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Speaker 1: At the feeling Baby.
Speaker 2: Great quarter, great quarter, soft landing, soft landing earning season
Speaker 2: is not over yet, That's all I'm gonna say. And listen.
Speaker 2: More than eighty percent of S and P five hundred
Speaker 2: companies eighty two percent of S and P five hundred
Speaker 2: copies issued results out of toped analyst earnings expectations by
Speaker 2: an average of stuff. I know, I know they learned.
Speaker 1: Okay, let's talk called managing expectations.
Speaker 2: Like I said, not everybody's running to downgrade stocks to sell.
Speaker 1: Yeah, that's a really good point. Did they used to
Speaker 1: do that? More?
Speaker 2: They never do that until it's like the stock is
Speaker 2: down to nothing.
Speaker 1: You're like, oh, thanks for the breaking news.
Speaker 2: All right. Having said that, let's talk a little bit
Speaker 2: about the soft landing that seems to be happening. Today's
Speaker 2: CPI report showed US inflation, as we just talked about,
Speaker 2: broadly slowing last month. And so despite some bumps in
Speaker 2: recent months, inflation team has settled substantially from that forty
Speaker 2: year high that was just last year, and it's led
Speaker 2: several FED policy makers to signal that maybe they're done
Speaker 2: raising interest rates.
Speaker 1: Okay, maybe with us more on the data and the
Speaker 1: impact on US yields, which today we got Bloomberg News
Speaker 1: economics enter Molly Smith. She's with us in the Bloomberg
Speaker 1: and Active Brokers studio along with Bloomberg Intelligence Chief US
Speaker 1: interest rates strategist Ira Jersey, live from BI headquarters in Princeton,
Speaker 1: New Jersey. Molly, I want to start with you and
Speaker 1: just get into the nitty gritty here. As Carol mentioned,
Speaker 1: everything is awesome at least today.
Speaker 4: Yeah.
Speaker 2: Great quarter, great quarter, great month. Really October is it though?
Speaker 1: I mean, you've been on team soft Landing for a
Speaker 1: long time.
Speaker 5: I have been. Thank you, Tim, I thank you for
Speaker 5: reminding everybody that I have been. I still am obviously optimistic.
Speaker 5: I think today gave a lot of reasons to still
Speaker 5: be optimistic. This was yeah, I think from the FEDS perspective,
Speaker 5: one of the more you know goldilocks reports that you
Speaker 5: could get, you know, it showed the one of the
Speaker 5: biggest contributors to inflation in the past few months has
Speaker 5: been that shelter category in rent and some of those
Speaker 5: rent measures stepped down pretty significantly this month, so that
Speaker 5: was very welcome to The rents of course, are still rising,
Speaker 5: but not nearly as fast as they have been in recent.
Speaker 2: And that's the point, still going up, but not as
Speaker 2: much as they.
Speaker 5: Were right, which is the same with core inflation. But
Speaker 5: then you saw overall inflation that's the one that includes
Speaker 5: that those food and gas court categories. That one was
Speaker 5: unchanged on the month, and that's because gas prices fell
Speaker 5: so much, so we were expecting that. But the read
Speaker 5: on core inflation coming in below expectations. That's what everyone
Speaker 5: is really cheering about right now.
Speaker 2: I want to get to you in terms of that
Speaker 2: two percent rate that's the FED target in a moment.
Speaker 2: But let's bring in Ira Jersey because Ira, we saw,
Speaker 2: you know, certainly an equity rally, but on the bond side,
Speaker 2: the treasury US treasury side, some significant moves all along
Speaker 2: the curve talked us about the trade this morning, this
Speaker 2: morning today specifically.
Speaker 4: Yeah, so it's happened all day. There's been pretty decent
Speaker 4: follow through actually, and if you look at the belly
Speaker 4: of the curve, right the best performing part of the
Speaker 4: treasury market right now is the five year kind of
Speaker 4: area of the curve, and that's that's basically the market saying, Oh,
Speaker 4: this is going to continue. The Fed's going to have
Speaker 4: to cut interest rates. So this idea of a goldilocks
Speaker 4: I'm not quite sure that's what the market's telling you.
Speaker 4: That's not what the rate market is telling you anyway.
Speaker 4: What the rate market is saying is the rate market's
Speaker 4: actually worried that the growth and inflation story is going
Speaker 4: to be so bad next year that the Federal Reserve
Speaker 4: is going to be cutting interest rates. So I have
Speaker 4: a different read on what the market's telling us. You know,
Speaker 4: it's extrapolating out I think a little bit too much. So,
Speaker 4: you know, I would take this with a grain of
Speaker 4: salt because it's one day's move. But nonetheless, the market
Speaker 4: certainly seems to think that you're going to get maybe
Speaker 4: a string of better inflation data, but maybe significantly worse
Speaker 4: growth data as well.
Speaker 2: You know, Ira, what's the nuance between in the trade
Speaker 2: between the activity indicating recession versus soft landing? How do
Speaker 2: you figure that out?
Speaker 4: Yeah, well, I think in the market, like what the
Speaker 4: treasury market has had been pricing for a long time
Speaker 4: was basically the Federal Reserve to do nothing with a
Speaker 4: tail risk that they would have to ease interest rates
Speaker 4: by the end of next year because you'd wind up
Speaker 4: seeing a recession and slower economic activity. But today they've
Speaker 4: just leaned into that slower economic activity, slower growth the
Speaker 4: federers are easing. You know, we went from from pricing
Speaker 4: in under two cuts by the end of next year
Speaker 4: to pricing in almost four cuts, right, So that's a
Speaker 4: pretty significant move, right, fifty bases point move. I mean,
Speaker 4: you just look at where short end futures are pricing,
Speaker 4: and they've moved basically at least one one more cut,
Speaker 4: if not more, throughout the course of the year. So
Speaker 4: you know, my base case is the Fed does nothing
Speaker 4: next year. But the market seems to be much more
Speaker 4: worried about, you know, softness in the economy.
Speaker 2: So okay, Molly, So that two percent target that Jay
Speaker 2: powellin companies say that's what they are shooting for, or
Speaker 2: that the trend line is getting there, that would maybe
Speaker 2: give them a reason to pause and just be done
Speaker 2: with this rate hiking cycle. Are we still have a
Speaker 2: ways to go?
Speaker 4: Right?
Speaker 5: Yeah? And remember also that two percent target is based
Speaker 5: on the other inflation metric that we're getting next week.
Speaker 5: So that's the PCE Inflation Report. That's the one that
Speaker 5: the Fed uses for the target. This one today was
Speaker 5: the CPI. It's a bit more public facing. I think
Speaker 5: some people might say this more is a truer sense
Speaker 5: of what consumers actually pay and representative of more their
Speaker 5: actual basket. But I mean, yeah, I think the real
Speaker 5: thing that they've been looking for has been a mediation
Speaker 5: more in the core metrics of inflation, so stripping out
Speaker 5: the volatile food and energy categories, especially core services x housing,
Speaker 5: so getting into where we've seen so much strength in
Speaker 5: especially rents and other services inflation that has been really strong.
Speaker 5: That did step down a bit in today's report, but
Speaker 5: like you still are generally getting so much more relief
Speaker 5: on the good side, as you guys were just saying
Speaker 5: with the luxury watches and other big purchases that people
Speaker 5: are just not buying as much physical stuff. But the
Speaker 5: services side is still where the strength in spending is.
Speaker 1: That it's been like that for quite a while.
Speaker 5: Mollie, Yeah, and that I mean that is ultimately reflective
Speaker 5: of what our economy is. The US economy is a
Speaker 5: service driven economy that you know, consumers tend to spend
Speaker 5: more of their UH except.
Speaker 1: For during the pandemic when right.
Speaker 5: It was long when there were no services to be had,
Speaker 5: right exactly. So now we're shifting back into that kind
Speaker 5: of normalization, and I think, yeah, it's a great point.
Speaker 5: It is sometimes really hard to distinguish from the market
Speaker 5: moves and also from the economic data. What is the
Speaker 5: differentiator between recession and soft landing and that's why, you know,
Speaker 5: to IRI's point, you can't read into one month of
Speaker 5: this too much.
Speaker 2: Well, that's that's the thing. I would say, a sustained level.
Speaker 1: And what I just would say, it's it's I think
Speaker 1: people could push back and say, well, it's one maybe
Speaker 1: one month of CPI data, but it's CPI data on
Speaker 1: top of data that we got, you know, starting a
Speaker 1: couple of weeks ago, with the jobs number that came
Speaker 1: in kind of lighter than expected, which gave people the idea, Okay,
Speaker 1: well maybe the labor market's not as hot as people
Speaker 1: thought and kind of set off this rally that we've
Speaker 1: seen the last two weeks.
Speaker 2: Ken Griffen of Citadel say that labor hoarding, maybe we're
Speaker 2: starting to see not as much of that which we
Speaker 2: had seen for a long time. I would come back
Speaker 2: in here, though. The bond mark at the US treasury
Speaker 2: market has been very vaultive this year, and so I
Speaker 2: am always hesitant, even when we've got a steep move
Speaker 2: on a daylight today, to buy the trend. How about you,
Speaker 2: you know and understand this market. I mean, we could
Speaker 2: get something that's a little hot in terms of the
Speaker 2: US economy and go in the other direction.
Speaker 4: Yeah, I think a lot of people were leaning a
Speaker 4: little bit short. A lot of people were burned. You know,
Speaker 4: we had when this past summer, if you recall when
Speaker 4: a lot of people, including myself, were calling for the
Speaker 4: Federal Reserve to have been finished with their interest rate hikes. Usually,
Speaker 4: when you when the Fed finishes hikes, you want to
Speaker 4: own duration, you want to own the lung and own
Speaker 4: market risk. And what happened this time was people got burned,
Speaker 4: right because you wound up getting better economic data than
Speaker 4: people thought you had. The September data was pretty strong,
Speaker 4: right so, and surprisingly strong, and that's one of the
Speaker 4: big reasons why people reset their expectations for the Fed,
Speaker 4: and you wound up getting that pretty big sell off
Speaker 4: during the months of August and September. And then you know,
Speaker 4: so subsequently, like you mentioned, the last two weeks has
Speaker 4: been great for the treasury market, right we hit five
Speaker 4: percent on the tenure yeld and then we've done nothing
Speaker 4: but rally for the last forty basis points or so.
Speaker 4: And I think that that is, you know, shows you
Speaker 4: how on edge the market is and how confused the
Speaker 4: market is about the future path of the economy because
Speaker 4: you know, I have still had a lot of people
Speaker 4: telling me. Some investors I've spoken to just today, we're
Speaker 4: mentioning that they think that inflation next year is going
Speaker 4: to reaccelerate. Meanwhile, you have, you know, the market pricing
Speaker 4: for cuts. So so I think if there's any piece
Speaker 4: of data that suggests that, hey, maybe inflation will be reaccelerating,
Speaker 4: you can wind up just going right back the other way.
Speaker 1: That's interesting. Hey, Molly, come on back in here.
Speaker 5: Did you want to frightened the thought of inflation reaccelerating?
Speaker 1: You'll keep you busy.
Speaker 5: I mean, I guess I could see the thing. And
Speaker 5: maybe I'm a little partial here. I'm in a somewhat
Speaker 5: of a home buying journey myself and thinking about, Okay,
Speaker 5: what's the reason that like housing prices could reaccelerate, and thinking, okay,
Speaker 5: if you start to get mortgage rates coming down, which
Speaker 5: it seems like we are at our near the peak
Speaker 5: that at least in the New York City market. Because
Speaker 5: you can't talk about housing really is a national market,
Speaker 5: it doesn't exist that there does seem to be a
Speaker 5: lot of demand here, and that when there would be
Speaker 5: more supply coming on if people start to move when
Speaker 5: rates come down. It seems like there would be a
Speaker 5: lot of demand to meet that extra supply, in which
Speaker 5: case prices could come back up. So I could see
Speaker 5: that in a housing sense, in the sense that like
Speaker 5: inflation could accelerate more in that sector. It's tough for
Speaker 5: me to see right now where the opportunities are for
Speaker 5: inflation elsewhere to re accelerate. I'm not saying it's not possible,
Speaker 5: but that's the most obvious one to meet that comes
Speaker 5: to mind.
Speaker 2: The house and one because it's just kind of so tight.
Speaker 2: It's interesting. Ken Griffin said he expects a US recession
Speaker 2: in the second quarter of next year.
Speaker 5: Scary. He also thinks, so that work from home is
Speaker 5: going to make it easier to fire people, So I mean,
Speaker 5: maybe that'll get the rise in unemployment that the FED
Speaker 5: is looking for.
Speaker 1: We're all just saying, we're all here today.
Speaker 2: Remember how was that? Happy Monday? Today? Ready? Great quarter
Speaker 2: month in the studio? It is. It is really really tricky.
Speaker 2: What's the next economic report on your radar? Really quick?
Speaker 5: Retail sales tomorrow retail See how well that.
Speaker 2: Does your consumer? Yeah? Right, well, all right, always love
Speaker 2: love love Molly Smith Economics cedit at Bloomberg News right
Speaker 2: here in our studio, Irid Jerseyer thanks to him as well,
Speaker 2: Chief US Interest Rate Strategy at Bloomberg Intelligence. It's amazing
Speaker 2: how expectations of what the FED is doing are moving
Speaker 2: so quickly in reaction to all of this. This is Bloomberg.
Speaker 3: If you're listening to the Bloomberg Business Week podcast, catch
Speaker 3: us live weekday afternoons from three to six Eastern Listen
Speaker 3: on Bloomberg dot com, the iHeartRadio app and the Bloomberg
Speaker 3: Business app, or watch us live on YouTube.
Speaker 1: Cherl, think about some of these skills that you need
Speaker 1: to be a good poker player. Yeah, are you thinking?
Speaker 6: Yeah?
Speaker 1: Okay, Patience, discipline, discipline.
Speaker 2: Ability to read people, confidence yep, understanding odds yep, or
Speaker 2: odd people no understanding odds.
Speaker 1: Maybe hot people too.
Speaker 2: Taking measured risk. And then I think this is a
Speaker 2: big one. Knowing when to quit.
Speaker 1: Yeah, so no question. I think that some of those things,
Speaker 1: or maybe all of them, what you need to be
Speaker 1: a good poker player also translates to other areas of life,
Speaker 1: whether we're talking, you know, in the workplace or out
Speaker 1: of the workplace.
Speaker 2: I love this kind of way of thinking. Aaron Laden
Speaker 2: is on a mission to use poker to teach life
Speaker 2: skills to women. She's the president of Poker Power. It's
Speaker 2: an organization that provides poker workshops to businesses also individuals
Speaker 2: to in poker Powers words quote, teach women critical leadership
Speaker 2: skills so they can turn any situation to their next
Speaker 2: big win. She is joining us, Aaron that is on
Speaker 2: zoom from Chicago. Erin Welcome. Nice to have you here
Speaker 2: with Tim and myself.
Speaker 7: How are you, I'm great, lovely to be here.
Speaker 2: Well, it's lovely to have you here. Tell us a
Speaker 2: little bit more about what you are doing and how
Speaker 2: you can take what you've learned in terms of playing
Speaker 2: poker and to really make it apply to women making
Speaker 2: some really serious advancements in the workplace.
Speaker 7: Yeah. Actually, the skills that you started with are exactly
Speaker 7: what we teach with Poker Power, and we have figured
Speaker 7: out a way to gamify leadership skills through the game
Speaker 7: of poker. And so it has nothing to do with
Speaker 7: the wanting to get you into the casino or even
Speaker 7: into that you know, basement home game where it's all
Speaker 7: smoky and gross, But it's all about getting women how
Speaker 7: to think like a winning poker player, and so that's
Speaker 7: taking risk, it's allocating capital, it's strategizing and problem solving
Speaker 7: using the skills of Texas.
Speaker 2: Hold them, Eric, take a step back your own experience
Speaker 2: playing poker and how it kind of got you to
Speaker 2: this point. Yeah.
Speaker 7: So I was not a poker player when I agreed
Speaker 7: to run this company, and that's an important part of
Speaker 7: the story. I was surrounded by poker when I was
Speaker 7: on Wall Street. I was at JP Morgan, and there
Speaker 7: was always a poker game going on, and I never
Speaker 7: had the confidence or the courage to ask if I
Speaker 7: could learn, and I certainly was something invited. And so
Speaker 7: my image of this game was quite negative. And that's
Speaker 7: just what I was familiar with. Fast forward twenty years,
Speaker 7: and what I have come to realize about Hooker is
Speaker 7: it is the secret. Sauce and I have been talking
Speaker 7: about equal pay for almost twenty years and trying to
Speaker 7: inspire women to live life differently through thinking differently and
Speaker 7: strategizing different really, but I hadn't really had a solution
Speaker 7: that could be tactical that women could employ on their
Speaker 7: own to exhance their own careers and certainly go for
Speaker 7: equal pay. Poker is that skill. And the reason that
Speaker 7: I say that is when you are playing this game
Speaker 7: you want it's communal, it's social, so it's fun and
Speaker 7: that's a good thing that gets people to come back
Speaker 7: to it. But two, it's a place to practice. And
Speaker 7: I think that's what's been missing, is that in order
Speaker 7: to negotiate well, in order to seek that promotion, you
Speaker 7: have to practice the courage and the confidence and the
Speaker 7: confidence and poker game after game gives you that opportunity.
Speaker 1: But do you have data that show that it's actually
Speaker 1: working for the groups and the individuals you work with.
Speaker 7: Yeah, we have tens of thousands of women over the
Speaker 7: last three years who have gone through our programs, which
Speaker 7: are both virtual and now in person. We love doing
Speaker 7: in person with our cohorts. And what we know from
Speaker 7: these different groups, and they're all ages, they're interns. All
Speaker 7: the way to CEOs is that it's learning to think
Speaker 7: like a winning poker player translates to asking for that raise,
Speaker 7: asking for that promotion. And what we see is through
Speaker 7: their testimonials is that we're hearing stories around doing just
Speaker 7: that and people are getting outside of their comfort zone,
Speaker 7: which may not sound like such a big deal, but
Speaker 7: it is absolutely critical to have the courage in order
Speaker 7: to do that. We're actually running a couple studies. So
Speaker 7: you asked about data, and we're big on data at
Speaker 7: Poker Power. We're actually doing a study with Northwestern and
Speaker 7: also with Harvard, and we're going to put numbers to
Speaker 7: exactly what I am.
Speaker 2: Saying, What is it about poker versus I don't know,
Speaker 2: you know, car racing or some other sport. What is
Speaker 2: it about poker specifically that gives you the skill? And
Speaker 2: I guess, and do you have to get to a
Speaker 2: certain expertise in terms of playing poker or is it
Speaker 2: just doing it over and over in order to be
Speaker 2: able then start applying it in the workplace.
Speaker 7: So what I like to say about poker and I
Speaker 7: used to race cars, So I love that analogy. But
Speaker 7: the reason it doesn't work is that to be an
Speaker 7: amazing car racer, it's a physical skill. It's mental, certainly,
Speaker 7: but it's a physical skill. Poker is different. And while
Speaker 7: you need to have stamina to stay at a poker table,
Speaker 7: what you really need is your mind. And so it's
Speaker 7: the ultimate meritocracy, and that is incredibly empowering for women
Speaker 7: to be able to sit down at a table and
Speaker 7: it doesn't matter how big, tall, strong they are, how
Speaker 7: fast they are, None of that matters. What matters is
Speaker 7: how they play their cards. And so I think it's actually,
Speaker 7: you know, the greatest leveler to help women take what
Speaker 7: they can from the poker table and start to apply
Speaker 7: it to real life and to workplace. And what we
Speaker 7: like to say is there's some number of hands, and
Speaker 7: so I think it's about one hundred hands of play
Speaker 7: for you to really start to understand the rules of
Speaker 7: the game, the position that you play in the game,
Speaker 7: and how your stack of chips factors into the game.
Speaker 7: Those are the key elements that you maneuver hand after hand.
Speaker 7: After those country hands, I say, you can go play
Speaker 7: in a charity tournament and you will not be the
Speaker 7: first person to bust. And the reason that matters is
Speaker 7: we need more women sitting at the table at those
Speaker 7: charity events because right now it's almost all men who
Speaker 7: are playing the game, and that's where the deals are
Speaker 7: getting done and that's where the networks are formed.
Speaker 1: We have like thirty seconds left, but I want to
Speaker 1: make sure we understand how the business works. How much
Speaker 1: does it cost to actually get trained by you guys.
Speaker 7: Yeah, so you can enroll in virtual classes today. We
Speaker 7: have them starting at the beginning of every month, and
Speaker 7: it's fifty dollars for four classes. So we feel very
Speaker 7: strongly about not having barriers to entry. If you would
Speaker 7: like to work with us as a corporate partner, you
Speaker 7: should reach out directly to me and the team and
Speaker 7: we will create the spoke experience that is one of
Speaker 7: a kind for your clients, for your internal employees, and
Speaker 7: for the different way and cohorts that you'd like to
Speaker 7: work with.
Speaker 2: Really interesting, all right, erin thank you so much, Aaron Leiden.
Speaker 2: She is the president of Poker Power, joining us on
Speaker 2: Zoom from Chicago. Interesting. So I guess there is what
Speaker 2: you can go play poker now?
Speaker 1: Not not good, I'll say that. Not good at poker.
Speaker 1: All it takes is one hundred hens or the roulette
Speaker 1: kind of guy. No, I don't do any of that stuff.
Speaker 1: I'll tell you my Vegas story, the point where I
Speaker 1: lost a lot of money in.
Speaker 2: The vegab story. Always are good stories. All right, this
Speaker 2: is Bloomberg.
Speaker 3: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: Just say Alexa play Bloomberg eleven thirty the.
Speaker 8: Phone.
Speaker 2: Yes, folks were taking you to the lone Star state
Speaker 2: and you might be called. Last month, Ken Paxton, he's
Speaker 2: Texas's and battled Republican attorney general, threatened to bar about
Speaker 2: eight banks from municipal bond deals in Texas simply because
Speaker 2: of their commitment to cut greenhouse gas emissions. It's a
Speaker 2: conflict that dates back a few years to twenty twenty one,
Speaker 2: when the Texas Legislator legislature enacted a pair of laws
Speaker 2: because some lawmakers saw big financial institutions as to woke
Speaker 2: when it came to oil and guns. That's what it
Speaker 2: really came down to.
Speaker 1: Well, let's go to the most recent threat, which was
Speaker 1: last month, and it spurred concern on New York trading
Speaker 1: desks about losing access to the state's fifty billion dollars
Speaker 1: a year debt market, where business is booming even as
Speaker 1: high interest rates krimp deal making elsewhere. After all, as
Speaker 1: Attorney General, Ken Paxton signs off on almost all meauti
Speaker 1: bonds issued in Texas, so his approval is key to
Speaker 1: infrastructure financing in the state.
Speaker 2: All right. Amanda Albright and Danielle Morin wrote about it
Speaker 2: for Bloomberg business Speak the story and the upcoming new
Speaker 2: issue of the magazine. It's on newsstands later on this
Speaker 2: week on Thursday, but it's already online at Bloomberg dot com,
Speaker 2: Slash BusinessWeek and of course on the Bloomberg terminal. Amanda,
Speaker 2: by the way, his municipal bonds report for Bloomberg News.
Speaker 2: She's with us on zoom from Kansas and also here
Speaker 2: in our Bloomberg Interactor Broker Studio is the editor of
Speaker 2: Bloomberg BusinessWeek. Jill Weber feels like a Texas showdown.
Speaker 6: And it's one that's been going for a while. Only
Speaker 6: it seems like, you know, once you're you know, in
Speaker 6: in this kind of situation with the Attorney General of Texas, Paxson,
Speaker 6: you know, first of all, he's been he's had some
Speaker 6: legal issues of his own. So once he once he
Speaker 6: got through those, you know, it turns out that he
Speaker 6: couldn't quite turn away from this one. Yeah, and this
Speaker 6: showdown continues, and it's all about municipal bonds which he
Speaker 6: signs off on, and that has some some tension, created
Speaker 6: some tension with Wall Street.
Speaker 2: Exactly. Yeah.
Speaker 8: No, I was just gonna say my coworkers and I
Speaker 8: the big thing we've been saying the past month is
Speaker 8: that we just can't believe that we're still writing about
Speaker 8: this in such an in depth way. These laws were
Speaker 8: enacted two years ago, so that's over two years of
Speaker 8: kind of drama in the Texas muni world over these laws.
Speaker 8: There's a law of targeting firearm policies, and then there's
Speaker 8: a law targeting energy policy. So the latest kind of
Speaker 8: drama is more about energy policies. And so Paxton back
Speaker 8: in office. A few weeks back into office, some people
Speaker 8: were hoping maybe he kind of forgot about these laws.
Speaker 8: He released a list of banks that he's reviewing for
Speaker 8: their basically their climate change policies and their commitments that
Speaker 8: they've made around greenhouse gas emissions. So we've seen a
Speaker 8: pretty dramatic reaction among the people that we talked to
Speaker 8: regularly for these stories. They seem pretty rattled by this,
Speaker 8: and I'm happy to talk through some of the specifics
Speaker 8: of it.
Speaker 1: But let's do that.
Speaker 6: Because Ultimately, you know, Texas is known for having a
Speaker 6: business friendly environment. This kind of puts it in a
Speaker 6: place where it might not get to last that long.
Speaker 8: Absolutely, and earlier this month, Jamie Diamond made unprecedented comments
Speaker 8: in the world of SB thirteen and SB nineteen saying that,
Speaker 8: you know, he wants Texas to remain a welcoming place
Speaker 8: for business. Obviously, JP Morgan has invested heavily in Texas,
Speaker 8: but the fact that he was willing to comment about
Speaker 8: these laws and the impact that they're having, shows that
Speaker 8: this is a really big deal to businesses, especially because
Speaker 8: a lot of them have gone all in on Texas
Speaker 8: and within the MUNI space. I mean, Texas is growing,
Speaker 8: school districts are selling bonds constantly, They're doing you know,
Speaker 8: billion dollar ballot initiatives so they can add new school
Speaker 8: buildings and stadiums. So Texas is really where the action
Speaker 8: is at in UNI. So that just makes all of
Speaker 8: this all the more painful for the muni bond desk
Speaker 8: at say a JP Morgan where they can't well it's
Speaker 8: called JP Morgan, but it makes it harder for them
Speaker 8: to work on transactions.
Speaker 1: Right now, Hey man, I want to talk about Ken Paxton,
Speaker 1: because this is a guy, an attorney general, who has
Speaker 1: come under a lot of pressure over the last couple
Speaker 1: of years, and there was a time not so long
Speaker 1: ago that perhaps the CEOs at the biggest banks in
Speaker 1: the US thought they wouldn't have to be dealing with
Speaker 1: him anymore. Just give us a rundown of a g.
Speaker 1: Ken Paxton, who, by the way, I think a lot
Speaker 1: of people might have heard of for the first time
Speaker 1: if you live outside of Texas, maybe during the controversy
Speaker 1: post Trump losing the twenty twenty election.
Speaker 8: Absolutely, so he's definitely a rising star in Texas and
Speaker 8: everyone kind of wants to know what his next move
Speaker 8: will be, whether it's you know, running for governor running
Speaker 8: for Senate. And so he's also a man of mystery
Speaker 8: in the muni bond market, a man of that people
Speaker 8: have really focused on because he has this role that
Speaker 8: is very unusual where he can sign off on muni
Speaker 8: bond contracts and some other types of contracts too, seems like.
Speaker 8: And so with he actually did an interview also this
Speaker 8: week about the laws, and he's sort of downplayed kind
Speaker 8: of that a lot of people see him having a
Speaker 8: very heavy hand and enacting these laws and implementing the
Speaker 8: laws and doing these reviews of policies. A lot of
Speaker 8: people within Texas see him having a heavy hand. But
Speaker 8: in this interview he talked about how he's just following
Speaker 8: the constitution, He's following the law, the legislators, the entity
Speaker 8: that enacted this law, and so he's just sort of
Speaker 8: doing his job, so to speak. But a lot of
Speaker 8: the people we talked to in Texas see it as
Speaker 8: a very kind of it fits with him being more conservative,
Speaker 8: and they see it as kind of being a very intense,
Speaker 8: for lack of a better word, a very intense way
Speaker 8: of implementing the laws. Because, for example, this list of
Speaker 8: banks that he's reviewing more recently, there's a lot of
Speaker 8: well known American banks that are very involved immuni. He's
Speaker 8: very involved in state and local finance, whereas the comptroller
Speaker 8: has his own list. He's also a Texas Republican. He
Speaker 8: really a list of banks that aren't so involved in
Speaker 8: Texas government contract work. So that list was seen as
Speaker 8: like a little more moderate, a little less splashy. So
Speaker 8: if that just that's kind of inside baseball. But there's
Speaker 8: two big Texas Republicans involved in implementing the law basically
Speaker 8: and carrying out the law, and they've taken two very
Speaker 8: different approaches.
Speaker 1: And as you point out in your story, Packson was
Speaker 1: suspended from office back in May as he faced impeachment
Speaker 1: over allegations of bribery and corruption, and his suspension ignited
Speaker 1: hopes and some quarters that interest in those laws that
Speaker 1: you've been referring to would quietly fade away. We should
Speaker 1: note the State Senate acquitted him back in September, and
Speaker 1: he quickly said he would review whether the lenders that
Speaker 1: join the net zero Banking Alliance will be allowed to
Speaker 1: underwrite muni deals in Texas.
Speaker 7: Droll.
Speaker 1: Good good summary there, Tim th Well, I was reading
Speaker 1: directly from Amanda's story, but it's like, yeah, it's all Amanda,
Speaker 1: it is this.
Speaker 6: You know thing for Waltreet. I think where I mean
Speaker 6: this is a there's a significant amount of business at
Speaker 6: risk here, Bill, Yeah, and you know, basically it comes
Speaker 6: down to sort of a you know a little bit
Speaker 6: of a grudge match between how Texas wants to do
Speaker 6: its business and how Wall Street does it. Okay, Amanda,
Speaker 6: worst case scenario here, how bad might this get for
Speaker 6: Wall Street?
Speaker 8: I think it could get pretty bad. We have eighteen,
Speaker 8: or we have eight underwriters who are on the list.
Speaker 8: I did like some quick math. I think the last
Speaker 8: I checked, those eight banks have underwritten like fourteen billion
Speaker 8: of the fifty three ish billion. Might be more now,
Speaker 8: but one in five deals, if that's easier in Texas,
Speaker 8: is essentially underwritten by one of these banks. So if
Speaker 8: you keep knocking off banks, it makes it harder and
Speaker 8: harder for municipalities to find a lender to work with
Speaker 8: at an attractive price.
Speaker 2: And what kind of.
Speaker 6: Projects could become at risk when we start thinking about
Speaker 6: that at scale.
Speaker 8: I think about school districts because school districts are selling
Speaker 8: so much in bonds lately because people are moving to Texas,
Speaker 8: theyre moving their families there, and school districts are really
Speaker 8: like brand from the ground up, being built through the
Speaker 8: bond market. They're constantly hitting the market with sales. I
Speaker 8: really think school districts are the ones that are probably
Speaker 8: most at risk because they're the most active at the moment.
Speaker 2: Our chief curmudgeon correspondent Budge, and I'm.
Speaker 3: Just saying this is going to cost taxpayer result.
Speaker 2: Well, that's that's where.
Speaker 1: This is the idea of voice you here is John
Speaker 1: Tucker's right.
Speaker 2: I'm with you on this because doesn't this lead to
Speaker 2: amanda higher financing costs for deals.
Speaker 8: Yes, there's been studies or there's a really prominent study
Speaker 8: that shows that in Texas specifically.
Speaker 2: So I mean ultimately, you do wonder are they not
Speaker 2: going to be able to get you know, maybe they're
Speaker 2: not going to be able to afford as many projects
Speaker 2: to do because their financing costs are going to be
Speaker 2: more expensive.
Speaker 6: You know what, though, it's Texas like this stuff.
Speaker 2: Every stick, you just turn it into, you know, some.
Speaker 6: Kind of culture war and hope it kind of blows
Speaker 6: over along the way, you know. And Ken Paxton is
Speaker 6: shown again and again and again that he has a
Speaker 6: way of kind of you know, galvanizing his base around
Speaker 6: stuff like this. So and you know, taking on Wall
Speaker 6: Street yet another way of you know, those those guys
Speaker 6: not in this state.
Speaker 2: Totally.
Speaker 8: I think the thing that interests me about it, and
Speaker 8: this definitely to me shows the anti ESG war is
Speaker 8: not going away. But to me, it's not a kitchen
Speaker 8: table issue that like your grandma cares about. So I
Speaker 8: am really curious about the politics of why this is,
Speaker 8: you know, the issue that he's really been harping on
Speaker 8: because to me, it doesn't necessarily seem like something every day.
Speaker 8: Every day people don't tend to care that much about
Speaker 8: bond issuances and who's underwriting their city's bond deal. So
Speaker 8: it's one of those weird things where I'm still trying.
Speaker 2: To taxes go up to pay for it, right, Yeah,
Speaker 2: Like that's when all of a sudden you sit up.
Speaker 2: I mean I live in an area where all of
Speaker 2: a sudden, you know, the border of education good and
Speaker 2: payers everything, and you know, they just add they can
Speaker 2: just randomly add it to like things like that start
Speaker 2: to get noticed.
Speaker 6: Wall Street makes a good foil too, right, And like
Speaker 6: the good point the whole ESG DeSantis thing, like he
Speaker 6: showed that there was a way to weaponize this, and
Speaker 6: you know, Paxton's saving enough to find new ways to
Speaker 6: do this too.
Speaker 7: You know.
Speaker 2: The other thing I do wonder, though, Amanda is like,
Speaker 2: doesnt Texas though have to have relationship I mean, City's
Speaker 2: out right, Goldman's out. Don't they want to have relationship
Speaker 2: that with some of these really big Wall Street banks?
Speaker 8: Yes? And I think you know, I think I said
Speaker 8: this last time on your show, But if people want
Speaker 8: to talk about this always call me. So I do
Speaker 8: think mayors and Texas and city finance officials they if
Speaker 8: you talk to them, maybe more privately, maybe not for
Speaker 8: a quote in Bloomberg News, I think they would tell
Speaker 8: you that they think this is really frustrating and they
Speaker 8: would like to work with whatever bank is the best
Speaker 8: to work with, the easiest, the cheapest to work with.
Speaker 8: And they really kind of also want this to go away.
Speaker 8: But it's difficult getting folks to talk about this. That
Speaker 8: kind of comes away from our piece. It's been difficult
Speaker 8: getting folks to talk about this on the record because
Speaker 8: it is such a divisive environment and people, because he
Speaker 8: has this power over contracts, people don't want to upset him.
Speaker 6: So that's that's a really good point. Every single UNI
Speaker 6: deal in the state he signs off on, right, Amanda.
Speaker 2: Remarkable exactly.
Speaker 6: Yeah. So I mean like this is you know, kind
Speaker 6: of your nightmare where your your business, your bonds have
Speaker 6: ended up in this place where uh, they're part of
Speaker 6: the culture wars. Remember when we talked about the culture wars,
Speaker 6: Like this is this is it in reality and there's
Speaker 6: kind of no escaping any of it in the US.
Speaker 1: Now, And is there I mean, is there an attorney
Speaker 1: general with more of a national profile at this point
Speaker 1: than Ken Paxton. I don't know if there is. And
Speaker 1: I think that's why Amanda, you know, referred us to like, Okay,
Speaker 1: a lot of people are looking what's his next movie
Speaker 1: as well?
Speaker 6: And he's proven to be teflon when you have sixteen
Speaker 6: accounts and acquit it on all of them, right, So,
Speaker 6: and you know, that was a really interesting case study
Speaker 6: for Texas. So I think we'll be talking about this
Speaker 6: again probably well, and I do.
Speaker 2: Is it just tech?
Speaker 9: So?
Speaker 2: I'm told we live in it, right, Amanda? Are there
Speaker 2: anything I mentioned there's an election next year? Are there
Speaker 2: other states though facing this? Because I do feel like
Speaker 2: the ESG pushback we see it. Is there other states
Speaker 2: or no? Is it really just a Texas thing, especially
Speaker 2: because of the potential the size.
Speaker 6: Well, I actually think Texas might be leading the way
Speaker 6: on this, Amanda, Right, And it might just be like
Speaker 6: how does Paxton navigate this? Because if other states are
Speaker 6: watching this, especially red states, like this could provide a
Speaker 6: little bit of an example for how to navigate this.
Speaker 8: Absolutely. I mean West Virginia and Oklahoma actually enacted similar
Speaker 8: laws deep the minutia of the laws differs among states,
Speaker 8: but Texas really led the charge. We already saw other
Speaker 8: Republican states follow suit. The firearms law hasn't caught on
Speaker 8: quite as much as the energy one, but energy was
Speaker 8: an issue, especially with concerns about Russia. It just it
Speaker 8: got a lot of traction, especially I think last year.
Speaker 8: So Texas really leads the way on the anti ESG war.
Speaker 8: And there's definitely chatter that these fair access laws that's
Speaker 8: what they're known as, that kind of are all encompassing
Speaker 8: cultural wars, issues that use government contracts as like the weapon.
Speaker 8: There's a lot of chatter that we will continue to
Speaker 8: see traction on these next year as state legislators go
Speaker 8: back into sessions. So it really seems like this isn't
Speaker 8: going away anytime anytime soon.
Speaker 2: I remember when just like everybody just jumped on the
Speaker 2: ESG board, like and you know, states, cities all wanted
Speaker 2: to be a part of it in terms of their
Speaker 2: investment portfolio.
Speaker 1: I think that's when stocks where our record has day
Speaker 1: after day of Carrol.
Speaker 6: Yeah, So you know, and to bring it back to
Speaker 6: the schools part, because I think that is a really
Speaker 6: interesting observation and you know, the fact that taxpayers are
Speaker 6: potentially going to feel this. Like I remember, like the
Speaker 6: story that we talked about in the Culture Wars package
Speaker 6: as the homeschooling one. Right, like this is already playing
Speaker 6: out and people are seeing how it's playing out, and
Speaker 6: they're kind of taking control of their decisions and doing
Speaker 6: things that are, you know, in some ways feel radical
Speaker 6: compared to where the mainstream has been. But like that's
Speaker 6: why where we go when we enter a fractured kind
Speaker 6: of landscape.
Speaker 1: But just like with that story, Joel, this feels like
Speaker 1: another reason why someone would choose to live somewhere and
Speaker 1: not somewhere else. I mean, these states are becoming their
Speaker 1: own fief domes.
Speaker 6: Well they That's also the point of America, right, Like
Speaker 6: there are for those dates, yeah, and there are, and
Speaker 6: the states are entitled to do something that's different than
Speaker 6: the Yeah, exactly, so that this is America and like
Speaker 6: we're we're living through.
Speaker 2: It's why you end up with red states, just the.
Speaker 6: Big dates, you know, American experiments.
Speaker 2: This is Texas, Texas man. All right, Amanda, thank you
Speaker 2: so much. Amita Albright Music Small Bond's reporter for Bloomberg News.
Speaker 2: They're in Kansas, and of course the editor of Bloomberg
Speaker 2: Business Retel whatever here in our studio. Check it out.
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Speaker 2: Can you let me drive?
Speaker 1: Oh no, no, no, no, who's going to drive? All right? Please?
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Speaker 3: This is the drive to the globe well.
Speaker 2: On Bloomberg Radio, all right, everybody, just about seventeen minutes
Speaker 2: away from quite a rally on Wall Street. I haven't
Speaker 2: seen this in some time. We've also seen, as John
Speaker 2: just broke down the numbers, quite a drop back in
Speaker 2: US treasury yields all along the curb. But we are
Speaker 2: pretty much just off our highs of this session, so
Speaker 2: just backing off a little bit. But nonetheless, really we've
Speaker 2: held onto these games really throughout the Dayti're.
Speaker 1: Curious what Dan Griffith, Senior vice president and director of
Speaker 1: Wealth Strategy at Huntington Private Bank, has to say about
Speaker 1: all this. Dan is here in our Bloomberg Interactive Brokers studio.
Speaker 1: I want to get to the survey that you did
Speaker 1: in just a few minutes, Dan, but first of all,
Speaker 1: give us an idea of where you're thinking about INFLA
Speaker 1: going if you think the FED is done after today's print,
Speaker 1: Because this is kind of a monster rally that we're saying, it's.
Speaker 9: A great day, and I I'm glad.
Speaker 2: To be unless market. It's not such a great day.
Speaker 9: That's true, that's true there. I'm sure there's always a
Speaker 9: few losers out there, right but I think for the
Speaker 9: most part, this is going to be good news for
Speaker 9: a lot of people out there, and we're glad to
Speaker 9: celebrate with the people who are going to are good
Speaker 9: to be.
Speaker 1: There and seeing good news.
Speaker 9: We are a lot of good news, as we'll mention
Speaker 9: a little bit from our clients, but we think that
Speaker 9: inflationary trends, you know, are starting to moderate. I think
Speaker 9: we've got some great news earlier this week that demonstrates
Speaker 9: that that'll be the case, and a lot of the
Speaker 9: conversations we're having with real business owners and our clients
Speaker 9: demonstrate the fact that they're starting to feel a little
Speaker 9: bit better about that. So we're thinking, we think through
Speaker 9: the end of the show.
Speaker 2: Feeling better about what inflationary trends. I mean, we're way
Speaker 2: down from where we.
Speaker 9: Were a year ago, significantly, So yeah, I think one
Speaker 9: of the other things that we're experiencing is this phenomenon
Speaker 9: that a lot of people haven't yet experienced some of
Speaker 9: what's the consequences of the rate hikes. If you haven't
Speaker 9: bought a new car in the last two years, or
Speaker 9: a new house in the line two years, if you
Speaker 9: haven't carried credit card debt in the last two years,
Speaker 9: and really this inflationary thing is just a headline as
Speaker 9: opposed to something that hits your pocketbook.
Speaker 2: Now we're starting that's say, zero zero zero one percent
Speaker 2: of the population.
Speaker 9: Right, You're exactly right, You're right. So I think we're
Speaker 9: seeing now many many more people are starting to say, Hey,
Speaker 9: I'm seeing a change because I've had to move or
Speaker 9: buy a new car and go from there. And I
Speaker 9: think that's why we think inflation will start to decrease.
Speaker 2: Your business clients, are they talking recession? Ken Ken Griffin
Speaker 2: of Citadel thinks it's a second quarter twenty twenty four thing.
Speaker 9: We're at about fifty five percent risk of recession in
Speaker 9: twenty twenty four, I will say.
Speaker 2: That that high are a lot for you guys.
Speaker 9: It's actually been pretty consistent. We think it's about, you know,
Speaker 9: fifty to fifty broadly. We were there all last year,
Speaker 9: and I think the market was out ahead of us
Speaker 9: and kind of came back to where we were. Part
Speaker 9: of what we're experiencing is when we talk to our
Speaker 9: clients themselves, we say, how do you feel what does
Speaker 9: it look like? Sixty percent of our clients that we
Speaker 9: recently surveyed said, you know, we actually feel like we're
Speaker 9: going to have a better year next year. More than
Speaker 9: sixty percent of them said twenty twenty three was a
Speaker 9: better year.
Speaker 2: Than they say a small business client, that's.
Speaker 9: Right, Yeah, small business and middle market clients, so a
Speaker 9: lot of them are still very optimistic. Only about eight
Speaker 9: percent of them had a negative outlook on the economy,
Speaker 9: and I think that's very telling in one of the
Speaker 9: reasons that we're in the position that we are.
Speaker 1: Based on the survey data that you got, do you
Speaker 1: think there's a more than typical disconnect between what we're
Speaker 1: seeing in the stock market and what you're seeing in
Speaker 1: the economy. With the caveat that. We know the stock
Speaker 1: market is not the economy, but they're certainly related.
Speaker 9: Yeah. I do think that's one of those things that
Speaker 9: we're realizing more and more right, that the markets themselves
Speaker 9: can be very different than what we see. I think
Speaker 9: we see that phenomenon in small and mid caps themselves,
Speaker 9: right as we see there's a disconnect between the large
Speaker 9: cap space and small and mid caps. But I think
Speaker 9: the nimbleness of the middle market client, the ability for
Speaker 9: small businesses to kind of adjust to supply chain disruption,
Speaker 9: a lot of them being able to turn around and say, hey,
Speaker 9: we're going to go ahead and adjust and make and
Speaker 9: make evolutionary changes. It's panned out, and as a result,
Speaker 9: I think we're going to end up with an economy
Speaker 9: that's a lot stronger, especially in that middle market space.
Speaker 2: All Right, Having said that, a client comes in and
Speaker 2: it's got has some money to put to work. One
Speaker 2: of the names that you like is Exon Mobile. We
Speaker 2: know they did the mid October deal buying Pioneer Natural
Speaker 2: Resources shale oil play. We get it. Is that a
Speaker 2: reason why you want to buy it or is it
Speaker 2: something else? Is it the dividend? What is it?
Speaker 7: Yeah.
Speaker 9: I think the dividend is one. It's an interesting phenomenon.
Speaker 9: A lot of our clients come in and say, Hey,
Speaker 9: we really want to talk about these higher yields and
Speaker 9: how we can lean into fixed income a little bit more,
Speaker 9: and then they realize, well, I'm giving up the opportunity
Speaker 9: for some upside and I'm giving up some really potentially
Speaker 9: beneficial dividends. And Exon's a great example of that right
Speaker 9: where they can still catch some upside. I think because
Speaker 9: of their myths earlier, a lot of clients kind of
Speaker 9: feel like they're on sale a little bit, and so
Speaker 9: they're happy to get the large dividend and happy to
Speaker 9: get potentially a little bit of something on sale, and
Speaker 9: that's one of the things that they're excited about. They're
Speaker 9: a leader in the premium basin. I think the consolidations
Speaker 9: that they've done are going to be very beneficial from
Speaker 9: a growth standpoint as well. Well.
Speaker 1: I don't want to say speaking of on sale, because
Speaker 1: that's absolutely not what's happening with Microsoft today. Another record
Speaker 1: high for the company, up fifty four percent so far
Speaker 1: this year. It was last week that it hit an
Speaker 1: all time high as well. Carol, what are you thinking
Speaker 1: when it comes to Microsoft, do you think there's still room
Speaker 1: to run?
Speaker 9: We do, and it's kind of funny. I mean, some
Speaker 9: of these names like Exon and Microsoft their names that
Speaker 9: people have thrown around a lot, and they've done really well.
Speaker 9: But we think, you know, again, Microsoft has done a
Speaker 9: lot and they're still upside. The work that they've done
Speaker 9: in the cloud computing area is one that we think
Speaker 9: there's still room to run there too, And obviously their
Speaker 9: growth in the gaming area is one that we're also following.
Speaker 9: So I know how much people at my house play
Speaker 9: certain games like Minecraft. If they figure out a way
Speaker 9: to monetize that, and I hope that's after you know,
Speaker 9: my kids are gone, that could be a definite.
Speaker 3: Up I mean.
Speaker 1: But actually a serious question though, are your kids Do
Speaker 1: you think they're going to like go from Minecraft to
Speaker 1: Xbox games that do cost money and have all the
Speaker 1: game if I can help it?
Speaker 9: But yes, I think for sure, Yeah, And obviously there
Speaker 9: are ways that they can figure out how to monetize that.
Speaker 9: If it's not you know, purely fun kind of games,
Speaker 9: I'm sure that they'll be creative ways to look at that.
Speaker 1: You're fine.
Speaker 2: Minecraft's educational John you're a Minecraft master, aren't you.
Speaker 1: No, of course not.
Speaker 3: Don't let your kids do video games.
Speaker 2: That is my.
Speaker 1: Advice to you was that.
Speaker 2: I was always I've.
Speaker 1: Always don't go down that pant.
Speaker 2: I always think about like all the tech entrepreneurs and
Speaker 2: doing panels with them like years ago, and they're like, yeah,
Speaker 2: my kid doesn't like they're not on a phone, they're
Speaker 2: not on it.
Speaker 1: Well, I know a lot of video games. I think phones.
Speaker 1: A lot of tech executives draw the line with phones,
Speaker 1: but they're okay with like with gaming. Really, I think
Speaker 1: gaming is is totally acceptable.
Speaker 7: Here's one of the weird things.
Speaker 6: It's just like, this is big kids watching other kids play.
Speaker 1: That is fifteen years twitch. That's psychotic, I think, and
Speaker 1: there is you know.
Speaker 9: YouTube has figured out how to monetize that for sure.
Speaker 9: So that's yeah, definitely a factor.
Speaker 2: Did you remember watching people play pong?
Speaker 3: John, Yeah, I was a huge Pong player.
Speaker 9: I'm still okay, No, just pop, you're still the Space Invaders.
Speaker 2: Oh my god. I always get some perspective. Dan Griffith,
Speaker 2: thank you so much. Thank you. Nice to have you
Speaker 2: in studio. Senior vice president, director of Wealth Strategy at
Speaker 2: Huntington Private Bank here. As we said in our Bloomberg
Speaker 2: Interactor Broker Studio, this is.
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