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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moven news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: All right, let's keep an eye on the market here,

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Speaker 1: as John was just reporting kind of a red day

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Speaker 1: on the screen here to s and p off one

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Speaker 1: percent and to me, the question is where do you

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Speaker 1: go here? This fed is going to keep it higher

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Speaker 1: for longer. Let's check in with our next guest. He's

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Speaker 1: probably got an informed opinion. David Diets, managing principle and

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Speaker 1: senior portfolio strategist at pepac Private Wealth Management. David, thanks

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Speaker 1: for joining us again here. I'm a little concerned here

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Speaker 1: that at the very least this stock market is range

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Speaker 1: bound until we get a better sense of what this

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Speaker 1: Federal Reserve is going to do here.

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Speaker 3: Well, it could be worse than range bound, as we

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Speaker 3: saw in September, where is the worst month of the

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Speaker 3: year for many sectors of the market. The s and p.

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Speaker 3: Five hundred. If this ten year treasury yield keeps rising,

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Speaker 3: that just puts pressure on all assets, whether that be

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Speaker 3: real estate, whether that be stocks, whether that be tech

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Speaker 3: stocks or utility stocks and so forth, because it reduces

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Speaker 3: that present value. The question is what is ultimately going

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Speaker 3: to break the rise and this interest rates, And we're

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Speaker 3: just not sure. But we're obviously we're looking at inflation,

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Speaker 3: We're looking at the federal Reserve, We're looking at the

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Speaker 3: amount of debt being issued by our federal government. We're

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Speaker 3: wondering what central banks overseas are doing with their catch

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Speaker 3: of US treasury securities that's all in the mix.

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Speaker 4: And looking at some of these long term yields here,

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Speaker 4: I mean, the thirty are just on absolute tear today.

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Speaker 4: Anything really that's like, you know, standing out to you

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Speaker 4: in that part of the curve right now.

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Speaker 5: Well, certainly uncertainty.

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Speaker 3: We just got a piece of information today, the so

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Speaker 3: called Jolt survey, which showed there were more job openings

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Speaker 3: than we're expected, and that's really an athem about to

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Speaker 3: bond prices and going to create higher yields because one

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Speaker 3: of the concerns of the bond market is if this

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Speaker 3: economy stays strong and the one of the most important

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Speaker 3: parts of it is labor, then there's going to be

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Speaker 3: more demand for borrowing, there's going to be more inflation,

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Speaker 3: there's going to be increasingly hawkish FED. So that has

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Speaker 3: helped push yields up again today, and of course we're

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Speaker 3: seeing the fallout of the market.

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Speaker 4: You know, I was taking a look into the jolt

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Speaker 4: support a little bit further here, and I'm not sure

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Speaker 4: how much of it you've seen, but you know, most

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Speaker 4: of this rise in job openings came pretty much exclusively

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Speaker 4: from professional business services and finance and insurance jobs like

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Speaker 4: that was like the more or less the bulk of

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Speaker 4: the jump and openings here. How much do you think

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Speaker 4: the FED reads into something like that? And of course,

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Speaker 4: you know, there is the bigger picture. The labor market

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Speaker 4: is still very strong. There still are a lot of

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Speaker 4: job openings. But just looking at this one report here,

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Speaker 4: seeing as it was so concentrated.

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Speaker 3: Yeah, so absolutely, well, you know, I do think that

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Speaker 3: these are the types of jobs that pay a little

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Speaker 3: bit better as opposed to the service sectors. So there's

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Speaker 3: a couple of things you could read into it. One

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Speaker 3: is that this initial surge and service sector jobs post

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Speaker 3: pandemic is starting to ease. Maybe that's reflective of middle

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Speaker 3: and lower income Americas having to pull in their belts

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Speaker 3: just a little bit as interest rates go up and

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Speaker 3: inflation bites. And of course the other thing, if these

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Speaker 3: higher paying jobs are the ones that are still most

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Speaker 3: in demand, those ultimately pay a little bit more and

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Speaker 3: that could exacerbate inflation. So you could make the case

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Speaker 3: that this is not the best mixed from the point

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Speaker 3: of view the Federal Reserve valuation.

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Speaker 1: David, You know, I guess there's a couple of ways

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Speaker 1: to look at valuation here. A the market's pretty pricey

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Speaker 1: given where rates are, but if you back out the

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Speaker 1: magnificent seven, maybe it's not as bad. How do you

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Speaker 1: think about valuation as we guroup for another round of earnings?

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Speaker 3: Yeah, absolutely, it is a tail to markets and so

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Speaker 3: many different metrics. And Paul, your right to focus and

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Speaker 3: valuation because now after the September and indeed the last

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Speaker 3: two months of Q three plus of course Monday is mixed. Outing.

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Speaker 3: If you strip out that magnificance magnificent seven, you've got

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Speaker 3: a pe on the market that's only fifteen. You know,

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Speaker 3: that's actually below what the average has been over the

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Speaker 3: last decade. But you're also right to point too. You know,

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Speaker 3: you need to always compare these things versus the yields

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Speaker 3: available on benchmark treasuries, of course, and you know, so

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Speaker 3: people are gonna say, well, gee, if I can get

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Speaker 3: four point seven percent risk free from a treasury, admittedly

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Speaker 3: with no growth of that income, that looks pretty good,

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Speaker 3: even relative to a fifteen pe on the market, particularly

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Speaker 3: given the risk of recession and increasingly hawkers fed, so

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Speaker 3: valuations look better. That's reasons for optimism. But we're still

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Speaker 3: looking over our shoulder at the bond market.

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Speaker 4: You know, David, I'm an economy person and I was

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Speaker 4: personally banking on this week being fairly quiet, expecting there

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Speaker 4: to be no Joltz report, no jobs report, but no

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Speaker 4: such thing. You know, we got a deal and the

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Speaker 4: government is the lights are on for now. So looking

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Speaker 4: ahead a little bit to Friday, what are you thinking

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Speaker 4: ahead of the jobs report?

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Speaker 3: Well, so it seems like the consensus on Wall Street

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Speaker 3: is maybe some job creation, maybe one hundred thousand, and

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Speaker 3: so we're going to be determining whether, you know, the

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Speaker 3: actual jobs created are less or more. Unfortunately, we're in

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Speaker 3: this situation here Molly, where good news has taken us

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Speaker 3: bad news because you know, a better economy means potentially

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Speaker 3: higher yields, which is going to cause people to rotate

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Speaker 3: out of stocks into these bombs. And so I think

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Speaker 3: from Wall Street's perspective, you may want something under one hundred.

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Speaker 3: Certainly if you are a bond investor, you want something

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Speaker 3: well less than a hundred. And that could help us

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Speaker 3: get you know, our feet back on the ground, and

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Speaker 3: of course gives some pause to the Fed who keeps

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Speaker 3: talking about higher for longer. If those job if that

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Speaker 3: job creation comes in softer, that's to watch. Of course,

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Speaker 3: two other things to watch. One is you know the

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Speaker 3: the weekly pay is that showing inflationary trends or backing

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Speaker 3: off a little bit? And of course do they change

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Speaker 3: the numbers for past months? If they revise them down,

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Speaker 3: that could be a positive. The so called bad news

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Speaker 3: is good news for stocks or could go the other way.

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Speaker 1: Corporate earnings start up and you know a week to

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Speaker 1: ten days here, Yet again, what are you looking for

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Speaker 1: in this earnings? Have we seen the worst of this

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Speaker 1: earning cycle? Or we still have some more pain to

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Speaker 1: go here?

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Speaker 3: In Q three, well, you know we are going to

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Speaker 3: see some pain because the latest factset pronouncements show that

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Speaker 3: on average we should just be a little bit below

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Speaker 3: the flat line, which is going to reflect the third

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Speaker 3: or fourth quarter in a row of negative year over

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Speaker 3: year earnings. Well, you know, you buy stocks for earnings.

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Speaker 3: If they're not making more money than they were the

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Speaker 3: prior year, Well, what's the point. Well, the point's going

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Speaker 3: to be that forecasters are looking for a close to

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Speaker 3: twelve percent jump in earnings in twenty twenty four, and

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Speaker 3: you buy a stock not for the past quarters earnings,

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Speaker 3: but for the upcoming earnings. So you know, all lives

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Speaker 3: are really going to be focused, not necessarily in what

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Speaker 3: they report, but what they say about conditions going forward.

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Speaker 3: If they're upbeat and constructive, that's the reason to jump

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Speaker 3: back in. If not, people may want to hold their power,

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Speaker 3: and that could be a more slogging that we're going

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Speaker 3: to have to do in the market.

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Speaker 4: Here, tell us where you're at, David, for you know,

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Speaker 4: looking into the November FOMC at this point and expectations

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Speaker 4: for the rest of the year as well.

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Speaker 3: So I think it's a coin toss right now as

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Speaker 3: to whether they're going to be another hike in November.

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Speaker 3: Counseling for it is they don't want to have to

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Speaker 3: say they're done, have assets take off and create another

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Speaker 3: inflationary problem. Want they don't want to say that they're

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Speaker 3: done and then have to come back in again. But

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Speaker 3: on the other hand, you know, these interest rate hikes

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Speaker 3: act with a long and variable lag. You know, I'm

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Speaker 3: still looking at this residence or real estate market where

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Speaker 3: mortgage rates have more than doubled. You know, all things

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Speaker 3: being equal, that means carrying costs have doubled. How can

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Speaker 3: residents or real estate prices stay where they are? And

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Speaker 3: that's consumer's biggest asset. So I think that there's a

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Speaker 3: lot of reasons for caution on the part of the

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Speaker 3: Federal Reserve. And so my best guess is they sit tight,

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Speaker 3: but they say they're going to stay vigilant. But we

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Speaker 3: all see all right.

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Speaker 1: David, thanks so much for joining us. We always appreciate

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Speaker 1: getting your thoughts. David Deets, managing Principal and senior portfolio

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Speaker 1: strategist at Peepeck Private Wealth Management.

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Speaker 6: You're listening to the team Ken's Are Live program Bloomberg

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Speaker 6: Markets weekdays at ten am Eastering.

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Speaker 6: The iHeartRadio app and the Bloomberg Business app or listen

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Speaker 1: Let's go to our next guest, because I'm looking at

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Speaker 1: this market and we had the job market, the job

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Speaker 1: opening is the Jolts thing MEJIGGI that came in really strong,

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Speaker 1: higher than any forecast out there. So of course the

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Speaker 1: market says, well, the Fed's not going to be cutting

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Speaker 1: rates anytime soon, maybe even raise rates. So let's check

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Speaker 1: in with Meghan Horneman. She's a chief investment officer at Verdants. Megan,

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Speaker 1: what do you make of the Jolts data we saw

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Speaker 1: this morning and the market's reaction to it.

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Speaker 7: So it is one month, we have to remember that

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Speaker 7: it has been consistently coming down. It was surprising to us.

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Speaker 7: I mean it was very concentrated in some of the

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Speaker 7: white collar jobs in finance, business education. It's going to

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Speaker 7: be more important on how that translates into Friday's number,

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Speaker 7: if it does at all. The one thing we took

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Speaker 7: out of that report is the quits rate, So that's

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Speaker 7: the amount of people that are voluntarily leaving their job,

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Speaker 7: and that still is very low. So that shows that

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Speaker 7: there isn't a ton of confidence in the future of

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Speaker 7: the labor market. People are holding on to their current jobs.

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Speaker 7: Let's just see what happens on Friday. We've already been

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Speaker 7: in the camp that there's more of a chance the

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Speaker 7: FED will have to raise rates at least one more

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Speaker 7: time this year. Whether it's November or December really will

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Speaker 7: depend on the data that's coming in. Right now. We

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Speaker 7: do see, you know, the labor market in its entirety

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Speaker 7: is still relatively strong, so the Fed can't necessarily pull

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Speaker 7: back what they're doing. The other thing that has concerned

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Speaker 7: us has been the fact that oil prices are back

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Speaker 7: on the rise, So that's going to cost some volatility

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Speaker 7: in the inflation data and make the job for the

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Speaker 7: FED even more difficult.

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Speaker 4: You also mentioned in the Joltz report there's a layoffs

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Speaker 4: also stayed low in addition to quits. And looking ahead

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Speaker 4: then to Friday with the jobs report, I mean, where

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Speaker 4: do you see the weakness coming from. It looks like,

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Speaker 4: you know, people have been calling for the hiring to

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Speaker 4: be slowing, and it is slowing. But I don't know.

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Speaker 4: Some of these estimates in here, for like one hundred

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Speaker 4: thousand down from one hundred and eighty seven that would

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Speaker 4: be a huge drop off.

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Speaker 7: I mean, as far as weakness in the labor market,

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Speaker 7: let's remember that the labor market is a lagging indicator.

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Speaker 7: So a lot of people put so much kind of

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Speaker 7: credence into every month's jobs report and the fact that

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Speaker 7: it's strong and the Fed's going to have to do

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Speaker 7: so much more. Let's just remember it's a lagging indicator.

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Speaker 7: It is what's kept the economy afloat for this entire year.

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Speaker 7: But going forward, there are some cracks that are starting

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Speaker 7: to emerge. When you look at some of the underlying

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Speaker 7: indicators and some of the indexes in manufacturing or even

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Speaker 7: the service side, this is showing weakness. We know that

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Speaker 7: from the construction side there's weakness there with the housing

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Speaker 7: market being in such disarray. So I don't necessarily think that,

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Speaker 7: you know, from the weakness in the labor market will

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Speaker 7: continue to materialize. It's just not going to materialize immediately. Also,

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Speaker 7: we do, in reality have a structural issue with labor

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Speaker 7: market right now. We have some demographics that are concerning.

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Speaker 7: But I do think if you look over a long

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Speaker 7: period of time, so I'm not talking about this month

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Speaker 7: or next month, there are other things that we have

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Speaker 7: to member like AI. This will come in and also

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Speaker 7: help with some of the structural issues in the labor market.

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Speaker 7: I just think it's going to make the Fed's job

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Speaker 7: very difficult and they're going to have to tread very

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Speaker 7: lightly with this. Unfortunately, it looks like they're going to

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Speaker 7: push the economy into a recession, a needed recession. There

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Speaker 7: are some excesses that need to be cleared out, but unfortunately,

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Speaker 7: with the amount of tightening that they're doing and that

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Speaker 7: they need to do, it's likely pushing the economy into recession.

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Speaker 1: Oh boy, all right, So I had taken recession off

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Speaker 1: the table, Megan, three months ago, So we'll have to

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Speaker 1: see how that plays out.

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Speaker 5: But I trust your opinion a lot more than mine.

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Speaker 5: Looking at the S and P.

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Speaker 1: Five hundred, Megan, you know, we're still up ten percent

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Speaker 1: for the year, but you know, down eight percent or

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Speaker 1: so from that. I guess that high back in the

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Speaker 1: July or so. Has a market adequally priced in higher

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Speaker 1: for longer?

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Speaker 5: Or do we have more to go? Or are we

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Speaker 5: going to tread water?

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Speaker 1: How do you kind of view the next three to

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Speaker 1: six months.

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Speaker 7: I still don't think it's completely over. I think a

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Speaker 7: lot of it has been done the damage, and we've

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Speaker 7: seen this has been a pretty rapid move. I just

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Speaker 7: don't think from a valuation perspective, there's two things. I

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Speaker 7: think PE multiples still are a little too high given

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Speaker 7: the higher for longer, and I also don't think I

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Speaker 7: know you mentioned you took recession off the table three

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Speaker 7: months ago. We've kind of always been in the camp

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Speaker 7: that there'd be a recession, but now there's more people

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Speaker 7: coming back into the camp that unfortunately this will end

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Speaker 7: in in a recession, whether it's a short and shallow recession,

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Speaker 7: but some sort of a recession. The earnings expectations for

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Speaker 7: next year aren't really reflecting that yet, so I'm afraid

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Speaker 7: that we're going to see earnings expectations come down lower

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Speaker 7: for next year, So that could put some more downward

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Speaker 7: pressure on the market.

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Speaker 4: There's still so much division within the FED right now

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Speaker 4: of where do we go from here, And you know,

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Speaker 4: I want to ask Megan, maybe you've got a better

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Speaker 4: idea then than they do right now of what the

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Speaker 4: data is telling you in terms of the direction of rates.

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Speaker 4: Right now, you think another hike maybe possible this year?

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Speaker 7: Yeah, And I won't say I'm smarter than anybody at

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Speaker 7: the FED. But I will say that I think it

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Speaker 7: is good to have some of the division there in

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Speaker 7: the committee because we are walking such a line. Inflation

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Speaker 7: is extraordinarily easy to reignite, especially if you start to

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Speaker 7: give the signs that hey, we are done, rate cuts

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Speaker 7: are done, or rate hikes, sorry, rate hikes are done,

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Speaker 7: because then eventually people are going to be looking for

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Speaker 7: that rate cut. What my concern is that that rate

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Speaker 7: cut isn't going to happen anytime soon because they're walking

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Speaker 7: such a fine line with inflation. With the PCE core,

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Speaker 7: we did just get below four percent on a year

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Speaker 7: of a year basis. That's good, Inflation is going in

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Speaker 7: the right direction. But there are some other factors that

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Speaker 7: we're concerned what just cause a lot of volatility and

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Speaker 7: inflation and make us getting from that four or five

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Speaker 7: percent inflation down to two percent much more difficult.

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Speaker 1: WTI crude oil back around ninety dollars a barrel. Is

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Speaker 1: there still an energy trade here for investors or has

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Speaker 1: that kind of played out?

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Speaker 7: I think if you're just looking at from a return perspective,

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Speaker 7: it is. Look, a lot of it has been priced

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Speaker 7: into the market. We think it's definitely an issue from

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Speaker 7: the inflation standpoint, but it's also something that can really

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Speaker 7: hurt the consumer. Sometimes the cure for high prices is

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Speaker 7: high prices, and energy is one of those things. If

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Speaker 7: this causes demand to pull back substantially, for the economy

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Speaker 7: to fall into recession, commodities including oil, they're not They

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Speaker 7: can't escape that weakness when we do fall into an

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Speaker 7: economic contraction.

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Speaker 1: All right, Megan, thank you so much for joining us again.

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Speaker 1: I always appreciate getting your thoughts. Megan Horneman, a chief

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Speaker 1: investment officer at Verdants.

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Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 6: flagship New York station, Just say Alexa Play Bloomberg eleven thirty.

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Speaker 1: Josh Joseph, CEO of Big Plan Holdings, he joins us

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Speaker 1: live here on our Bloomberg Interactive Broker studio. Josh, thanks

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Speaker 1: so much for joining us here. What is Big Plan

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Speaker 1: Holdings and how'd you get here?

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Speaker 6: Yeah?

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Speaker 8: Thank you for having me. Big Plan Holdings is a

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Speaker 8: diversified family office that my wife and daughters run out

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Speaker 8: of Nashville, Tennessee at this point, focused in cannabis, real estate, hospitality, fashion,

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Speaker 8: professional sports, music, and entertainment.

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Speaker 1: You funded this family office with the sale.

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Speaker 8: Of your cannabis company, yeah, out of Chicago.

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Speaker 5: Yeah.

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Speaker 8: We founded a company in Chicago in the Chicago Land

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Speaker 8: area back in twenty fourteen fifteen, and grew that to

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Speaker 8: the largest privately held cannabis company in the US upon

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Speaker 8: an exit in July twenty two. Would you to cure

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Speaker 8: Leaf acquired US. That's a public traded yeah company, Yeah,

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Speaker 8: public Canadian company. Yeah, you can only be public right

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Speaker 8: now in Canada in the cannabis space.

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Speaker 5: That's a good American story. Yeah.

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Speaker 4: So what's the steely this story with the legality of

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Speaker 4: cannabis and Tennessee right now?

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Speaker 5: Not much of one. Yeah, not much Yeah, not much

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Speaker 5: of one. Yeah.

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Speaker 8: Tennessee is going to be one of the last remaining

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Speaker 8: states to fall, is my guess at this point. So

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Speaker 8: has that you know, Tennessee is a very strong state.

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Speaker 8: So you know, more often than not, the states will

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Speaker 8: jump in because of you know, needing some additional money

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Speaker 8: to come in and you know, right size budgets, et cetera.

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Speaker 8: Tennessee's fiscally strong. I think politics also, of course plays

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Speaker 8: a role in that as well. And I think that

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Speaker 8: they'll be one of the last states to fall.

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Speaker 4: So when you say fiscally strong, AKA, they don't have

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Speaker 4: much of a financial incentive here, correct.

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Speaker 1: Okay, So where we on the national legislation for cannabis,

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Speaker 1: because it feels like that domino has to fall before

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Speaker 1: banking can have you know, it just seems like that

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Speaker 1: has to happen.

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Speaker 5: At some point.

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Speaker 8: Yeah, A lot of people think that federal legalization is

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Speaker 8: the key. I actually don't. I think a lot of

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Speaker 8: us who've been in the business, you know, I've been

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Speaker 8: in it since twenty fourteen, which is, you know, about

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Speaker 8: fifty years in any other industry, I think federal legalization

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Speaker 8: really is We're fine keeping it at the state level

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Speaker 8: in this industry. But how about like banking, Yeah, what

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Speaker 8: we need to happen, what we need to have happened,

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Speaker 8: or two or three things there, three or four things really. Recently,

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Speaker 8: the Department of Health and Human Services just about two

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Speaker 8: weeks ago made a recommendation to reschedule cannabis to a

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Speaker 8: Schedule three drug from a Schedule one that would allow

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Speaker 8: a couple of things, a couple dominoes to fall into place,

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Speaker 8: that would allow hopefully what will be safe banking to

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Speaker 8: be passed on Capitol Hill, which has already passed through

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Speaker 8: the House seven times and has failed in the Senate

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Speaker 8: each time. So we're hoping that with this most recent

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Speaker 8: subcommittee bipartisan subcommittee legislation from a week or two ago

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Speaker 8: that came.

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Speaker 5: Through that hopefully we'll get that passed.

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Speaker 8: There's something in the IRS tax co to ADE that

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Speaker 8: we are not allowed to use in cannabis.

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Speaker 5: We are very very hopeful.

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Speaker 8: That we will be allowed to use to ADE and

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Speaker 8: exercise that to allow for the appropriate deductions to be taken,

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Speaker 8: which will almost automatically allow for all the big MSOs

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Speaker 8: and larger operators to be profitable right away, almost overnight,

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Speaker 8: and then being uplisted and being allowed to be listed

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Speaker 8: on the Nasdaq would be absolutely tremendous. So right now

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Speaker 8: you can only be listed in Canada. So that's why

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Speaker 8: federal legalization really it doesn't matter if that makes sense

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Speaker 8: all that much.

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Speaker 4: It looks like this bill that that just went through

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Speaker 4: the Senate Banking Committee seems pretty serious. This is kind

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Speaker 4: of crazy to me. I had no idea that cannabis

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Speaker 4: related companies right now are forced to operate using only cash.

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Speaker 4: Is that true?

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Speaker 8: Yeah, Yeah, it's aund so archaic.

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Speaker 5: It's really really antiquated. Yeah, really antiquated.

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Speaker 8: It's a real challenge in the industry for you know,

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Speaker 8: as you scale your business, it's a tremendous, tremendous challenge.

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Speaker 8: Is a consumer or a patient or a consumer, it's

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Speaker 8: a challenge. And so this would allow really, you know,

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Speaker 8: for the big banks, the FDIC insured banks, to be

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Speaker 8: able to take our money and also provide loans to us,

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Speaker 8: because as of now, to scale your business in the

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Speaker 8: cannabis industry, it's really all cash. You can't provide any

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Speaker 8: no one can provide you any leverage in the public markets.

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Speaker 8: So you're getting leveraged from private investors like ourselves. You know,

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Speaker 8: we'll we'll, we'll lend to certain cannabis operators, et cetera.

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Speaker 8: But they don't come they don't come cheap.

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Speaker 4: Yep.

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Speaker 1: All right, So we have legal cannabis here in New York.

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Speaker 1: But if you I'm sure you've walked down the streets

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Speaker 1: of New York City there's these cheesy weed shops two

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Speaker 1: or three to every block.

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Speaker 5: What did the city do so get.

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Speaker 1: So incredibly wrong here?

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Speaker 5: Yeah?

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Speaker 8: The state, So it's yeah, it's it's at the state level.

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Speaker 8: And in my opinion, it's it's at the state level.

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Speaker 8: States state will you know, enact legislation, filled adopt rules

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Speaker 8: and rigs as we call them, and you know, and

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Speaker 8: then New York like so many other states, unfortunately, will

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Speaker 8: roll out a program and they're just not ready for it.

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Speaker 8: And time and time again we've seen this over the

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Speaker 8: last decade when states roll them out, especially in limited

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Speaker 8: license states. There's rightfully, there's been a real big push

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Speaker 8: for DEI diversity, equity and inclusion, social equity participation in

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Speaker 8: the cannabis industry, and there are just not the appropriate

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Speaker 8: tool for a lot of these states when they roll

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Speaker 8: out programs to allow for the influx of interest that

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Speaker 8: they're getting that these cannabis commissions are getting. And so

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Speaker 8: New York is one of many many states. Really, Yeah,

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Speaker 8: can you put the genie back in the bottle here?

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Speaker 8: It's tough. It's hard. Yeah, it's hard. You know, they're

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Speaker 8: going to try, they're trying right now. But it's a challenge.

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00:21:18,400 --> 00:21:21,040
Speaker 1: Because you're supposed to have approved, state approved dispensaries, which

438
00:21:21,040 --> 00:21:23,160
Speaker 1: we have a couple or three here in the city.

439
00:21:23,200 --> 00:21:25,399
Speaker 1: Matt Miller would know the details better than me. But

440
00:21:25,480 --> 00:21:29,200
Speaker 1: then we have the unlicensed ones, right, and I guess

441
00:21:29,320 --> 00:21:32,479
Speaker 1: the law enforcements just has chosen not to enforce.

442
00:21:32,920 --> 00:21:34,879
Speaker 8: Yeah, that's that's what they've chosen to do. You know,

443
00:21:34,920 --> 00:21:36,639
Speaker 8: at this point, you know they're a bigger fish to

444
00:21:36,680 --> 00:21:40,240
Speaker 8: fry from a law enforcement standpoint, and so it is

445
00:21:40,280 --> 00:21:41,840
Speaker 8: tough to put the genie back in the bottle.

446
00:21:41,880 --> 00:21:43,240
Speaker 5: To your question, is.

447
00:21:43,160 --> 00:21:44,960
Speaker 4: That a problem in other states too? Or is it

448
00:21:45,040 --> 00:21:47,040
Speaker 4: just US city folks complaining here?

449
00:21:47,160 --> 00:21:49,320
Speaker 5: No, I think it is.

450
00:21:49,440 --> 00:21:54,480
Speaker 8: I think New York, though, has really has a real issue.

451
00:21:55,480 --> 00:21:57,320
Speaker 8: Actually job yeah, yeah, I think I think you have

452
00:21:57,320 --> 00:21:59,920
Speaker 8: a real issue. Coming from Illinois, coming from the Chicagoland area,

453
00:22:00,040 --> 00:22:03,560
Speaker 8: I will say as is screwed up as our state,

454
00:22:03,680 --> 00:22:05,800
Speaker 8: my home, my former home state of Illinois is in

455
00:22:05,840 --> 00:22:09,600
Speaker 8: many respects Illinois cannabis program. We were the eleventh state

456
00:22:09,640 --> 00:22:12,080
Speaker 8: back in twenty fourteen. They actually did a really nice

457
00:22:12,160 --> 00:22:15,800
Speaker 8: job crafting a program that did not provide for what

458
00:22:15,880 --> 00:22:17,000
Speaker 8: is happening here in New York.

459
00:22:17,200 --> 00:22:21,359
Speaker 1: What are the economics for a state for the cannabis.

460
00:22:21,000 --> 00:22:21,720
Speaker 5: Business, does it?

461
00:22:21,960 --> 00:22:25,040
Speaker 1: What are the what are the revenue arguments that are

462
00:22:25,080 --> 00:22:27,359
Speaker 1: being made have been made, and are they coming to fruition?

463
00:22:27,720 --> 00:22:28,920
Speaker 5: Yeah? They are? Yeah.

464
00:22:28,960 --> 00:22:32,480
Speaker 8: I mean you know, Illinois recently, you know, had more

465
00:22:32,480 --> 00:22:35,880
Speaker 8: in sales tax revenue, as an example, in cannabis sales.

466
00:22:35,680 --> 00:22:36,639
Speaker 5: Than alcohol sales.

467
00:22:36,760 --> 00:22:38,960
Speaker 8: Really yeah, and you're going to continue to see that

468
00:22:39,040 --> 00:22:41,919
Speaker 8: trend around the country, is my guess. So you know,

469
00:22:41,960 --> 00:22:45,040
Speaker 8: when these states are putting together annual budgets, you know,

470
00:22:45,480 --> 00:22:49,520
Speaker 8: this cannabis tax that's coming in is rather significant. You know,

471
00:22:49,520 --> 00:22:51,040
Speaker 8: I can talk to you, you know about Illinois just

472
00:22:51,040 --> 00:22:53,320
Speaker 8: for a second, just because that was where I started.

473
00:22:53,359 --> 00:22:55,040
Speaker 8: And you know, if you're a medical patient, you're going

474
00:22:55,080 --> 00:22:57,000
Speaker 8: to pay about three or four percent. I want to say,

475
00:22:57,080 --> 00:23:00,479
Speaker 8: if you're an adult use customer, you're going to pay

476
00:23:00,520 --> 00:23:04,400
Speaker 8: somewhere between thirty and forty percent of tax based upon

477
00:23:04,640 --> 00:23:07,159
Speaker 8: you So figure you're you're at a thirty five percent

478
00:23:07,520 --> 00:23:08,320
Speaker 8: average tax.

479
00:23:08,760 --> 00:23:11,440
Speaker 5: So yeah, it adds up, you know, pretty significantly.

480
00:23:11,800 --> 00:23:15,040
Speaker 4: When we're looking at you know, next states that could

481
00:23:15,400 --> 00:23:18,760
Speaker 4: legalize weed, cannabis.

482
00:23:18,160 --> 00:23:20,520
Speaker 5: Cannabis, cannabis, yes, cannabis.

483
00:23:20,119 --> 00:23:22,000
Speaker 4: Is proper word. Here can we not say weed.

484
00:23:22,119 --> 00:23:23,120
Speaker 6: Is that weird?

485
00:23:23,200 --> 00:23:23,440
Speaker 5: Of course?

486
00:23:23,640 --> 00:23:26,920
Speaker 4: Okay, oh right, yes, excuse me, right, that one of

487
00:23:26,960 --> 00:23:30,240
Speaker 4: our new favorite tickers. But when we're looking at legalization

488
00:23:30,359 --> 00:23:33,879
Speaker 4: for future states, I mean, is it really a political argument?

489
00:23:34,040 --> 00:23:35,040
Speaker 4: Is it a fiscal one?

490
00:23:35,080 --> 00:23:35,159
Speaker 3: Like?

491
00:23:35,280 --> 00:23:37,720
Speaker 4: What are the big talking points here?

492
00:23:37,800 --> 00:23:38,000
Speaker 5: Yeah?

493
00:23:38,040 --> 00:23:40,840
Speaker 8: What happens is every every state will always roll out

494
00:23:40,840 --> 00:23:43,880
Speaker 8: a medical program first, every single one. They will typically

495
00:23:44,000 --> 00:23:47,520
Speaker 8: let that go for a year, two years. They'll see

496
00:23:47,520 --> 00:23:50,119
Speaker 8: how it goes. They will notice that there is not

497
00:23:50,200 --> 00:23:52,680
Speaker 8: an uptick in criminal activity, they will notice that there

498
00:23:52,720 --> 00:23:55,240
Speaker 8: is not an uptick in DUIs and all of that

499
00:23:55,320 --> 00:23:57,760
Speaker 8: kind of stuff that folks get scared of, that officials

500
00:23:57,760 --> 00:24:01,040
Speaker 8: get scared of. Then they start talking about adult use.

501
00:24:01,160 --> 00:24:04,880
Speaker 8: You're a recreational use, and so it takes a couple

502
00:24:04,920 --> 00:24:07,840
Speaker 8: of minutes for a state to come around, and you know,

503
00:24:07,920 --> 00:24:10,200
Speaker 8: and then once they do it, then takes a little

504
00:24:10,240 --> 00:24:13,199
Speaker 8: bit more time for them to enact adult use legislation.

505
00:24:13,520 --> 00:24:15,520
Speaker 8: We're seeing it move a little bit quicker now, just

506
00:24:15,560 --> 00:24:18,000
Speaker 8: because we have so many states that have opted into

507
00:24:18,440 --> 00:24:20,760
Speaker 8: medical programs. I think we're up to thirty seven I

508
00:24:20,800 --> 00:24:24,359
Speaker 8: want to say states plus four territories that I could

509
00:24:24,359 --> 00:24:27,040
Speaker 8: be off by one or two, but around that number

510
00:24:27,160 --> 00:24:29,960
Speaker 8: that have at least medical programs, and then when you

511
00:24:30,000 --> 00:24:32,520
Speaker 8: break that down, you're having the low twenties on adult use.

512
00:24:33,240 --> 00:24:35,320
Speaker 5: Hey, Josh, thanks so much for joining us. Really appreciate

513
00:24:35,359 --> 00:24:36,080
Speaker 5: you coming in here.

514
00:24:36,240 --> 00:24:40,600
Speaker 1: Josh Joseph, CEO of Big Plan Holdings talking about the

515
00:24:40,600 --> 00:24:43,399
Speaker 1: cannabis business. Make a lot of movement here on the

516
00:24:43,440 --> 00:24:44,119
Speaker 1: state level.

517
00:24:45,280 --> 00:24:49,119
Speaker 6: You're listening to the Team Can't Live program Bloomberg Markets

518
00:24:49,160 --> 00:24:52,280
Speaker 6: weekdays at ten am Eastern on Bloomberg dot Com, the

519
00:24:52,359 --> 00:24:55,480
Speaker 6: iHeartRadio app and the Bloomberg Business app, or listen on

520
00:24:55,560 --> 00:24:57,520
Speaker 6: demand wherever you get your podcasts.

521
00:25:00,000 --> 00:25:01,120
Speaker 5: Satalie Traetrevetic Joints.

522
00:25:01,119 --> 00:25:03,680
Speaker 1: So she's had an investment grade credit strategy at paid

523
00:25:03,720 --> 00:25:06,000
Speaker 1: in and regal. What should I do with a credit

524
00:25:06,040 --> 00:25:08,600
Speaker 1: side because for the first time in like forever, I

525
00:25:08,640 --> 00:25:09,600
Speaker 1: can get yield here.

526
00:25:10,640 --> 00:25:13,200
Speaker 9: Yield at six point one five percent are pretty attractive.

527
00:25:13,359 --> 00:25:15,320
Speaker 9: But these days it always seems like the best day

528
00:25:15,359 --> 00:25:18,240
Speaker 9: to buy bonds is tomorrow. So it seems to be

529
00:25:18,800 --> 00:25:21,239
Speaker 9: going higher and higher. We think we are near the

530
00:25:21,280 --> 00:25:23,920
Speaker 9: top and you kind of can lock in rates today

531
00:25:23,920 --> 00:25:26,400
Speaker 9: at these higher levels. You mentioned the two year at

532
00:25:26,400 --> 00:25:28,679
Speaker 9: five in a little bit is nice, but we were

533
00:25:28,720 --> 00:25:31,000
Speaker 9: seeing investors want to go further out the curve, even

534
00:25:31,040 --> 00:25:33,080
Speaker 9: if it means taking the lower yield, you can still

535
00:25:33,080 --> 00:25:35,880
Speaker 9: get close to those six percent on ten year corporates,

536
00:25:35,880 --> 00:25:37,080
Speaker 9: and we find that pretty compelling.

537
00:25:37,440 --> 00:25:40,159
Speaker 1: Natalie True Trevethic Joints is she's had investment grade credit

538
00:25:40,160 --> 00:25:41,840
Speaker 1: strategy at paid In and Regal.

539
00:25:42,520 --> 00:25:45,040
Speaker 4: Thanks Natalie for joining us. And yeah, you know, Paul

540
00:25:45,280 --> 00:25:47,200
Speaker 4: was right. I am a bit of a credit person,

541
00:25:47,200 --> 00:25:50,359
Speaker 4: at least in a former life here, and you know,

542
00:25:50,400 --> 00:25:53,160
Speaker 4: I'm looking at investment grade bond yields right now, and

543
00:25:53,640 --> 00:25:57,359
Speaker 4: spreads are still pretty tight all things considered. There there

544
00:25:57,400 --> 00:25:59,680
Speaker 4: is a little bit of widening here. But I guess

545
00:25:59,720 --> 00:26:02,199
Speaker 4: like the question for you right now is probably what

546
00:26:02,400 --> 00:26:04,359
Speaker 4: like there probably is no need to take any credit

547
00:26:04,440 --> 00:26:07,080
Speaker 4: risk right like, you know, duration is just like doing

548
00:26:07,119 --> 00:26:07,960
Speaker 4: all the work for you.

549
00:26:09,320 --> 00:26:11,320
Speaker 9: Duration is doing the bulk of the work. But getting

550
00:26:11,359 --> 00:26:13,480
Speaker 9: that extra one hundred and twenty five basis points by

551
00:26:13,520 --> 00:26:17,160
Speaker 9: going into id credit still seems to make sense. There

552
00:26:17,160 --> 00:26:19,680
Speaker 9: has been this tug of war between credit looking rich

553
00:26:19,720 --> 00:26:22,479
Speaker 9: on a spread basis but attractive on a yield basis,

554
00:26:22,720 --> 00:26:25,560
Speaker 9: and all factors are signaling that people are yield buyers

555
00:26:25,560 --> 00:26:28,080
Speaker 9: and are really looking at these high yields that you

556
00:26:28,080 --> 00:26:30,120
Speaker 9: can get in high yield a year or two ago

557
00:26:30,480 --> 00:26:32,680
Speaker 9: and seeing it as a relatively safe have in place

558
00:26:32,720 --> 00:26:33,520
Speaker 9: to park their money.

559
00:26:34,400 --> 00:26:36,160
Speaker 1: Natalie, how do you guys think about it over there

560
00:26:36,160 --> 00:26:37,880
Speaker 1: at paid and Regal in terms of what this filter

561
00:26:38,000 --> 00:26:40,800
Speaker 1: reserve is going to do here? Is there another one

562
00:26:40,840 --> 00:26:43,200
Speaker 1: move higher or do you think they can stay here?

563
00:26:44,320 --> 00:26:47,000
Speaker 9: We think there's one move higher. The issue which we

564
00:26:47,000 --> 00:26:49,639
Speaker 9: think is going to propel that is just still strong employment.

565
00:26:50,280 --> 00:26:53,000
Speaker 9: Consumers still have a lot of money. Maybe the savings

566
00:26:53,040 --> 00:26:57,000
Speaker 9: rate is coming down, but their expenditures are still below

567
00:26:57,040 --> 00:26:59,160
Speaker 9: what they're earning, so we still feel that the consumer

568
00:26:59,200 --> 00:27:01,800
Speaker 9: has some strength behind them.

569
00:27:01,960 --> 00:27:04,320
Speaker 4: Yeah, that's got to be a factor. Then concerning for

570
00:27:04,520 --> 00:27:07,000
Speaker 4: the Fed here and we obviously saw the jolts support

571
00:27:07,080 --> 00:27:11,240
Speaker 4: this morning, job openings not coming down. You must be

572
00:27:11,320 --> 00:27:14,120
Speaker 4: looking ahead then to Friday and I'm the next catalyst

573
00:27:14,160 --> 00:27:17,920
Speaker 4: then on the jobs report then for rates, any expectations

574
00:27:17,960 --> 00:27:19,959
Speaker 4: as we're looking into later this week.

575
00:27:21,040 --> 00:27:22,720
Speaker 9: Yeah, we think as long as you get one hundred

576
00:27:22,760 --> 00:27:25,760
Speaker 9: thousand of job growth per month, that could keep us

577
00:27:25,760 --> 00:27:28,520
Speaker 9: at an unemployment rate of three point eight percent. So

578
00:27:28,640 --> 00:27:31,119
Speaker 9: for the catalyst for the unemployment rate to move higher,

579
00:27:31,240 --> 00:27:33,639
Speaker 9: which would really maybe give the FED more reason to pause.

580
00:27:33,800 --> 00:27:35,720
Speaker 9: We just don't really see that in the cards in

581
00:27:35,760 --> 00:27:37,040
Speaker 9: the near term.

582
00:27:37,520 --> 00:27:40,040
Speaker 1: Not only in a credit space. Are there certain industries

583
00:27:40,119 --> 00:27:42,600
Speaker 1: that you guys feel more comfortable here or some industries

584
00:27:42,600 --> 00:27:46,080
Speaker 1: that maybe represent better value right here given where we

585
00:27:46,119 --> 00:27:47,080
Speaker 1: are in the economic cycle.

586
00:27:48,119 --> 00:27:51,240
Speaker 9: Sure, from the credit perspective, we're actually liking the utility

587
00:27:51,320 --> 00:27:54,560
Speaker 9: sector right now. We've seen valuations cheap and up there,

588
00:27:54,680 --> 00:27:56,639
Speaker 9: and they tend to be higher quality bonds which are

589
00:27:56,680 --> 00:28:00,200
Speaker 9: also secured, so we're seeing better value in that sector today.

590
00:28:00,359 --> 00:28:02,920
Speaker 9: We're also seeing value in some of the consumer sectors.

591
00:28:03,240 --> 00:28:06,000
Speaker 9: Autos have also cheapened up a little because of the strike,

592
00:28:06,280 --> 00:28:07,720
Speaker 9: and we don't think this is going to be a

593
00:28:07,760 --> 00:28:11,920
Speaker 9: long term burden on their ability to continue to earn

594
00:28:12,359 --> 00:28:14,679
Speaker 9: strong cash flows. So that's a sector we also like

595
00:28:14,680 --> 00:28:16,240
Speaker 9: buying on this little bit of weakness.

596
00:28:16,640 --> 00:28:18,560
Speaker 4: How about in terms of credit quality, you think this

597
00:28:18,640 --> 00:28:21,119
Speaker 4: is a time to maybe be greedy, reached down a

598
00:28:21,119 --> 00:28:22,480
Speaker 4: little bit, or no need.

599
00:28:24,440 --> 00:28:27,000
Speaker 9: Well, we like investment, great credit, but we are fine

600
00:28:27,040 --> 00:28:29,000
Speaker 9: going down into the triple B space. A lot of

601
00:28:29,000 --> 00:28:31,400
Speaker 9: the single lay names have had so much demand that

602
00:28:31,440 --> 00:28:34,439
Speaker 9: you aren't offering you a big premium over treasuries. We

603
00:28:34,480 --> 00:28:36,680
Speaker 9: also think there's some value in the high yield market.

604
00:28:36,720 --> 00:28:38,640
Speaker 9: We don't think there's going to be a big wave

605
00:28:38,680 --> 00:28:41,600
Speaker 9: of defaults here, so playing some of that crossover space

606
00:28:41,640 --> 00:28:43,640
Speaker 9: is pretty attractive because then you get yields closer to

607
00:28:43,680 --> 00:28:44,360
Speaker 9: seven percent.

608
00:28:45,240 --> 00:28:46,280
Speaker 5: How about do you.

609
00:28:46,200 --> 00:28:48,600
Speaker 1: Guys have much exposure to the mortgage backed securities market,

610
00:28:48,600 --> 00:28:50,680
Speaker 1: because it just seems crazy with mortgage rates and what's

611
00:28:50,680 --> 00:28:51,720
Speaker 1: going on in the housing market.

612
00:28:51,760 --> 00:28:54,360
Speaker 5: I'm not sure if that's where you guys play as well.

613
00:28:55,160 --> 00:28:55,400
Speaker 3: Yeah.

614
00:28:55,400 --> 00:28:58,040
Speaker 9: Paydon as a firm has a lot of investments across mbs.

615
00:28:58,080 --> 00:28:59,880
Speaker 9: It's not my area of expertise, though.

616
00:29:01,560 --> 00:29:04,440
Speaker 4: Do you look at anything else in like the asset backspace?

617
00:29:04,480 --> 00:29:06,200
Speaker 4: I mean, I guess I would also maybe be a

618
00:29:06,200 --> 00:29:09,120
Speaker 4: little concerned with like auto loans right now and just

619
00:29:09,200 --> 00:29:11,840
Speaker 4: anything as you're saying, you know, if consumer spending might

620
00:29:11,880 --> 00:29:15,520
Speaker 4: be slowing here just looking at it from that macro perspective.

621
00:29:16,360 --> 00:29:18,680
Speaker 9: Yeah, from the macro perspective, we do see a little

622
00:29:18,720 --> 00:29:21,360
Speaker 9: bit of weakness, but the strength of some of these securities,

623
00:29:21,560 --> 00:29:24,760
Speaker 9: particularly in the triple A buckets, it's still very strong,

624
00:29:24,880 --> 00:29:27,400
Speaker 9: and we have seen valuations cheapen up here, so it

625
00:29:27,560 --> 00:29:30,160
Speaker 9: actually can be a bit of an opportunity to buy

626
00:29:30,160 --> 00:29:31,240
Speaker 9: in this weakness.

627
00:29:32,040 --> 00:29:34,080
Speaker 1: Now on what is seeing the new issue market, I'd

628
00:29:34,080 --> 00:29:36,800
Speaker 1: be you know, I can I wonder what the issuers

629
00:29:36,800 --> 00:29:39,720
Speaker 1: are thinking about here with these rates continuing to move higher.

630
00:29:39,800 --> 00:29:42,640
Speaker 5: What do you have like when your discussions with new issuers.

631
00:29:43,200 --> 00:29:45,320
Speaker 9: Yeah, there's been a lot of issuance in September, but

632
00:29:45,360 --> 00:29:48,800
Speaker 9: at underwhelmed relative to expectations. And what we're seeing is

633
00:29:48,840 --> 00:29:51,160
Speaker 9: a little bit of a dichotomy between what buyers want

634
00:29:51,160 --> 00:29:53,080
Speaker 9: to buy, which is ten and thirty year bonds, and

635
00:29:53,160 --> 00:29:55,120
Speaker 9: what issuers want to issue, which is really the front

636
00:29:55,200 --> 00:29:57,120
Speaker 9: end of the curve. We're seeing a lot more to

637
00:29:57,200 --> 00:29:59,720
Speaker 9: your issuance this year than we have before, and deals

638
00:29:59,720 --> 00:30:02,200
Speaker 9: are with a lot of two three, five sevens because

639
00:30:02,200 --> 00:30:05,480
Speaker 9: they rather have these higher rates for a shorter period

640
00:30:05,520 --> 00:30:07,880
Speaker 9: of time. And they also bought so much thirty year

641
00:30:07,920 --> 00:30:11,120
Speaker 9: paper post pandemic at virtually free rates, so they already

642
00:30:11,120 --> 00:30:13,719
Speaker 9: have that part of their maturity wall very full. So

643
00:30:13,760 --> 00:30:16,200
Speaker 9: we see them kind of topping up more the belly

644
00:30:16,240 --> 00:30:17,080
Speaker 9: of the curve here.

645
00:30:17,520 --> 00:30:19,640
Speaker 4: So what are your contacts on the sell side saying

646
00:30:19,680 --> 00:30:21,920
Speaker 4: about this? Are the issues going to start giving you

647
00:30:21,920 --> 00:30:22,400
Speaker 4: what you want.

648
00:30:23,680 --> 00:30:26,760
Speaker 9: No, deals have been coming up very tight levels, very

649
00:30:26,760 --> 00:30:30,560
Speaker 9: aggressive typically, you know, pricing twenty five basis points tighter

650
00:30:30,600 --> 00:30:34,440
Speaker 9: than their initial price talk and dealers and investors aren't

651
00:30:34,520 --> 00:30:37,360
Speaker 9: dropping from these deals. So the demand just is outweighing

652
00:30:37,400 --> 00:30:39,760
Speaker 9: the supply right now. So we think it's a little

653
00:30:39,760 --> 00:30:42,320
Speaker 9: bit more of a seller's market. And also you have

654
00:30:42,400 --> 00:30:45,600
Speaker 9: to think that these companies aren't refinancing their entire debt

655
00:30:45,640 --> 00:30:48,280
Speaker 9: stack at these higher yields of six percent. They've been

656
00:30:48,320 --> 00:30:51,160
Speaker 9: able to borrow very cheaply for many years, so they

657
00:30:51,160 --> 00:30:53,840
Speaker 9: aren't going to stop boring just because interest rates have

658
00:30:53,880 --> 00:30:56,080
Speaker 9: gone up. They want to maintain their access to the

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00:30:56,120 --> 00:30:56,920
Speaker 9: capital markets.

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Speaker 1: All right, Natalie, thanks so much for joining us. Really

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Speaker 1: appreciate you taking the time as always. Natalie Trevithick, head

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Speaker 1: of investment grade credit strategy at Payden and Regal.

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Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

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Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

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Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

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Speaker 2: at Matt Miller nineteen seventy three.

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Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney

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Speaker 1: before the podcast. You can always catch us worldwide at

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Speaker 1: Bloomberg Radio