half of what we love. And so as we 0:12:00.800 --> 0:12:03.680 move through time, you want to compound at the highest 0:12:03.760 --> 0:12:06.920 rate possible, and we're doing that basically in just about 0:12:06.960 --> 0:12:08.480 every strategy that we manage. 0:12:09.120 --> 0:12:12.120 What's on your dashboard, George, when you look especially at 0:12:12.720 --> 0:12:17.800 you know, the try to engage the health of corporate 0:12:17.880 --> 0:12:22.680 America or you know, corporates globally, it seems from looking 0:12:22.720 --> 0:12:23.439 at spreads to. 0:12:23.440 --> 0:12:24.800 Me like they're pretty healthy. 0:12:24.880 --> 0:12:29.480 But if I look at other interest rate indications, we're 0:12:29.480 --> 0:12:32.319 headed for a recession. So how do you what's the 0:12:32.400 --> 0:12:34.680 data that you look at every morning to do your job? 0:12:35.200 --> 0:12:37.240 Yeah, I mean, I think what's unique about this cycle? 0:12:37.400 --> 0:12:39.680 You know, it's not a great surprise, but inflation is 0:12:39.720 --> 0:12:42.400 both you know, it's it's a it's a double edged sword. 0:12:42.840 --> 0:12:45.000 You know, it generates a lot of nominal income for 0:12:45.040 --> 0:12:48.960 both individuals as well as companies, and that nominal income 0:12:49.080 --> 0:12:51.120 is ultimately used to pay back debts. So when we 0:12:51.160 --> 0:12:55.200 see companies that have good, solid balance sheets, ones that 0:12:55.240 --> 0:12:58.640 are pretty well funded, not a lot of immediate borrowing needs, 0:12:58.679 --> 0:13:02.079 and relatively low cost of debt, they're in a good 0:13:02.120 --> 0:13:05.000 position to kind of weather a lot of economic volatility. 0:13:05.240 --> 0:13:07.600 And that's really what we're seeing, and that kind of 0:13:07.600 --> 0:13:09.920 moves up and down the rating spectrum. That's not just 0:13:10.280 --> 0:13:12.760 you know, the very highly rated triple A rated of 0:13:12.800 --> 0:13:15.280 the few that exist companies in the world, but that 0:13:15.320 --> 0:13:17.480 can kind of go all the way down kind of 0:13:17.480 --> 0:13:19.960 the credit spectrum. And so what do I worry about. 0:13:20.000 --> 0:13:23.080 I worry about companies and individuals that are attached to 0:13:23.200 --> 0:13:26.640 floating rate debt costs because they've gone up, they've gone 0:13:26.679 --> 0:13:29.040 up a lot, they've gone up quickly, and they are 0:13:29.080 --> 0:13:31.439 now sort of working through and we're seeing it in earnings. 0:13:31.440 --> 0:13:34.880 You're seeing you're seeing margin pressure. You're seeing now that 0:13:35.520 --> 0:13:38.960 a reduction in capital spending and all that has to 0:13:38.960 --> 0:13:41.400 do with the cost of capital. So that is working 0:13:41.440 --> 0:13:44.000 its way through the system. But we don't have the 0:13:44.040 --> 0:13:47.760 same kind of pressures in say one specific sector like 0:13:47.800 --> 0:13:50.400 we had in eight or even in the dot com 0:13:50.400 --> 0:13:53.360 bubble back in two thousand and so this is kind 0:13:53.400 --> 0:13:56.600 of a long drawn out exercise, and for us as 0:13:56.679 --> 0:13:59.520 bond investors, you know, sort of that quality that that 0:13:59.600 --> 0:14:04.120 company analysis becomes absolutely critical. We can build good portfolios 0:14:04.160 --> 0:14:07.920 with good companies that have very strong predictive paying power, 0:14:08.320 --> 0:14:11.559 and that's where you sort of grab today's yields. You 0:14:11.640 --> 0:14:15.760 capture it, and you continuously compound it through time. If 0:14:15.840 --> 0:14:18.400 you can avoid permanent impairment, you win. 0:14:19.320 --> 0:14:21.320 George, I know you've got a lot of experience in 0:14:21.320 --> 0:14:23.880 a high yield space here. You know, if I'm staring 0:14:23.960 --> 0:14:28.280 down our recession, do I allocate capital incremental capital to 0:14:28.320 --> 0:14:30.680 the highild space or might just too worried about again 0:14:30.720 --> 0:14:32.720 the potential recession and credit quality and all that kind 0:14:32.720 --> 0:14:33.120 of stuff. 0:14:33.480 --> 0:14:36.320 I think that the basic, you know, sort of assumption 0:14:36.480 --> 0:14:40.000 is avoid high yield going into a recession. You know, 0:14:40.120 --> 0:14:43.080 it's a good rule of thumb, but it's not exclusive. 0:14:43.200 --> 0:14:46.080 And as I mentioned, you know, what's unique about this 0:14:46.160 --> 0:14:48.160 cycle is we have a wide range of companies that 0:14:48.240 --> 0:14:52.280 have very very well funded capital structures that includes high 0:14:52.320 --> 0:14:55.120 yield companies. I mean, if you just simply avoided the 0:14:55.200 --> 0:14:58.320 lowest and riskiest sectors of the market like triple c's 0:14:59.200 --> 0:15:02.440 that that you've already taken out, like the line's share 0:15:02.480 --> 0:15:06.160 of default risk in the universe. You haven't eliminated it, 0:15:06.320 --> 0:15:08.840 but you've taken most of it out. And so just 0:15:08.920 --> 0:15:11.640 moving a little bit up in quality and focusing on 0:15:11.680 --> 0:15:14.480 say triple b's, double B single bee companies. Those are 0:15:14.520 --> 0:15:17.320 the ones that are kind of hovering between investment create 0:15:17.400 --> 0:15:21.640 and high yield companies that are paying six, seven, sometimes 0:15:21.680 --> 0:15:26.600 eight percent yields and have good earnings transparency as well 0:15:26.680 --> 0:15:30.200 as a well funded capital structure. To us that those 0:15:30.240 --> 0:15:34.400 are very attractive opportunities, So our messages don't throw the 0:15:34.440 --> 0:15:36.920 baby out with the bathwater, you know, be willing to 0:15:37.000 --> 0:15:40.560 sort of look for those high quality companies regardless of 0:15:40.560 --> 0:15:43.080 their rating, and then stick with them as you move 0:15:43.160 --> 0:15:45.880 through time. So, you know, we like that segment of 0:15:45.920 --> 0:15:47.760 the market. We like it in the front end of 0:15:47.800 --> 0:15:50.640 the curve, so shorter duration, so constrain some of that 0:15:50.760 --> 0:15:54.560 interest rate sensitivity and sort of capture that sort of 0:15:54.600 --> 0:15:58.040 seven percent running yield and just try and compound it 0:15:58.120 --> 0:16:01.440 and use that income to fund other parts of your strategy. 0:16:02.520 --> 0:16:05.440 All right, So I mean, in your high yield models, 0:16:05.440 --> 0:16:08.560 are your analysts what are they kind of modeling in 0:16:08.600 --> 0:16:10.920 here for top line? I know it varies by industry, 0:16:10.920 --> 0:16:13.240 but I mean, are you guys, is your base case 0:16:13.360 --> 0:16:15.400 a recession model that you guys have had in your 0:16:15.400 --> 0:16:18.080 back pocket for several years? Are you bringing that recession 0:16:18.080 --> 0:16:19.400 model out? And that's my base case. 0:16:19.520 --> 0:16:22.960 Our base case is no growth. Okay, so high nominal growth, 0:16:23.440 --> 0:16:27.520 zero real growth. In that world, companies still make money. 0:16:27.800 --> 0:16:31.720 It's just in real terms, who has pricing power, who's 0:16:31.840 --> 0:16:35.200 keeping pace with sort of the economic backdrop that we're seeing, 0:16:35.560 --> 0:16:37.800 and so we're sort of seeming to be sliding in 0:16:37.800 --> 0:16:40.200 that direction. Today's data tells us that we're in a 0:16:40.600 --> 0:16:43.400 what we'd call kind of a slow flation world. You know, 0:16:43.480 --> 0:16:46.800 maybe we're sliding towards stagflation, but we're not there yet. 0:16:47.040 --> 0:16:50.560 But in a world of slow flation, there are companies 0:16:50.600 --> 0:16:54.400 that are keeping pace with kind of pricing pressures. They're 0:16:54.440 --> 0:16:57.920 maintaining their margins and for the most part, you know, 0:16:58.160 --> 0:17:01.400 as a debt person, they don't have big borrowing needs. 0:17:01.760 --> 0:17:02.840 They might have a lot of. 0:17:02.800 --> 0:17:05.120 Debt to begin with, but they don't have a lot 0:17:05.160 --> 0:17:09.040 of borrowing needs going forward. So from that perspective, we 0:17:09.080 --> 0:17:11.720 can find good companies, and you know those are that's 0:17:11.720 --> 0:17:14.239 what's in our high yield bond fund, that's what's in 0:17:14.280 --> 0:17:17.159 our short duration high income fund. That's in kind of 0:17:17.160 --> 0:17:21.000 our more aggressive fixed income strategies. And you know, those 0:17:21.200 --> 0:17:24.280 prices move around, but the paying ability of those companies 0:17:24.359 --> 0:17:25.359 is pretty strong. 0:17:25.720 --> 0:17:27.199 All right, George, thanks so much for coming in. I 0:17:27.200 --> 0:17:30.360 really appreciated George Borri. He is the chief investment strategist 0:17:30.600 --> 0:17:34.800 covering all the fixed income stuff for Allspring Global Investments. 0:17:34.840 --> 0:17:34.959 Here. 0:17:34.960 --> 0:17:37.359 We appreciate them coming into the Bloomberg and Actor Broker studio. 0:17:37.440 --> 0:17:40.120 Just looking at the yield right here in the treasury market, 0:17:40.160 --> 0:17:42.800 we've got the ten year treasury up about seven basis 0:17:42.800 --> 0:17:45.359 points three point five to one percent, a little bit 0:17:45.400 --> 0:17:47.720 more action there, and movement in the two year space. 0:17:48.160 --> 0:17:51.000 We got it up ten basis points four point zero 0:17:51.119 --> 0:17:54.359 five percent on your two years, So getting paid the 0:17:54.440 --> 0:17:56.680 kind of weight there in that short term paper that 0:17:56.760 --> 0:17:57.679 kind of gets your attention. 0:17:58.080 --> 0:18:01.680 You're listening to the Take kens Are program Bloomberg Markets 0:18:01.760 --> 0:18:05.520 weekdays at ten am Eastern on Bloomberg Radio, tune in app, 0:18:05.560 --> 0:18:08.399 Bloomberg dot Com, and the Bloomberg Business App. You can 0:18:08.440 --> 0:18:11.679 also listen live on Amazon Alexa from our flagship New 0:18:11.760 --> 0:18:16.080 York station, Just say Alexa play Bloomberg eleven thirty. 0:18:17.000 --> 0:18:19.840 We got Mara Goldstein. She's a biotech analyst at miss 0:18:19.920 --> 0:18:23.440 Zuho and she joined us share Mara, thanks so much 0:18:23.440 --> 0:18:25.000 for joining us. You really appreciate it. I know you 0:18:25.080 --> 0:18:28.160 upgraded recently. Hang on, what go Mayra? 0:18:28.280 --> 0:18:31.359 Before we get to the world of drugs, we got 0:18:31.359 --> 0:18:33.120 to talk about your resume. 0:18:33.880 --> 0:18:36.399 Go Alex Brown. I love Alex Brown. 0:18:36.520 --> 0:18:41.480 Yeah, yeah, yeah, you're publicly outing me. But yeah, Alex Brown. 0:18:42.160 --> 0:18:44.080 Was that in Baltimore? Or is that was that in Baltimore, 0:18:44.119 --> 0:18:44.359 New York? 0:18:45.160 --> 0:18:47.840 So I was here in New York, based in Baltimore. 0:18:48.040 --> 0:18:50.880 All right, Yeah, Drew Marcus was my arch competitor at 0:18:51.119 --> 0:18:51.760 alex bid. 0:18:52.320 --> 0:18:53.520 Yeah. 0:18:54.119 --> 0:18:55.879 Now we're good, good buddies. It brings me back to 0:18:55.960 --> 0:18:59.560 my days at Tucker Anthony. Yeah, go back, back back. 0:19:00.200 --> 0:19:02.400 I know you upgraded Merk recently. What's the call there? 0:19:02.440 --> 0:19:04.280 I mean this is a big company. I forgot it's 0:19:04.280 --> 0:19:06.000 so big, two hundred and eighty billion of market cap. 0:19:06.080 --> 0:19:08.639 The stocks kind of unchanged here to date. What's your 0:19:08.720 --> 0:19:09.360 call here on MERK? 0:19:10.080 --> 0:19:12.160 So we upgraded Mark at the end of last year, 0:19:12.160 --> 0:19:15.360 and it was based on our view that so Tattertep, 0:19:15.440 --> 0:19:18.199 which is a product that the company acquired to the 0:19:18.240 --> 0:19:21.240 acquisition of accelera On, would be a great product. We 0:19:21.280 --> 0:19:24.080 saw the data, the Phase three data earlier this year. 0:19:24.119 --> 0:19:26.119 It looks like it's it looks like it's going to 0:19:26.119 --> 0:19:29.159