1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,560 Speaker 1: us live on YouTube. 6 00:00:27,720 --> 00:00:32,000 Speaker 2: Stephen Major joins us legendary at HSBC's Global Macro Advisor 7 00:00:32,080 --> 00:00:36,199 Speaker 2: now at Tradition, and we're just thrilled he could come 8 00:00:36,240 --> 00:00:40,320 Speaker 2: back on today. Stephen Major, congratulations on this effort. At Tradition. 9 00:00:40,520 --> 00:00:45,240 Speaker 2: You are associated with the belief in price up, yield down. 10 00:00:45,600 --> 00:00:50,800 Speaker 2: Do you maintain a structural dampening of yield into the 11 00:00:50,840 --> 00:00:53,160 Speaker 2: coming years? 12 00:00:53,159 --> 00:00:57,680 Speaker 3: Shul Tom says yes. The elaboration on that, Tom is 13 00:00:57,680 --> 00:01:01,560 Speaker 3: that the returns on off of from fixed income are 14 00:01:01,600 --> 00:01:04,520 Speaker 3: really quite healthy. And if you think about the amount 15 00:01:04,600 --> 00:01:06,920 Speaker 3: of cash that people are holding, so is it some 16 00:01:07,040 --> 00:01:10,919 Speaker 3: seven trillion dollars in money markets now? I think before 17 00:01:10,920 --> 00:01:14,520 Speaker 3: I started my garden leave six months ago, it might 18 00:01:14,520 --> 00:01:17,880 Speaker 3: have been nearer six but seven trillion dollars in cash 19 00:01:18,000 --> 00:01:20,479 Speaker 3: that's not going to be earning what it was at 20 00:01:20,480 --> 00:01:23,080 Speaker 3: the start of this year. So there's plenty of cash 21 00:01:23,080 --> 00:01:25,399 Speaker 3: to go into fixed income here now. If you look 22 00:01:25,400 --> 00:01:28,120 Speaker 3: at the returns of other asset classes, it gets quite interesting. 23 00:01:28,360 --> 00:01:32,199 Speaker 3: You know, I get people asking me about gold, about bitcoin, 24 00:01:32,959 --> 00:01:35,600 Speaker 3: What do I know about that? But people ask and 25 00:01:36,080 --> 00:01:38,600 Speaker 3: you look at it, just about everything's given you a 26 00:01:38,640 --> 00:01:41,640 Speaker 3: good return s and P five hundred. Obviously we know 27 00:01:41,680 --> 00:01:44,839 Speaker 3: the numbers there. The bomb markets had a positive return, 28 00:01:45,160 --> 00:01:47,600 Speaker 3: Gold is on a tear. Gold goes up every day. 29 00:01:47,600 --> 00:01:50,800 Speaker 3: It seems bitcoin not. But then again, it's all about 30 00:01:50,800 --> 00:01:53,680 Speaker 3: the context of the last few years of performance. So 31 00:01:53,720 --> 00:01:55,120 Speaker 3: it seems that most people are going to go into 32 00:01:55,120 --> 00:01:58,640 Speaker 3: twenty twenty six with a healthy return based on whatever 33 00:01:58,720 --> 00:02:01,800 Speaker 3: they've got. People have done all right. The question is 34 00:02:01,800 --> 00:02:04,240 Speaker 3: how do you set your portfolio up for twenty twenty six. 35 00:02:04,360 --> 00:02:07,560 Speaker 3: And I would say bonds have a central place. I mean, 36 00:02:07,600 --> 00:02:09,920 Speaker 3: if you can get five six percent return in the 37 00:02:09,960 --> 00:02:12,840 Speaker 3: next year, you should be happy. The trouble is people 38 00:02:12,840 --> 00:02:13,720 Speaker 3: aren't happy with that. 39 00:02:13,720 --> 00:02:14,400 Speaker 4: They're greedy. 40 00:02:14,880 --> 00:02:17,600 Speaker 3: So that's a slightly longer answer, Steve. 41 00:02:17,960 --> 00:02:21,360 Speaker 5: We've seen since the beginning of twenty twenty five, and 42 00:02:21,360 --> 00:02:24,480 Speaker 5: we had all that uncertainty about the tariffs and introduction 43 00:02:24,520 --> 00:02:26,919 Speaker 5: of the tariffs and Liberation Day, a lot of risk 44 00:02:26,960 --> 00:02:29,560 Speaker 5: at most risk assets have rebounded one that has not 45 00:02:29,680 --> 00:02:32,200 Speaker 5: has been the US dollars still down about I don't know, 46 00:02:32,240 --> 00:02:34,359 Speaker 5: eight nine, ten percent from the early year highs. What 47 00:02:34,800 --> 00:02:36,119 Speaker 5: do you make of the US dollar here? 48 00:02:36,840 --> 00:02:41,480 Speaker 3: Yeah, Paul, Again it's context because we're down on the year, 49 00:02:41,639 --> 00:02:44,440 Speaker 3: but on the last five years, we're up by a 50 00:02:44,480 --> 00:02:45,360 Speaker 3: similar amount. 51 00:02:45,520 --> 00:02:45,680 Speaker 2: Yep. 52 00:02:46,000 --> 00:02:51,000 Speaker 3: So five years is an investment cycle, business cycle sort 53 00:02:51,000 --> 00:02:55,960 Speaker 3: of time period. So, yeah, the dollar is down. It 54 00:02:55,960 --> 00:02:58,000 Speaker 3: could be down a lot more if you told me 55 00:02:58,120 --> 00:02:59,960 Speaker 3: some of the things that have been happening this year. 56 00:03:00,320 --> 00:03:01,840 Speaker 3: I mean, you go back to the start of this year, 57 00:03:01,919 --> 00:03:04,400 Speaker 3: if you had known some of the steps that have 58 00:03:04,520 --> 00:03:06,960 Speaker 3: been taken. So you mentioned tariffs, but you could also 59 00:03:06,960 --> 00:03:09,480 Speaker 3: talk about the FED chair for example. You could talk 60 00:03:09,480 --> 00:03:13,120 Speaker 3: about the data releases, what happened at the Employment Bureau, 61 00:03:13,240 --> 00:03:15,040 Speaker 3: all these things. I mean, I've forgotten half of what 62 00:03:15,080 --> 00:03:18,160 Speaker 3: happened this year already. But if you told me these 63 00:03:18,200 --> 00:03:20,120 Speaker 3: events were going to happen at the start of this year, 64 00:03:20,240 --> 00:03:24,320 Speaker 3: I'd say, yeah, the dollar will be down. So is 65 00:03:24,360 --> 00:03:28,720 Speaker 3: the dollar down by more than we would reasonably expect? Well, 66 00:03:28,919 --> 00:03:31,200 Speaker 3: it seems okay. And actually in the context of the 67 00:03:31,240 --> 00:03:34,320 Speaker 3: last five years, it seems okay. And when people tell 68 00:03:34,360 --> 00:03:36,840 Speaker 3: me that there's a d dollarization going on. I don't 69 00:03:36,880 --> 00:03:39,800 Speaker 3: see it in the data, and I always ask, well, 70 00:03:39,840 --> 00:03:40,960 Speaker 3: what else are you going to hold? 71 00:03:41,440 --> 00:03:42,600 Speaker 2: Actually is? 72 00:03:43,600 --> 00:03:46,400 Speaker 3: And so it's an unsatisfactory answer because it's the same 73 00:03:46,440 --> 00:03:49,880 Speaker 3: answer to the same question. But I'm afraid it's still 74 00:03:49,920 --> 00:03:52,520 Speaker 3: the case that the dollar is something that you have 75 00:03:52,640 --> 00:03:55,560 Speaker 3: to hold. It takes a big chunk of everyone's portfolio. 76 00:03:56,040 --> 00:03:58,360 Speaker 3: I live in a region in the UAE, in the 77 00:03:58,400 --> 00:04:01,720 Speaker 3: Middle East where many currencies are linked to the dollar exact. 78 00:04:02,000 --> 00:04:03,400 Speaker 3: There's no evidence of that changing. 79 00:04:05,320 --> 00:04:05,720 Speaker 6: Stephen. 80 00:04:05,760 --> 00:04:08,560 Speaker 5: In the US treasury market, you know, we've got the 81 00:04:08,600 --> 00:04:10,880 Speaker 5: two year at three point fifty, We've got the ten 82 00:04:10,960 --> 00:04:13,440 Speaker 5: year at call it four fifteen, so sixty five basis 83 00:04:13,480 --> 00:04:15,320 Speaker 5: points or so there of steepening. 84 00:04:15,440 --> 00:04:16,320 Speaker 6: What does that tell you. 85 00:04:17,600 --> 00:04:19,800 Speaker 3: Well, the steepening has come from the front, hasn't that. 86 00:04:20,240 --> 00:04:23,719 Speaker 3: In fact, you pick your point on the curve, the 87 00:04:23,760 --> 00:04:27,159 Speaker 3: middle point, let's say sevens to ten's has done very little, 88 00:04:27,480 --> 00:04:30,320 Speaker 3: which means your positive total return this year of what 89 00:04:30,480 --> 00:04:33,159 Speaker 3: best part of five percent is coming from the coupon. 90 00:04:34,040 --> 00:04:37,080 Speaker 3: You just clip the coupon, that's fine. But if you 91 00:04:37,160 --> 00:04:38,960 Speaker 3: go to the front of the curve, those yields have 92 00:04:38,960 --> 00:04:40,839 Speaker 3: come down a lot, which means the FED has cut 93 00:04:40,880 --> 00:04:42,839 Speaker 3: by more than most people expected at the start of 94 00:04:42,839 --> 00:04:45,479 Speaker 3: the year. By definition, for the year to fall, it 95 00:04:45,480 --> 00:04:47,880 Speaker 3: had to beat the forwards for you to make money, 96 00:04:48,160 --> 00:04:50,680 Speaker 3: and that's what's happened. The longer end has slipped a 97 00:04:50,680 --> 00:04:53,240 Speaker 3: little bit. But there's a lot of focus on this 98 00:04:53,560 --> 00:04:59,520 Speaker 3: steepening of the US curve. Well, actually it's a ball steepening, right, 99 00:04:59,560 --> 00:05:03,080 Speaker 3: It's a bullish steepening. And many people who were calling steepening. 100 00:05:03,200 --> 00:05:05,880 Speaker 3: I bet we're arguing that yields would have to go 101 00:05:06,120 --> 00:05:09,320 Speaker 3: up in the longer end, and that hasn't happened. That 102 00:05:09,360 --> 00:05:13,239 Speaker 3: happened in Germany, it's happened in Japan, and the reasons 103 00:05:13,240 --> 00:05:15,080 Speaker 3: are quite clear why it happened. It didn't happen in 104 00:05:15,080 --> 00:05:15,520 Speaker 3: the US. 105 00:05:16,080 --> 00:05:18,400 Speaker 2: Stephen Major where this folks of tradition based out of 106 00:05:18,440 --> 00:05:23,720 Speaker 2: Dubai in or London Studios at que Queen Victoria Street, 107 00:05:23,800 --> 00:05:26,320 Speaker 2: and we welcome all of you across America around the 108 00:05:26,360 --> 00:05:29,359 Speaker 2: world to the Pacific rim good evening and over to 109 00:05:29,400 --> 00:05:34,000 Speaker 2: Indian and mister Major's Dubai is well. Steve Major, I 110 00:05:34,360 --> 00:05:37,040 Speaker 2: look at the curves in the pros you Jim Carron 111 00:05:37,120 --> 00:05:42,000 Speaker 2: coming up with Morgan Stanley, Which spread is the best 112 00:05:42,040 --> 00:05:46,279 Speaker 2: spread for our audience to study if they know there's 113 00:05:46,320 --> 00:05:50,320 Speaker 2: twenty eight flavors of spreads. The vanilla spread is twos 114 00:05:50,400 --> 00:05:53,800 Speaker 2: is compared to tenure. But which is the steve major 115 00:05:53,920 --> 00:05:57,760 Speaker 2: spread that provides the most information and guidance. 116 00:05:58,880 --> 00:06:02,479 Speaker 3: Yeah, if you want number on the curve, it's probably 117 00:06:02,600 --> 00:06:05,719 Speaker 3: five to thirty year. You can ask Jim next. Send 118 00:06:05,760 --> 00:06:08,359 Speaker 3: in my regards, but Jim will have an idea as well. 119 00:06:08,440 --> 00:06:12,120 Speaker 3: I think twos tens can be quite distorted because two's 120 00:06:12,160 --> 00:06:14,800 Speaker 3: is about the FED. That that is as simple as that. 121 00:06:15,120 --> 00:06:17,479 Speaker 3: Two's is not a credit risk story. It's not a 122 00:06:17,520 --> 00:06:21,000 Speaker 3: sovereign risk story. It's not about auctions or anything. Really, 123 00:06:21,040 --> 00:06:24,080 Speaker 3: twos is safe, twos is about the FED. Tens starts 124 00:06:24,120 --> 00:06:25,919 Speaker 3: to be a bit more cyclical, a bit more about 125 00:06:25,920 --> 00:06:31,520 Speaker 3: the data and looking into longer term sort of trends. 126 00:06:32,279 --> 00:06:34,640 Speaker 3: I think fives thirties is your best measure of the 127 00:06:34,720 --> 00:06:37,800 Speaker 3: curve because you're capturing something that is close to where 128 00:06:37,800 --> 00:06:40,760 Speaker 3: the FED is and sensitive to rates, but not quite 129 00:06:40,760 --> 00:06:42,680 Speaker 3: as sensitive as twos, and I think I think it 130 00:06:42,720 --> 00:06:44,440 Speaker 3: captures the whole story. Five thirties. 131 00:06:44,560 --> 00:06:47,440 Speaker 2: Let's stay on this steave major in honor of Jim Carren, 132 00:06:47,680 --> 00:06:51,800 Speaker 2: physics major in Bowden. Let's just stay on the physics 133 00:06:51,839 --> 00:06:54,000 Speaker 2: of the moment, and I want to look at this 134 00:06:54,200 --> 00:06:58,120 Speaker 2: first and second derivatives of the way the curve is changing. 135 00:06:58,640 --> 00:07:02,000 Speaker 2: Is there an accelerat of tendency or is there a 136 00:07:02,120 --> 00:07:05,760 Speaker 2: quiet stability to yield dynamics right now? 137 00:07:07,160 --> 00:07:11,040 Speaker 3: Look, I think that the bomb market has performed very well. 138 00:07:11,120 --> 00:07:13,720 Speaker 3: And one of the measures I would say on the 139 00:07:13,760 --> 00:07:16,600 Speaker 3: health of this bomb market is the asset swap spread. 140 00:07:16,920 --> 00:07:20,160 Speaker 3: So that's the difference between the treasuries and the swaps. 141 00:07:20,640 --> 00:07:23,240 Speaker 3: When the treasury yield is going up at a faster 142 00:07:23,360 --> 00:07:27,000 Speaker 3: rate than the swaps, that you might infer that there's 143 00:07:27,040 --> 00:07:29,920 Speaker 3: something amiss. There's something wrong with the treasuries. People are 144 00:07:29,960 --> 00:07:34,520 Speaker 3: worried about the term premium and other measures of risk. 145 00:07:34,960 --> 00:07:38,240 Speaker 3: They're worried about the longer, longer term credit quality even 146 00:07:38,280 --> 00:07:41,920 Speaker 3: of the US government. But the fact is those treasures 147 00:07:41,920 --> 00:07:43,920 Speaker 3: have been coming in, they've been doing better, the yields 148 00:07:43,960 --> 00:07:47,120 Speaker 3: have been coming in versus the swaps, and it could 149 00:07:47,200 --> 00:07:49,840 Speaker 3: be because they got over sold. It could be that 150 00:07:49,880 --> 00:07:53,840 Speaker 3: the fiscal narrative has been overplayed. I mean, I look 151 00:07:53,880 --> 00:07:55,760 Speaker 3: at the fiscal position of the US. I don't think 152 00:07:55,760 --> 00:07:59,400 Speaker 3: it's that bad, but I sound like a heretic. I'm 153 00:07:59,440 --> 00:08:02,040 Speaker 3: just looking. I was looking at the data. It's actually 154 00:08:02,120 --> 00:08:05,920 Speaker 3: come in better than people expected, and the US Treasury 155 00:08:05,960 --> 00:08:09,560 Speaker 3: is finding you buyers of its bonds. You can think 156 00:08:09,560 --> 00:08:12,080 Speaker 3: about what stable coin might do to the demand supply 157 00:08:12,280 --> 00:08:15,320 Speaker 3: dynamics longer term, for example. But I just think that 158 00:08:15,360 --> 00:08:18,000 Speaker 3: there's a narrative out there that is just ready to 159 00:08:18,040 --> 00:08:20,120 Speaker 3: go all the time, and it tends to be very 160 00:08:20,160 --> 00:08:22,800 Speaker 3: negative on the US Treasury and on the US government, 161 00:08:23,080 --> 00:08:26,280 Speaker 3: and it's willing this risk premium called it term premium 162 00:08:26,320 --> 00:08:29,480 Speaker 3: if you want to be there, and it just isn't. 163 00:08:29,120 --> 00:08:32,360 Speaker 3: It's nothing like what people that expected. The curve has steepened, 164 00:08:32,400 --> 00:08:35,200 Speaker 3: but that's because short dated yields went down. That's a 165 00:08:35,280 --> 00:08:37,640 Speaker 3: very different explanation to the one that people were offering 166 00:08:37,679 --> 00:08:38,360 Speaker 3: one year ago. 167 00:08:39,200 --> 00:08:41,480 Speaker 6: Stephen. If you look back on twenty twenty five, it's 168 00:08:41,480 --> 00:08:42,079 Speaker 6: been a great year. 169 00:08:42,080 --> 00:08:45,440 Speaker 5: I'm looking at the world equity indices, the WI function, 170 00:08:45,600 --> 00:08:49,440 Speaker 5: the Bloomberg terminal, double digit returns across the globe. You're 171 00:08:49,480 --> 00:08:52,640 Speaker 5: on equities. We had US fix income high single digit 172 00:08:52,679 --> 00:08:55,320 Speaker 5: total returns in twenty twenty five. What do we set 173 00:08:55,360 --> 00:08:56,920 Speaker 5: up what's the setup for twenty twenty six? 174 00:08:57,000 --> 00:08:59,400 Speaker 3: Do you think, I mean, Paul yours, you're so right, 175 00:08:59,400 --> 00:09:02,160 Speaker 3: you couldn't really go wrong. I'm sure they're going to 176 00:09:02,160 --> 00:09:05,800 Speaker 3: meet people who did go wrong, but you just I 177 00:09:05,840 --> 00:09:07,920 Speaker 3: think the biggest mistake anyone could make will be taking 178 00:09:07,920 --> 00:09:11,079 Speaker 3: profits too early in this rally, and whether that's gold 179 00:09:11,160 --> 00:09:13,600 Speaker 3: or S and P five hundred and there are better 180 00:09:13,600 --> 00:09:15,440 Speaker 3: people than me that have given you explanations as to 181 00:09:15,440 --> 00:09:18,360 Speaker 3: why this will continue in twenty twenty six. So it 182 00:09:18,360 --> 00:09:21,000 Speaker 3: does seem that the economy is resilient, the growth numbers 183 00:09:21,000 --> 00:09:24,160 Speaker 3: are robust, the Fed's going to be dubbish. Whoever's going 184 00:09:24,200 --> 00:09:26,079 Speaker 3: to be in charge will be cut in rates by 185 00:09:26,160 --> 00:09:29,880 Speaker 3: more than the current chair for sure. So that's quite 186 00:09:29,920 --> 00:09:33,240 Speaker 3: a nice setup going into twenty twenty six. It's very 187 00:09:33,280 --> 00:09:37,839 Speaker 3: difficult to see how this could be derailed. But that's 188 00:09:37,840 --> 00:09:40,360 Speaker 3: exactly when you should start to worry, because when it's 189 00:09:40,400 --> 00:09:43,320 Speaker 3: so obvious and everyone's doing the same thing, then you 190 00:09:43,400 --> 00:09:47,000 Speaker 3: need to be diversified. And I'm meeting people that are 191 00:09:47,040 --> 00:09:50,240 Speaker 3: not touching the bomb market. They're coming up with all 192 00:09:50,280 --> 00:09:52,600 Speaker 3: reasons for not holding bonds. That says to me, there 193 00:09:52,640 --> 00:09:55,840 Speaker 3: might even be a structural short out there. Interesting, people 194 00:09:56,480 --> 00:09:59,520 Speaker 3: are holding less than they need to of global fixed income. 195 00:09:59,559 --> 00:10:03,560 Speaker 3: Don't forget credit spreads are tight as well, again relative 196 00:10:03,600 --> 00:10:06,959 Speaker 3: to history. So to me, the government markets, led by 197 00:10:06,960 --> 00:10:10,120 Speaker 3: the Treasury, they look like reasonable value. You're going to 198 00:10:10,200 --> 00:10:13,880 Speaker 3: get five to six percent total return, probably again in 199 00:10:13,880 --> 00:10:16,960 Speaker 3: twenty twenty six. I think the biggest problem is greed. 200 00:10:17,600 --> 00:10:19,280 Speaker 3: That people expect that you should be able to make 201 00:10:19,320 --> 00:10:21,280 Speaker 3: ten to fifteen percent because they've got used to it. 202 00:10:21,760 --> 00:10:27,120 Speaker 3: But I think we all know that that expectation isn't realistic. 203 00:10:28,200 --> 00:10:33,040 Speaker 5: Just along that line there Stephen spots silver hits fresh 204 00:10:33,320 --> 00:10:37,439 Speaker 5: record above seventy dollars an hour. So the commodity markets 205 00:10:37,640 --> 00:10:40,439 Speaker 5: are just going nuts. What do you think of that? 206 00:10:40,679 --> 00:10:43,160 Speaker 5: Gold and silver medium and all those pressures. 207 00:10:43,720 --> 00:10:49,400 Speaker 3: Well, we're quite big players in gold at tradition and 208 00:10:48,600 --> 00:10:52,520 Speaker 3: the trend there is very clear. The people I speak to, 209 00:10:52,559 --> 00:10:57,360 Speaker 3: the gold brokers, gold traders, all convinced it continues. Again. 210 00:10:58,720 --> 00:11:00,720 Speaker 3: The problem with gold, I think for many people is 211 00:11:00,720 --> 00:11:04,160 Speaker 3: they don't hold enough. So when something's going up, by definition, 212 00:11:04,240 --> 00:11:08,400 Speaker 3: you don't hold enough of it, do you. So look, 213 00:11:08,559 --> 00:11:11,040 Speaker 3: I can imagine that a personal portfolio should have ten 214 00:11:11,080 --> 00:11:14,040 Speaker 3: to fifteen percent in gold institutions could be moving in 215 00:11:14,040 --> 00:11:16,880 Speaker 3: that direction as well, and that probably get enough gold 216 00:11:16,880 --> 00:11:17,319 Speaker 3: in the world. 217 00:11:17,679 --> 00:11:19,839 Speaker 2: Stephen Major with us and of course based out of 218 00:11:19,880 --> 00:11:22,160 Speaker 2: Dubai and all of us work in Hong Kong, particularly 219 00:11:22,240 --> 00:11:24,520 Speaker 2: during COVID. But he's in London. Do you know why 220 00:11:24,520 --> 00:11:25,200 Speaker 2: he's in London? 221 00:11:25,400 --> 00:11:25,559 Speaker 6: Why? 222 00:11:25,800 --> 00:11:26,199 Speaker 5: Okay u? 223 00:11:26,240 --> 00:11:28,960 Speaker 2: I mean, Steve, I don't care about the dan bond market. 224 00:11:29,000 --> 00:11:32,240 Speaker 2: The idea that west Ham would be relegated and have 225 00:11:32,320 --> 00:11:35,040 Speaker 2: to go down to the minor leagues is just anathema 226 00:11:35,080 --> 00:11:37,600 Speaker 2: to me. I mean, Santo's trying to get it done. 227 00:11:37,800 --> 00:11:40,320 Speaker 2: They got full of here, Okay, I get it. Come on, 228 00:11:40,480 --> 00:11:44,640 Speaker 2: Stephen Major, what does west Ham do to not It's 229 00:11:44,679 --> 00:11:47,640 Speaker 2: like if the Baltimore Orioles were sent down to Triple A. 230 00:11:47,960 --> 00:11:51,720 Speaker 2: Steve Major, what does west Ham need to do? Yeah? 231 00:11:51,760 --> 00:11:54,040 Speaker 3: I guess for those that don't follow football. One of 232 00:11:54,040 --> 00:11:55,760 Speaker 3: the things that we're talking about here is that there's 233 00:11:55,760 --> 00:11:59,360 Speaker 3: a sixty thousand seater stadium, the old Olympic Stadium that 234 00:11:59,400 --> 00:12:02,160 Speaker 3: could be in the lower leagues, which would would be 235 00:12:02,240 --> 00:12:05,840 Speaker 3: a bit of an odd situation, right, but it's still 236 00:12:06,040 --> 00:12:09,480 Speaker 3: We're only halfway on the season, and I think that 237 00:12:09,600 --> 00:12:11,839 Speaker 3: Westam had been a bit unlucky, to tell you the truth, 238 00:12:11,840 --> 00:12:14,720 Speaker 3: and they haven't really had the of the green, so 239 00:12:14,920 --> 00:12:18,160 Speaker 3: there's still time. I'm a patient man. I think let's 240 00:12:18,160 --> 00:12:20,480 Speaker 3: talk again in a few months and hopefully we'll be 241 00:12:20,480 --> 00:12:21,040 Speaker 3: out of trouble. 242 00:12:21,280 --> 00:12:23,679 Speaker 2: It is still early in this season. I love when 243 00:12:23,720 --> 00:12:25,640 Speaker 2: they do this. They do this in YouTube when they 244 00:12:25,679 --> 00:12:29,520 Speaker 2: show the highlights, they show the map of London with 245 00:12:29,720 --> 00:12:33,000 Speaker 2: all the stadiums around. It's so cool. It's like if 246 00:12:33,040 --> 00:12:37,400 Speaker 2: New York City had five Major League Baseball team rights, right, 247 00:12:37,520 --> 00:12:42,040 Speaker 2: It's just fair, very cool. Tell us about Dubai, Steve Major. 248 00:12:42,160 --> 00:12:43,360 Speaker 2: The time we've got left, we're going to go to 249 00:12:43,400 --> 00:12:46,280 Speaker 2: an important inter year folks with Sir mic over at 250 00:12:46,280 --> 00:12:49,840 Speaker 2: Novo Nordisk in a bit. But Stephen Major, tell us 251 00:12:49,880 --> 00:12:53,880 Speaker 2: about your in Dubai, the vibrancy of Dubai. You know 252 00:12:53,920 --> 00:12:57,360 Speaker 2: what what the Emirates have done with that airport, with 253 00:12:57,520 --> 00:13:01,120 Speaker 2: that airline. What is the new Dubai look like to 254 00:13:01,280 --> 00:13:03,440 Speaker 2: a global traveler like Steve Major. 255 00:13:04,800 --> 00:13:07,280 Speaker 3: It's getting busy. I mean you can see the numbers. 256 00:13:07,760 --> 00:13:12,440 Speaker 3: The population's north of ten million, and it's nearly ninety 257 00:13:12,480 --> 00:13:16,960 Speaker 3: percent non Emiraties, so foreigners like me. But the place 258 00:13:17,040 --> 00:13:19,640 Speaker 3: is booming, and it's not just Dubai's AVDB and the 259 00:13:19,640 --> 00:13:22,480 Speaker 3: other emirates as well. And as you know, some of 260 00:13:22,520 --> 00:13:24,800 Speaker 3: the big funds, some of the hedge funds have got 261 00:13:24,840 --> 00:13:27,400 Speaker 3: as many people sitting in Dubai's they've got in London 262 00:13:27,480 --> 00:13:31,040 Speaker 3: or New York. So you know, the numbers speak for themselves. 263 00:13:31,400 --> 00:13:35,360 Speaker 3: And I think the geography, the location is very good, right, 264 00:13:35,880 --> 00:13:37,800 Speaker 3: the sort of time zone works well. And then and 265 00:13:37,800 --> 00:13:41,440 Speaker 3: then it's very high tech and it's a can do 266 00:13:41,640 --> 00:13:45,080 Speaker 3: kind of society. So I think there's many reasons why 267 00:13:45,120 --> 00:13:45,960 Speaker 3: people are based there. 268 00:13:46,120 --> 00:13:49,520 Speaker 2: Mean Steven Major with Tradition as we celebrate his return 269 00:13:49,559 --> 00:13:52,360 Speaker 2: to the street and look for his outlooks very prominent 270 00:13:52,720 --> 00:13:57,040 Speaker 2: out on LinkedIn with Tradition. Stay with us. More from 271 00:13:57,040 --> 00:13:59,719 Speaker 2: Bloomberg Surveillance coming up after this. 272 00:14:06,960 --> 00:14:10,560 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 273 00:14:10,640 --> 00:14:13,760 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 274 00:14:13,880 --> 00:14:17,240 Speaker 1: Apple Karplay and Android Atto with the Bloomberg Business app, 275 00:14:17,440 --> 00:14:19,120 Speaker 1: or watch us live on YouTube. 276 00:14:19,360 --> 00:14:22,960 Speaker 2: We continue looking at what we learn from yield. Jim 277 00:14:23,040 --> 00:14:26,240 Speaker 2: Kieren is with Morgan Stanley. He's been definitive for decades 278 00:14:26,680 --> 00:14:30,680 Speaker 2: on yield Jim. First of all, Stephen Major sends his 279 00:14:30,840 --> 00:14:34,480 Speaker 2: kind greetings. He talked about Yeah, you know, you guys 280 00:14:34,520 --> 00:14:37,240 Speaker 2: go way back here in the battle. He has a 281 00:14:37,360 --> 00:14:43,520 Speaker 2: structural optimism about fixed income Grab the coupon, and he 282 00:14:43,640 --> 00:14:46,240 Speaker 2: calls it a bullish steepener and that good things will 283 00:14:46,240 --> 00:14:48,760 Speaker 2: turn out. Do you agree? 284 00:14:49,120 --> 00:14:49,440 Speaker 4: Well? 285 00:14:49,480 --> 00:14:52,560 Speaker 7: First of all, good morning and Merry Christmas to you both. 286 00:14:52,720 --> 00:14:54,840 Speaker 7: And Steve Major is absolutely one of the best in 287 00:14:54,880 --> 00:14:57,640 Speaker 7: the business. I call him the James Bond of interest 288 00:14:57,720 --> 00:15:02,920 Speaker 7: rates strategy. I will say that, you know, grab the 289 00:15:02,960 --> 00:15:06,960 Speaker 7: coupon is definitely the way I'm thinking about the fixed 290 00:15:06,960 --> 00:15:10,600 Speaker 7: income markets in twenty twenty six. And the reason that 291 00:15:10,640 --> 00:15:13,080 Speaker 7: I say that is that when I look across the 292 00:15:13,120 --> 00:15:16,520 Speaker 7: Yeld curve, how much do I believe that yields will 293 00:15:16,560 --> 00:15:20,280 Speaker 7: actually be moving lower in twenty twenty six. I don't 294 00:15:20,320 --> 00:15:22,240 Speaker 7: really think that they will. The front end, maybe because 295 00:15:22,280 --> 00:15:24,240 Speaker 7: the Fed, the Fed's going to cut, the Yeld curve 296 00:15:24,280 --> 00:15:26,600 Speaker 7: is going to steepen. But for the rest of the curve, 297 00:15:26,800 --> 00:15:28,920 Speaker 7: I think it's more of a sideways range. It may 298 00:15:29,000 --> 00:15:31,320 Speaker 7: drift a little bit higher. So I think the most 299 00:15:31,360 --> 00:15:33,960 Speaker 7: we can expect out of twenty twenty six is the 300 00:15:34,000 --> 00:15:36,440 Speaker 7: coupon and the yield and the bond, and that should 301 00:15:36,440 --> 00:15:38,560 Speaker 7: be a good estimate for your expected return. 302 00:15:39,640 --> 00:15:43,560 Speaker 5: So how do you think about this Federal Reserve this year? 303 00:15:44,080 --> 00:15:44,320 Speaker 6: Jim? 304 00:15:44,520 --> 00:15:48,120 Speaker 5: We've gotten some cuts here. I think we're going to 305 00:15:48,160 --> 00:15:50,880 Speaker 5: get maybe some more in twenty twenty six, but it's 306 00:15:50,920 --> 00:15:52,720 Speaker 5: not a lockdown at this point. 307 00:15:52,720 --> 00:15:53,640 Speaker 6: How are you thinking about that? 308 00:15:55,000 --> 00:15:55,080 Speaker 2: So? 309 00:15:55,360 --> 00:15:58,000 Speaker 7: Look, you know, I do think that the I do 310 00:15:58,040 --> 00:16:01,400 Speaker 7: think that the Fed's going to cut possibly two more times. 311 00:16:01,640 --> 00:16:03,840 Speaker 7: And I know there's a lot of concern about the 312 00:16:03,880 --> 00:16:06,680 Speaker 7: next FED chair, whoever's coming in. I don't think it's 313 00:16:06,720 --> 00:16:09,480 Speaker 7: about interest rate cuts. What I think it's really about 314 00:16:09,680 --> 00:16:14,680 Speaker 7: is the overall regulatory aspect of the Fed. I think 315 00:16:14,880 --> 00:16:18,000 Speaker 7: the next FED chair, and in President Trump's selection for 316 00:16:18,040 --> 00:16:20,640 Speaker 7: the next FED chair, has a lot more to do 317 00:16:20,840 --> 00:16:24,160 Speaker 7: about how the Fed will act as a regulator versus 318 00:16:24,280 --> 00:16:26,960 Speaker 7: how they're going to think about interest rates. Look, this 319 00:16:27,080 --> 00:16:29,040 Speaker 7: is probably going to be two more cuts, is probably 320 00:16:29,080 --> 00:16:31,920 Speaker 7: going to be under Powell. If another FED chair comes in, 321 00:16:32,160 --> 00:16:36,320 Speaker 7: is there another rate cut? Possibly? But it's really going 322 00:16:36,360 --> 00:16:39,200 Speaker 7: to depend on the inflation data that's out there, So 323 00:16:39,480 --> 00:16:42,320 Speaker 7: I'm not overly excited about that. What I'm really excited 324 00:16:42,320 --> 00:16:46,920 Speaker 7: about is effectively what the regulatory nature of the FED 325 00:16:46,960 --> 00:16:49,040 Speaker 7: will be. And it does seem like we're moving into 326 00:16:49,080 --> 00:16:51,640 Speaker 7: a zone, or at least a time period where there's 327 00:16:51,680 --> 00:16:53,080 Speaker 7: going to be a lot of deregulation. 328 00:16:53,560 --> 00:16:56,840 Speaker 2: What do you tell the equity beasts at Morgan Stantley, 329 00:16:56,880 --> 00:16:59,880 Speaker 2: the fixed income people call the stock market people beast, 330 00:17:00,120 --> 00:17:03,360 Speaker 2: I mean, you know they're out of control. What does 331 00:17:03,400 --> 00:17:07,080 Speaker 2: the bond market, Jim Careen signal to people focused on 332 00:17:07,160 --> 00:17:08,200 Speaker 2: the S and P five. 333 00:17:08,119 --> 00:17:12,879 Speaker 7: Hundred, It actually is a very positive signal for equities 334 00:17:13,080 --> 00:17:15,560 Speaker 7: because look, I mean, credit spreads are typing, yes, but 335 00:17:15,600 --> 00:17:16,440 Speaker 7: they're not widening. 336 00:17:17,320 --> 00:17:19,440 Speaker 2: Default risks are relatively low. 337 00:17:19,480 --> 00:17:23,240 Speaker 7: We're not really seeing a materially a material widening of 338 00:17:23,640 --> 00:17:28,280 Speaker 7: default risks or increase in default risks. Interest rates, while 339 00:17:28,320 --> 00:17:30,520 Speaker 7: they may drift a little bit higher in the back end, 340 00:17:30,680 --> 00:17:33,040 Speaker 7: they don't seem like they're moving out of control. You know, 341 00:17:33,040 --> 00:17:35,480 Speaker 7: they might go a little higher, but certainly not to 342 00:17:35,600 --> 00:17:38,800 Speaker 7: levels that I think will destroy the equity markets. So 343 00:17:38,880 --> 00:17:41,160 Speaker 7: I think twenty twenty six, at least from the bond 344 00:17:41,160 --> 00:17:43,919 Speaker 7: markets perspective, I don't think the bond market's going to 345 00:17:43,920 --> 00:17:45,840 Speaker 7: get in the way of equities I don't think that 346 00:17:45,880 --> 00:17:49,320 Speaker 7: we're in and unless we get a shock higher in inflation, 347 00:17:49,440 --> 00:17:52,320 Speaker 7: which is the risk in my opinion for twenty twenty six, 348 00:17:52,359 --> 00:17:54,960 Speaker 7: if that happens, then all bets are off. But if 349 00:17:54,960 --> 00:17:57,800 Speaker 7: that doesn't materialize, and I don't think it will, then 350 00:17:58,000 --> 00:18:00,920 Speaker 7: I think it's really saying smooth sailing for equities. Equities 351 00:18:00,960 --> 00:18:03,400 Speaker 7: have to make their own way, but bonds aren't going 352 00:18:03,400 --> 00:18:05,080 Speaker 7: to be the hurdle that we have to jump over. 353 00:18:06,200 --> 00:18:09,800 Speaker 5: Historically, Jim, it's been us. Large cap has kind of 354 00:18:09,800 --> 00:18:12,159 Speaker 5: been the way to go. Is it time to think 355 00:18:12,200 --> 00:18:14,320 Speaker 5: about mid caps and maybe even smaller cap? 356 00:18:15,640 --> 00:18:18,320 Speaker 7: So you know, this is a really good question. So 357 00:18:18,480 --> 00:18:21,240 Speaker 7: I still think large cap is going to do well 358 00:18:21,600 --> 00:18:24,720 Speaker 7: in twenty twenty six. Certainly, a lot of the cap 359 00:18:24,840 --> 00:18:27,200 Speaker 7: X spending is there, a lot of the benefits from 360 00:18:27,240 --> 00:18:30,320 Speaker 7: taxes are there. But I do think that twenty twenty six, 361 00:18:30,359 --> 00:18:32,720 Speaker 7: and this is the way that we're positioning our portfolios 362 00:18:32,720 --> 00:18:36,200 Speaker 7: across fixed income and equities, is that we do think 363 00:18:36,200 --> 00:18:38,480 Speaker 7: that the cyclical components of the markets are going to 364 00:18:38,520 --> 00:18:42,280 Speaker 7: see an upturn. So what we likely will see is 365 00:18:42,320 --> 00:18:45,320 Speaker 7: the broader markets the four ninety three right outside of 366 00:18:45,359 --> 00:18:48,040 Speaker 7: the mag seven, we'll actually start to perform better. 367 00:18:48,119 --> 00:18:48,320 Speaker 2: Now. 368 00:18:48,359 --> 00:18:52,439 Speaker 7: Why because what we're already seeing if you look at confidence, 369 00:18:52,560 --> 00:18:55,760 Speaker 7: if you look at even just the decline and interest 370 00:18:55,800 --> 00:18:58,800 Speaker 7: rates that we've had over the past year, all of 371 00:18:58,840 --> 00:19:02,440 Speaker 7: that works with a lag, and the cyclical sectors are 372 00:19:02,680 --> 00:19:05,080 Speaker 7: likely to be what benefits from that. But it's probably 373 00:19:05,080 --> 00:19:07,919 Speaker 7: not going to be Paul until until the end of 374 00:19:07,960 --> 00:19:10,760 Speaker 7: the first quarter. I think the first quarter of twenty 375 00:19:10,800 --> 00:19:14,280 Speaker 7: twenty six, we'll still see the soft patch bleed over 376 00:19:14,320 --> 00:19:17,280 Speaker 7: from twenty twenty five, and it's not until then that 377 00:19:17,359 --> 00:19:20,760 Speaker 7: I believe that the tax policies, the fiscal stimulus, the 378 00:19:20,840 --> 00:19:24,439 Speaker 7: lower interest rates, which act with a lag, will actually 379 00:19:24,440 --> 00:19:26,600 Speaker 7: start to take hold. And I would expect the labor 380 00:19:26,640 --> 00:19:30,000 Speaker 7: markets to even get better starting around the second quarter. 381 00:19:30,040 --> 00:19:32,359 Speaker 7: But I still think there's going to be weakness in 382 00:19:32,359 --> 00:19:35,800 Speaker 7: front of us, at least until March thirty one. 383 00:19:36,560 --> 00:19:40,639 Speaker 2: I'm I'm just fascinated here by Jim Kieren Folks in 384 00:19:40,680 --> 00:19:44,880 Speaker 2: the physics of a sixty forty portfolio. We got three 385 00:19:44,920 --> 00:19:48,280 Speaker 2: groups of people, Jim Karen. We got people their standards 386 00:19:48,440 --> 00:19:51,560 Speaker 2: the dock, and after three years of double digit equity performance, 387 00:19:51,880 --> 00:19:56,000 Speaker 2: the boats really really left the dock. We got people 388 00:19:56,240 --> 00:19:59,120 Speaker 2: that did the right thing sixty forty, and they're like, well, 389 00:19:59,160 --> 00:20:02,280 Speaker 2: I underperformed. Should have just loaded the boat on Nvidia. 390 00:20:02,400 --> 00:20:04,400 Speaker 2: And then we got people trying to find a new 391 00:20:04,480 --> 00:20:09,120 Speaker 2: sixty forty. What does Jim Caron's new sixty percent stocks 392 00:20:09,160 --> 00:20:10,679 Speaker 2: forty percent bonds look like? 393 00:20:11,840 --> 00:20:15,080 Speaker 7: Yeah, it's you know, this is a question of our time, right. 394 00:20:15,160 --> 00:20:19,679 Speaker 7: So I think that the interest rates cycle that we 395 00:20:19,800 --> 00:20:22,520 Speaker 7: have from nineteen eighty one to twenty twenty one was 396 00:20:22,560 --> 00:20:25,480 Speaker 7: pretty much just downward rates, which meant that bonds were stable. 397 00:20:25,640 --> 00:20:28,760 Speaker 7: Sixty forty is a passive way to look at the markets, 398 00:20:28,840 --> 00:20:32,440 Speaker 7: was a very very good allocation. But now that interest 399 00:20:32,480 --> 00:20:36,080 Speaker 7: rates are likely to move sideways over time, that means 400 00:20:36,119 --> 00:20:39,000 Speaker 7: that sixty forty is no longer optimal. So what it 401 00:20:39,080 --> 00:20:42,359 Speaker 7: means is that you probably need to have a bit more, 402 00:20:42,600 --> 00:20:45,440 Speaker 7: a bit more equity, a bit less bonds, because bonds 403 00:20:45,480 --> 00:20:48,000 Speaker 7: aren't going to be the stable returns. Plus bond return 404 00:20:48,160 --> 00:20:51,960 Speaker 7: correlations are very high relative to equity return correlations, so 405 00:20:52,000 --> 00:20:55,440 Speaker 7: therefore one is edged necessarily against the other. So this 406 00:20:55,520 --> 00:20:58,040 Speaker 7: is another factor that you know that I look at. 407 00:20:58,080 --> 00:21:00,479 Speaker 7: So I would say it's it's a little more our equities, 408 00:21:00,480 --> 00:21:01,320 Speaker 7: a little less ball. 409 00:21:01,400 --> 00:21:04,639 Speaker 2: Jim, I got the first look at GDP here and 410 00:21:04,720 --> 00:21:06,840 Speaker 2: I know you haven't seen this. Excuse me the second look. 411 00:21:06,880 --> 00:21:09,960 Speaker 2: I know you haven't seen this, but these are jaw 412 00:21:10,080 --> 00:21:16,280 Speaker 2: dropping ellen Zendner's statistics. I mean, this is unbelievable. I 413 00:21:16,320 --> 00:21:20,679 Speaker 2: got a GDP annualized not three point three, but a 414 00:21:20,800 --> 00:21:25,560 Speaker 2: stick up four point three. I got personal consumption, thank you, 415 00:21:25,600 --> 00:21:29,040 Speaker 2: Paul Sweeney two point seven up to three point five. 416 00:21:29,720 --> 00:21:35,200 Speaker 2: I'm iballing seven percent nominal Jim, Karen, what do bonds 417 00:21:35,320 --> 00:21:38,560 Speaker 2: do in a Trump boom economy? 418 00:21:39,800 --> 00:21:42,760 Speaker 7: Well, see that's the thing, right, you know, we're getting 419 00:21:42,840 --> 00:21:45,800 Speaker 7: much stronger than expected data. I think we're starting to 420 00:21:45,920 --> 00:21:49,040 Speaker 7: leave this soft patch. And if we get this capex 421 00:21:49,200 --> 00:21:51,440 Speaker 7: spending which has been you know, going on in twenty 422 00:21:51,480 --> 00:21:54,320 Speaker 7: twenty five, if that continues into twenty twenty six, and 423 00:21:54,359 --> 00:21:58,080 Speaker 7: we get a furthering of the higher levels of productivity, 424 00:21:58,440 --> 00:22:00,520 Speaker 7: than what that means is that you're going to get 425 00:22:00,600 --> 00:22:04,000 Speaker 7: higher growth and lower inflation. So it doesn't mean that inflation. 426 00:22:04,160 --> 00:22:06,640 Speaker 7: So right now we're talking about GDP growth being good, 427 00:22:06,680 --> 00:22:11,040 Speaker 7: but inflation data has been relatively stable. Well, the next 428 00:22:11,040 --> 00:22:12,800 Speaker 7: inflation data is going to be the point. So if 429 00:22:12,800 --> 00:22:15,640 Speaker 7: we have really high inflation for the next print. That's 430 00:22:15,680 --> 00:22:18,439 Speaker 7: a problem. If we have stable inflation and we're printing 431 00:22:18,440 --> 00:22:22,200 Speaker 7: these types of GDP numbers, that's really good, especially for equities. 432 00:22:23,000 --> 00:22:23,679 Speaker 6: Just extraordinary. 433 00:22:23,680 --> 00:22:25,639 Speaker 5: Again on that economic data at the top is just 434 00:22:26,040 --> 00:22:30,520 Speaker 5: referring to mortgage backed securities. They've had a great year 435 00:22:30,720 --> 00:22:32,760 Speaker 5: in twenty twenty five. On the agency side, here is 436 00:22:32,800 --> 00:22:35,200 Speaker 5: that still a call for twenty twenty six. 437 00:22:35,840 --> 00:22:39,640 Speaker 7: It's our highest overweight in our portfolio, especially non agency 438 00:22:39,760 --> 00:22:43,359 Speaker 7: mortgage backed securities. The housing market. Whether we look at 439 00:22:43,400 --> 00:22:45,680 Speaker 7: the technicals, you look at the credit fundamentals. 440 00:22:46,400 --> 00:22:47,680 Speaker 2: A lot of the regulation that. 441 00:22:47,600 --> 00:22:50,520 Speaker 7: Came in since the financial crisis Dot Frank has meant 442 00:22:50,520 --> 00:22:54,679 Speaker 7: that the credit quality of these assets is a lot stronger. 443 00:22:55,080 --> 00:22:57,919 Speaker 7: The yield and the spread that you get out of 444 00:22:57,960 --> 00:23:01,400 Speaker 7: mortgage is relative to their equivalent investment grade or even 445 00:23:01,400 --> 00:23:05,120 Speaker 7: some investment grade bonds is better. So you're getting higher 446 00:23:05,240 --> 00:23:09,840 Speaker 7: quality bonds with a higher yield in the mortgage space. 447 00:23:10,280 --> 00:23:13,000 Speaker 7: So it is it is an overweight for us. We're 448 00:23:13,040 --> 00:23:16,080 Speaker 7: not worried about the housing market in this in this 449 00:23:16,119 --> 00:23:18,480 Speaker 7: particular cycle, so we really like that. 450 00:23:18,520 --> 00:23:21,480 Speaker 2: So yes, for twenty twenty six, we have thirty seconds. 451 00:23:21,720 --> 00:23:24,720 Speaker 2: Just give me the Jim Karen nutshell of seven percent 452 00:23:24,800 --> 00:23:29,639 Speaker 2: nominal GDP. It's like China. We have China GDP. 453 00:23:31,680 --> 00:23:34,720 Speaker 7: Well, well, at least for a little while. But yeah, 454 00:23:34,880 --> 00:23:37,040 Speaker 7: So what it means is that bond yields are likely to. 455 00:23:37,080 --> 00:23:37,919 Speaker 2: Drift a bit higher. 456 00:23:38,040 --> 00:23:39,760 Speaker 7: I think that's natural, but it's not going to get 457 00:23:39,760 --> 00:23:41,720 Speaker 7: in the way. And I think that's the key. So 458 00:23:41,840 --> 00:23:43,919 Speaker 7: just because we see the ten year yield, you know, 459 00:23:44,000 --> 00:23:46,159 Speaker 7: going up, doesn't mean it gets in the way of 460 00:23:46,240 --> 00:23:49,280 Speaker 7: growth in the economy. Because if you're supporting a seven 461 00:23:49,280 --> 00:23:52,000 Speaker 7: percent nominal GDP, you would expect bond yields to be 462 00:23:52,000 --> 00:23:54,280 Speaker 7: a little bit higher, but it's not going to be restrictive. 463 00:23:54,600 --> 00:23:56,680 Speaker 7: So I'd say that the economy seems like it's running 464 00:23:56,720 --> 00:24:01,320 Speaker 7: a bit hot and inflation is not. So in economy 465 00:24:01,359 --> 00:24:05,520 Speaker 7: hot inflation y that is a high productivity environment. 466 00:24:05,320 --> 00:24:07,960 Speaker 2: When we invented this, folks, This is what's about Jim 467 00:24:08,119 --> 00:24:12,600 Speaker 2: Karen setting you up for twenty twenty six. Stay with us. 468 00:24:12,800 --> 00:24:23,120 Speaker 2: More from Bloomberg Surveillance coming up after this. 469 00:24:23,119 --> 00:24:27,040 Speaker 1: This is the Bloomberg Surveillance podcast. Listen live each weekday 470 00:24:27,080 --> 00:24:30,439 Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto 471 00:24:30,480 --> 00:24:33,480 Speaker 1: with the Bloomberg Business App. You can also listen live 472 00:24:33,520 --> 00:24:37,119 Speaker 1: on Amazon Alexa from our flagship New York station. Just 473 00:24:37,160 --> 00:24:40,040 Speaker 1: say Alexa play Bloomberg eleven thirty. 474 00:24:40,040 --> 00:24:43,040 Speaker 2: We migrate to private credit. Pau's been anticipating this all 475 00:24:43,119 --> 00:24:47,359 Speaker 2: day with Churchill Asset Management giving us huge, huge perspective 476 00:24:47,400 --> 00:24:51,520 Speaker 2: in twenty twenty five. What does private credit in that 477 00:24:51,960 --> 00:24:57,640 Speaker 2: wall of money do within eight point two percent nominal GDP, 478 00:24:58,160 --> 00:24:59,840 Speaker 2: you and I have never seen. 479 00:25:00,680 --> 00:25:01,480 Speaker 4: That's a big number. 480 00:25:01,520 --> 00:25:03,439 Speaker 8: I'll bet you a lot of those are middle market companies, 481 00:25:03,440 --> 00:25:06,000 Speaker 8: by the way, in the service sectors, because we're seeing 482 00:25:06,000 --> 00:25:08,080 Speaker 8: a lot of growth. So yeah, I always coming with a 483 00:25:08,080 --> 00:25:09,960 Speaker 8: fun fact. The first of all, Happy holidays. Great to 484 00:25:10,000 --> 00:25:13,639 Speaker 8: be in the studio. We usually either have a strong 485 00:25:13,680 --> 00:25:15,960 Speaker 8: fourth quarter and then build up the pipeline in the 486 00:25:15,960 --> 00:25:19,920 Speaker 8: first quarter or for whatever reason, not great fourth quarter, 487 00:25:20,040 --> 00:25:21,359 Speaker 8: but the first quarter is building. 488 00:25:21,359 --> 00:25:22,119 Speaker 4: We've had both. 489 00:25:22,160 --> 00:25:25,359 Speaker 8: We had a I think a record fourth quarter and 490 00:25:25,400 --> 00:25:27,399 Speaker 8: we've got a record pipeline for the first quarter. So 491 00:25:27,440 --> 00:25:31,679 Speaker 8: I think this this GDP report mirrors the confidence that 492 00:25:31,680 --> 00:25:34,560 Speaker 8: our private equity investors have, and we've had a few 493 00:25:34,560 --> 00:25:38,680 Speaker 8: of them on our podcast just talking about the opportunities 494 00:25:38,680 --> 00:25:41,520 Speaker 8: with these smaller companies and the growth, particularly in the 495 00:25:41,560 --> 00:25:43,479 Speaker 8: service sectors, guys, I mean this is where a lot 496 00:25:43,480 --> 00:25:46,480 Speaker 8: of them. I'll bet you you dissect that four point 497 00:25:46,480 --> 00:25:49,040 Speaker 8: three and the eight percent you know that you're looking at, 498 00:25:49,080 --> 00:25:50,560 Speaker 8: I'll bet you a lot of that's in the service 499 00:25:50,560 --> 00:25:51,280 Speaker 8: sectors right now. 500 00:25:52,080 --> 00:25:55,560 Speaker 5: Just a Bloomberg had headline kept coming across the tape 501 00:25:55,560 --> 00:25:57,720 Speaker 5: here in the M and A Space service now to 502 00:25:57,760 --> 00:26:00,840 Speaker 5: buy armis for about seven point seven five billion dollars 503 00:26:00,880 --> 00:26:03,800 Speaker 5: in cash. The deals are coming, yeah, fast and furious. 504 00:26:03,880 --> 00:26:05,680 Speaker 5: Talk to us about your pipeline for twenty Yeah. 505 00:26:05,720 --> 00:26:08,760 Speaker 8: So what's interesting about the pipeline now is with interest 506 00:26:08,840 --> 00:26:14,159 Speaker 8: rates coming down and inflation kind of quiescent relative to 507 00:26:14,200 --> 00:26:16,080 Speaker 8: the growth, and that's to be the case. I mean, 508 00:26:16,119 --> 00:26:19,080 Speaker 8: we're seeing a really balanced to macro. I was listening 509 00:26:19,080 --> 00:26:22,000 Speaker 8: to Jim Caron before I came on with you, and 510 00:26:22,080 --> 00:26:23,880 Speaker 8: I agree with one hundred percent with what he's saying. 511 00:26:23,920 --> 00:26:27,080 Speaker 8: It's very constructive for credit. I think that the deal 512 00:26:27,160 --> 00:26:30,680 Speaker 8: flow that we are seeing now is mirroring the kind 513 00:26:30,680 --> 00:26:33,000 Speaker 8: of deal flow we saw in twenty nineteen. 514 00:26:33,080 --> 00:26:34,040 Speaker 4: It's pretty strong. 515 00:26:34,119 --> 00:26:36,639 Speaker 8: I think interest rates being where they are as a 516 00:26:36,680 --> 00:26:37,160 Speaker 8: big driver. 517 00:26:37,400 --> 00:26:39,479 Speaker 2: I like that, and you know, we all have our 518 00:26:39,560 --> 00:26:42,520 Speaker 2: COVID stories. But I remember sitting in a chair on 519 00:26:42,600 --> 00:26:45,280 Speaker 2: an island looking at a plane going over and saying, 520 00:26:45,760 --> 00:26:47,679 Speaker 2: am I going to be on the last plane? And 521 00:26:47,800 --> 00:26:50,480 Speaker 2: I was? And the answer is that was a medical 522 00:26:50,520 --> 00:26:56,240 Speaker 2: crisis that was not a financial crisis. How does this end? 523 00:26:56,640 --> 00:26:59,639 Speaker 2: If you have six seven percent phenomenal, if you have 524 00:26:59,680 --> 00:27:04,199 Speaker 2: this shape has boom, private equity, private credit? Do you 525 00:27:04,240 --> 00:27:06,160 Speaker 2: have a theory on how this ends? 526 00:27:06,240 --> 00:27:07,280 Speaker 4: So Tom tell me you. 527 00:27:07,560 --> 00:27:09,000 Speaker 8: I can give you the theory if you tell me 528 00:27:09,520 --> 00:27:11,760 Speaker 8: what cycle we are in right now? Are we in 529 00:27:11,840 --> 00:27:14,800 Speaker 8: the twenty ten to twenty twenty five satalogue? 530 00:27:15,160 --> 00:27:17,080 Speaker 2: Okay, what that well said? Right? 531 00:27:17,280 --> 00:27:17,359 Speaker 5: So? 532 00:27:17,680 --> 00:27:20,760 Speaker 8: Or are we in a mini cycle that just picked 533 00:27:20,840 --> 00:27:22,440 Speaker 8: up after Liberation. 534 00:27:22,080 --> 00:27:25,120 Speaker 2: Day or coming out of the eighteen nineties? World War 535 00:27:25,160 --> 00:27:27,720 Speaker 2: One got in the way, Thank you, folks. There was 536 00:27:27,800 --> 00:27:30,480 Speaker 2: just a concerted technology lift. 537 00:27:30,920 --> 00:27:34,280 Speaker 8: Correct and now AI with AI being I'll bet you 538 00:27:34,400 --> 00:27:36,000 Speaker 8: behind a lot of that, you're going to see a 539 00:27:36,040 --> 00:27:37,480 Speaker 8: lift that's going to continue for a while. 540 00:27:37,520 --> 00:27:40,600 Speaker 2: I've never said the stuff for saying today, yep, eight 541 00:27:40,640 --> 00:27:42,160 Speaker 2: point two, this is. 542 00:27:42,600 --> 00:27:44,359 Speaker 4: This is a good Christmas presents. 543 00:27:44,600 --> 00:27:44,919 Speaker 6: President. 544 00:27:44,920 --> 00:27:48,000 Speaker 2: Do you need someone to empty ash trees at Churchill? Yeah? 545 00:27:48,000 --> 00:27:49,199 Speaker 2: We get back in the business. 546 00:27:49,320 --> 00:27:51,199 Speaker 8: No, you're doing the heavy lifting right now. This is 547 00:27:51,200 --> 00:27:52,120 Speaker 8: great thought leadership. 548 00:27:52,160 --> 00:27:52,480 Speaker 2: We love it. 549 00:27:52,600 --> 00:27:52,879 Speaker 6: Randy. 550 00:27:52,920 --> 00:27:56,359 Speaker 5: What are your investors telling you these days? I mean, 551 00:27:56,400 --> 00:27:58,520 Speaker 5: do they want you to, hey, put more money to 552 00:27:58,560 --> 00:27:59,960 Speaker 5: work or monetize more? 553 00:28:00,080 --> 00:28:00,840 Speaker 6: What they want it? 554 00:28:00,920 --> 00:28:04,639 Speaker 8: They want it put to work quickly but safely, so 555 00:28:04,680 --> 00:28:07,560 Speaker 8: they want you know. They're worried about default risk, right, Okay, 556 00:28:07,720 --> 00:28:10,800 Speaker 8: they're also worried about growth. Are we in a bubble? 557 00:28:10,920 --> 00:28:11,080 Speaker 2: Right? 558 00:28:11,080 --> 00:28:12,280 Speaker 4: We talked about that a lot. 559 00:28:12,440 --> 00:28:15,359 Speaker 8: So KBRI came out with a really interesting stat So 560 00:28:15,400 --> 00:28:17,920 Speaker 8: they looked at the last decade. They looked at leverage 561 00:28:17,920 --> 00:28:23,080 Speaker 8: loan growth versus corporate lending growth. So leverage loans including bonds, 562 00:28:23,640 --> 00:28:27,639 Speaker 8: syndicated loans, private credit six percent over the last ten years. 563 00:28:28,080 --> 00:28:30,879 Speaker 8: If you look corporate lending, which includes C and I loans, 564 00:28:30,880 --> 00:28:35,080 Speaker 8: so bank loans and investment grade bonds five percent. Not 565 00:28:35,200 --> 00:28:37,160 Speaker 8: much of a bubble there, six versus five. 566 00:28:37,920 --> 00:28:40,920 Speaker 5: You know, in the much bigger market, Captain, where you 567 00:28:40,920 --> 00:28:45,480 Speaker 5: guys typically play. In this Warner Brothers Discovery situation, there 568 00:28:45,520 --> 00:28:48,560 Speaker 5: are debt deals flying all over the place. Bridges are 569 00:28:48,600 --> 00:28:50,960 Speaker 5: being refinanced here and there, and the banks are coming 570 00:28:51,000 --> 00:28:52,040 Speaker 5: in and guarantees. 571 00:28:52,480 --> 00:28:54,440 Speaker 2: The credit in that part. 572 00:28:54,320 --> 00:28:57,880 Speaker 6: Of the market is everywhere. So what's it like in 573 00:28:57,920 --> 00:28:58,280 Speaker 6: your market? 574 00:28:58,440 --> 00:28:58,640 Speaker 2: Yeah? 575 00:28:58,760 --> 00:29:01,200 Speaker 8: So when I got out of the Uner versus Chicago 576 00:29:01,240 --> 00:29:05,040 Speaker 8: and I was interviewing my mentors said, talk about capital formation. 577 00:29:05,160 --> 00:29:06,520 Speaker 4: This is in nineteen seventy nine. 578 00:29:07,080 --> 00:29:09,080 Speaker 8: This is what we are looking at right now with 579 00:29:09,160 --> 00:29:12,560 Speaker 8: private markets because they are looking and taking away the 580 00:29:13,240 --> 00:29:16,920 Speaker 8: opportunity for financing these deals that the banks had but 581 00:29:16,960 --> 00:29:20,080 Speaker 8: they've given up. There was you saw the announcement that 582 00:29:20,160 --> 00:29:22,680 Speaker 8: leverage loan guidance was being removed. Everybody was like, oh 583 00:29:22,680 --> 00:29:25,000 Speaker 8: my god, the banks are getting back into it. I'm sorry, 584 00:29:25,000 --> 00:29:29,240 Speaker 8: but they're cultures that the armies of risk and compliance 585 00:29:29,240 --> 00:29:31,120 Speaker 8: people that have been built up in the banks over 586 00:29:31,160 --> 00:29:33,200 Speaker 8: the last four decades, those aren't going anywhere. 587 00:29:33,360 --> 00:29:35,560 Speaker 2: How do you edge folks? I should say, excuse me. 588 00:29:35,640 --> 00:29:38,840 Speaker 2: Randy Schimmer with his vice chair chief investment Strategists at 589 00:29:38,920 --> 00:29:41,840 Speaker 2: Churchill Asset Manager and a massive thanks to Stuart Paul. 590 00:29:42,040 --> 00:29:43,320 Speaker 2: He's in the car already, is. 591 00:29:43,400 --> 00:29:47,760 Speaker 6: Yes, No, he's ski and ski out. Yeah really yeah, 592 00:29:47,800 --> 00:29:48,200 Speaker 6: that's how. 593 00:29:48,120 --> 00:29:50,800 Speaker 2: He didn't tell us that. Yeah, that's Wong and the 594 00:29:50,800 --> 00:29:54,520 Speaker 2: team rock. You know. They it's like Lee Cooperman had 595 00:29:54,560 --> 00:29:57,400 Speaker 2: got the backdrop behind it. They're in somebody this summer, 596 00:29:57,480 --> 00:30:00,520 Speaker 2: Randy Schimmer with us year. How do you pass off 597 00:30:00,680 --> 00:30:03,960 Speaker 2: your risk? How do you hedge in the new world 598 00:30:04,400 --> 00:30:05,400 Speaker 2: of private Yeah. 599 00:30:05,320 --> 00:30:07,360 Speaker 8: Well, we're actually not passing off of the risk. That's 600 00:30:07,400 --> 00:30:10,160 Speaker 8: the beautiful part about our model. We hold the risk 601 00:30:10,480 --> 00:30:13,560 Speaker 8: along with everybody else. We're investing alongside everyone. The Lasa 602 00:30:13,600 --> 00:30:17,160 Speaker 8: Matteo for one K. We talked about that last time. TIAA, 603 00:30:17,280 --> 00:30:19,720 Speaker 8: which is our parent company, Triple A Company, holds the 604 00:30:19,760 --> 00:30:23,560 Speaker 8: same risk that Lisa one K. 605 00:30:23,840 --> 00:30:26,120 Speaker 2: Compare it in the old days to the scam of 606 00:30:26,160 --> 00:30:29,760 Speaker 2: a general partner with many limited partners that you know, 607 00:30:30,160 --> 00:30:31,640 Speaker 2: I'm not going to go to the history, folks, but 608 00:30:31,680 --> 00:30:38,400 Speaker 2: it ended ugly. It's a partnership from casually talking, But 609 00:30:38,480 --> 00:30:41,640 Speaker 2: what kind of flavor of partnership is it. 610 00:30:41,640 --> 00:30:44,480 Speaker 8: It's a sharing of risk partnership, but a sharing of 611 00:30:44,560 --> 00:30:49,480 Speaker 8: reward partnership. So all of the income stream that these 612 00:30:49,560 --> 00:30:52,960 Speaker 8: loans are producing, which right now is close to double 613 00:30:53,040 --> 00:30:54,880 Speaker 8: digits still because interest rates are high. 614 00:30:55,000 --> 00:30:56,600 Speaker 2: What triple leverage all cash and. 615 00:30:57,080 --> 00:30:59,800 Speaker 8: This is with no leverage, Okay, so the risk will 616 00:31:00,440 --> 00:31:03,240 Speaker 8: is very balanced. And we looking into twenty twenty six 617 00:31:03,240 --> 00:31:06,440 Speaker 8: we talked about this. I actually think that with tariff 618 00:31:07,480 --> 00:31:11,240 Speaker 8: inflation under control, that the macro risk and this is 619 00:31:11,400 --> 00:31:13,920 Speaker 8: Jim Karn's point, the macro risk is looking pretty strong. 620 00:31:13,960 --> 00:31:17,560 Speaker 8: So now it's portfolio selection, Fellas. This is what is like, 621 00:31:17,800 --> 00:31:20,160 Speaker 8: how does a bad loan get into your portfolio? The 622 00:31:20,200 --> 00:31:22,480 Speaker 8: only way it gets in your portfolio if you put 623 00:31:22,520 --> 00:31:25,480 Speaker 8: it there. So the whole thing is about assets selection 624 00:31:25,800 --> 00:31:28,160 Speaker 8: and having twenty years of experience and not doing bad. 625 00:31:28,280 --> 00:31:31,200 Speaker 2: I mean, ask one more question, because Paul's got fourteen okay, 626 00:31:31,280 --> 00:31:33,200 Speaker 2: but then how do you get rid of a bad loan? 627 00:31:34,240 --> 00:31:35,800 Speaker 8: Well, you work it out, and that's what we do. 628 00:31:35,880 --> 00:31:38,360 Speaker 8: And by the way, some people don't like being landlords. 629 00:31:38,440 --> 00:31:41,840 Speaker 8: They don't like fixing the sink or the plumbing or 630 00:31:41,880 --> 00:31:44,440 Speaker 8: whatever's going wrong. We are landlords. We take care of 631 00:31:44,480 --> 00:31:48,360 Speaker 8: the properties. We own it, We fix it, we get 632 00:31:48,400 --> 00:31:51,120 Speaker 8: it back in shape and allow the private equity sponsor 633 00:31:51,200 --> 00:31:53,960 Speaker 8: to sell the business. We're not in business of taking 634 00:31:54,560 --> 00:31:57,719 Speaker 8: risk on the credit side because we're not getting outsize us. 635 00:31:57,760 --> 00:31:59,360 Speaker 8: We're just getting our principal and interest back. 636 00:31:59,520 --> 00:32:00,560 Speaker 4: So we're conservatives. 637 00:32:00,600 --> 00:32:04,680 Speaker 5: So do you hold your loans to maturity or until. 638 00:32:04,800 --> 00:32:07,680 Speaker 8: Or until they pay off it's very unusual for the 639 00:32:07,720 --> 00:32:10,880 Speaker 8: loans to actually go to maturity. Something usually happens the 640 00:32:10,880 --> 00:32:15,320 Speaker 8: private acuity firm will will refinance, they'll sell you guys. 641 00:32:15,360 --> 00:32:18,880 Speaker 8: Came out with a great data piece for the lead 642 00:32:18,960 --> 00:32:20,360 Speaker 8: Left this week. 643 00:32:20,160 --> 00:32:21,800 Speaker 4: On the leverage loan. 644 00:32:22,720 --> 00:32:25,960 Speaker 8: Number of dividend recaps being done in this market in 645 00:32:26,000 --> 00:32:29,320 Speaker 8: the leverage lone space at record highs for the for 646 00:32:29,360 --> 00:32:31,840 Speaker 8: the recent quarter. So you know, people are taking money 647 00:32:31,880 --> 00:32:34,000 Speaker 8: out of these deals. They're giving those. Now do you 648 00:32:34,040 --> 00:32:36,680 Speaker 8: finance that? Do you mind the private guys, We don't 649 00:32:36,680 --> 00:32:38,600 Speaker 8: mind taking some of the money, but we don't like 650 00:32:38,640 --> 00:32:40,640 Speaker 8: them taking all the money out because we like them 651 00:32:40,640 --> 00:32:42,360 Speaker 8: to have some skin in the game. You know, if 652 00:32:42,360 --> 00:32:44,160 Speaker 8: you keep fifty percent of your money in, we'll do 653 00:32:44,200 --> 00:32:45,400 Speaker 8: that deal, okay. 654 00:32:45,600 --> 00:32:50,520 Speaker 5: Because is it still a tough market to monetize the 655 00:32:50,600 --> 00:32:52,120 Speaker 5: investments for these private equity guys. 656 00:32:52,760 --> 00:32:53,640 Speaker 4: It's getting better. 657 00:32:53,760 --> 00:32:58,920 Speaker 8: So you've got this trillion plus you know iceberg that 658 00:32:59,040 --> 00:33:01,720 Speaker 8: is slowly melting. The reason to smelting is because interest 659 00:33:01,760 --> 00:33:05,600 Speaker 8: rates are coming down and so financing costs, which is 660 00:33:05,680 --> 00:33:07,640 Speaker 8: driving M and A. And you've seen now record M 661 00:33:07,680 --> 00:33:10,640 Speaker 8: and A coming out of the choot, which is driving 662 00:33:10,680 --> 00:33:11,320 Speaker 8: our deal flow. 663 00:33:12,000 --> 00:33:13,680 Speaker 4: Interest rates make that possible. 664 00:33:14,560 --> 00:33:16,800 Speaker 5: I'm looking at this Jimmy O'Connors and Window Mountain. I'm 665 00:33:17,000 --> 00:33:20,440 Speaker 5: fascinated by it. Road trip we're going there. What's the 666 00:33:20,480 --> 00:33:22,959 Speaker 5: sector you like in twenty twenty? Does it have to 667 00:33:22,960 --> 00:33:23,840 Speaker 5: be an AI deal? 668 00:33:24,080 --> 00:33:26,120 Speaker 8: Get they give you a good deal that we just 669 00:33:26,560 --> 00:33:32,320 Speaker 8: approved in the linen management area and health care healthcare companies. 670 00:33:32,400 --> 00:33:33,880 Speaker 4: Right, you go to the hospital. 671 00:33:33,960 --> 00:33:36,320 Speaker 8: You know, some of this disposable, but you've got the 672 00:33:36,640 --> 00:33:40,120 Speaker 8: you know, the bed clothes and stuff like that. You know, 673 00:33:40,160 --> 00:33:43,520 Speaker 8: there's a lot of this this under the radar stuff 674 00:33:43,560 --> 00:33:47,920 Speaker 8: that's very cool and low risk. You're Chicago, Chicago, the 675 00:33:47,960 --> 00:33:48,920 Speaker 8: academic pile. 676 00:33:49,040 --> 00:33:52,040 Speaker 2: Yes, what was your salary hope when you interviewed out 677 00:33:52,080 --> 00:33:52,520 Speaker 2: of booth? 678 00:33:53,240 --> 00:33:56,120 Speaker 8: Well, I think my first job, I was getting twenty five. 679 00:33:56,360 --> 00:33:59,440 Speaker 2: Twenty five K. The fancy people were getting forty and 680 00:33:59,480 --> 00:34:02,800 Speaker 2: you'd never get there right exactly, Okay, Lisa, we're doing 681 00:34:02,840 --> 00:34:05,600 Speaker 2: the newspapers right now because I'm not here tomorrow to 682 00:34:05,680 --> 00:34:08,239 Speaker 2: the end of the year. Michael Arrowit, thank you so 683 00:34:08,320 --> 00:34:11,200 Speaker 2: much for doing this. This is some empower the four 684 00:34:11,360 --> 00:34:16,040 Speaker 2: one kay people salaries. Americans say they consider the minimum 685 00:34:16,080 --> 00:34:22,040 Speaker 2: to be financially successful. Randy Schimmer twenty five thousand, boomers 686 00:34:22,440 --> 00:34:27,040 Speaker 2: ninety nine thousand, rounded up one hundred thousand fossils. Gen 687 00:34:27,360 --> 00:34:29,720 Speaker 2: X born after sixty. 688 00:34:29,320 --> 00:34:35,040 Speaker 9: Five, two hundred twelve thousand, millennials one hundred and eighty thousand. 689 00:34:36,080 --> 00:34:39,399 Speaker 9: The average is two hundred seventy thousand dollars a year. 690 00:34:39,920 --> 00:34:45,120 Speaker 9: Gen Z's clocking in at five hundred and eighty seven thousand. 691 00:34:45,920 --> 00:34:48,000 Speaker 4: That's a wealth investor right there. And we look at 692 00:34:48,480 --> 00:34:48,680 Speaker 4: for that. 693 00:34:49,960 --> 00:34:51,960 Speaker 2: I mean, Lisa, what happened? 694 00:34:52,280 --> 00:34:53,480 Speaker 6: I don't the kids come out? 695 00:34:53,680 --> 00:34:56,480 Speaker 10: It's too expensive for everything nowaday for the kid. 696 00:34:57,160 --> 00:35:01,080 Speaker 2: Somebody at a beautiful vignette here of the starter homes 697 00:35:01,120 --> 00:35:05,400 Speaker 2: we all lived in or rented. I mean, you know, 698 00:35:05,440 --> 00:35:08,319 Speaker 2: I lived above a pizza parlor, you know, right down 699 00:35:08,360 --> 00:35:12,480 Speaker 2: from Gitsie's White Hots in Rochester. The cockroaches would come 700 00:35:12,560 --> 00:35:15,480 Speaker 2: up at night after the pizza parlor closed. We all 701 00:35:15,520 --> 00:35:17,719 Speaker 2: lived at these dumps. I mean except for Swimmer. He 702 00:35:17,760 --> 00:35:21,200 Speaker 2: was rocking right from day one. And now these kids. 703 00:35:20,960 --> 00:35:24,239 Speaker 10: Want to grant it, you know, they want the makers. 704 00:35:25,200 --> 00:35:26,320 Speaker 2: Are you doing that tomorrow? 705 00:35:26,840 --> 00:35:27,480 Speaker 4: They don't know. 706 00:35:28,360 --> 00:35:31,920 Speaker 2: Or Fels said, go two thousand dollars, sneakers. They just 707 00:35:31,960 --> 00:35:34,440 Speaker 2: went for a bigger value. Did you do the transaction 708 00:35:34,840 --> 00:35:39,400 Speaker 2: on Golden Goose sneakers. It went for a bigger, bigger 709 00:35:39,600 --> 00:35:43,920 Speaker 2: value than Versace Golden. I went by the store and 710 00:35:43,960 --> 00:35:46,200 Speaker 2: I just you know, I try to distract the women 711 00:35:46,239 --> 00:35:49,719 Speaker 2: when we go buy the store, you know, fancy sneakers. 712 00:35:49,880 --> 00:35:53,399 Speaker 2: Randy Shimmer, thank you so much for being Let's really 713 00:35:53,400 --> 00:35:57,080 Speaker 2: appreciate you coming in. Stay with us. More from Bloomberg 714 00:35:57,200 --> 00:36:06,319 Speaker 2: Surveillance coming up after this. 715 00:36:06,320 --> 00:36:10,200 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 716 00:36:10,239 --> 00:36:13,240 Speaker 1: starting at seven am Eastern on Apple Corplay and Android 717 00:36:13,280 --> 00:36:16,320 Speaker 1: Auto with the Bloomberg Business app. You can also listen 718 00:36:16,400 --> 00:36:19,680 Speaker 1: live on Amazon Alexa from our flagship New York station, 719 00:36:20,239 --> 00:36:22,880 Speaker 1: Just say Alexa Play Bloomberg eleven thirty. 720 00:36:23,160 --> 00:36:26,320 Speaker 2: Let's get right too at the newspapers with Lisa Mateo. 721 00:36:26,440 --> 00:36:29,320 Speaker 10: All right, I want to start with this big affordability issue. 722 00:36:29,600 --> 00:36:31,920 Speaker 10: The price of new cars and trucks in the US 723 00:36:32,120 --> 00:36:35,759 Speaker 10: increase thirty three percent since twenty twenty. The average price 724 00:36:35,760 --> 00:36:37,920 Speaker 10: of new carbrook the fifty thousand dollars barrier. 725 00:36:38,000 --> 00:36:38,440 Speaker 2: This fall. 726 00:36:38,680 --> 00:36:41,080 Speaker 10: JD Power the average monthly payment for a new car. 727 00:36:41,120 --> 00:36:44,880 Speaker 10: It says it's estimated at seven hundred and sixty dollars 728 00:36:44,920 --> 00:36:47,560 Speaker 10: a month, which means a lot of families can't afford that. 729 00:36:47,640 --> 00:36:48,880 Speaker 6: So what happens. 730 00:36:49,320 --> 00:36:51,839 Speaker 10: Experts are saying the typical forty eight to sixty month 731 00:36:51,880 --> 00:36:54,000 Speaker 10: car Loan term will it how has given way to 732 00:36:54,520 --> 00:36:59,359 Speaker 10: seventy two month learn terms, and even even longer. They're 733 00:36:59,400 --> 00:37:04,120 Speaker 10: saying they're reaching one hundred months or more than eight years, 734 00:37:04,200 --> 00:37:05,960 Speaker 10: especially when you get those larger use card. 735 00:37:06,040 --> 00:37:08,719 Speaker 2: Does the article say what it's done to use car prices? 736 00:37:08,920 --> 00:37:11,319 Speaker 10: It hasn't said that, but it said because people have 737 00:37:11,400 --> 00:37:14,200 Speaker 10: been holding onto their used cars for so long, holding 738 00:37:14,200 --> 00:37:17,960 Speaker 10: out that now they need the new car and they 739 00:37:17,960 --> 00:37:19,440 Speaker 10: have no choice but to kind. 740 00:37:19,280 --> 00:37:23,520 Speaker 2: Of And to me, it's the auto insurance. I mean, 741 00:37:23,600 --> 00:37:26,520 Speaker 2: you know, use hundred bucks a month and those days are. 742 00:37:26,400 --> 00:37:30,560 Speaker 5: Over yep, yep. It is crazy expensive. And then if 743 00:37:30,560 --> 00:37:32,480 Speaker 5: you want to go like ev, you got to pay 744 00:37:32,520 --> 00:37:32,920 Speaker 5: a premium. 745 00:37:32,920 --> 00:37:36,000 Speaker 2: On topic last night, the entire discussion at dinner last 746 00:37:36,080 --> 00:37:39,560 Speaker 2: night was electric utility bills. I mean people are talking 747 00:37:39,600 --> 00:37:42,960 Speaker 2: Red Sox baseball. You know what the Bears did to 748 00:37:43,000 --> 00:37:46,200 Speaker 2: the Packers. No, we're talking the governor bills. The governor 749 00:37:46,239 --> 00:37:48,839 Speaker 2: elected New Jersey. She got hired pretty much on that 750 00:37:48,960 --> 00:37:52,000 Speaker 2: topic alone. She's going to bring down utility bills. 751 00:37:52,120 --> 00:37:54,000 Speaker 10: I want is there an age cutoff for when you 752 00:37:54,080 --> 00:38:00,600 Speaker 10: kick the youth off the auto insurance from exactly the 753 00:38:00,600 --> 00:38:01,360 Speaker 10: family plan. 754 00:38:01,560 --> 00:38:04,439 Speaker 2: Or keep it on the cell phone bill? Just asking 755 00:38:04,600 --> 00:38:07,520 Speaker 2: because they're for Social Security and I'm still paying for 756 00:38:07,560 --> 00:38:08,920 Speaker 2: their cell phone bill. Next. 757 00:38:09,440 --> 00:38:12,880 Speaker 10: Okay, restaurants, they found a new way to fatten up 758 00:38:12,880 --> 00:38:15,560 Speaker 10: your check. Okay, if you've noticed, have you gotten the 759 00:38:15,600 --> 00:38:16,800 Speaker 10: dessert menu lately? 760 00:38:17,280 --> 00:38:19,240 Speaker 2: If you notice our dessert. 761 00:38:18,880 --> 00:38:22,040 Speaker 10: Wines listed on there? Yes, shortly, Okay, they've been doing 762 00:38:22,040 --> 00:38:24,839 Speaker 10: it more and more a long time. They're like thought 763 00:38:24,840 --> 00:38:28,120 Speaker 10: of unsophisticated, too sweet like people, eh, but now they're 764 00:38:28,160 --> 00:38:30,960 Speaker 10: on the menu because they cost a fraction of what 765 00:38:31,080 --> 00:38:33,520 Speaker 10: reds would cost from a similar year. So, for example, 766 00:38:33,640 --> 00:38:35,440 Speaker 10: if you get a glass of old wine from nineteen 767 00:38:35,480 --> 00:38:37,799 Speaker 10: eighty nine, the sweet ones, it'll be fifty dollars, where 768 00:38:37,840 --> 00:38:40,600 Speaker 10: as a bottle from that same nineteen eighties zyear will 769 00:38:40,600 --> 00:38:44,759 Speaker 10: cost several thousand dollars. So people are more willing to 770 00:38:44,800 --> 00:38:47,000 Speaker 10: get the sweet wine at the end. And then because 771 00:38:47,040 --> 00:38:49,600 Speaker 10: they have higher sugar content, the bottles can be left 772 00:38:49,719 --> 00:38:51,920 Speaker 10: open longer, and so they can. 773 00:38:51,800 --> 00:38:53,719 Speaker 6: Extend the life of us. Bot what you're doing that 774 00:38:53,840 --> 00:38:54,759 Speaker 6: see and then it. 775 00:38:54,800 --> 00:38:58,000 Speaker 10: Takes less, you know, manpower to just offer a dessert 776 00:38:58,000 --> 00:39:00,360 Speaker 10: wine than a fancy dessert where you need a special 777 00:39:00,440 --> 00:39:03,000 Speaker 10: chef and you need you know, additional manpower. 778 00:39:02,560 --> 00:39:07,640 Speaker 5: To get jamison neat. We're fine. 779 00:39:07,239 --> 00:39:10,319 Speaker 2: So what did you do when Bailey's was introduced? 780 00:39:11,160 --> 00:39:13,960 Speaker 6: It was like just ignored christ ignore that, ignore that. 781 00:39:14,280 --> 00:39:14,480 Speaker 2: Yeah. 782 00:39:14,920 --> 00:39:17,520 Speaker 6: Yeah, so norther in Northern Ireland, I have a problem. 783 00:39:17,320 --> 00:39:19,240 Speaker 5: Because they don't have Jamison's in Northern Ireland. 784 00:39:19,320 --> 00:39:20,440 Speaker 6: Really they don't. 785 00:39:20,840 --> 00:39:24,280 Speaker 5: We have to get I think she is old bush Mill. 786 00:39:24,400 --> 00:39:27,880 Speaker 6: It's a whole Northern Ireland, Republic of Ireland thing. 787 00:39:31,400 --> 00:39:34,719 Speaker 10: I was going to be quite okay, this is the 788 00:39:34,800 --> 00:39:36,920 Speaker 10: last one. Okay. We took you from sweet wine to beer. 789 00:39:37,000 --> 00:39:39,040 Speaker 10: Okay in the Wall Street Journal saying this is not 790 00:39:39,120 --> 00:39:42,040 Speaker 10: just any beer. It is a new version of Boston Beer's, 791 00:39:42,080 --> 00:39:46,080 Speaker 10: highly boozy Utopia's brand. It is the strongest yet thirty 792 00:39:46,200 --> 00:39:48,800 Speaker 10: percent alcohol by volume. 793 00:39:48,520 --> 00:39:51,320 Speaker 2: Through illegal in fifteen states. 794 00:39:52,640 --> 00:39:54,880 Speaker 10: Just to give you idea, traditional Sam Adams is like 795 00:39:54,920 --> 00:39:57,920 Speaker 10: five to six percent, okay, but thirty percent puts it 796 00:39:58,000 --> 00:40:00,680 Speaker 10: right up there with Kognak, like the same the level. 797 00:40:00,719 --> 00:40:03,719 Speaker 2: You're really on a trend here today before the holidays 798 00:40:04,800 --> 00:40:05,560 Speaker 2: don't open up. 799 00:40:05,800 --> 00:40:07,879 Speaker 10: But they're saying, don't try and make this at home 800 00:40:07,920 --> 00:40:09,759 Speaker 10: because the beer is so strong it ate through the 801 00:40:09,760 --> 00:40:11,719 Speaker 10: side of an insulated paper cup, so it. 802 00:40:11,640 --> 00:40:15,720 Speaker 5: Could be dangerous your inside. 803 00:40:15,960 --> 00:40:18,480 Speaker 10: Thank you, But apparently it's a it's a small portion, 804 00:40:18,640 --> 00:40:21,279 Speaker 10: like a little you know, niche aspect. But but some 805 00:40:21,320 --> 00:40:23,480 Speaker 10: people like it. It's all about for them the innovation. 806 00:40:24,000 --> 00:40:26,960 Speaker 2: Okay, well, thank you so much, Lisa, say the newspapers. 807 00:40:27,160 --> 00:40:32,000 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 808 00:40:32,120 --> 00:40:35,919 Speaker 1: and anywhere else you get your podcasts. Listen live each 809 00:40:35,920 --> 00:40:39,760 Speaker 1: weekday seven to ten am Eastern on Bloomberg dot com, 810 00:40:39,920 --> 00:40:43,720 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 811 00:40:44,000 --> 00:40:47,080 Speaker 1: You can also watch us live every weekday on YouTube 812 00:40:47,440 --> 00:40:49,440 Speaker 1: and always on the Bloomberg terminal.