WEBVTT - US Mortgage Rates Drop, Nvidia Earnings

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<v Speaker 2>Another piece of data that came out tore that got

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<v Speaker 2>my attention.

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<v Speaker 3>Thirty year fixed mortgage dropping down to six point four

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<v Speaker 3>to four percent, the lowis since twenty twenty three.

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<v Speaker 2>What does that mean for real estate? What does it

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<v Speaker 2>mean for the mortgage market? What does it mean for

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<v Speaker 2>mortage backer securities?

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<v Speaker 3>Fortunately, we have an expert that does that kind of

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<v Speaker 3>stuff here, Erica Aidelberg, Chief Morket Market Little, chief mortgage

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<v Speaker 3>backed security strategist for Bloomberg Intelligence. She joins us here

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<v Speaker 3>in our Bloomberg Interactive Brokers studio. So, Erica, We've got it.

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<v Speaker 3>Seems like everybody's paying.

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<v Speaker 2>Attention to fed chair Pal, who's very clear. On Friday,

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<v Speaker 2>richi'l coming down.

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<v Speaker 3>We're even singing in the mortgage market in terms of

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<v Speaker 3>what you have to pay for thirty year mortgage?

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<v Speaker 2>What's that, dude? The mortgage backed securities.

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<v Speaker 4>Market, what's that? Do so it's very interesting.

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<v Speaker 5>As you said, the data came out today and one

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<v Speaker 5>of the other telling parts of the data that comes

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<v Speaker 5>out not only does the Mortgage Banker Association tell you

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<v Speaker 5>what the mortgage rate is that you know people are

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<v Speaker 5>taking out right now, but they also tell you about

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<v Speaker 5>what type of mortgage loan demand they're seeing. There's the

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<v Speaker 5>loan application indices, and at this point we are seeing.

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<v Speaker 4>Refinancings pick up.

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<v Speaker 5>They actually picked up earlier this month to the highest

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<v Speaker 5>in two years. Still very low historically because there's not

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<v Speaker 5>that many people with higher rate mortgages, but it's barely

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<v Speaker 5>moving the needle for mortgage purchase loan demand, which is

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<v Speaker 5>very telling. It means the housing market is still pretty

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<v Speaker 5>much stuck at these levels. Whether you know it depends

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<v Speaker 5>on who you talk to. Some people think that home

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<v Speaker 5>buyers are just being patient. They think rates will fall

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<v Speaker 5>given the Defense going to cut interest rates. They may

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<v Speaker 5>be sorry that home prices go up and it may

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<v Speaker 5>not get easier for them. The other question is maybe

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<v Speaker 5>it's really still a bailability issue because mortgage I'm sorry,

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<v Speaker 5>home inventories are they're for your.

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<v Speaker 4>Highs and listenings have picked up but still low.

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<v Speaker 5>Again by historical standard, especially relative to the number of

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<v Speaker 5>households out there. But I think it really comes down

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<v Speaker 5>to still an affordability challenge for people who want to

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<v Speaker 5>take out mortgages. You know, there's still barely fifty percent

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<v Speaker 5>of barers who can really afford to take out a

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<v Speaker 5>mortgage at this level relative to the median sized home

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<v Speaker 5>because home prices again have just continued to go up

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<v Speaker 5>with limited inventory.

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<v Speaker 1>Yeah.

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<v Speaker 6>Well, it's fascinating to me to think about, you know,

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<v Speaker 6>your average consumer who's contemplating a home purchase, especially those

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<v Speaker 6>first time buyers, how educated they really are on sort

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<v Speaker 6>of the link between FED policy and mortgage rates. I mean,

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<v Speaker 6>do you think that general public has become aware enough

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<v Speaker 6>to know that maybe if I wait six months, I'll

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<v Speaker 6>get a lower rate than if I go today.

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<v Speaker 5>I mean maybe if you're really in the home for

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<v Speaker 5>a mortgage, and maybe if you're paying tention to the

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<v Speaker 5>USA Today headlines. But ya, six and a half six

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<v Speaker 5>forty four is still quite expensive historically, and a lot

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<v Speaker 5>of people who do know anything about mortgage rates is like, oh, well,

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<v Speaker 5>my friend has a four percent mortgage rate, So I

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<v Speaker 5>don't know if you know mortgage rates above six and

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<v Speaker 5>a half percent is going to trigger much and especially

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<v Speaker 5>if you're an existing home owner with a mortgage rate

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<v Speaker 5>in the three percent range, you know, then you know

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<v Speaker 5>it's still pretty inhibiting to think about a new home.

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<v Speaker 3>So I'm looking, so I'm looking at the end go

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<v Speaker 3>function to Bloomberg Index browser. I see the Bloomberg Mortgage

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<v Speaker 3>Backed Security Index up three.

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<v Speaker 2>Point seventy nine percent this year. Where do we go

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<v Speaker 2>from here? Do you think? I mean, what's the call

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<v Speaker 2>out there? We talk to your clients.

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<v Speaker 5>Well, getting back to the FED question in a way,

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<v Speaker 5>because mortgage durations, their sensitivity to interest rates is actually

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<v Speaker 5>based more on the longer part of the curve. We've

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<v Speaker 5>had a pretty good rally in ten year rates, for instance,

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<v Speaker 5>and that's really a lot of We've had a little

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<v Speaker 5>spread tightening, but that's really what's driven a lot of

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<v Speaker 5>the turns for the mortgage backed Security Index. The problem

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<v Speaker 5>is the FED doesn't control the longer end of the

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<v Speaker 5>mortgage market, and they don't control the longer end of

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<v Speaker 5>the interest rate market, and longer end rates tend to

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<v Speaker 5>price in what they see going forward. Okay, so they're

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<v Speaker 5>already pricing in a lot of the FED cuts the

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<v Speaker 5>forward rate curve, which you know tells you kind of

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<v Speaker 5>what market expectations are, only have longer rates falling by

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<v Speaker 5>another ten to fifty by the end of the year,

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<v Speaker 5>so you know, good for mortgage returns. And one of

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<v Speaker 5>the things that I wrote about today actually is the

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<v Speaker 5>fact that to the extent that the yield cver is

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<v Speaker 5>uninverting and it's getting cheaper for banks to hold their

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<v Speaker 5>funding and buy, mortgage backed securities are more attractive. We're

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<v Speaker 5>saying banks begin to come back into the mortgage backed

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<v Speaker 5>securities market and they're a key less economic buyer. So

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<v Speaker 5>when they do that, mortgage spreads have more rooms to tighten,

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<v Speaker 5>and that could add to mortgage returns between here and

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<v Speaker 5>your end if that trend continues.

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<v Speaker 6>Yeah, I wanted to ask you about that. I noticed

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<v Speaker 6>in one of your recent notes you pointed that out

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<v Speaker 6>that banks MBI holdings happen rising. So that's not a

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<v Speaker 6>sign of less demand from investors. That's more of the

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<v Speaker 6>banks are actively holding more of these securities.

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<v Speaker 7>Yeah.

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<v Speaker 5>Banks like mortgages for a couple of reasons, and they

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<v Speaker 5>haven't liked them very much in the past two years.

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<v Speaker 5>They like mortgages because they have a good margin versus

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<v Speaker 5>their deposits, for instance, that they're paying out on not

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<v Speaker 5>so true in an inverted yield curve.

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<v Speaker 4>And they like them, especially when they think.

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<v Speaker 5>Making loans might be a little bit riskier. You know,

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<v Speaker 5>they kind of weigh that variability between outright loans, whether

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<v Speaker 5>it's commercial or residential loans, and mortgage backed securities. And

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<v Speaker 5>it's also possible that with banks worried about it, but

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<v Speaker 5>of a slowdown in the economy, that they may actually

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<v Speaker 5>think mortgage backed securities, which are guaranteed principal and interest

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<v Speaker 5>from Fanny and Freddie or Jinny, that those are safer

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<v Speaker 5>bet right now than loans.

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<v Speaker 2>All right, Erica, thank you so much for joining us.

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<v Speaker 3>Erica Adelberg, she's chief mortgage back security strategist for Bloomberg Intelligence.

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<v Speaker 3>Joining us live here on a Bloomberg Interactive broker studio,

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<v Speaker 3>the news and in the more Burg's business today, as

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<v Speaker 3>we have the thirty year fixed mortgage dropping to six

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<v Speaker 3>point four to four percent, that is a lowest since

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<v Speaker 3>twenty twenty three, so in anticipation of I guess the

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<v Speaker 3>FED lowering rates. So we got some confirmation of that

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<v Speaker 3>trend on Friday out of Jackson Hole when FED Chairman

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<v Speaker 3>J Powell was pretty clear that that was the intention

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<v Speaker 3>of the Federal Reserve, perhaps starting as soon as the

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<v Speaker 3>September meeting. So we're seeing some movement there in the

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<v Speaker 3>morge backed securities market.

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<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

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<v Speaker 2>That's where you will find us.

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<v Speaker 3>I guess it's all in Nvidia all day today because

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<v Speaker 3>we have ed Ludlow from It's like a housean Francisco.

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<v Speaker 3>Bloomberg Technology will have a live program with Jensen Wang,

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<v Speaker 3>the CEO of in Vidio, today six thirty pm Wall

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<v Speaker 3>Street Time.

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<v Speaker 6>I believe it is the time we should almost have

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<v Speaker 6>like an AI chat bot be the co host today

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<v Speaker 6>exactly and just or a guest and just ask, you know,

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<v Speaker 6>chat cheapt what's going to happen with Nvidia earnings.

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<v Speaker 3>Yeah, it it's really interesting how it's become such a

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<v Speaker 3>big name and then you see a super microcomputer, which

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<v Speaker 3>you know kind of was from a stock price performance perspective,

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<v Speaker 3>kind of in that same breath, but it's getting taken

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<v Speaker 3>out to the woodshed. Today's they've got some company specific

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<v Speaker 3>problems with the other stocks down twenty three percent. Let's talk

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<v Speaker 3>to somebody who does this stuff for a living, Shelby McFadden,

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<v Speaker 3>investment analyst at Motley Full Asset Management. You've joined us

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<v Speaker 3>live here in our Bloomberg Interactive Broker studio. You get

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<v Speaker 3>extra points for that. So Shelby, let's just step back.

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<v Speaker 3>Mike and I were just talking about nvidio. It's kind

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<v Speaker 3>of on the top of everybody's list. How do you

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<v Speaker 3>think about a company like Nvidia AI. It's been it's

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<v Speaker 3>really taken over almost the not just the tech narrative,

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<v Speaker 3>but almost the narrative for the entire market.

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<v Speaker 2>Yeah.

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<v Speaker 8>Absolutely, I mean it's definitely been pervasive in a positive way.

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<v Speaker 8>Right when we look at nvideo, we see a company

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<v Speaker 8>that gets to benefit from a massive secular change coming

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<v Speaker 8>in the market. So despite all of the extra fluff

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<v Speaker 8>in valuation, we cannot deny that there is a sort

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<v Speaker 8>of step change that we're witnessing here and how business

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<v Speaker 8>is going to be done and how labor is going

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<v Speaker 8>to be paid for if we also think about it

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<v Speaker 8>that way. But as active investors, we also need to

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<v Speaker 8>consider the fact that you have to look at your timeline,

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<v Speaker 8>you have to understand the risk that you're willing to take,

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<v Speaker 8>and understanding that in this situation, it's not just going

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<v Speaker 8>to be oh, let's take a look at standard deviation, right,

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<v Speaker 8>it's taking a look at these sort of macro factors

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<v Speaker 8>that get involved. We're looking at something that's deeply affected

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<v Speaker 8>by policy, something that's much more affected by their own

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<v Speaker 8>forward looking statements, and also affected by the customers that

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<v Speaker 8>they serve very deeply. So if we have the hyperscalers say,

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<v Speaker 8>you know what, these projects aren't paying off. Our shareholders

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<v Speaker 8>are not willing to tolerate this low roich that we're

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<v Speaker 8>delivering them on some of these projects. That then comes

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<v Speaker 8>back and affects the videos of the world as well

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<v Speaker 8>as their suppliers and other fabricators.

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<v Speaker 6>Yeah, I think That's a great point that's often lost

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<v Speaker 6>in the discussion of in videos, that every incremental dollar

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<v Speaker 6>of new revenue they find is a dollar of costline

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<v Speaker 6>for some other company. And you know, when people get

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<v Speaker 6>you know, restless about when those investments pay off, what

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<v Speaker 6>does that mean for in videos? So I think that's,

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<v Speaker 6>you know, a really fascinating component of this. But Shelby,

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<v Speaker 6>one thing I find really fascinating about in videos. I

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<v Speaker 6>look at their history of reporting earnings, and this is

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<v Speaker 6>one of those companies that always tends to surprise surprise.

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<v Speaker 6>We beat estimates again this quarter, and not by small matters,

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<v Speaker 6>you know, a twelve percent one quarter, twenty percent another quarter,

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<v Speaker 6>thirty one percent another quarter. When you get to be

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<v Speaker 6>the size of a video though, a three trillion dollar stock,

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<v Speaker 6>I feel like you can't quite get away with that

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<v Speaker 6>like you used to. You know, how hard do they

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<v Speaker 6>have to beat estimates to really move the needle? Now

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<v Speaker 6>do you think like a match of estimates I feel

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<v Speaker 6>like would be a disaster for a company like this.

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<v Speaker 8>Oh, you're absolutely right, because when we think about mature

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<v Speaker 8>companies that have a sort of history of under promising

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<v Speaker 8>and over delivering, investors sort of celebrate that. We're fine

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<v Speaker 8>with it, especially if let's say there's a dividend, they

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<v Speaker 8>kind of coast. But when investors are paying for your growth,

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<v Speaker 8>that's not necessarily a luxury that you have.

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<v Speaker 4>And we've seen.

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<v Speaker 8>That with the likes of Micron sort of delivering more

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<v Speaker 8>mature growth, a little bit more flat on their optimism

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<v Speaker 8>about the future, and the stock price was punished for that.

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<v Speaker 8>So we've seen what happens when that starts to taper off,

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<v Speaker 8>the moment that that surprise gap begins to shrink. It

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<v Speaker 8>will all depend on how rational investors are feeling that day.

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<v Speaker 6>Yeah, you just at a buyback announcement to it.

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<v Speaker 8>Exactly, our investors feeling like, you know what, I knew

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<v Speaker 8>this was coming, I priced it in, or is it

0:10:44.240 --> 0:10:47.200
<v Speaker 8>more of this is outrageous? You know this won't work

0:10:47.200 --> 0:10:49.120
<v Speaker 8>for me. And then on top of that, what kind

0:10:49.160 --> 0:10:51.320
<v Speaker 8>of outlook are they pointing to for the future? That's

0:10:51.320 --> 0:10:52.000
<v Speaker 8>sort of the potion.

0:10:52.840 --> 0:10:55.280
<v Speaker 3>Are there other ways that you guys are thinking about

0:10:55.280 --> 0:10:59.839
<v Speaker 3>getting exposure to this AI wave above and beyond Nvidia.

0:11:00.080 --> 0:11:01.520
<v Speaker 8>I think we like to pop the hood a bit

0:11:01.520 --> 0:11:04.640
<v Speaker 8>more so instead of getting direct exposure via some of

0:11:04.679 --> 0:11:07.080
<v Speaker 8>the megacap tech and we do have exposure there and

0:11:07.120 --> 0:11:11.040
<v Speaker 8>we you know, sort of change our allocations accordingly. We

0:11:11.160 --> 0:11:14.320
<v Speaker 8>look at companies that really do have an opportunity to

0:11:14.559 --> 0:11:16.640
<v Speaker 8>start leveraging data in a way that they haven't before,

0:11:17.320 --> 0:11:19.720
<v Speaker 8>in a way that is, if you don't start doing

0:11:19.760 --> 0:11:21.840
<v Speaker 8>it this way, you may be left behind. And so

0:11:22.320 --> 0:11:24.520
<v Speaker 8>their peer group may move as a pack. But if

0:11:24.520 --> 0:11:26.760
<v Speaker 8>they're sort of the top of their peer group in

0:11:27.080 --> 0:11:29.840
<v Speaker 8>dipping into those new functionalities, that's where we want to be.

0:11:29.920 --> 0:11:32.240
<v Speaker 8>So sometimes that tends to be in smalls, right because

0:11:32.240 --> 0:11:35.920
<v Speaker 8>they have the biggest runway, if you will, comparatively. So

0:11:35.960 --> 0:11:39.160
<v Speaker 8>it's a look at what sort of systems or platforms

0:11:39.360 --> 0:11:41.480
<v Speaker 8>can they start using to do their business in a

0:11:41.520 --> 0:11:43.440
<v Speaker 8>more efficient way, and then we get a.

0:11:43.440 --> 0:11:47.000
<v Speaker 6>Hold of those rains, you know, Shelby, I think a

0:11:47.000 --> 0:11:49.640
<v Speaker 6>lot of people tend to forget on Nvidia earnings day

0:11:49.800 --> 0:11:52.480
<v Speaker 6>there actually are other stocks in the stock market, yes, right,

0:11:52.720 --> 0:11:54.679
<v Speaker 6>you know there are other opportunities out there. I know

0:11:54.720 --> 0:11:58.559
<v Speaker 6>you've kept a close eye on the retail companies late

0:11:58.600 --> 0:12:00.920
<v Speaker 6>in the game reporting earnings as you u what are

0:12:00.920 --> 0:12:03.200
<v Speaker 6>some of the big takeaways there? You know, everyone is

0:12:03.240 --> 0:12:05.800
<v Speaker 6>trying to sort of get a feel for the sort

0:12:05.800 --> 0:12:08.120
<v Speaker 6>of macro story of where the consumer is now. Are

0:12:08.160 --> 0:12:10.959
<v Speaker 6>they trading down to the Walmarts of the world. What's

0:12:11.000 --> 0:12:13.920
<v Speaker 6>your take sort of big picture wise on how the

0:12:13.960 --> 0:12:17.040
<v Speaker 6>consumer is doing after reading all these retailer earnings records.

0:12:17.120 --> 0:12:20.040
<v Speaker 8>Yeah, I think the take is that staples are still

0:12:20.120 --> 0:12:22.800
<v Speaker 8>king right now, and in staples, they're going to do

0:12:22.800 --> 0:12:24.440
<v Speaker 8>a little bit of trade down to value. We've seen

0:12:24.480 --> 0:12:27.559
<v Speaker 8>that in the retailer space, but also in the brand

0:12:27.600 --> 0:12:29.840
<v Speaker 8>space within those retailers. And then when it comes to

0:12:29.880 --> 0:12:33.560
<v Speaker 8>discretionary discount is what is starting to take space again.

0:12:34.120 --> 0:12:36.199
<v Speaker 8>So you know, when it comes to soft lines, they're

0:12:36.240 --> 0:12:40.160
<v Speaker 8>wanting to get that little bit of a froth off

0:12:40.160 --> 0:12:42.199
<v Speaker 8>the top to be able to still have some fun.

0:12:42.960 --> 0:12:44.920
<v Speaker 8>But there's definitely a difference in the way that they

0:12:44.920 --> 0:12:45.760
<v Speaker 8>were spending last year.

0:12:45.840 --> 0:12:48.640
<v Speaker 6>Is that relate back to sort of a draw down

0:12:48.800 --> 0:12:51.560
<v Speaker 6>of the savings of the consumer? You know, we everyone

0:12:51.600 --> 0:12:54.480
<v Speaker 6>built up those savings during the pandemic and now that's

0:12:54.520 --> 0:12:55.040
<v Speaker 6>all gone.

0:12:55.160 --> 0:12:57.120
<v Speaker 8>Absolutely, it's the draw down. And it's also the fact

0:12:57.160 --> 0:12:59.160
<v Speaker 8>that earlier in the year we had a lot of

0:12:59.200 --> 0:13:02.520
<v Speaker 8>the credit zerros and banks tell us that at the

0:13:02.559 --> 0:13:04.679
<v Speaker 8>lower end of credit, folks were just saying you know what,

0:13:04.720 --> 0:13:07.839
<v Speaker 8>it is time to stop using extra credit. At the

0:13:07.920 --> 0:13:09.720
<v Speaker 8>upper end, folks are using it and they're just saying,

0:13:09.720 --> 0:13:11.360
<v Speaker 8>you know what, will spread out our payments because we're

0:13:11.360 --> 0:13:13.080
<v Speaker 8>not going to have to deal with the APR. But

0:13:13.240 --> 0:13:15.160
<v Speaker 8>we do know that the savings are pretty much gone,

0:13:15.440 --> 0:13:17.800
<v Speaker 8>and then there is a reluctancy to be using credit

0:13:17.880 --> 0:13:21.200
<v Speaker 8>because of those high rates. So there's a little bit

0:13:21.240 --> 0:13:23.479
<v Speaker 8>of punishment there to be had by brands and retailers.

0:13:23.960 --> 0:13:24.680
<v Speaker 2>I was going to ask you.

0:13:24.679 --> 0:13:28.320
<v Speaker 3>How you phil about that the retail the consumer out there,

0:13:28.360 --> 0:13:30.640
<v Speaker 3>But two of your stock picks are pretty consumer oriented

0:13:30.720 --> 0:13:31.720
<v Speaker 3>Starbucks and Walmart.

0:13:31.800 --> 0:13:34.280
<v Speaker 2>Yeah, Starbucks, what a wild.

0:13:34.040 --> 0:13:36.800
<v Speaker 3>Ride you shift your ceo and boom. I mean, is

0:13:36.840 --> 0:13:39.160
<v Speaker 3>any ceo worth twenty five percent popping the stock?

0:13:39.360 --> 0:13:41.400
<v Speaker 8>Well, that's something that we still have to learn, right, So,

0:13:42.200 --> 0:13:45.800
<v Speaker 8>and the thing about Starbucks is s it's such a

0:13:45.800 --> 0:13:49.200
<v Speaker 8>fun case because in our assessment of quality at MALI

0:13:49.240 --> 0:13:52.440
<v Speaker 8>Fulasset Management, the first pillar is management, culture and incentives,

0:13:52.840 --> 0:13:55.800
<v Speaker 8>And so when we look at something like this, we see, Okay,

0:13:55.840 --> 0:13:58.240
<v Speaker 8>he's been hired to solve a problem, and we do

0:13:58.360 --> 0:14:00.520
<v Speaker 8>know that his track record is a lot of cutting

0:14:00.559 --> 0:14:03.000
<v Speaker 8>and that he's done great for shareholders in doing so.

0:14:03.480 --> 0:14:05.120
<v Speaker 8>But the thing we have to also consider is what's

0:14:05.160 --> 0:14:07.680
<v Speaker 8>going to be the new identity for the Starbucks customer.

0:14:07.679 --> 0:14:09.599
<v Speaker 8>What's he going to contribute to that, and what's he

0:14:09.640 --> 0:14:11.880
<v Speaker 8>going to contribute to culture there and the labor force.

0:14:11.920 --> 0:14:13.400
<v Speaker 8>That's going to be a big task. So we love

0:14:13.440 --> 0:14:16.599
<v Speaker 8>Starbucks because of their scale, their primacy, their competitive advantage,

0:14:16.679 --> 0:14:18.480
<v Speaker 8>but it doesn't mean that a new CEO is going

0:14:18.520 --> 0:14:21.000
<v Speaker 8>to be perfect in active management is watching how well

0:14:21.120 --> 0:14:22.000
<v Speaker 8>or not he's gonna do.

0:14:22.520 --> 0:14:25.840
<v Speaker 6>Shelby, I can't let you go without asking about the hats,

0:14:25.880 --> 0:14:28.360
<v Speaker 6>the old Motley Fool hats. I'm old enough to remember

0:14:28.840 --> 0:14:31.640
<v Speaker 6>whenever someone from mottnany Motley Fool showed up in the media,

0:14:31.680 --> 0:14:33.200
<v Speaker 6>they'd have one of those great Chester hats.

0:14:33.240 --> 0:14:33.640
<v Speaker 2>What happened?

0:14:33.640 --> 0:14:34.440
<v Speaker 6>Can we bring them back?

0:14:34.720 --> 0:14:36.600
<v Speaker 8>I mean, I've got to ask my legal team and

0:14:36.640 --> 0:14:38.840
<v Speaker 8>all of my right but we I mean, we do

0:14:38.880 --> 0:14:41.400
<v Speaker 8>still have them and a lot of our our merchandise.

0:14:41.440 --> 0:14:43.880
<v Speaker 8>You see a sticker, anything branded is gonna have that

0:14:43.960 --> 0:14:45.320
<v Speaker 8>Jester hat on it. But let me see what I

0:14:45.360 --> 0:14:45.600
<v Speaker 8>can do.

0:14:47.040 --> 0:14:50.680
<v Speaker 3>All right, So you know a company like a Starbucks,

0:14:50.840 --> 0:14:52.200
<v Speaker 3>what's the story on Walmart?

0:14:52.200 --> 0:14:54.360
<v Speaker 2>Here? Is that a is that just a GDP play.

0:14:54.800 --> 0:14:57.000
<v Speaker 8>The thing about Walmart is I think if you look

0:14:57.040 --> 0:14:59.080
<v Speaker 8>over the past ten years, probably that's how a lot

0:14:59.080 --> 0:15:01.360
<v Speaker 8>of analysts were modeling it out. But when we've looked

0:15:01.400 --> 0:15:05.080
<v Speaker 8>probably since twenty twenty, really they were being treated like

0:15:05.120 --> 0:15:07.280
<v Speaker 8>a growth stock for quite some time, and so we

0:15:07.320 --> 0:15:10.840
<v Speaker 8>actually trimmed our allocation accordingly because our investment thesis for

0:15:10.880 --> 0:15:13.280
<v Speaker 8>Walmart is not a growth stock, right, so we wanted

0:15:13.280 --> 0:15:17.160
<v Speaker 8>to sort of a trim as we needed to. But

0:15:17.280 --> 0:15:19.520
<v Speaker 8>what they have started to do is they have showed

0:15:19.520 --> 0:15:21.720
<v Speaker 8>that they have the power to capture things like retail

0:15:21.760 --> 0:15:24.760
<v Speaker 8>media a lot faster than some of their smaller competitors.

0:15:24.760 --> 0:15:26.840
<v Speaker 8>So it looked like, ah, they're just kind of asleep

0:15:26.880 --> 0:15:29.040
<v Speaker 8>at the wheel. No, it's a sleeping there. So they

0:15:29.080 --> 0:15:31.640
<v Speaker 8>have a lot of capacity, and they do have a

0:15:31.640 --> 0:15:34.880
<v Speaker 8>pretty nice yield when the stock is trading as a

0:15:34.880 --> 0:15:37.760
<v Speaker 8>GDP PLA, so it is a bit safe, but right

0:15:37.800 --> 0:15:40.560
<v Speaker 8>now it is also quite an earner. So it's a

0:15:40.640 --> 0:15:42.720
<v Speaker 8>nice thing to have in our in our yield portfolio

0:15:42.760 --> 0:15:44.080
<v Speaker 8>and sometimes in core.

0:15:44.320 --> 0:15:46.080
<v Speaker 3>Yeah, I mean it's kind of DIPPDENI had one point

0:15:46.120 --> 0:15:48.120
<v Speaker 3>one percent Shelby mcfadd and thank you so much.

0:15:48.120 --> 0:15:48.560
<v Speaker 2>For joiningus.

0:15:48.600 --> 0:15:51.600
<v Speaker 3>Shelby Mthad, and she's an investment analyst at Motley Full

0:15:51.640 --> 0:15:54.480
<v Speaker 3>Asset Management based down in Alexandria, Virginia.

0:15:54.520 --> 0:15:57.040
<v Speaker 2>But here in our New York studio, we appreciate.

0:15:56.600 --> 0:16:01.480
<v Speaker 1>That you're listening to the Bloomberg Until Diligence podcast. Catch

0:16:01.560 --> 0:16:04.280
<v Speaker 1>us live weekdays at ten am Eastern on Apple Car

0:16:04.400 --> 0:16:07.400
<v Speaker 1>playing Android Auto with the Bloomberg Business App. Listen on

0:16:07.440 --> 0:16:10.720
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0:16:10.800 --> 0:16:12.160
<v Speaker 1>on YouTube.

0:16:13.360 --> 0:16:15.040
<v Speaker 2>Let's talk a little bit of retail. How about some

0:16:15.080 --> 0:16:16.080
<v Speaker 2>retail earnings here.

0:16:16.080 --> 0:16:18.560
<v Speaker 3>We've got Coals after Crombie Nords from all that kind

0:16:18.560 --> 0:16:21.360
<v Speaker 3>of good stuff coming Mary Ross Gilbert senior analysts for

0:16:21.560 --> 0:16:23.720
<v Speaker 3>Bloomberg Intelligence covering the equity space.

0:16:24.000 --> 0:16:26.800
<v Speaker 2>Mary Ross, thanks so much for joining us here. What

0:16:26.840 --> 0:16:28.440
<v Speaker 2>are you hearing from some of the retailers?

0:16:29.440 --> 0:16:33.240
<v Speaker 9>Thank you, Paul. Yeah, So, I would say mixed results

0:16:33.240 --> 0:16:36.400
<v Speaker 9>coming out of retailers. So, for example, on Coals, they

0:16:36.480 --> 0:16:39.480
<v Speaker 9>missed on the sales line, so the comp sales came

0:16:39.520 --> 0:16:43.760
<v Speaker 9>in down about five percent and analysts were expecting down

0:16:43.760 --> 0:16:46.600
<v Speaker 9>two and a half percent. But the good news was

0:16:46.640 --> 0:16:49.480
<v Speaker 9>that they beat on the bottom line and they raised

0:16:49.480 --> 0:16:53.240
<v Speaker 9>their earnings guidance for the year, so they're now expecting

0:16:53.320 --> 0:16:56.400
<v Speaker 9>something closer to two dollars whereas before they are expecting

0:16:56.440 --> 0:17:00.680
<v Speaker 9>something less than a dollar eighty previously. So while that

0:17:00.800 --> 0:17:03.400
<v Speaker 9>is good news, they do need to get the top

0:17:03.440 --> 0:17:08.480
<v Speaker 9>line right sided. And with Tom Kingsbury as the CEO,

0:17:08.800 --> 0:17:12.640
<v Speaker 9>and he's has an amazing track record. He's the one

0:17:12.640 --> 0:17:17.000
<v Speaker 9>who took Burlington from sort of a mall based type

0:17:17.600 --> 0:17:22.320
<v Speaker 9>discount retailer to an off price, fast growing company, so

0:17:23.119 --> 0:17:24.879
<v Speaker 9>there's a lot of faith in him. He's bringing in

0:17:25.160 --> 0:17:28.040
<v Speaker 9>a new categories that so Fara business did well. It

0:17:28.119 --> 0:17:31.080
<v Speaker 9>was up low teens on a comp basis, with total

0:17:31.119 --> 0:17:34.800
<v Speaker 9>beauty sales up forty five percent. But now we need

0:17:34.880 --> 0:17:38.680
<v Speaker 9>conversion and yes there's headwinds from the consumer. So then

0:17:38.720 --> 0:17:41.159
<v Speaker 9>if you take it over to Abercrombie on the other

0:17:41.280 --> 0:17:45.320
<v Speaker 9>side of the picture, their customer base for both brands,

0:17:45.320 --> 0:17:48.600
<v Speaker 9>Hollister and the Abercrombie and Fitch brands, their household income

0:17:48.680 --> 0:17:50.879
<v Speaker 9>is one hundred to one hundred and fifty thousand, not

0:17:51.080 --> 0:17:53.959
<v Speaker 9>like Cohal's where you're under seventy five in household income,

0:17:53.960 --> 0:17:57.359
<v Speaker 9>and so you really have to be very discerning. So

0:17:57.640 --> 0:18:02.440
<v Speaker 9>an Abercromby is executing very, very well, and that explains

0:18:02.440 --> 0:18:05.480
<v Speaker 9>why they had double digit increases in comp sales. The

0:18:05.520 --> 0:18:09.000
<v Speaker 9>Abercrombie brand was up twenty one percent on a comp basis,

0:18:09.320 --> 0:18:13.439
<v Speaker 9>and you had a fifteen percent increase on Hollister, and

0:18:13.440 --> 0:18:16.359
<v Speaker 9>that's on top of double digit increases a year ago.

0:18:17.040 --> 0:18:21.200
<v Speaker 9>And they're seeing strength early in the third quarter. They're

0:18:21.240 --> 0:18:25.760
<v Speaker 9>constantly extending the categories because they know what their gen

0:18:25.920 --> 0:18:30.080
<v Speaker 9>Z for the Hollister and Millennial on the Abercrombie side

0:18:30.119 --> 0:18:34.680
<v Speaker 9>customers want. So that's a company that's executing very well

0:18:34.720 --> 0:18:38.080
<v Speaker 9>with just great results. And then Nordstrom is sort of

0:18:38.160 --> 0:18:42.200
<v Speaker 9>in that similar category, and we did see good numbers

0:18:42.200 --> 0:18:45.399
<v Speaker 9>come out of them late yesterday. The sales were a

0:18:45.440 --> 0:18:50.960
<v Speaker 9>little lighter than Consensus estimated. Other comp sales for Rack

0:18:51.160 --> 0:18:54.280
<v Speaker 9>were up four percent. Consensus was looking for six percent,

0:18:54.480 --> 0:18:57.160
<v Speaker 9>and the full line store was up just under one

0:18:57.240 --> 0:18:59.320
<v Speaker 9>percent on a comp basis, but they were looking for

0:18:59.359 --> 0:19:02.280
<v Speaker 9>something more than one percent, like one point three. But

0:19:02.960 --> 0:19:07.600
<v Speaker 9>they had strong full price sales. That's very encouraging and

0:19:07.640 --> 0:19:11.160
<v Speaker 9>the fact that the business is actually generating positive sales

0:19:11.640 --> 0:19:15.040
<v Speaker 9>something that we're not seeing really in department stores. Of course,

0:19:15.080 --> 0:19:19.159
<v Speaker 9>when we had Macy's report with disappointing numbers. So again

0:19:19.200 --> 0:19:22.640
<v Speaker 9>that speaks to their hire income consumer also in that base,

0:19:22.680 --> 0:19:26.480
<v Speaker 9>and of course rack total revenues were up almost nine percent.

0:19:26.880 --> 0:19:30.040
<v Speaker 9>It's the off price story. Ye, you know something that

0:19:30.080 --> 0:19:32.439
<v Speaker 9>we saw out of the off price last week with

0:19:32.600 --> 0:19:33.720
<v Speaker 9>TJX and Ross.

0:19:34.480 --> 0:19:36.800
<v Speaker 6>You know, Mary, if I listen to everything you're saying

0:19:36.840 --> 0:19:40.399
<v Speaker 6>from sort of a macro economics lens, I wonder if

0:19:40.440 --> 0:19:43.439
<v Speaker 6>there's like a big theme to be taken away here,

0:19:43.520 --> 0:19:47.520
<v Speaker 6>you know, excluding sort of the execution hits and misses

0:19:47.520 --> 0:19:49.480
<v Speaker 6>from each company. But it sounds to me like, you know,

0:19:49.520 --> 0:19:52.960
<v Speaker 6>those lower income consumers are struggling a little bit, the

0:19:53.000 --> 0:19:56.160
<v Speaker 6>higher income consumers are still spending. I mean, is it

0:19:56.200 --> 0:19:59.119
<v Speaker 6>is that simple takeaway? Is that too simplified or is

0:19:59.160 --> 0:20:01.960
<v Speaker 6>that really kind of the story that is emerging from

0:20:02.000 --> 0:20:04.320
<v Speaker 6>the earning season for retailers.

0:20:04.640 --> 0:20:07.520
<v Speaker 9>Yeah, I think that's fair. And even you know, as

0:20:07.520 --> 0:20:10.320
<v Speaker 9>we get up into the higher income they're also trying

0:20:10.320 --> 0:20:12.439
<v Speaker 9>to save money too. I think that you saw that

0:20:12.520 --> 0:20:15.520
<v Speaker 9>in the news out last week with walmartin Target and

0:20:15.600 --> 0:20:17.840
<v Speaker 9>so a lot of them are taking advantage of the

0:20:17.840 --> 0:20:20.800
<v Speaker 9>better prices there, but that also keeps them in a

0:20:20.800 --> 0:20:25.080
<v Speaker 9>good position to continue spending elsewhere, you know, so for

0:20:25.200 --> 0:20:29.240
<v Speaker 9>things that are more desirable. So yes, I think clearly

0:20:29.320 --> 0:20:32.320
<v Speaker 9>the lower income, lower middle income consumer and even middle

0:20:32.600 --> 0:20:37.120
<v Speaker 9>income consumer is just having a hard time dealing with

0:20:37.520 --> 0:20:41.199
<v Speaker 9>high food and energy prices and that's showing up in

0:20:41.280 --> 0:20:44.760
<v Speaker 9>their very discerning spending. That's exactly what you're seeing.

0:20:45.119 --> 0:20:47.600
<v Speaker 3>So Mary, helping me understand what's happening with the Amercrombie

0:20:47.600 --> 0:20:52.040
<v Speaker 3>stock today. It's down sixteen percent on the news. So

0:20:52.119 --> 0:20:55.240
<v Speaker 3>I guess the sales boost was good but not good enough.

0:20:57.640 --> 0:21:00.239
<v Speaker 9>Yeah, it could be, but I also view it is

0:21:00.280 --> 0:21:04.720
<v Speaker 9>potentially short lived as well. So sometimes when you have reactions,

0:21:04.720 --> 0:21:08.280
<v Speaker 9>for example on Coals, even though they had the big

0:21:08.359 --> 0:21:14.159
<v Speaker 9>sales miss, right, you see those stocks up very strong there,

0:21:14.200 --> 0:21:16.880
<v Speaker 9>But I think part of it's probably due to short covering,

0:21:17.880 --> 0:21:22.000
<v Speaker 9>and you know, there's probably some optimism that with they're

0:21:22.040 --> 0:21:24.399
<v Speaker 9>getting the babies r us those just started to flow

0:21:24.440 --> 0:21:27.399
<v Speaker 9>in this month, so we're not really seeing the benefits

0:21:27.440 --> 0:21:29.920
<v Speaker 9>of that, and they're seeing good momentum in the new

0:21:29.960 --> 0:21:32.960
<v Speaker 9>categories that they brought. We're just not seeing it convert

0:21:33.080 --> 0:21:36.800
<v Speaker 9>all the way to lifting sales. But as we start

0:21:36.840 --> 0:21:39.560
<v Speaker 9>to cycle looking out a year from now, which of course,

0:21:39.600 --> 0:21:44.840
<v Speaker 9>we know that's really how equities and investors think they're

0:21:44.880 --> 0:21:47.280
<v Speaker 9>going to be going against these easy comparisons, and it

0:21:47.359 --> 0:21:50.920
<v Speaker 9>may make it easier for them to show a sales lift.

0:21:50.920 --> 0:21:52.640
<v Speaker 9>But we'll see, you.

0:21:52.600 --> 0:21:55.000
<v Speaker 6>Know, Mary, I just sent my youngest two kids off

0:21:55.040 --> 0:21:57.280
<v Speaker 6>to the school today. They back to school already we

0:21:57.320 --> 0:21:59.840
<v Speaker 6>started early in the touching. But it got me thinking

0:21:59.880 --> 0:22:03.280
<v Speaker 6>of that whole that really important back to school shopping season,

0:22:03.400 --> 0:22:06.440
<v Speaker 6>especially for you know, your Abercrombie's of the world. What's

0:22:06.480 --> 0:22:08.879
<v Speaker 6>the outlook there? I mean, if you could put, you know,

0:22:08.920 --> 0:22:11.119
<v Speaker 6>break out your crystal ball and tell us what the

0:22:11.119 --> 0:22:13.119
<v Speaker 6>next quarter numbers are going to look like, do you think,

0:22:13.760 --> 0:22:15.560
<v Speaker 6>you know, is there going to be some weakness because

0:22:15.560 --> 0:22:17.160
<v Speaker 6>of all these issues you're describing.

0:22:19.000 --> 0:22:21.560
<v Speaker 9>Yeah, so it's a good question. I think once again,

0:22:21.720 --> 0:22:24.840
<v Speaker 9>well we'll probably have some mixed results. But Abercromby is

0:22:24.880 --> 0:22:29.600
<v Speaker 9>seeing very good reaction to some of the initial categories

0:22:29.600 --> 0:22:32.680
<v Speaker 9>that they have. So for example, in Hollister, they've got

0:22:32.680 --> 0:22:36.359
<v Speaker 9>their collegiate line that they've launched and it's more extended.

0:22:36.400 --> 0:22:39.680
<v Speaker 9>It covers about thirty two universities if you look at it.

0:22:39.800 --> 0:22:44.800
<v Speaker 9>On the Abercrombie side, they have the NFL line by Abercrombie,

0:22:44.840 --> 0:22:47.000
<v Speaker 9>and they've had that. This is the third year running now,

0:22:47.040 --> 0:22:50.000
<v Speaker 9>but each year they extend it further and further because

0:22:50.000 --> 0:22:52.680
<v Speaker 9>the demand is so strong, and that's sort of part

0:22:52.720 --> 0:22:55.920
<v Speaker 9>of their strategy. So we are seeing I think good

0:22:55.920 --> 0:22:58.800
<v Speaker 9>results there now as we start to get more media

0:22:58.880 --> 0:23:02.560
<v Speaker 9>coverage of the election uncertainty we have seen in past

0:23:02.680 --> 0:23:05.959
<v Speaker 9>times around this election cycle where there is that uncertainty,

0:23:05.960 --> 0:23:10.880
<v Speaker 9>it can sometimes have an impact on consumer spending. But generally,

0:23:10.960 --> 0:23:14.080
<v Speaker 9>I think it's really going to come down to, you know,

0:23:14.119 --> 0:23:17.879
<v Speaker 9>those that are executing and those that are skewing to

0:23:18.240 --> 0:23:22.840
<v Speaker 9>a more of a premium consumer or ones with greater

0:23:23.240 --> 0:23:29.720
<v Speaker 9>discretionary income fascinating out platform, whereas the lower income underperforming.

0:23:29.880 --> 0:23:33.080
<v Speaker 6>Fascinating Paul that we were also obsessed with politics, that

0:23:33.160 --> 0:23:36.400
<v Speaker 6>the upcoming election can influence our spending path exactly.

0:23:36.560 --> 0:23:37.480
<v Speaker 2>We'll see how it to blaze out.

0:23:37.480 --> 0:23:39.600
<v Speaker 3>Mary Ross Gilbert, thank you so much for joining us.

0:23:39.640 --> 0:23:42.520
<v Speaker 3>Mary Ross Gilbert senior Ecody analysts covering the retail space

0:23:42.560 --> 0:23:46.600
<v Speaker 3>for Bloomberg Intelligence. She's based out there in Los Angeles, California.

0:23:46.640 --> 0:23:49.360
<v Speaker 3>So again, some of the retailers putting us some decent numbers.

0:23:50.400 --> 0:23:52.840
<v Speaker 3>Sometimes the guidance is not as good and so you

0:23:52.920 --> 0:23:55.080
<v Speaker 3>get a little bit of a pullback like in Abercrombie,

0:23:55.080 --> 0:23:57.439
<v Speaker 3>but that slacks up still up sixty percent year to date,

0:23:57.480 --> 0:24:00.000
<v Speaker 3>so maybe just a little profit taking their.

0:24:01.480 --> 0:24:05.359
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:24:05.440 --> 0:24:08.960
<v Speaker 1>weekdays at ten am Eastern on applecar Play and Android

0:24:09.000 --> 0:24:11.760
<v Speaker 1>Auto with the Bloomberg Business app. You can also listen

0:24:11.880 --> 0:24:14.960
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0:24:15.320 --> 0:24:19.040
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0:24:19.800 --> 0:24:22.639
<v Speaker 3>And we also have some great guests from the world

0:24:22.720 --> 0:24:24.520
<v Speaker 3>of Global Wall Street to help us understand what's going

0:24:24.560 --> 0:24:25.960
<v Speaker 3>on in the world of ETFs. One of those is

0:24:25.960 --> 0:24:29.800
<v Speaker 3>Sylvia Jablonski, chief of executive Officer and Chief investment Officer

0:24:30.080 --> 0:24:34.639
<v Speaker 3>of Defiance ETFs. Sylvia, thanks so much for joining us here.

0:24:35.800 --> 0:24:37.840
<v Speaker 3>You know, for better or worse, the talk of the day,

0:24:37.840 --> 0:24:40.159
<v Speaker 3>if not the week, has been in Nvidia From an

0:24:40.240 --> 0:24:44.119
<v Speaker 3>ETF perspective, How do you guys at Defiance try to

0:24:44.160 --> 0:24:48.679
<v Speaker 3>give some product opportunities for AI to your clients.

0:24:49.520 --> 0:24:51.919
<v Speaker 7>Good morning and thanks thanks for having me today.

0:24:52.200 --> 0:24:54.080
<v Speaker 10>Well, we have a bunch of them, actually we have

0:24:55.160 --> 0:24:59.680
<v Speaker 10>several two times LEVERTYTF single stock products that tracks semiconductor

0:25:00.119 --> 0:25:04.360
<v Speaker 10>have you know, like a two beta Broadcom to two

0:25:04.359 --> 0:25:08.520
<v Speaker 10>beta super micro computers, two beta micro strategy, and so

0:25:08.720 --> 0:25:11.080
<v Speaker 10>you know those definitely participate when the video flies.

0:25:11.600 --> 0:25:13.040
<v Speaker 7>And then we have an ai E t F.

0:25:13.119 --> 0:25:16.360
<v Speaker 10>Basically machine learning and supercomputing and that's and that's quantum.

0:25:16.359 --> 0:25:18.520
<v Speaker 10>It has a huge position in n video and all

0:25:18.560 --> 0:25:20.639
<v Speaker 10>the chip stock. So you know, there are lots of

0:25:20.640 --> 0:25:23.080
<v Speaker 10>ways to get this, whether it's through single stock exposure

0:25:23.520 --> 0:25:25.680
<v Speaker 10>and a video stock itself or some of the ETFs

0:25:25.720 --> 0:25:27.760
<v Speaker 10>like ours out there lots of options.

0:25:28.359 --> 0:25:30.359
<v Speaker 6>H Cyphia, I wanted to ask you about those single

0:25:30.480 --> 0:25:34.159
<v Speaker 6>name uh Leverage ETFs. I know you have one for

0:25:34.240 --> 0:25:38.200
<v Speaker 6>Eli Lilly Broadcom micro Strategy. How big is the potential

0:25:38.320 --> 0:25:41.000
<v Speaker 6>market for those? Do you think? I mean? Is is

0:25:41.040 --> 0:25:43.960
<v Speaker 6>it conceivable to see half d S and P or

0:25:44.000 --> 0:25:47.320
<v Speaker 6>something like that have LeVert ETFs on all these names.

0:25:48.800 --> 0:25:51.920
<v Speaker 10>You know, it's it's a fairly new phenomenon in Leverty

0:25:51.960 --> 0:25:54.840
<v Speaker 10>tf so Lever and innversitytfs have been around, you know

0:25:55.080 --> 0:25:58.439
<v Speaker 10>forever at this point, well over a decade and decades

0:25:58.440 --> 0:25:59.040
<v Speaker 10>if you count.

0:25:58.880 --> 0:26:00.400
<v Speaker 7>The mutual phone products that I said.

0:26:00.440 --> 0:26:04.399
<v Speaker 10>Before people levered up btfs themselves but the leverage single

0:26:04.400 --> 0:26:06.560
<v Speaker 10>stock has been a pretty new concept. It's just been

0:26:06.600 --> 0:26:08.719
<v Speaker 10>out for you know, really the last few years, and

0:26:09.080 --> 0:26:10.959
<v Speaker 10>billions of dollars have flown into that space.

0:26:11.000 --> 0:26:11.159
<v Speaker 7>You know.

0:26:11.200 --> 0:26:15.400
<v Speaker 10>The levered en video that granted Shaars has is just massive,

0:26:15.640 --> 0:26:16.240
<v Speaker 10>got massive.

0:26:16.240 --> 0:26:18.479
<v Speaker 7>Out of the gates direction has some of them. And

0:26:18.640 --> 0:26:20.560
<v Speaker 7>you know, we had a great test case.

0:26:20.600 --> 0:26:23.680
<v Speaker 10>We launched a two x micro strategy m STX just

0:26:23.720 --> 0:26:25.440
<v Speaker 10>a few days ago and it's you know, there are

0:26:25.480 --> 0:26:28.280
<v Speaker 10>some days where it's trading like one hundred million in

0:26:28.359 --> 0:26:30.960
<v Speaker 10>volume already, So the upsite is certainly there from these

0:26:30.960 --> 0:26:32.880
<v Speaker 10>tactical traders that know how to use them.

0:26:33.160 --> 0:26:34.520
<v Speaker 7>So I think the sky is the limit.

0:26:34.560 --> 0:26:37.480
<v Speaker 10>And you know, I think with LEVERTYTFS two, people tend

0:26:37.480 --> 0:26:40.680
<v Speaker 10>to like some of the names that are more popular, right,

0:26:40.680 --> 0:26:43.400
<v Speaker 10>Definitely the mag seven, Definitely the semiconductor names. So whether

0:26:43.480 --> 0:26:44.560
<v Speaker 10>or not we get half of the S and P

0:26:44.680 --> 0:26:46.920
<v Speaker 10>five hundred, I don't know, but I think we'll definitely

0:26:46.960 --> 0:26:50.800
<v Speaker 10>get kind of like the as Belchunas who you mentioned before,

0:26:50.840 --> 0:26:54.399
<v Speaker 10>likes to say hot, saucy ish names out there.

0:26:55.640 --> 0:26:57.640
<v Speaker 3>One of the names that you've got a leverage ticker

0:26:57.720 --> 0:27:01.119
<v Speaker 3>on is Eli Lilly tell Us why you guys launched

0:27:01.160 --> 0:27:01.600
<v Speaker 3>that product.

0:27:02.640 --> 0:27:04.679
<v Speaker 10>Yeah, so that one's actually pretty interesting because if you

0:27:04.680 --> 0:27:06.720
<v Speaker 10>look at Eli Lilly's stock, you know, it's kind of

0:27:06.760 --> 0:27:10.480
<v Speaker 10>just had this like nice steady, you know, very low

0:27:10.600 --> 0:27:12.960
<v Speaker 10>range bound volatility, tends to be a trending you know,

0:27:13.040 --> 0:27:15.800
<v Speaker 10>upward stock, and I think it's their menu of services

0:27:15.840 --> 0:27:18.960
<v Speaker 10>that interests us. There's this phenomenon with the weight loss drugs.

0:27:18.960 --> 0:27:21.040
<v Speaker 10>Obviously with set bounds. You know, they get credit for

0:27:21.119 --> 0:27:24.280
<v Speaker 10>kind of having one of the best ones. Their earnings

0:27:24.280 --> 0:27:26.480
<v Speaker 10>call actually was one of the most positive in terms

0:27:26.480 --> 0:27:29.480
<v Speaker 10>of being able to supply you know, the amount of

0:27:29.520 --> 0:27:32.040
<v Speaker 10>medication needed for the demand out there, the growth that

0:27:32.080 --> 0:27:34.480
<v Speaker 10>they see going forward. They have Manjaro, they have a

0:27:34.480 --> 0:27:37.639
<v Speaker 10>whole bunch of like cancer trials going on, Alzheimer's trials

0:27:37.720 --> 0:27:40.399
<v Speaker 10>going on, and you know, well they're like setbacks here

0:27:40.440 --> 0:27:42.280
<v Speaker 10>and there. For every drug company, it's it's one of

0:27:42.280 --> 0:27:45.280
<v Speaker 10>the company that tends to have the most robust product

0:27:45.400 --> 0:27:48.080
<v Speaker 10>lineup and then you know, great balance sheet, they pay

0:27:48.119 --> 0:27:52.199
<v Speaker 10>a dividend, aging baby boomer population, defensive qualities.

0:27:52.520 --> 0:27:55.440
<v Speaker 7>Why not Eli Lilly, right, and why not lever it up?

0:27:56.240 --> 0:27:59.160
<v Speaker 6>Yeah, Well, obviously, Sylvi, you know, there is a lot

0:27:59.200 --> 0:28:03.320
<v Speaker 6>of risk inherit in using leverage in the stock market.

0:28:03.359 --> 0:28:07.120
<v Speaker 6>And I'm just curious, you know who where the demand

0:28:07.160 --> 0:28:09.080
<v Speaker 6>for these is coming from. Is it from the hedge

0:28:09.080 --> 0:28:11.560
<v Speaker 6>funds or the retail side. And you know, if there's

0:28:11.560 --> 0:28:15.800
<v Speaker 6>a lot of retail demand, it strikes me as you know,

0:28:16.480 --> 0:28:18.720
<v Speaker 6>a bit of risk for defiance as well to be

0:28:19.119 --> 0:28:23.399
<v Speaker 6>providing these products to traders who might not really appreciate

0:28:23.480 --> 0:28:25.520
<v Speaker 6>how risky they are. Is there any sort of way

0:28:25.560 --> 0:28:27.159
<v Speaker 6>you're navigating that issue.

0:28:27.880 --> 0:28:28.880
<v Speaker 7>Yeah, that's a good question.

0:28:28.920 --> 0:28:30.800
<v Speaker 10>And I think, like you know, for the because lever

0:28:31.080 --> 0:28:33.800
<v Speaker 10>and universityfs have been out for so long, there's been

0:28:33.840 --> 0:28:36.240
<v Speaker 10>so much of an effort both by regulators, you know,

0:28:36.280 --> 0:28:40.240
<v Speaker 10>the sec the issuers themselves, the trading brokerash platforms, things

0:28:40.280 --> 0:28:40.440
<v Speaker 10>like that.

0:28:40.520 --> 0:28:42.040
<v Speaker 7>Bloomberg, you guys do a ton of this.

0:28:42.400 --> 0:28:45.000
<v Speaker 10>There's so much education out there and also just so

0:28:45.000 --> 0:28:47.400
<v Speaker 10>many learning labels, right like these are daily products.

0:28:47.840 --> 0:28:48.520
<v Speaker 7>Make sure you're.

0:28:48.400 --> 0:28:50.240
<v Speaker 10>Making a decision every single day if you want to

0:28:50.240 --> 0:28:52.720
<v Speaker 10>continue holding it, or if you know, if you've got

0:28:52.760 --> 0:28:55.000
<v Speaker 10>your gains for the day and you're no longer bullish

0:28:55.000 --> 0:28:56.040
<v Speaker 10>on a bull fund, sell it.

0:28:56.160 --> 0:28:56.760
<v Speaker 7>Things like this.

0:28:56.880 --> 0:28:59.840
<v Speaker 10>So we're very clear in the perspectus and all of

0:28:59.840 --> 0:29:02.760
<v Speaker 10>our materials about you know, these are day trading tools,

0:29:03.040 --> 0:29:05.040
<v Speaker 10>and retail is such a broad thing, right. I mean,

0:29:05.080 --> 0:29:07.600
<v Speaker 10>I've learned this in my career. There are some retail

0:29:07.640 --> 0:29:10.200
<v Speaker 10>traders out there that are as skilled as you know,

0:29:10.320 --> 0:29:11.760
<v Speaker 10>the top hedge funds in the world.

0:29:11.840 --> 0:29:14.640
<v Speaker 7>Right. So to answer your question, it's a mix of everything.

0:29:14.680 --> 0:29:15.480
<v Speaker 7>It's it's day.

0:29:15.360 --> 0:29:19.760
<v Speaker 10>Traders, you know, savvy, technical, tactical retail traders, it's hedge funds,

0:29:19.840 --> 0:29:21.440
<v Speaker 10>large institutions, pensions.

0:29:22.160 --> 0:29:24.560
<v Speaker 7>Really runs the gamut on this and it always has.

0:29:24.600 --> 0:29:30.080
<v Speaker 3>Actually historically, I look at when I just kind of

0:29:30.120 --> 0:29:33.440
<v Speaker 3>study this industry read Eric's work on the industry. Is

0:29:34.160 --> 0:29:37.200
<v Speaker 3>I'm uncomfortable about the concentration. There's so there's a handful

0:29:37.240 --> 0:29:39.880
<v Speaker 3>of really really big ETF houses out there, whether it's

0:29:39.880 --> 0:29:42.400
<v Speaker 3>the vanguards or the state streets, and then there's just

0:29:42.440 --> 0:29:45.920
<v Speaker 3>a gajillion smaller ones. Is that a healthy structure?

0:29:45.920 --> 0:29:46.360
<v Speaker 2>Do you think?

0:29:47.880 --> 0:29:49.800
<v Speaker 10>You know, it's like the mag seven of the SSC

0:29:49.960 --> 0:29:53.720
<v Speaker 10>five hundred, right, the rest of us small and midcalfs

0:29:54.080 --> 0:29:56.200
<v Speaker 10>or you know, trying to catch some tailwinds, We're coming

0:29:56.240 --> 0:29:58.800
<v Speaker 10>up with good products. Rates falling is always a helpful thing.

0:29:59.000 --> 0:30:00.640
<v Speaker 10>It's the same old thing, right. I think you have

0:30:00.720 --> 0:30:03.120
<v Speaker 10>ETF shops that come out and you know, as long

0:30:03.160 --> 0:30:05.600
<v Speaker 10>as we have some tenure and you know, have a

0:30:05.640 --> 0:30:07.920
<v Speaker 10>good amount of product lineups and the right digligences all

0:30:07.920 --> 0:30:10.360
<v Speaker 10>that kind of thing. I think investors are willing to

0:30:10.400 --> 0:30:13.440
<v Speaker 10>give products a try now, regardless of who the issuer was.

0:30:14.440 --> 0:30:17.080
<v Speaker 10>That being said, you know, a company like Defiance is

0:30:17.120 --> 0:30:19.080
<v Speaker 10>never going to come out and try to launch you know,

0:30:19.120 --> 0:30:22.400
<v Speaker 10>a free S and P five hundred black Rock Vanguard

0:30:22.840 --> 0:30:25.320
<v Speaker 10>Stage Street. I mean, it's there, they won that game, right,

0:30:25.400 --> 0:30:27.640
<v Speaker 10>But I think we can be creative with products that

0:30:27.680 --> 0:30:30.280
<v Speaker 10>don't exist in the marketplace yet and that there's appetite for.

0:30:30.520 --> 0:30:32.480
<v Speaker 10>And the good thing about being a smaller shop is

0:30:32.520 --> 0:30:33.959
<v Speaker 10>like we can we can kind of see what all

0:30:33.960 --> 0:30:36.440
<v Speaker 10>the bohemits have done and just try to, you know,

0:30:36.520 --> 0:30:38.640
<v Speaker 10>kind of like figure out what's missing and put our

0:30:38.680 --> 0:30:40.520
<v Speaker 10>own secret sauce on it. So I do think there's

0:30:40.640 --> 0:30:42.760
<v Speaker 10>room for a whole lot of us small guys.

0:30:42.800 --> 0:30:44.320
<v Speaker 7>And you know, we're all growing.

0:30:44.360 --> 0:30:46.480
<v Speaker 10>We've all had some pretty successful launches in the last

0:30:46.520 --> 0:30:48.280
<v Speaker 10>couple of years, so we'll catch up.

0:30:48.920 --> 0:30:52.360
<v Speaker 6>Yeah, Sylviya, I'm curious how you're thinking about the market overall.

0:30:52.440 --> 0:30:54.640
<v Speaker 6>I mean to me, it's it's kind of a weird

0:30:54.920 --> 0:30:59.360
<v Speaker 6>environment we're in right now. Everyone's bracing for somewhat aggressive

0:30:59.560 --> 0:31:02.120
<v Speaker 6>Federal Reserve interest rate cuts, and yet we've got the

0:31:02.160 --> 0:31:05.560
<v Speaker 6>stock market near high. I'm looking at the Nasdaq one

0:31:05.640 --> 0:31:10.040
<v Speaker 6>hundred valuations, you know, p's in the thirties. It's Does

0:31:10.080 --> 0:31:12.400
<v Speaker 6>it feel weird to be bullish on the equity market

0:31:12.480 --> 0:31:14.760
<v Speaker 6>when the FED is about to go on an aggressive

0:31:14.840 --> 0:31:16.040
<v Speaker 6>rate cutting campaign?

0:31:17.360 --> 0:31:18.400
<v Speaker 7>Yeah, it's a strange.

0:31:18.760 --> 0:31:20.480
<v Speaker 10>I think we're in a period in the markets where

0:31:20.520 --> 0:31:21.720
<v Speaker 10>it's going to be, you know, where we're going to

0:31:21.720 --> 0:31:24.400
<v Speaker 10>start to see some slower growth. But I don't necessarily

0:31:24.440 --> 0:31:26.560
<v Speaker 10>think that, you know, the all bets are.

0:31:26.480 --> 0:31:27.640
<v Speaker 7>Off for stock appreciation.

0:31:27.800 --> 0:31:29.640
<v Speaker 10>The good news is that even when rates have been

0:31:29.680 --> 0:31:32.880
<v Speaker 10>super high, corporate America has performed right. And I think

0:31:32.960 --> 0:31:35.280
<v Speaker 10>a lot of the reasons you see these higher multiples

0:31:35.280 --> 0:31:38.080
<v Speaker 10>is because their earnings have actually have actually matched what

0:31:38.240 --> 0:31:40.520
<v Speaker 10>you know, what's been kind of like dictated on these stocks.

0:31:40.560 --> 0:31:43.520
<v Speaker 10>And I think that shor and corporate earnings like, yes,

0:31:43.600 --> 0:31:46.080
<v Speaker 10>jobs are you know, kind of weakening a little bit,

0:31:46.120 --> 0:31:48.040
<v Speaker 10>but it's nothing to be concerned of in terms of

0:31:48.400 --> 0:31:51.920
<v Speaker 10>historical unemployment rate, retail consumers are strong. You can see

0:31:51.920 --> 0:31:54.000
<v Speaker 10>that across some of the earnings. You know, wages have

0:31:54.080 --> 0:31:56.560
<v Speaker 10>been pretty steady, There's lots of cash on the sidelines,

0:31:56.600 --> 0:31:58.920
<v Speaker 10>and so I think that there will be this period

0:31:58.920 --> 0:32:02.240
<v Speaker 10>of time in and you know, in coming months, really

0:32:02.240 --> 0:32:04.719
<v Speaker 10>where the market's going to really like these rate cuts,

0:32:04.720 --> 0:32:07.120
<v Speaker 10>and I think that stocks will be rewarded from it.

0:32:07.560 --> 0:32:08.800
<v Speaker 7>And then the second thing I'll say is.

0:32:08.800 --> 0:32:10.680
<v Speaker 10>I think we're going to see breath expansion right when

0:32:10.720 --> 0:32:14.120
<v Speaker 10>those rates actually lower, and companies like small caps and

0:32:14.200 --> 0:32:17.040
<v Speaker 10>mid caps can actually you know, have that show up

0:32:17.080 --> 0:32:20.120
<v Speaker 10>in their bottom lines. I think, you know, I think

0:32:20.160 --> 0:32:22.520
<v Speaker 10>you get some breath expansion there. But the MAC seven,

0:32:22.560 --> 0:32:25.520
<v Speaker 10>you know, unless you think innovation and AI are dead,

0:32:25.640 --> 0:32:26.400
<v Speaker 10>it's just a difference.

0:32:26.600 --> 0:32:29.360
<v Speaker 7>It's a tech heavy world. So I'm always going to

0:32:29.360 --> 0:32:30.320
<v Speaker 7>buy those companies.

0:32:30.360 --> 0:32:32.480
<v Speaker 10>And to your point, even if I'm totally wrong and

0:32:32.520 --> 0:32:35.200
<v Speaker 10>the market pulls back, I want to have quality companies

0:32:35.200 --> 0:32:37.440
<v Speaker 10>with huge balance sheets. And again that takes me back

0:32:37.480 --> 0:32:39.520
<v Speaker 10>to the MAC seven. So I don't think that story

0:32:39.560 --> 0:32:40.120
<v Speaker 10>is over.

0:32:40.440 --> 0:32:42.480
<v Speaker 2>All, right, Sylvia, thank you so much for joining us.

0:32:42.520 --> 0:32:43.239
<v Speaker 2>Really appreciate it.

0:32:43.280 --> 0:32:47.880
<v Speaker 3>Sylvia Tablonski, Chief executive Officer and chief Investment officer defines ETFs.

0:32:49.600 --> 0:32:53.480
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:32:53.560 --> 0:32:57.080
<v Speaker 1>weekdays at ten am Eastern on applecar Play and Android

0:32:57.120 --> 0:33:00.320
<v Speaker 1>Auto with the Bloomberg Business. You can also listen live

0:33:00.400 --> 0:33:03.560
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0:33:03.600 --> 0:33:06.200
<v Speaker 1>Say Alexa playing Bloomberg eleven thirty.

0:33:07.520 --> 0:33:08.400
<v Speaker 2>Let's switch hears here.

0:33:08.440 --> 0:33:12.760
<v Speaker 3>One of the top red stories on the Bloomberg terminal

0:33:12.800 --> 0:33:15.680
<v Speaker 3>here is about a hedge fund, About the hedge fund business.

0:33:15.720 --> 0:33:18.080
<v Speaker 3>No surprise, a lot of hedge fund folks have Bloomberg terminals,

0:33:18.120 --> 0:33:18.520
<v Speaker 3>so they.

0:33:18.360 --> 0:33:19.280
<v Speaker 2>Read stuff about it.

0:33:19.880 --> 0:33:22.280
<v Speaker 3>Hema Parmar Joints as she is the hedge fund reporter

0:33:22.400 --> 0:33:25.680
<v Speaker 3>for Bloomberg News, talk to us about two Sigma, Who

0:33:25.720 --> 0:33:28.720
<v Speaker 3>is two Sigma and what's happening today with this big

0:33:28.760 --> 0:33:29.360
<v Speaker 3>hedge fund.

0:33:29.320 --> 0:33:33.520
<v Speaker 11>Yes, giant hedge fund, sixty billion dollars, big quant pioneer,

0:33:33.680 --> 0:33:36.920
<v Speaker 11>meaning they use computer algorithms to trade across a variety

0:33:36.920 --> 0:33:41.280
<v Speaker 11>of assets. The two founders, John Ovidek and David Siegel,

0:33:41.640 --> 0:33:45.440
<v Speaker 11>founded the firm twenty odd years ago, but over the

0:33:45.560 --> 0:33:48.080
<v Speaker 11>years they had a rift. They didn't get along. They've

0:33:48.080 --> 0:33:50.520
<v Speaker 11>been feuding for the past few years, so much so

0:33:50.640 --> 0:33:54.120
<v Speaker 11>that the firm had to in their public disclosures and

0:33:54.200 --> 0:33:56.240
<v Speaker 11>a regulatory filing, which is a very strange thing for

0:33:56.280 --> 0:34:01.000
<v Speaker 11>hedge fund to do. She close disclose that that the

0:34:01.040 --> 0:34:04.280
<v Speaker 11>feud was so bad that it was a material risk

0:34:04.360 --> 0:34:05.560
<v Speaker 11>to investors.

0:34:05.320 --> 0:34:09.799
<v Speaker 6>That's unbelievable people, But it doesn't sound like they've you know,

0:34:09.920 --> 0:34:12.719
<v Speaker 6>even after they disclosed that. It doesn't seem like there

0:34:12.760 --> 0:34:14.840
<v Speaker 6>was a lot of outflows out of the fund or anything.

0:34:15.040 --> 0:34:18.160
<v Speaker 6>Do you think that changes with this announcement now that

0:34:18.200 --> 0:34:21.439
<v Speaker 6>people realize, wait a minute, this something's really going wrong here.

0:34:21.600 --> 0:34:23.480
<v Speaker 11>I think what's interesting about a firm like this is

0:34:23.520 --> 0:34:26.759
<v Speaker 11>because it's quantitative. There are so many teams. It's kind

0:34:26.760 --> 0:34:29.080
<v Speaker 11>of an institution the way it's built out. It's not

0:34:29.160 --> 0:34:31.439
<v Speaker 11>like if we think of a fundamental longtered equity fund

0:34:31.480 --> 0:34:34.080
<v Speaker 11>where everything relies on the PM or the one person

0:34:34.080 --> 0:34:37.640
<v Speaker 11>at the very top. Here, it's kind of a team structure,

0:34:37.960 --> 0:34:40.600
<v Speaker 11>and it can sort of be business as usual in

0:34:40.640 --> 0:34:44.759
<v Speaker 11>some ways, even with a rift like this. So the

0:34:44.800 --> 0:34:49.040
<v Speaker 11>performance has been relatively unchanged and redemptions have been relatively

0:34:49.080 --> 0:34:51.840
<v Speaker 11>unchanged to you haven't seen a mass exodus of clients

0:34:52.080 --> 0:34:54.280
<v Speaker 11>in the wake of news like this, which is really interesting.

0:34:54.360 --> 0:34:56.520
<v Speaker 11>Because if it was many other funds, you know, you

0:34:56.600 --> 0:34:57.239
<v Speaker 11>might have seen that.

0:34:57.680 --> 0:35:01.280
<v Speaker 2>How's their performance been? Has it affected their performance?

0:35:01.400 --> 0:35:03.919
<v Speaker 11>It hasn't really affected their performance. The performance has been

0:35:04.120 --> 0:35:06.520
<v Speaker 11>has been I would say, unchanged up about ten percent

0:35:06.560 --> 0:35:08.239
<v Speaker 11>and one of their funds this year, which is not bad,

0:35:08.360 --> 0:35:11.520
<v Speaker 11>up about seven for the other. It's it's okay, it's fine.

0:35:11.600 --> 0:35:14.400
<v Speaker 6>I guess once you put those systematic strategies in place

0:35:14.440 --> 0:35:16.600
<v Speaker 6>and turn the computer on, you can fight all you want.

0:35:17.160 --> 0:35:19.160
<v Speaker 6>It doesn't matter. But is there any sense of what

0:35:19.200 --> 0:35:21.760
<v Speaker 6>this feud is all about? Is it just a personality conflict?

0:35:21.800 --> 0:35:24.359
<v Speaker 6>Do we know anything about what set the heart of it?

0:35:24.560 --> 0:35:26.800
<v Speaker 11>Yes, they disagree about a disagree on a number of

0:35:26.840 --> 0:35:29.800
<v Speaker 11>different things about the firms. So it could be organizational structure,

0:35:29.880 --> 0:35:34.560
<v Speaker 11>succession planning, the roles of senior executives, and it got

0:35:34.560 --> 0:35:38.520
<v Speaker 11>to such a point where employees struggled to actually implement initiatives,

0:35:38.920 --> 0:35:43.120
<v Speaker 11>and it could have or began to impact retention of talent.

0:35:43.680 --> 0:35:46.560
<v Speaker 11>So when you're seeing the material impacts of it, which

0:35:46.600 --> 0:35:48.759
<v Speaker 11>there were some, you know that may have led to

0:35:48.800 --> 0:35:51.279
<v Speaker 11>them needing to publicly disclose all.

0:35:51.280 --> 0:35:54.400
<v Speaker 3>Right, So, as Hedge fund reporter for Bloomberg News, how

0:35:54.520 --> 0:35:57.000
<v Speaker 3>how is the industry? Are funds flowing into the industry

0:35:57.000 --> 0:35:58.680
<v Speaker 3>out of the industry. How's did it industry doing?

0:35:58.920 --> 0:35:59.160
<v Speaker 7>Yeah?

0:35:59.280 --> 0:36:03.080
<v Speaker 11>So, for for years, the industry has generally grown bigger

0:36:03.120 --> 0:36:06.200
<v Speaker 11>and bigger. What's fascinating is that typically the assets are

0:36:06.200 --> 0:36:09.400
<v Speaker 11>going to the biggest funds, so the bigger funds continue

0:36:09.440 --> 0:36:12.280
<v Speaker 11>to get larger. If we look within the multi strategy

0:36:12.280 --> 0:36:15.120
<v Speaker 11>hedge fund space with these are funds that trade across

0:36:15.160 --> 0:36:18.840
<v Speaker 11>all kinds of assets and little pods of teams. That

0:36:18.920 --> 0:36:22.600
<v Speaker 11>strategy has generally attracted a ton of assets, and you've

0:36:22.600 --> 0:36:25.960
<v Speaker 11>seen these firms grow from twenty billion to sixty billion

0:36:25.960 --> 0:36:26.799
<v Speaker 11>in just a few years.

0:36:27.239 --> 0:36:29.680
<v Speaker 6>Yeah. But in a year like this, when the stock

0:36:29.719 --> 0:36:32.760
<v Speaker 6>market just keeps ripping higher, it's not necessarily the best

0:36:32.800 --> 0:36:35.799
<v Speaker 6>back drop for a hedge fund, especially as you point

0:36:35.800 --> 0:36:37.759
<v Speaker 6>it out a long short. Are there any sort of

0:36:37.880 --> 0:36:41.760
<v Speaker 6>strategies pockets that are performing especially well, you know, trend

0:36:41.800 --> 0:36:44.160
<v Speaker 6>following I imagine is doing well anything else?

0:36:44.320 --> 0:36:49.360
<v Speaker 11>Yeah, Equity funds have generally done well. Longstert equity fundamental

0:36:49.400 --> 0:36:53.719
<v Speaker 11>stock pickers are up in the twenty percent so far ish,

0:36:53.760 --> 0:36:57.359
<v Speaker 11>depending on the funds. Keep in mind that a lot

0:36:57.360 --> 0:37:01.080
<v Speaker 11>of these guys buy tech stocks, so if they've time

0:37:01.160 --> 0:37:03.600
<v Speaker 11>to correctly, have sort of like ridden the wave up,

0:37:04.239 --> 0:37:07.040
<v Speaker 11>but have felt pain as well too, so it's been

0:37:07.120 --> 0:37:09.560
<v Speaker 11>kind of a rocky rider. Looking at the fund, this

0:37:09.640 --> 0:37:12.600
<v Speaker 11>industry is quite a fun specific space, so it depends

0:37:12.640 --> 0:37:15.800
<v Speaker 11>on the strategy, the manager, the size of the vehicle,

0:37:16.120 --> 0:37:19.880
<v Speaker 11>how they handle risk. So they're depending on the appetite

0:37:19.920 --> 0:37:21.920
<v Speaker 11>of the investor and how diversified they want to be.

0:37:22.440 --> 0:37:24.960
<v Speaker 11>They may choose one type of fund versus the yah.

0:37:24.840 --> 0:37:26.719
<v Speaker 2>Know the two Sigma news today that you report on.

0:37:27.040 --> 0:37:29.319
<v Speaker 3>It highlights one of the risks I think investing in

0:37:29.360 --> 0:37:32.319
<v Speaker 3>the space, which is this is pretty common. That is,

0:37:32.680 --> 0:37:35.120
<v Speaker 3>the founders are really what you're investing in. I'm investing

0:37:35.160 --> 0:37:38.839
<v Speaker 3>with Stevie Cohen at point seventy two. I'm trusting him.

0:37:39.239 --> 0:37:43.320
<v Speaker 3>Is the England or a millennium. I'm investing with those

0:37:43.640 --> 0:37:45.920
<v Speaker 3>people in their names. But if they leave or they

0:37:45.920 --> 0:37:48.080
<v Speaker 3>get hit by a truck, that's a real issue.

0:37:48.280 --> 0:37:50.680
<v Speaker 11>It depends on the strategy. So for a stock picker

0:37:50.840 --> 0:37:54.040
<v Speaker 11>for the Tiger Cubs for example, where the people at

0:37:54.040 --> 0:37:56.640
<v Speaker 11>the very top really have a lot of impact on

0:37:56.680 --> 0:38:00.200
<v Speaker 11>the actual investments, yes, it can matter if one of

0:38:00.200 --> 0:38:02.840
<v Speaker 11>those people who are to step away for a firm

0:38:03.480 --> 0:38:07.640
<v Speaker 11>like to Stigma, where a lot of the investments are

0:38:08.000 --> 0:38:11.960
<v Speaker 11>sort of made many layers down, it may not impact

0:38:12.120 --> 0:38:16.200
<v Speaker 11>investor sentiment to the point where it would impact redemptions

0:38:16.280 --> 0:38:18.960
<v Speaker 11>or flows. That said, you do look to the very

0:38:19.000 --> 0:38:20.600
<v Speaker 11>top of a firm and you want the people at

0:38:20.600 --> 0:38:22.880
<v Speaker 11>the very top to be working together. And clearly they

0:38:22.880 --> 0:38:25.919
<v Speaker 11>were not working well enough for the firm to have

0:38:26.000 --> 0:38:30.319
<v Speaker 11>two brand new co CEOs step in place and try

0:38:30.360 --> 0:38:32.560
<v Speaker 11>to fix things and try to get everyone working better

0:38:32.600 --> 0:38:34.960
<v Speaker 11>and more efficient. You don't want an inefficient firm, regardless

0:38:34.960 --> 0:38:35.560
<v Speaker 11>of the strategy.

0:38:35.840 --> 0:38:38.200
<v Speaker 6>And to be sure, over Deck and Siegel aren't actually

0:38:38.280 --> 0:38:40.399
<v Speaker 6>leaving the firm, right, They're just kind of stepping down

0:38:40.400 --> 0:38:40.960
<v Speaker 6>from the CEO.

0:38:41.280 --> 0:38:45.560
<v Speaker 11>They're giving up the co CEO title. Will remain co

0:38:45.719 --> 0:38:47.759
<v Speaker 11>chairman of the firm, which is the role.

0:38:47.719 --> 0:38:48.200
<v Speaker 4>That they have.

0:38:49.120 --> 0:38:52.120
<v Speaker 11>They are the biggest investors in the funds. They have

0:38:52.200 --> 0:38:54.520
<v Speaker 11>the largest equity stake in the fund, so they do

0:38:54.560 --> 0:38:57.360
<v Speaker 11>have influence. They will continue to advise and continue to

0:38:57.560 --> 0:38:59.359
<v Speaker 11>help guide the direction of the firm.

0:38:59.520 --> 0:39:01.760
<v Speaker 2>Yesmah, thank you so much for joining us. Really appreciate

0:39:01.800 --> 0:39:03.320
<v Speaker 2>Hima Palmer. She's hedge fund.

0:39:03.200 --> 0:39:05.160
<v Speaker 3>Reporter for bloom Bloomberg News Journeys live here in our

0:39:05.160 --> 0:39:06.920
<v Speaker 3>Bloomberg studio here in midtown Manhattan.

0:39:07.320 --> 0:39:11.839
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on apples, Spotify,

0:39:12.040 --> 0:39:15.680
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0:39:15.840 --> 0:39:20.040
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0:39:20.160 --> 0:39:22.840
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