WEBVTT - BNY's Loh: Need To Get Used to Lower Yield Environment (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg to Washington, d C,

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<v Speaker 1>Bloomberg to Boston, Bloomberg twelve hundred to San Francisco, Bloomberg

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<v Speaker 1>nine to the country's general one and around the globe

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<v Speaker 1>the Bloomberg Radio Plus Appen Bloomberg dot Com. This is

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<v Speaker 1>taking Stock. Coming up on taking stock stagnation in Europe.

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<v Speaker 1>Will the European Union allow bond holders to take a

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<v Speaker 1>hit if banks go under? We'll find out more. Also,

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<v Speaker 1>a look at the Federal Reserve and their interest rate policy.

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<v Speaker 1>Coming up with Marvin Lowe, global market strategist for b

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<v Speaker 1>n Y Melon. Right now, let's go to Charlie Pellett

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<v Speaker 1>and the Bloomberg news room for a Bloomberg Business Flash,

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<v Speaker 1>and I thank you, Pim Fox from Bloomberg World Headquarters.

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<v Speaker 1>I'm Charlie Pellett. Stocks are advancing on this Wednesday, the DAL,

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<v Speaker 1>the SMP NEZDAC all climbing right now, the SMP five

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<v Speaker 1>hundred index up ten points, a gain there of five

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<v Speaker 1>tenths of one percent. An Heeuser Busch InBev has won

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<v Speaker 1>government anti trust approval for its takeover of s A. B.

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<v Speaker 1>Miller after the maker of Budweiser agreed to give up

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<v Speaker 1>ownership of the Miller brand and open the door to

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<v Speaker 1>greater competition from craft beers. Stocks are advancing. We're seeing

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<v Speaker 1>records as quarterly numbers out of Microsoft and Morgan Stanley

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<v Speaker 1>spur optimism that corporate earnings can support further gains. Morgan

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<v Speaker 1>Stanley posted profit that beat analysts estimates, as the firm

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<v Speaker 1>report of a surprise gain in bond trading revenue and

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<v Speaker 1>compensation costs that were lower than expected. David Campbell Bacon

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<v Speaker 1>Campbell covers Banks for Bloomberg News Look year over year

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<v Speaker 1>revenue at Morgan Stanley declined for the third out of

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<v Speaker 1>the last four quarters. So the industry still has a

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<v Speaker 1>revenue problem, there's no question about that. And obviously with

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<v Speaker 1>the trading results, we always talk about how sustainable they

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<v Speaker 1>are from one quarter to the next. Uh, this doesn't

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<v Speaker 1>really give us any more insight into this. And right

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<v Speaker 1>now we do have shares of Morgan Stanley trading higher

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<v Speaker 1>by one point four percent. United Condental Holdings flying higher

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<v Speaker 1>as well today, at the highest value in almost three months.

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<v Speaker 1>After CEO Oscar Munio said he is reviewing all aspects

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<v Speaker 1>of the airline's operations in an effort to boost profitability.

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<v Speaker 1>Gold Is lawer by one point one percent, down fourteen

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<v Speaker 1>fifty ounce. The thirteen seventeen crude oil West Texas Intermediate

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<v Speaker 1>Crude up five tenths of one percent. Crude oil now

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<v Speaker 1>up by twenty cents forty four eight five a barrel

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<v Speaker 1>again recapping the SMP five index up ten to seventy four,

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<v Speaker 1>a gain of point five percent to thirty two on

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<v Speaker 1>Wall Street. Now, the other story is making news. Thank you,

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<v Speaker 1>Charlie from the Bloomberg News room. I'm Rami in a

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<v Speaker 1>cent cio. It's day three of the Republican National Convention.

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<v Speaker 1>ABC News spoke with Eric Trump, who says it's been

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<v Speaker 1>an incredible journey to watch his father become the numbinee

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<v Speaker 1>for president. When he becomes passionate about something, he sets

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<v Speaker 1>his mind to it and he does it. And you

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<v Speaker 1>see that as you sit in this arena, I mean,

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<v Speaker 1>this incredible arena, with this incredible passion, and I'm proud

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<v Speaker 1>of him. I mean, I'm just proud of the man.

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<v Speaker 1>He's done such an unbelievable job. Eric Trump will speak

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<v Speaker 1>tonight at the convention along with Donald Trump's running mate

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<v Speaker 1>Mike Pence and Texas Senator Ted Cruz. The people of

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<v Speaker 1>Baton Rouge, Louisiana are remembering their three slain police officers.

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<v Speaker 1>Residents turned out at makeshift memorials, churches and rallies, with

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<v Speaker 1>some faith and community leaders gathering to discuss ways to

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<v Speaker 1>improve police relations with black residents. The officers were fatally

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<v Speaker 1>shot by a former marine on Sunday morning. Three others

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<v Speaker 1>were wounded. The parents of the University of California student

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<v Speaker 1>killed the niece France or speaking out, Conrad Leslie says

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<v Speaker 1>at first he and his wife thought Nicholas survived the attack.

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<v Speaker 1>As soon as we landed in Paris, we found our phones,

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<v Speaker 1>thinking that we're going to get into good news, but

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<v Speaker 1>instead we had a voicemail and it said we had

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<v Speaker 1>some new fingers on and unfortunately, uh, they said it

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<v Speaker 1>was bad news. Officials say five people remain in custody

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<v Speaker 1>for possible links to the attack, and the search is

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<v Speaker 1>underway for four suspects were fired shots at NYPD officers

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<v Speaker 1>last night. Police say the four drove past the officers

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<v Speaker 1>and shot them as they were walking in Brooklyn, and

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<v Speaker 1>then fled the scene. Global News twenty four hours a day,

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<v Speaker 1>powered by more than journalists and analysts in more than

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<v Speaker 1>one under twenty countries. I'm Ramie in Essensio. This is Bloomberg, Charlie,

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<v Speaker 1>and we thank you and again recapping stocks are advancing,

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<v Speaker 1>the SMP five indecks climbing to a record up ten

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<v Speaker 1>points now seventy three. That is a gain of five

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<v Speaker 1>tenths of one percent. I'm Charlie Pellet and that's a

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<v Speaker 1>Bloomberg business flash. This is taking stock the Fed in

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<v Speaker 1>focus on Bloomberg Radio, the Fed in focus. The Federal Reserve?

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<v Speaker 1>Is it on hold for rate hikes because of the

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<v Speaker 1>political season? Let's find out more from Arevin Low, Global

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<v Speaker 1>market strategist b n Y Melon and joining us now, Marvin,

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<v Speaker 1>thank you very much for being with us. Well, thank

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<v Speaker 1>you very much for having me again, Pim Marvin. Do

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<v Speaker 1>you think that the Federal Reserve is going to do

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<v Speaker 1>nothing because we are in the thick of the election cycle?

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<v Speaker 1>You know what, I personally do think that they are

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<v Speaker 1>on hold. I think in addition to the election cycle,

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<v Speaker 1>we still have the potential fallout from Brexit, which, while

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<v Speaker 1>you know everyone's being pretty sanguine about it, UM still

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<v Speaker 1>has a lot of questions that need to be answered.

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<v Speaker 1>So what would those questions be that would satisfy you? Well, um,

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<v Speaker 1>you know, the process itself is so unique, um that

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<v Speaker 1>we really don't have a lot of history to kind

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<v Speaker 1>of base it on. Um. I guess I would lean

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<v Speaker 1>towards the IMF report, the report that the IMF put

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<v Speaker 1>out earlier this week which lowered global growth. So that's

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<v Speaker 1>certainly a big question, and whether or not there's additional

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<v Speaker 1>knock on effects with regard to either tightening credit conditions

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<v Speaker 1>throughout Europe or um embolding potential other populous movements which

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<v Speaker 1>you know certainly have a basis not only UH in

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<v Speaker 1>the UK, but around Europe and possibly even here. Well,

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<v Speaker 1>I'm going to play to your title as the global

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<v Speaker 1>market strategies for just a minute, because you mentioned the

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<v Speaker 1>International Monetary Fund, and they came out with report that

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<v Speaker 1>suggests that Italy's economy will remain stagnant for the next

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<v Speaker 1>get this, twenty years. It is the euro Zone's third

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<v Speaker 1>largest economy. Will what happens in Italy affect the United States?

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<v Speaker 1>You know, what happens in Italy certainly affects the Eurozone,

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<v Speaker 1>and what happens in the Eurozone we've seen from either

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<v Speaker 1>a reach perspective or a UM risk taking appetitles in

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<v Speaker 1>the financial markets certainly has an impact here. Also, central

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<v Speaker 1>banks have been successful in calming nerves in the past,

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<v Speaker 1>and I think that's um the point in the cycle

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<v Speaker 1>that we're at now. But without really addressing those problems yesterday.

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<v Speaker 1>They will affect um, the US, they will affect the FED.

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<v Speaker 1>Thought we are a citizen of the world. In that case,

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<v Speaker 1>will we catch some of that helicopter money if Mario

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<v Speaker 1>drag starts dropping it from the skies? Well, um, at

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<v Speaker 1>this point, you know, helicopter money discussion really is more

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<v Speaker 1>focused on Japan. I don't think the ECB has taken

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<v Speaker 1>a a very strong stance in going that way. But

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<v Speaker 1>the trend of lower yields amongst the other central banks

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<v Speaker 1>will have their impact on the U S yield curve.

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<v Speaker 1>And while we've seen yield rise over the last couple

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<v Speaker 1>of weeks, you know, they still are significantly lower since Brexit,

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<v Speaker 1>and expectations are that um, you know, the Bank of England, UH,

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<v Speaker 1>the e c B and the Bank of Japan are

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<v Speaker 1>possibly moving towards the next stage of monetary accommodation. If

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<v Speaker 1>they do move to this next stage of monetary accommodation.

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<v Speaker 1>What does that do to U S interest rates? UM.

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<v Speaker 1>You know, it's it's an interesting time right now because

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<v Speaker 1>at the same time that I'm having this conversation with you,

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<v Speaker 1>there's certainly a lot of discussion about whether or not

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<v Speaker 1>the FED is going to try to hype rates again

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<v Speaker 1>this year. You know, we've seen the odds of a

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<v Speaker 1>rate hike UM increase significantly over the past few weeks

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<v Speaker 1>and never been some pretty high profile stories in the

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<v Speaker 1>press about the FED ready to move again. UM. Kind

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<v Speaker 1>of trying to put all of that together. While the

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<v Speaker 1>FED UM, you know, certainly wants to increase rates to

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<v Speaker 1>UM put additional bullets within within their arsenal, our yield

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<v Speaker 1>curve is certainly influenced by a lot of these other

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<v Speaker 1>yield curves. So the last time I was on your program,

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<v Speaker 1>I really thought that we were in a period where

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<v Speaker 1>should expect kind of this range bound or lower yield

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<v Speaker 1>type environment. UM. Even though we have backed up, we

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<v Speaker 1>still remain relatively low by historical standards, if not at

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<v Speaker 1>all time low still around the world. And I'll stand

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<v Speaker 1>by that thingment. I think that we need to deal

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<v Speaker 1>and and get used to this lower yield environment. Well,

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<v Speaker 1>I'll just give you the details. Right, the ten uere

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<v Speaker 1>right now trades at one point five seven. It is

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<v Speaker 1>down seven thirty seconds today. Also, the thirty year bond

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<v Speaker 1>is selling off down seconds, a decline of a little

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<v Speaker 1>bit more than half a percent, trading at two point

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<v Speaker 1>to nine. All Right, As a global market strategist, what

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<v Speaker 1>do you recommend people do with their money? Well, again, um,

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<v Speaker 1>you know, it really is a function of tempering expectations.

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<v Speaker 1>And we kind of had a little bit of this discussion,

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<v Speaker 1>um the last time I was there. You know, really

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<v Speaker 1>understanding that risk is part of the equation, That of

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<v Speaker 1>volatility is probably something that we need to get used to.

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<v Speaker 1>And finding the part of the market that makes sense

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<v Speaker 1>for your risk tolerance. Generating the type of returns that

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<v Speaker 1>you had from the fixed income market is going to

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<v Speaker 1>be challenging. Uh. It certainly requires one to look at

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<v Speaker 1>um non sovereign um types of fixed income investments if

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<v Speaker 1>you're looking for that type of that type of return.

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<v Speaker 1>You know, we've seen really strong returns within the high

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<v Speaker 1>yield world. Uh, the investment grades space within the US

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<v Speaker 1>and it's you know, for USD investors that kind of

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<v Speaker 1>makes UM the currency aspect a little bit easier, continues

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<v Speaker 1>to offer spread to to that treasury market, and it

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<v Speaker 1>continues to post positive returns in there. So it's that

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<v Speaker 1>type of thinking that I believe UM investors need to

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<v Speaker 1>to do rather than just simply looking at the government

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<v Speaker 1>bond market. So do people have to get used to

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<v Speaker 1>relative returns as opposed to absolute returns to a certain extent,

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<v Speaker 1>to a certain extent, to a certain extent, and you

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<v Speaker 1>know that certainly comes into your retirement planning process and

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<v Speaker 1>everything else that goes along with it. UM. When you

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<v Speaker 1>do have these sovereign yields anchored at these either very

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<v Speaker 1>low and or negative levels around the world, a relative

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<v Speaker 1>return is something that UM you have to take into consideration.

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<v Speaker 1>Thank you very much for spending time with us and

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<v Speaker 1>giving us your thoughts. Marvin Lowe is global market strategist

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<v Speaker 1>for b N Y Melan and they can be followed

0:10:47.160 --> 0:10:51.360
<v Speaker 1>on Twitter at b N Y Melan. You're listening to

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<v Speaker 1>taking Stockheim, pim Fox, and this is Bloomberg. The fed

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