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

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Speaker 1: my co host Matt Miller. Every business day, we bring

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

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

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. Let's bring in Dr

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Speaker 1: Lindsay Piaza. Now she's chief economist for STI Full Financial

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Speaker 1: and we'll start off, Lindsay with your reaction to the

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Speaker 1: FED discussion and and and the and the release that

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Speaker 1: we had yesterday. I want to kick it off of

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Speaker 1: the dots because clearly that's what the market paid the

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Speaker 1: most attention to. But um, Jerome Palace had take this

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Speaker 1: with a grain of salt. This isn't it's not not

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Speaker 1: like a plan. We haven't discussed this and we're moving

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Speaker 1: in that direction. Um, what do you think about the

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Speaker 1: dot plot? Well, I thought it was pretty interesting. We

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Speaker 1: saw actually a number of revisions to the Fed's forecast.

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Speaker 1: Not only did they x but I to the potential

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Speaker 1: pathway for higher rates, but they also increase their expectation

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Speaker 1: for inflation and growth and at the same time, they

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Speaker 1: left their view of the labor market pretty much unchanged.

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Speaker 1: So their expectation for being able to raise rates faster

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Speaker 1: is really predicated not on fears of inflation, but the

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Speaker 1: fact that the recovery is picking up momentum, that it's

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Speaker 1: it's recovering it a faster than expected pace. So I

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Speaker 1: thought this was a pretty positive projection from the Fed.

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Speaker 1: And you know, on the jobs front, on the labor front, Lindsay,

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Speaker 1: you know, the data over the last couple of months

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Speaker 1: has been a little bit disappointing in terms of the

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Speaker 1: folks getting back to work. How do you view that?

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Speaker 1: How do you think the Fed's viewing that is just

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Speaker 1: kind of a little bit of an aberration that things

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Speaker 1: will pick up. That seems to be what they're suggesting. Well,

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Speaker 1: I think the FED was very clear and acknowledging the

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Speaker 1: recent improvements that we've seen in the economy. But at

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Speaker 1: the same time, I think the chairman was tempering the

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Speaker 1: market's expectations to say, wait a minute, we're not entirely

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Speaker 1: out of the woods quite yet. Yes, we've taken big

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Speaker 1: steps in the right direction, but we still have millions

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Speaker 1: of Americans that have yet to return to the labor market.

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Speaker 1: So there's further progress that needs to be achieved before

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Speaker 1: we can talk about reaching that pre crisis vitality. So

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Speaker 1: I think the Fed was very careful to walk this

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Speaker 1: delicate line of yes, applauding the improvements, but also justifying

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Speaker 1: the need for further accommodation going forward. What do you

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Speaker 1: think the ten year yield means that real yielded I

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Speaker 1: think negative seven basis points. Does that change significantly through

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Speaker 1: your end? I think this says that the market is

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Speaker 1: buying into the FEDS inflation dismissal rhetoric, that the market

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Speaker 1: is really buying into the notion that these these recent

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Speaker 1: price pressures will prove temporary and going into the end

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Speaker 1: of the year, in early we'll start to see inflation

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Speaker 1: come back down in line with the FEDS two percent targets.

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Speaker 1: So I think from here the market is signaling that

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Speaker 1: ape Can inflation has already been priced in, and in fact,

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Speaker 1: we could continue to see some downward pressure on the

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Speaker 1: longer end of the curve as we do start to

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Speaker 1: see that reduced price pressures come to fruition or translate

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Speaker 1: into the data. So, lindsay, what's your sense of timing here,

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Speaker 1: as we think about tapering, is going to be the first,

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Speaker 1: you know, act that we will get from this Federal Reserve.

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Speaker 1: How are you thinking about that and from a timing perspective, Well,

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Speaker 1: I think the FED has been pretty clear that they're

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Speaker 1: going to give the market ample notice in terms of

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Speaker 1: that discussion, and once the discussion begins, they're going to

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Speaker 1: again give the market ample notice before a formal announcement

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Speaker 1: is made. So if we anticipate that the discussion really

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Speaker 1: begins around that August September time frame, it's likely that

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Speaker 1: by the end of the year, at that December meeting,

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Speaker 1: the FED initiates a formal announcement that taper will begin,

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Speaker 1: making the actual process of drawing down those purchases two

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Speaker 1: event and I do think this is going to be

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Speaker 1: a very deliberate, very slow, very transparent process over six twelve,

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Speaker 1: maybe even eighteen months period, pushing out to that first

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Speaker 1: rate increase well into which again lines up with what

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Speaker 1: we saw in terms of the latest dot plot with

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Speaker 1: the vast majority of FETE officials anticipating at least one

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Speaker 1: rate hike by the end of What do you think

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Speaker 1: about the housing market, Lindsay David Rosenberg. Obviously he's a

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Speaker 1: bear um, but he says we're in a bubble and

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Speaker 1: it's not hard to understand why. Well, I do think

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Speaker 1: that the housing market strength is very different from what

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Speaker 1: we saw going into the oh seven o eight recession.

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Speaker 1: This time around, it's not being driven by speculative demand

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Speaker 1: or purchases of vacation homes or second homes. This is

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Speaker 1: a shift, a structural shift in demand for homes, particularly

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Speaker 1: outside of the urban centers. Now some of the variable

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Speaker 1: some of the factors are COVID related, but some are not.

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Speaker 1: We see an entire generation of millennials finally deciding to

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Speaker 1: jump into the housing market, and so there is some

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Speaker 1: structural demand that I do think will continue to support

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Speaker 1: this type of growth going forward. So I think it's

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Speaker 1: a little bit premature to say that this is a

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Speaker 1: bubble um. I do think this is more of a

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Speaker 1: long standing structural support that we'll see in terms of

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Speaker 1: the housing market. All right, Lindsay, thanks so much for

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Speaker 1: joining us. We always appreciate getting your perspective here. Lindsay

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Speaker 1: PEEGSA chief economists for Stephi Financial, joining us on the

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Speaker 1: phone from Chicago, and I guess if you're in the

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Speaker 1: market for buying a home, Matt, it might be higher

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Speaker 1: prices for longer. That hurts. That hurts to hear. But

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Speaker 1: the good news is if you're in the market for

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Speaker 1: selling a home, you're gonna probably get a higher price.

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Speaker 1: And I see that Porscha is now putting out the

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Speaker 1: new nine eleven nine nine two in GT three form. Sure,

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Speaker 1: so I would say, anyone who's selling a home right now,

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Speaker 1: seriously consider buying this nine eleven that you heard it here. First,

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Speaker 1: skin over now to Ian Billina. He is the founder

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Speaker 1: and CEO at Token Metrics. He's been involved in the

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Speaker 1: crypto space for uh three four human years, which is

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Speaker 1: like twenty crypto years. He can speak to us on

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Speaker 1: what he's seen in terms of well, let's talk about

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Speaker 1: bitcoin to to start with, Ian, Um, I know there

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Speaker 1: are five thousand, four hundred and sixty eight other coins

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Speaker 1: out there, but you think bitcoin is widely considered still

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Speaker 1: the most important and um expected to be still the

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Speaker 1: most important cryptocurrency in the next decade. Oh wow. First

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Speaker 1: of all, thanks for heaving me to be on So

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Speaker 1: bitcoin right now is the most impromative piturency in the market. UM,

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Speaker 1: it's basically a proxy for the whole market. But we

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Speaker 1: actually take a contragrant viewpoint on this. We believe in

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Speaker 1: the future in the next ten years belong to a

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Speaker 1: crypt Well, we're not over bitcoin. Bitcoin we had the

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Speaker 1: person of our advantage. However, if you see all the

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Speaker 1: growth happening in the space, it's happening in other block chains,

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Speaker 1: for example in DeFi. Right now, Defy has over one

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Speaker 1: billion dollars in total value and over so many type

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Speaker 1: percent of that is happening on Etheria. So well, bitkoin

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Speaker 1: was first and it's definitely the champion of the space.

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Speaker 1: There's lots of innovation happening all over the space. Ian,

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Speaker 1: I'd love to get your view on this one of

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Speaker 1: the issues or one of the I guess the selling

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Speaker 1: points if you will, or when the attributes a bitcoin

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Speaker 1: was it's uh anonymity that can't be traced. But yet

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Speaker 1: we've seen in some of the ransomware nymity. Yes, bitcoin

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Speaker 1: is never was never thought to be anonymous. We we've

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Speaker 1: always known that it is on a public ledger and

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Speaker 1: can be traced by everyone in the world. Well, that

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Speaker 1: was see, that was news to me at least, I guess,

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Speaker 1: and you know, so talk to us about what happened

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Speaker 1: with some of those ransomware and the ability of authorities

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Speaker 1: to kind of trace it and get it back. Yeah. Well,

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Speaker 1: I mean that's one of the miscommunications when it comes

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Speaker 1: to crypto and bitcoin. People think bitcoin is completely anonymous. Now,

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Speaker 1: early on, in the early days, yes, there was dark

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Speaker 1: there was the dark web, so code and all those

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Speaker 1: the farious actors were using bigmoin for crypto in general.

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Speaker 1: For that means, however, the blockchain has been one of

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Speaker 1: the best innovations in the last twenty years. So now

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Speaker 1: regulators and that the police and FBI are able to

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Speaker 1: work and transact and track transactions on the blockchain. The

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Speaker 1: companies out there like chain analysis that helps regulators do

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Speaker 1: just that. Right, So the people think they can hide

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Speaker 1: from bitcoin and blocking blatchin transactions, that's completely false. If anything,

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Speaker 1: it makes it easier to catch somebody. Yeah. I always, uh,

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Speaker 1: whenever I'm talking to a money launderer or a drug dealer,

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Speaker 1: I always say stick to cash, buddy, because everyone in

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Speaker 1: the world can see the blockchain. It's all laid out

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Speaker 1: in the open for you on the web. And I

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Speaker 1: guess some people have strategies of breaking up their payments

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Speaker 1: into tiny little pieces and sending it out to a

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Speaker 1: million different wallists to try and confuse the Feds. But look,

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Speaker 1: anybody with a little time on his or her hands

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Speaker 1: or their hands can can go out there and and

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Speaker 1: chase everything. I want to talk a little bit more

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Speaker 1: about Defy, you know, because blockchain has become so ubiquitous,

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Speaker 1: and I guess the community has now accepted that it

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Speaker 1: needs more stringent regulation or at least clarification on regulation.

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Speaker 1: Is Defy different in that it's more kind of libertarian

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Speaker 1: still in its heart, I would say yes, right, I

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Speaker 1: mean not all the way, but definitely yes. So Defy

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Speaker 1: essentially is taking services that were typically done by the

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Speaker 1: backing industry and Wall Street, and it's letting people now

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Speaker 1: be able to participate in that globally, not having any

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Speaker 1: mod aman, not having to ask for permission from anybody.

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Speaker 1: So take different services such as lending, savings, investing. Now

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Speaker 1: anybody globally can participate in this new economy, in this

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Speaker 1: in this new world of open finance. So to me,

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Speaker 1: this is breaking down barriers. This is breaking down borders,

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Speaker 1: and it's it's becoming more inclusive. Is there a sense

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Speaker 1: um in that in the crypto space broadly defined that regulation.

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Speaker 1: Government regulation is coming and it's something that this industry

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Speaker 1: needs to be ready for. Yes, I believe. So I

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Speaker 1: think for crypto assets to go mainstream, they definitely do

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Speaker 1: need more regulation. For example, today, Uh, the then e

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Speaker 1: t F was perspected by the SEC. And for example,

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Speaker 1: if the et F does get approved, that will be

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Speaker 1: huge for both retail and institutional adoption. So if crypto

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Speaker 1: ever hopes to go mainstream, uh, in a way, it

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Speaker 1: kind of already is. But to fully go mainstream and

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Speaker 1: gave global adoption, it doesn't need to have regulation and

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Speaker 1: compliance were all all regular. It will be happy with it.

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Speaker 1: And you went from um IBM as a technical sales

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Speaker 1: engineer and open source UM Analytics sales executive into UM

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Speaker 1: dealing with cloud essay software is a service UM and

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Speaker 1: then into and then you and then you started token

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Speaker 1: matrix and you have uh apparently kind of a moneyball

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Speaker 1: approach to the way you invest in crypto. Yeah, what

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Speaker 1: about analysis? Could you give us a price target for

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Speaker 1: example on bitcoin year end? Oh? Wow, Well, I mean

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Speaker 1: so we're talking with twecks. We use machine learning and

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Speaker 1: data analytics to help the customers make money. Crypto or

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Speaker 1: rather also prevented from losing money. Um prediction wise, our

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Speaker 1: predictions only go out for about a month or so.

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Speaker 1: But we are pretty optimistic in bitcoin and crypto this year.

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Speaker 1: I'm optimistic all the way into about QUO three and

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Speaker 1: then QUO four to Pree. Historically has not been a

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Speaker 1: good except for maybe in December during Christmas to see

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Speaker 1: them cycle back in right now, forty k. We're kind

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Speaker 1: of in Limbor territory next month, and so we do

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Speaker 1: expect summer somewhere between July and August and September. But

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Speaker 1: bitcoin and it didom to go up because the room

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Speaker 1: is going to have an upgrade, but the bitcoin, I

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Speaker 1: wouldn't be surprised that bitcoin want to do my k

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Speaker 1: okay here, all right, and thanks so much for joining

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Speaker 1: us to really appreciate a fascinating im Bilina, founder and

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Speaker 1: CEO of Token Metric. Alright, So yesterday we had the

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Speaker 1: FED coming in and you know, a little bit of

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Speaker 1: a hawkish view here as it relates to interest rates,

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Speaker 1: and we want to get a sense of what that

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Speaker 1: means for the banks because the banks have had such

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Speaker 1: a good trade here recently and it's been such a

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Speaker 1: good place. So if you want to talk banks, Matt,

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Speaker 1: there's only one person to chat with, and that's Mike Mayo,

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Speaker 1: senior banking analysts for Wells Fargo Securities. Mike, what was

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Speaker 1: your takeaway for the banks that you cover as it

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Speaker 1: relates to what looks to be You know, we're gonna

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Speaker 1: have some ingust rates going up by you three. What

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Speaker 1: does that mean for your call on the banks? Well, Matt,

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Speaker 1: we have several nineteen seventies classics. We had disco, leisure suits,

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Speaker 1: mood rings, and inflation, and I thought those were all gone.

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Speaker 1: But right up front in the four page FED press release,

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Speaker 1: they had the three key words inflation has risen. And

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Speaker 1: then as you said, now now the FED is saying

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Speaker 1: to interest rate increases sooner than people had expected. Um.

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Speaker 1: And you know, inflation can be either heaven or hell

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Speaker 1: for the banks, and it was hell for the banks

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Speaker 1: in the nineteen seventies, and frankly, in UM that was

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Speaker 1: pretty hellish. Uh. Banks had all sorts of losses on

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Speaker 1: securities and derivatives and mismatches between their assets and liabilities.

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Speaker 1: But I think in this scenario, I think it's in

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Speaker 1: the direction of heaven. Banks have really paid a big

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Speaker 1: price for the unusual low level of interest rates. UH.

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Speaker 1: The our net interest margin over the past year showed

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Speaker 1: the biggest decline in a century. And that's because while

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Speaker 1: banks has spent a lot of money gathering deposits with

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Speaker 1: branches and technology and service and everything else, they haven't

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Speaker 1: earned much on those deposits. Are now they can finally

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Speaker 1: redeploy those deposits and the potentially higher yielding securities and

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Speaker 1: and hopefully loans. Let's talk about the big investment banks

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Speaker 1: for a moment, because we had I mean we were

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Speaker 1: we weren't expecting trading to keep up with the same

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Speaker 1: um at the same pace as last year this time,

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Speaker 1: but we've had a number of CEO s um Jamie Diamond,

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Speaker 1: I think Gorman also saying that you know it's time

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Speaker 1: to come back to earth already trading Credit Suite is

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Speaker 1: dismantling their trading business kind of unrelated reasons. But UM,

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Speaker 1: they have said that M and A may make up

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Speaker 1: for some of the loss there. What's your view on

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Speaker 1: on the big investment banks. Well, look from the trading side, UM,

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Speaker 1: nobody expected the levels to be sustained at two pieces.

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Speaker 1: In fact, going into the year everybody said we expect

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Speaker 1: and the way it's playing out is it's going to

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Speaker 1: be somewhere between based on our forecast. So there's just

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Speaker 1: no big surprises there. Um And frankly, corporations frontloaded a

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Speaker 1: lot of their financing earlier in the pandemic and that's

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Speaker 1: a good thing, and trading plays off of that, so

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Speaker 1: less issue was less trading. On the other hand, Wow, mergers,

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Speaker 1: This might have been missed by the market, but Jamie

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Speaker 1: Diamond just said investment banking this quarter could be one

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Speaker 1: of the best quarters they've ever seen. Um So, you

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Speaker 1: know the likes of Goldman, Sachs and JP Morgan And

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Speaker 1: if you think about it, take a step back, every

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Speaker 1: company and every industry globally is in some way rethinking

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Speaker 1: their business model post pandemic, given the acceleration or the

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Speaker 1: second wave of digitization. Um So you have Murders are strong,

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Speaker 1: that's likely to have legs trading its subsiding some but

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Speaker 1: that shouldn't be a big surprise. Mike, what's your top

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Speaker 1: conviction bet right here? I know you've been focusing a

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Speaker 1: lot on technology for these global banks, but what's the

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Speaker 1: what's the bet You're what's the bank you're talking to

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Speaker 1: most of your clients. Well, I don't like using the

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Speaker 1: word debt. It's it's it's a new because we've been

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Speaker 1: a lot of ours dissecting the financial statements and dissecting

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Speaker 1: what management has to say, and on both fronts, Bank

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Speaker 1: America really is surprising. I thought that the CEO Bank

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Speaker 1: America should have been fired um a little less than

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Speaker 1: a decade ago. I went to the shareholder meetings, I

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Speaker 1: spoke up. They weren't always happy about that, but you know,

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Speaker 1: that's what the facts said to me at the time.

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Speaker 1: That never stopped you before, But now, as a fact

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Speaker 1: change so to our conclusions. And now I think the

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Speaker 1: CEO Bank America, Brian Monahan, is really one of the

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Speaker 1: best um and it's really remarkable how he's grown into

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Speaker 1: that position. And there you know, they start off saying

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Speaker 1: responsible growth. Everybody at the company knows responsible growth, and

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Speaker 1: at first I thought it was an empty platitude that

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Speaker 1: didn't mean much at the beginning, but now it means

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Speaker 1: a great deal. Not just to have earnings growth sustainably

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Speaker 1: by not being in the most risky segments. Remember they

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Speaker 1: bought countrywide and how all the mortgage problems, but also

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Speaker 1: means responsible to you know, their their customers and their

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Speaker 1: employees and their communities, and you know they're out front

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Speaker 1: and center saying we're gonna pay a dollar minimum. Ways

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Speaker 1: by the Brian Morning and on the Sunday talk shows

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Speaker 1: talk about cyber security. So what you have here is

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Speaker 1: both UM strategically positioned much better than before. Financially they

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Speaker 1: benefit from higher interest rates three times more than the

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Speaker 1: average bank, and then just from a you know, tone

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Speaker 1: of society, they're they're right on top of it. So

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Speaker 1: Bank America is the name that we've been going with,

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Speaker 1: and they're also one of the best fintech players in

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Speaker 1: the world. By the way, I was talking to UH

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Speaker 1: David Rosenberg this morning, and Rosie said something along the

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Speaker 1: lines of when the housing bubble bursts now, there will

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Speaker 1: be people arguing that we're seeing that we're wait seeing

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Speaker 1: a housing bubble right now, but you've got to admit

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Speaker 1: it's red hot this market. How important is that UM

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Speaker 1: and and how dangerous is that to the big banks? Well,

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Speaker 1: I think what's interesting here is just the degree of

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Speaker 1: collateral that banks have. So you know, when banks have

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Speaker 1: a big crisis, they don't normally repeat the same problem

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Speaker 1: in the next grace, it's right. So the type of

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Speaker 1: underwriting for homes, the type of people who get those loans,

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Speaker 1: the collateral behind that. I mean, you you know, you know,

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Speaker 1: I've lived through the global financial graces and saw how

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Speaker 1: crazy it was. I mean, everyone from you know, kids

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Speaker 1: to dogs to deceive people got application that that's real, right,

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Speaker 1: Florida strippers with five condos exactly. And the crazy thing is,

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Speaker 1: you know, people were like getting credit without everyone else

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Speaker 1: knowing what kind of credit they were getting. It was

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Speaker 1: the best. The banking industry is cleaned up, by the way,

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Speaker 1: if there's if there's risk, it's remember banks provide less

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Speaker 1: than one third of all loans in our economy, so

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Speaker 1: if there's risk of some of these non banked players

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Speaker 1: out there. So when it comes to housing, I think

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Speaker 1: that's fine. I think, you know, areas to watch continue

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Speaker 1: to be commercial real estate offices. That's not a new phenomena,

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Speaker 1: but it's still something worth noting. And look, I do

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Speaker 1: go back to interest rates though, I mean it could

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Speaker 1: be you know, a heaven or hell, and you know

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Speaker 1: hell comes in two forms if you have deflation like Japan,

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Speaker 1: and that's what you know, the bed and everybody was

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Speaker 1: worried about for a number of years. But there is

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Speaker 1: still tail risk for hell, if rates get out of control.

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Speaker 1: And this is something we had a bank conference last month,

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Speaker 1: and this is something that investors we're talking about more

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Speaker 1: than I had heard in like maybe over a decade

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Speaker 1: or two it and um, so that's a sort of

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Speaker 1: chail risk. And if rates went up too much too quickly,

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Speaker 1: then you could have credit issues because then the interest

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Speaker 1: cost for borrows would go higher. So, Mike, you've been

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Speaker 1: covering these banks for decades. Can they earned the returns

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Speaker 1: they earned before the financial crisis? Or is the where

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Speaker 1: is the industry just fundamentally changed on a secular basis? Well,

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Speaker 1: yes and no, Um, we don't have their traditional banking revenues,

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Speaker 1: their traditional banking margins getting back to where they were

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Speaker 1: pre pandemic for a few more years. And that's just

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Speaker 1: the nature of low rates. And frankly, you could say

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Speaker 1: banks benefited from some of the government programs, but they

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Speaker 1: also got hurt a lot by the low level rate.

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Speaker 1: In the other hand, we think banks for making up

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Speaker 1: the difference by improving efficiency, by lowering unit costs, by

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Speaker 1: you know, embracing the tech revolution. And you know what,

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Speaker 1: I went to a tech conference as a bank analyst.

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Speaker 1: What was I doing there? I didn't I didn't understand

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Speaker 1: of what I heard, the jargon it was, it was

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Speaker 1: kind of crazy. But the one percent that I did

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Speaker 1: take away with my aha moment. My aha moment was

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Speaker 1: look at all these other industries that have implemented tech,

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Speaker 1: you know, whether it's retail or healthcare or pick your industry,

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Speaker 1: They've already had their transformation. And so now banks are

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Speaker 1: in the cusp of doing what's already been done elsewhere.

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Speaker 1: So you're not it's not like you're reinventing the wheel.

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Speaker 1: You're just applying what's already been tried and true elsewhere.

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Speaker 1: So when you know the CEO of Microsoft, as Satia

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Speaker 1: talks about the second wave of the digital transformation, well,

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Speaker 1: banks are about to jump on board on that. Mike,

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Speaker 1: thanks so much for joining us. Always a pleasure talking

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Speaker 1: to you. Um, I wish we could spend more time.

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Speaker 1: We could talk to you for an hour. Maybe someday

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Speaker 1: we'll do that, Mike Mayo. UM, they're talking to us

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Speaker 1: about the banks, and as we've said, he's probably one

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Speaker 1: of the most well known banking analysts in in the US,

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Speaker 1: if not the world. Um. There he is the US

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Speaker 1: large cat bank research director, managing director at Wells Fargo Securities.

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Speaker 1: Now I'm gonna bring in David Deeds right now. He

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Speaker 1: is managing principal and senior portfolio strategies at Pepack Private

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Speaker 1: Wealth Management. They have just under ten billion dollars in

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Speaker 1: assets under management. And i'll at first, David, ask your

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Speaker 1: take on j Pal's performance yesterday. How how do you

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Speaker 1: think he handled well, no real moves, but kind of uh,

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Speaker 1: a little bit of a more hawkish tone. Yeah, I

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Speaker 1: think he did a good job. Obviously, it did catch

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Speaker 1: the market a little bit by surprising. You never want

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Speaker 1: to catch the market by surprise. You always want to

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Speaker 1: ease into things. I think they were just a little

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Speaker 1: bit more hawkish than they were just several months ago,

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Speaker 1: by um, you know, pulling forward the potential data, the

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Speaker 1: first rate hike, at least it's reflected in that dot plot.

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Speaker 1: And of course you know talking about that, the next

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Speaker 1: conversation is going to be on the tapering, and I

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Speaker 1: think that caught people by surprise. I think, from my perspective,

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Speaker 1: what was most interesting is the big reason for going

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Speaker 1: slow on normalizing monetary policy is trying to figure out

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Speaker 1: whether inflation is transitory or permanent. We don't have enough information.

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Speaker 1: The Fed doesn't have enough information to make that decision now,

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Speaker 1: So why are they getting a little bit more hawkish?

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Speaker 1: I think the real reason is always goes back to

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Speaker 1: the pandemic. The pandemic is receiving. This economy is on track,

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Speaker 1: and ultimately, if the economy gets to be normalized and

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Speaker 1: interstrates have to get normal realize and that's what they're

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Speaker 1: looking at. Um. But it did catch people by surprise.

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Speaker 1: All right, Dave, given that background, here, did your view

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Speaker 1: of the market, where do you want to be allocated

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Speaker 1: within these markets that changed much yesterday? You know? No, Um,

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Speaker 1: you know, we look at the economy and the data

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Speaker 1: and what history tells us is the most likely pass forward.

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Speaker 1: Not We're not going to base anything based on one

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Speaker 1: meeting by the Federal Reserve. Obviously, this meeting was different

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Speaker 1: than the meeting back in March, so that can change. Um.

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Speaker 1: I think it's clear that the most important factor out

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Speaker 1: there is that pandemic is receding. Obviously, they are concerns

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Speaker 1: about variants and so forth. Overseas not doing quite as well,

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Speaker 1: but I think the direction is very, very positive. We're

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Speaker 1: seeing UM. The only thing that's lagging here a little

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Speaker 1: bit is the labor market. But there are good reasons,

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Speaker 1: have nothing to do with the economy really as to

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Speaker 1: why that's lagging. Obviously, there's some incentives to keep collecting benefits.

430
00:24:57,080 --> 00:24:59,920
Speaker 1: There's like a childcare. There's some fear of COVID into work.

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00:25:00,359 --> 00:25:02,600
Speaker 1: I think all that will get resolved positively. So I

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00:25:02,640 --> 00:25:05,600
Speaker 1: think we've got a strong economy going forward, and I

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00:25:05,640 --> 00:25:08,639
Speaker 1: want to position UH portfolios to take advantage of that.

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00:25:10,160 --> 00:25:14,240
Speaker 1: How do you best position them to do so well?

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00:25:14,359 --> 00:25:17,399
Speaker 1: If the economy is getting better, I think you want

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00:25:18,000 --> 00:25:23,480
Speaker 1: UH your portfolio to be filled with investments that will

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00:25:23,520 --> 00:25:26,520
Speaker 1: respond to that, In other words, a slight cyclical tilt,

438
00:25:26,920 --> 00:25:29,240
Speaker 1: unless everyone else has done so already. David, right, because

439
00:25:29,240 --> 00:25:30,720
Speaker 1: you don't want to do that if the prices are

440
00:25:30,840 --> 00:25:36,040
Speaker 1: too high. Yeah. I think people who own material stocks,

441
00:25:36,040 --> 00:25:40,520
Speaker 1: who own financial services stocks, who own energy stocks, who

442
00:25:40,520 --> 00:25:44,160
Speaker 1: are most cyclical stocks, don't feel we're at the peak UM.

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00:25:44,200 --> 00:25:47,480
Speaker 1: So I think there is more to go UH in

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00:25:47,600 --> 00:25:52,840
Speaker 1: the economy, and UH, for example, of financial institutions are

445
00:25:52,880 --> 00:25:56,960
Speaker 1: are trading at evaluation trials of the book value and

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00:25:57,000 --> 00:25:59,639
Speaker 1: relative to earnings, it's much lower than historically has been

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00:25:59,640 --> 00:26:02,400
Speaker 1: the case. So that kind of goes to the question

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00:26:02,440 --> 00:26:05,720
Speaker 1: I've had, David, and and given your experience and perspective,

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00:26:05,840 --> 00:26:07,960
Speaker 1: I suspect you can have an opinion here. But as

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00:26:07,960 --> 00:26:10,720
Speaker 1: we think about these cyclical stocks which have traded so

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00:26:10,800 --> 00:26:14,359
Speaker 1: well really since uh last September, that cyclical trade has

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00:26:14,400 --> 00:26:16,639
Speaker 1: really been a great rotation trade for a lot of investors.

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00:26:17,040 --> 00:26:19,600
Speaker 1: How long do you think that can go on? Like

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00:26:19,640 --> 00:26:21,760
Speaker 1: how much legs does that type of trade have on

455
00:26:22,240 --> 00:26:25,080
Speaker 1: as opposed to just buying Amazon and Apple and you know,

456
00:26:25,160 --> 00:26:28,000
Speaker 1: looking at it maybe ten years from now. Yeah, you

457
00:26:28,080 --> 00:26:30,840
Speaker 1: know it's a great question. You know one answer as well,

458
00:26:30,920 --> 00:26:34,639
Speaker 1: how long did the tech roth stock trade trump the

459
00:26:34,720 --> 00:26:39,280
Speaker 1: value trade? Um? Almost a decade probably, but if you

460
00:26:39,320 --> 00:26:41,800
Speaker 1: look back for a hundred years, they're kind of neckonnect

461
00:26:41,880 --> 00:26:45,240
Speaker 1: maybe a slight actual edge to value. Second, of course,

462
00:26:45,480 --> 00:26:47,040
Speaker 1: is I think you want to look at the interest

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00:26:47,119 --> 00:26:49,880
Speaker 1: rates to explain what's going on today and where things

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00:26:49,920 --> 00:26:53,560
Speaker 1: may lie. You know, what's interesting today is the industration

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00:26:53,720 --> 00:26:57,639
Speaker 1: coming back down is one five one where we expect

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00:26:57,760 --> 00:27:00,359
Speaker 1: the ten your treasury to be when the dust settles

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00:27:00,359 --> 00:27:02,760
Speaker 1: and we have a normal economy. I think that is

468
00:27:02,920 --> 00:27:06,160
Speaker 1: highly unlikely. In two thousand nineteen, we saw the ten

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00:27:06,240 --> 00:27:10,400
Speaker 1: year at two point nine, so by many metrics, businesses

470
00:27:10,440 --> 00:27:13,200
Speaker 1: are saying even more business and they saw pre pandemic

471
00:27:13,240 --> 00:27:16,479
Speaker 1: in two thousand nineteen, So why wouldn't that Why wouldn't

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00:27:16,480 --> 00:27:18,680
Speaker 1: that tenure treasury go back up to two point nine?

473
00:27:19,080 --> 00:27:21,199
Speaker 1: If that's the case, what are going to be the

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00:27:21,240 --> 00:27:24,240
Speaker 1: aspects of the economy that are going to respond. Well,

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00:27:24,440 --> 00:27:27,000
Speaker 1: you've got to start with financials. Their most important products

476
00:27:27,000 --> 00:27:28,879
Speaker 1: as loans, and if the interest rate is going to

477
00:27:28,920 --> 00:27:30,800
Speaker 1: go up one to one and a half percent more

478
00:27:30,840 --> 00:27:33,800
Speaker 1: from here, I think that positions them quite well. Do

479
00:27:33,840 --> 00:27:36,439
Speaker 1: you expect dollar strength now against for example, the year

480
00:27:36,520 --> 00:27:41,960
Speaker 1: on the pound? Um, I'm just I'm just asking David,

481
00:27:42,000 --> 00:27:44,240
Speaker 1: because a lot of people have been investing in European

482
00:27:44,280 --> 00:27:47,160
Speaker 1: equities saying, look, they're they're reopening is to come, so

483
00:27:47,200 --> 00:27:49,040
Speaker 1: they are going to get that growth pushed that the

484
00:27:49,119 --> 00:27:53,920
Speaker 1: US got a couple of months ago. So I think

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00:27:54,000 --> 00:27:58,320
Speaker 1: that the dollar is not going to strengthen dramatically. Here's why.

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00:27:58,400 --> 00:28:02,359
Speaker 1: I think overseas are lagging relative to what we've done,

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00:28:02,680 --> 00:28:05,840
Speaker 1: and as they ultimately get the pandemic as well. Under

488
00:28:05,880 --> 00:28:09,160
Speaker 1: controls we have, I think their economies have respond their

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00:28:09,200 --> 00:28:13,080
Speaker 1: currencies will get better ultimately. Of course, I think that

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00:28:13,840 --> 00:28:16,679
Speaker 1: although we should normalize the interest race, and they talked

491
00:28:16,680 --> 00:28:19,440
Speaker 1: a good game yesterday, there's gonna be just trendous pressure.

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00:28:19,480 --> 00:28:22,280
Speaker 1: Even though they're independent. There's gonna be political pressure to

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00:28:22,440 --> 00:28:25,760
Speaker 1: let things grow, to keep the party going, to keep

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00:28:25,800 --> 00:28:28,960
Speaker 1: the punch bowl out longer. That's not gonna be a

495
00:28:29,040 --> 00:28:32,720
Speaker 1: boon to the dollar until therefore, Um, I think the

496
00:28:32,760 --> 00:28:35,480
Speaker 1: dollar will we can ultimately. All right, David, thanks so

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Speaker 1: much for joining us. As always, we love getting your perspective.

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Speaker 1: David Dead's managing principal and senior portfolio manager at p

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00:28:41,400 --> 00:28:46,760
Speaker 1: PACK Private Wealth Management, located in beautiful downtown Summit, New Jersey, which,

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00:28:46,800 --> 00:28:49,840
Speaker 1: by the way, Matt has a hopping outdoor dining scene,

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00:28:50,120 --> 00:28:52,840
Speaker 1: particularly on Thursday nights. We're gonna have more coming up.

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Speaker 1: This is bloom Thanks for listening to the Bloomberg Markets podcast.

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Speaker 1: You can subscribe and listen to interviews of Apple Podcasts

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00:29:01,080 --> 00:29:05,000
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm

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00:29:05,040 --> 00:29:09,080
Speaker 1: on Twitter at Matt Miller three, and I'm fall Sweeney.

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00:29:09,080 --> 00:29:11,720
Speaker 1: I'm on Twitter at pt Sweeney Before the podcast, you

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00:29:11,720 --> 00:29:14,160
Speaker 1: can always catch us worldwide at Bloomberg Radio