WEBVTT - The Fed Decision, Tech Earnings on Tap 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.200 us live on YouTube. 0:00:27.520 --> 0:00:30.640 This is a joy because we keep very much track 0:00:30.680 --> 0:00:33.400 of people with short Oh, Mike Green, I'm sorry, we 0:00:33.479 --> 0:00:35.320 got breaking news. You're gonna be on for a minute 0:00:35.320 --> 0:00:38.319 and a half. So this morning, I don't care if 0:00:38.320 --> 0:00:40.960 there's breaking news now, we're not gonna go to it. 0:00:41.000 --> 0:00:43.640 We're gonna go to Mike Green here to get some good, 0:00:43.680 --> 0:00:46.639 good analysis about what's going on. Of course, with Simplify 0:00:47.240 --> 0:00:51.159 asset management, I look at the Washington postfeed, the New 0:00:51.240 --> 0:00:55.640 York Times feed. It's nuts out there. How do you 0:00:55.880 --> 0:01:02.160 synthesize the chaos over into just remain calm to execute 0:01:02.280 --> 0:01:03.400 investment process? 0:01:03.640 --> 0:01:05.240 Well, I think all of us are kind of hoping 0:01:05.280 --> 0:01:07.759 that that chaos that you're describing is just the flurry 0:01:07.800 --> 0:01:10.120 of blows that comes out from an aggressive boxer in 0:01:10.120 --> 0:01:13.280 the first round, and that eventually it settles down. But 0:01:13.360 --> 0:01:15.479 it is remarkable when you kind of look at what's 0:01:15.480 --> 0:01:18.480 happening We used to wake up to market volatility and 0:01:18.520 --> 0:01:21.279 look to the politics to explain it, and instead today 0:01:21.319 --> 0:01:25.759 we're looking at political volatility and the markets remain totally sanguine. 0:01:25.800 --> 0:01:27.320 I think a lot of it is just we don't 0:01:27.360 --> 0:01:30.200 know what to do, right may I look at it. 0:01:30.760 --> 0:01:33.520 I don't know if you know this, but Lisa's newspapers 0:01:33.880 --> 0:01:36.399 at the back end of the seven o'clock hour that's 0:01:36.520 --> 0:01:41.600 funded by an NGO, a government thing, and the answer 0:01:41.640 --> 0:01:44.759 is like, even NGOs, our guests are unfunded right now. 0:01:45.840 --> 0:01:48.560 Yeah, so this is the key question. Now, a federal 0:01:48.640 --> 0:01:50.400 judge just put a stay on this for a week. 0:01:50.440 --> 0:01:52.880 We'll find out on Monday what the ultimate decision is 0:01:52.880 --> 0:01:54.320 around this, or at least what the next step in 0:01:54.360 --> 0:01:58.360 the process. But yeah, this decision to stop funding the NGOs, 0:01:58.360 --> 0:02:01.600 et cetera, in pursue of basically making sure that Trump's 0:02:01.600 --> 0:02:04.960 executive orders are enforced. It's gonna be one of many questions. 0:02:05.000 --> 0:02:06.760 We don't know how many payrolls camp be met. We 0:02:06.760 --> 0:02:09.560 don't know how many different firms are ultimately going to 0:02:09.560 --> 0:02:13.000 be affected by this, how many commercial real estate properties 0:02:13.000 --> 0:02:14.959 that are currently housing people are suddenly going to be 0:02:14.960 --> 0:02:16.080 faced with their bills on paid. 0:02:16.200 --> 0:02:17.520 We just don't know is. 0:02:17.480 --> 0:02:20.080 The best advice for an investor to try to ignore 0:02:20.120 --> 0:02:22.280 the noise and focus on the fundamentals. Where we have 0:02:22.360 --> 0:02:25.040 earnings this week, maybe that's really what matters. 0:02:25.120 --> 0:02:27.040 Well, we do have earnings, and I heard earlier the 0:02:27.040 --> 0:02:30.200 commentary about, you know, we're excited that ASML's orders are 0:02:30.240 --> 0:02:33.160 off the charts. But remember ASML's reporting off of a 0:02:33.200 --> 0:02:36.880 December quarter deep seat came out on this this past week, 0:02:37.240 --> 0:02:39.400 we've also known that this was kind of the case, right. 0:02:39.440 --> 0:02:42.080 This is very much like the development of you know, 0:02:42.160 --> 0:02:45.280 multiple signals and amplification that happened in fiber optics that 0:02:45.440 --> 0:02:47.320 change the tone around fiber optics. 0:02:47.440 --> 0:02:49.480 I got to go here. Alisa helped me out here, 0:02:49.880 --> 0:02:53.520 T mobiles out well, Lisa's one of Lisa's entourage, whispered 0:02:53.560 --> 0:02:55.519 in my ear, go to our inn T mobile. I 0:02:55.560 --> 0:02:59.040 mean it's plus plus two twenty one and it's up seven. 0:02:58.760 --> 0:03:02.000 Dollars now, yeah, earning smash expectations for it. So I 0:03:02.040 --> 0:03:04.520 wanted to look, let's check in Core. 0:03:05.160 --> 0:03:08.359 Do you know I pay a mortgage payment to remember 0:03:08.440 --> 0:03:12.120 Vince Ferrell. Vince Ferrell was just such a great supporter 0:03:12.200 --> 0:03:15.120 of Bloomberg surveillance. I miss him every day. We lost 0:03:15.200 --> 0:03:17.720 Vince Ferrell way too long. We used to sit in 0:03:17.800 --> 0:03:20.919 tears in the radio studio with Ken Pruitt and try 0:03:20.960 --> 0:03:24.000 to figure out how many children their phone bills we 0:03:24.040 --> 0:03:30.280 were paying and with t good Morning tea mobile mortgage payment? Help, Pa? 0:03:30.320 --> 0:03:32.560 Why did you keep us going with Mike cream? Hey Mike, 0:03:32.639 --> 0:03:33.240 So we sit here. 0:03:33.320 --> 0:03:36.160 We had twenty twenty three and twenty twenty four both 0:03:36.760 --> 0:03:38.520 north of twenty percent returns on the S and P 0:03:38.640 --> 0:03:41.240 five hundred. How do you think about twenty twenty five 0:03:41.280 --> 0:03:43.960 going into the year? I mean, should we just temper 0:03:44.000 --> 0:03:46.440 that and hope for a single digit return? How do 0:03:46.440 --> 0:03:47.040 you think about it? 0:03:47.120 --> 0:03:49.840 Well, I'm often reminded of an event in late nineteen 0:03:49.920 --> 0:03:52.440 ninety nine when I asked my mother in law, you know, 0:03:53.120 --> 0:03:55.440 she'd had a phenomenal nineteen ninety nine. I said, you 0:03:55.440 --> 0:03:59.040 know what if stocks were up fifteen percent in two thousand, 0:03:59.080 --> 0:04:01.560 would you be surprised? Yeah, I'd be really surprised. I'm like, well, 0:04:01.560 --> 0:04:03.920 then why not take something off the table? And her 0:04:03.960 --> 0:04:07.040 reaction was, I'd be very surprised if they were only 0:04:07.120 --> 0:04:10.080 up fifteen perccon right, So we're if you actually look 0:04:10.080 --> 0:04:11.600 at what's happening in the market on a year to 0:04:11.680 --> 0:04:14.640 day basis, a lot of the not mag seven stocks 0:04:14.720 --> 0:04:16.800 in videos, the non in videos instead. 0:04:16.520 --> 0:04:17.600 Of the world, they're up sharply. 0:04:17.640 --> 0:04:19.800 The Dow is up almost eight percent ye before the 0:04:19.839 --> 0:04:21.280 first month of the year is out of the way, 0:04:21.360 --> 0:04:22.960 so it's hard to argue this is going to be 0:04:23.040 --> 0:04:23.920 another calumn year. 0:04:24.200 --> 0:04:26.680 We're going to hear from the Fed today Tom Keen 0:04:26.720 --> 0:04:28.720 and the Surrounds team of full coverage starting a one 0:04:28.800 --> 0:04:32.160 thirty pm Wall Street time. What do you should we 0:04:32.200 --> 0:04:34.440 expect anything from the Fed this year or just kind 0:04:34.440 --> 0:04:37.080 of sit on the signlines and follow the data. 0:04:37.160 --> 0:04:39.480 You know, this is we definitely want to follow the data. 0:04:39.560 --> 0:04:41.160 But one of the things that I think is really 0:04:41.200 --> 0:04:43.160 critically is the market is only pricing about a ten 0:04:43.200 --> 0:04:46.000 percent probability of a cut at this meeting. They're pricing 0:04:46.120 --> 0:04:48.320 very low probability of the idea of a hike throughout 0:04:48.360 --> 0:04:51.120 the year. That's backed off since obviously in video. But 0:04:52.160 --> 0:04:54.560 if we look at that commentary that's going to come out, 0:04:54.760 --> 0:04:56.320 this is where we're really going to find out what 0:04:56.320 --> 0:04:58.760 the Fed is thinking. Agree, So we aren't going to 0:04:58.800 --> 0:05:00.560 know what the press release. We know what's going to 0:05:00.600 --> 0:05:02.400 happen the market. The FED is not going to surprise 0:05:02.480 --> 0:05:06.240 the market there. Whether Palell chooses to react to the 0:05:06.279 --> 0:05:10.120 first week of the Trump administration in terms of answering questions, 0:05:10.200 --> 0:05:14.680 implications of it, inflation concerns, we genuinely just don't know. 0:05:14.800 --> 0:05:17.360 I totally agree, totally agree. I just I just refuse 0:05:17.400 --> 0:05:19.360 to believe it's a snooze fest with all that's going 0:05:19.360 --> 0:05:22.720 on politically, and why you to treat Mike Green with 0:05:22.800 --> 0:05:26.479 us to simplify, we continue here an extended conversation to 0:05:26.520 --> 0:05:29.800 begin at your day. Many other worthies coming up at 0:05:29.839 --> 0:05:32.280 the FED meeting and on the equity markets. Cam Dawson 0:05:32.320 --> 0:05:35.880 will be with us later as well. The nastic Paul 0:05:36.040 --> 0:05:38.000 up four tenths of a percent right now. 0:05:38.200 --> 0:05:40.480 So, Michael, what do you expect here for earnings? If 0:05:40.480 --> 0:05:42.400 if I've got a FED that's going to be the 0:05:42.520 --> 0:05:46.320 kind of quiecent we're going to say for twenty twenty five, 0:05:46.360 --> 0:05:48.840 maybe one, maybe two great rate cuts. That puts a 0:05:48.880 --> 0:05:50.520 lot of pressure on earnings, doesn't it. 0:05:50.520 --> 0:05:52.080 It does put pressure on earnings. And one of the 0:05:52.120 --> 0:05:54.640 most important areas that puts pressure on earnings is actually 0:05:54.680 --> 0:05:57.239 from not the leading companies, those companies that are flush 0:05:57.279 --> 0:05:59.680 and cash, et cetera, but those companies that are now 0:05:59.720 --> 0:06:02.040 facing refinancing. So if we look at things like the 0:06:02.080 --> 0:06:06.240 high Yield Index, we've actually seen credit spreads compress. Many 0:06:06.279 --> 0:06:09.919 of these companies have not refinanced that paper from the 0:06:09.960 --> 0:06:13.200 twenty twenty twenty twenty one time period. You're now approaching 0:06:13.240 --> 0:06:16.560 that maturity wall. And when these companies refinanced, even though 0:06:16.560 --> 0:06:19.120 credit spreads are tight, the absolute level of interest rates 0:06:19.120 --> 0:06:20.520 are a lot higher. So in many of these companies, 0:06:20.520 --> 0:06:21.960 you're talking about going from four to four and a 0:06:22.000 --> 0:06:24.440 half percent coupons to seven to seven and a half 0:06:24.520 --> 0:06:25.640 or eight percent coupons. 0:06:25.760 --> 0:06:28.760 Ma Green, how do you perceive Apple? On Monday, we 0:06:28.800 --> 0:06:32.160 had a total full scale panic and everybody turned to 0:06:32.200 --> 0:06:38.080 Cooper Tino and said, they're not doing the capex ballet. 0:06:37.760 --> 0:06:40.599 Is that a heritage from Steve Jobs? Is that a 0:06:41.120 --> 0:06:43.720 Tim Cook thing? Or is it blind luck Well. 0:06:43.720 --> 0:06:45.640 I think it's a combination of components. So Apple has 0:06:45.640 --> 0:06:48.840 always been a capital intensive, light business. They've always chosen 0:06:48.880 --> 0:06:52.560 to outsource their manufacturing while keeping control of their intellectual property. 0:06:53.200 --> 0:06:55.640 But I think the much more important message is nobody 0:06:55.680 --> 0:06:57.840 lost their job on Monday, and so four oh one 0:06:57.920 --> 0:07:00.560 k flows continue to come into the markets. Esters are 0:07:00.560 --> 0:07:03.000 continuing to pile in. A lot of this is a 0:07:03.040 --> 0:07:05.159 function of the autopilot of the way that we've set 0:07:05.200 --> 0:07:08.120 up flows into our system. When people are working, they're 0:07:08.160 --> 0:07:10.680 contributing to the stock market. That money is flowing into 0:07:10.720 --> 0:07:13.600 an index fund, and guess what that index fund is buying? 0:07:14.520 --> 0:07:19.960 Spring training February nine. The Dodgers play in Tokyo, so 0:07:20.000 --> 0:07:22.960 they started early spring training. What inning are we in, 0:07:23.080 --> 0:07:24.480 Mike Grain, of this bull market? 0:07:26.440 --> 0:07:28.400 I have thought we've been in extended innings for an 0:07:28.440 --> 0:07:31.440 extended period of time. A typical bear market bowl market 0:07:31.600 --> 0:07:34.680 lasts for between three and five years, so we're probably 0:07:34.720 --> 0:07:35.720 getting towards the end of it. 0:07:35.720 --> 0:07:36.520 Am I yet. 0:07:36.360 --> 0:07:38.520 Ready to call my mother in law and say you. 0:07:38.520 --> 0:07:40.960 Must get out? Not quite. So. 0:07:41.240 --> 0:07:45.120 We had some news earlier about this whole China AI thing, 0:07:45.240 --> 0:07:48.160 and we're all trying to learn it literally on the fly. 0:07:48.920 --> 0:07:51.679 AI has been a theme for this stock market really 0:07:51.880 --> 0:07:52.680 a couple of years now. 0:07:52.720 --> 0:07:54.400 It's been a supporter of growth and. 0:07:54.240 --> 0:07:56.000 It just means so many positive things for so many 0:07:56.040 --> 0:07:59.800 different industries. What's the assumption did anything change for you 0:07:59.840 --> 0:08:02.239 with is deep seek news earlier this week. 0:08:02.440 --> 0:08:05.040 Well, the fascinating thing is that the deep seek news 0:08:05.080 --> 0:08:09.480 was actually out weeks ago, right so and candidly months ago. 0:08:09.600 --> 0:08:12.840 So the key innovation was actually the handling of memory components. 0:08:13.320 --> 0:08:15.440 They announced and released a paper in August of I 0:08:15.440 --> 0:08:17.400 think it was actually August or July of last year 0:08:17.440 --> 0:08:20.240 that actually highlighted these breakthroughs and a lot of this 0:08:20.280 --> 0:08:22.440 stuff if you just think about it in an evolutionary terms, 0:08:22.520 --> 0:08:26.520 is really straightforward. Can we do more computing with less energy? 0:08:26.840 --> 0:08:29.720 Can we actually split up our brain into in terms 0:08:29.720 --> 0:08:32.320 of a reptilian brain and an mammalian brain the Sarah 0:08:32.360 --> 0:08:35.240 bellm etcetera. That's all we're doing with these components, their 0:08:35.320 --> 0:08:38.319 natural evolutionary processes that simply say these things are getting 0:08:38.320 --> 0:08:40.760 better and cheaper, et cetera. One stat I just wanted 0:08:40.800 --> 0:08:42.960 to share with you, if you look at the actual 0:08:43.000 --> 0:08:46.199 inflation adjusted price of an Apple two, the deep seat 0:08:46.520 --> 0:08:50.720 innovations basically drop the cost of AI an LLM for 0:08:50.760 --> 0:08:53.440 the average individual down to roughly the same inflation adjusted 0:08:53.480 --> 0:08:55.560 costs as an Apple too in nineteen seventy seven, My 0:08:55.640 --> 0:08:56.040 cream with. 0:08:56.120 --> 0:08:58.920 Us to simplify, we're going to continue in extended conversation 0:08:59.040 --> 0:09:01.840 to get us going futures up five red and green 0:09:01.840 --> 0:09:03.640 in the screen. But I got a dancetick up four 0:09:03.720 --> 0:09:08.080 tenths of a percent, Meta and Microsoft this afternoon, and 0:09:08.160 --> 0:09:10.720 more importantly, Paul helped me in the eleven o'clock hour. 0:09:11.120 --> 0:09:14.000 You have the chief executive officer of T Mobile. 0:09:14.080 --> 0:09:18.160 Yeah, I think so, absolutely eleven. I think we're good 0:09:18.200 --> 0:09:20.000 on that. Hopefully he won't be coming with a collection 0:09:20.080 --> 0:09:21.760 notice that. Yeah, so we'll get the latest. I mean 0:09:21.760 --> 0:09:25.679 that telecom space, Tom, the wireless space. It's so competitive, 0:09:25.880 --> 0:09:26.880 you know, but. 0:09:27.600 --> 0:09:31.240 So competitive it's kill a millany exactly. You know, you 0:09:31.320 --> 0:09:33.559 don't think, oh you get this, this it's all free, 0:09:33.559 --> 0:09:34.520 free for you, and then. 0:09:34.800 --> 0:09:38.400 Ninety days later it's like hello, yeah, exactly right, Hey Mike, 0:09:38.440 --> 0:09:39.880 what screens well for you guys? 0:09:39.960 --> 0:09:41.600 These days? Are you? 0:09:41.600 --> 0:09:44.240 You know? Ever, I think probably the last ten to 0:09:44.280 --> 0:09:49.160 fifteen years technology has led this market. Is technology still 0:09:49.160 --> 0:09:50.480 going to leave this market going forward? 0:09:50.480 --> 0:09:52.760 Do you think it's It's hard for me to see 0:09:52.840 --> 0:09:55.120 leadership change in a very meaningful way because I spend 0:09:55.160 --> 0:09:57.560 so much my time focused on the passive components and 0:09:57.600 --> 0:10:01.200 these largest companies. There's a free that is created by 0:10:01.200 --> 0:10:03.600 these orders, and so it just pushes the leadership further. 0:10:04.760 --> 0:10:07.800 This Monday, when we had the news of deep seeking 0:10:07.880 --> 0:10:10.480 the hit on Nvidia, I ruffled a lot of feathers 0:10:10.480 --> 0:10:11.959 by saying, I just don't see why this is. 0:10:11.920 --> 0:10:13.520 Going to change. And here we are two or three 0:10:13.559 --> 0:10:14.000 days later. 0:10:14.040 --> 0:10:15.920 Some of these are background charge and markets are being 0:10:16.000 --> 0:10:17.240 led by the largest companies. 0:10:17.320 --> 0:10:19.960 Well, how have ETFs changes in the fact that Mike 0:10:19.960 --> 0:10:22.840 Green and I and Paul Sweeney. Yeah, I'm going back 0:10:22.880 --> 0:10:25.760 to wheat for security now, way back. This is right 0:10:25.800 --> 0:10:29.200 after the Confederacy pulled back comes Shenandoah Valley, and the 0:10:29.240 --> 0:10:34.720 basic idea here is we used to rotate, blowney, we 0:10:34.800 --> 0:10:39.600 don't rotate anymore. How have ETF's the dynamics changed that. 0:10:40.000 --> 0:10:42.920 Well, it's interesting because you actually can see the rotation. 0:10:43.040 --> 0:10:45.880 So immediately after Trump's election, we saw small caps take 0:10:45.880 --> 0:10:48.840 off right and you saw the actual flows into things 0:10:48.880 --> 0:10:52.160 like the IWM ETF. You can track the shares outstanding. 0:10:52.480 --> 0:10:55.320 There's explosive buying of that. On this theory that we 0:10:55.320 --> 0:10:58.240 should rotate, Well, guess what, once you've rotated. 0:10:58.280 --> 0:11:00.560 What do you do next? Rotate? 0:11:00.679 --> 0:11:03.439 And so small caps then saw people basically move away 0:11:03.440 --> 0:11:06.200 from them, and the market went right back to doing 0:11:06.200 --> 0:11:08.560 what it was doing before, which is the vast majority 0:11:08.559 --> 0:11:10.800 of the flows are people who are not rotating, not 0:11:10.840 --> 0:11:13.800 doing anything other than putting money in their paycheck into 0:11:13.800 --> 0:11:15.560 the market on their four oh one case, on a 0:11:15.559 --> 0:11:16.880 weekly basis or a bi weekly. 0:11:17.000 --> 0:11:19.640 That's a second time you've mentioned that. I mean, the 0:11:19.640 --> 0:11:23.719 financial media is ignoring Larry MacDonald was brilliant at this. 0:11:24.200 --> 0:11:29.160 There's just this wall of money almost inputting into the 0:11:29.200 --> 0:11:32.839 market on a daily basis, right, yeah, it really is. 0:11:32.880 --> 0:11:34.760 And that money flows in and what is it by 0:11:34.800 --> 0:11:37.719 the most of in Vidia, Apple, Microsoft, et cetera. Now 0:11:38.040 --> 0:11:40.760 the relative shifts like things like in Vidia catching fire 0:11:40.800 --> 0:11:43.839 and people waking up to it. That's actually exacerbated by 0:11:43.840 --> 0:11:46.640 this because if you think about what ends up happening, right, 0:11:46.800 --> 0:11:48.760 Tom Keen and his brilliance is like in video, it's 0:11:48.800 --> 0:11:50.840 the future. I'm going to buy some of these shares. Well, 0:11:51.080 --> 0:11:53.600 who's going to sell those shares to you? The passive 0:11:53.600 --> 0:11:55.680 index fund will not sell those shares to you under 0:11:55.679 --> 0:11:58.840 any conditions unless a general sellerator comes through. And so 0:11:58.880 --> 0:12:01.200 you're competing with other people who are having the same insights. 0:12:01.200 --> 0:12:03.920 That can cause that sort of sharp performance that we've seen. 0:12:04.320 --> 0:12:05.920 But once it's there, it's kind of built in. 0:12:06.160 --> 0:12:08.040 Mike Cree. One final question. You've got to get Michael 0:12:08.080 --> 0:12:10.560 Barran here, but one final question. It is just simply 0:12:11.000 --> 0:12:16.360 what do you say to our listeners and viewers in cash? Well? 0:12:17.559 --> 0:12:19.600 This is a very challenging one, right because the fomo 0:12:19.760 --> 0:12:23.040 component of watching your neighbor get rich is really really difficult. 0:12:23.280 --> 0:12:24.559 I just keep emphasizing for. 0:12:24.480 --> 0:12:27.400 People invest for what you need, not what your neighbor wants. 0:12:27.760 --> 0:12:29.960 And the reality is is that we've got real interest 0:12:30.040 --> 0:12:32.360 rates through tips and through duration at this point that 0:12:32.400 --> 0:12:36.000 are attractive enough to allow many institutions and many households 0:12:36.000 --> 0:12:39.160 to meet their objection their objectives in terms of retirements. 0:12:39.480 --> 0:12:41.520 I just encourage people to make sure that you're thinking 0:12:41.520 --> 0:12:44.960 about that income portion of your portfolio and recognizing that 0:12:45.080 --> 0:12:48.520 the volatility that we are not seeing currently will eventually return. 0:12:48.880 --> 0:12:52.120 Did you get enough time today? I did? Mike Green, 0:12:52.200 --> 0:12:54.640 thank you so much. He's been in here, folks, like 0:12:54.720 --> 0:12:57.120 three times. It's oh, Mike, I'm sorry you're on for 0:12:57.200 --> 0:13:00.720 ninety seconds. That was great to have an extended conversation. 0:13:07.720 --> 0:13:11.319 You're listening to the Bloomberg surveillance podcast. Catch US live 0:13:11.360 --> 0:13:14.560 weekday afternoons from seven to ten am Eastern Listen on 0:13:14.600 --> 0:13:18.280 Applecarplay and Android Auto with the Bloomberg Business app, or 0:13:18.440 --> 0:13:20.000 watch us live on YouTube. 0:13:20.040 --> 0:13:22.200 We have to talk to Amanda Linum of Black Rock 0:13:22.600 --> 0:13:25.960 about adult material. But we got to do this first. 0:13:26.040 --> 0:13:28.840 This YouTube thing I'm doing and Paul's doing. Our heads 0:13:28.840 --> 0:13:32.320 are spinning. It's all new. C and End's dealing with it. 0:13:32.440 --> 0:13:35.880 Everybody's dealing with YouTube, and we have a team that's 0:13:35.920 --> 0:13:38.600 been brilliant. The word they use, Paul our colin of 0:13:38.640 --> 0:13:42.240 the Twins says discoverability. Oh okay, And the biggest thing 0:13:42.320 --> 0:13:45.120 I did is I switched to YouTube premium. It's one 0:13:45.200 --> 0:13:48.280 hundred and sixty seven dollars a year. If you pay annually, 0:13:48.320 --> 0:13:50.960 it's ten bucks a month. One twenty. Amanda, you did 0:13:50.960 --> 0:13:54.360 the same thing. What's the difference you perceive in YouTube 0:13:54.400 --> 0:13:57.600 premium versus regular run rate YouTube? 0:13:57.720 --> 0:13:59.559 I love it and thank you for having me because 0:13:59.559 --> 0:14:01.640 I can want you guys on two times the speed 0:14:01.640 --> 0:14:04.880 without the commercials. So I can stay informed. Yes, so 0:14:04.920 --> 0:14:07.160 I can stay informed. But it takes half the time, 0:14:07.200 --> 0:14:07.880 and it's amazing. 0:14:07.880 --> 0:14:08.800 It takes half the time. 0:14:10.880 --> 0:14:13.840 Exactly, But I can you guys are so good that 0:14:13.880 --> 0:14:15.080 I can follow along had. 0:14:17.000 --> 0:14:20.280 Years of fixed in coming analysis. When you're listening at 0:14:20.360 --> 0:14:24.080 two times the speed, how will you listen to Joe Prowl? 0:14:25.600 --> 0:14:30.720 That's an idea the press conference in two times speedly, 0:14:31.400 --> 0:14:31.840 what are you going. 0:14:31.840 --> 0:14:34.480 To listen for today? I'm going to listen for two things. 0:14:34.520 --> 0:14:37.800 One do we still think that policy is meaningfully restrictive? 0:14:38.120 --> 0:14:40.720 And then two, what is the bar for cutting rates? 0:14:40.800 --> 0:14:43.480 Is improvement and inflation enough for them to cut rates 0:14:44.040 --> 0:14:46.720 or do they actually need to see further cooling in 0:14:46.760 --> 0:14:48.600 the labor market. I think that will tell us a 0:14:48.600 --> 0:14:53.120 bit about the forward path. I'm not expecting really a 0:14:53.200 --> 0:14:55.320 cut to be on the table even in the March meeting, 0:14:55.360 --> 0:14:59.520 because the January seasonality and inflation will probably distort the 0:14:59.560 --> 0:15:01.800 numbers of But I do think that as we move 0:15:01.800 --> 0:15:03.400 towards the second half of the year, we'll want to 0:15:03.400 --> 0:15:05.840 see what the next action is in terms of an 0:15:05.840 --> 0:15:08.120 extended pause or a cut across. 0:15:07.800 --> 0:15:10.080 The fixed income community. This year to date, just so 0:15:10.120 --> 0:15:12.440 far here in January, we have some positive returns here 0:15:12.520 --> 0:15:15.760 led by high yield. What does the macro credit call 0:15:15.800 --> 0:15:17.000 for you guys in twenty twenty five? 0:15:17.080 --> 0:15:19.000 So I think the lesson from twenty twenty four is 0:15:19.000 --> 0:15:21.320 that there was an opportunity cost to being too defensive, 0:15:22.000 --> 0:15:24.320 and really our view on credit in twenty twenty fives 0:15:24.360 --> 0:15:25.840 you just have to be very clear on why you're 0:15:25.840 --> 0:15:29.320 buying credit. We're recommending that investors buy credit for carry 0:15:29.400 --> 0:15:32.560 and for yield, not for the total return boost from, 0:15:32.760 --> 0:15:35.760 for example, tightening and spreads or decline in rates. Spreads 0:15:35.760 --> 0:15:38.240 are already quite tight, so there's not a ton of 0:15:38.320 --> 0:15:41.200 room for absolute spread tightening from here. And our base 0:15:41.240 --> 0:15:43.680 case is that structurally higher interest rates will prevail. 0:15:43.800 --> 0:15:44.880 So if we do get. 0:15:44.720 --> 0:15:47.440 A boost to total returns from those typical drivers and 0:15:47.480 --> 0:15:49.680 total returns, that would be a bonus. But actually were 0:15:49.800 --> 0:15:51.840 we see a pretty compelling opportunity from the all in 0:15:51.920 --> 0:15:53.720 yield perspective and corporate credit. 0:15:53.800 --> 0:15:57.520 How do you feel about investment grade versus high yield? 0:15:57.720 --> 0:16:00.760 Yeah, I actually am comfortable moving down the quality spectrum. 0:16:00.760 --> 0:16:03.080 I would say for investors that can only play in 0:16:03.200 --> 0:16:05.920 investment grade, triple b's are a nice option for that. 0:16:06.000 --> 0:16:07.960 So moving down in the quality spectrum, I would say. 0:16:07.960 --> 0:16:10.160 The big takeaway over the past few years, frankly, is 0:16:10.200 --> 0:16:13.160 that there's a lot more fluidity between these markets. Actually, 0:16:13.160 --> 0:16:15.800 if you look at credit metrics, between the high end 0:16:15.800 --> 0:16:18.240 of high yield and the low end of IG, either're converging. 0:16:19.320 --> 0:16:21.400 There's not a steep of a penalty for a company 0:16:21.440 --> 0:16:23.720 to fall from IG to high yield. We're just seeing 0:16:23.760 --> 0:16:25.680 a lot more of the blurring of the lines, and 0:16:25.720 --> 0:16:29.480 so that line of demarcation between IG and high yield. 0:16:29.280 --> 0:16:31.160 Is much less punitive than it used to be. We 0:16:31.200 --> 0:16:33.160 actually like moving down in quality now. 0:16:33.240 --> 0:16:35.640 I would say when you get into things like triple c's, 0:16:36.160 --> 0:16:40.000 especially on triple C loans have underperformed because of certain 0:16:40.040 --> 0:16:43.040 technicals related to colos and rating sensitivity, you have to 0:16:43.080 --> 0:16:43.960 tread a bit carefully. 0:16:44.080 --> 0:16:45.840 But in general we like credit risk. 0:16:45.880 --> 0:16:48.400 And I looked at the Atlanta FED GDP now three 0:16:48.440 --> 0:16:52.280 point two percent, solidly above trend, and so that's the 0:16:52.400 --> 0:16:55.200 key for credit is the growth I totally. 0:16:54.800 --> 0:16:57.000 This is my main theory. Is the number one thing 0:16:57.040 --> 0:17:00.680 we've been wrong on has been the growth story is 0:17:00.720 --> 0:17:04.280 a continuum. Does black Rock believe the growth story continues? 0:17:04.400 --> 0:17:04.840 We do. 0:17:05.000 --> 0:17:07.439 And I would say the one sign post to watch 0:17:07.480 --> 0:17:10.240 because I think amid all of this uncertainty and volatility, 0:17:10.240 --> 0:17:12.399 we just need to know what to watch for the 0:17:12.440 --> 0:17:15.920 growth story has been hinged on the US consumer remaining resilient. 0:17:16.000 --> 0:17:18.360 The pockets of weakness that we've seen have really been 0:17:18.359 --> 0:17:21.159 confined to the low end. That's because the labor market 0:17:21.200 --> 0:17:24.680 is in this kind of low hiring but low firing environment. 0:17:24.880 --> 0:17:27.040 I think the key time for that to change is 0:17:27.040 --> 0:17:30.840 that if corporates start flexing the layoff tool more aggressively, 0:17:31.400 --> 0:17:34.480 that might allow the weakness in the consumer to extend 0:17:34.480 --> 0:17:37.359 beyond that lower income cohort. And I think that could 0:17:37.359 --> 0:17:39.480 be the risk to the US economy because we know 0:17:39.520 --> 0:17:41.600 the consumer generates two thirds of GDP. 0:17:41.800 --> 0:17:43.879 Paul Swedy Craig tourist joining us here in the nine 0:17:43.920 --> 0:17:48.880 o'clock on that lower core. He's got some brilliant research. 0:17:49.280 --> 0:17:51.320 Man, Are there some sectors that screen well for you 0:17:51.440 --> 0:17:52.080 guys right now? 0:17:52.640 --> 0:17:54.280 Folks still like financials. 0:17:54.680 --> 0:17:56.680 I think when you think about some of the tailwes 0:17:56.720 --> 0:17:59.320 in terms of a rebound in capital markets, activity, steeper 0:17:59.359 --> 0:18:04.399 yield curve of you know, deregulation, possibly less exposure to 0:18:04.480 --> 0:18:05.800 kind of global trade tensions. 0:18:06.200 --> 0:18:08.840 Sally support their earnings on a Monday. They come out 0:18:08.880 --> 0:18:10.960 Tuesday with these huge bomb offerings. 0:18:11.359 --> 0:18:12.120 Do you pick up the phone? 0:18:12.119 --> 0:18:14.080 There the new Yeah, the new issue market is a 0:18:14.119 --> 0:18:16.480 really attractive way to put capital to work because those 0:18:16.520 --> 0:18:18.840 deals often come at a spread concession, right, So that's 0:18:18.840 --> 0:18:21.159 a that's a way that investors can kind of participate 0:18:22.000 --> 0:18:25.000 in new issue pricings. Financials are a massive part of 0:18:25.000 --> 0:18:27.200 the investment grade in next but even outside of financials, 0:18:27.240 --> 0:18:29.080 I think there are a lot of sectors. 0:18:28.520 --> 0:18:32.360 Career mortals buy new issue paper or is it like 0:18:32.400 --> 0:18:35.280 the junior members of Blackguard? No, you can't have that, 0:18:35.359 --> 0:18:36.199 Amanda has it. 0:18:36.920 --> 0:18:39.040 The new issue markets are are wide open. 0:18:39.480 --> 0:18:41.720