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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Storry Caleviceinea now with RBC Capital Markets through the midyear

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Speaker 2: briefing and forward. What's what? It's a calvisine and nuance?

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Speaker 2: Right now? You've been wonderfully in the market. I don't

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Speaker 2: get go to cash from you, But what's a nuance

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Speaker 2: to stagger into September or dare I say December?

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Speaker 3: So look, I think this is a complicated tape, Tom,

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Speaker 3: And when I look at and when I look at

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Speaker 3: my models, you know, we err on the side of

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Speaker 3: being intellectually honest, as we think all Wall Street people

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Speaker 3: should be.

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Speaker 2: But the reality to your original idea for Bloomberg Surveillance

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Speaker 2: will continue.

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Speaker 3: But the reality is is when we've done sort of

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Speaker 3: our typical valueuation EPs type modeling, it tells us the

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Speaker 3: market's a little bit over our skis. I even tried

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Speaker 3: to put in some really you know, optimistic assumptions take

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Speaker 3: inflation down to two percent raise earnings on a bottom

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Speaker 3: up basis from where they are for this year, I

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Speaker 3: can get the math to sixty two hundred. But if

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Speaker 3: I just sort of use, you know, baseline estimates on

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Speaker 3: the street, the math is more like fifty seven to

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Speaker 3: fifty nine hundred. Now, if I look at it from

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Speaker 3: a sentiment perspective, we had a growth scare on April eighth,

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Speaker 3: we bottomed out eighteen point nine percent. How much does

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Speaker 3: the market tend to run after those kinds of drawdowns?

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Speaker 4: Where is it?

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Speaker 3: Nine months later? You can get to around sixty three

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Speaker 3: hundred on the S and P, so we're obviously there.

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Speaker 3: So the market has made sense to me from a

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Speaker 3: sentiment rebound perspective. It hasn't made sense to me from

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Speaker 3: evaluation fundamental.

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Speaker 5: Perspective, and it doesn't make sense on a fundamental basis.

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Speaker 5: Yet we're rolling right into earnings here, stay next week here.

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Speaker 5: So what do you need to see from corporate America?

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Speaker 3: Well, I'll tell you what you know. Some of the

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Speaker 3: questions are on my mind, and I kind of put

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Speaker 3: it in the context of what I heard from investors.

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Speaker 3: I took a day off last week, but the two

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Speaker 3: weeks prior to that I'm allowed every now and then.

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Speaker 3: Really really, I put my weekly out early so I

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Speaker 3: could take the weekend off.

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Speaker 6: I know, well, the eye travel is now over.

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Speaker 4: I've declared it.

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Speaker 6: These analysts, they travel in the spring agrestlution, that's how

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Speaker 6: it works.

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Speaker 3: But I was, you know, a bunch of different states

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Speaker 3: all over the place some of the marketing I did

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Speaker 3: with my rage strategists, so you know, got into a

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Speaker 3: front of a fair number of you know, kind of

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Speaker 3: multi asset type people. And I'll tell you that everybody

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Speaker 3: kind of wants to look through twenty twenty five and

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Speaker 3: a month and a half ago, it was well, we

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Speaker 3: paid the price for whatever potholes or whatever inflation is coming,

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Speaker 3: and now it's really morphed into there's not going to

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Speaker 3: be any inflation. I actually had one client tell me

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Speaker 3: tariffs are deflationary. And I have a lot of people

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Speaker 3: who are looking at the recent cooler than expected prints

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Speaker 3: and saying the tariffs aren't going to show up. Whereas

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Speaker 3: when I talk to you know, my colleagues at RBC,

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Speaker 3: and we all kind of debate when those impacts are coming.

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Speaker 3: We've thought it would be more in the fall all along. Okay,

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Speaker 3: so we think there's a little bit of a mismatch.

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Speaker 7: You know.

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Speaker 3: I'm hearing from investors' companies. You know, they're very excited

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Speaker 3: about CAPEX, and then I see something like the Duke

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Speaker 3: CFO survey which came out I think two weeks ago

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Speaker 3: and really kind of threw cold water on the idea

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Speaker 3: that all this Capex is coming anytime soon. So those

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Speaker 3: are things we're gonna have to sort out in this

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Speaker 3: reporting season. Our companies excited about the one big beautiful

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Speaker 3: bill and the bonus deppreciation, Are we going to get

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Speaker 3: a lot of kind of green shoots on Capex. We're

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Speaker 3: going to have to see. But I can tell you

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Speaker 3: the equity investors I just got done talking to think

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Speaker 3: it's coming and it's baked into the market.

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Speaker 2: The Royal Bank of Canada is definitive across the heritage

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Speaker 2: of nineteenth century Canada, from the Maritimes and Nova Scotia

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Speaker 2: down to the which was then the financial capital Montreal,

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Speaker 2: Toronto still under development. You people have a huge focus

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Speaker 2: on the tariff wars, brief us on what RBC says

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Speaker 2: about what it means for Canada, what it means for

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Speaker 2: the US.

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Speaker 3: Well, I just cover the US, so going, I'm going

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Speaker 3: to sort of stick to my knitting and not tell us.

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Speaker 2: What the people in Toronto and montrealthic.

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Speaker 3: So, you know, Tom, if I think flu if I

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Speaker 3: think back to my most recent trip to Canada seeing

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Speaker 3: investors up there, it was a very different trip than

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Speaker 3: what i'd say had back in December and what I

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Speaker 3: had had back in February, when I would say we

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Speaker 3: would go into meetings and the conversations were pretty much

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Speaker 3: all about tariffs. When you talked to a lot of

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Speaker 3: global investors in Canada who are always sort of thinking

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Speaker 3: about countries and comparing them, and you know, we heard

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Speaker 3: plenty of conversation about tariffs on this last trip, but

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Speaker 3: there was also a lot of emphasis on AI and

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Speaker 3: productivity in the US, and people were actually starting to

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Speaker 3: talk about some non tariff related things. And I know

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Speaker 3: that sounds a little bit shocking, but I would say

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Speaker 3: it was not as negative a vibe as what I

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Speaker 3: had seen earlier in the year or late last year.

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Speaker 5: What screen's well for you, guys, I don't know if

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Speaker 5: it's a particular sectors of the market or factors in

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Speaker 5: the market, but what screen's well for you?

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Speaker 6: Because this market doesn't look cheap to.

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Speaker 4: Me at all.

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Speaker 2: No, it does.

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Speaker 3: If you look at a cap weighted market CAF weight

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Speaker 3: at SMP five hundred pe, it's a twenty five times again,

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Speaker 3: which is getting close to kind of you know, the

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Speaker 3: typical highs. You have a little bit more room to

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Speaker 3: go back to pass ties if you look at equal

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Speaker 3: weight at SMP, and I think that's one of the

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Speaker 3: reasons why we're started to see, you know, kind of

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Speaker 3: the momentum trade breaking down. Was kind of the big

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Speaker 3: talk before my day off. That was the big talk

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Speaker 3: on the trading floor about how the momentum trade was

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Speaker 3: breaking down. And I do think it's because in part

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Speaker 3: of that valuation differential, I would say, Paul, on sectors,

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Speaker 3: one thing that screened well to us that we have

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Speaker 3: actually upgraded recently. I understand it's getting hit pretty hard

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Speaker 3: today and I think some of that's on tarafanks, but

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Speaker 3: the material sector. We just did a survey of our analysts.

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Speaker 3: We do this a few times a year, and my

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Speaker 3: analysts in the material space were pretty uniformly bullish across

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Speaker 3: the board. My fertilizer's analyst was neutral. That was the

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Speaker 3: most cautious outlook I got. It's a very reasonably valued sector.

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Speaker 3: We're starting to see earnings revisions improve. The dollar weakening

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Speaker 3: should help that sector's earnings revision trends. And I would

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Speaker 3: honestly if we do get you know, some incremental sort

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Speaker 3: of relief once we get past some of these you know,

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Speaker 3: I guess the new August deadline on tariffs. I'd rather

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Speaker 3: play a sector like that, that consumer than consumer discretionary,

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Speaker 3: which actually hasn't underperformed since the since the Liberation Day tariffs.

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Speaker 2: Lorie, thank you, thank you so much. With the RBC

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Speaker 2: Capital Markets.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us Live

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Speaker 1: weekday afternoons from seven to ten am. E's durn Listen

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Speaker 1: on Applecarplay and Android Otto with the Bloomberg Business app,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Let's get right to it, because it's a mystery, and

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Speaker 2: we're going to be brief as always. Wonderfully, Hey, Henrietta

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Speaker 2: Trees is the Veda partners. We've been talking legislation, we've

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Speaker 2: been talking the President's golf game, and now the complete

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Speaker 2: confusion of tariffs. Henrietta, where is the outcome of this,

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Speaker 2: the desired outcome of the Trump administration. Is it months

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Speaker 2: out or years out.

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Speaker 8: We got three and a half years of this as

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Speaker 8: far as I'm concerned, and the next seven months are

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Speaker 8: the most leeway that the president will have going into

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Speaker 8: the midterm election cycle, and I think that's what we

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Speaker 8: really need to focus on. So I think in retrospect,

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Speaker 8: if we sit back here, you know, next February and

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Speaker 8: we talk about where tariffs were today, I suspect that

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Speaker 8: they'll be on the low end of the spectrum versus

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Speaker 8: where they're going to be in the back happ of

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Speaker 8: twenty five.

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Speaker 6: What does it do because.

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Speaker 2: What does that I mean, we're talking of tripling in

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Speaker 2: tariffs right or affourbling. What does that do to America?

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Speaker 2: I don't think there's enough discussion about this, Henrietta.

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Speaker 8: There's absolutely not, and you can see it in the

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Speaker 8: small business data. I was actually just looking at some

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Speaker 8: of the polling. The small businesses are the ones that

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Speaker 8: are most concerned. Whether they're importing, you know, couches for

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Speaker 8: your outdoor stuff and selling it. None of that stuff

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Speaker 8: is made in the United States, and so those small

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Speaker 8: businesses are going out of business and they're dealing with

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Speaker 8: the steel inputs and whether or not it's the honed

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Speaker 8: parts or just the big pieces of rolled steel. It's

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Speaker 8: everything that's getting tariffed now at fifty percent, and that's

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Speaker 8: making the manufacturing sector drop off, employment there drop off.

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Speaker 8: It is a sort of slow rolling train wreck. And

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Speaker 8: the slow rolling part is I think the part that's

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Speaker 8: most insidious, because the market has obviously adapted to it

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Speaker 8: and is not reacting to tariff's the way that they

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Speaker 8: did at the beginning.

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Speaker 2: Of the year.

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Speaker 8: And I think the slow burn of the way the

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Speaker 8: administration is putting this on has the effect of tempering

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Speaker 8: the market's expectation, like that frog and boiling water situation, Henrietta.

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Speaker 5: If I'm just any country out there, why don't I

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Speaker 5: just kind of slow walk this? THNK Because one could

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Speaker 5: argue Donald Trump is a lame duck president and every

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Speaker 5: day becomes more of a lame duck president.

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Speaker 6: Is that a trading strategy for some of these countries?

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Speaker 8: Do you think I don't love that, to be honest,

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Speaker 8: because a lame duck president can sometimes be the most dangerous,

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Speaker 8: and especially now that the OBBB is done, there's no

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Speaker 8: tether from Congress. There's you know, I was I was

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Speaker 8: talking to a client last week out how the Republican

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Speaker 8: Party and the Senator specifically from farm states, we're able

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Speaker 8: to sort of temper the president's more aggressive actions on

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Speaker 8: trade in twenty seventeen when they were writing the tax bill,

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Speaker 8: and then as soon as that tax bill was done,

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Speaker 8: it was like a switch turned and Ambassador Lightheiser just

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Speaker 8: blew through the roof with Section three h one tariffs

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Speaker 8: across all goods from China on Section two thirty two

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Speaker 8: tiers for the first time. And that's basically the phase

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Speaker 8: that we're at right now. The OBBB is done. We

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Speaker 8: don't have to do a twenty seventeen tax bill fix.

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Speaker 8: We don't have to do any of the debt ceialing

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Speaker 8: components for the next two years. We're really in free

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Speaker 8: reign territory for tariffs, and I think that they are

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Speaker 8: going up otherwise, why would you need an August one delay?

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Speaker 8: The tariff lights are going up on hundreds of nations,

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Speaker 8: one nations.

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Speaker 2: This is from a blog here Daily seventy five. Thank

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Speaker 2: you so much. This is Remy Cohen of Domain Canaros,

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Speaker 2: which is a NAPA Valley distributor. Not only does certain

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Speaker 2: tariffs increase the cost of goods used for to produce

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Speaker 2: wines domestically. Tariffs on import sorded wine also impact the

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Speaker 2: domestic industry distributors, retailers and restaurants is as well. When

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Speaker 2: does this happen? Like when you know, when does the bottle?

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Speaker 2: What did you have this weekend? You bought some ring Bosco?

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Speaker 5: Sure you know it was a two sir, it was

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Speaker 5: a Mulgan David triking Italians days Herietta.

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Speaker 2: If Paul has this representative Mogan David twenty twenty, how

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Speaker 2: do they retaliate abroad? They're just going to tell the

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Speaker 2: president no, right.

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Speaker 8: Well, first of all, Paul, please invite me next time.

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Speaker 8: And then second of all, I think when you are

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Speaker 8: looking into the details of the negotiations that are happening

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Speaker 8: right now to this point, there's a tremendous amount of

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Speaker 8: focus on the section two thirty two tires, the sectoral tires.

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Speaker 8: So it's the wine industry, the pharmaceutical industry, semiconductors, aircraft trucking,

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Speaker 8: those tireff rates and those sectors are inordinately exposed to

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Speaker 8: higher tire rates, and those two thirty twos are permanent.

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Speaker 8: So unlike AIPA, which is where the base case of

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Speaker 8: all these other tiers come in and they're at least

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Speaker 8: subject to some sort of concern about whether the Supreme

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Speaker 8: Court will let them stay on or the federal circuit courts.

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Speaker 8: Those two thirty two tires are permanent, and they're an

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Speaker 8: integral infrastructural problem for individual ste Next time, Henriet.

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Speaker 2: To Trey's on French cheeses and what it means. Thank

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Speaker 2: you so much with Beta Pargners.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on Apple Corplay and Android

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Speaker 1: Auto with the Bloomberg Business App. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station,

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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

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Speaker 2: Our conversation of the day for American Wall Street. Sheila Kodlup,

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Speaker 2: managing director at Jefferies, is absolutely definitive on the broad

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Speaker 2: transportation and aviation business with a real defense bias as well.

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Speaker 2: Paul asked the money question. When you walked in our

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Speaker 2: beautiful somebody said, our studio looks like get Smart's the cone?

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Speaker 2: You don't even know what the con silence is?

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Speaker 6: Yeah, absolutely, it is a cone of silence.

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Speaker 2: Unless she was talking is bowing back.

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Speaker 9: Bone's doing better, it's on its way back. I think

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Speaker 9: it's a steady improvement and that's what we really want

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Speaker 9: to see. Kelly Orberg has been CEO for Baddie.

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Speaker 2: Year, and what you're doing different now versus the other

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Speaker 2: train wrecks.

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Speaker 9: I think he's more engaged versus Dave Calhoun. To be

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Speaker 9: quite frank, he focuses on six KPIs. You have Stephanie

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Speaker 9: Pope running the commercial business, and they're focusing on steady improvements.

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Speaker 9: They're focused on what the workforce wants to see, what's

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Speaker 9: user friendly. I was down in Charleston in February.

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Speaker 10: I've talked about this before.

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Speaker 9: You know, if the manual, old school manual doesn't work

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Speaker 9: and it's very very aerospace heavy focus, then the workforce

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Speaker 9: is now newer, less senior. Can we make it easier?

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Speaker 9: What do people use today? They use videos, YouTube videos

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Speaker 9: on how to how to fix things and better documentation.

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Speaker 9: That was one thing that learned from the Air Alaska

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Speaker 9: accident last year.

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Speaker 2: So I mean, it's not funny, Paul, but a YouTube

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Speaker 2: video how to use a RIVET gun exactly.

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Speaker 5: I don't know, Sheila, what I've been kind of led

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Speaker 5: to believe is if you want to really get a

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Speaker 5: sense of how Boeing's doing, track the seven three seven deliveries,

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Speaker 5: where are we today and maybe where does the company

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Speaker 5: want to get to?

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Speaker 9: Sure the three seven is very important because the three

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Speaker 9: things we look at for Boeing our three seven, triple

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Speaker 9: seven X. In defense, triple seven X is losing four

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Speaker 9: billion this year three billion last year, so quite a

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Speaker 9: big number, like four billion of free cash flow losses.

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Speaker 9: Defence is a two billion loss last year at billion

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Speaker 9: this year. So I like to keep an eye on

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Speaker 9: those two negatives that people don't often focus on. Three

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Speaker 9: seven accounts for fifty percent of free cash flow. The

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Speaker 9: way we simply put it is you're making about ten

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Speaker 9: to twenty million of free cash flow per plane. So

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Speaker 9: last year they did an average of twenty four deliveries

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Speaker 9: a month. This year we thought they'd get to thirty.

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Speaker 9: They're trending June, which they'll report tomorrow at eleven am

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Speaker 9: at forty two max's, so they're ten high than we thought.

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Speaker 9: So think about that. Annualize it for the half of

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Speaker 9: the year. That's about five hundred to five seven to

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Speaker 9: fifty of years.

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Speaker 2: If they're losing on the big planes because of Airbus.

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Speaker 2: How do you respond to a given listener, viewer, congressperson

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Speaker 2: who says Boeing can't compete with the Airbus because Airbus

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Speaker 2: is government supported across France and all of the continent,

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Speaker 2: and Boeing is not government supported. How do you respond

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Speaker 2: to that observation?

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Speaker 9: So great question, Tom Boeing actually does better on their

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Speaker 9: wide bodies. They're wide bodies. They have about sixty percent

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Speaker 9: market share versus the narrowbodies. They're at forty, So it's

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Speaker 9: the inverse. The wide bodies they manufacture are the seven

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Speaker 9: eight seven really and the triple seven X is new.

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Speaker 9: We don't really ow it's not certified yet. The engine

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Speaker 9: by GE was certified in twenty twenty. This aircraft was

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Speaker 9: supposed to be certified five years ago. It's expected to

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Speaker 9: be certified in twenty six. So what Boeing's doing right

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Speaker 9: now is building inventory. So they have I production test

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Speaker 9: flight program, aircraft in test flights, so they're building the

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Speaker 9: planes to deliver in twenty six twenty seven.

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Speaker 5: Okay, let's say they get the airplanes to the airlines.

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Speaker 5: Do the airlines need them, do they want them to?

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Speaker 2: Where are we held.

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Speaker 3: Yeah.

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Speaker 9: I actually wrote a note about this. On my way

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Speaker 9: back from the Paris air show. I was flying.

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Speaker 5: How come to air shows are not in like sheboygan,

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Speaker 5: They're always in Paris or London.

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Speaker 9: Yeah, they're in great locations for a reason. Airspace is

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Speaker 9: a great sector to cover, not only because it's neat,

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Speaker 9: but we have great air show locations. Yes, I was

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Speaker 9: on a Triple seven, the older version from Paris to

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Speaker 9: JFK and I looked up the age of the Triple

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Speaker 9: seven fleet and it's fourteen years old, fourteen point three.

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Speaker 4: You know how many.

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Speaker 9: Airlines in the US and Europe have ordered Triple seven

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Speaker 9: X's about zero, So it's quite interesting that there's actually

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Speaker 9: a big opportunity for Triple seven X orders.

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Speaker 2: I got to get this in. I was on the

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Speaker 2: deck this week and having a beverage of my choice

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Speaker 2: to go. She was on the show Monday. They go

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Speaker 2: ask her about business jets. Business jets, perlute under two

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Speaker 2: percent of our air pollution. But everybody's having a total

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Speaker 2: cow about the pollution of business jets.

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Speaker 9: I think zero two percent of all transport business.

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Speaker 2: Does the golf stream that we have, We have a

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Speaker 2: G three but to business jets pollute.

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Speaker 9: I'm surprised you have an update graded to the seven hundred.

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Speaker 6: Have a ticket in for that?

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Speaker 2: I said, we have a ticket in Reto said, no,

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Speaker 2: we haven't upgraded. And for the height, it's a troublem.

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Speaker 2: But does the G three does it pollute? Am? I

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Speaker 2: just to feel guilty when Lisa goes off to San

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Speaker 2: Francisco on a G.

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Speaker 9: Three point zero five percent of transportation pollution is what

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Speaker 9: biz jets account for.

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Speaker 10: Just not a lot of them.

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Speaker 6: They're just going after the rich people, right, Yeah, and

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Speaker 6: they don't.

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Speaker 9: Fly that often. I mean, think about airplanes they fly

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Speaker 9: to Okay, cars, trucks. I mean, it's just I think

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Speaker 9: aerospace is rather ok Okay, Tom, don't.

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Speaker 2: I mean Okay, I'm looking at this like what Taylor

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Speaker 2: Taylor has, and I just can't make a decision. We're

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Speaker 2: sticking with the G three. Sheila Kler, thank you so

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Speaker 2: much for Jeffries. Here today, I'm Boeing and I'm the

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Speaker 2: Resurrection of Boeing.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto.

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Speaker 1: With the Bloomberg Business app, you can also watch US

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Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal.

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Speaker 2: Right now briefing, Brad roguelf joins just Global how to

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Speaker 2: research at Barclay's here, And what's cool about brad rogue

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Speaker 2: off is you've got not only the economics, but also

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Speaker 2: actual nuance within derivative fixed income instruments, high yield and

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Speaker 2: such as well. Where is the opportunity forward if you

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Speaker 2: look at the broad spectrum of Barclay's research, where's the

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Speaker 2: key opportunity.

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Speaker 7: Key opportunity across all the markets. So I give me

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Speaker 7: a big playing field here, I appreciate it. So look,

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Speaker 7: you know, I think since we said global, I think

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Speaker 7: we have to talk about that a little bit. And

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Speaker 7: we've seen a real rally across Europe across all sorts

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Speaker 7: of products, right whether you're looking at fixed income, you're

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Speaker 7: looking at equities, and you know, we do think there's

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Speaker 7: probably shifted to a little bit more value to the

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Speaker 7: US than we thought at the beginning of the year.

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Speaker 4: We actually did prefer Europe in a lot of different areas.

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Speaker 4: Then you know, I think you know, there's the US and.

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Speaker 7: Then there's certain opportunities within emerging markets as well, but

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Speaker 7: we think, you know.

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Speaker 4: Us exceptionalism, they may not be as exceptional as it was.

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Speaker 4: If we go back by this is our.

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Speaker 2: Earnings exceptional, it's going to be their quarter after quarter.

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Speaker 2: Paul have the number memorized and it's always it's a beat,

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Speaker 2: whether it's the top line, bottom line, whatever. Why why

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Speaker 2: is it going to change this time around?

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Speaker 5: No?

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Speaker 2: I look.

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Speaker 7: I think if you look in the US and you say, okay,

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Speaker 7: earnings growth maybe less than it was we go back

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Speaker 7: over the last couple of years, but still a lot

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Speaker 7: better than if you look at data for where European

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Speaker 7: companies are right now or earnings growth is much more modest,

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Speaker 7: So you know, it's it's exceptional relative you know, relative exceptionalism,

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Speaker 7: I guess is maybe the term we should be using.

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Speaker 5: What is a non bank financial institutions?

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Speaker 4: And why should I care?

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Speaker 7: You should care because they are taking off a lot

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Speaker 7: larger portion of the financial system at this point, So

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Speaker 7: a non bank financial institution is not a bank, right,

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Speaker 7: That's the easiest part about it. But one of the

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Speaker 7: things you guys talk about here we talked about in

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Speaker 7: all of these programs is something like private credit, for example,

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Speaker 7: and we talk about how banks are being disintermediated rights.

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Speaker 4: That's a very common term.

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Speaker 7: And then we always talk about how the private credit

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Speaker 7: markets are so opaque, right because they're being done at

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Speaker 7: these non bank financial institutions. Well, you know, what you're

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Speaker 7: seeing is a lot of the lending traditional C and

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Speaker 7: I lending that used to be done purely at banks

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Speaker 7: is actually happening at these non bank financial institutions now

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Speaker 7: and it's really changing the customer client type relationship and

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Speaker 7: it is leading to a bit more leverage in the system.

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Speaker 7: So that's probably the answer to why you should care

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Speaker 7: is if that leverage gets a little bit excessive. And

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Speaker 7: I don't think it's as opaque as most people do,

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Speaker 7: but it's not as clear and obvious as when this

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Speaker 7: lending occurs at banks.

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Speaker 2: So do you and your team forget about you as

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Speaker 2: global head of research. But to Fancy Barclay's people have

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Speaker 2: an understanding of what the haircut is for people that

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Speaker 2: need to exit private credit or private equity.

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Speaker 7: Yeah, sure, so if you if you think about it,

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Speaker 7: there's there's there's two there's two different ways I would

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Speaker 7: I would think about it. First is if you if

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Speaker 7: you just own private credit, right you can put leverage

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Speaker 7: on that. Think about business development companies, which is probably

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Speaker 7: the thing the most familiar with people listening, right, because

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Speaker 7: you can go out, anyone can go out.

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Speaker 4: And buy a BDC.

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Speaker 7: Even those tend to have they can have up to

438
00:20:47,400 --> 00:20:48,920
Speaker 7: two turns of leverage, but they have a turn of

439
00:20:49,000 --> 00:20:50,080
Speaker 7: leverage essentially on it.

440
00:20:50,200 --> 00:20:50,320
Speaker 6: Right.

441
00:20:50,359 --> 00:20:52,320
Speaker 4: So there's your haircut right there, you know, like fifty

442
00:20:52,359 --> 00:20:53,119
Speaker 4: percent haircut.

443
00:20:54,040 --> 00:20:56,640
Speaker 7: But then what you're asking about is another thing, which

444
00:20:56,680 --> 00:20:59,760
Speaker 7: is if you need liquidity as an endowment, as you know,

445
00:21:00,320 --> 00:21:02,639
Speaker 7: as any kind of institution, and you're willing to sell that,

446
00:21:03,760 --> 00:21:04,560
Speaker 7: what's the haircut?

447
00:21:06,080 --> 00:21:08,240
Speaker 2: I mean, I think, Paul, to me, this is the

448
00:21:08,280 --> 00:21:10,399
Speaker 2: heart of the matter. I'm listening to Brad Rogoffin. It

449
00:21:10,440 --> 00:21:12,840
Speaker 2: might as well be two thousand and six or two

450
00:21:12,880 --> 00:21:16,240
Speaker 2: thousand and eight. I'm sorry, the same phrases are there

451
00:21:17,200 --> 00:21:19,120
Speaker 2: is we heard years ago.

452
00:21:19,280 --> 00:21:22,040
Speaker 7: So I think that's a fair comment, right, And look,

453
00:21:22,080 --> 00:21:24,000
Speaker 7: as someone who worked at Lehman Brothers.

454
00:21:23,760 --> 00:21:24,760
Speaker 4: Then I get it.

455
00:21:25,720 --> 00:21:27,360
Speaker 7: I say lived through it, but I guess we died

456
00:21:27,359 --> 00:21:30,480
Speaker 7: through it Leman. But you know what I would say

457
00:21:30,680 --> 00:21:34,320
Speaker 7: is it's absolutely there's leverage. There's more leverage, right, which

458
00:21:34,400 --> 00:21:38,320
Speaker 7: reminds you of pre GFC. The difference is the quantum

459
00:21:38,400 --> 00:21:41,560
Speaker 7: of that leverage. Look, I remember sitting there looking at

460
00:21:41,680 --> 00:21:44,480
Speaker 7: very similar instruments being levered eight times. Then there are

461
00:21:44,480 --> 00:21:46,000
Speaker 7: eleven two times now, right, So.

462
00:21:46,040 --> 00:21:46,679
Speaker 2: That's a difference.

463
00:21:46,880 --> 00:21:49,840
Speaker 4: That's a difference, but there's less of it, but there's

464
00:21:49,880 --> 00:21:52,280
Speaker 4: leverage once again, So how much.

465
00:21:52,280 --> 00:21:56,160
Speaker 5: Risk if any do non bank fin institution's private credit

466
00:21:56,240 --> 00:21:59,240
Speaker 5: broadly defined? How much risk is that in the system

467
00:21:59,320 --> 00:22:04,879
Speaker 5: adjusting that better capitalization? So the risk isn't shouldn't be concerning?

468
00:22:05,000 --> 00:22:06,320
Speaker 7: Is that the kind I don't think it should be

469
00:22:06,359 --> 00:22:09,320
Speaker 7: nearly as concerning as the time period that we just reference,

470
00:22:09,400 --> 00:22:12,520
Speaker 7: because there's a lot less leverage. Now what's happening is

471
00:22:12,720 --> 00:22:15,520
Speaker 7: the loans to those companies, you know, the underlying leverage,

472
00:22:15,600 --> 00:22:19,199
Speaker 7: meaning that the corporates, right, are still levered more than

473
00:22:19,240 --> 00:22:21,040
Speaker 7: the lending that banks are doing. So there's a little

474
00:22:21,040 --> 00:22:25,120
Speaker 7: bit more risk related to that, right, But this funding

475
00:22:25,840 --> 00:22:30,600
Speaker 7: being more stable obviously is a positive thing.

476
00:22:30,880 --> 00:22:33,399
Speaker 4: Right, and I think the risk of that onwines lower.

477
00:22:33,440 --> 00:22:36,280
Speaker 7: And also the assets that are being owned by private

478
00:22:36,359 --> 00:22:38,840
Speaker 7: credit and non bank financials and the leverage being provided

479
00:22:38,880 --> 00:22:39,040
Speaker 7: on that.

480
00:22:39,280 --> 00:22:41,960
Speaker 4: These are assets we know and can model. They're typically corporates.

481
00:22:42,000 --> 00:22:44,520
Speaker 7: What we're starting to see another term you guys have

482
00:22:44,640 --> 00:22:47,560
Speaker 7: probably used a little bit here is ABFs or asset

483
00:22:47,640 --> 00:22:50,280
Speaker 7: backed you know, funding and you know, and a lot

484
00:22:50,320 --> 00:22:54,000
Speaker 7: of different nuanced asset backed securities where we're seeing more

485
00:22:54,040 --> 00:22:56,640
Speaker 7: and more leverage on that. That worries me a little

486
00:22:56,640 --> 00:22:57,840
Speaker 7: bit as we move forward.

487
00:22:57,880 --> 00:22:58,640
Speaker 4: We're not there yet.

488
00:22:58,760 --> 00:23:00,560
Speaker 7: But if you start putting les which on things you

489
00:23:00,600 --> 00:23:03,760
Speaker 7: can't model as much and don't have history, who knows.

490
00:23:04,000 --> 00:23:09,000
Speaker 2: Barkley's cheeky tim Long with an underweight on Apple. I

491
00:23:09,040 --> 00:23:11,600
Speaker 2: mean this is you know, it's not a lonely call,

492
00:23:11,720 --> 00:23:15,440
Speaker 2: but it's it's controversial, to say the least from where

493
00:23:15,520 --> 00:23:18,479
Speaker 2: you sit with all of your I'm going to call

494
00:23:18,480 --> 00:23:22,480
Speaker 2: it as a broad sense derivative experience. Brad Rogoff's take

495
00:23:22,600 --> 00:23:26,840
Speaker 2: on MAG seven and it's enduring stream of cash flows.

496
00:23:27,320 --> 00:23:29,200
Speaker 7: I think the enduring stream of cash flows is. Look,

497
00:23:29,200 --> 00:23:33,000
Speaker 7: I'm a fixed income guy. I love enduring extremes fixed

498
00:23:33,080 --> 00:23:34,080
Speaker 7: income folks.

499
00:23:34,119 --> 00:23:37,959
Speaker 2: This is really important. Years ago when Amazon blew up,

500
00:23:38,080 --> 00:23:41,720
Speaker 2: it was Leman fixed income that was out front on

501
00:23:41,840 --> 00:23:45,400
Speaker 2: that train ruck. You guys see things, they're twisted ball.

502
00:23:45,480 --> 00:23:48,760
Speaker 2: I say, how do you look at MAG seven coming

503
00:23:48,840 --> 00:23:50,119
Speaker 2: from a clip to coupons.

504
00:23:50,200 --> 00:23:53,159
Speaker 7: Look look from from from from a credit standpoint, right,

505
00:23:53,280 --> 00:23:57,200
Speaker 7: the beta on MAG seven is vastly different than when

506
00:23:57,240 --> 00:23:58,640
Speaker 7: you're thinking about the equity world.

507
00:23:58,760 --> 00:23:58,879
Speaker 2: Right.

508
00:23:58,960 --> 00:24:01,040
Speaker 7: So these are some of the least companies you see

509
00:24:01,040 --> 00:24:02,919
Speaker 7: the cash they have. The problem with the cash they

510
00:24:02,960 --> 00:24:05,280
Speaker 7: have in the cash flow that they throw off, though,

511
00:24:06,040 --> 00:24:08,240
Speaker 7: is that they're spending on something right right now, they're

512
00:24:08,240 --> 00:24:12,600
Speaker 7: spending in most data centers, right and AI and so

513
00:24:12,960 --> 00:24:15,360
Speaker 7: you know, it depends whether you think they can turn

514
00:24:15,440 --> 00:24:18,439
Speaker 7: that cash flow on or off, which I think they

515
00:24:18,520 --> 00:24:21,639
Speaker 7: do have some flexibility around. But from the fixed income side,

516
00:24:22,000 --> 00:24:24,680
Speaker 7: we worry a lot less about tech in general. But

517
00:24:24,920 --> 00:24:26,240
Speaker 7: if you don't mind, I'm going to actually take it

518
00:24:26,240 --> 00:24:29,160
Speaker 7: back to your last question too, which is what would

519
00:24:29,160 --> 00:24:31,120
Speaker 7: be the concerns right that you were just asking around

520
00:24:31,160 --> 00:24:33,600
Speaker 7: private credit. Well, the concerns would be that the private

521
00:24:33,680 --> 00:24:37,840
Speaker 7: credit market is massively over indexed towards technology. And if

522
00:24:37,880 --> 00:24:41,920
Speaker 7: we think this AI revolution leads to say, certain software

523
00:24:42,000 --> 00:24:46,200
Speaker 7: companies being less relevant in the future, then that's actually

524
00:24:46,240 --> 00:24:48,280
Speaker 7: a problem that could come from private credit.

525
00:24:49,240 --> 00:24:51,399
Speaker 6: Brad, real quick, how do you get paid for research

526
00:24:51,520 --> 00:24:51,920
Speaker 6: these days?

527
00:24:52,160 --> 00:24:52,920
Speaker 4: Is it harder and harder?

528
00:24:53,080 --> 00:24:53,720
Speaker 2: Back in my day.

529
00:24:54,119 --> 00:24:55,920
Speaker 5: There's many ways I get get paid for my research.

530
00:24:56,080 --> 00:24:56,640
Speaker 4: How about today?

531
00:24:56,640 --> 00:24:57,639
Speaker 6: How do you guys think about that?

532
00:24:57,840 --> 00:25:00,199
Speaker 7: Yeah, Well, look as someone onces going to come from

533
00:25:00,200 --> 00:25:02,080
Speaker 7: the fixed income side looks at the equity side.

534
00:25:02,160 --> 00:25:04,000
Speaker 4: Now, those answers are very different.

535
00:25:04,119 --> 00:25:06,920
Speaker 7: Right on the equity side, I would say increasingly, and

536
00:25:07,080 --> 00:25:08,920
Speaker 7: really important part of it is the connections we have

537
00:25:09,000 --> 00:25:12,359
Speaker 7: with companies, right, and you build those connections and you're

538
00:25:12,359 --> 00:25:15,400
Speaker 7: making sure investors really get to know those companies. Putting

539
00:25:15,440 --> 00:25:17,280
Speaker 7: on events and doing the right type of events are

540
00:25:17,280 --> 00:25:19,840
Speaker 7: a huge part of it. And then look in the

541
00:25:20,119 --> 00:25:21,040
Speaker 7: fixed income.

542
00:25:20,840 --> 00:25:24,920
Speaker 4: Side, coming up with ideas you know, couldn't be more important.

543
00:25:25,080 --> 00:25:26,880
Speaker 4: And I think that was probably always the case. Yeah,

544
00:25:26,880 --> 00:25:27,639
Speaker 4: and it still is.

545
00:25:28,000 --> 00:25:30,399
Speaker 2: Thank you bred Rogo. I greatly appreciated global how to

546
00:25:30,440 --> 00:25:34,320
Speaker 2: researcher Park Liz on a fixed income This is.

547
00:25:34,320 --> 00:25:38,240
Speaker 1: The Bloomberg Surveillance Podcast. Listen live each weekday starting at

548
00:25:38,320 --> 00:25:41,320
Speaker 1: seven am Eastern on Apple Coarclay, and Android Auto with

549
00:25:41,440 --> 00:25:44,359
Speaker 1: the Bloomberg Business App. You can also listen live on

550
00:25:44,480 --> 00:25:48,760
Speaker 1: Amazon Alexa from our flagship New York station, Just say Alexa,

551
00:25:48,920 --> 00:25:51,440
Speaker 1: Play Bloomberg, eleven thirty newspapers.

552
00:25:51,520 --> 00:25:53,480
Speaker 2: Lisa Mateo here to brief, what do you go?

553
00:25:53,640 --> 00:25:54,920
Speaker 10: All right, I want to start with the Wall Street

554
00:25:54,960 --> 00:25:57,680
Speaker 10: Journal because they're talking about pricey mountaintowns. When do you

555
00:25:57,720 --> 00:25:59,960
Speaker 10: think you do you think of like aspin.

556
00:25:59,720 --> 00:26:02,640
Speaker 2: De think put in a down payment out to tell

557
00:26:02,640 --> 00:26:05,160
Speaker 2: you're right, tell you right. There you go, that's house

558
00:26:05,200 --> 00:26:06,040
Speaker 2: four million dollars.

559
00:26:06,920 --> 00:26:07,280
Speaker 1: There you go.

560
00:26:07,520 --> 00:26:11,200
Speaker 10: But there was a new place catching up. It is Ketchem, Idaho.

561
00:26:11,520 --> 00:26:14,240
Speaker 10: Oh yeah, and you say, who, Well, it's a former

562
00:26:14,320 --> 00:26:17,000
Speaker 10: mining town. I didn't know the south central Idaho Sun

563
00:26:17,200 --> 00:26:20,720
Speaker 10: Valley main tourist area. Realtor dot com says in May

564
00:26:21,480 --> 00:26:23,680
Speaker 10: five they had a medium home listing price of three

565
00:26:23,720 --> 00:26:27,399
Speaker 10: point two three point seven two million dollars. So it

566
00:26:27,480 --> 00:26:31,159
Speaker 10: has a small downtown about six blocks, you know, restaurants, galleries, bars,

567
00:26:31,280 --> 00:26:34,199
Speaker 10: things like that. But it's nice. It's near great skiing places.

568
00:26:34,280 --> 00:26:36,240
Speaker 10: So that's one of the reasons for the draw. They

569
00:26:36,320 --> 00:26:38,159
Speaker 10: have a couple of things, you know, at the end

570
00:26:38,200 --> 00:26:41,400
Speaker 10: of just summer they have their Wagon Days, big hitch parade.

571
00:26:41,920 --> 00:26:43,720
Speaker 6: They have never been trailing the sheep.

572
00:26:44,000 --> 00:26:47,600
Speaker 5: The Allen and Company media conference is there Ed Lovelow's

573
00:26:48,520 --> 00:26:50,960
Speaker 5: this week Ed Ludlow.

574
00:26:50,760 --> 00:26:53,360
Speaker 2: Be there and he's looking he's like he's like four

575
00:26:53,440 --> 00:26:54,720
Speaker 2: streets out from the center.

576
00:26:54,800 --> 00:26:56,879
Speaker 5: He's looking, and I love sun Valley. If ski there

577
00:26:56,920 --> 00:26:59,360
Speaker 5: a couple of times. It's not a monstrous place like Veil,

578
00:26:59,440 --> 00:27:01,000
Speaker 5: but it's out standing, really good.

579
00:27:01,160 --> 00:27:01,399
Speaker 2: Love it.

580
00:27:01,760 --> 00:27:04,200
Speaker 10: Did you see it in comparison to an Aspen or

581
00:27:04,560 --> 00:27:07,720
Speaker 10: h way smaller it's smaller, yeah, smaller, but it's it's

582
00:27:08,080 --> 00:27:09,440
Speaker 10: as high quality as those.

583
00:27:09,480 --> 00:27:12,120
Speaker 6: And the downtown is fantastic, you know, so it's great.

584
00:27:12,400 --> 00:27:13,400
Speaker 2: It loved.

585
00:27:13,440 --> 00:27:18,960
Speaker 10: Look. Yeah, Okay, a big day tomorrow, Amazon Prime Day. Okay,

586
00:27:19,000 --> 00:27:21,119
Speaker 10: it's kicking off. You know, four days.

587
00:27:21,560 --> 00:27:23,720
Speaker 6: It's not a day, it's no, it's four days.

588
00:27:23,800 --> 00:27:26,320
Speaker 2: They increase, is it for you can save money?

589
00:27:26,640 --> 00:27:29,160
Speaker 10: You can save money on certain items.

590
00:27:29,400 --> 00:27:30,000
Speaker 6: So that's the thing.

591
00:27:30,040 --> 00:27:32,440
Speaker 10: You have to go and see what are the big deals.

592
00:27:34,040 --> 00:27:36,320
Speaker 10: Bilberg Intelligence says it's going to be a big thing

593
00:27:36,440 --> 00:27:39,119
Speaker 10: for them because they're offering the big discounts. People are

594
00:27:39,200 --> 00:27:41,760
Speaker 10: kind of tired scared about terif related costs, so they

595
00:27:41,840 --> 00:27:43,760
Speaker 10: might be a draw to this. There's a lot of

596
00:27:43,800 --> 00:27:46,280
Speaker 10: AI powered tools that are going to make it easier

597
00:27:46,359 --> 00:27:49,840
Speaker 10: for people to shop. But what Amazon banks on is

598
00:27:50,000 --> 00:27:52,680
Speaker 10: that more people will sign up for their subscription to

599
00:27:52,760 --> 00:27:53,680
Speaker 10: the Amazon.

600
00:27:53,520 --> 00:27:57,040
Speaker 2: Okay, but Costco does this twenty four to seven. What's

601
00:27:57,119 --> 00:28:01,040
Speaker 2: special about this versus what you're living in six at Costco?

602
00:28:01,160 --> 00:28:04,200
Speaker 10: Every These are like deep discounts like these are these

603
00:28:04,240 --> 00:28:07,280
Speaker 10: are bigger than Costco discounts. But I mean you compare

604
00:28:07,359 --> 00:28:09,800
Speaker 10: the Amazon Prime membership that you have to buy in

605
00:28:10,000 --> 00:28:11,159
Speaker 10: order to be a part of this.

606
00:28:11,400 --> 00:28:15,280
Speaker 2: Versus just like Bentonville and pauland that they're the savings

607
00:28:15,320 --> 00:28:18,119
Speaker 2: if you will, is all eaten by the manufacturer, the

608
00:28:18,920 --> 00:28:19,960
Speaker 2: produc exactly.

609
00:28:20,080 --> 00:28:24,080
Speaker 5: I think there's Amazon just putting it this time of

610
00:28:24,080 --> 00:28:25,960
Speaker 5: the year, which is usually a slow time of the year.

611
00:28:26,200 --> 00:28:27,200
Speaker 4: Just juices up sales.

612
00:28:27,359 --> 00:28:29,159
Speaker 10: Yes, and I think just a fast delivery. I mean

613
00:28:29,200 --> 00:28:31,399
Speaker 10: you can get us tomorrow or even the same day.

614
00:28:31,600 --> 00:28:34,360
Speaker 2: Where you guys live, folks, we don't talk when we're

615
00:28:34,400 --> 00:28:36,600
Speaker 2: not in the show. I mean Lisa and she hates me,

616
00:28:36,720 --> 00:28:39,680
Speaker 2: but it's a separate story. Where you live, is Amazon

617
00:28:39,880 --> 00:28:43,360
Speaker 2: just like Ubiquitous? Yes? Where I live, they're everywhere, Yeah,

618
00:28:43,600 --> 00:28:45,320
Speaker 2: every corner four to seven.

619
00:28:45,480 --> 00:28:46,640
Speaker 4: Yep, absolutely everywhere.

620
00:28:46,680 --> 00:28:48,560
Speaker 5: And you go out on an interstate highway and there's

621
00:28:48,640 --> 00:28:51,000
Speaker 5: more Amazon trucks than anything else out there.

622
00:28:53,320 --> 00:28:56,440
Speaker 10: Okay, So a new study saying that sweet and salty

623
00:28:57,040 --> 00:28:59,280
Speaker 10: treats they're being left on the store shelf, so people

624
00:28:59,320 --> 00:29:01,320
Speaker 10: are not having them, like the cookies, the potato chips,

625
00:29:01,360 --> 00:29:05,719
Speaker 10: the chocolate bars. And it's affecting like companies like Pepsi,

626
00:29:05,960 --> 00:29:07,640
Speaker 10: you know, like General Mills.

627
00:29:07,360 --> 00:29:08,040
Speaker 6: All these companies.

628
00:29:08,120 --> 00:29:10,040
Speaker 2: You see a sea changer, I do you know.

629
00:29:10,120 --> 00:29:12,360
Speaker 10: Actually, we had like a big barbecue and you notice

630
00:29:12,360 --> 00:29:15,920
Speaker 10: people going less for the sweets. People also eating less

631
00:29:16,040 --> 00:29:17,240
Speaker 10: because of the GLP ones.

632
00:29:17,480 --> 00:29:18,440
Speaker 6: You know that they're they're on.

633
00:29:18,680 --> 00:29:21,120
Speaker 10: I don't know if it wasn't my cooking my.

634
00:29:21,200 --> 00:29:25,920
Speaker 2: Problem this weekend. You didn't hear that now Nathan's famous,

635
00:29:26,000 --> 00:29:28,160
Speaker 2: did it? It was so nice? George say over there

636
00:29:28,280 --> 00:29:32,680
Speaker 2: mentioned John Farrell and me at the hot dog eating contest.

637
00:29:32,880 --> 00:29:35,000
Speaker 2: Oh gosh, I got up to twenty hot dogs. I

638
00:29:35,040 --> 00:29:35,800
Speaker 2: couldn't go further.

639
00:29:36,760 --> 00:29:41,400
Speaker 6: So Joey guy came back. You won, right, Yes, yes,

640
00:29:41,640 --> 00:29:41,920
Speaker 6: you did?

641
00:29:42,040 --> 00:29:42,560
Speaker 4: Okay, yes?

642
00:29:42,800 --> 00:29:42,920
Speaker 5: One?

643
00:29:43,120 --> 00:29:45,480
Speaker 2: Oh my god. Have you ever had a Nathan's hot dog?

644
00:29:45,560 --> 00:29:47,720
Speaker 10: Lisa, Yes, they're delicious. We had them this weekend.

645
00:29:47,840 --> 00:29:49,160
Speaker 4: She's a Brooklyn of course.

646
00:29:50,160 --> 00:29:52,280
Speaker 2: Okay, we gotta do It's hot dogs.

647
00:29:52,480 --> 00:29:52,640
Speaker 6: I know.

648
00:29:52,880 --> 00:29:56,320
Speaker 2: That's the biggest news of this morning. Lisa Matteo in

649
00:29:56,400 --> 00:29:57,760
Speaker 2: the newspapers.

650
00:29:57,360 --> 00:30:02,120
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,

651
00:30:02,280 --> 00:30:06,560
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

652
00:30:06,720 --> 00:30:10,120
Speaker 1: seven to ten am Eastern on Bloomberg dot Com, the

653
00:30:10,240 --> 00:30:14,240
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You

654
00:30:14,320 --> 00:30:17,640
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655
00:30:17,880 --> 00:30:19,560
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