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

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Find the Bloomberg Markets

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Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. Okay, having worked on Wall

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Speaker 1: Street for twenty years, there's a story on the terminal

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Speaker 1: today that really hit close to home for me. It's

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Speaker 1: a story where a Bank of America is floating an

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Speaker 1: idea to its traders to keep bonuses flat relative to

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Speaker 1: last year despite a huge profit year UH in the

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Speaker 1: trading environment. To get some more details here, we welcome

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Speaker 1: Lenon new in Financial reporter for Bloomberg News. Lennan, I've

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Speaker 1: sat across the desk from my manager many many times

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Speaker 1: around this time of year, arguing for a higher bonus. Hey,

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Speaker 1: look how well I did. Look how profitable our desk

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Speaker 1: was that. I think, what's can I borrow you? For

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Speaker 1: a humanus like manager? And I need to me exactly right. So, Lenan,

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Speaker 1: it doesn't sound like there's gonna be some open ears

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Speaker 1: for that kind of discussion this year. That's right, Paul,

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Speaker 1: I think these sources we spoke to across the street obviously,

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Speaker 1: I think that this is not enough. You know, it's

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Speaker 1: been a manner year for trading desks. The reality is

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Speaker 1: that they have jumped, you know, huge amounts, and Bank

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Speaker 1: of America I think is on the lower end of

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Speaker 1: the desks that have done extremely well throughout this year. Um.

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Speaker 1: So it comes as a kind of bitter pill at

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Speaker 1: your end to see that their bonuses are probably being

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Speaker 1: going to be flat and that you know, managers are

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Speaker 1: managing expectations about a more gloomy environment. So I mean,

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Speaker 1: given that a lot of people are experiencing reductions and

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Speaker 1: pay will it be something that traders will just have

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Speaker 1: to eat or will they look to other banks to

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Speaker 1: see what they're doing. How does this go down? Well,

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Speaker 1: vunny right now, it's going down like a red bull,

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Speaker 1: as you can imagine. But BA is a consumer bank,

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Speaker 1: you know, right now, less than a fifth of its

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Speaker 1: net income comes from trading. And on top of that,

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Speaker 1: you know, there is this legacy of a financial crisis

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Speaker 1: and rank of the optics of paying big bonuses when

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Speaker 1: the rest of the economy is doing so poorly. It's

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Speaker 1: something I think the banks leadership is acutely aware of.

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Speaker 1: So I don't think there are a lot of options here.

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Speaker 1: Of course, as Paul says, you know, managers will advocate

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Speaker 1: for their staff. They will point to those strong pm

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Speaker 1: L numbers and say, hey, look, we made a big

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Speaker 1: contribution to the banks making money this year. Um, so

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Speaker 1: we need to be properly compensated for it. But I'm

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Speaker 1: not sure that that's going to be particularly convincing given

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Speaker 1: this terrible environment that the rest of the U. S.

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Speaker 1: Economy is in. So Lennon, when I worked on Wall Street,

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Speaker 1: you know, bonuses would make up, particularly for senior people,

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Speaker 1: maybe of their total compensation. I believe that's changed really

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Speaker 1: since the financial crisis, is that they've gone to more

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Speaker 1: of a fixed salary model. But still, uh, the bonuses

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Speaker 1: have a big, big impact for a lot of folks.

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Speaker 1: That's right, Pearl, And well, we're not talking about the

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Speaker 1: outsized bonuses that you know you might have been discussing

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Speaker 1: in the nineties, but we're looking bonuses are still a

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Speaker 1: huge deal for everyone on Wall Street. So this comes

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Speaker 1: as a very disappointing signal. You know, the managers are

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Speaker 1: managing expectations, and as Bonnie said, other banks are watching

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Speaker 1: this closely as well to see how they'll compensate their

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Speaker 1: staff and to kind of see what the herd is doing. Right,

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Speaker 1: this might be cover for other banks to say, hey, listen,

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Speaker 1: Via is not paying as much, and um, you know,

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Speaker 1: the environment is bad for everyone. On top of which,

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Speaker 1: we have other banks that are actually planning to cut staff.

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Speaker 1: So right now, Beve has said they're going to keep

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Speaker 1: everyone's jobs fast this year, but then again they're managing

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Speaker 1: expectations that that might mean that everyone doesn't get paid

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Speaker 1: as well. So what options do dissatisfied traders have? I mean,

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Speaker 1: can they just walk across the street anymore? It sounds

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Speaker 1: like that's not really an option, and I think everyone

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Speaker 1: is fully aware of that. Right It's still early days,

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Speaker 1: and it's possible that managers can go back to executives

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Speaker 1: and say, look, my team deserves more and lobby really

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Speaker 1: hard for more. But still, you know, the jobs are

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Speaker 1: are hard to come by these days on Wall Street,

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Speaker 1: and I think everyone is pretty aware of that. So

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Speaker 1: right now, I think a lot of traders are happy

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Speaker 1: to still have their jobs. Um, and so you know,

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Speaker 1: they don't really have a lot of options, particularly if

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Speaker 1: we think that next year there may be some more

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Speaker 1: cuts to come across the industry. So have we heard

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Speaker 1: anything leland from some of the other big players the

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Speaker 1: Goldman Sachs is the Morgan Stanley's of the world, or

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Speaker 1: a kind of upfront floating this idea. I think the

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Speaker 1: ave is early floating this idea. And again I have

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Speaker 1: to stress that these are very early conversations, Paul. You

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Speaker 1: know that you know there are some expectations being managed

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Speaker 1: early on, but that obviously this will raise the level

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Speaker 1: of the discussion and you know, cause a lot of

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Speaker 1: debate I think, to go on internally about how much

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Speaker 1: trader should be paid. UM. We are watching the other

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Speaker 1: banks very closely as well to see what indications are

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Speaker 1: coming out of them. UM, and the survey consultants that

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Speaker 1: we talked to, you know, the recruitment consultants and the

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Speaker 1: pay consultants have guided higher on trading. And so this

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Speaker 1: comes as a real disappointment because the expectations are already

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Speaker 1: set high for this trading bonanza and now we're already

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Speaker 1: starting to see early signs that that's really being tamped

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Speaker 1: down across the street. And I think that that may

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Speaker 1: be a trend that we see with other banks coming

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Speaker 1: in the in the next couple of weeks. I mean,

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Speaker 1: what can you do. It's not exactly like you can

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Speaker 1: call in the union what happens in cases like this,

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Speaker 1: and surely we've seen it before. Yeah, it's interesting because

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Speaker 1: I think on the street, Um, you know, people talk

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Speaker 1: about everything being very merit and performance based, right, and

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Speaker 1: so a lot of people in the street, if they

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Speaker 1: if their division that their desk brought in you know,

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Speaker 1: bumping revenues, then they expect to get you know, not

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Speaker 1: not exactly that amount, but at least directionally a good

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Speaker 1: bump in their compensation, right. And so I think this

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Speaker 1: kind of flies in the face of what people on

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Speaker 1: the street, um, you know, really think they deserve. And um,

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Speaker 1: it's it's going to be a bit of a cultural shock,

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Speaker 1: I believe, because you know, it's just a very strange year.

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Speaker 1: In a normal year, if the trading test made a

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Speaker 1: lot of money, you'd expect to get a decent bonus.

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Speaker 1: And this year, I think, just because of the broader

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Speaker 1: context we're in the banks simply are aware that you know,

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Speaker 1: paying big banker bonuses is not going to be a

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Speaker 1: good look. Let's also just point out that they're still

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Speaker 1: getting bonuses, just not more than last year, but they're

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Speaker 1: the sales and trading pool is at last year's level,

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Speaker 1: even though revenue obviously has done this year. And we

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Speaker 1: have to leave it there. But thank you for your

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Speaker 1: story from lannan noon, and you can see on your

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Speaker 1: Bloomberg about Bank of America and traders getting jewelhood. There

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Speaker 1: a slew of data to pass through today. We had

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Speaker 1: a whole bunch of jobs data earlier this morning, durable

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Speaker 1: goods orders, We have the fo m C minutes later

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Speaker 1: this afternoon, and then of course the non nation of

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Speaker 1: Janet Yellen to be Secretary of the Treasury. When you

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Speaker 1: have days like that, you just have to speak to

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Speaker 1: Danielle di Martino, Booth CEO and director of Intelligence at

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Speaker 1: Quill Intelligence. She's a former advisor at the Dallas Federal

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Speaker 1: Reserve and a Bloomberg opinion columnist. Danielle, thanks so much

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Speaker 1: for joining us on a very busy Thanksgiving Eve. First off,

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Speaker 1: I list love to get your thoughts on the nomination

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Speaker 1: of Janet Yellen for Secretary of the Treasury. Well, I

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Speaker 1: think that this was a very convenient political move on

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Speaker 1: president like Biden's part, I'm I'm no big fan of it,

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Speaker 1: and in fact, I wrote a long book about it

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Speaker 1: about and I detailed Janet Yellen's philosophy in it. And

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Speaker 1: we have to remember that she is a trained labor economists.

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Speaker 1: So you think back to her days at the San

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Speaker 1: Francisco Fete and companies that we haven't talked about in years,

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Speaker 1: like New Century and Countrywide Mortgage. These were in her backyard.

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Speaker 1: And at the root of being unaware of the subprime

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Speaker 1: crisis building on the West Coast was Janney Ellen's unappreciation

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Speaker 1: and lack of knowledge and experience with the financial markets.

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Speaker 1: If you think back to a year ago when we

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Speaker 1: were in the not QE era and overnight repo funding

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Speaker 1: strains and reserves not being kind of. These are very

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Speaker 1: technical type of issues that as Secretary of the Treasury

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Speaker 1: you would need to be highly familiar with. So again,

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Speaker 1: I think markets are applauding the fact that she has

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Speaker 1: said that that that you could reopen the Fed Reserve

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Speaker 1: Act and allow the Federal reserves by stocks, that negative

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Speaker 1: interest rates could be imposed under the under certain circumstances.

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Speaker 1: I think she would certainly spearhead a digital currency in

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Speaker 1: order to deliver money directly to individuals, helicopter money, so

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Speaker 1: to speak. But again, um, these are these are the

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Speaker 1: types of policies that have tended to UH to help

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Speaker 1: out the top one percent looking back in history, and

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Speaker 1: and end up being a backlash, if you will, against

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Speaker 1: those who need it the most. Yes, do you think

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Speaker 1: that just for the moment, she will work a sort

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Speaker 1: of hand in hand with the FED and try and

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Speaker 1: do something in terms of retrievings some of those emergency

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Speaker 1: funds that Stephen manutition is as buddhiside. Well, I certainly

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Speaker 1: think that that will be priority number one. Of course,

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Speaker 1: it's not as easy as look. I think of the

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Speaker 1: months and months we've been watching Minutian go back and

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Speaker 1: forth between McConnell and Pelosi. These are these You need

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Speaker 1: an extremely savvy politician UH to make these deals. And

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Speaker 1: it's not just a matter of flipping a switch. You

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Speaker 1: have to get congressional approval UH to have these funds reallocated.

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Speaker 1: And we don't know for sure what Manutions motivations are,

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Speaker 1: but this could be such that McConnell could, in the

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Speaker 1: Continuing Resolution December the eleventh, have his skinny stimulus bill

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Speaker 1: of a half trillion. You tack on what has been

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Speaker 1: taken away from the Fed and you get to a trillion.

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Speaker 1: But politically, the optics from McConnell would be very favorable

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Speaker 1: because there would only be a new half a trillion

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Speaker 1: stimulus package attached. So again, we don't know where Minutan

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Speaker 1: is coming from, but we do know that Congress would

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Speaker 1: have to would have to sign into law reopening these lines,

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Speaker 1: these credit uh facilities at the Reserve. All right, Daniel,

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Speaker 1: let's go to the ECO page on the Bloomberg terminal here.

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Speaker 1: What are some of your key takeaways here from some

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Speaker 1: of the economic data we saw this morning. So, you know,

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Speaker 1: besides the you know, as we were listening um coming

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Speaker 1: into the segment, the back to back increases in regular

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Speaker 1: state initial jobless claims. Yet we're trying at GROL Intelligence

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Speaker 1: right now to kind of back into what the survey

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Speaker 1: week looks like for non farm payrolds. Next week is

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Speaker 1: when we finally get the we call it the bathtub

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Speaker 1: where you get every source of a mayor are consclaiming

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Speaker 1: unemployment insurance in some form. We saw that tick up

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Speaker 1: this week for the weekend in November seventh to the

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Speaker 1: first time since August, and we know that the last

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Speaker 1: two weeks have come up, so we're anticipating that when

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Speaker 1: we get that final print for the survey week, which

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Speaker 1: always includes the twelfth of the month, we get that

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Speaker 1: next Thursday morning, right before the payroll report, we're anticipating

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Speaker 1: that that number goes up again. So you're seeing economists

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Speaker 1: across the street scrambled to take down their their November

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Speaker 1: unemployment payrolls forecast. And if you look inside the weeds

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Speaker 1: of the University of Mission Consumer Confidence report, you also

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Speaker 1: saw that employment expectations came in at the lowest levels

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Speaker 1: in April. So we're definitely starting to see some backtracking

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Speaker 1: in the labor data, which is of course key to

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Speaker 1: a consumer driven economy. So what are you anticipating, Danielle,

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Speaker 1: Does this economy show more scarring zone we're seeing forecast

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Speaker 1: of I don't think. I think we're about six weeks

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Speaker 1: behind Europe in terms of the coronavirus UH and by

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Speaker 1: the way, not imposing restrictions. So I do see economists

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Speaker 1: across the pond taking down their Q four estimates, and

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Speaker 1: I would foresee that the United States could easily slip

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Speaker 1: back into contractions into recession at the end of the

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Speaker 1: fourth quarter going into the first quarter of given purely

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Speaker 1: what we're seeing in terms of of of of people

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Speaker 1: choosing to be less mobile in states where there are

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Speaker 1: not even restrictions, and what we're seeing in terms of

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Speaker 1: small business revenues and small businesses that are open. These

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Speaker 1: are declining figures. Leisure and hospitality, job openings have come

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Speaker 1: down appreciately. There's their lowest August. These are all signs

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Speaker 1: that the economy is going into a retrenchment because the

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Speaker 1: coronavirus is becoming so severe in the United States that

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Speaker 1: it cannot be ignored. Danielle, we appears that we have

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Speaker 1: a new president here. Um it appears that it might

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Speaker 1: be a split government once again in terms of UH.

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Speaker 1: It appears that the Republicans may continue to control the center.

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Speaker 1: Off to see what happens in Georgia. How did you

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Speaker 1: view what was your key takeaway from this political season

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Speaker 1: and kind of where we find ourselves now? Well, I

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Speaker 1: think I think more than anything else, the American voters

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Speaker 1: have spoken that they're not divided at all, They're in

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Speaker 1: the middle. When you look at the least appreciative appreciated

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Speaker 1: story of this last election. It is the change of

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Speaker 1: of the change of the guard in the House of Representatives.

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Speaker 1: And you know, Nancy Pelosi is going to have the

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Speaker 1: slimmest margin of majority in two decades, and that I

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Speaker 1: think is less appreciated because you will have more of

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Speaker 1: a bifurcation between the administration, assuming these two Georgia's seats

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Speaker 1: go to the GOP, which is a big assumption. Assuming

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Speaker 1: that that is the case, you really will have an

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Speaker 1: administration in one party in a Congress largely in the other. Danielle,

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Speaker 1: really quickly, because we're out of time. Do we get

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Speaker 1: a fourth round of to meet us fiscal Oh? Oh, absolutely.

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Speaker 1: I think that this will be priority number one. You're

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Speaker 1: not going to see mass addictions and the Cares Act

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Speaker 1: unemployment benefits expire when upwards of thirteen million Americans are

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Speaker 1: collecting these emergency forms of unemployment insurance. Danielle, thank you

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Speaker 1: so much for joining us once again today. Danielle Di

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Speaker 1: Martineo Booth is CEO and director of Quill Intelligence, former

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Speaker 1: advisor of Course after Dallas FED also Bloomberg Opinion Columns,

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Speaker 1: and she's based in Dallas typically and we thank her again.

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Speaker 1: That raft of economic data today will pitch forward to

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Speaker 1: the f O m C meeting and all of that

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Speaker 1: later on, So do tune in from two pm onwards

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Speaker 1: for all that emerges from there. For the longest time

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Speaker 1: during this pandemic, oil has been just really hovering around

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Speaker 1: that forty level. We've actually had a lift here over

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Speaker 1: the past a week or so. We're up another one

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Speaker 1: percent today oil w t I oil trading at forty

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Speaker 1: five dollars thirty five cents per gown again, a lift

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Speaker 1: off of that forty range it had been hovering out

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Speaker 1: for a long time. To get a sense of kind

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Speaker 1: of what this means, what's driving it, we welcome John Kilduff.

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Speaker 1: He joins us. He's a founder of Again Capital. John,

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Speaker 1: thanks so much for joining us here. You know, it's

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Speaker 1: it appears that investors across various asset classes here are

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Speaker 1: willing to look towards the other side of this pandemic

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Speaker 1: and start to really discount uh pick up an economic

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Speaker 1: activity UH next year. What do you see in the

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Speaker 1: supply demand of the oil markets globally, I mean, for oil,

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Speaker 1: there's no doubt that that is a key factor here.

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Speaker 1: Oil has really been the covid trade or pandemic trade

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Speaker 1: or now vaccine trade across all the markets. Um. I mean,

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Speaker 1: we had a significant dip and things were looking rather bleak,

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Speaker 1: just as several weeks ago when we saw those renewed

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Speaker 1: lockdowns in Europe, and of course the raising Caselow is here,

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Speaker 1: but now with the successive VEX positive vaccine news, that's

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Speaker 1: exactly it. And the sort of connecting the dots here

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Speaker 1: is that you can see the pent up demand, um,

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Speaker 1: you know, for for transportation, for travel, um, just what

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Speaker 1: we saw over the weekend where there was you know,

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Speaker 1: the highest number of airport visitors since early March, and

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Speaker 1: so jet fuel has been crushed consistently down Paul, versus

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Speaker 1: that you know year on year measures um, and it's

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Speaker 1: really been weighing. That factor has really been weighing on

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Speaker 1: this market. And the pent up demand is obvious and

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Speaker 1: it's kind of come roaring back. And I really see

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Speaker 1: a big pick up next year for gasoline and for

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Speaker 1: for jet fuel and diesel fuels. John, why are you

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Speaker 1: convinced that this is longer than just a Thanksgiving blip? Well,

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Speaker 1: I think there's the hopefulness out there and and and

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Speaker 1: you know, I hate to say it, but the apparently

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Speaker 1: almost even disregard uh for for folks that they are

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Speaker 1: going to uh, they're going to travel. I mean they're

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Speaker 1: they're they're going to travel after this Thanksgiving. I think

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Speaker 1: that there's the setup is gonna be that you're gonna

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Speaker 1: go travel for Christmas as well, um, and get in

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Speaker 1: their cars this time even more so and and continue

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Speaker 1: to travel. The other thing too, is I think people

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Speaker 1: are starting to realize that it appears that air travel

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Speaker 1: is safe, that the the that the the planes air

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Speaker 1: systems are not engendering or in inculcating uh COVID nineteen cases.

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Speaker 1: And I think that word is getting out there and

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Speaker 1: that is helping as well. So we're sitting we're seeing

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Speaker 1: the beginning of the rebound. But the thing about it

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Speaker 1: is that, as Paul mentioned, we're looking ahead here and

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Speaker 1: there's a ton of pent up demand that's going to

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Speaker 1: hit the petroleum market. All right, So, John, so that's

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Speaker 1: kind of the demand side of the equation. Talk to

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Speaker 1: us about the supply side globally here, How is OPEC behaving,

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Speaker 1: how's RUSH behaving and meeting the US, Well, they're they're

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Speaker 1: they're OPEC plus, which includes Russia, UM have been rather disciplined.

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Speaker 1: I mean, there they are itching to put more oil

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Speaker 1: on the market, which is going to I think hold

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Speaker 1: back any kind of potentially substantial UH price rise. But

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Speaker 1: I think the discipline should prove sufficient to get UH,

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Speaker 1: certainly brent over fifty dollars a barrel with relative ease

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Speaker 1: come the beginning of the new year, UH and push

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Speaker 1: w T I prices similarly up towards that level. Right now,

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Speaker 1: if if things were to snap back meaningfully, UH, we

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Speaker 1: find ourselves in a very tightly supplied situation and and

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Speaker 1: see a draw down pretty quickly of global inventories. So

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Speaker 1: I mean, to the extent that these vaccines work out,

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Speaker 1: and again this thesis of mine that the pent up

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Speaker 1: demand is there, UM, it's gonna get real interesting in

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Speaker 1: in terms of prices in the US. Two now haven't

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Speaker 1: been you know, just raked over by this low price environment.

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Speaker 1: Um we UH, the US is going to be a

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Speaker 1: diminished factor and certainly won't get the encouragement in terms

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Speaker 1: of drilling uh an exploration activity under the Biden administration

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Speaker 1: that they had under the Trump administration. So that's also

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Speaker 1: a factor. So what do companies do at a time

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Speaker 1: like this, when their stock prices are just all over

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Speaker 1: the place, John, You know, every time oil goes up,

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Speaker 1: they see a nice gain and then a law something.

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Speaker 1: Do they just ignore their daily stock market fluctuations. Well,

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Speaker 1: they have to and I and actually what they've been doing,

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Speaker 1: uh is well suffering under it, suffering under the environment,

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Speaker 1: and and really retrenching. I mean there's been considerable capital

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Speaker 1: expenditure cutbacks, considerable you know, even self examination of what

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Speaker 1: their future holes in terms, especially with the climate uh

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Speaker 1: pushback movement. So um, but yeah, I mean so you know,

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Speaker 1: but you've seen the companies that have really done a

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Speaker 1: Holman's work on this, like Chevron get making themselves almost

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Speaker 1: a bulletproof Now. I think going forward and the prices

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Speaker 1: pick up, they'll only benefit. I think it's on Mobile

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Speaker 1: to a to a lesser degree. But um and the

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Speaker 1: other players that the companies that are left standing in

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Speaker 1: the aftermath of this are going to do well. It's

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Speaker 1: like almost a free call option on oil prices going

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Speaker 1: up from here. I think it's a very attractive sector, uh,

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Speaker 1: for for the upcoming year. John. And we can see

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Speaker 1: some more pain in the oil patch here. Maybe it's

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Speaker 1: more consolidation of some of the weaker balance heated players.

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Speaker 1: There's no doubt the pain. It's not over yet, and

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Speaker 1: I think to the extent that the prospects start to

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Speaker 1: look brighter price wise and industry wide. Uh, you'll see

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Speaker 1: another round of the stronger, you know, like the Chevrons

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Speaker 1: getting back out there on the acquisition trail and and

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Speaker 1: consolidating uh, their position even more so. So you're gonna

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Speaker 1: have a smaller group of stronger players with the bigger

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Speaker 1: portfolios of production, but also of discipline that they won't

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Speaker 1: just drill for drilling sake or to cover cash flow

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Speaker 1: requirements for their for their loans and inventures. They're gonna

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Speaker 1: they're gonna be moderate, and that would that should also

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Speaker 1: help to sort of set us up for a more

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Speaker 1: consistent higher price than what we just went through. All right, John,

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Speaker 1: Always a pleasure of speaking with you and getting an update.

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Speaker 1: That is, John killed off their founding partner again Capital

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Speaker 1: and of course crude oil today above forty five dollars

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Speaker 1: of barrel once again forty five thirty three of one

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Speaker 1: percent or forty two cents for a barrel of w

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Speaker 1: T I and Brent crude is above forty eight dollars

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Speaker 1: of arrel. Of course, there's always that spread there between

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Speaker 1: Brent and w T I. So a couple of little

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Speaker 1: items to take note all of the f o MC

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Speaker 1: meeting a little later on today, some more certainty as

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Speaker 1: to who we might be seeing populating the Treasury as

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Speaker 1: well as of course the Federal Reserve over the next

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Speaker 1: couple of years, and the possibility that those people might

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Speaker 1: actually cooperate. So let's bring in Laird Landman to see

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Speaker 1: what all this means for markets. Starred Landman is co

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Speaker 1: director for Fixed Income at tc W, which is two

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Speaker 1: thirty five billion dollars under management firm wide. So, Laard,

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Speaker 1: how different does the landscape look today versus just last week.

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Speaker 1: I think it's got We've gotten a lot of clarification

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Speaker 1: because of these political appointments that things are probably not

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Speaker 1: going to be quite as radical as uh people might

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Speaker 1: have initially feared in terms of policy changes. Obviously there

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Speaker 1: is some chance of increased cooperation as you pointed out,

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Speaker 1: between the FAT and the Treasury. I wouldn't be convinced

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Speaker 1: for bond markets that that's a great thing. We could

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Speaker 1: continue to see a trend of yield yields going higher

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Speaker 1: in the face of that in the long end of

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Speaker 1: the curve. So Lard, we had just this morning a

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Speaker 1: batch of economic data and I guess we could call

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Speaker 1: it mixed at best, derbal good orders. Uh, maybe better

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Speaker 1: than expect it. But boy, the the labor market remains

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Speaker 1: very challenging with the stubbornly high jobless claims. What's your

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Speaker 1: view of kind of where this economy is now and

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Speaker 1: and you know how it what may continue to progress? Well,

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Speaker 1: we've come through a recession like no recession we've ever had.

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Speaker 1: You know, wealth is up four personal incomes were up

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Speaker 1: six percent over the course of this. But obviously you

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Speaker 1: point out the weak spot is is unemployment. And when

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Speaker 1: you dig into that number and you realize that we

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Speaker 1: still have close unemployment for the lowest third of of

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Speaker 1: earners in the economy, there are people who have been

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Speaker 1: extremely damaged in this and that's sort of covered up

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Speaker 1: by this flood of money into the financial markets and

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Speaker 1: the bowl markets we've seen in stocks, uh, in corporate

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Speaker 1: bonds and high yield. But underneath all this, I would

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Speaker 1: say the underlying economic trends are not all that healthy. Uh.

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Speaker 1: And clearly the stimulus got into the economy, But I'm

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Speaker 1: not convinced it it went to the right people. If

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Speaker 1: if you dine out as much as I did, once

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Speaker 1: the restrictions were lifted, you saw plenty of people at

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Speaker 1: fancy restaurants using those their their their unemployment cards to

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Speaker 1: play tay for dinner. So I'm not sure that the

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Speaker 1: money necessarily it got into the economy, but I'm not

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Speaker 1: sure it went to that lowest third it got where

433
00:24:07,480 --> 00:24:11,040
Speaker 1: it needed to get to really cure the problem. I

434
00:24:11,040 --> 00:24:13,560
Speaker 1: think we still have to face the problem long term.

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00:24:13,760 --> 00:24:17,000
Speaker 1: For sure. They'll obviously that that would in itself have

436
00:24:17,080 --> 00:24:20,480
Speaker 1: supported some jobs and so on as well. Laard Um,

437
00:24:20,520 --> 00:24:23,120
Speaker 1: you said that yields might go up at the long end.

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00:24:23,440 --> 00:24:25,959
Speaker 1: Why would that necessarily be bad for markets? I mean,

439
00:24:25,960 --> 00:24:28,679
Speaker 1: I understand just in terms of looking for return or

440
00:24:28,720 --> 00:24:30,720
Speaker 1: what have you. But would it be such a bad

441
00:24:30,760 --> 00:24:33,320
Speaker 1: thing if fields did go up with it. Well, I

442
00:24:33,359 --> 00:24:36,760
Speaker 1: don't think it's it's it's it's not unhealthy for the economy. Obviously,

443
00:24:36,880 --> 00:24:39,439
Speaker 1: if you own ten your treasuries, um, you're not going

444
00:24:39,520 --> 00:24:42,520
Speaker 1: to be cheering as you see the prices go down

445
00:24:42,560 --> 00:24:46,840
Speaker 1: as the yields go up. UM. So I do think, uh,

446
00:24:46,880 --> 00:24:50,720
Speaker 1: it's indicative of I think a skepticism when the Fed

447
00:24:50,800 --> 00:24:54,000
Speaker 1: and the Treasury of historically worked together that has long

448
00:24:54,119 --> 00:24:59,280
Speaker 1: term resulted in increased inflation and inflation expectations. UM. Clearly

449
00:24:59,320 --> 00:25:02,919
Speaker 1: there's a lot of hugely in the market regarding inflation.

450
00:25:03,040 --> 00:25:05,520
Speaker 1: You know, tips are suggesting something a little bit above

451
00:25:05,600 --> 00:25:08,080
Speaker 1: one and a half. When you look at some of

452
00:25:08,119 --> 00:25:11,600
Speaker 1: the numbers that are actually coming in, UM, they're consistent

453
00:25:11,680 --> 00:25:14,240
Speaker 1: with that. When you take out some of the really

454
00:25:14,280 --> 00:25:19,320
Speaker 1: inflating sectors of the economy like housing, shelter and autos,

455
00:25:19,359 --> 00:25:21,400
Speaker 1: you know, you get back down to about point four

456
00:25:22,280 --> 00:25:25,680
Speaker 1: point five on the core. UM. So there's again and

457
00:25:25,960 --> 00:25:30,160
Speaker 1: in course in Europe you have some countries beginning to deflate. Actually,

458
00:25:30,160 --> 00:25:31,719
Speaker 1: so I think there's a lot of confusion out there

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00:25:31,760 --> 00:25:35,919
Speaker 1: about that. UM. We don't think the underlying economy is

460
00:25:35,920 --> 00:25:40,800
Speaker 1: healthy enough to support true economic inflation, but you could

461
00:25:40,880 --> 00:25:44,160
Speaker 1: get monetary inflation if you get too much cooperation between

462
00:25:44,240 --> 00:25:48,720
Speaker 1: the the Essential Bank and the Treasury. So lared having

463
00:25:48,880 --> 00:25:51,879
Speaker 1: spoken to you when your TCW colleagues you know in

464
00:25:51,920 --> 00:25:54,879
Speaker 1: the past, UH, definitely sense that you folks have a

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00:25:55,119 --> 00:25:58,360
Speaker 1: cautious view on the marketplace, maybe more so uh than

466
00:25:58,560 --> 00:26:02,600
Speaker 1: some of your peers. Where given that backdrop, where do

467
00:26:02,800 --> 00:26:07,399
Speaker 1: you see some opportunities here to deploy capital. Well, I

468
00:26:07,440 --> 00:26:09,800
Speaker 1: think you can look uh in a couple of places. One,

469
00:26:09,880 --> 00:26:13,000
Speaker 1: it's very possible that the bowl market in corporate bonds

470
00:26:13,040 --> 00:26:16,560
Speaker 1: continues because UH, we are going to continue to see

471
00:26:16,600 --> 00:26:19,639
Speaker 1: a flot of money coming in from Japan and Europe

472
00:26:19,760 --> 00:26:23,639
Speaker 1: as are hedged yields into corporate bonds is very attractive

473
00:26:23,760 --> 00:26:28,200
Speaker 1: versus what they can engineer. UM. At the same time,

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00:26:28,240 --> 00:26:30,919
Speaker 1: you have to be cautious. This will probably be one

475
00:26:30,960 --> 00:26:33,600
Speaker 1: of the most Styrian periods that will ever see. There's

476
00:26:33,720 --> 00:26:37,160
Speaker 1: dramatic changes going on in the economy that will result

477
00:26:37,320 --> 00:26:40,399
Speaker 1: in winners and losers i e. More defaults in the

478
00:26:40,400 --> 00:26:42,399
Speaker 1: bond market, so you have to really do your credit

479
00:26:42,440 --> 00:26:45,880
Speaker 1: work in here and picking these companies. UH. The second

480
00:26:45,920 --> 00:26:49,840
Speaker 1: place is obviously, UH some of the legacy non agency

481
00:26:49,880 --> 00:26:52,879
Speaker 1: bonds in the mortgage market will continue to look attractive

482
00:26:52,880 --> 00:26:57,720
Speaker 1: in our opinion. Obviously, there's been a huge move of

483
00:26:57,359 --> 00:27:01,679
Speaker 1: of money into residential real estate, particularly in the suburbs,

484
00:27:01,680 --> 00:27:04,720
Speaker 1: so even where you're seeing increased delinquencies, you're not seeing

485
00:27:04,760 --> 00:27:08,280
Speaker 1: losses on those types of security, so they still represent

486
00:27:08,440 --> 00:27:12,520
Speaker 1: value for the fixed income investor c MBS. We think

487
00:27:12,520 --> 00:27:14,240
Speaker 1: will be an area that will be challenged over the

488
00:27:14,280 --> 00:27:16,480
Speaker 1: next couple of years as they deal with the long

489
00:27:16,600 --> 00:27:20,840
Speaker 1: term effects all those Styrian effects of work from home

490
00:27:21,800 --> 00:27:25,000
Speaker 1: et cetera that will have, you know, pretty devastating effects

491
00:27:25,520 --> 00:27:29,760
Speaker 1: on demand for commercial real estate. Right. Hey, Lart, thanks

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00:27:29,760 --> 00:27:32,239
Speaker 1: so much for joining us. We really appreciate getting your

493
00:27:32,240 --> 00:27:35,800
Speaker 1: thoughts here on the fixed income markets. Landman, co director

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00:27:35,880 --> 00:27:38,920
Speaker 1: for Fixed Income at tc W, a little shop out

495
00:27:38,920 --> 00:27:40,760
Speaker 1: on the West Coast and they have about two thirty

496
00:27:40,760 --> 00:27:44,480
Speaker 1: five billion dollars under management and datat When you go

497
00:27:44,520 --> 00:27:46,639
Speaker 1: to l a two big meetings you have to have.

498
00:27:46,760 --> 00:27:49,879
Speaker 1: Number one is Capital Group and the other one is TCW.

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00:27:50,160 --> 00:27:54,480
Speaker 1: Just huge shops that they're all over the marketplace. Thanks

500
00:27:54,480 --> 00:27:57,720
Speaker 1: for listening to Boomberg Markets podcast. You can subscribe and

501
00:27:57,800 --> 00:28:01,600
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform

502
00:28:01,640 --> 00:28:04,760
Speaker 1: you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie

503
00:28:04,840 --> 00:28:07,640
Speaker 1: Quinn and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.

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00:28:07,680 --> 00:28:10,320
Speaker 1: Before the podcast, you can always catch us worldwide at

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00:28:10,359 --> 00:28:11,160
Speaker 1: Bloomberg Radio