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Speaker 2: The Luckiest Guy on the Street, Georgetown, John Hopkins Academics
Speaker 2: is Axel pell or pale.
Speaker 3: I don't know how to pronounce this.
Speaker 2: Last time he gets to work with Stever Shudo over
Speaker 2: at Miszoo each and every day. Stever Shudo joins us
Speaker 2: right now as he provides wisdom to Alex and also
Speaker 2: to us on the American economy. Steve, just for inflation
Speaker 2: is all of our listeners and viewers have to Are
Speaker 2: we growing adjusted for inflation?
Speaker 3: I think we are growing adjusted for inflation.
Speaker 4: I think we've You've got a fairly healthy growth rate
Speaker 4: outside of the inflation environment. But I do think it's
Speaker 4: a little bit too hot for the inflation environment. Even
Speaker 4: the Chairman indicate that in his post meeting policy statement.
Speaker 4: He talks about the you know, the the FEDS mandate
Speaker 4: dual mandate being intentioned. Basically, the inflation numbers are running hotter,
Speaker 4: but they have the weaker labor market numbers, and I
Speaker 4: think you're getting a bit more productivity helping out the
Speaker 4: overall real side of the economy.
Speaker 5: So Steve going to the labor side of the economy here.
Speaker 5: I mean, if you just look at the headline, you know,
Speaker 5: on unemployment rate, it seems pretty darn solid, if not
Speaker 5: close to full employment.
Speaker 6: Here, how do you characterize this US labor market?
Speaker 4: Well, I mean, like everything else, everything is a bit
Speaker 4: of a tale of two stories. You know, you've got
Speaker 4: in the economy. You've got certain sectors of the economy
Speaker 4: that are doing extremely well, and you've got certain sectors
Speaker 4: of the economy that are not doing very well. I
Speaker 4: think when you look at the labor market as well,
Speaker 4: you're seeing certain components of the labor market, like the
Speaker 4: unemployment rate, because there's a scarcity of workers that's holding
Speaker 4: the unemployment rate down. But by the same token, there's
Speaker 4: a greater uncertainty out there in the business community about
Speaker 4: where we're going, how sustainable things are, and therefore there's
Speaker 4: a bit of a reluctance to hire workers. So you
Speaker 4: wind up with the employment numbers coming off a little bit,
Speaker 4: but you wind up with a tight unemployment rate remaining
Speaker 4: an important component of the overall market environment.
Speaker 5: So I guess with that background, Steve, the FED has
Speaker 5: begun cutting rates with that twenty five basis point cut.
Speaker 5: How do you think the cadence will kind of play
Speaker 5: out over the coming meetings?
Speaker 4: Well, I think you're probably going to definitely get an
Speaker 4: October meeting. We put in three after the last payroll
Speaker 4: employment number. I do think the December meeting will be
Speaker 4: more data dependent than the October meeting, and I think
Speaker 4: any meeting thereafter will also be more data dependent. You know,
Speaker 4: it's interesting the chairman is able to pull off an
Speaker 4: insurance rate cut against the dot plot telling you four
Speaker 4: rate cuts were coming in fairly rapid order by talking
Speaker 4: not just about the fact that the dual.
Speaker 3: Mandate is in opposite directions.
Speaker 4: But also getting into saying, what we're really looking at
Speaker 4: is the risks underlying those dual mandates and making determination
Speaker 4: based on those risks, and therefore it is an insurance
Speaker 4: rate cut, and they've given themselves that out.
Speaker 2: We welcome all of you across the nation this morning.
Speaker 2: The way you listen to us, Good Morning ninety nine
Speaker 2: one FM in Washington ninety two nine FM and Boston.
Speaker 3: Little bit of serious baseball.
Speaker 2: Starting today for the dreaded Toronto Blue Jays, we'll have
Speaker 2: to see the Good Morning, Bloomberg Eleven's three O and
Speaker 2: Miles Miller's New York. We continue with Steve Rshudo on YouTube. Steve,
Speaker 2: you've sement you three rate cuts, but in your research
Speaker 2: note you say the markets price are six rate cuts
Speaker 2: If we don't get market pricing on FED easing in
Speaker 2: all your experience with dominic constant, what does that do
Speaker 2: to the stock market?
Speaker 4: Well, I think the thing is the Fed's not going
Speaker 4: to change the long term target for the FED funds
Speaker 4: rate quickly. So therefore you know the concept of whether
Speaker 4: we get to six rate cuts or not is going
Speaker 4: to depend on the data, and the data will determine it.
Speaker 3: But I don't think they're going to change.
Speaker 4: The idea that their view on neutral is to get
Speaker 4: back down to three percent. So then in that environment,
Speaker 4: I think you avoid a lot of the worst case
Speaker 4: scenarios that you would get if there was a sudden reprisal.
Speaker 4: In terms of monetary policy, the dots are very very
Speaker 4: important in terms of grounding the market to certain levels.
Speaker 4: And unless those unless that grounding changes which we don't
Speaker 4: see happening quickly. We're not going to have the end
Speaker 4: result volatility that people would be concerned about normally.
Speaker 3: Paul's too early to go, Nerd.
Speaker 6: Can we go?
Speaker 3: Nerd? Okay, let's get permission from Pall you go, Nerd? Okay?
Speaker 2: Steve, what's roaring here after the Myron speech is a
Speaker 2: tailor rule. The Bloomberg has a beautiful function TYL, so
Speaker 2: you can do your own tailor role. I got so
Speaker 2: upset about it, the certitude, the lack of humility, and
Speaker 2: the speech Steve shutout that I looked up Robert Hetzel,
Speaker 2: a paper I remembered from the Richmond fed like twenty
Speaker 2: five years ago, maybe twenty eight years ago, and he
Speaker 2: quotes the giant Orphanedes as well, that a little humilities
Speaker 2: in order in guessing the output gap guessing nahru have
Speaker 2: we lost our academic humility when we try to gain
Speaker 2: this odd economy?
Speaker 3: Well?
Speaker 4: I think what happened is in that period post financial
Speaker 4: crisis and post immediately post COVID, all the normal algorithms
Speaker 4: got distorted, and therefore there is a data set that
Speaker 4: supports things like Stephen Meron was talking about yesterday, which
Speaker 4: is basically a zero R start environment. Again, I don't
Speaker 4: think we're in that environment any where. We don't have
Speaker 4: the balance sheet related issues that existed then, but that
Speaker 4: kind of distortion is still out there. But again, I
Speaker 4: think he's to a certain extent, he's pushed himself to
Speaker 4: an extreme, and I think that will minimize his vote
Speaker 4: to a certain extent.
Speaker 3: Thank you, That's just what I wanted to hear.
Speaker 2: With that said, do we have the institutional courage Stavershudo
Speaker 2: to push against a zero R start or the eight
Speaker 2: other flavors of that expansion, that lack of restrictiveness.
Speaker 7: Yeah.
Speaker 3: No.
Speaker 4: I think the committee in general tries to do a
Speaker 4: good job. I think the committee members are focused on
Speaker 4: doing good job. I think the research staff tries to
Speaker 4: do a very good job and a good thorough job,
Speaker 4: and I think they do a good job of informing
Speaker 4: the board and the members of the committee. And I
Speaker 4: think in that environment, it's the institutional portion of it
Speaker 4: that becomes more important than the one or two voices
Speaker 4: that are leaning to one aggressive side.
Speaker 6: Steve Hel's the US consumer doing well.
Speaker 5: It's a pretty solid retail sales a week or so ago,
Speaker 5: and boy, we hear about some of the challenges out there,
Speaker 5: but the consumer seems to be hanging in there.
Speaker 4: What do you think, Well, again, even though we're not
Speaker 4: hiring a lot of workers, we're working people longer, we're
Speaker 4: paying the more, and the net result is you have
Speaker 4: consumer spending building on top of that. And again that's
Speaker 4: a little bit of this tale of two different economies.
Speaker 4: There are aspects that are doing well in their aspects
Speaker 4: that are not doing well.
Speaker 3: You've got an.
Speaker 4: Economy that has very, very accommodated financial markets. It's an
Speaker 4: economy that's benefiting from excess liquidity. It's an economy that's
Speaker 4: benefiting from strong balance sheets. You put all that together,
Speaker 4: you've got a healthy economic environment. If you're not generating employment,
Speaker 4: you're generating hours. If you're generating hours, you're still generating income.
Speaker 4: If you're generating income, you're generating spending.
Speaker 3: Steve Shudel, thank you so much, greatly appreciate it.
Speaker 2: With from the Zoo, Stay with us. More from Bloomberg
Speaker 2: Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 3: On YouTube, joining us Liz Sanders.
Speaker 2: People don't I mean, Lizzy and you're so ubiquitous and
Speaker 2: you know, definitive since lewer Kaiser and people don't actually
Speaker 2: read your note and the end of the Lizanne Sanders
Speaker 2: note today is absolute gold. Let's start with this. Only
Speaker 2: seventy percent of S and P five hundred are outperforming
Speaker 2: the index of past three months and pasted one year.
Speaker 3: Does everybody own that? I mean, the xuberance out there
Speaker 3: is everybody owns a.
Speaker 8: Video, right, Yeah, even though within the mag seven you're
Speaker 8: seeing dispersion. So four out of the seven are underperforming
Speaker 8: the S and P five hundred. But you also have
Speaker 8: to think about the difference between the performance of some
Speaker 8: of those top names and the contribute. So Nvidia is
Speaker 8: the best performer year to date among the Magnificent seven,
Speaker 8: but it's the forty seventh best performing stock in.
Speaker 3: The eighteenth until the last couple of days are standing.
Speaker 8: We just had a little bit of a lift. Actually
Speaker 8: in terms of contribution rank, in Vidia is still number one,
Speaker 8: but as of a couple of days ago, Apple was
Speaker 8: number five. Hundred and three. Within the S and P
Speaker 8: five hundred.
Speaker 3: There's only five. It's the most because.
Speaker 8: To classes of service by alphabet and merge your pathway.
Speaker 3: Only Kevin Gordon owns that. Okay, I got to ask
Speaker 3: this right now. What are Schwab clients.
Speaker 8: Doing depends on the Schwab client, so we a lot
Speaker 8: of the inflow of new client assets for us are
Speaker 8: actually younger investors. I almost said that with air quotes,
Speaker 8: but of course we're on We're on radio, although on
Speaker 8: YouTube as well, So I think there's a big differentiation
Speaker 8: these days between what retail traders are doing and thinking
Speaker 8: and what individual investors are doing and thinking. I will
Speaker 8: say that I have a little bit of a sour
Speaker 8: feeling given some of the anecdotal conversations I've had with
Speaker 8: even some of our let's call it more seasoned, ostensibly
Speaker 8: disciplined investors. I had two investors at an event I
Speaker 8: did a couple of weeks ago, a great event at
Speaker 8: Churchill Downs I've never been before, super cool venue. One
Speaker 8: said that she her last two stocks that she had
Speaker 8: bought she got from a from a TikTok influencer, and
Speaker 8: she didn't even know the name of the person didn't
Speaker 8: quite know what she had bought, and another said that
Speaker 8: she had she had bought two stocks because the tickers
Speaker 8: were her initials and her husband's initials. Okay, so those
Speaker 8: anecdotes are a little bit unsettling, but I still believe
Speaker 8: that that's the exception, not the rule.
Speaker 3: How should we.
Speaker 5: Think about this concentration risk that we hear about so much?
Speaker 5: It's been expressed to mean so many different ways in
Speaker 5: terms of move in the market cap, But it's they're
Speaker 5: the biggest earnings contributors that don't worry about it.
Speaker 6: How do you guys think about it?
Speaker 8: Well, they are the biggest earnings contributors that said it's
Speaker 8: accelerating pace of earnings growth. It depends on what cohort
Speaker 8: you're talking about, if you're talking about the MAG seven
Speaker 8: or the ten largest names or AIAI adjacent. Yes, the
Speaker 8: earnings profile has been significantly higher than for the rest
Speaker 8: of the S and P five hundred, but at a
Speaker 8: decelerating pace. I think that was part and parcel to
Speaker 8: the pullback. We not only got in the major averages
Speaker 8: in that mid February to early April period of time,
Speaker 8: but the further drag on performance was many of those
Speaker 8: leadership names. Memories are short though, so a lot of
Speaker 8: the players in those names don't remember as early as
Speaker 8: recently as just earlier this year.
Speaker 2: Across America, Lizzie Saunders with us this morning and the
Speaker 2: way you listened to us Bloomberg Radio Good Morning, ninety
Speaker 2: to nine FM in Boston, ninety ninety one, Nathan Hager
Speaker 2: Radio in Washington as well on YouTube, subscribe to Bloomberg podcasts.
Speaker 2: That's what the hipsters do. Like Kevin Gordon as well.
Speaker 2: We're on YouTube and thank you for that, Paul.
Speaker 5: So Liziane talked to usbout earnings because it's some point,
Speaker 5: you know, earnings really have to come through, and arguably
Speaker 5: that they did here so far this year earning second
Speaker 5: quarter earnings very strong.
Speaker 6: How do you think about it in the back half
Speaker 6: of the year going into next year. Yeah, you're right.
Speaker 8: When all was said and done in the aftermath of
Speaker 8: first quarter and second quarter reporting season, actual earnings were
Speaker 8: about double what the estimate was heading in. And what
Speaker 8: was interesting about that first half is there was limited
Speaker 8: extrapolation on the part of analysts into the second half
Speaker 8: of this year and into twenty twenty six. Maybe justifiably
Speaker 8: because of uncertainty with regard to policy that you could
Speaker 8: argue sets the bar sufficiently low as we approach third
Speaker 8: quarter earning season. But I also think that there's a
Speaker 8: risk factor in if either you know, one or two
Speaker 8: high profile names misses on earnings or you just get
Speaker 8: an aggregate reporting season that is not quite as robust
Speaker 8: as it was in the first half of the year.
Speaker 8: So when I think about you know, I'm paid to
Speaker 8: assess risks, not just opportunities, and I think either some
Speaker 8: very specific Gurning's missus, I don't think that's a big case,
Speaker 8: but I think that's a risk fact.
Speaker 2: A wonderful tweet out today I highlighted in the last
Speaker 2: hour of Paul Tutor Jones talking about the challenge of
Speaker 2: investing in the back third of a bull market or
Speaker 2: the back third of a bear market. Let's first identify,
Speaker 2: does liz Ane Saunders think we're in the seventh, eighth,
Speaker 2: ninth inning.
Speaker 3: Of a bull market?
Speaker 8: Yes, I would say, what we don't as a character, well,
Speaker 8: what we don't know is whether it's an extra innings bullmarket,
Speaker 8: like in the late nineteen nineteen to.
Speaker 2: Put a video on second base, Okay, great, we're at
Speaker 2: the back end of a bull market. How do you
Speaker 2: behave what's the best practice.
Speaker 8: So, notwithstanding baskets like the meme stocks and heavily shorted
Speaker 8: stocks and nonprofitable tech which are dominating performance at the
Speaker 8: sub cap weighted index level since the April eighth closing low,
Speaker 8: I think you want to fade the low quality part
Speaker 8: of the rally and lean into higher quality. In fact,
Speaker 8: I'll use an acronym that was more popular twenty years ago,
Speaker 8: and I've been doing this almost forty years. I think
Speaker 8: the way to think about factor investing in this environment
Speaker 8: is less about traditional quality factors but almost garb. I
Speaker 8: think you don't want to sacrifice growth, but you want
Speaker 8: to have that value eye on valuation.
Speaker 3: I think it's the growth for those that have never
Speaker 3: heard the.
Speaker 8: Phrase growth at a reasonable price, okay, foreign con I.
Speaker 3: Mean, and you don't do individual names Walmart or the
Speaker 3: pe of forty. I don't think that's Garby, is it?
Speaker 8: Maybe not? And that's why I think you want that blend.
Speaker 3: You want reactor. It gives you the best blend.
Speaker 8: I think monolithic sector based investing doesn't make sense in
Speaker 8: this environment. So even the leadership sectors like tech and
Speaker 8: communication services have a lot of losers embedded within them.
Speaker 8: So I think factor based investing.
Speaker 2: What is say I know the answer to her questions, Brockton,
Speaker 2: it's not that hard with Lizan on a factor basis,
Speaker 2: what is the most attractive factor nature of the meg seven.
Speaker 8: Well, they have often been the momentum players. Now that said,
Speaker 8: when momentum is discussed as a factor, it's more of
Speaker 8: a concept. It's not a fundamental factor. So when momentum
Speaker 8: is a factor at work is working, it just means
Speaker 8: that the stocks that have been working continue to work.
Speaker 8: You can have momentum in utility stocks. I think people
Speaker 8: when they hear momentum, they automatically think high beta tech,
Speaker 8: tech adjacent kind of names. But I think outside of that,
Speaker 8: I think you still want to look for strength and
Speaker 8: balance sheet, strong free cash flow, high interest coverage, reasonable
Speaker 8: valuations on a pe, and a price to book. But
Speaker 8: you want to also keep an eye on the growth
Speaker 8: side of things, so positive forward earnings estimate trends and
Speaker 8: positive earnings announcements.
Speaker 2: Ll Zenne Saunders, thank you so much for being the
Speaker 2: most real commitment to surveillance over the years.
Speaker 3: Is with Charles Schwab Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
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Speaker 1: say Alexa play Bloomberg eleven thirty.
Speaker 2: And an equity bullmarket. One thing you do is you
Speaker 2: watch bonds. That's a cardinal world. Bonds are out front.
Speaker 2: Sinje Bowen with a snow hiield bonds, senior bank loan
Speaker 2: portfolio manager at Beach Point Capital Management. Love your note,
Speaker 2: and my basic idea is bond c the agony First?
Speaker 2: Is there any agony in bonds right now? Or is
Speaker 2: it the same madness as an equity bull market?
Speaker 8: Well, first of all, good morning, thanks for having me.
Speaker 6: I would say it's both.
Speaker 7: I mean, similar to other risk assets, leverage, credit shows
Speaker 7: fairly rich valuations at this point. In high yield, for example,
Speaker 7: there are a lot of double B rated bonds that
Speaker 7: trade inside of two hundred basis points over treasuries. In
Speaker 7: senior loans, over two thirds of the senior loan bank
Speaker 7: market trades above par.
Speaker 2: So you don't see stupidity yet inbounds, well, we do
Speaker 2: see discharge like an equity guy or I wouldn't know
Speaker 2: convexity if you hit me over the head. Is there
Speaker 2: stupidity in the bond world that I need to be
Speaker 2: worried about.
Speaker 7: Probably not to the same extent as in other risk
Speaker 7: asset classes. Credit fundamentals continue to hold in very well
Speaker 7: in this macroeconomic backdrop. You know, credit tends to perform well,
Speaker 7: and so there's not a lot of excess in terms
Speaker 7: of just you know, irresponsible credit creation that's taken place
Speaker 7: over the past few years. And so to the extent
Speaker 7: that we do get problems within credit, they're usually idiosyncratic,
Speaker 7: either related to the specific issuer or to the sector,
Speaker 7: and that's usually an impact from one of the surprise
Speaker 7: policies that we've had over the past year, you know,
Speaker 7: potential geopolitical risk or or something that crops up that
Speaker 7: poses surprise. And again, you know, similar to other asset classes,
Speaker 7: just given where things trade, you know, it is an
Speaker 7: asymmetric payoff.
Speaker 3: If you do get something wrong.
Speaker 5: The new issue market is just ripping. The desk can't
Speaker 5: get this stuff off their books and fast enough. Is
Speaker 5: it too much supply coming in the marketplace?
Speaker 6: Are you guys buying?
Speaker 5: What are you seeing when the desk call you up
Speaker 5: and say, hey, we've got another deal.
Speaker 3: Yeah, Well, there are two sides to the coin.
Speaker 7: On the one hand, the market's open, so a lot
Speaker 7: of companies across a lot of different sectors, and you know,
Speaker 7: up and down the credit quality spectrum are able to
Speaker 7: access the market refinance near term obligations, and so that
Speaker 7: maturity wall that was a problem during the right hiking
Speaker 7: cycle isn't really one anymore. And so you know, access
Speaker 7: to capital is an important component that staves off the
Speaker 7: faults and therefore credit losses. But at the same time,
Speaker 7: you know, there are periods of time when the market
Speaker 7: becomes technically imbalanced, where the amount of supply sort of
Speaker 7: you know, it's too much for the market to absorb.
Speaker 3: We are not really in that right now in.
Speaker 7: Both high yield n loans, you know, especially in loans
Speaker 7: given the amount of net new COLO creation, which is
Speaker 7: the major buyer for senior bank loans, that's that's very
Speaker 7: much in favor of issuers at this point.
Speaker 5: Back early in my career, cut my teeth at the
Speaker 5: chasement and bank making leverage loans to the TMT space.
Speaker 6: We made a.
Speaker 5: Small fortune doing that. How's that leverage loan business today?
Speaker 5: And how much is going to private credit?
Speaker 7: Well, the market share shift between private and public, and
Speaker 7: we at beach point we do both private and public,
Speaker 7: and so we sit back and we can see, you know,
Speaker 7: what are the trade offs between the markets and how
Speaker 7: these companies choose to finance themselves and what levers they
Speaker 7: want to pull on in order to you know, get
Speaker 7: the capital that they want or need. And so that
Speaker 7: share shift changes depending on the technical inflows and outflows
Speaker 7: between the two asset classes. And so for a while
Speaker 7: private credit was taking share from the broadly syndicated market.
Speaker 7: That's now, you know, turning around a little bit.
Speaker 3: And so it comes and goes.
Speaker 2: Yeah, but I mean there's a little private equity angst
Speaker 2: out there in the zeitgeist this morning. Do you sense
Speaker 2: angst within private credit? I mean, you know, we get
Speaker 2: all sorts of cross messaging here. I'm hearing things I
Speaker 2: heard thirty years ago, the same phrases in all that.
Speaker 2: I mean, you've got the radar up on this, particularly
Speaker 2: with loans. I mean what's your take on private credit?
Speaker 2: Are there shadows out there we need to study?
Speaker 7: Yeah, well, I mean commonly through market cycles. A rule
Speaker 7: of thumb is, if you want to know where problem
Speaker 7: areas are going to be, look at where the most
Speaker 7: credit has been created recently. And private credit does fit
Speaker 7: that profile. And so you do see right now, for example,
Speaker 7: a higher backward looking default rate within private credit than
Speaker 7: you do in public credit. But at the same time,
Speaker 7: those vehicles are equipped with different mechanisms to be relatively defensive.
Speaker 7: There's still a lot of capital that's waiting to be
Speaker 7: deployed within that market, and so you know the ability
Speaker 7: to navigate these different situations of higher default, you know
Speaker 7: you may stave off credit loss.
Speaker 2: Sinjya, thank you so much for joining Sidjon Barron Ruthers
Speaker 2: from the Left Coast with Beach Point Capital Management.
Speaker 3: Greatly appreciate that. Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
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Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
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Speaker 1: terminal joining.
Speaker 2: So Margaret Franklin the CFA Institute. Full disclosure, I'm a
Speaker 2: member of the CFA Institute. It's where you take three
Speaker 2: exams and you try to pass them and they're very
Speaker 2: British and that they throw a wall of stuff at
Speaker 2: you and you flunk and then you pass. It's a
Speaker 2: rite of passage in the on Wall Street and it's
Speaker 2: gone worldwide. So Margaret Franklin's in Toronto, cushy job, the
Speaker 2: whole thing, and in September twenty nineteen she gets this
Speaker 2: piece of cake job to run the CFA Institute. How
Speaker 2: about that COVID it showed up four months Efty dropped
Speaker 2: in how did the CFA Institute survive COVID?
Speaker 9: Well, Tom, actually, testing times give you the opportunity to
Speaker 9: really change the directory.
Speaker 8: So you talked about the.
Speaker 9: Exam being that wall of material and testing we actually
Speaker 9: took the time to wait to go from paper based tests,
Speaker 9: which you would remember, to computer based tests, and that
Speaker 9: was really reimagining how we can make it more learner centric.
Speaker 9: So modular mobiles, it's way very else, the same way,
Speaker 9: way better it is and it's the same rigger, it's
Speaker 9: the same quality. But at the end of the day,
Speaker 9: the idea is not to fail people. It's to demonstrate
Speaker 9: that you have the knowledge, skills, and ability. And I
Speaker 9: think the program really does that.
Speaker 2: My life would be different when I was twenty with
Speaker 2: perplexity or when I was doing CFA.
Speaker 3: Thank you Fidelity for telling me just shut up and
Speaker 3: go get it.
Speaker 2: Show the difference between the three ratio or five ratio
Speaker 2: DuPont analysis. It's laid out perfectly like CFA level two.
Speaker 2: How is perplexity and AI? Can it change the capture
Speaker 2: of knowledge?
Speaker 9: So we think that AI, that stack on top of
Speaker 9: the intelligence stack is really important. So if I look
Speaker 9: back two years ago, certainly subject matter experts were really
Speaker 9: anxious about their role within within almost everything. And what
Speaker 9: we find is that the subject matter experts, those who know,
Speaker 9: become really valuable. They know the questions to ask and
Speaker 9: they know how to evaluate the output on the way out.
Speaker 9: So the CFA program, and actually the broader portfolio that
Speaker 9: we offer becomes I think more important because you need
Speaker 9: people who actually know what they're doing to be able
Speaker 9: to capitalize on really extraordinary things that AI can offer us.
Speaker 3: Yeah, but like.
Speaker 2: White Freed, Sandy with you know, Paul, it's like six
Speaker 2: hundred pages. It's got a John de York, I never
Speaker 2: got equipment leasing. I flanked it three times, Margaret, Is
Speaker 2: AI going to replace the torture of readings V body
Speaker 2: up at bu or White, Freed, Sandy accounting?
Speaker 9: Well, the program actually is looking at the modality with
Speaker 9: which we teach it. So I think the core content,
Speaker 9: obviously modernized for what's important now is still the foundation
Speaker 9: of it all. But how we teach it is increasingly
Speaker 9: more accessible and more effective.
Speaker 3: Paul, surveillance, correction, White, Sandy and Free.
Speaker 5: Oh very good, Margaret, what is Global Wall Street asking
Speaker 5: of the CFA institute?
Speaker 6: These says what skills do they want? What context?
Speaker 9: So what we've heard from employers loud and clear is
Speaker 9: the knowledge is great from the CFA program. It differentiates.
Speaker 9: It says something about your commitment, discipline, and ability to
Speaker 9: master a really complex body of knowledge. But what they
Speaker 9: are really focused on is making sure that candidates are
Speaker 9: much more job ready when they arrive. So we introduced
Speaker 9: our practical skills modules in this current curriculum, but we
Speaker 9: have a strategic initiative to really advance our skills learning
Speaker 9: and so that'll be a feature of the next duration,
Speaker 9: and of course AI allows us to do that so
Speaker 9: much better.
Speaker 5: It is United Nation Week. Here in New York, it's
Speaker 5: Climate Week. Sustainability ESG. It seemed to be really important
Speaker 5: in the financial marketplace for a while. In the US
Speaker 5: it seems to have faded pretty significantly. But I know
Speaker 5: outside of the US that whole concept is sustainability and
Speaker 5: incorporating that into your financial analysis.
Speaker 6: How do you guys approach that?
Speaker 9: So what I would say about sustainability is it's matured
Speaker 9: over let's call it ten years ago when the tragedy
Speaker 9: the horizon speech was and certainly the last five years.
Speaker 9: It is not going away. It's just not being talked
Speaker 9: about as much. And why is that? Because climate risk
Speaker 9: is financial risk. It's financially material act owners. When we
Speaker 9: look at pension plans, sovereign wealth funds, they are not
Speaker 9: walking away from it at all. The skills required for it, though,
Speaker 9: are being incorporated much more into mainstream portfolio management, risk analysis,
Speaker 9: and investment research. What I will say is that the
Speaker 9: opportunity set is different than it was five years ago.
Speaker 9: It's investable, it's scalable. You know, the cost curve coming
Speaker 9: down on for instance, renewable energy makes that much more
Speaker 9: attractive from both a risk and return perspective. So I
Speaker 9: don't think it's going away at all, and in fact,
Speaker 9: our numbers bear that out. We have over fifty thousand
Speaker 9: people who have taken our stack on our Sustainability Certificate
Speaker 9: and that broader stack, so we don't.
Speaker 3: See it going theay I haven't done that. There's still
Speaker 3: time and h.
Speaker 2: One b okay I remember the desperation of well meaning Indians.
Speaker 2: Why need to take CFA one two three and like
Speaker 2: they had to fly to Dubaia can't remember during COVID,
Speaker 2: I mean a men's commitment on.
Speaker 3: The part of these kids. You're away from the H
Speaker 3: one v remit.
Speaker 2: But nevertheless, the CFA Institute of Impact in India is extraordinary.
Speaker 9: Color that for us, so I think there are India
Speaker 9: is a great example of the globalization and the interconnectedness
Speaker 9: of global markets and that CFA provides. That CFA provide
Speaker 9: provides ethical training, very high quality education, but also a
Speaker 9: common language. And we see that everywhere in international markets
Speaker 9: that they want people talking the same language as they
Speaker 9: export capital and import capital. India is our number one market,
Speaker 9: really yeah, it's our under one number one candidate market
Speaker 9: and that reflects two things. One is, you know, the
Speaker 9: diaspora is everywhere, but importantly India as a capital market
Speaker 9: and as a service provider to the financial markets is
Speaker 9: in increasingly becoming more sophisticated. And so again that CFA
Speaker 9: program and charter becomes a distinction for that market.
Speaker 2: Is there going to be CFA Level four I've been
Speaker 2: asking for. I'm sitting there with some panel with Michael
Speaker 2: Mobison and we might go and we got to reach out.
Speaker 2: Hare's got to be more. Is it going to be
Speaker 2: CFA level four expanded? I need to I need the
Speaker 2: agony of six months gone.
Speaker 9: Well, Tom, what we have on offer for you is
Speaker 9: an expanded portfolio with increasing specialization. So we have our
Speaker 9: sustainability stack. Private markets are increasingly important in a permanent
Speaker 9: feature in in portfolios, so we have a p Private
Speaker 9: markets stack. There are specialized learning for people who are
Speaker 9: changing careers. Uh, I want more specialized as they advance
Speaker 9: into crews, and that hasn't been available prior, so it's
Speaker 9: very important.
Speaker 3: John Tucker, what do you think CFA radio blather it.
Speaker 9: It's fun, Jo, that's fun.
Speaker 2: How much okay, how much time am I going to
Speaker 2: have to invest in studying to pass all levels?
Speaker 9: To pass all levels? It still remains three hundred hours
Speaker 9: per level.
Speaker 3: You can do it.
Speaker 9: You can do it nine hundred hours.
Speaker 3: It's engaging.
Speaker 6: Forty two kids. For the CFA the right passage for me?
Speaker 2: Would you take the exam and you're certain you flunk
Speaker 2: every time you take it? And we would go down
Speaker 2: Newberry Street in Boston to some sushi bar I can't remember.
Speaker 2: And one night I'm there, are getting completely plastered. Yeah
Speaker 2: for CFA level whatever, and cam Neely's sitting next to me, like,
Speaker 2: you know, six feet feet away, and we end up.
Speaker 2: He goes, why are you you know, you know, blah
Speaker 2: blah blah, and and you know, giant of the Boston Bruins. Oh,
Speaker 2: I took an examined finance, and I had another beverage
Speaker 2: in my choice.
Speaker 3: Gets what's the latest pass rate for gas?
Speaker 6: Are back up?
Speaker 9: So they're back up, they're back up, so the back
Speaker 9: up to historical norms. Level ones are at around forty
Speaker 9: five percent. But interesting you ask that we have all deferrals,
Speaker 9: so if you can't take it, you can you can
Speaker 9: pay to get a deferral. And actually the deferred candidates
Speaker 9: are performing really significantly below the average. And so for
Speaker 9: all of you candidates who are out there, don't defer.
Speaker 3: Yeah, tough yeah, tough it out. It's a guy.
Speaker 2: At standish are years ago, Toby in Boston. It's a
Speaker 2: rite of passage. Margaret Franklin, thank you so much for
Speaker 2: joining us her leadership at the CFA Institute.
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