1
00:00:00,800 --> 00:00:04,040
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

2
00:00:04,040 --> 00:00:06,920
Speaker 1: my co host Matt Miller. Every business day we bring

3
00:00:06,960 --> 00:00:11,520
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

4
00:00:11,520 --> 00:00:15,600
Speaker 1: with essential market moving news. Find a Bloomberg Markets podcast

5
00:00:15,600 --> 00:00:18,439
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

6
00:00:18,480 --> 00:00:22,320
Speaker 1: at Bloomberg dot com slash podcast. I want to bring

7
00:00:22,360 --> 00:00:24,279
Speaker 1: in our next guest, Matt, because he's got a lot

8
00:00:24,360 --> 00:00:28,680
Speaker 1: of explaining to do. Steve Matthews, US economy reporter Flood

9
00:00:28,680 --> 00:00:31,639
Speaker 1: Bloomberg News. Steve, I want to start with this balance

10
00:00:31,680 --> 00:00:33,839
Speaker 1: sheet thing. It's June one. People are telling me this

11
00:00:33,920 --> 00:00:36,400
Speaker 1: is an important day. The Fed's gonna been shrinking the

12
00:00:36,400 --> 00:00:39,519
Speaker 1: balance sheet. How did they do that? What does it

13
00:00:39,600 --> 00:00:43,000
Speaker 1: mean and what should we be looking out for? So, yes,

14
00:00:43,080 --> 00:00:48,560
Speaker 1: today is the official start of QT, or quantitative tightening,

15
00:00:48,680 --> 00:00:54,680
Speaker 1: and UH, the Fed basically since UH, since COVID happened,

16
00:00:55,040 --> 00:00:59,920
Speaker 1: started increasing the size of the balance sheet by buying treasuries,

17
00:01:00,000 --> 00:01:05,319
Speaker 1: securities and mortgage backed securities and essentially doubled the size

18
00:01:05,360 --> 00:01:08,959
Speaker 1: of the balance sheet to nine trillion dollars. And now

19
00:01:09,440 --> 00:01:12,920
Speaker 1: they've realized that all of this money slashing around in

20
00:01:12,920 --> 00:01:17,560
Speaker 1: the system. Plus low interest rates has created inflation and

21
00:01:17,600 --> 00:01:20,560
Speaker 1: they've got to get that under control. So they're cutting

22
00:01:20,560 --> 00:01:23,880
Speaker 1: the size of the balance sheet by about a trillion

23
00:01:24,840 --> 00:01:29,199
Speaker 1: dollars a year. And they're not selling assets, but as

24
00:01:29,280 --> 00:01:34,480
Speaker 1: the assets mature, as treasury bills or treasury notes uh

25
00:01:35,240 --> 00:01:39,600
Speaker 1: come do, or mortgage back securities when they mature, they

26
00:01:39,720 --> 00:01:43,959
Speaker 1: are not reinvesting the money that matures, and by that,

27
00:01:44,480 --> 00:01:48,120
Speaker 1: by that means they will gradually shrink the balance sheet.

28
00:01:48,200 --> 00:01:51,240
Speaker 1: Thank goodness, they were buying mortgage bonds for the past

29
00:01:51,280 --> 00:01:53,520
Speaker 1: couple of years because I was able to get my

30
00:01:53,560 --> 00:01:55,840
Speaker 1: house at only twice what it costs the last time

31
00:01:55,880 --> 00:02:00,000
Speaker 1: it's sold. You know, Yeah, that that's right, super healthful.

32
00:02:00,280 --> 00:02:02,600
Speaker 1: They may have overdone it a little bit on the

33
00:02:02,680 --> 00:02:05,320
Speaker 1: housing side, and in fact, that is one of the

34
00:02:05,320 --> 00:02:07,920
Speaker 1: big debates at the FED right now is what to

35
00:02:08,000 --> 00:02:11,840
Speaker 1: do with all of the mortgage backed securities because they're

36
00:02:11,880 --> 00:02:15,640
Speaker 1: not maturing. I mean, these mortgage backed securities are you know,

37
00:02:15,760 --> 00:02:19,520
Speaker 1: ten years, thirty years? Uh. You know, people don't when

38
00:02:19,520 --> 00:02:23,519
Speaker 1: you sell your house, the MBS that's associated with it, well,

39
00:02:23,880 --> 00:02:27,040
Speaker 1: the mortgage is paid off, but people don't sell their

40
00:02:27,040 --> 00:02:31,399
Speaker 1: houses that frequently. So getting down getting rid of the

41
00:02:31,520 --> 00:02:34,120
Speaker 1: MBS on their balance sheet. It's going to take a

42
00:02:34,160 --> 00:02:37,080
Speaker 1: long time, which is why they're thinking about selling mbs

43
00:02:37,160 --> 00:02:39,520
Speaker 1: as well. It's crazy that they even thought it was

44
00:02:39,880 --> 00:02:42,680
Speaker 1: necessary at the time, like when we get into the

45
00:02:42,680 --> 00:02:45,639
Speaker 1: pandemic that they say, we better make sure that people

46
00:02:45,760 --> 00:02:50,520
Speaker 1: can and buy houses. I mean they already had houses.

47
00:02:51,120 --> 00:02:55,080
Speaker 1: I mean the house market. There was a great deal

48
00:02:55,120 --> 00:02:58,160
Speaker 1: of fear you had, you know, you had the unemployment

49
00:02:58,240 --> 00:03:01,400
Speaker 1: rate went up to around that there were predictions that

50
00:03:01,480 --> 00:03:04,360
Speaker 1: it could go to I mean Jim Bullard was saying,

51
00:03:04,600 --> 00:03:09,280
Speaker 1: you could have just historically high unemployment. The whole economy

52
00:03:09,360 --> 00:03:13,120
Speaker 1: was shutdown, there were problems with the financial system. So

53
00:03:13,160 --> 00:03:15,880
Speaker 1: I think that you know, they get a pass for

54
00:03:15,960 --> 00:03:20,919
Speaker 1: their initial response, but where you can criticize them fairly

55
00:03:21,480 --> 00:03:25,720
Speaker 1: is they were not very fast and in realizing Okay,

56
00:03:25,760 --> 00:03:29,760
Speaker 1: things have changed now and they need to start and

57
00:03:29,800 --> 00:03:32,200
Speaker 1: now the White House reality and now the White House

58
00:03:32,240 --> 00:03:36,560
Speaker 1: wants us to believe that they're solely responsible for inflation.

59
00:03:36,720 --> 00:03:38,839
Speaker 1: This is fascinating. The last couple of days we've seen

60
00:03:38,880 --> 00:03:41,680
Speaker 1: President by and really passed the book um a couple

61
00:03:41,760 --> 00:03:45,240
Speaker 1: on a couple of occasions. Now he's saying like you

62
00:03:45,400 --> 00:03:49,920
Speaker 1: fix it right, Well, is the FED really the only

63
00:03:51,320 --> 00:03:53,760
Speaker 1: body in the US that has anything to do with

64
00:03:53,920 --> 00:03:58,280
Speaker 1: prices and price stability? I mean, did the influx of

65
00:03:58,480 --> 00:04:02,640
Speaker 1: trillions of dollars in fiscal spending not have anything to

66
00:04:02,680 --> 00:04:08,920
Speaker 1: do with it? Clearly the fiscal spending, fiscal and regulatory

67
00:04:09,040 --> 00:04:13,560
Speaker 1: policy feed into inflation and what's happening. You know, a

68
00:04:13,640 --> 00:04:17,160
Speaker 1: lot of what has happened was initially out of the

69
00:04:17,200 --> 00:04:21,240
Speaker 1: FEDS control. However, the fair point is from the FED

70
00:04:21,320 --> 00:04:25,479
Speaker 1: standpoint is they accepted, they accept the idea that the

71
00:04:25,560 --> 00:04:28,680
Speaker 1: central bank is responsible for inflation, maybe not in the

72
00:04:28,839 --> 00:04:31,760
Speaker 1: very short term, but in the medium and long term.

73
00:04:32,320 --> 00:04:36,040
Speaker 1: And you know, they think that's right that you know,

74
00:04:36,400 --> 00:04:40,000
Speaker 1: it's their job to have price stability. You know, it's

75
00:04:40,000 --> 00:04:43,120
Speaker 1: in the law. They have the tools to bring that about.

76
00:04:43,640 --> 00:04:46,320
Speaker 1: They are supposed to look at what's happening with fiscal

77
00:04:46,360 --> 00:04:49,760
Speaker 1: policy and you know, make a judgment of how that's

78
00:04:49,760 --> 00:04:53,320
Speaker 1: going to feed into inflation. And they got that wrong. So,

79
00:04:53,520 --> 00:04:56,720
Speaker 1: I mean, they take responsibility for kind of screwing it up.

80
00:04:57,120 --> 00:04:59,960
Speaker 1: And it was interesting to hear Janet Yellow. That's why

81
00:05:00,000 --> 00:05:04,640
Speaker 1: I want to go what she's saying. She was wrong

82
00:05:04,680 --> 00:05:07,920
Speaker 1: about inflation. Does that mean the FED also believes it

83
00:05:07,960 --> 00:05:10,200
Speaker 1: was wrong about inflation. What do you take away from

84
00:05:10,200 --> 00:05:12,479
Speaker 1: the admitted it already, she was just a little bit

85
00:05:12,560 --> 00:05:16,239
Speaker 1: late to the party. Yeah, Powell has said that in

86
00:05:16,279 --> 00:05:19,640
Speaker 1: so many words. He has not said that, perhaps with

87
00:05:20,120 --> 00:05:23,000
Speaker 1: the clarity of Janet Yell and saying, hey, we just

88
00:05:23,160 --> 00:05:26,240
Speaker 1: we just blew it, but he has said that in

89
00:05:26,279 --> 00:05:30,400
Speaker 1: so many words that they totally missed the boat. And

90
00:05:30,600 --> 00:05:34,240
Speaker 1: you know that's why we're recovering so quickly now to

91
00:05:34,400 --> 00:05:38,320
Speaker 1: do these fifty basis points hikes which are going to

92
00:05:38,720 --> 00:05:43,279
Speaker 1: happen in June and July and maybe in September as well. Yeah,

93
00:05:43,279 --> 00:05:46,359
Speaker 1: if you if you believe Waller, every single meeting until

94
00:05:46,400 --> 00:05:49,200
Speaker 1: they get inflation back down to the FEDS two percent level,

95
00:05:49,279 --> 00:05:52,599
Speaker 1: right well, until they see clear and convincing evidence, is

96
00:05:52,720 --> 00:05:57,480
Speaker 1: what Powell said, uh, the other day. So you know,

97
00:05:58,000 --> 00:06:02,000
Speaker 1: the real debate at the FOMC right now is on September.

98
00:06:02,040 --> 00:06:04,359
Speaker 1: It's pretty well locked in that we're gonna get a

99
00:06:04,400 --> 00:06:08,440
Speaker 1: half point increase in June and July. And you know,

100
00:06:08,640 --> 00:06:13,279
Speaker 1: you've had Waller come out basically endorsing fifty basis points

101
00:06:13,279 --> 00:06:16,600
Speaker 1: for September. But the flip side is you have like

102
00:06:16,760 --> 00:06:21,159
Speaker 1: Raffael Bostick, the Atlanta head FED head saying maybe we'll pause.

103
00:06:21,240 --> 00:06:23,600
Speaker 1: Then that's what the markets liked earlier in the week,

104
00:06:23,600 --> 00:06:27,159
Speaker 1: all right. Steve Matthews, US economy reporter for Bloomberg News.

105
00:06:27,200 --> 00:06:29,839
Speaker 1: He is based on in Atlantic. With him, we could

106
00:06:29,839 --> 00:06:31,560
Speaker 1: do a whole show with him, and he covers everything.

107
00:06:31,680 --> 00:06:33,880
Speaker 1: He's been doing it for a long time, and uh,

108
00:06:33,920 --> 00:06:35,720
Speaker 1: he knows what's going on, so we love getting a

109
00:06:35,720 --> 00:06:38,599
Speaker 1: few minutes of his time. He got the FED rolling

110
00:06:38,600 --> 00:06:46,359
Speaker 1: off this balance sheet coming into this year and reading

111
00:06:46,360 --> 00:06:49,200
Speaker 1: a lot of preview notes for one of the themes

112
00:06:49,440 --> 00:06:54,240
Speaker 1: was volatility. Get ready and get comfortable with volatility. Employ

113
00:06:54,320 --> 00:06:58,040
Speaker 1: where they right. And that applies to today because just

114
00:06:58,320 --> 00:07:01,240
Speaker 1: earlier this morning, that's he was up thirty thirty two

115
00:07:01,279 --> 00:07:04,240
Speaker 1: points an hour down twenty eight points. I don't know

116
00:07:04,279 --> 00:07:06,679
Speaker 1: why I'm looking at my Bloomberg terminal, but maybe Jess Metton,

117
00:07:07,240 --> 00:07:09,279
Speaker 1: she joins us here in our Bloomberg radio studio, maybe

118
00:07:09,320 --> 00:07:12,600
Speaker 1: she can tell she's a Bloomberg Markets reporter. Jes, I

119
00:07:12,680 --> 00:07:15,280
Speaker 1: know things are moving around here. We saw the yields

120
00:07:15,280 --> 00:07:16,600
Speaker 1: pop up. I mean, what have you seen in the

121
00:07:16,720 --> 00:07:19,320
Speaker 1: equity trading this morning? And maybe over the last week

122
00:07:19,400 --> 00:07:22,920
Speaker 1: or so. A big thing is yields again and having

123
00:07:22,920 --> 00:07:24,440
Speaker 1: them spike, and a lot of it has to do

124
00:07:24,480 --> 00:07:29,280
Speaker 1: with investors recalibrating and pricing in potentially more aggressive moves

125
00:07:29,360 --> 00:07:33,320
Speaker 1: after the next two Federal Reserve meetings. Jerome Palell FED

126
00:07:33,400 --> 00:07:36,760
Speaker 1: chair had signaled that there would be two fifty basis

127
00:07:36,760 --> 00:07:39,400
Speaker 1: point moves at the next two meetings, but investors were hopeful,

128
00:07:39,520 --> 00:07:42,040
Speaker 1: especially because a number of FED speakers have come out

129
00:07:42,120 --> 00:07:45,920
Speaker 1: recently suggesting that potentially they could maybe debate whether there

130
00:07:45,960 --> 00:07:48,560
Speaker 1: could be a pause in reason rates, especially since now

131
00:07:48,920 --> 00:07:52,920
Speaker 1: we have the FED balance sheet runoff starting today. But

132
00:07:53,120 --> 00:07:57,360
Speaker 1: now because a lot of these inflation indicators still very elevated,

133
00:07:57,400 --> 00:07:59,720
Speaker 1: and even outside of the US looking at what's happening

134
00:07:59,720 --> 00:08:02,440
Speaker 1: in your up that's causing those concerns that central banks

135
00:08:02,440 --> 00:08:04,800
Speaker 1: potentially have to be even more aggressive, And now we're

136
00:08:04,800 --> 00:08:08,120
Speaker 1: seeing them trying to bake in potentially bigger reed hikes

137
00:08:08,160 --> 00:08:11,720
Speaker 1: coming up after those two meetings. So we also have

138
00:08:11,920 --> 00:08:15,960
Speaker 1: today's the first day of reducing the balance sheet, and

139
00:08:16,640 --> 00:08:19,000
Speaker 1: are we going to feel the effects immediately? I mean,

140
00:08:19,760 --> 00:08:22,400
Speaker 1: obviously we're seeing a jump in rates right now, but

141
00:08:22,760 --> 00:08:25,160
Speaker 1: that's unlikely that all of us. It kicked in at

142
00:08:25,160 --> 00:08:29,800
Speaker 1: like ten nine, right, But are we going to start

143
00:08:30,040 --> 00:08:33,280
Speaker 1: um hearing about this right away? Our market participants gonna

144
00:08:33,320 --> 00:08:37,080
Speaker 1: say there's no liquidity and great question. And this has

145
00:08:37,120 --> 00:08:40,600
Speaker 1: been telegraphed so much, and FEED chair Jerome Palace tried

146
00:08:40,679 --> 00:08:43,920
Speaker 1: to be careful with his language and FED speakers in

147
00:08:44,000 --> 00:08:47,079
Speaker 1: recent months, just signaling that this would be coming. So

148
00:08:47,200 --> 00:08:49,600
Speaker 1: investors have known for months now and a lot of

149
00:08:49,640 --> 00:08:52,080
Speaker 1: it potentially has some of it been priced in, But

150
00:08:52,080 --> 00:08:54,280
Speaker 1: there's not a ton of historical precedents to go on

151
00:08:54,360 --> 00:08:57,000
Speaker 1: because if you remember did the last time we were

152
00:08:57,040 --> 00:08:59,560
Speaker 1: going through this, the FED was much more patient and

153
00:08:59,600 --> 00:09:02,640
Speaker 1: caution is during that time period, even when it first

154
00:09:02,720 --> 00:09:05,680
Speaker 1: began started trying to raise raids after the financial crisis

155
00:09:05,720 --> 00:09:09,280
Speaker 1: in the December of fifteen, and then obviously a couple

156
00:09:09,240 --> 00:09:11,680
Speaker 1: of years later once we got to that's when the

157
00:09:11,679 --> 00:09:14,880
Speaker 1: FED eventually started their balance shoot runoff. And as you know,

158
00:09:15,120 --> 00:09:18,000
Speaker 1: in the fall of that's when there was obviously less

159
00:09:18,000 --> 00:09:21,080
Speaker 1: liquidity in the system, and there was a big bout

160
00:09:21,120 --> 00:09:23,640
Speaker 1: of volatility that we saw in with the SMP five

161
00:09:23,679 --> 00:09:26,959
Speaker 1: hundred teetering on the brink of a correction that December.

162
00:09:26,960 --> 00:09:30,280
Speaker 1: But the FED did reverse course and stopped hiking rates,

163
00:09:30,280 --> 00:09:33,120
Speaker 1: and then eventually six months later they began cutting rates.

164
00:09:33,160 --> 00:09:35,720
Speaker 1: But it's tough to see if that could even be

165
00:09:35,840 --> 00:09:39,040
Speaker 1: the case this time around, just given how high inflation

166
00:09:39,120 --> 00:09:41,280
Speaker 1: is right now, and so that doesn't really give investors

167
00:09:41,320 --> 00:09:43,679
Speaker 1: conviction that you would see in about phase like that

168
00:09:43,760 --> 00:09:46,559
Speaker 1: with a central bank. You know, you look at the SMP,

169
00:09:46,720 --> 00:09:49,839
Speaker 1: the chart of the SMP, We're beginning June right where

170
00:09:49,880 --> 00:09:52,480
Speaker 1: it started May. Why did we go through all of

171
00:09:52,520 --> 00:09:55,439
Speaker 1: that rigamarole of the month of May when we're back

172
00:09:55,440 --> 00:09:58,280
Speaker 1: to the same place we were before. That's volatility we are,

173
00:09:58,440 --> 00:10:01,319
Speaker 1: and it's it's if a lot of the seasonality indicators.

174
00:10:01,360 --> 00:10:04,319
Speaker 1: If you think of, say, for instance, April historically supposed

175
00:10:04,320 --> 00:10:07,440
Speaker 1: to be a strong month was not for the SMP

176
00:10:07,559 --> 00:10:09,600
Speaker 1: five hundred. You look at May sell the main go

177
00:10:09,640 --> 00:10:12,120
Speaker 1: away that did not follow the case, and June historically

178
00:10:12,160 --> 00:10:14,960
Speaker 1: that June swoon that actually hasn't been the case over

179
00:10:15,000 --> 00:10:16,760
Speaker 1: the past decades. So you look at some of these

180
00:10:16,760 --> 00:10:19,640
Speaker 1: seasonality indicators, it's almost as if they haven't followed the pattern.

181
00:10:19,720 --> 00:10:21,480
Speaker 1: But one of the key things is when I talk

182
00:10:21,520 --> 00:10:23,840
Speaker 1: to strategist, they always bring up the midterm election years.

183
00:10:23,840 --> 00:10:25,880
Speaker 1: So if you look at that seasonality indicator, we are

184
00:10:25,920 --> 00:10:28,960
Speaker 1: actually following that and the second quarter is typically the

185
00:10:29,080 --> 00:10:32,400
Speaker 1: weakest on average, so LPL Financial Crunch the numbers going

186
00:10:32,440 --> 00:10:34,920
Speaker 1: back to nineteen fifty and on average, the second quarter

187
00:10:35,000 --> 00:10:37,080
Speaker 1: usually has a drop of about a little over two

188
00:10:37,080 --> 00:10:39,280
Speaker 1: percent for the SMP five hundred in June is the

189
00:10:39,320 --> 00:10:41,920
Speaker 1: weakest month in the in the midterm election years and

190
00:10:41,920 --> 00:10:44,600
Speaker 1: in the presidential cycle. So in that case it could

191
00:10:44,600 --> 00:10:47,560
Speaker 1: potentially not vote that well for equity markets. But again,

192
00:10:47,679 --> 00:10:49,960
Speaker 1: the SMP five hundreds off to its worst start two

193
00:10:50,040 --> 00:10:52,680
Speaker 1: years since nineteen seventies, so so it's because it's dropped

194
00:10:52,720 --> 00:10:55,200
Speaker 1: so much that could potentially give it some room to

195
00:10:55,320 --> 00:10:58,480
Speaker 1: move higher. But it's tricky to see, especially now that

196
00:10:58,520 --> 00:11:00,400
Speaker 1: we have that balance sheet run off star if that's

197
00:11:00,400 --> 00:11:02,880
Speaker 1: going to ignite another jolt of volatility and market? Do

198
00:11:02,880 --> 00:11:06,640
Speaker 1: you use S E A G. The Bloomberg terminal it's

199
00:11:06,840 --> 00:11:09,679
Speaker 1: called the seasonality chart? Is so cool to use? What

200
00:11:09,760 --> 00:11:13,240
Speaker 1: is it that well? Put in any index or any stock?

201
00:11:13,400 --> 00:11:16,160
Speaker 1: So I have the SMPN and then you type s

202
00:11:16,200 --> 00:11:20,720
Speaker 1: E A G go and the pro tip is on

203
00:11:20,760 --> 00:11:24,240
Speaker 1: the toolbar you click heat map instead of line. Okay,

204
00:11:24,360 --> 00:11:27,800
Speaker 1: got it here right there, you go heat map and

205
00:11:27,800 --> 00:11:30,160
Speaker 1: then you can see the seasonality. You could bring it

206
00:11:30,160 --> 00:11:33,040
Speaker 1: out like twenty years and it just tells you like

207
00:11:33,200 --> 00:11:35,280
Speaker 1: historically this is a good month or a bad month.

208
00:11:35,360 --> 00:11:40,520
Speaker 1: Long have you been in Bloomberg two years? Just the

209
00:11:40,520 --> 00:11:45,200
Speaker 1: I mean you are the function I well two years.

210
00:11:45,400 --> 00:11:49,200
Speaker 1: I love this machine. Um no, So I just think

211
00:11:49,240 --> 00:11:54,320
Speaker 1: it's a fascinating tool. Now in terms of um, you know,

212
00:11:54,360 --> 00:11:58,120
Speaker 1: bottoms up analysis. We thought that there was gonna be

213
00:11:59,400 --> 00:12:02,439
Speaker 1: that that that profits we're gonna continue, that margins were

214
00:12:02,440 --> 00:12:05,320
Speaker 1: gonna stay wide, that things were gonna still be awesome

215
00:12:05,320 --> 00:12:08,320
Speaker 1: this year, and um now it looks like analysts are

216
00:12:08,360 --> 00:12:13,199
Speaker 1: bringing down their expectations of awesomeness due to inflation, right

217
00:12:13,400 --> 00:12:16,640
Speaker 1: they are, so Bloomberg Intelligence crunch these numbers and the

218
00:12:16,720 --> 00:12:19,520
Speaker 1: Ford earnings per share forecast revisions for the SMP five

219
00:12:19,559 --> 00:12:24,280
Speaker 1: hundred are trending lower for each quarter until three now.

220
00:12:24,320 --> 00:12:26,800
Speaker 1: And especially that has a lot to do with what's

221
00:12:26,840 --> 00:12:31,200
Speaker 1: happening with margin pressures and really tied to inflation. And

222
00:12:31,200 --> 00:12:34,319
Speaker 1: and Gina Martin Adams her team at Bloomberg Intelligence, they

223
00:12:34,320 --> 00:12:38,520
Speaker 1: crunched the inflation discussions in earnings calls for the first

224
00:12:38,600 --> 00:12:41,240
Speaker 1: quarter in those discussions for on inflation. They continue to

225
00:12:41,360 --> 00:12:44,359
Speaker 1: rise in those calls more than five mentions on average,

226
00:12:44,600 --> 00:12:47,520
Speaker 1: and they increased more than from the fourth quarter and

227
00:12:47,559 --> 00:12:50,120
Speaker 1: over twenty three times from their loan the first three

228
00:12:50,120 --> 00:12:54,840
Speaker 1: months of one optimistic sign. Supply chain concerns did ease

229
00:12:54,880 --> 00:12:57,880
Speaker 1: for a second quarter, however, they still remained ninety percent

230
00:12:58,040 --> 00:13:01,600
Speaker 1: higher from a year ago. So those are two issues

231
00:13:01,679 --> 00:13:04,720
Speaker 1: that companies are still battling, and especially depending on the

232
00:13:04,760 --> 00:13:07,959
Speaker 1: types of companies that we've had, when you're looking at retailers,

233
00:13:08,080 --> 00:13:11,640
Speaker 1: not necessarily all equal. Right now, you had Target Walmart

234
00:13:12,360 --> 00:13:15,199
Speaker 1: in ending up lowering their profit forecast for the year,

235
00:13:15,240 --> 00:13:17,400
Speaker 1: But then you had Macy's come in and raised their

236
00:13:17,440 --> 00:13:20,720
Speaker 1: sales guidance. And then you had on the discount retailers

237
00:13:21,280 --> 00:13:24,679
Speaker 1: General A Dollar General and Dollar Tree also doing much

238
00:13:24,720 --> 00:13:27,520
Speaker 1: better than expected. And then you have Williams Sonoma that

239
00:13:27,640 --> 00:13:29,920
Speaker 1: ended up doing much better than expected. So depending on

240
00:13:30,520 --> 00:13:32,959
Speaker 1: where you are in the retail space and in looking

241
00:13:32,960 --> 00:13:37,680
Speaker 1: at that discretionary companies, it's it hasn't necessarily been equal,

242
00:13:37,760 --> 00:13:39,600
Speaker 1: and some of the higher end has held up a

243
00:13:39,600 --> 00:13:41,840
Speaker 1: bit better than on the lower end. All right, So

244
00:13:42,000 --> 00:13:46,320
Speaker 1: before you got to Bloomberg News, you were at USA

245
00:13:46,440 --> 00:13:49,480
Speaker 1: Today Wall Street Journal. Before that, she was an Aggie

246
00:13:50,880 --> 00:13:54,400
Speaker 1: and M now Texas A and M is in College Station, Texas.

247
00:13:54,480 --> 00:13:57,080
Speaker 1: I've never been, and there's a reasonable likelihood that I

248
00:13:57,080 --> 00:13:59,760
Speaker 1: will never get the College Station. In thirty seconds, tell

249
00:13:59,760 --> 00:14:03,200
Speaker 1: me abou college Station, Texas. So it's a great place.

250
00:14:03,280 --> 00:14:05,960
Speaker 1: It's in College Station, Texas, obviously, and it's a school

251
00:14:06,000 --> 00:14:08,000
Speaker 1: that has more than fifty students, so you're in a

252
00:14:08,040 --> 00:14:12,200
Speaker 1: small town, but there's more than fifty thou And I mean,

253
00:14:12,240 --> 00:14:14,079
Speaker 1: it's been a while since I graduated. I was a

254
00:14:14,080 --> 00:14:16,760
Speaker 1: class of two thousand tents, so I've been out for

255
00:14:16,800 --> 00:14:19,560
Speaker 1: a while though. But it's one of those definitely tradition

256
00:14:19,600 --> 00:14:22,800
Speaker 1: based type schools. Football was your ten year reunion ruined

257
00:14:22,840 --> 00:14:25,600
Speaker 1: by the pandemic. Did not go to Unfortunately, no ten

258
00:14:25,680 --> 00:14:28,520
Speaker 1: year reunion for me because of the pandemic that happened.

259
00:14:28,640 --> 00:14:31,480
Speaker 1: But you know, I will make it back down there.

260
00:14:31,760 --> 00:14:35,080
Speaker 1: You go to football games. Football, Football's religion down there,

261
00:14:35,160 --> 00:14:39,120
Speaker 1: and especially even high school football is Friday night exactly.

262
00:14:39,160 --> 00:14:42,239
Speaker 1: That's the worst thing ever when I moved to Westchester,

263
00:14:42,320 --> 00:14:45,280
Speaker 1: as I realized they played football on Saturday afternoons. What

264
00:14:45,400 --> 00:14:50,440
Speaker 1: a stupid yea Friday night games. Good stuff. Jess Jess Met,

265
00:14:50,440 --> 00:14:53,040
Speaker 1: an equities reporter for Bloomberg News and a proud Texas

266
00:14:53,080 --> 00:14:56,400
Speaker 1: A and m Aggie getting the latest on College Station Texas.

267
00:14:59,480 --> 00:15:02,760
Speaker 1: Let's check in David Kat's, president and CEO of Matrix

268
00:15:02,800 --> 00:15:06,160
Speaker 1: Asset Advisors. David, you just heard Tim Fury from I

269
00:15:06,440 --> 00:15:09,240
Speaker 1: M talking about some pretty good manufacturing numbers. How does

270
00:15:09,280 --> 00:15:11,880
Speaker 1: that dovetail in with kind of how you guys are

271
00:15:11,960 --> 00:15:16,360
Speaker 1: thinking about this economy as you think about your portfolio. Well,

272
00:15:16,400 --> 00:15:18,520
Speaker 1: we think that this is going to be a difficult

273
00:15:18,600 --> 00:15:21,360
Speaker 1: year for the FED too slow inflation yet keep the

274
00:15:21,360 --> 00:15:24,600
Speaker 1: economy going, but we think they likely will be able

275
00:15:24,640 --> 00:15:27,000
Speaker 1: to pull it off. And the data that you were

276
00:15:27,040 --> 00:15:29,240
Speaker 1: just giving in the conversation you just had sort of

277
00:15:29,240 --> 00:15:33,040
Speaker 1: supports that, Um, the economy is still strong. You just

278
00:15:33,120 --> 00:15:35,760
Speaker 1: had a few banks speaking the last week or two

279
00:15:35,840 --> 00:15:38,840
Speaker 1: that talked about consumers being good and business is being

280
00:15:38,840 --> 00:15:41,720
Speaker 1: good and loans being up. So we think the economy

281
00:15:41,840 --> 00:15:45,160
Speaker 1: is hanging in. Uh. Psychologically, it's a tough environment with

282
00:15:45,200 --> 00:15:47,520
Speaker 1: the FED talking about raising rates as much as they are,

283
00:15:48,240 --> 00:15:51,040
Speaker 1: but we're hopeful that will be able to walk across

284
00:15:51,080 --> 00:15:54,320
Speaker 1: that type ro So even if the Fed raises rates

285
00:15:54,360 --> 00:15:59,960
Speaker 1: another fifty fifty, fifty and fifty is it gonna be okay?

286
00:16:00,760 --> 00:16:03,920
Speaker 1: But we think the FED is talking a very hawkish game,

287
00:16:04,080 --> 00:16:06,280
Speaker 1: so it's set the expectation for a fifty and a

288
00:16:06,360 --> 00:16:09,080
Speaker 1: fifty UM. We think that we're going to start to

289
00:16:09,080 --> 00:16:13,160
Speaker 1: get some inflation relief by the late summer early fall,

290
00:16:13,640 --> 00:16:15,680
Speaker 1: and as that takes hold, we think that by the

291
00:16:15,760 --> 00:16:17,680
Speaker 1: year end, the FED might be able to be a

292
00:16:17,680 --> 00:16:21,880
Speaker 1: little bit less aggressive than currently feared. Uh. It's easier

293
00:16:21,920 --> 00:16:24,360
Speaker 1: for them to talk a hawkish game than to actually

294
00:16:24,480 --> 00:16:27,400
Speaker 1: execute a hawk is game. So we're hoping that that's

295
00:16:27,400 --> 00:16:30,480
Speaker 1: what's going on right now. The market originally thought the

296
00:16:30,480 --> 00:16:33,240
Speaker 1: FED was behind the curve. You don't hear them talking

297
00:16:33,240 --> 00:16:36,680
Speaker 1: about that too much. Right now. People understand that the

298
00:16:36,720 --> 00:16:39,960
Speaker 1: FED is going to break the inflation psychology and the

299
00:16:40,000 --> 00:16:42,920
Speaker 1: inflation cycle. It's just a question can they keep the

300
00:16:42,960 --> 00:16:46,200
Speaker 1: economy going in the meantime, And from where we sit,

301
00:16:46,360 --> 00:16:49,360
Speaker 1: we definitely think that's going to be the case in two,

302
00:16:49,760 --> 00:16:53,640
Speaker 1: but we also think that three still can be a

303
00:16:53,840 --> 00:16:56,680
Speaker 1: reasonably good year in terms of the economy. All right,

304
00:16:56,720 --> 00:16:58,320
Speaker 1: So if I do have that kind of you know,

305
00:16:58,400 --> 00:17:03,360
Speaker 1: twelve month plus horizon, what sectors or what names are

306
00:17:03,440 --> 00:17:06,679
Speaker 1: you guys looking at these days? So, so that's a

307
00:17:06,680 --> 00:17:09,160
Speaker 1: great question. We think the best way to navigate this

308
00:17:09,200 --> 00:17:11,320
Speaker 1: market is to have that twelve month time arising. There

309
00:17:11,359 --> 00:17:12,639
Speaker 1: are a lot of stocks that have a lot of

310
00:17:12,640 --> 00:17:15,960
Speaker 1: short term uncertainty, but on twelve months they should be

311
00:17:15,960 --> 00:17:18,760
Speaker 1: a lot higher. So sectors that we like, uh, first

312
00:17:18,800 --> 00:17:21,399
Speaker 1: and foremost, we think that the financials are going to

313
00:17:21,480 --> 00:17:23,640
Speaker 1: be a very good place to be over the next year.

314
00:17:24,240 --> 00:17:26,359
Speaker 1: We think you can get involved right now with a

315
00:17:26,359 --> 00:17:30,199
Speaker 1: lot of beaten down technology. So we went into two

316
00:17:30,240 --> 00:17:33,320
Speaker 1: a little bit wary about technology. Uh, they've got beaten

317
00:17:33,359 --> 00:17:37,400
Speaker 1: down enough that there are many opportunities right there. Um,

318
00:17:37,480 --> 00:17:39,480
Speaker 1: you know, with the megacap tech we think is a

319
00:17:39,480 --> 00:17:41,520
Speaker 1: good place to be. And then sort of one off

320
00:17:41,920 --> 00:17:44,199
Speaker 1: type of stocks like we like Starbucks here, we like

321
00:17:44,280 --> 00:17:50,600
Speaker 1: air products here. Uh. Paramount Um is a solid business

322
00:17:50,720 --> 00:17:53,760
Speaker 1: at a very attractive valuation. The CEO just brought fifteen

323
00:17:53,760 --> 00:17:57,000
Speaker 1: million dollars worth at the stock or twenty million dollars

324
00:17:57,000 --> 00:17:59,920
Speaker 1: worth at the stock. Excuse me, Starbucks. The CEO bought

325
00:18:00,040 --> 00:18:02,480
Speaker 1: fifteen million dollars rot the stock. Five sir. If you

326
00:18:02,560 --> 00:18:06,320
Speaker 1: had some fairly significant insider buying, so we would take

327
00:18:06,320 --> 00:18:09,240
Speaker 1: our queue from companies that are buying backstock from insiders

328
00:18:09,240 --> 00:18:11,920
Speaker 1: that are buying stock. UM, and if you can buy

329
00:18:12,119 --> 00:18:15,840
Speaker 1: a great company like Google at sixteen seventeen times earnings,

330
00:18:15,880 --> 00:18:18,160
Speaker 1: we think you're gonna do real well. All right, David,

331
00:18:18,160 --> 00:18:20,240
Speaker 1: good stuff. Appreciate yes, sharing some of the names you

332
00:18:20,240 --> 00:18:23,720
Speaker 1: guys are working on. David Kat's president and chief investment

333
00:18:23,720 --> 00:18:29,960
Speaker 1: officer of Matrix Asset Advisers. I guess you know what

334
00:18:30,040 --> 00:18:32,440
Speaker 1: we've all probably experienced over the last couple of years

335
00:18:32,480 --> 00:18:35,440
Speaker 1: during this pandemic is we're doing more and more stuff

336
00:18:35,440 --> 00:18:38,760
Speaker 1: from home. We're working from home, we're going to school

337
00:18:38,760 --> 00:18:41,720
Speaker 1: at home. Thankfully those days are over for most of us.

338
00:18:42,320 --> 00:18:43,879
Speaker 1: But it just kind of goes to the issue of

339
00:18:43,920 --> 00:18:47,400
Speaker 1: identity security, data security, all that stuff. It just really

340
00:18:47,440 --> 00:18:49,639
Speaker 1: comes down and puts it really front and center for

341
00:18:49,640 --> 00:18:52,960
Speaker 1: a lot of folks. Fran Rosh, he's the CEO Forge Rock.

342
00:18:53,680 --> 00:18:57,640
Speaker 1: They are a company that focuses on identity security. So

343
00:18:57,680 --> 00:18:59,480
Speaker 1: it's a good person to check in with. Fran. Thanks

344
00:18:59,480 --> 00:19:02,439
Speaker 1: so much for Joe warning us. UM. Please tell me

345
00:19:02,520 --> 00:19:05,560
Speaker 1: you've got a better mouse trap for identity security. I mean,

346
00:19:05,560 --> 00:19:08,000
Speaker 1: I've got a million user names and passwords out there.

347
00:19:08,280 --> 00:19:10,800
Speaker 1: I've got thumb prints, I got facial recognition. Where do

348
00:19:10,840 --> 00:19:13,840
Speaker 1: you think we're going here? Great? Thanks for having me,

349
00:19:13,920 --> 00:19:15,480
Speaker 1: and I think we do have a better mouse trap.

350
00:19:15,960 --> 00:19:18,920
Speaker 1: And I think what we've seen is this industry evolved.

351
00:19:19,119 --> 00:19:22,920
Speaker 1: I think people used to think about identities of security solution,

352
00:19:23,000 --> 00:19:25,800
Speaker 1: how do I block the bad guys from getting access

353
00:19:25,840 --> 00:19:29,680
Speaker 1: to account data or company information? And we've seen an

354
00:19:29,680 --> 00:19:34,119
Speaker 1: evolution where our c I O and CCO customers are

355
00:19:34,560 --> 00:19:38,800
Speaker 1: increasing demand from the business line. The guy's gall's responsive

356
00:19:38,840 --> 00:19:42,879
Speaker 1: for revenue to create better experiences because identities with the

357
00:19:42,920 --> 00:19:46,639
Speaker 1: front door of the business, whether it's banking, healthcare, e commerce,

358
00:19:47,320 --> 00:19:50,840
Speaker 1: digital streaming, everything is really going digital. So at Board

359
00:19:50,880 --> 00:19:56,000
Speaker 1: Drock we really kind of uh been a revolution revolutionizing

360
00:19:56,000 --> 00:19:58,680
Speaker 1: in a couple of different areas. Helping our customers create

361
00:19:58,720 --> 00:20:03,240
Speaker 1: identity experiences are frictional, it's and easy, well out compromising

362
00:20:03,280 --> 00:20:06,960
Speaker 1: on security and that's our objective. But how how does

363
00:20:07,000 --> 00:20:09,560
Speaker 1: it work? I mean, much like Paul said, you know,

364
00:20:09,600 --> 00:20:13,040
Speaker 1: I have a million different passwords for things. I'm constantly

365
00:20:13,080 --> 00:20:15,960
Speaker 1: clicking to forgot your password button because I have no

366
00:20:16,080 --> 00:20:21,600
Speaker 1: idea what I entered last time? Is there away across

367
00:20:21,680 --> 00:20:24,800
Speaker 1: all accounts and all devices to figure this out in

368
00:20:24,840 --> 00:20:28,199
Speaker 1: a simple with a simple solution, I think there is

369
00:20:28,200 --> 00:20:31,120
Speaker 1: a better way. And and you know, usually and passwords

370
00:20:31,119 --> 00:20:33,560
Speaker 1: have been around for like fifty or sixty years, and

371
00:20:33,600 --> 00:20:36,080
Speaker 1: we look at them as like a lose lose situation

372
00:20:36,359 --> 00:20:39,359
Speaker 1: to both the bad experience and they're bad security because

373
00:20:39,359 --> 00:20:42,080
Speaker 1: everybody uses the same one. So we're working on a

374
00:20:42,119 --> 00:20:45,880
Speaker 1: better way to identify who you are than that static approach.

375
00:20:46,200 --> 00:20:48,320
Speaker 1: And a lot of that comes down to bringing AI

376
00:20:48,520 --> 00:20:52,120
Speaker 1: capability into the identity solution. We can look at your

377
00:20:52,359 --> 00:20:56,080
Speaker 1: user behavior, device behavior. We partner with companies like Apple

378
00:20:56,119 --> 00:20:59,240
Speaker 1: and Google and Microsoft who can serve up certain information

379
00:20:59,280 --> 00:21:01,760
Speaker 1: from your device to find a much more kind of

380
00:21:01,760 --> 00:21:06,280
Speaker 1: behind the scenes, frictionalists and more secure way to recognize

381
00:21:06,280 --> 00:21:09,159
Speaker 1: you and eventually eliminate the user name and password. And

382
00:21:09,200 --> 00:21:11,560
Speaker 1: this is a great application for AI. So how do

383
00:21:11,600 --> 00:21:14,320
Speaker 1: we get there? I mean, what we're sold, right, Paul,

384
00:21:14,880 --> 00:21:18,080
Speaker 1: So what do we do so that Ford Drock can

385
00:21:18,440 --> 00:21:20,800
Speaker 1: get rid of user names and passwords across all of

386
00:21:20,800 --> 00:21:24,280
Speaker 1: our things. A lot of it is change management. So

387
00:21:24,400 --> 00:21:27,000
Speaker 1: many of the organizations that you create those user names

388
00:21:27,000 --> 00:21:30,240
Speaker 1: and passwords with have been around for decades. They've got

389
00:21:30,240 --> 00:21:33,720
Speaker 1: a let of legacy systems and applications and infrastructure, and

390
00:21:33,760 --> 00:21:37,040
Speaker 1: this requires change change on their behalf to kind of

391
00:21:37,080 --> 00:21:40,879
Speaker 1: make that replacement of legacy technology with something modern like

392
00:21:40,920 --> 00:21:43,920
Speaker 1: Ford Drock. And it also means change for the consumer.

393
00:21:44,320 --> 00:21:46,320
Speaker 1: And a lot of consumers we say we want to

394
00:21:46,359 --> 00:21:49,159
Speaker 1: get rid of us name, password, but it's still we

395
00:21:49,160 --> 00:21:52,120
Speaker 1: were comfortable with it. So it's a lot about change management,

396
00:21:52,119 --> 00:21:56,200
Speaker 1: which is why we're getting out there and engaging with enterprises, banks, healthcare,

397
00:21:56,560 --> 00:21:58,800
Speaker 1: e commerce to tell them there is something better and

398
00:21:58,840 --> 00:22:02,000
Speaker 1: to get out and let to know that consumer that changes. Okay,

399
00:22:02,080 --> 00:22:05,359
Speaker 1: you can ditch that old approach, get better experiences and

400
00:22:05,440 --> 00:22:10,520
Speaker 1: better security. How about fingerprint UH and facial recognition? How

401
00:22:10,520 --> 00:22:15,440
Speaker 1: do those kind of rank? They're really important. UM Biometrics

402
00:22:15,520 --> 00:22:18,040
Speaker 1: is a great way to authenticate you in place of

403
00:22:18,119 --> 00:22:20,280
Speaker 1: you used name and password. And this is where there

404
00:22:20,320 --> 00:22:22,720
Speaker 1: was an announcement a couple of weeks ago. There's been

405
00:22:22,760 --> 00:22:26,040
Speaker 1: some standards bodies called the phyto Web Up Web off

406
00:22:26,119 --> 00:22:29,840
Speaker 1: end standards that created a way that companies like Microsoft,

407
00:22:30,600 --> 00:22:33,440
Speaker 1: like Google, like Apple can take the work that they

408
00:22:33,520 --> 00:22:38,000
Speaker 1: do around biometrics and authenticating you securely to their devices

409
00:22:38,119 --> 00:22:42,720
Speaker 1: and then transmit that security to the website you're authenticating too,

410
00:22:43,160 --> 00:22:45,800
Speaker 1: So it really becomes a way to do those secure

411
00:22:45,800 --> 00:22:49,720
Speaker 1: biometrics for your fingerprint, your facial recognition stays on the

412
00:22:49,760 --> 00:22:52,119
Speaker 1: device so you don't have to worry about it showing

413
00:22:52,200 --> 00:22:55,000
Speaker 1: up on the Internet, but also leverage it as a

414
00:22:55,080 --> 00:22:57,960
Speaker 1: better authentication device than you use the name and password.

415
00:22:58,080 --> 00:23:00,880
Speaker 1: So it's it's a big driver. But it also means

416
00:23:00,920 --> 00:23:03,399
Speaker 1: bringing the idea of consumer privacy and saying we're going

417
00:23:03,440 --> 00:23:06,240
Speaker 1: to leverage that biometric for one thing and one thing only.

418
00:23:06,520 --> 00:23:08,800
Speaker 1: That's to authenticate you to our website. We're never going

419
00:23:08,840 --> 00:23:11,679
Speaker 1: to share that information or use it for any other purpose.

420
00:23:11,920 --> 00:23:14,280
Speaker 1: I gave up my privacy years ago, so I'm not

421
00:23:14,280 --> 00:23:16,639
Speaker 1: worried about that. Fran, thanks so much for joining us.

422
00:23:16,680 --> 00:23:20,360
Speaker 1: Fran Rosch there. Uh. He's the CEO of fourge Rock

423
00:23:20,800 --> 00:23:23,000
Speaker 1: Trades on the n Y s C under the ticker

424
00:23:23,160 --> 00:23:28,080
Speaker 1: f O r G, and they're hoping to make our um.

425
00:23:28,119 --> 00:23:30,359
Speaker 1: I guess I was going to say Internet experience, but

426
00:23:30,400 --> 00:23:33,600
Speaker 1: I guess it's everyone's all experience for the future, right

427
00:23:33,600 --> 00:23:35,800
Speaker 1: because everything is online now. So yeah, I mean the

428
00:23:35,800 --> 00:23:38,800
Speaker 1: Bloomberg system. You know, we use the fingerprint, and that

429
00:23:38,960 --> 00:23:42,360
Speaker 1: seems among and the user name and and the password.

430
00:23:42,680 --> 00:23:44,560
Speaker 1: I mean, yeah, we take it seriously. A lot of

431
00:23:44,560 --> 00:23:46,639
Speaker 1: my you know, my bank, you know they used his

432
00:23:46,680 --> 00:23:50,320
Speaker 1: facial recognition. A lot of places using facial recognition, so

433
00:23:50,440 --> 00:23:54,879
Speaker 1: lots of issues everything. Thanks for listening to the Bloomberg

434
00:23:54,960 --> 00:23:58,359
Speaker 1: Markets podcast. You can subscribe and listen to interviews with

435
00:23:58,400 --> 00:24:03,200
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.

436
00:24:03,480 --> 00:24:06,960
Speaker 1: I'm on Twitter at Matt Miller nineteen seventy three. Put

437
00:24:07,000 --> 00:24:09,280
Speaker 1: on fall Sweeney. I'm on Twitter at p T Sweeney

438
00:24:09,359 --> 00:24:12,000
Speaker 1: before the podcast. You can always catch us worldwide at

439
00:24:12,040 --> 00:24:12,800
Speaker 1: Bloomberg Radio