WEBVTT - Defiance ETFs CIO: Great Day to Buy the Dip 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.360 at Bloomberg dot com slash podcast. Markets selling off today, 0:00:22.360 --> 0:00:24.439 A lot of filters are asking themselves this morning. Is 0:00:24.480 --> 0:00:28.400 this a you know, a healthy pullback and otherwise upward 0:00:28.440 --> 0:00:32.120 biased market or is this something different? Let's check in 0:00:32.120 --> 0:00:37.159 with Sylvia Jablonsky, chief investment officer for Defiance et S. So, Sylvia, 0:00:37.200 --> 0:00:39.760 when you see action like this today, what do you 0:00:39.880 --> 0:00:41.639 make of it? We haven't seen it too often, these 0:00:41.680 --> 0:00:44.720 types of pullbacks in this recent bull market. What do 0:00:44.800 --> 0:00:48.760 you make of it? Good morning? UM. You know, I 0:00:48.800 --> 0:00:52.800 think today is partially a result of what we're hearing 0:00:52.960 --> 0:00:55.600 in China. You know, Hong Kong aquity saw a big 0:00:55.640 --> 0:00:59.320 sell off during the Asia trading session. UM. Europe followed 0:00:59.400 --> 0:01:03.160 to you have the ever Grand group issue that I 0:01:03.200 --> 0:01:05.600 think bought some some fear and volatility to the market. 0:01:05.680 --> 0:01:07.280 But you know, there are a couple of other things 0:01:07.280 --> 0:01:09.839 going on. You still have COVID cases, You still have 0:01:10.120 --> 0:01:12.280 you know, the idea that September is the worst track 0:01:12.319 --> 0:01:15.560 record for for any month historically, and the second half 0:01:15.600 --> 0:01:17.360 of it tends to be, you know, worse than the 0:01:17.400 --> 0:01:20.199 first and certainly the worst training period of the year. 0:01:20.760 --> 0:01:23.480 And then there's the concern about d C and and 0:01:23.640 --> 0:01:26.480 raising the depth ceiling and you know, sort of corporate 0:01:26.480 --> 0:01:28.560 tax fears and things like that. So, you know, long 0:01:28.560 --> 0:01:30.480 stories short, I think that there are a lot of 0:01:30.520 --> 0:01:33.520 reasons why there's solatility in the market. But you know, 0:01:33.560 --> 0:01:36.600 I remain very bullish on the market in the year. 0:01:36.680 --> 0:01:39.800 The fundamentals are good. We're in economic recovery, and I 0:01:39.800 --> 0:01:42.280 think days like today, you know, if you can sort 0:01:42.280 --> 0:01:43.959 of grin and bear it, I think it's a great 0:01:44.000 --> 0:01:46.440 day to buy on the dips, particularly in the in 0:01:46.520 --> 0:01:50.040 the top quality name. So, um, you know, I don't 0:01:50.040 --> 0:01:52.400 think that this is the beginning of sort of the end. 0:01:52.480 --> 0:01:55.000 I mean, the biggest pullback we've seen in the last 0:01:55.000 --> 0:01:57.640 couple of years is is, you know, four percent. The 0:01:57.680 --> 0:02:00.000 average pullback of the SMP by hundred is about fourteen 0:02:00.080 --> 0:02:03.320 fift over time, so it's really not that bad. It's 0:02:03.320 --> 0:02:05.960 a little bit of altility in the market for various reasons. 0:02:06.720 --> 0:02:10.960 Are you still bullish when you look at um the 0:02:11.040 --> 0:02:14.840 progress or lack thereof on the infrastructure bill? I mean, 0:02:14.880 --> 0:02:18.960 the idea that fiscal spending from this government has added three, 0:02:19.120 --> 0:02:21.960 four or five six percentage points per quarter for the 0:02:22.040 --> 0:02:27.120 last you know, four five quarters, and that now that 0:02:27.280 --> 0:02:31.360 fiscal um kind of punch bowl maybe empty. Isn't that 0:02:31.440 --> 0:02:35.640 a worry for markets? You know? I think just a 0:02:35.639 --> 0:02:38.680 lot a lot of the corporations within the in the 0:02:38.720 --> 0:02:42.359 market that are essentially leading the market, UM, are are 0:02:42.400 --> 0:02:44.919 just just cash heavy. You know, they have incredibly strong 0:02:45.040 --> 0:02:48.000 balance sheets. Um I think that you know, they're they're 0:02:48.000 --> 0:02:50.480 sort of well positioned. So even if that spending isn't 0:02:50.880 --> 0:02:53.160 coming into the market to the level was before, I 0:02:53.200 --> 0:02:55.840 do expect them to have you know, perhaps they won't 0:02:55.840 --> 0:02:58.560 have sixty year over year revenue growth, but I still 0:02:58.600 --> 0:03:01.520 expect them to be in the green for for the 0:03:01.560 --> 0:03:05.280 coming years. And you know, rates remain very low. I 0:03:05.320 --> 0:03:07.240 think that even if we get to a point where 0:03:07.280 --> 0:03:10.080 we start getting announcements about tapering, don't forget that rates 0:03:10.080 --> 0:03:12.880 remain very low. So if you have this combination of 0:03:12.919 --> 0:03:16.200 strong balance sheets and low rates and you know, continue 0:03:16.280 --> 0:03:19.359 demand strong consumer I mean, the retail numbers were phenomenal there, 0:03:19.520 --> 0:03:23.120 their UM temper cent higher than than the pre COVID periods. 0:03:23.120 --> 0:03:26.440 We've got this consumer spending out there. I think it's 0:03:26.440 --> 0:03:28.800 still a fairly rosy picture. You know. What could set 0:03:28.800 --> 0:03:31.919 it back though, I think will be uh any kind 0:03:31.919 --> 0:03:34.680 of you know, corporate taxation that that is that is 0:03:34.680 --> 0:03:38.120 really negative towards the bottom line. UM. I think, you know, 0:03:38.720 --> 0:03:40.960 depending on what long term and short term type of 0:03:41.000 --> 0:03:43.800 gain taxes look like for individuals, that might impact the market. 0:03:43.880 --> 0:03:47.520 But overall, I expect to see at the market end 0:03:47.600 --> 0:03:51.440 up and continue to move in a robust way. So 0:03:51.440 --> 0:03:53.600 so you were suggesting, you know, and sell offs like 0:03:53.600 --> 0:03:56.120 we're seeing this morning, to buy on that weakness. What 0:03:56.200 --> 0:04:00.840 sectors would you be buying here on this type of weakness? Yeah, 0:04:00.880 --> 0:04:03.520 so you know, so that this morning I looked at UM. 0:04:03.560 --> 0:04:05.760 I looked at the five five G trade, which which 0:04:05.800 --> 0:04:07.400 I love. You know, I think five g's the future. 0:04:07.440 --> 0:04:10.080 You've got these you have these companies which are spanned 0:04:10.080 --> 0:04:15.560 from telecom um to radio technology to semiconductors. So UM, 0:04:15.600 --> 0:04:16.920 you have the five G E T s, you have 0:04:16.960 --> 0:04:20.680 everything from like the naivideo's UM, the A m d s, 0:04:20.760 --> 0:04:25.440 the stocks like Nokia, UM, you know, an American tower. 0:04:25.480 --> 0:04:28.880 I think that five gs the future, augmented reality, AI, 0:04:29.040 --> 0:04:32.320 dated processing, all of all of this relies on five G. 0:04:33.040 --> 0:04:35.080 I also think that it's a good time to look 0:04:35.080 --> 0:04:38.680 at crypto. I think that you know, it's it's suspiciously 0:04:38.960 --> 0:04:41.680 um getting sort of a hammer today and in regards 0:04:41.720 --> 0:04:44.680 to what we saw coming out of China. And you know, 0:04:44.680 --> 0:04:47.400 I'm very bullish on the long term price of bitcoin 0:04:47.440 --> 0:04:49.840 and the ethereum. UM. You know, I think n f 0:04:49.880 --> 0:04:51.680 t s are going to propel all of this forward too. 0:04:51.720 --> 0:04:54.480 So I think particularly for investors that have some risk 0:04:54.520 --> 0:04:57.240 tolerance and they're excited about the crypto space. You know, 0:04:57.240 --> 0:04:59.800 when you see these pullbacks, UM, they're they're certainly good 0:04:59.839 --> 0:05:01.400 up change to get in if you haven't had the 0:05:01.400 --> 0:05:06.120 opportunity to do so. UM. What do you think about 0:05:06.160 --> 0:05:09.720 the housing market right now? Does that worry you, Sylvia? 0:05:09.839 --> 0:05:14.480 Because UM, it's not just the case in the US 0:05:14.480 --> 0:05:17.279 that prices have soared, I mean thirty percent. There's a 0:05:17.279 --> 0:05:19.679 story on the Bloomberg today talking about, UM, the housing 0:05:19.720 --> 0:05:22.240 prices in the US up thirty percent since the mid 0:05:22.279 --> 0:05:25.200 two thousands, when you know, Michael Bury was sitting in 0:05:25.240 --> 0:05:28.960 front of his computer listening to Metallica placing short bets 0:05:29.000 --> 0:05:32.279 on um the market. Should we be worried that this 0:05:32.320 --> 0:05:37.320 housing market has gone too far, too fast in New York, London, Paris, Berlin. 0:05:39.800 --> 0:05:42.640 I think it's you know, I think it's something that 0:05:42.800 --> 0:05:44.800 we should sort of sit back and think on in 0:05:44.880 --> 0:05:46.880 terms of, like, if you're a buyer in the market 0:05:46.920 --> 0:05:49.160 now looking to buy a home, I mean, chances are 0:05:49.200 --> 0:05:51.839 that you're going to overpay for it. You've seen you know, 0:05:51.920 --> 0:05:54.160 people all over the world sort of sitting on our 0:05:54.200 --> 0:05:56.680 hands in terms of buying a home, you know. And 0:05:56.720 --> 0:05:59.120 I think it depends on where right, Like I mean 0:05:59.160 --> 0:06:00.719 I live in New York City. I actually think you 0:06:00.760 --> 0:06:02.720 do have deals in the city, but you definitely don't 0:06:02.760 --> 0:06:05.080 have guilt in like Westchester when people are trying to flee, 0:06:05.160 --> 0:06:07.159 So it's sit on your hand and wait until it 0:06:07.160 --> 0:06:08.840 falls a little bit. I do think they're a little 0:06:08.839 --> 0:06:11.279 bit inflated. Hey, Sylvia, thanks so much for joining us. 0:06:11.360 --> 0:06:15.400 Really appreciate it. Sylvia Jablonski, chief investment officer for Defiance 0:06:15.520 --> 0:06:17.839 E t F. She's out with the call this morning. 0:06:18.040 --> 0:06:23.520 By this dip Jose Herrera. He is one of the 0:06:23.560 --> 0:06:27.000 founders and the CEO of Horatio, which is a company 0:06:27.040 --> 0:06:31.400 that helps um improve the customer experience of startups and 0:06:31.440 --> 0:06:35.880 small businesses which maybe had been having problems. And it's 0:06:35.920 --> 0:06:38.839 interesting especially now, I think because of not the supply 0:06:38.920 --> 0:06:42.440 chain shortage so much as the labor shortage and the 0:06:42.520 --> 0:06:47.040 changes that we've seen during the pandemic. Jose, UM, talk 0:06:47.120 --> 0:06:49.440 to us first about your business and how it's developed 0:06:49.480 --> 0:06:54.479 throughout throughout this this difficult period. Thank you for helping 0:06:54.560 --> 0:06:56.240 me today and it's a pleasure to talk to you 0:06:56.279 --> 0:06:58.760 both today. UM. Yeah. So, Horrisio is a company that 0:06:59.040 --> 0:07:02.200 works with fast growing e commerce brands to enhance their 0:07:02.200 --> 0:07:05.880 customer experience and provide a dedicated team of associates that 0:07:05.920 --> 0:07:08.479 are proud to represent their brand values and voice, and 0:07:08.600 --> 0:07:13.080 ultimately mitigate any customer frustrations that may arise as part 0:07:13.120 --> 0:07:16.880 of the shopping process. And so, as you mentioned, we 0:07:16.920 --> 0:07:21.000 are having significant issues with global ports shutting down across 0:07:21.040 --> 0:07:23.720 the world, and now with the holiday season, we are 0:07:23.720 --> 0:07:25.960 also expecting a lot of issues when it comes to 0:07:26.560 --> 0:07:29.600 significant shipping delays from FedEx and other delivery partners, and 0:07:29.640 --> 0:07:31.800 so We are working with all these fast growing e 0:07:31.840 --> 0:07:35.440 commerce brands to prepare themselves for the busy holiday period 0:07:35.760 --> 0:07:39.280 that's coming in a couple of weeks. So Jose does 0:07:39.480 --> 0:07:43.280 the customer experience. It's become more and more automated. It's 0:07:43.280 --> 0:07:47.120 almost impossible to reach a human these days, and I 0:07:47.200 --> 0:07:50.320 gotta think that results and if I'm just representative of 0:07:50.400 --> 0:07:53.520 the general consumer tremendous frustration. What are some of the 0:07:53.520 --> 0:07:56.840 solutions you guys are thinking about. Yeah, and I think 0:07:56.920 --> 0:08:00.200 that's exactly the reason why Horatio exists. We are the 0:08:00.240 --> 0:08:04.120 perfect balance between leveraging AI and also the human touch. 0:08:04.200 --> 0:08:06.880 So we provide dedicated teams and of humans that are 0:08:06.920 --> 0:08:09.760 proud to represent these companies brand values and voice. So 0:08:09.800 --> 0:08:12.960 we provide first time personalized omni channel customer support so 0:08:13.000 --> 0:08:15.760 that the customers can reach out through whatever channel they want, 0:08:15.840 --> 0:08:19.600 whether it's chat, email, SMS, which nowadays more more than 0:08:19.840 --> 0:08:22.480 seventy percent of consumers want to ask questions through text, 0:08:22.960 --> 0:08:26.760 and so we allow these uh consumers to reach out 0:08:26.760 --> 0:08:30.200 through the preferred method of their choice, but leveraging both 0:08:30.240 --> 0:08:33.360 AI and the human touch to provide an amazing customer experience. 0:08:34.480 --> 0:08:36.280 You know, I don't know if it's because I'm old, 0:08:36.720 --> 0:08:38.679 but I'm guessing Paul is going to agree with me. 0:08:38.960 --> 0:08:41.720 I want to call a place and talk to humans 0:08:41.720 --> 0:08:45.000 straight away. I don't want to be uh doing some 0:08:45.200 --> 0:08:48.360 chat bought action where the thing has no idea what 0:08:48.480 --> 0:08:50.839 I need or can't meet my demands. I don't want 0:08:50.840 --> 0:08:52.800 to be sending an email where I know I'm not 0:08:52.800 --> 0:08:56.840 going to get a response back. Um, but isn't it 0:08:56.920 --> 0:08:59.080 difficult to get a call center up and running? I mean, 0:08:59.120 --> 0:09:01.360 how do you get some one who knows about the 0:09:01.400 --> 0:09:06.319 product and um, you know, can speak not just English 0:09:06.320 --> 0:09:09.800 but whatever language customers are calling in, and and can 0:09:09.640 --> 0:09:14.080 and can deal with the customer intelligently. Definitely, it's extremely 0:09:14.160 --> 0:09:16.839 important to two number one as a brand be very 0:09:16.840 --> 0:09:20.440 proactive with your customers so that you mitigate the risk 0:09:20.480 --> 0:09:23.640 of of of needing a huge call center operation. And 0:09:23.679 --> 0:09:25.760 that's why we leverage the other channels that I mentioned 0:09:26.080 --> 0:09:29.240 which are easier to manage in scale, like SMS, social 0:09:29.240 --> 0:09:33.680 media emails. So you have to anticipate any challenges that 0:09:33.760 --> 0:09:36.760 your consumers may expect from you, and then also have, 0:09:37.000 --> 0:09:40.320 like you mentioned, availability through phone if needed. UM. So 0:09:40.360 --> 0:09:41.680 with a lot of the brands that we work with 0:09:41.800 --> 0:09:44.839 we provide a concierge level approach to phone, so if 0:09:44.880 --> 0:09:47.560 we are not able to fix your issue over the 0:09:47.600 --> 0:09:50.640 other channels, we allow you to schedule a call for 0:09:50.760 --> 0:09:52.560 fifteen minutes so that you know that we are going 0:09:52.640 --> 0:09:55.040 to be calling you at a specific time so you 0:09:55.040 --> 0:09:57.920 don't have to wait in line. Particularly now day when 0:09:58.440 --> 0:10:02.200 we are seeing unprecedented num revers of customer inquiries and 0:10:02.280 --> 0:10:05.640 now with the holiday period coming, what's the what's the 0:10:05.679 --> 0:10:08.400 size of your customer base? I mean, how quickly could 0:10:08.400 --> 0:10:10.880 you scale up? Would it be possible for you to help? 0:10:10.880 --> 0:10:15.080 For example, the airlines, your lens is A is A 0:10:15.360 --> 0:10:18.280 is a huge challenge nowadays. I think that you know, 0:10:18.520 --> 0:10:21.199 because of the way that they are structured, it will 0:10:21.280 --> 0:10:24.120 take months for them to to to really fix those issues. 0:10:24.400 --> 0:10:27.800 And I think that um, you know, we are better 0:10:27.840 --> 0:10:30.800 set up for e commerce direct to consumer brands. I 0:10:30.800 --> 0:10:33.680 think that airlines are have to fix a lot of 0:10:33.720 --> 0:10:37.520 issues and incorporate more AI and analytics to fix their 0:10:37.559 --> 0:10:41.480 underlying historical issues that they faced in the past. All right, 0:10:41.559 --> 0:10:44.920 so Jose, just in thirty seconds, how has the pandemic 0:10:45.000 --> 0:10:47.360 kind of changed your business and customer service in general? 0:10:48.960 --> 0:10:53.719 It has definitely accelerated e commerce. UH five years right, 0:10:53.720 --> 0:10:57.840 I think that, UM, the pandemic really shifted. I think 0:10:57.840 --> 0:11:01.000 that the number was some something along the lines of 0:11:01.080 --> 0:11:04.360 sales happen online. And I think that before COVID we 0:11:04.360 --> 0:11:07.280 were at a ten percent of silver happening online or 0:11:07.280 --> 0:11:10.920 even less. And so it has definitely accelerated, UH, the 0:11:11.080 --> 0:11:15.920 need for customer support across all organizations. And I think 0:11:16.000 --> 0:11:19.080 that we are not going to see these stopping anytime soon. 0:11:19.080 --> 0:11:20.600 And I think that you know now that the holidays 0:11:20.640 --> 0:11:23.319 are coming soon, we are expecting a few percent uptick 0:11:23.360 --> 0:11:27.640 in customer service inquiries. More people are going to need 0:11:27.720 --> 0:11:29.559 to use your service. As Jose, thanks so much for 0:11:29.640 --> 0:11:32.640 joining us, Jose Herrera. They're one of the founders and 0:11:32.679 --> 0:11:36.920 the CEO of Horatio, a company that helps e commerce 0:11:37.600 --> 0:11:42.120 businesses tech businesses tailor their customer experience. And we're going 0:11:42.120 --> 0:11:47.679 into a difficult period. They're gonna need it. The talk 0:11:47.760 --> 0:11:53.280 has certainly escalated as it relates to taper, UH, the 0:11:53.400 --> 0:11:56.440 bond purchases funder Federal Reserve, maybe even raising some rates 0:11:56.440 --> 0:11:59.640 some point in the foreseeable future. Yet I look at 0:11:59.640 --> 0:12:02.800 the ten year it stuck at one point three kind 0:12:02.800 --> 0:12:05.480 of words, been for a long time. Let's check in 0:12:05.520 --> 0:12:07.800 with one of the pros and the fixed income markets 0:12:07.800 --> 0:12:09.640 to get a sense of what's going on. R J. Gallo, 0:12:10.040 --> 0:12:13.400 Senior portfolio management head of the municipal bondup but federated Hermes. 0:12:14.200 --> 0:12:17.760 R J. The bond markets just like saying, ho hum, 0:12:17.960 --> 0:12:21.280 so what I mean, how concerned are you about that? 0:12:21.480 --> 0:12:27.719 You know, tapering these FED purchases and then ultimately raising rates. Well, 0:12:27.760 --> 0:12:31.719 good morning, Um, the taper discussion has gone on for 0:12:31.800 --> 0:12:36.680 so long it's it's it's almost baked in, right, and 0:12:36.720 --> 0:12:40.240 I think the set has been bailed out. The set 0:12:40.440 --> 0:12:43.640 was very forward looking, and getting taper out there months 0:12:43.640 --> 0:12:46.760 in advance world is different than when it just sort 0:12:46.800 --> 0:12:49.600 of came up. Um, So that's you know, you got 0:12:49.600 --> 0:12:52.199 to congratulate the set on that part. Introducing the market 0:12:52.200 --> 0:12:54.000 to it over and over and over helps. But I 0:12:54.040 --> 0:12:56.640 think the FA's also being helped by the simple fact 0:12:56.880 --> 0:13:00.360 that on the fiscal policy side, the amount of debt 0:13:00.360 --> 0:13:04.280 issuance in coming months is itself going to taper. So 0:13:04.320 --> 0:13:06.600 although the demand will go down from the FED, that 0:13:06.640 --> 0:13:10.040 will be partly offset by by lesser issuance from the U. S. 0:13:10.080 --> 0:13:12.760 Treasury but you've also got some of the fiscal follies 0:13:12.800 --> 0:13:14.680 going on in Washington. We don't have a budget for 0:13:14.760 --> 0:13:17.600 next year. The death ceiling thing looms over our heads. 0:13:18.280 --> 0:13:21.040 Everyone always thinks the death ceiling shouldn't matter. But how 0:13:21.040 --> 0:13:24.439 often does the s a seated American president challenge the 0:13:24.480 --> 0:13:26.880 validity of an election they lost. You know, weird things 0:13:26.920 --> 0:13:29.640 can happen, And I think when weird things happen in Washington, 0:13:29.920 --> 0:13:32.240 and we are now facing another event risk in Washington, 0:13:32.600 --> 0:13:35.400 that might bring about some caution in the markets. Um, 0:13:35.520 --> 0:13:37.480 that might be another reason why bond yields really aren't 0:13:37.520 --> 0:13:40.000 doing much. Not to mention the Chinese news that we're 0:13:40.000 --> 0:13:43.160 all talking about this morning, well, and we just also 0:13:43.200 --> 0:13:48.640 had a great conversation with Rich Miller about the fiscal cliff. Um, 0:13:48.679 --> 0:13:53.000 this is an economy that's been juiced by trillions and 0:13:53.080 --> 0:13:56.640 trillions of dollars of fiscal spending that looks like it 0:13:56.760 --> 0:14:00.880 may come to an end. How do you how do 0:14:00.920 --> 0:14:05.160 you input that into your into your calculations? Um? I 0:14:05.240 --> 0:14:09.520 noticed that that your federator, excuse me, Bloomberg this morning 0:14:09.600 --> 0:14:12.520 ran an article about this very point and looked at 0:14:12.520 --> 0:14:14.760 the Hutchins Center, which is a group out of the 0:14:14.760 --> 0:14:17.680 Broken's Institution which tries to look at the cumulative impact 0:14:18.000 --> 0:14:21.360 of government spending in tax decisions, not just the GDP impact. 0:14:21.600 --> 0:14:23.760 You know, in GDP accounting, if the government cuts a 0:14:23.840 --> 0:14:26.280 check to you or me that doesn't directly add to GDP, 0:14:26.520 --> 0:14:28.760 it only has the GDP when we spend it. Right, 0:14:29.080 --> 0:14:32.000 So the GDP accounting for government spending will often under 0:14:32.040 --> 0:14:36.160 state fiscal policies influence and to your point, at the 0:14:36.200 --> 0:14:39.320 amount of influence has been massive. Think of the p 0:14:39.320 --> 0:14:41.400 p P loans which were really grants. Think of all 0:14:41.400 --> 0:14:45.000 the checks cut to household trillions of dollars. Right, So, 0:14:45.080 --> 0:14:48.160 clearly the government can't keep that spending pace up. It 0:14:48.200 --> 0:14:51.200 has to diminish on a sequential basis, and it already 0:14:51.240 --> 0:14:53.240 is expected to do so. The Hutchings Center does a 0:14:53.280 --> 0:14:56.280 great job of trying to quantify the the you know, 0:14:56.360 --> 0:15:00.680 the impact on GDP of those changes, and they're clearly 0:15:00.720 --> 0:15:03.480 below the line there in the red incoming quarters, including 0:15:03.680 --> 0:15:06.080 the one we're in. So you have to wonder, can 0:15:06.080 --> 0:15:09.120 the Biden program in Washington, namely the three and half 0:15:09.160 --> 0:15:12.560 trillion dollar reconciation Reconciliation Bill as well as the Infrastructure 0:15:12.560 --> 0:15:15.640 bill which is so far proceeding on a bipartisan basis. 0:15:15.880 --> 0:15:18.760 How much will it offset that headwind. It's not going 0:15:18.800 --> 0:15:22.320 to give us another CARES Act. Those bills are are 0:15:22.360 --> 0:15:25.160 are both of them are over ten years. You know, 0:15:25.200 --> 0:15:27.280 the Cares Act and the American Rescue Plan were over 0:15:27.320 --> 0:15:30.440 a couple of quarters. So we are facing a fiscal 0:15:30.440 --> 0:15:32.920 policy headwind no matter how you cut it. The question 0:15:33.000 --> 0:15:35.280 is the degree in terms of how the Biden Plan 0:15:35.320 --> 0:15:38.880 gets enacted or trimmed further in the coming months. So 0:15:39.040 --> 0:15:42.120 r J your head of the Municial bond group at Federated, 0:15:42.320 --> 0:15:47.920 how are you guys positioning your municipal bond portfolios? Um, 0:15:47.920 --> 0:15:49.720 we believe well, First of all, munities have had a 0:15:49.800 --> 0:15:53.360 very very strong year. We've talked about that in the past. Um, 0:15:53.440 --> 0:15:57.000 the simple fact that taxes were expected to rise, and 0:15:57.000 --> 0:15:59.960 now we have real proposals out of Washington, their soldier 0:16:00.120 --> 0:16:03.680 proposals that would raise marginal rates for for individuals, especially 0:16:03.760 --> 0:16:07.200 high income individuals. Also higher capital gains rates and higher 0:16:07.240 --> 0:16:11.160 corporate tax rates. Um. You know that's finally manifesting in 0:16:11.280 --> 0:16:14.600 the discussions in Washington. Munis I think expected that, and 0:16:14.600 --> 0:16:18.000 that's why muni ratios are all very low, historically low 0:16:18.040 --> 0:16:20.760 the ratio of triple ammuni yield to a triple a 0:16:21.040 --> 0:16:23.760 UH to a treasury yield. These days, if you look 0:16:23.760 --> 0:16:26.520 at the Bloomberg series, you know, on the tenure part 0:16:26.560 --> 0:16:30.520 of the curves around, that's unusually low, but that's pricing 0:16:30.520 --> 0:16:33.760 in those tax increases. UM. We've been pretty positive on 0:16:33.880 --> 0:16:37.800 munies all year, to include within munies taking more credit risks, 0:16:37.800 --> 0:16:40.880 so high yield munies have done extremely well. We've caught 0:16:40.920 --> 0:16:42.600 a good bit of that in all of our different 0:16:42.600 --> 0:16:45.960 strategies here at the company, at Federated hermes Um. At 0:16:46.000 --> 0:16:48.880 this point, spreads are tight, like they are everywhere. There's 0:16:48.880 --> 0:16:51.440 not a lot of cheap assets left in munis or 0:16:51.440 --> 0:16:56.160 anywhere else for that matter, reflecting the FEDS highly accommodated 0:16:56.200 --> 0:16:59.160 monetary policy. So we're getting a little bit more cautious, 0:16:59.200 --> 0:17:00.760 not in the sense that we're heading for some sort 0:17:00.760 --> 0:17:03.560 of washout munities, but we think the prospects of incremental 0:17:03.600 --> 0:17:07.360 out performance from here aren't so great. Tight ratios, tight spreads, 0:17:08.359 --> 0:17:10.399 you know, at this point you're sort of clipping coupon 0:17:10.400 --> 0:17:13.280 and trying to make up some good idiots and cratic 0:17:13.320 --> 0:17:16.480 calls on security selection to eke out performance. Are J 0:17:16.640 --> 0:17:19.320 always great to talk to. You really appreciate you joining 0:17:19.400 --> 0:17:22.840 us today as well. So, um, I mean it's interesting 0:17:23.240 --> 0:17:27.480 what we see in markets markets today, but you don't. 0:17:28.800 --> 0:17:30.719 I mean today is I think a little bit special 0:17:30.720 --> 0:17:32.720 and we'll see tomorrow if it if it continues on. 0:17:32.840 --> 0:17:34.920 So yeah, I mean you had to, you know, sell off, 0:17:34.960 --> 0:17:36.879 but kind of a little bit of studying here here 0:17:37.080 --> 0:17:40.239 in the mid day. Yes. And also I mean, as 0:17:40.280 --> 0:17:43.760 I talked about the top, we sometimes exaggerate, exaggerate the 0:17:43.920 --> 0:17:46.720 you know, the size of it's not even a two 0:17:46.720 --> 0:17:49.119 percent drop. Ye. So at the worst point. R J. 0:17:49.200 --> 0:17:52.520 Gallo as senior portfolio manager and head of the Muni 0:17:52.520 --> 0:17:57.320 Bond Group at Federated Hermes, they've got six forty six 0:17:57.359 --> 0:18:00.760 billion dollars and assets under management, about a hundred and 0:18:00.880 --> 0:18:04.040 change in equities under Management's are great to get his take, 0:18:04.760 --> 0:18:12.080 this is Bloomberg. Okay, Well, we've certainly heard about income inequality, 0:18:12.160 --> 0:18:16.359 wealth inequality. How about housing inequality? The big take story 0:18:16.400 --> 0:18:20.600 today entitled Storing Housing inequality is now a global political 0:18:20.840 --> 0:18:23.439 fault line. The dream of owning a home is increasingly 0:18:23.440 --> 0:18:27.280 out of reach. Democratic and are authoritarian governments alike are 0:18:27.320 --> 0:18:29.520 struggling with the consequences with the story. Here today is 0:18:29.560 --> 0:18:33.199 Alan Crawford, senior editor for International Government in Bloomberg News, 0:18:33.280 --> 0:18:36.159 running us on the phone from Burglin. That's where all 0:18:36.160 --> 0:18:39.200 the smart, cool kids are. I guess Alan, thanks so 0:18:39.280 --> 0:18:42.440 much for joining us here talk to us about housing inequality. 0:18:42.480 --> 0:18:46.720 What's really driving it out there? Well, I think it's 0:18:46.760 --> 0:18:51.800 probably no surprise to to listeners to assure that house 0:18:51.800 --> 0:18:55.679 prices are are hitting fresh records worldwide and as a 0:18:55.720 --> 0:18:59.280 result of the pandemic. And that's that's due to issues 0:18:59.320 --> 0:19:03.360 like all to low interest rates, the fact that very 0:19:03.359 --> 0:19:06.160 few homes are actually being built and put on the market. 0:19:06.560 --> 0:19:09.679 But what is what is new is that this is 0:19:09.720 --> 0:19:14.120 happening globally and it we're starting to see the political 0:19:14.200 --> 0:19:18.160 impact of this because it's not just about the pure numbers. 0:19:18.520 --> 0:19:23.720 It's also a generational issue because statistically we know that 0:19:23.800 --> 0:19:27.320 Baby boomers are far more likely to own their own 0:19:27.320 --> 0:19:31.359 home than Millennials and Generation Z, so these that latter 0:19:31.840 --> 0:19:36.840 cohort of society risks getting completely left behind. Here. What 0:19:36.960 --> 0:19:39.919 kind of problems does this mean? We've all seen staring 0:19:40.000 --> 0:19:43.919 home prices and it's I have to say, Uh, sometimes 0:19:43.960 --> 0:19:48.960 the numbers are pretty shocking increased in the US since 0:19:49.160 --> 0:19:53.320 the mid two thousands, which you know, uh and and 0:19:53.320 --> 0:19:55.760 then you were telling me this morning about Boise, Idaho 0:19:55.800 --> 0:19:58.679 saw an increase of in the first quarter of this 0:19:58.760 --> 0:20:01.280 year alone. What does this mean in for politicians? Alan, 0:20:01.320 --> 0:20:03.399 What does this mean for elections around the world? What 0:20:03.440 --> 0:20:07.919 does this mean for governments? Well, in the US, it 0:20:08.040 --> 0:20:11.760 means that some of the traditional policies that are that 0:20:12.119 --> 0:20:18.119 are you traditionally deployed to try and expand affordable homes, 0:20:18.280 --> 0:20:23.600 the risk backfiring, the risk just putting more more petrol 0:20:23.680 --> 0:20:27.800 gasoline on the fire of the housing market. And but 0:20:28.080 --> 0:20:31.560 so that that just exacerbates the existing gulf. But what 0:20:31.600 --> 0:20:36.000 we're seeing is that there's also a parallel crisis in 0:20:36.119 --> 0:20:39.320 terms of the rental market in many cities, not everywhere, 0:20:39.560 --> 0:20:42.159 but in many cities. And we see that here in Berlin. 0:20:42.840 --> 0:20:46.119 The city government is under pressure and in fact, just 0:20:46.280 --> 0:20:50.600 last week it bought fifteen thousand departments to try and 0:20:50.640 --> 0:20:55.160 the swage this public anger over the rent price increases. 0:20:55.600 --> 0:20:57.760 A couple of months ago, we saw the collapse of 0:20:57.800 --> 0:21:00.720 the Swedies government for a variety of reasons, but at 0:21:00.760 --> 0:21:05.680 its heart were proposed changes to two rental caps which 0:21:05.720 --> 0:21:09.280 were completely out of favor with the coalition parties, and 0:21:09.320 --> 0:21:13.480 the government collapse. So the point is there's no uniform 0:21:13.640 --> 0:21:18.760 political impact here, but it's it's really stoking uncertainty and 0:21:19.000 --> 0:21:22.280 in some cases instability. I'm kind of wondering what what's 0:21:22.359 --> 0:21:26.040 kind of the source of this housing issue on a 0:21:26.040 --> 0:21:28.880 global scale. It's it seems to me a supply and demand. 0:21:28.920 --> 0:21:32.720 I mean, you know what's changed here. Is there a 0:21:32.800 --> 0:21:38.399 sudden surgeon people looking for residences or is there just 0:21:38.680 --> 0:21:43.120 a supply has come out of the market. What's happened there? 0:21:43.240 --> 0:21:47.600 There are different it depends on the market. But for 0:21:47.640 --> 0:21:51.960 what the single unifying factor is the pandemic And and 0:21:51.960 --> 0:21:55.040 and amid that, as I said, you've got these really 0:21:55.040 --> 0:21:59.000 low interest rates which are fueling purchases, and you've got 0:21:59.000 --> 0:22:03.199 this idea that the families are shifting their priorities or 0:22:03.280 --> 0:22:06.480 have been over the past eighteen months in terms of spending, 0:22:06.600 --> 0:22:09.760