WEBVTT - SpaceX Spinoff and Rates Outlook 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.600 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 0:00:38.640 --> 0:00:39.760 my co host Matt Miller. 0:00:40.200 --> 0:00:44.279 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.200 and Bloomberg experts, along with essential market moven News. 0:00:48.720 --> 0:00:51.839 Find the Bloomberg Markets Podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:55.080 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:55.440 --> 0:00:58.960 Let's go back out to the West Coast to San Francisco. 0:00:59.560 --> 0:01:04.240 Space Discuss is spinning off Starlink via IPO as soon 0:01:04.280 --> 0:01:07.040 as twenty twenty four. I don't know what's going on there, 0:01:07.040 --> 0:01:09.319 but Ed Ludlow does. He's the host of Bloomberg Technology. 0:01:09.319 --> 0:01:11.200 He's out there somewhere in California, I don't know where. 0:01:11.319 --> 0:01:13.720 Sometimes he's in the desert for these rocket launches. 0:01:13.840 --> 0:01:16.480 Dude, as soon as late twenty twenty four, that's not 0:01:16.640 --> 0:01:17.840 soon at all, exactly. 0:01:17.920 --> 0:01:18.920 I'm not putting that in mind. 0:01:19.600 --> 0:01:22.080 As far away as late twenty twenty four, that's like 0:01:22.080 --> 0:01:23.759 one hundred years from now, exactly. 0:01:24.160 --> 0:01:26.039 What's happening with our good friends at SpaceX. 0:01:26.560 --> 0:01:31.120 Yeah, all good points and sources tell us that this IPO, 0:01:31.240 --> 0:01:33.680 which is a spin off as Starlink as a separate unit, 0:01:33.760 --> 0:01:36.240 could happen towards the end of twenty twenty four, the 0:01:36.360 --> 0:01:38.120 end of twenty twenty four. We have an election to 0:01:38.160 --> 0:01:40.760 bear that in mind, and if not twenty twenty four 0:01:40.800 --> 0:01:42.920 to twenty twenty five, And Matt, you're completely right, that 0:01:43.319 --> 0:01:47.920 is distant. But this is highly anticipated, right, you know, 0:01:48.080 --> 0:01:51.560 given the recent news flow must confirming that Starlink, which 0:01:51.600 --> 0:01:57.080 is SpaceX's satellite consolation based internet service, has reached cash 0:01:57.080 --> 0:02:00.320 flow break even. That is what he has said pretty 0:02:00.320 --> 0:02:03.360 consistently over the years, would be the trigger to work 0:02:03.400 --> 0:02:06.920 towards a listing spinning off through a listing, and what 0:02:06.960 --> 0:02:09.840 my colleagues and I are reporting is that even though 0:02:09.880 --> 0:02:14.600 that is far away, they're taking really material steps towards 0:02:14.680 --> 0:02:17.720 doing that. So, for example, one source told me that 0:02:17.760 --> 0:02:22.680 they're already shifting Starlink's assets, it's business assets, it's people, 0:02:23.240 --> 0:02:26.600 to a new wholly owned subsidiary to prepare it to 0:02:26.639 --> 0:02:29.000 be a sort of standalone unit ahead of an IPO. 0:02:29.720 --> 0:02:33.200 The amazing thing to me, you write this in your 0:02:33.240 --> 0:02:37.000 story with Gillian Tan and a couple of other Bloomberg 0:02:37.000 --> 0:02:41.959 News reporters. They're expecting starlink to generate ten billion dollars 0:02:41.960 --> 0:02:44.600 in revenue next year, which eclipses that of the rocket 0:02:44.639 --> 0:02:48.840 launch business at SpaceX. So it's essentially a bigger It's 0:02:48.919 --> 0:02:52.000 essentially their core business at SpaceX, right, at least judging by. 0:02:52.040 --> 0:02:56.160 Sales, exactly right, it's essentially their core business. So what 0:02:56.200 --> 0:03:01.680 we reported was that revenues due to significantly next year 0:03:02.000 --> 0:03:04.000 to around fifteen billion dollars. 0:03:04.080 --> 0:03:06.080 This year, overall it will. 0:03:05.919 --> 0:03:09.480 Be about nine billion dollars, with a pretty even split 0:03:09.520 --> 0:03:12.760 between Launch and Starlink, But next year Starlink will be 0:03:12.840 --> 0:03:15.160 the vast majority, more than ten billion. 0:03:15.360 --> 0:03:15.640 Guys. 0:03:15.680 --> 0:03:18.320 I just want to say for sheer transparency with the 0:03:18.360 --> 0:03:22.280 audience that as soon as we publish the story. Elon 0:03:22.400 --> 0:03:25.880 Musk responded to a user on X, the platform formerly 0:03:25.880 --> 0:03:29.280 known as Twitter, who had posted a screen grab of 0:03:29.320 --> 0:03:31.960 the story and image of it, and musk response was 0:03:32.000 --> 0:03:33.840 one single word, which was false. 0:03:34.320 --> 0:03:34.960 So on the. 0:03:34.920 --> 0:03:38.560 Face of it, Musk is denying the accuracy of our report. 0:03:38.760 --> 0:03:41.480 But I would also tell our audience this is not 0:03:41.520 --> 0:03:44.840 the first time Musk has replied or posted on x 0:03:44.880 --> 0:03:47.840 about something I've reported saying it's false that in the 0:03:47.960 --> 0:03:51.800 end is proved completely true by regulatory or legal filings 0:03:51.840 --> 0:03:52.360 or otherwise. 0:03:52.680 --> 0:03:55.880 I mean, this sounds like a really you know, cool business, 0:03:55.920 --> 0:03:58.760 admirable business, you know, connecting parts of the world that 0:03:59.440 --> 0:04:03.920 you know can't get you know, I guess internet connectivity. 0:04:03.920 --> 0:04:06.720 Besides it, are their competitors to Starlink out there. 0:04:07.320 --> 0:04:12.040 Well, the legacy into a space based internet company is 0:04:12.120 --> 0:04:15.520 like Viasat, for example, But they've just not been able 0:04:15.560 --> 0:04:18.839 to make this a business in the way or the 0:04:18.920 --> 0:04:21.320 speed that Stalink has. You remember, Paul, when I was 0:04:21.320 --> 0:04:24.560 in New York last week, we talked about Starlink's revenues 0:04:25.080 --> 0:04:28.840 and the reason that it's worth discussing and reporting the 0:04:28.920 --> 0:04:33.440 stepping stones towards an IPO is that this is the 0:04:33.480 --> 0:04:36.720 mainstay of SpaceX's future. Right, everyone kind of wants an 0:04:36.760 --> 0:04:41.200 association or investment into an Elon Musk company. SpaceX is 0:04:41.200 --> 0:04:44.640 a private company, and although there is some liquidity in 0:04:44.680 --> 0:04:47.480 the trading of its shares on the secondaries market and 0:04:47.520 --> 0:04:50.600 from time to time a tender offer where employees can 0:04:50.640 --> 0:04:54.200 sell shares, there isn't really much opportunity to have ownership 0:04:54.200 --> 0:04:56.880 of it. So there's a lot of interest here. But 0:04:57.000 --> 0:05:00.680 Starlink has been a game changer for people to access 0:05:00.720 --> 0:05:03.200 the Internet around the world where they otherwise have not 0:05:03.240 --> 0:05:06.839 been able to because of the satellite and ground receiver 0:05:06.880 --> 0:05:07.720 based technology. 0:05:07.880 --> 0:05:10.000 Well, and a lot of people first heard about Starlink 0:05:10.440 --> 0:05:14.400 because of Russia's invasion of Ukraine, the Ukrainians using Starlink 0:05:14.440 --> 0:05:20.400 to defend themselves. There there is a competitor from Jeff Bezos, right, 0:05:20.400 --> 0:05:22.760 it can't pronounce it, but it's like Project. 0:05:22.480 --> 0:05:25.120 Creeper Kuiper Kuiper. 0:05:24.920 --> 0:05:28.080 Yeah, well, because it's kui. 0:05:27.960 --> 0:05:30.480 Well exactly so, and what they're trying to do is 0:05:30.520 --> 0:05:33.400 the same thing. Jeff Bezos has a rocket company. It's 0:05:33.400 --> 0:05:36.679 called Blue Origin, but in the first instance, they're relying 0:05:36.720 --> 0:05:40.880 on United Launch Alliance to put and other carriers sort 0:05:40.880 --> 0:05:45.200 of legacy rocket companies to put Kuyper satellite constellations into space. 0:05:45.240 --> 0:05:48.120 They have a very small, like single digit number of 0:05:48.240 --> 0:05:52.400 early prototypes. But it's this idea that you know, you can. 0:05:52.240 --> 0:05:54.440 Have whereas starlink has five thousand, right. 0:05:54.440 --> 0:05:58.640 Ed exactly, And not only does Stalink have five thousand 0:05:58.760 --> 0:06:01.640 or in the thousands that you know, these are satellites 0:06:01.680 --> 0:06:03.760 which go in lower orbit, and from time to time 0:06:03.800 --> 0:06:06.400 they have to be decommissioned or they get broken. But 0:06:06.600 --> 0:06:09.000 the other success of SpaceX is that it kind of 0:06:09.000 --> 0:06:12.080 feeds itself, right. You and I cover so many launches 0:06:12.160 --> 0:06:16.080 so regularly, and SpaceX has a rocket launch company where 0:06:16.080 --> 0:06:19.400 it's able to put its own constellation or maintain its 0:06:19.440 --> 0:06:23.000 own constellation with constant launching. And so let's fast forward 0:06:23.000 --> 0:06:25.520 just a little bit real quick. This Friday, we might 0:06:25.560 --> 0:06:29.360 see Starship attempt to second full launch. It's big, shiny, 0:06:29.680 --> 0:06:32.560 pointy rocket you may have seen. And the significance of 0:06:32.600 --> 0:06:35.880 that is not just that that technology has the long 0:06:36.000 --> 0:06:36.520 term goal. 0:06:36.400 --> 0:06:37.760 Of getting humans to Mars. 0:06:38.080 --> 0:06:42.640 I can hear Paul's eyes rolling and increasing, but actually, 0:06:42.680 --> 0:06:46.479 if they can get starship to be successful. It's the 0:06:46.480 --> 0:06:49.360 most powerful rocket ever designed and made. Then they can 0:06:49.400 --> 0:06:52.800 even ramp up Starlink even further and take that five 0:06:52.800 --> 0:06:57.000 thousand constellation to ten thousand, fifteen thousand, thirty thousand. And 0:06:57.040 --> 0:07:00.200 actually at Bloomberg Intelligence they've crunched numbers on that and 0:07:00.240 --> 0:07:03.680 it basically helps you dominate connectivity worldwide. 0:07:04.120 --> 0:07:07.799 So to date ed has has Elon been funding SpaceX 0:07:07.880 --> 0:07:09.440 just out of his own pocket? 0:07:09.920 --> 0:07:11.239 Well, I love that story. 0:07:11.400 --> 0:07:14.280 You know, you guys have been at Bloomberg a long 0:07:14.320 --> 0:07:17.120 time right on the news side, and we historically have 0:07:17.240 --> 0:07:20.280 not covered private companies as closely as we cover public 0:07:20.320 --> 0:07:25.400 companies for obvious reasons. But the cap table SpaceX is fascinating. 0:07:25.840 --> 0:07:29.080 You have names like Fidelity and Sequoia on there. You 0:07:29.160 --> 0:07:32.440 have high networth individuals. You have Elon Musk and gwin 0:07:32.520 --> 0:07:35.680 Shotwell who Elon Musk being the CEO, gwinshot Well being 0:07:35.680 --> 0:07:39.200 the president and CEO of that company. There have been 0:07:39.320 --> 0:07:44.239 tender offers again, that's where staff can sell their stock 0:07:44.360 --> 0:07:47.840 units that they receive as compensation to buyers on the 0:07:47.840 --> 0:07:51.560 secondary market for simply liquidity. But when that opportunity comes 0:07:51.560 --> 0:07:55.760 abound sort of traditional asset or investment managers, high networth individuals, 0:07:55.800 --> 0:07:58.680 even retail investors clamor to get a piece of that. 0:07:58.960 --> 0:08:01.120 Partly because of what we've reported. There might be a 0:08:01.200 --> 0:08:04.040 Starlink IPO soon at the end of next year, but 0:08:04.080 --> 0:08:06.240 also you just want to own something because of elon 0:08:06.320 --> 0:08:09.080 musk track record. So the cat table is really interesting. 0:08:09.520 --> 0:08:12.160 Yeah, there's a great new podcast, Elon Inc. Have you 0:08:12.200 --> 0:08:14.520 been listening to right now? That's from Bloomberg Business Week. Yeah, 0:08:14.560 --> 0:08:18.520 David Papadopolis. I never realized that he has such a 0:08:18.560 --> 0:08:21.400 good voice for radio. I mean I've heard him, you know, 0:08:21.600 --> 0:08:23.680 yammering at me in the newsroom and it's not the same. 0:08:24.360 --> 0:08:28.600 But Elon Inc. What a cool podcast, which covers obviously 0:08:28.680 --> 0:08:31.320 all of the you know, the whole empire. So starlink 0:08:31.400 --> 0:08:36.520 SpaceX boring Tesla Twitter, which some people insist on calling 0:08:36.800 --> 0:08:40.719 X and it's it's such a cool, cool thing. So 0:08:40.800 --> 0:08:43.679 Starlink maybe at the end of next year, but we 0:08:43.760 --> 0:08:47.080 won't be able to get ahold of the launch business 0:08:47.400 --> 0:08:49.959 of SpaceX as a public company. 0:08:51.040 --> 0:08:54.280 My understanding and the understanding of my colleagues who reported 0:08:54.280 --> 0:08:58.079 the stories is that once if Starlink spins off into 0:08:58.160 --> 0:09:01.880 a public company space X. The remainder, which is largely 0:09:01.920 --> 0:09:06.400 the launch business, remains a private company, you know, and 0:09:06.440 --> 0:09:10.319 the transaction, based on past precedent is, you know, every 0:09:10.360 --> 0:09:15.880 SpaceX shareholder of nottal record would receive receive an equivalent 0:09:15.960 --> 0:09:19.800 volume of Starlink shares. Obviously their value would be changed 0:09:20.400 --> 0:09:23.000 relative to whatever they held the private SpaceX stock at. 0:09:23.080 --> 0:09:26.520 So that will be interesting. And just on that, there's 0:09:26.559 --> 0:09:29.640 only so much money you can make sending things into orbit, right, 0:09:29.720 --> 0:09:33.920 the per launch margin is much lower than the databased business. 0:09:34.000 --> 0:09:35.439 So MOSCA said in the. 0:09:35.400 --> 0:09:37.959 Past that it could cap out at like three billion 0:09:38.000 --> 0:09:40.280 dollars of sales a year. Actually i'd heard that this 0:09:40.360 --> 0:09:42.600 year it's more like four billion, four and a half billion. 0:09:42.679 --> 0:09:43.720 But it has a limit. 0:09:44.200 --> 0:09:46.680 I know that because I read ed Ludlow's reporting do 0:09:46.800 --> 0:09:48.720 you look at you? And I watch and listened to 0:09:48.800 --> 0:09:51.000 him on Bloomberg radio and television. 0:09:51.040 --> 0:09:54.040 SpaceX ways spinning off Starlink via IPO as soon as 0:09:54.080 --> 0:09:57.640 twenty twenty four, but following Bloomberg, ship work must called it. 0:09:57.760 --> 0:10:01.360 Quote Foss in a post on ex social media platform 0:10:01.440 --> 0:10:04.320 he owns without elaborating, ed, Ludlow, thanks so much. We 0:10:04.400 --> 0:10:07.800 appreciate it. Ed Ludlow, he's a host of Bloomberg Technology. 0:10:07.840 --> 0:10:08.520 He's wired in. 0:10:10.120 --> 0:10:13.959 You're listening to the team can'shur live program Bloomberg Markets 0:10:14.000 --> 0:10:17.080 weekdays at ten am Eastern on Bloomberg dot Com, the 0:10:17.160 --> 0:10:20.320 iHeartRadio app and the Bloomberg Business App, or listen on 0:10:20.360 --> 0:10:22.360 demand wherever you get your podcasts. 0:10:24.440 --> 0:10:26.880 Jay Heffel joins us. He's a CEO, founder and portfolio 0:10:26.920 --> 0:10:30.400 manager of Infrastructural Capital Managers ADVISORCY joins us here live 0:10:30.440 --> 0:10:33.360 in the studio. He doesn't phone it in. Folks, Jay, 0:10:33.360 --> 0:10:35.160 there's no inflation out there. You've been saying this for 0:10:35.200 --> 0:10:38.200 a long time. Inflation has been coming down. CPI dated 0:10:38.240 --> 0:10:40.560 this week, PPI dated this week. That surprised you at 0:10:40.559 --> 0:10:43.800 all because it seems like some positive surprise for the market. 0:10:45.040 --> 0:10:48.559 Thanks Paul and Matt. Well, we've been pretty public. We 0:10:48.679 --> 0:10:50.839 put out a piece on October thirty first, and we 0:10:50.960 --> 0:10:56.200 said this on National TV last week that this the 0:10:56.240 --> 0:11:00.520 CPI and PPI would print cool. But that's not because 0:11:00.720 --> 0:11:03.840 we speak to God or anything. It's simply that we 0:11:03.960 --> 0:11:07.760 focus on oil prices and energy prices as a leading indicator, 0:11:08.200 --> 0:11:12.079 and what's not appreciated even by our Federal Reserve, which 0:11:12.160 --> 0:11:16.079 is hard to believe, is there's a substantial bleed through 0:11:16.840 --> 0:11:20.120 of energy prices to core and we did see that. 0:11:21.000 --> 0:11:23.360 If you think about it, there is no business in 0:11:23.400 --> 0:11:26.679 the United States it doesn't use energy, but some use 0:11:26.720 --> 0:11:29.680 a gigantic amount of energy. So food is forty percent 0:11:29.760 --> 0:11:33.720 energy airline fares, so you get both an immediate bleed 0:11:33.800 --> 0:11:37.040 throup to goin airline, our airline fares eventually to food. 0:11:37.840 --> 0:11:41.040 And so that's one reason we've been bullish and thought 0:11:41.040 --> 0:11:43.679 the rates were too high at five percent. We thought 0:11:43.720 --> 0:11:45.360 they'd come down to kind of this range and might 0:11:45.440 --> 0:11:49.000 stall out around here. But I would focus on energy. 0:11:49.080 --> 0:11:52.760 And then also the other strange point about this report 0:11:53.040 --> 0:11:56.040 is we kind of already know next month's report, so 0:11:56.080 --> 0:12:00.360 you don't have TOPI yes, because what happened, which is 0:12:00.360 --> 0:12:02.720 pretty unusual, is that it was sort of like a 0:12:02.720 --> 0:12:06.520 bell went off the first day of October and gasoline 0:12:06.679 --> 0:12:09.000 latively dropped ten percent during the month. 0:12:09.120 --> 0:12:09.360 YEP. 0:12:09.679 --> 0:12:13.280 So guess what, Only five percent was reflected in October, 0:12:13.320 --> 0:12:15.719 and there's gonna be another five next month and we're 0:12:15.720 --> 0:12:18.760 already halfway through the month, so it's unlikely to skyrocket. 0:12:19.000 --> 0:12:20.760 And also retail is lagged. 0:12:20.440 --> 0:12:23.559 And just to that point, the daily national average gasoline 0:12:23.600 --> 0:12:27.320 price regular unleaded three dollars and thirty four cents today. 0:12:27.520 --> 0:12:29.520 It was three dollars and ninety cents just back in 0:12:29.679 --> 0:12:31.000 mid septem. 0:12:30.720 --> 0:12:32.760 Right, And we kind of know that that will decline 0:12:33.200 --> 0:12:35.160 for the rest of the month because what happens is 0:12:35.160 --> 0:12:38.040 when wholesale comes down, there's a lag because you have 0:12:38.080 --> 0:12:42.280 inventory in the channel. So the chances we kind of 0:12:42.280 --> 0:12:45.520 already know that we're going to have a cool CPI 0:12:45.640 --> 0:12:49.280 and PPI both headline and core for next month as well. 0:12:49.360 --> 0:12:50.520 So that's pretty bullish. 0:12:50.960 --> 0:12:53.560 But now now the core is what really counts, right, 0:12:53.600 --> 0:12:57.000 because the energy price is really our transitory. The swings 0:12:57.040 --> 0:12:59.839 that we've seen just in the last year show you 0:12:59.880 --> 0:13:05.120 that I quote your CPI R index quite often, which 0:13:05.160 --> 0:13:07.360 is your own proprietary index. I find it on the 0:13:07.360 --> 0:13:13.080 infracap Funds dot com page, and it's come down substantially 0:13:13.160 --> 0:13:16.640 compared to what the BLS gives us. Their core CPI 0:13:16.840 --> 0:13:19.120 right now is four spot one to three, right, and 0:13:19.160 --> 0:13:22.320 yours is, oh sorry, this is September, but it was 0:13:22.360 --> 0:13:24.360 four point one three and yours was one point three 0:13:24.360 --> 0:13:28.360 percent after having come down below one. Yours was also 0:13:28.480 --> 0:13:32.679 higher than the highest core CPI back in June of 0:13:32.760 --> 0:13:36.280 last year, so it was higher, it's been much lower. 0:13:36.440 --> 0:13:41.240 Do you think it's possible that inflation resurges again, Well, I. 0:13:41.160 --> 0:13:45.199 Wouldn't totally ignore the energy price dynamic because that does 0:13:45.240 --> 0:13:46.439 feed through to the whole economy. 0:13:46.440 --> 0:13:47.320 It has knock on effects. 0:13:47.559 --> 0:13:50.360 And keep in mind that we have an eighty percent 0:13:50.440 --> 0:13:54.240 cost advantage on natural gas too, because we're the Saudi 0:13:54.280 --> 0:13:57.280 Arabia of natural gas and that affects electricity. So it 0:13:57.400 --> 0:13:59.880 is a long term bull factor that we have low 0:14:00.640 --> 0:14:05.800 energy prices in the US. But with regard to the 0:14:05.800 --> 0:14:09.880 potential for a resurgence, yes, the answer is there's a 0:14:09.920 --> 0:14:11.679 little bit of a sign of that, and that's why 0:14:11.720 --> 0:14:14.080 it's better to look at case Shiller than the ridiculous 0:14:14.080 --> 0:14:16.840 stuff that the BLS puts out. So we actually have 0:14:17.000 --> 0:14:19.640 had like for instance, we just marked oart. We didn't 0:14:19.680 --> 0:14:22.120 update our website yet, but we just put out a 0:14:22.400 --> 0:14:25.680 lease yesterday that now our measures up to two. So 0:14:25.760 --> 0:14:28.360 because case Shiller is actually ticking up now, I would 0:14:28.360 --> 0:14:29.120 still see. 0:14:29.160 --> 0:14:32.080 So it was one point three in September. In the 0:14:32.120 --> 0:14:35.680 month before that, it was like zero point eighty nine. Uh, 0:14:35.960 --> 0:14:39.480 and now it's at two, so your index is indeed 0:14:39.520 --> 0:14:40.360 coming back. 0:14:40.200 --> 0:14:43.120 Up, right. So I mean, if the FED was ever 0:14:43.160 --> 0:14:45.040 looked at it, of course they might start to be worried, 0:14:45.040 --> 0:14:47.280 but they're worried about what it was like a year 0:14:47.280 --> 0:14:50.760 and a half ago. So but I would still say 0:14:50.880 --> 0:14:56.040 that the chances of rate skyrocketing with the FED having 0:14:56.320 --> 0:14:59.720 short term rates above five and mortgage rates almost almost 0:14:59.720 --> 0:15:04.120 a day eight percent, is pretty low. It's not impossible, 0:15:04.120 --> 0:15:07.280 but it's pretty low. So we're not really concerned about that. 0:15:07.320 --> 0:15:10.240 We think it's kind of just normalizing. And also rents 0:15:10.360 --> 0:15:13.800 do matter, and there are a lot of apartments coming 0:15:13.840 --> 0:15:16.480 online in the next year, so the chances of a 0:15:16.520 --> 0:15:21.960 big resurgence in housing costs are pretty low. And then 0:15:22.040 --> 0:15:23.800 it's not really going to affect FED policy because it 0:15:23.800 --> 0:15:25.840 would take them eighteen months to figure out that it 0:15:25.880 --> 0:15:26.760 was actually happening. 0:15:27.280 --> 0:15:30.480 So what are we doing here? I know you're still 0:15:30.480 --> 0:15:32.760 bullish on bonds here, So how are you guys kind 0:15:32.760 --> 0:15:34.120 of positioning yourselves these days? 0:15:34.440 --> 0:15:36.960 Well, you know, we're we sort of are the self 0:15:37.400 --> 0:15:43.080 proclaimed preferred stock kings, so we love it is self proclaimed, 0:15:43.120 --> 0:15:46.280 by the way, but we'd love preferred stocks if you 0:15:46.320 --> 0:15:49.720 really look at it, particularly funds like ours have actually 0:15:49.800 --> 0:15:53.640 outperformed like almost all other fixed income so they have 0:15:53.800 --> 0:15:57.360 higher coupons, which means they have lower duration. You can 0:15:57.400 --> 0:15:59.760 look all this up in the terminal because duration is 0:15:59.800 --> 0:16:02.520 kind of hard to calculate. And what also happens with 0:16:02.600 --> 0:16:05.640 preferreds a lot of retail investors sell them in downturns, 0:16:06.000 --> 0:16:08.320 so you can buy them well below par. And then 0:16:08.360 --> 0:16:10.520 the final thing is very unusual about the asset class. 0:16:11.160 --> 0:16:14.120 It has a lot of fixed to floating. So our 0:16:14.160 --> 0:16:18.240 fund's about over fifty percent fixed to floating. And why 0:16:18.280 --> 0:16:20.960 that's important is that all these rates were set when 0:16:21.480 --> 0:16:23.840 FED funds is at two. They're bumping up the five, 0:16:23.880 --> 0:16:26.840 so you're getting a three percent bump in a good 0:16:27.160 --> 0:16:30.080 portion of it. So we would urge investors to take 0:16:30.080 --> 0:16:31.920 a look at that. You can buy funds like ours, 0:16:32.000 --> 0:16:34.160 or you can do it directly. If you do it directly, 0:16:34.440 --> 0:16:35.920 you might want to get a terminal though, beause it's 0:16:35.920 --> 0:16:36.520 pretty complicated. 0:16:36.520 --> 0:16:38.240 You have to look up all the Yes, you should 0:16:38.240 --> 0:16:38.880 get a terminal. 0:16:38.960 --> 0:16:39.160 Yeah. 0:16:39.160 --> 0:16:39.360 Thanks. 0:16:39.760 --> 0:16:42.680 You can use the infracap funds dot com website for 0:16:42.720 --> 0:16:46.440 your inflation data. Everything else on the Bloomberg terminal. Jay, 0:16:46.560 --> 0:16:49.840 we called you in here because the EU says that 0:16:49.880 --> 0:16:52.480 the Euro Area and its biggest economies are going to 0:16:52.520 --> 0:16:55.800 avoid a recession. You've been bearish on the European Union. 0:16:56.240 --> 0:16:58.040 What do you think is going to happen in that economy. 0:16:58.760 --> 0:17:03.400 Well, we prefer real time data as opposed to like 0:17:03.440 --> 0:17:06.920 econometric models, and so if you follow the recent data, 0:17:06.960 --> 0:17:11.920 even this morning on eco Eurozone, there was a terrible 0:17:12.080 --> 0:17:15.400 industrial production report that came out forgot I think it's 0:17:15.480 --> 0:17:19.160 over down over one percent. But also you can access 0:17:19.800 --> 0:17:24.000 on the web the equivalent of the Atlanta GDP now 0:17:24.560 --> 0:17:28.520 and so the Eurozone GDP now is tracking at a 0:17:28.600 --> 0:17:32.240 negative one point two percent annualized rate. And mean the 0:17:32.320 --> 0:17:35.439 quarters early on to be fair, but that was also 0:17:36.480 --> 0:17:38.920 you know, presaging that we would have a recession last 0:17:39.000 --> 0:17:42.120 quarter too, and then all that's just the individual data 0:17:42.200 --> 0:17:44.680 is terrible and there's no bowl case because we had 0:17:44.680 --> 0:17:48.760 two rate increases last quarter. And keep in mind that 0:17:48.920 --> 0:17:52.040 forty five percent of mortgages are floating rate in Europe, 0:17:52.560 --> 0:17:55.639 so those those increases haven't even yet shown up in 0:17:55.720 --> 0:17:59.480 retail sales, so there's and they of course don't have 0:17:59.640 --> 0:18:01.280 the energy costs advantag They don't have any of the 0:18:01.280 --> 0:18:03.240 advantage of us. They don't have a shortge of housing, 0:18:03.680 --> 0:18:09.200 they don't have countercyclical infrastructure spending. Their natural gas prices 0:18:09.200 --> 0:18:11.520 are five times ours, so we have a big gun. 0:18:11.800 --> 0:18:16.040 So they're really kind of a disaster in our data shows. 0:18:16.400 --> 0:18:20.960 And I wouldn't be too focused on your official forecast 0:18:20.960 --> 0:18:23.919 because they update them every y're a little bit like 0:18:23.960 --> 0:18:27.200 the BLS. They updated every six months, so it's you be. 0:18:27.240 --> 0:18:29.840 The last industrial production in the Eurozone fell one point 0:18:29.880 --> 0:18:32.240 one percent. That was worse and expected. That data just 0:18:32.320 --> 0:18:37.720 out about ten hours ago, and industrial production year over 0:18:37.800 --> 0:18:39.200 year was down six point. 0:18:39.040 --> 0:18:40.520 Nine per It's just awful. 0:18:40.520 --> 0:18:42.879 It's very bad, all right, Jay, thanks so much for 0:18:42.880 --> 0:18:45.480 coming in again. Really appreciate taking a walk across town. 0:18:45.600 --> 0:18:48.280 Jay Hatfield, he's the CEO, he is the founder, and 0:18:48.280 --> 0:18:53.280 he's a portfolio manager of Infrastructure Capital Advisors. They like 0:18:53.320 --> 0:18:55.000 preferred stocks. You don't hear that too often. 0:18:55.040 --> 0:18:55.720 That's pretty cool. 0:18:56.000 --> 0:18:59.119 You're listening to the Take cans Our Live program Bloomberg 0:18:59.200 --> 0:19:03.080 Markets at ten am Eastern on Bloomberg Radio, the tune 0:19:03.119 --> 0:19:06.040 in app, Bloomberg dot Com, and the Bloomberg Business app. 0:19:06.119 --> 0:19:08.919 You can also listen live on Amazon Alexa from our 0:19:08.960 --> 0:19:14.000 flagship New York station, just say Alexa playing Bloomberg eleven thirty. 0:19:15.000 --> 0:19:17.200 Check out our next guest right away, Chris Wellen. He's 0:19:17.200 --> 0:19:20.359 a chairman of Whalen Global Advisors. Chris, thanks so much 0:19:20.400 --> 0:19:23.360 for joining us via zoom here. I mean, you look 0:19:23.359 --> 0:19:25.960 at this market over the past couple of days, it's 0:19:26.000 --> 0:19:30.000 basically telling you inflation is whipped, we've seen peak rates. 0:19:31.040 --> 0:19:32.480 What do you take away from some of the data 0:19:32.480 --> 0:19:34.480 we've received over the past couple of days. 0:19:35.720 --> 0:19:38.439 Well, the fact that we're looking at data of this 0:19:38.760 --> 0:19:43.480 maturity tells you something we should take us somewhat more 0:19:44.800 --> 0:19:48.280 nuanced approach. I think to rates because the volatility has 0:19:48.359 --> 0:19:52.480 been so enormous one way and another, and also the 0:19:52.600 --> 0:19:56.439 quality of you know, forward rates. For example, the thirty 0:19:56.480 --> 0:19:59.480 and sixty day rates in the mortgage market, which is 0:19:59.520 --> 0:20:03.000 the found of the treasury market, by the way, has 0:20:03.040 --> 0:20:05.439 been all over the place. So today I would tell 0:20:05.480 --> 0:20:08.520 you the belly of the curve that contract closest to 0:20:08.680 --> 0:20:11.560 par is still a six and a half to a seven, 0:20:12.160 --> 0:20:14.520 So that means to make money they have to be 0:20:14.560 --> 0:20:18.840 writing seven and three quarter percent mortgages. If not eights, 0:20:19.119 --> 0:20:21.679 you know what I mean. So things have yet to 0:20:21.760 --> 0:20:24.439 settle down, even though we rallied a point and yield 0:20:24.880 --> 0:20:30.399 over the last what week. So the aspirational aspects of 0:20:30.440 --> 0:20:32.520 this I think cannot be dismissed. 0:20:33.600 --> 0:20:38.840 So you've got to be writing higher rate mortgages. And 0:20:39.160 --> 0:20:44.000 how is the mortgage outlook right now, Chris, because the 0:20:44.040 --> 0:20:46.879 housing market seems to have ground to a halt, at 0:20:46.960 --> 0:20:50.640 least in terms of existing homes, which means probably very 0:20:50.640 --> 0:20:52.960 few people are going out and getting those mortgages. 0:20:54.480 --> 0:20:58.560 Well, it's largely a cash buyer's market today. You're seeing 0:20:58.680 --> 0:21:01.679 compression above the meat, which is about four hundred and 0:21:01.680 --> 0:21:06.119 fifty thousand dollars. By the way, the average is three thirty. 0:21:06.200 --> 0:21:08.800 I think if you look at the mortgage bankers data, 0:21:09.400 --> 0:21:11.879 so you know, the way I would say it is, 0:21:11.920 --> 0:21:15.000 we were dragging the you'll curve up. So it's been 0:21:15.119 --> 0:21:17.840 very hard for lenders to make any premium when they 0:21:17.880 --> 0:21:21.719 sell their loans into the bond market, and that's changed 0:21:21.720 --> 0:21:24.600 a bit. You may also see some lenders have a 0:21:24.640 --> 0:21:28.199