1 00:00:02,400 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:09,119 --> 00:00:13,320 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:13,320 --> 00:00:15,800 Speaker 1: Eastern on Apple car Playing and broud Auto with the 4 00:00:15,800 --> 00:00:19,680 Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts, 5 00:00:19,920 --> 00:00:22,800 Speaker 1: or watch us live on YouTube. 6 00:00:23,320 --> 00:00:24,920 Speaker 2: Another piece of data that came out tore that got 7 00:00:24,960 --> 00:00:25,479 Speaker 2: my attention. 8 00:00:26,840 --> 00:00:29,200 Speaker 3: Thirty year fixed mortgage dropping down to six point four 9 00:00:29,240 --> 00:00:31,280 Speaker 3: to four percent, the lowis since twenty twenty three. 10 00:00:31,680 --> 00:00:34,320 Speaker 2: What does that mean for real estate? What does it 11 00:00:34,360 --> 00:00:35,800 Speaker 2: mean for the mortgage market? What does it mean for 12 00:00:35,800 --> 00:00:36,800 Speaker 2: mortage backer securities? 13 00:00:36,920 --> 00:00:38,600 Speaker 3: Fortunately, we have an expert that does that kind of 14 00:00:38,640 --> 00:00:43,600 Speaker 3: stuff here, Erica Aidelberg, Chief Morket Market Little, chief mortgage 15 00:00:43,720 --> 00:00:46,760 Speaker 3: backed security strategist for Bloomberg Intelligence. She joins us here 16 00:00:46,760 --> 00:00:50,159 Speaker 3: in our Bloomberg Interactive Brokers studio. So, Erica, We've got it. 17 00:00:50,200 --> 00:00:51,600 Speaker 3: Seems like everybody's paying. 18 00:00:51,479 --> 00:00:53,880 Speaker 2: Attention to fed chair Pal, who's very clear. On Friday, 19 00:00:53,960 --> 00:00:54,680 Speaker 2: richi'l coming down. 20 00:00:54,920 --> 00:00:57,640 Speaker 3: We're even singing in the mortgage market in terms of 21 00:00:57,680 --> 00:00:59,320 Speaker 3: what you have to pay for thirty year mortgage? 22 00:00:59,360 --> 00:01:02,000 Speaker 2: What's that, dude? The mortgage backed securities. 23 00:01:01,480 --> 00:01:04,679 Speaker 4: Market, what's that? Do so it's very interesting. 24 00:01:04,760 --> 00:01:07,000 Speaker 5: As you said, the data came out today and one 25 00:01:07,040 --> 00:01:09,039 Speaker 5: of the other telling parts of the data that comes 26 00:01:09,040 --> 00:01:11,800 Speaker 5: out not only does the Mortgage Banker Association tell you 27 00:01:12,560 --> 00:01:15,160 Speaker 5: what the mortgage rate is that you know people are 28 00:01:15,160 --> 00:01:17,920 Speaker 5: taking out right now, but they also tell you about 29 00:01:17,959 --> 00:01:20,679 Speaker 5: what type of mortgage loan demand they're seeing. There's the 30 00:01:20,720 --> 00:01:24,080 Speaker 5: loan application indices, and at this point we are seeing. 31 00:01:23,959 --> 00:01:25,120 Speaker 4: Refinancings pick up. 32 00:01:25,200 --> 00:01:28,000 Speaker 5: They actually picked up earlier this month to the highest 33 00:01:28,040 --> 00:01:30,880 Speaker 5: in two years. Still very low historically because there's not 34 00:01:30,880 --> 00:01:34,080 Speaker 5: that many people with higher rate mortgages, but it's barely 35 00:01:34,240 --> 00:01:38,120 Speaker 5: moving the needle for mortgage purchase loan demand, which is 36 00:01:38,319 --> 00:01:40,800 Speaker 5: very telling. It means the housing market is still pretty 37 00:01:40,880 --> 00:01:44,160 Speaker 5: much stuck at these levels. Whether you know it depends 38 00:01:44,200 --> 00:01:45,960 Speaker 5: on who you talk to. Some people think that home 39 00:01:45,959 --> 00:01:48,840 Speaker 5: buyers are just being patient. They think rates will fall 40 00:01:49,200 --> 00:01:51,240 Speaker 5: given the Defense going to cut interest rates. They may 41 00:01:51,280 --> 00:01:53,880 Speaker 5: be sorry that home prices go up and it may 42 00:01:53,920 --> 00:01:57,640 Speaker 5: not get easier for them. The other question is maybe 43 00:01:57,640 --> 00:02:04,400 Speaker 5: it's really still a bailability issue because mortgage I'm sorry, 44 00:02:04,480 --> 00:02:06,640 Speaker 5: home inventories are they're for your. 45 00:02:06,600 --> 00:02:09,160 Speaker 4: Highs and listenings have picked up but still low. 46 00:02:09,280 --> 00:02:12,040 Speaker 5: Again by historical standard, especially relative to the number of 47 00:02:12,040 --> 00:02:14,520 Speaker 5: households out there. But I think it really comes down 48 00:02:14,600 --> 00:02:17,880 Speaker 5: to still an affordability challenge for people who want to 49 00:02:17,919 --> 00:02:22,320 Speaker 5: take out mortgages. You know, there's still barely fifty percent 50 00:02:22,520 --> 00:02:25,120 Speaker 5: of barers who can really afford to take out a 51 00:02:25,120 --> 00:02:27,799 Speaker 5: mortgage at this level relative to the median sized home 52 00:02:28,160 --> 00:02:30,760 Speaker 5: because home prices again have just continued to go up 53 00:02:30,800 --> 00:02:32,519 Speaker 5: with limited inventory. 54 00:02:33,120 --> 00:02:33,320 Speaker 1: Yeah. 55 00:02:33,320 --> 00:02:35,120 Speaker 6: Well, it's fascinating to me to think about, you know, 56 00:02:35,160 --> 00:02:39,400 Speaker 6: your average consumer who's contemplating a home purchase, especially those 57 00:02:39,440 --> 00:02:43,480 Speaker 6: first time buyers, how educated they really are on sort 58 00:02:43,480 --> 00:02:46,600 Speaker 6: of the link between FED policy and mortgage rates. I mean, 59 00:02:46,880 --> 00:02:50,200 Speaker 6: do you think that general public has become aware enough 60 00:02:50,320 --> 00:02:53,200 Speaker 6: to know that maybe if I wait six months, I'll 61 00:02:53,240 --> 00:02:55,240 Speaker 6: get a lower rate than if I go today. 62 00:02:55,800 --> 00:02:57,600 Speaker 5: I mean maybe if you're really in the home for 63 00:02:57,639 --> 00:03:00,360 Speaker 5: a mortgage, and maybe if you're paying tention to the 64 00:03:00,480 --> 00:03:03,480 Speaker 5: USA Today headlines. But ya, six and a half six 65 00:03:03,639 --> 00:03:07,680 Speaker 5: forty four is still quite expensive historically, and a lot 66 00:03:07,680 --> 00:03:10,799 Speaker 5: of people who do know anything about mortgage rates is like, oh, well, 67 00:03:10,960 --> 00:03:13,920 Speaker 5: my friend has a four percent mortgage rate, So I 68 00:03:13,919 --> 00:03:16,160 Speaker 5: don't know if you know mortgage rates above six and 69 00:03:16,200 --> 00:03:18,480 Speaker 5: a half percent is going to trigger much and especially 70 00:03:18,480 --> 00:03:21,600 Speaker 5: if you're an existing home owner with a mortgage rate 71 00:03:21,680 --> 00:03:25,200 Speaker 5: in the three percent range, you know, then you know 72 00:03:25,240 --> 00:03:27,680 Speaker 5: it's still pretty inhibiting to think about a new home. 73 00:03:28,280 --> 00:03:30,919 Speaker 3: So I'm looking, so I'm looking at the end go 74 00:03:31,080 --> 00:03:34,160 Speaker 3: function to Bloomberg Index browser. I see the Bloomberg Mortgage 75 00:03:34,160 --> 00:03:36,880 Speaker 3: Backed Security Index up three. 76 00:03:36,680 --> 00:03:40,600 Speaker 2: Point seventy nine percent this year. Where do we go 77 00:03:40,680 --> 00:03:42,160 Speaker 2: from here? Do you think? I mean, what's the call 78 00:03:42,200 --> 00:03:43,480 Speaker 2: out there? We talk to your clients. 79 00:03:43,640 --> 00:03:47,000 Speaker 5: Well, getting back to the FED question in a way, 80 00:03:47,080 --> 00:03:50,440 Speaker 5: because mortgage durations, their sensitivity to interest rates is actually 81 00:03:50,440 --> 00:03:52,400 Speaker 5: based more on the longer part of the curve. We've 82 00:03:52,400 --> 00:03:54,640 Speaker 5: had a pretty good rally in ten year rates, for instance, 83 00:03:54,640 --> 00:03:56,600 Speaker 5: and that's really a lot of We've had a little 84 00:03:56,640 --> 00:03:59,440 Speaker 5: spread tightening, but that's really what's driven a lot of 85 00:03:59,480 --> 00:04:02,840 Speaker 5: the turns for the mortgage backed Security Index. The problem 86 00:04:02,880 --> 00:04:04,520 Speaker 5: is the FED doesn't control the longer end of the 87 00:04:04,560 --> 00:04:07,040 Speaker 5: mortgage market, and they don't control the longer end of 88 00:04:07,040 --> 00:04:10,960 Speaker 5: the interest rate market, and longer end rates tend to 89 00:04:11,040 --> 00:04:14,119 Speaker 5: price in what they see going forward. Okay, so they're 90 00:04:14,120 --> 00:04:16,880 Speaker 5: already pricing in a lot of the FED cuts the 91 00:04:17,240 --> 00:04:20,320 Speaker 5: forward rate curve, which you know tells you kind of 92 00:04:20,320 --> 00:04:23,840 Speaker 5: what market expectations are, only have longer rates falling by 93 00:04:23,880 --> 00:04:26,080 Speaker 5: another ten to fifty by the end of the year, 94 00:04:26,160 --> 00:04:29,040 Speaker 5: so you know, good for mortgage returns. And one of 95 00:04:29,080 --> 00:04:31,240 Speaker 5: the things that I wrote about today actually is the 96 00:04:31,279 --> 00:04:34,200 Speaker 5: fact that to the extent that the yield cver is 97 00:04:34,520 --> 00:04:38,280 Speaker 5: uninverting and it's getting cheaper for banks to hold their 98 00:04:38,279 --> 00:04:41,160 Speaker 5: funding and buy, mortgage backed securities are more attractive. We're 99 00:04:41,160 --> 00:04:43,440 Speaker 5: saying banks begin to come back into the mortgage backed 100 00:04:43,440 --> 00:04:48,200 Speaker 5: securities market and they're a key less economic buyer. So 101 00:04:48,240 --> 00:04:50,640 Speaker 5: when they do that, mortgage spreads have more rooms to tighten, 102 00:04:51,160 --> 00:04:53,719 Speaker 5: and that could add to mortgage returns between here and 103 00:04:53,760 --> 00:04:55,360 Speaker 5: your end if that trend continues. 104 00:04:55,520 --> 00:04:57,000 Speaker 6: Yeah, I wanted to ask you about that. I noticed 105 00:04:57,000 --> 00:04:58,800 Speaker 6: in one of your recent notes you pointed that out 106 00:04:58,880 --> 00:05:02,640 Speaker 6: that banks MBI holdings happen rising. So that's not a 107 00:05:02,680 --> 00:05:05,400 Speaker 6: sign of less demand from investors. That's more of the 108 00:05:05,400 --> 00:05:08,480 Speaker 6: banks are actively holding more of these securities. 109 00:05:08,600 --> 00:05:08,760 Speaker 7: Yeah. 110 00:05:09,000 --> 00:05:11,520 Speaker 5: Banks like mortgages for a couple of reasons, and they 111 00:05:11,560 --> 00:05:13,360 Speaker 5: haven't liked them very much in the past two years. 112 00:05:13,640 --> 00:05:16,240 Speaker 5: They like mortgages because they have a good margin versus 113 00:05:16,560 --> 00:05:20,320 Speaker 5: their deposits, for instance, that they're paying out on not 114 00:05:20,400 --> 00:05:22,040 Speaker 5: so true in an inverted yield curve. 115 00:05:22,360 --> 00:05:25,280 Speaker 4: And they like them, especially when they think. 116 00:05:25,080 --> 00:05:27,720 Speaker 5: Making loans might be a little bit riskier. You know, 117 00:05:28,040 --> 00:05:31,680 Speaker 5: they kind of weigh that variability between outright loans, whether 118 00:05:31,680 --> 00:05:35,520 Speaker 5: it's commercial or residential loans, and mortgage backed securities. And 119 00:05:35,680 --> 00:05:38,960 Speaker 5: it's also possible that with banks worried about it, but 120 00:05:39,040 --> 00:05:41,960 Speaker 5: of a slowdown in the economy, that they may actually 121 00:05:41,960 --> 00:05:45,159 Speaker 5: think mortgage backed securities, which are guaranteed principal and interest 122 00:05:45,160 --> 00:05:48,719 Speaker 5: from Fanny and Freddie or Jinny, that those are safer 123 00:05:48,800 --> 00:05:49,960 Speaker 5: bet right now than loans. 124 00:05:50,839 --> 00:05:52,640 Speaker 2: All right, Erica, thank you so much for joining us. 125 00:05:52,680 --> 00:05:56,560 Speaker 3: Erica Adelberg, she's chief mortgage back security strategist for Bloomberg Intelligence. 126 00:05:56,640 --> 00:05:59,000 Speaker 3: Joining us live here on a Bloomberg Interactive broker studio, 127 00:05:59,400 --> 00:06:00,880 Speaker 3: the news and in the more Burg's business today, as 128 00:06:00,920 --> 00:06:03,400 Speaker 3: we have the thirty year fixed mortgage dropping to six 129 00:06:03,440 --> 00:06:06,760 Speaker 3: point four to four percent, that is a lowest since 130 00:06:06,920 --> 00:06:10,159 Speaker 3: twenty twenty three, so in anticipation of I guess the 131 00:06:10,200 --> 00:06:13,040 Speaker 3: FED lowering rates. So we got some confirmation of that 132 00:06:13,480 --> 00:06:15,880 Speaker 3: trend on Friday out of Jackson Hole when FED Chairman 133 00:06:15,960 --> 00:06:19,200 Speaker 3: J Powell was pretty clear that that was the intention 134 00:06:19,400 --> 00:06:22,520 Speaker 3: of the Federal Reserve, perhaps starting as soon as the 135 00:06:22,600 --> 00:06:24,719 Speaker 3: September meeting. So we're seeing some movement there in the 136 00:06:24,720 --> 00:06:26,280 Speaker 3: morge backed securities market. 137 00:06:27,720 --> 00:06:31,599 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 138 00:06:31,680 --> 00:06:35,200 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 139 00:06:35,200 --> 00:06:38,000 Speaker 1: Auto with the Bloomberg Business app. You can also listen 140 00:06:38,120 --> 00:06:41,200 Speaker 1: live on Amazon Alexa from our flagship New York station 141 00:06:41,560 --> 00:06:46,120 Speaker 1: just Say Alexa playing Bloomberg eleven thirty. 142 00:06:46,200 --> 00:06:49,280 Speaker 3: Michael Reagan sitting in for Alextel on Paul Sweeneyer live 143 00:06:49,279 --> 00:06:49,640 Speaker 3: here in our. 144 00:06:49,560 --> 00:06:51,560 Speaker 2: Bloomberg Interactive Broker's studio. 145 00:06:51,520 --> 00:06:53,880 Speaker 3: And we're streaming live on YouTube ahead over YouTube dot 146 00:06:53,880 --> 00:06:55,760 Speaker 3: Com search Bloomberg Podcast. 147 00:06:55,800 --> 00:06:57,240 Speaker 2: That's where you will find us. 148 00:06:57,800 --> 00:07:00,839 Speaker 3: I guess it's all in Nvidia all day today because 149 00:07:00,880 --> 00:07:04,279 Speaker 3: we have ed Ludlow from It's like a housean Francisco. 150 00:07:04,560 --> 00:07:07,719 Speaker 3: Bloomberg Technology will have a live program with Jensen Wang, 151 00:07:08,080 --> 00:07:11,480 Speaker 3: the CEO of in Vidio, today six thirty pm Wall 152 00:07:11,480 --> 00:07:11,960 Speaker 3: Street Time. 153 00:07:12,080 --> 00:07:13,880 Speaker 6: I believe it is the time we should almost have 154 00:07:13,920 --> 00:07:16,360 Speaker 6: like an AI chat bot be the co host today 155 00:07:16,520 --> 00:07:19,760 Speaker 6: exactly and just or a guest and just ask, you know, 156 00:07:20,200 --> 00:07:22,960 Speaker 6: chat cheapt what's going to happen with Nvidia earnings. 157 00:07:23,120 --> 00:07:24,880 Speaker 3: Yeah, it it's really interesting how it's become such a 158 00:07:24,880 --> 00:07:27,680 Speaker 3: big name and then you see a super microcomputer, which 159 00:07:27,720 --> 00:07:30,760 Speaker 3: you know kind of was from a stock price performance perspective, 160 00:07:30,800 --> 00:07:33,240 Speaker 3: kind of in that same breath, but it's getting taken 161 00:07:33,280 --> 00:07:36,360 Speaker 3: out to the woodshed. Today's they've got some company specific 162 00:07:36,400 --> 00:07:38,960 Speaker 3: problems with the other stocks down twenty three percent. Let's talk 163 00:07:38,960 --> 00:07:41,280 Speaker 3: to somebody who does this stuff for a living, Shelby McFadden, 164 00:07:41,560 --> 00:07:44,720 Speaker 3: investment analyst at Motley Full Asset Management. You've joined us 165 00:07:44,760 --> 00:07:47,160 Speaker 3: live here in our Bloomberg Interactive Broker studio. You get 166 00:07:47,160 --> 00:07:50,360 Speaker 3: extra points for that. So Shelby, let's just step back. 167 00:07:50,840 --> 00:07:52,480 Speaker 3: Mike and I were just talking about nvidio. It's kind 168 00:07:52,480 --> 00:07:54,840 Speaker 3: of on the top of everybody's list. How do you 169 00:07:54,840 --> 00:07:58,120 Speaker 3: think about a company like Nvidia AI. It's been it's 170 00:07:58,160 --> 00:08:00,800 Speaker 3: really taken over almost the not just the tech narrative, 171 00:08:00,800 --> 00:08:02,360 Speaker 3: but almost the narrative for the entire market. 172 00:08:02,600 --> 00:08:02,760 Speaker 2: Yeah. 173 00:08:02,800 --> 00:08:05,800 Speaker 8: Absolutely, I mean it's definitely been pervasive in a positive way. 174 00:08:05,880 --> 00:08:07,920 Speaker 8: Right when we look at nvideo, we see a company 175 00:08:07,960 --> 00:08:11,040 Speaker 8: that gets to benefit from a massive secular change coming 176 00:08:11,040 --> 00:08:13,640 Speaker 8: in the market. So despite all of the extra fluff 177 00:08:13,680 --> 00:08:16,520 Speaker 8: in valuation, we cannot deny that there is a sort 178 00:08:16,560 --> 00:08:18,680 Speaker 8: of step change that we're witnessing here and how business 179 00:08:18,760 --> 00:08:21,760 Speaker 8: is going to be done and how labor is going 180 00:08:21,800 --> 00:08:23,840 Speaker 8: to be paid for if we also think about it 181 00:08:23,840 --> 00:08:26,360 Speaker 8: that way. But as active investors, we also need to 182 00:08:26,360 --> 00:08:29,320 Speaker 8: consider the fact that you have to look at your timeline, 183 00:08:29,360 --> 00:08:31,720 Speaker 8: you have to understand the risk that you're willing to take, 184 00:08:31,760 --> 00:08:33,880 Speaker 8: and understanding that in this situation, it's not just going 185 00:08:33,920 --> 00:08:35,800 Speaker 8: to be oh, let's take a look at standard deviation, right, 186 00:08:36,360 --> 00:08:39,160 Speaker 8: it's taking a look at these sort of macro factors 187 00:08:39,160 --> 00:08:41,640 Speaker 8: that get involved. We're looking at something that's deeply affected 188 00:08:41,679 --> 00:08:44,480 Speaker 8: by policy, something that's much more affected by their own 189 00:08:44,600 --> 00:08:47,760 Speaker 8: forward looking statements, and also affected by the customers that 190 00:08:47,800 --> 00:08:50,360 Speaker 8: they serve very deeply. So if we have the hyperscalers say, 191 00:08:50,600 --> 00:08:52,960 Speaker 8: you know what, these projects aren't paying off. Our shareholders 192 00:08:53,000 --> 00:08:56,040 Speaker 8: are not willing to tolerate this low roich that we're 193 00:08:56,040 --> 00:08:58,880 Speaker 8: delivering them on some of these projects. That then comes 194 00:08:58,920 --> 00:09:01,040 Speaker 8: back and affects the videos of the world as well 195 00:09:01,080 --> 00:09:03,319 Speaker 8: as their suppliers and other fabricators. 196 00:09:03,480 --> 00:09:05,679 Speaker 6: Yeah, I think That's a great point that's often lost 197 00:09:05,720 --> 00:09:08,920 Speaker 6: in the discussion of in videos, that every incremental dollar 198 00:09:09,559 --> 00:09:12,160 Speaker 6: of new revenue they find is a dollar of costline 199 00:09:12,200 --> 00:09:14,840 Speaker 6: for some other company. And you know, when people get 200 00:09:15,440 --> 00:09:18,480 Speaker 6: you know, restless about when those investments pay off, what 201 00:09:18,520 --> 00:09:20,160 Speaker 6: does that mean for in videos? So I think that's, 202 00:09:20,800 --> 00:09:24,120 Speaker 6: you know, a really fascinating component of this. But Shelby, 203 00:09:24,160 --> 00:09:26,840 Speaker 6: one thing I find really fascinating about in videos. I 204 00:09:26,880 --> 00:09:30,120 Speaker 6: look at their history of reporting earnings, and this is 205 00:09:30,160 --> 00:09:33,160 Speaker 6: one of those companies that always tends to surprise surprise. 206 00:09:33,480 --> 00:09:36,640 Speaker 6: We beat estimates again this quarter, and not by small matters, 207 00:09:36,640 --> 00:09:40,240 Speaker 6: you know, a twelve percent one quarter, twenty percent another quarter, 208 00:09:40,280 --> 00:09:43,080 Speaker 6: thirty one percent another quarter. When you get to be 209 00:09:43,160 --> 00:09:45,920 Speaker 6: the size of a video though, a three trillion dollar stock, 210 00:09:46,000 --> 00:09:48,200 Speaker 6: I feel like you can't quite get away with that 211 00:09:48,320 --> 00:09:50,679 Speaker 6: like you used to. You know, how hard do they 212 00:09:50,720 --> 00:09:52,920 Speaker 6: have to beat estimates to really move the needle? Now 213 00:09:52,960 --> 00:09:55,960 Speaker 6: do you think like a match of estimates I feel 214 00:09:56,000 --> 00:09:57,760 Speaker 6: like would be a disaster for a company like this. 215 00:09:57,920 --> 00:10:00,560 Speaker 8: Oh, you're absolutely right, because when we think about mature 216 00:10:00,640 --> 00:10:03,240 Speaker 8: companies that have a sort of history of under promising 217 00:10:03,280 --> 00:10:06,200 Speaker 8: and over delivering, investors sort of celebrate that. We're fine 218 00:10:06,200 --> 00:10:08,920 Speaker 8: with it, especially if let's say there's a dividend, they 219 00:10:09,040 --> 00:10:12,480 Speaker 8: kind of coast. But when investors are paying for your growth, 220 00:10:12,520 --> 00:10:14,280 Speaker 8: that's not necessarily a luxury that you have. 221 00:10:14,600 --> 00:10:15,439 Speaker 4: And we've seen. 222 00:10:15,360 --> 00:10:19,360 Speaker 8: That with the likes of Micron sort of delivering more 223 00:10:19,440 --> 00:10:23,439 Speaker 8: mature growth, a little bit more flat on their optimism 224 00:10:23,520 --> 00:10:26,360 Speaker 8: about the future, and the stock price was punished for that. 225 00:10:26,400 --> 00:10:28,720 Speaker 8: So we've seen what happens when that starts to taper off, 226 00:10:29,480 --> 00:10:33,760 Speaker 8: the moment that that surprise gap begins to shrink. It 227 00:10:33,800 --> 00:10:36,960 Speaker 8: will all depend on how rational investors are feeling that day. 228 00:10:37,040 --> 00:10:39,559 Speaker 6: Yeah, you just at a buyback announcement to it. 229 00:10:39,840 --> 00:10:42,280 Speaker 8: Exactly, our investors feeling like, you know what, I knew 230 00:10:42,280 --> 00:10:44,200 Speaker 8: this was coming, I priced it in, or is it 231 00:10:44,240 --> 00:10:47,200 Speaker 8: more of this is outrageous? You know this won't work 232 00:10:47,200 --> 00:10:49,120 Speaker 8: for me. And then on top of that, what kind 233 00:10:49,160 --> 00:10:51,320 Speaker 8: of outlook are they pointing to for the future? That's 234 00:10:51,320 --> 00:10:52,000 Speaker 8: sort of the potion. 235 00:10:52,840 --> 00:10:55,280 Speaker 3: Are there other ways that you guys are thinking about 236 00:10:55,280 --> 00:10:59,839 Speaker 3: getting exposure to this AI wave above and beyond Nvidia. 237 00:11:00,080 --> 00:11:01,520 Speaker 8: I think we like to pop the hood a bit 238 00:11:01,520 --> 00:11:04,640 Speaker 8: more so instead of getting direct exposure via some of 239 00:11:04,679 --> 00:11:07,080 Speaker 8: the megacap tech and we do have exposure there and 240 00:11:07,120 --> 00:11:11,040 Speaker 8: we you know, sort of change our allocations accordingly. We 241 00:11:11,160 --> 00:11:14,320 Speaker 8: look at companies that really do have an opportunity to 242 00:11:14,559 --> 00:11:16,640 Speaker 8: start leveraging data in a way that they haven't before, 243 00:11:17,320 --> 00:11:19,720 Speaker 8: in a way that is, if you don't start doing 244 00:11:19,760 --> 00:11:21,840 Speaker 8: it this way, you may be left behind. And so 245 00:11:22,320 --> 00:11:24,520 Speaker 8: their peer group may move as a pack. But if 246 00:11:24,520 --> 00:11:26,760 Speaker 8: they're sort of the top of their peer group in 247 00:11:27,080 --> 00:11:29,840 Speaker 8: dipping into those new functionalities, that's where we want to be. 248 00:11:29,920 --> 00:11:32,240 Speaker 8: So sometimes that tends to be in smalls, right because 249 00:11:32,240 --> 00:11:35,920 Speaker 8: they have the biggest runway, if you will, comparatively. So 250 00:11:35,960 --> 00:11:39,160 Speaker 8: it's a look at what sort of systems or platforms 251 00:11:39,360 --> 00:11:41,480 Speaker 8: can they start using to do their business in a 252 00:11:41,520 --> 00:11:43,440 Speaker 8: more efficient way, and then we get a. 253 00:11:43,440 --> 00:11:47,000 Speaker 6: Hold of those rains, you know, Shelby, I think a 254 00:11:47,000 --> 00:11:49,640 Speaker 6: lot of people tend to forget on Nvidia earnings day 255 00:11:49,800 --> 00:11:52,480 Speaker 6: there actually are other stocks in the stock market, yes, right, 256 00:11:52,720 --> 00:11:54,679 Speaker 6: you know there are other opportunities out there. I know 257 00:11:54,720 --> 00:11:58,559 Speaker 6: you've kept a close eye on the retail companies late 258 00:11:58,600 --> 00:12:00,920 Speaker 6: in the game reporting earnings as you u what are 259 00:12:00,920 --> 00:12:03,200 Speaker 6: some of the big takeaways there? You know, everyone is 260 00:12:03,240 --> 00:12:05,800 Speaker 6: trying to sort of get a feel for the sort 261 00:12:05,800 --> 00:12:08,120 Speaker 6: of macro story of where the consumer is now. Are 262 00:12:08,160 --> 00:12:10,959 Speaker 6: they trading down to the Walmarts of the world. What's 263 00:12:11,000 --> 00:12:13,920 Speaker 6: your take sort of big picture wise on how the 264 00:12:13,960 --> 00:12:17,040 Speaker 6: consumer is doing after reading all these retailer earnings records. 265 00:12:17,120 --> 00:12:20,040 Speaker 8: Yeah, I think the take is that staples are still 266 00:12:20,120 --> 00:12:22,800 Speaker 8: king right now, and in staples, they're going to do 267 00:12:22,800 --> 00:12:24,440 Speaker 8: a little bit of trade down to value. We've seen 268 00:12:24,480 --> 00:12:27,559 Speaker 8: that in the retailer space, but also in the brand 269 00:12:27,600 --> 00:12:29,840 Speaker 8: space within those retailers. And then when it comes to 270 00:12:29,880 --> 00:12:33,560 Speaker 8: discretionary discount is what is starting to take space again. 271 00:12:34,120 --> 00:12:36,199 Speaker 8: So you know, when it comes to soft lines, they're 272 00:12:36,240 --> 00:12:40,160 Speaker 8: wanting to get that little bit of a froth off 273 00:12:40,160 --> 00:12:42,199 Speaker 8: the top to be able to still have some fun. 274 00:12:42,960 --> 00:12:44,920 Speaker 8: But there's definitely a difference in the way that they 275 00:12:44,920 --> 00:12:45,760 Speaker 8: were spending last year. 276 00:12:45,840 --> 00:12:48,640 Speaker 6: Is that relate back to sort of a draw down 277 00:12:48,800 --> 00:12:51,560 Speaker 6: of the savings of the consumer? You know, we everyone 278 00:12:51,600 --> 00:12:54,480 Speaker 6: built up those savings during the pandemic and now that's 279 00:12:54,520 --> 00:12:55,040 Speaker 6: all gone. 280 00:12:55,160 --> 00:12:57,120 Speaker 8: Absolutely, it's the draw down. And it's also the fact 281 00:12:57,160 --> 00:12:59,160 Speaker 8: that earlier in the year we had a lot of 282 00:12:59,200 --> 00:13:02,520 Speaker 8: the credit zerros and banks tell us that at the 283 00:13:02,559 --> 00:13:04,679 Speaker 8: lower end of credit, folks were just saying you know what, 284 00:13:04,720 --> 00:13:07,839 Speaker 8: it is time to stop using extra credit. At the 285 00:13:07,920 --> 00:13:09,720 Speaker 8: upper end, folks are using it and they're just saying, 286 00:13:09,720 --> 00:13:11,360 Speaker 8: you know what, will spread out our payments because we're 287 00:13:11,360 --> 00:13:13,080 Speaker 8: not going to have to deal with the APR. But 288 00:13:13,240 --> 00:13:15,160 Speaker 8: we do know that the savings are pretty much gone, 289 00:13:15,440 --> 00:13:17,800 Speaker 8: and then there is a reluctancy to be using credit 290 00:13:17,880 --> 00:13:21,200 Speaker 8: because of those high rates. So there's a little bit 291 00:13:21,240 --> 00:13:23,479 Speaker 8: of punishment there to be had by brands and retailers. 292 00:13:23,960 --> 00:13:24,680 Speaker 2: I was going to ask you. 293 00:13:24,679 --> 00:13:28,320 Speaker 3: How you phil about that the retail the consumer out there, 294 00:13:28,360 --> 00:13:30,640 Speaker 3: But two of your stock picks are pretty consumer oriented 295 00:13:30,720 --> 00:13:31,720 Speaker 3: Starbucks and Walmart. 296 00:13:31,800 --> 00:13:34,280 Speaker 2: Yeah, Starbucks, what a wild. 297 00:13:34,040 --> 00:13:36,800 Speaker 3: Ride you shift your ceo and boom. I mean, is 298 00:13:36,840 --> 00:13:39,160 Speaker 3: any ceo worth twenty five percent popping the stock? 299 00:13:39,360 --> 00:13:41,400 Speaker 8: Well, that's something that we still have to learn, right, So, 300 00:13:42,200 --> 00:13:45,800 Speaker 8: and the thing about Starbucks is s it's such a 301 00:13:45,800 --> 00:13:49,200 Speaker 8: fun case because in our assessment of quality at MALI 302 00:13:49,240 --> 00:13:52,440 Speaker 8: Fulasset Management, the first pillar is management, culture and incentives, 303 00:13:52,840 --> 00:13:55,800 Speaker 8: And so when we look at something like this, we see, Okay, 304 00:13:55,840 --> 00:13:58,240 Speaker 8: he's been hired to solve a problem, and we do 305 00:13:58,360 --> 00:14:00,520 Speaker 8: know that his track record is a lot of cutting 306 00:14:00,559 --> 00:14:03,000 Speaker 8: and that he's done great for shareholders in doing so. 307 00:14:03,480 --> 00:14:05,120 Speaker 8: But the thing we have to also consider is what's 308 00:14:05,160 --> 00:14:07,680 Speaker 8: going to be the new identity for the Starbucks customer. 309 00:14:07,679 --> 00:14:09,599 Speaker 8: What's he going to contribute to that, and what's he 310 00:14:09,640 --> 00:14:11,880 Speaker 8: going to contribute to culture there and the labor force. 311 00:14:11,920 --> 00:14:13,400 Speaker 8: That's going to be a big task. So we love 312 00:14:13,440 --> 00:14:16,599 Speaker 8: Starbucks because of their scale, their primacy, their competitive advantage, 313 00:14:16,679 --> 00:14:18,480 Speaker 8: but it doesn't mean that a new CEO is going 314 00:14:18,520 --> 00:14:21,000 Speaker 8: to be perfect in active management is watching how well 315 00:14:21,120 --> 00:14:22,000 Speaker 8: or not he's gonna do. 316 00:14:22,520 --> 00:14:25,840 Speaker 6: Shelby, I can't let you go without asking about the hats, 317 00:14:25,880 --> 00:14:28,360 Speaker 6: the old Motley Fool hats. I'm old enough to remember 318 00:14:28,840 --> 00:14:31,640 Speaker 6: whenever someone from mottnany Motley Fool showed up in the media, 319 00:14:31,680 --> 00:14:33,200 Speaker 6: they'd have one of those great Chester hats. 320 00:14:33,240 --> 00:14:33,640 Speaker 2: What happened? 321 00:14:33,640 --> 00:14:34,440 Speaker 6: Can we bring them back? 322 00:14:34,720 --> 00:14:36,600 Speaker 8: I mean, I've got to ask my legal team and 323 00:14:36,640 --> 00:14:38,840 Speaker 8: all of my right but we I mean, we do 324 00:14:38,880 --> 00:14:41,400 Speaker 8: still have them and a lot of our our merchandise. 325 00:14:41,440 --> 00:14:43,880 Speaker 8: You see a sticker, anything branded is gonna have that 326 00:14:43,960 --> 00:14:45,320 Speaker 8: Jester hat on it. But let me see what I 327 00:14:45,360 --> 00:14:45,600 Speaker 8: can do. 328 00:14:47,040 --> 00:14:50,680 Speaker 3: All right, So you know a company like a Starbucks, 329 00:14:50,840 --> 00:14:52,200 Speaker 3: what's the story on Walmart? 330 00:14:52,200 --> 00:14:54,360 Speaker 2: Here? Is that a is that just a GDP play. 331 00:14:54,800 --> 00:14:57,000 Speaker 8: The thing about Walmart is I think if you look 332 00:14:57,040 --> 00:14:59,080 Speaker 8: over the past ten years, probably that's how a lot 333 00:14:59,080 --> 00:15:01,360 Speaker 8: of analysts were modeling it out. But when we've looked 334 00:15:01,400 --> 00:15:05,080 Speaker 8: probably since twenty twenty, really they were being treated like 335 00:15:05,120 --> 00:15:07,280 Speaker 8: a growth stock for quite some time, and so we 336 00:15:07,320 --> 00:15:10,840 Speaker 8: actually trimmed our allocation accordingly because our investment thesis for 337 00:15:10,880 --> 00:15:13,280 Speaker 8: Walmart is not a growth stock, right, so we wanted 338 00:15:13,280 --> 00:15:17,160 Speaker 8: to sort of a trim as we needed to. But 339 00:15:17,280 --> 00:15:19,520 Speaker 8: what they have started to do is they have showed 340 00:15:19,520 --> 00:15:21,720 Speaker 8: that they have the power to capture things like retail 341 00:15:21,760 --> 00:15:24,760 Speaker 8: media a lot faster than some of their smaller competitors. 342 00:15:24,760 --> 00:15:26,840 Speaker 8: So it looked like, ah, they're just kind of asleep 343 00:15:26,880 --> 00:15:29,040 Speaker 8: at the wheel. No, it's a sleeping there. So they 344 00:15:29,080 --> 00:15:31,640 Speaker 8: have a lot of capacity, and they do have a 345 00:15:31,640 --> 00:15:34,880 Speaker 8: pretty nice yield when the stock is trading as a 346 00:15:34,880 --> 00:15:37,760 Speaker 8: GDP PLA, so it is a bit safe, but right 347 00:15:37,800 --> 00:15:40,560 Speaker 8: now it is also quite an earner. So it's a 348 00:15:40,640 --> 00:15:42,720 Speaker 8: nice thing to have in our in our yield portfolio 349 00:15:42,760 --> 00:15:44,080 Speaker 8: and sometimes in core. 350 00:15:44,320 --> 00:15:46,080 Speaker 3: Yeah, I mean it's kind of DIPPDENI had one point 351 00:15:46,120 --> 00:15:48,120 Speaker 3: one percent Shelby mcfadd and thank you so much. 352 00:15:48,120 --> 00:15:48,560 Speaker 2: For joiningus. 353 00:15:48,600 --> 00:15:51,600 Speaker 3: Shelby Mthad, and she's an investment analyst at Motley Full 354 00:15:51,640 --> 00:15:54,480 Speaker 3: Asset Management based down in Alexandria, Virginia. 355 00:15:54,520 --> 00:15:57,040 Speaker 2: But here in our New York studio, we appreciate. 356 00:15:56,600 --> 00:16:01,480 Speaker 1: That you're listening to the Bloomberg Until Diligence podcast. Catch 357 00:16:01,560 --> 00:16:04,280 Speaker 1: us live weekdays at ten am Eastern on Apple Car 358 00:16:04,400 --> 00:16:07,400 Speaker 1: playing Android Auto with the Bloomberg Business App. Listen on 359 00:16:07,440 --> 00:16:10,720 Speaker 1: demand wherever you get your podcasts, or watch us live 360 00:16:10,800 --> 00:16:12,160 Speaker 1: on YouTube. 361 00:16:13,360 --> 00:16:15,040 Speaker 2: Let's talk a little bit of retail. How about some 362 00:16:15,080 --> 00:16:16,080 Speaker 2: retail earnings here. 363 00:16:16,080 --> 00:16:18,560 Speaker 3: We've got Coals after Crombie Nords from all that kind 364 00:16:18,560 --> 00:16:21,360 Speaker 3: of good stuff coming Mary Ross Gilbert senior analysts for 365 00:16:21,560 --> 00:16:23,720 Speaker 3: Bloomberg Intelligence covering the equity space. 366 00:16:24,000 --> 00:16:26,800 Speaker 2: Mary Ross, thanks so much for joining us here. What 367 00:16:26,840 --> 00:16:28,440 Speaker 2: are you hearing from some of the retailers? 368 00:16:29,440 --> 00:16:33,240 Speaker 9: Thank you, Paul. Yeah, So, I would say mixed results 369 00:16:33,240 --> 00:16:36,400 Speaker 9: coming out of retailers. So, for example, on Coals, they 370 00:16:36,480 --> 00:16:39,480 Speaker 9: missed on the sales line, so the comp sales came 371 00:16:39,520 --> 00:16:43,760 Speaker 9: in down about five percent and analysts were expecting down 372 00:16:43,760 --> 00:16:46,600 Speaker 9: two and a half percent. But the good news was 373 00:16:46,640 --> 00:16:49,480 Speaker 9: that they beat on the bottom line and they raised 374 00:16:49,480 --> 00:16:53,240 Speaker 9: their earnings guidance for the year, so they're now expecting 375 00:16:53,320 --> 00:16:56,400 Speaker 9: something closer to two dollars whereas before they are expecting 376 00:16:56,440 --> 00:17:00,680 Speaker 9: something less than a dollar eighty previously. So while that 377 00:17:00,800 --> 00:17:03,400 Speaker 9: is good news, they do need to get the top 378 00:17:03,440 --> 00:17:08,480 Speaker 9: line right sided. And with Tom Kingsbury as the CEO, 379 00:17:08,800 --> 00:17:12,640 Speaker 9: and he's has an amazing track record. He's the one 380 00:17:12,640 --> 00:17:17,000 Speaker 9: who took Burlington from sort of a mall based type 381 00:17:17,600 --> 00:17:22,320 Speaker 9: discount retailer to an off price, fast growing company, so 382 00:17:23,119 --> 00:17:24,879 Speaker 9: there's a lot of faith in him. He's bringing in 383 00:17:25,160 --> 00:17:28,040 Speaker 9: a new categories that so Fara business did well. It 384 00:17:28,119 --> 00:17:31,080 Speaker 9: was up low teens on a comp basis, with total 385 00:17:31,119 --> 00:17:34,800 Speaker 9: beauty sales up forty five percent. But now we need 386 00:17:34,880 --> 00:17:38,680 Speaker 9: conversion and yes there's headwinds from the consumer. So then 387 00:17:38,720 --> 00:17:41,159 Speaker 9: if you take it over to Abercrombie on the other 388 00:17:41,280 --> 00:17:45,320 Speaker 9: side of the picture, their customer base for both brands, 389 00:17:45,320 --> 00:17:48,600 Speaker 9: Hollister and the Abercrombie and Fitch brands, their household income 390 00:17:48,680 --> 00:17:50,879 Speaker 9: is one hundred to one hundred and fifty thousand, not 391 00:17:51,080 --> 00:17:53,959 Speaker 9: like Cohal's where you're under seventy five in household income, 392 00:17:53,960 --> 00:17:57,359 Speaker 9: and so you really have to be very discerning. So 393 00:17:57,640 --> 00:18:02,440 Speaker 9: an Abercromby is executing very, very well, and that explains 394 00:18:02,440 --> 00:18:05,480 Speaker 9: why they had double digit increases in comp sales. The 395 00:18:05,520 --> 00:18:09,000 Speaker 9: Abercrombie brand was up twenty one percent on a comp basis, 396 00:18:09,320 --> 00:18:13,439 Speaker 9: and you had a fifteen percent increase on Hollister, and 397 00:18:13,440 --> 00:18:16,359 Speaker 9: that's on top of double digit increases a year ago. 398 00:18:17,040 --> 00:18:21,200 Speaker 9: And they're seeing strength early in the third quarter. They're 399 00:18:21,240 --> 00:18:25,760 Speaker 9: constantly extending the categories because they know what their gen 400 00:18:25,920 --> 00:18:30,080 Speaker 9: Z for the Hollister and Millennial on the Abercrombie side 401 00:18:30,119 --> 00:18:34,680 Speaker 9: customers want. So that's a company that's executing very well 402 00:18:34,720 --> 00:18:38,080 Speaker 9: with just great results. And then Nordstrom is sort of 403 00:18:38,160 --> 00:18:42,200 Speaker 9: in that similar category, and we did see good numbers 404 00:18:42,200 --> 00:18:45,399 Speaker 9: come out of them late yesterday. The sales were a 405 00:18:45,440 --> 00:18:50,960 Speaker 9: little lighter than Consensus estimated. Other comp sales for Rack 406 00:18:51,160 --> 00:18:54,280 Speaker 9: were up four percent. Consensus was looking for six percent, 407 00:18:54,480 --> 00:18:57,160 Speaker 9: and the full line store was up just under one 408 00:18:57,240 --> 00:18:59,320 Speaker 9: percent on a comp basis, but they were looking for 409 00:18:59,359 --> 00:19:02,280 Speaker 9: something more than one percent, like one point three. But 410 00:19:02,960 --> 00:19:07,600 Speaker 9: they had strong full price sales. That's very encouraging and 411 00:19:07,640 --> 00:19:11,160 Speaker 9: the fact that the business is actually generating positive sales 412 00:19:11,640 --> 00:19:15,040 Speaker 9: something that we're not seeing really in department stores. Of course, 413 00:19:15,080 --> 00:19:19,159 Speaker 9: when we had Macy's report with disappointing numbers. So again 414 00:19:19,200 --> 00:19:22,640 Speaker 9: that speaks to their hire income consumer also in that base, 415 00:19:22,680 --> 00:19:26,480 Speaker 9: and of course rack total revenues were up almost nine percent. 416 00:19:26,880 --> 00:19:30,040 Speaker 9: It's the off price story. Ye, you know something that 417 00:19:30,080 --> 00:19:32,439 Speaker 9: we saw out of the off price last week with 418 00:19:32,600 --> 00:19:33,720 Speaker 9: TJX and Ross. 419 00:19:34,480 --> 00:19:36,800 Speaker 6: You know, Mary, if I listen to everything you're saying 420 00:19:36,840 --> 00:19:40,399 Speaker 6: from sort of a macro economics lens, I wonder if 421 00:19:40,440 --> 00:19:43,439 Speaker 6: there's like a big theme to be taken away here, 422 00:19:43,520 --> 00:19:47,520 Speaker 6: you know, excluding sort of the execution hits and misses 423 00:19:47,520 --> 00:19:49,480 Speaker 6: from each company. But it sounds to me like, you know, 424 00:19:49,520 --> 00:19:52,960 Speaker 6: those lower income consumers are struggling a little bit, the 425 00:19:53,000 --> 00:19:56,160 Speaker 6: higher income consumers are still spending. I mean, is it 426 00:19:56,200 --> 00:19:59,119 Speaker 6: is that simple takeaway? Is that too simplified or is 427 00:19:59,160 --> 00:20:01,960 Speaker 6: that really kind of the story that is emerging from 428 00:20:02,000 --> 00:20:04,320 Speaker 6: the earning season for retailers. 429 00:20:04,640 --> 00:20:07,520 Speaker 9: Yeah, I think that's fair. And even you know, as 430 00:20:07,520 --> 00:20:10,320 Speaker 9: we get up into the higher income they're also trying 431 00:20:10,320 --> 00:20:12,439 Speaker 9: to save money too. I think that you saw that 432 00:20:12,520 --> 00:20:15,520 Speaker 9: in the news out last week with walmartin Target and 433 00:20:15,600 --> 00:20:17,840 Speaker 9: so a lot of them are taking advantage of the 434 00:20:17,840 --> 00:20:20,800 Speaker 9: better prices there, but that also keeps them in a 435 00:20:20,800 --> 00:20:25,080 Speaker 9: good position to continue spending elsewhere, you know, so for 436 00:20:25,200 --> 00:20:29,240 Speaker 9: things that are more desirable. So yes, I think clearly 437 00:20:29,320 --> 00:20:32,320 Speaker 9: the lower income, lower middle income consumer and even middle 438 00:20:32,600 --> 00:20:37,120 Speaker 9: income consumer is just having a hard time dealing with 439 00:20:37,520 --> 00:20:41,199 Speaker 9: high food and energy prices and that's showing up in 440 00:20:41,280 --> 00:20:44,760 Speaker 9: their very discerning spending. That's exactly what you're seeing. 441 00:20:45,119 --> 00:20:47,600 Speaker 3: So Mary, helping me understand what's happening with the Amercrombie 442 00:20:47,600 --> 00:20:52,040 Speaker 3: stock today. It's down sixteen percent on the news. So 443 00:20:52,119 --> 00:20:55,240 Speaker 3: I guess the sales boost was good but not good enough. 444 00:20:57,640 --> 00:21:00,239 Speaker 9: Yeah, it could be, but I also view it is 445 00:21:00,280 --> 00:21:04,720 Speaker 9: potentially short lived as well. So sometimes when you have reactions, 446 00:21:04,720 --> 00:21:08,280 Speaker 9: for example on Coals, even though they had the big 447 00:21:08,359 --> 00:21:14,159 Speaker 9: sales miss, right, you see those stocks up very strong there, 448 00:21:14,200 --> 00:21:16,880 Speaker 9: But I think part of it's probably due to short covering, 449 00:21:17,880 --> 00:21:22,000 Speaker 9: and you know, there's probably some optimism that with they're 450 00:21:22,040 --> 00:21:24,399 Speaker 9: getting the babies r us those just started to flow 451 00:21:24,440 --> 00:21:27,399 Speaker 9: in this month, so we're not really seeing the benefits 452 00:21:27,440 --> 00:21:29,920 Speaker 9: of that, and they're seeing good momentum in the new 453 00:21:29,960 --> 00:21:32,960 Speaker 9: categories that they brought. We're just not seeing it convert 454 00:21:33,080 --> 00:21:36,800 Speaker 9: all the way to lifting sales. But as we start 455 00:21:36,840 --> 00:21:39,560 Speaker 9: to cycle looking out a year from now, which of course, 456 00:21:39,600 --> 00:21:44,840 Speaker 9: we know that's really how equities and investors think they're 457 00:21:44,880 --> 00:21:47,280 Speaker 9: going to be going against these easy comparisons, and it 458 00:21:47,359 --> 00:21:50,920 Speaker 9: may make it easier for them to show a sales lift. 459 00:21:50,920 --> 00:21:52,640 Speaker 9: But we'll see, you. 460 00:21:52,600 --> 00:21:55,000 Speaker 6: Know, Mary, I just sent my youngest two kids off 461 00:21:55,040 --> 00:21:57,280 Speaker 6: to the school today. They back to school already we 462 00:21:57,320 --> 00:21:59,840 Speaker 6: started early in the touching. But it got me thinking 463 00:21:59,880 --> 00:22:03,280 Speaker 6: of that whole that really important back to school shopping season, 464 00:22:03,400 --> 00:22:06,440 Speaker 6: especially for you know, your Abercrombie's of the world. What's 465 00:22:06,480 --> 00:22:08,879 Speaker 6: the outlook there? I mean, if you could put, you know, 466 00:22:08,920 --> 00:22:11,119 Speaker 6: break out your crystal ball and tell us what the 467 00:22:11,119 --> 00:22:13,119 Speaker 6: next quarter numbers are going to look like, do you think, 468 00:22:13,760 --> 00:22:15,560 Speaker 6: you know, is there going to be some weakness because 469 00:22:15,560 --> 00:22:17,160 Speaker 6: of all these issues you're describing. 470 00:22:19,000 --> 00:22:21,560 Speaker 9: Yeah, so it's a good question. I think once again, 471 00:22:21,720 --> 00:22:24,840 Speaker 9: well we'll probably have some mixed results. But Abercromby is 472 00:22:24,880 --> 00:22:29,600 Speaker 9: seeing very good reaction to some of the initial categories 473 00:22:29,600 --> 00:22:32,680 Speaker 9: that they have. So for example, in Hollister, they've got 474 00:22:32,680 --> 00:22:36,359 Speaker 9: their collegiate line that they've launched and it's more extended. 475 00:22:36,400 --> 00:22:39,680 Speaker 9: It covers about thirty two universities if you look at it. 476 00:22:39,800 --> 00:22:44,800 Speaker 9: On the Abercrombie side, they have the NFL line by Abercrombie, 477 00:22:44,840 --> 00:22:47,000 Speaker 9: and they've had that. This is the third year running now, 478 00:22:47,040 --> 00:22:50,000 Speaker 9: but each year they extend it further and further because 479 00:22:50,000 --> 00:22:52,680 Speaker 9: the demand is so strong, and that's sort of part 480 00:22:52,720 --> 00:22:55,920 Speaker 9: of their strategy. So we are seeing I think good 481 00:22:55,920 --> 00:22:58,800 Speaker 9: results there now as we start to get more media 482 00:22:58,880 --> 00:23:02,560 Speaker 9: coverage of the election uncertainty we have seen in past 483 00:23:02,680 --> 00:23:05,959 Speaker 9: times around this election cycle where there is that uncertainty, 484 00:23:05,960 --> 00:23:10,880 Speaker 9: it can sometimes have an impact on consumer spending. But generally, 485 00:23:10,960 --> 00:23:14,080 Speaker 9: I think it's really going to come down to, you know, 486 00:23:14,119 --> 00:23:17,879 Speaker 9: those that are executing and those that are skewing to 487 00:23:18,240 --> 00:23:22,840 Speaker 9: a more of a premium consumer or ones with greater 488 00:23:23,240 --> 00:23:29,720 Speaker 9: discretionary income fascinating out platform, whereas the lower income underperforming. 489 00:23:29,880 --> 00:23:33,080 Speaker 6: Fascinating Paul that we were also obsessed with politics, that 490 00:23:33,160 --> 00:23:36,400 Speaker 6: the upcoming election can influence our spending path exactly. 491 00:23:36,560 --> 00:23:37,480 Speaker 2: We'll see how it to blaze out. 492 00:23:37,480 --> 00:23:39,600 Speaker 3: Mary Ross Gilbert, thank you so much for joining us. 493 00:23:39,640 --> 00:23:42,520 Speaker 3: Mary Ross Gilbert senior Ecody analysts covering the retail space 494 00:23:42,560 --> 00:23:46,600 Speaker 3: for Bloomberg Intelligence. She's based out there in Los Angeles, California. 495 00:23:46,640 --> 00:23:49,360 Speaker 3: So again, some of the retailers putting us some decent numbers. 496 00:23:50,400 --> 00:23:52,840 Speaker 3: Sometimes the guidance is not as good and so you 497 00:23:52,920 --> 00:23:55,080 Speaker 3: get a little bit of a pullback like in Abercrombie, 498 00:23:55,080 --> 00:23:57,439 Speaker 3: but that slacks up still up sixty percent year to date, 499 00:23:57,480 --> 00:24:00,000 Speaker 3: so maybe just a little profit taking their. 500 00:24:01,480 --> 00:24:05,359 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 501 00:24:05,440 --> 00:24:08,960 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 502 00:24:09,000 --> 00:24:11,760 Speaker 1: Auto with the Bloomberg Business app. You can also listen 503 00:24:11,880 --> 00:24:14,960 Speaker 1: live on Amazon Alexa from our flagship New York station 504 00:24:15,320 --> 00:24:19,040 Speaker 1: just say Alexa playing Bloomberg eleven thirty. 505 00:24:19,800 --> 00:24:22,639 Speaker 3: And we also have some great guests from the world 506 00:24:22,720 --> 00:24:24,520 Speaker 3: of Global Wall Street to help us understand what's going 507 00:24:24,560 --> 00:24:25,960 Speaker 3: on in the world of ETFs. One of those is 508 00:24:25,960 --> 00:24:29,800 Speaker 3: Sylvia Jablonski, chief of executive Officer and Chief investment Officer 509 00:24:30,080 --> 00:24:34,639 Speaker 3: of Defiance ETFs. Sylvia, thanks so much for joining us here. 510 00:24:35,800 --> 00:24:37,840 Speaker 3: You know, for better or worse, the talk of the day, 511 00:24:37,840 --> 00:24:40,159 Speaker 3: if not the week, has been in Nvidia From an 512 00:24:40,240 --> 00:24:44,119 Speaker 3: ETF perspective, How do you guys at Defiance try to 513 00:24:44,160 --> 00:24:48,679 Speaker 3: give some product opportunities for AI to your clients. 514 00:24:49,520 --> 00:24:51,919 Speaker 7: Good morning and thanks thanks for having me today. 515 00:24:52,200 --> 00:24:54,080 Speaker 10: Well, we have a bunch of them, actually we have 516 00:24:55,160 --> 00:24:59,680 Speaker 10: several two times LEVERTYTF single stock products that tracks semiconductor 517 00:25:00,119 --> 00:25:04,360 Speaker 10: have you know, like a two beta Broadcom to two 518 00:25:04,359 --> 00:25:08,520 Speaker 10: beta super micro computers, two beta micro strategy, and so 519 00:25:08,720 --> 00:25:11,080 Speaker 10: you know those definitely participate when the video flies. 520 00:25:11,600 --> 00:25:13,040 Speaker 7: And then we have an ai E t F. 521 00:25:13,119 --> 00:25:16,360 Speaker 10: Basically machine learning and supercomputing and that's and that's quantum. 522 00:25:16,359 --> 00:25:18,520 Speaker 10: It has a huge position in n video and all 523 00:25:18,560 --> 00:25:20,639 Speaker 10: the chip stock. So you know, there are lots of 524 00:25:20,640 --> 00:25:23,080 Speaker 10: ways to get this, whether it's through single stock exposure 525 00:25:23,520 --> 00:25:25,680 Speaker 10: and a video stock itself or some of the ETFs 526 00:25:25,720 --> 00:25:27,760 Speaker 10: like ours out there lots of options. 527 00:25:28,359 --> 00:25:30,359 Speaker 6: H Cyphia, I wanted to ask you about those single 528 00:25:30,480 --> 00:25:34,159 Speaker 6: name uh Leverage ETFs. I know you have one for 529 00:25:34,240 --> 00:25:38,200 Speaker 6: Eli Lilly Broadcom micro Strategy. How big is the potential 530 00:25:38,320 --> 00:25:41,000 Speaker 6: market for those? Do you think? I mean? Is is 531 00:25:41,040 --> 00:25:43,960 Speaker 6: it conceivable to see half d S and P or 532 00:25:44,000 --> 00:25:47,320 Speaker 6: something like that have LeVert ETFs on all these names. 533 00:25:48,800 --> 00:25:51,920 Speaker 10: You know, it's it's a fairly new phenomenon in Leverty 534 00:25:51,960 --> 00:25:54,840 Speaker 10: tf so Lever and innversitytfs have been around, you know 535 00:25:55,080 --> 00:25:58,439 Speaker 10: forever at this point, well over a decade and decades 536 00:25:58,440 --> 00:25:59,040 Speaker 10: if you count. 537 00:25:58,880 --> 00:26:00,400 Speaker 7: The mutual phone products that I said. 538 00:26:00,440 --> 00:26:04,399 Speaker 10: Before people levered up btfs themselves but the leverage single 539 00:26:04,400 --> 00:26:06,560 Speaker 10: stock has been a pretty new concept. It's just been 540 00:26:06,600 --> 00:26:08,719 Speaker 10: out for you know, really the last few years, and 541 00:26:09,080 --> 00:26:10,959 Speaker 10: billions of dollars have flown into that space. 542 00:26:11,000 --> 00:26:11,159 Speaker 7: You know. 543 00:26:11,200 --> 00:26:15,400 Speaker 10: The levered en video that granted Shaars has is just massive, 544 00:26:15,640 --> 00:26:16,240 Speaker 10: got massive. 545 00:26:16,240 --> 00:26:18,479 Speaker 7: Out of the gates direction has some of them. And 546 00:26:18,640 --> 00:26:20,560 Speaker 7: you know, we had a great test case. 547 00:26:20,600 --> 00:26:23,680 Speaker 10: We launched a two x micro strategy m STX just 548 00:26:23,720 --> 00:26:25,440 Speaker 10: a few days ago and it's you know, there are 549 00:26:25,480 --> 00:26:28,280 Speaker 10: some days where it's trading like one hundred million in 550 00:26:28,359 --> 00:26:30,960 Speaker 10: volume already, So the upsite is certainly there from these 551 00:26:30,960 --> 00:26:32,880 Speaker 10: tactical traders that know how to use them. 552 00:26:33,160 --> 00:26:34,520 Speaker 7: So I think the sky is the limit. 553 00:26:34,560 --> 00:26:37,480 Speaker 10: And you know, I think with LEVERTYTFS two, people tend 554 00:26:37,480 --> 00:26:40,680 Speaker 10: to like some of the names that are more popular, right, 555 00:26:40,680 --> 00:26:43,400 Speaker 10: Definitely the mag seven, Definitely the semiconductor names. So whether 556 00:26:43,480 --> 00:26:44,560 Speaker 10: or not we get half of the S and P 557 00:26:44,680 --> 00:26:46,920 Speaker 10: five hundred, I don't know, but I think we'll definitely 558 00:26:46,960 --> 00:26:50,800 Speaker 10: get kind of like the as Belchunas who you mentioned before, 559 00:26:50,840 --> 00:26:54,399 Speaker 10: likes to say hot, saucy ish names out there. 560 00:26:55,640 --> 00:26:57,640 Speaker 3: One of the names that you've got a leverage ticker 561 00:26:57,720 --> 00:27:01,119 Speaker 3: on is Eli Lilly tell Us why you guys launched 562 00:27:01,160 --> 00:27:01,600 Speaker 3: that product. 563 00:27:02,640 --> 00:27:04,679 Speaker 10: Yeah, so that one's actually pretty interesting because if you 564 00:27:04,680 --> 00:27:06,720 Speaker 10: look at Eli Lilly's stock, you know, it's kind of 565 00:27:06,760 --> 00:27:10,480 Speaker 10: just had this like nice steady, you know, very low 566 00:27:10,600 --> 00:27:12,960 Speaker 10: range bound volatility, tends to be a trending you know, 567 00:27:13,040 --> 00:27:15,800 Speaker 10: upward stock, and I think it's their menu of services 568 00:27:15,840 --> 00:27:18,960 Speaker 10: that interests us. There's this phenomenon with the weight loss drugs. 569 00:27:18,960 --> 00:27:21,040 Speaker 10: Obviously with set bounds. You know, they get credit for 570 00:27:21,119 --> 00:27:24,280 Speaker 10: kind of having one of the best ones. Their earnings 571 00:27:24,280 --> 00:27:26,480 Speaker 10: call actually was one of the most positive in terms 572 00:27:26,480 --> 00:27:29,480 Speaker 10: of being able to supply you know, the amount of 573 00:27:29,520 --> 00:27:32,040 Speaker 10: medication needed for the demand out there, the growth that 574 00:27:32,080 --> 00:27:34,480 Speaker 10: they see going forward. They have Manjaro, they have a 575 00:27:34,480 --> 00:27:37,639 Speaker 10: whole bunch of like cancer trials going on, Alzheimer's trials 576 00:27:37,720 --> 00:27:40,399 Speaker 10: going on, and you know, well they're like setbacks here 577 00:27:40,440 --> 00:27:42,280 Speaker 10: and there. For every drug company, it's it's one of 578 00:27:42,280 --> 00:27:45,280 Speaker 10: the company that tends to have the most robust product 579 00:27:45,400 --> 00:27:48,080 Speaker 10: lineup and then you know, great balance sheet, they pay 580 00:27:48,119 --> 00:27:52,199 Speaker 10: a dividend, aging baby boomer population, defensive qualities. 581 00:27:52,520 --> 00:27:55,440 Speaker 7: Why not Eli Lilly, right, and why not lever it up? 582 00:27:56,240 --> 00:27:59,160 Speaker 6: Yeah, Well, obviously, Sylvi, you know, there is a lot 583 00:27:59,200 --> 00:28:03,320 Speaker 6: of risk inherit in using leverage in the stock market. 584 00:28:03,359 --> 00:28:07,120 Speaker 6: And I'm just curious, you know who where the demand 585 00:28:07,160 --> 00:28:09,080 Speaker 6: for these is coming from. Is it from the hedge 586 00:28:09,080 --> 00:28:11,560 Speaker 6: funds or the retail side. And you know, if there's 587 00:28:11,560 --> 00:28:15,800 Speaker 6: a lot of retail demand, it strikes me as you know, 588 00:28:16,480 --> 00:28:18,720 Speaker 6: a bit of risk for defiance as well to be 589 00:28:19,119 --> 00:28:23,399 Speaker 6: providing these products to traders who might not really appreciate 590 00:28:23,480 --> 00:28:25,520 Speaker 6: how risky they are. Is there any sort of way 591 00:28:25,560 --> 00:28:27,159 Speaker 6: you're navigating that issue. 592 00:28:27,880 --> 00:28:28,880 Speaker 7: Yeah, that's a good question. 593 00:28:28,920 --> 00:28:30,800 Speaker 10: And I think, like you know, for the because lever 594 00:28:31,080 --> 00:28:33,800 Speaker 10: and universityfs have been out for so long, there's been 595 00:28:33,840 --> 00:28:36,240 Speaker 10: so much of an effort both by regulators, you know, 596 00:28:36,280 --> 00:28:40,240 Speaker 10: the sec the issuers themselves, the trading brokerash platforms, things 597 00:28:40,280 --> 00:28:40,440 Speaker 10: like that. 598 00:28:40,520 --> 00:28:42,040 Speaker 7: Bloomberg, you guys do a ton of this. 599 00:28:42,400 --> 00:28:45,000 Speaker 10: There's so much education out there and also just so 600 00:28:45,000 --> 00:28:47,400 Speaker 10: many learning labels, right like these are daily products. 601 00:28:47,840 --> 00:28:48,520 Speaker 7: Make sure you're. 602 00:28:48,400 --> 00:28:50,240 Speaker 10: Making a decision every single day if you want to 603 00:28:50,240 --> 00:28:52,720 Speaker 10: continue holding it, or if you know, if you've got 604 00:28:52,760 --> 00:28:55,000 Speaker 10: your gains for the day and you're no longer bullish 605 00:28:55,000 --> 00:28:56,040 Speaker 10: on a bull fund, sell it. 606 00:28:56,160 --> 00:28:56,760 Speaker 7: Things like this. 607 00:28:56,880 --> 00:28:59,840 Speaker 10: So we're very clear in the perspectus and all of 608 00:28:59,840 --> 00:29:02,760 Speaker 10: our materials about you know, these are day trading tools, 609 00:29:03,040 --> 00:29:05,040 Speaker 10: and retail is such a broad thing, right. I mean, 610 00:29:05,080 --> 00:29:07,600 Speaker 10: I've learned this in my career. There are some retail 611 00:29:07,640 --> 00:29:10,200 Speaker 10: traders out there that are as skilled as you know, 612 00:29:10,320 --> 00:29:11,760 Speaker 10: the top hedge funds in the world. 613 00:29:11,840 --> 00:29:14,640 Speaker 7: Right. So to answer your question, it's a mix of everything. 614 00:29:14,680 --> 00:29:15,480 Speaker 7: It's it's day. 615 00:29:15,360 --> 00:29:19,760 Speaker 10: Traders, you know, savvy, technical, tactical retail traders, it's hedge funds, 616 00:29:19,840 --> 00:29:21,440 Speaker 10: large institutions, pensions. 617 00:29:22,160 --> 00:29:24,560 Speaker 7: Really runs the gamut on this and it always has. 618 00:29:24,600 --> 00:29:30,080 Speaker 3: Actually historically, I look at when I just kind of 619 00:29:30,120 --> 00:29:33,440 Speaker 3: study this industry read Eric's work on the industry. Is 620 00:29:34,160 --> 00:29:37,200 Speaker 3: I'm uncomfortable about the concentration. There's so there's a handful 621 00:29:37,240 --> 00:29:39,880 Speaker 3: of really really big ETF houses out there, whether it's 622 00:29:39,880 --> 00:29:42,400 Speaker 3: the vanguards or the state streets, and then there's just 623 00:29:42,440 --> 00:29:45,920 Speaker 3: a gajillion smaller ones. Is that a healthy structure? 624 00:29:45,920 --> 00:29:46,360 Speaker 2: Do you think? 625 00:29:47,880 --> 00:29:49,800 Speaker 10: You know, it's like the mag seven of the SSC 626 00:29:49,960 --> 00:29:53,720 Speaker 10: five hundred, right, the rest of us small and midcalfs 627 00:29:54,080 --> 00:29:56,200 Speaker 10: or you know, trying to catch some tailwinds, We're coming 628 00:29:56,240 --> 00:29:58,800 Speaker 10: up with good products. Rates falling is always a helpful thing. 629 00:29:59,000 --> 00:30:00,640 Speaker 10: It's the same old thing, right. I think you have 630 00:30:00,720 --> 00:30:03,120 Speaker 10: ETF shops that come out and you know, as long 631 00:30:03,160 --> 00:30:05,600 Speaker 10: as we have some tenure and you know, have a 632 00:30:05,640 --> 00:30:07,920 Speaker 10: good amount of product lineups and the right digligences all 633 00:30:07,920 --> 00:30:10,360 Speaker 10: that kind of thing. I think investors are willing to 634 00:30:10,400 --> 00:30:13,440 Speaker 10: give products a try now, regardless of who the issuer was. 635 00:30:14,440 --> 00:30:17,080 Speaker 10: That being said, you know, a company like Defiance is 636 00:30:17,120 --> 00:30:19,080 Speaker 10: never going to come out and try to launch you know, 637 00:30:19,120 --> 00:30:22,400 Speaker 10: a free S and P five hundred black Rock Vanguard 638 00:30:22,840 --> 00:30:25,320 Speaker 10: Stage Street. I mean, it's there, they won that game, right, 639 00:30:25,400 --> 00:30:27,640 Speaker 10: But I think we can be creative with products that 640 00:30:27,680 --> 00:30:30,280 Speaker 10: don't exist in the marketplace yet and that there's appetite for. 641 00:30:30,520 --> 00:30:32,480 Speaker 10: And the good thing about being a smaller shop is 642 00:30:32,520 --> 00:30:33,959 Speaker 10: like we can we can kind of see what all 643 00:30:33,960 --> 00:30:36,440 Speaker 10: the bohemits have done and just try to, you know, 644 00:30:36,520 --> 00:30:38,640 Speaker 10: kind of like figure out what's missing and put our 645 00:30:38,680 --> 00:30:40,520 Speaker 10: own secret sauce on it. So I do think there's 646 00:30:40,640 --> 00:30:42,760 Speaker 10: room for a whole lot of us small guys. 647 00:30:42,800 --> 00:30:44,320 Speaker 7: And you know, we're all growing. 648 00:30:44,360 --> 00:30:46,480 Speaker 10: We've all had some pretty successful launches in the last 649 00:30:46,520 --> 00:30:48,280 Speaker 10: couple of years, so we'll catch up. 650 00:30:48,920 --> 00:30:52,360 Speaker 6: Yeah, Sylviya, I'm curious how you're thinking about the market overall. 651 00:30:52,440 --> 00:30:54,640 Speaker 6: I mean to me, it's it's kind of a weird 652 00:30:54,920 --> 00:30:59,360 Speaker 6: environment we're in right now. Everyone's bracing for somewhat aggressive 653 00:30:59,560 --> 00:31:02,120 Speaker 6: Federal Reserve interest rate cuts, and yet we've got the 654 00:31:02,160 --> 00:31:05,560 Speaker 6: stock market near high. I'm looking at the Nasdaq one 655 00:31:05,640 --> 00:31:10,040 Speaker 6: hundred valuations, you know, p's in the thirties. It's Does 656 00:31:10,080 --> 00:31:12,400 Speaker 6: it feel weird to be bullish on the equity market 657 00:31:12,480 --> 00:31:14,760 Speaker 6: when the FED is about to go on an aggressive 658 00:31:14,840 --> 00:31:16,040 Speaker 6: rate cutting campaign? 659 00:31:17,360 --> 00:31:18,400 Speaker 7: Yeah, it's a strange. 660 00:31:18,760 --> 00:31:20,480 Speaker 10: I think we're in a period in the markets where 661 00:31:20,520 --> 00:31:21,720 Speaker 10: it's going to be, you know, where we're going to 662 00:31:21,720 --> 00:31:24,400 Speaker 10: start to see some slower growth. But I don't necessarily 663 00:31:24,440 --> 00:31:26,560 Speaker 10: think that, you know, the all bets are. 664 00:31:26,480 --> 00:31:27,640 Speaker 7: Off for stock appreciation. 665 00:31:27,800 --> 00:31:29,640 Speaker 10: The good news is that even when rates have been 666 00:31:29,680 --> 00:31:32,880 Speaker 10: super high, corporate America has performed right. And I think 667 00:31:32,960 --> 00:31:35,280 Speaker 10: a lot of the reasons you see these higher multiples 668 00:31:35,280 --> 00:31:38,080 Speaker 10: is because their earnings have actually have actually matched what 669 00:31:38,240 --> 00:31:40,520 Speaker 10: you know, what's been kind of like dictated on these stocks. 670 00:31:40,560 --> 00:31:43,520 Speaker 10: And I think that shor and corporate earnings like, yes, 671 00:31:43,600 --> 00:31:46,080 Speaker 10: jobs are you know, kind of weakening a little bit, 672 00:31:46,120 --> 00:31:48,040 Speaker 10: but it's nothing to be concerned of in terms of 673 00:31:48,400 --> 00:31:51,920 Speaker 10: historical unemployment rate, retail consumers are strong. You can see 674 00:31:51,920 --> 00:31:54,000 Speaker 10: that across some of the earnings. You know, wages have 675 00:31:54,080 --> 00:31:56,560 Speaker 10: been pretty steady, There's lots of cash on the sidelines, 676 00:31:56,600 --> 00:31:58,920 Speaker 10: and so I think that there will be this period 677 00:31:58,920 --> 00:32:02,240 Speaker 10: of time in and you know, in coming months, really 678 00:32:02,240 --> 00:32:04,719 Speaker 10: where the market's going to really like these rate cuts, 679 00:32:04,720 --> 00:32:07,120 Speaker 10: and I think that stocks will be rewarded from it. 680 00:32:07,560 --> 00:32:08,800 Speaker 7: And then the second thing I'll say is. 681 00:32:08,800 --> 00:32:10,680 Speaker 10: I think we're going to see breath expansion right when 682 00:32:10,720 --> 00:32:14,120 Speaker 10: those rates actually lower, and companies like small caps and 683 00:32:14,200 --> 00:32:17,040 Speaker 10: mid caps can actually you know, have that show up 684 00:32:17,080 --> 00:32:20,120 Speaker 10: in their bottom lines. I think, you know, I think 685 00:32:20,160 --> 00:32:22,520 Speaker 10: you get some breath expansion there. But the MAC seven, 686 00:32:22,560 --> 00:32:25,520 Speaker 10: you know, unless you think innovation and AI are dead, 687 00:32:25,640 --> 00:32:26,400 Speaker 10: it's just a difference. 688 00:32:26,600 --> 00:32:29,360 Speaker 7: It's a tech heavy world. So I'm always going to 689 00:32:29,360 --> 00:32:30,320 Speaker 7: buy those companies. 690 00:32:30,360 --> 00:32:32,480 Speaker 10: And to your point, even if I'm totally wrong and 691 00:32:32,520 --> 00:32:35,200 Speaker 10: the market pulls back, I want to have quality companies 692 00:32:35,200 --> 00:32:37,440 Speaker 10: with huge balance sheets. And again that takes me back 693 00:32:37,480 --> 00:32:39,520 Speaker 10: to the MAC seven. So I don't think that story 694 00:32:39,560 --> 00:32:40,120 Speaker 10: is over. 695 00:32:40,440 --> 00:32:42,480 Speaker 2: All, right, Sylvia, thank you so much for joining us. 696 00:32:42,520 --> 00:32:43,239 Speaker 2: Really appreciate it. 697 00:32:43,280 --> 00:32:47,880 Speaker 3: Sylvia Tablonski, Chief executive Officer and chief Investment officer defines ETFs. 698 00:32:49,600 --> 00:32:53,480 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 699 00:32:53,560 --> 00:32:57,080 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 700 00:32:57,120 --> 00:33:00,320 Speaker 1: Auto with the Bloomberg Business. You can also listen live 701 00:33:00,400 --> 00:33:03,560 Speaker 1: on Amazon Alexa from our flagship New York station Just 702 00:33:03,600 --> 00:33:06,200 Speaker 1: Say Alexa playing Bloomberg eleven thirty. 703 00:33:07,520 --> 00:33:08,400 Speaker 2: Let's switch hears here. 704 00:33:08,440 --> 00:33:12,760 Speaker 3: One of the top red stories on the Bloomberg terminal 705 00:33:12,800 --> 00:33:15,680 Speaker 3: here is about a hedge fund, About the hedge fund business. 706 00:33:15,720 --> 00:33:18,080 Speaker 3: No surprise, a lot of hedge fund folks have Bloomberg terminals, 707 00:33:18,120 --> 00:33:18,520 Speaker 3: so they. 708 00:33:18,360 --> 00:33:19,280 Speaker 2: Read stuff about it. 709 00:33:19,880 --> 00:33:22,280 Speaker 3: Hema Parmar Joints as she is the hedge fund reporter 710 00:33:22,400 --> 00:33:25,680 Speaker 3: for Bloomberg News, talk to us about two Sigma, Who 711 00:33:25,720 --> 00:33:28,720 Speaker 3: is two Sigma and what's happening today with this big 712 00:33:28,760 --> 00:33:29,360 Speaker 3: hedge fund. 713 00:33:29,320 --> 00:33:33,520 Speaker 11: Yes, giant hedge fund, sixty billion dollars, big quant pioneer, 714 00:33:33,680 --> 00:33:36,920 Speaker 11: meaning they use computer algorithms to trade across a variety 715 00:33:36,920 --> 00:33:41,280 Speaker 11: of assets. The two founders, John Ovidek and David Siegel, 716 00:33:41,640 --> 00:33:45,440 Speaker 11: founded the firm twenty odd years ago, but over the 717 00:33:45,560 --> 00:33:48,080 Speaker 11: years they had a rift. They didn't get along. They've 718 00:33:48,080 --> 00:33:50,520 Speaker 11: been feuding for the past few years, so much so 719 00:33:50,640 --> 00:33:54,120 Speaker 11: that the firm had to in their public disclosures and 720 00:33:54,200 --> 00:33:56,240 Speaker 11: a regulatory filing, which is a very strange thing for 721 00:33:56,280 --> 00:34:01,000 Speaker 11: hedge fund to do. She close disclose that that the 722 00:34:01,040 --> 00:34:04,280 Speaker 11: feud was so bad that it was a material risk 723 00:34:04,360 --> 00:34:05,560 Speaker 11: to investors. 724 00:34:05,320 --> 00:34:09,799 Speaker 6: That's unbelievable people, But it doesn't sound like they've you know, 725 00:34:09,920 --> 00:34:12,719 Speaker 6: even after they disclosed that. It doesn't seem like there 726 00:34:12,760 --> 00:34:14,840 Speaker 6: was a lot of outflows out of the fund or anything. 727 00:34:15,040 --> 00:34:18,160 Speaker 6: Do you think that changes with this announcement now that 728 00:34:18,200 --> 00:34:21,439 Speaker 6: people realize, wait a minute, this something's really going wrong here. 729 00:34:21,600 --> 00:34:23,480 Speaker 11: I think what's interesting about a firm like this is 730 00:34:23,520 --> 00:34:26,759 Speaker 11: because it's quantitative. There are so many teams. It's kind 731 00:34:26,760 --> 00:34:29,080 Speaker 11: of an institution the way it's built out. It's not 732 00:34:29,160 --> 00:34:31,439 Speaker 11: like if we think of a fundamental longtered equity fund 733 00:34:31,480 --> 00:34:34,080 Speaker 11: where everything relies on the PM or the one person 734 00:34:34,080 --> 00:34:37,640 Speaker 11: at the very top. Here, it's kind of a team structure, 735 00:34:37,960 --> 00:34:40,600 Speaker 11: and it can sort of be business as usual in 736 00:34:40,640 --> 00:34:44,759 Speaker 11: some ways, even with a rift like this. So the 737 00:34:44,800 --> 00:34:49,040 Speaker 11: performance has been relatively unchanged and redemptions have been relatively 738 00:34:49,080 --> 00:34:51,840 Speaker 11: unchanged to you haven't seen a mass exodus of clients 739 00:34:52,080 --> 00:34:54,280 Speaker 11: in the wake of news like this, which is really interesting. 740 00:34:54,360 --> 00:34:56,520 Speaker 11: Because if it was many other funds, you know, you 741 00:34:56,600 --> 00:34:57,239 Speaker 11: might have seen that. 742 00:34:57,680 --> 00:35:01,280 Speaker 2: How's their performance been? Has it affected their performance? 743 00:35:01,400 --> 00:35:03,919 Speaker 11: It hasn't really affected their performance. The performance has been 744 00:35:04,120 --> 00:35:06,520 Speaker 11: has been I would say, unchanged up about ten percent 745 00:35:06,560 --> 00:35:08,239 Speaker 11: and one of their funds this year, which is not bad, 746 00:35:08,360 --> 00:35:11,520 Speaker 11: up about seven for the other. It's it's okay, it's fine. 747 00:35:11,600 --> 00:35:14,400 Speaker 6: I guess once you put those systematic strategies in place 748 00:35:14,440 --> 00:35:16,600 Speaker 6: and turn the computer on, you can fight all you want. 749 00:35:17,160 --> 00:35:19,160 Speaker 6: It doesn't matter. But is there any sense of what 750 00:35:19,200 --> 00:35:21,760 Speaker 6: this feud is all about? Is it just a personality conflict? 751 00:35:21,800 --> 00:35:24,359 Speaker 6: Do we know anything about what set the heart of it? 752 00:35:24,560 --> 00:35:26,800 Speaker 11: Yes, they disagree about a disagree on a number of 753 00:35:26,840 --> 00:35:29,800 Speaker 11: different things about the firms. So it could be organizational structure, 754 00:35:29,880 --> 00:35:34,560 Speaker 11: succession planning, the roles of senior executives, and it got 755 00:35:34,560 --> 00:35:38,520 Speaker 11: to such a point where employees struggled to actually implement initiatives, 756 00:35:38,920 --> 00:35:43,120 Speaker 11: and it could have or began to impact retention of talent. 757 00:35:43,680 --> 00:35:46,560 Speaker 11: So when you're seeing the material impacts of it, which 758 00:35:46,600 --> 00:35:48,759 Speaker 11: there were some, you know that may have led to 759 00:35:48,800 --> 00:35:51,279 Speaker 11: them needing to publicly disclose all. 760 00:35:51,280 --> 00:35:54,400 Speaker 3: Right, So, as Hedge fund reporter for Bloomberg News, how 761 00:35:54,520 --> 00:35:57,000 Speaker 3: how is the industry? Are funds flowing into the industry 762 00:35:57,000 --> 00:35:58,680 Speaker 3: out of the industry. How's did it industry doing? 763 00:35:58,920 --> 00:35:59,160 Speaker 7: Yeah? 764 00:35:59,280 --> 00:36:03,080 Speaker 11: So, for for years, the industry has generally grown bigger 765 00:36:03,120 --> 00:36:06,200 Speaker 11: and bigger. What's fascinating is that typically the assets are 766 00:36:06,200 --> 00:36:09,400 Speaker 11: going to the biggest funds, so the bigger funds continue 767 00:36:09,440 --> 00:36:12,280 Speaker 11: to get larger. If we look within the multi strategy 768 00:36:12,280 --> 00:36:15,120 Speaker 11: hedge fund space with these are funds that trade across 769 00:36:15,160 --> 00:36:18,840 Speaker 11: all kinds of assets and little pods of teams. That 770 00:36:18,920 --> 00:36:22,600 Speaker 11: strategy has generally attracted a ton of assets, and you've 771 00:36:22,600 --> 00:36:25,960 Speaker 11: seen these firms grow from twenty billion to sixty billion 772 00:36:25,960 --> 00:36:26,799 Speaker 11: in just a few years. 773 00:36:27,239 --> 00:36:29,680 Speaker 6: Yeah. But in a year like this, when the stock 774 00:36:29,719 --> 00:36:32,760 Speaker 6: market just keeps ripping higher, it's not necessarily the best 775 00:36:32,800 --> 00:36:35,799 Speaker 6: back drop for a hedge fund, especially as you point 776 00:36:35,800 --> 00:36:37,759 Speaker 6: it out a long short. Are there any sort of 777 00:36:37,880 --> 00:36:41,760 Speaker 6: strategies pockets that are performing especially well, you know, trend 778 00:36:41,800 --> 00:36:44,160 Speaker 6: following I imagine is doing well anything else? 779 00:36:44,320 --> 00:36:49,360 Speaker 11: Yeah, Equity funds have generally done well. Longstert equity fundamental 780 00:36:49,400 --> 00:36:53,719 Speaker 11: stock pickers are up in the twenty percent so far ish, 781 00:36:53,760 --> 00:36:57,359 Speaker 11: depending on the funds. Keep in mind that a lot 782 00:36:57,360 --> 00:37:01,080 Speaker 11: of these guys buy tech stocks, so if they've time 783 00:37:01,160 --> 00:37:03,600 Speaker 11: to correctly, have sort of like ridden the wave up, 784 00:37:04,239 --> 00:37:07,040 Speaker 11: but have felt pain as well too, so it's been 785 00:37:07,120 --> 00:37:09,560 Speaker 11: kind of a rocky rider. Looking at the fund, this 786 00:37:09,640 --> 00:37:12,600 Speaker 11: industry is quite a fun specific space, so it depends 787 00:37:12,640 --> 00:37:15,800 Speaker 11: on the strategy, the manager, the size of the vehicle, 788 00:37:16,120 --> 00:37:19,880 Speaker 11: how they handle risk. So they're depending on the appetite 789 00:37:19,920 --> 00:37:21,920 Speaker 11: of the investor and how diversified they want to be. 790 00:37:22,440 --> 00:37:24,960 Speaker 11: They may choose one type of fund versus the yah. 791 00:37:24,840 --> 00:37:26,719 Speaker 2: Know the two Sigma news today that you report on. 792 00:37:27,040 --> 00:37:29,319 Speaker 3: It highlights one of the risks I think investing in 793 00:37:29,360 --> 00:37:32,319 Speaker 3: the space, which is this is pretty common. That is, 794 00:37:32,680 --> 00:37:35,120 Speaker 3: the founders are really what you're investing in. I'm investing 795 00:37:35,160 --> 00:37:38,839 Speaker 3: with Stevie Cohen at point seventy two. I'm trusting him. 796 00:37:39,239 --> 00:37:43,320 Speaker 3: Is the England or a millennium. I'm investing with those 797 00:37:43,640 --> 00:37:45,920 Speaker 3: people in their names. But if they leave or they 798 00:37:45,920 --> 00:37:48,080 Speaker 3: get hit by a truck, that's a real issue. 799 00:37:48,280 --> 00:37:50,680 Speaker 11: It depends on the strategy. So for a stock picker 800 00:37:50,840 --> 00:37:54,040 Speaker 11: for the Tiger Cubs for example, where the people at 801 00:37:54,040 --> 00:37:56,640 Speaker 11: the very top really have a lot of impact on 802 00:37:56,680 --> 00:38:00,200 Speaker 11: the actual investments, yes, it can matter if one of 803 00:38:00,200 --> 00:38:02,840 Speaker 11: those people who are to step away for a firm 804 00:38:03,480 --> 00:38:07,640 Speaker 11: like to Stigma, where a lot of the investments are 805 00:38:08,000 --> 00:38:11,960 Speaker 11: sort of made many layers down, it may not impact 806 00:38:12,120 --> 00:38:16,200 Speaker 11: investor sentiment to the point where it would impact redemptions 807 00:38:16,280 --> 00:38:18,960 Speaker 11: or flows. That said, you do look to the very 808 00:38:19,000 --> 00:38:20,600 Speaker 11: top of a firm and you want the people at 809 00:38:20,600 --> 00:38:22,880 Speaker 11: the very top to be working together. And clearly they 810 00:38:22,880 --> 00:38:25,919 Speaker 11: were not working well enough for the firm to have 811 00:38:26,000 --> 00:38:30,319 Speaker 11: two brand new co CEOs step in place and try 812 00:38:30,360 --> 00:38:32,560 Speaker 11: to fix things and try to get everyone working better 813 00:38:32,600 --> 00:38:34,960 Speaker 11: and more efficient. You don't want an inefficient firm, regardless 814 00:38:34,960 --> 00:38:35,560 Speaker 11: of the strategy. 815 00:38:35,840 --> 00:38:38,200 Speaker 6: And to be sure, over Deck and Siegel aren't actually 816 00:38:38,280 --> 00:38:40,399 Speaker 6: leaving the firm, right, They're just kind of stepping down 817 00:38:40,400 --> 00:38:40,960 Speaker 6: from the CEO. 818 00:38:41,280 --> 00:38:45,560 Speaker 11: They're giving up the co CEO title. Will remain co 819 00:38:45,719 --> 00:38:47,759 Speaker 11: chairman of the firm, which is the role. 820 00:38:47,719 --> 00:38:48,200 Speaker 4: That they have. 821 00:38:49,120 --> 00:38:52,120 Speaker 11: They are the biggest investors in the funds. They have 822 00:38:52,200 --> 00:38:54,520 Speaker 11: the largest equity stake in the fund, so they do 823 00:38:54,560 --> 00:38:57,360 Speaker 11: have influence. They will continue to advise and continue to 824 00:38:57,560 --> 00:38:59,359 Speaker 11: help guide the direction of the firm. 825 00:38:59,520 --> 00:39:01,760 Speaker 2: Yesmah, thank you so much for joining us. Really appreciate 826 00:39:01,800 --> 00:39:03,320 Speaker 2: Hima Palmer. She's hedge fund. 827 00:39:03,200 --> 00:39:05,160 Speaker 3: Reporter for bloom Bloomberg News Journeys live here in our 828 00:39:05,160 --> 00:39:06,920 Speaker 3: Bloomberg studio here in midtown Manhattan. 829 00:39:07,320 --> 00:39:11,839 Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 830 00:39:12,040 --> 00:39:15,680 Speaker 1: and anywhere else you'll get your podcasts. Listen live each weekday, 831 00:39:15,840 --> 00:39:20,040 Speaker 1: ten am to noon Eastern on Bloomberg dot com, Beheartradio app, 832 00:39:20,160 --> 00:39:22,840 Speaker 1: tune In, and the Bloomberg Business app. You can also 833 00:39:22,920 --> 00:39:26,279 Speaker 1: watch us live every weekday on YouTube and always on 834 00:39:26,320 --> 00:39:27,240 Speaker 1: the Bloomberg Journal