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Speaker 3: The real data was the June number for PCE. This
Speaker 3: is what the FED looks at, personal income up two
Speaker 3: tenths of one percent, spending up three tenths of one percent,
Speaker 3: holding up. You also had a core PCE on a
Speaker 3: month on month coming in just two tenths of one
Speaker 3: percent and two point six percent year on year.
Speaker 4: So they say this is status quo.
Speaker 1: John Tucker, how goldly lockxy?
Speaker 4: Is this I mean?
Speaker 3: Or is it just a case of confirmation bias? Like
Speaker 3: you see what you want to see? Yeah, let's have
Speaker 3: someone who might have an opinion on that one. Lauren
Speaker 3: Saylor Baker is economists and senior consulting speaker at ITR
Speaker 3: Economics on the data. Is this data like a see
Speaker 3: what you want to see? Or is this a goldilocks
Speaker 3: for real.
Speaker 4: Result to be?
Speaker 5: This is not confirmation bias, as we got the GDP
Speaker 5: numbers yesterday. The economy is still holding up, very resilient,
Speaker 5: inflation finally coming down. It was a little more persistent,
Speaker 5: a little stickier than the FED wanted to see at
Speaker 5: the start of the year. But all of the most
Speaker 5: recent months of data giving them what they need to start.
Speaker 5: Cuts in September.
Speaker 1: All right, cuts in September. What about July thirty? First
Speaker 1: we heard from Bill Dudley, even Mohammad al Arian Bloomberg
Speaker 1: columnists saying that they should get it done with and
Speaker 1: get it done soon.
Speaker 5: I think that's the wishful thinking in the room. I
Speaker 5: do not expect the FED to be moving in their
Speaker 5: meeting next week. If we could accuse the FED of
Speaker 5: one thing, it would probably not be cutting rights too
Speaker 5: soon in this cycle.
Speaker 3: What do you think that the well, what are we
Speaker 3: gonna learn? Though, Like, Okay, they don't want to cut
Speaker 3: too soon. But to John Tucker's point, I get next
Speaker 3: week might be pushing a little bit. What else are
Speaker 3: we going to learn from next week until September that
Speaker 3: will really cement anything. It's just going to be the
Speaker 3: same trajectory, right.
Speaker 4: Well, that's their hope.
Speaker 5: So the FED really does want The word they're using
Speaker 5: is confidence, and to them that just means more months
Speaker 5: of data, additional data points coming in, so they don't
Speaker 5: want to move too quickly. I mentioned very strong GDP
Speaker 5: numbers that came out yesterday that will very likely be
Speaker 5: revised in future releases. So they just want to see
Speaker 5: that the inflation, as I mentioned, has been more persistent,
Speaker 5: has been stick here, that it isn't starting to creep
Speaker 5: back up by the end of the summer. Again, I
Speaker 5: think it's moving in the right direction finally, But because
Speaker 5: it took so long for us to get here. We
Speaker 5: had been on a nice smooth disinflationary track and then
Speaker 5: we hit that three three and a half percent range
Speaker 5: and things went much more sideways. So the Fed just
Speaker 5: wants to be sure this isn't a blip. We've had
Speaker 5: a couple of months of good data. They want to
Speaker 5: see a couple more.
Speaker 1: Well, there's another sign to their policy mandate. Isn't there
Speaker 1: and what's happening on that it has been there?
Speaker 6: There is?
Speaker 5: Yeah, Yes, the labor market is actually something they had
Speaker 5: wanted to see. Wage inflation cool. If we separate goods
Speaker 5: inflation out from service inflation, that good side of things
Speaker 5: is well under control. It has been for some time.
Speaker 5: Now it's the service side that's been held up by
Speaker 5: a very very tight labor market, so they're watching again.
Speaker 5: Cooling labor has really been expected. Our labor market was
Speaker 5: just on fire for the past couple of years. I
Speaker 5: expect long term we have a floor under labor market activity.
Speaker 5: We're starting to see the tide shift back in flavor of,
Speaker 5: you know, a slightly looser market at the moment. I
Speaker 5: don't think we're going to go too far that way though.
Speaker 5: It's just a demographic issue. We have baby boomers, that
Speaker 5: huge generation finally retiring. We don't have a huge glot
Speaker 5: of workers waiting on the sidelines or aging into the
Speaker 5: workforce at this point, so the numbers aren't going to
Speaker 5: materially rebalance this little bit of loosening in twenty twenty four.
Speaker 5: But I think that's a temporary trend.
Speaker 1: Well what happens, What's what happens more quickly, when labor
Speaker 1: starts to cool. Does that really really start to cool?
Speaker 1: Because it also affects personal spending as well.
Speaker 5: Sure, again, I don't think it really really starts to cool.
Speaker 5: Labor has been supporting that personal spending component, which again
Speaker 5: about two thirds of GDP driven by consumer spending, so
Speaker 5: that is the floor under economic activity this time around.
Speaker 5: We do see some echo effects from the pandemic still
Speaker 5: playing out in the labor market. Because things got so
Speaker 5: tight in that twenty one twenty two time frame, it
Speaker 5: drew a lot of folks into the labor market. So
Speaker 5: as we look at things like labor force participation rates
Speaker 5: for primeage workers, those are at twenty plus year highs
Speaker 5: right now. Again, we've brought more of those workers back
Speaker 5: to the workforce. The risk now is if we start
Speaker 5: to see layoffs or even if we just see more
Speaker 5: folks entering again. I don't think there are too many
Speaker 5: of them left on the sidelines, but that could pull
Speaker 5: down some of that, say unemployment rate. I don't think
Speaker 5: the fundamental drivers are there, and I think the ones
Speaker 5: that we're seeing are again a very temporary shoe focused
Speaker 5: on twenty twenty four, twenty five and beyond. Looks like
Speaker 5: that tightness will just be grinding tighter.
Speaker 3: Still, going back to the inflation point for a moment,
Speaker 3: we have seen freight rates kind of start to move
Speaker 3: a lot higher. We heard from Chipotle that their costs
Speaker 3: are really starting to increase, Like they singled out the
Speaker 3: price of avocado. And I can appreciate that some of
Speaker 3: these are idiosyncratic, but is there a danger that certain
Speaker 3: type of inflation that we felt was done will start
Speaker 3: coming back.
Speaker 5: We will always see pockets of inflation, I mean avocado specifically.
Speaker 5: If you look at those trade routes, we get these
Speaker 5: odd kind of one off events. So weather events. There's
Speaker 5: been a drought in the Panama Canal that is keeping
Speaker 5: ships from getting through. That's really increasing the time and
Speaker 5: the cost of that journey. So I from an economic
Speaker 5: fundamental point of view, I wouldn't say that's the trend,
Speaker 5: but yes, weather events, these kind of black swan events. Obviously,
Speaker 5: geopolitics that is the big one right now. I would
Speaker 5: not want to make any predictions on that front. That's
Speaker 5: not my ex for tease. But generally, if we look
Speaker 5: at major industrial commodity prices right raw material cost most
Speaker 5: of those are still below the year ago level. They're
Speaker 5: trending much more sideways than outright rise or decline. So
Speaker 5: I hope that's a breath of relief after a few
Speaker 5: years of very strong volatility. But we'll always be able
Speaker 5: to cherry pick those examples.
Speaker 1: You know what, I haven't looked at a long time
Speaker 1: and just look at the yield curve, the inversion between
Speaker 1: twos and tens. It's less invertity. What yeah, what does
Speaker 1: that tell you?
Speaker 5: So the yield curve, it's a great rule of thumb
Speaker 5: that yield curb inversions tend to precede a recession. This
Speaker 5: time around, clearly that has not been the case. We've
Speaker 5: been inverted for what two years now, are going on
Speaker 5: two years now, it's.
Speaker 1: Just eighteen basis points separation.
Speaker 5: Well, we like to see that come under control. Looks
Speaker 5: like it might normalize sooner than later, but that was
Speaker 5: never a guarantee. We've had several historical cases, so a
Speaker 5: lot of precedent for an inverted yield curve with no
Speaker 5: following recession.
Speaker 2: So I think.
Speaker 5: That's a funroll of thumb. It certainly gives us a
Speaker 5: great look into, you know, where the market is expecting
Speaker 5: things to trend, but not an iron cloud guarantee. And again,
Speaker 5: I think the outlier this time around, what really kept
Speaker 5: us out of that GDP recession was the labor side
Speaker 5: of things. That tight labor market supporting the consumer.
Speaker 4: All right, Lauren, thanks a lot, We really appreciate it.
Speaker 3: Lauren Zadelbaker is economists and senior consulting speaker at ITR Economics.
Speaker 4: Thank you very much.
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Speaker 3: There was another story that is starting that was reading
Speaker 3: high that was a surprise to many, and that is
Speaker 3: the se SEE suing Andrew Left of committing fraud through
Speaker 3: stock trades, social media posts, and research reports. This is
Speaker 3: SEC's biggest move yet in a year's long crackdown against
Speaker 3: traders who tout these bearish bets. Joining us now is
Speaker 3: Tom Schoenberg, a Bloomberg senior reporter.
Speaker 4: Tom. Can you walk us through what we know about
Speaker 4: the suit?
Speaker 1: Well, first of who is mister Left?
Speaker 4: Oh, sorry, who's mister Left?
Speaker 6: Andrew Left is a famed short seller. He has a
Speaker 6: you know, website, Citron Research, and he's been making sort
Speaker 6: of bearish bets for years of kind of a real, real,
Speaker 6: sort of well known voice in stock trade.
Speaker 3: So what was the problem because I mean short sellers,
Speaker 3: long long guys come on, they.
Speaker 4: Talk about the stocks they like.
Speaker 3: Short sellers come on, they talk about what they don't
Speaker 3: like about the stock, and they have positions on that
Speaker 3: benefit if the stock goes down. But we know all
Speaker 3: of this, So what was the specific problem with an
Speaker 3: your Left?
Speaker 6: So so what's happening here is both we've had both
Speaker 6: the SEC and the d o J. Now the criminal
Speaker 6: case alleging that Andrew Left was essentially not trading on
Speaker 6: the way he was telling the public he was going
Speaker 6: to be traded, he would essentially profit from going out
Speaker 6: either releasing a report or tweets or other social media
Speaker 6: interviews saying company stock, what should be valued at x
Speaker 6: and as everyone as as the market moved to that,
Speaker 6: he was immediately getting out and sort of making a
Speaker 6: profit on those sort of you know, short term stock movements.
Speaker 1: So saying one thing and doing another, basically.
Speaker 6: That's correct, that's according to the government.
Speaker 1: Yet this is something that's been kind of plaguing this
Speaker 1: industry for a while, isn't it.
Speaker 6: Well, this is obviously you know, uh, you know, the
Speaker 6: mean stock frenzy from the about three years ago, you know,
Speaker 6: caused sort of a longer, deeper look into this, both
Speaker 6: by you know, Congress and that as we're seeing here
Speaker 6: the Justice Department in the SEC, and you know, it
Speaker 6: looks like they're looking at conduct, you know, conduct in
Speaker 6: both of these cases go as far back as twenty eighteen,
Speaker 6: and with the Justice Department saying as recent is October
Speaker 6: twenty twenty three.
Speaker 4: So this, this conversation happens at home like every six months.
Speaker 4: My husband says, I don't understand short selling. Why do
Speaker 4: we allow it?
Speaker 3: And my response is like, oh, because it helps keep
Speaker 3: markets in our CEOs in check because they have someone
Speaker 3: being more critical the short I'm just explaining. But you
Speaker 3: know what if we look at it, like why do
Speaker 3: we allow short selling?
Speaker 6: Right? Well, what you see with you know, Andrew Left
Speaker 6: essentially became sort of a well known short seller in
Speaker 6: part because of a number of the reports that he released,
Speaker 6: you know, we wound up leading to actual charges against
Speaker 6: the company or you know, SEC violations and so on.
Speaker 6: So he established a you know, having a good reputation
Speaker 6: in the space. And what the government is saying here
Speaker 6: is that you know, once he had that reputation, had
Speaker 6: that audience, he sort of misused that to sort of
Speaker 6: you know, essentially fool people into moving to a certain
Speaker 6: position that he himself wasn't maintaining, even though he gave
Speaker 6: the illusion that that's where he was.
Speaker 1: What what are the companies involved?
Speaker 2: Do?
Speaker 7: What?
Speaker 1: Do we know? The names?
Speaker 6: Well, we got everything from Tesla, Roku, Navidia, there's you
Speaker 6: know about you know, I think two dozen or more
Speaker 6: in here.
Speaker 1: And how much did he how much did he make
Speaker 1: as a result of this? Do we know what? The SEC?
Speaker 6: Yeah, SEC is saying that he profited as.
Speaker 2: Just twenty million dollars.
Speaker 6: Which also involved you know, one of the one of
Speaker 6: the criminal charges against Andrew is for lying to federal
Speaker 6: agents claiming that he also wasn't didn't receive a conversational
Speaker 6: hedge funds. They're saying, you see more than a million
Speaker 6: dollars from two edge funds.
Speaker 1: Real quick? Have we heard from mister Left.
Speaker 6: At the moment, he has, he's not commenting. You know,
Speaker 6: if that changes, obviously we will we will report that.
Speaker 4: All right, We appreciate it, Thank you very much.
Speaker 3: Tom. Tom Schomberg, Bloomberg senior reporter, joining us on that game.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple car Play and
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Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 3: Let's get back to the market. Lisa was talking about
Speaker 3: what's happening in the bond market. You're seen buying pretty
Speaker 3: much all across the curve. It's been quite a week
Speaker 3: and we've seen a steepener of the last few days.
Speaker 4: That has been quite a week.
Speaker 3: So we want to get some great insight here with
Speaker 3: Steve Major. He's a global head of fixed income research
Speaker 3: at HSBC. I keep saying he lives in Asia. It
Speaker 3: was Hong Kong and now he's in Dubai.
Speaker 1: But the point is Shanghai Bank of Commerce, right, so.
Speaker 3: Banking corporation, Okay, But the point is he's never here,
Speaker 3: so you have to be on the early, early, early show,
Speaker 3: or he has to stay up late late late for
Speaker 3: you in order to get him on TV and radio.
Speaker 3: But he's here in studio and this is very exciting.
Speaker 3: He's a prolific voice when it comes to the fixed
Speaker 3: income market.
Speaker 4: Steve, thanks for being here. It's great to see you.
Speaker 8: Thank you for having me.
Speaker 4: So just broad Stokes, What are your calls right now
Speaker 4: on the US bond market.
Speaker 8: Well, it's lower yields. We've tended to have a lower
Speaker 8: as you know. And it's not just for the sake
Speaker 8: of it. We're not just doing it. We're not doing
Speaker 8: it to attract attention. It's because we incorporate a more
Speaker 8: structural and secular approach to the to the forecasting. If
Speaker 8: you just do it based on the cyclicuse, you'd always
Speaker 8: have a higher yield. And that might explain why other
Speaker 8: people think yields should be five. And so to me,
Speaker 8: if yields are bearing down on four for the ten
Speaker 8: year right now, and you ask me where we're being
Speaker 8: a year or so, it's time, I would say nearer
Speaker 8: to three than five.
Speaker 1: So you're looking at the stuff that's not necessarily short termy,
Speaker 1: but the more long term.
Speaker 8: Stand exactly structural and secular. Structural tends to be more
Speaker 8: things like regulation. Perhaps secular would be more demographic, so
Speaker 8: the impact of aging populations, things.
Speaker 1: That's really long term.
Speaker 8: Yeah, well yes, but then you need to because you
Speaker 8: have to have a view on the equilibrium to have
Speaker 8: a view on the tenure. Now, this is where many
Speaker 8: people switch off they'll say, well, I can't observe this
Speaker 8: our star or this equilibrium rate, so I'm not going
Speaker 8: to use it. Well, everyone who buys or sells a
Speaker 8: ten year security is implicitly taking a view on that number,
Speaker 8: because the tenure yield is not defined by today's policy rate,
Speaker 8: is defined by the path of that policy rate and
Speaker 8: where it ends up in the longer run. So if
Speaker 8: you think that the longer un equilibrium policy rate is four,
Speaker 8: for example, and then you think that the yield probably
Speaker 8: won't go down much more from here, and you would
Speaker 8: also think that the FED isn't particularly restrictive. Okay, that's
Speaker 8: an interesting point.
Speaker 1: Yeah, it's the FED restrictive because I can't figure out
Speaker 1: and then also when you answer that question for me,
Speaker 1: what goes into making that determination whether or not they
Speaker 1: are restrictive.
Speaker 8: Yeah, so you know, our assumption is that the fed's
Speaker 8: longer run equilibrium is about where the FED thinks it is,
Speaker 8: which is two and a half percent, and it's two
Speaker 8: point seven to be precise, and it's pretty much unchanged
Speaker 8: from before the pandemic. Now, I would look at this
Speaker 8: as scientifically as possible. It's difficult to be a scientist
Speaker 8: in bonds really, but the point is what has changed?
Speaker 8: And it's very easy to say the market indicates something
Speaker 8: has changed, therefore the world has changed. That's not good enough.
Speaker 8: All there is is a risk premium around the possibility
Speaker 8: that the world has changed. It is very different. So
Speaker 8: I think that the policy is restrictive because today's rate
Speaker 8: is more than double what the longer run equilibrium is.
Speaker 3: How do you look at something like fiscal stimulus And
Speaker 3: I appreciate that you're going to say that that's cyclical,
Speaker 3: but when we're looking at something globally from the energy
Speaker 3: transition where companies, private equity, and governments are going to
Speaker 3: be spending boltloads of money in the next thirty years, Yeah,
Speaker 3: how does that fit into your model?
Speaker 8: Yeah, so there's a debt, there's a debt and a deficit,
Speaker 8: there's a stock and a flow effect. I think that
Speaker 8: when you're talking about deficits that are going up and
Speaker 8: therefore more bonds, you can see how that can feed
Speaker 8: into the risk premium. But then the debt stock is
Speaker 8: a drag on longer run growth because it has to
Speaker 8: be rolled over and finance, and it takes cash flow
Speaker 8: away from investment and consumption. My point is that it's
Speaker 8: just it can be a little bit too easy and
Speaker 8: somewhat lazy to say there's a lot of supply, therefore
Speaker 8: the yield has to go up because you really do
Speaker 8: need to know what's on the other side. Now, when
Speaker 8: it comes to bonds, the substitution effect, if you like,
Speaker 8: it depends on the value. What a bonds look like
Speaker 8: compared to stocks, what a bonds look like compared to money,
Speaker 8: what do government bonds look like compared to credit, etc. Etc.
Speaker 8: It strikes me that the valuation argument for bonds is
Speaker 8: looking pretty good.
Speaker 1: All right, So what am I supposed to buy right now?
Speaker 8: Well, most real money investors that's different to a hedge
Speaker 8: fund or a trader, are sitting in what we call
Speaker 8: the belly in the middle majorities in credit. That way,
Speaker 8: they mitigate the negative carry because the market's implying the cuts.
Speaker 8: So your good quality You can buy indices of good
Speaker 8: quality credit and you're going to get a yield more
Speaker 8: than on the S and P five hundred forward earnings.
Speaker 8: And to me, you could have said that at any
Speaker 8: point in the last year. But ultimately it's a safe
Speaker 8: investment to be buying good quality US corporates.
Speaker 3: What about in the treasury curve. Where do you think
Speaker 3: we're going to see the most action, Alex.
Speaker 8: You mentioned the steepener that's been playing out. Do you
Speaker 8: know that the movement in let's look at twos tens right,
Speaker 8: the two tens has moved about as much as it
Speaker 8: did in the one month after the twenty sixteen election,
Speaker 8: which says that if there is a trade around this,
Speaker 8: it just played out. It just happened. Now it's all
Speaker 8: about the probabilities around the election result, and we've just
Speaker 8: seen a huge swing in that in the last few weeks.
Speaker 8: So the idea that it was all one way traffic
Speaker 8: and there was only gonna be one winner and one
Speaker 8: outcome with one set of policies, that's no longer clear today.
Speaker 8: So if the steepener was predicated on that, then I
Speaker 8: think people will start to think again. So it's, you know,
Speaker 8: to put a steepener on at this point today, given
Speaker 8: how much it just moved, I think would be dangerous.
Speaker 3: But what if it wasn't about the election? What if
Speaker 3: it was about pricing in the cuts?
Speaker 8: And that's I think you're spot on, because in fact
Speaker 8: it's been the it's been the recent inflation prints and
Speaker 8: the calling real economy that has dominated the scenario analysis
Speaker 8: and the fiscal views and the election views, and so
Speaker 8: that's explained the steepening. That's explained why two's are pushing
Speaker 8: to the low yield for the last year. But the
Speaker 8: problem is, if you enter today, you buy a two
Speaker 8: year that is so far through the money market rate
Speaker 8: that if the Fed isn't cutting and cutting by more
Speaker 8: than is priced in on the WRP screen, you're not
Speaker 8: going to make any money. And so that's why I
Speaker 8: think that the steepener may have played out.
Speaker 1: Okay, so the obligatory question we'll finish up with this September,
Speaker 1: how and what's the path forward beyond September.
Speaker 8: The baseline is they do twenty five. The interesting thing
Speaker 8: is that the scenarios around that, whether it could be
Speaker 8: more to me to value a bond today, you need
Speaker 8: to think about not just the next couple of meetings,
Speaker 8: it's the it's through next year as well. They're in
Speaker 8: anmazing path and I think that they will deliver at
Speaker 8: least what's in the in the forwards, which makes it
Speaker 8: difficult to buy the front end, but makes you want
Speaker 8: to be a bit higher up.
Speaker 1: On the curve.
Speaker 4: Steve, It's so good to see you.
Speaker 3: Steven Major, Global head of Fixed Income Research at HSBC.
Speaker 3: So helpful to understand all those different dynamics. I was
Speaker 3: taking notes.
Speaker 1: Did you see me here from his underground layer?
Speaker 4: It doesn't look oh, he was just somewhere else.
Speaker 3: It just means all right, come back next time. Okay,
Speaker 3: Well we'll just go with it.
Speaker 4: Steve Major, the man of mystery, Thank you very much
Speaker 4: for joining us.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
Speaker 2: Otto with the Bloomberg Business. You can also listen live
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Speaker 2: say Alexa play Bloomberg eleven thirty.
Speaker 4: All right, two politics we go.
Speaker 3: So the latest was that former President Barack Obama and
Speaker 3: Michelle Obama has a have a officially endorsed vice president
Speaker 3: now presidential candidate.
Speaker 4: Can I say that now?
Speaker 1: Kamala Harrish presumptive.
Speaker 3: Presumptive presumptive nominee Kamala Harris. Nathan Dean Bloomberg Intelligence and
Speaker 3: your Policy analyst, joins us. Now, Nathan, the last sort
Speaker 3: of you know, lever falls into place for Kamala Harris.
Speaker 4: What can we expect over the weekend.
Speaker 9: So I'm actually hoping that we don't expect all that much.
Speaker 10: I mean, after two weekends you know of having really
Speaker 10: big news. But you know the next thing for us
Speaker 10: really is to try and figure out who Kamala Harris
Speaker 10: is going to pick as their vice presidential candidate. You know,
Speaker 10: the the betting markets, which you can find in the
Speaker 10: terminal at WSL election are really suggesting it's coming down
Speaker 10: to Senator Mark Kelly of Arizona and Senator Josh Shapiro
Speaker 10: out of Pennsylvania, you know, Senator Cooper and Senator Bashara
Speaker 10: out of North Carolina and Kentucky being the others. But
Speaker 10: you know, just remember that Kamala Harris has a lot
Speaker 10: of time. The Chicago election isn't until August twenty second,
Speaker 10: and that's when she actually has to pick that vice
Speaker 10: president nominee.
Speaker 9: So you know, I'm thinking that they may take some time.
Speaker 9: I'm on this.
Speaker 10: The news cycle is worth them right now. You know,
Speaker 10: maybe they're going to play that up again. So I'm
Speaker 10: thinking for the next week or so, it could be
Speaker 10: just more back to originally what we originally thought.
Speaker 9: Just a campaign for the presidency.
Speaker 1: What it's a history teaches. I mean, Pennsylvania, Shapiro, what
Speaker 1: is it nineteen delegates there?
Speaker 10: Yeah, so I don't remember the number off the top
Speaker 10: of my heads. But you know, for the Democrats, you know,
Speaker 10: the really it's this idea of the Russbelt, Pennsylvania, Michigan,
Speaker 10: in Wisconsin, you know, the other tuples.
Speaker 1: Let me just I just want to might I should
Speaker 1: have follow up with my actual question picking a vice
Speaker 1: presidential candidate, does that really move the needle for the
Speaker 1: person who's on the top of the ticket.
Speaker 9: Does it matter?
Speaker 10: You know, yeah, you know, I think it would matter
Speaker 10: at a specific state level. So if you go with
Speaker 10: Josh Shapiro, you know, obviously I think you're gonna get
Speaker 10: a boost because he's really popular in the state of Pennsylvania.
Speaker 10: But just to remember that we're also talking about the
Speaker 10: vice presidential picks here when it comes to policy and
Speaker 10: the one debate that's between the vice president. You know,
Speaker 10: historic it's usually people don't go to the polls to
Speaker 10: vote for the vice president. They go to the polls
Speaker 10: and they go to the ballots to vote for the president.
Speaker 10: So you know, there's a lot of focus on the
Speaker 10: VP candidates, and then certainly we cover at BI in
Speaker 10: terms of how they can ultimately influence policy and so
Speaker 10: forth like that. But you know, at the end of
Speaker 10: the day, when people go to November, they're going to
Speaker 10: be voting for either President Trump or Vice President Kamala Harris.
Speaker 4: When do we think.
Speaker 3: We're going to get real policy initiatives from Kamala Harris?
Speaker 3: I appreciate that in her first sort of campaign speech,
Speaker 3: she's not going to do that, Like her goal is
Speaker 3: to get everyone jazzed up and excited. When do you
Speaker 3: think we're going to start to hear more specifics?
Speaker 9: I actually don't think it's going to come all that
Speaker 9: too soon.
Speaker 10: I mean, when we went back to look at some
Speaker 10: of their policy statements, we had to go all the
Speaker 10: way back to our time as attorney general as California,
Speaker 10: and I think August they're just going to focus more
Speaker 10: so on this idea of you know, the vice presidential pick,
Speaker 10: and I think you'll see a little bit more on
Speaker 10: border and a little bit more on immigration. But when
Speaker 10: it comes to like her economic policy, you know, foreign
Speaker 10: relations and so forth like that, I think we aren't
Speaker 10: going to see the specifics until we get to September,
Speaker 10: which is the debate season, and so after Labor Day,
Speaker 10: after the August recess, I think Americans will really be
Speaker 10: paying attention to the race then, and at that point,
Speaker 10: Kamala Harris is going to have to explain those policy positions.
Speaker 10: I think the next two weeks or so, they're just
Speaker 10: going to try and figure it out, just because remember
Speaker 10: that her campaign is only what four days old, five
Speaker 10: days old at this point, so I think there's still
Speaker 10: a lot of baby steps that campaign has to do,
Speaker 10: and then we'll see more and more of the policy statements,
Speaker 10: I think towards Labor Day and maybe even to September.
Speaker 1: At that point, do you know how long we have
Speaker 1: to wait before we get really good polling data?
Speaker 9: You know?
Speaker 10: I think it's the first We've already started to see
Speaker 10: the first polls that have come out post the Biden decision,
Speaker 10: but it's early, and it's at a national level. I
Speaker 10: think some more of the state polling data that was
Speaker 10: more important to us in terms of like Pennsylvania, Arizona
Speaker 10: and so forth like that, that's being conducted this week,
Speaker 10: and so I think, you know, and please don't hold
Speaker 10: me to this, it'll probably be the tail end of
Speaker 10: next week when we start to see that do.
Speaker 4: We trust polls now, John Tucker? Is that something that
Speaker 4: we do.
Speaker 1: A Dewey defeated Truman, didn't he?
Speaker 4: Oh, okay, it was a little bit ago though. So
Speaker 4: when it comes to the campaign, is the campaign and
Speaker 4: infrastructure for President Biden, is that infrastructure set up for
Speaker 4: Kamala Harris right now to do what she needs to
Speaker 4: do and travel a lot and do a lot of
Speaker 4: rallies and get her name out there.
Speaker 10: According to them, yes, but I would say just you know,
Speaker 10: it's also you know, you have the ground staff, but
Speaker 10: you also have the leadership staff, and I think the
Speaker 10: lead leadership staff is going to obviously change, if not
Speaker 10: in direct positions, but in terms of influence.
Speaker 9: I mean, look, you know.
Speaker 10: Vice President Harris had a campaign back in twenty twenty
Speaker 10: didn't go so well for us. She was one of
Speaker 10: the first people to drop out of the Democratic nomination process. However,
Speaker 10: you know, the Democratic Party is fairly aligned at this point,
Speaker 10: and so I think that there are other people out
Speaker 10: there who are certainly interested, if not serving in the campaign,
Speaker 10: but at least be able to whisper into that campaign.
Speaker 9: So I think what's.
Speaker 10: Happening right now is that you know, obviously they're going
Speaker 10: through this growth. They didn't really have much of a
Speaker 10: plan up until Sunday or maybe a few days beforehand.
Speaker 9: So I think they'll have another week or two.
Speaker 10: But then, you know, come August, early August, mid August,
Speaker 10: I think they'll be fine.
Speaker 9: In terms of moving forward.
Speaker 1: Is there going to be a debate? Is that a
Speaker 1: sure thing?
Speaker 9: Well, you know, I certainly think so.
Speaker 10: I mean, look, if President Trump, you know it would
Speaker 10: were to back out with one of the dates, the
Speaker 10: September tenth date, if I recall correctly, is still moving forward.
Speaker 10: And I think they've invited both candidates for a September
Speaker 10: seventeenth debate.
Speaker 9: And look, if one of the one of the.
Speaker 10: Candidates at this point decides to drop out, I think
Speaker 10: that's a serious, uh mistake on their part.
Speaker 9: But you know, it's Washington politics. Anything can happen.
Speaker 10: But I think at this point, certainly they'll entertain and
Speaker 10: I think ultimately they'll have one, if not two debates
Speaker 10: going forward.
Speaker 4: Oh boy, we're definitely watching that.
Speaker 2: Well.
Speaker 1: I'm worrieds just like the forum, that it's going to take.
Speaker 3: Yeah, all right, Nathan, we thank you. We really do
Speaker 3: hope you have a weekend for the first time in
Speaker 3: quite a while. Nathan Dean, Bloomberg Intelligence Senior policy analyst,
Speaker 3: don't scare the guy.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 3: Focus on Unis is brought to you by Build America
Speaker 3: Mutual ensures of US municipal bond that finance essential American
Speaker 3: infrastructure and provides guaranteed income to improve any portfolio. Be
Speaker 3: part of Building America. Invest in BAM insured bonds.
Speaker 4: How'd I do?
Speaker 1: Amanda come out? You can chime in there, go bam bam.
Speaker 2: Oh.
Speaker 4: She sounded like me and I first started doing the show.
Speaker 3: Yeah, sure, where we're going to get you just gotta
Speaker 3: really own it and like jump in there. Amanda Albright
Speaker 3: is a municipal finance reporter and she joins us from
Speaker 3: Bloomberg News.
Speaker 4: Okay, a man the.
Speaker 1: Mantle, I should say from Joe Mysek, you have some
Speaker 1: pretty big shoes to fill there, Amanda.
Speaker 7: Yes, very big shoes to Bill Pressure.
Speaker 4: We support you, We miss him, and we support you.
Speaker 3: There are a couple of stories that caught my eye
Speaker 3: this week because I'm I'm very I have lack of
Speaker 3: confidence when it comes to my ability to discuss muni's,
Speaker 3: so I want to make sure that I can handle
Speaker 3: this segment.
Speaker 4: Goldman Sachs makes a bet.
Speaker 3: On a muni et F market one hundred and nine
Speaker 3: billion dollar meuni ETF market.
Speaker 4: What have they done this week?
Speaker 7: Yeah, so Goldman has joined the rush of firms that
Speaker 7: we've seen that have started offering muni bond ETF's. Goldman
Speaker 7: sax Asset Management already had immuniti ETF, but they are
Speaker 7: kind of getting deeper involved in the space with four
Speaker 7: new funds. So one of the funds appeals to folks
Speaker 7: in New York that are worried about their taxes that
Speaker 7: it's been a common theme lately. There's another fund that
Speaker 7: kind of mimics like a cash like fund, except it's
Speaker 7: tax exempt. So I'm like money market funds that are
Speaker 7: paying you know, upwards of five percent. You can kind
Speaker 7: of shield your tax is if you invest in their
Speaker 7: ultra short MUNI fund. So we've seen a bunch of
Speaker 7: companies get further involved in the ETF space just because
Speaker 7: it seems like that's kind of that and separately managed
Speaker 7: accounts are becoming a little bit more popular compared to
Speaker 7: traditional mutual funds.
Speaker 1: And these are actively managed funds, right, and you said
Speaker 1: ultra short, so that sort of sets them apart from others.
Speaker 7: Yeah, And interestingly enough, it seems like actively managed is
Speaker 7: where other companies kind of see more of an opportunity
Speaker 7: to make an impact. The passive space within muny ETFs
Speaker 7: is very dominated by Vanguard and black Rock. They have
Speaker 7: two extremely large funds that are both passive passively managed,
Speaker 7: and so I think it's a little bit harder for
Speaker 7: other companies to kind of gain market share in that segment.
Speaker 7: So we're seeing most of the launches within actively managed.
Speaker 1: And are they popular.
Speaker 4: I was going to ask that, Oh he stole it.
Speaker 1: See it's a mind she held between the two of us.
Speaker 4: Actively managed.
Speaker 7: It is definitely making it's growing, but I still think
Speaker 7: it's really hard to compete with to passively managed funds
Speaker 7: that are I think when I ran the numbers, it
Speaker 7: was close to seventy billion between the two of them.
Speaker 7: So I still think passively managed, being you know, so
Speaker 7: cheap and so easy for investors to get involved in,
Speaker 7: is still like we shouldn't we shouldn't write that off.
Speaker 7: But I think a lot of the money managers are
Speaker 7: betting that active will eventually gain more adoption.
Speaker 1: And I'm guessing that these are for people who live
Speaker 1: in high tech states.
Speaker 4: Right exactly.
Speaker 1: So it's just offered where like New York, California, New Jersey.
Speaker 7: So there's a California fund and then a New York fund.
Speaker 7: So when we spoke to the folks at Goldman, you know,
Speaker 7: they just mentioned that they're still hearing concerns about perennially
Speaker 7: perannial concern about high taxes in both of those states,
Speaker 7: and that's you know, kind of been We're seeing a
Speaker 7: lot of demand for unis generally this year, and definitely
Speaker 7: taxes are part of that, especially given folks not knowing
Speaker 7: what's going to happen next year with tax rates. Taxes
Speaker 7: are front and center.
Speaker 4: Let's move to another great story.
Speaker 3: It was a big take this week you and a
Speaker 3: couple of your colleagues wrote about it, and the title
Speaker 3: is Harvard's four hundred and sixty five million dollars in
Speaker 3: tax benefits draw some new scrutiny. Can you tell us
Speaker 3: about this big take What was your takeaway and would
Speaker 3: you learn?
Speaker 7: Yeah, so we have a story just kind of examining
Speaker 7: different tax benefits that Harvard has just given the very
Speaker 7: intense focus on Harvard for the past I guess year
Speaker 7: they we focused a lot on the property side because
Speaker 7: there's a very rich and kind of long standing debate
Speaker 7: over tax exempt property in college towns across the US,
Speaker 7: not just in Boston and Cambridge, but we found that
Speaker 7: within Boston and Cambridge there is kind of a growing
Speaker 7: push to have Harvard pay more in what's known as
Speaker 7: payments in lieu of taxes or pilots, and that's basically
Speaker 7: an annual payment that Harvard makes every year to account
Speaker 7: for the fact that it's property is tax exempt. Which
Speaker 7: this is a debate that could be could be had
Speaker 7: at any college town with any university pretty much because
Speaker 7: city leaders are always going to want more from their universities.
Speaker 7: But I think just the growing wealth at Harvard and
Speaker 7: you know, sky high tuition has just kind of reinvigorated
Speaker 7: this debate and it's a really interesting topic and also
Speaker 7: very relevant to many elite institutions, the debate that's taking
Speaker 7: place both in city halls but also in Congress because
Speaker 7: the Ivy League has become a major target lately.
Speaker 1: Okay, apolitic the intersection of politics and munichs Hey in
Speaker 1: the MEUNI space, if we can back up for what
Speaker 1: is issuance like and what are some of the more
Speaker 1: interesting issues that you see out there.
Speaker 7: Yeah, issuance has been pretty surprising this year. I think
Speaker 7: it's up thirty eight percent, a record first half of
Speaker 7: the year. That was something that Joe loved covering when
Speaker 7: he was with US.
Speaker 1: Oh, he retired. We sound like he's died. He's retired, retired,
Speaker 1: he's on a beach somewhere.
Speaker 7: He's Yes, he's still rooting us on and reading our coverage.
Speaker 7: But there's just been so many for just kind of
Speaker 7: a preview for terminal readers. In a little bit, we
Speaker 7: should have a story about how a lot of these
Speaker 7: deals are getting totally gobbled up. There's like kind of
Speaker 7: you know, the food fight for for MUNI deals. Some
Speaker 7: investors are kind of frustrated by this because they can't
Speaker 7: get enough bonds that they put in order for and
Speaker 7: we're really seeing this across the board for you know,
Speaker 7: even very vanilla bond structures.
Speaker 4: And then you know, it's actually surprised me.
Speaker 7: There's not been a ton of deals that I've been
Speaker 7: really like, oh, this is so interesting that they're doing this.
Speaker 7: It's just kind of a typical infrastructure that we're seeing
Speaker 7: getting funded, and not a ton of like you know,
Speaker 7: high yield issuances, but just kind of across the board
Speaker 7: general obligation bonds, triple A, double A, and but yet there's.
Speaker 4: So much demand for them.
Speaker 7: And I think part of that is people are worried
Speaker 7: that this is a rush before the election, trying to
Speaker 7: get ahead of any volatility, and people are worried that,
Speaker 7: you know, after November, these sales are going to go away,
Speaker 7: so you kind of have to get in the market
Speaker 7: now while you while you can.
Speaker 1: So this is exciting. Is anybody on shaky ground?
Speaker 7: No, I'm so surprised that everything is just anytime. The
Speaker 7: US economy is doing well, COMMUNI issuers are they do well?
Speaker 7: States do well. I just saw Virginia. I think they
Speaker 7: had a billion more in tax revenue than anticipated for
Speaker 7: the most recent fiscal year. Like it's really surprising just
Speaker 7: how well state and local finances have been holding up.
Speaker 7: It's pretty remarkable, but that just speaks to the broader economy.
Speaker 3: Yeah, I was going to say, like it is really surprising,
Speaker 3: particularly as the whole narrative of the COVID funding it
Speaker 3: is running out. They're going to have huge budgets shortfalls,
Speaker 3: and I feel like I have yet to hear that.
Speaker 7: Yeah, we definitely haven't. Where I see stress is more
Speaker 7: higher ed private colleges. Those aren't kind of typical classic
Speaker 7: munique credits or you know, they're not funded necessarily by
Speaker 7: tax revenues. But where we're seeing stress is not necessarily
Speaker 7: states and cities. It's more like a private college that's
Speaker 7: sold muny bonds. And I was talking with a colleague
Speaker 7: today about how schools that have been relying on pandemic
Speaker 7: really funding. Those are the areas that, now that the
Speaker 7: funding is running out, schools are kind of where the
Speaker 7: stress is being seen rather than like the city, though
Speaker 7: of course there's probably exceptions out there.
Speaker 4: All right, Amanda, thank you so much.
Speaker 3: We really appreciate Amanda Albright Municipal Bonds report. Does Joe
Speaker 3: Myisick like really email you about your stories of course.
Speaker 4: Oh my god.
Speaker 3: I love that he's retired, but he's not he's reading,
Speaker 3: he's listening. Yes, please tell him that we say hi,
Speaker 3: I learned la a lot.
Speaker 1: That was really interesting and you are so like.
Speaker 4: Not so scared. Every Friday, nieds, I definitely get nervous.
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