1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,759 Speaker 1: at Bloomberg dot com slash podcast Why. I read something 7 00:00:21,800 --> 00:00:23,720 Speaker 1: a couple of days ago on the Bloomberg terminal that 8 00:00:23,760 --> 00:00:27,080 Speaker 1: really got my attention. The author said, hey, we are 9 00:00:27,280 --> 00:00:30,640 Speaker 1: or we're very close into recession already, but he says 10 00:00:30,800 --> 00:00:34,720 Speaker 1: that's not all bad news. While growth slows, the FED 11 00:00:34,760 --> 00:00:37,360 Speaker 1: will take notice and any pause and raid hikes will 12 00:00:37,440 --> 00:00:40,680 Speaker 1: be a boon to risk assets. That got my attention. 13 00:00:40,720 --> 00:00:42,239 Speaker 1: I said, we gotta get this guy on the air. 14 00:00:42,320 --> 00:00:46,040 Speaker 1: Vince Signarella, global macro strategist for bloom blerg Bloomberg News 15 00:00:46,120 --> 00:00:48,360 Speaker 1: joint us. I will note working from home, he has 16 00:00:48,479 --> 00:00:53,440 Speaker 1: lost forever, his Metro North past, his you know, subway tokens, 17 00:00:53,640 --> 00:00:57,000 Speaker 1: no nothing. It's interesting to see the juxtaposition because you 18 00:00:57,040 --> 00:01:01,360 Speaker 1: have so much respect for Vince and his halls. Um, 19 00:01:01,520 --> 00:01:03,160 Speaker 1: we were talking about the night he sent out the 20 00:01:03,640 --> 00:01:06,880 Speaker 1: story on the other hand, you feel like he's phoning 21 00:01:06,880 --> 00:01:09,240 Speaker 1: it in as someone who's working from home. He's one 22 00:01:09,240 --> 00:01:11,600 Speaker 1: of the few people that I believe it's one of 23 00:01:11,640 --> 00:01:14,280 Speaker 1: the few people. Yeah, I'm generally a not a fan 24 00:01:14,319 --> 00:01:16,000 Speaker 1: of work from home, but there are some people that 25 00:01:16,040 --> 00:01:19,520 Speaker 1: have earned it, and Vince Signarella has earned the ability 26 00:01:19,600 --> 00:01:21,680 Speaker 1: to work from home, and plus he's got a great 27 00:01:21,680 --> 00:01:23,880 Speaker 1: set up. Vince, talk to us about the Chicago FED 28 00:01:24,200 --> 00:01:27,680 Speaker 1: National Activity Index. What did we see? Yeah, you know, 29 00:01:27,760 --> 00:01:30,399 Speaker 1: it is one of the most overlooked indexes because people 30 00:01:30,440 --> 00:01:32,759 Speaker 1: don't really understand it because it just kind of hovers 31 00:01:32,800 --> 00:01:35,840 Speaker 1: around zero um and it's not sort of fused to 32 00:01:36,000 --> 00:01:38,600 Speaker 1: the hundred that a lot of indexes are. So where 33 00:01:38,600 --> 00:01:41,600 Speaker 1: you see, you know, confidence indexes at just the or 34 00:01:41,640 --> 00:01:44,880 Speaker 1: below signaling recession. People don't really know what to do 35 00:01:44,920 --> 00:01:47,720 Speaker 1: with the Chicago Fed. But on a quarterly basis, it 36 00:01:47,880 --> 00:01:50,680 Speaker 1: is such a great indicator of g d P and 37 00:01:50,720 --> 00:01:53,920 Speaker 1: when it sustains below zero, and it's just dip below zero, 38 00:01:54,000 --> 00:01:56,720 Speaker 1: so it's a little too soon to tell. We need 39 00:01:56,760 --> 00:01:59,400 Speaker 1: a few readings below zero for sure, but if we 40 00:01:59,480 --> 00:02:02,080 Speaker 1: get them a few months and it stays below zero 41 00:02:02,240 --> 00:02:05,880 Speaker 1: on that quarterly basis, it's basically signaling a recession. And 42 00:02:06,280 --> 00:02:07,920 Speaker 1: you know, when you look at some of the numbers, 43 00:02:08,200 --> 00:02:11,800 Speaker 1: you know the Atlanta is calling second quarter growth at 44 00:02:11,840 --> 00:02:16,280 Speaker 1: minus one point six and such. You put it all together, um, 45 00:02:16,320 --> 00:02:18,560 Speaker 1: it very much looks like we're already in a recession. 46 00:02:18,960 --> 00:02:20,960 Speaker 1: And when you see the White House trying to walk 47 00:02:20,960 --> 00:02:23,480 Speaker 1: it back and trying to change the definition of the recession, 48 00:02:23,880 --> 00:02:25,760 Speaker 1: makes you feel like you know you're there. And I 49 00:02:25,800 --> 00:02:29,919 Speaker 1: think the final shot off for me yesterday when Janet Yellen, 50 00:02:29,960 --> 00:02:33,880 Speaker 1: Secretary Yelling called for a press conference on Thursday. When 51 00:02:33,919 --> 00:02:37,520 Speaker 1: we get the GDP numbers on Thursday morning, if I 52 00:02:37,520 --> 00:02:39,400 Speaker 1: had to roll the dice, I'd say she's doing that 53 00:02:39,520 --> 00:02:42,080 Speaker 1: because she wants to try to walk back the fact 54 00:02:42,120 --> 00:02:44,760 Speaker 1: that we're going to see a second negative growth number, 55 00:02:45,320 --> 00:02:47,960 Speaker 1: um and and try to talk the market out of 56 00:02:47,960 --> 00:02:50,240 Speaker 1: the fact that we're in a recession. So so we 57 00:02:50,840 --> 00:02:55,079 Speaker 1: I mean, the Atlanta Fed shows the second quarter was contraction. 58 00:02:55,320 --> 00:02:58,519 Speaker 1: The first quarter we know was also a contraction. Nonetheless, 59 00:02:58,639 --> 00:03:03,079 Speaker 1: unemployment at three and a half percent and nominal GDP 60 00:03:03,520 --> 00:03:07,000 Speaker 1: in double digits. Um, how do you how do you 61 00:03:07,040 --> 00:03:10,480 Speaker 1: put those things together? Well, unemployment first of all, as 62 00:03:10,480 --> 00:03:12,360 Speaker 1: a lagging indu theater so it's going to take about 63 00:03:12,360 --> 00:03:14,000 Speaker 1: two or six months where it could catch up, and 64 00:03:14,040 --> 00:03:16,360 Speaker 1: I think it will. UM. I think is you know, 65 00:03:16,360 --> 00:03:19,440 Speaker 1: if the Fed keeps things going UM and keeps pushing 66 00:03:19,639 --> 00:03:22,000 Speaker 1: the interest rate environment. I mean, look at home sales 67 00:03:22,040 --> 00:03:25,000 Speaker 1: this morning, dropped precipitously and for one of the first 68 00:03:25,040 --> 00:03:27,919 Speaker 1: times we've seen home sales fall in both the South 69 00:03:27,960 --> 00:03:30,600 Speaker 1: and that's where Florida and Miami has been leading, and 70 00:03:30,680 --> 00:03:35,160 Speaker 1: in the Northeast, which has been residient to higher mortgage rates, 71 00:03:35,200 --> 00:03:37,880 Speaker 1: and a big drop in both of those areas. And 72 00:03:38,000 --> 00:03:41,600 Speaker 1: you know, that's where the average consumer feels. Well. The 73 00:03:41,640 --> 00:03:45,080 Speaker 1: average consumer isn't attached to the stock market. They're attached 74 00:03:45,120 --> 00:03:48,160 Speaker 1: to their home, and when home prices start to fall, 75 00:03:48,280 --> 00:03:53,360 Speaker 1: consumers feel poorer and the confidence drops and spending drops, etcetera, etcetera. 76 00:03:53,440 --> 00:03:57,000 Speaker 1: So my point is, I think the Feds already done 77 00:03:57,320 --> 00:04:00,800 Speaker 1: a substantial effort to try to slow inflation. They're gonna 78 00:04:00,840 --> 00:04:03,400 Speaker 1: go seventy five basis points today because it's baked in 79 00:04:03,600 --> 00:04:06,480 Speaker 1: and they'll lose credibility if they don't. UM. But I 80 00:04:06,520 --> 00:04:08,760 Speaker 1: don't think they need to be too aggressive going forward. 81 00:04:08,840 --> 00:04:11,720 Speaker 1: I think they need to let this play out. It 82 00:04:11,800 --> 00:04:15,080 Speaker 1: takes at least six months for monetary policy to work 83 00:04:15,120 --> 00:04:17,320 Speaker 1: its way through the system, and they're not giving it 84 00:04:17,480 --> 00:04:19,800 Speaker 1: enough time. If they go like, you know, hell bent 85 00:04:20,240 --> 00:04:23,520 Speaker 1: without waiting for it to do something and and giving 86 00:04:23,640 --> 00:04:27,320 Speaker 1: the consumer and opportunity to react, all right, So then 87 00:04:27,400 --> 00:04:29,920 Speaker 1: if the seventy five basis points is baked in today 88 00:04:30,040 --> 00:04:33,040 Speaker 1: as the market is implying, I guess it comes down 89 00:04:33,040 --> 00:04:35,240 Speaker 1: to kind of trying to read the tea leaves of 90 00:04:35,279 --> 00:04:37,920 Speaker 1: the tone of the body language of FED Chairman Pal. 91 00:04:37,960 --> 00:04:41,240 Speaker 1: We have Michael McKee uh from Bloomberg down there in 92 00:04:41,320 --> 00:04:44,320 Speaker 1: d C today will tend the press conference. What are 93 00:04:44,360 --> 00:04:47,520 Speaker 1: you looking for from FED Chairman Pal? What message do 94 00:04:47,560 --> 00:04:51,360 Speaker 1: you think he should deliver? You know, I know he's 95 00:04:51,400 --> 00:04:53,359 Speaker 1: going to say that we're still pushing this because we 96 00:04:53,400 --> 00:04:57,240 Speaker 1: still need to find inflation. Inflation is at very high levels. Um, 97 00:04:57,440 --> 00:04:59,960 Speaker 1: we don't want to you know, we don't want to 98 00:05:00,040 --> 00:05:03,000 Speaker 1: back off and lose control of this. I mean to me, 99 00:05:03,320 --> 00:05:05,800 Speaker 1: it's a policy error because they're just reacting to the 100 00:05:05,880 --> 00:05:09,640 Speaker 1: value when they call the transitory. What I would love 101 00:05:09,680 --> 00:05:11,760 Speaker 1: to hear him say is that we're you know, we're 102 00:05:11,839 --> 00:05:14,800 Speaker 1: doing this to try to get FED funds rate. You know, 103 00:05:14,880 --> 00:05:16,960 Speaker 1: close to the three to three and a half percent level, 104 00:05:16,960 --> 00:05:19,440 Speaker 1: which is where we think inflation is going to come 105 00:05:19,480 --> 00:05:23,680 Speaker 1: back to eventually, and that from this point forward, while 106 00:05:23,720 --> 00:05:26,240 Speaker 1: we will be potentially raising rates to get to that 107 00:05:26,320 --> 00:05:28,240 Speaker 1: three and a three and a half percent, we want 108 00:05:28,279 --> 00:05:30,960 Speaker 1: to see how the economy reacts and what the data 109 00:05:31,000 --> 00:05:34,560 Speaker 1: show us. And if there's a sustained drop in inflation 110 00:05:34,680 --> 00:05:38,360 Speaker 1: over the next three months, that's going to effect September's 111 00:05:38,400 --> 00:05:42,440 Speaker 1: policy decision, not just let's just raise another seventy five 112 00:05:42,880 --> 00:05:45,240 Speaker 1: basis points in hell and high water are what the 113 00:05:45,279 --> 00:05:49,000 Speaker 1: economy and doesn't want inflation numbers. Do they ditch forward guidance? 114 00:05:51,000 --> 00:05:53,719 Speaker 1: I don't think they will. Um. They've been relying on 115 00:05:53,800 --> 00:05:57,279 Speaker 1: that so much, and realistically I wish they would. Um. 116 00:05:57,320 --> 00:05:59,600 Speaker 1: You know. I remember being at a at a money 117 00:05:59,640 --> 00:06:03,719 Speaker 1: market here talk with fed's Bullard and he said, I 118 00:06:03,720 --> 00:06:06,520 Speaker 1: don't know why you guys keep calling higher interest rates, 119 00:06:06,520 --> 00:06:08,240 Speaker 1: and I sort of raised my hand and went, it's 120 00:06:08,240 --> 00:06:12,000 Speaker 1: in your bloody dot plot if you would if you 121 00:06:12,040 --> 00:06:14,040 Speaker 1: don't point it out in your dot plot, and that 122 00:06:14,200 --> 00:06:16,320 Speaker 1: that's the forward guide. It's the market to reacting on. 123 00:06:16,400 --> 00:06:18,880 Speaker 1: So I'd love to see the forward guidance go away 124 00:06:19,560 --> 00:06:22,840 Speaker 1: and and markets trade the way they once did is 125 00:06:22,920 --> 00:06:25,560 Speaker 1: based on their their own thoughts of where they think 126 00:06:25,440 --> 00:06:27,840 Speaker 1: things things are going, and it would be helpful. I 127 00:06:28,279 --> 00:06:30,800 Speaker 1: feel like it would be helpful. Also, then you could 128 00:06:30,880 --> 00:06:33,680 Speaker 1: use the market as an input right in terms of 129 00:06:33,839 --> 00:06:37,520 Speaker 1: reaction to economics. Otherwise the markets are just reacting to 130 00:06:37,600 --> 00:06:42,279 Speaker 1: what they expect from the Fed. Vincinerello, global macro strategist 131 00:06:42,440 --> 00:06:45,119 Speaker 1: for Bloomberg News joining us read his stuff I highly 132 00:06:45,120 --> 00:06:48,280 Speaker 1: recommended on the Bloomberg terminal. He's making a case that yeah, 133 00:06:48,320 --> 00:06:49,960 Speaker 1: maybe we're in a recession, but that just means the 134 00:06:50,040 --> 00:06:52,640 Speaker 1: FED can be a little cautious and that's good for 135 00:06:52,920 --> 00:07:02,839 Speaker 1: risk assets. Well, my good friends like Credit Suisse, they're 136 00:07:02,880 --> 00:07:08,560 Speaker 1: replacing their CEO Thomas Gotstein. Got Stein, thank you very much. 137 00:07:08,560 --> 00:07:10,040 Speaker 1: Who was the reason I'm going to ask you from work? 138 00:07:11,760 --> 00:07:14,760 Speaker 1: So he's resigning after a two year tenure mark by scandal, 139 00:07:14,760 --> 00:07:20,000 Speaker 1: turmoil and huge losses Shownalie Bassett, I get that right. Yes, 140 00:07:20,840 --> 00:07:24,080 Speaker 1: that's not where my expertise lies. All morning long, I've 141 00:07:24,080 --> 00:07:26,560 Speaker 1: heard people say, Gottstein, you're not the first, and you 142 00:07:26,560 --> 00:07:30,080 Speaker 1: won't be the scot Stein. If it's an e I 143 00:07:30,600 --> 00:07:34,640 Speaker 1: in German it's always I and also Stein means stone, 144 00:07:34,800 --> 00:07:37,320 Speaker 1: so it's never Steen unless the person came to America 145 00:07:37,600 --> 00:07:39,960 Speaker 1: through l Well, anyways, he's on his way out. He's 146 00:07:39,960 --> 00:07:42,920 Speaker 1: on his way out. Who's coming in a corner? Did 147 00:07:42,960 --> 00:07:46,480 Speaker 1: I say that correctly? Yes? Okay, pretty much. He is 148 00:07:46,520 --> 00:07:49,800 Speaker 1: going to be taking over his chief executive officer of Remember, 149 00:07:49,880 --> 00:07:52,960 Speaker 1: this is a bank that has lost about of its 150 00:07:53,000 --> 00:07:56,440 Speaker 1: stock market value this year. This is a tiny bank 151 00:07:56,480 --> 00:08:00,200 Speaker 1: these days. It's fifteen billion dollars in market a TENCNY 152 00:08:00,280 --> 00:08:03,800 Speaker 1: little zombie. Teen little zombie. It's got it's it's also 153 00:08:03,840 --> 00:08:09,600 Speaker 1: got results out. The worst trading performance this century is 154 00:08:09,640 --> 00:08:11,760 Speaker 1: how Donald Griffin of Bloomberg puts it, which is, you know, 155 00:08:11,760 --> 00:08:14,080 Speaker 1: it sounds dramatic, and it is because again their macro 156 00:08:14,200 --> 00:08:16,960 Speaker 1: had been going on. But other European banks are able 157 00:08:17,000 --> 00:08:19,920 Speaker 1: to hold up some results, but they're also zombies. By 158 00:08:19,920 --> 00:08:22,880 Speaker 1: the way, can we just rewind for a second. You care, Paul, 159 00:08:22,960 --> 00:08:26,360 Speaker 1: You care about Credit Sweets because you used to work 160 00:08:26,400 --> 00:08:29,800 Speaker 1: for the correct CB. You listen, guys, Credit Sweez is 161 00:08:29,840 --> 00:08:31,640 Speaker 1: still one of the biggest wealth managers in the world, 162 00:08:31,920 --> 00:08:35,480 Speaker 1: and so to kind of chip away at this firm 163 00:08:35,640 --> 00:08:38,400 Speaker 1: is a really interesting thing. You have Morgan Stanley interesting 164 00:08:38,480 --> 00:08:41,040 Speaker 1: and during wealth management of City Group trying to get bigger, 165 00:08:41,040 --> 00:08:43,600 Speaker 1: and wealth management you have, and both of those firms 166 00:08:43,600 --> 00:08:45,600 Speaker 1: have huge investment banks already. Well did you think about 167 00:08:45,600 --> 00:08:47,800 Speaker 1: Credit sweee is just a few years ago? Like my 168 00:08:47,840 --> 00:08:49,880 Speaker 1: account has been with Credit Swiss ever since I worked there. 169 00:08:50,559 --> 00:08:53,719 Speaker 1: They got out of the US wealth management business just 170 00:08:53,960 --> 00:08:58,000 Speaker 1: when Morgan Stanley and everybody else was ramping looked around, 171 00:08:58,200 --> 00:09:00,079 Speaker 1: like why would you get out of a business that 172 00:09:00,200 --> 00:09:04,840 Speaker 1: has low capital allocation steady returns only Credit Swiss wood Well, 173 00:09:05,000 --> 00:09:08,360 Speaker 1: not not because they wanted to. They had regulatory issues 174 00:09:08,400 --> 00:09:10,960 Speaker 1: here in the United States which really pushed them out 175 00:09:10,960 --> 00:09:12,720 Speaker 1: of the United States. And so if you look at 176 00:09:12,880 --> 00:09:16,960 Speaker 1: what's happened over the last couple of decades here for 177 00:09:17,000 --> 00:09:21,160 Speaker 1: Credit Swiss is a series of regulatory issues, um and 178 00:09:21,280 --> 00:09:24,800 Speaker 1: mishaps with major clients, most recently Archagos and Green Cell. 179 00:09:25,240 --> 00:09:27,719 Speaker 1: Remember it was just before the pandemic that they were 180 00:09:27,840 --> 00:09:31,880 Speaker 1: ramping up their trading business. They were hiring from major 181 00:09:32,000 --> 00:09:36,360 Speaker 1: rivals across Wall Street, both and trading and investment banking. 182 00:09:36,559 --> 00:09:39,480 Speaker 1: Sale and I don't know the Swiss politics about you 183 00:09:39,559 --> 00:09:42,480 Speaker 1: might know of UBS and Credit Swiss ever getting together 184 00:09:42,520 --> 00:09:46,240 Speaker 1: because yeah, that's for no other reason, just to get bigger. Well, 185 00:09:47,600 --> 00:09:50,320 Speaker 1: then you leave Switzerland with one major bank, right right, 186 00:09:50,360 --> 00:09:53,360 Speaker 1: So it's a complicated question. I think the Swiss government 187 00:09:53,400 --> 00:09:55,959 Speaker 1: is always liked the two. They wanted to protect the two, 188 00:09:55,960 --> 00:09:58,319 Speaker 1: which is why they have such strict capital requirements out 189 00:09:58,320 --> 00:10:01,280 Speaker 1: of Switzerland, some of the toughest in the world. And 190 00:10:01,600 --> 00:10:03,680 Speaker 1: you look at it now and the question about Credit 191 00:10:03,679 --> 00:10:06,400 Speaker 1: Sweets getting bought to save it is a real question. 192 00:10:06,440 --> 00:10:09,120 Speaker 1: The question is whether the UBS merger makes sense or 193 00:10:09,160 --> 00:10:12,960 Speaker 1: whether a different company like a Deutsche Bank or a 194 00:10:12,960 --> 00:10:16,840 Speaker 1: Morgan Stanley, which is not all that likely from all 195 00:10:16,840 --> 00:10:19,400 Speaker 1: of my reporting over the years, but it's something that 196 00:10:19,520 --> 00:10:21,920 Speaker 1: is pan European making more sense for from the Credit 197 00:10:21,920 --> 00:10:23,800 Speaker 1: Sweez People talk about it a lot, but I think 198 00:10:23,800 --> 00:10:26,440 Speaker 1: you're right, not gonna happen. The Swiss government does not 199 00:10:26,559 --> 00:10:28,240 Speaker 1: want that to happen. They want to keep them. They 200 00:10:28,240 --> 00:10:30,240 Speaker 1: want to keep two banks. Look, you don't want to 201 00:10:30,240 --> 00:10:34,520 Speaker 1: be reliant on one, as the German UH natural gas 202 00:10:34,559 --> 00:10:37,439 Speaker 1: situation illustrates. You don't want to be relying on one 203 00:10:37,480 --> 00:10:43,160 Speaker 1: supplier um And also cross border European bank mergers just 204 00:10:43,280 --> 00:10:45,719 Speaker 1: not gonna happen right now. That could happen eventually, but 205 00:10:45,800 --> 00:10:49,440 Speaker 1: probably not another nation picking up credit st banks do 206 00:10:49,559 --> 00:10:52,199 Speaker 1: turn around. Look at Deutsche Bank for example, they shrunk 207 00:10:52,240 --> 00:10:54,480 Speaker 1: to grow and now they're at a place where they're 208 00:10:54,520 --> 00:10:58,000 Speaker 1: performing better and trading and investment banking they're taking on 209 00:10:58,160 --> 00:11:00,439 Speaker 1: less risk. That is what Credit wants to do. Listen, 210 00:11:00,440 --> 00:11:02,960 Speaker 1: it's such an interesting thing because this business model change 211 00:11:02,960 --> 00:11:04,440 Speaker 1: has been talked about for as long as I've been 212 00:11:04,480 --> 00:11:06,760 Speaker 1: on the beat. This is nine years that you know, 213 00:11:06,880 --> 00:11:11,080 Speaker 1: UBS has made this change capital light trading desks for 214 00:11:11,120 --> 00:11:14,680 Speaker 1: the most part, only having investment banking to serve the 215 00:11:14,720 --> 00:11:17,720 Speaker 1: wealth clients. And that's what Credit Swiss now wants to do. 216 00:11:17,840 --> 00:11:20,360 Speaker 1: Now can they pull it off as they're losing so 217 00:11:20,440 --> 00:11:23,160 Speaker 1: much talent? That's the question, all right, what do we 218 00:11:23,200 --> 00:11:29,120 Speaker 1: know about this? Ulric Kerner Kerner our Bloomberg's Marion Halfdemeyer 219 00:11:29,280 --> 00:11:33,960 Speaker 1: calls him a fixer, so he has he has a 220 00:11:34,080 --> 00:11:37,559 Speaker 1: reputation for being technical, decisive, remember credits. We's just presented 221 00:11:37,559 --> 00:11:41,120 Speaker 1: a plan to investors under Thomas Scott Stegn. We were 222 00:11:41,160 --> 00:11:44,640 Speaker 1: talking about it um about the way they would move forward. 223 00:11:44,840 --> 00:11:50,200 Speaker 1: So can he create a more precise laser sharp playbook? 224 00:11:50,240 --> 00:11:52,600 Speaker 1: Here and her reporting is interesting. I mean, he's just 225 00:11:52,640 --> 00:11:56,959 Speaker 1: a formal former US UBS. Guy Kerner, who is currently 226 00:11:57,000 --> 00:12:00,319 Speaker 1: Credit Swiss as asset management has spent twenty years at 227 00:12:00,320 --> 00:12:03,240 Speaker 1: the largest Swiss firms, UBS and Credit Swiss, and the 228 00:12:03,320 --> 00:12:08,680 Speaker 1: musical chairs between UBS and Credit Swiss is consistently interesting, right, interesting, 229 00:12:08,720 --> 00:12:11,400 Speaker 1: So all right, it's more change at Credit Swiss. I 230 00:12:11,440 --> 00:12:13,320 Speaker 1: guess that's yeah. And God's tigned, by the way, just 231 00:12:13,440 --> 00:12:16,840 Speaker 1: came in at the beginning of the pandemic right February. 232 00:12:17,120 --> 00:12:20,359 Speaker 1: He wasn't responsible for our ark goes, he wasn't responsible 233 00:12:20,400 --> 00:12:23,600 Speaker 1: for green sill. But it's like every quarter there's a 234 00:12:23,640 --> 00:12:25,920 Speaker 1: profit warning. He just can't turn it around. Why didn't 235 00:12:25,920 --> 00:12:27,680 Speaker 1: he just do a kitchen sink thing and get it 236 00:12:27,720 --> 00:12:30,400 Speaker 1: all out of the way. I think that's the hope now, yeah, 237 00:12:30,640 --> 00:12:33,840 Speaker 1: for sure. Alright, Just you know, you think about Swiss banking, 238 00:12:34,200 --> 00:12:37,760 Speaker 1: you want to think stability, and you don't necessarily get that. 239 00:12:38,000 --> 00:12:40,240 Speaker 1: I like, I like to think secrecy too, but they 240 00:12:40,240 --> 00:12:41,640 Speaker 1: don't do that anymore. You'd like to think that, like 241 00:12:41,679 --> 00:12:44,240 Speaker 1: the Born Identity, that that kind of stuff is a great, 242 00:12:44,400 --> 00:12:47,240 Speaker 1: great scene and I mean obviously an awesome movie. I 243 00:12:47,280 --> 00:12:52,800 Speaker 1: also like that you think about art I think about 244 00:12:52,840 --> 00:12:55,400 Speaker 1: you know, secret money stashes and all that kind of 245 00:12:55,440 --> 00:13:03,719 Speaker 1: good stuff, and you know international intrigue. It is fed Day, 246 00:13:03,880 --> 00:13:05,920 Speaker 1: but that's a big day here at that Bloomberg. It's 247 00:13:05,920 --> 00:13:08,360 Speaker 1: like Draft Day for ESPN. True if Draft Day were 248 00:13:08,400 --> 00:13:10,760 Speaker 1: once a month. Yeah, exactly. So we're all in, and 249 00:13:10,760 --> 00:13:13,360 Speaker 1: we're all in. That means we get Danielle di Martino 250 00:13:13,440 --> 00:13:16,839 Speaker 1: booth here in our Bloomberg Interactive Broker studio. Danielle CEO 251 00:13:16,880 --> 00:13:19,880 Speaker 1: and chief strategists at Quill Intelligence also spent some time 252 00:13:19,920 --> 00:13:23,280 Speaker 1: at the Federal Reserve and some don't town down in 253 00:13:23,320 --> 00:13:26,839 Speaker 1: Texas or something big, the big book. I love the title, 254 00:13:26,880 --> 00:13:29,920 Speaker 1: will still love the title of your book, fed up exactly. 255 00:13:29,960 --> 00:13:31,960 Speaker 1: That kind of gets you there, all right. Lots of 256 00:13:32,040 --> 00:13:34,920 Speaker 1: ECO data on their terminal E c O go for 257 00:13:35,040 --> 00:13:37,040 Speaker 1: you kids out there with the Bloomberg terminal. One of 258 00:13:37,040 --> 00:13:39,360 Speaker 1: the things that just jumped out of as Danielle pointed 259 00:13:39,360 --> 00:13:41,160 Speaker 1: out as he was coming into the studio, pending home 260 00:13:41,200 --> 00:13:46,400 Speaker 1: sales month on month minus eight point six percent. Census 261 00:13:46,760 --> 00:13:52,239 Speaker 1: was minus one percent. Housing had been such an economic stalwart, 262 00:13:52,360 --> 00:13:56,280 Speaker 1: daniel What about the year over year depending home minus 263 00:13:56,400 --> 00:14:00,600 Speaker 1: ninth YEP minus twenty Louise census were did you sell 264 00:14:00,640 --> 00:14:02,559 Speaker 1: your house? You bought you. I've bought my house that 265 00:14:02,800 --> 00:14:05,400 Speaker 1: literally the top of the market. The only thing that 266 00:14:05,400 --> 00:14:07,600 Speaker 1: makes me feel okay is that I've got a decent 267 00:14:07,640 --> 00:14:10,360 Speaker 1: mortgage rate and you're gonna be there for twenty years. 268 00:14:10,360 --> 00:14:12,720 Speaker 1: You did notice in the retail inventories data that auto 269 00:14:12,760 --> 00:14:16,120 Speaker 1: and auto parts drove the train there at three the 270 00:14:16,120 --> 00:14:20,000 Speaker 1: car is coming, I hope. So from from your mouth 271 00:14:20,040 --> 00:14:23,840 Speaker 1: to Mary Mary Barry, Mary Barry yesterday warned about economic 272 00:14:23,840 --> 00:14:27,520 Speaker 1: conditions weakening. I just wanted the one chip they need 273 00:14:27,520 --> 00:14:30,440 Speaker 1: for my Silverado. Put it in the truck and then 274 00:14:30,520 --> 00:14:32,240 Speaker 1: ship it to me. That's all I want. So what 275 00:14:32,280 --> 00:14:34,240 Speaker 1: does the housing data? What does the eco data? Danielle 276 00:14:34,280 --> 00:14:37,040 Speaker 1: kind of tell you. So, look housing, since we're actually 277 00:14:37,080 --> 00:14:41,360 Speaker 1: talking about the two sectors that lead economies consistently, in 278 00:14:41,440 --> 00:14:45,520 Speaker 1: and out of expansions and contractions, housing and autos always 279 00:14:45,560 --> 00:14:47,600 Speaker 1: take the lead. Those are just the rules of ECO 280 00:14:47,640 --> 00:14:51,640 Speaker 1: one oh one. Because housing has tentacles, right, It affects consumption, 281 00:14:51,760 --> 00:14:54,040 Speaker 1: If it affects what you put in houses, it affects 282 00:14:54,040 --> 00:14:56,280 Speaker 1: your sentiment. If you start hearing people who have been 283 00:14:56,280 --> 00:14:57,920 Speaker 1: all excited my house price is going up this much, 284 00:14:57,920 --> 00:15:00,480 Speaker 1: blah blah blah. Now they're like my house price way up. 285 00:15:00,520 --> 00:15:03,680 Speaker 1: My my property taxes are through the roof, and sales 286 00:15:03,680 --> 00:15:05,720 Speaker 1: are cratering, so you're not as happy anymore. You're not 287 00:15:05,760 --> 00:15:08,920 Speaker 1: going to buy as much stuff. So it has ripple 288 00:15:08,960 --> 00:15:10,720 Speaker 1: effects throughout the rest of the economy. And I think 289 00:15:10,720 --> 00:15:12,200 Speaker 1: that that's what we need to be paying attention to. 290 00:15:12,240 --> 00:15:15,480 Speaker 1: Outside of the spike down that we saw during during COVID, 291 00:15:15,880 --> 00:15:18,120 Speaker 1: this is the lowest data that we've seen since after 292 00:15:18,160 --> 00:15:21,800 Speaker 1: the financial crisis, after the housing bubble burst. By the way, 293 00:15:21,880 --> 00:15:25,240 Speaker 1: my my property taxes, I could put my kid through Harvard. Yes, 294 00:15:25,480 --> 00:15:28,120 Speaker 1: with my property taxes. It's insane. But you're going to 295 00:15:28,160 --> 00:15:32,120 Speaker 1: see property tax foreclosures for older Americans on fixed incomes 296 00:15:33,160 --> 00:15:36,600 Speaker 1: own their homes right terrifying and and I I know 297 00:15:36,680 --> 00:15:38,360 Speaker 1: so many people now have been trying to sell their 298 00:15:38,400 --> 00:15:41,720 Speaker 1: houses but they can't because nobody can get our wants 299 00:15:41,760 --> 00:15:44,600 Speaker 1: to get a mortgage for six percent at these prices, 300 00:15:44,680 --> 00:15:48,520 Speaker 1: and financing is falling through, and new home sales you're 301 00:15:48,560 --> 00:15:53,000 Speaker 1: hearing about cancelations with every single home home. Speaking of cancelations, 302 00:15:53,040 --> 00:15:55,120 Speaker 1: I really want to get to forward guidance. The Fed 303 00:15:55,240 --> 00:15:58,840 Speaker 1: decides today, and yes it's every month, but it's really 304 00:15:59,040 --> 00:16:02,680 Speaker 1: more excitingly lead than it had been for a while. Um, 305 00:16:02,720 --> 00:16:05,360 Speaker 1: not only do we expect seventy five basis points, maybe 306 00:16:05,400 --> 00:16:09,880 Speaker 1: even a hundred, but they could ditch forward guidance. Is 307 00:16:09,920 --> 00:16:13,440 Speaker 1: that a possibility? It's like taken away the pacifier. Yeah, 308 00:16:13,480 --> 00:16:15,440 Speaker 1: it really is. I mean and and as I was 309 00:16:15,480 --> 00:16:17,680 Speaker 1: saying before we went on the air, to me, this 310 00:16:17,720 --> 00:16:21,000 Speaker 1: indicates a lower strike price on the FED poot and 311 00:16:21,120 --> 00:16:23,160 Speaker 1: it means to me that that markets are going to 312 00:16:23,200 --> 00:16:25,320 Speaker 1: be much more reactionary because they're going to assume that 313 00:16:25,360 --> 00:16:27,520 Speaker 1: the FED is going to be much more reactionary to 314 00:16:27,600 --> 00:16:31,760 Speaker 1: the data rather than like one ludes. So because that 315 00:16:31,880 --> 00:16:36,720 Speaker 1: forward guidance implies, it implies a calmness no matter what happens. 316 00:16:36,720 --> 00:16:39,120 Speaker 1: And this is what we plan to do, and we're 317 00:16:39,120 --> 00:16:41,880 Speaker 1: gonna stick to our word, or we're gonna follow leg 318 00:16:41,840 --> 00:16:44,600 Speaker 1: guard down the rabbit hole and get rid of it. Daniel. 319 00:16:44,680 --> 00:16:45,880 Speaker 1: Earlier in the show we had it. We had a 320 00:16:45,920 --> 00:16:47,960 Speaker 1: trader type on and he was kind of making the 321 00:16:48,040 --> 00:16:52,040 Speaker 1: trading call that you know, recession, if we're not in it, 322 00:16:52,080 --> 00:16:54,200 Speaker 1: we're darned close to it. And that's going to give 323 00:16:54,280 --> 00:16:57,400 Speaker 1: reason for the FED to be more cautious going forward. 324 00:16:57,440 --> 00:17:00,760 Speaker 1: That's a positive for risk assets. That was his trading call. 325 00:17:00,880 --> 00:17:03,320 Speaker 1: That's the FED put. Okay, how does that's the assumption 326 00:17:03,360 --> 00:17:06,240 Speaker 1: that the FED put is intact? And we get any 327 00:17:06,280 --> 00:17:09,560 Speaker 1: sense of that today from so I need to pay attention. 328 00:17:09,800 --> 00:17:12,240 Speaker 1: I still think off course, so but I have to 329 00:17:12,240 --> 00:17:14,560 Speaker 1: pay atten well basically, But it's not popular. But I 330 00:17:14,600 --> 00:17:17,720 Speaker 1: think Powell is determined to push through in September. Yeah, 331 00:17:17,880 --> 00:17:22,760 Speaker 1: because going against this is his desire not to be 332 00:17:22,960 --> 00:17:26,359 Speaker 1: and Arthur Burns repeat exactly, he would rather be a 333 00:17:26,400 --> 00:17:31,280 Speaker 1: Paul Volker exactly. That was always his idol. He loved, 334 00:17:31,640 --> 00:17:35,880 Speaker 1: loves Paul Volker. Who doesn't don't didn't We all love 335 00:17:35,880 --> 00:17:39,399 Speaker 1: Paul Volker? But the giant to the extent that he 336 00:17:39,480 --> 00:17:42,159 Speaker 1: can without breaking credit, and you have not seen this 337 00:17:42,240 --> 00:17:46,160 Speaker 1: massive gapping out in how yield spreads to indicate distresses 338 00:17:46,200 --> 00:17:49,919 Speaker 1: like systemic watch out to the extent he doesn't break credit. 339 00:17:49,960 --> 00:17:52,119 Speaker 1: I think he keeps going. I think Powell keep I 340 00:17:52,119 --> 00:17:54,119 Speaker 1: think he goes on September twenty one. So what do 341 00:17:54,160 --> 00:17:56,879 Speaker 1: you think a terminal rate? We're talking about four? I 342 00:17:56,920 --> 00:18:01,720 Speaker 1: heard we've been Tryinhart was saying he thinks five percent 343 00:18:01,880 --> 00:18:04,600 Speaker 1: or more. An unemployment at six percent, now that's an outlier. 344 00:18:04,800 --> 00:18:08,560 Speaker 1: Pending home sales down, you're over your I don't think so. Okay, 345 00:18:08,640 --> 00:18:11,120 Speaker 1: not happening. It'll break the economy. Two and a half 346 00:18:11,400 --> 00:18:15,359 Speaker 1: broke the economy before the crisis. So what do you think? Three? 347 00:18:16,080 --> 00:18:18,480 Speaker 1: And I think we may get to a three handle. 348 00:18:18,560 --> 00:18:21,960 Speaker 1: But again, we've got two trillion dollars more in corporate 349 00:18:21,960 --> 00:18:26,399 Speaker 1: debt than we had last time he attempted this. While cute, 350 00:18:26,560 --> 00:18:30,440 Speaker 1: nobody's talking about quantitative tightening, it's still going on, it 351 00:18:30,720 --> 00:18:33,840 Speaker 1: still ramping up. It's oh my gosh. The conspiracy theorists 352 00:18:33,840 --> 00:18:36,640 Speaker 1: on my Twitter feed are making me nuts. Look, there 353 00:18:36,680 --> 00:18:39,840 Speaker 1: are two dates in which treasuries mature, fifteen of the 354 00:18:39,880 --> 00:18:42,560 Speaker 1: month and the last day of the month. So if 355 00:18:42,600 --> 00:18:44,439 Speaker 1: if there's kind of some some kind of noise in 356 00:18:44,480 --> 00:18:47,480 Speaker 1: between some week, it's because treasuries didn't mature. Get over it. 357 00:18:47,880 --> 00:18:50,840 Speaker 1: What's your Twitter handle? By the way, at DeMartino booth, 358 00:18:50,840 --> 00:18:55,560 Speaker 1: Now you're gonna send more crazy social media. I look 359 00:18:55,560 --> 00:19:00,080 Speaker 1: at I'm looking at euro dollar futures um and to 360 00:19:00,119 --> 00:19:02,199 Speaker 1: see what the market thinks the Fed is going to do. 361 00:19:02,400 --> 00:19:05,399 Speaker 1: And I've been pointed this direction by Kevin Muir. The 362 00:19:05,440 --> 00:19:09,160 Speaker 1: macro tourists love his stuff. Um, he sees a peek 363 00:19:09,280 --> 00:19:11,520 Speaker 1: or euro dollar future show as a peek at around 364 00:19:11,520 --> 00:19:13,920 Speaker 1: three e D and then they come right back down 365 00:19:14,480 --> 00:19:16,800 Speaker 1: in twenty three and twenty four. Is that what we're 366 00:19:16,800 --> 00:19:19,680 Speaker 1: going to see? It depends on who Powell is. That's 367 00:19:19,680 --> 00:19:22,480 Speaker 1: the FED put, right, that is the Fed put, and 368 00:19:22,600 --> 00:19:25,720 Speaker 1: markets are anticipating that already. That's what we're seeing in 369 00:19:25,760 --> 00:19:27,840 Speaker 1: the stock market right now. They're anticipating that rates are 370 00:19:27,880 --> 00:19:31,359 Speaker 1: coming down in twenty three and quickly. And you think 371 00:19:31,880 --> 00:19:35,600 Speaker 1: maybe not so much. Just look, there's a midterm election 372 00:19:35,640 --> 00:19:37,439 Speaker 1: in front of us, there really is, and there's no 373 00:19:37,520 --> 00:19:40,520 Speaker 1: fiscal relief coming. And Powell really does want to prove 374 00:19:40,640 --> 00:19:44,280 Speaker 1: his his medal. He wants to take back his reputation. 375 00:19:44,320 --> 00:19:47,639 Speaker 1: He wants to undo the transitory sin. But does he 376 00:19:47,760 --> 00:19:50,240 Speaker 1: want to make sure that the Democrats don't get too 377 00:19:50,280 --> 00:19:53,200 Speaker 1: slaughtered in the mid terms? I mean, last check, he's 378 00:19:53,240 --> 00:19:56,240 Speaker 1: a Republican, so yeah, so, and he's like the only 379 00:19:56,240 --> 00:19:58,879 Speaker 1: one on the whole board, and he wants to prove 380 00:19:59,000 --> 00:20:01,600 Speaker 1: he's got the veto the ultimate detail power. He wants 381 00:20:01,680 --> 00:20:05,480 Speaker 1: to exert his his his his control over his board, 382 00:20:05,560 --> 00:20:08,119 Speaker 1: and I think he is Wow, alright, good stuff. I 383 00:20:08,119 --> 00:20:10,800 Speaker 1: mean we get Danielle DiMartino booth In Studio brings the 384 00:20:10,880 --> 00:20:14,600 Speaker 1: A game every time. Well, and it's an incredibly dramatic time, right, 385 00:20:15,920 --> 00:20:17,879 Speaker 1: I'm like, oh my gosh, every bit of data, very 386 00:20:17,880 --> 00:20:20,920 Speaker 1: exciting economic geeks, interest rate geeks, we got them here. 387 00:20:21,080 --> 00:20:24,200 Speaker 1: Daniel D. Martino, Booths CEO and chief strategist at quill 388 00:20:24,320 --> 00:20:26,760 Speaker 1: In Intelligence, joining us life here in our Bloomberg Interactive 389 00:20:26,760 --> 00:20:29,880 Speaker 1: Broker studio. The FED released two pm Wall Street Time 390 00:20:30,200 --> 00:20:33,080 Speaker 1: press conference two thirty Wall Street Time. Of course, Bloomberg's 391 00:20:33,080 --> 00:20:37,840 Speaker 1: complete coverage starting at one thirty pm Wall Street Time. 392 00:20:37,880 --> 00:20:43,960 Speaker 1: We cover it because it's important. So it's kind of 393 00:20:44,040 --> 00:20:47,600 Speaker 1: mid June. We've had interest rates pullback really substantially when 394 00:20:47,600 --> 00:20:49,879 Speaker 1: I got the tenure down at two point seven six percent. 395 00:20:49,920 --> 00:20:52,320 Speaker 1: We've had the S and P five you know, rally 396 00:20:52,440 --> 00:20:55,560 Speaker 1: abound eight percent during that time, and so you know, 397 00:20:55,720 --> 00:20:58,240 Speaker 1: kind of dumb money like me, I'm saying, do I 398 00:20:58,359 --> 00:21:00,639 Speaker 1: buy this thing? Is it a dead cat bounce? What 399 00:21:00,680 --> 00:21:03,240 Speaker 1: do I do here? And I know other people are 400 00:21:03,240 --> 00:21:07,400 Speaker 1: out there like me asking those questions, and hopefully Katerina Simonetti, 401 00:21:07,440 --> 00:21:09,960 Speaker 1: who's a senior vice president and private wealth adviser for 402 00:21:10,040 --> 00:21:13,280 Speaker 1: Morgan Stanley, has some some answers there. So, Katarina, how 403 00:21:13,320 --> 00:21:14,879 Speaker 1: are you when you talk to your clients, how are 404 00:21:14,880 --> 00:21:17,600 Speaker 1: you kind of framing this year today, which has been 405 00:21:17,680 --> 00:21:20,800 Speaker 1: brutal but a little bit of a bounce here over 406 00:21:20,800 --> 00:21:23,920 Speaker 1: the last month or so. Well, thank you for having 407 00:21:23,920 --> 00:21:26,480 Speaker 1: me on the show, And you're right, we're looking for 408 00:21:26,520 --> 00:21:30,560 Speaker 1: any type of source for optimism that we can find. 409 00:21:31,520 --> 00:21:33,879 Speaker 1: As much as we want to believe that this is 410 00:21:33,920 --> 00:21:37,239 Speaker 1: the start of the market recovery, most likely this is 411 00:21:37,320 --> 00:21:40,359 Speaker 1: just a bear market rally because what we need to 412 00:21:40,400 --> 00:21:44,200 Speaker 1: see is we need to see significant earnings revisions, lower inflation, 413 00:21:44,720 --> 00:21:48,200 Speaker 1: and the actual pivot and sad strategy before we can 414 00:21:48,240 --> 00:21:50,879 Speaker 1: get excited about this rally. And we don't think that 415 00:21:50,960 --> 00:21:54,640 Speaker 1: we're quite there yet, so for now, we're staying defensive. 416 00:21:54,840 --> 00:22:00,000 Speaker 1: We prefer defensive sectors like healthcare, like utilities, like consumer states, 417 00:22:00,040 --> 00:22:03,639 Speaker 1: than reads to the growth sectors, as difficult as it 418 00:22:03,720 --> 00:22:06,840 Speaker 1: might be, because we all know that investors love their 419 00:22:06,880 --> 00:22:10,240 Speaker 1: growth stocks. We have this love affair with the growth sector. 420 00:22:10,320 --> 00:22:13,240 Speaker 1: It's exciting sector. It's something that we all love to own. 421 00:22:13,600 --> 00:22:18,520 Speaker 1: But for now, our recommendation to our clients, to the 422 00:22:18,600 --> 00:22:21,320 Speaker 1: investors is to stay defensive and to get through the 423 00:22:21,440 --> 00:22:23,639 Speaker 1: end of this year, which most likely is going to 424 00:22:23,720 --> 00:22:28,119 Speaker 1: bring significant further volatility. As we know, continue with the 425 00:22:28,400 --> 00:22:32,720 Speaker 1: team yearnings. Yeah, we've we've really seen the rotation into value, 426 00:22:33,080 --> 00:22:36,600 Speaker 1: although recently UM in terms of E t F flows 427 00:22:36,680 --> 00:22:39,920 Speaker 1: growth has picked back up again. Um, what what is 428 00:22:39,920 --> 00:22:43,639 Speaker 1: it gonna take, Katarina, because Vince Ignarella here at Bloomberg 429 00:22:43,720 --> 00:22:48,359 Speaker 1: has pointed out a lot of UM leading indicators show 430 00:22:48,440 --> 00:22:50,919 Speaker 1: that we could be in or at least headed for 431 00:22:51,280 --> 00:22:54,520 Speaker 1: very soon a recession and at that point he thinks 432 00:22:55,240 --> 00:22:58,640 Speaker 1: the FED has to at least stop, but maybe even 433 00:22:58,680 --> 00:23:02,959 Speaker 1: turn around, and that's good risk assets. Well, absolutely, it 434 00:23:03,000 --> 00:23:06,119 Speaker 1: seems that the equity market is looking ahead to the 435 00:23:06,240 --> 00:23:09,640 Speaker 1: said pivot. The question is at what point isn't going 436 00:23:09,720 --> 00:23:12,439 Speaker 1: to come? And what we're dealing with right now is 437 00:23:12,560 --> 00:23:15,760 Speaker 1: major fears of recession at least, you know, most of 438 00:23:15,880 --> 00:23:19,199 Speaker 1: the the individual investors are convinced that we're going to 439 00:23:19,240 --> 00:23:22,000 Speaker 1: get in in recession of some kind, whether it's going 440 00:23:22,040 --> 00:23:25,160 Speaker 1: to be deep or shallow recession. You know, we are 441 00:23:25,280 --> 00:23:30,120 Speaker 1: in the environment over the historically unprecedented inflation levels that 442 00:23:30,160 --> 00:23:32,960 Speaker 1: we have not seen, you know, for many, many years, 443 00:23:33,000 --> 00:23:35,600 Speaker 1: and this is definitely, you know, a contributing factor to 444 00:23:36,240 --> 00:23:40,439 Speaker 1: the said decision to continue raising rates. We're dealing the 445 00:23:40,480 --> 00:23:44,080 Speaker 1: bowl over labor markets, ongoing to a political risk. There 446 00:23:44,119 --> 00:23:46,560 Speaker 1: are a lot of things that are hitting this market 447 00:23:46,600 --> 00:23:48,840 Speaker 1: all at the same time. And this is not to 448 00:23:48,920 --> 00:23:51,119 Speaker 1: say that there's no end in sight. You know, we 449 00:23:51,320 --> 00:23:55,440 Speaker 1: just are having difficult time getting excited about the growth 450 00:23:55,560 --> 00:23:58,480 Speaker 1: at this point, you know, with this type of inflation 451 00:23:58,520 --> 00:24:02,240 Speaker 1: ary pressures and need to general read additional extra income 452 00:24:02,400 --> 00:24:07,520 Speaker 1: were investors to compensate for high inflation. So, Katarina, you know, 453 00:24:07,800 --> 00:24:11,000 Speaker 1: a lot of retail investors and investors just in general 454 00:24:11,000 --> 00:24:13,280 Speaker 1: have kind of been you know, kind of weaned on 455 00:24:13,280 --> 00:24:17,280 Speaker 1: this sixty forty uh portfolio. But boy, this year that 456 00:24:17,359 --> 00:24:20,680 Speaker 1: got you nowhere because you've got you know, bond returns 457 00:24:20,760 --> 00:24:24,480 Speaker 1: double digit declines and returns and performance that we've never 458 00:24:24,520 --> 00:24:26,639 Speaker 1: seen in some of the corporate bond and even the 459 00:24:26,640 --> 00:24:30,240 Speaker 1: treasury sectors in the bond market. Are you getting a 460 00:24:30,280 --> 00:24:32,159 Speaker 1: sense that you just kind of kind of throw up 461 00:24:32,160 --> 00:24:36,720 Speaker 1: your hands and start buying them here? The sixty portfolio 462 00:24:36,800 --> 00:24:40,080 Speaker 1: has been a stable for many years, and we think 463 00:24:40,119 --> 00:24:42,320 Speaker 1: that it's going to continue being a stable We just 464 00:24:42,480 --> 00:24:46,040 Speaker 1: have to revise our expectations for what we can actually 465 00:24:46,080 --> 00:24:49,120 Speaker 1: earn and portfolio like this UM. And when it comes 466 00:24:49,160 --> 00:24:52,119 Speaker 1: to bonds, yes, I think that that we have to 467 00:24:52,200 --> 00:24:55,800 Speaker 1: be very particular in in what kind of bond sectors 468 00:24:55,800 --> 00:24:58,360 Speaker 1: we're looking at. We have to you know, it's kind 469 00:24:58,359 --> 00:25:01,440 Speaker 1: of gravitate to first quality. But there are a tremendous 470 00:25:01,440 --> 00:25:04,360 Speaker 1: amount of buying opportunities in the bond markets right now 471 00:25:04,480 --> 00:25:07,160 Speaker 1: as bonds you know, are looking to recover a set 472 00:25:07,240 --> 00:25:10,080 Speaker 1: of stocks, uh and uh, you know, we can't give 473 00:25:10,160 --> 00:25:11,639 Speaker 1: up on them. And you know, I think that that 474 00:25:11,840 --> 00:25:13,760 Speaker 1: it was a bit of a wake up pole and 475 00:25:13,800 --> 00:25:16,480 Speaker 1: a shock to a lot of retail investors seeing their 476 00:25:16,520 --> 00:25:19,320 Speaker 1: bonds port folios decline as much as they did. But 477 00:25:19,400 --> 00:25:23,919 Speaker 1: we're encouraging them to stay with their uh sixty foot models, 478 00:25:24,400 --> 00:25:27,960 Speaker 1: if bests where they're at, but take a really hard 479 00:25:28,040 --> 00:25:30,840 Speaker 1: and close look at the quality of bonds that they 480 00:25:30,880 --> 00:25:33,640 Speaker 1: own within these portfolios because it's going to make all 481 00:25:33,680 --> 00:25:38,199 Speaker 1: the difference in the world. So so you're you're just 482 00:25:38,320 --> 00:25:42,480 Speaker 1: looking at UM, investment grade and government securities because a 483 00:25:42,520 --> 00:25:46,000 Speaker 1: lot of people have reached out for higher yield bonds recently, 484 00:25:47,359 --> 00:25:50,760 Speaker 1: well their investment grade, their government securities, but also you 485 00:25:50,800 --> 00:25:54,040 Speaker 1: know they're preferred. There's ideals. We just need to make 486 00:25:54,040 --> 00:25:58,640 Speaker 1: sure that the allocation of these the fixed income access classes, 487 00:25:58,680 --> 00:26:02,040 Speaker 1: but then the folios that are appropriate because you know, 488 00:26:02,119 --> 00:26:04,920 Speaker 1: we want to a lot of investors are not realizing 489 00:26:04,960 --> 00:26:08,720 Speaker 1: that they're taking on some extra risks by incorporating some 490 00:26:08,880 --> 00:26:13,399 Speaker 1: of the the lower quality bonds in the portfolio. And 491 00:26:13,440 --> 00:26:16,000 Speaker 1: this is the time because everything is down, the the 492 00:26:16,119 --> 00:26:20,200 Speaker 1: bond market has been hit, you know, just so significantly 493 00:26:20,280 --> 00:26:22,800 Speaker 1: more than we have seen in many many years, you know, 494 00:26:22,880 --> 00:26:25,280 Speaker 1: so they are buying opportunities where we can pick up 495 00:26:25,359 --> 00:26:28,879 Speaker 1: some of the higher quality fixed income and improve the 496 00:26:28,960 --> 00:26:33,840 Speaker 1: overall quality of the portfolio by doing so. Um And 497 00:26:33,880 --> 00:26:36,159 Speaker 1: when it comes to yield, of course, you know, the 498 00:26:36,240 --> 00:26:39,439 Speaker 1: high yields and preferred make a significant difference. But we 499 00:26:39,480 --> 00:26:42,640 Speaker 1: can also look at the non six income access classes 500 00:26:42,640 --> 00:26:46,440 Speaker 1: and bond alternatives like reads for example. You know, we 501 00:26:46,440 --> 00:26:52,080 Speaker 1: we um incorporate the the higher yielding equities in the 502 00:26:52,119 --> 00:26:55,760 Speaker 1: portfolios in order to to kind of just just balance 503 00:26:55,880 --> 00:26:58,760 Speaker 1: of the risks that we're seeing in six income. All right, 504 00:26:58,840 --> 00:27:02,159 Speaker 1: good stuff, there as all Is. Katerina Simonettie Katarina is 505 00:27:02,160 --> 00:27:05,240 Speaker 1: a senior vice president private wealth adviser with our good 506 00:27:05,240 --> 00:27:12,639 Speaker 1: friends over at Morgan Stanley Teva Pharmaceuticals t e v A. 507 00:27:12,720 --> 00:27:15,560 Speaker 1: The stock is up big today. The company struck a 508 00:27:15,600 --> 00:27:18,160 Speaker 1: deal with US state and local governments to pay more 509 00:27:18,160 --> 00:27:22,280 Speaker 1: than four billion dollars to settle thousands of lawsuits. So 510 00:27:22,359 --> 00:27:25,480 Speaker 1: stock reacting positively to that. Uh. Fortunately today we have 511 00:27:25,520 --> 00:27:29,760 Speaker 1: car Sholtz with us, the CEO of Teva Pharmaceuticals Core. 512 00:27:29,800 --> 00:27:31,719 Speaker 1: Thanks so much for taking the time here. I love 513 00:27:31,760 --> 00:27:34,400 Speaker 1: for you to kind of put into context. Uh, this 514 00:27:34,720 --> 00:27:37,480 Speaker 1: um I guess agreement, this deal with US state and 515 00:27:37,520 --> 00:27:41,440 Speaker 1: local governments, gives us a sense of what it entails. Yeah, 516 00:27:41,440 --> 00:27:44,359 Speaker 1: so it's a thing that's been long in the works, 517 00:27:44,359 --> 00:27:46,680 Speaker 1: she could say. So, we've been negotiating for a long time, 518 00:27:47,280 --> 00:27:50,520 Speaker 1: and the deal basically in jails that we'll be paying 519 00:27:50,600 --> 00:27:55,080 Speaker 1: over a thirteen year period money to the states and subdivisions, 520 00:27:55,600 --> 00:27:58,240 Speaker 1: money that they can use to help people suffering from 521 00:27:58,240 --> 00:28:03,040 Speaker 1: substance abuse, and will also be contributing product which is 522 00:28:03,080 --> 00:28:06,720 Speaker 1: in this case generic version of knock and spray, which 523 00:28:06,760 --> 00:28:09,760 Speaker 1: you can use to save people if they have an 524 00:28:09,760 --> 00:28:14,480 Speaker 1: overdose situation, So those two elements will be contributing, and 525 00:28:14,600 --> 00:28:18,000 Speaker 1: it's something we've negotiated for a long time and we're happy, 526 00:28:18,200 --> 00:28:22,560 Speaker 1: happy to see this resolution and move forward from here. Well, 527 00:28:22,680 --> 00:28:29,040 Speaker 1: why is the opioid pandemic um solely affecting the United States? 528 00:28:29,040 --> 00:28:32,000 Speaker 1: I was living in Germany for the past five years 529 00:28:32,000 --> 00:28:38,040 Speaker 1: and we didn't hear about any opioid overdoses or addictions there. Yeah, 530 00:28:38,080 --> 00:28:40,040 Speaker 1: so that's a good question. I think that the main 531 00:28:40,120 --> 00:28:44,520 Speaker 1: reason is that in most European countries, including Germany for instance, 532 00:28:44,920 --> 00:28:50,320 Speaker 1: you have a national driven healthcare system which encompasses all 533 00:28:50,480 --> 00:28:54,959 Speaker 1: doctors in the system and all patients, all the whole population, 534 00:28:55,440 --> 00:28:59,120 Speaker 1: and there's a very easy, strict way to control any 535 00:28:59,560 --> 00:29:04,000 Speaker 1: script it's written, any script that's received by anybody. So 536 00:29:04,080 --> 00:29:07,560 Speaker 1: if you're a person who needs opioids because you have pain, 537 00:29:08,440 --> 00:29:11,440 Speaker 1: either because you have had an operation, or you're maybe 538 00:29:12,000 --> 00:29:15,440 Speaker 1: terminally cancer or whatever situation, then it's very easy for 539 00:29:15,600 --> 00:29:19,840 Speaker 1: society to keep check on which patient gets which prescription 540 00:29:19,920 --> 00:29:22,880 Speaker 1: from which doctor. And that basically means that the whole 541 00:29:22,920 --> 00:29:26,800 Speaker 1: control system for many years, last twenty thirty years, in 542 00:29:26,840 --> 00:29:31,160 Speaker 1: most European countries have been very strict and easy to implement, 543 00:29:31,480 --> 00:29:35,040 Speaker 1: whereas in the United States, where we have private healthcare 544 00:29:35,360 --> 00:29:38,720 Speaker 1: and where it's much more dispersed and where there's less 545 00:29:39,120 --> 00:29:42,240 Speaker 1: central control in terms of databases and so on on, 546 00:29:42,400 --> 00:29:45,000 Speaker 1: in the prescription, it has been more of a challenge 547 00:29:45,320 --> 00:29:50,080 Speaker 1: to control. Take. On top of that that, the access 548 00:29:50,120 --> 00:29:54,440 Speaker 1: to illegal drugs in the US is much much higher 549 00:29:54,440 --> 00:29:57,120 Speaker 1: than it is in most European countries. The access to 550 00:29:57,240 --> 00:30:00,600 Speaker 1: illegal fence ail meth and fedomin and fedoman on in 551 00:30:00,640 --> 00:30:05,840 Speaker 1: the US is of course very very problematic because so 552 00:30:05,920 --> 00:30:08,520 Speaker 1: easy to get access to either food the internet, you know, 553 00:30:08,640 --> 00:30:12,720 Speaker 1: just buying it online, or food invitation that comes in 554 00:30:12,840 --> 00:30:17,840 Speaker 1: from China, Mexico, Colombians on coor what do you think about, uh, 555 00:30:17,880 --> 00:30:20,520 Speaker 1: you know, after we've been through this pandemic, I'm gonna 556 00:30:20,520 --> 00:30:23,720 Speaker 1: say we've been through it because now you know, seventy 557 00:30:23,720 --> 00:30:26,680 Speaker 1: eight year old man can get COVID and uh, you know, 558 00:30:26,760 --> 00:30:28,880 Speaker 1: barely feel it for five days and he's back in 559 00:30:28,880 --> 00:30:31,520 Speaker 1: the oval office with no problems. How do you see 560 00:30:31,520 --> 00:30:36,440 Speaker 1: it from from your vantage point? So my company, Tea, 561 00:30:36,560 --> 00:30:39,720 Speaker 1: we are, you know, a really company, and we were 562 00:30:39,760 --> 00:30:43,320 Speaker 1: there together with the Israeli government with the very first 563 00:30:43,320 --> 00:30:48,320 Speaker 1: wave of vaccinations very early on. So Chever actually organized 564 00:30:48,720 --> 00:30:54,360 Speaker 1: orchestrated the whole distribution and setting up the vaccination programs 565 00:30:54,400 --> 00:30:58,400 Speaker 1: go with these really government, and that worked very well, 566 00:30:59,120 --> 00:31:02,280 Speaker 1: and I think it's who as President Biden said that 567 00:31:02,720 --> 00:31:07,120 Speaker 1: vaccination and booster shots are very important, especially for the 568 00:31:07,200 --> 00:31:09,920 Speaker 1: elderly part of the population. I say the plus fifty 569 00:31:10,120 --> 00:31:14,760 Speaker 1: years of age myself, I've been vaccinated and I've had 570 00:31:14,760 --> 00:31:18,520 Speaker 1: three boosters. I've been you could say I've been vaccinated 571 00:31:18,600 --> 00:31:22,160 Speaker 1: with the fighter bion take vaccine four times, and I 572 00:31:22,200 --> 00:31:25,240 Speaker 1: think it makes sense, and I do believe that it 573 00:31:25,320 --> 00:31:28,719 Speaker 1: doesn't keep you away from getting COVID again. You can 574 00:31:28,760 --> 00:31:31,800 Speaker 1: see ready to get it again, but it does reduce 575 00:31:31,960 --> 00:31:35,440 Speaker 1: dramatically the symptoms you get. And we have to remember 576 00:31:35,440 --> 00:31:38,120 Speaker 1: that this is a cold virus. This is like getting 577 00:31:38,120 --> 00:31:40,200 Speaker 1: a cold in a way. It's just a severe cold, 578 00:31:40,480 --> 00:31:43,240 Speaker 1: and you keep getting a cold a normal code. You 579 00:31:43,280 --> 00:31:44,959 Speaker 1: can get that every second year. You get it one 580 00:31:45,120 --> 00:31:47,640 Speaker 1: year because it mutates. So I think the same thing 581 00:31:47,680 --> 00:31:50,920 Speaker 1: will happen here. But we will gradually build up natural 582 00:31:50,960 --> 00:31:54,520 Speaker 1: immunity by getting it, and we can boost that then 583 00:31:54,720 --> 00:31:59,640 Speaker 1: with getting vaccination shots. And we just got to be 584 00:31:59,640 --> 00:32:03,920 Speaker 1: careful to take care of the vulnerable population. How important 585 00:32:04,040 --> 00:32:07,000 Speaker 1: is pax slovid core And I think, if I'm not mistaken, 586 00:32:07,160 --> 00:32:10,840 Speaker 1: you will also make um a generic version of pax 587 00:32:10,840 --> 00:32:13,560 Speaker 1: sloved Is that correct? We will, of course make that 588 00:32:13,600 --> 00:32:15,240 Speaker 1: as soon as we allowed to. I don't think we 589 00:32:15,280 --> 00:32:18,080 Speaker 1: allowed to do it in the US right now because 590 00:32:18,440 --> 00:32:23,200 Speaker 1: it's patented, but we have sort of the teamed up 591 00:32:23,560 --> 00:32:25,719 Speaker 1: with the originator and said that we would like to 592 00:32:25,840 --> 00:32:28,560 Speaker 1: manufacture it for those parts of the world where it's 593 00:32:28,680 --> 00:32:34,240 Speaker 1: being made available despite the patents, so speak the cord. 594 00:32:34,320 --> 00:32:37,280 Speaker 1: Now that the opioid issue from a litigation perspective is 595 00:32:37,640 --> 00:32:40,880 Speaker 1: largely behind the company, what do you think investors are 596 00:32:40,920 --> 00:32:42,760 Speaker 1: focusing on or what should they be focusing on? And 597 00:32:43,040 --> 00:32:45,200 Speaker 1: as they take a look at your company, I think 598 00:32:45,200 --> 00:32:48,360 Speaker 1: they should focus more on the fundamentals, which are that 599 00:32:48,440 --> 00:32:50,960 Speaker 1: we are the leading generic company in the world with 600 00:32:51,000 --> 00:32:54,960 Speaker 1: a fantastic portfolio, and we're building a very strong pipeline 601 00:32:55,120 --> 00:32:58,600 Speaker 1: and very strong business and bissimilars and biosimilars whill keep 602 00:32:58,640 --> 00:33:02,320 Speaker 1: on growing significant over the next ten years. And then 603 00:33:02,360 --> 00:33:07,040 Speaker 1: we have a long and strong tradition in neuroscience and 604 00:33:07,200 --> 00:33:09,760 Speaker 1: in munology where we have had you know, one of 605 00:33:09,800 --> 00:33:12,160 Speaker 1: the best products in MS in the world, one of 606 00:33:12,200 --> 00:33:16,000 Speaker 1: the first good products for Parkinson's disease, and we're doing 607 00:33:16,080 --> 00:33:19,680 Speaker 1: research in executive those areas. We have projects now on 608 00:33:19,800 --> 00:33:23,880 Speaker 1: project that potentially can be very addictive Parkinson's disease, and 609 00:33:24,000 --> 00:33:26,480 Speaker 1: all the projects where we use the immune system to 610 00:33:26,520 --> 00:33:30,840 Speaker 1: five cancer. So I would say that combination is quite unique. 611 00:33:31,160 --> 00:33:34,800 Speaker 1: And because we have this combination of doing bio pharmaceuticals 612 00:33:34,840 --> 00:33:37,400 Speaker 1: and biosin US, then we know how to do it, 613 00:33:37,440 --> 00:33:40,440 Speaker 1: but we also know how to sell them in this marketplace. 614 00:33:40,520 --> 00:33:42,960 Speaker 1: All right, course, Schultz, thank you so much for joining us. Really, 615 00:33:43,160 --> 00:33:46,080 Speaker 1: I appreciate you taking the time. It's Core Schultz, CEO 616 00:33:46,280 --> 00:33:50,600 Speaker 1: of Teva Pharmaceuticals stock today on the resolution of their 617 00:33:50,640 --> 00:33:57,560 Speaker 1: litigation for the opioid crisis. Thanks for listening to the 618 00:33:57,560 --> 00:34:01,040 Speaker 1: Bloomberg Markets podcast. You can see subscribe and listen to 619 00:34:01,080 --> 00:34:05,240 Speaker 1: interviews with Apple Podcasts or whatever podcast platform you prefer. 620 00:34:05,640 --> 00:34:09,600 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three, 621 00:34:10,040 --> 00:34:12,520 Speaker 1: pt on Fall Sweeney I'm on Twitter at pt Sweeney. 622 00:34:12,560 --> 00:34:15,239 Speaker 1: Before the podcast, you can always catch us worldwide at 623 00:34:15,239 --> 00:34:16,000 Speaker 1: Bloomberg Radio.