Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. All right, want to
Speaker 1: treat today in our Bloomberg Interactive Broker studio. Today we
Speaker 1: have Eric Adams, New York City mayor candidate, and he's
Speaker 1: got a day job too, he's Brooklyn Borough President. He
Speaker 1: joins us here in studio. Mr Adams, thank you so
Speaker 1: much for joining us. We really appreciate you taking the time. Um,
Speaker 1: you know, you still have a general election to go,
Speaker 1: but let's make the assumption that you per that you
Speaker 1: win that election. What is job one for you? And
Speaker 1: you're a new administration of public safety? We we have
Speaker 1: to be safe. I stated this over and over again.
Speaker 1: The prerequisite to prosperities, public safety and justice. I must
Speaker 1: allow New Yorkers to know that they're going to be
Speaker 1: safe on our their subway system when they returned back
Speaker 1: to their offices. Our individuals that go to restaurants are
Speaker 1: not going to be robbed like we saw a few
Speaker 1: days ago while they sit down and have dinner. This
Speaker 1: city must be safe for tourism to return and for
Speaker 1: businesses to grow and thrive. How do we do that
Speaker 1: or how does a city do that? Is it simply
Speaker 1: numbers more cops, better train cops, better deployment of cops.
Speaker 1: How do we do that? It's a combination. Uh, the
Speaker 1: bad guys are watching the good people of this city
Speaker 1: squabble with each other over technical aspects and how we police.
Speaker 1: So I'm going to hit reset with my police officers
Speaker 1: and let them know I have their backs. But I'm
Speaker 1: also going to send aloud message that if you don't
Speaker 1: respect the nobility of public protection, you can't serve in
Speaker 1: my agency. And We're going to reintroduce ourselves to the
Speaker 1: men and women who are protecting us. Yeah, I saw.
Speaker 1: I was back in New York, um where I'm from,
Speaker 1: actually went to PS for kindergarten. I was back in
Speaker 1: New York in July and Um I was hanging out
Speaker 1: on Street and Lex waiting for an uber. I saw
Speaker 1: a group of people riding stolen motorcycles past a few
Speaker 1: squad cars. Not none of the police moved a finger.
Speaker 1: I turned around. Somebody was selling drugs right behind me.
Speaker 1: The police clearly could see it, not doing anything about it.
Speaker 1: How do you motivate a police force that is just
Speaker 1: seemingly given up, and that's true. You motivate them by
Speaker 1: letting them know that one of their own will be
Speaker 1: moving into the position of ensuring that they get to
Speaker 1: support they need to get there to do their jobs.
Speaker 1: And you're right, I've witnessed it as well, just a
Speaker 1: hands off approach to dealing with those quality of life issues,
Speaker 1: and that's not acceptable a city as diverse and as
Speaker 1: large as New York is in parative that we have
Speaker 1: a set of standards and how do we expect to
Speaker 1: treat our neighbors. I've watched a group of people on
Speaker 1: a t v s driving up to down the sidewalk
Speaker 1: of by Fifth Avenue in Manhattan, New Prospect in Central Park.
Speaker 1: We can't have a city of disorder. We can do
Speaker 1: it without heavy handedness. But at the same time, we
Speaker 1: need to create a standard of expectations in our city. Alright,
Speaker 1: some stratums you when you came into the Bloomberg in
Speaker 1: the Bloomberg headquarters here on Election toon Avenue and fifty
Speaker 1: eight Street. You might have seen that in this block
Speaker 1: between fifty eight and fifty nine Street on Electionington, every
Speaker 1: storefront was vacant and pre pandemic. They were thriving with
Speaker 1: some seemingly big box stores as well as some local retailers.
Speaker 1: How do we bring business back to How do we
Speaker 1: reopen New York City? How do we bring business back
Speaker 1: to New York City? One thing I have been doing
Speaker 1: for the last two and a half three years, having
Speaker 1: focused with business leaders and finding out how do we
Speaker 1: do just that? And I was alarmed to discover how
Speaker 1: too expensive, to bureaucratic, and too difficult it is to
Speaker 1: do business in the empire state. We were a city
Speaker 1: where we build empires. But cities are made up of agencies,
Speaker 1: and if those agencies are in the way of building empires,
Speaker 1: we would never be able to allow it to happen.
Speaker 1: This is a city that is vibrating with ten million dreams. Uh,
Speaker 1: those dreams are about to wake up, and they're going
Speaker 1: to wake up because I'm going to create a city
Speaker 1: that is open for business, where we're going to you
Speaker 1: utilize our agencies and our manpower to make sure businesses
Speaker 1: are here. We're going to attract them with incentives. We're
Speaker 1: going to encourage them to developing out of boroughs. We're
Speaker 1: going to build out the pipeline of talent so that
Speaker 1: we can filled the jobs that are available. Right now,
Speaker 1: no one wants to do business in this city because
Speaker 1: we have been defined as a business enemy city instead
Speaker 1: of a business friendly city. It is too expensive and
Speaker 1: I think, uh for residents as well. I say this
Speaker 1: as a free market capitalist, and I'm sure that almost
Speaker 1: all of our listeners and most of our clients also
Speaker 1: believe in free markets. On the other hand, if you're
Speaker 1: you know, a family of three or four or five,
Speaker 1: and you're working middle class job in New York, there's
Speaker 1: no way you can afford an apartment big enough for
Speaker 1: the family. How do you do? How do you deal
Speaker 1: with that? As mayor? Well, clearly we have decimated the
Speaker 1: middle class in this city. There are a lot of
Speaker 1: incentives for low income and high income, but we forgot
Speaker 1: the backbone of our city. And I believe the backbone
Speaker 1: is that teacher and accountant. Uh that backbone. Believe it
Speaker 1: in odd is even the fast food workers. We were
Speaker 1: successfully getting them to receive a fifteen dollar minimum wage. Uh,
Speaker 1: you have a husband and wife. They are moved into
Speaker 1: an area where the city is unaffordable. And so we
Speaker 1: must reinvest in the Mitchell Llama style programs that we had,
Speaker 1: in the officer teacher next door programs that we had
Speaker 1: where we incentivized people to be able to not only
Speaker 1: rent approaches. And then we should look at our affordable
Speaker 1: housing program and look at some form of affordable housing
Speaker 1: with ownership in that affordable housing. How do we carry
Speaker 1: it out so people can start owning and building equity
Speaker 1: in the city that they love. So we must ensure
Speaker 1: the areas that government can control, such as rent. We
Speaker 1: must ensure that we have a cross section based on
Speaker 1: income bands of low income, middle income New Yorker is
Speaker 1: so that they can stay in the city that they love. Uh.
Speaker 1: Mr Adams talked to us about infrastructure. We've um, you know,
Speaker 1: the subways and just general infrastructure in this city challenge.
Speaker 1: We just have the recent um, you know, the remnants
Speaker 1: from the Hurricane Ida, you know, putting a crimp into
Speaker 1: the subway system for about twenty four hours. How do
Speaker 1: you think about infrastructure in this city? Great question of
Speaker 1: you know, we need to be honest with ourselves. We
Speaker 1: screwed up the planet and we didn't do it in
Speaker 1: one day. We did it over years of improper treating
Speaker 1: of the planet. So we're not going to fix this instantly.
Speaker 1: We must have an intervention plan and a prevention plan,
Speaker 1: prevention other long term things. Every new sewer project we
Speaker 1: should build it with a one hundred year outlook of
Speaker 1: canna withstand the water levels and the changes in our environment.
Speaker 1: We need to look at how do we learn how
Speaker 1: to live with water UH, And there's some amazing programs
Speaker 1: that are taking place globally. I'm getting ready to take
Speaker 1: a trip to the Netherlands so I could look at
Speaker 1: some of the things that they're doing. But then we
Speaker 1: need intervention right now. Mother Nature is not going to
Speaker 1: wait for us to build out our sewer systems, so
Speaker 1: we need to have early warning systems, identified those basement
Speaker 1: apartments and give people the proper escape routes, investing legalizing
Speaker 1: some of the units. UH build large retaining pools of
Speaker 1: We could use some of our open spaces to build
Speaker 1: large retaining pools to deal with water spill off, spill
Speaker 1: off and to hold the water into we did with
Speaker 1: the emergency situation of something they're doing in Hoboken right
Speaker 1: now where they're building basketball courts over retaining pools. So
Speaker 1: we have to think differently and embrace the concept that
Speaker 1: are coming from the experts who we have been meeting with.
Speaker 1: But there must be a two pronged attack, both intervention
Speaker 1: and prevention. Have you got any um, you know, think
Speaker 1: differently solutions to the congestion, the traffic, the double parking.
Speaker 1: You know, it's always been an issue with New York,
Speaker 1: but cities around the world are coming up with other
Speaker 1: ideas and ways to fight it. I'm a congestion pricing guy.
Speaker 1: I believe in it. I believe the concept is important.
Speaker 1: Is similar to what London has done many years ago.
Speaker 1: I think it's important that we do so. But I
Speaker 1: also believe we need to incentivize truck deliveries. A lot
Speaker 1: of our congestion is coming from deliveries. We need to
Speaker 1: start delivering at night, and I think if we incentivize that,
Speaker 1: we can get a lot of the deliveries done. Uh.
Speaker 1: And then we need to use alternative methods of transportation. UH.
Speaker 1: That's everything from the scooters, uh, the you know, the
Speaker 1: mopas I've visited many countries bike use. When I'm in
Speaker 1: China or in other parts of the globe, people are
Speaker 1: using non cars to get around for those who can
Speaker 1: do so. And not only does it encourage a greater
Speaker 1: level of mobility diversity, but it does it also deals
Speaker 1: with the congestion because this congestion is not sustainable in
Speaker 1: the city. Too much is lose, is lost doing business
Speaker 1: in the city because you're stuck in traffic somewhere. And
Speaker 1: then we must create a first rate transportation system. I'm
Speaker 1: gonna train user, I have a metro card. We create
Speaker 1: a safe, first rate transportation system, people will utilize our
Speaker 1: subways and buses. Inequality. As this city builds back, reopens,
Speaker 1: how do we ensure it reopens and builds back for everyone.
Speaker 1: It's so true. That is a real problem we have
Speaker 1: in the city. Uh, the inequalities that we're witnessing is
Speaker 1: leading to the lack of prosperity for so many New
Speaker 1: Yorkers and it's just on so many levels. We must
Speaker 1: do so, and it's not going to be done in
Speaker 1: the first four years. What I must do, if I'm
Speaker 1: fortunate enough to become the mayor, is to build the
Speaker 1: foundation that other mayors can build on. Uh. The inequalities
Speaker 1: is to go to the source. Number one education. We
Speaker 1: need to deal with children with special needs and learning
Speaker 1: disability tease. One study showed that over thirty of our
Speaker 1: prison population a place like uh like Texas, we're dyslexic.
Speaker 1: We don't just do dyslexia screening in our city. UM
Speaker 1: learning disabilities. Uh, you see, fifty five percent of the
Speaker 1: inmates a rich is a dealing with learning disabilities. So
Speaker 1: one way of ending inequalities is to focus on education
Speaker 1: so people can have the opportunities they deserved. Eric Adams,
Speaker 1: thank you so much for joining us. We really appreciate
Speaker 1: your time. Eric Adams, New York City Mayoral. Kennedy in
Speaker 1: Brooklyn Borough President joining us here in our Bloomberg Interactive
Speaker 1: Broker studio. I want to bring in Megan Horneman, director
Speaker 1: of portfolio Strategy Advertence Capital Advisors, about two point six
Speaker 1: billion dollars in assets under management, located in Hunt Valley, Maryland,
Speaker 1: just outside the Charms City of Baltimore. Megan, thanks so
Speaker 1: much for joining us here. You know, let's turn to
Speaker 1: earnings here, evaluation and some of the old time fundamental
Speaker 1: stuff here we've had some really good earnings over the
Speaker 1: past several quarters, but some economic concerns you know, from
Speaker 1: the delta variant and so on, or maybe causing some
Speaker 1: people to question some of the earnings essments out there
Speaker 1: for ACQUES three and four. How do you think about
Speaker 1: that in potential risk for this market. Yes, I think
Speaker 1: we we've likely seen that peak in the earnings growth rate.
Speaker 1: We probably saw that this year, and now there's just
Speaker 1: a little bit more uncertainty because people had come into
Speaker 1: the third quarter with such heightened expectations for economic growth
Speaker 1: and now a lot of the data has been mixed.
Speaker 1: I mean you can see that even just by looking
Speaker 1: at the City Group Economic Surprise Index that's deeply in
Speaker 1: negative territory. Um. I know, we got some some positive
Speaker 1: news from the consumer, but it is on the backup
Speaker 1: some downward revisions to the prior month. And then as
Speaker 1: as mentioned, the consumer confidence is still relatively weak. So
Speaker 1: I think you're going to see some estimates coming down,
Speaker 1: not just from the earnings perspective, but also from the
Speaker 1: economic growth perspective as well. We have our own economic
Speaker 1: Surprise Index as L and a really cool page that
Speaker 1: you can pull it up with e C s U.
Speaker 1: Paul just in case you're on right now is the
Speaker 1: command and obviously, UM it matches up with Megan with
Speaker 1: the city surprise in Dex we've seen you can you
Speaker 1: can if you click on the chart on e C
Speaker 1: S you go, you can blow up the surprise index. Um,
Speaker 1: look look at or zoom into what we've seen happen
Speaker 1: over the last I don't know, UM, I guess six months.
Speaker 1: It hit a high in April May and has come
Speaker 1: down now into pretty extreme negative territory. Um does this
Speaker 1: opera opportunities you think, Megan, I don't think quite yet.
Speaker 1: I think there's still is some more there's some other
Speaker 1: things in the market that keep us a little hesitant. Um,
Speaker 1: we have some dry powder, we have cash in portfolios
Speaker 1: that we're waiting to put to work. We're still optimistic
Speaker 1: long term, but in the very near term, I think
Speaker 1: there's still some other risks that we have to digest.
Speaker 1: Whether it's from the political standpoint. Um, there's going to
Speaker 1: be a lot of noise just over the next next
Speaker 1: couple of months, the Federal Reserve next week evaluation. Still
Speaker 1: even with the modest you know, weakness we've seen here
Speaker 1: and I say very modest. Keep in mind, the smps
Speaker 1: only down about two um. This isn't really a pullback
Speaker 1: that we're seeing here, um. But the valuations still look
Speaker 1: a little bit stretched here. And do you expect to
Speaker 1: pull back? Do you expect that we've been hearing so
Speaker 1: many warnings of maybe there's a ten even fiftcent pullback
Speaker 1: to come. I think that there is chance for this
Speaker 1: to continue to get for us to go a bit
Speaker 1: weaker from here. I can't pinpoint exactly whether it'll be
Speaker 1: ten or fifteen percent, but I think we're well overdue
Speaker 1: for at least a minimum of five percent correction. We
Speaker 1: haven't even pullback. We haven't even had that this year yet. Megan,
Speaker 1: where are you suggesting your clients allocate their equity portfolios.
Speaker 1: Is it more than the growth, typical growth kind of
Speaker 1: portfolio and that has worked so well for a decade
Speaker 1: or more, or is it some of the more cyclical
Speaker 1: trades that might be more sensitive to maybe you know,
Speaker 1: you know, rising in flay, shouldn't reopening economy, that type
Speaker 1: of thing. Yeah, we we have a little bit of
Speaker 1: both in our portfolios, but we definitely have more of
Speaker 1: the value til given our view that we think the
Speaker 1: cyclical trade has room to go. And also we think
Speaker 1: that interest rates are going to go higher from here.
Speaker 1: I think that everybody knows that. But I think interest
Speaker 1: rates right now just aren't justified where they are looking
Speaker 1: at long term ten thirty year treasure yields, that's just
Speaker 1: not justifiable. And when you're talking about the FED tapering,
Speaker 1: those types of things will weigh on those expensive, you know,
Speaker 1: growth types of stock, so we have more of a
Speaker 1: value till here in the US you expect a serious taper.
Speaker 1: I think you're gonna get the first um, you know,
Speaker 1: a solid suggestion about it um in the meeting next week.
Speaker 1: I think you'll start to see the actual taper or
Speaker 1: taping taking place before the end of this year, probably
Speaker 1: in the in the November meeting. But I think we're
Speaker 1: probably going to kind of get us through this debt
Speaker 1: ceiling that we have at the end of this month.
Speaker 1: I don't think you're gonna get a firm commitment of
Speaker 1: its starting next week. I think it'll probably be in
Speaker 1: November or December, and then they'll have that continue to
Speaker 1: taper through the all of next year and they'll continue
Speaker 1: to say, you know, interest rates and tapering are not
Speaker 1: tied together, so the interest rate hikes are still aways off. Megan,
Speaker 1: do you get a lot of incoming calls from your
Speaker 1: clients about crypto and if so, what do you tell them? Uh? No,
Speaker 1: We've been UM pretty vocal and some of our publications
Speaker 1: about the crypto market UM that we at this time
Speaker 1: we're not investing in in the cryptocurrency market or any
Speaker 1: of the other crypto type of investments. There's still this
Speaker 1: is such a um the crypto market and all of
Speaker 1: these other crypto coins and things. But this is a
Speaker 1: very new UM kind of experiment trying to look at
Speaker 1: at things. Is using this as some sort of a
Speaker 1: uh form of tender. But I just don't think that
Speaker 1: at this time that it really warrants us investing in it.
Speaker 1: It's way too violatble for our clients, just doesn't have
Speaker 1: a place in client portfolios. We don't leave it's going
Speaker 1: to take over any kind of the regular you know,
Speaker 1: the US dollar or anything from a currency perspective and regulation.
Speaker 1: I think it's the biggest risk that you're going to
Speaker 1: see in the crypto market. Could really take the wind
Speaker 1: out of the sales here and then also just spark
Speaker 1: volatility and that's just not something that we that we
Speaker 1: find profit find a good place for portfolios. Megan, thanks
Speaker 1: so much for joining us. Great to get your take
Speaker 1: and I hope we can get you back on the
Speaker 1: program soon. Megan Hornum and their director of portfolio Strategy
Speaker 1: at Verden's Capital Advisers out of Hunt Valley, Maryland, where
Speaker 1: they have about two point six billion dollars of assets
Speaker 1: under management. Earlier I said we're gonna bring in Morgan
Speaker 1: Stanley's global chief economist, Seth Carpenter, and we've got him
Speaker 1: on the line right now. Seth, great to have you
Speaker 1: with us. Um. I guess the overriding question is what
Speaker 1: does the global economy look like right now after a
Speaker 1: big spike in the delta variant? Is it rolling over?
Speaker 1: Are we reopening again? It's your view. Yeah, it's great
Speaker 1: that it's great to be on with with both of you,
Speaker 1: So thank you for having me. You know, in the
Speaker 1: medium term where we're pretty constructive and then there are
Speaker 1: a bunch of asterisks to talk about downside risks, but
Speaker 1: you sort of nailed it with the delta variant being there.
Speaker 1: So what have we seen. We've seen a clear deceleration,
Speaker 1: but there was always going to be a bit of
Speaker 1: a deceleration once we got past the surge and growth
Speaker 1: from reopening and settled into something you know, more medium
Speaker 1: term and sustainable. So we still feel like we'll see
Speaker 1: the slowdown, but it will be sustained. What's driving that,
Speaker 1: I mean, look at global trade for example, trade and
Speaker 1: consumer good sort of exploded out and brought us back
Speaker 1: to pre COVID levels. We're seeing now trading capital goods
Speaker 1: in a CAPEX cycle. What could get in the way, though,
Speaker 1: is if DELTA is not as contained as we think,
Speaker 1: So as you implied and as we think, you know,
Speaker 1: we're peaking with delta, it should be subsiding. And if
Speaker 1: that's the case, then we should see continued, you know,
Speaker 1: reasonably strong growth from consumers globally, not just in the US.
Speaker 1: And the part of global trade that's lower than pre
Speaker 1: COVID levels is trade and services, especially tourism, and if
Speaker 1: travel restrictions keep getting lifted, you know, we should see
Speaker 1: that coming back as well. Seth, I'm a logistics geek
Speaker 1: here and I'm just fascinated by it, by this global
Speaker 1: supply chain UH challenges out there, and it's affecting all
Speaker 1: types of companies and industries. We hear that, then they're
Speaker 1: quarterly conference calls. Um, how does that impact your global
Speaker 1: economic outlook if we can't get goods to where they
Speaker 1: need to be in a timely fashion. Uh so, yeah,
Speaker 1: I think I think you're right to focus on it.
Speaker 1: And I think the even more sort of nerdy part
Speaker 1: of it is that there are non linear implications here.
Speaker 1: It's not as though there's a producer that has a
Speaker 1: supplier and if that supplier has trouble, then we have
Speaker 1: a supply chain issue. It's the fact that they are producers,
Speaker 1: many of them, who have suppliers, and those suppliers have
Speaker 1: suppliers and those suppliers of suppliers as well. And so
Speaker 1: when a country somewhere has a COVID case flare up
Speaker 1: and there are these very intense restrictions, but in place
Speaker 1: to limit things, you can get a disruption that just
Speaker 1: spreads out in a very rapid way. So you know,
Speaker 1: we're trying to monitor those sorts of things as well
Speaker 1: as we can. We turn to our colleagues, whore the
Speaker 1: equity analysts who cover specific firms. This general feedback we're
Speaker 1: getting as things have got past their worst for supply
Speaker 1: chain's disruptions and they're gradually getting better. You can look
Speaker 1: at some of the p M I type surveys and
Speaker 1: look at how long the delivery delays are, and does
Speaker 1: also give you the impression that we got past worse
Speaker 1: than things are slowly starting to normalize by no means
Speaker 1: good right now, but hopefully starting to heal. And so
Speaker 1: again it with that is the baseline view that the
Speaker 1: supply chains are going to get fixed over time. You've
Speaker 1: got to feel pretty good as a baseline, But we
Speaker 1: have seen flare ups time and again, and and so
Speaker 1: I think again you don't want to get too complacent
Speaker 1: and just assume that everything's on a steady path back
Speaker 1: to normal. Well, I'm sure that UM J. Powell and
Speaker 1: Christine Leguard would agree with you. Nonetheless, it doesn't really
Speaker 1: seem like all these asset purchases are doing that much.
Speaker 1: Should they be wrapping this stuff up? Is it time
Speaker 1: to taper? Yeah? Well, I mean I think just listening
Speaker 1: to the FED commentary themselves, the answer is yes. And
Speaker 1: so Powell and the rest of the committee has said
Speaker 1: that tapering this year is their baseline view, and so
Speaker 1: I see no reason to disagree with them. You know,
Speaker 1: our view is slightly more probability on December than the November,
Speaker 1: whereas November is clearly from my perspective, market consensus. You know,
Speaker 1: the last um CPI report, the last retail sales report,
Speaker 1: the last jobs report have shown us that forecasting and
Speaker 1: current circumstances is even harder than usual, and so I
Speaker 1: think that favor is slightly more patient fed to accumulate,
Speaker 1: you know, two more jobs report before tapering instead of
Speaker 1: just the one that they're going to get at the
Speaker 1: November meeting. But nevertheless, it seems like they're set to
Speaker 1: start tapering. I think the ECB is a little trickier
Speaker 1: they're President le Guard said in her press conference. You know,
Speaker 1: the lady isn't tapering and trying to draw a big
Speaker 1: distinction between the PEP, the emergency QUEI program versus the
Speaker 1: app ongoing QUI program. You know, our the Morgan Stanley
Speaker 1: European Economics team expects, uh as the PEP program is
Speaker 1: tapered down, the APP program gets more flexible and actually
Speaker 1: picks up a little bit um. You know, is that constructive?
Speaker 1: You asked you they be wound down. I think the
Speaker 1: challenge that the ECB has to confront is where inflation
Speaker 1: expectations are for them and how how low they are.
Speaker 1: Their own forecasts have inflation coming back down well below
Speaker 1: two percent, you know, one and a half percent or
Speaker 1: so in coming years. That for them, I think is
Speaker 1: the key struggle if they ever want to get their
Speaker 1: inflation rate back up to their two percent target. And
Speaker 1: I think that from from the CBS perspective, is the
Speaker 1: real reason to keep going with their QUI program is
Speaker 1: to try to support those inflation expectations. So that's how
Speaker 1: coordinated are the global central banks these days? As again
Speaker 1: this is a global issue, like you know, we haven't
Speaker 1: really seen before. How coordinated are they? Should they be
Speaker 1: more coordinated? How do you view it? Yeah? So, um,
Speaker 1: it's interesting. So it spent fifteen years doing central banking
Speaker 1: at the FED, and one thing that always happens is
Speaker 1: lots of communication. Coordination where they actually take actions together
Speaker 1: is quite rare. And I think now we're actually in
Speaker 1: a place where there's meaningful divergence that's starting to happen.
Speaker 1: And I think right now that divergence is between e
Speaker 1: M central banks and d M central banks in general.
Speaker 1: And then as we get into next year and beyond,
Speaker 1: it will be divergence between the ECB on the one
Speaker 1: hand and other developed market central banks. And what I
Speaker 1: mean here is, you know, inflation, the inflation surges is global.
Speaker 1: It's likely to be transitory. But a lot of e
Speaker 1: m UH central banks are saying, we can't rely on
Speaker 1: anchored inflation expectations given the performance of inflation in recent decades,
Speaker 1: so they have to be a little bit more active
Speaker 1: to the high inflation. Until we're seeing, for example, Latan
Speaker 1: central banks shifting to a hawkish stance UH in contrast
Speaker 1: to where the d M central banks are UM and
Speaker 1: I think you know that makes sense. They also have
Speaker 1: to react to the market starting to say, wow, the
Speaker 1: Fed's gonna start to taper, and after that, at some point,
Speaker 1: the Fed's gonna start to hike, and they have to
Speaker 1: worry about depreciation possibly exascerbating inflation. Fast forward to next
Speaker 1: year when we see the Bank of England the Bank
Speaker 1: of Canada starting to tighten policy, and then we think
Speaker 1: the FED actually raises rates in the middle of three
Speaker 1: that's going to be very different than the ECB with
Speaker 1: their inflation outlook. I think they're in trouble if they
Speaker 1: have any communication missteps and inflation expectations go lower, not higher.
Speaker 1: You know, if you push our European econ economics team
Speaker 1: and you say when when is the ECB gonna hike?
Speaker 1: They they say, well, I'd say you had five but
Speaker 1: with the risk to never, because you know, I'm an economist.
Speaker 1: We forecast, but how good is the forecast? Exactly? All right,
Speaker 1: set thank you so much for joining us. To really
Speaker 1: appreciate your time. Seth Carpenter, Global chief economist for Morgan Stanley.
Speaker 1: Joining us now we are truly global. We not only
Speaker 1: cover what happens in New York, but we also cover
Speaker 1: what happens outside of Detroit. Let's go to David Diets
Speaker 1: right now. Sorry, some in New Jersey, David, and some
Speaker 1: in New Jersey. It is a booming outdoor dining capital
Speaker 1: of New Jersey. Yeah, I don't know how I I
Speaker 1: was thinking of something else anyway. David Deets joins us
Speaker 1: managing Principal and senior portfolio strategist at Peapack Private Wealth Management.
Speaker 1: We've got about ten billion dollars of assets under management,
Speaker 1: so not that far off from New York. David, what
Speaker 1: did you think about the our interview with the next mayor.
Speaker 1: I mean, how important is uh is New York to
Speaker 1: Summit New Jersey. Well, it's critical, I think. I mean
Speaker 1: I would say that the residents Summit New Jersey have
Speaker 1: historically commun it it into New York. Now we'll see,
Speaker 1: of course, in this post pandemic world, whether there's a
Speaker 1: little bit more permanent remote working. But uh, the somewhat
Speaker 1: depends on New York and and our real estate prices
Speaker 1: go up as New York real estate prices go up.
Speaker 1: So whatever is good for New York is gonna be
Speaker 1: good for Summer. And David, I just so you know,
Speaker 1: I hopped on New Jersey Transit from Summer today and
Speaker 1: make my way into New York. To everybody, trains are
Speaker 1: more packed. I will say they're much more crowded than
Speaker 1: they were even a couple of weeks ago. So it
Speaker 1: looks like people slowly are coming back to work. So David,
Speaker 1: is your day job is looking at these markets here
Speaker 1: and trying to get a sense of where the next
Speaker 1: six to twelve months are. I'm a valuation guy, you know,
Speaker 1: I'm a little more than a little I'm a lot
Speaker 1: concerned with valuation here. Yes, I know the ten years,
Speaker 1: you know, one point three eight percent, But still this
Speaker 1: is a big multiple. How do you think about evaluation? Yeah,
Speaker 1: so evaluation is critical, of course, because we all know
Speaker 1: that the more you pay, the lower is going to
Speaker 1: be your returns. But I guess I would pushed back
Speaker 1: just a little bit insofar as UM your key valuation
Speaker 1: metric perhaps is what you can uh earn in terms
Speaker 1: of alternatives like putting your money in a CD, like
Speaker 1: buying a ten year treasury. It we've got historic lows
Speaker 1: on those levels. Indeed, the yield on the SMP five
Speaker 1: hundred is about comparable with that yield on attain your treasury.
Speaker 1: Now ten your treasury payout is going to be locked
Speaker 1: in for the next ten years. Historically, dividends move up
Speaker 1: two to ten percent each year. So if people put
Speaker 1: a gun to my head and say, Dave, where am
Speaker 1: I going to make more money over the next ten years?
Speaker 1: Was with the dividend payout on stocks going up and
Speaker 1: presumably asset prices moving up as well, it seems to
Speaker 1: tilt pretty well in favor of fixed income. Of course,
Speaker 1: there's not going to be a straight line. One other
Speaker 1: thing I point out is, remember, uh, Matt, you know
Speaker 1: five companies at the very top of the SMP five
Speaker 1: hundred account for of the overall waiting of that market.
Speaker 1: That index, okay, and those are the ones that, for example,
Speaker 1: Microsoft trying to get thirty three times earnings if you
Speaker 1: strip is out. Although it's not a cheap market, is
Speaker 1: certainly more reasonably priced. Well, some stocks are cheap. Some
Speaker 1: uh industries or regions have taken a hit. I noticed
Speaker 1: that some of your ideas wells Fargo taken a beating lately,
Speaker 1: Exxon as well, I share as large cap China. Is
Speaker 1: the idea that the bad news you think is has
Speaker 1: passed on these Well, you know, we we do like
Speaker 1: to buy things that you know, have solid valuations but
Speaker 1: are a little bit out of favor. So let's look
Speaker 1: at China for a moment. Here. You know, the China
Speaker 1: Large cap et F is down thirty seven since March.
Speaker 1: So if the if the concern is we're at nosbley
Speaker 1: valuations China maybe the antidote. Of course, that doesn't mean
Speaker 1: things are going to turn around. But the more I
Speaker 1: look at it, and I was certainly heartened by the
Speaker 1: fact that they injected about fourteen billion dollars of reserves
Speaker 1: in the past twenty four hours into the economy. It
Speaker 1: doesn't make any sense for the second largest economy if
Speaker 1: it wants to be a true geopolito, well power to
Speaker 1: kneecap that private sector. It just doesn't really make sense.
Speaker 1: Now there's a lot of noises here, but to destroy
Speaker 1: the value of companies like Ali Baba in ten cent, well,
Speaker 1: what do they really get out of that? Yeah, it's
Speaker 1: been an extraordinarily difficult time for those stocks there, and
Speaker 1: it just kind of highlights, you know, the whole quote
Speaker 1: unquote China risk uh that people always had in the
Speaker 1: back of their mind. But boys are coming to roost here. Uh.
Speaker 1: David back closer to home with the U S stocks here,
Speaker 1: do I go reopening cyclical small caps or do I
Speaker 1: stick with my big cab growthy Amazon, Apples, Google's kind
Speaker 1: of things? Well, certainly you want to beat the first
Speaker 1: of five. But I share the concern we started conversation
Speaker 1: with that our evaluations are an issue. So I valuations
Speaker 1: are an issue. You've got to be cautious with Microsoft,
Speaker 1: You've gotta be cautious with for example, Amazon, and and
Speaker 1: we like for example financial services. We think that five
Speaker 1: years now, interest rates will be higher as inflation picks up,
Speaker 1: as the economy picks up, and loan demand goes up,
Speaker 1: and you know, the financial services companies are so well
Speaker 1: poised to benefit from that because the price of their
Speaker 1: key product, loans will will go up. Historically, they're not
Speaker 1: trading much above what they've normally traded in the last
Speaker 1: twenty years in terms of relative to book value. The
Speaker 1: one word, oh did I I think you might have
Speaker 1: lost David Diets. I thought it was me for a second.
Speaker 1: Maybe there's probably some problems, you know, in the summit,
Speaker 1: maybe the phone issues out there and someone off the
Speaker 1: check on that. When we get home. We didn't even
Speaker 1: get to get to bud. Yes, I mean, I mean
Speaker 1: we didn't. You know, it's t Bush. He likes Anheuser
Speaker 1: Busch as well, which I wanted to ask about now.
Speaker 1: It's shocking if you pull up the chart right bud
Speaker 1: uh the ticker b U D obviously, and the beer
Speaker 1: um has risen this year up to eighty dollars a share,
Speaker 1: but it's now back down at fifty seven, and I
Speaker 1: wonder why that is. I mean, we're people drinking more
Speaker 1: bud at home, and you think when they go out
Speaker 1: to the bars in the reopening trade, they're gonna be
Speaker 1: ordering um, you know, yava or Vosh diner becks something
Speaker 1: a little bit more high brow. Or is the idea
Speaker 1: that the delta variant has stopped people from going out
Speaker 1: and ordering a bud at the ballpark. Here's what I
Speaker 1: think it is. I think it's the hard seltzer thing.
Speaker 1: It's a fat. It's gone. It's over the white claw
Speaker 1: every oh and Anheuser Bush makes. It's not You're right,
Speaker 1: they don't just make beer. They make that stuff. What's
Speaker 1: for the whole industry. It's for the whole industry. And
Speaker 1: that was kind of that was one of the really
Speaker 1: near term growth drivers for um, you know, the malt
Speaker 1: liquor business, if you will, kind of the beer business
Speaker 1: over the last couple years of these hard seltzer So
Speaker 1: it was kind of like the wine coolers of our day. So,
Speaker 1: but it was a fat. It reminded me of Zema.
Speaker 1: When I was in high school, there was there was
Speaker 1: a malt liquor beverage called Zema. I remember that it
Speaker 1: was clear and absolutely delicious. Really you didn't drink that,
Speaker 1: did you? Well? I did when I was fifteen. Um,
Speaker 1: but obviously a else aren't down and that's the same
Speaker 1: with the hard Seltzer. Right, we got David Diet's back.
Speaker 1: Let me David just asked you quickly about Anheuser Busch.
Speaker 1: Why has it been hit so hard coming from eight
Speaker 1: down to fifty seven? And why do you like it? Sure?
Speaker 1: Absolutely so we like it because when you talk about beer,
Speaker 1: you know it's got. UM is one of the largest
Speaker 1: consumer products companies in the world. It's got like ten
Speaker 1: of the twenty largest brands. So why is it off
Speaker 1: from the start of the summer. I think several things.
Speaker 1: One is UM busting beer, which is big on the
Speaker 1: hard Seltzer and not very disappointing continuing trend in in
Speaker 1: hart Seltzer, So the whole category were sold off, but
Speaker 1: of course we know, but there's a lot more than
Speaker 1: the hard Seltzer. Second, of course, there is concerned about
Speaker 1: this surging dollar UM and of course so much of
Speaker 1: their revenues come in from overseas. That's not helpful. And
Speaker 1: of course the big difference between the start of the
Speaker 1: summer and now is the continuing delta variant issues, and
Speaker 1: so much of their business comes in from the emerging markets.
Speaker 1: There's real questions, says delay in the reoining great, but
Speaker 1: I thank you very longer term for you. You'll do well. Yeah,
Speaker 1: all right, David. Thanks, I'm glad we got you back
Speaker 1: in for that. David Dietz talking to us there from
Speaker 1: Peapack Private Wealth Management. Thanks for listening to the Bloomberg
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
Speaker 1: I'm on Twitter at Matt Miller. Yet on Fall Sweeney
Speaker 1: I'm on Twitter at pt Sweeney before the podcast. You
Speaker 1: can always catch us worldwide at Bloomberg Radio