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Speaker 2: Right now, what we're going to do is get to
Speaker 2: the economic data at Greg Boudele with us here to
Speaker 2: wrap around it on the mathiness and derivative moment. This weekend,
Speaker 2: all financial publications will tell the American public give up
Speaker 2: the upside hedge, taking a higher income when you hedge,
Speaker 2: and you'll be happy. You're the pro at this. Should
Speaker 2: we be doing that? Should we be giving up upside
Speaker 2: potential in bringing in a premium income to goose our
Speaker 2: dividend to goose so sure, buyback.
Speaker 3: That's certainly how we feel about things.
Speaker 2: In the short run.
Speaker 3: We titled I Not Yesterday tariff fatigue. The market is
Speaker 3: starting to look a little bit tired. Some of the
Speaker 3: imbalances in position in which we think drove the extent
Speaker 3: of this rally have started to become worked through a
Speaker 3: little bit, and we think we are in an environment
Speaker 3: where it would be easier for the market to tread water.
Speaker 3: When we look at the options complex, there are places
Speaker 3: where we think it is better to extract premium and
Speaker 3: others where we think it is better to own that optionality.
Speaker 4: So if we think the markets are going to kind
Speaker 4: of tread water a little bit, am I writing options
Speaker 4: these days? Is that what people are doing?
Speaker 5: So?
Speaker 3: I think like one of the kind of oldest option
Speaker 3: strategies out there is the covered core boom owning the
Speaker 3: equity selling some upside against that. What you're basically doing
Speaker 3: is giving up some of the right tail of the
Speaker 3: distribution the short term in exchange for some income.
Speaker 4: See I paid attention in Futures and Options class Cam Harvey. Yeah,
Speaker 4: I paid attention. There are people what do they feel
Speaker 4: like in terms of the risk, Like, if I want
Speaker 4: the I some protection here, is it expensive relative to
Speaker 4: historic levels or where are we?
Speaker 3: So it kind of depends what you're looking at. If
Speaker 3: we're talking broad US indices, then it's way off the highs.
Speaker 3: Things got very expensive post Liberation Day, but we are
Speaker 3: not back to those pre Liberation day levels. You know,
Speaker 3: the equity market is we've been touching distance of all
Speaker 3: time highs, but equity optionality is still a little bit
Speaker 3: more elevated from where it was, particularly on the downside.
Speaker 3: So yeah, if you're just going and buying US index hedges,
Speaker 3: you have to be careful because it's not cheap.
Speaker 2: If you're buying individual stock edges, do you partition it
Speaker 2: between fancy stocks where you could get crushed, taking in
Speaker 2: premium where they take off like Microsoft this month of
Speaker 2: May or and then there's four to eighty three other
Speaker 2: stocks that you really can grab a premium. Is that
Speaker 2: how it works? Yeah?
Speaker 3: I think you have to think about what are the
Speaker 3: risks that you are worried about. What are you trying
Speaker 3: to hedge. Is it more eosyncratic stock specific or are
Speaker 3: we looking for more macro hedges. We've been talking more
Speaker 3: about looking at macro hedges, but going a little bit
Speaker 3: out the term structure, out to say the September expiry
Speaker 3: where we think some of the macro weakness could start
Speaker 3: to manifest a little bit more. I think the smaller midcaps,
Speaker 3: so the Russell IWM is a part of the market
Speaker 3: which I think looks attractive to use to hedge.
Speaker 2: Greg boutle ready for those compliance of BMP Perry, but
Speaker 2: they don't even speak English in New York, it's in French.
Speaker 2: They're even more ergus O mon dieux, Greg Bottle on
Speaker 2: naked short selling.
Speaker 3: Go so, I think that if you want to be
Speaker 3: naked short the market, then you have to be willing
Speaker 3: to accept the risk that comes with it. For us,
Speaker 3: we think there is better risk world profile and putting
Speaker 3: on hedges on the downside owning optionality than there is
Speaker 3: naked short selling.
Speaker 2: That was like road compliance. Yeah, that was really that
Speaker 2: was a plus, say Greg Bodles answered that question before.
Speaker 2: Naked short selling, folks, is not to be tried. Don't
Speaker 2: do this at home. It's really really hazardous. You'll be
Speaker 2: right four or five six times and boom and it
Speaker 2: doesn't work out right. Be careful out there. Let's talk
Speaker 2: to Paul Sweety about option you know, how to not
Speaker 2: lose money in the or the de Jerrians one of
Speaker 2: the two. I'm just going to make it as clear
Speaker 2: as I can. I got economic data with some revisions here.
Speaker 2: I got a sweet PCI year over year of two
Speaker 2: point one percent, signaling some disinflation. I got a revision
Speaker 2: showing personal income is better, and it doesn't care because
Speaker 2: the president just tweeted yep, I mean, basically, there's no
Speaker 2: dynamic with an SMP futurest Greg battle they're negative twenty,
Speaker 2: they come up a little. In defense, they come up
Speaker 2: negative twenty out of negative twenty five up the negative twenty.
Speaker 2: Do we misjudge the American economy? Is that the issue
Speaker 2: for people cautious on the equity market potentially?
Speaker 3: I think the question about the data is when is
Speaker 3: it going to start to matter? At the moment, what
Speaker 3: we see is backward looking data that maybe is starting
Speaker 3: to capture the first impacts of the tariffs. But what
Speaker 3: matters as much more as when we move through June July,
Speaker 3: does the data stay very resilient case that's going to
Speaker 3: create question marks for the bears. I think the consensus
Speaker 3: is that the data will start to soften as we
Speaker 3: moved through the summer. So I think at the moment
Speaker 3: it's very hard to get a positive risk signal or
Speaker 3: more clear from data.
Speaker 2: This is really important to continuing claims breaking out. Yesterday
Speaker 2: Veronica Clark mentioned it's the end of May. We don't
Speaker 2: have a clue except we said that at the end
Speaker 2: of December.
Speaker 4: Lie exactly exactly as well.
Speaker 2: Here we go.
Speaker 4: So given that uncertainty, Greg do you find your clients.
Speaker 4: Are they coming to you and say, I want to
Speaker 4: have more protection around my portfolio than typically or are
Speaker 4: they just saying I can't worry about this stuff.
Speaker 3: I think people are more defensively positioned. We look at
Speaker 3: this through quantitative lens where we aggregate a lot of
Speaker 3: the flows in the equity market, and we've produced this
Speaker 3: composite equity positioning indicator and it scales from zero to
Speaker 3: one hundred, so it's pretty easy to read we are
Speaker 3: euphoric levels at the end of last year almost ninety
Speaker 3: seven hour of one hundred. Things got very washed out
Speaker 3: post liberation, and now we've made our way back into
Speaker 3: this more neutral territory. That indicator sits in the mid forties,
Speaker 3: so points to a market where people are more defensively positioned.
Speaker 3: But we're not as barishes as we were from a
Speaker 3: positioning landscape a month ago.
Speaker 4: Ninety seven reading I kind of remember those days. It
Speaker 4: was like we have in an administration that's going to
Speaker 4: be pro growth, you know, less regulatory and boy times
Speaker 4: have changed.
Speaker 3: Six months ago, but it feels like a lot longer
Speaker 3: than it does it does.
Speaker 4: What's kind of the smart trade you've somebody's come up
Speaker 4: to you with recently when your clients are called gym
Speaker 4: say hey, we like to do this, and you're like, really.
Speaker 3: I think the things that people have been doing have
Speaker 3: been more nuanced. As we were discussing earlier, it is
Speaker 3: looking at ways to fun trade. So if you're looking
Speaker 3: at the optionality complex and like, I do you think
Speaker 3: maybe there's value in owning some of that September optionality
Speaker 3: where the data starts to matter a little bit more
Speaker 3: through the summer. It's looking at smart ways to try
Speaker 3: and finance that. So you know, one of the things
Speaker 3: that we were talking about in our tariffy yesterday was
Speaker 3: how to fund those hedges. So we think looking at
Speaker 3: things like cover calls and things like the energy space
Speaker 3: is probably probably an interesting way.
Speaker 4: So what's a covered call in the energy space?
Speaker 2: Like that?
Speaker 3: So a cover call is simply if you are long
Speaker 3: the stock and you are selling optionality against that such
Speaker 3: that you are not nakedly short that option. And in
Speaker 3: terms of the energy space, that could be one of
Speaker 3: the energy ETFs such as Yahoo or some of the
Speaker 3: some of the large energy stocks. It's a very benign strategy,
Speaker 3: but a way to eke out a little bit of
Speaker 3: yield that we think you can spend on hedges.
Speaker 2: We got a great set of people. Robert from uh
Speaker 2: I think it's it's up and it's colder than Union College.
Speaker 2: He was upset at our Union College discussion of D
Speaker 2: one hockey with Pat Haskell Blackrock. Robert comes in and
Speaker 2: says Hamilton College is destined D one hockey. He notes
Speaker 2: Paul the complete return of the trade deficit. It is
Speaker 2: a spring back from a negative one six zero, stunning
Speaker 2: back to negative nine zero. That's not I wonder if
Speaker 2: the President will bring that up at the press conference today.
Speaker 2: Our policies are working. We're getting rid of the trade deficence.
Speaker 4: Awesome, that would be the promise than with Italy with
Speaker 4: the purchase.
Speaker 2: Wait a couple of weeks. If you're gonna have a
Speaker 2: trade deficit, you're gonna be on the Spanish steps and
Speaker 2: you looked out that's that. You look down that street,
Speaker 2: a gauntlet of stores. It's it's it's Lisa, what's it
Speaker 2: called its avenue tradio deficit? You o something like that? Greg,
Speaker 2: thank you for coming in, Thank you for the explanation
Speaker 2: there and getting through the compliance moment un naked naked
Speaker 2: you know you nailed it, Greg Botle, don't be a stranger.
Speaker 2: Thank you. With b MP Perry by just wonderful through
Speaker 2: some of the sous on VMP Perry BA has had
Speaker 2: a really really excellent, uh excellent moment there, I should
Speaker 2: say as well, again when we set this up and
Speaker 2: Eric did a great job with the interns, we wanted
Speaker 2: a broader view. Even Devid can give that to us
Speaker 2: right now. She has been wonderful, particularly with a transatlantic view.
Speaker 2: All of that important into the President's press conference today.
Speaker 2: Ifan Devid joins us from Manetta. If and what are
Speaker 2: you writing into the month of June.
Speaker 6: Excellent question.
Speaker 7: I think we're going to see a continuation of this
Speaker 7: type of volatility. We're obviously going to see getting close
Speaker 7: to drop dead dates and some of these tariffree negotiations.
Speaker 7: We'll see how the negotiations actually play out. We're going
Speaker 7: to see more and more clarity in terms of the
Speaker 7: actual impact of tariffs on prices. We've only seen really
Speaker 7: sporadic clarity up to now, and we're probably going to
Speaker 7: see more resolution in terms of the legality of these tariffs.
Speaker 7: We're going to this day now that's been placed on
Speaker 7: the Court of Trade decision. There should be an appeal
Speaker 7: and we should see the outcome of that. So lots
Speaker 7: going on. It's not going to be is silly in
Speaker 7: the quiet summer.
Speaker 2: Are Europeans returning to American investment, leaving American investment? Are
Speaker 2: they waiting for Paul's arrival in Rome? Which is it?
Speaker 7: I'd say at this point there is not a net
Speaker 7: increase in US investment. There has been an overweight to
Speaker 7: the US for the most part. It has played out
Speaker 7: very well. The strong dollar has worked very well for them.
Speaker 7: Right now it seems that the US investment story is
Speaker 7: losing a little bit of its charm, its cachet. The
Speaker 7: weaker dollar is the course affecting that. And then we're
Speaker 7: hearing just about this anti perhaps foreign student movement, the
Speaker 7: lack of travel into the US, perhaps the sense that
Speaker 7: there might be a revenge that was a headline today.
Speaker 7: So all that all adds to the uncertainty. And I
Speaker 7: would say, now there is often taking and timing back.
Speaker 2: I mean, Paul, think about it ending to give in
Speaker 2: school where kids are like I got to get up
Speaker 2: and go to thermodynamics, and I got to put up
Speaker 2: with all this protest and angst and passports and all that.
Speaker 2: Why don't I just go to Trinity College Dublin. I mean,
Speaker 2: you know, Boom, you're there.
Speaker 4: I'd be right there. They would love me there. Even
Speaker 4: where do we go here? I mean, Tom's been long
Speaker 4: bitcoin and just laughing all the way to the bank.
Speaker 4: But how about for the rest of us? How much
Speaker 4: risk are your clients feel like they need to take
Speaker 4: these days? Or it's just too much noise out there?
Speaker 6: It's an excellent question.
Speaker 7: There definitely is not sort of satisfaction with sitting in
Speaker 7: cash right now. We know that cash is not a drag,
Speaker 7: but there's still that that four between four and five percent,
Speaker 7: it's still not great. After inflation, there's a real sense
Speaker 7: that inflation is going to be with us for a
Speaker 7: very long time and that we will have to invest
Speaker 7: in growth assets. So where are clients comfortable taking risk.
Speaker 7: They're still quite comfortable in the equity markets, and that's
Speaker 7: a good thing because that will have to be their
Speaker 7: engine of growth for some time. They're increasingly more comfortable
Speaker 7: in the private segments, private equity, private credit. They're not
Speaker 7: as comfortable in real estate as before. Perhaps there is
Speaker 7: a little bit of muscle memory or even trauma around
Speaker 7: previous downturns and something like infrastructure or income generating.
Speaker 6: That's really something for the institutions.
Speaker 7: It's not something I see a ton of interest among
Speaker 7: private wealth clients in Interesting would on Frenday College seven
Speaker 7: Trendy College, telln is an excellent place to visit.
Speaker 2: Ephan Devin, stay with us, please Interesting Friday Morning across
Speaker 2: a nation. Good morning from the early morning Left Coast
Speaker 2: out there and Android Auto Apple car play Major. Good
Speaker 2: morning to Sirius XM Channel one twenty one, huge distribution
Speaker 2: for US ninety nine one FM in Washington, ninety two
Speaker 2: nine FM in Boston, and Bloomberg eleventh three to zero
Speaker 2: in New York. We say good morning on YouTube building
Speaker 2: every month. Paul and I just dumbfounded by the success
Speaker 2: of Bloomberg podcast. Thank you so much for your attention there,
Speaker 2: particularly your global attention. The evening of the Pacific at RIM,
Speaker 2: futures are negative twenty five off the President's tweet. They
Speaker 2: come up a little bit off buoyant personal income spending
Speaker 2: quite essent inflation at the margin. Futures go negative twenty
Speaker 2: five up the negative twenty.
Speaker 4: If and you mentioned private equity, private credit I'm surprised
Speaker 4: that at the level of exposure that a lot of
Speaker 4: family offices and their clients have to alternative investments. What
Speaker 4: do you think is a reasonable allocation because there's so
Speaker 4: many opportunities now, hedge funds, private equity, now private credit
Speaker 4: has become such a big market opportunity. What's your expertise, I'd.
Speaker 7: Say, depending of course on the size of that family office.
Speaker 7: But we're seeing anything from fifteen to thirty percent in
Speaker 7: alternative assets. Certainly would lower be lower at the dipping
Speaker 7: the toe in the water stage, and you have five
Speaker 7: percent ten percent, I'd say less than five percent, it's
Speaker 7: not really worth the extra work and due diligence involved
Speaker 7: and this sacrifice sub liquidity. It's important to really understand
Speaker 7: the segment all about relationships. You're in there for the
Speaker 7: long haul, and I have to be a meaningful allocation.
Speaker 7: But between five and fifteen absolutely normal, and if you
Speaker 7: really have high conviction going higher.
Speaker 4: And that again, if we saw a movement of capital
Speaker 4: investment capital out of the US earlier this year, when
Speaker 4: the uncertainty was maybe at its peak around tariffs and
Speaker 4: economic impacts, was that just a short term trade or
Speaker 4: as you talk to your clients, do they feel less
Speaker 4: likely or less confident investing in the US markets?
Speaker 7: Yeah, definitely, there is I'd say a wariness around having
Speaker 7: too much in the US right now, and our clients
Speaker 7: have always had global exposure, and that global piece was
Speaker 7: a little difficult to defend recently, especially in the last
Speaker 7: over fifteen years under performance that is definitely by definition
Speaker 7: difficult to defend and with a strong dollar two. Now
Speaker 7: that some of those movements have reversed, our clients are
Speaker 7: taking are quite confident now in their non US holdings,
Speaker 7: and I would say that the non US story it
Speaker 7: tends to get crowded out a lot by some of
Speaker 7: the flooding of the zone that occurs in the US,
Speaker 7: and that the Trump administration the US developments are on
Speaker 7: everyone's lips no matter where you are, particularly in Europe.
Speaker 7: But behind US and Europe there is by stealth. I
Speaker 7: would call it a steady growth of investment in the sector,
Speaker 7: in the industrial complex, really coming back from rock bottom
Speaker 7: in terms of confidence.
Speaker 6: And just innovation and a lot more focus of that.
Speaker 7: I think we have to start looking beyond some of
Speaker 7: the noise in the US.
Speaker 2: Ivan Devid, thank you so much for the brief from
Speaker 2: Minetta this morning. Here in a Friday where we set
Speaker 2: up conversations to get you into the month of June
Speaker 2: features negative twenty five lift to negative nineteen, the Vics
Speaker 2: nineteen zero point five to one dead tape two hours ago.
Speaker 2: The President with a tweet makes it more sprightly here
Speaker 2: with angst about China, Paul, you gotta believe China responds
Speaker 2: in some way towards the Asia Monday opening of seven PMSH.
Speaker 4: Yeah, you know, I'm not really sure what the president's
Speaker 4: referencing in his tweet here as it relates to discussions
Speaker 4: with China, but obviously he doesn't like what he sees
Speaker 4: and maybe hears from China. But it just kind of
Speaker 4: brings back into the discussion and a little bit of
Speaker 4: heightened trade uncertainty, which seems to be the background.
Speaker 2: I'm going to go by to the Peterson Institute and
Speaker 2: the iconic work of William Klein here the idea of
Speaker 2: bilateral or unilateral discussions. It's a multilateral world joining us
Speaker 2: right now on the short term bond market where he
Speaker 2: is world acclaimed. Ira Jersey just off testimony to I
Speaker 2: believe the House of Representatives joins us this morning, driving
Speaker 2: all a fixed income at Bloomberg Intelligence. I rate just
Speaker 2: simple into June. Is you and your team right, do
Speaker 2: you have like a theme or are you as confused
Speaker 2: as everyone else? Yeah?
Speaker 8: Well I think the theme is confusion. Uh, And you
Speaker 8: know certainly that we're going to continue to probably have
Speaker 8: these headlines right like we're trying to and the market
Speaker 8: is trying to find where the endgame is likely to
Speaker 8: be in terms of all of these policy actions that
Speaker 8: the president's doing. And of course, when you have court
Speaker 8: decisions that seem to you know, are going to might
Speaker 8: force the president to backtrack, and some of these tariffs
Speaker 8: unwined because there's an overreach of executive orders, that again
Speaker 8: puts another layer of confusion into things. So I think
Speaker 8: what that means is that you're not necessarily going to
Speaker 8: see a whole lot of directional moves in the rates
Speaker 8: market in particular, right, So the treasury market will probably
Speaker 8: just be kind of range bound, but you're going to
Speaker 8: see a lot of volatility within that range, and that
Speaker 8: that's certainly what you've seen the last two months.
Speaker 4: We got some inflation data today core pc E n
Speaker 4: X a month to month zero point one percent on
Speaker 4: an annualized basis two point five percent. That's right in
Speaker 4: line with expectations. It doesn't seem like some of these
Speaker 4: tariffs are impacting inflation yet. I guess, how's your market
Speaker 4: kind of digesting this?
Speaker 8: Yeah, So certainly that the yet is what matters in
Speaker 8: that sentence there, Paul, because if you look at the
Speaker 8: durable goods, like if within the PC data you can
Speaker 8: break out durable goods and non durable goods, which are
Speaker 8: things like consumables and the like, and then services. What
Speaker 8: you saw is it was actually a decline in prices
Speaker 8: for both of those goods sectors, but a three point
Speaker 8: three percent increase in prices month on month for for
Speaker 8: the services sector. So you still have services driving inflation
Speaker 8: at the moment. And the continued fear is that with
Speaker 8: a significantly lower amount of imports coming in that eventually
Speaker 8: that's going to go through prices. So as inventories are
Speaker 8: drawn down, you're going to see, you know, new prices
Speaker 8: for what the imported goods were. So look at the
Speaker 8: trade number. You know, I haven't heard you in the
Speaker 8: last couple of minutes anyway talk about the trade data.
Speaker 8: But twenty percent draw down a twenty percent decline in
Speaker 8: imports is pretty significant, right, and you know that this
Speaker 8: is only for one month, and the first month where
Speaker 8: tariffs were imposed. It might be even worse as we
Speaker 8: get the May data, right, and so when we end
Speaker 8: up getting higher prices than in the future. For that
Speaker 8: the rates market, though, you know, you look at inflation
Speaker 8: break evens right now, they haven't moved very much, right
Speaker 8: tenure inflation break evens two point three three percent. Even
Speaker 8: though you might have an uptakeing inflation briefly, the market
Speaker 8: certainly doesn't think it's going to be very sticky.
Speaker 2: Well, thanks to Bob a professor up at Hamilton College
Speaker 2: for that mentioned in the trade deficit really came back
Speaker 2: as mister Jersey mentions the interest rates as well. Ira Jersey,
Speaker 2: did you buy we're talking UNI bonds earlier? Did you
Speaker 2: take a position in the two hundred million dollars of
Speaker 2: Georgia's Fayette County Development Authority bonds to build the new
Speaker 2: headquarters for the US Soccer Federation.
Speaker 8: So I did not, but I am very excited to
Speaker 8: have a home for US Soccer that's in a single location.
Speaker 8: I think Atlanta was an interesting place because we do
Speaker 8: have a lot of players going over to Europe, so
Speaker 8: easier to have something in the East Coast than in
Speaker 8: the Central or West Coast time zones for a lot
Speaker 8: of those players when they come back to play for
Speaker 8: their national teams.
Speaker 2: IRA one final question sliding into June July fifth. It's
Speaker 2: called the sold out Stadium. I mean it's every content there,
Speaker 2: I mean, lamars sold out. Are you going to go
Speaker 2: to Back to Beginning? I mean, this is like a
Speaker 2: huge deal for the United Kingdom. This is like a
Speaker 2: massive fund raise. Are you going to be there?
Speaker 8: Ira, So I I I plan on it. Yeah, I'm
Speaker 8: going to take it. We're in the middle of our
Speaker 8: semi pro Socra season that we're in right now, but
Speaker 8: I'm going to take that that long weekend off to
Speaker 8: the jet set over there and uh and go watch
Speaker 8: some Black Sabbath and uh and a few other for Pinterra.
Speaker 2: Sure, Okay, there you go, Lisa, there's your road trip.
Speaker 2: You know.
Speaker 4: So I just never got into metal.
Speaker 2: It's up North. It's up North. Okay, it's the Land
Speaker 2: of Metal. Okay, Yeah, it's it's a huge deal. It's
Speaker 2: called Back to the Beginning Villa Park, Ira, Jersey, be
Speaker 2: there and this is in support of huge causes for Birmingham,
Speaker 2: including the Birmingham Children's Hospital and the Acorn Children's Hospice,
Speaker 2: as well serious stuff by Black Sabbath and all the
Speaker 2: metal heads up there. Futures going negative twenty five to
Speaker 2: negative seventeen. It's well the next.
Speaker 4: Nineteen point high a Jersey metalhead, I never would have
Speaker 4: picked that.
Speaker 2: We you know, that's what happens when you read Fobosi.
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Speaker 2: Seema shop chief Global strategiest of principles. She has been
Speaker 2: wonderful about a persistent view on the market. Seema. Do
Speaker 2: you have to rewrite your view this weekend or is
Speaker 2: it even possible?
Speaker 9: Hi?
Speaker 6: Tom No, I think look yesterday's news, it didn't change
Speaker 6: anything for us, the tariff story. This is absolutely not
Speaker 6: the end of the road. I don't think President Trump
Speaker 6: would permit it to be the end of the road.
Speaker 6: So I think it's been really important for inverses, for
Speaker 6: everyone to really try and look away from some of
Speaker 6: that noise, some of it is meaningful, some of that
Speaker 6: is going to be sustained. Per Certainly, the news from
Speaker 6: this week is not something that is changing our views.
Speaker 2: You just metten out with a note she's up at
Speaker 2: three am this morning. You see that she's so productive
Speaker 2: all night. Right, Seema shot SMB five hundred, up six
Speaker 2: point two percent. If we close out the month and
Speaker 2: this huge advance, what do people do who didn't participate,
Speaker 2: What do you do with cash? With an equity outlook
Speaker 2: right now?
Speaker 6: Yes, we have still a slightly positive view for the
Speaker 6: rest of the year. The reason is is that we're
Speaker 6: not anticipating recession. And so even if you just have
Speaker 6: slightly modest positive growth, so expecting one and a half
Speaker 6: percent growth for this year, that is still a scenario
Speaker 6: where you can get positive earnings growth. And if you've
Speaker 6: got postive earnings growth, you should see the equity market
Speaker 6: still get positive returns. The thing is it's not going
Speaker 6: to be They're not going to be significant positive gains,
Speaker 6: nothing like what we've seen in previous years. And it's
Speaker 6: important for investors remember there will be a ton of noise.
Speaker 6: We're expecting volatility to stay fairly high over the coming months,
Speaker 6: and so it's going to be important that if you
Speaker 6: aren't invested, to get invested, but also once you're invested,
Speaker 6: stop looking at every single headline because that could be very,
Speaker 6: very disruptive.
Speaker 4: So siman, just looking back on year to date, I
Speaker 4: mean it's been a glass half full, glass half empty.
Speaker 4: I mean we had that twenty percent sell off in
Speaker 4: the marketplace, but then we've retraced most of that coming
Speaker 4: back higher. What are the markers that you're looking at
Speaker 4: the to really give you a sense of how this
Speaker 4: market might perform for the rest of the year. What
Speaker 4: should we be focusing on.
Speaker 6: Yeah, this is a really important question. So when we're
Speaker 6: talking about the horizons, we're seeing that there is a
Speaker 6: bit of a difference coming through. So over a three
Speaker 6: month horizon, there is a lot of concerns. We do
Speaker 6: think there are a number of potholes that are coming
Speaker 6: that you could start to see a couple of market
Speaker 6: pullbacks come through. If you're looking at a twelve month horizon,
Speaker 6: it's a slightly more positive outlook where we do see
Speaker 6: those positive returns coming through. So within the next three months,
Speaker 6: the things that we can be looking at for is
Speaker 6: of course can be the economic data. At the moment,
Speaker 6: the market has been I think inspired by the fact
Speaker 6: that the hard data has remained really strong. It will
Speaker 6: likely slow down in Q three, So that's potential pothole.
Speaker 6: And the other thing is of course going to be inflation.
Speaker 6: We're anticipate painting a spike in inflation again in Q three,
Speaker 6: and I think at that point there'll be some discussions
Speaker 6: around the FED is going to do, and that's where
Speaker 6: you start to see a few potential disturbances to the market.
Speaker 2: The heart of the matter, and Seema we're hearing is
Speaker 2: from a lot of people, is if we get this
Speaker 2: redo and inflation PC today folks on a Friday, a
Speaker 2: lot of economic data for you at eight thirty and
Speaker 2: at ten o'clock as well. But Seema, if we get it,
Speaker 2: then we get a nominal GDP pop. Do you just
Speaker 2: pull that indu sustained earning surprises to the upside?
Speaker 6: I mean, I think so. I mean, I think to
Speaker 6: some extent there was so much negativity about a month ago,
Speaker 6: so there's still some upgrades to go in terms of
Speaker 6: where I think a lot of people are pricing in
Speaker 6: for earnings and you know, inflation, it can be positive,
Speaker 6: of course you talk about the normal growth side, but
Speaker 6: it can have it's certainly its negative impact in terms
Speaker 6: of margins. So when we're thinking about earnings, when we're
Speaker 6: thinking about forward guidance, that's really the key thing that
Speaker 6: we're looking at is how much pricing power do these
Speaker 6: companies have. Are they able to pass on those price
Speaker 6: increases or are they having to absorb themselves? And that,
Speaker 6: to me, I think is one of the key things
Speaker 6: that we're going to be looking out for over the
Speaker 6: coming months and quarters.
Speaker 4: Sima, we just kind of got through earning share we had.
Speaker 4: We've kind of finished up the earning season on a
Speaker 4: pretty high note with Nvidia giving some some good numbers
Speaker 4: out But still I think there are concerns out there
Speaker 4: in the marketplace that earnings estimates out there is still
Speaker 4: maybe too high. How do you think about the earning
Speaker 4: story out there?
Speaker 6: Well, I think it's also worth keeping in mind that
Speaker 6: on a general annual basis, you do see this continuous
Speaker 6: down grade to earning forecast as the year progresses. This
Speaker 6: is going to be no different for this year. The
Speaker 6: question is, are even from that perspective, are earning still
Speaker 6: a little bit too optimistic? Given if you kind of
Speaker 6: think through the agrads that are likely in a normal
Speaker 6: seasonal fashion, I think there is still some negativity to come,
Speaker 6: but I don't want to exaggerate that.
Speaker 2: Then.
Speaker 6: I think it's going to be really important that you
Speaker 6: think about in terms of which are the pockets, which
Speaker 6: are the sectors which are going to be most exposed,
Speaker 6: because there will be our areas of opportunity. I mean,
Speaker 6: the ones that we like from sectoral perspective are going
Speaker 6: to be the financials. We're going to like utilities, and
Speaker 6: we like energy. So there's still a lot of good
Speaker 6: news from a deregulation perspective. It's just that maybe in
Speaker 6: the near term there could be some disappointment which can
Speaker 6: then ideally be reversed as you get through to the
Speaker 6: second half of the year.
Speaker 2: Journalist this morning, Sea Michelle. We do continue with her
Speaker 2: with principal asset manager, who welcome all of you to
Speaker 2: cross the nation and your commute. I was run again
Speaker 2: had a driver, you staid the Bentley was in the garage?
Speaker 2: Ye serious? Xam is normous? Is It's like like, cy
Speaker 2: help me out in the control rooms? I wake up.
Speaker 2: I know you're up with the Nick slate. Serious Exam
Speaker 2: is a big deal. It's a big deal. It's like
Speaker 2: very general, enormous Channel one Good Mornings, I Serious Exam
Speaker 2: for June. That's going to be my focus here in
Speaker 2: our wonderful distribution. You mentioned we're on Bloomberg Originals. Yeah. Absolutely,
Speaker 2: this is TV like Roku.
Speaker 4: If you got like a Samsung Smart, the Smart TV's
Speaker 4: time where you don't even need cable or anything like that.
Speaker 2: They just got the soft and watches in the United Kingdom.
Speaker 4: You just search Bloomberg original look at that.
Speaker 2: It's amazing on YouTube. Good morning. Subscribe to Bloomberg Podcasts,
Speaker 2: curring each and every day. Really excited. Can we do
Speaker 2: a shout out Tracy and Joe. Sure, they're killing it
Speaker 2: on outline. They're really helping out Bloomberg Podcasts. Thank you
Speaker 2: to odd Lots for all your support. There. Seema show
Speaker 2: with us with futures at negative three.
Speaker 4: In the fixed income market here, I look at it
Speaker 4: to your treasury, I'm getting close to four percent here.
Speaker 4: That's a that's not a bad way to make a
Speaker 4: lit there. Do I take credit risk on top of that?
Speaker 4: How do you guys think about that?
Speaker 8: Yeah?
Speaker 6: I think you can take a bit of credit risk. Erny.
Speaker 6: As long as we're not anticipating recession, then defaults they're
Speaker 6: going to rise likely, but they're not going to spike.
Speaker 6: We would be focused a bit more on the high
Speaker 6: quality part of the market because we are expecting an
Speaker 6: economic slowdown. And if you're looking across the treasury curve,
Speaker 6: like where do you want to be focused, it's probably
Speaker 6: in the short duration side.
Speaker 5: You know.
Speaker 6: Thelongside is where you're continuing to see and I don't
Speaker 6: think it's going to disappear. Some of those fiscal concerns
Speaker 6: continuing to come through, and we think that's going to
Speaker 6: be a persistent narrative. So for us, it's that short
Speaker 6: duration and the high quality segments that we're most interested
Speaker 6: in from a credit and from a treasury curve perspective.
Speaker 2: Seman, what does big tech look like from London? I mean,
Speaker 2: I think it's just like this American thing. We're all
Speaker 2: mental about Apple and Paul and I drive by the
Speaker 2: Apple store at Central Park, South Central Park, and yeah,
Speaker 2: Central Park and Fifth Avenue every day. But Sima, what
Speaker 2: does mag seven look like from London? You've got a
Speaker 2: nice distance to it.
Speaker 6: I think we're just as obsessed with it as the
Speaker 6: US is when you're you know, when we're talking to
Speaker 6: investors in the UK, it's the same kind of questions.
Speaker 6: They're obsessed with the big tech trade. They want to
Speaker 6: know which is going to persist or is it something
Speaker 6: which has maybe run its course. But if you're looking
Speaker 6: at it again O for a longer term perspective, you
Speaker 6: don't see that investors are losing much interest. They're just
Speaker 6: looking for what is a buying opportunity? When can we
Speaker 6: really buy the dip if there is going to be another.
Speaker 2: Dip so sima.
Speaker 4: Earlier in this year, when we had the you know,
Speaker 4: maybe the peak volatility in the US markets around the terrace,
Speaker 4: we still have a pronounced shift of capital out of
Speaker 4: the US to other parts of the world, most notably
Speaker 4: European equity markets. Is that still the trade here? Do
Speaker 4: people feel like Europe is a good place to move
Speaker 4: money visa the the US?
Speaker 6: Well, I think that trade has lost a bit of
Speaker 6: it shine in the last couple of weeks. What we're
Speaker 6: seeing is that investors really questioning. They know that there
Speaker 6: is maybe a potential upside, but they almost at the
Speaker 6: point where they're saying, show us some money when is
Speaker 6: Europe really going to start to outperform on is it
Speaker 6: really going to start talking about deregulation? And only at
Speaker 6: that point can they start to think about the increase
Speaker 6: in potential growth rate for Europe. So it is a discussion.
Speaker 6: It's certing more a different discussion than it was in
Speaker 6: prior years. But I think in the last couple of
Speaker 6: weeks you are studying to get to that point where
Speaker 6: investors are becoming a little bit more skeptic and they
Speaker 6: want to see that Europe is realistically going to come
Speaker 6: through on some of the plans that people have been
Speaker 6: talking about.
Speaker 2: To me, the great divide of may Sey Mischa has
Speaker 2: been the mood of retail in America versus institutional Wall Street.
Speaker 2: Do you see the same thing in the city.
Speaker 6: Yeah, I think so. In a way, it's been interesting
Speaker 6: because the retail money is the money that's been really smart.
Speaker 6: They stayed invested through the last couple of months. They
Speaker 6: didn't come out of their trades when things got a
Speaker 6: little bit rocky. So I think there is a divide
Speaker 6: in the behavior. And certainly if you know for institutions
Speaker 6: that they're trying to get back into the market if
Speaker 6: they did exit it was retail to State Investige.
Speaker 2: Seema Nixer Pacers.
Speaker 6: I'm going to say, Nick, look at.
Speaker 2: That right on top of it. Thank you, Semashawe really appreciated.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business App. You can also listen
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Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: We really wanted the tax of brain folks. You went
Speaker 2: through the rolodex and said, okay, who can spouse connected
Speaker 2: the Pat Askell joins us right now. Municipal bonds. We
Speaker 2: really Paul's been on fire about this, taking advantage of
Speaker 2: tax free bonds right now. Our airport bought you your
Speaker 2: union college. It's connected the years ago before a lot
Speaker 2: of years, a few years ago before. Help me here
Speaker 2: with airport. It's is there an opportunity with all the
Speaker 2: gloom about airports aviation, our municipal bonds of LaGuardia or
Speaker 2: o hair A vailue. Now, yes, we like the airport sector.
Speaker 10: You know, the financials, the planes are full, the off
Speaker 10: the off putty contracts like the there's a lot of
Speaker 10: opportunity there. I mean, you look at LaGuardia, it's a
Speaker 10: beautiful project. Now that it's done, JFK is going through
Speaker 10: the construction. You know, other airports in the country are
Speaker 10: going to continue to uh to be the opportunities for us.
Speaker 2: Can a little guy buy those bonds? Can I go
Speaker 2: out and say, hey, the uber pick up at LaGuardia
Speaker 2: was actually pretty good. I want to buy ten thousand
Speaker 2: dollars at Laguardian. Yeah you can do that. Yeah, sure
Speaker 2: you can.
Speaker 10: You can definitely do It's easier to do it during
Speaker 10: the new issue process because the bonds tend to get
Speaker 10: put away, but sure, mom, pop can still buy me
Speaker 10: any bonds. It's it's easier, you know, to to buy
Speaker 10: manage products on those kind of denominations. But certainly you
Speaker 10: can do it.
Speaker 4: Pat the minisial bombs just going at the the on
Speaker 4: the Bloomberg I end go function, Bloomberg index browser underperforming
Speaker 4: the US agg pretty substantially this year.
Speaker 10: Underperforming this year, outperforming in the last month, so you know,
Speaker 10: pretty good relative value coming into April when we had
Speaker 10: VAUL kick up in the beginning of April based on
Speaker 10: due to the post Liberation Day market moves, communis underperformed
Speaker 10: since then have done very well. And I think there's
Speaker 10: really three things. The relative value that you pointed out
Speaker 10: to other fixing a masset classes the technicals. We're going
Speaker 10: into a positive technical as we go into the summer,
Speaker 10: as supply as supply wanes, and some of the policy
Speaker 10: concerns we had out there as we have the tax
Speaker 10: bill was first come out of committee in Congress. Looks
Speaker 10: like unions are relatively unscathed.
Speaker 4: That's the key point, because that was a I guess
Speaker 4: it's always a point. I guess what I've learned from
Speaker 4: new municipal guys is every administration comes in, you always
Speaker 4: have the risk that the tax deductibility of municipal bonds
Speaker 4: may be reduced or eliminated. And that's true in this administration, but.
Speaker 10: True in the Obama administration. True and Trump one point oh,
Speaker 10: true and Trump two point oh. That at least it
Speaker 10: gets discussed, and I think at the end of the
Speaker 10: day we get back to the same thing at all times.
Speaker 10: There's very few things that pull well on both sides
Speaker 10: of the aisle in our country. One of them's infrastructure.
Speaker 10: This is the market that we build most of our
Speaker 10: infrastructure in our country, and the exemption to keep the
Speaker 10: borrowing costs or state local governments stays in place to
Speaker 10: keep that borrowing cost lower.
Speaker 2: Why would anyone call, by full faith in credit taxable
Speaker 2: over a certain income level. I just don't get it.
Speaker 2: I mean, the yield pickup inural state, I mean a
Speaker 2: black crop is there's no debate. No, the yield pickup
Speaker 2: is stunning.
Speaker 10: The when you think about investment grade municipals on a
Speaker 10: tax equivalent yield basis behind six percent and a high
Speaker 10: yield municipal basis behind nine percent.
Speaker 2: It's they offer incredible value.
Speaker 10: I mean, this is the first time we think about
Speaker 10: it since pre financial crisis. Will we be able to
Speaker 10: get this level of yields embedded in portfolios with the
Speaker 10: exception of a few times of crisis you go back
Speaker 10: to seven?
Speaker 4: Yeah, what's the credit outlook out there for municipalities? Because
Speaker 4: I know during the coming out of the during the pandemic,
Speaker 4: I thought, oh my goodness, we're going to have the
Speaker 4: first left and right. But there's so much liquidity pumped
Speaker 4: in by the government that that did not happen.
Speaker 10: The rough numbers are you know, state and local governments
Speaker 10: came out of the pandemic short about one hundred and
Speaker 10: forty billion through a variety of federal programs to airports, universities,
Speaker 10: and local governments. The feds gave the muni sector about
Speaker 10: three hundred billion, so that we really came out of
Speaker 10: the pandemic in very good stead and that continues to
Speaker 10: be the case. I mean, you know some of the
Speaker 10: noise you have around universities right now, on some of
Speaker 10: these flagship universities, even if they were downgraded, they're triple
Speaker 10: A to double A, right, you know they're going to
Speaker 10: have instead of seven times coverage, they're gonna have four
Speaker 10: point seven times coverage, right. And I think we'd all
Speaker 10: agree on most of the universities that are in the press,
Speaker 10: the demand from a student perspective pretty and elastic.
Speaker 2: I'm looking at the black Rock, New York State municipal
Speaker 2: buying front. It's had a really rocky one year two
Speaker 2: year in twenty twenty, it was like world class performing
Speaker 2: ninety fifth percentile? Is that how your world roles where
Speaker 2: there's a challenge in a churn and you know you
Speaker 2: make your coupon and reinvest it or whatever, and then
Speaker 2: there's one big year where you really get the total return.
Speaker 10: Now, I actually think most people buy our products for income.
Speaker 2: I would take it the other way. They take the coupon.
Speaker 10: Yeah, where they want, they want the coupon. I mean,
Speaker 10: you know, in general terms, I always say, when the
Speaker 10: fixed in fixed income is larger, it's more attractive, it
Speaker 10: makes better.
Speaker 2: Ballast in the portfolio.
Speaker 10: So we we don't try to hit home runs in
Speaker 10: terms of total return in any one given year.
Speaker 4: What's total what's the new issue market look like, what's
Speaker 4: the calendar look like?
Speaker 10: It's it's busy that you were going to have another
Speaker 10: Last year was a record year. Last year is a
Speaker 10: record year. This year it could be like, Yeah, last
Speaker 10: year was north of five hundred billion. It looks like
Speaker 10: we're going to come in around five and a quarter
Speaker 10: to five thirty this year. That's what it's looking like
Speaker 10: right now. And it's it's it's being absorbed in a
Speaker 10: better orderly fashioned again, with the exception of the two
Speaker 10: weeks you know, kind of following Liberation Day, where markets
Speaker 10: all over the globe war we're in fuegos so, but
Speaker 10: it's been relatively well received.
Speaker 2: So to get back to airlines. Say Atlanta Hartsfield, they're
Speaker 2: doing a big building project, it's empty million. Do they
Speaker 2: make four phone calls to Blackrock Fidelity in the rest or?
Speaker 2: Is it distributed like the old days? It's it's distributed,
Speaker 2: you know.
Speaker 10: Look, it's the retail or period is not as dominant
Speaker 10: as it was in the in the old days that
Speaker 10: we're going to go back kind of seventies and eighties. However,
Speaker 10: there still is a retail or period, and it's you know,
Speaker 10: an issue like Hartfield, for example, that'd be out there
Speaker 10: and you know they would be doing a rango for
Speaker 10: two or three weeks and they'd have one hundred investors
Speaker 10: in the book.
Speaker 2: You're committed to one of the great schools in America.
Speaker 2: Full disclosure, My uncle was a professor there years ago.
Speaker 2: Union College Connected in New York. It's rated top forty
Speaker 2: schools in the nation for value as well.
Speaker 1: There.
Speaker 2: Yeah, it's the new engineering. It's such our ci. It's
Speaker 2: a one after thoughts. Friends got into RPI and you
Speaker 2: know it's great. How'd the admission season go? You guys
Speaker 2: prospering in all this education turmoil, you.
Speaker 10: Know, it looks small, smaller Upstate universities are. You know,
Speaker 10: in New England, universities are are an intense competition for students.
Speaker 10: Union is doing well, but it's just like all its counterparts,
Speaker 10: you know, the you know, you bring up R P I,
Speaker 10: R I T a lot of the schools that we
Speaker 10: know about their excellent institutions. But because there's that demographic
Speaker 10: waste they're going through right now where there's a few
Speaker 10: less students out there, there's a lot of competition that
Speaker 10: they and they don't have, you know, the really really
Speaker 10: significant endowments to some of the college.
Speaker 2: So your selling point is it's warm. Schenectady is warmer
Speaker 2: than Rochester is.
Speaker 10: At the selling point, we're warmer than Rochester. We're getting
Speaker 10: a new hockey rank. We're excited about school rink, not
Speaker 10: the Hasspital rank, but the might be involved a little bit.
Speaker 2: But the I'm afraid to ask cowmedy. See, so you
Speaker 2: keeping it under.
Speaker 10: Ten thousand, they were keeping it under ten thousand. This
Speaker 10: is gonna this is gonna be a really cool addition.
Speaker 10: Downtown Schenectady has gone through real boon in the last
Speaker 10: twenty years. As ge he has come back very cool.
Speaker 10: I didn't know that it's exciting to.
Speaker 2: Watch, which is a remote in the fall. I promise
Speaker 2: I'd learned how to spell D one. Hockey is like
Speaker 2: an addiction, isn't it?
Speaker 10: College hockey with these smaller five days and you're right
Speaker 10: on top of the ice.
Speaker 2: It's exciting, it really is. Now, Pat Haskell, thank you
Speaker 2: so much from Union College. Also by way of black
Speaker 2: Rock as.
Speaker 1: Well, this is the Bloomberg Surveillance Podcast. Listen live each
Speaker 1: weekday starting at seven am Eastern on Apple Corplay and
Speaker 1: Android Auto with the Bloomberg Business app. You can also
Speaker 1: watch us live every weekday on YouTube and always on
Speaker 1: the Bloomberg terminal.
Speaker 2: Right, economis of the year last year, Lindsay Pigs that
Speaker 2: joins us on chief economists at Stefel and Lindzie with
Speaker 2: great respect, let's go short term. My head is spinning
Speaker 2: looking at the Eco co screen all the different things
Speaker 2: in Michigan to come on. One year inflation seven point
Speaker 2: one percent, five to ten year inflation four point six percent.
Speaker 2: How are you framing out? A Q three Q four
Speaker 2: call at Steefel? Can you count up the American economy? Right?
Speaker 5: No, Well, we have to be careful when we're looking
Speaker 5: at the soft data. The soft data seems to be
Speaker 5: pricing in more of a worst case scenario, consumers vocalizing
Speaker 5: all of this concern. But as we saw this morning,
Speaker 5: in the hard data, the consumer is still out in
Speaker 5: the marketplace spending, so there seems to be again more
Speaker 5: of this erosion of confidence than an actual change in behavior.
Speaker 5: We see that on the court side as well.
Speaker 2: So what's your number forward? I'm sorry, what's your number forward?
Speaker 2: You're real GDP?
Speaker 5: I think GDP in the second half of the year
Speaker 5: is going to recover to about a one and a
Speaker 5: half one point seven percent pace, So positive, we're back
Speaker 5: in positive territory, but certainly nothing to write home about.
Speaker 5: But again I think against that backdrop of almost two
Speaker 5: percent growth upside risk to inflation, the conversation for the
Speaker 5: FED is going to shift dramatically from where it is
Speaker 5: right now, as FED officials are saying we're well positioned
Speaker 5: or they're looking for potential justification for additional policy easing.
Speaker 4: So do we have have we taken recession off the table? Lindsay,
Speaker 4: because say earlier in New Year, when people were trying
Speaker 4: to run their models in there thinking about one hundred
Speaker 4: and plus percent tariffs in various countries. That was very
Speaker 4: much the talk of the town. But is that off
Speaker 4: the table now?
Speaker 5: Well, remember recession was never in our base case scenario.
Speaker 5: We were looking for a slowdown in momentum, and we
Speaker 5: certainly saw that come to fruition in the first quarter,
Speaker 5: but by Q two we are looking for a return
Speaker 5: to minimal positive growth. So yes, that does remove the
Speaker 5: near term fear of a recession. Now again, things can change,
Speaker 5: so recession is not necessarily off the table, but our
Speaker 5: base case says that the worst of the brunt of
Speaker 5: that anticipation, that concern around tariffs has already been felt.
Speaker 5: January to March.
Speaker 4: Lindsay, we've seen a lot of risk assets, particularly the
Speaker 4: US equity markets, bounce back nicely. Big exception is the
Speaker 4: US dollar. What's your view there, Well, there's.
Speaker 5: Going to continue to be a lot of volatility, I
Speaker 5: think as the currency market is trying to gauge, just
Speaker 5: like investors broadly are trying to gauge what the endgame
Speaker 5: for tariffs is going to be. Now, of course, this
Speaker 5: back and forth that the most recent disappointing news in
Speaker 5: terms of trade talks with China, This is going to
Speaker 5: continue to put pressure or at least volatility on the
Speaker 5: US dollar, and I think this is going to be
Speaker 5: a storyline that we're not going to be able to
Speaker 5: shake maybe through the year end.
Speaker 2: Helping here with the asset move, we're going to see
Speaker 2: if we have tariffs up and Lisa Mateo's reporting the
Speaker 2: gap is having some challenges. They go from twenty eight
Speaker 2: to twenty three right now on stock price. Do we
Speaker 2: just see lindsay in your world and asset erosion due
Speaker 2: to well stagflation sense.
Speaker 5: I think stagflation is the biggest concern because again, as
Speaker 5: we talk about our forecast for growth in the second
Speaker 5: half of the year, while moving back into positive territory,
Speaker 5: a one and a half percent growth rate is is
Speaker 5: well below the bare minimum. Let's say that you should
Speaker 5: expect for a developed economy one percent from productivity gains
Speaker 5: one percent from population growth, so two percent is really
Speaker 5: the minimum, and we're expected to fall below that, so
Speaker 5: it's essentially a non accelerating economy. Then you layer on
Speaker 5: the upside risks of price pressures, which I do think
Speaker 5: will filter back in as tariffs become more solidified in
Speaker 5: terms of their implementation, and stagflation is going to be
Speaker 5: a very real scenario when you think about what keeps
Speaker 5: you up at night, it's not the recessionary scenario.
Speaker 6: There we get the.
Speaker 5: Recovery boomed, but the stagflation scenario limits the impact of
Speaker 5: market policy on either side and could be a lingering
Speaker 5: scenario for years to come.
Speaker 2: This is a major May insight, folks. Is this new
Speaker 2: rewaighting of modest or if you're gloomy, tangible stagflation. She's
Speaker 2: recovering from primes right now with the market opening here,
Speaker 2: don't stop believing, Lisa Matteo, Lisa, what do you got it?
Speaker 11: And we've got a lower open. That's what we have
Speaker 11: right now. This is the last trading day of the month.
Speaker 11: S and P five hundred down two tens a percent,
Speaker 11: fourteen points, five thousand, eight hundred ninety seven, the Dow
Speaker 11: off two tens of percent eighty five points forty two thousand,
Speaker 11: one hundred twenty three, and the NA deck down about
Speaker 11: two tens percent fifty five points and nineteen thousand, one
Speaker 11: hundred and twenty taking it to the two year yield
Speaker 11: three point nine four percent, that's little change, and the
Speaker 11: yield on the tenure four point four two percent, that
Speaker 11: is little change. We'll check in with commodities. We have
Speaker 11: spot gold down about six tens of percent, three thousand,
Speaker 11: two hundred and ninety five dollars an ounce. Over to
Speaker 11: oil Brent crude down three tens of percent, sixty three
Speaker 11: dollars a barrel, WTI crewed sixty dollars a barrel. The
Speaker 11: Bloomberg dollars Spot Index up about a ten to percent,
Speaker 11: and Bitcoin down half a percent at just above one
Speaker 11: hundred five thousand. That is your Bloomberg opening Bell report.
Speaker 2: All in, Tom, thanks so much, Lisa, greatly appreciate that. Again,
Speaker 2: negative one twenty six on the Dow Vix, not out
Speaker 2: your twenty but getting there again. The presidential press conference
Speaker 2: with mister I guess I'm calling it a press conference.
Speaker 2: I think it's okay. With Elon Musk, we'll see that
Speaker 2: at one thirty. An important tweet here in China an
Speaker 2: hour an hour and a half ago. Maybe we'll get more.
Speaker 2: Lindsay piigser with us here. Lindsey a lot of and
Speaker 2: I sort of like the chart. It's an elegant chart.
Speaker 2: Continuing claims reach out to a new worser, going back
Speaker 2: to the pandemic, going back to twenty twenty two, twenty one.
Speaker 2: Is there a significance at once twice three four five
Speaker 2: On the six try we break through nineteen hundred on claims.
Speaker 5: I think the claims data wall well, very volatile, has
Speaker 5: been more indicative of this slow loss of momentum in
Speaker 5: the labor market. The second part of the labor equation,
Speaker 5: fears about losing one's job, is not overly robust at
Speaker 5: this point, and when we look at the job creation component,
Speaker 5: that's still relatively positive as well, again down from an
Speaker 5: earlier more robust pace. We're talking about second derivative decline here,
Speaker 5: But overall, the labor market picture is still very solid,
Speaker 5: and that's the component that continues to support the momentum
Speaker 5: of the consumer out in the marketplace. This thesis of
Speaker 5: resilience on the part of the consumer, it's coming from
Speaker 5: these ongoing solid conditions in the labor market. So I'm
Speaker 5: not overly concerned about the volatility of the continuing or
Speaker 5: initial jobless claims data.
Speaker 4: So the consumer is resilient. But we keep hearing about
Speaker 4: a bifurcated view of the consumer. The higher ends doing fine,
Speaker 4: maybe even better than fine, and the lower ends really
Speaker 4: facing the challenges out there, how sustainable is that?
Speaker 5: Well, we are facing challenges. I don't want to over
Speaker 5: sell the strength of the consumer. The average American, the
Speaker 5: average household is feeling pain from higher prices over the
Speaker 5: past years, higher borrowing costs, the resumption of student debt payments,
Speaker 5: and now you layer on the fear of changes to
Speaker 5: trade policy or additional tariffs.
Speaker 6: There absolutely is.
Speaker 5: Pain being felt, and we see that in that loss
Speaker 5: of momentum. But nominally, across the board, consumers are still spending.
Speaker 5: Now you're right in the middle and the upper end
Speaker 5: of the income spectrum, we see consumers benefiting more from
Speaker 5: this massive run up in household net worth thanks to
Speaker 5: an accumulation of asset prices which the lower end is
Speaker 5: largely precluded from enjoying. Just statistically speaking, they're less likely
Speaker 5: to have a stake in the equity market, less likely
Speaker 5: to own property, and so again having enjoyed this run
Speaker 5: up in household net worth that many Americans have. But
Speaker 5: when we look where consumers are spending, even those at
Speaker 5: the lower end are still benefiting from that more organic
Speaker 5: growth in income from the access to additional short term
Speaker 5: spending options such as buy now, pay later four oh
Speaker 5: one K hardship withdrawals an intergenerational wealth transfer, so there
Speaker 5: are still a number of inorganic factors supporting consumers. But
Speaker 5: even at the lower end, income growth component is really
Speaker 5: a positive notion.
Speaker 2: I hate you. I've got eight more questions in no time,
Speaker 2: Lindsay Pigs, thank you so much, Chief Economists and Steve
Speaker 2: O my Economists of the Year. Last year, her optimism
Speaker 2: on the economy really measured. She was just really, really,
Speaker 2: really good job day to day, grinding out the view
Speaker 2: for the crystal ball and this American economy.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: Philip Deal joins as president of US Money Reserve. Also
Speaker 2: Tory duty at the US men is public service to
Speaker 2: the nation. Showed he could join us here. It's on
Speaker 2: gold and you know the usual krugarands. Yeah, you know that,
Speaker 2: Philip dial Just to cut to the chase, what's the
Speaker 2: biggest misconception Lisa Matteo, and I'm keen about the US Mint.
Speaker 9: About the US Mint, well, it's a fortune five hundred
Speaker 9: sized company has a marketing and and manufacturing component, but
Speaker 9: it also protects the gold at Fort Knock, so that's
Speaker 9: one of its major claims to fame.
Speaker 2: Is a penny going away? Excuse me?
Speaker 4: Yeah, that's a good question, I think.
Speaker 2: Phil, What do you think about?
Speaker 8: Mean?
Speaker 2: Come on, I had a coin collection. Did you have
Speaker 2: a coin collection? Phil? Did you have a little punching
Speaker 2: blue things on the floor?
Speaker 9: Director of the United States meant then I did.
Speaker 4: Ye, not a big coin collection. What is happening with
Speaker 4: the US penny? Do we have any We have a
Speaker 4: conclusion there.
Speaker 9: Yes, US penny's going away by executive order. The President
Speaker 9: has ordered the penny production to stop. The penny is
Speaker 9: going to continue in circulation. It's not being demonetized, right,
Speaker 9: but I think a period of a few years it's
Speaker 9: going to it's gonna wind its way out of the
Speaker 9: economy and right be an item of the past, just
Speaker 9: like the halfpenny.
Speaker 2: Is you Phil? I'm gonna cut to the chase. The
Speaker 2: whole thing with gold, the perception as well as a
Speaker 2: bunch of flakes. You're not a flake, You're like an
Speaker 2: actual adult with real world experience with this. What's the
Speaker 2: most efficacious way to acquire tangible gold? Now, like my
Speaker 2: mother bought Kruger rans a million years ago.
Speaker 9: Well, of course, being a former director of the United
Speaker 9: States meant I like American Eagles the gold coin of
Speaker 9: the United States, and it has been you know, it
Speaker 9: dates back to the mid nineteen eighties. And my company
Speaker 9: US Money Reserve sells eagles and that's our biggest seller,
Speaker 9: but we have a wide range of products as well.
Speaker 9: But the Eagle is legal tender of the United States
Speaker 9: and it's back by the full faith and credit of
Speaker 9: the United States for its purity of gold.
Speaker 4: Philip, why has gold been on such a tear recently.
Speaker 9: Well, there's a lot of history behind gold, of course,
Speaker 9: about three thousand years history of being wealth insurance essentially.
Speaker 9: And the story begins the day after the Harmas attack
Speaker 9: on Israel, and that really illustrates one of the main
Speaker 9: drivers of gold prices over decades, hundreds of years, and
Speaker 9: that is war and great economic uncertainty. And as the
Speaker 9: war spread through the Middle East, then gold really began
Speaker 9: its ascent. The second major factor was in November of
Speaker 9: twenty twenty three. About a month later, we got the
Speaker 9: first report good inflation report from the Department of Commerce,
Speaker 9: and with that report began that the Fed would began
Speaker 9: lowering interest rates, and gold immediately responded to that. And
Speaker 9: I'd say, there are other factors, but the other major
Speaker 9: factor is central banks have buying gold hand over fist
Speaker 9: for the last three years. Yes, and that has been
Speaker 9: a major driver.
Speaker 2: So one more question. I think it's really important, and
Speaker 2: Paul's been much better at this moment. I go Mental
Speaker 2: filled deal like Texas A and m Mental. He said,
Speaker 2: we got another valmore. No, I don't know what that's
Speaker 2: about it, Phil, I go Texas A and m Mental.
Speaker 2: When people tell me bitcoin is a gold equivalent, how
Speaker 2: do you respond, is a former head of the Mint,
Speaker 2: you're actually an adult in the gold coin business. When
Speaker 2: somebody tells you bitcoin is a gold eagle equivalent.
Speaker 9: Yeah, I try to be more civil about it.
Speaker 2: But my reaction, my intern reaction is like yours.
Speaker 9: I mean, it's sort of ridiculous because gold is you know,
Speaker 9: for hundreds of thousands of years, has been held and
Speaker 9: today is being held by central banks and individuals as
Speaker 9: a store of value, which means you can count on
Speaker 9: its value. And can you do that with bitcoin? I mean,
Speaker 9: what over the last several months it's gone up and
Speaker 9: down thirty So no, it's not competition for gold at all.
Speaker 9: And people who would put it in I mean, you
Speaker 9: can't put it in your IRA, but it's not included
Speaker 9: in federal government policy. But even if you could, I mean,
Speaker 9: you'd have mighty disappointments, unlike with gold. I mean, so
Speaker 9: what we've had with gold is sort of the best
Speaker 9: of both worlds. Gold I've been seen for forever as
Speaker 9: bad news investment, but it's been performing extraordinarily and good times.
Speaker 2: Your political hitter down there in Texas, phil Deal, I
Speaker 2: need a and m longhorns Thanksgiving Day. That's what we
Speaker 2: need to return here, Philip Deal with us money Reserve
Speaker 2: of bustin Texas. Thank you for the time there.
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