Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. Okay, having worked on Wall
Speaker 1: Street for twenty years, there's a story on the terminal
Speaker 1: today that really hit close to home for me. It's
Speaker 1: a story where a Bank of America is floating an
Speaker 1: idea to its traders to keep bonuses flat relative to
Speaker 1: last year despite a huge profit year UH in the
Speaker 1: trading environment. To get some more details here, we welcome
Speaker 1: Lenon new in Financial reporter for Bloomberg News. Lennan, I've
Speaker 1: sat across the desk from my manager many many times
Speaker 1: around this time of year, arguing for a higher bonus. Hey,
Speaker 1: look how well I did. Look how profitable our desk
Speaker 1: was that. I think, what's can I borrow you? For
Speaker 1: a humanus like manager? And I need to me exactly right. So, Lenan,
Speaker 1: it doesn't sound like there's gonna be some open ears
Speaker 1: for that kind of discussion this year. That's right, Paul,
Speaker 1: I think these sources we spoke to across the street obviously,
Speaker 1: I think that this is not enough. You know, it's
Speaker 1: been a manner year for trading desks. The reality is
Speaker 1: that they have jumped, you know, huge amounts, and Bank
Speaker 1: of America I think is on the lower end of
Speaker 1: the desks that have done extremely well throughout this year. Um.
Speaker 1: So it comes as a kind of bitter pill at
Speaker 1: your end to see that their bonuses are probably being
Speaker 1: going to be flat and that you know, managers are
Speaker 1: managing expectations about a more gloomy environment. So I mean,
Speaker 1: given that a lot of people are experiencing reductions and
Speaker 1: pay will it be something that traders will just have
Speaker 1: to eat or will they look to other banks to
Speaker 1: see what they're doing. How does this go down? Well,
Speaker 1: vunny right now, it's going down like a red bull,
Speaker 1: as you can imagine. But BA is a consumer bank,
Speaker 1: you know, right now, less than a fifth of its
Speaker 1: net income comes from trading. And on top of that,
Speaker 1: you know, there is this legacy of a financial crisis
Speaker 1: and rank of the optics of paying big bonuses when
Speaker 1: the rest of the economy is doing so poorly. It's
Speaker 1: something I think the banks leadership is acutely aware of.
Speaker 1: So I don't think there are a lot of options here.
Speaker 1: Of course, as Paul says, you know, managers will advocate
Speaker 1: for their staff. They will point to those strong pm
Speaker 1: L numbers and say, hey, look, we made a big
Speaker 1: contribution to the banks making money this year. Um, so
Speaker 1: we need to be properly compensated for it. But I'm
Speaker 1: not sure that that's going to be particularly convincing given
Speaker 1: this terrible environment that the rest of the U. S.
Speaker 1: Economy is in. So Lennon, when I worked on Wall Street,
Speaker 1: you know, bonuses would make up, particularly for senior people,
Speaker 1: maybe of their total compensation. I believe that's changed really
Speaker 1: since the financial crisis, is that they've gone to more
Speaker 1: of a fixed salary model. But still, uh, the bonuses
Speaker 1: have a big, big impact for a lot of folks.
Speaker 1: That's right, Pearl, And well, we're not talking about the
Speaker 1: outsized bonuses that you know you might have been discussing
Speaker 1: in the nineties, but we're looking bonuses are still a
Speaker 1: huge deal for everyone on Wall Street. So this comes
Speaker 1: as a very disappointing signal. You know, the managers are
Speaker 1: managing expectations, and as Bonnie said, other banks are watching
Speaker 1: this closely as well to see how they'll compensate their
Speaker 1: staff and to kind of see what the herd is doing. Right,
Speaker 1: this might be cover for other banks to say, hey, listen,
Speaker 1: Via is not paying as much, and um, you know,
Speaker 1: the environment is bad for everyone. On top of which,
Speaker 1: we have other banks that are actually planning to cut staff.
Speaker 1: So right now, Beve has said they're going to keep
Speaker 1: everyone's jobs fast this year, but then again they're managing
Speaker 1: expectations that that might mean that everyone doesn't get paid
Speaker 1: as well. So what options do dissatisfied traders have? I mean,
Speaker 1: can they just walk across the street anymore? It sounds
Speaker 1: like that's not really an option, and I think everyone
Speaker 1: is fully aware of that. Right It's still early days,
Speaker 1: and it's possible that managers can go back to executives
Speaker 1: and say, look, my team deserves more and lobby really
Speaker 1: hard for more. But still, you know, the jobs are
Speaker 1: are hard to come by these days on Wall Street,
Speaker 1: and I think everyone is pretty aware of that. So
Speaker 1: right now, I think a lot of traders are happy
Speaker 1: to still have their jobs. Um, and so you know,
Speaker 1: they don't really have a lot of options, particularly if
Speaker 1: we think that next year there may be some more
Speaker 1: cuts to come across the industry. So have we heard
Speaker 1: anything leland from some of the other big players the
Speaker 1: Goldman Sachs is the Morgan Stanley's of the world, or
Speaker 1: a kind of upfront floating this idea. I think the
Speaker 1: ave is early floating this idea. And again I have
Speaker 1: to stress that these are very early conversations, Paul. You
Speaker 1: know that you know there are some expectations being managed
Speaker 1: early on, but that obviously this will raise the level
Speaker 1: of the discussion and you know, cause a lot of
Speaker 1: debate I think, to go on internally about how much
Speaker 1: trader should be paid. UM. We are watching the other
Speaker 1: banks very closely as well to see what indications are
Speaker 1: coming out of them. UM, and the survey consultants that
Speaker 1: we talked to, you know, the recruitment consultants and the
Speaker 1: pay consultants have guided higher on trading. And so this
Speaker 1: comes as a real disappointment because the expectations are already
Speaker 1: set high for this trading bonanza and now we're already
Speaker 1: starting to see early signs that that's really being tamped
Speaker 1: down across the street. And I think that that may
Speaker 1: be a trend that we see with other banks coming
Speaker 1: in the in the next couple of weeks. I mean,
Speaker 1: what can you do. It's not exactly like you can
Speaker 1: call in the union what happens in cases like this,
Speaker 1: and surely we've seen it before. Yeah, it's interesting because
Speaker 1: I think on the street, Um, you know, people talk
Speaker 1: about everything being very merit and performance based, right, and
Speaker 1: so a lot of people in the street, if they
Speaker 1: if their division that their desk brought in you know,
Speaker 1: bumping revenues, then they expect to get you know, not
Speaker 1: not exactly that amount, but at least directionally a good
Speaker 1: bump in their compensation, right. And so I think this
Speaker 1: kind of flies in the face of what people on
Speaker 1: the street, um, you know, really think they deserve. And um,
Speaker 1: it's it's going to be a bit of a cultural shock,
Speaker 1: I believe, because you know, it's just a very strange year.
Speaker 1: In a normal year, if the trading test made a
Speaker 1: lot of money, you'd expect to get a decent bonus.
Speaker 1: And this year, I think, just because of the broader
Speaker 1: context we're in the banks simply are aware that you know,
Speaker 1: paying big banker bonuses is not going to be a
Speaker 1: good look. Let's also just point out that they're still
Speaker 1: getting bonuses, just not more than last year, but they're
Speaker 1: the sales and trading pool is at last year's level,
Speaker 1: even though revenue obviously has done this year. And we
Speaker 1: have to leave it there. But thank you for your
Speaker 1: story from lannan noon, and you can see on your
Speaker 1: Bloomberg about Bank of America and traders getting jewelhood. There
Speaker 1: a slew of data to pass through today. We had
Speaker 1: a whole bunch of jobs data earlier this morning, durable
Speaker 1: goods orders, We have the fo m C minutes later
Speaker 1: this afternoon, and then of course the non nation of
Speaker 1: Janet Yellen to be Secretary of the Treasury. When you
Speaker 1: have days like that, you just have to speak to
Speaker 1: Danielle di Martino, Booth CEO and director of Intelligence at
Speaker 1: Quill Intelligence. She's a former advisor at the Dallas Federal
Speaker 1: Reserve and a Bloomberg opinion columnist. Danielle, thanks so much
Speaker 1: for joining us on a very busy Thanksgiving Eve. First off,
Speaker 1: I list love to get your thoughts on the nomination
Speaker 1: of Janet Yellen for Secretary of the Treasury. Well, I
Speaker 1: think that this was a very convenient political move on
Speaker 1: president like Biden's part, I'm I'm no big fan of it,
Speaker 1: and in fact, I wrote a long book about it
Speaker 1: about and I detailed Janet Yellen's philosophy in it. And
Speaker 1: we have to remember that she is a trained labor economists.
Speaker 1: So you think back to her days at the San
Speaker 1: Francisco Fete and companies that we haven't talked about in years,
Speaker 1: like New Century and Countrywide Mortgage. These were in her backyard.
Speaker 1: And at the root of being unaware of the subprime
Speaker 1: crisis building on the West Coast was Janney Ellen's unappreciation
Speaker 1: and lack of knowledge and experience with the financial markets.
Speaker 1: If you think back to a year ago when we
Speaker 1: were in the not QE era and overnight repo funding
Speaker 1: strains and reserves not being kind of. These are very
Speaker 1: technical type of issues that as Secretary of the Treasury
Speaker 1: you would need to be highly familiar with. So again,
Speaker 1: I think markets are applauding the fact that she has
Speaker 1: said that that that you could reopen the Fed Reserve
Speaker 1: Act and allow the Federal reserves by stocks, that negative
Speaker 1: interest rates could be imposed under the under certain circumstances.
Speaker 1: I think she would certainly spearhead a digital currency in
Speaker 1: order to deliver money directly to individuals, helicopter money, so
Speaker 1: to speak. But again, um, these are these are the
Speaker 1: types of policies that have tended to UH to help
Speaker 1: out the top one percent looking back in history, and
Speaker 1: and end up being a backlash, if you will, against
Speaker 1: those who need it the most. Yes, do you think
Speaker 1: that just for the moment, she will work a sort
Speaker 1: of hand in hand with the FED and try and
Speaker 1: do something in terms of retrievings some of those emergency
Speaker 1: funds that Stephen manutition is as buddhiside. Well, I certainly
Speaker 1: think that that will be priority number one. Of course,
Speaker 1: it's not as easy as look. I think of the
Speaker 1: months and months we've been watching Minutian go back and
Speaker 1: forth between McConnell and Pelosi. These are these You need
Speaker 1: an extremely savvy politician UH to make these deals. And
Speaker 1: it's not just a matter of flipping a switch. You
Speaker 1: have to get congressional approval UH to have these funds reallocated.
Speaker 1: And we don't know for sure what Manutions motivations are,
Speaker 1: but this could be such that McConnell could, in the
Speaker 1: Continuing Resolution December the eleventh, have his skinny stimulus bill
Speaker 1: of a half trillion. You tack on what has been
Speaker 1: taken away from the Fed and you get to a trillion.
Speaker 1: But politically, the optics from McConnell would be very favorable
Speaker 1: because there would only be a new half a trillion
Speaker 1: stimulus package attached. So again, we don't know where Minutan
Speaker 1: is coming from, but we do know that Congress would
Speaker 1: have to would have to sign into law reopening these lines,
Speaker 1: these credit uh facilities at the Reserve. All right, Daniel,
Speaker 1: let's go to the ECO page on the Bloomberg terminal here.
Speaker 1: What are some of your key takeaways here from some
Speaker 1: of the economic data we saw this morning. So, you know,
Speaker 1: besides the you know, as we were listening um coming
Speaker 1: into the segment, the back to back increases in regular
Speaker 1: state initial jobless claims. Yet we're trying at GROL Intelligence
Speaker 1: right now to kind of back into what the survey
Speaker 1: week looks like for non farm payrolds. Next week is
Speaker 1: when we finally get the we call it the bathtub
Speaker 1: where you get every source of a mayor are consclaiming
Speaker 1: unemployment insurance in some form. We saw that tick up
Speaker 1: this week for the weekend in November seventh to the
Speaker 1: first time since August, and we know that the last
Speaker 1: two weeks have come up, so we're anticipating that when
Speaker 1: we get that final print for the survey week, which
Speaker 1: always includes the twelfth of the month, we get that
Speaker 1: next Thursday morning, right before the payroll report, we're anticipating
Speaker 1: that that number goes up again. So you're seeing economists
Speaker 1: across the street scrambled to take down their their November
Speaker 1: unemployment payrolls forecast. And if you look inside the weeds
Speaker 1: of the University of Mission Consumer Confidence report, you also
Speaker 1: saw that employment expectations came in at the lowest levels
Speaker 1: in April. So we're definitely starting to see some backtracking
Speaker 1: in the labor data, which is of course key to
Speaker 1: a consumer driven economy. So what are you anticipating, Danielle,
Speaker 1: Does this economy show more scarring zone we're seeing forecast
Speaker 1: of I don't think. I think we're about six weeks
Speaker 1: behind Europe in terms of the coronavirus UH and by
Speaker 1: the way, not imposing restrictions. So I do see economists
Speaker 1: across the pond taking down their Q four estimates, and
Speaker 1: I would foresee that the United States could easily slip
Speaker 1: back into contractions into recession at the end of the
Speaker 1: fourth quarter going into the first quarter of given purely
Speaker 1: what we're seeing in terms of of of of people
Speaker 1: choosing to be less mobile in states where there are
Speaker 1: not even restrictions, and what we're seeing in terms of
Speaker 1: small business revenues and small businesses that are open. These
Speaker 1: are declining figures. Leisure and hospitality, job openings have come
Speaker 1: down appreciately. There's their lowest August. These are all signs
Speaker 1: that the economy is going into a retrenchment because the
Speaker 1: coronavirus is becoming so severe in the United States that
Speaker 1: it cannot be ignored. Danielle, we appears that we have
Speaker 1: a new president here. Um it appears that it might
Speaker 1: be a split government once again in terms of UH.
Speaker 1: It appears that the Republicans may continue to control the center.
Speaker 1: Off to see what happens in Georgia. How did you
Speaker 1: view what was your key takeaway from this political season
Speaker 1: and kind of where we find ourselves now? Well, I
Speaker 1: think I think more than anything else, the American voters
Speaker 1: have spoken that they're not divided at all, They're in
Speaker 1: the middle. When you look at the least appreciative appreciated
Speaker 1: story of this last election. It is the change of
Speaker 1: of the change of the guard in the House of Representatives.
Speaker 1: And you know, Nancy Pelosi is going to have the
Speaker 1: slimmest margin of majority in two decades, and that I
Speaker 1: think is less appreciated because you will have more of
Speaker 1: a bifurcation between the administration, assuming these two Georgia's seats
Speaker 1: go to the GOP, which is a big assumption. Assuming
Speaker 1: that that is the case, you really will have an
Speaker 1: administration in one party in a Congress largely in the other. Danielle,
Speaker 1: really quickly, because we're out of time. Do we get
Speaker 1: a fourth round of to meet us fiscal Oh? Oh, absolutely.
Speaker 1: I think that this will be priority number one. You're
Speaker 1: not going to see mass addictions and the Cares Act
Speaker 1: unemployment benefits expire when upwards of thirteen million Americans are
Speaker 1: collecting these emergency forms of unemployment insurance. Danielle, thank you
Speaker 1: so much for joining us once again today. Danielle Di
Speaker 1: Martineo Booth is CEO and director of Quill Intelligence, former
Speaker 1: advisor of Course after Dallas FED also Bloomberg Opinion Columns,
Speaker 1: and she's based in Dallas typically and we thank her again.
Speaker 1: That raft of economic data today will pitch forward to
Speaker 1: the f O m C meeting and all of that
Speaker 1: later on, So do tune in from two pm onwards
Speaker 1: for all that emerges from there. For the longest time
Speaker 1: during this pandemic, oil has been just really hovering around
Speaker 1: that forty level. We've actually had a lift here over
Speaker 1: the past a week or so. We're up another one
Speaker 1: percent today oil w t I oil trading at forty
Speaker 1: five dollars thirty five cents per gown again, a lift
Speaker 1: off of that forty range it had been hovering out
Speaker 1: for a long time. To get a sense of kind
Speaker 1: of what this means, what's driving it, we welcome John Kilduff.
Speaker 1: He joins us. He's a founder of Again Capital. John,
Speaker 1: thanks so much for joining us here. You know, it's
Speaker 1: it appears that investors across various asset classes here are
Speaker 1: willing to look towards the other side of this pandemic
Speaker 1: and start to really discount uh pick up an economic
Speaker 1: activity UH next year. What do you see in the
Speaker 1: supply demand of the oil markets globally, I mean, for oil,
Speaker 1: there's no doubt that that is a key factor here.
Speaker 1: Oil has really been the covid trade or pandemic trade
Speaker 1: or now vaccine trade across all the markets. Um. I mean,
Speaker 1: we had a significant dip and things were looking rather bleak,
Speaker 1: just as several weeks ago when we saw those renewed
Speaker 1: lockdowns in Europe, and of course the raising Caselow is here,
Speaker 1: but now with the successive VEX positive vaccine news, that's
Speaker 1: exactly it. And the sort of connecting the dots here
Speaker 1: is that you can see the pent up demand, um,
Speaker 1: you know, for for transportation, for travel, um, just what
Speaker 1: we saw over the weekend where there was you know,
Speaker 1: the highest number of airport visitors since early March, and
Speaker 1: so jet fuel has been crushed consistently down Paul, versus
Speaker 1: that you know year on year measures um, and it's
Speaker 1: really been weighing. That factor has really been weighing on
Speaker 1: this market. And the pent up demand is obvious and
Speaker 1: it's kind of come roaring back. And I really see
Speaker 1: a big pick up next year for gasoline and for
Speaker 1: for jet fuel and diesel fuels. John, why are you
Speaker 1: convinced that this is longer than just a Thanksgiving blip? Well,
Speaker 1: I think there's the hopefulness out there and and and
Speaker 1: you know, I hate to say it, but the apparently
Speaker 1: almost even disregard uh for for folks that they are
Speaker 1: going to uh, they're going to travel. I mean they're
Speaker 1: they're they're going to travel after this Thanksgiving. I think
Speaker 1: that there's the setup is gonna be that you're gonna
Speaker 1: go travel for Christmas as well, um, and get in
Speaker 1: their cars this time even more so and and continue
Speaker 1: to travel. The other thing too, is I think people
Speaker 1: are starting to realize that it appears that air travel
Speaker 1: is safe, that the the that the the planes air
Speaker 1: systems are not engendering or in inculcating uh COVID nineteen cases.
Speaker 1: And I think that word is getting out there and
Speaker 1: that is helping as well. So we're sitting we're seeing
Speaker 1: the beginning of the rebound. But the thing about it
Speaker 1: is that, as Paul mentioned, we're looking ahead here and
Speaker 1: there's a ton of pent up demand that's going to
Speaker 1: hit the petroleum market. All right, So, John, so that's
Speaker 1: kind of the demand side of the equation. Talk to
Speaker 1: us about the supply side globally here, How is OPEC behaving,
Speaker 1: how's RUSH behaving and meeting the US, Well, they're they're
Speaker 1: they're OPEC plus, which includes Russia, UM have been rather disciplined.
Speaker 1: I mean, there they are itching to put more oil
Speaker 1: on the market, which is going to I think hold
Speaker 1: back any kind of potentially substantial UH price rise. But
Speaker 1: I think the discipline should prove sufficient to get UH,
Speaker 1: certainly brent over fifty dollars a barrel with relative ease
Speaker 1: come the beginning of the new year, UH and push
Speaker 1: w T I prices similarly up towards that level. Right now,
Speaker 1: if if things were to snap back meaningfully, UH, we
Speaker 1: find ourselves in a very tightly supplied situation and and
Speaker 1: see a draw down pretty quickly of global inventories. So
Speaker 1: I mean, to the extent that these vaccines work out,
Speaker 1: and again this thesis of mine that the pent up
Speaker 1: demand is there, UM, it's gonna get real interesting in
Speaker 1: in terms of prices in the US. Two now haven't
Speaker 1: been you know, just raked over by this low price environment.
Speaker 1: Um we UH, the US is going to be a
Speaker 1: diminished factor and certainly won't get the encouragement in terms
Speaker 1: of drilling uh an exploration activity under the Biden administration
Speaker 1: that they had under the Trump administration. So that's also
Speaker 1: a factor. So what do companies do at a time
Speaker 1: like this, when their stock prices are just all over
Speaker 1: the place, John, You know, every time oil goes up,
Speaker 1: they see a nice gain and then a law something.
Speaker 1: Do they just ignore their daily stock market fluctuations. Well,
Speaker 1: they have to and I and actually what they've been doing,
Speaker 1: uh is well suffering under it, suffering under the environment,
Speaker 1: and and really retrenching. I mean there's been considerable capital
Speaker 1: expenditure cutbacks, considerable you know, even self examination of what
Speaker 1: their future holes in terms, especially with the climate uh
Speaker 1: pushback movement. So um, but yeah, I mean so you know,
Speaker 1: but you've seen the companies that have really done a
Speaker 1: Holman's work on this, like Chevron get making themselves almost
Speaker 1: a bulletproof Now. I think going forward and the prices
Speaker 1: pick up, they'll only benefit. I think it's on Mobile
Speaker 1: to a to a lesser degree. But um and the
Speaker 1: other players that the companies that are left standing in
Speaker 1: the aftermath of this are going to do well. It's
Speaker 1: like almost a free call option on oil prices going
Speaker 1: up from here. I think it's a very attractive sector, uh,
Speaker 1: for for the upcoming year. John. And we can see
Speaker 1: some more pain in the oil patch here. Maybe it's
Speaker 1: more consolidation of some of the weaker balance heated players.
Speaker 1: There's no doubt the pain. It's not over yet, and
Speaker 1: I think to the extent that the prospects start to
Speaker 1: look brighter price wise and industry wide. Uh, you'll see
Speaker 1: another round of the stronger, you know, like the Chevrons
Speaker 1: getting back out there on the acquisition trail and and
Speaker 1: consolidating uh, their position even more so. So you're gonna
Speaker 1: have a smaller group of stronger players with the bigger
Speaker 1: portfolios of production, but also of discipline that they won't
Speaker 1: just drill for drilling sake or to cover cash flow
Speaker 1: requirements for their for their loans and inventures. They're gonna
Speaker 1: they're gonna be moderate, and that would that should also
Speaker 1: help to sort of set us up for a more
Speaker 1: consistent higher price than what we just went through. All right, John,
Speaker 1: Always a pleasure of speaking with you and getting an update.
Speaker 1: That is, John killed off their founding partner again Capital
Speaker 1: and of course crude oil today above forty five dollars
Speaker 1: of barrel once again forty five thirty three of one
Speaker 1: percent or forty two cents for a barrel of w
Speaker 1: T I and Brent crude is above forty eight dollars
Speaker 1: of arrel. Of course, there's always that spread there between
Speaker 1: Brent and w T I. So a couple of little
Speaker 1: items to take note all of the f o MC
Speaker 1: meeting a little later on today, some more certainty as
Speaker 1: to who we might be seeing populating the Treasury as
Speaker 1: well as of course the Federal Reserve over the next
Speaker 1: couple of years, and the possibility that those people might
Speaker 1: actually cooperate. So let's bring in Laird Landman to see
Speaker 1: what all this means for markets. Starred Landman is co
Speaker 1: director for Fixed Income at tc W, which is two
Speaker 1: thirty five billion dollars under management firm wide. So, Laard,
Speaker 1: how different does the landscape look today versus just last week.
Speaker 1: I think it's got We've gotten a lot of clarification
Speaker 1: because of these political appointments that things are probably not
Speaker 1: going to be quite as radical as uh people might
Speaker 1: have initially feared in terms of policy changes. Obviously there
Speaker 1: is some chance of increased cooperation as you pointed out,
Speaker 1: between the FAT and the Treasury. I wouldn't be convinced
Speaker 1: for bond markets that that's a great thing. We could
Speaker 1: continue to see a trend of yield yields going higher
Speaker 1: in the face of that in the long end of
Speaker 1: the curve. So Lard, we had just this morning a
Speaker 1: batch of economic data and I guess we could call
Speaker 1: it mixed at best, derbal good orders. Uh, maybe better
Speaker 1: than expect it. But boy, the the labor market remains
Speaker 1: very challenging with the stubbornly high jobless claims. What's your
Speaker 1: view of kind of where this economy is now and
Speaker 1: and you know how it what may continue to progress? Well,
Speaker 1: we've come through a recession like no recession we've ever had.
Speaker 1: You know, wealth is up four personal incomes were up
Speaker 1: six percent over the course of this. But obviously you
Speaker 1: point out the weak spot is is unemployment. And when
Speaker 1: you dig into that number and you realize that we
Speaker 1: still have close unemployment for the lowest third of of
Speaker 1: earners in the economy, there are people who have been
Speaker 1: extremely damaged in this and that's sort of covered up
Speaker 1: by this flood of money into the financial markets and
Speaker 1: the bowl markets we've seen in stocks, uh, in corporate
Speaker 1: bonds and high yield. But underneath all this, I would
Speaker 1: say the underlying economic trends are not all that healthy. Uh.
Speaker 1: And clearly the stimulus got into the economy, But I'm
Speaker 1: not convinced it it went to the right people. If
Speaker 1: if you dine out as much as I did, once
Speaker 1: the restrictions were lifted, you saw plenty of people at
Speaker 1: fancy restaurants using those their their their unemployment cards to
Speaker 1: play tay for dinner. So I'm not sure that the
Speaker 1: money necessarily it got into the economy, but I'm not
Speaker 1: sure it went to that lowest third it got where
Speaker 1: it needed to get to really cure the problem. I
Speaker 1: think we still have to face the problem long term.
Speaker 1: For sure. They'll obviously that that would in itself have
Speaker 1: supported some jobs and so on as well. Laard Um,
Speaker 1: you said that yields might go up at the long end.
Speaker 1: Why would that necessarily be bad for markets? I mean,
Speaker 1: I understand just in terms of looking for return or
Speaker 1: what have you. But would it be such a bad
Speaker 1: thing if fields did go up with it. Well, I
Speaker 1: don't think it's it's it's it's not unhealthy for the economy. Obviously,
Speaker 1: if you own ten your treasuries, um, you're not going
Speaker 1: to be cheering as you see the prices go down
Speaker 1: as the yields go up. UM. So I do think, uh,
Speaker 1: it's indicative of I think a skepticism when the Fed
Speaker 1: and the Treasury of historically worked together that has long
Speaker 1: term resulted in increased inflation and inflation expectations. UM. Clearly
Speaker 1: there's a lot of hugely in the market regarding inflation.
Speaker 1: You know, tips are suggesting something a little bit above
Speaker 1: one and a half. When you look at some of
Speaker 1: the numbers that are actually coming in, UM, they're consistent
Speaker 1: with that. When you take out some of the really
Speaker 1: inflating sectors of the economy like housing, shelter and autos,
Speaker 1: you know, you get back down to about point four
Speaker 1: point five on the core. UM. So there's again and
Speaker 1: in course in Europe you have some countries beginning to deflate. Actually,
Speaker 1: so I think there's a lot of confusion out there
Speaker 1: about that. UM. We don't think the underlying economy is
Speaker 1: healthy enough to support true economic inflation, but you could
Speaker 1: get monetary inflation if you get too much cooperation between
Speaker 1: the the Essential Bank and the Treasury. So lared having
Speaker 1: spoken to you when your TCW colleagues you know in
Speaker 1: the past, UH, definitely sense that you folks have a
Speaker 1: cautious view on the marketplace, maybe more so uh than
Speaker 1: some of your peers. Where given that backdrop, where do
Speaker 1: you see some opportunities here to deploy capital. Well, I
Speaker 1: think you can look uh in a couple of places. One,
Speaker 1: it's very possible that the bowl market in corporate bonds
Speaker 1: continues because UH, we are going to continue to see
Speaker 1: a flot of money coming in from Japan and Europe
Speaker 1: as are hedged yields into corporate bonds is very attractive
Speaker 1: versus what they can engineer. UM. At the same time,
Speaker 1: you have to be cautious. This will probably be one
Speaker 1: of the most Styrian periods that will ever see. There's
Speaker 1: dramatic changes going on in the economy that will result
Speaker 1: in winners and losers i e. More defaults in the
Speaker 1: bond market, so you have to really do your credit
Speaker 1: work in here and picking these companies. UH. The second
Speaker 1: place is obviously, UH some of the legacy non agency
Speaker 1: bonds in the mortgage market will continue to look attractive
Speaker 1: in our opinion. Obviously, there's been a huge move of
Speaker 1: of money into residential real estate, particularly in the suburbs,
Speaker 1: so even where you're seeing increased delinquencies, you're not seeing
Speaker 1: losses on those types of security, so they still represent
Speaker 1: value for the fixed income investor c MBS. We think
Speaker 1: will be an area that will be challenged over the
Speaker 1: next couple of years as they deal with the long
Speaker 1: term effects all those Styrian effects of work from home
Speaker 1: et cetera that will have, you know, pretty devastating effects
Speaker 1: on demand for commercial real estate. Right. Hey, Lart, thanks
Speaker 1: so much for joining us. We really appreciate getting your
Speaker 1: thoughts here on the fixed income markets. Landman, co director
Speaker 1: for Fixed Income at tc W, a little shop out
Speaker 1: on the West Coast and they have about two thirty
Speaker 1: five billion dollars under management and datat When you go
Speaker 1: to l a two big meetings you have to have.
Speaker 1: Number one is Capital Group and the other one is TCW.
Speaker 1: Just huge shops that they're all over the marketplace. Thanks
Speaker 1: for listening to Boomberg Markets podcast. You can subscribe and
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
Speaker 1: you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie
Speaker 1: Quinn and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio