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Speaker 2: David Gera Here in the Bloomberg Interactive Broker Studio. We
Speaker 2: were just speaking about how fetcher Jerome pal did say
Speaker 2: more good inflation data would still need to boost the
Speaker 2: Fed's confidence. But of course we will get another update
Speaker 2: on CPI David here on Thursday. So traders looking at that,
Speaker 2: and I wrote a story earlier today looking at sort
Speaker 2: of the options market what they were pricing in at
Speaker 2: the JP Morgan Trading dest sing a potential move here
Speaker 2: of about nine tenths of a percent. So that actually
Speaker 2: would be the biggest in about a month, because just
Speaker 2: a month ago we had CPI and the FED decision
Speaker 2: on the same day. But that is in line with
Speaker 2: the last three CPI prints. But we have two really
Speaker 2: great guests coming up to speak with us on this,
Speaker 2: so we'll also have Moly Smith, who's on our Economics Desk,
Speaker 2: but also Ira Jersey, who's Bloomberg Intelligence Headquarters in New Jersey.
Speaker 2: Get's going to speak with us, but first we're going
Speaker 2: to get a clip here hearing a little bit more
Speaker 2: of what Fed Chair Jerome pal had to say. So
Speaker 2: listen more of what he had to say about inflation
Speaker 2: as well as the path of interest rates.
Speaker 3: The most recent inflation readings, however, have shown some modest
Speaker 3: further progress and more good data would strengthen our confidence
Speaker 3: that inflation is moving sustainably toward two percent. We continue
Speaker 3: to make decisions meeting by meeting. We know that reducing
Speaker 3: policy restraint too soon or too much could stall or
Speaker 3: even reverse the progress that we've seen on inflation.
Speaker 2: All right, So that was obviously FED Chair Jerome Pale
Speaker 2: on Capitol Hill, who will be speaking tomorrow as well
Speaker 2: in front of the House. So I want to bring
Speaker 2: in Ira Jersey, who here works at Bloomberg News, who's
Speaker 2: our US interest rates strategiest and he's based actually at
Speaker 2: the Blue Intelligence headquarters in New Jersey, as well as
Speaker 2: Wally Smith, who is one of our top editors here
Speaker 2: for the economics desk. I'll start with you, Molly to
Speaker 2: kind of get a recap here of what people were
Speaker 2: expecting fed share pal to say versus what we ended
Speaker 2: up getting here.
Speaker 4: Yeah, very two, very different things. I think people were
Speaker 4: obviously hoping to get a bit more about the timing
Speaker 4: of when we might be seeing some interest rate cuts,
Speaker 4: and Powell on two occasions said he will not be
Speaker 4: offering any signals on the timing of interest rate cuts,
Speaker 4: which I said to the chat, I guess we can
Speaker 4: all go home, because it seems like that's really what
Speaker 4: we were all here for. And he then said again
Speaker 4: when another lawmaker had pressed him on the topic, had
Speaker 4: also said, yeah, I'm not really going to get into
Speaker 4: that today. So a bit of a bummer. So we're
Speaker 4: all still here sitting Okay, maybe one maybe two?
Speaker 5: Right TVD TVD Jersey. Let me turn to you. That's
Speaker 5: the editor's perspective. Let me get the market market strategy
Speaker 5: perspective on this is. But what were you listening for
Speaker 5: and what did you hear from the fed share today?
Speaker 6: Well, first, let me say that Laurie does a great
Speaker 6: job with the tea live chat. So if you're you know,
Speaker 6: if you can't listen to radio or watch TV and
Speaker 6: you have a.
Speaker 5: More live Yeah, for sure.
Speaker 6: I participate for example, and try to give my insights
Speaker 6: onto the rates market on those blogs as well. So
Speaker 6: the I think from j Powell, like like Laurie said,
Speaker 6: he said even in his prepared remarks that they were
Speaker 6: going meeting to meeting, he tried to say, where's data
Speaker 6: dependent as we can possibly be, and he reiterated that.
Speaker 6: So he didn't say anything broadly new in terms of
Speaker 6: the monetary policy perspective, but the fact that he reiterated
Speaker 6: basically what was said at in the June meeting minutes
Speaker 6: which were released last Wednesday when the market, when the
Speaker 6: bond market was closed, at least, I think was just
Speaker 6: telling in and of itself, because you know, it's pretty
Speaker 6: clear that they're trying to say, like, look, it might
Speaker 6: be September, it might be November, it might be December,
Speaker 6: but we're going to cut. The one thing that he
Speaker 6: did say that I think was important was he did
Speaker 6: reiterate that he didn't think that the next move as
Speaker 6: a hike was likely. And that's something that remember, just
Speaker 6: two months go, we were pricing for almost a twenty
Speaker 6: percent probability of a hike. That's almost being completely priced
Speaker 6: out of the market.
Speaker 2: Now, well, Molly, I want to bring you back into
Speaker 2: the conversation because David and I had mentioned we will
Speaker 2: get another update on CPI on Thursday. What are the
Speaker 2: expectations here from economists?
Speaker 4: Yeah, so probably going to get something that's a bit
Speaker 4: more of a maybe inflation still gradually coming down, if anything,
Speaker 4: maybe moving still a little bit sideways in this range
Speaker 4: that it's been in. You know we've seen which you know,
Speaker 4: Power alluded to today, the big moves in inflation have
Speaker 4: really are past us, which you know is to be
Speaker 4: expected at this point, there's less progress to be made
Speaker 4: and it's going to be coming in you know, smaller
Speaker 4: chunks with each report that we get. So there was
Speaker 4: definitely a lot of questions on housing inflation today and
Speaker 4: that there's you know, the best thing that Howell said
Speaker 4: that the Fed can do for the housing market is
Speaker 4: to get inflation back to two percent, so that that
Speaker 4: will hopefully then bring you know, treasury yields and interest
Speaker 4: rates back down and then make you know, mortgage rates
Speaker 4: also more affordable. So that's really yeah, to be expected
Speaker 4: from him. You know that they can't really control of course,
Speaker 4: that the US has a persistent structural shortage of housing,
Speaker 4: and that's what when he was saying, well, this is
Speaker 4: you on lawmakers to try to you know, that's more
Speaker 4: your job and that's not something that.
Speaker 7: We can do.
Speaker 5: And we're going to get into that a little bit
Speaker 5: later in the show. But Molly, let me ask you
Speaker 5: about the crucible in which this is happening. So this
Speaker 5: is before the Senate Banking Committee. You had a pretty
Speaker 5: forceful statement from the chair of that committee from Shared Brown,
Speaker 5: basically saying to the FED chair, stop raising rate stops
Speaker 5: bring rates down, that this is having a really deleterious
Speaker 5: effect on the American consumer, on those who want to
Speaker 5: buy houses. And there's also this kind of moment of
Speaker 5: emphasis on the chair's part about the independence of the
Speaker 5: Federal Reserve. As we see this kind of swirl of
Speaker 5: politics surrounding what might happen if Donald Trump were to
Speaker 5: be elected again, How did he deal with that sort
Speaker 5: of how did the setting of this kind of color
Speaker 5: your sense of what the FED chair had to say.
Speaker 4: Well, it seems like at least Powell and pretty much
Speaker 4: everyone on the Senate Banking Committee agrees that the FED
Speaker 4: is and should remain an independent institution, and that there
Speaker 4: was pretty unanimous support on that front, and you know,
Speaker 4: without of course addressing the elephant in the room that
Speaker 4: if Donald Trump were an elected president, that that's something
Speaker 4: that he's kind of looking to attack, right that he
Speaker 4: you know, wants to be a bit more involved somehow
Speaker 4: in how the FED sets monetary policy, and perhaps ousting
Speaker 4: Powell this was someone who he appointed. So yeah, clearly
Speaker 4: that there's a bit of you know, there's certainly a
Speaker 4: backdrop to all that, and I think he handled it
Speaker 4: pretty delicately and just stressing you know, the Fed's credibility
Speaker 4: really relies on its independence.
Speaker 2: Hey, I want to bring you back into the conversation.
Speaker 2: What are you seeing when we're talking about, say, speculative
Speaker 2: net positioning, when you're looking at the bond market, and
Speaker 2: what that tells us about where traders are betting, where
Speaker 2: rates could be headed in the second half of this year.
Speaker 6: Well, a lot of the spec positioning right now is
Speaker 6: really basis trade. So it's people trading futures versus cash.
Speaker 6: There's a little tiny bit of money to be made,
Speaker 6: So in order to be to make that money, though,
Speaker 6: you have to lever yourself a lot. So that's one
Speaker 6: reason why you have such large shorts and some of
Speaker 6: the some of the contracts. I want I go back
Speaker 6: to something that Molly said just a second ago, and
Speaker 6: you know that's about what J Powell and the FED
Speaker 6: independence argument, because you know, from a market perspective, I
Speaker 6: think that if the FED were will lose a significant
Speaker 6: amount of its independence, then you'd wind up in a
Speaker 6: situation where the bond market would probably sell off quite
Speaker 6: a bit and certainly get a much much steeper yield
Speaker 6: curve because it'd be worries that the FED would keep
Speaker 6: interest rates too low for too long in a future
Speaker 6: environment where you get more inflation. So I think that
Speaker 6: there is a risk there that something like that happens.
Speaker 6: And of course, you know, way back when when J.
Speaker 6: Powell was first appointed, I was actually surprised that Donald
Speaker 6: Trump appointed him because he appointed a mainstream kind of
Speaker 6: thinker from the from from the FED border governors instead
Speaker 6: of someone more duvish. So you know, Donald Trump will
Speaker 6: still have the opportunity to appoint Aduvish FED chair. He'll
Speaker 6: just have to wait, you know, eleven months to do that.
Speaker 6: And because that person won't take office till the beginning
Speaker 6: of twenty twenty six.
Speaker 5: Molly, we've talked a lot about inflation, is of course
Speaker 5: what we're all supposed to be talking about this part
Speaker 5: in the time, but we did get a little color
Speaker 5: from the FED chair on the labor market as well,
Speaker 5: And I wonder what stood out to you from from
Speaker 5: his comments. Of course, we have the rate now at
Speaker 5: four point one percent, but what did he say just
Speaker 5: sort of about his perspective, I guess the Fed's perspective
Speaker 5: on how healthy the jobs market is now?
Speaker 4: Yeah, I think you know, this is now starting to
Speaker 4: look a lot more like the jobs market that we
Speaker 4: had before the pandemic, which was a very healthy jobs market.
Speaker 4: And that Powell said something today that he hasn't really
Speaker 4: said yet but has probably been true for a while,
Speaker 4: that the labor market is no longer inflationary, and that
Speaker 4: that's something that you know, one economist I noticed that
Speaker 4: he had sent around to his distribution list that this
Speaker 4: has been the case for a while. But it's nice
Speaker 4: to see Powell finally acknowledging this because there has been
Speaker 4: so much concern about, you know, all these job openings
Speaker 4: and perhaps if that's propelling wages higher, or you know,
Speaker 4: what kind of inflationary environment that might get us into
Speaker 4: but he seemed to be, you know, a bit more
Speaker 4: comfortable with where the labor market is in relation to inflation,
Speaker 4: but certainly that you know, any like he's been saying,
Speaker 4: any unexpected weakening in the labor market could force the
Speaker 4: Fed to act a bit more aggressively.
Speaker 5: Molly, great to speak with you. Thank you very much.
Speaker 5: That's Molly Smith from our ECON team. Our thanks to
Speaker 5: Ira Jersey as well, chief US interest rate strategist to
Speaker 5: Bloomberg Intelligence, joining us from Bloomberg Intelligence headquarters just a
Speaker 5: bit south of here in New Jersey. And I know
Speaker 5: we want to get into some of what you're talking about, right,
Speaker 5: a knock on effect of this kind of very strange
Speaker 5: economic environment.
Speaker 2: That's right, and especially because why high rates have failed
Speaker 2: to dent record stock prices right now as well as
Speaker 2: home price is too. So who better to bring in
Speaker 2: than Bloomberg's own personal finance reporter, Suzanne Wooley, who's here
Speaker 2: in the Bloomberg Interactive Brokers studio. Thanks so much for
Speaker 2: joining us this afternoon. And it's interesting because you wrote
Speaker 2: about how more people in the market right now, especially
Speaker 2: when you're thinking about stocks and what's happening with housing
Speaker 2: prices staying relatively high here, but it's still a confusing
Speaker 2: world of finance. And this is also you wrote for
Speaker 2: her latest Bloomberg Business Week story here, So walk us
Speaker 2: through this sort of dynamic, especially coming out of the pandemic,
Speaker 2: and how unique this is compared to history.
Speaker 8: Well, for most of us, we went through such a
Speaker 8: long period of really reads near zero, you know, back
Speaker 8: in twenty twenty it's early as twenty twenty two though,
Speaker 8: they were at zero point zero eight percent. Now this
Speaker 8: is the federal funds, right that I'm talking about. Now
Speaker 8: it's around five point three percent, so very abrupt ramp up.
Speaker 8: You know, they're like eleven fed hikes and something like
Speaker 8: a sixteen month period, right.
Speaker 7: So came on big.
Speaker 8: And normally the script would be that we would expect
Speaker 8: the stock market to take a hit, and you know,
Speaker 8: housing with mortgage rates now at seven percent, in twenty
Speaker 8: twenty one they were like around three percent, you expect
Speaker 8: that to take a hit. Hasn't happened, obviously, you know.
Speaker 8: And a big reason with the stock market is of course, AI,
Speaker 8: right is just like powered over everything, and you know
Speaker 8: when you look at the SMP and Vidia, it contributed
Speaker 8: by thirty percent of the index is gained to date.
Speaker 8: You know, Microsoft contributed another ten percent. So AI is
Speaker 8: just sending it, you know, a market cap index flying.
Speaker 2: And even things beyond traditional tech and gross stocks. If
Speaker 2: you look at utilities with people think it's more kind
Speaker 2: of steady diven in low volatility. But if you have
Speaker 2: the particular sub industry groups within it that are related
Speaker 2: to data center businesses, those have taken off at certain
Speaker 2: points this year two exactly.
Speaker 8: It's like an AI is, you know, an energy play.
Speaker 8: It's such a huge energy guzzler, you know, so those
Speaker 8: things have propped it up and underneath when you look
Speaker 8: under the hood at the SMP. I was just listening
Speaker 8: to Goldman Sachs's mid year investment outlook and one of
Speaker 8: their experts was talking about, how, you know, the average
Speaker 8: gain and the stock for the SMP for the year
Speaker 8: is like three percent, you know, so beneath the breadth
Speaker 8: as we know is just so narrow. In the mag
Speaker 8: seven or mag whatever they are now six ' five.
Speaker 2: Right, we've gone from a lot of.
Speaker 5: I want to ask you about the kind of consumer
Speaker 5: psychology aspect of this. There's such a great line in
Speaker 5: your piece about how for most people into the age
Speaker 5: of thirty five, they never had to live in a
Speaker 5: world where rates are what they are. You talk about
Speaker 5: what we've become a custom them to. How have you
Speaker 5: found as you talk to people reporting out this piece,
Speaker 5: what council have they given people who might long for
Speaker 5: those lower rates not even not even know that they
Speaker 5: used to be as high as they are in higher
Speaker 5: see right.
Speaker 8: Well, I mean some people are saying, listen, you know
Speaker 8: these rates are really not that unusual when you look
Speaker 8: over the long scheme of things, so you know they
Speaker 8: people are thinking that rates I mean a lot of
Speaker 8: people think rates will go down now with people are
Speaker 8: saying that the Fed maybe we'll get one cut in
Speaker 8: September and such. But you really have to sort of
Speaker 8: rethink some of your basics. There are a lot of
Speaker 8: people who have gotten into buy now, pay later loans.
Speaker 5: Which we know so little about still exactly.
Speaker 7: It's sort of a black box in a way.
Speaker 8: And we had a poll on a Harris poll don
Speaker 8: back in April that showed that forty three percent of
Speaker 8: people in those loans were behind in their payments. And
Speaker 8: you know, that's an area where they're going to feel
Speaker 8: a lot of interest rate pressure, but also just in
Speaker 8: buying a home you have to sort of think through
Speaker 8: it a bit differently because if you want to get
Speaker 8: a seven percent mortgage rate, you know, and rates don't
Speaker 8: go down that much, you really can't. I mean, it's
Speaker 8: not why is to take a flyer and.
Speaker 7: Just think, oh, yeah, you're down the road, I'll be
Speaker 7: down to whatever.
Speaker 9: You know.
Speaker 5: Do we see people taking more flexible rates or are
Speaker 5: trying different? Are they just wedded to the notion that
Speaker 5: it's going to be high or where it is?
Speaker 8: For there are little pockets that are starting to pop up,
Speaker 8: Like there's something called it's a little complicated, but it's
Speaker 8: an assumable mortgage, and it's when you can actually assume
Speaker 8: the seller's mortgage at their rate. Interesting, you know, at
Speaker 8: their you know, it's it's complicated to do. But more
Speaker 8: startups are popping up to create a sort of a
Speaker 8: more organized market for these assumable mortgages because it's so appealing.
Speaker 8: If you could just inherit someone's three percent mortgage, that
Speaker 8: would be great. It's very expensive because you have to
Speaker 8: sort of pay the premium on their home and you
Speaker 8: have to pay off the equity that's in their mortgage, so.
Speaker 5: You need a lot of fun money for that.
Speaker 7: Yeah, it's not an appealing option for most people.
Speaker 2: Well, we only have about forty five seconds left. But
Speaker 2: what do you think are the biggest takeaways for people
Speaker 2: to take from your story? As well as how long
Speaker 2: this dynamic can continue, which obviously a million dollar questions.
Speaker 8: I think a lot of people that I spoke with,
Speaker 8: more of the financial planner types, were just giving some
Speaker 8: good solid advice about diversification and if you're sitting on
Speaker 8: some really big equity gains, and now, particularly in tech,
Speaker 8: they've been telling some of their clients, you know, maybe
Speaker 8: do a little profit taking, just make sure you're diversified
Speaker 8: because there's just so much talk right now about it
Speaker 8: expecting greater volatility, how long this lasts, which we've been
Speaker 8: hearing forever, But they're just kind of telling people to
Speaker 8: remember if they need to rebalance now, they can get
Speaker 8: five percent on a bot.
Speaker 2: Right. Well, that was Sulisane really personal finance reporter at
Speaker 2: Bloomberg News on why hireing have failed to dent record
Speaker 2: stock prices and housing prices here, thanks so much for
Speaker 2: joining us. Well more coming up, this is Bloomberg.
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Speaker 2: And another really interesting story, David, that is in the
Speaker 2: terminal that we've been reading here is about looking at
Speaker 2: Bobby Jane's complex hedge fund debut and how it's spawning
Speaker 2: fans as well as doubters to Who better to come
Speaker 2: in than the author of the story, Ahemma Palmer, who's
Speaker 2: here at one of our hedge fund reporters at Bloomberg
Speaker 2: News in New York in studio with us. So walk
Speaker 2: us through your story here about Bobby Jane's fund. What
Speaker 2: makes it so complex such that it is unprecedented?
Speaker 10: Yes, So what he's trying to do here is launch
Speaker 10: a fully formed multi strategy hedge fund. Means is going
Speaker 10: to trade six strategies on day one when it launched
Speaker 10: July first trade all of those strategies, have the teams
Speaker 10: built out, have everyone hired in the right seats, all
Speaker 10: the operational back and operational infrastructure and back office teams.
Speaker 10: It's a pretty big undertaking. It's never been done before. Typically,
Speaker 10: hedge funds start out small with one or two strategies,
Speaker 10: and then they add on more over time. What he's
Speaker 10: doing here is birthing a fully formed multi shrat heedge fund.
Speaker 5: Why is he going this route? So you describe the
Speaker 5: complications of doing that. He has been ambitious about what
Speaker 5: he hoped to raise, raised a little less than I
Speaker 5: think what he wanted to the very beginning here. But
Speaker 5: I think of a hedge fund starting in this environment
Speaker 5: in particular, how complicated that must be, how difficult it
Speaker 5: must be the line of the talent, of the technology
Speaker 5: infrastructure to do all of this.
Speaker 10: Absolutely, it's very challenging in this fundraising environment too. His
Speaker 10: thinking is that it's more efficient when you start a
Speaker 10: firm of the size doing these many different types of things.
Speaker 10: If you build the infrastructure from the ground up ready
Speaker 10: for all the different parts, then you're less likely to
Speaker 10: have duplicate costs, duplicate talent. It's going to be more efficient.
Speaker 10: Every system will have everything it needs in order to
Speaker 10: get going, and you don't need to add on things
Speaker 10: later and then double over on expenses and everything. He
Speaker 10: also was trying to build a system where even if
Speaker 10: in the future, he adds more talent and has more
Speaker 10: money to invest that the cost of operating the business
Speaker 10: don't scale proportionally to that.
Speaker 11: Talk to us more.
Speaker 2: About the asset raising environment right now. In some of
Speaker 2: the top challenges, it's really tough out there to be
Speaker 2: raising money.
Speaker 10: So five point three is a good amount of change
Speaker 10: to be starting a hedge fund with it. It's the
Speaker 10: second biggest launch that we've seen in years, is the
Speaker 10: biggest launch we've seen this year. But the environment is
Speaker 10: tricky for a few reasons. Firstly, investors are not getting
Speaker 10: as much money back from private equity from distributions as
Speaker 10: they have been in the past, and so that limits
Speaker 10: how much money they have to put to work, though
Speaker 10: also a lot more cautious about every dollar they want
Speaker 10: to put to work. You have an option, You have
Speaker 10: optionality between the hot private credit markets or a multishat fund,
Speaker 10: and they've been so somewhat underperforming recently. You're seeing a
Speaker 10: lot of questions over should we even invest in hedge
Speaker 10: funds or do we put it someplace else? With each dollar?
Speaker 10: Do we want to take the day one risk in
Speaker 10: investing in a brand new manager and a new fund
Speaker 10: versus a tried and true option. So LP's a weighing
Speaker 10: all of these things, and every dollar is harder to
Speaker 10: get these days than it has been in some time.
Speaker 5: The piece opens with a meal a pitch at the
Speaker 5: seafood restaurant at the Breakers in South Florida. Bobby Jaen
Speaker 5: making this overture to a Middle East sovereign wealth fund
Speaker 5: I believe ultimately ponies up. I think about close to
Speaker 5: a billion dollars to the fund. How has he made
Speaker 5: that pitch? How is he trying to convince investors, yes,
Speaker 5: that this model that you've described as being kind of
Speaker 5: un orthodox is likely to work, and be that this
Speaker 5: is the moment to do it. That you know, don't
Speaker 5: bide your time, don't watch all of this unfold, get
Speaker 5: in now, and this is likely to reapers here in
Speaker 5: the next I guess twelve months to eighteen months exactly.
Speaker 10: So he has gotten Adia, which is the Abi Dhabi
Speaker 10: Investment Authority, with a billion dollar ticket, other big name investors,
Speaker 10: to a number of bank platforms. So you know, his
Speaker 10: pitch is, yes, you get the ground. You know, day
Speaker 10: one opportunity to invest in this fund. He's offered a
Speaker 10: lot of concessions and.
Speaker 7: He's fees are cheaper. He's lowered fees.
Speaker 10: The bigger the tickets, the more the better fees you
Speaker 10: get for investing. He offered promise them future capacity. So
Speaker 10: if you want an investor any future optionality, if you
Speaker 10: like what you see, you can get in later on
Speaker 10: and that will be guaranteed. Some investors got co invest opportunities.
Speaker 10: The liquidity of this fund means that you can get
Speaker 10: your cash back in three years versus other other competitive
Speaker 10: firms the more like five and there's a number of
Speaker 10: other investor family terms. So you do see in this
Speaker 10: environment needing to have more concessions make it worthwhile. And
Speaker 10: I think even Bobby Jane understands that there's a day
Speaker 10: one risk to doing this kind of thing and made
Speaker 10: those these these perks advantageous for them.
Speaker 2: And you talked about obviously the concerns and the caution
Speaker 2: that investors have. Clearly there's different issues when it comes
Speaker 2: to lofty targets, But what are some of the underlying
Speaker 2: problems in the root of where those concerns.
Speaker 10: Lie with investing in hedge funds? Right, Yes, so you
Speaker 10: know people use hedge funds in their portfolios in a
Speaker 10: few different ways. It could be to hedge against you know,
Speaker 10: if the markets take a downturn, then maybe invest in
Speaker 10: some of the multi strategy funds. Multi shrat funds aren't
Speaker 10: typically aiming to always beat the market. They want to
Speaker 10: be a steady return roughly a percent a month, tried
Speaker 10: and reliable and true, and so that's sort of how
Speaker 10: they would think about it. But if you want, you know,
Speaker 10: really huge returns, so hedge funds are incredibly volatile where
Speaker 10: you can see double digit gains one year and then
Speaker 10: double digit losses the following year. So it really is
Speaker 10: like strategy strategy dependent, fund dependent, liquidity dependent. As this
Speaker 10: strategy has shifted to become a lot more illiquid. The
Speaker 10: assets themselves are pretty liquid, but the structure of these
Speaker 10: vehicles means it's harder to get your money back, and
Speaker 10: it's become a lot more expensive to run these multi
Speaker 10: strategy funds. There's been more caution when it comes to
Speaker 10: this specific strategy fum investors because they're thinking, well, do
Speaker 10: I want to be locked up for this long? And
Speaker 10: what am I paying for? Because they're paying for the
Speaker 10: talents and the compensation of these traders.
Speaker 5: Your world is one in which I think personality matters,
Speaker 5: and you know, the head of these funds, you know,
Speaker 5: can really shape the way that the business works. I
Speaker 5: think Bobby Janis is close to a household name as
Speaker 5: you can get. But what can you tell us about him?
Speaker 5: And is he in the mold of his England or
Speaker 5: is he somebody who has taken a lot of inspiration
Speaker 5: from the time that he's spent at millennium Sor how
Speaker 5: does he operate? How is he as a manager's or
Speaker 5: what's his personality like as somebody who's ever seeing these
Speaker 5: billions of dollars?
Speaker 10: Yes, so if you look at his tenure, he spent
Speaker 10: more than twenty years at Credit Sweez. He spent about
Speaker 10: six at Millennium, so really you know, experience that big
Speaker 10: name repids. At Millennium, he was co cio, worked very
Speaker 10: closely with Izzy Englander at Credit Sweets. He helped to
Speaker 10: build out various businesses, So he's sort of known for
Speaker 10: building businesses, working with teams, being sort of on that
Speaker 10: higher up level versus being in the weeds unnecessarily a trade.
Speaker 10: But he is has been described to us as being
Speaker 10: more cerebral, more like a philosopher, thinks in matrices and
Speaker 10: can jump between sort of the big picture idea and
Speaker 10: in the weeds details. But we have also heard from
Speaker 10: investors that he struggles to communicate some of his ideas
Speaker 10: clearly and sucstence disinctly. What that's meant is some investors
Speaker 10: have walked away from meetings feeling either frustrated that they
Speaker 10: didn't really understand things, or walked away with ideas of
Speaker 10: the firm that were not really what the firm is,
Speaker 10: or unclear as to what Bobby's trying to build here.
Speaker 5: And Bobby trying to use that sort of seeing things
Speaker 5: as a matrix to oversee what I think he describes
Speaker 5: a smories board of options here at this fun just
Speaker 5: a fascinating piece by Emma Parmer on the Bloomberg terminal,
Speaker 5: Bobby Jane's complex hedge fund debut, sponds, fans and daughters.
Speaker 5: I was just fascinated by, I guess the ambitions prisonly
Speaker 5: of doing this and trying to do it on such
Speaker 5: short short order.
Speaker 2: No, it's true, and then obviously the challenges that come
Speaker 2: with it and the money they've been able to pull off,
Speaker 2: but still the other issues they have to deal with.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Listen live
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Speaker 2: David, let's switch gears here and talk more about the
Speaker 2: latest jobs report data as well as women leaving the
Speaker 2: US workforce. We're going to bring in Laura Gasner, adding
Speaker 2: a serial entrepreneur, a HR veteran who's joining us on
Speaker 2: Zoom in New York City. Thanks so much, Laura for
Speaker 2: making time for us now. We wanted to dig deeper
Speaker 2: here when it comes to this libor market report. Obviously
Speaker 2: we get them monthly, but dig deeper to us and
Speaker 2: when it comes to the issues when it comes to
Speaker 2: women leaving the workforce, especially coming out of the pandemic,
Speaker 2: and how that's been exacerbated by that issue.
Speaker 11: I mean, I think that we saw during the pandemic
Speaker 11: women were leaving the workforce in droves because obviously during
Speaker 11: the pandemic, our kids were all home from school. Suddenly
Speaker 11: we were dealing with our parents who were getting older,
Speaker 11: some of them getting sick and women were the ones
Speaker 11: who had to pick up all of the slack. We
Speaker 11: saw women just absolutely leading the workforce in historic numbers,
Speaker 11: but we're saying that that's still happening, and that's due
Speaker 11: in large part because the gender pakeapp of course continues
Speaker 11: as a lack of flexibility and control for women, especially
Speaker 11: as they've become more senior, there's inadequate opportunities for advancement.
Speaker 11: It's hard to integrate work in life, and of course
Speaker 11: we're all looking for more purpose in our life right
Speaker 11: now as well. So it's across so many different variables
Speaker 11: that we're seeing it. And because women are getting paid
Speaker 11: less than men at the same job, that gender pay
Speaker 11: gapp does still exist. It just means that when it
Speaker 11: comes time to choose who's going to lead the workforce,
Speaker 11: it often ends up being the woman.
Speaker 5: I look just kind of the nature of the pandemic,
Speaker 5: which was without precedent, and how little time relatively has
Speaker 5: passed since then, and we do have this atmosphere now
Speaker 5: and a lot of workplaces where there is more flexibility
Speaker 5: baked in, able to work from home more. Do we
Speaker 5: know sort of how that's affecting workplace dynamics or again,
Speaker 5: given how little time has passed, are we still trying
Speaker 5: to figure out what the sort of longer term effects
Speaker 5: of that new, more novel flexibility is going to be
Speaker 5: on workers in the workforce.
Speaker 11: Yeah, I think we're still trying to figure it out,
Speaker 11: and I think a lot of it comes down to
Speaker 11: the fact that, you know, the workers are using the
Speaker 11: same tools that they used in the office. They're using ZOM,
Speaker 11: they're using Sleck, they're using all of the same tools
Speaker 11: that they're using when they're actually an office to work
Speaker 11: from home. But the bosses, which tend to be predominantly morales,
Speaker 11: still the maganity of people and meta physicians are still
Speaker 11: Then those bosses have to be different tools, but they
Speaker 11: can't just manage by walking around anymore. Becomes very different
Speaker 11: for them to figure out how they're going to see
Speaker 11: how people work now. I ran an executive search from
Speaker 11: for fifteen year seventy two thousand and two to twenty seventeen,
Speaker 11: fifteen years, and we were always virtual, like before it
Speaker 11: was COVID cool. We were all virtual, and people used
Speaker 11: to say to me like, Laura, do you how do
Speaker 11: you judge the quality of being team's work? And I'll
Speaker 11: just like are you waiting, are you sitting, or are
Speaker 11: you listening? By the quality of my team's work. But
Speaker 11: the problem is a lot of bosses, if you can't
Speaker 11: see are people working, we wonder whether or not they're
Speaker 11: actually working. And so you know, if you've got kids
Speaker 11: at home again, you know how old is the story
Speaker 11: of the man takes time off for work to go
Speaker 11: to the kid's soccer game. Everyone goes, Oh, what a
Speaker 11: good daddy is, And the woman takes time off to
Speaker 11: go to the soccer game, and everyone's like, well, she
Speaker 11: prioritizes her kids over the work. So if there's a
Speaker 11: woman and she's in a flexible work arrangement and she's
Speaker 11: got kids at home, of course we always fall to
Speaker 11: that age old trope that it must be that she's
Speaker 11: being a mom and not working. So I think that
Speaker 11: bosses have to really change the way that they're thinking
Speaker 11: about how they manage their people and really think about
Speaker 11: what the metrics are but which they're managing the people.
Speaker 11: So it's not just do I see them working, Okay,
Speaker 11: they must be working.
Speaker 2: There was an interesting story in Forbes where they were
Speaker 2: citing a survey about how sixty percent of you as
Speaker 2: business executives said that their company will likely have to
Speaker 2: have layoffs over the next few months in the second
Speaker 2: half of this year, and that was based on resume
Speaker 2: template survey. So if you are unexpectedly laid off, what
Speaker 2: high income skills do you think people really need and
Speaker 2: that will be crucial to move forward?
Speaker 11: Oh, I think that we all have to. I think relationships.
Speaker 11: I think it all comes down to human caspital all
Speaker 11: the time, all ways. So I could say AI, I
Speaker 11: could talk about, you know, all the different types of
Speaker 11: technology skills that we need. But at the end of
Speaker 11: the day, I think, especially now that we're all working
Speaker 11: remote and being able to figure out how to create relationships,
Speaker 11: how'd be steward relationship to you decide what to ask for,
Speaker 11: when to ask for how do you move that relationship forward?
Speaker 11: Business moves at the speed of relationships all the time.
Speaker 11: So making sure in this period of time where we're
Speaker 11: working in this remote in this hybrid fashion, especially if
Speaker 11: you're a young person, making sure that you are making
Speaker 11: time to go into the office, getting to see people,
Speaker 11: going out to talk through with people, making sure that
Speaker 11: you are investing in that one on one relationship building
Speaker 11: time because those are the skills that we're losing right now.
Speaker 11: They're sort of leaching out of our civil discourse or
Speaker 11: reaching out of the way that we work with each other.
Speaker 11: And so to think somebody who's able to create those
Speaker 11: high level, deep sticky relationships will be skills that will
Speaker 11: help people absolutely forever and ever.
Speaker 2: All Right, Laura, thanks for sticking with us. That's Laura
Speaker 2: Gasner adding so your entrepreneur and each R veteran who
Speaker 2: is joining us on Zoom here in New York City.
Speaker 2: And it's really fascinating, especially when you think of this
Speaker 2: dynamic of the labor market still. You know, just at
Speaker 2: the end of last year's unemployment was still there a
Speaker 2: half century load, David, and not far off from that
Speaker 2: still even though it's around four percent.
Speaker 5: And an interesting study I saw recently in the Harvard
Speaker 5: Business Review just indicating that this really kind of plays
Speaker 5: out differently among how senior you are within the workforce.
Speaker 5: So as I was kind of getting too there, I
Speaker 5: think there's a lot we still don't know yet just
Speaker 5: about how this is all going to shake out. This
Speaker 5: is Blimber Business Week on BLOEM Radio David Gerra with
Speaker 5: Jess Manton and for Carol Mass and Tim Stanbek.
Speaker 2: M brother mack.
Speaker 9: A journal.
Speaker 10: How about you let me drive?
Speaker 4: Oh no, no, no, no's honey, please, I'll do the driving.
Speaker 1: Gravels eleas mate, I want to try it.
Speaker 3: It's good question time.
Speaker 1: This please the drive to the Globe dot Com thing
Speaker 1: well round.
Speaker 2: On Bloomberg Radio Jessman and David Gera here in the
Speaker 2: Bloomberg Interactive Brokers studio in of course for Carol and Tim,
Speaker 2: who both have the day off. If you look at
Speaker 2: where the S and P five hundred is trading right now,
Speaker 2: David that we have a little under twenty minutes left
Speaker 2: to go on track four, it's thirty thirty six records
Speaker 2: of the year.
Speaker 5: Pretty astonishing, it is.
Speaker 2: I must say I did a charticle after the first
Speaker 2: half and at that point it had been thirty one records.
Speaker 2: That was the best pace of records in the first
Speaker 2: half of your year, second best this century behind twenty
Speaker 2: twenty one. Obviously that was when you saw a big
Speaker 2: rebound in the stock market from the depths of COVID.
Speaker 2: But we have so many different things coming up. Obviously
Speaker 2: we have a fed Shared's Room palas we've mentioned back
Speaker 2: on Capitol Hill tomorrow in front of the house. We
Speaker 2: also have that CPI report of course coming on Thursday,
Speaker 2: and then earning season getting into full swing at the
Speaker 2: end of the week. Of course the big banks like
Speaker 2: JP Morgan reporting. But who better to talk to us
Speaker 2: about his outlook on the stock market, the economy, all
Speaker 2: things in Louis Navalier, founder in CIO at Navalier Associates,
Speaker 2: who's joining us once again. So it's always great having
Speaker 2: you back here with us talk to us about kind
Speaker 2: of your outlook moving forward, especially when we've continued to
Speaker 2: see a big rise here and you looking at the
Speaker 2: S and P F five hundred, the spread between the
Speaker 2: SNP it's two hundred day movie average hovering around thirteen percent.
Speaker 2: But as you know, that can kind of go on
Speaker 2: for a while here. As we have seen the S
Speaker 2: and P five hundred rise, Louis.
Speaker 9: Well means are supposed to be up eight point eight
Speaker 9: percent for the second quarter. That's the best estimate from
Speaker 9: the Allison over two years. We have very easy year
Speaker 9: of year comparisons, but it should be you know, it's
Speaker 9: every stock for itself come earning season. Now. The other
Speaker 9: thing is we're expecting a very good CPI and PPI
Speaker 9: later in the week, and so we might get a
Speaker 9: little turbo boost on the anticipation that the FED will
Speaker 9: be cutting on September eighteenth.
Speaker 5: Louis, as Jess mentioned a moment ago, the FED chair
Speaker 5: was up on Capitol Hill, largely sticking to script as
Speaker 5: I saw it, as I heard it today. Anything stand
Speaker 5: out to you and sort of how are you processing
Speaker 5: or thinking about what the Fed's next steps are here
Speaker 5: and how that's affecting your your investment strategy at this point.
Speaker 9: Well, the Fed's clearly worried about the labor market because
Speaker 9: we've gone from three point four percent unemployment to four
Speaker 9: point one percent in a little over a year, and
Speaker 9: so it's there's a problem. And you know, if we
Speaker 9: throw out government jobs and healthcare jobs, there's not a
Speaker 9: lot of job creation. And we you know, we have
Speaker 9: those negative sm numbers. You know, manufacturing has been down
Speaker 9: for the last twenty months. There was one month but
Speaker 9: one up, and now the service sector has been down
Speaker 9: to the last three months. So anytime you get those
Speaker 9: ISM surveys under fifty, it's a bad sign. So he
Speaker 9: clearly sees that they've engineered a soft landing, but they
Speaker 9: don't want to be too cute.
Speaker 2: I've been taking a close look at systematic positioning as
Speaker 2: well as discretionary positioning, so obviously people listening if usually
Speaker 2: fund managers have more of the discretion to make their changes,
Speaker 2: whereas with systematic positioning it's more kind of tied to algos.
Speaker 2: But louis what I've been looking at that, especially from
Speaker 2: Deutsche Bank. It's interesting because they've seen a bit of
Speaker 2: when you're thinking about sort of stretched positioning here for
Speaker 2: tech is what they're seeing, but they've been seeing that
Speaker 2: for a while. But they're also seeing more rotation into
Speaker 2: areas like financials and other areas that obviously have at
Speaker 2: times benefited from rate cut cycles. There, how are you
Speaker 2: putting money to work right now in the stock market
Speaker 2: and where are you putting that?
Speaker 9: Well, I'm super concentrated. You know, most of our clients
Speaker 9: are taxable and they don't like to pay a lot
Speaker 9: of taxes. So we are grossly overweighted in the video
Speaker 9: super Micro on another stock called a Lar, which is
Speaker 9: a cybersecurity stock. Also we have CrowdStrike, another cybersecurity firm,
Speaker 9: but we're loaded with Lily, you know, menor Disk and
Speaker 9: those stocks right now are probably thirty five percent of
Speaker 9: our portfolios. We have invested a lot in the utility
Speaker 9: grid and beefing up the demands for cloud computing. Essentially,
Speaker 9: I'm here in Reno and we have the Apple Google
Speaker 9: servers here in Reno, but I live high in the
Speaker 9: hills and suburbia, and they have these netch They have
Speaker 9: diesel generators every mile to make sure you can meet
Speaker 9: our air conditioning demand. So the server farms have priority
Speaker 9: around here. They can't they can't go down, and so
Speaker 9: expanding the grid has become very problematic and it's not easy.
Speaker 9: I mean, you know, the power is just coming on
Speaker 9: now in Houston. I mean people that have been kind
Speaker 9: of miserable for the last couple of days.
Speaker 5: This is so fascinating to me. We had a big
Speaker 5: piece at Bloomberg last week kind of looking at this
Speaker 5: and the heightened demand that that AI and cloud computing
Speaker 5: is having for energy and the consequences of building all
Speaker 5: of these data centers. Can you walk us through to
Speaker 5: more granular levels, what companies or what stocks for appealing
Speaker 5: to you as you look at Yes and Video, which
Speaker 5: you said is in your portfolio with these others that
Speaker 5: are kind of secondary plays when it comes to AI.
Speaker 9: I would be Eten which is etn mcre Eme, Quanta
Speaker 9: Services PWR, and then Vistra which is v our Tea.
Speaker 9: Those all help make the grid more efficient expand. The
Speaker 9: one thing holding the grid back is the Biden administration
Speaker 9: did pass a law that if you add a new
Speaker 9: not a law, but an executive order that if you
Speaker 9: do a new natural gas power plant, they would like
Speaker 9: you to sequester the carbon and that's an eight year permit.
Speaker 9: So normally you would just hook up a natural gas
Speaker 9: power plant and that's how you expand the grid. Okay,
Speaker 9: but when you put all these new rules on it, it
Speaker 9: really messes things up. Now Here in Nevada, you know,
Speaker 9: we're next to California. We're extra green. Everything here is
Speaker 9: solar and batteries. We do have a lot of geothermal,
Speaker 9: but that can only.
Speaker 11: Do so much.
Speaker 2: Since you are in Reno, talk to us about what
Speaker 2: it's like for the economy. What you're seeing consumers spending
Speaker 2: their money on, whether you're going to the grocery store
Speaker 2: or other things. Telltale signs about the economy right now.
Speaker 9: Yeah, Well, you know, Reno is a is a boomtown
Speaker 9: because we're next to California and people move here, and
Speaker 9: you know that we got a lot of The Schwab
Speaker 9: office in Reno is the largest in the world, so
Speaker 9: there's a lot of money hiding here. Plus we have
Speaker 9: a lot of corporate money. Microsoft is one of the
Speaker 9: largest employers in Reno because there's a two percent tax
Speaker 9: on gross revenue in Washington State. Amazon is here too,
Speaker 9: big time, so they're avoiding the state corporate taxes. But
Speaker 9: we have Apple, Google, Intel, the into It founders, my neighbor,
Speaker 9: you know, Cisco's here that they're all a lot. We
Speaker 9: have a lot of Treasury departments here. But yeah, we
Speaker 9: got a lot of wealthy retirees. You know, the Californians
Speaker 9: come in and buy our real estate and what used
Speaker 9: to be you know, you know, two hundred foot for
Speaker 9: a home is now in the hills pushing four to
Speaker 9: five hundred a foot. It's funny the last twelve hundred.
Speaker 9: But then we have to remind them where they built.
Speaker 9: But you know, it's it's a boomtown. But you know,
Speaker 9: we do have extreme weather here and they should have
Speaker 9: a four wheel drive and they better put snow tires
Speaker 9: on the right.
Speaker 2: You know, we only have about fifteen seconds left. But
Speaker 2: what's the top question you're getting from your clients right now?
Speaker 1: Oh?
Speaker 9: Just it's all about the I stocks. And fortunately we're loaded,
Speaker 9: so we're fine.
Speaker 2: You're good, all right, Luis Davia, thanks so much for
Speaker 2: joining us again. Founder in CEO Navalier and associates joining
Speaker 2: us from Reno, Nevada. We'll have more coming up. This
Speaker 2: is Bloomberg.
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