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Speaker 2: the one that puts Greek and Latin into our bond cover.
Speaker 2: And Robert Michael, Bob Michael of JP Morgan. How do
Speaker 2: the Greeks right now? The derivative Greeks play into what
Speaker 2: you do When you look at the quiet of holes
Speaker 2: in the market or a new volatility, maybe it's skew
Speaker 2: that you play. How does a derivative space fit in?
Speaker 3: They're critical to what we do in the markets. I
Speaker 3: think so much of what you try to do is
Speaker 3: in the cash market, but there's limited bandwidth. Broker dealer
Speaker 3: balance sheets, aren't what they used to be, And a
Speaker 3: lot of the balance sheet in the industry sits with
Speaker 3: investors like ourselves, and we tend to own securities until
Speaker 3: we change our mind. So we're not in the market
Speaker 3: actively trying to change positions. You go into the derivatives
Speaker 3: market to help you change the positioning of your portfolio
Speaker 3: or perhaps put a bit of a hedge on.
Speaker 2: Is there about Michael, and I think of Ian Lingoln
Speaker 2: at BMO Capital. You're saying we're going to see price up,
Speaker 2: yield down. Is there a bet in the space now
Speaker 2: like what you believe that we will see as a
Speaker 2: regime lower yields.
Speaker 3: Well, it's everywhere we liken the current environment. In nineteen
Speaker 3: ninety five, there's one critical difference. When the FED finished
Speaker 3: hiking rates from three percent to six percent in ninety five,
Speaker 3: the entire yeal curve was above the FED funds rate. Today,
Speaker 3: we think the Fed is done hiking rates, but the
Speaker 3: entire yeal curve is trading roughly one hundred basis points
Speaker 3: through the FED funds rate. So that's telling us that
Speaker 3: the market still believes that the Fed will come in
Speaker 3: take pressure off of businesses and households by doing at
Speaker 3: least a few rate cuts over the next twelve months.
Speaker 1: Bob, We're sitting here at two year treasury almost at
Speaker 1: five percent. Here, I don't know, I'm going to park
Speaker 1: my money right there, and I'm going to feel fine.
Speaker 1: Is that a bad trade?
Speaker 3: It's not a bad trade, but you may feel lonely
Speaker 3: compared to the money that's sitting in money market funds.
Speaker 3: You're willing to step out. But what we're looking at
Speaker 3: is over six trillion dollars of assets sitting in money
Speaker 3: market funds and they're feeling cozier at somewhere closer to
Speaker 3: a five and a half percent yield. For that money
Speaker 3: to come out and come into the bond market, we
Speaker 3: do need to see the Fed begin to cut rates,
Speaker 3: or at least telegraph that they're thinking about it again
Speaker 3: and not dropping these sins that maybe rates could go higher.
Speaker 1: So what do you think our Fed should do? I mean,
Speaker 1: the economic data suggests that maybe there's no reason to
Speaker 1: cut rates. We've got I don't know, inflation still out there.
Speaker 3: If I were at the Fed, everything looks so good,
Speaker 3: I would just sit in my hands for the next
Speaker 3: couple quarters see what happens into the election. And do nothing.
Speaker 3: You're looking at over two years of unemployment below four percent.
Speaker 3: I know we get PCE at the end of this week.
Speaker 3: There's a lot of debate. Is it going to be
Speaker 3: two seven or two point eight year every year? Is
Speaker 3: it a point two five for a point twenty seven increase?
Speaker 3: The reality is to something year every year is much
Speaker 3: lower than the six point six percent year every year
Speaker 3: it was a couple of years ago.
Speaker 2: So the stated system, is there leverage in the system?
Speaker 2: Is there that animal don't I don't want to say
Speaker 2: animal spirit, that that ancient animal instinct to leverage up
Speaker 2: when we're certain we know what we're doing. Is there
Speaker 2: that bet right now?
Speaker 3: You're not seeing it to the extent that we saw
Speaker 3: it previously, either headed into the dot com bubble in
Speaker 3: two thousand or certainly into the Great Financial Crisis in
Speaker 3: two thousand and seven two thousand and eight. But there
Speaker 3: is a lot of borrowing going on out there. The
Speaker 3: most levered balance sheet are not businesses in household they're
Speaker 3: actually federal governments. Globally, when you look about the extension
Speaker 3: of credit into the system, bank balance sheets may have shrunk.
Speaker 3: Private credit is out there, but.
Speaker 2: The heart of the matter. Going back to Rogueff and Reinhardt,
Speaker 2: this time is different. Is they took within their iconic
Speaker 2: study of debt that it's about public and private combination
Speaker 2: of debt. Would you suggest we're going to see a
Speaker 2: private debt issuance and build up and belief in debt,
Speaker 2: so we've got both public and private over indebtedness.
Speaker 3: It doesn't feel like we're heading there. I agree, right
Speaker 3: right now, it feels like and I know you did
Speaker 3: a story that consumers are looking to do a bit
Speaker 3: more vacationing and a third of them are willing to
Speaker 3: put that, willing to go into debt to do that.
Speaker 3: Going into the financial crisis, one hundred and twenty percent
Speaker 3: of them would have been willing to have gone into
Speaker 3: debt to go on vacation. So there is some moderation.
Speaker 3: You look at housing, consumers aren't changing, aren't chasing how
Speaker 3: housing prices higher.
Speaker 2: Let's listen to our Latin tour guide here as we.
Speaker 3: Go to Rome, Arma, we're room quay kind of troy
Speaker 3: I quy primus aboris.
Speaker 2: That's great, and that's like Lisa Mateo's schedule to go
Speaker 2: to Rome. Here she's going deep into debt. Okay, and
Speaker 2: to go to loan so she can catch up with
Speaker 2: Bob Michael and the Latin. That's perfect, it's out there
Speaker 2: as well. It's going to happen.
Speaker 4: Bob. What do I do here?
Speaker 1: And if I want to take some credit risk here?
Speaker 1: Do I stay with investment grade? Do I go to
Speaker 1: high yield? Because high yield was the performer last year
Speaker 1: in the fixed income space? Where do we go in
Speaker 1: a credit space?
Speaker 3: You hope that over the next week high yield pulls
Speaker 3: back a little bit further and then you go in
Speaker 3: without recession on the horizon. You have nothing to fear
Speaker 3: but yourself. If you stay out of the high yield market,
Speaker 3: you're you're picking up now yields of over eight percent. Wow,
Speaker 3: corporate profitability looks good. It's a much cleaner high yield
Speaker 3: market than anything I like time six percent of it
Speaker 3: washed away back in twenty twenty.
Speaker 2: I guess I got to go to the FED meeting
Speaker 2: as well. The basic ideas, it's a snoozefest to get
Speaker 2: to June when they redo the dots and as a
Speaker 2: raging debate now Craig Trus with great leadership on this
Speaker 2: over the weekend about the FED almost over communicating. Is
Speaker 2: your world made more complex because there's too much communication
Speaker 2: from FED presidents, governors and leaders.
Speaker 3: You know, Tom, the one dead language that I miss
Speaker 3: is FED speak. Remember in the days back in the eighties,
Speaker 3: when the FED wasn't always telling you every day what
Speaker 3: you were thinking.
Speaker 2: I yearned for it.
Speaker 3: You used to get the FED minutes, you used to
Speaker 3: get the listen to the Humphrey Hawkins testimony. You heard
Speaker 3: what Greenspan said, then you got out your secret FED
Speaker 3: decodering and interpretated what he meant was a value to that.
Speaker 3: And I think there is just way too much daily
Speaker 3: information coming, Paul.
Speaker 2: The most important conversation I've had on this is someone
Speaker 2: that Bob Michael knows, Richard Berner, who drove the ship
Speaker 2: at Morgan Stanley for Steve Roach for years in the
Speaker 2: US economy, public service to the nation at Treasury. And
Speaker 2: what was so important here is there was just what
Speaker 2: mister Michael says. And then you would go see a
Speaker 2: president at a rotary club or some other economic club
Speaker 2: and they'd say, just as little at the breakfast is
Speaker 2: they were saying to us on the street.
Speaker 1: Bob, you're head of the global fixed in home currency
Speaker 1: and Commodities group. Here, let's go currencies. What is there
Speaker 1: a bare case for the US dollar here? Or are
Speaker 1: we just all along the US dollar and letting everybody
Speaker 1: else deal with it.
Speaker 3: There's a bare case for the dollar when the FED
Speaker 3: starts cutting rates. Until they do that, there's no sense
Speaker 3: fighting the strength and the dollar. If you look at
Speaker 3: when the dollar really started to gain strength, it's when
Speaker 3: the FED started hiking the FED funds rate at the
Speaker 3: start of twenty twenty two. Back then, yen was about
Speaker 3: one ten, not one point fifty. The entire strength and
Speaker 3: dollar yen has come from the FED hiking rates, not
Speaker 3: anything that's happened on the Bank of Japan's part.
Speaker 1: So, and we see central banks around the world cutting rates,
Speaker 1: are or saying they will cut rates, signaling that they
Speaker 1: will cut rates. So I mean, does a FED, how
Speaker 1: does the FED think about the dollar when they think
Speaker 1: about their rate policy.
Speaker 3: You're right, there have been seven thousand basis points of
Speaker 3: rate cuts in the emerging market central banks. So those
Speaker 3: central banks have been cutting rates for over a year,
Speaker 3: and I have to imagine they're starting to second guests
Speaker 3: whether they need to keep cutting rates. Here, I don't
Speaker 3: know that the FED thinks about the dollar all that much.
Speaker 3: If we go back, we were just talking about the
Speaker 3: FED speak of the nineteen eighties. I remember we used
Speaker 3: to look at the ten book, We used to look
Speaker 3: at the minutes. We used to see how they prioritized inflation,
Speaker 3: growth and the dollar, and many times the dollar was
Speaker 3: their number one priority. I don't think it's their priority
Speaker 3: right now. I think it's a huge one for the
Speaker 3: ECB and the Bank of Japan A.
Speaker 2: Bob and the time we got left. I really want
Speaker 2: to focus here on end of the earning season in
Speaker 2: corporate issuance off of like ZV Body at Boston University,
Speaker 2: or there's a thing folks called eminem. It's not the candy,
Speaker 2: but it's a theory here and the allocation of your
Speaker 2: capital structure to debt. Are we underdebted right now in
Speaker 2: quality corporate America? Do they have not enough bills, notes
Speaker 2: and bonds?
Speaker 3: I think we are. We have spent the last quarter
Speaker 3: trying to poke holes in corporate profitability in the markets
Speaker 3: and at JP Morgan with our credit research team, and
Speaker 3: they can't do it. And instead what they're seeing is
Speaker 3: a reacceleration in corporate profitability and businesses thinking about investing
Speaker 3: in cap X. Again, it looks pretty bright out there
Speaker 3: for corporate America. It does remind me in nineteen ninety five.
Speaker 2: Do you suggest bond issuance will be the surprise of
Speaker 2: the next eighteen months.
Speaker 3: I don't know. I think there's a shortage of corporate
Speaker 3: debt right now. We were looking out over the next
Speaker 3: couple quarters and there's money, more money maturing than there
Speaker 3: are planned.
Speaker 2: At what you just heard there, folks, is classic John
Speaker 2: Templeton from Bob Michael. I'm sorry, Paul, I'm in this camp.
Speaker 2: There's a shortage of bonds. Nobody's looking at the Bob
Speaker 2: Michael world and it's a tangible part of how we
Speaker 2: do this, and it links into the equity market, and
Speaker 2: there's just a shortage of bonds. That's all there is.
Speaker 1: I mean, Bob, you read you're JP Morgan Asset Management.
Speaker 1: You guys are pretty big. If you wanted to get
Speaker 1: out of a position change a big allocation. Is there
Speaker 1: enough liquidity on the street to kind of get that
Speaker 1: trade done to your liking today versus ten or fifteen
Speaker 1: years ago. How much harder is it, if at all,
Speaker 1: to kind of make major trades for you guys.
Speaker 3: Right now. When things are relatively stable, you can do it.
Speaker 3: It will take a little bit of time, depending how
Speaker 3: large a position you're trying to move. There's a lot
Speaker 3: more in portfolio trading, so hundreds of line items all
Speaker 3: at once at a single price. That's a feature that
Speaker 3: didn't exist pre financial crisis. But when everyone is waried
Speaker 3: and everyone's pulling back liquidity and their balance sheet, then
Speaker 3: it is far more challenging than it was.
Speaker 1: JP Morgan, you say, get that trade done for me, right?
Speaker 1: I mean, you guys are players.
Speaker 3: You try not to do that because you are, You
Speaker 3: are reliant on a counterparty. I think that's a pre
Speaker 3: financial crisis.
Speaker 2: Let me pin down the ten year yeld twelve months
Speaker 2: from now, just a vanilla media call here for animals
Speaker 2: like me.
Speaker 3: I think we're going to be right around four percent.
Speaker 2: Down, but not down with the drama that financial media.
Speaker 3: Not a whole lot, Not a whole lot. I think
Speaker 3: the FED could probably get one hundred and one hundred
Speaker 3: and twenty five basis points of great cut.
Speaker 2: So are you doing cliff notes now in FED speak?
Speaker 2: If you got Greek and Latin down from your undergraduate days.
Speaker 2: I don't are you looking at fed speakers.
Speaker 3: I don't need to do. If they're telling us every
Speaker 3: ten minutes what they're thinking, you don't need cliff notes.
Speaker 2: About Michael, thank you so much, just generous with his
Speaker 2: time here on a Monday that morning, he of course
Speaker 2: is with JP Morgan. This is what we like to
Speaker 2: do best. There's no other way to put it. We
Speaker 2: like to look at equities, bonds, currencies, commodities and shift
Speaker 2: from world class to world class. We do this with
Speaker 2: Bob Michael, J. P. Morgan and bonds and now one
Speaker 2: of my favorite people looking at It's called investment strategy,
Speaker 2: but far more it's just equity strategy. Liz Young joins
Speaker 2: us with an always twisted view from so far thrilled
Speaker 2: she could be with us today, Liz into this earning
Speaker 2: season is a glass half full or less.
Speaker 5: So you know what, I think it's half full on expectations,
Speaker 5: but companies have to come through. And I have to
Speaker 5: tell you, Tom, I don't think I've ever been called
Speaker 5: twisted on a Monday morning, So I don't know if
Speaker 5: that's a good sign for the week, but I think
Speaker 5: what's going to happen this earning season. We've already seen
Speaker 5: it a little bit, especially with the financials, is that
Speaker 5: it's not just about the results. It's always about the guidance.
Speaker 5: But I think right now, even more so, especially with
Speaker 5: where equity valuations are, companies have to come in with guidance,
Speaker 5: and expectors are expecting the guidance to be stronger even
Speaker 5: than before. So companies have to come in with strong
Speaker 5: guidance and optimistic outlook in order to really be rewarded
Speaker 5: at these levels.
Speaker 2: Yeah. And then the reason I say twisted, folks, is
Speaker 2: I got so far working off of Anthony Nodo with
Speaker 2: a real digital heritage. It's almost like a West Coast
Speaker 2: ethos here on like three zip codes in midtown Manhattan
Speaker 2: and list with that, how does a technology group look?
Speaker 2: I mean, maybe not individual stock if you don't want
Speaker 2: to give me a buy Hoed, Sell and Apple, although
Speaker 2: we're listening, but the basic idea here does the tech
Speaker 2: boom continue?
Speaker 5: I think there's two things that we need to pay
Speaker 5: attention to in these results for tech companies. First and
Speaker 5: foremost investors should be aware that expectations for SMP earnings
Speaker 5: growth are positive marginally right low single digits, and all
Speaker 5: of that growth is coming from those tech companies or
Speaker 5: the expectations are coming from those tech companies, So we
Speaker 5: need tech to come through on these first quarter results
Speaker 5: in a positive way in order to carry the index.
Speaker 5: This is the other thing that I think is happening
Speaker 5: and that is really important to watch, not just this
Speaker 5: quarter but for the rest of the year, is that
Speaker 5: we obviously had all of this AI enthusiasm pull forward,
Speaker 5: and now we're looking at it through a company lens
Speaker 5: of when is it really going to come to fruition,
Speaker 5: when is it going to actually create profits? And I
Speaker 5: think some of the enthusiasm and excitement is coming out
Speaker 5: of that, just as everybody realizes that the profits aren't
Speaker 5: happening immediately and there's only really a couple companies that
Speaker 5: are doing a decent job of generating revenue off of
Speaker 5: AI right now, So it may just take longer. Doesn't
Speaker 5: mean the theme is dead, but it may just take
Speaker 5: longer in order to justify these levels of valuations.
Speaker 1: All right, let's talk about valuations, Liz, give us your
Speaker 1: thoughts about how this market is valued. Here do I
Speaker 1: pull out the Magnificent seven and try to look at
Speaker 1: the market on that basis?
Speaker 5: Where are we well given where yields have gone just
Speaker 5: over the past month. The market right now is valued
Speaker 5: for a pretty great environment. And when I say pretty great,
Speaker 5: I mean we've got fundamentals from an earning's perspective that
Speaker 5: need to deliver at least stay this strong or strengthen.
Speaker 5: And we would also need the economic fundamentals to stay
Speaker 5: this strong or strengthen, and we would need geopolitical risks
Speaker 5: to calm down or at least have the absence of
Speaker 5: any big shocks. In the last couple weeks, we obviously
Speaker 5: have had geopolitical tensions heating up and the likelihood of
Speaker 5: shocks feeling higher. So the valuations as we see it now,
Speaker 5: especially given where tenure yields are, do feel a bit high,
Speaker 5: even with this recent pullback. So I think we have
Speaker 5: to really watch how these numbers deliver, how the data delivers.
Speaker 5: And we've obviously got a big inflation read coming later
Speaker 5: this week.
Speaker 1: Yeah, we do absolutely on Friday, And Liz, that kind
Speaker 1: of goes to I guess the Fed. I mean, the
Speaker 1: market seems to be pricing out much fewer rate cuts
Speaker 1: this year. How much is the market being held hostage
Speaker 1: by rate cuts or the expectation of rate cuts at
Speaker 1: the moment, I.
Speaker 5: Think the momentum in the market is absolutely held hostage
Speaker 5: by what the expectations for rate cuts are. So far,
Speaker 5: we've digested it pretty well. I know that there's been
Speaker 5: a correction, it's only a little bit so far. It
Speaker 5: just feels bigger because our muscle memory is for the
Speaker 5: market to rise uninhibited. But I think the rate cut
Speaker 5: mentality is starting to actually affect where markets are trading.
Speaker 5: But that's more of a rational approach. Some of the
Speaker 5: relationships that we typically expect from markets, things like yields up,
Speaker 5: stocks down, That is actually happening again, which feels much
Speaker 5: more rational to me. And I think investors are taking
Speaker 5: a hard look at how much am I really willing
Speaker 5: to pay for forward earnings in an environment where yields
Speaker 5: may stay high, if not higher, for even longer than
Speaker 5: we expected.
Speaker 2: Bob Micah was there. He's looking for lower rates, but
Speaker 2: lis not much lower rates. There's not much drama from
Speaker 2: JP Morgan. Price up, yield down, Yeah, we get that
Speaker 2: if we yet, as you say, higher yields or renew regime,
Speaker 2: a higher yield reset or an our start to take
Speaker 2: it over to economics of two and a half two
Speaker 2: point six Dare I say three point one percent? How
Speaker 2: does that fold into the stock market three years out?
Speaker 5: Well, I think that's what we're going through right now,
Speaker 5: is this digestion process of Okay, if yields aren't going
Speaker 5: to come down as dramatically as we thought by the
Speaker 5: end of this year, when will they come down now?
Speaker 5: What we're looking at is the reason that they're staying
Speaker 5: higher right now is mostly predicated on the idea that
Speaker 5: the economy is still strong, which has caused inflation to
Speaker 5: be perhaps more of a problem for a longer period
Speaker 5: of time than we'd hoped. So what companies have to
Speaker 5: do and what stocks will have to react to, is
Speaker 5: that we probably can no longer pass through these inflationary
Speaker 5: pressures because we've done that already and there's not a
Speaker 5: lot of clearance to do much more of it. So
Speaker 5: companies are going to have to be careful about costs.
Speaker 5: They're probably going to engage in some cost cutting in
Speaker 5: order to maintain margins, and then get more creative and
Speaker 5: get more intentional about how they're going to expand their
Speaker 5: own pie. How are they going to grow revenue without
Speaker 5: having to pass through costs? And I think that's where
Speaker 5: we're going to start to see a lot of divergence
Speaker 5: in these groups that have just blindly benefited from some
Speaker 5: inflationary rises in revenue.
Speaker 1: All right, Liz, what are some sectors that you think
Speaker 1: or maybe that you guys are looking at right now
Speaker 1: going forward for the back half of the year.
Speaker 5: Well, there's obviously been a rotation that's been on and
Speaker 5: then the rotation has been off, and I think we're
Speaker 5: going to continue to see some of that volatility as
Speaker 5: the year progresses. Some sectors that I think will stay
Speaker 5: durable in those rotations, though, are energy. There has been
Speaker 5: a huge run in energy since the beginning of the year,
Speaker 5: so it could stall out a little bit as volatility
Speaker 5: picks up, and obviously geopolitical tensions will affect that. But
Speaker 5: energy stocks still seem to be quite attract two investors,
Speaker 5: and I think people are not quite positioned yet for
Speaker 5: those to look all that overbought. And then when you
Speaker 5: look at things like earlier in the year, I was
Speaker 5: constructive on healthcare. As we near an election, I would
Speaker 5: pair back on healthcare. I still do feel good about
Speaker 5: dividend paying stocks. Those can come from a number of sectors,
Speaker 5: but dividend payers in an environment where if yields do
Speaker 5: come down at some point, you want to have that
Speaker 5: in the porto.
Speaker 2: Well, you're talking to Anthony Nodo, it's so Fi with
Speaker 2: all of his great work on Wall Street. I'm fascinated.
Speaker 2: Do we need to see tech pay a dividend? Liz
Speaker 2: Young this whole idea. We're not going to do a dividend,
Speaker 2: it's a taxable event. We're only going to do share buybacks.
Speaker 5: Where are you on that, Well, dividends are an important
Speaker 5: piece as a shareholder. We need to talk about shareholder
Speaker 5: friendly companies. But if you're looking you have to break
Speaker 5: tech up into a number of different pieces. There are
Speaker 5: tech companies that have been around for a really long time,
Speaker 5: very established, maybe in more saturated markets, and the growth
Speaker 5: is slower because they're not innovating at such a fast
Speaker 5: clip and they're very large companies, Whereas if you look
Speaker 5: at smaller companies that are still growing very very quickly,
Speaker 5: what you want to hear from those companies as a
Speaker 5: shareholder is that they're investing in their growth. So I
Speaker 5: don't think we can paint it with a broad brush
Speaker 5: company like Sofi, smaller earlier in its life cycle than
Speaker 5: maybe something really big like IBM that's been around for
Speaker 5: a long time. So as a shareholder, if you're buying
Speaker 5: a company with the intention to expect strong growth from
Speaker 5: it in the future, I'd probably want to hear that
Speaker 5: they're investing in their growth.
Speaker 2: Liz, thank you. Just wonderful. Liz Young, thank you so much.
Speaker 2: How to investment strategy, it's so fine. I really can't
Speaker 2: say enough about a Bob Michael to Liz Young excellence
Speaker 2: there in bonds and inequities. Joining us now for a
Speaker 2: brief in the Philadelphia seventy six Ers, Eric bil chunis,
Speaker 2: how revved up is Philadelphia?
Speaker 4: Oh, we're revved up. We enjoyed the you know, I
Speaker 4: had my first beer moment when the New York Knicks
Speaker 4: man just going up one to oh in invest of seven,
Speaker 4: we're like burning and beat Jersey. All these chants. They
Speaker 4: acted like they won this championship. That was fun. It
Speaker 4: should be interesting in Philly. We like to return the face.
Speaker 1: Yes, what what?
Speaker 2: What's the single thing that can allow the Sixers to
Speaker 2: do better than the pundits say?
Speaker 4: Play more Kyle Lowry, who is just an animal in
Speaker 4: the clutch and play less. Tobias Harris who is way
Speaker 4: Philly is just over this guy. But he's like just
Speaker 4: assumed he's a starter. He plays a lot, he just
Speaker 4: misses a lot of shots.
Speaker 1: And it's all comes down to Embiid it does.
Speaker 4: He's a warrior and Embid I think against the next
Speaker 4: he'll show clutch gene. Sometimes Embiide has this thing with
Speaker 4: the Celtics. He just can't beat them in the end.
Speaker 4: But I think he'll do good against the next.
Speaker 2: Time we had to do this, the owners in Belchunas
Speaker 2: would show up if we talked sixers basketball. So Eric
Speaker 2: Belchunis owns a high ground in ETF. So I want
Speaker 2: to make clear, folks, this is an earned high ground.
Speaker 2: He didn't do it with pr people, and he didn't
Speaker 2: do it with social media. He did it with two
Speaker 2: books that are absolutely meant, the Magic of John Bogel
Speaker 2: and all. So of course this ETF boom, it's there.
Speaker 2: I gotta go to the event over the weekend. A
Speaker 2: manipulated halving of the supply of bitcoin up today. Last
Speaker 2: time I looked up fourteen hundred dollars sixty six thousand.
Speaker 2: What does that mean for the kajillion dollars and bitcoin ETFs.
Speaker 4: Yeah, right now, it's a little bit of a holding pattern.
Speaker 4: The flows have been, you know, a little bit a
Speaker 4: couple outflows here, a couple inflows there. But that second
Speaker 4: wave I spoke of the past couple weeks has definitely
Speaker 4: died down. We'll see if we get a third wave.
Speaker 4: So right now we're holding at about net twelve point
Speaker 4: five billion since they launched, which to me, if that's
Speaker 4: all they get this whole year, that's a success. That's
Speaker 4: how big that number is. But we'll see what happens.
Speaker 4: I think that the price is holding pattern is interestingly
Speaker 4: intertwined with the flows holding pattern. Maybe one of them
Speaker 4: is waiting to go up, but they tend to be
Speaker 4: in a spiral together for now. I think the ETFs
Speaker 4: are one of the biggest catalysts. There's definitely algos trading
Speaker 4: off of the ETF flows, so there's almost like an
Speaker 4: amplification effect. So we'll see what happens with the ETF
Speaker 4: flows this week. One good news though, is gbtc's outflows
Speaker 4: continue to get lower, so they're now in the same.
Speaker 1: Double see the Grayscale.
Speaker 4: Yeah, gbt the Grayscale Bitcoin Trust that converted with twenty
Speaker 4: eight billion. It's now down to I think twenty billion,
Speaker 4: but has seen sixteen billion of outflows. That's been a
Speaker 4: weight on this, but the twelve point five billion is
Speaker 4: net of those outflows. But GBTC seeing less and less
Speaker 4: is a good sign. But the nine new ones have
Speaker 4: also seen less and less inflows. So we're kind of
Speaker 4: at this sort of Like I said, it's just sort
Speaker 4: of a breather, and that makes sense. You know, ETF
Speaker 4: flows for something like that would be hot sauce like
Speaker 4: this tend to be somewhat correlated with price. But there's
Speaker 4: some catalysts coming up. I think a large chunk of
Speaker 4: advisors haven't even looked at this yet. They like to
Speaker 4: wait a couple months. The wirehouses they're not really able
Speaker 4: to solicit them yet so and you've got no options
Speaker 4: on them yet. That could come down the road. So
Speaker 4: there's some good optimistic catalysts. But of course bitcoins price
Speaker 4: can do crazy things and that's a huge variable.
Speaker 1: Is Blackrock just gonna own this space too?
Speaker 4: Yeah? I mean I just tweeted today they've now seen
Speaker 4: sixty nine straight days of inflows basically right out of
Speaker 4: the gate flows every day. That's basically in the top
Speaker 4: ten all time, and it's the most highest streak of
Speaker 4: any ETF by far that's active right now. So they're
Speaker 4: loving it. I mean, Larry Fink was on a different
Speaker 4: channel about two weeks ago and he was grinning ear
Speaker 4: to ear like a proud father about ibit. He's like,
Speaker 4: this is the greatest launching ETF history. Now, keep in mind,
Speaker 4: Blackrock has one thousand ETFs across the world. They've got
Speaker 4: a bunch of other businesses. He rarely brings up individual ETFs,
Speaker 4: and here he is talking about this one ticker, which,
Speaker 4: by the way, listen to this that out of those
Speaker 4: thousand ETFs in the world, IBID accounts for twenty four
Speaker 4: percent of all their netflows this year.
Speaker 2: Wow. Well, you know there's a generational thing going on here.
Speaker 2: Did you notice this Paul on the other side of
Speaker 2: Belchiunas and Lisa, they're like incredibly cut jesseled, Yeah, exactly,
Speaker 2: And I can barely keep in this your perspective on
Speaker 2: the death of the mutual fun business. Paul and I
Speaker 2: live this each in our own way. When did they
Speaker 2: roll up and go home?
Speaker 4: Yeah, this is a very complicated sub It's complicated. It's
Speaker 4: complicated in most businesses. If you lose customers, you probably
Speaker 4: get acquired or you got a business like in a mall.
Speaker 4: If you sell candlesticks and the customer stuff's coming, it's
Speaker 4: over right, right, Maybe a month you have and then
Speaker 4: you're out. The thing with mutual funds is you can
Speaker 4: lose customers and still make more money if the market
Speaker 4: goes up. So you got all these mutual funds that
Speaker 4: came into this last bull market, will call since two
Speaker 4: thousand and eight, they had trillions of dollars. So even
Speaker 4: though they've seen trillions of outflows, the market's gone up
Speaker 4: what three fourfold, So the value of their portfolios is gigantic.
Speaker 4: So equity mutual funds, this that will blow your mind.
Speaker 4: It makes my head hurt. Have seen three trillion dollars
Speaker 4: of outflows in the past ten years, right, makes sense,
Speaker 4: that's the story. But their assets grew by six trillion,
Speaker 4: so they're doing fine, but they're losing customers. It's a
Speaker 4: mirage asset. So and they know this. So what I
Speaker 4: like to say is the writing's on the wall. They
Speaker 4: can see the writing on the wall. They know they're
Speaker 4: making as much money as ever, but they they know
Speaker 4: the customers are leaving. So a lot of them are
Speaker 4: moving over to the ETF space to try to be
Speaker 4: where the customers are.
Speaker 2: Are they successfully moving over to the ETF.
Speaker 4: Space, Yes, but success means a little cannibalization, and some
Speaker 4: are more willing to do it than others. JP Morgan's
Speaker 4: a great example, got cheap quick and having huge success.
Speaker 4: I think the more diversified a company is, like JP
Speaker 4: Morgan has so much going on, Jamie Diamond might not even.
Speaker 2: Be aware of what they're doing.
Speaker 4: That those people hire an ETF person and they create
Speaker 4: a true ETF business. The tough ones are the mutual
Speaker 4: fund companies like say a federated where or mfs, where
Speaker 4: all they have is the mutual funds. It's harder for
Speaker 4: them to eat their own arm off.
Speaker 1: Get so, I mean where other than the bitcoin space,
Speaker 1: What's where are we seeing fun flows these days? We
Speaker 1: just had Joanne Bianca on from the bomb blocks. They're
Speaker 1: seeing flows and going into high yield and so on
Speaker 1: and so forth. Where we are you seeing kind of the.
Speaker 4: Yeah, let me give you a great example. So emerging markets.
Speaker 4: Emerging market's kind of been a little you know, out
Speaker 4: off lately.
Speaker 2: Yep.
Speaker 4: But there's one ETF that's taken in four times the
Speaker 4: flows of any other and it's a non obvious one.
Speaker 4: E MXC this is the I Shares Emerging Markets X China.
Speaker 4: This thing is now thirteen billion dollars. You know, this
Speaker 4: is like I said that, they grow up so fast sometimes.
Speaker 4: So if you have no China in your em your
Speaker 4: ETFs are flying off the shelves. If you have China
Speaker 4: in your E M, E T F, you can't sell it.
Speaker 1: Wow.
Speaker 2: Thank you, this is great, and thank you for the
Speaker 2: seventy six ers brief. Anytime I'm the rook I don't
Speaker 2: like Lisa and I were like, we don't know what
Speaker 2: we're talking about.
Speaker 4: Sweeney's Kyle Lowry. The more you see him, the higher
Speaker 4: our chances are.
Speaker 2: Eric Belchuns, thank you so much. The Philadelphia is seventy
Speaker 2: six ers. They play a team in New York. Here
Speaker 2: you look at the front pages Lisa all night or
Speaker 2: Sunday night, getting ready for the newspapers. What do you go?
Speaker 6: I need another cup of coffee. Now that's what I need.
Speaker 7: We're starting with the Wall Street Journal. They have this
Speaker 7: interesting look about how diversity goals. They're starting to disappear
Speaker 7: from companies' annual reports. So they did this analysis of
Speaker 7: ten K filings to the SEC. Now, some companies shortened descriptions,
Speaker 7: removed entire sections, others changed a few words phrases to
Speaker 7: cut out mentions of race specific hiring. But you know,
Speaker 7: it comes, you know as a lot of legal political
Speaker 7: threats after Affirmative Action decision. So these are some of
Speaker 7: the changes colds like no longer says it's cultivating quote
Speaker 7: diverse leaders. It now says it's just leaders. So those
Speaker 7: are just some of the things. But analysts are telling
Speaker 7: the journal that there's this kind of reevaluation the level
Speaker 7: of political risk that these companies are willing to take now.
Speaker 7: So now you're starting to see a difference from a
Speaker 7: few years.
Speaker 2: So the catalyst Paul for this was money. I think
Speaker 2: it started with Hollywood, where different Hollywood entities added up
Speaker 2: actual screen failures from somewhat of a diversity thrusts led
Speaker 2: by Disney. And one number I saw in variety was
Speaker 2: a billion dollars of losses on projects that were spurred
Speaker 2: forward by diversity. And now it's come over to other industries.
Speaker 1: Yeah, I mean I've seen written in a variety of
Speaker 1: media over the last six months kind of phrases of
Speaker 1: peak DEI, peak wokeness. Have we passed the peaks and
Speaker 1: those types of things. I don't know. But again, here's
Speaker 1: something from the Wall Street Journal talking about diversity and
Speaker 1: any report a.
Speaker 2: Woman would say, least as I had a shit going
Speaker 2: years ago where i'd interview a CEO. Usually they don't.
Speaker 2: They don't want to come on with me because you know,
Speaker 2: I asked like real questions, and you know, I would
Speaker 2: put up their annual report from three or five years ago,
Speaker 2: which read like it was in Sanskrit. Because there's always
Speaker 2: a vogue to be fair to everybody doing the hard
Speaker 2: work of diversity. There's always something in and two or
Speaker 2: three years later you look back and you go, did
Speaker 2: I really write that? Or did my team really write that?
Speaker 2: That's why one reason I think James Diamond's sixty two
Speaker 2: page epistle is actually valuable because he's not writing a
Speaker 2: PR structured in DNA. But it's fascinting to see where
Speaker 2: this is twelve months from now. So what else do you?
Speaker 5: Yeah?
Speaker 6: It keeps changing.
Speaker 7: Okay, this is about more Americans wanting to go on
Speaker 7: vacation right vacation season, but they're willing to go in
Speaker 7: debt in order to go on vacation. This is a
Speaker 7: Bank Greade survey. A little more than half say they're
Speaker 7: planning the summer vacation twenty twenty four. But of those,
Speaker 7: one in three say they are willing to go in debt.
Speaker 6: Carrie put it on a credit card. They're willing to buy.
Speaker 7: Now, pay later, borrow from family friends to go on vacation,
Speaker 7: even taking out personal loans, or just think.
Speaker 2: There's a thing called uplift, which is the buy now,
Speaker 2: pay later for airplane tickets, and that's changed the world.
Speaker 2: And what I see there is people that would fly
Speaker 2: economy doing that buy now, pay later and buying premium economy,
Speaker 2: or people that would buy premium economy, buy now, pay later,
Speaker 2: slide into business class. And to me, that's been a
Speaker 2: profound It's one vehicle of what you're talking about here.
Speaker 1: Well, we've heard from all like the cruise companies that
Speaker 1: they're fully booked and they're booking next year and bookings
Speaker 1: are great, and same thing for the hotels.
Speaker 2: But Rich, help me out here, this is important.
Speaker 4: Where's he going?
Speaker 6: Rich?
Speaker 2: Is our surveillance cruise reports. There's no cruises. He's even
Speaker 2: done the Alaska polar Bear thing like the are they booming? Boom?
Speaker 2: They're booming, like like you got a race to get
Speaker 2: a booking? Where's your next cruise ate Slavia? Can you
Speaker 2: see Rich? He's probably taken kind fellow or global technical director.
Speaker 2: Can you see Rich Truman at the parapet of the
Speaker 2: Game of Thrones castle in du Barberick looking out looking
Speaker 2: for the damn dragons? I can see it now.
Speaker 7: The Yeah, okay, so we've been talking about Apple relying
Speaker 7: on China for and the iPhone for growth. Yeah, so Apple,
Speaker 7: what Bloomberg is saying, this is a really interesting report
Speaker 7: that they need to explore new ways to get back
Speaker 7: on track, like a lower grade iPhone, maybe in the
Speaker 7: two hundred and fifty dollars range. Don't know if that's possible,
Speaker 7: but the article really gets into how, you know, different
Speaker 7: ways Apple can go about doing that.
Speaker 6: But it's really been trying.
Speaker 7: I mean, they've been trying to put out you know,
Speaker 7: all in one services, a lot of accessories that hasn't worked.
Speaker 7: They tried to put out a cheaper iPhone, didn't really
Speaker 7: pick up too much.
Speaker 6: But Bloomberg is saying, this is that target they need
Speaker 6: to hit. That tool.
Speaker 1: I mean, this is re reporting by Mark German, So
Speaker 1: nobody knows Apple better than the course Mark Mark germant.
Speaker 1: But I've always kind of said, if they keep saying
Speaker 1: they point out India as in market for growth, given
Speaker 1: that maybe they want to pivot away from China, but
Speaker 1: if you want to be a player in India, don't
Speaker 1: you have to have a lower cost phone to appeal
Speaker 1: to that market?
Speaker 2: Can you make the profit?
Speaker 4: Apple is exactly that's You're right, I don't have.
Speaker 2: In front of those ratios, But the amount of money
Speaker 2: Apple makes per phone versus Samson is shocking. It's shocking.
Speaker 6: They delta, You're right, I do, I do?
Speaker 7: Okay, So more workers or should I say some workers?
Speaker 7: They swear that ketamine, although there's psychedelics.
Speaker 6: Can boost creativity and focus.
Speaker 4: On the job.
Speaker 6: I mean, we saw it.
Speaker 7: Elon Musk says he takes it to boost his mental health.
Speaker 7: But the thing that's pushing is because it's becoming legal
Speaker 7: in some areas.
Speaker 6: Like Oregon, Colorado.
Speaker 7: So it's leggetting that lessening that negative field that people have. Yes,
Speaker 7: keying and psychedelics.
Speaker 2: You listen to Disraeli gears and you know not that
Speaker 2: I know anything about that.
Speaker 6: But no, not, of course not.
Speaker 7: But the FDA says they ketamine is not good for
Speaker 7: mental health treatment.
Speaker 6: They don't recommend it.
Speaker 1: Psychedelics are beginning to find some adherents beyond Silicon Valley
Speaker 1: who say the drugs make them better at their jobs
Speaker 1: by expanding imaginations or taming doubts about their abilities, though
Speaker 1: supporting researchers limited.
Speaker 7: Go figure.
Speaker 1: Yeah, and this is an a Wall Street journal.
Speaker 6: And it is so we'll see if it if it
Speaker 6: kind of picks up, but keta means more, thank you.
Speaker 6: More workers are kind of getting behind it and hopping
Speaker 6: on the train. We'll see.
Speaker 2: Okay, Well, thank you, Lisa. That was your newspapers, Lisa
Speaker 2: Matello with our newspapers. This is a Bloomberg Surveillance podcast,
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