1 00:00:02,080 --> 00:00:05,400 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:05,480 --> 00:00:08,560 Speaker 1: dot Com, the radio, plus Globo lact and on your radio. 3 00:00:08,840 --> 00:00:12,959 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters. 4 00:00:13,000 --> 00:00:16,239 Speaker 1: I'm Katherine Cowdery. Stocks have been fluctuating today after the 5 00:00:16,400 --> 00:00:19,680 Speaker 1: SMP FI foundered rebounded from a seven week low. Investors 6 00:00:19,680 --> 00:00:22,239 Speaker 1: are awaiting further direction on the health of the economy 7 00:00:22,320 --> 00:00:25,759 Speaker 1: and prospects for higher interest rates. James Bullard, president of 8 00:00:25,800 --> 00:00:28,200 Speaker 1: the Federal Reserve Bank of St. Louis, sad today he 9 00:00:28,280 --> 00:00:31,440 Speaker 1: does not see the UK's vote on European Union membership 10 00:00:31,520 --> 00:00:34,400 Speaker 1: influencing the US Central Banks meeting that will be held 11 00:00:34,400 --> 00:00:37,760 Speaker 1: the week before the referendum. And San Franciscos John Williams 12 00:00:37,800 --> 00:00:40,400 Speaker 1: said today that two to three rate increases this year 13 00:00:40,440 --> 00:00:43,800 Speaker 1: are still about right. We check the markets every fifteen 14 00:00:43,800 --> 00:00:46,440 Speaker 1: minutes throughout the training day. DOL Industrial Average is currently 15 00:00:46,520 --> 00:00:50,000 Speaker 1: up ten points at seventeen thousand five HUND eleven, SMP 16 00:00:50,040 --> 00:00:53,320 Speaker 1: five foundered down two at two thousand fifty. Then NAZDAC 17 00:00:53,400 --> 00:00:56,280 Speaker 1: is up nearly one point at forty seven seventy. West 18 00:00:56,280 --> 00:00:59,080 Speaker 1: Texas Intermediate crude oil down twenty six cents of barrel 19 00:00:59,160 --> 00:01:02,800 Speaker 1: half a percent rating at slack golled down a dollar 20 00:01:02,880 --> 00:01:06,480 Speaker 1: eighty announced at twelve fifteen DAN year treasury unchanged with 21 00:01:06,520 --> 00:01:08,759 Speaker 1: the yield of one point a three percent, and that's 22 00:01:08,760 --> 00:01:12,319 Speaker 1: a Bloomberg business slash. Catherine Catterie thinks, so much time 23 00:01:12,360 --> 00:01:14,880 Speaker 1: now for the e t F report, proty biobedic vector ETFs. 24 00:01:15,120 --> 00:01:18,240 Speaker 1: Expect more from yourmmunities, target taxes, income by matority, and 25 00:01:18,280 --> 00:01:21,200 Speaker 1: credit quality, all of low cost ETFs. Because edec dot 26 00:01:21,200 --> 00:01:24,839 Speaker 1: com slash community FEDEC access, the opportunities for this returned 27 00:01:24,880 --> 00:01:29,039 Speaker 1: to Katherine Catterie. Financial markets were buffeted this week by 28 00:01:29,040 --> 00:01:32,040 Speaker 1: speculation that the Federal Reserve is moving closer to raising 29 00:01:32,080 --> 00:01:35,600 Speaker 1: interest rates. That speculation increased after minutes from the feds 30 00:01:35,680 --> 00:01:38,440 Speaker 1: April meeting signaled officials are willing to raise rates in 31 00:01:38,560 --> 00:01:42,320 Speaker 1: June if the economy shows sustained improvement. Those rate concerns 32 00:01:42,319 --> 00:01:45,280 Speaker 1: were reflected and flows into and out of et f s. 33 00:01:45,560 --> 00:01:48,960 Speaker 1: Here's Bloomberg Intelligence analyst Eric Baltnis on Thursday t t 34 00:01:49,120 --> 00:01:52,680 Speaker 1: F flows. We have early signs that the hot money 35 00:01:52,720 --> 00:01:55,520 Speaker 1: is scared. They're really taking the Fed seriously. Because h 36 00:01:55,640 --> 00:01:57,640 Speaker 1: y G saw eight hundred and sixty million dollars and 37 00:01:57,640 --> 00:02:00,920 Speaker 1: outflows that is the largest it's ever seen, and for 38 00:02:00,960 --> 00:02:03,080 Speaker 1: that matter, the largest any fixed income ETF has ever 39 00:02:03,080 --> 00:02:04,880 Speaker 1: seen in a day. It's almost a billion dollars. Val 40 00:02:04,960 --> 00:02:07,880 Speaker 1: Tuna said, in contrast, the I shares one to three 41 00:02:07,960 --> 00:02:11,280 Speaker 1: year treasury bond a t F attracted inflows. He puts 42 00:02:11,280 --> 00:02:14,040 Speaker 1: a situation in perspective, and this is about the twenty 43 00:02:14,320 --> 00:02:16,440 Speaker 1: time we've seen this sort of sell off because of 44 00:02:16,480 --> 00:02:18,680 Speaker 1: something that Fed said. And then eventually they'll buy back 45 00:02:18,720 --> 00:02:22,560 Speaker 1: in if history of piece itself. That's your Bloomberg ETF report. 46 00:02:22,760 --> 00:02:28,840 Speaker 1: I'm Katherine Cowdery. This is taking Stock with pim Box 47 00:02:28,880 --> 00:02:34,000 Speaker 1: and Kathleen Hayes on Bloomberg Radio. We are broadcasting live 48 00:02:34,040 --> 00:02:36,480 Speaker 1: from the b n Y Melan asset a Servicing a 49 00:02:36,720 --> 00:02:41,120 Speaker 1: conference in Tucson, Arizona. This is taking Stock on pim Fox. 50 00:02:41,160 --> 00:02:44,079 Speaker 1: My co host Kathleen Hayes, our next guest here to 51 00:02:44,120 --> 00:02:45,760 Speaker 1: tell us a little bit about what I think of 52 00:02:45,840 --> 00:02:50,160 Speaker 1: as alternatives to ordinary investments that we may have been 53 00:02:50,200 --> 00:02:54,480 Speaker 1: taught to understand, such as stocks, bonds and cash. And 54 00:02:54,560 --> 00:02:57,640 Speaker 1: who better to help us? And then Frank Losala. He 55 00:02:57,680 --> 00:03:00,880 Speaker 1: is the chief executive officer of Global uxtured products and 56 00:03:01,000 --> 00:03:05,840 Speaker 1: alternative investment services for b N. Why Melan and he 57 00:03:05,960 --> 00:03:09,519 Speaker 1: joins us, Now, thanks for being here. Um, I was 58 00:03:09,560 --> 00:03:12,600 Speaker 1: gonna really say that the best qualification you have for 59 00:03:12,639 --> 00:03:16,400 Speaker 1: this job is you have an m a In theology. 60 00:03:16,480 --> 00:03:18,720 Speaker 1: I do, right, and I didn't know you had that. 61 00:03:19,000 --> 00:03:22,600 Speaker 1: Right you have, you have an m a in in theology, 62 00:03:22,639 --> 00:03:24,840 Speaker 1: And I gotta say at certain times that must come 63 00:03:24,880 --> 00:03:28,440 Speaker 1: in very handy when you because there's no one size 64 00:03:28,440 --> 00:03:33,440 Speaker 1: fits all. Every everything has become so particular and specific. Now, 65 00:03:33,760 --> 00:03:35,800 Speaker 1: what if you could tell us in your mind you've 66 00:03:35,840 --> 00:03:39,400 Speaker 1: got a lot of experience and read the whole bio. Um, 67 00:03:39,440 --> 00:03:42,880 Speaker 1: how is alternative How do you see alternative investments? How 68 00:03:42,880 --> 00:03:44,839 Speaker 1: do you describe it to people? Well, let me say 69 00:03:44,880 --> 00:03:48,840 Speaker 1: one thing about the theology. Uh, master's Um, there was 70 00:03:48,880 --> 00:03:51,080 Speaker 1: a spiritual component to this business. When you try to 71 00:03:51,080 --> 00:03:54,040 Speaker 1: continue to forecast and you fail regularly, you it's an 72 00:03:54,040 --> 00:03:56,920 Speaker 1: exercise and humility. So so you learn a lot about 73 00:03:57,680 --> 00:04:01,520 Speaker 1: um just being humble. But no, Um, it's true him. 74 00:04:02,280 --> 00:04:04,760 Speaker 1: There is a structural shift going on. The way we 75 00:04:04,800 --> 00:04:07,760 Speaker 1: see it is when we speak to investors, asset owners, 76 00:04:07,880 --> 00:04:10,880 Speaker 1: investment managers. There is a structural shift in terms of 77 00:04:10,880 --> 00:04:14,000 Speaker 1: the way people have to think about investing. And although 78 00:04:14,040 --> 00:04:17,080 Speaker 1: we've heard a lot about the demise of alternative investments 79 00:04:17,120 --> 00:04:20,360 Speaker 1: and hedge funds, the fact is, um, when you look 80 00:04:20,400 --> 00:04:22,920 Speaker 1: at the market, whether it's a zero interest rate market 81 00:04:23,000 --> 00:04:25,880 Speaker 1: for bonds which seems to be you know, fully priced in, 82 00:04:26,320 --> 00:04:32,640 Speaker 1: fully priced domestic equity portfolio cash doing nothing, UM, investors 83 00:04:32,680 --> 00:04:35,360 Speaker 1: really a hungry for cash flow. And what we found 84 00:04:35,400 --> 00:04:38,560 Speaker 1: in a couple of the white papers that we've recently issued, 85 00:04:38,960 --> 00:04:43,159 Speaker 1: there is clearly more and more interest in private equity, 86 00:04:43,240 --> 00:04:47,360 Speaker 1: real asset investment and real estate assets, which by the way, 87 00:04:47,440 --> 00:04:52,039 Speaker 1: are not priced cheaply either, but when you think about 88 00:04:52,080 --> 00:04:56,440 Speaker 1: the alternatives, it becomes a more attractive investment vehicle as 89 00:04:56,480 --> 00:05:00,880 Speaker 1: part of a broader portfolio. Frank, we've been sing off 90 00:05:00,920 --> 00:05:03,280 Speaker 1: and on for many years. And when you look back 91 00:05:03,320 --> 00:05:06,200 Speaker 1: and think UM, and when I started into this business 92 00:05:06,200 --> 00:05:09,400 Speaker 1: as a as a journalist, interest rates way higher. There 93 00:05:09,440 --> 00:05:11,919 Speaker 1: was so much room for the ball market trolley and 94 00:05:11,920 --> 00:05:13,719 Speaker 1: make money on that side of it, not just holding 95 00:05:13,760 --> 00:05:15,480 Speaker 1: onto it for yield, but making money in the capital 96 00:05:15,520 --> 00:05:19,600 Speaker 1: appreciation stocks much lower you know, market crash come back up. 97 00:05:19,760 --> 00:05:21,960 Speaker 1: But when you talk about how things have changed, structurally. 98 00:05:22,040 --> 00:05:24,120 Speaker 1: How much does it have to do with just some 99 00:05:24,200 --> 00:05:28,760 Speaker 1: of these underlying changes in inflation and globalization pushing things down, 100 00:05:28,760 --> 00:05:31,839 Speaker 1: and the rise of technology as and as an investment opportunity, 101 00:05:31,839 --> 00:05:33,840 Speaker 1: but also as something that is sucked a lot of 102 00:05:33,960 --> 00:05:36,920 Speaker 1: jobs out of the middle of the economy. You know, Kathleen, 103 00:05:37,000 --> 00:05:39,719 Speaker 1: I think that's there's a lot to it, and I 104 00:05:39,760 --> 00:05:42,159 Speaker 1: think part of the challenge, and I'm not sure anyone 105 00:05:42,200 --> 00:05:45,640 Speaker 1: has really been effectively able to get their heads around it, 106 00:05:45,680 --> 00:05:49,680 Speaker 1: but there are significant changes. As you say, we're we 107 00:05:49,720 --> 00:05:52,080 Speaker 1: would have never thought, at least when I was going 108 00:05:52,120 --> 00:05:54,640 Speaker 1: to graduate school in business, that we would be in 109 00:05:54,680 --> 00:05:57,200 Speaker 1: a zero and negative interest rate environment. No one would 110 00:05:57,200 --> 00:05:59,800 Speaker 1: have ever thought that. No one would have ever thought 111 00:06:00,440 --> 00:06:03,880 Speaker 1: we could have big productivity gains without having to have 112 00:06:04,000 --> 00:06:08,080 Speaker 1: to hire people. Um, the demographic shifts in terms of 113 00:06:08,120 --> 00:06:11,320 Speaker 1: the aging population in some parts of the world, and 114 00:06:11,480 --> 00:06:14,080 Speaker 1: I'm not sure we know how to how to handle that, 115 00:06:14,240 --> 00:06:18,560 Speaker 1: but well understand it and then invest effectively to take 116 00:06:18,560 --> 00:06:21,920 Speaker 1: advantage of the opportunities that those shifts present to us. 117 00:06:22,640 --> 00:06:25,839 Speaker 1: And that said, um, I think we're learning about you know, 118 00:06:25,880 --> 00:06:28,000 Speaker 1: if you want to call it the new norm, that's fine. 119 00:06:28,080 --> 00:06:30,920 Speaker 1: I think I think that's good. But what we what 120 00:06:30,960 --> 00:06:34,040 Speaker 1: I think we're doing now is taking those different currents 121 00:06:34,040 --> 00:06:36,880 Speaker 1: that you just sort of outlined and trying to figure out, 122 00:06:36,920 --> 00:06:40,240 Speaker 1: So then where will the next investment opportunity be. And 123 00:06:40,760 --> 00:06:43,920 Speaker 1: right now, as I said earlier, we see a lot 124 00:06:43,960 --> 00:06:47,560 Speaker 1: of it going to real assets, where you know, there 125 00:06:47,640 --> 00:06:51,880 Speaker 1: is a cash flow, a certain degree of of stability, 126 00:06:52,279 --> 00:06:56,000 Speaker 1: less volatility than we get in fixed income or or equities, 127 00:06:56,720 --> 00:07:01,080 Speaker 1: and it's becoming more and more attractive. And as um, 128 00:07:01,120 --> 00:07:03,800 Speaker 1: someone very smart was telling me just a few minutes ago, 129 00:07:03,880 --> 00:07:08,600 Speaker 1: there is a psychological change in the market that um, 130 00:07:08,720 --> 00:07:11,520 Speaker 1: we have to we have to deal with and make 131 00:07:11,520 --> 00:07:14,240 Speaker 1: sure investments understand what that psychology is. It's a psycho 132 00:07:14,400 --> 00:07:18,760 Speaker 1: psychology of low risk uh, good solid cash flow uh, 133 00:07:18,800 --> 00:07:22,280 Speaker 1: not a lot of volatility, and being able to just 134 00:07:22,440 --> 00:07:27,239 Speaker 1: invest for the long haul. And people, as we heard 135 00:07:27,320 --> 00:07:31,120 Speaker 1: on a panel earlier today, people don't want to pay 136 00:07:31,160 --> 00:07:34,520 Speaker 1: for beta. They will pay for alpha, but investors are 137 00:07:34,680 --> 00:07:38,880 Speaker 1: very smart and they only want to pay for out 138 00:07:38,920 --> 00:07:42,120 Speaker 1: performing the market. And right now, that's very, very hard 139 00:07:42,160 --> 00:07:45,920 Speaker 1: to do. Real estate. Let's talk about real estate as 140 00:07:45,920 --> 00:07:48,880 Speaker 1: an alternative investment because that may fit many of the 141 00:07:48,920 --> 00:07:53,240 Speaker 1: criteria that you've just described, but there is liquidity, and 142 00:07:53,320 --> 00:07:56,200 Speaker 1: maybe there's a premium for liquidity that you would have 143 00:07:56,280 --> 00:07:58,400 Speaker 1: to pay if you don't know, if you don't get 144 00:07:58,440 --> 00:08:00,600 Speaker 1: it in real estate, then that's not not for you. 145 00:08:01,160 --> 00:08:03,600 Speaker 1: That's exactly right. Well, well, Pim, I'll tell you something else. 146 00:08:03,640 --> 00:08:05,520 Speaker 1: What we see with a lot of the managers that 147 00:08:05,600 --> 00:08:09,360 Speaker 1: we interact with is there is a lot of cash 148 00:08:09,440 --> 00:08:12,280 Speaker 1: on the side from investors that want to be in 149 00:08:12,360 --> 00:08:16,240 Speaker 1: real estate assets. The problem is finding a quality piece 150 00:08:16,240 --> 00:08:19,280 Speaker 1: of real estate to put in the portfolio, and that 151 00:08:19,360 --> 00:08:22,200 Speaker 1: could take years. So you can launch a fund, and 152 00:08:22,280 --> 00:08:25,480 Speaker 1: we see this now. You can launch a fund and 153 00:08:25,560 --> 00:08:28,440 Speaker 1: you can have capital lined up, but it could take 154 00:08:28,480 --> 00:08:32,880 Speaker 1: you forever to find a quality piece of property. And 155 00:08:32,920 --> 00:08:34,959 Speaker 1: what we're starting to see to your point about cash froll, 156 00:08:35,440 --> 00:08:37,280 Speaker 1: if you look at the traditional areas like the New 157 00:08:37,360 --> 00:08:41,760 Speaker 1: York area, the northeast to southwest, you see that that 158 00:08:41,960 --> 00:08:44,480 Speaker 1: those assets they're looking for assets now outside of what 159 00:08:44,600 --> 00:08:47,520 Speaker 1: you would what we would consider the primary areas. They're 160 00:08:47,520 --> 00:08:50,600 Speaker 1: going to, you know, the midwest to can't you know, 161 00:08:50,760 --> 00:08:54,120 Speaker 1: Kansas City and the areas that we otherwise wouldn't think 162 00:08:54,520 --> 00:08:57,440 Speaker 1: would be attractive, and that's where the money on the 163 00:08:57,480 --> 00:09:01,760 Speaker 1: real estate side, is actually moving to big picture? I mean, 164 00:09:02,360 --> 00:09:05,679 Speaker 1: is anything changed on this front where breggsit whether or 165 00:09:05,720 --> 00:09:08,319 Speaker 1: not the UK is going to leave European Union, of 166 00:09:08,360 --> 00:09:10,640 Speaker 1: the UK government saying today, oh, it throw us into 167 00:09:10,640 --> 00:09:13,920 Speaker 1: a terrible recession, and you know the naysayers that are 168 00:09:13,960 --> 00:09:16,040 Speaker 1: who want to leave her Sami, we are just playing politics. 169 00:09:16,040 --> 00:09:19,080 Speaker 1: But when you look at it from an investment management 170 00:09:19,120 --> 00:09:22,120 Speaker 1: standpoint is have we always been dealing with things to 171 00:09:22,160 --> 00:09:23,920 Speaker 1: have that much impact on our markets or do you 172 00:09:23,920 --> 00:09:26,760 Speaker 1: think this is a larger force to contend with in 173 00:09:26,760 --> 00:09:30,960 Speaker 1: a very globalized world. I think the political dynamics of 174 00:09:31,040 --> 00:09:35,640 Speaker 1: something like a bregsit will become more pronounced as we 175 00:09:35,679 --> 00:09:38,760 Speaker 1: moved down the path towards globalization, or some people would 176 00:09:38,760 --> 00:09:42,520 Speaker 1: say the reversal of globalization more of a domestic uh 177 00:09:42,960 --> 00:09:44,960 Speaker 1: lean in a lot of the western countries which we 178 00:09:45,040 --> 00:09:48,600 Speaker 1: see going on right now. I think bregsit in of 179 00:09:48,640 --> 00:09:52,680 Speaker 1: itself is probably well, it's clearly on everybody's right off screen. 180 00:09:53,320 --> 00:09:55,640 Speaker 1: Um when when you look at you know, I was 181 00:09:55,679 --> 00:09:59,240 Speaker 1: looking at at some of the the statistics this morning 182 00:09:59,240 --> 00:10:01,679 Speaker 1: on some of the um the oddsmakers which I look 183 00:10:01,720 --> 00:10:04,240 Speaker 1: at the London the London City odds they have that 184 00:10:04,320 --> 00:10:06,880 Speaker 1: down to on the fifty percent. Now that that breads 185 00:10:06,920 --> 00:10:12,640 Speaker 1: that might happen, obviously that would be an enormous, enormously 186 00:10:12,720 --> 00:10:16,839 Speaker 1: disruptive to the market. Um the consequences I think are 187 00:10:16,880 --> 00:10:19,880 Speaker 1: unimaginable and and the fact that there would be a Brexit, 188 00:10:19,960 --> 00:10:23,320 Speaker 1: to my mind's eye, is unimaginable. I do think though, 189 00:10:24,080 --> 00:10:27,560 Speaker 1: the political uncertainty that we're going to deal with will continue, 190 00:10:28,120 --> 00:10:31,120 Speaker 1: and investment managers have to be ready for that. And 191 00:10:31,160 --> 00:10:34,120 Speaker 1: again I would I would say that plays into this 192 00:10:34,280 --> 00:10:38,320 Speaker 1: desire to move into more real assets because it's viewed 193 00:10:38,320 --> 00:10:42,880 Speaker 1: as less risky, well put, very well put. Frankly, so, 194 00:10:43,120 --> 00:10:45,079 Speaker 1: thank you so much for joining us. Thank you, got 195 00:10:45,080 --> 00:10:48,439 Speaker 1: to have you back soon. He's CEO Global Structure Products 196 00:10:48,440 --> 00:10:50,959 Speaker 1: and Alternative Investment Services where B and mind Melon and 197 00:10:51,040 --> 00:10:54,440 Speaker 1: of course we are broadcasting Live and Invested sixteen the 198 00:10:54,480 --> 00:10:56,680 Speaker 1: Power of Big Ideas. It's a B and mind Melon 199 00:10:56,720 --> 00:10:59,720 Speaker 1: client conference here at Dove Mountain, the Dove Mountain, it's Carlton, 200 00:10:59,760 --> 00:11:04,360 Speaker 1: about thirty miles from Tucson, Arizona. Movers and shakers coming up. 201 00:11:04,360 --> 00:11:07,640 Speaker 1: Market's about ready to close our stocks there. Dave Wilson 202 00:11:07,640 --> 00:11:13,440 Speaker 1: will be joining us this is taking stock on Globrig radio. Yeah.