1
00:00:00,120 --> 00:00:03,320
Speaker 1: Let's get more insight now on Treasury's FED policy where

2
00:00:03,360 --> 00:00:06,120
Speaker 1: this economy is heading with Al Rabel, he is the

3
00:00:06,160 --> 00:00:09,840
Speaker 1: CEO of Cain Anderson Capital Advisors, joining us on set

4
00:00:09,960 --> 00:00:13,119
Speaker 1: along with Bloomberg's Shanali basic al great to have you

5
00:00:13,720 --> 00:00:16,520
Speaker 1: in person with us, and it feels like economists have

6
00:00:16,600 --> 00:00:20,400
Speaker 1: been tripping over themselves to push back their recession calls.

7
00:00:20,440 --> 00:00:22,560
Speaker 1: Maybe you're starting to see that priced out of the

8
00:00:22,600 --> 00:00:25,880
Speaker 1: bond market, that recession trade. Are you still braced for

9
00:00:25,920 --> 00:00:26,640
Speaker 1: a hard landing?

10
00:00:27,360 --> 00:00:28,920
Speaker 2: I'm still in the heart landing camp.

11
00:00:29,160 --> 00:00:31,840
Speaker 3: I know we sort of have consensus around soft landing

12
00:00:31,880 --> 00:00:34,080
Speaker 3: at this point, but I think the reality is that

13
00:00:34,120 --> 00:00:37,120
Speaker 3: we've already landed. Core inflation is down to three percent

14
00:00:37,240 --> 00:00:41,040
Speaker 3: plus core inflation minus shelter is down to one percent.

15
00:00:41,600 --> 00:00:44,280
Speaker 3: So the reality, in my view, is that we've already landed,

16
00:00:44,360 --> 00:00:47,000
Speaker 3: and that the Fed will do what it has historically done,

17
00:00:47,000 --> 00:00:50,320
Speaker 3: which is go is wait too late to get started.

18
00:00:49,960 --> 00:00:50,960
Speaker 2: And then go too far.

19
00:00:51,040 --> 00:00:53,080
Speaker 3: And I believe that they've already gone too far. Now

20
00:00:53,120 --> 00:00:56,640
Speaker 3: we'll see what mister Powell says on Friday. We'll see

21
00:00:56,640 --> 00:01:00,680
Speaker 3: what happens in September. But we've got seventeen million dollars

22
00:01:00,680 --> 00:01:06,040
Speaker 3: of household debt. We've got twelve excuse me trillion, seventeen

23
00:01:06,040 --> 00:01:08,959
Speaker 3: trillion of household that twelve trillion of mortgage debt, one

24
00:01:08,959 --> 00:01:11,720
Speaker 3: point six trillion of auto debt, a trillion plus of

25
00:01:11,760 --> 00:01:13,480
Speaker 3: student debt, which, as we know, is going to have

26
00:01:13,520 --> 00:01:16,160
Speaker 3: to start actually paying on that debt sometime soon. So

27
00:01:16,640 --> 00:01:19,000
Speaker 3: we're a consumer driven economy. I think we're in for

28
00:01:19,280 --> 00:01:21,720
Speaker 3: you know, we're in for a rough road ahead.

29
00:01:22,000 --> 00:01:23,720
Speaker 4: Speaking of the rough road ahead, you look at the

30
00:01:23,760 --> 00:01:26,600
Speaker 4: five year, the two year, sorry over at five oh

31
00:01:26,640 --> 00:01:28,520
Speaker 4: four nearly today, and you look at a four and

32
00:01:28,640 --> 00:01:30,679
Speaker 4: thirty three handle on the ten year, and you think

33
00:01:30,720 --> 00:01:33,039
Speaker 4: about the trajectory of rates and what else has to

34
00:01:33,120 --> 00:01:37,119
Speaker 4: break as rates stay this elevated. Where has the market

35
00:01:37,200 --> 00:01:39,520
Speaker 4: not yet seen pain that you expect?

36
00:01:40,080 --> 00:01:43,119
Speaker 3: Well, you know, you were talking about the regional banking downgrade.

37
00:01:43,160 --> 00:01:44,920
Speaker 3: I mean we're very close to that. We've got a

38
00:01:44,920 --> 00:01:47,120
Speaker 3: big real estate debt business and a big real estate

39
00:01:47,160 --> 00:01:47,920
Speaker 3: equity business.

40
00:01:47,920 --> 00:01:48,680
Speaker 2: On the debt side.

41
00:01:48,680 --> 00:01:50,840
Speaker 3: We've got a trillion and a half of maturity's coming

42
00:01:50,840 --> 00:01:53,960
Speaker 3: in the next eighteen months. Obviously, that's going to be

43
00:01:54,000 --> 00:01:57,360
Speaker 3: difficult to do in an illiquid environment. Regional banks or

44
00:01:57,400 --> 00:02:00,240
Speaker 3: a big provider of capital, or historically have been. Now

45
00:02:00,240 --> 00:02:03,200
Speaker 3: private credit is coming in, private equity is coming in

46
00:02:03,240 --> 00:02:06,240
Speaker 3: and filling some of that gap. But the reality is

47
00:02:06,280 --> 00:02:08,360
Speaker 3: there is a lot of mortgage that has to be

48
00:02:08,400 --> 00:02:10,519
Speaker 3: refinanced and those rates are a lot higher. And I

49
00:02:10,560 --> 00:02:12,680
Speaker 3: can tell you that a lot of those Excel spreadsheets

50
00:02:12,720 --> 00:02:13,400
Speaker 3: just don't work.

51
00:02:13,560 --> 00:02:15,440
Speaker 5: Well. What about the default rates here?

52
00:02:15,440 --> 00:02:17,320
Speaker 4: Because you have seen a few defaults start to hit

53
00:02:17,360 --> 00:02:20,280
Speaker 4: the market, but nothing so crazy yet, do you expect

54
00:02:20,320 --> 00:02:23,520
Speaker 4: that there's going to be significant distress? And frankly, you've

55
00:02:23,520 --> 00:02:26,120
Speaker 4: made your name in some of this real estate distress.

56
00:02:26,440 --> 00:02:30,000
Speaker 4: At what point do you find assets that are cheap

57
00:02:30,080 --> 00:02:30,799
Speaker 4: enough to buy?

58
00:02:31,520 --> 00:02:34,240
Speaker 3: Well, it's true, I've lived through eighty eight, ninety eight

59
00:02:34,320 --> 00:02:36,480
Speaker 3: oh eight and the pandemic, and so I've been through

60
00:02:36,520 --> 00:02:40,960
Speaker 3: a number of different crises. I don't see capitulation yet.

61
00:02:41,200 --> 00:02:43,720
Speaker 3: It is a lagging indicator. I mean, the issue is

62
00:02:43,760 --> 00:02:46,560
Speaker 3: that you've got a twelve month lag on shelter really

63
00:02:46,600 --> 00:02:51,400
Speaker 3: being factored into the inflationary dynamics. So you know, I

64
00:02:51,400 --> 00:02:55,280
Speaker 3: think we're going to see capitulation and prices that are interesting,

65
00:02:55,400 --> 00:02:59,240
Speaker 3: and private credit and real estate credit get very interesting.

66
00:02:59,320 --> 00:03:02,640
Speaker 3: From a buyer perspective later this year and into the

67
00:03:02,639 --> 00:03:03,839
Speaker 3: first half of next year.

68
00:03:04,240 --> 00:03:06,000
Speaker 5: What's going to be the catalyst for you to start

69
00:03:06,040 --> 00:03:08,400
Speaker 5: picking up some of that credit.

70
00:03:09,840 --> 00:03:12,239
Speaker 3: We are already doing that. I think it will pick

71
00:03:12,320 --> 00:03:14,640
Speaker 3: up pace going forward. And the reality is that you

72
00:03:14,720 --> 00:03:17,760
Speaker 3: have to have capitulation on the regional banking side. We

73
00:03:17,800 --> 00:03:20,520
Speaker 3: have forty five hundred banks plus or minus in this country.

74
00:03:20,520 --> 00:03:23,920
Speaker 3: No other country has ten percent of that. I think

75
00:03:23,960 --> 00:03:27,440
Speaker 3: we're in the early stages of a recalibration of our

76
00:03:27,480 --> 00:03:30,560
Speaker 3: banking sector, which is really a confidence game. And as

77
00:03:30,600 --> 00:03:33,720
Speaker 3: we know and we saw with SVB, deposits can go

78
00:03:33,800 --> 00:03:37,200
Speaker 3: away in I won't say nanoseconds, but very very quickly,

79
00:03:37,280 --> 00:03:38,120
Speaker 3: so even if you have a.

80
00:03:38,120 --> 00:03:39,280
Speaker 2: Strong deposit base.

81
00:03:39,600 --> 00:03:41,960
Speaker 3: So I can tell you that a lot of what

82
00:03:42,040 --> 00:03:46,080
Speaker 3: mister Powell has done with rate rises, I believe you

83
00:03:46,400 --> 00:03:50,320
Speaker 3: would I would be in the camp of pause now

84
00:03:50,480 --> 00:03:54,240
Speaker 3: and don't rule out rate decreases so quickly in the

85
00:03:54,280 --> 00:03:57,680
Speaker 3: first half of next year, because the liquidity dynamics are

86
00:03:57,680 --> 00:03:59,200
Speaker 3: doing your job for you.

87
00:03:59,360 --> 00:04:00,440
Speaker 2: At this point in time.

88
00:04:00,920 --> 00:04:02,960
Speaker 5: You say that we have forty five hundred banks right now,

89
00:04:02,960 --> 00:04:05,120
Speaker 5: but you don't think we'll have that going forward. How

90
00:04:05,200 --> 00:04:07,840
Speaker 5: much of that is part of the calculus for Powell

91
00:04:07,880 --> 00:04:10,360
Speaker 5: and for the Fed to decide how to proceed with

92
00:04:10,400 --> 00:04:13,640
Speaker 5: grapes that consolidation in regional banks.

93
00:04:13,480 --> 00:04:16,000
Speaker 3: It's part of the calculus, you know. I don't think

94
00:04:16,000 --> 00:04:18,720
Speaker 3: he's looking at that per se. I mean, I think

95
00:04:18,760 --> 00:04:23,520
Speaker 3: he wants an orderly transition, if you will, And I

96
00:04:23,600 --> 00:04:26,440
Speaker 3: think you know, you know, we've seen the tip of

97
00:04:26,480 --> 00:04:30,279
Speaker 3: the iceberg on banking consolidation, but very much the tip

98
00:04:30,320 --> 00:04:33,800
Speaker 3: of the iceberg. You know, their talking points are the

99
00:04:33,800 --> 00:04:36,320
Speaker 3: banking sectors strong, there's not an issue. So I think

100
00:04:36,360 --> 00:04:39,040
Speaker 3: they want to see this happen organically over time.

101
00:04:39,480 --> 00:04:40,839
Speaker 2: Hopefully we don't.

102
00:04:40,600 --> 00:04:43,080
Speaker 3: Have a catalyst that makes it, you know, that turns

103
00:04:43,120 --> 00:04:46,680
Speaker 3: this from a slow moving train wreck into a crisis.

104
00:04:48,000 --> 00:04:50,599
Speaker 3: I actually think that we're looking more at a slow

105
00:04:50,640 --> 00:04:52,960
Speaker 3: moving train wreck. We all sort of see what's coming,

106
00:04:53,600 --> 00:04:57,080
Speaker 3: and we won't have something like the GFC or March

107
00:04:57,120 --> 00:05:00,680
Speaker 3: of twenty twenty again. But I will say that, you know,

108
00:05:00,720 --> 00:05:02,080
Speaker 3: we're prepared for it should that.

109
00:05:02,120 --> 00:05:04,640
Speaker 1: Happen, and make maybe markets do as well, because you

110
00:05:04,680 --> 00:05:07,279
Speaker 1: look at what's happening in bank stocks, they've really stayed

111
00:05:07,320 --> 00:05:09,640
Speaker 1: at those levels that they drop to in March. But

112
00:05:10,000 --> 00:05:13,240
Speaker 1: wrap that into what you see in private credit, because

113
00:05:13,279 --> 00:05:15,400
Speaker 1: the point has been made many times that this is

114
00:05:15,440 --> 00:05:19,880
Speaker 1: a great opportunity for private credit, but what's the risk there?

115
00:05:20,480 --> 00:05:22,880
Speaker 3: Well, the risk there is obviously default, So it's not

116
00:05:23,040 --> 00:05:25,240
Speaker 3: throw a dart. You've got so for at five and

117
00:05:25,240 --> 00:05:27,760
Speaker 3: a quarter percent, and you're getting seven percent or eight

118
00:05:27,760 --> 00:05:30,960
Speaker 3: percent above that and fourteen percent current yield, and isn't

119
00:05:31,000 --> 00:05:33,440
Speaker 3: that great? And I do think investors are looking at

120
00:05:33,760 --> 00:05:36,640
Speaker 3: fourteen percent plus or minus current yields on the private

121
00:05:36,720 --> 00:05:40,960
Speaker 3: credit side, and even if you factor in a modest

122
00:05:41,000 --> 00:05:44,159
Speaker 3: default rate, it still looks a lot better than it

123
00:05:44,320 --> 00:05:47,800
Speaker 3: historically has. That said, I think the players who are disciplined,

124
00:05:47,839 --> 00:05:49,800
Speaker 3: who understand and who have been together for a.

125
00:05:49,720 --> 00:05:50,640
Speaker 2: Long period of time.

126
00:05:50,720 --> 00:05:54,120
Speaker 3: Private credit did well during the GFC did pretty well

127
00:05:54,200 --> 00:05:56,520
Speaker 3: during the pandemic as well. I think it will hold

128
00:05:56,600 --> 00:05:59,279
Speaker 3: up here as it has in the past.

129
00:05:59,720 --> 00:06:03,640
Speaker 2: But it's not all players are equal, and certainly required.

130
00:06:03,360 --> 00:06:05,920
Speaker 4: How many people are flying fast and loose. You know,

131
00:06:05,960 --> 00:06:07,680
Speaker 4: if you talk to some of the big credit providers,

132
00:06:07,680 --> 00:06:11,040
Speaker 4: they'll tell you this is the Goalden opportunity. You're getting

133
00:06:11,320 --> 00:06:15,359
Speaker 4: eight to twelve percent back because there is this liquidity constraint.

134
00:06:15,400 --> 00:06:16,440
Speaker 4: But at the same time, there are a lot of

135
00:06:16,440 --> 00:06:19,240
Speaker 4: new players. Are you worried that they're getting in over

136
00:06:19,240 --> 00:06:19,799
Speaker 4: their skis?

137
00:06:20,440 --> 00:06:22,840
Speaker 3: I don't see the fast and loose yet. I see

138
00:06:22,839 --> 00:06:24,760
Speaker 3: a lot of dry powder right now. I see a

139
00:06:24,760 --> 00:06:29,560
Speaker 3: lot of anticipation of huge opportunity. We're going to see this,

140
00:06:29,920 --> 00:06:33,000
Speaker 3: We're getting ready for it. I haven't seen, as I said,

141
00:06:33,040 --> 00:06:37,320
Speaker 3: capitulation and that opportunity present itself in the form of transactions.

142
00:06:37,320 --> 00:06:39,880
Speaker 3: You're starting to see some deals get done.

143
00:06:40,279 --> 00:06:41,920
Speaker 2: I'm not too concerned about that.

144
00:06:42,000 --> 00:06:45,240
Speaker 3: I think the market needs liquidity and there will be

145
00:06:45,320 --> 00:06:48,200
Speaker 3: winners and losers, at least on a relative scale. So

146
00:06:48,640 --> 00:06:51,960
Speaker 3: I'm not too concerned about too much private capital flooding

147
00:06:51,960 --> 00:06:55,120
Speaker 3: the markets or poor deals getting done. I'm more concerned

148
00:06:55,160 --> 00:06:59,000
Speaker 3: about mister Powell and the fact that, in my view,

149
00:06:59,040 --> 00:07:02,240
Speaker 3: we've come too far too fast, and the and that

150
00:07:02,400 --> 00:07:06,560
Speaker 3: the orientation is still, if not at least towards future tightening,

151
00:07:07,240 --> 00:07:10,600
Speaker 3: no time in the next year loosening. And I would

152
00:07:10,640 --> 00:07:14,280
Speaker 3: just base that on data and look at the lagging

153
00:07:14,680 --> 00:07:18,880
Speaker 3: the lagging dynamics of shelter and what is sort of

154
00:07:18,920 --> 00:07:22,680
Speaker 3: twelve months in arrears. So I think the job's already done,

155
00:07:22,840 --> 00:07:23,200
Speaker 3: all right.

156
00:07:23,240 --> 00:07:25,680
Speaker 1: Al Unfortunately, we got to leave it there. Really enjoyed this.

157
00:07:25,800 --> 00:07:28,320
Speaker 1: That is Al Raebel. He is the CEO of Cain

158
00:07:28,440 --> 00:07:31,880
Speaker 1: Anderson Capital Advisors, and of course, Bloomberg's Shanali Bassett