1 00:00:02,920 --> 00:00:10,799 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,840 --> 00:00:15,000 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:15,040 --> 00:00:17,480 Speaker 1: Eastern on Affo Car Playing and Broud Auto with the 4 00:00:17,520 --> 00:00:21,320 Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,640 --> 00:00:23,320 Speaker 1: or watch us live on YouTube. 6 00:00:25,400 --> 00:00:27,479 Speaker 2: Lots of earnings coming out this week. 7 00:00:27,720 --> 00:00:29,760 Speaker 3: We also had in addition to the tech game, so 8 00:00:29,760 --> 00:00:32,160 Speaker 3: I also had a lot of big energy companies report. 9 00:00:32,240 --> 00:00:36,600 Speaker 3: Exxon Chevron reported. Let's break it all down with Vince Piazza. 10 00:00:36,640 --> 00:00:38,800 Speaker 3: He's a senior equity research channels covering the oil and 11 00:00:38,840 --> 00:00:42,680 Speaker 3: gas space for Bloomberg Intelligence. Joining us from Philadelphia via 12 00:00:42,960 --> 00:00:45,000 Speaker 3: zoom So, Vince, let's break it down. Let's start with 13 00:00:45,159 --> 00:00:48,400 Speaker 3: Exxon Mobile. Looks like they missed a little bit here 14 00:00:49,440 --> 00:00:52,120 Speaker 3: on some of their earnings. Give us the lowdown from 15 00:00:52,200 --> 00:00:52,760 Speaker 3: Xon Mobile. 16 00:00:54,480 --> 00:00:58,880 Speaker 4: Well, look, I think here's the takeaway we're telling investors 17 00:00:58,960 --> 00:01:03,639 Speaker 4: and listeners right, this is about cash. Cash is king. Yes, 18 00:01:03,760 --> 00:01:06,720 Speaker 4: they missed, they telegraphed some of that miss It's really 19 00:01:06,800 --> 00:01:12,240 Speaker 4: on lower natural gas prices, margins, a lot of timing 20 00:01:12,560 --> 00:01:17,080 Speaker 4: effects and maintenance issues one timers. Really, But if you 21 00:01:17,200 --> 00:01:21,160 Speaker 4: think about Exon Mobile this quarter, I want you to 22 00:01:21,280 --> 00:01:24,880 Speaker 4: say cash is king free cash flow of over ten 23 00:01:25,000 --> 00:01:27,800 Speaker 4: billion dollars this quarter. That's a forty billion dollar run 24 00:01:27,959 --> 00:01:31,319 Speaker 4: rate annualized. You know, they paid out something like six 25 00:01:31,400 --> 00:01:36,759 Speaker 4: point eight billion distributions, dividends and also share buybacks. Thirty 26 00:01:36,840 --> 00:01:39,240 Speaker 4: three billion of cash on the balance sheet at the 27 00:01:39,400 --> 00:01:42,760 Speaker 4: end of Q one. This is the lowest financial leverage 28 00:01:42,840 --> 00:01:49,640 Speaker 4: they've had in roughly a decade. So, yes, earnings did miss. 29 00:01:49,800 --> 00:01:52,559 Speaker 4: That seems to be dragging it down roughly four percent 30 00:01:52,680 --> 00:01:56,520 Speaker 4: this morning. But the main takeaway for us is that 31 00:01:57,160 --> 00:02:01,880 Speaker 4: they're in a really strong position balance sheets, they're generating capital, 32 00:02:02,680 --> 00:02:06,280 Speaker 4: they're paying dividend to three percent yield, and they're buying 33 00:02:06,400 --> 00:02:11,880 Speaker 4: backstop the Pioneer acquisition. At least from what I heard, 34 00:02:12,520 --> 00:02:15,399 Speaker 4: it doesn't really seem that there's much in the way 35 00:02:15,480 --> 00:02:19,799 Speaker 4: it's going to push the closing of that deal past 36 00:02:20,800 --> 00:02:25,000 Speaker 4: past the first half. So once that deal closes, Paul, 37 00:02:25,120 --> 00:02:28,320 Speaker 4: you're looking at a stop buy back run rate of 38 00:02:28,840 --> 00:02:32,119 Speaker 4: roughly twenty billion dollars a year. So I think they're 39 00:02:32,160 --> 00:02:36,880 Speaker 4: in a fairly good position, probably better than this four 40 00:02:36,960 --> 00:02:40,120 Speaker 4: percent clip that you're seeing this morning, and I think, 41 00:02:40,240 --> 00:02:43,160 Speaker 4: quite frankly better than what Chevron had to offer. 42 00:02:43,480 --> 00:02:47,240 Speaker 5: Yeah, breakdown Chevron for US that company adjusted EPs beat, 43 00:02:47,680 --> 00:02:50,560 Speaker 5: upstream earnings beat, but the cash flow from operations for 44 00:02:50,600 --> 00:02:53,680 Speaker 5: the first quarter six point eight billion dollars versus estimates 45 00:02:53,720 --> 00:02:55,079 Speaker 5: of seven point eight billion. 46 00:02:56,639 --> 00:02:59,840 Speaker 4: Yeah, so you know, again cash is king, right, they 47 00:03:00,080 --> 00:03:03,880 Speaker 4: posted gap free cash flow of just under a three billion, 48 00:03:04,040 --> 00:03:07,200 Speaker 4: yet they paid out three billion of divvies and another 49 00:03:07,320 --> 00:03:11,760 Speaker 4: three billion and shary purchases. You know, if you compare 50 00:03:11,880 --> 00:03:16,880 Speaker 4: the financial leverage, right, Exon is net debt to cap 51 00:03:17,000 --> 00:03:21,079 Speaker 4: of roughly three percent, again, lowest in a decade. For Chevron, 52 00:03:21,360 --> 00:03:24,799 Speaker 4: it's closer to nine percent, So they're not generating the 53 00:03:24,960 --> 00:03:27,000 Speaker 4: kind of free cash flow and they're probably dipping in 54 00:03:27,560 --> 00:03:30,440 Speaker 4: to the balance sheet to help fund those distributions. 55 00:03:30,760 --> 00:03:30,919 Speaker 1: You know. 56 00:03:31,120 --> 00:03:38,080 Speaker 4: Obviously there's also the uncertainty around preemption rights over Hess 57 00:03:38,160 --> 00:03:42,800 Speaker 4: and really really Guyana, so that remains an open question. 58 00:03:43,600 --> 00:03:49,080 Speaker 4: Whereas Exxon's acquisition a Pioneer looks like it shouldn't be 59 00:03:49,200 --> 00:03:52,720 Speaker 4: that many issues for them to close at that time. 60 00:03:52,800 --> 00:03:56,320 Speaker 4: Whereas you know, the Hess deal for Chevron could get extended, 61 00:03:56,720 --> 00:04:01,800 Speaker 4: so fewer questions around Exon, yet it's four more. I 62 00:04:01,920 --> 00:04:04,120 Speaker 4: have more questions around Chevron and that seems to be 63 00:04:04,440 --> 00:04:07,920 Speaker 4: you know, roughly down one percent. But in terms of 64 00:04:08,000 --> 00:04:10,680 Speaker 4: what's going on, what what has gone on this year, 65 00:04:11,320 --> 00:04:14,560 Speaker 4: I mean Exon even with that four percent clip, it's 66 00:04:14,680 --> 00:04:16,880 Speaker 4: up seventeen percent this year. Yeah, and it's you know, 67 00:04:17,400 --> 00:04:20,880 Speaker 4: pretty much in line with with crude and what we've 68 00:04:20,880 --> 00:04:22,480 Speaker 4: seen CREWD do this year as well. 69 00:04:22,600 --> 00:04:24,200 Speaker 3: And that's the one I wanted to get to Vincent 70 00:04:24,240 --> 00:04:26,440 Speaker 3: we just updated. I mean, both of these companies are 71 00:04:26,560 --> 00:04:29,240 Speaker 3: so diversified within the energy space. 72 00:04:29,839 --> 00:04:34,080 Speaker 2: How highly correlated are they to the price of Brent crude? 73 00:04:35,760 --> 00:04:35,960 Speaker 6: Yeah. 74 00:04:36,040 --> 00:04:39,960 Speaker 4: Look, you know what with the acquisitions that Exon has 75 00:04:40,040 --> 00:04:43,200 Speaker 4: made and what the acquisition that Exon you know will 76 00:04:43,279 --> 00:04:46,919 Speaker 4: make with Pioneer, they're going to be much more correlated 77 00:04:47,120 --> 00:04:51,280 Speaker 4: to us on sure, And in this case, Pioneer is 78 00:04:51,800 --> 00:04:57,440 Speaker 4: is much more exposed to to the to the permium 79 00:04:57,480 --> 00:05:02,120 Speaker 4: basin and much more exposed to regional Texas benchmarks in 80 00:05:02,240 --> 00:05:04,360 Speaker 4: the case of in the case of Chevron, you know, 81 00:05:04,800 --> 00:05:08,280 Speaker 4: with the UH with with the Hess deal, they're going 82 00:05:08,400 --> 00:05:13,120 Speaker 4: to have some US exposure via via the Bakan, but 83 00:05:13,880 --> 00:05:17,720 Speaker 4: you know, obviously the Guyana exposure in offshore, so that 84 00:05:17,800 --> 00:05:22,480 Speaker 4: seems to be more tilted toward seaborne marks, whereas Exon 85 00:05:22,880 --> 00:05:26,640 Speaker 4: and they're the importance of the Permian for Exon I 86 00:05:26,680 --> 00:05:29,640 Speaker 4: will likely shine through post the Pioneer deal. 87 00:05:30,200 --> 00:05:33,200 Speaker 5: We had Tesla earnings earlier this week, we talked a 88 00:05:33,240 --> 00:05:38,200 Speaker 5: lot about dropping demand for electric vehicles. I'm wondering to 89 00:05:38,320 --> 00:05:43,479 Speaker 5: what extent is that bullish for companies like Exon and Chevron. 90 00:05:45,560 --> 00:05:49,280 Speaker 4: So when we discuss natural gas, you know, we've had 91 00:05:51,000 --> 00:05:58,039 Speaker 4: rough and storage actually ballooned. You know, we're roughly thirty 92 00:05:58,360 --> 00:06:00,680 Speaker 4: percent above the five year high for now gas storage 93 00:06:00,680 --> 00:06:03,840 Speaker 4: in the US, and that's a new a new five 94 00:06:03,920 --> 00:06:07,520 Speaker 4: year average high. We have over we have an oversupply issue, 95 00:06:07,560 --> 00:06:09,160 Speaker 4: and we had a horrible winter, so we didn't see 96 00:06:09,200 --> 00:06:12,240 Speaker 4: the demand, the cyclical demand. But in terms of natural 97 00:06:12,320 --> 00:06:16,159 Speaker 4: gases share in the more important sectors, the power stack, 98 00:06:17,200 --> 00:06:20,760 Speaker 4: that has actually improved over the last several years, So 99 00:06:21,320 --> 00:06:26,880 Speaker 4: that gas as a feedstock into power generation that will increase. 100 00:06:27,360 --> 00:06:30,600 Speaker 4: It's not so much evs, but think about the amount 101 00:06:30,680 --> 00:06:33,600 Speaker 4: of power that one needs for all these data all 102 00:06:33,640 --> 00:06:37,279 Speaker 4: these data centers. Whether you're mining bitcoin or whether you're 103 00:06:37,360 --> 00:06:41,239 Speaker 4: Microsoft and these other tech companies building out their data centers, 104 00:06:41,520 --> 00:06:45,360 Speaker 4: you're still going to need and a massive amount of power. 105 00:06:46,720 --> 00:06:51,040 Speaker 4: And while you still are investing in solar and wind 106 00:06:52,200 --> 00:06:56,960 Speaker 4: uh and other technologies, you're still going to need that 107 00:06:57,240 --> 00:07:02,240 Speaker 4: transparency and the depend didn't see on natural gas as 108 00:07:02,279 --> 00:07:04,320 Speaker 4: a major feedstock into the power sect. 109 00:07:05,120 --> 00:07:09,720 Speaker 3: Hey, Vince, just wondering kind of where we are in 110 00:07:10,320 --> 00:07:14,200 Speaker 3: terms of this commitment to going green, greener energy. I 111 00:07:14,280 --> 00:07:17,280 Speaker 3: was at a bn EF conference with Alex Steele last 112 00:07:17,320 --> 00:07:19,280 Speaker 3: week in New York, and a lot of the energy 113 00:07:19,280 --> 00:07:21,040 Speaker 3: companies were there, and they're talking about the investments that 114 00:07:21,040 --> 00:07:23,680 Speaker 3: they're making and thinking things like that. How do investors 115 00:07:23,760 --> 00:07:26,680 Speaker 3: feel about the investments that these energy companies are making 116 00:07:26,800 --> 00:07:29,320 Speaker 3: in their traditional fossil fuels versus maybe some of the 117 00:07:29,800 --> 00:07:31,160 Speaker 3: newer technologies. 118 00:07:32,640 --> 00:07:34,160 Speaker 7: Yeah, I still think we're in the. 119 00:07:35,680 --> 00:07:36,560 Speaker 4: Early stages. 120 00:07:36,960 --> 00:07:37,080 Speaker 1: Uh. 121 00:07:37,240 --> 00:07:42,960 Speaker 4: You know, Exon talked about direct air capture and gray 122 00:07:43,240 --> 00:07:47,000 Speaker 4: versus green hydrogen. You're still going to need significant amount 123 00:07:47,200 --> 00:07:52,080 Speaker 4: of civic support, government support for these projects. 124 00:07:52,240 --> 00:07:52,400 Speaker 8: You know. 125 00:07:52,520 --> 00:07:55,200 Speaker 4: Occidental seems to be more further along in terms of 126 00:07:55,640 --> 00:07:59,600 Speaker 4: direct air capture. Exon talked about that. Excellon continues to 127 00:07:59,640 --> 00:08:02,920 Speaker 4: talk about it, but I think we're still somewhat a 128 00:08:03,000 --> 00:08:09,960 Speaker 4: ways from using it as a mechanism in our models 129 00:08:10,920 --> 00:08:14,680 Speaker 4: for a fundamental change in the makeup of these entities. 130 00:08:15,520 --> 00:08:19,400 Speaker 4: It's still going to be about upstream extraction and cracking 131 00:08:19,440 --> 00:08:23,400 Speaker 4: the molecules and putting them into the system, into the broad. 132 00:08:24,800 --> 00:08:26,760 Speaker 2: All right, Vince, thanks so much, appreciate it. 133 00:08:27,040 --> 00:08:30,000 Speaker 3: Vince Biazza, senior equity analyst covering the oil and gas 134 00:08:30,000 --> 00:08:33,440 Speaker 3: space for Bloomberg Intelligence. There again, we had a couple 135 00:08:33,480 --> 00:08:38,160 Speaker 3: of the big companies report earnings here, Exxon Mobile and Chevron. 136 00:08:39,679 --> 00:08:43,520 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 137 00:08:43,640 --> 00:08:47,160 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 138 00:08:47,200 --> 00:08:50,320 Speaker 1: Auto with the Bloomberg Business. You can also listen live 139 00:08:50,480 --> 00:08:53,599 Speaker 1: on Amazon Alexa from our flagship New York station Just 140 00:08:53,720 --> 00:08:56,319 Speaker 1: say Alexa playing Bloomberg eleven thirty. 141 00:08:58,080 --> 00:09:00,559 Speaker 2: We're a little lonely today. Friday's on a big in 142 00:09:00,720 --> 00:09:01,319 Speaker 2: person day. 143 00:09:01,520 --> 00:09:02,240 Speaker 5: Not a lot of people. 144 00:09:03,040 --> 00:09:03,160 Speaker 8: You know. 145 00:09:03,280 --> 00:09:07,040 Speaker 3: We're here in our Bloomberg Interactive Broker studio, but we're 146 00:09:07,120 --> 00:09:08,679 Speaker 3: kind of kind of lonely here. But I'll say we're 147 00:09:08,760 --> 00:09:11,480 Speaker 3: joined now by Sarah Ponsek. She's a financial advisor at 148 00:09:11,520 --> 00:09:16,160 Speaker 3: UBS Private Wealth Management. She's based down a Boca Briton, Florida. 149 00:09:16,920 --> 00:09:20,040 Speaker 3: Nice Trade from New York City, she joined the mess 150 00:09:20,760 --> 00:09:21,720 Speaker 3: of moving down to Florida. 151 00:09:21,760 --> 00:09:24,200 Speaker 2: She was actually a little bit on the early side. Sarah, 152 00:09:24,240 --> 00:09:24,520 Speaker 2: thanks so. 153 00:09:24,600 --> 00:09:27,679 Speaker 3: Much for joining us here. A lot of earnings, a 154 00:09:27,800 --> 00:09:32,199 Speaker 3: lot of economic data. This week, we've seen some volatility 155 00:09:32,320 --> 00:09:34,720 Speaker 3: in the equity markets, pulling back maybe four or five 156 00:09:34,720 --> 00:09:36,040 Speaker 3: percent here off off the peak. 157 00:09:36,480 --> 00:09:38,360 Speaker 2: What are you telling your clients at ubs? 158 00:09:39,559 --> 00:09:41,160 Speaker 7: It's great to be here with you both. And yes, 159 00:09:41,200 --> 00:09:43,160 Speaker 7: I was part of the mass exodus down to Florida, 160 00:09:43,200 --> 00:09:45,959 Speaker 7: but I tell everyone that I I was raised here, 161 00:09:46,240 --> 00:09:49,440 Speaker 7: I'm from Florida. I have a lot of a lega. 162 00:09:51,040 --> 00:09:53,680 Speaker 7: But no, Look, this was a big week in terms 163 00:09:53,720 --> 00:09:56,000 Speaker 7: of information when you think about what's driving the market 164 00:09:56,080 --> 00:10:00,199 Speaker 7: right now and what is most important when it comes 165 00:10:00,200 --> 00:10:03,559 Speaker 7: to thinking about the market outlook, there's really two components 166 00:10:03,559 --> 00:10:03,719 Speaker 7: of that. 167 00:10:04,040 --> 00:10:07,600 Speaker 8: One inflation and growth, which we had insight into this week, 168 00:10:08,000 --> 00:10:11,599 Speaker 8: and two tech and tech earnings, because so much of 169 00:10:11,679 --> 00:10:14,920 Speaker 8: this rally that we have seen over the past five months, 170 00:10:14,960 --> 00:10:18,920 Speaker 8: past year has been predicated upon this assumption that we 171 00:10:19,000 --> 00:10:20,440 Speaker 8: are going to see. 172 00:10:21,200 --> 00:10:26,400 Speaker 7: Unbelievable growth and AI. Now, with that said, what did 173 00:10:26,480 --> 00:10:27,520 Speaker 7: we learn this week? 174 00:10:28,080 --> 00:10:32,040 Speaker 8: Honestly, nothing too new at the PCEE numbers this morning 175 00:10:32,160 --> 00:10:34,800 Speaker 8: that came in pretty much bang in line with expectations. 176 00:10:35,080 --> 00:10:37,880 Speaker 7: Inflation sticky. We all know that the Fed's dealing with 177 00:10:38,000 --> 00:10:40,120 Speaker 7: it and they're just waiting at this point in time. 178 00:10:40,679 --> 00:10:44,160 Speaker 8: And we saw some unbelievable tech earnings overnight as well, 179 00:10:44,360 --> 00:10:48,440 Speaker 8: proving that CAPEC spending in AI is paying off. 180 00:10:48,640 --> 00:10:50,920 Speaker 7: So, you know, as for what we saw this. 181 00:10:51,000 --> 00:10:55,240 Speaker 8: Week, how that reflects into the outlook for the market ahead, 182 00:10:55,559 --> 00:10:57,199 Speaker 8: There really isn't too much of a change at this 183 00:10:57,280 --> 00:10:57,800 Speaker 8: point in time. 184 00:10:58,400 --> 00:11:01,160 Speaker 5: Okay, So when you look at the macro data, not 185 00:11:01,320 --> 00:11:03,040 Speaker 5: just this week, but what we've seen over the last 186 00:11:03,120 --> 00:11:06,920 Speaker 5: several months, are we really going to get cuts this 187 00:11:07,080 --> 00:11:08,679 Speaker 5: year from the Federal reserves era? 188 00:11:09,760 --> 00:11:12,120 Speaker 7: It's a good question. I think it's the million dollar 189 00:11:12,240 --> 00:11:14,120 Speaker 7: questions on everyone's mind. 190 00:11:14,280 --> 00:11:17,080 Speaker 8: And frankly, I don't even know if FED Chair Powell 191 00:11:17,559 --> 00:11:19,480 Speaker 8: and his colleagues at the FED know the answer to 192 00:11:19,559 --> 00:11:22,920 Speaker 8: that question right now. Look, our economists base case is 193 00:11:22,960 --> 00:11:26,760 Speaker 8: that we will still see two FED rate cuts this year. 194 00:11:27,400 --> 00:11:30,599 Speaker 8: Coming into the year, our expectation was for three. We 195 00:11:30,760 --> 00:11:34,200 Speaker 8: never bought into the markets expectations that we might see 196 00:11:34,440 --> 00:11:37,960 Speaker 8: six seven rate cuts throughout twenty twenty four. We were 197 00:11:38,000 --> 00:11:41,360 Speaker 8: standing pad at three that has since been revised to two, 198 00:11:41,840 --> 00:11:45,960 Speaker 8: with that starting likely in September, sometime in the back 199 00:11:46,080 --> 00:11:49,160 Speaker 8: half of the year. But again, the only way that 200 00:11:49,200 --> 00:11:51,160 Speaker 8: we are actually going to see that come to fruition 201 00:11:51,440 --> 00:11:55,000 Speaker 8: is if we see progress on the inflation front, and 202 00:11:55,320 --> 00:11:58,760 Speaker 8: right now there are concerns and question marks surrounding that. 203 00:11:58,920 --> 00:12:00,600 Speaker 8: So I would say, if we think about what, what's 204 00:12:00,679 --> 00:12:04,719 Speaker 8: the biggest risk to you know, our base case right now, 205 00:12:05,200 --> 00:12:08,000 Speaker 8: what's our biggest risk to the market outlook, it is 206 00:12:08,080 --> 00:12:12,960 Speaker 8: that inflation stays sticky for longer and that those cuts 207 00:12:13,120 --> 00:12:14,959 Speaker 8: just get pushed out into the future. 208 00:12:15,280 --> 00:12:17,040 Speaker 7: And I know there has been some talk of even 209 00:12:17,120 --> 00:12:22,040 Speaker 7: a great hike at this point. That's not our forecasts 210 00:12:22,080 --> 00:12:24,800 Speaker 7: at this point in time, and we would you know, 211 00:12:25,160 --> 00:12:26,600 Speaker 7: there'd be a lot that would have to happen. 212 00:12:26,640 --> 00:12:29,000 Speaker 8: We would need to see a reacceleration in inflation for 213 00:12:29,120 --> 00:12:30,720 Speaker 8: us to believe that that might be on the table. 214 00:12:31,400 --> 00:12:33,720 Speaker 3: So, Sarah, what do you mean you speak to your 215 00:12:33,800 --> 00:12:36,679 Speaker 3: clients kind of what are you telling them here as 216 00:12:36,720 --> 00:12:41,720 Speaker 3: it relates to any change in maybe asset allocation, stocks, bonds, alternatives. 217 00:12:42,000 --> 00:12:43,719 Speaker 3: What's what's kind of the message you're trying to get 218 00:12:43,720 --> 00:12:45,800 Speaker 3: across to your clients So the. 219 00:12:45,840 --> 00:12:48,360 Speaker 8: Message within the last couple of weeks, because it seems 220 00:12:48,360 --> 00:12:50,880 Speaker 8: as though, you know, investors always have short term amnesia. 221 00:12:50,920 --> 00:12:53,480 Speaker 8: You see any blip in the market, any volatility, and 222 00:12:53,520 --> 00:12:56,679 Speaker 8: there is concern. So even amongst clients of ours who 223 00:12:57,360 --> 00:12:59,880 Speaker 8: you know have had phenomenal performance over the last year. 224 00:13:00,559 --> 00:13:01,800 Speaker 8: For all, if you look at the S and P 225 00:13:01,960 --> 00:13:04,480 Speaker 8: five hundred over a five month span, we saw the 226 00:13:04,559 --> 00:13:07,679 Speaker 8: stock market almost just go straight up thirty percent over 227 00:13:07,800 --> 00:13:10,079 Speaker 8: five months, and all of a sudden over the last 228 00:13:10,120 --> 00:13:12,000 Speaker 8: couple of weeks, we are faced with volatility and we 229 00:13:12,080 --> 00:13:14,319 Speaker 8: see a pullback. What are we telling them in relation 230 00:13:14,440 --> 00:13:17,000 Speaker 8: to that, Well, one we all have to know as investors, 231 00:13:17,480 --> 00:13:22,559 Speaker 8: pullbacks are normal. Corrections are a healthy element of the 232 00:13:22,679 --> 00:13:25,400 Speaker 8: investment process. In fact, if you actually look at how 233 00:13:25,520 --> 00:13:28,720 Speaker 8: often we see five percent pullbacks in the stock market 234 00:13:28,960 --> 00:13:32,400 Speaker 8: and averagely happen about three times a year. So making 235 00:13:32,480 --> 00:13:35,160 Speaker 8: sure that you don't see this pullback as a reason 236 00:13:35,240 --> 00:13:38,520 Speaker 8: to completely throw your plan and strategic acid allocation. 237 00:13:38,200 --> 00:13:38,760 Speaker 7: Out of place. 238 00:13:39,160 --> 00:13:42,160 Speaker 8: Now, as you're asking a question as to what we're 239 00:13:42,360 --> 00:13:45,280 Speaker 8: talking about, if we're making any changes as it pertains 240 00:13:45,320 --> 00:13:48,400 Speaker 8: to asset allocation, I would say the biggest message to 241 00:13:48,480 --> 00:13:51,680 Speaker 8: get across right now. For a long term investor who's 242 00:13:51,679 --> 00:13:53,800 Speaker 8: trying to build wealth long term is if you are 243 00:13:53,960 --> 00:13:57,000 Speaker 8: sitting on a lot of cash right now, which a 244 00:13:57,160 --> 00:13:59,240 Speaker 8: lot of investors are. If you look at the amount 245 00:13:59,280 --> 00:14:02,920 Speaker 8: of cash and market funds, it's above six trillion dollars, 246 00:14:03,000 --> 00:14:05,520 Speaker 8: So there's a lot of cash out there. At this 247 00:14:05,720 --> 00:14:08,640 Speaker 8: point in time, you should be looking to buy bonds 248 00:14:08,800 --> 00:14:11,960 Speaker 8: lock in yields, because yes, it's great that you can 249 00:14:12,000 --> 00:14:13,920 Speaker 8: get a juicy five five and a half percent in 250 00:14:14,000 --> 00:14:17,000 Speaker 8: a money market right now on your cash, But what 251 00:14:17,120 --> 00:14:19,280 Speaker 8: are you going to be thinking And I'm not even 252 00:14:19,280 --> 00:14:20,880 Speaker 8: going to say a year from now, but two three 253 00:14:20,960 --> 00:14:23,280 Speaker 8: years from now, we see interest rates come back down 254 00:14:23,320 --> 00:14:25,560 Speaker 8: and all of a sudden, you didn't invest your cash. 255 00:14:25,640 --> 00:14:27,320 Speaker 7: You're not getting a return on your cash. 256 00:14:27,680 --> 00:14:29,240 Speaker 8: And by the way, at that point in time, you 257 00:14:29,320 --> 00:14:31,640 Speaker 8: can't go out and buy bonds yielding what they're yielding 258 00:14:31,720 --> 00:14:34,320 Speaker 8: now either. So making sure that if you're someone who's 259 00:14:34,360 --> 00:14:38,160 Speaker 8: sitting on a hefty cash position, working through a plan 260 00:14:38,280 --> 00:14:40,600 Speaker 8: and making sure that you're putting that cash to work, 261 00:14:41,280 --> 00:14:43,400 Speaker 8: at least in the bond market at this point in time. 262 00:14:44,000 --> 00:14:47,720 Speaker 8: For stocks, look, we're seeing volatility, it might make sense 263 00:14:47,840 --> 00:14:49,480 Speaker 8: to ease into the market over a period of time. 264 00:14:49,520 --> 00:14:52,120 Speaker 7: Don't need to do it all at once. But it's 265 00:14:52,200 --> 00:14:54,640 Speaker 7: time in the market, not timing the market that matters. 266 00:14:55,120 --> 00:14:58,400 Speaker 8: And over a long period of time, cash is not 267 00:14:58,560 --> 00:14:59,880 Speaker 8: the best asset class to be sitting. 268 00:15:00,480 --> 00:15:03,320 Speaker 5: I'm wondering what you make of the boom in some 269 00:15:03,520 --> 00:15:08,080 Speaker 5: of these options linked products. I write about ETFs, and 270 00:15:08,520 --> 00:15:10,920 Speaker 5: earlier this week I wrote about a new ETF that 271 00:15:11,080 --> 00:15:16,440 Speaker 5: offers one hundred percent downside protection, but it caps the upside. 272 00:15:16,800 --> 00:15:19,720 Speaker 5: We know that covered call ETFs have seen about seventy 273 00:15:19,800 --> 00:15:24,280 Speaker 5: billion dollars. Is that a product that people are interested 274 00:15:24,320 --> 00:15:26,880 Speaker 5: in from your view, Sarah, or is it just an 275 00:15:26,920 --> 00:15:29,720 Speaker 5: easier bet to just buy bonds don't worry about all 276 00:15:29,720 --> 00:15:30,800 Speaker 5: the time it's done well. 277 00:15:30,920 --> 00:15:35,040 Speaker 8: Well, it's a completely different, you know, investment scenario investors 278 00:15:35,080 --> 00:15:38,520 Speaker 8: who are looking to trade options or you know, we 279 00:15:38,880 --> 00:15:41,360 Speaker 8: do work with clients when it comes to structured products 280 00:15:41,440 --> 00:15:45,640 Speaker 8: or structured notes as well. Occasionally investors like the idea 281 00:15:45,960 --> 00:15:49,800 Speaker 8: of you know, being able to have their cake and 282 00:15:49,880 --> 00:15:53,080 Speaker 8: eat it too. In essence, what you're describing is an 283 00:15:53,080 --> 00:15:56,640 Speaker 8: investment product in which you can get upside but limit 284 00:15:56,720 --> 00:15:59,960 Speaker 8: your downside as well well. Investors, you know, would take 285 00:16:00,120 --> 00:16:01,840 Speaker 8: that any day of the week. Of course, there's always 286 00:16:01,880 --> 00:16:03,680 Speaker 8: trade offs, and I don't know the specifics of the 287 00:16:03,760 --> 00:16:06,680 Speaker 8: ETF that you're speaking of, but I would imagine that 288 00:16:06,760 --> 00:16:09,280 Speaker 8: there's got to be some trade offs. You can't get 289 00:16:09,320 --> 00:16:11,480 Speaker 8: one hundred percent upside in the stock market and you 290 00:16:11,520 --> 00:16:14,440 Speaker 8: had cap your downside one hundred percent as well. But 291 00:16:14,560 --> 00:16:16,920 Speaker 8: I would say from our perspective more so, I have 292 00:16:17,160 --> 00:16:20,200 Speaker 8: had clients who might be sitting on and I'm not 293 00:16:20,240 --> 00:16:23,560 Speaker 8: going to name particular names, but maybe a large megacap 294 00:16:23,640 --> 00:16:26,960 Speaker 8: tech stock that has run up significantly over the last year, 295 00:16:27,400 --> 00:16:30,160 Speaker 8: and we're talking about different options strategies with them on 296 00:16:30,680 --> 00:16:33,120 Speaker 8: how to limit their downside or how to maybe take 297 00:16:33,200 --> 00:16:37,000 Speaker 8: some profits while being really smart and tactical tactical about 298 00:16:37,000 --> 00:16:39,800 Speaker 8: the tax implications of realizing those gains as well. You know, 299 00:16:40,320 --> 00:16:43,880 Speaker 8: how do you deal with the actual ramifications of having 300 00:16:44,240 --> 00:16:48,080 Speaker 8: a position in your portfolio that has performed phenomenally. That's great, 301 00:16:48,680 --> 00:16:50,400 Speaker 8: but at that point in time, if it is a 302 00:16:50,520 --> 00:16:54,320 Speaker 8: significant portion of your portfolio, how can you diversify out 303 00:16:54,360 --> 00:16:56,960 Speaker 8: of that position? How can you limit your downside? But 304 00:16:57,080 --> 00:16:59,400 Speaker 8: while being cognizant of the tax effects as well. 305 00:17:00,080 --> 00:17:02,480 Speaker 2: Sarah, thanks so much for joining us. Always appreciate checking 306 00:17:02,520 --> 00:17:02,840 Speaker 2: in with you. 307 00:17:02,960 --> 00:17:06,760 Speaker 3: Sarah Ponsek, She's a financial advisor UBS Private Wealth Management 308 00:17:06,800 --> 00:17:09,720 Speaker 3: down there in lovely Boca Raton, Florida. 309 00:17:09,800 --> 00:17:11,680 Speaker 2: Back going back to her home state. 310 00:17:11,800 --> 00:17:12,000 Speaker 7: There. 311 00:17:14,520 --> 00:17:18,400 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 312 00:17:18,520 --> 00:17:21,840 Speaker 1: weekdays at ten am Eastern on Focarplay and Android Auto 313 00:17:21,920 --> 00:17:24,800 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 314 00:17:24,920 --> 00:17:27,880 Speaker 1: get your podcasts, or watch us live on YouTube. 315 00:17:29,240 --> 00:17:31,440 Speaker 3: Let's talk tech earnings. At least was just reporting on 316 00:17:31,560 --> 00:17:36,240 Speaker 3: some of the tech names. Both Microsoft and Google reported 317 00:17:36,560 --> 00:17:40,480 Speaker 3: numbers last night, beating expectations, putting in some pretty solid numbers. 318 00:17:40,720 --> 00:17:44,840 Speaker 3: Both stocks trading quite well here this morning. Let's bring 319 00:17:44,880 --> 00:17:46,919 Speaker 3: in man Deep Singh and Onna rog Rana. They are 320 00:17:47,000 --> 00:17:51,960 Speaker 3: senior technology analyst for Bloomberg Intelligence. Man Deep is here 321 00:17:52,000 --> 00:17:54,639 Speaker 3: in our Bloomberg Interactor Brooker Studio, and Honurrock is in 322 00:17:55,600 --> 00:17:59,600 Speaker 3: work is in Chicago, hon rog Let's start with you Microsoft. 323 00:18:00,280 --> 00:18:02,760 Speaker 3: What you see from our good friends in Seattle last night. 324 00:18:04,119 --> 00:18:05,800 Speaker 9: Yeah, I was a bit surprised. I think the beat 325 00:18:06,000 --> 00:18:08,879 Speaker 9: was much more than what I had anticipated. I was 326 00:18:08,920 --> 00:18:12,080 Speaker 9: actually a little more pessimistic going in but they really 327 00:18:12,200 --> 00:18:14,639 Speaker 9: showed that they are the you know, one software company 328 00:18:14,680 --> 00:18:18,000 Speaker 9: that's really capitalizing on the AI demand. So so I 329 00:18:18,040 --> 00:18:20,520 Speaker 9: mean all go down to Microsoft side margins. A good 330 00:18:20,880 --> 00:18:23,639 Speaker 9: outlook is good, so you know, no bad news there. 331 00:18:24,600 --> 00:18:27,640 Speaker 3: All right, So man, deep, let's like likewise on alphabet, 332 00:18:27,640 --> 00:18:30,280 Speaker 3: I'm seeing stock you know, fifty two weeks high today, 333 00:18:30,480 --> 00:18:33,920 Speaker 3: just ripping. You've liked this name, You've been on top 334 00:18:33,960 --> 00:18:34,720 Speaker 3: of it all along. 335 00:18:35,240 --> 00:18:37,200 Speaker 2: What were some of the takeaways from the quarta last night. 336 00:18:37,680 --> 00:18:43,840 Speaker 10: Was focus because everyone thought their traditional search is getting disrupted. 337 00:18:44,040 --> 00:18:48,119 Speaker 10: You know, they're going to lose share in search. And 338 00:18:48,280 --> 00:18:51,280 Speaker 10: what they showed us last night is not only you know, 339 00:18:51,640 --> 00:18:55,000 Speaker 10: they have maintained their share, Jenny I is actually helping 340 00:18:55,160 --> 00:18:59,600 Speaker 10: engagement with their search and not just search on maps, 341 00:18:59,720 --> 00:19:03,600 Speaker 10: on YouTube and on top of that, I think what 342 00:19:04,160 --> 00:19:08,560 Speaker 10: really should excite investors is they have got the cloud 343 00:19:08,640 --> 00:19:14,080 Speaker 10: business where you see accelerating growth along with YouTube. So 344 00:19:14,280 --> 00:19:17,439 Speaker 10: now it's one hundred billion dollar ERUR business going at 345 00:19:17,480 --> 00:19:20,680 Speaker 10: twenty five percent without any impact. 346 00:19:20,320 --> 00:19:20,920 Speaker 2: To the cost. 347 00:19:21,480 --> 00:19:24,520 Speaker 10: Remember, everyone thought, oh, the search queries are going to 348 00:19:24,600 --> 00:19:28,359 Speaker 10: cost more because you have to use this GENI infrastructure. No, 349 00:19:28,880 --> 00:19:31,920 Speaker 10: there was a five hundred basis point margin expansion in search. 350 00:19:32,040 --> 00:19:35,680 Speaker 10: So clearly they have executed very well and it's not 351 00:19:35,840 --> 00:19:38,720 Speaker 10: a one quarter thing. I think this is going to continue. 352 00:19:39,320 --> 00:19:42,879 Speaker 5: So, Mandy, the cloud operation for Google first quarter profit 353 00:19:42,960 --> 00:19:45,920 Speaker 5: of nine hundred million dollars, that was ahead of estimate 354 00:19:45,960 --> 00:19:48,840 Speaker 5: projections of six hundred and seventy two million. So can 355 00:19:48,880 --> 00:19:51,159 Speaker 5: you talk a little bit more about what's fueling that 356 00:19:51,440 --> 00:19:53,600 Speaker 5: beat in the cloud side for Google. 357 00:19:53,800 --> 00:19:56,200 Speaker 10: I mean, in the case of cloud, there is one 358 00:19:56,320 --> 00:19:59,480 Speaker 10: traditional cloud revenue and then there is the GENAI link 359 00:19:59,560 --> 00:20:02,920 Speaker 10: cloud revenue. And what Google has done well is one 360 00:20:03,040 --> 00:20:06,280 Speaker 10: they are getting the n video GPUs and that's where 361 00:20:06,400 --> 00:20:09,240 Speaker 10: you know, the sixty percent increase in CAPEX is coming in. 362 00:20:09,400 --> 00:20:12,119 Speaker 10: And the market didn't mind that capex in increase in 363 00:20:12,240 --> 00:20:16,160 Speaker 10: contrast to Meta where the stock felt. So clearly they're 364 00:20:16,280 --> 00:20:20,359 Speaker 10: deploying that those GPUs on the cloud and it's contributing 365 00:20:21,119 --> 00:20:23,440 Speaker 10: in terms of additional revenue, which is where the beat 366 00:20:23,520 --> 00:20:25,960 Speaker 10: comes from in terms of why that growth rate accelerated. 367 00:20:26,160 --> 00:20:28,320 Speaker 3: And anag I'm just kind of looking at the you know, 368 00:20:28,480 --> 00:20:32,680 Speaker 3: Microsoft such An Adela, the CEO. He's been infusing Microsoft's 369 00:20:32,920 --> 00:20:37,280 Speaker 3: entire product line with AI technology from partner Open AI. 370 00:20:37,440 --> 00:20:41,080 Speaker 3: How much of advantage is partnering with open ai. How 371 00:20:41,160 --> 00:20:43,040 Speaker 3: much is advantage does that give Microsoft? 372 00:20:44,600 --> 00:20:46,879 Speaker 9: I think it's only in terms of time, so you know, 373 00:20:46,960 --> 00:20:48,920 Speaker 9: before all the others ketchup and try to do the 374 00:20:48,960 --> 00:20:51,119 Speaker 9: same thing. I think it's a land grab thing at 375 00:20:51,160 --> 00:20:53,040 Speaker 9: this point of you know, try to get as much 376 00:20:53,040 --> 00:20:55,720 Speaker 9: as you can get people hooked into these products with 377 00:20:55,840 --> 00:20:59,200 Speaker 9: open AI and then you know, but I'm fairly certain 378 00:20:59,240 --> 00:21:03,480 Speaker 9: other companies, everybody from Google to Amazon will have similar 379 00:21:04,320 --> 00:21:07,000 Speaker 9: infrastructure for other people to play where they currently have 380 00:21:07,119 --> 00:21:09,600 Speaker 9: it already. It's just that it's not getting infused in 381 00:21:09,680 --> 00:21:10,840 Speaker 9: products that quickly. 382 00:21:11,960 --> 00:21:17,800 Speaker 5: What exactly are like Microsoft's AI services? What are some 383 00:21:17,960 --> 00:21:22,160 Speaker 5: examples of how that company is basically deploying a AI 384 00:21:22,359 --> 00:21:24,200 Speaker 5: especially for these enterprise customers. 385 00:21:25,359 --> 00:21:27,720 Speaker 9: Yeah, the first and the foremost is they run open 386 00:21:27,760 --> 00:21:30,520 Speaker 9: AI's back end, so you use more chat GPT, they 387 00:21:30,600 --> 00:21:32,440 Speaker 9: make more money off of it, and that's the number 388 00:21:32,480 --> 00:21:34,760 Speaker 9: one place where you see we see their growth rate. 389 00:21:34,800 --> 00:21:37,840 Speaker 9: Now we calculate that to somewhere around a billion dollars 390 00:21:37,880 --> 00:21:40,240 Speaker 9: a quarter at this point run rate of all AI 391 00:21:40,359 --> 00:21:43,720 Speaker 9: services added in for Microsoft, So that's a very big 392 00:21:43,800 --> 00:21:46,600 Speaker 9: number or annualized at four billion The second part is 393 00:21:46,720 --> 00:21:50,400 Speaker 9: a product called GitHub where they have infused open Ai services, 394 00:21:50,520 --> 00:21:53,040 Speaker 9: so it helps people code things on a very much 395 00:21:53,119 --> 00:21:55,920 Speaker 9: faster pace. Then you have Office three sixty five that 396 00:21:56,119 --> 00:22:00,240 Speaker 9: also has copilots built in using open Ai services. I 397 00:22:00,280 --> 00:22:02,520 Speaker 9: would say their entire suite, you know, same thing, were 398 00:22:02,560 --> 00:22:05,199 Speaker 9: LinkedIn same thing for you know, other products. So they 399 00:22:05,840 --> 00:22:08,640 Speaker 9: are using a lot of those R and D dollars 400 00:22:08,720 --> 00:22:11,560 Speaker 9: from or R and D expertise from open Ai to 401 00:22:11,760 --> 00:22:12,880 Speaker 9: improve their own products. 402 00:22:13,480 --> 00:22:16,320 Speaker 3: Hey man, deep, I'm looking at our good friends at Google. 403 00:22:16,520 --> 00:22:19,119 Speaker 3: This is an AH alphabet free studios. You know, so 404 00:22:19,280 --> 00:22:21,240 Speaker 3: are good friends of Google? Eighty billion a free cash 405 00:22:21,280 --> 00:22:23,960 Speaker 3: flow this year, ninety billion next year. I'm a big, 406 00:22:24,480 --> 00:22:27,760 Speaker 3: you know, use of cash kind of guy. They're buying 407 00:22:27,840 --> 00:22:30,280 Speaker 3: back seventy billion dollars worth of stock and they started 408 00:22:30,359 --> 00:22:32,320 Speaker 3: they're going to initiate an actual dividend. 409 00:22:33,240 --> 00:22:34,959 Speaker 2: That's a good thing, right, Yeah? Is that a good 410 00:22:35,040 --> 00:22:35,520 Speaker 2: use of cash. 411 00:22:35,520 --> 00:22:37,800 Speaker 3: I mean, it's not like they're skipping on capex or anything. 412 00:22:38,080 --> 00:22:42,320 Speaker 10: They're not in Probably they're following the Apple playbook, where 413 00:22:42,480 --> 00:22:45,399 Speaker 10: all the free cash flow you generate you use it 414 00:22:45,600 --> 00:22:49,200 Speaker 10: for buybacks and dividend and capex increases. I mean look, 415 00:22:49,280 --> 00:22:52,760 Speaker 10: Google did raise their CAPEX guide by almost sixty seventy percent, 416 00:22:52,880 --> 00:22:57,159 Speaker 10: so clearly I think that's what investors want them to do, 417 00:22:57,440 --> 00:23:00,679 Speaker 10: and they can't acquire any companies, so this is probably 418 00:23:00,720 --> 00:23:01,800 Speaker 10: the best use of the cash. 419 00:23:01,960 --> 00:23:05,399 Speaker 5: You know, How do you compare that with Meta, because 420 00:23:05,400 --> 00:23:07,720 Speaker 5: earlier in the week it seemed like the Meta investors 421 00:23:07,800 --> 00:23:13,280 Speaker 5: were not very happy about increased spending on AI initiatives. 422 00:23:13,920 --> 00:23:16,760 Speaker 10: I think Meta is one of the top three companies 423 00:23:16,800 --> 00:23:20,080 Speaker 10: when it comes to generative AI, and they are exposed 424 00:23:20,160 --> 00:23:22,440 Speaker 10: in a positive way. It's just they don't have a 425 00:23:22,520 --> 00:23:27,360 Speaker 10: cloud business like Amazon, Microsoft and Google have, so all 426 00:23:27,480 --> 00:23:31,040 Speaker 10: the CAPEX they do is going for their own infrastructure 427 00:23:31,160 --> 00:23:34,000 Speaker 10: for their own apps, which is very important and it's 428 00:23:34,080 --> 00:23:38,440 Speaker 10: helping them actually improve their at targeting recommendation engines. But 429 00:23:38,520 --> 00:23:41,520 Speaker 10: they also have a money losing reality lab segment, and 430 00:23:41,680 --> 00:23:45,680 Speaker 10: investors just want to discern how much are you continuing 431 00:23:45,800 --> 00:23:49,280 Speaker 10: to lose on reality labs versus the AI capex, which 432 00:23:49,359 --> 00:23:51,800 Speaker 10: is I think the good capex. So that's why you 433 00:23:51,840 --> 00:23:52,840 Speaker 10: saw that stock reaction. 434 00:23:52,920 --> 00:23:55,720 Speaker 2: All right, an rad I'm looking ahead. That's what I do. 435 00:23:56,000 --> 00:24:00,000 Speaker 3: Next Thursday, after the close, Apple is going to report 436 00:24:00,280 --> 00:24:03,080 Speaker 3: earnings their stock is down eleven percent year to date, 437 00:24:03,280 --> 00:24:07,200 Speaker 3: really underperforming what it considers its peers being the metas, 438 00:24:07,240 --> 00:24:10,000 Speaker 3: the Amazon's, the you know, the Microsoft's of the world. Here, 439 00:24:10,680 --> 00:24:13,040 Speaker 3: what do you need to see next Thursday on that 440 00:24:13,080 --> 00:24:14,280 Speaker 3: conference call after the close. 441 00:24:15,840 --> 00:24:19,120 Speaker 9: Yeah, any comments about stabilization in China is the only catalyst. 442 00:24:19,200 --> 00:24:21,480 Speaker 9: Other than that. I mean, I don't see anything that 443 00:24:21,640 --> 00:24:23,800 Speaker 9: can you know, I would say change the mood for 444 00:24:23,920 --> 00:24:27,080 Speaker 9: what's happening with Apple, primarily because iPhone sales is what 445 00:24:27,280 --> 00:24:30,480 Speaker 9: drives company, and then there are no leading indicators that 446 00:24:30,600 --> 00:24:34,440 Speaker 9: will give us any signs that that can improve anytime soon. 447 00:24:35,760 --> 00:24:40,440 Speaker 5: Can I ask about Snap? Oh, Paul, I mean, I 448 00:24:40,480 --> 00:24:42,720 Speaker 5: know we were talking about, you know, the larger companies 449 00:24:42,760 --> 00:24:45,440 Speaker 5: and the larger earnings, but I mean Snapchat. This was 450 00:24:45,480 --> 00:24:48,560 Speaker 5: the first time that we're seeing the stock higher the 451 00:24:48,680 --> 00:24:52,920 Speaker 5: prior seven earnings reports. The stock just absolutely tanked after 452 00:24:53,000 --> 00:24:56,159 Speaker 5: the earning. So is this a turnaround for Snap? 453 00:24:56,400 --> 00:24:58,840 Speaker 10: I mean, look for a company like Snap which is 454 00:24:58,920 --> 00:25:03,040 Speaker 10: not profitable, they are sort of driven by how the 455 00:25:03,160 --> 00:25:06,280 Speaker 10: overall digital ad market is doing. And in this case, 456 00:25:06,480 --> 00:25:10,639 Speaker 10: the print from Beta and Alphabet shows digital ad market 457 00:25:10,840 --> 00:25:13,280 Speaker 10: is coming back. You're seeing a rebound even though the 458 00:25:13,640 --> 00:25:17,520 Speaker 10: small business sentiment is still quite weak, and if there 459 00:25:17,560 --> 00:25:20,919 Speaker 10: is a TikTok ban, there is no doubt that Snap 460 00:25:21,040 --> 00:25:24,000 Speaker 10: is one of the beneficiaries, both in terms of engagement 461 00:25:24,240 --> 00:25:26,720 Speaker 10: as well as ad dollars moving to their platform. And 462 00:25:26,840 --> 00:25:29,040 Speaker 10: we saw a glimpse of that in their print when 463 00:25:29,080 --> 00:25:32,639 Speaker 10: they said their advertisers actually grew eighty five percent and 464 00:25:32,760 --> 00:25:35,200 Speaker 10: their brand ad revenue grew twelve percent, which is the 465 00:25:35,320 --> 00:25:37,640 Speaker 10: first time in the last four quarters their brand ad 466 00:25:37,720 --> 00:25:38,760 Speaker 10: actually is positive. 467 00:25:39,440 --> 00:25:41,320 Speaker 3: All right, men, deep saying thank you so much. Mendeep 468 00:25:41,359 --> 00:25:45,800 Speaker 3: sing Anaragrana. They are senior technology analys for Bloomberg Intelligence. 469 00:25:45,920 --> 00:25:50,480 Speaker 3: They drive our global technology research effort at Bloomberg Intelligence. 470 00:25:51,440 --> 00:25:53,400 Speaker 2: Two of the best on the street. We appreciate getting 471 00:25:53,400 --> 00:25:54,240 Speaker 2: them again. 472 00:25:54,520 --> 00:25:57,440 Speaker 3: Big numbers, good numbers out of the tech companies last night, 473 00:25:58,280 --> 00:26:00,440 Speaker 3: you know, Snap on the smaller capsite ony billion of 474 00:26:00,480 --> 00:26:03,800 Speaker 3: market cap, and then of course Microsoft and Google and 475 00:26:04,040 --> 00:26:07,000 Speaker 3: again all those stocks hire as we talked with the Anorog, 476 00:26:07,040 --> 00:26:10,679 Speaker 3: a big big Thursday next week when Apple reports it's 477 00:26:10,680 --> 00:26:12,520 Speaker 3: earning example for the close, a lot of pressure I 478 00:26:12,560 --> 00:26:15,440 Speaker 3: think on that company too, as Aniog said, kind of 479 00:26:15,480 --> 00:26:16,840 Speaker 3: give some clarity about China. 480 00:26:16,920 --> 00:26:17,800 Speaker 2: I'm not sure they can. 481 00:26:18,640 --> 00:26:20,919 Speaker 3: They might just be one of those issues that's going 482 00:26:20,960 --> 00:26:23,560 Speaker 3: to be hanging over this company, force many quarters to come. 483 00:26:23,640 --> 00:26:24,119 Speaker 2: I don't know. 484 00:26:24,720 --> 00:26:26,879 Speaker 3: And then, of course you know their play on AI. 485 00:26:27,040 --> 00:26:30,280 Speaker 3: They do have a developer event on May seventh that's 486 00:26:30,320 --> 00:26:33,160 Speaker 3: also going to be highly anticipated. Maybe that's an opportunity 487 00:26:33,200 --> 00:26:35,680 Speaker 3: for Apple to come out and say here is our 488 00:26:35,760 --> 00:26:39,440 Speaker 3: AI strategy. iPad right, yeah, I mean I still have 489 00:26:39,560 --> 00:26:42,000 Speaker 3: my iPad, the original one. I don't know, but I 490 00:26:42,840 --> 00:26:45,320 Speaker 3: put everything on the phone. These days, I don't. I 491 00:26:45,640 --> 00:26:48,360 Speaker 3: rarely use the iPad. It's just everything's on the phone. 492 00:26:48,400 --> 00:26:48,840 Speaker 2: But we'll see. 493 00:26:50,320 --> 00:26:54,160 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 494 00:26:54,280 --> 00:26:57,200 Speaker 1: weekdays at ten am Eastern on Apple card Play and 495 00:26:57,320 --> 00:27:00,960 Speaker 1: Android Auto with the Bloomberg Business app. Also listen live 496 00:27:01,080 --> 00:27:04,240 Speaker 1: on Amazon Alexa from our flagship New York station just 497 00:27:04,320 --> 00:27:06,920 Speaker 1: say Alexa playing Bloomberg eleven thirty. 498 00:27:08,160 --> 00:27:11,639 Speaker 3: This market is moving higher. We had some PCE data today. 499 00:27:11,760 --> 00:27:13,800 Speaker 3: The month on month of zero point three kind of 500 00:27:13,800 --> 00:27:16,000 Speaker 3: came in line with expectation, but the annualized number a 501 00:27:16,119 --> 00:27:19,320 Speaker 3: tick higher. But again, strong tech earnings kind of driving 502 00:27:19,359 --> 00:27:21,639 Speaker 3: this market here. Maybe a little bit of relief that 503 00:27:21,680 --> 00:27:24,080 Speaker 3: the inflation data didn't come in even hotter, maybe a 504 00:27:24,200 --> 00:27:26,600 Speaker 3: zero point four percent or zero point five percent on 505 00:27:26,680 --> 00:27:30,560 Speaker 3: a month month basis. Here and on a Rothbund joins 506 00:27:30,640 --> 00:27:35,360 Speaker 3: us here, chief investment officer at Sibiz Investment Advisory Services 507 00:27:35,680 --> 00:27:37,600 Speaker 3: on and thanks so much for joining us here. Boy 508 00:27:37,680 --> 00:27:41,560 Speaker 3: a busy, busy week in terms of economic data, earnings 509 00:27:41,880 --> 00:27:45,840 Speaker 3: data tie it all up together for us. And how 510 00:27:46,000 --> 00:27:48,239 Speaker 3: is your market perception changed, if at all? 511 00:27:50,160 --> 00:27:50,720 Speaker 7: Good morning. 512 00:27:51,359 --> 00:27:54,440 Speaker 11: My market perception hasn't early changed. We expected this week 513 00:27:54,520 --> 00:27:57,920 Speaker 11: to be a very interesting and busy week. If you 514 00:27:57,960 --> 00:28:00,919 Speaker 11: think about the market cap of the companies that are 515 00:28:01,000 --> 00:28:03,280 Speaker 11: leading the S and P five hundred, those were the 516 00:28:03,359 --> 00:28:05,959 Speaker 11: ones that were reporting this week, So it was going 517 00:28:06,040 --> 00:28:08,560 Speaker 11: to move the markets up or down and definitely affect 518 00:28:08,600 --> 00:28:10,760 Speaker 11: the beta of the market and the sentiment. And that's 519 00:28:10,800 --> 00:28:13,400 Speaker 11: what we're seeing today. We saw that yesterday. I don't 520 00:28:13,400 --> 00:28:18,200 Speaker 11: think it changes the general feel of the market's feeling 521 00:28:18,320 --> 00:28:21,359 Speaker 11: like it's over bought, so I don't think it changes 522 00:28:21,400 --> 00:28:25,119 Speaker 11: the dynamics. The PCE certainly could have had a bit 523 00:28:25,200 --> 00:28:27,119 Speaker 11: bigger impact on the markets today, but it. 524 00:28:27,160 --> 00:28:27,680 Speaker 2: Really did it. 525 00:28:27,880 --> 00:28:31,560 Speaker 11: So I think it's pretty much the same old a 526 00:28:31,600 --> 00:28:34,960 Speaker 11: little bit of a difference today with alphabet ana. 527 00:28:35,119 --> 00:28:40,640 Speaker 5: Do you think that the macro is getting maybe more confusing, because, 528 00:28:40,960 --> 00:28:43,480 Speaker 5: like we were talking about John Tucker were saying, the 529 00:28:43,600 --> 00:28:46,600 Speaker 5: PC data came in a little bit hotter, but we're 530 00:28:46,600 --> 00:28:50,280 Speaker 5: seeing treasure yields down. Earlier this week we had Bill 531 00:28:50,400 --> 00:28:52,840 Speaker 5: Gross saying that he was bearish on tech void tech. 532 00:28:53,120 --> 00:28:56,080 Speaker 5: Now we have the Nasdaq up about two percent. 533 00:28:56,600 --> 00:28:57,240 Speaker 2: What is going on? 534 00:28:57,440 --> 00:28:59,840 Speaker 5: Is it getting harder for experts like you to kind 535 00:28:59,880 --> 00:29:03,040 Speaker 5: of discern, you know, what's really driving this market? 536 00:29:04,000 --> 00:29:06,680 Speaker 11: Well, so it's been hard for a while, so I 537 00:29:06,720 --> 00:29:11,320 Speaker 11: don't think it has become hard. So in terms of PCEE, frankly, 538 00:29:11,440 --> 00:29:14,080 Speaker 11: it is hotter. The year of A number is a 539 00:29:14,120 --> 00:29:17,560 Speaker 11: little bit hotter than expected, but it's actually in line 540 00:29:17,680 --> 00:29:22,000 Speaker 11: with what the FED has forecast back in March. By 541 00:29:22,080 --> 00:29:24,400 Speaker 11: the end of this year, the FED is expecting two 542 00:29:24,400 --> 00:29:27,600 Speaker 11: point six percent in core PC were ear y'ere around 543 00:29:27,680 --> 00:29:30,000 Speaker 11: two point eight and that was a March figure, right, 544 00:29:30,080 --> 00:29:32,640 Speaker 11: So we have a lot of room. Anything can happen 545 00:29:32,720 --> 00:29:35,000 Speaker 11: between now and December, so I think we can be 546 00:29:35,080 --> 00:29:38,160 Speaker 11: patient on that. I think the market's reflecting that. With 547 00:29:38,320 --> 00:29:42,080 Speaker 11: regards to tech. I think tech right now, especially big 548 00:29:42,240 --> 00:29:46,000 Speaker 11: tech they're at a sweet spot between development of AI 549 00:29:46,280 --> 00:29:48,680 Speaker 11: and they're not betting the farm on it. They're just 550 00:29:48,880 --> 00:29:53,000 Speaker 11: incubating it somewhere deep inside of their company while there's 551 00:29:53,040 --> 00:29:57,840 Speaker 11: still excuse me, while they're still able to turn cash right, 552 00:29:58,000 --> 00:30:01,600 Speaker 11: and so Google or Alphabet signaling a divid end, I 553 00:30:01,680 --> 00:30:04,640 Speaker 11: think it's a big that's a signal. So I think 554 00:30:04,680 --> 00:30:07,800 Speaker 11: that it's the sweet spot of AI and cash flow 555 00:30:07,920 --> 00:30:10,680 Speaker 11: and quality earnings. I think I think TEX still has 556 00:30:10,720 --> 00:30:15,560 Speaker 11: some room to run, certainly notwithstanding the volatility that may come. 557 00:30:15,960 --> 00:30:18,160 Speaker 11: But over the long run, I don't think it's necessarily 558 00:30:18,240 --> 00:30:19,400 Speaker 11: a place to run away from. 559 00:30:20,360 --> 00:30:22,960 Speaker 3: So on a we've had I guess about forty five 560 00:30:22,960 --> 00:30:24,800 Speaker 3: percent of the S and P five hundred report they're 561 00:30:24,800 --> 00:30:29,240 Speaker 3: earnings as of today. Any takeaways for you here, how's 562 00:30:29,280 --> 00:30:31,440 Speaker 3: corporate America doing well? 563 00:30:31,480 --> 00:30:35,160 Speaker 11: The corporate America is not doing as well as the 564 00:30:36,120 --> 00:30:39,200 Speaker 11: big tech companies might imply. Right, So if you think 565 00:30:39,240 --> 00:30:44,360 Speaker 11: about the three companies Microsoft, Meta and Alphabet, I mean 566 00:30:44,440 --> 00:30:47,880 Speaker 11: together they have returned what your earnings growth of more 567 00:30:47,920 --> 00:30:51,240 Speaker 11: than sixty percent. That is definitely skewing the earnings growth 568 00:30:51,360 --> 00:30:54,560 Speaker 11: profile of the S and P five hundred index in general. 569 00:30:54,840 --> 00:30:57,160 Speaker 11: So I mean where do people say SMP four hundred 570 00:30:57,160 --> 00:31:00,239 Speaker 11: and ninety five or that would be four hundred ninety seven, right, 571 00:31:01,080 --> 00:31:03,920 Speaker 11: So I think that the rest of the markets, they're 572 00:31:04,000 --> 00:31:07,320 Speaker 11: still lagging. I believe as at the end of last Friday, 573 00:31:07,360 --> 00:31:09,120 Speaker 11: that was the last number I actually looked at for 574 00:31:09,240 --> 00:31:13,280 Speaker 11: the entire index out if you're looking at four or 575 00:31:13,360 --> 00:31:16,280 Speaker 11: ninety five stocks outside of some tech stocks, we're looking 576 00:31:16,320 --> 00:31:18,880 Speaker 11: at year or year's earning growth. That was a little 577 00:31:18,880 --> 00:31:22,080 Speaker 11: bit on the negative side in terms of expectations. Hopefully 578 00:31:22,200 --> 00:31:26,160 Speaker 11: we will beat those expectations for the second half of 579 00:31:26,400 --> 00:31:30,960 Speaker 11: the earning season, but it's certainly not looking it's not 580 00:31:31,040 --> 00:31:32,120 Speaker 11: looking all that stellar. 581 00:31:33,400 --> 00:31:35,560 Speaker 5: When you look at the month of April, we have 582 00:31:35,800 --> 00:31:39,000 Speaker 5: the S and P five hundred SPY ETF down about 583 00:31:39,040 --> 00:31:41,920 Speaker 5: three percent. We have TLT, which is an ETF that 584 00:31:42,000 --> 00:31:46,760 Speaker 5: tracks long term treasury bonds, down six percent. Where are 585 00:31:46,800 --> 00:31:50,280 Speaker 5: you going for protection when it seems like that traditional 586 00:31:50,360 --> 00:31:55,000 Speaker 5: stock bond correlation hasn't really been serving investors for protection. 587 00:31:56,520 --> 00:31:59,200 Speaker 11: Yeah, and that's been true for a while now, and 588 00:31:59,280 --> 00:32:01,960 Speaker 11: it's been really tough for people who are sixty, forty, 589 00:32:02,000 --> 00:32:04,840 Speaker 11: fifty to fifty, you name it. I think you have 590 00:32:04,960 --> 00:32:09,760 Speaker 11: to be actively protecting, especially with fixed income, which traditionally 591 00:32:10,000 --> 00:32:13,880 Speaker 11: has been a hedgekin secuity beta. Lately it hasn't been 592 00:32:14,040 --> 00:32:17,000 Speaker 11: right lately, meaning the last two years. It's a long time. 593 00:32:17,760 --> 00:32:19,920 Speaker 11: I think you still have to be mindful of duration 594 00:32:20,200 --> 00:32:23,360 Speaker 11: because even if the Fed, you know, PC came in 595 00:32:23,480 --> 00:32:26,480 Speaker 11: relatively in line with expectations and the markets are sort 596 00:32:26,520 --> 00:32:28,960 Speaker 11: of thinking, okay, maybe the Fed can be on track, 597 00:32:29,480 --> 00:32:33,320 Speaker 11: three rate cuts is still a bit high in my opinion. 598 00:32:33,440 --> 00:32:36,480 Speaker 11: They may be doing two, maybe down the one, depending 599 00:32:36,520 --> 00:32:38,880 Speaker 11: how the data runs between now and the end of 600 00:32:38,960 --> 00:32:41,600 Speaker 11: the year. So I think duration, you still have to 601 00:32:41,680 --> 00:32:44,840 Speaker 11: be a bit careful. But look, the total yield profile 602 00:32:45,240 --> 00:32:49,720 Speaker 11: is very delicious. It's yummy. So I think clipping coupons 603 00:32:49,960 --> 00:32:52,040 Speaker 11: and being aware of duration is what you have to 604 00:32:52,120 --> 00:32:53,680 Speaker 11: do with your fix income portfolio. 605 00:32:54,200 --> 00:32:56,120 Speaker 3: So I mean, that's a great point. I wanted to 606 00:32:56,240 --> 00:32:58,720 Speaker 3: just get on the fixingcome story. Here do I sit 607 00:32:58,760 --> 00:33:01,040 Speaker 3: in my two year treasury close to five percent or 608 00:33:01,160 --> 00:33:02,600 Speaker 3: do I take some credit risk here? 609 00:33:04,040 --> 00:33:06,560 Speaker 11: So high yield I mean I think when I think 610 00:33:06,600 --> 00:33:10,800 Speaker 11: of lower duration profile than your traditional fixing combined benchmark, 611 00:33:10,800 --> 00:33:14,160 Speaker 11: which is the AG and then of course clipping high coupons, 612 00:33:14,200 --> 00:33:16,120 Speaker 11: I think of high yield. Right, high yield is sitting 613 00:33:16,160 --> 00:33:19,080 Speaker 11: at duration a little bit less than four years, and 614 00:33:19,640 --> 00:33:21,640 Speaker 11: I think the last time I checked the yield, the 615 00:33:21,720 --> 00:33:24,719 Speaker 11: total yield for the Bloomberg High Yield Index is around 616 00:33:25,040 --> 00:33:28,440 Speaker 11: you know, just under eight percent, nearly eight percent. I mean, 617 00:33:28,520 --> 00:33:30,600 Speaker 11: that's that's a really if you think about you know, 618 00:33:30,720 --> 00:33:34,520 Speaker 11: yield versus duration risk, that's actually a not a bad 619 00:33:35,160 --> 00:33:39,120 Speaker 11: risk reward ratio. And frankly high yield if you stay 620 00:33:39,240 --> 00:33:43,440 Speaker 11: in the higher credit profile, it's not a bad deal. Right, 621 00:33:43,560 --> 00:33:46,320 Speaker 11: So rate hikes, I'm not saying that, you know, everything 622 00:33:46,520 --> 00:33:48,200 Speaker 11: is a tie that lifts all Boat's not like that 623 00:33:48,320 --> 00:33:51,320 Speaker 11: at all. If you want to utilize active managers to 624 00:33:51,440 --> 00:33:54,840 Speaker 11: really look for quality balance sheet, I think that that 625 00:33:54,920 --> 00:33:58,760 Speaker 11: could also work as well. But that yield, actually, if 626 00:33:58,760 --> 00:34:01,160 Speaker 11: there is a spread, winding can go a long way 627 00:34:01,240 --> 00:34:03,600 Speaker 11: to protecting on the downside in terms of price section. 628 00:34:03,960 --> 00:34:06,280 Speaker 3: All right, Anna, thank you so much for joining us. 629 00:34:06,320 --> 00:34:09,479 Speaker 3: As always, Anna rathbun She is the chief Investment Officer 630 00:34:09,680 --> 00:34:13,839 Speaker 3: Sibiz Investment Advisory Services. Joining us from Cleveland, Ohio via 631 00:34:14,360 --> 00:34:15,520 Speaker 3: that zoom thing. 632 00:34:18,200 --> 00:34:22,040 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 633 00:34:22,160 --> 00:34:25,680 Speaker 1: weekdays at ten Am Eastern on Applecar Play and Android 634 00:34:25,719 --> 00:34:28,439 Speaker 1: Auto with the Bloomberg Business app. You can also listen 635 00:34:28,600 --> 00:34:31,680 Speaker 1: live on Amazon Alexa from our flagship New York station, 636 00:34:32,080 --> 00:34:34,799 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 637 00:34:36,520 --> 00:34:37,719 Speaker 2: Eric Zaski Joints is here. 638 00:34:37,760 --> 00:34:41,279 Speaker 3: He's the senior municipal bond strategist for Bloomberg Intelligence. Hey, Eric, 639 00:34:41,400 --> 00:34:43,719 Speaker 3: talk to us here. We've had rates kind of moving 640 00:34:43,800 --> 00:34:46,960 Speaker 3: around here. We had some higher rates earlier. Talk to 641 00:34:47,040 --> 00:34:51,120 Speaker 3: us about what's happening in the municipal bond market visa 642 00:34:51,160 --> 00:34:52,680 Speaker 3: VI kind of the treasury market here. 643 00:34:53,480 --> 00:34:53,640 Speaker 7: Yeah. 644 00:34:53,640 --> 00:34:55,719 Speaker 6: Absolutely, Well, there's two ways you can really look at it, right. 645 00:34:55,760 --> 00:34:58,760 Speaker 6: We can focus on total returns, which certainly aren't that great, 646 00:34:59,400 --> 00:35:01,120 Speaker 6: or you could look at it is a buying opportunity 647 00:35:01,200 --> 00:35:03,399 Speaker 6: right yield draw up thirty basis points on the month, 648 00:35:03,440 --> 00:35:06,840 Speaker 6: about fifty five sixty basis points on the year. Certainly 649 00:35:06,960 --> 00:35:09,080 Speaker 6: not near where we were last fall, but certainly an 650 00:35:09,120 --> 00:35:11,960 Speaker 6: interesting opportunity to come back into the market and you know, 651 00:35:12,120 --> 00:35:15,359 Speaker 6: get those four percent five percent higher premium structures at 652 00:35:15,520 --> 00:35:17,920 Speaker 6: cheaper dollar prices. And that's ultimately what people want to 653 00:35:17,960 --> 00:35:19,400 Speaker 6: be doing when they're building portfolios. 654 00:35:20,560 --> 00:35:23,080 Speaker 5: If you run ETF go on the terminal. I'm bringing 655 00:35:23,080 --> 00:35:24,160 Speaker 5: ETFs into this poll. 656 00:35:24,440 --> 00:35:25,320 Speaker 6: Yeah, let's do it. 657 00:35:25,560 --> 00:35:29,279 Speaker 5: You can see that over the last year when you 658 00:35:29,440 --> 00:35:34,600 Speaker 5: scan for municipal bond ETFs, sixteen billion dollars of inflows 659 00:35:35,000 --> 00:35:38,239 Speaker 5: into those funds. Does that make sense to you that 660 00:35:38,680 --> 00:35:40,360 Speaker 5: we're seeing this much money kind of pour into the 661 00:35:40,400 --> 00:35:41,200 Speaker 5: strategy right now? 662 00:35:41,840 --> 00:35:42,040 Speaker 7: Yeah? 663 00:35:42,080 --> 00:35:42,799 Speaker 1: Absolutely right. 664 00:35:42,880 --> 00:35:45,120 Speaker 6: So, anytime you have a cheap data strategy that has 665 00:35:45,160 --> 00:35:47,480 Speaker 6: gotten a lot of attention in the news, not only 666 00:35:47,600 --> 00:35:50,160 Speaker 6: what we're saying on the Bloomberg side, but externally, there's 667 00:35:50,160 --> 00:35:52,239 Speaker 6: going to be more attention focused on that from WELP 668 00:35:52,280 --> 00:35:54,839 Speaker 6: advisors and retail clients, and that's why you're seeing those 669 00:35:54,880 --> 00:35:57,400 Speaker 6: flows go in there. But just to keep it in context, 670 00:35:57,480 --> 00:36:01,160 Speaker 6: from a notional standpoint, sixteen billion flows in a fortullion 671 00:36:01,160 --> 00:36:03,799 Speaker 6: dollar market, it's not really that big of a deal. 672 00:36:04,120 --> 00:36:06,360 Speaker 6: It seems impactful sort of looking at it in a vacuum, 673 00:36:06,360 --> 00:36:08,239 Speaker 6: but when you look at a total mini market, still 674 00:36:08,239 --> 00:36:09,120 Speaker 6: a very small piece. 675 00:36:10,160 --> 00:36:12,879 Speaker 3: Hey, Eric, I want to ask you about this Brightline deal, 676 00:36:12,960 --> 00:36:15,200 Speaker 3: this railroad deal. Yeah, talk to us about I know 677 00:36:15,239 --> 00:36:17,759 Speaker 3: they came to market recently. What is Brightline and what 678 00:36:17,960 --> 00:36:19,000 Speaker 3: was the deal they brought to market? 679 00:36:19,840 --> 00:36:22,759 Speaker 6: Yeah, so they obviously they have a train system down 680 00:36:22,800 --> 00:36:25,480 Speaker 6: in Florida right now, it's going from you know, Palm 681 00:36:25,560 --> 00:36:27,520 Speaker 6: Beach area down to Miami. They're extending it up to 682 00:36:27,560 --> 00:36:30,120 Speaker 6: o Orlando. It's a high yield deal. There was two 683 00:36:30,160 --> 00:36:31,880 Speaker 6: portions of the deal. While was triple B, there was 684 00:36:31,920 --> 00:36:35,200 Speaker 6: a non rated portion. Part of it was a funding. Look, 685 00:36:35,520 --> 00:36:38,799 Speaker 6: it's still a speculative project. You know, will people use 686 00:36:38,880 --> 00:36:40,680 Speaker 6: the train, what will rider ship be a lot of 687 00:36:40,760 --> 00:36:43,960 Speaker 6: questions that nobody really seems to have answers for. But 688 00:36:44,239 --> 00:36:46,960 Speaker 6: I will say, look, I'm definitely jealous. I wasn't able 689 00:36:47,000 --> 00:36:48,080 Speaker 6: to get any of those bonds. 690 00:36:48,160 --> 00:36:48,279 Speaker 1: Right. 691 00:36:48,800 --> 00:36:50,239 Speaker 6: If you look at this sort of where they came 692 00:36:50,719 --> 00:36:53,480 Speaker 6: on the non rated portion, you're talking about twelve percent 693 00:36:53,640 --> 00:36:56,840 Speaker 6: tax exempt yields, you know, on a tax equivalent yield basis, 694 00:36:56,880 --> 00:36:59,279 Speaker 6: it's like eighteen percent, right, So obviously a lot of 695 00:36:59,360 --> 00:37:01,560 Speaker 6: risk and a lot of compensation being demanded for the 696 00:37:01,640 --> 00:37:02,400 Speaker 6: risk being taken. 697 00:37:03,040 --> 00:37:05,760 Speaker 3: Andre that, How was that deal welcomed by the marketplace 698 00:37:05,800 --> 00:37:06,640 Speaker 3: in terms of demand? 699 00:37:07,600 --> 00:37:09,960 Speaker 6: Very oversubscribed and that really sort of speaks to the 700 00:37:10,080 --> 00:37:12,520 Speaker 6: dearth of high old issuans that we're seeing in the marketplace, 701 00:37:12,560 --> 00:37:14,520 Speaker 6: and also the returns that we're seeing in high yold 702 00:37:14,600 --> 00:37:17,080 Speaker 6: muni's as well. So we started off the conversation talking 703 00:37:17,080 --> 00:37:19,799 Speaker 6: about IG total returns, which are down almost like two 704 00:37:19,840 --> 00:37:23,359 Speaker 6: percent on the year, But higommunities are positive, right, They're 705 00:37:23,440 --> 00:37:25,560 Speaker 6: really the only green portion of the screen I can 706 00:37:25,600 --> 00:37:27,479 Speaker 6: look at when I look at I go and looking 707 00:37:27,520 --> 00:37:30,400 Speaker 6: for munis. So there is obviously a lot of interest 708 00:37:30,440 --> 00:37:33,479 Speaker 6: both retail and institutional in high yield credit and looking 709 00:37:33,520 --> 00:37:35,080 Speaker 6: for deals that have some hair to them. 710 00:37:36,200 --> 00:37:40,160 Speaker 5: You have a note out it says muni tourists who 711 00:37:40,920 --> 00:37:44,440 Speaker 5: dabble casually in the municipal bond market are being bombarded 712 00:37:44,520 --> 00:37:47,560 Speaker 5: with calls to come back to what has been a 713 00:37:47,640 --> 00:37:51,080 Speaker 5: treacherous place so far in twenty twenty four. What kind 714 00:37:51,120 --> 00:37:55,239 Speaker 5: of market outlook does an investor have to have if 715 00:37:55,280 --> 00:37:57,399 Speaker 5: there's someone who was a muni tourist and now they're 716 00:37:57,400 --> 00:37:58,800 Speaker 5: going to come back into this space. 717 00:38:00,000 --> 00:38:01,799 Speaker 6: Lot of people got scared last year because they found 718 00:38:01,840 --> 00:38:04,200 Speaker 6: out that their bond portfolios could have losses, and I 719 00:38:04,239 --> 00:38:06,880 Speaker 6: think that's something a lot of investors probably hadn't seen before, 720 00:38:07,640 --> 00:38:09,839 Speaker 6: So there was probably some reticence there, and then there's 721 00:38:09,840 --> 00:38:12,040 Speaker 6: a lot of excitement as last year ended, where rates 722 00:38:12,040 --> 00:38:13,880 Speaker 6: were rallying right and Meeti's turned out. 723 00:38:13,760 --> 00:38:14,520 Speaker 2: To be a great buy. 724 00:38:14,880 --> 00:38:17,680 Speaker 6: There's still a great buy from a risk adjusted, you know, 725 00:38:18,239 --> 00:38:21,000 Speaker 6: purchase standpoint, you know, because they have much lower default 726 00:38:21,080 --> 00:38:24,240 Speaker 6: risk than corporate credits. But you know, there is probably 727 00:38:24,239 --> 00:38:26,160 Speaker 6: a reticence to sort of dive back in knowing that 728 00:38:26,239 --> 00:38:28,720 Speaker 6: the Fed really doesn't have a firm control where inflation 729 00:38:28,880 --> 00:38:30,600 Speaker 6: is right now and when and if they're going to cut. 730 00:38:31,320 --> 00:38:33,560 Speaker 6: But I, like I said, the ball, you know, if 731 00:38:33,600 --> 00:38:35,040 Speaker 6: you can come in and you can buy those five 732 00:38:35,080 --> 00:38:37,520 Speaker 6: percent coupons at a lower dollar price, I think it's 733 00:38:37,560 --> 00:38:39,080 Speaker 6: more interesting opportunity right now. 734 00:38:39,960 --> 00:38:43,800 Speaker 3: So, Eric, so what's the credit risk profile of the 735 00:38:43,920 --> 00:38:47,000 Speaker 3: municipal bond space? I know, in historic has generally been 736 00:38:47,480 --> 00:38:50,080 Speaker 3: pretty darn good. Are we seeing any cracks out there? 737 00:38:51,320 --> 00:38:52,960 Speaker 6: No, not as of yet. I mean, if you look 738 00:38:53,000 --> 00:38:55,719 Speaker 6: at just the the Bloomberg Media Index, it's average double 739 00:38:55,800 --> 00:38:58,840 Speaker 6: A credit quality and that really sort of spans the gamut. 740 00:38:58,880 --> 00:39:00,960 Speaker 6: You have some trip wle B rated credits in there 741 00:39:01,080 --> 00:39:03,680 Speaker 6: and some triple A rated credits right just the averages 742 00:39:03,719 --> 00:39:07,040 Speaker 6: double A. I will say that from a rating agency standpoint, 743 00:39:07,080 --> 00:39:09,239 Speaker 6: we're not really seeing any cracks, but they're also very 744 00:39:09,280 --> 00:39:12,000 Speaker 6: backwards looking and that they're looking at audits from last year. 745 00:39:12,560 --> 00:39:15,480 Speaker 6: Everything's on a very big lag. We're actually working on 746 00:39:15,560 --> 00:39:17,839 Speaker 6: a new sentiment monitor over on our side on BI 747 00:39:18,080 --> 00:39:20,520 Speaker 6: and what we're showing on a predictive standpoint is that 748 00:39:20,880 --> 00:39:23,120 Speaker 6: things should be worsening or at least softening a little 749 00:39:23,120 --> 00:39:24,480 Speaker 6: bit when it comes to me to spoke credit in 750 00:39:24,480 --> 00:39:26,799 Speaker 6: the next twelve to twenty four months. Right we've seen 751 00:39:26,840 --> 00:39:29,520 Speaker 6: a very large up taken headlines talking about layoffs from 752 00:39:29,560 --> 00:39:32,240 Speaker 6: the state and local government sector, as well as budget 753 00:39:32,239 --> 00:39:34,160 Speaker 6: cuts and budget deficits. So something we want to keep 754 00:39:34,160 --> 00:39:34,520 Speaker 6: our eye on. 755 00:39:35,280 --> 00:39:38,960 Speaker 5: How should investors be thinking about picking where in the 756 00:39:39,040 --> 00:39:40,800 Speaker 5: market they want to invest. I'm going to bring this 757 00:39:40,920 --> 00:39:43,760 Speaker 5: back to ETFs, but obviously you can buy immuni ETF 758 00:39:44,080 --> 00:39:47,320 Speaker 5: that's going to track a number of different regions of 759 00:39:47,600 --> 00:39:51,879 Speaker 5: a specific state in the US. Is that the better 760 00:39:52,040 --> 00:39:55,200 Speaker 5: bet or should people be kind of maybe zeroing in 761 00:39:55,320 --> 00:39:56,839 Speaker 5: on a specific state right now? 762 00:39:57,560 --> 00:39:59,040 Speaker 6: Well, I think it goes back to the argument of 763 00:39:59,120 --> 00:40:01,880 Speaker 6: passive versus active management, And I think in a sloppier 764 00:40:01,960 --> 00:40:04,520 Speaker 6: market like we're seeing now, when yields are hired and 765 00:40:04,520 --> 00:40:07,120 Speaker 6: there's a lot more volatility, the case for active management 766 00:40:07,200 --> 00:40:10,000 Speaker 6: can really be made. You talk about those ETFs that 767 00:40:10,040 --> 00:40:12,840 Speaker 6: are getting the flows, they're passive structures. So if you 768 00:40:12,880 --> 00:40:15,040 Speaker 6: look at what they're actually investing in, they're missing about 769 00:40:15,080 --> 00:40:17,680 Speaker 6: thirty percent of the UNI market by credit exposure. They're 770 00:40:17,719 --> 00:40:20,520 Speaker 6: not buying higher education, they're not buying hospitals, they're not 771 00:40:20,600 --> 00:40:23,239 Speaker 6: buying natural gas bonds or bond subject to AMT, So 772 00:40:23,560 --> 00:40:25,640 Speaker 6: all the sort of the higher alpha areas that we've 773 00:40:25,680 --> 00:40:27,880 Speaker 6: seen over the last several months they're missing out on. 774 00:40:28,760 --> 00:40:31,479 Speaker 6: You know, so that is an opportunity that you would 775 00:40:31,560 --> 00:40:33,920 Speaker 6: find more on the active sector, but you're going to 776 00:40:33,920 --> 00:40:36,560 Speaker 6: be paying more for a management fee for that. So 777 00:40:36,680 --> 00:40:38,359 Speaker 6: if it was me, I'd probably be looking more toward 778 00:40:38,360 --> 00:40:39,960 Speaker 6: active management right now in this market. 779 00:40:40,200 --> 00:40:41,600 Speaker 2: All right, Eric, thanks so much for joining us. 780 00:40:41,680 --> 00:40:45,239 Speaker 3: Eric Kazaski, senior municipal strategists for Bloomberg Intelligence, joining us 781 00:40:45,280 --> 00:40:49,680 Speaker 3: from the Princeton, New Jersey offices of a BI in Princeton. 782 00:40:49,960 --> 00:40:54,440 Speaker 1: This is the Bloomberg Intelligence podcast, available on apples, Spotify, 783 00:40:54,680 --> 00:40:57,839 Speaker 1: and anywhere else you get your podcasts. Listen live each 784 00:40:57,880 --> 00:41:01,400 Speaker 1: weekday ten am to noon Eastern Bloomberg dot Com, the 785 00:41:01,520 --> 00:41:04,920 Speaker 1: iHeartRadio app, tune in, and the Bloomberg Business app. You 786 00:41:05,000 --> 00:41:08,160 Speaker 1: can also watch us live every weekday on YouTube and 787 00:41:08,360 --> 00:41:09,920 Speaker 1: always on the Bloomberg Terminal