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Speaker 2: A Landa lining with us was Blackrock right now hugely.
Speaker 2: We got a great set of guests to day now solid.
Speaker 2: It's like, you know, summer dunkin Donuts, you have the
Speaker 2: little dunkin Donut pause.
Speaker 3: Yeah, you know, it's like it's coming in studio to the.
Speaker 2: Studio, and it's like they just they just they're just
Speaker 2: coming in for the from Mike's air conditioning. Don't kid yourself,
Speaker 2: it's cooler here than Larry's air conditioning.
Speaker 4: Good morning, Amanda. I have to impress you.
Speaker 2: I looked at the not the FED yield curve, which
Speaker 2: is not the two year ten year, but the two
Speaker 2: year thirty year curve. I regressed it back three decades
Speaker 2: and we're not even to like normal steepness now, are
Speaker 2: we right?
Speaker 5: Good morning? Thank you for having me.
Speaker 6: You're hitting on one of the themes that is actually
Speaker 6: pretty consistent across our platform, which is an expectation for
Speaker 6: steeper curves, and I think normal, yes, and I think
Speaker 6: we've already had some steepening. But the expectation across a
Speaker 6: variety of different tasks is that that steepening trend could continue,
Speaker 6: driven by a multitude of factors, but at the long end,
Speaker 6: the fiscal situation that ranks among them. And I think
Speaker 6: from our perspective, and this goes back to our views
Speaker 6: on corporate credit. When we're allocating to corporate credit, we're
Speaker 6: doing so because of yield and income and carry, not
Speaker 6: because importantly we expect a long, a material rally in
Speaker 6: rates that would boost total return.
Speaker 2: So Marcus Ashworth does a heavy lifting for me at
Speaker 2: Queen Victoria Street. All I do, folks, is gammer and
Speaker 2: go to lunch. Ashwarth really works. European long bonds are
Speaker 2: near their cell by date on the desk. Do you
Speaker 2: have the tension I have when I look at a
Speaker 2: five year thirty or a Japanese twenty or a French ship.
Speaker 2: It's like a game of risk, folks.
Speaker 6: I mean, I think all of our platforms are focused
Speaker 6: on where can they get the best attractive return, and
Speaker 6: oftentimes outside the US is something that's on the radar
Speaker 6: for sure.
Speaker 2: So are you buying the I'm going to make some
Speaker 2: news here, are you buying the French thirty?
Speaker 6: Well, I think it just depends on the mandate and
Speaker 6: how they're allocating across. But I do think when you
Speaker 6: think about some of the fiscal developments in Europe, whether
Speaker 6: it's German infrastructure defense spending right like, you have a
Speaker 6: return of yield support in Europe that wasn't there for
Speaker 6: the past several years. It wasn't that long ago that
Speaker 6: we were dealing with negative rates in Europe, and so
Speaker 6: we do have a much more attractive I think backdropp
Speaker 6: or income and yield and so absolutely Tom outside of
Speaker 6: US exposures are absolutely on the suite of available options
Speaker 6: depending upon the portrac.
Speaker 3: In the US market, the US corporate highild market, I'm
Speaker 3: looking at the id GO function on the Bloomberg terminal,
Speaker 3: gives me all the returns across all fai s income
Speaker 3: that's been the best performer, like by far, how do
Speaker 3: you think about the hygyiold market.
Speaker 6: So this is something that on actually in early April
Speaker 6: April tenth, we had outlined an expectation that actually corporates
Speaker 6: might be able to navigate this, and we were comfortable
Speaker 6: selectively moving down in credit quality into the high end
Speaker 6: of high yeld, not chasing all the way down the
Speaker 6: credit spectrum, but into the high end of highyield. And
Speaker 6: as you noted, doble B's have won one of the
Speaker 6: best performers so far you're to date. We're expecting that
Speaker 6: to continue. One of the questions that my team gets
Speaker 6: constantly is what explains the resilience in high yield spreads
Speaker 6: given all of the uncertainty we actually dug into this
Speaker 6: last week to a large extent, And I think the
Speaker 6: key takeaway from us is that corporates have a lot
Speaker 6: of levers internally that they can flex to mitigate this
Speaker 6: uncertainty and the impact of tariffs, and we're seeing it
Speaker 6: in real time, and I think that's part of the
Speaker 6: reason why HyG yield and IG spreads have been so resilient.
Speaker 6: Never mind the fact that the technicals are really, really supportive.
Speaker 2: It's like the NFL, we got a whole team in
Speaker 2: a control room in downtown Manhattan. Kylin just emails from
Speaker 2: our surveillance control over sure where we need to rule.
Speaker 4: That was a massive jargon.
Speaker 2: So when a high yield spreads are tight, Paul Helby,
Speaker 2: that's price up, yield down, and so the yield is
Speaker 2: closer to the government.
Speaker 3: I think that's what the bond people think. Okay, I
Speaker 3: mean I learned define Lisa bromok.
Speaker 4: Okay, they say the ref's got to go out in
Speaker 4: the field.
Speaker 2: We can continue to talk to Amanda after that.
Speaker 3: So what are we thinking about earning share? What are
Speaker 3: you guys going to be looking for from an earning
Speaker 3: season this year?
Speaker 6: Yeah, and I think just to go back to your
Speaker 6: point time on spreads, the tighter spreads just means a
Speaker 6: receptivity towards credit risk, right, more comfort towards credit risk.
Speaker 5: That's how we would think about it heading into earnings.
Speaker 6: One of the key things that we're watching is the
Speaker 6: speedback loop between corporate margins, the layoff rate, which is
Speaker 6: still low, consumer spending in overall economic activity right now.
Speaker 6: If you can see this on the Bloomberg terminal, average
Speaker 6: EBITDUM margins for ig are above twenty percent. Average EBITDUM
Speaker 6: margins for high yield are above thirty percent. So what
Speaker 6: we're watching is is there pressure on those margins because
Speaker 6: of higher input costs for example, and do corporates flex
Speaker 6: that lay off tool more aggressively? But going back to
Speaker 6: the earlier discussion, actually, I think we've been pleasantly surprised
Speaker 6: that the multitude of levers that corporates can flex here,
Speaker 6: And so what we're really watching for is is there
Speaker 6: a middle ground between how these corporates navigate this, whether
Speaker 6: that's vendor relationships, inventory purchases, the list goes on to
Speaker 6: navigate these this uncertainty and the policy.
Speaker 3: Because we're really not seeing it in inflation data, yet
Speaker 3: it doesn't appear to be so maybe the consumers aren't
Speaker 3: going to bear the big brunt bed I don't know.
Speaker 6: I think our expectation is that inflation is just stubbornly
Speaker 6: above target.
Speaker 5: It makes it difficult for the FED to cut in
Speaker 5: this environment.
Speaker 6: If you dig under the surface from yesterday's data, you
Speaker 6: did see some categories have upward pressure, and I think
Speaker 6: it was telling actually that we were never expecting a
Speaker 6: cut in July, and I thought even September was difficult.
Speaker 6: The market seems to be further pricing out the next
Speaker 6: bed rate cut, and I think that's probably appropriate.
Speaker 2: Don't be a stranger more questions, is your conditioning okay?
Speaker 5: It's great, better.
Speaker 4: Than Blacklow come in to line him.
Speaker 2: Thank you so much, greatly appreciate it.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 2: Banker Innings and Now with Goldman, Sachs and Morgan standing out.
Speaker 2: Someone with decades of experience here, Gerard Cassidy. Gerard, I've
Speaker 2: been dying to ask you this question. I got a
Speaker 2: JP Morgan with an eighteen percent return on equity.
Speaker 4: Everybody is factors away in a ten, nine and eight an.
Speaker 2: Eleven percent return on equity. Is JP Morgan unique and
Speaker 2: superior or the others lagging?
Speaker 4: Which is it?
Speaker 7: I think it's that JP Morgan is unique and superior,
Speaker 7: partly due to the fact, you might recall, during the
Speaker 7: pandemic there was a surge of deposits in the US
Speaker 7: banking industry due to the actions taken by the Federal
Speaker 7: Reserve in the US government. JP Morgan, along with the
Speaker 7: other big banks saw a big increase in their deposits,
Speaker 7: and JP Morgan invested them in a very short duration portfolio,
Speaker 7: cash up at the FED and overnight funds, whereas other
Speaker 7: banks took duration risks, like Bank America. As a result,
Speaker 7: their profitability at JP Morgan as far as superior than
Speaker 7: their peers. The other important part time is that their
Speaker 7: efficiency ratio expenses divided by revenues is around fifty two percent,
Speaker 7: much lower than any of its peers. And that's the
Speaker 7: other factor why they stand out.
Speaker 4: Gered. You and I go so far back. We used
Speaker 4: to go to the Saint Patrick's state party in Boston
Speaker 4: where Albert Gallaton would show up.
Speaker 2: I mean, we go way back. What happens the day
Speaker 2: Jamie Diamond decides to retire? I mean, what happens to
Speaker 2: JP Morgan?
Speaker 4: You know, does it? Does it? Crator? Do they move on?
Speaker 4: How do you see that game happening? Gerard?
Speaker 7: They certainly do not Creter in our review, He's got
Speaker 7: some very strong era parents, in particular Marion Lake, who
Speaker 7: heads up the Consumer Bank. But Tom, you're bringing up
Speaker 7: a good point, because when he steps down, the stock
Speaker 7: is not going to react well to that news. The
Speaker 7: guy is really in a class by his own. He's
Speaker 7: in the Hall of Fame and bank Cegos and he's
Speaker 7: going to be hard to replace. But it doesn't mean
Speaker 7: JP Morgan crashes down. But it may lose some of
Speaker 7: its momentum on the day of the announcement, But as
Speaker 7: they demonstrate under the new leadership, with whoever's at the helm,
Speaker 7: I think you'll see them over time gravitate back to
Speaker 7: where they were when he was in charge.
Speaker 4: Gerard.
Speaker 3: When President Trump was elected to a second term here,
Speaker 3: one of the Trump trades, if you will, was to
Speaker 3: own financials bank stocks here in large part to the
Speaker 3: expectation maybe looser or regulatory framework. Is that kind of
Speaker 3: playing out? How does the market discounting that these days?
Speaker 7: Actually, Paul, it played out extremely well after he was
Speaker 7: elected in November, and the bank stocks were clear outperformers
Speaker 7: in twenty twenty four.
Speaker 8: They were also doing very well through the end.
Speaker 7: Of February, outperforming the market, and then of course the
Speaker 7: Trump tariff policies were announced, the stocks sold off very hard.
Speaker 8: But since the first week of April, you.
Speaker 7: Know, the bank stocks, not including yesterday's trading action, the
Speaker 7: bank indicies had recovered about thirty five percent, which put
Speaker 7: them near to date ahead of the S.
Speaker 8: And P five hundred again the bank indices.
Speaker 7: So I think what you're seeing is that the Trump
Speaker 7: trade is still working for the banks. And the reason
Speaker 7: for Paul is that the deregulation outlook for the banks
Speaker 7: is very positive.
Speaker 3: So yard here is by the group, here is it
Speaker 3: try to be selective. How are your clients thinking about
Speaker 3: some of these big banks, because boy, the earnings over
Speaker 3: there today and yesterday you look pretty solid across the board.
Speaker 8: They really do.
Speaker 7: And it's a good question, and you can certainly buy
Speaker 7: the group through one of the ETFs that we're all
Speaker 7: familiar with. But I think if you are in the
Speaker 7: camp that the Federal Reserve could be lowering shor term
Speaker 7: interest rates between now and the end of the year
Speaker 7: twenty five to fifty basis points.
Speaker 4: Maybe a year.
Speaker 7: From now the short end of the curve is down
Speaker 7: seventy five or even one hundred basis points. Is a
Speaker 7: positive slope to the curve, assuming the tenure stays anchored
Speaker 7: at four and a half percent, a three and a
Speaker 7: half three and three quotas sped funds four and a
Speaker 7: half ten uyere is very.
Speaker 8: Positive for the banks.
Speaker 7: In fact, you have to go back twenty years to
Speaker 7: find that kind of environment where the Fed funds rate
Speaker 7: it was over three percent with a positive slope. So
Speaker 7: that would suggest regional banks could which I've logged the
Speaker 7: money centers could be the play for the next six
Speaker 7: to twelve months.
Speaker 2: Gered I need to recover my portfolio. I don't own bitcoin,
Speaker 2: I didn't buy JP Morgan. Give me the small bank
Speaker 2: stock at Gerard Cassidy at Tucker Anthony.
Speaker 4: RLDA this morning.
Speaker 8: That's a great name, it's not so small.
Speaker 7: The challenge Tom is that the small banks are being acquired.
Speaker 7: But I steer people to popular in Puerto Rico. And
Speaker 7: what though it's not a community bank anymore. Puerto Rico
Speaker 7: has fully recovered, obviously from the terrible years they had
Speaker 7: five years ago. And this is the leading bank in
Speaker 7: the on the island and they're doing a great job
Speaker 7: and they have a ton of excess capital and the
Speaker 7: buyback should be very supportive.
Speaker 4: Plus has road trip to me short on it.
Speaker 2: Gerard Cassidy with RBC Capital Markets Legendary.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 4: This is well.
Speaker 2: Timed with David Malpass is making jokes about cors burying,
Speaker 2: you know, taking physics, call it, you know, a huge
Speaker 2: program back in her youth. But the scope and scale
Speaker 2: of what mister Melpass has done, including running for a
Speaker 2: Republican office within the Empire, stayed out of a pickup
Speaker 2: truck or a van. It's like you know, VW van
Speaker 2: or something. And he's done so much, including the former
Speaker 2: president at the World Bank, where thrilled he could join
Speaker 2: us this morning, David, this could be like a four
Speaker 2: hour conversation.
Speaker 4: There's a little bit going on. Hi, Tom and Paul,
Speaker 4: good to see you.
Speaker 2: I look at the Indonesian rupea. I'm sure it's the
Speaker 2: first thing you looked at this morning. And I got
Speaker 2: a moonshot of Indonesia weakness from twenty eleven. I guess
Speaker 2: is capitulate the right words. They've capitulated to Trump tariffs
Speaker 2: for the World Bank and for emerging markets. If we
Speaker 2: get Indonesia like tariffs, do they unravel?
Speaker 9: Currencies are really important to people. If you think about
Speaker 9: working people around the world.
Speaker 4: They buy that. All they do is get.
Speaker 9: A wage and then spend it and they and that's
Speaker 9: where inflation is the rub And so as you I
Speaker 9: do wake up every morning thinking about what currencies are
Speaker 9: doing around the world. There's a huge amount of pressure
Speaker 9: on weaker currencies and they're trying to find how they're
Speaker 9: going to interact in between the US and China. So
Speaker 9: that's the source of this, you know. The mistake, and
Speaker 9: we should remind people of this was becoming the world
Speaker 9: becoming dependent on China. We were all aware of how
Speaker 9: harmed Germany was by depending on Russia for their natural gas.
Speaker 9: Even starting with Reagan, he pleaded with the Europeans not
Speaker 9: to get stuck were the Soviet Union. So but in
Speaker 9: the recent years, year after year, we're more dependent on China.
Speaker 4: So that takes work to get a case. So you
Speaker 4: have the voice of the president.
Speaker 2: I mean you come from the Republican side. If you
Speaker 2: were to advise the group, mister Bessett and all, do
Speaker 2: we want to mandate a weaker dollar policy or is
Speaker 2: that feasible that we can we can tell the rest
Speaker 2: of the world what to do.
Speaker 9: It's clearly what we're doing is building manufacturing in the
Speaker 9: US so that it's competitive and that it can have
Speaker 9: verticals supply chains that get it done. You have to
Speaker 9: have small business loans, You have to have workers with skills,
Speaker 9: better education system, and they're working on that and that
Speaker 9: will work to give to give you the trade balance,
Speaker 9: more balanced trade.
Speaker 4: That we need.
Speaker 9: I think currencies are a slippery slope because once you
Speaker 9: weaken your currency, you get more prices, you get more
Speaker 9: inflation out of that. So my view is that we
Speaker 9: ought to be defending the dollar intense, defending the dollar
Speaker 9: and making clear to the world it's going to be
Speaker 9: the US dollar for fifty years and invest in US
Speaker 9: or losing.
Speaker 2: I can't say how much he bes shown the door
Speaker 2: at the White House faced.
Speaker 4: I don't think.
Speaker 9: I don't think that the White House wants good outcomes
Speaker 9: for workers.
Speaker 4: Come on, David, I'm gonna stop you.
Speaker 2: President Trump has a history at every step of saying
Speaker 2: he wants a week dollar to boost.
Speaker 9: Exports, he wants good outcomes for workers, and that's what's
Speaker 9: going on right now. So I'm not sure I agree
Speaker 9: with that. If you want the yield curved lower, you
Speaker 9: defend the dollar and everybody will invest in your bonds
Speaker 9: and in your bills, and.
Speaker 4: That is going on. Look at what's going on in Europe.
Speaker 9: The euro is strengthening and they're feeling their oats because
Speaker 9: they finally started doing some defense spending. And so that
Speaker 9: Trump is changing the world pretty rapidly in a way
Speaker 9: that we'll make it more secure from Russia and China,
Speaker 9: and we'll get a lot more investment into the US.
Speaker 9: But I don't think the markets should be should expect
Speaker 9: dollar weakness out of that policy. If you're doing good
Speaker 9: policies in the US, it's going to be dollars supportive.
Speaker 3: David, with all the tariff discussions going on, is globalization
Speaker 3: dead or dying because we all grew up with globalization, Well.
Speaker 9: We did, but it was a mistake in many ways.
Speaker 9: So globalization, so let's use two words. Globalization means getting
Speaker 9: parts from other countries in an efficient way. So that
Speaker 9: made sense in areas, But then was it sensible for
Speaker 9: Germany to get its energy from Russia? No, from the
Speaker 9: Soviet Communist Soviet Union and they cut sweet ardeals to
Speaker 9: do it. That was a mistake. Same with China. We
Speaker 9: just went too far and had no knowledge of what
Speaker 9: we were doing in terms of the dependence. So I
Speaker 9: think as we you know, people use words, So globalization
Speaker 9: is this word that we think we know what it means.
Speaker 4: But I think we will.
Speaker 9: Stay in a market based global economy where you can outsource,
Speaker 9: but a lot of it is going to be made
Speaker 9: in the United States.
Speaker 3: Tariffs in general, is that the tool to get us there?
Speaker 3: Do you think is that the best tool to get
Speaker 3: us there?
Speaker 9: What we know is that the WTO wasn't working, and
Speaker 9: the whole idea of most favored nation and permanent normal
Speaker 9: trading relationship didn't work. That was the whole system that
Speaker 9: the US pioneered and led on and really got hurt by.
Speaker 9: It was the idea of we lower ours to everybody
Speaker 9: at the same time, regardless of what they're doing. So
Speaker 9: that's getting that's getting a fully rethought. I think it
Speaker 9: can lead to a more balanced relationship. But you have
Speaker 9: you really have to start with it.
Speaker 4: China.
Speaker 9: You know, China is intensely communists and became a dominant
Speaker 9: country playing that game.
Speaker 4: We need a new game. Let me get the question
Speaker 4: out of the way.
Speaker 2: Have you been contacted by the White House and their
Speaker 2: new FED chairman search?
Speaker 9: I don't want to go into conversations. I want to
Speaker 9: really focus on how do you fix the FED? And
Speaker 9: you have to fix it in its models, in its
Speaker 9: balance sheet, and in its regulatory policy. This is going
Speaker 9: to take an intense effort by the whole board. There's
Speaker 9: got to be leadership of moving the board to the
Speaker 9: idea that they're.
Speaker 2: Different ways to If the president sets up a new
Speaker 2: chairman of whatever ILK, whether it's David Malbus or anyone else,
Speaker 2: can't the other presidents and governors just start dissenting, almost
Speaker 2: as a dissent vote.
Speaker 4: People will talk about that.
Speaker 9: I think leadership really can dominate within the FED system.
Speaker 9: You remember that it's not just the US FED. The
Speaker 9: FED is the central player in the global central banking
Speaker 9: system and has lots of latitude to make it work.
Speaker 2: Can you tell me why Glenn Hubbard's name is not
Speaker 2: being mentioned. I mean, he's absolutely definitive at Columbia. He's
Speaker 2: our most articulate supply side expert. Why in God's name
Speaker 2: as a president not talking to Professor Hubbard?
Speaker 9: Everyone you said our great candidates Kevin and Kevin and
Speaker 9: Scott and Glenn, and so I don't know the list.
Speaker 9: I hope that the search is wide and that that
Speaker 9: people recognize that we don't want incriminalism, we want really
Speaker 9: a sea change in how the FAT operates in a
Speaker 9: way that is confident.
Speaker 2: Is there any historical evidence back to McChesney martin nineteen
Speaker 2: fifty one that we're going to get a sea change
Speaker 2: within that institution?
Speaker 4: What yes on a case? So Paul Volker obviously was
Speaker 4: a sea change point him, well, said Jimmy Carter.
Speaker 9: As you think about it, Yellen even was a sea change,
Speaker 9: but to the negative side.
Speaker 4: So some are nice. Some part of what we're doing
Speaker 4: has to be to reverse.
Speaker 2: Album over there two minutes some sportsman like contact.
Speaker 4: Paul saved the interviews.
Speaker 3: With a little bit of hindsight here, what do you
Speaker 3: think this FED has gotten wrong?
Speaker 4: Has wrong?
Speaker 9: It's you know, the inflation obviously during Biden not recognizing it,
Speaker 9: but the keep keeping buying bonds when the rates were
Speaker 9: near zero that extended into twenty twenty one and twenty two.
Speaker 9: They were still doing QE that How much did they
Speaker 9: lose four taxpayers on that alone? A giant the buildings
Speaker 9: that you see in the news, why are you building it?
Speaker 4: At World Bank?
Speaker 9: I gave up leases on three three buildings during COVID,
Speaker 9: recognizing office space in DC was going to be cheap
Speaker 9: as can be and that that helps net income a lot.
Speaker 9: They're going the other way of building this, you know,
Speaker 9: a palace.
Speaker 4: But every room has a Bloomberg terminal. Those those are
Speaker 4: really expensive.
Speaker 2: Oh really, you know, we thank you for writing to
Speaker 2: check David Malpass Bank, thank you so much.
Speaker 9: And small business lending. That's a big mistake.
Speaker 4: Not enough of it. Okay, well you back somehow.
Speaker 2: I think it's going to be an eventful Central Bank
Speaker 2: discussion mister Malpass of course iconic with John writing it,
Speaker 2: Bear Stearns going on to a World bank as well
Speaker 2: and working within Republican Powletics.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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 2: When we invented this exercise, folks, it was thinking along
Speaker 2: the lines of going from Gina Martin Adams to Patrick Armstrong.
Speaker 2: Mister Armstrong is with Plurimi Wealth in London is a
Speaker 2: wonderful transatlantic view absolutely definitive onbelief, conviction and asset allocation.
Speaker 2: I just got a note from Ira Jersey of Bloomberg Intelligence. Patrick,
Speaker 2: he's coming out with a study on the thirty year bond.
Speaker 2: Momentarily we'll bring that to you first, folks here at Surveillance, Patrick,
Speaker 2: are you doing a study of thirty year paper in
Speaker 2: Europe and America?
Speaker 4: And what does it signal? Well, I wouldn't want to
Speaker 4: own it.
Speaker 10: I'd rather short the thirty year of treasury. We don't
Speaker 10: shorten at the moment, but I think we're in a
Speaker 10: period where inflation. There's going to be unequivocal spikes and
Speaker 10: inflation over the next decade and over the next twenty years.
Speaker 10: All populist regimes. The endgame is printing new money to
Speaker 10: pay off the old debt. It's Inflation's a big risk,
Speaker 10: and the market for the next decade is priced for perfection.
Speaker 10: Inflation break evens moved up to two point four percent
Speaker 10: today from two point three yesterday, But that's pricing a
Speaker 10: fed because that has a populate decade, and it's just
Speaker 10: so many forces that aren't going to allow that.
Speaker 4: Do you follow on that?
Speaker 2: We will see a breakout higher in the inflation adjusted
Speaker 2: the real rate whatever country, and that will pinge upon
Speaker 2: equity performance.
Speaker 10: I don't even know if the real rate necessarily goes
Speaker 10: a lot higher, because it's the inflation part. It's the
Speaker 10: big risk. So if you're getting right now, you can
Speaker 10: lock in with a tip inflation plus two point three percent,
Speaker 10: no matter what that inflation is over the next thirty
Speaker 10: years on the thirty year tip right now. So that's
Speaker 10: a pretty compelling real yield. What I think is the
Speaker 10: nominal yields that people who are buying them at five
Speaker 10: percent thinking they're going to get two point three percent
Speaker 10: real yields. I don't know if that is going to
Speaker 10: end up being a real yield because inflation rises, I'm
Speaker 10: not sure real yields rise with them. I actually think
Speaker 10: real yields may come down, but nominal yields move higher.
Speaker 3: So Patrick, giving that backdrop, what's your allocation, your asset
Speaker 3: allocation today, how has that change? Maybe over the last
Speaker 3: six or twelve.
Speaker 10: Months, it's not changed a lot. We added equities in
Speaker 10: April thinking we would hold our nose and stick with
Speaker 10: them because valuation has got to prety reasonable valuations, and
Speaker 10: then things came back much sharper than we ever would
Speaker 10: have expected. We haven't trimmed equities yet, so I'm at
Speaker 10: risk of being complacent that the topple trade continues. Trump
Speaker 10: won't put in measures that disrupt the market significantly, or
Speaker 10: he will pivot if the market force, if market forces
Speaker 10: him to do so. But on bonds, I'm sure Japanese bonds,
Speaker 10: I don't know why anyone would want to own a
Speaker 10: Japanese bond. Bank of Japan owns more than half of them,
Speaker 10: but anybody else, it doesn't make sense. Inflation's three point two,
Speaker 10: the ten year yield is one and a half. You're
Speaker 10: just destroying purchasing Japanese bond. You buy a US tip,
Speaker 10: no matter what inflation is, you get inflation plus at
Speaker 10: a realm right now. So that's where we're long tips,
Speaker 10: short Japanese.
Speaker 2: I mean, Paul, you know, I don't have any pithy
Speaker 2: response to this because Patrick's dead on.
Speaker 4: And it's just like all all my radars up.
Speaker 2: And that's why when I come in, I look at
Speaker 2: the French thirty and the Japanese twenty, and they're not pretty.
Speaker 3: No, no, not at all. So I mean Patrick, here
Speaker 3: in the US there has been a lot to talk
Speaker 3: about who the next FED chairman is or should be.
Speaker 3: Should we be paying attention to any then.
Speaker 10: You've got to I think that's one of the biggest
Speaker 10: tail risks is Trump just goes full chaos and puts
Speaker 10: someone who's even more dubbish than any of the central
Speaker 10: bankers who are there right now. So Waller is a dove,
Speaker 10: he's credible, his arguments make sense on why you would
Speaker 10: cut rates. But if he goes more extreme than that,
Speaker 10: and Jared Kushner comes in or one of his sons
Speaker 10: something really crazy, it's not totally implausible. And that's how
Speaker 10: he's thinking one percent interest rates. He thinks it's great news.
Speaker 10: He's thinks short term fix gives me a sugar rush,
Speaker 10: but there's real long term consequences. So Urduwan's dining in
Speaker 10: Turkey works for a very very short time, but the
Speaker 10: long term consequences would definitely be there.
Speaker 2: Patrick, don't be a strange We're going to come here
Speaker 2: and look at some economic data right now, Patrick Armstrong,
Speaker 2: we continue with REMI Health Management. We've got a really
Speaker 2: important economic set of data here coming off of CPI yesterday,
Speaker 2: and I get the PPA look at that Paul.
Speaker 4: It's a string of zero signaling disinflation.
Speaker 3: Yeah, absolutely, it's a.
Speaker 4: Massively disinflated thing.
Speaker 2: Equities pop right off.
Speaker 3: The news, right off the news here, I mean PPI
Speaker 3: final demand month on month flat, the consensus was zero
Speaker 3: point two percent. Even if you xoff food and energy flat,
Speaker 3: no inflation at the producer level there the consensus was
Speaker 3: positive zero point two So even though I mean to
Speaker 3: analyze those rivers coming in below expectations.
Speaker 2: I mean, equities pop here features up nine. It's not
Speaker 2: all that much to it, but the fact is it's
Speaker 2: a pop here with the VIC seventeen point seven zero
Speaker 2: thirty or bond even there comes in from a five
Speaker 2: oh one into the handle is a four point nine
Speaker 2: to eight. So price up, yield down there. And again, well,
Speaker 2: the revisions were higher, I'll cut you know, the concern
Speaker 2: crew some slack. The revisions came in a higher but
Speaker 2: nevertheless a disinflationary tendency.
Speaker 4: I think that may work out to a churn.
Speaker 2: We'll see with Patrick Armstrong or Plurimi, Well, Patrick, I
Speaker 2: love the distance you have, even when you're writing in
Speaker 2: the ft from mag seven from across the ocean, What
Speaker 2: does MAG seven look like into the July thirty earning season.
Speaker 10: So the ones we own, I'm sticking with them through
Speaker 10: the earnings reports. So in Video's got some nice tail
Speaker 10: wins with opening up exports again into China. It's an
Speaker 10: expensive company again, the profit margins are incredible Meta and Alphabet.
Speaker 10: I think they're trading at very reasonable multiples market multiples
Speaker 10: with above market growth. We own Apple as well. That's
Speaker 10: what I'm a bit unsure of getting the US consumer.
Speaker 4: Why do you own Apple?
Speaker 10: It's buying back so many shares is the real driver
Speaker 10: of it. The thing I'm most attracted to is I've
Speaker 10: got a clear demand for Apple shares with all the
Speaker 10: cash flower of producers, and it's using that to buy
Speaker 10: its own shares. So it's a company that's not at
Speaker 10: a ridiculous multiple, lofty multiple. If they price it right
Speaker 10: on a new cheaper phone that doesn't destroy the margin
Speaker 10: on what they're selling right now, I think it's a
Speaker 10: very attractive value. If they don't get that right, and
Speaker 10: that's the risk that's concerning me a little bit. As
Speaker 10: they eat into their margin by selling cheaper products, we'll
Speaker 10: see that on the earnings report. What their plans are
Speaker 10: hopefully it's credible, but that's the one risk of the
Speaker 10: stock that I do own. I don't own Tesla. We
Speaker 10: sold Amazon about a month ago just on concerns on
Speaker 10: the consumer.
Speaker 2: I mean, I don't see I don't see Patrick Armstrong
Speaker 2: and a Tesla. I see even an MGTD nineteen three.
Speaker 3: Yeah, it's a good Peter o'tool used. It's a solid one. Patrick.
Speaker 3: We saw earlier in the year people kind of dumping
Speaker 3: US assets, including stocks and moving over to Europe. Is
Speaker 3: that kind of played out or is that maybe a
Speaker 3: longer term trend.
Speaker 10: We're still doing it, so every month it seems I'm
Speaker 10: selling a US company and buying a European one. Recently
Speaker 10: it's we still own half of our global portfolio fifty
Speaker 10: two percent. It is in the US, but if you
Speaker 10: look at a copway mark should be in the US,
Speaker 10: so I'm not totally in the US companies, those big
Speaker 10: cop tech are still dominant companies that look great. But incrementally,
Speaker 10: fiscal flust is coming through in Europe, and we do
Speaker 10: think the US is tapped out on fiscal fluster. If
Speaker 10: I'm right, move higher, the dead dynamics are going to
Speaker 10: start to be a big strain in the US.
Speaker 2: We don't care. I mean, it's not why we head
Speaker 2: you on. Do you see a new totenam with their
Speaker 2: new coaching regime.
Speaker 4: I don't know.
Speaker 10: I'm a Manchester United fan. I know beat us in
Speaker 10: the European Cup final. But Tottenham's got some quality players,
Speaker 10: a good coach, probably better position to do better than
Speaker 10: they did last year in the league anywhere.
Speaker 4: I don't know if they'll win Europe. Okay, you can
Speaker 4: come back.
Speaker 2: Patrick Krstrung, thank you so just absolutely fabulous folks to
Speaker 2: look for his work often in the ft just says
Speaker 2: a great, great job. Patrick Armstrong there with.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just say Alexa, play Bloomberg eleven thirty.
Speaker 4: Let's do the newspapers and relax.
Speaker 3: Let's do it.
Speaker 11: Have you ever kicked your feet up at the Waldorf Astoria?
Speaker 3: Okay, a lot of rubber chicken lunches there. It's really
Speaker 3: I can't wait to see them.
Speaker 11: Well, that's the thing right, I don't.
Speaker 2: Want to, but there's some just spectacular moments.
Speaker 11: Well, you should check it out because it's starting to
Speaker 11: it's opening September, but it's starting to open to a
Speaker 11: few visitors for the main lobbies. So you can go
Speaker 11: check it out. The New York Post got there. The
Speaker 11: clock is still the clock. Yes, the clock is still there.
Speaker 3: And there you know it's not there.
Speaker 11: If you ever been to Sir Harry's Bar, there no longer,
Speaker 11: no longer there. We have two new restaurants there, so
Speaker 11: you can do that. Yes, the Peacock Alley Lounge.
Speaker 5: Yes, us.
Speaker 11: And what they do have is to the the murals,
Speaker 11: the interior designs. They restored them, so they kept that.
Speaker 4: Extraordinary.
Speaker 11: Yes, yes, so it's keeping that New York elegance that
Speaker 11: they say that New have lost over the years.
Speaker 4: Yep, that's folks, Just one little vignette.
Speaker 12: Please, When you walk down a hallway and the door
Speaker 12: is open and it's the room where Cold Porter wrote
Speaker 12: some of his giant songs of the middle twentieth century,
Speaker 12: that's the way they roll at the Waldorf for the estiary.
Speaker 11: Well, love of Marilyn Monroe, I mean Frank Sinatra, I
Speaker 11: mean they've already kind.
Speaker 3: Of been there, so it is coming back.
Speaker 11: It is coming back, all right. So we'll go to
Speaker 11: the Boss and Globe okay, because they have this question out.
Speaker 3: How do you like your lobster roll? Okay?
Speaker 11: Do you like it cold with mayo, warm with butter?
Speaker 11: Or do you like it topped with caviar?
Speaker 4: Cold?
Speaker 3: Cold? Cold caveat?
Speaker 2: I saw you you did something yesterday on social Yes,
Speaker 2: Greek yogurt.
Speaker 11: Yes, I like mine with cold with Greek yogurt on
Speaker 11: a whole wheat hot dog butt. Okay, sorry, that's how
Speaker 11: I had.
Speaker 2: A global technical director just fell off his chair in
Speaker 2: the control room.
Speaker 11: That's how I like it. But the Boss and Glove
Speaker 11: gave some of their top picks. So if you're in
Speaker 11: the mood for one of the best ones around, they
Speaker 11: say you have to head two alive and kicking lobsters.
Speaker 11: It's a family run fish market. Maybe go to James
Speaker 11: Hooking Company, a fish shash in the middle of box Water.
Speaker 4: You've been there many times.
Speaker 2: If I've been there and there's always a line, is
Speaker 2: there it's just picnic tables and it's like it's like,
Speaker 2: are you It's back before they became Hampton's Like, I
Speaker 2: mean Boston lobsters, not like the Hamptons. You're not doing
Speaker 2: seventy bucks.
Speaker 11: Producer Eric gave his topic. He said, Mabels in Maine,
Speaker 11: that is.
Speaker 3: The place to go have an excellent lobster roll.
Speaker 4: Yeah, thank you. I'm so damn hungry. Can we do
Speaker 4: like a door dish lobster roll and put it on
Speaker 4: red O's MX.
Speaker 11: YEP, one more for you. Two big milestones this week
Speaker 11: that kind of showed the struggles of broadcast networks. The
Speaker 11: first one, Nielsen results actually showed the gap widening between
Speaker 11: viewers spending more time watching streaming services than broadcast cable.
Speaker 11: So it's starting to widen. Forty six percent of Americans
Speaker 11: TV time spent streaming services, led by YouTube, Netflix. They
Speaker 11: topped the driving force. Well, you know, schools out some
Speaker 11: more kids are streaming and kids like streaming, so that's
Speaker 11: a reason for it. The second thing, the other milestone
Speaker 11: is that for the third straight week, Nielsen said Fox
Speaker 11: News Channel had more viewers in primetime on weeknights than
Speaker 11: any of the main broadcast networks. We're talking ABC, CBS, NBC,
Speaker 11: and Fox Entertainment. Two point four million viewers in primetime
Speaker 11: on weeknights.
Speaker 2: Thank you so much for doing this. Well, these are
Speaker 2: Titanic shifts. I mean this was back to Moffatt, Nathanson
Speaker 2: and Rich Greenfield. The audience is telling the fancy people.
Speaker 3: What you do, and the advertisers are following you. Take
Speaker 3: a look at some of the advertisers on broadcast television.
Speaker 3: It's just the oh, it's just the healthcare, the drug things,
Speaker 3: because that's the audience.
Speaker 4: And secretary trying to get rid of the drug heads.
Speaker 3: Yep. So I don't know what that would do to
Speaker 3: the networks these days. Okay, that's just I mean, it's
Speaker 3: just the trend. We've been seeing it for years and years.
Speaker 2: Did you do the newspapers today or did your intern
Speaker 2: to them?
Speaker 4: Excuse me, analyst? Did you analysts to it?
Speaker 11: No, No, they were off today.
Speaker 4: I bet they were getting ready for Thursday.
Speaker 2: Happy are under the bridge there at Grand Central Station,
Speaker 2: Lisa Mateo, thank you so much.
Speaker 4: It is the newspapers.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify
Speaker 1: and anywhere else you get your podcasts. Listen live each
Speaker 1: weekday seven to ten am Easter and on Bloomberg dot com.
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