Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
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Speaker 1: us live on YouTube and off of the weekend.
Speaker 2: I love what jillmo X said at AXA in Paris.
Speaker 3: He said, it is searching in vain for information.
Speaker 2: In charge of information for Bloomberg Surveillance, Lori Kelvisina with
Speaker 2: RBC Capital Markets.
Speaker 3: I say, when you walked in.
Speaker 2: Today, what'd you first look at? But like all of us,
Speaker 2: you were working all weekend. What were you both stirring
Speaker 2: in the Kelvisina system this weekend?
Speaker 4: Well, so I'll tell you. On Friday I wrote my
Speaker 4: weekly and then what I was doing Saturday night and
Speaker 4: Sunday night because I have little kids, so you know,
Speaker 4: I have to do a lot of this at night
Speaker 4: after they go to sleep.
Speaker 3: But I was reading Please, you said the what's the masters?
Speaker 4: Mom's got to work, I was saying to Gargy earlier.
Speaker 4: I'm now starting to watch White Lotus. This is the
Speaker 4: first TV show I've watched in years because I just
Speaker 4: don't have time. But honestly, my free time this weekend,
Speaker 4: I was reading through Earning's called transcripts, and then I
Speaker 4: was also reading through conference transcripts. And my team had
Speaker 4: done a first pass on me last week for me
Speaker 4: last week, but we were reading across the Russell three thousand,
Speaker 4: not just the SMP five hundred. And I'm a little
Speaker 4: bit of a transcript junkie. I have been really since
Speaker 4: twenty sixteen, twenty seventeen, twenty eighteen, and we've learned that
Speaker 4: in these periods where everything is uncertain and shifting, don't
Speaker 4: just look at the SMP five hundred. The Russell companies,
Speaker 4: the smaller cap companies have simpler business models and they
Speaker 4: can often sort of help you home in on specific
Speaker 4: issues with a lot more clarity.
Speaker 2: And this is so much in honor of work at
Speaker 2: Bloomberg by rich Yamarone, who we had lost way too early.
Speaker 2: Yamarone did the Orange Book, which invented forget about all
Speaker 2: the numbers, just listen to people. After someone like Lauri
Speaker 2: Kelvicina says, great.
Speaker 5: Quarter exactly, So, Laurie, what have you guys done at
Speaker 5: RBC and your group there with your S and P
Speaker 5: five hundred targets and your earnings.
Speaker 4: So we've cut them twice this year. March seventeenth was
Speaker 4: the first time. I'm honestly it was. It was the
Speaker 4: Thursday night after Liberation Day. I can't remember what date
Speaker 4: that was that we did the second hut. Time is
Speaker 4: warping in here, but we cut things twice. And what
Speaker 4: we did in that sort of early April adjustment was
Speaker 4: we shifted from our bullcase to our barecase. And we've
Speaker 4: been telegraphing that we would need to do so if
Speaker 4: we broke below ten percent from the February peak. What
Speaker 4: was interesting was pre rose Garden the market was trying
Speaker 4: to hold in sort of garden variety five to ten
Speaker 4: percent correction territory. The market's kind of doing the same
Speaker 4: thing right now in growth scare territory.
Speaker 5: We went down on.
Speaker 4: Tuesday's clothes and touched minus eighteen point nine percent from
Speaker 4: the peak. That is very similar to what we did
Speaker 4: back in twenty eighteen, and that's basically in line with
Speaker 4: your average kind of growth scare where there's a fear
Speaker 4: of a recession or big breakdown that doesn't happen.
Speaker 5: So what do we I guess, let's just go to
Speaker 5: the earning front. Since we're starting to kick into the
Speaker 5: earning season here, it's not so much what they what
Speaker 5: we're going to hear about their first quarter performance as
Speaker 5: warm about what companies are. Do you expect any companies
Speaker 5: to provide guidance or how do you think about the
Speaker 5: earnings out.
Speaker 4: Well, so there are some that are still doing it
Speaker 4: and there are some that are not. What I will
Speaker 4: tell you is a positive development, Paul, and I know
Speaker 4: I was sort of ranting about this on television last week,
Speaker 4: but companies are finally giving us a more detailed conversation
Speaker 4: about their exposure, not just to China. We've been hearing
Speaker 4: about that since November, but they're finally starting to talk
Speaker 4: about Vietnam and Mexico and Canada and other countries. So
Speaker 4: they've been sort of shocked into having a more honest
Speaker 4: and detailed conversation with the south Side community and the
Speaker 4: Byside community. Frankly, and to me, that's more important than
Speaker 4: why whether or not, you know, we suspend guidance. Some
Speaker 4: companies are baking some tariffins, some aren't, But it's the
Speaker 4: level of discussion. We just have needed more disclosure. I
Speaker 4: think that's why we've seen such big gaps in here.
Speaker 5: So what do we do going forward?
Speaker 2: Here?
Speaker 3: Is it?
Speaker 5: Are you recommending more cash and you typically do? Are
Speaker 5: you reckoning a bigger treasury portfolio than you typically do?
Speaker 4: Or so I stick in the equity world, and so
Speaker 4: you know, I don't you know, I always like us equities,
Speaker 4: you know, I tend to say, And you know, we
Speaker 4: haven't made a change in our target. We're still sticking
Speaker 4: with the fifty five to fifty. We have said if
Speaker 4: recession is starting to get baked in, we're going to
Speaker 4: have another break lower. I don't think that's baked into
Speaker 4: the price now. Okay, But I was on the road
Speaker 4: last week with Amy with Silverman, my partner in crime,
Speaker 4: over at RBC, and we were seeing a bunch of
Speaker 4: clients and we actually saw these younger guys who'd only
Speaker 4: been in the business a couple of years, and they
Speaker 4: just sort of, you know, I forget how we got
Speaker 4: on this topic. And the advice I gave them, I
Speaker 4: think applies to everybody. I said, we never know in
Speaker 4: these periods, in the moment where we bought them, we
Speaker 4: never know how low exactly it's going to go. We
Speaker 4: have our milestones. We're going to check those off. We're
Speaker 4: going to keep an eye on those. We want to
Speaker 4: do two things right now. You want to look for
Speaker 4: the defensive opportunity and the rebound opportunity, and you kind
Speaker 4: of have to do both. So on the defensive side,
Speaker 4: we've liked utilities all along, we're sticking with that. On
Speaker 4: the offensive side, we really like financials. And our point
Speaker 4: to these guys was you're not going to be able
Speaker 4: to peg the bottom, so don't even try.
Speaker 5: All right, So financials on the rebound d s. Do
Speaker 5: you hear anything on Friday that it kind of gave
Speaker 5: you a greater conviction when we heard from some of
Speaker 5: the big banks, and we hear from Goldman today.
Speaker 4: Yeah, so you know, we're definitely seeing, right the benefits
Speaker 4: of increased activity and getting some rotation in the market
Speaker 4: and things, you know, generally functioning properly. I know there
Speaker 4: were some questions about that on the bond market last week,
Speaker 4: but that seems to have been, you know, died down
Speaker 4: at this point anyway. But I think that what I
Speaker 4: really have heard, you know, from the banking community in particular,
Speaker 4: is their ability to manage through crises and so all
Speaker 4: of the learnings from the GFC, even SBB. Frankly, I
Speaker 4: think was a great road test for these companies and
Speaker 4: I felt like I heard that confidence come through last week.
Speaker 3: What's the.
Speaker 2: Idea of do nothing? Is that an efficacious strategy?
Speaker 4: It is sometimes you need to sit and listen to
Speaker 4: the market and let things play out. And I know
Speaker 4: that that is difficult for Wall Street people to do,
Speaker 4: but I do think this is one of those times.
Speaker 2: Excuse me, folks, I'm distracted learning about the amazing Blue
Speaker 2: Origin flight we're going to see here in twenty minutes,
Speaker 2: really extraordinary.
Speaker 3: Lori Kelvcina, where.
Speaker 2: It's for those of you across the nation, across Canada
Speaker 2: of RBC Capital Markets, the Royal Bank of Canada. Good
Speaker 2: Morning worldwide as well in your commute and of course
Speaker 2: on YouTube subscribe to Bloomberg Podcast. Just can't say enough
Speaker 2: about the YouTube distribution. We knew it was working, but
Speaker 2: in this crisis, we've been humbled by the growth. Thank
Speaker 2: you so much. Their futures up eighty eight, I mean,
Speaker 2: Gold and Sacks went out and it's completely unfair question
Speaker 2: to you. They popped a forty billion dollars share buyback
Speaker 2: twenty five point two percent of their market cap? Are
Speaker 2: we going to see more of these shocks where people
Speaker 2: just say, we don't know what the White House is
Speaker 2: going to do, We're going to be opportunistic.
Speaker 4: So when I was talking to investors last week, we
Speaker 4: were sort of debating pe multiples. Can you even really
Speaker 4: you know, value a company right now and we don't
Speaker 4: have visibility into the earnings. And what one investor told
Speaker 4: me was, they're really buying good management teams right now,
Speaker 4: and I think that's a very you know, sort of
Speaker 4: smart way to think about it. Who can navigate through?
Speaker 4: I will say on the buybacks in particular, when I
Speaker 4: did my last round of updates on my S and
Speaker 4: P earnings model, we actually had actual data and for
Speaker 4: share counts as of one queue and it grew by
Speaker 4: I think point nine percent year over year, and that's
Speaker 4: the biggest we've seen. But we've had a string of
Speaker 4: several quarters where the sharecounts have been growing, so I
Speaker 4: don't think that And of course you have buybacks, but
Speaker 4: there's issue went so but when you do all the
Speaker 4: math right, like, we haven't had a de equitization theme,
Speaker 4: you know, the way my former colleague Brob Bucklin used
Speaker 4: to talk about. So it's it's interesting, you know, to
Speaker 4: sort of hear that news in the context of this
Speaker 4: hasn't really been a great period for shrinking the share counts.
Speaker 2: Paul's the equidization English or is that Lori Kelvicina.
Speaker 4: Ill That's that's Rob Bucklan, my old one of my
Speaker 4: old mentors in the city.
Speaker 5: What is it where we with small and mid cap
Speaker 5: stocks these days?
Speaker 4: So they were trying really hard before the rest starting
Speaker 4: to bottom, and you're actually seeing some outperformance on the
Speaker 4: big down days. As we have moved past that event,
Speaker 4: investors are sort of toggling between sluggish growth, near stall
Speaker 4: speed or recession. I don't think that it's a clear
Speaker 4: cut case for recession yet, to be honest, but the
Speaker 4: small caps are acting like it is, and so we
Speaker 4: continued to see some underperformance. You've also been starting to
Speaker 4: see growth outperform value, which is also consistent with the
Speaker 4: sluggish economy. So it's there's opportunity there. We know we
Speaker 4: need to buy them mid recession if we get one.
Speaker 4: But in the short term they're they're expressing the economic case.
Speaker 2: You mentioned being some financials just you know, to pick
Speaker 2: on them in this Meliu is this where smaller banks
Speaker 2: throw in the towel and we get an M and
Speaker 2: A surprise and small in midcast I think.
Speaker 4: That, you know, an old investment or back in my
Speaker 4: back in my my first investment bank, I worked at
Speaker 4: an investment banker there once told me that you look
Speaker 4: at confidence, you look at the vics, you know, for
Speaker 4: M and A deals, and we have lousy confidence. And
Speaker 4: we've actually, you know, no one's debating if the BIX
Speaker 4: is broken anymore. We've seen a breakout there. So I
Speaker 4: do have a feeling, at least in the short term,
Speaker 4: the kind of gloom on M and A that you
Speaker 4: heard from some of the bigger banks late last week
Speaker 4: is probably deserved and.
Speaker 5: We should not expect or rely upon the FED to
Speaker 5: kind of magically fix this. They can't really deal with
Speaker 5: consumer confidence and those types of issues.
Speaker 4: Look, we have a data driven FED, right, and I
Speaker 4: think that there you know, let's put aside what was
Speaker 4: going on in the bond market last week, right, but
Speaker 4: if you if you just think about sort of the
Speaker 4: tension between you know, inflation and the potential inflation that
Speaker 4: may be coming from the A policy, that it's a
Speaker 4: tough spot for them to be in that is part
Speaker 4: of their mandate, and the labor data is holding up.
Speaker 4: And to be honest, in everything I've read, and I've
Speaker 4: been reading really closely across the rustle three thousands since
Speaker 4: probably like the last two weeks of February, and I'm
Speaker 4: not seeing a lot of alarmism on labor. We do
Speaker 4: see it in the survey data, but in terms of
Speaker 4: what companies are actually saying when they're going out to conferences,
Speaker 4: when they're on earnings calls, they're not ringing the alarm
Speaker 4: bell on labor right.
Speaker 5: Now, even lower lower wage labor because of you know,
Speaker 5: President Trump and his administration have been pretty effective in
Speaker 5: kind of slowing down, if not stopping illegal immigration. Have
Speaker 5: we seen that in the housing market in the Are
Speaker 5: we hear in any of the agricultural world.
Speaker 4: So I didn't read any homebuilders from like the last
Speaker 4: week and a half, But in my last batch of reading,
Speaker 4: I did read a couple of the homebuilders that reported
Speaker 4: early and they specifically said they weren't seeing any kind
Speaker 4: of derivative negative pressures on labor because of immigration.
Speaker 2: David Sasar is north of New York City. You should
Speaker 2: see what he's like. Eight thousand square.
Speaker 5: Oh good for him.
Speaker 2: The Christmas tree, it's almost as big as scarlet foods.
Speaker 3: Yea.
Speaker 2: Damien said, it's just booming. He said, there's absolutely no
Speaker 2: let up whatsoever.
Speaker 4: And look, I will say if we're thinking short term
Speaker 4: long term, if you go back to twenty eighteen, companies
Speaker 4: didn't really raise the alarm bell on tariffs until like
Speaker 4: September in that conference season, before the earnings reporting season,
Speaker 4: kind of post labor day. So it may take some
Speaker 4: time to see the residual impacts. We are seeing in
Speaker 4: company commentary indications of tariff pre buying. We saw one
Speaker 4: of the banks call that out. And also you know,
Speaker 4: some and some of my clients I met with last
Speaker 4: week also clued me in on this. But the idea
Speaker 4: of managing your inventories and pulling forward some of that inventory,
Speaker 4: I would you know, we called this earning season in
Speaker 4: our latest weekly as potentially like a box of chocolates.
Speaker 4: We don't know exactly what we're going to get. We
Speaker 4: could get some good ones.
Speaker 2: You have to stop talking, But if you could just
Speaker 2: sit there, because when you sit here, the market goes up.
Speaker 3: Yeah, that works.
Speaker 2: SMB Futures ninety dow p getting them ere up five
Speaker 2: hundred and four to seventy four on a Lori Kelvin
Speaker 2: scene of Dow Jones Industrial Average. Miss Calvacina is with
Speaker 2: the Royal Bank of Canada RBC Capital Markets.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or
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Speaker 3: We're gonna digress here.
Speaker 2: We got too short a visit with Gargi Chowdry, but
Speaker 2: we've got to take the time out of here because
Speaker 2: it's a time of year where someone like me looks
Speaker 2: out the window goes, I gotta get in shape. We
Speaker 2: got a division here today in the studios, Folks are
Speaker 2: wonderful studios here at Bloomberg.
Speaker 3: Over here on the north side of the studio is the.
Speaker 2: Out of shape Sunday. We're going to run studio. On
Speaker 2: the other side of the studio, Lisa Matteo and Gargy
Speaker 2: Choudry are the real deal.
Speaker 3: Gargy, how do you.
Speaker 2: Get moti evated to jump into the Hudson River swim five.
Speaker 6: Miles two and a half, But I will say that
Speaker 6: the Hudson is cleaner than its reputation has you believe.
Speaker 5: See, but again just a whole look.
Speaker 3: Dogs get okay, there are.
Speaker 5: Certain people that do that stuff.
Speaker 2: I get this some missus Keane. You got to learn
Speaker 2: to stretch. Can you see me stretching? Lisa and Gargy,
Speaker 2: how do you stretch? What's the most efficacious way to stretch?
Speaker 6: Yoa glass? Yoga?
Speaker 1: Oh there you go?
Speaker 3: What's yoga?
Speaker 5: Yeah?
Speaker 3: Lisa? How do you stretch? You got to get out
Speaker 3: of you to the body.
Speaker 7: Do it a little pilates? Maybe I have a machine.
Speaker 3: I have a machine too. If that Bill has it,
Speaker 3: you know it's a dog pilates. Thank you for that.
Speaker 6: Uh.
Speaker 3: These two are really.
Speaker 2: Committed to doing iron Man and triathle On and all that.
Speaker 2: It's wonderful to see that Gurgy. I got to get
Speaker 2: the boy market one l think out.
Speaker 3: Making the circuit this weekend.
Speaker 2: Explain the worry at black Rock that we hear from
Speaker 2: Larry Fink and that we hear from Gardisha.
Speaker 3: Color, the quality of the.
Speaker 6: Angst, color, the quality of the angst. I love that.
Speaker 6: So I think the best way I can speak to
Speaker 6: it is what we saw sort of over forty eight
Speaker 6: period where thirty treasury yields moved up by call it
Speaker 6: seventy two basis price down, yields moved up price down, Yes,
Speaker 6: and I think a part of that we all know
Speaker 6: was to make room for the auction. Some of that
Speaker 6: was the big basis unwind, it was around swap spreads.
Speaker 6: But I do want to be very clear there was
Speaker 6: no panic in the market. There was volumes trading. You know,
Speaker 6: we monitor a lot what ETFs are doing as a
Speaker 6: percentage of tape. You had a few days where et
Speaker 6: apps were allowing to be that release valve of the market.
Speaker 6: So yes, a big fear around what deficits might do,
Speaker 6: which is leading to long ends moving higher. Today they
Speaker 6: are a bit stable, but certainly that's been the price
Speaker 6: action for long end which is why we think the
Speaker 6: belly of the curve still offers you better value at
Speaker 6: the same time, not panicked move. There's still risk changing hands.
Speaker 6: I think that's really important for all your listeners to
Speaker 6: be aware of.
Speaker 5: So just broadly speaking in terms across all of your portfolio,
Speaker 5: I mean black Rock's got a couple of dollars under management.
Speaker 5: We understand that. How do you guys internally when you
Speaker 5: sit down and have your meetings, say, what are we
Speaker 5: going to do this week? Is realistically, we have no
Speaker 5: idea what's going to come out of the White House
Speaker 5: which will whipsaw markets? How do you guys have black
Speaker 5: Rock kind of think about that.
Speaker 6: Yeah, So you know, we have a lot of internal
Speaker 6: meetings as you point out, and senior investors get together
Speaker 6: and talk about what they're seeing in their corner of
Speaker 6: the markets. And I think one of the things that
Speaker 6: everyone's trying to do is separate the signal from the noise.
Speaker 6: So there obviously has been some noise around, especially this weekend,
Speaker 6: around some exceptions perhaps and then some tweets around maybe
Speaker 6: those exceptions are not exactly what we first not them
Speaker 6: to be. But taking a giant step back coming into
Speaker 6: the cl what was the tariff rate and what do
Speaker 6: we think projections for tariff rates are going to be
Speaker 6: in the next few months. Looking at the soft versus
Speaker 6: the hard data, obviously soft data a little bit worrisome.
Speaker 6: We saw that Michigan softening again and inflation picking up
Speaker 6: pretty meaningfully in the Michigan five to tenure inflation expectations,
Speaker 6: but at the same time in the herd data you
Speaker 6: have not yet seen. Any of the concerns are on
Speaker 6: rising inflation and slowing growth. So recognizing both of those
Speaker 6: and most importantly telling our clients what to do. That's
Speaker 6: our role. Telling clients stay invested, add some diversifiers, add
Speaker 6: some hedges, clip some coupons, and the fixed and come markets.
Speaker 2: What do you do with cash? Do you increase cash?
Speaker 2: Do you wait with cash? I mean to me, you know,
Speaker 2: to our listeners and viewers. That's a key key question.
Speaker 6: Here, Tom great question when we.
Speaker 3: Think, yeah, this is it, I'm going home.
Speaker 6: Cash has seen a lot of inflows. SGOV, which is
Speaker 6: our t bill sort of ETF, has seen the most
Speaker 6: amount of inflos. It's one of the highest gathering asset
Speaker 6: classes this year. So investors are thinking about cash as
Speaker 6: an asset class. I think we need to recognize that
Speaker 6: there continues to be a role for things like SGOV
Speaker 6: in your portfolio. But what we're telling investors is also
Speaker 6: think of opportunities to you sort of look at areas
Speaker 6: of the market that have had perhaps too much of
Speaker 6: a correction. We're telling investors add some minimum volatility, add
Speaker 6: some gold, think of areas to buy quality technology, in
Speaker 6: your portfolio.
Speaker 3: So longer term.
Speaker 5: I mean again, the administration is promising perhaps some near
Speaker 5: term pain for some longer term gain in terms of
Speaker 5: productivity investment. Is that something you can think about or
Speaker 5: is it just trying to deal with the day.
Speaker 6: To day No, absolutely, that's the job trying to think about.
Speaker 6: Like I said, what is the signal versus what is
Speaker 6: the noise in the future? Is the signal towards a
Speaker 6: more productive world in the future. Are we going to
Speaker 6: get to a point where we can point to higher
Speaker 6: growth as a result of all of the noise that
Speaker 6: we might be getting today. I think it's a little
Speaker 6: too early to tell. I'm looking at price action in
Speaker 6: the markets now, and I'm very relieved to see that
Speaker 6: bond markets are behaving in a pretty normalized manner, which
Speaker 6: gives us a little bit of confidence in where equities
Speaker 6: can go.
Speaker 2: To the Okay, this is Keith, thank you for bringing
Speaker 2: us up. I've got a whole set of things. I
Speaker 2: look at some of them pretty esoteric. I look at
Speaker 2: libr or ois a new and SO for ten year.
Speaker 2: Damien Sasauer looks at SO for two year. They're behaving well.
Speaker 2: This morning, Sweeney's brilliant. He looks at the TUESDA ten spread.
Speaker 2: What does Gargie Chowdery suggest we should look at to
Speaker 2: say the bond market's deteriorating?
Speaker 3: The bond market's.
Speaker 6: Okay, yeah, absolutely, so I would say look at what
Speaker 6: on the run versus off the run treasuries are doing.
Speaker 6: So how much are off the runs getting? You know,
Speaker 6: how much illiquidity is there in the markets. That's one
Speaker 6: thing I would look at the repo markets is are
Speaker 6: the repo markets functioning proper? Is there any squeeze?
Speaker 2: Okay, we're hearing from Irish Jersey when he's not watching
Speaker 2: aston Vila that the repo market is functioning properly.
Speaker 3: Do you agree as of right now?
Speaker 6: Absolutely, the repot markets are functioning properly. And I think
Speaker 6: that's one of the reasons why we haven't found this
Speaker 6: move over the last week to be panic inducing.
Speaker 2: Paul panic inducing. You just gave Paul panic. He thought
Speaker 2: he's going to get his vesper repod.
Speaker 3: Yes.
Speaker 2: The answer to repel market, folks, is short, short term paper.
Speaker 2: I call it the trust market. It's wrapped around lots
Speaker 2: of It's there on the bt M M screen of Bloomberg,
Speaker 2: and I no I Mike came up to me. He
Speaker 2: said to me once he is, do you have any
Speaker 2: idea what one single statistic is on the bt MM
Speaker 2: screen is no, No, mister treasure money markets, I don't gargy.
Speaker 2: Thank you so much, particularly for the what's the key
Speaker 2: thing with yoga like in Heal Deep? What's what's this
Speaker 2: thing called on radio?
Speaker 3: What? What's this thing called?
Speaker 7: I think you're trying to do the mountain post? Is
Speaker 7: that what's happening?
Speaker 6: I think Doom's doing the Mountain tors.
Speaker 3: We're play Mountains. The next song out Leslie West, Get prepared,
Speaker 3: Gardi Showbery. Thank you so much, greatly, greatly appreciate it.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: say Alexa play Bloomberg eleven thirty Trust Company.
Speaker 2: The West is TCW, and they have all sorts of
Speaker 2: wonderful people. We can literally the quality is so good,
Speaker 2: like they're good competitor in La Capitol Group that we
Speaker 2: can take anybody blind any time. Penny Foley is flat
Speaker 2: out a legend out of TCW in emerging markets and
Speaker 2: joins US. Right now, You've aged after last.
Speaker 3: Week, you and I have never seen this.
Speaker 2: I mean, you go back to Ecuador, you go back
Speaker 2: Carl Weinberg's Lehman, you go back to the financial crisis
Speaker 2: ninety eight. You could feel the sweat on the beach.
Speaker 3: All the others. This is unique. Why is it unique
Speaker 3: for Pennyfolio?
Speaker 8: It's it's uh, you know, the uncertainty factor is huge, uh,
Speaker 8: and that means that you've got to have higher you know,
Speaker 8: higher risk premia. There is an absolute surprise at you know,
Speaker 8: at every level. You know, I think EM growth is
Speaker 8: really fit facing multiple shocks, you know, uncertainty, which has
Speaker 8: had an impact on you know, business and consumer uh
Speaker 8: decline and realed income, supply chain disruptions and you know,
Speaker 8: and really a huge negative wealth effect. You know. For
Speaker 8: the rest of the world, it's been more of a
Speaker 8: straightforward demand shock. So I think the downward pressure on
Speaker 8: US growth, all other things being equal, is estimated. It's
Speaker 8: sort of one to two percentage points for the next
Speaker 8: four quarters. The impact on the rest of the world
Speaker 8: x China is probably only half that. And you said
Speaker 8: earlier central banks have the ability to cut rates in
Speaker 8: EM and also provide some fiscal UH stimulus. You know,
Speaker 8: I think the differentiation in EM is going to be key. Obviously,
Speaker 8: oil exporters are going to be hurt. Importers with relatively
Speaker 8: closed economies, they're going to do a whole lot better.
Speaker 3: You know.
Speaker 8: What we did was essentially re underwritten every high yield
Speaker 8: position in the portfolio to identify those that will face
Speaker 8: a higher default risk in the current environment.
Speaker 7: And we've used kind of the baby with.
Speaker 8: The Bathwater sell off in the course of the last
Speaker 8: ten days to pick up select names that seem significantly
Speaker 8: under sold UH, mostly corporates, small corporates, but were very,
Speaker 8: very cautious because I think the you know, the technicals
Speaker 8: are still really pretty challenging, and a lot of the
Speaker 8: cell side have been told to away from it.
Speaker 2: I could clients for TCWS listen to this, I can
Speaker 2: ignore I have every years.
Speaker 5: Penny from your perspective in emerging markets? Is US economic exceptionalism?
Speaker 3: Is that over?
Speaker 8: You know, it's it's a it's a great question. I mean,
Speaker 8: I think you've I heard you a little earlier saying
Speaker 8: that you know, the US. You know, markets last week
Speaker 8: were very unusually so yields up, on prices down, currency
Speaker 8: was weaker, stock flower you know, that usually spells capital outflows,
Speaker 8: and it's pretty common in emerging markets. You know, in
Speaker 8: the case of the US, you've seen that happen maybe
Speaker 8: just a handful of times in the last thirty years.
Speaker 8: And you know, and as you both know, foreigners owned
Speaker 8: about a third of the US treasuring market. They own
Speaker 8: twenty five percent of US corporate bonds and close to
Speaker 8: twenty percent of equity, So the potential for outflows is
Speaker 8: not inconsiderate, you know, inconsiderable. You know, the erosion of
Speaker 8: social and political norms and loss of trust could pose
Speaker 8: longer term issues for the US, but you know, in
Speaker 8: my view, it's probably just at the margin at this point.
Speaker 8: I mean, they're just too many factors that support US dominance,
Speaker 8: and it's you know, it's entrepreneurial culture, technological and you know,
Speaker 8: in scientific advances, flexible label markets, and just the sheer size,
Speaker 8: you know, and depth of our capital markets. But no question,
Speaker 8: the narrative around US exceptionalism has lost a bit of
Speaker 8: its steam in the last couple of.
Speaker 5: Where do you see value out there these days? In
Speaker 5: your world of emerging markets? I wouldn't even know how
Speaker 5: to look or value or characterize value. But where do
Speaker 5: you guys see opportunities these days?
Speaker 8: You know what's interesting in in EM You've seen UH
Speaker 8: outperformance relative to the developed world, to the US, So
Speaker 8: somebody's seeing value somewhere, and I think they're you know,
Speaker 8: on average, UH, you've seen EM spreads outperform U US peers.
Speaker 8: And this compression is at every at every rating level.
Speaker 8: So there are a couple of reasons for that. You know,
Speaker 8: most EM sovereigns are in the early to mid stage
Speaker 8: of the credit cycle, having gone through, you know, a
Speaker 8: pretty big restructuring and default cycle in twenty one twenty two.
Speaker 8: Also since the Taper tantrum, you know, a number of
Speaker 8: EM sovereigns have undertaken pretty broad based structural reform. So
Speaker 8: that makes them, you know, resilient or more resilient in
Speaker 8: an external volatility.
Speaker 3: You know.
Speaker 8: And in fact, this year or last year, you saw
Speaker 8: positive BM rating changes exceed negative ones retiring, you know,
Speaker 8: for the first time in you know, in a decade.
Speaker 2: With the time we got left, I gotta ask you
Speaker 2: about la mister Ahmanson was one of my first supporters
Speaker 2: in doing this act years ago. The Cross Company to
Speaker 2: the West goes back to mister Day in nineteen seventy one,
Speaker 2: is well, you're a pillar out there with the La
Speaker 2: Opera and all house laws angels doing after the fire.
Speaker 8: You know, I think the fire obviously was was a
Speaker 8: huge issue. And and you know what is astounded me
Speaker 8: is how quickly people came together as a community to rebuild.
Speaker 8: And uh, you know TCW, for example, was absolutely extraordinary.
Speaker 8: There are a number of people that lost their homes
Speaker 8: at TCURE, including our our CEO, and and they came
Speaker 8: together to really you know, support employees. We all came
Speaker 8: into the office. There was you know, nobody said life
Speaker 8: is you know, life is too short.
Speaker 7: There was just a real great.
Speaker 8: Sense of community, probably more so than you've seen in
Speaker 8: Los Angeles.
Speaker 2: For what's the number one thing the East Coast gets
Speaker 2: wrong about the larger LA experiment. I'm sitting on Sunset
Speaker 2: Boulevard going this place is rocket with all the gloom
Speaker 2: and all that. What's the number one thing East Coast
Speaker 2: idiots get wrong about LA?
Speaker 3: Oh?
Speaker 8: I think they you know, they look at at l
Speaker 8: A and say, well, you know it's a soft you know,
Speaker 8: kind of you know, not so serious.
Speaker 7: You mean coast, Okay, so serious the place.
Speaker 8: It is a serious place. I mean, no question when
Speaker 8: I get on a plane to come to the East Coast,
Speaker 8: I get all repped up when I you know, going
Speaker 8: out to Los Angeles. You know, I saw you know,
Speaker 8: it's going to be quieter, it's going to be but
Speaker 8: it's it's a you know a lot of people in
Speaker 8: on the West Coast have come from the East Coast.
Speaker 8: There's a very vibrant industry away from away from the
Speaker 8: you know, the movie industry, and the movie industry itself
Speaker 8: is driving a lot of innovation and change. So I
Speaker 8: think it's a very exciting.
Speaker 2: Thank you so much for visiting pennyfolio with us, I
Speaker 2: kind of get TCW and of course with the Emerging
Speaker 2: Markets Group.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on applecar Play and Android
Speaker 1: Ato with the Bloomberg Business app. You can also watch
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Speaker 3: This is way cool. Plus RENI in time came.
Speaker 2: We welcome all of you extended conversation now with Henrietta Treys.
Speaker 2: She's killing it in Washington, discussing this moment we're all
Speaker 2: living and you wonder.
Speaker 3: Where it came from? Well, inter ute.
Speaker 2: She worked for Marty's Wags Wagged Demnum and before that
Speaker 2: she worked for somebody of all respect across the aisle,
Speaker 2: Joseph Crowley, Joe Crowley, a Democrat from New York. Henrietta
Speaker 2: Trees and studio here in New York. What was it
Speaker 2: like working for Joe Crowley? And where are the Joe
Speaker 2: Crowley's today?
Speaker 3: To say? The Democratic Party?
Speaker 7: Oh, it was so great.
Speaker 9: Some of my most incredible, impressive memories are from the
Speaker 9: folks I met there, Kevin Casey, Greg Shiowitz.
Speaker 2: There's a crimal scream, including from Republicans Democrats, find your
Speaker 2: inner Crowley?
Speaker 3: Where is it?
Speaker 9: It is searching for an issue that they can seize
Speaker 9: on to unite them. I will say I notice a
Speaker 9: lot of that with the Ways and Means Committee chiefs
Speaker 9: of Staff right now around the issue of pharmaceutical tariffs.
Speaker 9: The Democratic Party has a real choke hold on the
Speaker 9: topic of healthcare in this country. And so as the
Speaker 9: President starts to migrate into the section two thirty two
Speaker 9: on pharmaceutical tariffs. I think the Democratic Party will really
Speaker 9: start to coalesce and we'll see that.
Speaker 2: Well, she's the only one I know before eight am
Speaker 2: that can talk stuff.
Speaker 5: So, Henriette, what's the what's the next? I know Congress
Speaker 5: is out for another recess. I don't know how they happen.
Speaker 5: They seem to have more recesses than anybody. But what's
Speaker 5: the to do list over the next couple of weeks
Speaker 5: that's really going to be impactful.
Speaker 9: There's only one to do list, and that's get the
Speaker 9: tax bill written. I think it's going to take until
Speaker 9: the end of the July recess, which is July twenty fourth.
Speaker 9: So if you want to like circle a date on
Speaker 9: your calendar for when this whole thing could pass, that's
Speaker 9: my base case expectation. It's going to be a really
Speaker 9: tough road from here. But I do not buy the
Speaker 9: narrative that somehow the Freedom Caucus is going to vote
Speaker 9: against a tax increase on all Americans. As y'all know,
Speaker 9: this is not a tax cut. There's very little that's
Speaker 9: stimulative from this bill. But there's no way that you
Speaker 9: vote to raise tax rates on every single income bracket.
Speaker 9: Maybe if you maybe you do the sea salt, the
Speaker 9: corporate solid rate, maybe you raise the millionaire tax.
Speaker 7: But other than that, you've got to vote for this bill.
Speaker 5: So you have to vote for this bill. And is
Speaker 5: President Trump, I mean, his obviously his sway over his party,
Speaker 5: his sway over Congress seems extraordinarily strong at the moment.
Speaker 5: Is that a time for him to push through everything
Speaker 5: he wants? Because is this something that may not last
Speaker 5: four years?
Speaker 7: Exactly?
Speaker 9: And that's that's my base case expectation. Same as it
Speaker 9: was during the first term. You get one year in
Speaker 9: a pass legislation, and then the next three are all
Speaker 9: voted to tariffs. The difference now is that he gets
Speaker 9: all four years for tariffs, one year for a taxi.
Speaker 2: You'veon stenus with an incredibly important ft. Yes, say this weekend,
Speaker 2: mister von stein Is will join us next week. I
Speaker 2: believe that you know dark in the door here in
Speaker 2: New York where he hearkens the madness. Now back to
Speaker 2: Nixon nineteen seventy one. I'm the only one east to
Speaker 2: the Mississippi River that remembers that. And the answers to
Speaker 2: annery Horden will speak with the Secretary of Treasure or
Speaker 2: Treasury today. He's had a pretty good weekend distancing himself
Speaker 2: from the rest of the Trump mob. What will you
Speaker 2: listen for from the Secretary of Treasury today?
Speaker 9: Yeah, the street is definitely hoping that Scott Bessett is
Speaker 9: the calm voice in the room. I think they've been
Speaker 9: trying to elevate that potentiality and you've seen it, you know,
Speaker 9: whether it's knives out for Howard Lutnik or distancing themselves
Speaker 9: from the Peter Navarros and Kevin Hassetts of the world.
Speaker 9: From Treasury Secretary Bessett, you want to see, I want
Speaker 9: to see some detailed conversations about exactly what nations are
Speaker 9: being negotiated with first, some sequencing, you know, Vietnam in
Speaker 9: any fine Vietnam.
Speaker 2: She is flying into Vietnam today, I believe, are you
Speaker 2: kidding me? What is the incentive for these people to
Speaker 2: negotiate with a vacillating White House? I mean, I love
Speaker 2: Jill Malwak this morning, X in Paris has a great code.
Speaker 2: If I can find it, I'm not going to be
Speaker 2: able to find it now. But basically, he says, this
Speaker 2: vain moment, how do they negotiate.
Speaker 7: And what are you even negotiating exactly? You want to
Speaker 7: bring the tires?
Speaker 9: We're one and a half percent to zero percent. Yeah,
Speaker 9: I don't think that there's anything.
Speaker 7: Real to be gleaned from a negotiation with them.
Speaker 9: I think the street wants to hear it, and frankly,
Speaker 9: i'd like Secretary best and to get very specific. We've
Speaker 9: had enough of these like really broad statements about the
Speaker 9: whole semiconductor industry is excluded. Okay, let's talk about the
Speaker 9: actual magnets from China, the critical minerals, right, what's going
Speaker 9: into what?
Speaker 7: Where are the cargo ships? Are they being hauled up
Speaker 7: at the at the ocean level? You know, when are
Speaker 7: they going to be off there?
Speaker 3: And Paul, you miss this? You're at the masters. I
Speaker 3: mean I can understand you missed it. Magnets, I mean
Speaker 3: that's what this is.
Speaker 2: The granularity is going to come down to shirts from Vietnam,
Speaker 2: magnets from wherever, China, and something from Poland I can't pronounce.
Speaker 7: I mean that's the reality, right, That's exactly the reality.
Speaker 5: So we have consumer confidence numbers coming down pretty dramatically,
Speaker 5: inflation expectations coming up from consumers pretty dramatically. It's the
Speaker 5: economy stupid, that's tough politics. What are Republicans in Congress,
Speaker 5: who do have maybe some races coming up in twenty
Speaker 5: six how are they trying to deal with what is
Speaker 5: potentially a very difficult economic fallout from President Trump's even
Speaker 5: discussions forget about implementation, just discussions.
Speaker 1: Yeah.
Speaker 9: Well, I think that polling data really tells them all
Speaker 9: that they need to know. And going into primary season,
Speaker 9: the Republicans need to be careful to stay to the
Speaker 9: right of Trump, not get on his bad side, because
Speaker 9: primary season is obviously where the very engaged voters go.
Speaker 9: So the latest data, I think it's from CBS News
Speaker 9: is anywhere between eighty and ninety one percent of Republican
Speaker 9: voters think that this is temporary, that prices will ultimately
Speaker 9: come down, and we need to give the president more time.
Speaker 7: So that is their playbook.
Speaker 9: The real struggle is the independent voter, because now they're underwater.
Speaker 9: They used to be thinking that President Trump was going
Speaker 9: to be good on the economy, and now they're going
Speaker 9: in the opposite direction. They think this is going to
Speaker 9: lead to permanent higher prices, job loss, etc.
Speaker 2: People ask me who am I following and of course,
Speaker 2: I just voice what I hear from Henrietta Trade. To me,
Speaker 2: the most important person inside the Beltwigh is how King Jeffries.
Speaker 2: What does he do in the coming weeks to get
Speaker 2: the Democrats going given this tear of crisis.
Speaker 9: Well, I think really we need to see. The next
Speaker 9: couple weeks are going to be hard because everybody's on recess.
Speaker 9: But the focus on pharmaceutical tariffs, I think is what
Speaker 9: you'll see the individual anecdotes about manufacturing plants, small businesses
Speaker 9: going bankrupt, not having enough cash to stay liquid during
Speaker 9: the increase in tariffs.
Speaker 7: However temporary these may be for a lot of companies.
Speaker 7: It's too long.
Speaker 2: Doesn't he get on an airplane and go out to
Speaker 2: some district in western Pennsylvania and try to f in
Speaker 2: his center tendency Democrat who can actually compete against a
Speaker 2: majority Republican Pennsylvania I.
Speaker 7: Think they tribe.
Speaker 9: I mean, I've been materially disappointed by how example had
Speaker 9: no unification.
Speaker 3: Well a Republican or Democrats.
Speaker 2: You can't even get out to Illinois, which I think
Speaker 2: they could compete and compete.
Speaker 3: When does that start with Congressman Jefferies?
Speaker 7: And honestly, if it hasn't started already. When is it
Speaker 7: going to? Because it's been what four.
Speaker 9: Months now of this administration, there's plenty of things to discuss.
Speaker 9: I think they're underwater.
Speaker 2: Have you ever met Daniel lanwat down in New Orleans?
Speaker 3: A record producer?
Speaker 7: I don't think so.
Speaker 3: Like to zero, it's like it's like it's like it's
Speaker 3: like magical. They did Chris Whitley's album Done give.
Speaker 5: Us thirty seconds House New Orleans.
Speaker 7: Doing That's fantastic. It's so fun.
Speaker 9: French Quarterfest this weekend was incredible. Went out there, hurt
Speaker 9: the Dirty Dozen Brass Band, come on down. It's a
Speaker 9: great time.
Speaker 5: So it's just a great, great city. I've been here
Speaker 5: a few times. I need to get there more.
Speaker 3: Why would say?
Speaker 2: With Martin Feldstein and Robert Schuller, we all three of
Speaker 2: us were sitting there.
Speaker 3: Eating and we said can we not leave? Yeah, that's
Speaker 3: what happen to be. You went down and just said
Speaker 3: I'm not leaving.
Speaker 7: I went down fifteen years ago. I can't get out.
Speaker 3: Lisa. Does it say remote? I mean to me, it's
Speaker 3: just surveillance.
Speaker 2: Remote, surveillance, remote, ne Orlans James carvel On, have you
Speaker 2: had a trace do this more often. You know, if
Speaker 2: you need to get up here, we can free up
Speaker 2: the surveillance golf stream and get you out here. Fantastic
Speaker 2: a trace Veda partners, huge value add for us.
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
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