WEBVTT - Stocks, Markets, and the Bond Market 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.080 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.720 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moven news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:20.960 --> 0:00:22.760 All right, let's keep an eye on the market here, 0:00:22.760 --> 0:00:25.439 as John was just reporting kind of a red day 0:00:25.560 --> 0:00:27.639 on the screen here to s and p off one 0:00:27.720 --> 0:00:30.319 percent and to me, the question is where do you 0:00:30.360 --> 0:00:32.320 go here? This fed is going to keep it higher 0:00:32.360 --> 0:00:34.599 for longer. Let's check in with our next guest. He's 0:00:34.600 --> 0:00:38.040 probably got an informed opinion. David Diets, managing principle and 0:00:38.080 --> 0:00:41.920 senior portfolio strategist at pepac Private Wealth Management. David, thanks 0:00:41.920 --> 0:00:44.559 for joining us again here. I'm a little concerned here 0:00:44.640 --> 0:00:47.880 that at the very least this stock market is range 0:00:47.920 --> 0:00:50.199 bound until we get a better sense of what this 0:00:50.240 --> 0:00:51.720 Federal Reserve is going to do here. 0:00:52.520 --> 0:00:55.480 Well, it could be worse than range bound, as we 0:00:55.520 --> 0:00:57.760 saw in September, where is the worst month of the 0:00:57.840 --> 0:01:00.480 year for many sectors of the market. The s and p. 0:01:00.600 --> 0:01:04.720 Five hundred. If this ten year treasury yield keeps rising, 0:01:05.920 --> 0:01:09.240 that just puts pressure on all assets, whether that be 0:01:09.319 --> 0:01:13.160 real estate, whether that be stocks, whether that be tech 0:01:13.200 --> 0:01:16.120 stocks or utility stocks and so forth, because it reduces 0:01:16.120 --> 0:01:19.280 that present value. The question is what is ultimately going 0:01:19.360 --> 0:01:22.840 to break the rise and this interest rates, And we're 0:01:22.959 --> 0:01:25.319 just not sure. But we're obviously we're looking at inflation, 0:01:25.400 --> 0:01:27.640 We're looking at the federal Reserve, We're looking at the 0:01:27.680 --> 0:01:30.520 amount of debt being issued by our federal government. We're 0:01:30.600 --> 0:01:34.880 wondering what central banks overseas are doing with their catch 0:01:35.080 --> 0:01:38.440 of US treasury securities that's all in the mix. 0:01:39.160 --> 0:01:41.200 And looking at some of these long term yields here, 0:01:41.600 --> 0:01:44.400 I mean, the thirty are just on absolute tear today. 0:01:45.040 --> 0:01:47.360 Anything really that's like, you know, standing out to you 0:01:47.400 --> 0:01:48.720 in that part of the curve right now. 0:01:49.520 --> 0:01:50.840 Well, certainly uncertainty. 0:01:51.000 --> 0:01:53.360 We just got a piece of information today, the so 0:01:53.440 --> 0:01:57.520 called Jolt survey, which showed there were more job openings 0:01:57.520 --> 0:02:00.320 than we're expected, and that's really an athem about to 0:02:00.440 --> 0:02:04.600 bond prices and going to create higher yields because one 0:02:04.640 --> 0:02:07.080 of the concerns of the bond market is if this 0:02:07.200 --> 0:02:10.600 economy stays strong and the one of the most important 0:02:10.639 --> 0:02:12.920 parts of it is labor, then there's going to be 0:02:13.000 --> 0:02:15.840 more demand for borrowing, there's going to be more inflation, 0:02:16.000 --> 0:02:19.760 there's going to be increasingly hawkish FED. So that has 0:02:19.880 --> 0:02:23.079 helped push yields up again today, and of course we're 0:02:23.080 --> 0:02:24.320 seeing the fallout of the market. 0:02:25.240 --> 0:02:26.800 You know, I was taking a look into the jolt 0:02:26.800 --> 0:02:29.160 support a little bit further here, and I'm not sure 0:02:29.200 --> 0:02:32.120 how much of it you've seen, but you know, most 0:02:32.120 --> 0:02:35.120 of this rise in job openings came pretty much exclusively 0:02:35.240 --> 0:02:39.200 from professional business services and finance and insurance jobs like 0:02:39.240 --> 0:02:42.200 that was like the more or less the bulk of 0:02:42.240 --> 0:02:44.600 the jump and openings here. How much do you think 0:02:44.639 --> 0:02:47.080 the FED reads into something like that? And of course, 0:02:47.120 --> 0:02:49.560 you know, there is the bigger picture. The labor market 0:02:49.600 --> 0:02:51.320 is still very strong. There still are a lot of 0:02:51.400 --> 0:02:54.600 job openings. But just looking at this one report here, 0:02:54.720 --> 0:02:57.280 seeing as it was so concentrated. 0:02:57.600 --> 0:03:00.520 Yeah, so absolutely, well, you know, I do think that 0:03:00.840 --> 0:03:03.040 these are the types of jobs that pay a little 0:03:03.080 --> 0:03:05.679 bit better as opposed to the service sectors. So there's 0:03:05.680 --> 0:03:07.760 a couple of things you could read into it. One 0:03:08.160 --> 0:03:11.200 is that this initial surge and service sector jobs post 0:03:11.200 --> 0:03:15.840 pandemic is starting to ease. Maybe that's reflective of middle 0:03:15.840 --> 0:03:19.040 and lower income Americas having to pull in their belts 0:03:19.080 --> 0:03:22.400 just a little bit as interest rates go up and 0:03:22.600 --> 0:03:26.040 inflation bites. And of course the other thing, if these 0:03:26.120 --> 0:03:28.239 higher paying jobs are the ones that are still most 0:03:28.240 --> 0:03:31.200 in demand, those ultimately pay a little bit more and 0:03:31.240 --> 0:03:34.200 that could exacerbate inflation. So you could make the case 0:03:34.240 --> 0:03:36.720 that this is not the best mixed from the point 0:03:36.720 --> 0:03:39.360 of view the Federal Reserve valuation. 0:03:39.880 --> 0:03:41.680 David, You know, I guess there's a couple of ways 0:03:41.680 --> 0:03:44.840 to look at valuation here. A the market's pretty pricey 0:03:44.880 --> 0:03:47.040 given where rates are, but if you back out the 0:03:47.080 --> 0:03:50.320 magnificent seven, maybe it's not as bad. How do you 0:03:50.360 --> 0:03:53.720 think about valuation as we guroup for another round of earnings? 0:03:54.600 --> 0:03:57.200 Yeah, absolutely, it is a tail to markets and so 0:03:57.280 --> 0:04:00.440 many different metrics. And Paul, your right to focus and 0:04:00.560 --> 0:04:04.360 valuation because now after the September and indeed the last 0:04:04.400 --> 0:04:08.360 two months of Q three plus of course Monday is mixed. Outing. 0:04:09.200 --> 0:04:13.240 If you strip out that magnificance magnificent seven, you've got 0:04:13.280 --> 0:04:16.280 a pe on the market that's only fifteen. You know, 0:04:16.400 --> 0:04:18.960 that's actually below what the average has been over the 0:04:19.040 --> 0:04:22.200 last decade. But you're also right to point too. You know, 0:04:22.360 --> 0:04:25.280 you need to always compare these things versus the yields 0:04:25.320 --> 0:04:29.440 available on benchmark treasuries, of course, and you know, so 0:04:29.560 --> 0:04:32.039 people are gonna say, well, gee, if I can get 0:04:32.040 --> 0:04:35.760 four point seven percent risk free from a treasury, admittedly 0:04:35.760 --> 0:04:38.680 with no growth of that income, that looks pretty good, 0:04:38.760 --> 0:04:42.599 even relative to a fifteen pe on the market, particularly 0:04:42.600 --> 0:04:45.880 given the risk of recession and increasingly hawkers fed, so 0:04:47.200 --> 0:04:50.640 valuations look better. That's reasons for optimism. But we're still 0:04:50.640 --> 0:04:52.239 looking over our shoulder at the bond market. 0:04:52.600 --> 0:04:54.880 You know, David, I'm an economy person and I was 0:04:54.960 --> 0:04:59.479 personally banking on this week being fairly quiet, expecting there 0:04:59.520 --> 0:05:03.359 to be no Joltz report, no jobs report, but no 0:05:03.480 --> 0:05:06.159 such thing. You know, we got a deal and the 0:05:06.200 --> 0:05:09.080 government is the lights are on for now. So looking 0:05:09.120 --> 0:05:11.760 ahead a little bit to Friday, what are you thinking 0:05:11.800 --> 0:05:12.840 ahead of the jobs report? 0:05:13.880 --> 0:05:16.719 Well, so it seems like the consensus on Wall Street 0:05:16.800 --> 0:05:20.279 is maybe some job creation, maybe one hundred thousand, and 0:05:20.320 --> 0:05:23.839 so we're going to be determining whether, you know, the 0:05:23.880 --> 0:05:27.680 actual jobs created are less or more. Unfortunately, we're in 0:05:27.720 --> 0:05:31.000 this situation here Molly, where good news has taken us 0:05:31.080 --> 0:05:34.640 bad news because you know, a better economy means potentially 0:05:34.760 --> 0:05:37.640 higher yields, which is going to cause people to rotate 0:05:37.920 --> 0:05:41.320 out of stocks into these bombs. And so I think 0:05:41.640 --> 0:05:45.120 from Wall Street's perspective, you may want something under one hundred. 0:05:45.200 --> 0:05:47.279 Certainly if you are a bond investor, you want something 0:05:47.560 --> 0:05:49.920 well less than a hundred. And that could help us 0:05:49.920 --> 0:05:52.080 get you know, our feet back on the ground, and 0:05:52.080 --> 0:05:54.080 of course gives some pause to the Fed who keeps 0:05:54.080 --> 0:05:57.839 talking about higher for longer. If those job if that 0:05:57.920 --> 0:06:00.800 job creation comes in softer, that's to watch. Of course, 0:06:00.800 --> 0:06:03.320 two other things to watch. One is you know the 0:06:03.640 --> 0:06:07.599 the weekly pay is that showing inflationary trends or backing 0:06:07.640 --> 0:06:10.520 off a little bit? And of course do they change 0:06:10.520 --> 0:06:13.480 the numbers for past months? If they revise them down, 0:06:13.680 --> 0:06:15.880 that could be a positive. The so called bad news 0:06:15.960 --> 0:06:17.880 is good news for stocks or could go the other way. 0:06:18.839 --> 0:06:21.919 Corporate earnings start up and you know a week to 0:06:22.000 --> 0:06:24.200 ten days here, Yet again, what are you looking for 0:06:24.240 --> 0:06:26.680 in this earnings? Have we seen the worst of this 0:06:26.760 --> 0:06:29.120 earning cycle? Or we still have some more pain to 0:06:29.160 --> 0:06:29.440 go here? 0:06:29.440 --> 0:06:32.800 In Q three, well, you know we are going to 0:06:32.800 --> 0:06:37.280 see some pain because the latest factset pronouncements show that 0:06:37.360 --> 0:06:39.719 on average we should just be a little bit below 0:06:39.760 --> 0:06:43.640 the flat line, which is going to reflect the third 0:06:43.720 --> 0:06:46.720 or fourth quarter in a row of negative year over 0:06:46.800 --> 0:06:49.640 year earnings. Well, you know, you buy stocks for earnings. 0:06:49.720 --> 0:06:52.680 If they're not making more money than they were the 0:06:52.720 --> 0:06:55.520 prior year, Well, what's the point. Well, the point's going 0:06:55.600 --> 0:06:59.320 to be that forecasters are looking for a close to 0:06:59.360 --> 0:07:02.520 twelve percent jump in earnings in twenty twenty four, and 0:07:02.600 --> 0:07:05.560 you buy a stock not for the past quarters earnings, 0:07:05.600 --> 0:07:08.200 but for the upcoming earnings. So you know, all lives 0:07:08.200 --> 0:07:10.040 are really going to be focused, not necessarily in what 0:07:10.080 --> 0:07:13.160 they report, but what they say about conditions going forward. 0:07:13.440 --> 0:07:16.520 If they're upbeat and constructive, that's the reason to jump 0:07:16.560 --> 0:07:20.080 back in. If not, people may want to hold their power, 0:07:20.080 --> 0:07:22.960 and that could be a more slogging that we're going 0:07:23.000 --> 0:07:23.880 to have to do in the market. 0:07:23.880 --> 0:07:28.520 Here, tell us where you're at, David, for you know, 0:07:28.560 --> 0:07:32.560 looking into the November FOMC at this point and expectations 0:07:32.600 --> 0:07:34.320 for the rest of the year as well. 0:07:35.880 --> 0:07:38.920 So I think it's a coin toss right now as 0:07:38.920 --> 0:07:41.800 to whether they're going to be another hike in November. 0:07:42.640 --> 0:07:45.040 Counseling for it is they don't want to have to 0:07:45.080 --> 0:07:48.840 say they're done, have assets take off and create another 0:07:48.880 --> 0:07:51.400 inflationary problem. Want they don't want to say that they're 0:07:51.400 --> 0:07:54.400 done and then have to come back in again. But 0:07:54.560 --> 0:07:58.000 on the other hand, you know, these interest rate hikes 0:07:58.120 --> 0:08:01.160 act with a long and variable lag. You know, I'm 0:08:01.200 --> 0:08:03.720 still looking at this residence or real estate market where 0:08:03.800 --> 0:08:07.240 mortgage rates have more than doubled. You know, all things 0:08:07.280 --> 0:08:09.760 being equal, that means carrying costs have doubled. How can 0:08:09.840 --> 0:08:12.240 residents or real estate prices stay where they are? And 0:08:12.280 --> 0:08:14.880 that's consumer's biggest asset. So I think that there's a 0:08:14.880 --> 0:08:17.320 lot of reasons for caution on the part of the 0:08:17.360 --> 0:08:20.520 Federal Reserve. And so my best guess is they sit tight, 0:08:20.560 --> 0:08:22.840 but they say they're going to stay vigilant. But we 0:08:22.920 --> 0:08:24.320 all see all right. 0:08:24.400 --> 0:08:26.280 David, thanks so much for joining us. We always appreciate 0:08:26.320 --> 0:08:30.480 getting your thoughts. David Deets, managing Principal and senior portfolio 0:08:30.680 --> 0:08:33.960 strategist at Peepeck Private Wealth Management. 0:08:35.040 --> 0:08:38.439 You're listening to the team Ken's Are Live program Bloomberg 0:08:38.480 --> 0:08:40.840 Markets weekdays at ten am Eastering. 0:08:40.520 --> 0:08:41.840 On Bloomberg dot Com. 0:08:41.920 --> 0:08:45.080 The iHeartRadio app and the Bloomberg Business app or listen 0:08:45.160 --> 0:08:47.400 on demand wherever you get your podcasts. 0:08:49.200 --> 0:08:50.800 Let's go to our next guest, because I'm looking at 0:08:50.800 --> 0:08:53.480 this market and we had the job market, the job 0:08:53.520 --> 0:08:56.640 opening is the Jolts thing MEJIGGI that came in really strong, 0:08:56.679 --> 0:08:59.320 higher than any forecast out there. So of course the 0:08:59.360 --> 0:09:01.400 market says, well, the Fed's not going to be cutting 0:09:01.440 --> 0:09:04.679 rates anytime soon, maybe even raise rates. So let's check 0:09:04.720 --> 0:09:08.200 in with Meghan Horneman. She's a chief investment officer at Verdants. Megan, 0:09:08.200 --> 0:09:10.719 what do you make of the Jolts data we saw 0:09:10.880 --> 0:09:13.080 this morning and the market's reaction to it. 0:09:15.240 --> 0:09:18.000 So it is one month, we have to remember that 0:09:18.360 --> 0:09:22.240 it has been consistently coming down. It was surprising to us. 0:09:22.360 --> 0:09:24.280 I mean it was very concentrated in some of the 0:09:24.320 --> 0:09:28.480 white collar jobs in finance, business education. It's going to 0:09:28.480 --> 0:09:31.520 be more important on how that translates into Friday's number, 0:09:31.559 --> 0:09:33.959 if it does at all. The one thing we took 0:09:33.960 --> 0:09:36.880 out of that report is the quits rate, So that's 0:09:36.920 --> 0:09:39.640 the amount of people that are voluntarily leaving their job, 0:09:39.920 --> 0:09:42.160 and that still is very low. So that shows that 0:09:42.200 --> 0:09:45.080 there isn't a ton of confidence in the future of 0:09:45.080 --> 0:09:47.680 the labor market. People are holding on to their current jobs. 0:09:48.320 --> 0:09:51.640 Let's just see what happens on Friday. We've already been 0:09:51.640 --> 0:09:53.600 in the camp that there's more of a chance the 0:09:53.600 --> 0:09:55.640 FED will have to raise rates at least one more 0:09:55.679 --> 0:09:58.719 time this year. Whether it's November or December really will 0:09:58.760 --> 0:10:01.760 depend on the data that's coming in. Right now. We 0:10:01.880 --> 0:10:04.240 do see, you know, the labor market in its entirety 0:10:04.280 --> 0:10:07.960 is still relatively strong, so the Fed can't necessarily pull 0:10:08.000 --> 0:10:10.440 back what they're doing. The other thing that has concerned 0:10:10.520 --> 0:10:12.960 us has been the fact that oil prices are back 0:10:13.000 --> 0:10:15.359 on the rise, So that's going to cost some volatility 0:10:15.400 --> 0:10:17.480 in the inflation data and make the job for the 0:10:17.520 --> 0:10:18.680 FED even more difficult. 0:10:19.040 --> 0:10:23.640 You also mentioned in the Joltz report there's a layoffs 0:10:23.679 --> 0:10:26.920 also stayed low in addition to quits. And looking ahead 0:10:26.920 --> 0:10:30.239 then to Friday with the jobs report, I mean, where 0:10:30.280 --> 0:10:32.600 do you see the weakness coming from. It looks like, 0:10:32.640 --> 0:10:35.440 you know, people have been calling for the hiring to 0:10:35.480 --> 0:10:37.920 be slowing, and it is slowing. But I don't know. 0:10:38.000 --> 0:10:40.200 Some of these estimates in here, for like one hundred 0:10:40.240 --> 0:10:42.560 thousand down from one hundred and eighty seven that would 0:10:42.600 --> 0:10:43.960 be a huge drop off. 0:10:45.960 --> 0:10:47.800 I mean, as far as weakness in the labor market, 0:10:47.880 --> 0:10:50.280 let's remember that the labor market is a lagging indicator. 0:10:50.559 --> 0:10:52.720 So a lot of people put so much kind of 0:10:52.720 --> 0:10:56.200 credence into every month's jobs report and the fact that 0:10:56.280 --> 0:10:57.880 it's strong and the Fed's going to have to do 0:10:57.960 --> 0:11:01.040 so much more. Let's just remember it's a lagging indicator. 0:11:01.120 --> 0:11:05.600 It is what's kept the economy afloat for this entire year. 0:11:05.920 --> 0:11:08.600 But going forward, there are some cracks that are starting 0:11:08.640 --> 0:11:11.479 to emerge. When you look at some of the underlying 0:11:12.080 --> 0:11:15.360 indicators and some of the indexes in manufacturing or even 0:11:15.360 --> 0:11:18.520 the service side, this is showing weakness. We know that 0:11:18.559 --> 0:11:21.199 from the construction side there's weakness there with the housing 0:11:21.240 --> 0:11:26.000 market being in such disarray. So I don't necessarily think that, 0:11:26.120 --> 0:11:28.600 you know, from the weakness in the labor market will 0:11:28.600 --> 0:11:32.880 continue to materialize. It's just not going to materialize immediately. Also, 0:11:32.960 --> 0:11:37.040 we do, in reality have a structural issue with labor 0:11:37.080 --> 0:11:39.800 market right now. We have some demographics that are concerning. 0:11:40.160 --> 0:11:42.160 But I do think if you look over a long 0:11:42.200 --> 0:11:44.400 period of time, so I'm not talking about this month 0:11:44.480 --> 0:11:46.640 or next month, there are other things that we have 0:11:46.679 --> 0:11:49.880 to member like AI. This will come in and also 0:11:49.960 --> 0:11:53.520 help with some of the structural issues in the labor market. 0:11:53.800 --> 0:11:55.600 I just think it's going to make the Fed's job 0:11:55.760 --> 0:11:58.280 very difficult and they're going to have to tread very 0:11:58.360 --> 0:12:00.640 lightly with this. Unfortunately, it looks like they're going to 0:12:00.720 --> 0:12:04.640 push the economy into a recession, a needed recession. There 0:12:04.640 --> 0:12:08.120 are some excesses that need to be cleared out, but unfortunately, 0:12:08.120 --> 0:12:10.040 with the amount of tightening that they're doing and that 0:12:10.080 --> 0:12:13.360 they need to do, it's likely pushing the economy into recession. 0:12:14.280 --> 0:12:16.600 Oh boy, all right, So I had taken recession off 0:12:16.600 --> 0:12:19.319 the table, Megan, three months ago, So we'll have to 0:12:19.320 --> 0:12:20.240 see how that plays out. 0:12:20.240 --> 0:12:22.560 But I trust your opinion a lot more than mine. 0:12:23.080 --> 0:12:23.840 Looking at the S and P. 0:12:23.920 --> 0:12:26.880 Five hundred, Megan, you know, we're still up ten percent 0:12:26.920 --> 0:12:28.719 for the year, but you know, down eight percent or 0:12:28.760 --> 0:12:30.840 so from that. I guess that high back in the 0:12:31.040 --> 0:12:34.800 July or so. Has a market adequally priced in higher 0:12:34.800 --> 0:12:35.440 for longer? 0:12:35.679 --> 0:12:37.640 Or do we have more to go? Or are we 0:12:37.720 --> 0:12:38.520 going to tread water? 0:12:38.880 --> 0:12:40.560 How do you kind of view the next three to 0:12:40.640 --> 0:12:41.559 six months. 0:12:43.320 --> 0:12:45.960 I still don't think it's completely over. I think a 0:12:46.000 --> 0:12:48.080 lot of it has been done the damage, and we've 0:12:48.120 --> 0:12:50.679 seen this has been a pretty rapid move. I just 0:12:50.720 --> 0:12:53.760 don't think from a valuation perspective, there's two things. I 0:12:53.760 --> 0:12:56.520 think PE multiples still are a little too high given 0:12:56.559 --> 0:12:59.760 the higher for longer, and I also don't think I 0:12:59.800 --> 0:13:02.400 know you mentioned you took recession off the table three 0:13:02.400 --> 0:13:04.839 months ago. We've kind of always been in the camp 0:13:04.880 --> 0:13:07.480 that there'd be a recession, but now there's more people 0:13:07.520 --> 0:13:10.480 coming back into the camp that unfortunately this will end 0:13:10.520 --> 0:13:13.640 in in a recession, whether it's a short and shallow recession, 0:13:13.679 --> 0:13:18.560 but some sort of a recession. The earnings expectations for 0:13:18.800 --> 0:13:22.360 next year aren't really reflecting that yet, so I'm afraid 0:13:22.400 --> 0:13:25.200 that we're going to see earnings expectations come down lower 0:13:25.240 --> 0:13:27.360 for next year, So that could put some more downward 0:13:27.360 --> 0:13:28.360 pressure on the market. 0:13:29.320 --> 0:13:31.800 There's still so much division within the FED right now 0:13:31.840 --> 0:13:34.680 of where do we go from here, And you know, 0:13:34.720 --> 0:13:36.880 I want to ask Megan, maybe you've got a better 0:13:36.960 --> 0:13:39.880 idea then than they do right now of what the 0:13:39.960 --> 0:13:43.320 data is telling you in terms of the direction of rates. 0:13:43.400 --> 0:13:46.400 Right now, you think another hike maybe possible this year? 0:13:48.160 --> 0:13:50.440 Yeah, And I won't say I'm smarter than anybody at 0:13:50.440 --> 0:13:54.920 the FED. But I will say that I think it 0:13:55.000 --> 0:13:57.120 is good to have some of the division there in 0:13:57.160 --> 0:14:01.040 the committee because we are walking such a line. Inflation 0:14:01.240 --> 0:14:05.679 is extraordinarily easy to reignite, especially if you start to 0:14:05.679 --> 0:14:08.600 give the signs that hey, we are done, rate cuts 0:14:08.600 --> 0:14:10.880 are done, or rate hikes, sorry, rate hikes are done, 0:14:11.240 --> 0:14:13.240 because then eventually people are going to be looking for 0:14:13.280 --> 0:14:16.440 that rate cut. What my concern is that that rate 0:14:16.520 --> 0:14:20.240 cut isn't going to happen anytime soon because they're walking 0:14:20.280 --> 0:14:23.320 such a fine line with inflation. With the PCE core, 0:14:23.440 --> 0:14:25.840 we did just get below four percent on a year 0:14:25.880 --> 0:14:29.120 of a year basis. That's good, Inflation is going in 0:14:29.160 --> 0:14:31.800 the right direction. But there are some other factors that 0:14:31.840 --> 0:14:34.720 we're concerned what just cause a lot of volatility and 0:14:34.760 --> 0:14:37.720 inflation and make us getting from that four or five 0:14:37.720 --> 0:14:41.320 percent inflation down to two percent much more difficult. 0:14:41.960 --> 0:14:45.080 WTI crude oil back around ninety dollars a barrel. Is 0:14:45.120 --> 0:14:48.680 there still an energy trade here for investors or has 0:14:48.720 --> 0:14:49.680 that kind of played out? 0:14:51.320 --> 0:14:54.000 I think if you're just looking at from a return perspective, 0:14:54.760 --> 0:14:56.760 it is. Look, a lot of it has been priced 0:14:56.800 --> 0:15:00.840 into the market. We think it's definitely an issue from 0:15:00.880 --> 0:15:04.520 the inflation standpoint, but it's also something that can really 0:15:04.600 --> 0:15:08.000 hurt the consumer. Sometimes the cure for high prices is 0:15:08.040 --> 0:15:10.760 high prices, and energy is one of those things. If 0:15:10.800 --> 0:15:13.920 this causes demand to pull back substantially, for the economy 0:15:13.960 --> 0:15:18.760 to fall into recession, commodities including oil, they're not They 0:15:18.800 --> 0:15:21.320 can't escape that weakness when we do fall into an 0:15:21.320 --> 0:15:22.200 economic contraction. 0:15:23.120 --> 0:15:25.120 All right, Megan, thank you so much for joining us again. 0:15:25.120 --> 0:15:27.840 I always appreciate getting your thoughts. Megan Horneman, a chief 0:15:27.840 --> 0:15:29.680 investment officer at Verdants. 0:15:30.160 --> 0:15:33.280 You're listening to the tape Can's our live program Bloomberg 0:15:33.320 --> 0:15:36.920 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:15:37.000 --> 0:15:40.240 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:15:40.240 --> 0:15:43.080 You can also listen live on Amazon Alexa from our 0:15:43.080 --> 0:15:48.160 flagship New York station, Just say Alexa Play Bloomberg eleven thirty. 0:15:49.120 --> 0:15:51.960 Josh Joseph, CEO of Big Plan Holdings, he joins us 0:15:52.000 --> 0:15:54.920 live here on our Bloomberg Interactive Broker studio. Josh, thanks 0:15:54.960 --> 0:15:58.120 so much for joining us here. What is Big Plan 0:15:58.240 --> 0:15:59.440 Holdings and how'd you get here? 0:15:59.600 --> 0:15:59.760 Yeah? 0:16:00.160 --> 0:16:02.280 Thank you for having me. Big Plan Holdings is a 0:16:02.320 --> 0:16:05.560 diversified family office that my wife and daughters run out 0:16:05.560 --> 0:16:12.640 of Nashville, Tennessee at this point, focused in cannabis, real estate, hospitality, fashion, 0:16:12.800 --> 0:16:15.000 professional sports, music, and entertainment. 0:16:15.080 --> 0:16:17.240 You funded this family office with the sale. 0:16:16.960 --> 0:16:19.760 Of your cannabis company, yeah, out of Chicago. 0:16:19.920 --> 0:16:20.120 Yeah. 0:16:20.120 --> 0:16:22.240 We founded a company in Chicago in the Chicago Land 0:16:22.320 --> 0:16:26.400 area back in twenty fourteen fifteen, and grew that to 0:16:27.160 --> 0:16:29.760 the largest privately held cannabis company in the US upon 0:16:29.800 --> 0:16:32.320 an exit in July twenty two. Would you to cure 0:16:32.440 --> 0:16:35.680 Leaf acquired US. That's a public traded yeah company, Yeah, 0:16:35.720 --> 0:16:38.240 public Canadian company. Yeah, you can only be public right 0:16:38.280 --> 0:16:40.840 now in Canada in the cannabis space. 0:16:41.000 --> 0:16:42.440 That's a good American story. Yeah. 0:16:42.480 --> 0:16:45.200 So what's the steely this story with the legality of 0:16:45.320 --> 0:16:46.840 cannabis and Tennessee right now? 0:16:47.440 --> 0:16:50.480 Not much of one. Yeah, not much Yeah, not much 0:16:50.480 --> 0:16:51.000 of one. Yeah. 0:16:51.000 --> 0:16:53.720 Tennessee is going to be one of the last remaining 0:16:53.760 --> 0:16:56.920 states to fall, is my guess at this point. So 0:16:57.080 --> 0:17:01.400 has that you know, Tennessee is a very strong state. 0:17:01.560 --> 0:17:03.440 So you know, more often than not, the states will 0:17:03.480 --> 0:17:06.760 jump in because of you know, needing some additional money 0:17:06.760 --> 0:17:09.240 to come in and you know, right size budgets, et cetera. 0:17:10.200 --> 0:17:13.800 Tennessee's fiscally strong. I think politics also, of course plays 0:17:13.800 --> 0:17:17.040 a role in that as well. And I think that 0:17:17.080 --> 0:17:18.600 they'll be one of the last states to fall. 0:17:18.880 --> 0:17:21.760 So when you say fiscally strong, AKA, they don't have 0:17:21.880 --> 0:17:24.360 much of a financial incentive here, correct. 0:17:24.560 --> 0:17:30.720 Okay, So where we on the national legislation for cannabis, 0:17:30.760 --> 0:17:33.840 because it feels like that domino has to fall before 0:17:34.440 --> 0:17:36.800 banking can have you know, it just seems like that 0:17:36.840 --> 0:17:37.480 has to happen. 0:17:37.320 --> 0:17:37.720 At some point. 0:17:37.760 --> 0:17:40.480 Yeah, A lot of people think that federal legalization is 0:17:40.520 --> 0:17:43.240 the key. I actually don't. I think a lot of 0:17:43.320 --> 0:17:44.720 us who've been in the business, you know, I've been 0:17:44.760 --> 0:17:47.560 in it since twenty fourteen, which is, you know, about 0:17:47.600 --> 0:17:51.440 fifty years in any other industry, I think federal legalization 0:17:51.800 --> 0:17:55.320 really is We're fine keeping it at the state level 0:17:55.440 --> 0:17:58.000 in this industry. But how about like banking, Yeah, what 0:17:58.040 --> 0:17:59.720 we need to happen, what we need to have happened, 0:17:59.800 --> 0:18:02.800 or two or three things there, three or four things really. Recently, 0:18:02.840 --> 0:18:04.960 the Department of Health and Human Services just about two 0:18:04.960 --> 0:18:09.119 weeks ago made a recommendation to reschedule cannabis to a 0:18:09.160 --> 0:18:12.399 Schedule three drug from a Schedule one that would allow 0:18:13.280 --> 0:18:15.439 a couple of things, a couple dominoes to fall into place, 0:18:15.680 --> 0:18:18.119 that would allow hopefully what will be safe banking to 0:18:18.200 --> 0:18:21.520 be passed on Capitol Hill, which has already passed through 0:18:21.520 --> 0:18:24.679 the House seven times and has failed in the Senate 0:18:24.720 --> 0:18:28.199 each time. So we're hoping that with this most recent 0:18:28.640 --> 0:18:32.360 subcommittee bipartisan subcommittee legislation from a week or two ago 0:18:32.440 --> 0:18:32.919 that came. 0:18:32.800 --> 0:18:34.399 Through that hopefully we'll get that passed. 0:18:35.280 --> 0:18:38.080 There's something in the IRS tax co to ADE that 0:18:38.119 --> 0:18:40.200 we are not allowed to use in cannabis. 0:18:40.760 --> 0:18:42.280 We are very very hopeful. 0:18:42.000 --> 0:18:44.680 That we will be allowed to use to ADE and 0:18:44.800 --> 0:18:48.119 exercise that to allow for the appropriate deductions to be taken, 0:18:48.600 --> 0:18:52.000 which will almost automatically allow for all the big MSOs 0:18:52.040 --> 0:18:55.680 and larger operators to be profitable right away, almost overnight, 0:18:56.080 --> 0:18:59.000 and then being uplisted and being allowed to be listed 0:18:59.000 --> 0:19:02.719 on the Nasdaq would be absolutely tremendous. So right now 0:19:02.760 --> 0:19:04.960 you can only be listed in Canada. So that's why 0:19:04.960 --> 0:19:08.080 federal legalization really it doesn't matter if that makes sense 0:19:08.119 --> 0:19:08.800 all that much. 0:19:09.160 --> 0:19:11.800 It looks like this bill that that just went through 0:19:11.800 --> 0:19:15.879 the Senate Banking Committee seems pretty serious. This is kind 0:19:15.920 --> 0:19:18.440 of crazy to me. I had no idea that cannabis 0:19:18.440 --> 0:19:22.040 related companies right now are forced to operate using only cash. 0:19:22.160 --> 0:19:22.760 Is that true? 0:19:23.040 --> 0:19:26.040 Yeah, Yeah, it's aund so archaic. 0:19:26.160 --> 0:19:29.280 It's really really antiquated. Yeah, really antiquated. 0:19:30.040 --> 0:19:33.240 It's a real challenge in the industry for you know, 0:19:33.240 --> 0:19:36.840 as you scale your business, it's a tremendous, tremendous challenge. 0:19:37.240 --> 0:19:39.520