1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:22,959 Speaker 1: at Bloomberg dot com. Every six months or so, the 8 00:00:23,079 --> 00:00:25,840 Speaker 1: debate about whether the U s should sell fifty two 9 00:00:25,840 --> 00:00:29,200 Speaker 1: a hundred year bonds emerges, and once again we have 10 00:00:29,360 --> 00:00:33,519 Speaker 1: that battle raging, Treasury Secretary Steve Manuchin weighing in and 11 00:00:33,520 --> 00:00:37,040 Speaker 1: saying that it seemed really like a logical thing to 12 00:00:37,080 --> 00:00:40,120 Speaker 1: do for the US to sell ultralong dated bonds in 13 00:00:40,159 --> 00:00:42,760 Speaker 1: the face of just how low interest rates have gone, 14 00:00:42,800 --> 00:00:45,400 Speaker 1: and his advisers are looking into it and are expected 15 00:00:45,400 --> 00:00:48,720 Speaker 1: to recommend against it. But Paul, it really raises this question, 16 00:00:49,040 --> 00:00:52,159 Speaker 1: you know, again and again, what is the hold up? 17 00:00:52,280 --> 00:00:55,480 Speaker 1: If the borrowing costs are so low, and if the 18 00:00:55,480 --> 00:00:57,800 Speaker 1: hold up is that compelling, why do we have this 19 00:00:57,880 --> 00:01:00,720 Speaker 1: debate every six months? Joining us at a discussed Marcus 20 00:01:00,760 --> 00:01:03,520 Speaker 1: Ashworth columnists covering European markets, as well as bond markets 21 00:01:03,560 --> 00:01:07,800 Speaker 1: globally for Bloomberg opinion joining us from London. So Marcus, 22 00:01:08,040 --> 00:01:11,679 Speaker 1: let's just start with why did Treasury Secretary Stephen mcnuchin 23 00:01:12,040 --> 00:01:15,160 Speaker 1: revive this debate that seems to sort of bubble up 24 00:01:15,240 --> 00:01:18,319 Speaker 1: every six months or so because he was told to 25 00:01:20,720 --> 00:01:23,840 Speaker 1: behind you, behind you, behind the curtain. Who knows? Um. 26 00:01:24,000 --> 00:01:27,080 Speaker 1: The great thing is is that the Treasury Borrowing Advisory 27 00:01:27,080 --> 00:01:30,120 Speaker 1: Committee the key word they're being advisory m keeps on 28 00:01:30,200 --> 00:01:32,679 Speaker 1: trying to push this back because look, and I've been 29 00:01:32,720 --> 00:01:36,080 Speaker 1: a years Treasury pod dealer, and it's difficult enough trying 30 00:01:36,080 --> 00:01:38,039 Speaker 1: to trade thirty years. Can you imagine trying to trade 31 00:01:38,560 --> 00:01:41,200 Speaker 1: hundred years or even stripped hundred years. All of a 32 00:01:41,200 --> 00:01:44,039 Speaker 1: sudden someone comes along lets you out of five hundred million, 33 00:01:44,200 --> 00:01:46,080 Speaker 1: you have no hope of getting them back, and cleep 34 00:01:46,120 --> 00:01:49,480 Speaker 1: paying five points higher. It's a disaster to try and 35 00:01:49,520 --> 00:01:52,320 Speaker 1: manage this type of risk from a dealer market maker 36 00:01:52,360 --> 00:01:54,880 Speaker 1: put point of view. They know also that of a 37 00:01:55,280 --> 00:01:57,760 Speaker 1: client buys this stuff, they're gonna look it away not 38 00:01:57,840 --> 00:02:01,360 Speaker 1: come back for what hundred years, So you know it 39 00:02:01,480 --> 00:02:05,680 Speaker 1: kills liquidity, it kills their sense of controlling risk. It can, 40 00:02:05,760 --> 00:02:08,000 Speaker 1: of course created a whole bunch of other stuff. I mean, look, 41 00:02:08,280 --> 00:02:10,000 Speaker 1: to make this sort of sector work, you'd have to 42 00:02:10,000 --> 00:02:13,440 Speaker 1: have hundred your futures, uh and options and all after 43 00:02:13,480 --> 00:02:16,440 Speaker 1: other stuff. It could be great, It could really stretch 44 00:02:16,520 --> 00:02:20,359 Speaker 1: the way that the people trade risk and trade duration convexity, 45 00:02:20,560 --> 00:02:22,160 Speaker 1: and it could do all sorts of things. But the U. S. 46 00:02:22,200 --> 00:02:24,560 Speaker 1: Treasury has to be committed to it for a longer 47 00:02:24,680 --> 00:02:28,079 Speaker 1: term clear plan. This trouble is that Trump could be 48 00:02:28,080 --> 00:02:30,680 Speaker 1: out of office in little every years time and then 49 00:02:30,800 --> 00:02:34,040 Speaker 1: new treasure secretary could do the opposite. So that's what 50 00:02:34,240 --> 00:02:36,840 Speaker 1: scares people, because you know, once you go down this route, 51 00:02:36,840 --> 00:02:38,360 Speaker 1: you've got to stay committed to it and there has 52 00:02:38,400 --> 00:02:40,400 Speaker 1: to be a rational reason for it. Now they can 53 00:02:40,400 --> 00:02:42,440 Speaker 1: be wrong. Yield are incredibly low. It makes sense for 54 00:02:42,480 --> 00:02:44,760 Speaker 1: as far as the government's concerned. But you have to 55 00:02:44,800 --> 00:02:48,360 Speaker 1: have your client base and pensions funds with you. And 56 00:02:48,520 --> 00:02:50,200 Speaker 1: though they may be in Europe and sent in the 57 00:02:50,280 --> 00:02:53,400 Speaker 1: UK because of actual eril and different reasons, there's less 58 00:02:53,520 --> 00:02:57,200 Speaker 1: demand and requirement in the US because you already have 59 00:02:57,280 --> 00:02:59,440 Speaker 1: strip thirty years, which give you a duration of final 60 00:02:59,680 --> 00:03:02,639 Speaker 1: exactly thirty years. Its coomed to a fifty year regular bond, 61 00:03:02,720 --> 00:03:05,720 Speaker 1: so there's less real need for it. But still this 62 00:03:05,919 --> 00:03:09,359 Speaker 1: is a government intent on doing different things. So Marcus, 63 00:03:09,440 --> 00:03:12,600 Speaker 1: are there other developed markets that have longer dated bonds 64 00:03:13,400 --> 00:03:17,560 Speaker 1: years and can we take anything away from those? Sure? Okay, 65 00:03:17,600 --> 00:03:21,440 Speaker 1: Look so in Europe, Germany doesn't go over thirty years. Um, 66 00:03:21,680 --> 00:03:25,160 Speaker 1: we were starting to see other countries around it go there. 67 00:03:25,200 --> 00:03:28,400 Speaker 1: So we know austri has done a one hundred year bond, uh, 68 00:03:28,639 --> 00:03:31,880 Speaker 1: Italy has done a fifty year bond, tapped it again, um, 69 00:03:32,040 --> 00:03:34,800 Speaker 1: France has done fifty years. UK goes out as far 70 00:03:34,880 --> 00:03:38,240 Speaker 1: as as fifty years, Sweden's about to look at possibly 71 00:03:38,240 --> 00:03:41,600 Speaker 1: doing a hundred years, Ireland in Belgium just a private 72 00:03:41,640 --> 00:03:44,600 Speaker 1: places the last couple of years in one hundred years. 73 00:03:44,640 --> 00:03:47,240 Speaker 1: But they're so like one offs, so they really and 74 00:03:47,400 --> 00:03:50,160 Speaker 1: you can look at maybe Italy toward certain degree, UK 75 00:03:50,360 --> 00:03:53,800 Speaker 1: definitely and possibly France of having any form of liquidity 76 00:03:54,440 --> 00:03:57,120 Speaker 1: further out. But it's becoming more and more popular because 77 00:03:57,400 --> 00:04:00,560 Speaker 1: there is a huge, huge hunt for yield in your 78 00:04:00,840 --> 00:04:03,120 Speaker 1: much more extreme than you see in your in the US. 79 00:04:03,160 --> 00:04:06,360 Speaker 1: And then you're on it's definitely there. But but Marcus, 80 00:04:06,440 --> 00:04:09,000 Speaker 1: I mean, how much is the obstacle for the US, 81 00:04:09,040 --> 00:04:12,280 Speaker 1: the fact that US rates are such an important benchmark, 82 00:04:12,720 --> 00:04:15,280 Speaker 1: and that you know, a shift in the whole curve 83 00:04:15,720 --> 00:04:19,600 Speaker 1: creates a much more challenging situation than say in some 84 00:04:19,680 --> 00:04:22,760 Speaker 1: of these nations in Europe that where there's more of 85 00:04:22,800 --> 00:04:26,120 Speaker 1: a composite type rate that is sort of the benchmark 86 00:04:26,200 --> 00:04:27,919 Speaker 1: for a lot of other debt. In other words, it 87 00:04:27,960 --> 00:04:30,760 Speaker 1: won't matter as much to the whole structure of of 88 00:04:30,800 --> 00:04:33,640 Speaker 1: a huge debt market if they issue longer dated debt 89 00:04:33,680 --> 00:04:36,560 Speaker 1: as it would in the US. Lisa, you've clearly been 90 00:04:36,600 --> 00:04:39,920 Speaker 1: doing bonds and fixes quite a while. Spots on exactly right, 91 00:04:39,960 --> 00:04:41,799 Speaker 1: and that is that is the number of the argument. 92 00:04:41,839 --> 00:04:44,080 Speaker 1: I couldn't put it better. You know, look it does 93 00:04:44,200 --> 00:04:45,840 Speaker 1: he cares if Ireland does it all think good for 94 00:04:45,920 --> 00:04:49,000 Speaker 1: them Austria. Likewise, that the reason why Germany hasn't done it. 95 00:04:49,080 --> 00:04:51,960 Speaker 1: Perhaps in Europe they don't really need the money and 96 00:04:52,160 --> 00:04:55,120 Speaker 1: that all and not have the potential sort of liquidity 97 00:04:55,120 --> 00:04:56,960 Speaker 1: out there. And this is that this is exactly the point. 98 00:04:57,440 --> 00:04:59,720 Speaker 1: If you go out to a hundred years, you've got 99 00:04:59,720 --> 00:05:03,280 Speaker 1: to be convinced it's it's it's a worthwhile thing. There 100 00:05:03,360 --> 00:05:05,680 Speaker 1: is huge demand for it, and it's gonna be sudden, 101 00:05:05,720 --> 00:05:07,440 Speaker 1: it's hangs around, and you're gonna be able to issue 102 00:05:07,480 --> 00:05:10,400 Speaker 1: them courtly, you know, for decent amounts of money, and 103 00:05:10,440 --> 00:05:12,360 Speaker 1: you're gonna be able to create a features market and 104 00:05:12,400 --> 00:05:15,839 Speaker 1: blah blah blah. You are the world's interest rate benstion mark. 105 00:05:16,520 --> 00:05:18,320 Speaker 1: Do you mess with that? At your peril? You have 106 00:05:18,400 --> 00:05:23,839 Speaker 1: a fantastic thirty liquid um bond which has strips off it, 107 00:05:23,880 --> 00:05:26,920 Speaker 1: which has tips off it, It's everything works perfectly. Why 108 00:05:27,000 --> 00:05:31,120 Speaker 1: mess for something which is perfection in liquidity terms? And 109 00:05:31,120 --> 00:05:33,479 Speaker 1: and you know for what benefit? Yeah? Okay, I get 110 00:05:33,480 --> 00:05:35,400 Speaker 1: the point that it's looking at very low rates for 111 00:05:35,400 --> 00:05:38,880 Speaker 1: a long, very long while. But you know, thirty years 112 00:05:38,880 --> 00:05:41,640 Speaker 1: not enough here, alright. So my my, my takeaway, Lisa's 113 00:05:41,680 --> 00:05:45,960 Speaker 1: Marcus is not a big fan of Nike, unlikely want 114 00:05:45,960 --> 00:05:47,560 Speaker 1: to trade it. I will never want to be you know. 115 00:05:47,800 --> 00:05:49,839 Speaker 1: Please make me make me a market a hundred million 116 00:05:51,000 --> 00:05:53,440 Speaker 1: Marcus Ashur, thank you so much for joining us. Marcus 117 00:05:53,520 --> 00:05:57,080 Speaker 1: is the Calamus covering European markets for Bloomberg Opinion from London. 118 00:05:57,120 --> 00:05:58,920 Speaker 1: You can read more on this and other stories from 119 00:05:58,920 --> 00:06:03,560 Speaker 1: Bloomberg Opinion at Bloomberg dot com, slash Opinion and on 120 00:06:03,600 --> 00:06:21,400 Speaker 1: the terminotorl by typing O P I n go. Well, 121 00:06:21,440 --> 00:06:25,040 Speaker 1: as investors come back next week from the long holiday weekend, 122 00:06:25,040 --> 00:06:27,279 Speaker 1: they're gonna take a look at their portfolios and they're 123 00:06:27,279 --> 00:06:30,040 Speaker 1: gonna say, hey, we're ten plus years into this economic cycle. 124 00:06:30,480 --> 00:06:33,240 Speaker 1: Trade uncertainty is out there weighing on my portfolio. But 125 00:06:33,279 --> 00:06:36,040 Speaker 1: I've got a dubbish fed What should I do? Uh? 126 00:06:36,080 --> 00:06:37,880 Speaker 1: Maybe to get some answers, we welcome our next guest, 127 00:06:37,920 --> 00:06:41,239 Speaker 1: Deepak Puri, chief investment Officer for the Americas for Deutsche 128 00:06:41,240 --> 00:06:43,600 Speaker 1: Bank Wealth Management, joins us here in O Bloomberg Interacted 129 00:06:43,640 --> 00:06:47,159 Speaker 1: Broker Studio. Deepak, thanks so much for joining us. So again, 130 00:06:47,240 --> 00:06:49,240 Speaker 1: we kind of look at the SMP and it's kind 131 00:06:49,279 --> 00:06:50,960 Speaker 1: of flat over the last twelve months. We've had a 132 00:06:50,960 --> 00:06:53,200 Speaker 1: great rally this year, but again if you look at 133 00:06:53,200 --> 00:06:55,919 Speaker 1: it over the trailing twelve months, kind of flat. What 134 00:06:56,000 --> 00:07:00,320 Speaker 1: are you telling the Deutsche Bank Wealth investors how should 135 00:07:00,320 --> 00:07:04,000 Speaker 1: be position a portfolio right now? Great? Thank you, Paul. 136 00:07:04,400 --> 00:07:06,560 Speaker 1: I think a couple of things. A what we have 137 00:07:06,640 --> 00:07:09,280 Speaker 1: seen over the last one year, especially year to date 138 00:07:09,800 --> 00:07:12,880 Speaker 1: is primarily driven by what we would call a PE expansion. 139 00:07:13,040 --> 00:07:15,840 Speaker 1: You know, it's not really driven by corporate earnings going up, 140 00:07:16,760 --> 00:07:19,800 Speaker 1: so keep that in mind as you've positioned yourself for 141 00:07:19,840 --> 00:07:23,480 Speaker 1: the next few quarters. Um. Having said that, I think 142 00:07:23,520 --> 00:07:25,760 Speaker 1: there's certain things for the next couple of months that 143 00:07:25,840 --> 00:07:28,080 Speaker 1: makes us take a little bit of a cautious stance. 144 00:07:28,560 --> 00:07:30,760 Speaker 1: You know, you look at the trade war that's going on. 145 00:07:30,840 --> 00:07:33,760 Speaker 1: Even though there was an olive branch yesterday from the Chinese, 146 00:07:34,160 --> 00:07:37,960 Speaker 1: we feel this is a you know, protracted sort of 147 00:07:38,400 --> 00:07:41,000 Speaker 1: give and take one step forward, two steps back kind 148 00:07:41,000 --> 00:07:44,320 Speaker 1: of situation, and we really don't expect a comprehensive trade 149 00:07:44,360 --> 00:07:47,920 Speaker 1: deal anytime soon. On top of that, the next couple 150 00:07:47,960 --> 00:07:49,960 Speaker 1: of quarters, the third quarter is going to be by 151 00:07:50,040 --> 00:07:53,120 Speaker 1: far the worst quarter for this calendar year, for the 152 00:07:53,120 --> 00:07:56,320 Speaker 1: earning season, and then the fourth quarter could be the 153 00:07:56,600 --> 00:07:59,600 Speaker 1: low watermark for the g d P. So the next 154 00:07:59,600 --> 00:08:02,400 Speaker 1: couple of course, are definitely something to keep an eye on. 155 00:08:03,000 --> 00:08:06,000 Speaker 1: Having said that, I think a longer term, uh, you know, 156 00:08:06,080 --> 00:08:09,320 Speaker 1: things look much better for equities, especially we haven't seen 157 00:08:09,480 --> 00:08:11,440 Speaker 1: a top. You know, when you look at how the 158 00:08:11,440 --> 00:08:14,360 Speaker 1: equity markets end, they usually end up with the bank. 159 00:08:14,840 --> 00:08:16,920 Speaker 1: You know, last twelve months, as you just pointed out, 160 00:08:17,080 --> 00:08:20,760 Speaker 1: has been relatively flattished. So this is not really a 161 00:08:20,960 --> 00:08:24,120 Speaker 1: very top heavy kind of an equity market. We still 162 00:08:24,120 --> 00:08:27,400 Speaker 1: see legs in this markets are twelve month forecast remains 163 00:08:27,520 --> 00:08:30,240 Speaker 1: around three thousand, but that is primarily drivened by a 164 00:08:30,240 --> 00:08:33,160 Speaker 1: little bit better earnings than a pe expansion that we 165 00:08:33,280 --> 00:08:37,920 Speaker 1: have seen them more recently. One counterpoint is that a 166 00:08:37,960 --> 00:08:41,199 Speaker 1: lot of the bearishness that you talk about has been 167 00:08:41,200 --> 00:08:44,640 Speaker 1: baked into valuations currently, and we've seen a sell off 168 00:08:44,679 --> 00:08:48,160 Speaker 1: that really has stemmed from the recognition of some of 169 00:08:48,200 --> 00:08:51,120 Speaker 1: those pesstomistic kind of developments that you were talking about. 170 00:08:51,520 --> 00:08:54,280 Speaker 1: Bank of America came out this morning and recommends buying 171 00:08:54,320 --> 00:08:56,679 Speaker 1: stocks right now because they say that the bearishness has 172 00:08:56,720 --> 00:08:59,800 Speaker 1: gotten so extreme that it makes sense. What do you 173 00:09:00,040 --> 00:09:03,320 Speaker 1: day to that. I wouldn't say that the bearishness is 174 00:09:03,360 --> 00:09:05,920 Speaker 1: to an extreme. I think there's you know, and you 175 00:09:06,080 --> 00:09:08,920 Speaker 1: have to take into account what the other asset classes 176 00:09:08,920 --> 00:09:11,480 Speaker 1: are telling your signaling. So I think the bearishness is 177 00:09:11,480 --> 00:09:13,680 Speaker 1: really at an extreme. When you look at the fixed 178 00:09:13,720 --> 00:09:17,240 Speaker 1: income markets, you know, they are really highlighting a really 179 00:09:17,600 --> 00:09:21,760 Speaker 1: pessimistic scenario for the for inflation, for growth, and so forth. 180 00:09:22,080 --> 00:09:24,720 Speaker 1: On the equity market side, you know, currently you're trading 181 00:09:24,760 --> 00:09:28,240 Speaker 1: at seventeen eighteen times multiple, which is to my mind, 182 00:09:28,720 --> 00:09:30,880 Speaker 1: is pretty much where it should be. Um. You know, 183 00:09:30,880 --> 00:09:34,280 Speaker 1: when you look at how to assign a PE multiple 184 00:09:34,360 --> 00:09:36,679 Speaker 1: on markets, you have to look at both what I 185 00:09:36,720 --> 00:09:40,160 Speaker 1: would call structural forces at play and then the technical trend. 186 00:09:40,440 --> 00:09:42,840 Speaker 1: The cyclical trend is what we call earning s curve. 187 00:09:43,080 --> 00:09:45,200 Speaker 1: You know, there's a lot of talk about yield curves 188 00:09:45,400 --> 00:09:47,800 Speaker 1: and yield curve inversion, but I see a lot less 189 00:09:47,840 --> 00:09:51,560 Speaker 1: focus on earning s curve, which is simply put next 190 00:09:51,559 --> 00:09:54,920 Speaker 1: twelve month earning, subtracting the trailing twelve months earning, and 191 00:09:54,960 --> 00:09:57,760 Speaker 1: what's the trajectory for that earning scurve? And that still 192 00:09:57,920 --> 00:10:00,560 Speaker 1: is positive. So that's a I think to extent a 193 00:10:00,640 --> 00:10:03,960 Speaker 1: positive take on the PE. On the other side, when 194 00:10:03,960 --> 00:10:07,360 Speaker 1: you look at the more structural forces at work, that 195 00:10:07,480 --> 00:10:10,920 Speaker 1: could be a little bit of a downside. UM. So 196 00:10:11,120 --> 00:10:13,760 Speaker 1: that is, you know, you're looking at inflation, prognosis and 197 00:10:13,800 --> 00:10:17,440 Speaker 1: so forth. So overall, that seventeen and a half multiple 198 00:10:17,520 --> 00:10:21,240 Speaker 1: seems reasonably fair to us, and that's what we're saying 199 00:10:21,280 --> 00:10:24,920 Speaker 1: that for the next round months it stays where it's at. UM. 200 00:10:24,960 --> 00:10:27,800 Speaker 1: I would be recommending a little bit of an underweight 201 00:10:27,840 --> 00:10:30,720 Speaker 1: position to your neutral at this stage, given the next 202 00:10:30,960 --> 00:10:33,400 Speaker 1: couple of quarters could be a little bit shaky, as 203 00:10:33,400 --> 00:10:36,439 Speaker 1: I said earlier. So you know, if you have a 204 00:10:37,440 --> 00:10:40,600 Speaker 1: fifty percent neutral allocation to equity, maybe this is the 205 00:10:40,679 --> 00:10:43,240 Speaker 1: time you take some profits of the table markets are 206 00:10:43,320 --> 00:10:47,720 Speaker 1: up fifteen sixt and reallocate or keep some extra money 207 00:10:48,080 --> 00:10:52,640 Speaker 1: in cash. So in your scenario, in your outlook for 208 00:10:52,760 --> 00:10:55,160 Speaker 1: the markets, how aggressive do you think the Fed is 209 00:10:55,200 --> 00:10:57,480 Speaker 1: going to be and how aggressive do you think they 210 00:10:57,520 --> 00:11:00,480 Speaker 1: need to be to kind of support your outlook. So 211 00:11:00,520 --> 00:11:02,440 Speaker 1: I think there is a little bit of a disconnect 212 00:11:02,480 --> 00:11:04,960 Speaker 1: in terms of what the FED futures market is saying 213 00:11:05,120 --> 00:11:07,600 Speaker 1: and what the reality is. You know, you look at 214 00:11:07,600 --> 00:11:11,400 Speaker 1: the numbers, especially from the consumers coming in yesterday today. 215 00:11:11,840 --> 00:11:14,880 Speaker 1: You know, yesterday's the revision on the GDP side. You know, 216 00:11:14,920 --> 00:11:17,680 Speaker 1: you see the consumer spending number at four point seven 217 00:11:18,000 --> 00:11:21,480 Speaker 1: multi year high. This morning we saw the core pc 218 00:11:21,640 --> 00:11:24,480 Speaker 1: E number, you know, inching a little bit upwards. I 219 00:11:24,520 --> 00:11:29,559 Speaker 1: think the FED has has to act given the Jackson 220 00:11:29,559 --> 00:11:32,560 Speaker 1: Old speech and also the preemptive insurance rate cut that 221 00:11:32,600 --> 00:11:36,319 Speaker 1: they started the July meeting with UM so they probably 222 00:11:36,320 --> 00:11:39,960 Speaker 1: go for a cut here in September meeting. But after that, 223 00:11:40,040 --> 00:11:42,840 Speaker 1: I think the incoming data dictates and um, you know, 224 00:11:42,880 --> 00:11:45,200 Speaker 1: our viewers to rate cuts for the next twelve months, 225 00:11:45,240 --> 00:11:47,800 Speaker 1: which is a little bit uh, you know, not as 226 00:11:47,800 --> 00:11:51,280 Speaker 1: aggressive at what the STEAD is expecting. And primarily our 227 00:11:51,440 --> 00:11:54,920 Speaker 1: take is dependent on the fact that we see consuming 228 00:11:54,960 --> 00:11:58,040 Speaker 1: a much better health than what the FED is looking at. 229 00:11:58,080 --> 00:12:00,960 Speaker 1: I think the FED is very myopically looking at and 230 00:12:01,120 --> 00:12:05,280 Speaker 1: it's maybe not asthmiopic, but they're really concerned about the 231 00:12:05,320 --> 00:12:08,440 Speaker 1: overseas market. You know, what's the other central banks doing 232 00:12:08,800 --> 00:12:12,520 Speaker 1: the manufacturing slump in the global economy, and that's creating 233 00:12:12,559 --> 00:12:15,040 Speaker 1: some level of anxiety. On top of that the trade 234 00:12:15,360 --> 00:12:19,000 Speaker 1: war that has the potential of really you know, having 235 00:12:19,040 --> 00:12:21,880 Speaker 1: a second, a third derivative effect that no one really 236 00:12:21,920 --> 00:12:24,720 Speaker 1: has the policy measures to counteract. So I think that's 237 00:12:24,840 --> 00:12:27,040 Speaker 1: really where the FED comes into play. But we still 238 00:12:27,080 --> 00:12:29,840 Speaker 1: think of this as a sort of an insurance policy 239 00:12:29,880 --> 00:12:32,600 Speaker 1: cut phase. So two to three rate cuts or all 240 00:12:32,720 --> 00:12:37,040 Speaker 1: similar to and not really start off an easing cycle, 241 00:12:37,120 --> 00:12:39,679 Speaker 1: which would be two thousand, two thousand two or two 242 00:12:39,720 --> 00:12:43,080 Speaker 1: thousand eight. Deepa poor thank you so much for being 243 00:12:43,080 --> 00:12:45,760 Speaker 1: with us. Debak Pouri is chief investment officer for the 244 00:12:45,760 --> 00:12:48,360 Speaker 1: America's at Deutsche Bank Wealth Management joining us here in 245 00:12:48,360 --> 00:12:52,360 Speaker 1: our Bloomberg Inactive broker studios, talking about a bit of 246 00:12:52,440 --> 00:12:55,640 Speaker 1: cautiousness heading into the next few months. Right now, we're 247 00:12:55,640 --> 00:12:58,400 Speaker 1: seeing a bit of cautiousness clawing back some of the 248 00:12:58,440 --> 00:13:01,679 Speaker 1: earlier games that we saw in the US equities nazdac 249 00:13:01,760 --> 00:13:04,960 Speaker 1: up now just four basis points, so almost flat on 250 00:13:05,000 --> 00:13:07,800 Speaker 1: the day after starting solidly in the green. We are 251 00:13:07,840 --> 00:13:11,200 Speaker 1: seeing bond yields coming off their earlier highs as well. 252 00:13:11,240 --> 00:13:13,880 Speaker 1: It seems like people are getting a little more skeptical 253 00:13:14,040 --> 00:13:32,640 Speaker 1: ahead of trade talks this weekend. Art investing should it 254 00:13:32,720 --> 00:13:35,760 Speaker 1: be a part of your portfolio? Our next guest thinks 255 00:13:35,760 --> 00:13:38,319 Speaker 1: maybe it should be. Dr Carvey Manus. He is an 256 00:13:38,400 --> 00:13:41,960 Speaker 1: art collector, board member of the namesake and the namesake 257 00:13:42,000 --> 00:13:44,400 Speaker 1: of the Manace Art and Education Center at the Nassau 258 00:13:44,440 --> 00:13:47,480 Speaker 1: County Museum of Art. Dr Manis, thanks so much for 259 00:13:47,600 --> 00:13:51,560 Speaker 1: joining us here in a Bloomberg Interactive broker studio. So again, 260 00:13:52,080 --> 00:13:53,520 Speaker 1: we've heard about it from time, like when I think 261 00:13:53,520 --> 00:13:55,280 Speaker 1: about investing in art, I think about these big hedge 262 00:13:55,320 --> 00:13:57,760 Speaker 1: fund managers going out and spending you know, gazillions of 263 00:13:57,800 --> 00:13:59,920 Speaker 1: dollars on art. Do you think it should be part 264 00:14:00,080 --> 00:14:04,640 Speaker 1: of maybe the average investors portfolio. Well, thank you for 265 00:14:04,640 --> 00:14:07,600 Speaker 1: inviting me, and uh, I think it's a good a 266 00:14:07,600 --> 00:14:09,880 Speaker 1: good investment. As a matter of fact, that the Wall 267 00:14:09,880 --> 00:14:13,600 Speaker 1: Street Journal came out a couple of months ago stating 268 00:14:13,640 --> 00:14:16,319 Speaker 1: that art was the best investment for two thousand eighteen. 269 00:14:17,040 --> 00:14:20,120 Speaker 1: Art work was up uh ten point six percent while 270 00:14:20,160 --> 00:14:24,240 Speaker 1: the SMP was down five And through the years, art 271 00:14:24,280 --> 00:14:27,000 Speaker 1: has been quite a good investment. I've been collecting for 272 00:14:27,240 --> 00:14:30,880 Speaker 1: over forty years and I've I've purchased pieces that were 273 00:14:31,280 --> 00:14:34,680 Speaker 1: let's say one thousand, five thousand, ten thousand, and they've 274 00:14:34,760 --> 00:14:40,160 Speaker 1: increased twenty and thirtyfold. And during uh good times, people 275 00:14:40,160 --> 00:14:43,040 Speaker 1: have money and they can they can buy art. And 276 00:14:43,040 --> 00:14:45,760 Speaker 1: and if you look at the graph of prices of art, 277 00:14:46,000 --> 00:14:49,080 Speaker 1: it continues to rise. Very rarely does it go down. 278 00:14:49,160 --> 00:14:51,560 Speaker 1: All right, let's let's start with how you got into 279 00:14:51,560 --> 00:14:55,160 Speaker 1: this in the first place. You're an orthopedic surgeon by day, 280 00:14:56,360 --> 00:14:59,440 Speaker 1: investor by night, and then perhaps if you have a 281 00:14:59,480 --> 00:15:03,000 Speaker 1: few then your back at your carpentry roots. So how 282 00:15:03,000 --> 00:15:05,680 Speaker 1: did you get into this sort of art in casting world? Well, 283 00:15:05,760 --> 00:15:08,480 Speaker 1: I always love art. As a as a child, I 284 00:15:08,480 --> 00:15:11,600 Speaker 1: would my father would take me to the Brooklyn Museum. 285 00:15:11,640 --> 00:15:13,520 Speaker 1: And uh, I I lived in a kind of a 286 00:15:13,600 --> 00:15:17,840 Speaker 1: rough area, a rough neighborhood. It was Crown Heights, and uh, 287 00:15:17,880 --> 00:15:20,960 Speaker 1: and my friends were not interested in museums. Nobody around 288 00:15:21,000 --> 00:15:23,720 Speaker 1: they was interested in museums except when my father would 289 00:15:23,760 --> 00:15:26,800 Speaker 1: take me. I loved looking around at the old Masters 290 00:15:26,840 --> 00:15:29,640 Speaker 1: and the Impressionists and and and the different paintings. I 291 00:15:29,680 --> 00:15:32,640 Speaker 1: just loved art. And when I went to college, I 292 00:15:33,120 --> 00:15:35,720 Speaker 1: was a pre med major, but I actually majored in 293 00:15:35,840 --> 00:15:39,360 Speaker 1: art history. So I took a lot of art history classes. Uh. 294 00:15:39,480 --> 00:15:42,600 Speaker 1: Then when I finished medical school and I was able 295 00:15:42,640 --> 00:15:47,720 Speaker 1: to save a few shekels, I started buying art. So 296 00:15:47,840 --> 00:15:53,720 Speaker 1: how would you suggest that someone gets started in the 297 00:15:53,880 --> 00:15:58,160 Speaker 1: art business and the kind of art investing in art? Okay, 298 00:15:58,240 --> 00:16:00,560 Speaker 1: that's a very good question. There are many anyways to 299 00:16:00,720 --> 00:16:03,240 Speaker 1: buy art. You can buy art at the auctions, you 300 00:16:03,280 --> 00:16:06,960 Speaker 1: can buy at galleries art fairs, you can buy online. Now, 301 00:16:07,240 --> 00:16:10,680 Speaker 1: buying online is is a very good venue. Uh. And 302 00:16:10,720 --> 00:16:13,000 Speaker 1: you don't have to spend a lot of money. Of course, 303 00:16:13,040 --> 00:16:15,400 Speaker 1: you can spend hundreds of millions like some of the 304 00:16:15,480 --> 00:16:19,880 Speaker 1: Matisse and Picassos. And actually, couldn't excuse me that you 305 00:16:19,960 --> 00:16:23,040 Speaker 1: who bought that the Da Vinci looked like that person 306 00:16:24,000 --> 00:16:27,920 Speaker 1: a little bit back at my records. Anyway, carryout, so 307 00:16:28,000 --> 00:16:31,880 Speaker 1: you can buy a lithograph. A lithograph, let's say, from Chicalo, Picasso, 308 00:16:32,000 --> 00:16:35,520 Speaker 1: famous artists that I just happened to mention, could be 309 00:16:35,520 --> 00:16:39,280 Speaker 1: between one thousand and a hundred thousand. So if you 310 00:16:39,360 --> 00:16:41,720 Speaker 1: have a you know, just a few thousand dollars to invest, 311 00:16:42,160 --> 00:16:45,920 Speaker 1: buy a litho from one of the famous artists. Now, Uh, 312 00:16:46,200 --> 00:16:49,120 Speaker 1: there are certain parts of an areas of art that 313 00:16:49,280 --> 00:16:52,600 Speaker 1: go up faster than other areas. So we have the 314 00:16:52,600 --> 00:16:55,560 Speaker 1: old masters that increase in value maybe four or five 315 00:16:55,600 --> 00:16:58,720 Speaker 1: percent a year. We have the modern artists like Picasso 316 00:16:58,920 --> 00:17:02,440 Speaker 1: and Uh and Jay and Dolly that increase in value 317 00:17:02,680 --> 00:17:05,280 Speaker 1: I don't know, six seven, eight percent per year. And 318 00:17:05,320 --> 00:17:08,439 Speaker 1: then you have the contemporary. The contemporary market is hot, 319 00:17:08,480 --> 00:17:11,560 Speaker 1: as am I llowed to say hell and say that 320 00:17:12,240 --> 00:17:15,359 Speaker 1: is really hot. And we have artists like Damien Hurst 321 00:17:15,400 --> 00:17:20,280 Speaker 1: and Jeff Coon's and especially well Walhole Lichtenstein. The pop 322 00:17:20,359 --> 00:17:23,840 Speaker 1: artists are still very hot, but the graffiti artists are 323 00:17:23,960 --> 00:17:31,359 Speaker 1: doing amazingly well. Artists like Basku, Yacht, Keith, Harry, Kenny Scharff, Uh, 324 00:17:31,400 --> 00:17:35,199 Speaker 1: and now fellow called cause k A W S they 325 00:17:35,200 --> 00:17:38,240 Speaker 1: are so hot. Uh. You buy a piece now and 326 00:17:38,400 --> 00:17:40,960 Speaker 1: within a year or two it they will definitely increase 327 00:17:41,000 --> 00:17:43,200 Speaker 1: in value. So if you if it, let's say it's 328 00:17:43,240 --> 00:17:47,040 Speaker 1: not one of the top names. How do you determine 329 00:17:47,080 --> 00:17:51,920 Speaker 1: whether something's good? Also a good question. First of all, 330 00:17:51,920 --> 00:17:54,199 Speaker 1: you're gonna this is a collection, and you have to 331 00:17:54,240 --> 00:17:58,119 Speaker 1: really like what you buy. You just can't buy because 332 00:17:58,160 --> 00:18:00,480 Speaker 1: you think it's an investment. You're gonna have to hold 333 00:18:00,520 --> 00:18:03,080 Speaker 1: onto these pieces for a while. It's not a flip 334 00:18:03,320 --> 00:18:06,600 Speaker 1: type of thing. Let's say like real estate or or stocks. 335 00:18:07,320 --> 00:18:08,919 Speaker 1: You have to hold onto it so you're gonna live 336 00:18:08,960 --> 00:18:10,960 Speaker 1: with it. So you have to find a piece that 337 00:18:11,000 --> 00:18:14,520 Speaker 1: you really like, uh, the color of the design, whatever, 338 00:18:14,760 --> 00:18:17,880 Speaker 1: a piece that you like. Then and then as far 339 00:18:17,920 --> 00:18:21,119 Speaker 1: as I'm sorry, what what I but how did you know? 340 00:18:22,119 --> 00:18:24,439 Speaker 1: I was thinking? I'm just thinking about you know, if 341 00:18:24,560 --> 00:18:27,600 Speaker 1: you ask, you asked the dealer, you you asked the 342 00:18:27,640 --> 00:18:31,359 Speaker 1: auction house, You get prices, you do due diligence. You 343 00:18:31,440 --> 00:18:35,359 Speaker 1: do your due diligence. Go online, put the artist name in. 344 00:18:35,640 --> 00:18:38,680 Speaker 1: Let's say the artist is John Smith. Put it online 345 00:18:38,840 --> 00:18:41,680 Speaker 1: and you'll see the prices uh if he's sold in 346 00:18:42,000 --> 00:18:44,920 Speaker 1: galleries and auctions. But if you if you're talking about 347 00:18:44,920 --> 00:18:48,360 Speaker 1: an up and coming artist that has not had any 348 00:18:48,440 --> 00:18:53,240 Speaker 1: UH sales at auctions or or major galleries, then it's difficult. 349 00:18:53,520 --> 00:18:57,320 Speaker 1: Then it's a crapshoot. But I try to buy like stocks. 350 00:18:57,320 --> 00:19:00,879 Speaker 1: I try to buy blue chip artists and UH and 351 00:19:00,880 --> 00:19:04,040 Speaker 1: and and occasionally I'll buy like an overd uh what 352 00:19:04,440 --> 00:19:06,680 Speaker 1: did they call us? The pink sheets? Occasionally I'll buy 353 00:19:06,840 --> 00:19:09,520 Speaker 1: an artist like on a pink sheet. But that's then 354 00:19:09,560 --> 00:19:11,520 Speaker 1: you're taking a risk. So all right, how about for 355 00:19:11,560 --> 00:19:15,119 Speaker 1: someone like me with little too absolutely no experience, how 356 00:19:15,160 --> 00:19:18,440 Speaker 1: do I spot fakes? Or is that a risk that 357 00:19:18,480 --> 00:19:20,280 Speaker 1: I have to really deal with something that's just you know, 358 00:19:20,280 --> 00:19:24,320 Speaker 1: it's it's not it's a fake, it's not authentic. Well, 359 00:19:24,480 --> 00:19:29,159 Speaker 1: Thomas Hoving, the director of the Modern Art Museum UH, 360 00:19:29,200 --> 00:19:32,919 Speaker 1: said that of the art and museums are fake. So 361 00:19:32,960 --> 00:19:35,320 Speaker 1: it's very hard to really stay away from fakes. But 362 00:19:35,680 --> 00:19:38,280 Speaker 1: what you need is provenance. You buy a piece, and 363 00:19:38,320 --> 00:19:41,200 Speaker 1: you need the papers from the gallery, from the auction, 364 00:19:42,080 --> 00:19:46,360 Speaker 1: provenance that this is an authentic piece. Where is the 365 00:19:46,440 --> 00:19:50,760 Speaker 1: bid coming from? That keeps prices continually marching higher. Is 366 00:19:50,800 --> 00:19:53,840 Speaker 1: there sort of the Chinese buyer that's been coming in 367 00:19:53,960 --> 00:19:56,960 Speaker 1: or the European buyer, or is it you know, everywhere, 368 00:19:56,960 --> 00:19:59,439 Speaker 1: And just the more that it becomes sort of you know, 369 00:19:59,680 --> 00:20:05,080 Speaker 1: pop pularised online, etcetera, the more everything is worth well, 370 00:20:05,160 --> 00:20:08,440 Speaker 1: you you have people who buy art who are very 371 00:20:08,480 --> 00:20:11,360 Speaker 1: wealthy and it's kind of a prestige type of thing. 372 00:20:12,320 --> 00:20:15,000 Speaker 1: Uh So that that pushes the prices up as well. 373 00:20:15,240 --> 00:20:19,880 Speaker 1: But there are more museums opening up every year, more 374 00:20:19,920 --> 00:20:23,720 Speaker 1: people are educated, more people are going to museums every year, 375 00:20:24,320 --> 00:20:28,040 Speaker 1: and people want to you know, have art in their 376 00:20:28,080 --> 00:20:31,280 Speaker 1: in their life. It's beautiful to be surrounded by, you know, 377 00:20:31,320 --> 00:20:34,280 Speaker 1: wonderful pieces of art. Besides the fact that it's a 378 00:20:34,359 --> 00:20:37,080 Speaker 1: very good investment. So if I go to an auction, 379 00:20:37,160 --> 00:20:39,399 Speaker 1: just real quickly, what do I need to know? Do 380 00:20:39,480 --> 00:20:44,880 Speaker 1: I just wave my little paddle when I like something? Well, yeah, 381 00:20:44,920 --> 00:20:51,880 Speaker 1: I guess no. You that's a big paddle, okay, but 382 00:20:52,119 --> 00:20:56,280 Speaker 1: uh you are that you look before you bid? You 383 00:20:56,320 --> 00:20:58,800 Speaker 1: have to you look up the artists and the auction 384 00:20:59,359 --> 00:21:02,479 Speaker 1: catalog will have a low estimate and a high estimate, 385 00:21:03,040 --> 00:21:06,000 Speaker 1: so they they do a lot of the due diligence 386 00:21:06,000 --> 00:21:09,479 Speaker 1: for you. Uh. Let's say a piece is estimated between 387 00:21:09,480 --> 00:21:12,560 Speaker 1: ten and twenty thousand, so you know, you you look 388 00:21:12,560 --> 00:21:15,399 Speaker 1: it up and and and online and see if this is, uh, 389 00:21:15,640 --> 00:21:18,280 Speaker 1: you know, within your price range. And if you see 390 00:21:18,320 --> 00:21:20,480 Speaker 1: if it's you think it's fair. And you could call 391 00:21:20,680 --> 00:21:24,120 Speaker 1: the auction or the gallery and ask for previous prices 392 00:21:24,240 --> 00:21:27,320 Speaker 1: and asked them how they came up with this particular estimate. 393 00:21:27,960 --> 00:21:30,080 Speaker 1: Dr Harvey Mannus, thank you so much for spending time 394 00:21:30,080 --> 00:21:34,600 Speaker 1: with us. My book collected. We're going to get there. 395 00:21:34,640 --> 00:21:37,400 Speaker 1: Don't worry. Dr Harvey man This is an art collector 396 00:21:37,440 --> 00:21:39,760 Speaker 1: of board member and the namesake of the Mannis Art 397 00:21:39,760 --> 00:21:42,360 Speaker 1: and Educations that are at the Nassau County Museum of Art. 398 00:21:42,440 --> 00:21:45,520 Speaker 1: And he has a book collecting Art for Pleasure and 399 00:21:45,680 --> 00:21:48,400 Speaker 1: a profit that he is holding up and you can 400 00:21:48,560 --> 00:22:07,000 Speaker 1: find it on Amazon and others. Hurricane Dorian continues to 401 00:22:07,080 --> 00:22:09,959 Speaker 1: bear down on the state of Florida, expected to make 402 00:22:10,080 --> 00:22:13,600 Speaker 1: landfall perhaps Monday of next week. The question really is 403 00:22:13,760 --> 00:22:17,560 Speaker 1: where will it make landfall. To help us get the latest, 404 00:22:17,600 --> 00:22:21,400 Speaker 1: we welcome Matthew Polozola, Senior annalys covering Property and Casualty 405 00:22:21,400 --> 00:22:23,840 Speaker 1: insurance for Bloomberg Intelligency joints us here in our Bloomberg 406 00:22:23,880 --> 00:22:27,240 Speaker 1: Interactive Broker studio and Brian Sullen, Energy and Commodities reporter 407 00:22:27,280 --> 00:22:29,520 Speaker 1: for Bloomberg News and our Bloomberg one oh six one 408 00:22:29,680 --> 00:22:32,639 Speaker 1: studio in Boston. Brian, let's start with you. Can you 409 00:22:32,680 --> 00:22:35,080 Speaker 1: just give us the latest on what we know about 410 00:22:35,200 --> 00:22:38,240 Speaker 1: the storm. So, the storm is um on the verge 411 00:22:38,240 --> 00:22:40,000 Speaker 1: of becoming a Category three, which will make it a 412 00:22:40,000 --> 00:22:42,719 Speaker 1: major hurricane, and it is potentially going to be a 413 00:22:42,720 --> 00:22:45,480 Speaker 1: category four when it finally gets to the Florida coast 414 00:22:45,560 --> 00:22:50,600 Speaker 1: um late Monday early Tuesday. Right now, the current thinking 415 00:22:50,680 --> 00:22:52,879 Speaker 1: is that it will be somewhere between Fort Lauderdale and 416 00:22:52,920 --> 00:22:58,920 Speaker 1: Port Lucy in Florida's um southeast coast. So, Matthew, given 417 00:22:58,920 --> 00:23:01,000 Speaker 1: the fact that you focus on insurance companies and that 418 00:23:01,000 --> 00:23:04,160 Speaker 1: they're expected to have potentially billions of dollars of losses 419 00:23:04,840 --> 00:23:08,400 Speaker 1: with this hurricane, I'm wondering, where do you see which 420 00:23:08,400 --> 00:23:10,719 Speaker 1: companies are going to be most affected? Which what are 421 00:23:10,720 --> 00:23:15,160 Speaker 1: you watching? Sure? So, the market share of homeowners insurance 422 00:23:15,160 --> 00:23:19,919 Speaker 1: in Florida is mostly dominated by smaller regional companies, large 423 00:23:20,240 --> 00:23:24,160 Speaker 1: mutual non public insurance companies, and the state run insurance 424 00:23:24,160 --> 00:23:27,520 Speaker 1: company so the large national companies like A I G. 425 00:23:27,760 --> 00:23:31,439 Speaker 1: Chub Um, All State Progressive, they will have exposure, but 426 00:23:31,480 --> 00:23:33,080 Speaker 1: they're kind of in the bottom half of the top 427 00:23:33,119 --> 00:23:35,639 Speaker 1: ten of market share. Not only that, but they're pretty 428 00:23:35,640 --> 00:23:39,680 Speaker 1: significantly protected by reinsurance. So in the event of a really, 429 00:23:39,720 --> 00:23:42,600 Speaker 1: really large storm, it's probably the smaller regional companies who 430 00:23:42,640 --> 00:23:46,480 Speaker 1: are most in jeopardy. So, Brian, I guess the question 431 00:23:46,520 --> 00:23:48,800 Speaker 1: is if comes across as it makes landfall as a 432 00:23:48,800 --> 00:23:52,399 Speaker 1: category for obviously major, major storm. I know one of 433 00:23:52,400 --> 00:23:54,600 Speaker 1: the things I've been reading about and hearing about this 434 00:23:54,600 --> 00:23:56,720 Speaker 1: storm is kind of the the speed at which the 435 00:23:56,800 --> 00:23:59,080 Speaker 1: storm is moving, i e. It's not going very fast. 436 00:23:59,080 --> 00:24:01,520 Speaker 1: So that suggest said there could be some significant damage. 437 00:24:01,600 --> 00:24:04,320 Speaker 1: Well what are you hearing? Um, Yeah, So there's two 438 00:24:04,320 --> 00:24:05,800 Speaker 1: things that are gonna happen. One is it's going to 439 00:24:05,880 --> 00:24:08,919 Speaker 1: come ashore and you're gonna have that that initial burst 440 00:24:08,960 --> 00:24:11,600 Speaker 1: of really intense winds in a small area plus the 441 00:24:11,640 --> 00:24:13,760 Speaker 1: storm surge, and that's gonna cause you most of your 442 00:24:13,800 --> 00:24:16,200 Speaker 1: damage right along the coast. But as you point out, 443 00:24:16,240 --> 00:24:18,360 Speaker 1: then it's gonna stall out and it's gonna sit over 444 00:24:18,400 --> 00:24:20,119 Speaker 1: Florida for maybe a couple of days. And this is 445 00:24:20,160 --> 00:24:24,040 Speaker 1: a situation similar but not exactly the same as what 446 00:24:24,080 --> 00:24:26,400 Speaker 1: happened in Texas with Harvey, where it just came out 447 00:24:26,400 --> 00:24:29,479 Speaker 1: and it just wrung itself out. So, um, I've been 448 00:24:29,520 --> 00:24:32,080 Speaker 1: watching the rainfall totals just keep going up, and right 449 00:24:32,160 --> 00:24:37,080 Speaker 1: now we're in the six to fifteen inch range. This 450 00:24:37,160 --> 00:24:41,080 Speaker 1: is really interesting to me from an insurance point of view, Matt, 451 00:24:41,160 --> 00:24:45,240 Speaker 1: because the more rain there is, the more relief there 452 00:24:45,240 --> 00:24:47,560 Speaker 1: Probably isn't some of these insurance companies right because it 453 00:24:47,600 --> 00:24:51,639 Speaker 1: isn't flood insurance covered by the government and not necessarily 454 00:24:51,680 --> 00:24:53,679 Speaker 1: their per view. Isn't that correct? That is true? So 455 00:24:53,720 --> 00:24:58,400 Speaker 1: the federal government basically backstops most of the private flood insurance. 456 00:24:58,520 --> 00:25:01,320 Speaker 1: There is commercial flood insurance, so you could see private 457 00:25:01,359 --> 00:25:05,439 Speaker 1: companies should UH see some of those losses, but for 458 00:25:05,480 --> 00:25:09,360 Speaker 1: the most part, a lot of flood uh doesn't impact 459 00:25:09,400 --> 00:25:11,960 Speaker 1: these companies. But one thing that I find really interesting, 460 00:25:12,000 --> 00:25:15,360 Speaker 1: so there were some estimates of fifty three billion dollars 461 00:25:15,400 --> 00:25:17,639 Speaker 1: for the potential losses for this storm. Is that correct? 462 00:25:18,000 --> 00:25:21,120 Speaker 1: That that's insured values of where it was aiming towards well? 463 00:25:21,160 --> 00:25:23,199 Speaker 1: But so so, what I'm struggling to understand is just 464 00:25:23,200 --> 00:25:26,240 Speaker 1: in a larger context, these slow moving storms seem to 465 00:25:26,320 --> 00:25:32,000 Speaker 1: be increasingly common. So how do insurance companies change their 466 00:25:32,680 --> 00:25:37,200 Speaker 1: calculus as this increasingly happens? I mean, basically, are our 467 00:25:37,240 --> 00:25:41,440 Speaker 1: insurance premiums going up dramatically as each storm happens? I 468 00:25:41,520 --> 00:25:44,560 Speaker 1: probably say not not as each storm happens, but certainly 469 00:25:44,600 --> 00:25:48,280 Speaker 1: over time. Insurers are definitely reacting to higher catastrophe prone 470 00:25:48,359 --> 00:25:52,360 Speaker 1: areas like California and wildfire and Florida with hurricanes. So 471 00:25:52,680 --> 00:25:55,800 Speaker 1: not only are they pulling back capacity, but they're buying 472 00:25:55,840 --> 00:25:59,720 Speaker 1: more protection for these areas as well. So Brian, Yeah, 473 00:25:59,720 --> 00:26:04,200 Speaker 1: I know you cover commodities for Bloomberg News. What's been 474 00:26:04,400 --> 00:26:08,120 Speaker 1: the projected impact on some of the citrus and other 475 00:26:08,640 --> 00:26:10,919 Speaker 1: you know kind of produce and so on for the 476 00:26:10,920 --> 00:26:13,720 Speaker 1: state of Florida. Um, it could it could get very 477 00:26:13,760 --> 00:26:17,480 Speaker 1: bad um in that situation, especially if um the storm 478 00:26:17,560 --> 00:26:20,920 Speaker 1: kind of drags its way northward up the peninsula. UM. 479 00:26:21,000 --> 00:26:23,199 Speaker 1: You know, the area where it's going to come in 480 00:26:23,280 --> 00:26:27,160 Speaker 1: and make landfall is not necessarily a heavy um citrus producer, 481 00:26:27,240 --> 00:26:30,080 Speaker 1: But uh, that's further north up the peninsula, and as 482 00:26:30,240 --> 00:26:31,919 Speaker 1: as the storm goes up there and you get these 483 00:26:31,920 --> 00:26:35,919 Speaker 1: flooding rains, that that is. UM, it's going to add up, Brian, 484 00:26:36,000 --> 00:26:39,200 Speaker 1: since you cover the weather so well, and I love 485 00:26:39,240 --> 00:26:41,679 Speaker 1: reading your stories because I've always interested in what's going 486 00:26:41,720 --> 00:26:45,000 Speaker 1: to be happening. How much more frequently are we seeing 487 00:26:45,040 --> 00:26:47,800 Speaker 1: these big, slow moving storms that just sort of dump 488 00:26:47,840 --> 00:26:51,120 Speaker 1: a lot of rain and create a whole host of problems. Yeah, 489 00:26:51,160 --> 00:26:53,280 Speaker 1: there's been a lot of discussion back and forth about 490 00:26:53,320 --> 00:26:57,119 Speaker 1: that with UM. People who have study climate change, for instance, 491 00:26:57,119 --> 00:26:59,240 Speaker 1: are saying that these things are becoming more common because 492 00:26:59,240 --> 00:27:02,760 Speaker 1: the jet stream itself is getting stuck. And in Dorian's situation, 493 00:27:02,800 --> 00:27:04,840 Speaker 1: what we're gonna have here is two very large high 494 00:27:04,840 --> 00:27:07,800 Speaker 1: pressure systems, one over the western Atlantic in one over 495 00:27:07,800 --> 00:27:11,400 Speaker 1: the Great Planes in the United States. And because hurricanes 496 00:27:11,400 --> 00:27:14,200 Speaker 1: don't move under their own power, these two two monsters 497 00:27:14,240 --> 00:27:17,399 Speaker 1: basically are gonna pin Dorian down and that's what's going 498 00:27:17,440 --> 00:27:20,400 Speaker 1: to create it and make it such a slow mover. UM. 499 00:27:20,480 --> 00:27:22,680 Speaker 1: And like I said, some people point to climate change 500 00:27:22,720 --> 00:27:24,520 Speaker 1: is saying that, you know, these big high pressure systems 501 00:27:24,520 --> 00:27:28,560 Speaker 1: are getting stuck more often because of UM the problems 502 00:27:28,680 --> 00:27:32,680 Speaker 1: related with that. So, Matthew, you mentioned earlier reinsurance. That's 503 00:27:32,800 --> 00:27:35,600 Speaker 1: one of the many areas of insurance I don't understand, 504 00:27:35,800 --> 00:27:38,840 Speaker 1: um explain to us kind of how the reinsurance market 505 00:27:38,960 --> 00:27:41,560 Speaker 1: works and kind of how that might how they might 506 00:27:41,560 --> 00:27:44,960 Speaker 1: be affected here in Florida. Sure, So it's insurance for 507 00:27:45,119 --> 00:27:47,720 Speaker 1: insurance companies. So like let's say you're all state and 508 00:27:47,720 --> 00:27:50,520 Speaker 1: you write a lot of homeowners insurance in this in Florida, 509 00:27:50,800 --> 00:27:53,280 Speaker 1: you might say you go to a re insurance company, say, 510 00:27:53,280 --> 00:27:55,760 Speaker 1: if we have losses over one billion dollars, you take 511 00:27:55,800 --> 00:27:59,960 Speaker 1: a certain percentage of that reinsurance company. So it's increasing 512 00:28:00,080 --> 00:28:01,959 Speaker 1: looking like this storm is probably gonna be worse than 513 00:28:02,080 --> 00:28:05,240 Speaker 1: last year's Hurricane Michael in terms of insured losses, maybe 514 00:28:05,320 --> 00:28:07,800 Speaker 1: closer to IRMA in two thousand seventeen. So when you 515 00:28:07,800 --> 00:28:12,440 Speaker 1: start to get into those like dollar storm losses, uh, 516 00:28:12,480 --> 00:28:16,960 Speaker 1: it starts to go through the reinsurance coverage of companies. So, Brian, 517 00:28:17,160 --> 00:28:20,800 Speaker 1: how would you rank this season that we have coming 518 00:28:20,880 --> 00:28:23,040 Speaker 1: up in terms of how active the hurricanes are going 519 00:28:23,119 --> 00:28:25,159 Speaker 1: to be? How are people sort of talking about it 520 00:28:25,320 --> 00:28:30,080 Speaker 1: versus previous years. So we're right now we're entering the 521 00:28:30,119 --> 00:28:33,719 Speaker 1: most active period of the hurricane season, and that typically 522 00:28:33,800 --> 00:28:36,200 Speaker 1: happens around this time of year, like say from August 523 00:28:36,240 --> 00:28:39,880 Speaker 1: twenty October one, so we're just getting going. Um, there's 524 00:28:40,040 --> 00:28:43,120 Speaker 1: two more potential storms out in the Atlantic following this one, 525 00:28:43,560 --> 00:28:45,880 Speaker 1: and they may take a similar track. So you know, 526 00:28:45,960 --> 00:28:47,680 Speaker 1: we could be back here in a week or two 527 00:28:47,720 --> 00:28:50,960 Speaker 1: weeks talking again about Florida taking a hit. I wouldn't 528 00:28:50,960 --> 00:28:53,800 Speaker 1: be surprised if that was the case. Um, the early 529 00:28:53,840 --> 00:28:55,600 Speaker 1: part of the season was kind of slow, but you 530 00:28:55,640 --> 00:28:57,840 Speaker 1: can't really judge the rest of the season by what 531 00:28:57,880 --> 00:28:59,560 Speaker 1: happens in the early part of the season, so we 532 00:28:59,600 --> 00:29:02,640 Speaker 1: could be in for a very active period here well. 533 00:29:02,680 --> 00:29:04,840 Speaker 1: And we wish the best to everybody who is in 534 00:29:04,840 --> 00:29:09,600 Speaker 1: the regions that are squarely in the target of Hurricane Dorian. Uh, Matt, 535 00:29:09,600 --> 00:29:11,720 Speaker 1: Paul Zilla, thank you so much for being with us. 536 00:29:11,720 --> 00:29:14,840 Speaker 1: Brian Sullivan, thank you as well, both of them for 537 00:29:14,960 --> 00:29:18,080 Speaker 1: Bloomberg covering from the insurance side as well as the 538 00:29:18,120 --> 00:29:22,400 Speaker 1: weather and commodity side. What we can be expecting definitely, Uh. 539 00:29:22,440 --> 00:29:26,880 Speaker 1: The human aspect is important, honestly, Paul, though, I'm actually 540 00:29:27,120 --> 00:29:31,240 Speaker 1: expecting the debate to emerge once again about the US 541 00:29:31,320 --> 00:29:36,440 Speaker 1: government's program to ensure against flood damage, because it's not 542 00:29:37,320 --> 00:29:40,880 Speaker 1: they don't have enough money to make it sustainable given 543 00:29:41,000 --> 00:29:43,200 Speaker 1: the payouts that we've seen in recent years, and so 544 00:29:43,240 --> 00:29:45,320 Speaker 1: there's going to be a big question of what you 545 00:29:45,400 --> 00:29:47,800 Speaker 1: do with this program. And it always sort of strikes me, 546 00:29:47,920 --> 00:29:50,440 Speaker 1: as you know, the bulk of the of the damage 547 00:29:50,480 --> 00:29:53,440 Speaker 1: gets caused by flooding, and so then it ends up 548 00:29:53,560 --> 00:29:56,480 Speaker 1: squarely in the government's hands. Very interesting. Well, I'm sure 549 00:29:56,480 --> 00:29:59,160 Speaker 1: I'll be talking more about that. Thanks for listening to 550 00:29:59,200 --> 00:30:01,880 Speaker 1: the Bloomberg Piano All podcast. You can subscribe and listen 551 00:30:01,880 --> 00:30:05,200 Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer. 552 00:30:05,440 --> 00:30:08,120 Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm 553 00:30:08,160 --> 00:30:11,040 Speaker 1: Lisa Abram Woyds. I'm on Twitter at Lisa abram woits one. 554 00:30:11,280 --> 00:30:13,880 Speaker 1: Before the podcast, you can always catch us worldwide. I'm 555 00:30:13,880 --> 00:30:14,760 Speaker 1: Bloomberg Radio.