1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,000 Speaker 1: us live on YouTube. 6 00:00:27,160 --> 00:00:30,240 Speaker 2: Themandalignum with us here right now, peat a credit research 7 00:00:30,320 --> 00:00:32,280 Speaker 2: black Rock. We're thrilled that she's with us. We do 8 00:00:32,320 --> 00:00:35,440 Speaker 2: an audible at right now, long ago and far away, 9 00:00:35,720 --> 00:00:39,920 Speaker 2: like think eighteen forty two, there was the Augustinian College 10 00:00:40,000 --> 00:00:43,960 Speaker 2: of Villanova. Wander forward to the class of seventy seven 11 00:00:44,000 --> 00:00:46,560 Speaker 2: and the math guy got out of it and ended 12 00:00:46,640 --> 00:00:49,960 Speaker 2: up the other day becoming Pope Leo. I believe the 13 00:00:50,040 --> 00:00:54,440 Speaker 2: fourteenth Amandolinum. Are you going to move? I mean, I 14 00:00:54,560 --> 00:00:57,040 Speaker 2: know that mister Fink would let he would let you go. 15 00:00:57,520 --> 00:01:00,000 Speaker 2: Do we look for you to do a Bloomberg Surveillance 16 00:01:00,120 --> 00:01:04,560 Speaker 2: interview from the Administration of the Patrimony of the Apostolic 17 00:01:04,720 --> 00:01:06,120 Speaker 2: See anytime soon. 18 00:01:06,240 --> 00:01:06,960 Speaker 3: I would welcome it. 19 00:01:07,040 --> 00:01:09,760 Speaker 4: I'm a massive supporter of the school. Was hoping for 20 00:01:09,840 --> 00:01:13,200 Speaker 4: some divine intervention last night, but it didn't didn't work 21 00:01:13,200 --> 00:01:13,680 Speaker 4: out that way. 22 00:01:13,720 --> 00:01:15,240 Speaker 3: But I love Villanova. 23 00:01:15,440 --> 00:01:18,039 Speaker 2: What I have to ask what was I mean, I 24 00:01:18,120 --> 00:01:21,520 Speaker 2: was watching with missus Keane like everyone at else. What 25 00:01:21,720 --> 00:01:24,880 Speaker 2: was it like when he stepped out on that belt. 26 00:01:25,520 --> 00:01:27,520 Speaker 4: I mean, I've been a massive supporter of the school, 27 00:01:27,560 --> 00:01:28,840 Speaker 4: but it was just so wonderful to see I was 28 00:01:28,880 --> 00:01:30,800 Speaker 4: actually quite surprised. I think others of the school said 29 00:01:30,840 --> 00:01:32,520 Speaker 4: the same thing, even those who were in the loop. 30 00:01:33,200 --> 00:01:35,440 Speaker 3: But it's it's super exciting for all of us. 31 00:01:35,680 --> 00:01:38,240 Speaker 2: Very good. Well, we look forward to speaking to you 32 00:01:38,319 --> 00:01:43,240 Speaker 2: from the administration of the Patrimony of the Apostolics, the Pope. 33 00:01:43,319 --> 00:01:44,559 Speaker 2: What's his favorite chief steak? 34 00:01:44,640 --> 00:01:46,800 Speaker 3: I mean, that's got to be one of the most 35 00:01:46,840 --> 00:01:47,800 Speaker 3: support thing. 36 00:01:47,880 --> 00:01:51,360 Speaker 2: What's what's the most important advice to the Administration of 37 00:01:51,400 --> 00:01:55,360 Speaker 2: the Patrimony of the Apostolic see and their bond portfolio? 38 00:01:55,400 --> 00:01:57,080 Speaker 2: Will it be price up eeled out? 39 00:01:57,200 --> 00:01:59,120 Speaker 3: Good morning? I should say thank you for having me. 40 00:01:59,640 --> 00:02:02,800 Speaker 4: I think one of the most important things I would 41 00:02:02,800 --> 00:02:06,640 Speaker 4: emphasize is maybe the concept of two sided risks has 42 00:02:06,720 --> 00:02:07,920 Speaker 4: really come into focus. 43 00:02:08,480 --> 00:02:10,400 Speaker 3: I would say more over the past few weeks. 44 00:02:10,440 --> 00:02:15,320 Speaker 4: It actually started before the US China trade paused tensions 45 00:02:15,600 --> 00:02:17,679 Speaker 4: of a couple of weeks ago. But I think when 46 00:02:17,680 --> 00:02:20,800 Speaker 4: we're talking to investors there's also a focus on what 47 00:02:20,919 --> 00:02:24,440 Speaker 4: could go right, and I think the fact pattern over 48 00:02:24,480 --> 00:02:26,440 Speaker 4: the past few days was case in point Friday, we 49 00:02:26,520 --> 00:02:27,919 Speaker 4: left it was a bit of a risk on tone. 50 00:02:27,960 --> 00:02:30,960 Speaker 4: We came in yesterday, quite a risk on tone. Corporates 51 00:02:30,960 --> 00:02:33,160 Speaker 4: investors alike don't want to be caught off sides, and 52 00:02:33,200 --> 00:02:35,160 Speaker 4: so I think there's just a recognition of the two 53 00:02:35,200 --> 00:02:38,480 Speaker 4: sided risks. We are actually comfortable selectively moving down in 54 00:02:38,520 --> 00:02:40,639 Speaker 4: credit quality. That's a view that we've had for a while, 55 00:02:41,400 --> 00:02:43,960 Speaker 4: and I think that is actually we're an investor that 56 00:02:44,080 --> 00:02:46,480 Speaker 4: is taking a bit of a longer term perspective. Compounding 57 00:02:46,480 --> 00:02:48,880 Speaker 4: these spreads and yields. I think it's a pretty attractive opportunity. 58 00:02:49,000 --> 00:02:50,840 Speaker 5: So I'm looking at just at the end go function 59 00:02:50,919 --> 00:02:53,000 Speaker 5: of Bloombergate next browser, just kind of look ato where 60 00:02:53,120 --> 00:02:56,919 Speaker 5: things are going in fixed income here. Corporate high yield 61 00:02:56,919 --> 00:02:59,200 Speaker 5: has been like the best performer two point four to 62 00:02:59,200 --> 00:03:00,919 Speaker 5: six percent total return year to date. 63 00:03:01,120 --> 00:03:01,320 Speaker 4: Yeah. 64 00:03:01,520 --> 00:03:04,639 Speaker 5: I mean again, it seems like the market's willing to 65 00:03:04,680 --> 00:03:05,360 Speaker 5: take credit risks. 66 00:03:05,400 --> 00:03:07,880 Speaker 4: Yes, and I think it's notable on a few fronts 67 00:03:08,000 --> 00:03:11,600 Speaker 4: high yield out performing IG in an environment like this 68 00:03:11,639 --> 00:03:14,800 Speaker 4: where there are some residual concerns about growth downside risks, 69 00:03:14,840 --> 00:03:16,960 Speaker 4: and also an expectation that we are slowing from an 70 00:03:16,960 --> 00:03:17,720 Speaker 4: above trend pace. 71 00:03:17,840 --> 00:03:20,840 Speaker 3: I think that's really twofold Paul. One is you're still. 72 00:03:20,639 --> 00:03:24,600 Speaker 4: Able to capture a pretty attractive incremental spread in high yield. 73 00:03:24,840 --> 00:03:28,440 Speaker 4: You don't have as much duration exposure, so when treasure 74 00:03:28,480 --> 00:03:31,160 Speaker 4: yields sell off, you're less impacted in the high old space. 75 00:03:31,360 --> 00:03:34,560 Speaker 4: And then two, importantly, fundamentals between a lot of these 76 00:03:34,600 --> 00:03:36,040 Speaker 4: pockets of the market have converged. 77 00:03:36,080 --> 00:03:37,800 Speaker 3: Actually, if you look at leverage for. 78 00:03:37,800 --> 00:03:39,840 Speaker 4: Double b's, which is the high end of high yield, 79 00:03:40,200 --> 00:03:42,960 Speaker 4: and leverage for triple b's, the low end of investment grade, they're. 80 00:03:42,760 --> 00:03:45,200 Speaker 3: Actually the same. You can see that on the Bloomberg terminal, So. 81 00:03:45,160 --> 00:03:47,200 Speaker 4: That you're not giving up a ton of credit quality 82 00:03:47,240 --> 00:03:49,560 Speaker 4: to move down. They're not giving up a ton in 83 00:03:49,760 --> 00:03:51,720 Speaker 4: fundamental quality to move down in credit quality. 84 00:03:51,720 --> 00:03:52,200 Speaker 6: And we like that. 85 00:03:52,320 --> 00:03:55,200 Speaker 2: See how she pitched the Bloomberg terminal. Let's have her back. 86 00:03:55,240 --> 00:03:58,760 Speaker 5: She knows who listens here. So what's the thought here 87 00:03:58,800 --> 00:04:01,320 Speaker 5: about this Federal Reserve? Again on earlier doesn't think there's 88 00:04:01,320 --> 00:04:02,400 Speaker 5: gonna be a rake cut this year. 89 00:04:02,600 --> 00:04:05,360 Speaker 4: It seems like the Fed officials are priming the market 90 00:04:05,520 --> 00:04:08,480 Speaker 4: to expect really nothing until September at the earliest. 91 00:04:09,120 --> 00:04:10,520 Speaker 3: That the commentary from the. 92 00:04:10,520 --> 00:04:13,080 Speaker 4: Past, I would say several days suggests that I think 93 00:04:13,120 --> 00:04:16,440 Speaker 4: that makes sense if you remove some of the downside 94 00:04:16,520 --> 00:04:18,960 Speaker 4: risks to growth. So we take kind of that left 95 00:04:18,960 --> 00:04:21,560 Speaker 4: tail recessionary case off the table, which we believe we've done, 96 00:04:21,560 --> 00:04:24,479 Speaker 4: and really we weren't expecting a recession anyway, and you 97 00:04:24,520 --> 00:04:25,719 Speaker 4: have above target inflation. 98 00:04:26,440 --> 00:04:27,160 Speaker 3: The urgency and. 99 00:04:27,080 --> 00:04:29,279 Speaker 4: The impetus for the Fed to act preemptively, we think 100 00:04:29,360 --> 00:04:30,120 Speaker 4: is pretty low. 101 00:04:30,360 --> 00:04:33,479 Speaker 2: Fold In we just had Jordan Rochester. I'm brilliant at 102 00:04:33,520 --> 00:04:40,159 Speaker 2: Missoul fold in what the Japanese angst and the indications 103 00:04:40,360 --> 00:04:44,960 Speaker 2: of Pacific rim week dollar angst, what it means for 104 00:04:45,120 --> 00:04:48,720 Speaker 2: full faith and credit investors in the United States. Are 105 00:04:48,720 --> 00:04:50,440 Speaker 2: they linked or are they separate? 106 00:04:50,680 --> 00:04:52,320 Speaker 3: Well, they are linked in some ways. 107 00:04:52,320 --> 00:04:56,200 Speaker 4: That foreign investors own around twenty plus twenty five percent 108 00:04:56,279 --> 00:04:57,000 Speaker 4: of the US. 109 00:04:56,760 --> 00:04:59,320 Speaker 3: Corporate bond market. Does walk away from that, no, I 110 00:04:59,320 --> 00:04:59,920 Speaker 3: think they are. 111 00:05:00,120 --> 00:05:03,200 Speaker 4: Conversations suggest that actually it's just the marginal dollar that 112 00:05:03,240 --> 00:05:05,640 Speaker 4: has a better chance of being deployed at home in 113 00:05:05,680 --> 00:05:09,080 Speaker 4: some of these markets where we're expecting either in Europe, 114 00:05:09,080 --> 00:05:12,760 Speaker 4: for example, fiscal to result in increased sovereign issue ines 115 00:05:13,000 --> 00:05:15,680 Speaker 4: higher yields that maybe weren't available in some of these 116 00:05:15,720 --> 00:05:17,200 Speaker 4: regions for the past several years. 117 00:05:17,240 --> 00:05:18,200 Speaker 3: They're now on offer. 118 00:05:18,440 --> 00:05:21,680 Speaker 4: And so I think corporates, for the incremental dollar are saying, Okay, 119 00:05:21,960 --> 00:05:24,520 Speaker 4: should I be a bit more geographically diversified. That's what 120 00:05:24,560 --> 00:05:27,680 Speaker 4: we're sensing in our conversations, not a wholesale reallocation, but 121 00:05:27,720 --> 00:05:29,680 Speaker 4: for the marginal dollars, should I deploy that at home? 122 00:05:30,400 --> 00:05:34,120 Speaker 5: So again the credit quality outlook here, I mean, if 123 00:05:34,120 --> 00:05:36,839 Speaker 5: we're not heading for a recession, do we have to 124 00:05:36,839 --> 00:05:38,760 Speaker 5: worry about credit quality in general? 125 00:05:38,760 --> 00:05:38,920 Speaker 2: Though? 126 00:05:38,960 --> 00:05:42,560 Speaker 5: Because it seems like, you know, the teriff rights are 127 00:05:42,720 --> 00:05:45,120 Speaker 5: materially higher than they were at the start the year. 128 00:05:45,160 --> 00:05:47,320 Speaker 5: It's got to impact growth from a lot of companies. 129 00:05:47,360 --> 00:05:48,719 Speaker 3: It's a great point. I think we are. 130 00:05:48,960 --> 00:05:52,000 Speaker 4: We are watching pockets of the various asset classes that 131 00:05:52,040 --> 00:05:54,960 Speaker 4: we track that we're under pressure even when growth was 132 00:05:55,000 --> 00:05:57,560 Speaker 4: above trend. So for example, parts of commercial real estate, 133 00:05:57,720 --> 00:05:59,960 Speaker 4: parts of corporate credit, both on the liquid and private 134 00:06:00,040 --> 00:06:03,360 Speaker 4: credit side, parts of the consumer right subprime. These were 135 00:06:03,400 --> 00:06:06,480 Speaker 4: areas that were already under pressure when growth was above trend. 136 00:06:06,839 --> 00:06:09,240 Speaker 4: Now that we're expecting a more challenging growth inflation mix. 137 00:06:09,279 --> 00:06:12,279 Speaker 4: There's really nothing on the horizon that expects us to 138 00:06:12,360 --> 00:06:14,920 Speaker 4: see those companies kind of reverse their fortunes and kind 139 00:06:14,960 --> 00:06:18,520 Speaker 4: of really improve those fundamentals. So that's where we are focused. 140 00:06:18,520 --> 00:06:22,599 Speaker 4: It's more dispersion, not widespread market disruption, So those tales 141 00:06:22,640 --> 00:06:24,800 Speaker 4: of the market are really where we're focused. It really 142 00:06:24,920 --> 00:06:26,640 Speaker 4: underscores the importance of granularity. 143 00:06:27,320 --> 00:06:29,680 Speaker 2: This is a way from your remit, but the ETF 144 00:06:30,640 --> 00:06:32,920 Speaker 2: you know, and of course led by black Rock. Obviously, 145 00:06:33,400 --> 00:06:36,359 Speaker 2: the flows into ETFs I think have surprised me and 146 00:06:36,400 --> 00:06:40,080 Speaker 2: Paul both inequities advance. Are you surprised that money needs 147 00:06:40,120 --> 00:06:43,320 Speaker 2: to find a warm place here given all the political. 148 00:06:42,800 --> 00:06:45,159 Speaker 3: Diversion, I would say yes. 149 00:06:45,200 --> 00:06:47,760 Speaker 4: The flows even in if you look at just regular 150 00:06:47,839 --> 00:06:50,240 Speaker 4: mutual fund flows, even in high yield, over the past 151 00:06:50,240 --> 00:06:52,680 Speaker 4: few weeks, they've rebounded pretty nicely. Keep in mind, though 152 00:06:52,720 --> 00:06:55,480 Speaker 4: those fun flows only capture a portion of the market. 153 00:06:55,520 --> 00:06:59,359 Speaker 4: They're not capturing the entire investor base that's in corporate credit. 154 00:06:59,400 --> 00:07:01,760 Speaker 4: And actually you can see it in the spread reactions 155 00:07:02,200 --> 00:07:04,839 Speaker 4: that there is these white These moments of widening have 156 00:07:04,920 --> 00:07:06,960 Speaker 4: been short lived because that money is coming in. 157 00:07:07,320 --> 00:07:11,280 Speaker 2: Did you watch Jalen Brunson at Villanova of course like Arena. 158 00:07:11,920 --> 00:07:12,880 Speaker 3: No, no, we were. 159 00:07:12,880 --> 00:07:14,800 Speaker 4: We were not there at the same time, but I 160 00:07:14,880 --> 00:07:17,440 Speaker 4: watched him when he was at Villanova when I was out. 161 00:07:18,120 --> 00:07:20,760 Speaker 4: Was he yeah, the whole Yeah, I mean the whole 162 00:07:20,760 --> 00:07:24,600 Speaker 4: team is just like, I think, a masterclass in execution 163 00:07:24,680 --> 00:07:27,360 Speaker 4: when they were at Villanova and Jay Wright was wonderful obviously, 164 00:07:27,520 --> 00:07:29,320 Speaker 4: and that's the thing, and they were all together. 165 00:07:29,600 --> 00:07:32,680 Speaker 5: Coach, I'm gonna call my relatively young coach, middle aged 166 00:07:32,720 --> 00:07:35,600 Speaker 5: coach this whole nil thing the transfer portal, he said, 167 00:07:35,600 --> 00:07:37,800 Speaker 5: I'm at it. 168 00:07:37,040 --> 00:07:40,080 Speaker 2: The one year, two years Brunson played three or four years. 169 00:07:40,080 --> 00:07:42,720 Speaker 5: I see, yeah, So, I mean that's Jay Writ's one 170 00:07:42,760 --> 00:07:44,520 Speaker 5: of a handful of great, great coaches. 171 00:07:44,800 --> 00:07:47,240 Speaker 2: I'm not I lift up Shack today just because I 172 00:07:47,240 --> 00:07:50,559 Speaker 2: thought he was hilarious just today doing the bicep curl 173 00:07:50,600 --> 00:07:52,920 Speaker 2: with a guy. You know, he picked up a guy 174 00:07:53,360 --> 00:07:56,160 Speaker 2: and was doing a bicep curl. And again Shack played 175 00:07:56,160 --> 00:07:59,240 Speaker 2: three four years. Yep, I know they ruined the game. 176 00:07:59,320 --> 00:07:59,480 Speaker 6: Huh. 177 00:08:00,120 --> 00:08:03,000 Speaker 2: It's it's okay. They ruin the game, Miss Wyman. 178 00:08:03,520 --> 00:08:06,480 Speaker 4: I enjoyed it even I enjoyed watching them, even though 179 00:08:06,520 --> 00:08:07,840 Speaker 4: they come wasn't what we wanted. 180 00:08:08,160 --> 00:08:11,240 Speaker 2: Whose Whose tickets do you get for tomorrow night? 181 00:08:11,680 --> 00:08:13,040 Speaker 3: Nobody's tickets. I just. 182 00:08:15,760 --> 00:08:17,200 Speaker 5: Salesperson. 183 00:08:17,240 --> 00:08:19,040 Speaker 2: I've got to take golden tickets somewhere. 184 00:08:19,400 --> 00:08:22,160 Speaker 3: Takes Maybe after today, maybe I'll have something. 185 00:08:22,160 --> 00:08:22,560 Speaker 7: I don't know. 186 00:08:23,360 --> 00:08:27,000 Speaker 2: She's available in New York Wall Street for tomorrow, Amanda 187 00:08:27,080 --> 00:08:29,720 Speaker 2: Light And thank you, Thank you, particularly thank you for 188 00:08:29,800 --> 00:08:34,640 Speaker 2: those comments on the Augustitian College of the Villanova. Greatly 189 00:08:34,679 --> 00:08:35,439 Speaker 2: appreciate that. 190 00:08:41,280 --> 00:08:44,840 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 191 00:08:44,920 --> 00:08:48,080 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 192 00:08:48,160 --> 00:08:51,840 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 193 00:08:51,960 --> 00:08:53,520 Speaker 1: watch us live on YouTube. 194 00:08:53,640 --> 00:08:56,520 Speaker 2: He's really something. He's at Missouli with Dom Constant and 195 00:08:56,520 --> 00:09:00,840 Speaker 2: Steve Hudo, Jordan Rochester Holtz Court in London, and all 196 00:09:00,880 --> 00:09:03,720 Speaker 2: I can say is there's sort of these distant articles 197 00:09:03,880 --> 00:09:07,199 Speaker 2: of people from the West writing about Japan and they 198 00:09:07,240 --> 00:09:10,439 Speaker 2: cite the numbers and there's real anks. It's priced down, 199 00:09:10,600 --> 00:09:14,679 Speaker 2: yield up and then out on LinkedIn, where he's brilliant. 200 00:09:14,760 --> 00:09:17,120 Speaker 2: And also of course all of his research from a zoo. 201 00:09:18,000 --> 00:09:22,800 Speaker 2: There's this absolute authority from Jordan Rochester of what it 202 00:09:22,920 --> 00:09:29,480 Speaker 2: means when long term Japanese paper goes lower price, higher yield, 203 00:09:29,600 --> 00:09:33,160 Speaker 2: including the forty year piece Jordan. Let's start with a 204 00:09:33,240 --> 00:09:37,920 Speaker 2: why why is it priced down yield up for Japanese 205 00:09:38,000 --> 00:09:38,840 Speaker 2: long term debt? 206 00:09:39,800 --> 00:09:42,120 Speaker 8: Well, it's a mixture of things, Tom good Morning. The 207 00:09:42,160 --> 00:09:44,520 Speaker 8: main thing is because the Bank Japan is in a 208 00:09:44,600 --> 00:09:47,680 Speaker 8: hiking cycle. So typically at the very start of a 209 00:09:47,760 --> 00:09:49,920 Speaker 8: rate hiking cycle, when you're leaving the. 210 00:09:50,000 --> 00:09:52,240 Speaker 6: Zero lower bounds is what Japan's been doing. 211 00:09:52,679 --> 00:09:55,240 Speaker 8: The long end does sell off as markets price in 212 00:09:55,360 --> 00:09:58,400 Speaker 8: a higher risk of higher rates for longer and that's 213 00:09:58,440 --> 00:10:01,360 Speaker 8: what happened with the ECB's example, when they escaped Qi 214 00:10:02,040 --> 00:10:04,560 Speaker 8: in twenty seventeen. When they did that, you saw a 215 00:10:04,600 --> 00:10:07,560 Speaker 8: big steepening in the curve in Europe, and that's been 216 00:10:07,600 --> 00:10:10,160 Speaker 8: what's happening in Japan. The other part of it as well, 217 00:10:10,320 --> 00:10:13,560 Speaker 8: is because of the life insurance and pension funds demand 218 00:10:13,600 --> 00:10:17,599 Speaker 8: for the long end being softer. That's because their liabilities 219 00:10:17,640 --> 00:10:20,240 Speaker 8: are getting smaller as interstrates a rising this kind of 220 00:10:20,280 --> 00:10:22,720 Speaker 8: the mathematics of a pension fund. And the third reason 221 00:10:23,280 --> 00:10:26,959 Speaker 8: is much more higher foreign participation in Japan's long end, 222 00:10:27,080 --> 00:10:30,400 Speaker 8: which isn't great to see because it does invite more 223 00:10:30,480 --> 00:10:34,000 Speaker 8: qualtity and speculation than previously, which was more of a 224 00:10:34,040 --> 00:10:36,439 Speaker 8: domestically owned market. We've actually seen a lot of hedge 225 00:10:36,440 --> 00:10:39,440 Speaker 8: funds and foreign real money move into that space. 226 00:10:40,320 --> 00:10:42,920 Speaker 2: I look sure Damian SSR has been a huge value 227 00:10:43,000 --> 00:10:48,720 Speaker 2: add weak Taiwan dollar, Singapore dollar even rolling over in others. 228 00:10:49,320 --> 00:10:53,880 Speaker 2: Measure the contagion of the Japanese challenge and what it 229 00:10:53,960 --> 00:10:57,200 Speaker 2: means for other Pacific room countries, and of course what 230 00:10:57,240 --> 00:11:00,000 Speaker 2: it means for the United States. 231 00:11:00,000 --> 00:11:01,920 Speaker 8: Sometimes when we talk about the US or Europe, we 232 00:11:01,920 --> 00:11:04,040 Speaker 8: talk about the bubble. We don't think about what's happening 233 00:11:04,040 --> 00:11:06,240 Speaker 8: outside that will feed through, and Japan is a clear 234 00:11:06,280 --> 00:11:08,920 Speaker 8: one for that. The yen has been the carry trade 235 00:11:08,920 --> 00:11:12,800 Speaker 8: funder of the past two decades, and that applies to 236 00:11:12,880 --> 00:11:15,640 Speaker 8: the front end and also the long end. Borrowing in 237 00:11:15,720 --> 00:11:18,319 Speaker 8: Japan at low rates and investing that in the US 238 00:11:18,800 --> 00:11:22,400 Speaker 8: at higher rates of return. Well, now domestic rates are 239 00:11:22,480 --> 00:11:24,800 Speaker 8: rising in Japan. You have to have either a higher 240 00:11:24,880 --> 00:11:27,240 Speaker 8: rate of return through investment in the US. So therefore 241 00:11:27,240 --> 00:11:30,200 Speaker 8: it means US fixed income will underperform and rates will 242 00:11:30,240 --> 00:11:33,280 Speaker 8: go higher in the US, or you need essentially to 243 00:11:33,360 --> 00:11:35,800 Speaker 8: move that money back to Japan, and you're having a 244 00:11:35,800 --> 00:11:38,680 Speaker 8: mixture of both, and that's leading to the yen strength. 245 00:11:38,679 --> 00:11:40,800 Speaker 8: We're looking for one thirty eight in dollar end by 246 00:11:40,840 --> 00:11:43,600 Speaker 8: the year end, down towards one thirty six or lower 247 00:11:43,720 --> 00:11:45,320 Speaker 8: when we get to March, and that's because of the 248 00:11:45,320 --> 00:11:48,760 Speaker 8: Boj's hiking cycle mainly, but it's also because of this 249 00:11:48,960 --> 00:11:50,560 Speaker 8: de dollarization. 250 00:11:49,960 --> 00:11:51,520 Speaker 6: Story as well as playing in the background. 251 00:11:51,679 --> 00:11:54,880 Speaker 8: I don't want to overemphasize that the dollarization story, it's 252 00:11:54,880 --> 00:11:58,360 Speaker 8: not sell America. But what we are talking about is 253 00:11:58,400 --> 00:12:00,599 Speaker 8: the rest of the world outperforming the US and the 254 00:12:00,640 --> 00:12:01,560 Speaker 8: second half this year. 255 00:12:02,240 --> 00:12:05,559 Speaker 5: So again you mentioned the dollar and the Bloomberg Dollar 256 00:12:05,640 --> 00:12:08,760 Speaker 5: indexes down, you know, almost eight percent from its recent high. 257 00:12:08,760 --> 00:12:12,079 Speaker 5: Here cannot seem to find a bid. While US equities 258 00:12:12,080 --> 00:12:15,480 Speaker 5: have rebounded most of the sell off they saw earlier 259 00:12:15,640 --> 00:12:18,800 Speaker 5: this year. What's your six to twelve month view of 260 00:12:18,840 --> 00:12:19,480 Speaker 5: the US dollar. 261 00:12:20,920 --> 00:12:22,840 Speaker 8: In the short term, I'll actually be a buyer of 262 00:12:22,840 --> 00:12:25,600 Speaker 8: the dollar because I think that the trade has got 263 00:12:25,640 --> 00:12:27,800 Speaker 8: a little bit ahead of itself. We're looking for one 264 00:12:27,960 --> 00:12:30,600 Speaker 8: twenty euro dollars, so there's still more room to go, 265 00:12:30,960 --> 00:12:33,480 Speaker 8: but we've already rallied quite significantly, and in cable we're 266 00:12:33,480 --> 00:12:36,760 Speaker 8: already out one thirty six to for year end, for example. 267 00:12:37,080 --> 00:12:39,600 Speaker 8: But long term it's I think what we're going to 268 00:12:39,640 --> 00:12:42,040 Speaker 8: see is a reaction to the tariffs in Q three 269 00:12:42,040 --> 00:12:44,520 Speaker 8: and Q four from Japan, from Europe and the rest 270 00:12:44,559 --> 00:12:47,679 Speaker 8: of the world, including China, fiscal STEAMNUS will come down 271 00:12:47,720 --> 00:12:51,679 Speaker 8: the pipeline reform in an effort to boost growth. Because 272 00:12:51,679 --> 00:12:53,920 Speaker 8: the US tariffs will hit the rest of the world growth, 273 00:12:54,280 --> 00:12:56,680 Speaker 8: those countries will have to respond in their own way, 274 00:12:57,000 --> 00:12:59,760 Speaker 8: and that will lead to expectations of growth picking up 275 00:12:59,760 --> 00:13:01,760 Speaker 8: for next year. So it's kind of a down and 276 00:13:01,840 --> 00:13:04,160 Speaker 8: up for the growth outlook, I think for the rest 277 00:13:04,160 --> 00:13:05,960 Speaker 8: of the world, and that's why we have the dollar 278 00:13:06,040 --> 00:13:07,920 Speaker 8: un performing because typically when the rest of the world 279 00:13:07,960 --> 00:13:11,240 Speaker 8: does fiscal reforms and picks up, the dollar weekends in 280 00:13:11,280 --> 00:13:13,960 Speaker 8: that environment. But short term, I think everybody short the dollar. 281 00:13:13,960 --> 00:13:15,560 Speaker 8: I think every guest on here will probably tell you 282 00:13:15,600 --> 00:13:17,520 Speaker 8: that there's very few out there pushing. 283 00:13:17,240 --> 00:13:17,840 Speaker 6: For long dollar. 284 00:13:18,080 --> 00:13:20,920 Speaker 8: And we are starting to see the normal correlations of 285 00:13:21,040 --> 00:13:23,920 Speaker 8: foreign exchange to interest rates picking back up, and at 286 00:13:23,920 --> 00:13:26,040 Speaker 8: the moment they say the dollar's fair value, and I 287 00:13:26,160 --> 00:13:27,959 Speaker 8: just worry that everyone's got the same trade on. 288 00:13:28,640 --> 00:13:31,840 Speaker 5: Rest of world what's the best rest of world trade 289 00:13:31,920 --> 00:13:33,640 Speaker 5: right here visa VI the dollar. 290 00:13:33,679 --> 00:13:37,480 Speaker 8: Do you think, well, the euro is the one which 291 00:13:37,520 --> 00:13:38,840 Speaker 8: stands out because of Germany. 292 00:13:38,840 --> 00:13:40,640 Speaker 6: I mean, just look at their defense sector. 293 00:13:40,720 --> 00:13:44,120 Speaker 8: Ryan Metal and a few other names just extremely outperforming 294 00:13:44,920 --> 00:13:47,160 Speaker 8: of our names within their sector. And that's because the 295 00:13:47,200 --> 00:13:50,160 Speaker 8: German fiscal taps have been turned on, the debt break 296 00:13:50,200 --> 00:13:53,280 Speaker 8: has been reformed. So that's where I'd be looking for Sterling. 297 00:13:53,280 --> 00:13:56,000 Speaker 8: I'm less interested in and the Yen. Of course, we're 298 00:13:56,160 --> 00:13:58,720 Speaker 8: bigger players of rates and we think that the yen 299 00:13:58,760 --> 00:13:59,800 Speaker 8: will strengthen. 300 00:14:00,160 --> 00:14:02,960 Speaker 2: Ester with us in London with Missoul can't say enough 301 00:14:03,000 --> 00:14:06,000 Speaker 2: about their research improvement over the last four or five 302 00:14:06,080 --> 00:14:10,080 Speaker 2: six years. Stephen Rushudo guide in the ship, dom constant 303 00:14:11,120 --> 00:14:14,719 Speaker 2: writing brilliant research in Jordan Rochester with them as well. 304 00:14:14,800 --> 00:14:19,080 Speaker 2: Jordan's a film in here, fold in here, excuse me, Jordan. 305 00:14:19,120 --> 00:14:22,120 Speaker 2: There's this basketball team called the New York Knicks, and 306 00:14:22,160 --> 00:14:24,840 Speaker 2: I can't think this morning. It's sort of like the 307 00:14:24,880 --> 00:14:30,360 Speaker 2: Tots before the europe will win Jordan, but we're praying Jordan. 308 00:14:30,520 --> 00:14:36,400 Speaker 2: Fold in here, the Rashudo GDP call and Dominic's brilliant work. 309 00:14:37,000 --> 00:14:40,880 Speaker 2: And now you get to know fed rate increases this year. 310 00:14:41,840 --> 00:14:43,920 Speaker 8: At least a good trade as well, because what we 311 00:14:43,960 --> 00:14:45,920 Speaker 8: think is there's going to be no Fed cuts this year. 312 00:14:46,400 --> 00:14:48,800 Speaker 8: Steve's got one and a half percent GDP forecast but 313 00:14:48,840 --> 00:14:51,200 Speaker 8: a three and a half percent inflation, So your nominal's 314 00:14:51,200 --> 00:14:53,800 Speaker 8: at five and the Fed's going to be looking at 315 00:14:53,800 --> 00:14:56,720 Speaker 8: three and a half inflation. That's not an environment where 316 00:14:56,720 --> 00:14:59,400 Speaker 8: you're cutting rates. You need to have really big weakness 317 00:14:59,440 --> 00:15:02,120 Speaker 8: in the labor mind to do so. However, what Constant 318 00:15:02,120 --> 00:15:04,280 Speaker 8: would point out, and what I point out too, is 319 00:15:04,320 --> 00:15:06,960 Speaker 8: that this market is very much inclined to say that 320 00:15:07,000 --> 00:15:08,920 Speaker 8: there's a very high bar to get to get this 321 00:15:09,040 --> 00:15:11,280 Speaker 8: market to think hikes are the next move by the Fed, 322 00:15:11,640 --> 00:15:14,400 Speaker 8: the market will continue to think that cuts the next move, 323 00:15:14,720 --> 00:15:16,760 Speaker 8: but we are of the view it won't happen this year. 324 00:15:17,120 --> 00:15:19,400 Speaker 8: So what that means for trades is we like front 325 00:15:19,520 --> 00:15:22,640 Speaker 8: end flatteners. So price out the rate cuts for this year, 326 00:15:22,880 --> 00:15:24,960 Speaker 8: pricing more cuts for next year, because that's how this 327 00:15:25,040 --> 00:15:25,880 Speaker 8: market is biased. 328 00:15:25,960 --> 00:15:27,240 Speaker 6: So we have a steep we can have. 329 00:15:27,200 --> 00:15:29,520 Speaker 8: A flattening of the curve. More cuts, price for twenty 330 00:15:29,520 --> 00:15:31,120 Speaker 8: twenty six, less for twenty five. 331 00:15:31,280 --> 00:15:34,680 Speaker 2: Global Wall Street brands that what you just heard whether 332 00:15:34,720 --> 00:15:37,760 Speaker 2: you agree or disagree. The heart of the matter is 333 00:15:37,840 --> 00:15:43,800 Speaker 2: Missoul gets to a pop in five percent nominal gdp Jordan. 334 00:15:43,960 --> 00:15:49,680 Speaker 2: It's a completely different nominal GDP than a normal nominal gdp. 335 00:15:50,280 --> 00:15:53,320 Speaker 2: How does the litmus paper your world? How does the 336 00:15:53,360 --> 00:15:57,640 Speaker 2: litmus paper of the system FX deal with this weird 337 00:15:57,880 --> 00:16:00,680 Speaker 2: wacko five percent nominal GDP. 338 00:16:02,200 --> 00:16:04,720 Speaker 8: It's not too whacko, Tom, But what it does mean 339 00:16:04,800 --> 00:16:08,120 Speaker 8: is that the equity earning space, for example, will be 340 00:16:08,120 --> 00:16:10,240 Speaker 8: in a healthy spot even though the real GDP is 341 00:16:10,320 --> 00:16:12,600 Speaker 8: low because real GDP has been roughly around two to 342 00:16:12,680 --> 00:16:15,960 Speaker 8: three in the US for some time, their earnings potential 343 00:16:16,040 --> 00:16:19,760 Speaker 8: will be inflation adjusted with the tariffs and so forth. 344 00:16:19,920 --> 00:16:22,600 Speaker 8: We've still got five percent nomenal GDP growth. This is 345 00:16:22,640 --> 00:16:25,920 Speaker 8: an environment where it's not us outperformance on a real 346 00:16:25,920 --> 00:16:28,880 Speaker 8: GDP perspective, but you will see the equity market hold up. 347 00:16:29,080 --> 00:16:30,880 Speaker 8: So we're not looking for a big risk off in 348 00:16:30,920 --> 00:16:32,960 Speaker 8: the equity market as a result of that, and that 349 00:16:33,080 --> 00:16:36,000 Speaker 8: means the dollar can weaken. That's the sort of story 350 00:16:36,040 --> 00:16:37,880 Speaker 8: that we have that helps us get that one twenty 351 00:16:37,880 --> 00:16:38,480 Speaker 8: by year end. 352 00:16:38,760 --> 00:16:40,840 Speaker 2: I mean, it's a narrative, you know, I mean, I mean, 353 00:16:41,000 --> 00:16:42,240 Speaker 2: you know, I don't know if he's going to be 354 00:16:42,320 --> 00:16:45,880 Speaker 2: right or wrong, but I would suggest Paul, very few 355 00:16:45,960 --> 00:16:52,440 Speaker 2: people are guessing now stocks higher within the sixteen hundred 356 00:16:52,440 --> 00:16:54,680 Speaker 2: Pennsylvania Avenue news flow. 357 00:16:54,840 --> 00:16:58,080 Speaker 5: Yeah, exactly, it's a lot of noise out there. Jordan. 358 00:16:58,720 --> 00:17:01,840 Speaker 5: We saw Germany's several months ago really step up their 359 00:17:01,840 --> 00:17:04,800 Speaker 5: commitment to spending more on their infrastructure on their defense. 360 00:17:05,920 --> 00:17:08,400 Speaker 5: Can the rest of Europe do that as well? Or 361 00:17:09,119 --> 00:17:10,400 Speaker 5: is that just a flash in the pan. 362 00:17:11,720 --> 00:17:13,800 Speaker 6: I wish they could, but the answers no. 363 00:17:14,000 --> 00:17:16,480 Speaker 8: I mean, look at France, they really struggled to pass 364 00:17:16,480 --> 00:17:18,719 Speaker 8: a budget just last year, they had to hold an 365 00:17:18,760 --> 00:17:22,440 Speaker 8: election over it and everything, so they're fisically constrained running 366 00:17:22,480 --> 00:17:25,639 Speaker 8: up against the buffers. Italy has been much more well behaved, 367 00:17:26,000 --> 00:17:28,280 Speaker 8: but it also would be running up against the buffers 368 00:17:28,720 --> 00:17:31,040 Speaker 8: of the rules, even though the rules have been suspended. 369 00:17:31,760 --> 00:17:34,760 Speaker 8: There's only so much the market will will take before 370 00:17:34,960 --> 00:17:37,560 Speaker 8: punishing them as well in their bond market. And then 371 00:17:37,600 --> 00:17:40,600 Speaker 8: the same for the UK, where the Chancellor is really 372 00:17:40,640 --> 00:17:45,200 Speaker 8: struggling to tinker around with spending and tax pledges that 373 00:17:45,240 --> 00:17:48,080 Speaker 8: she's made without breaking her own fiscal rules, and we 374 00:17:48,280 --> 00:17:50,800 Speaker 8: actually could see a bit more spending on the government 375 00:17:50,880 --> 00:17:53,480 Speaker 8: side in the UK, but higher taxes at the next 376 00:17:53,480 --> 00:17:57,000 Speaker 8: October budget. So it really boils down to can the 377 00:17:57,080 --> 00:18:00,439 Speaker 8: EU get around this by doing joint tissue, and I 378 00:18:00,480 --> 00:18:02,560 Speaker 8: think that's what we might see. There's a big summit 379 00:18:02,600 --> 00:18:04,000 Speaker 8: coming up in June. We've got a few dates in 380 00:18:04,080 --> 00:18:06,439 Speaker 8: June at the G seven middle of June, fifteenth to 381 00:18:06,440 --> 00:18:09,200 Speaker 8: the seventeenth, there's a NATO summit, and there's an EU 382 00:18:09,280 --> 00:18:11,920 Speaker 8: Defense summit towards the end of June. If we get 383 00:18:11,960 --> 00:18:16,000 Speaker 8: one of those leading to joint issuance becoming a story 384 00:18:16,359 --> 00:18:18,879 Speaker 8: that could help the Europeans out of this because that 385 00:18:18,880 --> 00:18:21,560 Speaker 8: would be triple A rated. It wouldn't have any of 386 00:18:21,600 --> 00:18:23,800 Speaker 8: the problems of France and Italy involved. 387 00:18:23,520 --> 00:18:25,480 Speaker 2: Out six months even to the end of the year. 388 00:18:25,520 --> 00:18:29,639 Speaker 2: What is the Jordan in Rochester big figure currency pair 389 00:18:30,359 --> 00:18:32,520 Speaker 2: where Lisa Matteo may profit. 390 00:18:34,119 --> 00:18:36,280 Speaker 8: I think essentially your holidays to Europe will get a 391 00:18:36,280 --> 00:18:37,000 Speaker 8: bit more expensive. 392 00:18:37,080 --> 00:18:39,879 Speaker 6: Tom. The one twenty call we've made on euro is 393 00:18:40,280 --> 00:18:40,880 Speaker 6: the key one. 394 00:18:41,119 --> 00:18:44,480 Speaker 8: The one thirty eight on Dolly n Sterling is where 395 00:18:44,520 --> 00:18:47,400 Speaker 8: it all but less benign with actually our target now. 396 00:18:47,480 --> 00:18:49,680 Speaker 8: So I think there's if I was biased to sell something, 397 00:18:49,720 --> 00:18:50,879 Speaker 8: it would be starling. 398 00:18:50,520 --> 00:18:53,720 Speaker 2: Because as euro came at one sixteen, you're going to 399 00:18:53,760 --> 00:18:57,320 Speaker 2: one twenty, a little bit above the historic set. Fine, 400 00:18:57,600 --> 00:19:00,040 Speaker 2: at what level euro do we begin to say the 401 00:19:00,480 --> 00:19:04,240 Speaker 2: export angst for Europe? Is it at one twenty or 402 00:19:04,280 --> 00:19:06,320 Speaker 2: is it a higher unimaginable number. 403 00:19:07,160 --> 00:19:08,760 Speaker 8: No, As we get to that level, that's going to 404 00:19:08,760 --> 00:19:10,440 Speaker 8: be where people start to talk about that we've already 405 00:19:10,480 --> 00:19:13,120 Speaker 8: got export We've already got export angs with the tariffs. 406 00:19:13,119 --> 00:19:16,359 Speaker 8: At the moment, the data looks fine because everybody's front running. 407 00:19:16,359 --> 00:19:19,040 Speaker 8: If you're in Chicago, if you're in Philadelphia, you're importing 408 00:19:19,080 --> 00:19:22,360 Speaker 8: as many cars as you can before those tariffs came 409 00:19:22,359 --> 00:19:24,760 Speaker 8: in at the higher levels. When we get to July, 410 00:19:24,960 --> 00:19:28,240 Speaker 8: that's when the reciprocal tariffs kick in, and that's when 411 00:19:28,280 --> 00:19:30,199 Speaker 8: we might see the data starts to slow down. So 412 00:19:30,240 --> 00:19:32,040 Speaker 8: I am worried over the summer that a lot of 413 00:19:32,080 --> 00:19:34,080 Speaker 8: this good news in the data leads to a more 414 00:19:34,160 --> 00:19:36,880 Speaker 8: doubsh GCB over the summer. But then in Q four 415 00:19:36,920 --> 00:19:39,320 Speaker 8: we'll see the issuance in Germany really pick up and 416 00:19:39,359 --> 00:19:41,080 Speaker 8: we'll talk about that higher level for Europe. 417 00:19:41,400 --> 00:19:43,760 Speaker 2: What a clinic, John Ranch, to thank you so much, greatly, 418 00:19:43,800 --> 00:19:47,520 Speaker 2: greatly appreciated with miszoom folding in the research there from 419 00:19:47,520 --> 00:19:51,280 Speaker 2: mister Rashudo and Doctor Constant as well. 420 00:19:51,640 --> 00:19:55,520 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 421 00:19:55,560 --> 00:19:58,840 Speaker 1: starting at seven am Eastern on Applecarplay and Android Otto 422 00:19:59,000 --> 00:20:01,960 Speaker 1: with the Bloomberg This Up. You can also listen live 423 00:20:02,040 --> 00:20:05,600 Speaker 1: on Amazon Alexa from our flagship New York station, Just 424 00:20:05,640 --> 00:20:08,200 Speaker 1: say Alexa Play Bloomberg eleven thirty. 425 00:20:08,520 --> 00:20:11,320 Speaker 2: Jennifer Jennsen, It's thrilled to have you with us. You've 426 00:20:11,359 --> 00:20:16,719 Speaker 2: got Stockton, Detroit, in Puerto Rico, cred Are you going 427 00:20:16,800 --> 00:20:22,000 Speaker 2: to be adding to those names? Harvard, Penn, Brown and 428 00:20:22,080 --> 00:20:25,040 Speaker 2: the rest? Is it really that bad for the rich 429 00:20:25,119 --> 00:20:26,880 Speaker 2: and mine at the private schools? 430 00:20:27,040 --> 00:20:29,040 Speaker 7: It is not, I'm happy to inform you. 431 00:20:29,960 --> 00:20:30,920 Speaker 3: Luckily, it's radio. 432 00:20:30,920 --> 00:20:33,119 Speaker 2: You got to talk more than that. It's early in 433 00:20:33,119 --> 00:20:35,040 Speaker 2: the morning, you gotta talk more than that. 434 00:20:35,920 --> 00:20:38,840 Speaker 7: So no, the good news is no. And here's why 435 00:20:39,240 --> 00:20:43,600 Speaker 7: we think that the market for the private higher education 436 00:20:43,720 --> 00:20:48,240 Speaker 7: universe is bifurcated. You have your really strong institutions Harvard, Yale, Stanford, 437 00:20:48,280 --> 00:20:51,399 Speaker 7: those guys, and then you have these small liberal arts 438 00:20:51,480 --> 00:20:54,600 Speaker 7: private schools that are maybe not in your city centers. 439 00:20:54,840 --> 00:20:57,120 Speaker 7: So we see a very bifurcated market. You have your 440 00:20:57,119 --> 00:20:59,520 Speaker 7: really really healthy balance sheet schools, and then you have 441 00:20:59,680 --> 00:21:01,760 Speaker 7: the small all are liberal arts schools that are really 442 00:21:01,880 --> 00:21:04,720 Speaker 7: challenged by the demographics that are out there. Fewer kids 443 00:21:04,720 --> 00:21:07,320 Speaker 7: are graduating from high school every year, fewer kids going 444 00:21:07,359 --> 00:21:10,320 Speaker 7: to college. How do you recruit them. The policies that 445 00:21:10,400 --> 00:21:13,480 Speaker 7: are coming out of DC, whether you're talking about federal aid, 446 00:21:13,520 --> 00:21:17,320 Speaker 7: whether you're talking about tax exemption, these are all targeted 447 00:21:17,560 --> 00:21:22,360 Speaker 7: at the high end, a really healthy part of the market. 448 00:21:22,680 --> 00:21:26,439 Speaker 7: So is this going to hurt the Harvards of the world. Sure, 449 00:21:26,520 --> 00:21:28,720 Speaker 7: it's going to be less money to them. They're going 450 00:21:28,800 --> 00:21:32,080 Speaker 7: to have less research programs going on. They might see 451 00:21:32,400 --> 00:21:36,800 Speaker 7: some different student mix if international students are truly eliminated 452 00:21:36,840 --> 00:21:40,680 Speaker 7: from their classes. But at the end of the day, 453 00:21:40,840 --> 00:21:44,840 Speaker 7: they've got strong balance sheets, incredible reputations. We're not going 454 00:21:44,880 --> 00:21:48,719 Speaker 7: to see even significant downgrades of these institutions, let alone 455 00:21:48,840 --> 00:21:50,600 Speaker 7: worrying about anything like a DeVault. 456 00:21:50,760 --> 00:21:54,040 Speaker 5: Jennifer, I think for your municipal bond market, the issue 457 00:21:54,040 --> 00:21:57,159 Speaker 5: front and center is the basis for your market, is 458 00:21:57,160 --> 00:22:02,679 Speaker 5: the tax deductibility of municipal bond interest payments. Is that 459 00:22:02,720 --> 00:22:05,040 Speaker 5: at risk here with some of the legislation. Sure. 460 00:22:05,080 --> 00:22:06,800 Speaker 7: So the thing that we have to keep in mind 461 00:22:06,920 --> 00:22:10,400 Speaker 7: is that the question over tax exemption comes up every administration. 462 00:22:10,560 --> 00:22:14,040 Speaker 7: Every time there's a new administration, this topic comes up. Now, Admittedly, 463 00:22:14,440 --> 00:22:17,960 Speaker 7: the conversation is far more robust this time around because 464 00:22:17,960 --> 00:22:20,040 Speaker 7: it's being you or being talked about is being used 465 00:22:20,080 --> 00:22:25,080 Speaker 7: as a way to help pay for the tax TCJA 466 00:22:25,200 --> 00:22:28,439 Speaker 7: tax exceptions. Now, the good news is that there's been 467 00:22:28,440 --> 00:22:31,760 Speaker 7: a huge lobbying effort amongst everybody in the municipal bond 468 00:22:31,760 --> 00:22:36,960 Speaker 7: industry reminding Congress that municipal bonds are the key tool 469 00:22:37,040 --> 00:22:39,640 Speaker 7: that we use to build infrastructure in this country. That's 470 00:22:39,680 --> 00:22:41,639 Speaker 7: how we do it here. The federal government does not 471 00:22:41,720 --> 00:22:44,480 Speaker 7: pay for infrastructure, so municipal bonds are a key component 472 00:22:44,520 --> 00:22:47,440 Speaker 7: of that. Now, who pays the debt service on municipal 473 00:22:47,480 --> 00:22:51,280 Speaker 7: bonds taxpayers. So if you take the tax exemption away, 474 00:22:51,359 --> 00:22:54,879 Speaker 7: it's going to raise borrowing costs for all municipalities and 475 00:22:55,040 --> 00:22:57,959 Speaker 7: increase what taxpayers have to pay to support that debt service. 476 00:22:58,000 --> 00:23:01,160 Speaker 2: If someone in a double triple tex extra state, look 477 00:23:01,280 --> 00:23:05,960 Speaker 2: outside outside of state municipal bunds right now. 478 00:23:06,080 --> 00:23:09,280 Speaker 7: So you definitely can do that, and we I mean, 479 00:23:09,320 --> 00:23:12,520 Speaker 7: we run national funds, so anybody invested in a national fund, 480 00:23:12,560 --> 00:23:14,960 Speaker 7: but of course have exposure throughout the country. 481 00:23:15,000 --> 00:23:17,960 Speaker 2: New York and California. You got to go fourporal tech free. 482 00:23:17,800 --> 00:23:20,199 Speaker 7: Right, Yeah, and you're going to do that because just 483 00:23:20,240 --> 00:23:22,560 Speaker 7: the taxes are so high here that for you to 484 00:23:22,640 --> 00:23:26,400 Speaker 7: have a tax yeah hamp for California, so I could 485 00:23:26,400 --> 00:23:29,120 Speaker 7: feel that too. So to have that in your portfolio 486 00:23:29,240 --> 00:23:31,840 Speaker 7: is definitely going to make sense. But there are definitely 487 00:23:32,000 --> 00:23:34,159 Speaker 7: other states out there where you just don't have the 488 00:23:34,240 --> 00:23:37,160 Speaker 7: ability to have as much municipal debt as you're lucky 489 00:23:37,160 --> 00:23:41,320 Speaker 7: to be able to get in New York, Massachusetts, New Jersey, California. 490 00:23:40,880 --> 00:23:42,479 Speaker 2: Were musciple supply. 491 00:23:43,240 --> 00:23:45,240 Speaker 3: I know, we're so lucky with the high taxes. 492 00:23:46,320 --> 00:23:48,720 Speaker 5: Tons of municipal bonds came into the market in twenty 493 00:23:48,720 --> 00:23:50,200 Speaker 5: two or four. I think it's like a record year 494 00:23:51,720 --> 00:23:54,040 Speaker 5: when rates are hired. That's what I learned, miss bond 495 00:23:54,080 --> 00:23:56,919 Speaker 5: market issue is issue when they need the money, not 496 00:23:56,960 --> 00:23:57,800 Speaker 5: when rates are low. 497 00:23:58,119 --> 00:23:59,719 Speaker 7: Exactly. It goes back to supply. 498 00:24:00,200 --> 00:24:01,800 Speaker 3: Look like this year yeah, so believe. 499 00:24:01,560 --> 00:24:03,119 Speaker 7: It or not, we actually think supply is going to 500 00:24:03,200 --> 00:24:06,080 Speaker 7: top last year's numbers. We're seeing that so far. This year, 501 00:24:06,520 --> 00:24:08,000 Speaker 7: and this is the time of the year where we 502 00:24:08,119 --> 00:24:10,639 Speaker 7: usually start to see supply numbers slow down a little bit. 503 00:24:10,680 --> 00:24:14,920 Speaker 7: You know, the summer comes on. Typically people stop issuing, dead, 504 00:24:14,960 --> 00:24:17,280 Speaker 7: people are on vacation, that whole thing. That is not 505 00:24:17,440 --> 00:24:20,560 Speaker 7: the case. We're still seeing ten plus billion dollar weeks 506 00:24:20,960 --> 00:24:23,760 Speaker 7: of issuance. We're seeing bonds get done well as well, 507 00:24:23,800 --> 00:24:27,320 Speaker 7: I mean oversubscribed, and the market's taking them well. 508 00:24:27,320 --> 00:24:30,159 Speaker 2: You so we're thrilled to have you here. What's the 509 00:24:30,280 --> 00:24:34,280 Speaker 2: number one mistake people make when investing in UNI bonds. 510 00:24:34,480 --> 00:24:37,239 Speaker 7: Not investing in meuning bonds. I think people think that 511 00:24:37,359 --> 00:24:42,200 Speaker 7: municipal bonds are for old retired people, and that's absolutely 512 00:24:41,520 --> 00:24:47,640 Speaker 7: not and that's absolutely not the case. And there's other 513 00:24:47,680 --> 00:24:50,080 Speaker 7: things than the tax exemption that municipal bonds can bring 514 00:24:50,080 --> 00:24:53,119 Speaker 7: your portfolio well, strong fundamentals. 515 00:24:52,760 --> 00:24:54,520 Speaker 3: And historically low default rates. 516 00:24:54,640 --> 00:24:57,119 Speaker 7: So one of the big comparisons we like to use 517 00:24:57,200 --> 00:24:59,760 Speaker 7: right now when we talk about why muni's now is 518 00:25:00,040 --> 00:25:02,040 Speaker 7: hering it to corporate bonds. We have a lot of 519 00:25:02,040 --> 00:25:04,040 Speaker 7: people still in cash who probably should get out of 520 00:25:04,040 --> 00:25:06,560 Speaker 7: that cash and get it invested. You come into the 521 00:25:06,640 --> 00:25:10,360 Speaker 7: MUNI market on a taxable equivalent equivalent yield. You can 522 00:25:10,440 --> 00:25:13,960 Speaker 7: still make hundreds of basis points over a corporate bond 523 00:25:14,200 --> 00:25:19,560 Speaker 7: with a significantly safer fundamental picture and with historically lower 524 00:25:19,600 --> 00:25:21,719 Speaker 7: default rates, so you can without having to take too 525 00:25:21,760 --> 00:25:25,000 Speaker 7: much risk. You can add, well, yes, I'm there, Jennifer. 526 00:25:25,040 --> 00:25:27,159 Speaker 2: Thank you so much, Jennifer Johnson, whether she is with 527 00:25:27,280 --> 00:25:28,880 Speaker 2: Franklin Templeton. 528 00:25:34,400 --> 00:25:38,280 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 529 00:25:38,320 --> 00:25:41,320 Speaker 1: starting at seven am Eastern on Apple, Cocklay and Android 530 00:25:41,359 --> 00:25:44,399 Speaker 1: Auto with the Bloomberg Business up. You can also watch 531 00:25:44,440 --> 00:25:47,399 Speaker 1: us live every weekday on YouTube and always on the 532 00:25:47,400 --> 00:25:48,520 Speaker 1: Bloomberg terminal. 533 00:25:48,960 --> 00:25:51,320 Speaker 2: And she's been up to three am working on this. 534 00:25:51,520 --> 00:25:54,800 Speaker 2: She's in a full tilt newspaper season. Here Lisa Mantao 535 00:25:55,359 --> 00:25:58,040 Speaker 2: with a wide view of twenty newspapers. So what do 536 00:25:58,040 --> 00:25:58,680 Speaker 2: you got this morning? 537 00:25:58,800 --> 00:26:01,280 Speaker 9: Okay, this one's in the wall st Journal. So Jeopardy 538 00:26:01,320 --> 00:26:04,560 Speaker 9: is starting this new dream job for men. It's called 539 00:26:04,600 --> 00:26:08,360 Speaker 9: a stay at home son. Okay, it's the champion there. 540 00:26:08,480 --> 00:26:11,480 Speaker 9: It's Brendon Leao. He's twenty seven, has a master's degree 541 00:26:11,560 --> 00:26:14,080 Speaker 9: right political science. He was studying for the ELSATS, got 542 00:26:14,080 --> 00:26:16,200 Speaker 9: the call for the show. He went on. He won 543 00:26:16,280 --> 00:26:19,919 Speaker 9: nearly sixty thousand dollars in three contests. He's unemployed. He 544 00:26:19,960 --> 00:26:22,280 Speaker 9: lives in moms and Dad's house. You know, he's twenty seven, 545 00:26:22,359 --> 00:26:24,399 Speaker 9: but he doesn't live in the basement playing video games. 546 00:26:24,480 --> 00:26:26,280 Speaker 7: No, he's still looking for a job. 547 00:26:26,840 --> 00:26:29,200 Speaker 9: But what it did is that, you know, they introduce 548 00:26:29,320 --> 00:26:32,200 Speaker 9: him as that, you know, here's this stay at home son, 549 00:26:32,359 --> 00:26:35,480 Speaker 9: and it sparked this talk on social media that people 550 00:26:35,480 --> 00:26:37,399 Speaker 9: are saying, hey, I want to be one of those 551 00:26:38,280 --> 00:26:39,959 Speaker 9: I want to do that. So it went from this 552 00:26:40,080 --> 00:26:43,760 Speaker 9: like negative turn right to a positive turn because of 553 00:26:43,800 --> 00:26:45,120 Speaker 9: the labor market right. 554 00:26:45,000 --> 00:26:49,000 Speaker 2: Here, yeash debate and what I've learned, it's ginormous in Europe. 555 00:26:49,840 --> 00:26:54,240 Speaker 5: It's way huge in Italy. 556 00:26:54,560 --> 00:26:58,200 Speaker 9: Yeah, so they stay at home longer, Yeah, forever, sahole. 557 00:26:58,440 --> 00:27:01,600 Speaker 9: It's like it's a cultural know in Latino community. Like me, 558 00:27:01,720 --> 00:27:03,800 Speaker 9: I like my kids to like stay home as long 559 00:27:03,840 --> 00:27:07,200 Speaker 9: as you can and say you know that, yes, I do. 560 00:27:07,320 --> 00:27:07,680 Speaker 5: I know. 561 00:27:08,720 --> 00:27:11,520 Speaker 2: Clock in the living room, folks, we've got a countdown 562 00:27:11,640 --> 00:27:16,320 Speaker 2: clock right now. You've got to guitars ready to move 563 00:27:16,359 --> 00:27:19,600 Speaker 2: in there me seven days out or one hundred and 564 00:27:19,600 --> 00:27:22,280 Speaker 2: twelve days out, I don't know whatever, but it is. 565 00:27:22,359 --> 00:27:24,320 Speaker 7: So he's warking this new trend. 566 00:27:24,400 --> 00:27:27,879 Speaker 9: Okay, okay, so those who can't find a job to 567 00:27:27,880 --> 00:27:30,120 Speaker 9: those who have won some good news for New York 568 00:27:30,160 --> 00:27:33,440 Speaker 9: City possibly have Today, former New York Company Andrew Cuomo 569 00:27:33,560 --> 00:27:35,840 Speaker 9: running for mayor. He's going to announce a plan to 570 00:27:36,000 --> 00:27:38,480 Speaker 9: raise the city's minimum wage to twenty dollars an hour 571 00:27:38,520 --> 00:27:41,159 Speaker 9: by twenty twenty seven, and that would put it among 572 00:27:41,160 --> 00:27:44,359 Speaker 9: the highest in the nation. He's also suggesting, because you're saying, 573 00:27:44,359 --> 00:27:47,080 Speaker 9: what about the businesses, to create this tax credit for 574 00:27:47,200 --> 00:27:50,240 Speaker 9: small businesses to help them adjust to the higher wage. 575 00:27:50,640 --> 00:27:53,000 Speaker 9: But he's appearing at a rally today, He's going to 576 00:27:53,040 --> 00:27:54,679 Speaker 9: be there with several unions that were backing in. 577 00:27:54,720 --> 00:27:56,439 Speaker 2: It was like, well, I think you're better tune on this. 578 00:27:56,600 --> 00:27:58,159 Speaker 2: I am because of all the work out in New 579 00:27:58,240 --> 00:28:01,320 Speaker 2: Jersey of the big box people. Is the is the 580 00:28:01,359 --> 00:28:04,639 Speaker 2: wage setter for minimum wage? Amazon? 581 00:28:05,080 --> 00:28:07,520 Speaker 5: I think so, And I think it's I don't think 582 00:28:07,520 --> 00:28:10,480 Speaker 5: it's the government. I kind of jokingly always say it's not. 583 00:28:10,560 --> 00:28:12,280 Speaker 5: I don't care what the government says in minimum wages 584 00:28:12,359 --> 00:28:15,920 Speaker 5: is whatever Amazon's paying in the work and most of America, 585 00:28:16,000 --> 00:28:18,040 Speaker 5: that just feels to me like you got to compete 586 00:28:18,040 --> 00:28:18,439 Speaker 5: against that. 587 00:28:18,480 --> 00:28:21,679 Speaker 2: It's like seventeen is right, Yeah, I think so. 588 00:28:21,840 --> 00:28:25,679 Speaker 5: I mean here in the state, Governor Kathy Hochel in 589 00:28:25,720 --> 00:28:28,480 Speaker 5: New York raised the minimum wages is sixteen dollars and 590 00:28:28,520 --> 00:28:31,240 Speaker 5: fifty cents an hour in New York City, so. 591 00:28:31,320 --> 00:28:34,080 Speaker 9: I think DC has the highest minium wage, like seventeen fifty. 592 00:28:34,160 --> 00:28:37,400 Speaker 5: Okay, So it's getting and again I think it's that's 593 00:28:37,400 --> 00:28:39,000 Speaker 5: the Nember we've heard from Amazon. 594 00:28:38,680 --> 00:28:42,880 Speaker 2: Two or three years ago. So okay, okay, today is 595 00:28:42,880 --> 00:28:43,240 Speaker 2: a day. 596 00:28:43,360 --> 00:28:46,480 Speaker 9: It's when New Yorkers they gather in the streets around sunset, 597 00:28:46,480 --> 00:28:49,200 Speaker 9: they take out their phones and there and their cameras 598 00:28:49,200 --> 00:28:51,640 Speaker 9: and they take a picture of the best sunset ever. 599 00:28:51,760 --> 00:28:52,880 Speaker 3: It's Manhattan headge. 600 00:28:52,920 --> 00:28:55,920 Speaker 9: Okay, but the first night, yes, it is tonight. But 601 00:28:56,000 --> 00:28:59,000 Speaker 9: the problem is, look at the outside. I know the 602 00:28:59,040 --> 00:29:01,360 Speaker 9: clouds are coming in and it's going to be cloudy. 603 00:29:01,600 --> 00:29:04,280 Speaker 9: It's supposed to be a full effect at eight thirteen pm. 604 00:29:04,360 --> 00:29:06,560 Speaker 9: So if you see people huddled outside of the Mill Street, 605 00:29:06,560 --> 00:29:09,080 Speaker 9: you know what it is. But if you can't see 606 00:29:09,160 --> 00:29:12,280 Speaker 9: it today, there's another chance tomorrow. But tomorrow is going 607 00:29:12,320 --> 00:29:13,240 Speaker 9: to be cloudy too. 608 00:29:14,160 --> 00:29:16,920 Speaker 5: It's the wettest spring everything. Yes, but if you stand 609 00:29:16,960 --> 00:29:18,440 Speaker 5: on and for people don't live in New York City. 610 00:29:18,600 --> 00:29:21,440 Speaker 5: You stand in any cross street. Correct, We're here at 611 00:29:21,440 --> 00:29:23,720 Speaker 5: fifty eighth Street. Just walk out on fifty eighth street. 612 00:29:23,760 --> 00:29:26,600 Speaker 5: Don't get run over. Look West, you can in theory 613 00:29:26,640 --> 00:29:28,160 Speaker 5: have this phenomenal sunset. Now. 614 00:29:28,200 --> 00:29:28,560 Speaker 2: I'll tell you. 615 00:29:28,560 --> 00:29:30,720 Speaker 5: We got a great sun rise this morning driving in 616 00:29:30,960 --> 00:29:33,000 Speaker 5: oh Okay. It was actually a little bit clear on 617 00:29:33,040 --> 00:29:35,400 Speaker 5: the eastern horizon, so it was a great sunrise over 618 00:29:35,400 --> 00:29:36,200 Speaker 5: the Atlantic Ocean. 619 00:29:36,240 --> 00:29:38,320 Speaker 9: But the sunset, I don't know if the sunset's good. 620 00:29:38,680 --> 00:29:40,840 Speaker 9: If you can't do it again, there's another chance you 621 00:29:40,880 --> 00:29:44,120 Speaker 9: have July eleventh and July twelfth, it's going to happen again. 622 00:29:44,200 --> 00:29:46,480 Speaker 9: And that's kind of the summertime, less chance of a 623 00:29:46,560 --> 00:29:48,720 Speaker 9: chance for Yeah, that's to be out there. 624 00:29:48,960 --> 00:29:50,480 Speaker 3: But it's a huge thing in New York City. 625 00:29:50,800 --> 00:29:55,160 Speaker 2: Very good, Lisa, I thank you. I did not really yep. Okay, 626 00:29:55,240 --> 00:29:58,040 Speaker 2: thank you, Lisa Totao there with the newspapers. 627 00:29:58,080 --> 00:30:03,120 Speaker 1: This is the Bloomberg Surveillance, available on Apple, Spotify, and 628 00:30:03,280 --> 00:30:07,320 Speaker 1: anywhere else you get your podcasts. Listen live each weekday 629 00:30:07,440 --> 00:30:10,920 Speaker 1: seven to ten am Eastern on Bloomberg dot Com, the 630 00:30:11,000 --> 00:30:15,040 Speaker 1: iHeartRadio app, tune in, and the Bloomberg Business app. You 631 00:30:15,080 --> 00:30:18,440 Speaker 1: can also watch us live every weekday on YouTube and 632 00:30:18,640 --> 00:30:20,360 Speaker 1: always on the Bloomberg terminal