1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,560 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,479 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,360 Speaker 1: at Bloomberg dot com slash podcast. Let's get over right 7 00:00:21,360 --> 00:00:25,400 Speaker 1: now to SETI Costarelity. He's the CEO of TAT Global Alternatives, 8 00:00:25,400 --> 00:00:30,160 Speaker 1: and we're gonna talk about marijuana legalization, which is big 9 00:00:30,240 --> 00:00:34,240 Speaker 1: here in the US. I don't think the Germans smoke pot. 10 00:00:34,800 --> 00:00:37,800 Speaker 1: They basically it's just if you're a beer. If you 11 00:00:37,840 --> 00:00:40,560 Speaker 1: smell someone smoking weed in Germany, it's usually a brit 12 00:00:40,600 --> 00:00:43,279 Speaker 1: or An American living in East Berlin. But I just 13 00:00:43,320 --> 00:00:45,839 Speaker 1: walked up Lexington Avenue and saw a store that was 14 00:00:45,880 --> 00:00:49,879 Speaker 1: selling actual weed and gummies with THHC none of the 15 00:00:49,960 --> 00:00:54,520 Speaker 1: cb D you know, fake fakeery going on. Um there said, 16 00:00:55,800 --> 00:00:58,240 Speaker 1: is this going to sweep the nation? Is it going 17 00:00:58,280 --> 00:01:02,520 Speaker 1: to sweep the globe and be come as normal as 18 00:01:03,040 --> 00:01:06,679 Speaker 1: you know, drinking liquor. Well, first of all, thanks for 19 00:01:06,720 --> 00:01:09,520 Speaker 1: having me on UM. I do think that it has 20 00:01:09,560 --> 00:01:14,720 Speaker 1: the absolute potential to do that. Um, you know, it's 21 00:01:14,720 --> 00:01:17,479 Speaker 1: obviously a burgeoning category. There's there's a number of countries 22 00:01:17,480 --> 00:01:20,680 Speaker 1: that have started to legalize it now and I think 23 00:01:20,720 --> 00:01:24,040 Speaker 1: in the US, once those laws start to pass, you'll 24 00:01:24,080 --> 00:01:29,360 Speaker 1: likely see, um, obviously a lot more uptake in the market. 25 00:01:30,040 --> 00:01:32,720 Speaker 1: All right, say so, the big issue for the development 26 00:01:32,760 --> 00:01:36,520 Speaker 1: of the cannabis market in the US has been federal legalization. 27 00:01:36,560 --> 00:01:37,840 Speaker 1: And we've had a lot of states, a lot of 28 00:01:37,840 --> 00:01:41,040 Speaker 1: big states, including New York and New Jersey, legalize it. 29 00:01:41,200 --> 00:01:45,960 Speaker 1: So where are we in terms of federal legislation. Well, 30 00:01:46,000 --> 00:01:48,200 Speaker 1: think they they've tried to pass a number of these 31 00:01:48,280 --> 00:01:52,440 Speaker 1: laws through the House. Ultimately, you know, when when you 32 00:01:52,480 --> 00:01:53,880 Speaker 1: kind of take a look at this, it's always just 33 00:01:53,880 --> 00:01:56,800 Speaker 1: this plug a war between fear and greed. And I think, 34 00:01:57,360 --> 00:01:59,480 Speaker 1: you know, for for as much as cannabis has been 35 00:01:59,680 --> 00:02:02,600 Speaker 1: elite goal federally in the US, you'd be hard pressed 36 00:02:02,600 --> 00:02:05,880 Speaker 1: to find any American or very few Americans that haven't 37 00:02:05,920 --> 00:02:09,280 Speaker 1: tried it up until this point. Now, I do think 38 00:02:09,280 --> 00:02:11,480 Speaker 1: that society as a whole is becoming a lot more 39 00:02:11,480 --> 00:02:13,840 Speaker 1: progressive and open to the idea. So I think it's 40 00:02:13,880 --> 00:02:16,840 Speaker 1: just a matter of time before it does end up passing, 41 00:02:16,840 --> 00:02:19,799 Speaker 1: but even though certain states have legalized it, in order 42 00:02:19,840 --> 00:02:22,120 Speaker 1: for it to really take hold, you need that federal 43 00:02:22,200 --> 00:02:25,400 Speaker 1: legalization so that banks can now start getting involved in 44 00:02:25,400 --> 00:02:29,560 Speaker 1: providing financing and really allowing these companies to generate sort 45 00:02:29,560 --> 00:02:31,720 Speaker 1: of the capital and access to capital markets in a 46 00:02:31,760 --> 00:02:35,520 Speaker 1: way that they can become large organizations, which is really 47 00:02:35,520 --> 00:02:38,000 Speaker 1: what's needed in the US if you want to see 48 00:02:38,000 --> 00:02:42,600 Speaker 1: this market flourish. I mean, the banking issue is I 49 00:02:42,639 --> 00:02:46,200 Speaker 1: would say, probably the biggest in terms of growth. Right, 50 00:02:46,919 --> 00:02:53,880 Speaker 1: what kind of growth do you expect from from marijuana? Well, 51 00:02:53,919 --> 00:02:56,480 Speaker 1: I think it's again it's still a burgeoning category. And 52 00:02:56,480 --> 00:02:59,520 Speaker 1: when you kind of take a look at the product itself, 53 00:02:59,560 --> 00:03:01,280 Speaker 1: I think in the getting a lot of people thought 54 00:03:01,320 --> 00:03:04,520 Speaker 1: that cannabis was going to compete with tobacco um, but 55 00:03:04,560 --> 00:03:06,560 Speaker 1: as a whole it really does. In cannabis competes more 56 00:03:06,680 --> 00:03:10,040 Speaker 1: with alcohol given sort of the drugs that are involved. 57 00:03:10,600 --> 00:03:12,760 Speaker 1: The CD is going to compete with alcohol. CBD, on 58 00:03:12,800 --> 00:03:15,600 Speaker 1: the other hand, does have the ability to compete, uh 59 00:03:15,600 --> 00:03:18,560 Speaker 1: with tobacco, which is what you know our company is 60 00:03:18,680 --> 00:03:21,680 Speaker 1: primarily focused on because it helps you quit smoking tobacco 61 00:03:21,760 --> 00:03:25,560 Speaker 1: or one well, exactly right, I think one of the 62 00:03:25,600 --> 00:03:28,280 Speaker 1: things that we're really proud of is that we've been 63 00:03:28,320 --> 00:03:32,080 Speaker 1: able to apply hemp, which is a derivative of cannabis 64 00:03:32,160 --> 00:03:34,640 Speaker 1: that doesn't have any t HC but does contain CDD. 65 00:03:35,040 --> 00:03:37,080 Speaker 1: We've been able to figure out that when you can 66 00:03:37,120 --> 00:03:41,120 Speaker 1: apply CBD to a cigarette smoker, it does have a 67 00:03:41,200 --> 00:03:45,040 Speaker 1: high likelihood of helping them eliminate that nicotine addiction because 68 00:03:45,040 --> 00:03:49,640 Speaker 1: CBD in and of itself isn't addictive. It's also not psychoactive. Right, 69 00:03:49,720 --> 00:03:52,560 Speaker 1: so when you think about the pool of smokers, which 70 00:03:52,600 --> 00:03:55,600 Speaker 1: is immense, and a lot of people don't really understand 71 00:03:55,600 --> 00:03:57,640 Speaker 1: how big the tobacco market is. It's it's like the 72 00:03:57,640 --> 00:04:01,760 Speaker 1: Mount everest of markets. Um, you know, comparatively to water, 73 00:04:02,520 --> 00:04:05,040 Speaker 1: the bottled water market is about two fifty billion dollars 74 00:04:05,040 --> 00:04:07,640 Speaker 1: a year globally, Tobacco is approaching a trillion dollars a year. 75 00:04:08,040 --> 00:04:11,120 Speaker 1: The CBD is not addictive, it's not psychoactive, and it 76 00:04:11,160 --> 00:04:14,280 Speaker 1: doesn't cause lung cancer. And you know, people behind you 77 00:04:14,320 --> 00:04:16,120 Speaker 1: on the street don't hate you for it. I mean, 78 00:04:16,120 --> 00:04:18,920 Speaker 1: there's so many, uh, you know, there's so many arguments 79 00:04:18,920 --> 00:04:22,120 Speaker 1: for it. My question is on the th HC side, 80 00:04:22,279 --> 00:04:25,800 Speaker 1: and and maybe this isn't you know your wheelhouse, But 81 00:04:25,880 --> 00:04:28,880 Speaker 1: I just wonder, are we going to find out that 82 00:04:28,920 --> 00:04:30,880 Speaker 1: a kid who smoked a ton of weed in high 83 00:04:30,920 --> 00:04:33,080 Speaker 1: school and college. I know a lot of kids like 84 00:04:33,160 --> 00:04:39,039 Speaker 1: that very very well, um ends up having some kind 85 00:04:39,080 --> 00:04:42,479 Speaker 1: of mental health issues later in life because I know 86 00:04:42,520 --> 00:04:45,560 Speaker 1: a lot of kids like that too. Well. Look, I 87 00:04:45,560 --> 00:04:47,840 Speaker 1: think you one of the things that they're going to 88 00:04:47,920 --> 00:04:50,599 Speaker 1: have to figure out is the regulations around the substance 89 00:04:50,600 --> 00:04:53,400 Speaker 1: now different than they have the regulations around alcohol. Right 90 00:04:53,440 --> 00:04:57,200 Speaker 1: at a certain point when the cognitive factors of the 91 00:04:57,200 --> 00:05:00,240 Speaker 1: brain that's sort of finished developing, you know, consider these 92 00:05:00,240 --> 00:05:02,520 Speaker 1: substances won't have the same effect as when you consume 93 00:05:02,560 --> 00:05:06,839 Speaker 1: them when you're in the developmental stage. So as they 94 00:05:07,080 --> 00:05:11,480 Speaker 1: right as they kind of progress on on the regulatory side, 95 00:05:11,839 --> 00:05:13,120 Speaker 1: those are the things that they're going to have to 96 00:05:13,160 --> 00:05:15,480 Speaker 1: figure out. And it would probably make sense that they 97 00:05:15,520 --> 00:05:18,320 Speaker 1: regulate the substance similar to how they would regulate alcohol 98 00:05:18,400 --> 00:05:22,200 Speaker 1: and put um certain age limits on when someone would 99 00:05:22,200 --> 00:05:23,520 Speaker 1: be able to legally go in and buy it, Like 100 00:05:23,560 --> 00:05:25,520 Speaker 1: we wouldn't expect the three year old or ten year 101 00:05:25,520 --> 00:05:27,640 Speaker 1: old to want to go in and buy cannabis legally. 102 00:05:29,000 --> 00:05:30,960 Speaker 1: I wouldn't expect a ten year old to walk into 103 00:05:30,960 --> 00:05:33,800 Speaker 1: a store and buy a Cannabio said, he talked to 104 00:05:33,839 --> 00:05:36,760 Speaker 1: us about the tat cigarettes. What are they, how do they? 105 00:05:36,760 --> 00:05:40,320 Speaker 1: How do they work? So basically, what we've done is 106 00:05:40,360 --> 00:05:43,960 Speaker 1: we've taken a hemp biomass and we've processed it in 107 00:05:44,000 --> 00:05:46,720 Speaker 1: a way so that it tastes and behaves like tobacco, 108 00:05:47,200 --> 00:05:50,800 Speaker 1: which is fundamentally different than what other let's call it 109 00:05:50,960 --> 00:05:52,880 Speaker 1: hemp cigarettes in the market would have been able to 110 00:05:52,920 --> 00:05:55,840 Speaker 1: do because one of the key things for smokers is 111 00:05:55,880 --> 00:05:59,599 Speaker 1: that they want a taste profile that resembles a cigarette. Now, 112 00:06:00,040 --> 00:06:01,799 Speaker 1: one thing I can tell you is that the number 113 00:06:01,839 --> 00:06:04,240 Speaker 1: of smokers that exist, there's almost forty million smokers in 114 00:06:04,400 --> 00:06:09,040 Speaker 1: the U s alone, about them have tried date. Yet 115 00:06:09,160 --> 00:06:10,880 Speaker 1: if you take a look at the market of smokers, 116 00:06:10,920 --> 00:06:13,320 Speaker 1: the number of smokers still weighs the number of vapors 117 00:06:13,320 --> 00:06:17,839 Speaker 1: twenty one, which tells you what to prefer delivery mechanism is. However, 118 00:06:18,760 --> 00:06:20,200 Speaker 1: you know, I used to work at Philip Morris and 119 00:06:20,240 --> 00:06:22,760 Speaker 1: I understand this quite well. You'd be hard pressed to 120 00:06:22,800 --> 00:06:25,240 Speaker 1: find the smoker that enjoys the factory because's a nicotine 121 00:06:26,320 --> 00:06:28,120 Speaker 1: and when you take a look at a lot of 122 00:06:28,120 --> 00:06:29,880 Speaker 1: the vape companies. They're trying to sell you on this 123 00:06:29,960 --> 00:06:33,320 Speaker 1: reduced risk element. However, they're still overly reliant on the 124 00:06:33,320 --> 00:06:35,840 Speaker 1: crutch of addiction in order to sell their wares, which 125 00:06:35,880 --> 00:06:40,520 Speaker 1: I think is absurd reliant, that's the point. Yeah, But 126 00:06:40,720 --> 00:06:44,520 Speaker 1: I mean, it's so easy to any other product. There 127 00:06:44,560 --> 00:06:46,240 Speaker 1: isn't any other product on it. If you have to 128 00:06:46,240 --> 00:06:48,400 Speaker 1: buy because you're addicted to it, you can buy it 129 00:06:48,440 --> 00:06:50,039 Speaker 1: because you like it, and there's still a market to 130 00:06:50,040 --> 00:06:52,800 Speaker 1: be had. So why can't we apply that similar mindset 131 00:06:52,839 --> 00:06:56,520 Speaker 1: to tobacco and provide smokers with something that they can 132 00:06:56,560 --> 00:07:01,160 Speaker 1: consume by choice, not by me. And that's exactly what 133 00:07:01,200 --> 00:07:04,120 Speaker 1: we're doing. So we've eliminated the tobacco, we've eliminated the nicotine. 134 00:07:04,520 --> 00:07:07,480 Speaker 1: We give you the same format as a cigarette, but 135 00:07:07,640 --> 00:07:11,520 Speaker 1: deliver CBD instead, which will still satiate a smoker the 136 00:07:11,560 --> 00:07:14,880 Speaker 1: same way nicotine will, but won't create an addiction. And 137 00:07:14,960 --> 00:07:17,280 Speaker 1: that way we can give the freedom to choose to 138 00:07:17,320 --> 00:07:19,840 Speaker 1: smokers and they can decide you want to smoke, smoke, 139 00:07:20,040 --> 00:07:22,080 Speaker 1: you don't want to smoke, don't smoke any chance, you 140 00:07:22,160 --> 00:07:25,520 Speaker 1: gotta chewing tobacco alternative can you can you help me 141 00:07:25,520 --> 00:07:28,680 Speaker 1: get get rid of the Copenhagen you like? You like 142 00:07:28,760 --> 00:07:32,000 Speaker 1: to dip? I mean yes. I don't know if I 143 00:07:32,000 --> 00:07:34,360 Speaker 1: should say that publicly because it's kind of embarrassing, especially 144 00:07:34,400 --> 00:07:36,600 Speaker 1: at my age, but yeah, especially if I'm at a 145 00:07:36,600 --> 00:07:38,600 Speaker 1: baseball game or driving a pickup truck or listen to 146 00:07:38,600 --> 00:07:41,520 Speaker 1: country music, I like to throw on a lip. It's 147 00:07:41,560 --> 00:07:45,560 Speaker 1: a great it's a great alternative. Before you're looking at 148 00:07:45,600 --> 00:07:47,520 Speaker 1: the markets here and Matt, we had that big sell 149 00:07:47,560 --> 00:07:50,800 Speaker 1: off on Monday, concern about growth, concern about the delta 150 00:07:51,160 --> 00:07:53,400 Speaker 1: variant and its impact on this economy. But boy, the 151 00:07:53,400 --> 00:07:56,760 Speaker 1: market recovered, to say the least, over this past four days. 152 00:07:56,800 --> 00:07:59,120 Speaker 1: And uh again, let's get a sense of where we 153 00:07:59,200 --> 00:08:01,320 Speaker 1: go from here. Brenda O'Connor joins us. She's a senior 154 00:08:01,400 --> 00:08:05,640 Speaker 1: vice president financial advisor UBS International, based in Miami. I believe, 155 00:08:05,640 --> 00:08:07,600 Speaker 1: if my notes are correct, we can talk about what's 156 00:08:07,600 --> 00:08:10,360 Speaker 1: going on down there in southern Florida, all the exodus 157 00:08:10,480 --> 00:08:12,720 Speaker 1: from Wall Street. But Brenda, give us a sense of 158 00:08:12,720 --> 00:08:15,880 Speaker 1: how you because some of the conversations you had with 159 00:08:15,960 --> 00:08:18,640 Speaker 1: your clients this week after that big sell off on 160 00:08:18,680 --> 00:08:21,400 Speaker 1: Monday and the subsequent rebound for the remainder of the week. 161 00:08:21,440 --> 00:08:24,560 Speaker 1: What are some of the conversations you were having. Yeah, 162 00:08:24,600 --> 00:08:26,840 Speaker 1: I mean, it was a pretty wild start of the week, 163 00:08:26,920 --> 00:08:29,520 Speaker 1: and you know, when the markets traded off around two percent, 164 00:08:29,920 --> 00:08:32,520 Speaker 1: you know, it looked pretty familiar to how and what 165 00:08:32,640 --> 00:08:34,720 Speaker 1: we saw at the beginning of the pandemic. You know, 166 00:08:34,920 --> 00:08:37,400 Speaker 1: we saw the relly of the US dollar, a drop 167 00:08:37,440 --> 00:08:40,079 Speaker 1: in equities, a drop in oil, and an increase in 168 00:08:40,120 --> 00:08:41,960 Speaker 1: bond meals. And as you said, you know, this was 169 00:08:42,040 --> 00:08:45,640 Speaker 1: quickly reversed on Tuesday, and we've seen markets grind fire 170 00:08:46,080 --> 00:08:48,280 Speaker 1: throughout the weekend. Here we are on Friday. The SMP 171 00:08:48,480 --> 00:08:50,800 Speaker 1: is up over sixteen percent year to date, and so, 172 00:08:51,040 --> 00:08:53,880 Speaker 1: you know, while some investors are concerned about the strength 173 00:08:53,960 --> 00:08:56,840 Speaker 1: of the recovery, whether that's because of the delta variant 174 00:08:57,120 --> 00:09:00,440 Speaker 1: or inflation, you know, for the most part are clients 175 00:09:00,559 --> 00:09:03,640 Speaker 1: are big proponents that this recovery will stay intact. And 176 00:09:03,679 --> 00:09:06,360 Speaker 1: we're so positive on christ As. What do you do 177 00:09:06,400 --> 00:09:09,000 Speaker 1: though with clients. I had dinner with a bunch of 178 00:09:09,120 --> 00:09:13,200 Speaker 1: traders last night who have just made so much money 179 00:09:13,200 --> 00:09:16,400 Speaker 1: that they want to get some of it into cash 180 00:09:16,760 --> 00:09:19,000 Speaker 1: before this turns around. Not like it's going to turn 181 00:09:19,040 --> 00:09:21,559 Speaker 1: aroundy time soon. But you don't need to ride out 182 00:09:21,600 --> 00:09:24,240 Speaker 1: the last hundred points of the S and P five hundred. 183 00:09:24,320 --> 00:09:27,800 Speaker 1: Do you start moving them out? No, So we're not 184 00:09:27,880 --> 00:09:30,720 Speaker 1: big proponents of moving to cash. I think the tactical 185 00:09:30,800 --> 00:09:33,199 Speaker 1: things that we've been speaking to clients this week about 186 00:09:33,240 --> 00:09:36,680 Speaker 1: are taking profit in sectors like US tech for example. 187 00:09:36,720 --> 00:09:39,199 Speaker 1: I mean, the Nasdaq was up thirty eight percent last year, 188 00:09:39,240 --> 00:09:42,839 Speaker 1: it's up another fourteenth this year, and so this is 189 00:09:42,880 --> 00:09:46,040 Speaker 1: an opportunity given where valuations are, where we're happy to 190 00:09:46,080 --> 00:09:48,880 Speaker 1: take a little profit off the table and allocated to 191 00:09:49,120 --> 00:09:53,120 Speaker 1: sectors that we do like. So, Bret, I think talk 192 00:09:53,160 --> 00:09:55,120 Speaker 1: to us about how you're talking to your clients about 193 00:09:55,480 --> 00:09:58,120 Speaker 1: international exposure. I know that in Miami that you get 194 00:09:58,240 --> 00:10:01,480 Speaker 1: tends to be a nice international community, a global community 195 00:10:01,520 --> 00:10:03,520 Speaker 1: down there, and I'm guessing that's reflected a little bit 196 00:10:03,520 --> 00:10:06,160 Speaker 1: in your book. How are you and your clients thinking 197 00:10:06,160 --> 00:10:10,720 Speaker 1: about international investment opportunities? Al Right, So we're still positive 198 00:10:10,760 --> 00:10:13,080 Speaker 1: on equities on a whole, and you know, they're still 199 00:10:13,120 --> 00:10:15,440 Speaker 1: spectors of the U S market that we like, although 200 00:10:15,559 --> 00:10:18,880 Speaker 1: you know, we do like certain parts of Asia, and 201 00:10:18,920 --> 00:10:21,280 Speaker 1: a lot of my families aren't even looking at equities, 202 00:10:21,280 --> 00:10:25,480 Speaker 1: they're turning to things like an alternative investment. So, you know, 203 00:10:25,640 --> 00:10:28,440 Speaker 1: these are our clients tend to have very long term 204 00:10:28,480 --> 00:10:34,480 Speaker 1: time horizons. They're great correlation benefits to alternative asset classes. Um. 205 00:10:34,520 --> 00:10:37,680 Speaker 1: You know, investors are often rewarded for a little with 206 00:10:37,760 --> 00:10:41,000 Speaker 1: a liquidity premium. So we've been looking at things like 207 00:10:41,120 --> 00:10:44,760 Speaker 1: private private real estate and private equities, specifically in the 208 00:10:44,800 --> 00:10:48,240 Speaker 1: secondary space. Well, luckily, some private equity firms are raising 209 00:10:48,280 --> 00:10:52,319 Speaker 1: some big funds right now. Carlisle raising twenties seven billion 210 00:10:52,360 --> 00:10:55,920 Speaker 1: dollar fund right, Blackstone just wrapped up last year at 211 00:10:56,120 --> 00:10:59,760 Speaker 1: twenty six billion dollar fund. Um. I think five d 212 00:11:00,200 --> 00:11:05,200 Speaker 1: twenty billion dollars came into private equity in the first half. 213 00:11:05,240 --> 00:11:09,480 Speaker 1: There's a lot of cash washing around, isn't there. Yeah, there, 214 00:11:09,559 --> 00:11:11,720 Speaker 1: there definitely is. And so there are certain parts of 215 00:11:11,720 --> 00:11:14,120 Speaker 1: the private equity market that we maybe stay away from. 216 00:11:14,160 --> 00:11:18,280 Speaker 1: But again, um there are subsets like um um secondaries 217 00:11:18,320 --> 00:11:20,600 Speaker 1: that we're really big fans of, and we still think 218 00:11:20,640 --> 00:11:23,200 Speaker 1: that you can get kind of mid teen high team 219 00:11:23,240 --> 00:11:26,080 Speaker 1: net returns on these asset classes. And if we look 220 00:11:26,160 --> 00:11:28,760 Speaker 1: forward um to the next five years and we look 221 00:11:28,760 --> 00:11:32,280 Speaker 1: at ubs as capital market assumptions, I mean those returns 222 00:11:32,360 --> 00:11:34,600 Speaker 1: kind of beat what we think equities may do over 223 00:11:34,640 --> 00:11:37,840 Speaker 1: the next three to five years or the market cycle. Brenda, 224 00:11:37,960 --> 00:11:40,280 Speaker 1: you know, get it. Love to get a sense of 225 00:11:40,320 --> 00:11:41,920 Speaker 1: how you're viewing US equities. What are some of the 226 00:11:41,960 --> 00:11:43,439 Speaker 1: sectors you like, because there is a little bit of 227 00:11:43,440 --> 00:11:45,000 Speaker 1: a push and pool out there between some of the 228 00:11:45,000 --> 00:11:47,360 Speaker 1: folks that are saying, boy, I'm sticking with those growth names, 229 00:11:47,400 --> 00:11:49,800 Speaker 1: the the Amazons, the apples of the world that have 230 00:11:50,040 --> 00:11:52,040 Speaker 1: done so well for me for such a long time. 231 00:11:52,440 --> 00:11:54,120 Speaker 1: And then there's obviously people that are you know, kind 232 00:11:54,120 --> 00:11:56,280 Speaker 1: of rotated into the more cyclical side of the market 233 00:11:56,280 --> 00:11:58,880 Speaker 1: and may be benefited from the some of this reopening trade. 234 00:11:58,880 --> 00:12:00,280 Speaker 1: If you will, let me get a sense kind of 235 00:12:00,280 --> 00:12:02,920 Speaker 1: where you are putting your client's assets right here in 236 00:12:02,920 --> 00:12:07,040 Speaker 1: the US. Yeah. So I'll talk about two sectors that 237 00:12:07,080 --> 00:12:10,839 Speaker 1: we like right now, and that's consumer discretionary and financials. 238 00:12:11,080 --> 00:12:13,360 Speaker 1: I mean with financials, yes, you know, the sector is 239 00:12:13,440 --> 00:12:16,199 Speaker 1: up twenty year to date, but we still think there's 240 00:12:16,320 --> 00:12:19,720 Speaker 1: upside here and that's really based on two reasons. Um. 241 00:12:19,800 --> 00:12:23,160 Speaker 1: The first is, you know, in an interest rate increasing environment, 242 00:12:23,320 --> 00:12:27,280 Speaker 1: this um this this subset will will tend to outperform. 243 00:12:27,600 --> 00:12:30,000 Speaker 1: And then a lot of the banks that raise these 244 00:12:30,040 --> 00:12:33,240 Speaker 1: big provisions for loan losses are now starting to release 245 00:12:33,280 --> 00:12:35,320 Speaker 1: some of this capital, and we think that's gonna benefit 246 00:12:35,720 --> 00:12:38,600 Speaker 1: bank and financial names. The other area we're looking into 247 00:12:39,040 --> 00:12:42,360 Speaker 1: is consumer discretionary, and this is really on the notion 248 00:12:42,480 --> 00:12:45,000 Speaker 1: that there is just a ton of cash sitting on 249 00:12:45,559 --> 00:12:48,480 Speaker 1: corporate and household balance sheets. If we look at household 250 00:12:48,480 --> 00:12:51,719 Speaker 1: balance sheets as an example, I mean US savings as 251 00:12:51,720 --> 00:12:55,839 Speaker 1: a percentage of disposable income is around twelve orcent. Listen, 252 00:12:55,880 --> 00:12:57,439 Speaker 1: it's not as high as it was earlier in the 253 00:12:57,559 --> 00:13:00,439 Speaker 1: pandemic at thirty five percent, but it's much higher than 254 00:13:00,480 --> 00:13:03,760 Speaker 1: the five to seven that's the historical average. So our 255 00:13:03,880 --> 00:13:07,240 Speaker 1: view is as this cash continues to work its way 256 00:13:07,240 --> 00:13:10,760 Speaker 1: through the system, it will benefit sectors like consumer discretionary, 257 00:13:11,679 --> 00:13:14,080 Speaker 1: anything you like in fixed income. I mean, I know, um, 258 00:13:14,120 --> 00:13:17,880 Speaker 1: it's tough to chase returns there, find returns there even um, 259 00:13:17,920 --> 00:13:22,200 Speaker 1: the further you've got the risk spectrum. Yeah, So you know, 260 00:13:22,360 --> 00:13:25,199 Speaker 1: most of my clients view their portfolios as an overall 261 00:13:25,280 --> 00:13:28,160 Speaker 1: asset allocation and a diverse by portfolio. So we still 262 00:13:28,240 --> 00:13:32,600 Speaker 1: have strategic allocations to fix income, but we tend and 263 00:13:32,640 --> 00:13:35,360 Speaker 1: are tending to UM stay away from that now, but 264 00:13:35,440 --> 00:13:38,440 Speaker 1: we still have You know, I would argue ten to 265 00:13:39,160 --> 00:13:43,120 Speaker 1: allocated to liquidity, cash and fixed income. Hey, Brenda, thanks 266 00:13:43,120 --> 00:13:45,480 Speaker 1: so much for joining us. We really appreciate you taking 267 00:13:45,520 --> 00:13:48,760 Speaker 1: the time. Brenda O'Connor, Senior vice president, Financial advisor for 268 00:13:48,840 --> 00:13:53,160 Speaker 1: UBS International. Her clients take a look at private equity 269 00:13:53,240 --> 00:13:55,760 Speaker 1: here and search for return. Since it was a suggesting 270 00:13:55,760 --> 00:13:57,480 Speaker 1: boy in the fix income mark with a ten year one. 271 00:13:57,720 --> 00:14:00,520 Speaker 1: Tough to find some yield out there. So some of 272 00:14:00,559 --> 00:14:04,319 Speaker 1: the folks with longer term investment horizons putting some of 273 00:14:04,360 --> 00:14:05,920 Speaker 1: the money to work in the private equity. And has 274 00:14:05,960 --> 00:14:08,559 Speaker 1: mentioned some big, big money is being raised out there 275 00:14:08,600 --> 00:14:13,120 Speaker 1: by some of these big funds. Now, let's talk real estate. 276 00:14:13,320 --> 00:14:17,280 Speaker 1: Cushman and Wakefield's head of head Economists and head of 277 00:14:17,320 --> 00:14:21,040 Speaker 1: retail research, Ken McCarthy joins us. And this is a 278 00:14:21,080 --> 00:14:25,680 Speaker 1: hot topic, UM hot industry, and you know, pricing on 279 00:14:25,760 --> 00:14:28,480 Speaker 1: at least on the retail side, the residential side, I 280 00:14:28,480 --> 00:14:31,360 Speaker 1: should say, has been amazing. But I have to say, 281 00:14:31,640 --> 00:14:36,000 Speaker 1: can as I walk through UM the valley of Manhattan 282 00:14:36,200 --> 00:14:41,160 Speaker 1: and look left and right, everything looks closed, It looks empty. 283 00:14:41,240 --> 00:14:45,000 Speaker 1: I mean here in our I guess Bornado building. Right, 284 00:14:45,120 --> 00:14:50,760 Speaker 1: we have no more UM anchor tenants. Home depot is gone. UH, 285 00:14:51,040 --> 00:14:53,840 Speaker 1: container store is gone. H and M is gone and 286 00:14:53,880 --> 00:14:57,880 Speaker 1: no one's replaced them. So it looks really bad. How 287 00:14:57,960 --> 00:15:01,880 Speaker 1: is it? So? Thanks very much. I don't think it's 288 00:15:01,920 --> 00:15:04,440 Speaker 1: as bad as it looks, you know. I think retail 289 00:15:04,520 --> 00:15:06,920 Speaker 1: has been challenged for a little while now because of 290 00:15:07,560 --> 00:15:11,000 Speaker 1: e commerce penetration, and then when COVID hit, it was 291 00:15:11,040 --> 00:15:13,320 Speaker 1: considered that this was going to be the end of retail, 292 00:15:13,400 --> 00:15:17,400 Speaker 1: the apocalypse. Uh. And definitely there have been some store closings, 293 00:15:17,400 --> 00:15:22,000 Speaker 1: there's been some movement around in where companies or retailers 294 00:15:22,560 --> 00:15:25,960 Speaker 1: decides to locate, but overall, the amount that's being spent 295 00:15:26,000 --> 00:15:28,320 Speaker 1: by consumers continues to grow. I think it's just a 296 00:15:28,320 --> 00:15:32,040 Speaker 1: matter of location more than anything else. You know. Many cities, 297 00:15:32,320 --> 00:15:37,600 Speaker 1: particularly cities like New York, which rely heavily on public transit, 298 00:15:37,720 --> 00:15:43,120 Speaker 1: have seen much slower adoption of back to work UH. 299 00:15:43,160 --> 00:15:46,000 Speaker 1: And that's particularly in a place like Midtown where most 300 00:15:46,040 --> 00:15:49,600 Speaker 1: of the retail is in office buildings. That's creating some challenges. 301 00:15:49,680 --> 00:15:53,400 Speaker 1: But overall, as we look at the retail sector in 302 00:15:53,480 --> 00:15:57,840 Speaker 1: commercial real estate, it actually performed surprisingly well in the downturn, 303 00:15:59,120 --> 00:16:03,000 Speaker 1: So I know it's interesting. I know for retail, the strategy, 304 00:16:03,120 --> 00:16:07,320 Speaker 1: the buzzword for many years has been omni channel. You know. Uh, 305 00:16:07,360 --> 00:16:09,920 Speaker 1: an example that would be, you know, buying something online 306 00:16:09,920 --> 00:16:13,160 Speaker 1: but picking it up at the physical store, so that 307 00:16:13,240 --> 00:16:15,640 Speaker 1: brings some life into a lot of the retailers in 308 00:16:15,720 --> 00:16:18,480 Speaker 1: terms of the bricks and mortar. Is that a long 309 00:16:18,600 --> 00:16:22,920 Speaker 1: term trend? Do you think? Well? Certainly, right now the 310 00:16:22,960 --> 00:16:26,360 Speaker 1: consumer is king in the retail world. Whatever the consumer wants, 311 00:16:26,400 --> 00:16:29,040 Speaker 1: retailers are trying to get it to them. Uh, it's 312 00:16:29,080 --> 00:16:30,720 Speaker 1: it's going to be a combination. I think you're right. 313 00:16:30,760 --> 00:16:33,320 Speaker 1: Omni channel is a good way of describing it, but 314 00:16:33,400 --> 00:16:38,480 Speaker 1: it's also about um, it's about digitally native brands think 315 00:16:39,080 --> 00:16:42,720 Speaker 1: Amazon as an example, are now going into bricks and mortar. 316 00:16:43,160 --> 00:16:45,880 Speaker 1: So it's a fusion of both of those at the 317 00:16:45,920 --> 00:16:48,800 Speaker 1: same time. Uh, that's gonna content that's gonna lead to 318 00:16:48,960 --> 00:16:51,280 Speaker 1: higher demand for bricks and mortar as well. I think 319 00:16:51,600 --> 00:16:55,360 Speaker 1: net net consumer spending is rising, It's probably going to 320 00:16:55,400 --> 00:16:58,280 Speaker 1: continue to grow, and as it does, the pie is 321 00:16:58,280 --> 00:17:01,200 Speaker 1: going to get bigger. But the question is, you know, 322 00:17:01,240 --> 00:17:02,880 Speaker 1: how much of it is going to be e commerce? 323 00:17:02,880 --> 00:17:04,520 Speaker 1: How much of it is gonna be bricks and mortar 324 00:17:04,720 --> 00:17:06,679 Speaker 1: net net, most of it's going to be bricks and 325 00:17:06,720 --> 00:17:09,240 Speaker 1: mortar in terms of overall as it is today again, 326 00:17:09,320 --> 00:17:13,200 Speaker 1: as you're speaking, we're watching the SMPI extend gains to 327 00:17:13,320 --> 00:17:18,000 Speaker 1: set yet another intra day record high. So you know, 328 00:17:18,000 --> 00:17:22,560 Speaker 1: at least if you're invested, your wealth is rising. Companies 329 00:17:22,640 --> 00:17:25,639 Speaker 1: have more power in the stock market. And although a 330 00:17:25,680 --> 00:17:27,640 Speaker 1: lot of debt has been taken on as we were 331 00:17:27,840 --> 00:17:31,800 Speaker 1: you know, just talking um, uh with our previous guests 332 00:17:31,840 --> 00:17:36,320 Speaker 1: about financing costs are basically nothing. So, um, what does 333 00:17:36,359 --> 00:17:40,520 Speaker 1: this mean for the market? Um? Is there is there 334 00:17:40,560 --> 00:17:43,359 Speaker 1: opportunity to come in and get some deals here? Is 335 00:17:43,400 --> 00:17:47,080 Speaker 1: there value out there? Or um, you know, is it 336 00:17:47,200 --> 00:17:51,960 Speaker 1: fairly valued now? So? I think that's very location sensitive 337 00:17:52,040 --> 00:17:54,680 Speaker 1: first of all. But second of all, I think there 338 00:17:54,880 --> 00:17:56,959 Speaker 1: was value. I think a lot of that has already 339 00:17:57,000 --> 00:18:00,639 Speaker 1: taken place. Uh that as we go forward, there the 340 00:18:00,680 --> 00:18:03,680 Speaker 1: opportunities are starting to diminish a little bit. Uh. There 341 00:18:03,720 --> 00:18:06,320 Speaker 1: There definitely if you're an occupier, there are places you 342 00:18:06,359 --> 00:18:10,679 Speaker 1: can go and take advantage of softer markets. But overall, 343 00:18:11,200 --> 00:18:13,760 Speaker 1: I think the market is probably pretty close to fairly 344 00:18:13,800 --> 00:18:16,080 Speaker 1: priced right now. It's a good point to keep reminding us, 345 00:18:16,080 --> 00:18:19,880 Speaker 1: by the way, that it's very location specific, and I'm 346 00:18:19,880 --> 00:18:22,040 Speaker 1: sure can you probably have to remind people about this 347 00:18:22,200 --> 00:18:26,520 Speaker 1: a lot because it is such a It's not um, 348 00:18:26,560 --> 00:18:31,400 Speaker 1: you know, one solid America is very big. Um. Commercial 349 00:18:31,400 --> 00:18:34,800 Speaker 1: real estate is global, I'm assuming you know. And so 350 00:18:35,880 --> 00:18:38,480 Speaker 1: it's it's difficult for for the lay person to really 351 00:18:38,720 --> 00:18:41,320 Speaker 1: get that through, or for me at least to get 352 00:18:41,320 --> 00:18:45,000 Speaker 1: that through my thick skull. Sure, now I feel the 353 00:18:45,040 --> 00:18:47,240 Speaker 1: same way when I walk the streets. I think this 354 00:18:47,359 --> 00:18:49,040 Speaker 1: is the way it is everywhere, and you have to 355 00:18:49,600 --> 00:18:52,240 Speaker 1: step back and say, no. You know, some cities, cities 356 00:18:52,280 --> 00:18:57,480 Speaker 1: that don't have as heavier reliance on public transity, for example, 357 00:18:57,520 --> 00:18:59,840 Speaker 1: a lot of people drive to work. They're seeing much 358 00:19:00,040 --> 00:19:03,840 Speaker 1: higher occupancy rates than cities that do rely on transit, 359 00:19:03,920 --> 00:19:07,439 Speaker 1: and that affects them, you know, effects where retailer is 360 00:19:07,440 --> 00:19:09,479 Speaker 1: going to open, where they're going to go in the future, 361 00:19:09,640 --> 00:19:13,360 Speaker 1: things like that. So, as they always say, in real estate, 362 00:19:13,400 --> 00:19:16,199 Speaker 1: it's all about location, all right, Well, my location is 363 00:19:16,280 --> 00:19:20,520 Speaker 1: midtown Manhattan. So here's my question, will Midtown man will 364 00:19:20,560 --> 00:19:24,199 Speaker 1: Manhattan in general, what's the expectation within the commercial real 365 00:19:24,280 --> 00:19:27,879 Speaker 1: estate community, what needs to happen for this to come back, 366 00:19:27,960 --> 00:19:31,440 Speaker 1: because the vacancy rates, as Matt mentioned, are just stunning 367 00:19:31,480 --> 00:19:34,240 Speaker 1: to to behold, and is it just simply a question 368 00:19:34,240 --> 00:19:38,840 Speaker 1: of they got all over the rates. So I think 369 00:19:38,960 --> 00:19:42,119 Speaker 1: it's going to be about economic growth. That's the fundamental driver. 370 00:19:42,240 --> 00:19:45,320 Speaker 1: We need to see more people in in the city 371 00:19:45,400 --> 00:19:47,920 Speaker 1: going to work in the office space. When that happens, 372 00:19:48,359 --> 00:19:52,280 Speaker 1: then you'll see more retailers come back with them and 373 00:19:52,320 --> 00:19:55,480 Speaker 1: start to reopen stores that may have been shut down. 374 00:19:55,840 --> 00:19:58,160 Speaker 1: But the key thing is going to be getting more 375 00:19:58,160 --> 00:20:00,760 Speaker 1: people on the streets a little long run. It's a 376 00:20:00,760 --> 00:20:03,800 Speaker 1: good point. I went over to Chick phil A this 377 00:20:03,840 --> 00:20:07,320 Speaker 1: morning at six am to try and, uh, get my 378 00:20:07,400 --> 00:20:10,360 Speaker 1: first taste of that fast food chain. I've never been 379 00:20:10,400 --> 00:20:12,800 Speaker 1: there before, and um, there was a sign on the 380 00:20:12,840 --> 00:20:16,000 Speaker 1: window that said we're closed until later because there's no 381 00:20:16,040 --> 00:20:18,080 Speaker 1: one here, and well then it's probably no one to 382 00:20:18,200 --> 00:20:21,240 Speaker 1: staff it as well. It's also a probably big issue, yeah, 383 00:20:21,760 --> 00:20:25,760 Speaker 1: I think, you know. And after that, I walk around 384 00:20:25,800 --> 00:20:27,919 Speaker 1: and I noticed all of the deli's are just not 385 00:20:28,000 --> 00:20:29,720 Speaker 1: open as early as they used to. And why would 386 00:20:29,760 --> 00:20:31,840 Speaker 1: they be because I was the only person walking around 387 00:20:31,840 --> 00:20:35,560 Speaker 1: the streets, especially on a Friday morning. Quite frankly, I'm 388 00:20:35,600 --> 00:20:38,680 Speaker 1: in the office. But you know, it's it's a bit 389 00:20:38,720 --> 00:20:41,800 Speaker 1: slow to to to pick up overall, and I think 390 00:20:41,840 --> 00:20:44,439 Speaker 1: you're right, Um, it's going to take a while. So 391 00:20:44,440 --> 00:20:47,040 Speaker 1: where where Where are the strong places for commercial real 392 00:20:47,119 --> 00:20:51,360 Speaker 1: estate right now? Well, if you look at migration, that's 393 00:20:51,400 --> 00:20:54,800 Speaker 1: a good indicator. A lot of it is in UH 394 00:20:54,920 --> 00:20:59,360 Speaker 1: in the Sun Belt. So places like Texas and Florida 395 00:20:59,480 --> 00:21:02,360 Speaker 1: which have UH, which recovered a little bit sooner, they're 396 00:21:02,400 --> 00:21:06,360 Speaker 1: also seeing faster growth in demand for office space, more 397 00:21:06,400 --> 00:21:10,080 Speaker 1: occupancy than we saw and driving that also is going 398 00:21:10,200 --> 00:21:13,800 Speaker 1: you know, as we see more people moving migrating into 399 00:21:13,840 --> 00:21:15,760 Speaker 1: the Sun Belt, which is in a long term trend. 400 00:21:15,800 --> 00:21:20,359 Speaker 1: It's not a new trend. Um that's gonna drive demand. 401 00:21:20,520 --> 00:21:24,360 Speaker 1: That's gonna drive demand, and demand is gonna drive more occupiers, 402 00:21:24,359 --> 00:21:28,800 Speaker 1: whether they're retailers or or office occupiers into those areas 403 00:21:28,840 --> 00:21:31,720 Speaker 1: to tap into that growth. All right, Ken, thanks so 404 00:21:31,800 --> 00:21:34,280 Speaker 1: much for joining us. Kevin McCarthy is an economist and 405 00:21:34,280 --> 00:21:37,960 Speaker 1: the retail research lead over at Kushman and Wakefield talking 406 00:21:38,000 --> 00:21:40,960 Speaker 1: to us about commercial real estate and the retail side. 407 00:21:41,040 --> 00:21:44,960 Speaker 1: I wish we saw these vacancies and in residential real 408 00:21:45,080 --> 00:21:48,439 Speaker 1: estate like, especially in Westchester, that would be fantastic for me, 409 00:21:48,480 --> 00:21:54,440 Speaker 1: but unfortunately it's quite the opposite. But what a week 410 00:21:54,440 --> 00:21:57,720 Speaker 1: it's been here. It was a decidedly risk off day 411 00:21:57,880 --> 00:22:01,919 Speaker 1: on Monday, and again calls about the delta variant and 412 00:22:01,960 --> 00:22:04,399 Speaker 1: the impact on economic growth. But boy, the markets have 413 00:22:04,520 --> 00:22:07,479 Speaker 1: kind of turned it around since then. Greg Staples had 414 00:22:07,480 --> 00:22:09,920 Speaker 1: a fixed income for the Americas for dw S Group, 415 00:22:09,920 --> 00:22:13,840 Speaker 1: which stands for in German Deutsche vert Papier Specialists and like, 416 00:22:14,480 --> 00:22:16,720 Speaker 1: all right, Greg, thanks so much for joining us. Greg, 417 00:22:16,720 --> 00:22:20,200 Speaker 1: talk to us about what you're seeing in your credit markets, 418 00:22:20,480 --> 00:22:23,760 Speaker 1: you know, over the recent trading days. You know, it's 419 00:22:23,760 --> 00:22:26,240 Speaker 1: actually been a pretty interesting market. We actually, we were 420 00:22:26,240 --> 00:22:29,320 Speaker 1: pretty positive on credit overall. It's it's good that American 421 00:22:29,400 --> 00:22:32,639 Speaker 1: corporations have taken this opportunity with low interest rates and 422 00:22:32,640 --> 00:22:35,440 Speaker 1: tight spreads over the past year to issue to issue 423 00:22:35,480 --> 00:22:37,280 Speaker 1: a fair amount of death, and market has been receptive. 424 00:22:37,280 --> 00:22:40,280 Speaker 1: And they strengthened their balance sheet and they pushed out maturities. 425 00:22:40,359 --> 00:22:42,680 Speaker 1: So there and it's gonna shape as we've ever seen them. 426 00:22:42,720 --> 00:22:45,320 Speaker 1: So we're pretty positive on credit overall. And and now 427 00:22:45,359 --> 00:22:50,440 Speaker 1: they've got the positive of grouping economic and market conditions 428 00:22:50,600 --> 00:22:52,160 Speaker 1: if you dig right in there, if a client comes 429 00:22:52,200 --> 00:22:53,679 Speaker 1: and gives you some money to put to work, what 430 00:22:53,720 --> 00:22:56,600 Speaker 1: do you like best. Well, it's a tough market because 431 00:22:56,600 --> 00:22:58,760 Speaker 1: in the fixed income markets, with interest rates tenure at 432 00:22:58,760 --> 00:23:02,119 Speaker 1: one thirty and credit it spreads extremely tight. There's not 433 00:23:02,160 --> 00:23:04,399 Speaker 1: a lot of upside here, but you are going to 434 00:23:04,440 --> 00:23:07,000 Speaker 1: earn some coupon interest, which is pretty decent. So we 435 00:23:07,080 --> 00:23:09,359 Speaker 1: like investment grade credit got to be selective. We like 436 00:23:09,400 --> 00:23:11,240 Speaker 1: high you'ld at the upper end of the credit spectrum, 437 00:23:11,240 --> 00:23:13,640 Speaker 1: and there are some opportunities and structured finance as well, 438 00:23:14,119 --> 00:23:16,159 Speaker 1: like floating rate debt, because we do think that the 439 00:23:16,160 --> 00:23:18,719 Speaker 1: FED is going to start raising interest rates probably at 440 00:23:18,720 --> 00:23:20,240 Speaker 1: the end of next year, and you do get that 441 00:23:20,320 --> 00:23:24,320 Speaker 1: upside as they start to move shorter term rates up. Hey, Greg, 442 00:23:24,320 --> 00:23:26,800 Speaker 1: talk to us about just credit quality in general. It 443 00:23:26,840 --> 00:23:31,240 Speaker 1: seems like with the FED being so accommodative, we the 444 00:23:31,280 --> 00:23:33,520 Speaker 1: credit quality has really kind of hung in there, and 445 00:23:33,600 --> 00:23:35,639 Speaker 1: you know, going into this pandemic, you know, I was 446 00:23:35,720 --> 00:23:37,760 Speaker 1: kind of looking across the high old space saying, oh boy, 447 00:23:38,080 --> 00:23:39,520 Speaker 1: here are a lot of credits that are going to 448 00:23:39,600 --> 00:23:41,560 Speaker 1: be at risk. Here, We're gonna see a lot of defaults. 449 00:23:41,560 --> 00:23:44,480 Speaker 1: But we really haven't have we No, And we've said 450 00:23:44,520 --> 00:23:46,560 Speaker 1: a lot of upgrades as well. I'd say again, for 451 00:23:46,600 --> 00:23:49,280 Speaker 1: the most part, corporations have have taken the opportunity to 452 00:23:49,640 --> 00:23:51,880 Speaker 1: strengthen their balance sh They've got a lot of liquidity there, 453 00:23:52,359 --> 00:23:55,600 Speaker 1: and they pushed off maturities, meaning they refinance but prepaying 454 00:23:55,640 --> 00:23:58,520 Speaker 1: near term maturity debt and refinancing with longer term maturity debt. 455 00:23:58,840 --> 00:24:01,760 Speaker 1: Overall debt levels are high. Let's let's not ignore that. 456 00:24:01,840 --> 00:24:04,679 Speaker 1: But the point is they've been refinancing with lower coupon 457 00:24:04,760 --> 00:24:06,760 Speaker 1: as well to dept service meaning what they have to 458 00:24:06,800 --> 00:24:09,320 Speaker 1: actually pay on an annual basis to meet those interest payments, 459 00:24:09,320 --> 00:24:12,600 Speaker 1: and ultimately in the maturities, that's an actually pretty good shape. 460 00:24:12,640 --> 00:24:15,080 Speaker 1: So we think it's a positive. But you're not getting 461 00:24:15,119 --> 00:24:18,040 Speaker 1: the returns um that that you'd like to I'm sure 462 00:24:18,119 --> 00:24:20,040 Speaker 1: for for the risk. Are you getting paid for the risk? 463 00:24:21,000 --> 00:24:22,560 Speaker 1: I think you're getting paid for the risk and not 464 00:24:22,680 --> 00:24:24,359 Speaker 1: too much more than that. And yes, you're not going 465 00:24:24,400 --> 00:24:26,920 Speaker 1: to get the returns. It's not a situation where of course, 466 00:24:26,920 --> 00:24:29,800 Speaker 1: in the bond market you're benefiting from declining interest rates. 467 00:24:29,800 --> 00:24:31,480 Speaker 1: If you want a bond with a high coupon and 468 00:24:31,560 --> 00:24:34,000 Speaker 1: high in a high interest rate environment, and rates come down, 469 00:24:34,520 --> 00:24:35,960 Speaker 1: the price of your bond goes up, and there's where 470 00:24:36,000 --> 00:24:37,920 Speaker 1: a lot of the return comes from. But in terms 471 00:24:37,960 --> 00:24:39,800 Speaker 1: of the current coup on the current yield right now, 472 00:24:39,800 --> 00:24:41,640 Speaker 1: you're gonna be earning maybe two percent on a good 473 00:24:41,640 --> 00:24:44,720 Speaker 1: investment grade bond and maybe four on a on a 474 00:24:44,760 --> 00:24:47,480 Speaker 1: high old bond, which which isn't fantastic, but given the 475 00:24:47,520 --> 00:24:49,919 Speaker 1: alternatives that are available elsewhere in the marketplace, I mean, 476 00:24:49,920 --> 00:24:53,040 Speaker 1: you've got cash earning virtually zero, and you know, equity 477 00:24:53,040 --> 00:24:55,440 Speaker 1: dividends are okay, it still it's probably not a bad 478 00:24:55,440 --> 00:24:57,879 Speaker 1: place to park your money. All right, talk to us 479 00:24:57,920 --> 00:25:00,560 Speaker 1: about this Federal Reserve. How are you viewing you know, 480 00:25:00,680 --> 00:25:03,800 Speaker 1: the risk here, the tapering risk to the marketplace. It 481 00:25:03,800 --> 00:25:06,720 Speaker 1: seems like the FED is, you know, doing all that 482 00:25:06,800 --> 00:25:10,440 Speaker 1: they can to kind of communicate and signal and all 483 00:25:10,440 --> 00:25:12,879 Speaker 1: of that good stuff, trying to avoid a taper tantrum? Again, 484 00:25:12,960 --> 00:25:14,800 Speaker 1: is is that kind of how you view it? Are 485 00:25:14,920 --> 00:25:17,440 Speaker 1: are you kind of pricing in some some risk here 486 00:25:17,520 --> 00:25:20,920 Speaker 1: as maybe races start to tighten. Well, first off, we 487 00:25:21,200 --> 00:25:22,960 Speaker 1: do think that the FED is going to begin tapering, 488 00:25:23,000 --> 00:25:24,520 Speaker 1: and I think that Powell and the rest of the 489 00:25:24,520 --> 00:25:26,840 Speaker 1: FED are going to try and inoculate the market as 490 00:25:26,920 --> 00:25:29,000 Speaker 1: much as they can by talking about it, talking about it, 491 00:25:29,040 --> 00:25:32,040 Speaker 1: talking about it, and probably don't won't implement it until 492 00:25:32,080 --> 00:25:34,199 Speaker 1: the end of the year call it December January, and 493 00:25:34,280 --> 00:25:37,760 Speaker 1: probably through a reduction in their mortgage back purchases. Initially, 494 00:25:38,040 --> 00:25:40,040 Speaker 1: they're scared to doubt about what was what we would 495 00:25:40,080 --> 00:25:42,560 Speaker 1: call a taper tantrum, meaning the pulling back of that 496 00:25:42,640 --> 00:25:46,240 Speaker 1: quantitative using injecting a fair amount of volatility in the marketplace. 497 00:25:46,240 --> 00:25:48,080 Speaker 1: There was an episode in two thousand and thirteen that 498 00:25:48,160 --> 00:25:50,520 Speaker 1: was really egg on the face of of the fedback then. 499 00:25:51,040 --> 00:25:52,479 Speaker 1: To be honest with you, I think, no matter what 500 00:25:52,480 --> 00:25:54,399 Speaker 1: they do, there was going to be volatility. I think 501 00:25:54,520 --> 00:25:57,000 Speaker 1: when you when you remove the biggest whale in the 502 00:25:57,000 --> 00:26:00,359 Speaker 1: marketplace that's been buying a hundred and twenty billion hours 503 00:26:00,480 --> 00:26:03,240 Speaker 1: of treasuries and mortgages every month, and you start to 504 00:26:03,240 --> 00:26:05,600 Speaker 1: pull back from that, no matter what you think, there's 505 00:26:05,600 --> 00:26:07,800 Speaker 1: going to be some volatility there. There's really not much 506 00:26:07,840 --> 00:26:11,120 Speaker 1: you can do about it. The impacts are seen and unseen, 507 00:26:11,280 --> 00:26:13,159 Speaker 1: and it's worked its way through the equity markets and 508 00:26:13,160 --> 00:26:15,919 Speaker 1: the overall risk markets. It's a little bit like pulling 509 00:26:16,080 --> 00:26:18,000 Speaker 1: uh I I hate to go here, but but a 510 00:26:18,080 --> 00:26:20,320 Speaker 1: drug addict off the drug and there's gonna be some 511 00:26:20,320 --> 00:26:22,399 Speaker 1: some volatility as resolved, but there's there's no way to 512 00:26:22,400 --> 00:26:25,439 Speaker 1: get away from it. How important is Jackson Hole for you? 513 00:26:25,520 --> 00:26:28,160 Speaker 1: How important is it for you know, fixte income investors 514 00:26:28,160 --> 00:26:31,640 Speaker 1: to pay attention in August? Well, it's obviously what they communicate, 515 00:26:31,680 --> 00:26:33,159 Speaker 1: and we think this could be the place where they 516 00:26:33,200 --> 00:26:35,880 Speaker 1: do start to talk about tapering. The FED meets next week, 517 00:26:35,920 --> 00:26:37,840 Speaker 1: and I know it's going to be a big item 518 00:26:37,840 --> 00:26:39,840 Speaker 1: of discussion. We won't find it out until what they 519 00:26:39,840 --> 00:26:42,199 Speaker 1: really talk about until the minutes come out somewhere after that. 520 00:26:42,280 --> 00:26:44,640 Speaker 1: But I think there is an expectation, or at least 521 00:26:44,800 --> 00:26:47,280 Speaker 1: a possibility that at the Jackson Hole meeting they do 522 00:26:47,359 --> 00:26:50,320 Speaker 1: start to grouch this tapering idea and present the framework 523 00:26:50,359 --> 00:26:54,600 Speaker 1: for the pulling back later in the year. Just real quick, Greg, 524 00:26:54,680 --> 00:26:56,800 Speaker 1: at thirty seconds, where are you and your team doing 525 00:26:56,800 --> 00:27:00,600 Speaker 1: your work today? What we're doing in our work work? 526 00:27:00,640 --> 00:27:03,760 Speaker 1: Are you home in the office. I'm sorry, I was 527 00:27:04,080 --> 00:27:07,239 Speaker 1: asking about that. We're in a hybrid right now, but 528 00:27:07,280 --> 00:27:09,040 Speaker 1: we expect to be going back on a on a 529 00:27:09,080 --> 00:27:12,280 Speaker 1: more dedicated basis after Labor Day. Uh, three days a week, 530 00:27:12,359 --> 00:27:13,919 Speaker 1: four days a week, and we've got some people in 531 00:27:13,960 --> 00:27:16,000 Speaker 1: Manhattan that quite frankly want to be in five days 532 00:27:16,040 --> 00:27:18,199 Speaker 1: a week during studio apartments and would rather be in 533 00:27:18,200 --> 00:27:20,159 Speaker 1: the office and out. People on the other side with 534 00:27:20,240 --> 00:27:22,119 Speaker 1: long commutes would be happy two days a week, but 535 00:27:22,440 --> 00:27:25,040 Speaker 1: we're being sensitive to our employees needs and looking to 536 00:27:25,080 --> 00:27:27,840 Speaker 1: go back on that positive hybrid basis after labor dat 537 00:27:28,440 --> 00:27:30,760 Speaker 1: all right, Greig, thanks so much for joining us. Always 538 00:27:30,760 --> 00:27:33,560 Speaker 1: appreciate hearing from you, getting your thoughts on these credit 539 00:27:33,560 --> 00:27:35,920 Speaker 1: markets fixtae point. Yeah, I had a fixing come for 540 00:27:35,920 --> 00:27:38,320 Speaker 1: the America's at DWS GRIP. Thanks for listening to the 541 00:27:38,320 --> 00:27:42,280 Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews 542 00:27:42,280 --> 00:27:46,600 Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm 543 00:27:46,600 --> 00:27:50,360 Speaker 1: Matt Miller. I'm on Twitter at Matt Miller V three 544 00:27:51,000 --> 00:27:53,600 Speaker 1: on false Sweeney I'm on Twitter at pt Sweeney. Before 545 00:27:53,640 --> 00:27:56,760 Speaker 1: the podcast. You can always catch us worldwide at Bloomberg Radio.