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Speaker 2: This is a really timely conversation Nisha Poultel. We get
Speaker 2: a huge response when she's on with Parametric. I'm thrilled
Speaker 2: that she could join us here on taking advantage of
Speaker 2: text rebounds.
Speaker 3: Not one, but two people in the last week have pounded.
Speaker 2: The table on your world. They're saying, basically, it's never
Speaker 2: been like this. Yeah, has it never been like this
Speaker 2: in the muni bond.
Speaker 4: World in the long end of the curve. So if
Speaker 4: you look at twenty year high quality triple A bond yields,
Speaker 4: we have not seen these yields system atinably this high
Speaker 4: in the past, I would say fifteen fifteen years or so. So,
Speaker 4: and here's the thing. As we talk about New York City,
Speaker 4: you do see, you know, headline stories around New York City,
Speaker 4: possibly credit. We can certainly discuss the budget bill and
Speaker 4: federal funding cuts to issuers, but my main line here
Speaker 4: is not much has changed from a credit quality perspective, right,
Speaker 4: so you're still looking at a very high quality acid
Speaker 4: class that purely based on technicals. A lot of issuance
Speaker 4: in a short period of time, not as much demand
Speaker 4: has really created this imbalance, and long ENDMUNI yields are
Speaker 4: up anywhere from eighty to ninety basis points year to date.
Speaker 4: So you're looking at tax equivalent yields for New York,
Speaker 4: you know, for New York residents anywhere around eight and
Speaker 4: a half to nine percent north of that in that
Speaker 4: long end of the curve. Right, these are bonds finite maturity.
Speaker 3: Give us an example of one of those bonds.
Speaker 2: Is it the New York Mets bond of two thousand
Speaker 2: fifty ten.
Speaker 4: No, I mean you're looking at New York City waters, right,
Speaker 4: very high quality issuer, New York City geos, New York
Speaker 4: City TFAs. These are just your large issuers that you're
Speaker 4: getting these types of yields for. And this is on
Speaker 4: a national basis as well. So again what we've seen
Speaker 4: is as you've had this big, beautiful bill proposal. Do
Speaker 4: you remember earlier this year a lot of talk around
Speaker 4: possibly removing the tax exemption or selective young mini bonds.
Speaker 4: I mean everything was on the table. So if you're
Speaker 4: an issuer and you're looking to issue death this year
Speaker 4: in the municipal bond market, a lot of that was
Speaker 4: pulled forward, right, you're like, let me just issue in
Speaker 4: the market now. Now, from a demand perspective, you really
Speaker 4: haven't seen a lot of inflows into the market. And
Speaker 4: that's really been the case for fixed income. It's been
Speaker 4: a little bit of a tough year, right, Choppy yields
Speaker 4: and investors don't want to take on a lot of durations.
Speaker 4: So if you see the ten year maturity and in
Speaker 4: that part of the curve has been very well supported.
Speaker 4: But most high tax market individuals, that say retail investors,
Speaker 4: are a little fearful of investing further out. So when
Speaker 4: you don't have that natural support and you have so
Speaker 4: much demand, this is what's created that imbalance. So we're
Speaker 4: seeing this as just a tremendous opportunity. And when you
Speaker 4: talk about those types of yields, right, I mean, compare
Speaker 4: this to any other asset class that you're looking at
Speaker 4: out there with this credit quality, it's you know, it's
Speaker 4: time to like in simply put, exactly, yes.
Speaker 5: The best performance I'm looking at my go function on
Speaker 5: the Bloomberg terminal. The best performance in fixed income has
Speaker 5: been US corporate high yield. Yes, that kind of surprised
Speaker 5: me a little bit. Yeah, what do you see in
Speaker 5: a high yield market?
Speaker 4: Yeah, I mean, look, spreads have remained incredibly tight, and
Speaker 4: a lot of this is based upon the fact that
Speaker 4: and I think a lot of your guests here have
Speaker 4: spoken about the resiliency of the economy, right, I mean,
Speaker 4: we just haven't seen any cracks in the economic data.
Speaker 4: Yet we're expecting the FED to stay on hold. And
Speaker 4: so you seen again a technical story there as well.
Speaker 4: You know, just an an incredible amount of demand which
Speaker 4: has caused spreads to remain tight. And now if you're
Speaker 4: on I in you look at what your broad union
Speaker 4: next has done. Yep, I mean it's underperformed everything else.
Speaker 2: If we have a debt and a deficit, we're debating
Speaker 2: whether mister Besson's going to give us more t bills
Speaker 2: and imaginable like back to biblical times.
Speaker 3: Yes or whatever. The phrase I use as an amateur.
Speaker 2: Is crowding out. Is the federal government full faith and credit.
Speaker 2: There's so much stuff because of the debt and the
Speaker 2: deficit that they're crowding out Niche Patel's world.
Speaker 4: Look, this is going to have an impact on yields,
Speaker 4: There's no doubt about it. So you know, I'm not
Speaker 4: here to say that we're going to have your long
Speaker 4: end yields, you know, fall tremendously here. I think the
Speaker 4: debts and deficit story is going to keep yels relatively
Speaker 4: elevated have a seper yel curve. But I think in short,
Speaker 4: when you talk about additional debt issuance that happens on
Speaker 4: the curve is a big part of this story. Right,
Speaker 4: We're talking about a lot of t bill issuance. So
Speaker 4: if you take a look at that in terms of
Speaker 4: the impact of the market, and you take a look
Speaker 4: at the assets that are seeing in money market funds,
Speaker 4: I mean, this is a story where you could see
Speaker 4: that easily being absorbed in the market. So does it
Speaker 4: relates to Munis? You know, you're seeing certainly some impact
Speaker 4: in terms of what treasure yields have done on Muni's
Speaker 4: but even more to a wider effect in the long
Speaker 4: and which is what's presenting this opportunity.
Speaker 5: What do you expect are fed to do for the
Speaker 5: remainder of the year. I mean, I guess if I
Speaker 5: look at the WRP function on.
Speaker 6: The bloomer, maybe two two cuts.
Speaker 5: Yeah, is that kind of where you think it's going
Speaker 5: to be.
Speaker 6: Is that where they should be?
Speaker 7: Yeah?
Speaker 4: I mean, look, I think I think two cuts are
Speaker 4: still plausible. And I I'm thinking, look, we can be
Speaker 4: in a scenario of where we were end of twenty three.
Speaker 4: So end of twenty three we had a sharp rally,
Speaker 4: at the end of the year, we had softening economic data,
Speaker 4: we had a FED pivot, and so look, no one's
Speaker 4: expecting the FED to do anything tomorrow, but the main
Speaker 4: story being we haven't given it enough time, right, we
Speaker 4: haven't maybe given it enough time for any of the
Speaker 4: cracks that possibly show up. So if you do start
Speaker 4: seeing any softening in the labor market Friday, I will
Speaker 4: say it again as you've been saying today, big day,
Speaker 4: big big jobs number, but solo the one the month after,
Speaker 4: and so the one a month after that. So I
Speaker 4: think the FED could be in a place by fall,
Speaker 4: late fall to start cutting. And I think that narrative
Speaker 4: could be you know, one cut talking about it could
Speaker 4: be that pivot that could possibly send send yels you know,
Speaker 4: certainly a little bit lower than where we are today,
Speaker 4: no doubt about it.
Speaker 3: Is there a demand?
Speaker 2: I mean, if I got a seven percent netclean, eight
Speaker 2: percent clean, nine percent triple, is it.
Speaker 3: Four poll tax free in New York?
Speaker 8: I don't know.
Speaker 3: I don't even know. But is there a demand you
Speaker 3: know within the street? Is it retailed demand?
Speaker 4: There is? There is, So we have started to see
Speaker 4: demand and pick up. I would say, I don't want
Speaker 4: to say very substantially, but we're starting to see you know,
Speaker 4: certainly investors picking their heads up and thinking, look, I
Speaker 4: can lock in this type of yield. You know, you
Speaker 4: can hold it to maturity, right, you can let it
Speaker 4: roll down again. Beautiful, beautiful thing about bonds. There's a
Speaker 4: finite maturity outside of credit issue, which is what a
Speaker 4: professional manager is paid to do. This is a tremendous opportunity.
Speaker 4: So I think, as we again go into the fall,
Speaker 4: possibly with the narrative that look, the FED could start cutting,
Speaker 4: how do I lock in yields?
Speaker 6: Right?
Speaker 4: And the last thing I'll kind of say here is
Speaker 4: like for fixing come investors, it's been a frustrating few years.
Speaker 4: I mean, as you all know, we are now sitting
Speaker 4: at yields where if you have a starting yield a
Speaker 4: four or five percent, this is going to be a
Speaker 4: big driver forward performance, right, So that's also the that's
Speaker 4: also the huge catalyst here on top of that, you
Speaker 4: have a pretty high cushion. Should rates move even further
Speaker 4: from here, so you can you know whether one hundred
Speaker 4: basis point move in many cases before you're even flash exactly.
Speaker 3: Thank you so much, Parametric.
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Speaker 2: Neil Dota is an optimist and maybe on this day,
Speaker 2: this is the best day in history to speak to
Speaker 2: Neil Doda of Renaissance Macro about the optimism of this nation.
Speaker 3: Neil, you've been.
Speaker 2: Writing on the tariff dynamic and how they are changeable
Speaker 2: as well.
Speaker 3: How will tariffs change our listeners our viewers?
Speaker 7: Well, Hi, Tom, how are you you know to me?
Speaker 7: The way I'm looking at tariffs as really it's it's
Speaker 7: a rotation of growth, right, I mean, over time we
Speaker 7: should see more activity going into our manufacturing sector, but
Speaker 7: that will come at the expense of other sectors of
Speaker 7: the economy. So you know, to me, it's it's not
Speaker 7: so much good or bad. I'm just looking at it,
Speaker 7: you know from the you know from my seat, which
Speaker 7: is it's rotating growth into some industries and away from
Speaker 7: other industries. So as an investor you should probably proceed accordingly.
Speaker 7: But you know, tariffs are going to be meant to
Speaker 7: are meant at some level to boost manufacturing activity. I
Speaker 7: think you know that will show up for for producers,
Speaker 7: and that will and then that will come at the
Speaker 7: expense of consumption. You remember, tariffs are a consumption tax
Speaker 7: and inefficient consumption tax, but a consumption tax.
Speaker 2: And Paul and Neal's note he talked to it's a
Speaker 2: VAT I mean basically it's you know him VAT tax
Speaker 2: as well that they use in Europe.
Speaker 5: So Neil, I mean, is this net net Can we
Speaker 5: at this stage meets too early say whether this is
Speaker 5: going to be a net positive a net negative for
Speaker 5: this economy because this is an economy that's based upon
Speaker 5: seventy percent consumption.
Speaker 7: Well, I mean, I think, I mean, most if you
Speaker 7: look at most models of the economy sort of workhorse
Speaker 7: macro models. They'll say that it's net negative that there's
Speaker 7: a persistent loss of output over a longer term period.
Speaker 7: But this is all I mean. But this is also
Speaker 7: sort of I guess, to some extent what people voted for.
Speaker 7: I mean, you know, they want more growth source domestically,
Speaker 7: and tariffs are one way to achieve that goal. But
Speaker 7: what I was trying to get at with what I
Speaker 7: wrote is, you know, all I'm saying is this. If
Speaker 7: you had told me that the effective tariff raid based
Speaker 7: on how much customs was collecting would be close to
Speaker 7: you know, let's say, ten to fifteen percent by the summer,
Speaker 7: you wouldn't really see other nations retaliate, stocks would be
Speaker 7: at records, and inflation would generally be coming in better
Speaker 7: than expected. I probably wouldn't have believed you, but that's
Speaker 7: that's kind of what's happened now. That doesn't mean that
Speaker 7: we're out of the woods. I mean, you know, as
Speaker 7: you know, I'm still cautious on the economic outlook, but
Speaker 7: I mean that it is what it is, right. I mean,
Speaker 7: if you had told someone that even though the effective
Speaker 7: tariff right has gone up over ten percentage points, that
Speaker 7: stocks would still be at records. I don't think most
Speaker 7: people would have believed you, but that's exactly what's happened.
Speaker 7: It's almost as if the uncertainty around the tariffs going
Speaker 7: away is more important than the tariffs themselves.
Speaker 2: Right, Neil dunna with us here with Ren McNeil, I'm
Speaker 2: gonna throw the eight thirty data. You know, I know
Speaker 2: you haven't had time to digest it. I'm just going
Speaker 2: to give broad strokes here, folks. The advance goods trade
Speaker 2: balance was not worser. The survey was negative ninety eight
Speaker 2: and it came into a much better negative eighty six.
Speaker 3: The advanced goods imports cratered.
Speaker 2: That's the economic word that Neil Dudda would use. We
Speaker 2: saw month over months plunge of I guess stuff coming
Speaker 2: into the country.
Speaker 3: Neil, in a general statement, help us with that. Do
Speaker 3: you have a clue what the three months moving averages
Speaker 3: of our trade dynamics?
Speaker 7: I mean, I haven't looked at that yet.
Speaker 6: Tom.
Speaker 7: I mean, it's interesting you just gave me some eight
Speaker 7: thirty numbers. But what I will say is, look, I mean,
Speaker 7: in business economic economics, I tend to tune out what
Speaker 7: goes on with the trade deficit and inventories. I know
Speaker 7: that's kind of surprising to hear, but ultimately what you
Speaker 7: want to look at is domestic demand. Obviously, the fact
Speaker 7: that in ports or decline, I mean, that's going to
Speaker 7: show up somewhere else. You know, maybe it means less
Speaker 7: inventory stocking, maybe it means less consumption. But ultimately the
Speaker 7: decline in imports, right, you know, we'll show up in
Speaker 7: some other area of GDP. You know, the fact that
Speaker 7: exports continue to weaken, you know, suggest that you know,
Speaker 7: the trade war might be having consequences for our you know,
Speaker 7: major trading partners, uh And is sapping growth over there,
Speaker 7: which means that if they're not growing as robustly as
Speaker 7: they had been, we can't export as much to them.
Speaker 2: So is a general statement, let's pick on Europe, we
Speaker 2: could pick on any other region.
Speaker 3: If Europe is slower, do we become slower.
Speaker 7: All else equal? Probably?
Speaker 6: Yes, Neil.
Speaker 5: When you think about these tariffs, is it a one
Speaker 5: time kind of jolt to prices or is it something
Speaker 5: and that we can lap and it won't we can
Speaker 5: put in our rear view mirrors. It's something different, something
Speaker 5: more longer term.
Speaker 7: Well, I mean i think it's I think it's a
Speaker 7: one time shock to the price level. I don't think
Speaker 7: it necessarily increases inflation, which is a general increase in
Speaker 7: the level of prices across the economy. I mean, what
Speaker 7: we've seen so far with tariffs is goods prices have
Speaker 7: gone up, as you'd expect for things like, you know, furniture,
Speaker 7: household furnishings, tools, you know, garden equipment, things like that,
Speaker 7: But prices for services have kept going down because the
Speaker 7: nominal anchor hasn't changed. I mean, John Cochrane University of
Speaker 7: Chicago has talked about this really well. I mean, basically,
Speaker 7: if you don't change the nominal anchor, tariffs represent a
Speaker 7: relative shifting of prices, it doesn't increase.
Speaker 3: The general level of prices.
Speaker 7: And that's what we're seeing right Like, so the fact
Speaker 7: that nominal income has generally been slow in households don't
Speaker 7: have the capacity to absorb higher rices across the economy.
Speaker 7: So if if goods producers are absorbing some of the
Speaker 7: cost which they are and passing on some of the
Speaker 7: cost of the consumer, people start paying more for goods,
Speaker 7: that means they have less money to spend elsewhere, and
Speaker 7: that ultimately forces the prices for those other areas down.
Speaker 7: It doesn't mean that it's good. It doesn't mean that
Speaker 7: it's a good thing. But that's kind of where I'm
Speaker 7: at right now. It's ultimately about the nominal and the
Speaker 7: fact that you know, Governor Waller, as you know, has
Speaker 7: been talking about this quite a bit, and that's why
Speaker 7: you're not seeing overall inflation rates celerate despite teriffs.
Speaker 2: Neil, thank you the brilliant note. Brilliant note. I can't
Speaker 2: say enough about what he says. They're folks of a
Speaker 2: disinflationary tendency of China, of Europe, and potentially of America.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: We have the absolute perfect guests this morning to give
Speaker 2: you perspective across the nation on the geography of this
Speaker 2: horrific event. We all talk to Peter Scheer here about
Speaker 2: the market, about all the news flow, and of course
Speaker 2: a bull market with futures. Frankly, this morning up eighteen
Speaker 2: the vis Paul Under fifteen, I didn't notice that.
Speaker 3: Yeah, I think it's a bull market and part of that.
Speaker 3: Peter Sheer.
Speaker 2: I was with someone from the Midwest this week and
Speaker 2: a family member, and I was trying to explain the
Speaker 2: resurgent New York and I was standing outside the glory
Speaker 2: of the new Waldorf Astoria. As you look from the
Speaker 2: Waldorf up Park Avenue to Blackstone, the Rudent Building and
Speaker 2: north up to fifty ninth Street, it is Finance America,
Speaker 2: isn't it.
Speaker 9: Yeah, And it's a little bit scary what happened. I
Speaker 9: was very scary, and I think we're all going to
Speaker 9: wind up trying to rethink how security should be working.
Speaker 6: What we do. It's you know, tragic and offer.
Speaker 2: This commitment that we've seen to these blocks. Citadel is there.
Speaker 2: We have Blackstone with their long term lease commitment across
Speaker 2: the street, the absolute miracle of what Jamie Diamond did
Speaker 2: at JP Morgan explain to our national audience why Wall
Speaker 2: Street's choosing to be midtown versus the stereotype of downtown.
Speaker 6: You know, I think it probably comes down to the
Speaker 6: commute for many people whether.
Speaker 3: You're coming in central stations there and.
Speaker 9: It's getting easier and easier to come into Penn station.
Speaker 9: So I think you want to be in this area.
Speaker 3: We'll have more coverage. Miles Miller will be with us here.
Speaker 3: He is on Park Avenue this morning. Peter, this bull
Speaker 3: market on Friday.
Speaker 2: We're distant from Friday after earnings reports coming out, we
Speaker 2: get a rationalization by the Bears. How did the bears
Speaker 2: get this market wrong?
Speaker 6: You know, I think there's been a few things.
Speaker 9: One is, I do think people have been missing how
Speaker 9: powerful this you know, national production.
Speaker 6: For national security element is.
Speaker 9: We've been talking about it for a while, and it
Speaker 9: started I think when the Department Defense invested four hundred
Speaker 9: million in MP two weeks ago and got billion dollars
Speaker 9: of debt for them. When Treasury Secretary Besant was on
Speaker 9: with Anne Marie last Tuesday, he almost said those exactly
Speaker 9: where it's national production for national security. And then President
Speaker 9: Trump later in the week went on talking about the
Speaker 9: importance of AI and data centers and that we are
Speaker 9: going to get defeat regulations to make sure that we
Speaker 9: get enough electricity to those data centers. So I think
Speaker 9: that's been an uplift to this. I think the trade
Speaker 9: deal noise is more just noise. I think it's actually
Speaker 9: weighing on the market. I think people are a little
Speaker 9: bit nervous, and I think the tariff impacts will be
Speaker 9: felt over the time. But for me, it's really been
Speaker 9: this resurgence of let's build things, let's build the infrastructure.
Speaker 6: And it does tie in.
Speaker 9: Very nicely with the big beautiful bill, with the accelerated depreciation.
Speaker 9: I think if we can just jumpstart some of these
Speaker 9: national production for national security, whether it's in chips, AI,
Speaker 9: data centers, rarest, critical minerals, pharma.
Speaker 6: That gets the economy going.
Speaker 9: I think that's why you've seen Also, it's and very
Speaker 9: few sectors that have really been driving this market, and
Speaker 9: the small capsits are still kind of lagging.
Speaker 5: Yeah, exactly. So I mean, I mean we're right smack
Speaker 5: in the middle of earnings. Peter, what have you learned
Speaker 5: so far in earnings? What do you expect to hear
Speaker 5: from the earning seriesce?
Speaker 9: You know, I think the biggest thing I've learned so
Speaker 9: far is if you say you're spending a lot of
Speaker 9: money on AI and chips, your.
Speaker 6: Stock goes up.
Speaker 9: So I think We're still in that mode that everyone
Speaker 9: is still very focused on the growth in AI, the
Speaker 9: growth and data centers and companies that are spending on
Speaker 9: it and helping grow that benefit.
Speaker 6: So that's not going to stop. I don't think anytime soon,
Speaker 6: is there.
Speaker 5: I mean, we're sitting here twenty two times earnings. I
Speaker 5: mean when do we?
Speaker 6: I guess valuations have not been.
Speaker 5: A problem for this market for the longest time. Is
Speaker 5: that still the case?
Speaker 1: Do we?
Speaker 6: How do we think about valuation this market?
Speaker 5: I'm not comfortable paying twenty two times twenty three times earnings.
Speaker 9: You know, I'm with you, And that's why I've been
Speaker 9: looking at the things that I think really have the upside.
Speaker 9: Are things that are still trading a little bit cheap
Speaker 9: that can benefit from this real you know, logistics, the
Speaker 9: industrial base kind of growing that I feel there's still
Speaker 9: value there.
Speaker 6: Got it?
Speaker 5: And so I guess the question is what do we
Speaker 5: need to see from earnings here? Do we need earnings
Speaker 5: growth to accelerate from here to.
Speaker 3: Support this market?
Speaker 5: Or if earning stay right where we are, we don't
Speaker 5: have any disappointments, that's good enough.
Speaker 6: You know.
Speaker 9: I think again, it's going to come down to those
Speaker 9: handful of companies. I keep looking at the rust of
Speaker 9: two thousand. What I want to say is I would
Speaker 9: love to be able to say, let's buy small caps.
Speaker 9: And the problem I hear and we're out there talking
Speaker 9: to companies, I think it's small and mid sized companies
Speaker 9: are still much more affected by tariffs than the large cap.
Speaker 9: They've had the ability to front run things, they've had
Speaker 9: the ability to buy up. You know, they've got the
Speaker 9: working capital, and the flip side of it has been
Speaker 9: you know, the President wants company countries to buy things
Speaker 9: from the US. But the three things they can buy
Speaker 9: us energy, airplanes, and chips. So that's going to continue
Speaker 9: to do well.
Speaker 6: I think.
Speaker 2: This morning, Peter Sure, this with Academy here as we
Speaker 2: welcome all of you acrasstination.
Speaker 3: It is a shaken in New York City.
Speaker 2: We'll have continuing coverage of the tragedy on Park Avenue.
Speaker 2: Last night, John Tucker leading our coverage with Michael Barr,
Speaker 2: Miles Miller with this on the scene with a wonderful
Speaker 2: article in Bloomberg a complete story of this, or Miles
Speaker 2: Miller with this later. Peters Sheer, one of the feelings
Speaker 2: I'm getting and it's percolating, and maybe we need to
Speaker 2: get to the weekend to get it.
Speaker 8: Is.
Speaker 2: What we've got is all American Trumpians stimulus, and there's
Speaker 2: a horizon out past the stimulus where the stimulus ends,
Speaker 2: somewhat like the pandemic.
Speaker 3: Do you worry that there's a point where Trumpian stimulus,
Speaker 3: Trumpian deregulation ends.
Speaker 6: Yeah.
Speaker 9: And I think on the tariffs right now, everyone there's
Speaker 9: a lot of people doing a victory lap. Oh, tariff's okay,
Speaker 9: fifteen percent's fine, And I think the reality is we
Speaker 9: get the benefits from the tariff revenue right away, so
Speaker 9: we're seeing that hitting the deficit. I think it's just
Speaker 9: going to take time for the tariff impact. I've always
Speaker 9: thought it's going to take time. Let's say you turn
Speaker 9: your inventory over twice a year, you're probably five to
Speaker 9: six months before your full inventory has been tarriffed. So
Speaker 9: I think it's going to be a slow decline in
Speaker 9: either corporate earnings or we're going to see a bit
Speaker 9: of inflation pressure. So I think there is damage being
Speaker 9: done to the economy through teriff that's just taking longer,
Speaker 9: and I think that's all going to tumble, not tumble,
Speaker 9: but it's going to start impacting things. And I don't
Speaker 9: think the job market is that healthy. And again I
Speaker 9: keep coming back to small and midsized companies. Is the
Speaker 9: engine of growth? Are they benefiting or being hurt by
Speaker 9: Tariff's I think their net being hurt.
Speaker 2: In the wall of economic data today, what matters to
Speaker 2: get to Friday and.
Speaker 3: Friday at eight thirty five, where are we going to
Speaker 3: meet Peter?
Speaker 6: I want to look at the quits rate.
Speaker 9: I think that the Jolts quit rate, to me is
Speaker 9: still one of the more useful pieces of information because
Speaker 9: it's almost crowdsource, right. People can tell how good their
Speaker 9: job situation is. Are not That quits rate has been
Speaker 9: fairly low, and if that continues low, it tells me
Speaker 9: there's still a lot of uncertainty.
Speaker 3: Let's go to Peter's Sheer world.
Speaker 2: I mean, we can just what you don't know, folks,
Speaker 2: is Peter Sheheer is this whole sidecar industry of looking
Speaker 2: at the technology of America? Is our jobs report, our
Speaker 2: quits rate, all this other fancy pants stuff.
Speaker 3: Is it AI affected? Now? All those gloomy articles. AI
Speaker 3: is going to take way John Tucker's job.
Speaker 9: Yeah, And I'd say I see that, and I think
Speaker 9: three different ways. One is the birth death model.
Speaker 6: Kind of to get wonky.
Speaker 9: Unfortunately, it's saying that new companies are being formed.
Speaker 6: I think that occurs now when.
Speaker 9: People get worried about their jobs and start thinking about
Speaker 9: a gig economy and apply to get an EI N
Speaker 9: or employment identification number. You're seeing law school applications skyrocket,
Speaker 9: which means to do right. And what's really starting to
Speaker 9: get nervous is the youth. The unemployment rate for recent
Speaker 9: college grads is creeping higher, and to me that seems
Speaker 9: the most likely area to be affected by this AI is, well,
Speaker 9: maybe we don't need four people doing decks, we just.
Speaker 6: Need one or two.
Speaker 9: You're not going to hand AI real decision making, but
Speaker 9: you might try and see if you can get rid
Speaker 9: of some of the junior employees. And I think that
Speaker 9: could be really detrimental to the economy over time if
Speaker 9: you lose that group of people and they're starting, you know,
Speaker 9: past to careers.
Speaker 5: Given all that background, peer, what's our Federal Reserve thinking
Speaker 5: these days?
Speaker 3: Do you think?
Speaker 6: You know?
Speaker 9: I think they're still very focused on inflation. I think
Speaker 9: they take the job data, the non farm payroll establishment
Speaker 9: headline is having been good. To look at the unemployment rate.
Speaker 9: I think they're you know, on hold. I think they
Speaker 9: should be cutting more. I think they should be start.
Speaker 9: I think honestly, they should have cut now. I think
Speaker 9: it's probably hard because they're getting so much pressure. I'm
Speaker 9: still looking for three cuts this year. I think the
Speaker 9: economy is going to be just.
Speaker 6: Weak enough on the jobs front that they have to cut.
Speaker 2: Bloomberg Surveillance folks with US railroad analyst Peter Sheer, remember
Speaker 2: did you read early Graham Dodd Coddle, Folks. Graham Dodd
Speaker 2: Coddle's a bio and they've rewritten it. But remember the
Speaker 2: first to two editions. We're all about railroad stocks, you know,
Speaker 2: because that was America.
Speaker 9: I spent some misguided, you know, teenage years playing railroad
Speaker 9: tycoon on.
Speaker 6: The computer back in the day.
Speaker 9: So I think it's just always a fascinating industry. And
Speaker 9: I do have to say one thing that I don't
Speaker 9: think i've ever said here before. In your fixed income portfolio,
Speaker 9: I think you're supposed to be heavily weighted munis. One
Speaker 9: of the little lost stories that we're talking all about
Speaker 9: this is Muni's are trading almost on top of taxables.
Speaker 9: So if you can afford, you know, if you have
Speaker 9: some money, I would put I take money out of
Speaker 9: money markets, put it in law dated muni's. I think
Speaker 9: that trade will actually be really good for income and
Speaker 9: total return.
Speaker 2: Niche Patel with this later on in the show. She's
Speaker 2: expert on MUNI bonds. So I got Norfolk Southern Paul,
Speaker 2: what is it? Two billion plus trade? The determination fee
Speaker 2: just billions of dollars.
Speaker 5: I mean a regulatory this is gonna shock.
Speaker 3: Well, that's where I want to go. But let me
Speaker 3: frame it out. Folks.
Speaker 2: No revenue growth, I mean they just they haven't had it.
Speaker 2: It's not happening since twenty twenty two. There is some profit, I'll.
Speaker 3: Give him that, and cash flows not all that moldy.
Speaker 2: I guess it's old line trading at a pretty rich multiple.
Speaker 2: It's not trading like Ford or GM.
Speaker 3: They couldn't do this in a Biden administration.
Speaker 6: Peter, I think that's spot on.
Speaker 9: I think this will be a good test for the
Speaker 9: Trump administration what we've been hoping for, right deregulation. This
Speaker 9: is something Trump is so expert at and is dealing
Speaker 9: with real estate and stuff. He likes deregulation. This gives
Speaker 9: him an opportunity, and there's so much that could be
Speaker 9: done in the railroad industry in and around New York City,
Speaker 9: let alone where you have all these different things. So
Speaker 9: I think this is really an interesting task. If you
Speaker 9: can push it through, that's exciting for the economy as
Speaker 9: a whole.
Speaker 3: Peter, thank you so much, and particularly thank you so
Speaker 3: much for your comments. I'm Park Avenue in Manhattan.
Speaker 2: Here at the beginning, mister sheer is with Academy Securities.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also watch
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Speaker 2: Christian Coolian rather saint with Blackrock, as we had to
Speaker 2: talk railroads there for a minute, and she's had an
Speaker 2: Ice shares investment strategy, but what it amounts to is
Speaker 2: tackling the ETF event for Blackrock to institutional clients. Christy More,
Speaker 2: I think you're maybe more qualified in the trenches than
Speaker 2: anyone I know. Where are ETFs in five years? Did
Speaker 2: they take over the world?
Speaker 8: Thanks for having me. It's nice to be here this morning.
Speaker 8: I heard some of the comments earlier from Verry as
Speaker 8: well upend of the the etfsation of the world. You know,
Speaker 8: I think that you know, we are certainly seeing ETFs
Speaker 8: continue to grow. I think there's some very notable changes
Speaker 8: though in what we've seen in just the last few years.
Speaker 3: Is give us the big change, give us a big change.
Speaker 8: Yeah, yeah, So, so you know, one of the biggest
Speaker 8: ones that we see is really just the adoption of
Speaker 8: active management inside the ETF wrapper. So for the first
Speaker 8: time ever, there's actually more active ETFs listed in the
Speaker 8: US than there are index ones. There's certainly still more
Speaker 8: assets in the index ones, but really we've seen this
Speaker 8: this c change in terms of launches being much more
Speaker 8: gravitating towards the active side. So, you know, we think
Speaker 8: that there's a huge amount of advantage, especially in something
Speaker 8: like some of these rotational strategies that you'll see from
Speaker 8: US too. So the ability to put even high turnover
Speaker 8: strategies active management inside an ETF can give you that
Speaker 8: tax benefit of the ETF while still being able to
Speaker 8: stay really nimble in an environment like this. So something
Speaker 8: like d y On F. That's our our Blackrock Factor
Speaker 8: Rotation ETF. It is our largest active ETF at Blackrock,
Speaker 8: and it does just that.
Speaker 5: Christy, my first knowledge and understanding of ETFs was lower
Speaker 5: cost visa VI the alternative being a mutual fund because
Speaker 5: in large part it was passive. I didn't have to
Speaker 5: pay for research, channalysts and all this kind of stuff. Now,
Speaker 5: the active, as you were just mentioning, is a real
Speaker 5: big source of growth. How does an active ETF from
Speaker 5: a cost perspective sack up to a mutual fund.
Speaker 8: Yeah, so we're still seeing that the the lower cost
Speaker 8: preference for ETFs is still true. So typically if you
Speaker 8: look at the cost profile of an active ETF versus
Speaker 8: an active mutual fund, you're still going to get quite
Speaker 8: a bit of cost savings. So it's somewhere in between
Speaker 8: the index average in the active average with the mutual funds.
Speaker 8: So lower cost also really importantly again for those active strategies,
Speaker 8: it's the you know, the tax benefits. I think that
Speaker 8: matter just as much and maybe even more for the
Speaker 8: ETF structure than the mutual fund one. But I certainly
Speaker 8: don't want to suggest that you know all of the
Speaker 8: growth and ETFs is coming from active management. You know,
Speaker 8: if you look at the portfolio of twenty twenty five,
Speaker 8: if you look at flows so far and where investors
Speaker 8: are choosing to allocate, there's a really big difference between
Speaker 8: this year and what we've seen in previous years. The
Speaker 8: first biggest change is we're seeing a tremendous amount of
Speaker 8: flows to alternative categories. So about eight percent of total
Speaker 8: ETF flows this year have gone to alternative categories. If
Speaker 8: you're worried about death and debt and deficits, you're probably
Speaker 8: thinking about gold and bitcoin. And if you are, you're
Speaker 8: probably thinking about IAU and IBIT, which are our funds
Speaker 8: and les.
Speaker 3: Listen to her working in Nice job, Christy.
Speaker 2: You got to go after that, you're in the timeout
Speaker 2: chair or at Survannahs Christie. One final question, how much
Speaker 2: are people losing in the triple leverage name the stock
Speaker 2: funt I mean, what's the damage? Come on, it's log normal,
Speaker 2: you know this from CFA. What's the damage to triple
Speaker 2: leverage that black Rock is seen?
Speaker 8: Certainly, I mean it's not a space that we play in,
Speaker 8: but certainly we see investors, you know, who are maybe
Speaker 8: thinking of that more as a long term play certainly
Speaker 8: pay the price in terms of much higher phase and
Speaker 8: daily reset. So it's not something that you should think
Speaker 8: of as a perennial position in your portfolio. I think
Speaker 8: sometimes they're using it tactically.
Speaker 3: Great, Christy, thank you so much. Next time, keep it
Speaker 3: under eighteen symbols from Blackrock.
Speaker 2: She said everything she's she's genuinous for so, I mean,
Speaker 2: Christi Aculin.
Speaker 3: This is all Coolian. This is all about like, actually,
Speaker 3: what do you you do? The wall? The blinding wall.
Speaker 6: That's unbelievable.
Speaker 5: I mean. Over the last twenty years has been one
Speaker 5: of the most amazing developments to me in global Wall Street.
Speaker 6: This has been the growth of etaps.
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