WEBVTT - More Fed Rate Cuts Will Help EM Assets: Eric Stein 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg PENL podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.760 Along with my co host Lisa Brahmas. Each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor, find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:24.560 Bloomberg dot com. Yields around the world have plunged to 0:00:24.880 --> 0:00:27.920 near or record lows in the past few weeks. The 0:00:28.000 --> 0:00:30.680 question is how low will they go? What is this 0:00:30.800 --> 0:00:34.159 a response to? Is it monetary policy alone or is 0:00:34.159 --> 0:00:37.199 it the idea that we're headed for a global downturn. 0:00:37.320 --> 0:00:39.839 Joining us now is Eric Stein, portfolio manager and co 0:00:39.920 --> 0:00:42.479 director of Global fixed income at Eaton Vance, which oversees 0:00:42.479 --> 0:00:46.040 four hundred and sixty billion dollars in Boston. Eric, thank 0:00:46.080 --> 0:00:47.960 you so much for being with us. I want to 0:00:48.000 --> 0:00:51.519 start with your prediction going forward. Have we seen the 0:00:51.600 --> 0:00:56.040 lows of US treasury yields in particular? Um? Well, first off, 0:00:56.040 --> 0:00:58.760 thanks for having me on you great great question. Uh, 0:00:58.800 --> 0:01:01.040 you know, I still think we probably will head lower 0:01:01.080 --> 0:01:04.040 at some point. Um. You know, both given just pressure 0:01:04.160 --> 0:01:07.720 from global monetary policy where we're one central bank cuts 0:01:07.760 --> 0:01:10.160 and then more need to cut, as well as the 0:01:10.240 --> 0:01:12.760 US China trade war. And you know what's interesting to 0:01:12.800 --> 0:01:14.880 me is that everyone's focused on the FED meeting last 0:01:14.920 --> 0:01:17.560 week with the you know, slightly more more hawkish than expected, 0:01:17.600 --> 0:01:20.560 but cut uh. And then when the trade war ramped up, 0:01:20.560 --> 0:01:23.720 you just saw massive, massive amounts more and more an 0:01:23.720 --> 0:01:26.639 interest rate volatility from the trade war and the tariff 0:01:26.680 --> 0:01:28.920 tweet from Trump then you actually did from the FED meeting. 0:01:29.440 --> 0:01:32.360 So Eric, wonder kind of what the house call is 0:01:32.440 --> 0:01:36.280 on the economy as you guys with your vast holdings. 0:01:36.319 --> 0:01:39.959 I mean, I seem to have growing concern about the 0:01:39.959 --> 0:01:43.480 global slowdown and might create a global recession. How are 0:01:43.480 --> 0:01:45.640 you guys viewing it? Yeah, so I'd say, you know, 0:01:45.680 --> 0:01:47.320 first of the great thing at being in a place 0:01:47.400 --> 0:01:49.400 like Eating Vance, we don't have a house call. We 0:01:49.440 --> 0:01:52.160 have you know, lots of different portfolio managers running running 0:01:52.160 --> 0:01:54.280 different funds around the firm. We all have our own 0:01:54.720 --> 0:01:56.640 different views on the economy, so that there is no 0:01:56.720 --> 0:02:00.120 house view per se at Eating Vance management. But you know, 0:02:00.160 --> 0:02:02.360 I will say my own particular view is that you know, 0:02:02.400 --> 0:02:04.880 the economy is still okay, that pretty good. You know, 0:02:04.960 --> 0:02:09.840 globally you see strong consumers, strong labor markets, yet weak investment. 0:02:10.520 --> 0:02:12.640 What you know, what would concern me is just that, 0:02:12.800 --> 0:02:15.560 you know, uncertainty and lack of investment that we've really 0:02:15.600 --> 0:02:18.200 seen for for some period of time has ramped up. 0:02:18.639 --> 0:02:21.480 And if the trade war rhetoric and tariffs are ramp up, 0:02:22.040 --> 0:02:24.080 you know, that could lead to the further concerns. So 0:02:24.200 --> 0:02:26.560 right now, the US economy consumers in very good shape, 0:02:26.800 --> 0:02:29.320 labor markets in very good shape. It's just the delta 0:02:29.919 --> 0:02:33.280 based on investment is what's concerning people and concerning me 0:02:33.320 --> 0:02:35.640 as well. Eric. It's interesting you say that people have 0:02:35.720 --> 0:02:38.399 different views within eating vans and are able to execute 0:02:38.440 --> 0:02:42.880 on them. What's the biggest debate among Yeah, so, you know, 0:02:42.919 --> 0:02:44.959 i'd I'd say one debate I have with some of 0:02:45.040 --> 0:02:47.600 my colleagues on you know, is does the does these 0:02:47.680 --> 0:02:51.040 yield curve matter? Does the shape of the yield curve, uh, 0:02:51.080 --> 0:02:53.679 you know, actually meet anything? And you know, I have been, 0:02:53.800 --> 0:02:56.320 you know, personally of the view that the yield curve 0:02:56.320 --> 0:03:00.520 connotes information and investors should not ignore information. And I 0:03:00.560 --> 0:03:02.680 think I wrote a blog post that or et vance website, 0:03:02.720 --> 0:03:05.040 you know, ignore it, ignore it at your peril. You're 0:03:05.040 --> 0:03:07.520 talking about the three months tenure or the two year 0:03:07.560 --> 0:03:09.959 tenure or all of them, all of the above. You know, 0:03:10.000 --> 0:03:12.280 I don't get so precise and you know, which a 0:03:12.400 --> 0:03:14.360 part of the curve because they think, you know, focusing 0:03:14.360 --> 0:03:16.560 on a couple of basis points in version here there, 0:03:16.600 --> 0:03:19.239 I think is missing the bigger point. Uh. And certainly 0:03:19.280 --> 0:03:21.680 their arguments and sometimes my colleagues make them that look 0:03:21.760 --> 0:03:24.079 certain parts of the curve or uh, you know, or 0:03:24.960 --> 0:03:28.079 are misleading because of you know, FED purchases and other 0:03:28.080 --> 0:03:30.359 foreign central bank purchases and treasuries. And I think all 0:03:30.400 --> 0:03:33.000 that's true. Um. But to me, when you see you know, 0:03:33.080 --> 0:03:35.800 significant moves in the curve, it's telling your information. So 0:03:35.840 --> 0:03:37.640 if you go back to the FED meeting last week, 0:03:37.680 --> 0:03:40.920 that hawk ish cut um, Fed cut rates, and the 0:03:41.000 --> 0:03:44.800 yield curve flattened pretty dramatically, which is not typically what 0:03:44.840 --> 0:03:47.800 a central bank would want to see when they're cutting 0:03:47.920 --> 0:03:51.000 rates and trying to ease monetary policy. So, Eric, we 0:03:51.040 --> 0:03:54.080 have over fifteen billion or trillion dollars of negative yielding 0:03:54.160 --> 0:03:56.560 debt out there in the marketplace. What do you think 0:03:56.560 --> 0:04:00.200 that's telling us? I think it's it's telling you know, well, 0:04:00.440 --> 0:04:02.480 a few things. One is, there's uh, you know, a 0:04:02.520 --> 0:04:05.560 lot of countries that have negative interest rates at the 0:04:05.560 --> 0:04:09.680 front end, whether that be Europe, Japan, UH, Switzerland, countries 0:04:09.720 --> 0:04:12.200 like that. Uh. In addition, it's just saying, you know, 0:04:12.240 --> 0:04:14.520 some of those places, I say, particularly in Europe and 0:04:14.520 --> 0:04:17.200 I think of Germany, you know, there's just too much 0:04:17.400 --> 0:04:21.400 demand for that debt relative to supply. And you know, 0:04:21.480 --> 0:04:24.479 typically my own view isn't then I'm usually not a big, 0:04:24.480 --> 0:04:28.200 big believer of fiscal stimulus per se, because I sometimes 0:04:28.200 --> 0:04:30.919 think it's misguided. But I think in the current environment, 0:04:31.000 --> 0:04:34.640 and particularly in Europe and particularly in Germany, the market 0:04:34.680 --> 0:04:37.560 is effectively demanding more debt, and I think, you know, 0:04:38.120 --> 0:04:40.240 in Europe and Germany, I think we will see more 0:04:40.240 --> 0:04:42.960 fiscal stimulus down the road, and I think that's very 0:04:43.000 --> 0:04:46.720 much needed. So you previously worked on the market's desk 0:04:46.839 --> 0:04:49.080 of the New York Federal Reserve, which makes me want 0:04:49.120 --> 0:04:51.159 to ask so many questions to you about what we've 0:04:51.200 --> 0:04:53.800 recently seen in terms of the turmoil there and some 0:04:53.880 --> 0:04:58.000 of the people who have departed. Are you concerned that 0:04:58.160 --> 0:05:01.560 the Federal Reserve doesn't necessary really have the market insight 0:05:01.839 --> 0:05:06.280 to be able to telegraph their intentions effectively, as I 0:05:06.320 --> 0:05:08.680 would say, no, that's not a particular concern of mind. 0:05:08.720 --> 0:05:10.520 You know, as a as a veteran who worked in 0:05:10.560 --> 0:05:12.520 the New York Fed Open Markets desk in oh seven 0:05:12.640 --> 0:05:14.480 o eight in the really the beginning of the crisis, 0:05:14.880 --> 0:05:16.520 you know, and I still keep in touch with people there. 0:05:16.520 --> 0:05:18.760 There are lots of you know, very talented professionals that 0:05:18.839 --> 0:05:21.560 whose job it is to um, you know, talk to 0:05:21.640 --> 0:05:24.640 financial market participants and kind of gauge market reaction of 0:05:25.000 --> 0:05:28.520 various um, you know, Paul, of various monetary policy actions 0:05:28.560 --> 0:05:31.799 where whether that be FED cutting rates, or or operations 0:05:31.800 --> 0:05:34.600 with the balance sheet or even sometimes you know, FED speeches. 0:05:34.600 --> 0:05:37.640 Where I think it becomes challenging is when there are 0:05:38.040 --> 0:05:40.720 FED speeches that are sometimes designed to kind of give 0:05:40.720 --> 0:05:45.320 a a Fed Reserve officials kind of medium term view, UM, 0:05:45.400 --> 0:05:48.120 but market participants a kind of are looking at it 0:05:48.160 --> 0:05:51.280 word by word, and I think that's where the FEDS communication, 0:05:51.440 --> 0:05:53.520 you know, gets really really challenging. Well, and then there's 0:05:53.520 --> 0:05:56.160 also the expectation currently baked into markets that there will 0:05:56.160 --> 0:05:58.320 be four rate cuts by the end of next year. 0:05:58.400 --> 0:06:01.520 Do you think that the Federal Reserve will deliver on that. 0:06:02.640 --> 0:06:05.400 So look, honestly, to me, it's it's it's it's about 0:06:05.440 --> 0:06:07.919 the trade war, and it's about you know, what you 0:06:07.920 --> 0:06:10.400 see with inflation expectations. I think we will get you know, 0:06:10.440 --> 0:06:14.160 significantly more rate cuts from here, uh, and then it's 0:06:14.200 --> 0:06:16.800 really what happens from that, um, you know. And I 0:06:16.839 --> 0:06:18.719 think that the Fed, you know, if anything, would like 0:06:18.760 --> 0:06:21.599 to be forward looking, uh and do more rate cuts 0:06:21.680 --> 0:06:24.400 earlier than not to have to get to the zero 0:06:24.920 --> 0:06:27.040 lower bound issue. And I think, you know, to some extent, 0:06:27.080 --> 0:06:29.279 it was tough on the communication again last week. It 0:06:29.320 --> 0:06:33.320 was all before the trade war tweets heat up again. Um. 0:06:33.360 --> 0:06:35.919 But but by cutting rates but doing so in a 0:06:35.960 --> 0:06:39.400 hawkish manner, you know, they didn't really get inflation expectations up. 0:06:39.440 --> 0:06:42.600 So to me, yes, the trade war matters, um, but 0:06:42.640 --> 0:06:45.279 it's also about inflation expectations. And if I were the FED, 0:06:45.279 --> 0:06:48.479 I'd be concerned that the inflation expectations are now lower 0:06:49.040 --> 0:06:53.120 than they were before before they cut rates. So, Eric, 0:06:53.160 --> 0:06:55.720 given your sense that that rates are likely to go down, 0:06:55.920 --> 0:06:58.680 what does how does that kind of position your view 0:06:58.720 --> 0:07:02.159 on emerging markets? Yes, well, you know, it's a great question. 0:07:02.279 --> 0:07:05.280 I think that's to me one of the real beneficiaries 0:07:05.320 --> 0:07:08.320 of this race to the bottom in developed market yields 0:07:08.400 --> 0:07:11.840 is emerging markets. Um. You know, obviously you know we've 0:07:11.840 --> 0:07:13.880 eat advanced management. We we take a very much a 0:07:13.880 --> 0:07:18.080 country focused approach to investing in emerging markets and trying 0:07:18.080 --> 0:07:20.160 to find countries that are that are going in the 0:07:20.240 --> 0:07:22.480 right direction or avoid or short countries that are going 0:07:22.520 --> 0:07:24.880 in the wrong direction. But just from a broad asset 0:07:24.920 --> 0:07:28.920 class perspective, certainly having a lower base rate UH in 0:07:29.000 --> 0:07:32.880 developed market yields, whether that be US, Europe or or Japan, 0:07:33.480 --> 0:07:36.240 that you know, that makes the broad asset class, you know, 0:07:36.280 --> 0:07:39.160 all that much more attractive. So you're buying e M. 0:07:39.160 --> 0:07:42.280 Just real quick, thirty seconds, what else you're buying? So 0:07:42.440 --> 0:07:45.440 like emerging markets in treasuries, if I had their own treasuries, 0:07:45.440 --> 0:07:47.200 I said, I think rates may go down, but obviously 0:07:47.200 --> 0:07:49.000 there's not a huge amount of value. I like TIPS. 0:07:49.240 --> 0:07:51.320 I think I think the FED will ease to get 0:07:51.360 --> 0:07:55.160 inflation expectations higher. So so I like I like TIPS. 0:07:55.400 --> 0:07:58.320 Also certain parts of the mortgage markets and credit markets 0:07:58.320 --> 0:08:00.600 as well. But you know, I think we're central banks 0:08:00.600 --> 0:08:02.360 around the world, They're going to try to get inflation 0:08:02.440 --> 0:08:05.000 expectations up. So in addition to us tips, we like 0:08:05.600 --> 0:08:08.800 New Zealand inflation link bonds. We like tie inflation link bonds, 0:08:08.800 --> 0:08:11.320 so other inflation link bonds around the world as well. 0:08:11.840 --> 0:08:13.760 Eric Snyinan, thanks so much for joining us. We appreciate 0:08:13.800 --> 0:08:16.440 your time. Eric's a portfolio manager and co director of 0:08:16.480 --> 0:08:33.920 Global Fixed Income out of eating Vance based in Boston. Well, 0:08:33.960 --> 0:08:37.040 as interest rates grind lower, homebuyers are finding it more 0:08:37.120 --> 0:08:39.880 affordable to buy, So let's get the latest on the 0:08:40.000 --> 0:08:42.960 housing market. Return to our good friend Logan motor Shami. 0:08:43.040 --> 0:08:45.720 He's a senior loan officer for a mc lenning group 0:08:45.880 --> 0:08:48.520 based in Irvine, California. Logan, thanks so much for joining 0:08:48.600 --> 0:08:51.360 us again. Um again, interest rates for you've had, you know, 0:08:51.440 --> 0:08:55.080 kind of touch or get near some very long term lows. Here, 0:08:55.360 --> 0:08:56.800 give us a sense of what's going on in the 0:08:56.840 --> 0:09:00.520 housing market in this interest rate environment. Well a ten 0:09:00.600 --> 0:09:04.040 your yield finally got to my forecast on one point 0:09:04.040 --> 0:09:06.800 six percent. We've had a big reversal since the loads 0:09:06.840 --> 0:09:10.040 of yesterday. But in regards to the mortgage market, right 0:09:10.080 --> 0:09:12.920 now we're seeing an uptick in refinances. But we have 0:09:13.000 --> 0:09:15.160 to be mindful that we were working for twenty one 0:09:15.320 --> 0:09:20.040 century lows in refinance refinances. So it's not like we're 0:09:20.040 --> 0:09:23.160 having another refinancing boom. I don't think we'll surpassed twenty 0:09:23.240 --> 0:09:29.000 six never surpassed the refinance booms. So until more the 0:09:29.040 --> 0:09:33.040 tenure yield can actually break under one percent, um, well, 0:09:33.120 --> 0:09:35.680 we'll have an uptick and refinances. But a lot of 0:09:35.679 --> 0:09:40.520 that are the buyers of homes from eighteen where mortgage 0:09:40.559 --> 0:09:43.920 rates are higher. Those people can do radar term refinances. 0:09:44.240 --> 0:09:47.080 You're left looking at roughly nine million home buyers at 0:09:47.120 --> 0:09:50.400 that where those two years combined that helped them get 0:09:50.440 --> 0:09:53.160 a little bit more disposable income. In terms of existing 0:09:53.160 --> 0:09:55.480 home sales, even though mortgage rates are lower, sales are 0:09:55.480 --> 0:09:58.520 down slightly a year over year, inventories up, but new 0:09:58.559 --> 0:10:02.000 home sales. That's where low mortgage rates has really helped 0:10:02.040 --> 0:10:04.840 the housing market is the recovery and new home sales 0:10:05.200 --> 0:10:09.520 and the monthly supply draw down UH in that data line. Okay, 0:10:09.559 --> 0:10:11.200 so let's dig in a little bit there, because we 0:10:11.240 --> 0:10:13.120 do have the thirty year mortgage rate, at least is 0:10:13.120 --> 0:10:16.920 measured by Freddie Mac at the lowest since seen and 0:10:16.960 --> 0:10:20.160 continuing to fall in tandem with yields. I'm trying to 0:10:20.200 --> 0:10:22.640 figure out how much of a boost is that to 0:10:22.720 --> 0:10:26.840 the US housing market and where I mean really the 0:10:26.840 --> 0:10:28.800 best place to look as the new home sales data, 0:10:28.960 --> 0:10:32.320 I mean new home sales were trending recessionary towards the 0:10:32.440 --> 0:10:37.840 end of the monthly supply spiked up to about seven months, 0:10:37.880 --> 0:10:41.920 and when rates got lower because that's mortgage market, that's 0:10:41.960 --> 0:10:45.600 where the demand recovery came so and because of mortgage 0:10:45.679 --> 0:10:47.640 rates are low, what's going to happen is that the 0:10:47.800 --> 0:10:50.880 year over year data for all housing data is going 0:10:50.880 --> 0:10:54.160 to be positive now because the comps are a lot better, 0:10:54.280 --> 0:10:56.320 and that's where we're gonna start to see year over 0:10:56.440 --> 0:11:00.520 year games and existing home sales, depending home sales, housing starts, 0:11:00.600 --> 0:11:04.760 and new home sales, and that's where it's stabilized the 0:11:04.800 --> 0:11:08.040 market enough to where we're not going lower anymore. So 0:11:08.120 --> 0:11:09.719 that's kind of how you should look at it. It's 0:11:09.760 --> 0:11:13.560 not really boosting total home sales as much as people 0:11:13.559 --> 0:11:15.920 would like. So look and give us a sense, maybe 0:11:16.400 --> 0:11:19.360 are there any geographic areas that are sticking out to 0:11:19.400 --> 0:11:23.480 you that are particularly strong or weak. Pretty much everywhere 0:11:23.520 --> 0:11:27.360 outside of the coastal areas are doing fine. The areas 0:11:27.440 --> 0:11:30.960 that you know like, for example, California, inventories up, sales 0:11:31.000 --> 0:11:33.400 are down, things are taking longer, so that's that's a 0:11:33.440 --> 0:11:37.319 weakness of demand. Now lower mortgage rates have stabilized, I 0:11:37.360 --> 0:11:40.760 would say the California market is stabilized, maybe in the 0:11:41.000 --> 0:11:45.120 Seattle markets as well, but they're not really boosting demand 0:11:45.440 --> 0:11:48.760 on a year or your basis, even with the inventory increases. 0:11:48.840 --> 0:11:52.080 So those places are just pricey and there's just the 0:11:52.200 --> 0:11:53.800 level of buyers are just not there. But if you 0:11:53.840 --> 0:11:56.000 look at California home sales for ten years, it really 0:11:56.000 --> 0:11:58.400 hasn't done much. So we're just working off of these 0:11:58.679 --> 0:12:01.600 you know, some up years, some down years out here well, 0:12:01.600 --> 0:12:04.320 and we have seen a slowdown in luxury home sales, 0:12:04.400 --> 0:12:07.760 certainly in those areas as well as on the on 0:12:07.800 --> 0:12:09.920 the East Coast to New York City, And I'm wondering 0:12:10.240 --> 0:12:15.320 where are we in that sort of downturn cycle, you know, 0:12:15.440 --> 0:12:18.520 the luxury market. You know, mortgage rates, you know, sometimes 0:12:18.520 --> 0:12:21.760 it doesn't really impact that kind of market. It's it's 0:12:21.840 --> 0:12:24.720 it's it's money. You know. Obviously, we we see the 0:12:24.840 --> 0:12:27.480 you know, foreign buyers are down, you know from China, 0:12:27.559 --> 0:12:29.640 so that impacts just a little bit out here. But 0:12:29.760 --> 0:12:33.719 again Uh, we're getting to areas where when you adjusted 0:12:33.760 --> 0:12:36.880 to inflation, now home prices are starting to get to 0:12:37.040 --> 0:12:39.880 levels to where during the housing bubble years you needed 0:12:40.000 --> 0:12:44.080 exotic loans to really boost the luxury market out here. 0:12:44.120 --> 0:12:46.240 So you can need to keep an eye on that 0:12:46.360 --> 0:12:49.440 because you know, there's no more exotic debt anymore. So 0:12:49.520 --> 0:12:51.199 pretty much everyone who owns the house can own a 0:12:51.240 --> 0:12:54.679 house in real terms right now. But back doing a 0:12:54.720 --> 0:12:57.000 housing bubble years, you know, this is where you needed, 0:12:57.200 --> 0:12:59.800 you know, exotic products to boost the upper end of 0:12:59.840 --> 0:13:01.839 the market. We don't have that anymore. So that's that's 0:13:01.840 --> 0:13:04.840 an area to always keep an eye on considering where 0:13:04.880 --> 0:13:08.560 we are in the home price days. So logan where 0:13:08.559 --> 0:13:10.719 we in terms of kind of the credit quality of 0:13:10.800 --> 0:13:13.679 the mortgage market right now. That was obviously, uh, you know, 0:13:13.760 --> 0:13:16.360 a big big issue in the financial crisis. Kind of 0:13:16.400 --> 0:13:19.560 where we now in terms of credit quality. Credit quality 0:13:19.640 --> 0:13:24.160 is excellent, and we've never really had tight lending in America, 0:13:24.280 --> 0:13:26.640 even from two thousand and on. We've just lend to 0:13:26.679 --> 0:13:28.920 the people that can own a house, and I think 0:13:28.960 --> 0:13:32.040 that's the difference. Uh, this is the best loan profile 0:13:32.120 --> 0:13:34.320 I've seen in my twenty three years there's no exotic 0:13:34.360 --> 0:13:37.720 debts out there. The FCO scores, which means these homeowners 0:13:37.720 --> 0:13:40.280 have really good cash flow, are very high. They're very 0:13:40.280 --> 0:13:43.000 good out here. And the best part is that the 0:13:43.080 --> 0:13:46.079 nested equity, the equity position from buyers from two thousand 0:13:46.160 --> 0:13:48.640 ten or two thousand sixteen looks really solid. There's no 0:13:48.760 --> 0:13:51.520 cash out boom. This is as good as it gets 0:13:51.880 --> 0:13:54.360 in terms of credit quality in the history of America 0:13:54.480 --> 0:13:56.439 right now. And I hope we don't ruin it. You know. 0:13:56.480 --> 0:13:57.679 I know there's a lot of people out there that 0:13:57.720 --> 0:14:00.319 says lending is tight. I totally disagree with them. This 0:14:00.400 --> 0:14:03.400 is how it should be. And uh, you'll see that's 0:14:03.400 --> 0:14:05.959 when the next recession finally hits. We're not going to 0:14:06.040 --> 0:14:08.240 have a mega wave of defaults like we had in 0:14:08.240 --> 0:14:10.520 the previous cycle. Who really uptick supply would be more 0:14:10.840 --> 0:14:13.880 late cycle lending, you know, low down payment, low cycle 0:14:13.960 --> 0:14:17.080 score of homebuyers running into the recession because they have 0:14:17.160 --> 0:14:21.120 no selling equity. But the credit quality, I cannot stress 0:14:21.200 --> 0:14:24.960 how wonderful it looks in this cycle. So Logan, you 0:14:25.080 --> 0:14:28.400 nailed it when you had your call for ten year 0:14:28.560 --> 0:14:32.920 treasury yields. They did hit your target price for the year, 0:14:33.000 --> 0:14:36.200 and they have bounced from there, currently trading at one 0:14:36.200 --> 0:14:39.160 point seven five. Where do you see them going through 0:14:39.200 --> 0:14:41.720 the end of the year. Boy? That really you know, 0:14:41.760 --> 0:14:43.720 I think that tweet you and I had about you know, 0:14:43.760 --> 0:14:46.000 fifteen days ago, we said, yeah, I could get to 0:14:46.080 --> 0:14:48.240 one sixty with one selloff in the stock market. But 0:14:48.680 --> 0:14:52.120 you know what panic buying. That's what I saw the 0:14:52.200 --> 0:14:55.520 last few days. Uh, it was. It was just panic buying, 0:14:55.720 --> 0:14:58.640 similar to what we saw in twenty sixty. Now I'd 0:14:58.680 --> 0:15:01.400 like to say, hey, we got to the one sixty level, 0:15:01.440 --> 0:15:03.520 and that's it. We should we should hold the whole 0:15:03.600 --> 0:15:06.280 hold that level and yield should rise. And I've always 0:15:06.320 --> 0:15:08.960 held at this one six level because I've always had 0:15:08.960 --> 0:15:11.720 that in my prediction articles for his last five years. 0:15:11.720 --> 0:15:13.400 But right now we have a lot of things in 0:15:13.480 --> 0:15:16.680 play that I just can't you know, I can't model out. 0:15:16.760 --> 0:15:19.320 You know, who knows what Trump's gonna do with China? 0:15:19.320 --> 0:15:22.840 Who knows what China is gonna do? Bret exit two 0:15:22.840 --> 0:15:25.240 point Oh it's gonna come at Halloween. Imagine adding that 0:15:25.280 --> 0:15:28.880 to this dance. Right now, there's this so many headline risks, 0:15:29.200 --> 0:15:31.600 but in terms of the economics, because p M. I 0:15:31.720 --> 0:15:35.000 data has the ability to even go lower. That can 0:15:35.120 --> 0:15:39.800 drive UH yields lower globally and here, but we're not 0:15:39.840 --> 0:15:42.720 gonna have a double dip manufacturing recession that had the 0:15:42.800 --> 0:15:46.280 same kind of impact this. So I will hold the 0:15:46.360 --> 0:15:48.600 line here at one sixty and say that this is 0:15:48.640 --> 0:15:51.520 the low for the year. But if you get p 0:15:51.720 --> 0:15:53.480 m I data to get worse, if you get to 0:15:53.600 --> 0:15:56.280 China and Trump trade wars to start, you know, going 0:15:56.320 --> 0:15:58.800 at each other left and right, if Bret exit two 0:15:58.880 --> 0:16:02.280 becomes really messy. But absolutely not only could the tenure 0:16:02.360 --> 0:16:05.480 deel go below one, we could take the tenure heel below, 0:16:06.840 --> 0:16:11.640 but those are things that we can't control. Loogan Modashami, 0:16:11.680 --> 0:16:13.560 thank you so much for being with us and sharing 0:16:13.560 --> 0:16:16.760 your insights with us today. Logan Modashami, a senior loan 0:16:16.800 --> 0:16:20.640 officer at MC Lending Group, joining us on the housing 0:16:20.680 --> 0:16:24.040 market and yields him saying that one point six on 0:16:24.120 --> 0:16:44.880 the tenure probably is the year's low. Well, I would 0:16:44.920 --> 0:16:47.080 like to give a narrative to today, Paul. I think 0:16:47.120 --> 0:16:49.600 that there is a narrative picking up, which is people 0:16:49.640 --> 0:16:53.239 have exhausted themselves, having some of themselves having a tantrum 0:16:53.280 --> 0:16:58.120 over the prospect of a global trade debacle and are 0:16:58.280 --> 0:17:02.480 basically now going back and looking at specific companies and 0:17:02.640 --> 0:17:06.239 actual economic data. Dave Wilson, Bloebergs Socks Editor, joining us 0:17:06.280 --> 0:17:09.280 here in the Bloomberg Interactive Broker Studios. Do you think 0:17:09.280 --> 0:17:11.560 that that's fair? I mean, it's sort of like a child, 0:17:11.600 --> 0:17:13.719 a toddler that has a tantrum and then only can 0:17:13.760 --> 0:17:15.679 go on for so long before they just get tired. 0:17:17.520 --> 0:17:21.200 If that's how you want to characterize characterizing, go for it, 0:17:22.080 --> 0:17:26.920 because there's certainly a number of examples where you're seeing 0:17:27.040 --> 0:17:31.240 some positives here that are being well received. Think about 0:17:31.240 --> 0:17:34.800 a company like Advanced micro Devices, right, I mean I'm 0:17:34.800 --> 0:17:38.960 thinking about it. Okay, big name in the chip business. Well, 0:17:39.000 --> 0:17:44.280 they come out with this new processor for server computers 0:17:44.359 --> 0:17:49.000 called EPIC, and they tell you that Google is already 0:17:49.119 --> 0:17:54.560 using this chip in their data center equipment. And so 0:17:54.720 --> 0:17:56.639 what do you get out of that? A gain of 0:17:56.720 --> 0:18:00.760 almost twelve percent, biggest in the S and P five hundred, 0:18:01.240 --> 0:18:03.200 you know, And you can go from there. I mean, 0:18:03.200 --> 0:18:07.240 you had numbers out from Booking Holdings and trip advisors, 0:18:07.240 --> 0:18:11.280 so we're talking you know, online travel there. Trip advisors 0:18:11.359 --> 0:18:14.480 numbers didn't look that great. At all. But they're reaffirming 0:18:14.520 --> 0:18:17.240 their full year projections, and the stocks up ten and 0:18:17.240 --> 0:18:21.640 a half percent. In booking, whose numbers look better for 0:18:21.680 --> 0:18:24.359 the second quarter after coming up short of antaly assessments 0:18:24.400 --> 0:18:27.400 in the first quarter, up about six and a half percent. 0:18:27.600 --> 0:18:30.680 So you know, you can find enough of those stories 0:18:30.720 --> 0:18:33.480 to give people some comfort at a time, you know, 0:18:33.560 --> 0:18:36.480 when the bigger picture, when you think about trade and 0:18:36.600 --> 0:18:40.919 interest rates and currencies and you name it, is looking 0:18:40.960 --> 0:18:43.520 a bit unsettled. You know what I'm thinking about today, 0:18:43.560 --> 0:18:46.320 not trade or currencies. I'm thinking about ketchup. So are 0:18:46.359 --> 0:18:51.560 good friends at Kraft Hein's head and exactly ketchup on 0:18:51.560 --> 0:18:54.159 a Thursday morning? Are good friends at Kraft Heins? Uh? 0:18:54.400 --> 0:18:57.080 Kind of a rough quarter they just reported, and it's 0:18:57.119 --> 0:18:59.360 so rough that they don't even give guidance. So investors 0:18:59.359 --> 0:19:03.399 are spooked. Style down. Let's break it down with our 0:19:03.480 --> 0:19:07.600 good Fred Craig Giammona covers all things consumer for Bloomberg News. 0:19:07.600 --> 0:19:09.800 He joins us here in our Bloomberg eleven three studios. 0:19:10.040 --> 0:19:12.640 Craig give us kind of the highlights or low lights 0:19:12.640 --> 0:19:15.120 of what we're seeing here. So they haven't reported earning 0:19:15.160 --> 0:19:18.359 since February February was when they put out the release 0:19:18.400 --> 0:19:21.320 basically saying that they had an sec investigation, fifteen billion 0:19:21.320 --> 0:19:24.760 dollar write down, weak profit numbers. They did an internal investigation, 0:19:24.800 --> 0:19:27.680 found some accounting problems. They haven't filed earnings for two 0:19:27.680 --> 0:19:30.080 straight quarters, so this was the first six months of 0:19:30.080 --> 0:19:32.000 twenty nineteen that they put out and the numbers are bad, 0:19:32.440 --> 0:19:35.600 profit and sales are down. And you know the new CEO, 0:19:35.680 --> 0:19:39.119 Miguel Patricio, he's a longtime Annheuser Bush guy. He's been 0:19:39.119 --> 0:19:41.800 in there for a month. Took over July one, and basically, 0:19:41.800 --> 0:19:43.639 I think what we're seeing here is the extent of 0:19:43.640 --> 0:19:45.440 the challenge that he faces as he tries some amount 0:19:45.480 --> 0:19:47.840 to come back at a company that really was never 0:19:47.880 --> 0:19:50.119 supposed to be about growing sales. It was supposed to 0:19:50.160 --> 0:19:52.760 be about buying something else. And this thing has been 0:19:52.840 --> 0:19:54.919 kind of off the rails since they got rebuffed by 0:19:54.960 --> 0:19:57.879 Unilever all the way back in Okay. So Warren buffin 0:19:57.920 --> 0:20:01.080 It has admitted that he just overpaid for this acquescence, right, 0:20:01.160 --> 0:20:03.280 So he's come out and he said, uh, you know, 0:20:03.520 --> 0:20:05.399 not that it was a mistake, but it was a mistake. 0:20:05.600 --> 0:20:10.480 My question is, what are the main problems here, bad brands, nobody, 0:20:10.680 --> 0:20:13.000 I mean, so you know, and it's I'm not I'm 0:20:13.040 --> 0:20:14.800 not making a joke. Like the problem here is that 0:20:14.840 --> 0:20:17.719 they put this company together to build a gigantic food company. 0:20:17.760 --> 0:20:20.160 Allah and Heuser Busch. Right. So what they did was 0:20:20.440 --> 0:20:23.600 they took Hines private, they slashed all the costs, they 0:20:23.600 --> 0:20:26.159 produced industry leading margins. Year and a half later, they 0:20:26.200 --> 0:20:29.480 bought Kraft, slashed all the costs, fired thousands of people, 0:20:29.720 --> 0:20:33.640 got the margins way up. February rolls around, right on schedule. 0:20:33.680 --> 0:20:36.240 We're buying Unilever for a hundred forty three billion. Hold 0:20:36.240 --> 0:20:39.240 on a second, Paul Pullman, you know, basically robuffs them. 0:20:39.480 --> 0:20:42.480 The deal doesn't happen. Since then, the market cap has 0:20:42.520 --> 0:20:45.399 just gotten absolutely destroyed because this isn't about building brands. 0:20:45.520 --> 0:20:48.480 So here's my question, Dave Wilson, question of the day. 0:20:48.920 --> 0:20:52.200 Does this just go to show that big conglomerates are 0:20:52.240 --> 0:20:54.040