1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast 5 00:00:15,560 --> 00:00:18,439 Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,120 Speaker 1: at Bloomberg dot com slash podcast. Matt, I have no 7 00:00:22,200 --> 00:00:24,000 Speaker 1: idea where we're gonna do with this next segment, so 8 00:00:24,200 --> 00:00:27,080 Speaker 1: I'm thrown it. Well. I have been waiting for at 9 00:00:27,160 --> 00:00:29,400 Speaker 1: least a week um to get Neil Grossman back in 10 00:00:29,480 --> 00:00:33,040 Speaker 1: here since the fed UM decision. He has worn many 11 00:00:33,120 --> 00:00:37,200 Speaker 1: hats on Wall Street as a prop trader at JP Morgan. 12 00:00:37,400 --> 00:00:39,720 Speaker 1: He took risk for the No August Bank, the Central 13 00:00:39,720 --> 00:00:43,200 Speaker 1: Bank of Norway. Um he ran a hedge fund. Yeah, 14 00:00:43,240 --> 00:00:44,880 Speaker 1: for sure, Well he was. I told you he was 15 00:00:44,880 --> 00:00:47,680 Speaker 1: a road road for Cambridge. I saw a gretty picture 16 00:00:47,760 --> 00:00:51,280 Speaker 1: from must have been the seventies over the weekend. But um, 17 00:00:51,320 --> 00:00:54,720 Speaker 1: now he is a vintner and an historical fiction author. 18 00:00:54,760 --> 00:00:58,600 Speaker 1: Neil Grossman joins us in the Interactive Broker Studio. Neil, 19 00:00:59,160 --> 00:01:02,120 Speaker 1: I want to get your take first on UM, the 20 00:01:02,120 --> 00:01:06,320 Speaker 1: FEDS inflationary goals because they already were aiming for two percent. 21 00:01:07,200 --> 00:01:08,520 Speaker 1: A lot of people have a problem with that to 22 00:01:08,560 --> 00:01:13,039 Speaker 1: begin with. But now we've well overshot that, and if 23 00:01:13,080 --> 00:01:15,360 Speaker 1: we ever want to get the average back to two percent, 24 00:01:16,240 --> 00:01:18,880 Speaker 1: it's gonna take years. Well, let's start with why you 25 00:01:18,880 --> 00:01:22,959 Speaker 1: should get the average back. Mr Powell and before him 26 00:01:23,000 --> 00:01:25,720 Speaker 1: Mr Bernankey spent a lot of years explained to us 27 00:01:25,760 --> 00:01:28,560 Speaker 1: that having inflation a little under two percent was not 28 00:01:28,680 --> 00:01:32,280 Speaker 1: really good. Um, despite the fact, of course that their 29 00:01:32,280 --> 00:01:36,959 Speaker 1: statutory mandate is actually zero price stability. That's just what 30 00:01:37,000 --> 00:01:39,400 Speaker 1: Congress says. But they can do whatever they want, right. 31 00:01:39,840 --> 00:01:42,360 Speaker 1: That's well, we can argue that too. That's not yes, 32 00:01:42,360 --> 00:01:44,119 Speaker 1: they do whatever they want. That's not really the idea. 33 00:01:44,160 --> 00:01:47,200 Speaker 1: But they spent a lot of time and then arguing 34 00:01:47,200 --> 00:01:49,240 Speaker 1: that they wanted to let the economy run a little 35 00:01:49,280 --> 00:01:51,800 Speaker 1: hot to push up inflation over to so you could 36 00:01:51,840 --> 00:01:54,800 Speaker 1: average it. So let's using that as a baseline. Now 37 00:01:54,880 --> 00:01:57,440 Speaker 1: that the fact is is that they let it run 38 00:01:57,440 --> 00:02:00,840 Speaker 1: a mock to get it back to a two percent average, 39 00:02:00,920 --> 00:02:04,120 Speaker 1: let's use a reasonable time frame like ten years. You're 40 00:02:04,160 --> 00:02:07,160 Speaker 1: gonna end up this year probably about twelve to four 41 00:02:08,160 --> 00:02:10,960 Speaker 1: over what the two percent trajectory was which means you're 42 00:02:10,960 --> 00:02:13,679 Speaker 1: going to really have to have inflation average like one 43 00:02:13,720 --> 00:02:16,280 Speaker 1: percent for eight years or something like that to get 44 00:02:16,320 --> 00:02:19,360 Speaker 1: you even close to the two percent. And that's, let's 45 00:02:19,400 --> 00:02:21,880 Speaker 1: face it, kind of a pipe dream. Well they're not 46 00:02:21,880 --> 00:02:24,440 Speaker 1: talking about that. Mr Powell has said I want to 47 00:02:24,440 --> 00:02:27,400 Speaker 1: get inflation just back to two percent, and let's talk 48 00:02:27,440 --> 00:02:29,799 Speaker 1: about the probability of what that takes. I mean, Paul 49 00:02:29,880 --> 00:02:33,200 Speaker 1: Valker got rates into the twenties and it took twenty 50 00:02:33,200 --> 00:02:35,920 Speaker 1: five years pretty much to get a stable two percent 51 00:02:36,040 --> 00:02:39,040 Speaker 1: ambient environment. I mean, you had your moments down, but 52 00:02:39,600 --> 00:02:41,560 Speaker 1: for the nineties we were still averaging three to three 53 00:02:41,560 --> 00:02:44,880 Speaker 1: and a half percent. If let's not anybody's business other 54 00:02:44,919 --> 00:02:46,720 Speaker 1: than than Congress is they're the ones who have to 55 00:02:46,760 --> 00:02:49,520 Speaker 1: just say that's not right. I I actually think that 56 00:02:49,560 --> 00:02:52,920 Speaker 1: there's a legitimate reason for having low inflation. It creates 57 00:02:52,919 --> 00:02:57,239 Speaker 1: an extraordinarily healthy environment. Done right, it minimizes volatively Matt. 58 00:02:57,400 --> 00:02:59,680 Speaker 1: Matt and I were doing some calculus this morning about 59 00:03:00,240 --> 00:03:03,680 Speaker 1: how to maximize the area inside of a fixed geometrical 60 00:03:04,120 --> 00:03:06,919 Speaker 1: This is interesting if you take if you I can 61 00:03:07,080 --> 00:03:11,440 Speaker 1: see doing that any any four sided shape, right, I 62 00:03:11,440 --> 00:03:15,399 Speaker 1: would have thought the area. Um. You know, if if 63 00:03:15,440 --> 00:03:20,640 Speaker 1: the total uhs around the perimeters, say thirty six inches, 64 00:03:20,680 --> 00:03:22,239 Speaker 1: I would have thought, it doesn't matter. You can stretch 65 00:03:22,240 --> 00:03:24,360 Speaker 1: a rectangle out, make it a square. It's all gonna 66 00:03:24,360 --> 00:03:27,520 Speaker 1: be the same area. It's not a square. Is the 67 00:03:27,560 --> 00:03:30,840 Speaker 1: maximal area and and and and any end gone, you know, 68 00:03:31,000 --> 00:03:35,200 Speaker 1: cube or whatever else you want. The maximual area is 69 00:03:35,200 --> 00:03:40,080 Speaker 1: equal size, which applies to returns on your investments, and 70 00:03:40,160 --> 00:03:44,680 Speaker 1: it also applies to things like compounding of inflation. So, 71 00:03:44,720 --> 00:03:47,240 Speaker 1: for example, if if I say to you, over a 72 00:03:47,240 --> 00:03:50,240 Speaker 1: ten year period, you can choose either ten percent returns 73 00:03:50,280 --> 00:03:52,920 Speaker 1: each year, or you can have eleven percent this year, 74 00:03:53,000 --> 00:03:55,080 Speaker 1: nine percent next year, eleven percent the year after that, 75 00:03:55,160 --> 00:03:57,280 Speaker 1: nine percent the year after that, eleven year after that nine. 76 00:03:58,080 --> 00:04:01,640 Speaker 1: You're much better off choosing ten percent each year. In fact, 77 00:04:01,680 --> 00:04:03,480 Speaker 1: is an RB. I would take the ten in short, 78 00:04:03,560 --> 00:04:06,080 Speaker 1: the eleven nine for for eternity, and I walk away 79 00:04:06,160 --> 00:04:09,360 Speaker 1: richer than Bill Gates. Um. But but the point is 80 00:04:09,400 --> 00:04:11,640 Speaker 1: that this applies to things like what the FED should 81 00:04:11,680 --> 00:04:14,400 Speaker 1: be doing to manage the economy. The FED should find 82 00:04:14,760 --> 00:04:18,520 Speaker 1: reasonable trajectories of g d P inflation and everything else, 83 00:04:19,000 --> 00:04:21,680 Speaker 1: and that and even the stock market and you want 84 00:04:21,720 --> 00:04:27,760 Speaker 1: to find a sustainable trajectory where you're minimizing the variability, 85 00:04:27,839 --> 00:04:30,760 Speaker 1: minimizing the volatility. That's actually how you get the maximum 86 00:04:30,800 --> 00:04:35,160 Speaker 1: long term. But in the I don't I don't think that. Well, 87 00:04:35,240 --> 00:04:37,760 Speaker 1: that that their mind. Well, two percent an interesting issue. 88 00:04:37,880 --> 00:04:41,120 Speaker 1: Two percent is a two factor optimization, right. They have 89 00:04:41,200 --> 00:04:45,760 Speaker 1: to mandates employment, full employment, and price stability, and they're 90 00:04:45,760 --> 00:04:49,880 Speaker 1: not totally consistent. So two percent has become their sort 91 00:04:49,920 --> 00:04:53,680 Speaker 1: of maximum of both. At the same time they beat that. 92 00:04:53,680 --> 00:04:55,880 Speaker 1: That was the sad thing they were. They were ahead 93 00:04:55,880 --> 00:04:59,159 Speaker 1: of that about eight six, seven years ago. They didn't 94 00:04:59,200 --> 00:05:01,680 Speaker 1: like that right. As my first sales manager, Pain Webber 95 00:05:01,760 --> 00:05:03,800 Speaker 1: would say, after I went through my big pitch about 96 00:05:03,839 --> 00:05:05,600 Speaker 1: what I wanted to do with Meatia stocks, he would 97 00:05:05,640 --> 00:05:08,120 Speaker 1: just interrupt me and say, Paul, are we buying him 98 00:05:08,160 --> 00:05:10,799 Speaker 1: or we selling him? What are we doing here? I'm well, 99 00:05:11,120 --> 00:05:13,960 Speaker 1: last time, two times ago I was on, I was short, 100 00:05:14,279 --> 00:05:16,720 Speaker 1: I went a little long, and yesterday I started going 101 00:05:16,760 --> 00:05:19,640 Speaker 1: short again. I think the market's got a lot more downstays. 102 00:05:19,640 --> 00:05:21,480 Speaker 1: And by the way, I think this is also quite healthy. 103 00:05:22,000 --> 00:05:25,599 Speaker 1: You need sort of a washout to equilibrate, and that 104 00:05:26,080 --> 00:05:27,920 Speaker 1: without that, I think we're gonna have a lot more 105 00:05:28,000 --> 00:05:31,839 Speaker 1: volatility going forward. I think you need to just get 106 00:05:31,960 --> 00:05:34,360 Speaker 1: some of the energy out of this system, and then 107 00:05:34,480 --> 00:05:36,480 Speaker 1: I think, at least for a while, you can be 108 00:05:36,640 --> 00:05:38,760 Speaker 1: you can be quite positive. Remember yesterday I was telling 109 00:05:38,760 --> 00:05:40,839 Speaker 1: you Neil Neil's target for the SMP at the end 110 00:05:40,839 --> 00:05:42,719 Speaker 1: of the year seventeen No, no no, no, that's my that's 111 00:05:42,720 --> 00:05:45,719 Speaker 1: my target probably next year, next year or whatever. Seventeen 112 00:05:45,800 --> 00:05:48,320 Speaker 1: seventy six. We're trading at four thousand. Think about it, 113 00:05:48,440 --> 00:05:51,000 Speaker 1: and I am a patriot, I get it, But you 114 00:05:51,080 --> 00:05:53,640 Speaker 1: do honestly think that we're going down. I think we're 115 00:05:53,640 --> 00:05:55,880 Speaker 1: going down, and I think we're gonna go down a 116 00:05:55,960 --> 00:05:59,000 Speaker 1: larger than people, partially because once you start to go down, 117 00:05:59,440 --> 00:06:02,360 Speaker 1: because the arkets are still functionally long and over invested. 118 00:06:03,279 --> 00:06:05,600 Speaker 1: The fact is that people have to be forced out 119 00:06:06,120 --> 00:06:09,320 Speaker 1: and to reduce their exposure. And when that process happens, 120 00:06:09,400 --> 00:06:13,279 Speaker 1: markets extend and over extend, so you can pick what 121 00:06:13,360 --> 00:06:15,760 Speaker 1: you want. I think the earnings are too high estimates. 122 00:06:16,080 --> 00:06:20,599 Speaker 1: I think that that the bottom line is that, um, 123 00:06:20,640 --> 00:06:23,279 Speaker 1: the pees are too high. And again, going back to 124 00:06:23,320 --> 00:06:26,320 Speaker 1: one last thing, interest rates at the long end have 125 00:06:26,440 --> 00:06:30,000 Speaker 1: to go higher, all right, That's good stuff. Here's what 126 00:06:30,040 --> 00:06:31,560 Speaker 1: you have to do if you get Neil and Adam 127 00:06:31,600 --> 00:06:35,080 Speaker 1: in together, John, because they are also friends, but they 128 00:06:35,080 --> 00:06:40,480 Speaker 1: fundamentally disagree because Adams yes, Okay, there we go. Neil Grossman, 129 00:06:40,520 --> 00:06:43,400 Speaker 1: co founder, former CIO t k n G Capital, Thanks 130 00:06:43,440 --> 00:06:48,720 Speaker 1: so much for joining us. You know, Matt, here's the 131 00:06:48,720 --> 00:06:51,520 Speaker 1: theme of the day. People you know, like Neil Grossman 132 00:06:51,640 --> 00:06:53,560 Speaker 1: and our next guest, Ted Smith. They get all these 133 00:06:53,600 --> 00:06:56,880 Speaker 1: fancy degrees in engineering, but I don't see anybody building 134 00:06:56,920 --> 00:07:00,839 Speaker 1: anything or like, you know, building that's true. Both of 135 00:07:00,880 --> 00:07:03,120 Speaker 1: them are vintners. Well, I don't know. I think it's 136 00:07:03,120 --> 00:07:07,160 Speaker 1: a scanner. I've watched Neil put together his vineyard over 137 00:07:07,200 --> 00:07:10,600 Speaker 1: the last ten years, and it takes a ton of 138 00:07:10,600 --> 00:07:14,520 Speaker 1: work and planning and forethought, and I think these are 139 00:07:14,560 --> 00:07:18,520 Speaker 1: just misspent educations. So he gets Ted Smith, co founder 140 00:07:18,520 --> 00:07:21,160 Speaker 1: and president of Union Square Advisors. He gets his engineering 141 00:07:21,240 --> 00:07:23,559 Speaker 1: stuff from Notre Dame, and then he goes to Wall Street. 142 00:07:23,600 --> 00:07:25,920 Speaker 1: I mean, go figure that, Ted, Thanks so much for joining. 143 00:07:26,000 --> 00:07:28,600 Speaker 1: You're in our bloom Bloomberg Interactive Broker Studio. We appreciate 144 00:07:28,640 --> 00:07:30,160 Speaker 1: that you're based on the West Coast, but you're here 145 00:07:30,160 --> 00:07:32,440 Speaker 1: in New York. Talk to us about M and A here, 146 00:07:32,480 --> 00:07:35,480 Speaker 1: because before we get to that, let's let's talk about 147 00:07:35,480 --> 00:07:37,480 Speaker 1: this engineer, like what did you do when you first 148 00:07:37,480 --> 00:07:40,320 Speaker 1: got to the street, Because if you're putting together analytical 149 00:07:40,360 --> 00:07:43,920 Speaker 1: models or if you're trading derivatives, I feel like that's 150 00:07:43,960 --> 00:07:46,800 Speaker 1: really helpful to have an engineering degree. It was very 151 00:07:46,800 --> 00:07:48,920 Speaker 1: helpful for me. Carter McClellan, who had started the tech 152 00:07:48,960 --> 00:07:51,080 Speaker 1: group at Morgan Stanley, had the bright idea of hiring 153 00:07:51,080 --> 00:07:53,520 Speaker 1: more engineers into the new tech investment banking group to 154 00:07:53,680 --> 00:07:56,360 Speaker 1: understand what our clients actually did. I thought I was 155 00:07:56,400 --> 00:07:57,720 Speaker 1: going to be a two year stop and then go 156 00:07:57,760 --> 00:08:00,400 Speaker 1: back and finish my PhD. In thirty three years later, 157 00:08:00,440 --> 00:08:03,480 Speaker 1: I haven't gone back. Still. You still have time building 158 00:08:03,520 --> 00:08:05,360 Speaker 1: and just you know, kind of making some wine. M 159 00:08:05,440 --> 00:08:07,720 Speaker 1: and A boy, we look at the equity markets, of 160 00:08:07,800 --> 00:08:10,720 Speaker 1: fixing the markets here, just brutal, brutal, brutal. How about 161 00:08:10,760 --> 00:08:12,080 Speaker 1: the M and A market? What do you see out there? 162 00:08:12,440 --> 00:08:14,680 Speaker 1: We're certainly down from last year. We're off a little 163 00:08:14,680 --> 00:08:17,120 Speaker 1: over a third from where we were this time last year. 164 00:08:17,680 --> 00:08:20,560 Speaker 1: Last year a little bit, yeah, But but I think 165 00:08:20,600 --> 00:08:23,040 Speaker 1: the key is deals are still getting done, right. I 166 00:08:23,040 --> 00:08:25,240 Speaker 1: think you have to look through the headlines as you 167 00:08:25,280 --> 00:08:27,600 Speaker 1: guys do. That's the whole point of the show. Uh, 168 00:08:27,600 --> 00:08:29,760 Speaker 1: And understand that even though the markets on both the 169 00:08:29,760 --> 00:08:32,520 Speaker 1: equity and the dead side are volatile, deals are getting done. 170 00:08:32,520 --> 00:08:34,880 Speaker 1: The big strategics want to do deals. The large private 171 00:08:34,880 --> 00:08:38,079 Speaker 1: equity firms are awash and capital, they're continuing to look 172 00:08:38,080 --> 00:08:41,280 Speaker 1: for transactions and we're still very busy advising on transaction. 173 00:08:41,360 --> 00:08:43,440 Speaker 1: So so things are happening, they're just taking a little 174 00:08:43,440 --> 00:08:45,640 Speaker 1: bit longer. And you know, certainly things that were at 175 00:08:45,679 --> 00:08:48,040 Speaker 1: the margin that could have gotten done six to twelve 176 00:08:48,040 --> 00:08:52,319 Speaker 1: months ago won't get done. Now, what's the rising rate environment? 177 00:08:52,640 --> 00:08:54,800 Speaker 1: What kind of effect does that have or does it 178 00:08:54,880 --> 00:08:57,840 Speaker 1: not have an effect? I mean, if you're company looking 179 00:08:57,880 --> 00:09:00,880 Speaker 1: to a fairly sizeable acquisition, you know, maybe you got 180 00:09:00,880 --> 00:09:03,320 Speaker 1: all your ducks in a row financially already and you're 181 00:09:03,320 --> 00:09:08,679 Speaker 1: not worried about rates today rather rates six months ago. Right, So, 182 00:09:08,720 --> 00:09:10,840 Speaker 1: if you're one of the large acquirers, you probably in 183 00:09:10,880 --> 00:09:13,120 Speaker 1: tech at least you're a wash in cash. You know, 184 00:09:13,160 --> 00:09:15,960 Speaker 1: whether whether you're earning you know, fifty basis points or 185 00:09:16,080 --> 00:09:18,559 Speaker 1: you know, on that cash that you let go out 186 00:09:18,559 --> 00:09:20,199 Speaker 1: the door to do an acquisition, probably not going to 187 00:09:20,320 --> 00:09:22,520 Speaker 1: change your P and L too much. Where it does 188 00:09:22,559 --> 00:09:24,480 Speaker 1: have an impact or will over the long haul have 189 00:09:24,520 --> 00:09:26,800 Speaker 1: an impact is on private equity when they're doing buyouts 190 00:09:26,800 --> 00:09:28,520 Speaker 1: and they're using some of the you know, some debt 191 00:09:28,880 --> 00:09:31,280 Speaker 1: to ultimately finance those. But again, we haven't seen a 192 00:09:31,320 --> 00:09:34,280 Speaker 1: slowdown yet. They're taking this interest rate in stride or 193 00:09:34,320 --> 00:09:36,520 Speaker 1: this interest rate environment, I should say in stride, and 194 00:09:36,520 --> 00:09:39,160 Speaker 1: they're continuing to do deals. That could change if we see, 195 00:09:39,440 --> 00:09:44,120 Speaker 1: you know, continue to see seventy five BIPs changes as 196 00:09:44,160 --> 00:09:46,600 Speaker 1: the norm here through the end of the year, maybe 197 00:09:46,600 --> 00:09:48,840 Speaker 1: we'll see some slowdown, but so far hasn't happened, I guess. 198 00:09:48,840 --> 00:09:51,720 Speaker 1: Also it depends on your view of the path of 199 00:09:51,760 --> 00:09:54,520 Speaker 1: interest rate increases into the future, right. I mean so 200 00:09:54,559 --> 00:09:57,040 Speaker 1: many people come on and say, I remember in the 201 00:09:57,040 --> 00:09:59,400 Speaker 1: eighties I was paying a seventeen percent mortgage or I 202 00:09:59,440 --> 00:10:03,160 Speaker 1: bought tried is yielding. Um, if you think that we're 203 00:10:03,200 --> 00:10:07,679 Speaker 1: headed there, yeah, then what we're saying for mortgages before 204 00:10:08,640 --> 00:10:11,960 Speaker 1: take that out right, lock it in right? And and 205 00:10:11,960 --> 00:10:13,720 Speaker 1: what what do you see is where do you see 206 00:10:13,800 --> 00:10:16,920 Speaker 1: rates going? Um, we certainly see it's gonna it's gonna 207 00:10:16,920 --> 00:10:19,240 Speaker 1: get more challenging, even this year, you know, a couple 208 00:10:19,320 --> 00:10:22,320 Speaker 1: more times at least, we think the Fed is going 209 00:10:22,360 --> 00:10:25,640 Speaker 1: to be pragmatic about not overreaching. But there's still obviously 210 00:10:25,679 --> 00:10:27,960 Speaker 1: a lot of debate amongst the governors about where this 211 00:10:27,960 --> 00:10:29,440 Speaker 1: should go and what they want to see with it. 212 00:10:29,840 --> 00:10:32,079 Speaker 1: But again to your point, man, I think we see 213 00:10:32,320 --> 00:10:36,160 Speaker 1: relatively still quite cheap. Capital is available from a broad 214 00:10:36,280 --> 00:10:38,600 Speaker 1: range of sour if it's particularly in the direct lender market, 215 00:10:39,200 --> 00:10:41,959 Speaker 1: which is now a multi trillion dollar asset class. Um. 216 00:10:42,040 --> 00:10:45,480 Speaker 1: So deals, deals are getting done, and those big buyout firms, look, 217 00:10:45,480 --> 00:10:46,880 Speaker 1: if they have to do a little more equity and 218 00:10:46,920 --> 00:10:48,800 Speaker 1: a little less debt to make their deals work, they 219 00:10:48,800 --> 00:10:50,480 Speaker 1: have the capital to do it. That's what I was 220 00:10:50,520 --> 00:10:53,200 Speaker 1: gonna say. There's so much money in the pe space. 221 00:10:53,320 --> 00:10:55,240 Speaker 1: I mean, Matt and I we just read stories day 222 00:10:55,280 --> 00:10:58,520 Speaker 1: after day after day about another big fund being raised. 223 00:10:58,600 --> 00:11:00,720 Speaker 1: There's always stories about they have like one point seven 224 00:11:00,720 --> 00:11:03,480 Speaker 1: trillion dollars in dry powder. I mean, it's just to 225 00:11:03,520 --> 00:11:05,760 Speaker 1: the point where it doesn't make any sense anymore. So, 226 00:11:05,800 --> 00:11:08,640 Speaker 1: but if they have dollars, think about how many yen 227 00:11:08,720 --> 00:11:11,040 Speaker 1: they have. Now they have dollars, think about how many 228 00:11:11,080 --> 00:11:13,040 Speaker 1: euros or pounds. We saw the pound go to the 229 00:11:13,120 --> 00:11:16,199 Speaker 1: loan of nineteen eighty five. Um, you probably hadn't even 230 00:11:16,200 --> 00:11:19,640 Speaker 1: got your degree at that point. So what is that? 231 00:11:19,800 --> 00:11:21,679 Speaker 1: Is that? A is that a tailwind for m and 232 00:11:21,760 --> 00:11:24,080 Speaker 1: at first for American companies? Certainly it must be. If 233 00:11:24,120 --> 00:11:26,120 Speaker 1: you want to buy something in Japan, it's at a discount, 234 00:11:26,280 --> 00:11:30,120 Speaker 1: right well, and just the general valuation environment. Things are 235 00:11:30,160 --> 00:11:32,000 Speaker 1: a discount relative to where we were six or twelve 236 00:11:32,040 --> 00:11:35,400 Speaker 1: months ago, right, So slightly more expensive debt capital, but 237 00:11:35,520 --> 00:11:38,640 Speaker 1: offset by cheaper valuations generally and the very strong dollar. 238 00:11:38,679 --> 00:11:40,600 Speaker 1: I think this is the age where American pe firms 239 00:11:40,600 --> 00:11:42,400 Speaker 1: are looking to go shopping around the world. I know, 240 00:11:42,559 --> 00:11:44,920 Speaker 1: I just I mean, we talked about what's a pint 241 00:11:44,920 --> 00:11:46,960 Speaker 1: of beer cost in London? These guys will talk about 242 00:11:46,960 --> 00:11:49,760 Speaker 1: what's a company costs? Uh in London? Ted Smith, thanks 243 00:11:49,760 --> 00:11:51,480 Speaker 1: so much for joining us, too short a time. We'll 244 00:11:51,520 --> 00:11:53,480 Speaker 1: get you back. Ted Smith, he's a co founder and 245 00:11:53,480 --> 00:11:56,599 Speaker 1: president of Union Square Advisors. Talking about some M and 246 00:11:56,679 --> 00:12:00,840 Speaker 1: A and tech space. A misspent education, no doubt about it. 247 00:12:00,880 --> 00:12:02,880 Speaker 1: Electrical engineering from Notre Dame and it goes to be 248 00:12:02,880 --> 00:12:05,080 Speaker 1: an investment banker. Go figure that. But what would you 249 00:12:05,280 --> 00:12:07,560 Speaker 1: I mean, what would you do? With an electrical engineering degree. 250 00:12:07,679 --> 00:12:10,880 Speaker 1: You learn to look at systems, you learn to analyze things. 251 00:12:10,920 --> 00:12:13,360 Speaker 1: You know, you know, go to like a defense contract there, 252 00:12:13,640 --> 00:12:15,240 Speaker 1: you know, and make I don't know whatever they make 253 00:12:15,280 --> 00:12:17,920 Speaker 1: submarines or something like that. That that that that would 254 00:12:17,960 --> 00:12:23,760 Speaker 1: be cool. That would be pretty cool too. That's jewelry. 255 00:12:23,800 --> 00:12:26,840 Speaker 1: I mean I I'm not a jewelry guy, per se 256 00:12:26,920 --> 00:12:30,439 Speaker 1: are you you're not? Really? Well, you've got a class ring. Well, 257 00:12:30,480 --> 00:12:33,040 Speaker 1: I have a Signet ring because my dad always had one, 258 00:12:33,400 --> 00:12:36,160 Speaker 1: because his dad always had one because his dad had one. 259 00:12:36,240 --> 00:12:38,480 Speaker 1: So just like a thing when you're a little kid, 260 00:12:38,679 --> 00:12:40,560 Speaker 1: you see your dad having it and then you want it. 261 00:12:40,600 --> 00:12:42,880 Speaker 1: But no, I don't wear other jewelry, all right, a 262 00:12:42,920 --> 00:12:45,640 Speaker 1: lot of but apparently it's a great category within retail. 263 00:12:45,800 --> 00:12:48,720 Speaker 1: Jennet Drosos joins us. She's a CEO of Signet Jewelers. 264 00:12:49,000 --> 00:12:52,080 Speaker 1: Signet is a public company trades upon the Big Board 265 00:12:52,080 --> 00:12:54,280 Speaker 1: of the New York Stock Exchange. S I G is 266 00:12:54,320 --> 00:12:55,719 Speaker 1: a symbol to put it, do you you buy a lot 267 00:12:55,720 --> 00:12:58,200 Speaker 1: of jewelry? Yeah? I'm with you on that, you know, 268 00:12:58,240 --> 00:13:00,839 Speaker 1: because my my wife loves to wear. Her family is 269 00:13:00,880 --> 00:13:04,840 Speaker 1: in the jewelry business in Spain. Really, but h I 270 00:13:04,920 --> 00:13:08,360 Speaker 1: still like stuff for her over here? Sure? Why not? Jenna, 271 00:13:08,360 --> 00:13:09,840 Speaker 1: Thanks so much for joining us here in our Bloomberg 272 00:13:09,880 --> 00:13:12,640 Speaker 1: Interactive Broker studio. Matt, something is to change, man. People 273 00:13:12,679 --> 00:13:15,000 Speaker 1: are coming into the studio like it's an exciting day. 274 00:13:15,040 --> 00:13:16,800 Speaker 1: It's an exciting day, saying Jenna, thanks so much for 275 00:13:16,920 --> 00:13:20,520 Speaker 1: joining us here. University of Georgia alum NBA from some 276 00:13:20,640 --> 00:13:25,520 Speaker 1: school down in Philadelphia. UM talked about the jewelry business. 277 00:13:26,000 --> 00:13:29,600 Speaker 1: How did it fare during the pandemic? Well, thanks for 278 00:13:29,640 --> 00:13:31,320 Speaker 1: having me and it is great to be in person. 279 00:13:31,840 --> 00:13:33,920 Speaker 1: Uh So, if I dial back to last year on 280 00:13:33,920 --> 00:13:36,600 Speaker 1: our record growth in the jewelry category, we think the 281 00:13:36,679 --> 00:13:41,800 Speaker 1: category was up about last calendar year, UM Signet was 282 00:13:42,240 --> 00:13:46,000 Speaker 1: grew our revenues about fifty so we gained significant market share. 283 00:13:46,040 --> 00:13:49,280 Speaker 1: We went from uh six and change to nine point 284 00:13:49,320 --> 00:13:52,720 Speaker 1: three percent share of the category and continue to be 285 00:13:52,760 --> 00:13:55,199 Speaker 1: overdeveloped in the bridle part of the category, where we 286 00:13:55,240 --> 00:13:57,920 Speaker 1: have about a thirty percent share. And that's a big 287 00:13:57,920 --> 00:14:01,640 Speaker 1: competitive And what does that mean engagement ring swdding rings exactly. 288 00:14:01,640 --> 00:14:03,800 Speaker 1: And this is the year of the wedding. Two point 289 00:14:03,920 --> 00:14:06,959 Speaker 1: five million weddings this year the highest and forty years 290 00:14:07,200 --> 00:14:10,320 Speaker 1: and that's gotta be the biggest spend, right, because yes, 291 00:14:10,360 --> 00:14:13,000 Speaker 1: I got married last year, yes, in October, and I 292 00:14:13,000 --> 00:14:17,720 Speaker 1: bought my wife, uh, you know, another engagement ring and um, 293 00:14:18,360 --> 00:14:20,880 Speaker 1: fortunately her parents made us the engagement rings. But are 294 00:14:20,880 --> 00:14:23,640 Speaker 1: there are the wedding rings? But uh, that's got to 295 00:14:23,640 --> 00:14:27,600 Speaker 1: be the biggest spend that a typical family, a typical 296 00:14:27,640 --> 00:14:31,760 Speaker 1: household does in the jewelry category, right it is. By 297 00:14:31,800 --> 00:14:34,680 Speaker 1: the way, I got married last year in October two. Congratulations, 298 00:14:34,760 --> 00:14:39,000 Speaker 1: and my team made me a beautiful that is gorgeous. Wow, 299 00:14:39,120 --> 00:14:40,560 Speaker 1: this is one of those times I wish were on TV. 300 00:14:40,680 --> 00:14:44,840 Speaker 1: That's beautiful. Thanks, Yes, the craftsmanship was really excellent. And 301 00:14:45,000 --> 00:14:47,080 Speaker 1: so why do you think the revenue growth was so 302 00:14:47,160 --> 00:14:50,160 Speaker 1: strong last year? Is it because, um, you know, we 303 00:14:50,240 --> 00:14:53,840 Speaker 1: had household savings built up, we got stimulus checks, etcetera. 304 00:14:53,960 --> 00:14:56,800 Speaker 1: Or is it because the market rallied so hard and 305 00:14:57,120 --> 00:14:59,840 Speaker 1: went to an all time high? What what drove that? 306 00:15:00,280 --> 00:15:03,840 Speaker 1: All of those things impact category growth and jewelry. So 307 00:15:04,040 --> 00:15:07,680 Speaker 1: number one was pent up demand for getting engaged. Uh, 308 00:15:07,840 --> 00:15:11,040 Speaker 1: couples who had chosen to live together, a quarantine together 309 00:15:11,120 --> 00:15:15,360 Speaker 1: during COVID, um, you know, became closer wanted to get engaged. 310 00:15:15,400 --> 00:15:18,160 Speaker 1: But a lot of people postponed the engagement until they 311 00:15:18,360 --> 00:15:20,720 Speaker 1: can have a view towards when they might have a wedding, 312 00:15:21,040 --> 00:15:23,560 Speaker 1: and with COVID still going on, they couldn't invite families, 313 00:15:23,560 --> 00:15:27,160 Speaker 1: So pent up demand for engagements was one. Second, with stimulus, 314 00:15:27,520 --> 00:15:32,200 Speaker 1: that really impacted primarily the lower end of the market. Uh. 315 00:15:32,720 --> 00:15:36,080 Speaker 1: Three big journeys that customers go on in jewelry. One 316 00:15:36,160 --> 00:15:40,000 Speaker 1: is the bridal journey. You're exactly right. Uh, Buying an 317 00:15:40,040 --> 00:15:42,960 Speaker 1: engagement ring is often the most expensive purchase a couple 318 00:15:43,000 --> 00:15:46,440 Speaker 1: has made together. It's very considered purchase. It's a wonderful 319 00:15:46,480 --> 00:15:51,640 Speaker 1: time to build a lifetime relationships with a couple, exactly. Fantastic. Second, 320 00:15:51,760 --> 00:15:55,680 Speaker 1: romantic gifting. Uh, couples who were living together couldn't go 321 00:15:55,720 --> 00:15:58,480 Speaker 1: out and celebrate, you know, with dinner, or you know, 322 00:15:58,520 --> 00:16:01,640 Speaker 1: couldn't go to a concert. We're buying jewelry for each other, 323 00:16:01,680 --> 00:16:04,760 Speaker 1: which was great. And then stimulus really contributed to the 324 00:16:04,760 --> 00:16:08,040 Speaker 1: self purchased journey, especially at the lower end. So all 325 00:16:08,080 --> 00:16:11,640 Speaker 1: those things came together to drive record market growth. So 326 00:16:11,840 --> 00:16:13,040 Speaker 1: one of the things that Met and I talked about 327 00:16:13,040 --> 00:16:15,240 Speaker 1: when we have CEOs here in the studio is it 328 00:16:15,280 --> 00:16:19,560 Speaker 1: seems like every business every sector has supply chain issues. 329 00:16:19,640 --> 00:16:21,520 Speaker 1: Is that true in the jewelry business? I mean, don't 330 00:16:21,560 --> 00:16:23,960 Speaker 1: you guys get a lot of diamonds from Russia and 331 00:16:24,120 --> 00:16:27,720 Speaker 1: other places like that, so it's not free for Signet UM. 332 00:16:27,800 --> 00:16:31,600 Speaker 1: We were a scale player where the world's largest specialty 333 00:16:31,640 --> 00:16:35,800 Speaker 1: retailer of diamond jewelry were vertically integrated. So we buy 334 00:16:36,320 --> 00:16:39,320 Speaker 1: um a portion of our rough diamonds directly from the 335 00:16:39,440 --> 00:16:42,280 Speaker 1: beers from the mind we cut and polish those ourselves. 336 00:16:42,800 --> 00:16:46,600 Speaker 1: Responsible sourcing UM is something that Signet has pioneered for 337 00:16:46,680 --> 00:16:49,480 Speaker 1: more than a decade. Uh and as soon as in fact, 338 00:16:49,520 --> 00:16:52,960 Speaker 1: even before the war broke out in Ukraine, we stopped 339 00:16:52,960 --> 00:16:57,119 Speaker 1: purchasing any diamonds that have Russian origin, and we've maintained 340 00:16:57,160 --> 00:16:59,920 Speaker 1: that all the way through the conflicts. So customers can 341 00:16:59,920 --> 00:17:03,280 Speaker 1: be very comfortable buying diamonds at Signet and knowing that 342 00:17:03,320 --> 00:17:06,359 Speaker 1: those UM you know, have in no way been part 343 00:17:06,359 --> 00:17:09,200 Speaker 1: of the conflict that's going on. What does your dealership 344 00:17:09,240 --> 00:17:11,439 Speaker 1: network look like? And I only say that because I 345 00:17:11,480 --> 00:17:14,600 Speaker 1: think in cars and motors, sure, but I mean it's 346 00:17:14,640 --> 00:17:16,680 Speaker 1: the same thing, right, You've got retail outlets all over 347 00:17:16,720 --> 00:17:18,879 Speaker 1: the place, You've got an online presence how does that 348 00:17:18,880 --> 00:17:22,679 Speaker 1: break down? Yes, so we have UM. We we have 349 00:17:23,040 --> 00:17:26,800 Speaker 1: banners retail banners that exist here in the US market. 350 00:17:26,840 --> 00:17:30,600 Speaker 1: For example, we just purchased Blue Nile a couple of 351 00:17:30,600 --> 00:17:33,480 Speaker 1: weeks ago, and we also have James Allen. Those sit 352 00:17:33,520 --> 00:17:36,240 Speaker 1: at the top of our portfolio more of an accessible 353 00:17:36,320 --> 00:17:40,240 Speaker 1: luxury online pure play and a big online play exactly 354 00:17:40,280 --> 00:17:44,560 Speaker 1: our biggest banners. K We also have Zails and Jared, 355 00:17:44,840 --> 00:17:49,080 Speaker 1: so those sitting in the mid market, and then UM 356 00:17:49,119 --> 00:17:51,679 Speaker 1: at our our more value end of the spectrum. We 357 00:17:51,720 --> 00:17:55,200 Speaker 1: have Banter by Piercing, Pagoda, and we also last year 358 00:17:55,240 --> 00:17:58,480 Speaker 1: bought rocks Box, which is the leader in rental jewelry. 359 00:17:58,560 --> 00:18:01,760 Speaker 1: So we have quite a wide range, and we've differentiated 360 00:18:01,800 --> 00:18:06,080 Speaker 1: those banners. They're carrying different merchandise, targeting different customers. That's 361 00:18:06,119 --> 00:18:08,760 Speaker 1: one of the success stories behind our share growth. So 362 00:18:08,880 --> 00:18:11,919 Speaker 1: online somebody will pop down five or ten dollars for 363 00:18:11,960 --> 00:18:16,399 Speaker 1: a diamond ring without actually seeing it. Interestingly, in the 364 00:18:16,480 --> 00:18:20,359 Speaker 1: second quarter price points above ten thousand dollars worth of 365 00:18:20,400 --> 00:18:25,040 Speaker 1: fastest growing for all of our banners. So okay, sales shared, Yes, 366 00:18:25,400 --> 00:18:28,199 Speaker 1: I'd say James Allen the website, I have spent some 367 00:18:28,320 --> 00:18:31,960 Speaker 1: time on it, and it's beautiful, and it's it's it's 368 00:18:31,960 --> 00:18:35,199 Speaker 1: so user friendly, and it pulls you deeper into it. 369 00:18:35,320 --> 00:18:37,840 Speaker 1: So once you go on there and start looking at things, 370 00:18:38,240 --> 00:18:40,320 Speaker 1: you actually spend more time than you may have planned 371 00:18:40,359 --> 00:18:41,919 Speaker 1: to do in the first place. You do spend a 372 00:18:41,920 --> 00:18:45,440 Speaker 1: lot on marketing as well, because I see K's Zales 373 00:18:45,680 --> 00:18:47,800 Speaker 1: ads all over the place where I hear them on radio. 374 00:18:48,520 --> 00:18:53,359 Speaker 1: So how important is that? Which outlets do you choose? Well, 375 00:18:53,560 --> 00:18:56,200 Speaker 1: you know, it's it's interesting. We've been on a five 376 00:18:56,280 --> 00:18:59,880 Speaker 1: year transformation plan and so I think the cumulative impact 377 00:19:00,040 --> 00:19:02,640 Speaker 1: of that is really putting us in a great position. Now. 378 00:19:02,720 --> 00:19:06,320 Speaker 1: One of the areas we've transformed as marketing. So historically 379 00:19:06,320 --> 00:19:09,480 Speaker 1: the company has been on TV advertising, mostly in November December, 380 00:19:09,560 --> 00:19:12,560 Speaker 1: mostly on the NFL, targeting guys who were, you know, 381 00:19:12,640 --> 00:19:17,760 Speaker 1: buying buying a holiday gifts. We did we make the 382 00:19:17,800 --> 00:19:21,280 Speaker 1: Hall of Fame ranks, which is great. Yes, so so 383 00:19:21,400 --> 00:19:24,960 Speaker 1: really exciting. But been anyway, we've really changed that marketing model, 384 00:19:25,040 --> 00:19:27,520 Speaker 1: so we're always on We're talking to our customers all 385 00:19:27,600 --> 00:19:31,920 Speaker 1: year long, more and more personalized and targeted, influencer marketing 386 00:19:31,960 --> 00:19:36,320 Speaker 1: and social media, online video, educational videos and YouTube. So 387 00:19:36,400 --> 00:19:39,520 Speaker 1: we've considerably broadened that mix, and as a result, our 388 00:19:39,520 --> 00:19:43,480 Speaker 1: return on advertising spend has grown significantly over the last 389 00:19:43,560 --> 00:19:46,200 Speaker 1: number of years. So it's a competitive advantage to us 390 00:19:46,200 --> 00:19:48,760 Speaker 1: to have a large portfolio and be a leading marketer. 391 00:19:48,880 --> 00:19:52,080 Speaker 1: But we've we've done that in a way that's highly personalized. Jennet, 392 00:19:52,119 --> 00:19:54,760 Speaker 1: great stuff. Thanks for coming into the Bloomberg Interactive workers. 393 00:19:54,840 --> 00:19:59,080 Speaker 1: Due to Jenna Dress, she is the CEATO of Signet Jewelers. Again, 394 00:19:59,119 --> 00:20:01,440 Speaker 1: the symbol the trade on New York Stock Exchange. You 395 00:20:01,600 --> 00:20:04,680 Speaker 1: popped this into your Bloomberg Professional terminal s I G 396 00:20:05,359 --> 00:20:08,119 Speaker 1: is the symbol to get that there. So good stuff 397 00:20:08,200 --> 00:20:11,160 Speaker 1: on the jewelry business. Pretty solid business. I mean, yeah, 398 00:20:11,280 --> 00:20:16,200 Speaker 1: we've been digging into it, so I think it's really 399 00:20:16,240 --> 00:20:20,000 Speaker 1: fascinating and um, we didn't get to it, but uh, 400 00:20:20,040 --> 00:20:21,760 Speaker 1: it'd be great to get. Next time we have Jenna on, 401 00:20:21,880 --> 00:20:25,479 Speaker 1: we can ask her about prices for um gold and 402 00:20:25,880 --> 00:20:29,240 Speaker 1: the other uh commodities. Yea, absolutely have some good stuff. 403 00:20:35,560 --> 00:20:38,840 Speaker 1: We heard from Christine Legard ECB president earlier this morning 404 00:20:39,359 --> 00:20:45,959 Speaker 1: taking down GDP growth forecast for Europe and not forecasting recession, 405 00:20:46,600 --> 00:20:49,359 Speaker 1: also adjusting some of the inflation concerns because that is 406 00:20:49,400 --> 00:20:51,560 Speaker 1: the number one concern for not just the Federal Reserve, 407 00:20:51,600 --> 00:20:53,560 Speaker 1: but for the e c B as well. But let's 408 00:20:53,560 --> 00:20:56,520 Speaker 1: get some thoughts on what we heard from miss uh 409 00:20:56,760 --> 00:21:00,720 Speaker 1: Leguard from Morgan del Down, head of investment Strategy for 410 00:21:00,840 --> 00:21:04,399 Speaker 1: Europe at Global x E t F s UM, again, 411 00:21:04,400 --> 00:21:05,919 Speaker 1: thanks so much for joining us here. We heard from 412 00:21:06,000 --> 00:21:10,199 Speaker 1: Christine Legard this morning. Do you think the ECB is 413 00:21:10,480 --> 00:21:15,920 Speaker 1: doing enough here to flight to fight inflation across the continent? Well, 414 00:21:15,960 --> 00:21:19,719 Speaker 1: I think the ECB has delivered the amount of akishness 415 00:21:19,840 --> 00:21:23,120 Speaker 1: the market was expecting, so UM. That's why I think 416 00:21:23,280 --> 00:21:27,800 Speaker 1: we have had like some muted reaction plast meeting. UM. 417 00:21:27,840 --> 00:21:31,119 Speaker 1: But what is unclear, and I think it's unclear for 418 00:21:31,320 --> 00:21:34,160 Speaker 1: food markets as well, because we see no clear direction 419 00:21:34,240 --> 00:21:37,280 Speaker 1: for for the year of versus dollar for example, is 420 00:21:37,320 --> 00:21:41,120 Speaker 1: that in the same statement, UM, Christine mcgard said that 421 00:21:41,480 --> 00:21:46,159 Speaker 1: the inflation and the risk of inflation becoming embedded in 422 00:21:46,280 --> 00:21:50,919 Speaker 1: more domestic prices and invlation expectations made warrant a several 423 00:21:51,560 --> 00:21:54,840 Speaker 1: other other other hikes. But at the same time they're 424 00:21:54,880 --> 00:21:58,680 Speaker 1: saying that they stayed data data dependent and they will 425 00:21:58,720 --> 00:22:00,879 Speaker 1: have a meeting by meeting EPPLE. So all of this 426 00:22:01,160 --> 00:22:04,199 Speaker 1: is quite it's quite confusing in these two opposite statesments 427 00:22:04,680 --> 00:22:07,760 Speaker 1: kind of con saw each other out. So I think 428 00:22:08,320 --> 00:22:12,840 Speaker 1: overall the market took these press conference as a more 429 00:22:13,280 --> 00:22:17,800 Speaker 1: natural tone that what it was expecting. So not providing 430 00:22:18,119 --> 00:22:22,080 Speaker 1: more support to the euro from from from the strengthening 431 00:22:22,080 --> 00:22:26,760 Speaker 1: we so pre meeting, you take a look, I mean normally, 432 00:22:27,000 --> 00:22:30,879 Speaker 1: I imagine you take a look at the ECB president's 433 00:22:30,920 --> 00:22:33,400 Speaker 1: dashboard and you see a ton of different data. Can 434 00:22:33,400 --> 00:22:35,680 Speaker 1: you wipe all of that off right now and just 435 00:22:35,720 --> 00:22:38,320 Speaker 1: put the Fed right there? I mean, don't they have 436 00:22:38,440 --> 00:22:40,640 Speaker 1: to do this as long as the Fed is doing 437 00:22:40,640 --> 00:22:45,879 Speaker 1: it well. Actually, the weakening of the euro we saw 438 00:22:45,960 --> 00:22:49,359 Speaker 1: about the past few months is definitely an uncomfortable um 439 00:22:49,640 --> 00:22:53,480 Speaker 1: situation for for for for the Eurozone and the e 440 00:22:53,600 --> 00:22:57,159 Speaker 1: c B M. I think we can't really compare like 441 00:22:57,359 --> 00:23:00,960 Speaker 1: for like these two regions because the fundamental are becoming 442 00:23:01,320 --> 00:23:04,960 Speaker 1: more divergent um with But if they morgan, if they 443 00:23:05,080 --> 00:23:08,080 Speaker 1: if they didn't raise by fifty or seventy five, I 444 00:23:08,119 --> 00:23:11,840 Speaker 1: mean if they only did twenty five, that would put 445 00:23:11,880 --> 00:23:14,720 Speaker 1: them in a in an even weaker position. Are the 446 00:23:14,760 --> 00:23:18,280 Speaker 1: euro right? So I mean they have to do these 447 00:23:18,359 --> 00:23:20,119 Speaker 1: jumbo rate hikes as long as the FED they had 448 00:23:20,160 --> 00:23:23,760 Speaker 1: to keep up. It's like they're tagging along. That's actually 449 00:23:23,800 --> 00:23:27,040 Speaker 1: what the market is expecting so um and it's interesting 450 00:23:27,080 --> 00:23:29,439 Speaker 1: for the rest of the years, market expects us like 451 00:23:29,640 --> 00:23:33,000 Speaker 1: about the same amount of hikes um in the FED 452 00:23:33,119 --> 00:23:36,119 Speaker 1: and for the FED and the ECB. So it's definitely 453 00:23:36,280 --> 00:23:40,080 Speaker 1: showing kind of a reverse currency wa there where the 454 00:23:40,119 --> 00:23:42,159 Speaker 1: e CP is trying to support the region. But I 455 00:23:42,240 --> 00:23:45,679 Speaker 1: think what is very important for the region is to 456 00:23:45,800 --> 00:23:48,919 Speaker 1: get back to inflation because this is the sole moderate 457 00:23:49,200 --> 00:23:52,880 Speaker 1: mandate for for the ECB compared to the FED. UM. 458 00:23:53,119 --> 00:23:56,360 Speaker 1: So inflation is everything. And there is one takeaway from 459 00:23:56,400 --> 00:23:59,879 Speaker 1: Prisidon by God is when she stressed that inflation forecast 460 00:24:00,080 --> 00:24:02,359 Speaker 1: for the end of the projecting period, which is twenty 461 00:24:02,800 --> 00:24:05,760 Speaker 1: four will not get back to two percent inflation, but 462 00:24:06,119 --> 00:24:10,439 Speaker 1: exceeding it by by thirty business points. So this is 463 00:24:10,440 --> 00:24:14,520 Speaker 1: actually a signal that the ECP will continue to to 464 00:24:14,640 --> 00:24:19,919 Speaker 1: provide a several large rate highs. In my opinion, Morgan 465 00:24:20,040 --> 00:24:23,880 Speaker 1: is it is it consensus in Europe that Europe will, 466 00:24:24,240 --> 00:24:26,600 Speaker 1: if it isn't already in will be in a recession 467 00:24:27,160 --> 00:24:31,600 Speaker 1: sooner rather than later. I think the across Europe now 468 00:24:31,680 --> 00:24:34,240 Speaker 1: you see a lot of divergence between countries. If you 469 00:24:34,280 --> 00:24:38,720 Speaker 1: take the countries that are really UM dependent on Russian 470 00:24:38,760 --> 00:24:42,760 Speaker 1: gas like Germany. Obviously the outlook for German, for the 471 00:24:42,760 --> 00:24:46,800 Speaker 1: German economy is not looking great. But all the major 472 00:24:46,840 --> 00:24:50,879 Speaker 1: economies like France, Spain, they are doing quite well because 473 00:24:50,920 --> 00:24:54,160 Speaker 1: they are not dependent on on gas supply from from Russia. 474 00:24:54,560 --> 00:24:57,600 Speaker 1: So there is some silver lining in what we heard 475 00:24:57,640 --> 00:25:00,960 Speaker 1: from Christinagam today and from what we see from the 476 00:25:00,960 --> 00:25:06,000 Speaker 1: economic data is um. First, the projections they the gross 477 00:25:06,000 --> 00:25:09,760 Speaker 1: projections for the real GDP across the region does not 478 00:25:10,000 --> 00:25:13,840 Speaker 1: signal an imminent recession UH and not no recision across 479 00:25:13,880 --> 00:25:20,280 Speaker 1: the protecting period, but instead more of a statflations denio UM. 480 00:25:20,400 --> 00:25:22,360 Speaker 1: So I think what what we are going to see 481 00:25:22,359 --> 00:25:26,320 Speaker 1: across the region is more economic fragmentation UM and that 482 00:25:26,400 --> 00:25:30,520 Speaker 1: could be actually some of it could be reduced by 483 00:25:30,720 --> 00:25:34,120 Speaker 1: cooperation between countries, and this is what we are starting 484 00:25:34,119 --> 00:25:39,000 Speaker 1: to see more soliarity around UM energy supply across major 485 00:25:39,040 --> 00:25:43,560 Speaker 1: economies like France and Germany, agreeing on France exporting some 486 00:25:43,640 --> 00:25:46,360 Speaker 1: of their gas fly to Germany if needs be so. 487 00:25:46,520 --> 00:25:50,760 Speaker 1: All of these solidarity might just reduce the economic risk 488 00:25:51,240 --> 00:25:54,440 Speaker 1: that the region is facing in the in this crisis. 489 00:25:54,480 --> 00:25:59,040 Speaker 1: But I think um, we have reached potentially that the 490 00:25:59,040 --> 00:26:03,320 Speaker 1: big pessimist and put for the Eurozone because definitely we 491 00:26:03,440 --> 00:26:08,840 Speaker 1: are saying, um, the energy prices um and the leverage 492 00:26:08,880 --> 00:26:13,920 Speaker 1: from from rosha um probably exhausted now. So I'm pick 493 00:26:13,960 --> 00:26:17,280 Speaker 1: pessimson probably behind her all right. Margane, thank you so 494 00:26:17,359 --> 00:26:21,200 Speaker 1: much for joining us. Really appreciate getting your perspective on Europe. 495 00:26:21,280 --> 00:26:24,560 Speaker 1: More Gaine Della Down, head of Investment Strategy for Europe 496 00:26:24,560 --> 00:26:28,240 Speaker 1: for Global x et f S based in London. There 497 00:26:28,280 --> 00:26:33,119 Speaker 1: So maybe maybe peak pessimism is past for the Eurozone. 498 00:26:33,119 --> 00:26:35,679 Speaker 1: We have to see the tough, tough winter from an 499 00:26:35,800 --> 00:26:40,320 Speaker 1: energy perspective is expected across the continent in the UK UM, 500 00:26:40,480 --> 00:26:42,360 Speaker 1: so I have to see how that plays out over 501 00:26:42,400 --> 00:26:48,679 Speaker 1: the next six to eight months. We did hear from 502 00:26:48,720 --> 00:26:51,120 Speaker 1: FED chairman j Pal this morning and make some comments 503 00:26:51,640 --> 00:26:54,480 Speaker 1: uh in a presentation at the Cato Institute. We brought 504 00:26:54,520 --> 00:26:56,520 Speaker 1: you that live this morning. I want to break it 505 00:26:56,560 --> 00:26:59,080 Speaker 1: down a little bit here with Janelle Marte Economics and 506 00:26:59,119 --> 00:27:02,200 Speaker 1: Federal Reserve your order for Bloomberg News. Thanks so much 507 00:27:02,240 --> 00:27:04,919 Speaker 1: for joining us here. I guess that you know the 508 00:27:04,960 --> 00:27:09,800 Speaker 1: messaging if nothing else since Jackson Hole has been consistent, 509 00:27:09,840 --> 00:27:14,520 Speaker 1: which is, we're really serious about fighting inflation and we 510 00:27:14,560 --> 00:27:18,040 Speaker 1: know what that means, higher rates. What are thoughts? So 511 00:27:18,280 --> 00:27:20,920 Speaker 1: that's right. I mean what we heard again from how 512 00:27:21,080 --> 00:27:23,440 Speaker 1: today is that the FED is going to do what 513 00:27:23,480 --> 00:27:26,720 Speaker 1: it has to do is acting fourth rightly, he said 514 00:27:26,800 --> 00:27:30,560 Speaker 1: to bring inflation down. So even though he didn't specify 515 00:27:30,680 --> 00:27:33,159 Speaker 1: what they're likely to do in September, I think he 516 00:27:33,280 --> 00:27:37,640 Speaker 1: really delivered his message pretty strongly at Jackson Hole, right, 517 00:27:37,840 --> 00:27:41,000 Speaker 1: which is and he did allude to that today, which 518 00:27:41,040 --> 00:27:45,280 Speaker 1: is that he wanted to send the morning out there 519 00:27:45,320 --> 00:27:47,919 Speaker 1: that the FED is not going to stop until inflation 520 00:27:48,600 --> 00:27:52,680 Speaker 1: is coming down, and that they're more concerned, are very 521 00:27:52,720 --> 00:27:57,960 Speaker 1: concerned about stopping their battle too early, declaring victory too soon. 522 00:27:58,440 --> 00:28:02,360 Speaker 1: We heard that from President Cleveland FED President Loretta Mesters. Well. 523 00:28:02,440 --> 00:28:05,000 Speaker 1: I think that's just a message that they're all delivering 524 00:28:05,119 --> 00:28:08,480 Speaker 1: right now, which is that they're they're they're not going 525 00:28:08,560 --> 00:28:12,400 Speaker 1: to stop too soon. They're really taking this very seriously. 526 00:28:12,880 --> 00:28:16,240 Speaker 1: I did hear yesterday from Brainerd and I'm trying to 527 00:28:16,240 --> 00:28:18,359 Speaker 1: find my note to myself because I wrote it down. 528 00:28:18,880 --> 00:28:22,600 Speaker 1: Um a comment that I thought sounded a little bit 529 00:28:22,640 --> 00:28:27,400 Speaker 1: more debbish. Um. She said, here's I've taken the verbatim, 530 00:28:27,440 --> 00:28:29,159 Speaker 1: but I dropped out the middle part because it was 531 00:28:29,200 --> 00:28:33,320 Speaker 1: too worthy. The rapidity of the tightening cycle creates risks 532 00:28:33,359 --> 00:28:36,320 Speaker 1: associated with overtightening, and it's been a while since I've 533 00:28:36,320 --> 00:28:39,760 Speaker 1: heard of FED speaker talk about those risks. Um. The 534 00:28:39,800 --> 00:28:43,040 Speaker 1: market seemed to take notice. Do you think we're gonna 535 00:28:43,040 --> 00:28:47,120 Speaker 1: start hearing more about that? So? I think you're right. 536 00:28:47,240 --> 00:28:50,600 Speaker 1: She she did make some comments on the risks of 537 00:28:50,720 --> 00:28:56,040 Speaker 1: going too far. UM. We'll see with time if we 538 00:28:56,320 --> 00:28:59,840 Speaker 1: if we hear more remarks along those lines. But we 539 00:29:00,040 --> 00:29:05,080 Speaker 1: didn't hear much pushback from Powell today. Uh uh. You know, 540 00:29:05,160 --> 00:29:09,240 Speaker 1: the market right now is leaning towards expecting another seventy 541 00:29:09,320 --> 00:29:14,080 Speaker 1: five basis point increase. These were Powell's last remarks UM, 542 00:29:14,200 --> 00:29:17,960 Speaker 1: or last scheduled remarks before the Fed goes into black 543 00:29:18,000 --> 00:29:22,600 Speaker 1: app period tomorrow, UM night, So you know he didn't 544 00:29:22,680 --> 00:29:25,880 Speaker 1: he didn't close the door to another. Of course, we 545 00:29:25,960 --> 00:29:29,120 Speaker 1: have another big report coming next week next Tuesday, and 546 00:29:29,280 --> 00:29:32,720 Speaker 1: update on consumer the Consumer Price Index, and that is 547 00:29:32,760 --> 00:29:36,280 Speaker 1: going to be very closely watched by Fed officials and 548 00:29:36,400 --> 00:29:40,400 Speaker 1: economists as to UM, what's really going on? With inflation. 549 00:29:40,720 --> 00:29:42,760 Speaker 1: You know, there's a lot of folks out there that's saying, hey, 550 00:29:42,800 --> 00:29:44,840 Speaker 1: maybe the Fed doesn't need to be that aggressive, or 551 00:29:44,960 --> 00:29:48,080 Speaker 1: or artist seeing inflation start to really roll over when 552 00:29:48,120 --> 00:29:52,400 Speaker 1: they look at the energy prices Gasoline coming down, oil 553 00:29:52,440 --> 00:29:55,960 Speaker 1: now trading just above eighty dollars barrel. W t I. 554 00:29:56,440 --> 00:29:59,000 Speaker 1: I've got the housing market rolling over, really impacted by 555 00:29:59,080 --> 00:30:01,440 Speaker 1: higher mortgage race. Um, maybe they don't need to do 556 00:30:01,560 --> 00:30:04,760 Speaker 1: much more after the seventy five basis point hike. What 557 00:30:04,800 --> 00:30:08,360 Speaker 1: are you hearing? So one thing that will be very 558 00:30:08,400 --> 00:30:12,959 Speaker 1: important in the next CPI update is what happens with 559 00:30:13,120 --> 00:30:16,400 Speaker 1: core inflation. So you make a good point that we 560 00:30:16,480 --> 00:30:20,360 Speaker 1: are now expecting headline maybe to come down a little 561 00:30:20,360 --> 00:30:23,400 Speaker 1: bit more because of what you're we're seeing with gas 562 00:30:23,440 --> 00:30:28,280 Speaker 1: prices easing in that relief that households are feeling. But 563 00:30:28,600 --> 00:30:32,000 Speaker 1: officials wants to see inflation come down across the board. 564 00:30:32,240 --> 00:30:36,400 Speaker 1: So they're going to be looking at shelter and they're 565 00:30:36,400 --> 00:30:38,840 Speaker 1: going to be looking at the report, um to see 566 00:30:38,880 --> 00:30:43,960 Speaker 1: what happened for inflation, because, um, even if we're seeing 567 00:30:44,120 --> 00:30:47,000 Speaker 1: some relief in some aspects, they needed to come down 568 00:30:47,080 --> 00:30:51,280 Speaker 1: across the board. I wonder we were talking Neil Grossman 569 00:30:51,320 --> 00:30:55,400 Speaker 1: about this earlier. Now, if we're gonna see the Fed 570 00:30:55,520 --> 00:30:59,239 Speaker 1: try and bring the average over say this decade to two, 571 00:30:59,840 --> 00:31:01,719 Speaker 1: or if they're just going to give up on you know, 572 00:31:01,800 --> 00:31:03,920 Speaker 1: this year and next and restart the clock once they 573 00:31:03,920 --> 00:31:08,200 Speaker 1: get there. They haven't specified, you know what time frame 574 00:31:08,280 --> 00:31:11,880 Speaker 1: they're aiming for two percent inflation over time for that 575 00:31:11,960 --> 00:31:16,400 Speaker 1: average target. But I mean, one thing that they're saying 576 00:31:16,440 --> 00:31:19,480 Speaker 1: is they want to see inflation come down for several 577 00:31:19,560 --> 00:31:23,440 Speaker 1: months in a row before they ease on their um 578 00:31:23,480 --> 00:31:28,400 Speaker 1: significantly or pause on the rate increases and um. Even 579 00:31:28,440 --> 00:31:31,360 Speaker 1: if it takes some time for them to bring inflation down, 580 00:31:31,480 --> 00:31:34,440 Speaker 1: you know, we'll see, you know, how how they eventually 581 00:31:35,200 --> 00:31:38,200 Speaker 1: respond or how long it actually takes. But they're they're 582 00:31:38,240 --> 00:31:42,440 Speaker 1: pretty serious so far aiming for two percent and not 583 00:31:42,640 --> 00:31:46,560 Speaker 1: lifting that target. Alright, Janelle, very good stuff. Appreciate getting 584 00:31:46,640 --> 00:31:51,080 Speaker 1: your reporting there. Janelle marte Um Economics and Federal Reserve 585 00:31:51,120 --> 00:31:53,720 Speaker 1: reporter for Bloomberg DUS breaking down kind of comments we 586 00:31:53,760 --> 00:31:56,000 Speaker 1: heard from FED Chairman j Pal this morning, which we 587 00:31:56,080 --> 00:32:00,440 Speaker 1: brought to you live on Bloomberg Radio from the Cato Institute. Again, 588 00:32:00,520 --> 00:32:03,400 Speaker 1: the message, if nothing else from this fellow reserve over 589 00:32:03,400 --> 00:32:05,800 Speaker 1: the past several weeks has been very clear. We are 590 00:32:05,880 --> 00:32:09,400 Speaker 1: here to fight inflation and that means raising rates. Thanks 591 00:32:09,440 --> 00:32:12,920 Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe 592 00:32:12,960 --> 00:32:16,680 Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast 593 00:32:16,720 --> 00:32:20,240 Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at 594 00:32:20,280 --> 00:32:23,920 Speaker 1: Matt Miller vent three. On Fall Sweeney, I'm on Twitter 595 00:32:23,960 --> 00:32:26,760 Speaker 1: at pt Sweeney. Before the podcast. You can always catch 596 00:32:26,880 --> 00:32:28,400 Speaker 1: us worldwide at Bloomberg Radio.