WEBVTT - Berkshire Earnings, US Election Preview 0:00:02.440 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.160 --> 0:00:13.280 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:13.360 --> 0:00:15.800 Eastern on Affle Card Playing and Broud Auto with the 0:00:15.840 --> 0:00:19.759 Bloomberg Business app. Listen on demand wherever you get your podcasts, 0:00:19.960 --> 0:00:23.480 or watch us live on YouTube. 0:00:23.120 --> 0:00:26.279 Worn Buffett and Berkshire have I recording some earnings over 0:00:26.320 --> 0:00:28.920 the weekend. The question I always have is how much 0:00:28.920 --> 0:00:30.160 cash do they have on their balantie? 0:00:30.160 --> 0:00:33.479 Everybody always wants to watch that as a contrarian potential indicator. 0:00:33.640 --> 0:00:35.120 Yeah, I just I just don't know what's going on 0:00:35.200 --> 0:00:38.239 over there. But our next guest does. Matt Pelosola. He's 0:00:38.280 --> 0:00:41.479 seen around us covering the insurance business for Bloomberg Intelligence 0:00:41.520 --> 0:00:44.480 during us here in a Bloomberg Interactive Brokers studio, Matt, 0:00:44.479 --> 0:00:47.680 wou'd you take away from the Berkshire's results on Saturday? 0:00:48.360 --> 0:00:50.680 So pult to answer your first question. Three hundred and 0:00:50.680 --> 0:00:54.120 twenty five billion dollars in cash. That's the most they've 0:00:54.120 --> 0:00:58.480 ever had. So when you look at their earnings, there's 0:00:58.520 --> 0:01:02.800 a couple of layers you have to unpeel. First, their 0:01:02.840 --> 0:01:08.320 gap earnings were swayed by investment changes. Buffett himself has said, 0:01:08.319 --> 0:01:09.759 you kind of just throw that out. We don't really 0:01:09.800 --> 0:01:11.840 look at that. It was like twenty six I think 0:01:11.880 --> 0:01:14.399 billion versus an eleven billion loss in the year ago. 0:01:14.959 --> 0:01:18.200 Those numbers are a little bit irrelevant. The next part 0:01:18.360 --> 0:01:21.759 is their earnings from operating companies. Those, if you look 0:01:21.760 --> 0:01:23.440 at just the number they give you, those were down 0:01:23.480 --> 0:01:26.720 about six percent. What happened there, though, was they have 0:01:27.360 --> 0:01:29.600 a lot of yen debt and there was a big 0:01:29.640 --> 0:01:33.240 four x loss in there, so peel that back. The 0:01:33.360 --> 0:01:36.760 operating companies earnings were up a little bit, which was 0:01:36.840 --> 0:01:42.640 less than I expected. The insurance operation had a couple 0:01:42.640 --> 0:01:46.760 of unforeseen negatives in it, and that really turned it down. 0:01:47.319 --> 0:01:50.080 Some of them I don't think are ongoing things, but 0:01:50.160 --> 0:01:52.560 that was really the negative variance was in the insurance 0:01:52.600 --> 0:01:53.960 business something. 0:01:54.120 --> 0:01:56.520 Because we were actually chatting about this earlier. When it 0:01:56.560 --> 0:01:59.680 came to the percent of their cash pilot Berkshire Hathaway 0:02:00.080 --> 0:02:02.040 last time it was around this high. The stock market 0:02:02.080 --> 0:02:05.040 to continued to move on to records over the following 0:02:05.040 --> 0:02:07.320 fifty two weeks, but then the last time on this 0:02:07.440 --> 0:02:10.200 opposite into that the lowest percent of cash he had 0:02:10.600 --> 0:02:12.560 at any time over the past decade was right when 0:02:12.560 --> 0:02:15.320 the S and P five hundred briefly peeged in twenty 0:02:15.360 --> 0:02:18.560 twenty one. So what's your thoughts when ever, you're kind 0:02:18.560 --> 0:02:20.880 of thinking about what this could mean more broadly for 0:02:20.960 --> 0:02:24.160 where like major indexes and equities could potentially be headed. 0:02:24.240 --> 0:02:27.720 Yeah, So, I mean Buffett is a more of a 0:02:27.840 --> 0:02:31.160 time in than timing of the market right clearly, So, 0:02:32.840 --> 0:02:37.920 I don't think he's making big moves on large expectations 0:02:37.960 --> 0:02:39.480 on the market. If you look what happened, they sold 0:02:39.560 --> 0:02:42.120 about twenty two billion dollars worth of Apple stock in 0:02:42.120 --> 0:02:45.600 the quarter. That's along with about nine and a half 0:02:45.680 --> 0:02:47.880 billion worth of Bank of America stock in the quarter. 0:02:49.800 --> 0:02:51.360 I don't think you look at that and say, Okay, 0:02:51.360 --> 0:02:53.760 he's completely parish on everything in the market. I think 0:02:53.800 --> 0:02:57.000 those were, you know, unique things. They were highly concentrated 0:02:57.000 --> 0:03:00.440 in Apple. Their Apple position is down seventy percent from 0:03:00.520 --> 0:03:03.880 its high in terms of the shares they own, so 0:03:04.280 --> 0:03:07.360 I think those things were unique to the stocks they own. 0:03:07.800 --> 0:03:11.040 Buffett has repeatedly talked about taxes going up. I don't 0:03:11.040 --> 0:03:14.720 think it's even an election cycle now, but he's just 0:03:14.720 --> 0:03:18.560 saying even longer term, there's probably only one direction taxes 0:03:18.600 --> 0:03:21.640 are going for us and that's up, so you'd not 0:03:21.760 --> 0:03:24.400 be surprised to see them taking large gains off the board. 0:03:25.240 --> 0:03:27.640 So three and twenty five billion dollars, is there any 0:03:27.800 --> 0:03:32.760 realistic scenario for deploying that capital over a multi year period. 0:03:32.960 --> 0:03:35.280 You know, it's tough. They are limited in how much 0:03:35.280 --> 0:03:37.600 shares they can buy back just on the float. 0:03:39.040 --> 0:03:39.720 We had wrote. 0:03:40.240 --> 0:03:43.080 You know, it's tough to see them doing a tens 0:03:43.080 --> 0:03:47.520 of billion dollar acquisition. There is the ownership in Chubb 0:03:47.560 --> 0:03:51.200 out there, which is, you know, perhaps the megadeal that 0:03:51.320 --> 0:03:55.520 may or may not ever happen if they do something. 0:03:55.600 --> 0:03:57.760 They bought Allegheny, which was an insurance company kind of 0:03:57.760 --> 0:03:59.560 conglomerate a couple of years ago. That was about twelve 0:03:59.560 --> 0:04:02.520 billion dollar. It seems like that's going to be the 0:04:02.520 --> 0:04:05.280 max on what they're going to do. But if I 0:04:05.280 --> 0:04:06.960 could predict a Buffett would do, I'd be on an 0:04:07.000 --> 0:04:07.680 island somewhere. 0:04:07.760 --> 0:04:09.600 So but no dividend. 0:04:10.400 --> 0:04:12.360 There will not be a dividend as long as Warren 0:04:12.360 --> 0:04:14.920 Buffett is sitting in all is that. I mean, I 0:04:15.000 --> 0:04:17.760 think he likes getting them, he doesn't like paying them. 0:04:17.800 --> 0:04:21.480 He says, you know, look, I and I would agree 0:04:21.520 --> 0:04:24.919 with him. I'm better off holding this money than giving it. 0:04:25.000 --> 0:04:26.880 Your return on a divid end is going to be 0:04:26.960 --> 0:04:30.160 less than my return investing it. That probably hasn't been 0:04:30.200 --> 0:04:33.240 true actually recently, but I think that's his mindset. 0:04:33.440 --> 0:04:35.600 You were mentioning about how claims they were years ago 0:04:35.680 --> 0:04:38.720 are costing them more than expected. Walk us through that dynamic. 0:04:38.839 --> 0:04:42.000 Sure, So this is called reserve development. So what happens 0:04:42.120 --> 0:04:45.719 is insurance companies like so for example, Geico, they write auto, 0:04:45.960 --> 0:04:47.960 some home, well not really home, but they'll write auto. 0:04:48.520 --> 0:04:50.160 You're either going to have a car accident in a 0:04:50.240 --> 0:04:53.160 year or you're not. But they'll write some liability business 0:04:53.240 --> 0:04:56.280 where you may have a claim, and that you might 0:04:56.320 --> 0:04:59.240 find out that I claim years into the future. And 0:05:00.080 --> 0:05:02.320 what is happening is you set up a reserve for that, 0:05:02.360 --> 0:05:05.880 and that reserve could be wrong or they're almost always 0:05:05.880 --> 0:05:08.080 wrong right, but it could be wrong too low or 0:05:08.080 --> 0:05:11.120 wrong too high. And what had happened in the quarter 0:05:11.279 --> 0:05:15.520 was those were their reserve for their primary insurance business. 0:05:15.920 --> 0:05:19.640 A specific unit of it was quite wrong, and there's 0:05:19.800 --> 0:05:22.360 there's new management took over that unit, and usually when 0:05:22.360 --> 0:05:25.520 that happens, they add to their reserves. If this was 0:05:25.560 --> 0:05:27.960 If this was just a you know, X Y Z 0:05:28.120 --> 0:05:31.880 insurance company, this would be really bad. But it's Berkshire. 0:05:31.880 --> 0:05:35.240 Their financial strength is so superior to anything you might 0:05:35.320 --> 0:05:37.719 see that it's kind of just a blip. 0:05:38.800 --> 0:05:47.840 I got a invest with Scooter Progressive. Progressive wrote the policy. 0:05:46.160 --> 0:05:47.119 I always wear a helmet. 0:05:47.200 --> 0:05:50.080 That's all I do. Have the helmet. Progressive. Give me 0:05:50.120 --> 0:05:52.120 thirty seconds on Progressive, because so far I'm happy with 0:05:52.200 --> 0:05:52.640 the Yeah. 0:05:52.680 --> 0:05:53.200 I mean, so. 0:05:54.839 --> 0:05:58.520 Berkshire themselves has kind of been saying Progressives eight our 0:05:58.600 --> 0:06:03.920 lunch for the past, you know. Progressive extremely innovative in pricing, 0:06:04.640 --> 0:06:06.919 which allowed them to kind of take a lot of 0:06:06.960 --> 0:06:09.160 market share. State Farms is kind of the big name 0:06:09.160 --> 0:06:10.840 there in auto insurance, and they all State has just 0:06:10.880 --> 0:06:13.600 been picking away, I mean not all State. Progressive has 0:06:13.640 --> 0:06:16.559 been picking away at them the recent spike in auto 0:06:16.600 --> 0:06:19.479 insurance prices. They navigated that a lot better than the 0:06:19.480 --> 0:06:21.760 rest of the industry, which is allowing them to pull 0:06:21.839 --> 0:06:26.960 more share. Geico is shrinking, Progressives growing really best operator 0:06:26.960 --> 0:06:28.000 in the auto insurance space. 0:06:28.040 --> 0:06:31.640 Progressive and actually Choice, my existing insurer, I've got like 0:06:31.720 --> 0:06:35.120 five thousand lines with their pricing was twice where Progressive 0:06:35.200 --> 0:06:35.840 was so I just. 0:06:35.800 --> 0:06:36.280 Like see you. 0:06:36.920 --> 0:06:38.560 They don't know how good of a risk you are. 0:06:38.440 --> 0:06:41.680 Exactly right me the vest mouscooter's cruising the Jersey short 0:06:41.720 --> 0:06:44.400 John Tucker, What that's a view? This is Blonimer. 0:06:44.480 --> 0:06:46.839 You see him, Come and get out of the way. 0:06:47.400 --> 0:06:51.279 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:06:51.360 --> 0:06:54.880 weekdays at ten am Eastern on applecard Play and Android 0:06:54.920 --> 0:06:57.679 Auto with the Bloomberg Business app. You can also listen 0:06:57.800 --> 0:07:00.880 live on Amazon Alexa from our flagsh New York station 0:07:01.240 --> 0:07:04.000 Just say Alexa playing Bloomberg eleven thirty. 0:07:05.040 --> 0:07:07.040 All right, Jess Metton sitting in for Alex Steel on 0:07:07.080 --> 0:07:09.200 Paul Sweeney. You're live here on a Bloomberg Interactive Brokers 0:07:09.240 --> 0:07:12.040 studio streaming live as well on YouTube dot com. So 0:07:12.080 --> 0:07:16.760 search there for Bloomberg podcast. The election tomorrow obviously one 0:07:16.800 --> 0:07:19.320 of the key issues driving this market for some time. 0:07:19.400 --> 0:07:22.440 It's got the latest analysis here. Mayo Wiley joins us. 0:07:22.480 --> 0:07:25.560 She's president and CEO of the Leadership Conference on Civil 0:07:25.600 --> 0:07:29.480 and Human Rights. Joining us if head that zoom thing here, 0:07:29.520 --> 0:07:32.280 so it comes in handy, Mayo, thank you so much 0:07:32.320 --> 0:07:34.840 for joining us here. I guess what we hear from 0:07:35.280 --> 0:07:37.480 you know a lot of the experts is this is 0:07:37.960 --> 0:07:40.080 too close to call. What are you hearing from some 0:07:40.120 --> 0:07:42.320 of the folks that you talk to. 0:07:43.720 --> 0:07:46.800 Well, certainly, what we know is that voters are going 0:07:46.880 --> 0:07:51.640 to decide the outcome of this election and absolutely cannot 0:07:52.160 --> 0:07:53.920 predict based on the polls. 0:07:54.040 --> 0:07:56.800 What we can say is what we're seeing in. 0:07:56.800 --> 0:08:01.040 The absolute enthusiasm to show up to these holes, even 0:08:01.040 --> 0:08:03.800 in early voting. As we know, election day is tomorrow, 0:08:04.360 --> 0:08:08.800 but I was in Pennsylvania on Saturday where thousands of 0:08:08.840 --> 0:08:10.800 doors were being knocked all over the state. 0:08:11.760 --> 0:08:13.800 Lots of high levels. 0:08:13.520 --> 0:08:17.400 Of turnout across not just Pennsylvania, but other states. We're 0:08:17.440 --> 0:08:22.480 hearing already for Detroit, Michigan, for example, fifty one percent 0:08:22.560 --> 0:08:26.080 turnout for early voting. Michigan is also one of those 0:08:26.080 --> 0:08:30.120 states that has same day registration, meaning people can show 0:08:30.200 --> 0:08:32.400 up at the polls and register to vote and then 0:08:32.520 --> 0:08:37.240 vote tomorrow. So what our own Civil Rights monitor polling 0:08:37.320 --> 0:08:40.480 showed in September that the Leadership Conference did with Brilliant 0:08:40.480 --> 0:08:44.800 Corners was enthusiasm is high on all sides in this 0:08:44.880 --> 0:08:47.800 election and seeing that at the polls. 0:08:48.360 --> 0:08:50.760 Talk to us Maya about what the mood is like 0:08:50.880 --> 0:08:55.240 in some of these key states in these battleground areas well. 0:08:55.280 --> 0:08:57.760 You know, I've been to Milwaukee, I've been to Detroit, 0:08:57.840 --> 0:09:02.000 I was in Pennsylvania. I think the mood is everything 0:09:02.200 --> 0:09:06.000 from completely motivated for folks to show up and have 0:09:06.120 --> 0:09:10.280 their voices heard at the polls, and anxiety. I mean, 0:09:10.320 --> 0:09:13.720 the anxiety is understandable. There is a lot at stake 0:09:13.840 --> 0:09:16.280 in this election. People are feeling it. You know. 0:09:16.320 --> 0:09:17.679 There's also been the. 0:09:17.400 --> 0:09:22.280 Reality of disinformation and the flood both from foreign governments 0:09:22.440 --> 0:09:26.840 like Russia, like China, like Iran trying to sow division 0:09:26.960 --> 0:09:32.840 and confusion, and sadly, some political leaders, some organizational leaders, 0:09:32.960 --> 0:09:36.880 some politicians picking up on that disinformation. So a lot 0:09:36.920 --> 0:09:39.840 of work on the ground across the country to make 0:09:39.840 --> 0:09:42.560 sure that voters know where to vote, how to vote, 0:09:42.640 --> 0:09:46.800 and that their votes count and will be counted. Because 0:09:46.840 --> 0:09:51.720 we do have an exceptionally impressive election system in this 0:09:51.800 --> 0:09:54.040 country we should be proud of and that's a big 0:09:54.080 --> 0:09:56.560 part of the work that people are doing on the ground. 0:09:57.320 --> 0:10:00.240 And Miley, a lot of experts are telling them to 0:10:00.360 --> 0:10:02.600 really be mindful of the turnout, that turnouts can be 0:10:02.600 --> 0:10:06.559 really critical for both sides. Actually, what's your understanding of 0:10:07.240 --> 0:10:10.760 maybe is one side better equipped to get the you know, 0:10:10.800 --> 0:10:12.120 the word out in the turnout going. 0:10:13.320 --> 0:10:15.960 Well, look, certainly it's a turnout election. I would argue 0:10:16.000 --> 0:10:18.679 all elections are actually turnout elections. 0:10:18.760 --> 0:10:21.079 When voters show up, they decide who lead us. 0:10:21.080 --> 0:10:23.480 And so the more voters who show up, the more 0:10:23.520 --> 0:10:26.160 we have a true reading of the country. The voter 0:10:26.320 --> 0:10:30.560 motivation is very high. Turnout is exceptionally high. We're already 0:10:30.600 --> 0:10:36.680 seeing numbers of turnout that are historic. They're approaching twenty 0:10:36.760 --> 0:10:40.560 twenty numbers. Remember President Joe Biden won the most number 0:10:40.600 --> 0:10:43.040 of votes of any president for over one hundred years 0:10:43.040 --> 0:10:45.840 of voting history. This is on part of a historic 0:10:45.880 --> 0:10:49.400 turnout election. I think the point about who does that benefit? 0:10:49.800 --> 0:10:53.120 I mean both sides, all sides are showing up. 0:10:53.240 --> 0:10:57.040 The real question is what do voters want and what's 0:10:57.080 --> 0:10:59.719 a stake? And how many of these voters are new 0:10:59.840 --> 0:11:02.840 votvoters or voters who did not show up in twenty 0:11:02.920 --> 0:11:05.520 twenty or in twenty twenty two. A lot of the 0:11:05.600 --> 0:11:08.320 get out the vote work has been focused in the 0:11:08.320 --> 0:11:11.920 civil rights community and certainly by US at the Leadership Conference, 0:11:12.240 --> 0:11:16.440 of making sure those people who can vote know where 0:11:16.480 --> 0:11:19.720 and how to vote and feel that their vote matters 0:11:19.760 --> 0:11:22.840 and will count, and that's why I think we're seeing 0:11:22.920 --> 0:11:24.880 high turnout as people are feeling that. 0:11:25.040 --> 0:11:28.880 Whenever you're speaking anecdotal lead to Americans across the country, 0:11:29.000 --> 0:11:31.800 what is more specific when it comes to policy proposals 0:11:31.840 --> 0:11:33.800 do they constantly keep bringing up to you? 0:11:34.920 --> 0:11:39.800 Look, people are very concerned obviously about everything from the 0:11:39.840 --> 0:11:44.160 state of our democracy and our freedoms, particularly abortion, but 0:11:44.679 --> 0:11:49.400 in communities of color, criminal justice reform is a huge issue. 0:11:49.080 --> 0:11:50.040 As is education. 0:11:50.600 --> 0:11:52.720 But I think we also know that across the board, 0:11:52.880 --> 0:11:55.520 costs are an issue. And you know, one of the 0:11:55.559 --> 0:11:58.719 things that's been so clear in this campaign is, you know, 0:11:58.840 --> 0:12:02.600 when Kamala Harris speaks about the fact that she is 0:12:02.640 --> 0:12:05.080 not going to drive up the cost of groceries, but 0:12:05.160 --> 0:12:12.080 Donald Trump obviously talking less about costs and more casting aspersions. 0:12:12.160 --> 0:12:15.000 I mean, people are really trying to listen for how 0:12:15.120 --> 0:12:19.160 is my life going to be better? And they're responding 0:12:19.280 --> 0:12:22.840 to where and how They're hearing very clear messages about 0:12:22.880 --> 0:12:26.640 what things they would see and feel in their own 0:12:26.679 --> 0:12:29.920 households and communities. I think that's also why we're seeing 0:12:30.000 --> 0:12:33.760 so many women vote because abortion and access to abortion 0:12:33.920 --> 0:12:37.960 as an issue of healthcare. Reproductive freedom is not just 0:12:38.040 --> 0:12:40.520 reproductive freedom, it's also the ability to get the care 0:12:40.600 --> 0:12:43.400 you need, including if your life is in danger. And 0:12:43.440 --> 0:12:46.760 we're seeing that as a huge motivator and topic of discussion, 0:12:47.080 --> 0:12:48.840 and I think that's part of why we're seeing what 0:12:48.880 --> 0:12:53.040 we saw in that Iowa poll, which showed frankly, that 0:12:53.120 --> 0:12:55.440 women were turning out in droves, and we've seen that 0:12:55.640 --> 0:12:59.000 gender gap so many women engaged in the selection, and. 0:12:58.920 --> 0:13:01.760 That is a big reason, right, Maya, thank you so 0:13:01.840 --> 0:13:04.200 much for joining us. We really appreciate getting some of 0:13:04.240 --> 0:13:07.120 your time. Maya Wiley, she's a president and CEO of 0:13:07.120 --> 0:13:10.800 the Leadership Conference on Civil and Human Rights, giving us 0:13:11.040 --> 0:13:15.040 her peview of again the selection for tomorrow. 0:13:15.520 --> 0:13:19.400 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:13:19.480 --> 0:13:22.199 weekdays at ten am Eastern on Apple car Playing and 0:13:22.320 --> 0:13:25.200 broun Otto with the Bloomberg Business app. Listen on demand 0:13:25.240 --> 0:13:29.559 wherever you get your podcasts, or watch us live on YouTube. 0:13:30.679 --> 0:13:34.240 Katie Kaminski joins us. She's a chief research strategist and 0:13:34.320 --> 0:13:40.199 portfolio managed Alpha Simplex Group, joining us via that Zoom thing. Katie, 0:13:41.600 --> 0:13:44.720 when you look at the markets broadly defined here, what 0:13:44.800 --> 0:13:47.440 are they kind of telling me about the next twenty 0:13:47.440 --> 0:13:49.440 four forty eight hours, or do you just try to 0:13:49.520 --> 0:13:52.800 power through all that stuff and think about longer term? 0:13:53.280 --> 0:13:54.480 Oh, this is tricky. 0:13:54.520 --> 0:13:56.640 I mean, I'd say that as a trend fuller, we 0:13:56.760 --> 0:13:58.800 tend to think about holding the course. 0:13:59.440 --> 0:14:00.679 But it's really hard. 0:14:00.760 --> 0:14:03.520 I mean, you're seeing today some reversal of trends that 0:14:03.559 --> 0:14:07.240 have been following from the last month. Really, yields have 0:14:07.400 --> 0:14:10.040 moved so much, yields have moved so much higher. 0:14:10.920 --> 0:14:12.440 You're seeing the reversal of that today. 0:14:12.600 --> 0:14:14.720 You've seen the dollar had been sort of on a 0:14:14.760 --> 0:14:17.079 tear and then now as reverting again. 0:14:17.320 --> 0:14:20.240 So there's just a lot of uncertainty in the short term. 0:14:20.320 --> 0:14:24.280 So actually powering through is probably a better way to 0:14:24.320 --> 0:14:26.000 sort of handle all of this volatility. 0:14:26.320 --> 0:14:28.640 Katie, I wanted to pick your brain about poly market 0:14:28.680 --> 0:14:30.400 because we've seen it a bit all over the place 0:14:30.440 --> 0:14:33.560 in recent weeks, sometimes favoring at Trump, whereas over the 0:14:33.560 --> 0:14:35.680 weekend you started to see that narrow out and begin 0:14:35.760 --> 0:14:40.080 to favor Harris instead. So as a trading kind of strategy, 0:14:40.160 --> 0:14:43.720 why would an investor use them for a trading strategy 0:14:43.720 --> 0:14:46.680 over polls? And why are they using a betting website 0:14:46.680 --> 0:14:49.640 over polling for judging sentiment because obviously, as we know, 0:14:49.800 --> 0:14:52.720 it's not really correlated to who would actually end up winning. 0:14:54.080 --> 0:14:55.640 Well, this is a good point, and I mean, I 0:14:55.640 --> 0:14:59.200 think it has to do more with market price discovery, 0:14:59.240 --> 0:15:01.480 and I think people a lot of faith in. 0:15:03.120 --> 0:15:05.200 Sort of market pricing of odds. 0:15:05.400 --> 0:15:08.560 But then you know, obviously polling could be sort of 0:15:08.560 --> 0:15:12.000 a different demographic group. So what's really making a lot 0:15:12.040 --> 0:15:15.080 of people, I think even myself, is you see the 0:15:15.120 --> 0:15:17.520 news and it's just flipping back and forth, and there 0:15:17.520 --> 0:15:21.400 are very different outlets pointing to different observations, and that 0:15:21.600 --> 0:15:24.240 just suggests how incredibly uncertain and tight. 0:15:24.160 --> 0:15:25.200 This race really is. 0:15:25.840 --> 0:15:29.000 And people are probably also looking at those areas which 0:15:29.120 --> 0:15:32.240 kind of they're used to, So I think the picture 0:15:32.280 --> 0:15:33.040 is very mixed. 0:15:34.040 --> 0:15:37.520 So Katie, from your perspective and just maybe your equity 0:15:37.560 --> 0:15:40.920 allocation here have you made have you hedged it at all? 0:15:41.200 --> 0:15:44.400 Or are you just position that we're going to be 0:15:44.400 --> 0:15:47.240 fine no matter who's kind of controlling things down there 0:15:47.240 --> 0:15:47.800 in Washington. 0:15:49.080 --> 0:15:51.760 Well, this is a good question because as a trend follower, 0:15:51.960 --> 0:15:55.680 our goal isn't really sort of to add a discretionary 0:15:55.760 --> 0:15:59.280 view on what we do we're just measuring where market 0:15:59.360 --> 0:16:03.040 directions are moving. And you have seen some momentum and 0:16:03.080 --> 0:16:05.880 equities over the last six weeks. But I think the 0:16:06.000 --> 0:16:08.720 biggest thing that people have been focused on is not 0:16:08.760 --> 0:16:12.400 necessarily just equities. It's just how much long bond signals 0:16:12.440 --> 0:16:17.280 have dissipated, even going short in US fixed income in 0:16:17.320 --> 0:16:19.840 some ways. And also how much the dollar has moved, 0:16:20.040 --> 0:16:22.480 but it's a short term moved and things are still 0:16:22.560 --> 0:16:26.080 very mixed. But US equities seem to be the most 0:16:26.160 --> 0:16:28.920 robust signal, which tells you maybe we're going to be 0:16:28.960 --> 0:16:30.400 fine either way, let's hope. 0:16:30.400 --> 0:16:33.480 So when it comes to Congress, in the makeup of 0:16:33.520 --> 0:16:36.200 Congress and particularly gridlock, because when I've been speaking with 0:16:36.240 --> 0:16:39.320 a lot of portfolio managers, especially when they're managing money 0:16:39.400 --> 0:16:43.080 for longer term horizons, they haven't been making big bets 0:16:43.120 --> 0:16:45.480 either way because a lot of times, even if they 0:16:45.480 --> 0:16:48.360 have certain policy proposals, as you know, it would take 0:16:48.480 --> 0:16:51.360 some time here to figure out whether or not those 0:16:51.400 --> 0:16:53.320 would get passed. So how much to you when you're 0:16:53.360 --> 0:16:56.640 thinking about gridlock in Congress, will that make certain trading 0:16:56.680 --> 0:16:59.480 decisions in the coming months or even having to wait 0:16:59.520 --> 0:17:01.480 on that, you know more of what that could look 0:17:01.560 --> 0:17:03.080 like in Congress when you think about the House as 0:17:03.080 --> 0:17:03.760 well as the Senate. 0:17:05.040 --> 0:17:06.280 I think you make a good point. 0:17:06.320 --> 0:17:08.679 It's just if you think about NPV or sort of 0:17:08.720 --> 0:17:11.199 the value of the markets, it's really about weighing the 0:17:11.280 --> 0:17:15.919 different possible outcomes. And even though we're going to have 0:17:16.000 --> 0:17:19.080 at least hopefully some resolution in terms of the election, 0:17:19.600 --> 0:17:22.639 it still is quite a long road for many different policies, 0:17:22.720 --> 0:17:27.280 particularly if you have a gridlock in Congress, and that 0:17:27.359 --> 0:17:31.879 means that status quo is probably closer than sort of 0:17:31.880 --> 0:17:35.840 these extreme scenarios which people are trying to discount and valuate. 0:17:36.240 --> 0:17:38.320 And so I think that that's why if you look 0:17:38.359 --> 0:17:42.160 for the overall trend, equities still remain somewhat positive, because 0:17:42.760 --> 0:17:46.000 the path to all of more extreme policy is actually 0:17:46.040 --> 0:17:48.320 a long one and it could take time to know, 0:17:48.400 --> 0:17:50.480 and we should have more information as that changes. 0:17:51.560 --> 0:17:54.520 Katie. In the world of fixed income, how much credit 0:17:54.600 --> 0:17:56.680 risk are you taking if any of these days? 0:17:57.600 --> 0:17:59.639 So we don't focus on credit risk, but I know 0:17:59.720 --> 0:18:03.440 that's in an area recently that has been very interesting, 0:18:03.560 --> 0:18:07.119 especially with yields higher. I think the fact that you 0:18:07.160 --> 0:18:09.840 didn't see a lot of credit deterioration in August was 0:18:09.880 --> 0:18:13.119 something that surprised me. We're much more focused on the 0:18:13.160 --> 0:18:18.240 directional level of yields, and we've really seen a major 0:18:18.359 --> 0:18:24.000 pivot towards higher, longer, steadier fed reaction, and I think 0:18:24.080 --> 0:18:27.320 that sort of is obviously going to impact credit as well. 0:18:27.960 --> 0:18:29.680 Katie, thank you so much for joining us. We always 0:18:29.680 --> 0:18:32.320 appreciate getting a few minutes of your time. Kati Kaminski. 0:18:32.440 --> 0:18:35.640 She's a chief research strategist and she's a portfolio manager 0:18:35.720 --> 0:18:37.879 over to Alpha Simplex Group. 0:18:39.440 --> 0:18:43.320 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:18:43.400 --> 0:18:46.920 weekdays at ten am Eastern on applecar Play and Android 0:18:46.960 --> 0:18:50.119 Auto with the Bloomberg Business. You can also listen live 0:18:50.240 --> 0:18:53.399 on Amazon Alexa from our flagship New York station Just 0:18:53.480 --> 0:18:56.359 Say Alexa, play Bloomberg eleven thirty. 0:18:57.280 --> 0:19:00.439 At Bloomberg Interactive Brooks Studio, or streaming live on YouTube 0:19:00.480 --> 0:19:03.359 as well as to check us out there Trump trades, 0:19:03.640 --> 0:19:07.520 which is basically long the dollar, short bonds. Are you 0:19:07.600 --> 0:19:09.359 long the Trump trade? Are you not? It seemed like 0:19:09.359 --> 0:19:11.159 the narrative maybe change a little bit over the weekends 0:19:11.200 --> 0:19:13.160 of new polling. I don't know how if you're a trader, 0:19:13.960 --> 0:19:16.400 you're playing this thing I don't know, but our next 0:19:16.440 --> 0:19:19.159 guest has a great big take story. Honest, you know, 0:19:19.200 --> 0:19:21.800 we love the big take stories coming out of Bloomberg News. 0:19:21.800 --> 0:19:25.040 Great topics, deeply resourced, deeply sourced. 0:19:24.840 --> 0:19:27.840 Always great visuals and charts like the pictures. 0:19:27.840 --> 0:19:30.200 The pictures helped me. Katherine Burton joins us. She's a 0:19:30.240 --> 0:19:32.080 senior reporter for Bloomberg News. She joins us here in 0:19:32.119 --> 0:19:36.640 our Bloomberg Interactive Broker studio. So, Kathy, what are traders 0:19:36.680 --> 0:19:38.600 on Global Wallstreet? What are they trying to do here 0:19:38.640 --> 0:19:40.719 ahead of this election? Are they trying to play it? 0:19:40.920 --> 0:19:43.240 Are they trying to hedge themselves? What are they doing? 0:19:43.840 --> 0:19:48.160 They're trying to do both. Actually, I would say that 0:19:48.440 --> 0:19:51.199 most of the traders have a slight tendency towards the 0:19:51.240 --> 0:19:55.080 Trump trade that has maybe reversed a little bit overnight 0:19:55.320 --> 0:19:59.919 with the new poll that showed Harris ahead and I 0:20:01.800 --> 0:20:05.960 but there's also a lot of hedging going on. People 0:20:06.040 --> 0:20:09.680 are betting on inflation, they're betting on a steeper yield curve, 0:20:09.760 --> 0:20:13.119 and both those things should make money no matter who wins. 0:20:13.520 --> 0:20:15.239 It's interesting because when I've been speaking to a lot 0:20:15.280 --> 0:20:18.200 of portfolio managers who are managing money for longer term. 0:20:18.240 --> 0:20:20.480 They're still kind of on the sidelines and are more 0:20:20.520 --> 0:20:22.760 focused on the Federal Reserve and kind of the direction 0:20:22.800 --> 0:20:25.520 of the economy. But when you're talking to say hedge funds, 0:20:25.520 --> 0:20:28.520 which obviously have a much shorter type of timeframe, what 0:20:28.680 --> 0:20:30.400 is the mood like there, and how exactly are there 0:20:30.440 --> 0:20:33.359 priming their computer models for a moment like this and 0:20:33.400 --> 0:20:35.360 how they're treating because obviously they have a different time 0:20:35.400 --> 0:20:37.960 horizon than they say somebody who's managing money like five 0:20:38.000 --> 0:20:39.320 ten years out right. 0:20:39.400 --> 0:20:42.000 So we spoke to one of those managers who has 0:20:42.040 --> 0:20:46.920 a pretty substantial quant aspect to their portfolio, and they 0:20:47.200 --> 0:20:49.920 did over the past few months, and because it's only 0:20:49.920 --> 0:20:52.520 been a few months since Harris came into the election, 0:20:53.440 --> 0:20:56.119 they've been looking at polls and betting markets and trying 0:20:56.119 --> 0:21:00.280 to put that into their models and isolate how set 0:21:00.359 --> 0:21:04.120 classes move with a rise or a fall in the polls. 0:21:05.200 --> 0:21:08.000 So people have been rejigging their models to try and 0:21:08.160 --> 0:21:09.640