1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,400 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,000 Speaker 1: at Bloomberg dot com slash podcast. And we check the 7 00:00:22,040 --> 00:00:27,440 Speaker 1: markets s I v P no B si v B. Right, 8 00:00:27,480 --> 00:00:29,920 Speaker 1: that's the ticket for boy yep, yep, and you go 9 00:00:30,000 --> 00:00:32,920 Speaker 1: pop that in the terminal. They're still not trading. They're 10 00:00:32,920 --> 00:00:35,920 Speaker 1: still halted for volatility. Yeah, and that's not that's not boy. No. 11 00:00:36,080 --> 00:00:37,840 Speaker 1: So we're looking at this stock right now. I'm not trading. 12 00:00:37,880 --> 00:00:40,520 Speaker 1: I want to get a sense of is this how 13 00:00:40,600 --> 00:00:43,560 Speaker 1: much is this as SVB specific or how much is 14 00:00:43,600 --> 00:00:45,720 Speaker 1: it broader to some of the banking system in general, 15 00:00:45,720 --> 00:00:47,680 Speaker 1: maybe on the regional side. And so when we want 16 00:00:47,680 --> 00:00:49,559 Speaker 1: to talk regional banks, there's only one person to talk to. 17 00:00:49,600 --> 00:00:52,240 Speaker 1: That's Herman Chant. He's a senior analyst. He covers US 18 00:00:52,240 --> 00:00:55,160 Speaker 1: regional banks and fintech for Bloomberg Intelligence. He's in our 19 00:00:55,200 --> 00:01:00,200 Speaker 1: Bloomberg Interactive Broker Studio today. He covers SVB. Herman, so 20 00:01:00,280 --> 00:01:03,880 Speaker 1: much for joining us here. Give us your sense of 21 00:01:03,920 --> 00:01:07,039 Speaker 1: what's happening in SVB and specifically, I think people ultimately 22 00:01:07,080 --> 00:01:09,640 Speaker 1: want to get to a sense of is this more 23 00:01:09,840 --> 00:01:13,039 Speaker 1: SVB specific given their business, their customers, or is it 24 00:01:13,080 --> 00:01:16,920 Speaker 1: maybe a little bit more endemic in the regional banking space. 25 00:01:17,120 --> 00:01:20,280 Speaker 1: What's your thought, sure, Paul, we do think it's more 26 00:01:20,319 --> 00:01:25,880 Speaker 1: specific to SVB. Svb's being affected by a classic bank run, 27 00:01:26,360 --> 00:01:30,280 Speaker 1: which is wrapped in a tech bubble which formed during 28 00:01:30,280 --> 00:01:34,800 Speaker 1: the pandemic period. Startups during that period we're raising a 29 00:01:34,800 --> 00:01:38,840 Speaker 1: boatload of capital from ventor capital companies and doing IPOs 30 00:01:38,880 --> 00:01:44,080 Speaker 1: at extravagant valuations, and that bubble is popping. So in effect, 31 00:01:44,319 --> 00:01:47,920 Speaker 1: you're seeing deposit outflow because of the tech bubble releasing 32 00:01:48,480 --> 00:01:53,800 Speaker 1: that's affecting SIVB specifically because they specifically cater to the 33 00:01:53,840 --> 00:01:57,800 Speaker 1: startup community and Silicon Valley. We'll walk us through then, 34 00:01:58,080 --> 00:02:00,520 Speaker 1: kind of how we got here from a yield perspective, 35 00:02:00,520 --> 00:02:02,880 Speaker 1: because my understanding and correct me if I'm wrong, keep 36 00:02:02,880 --> 00:02:05,320 Speaker 1: me honest here is that a lot of these banks, 37 00:02:05,720 --> 00:02:08,200 Speaker 1: I mean, they're lending for the long term, correct, And 38 00:02:08,520 --> 00:02:10,600 Speaker 1: this is a bank that did not diversify in the 39 00:02:10,639 --> 00:02:13,160 Speaker 1: way that say, some of the other bigger banks would 40 00:02:13,160 --> 00:02:15,960 Speaker 1: have sure, So in a lot of ways, SBB was 41 00:02:16,000 --> 00:02:18,600 Speaker 1: a victim of their own success because of the positive 42 00:02:18,600 --> 00:02:21,359 Speaker 1: inflows that happened during the pandemic. Billions of dollars came 43 00:02:21,400 --> 00:02:24,440 Speaker 1: in and they invested all of a lot of that 44 00:02:24,560 --> 00:02:28,840 Speaker 1: liquidity into securities when interest rates for zero. So we're 45 00:02:28,880 --> 00:02:32,320 Speaker 1: thinking about yields on that investment portfolio about one and 46 00:02:32,400 --> 00:02:35,840 Speaker 1: a half two percents now with rates worthy are today 47 00:02:35,960 --> 00:02:40,400 Speaker 1: the value of those securities has declined dramatically, and there's 48 00:02:40,400 --> 00:02:44,799 Speaker 1: a duration mismatch with the posts coming out, and your 49 00:02:45,400 --> 00:02:49,720 Speaker 1: securities are sticky on the balance sheets. So that has 50 00:02:49,919 --> 00:02:53,440 Speaker 1: necessitated a bid to sell these securities to inject some 51 00:02:53,480 --> 00:02:55,920 Speaker 1: liquidity onto the balance sheet. And the market was spooked 52 00:02:55,919 --> 00:02:59,519 Speaker 1: by this. What do the regulators do here? Herman? I mean, 53 00:02:59,520 --> 00:03:04,160 Speaker 1: you see NBC's reporting that SVB tread race from capital failed, 54 00:03:04,280 --> 00:03:06,560 Speaker 1: now looking to sell themselves. How do you think this 55 00:03:06,600 --> 00:03:09,919 Speaker 1: plays out to the regulator step in? Does another bank 56 00:03:10,000 --> 00:03:12,160 Speaker 1: step in a by SVB? How did these typically play off? 57 00:03:12,480 --> 00:03:17,000 Speaker 1: So the best case scenario is SBB somehow finds to 58 00:03:17,080 --> 00:03:19,640 Speaker 1: raise this capital and assuages the fears that's going on 59 00:03:19,720 --> 00:03:23,760 Speaker 1: in the marketplace. If that doesn't happen, then most likely 60 00:03:24,040 --> 00:03:27,960 Speaker 1: the regulators need to step in and force a sale 61 00:03:27,960 --> 00:03:32,320 Speaker 1: to a larger institution that is viewed to be more stable. Well, 62 00:03:32,440 --> 00:03:34,040 Speaker 1: I think what a lot of people don't realize is 63 00:03:34,040 --> 00:03:37,000 Speaker 1: that SVB is actually a member of the SMP five hundred, 64 00:03:37,000 --> 00:03:40,360 Speaker 1: and that is a really big deal when you talk about, Yeah, 65 00:03:41,200 --> 00:03:43,480 Speaker 1: a lot of people known. It's pretty interesting because and 66 00:03:43,560 --> 00:03:47,800 Speaker 1: frankly full admitting everything. I didn't know that either until 67 00:03:47,800 --> 00:03:49,880 Speaker 1: a couple of days ago. But I think what it 68 00:03:49,920 --> 00:03:51,880 Speaker 1: speaks to is this idea of is this as some 69 00:03:51,920 --> 00:03:55,280 Speaker 1: sort of repeat of the two thousand and eight kind 70 00:03:55,320 --> 00:03:57,760 Speaker 1: of Lehman Brothers moment. A lot of people bracing over 71 00:03:57,800 --> 00:03:59,440 Speaker 1: the weekend to see if it is. Do you think 72 00:03:59,480 --> 00:04:03,400 Speaker 1: it is any parallels there? The hope is that there's 73 00:04:03,480 --> 00:04:07,360 Speaker 1: the contagion risk is stable, and we see this as 74 00:04:07,440 --> 00:04:11,840 Speaker 1: really a SVB specific issue. We talked about in our 75 00:04:11,880 --> 00:04:15,000 Speaker 1: research that you can find on the terminal about svb's 76 00:04:15,160 --> 00:04:20,159 Speaker 1: large unrealized losses on their portfolio, and no other bank 77 00:04:20,240 --> 00:04:23,719 Speaker 1: in our coverage universe has that same unrealized loss that 78 00:04:23,760 --> 00:04:27,520 Speaker 1: they're sitting on, So these paper losses can become economic 79 00:04:27,560 --> 00:04:31,200 Speaker 1: losses if deposits run out of the balance sheets, and 80 00:04:31,320 --> 00:04:34,240 Speaker 1: that's what the fear is with SBB. The hope is 81 00:04:34,279 --> 00:04:37,679 Speaker 1: that deposits within regional banks stay a bit more stable 82 00:04:37,839 --> 00:04:39,839 Speaker 1: going forward because they don't have these issues with the 83 00:04:39,880 --> 00:04:43,720 Speaker 1: startups burning through cash. Who might be a potential buyer 84 00:04:43,880 --> 00:04:46,400 Speaker 1: for SVB? Do you think, yeah, it's it's probably one 85 00:04:46,440 --> 00:04:49,520 Speaker 1: of the larger institutions. If we're talking about larger regionals, 86 00:04:49,680 --> 00:04:53,600 Speaker 1: we could definitely see somebody like P ANDC or Truist. 87 00:04:54,040 --> 00:04:58,520 Speaker 1: Some Canadians could be interested, like in RBC, and then 88 00:04:58,600 --> 00:05:03,080 Speaker 1: you've got If that doesn't happen, then you can lean 89 00:05:03,200 --> 00:05:05,920 Speaker 1: on the largest banks in the US. We're talking about 90 00:05:05,960 --> 00:05:09,240 Speaker 1: you know, b of A and JP and Morton And 91 00:05:09,320 --> 00:05:11,360 Speaker 1: what about the how much are they really going to 92 00:05:11,440 --> 00:05:13,240 Speaker 1: be paying for it? I mean, no one really wants 93 00:05:13,240 --> 00:05:16,080 Speaker 1: to touch this bank, I imagine afterwards, and I believe 94 00:05:16,080 --> 00:05:17,560 Speaker 1: their stock. I mean a couple of days ago, stock 95 00:05:17,680 --> 00:05:19,400 Speaker 1: is at like two sixty six or something like that. 96 00:05:19,400 --> 00:05:22,640 Speaker 1: Shares are now I think below sixty How much do 97 00:05:22,720 --> 00:05:27,320 Speaker 1: you pay for SVB? Well, yeah, THATSB unfortunately is not 98 00:05:27,400 --> 00:05:32,240 Speaker 1: in a situation to leverage that they're strong franchise outside 99 00:05:32,240 --> 00:05:35,680 Speaker 1: of what's going on today, so it would be unfortunately 100 00:05:35,760 --> 00:05:39,760 Speaker 1: a price that is not that would be unhelpful for 101 00:05:39,920 --> 00:05:43,080 Speaker 1: existing shareholders. All right, let's step back from SVB and 102 00:05:43,120 --> 00:05:47,200 Speaker 1: look at your coverage more broadly. Regional banks, how are 103 00:05:47,240 --> 00:05:50,119 Speaker 1: they situated here in this you know, like a rising 104 00:05:50,160 --> 00:05:52,560 Speaker 1: interest rate environment. I thought that was good for banks 105 00:05:52,720 --> 00:05:55,200 Speaker 1: that interest margin, but I look at the SMP regional 106 00:05:55,240 --> 00:05:58,280 Speaker 1: bank indecks fifty two weeks low here. So talk to 107 00:05:58,360 --> 00:06:01,200 Speaker 1: us about the environment for regional banks right now, right, 108 00:06:01,760 --> 00:06:06,400 Speaker 1: So fundamentally things are strong. Profitability has increased in twenty 109 00:06:06,440 --> 00:06:08,720 Speaker 1: twenty two because of the rising rate environment that you 110 00:06:08,800 --> 00:06:12,440 Speaker 1: talked about, so margins have expanded. Credit quality is still 111 00:06:12,600 --> 00:06:16,560 Speaker 1: very benign, as consumers are still paying off their loans 112 00:06:16,640 --> 00:06:21,560 Speaker 1: and commercial customers are really healthy. What's really happening is 113 00:06:21,640 --> 00:06:27,479 Speaker 1: there's a focus on deposits and liquidity risk, which is 114 00:06:27,600 --> 00:06:29,800 Speaker 1: the name of the game these days, and also the 115 00:06:30,720 --> 00:06:33,839 Speaker 1: paper losses on the investment securities where all these banks 116 00:06:33,880 --> 00:06:38,320 Speaker 1: bought a lot of investment securities during the pandemic when 117 00:06:38,400 --> 00:06:41,720 Speaker 1: rates or zero. There's a headline here crossing the Bloomberg terminal. 118 00:06:41,800 --> 00:06:44,280 Speaker 1: Jenny Yellen saying that the Treasury is monitoring a few 119 00:06:44,320 --> 00:06:47,720 Speaker 1: banks amid issues at SVB, so something that we are 120 00:06:47,720 --> 00:06:49,160 Speaker 1: going to keep our eyes on. But I want to 121 00:06:49,200 --> 00:06:51,560 Speaker 1: really kind of harp back on a word you used, liquidity. 122 00:06:51,920 --> 00:06:53,680 Speaker 1: I think it's a concern we had about six months 123 00:06:53,680 --> 00:06:57,520 Speaker 1: ago when the Federal Reserve had just started their tightening cycle. 124 00:06:58,040 --> 00:07:01,599 Speaker 1: Is liquidity something separate from SVB that banks should be 125 00:07:01,640 --> 00:07:05,120 Speaker 1: worried about here? Um, yes, I think, And nobody wants 126 00:07:05,160 --> 00:07:08,640 Speaker 1: to be in SBB shoes right now. So what likely 127 00:07:08,680 --> 00:07:10,680 Speaker 1: will happen going forward is the banks are going to 128 00:07:10,720 --> 00:07:14,480 Speaker 1: pay up more for deposits to keep their deposit urs 129 00:07:14,520 --> 00:07:18,040 Speaker 1: in their balance sheets. So you're going to see rising 130 00:07:18,080 --> 00:07:21,800 Speaker 1: deposit costs to keep deposits stable. Where we in terms 131 00:07:21,880 --> 00:07:24,840 Speaker 1: of I like private credit is something that's become an 132 00:07:24,880 --> 00:07:27,920 Speaker 1: amazing growth business. It's fascinated me. How did the regional 133 00:07:27,920 --> 00:07:33,520 Speaker 1: banks view the private credit business as a competitive threat? Right, So, 134 00:07:33,720 --> 00:07:38,080 Speaker 1: the private creditor companies have come in and frankly, regional 135 00:07:38,120 --> 00:07:40,240 Speaker 1: banks have seed a chair. So that's one of the 136 00:07:40,280 --> 00:07:44,840 Speaker 1: reasons why we think regional bank credit quality will hold 137 00:07:44,880 --> 00:07:49,960 Speaker 1: in in the upcoming pending downturn because regional banks have 138 00:07:50,040 --> 00:07:53,040 Speaker 1: really derisked their balance sheets during the credit crisis, and 139 00:07:53,080 --> 00:07:56,520 Speaker 1: you've seen new entrants that come in, like private credit 140 00:07:56,600 --> 00:08:01,240 Speaker 1: BDCs that have taken share from the typical regional banks, 141 00:08:02,160 --> 00:08:07,120 Speaker 1: which has helped the regional's lower risk their loan books. 142 00:08:07,280 --> 00:08:09,840 Speaker 1: All right, good stuff. Herman Chan, Senior analyst. He covers 143 00:08:09,880 --> 00:08:13,360 Speaker 1: the US regional banks and fintech for Bloomberg Intelligence. Specifically, 144 00:08:13,360 --> 00:08:15,440 Speaker 1: he covers a Silicon Valley bank, so he is our 145 00:08:15,480 --> 00:08:19,320 Speaker 1: absolute in house go to expert on SVB. And the 146 00:08:19,800 --> 00:08:24,000 Speaker 1: news today that again the stock has halted pending news. 147 00:08:24,360 --> 00:08:26,880 Speaker 1: It was indicating down about sixty percent after losing sixty 148 00:08:26,880 --> 00:08:29,720 Speaker 1: percent of its value yesterday. Some real ongoing concern issues. 149 00:08:32,840 --> 00:08:35,280 Speaker 1: Jobs market solid, I mean, any way you look at it, 150 00:08:35,400 --> 00:08:37,839 Speaker 1: people that want to get a job or getting a job. 151 00:08:37,880 --> 00:08:40,600 Speaker 1: We had some good jobs number today. Carol Schleife joins us. 152 00:08:40,600 --> 00:08:46,840 Speaker 1: He's a chief CIO of BEMO Family Office located in Minneapolis. 153 00:08:47,840 --> 00:08:51,040 Speaker 1: A great town. I love Minneapolis. Maybe not in February 154 00:08:51,120 --> 00:08:53,240 Speaker 1: or January, but otherwise a great town. Kyle, thanks so 155 00:08:53,320 --> 00:08:56,360 Speaker 1: much for joining us here in our Bloomberg Interactive Brokers studio. 156 00:08:56,800 --> 00:08:59,800 Speaker 1: He saw the jobs numbers today. How do you think 157 00:08:59,800 --> 00:09:04,079 Speaker 1: this FEDER reserve is gonna react, and what do you 158 00:09:04,120 --> 00:09:06,960 Speaker 1: tell your clients? You know, the difficulty for the FED 159 00:09:07,160 --> 00:09:10,120 Speaker 1: and for investors today is they really wanted clarity out 160 00:09:10,120 --> 00:09:12,960 Speaker 1: of this job's number, and they got more confusion because 161 00:09:12,960 --> 00:09:15,800 Speaker 1: parts of it were strong, parts weren't as strong, and 162 00:09:15,840 --> 00:09:17,920 Speaker 1: so looking through that, so now we're going to be 163 00:09:18,000 --> 00:09:21,480 Speaker 1: waiting breathless for the CPI numbers next week and each 164 00:09:21,520 --> 00:09:24,080 Speaker 1: bit of data. So I think the FED will they 165 00:09:25,000 --> 00:09:27,440 Speaker 1: Chairman Paul told us earlier this week they'll take it 166 00:09:27,480 --> 00:09:30,360 Speaker 1: in totality. So there's a lot of other factors to 167 00:09:30,440 --> 00:09:34,000 Speaker 1: look at, but you're right, the overarching is that it's 168 00:09:34,040 --> 00:09:37,440 Speaker 1: a very strong jobs market. People can get jobs if 169 00:09:37,520 --> 00:09:40,400 Speaker 1: they want them. We saw some interesting things going on 170 00:09:40,480 --> 00:09:43,920 Speaker 1: in the construction markets, not so much some of the manufacturing, 171 00:09:43,960 --> 00:09:46,480 Speaker 1: but construction, and it plays into one of the themes 172 00:09:46,520 --> 00:09:49,280 Speaker 1: that we've been talking about a lot, which is this 173 00:09:49,360 --> 00:09:52,920 Speaker 1: industrial renaissance. But the FED has a lot to pass through, 174 00:09:52,960 --> 00:09:55,040 Speaker 1: and I think they're going to look at how much 175 00:09:55,080 --> 00:09:57,600 Speaker 1: stress is already being placed on the credit markets too, 176 00:09:57,640 --> 00:10:00,480 Speaker 1: and what's going on in the fringes there, and and 177 00:10:01,360 --> 00:10:04,200 Speaker 1: not wanting to disturb things. So it was really interesting 178 00:10:04,240 --> 00:10:06,720 Speaker 1: watching the futures market go from earlier in the week 179 00:10:07,200 --> 00:10:10,959 Speaker 1: price in a two thirds expectation of a fifty basis 180 00:10:10,960 --> 00:10:13,520 Speaker 1: point and now we're back down to about a third. Yeah. Well, 181 00:10:13,600 --> 00:10:17,719 Speaker 1: in twenty four hours we went from while pricing, is 182 00:10:17,720 --> 00:10:21,000 Speaker 1: a market getting that wrong? I'm not sure. I think 183 00:10:21,000 --> 00:10:22,800 Speaker 1: what the market is getting wrong is they're paying too 184 00:10:22,880 --> 00:10:25,440 Speaker 1: much attention to all this short term stuff and not 185 00:10:25,559 --> 00:10:29,160 Speaker 1: stepping back and looking at overarchingly. We've got a very 186 00:10:29,200 --> 00:10:32,320 Speaker 1: solid economy going on here. We're trying to pull some 187 00:10:32,400 --> 00:10:35,880 Speaker 1: of the inflation, the post pandemic inflation out of it 188 00:10:35,920 --> 00:10:39,720 Speaker 1: and level that off. That's been fitful. I heard some 189 00:10:39,800 --> 00:10:43,880 Speaker 1: commentator fed official last night talking about there was this 190 00:10:43,960 --> 00:10:46,240 Speaker 1: misperception that it was going to be a really even 191 00:10:46,320 --> 00:10:49,120 Speaker 1: path to bring it down, and it's not. It's fitful, 192 00:10:49,160 --> 00:10:51,160 Speaker 1: and that's what we're seeing. We're seeing it in the data, 193 00:10:51,240 --> 00:10:54,320 Speaker 1: we're seeing it everything else. But the market is missing 194 00:10:54,360 --> 00:10:56,000 Speaker 1: the fact that you still do have a lot of 195 00:10:56,040 --> 00:10:59,040 Speaker 1: strength under the economy. You've got a lot of spending 196 00:10:59,120 --> 00:11:03,720 Speaker 1: teat up in some really important areas that will help 197 00:11:03,840 --> 00:11:06,800 Speaker 1: stabilize things intermediate and longer term, and you do have 198 00:11:06,960 --> 00:11:09,400 Speaker 1: strong growth globally as well, because there are a lot 199 00:11:09,440 --> 00:11:12,360 Speaker 1: of central banks there that have backed off their increases 200 00:11:12,400 --> 00:11:15,440 Speaker 1: are went to pause for a bit. So given that 201 00:11:15,600 --> 00:11:20,079 Speaker 1: you know, rising interest rates not so good for risk assets, 202 00:11:20,160 --> 00:11:24,760 Speaker 1: yet underlying economic activity remains pretty darn decent. What are 203 00:11:24,800 --> 00:11:27,520 Speaker 1: some of the sectors in the equity market that you 204 00:11:27,520 --> 00:11:30,600 Speaker 1: guys are more open to. I think the interesting thing 205 00:11:30,679 --> 00:11:33,080 Speaker 1: is is if you look broader in the equity markets, 206 00:11:33,120 --> 00:11:37,480 Speaker 1: there's places in industrials and materials and manufacturing which haven't 207 00:11:37,520 --> 00:11:39,240 Speaker 1: been at the top of the heap in terms of 208 00:11:39,400 --> 00:11:42,679 Speaker 1: SMP sectors for years, and so looking at some of 209 00:11:42,679 --> 00:11:45,400 Speaker 1: those because when you actually passed through the last round 210 00:11:45,400 --> 00:11:48,480 Speaker 1: of quarterly earnings reports, there was a lot of record 211 00:11:48,520 --> 00:11:51,440 Speaker 1: backlogs in some of that that plant and equipment we're 212 00:11:51,480 --> 00:11:54,400 Speaker 1: putting out there. The manufacturing. Heck, even when I was 213 00:11:55,400 --> 00:11:57,720 Speaker 1: on the interstate waiting to get to the airport a 214 00:11:57,720 --> 00:12:00,760 Speaker 1: couple of days ago, I've never in forty years of 215 00:12:00,800 --> 00:12:05,400 Speaker 1: commuting that interstate's seen as many plant parts out there 216 00:12:05,520 --> 00:12:08,680 Speaker 1: and road construction parts. Even though we're one hundred inches 217 00:12:08,679 --> 00:12:11,679 Speaker 1: of snow in Minneapolis there, still they're still queuing up 218 00:12:12,000 --> 00:12:15,400 Speaker 1: for plant for road construction all the way around, and 219 00:12:15,440 --> 00:12:20,199 Speaker 1: so the industrial sectors the more there's an interesting way 220 00:12:20,240 --> 00:12:22,360 Speaker 1: to play it. And some of the tech names will 221 00:12:22,440 --> 00:12:27,760 Speaker 1: play in this newer environment to where we're rebuilding in 222 00:12:27,480 --> 00:12:33,120 Speaker 1: the infrastructure, we're going to be putting cybersecurity in um 223 00:12:33,760 --> 00:12:38,479 Speaker 1: really sophisticated artificial intelligence in places the migration to the 224 00:12:38,520 --> 00:12:41,600 Speaker 1: web continues, you'll be putting sensors in all those plants. 225 00:12:41,600 --> 00:12:44,559 Speaker 1: So there's ways to play it, but they're a different 226 00:12:44,640 --> 00:12:48,079 Speaker 1: way than than we've seen. I think over the last decade. 227 00:12:48,760 --> 00:12:50,960 Speaker 1: Are you worried at all about the SVB news? How 228 00:12:50,960 --> 00:12:54,760 Speaker 1: are you processing that? I think we're processing it the 229 00:12:54,800 --> 00:12:58,520 Speaker 1: bigger broader. We're definitely watching for cracks in the in 230 00:12:58,559 --> 00:13:02,040 Speaker 1: the credit market. It'stant to remember that we're not in 231 00:13:02,080 --> 00:13:04,719 Speaker 1: the same environment we were in Oe No. Nine and 232 00:13:04,840 --> 00:13:07,400 Speaker 1: that the subsequent to that there were a lot of 233 00:13:07,440 --> 00:13:12,440 Speaker 1: rules and regulations for the banks in general. But we're 234 00:13:12,440 --> 00:13:16,120 Speaker 1: watching for pressure because credit markets and the access to 235 00:13:16,200 --> 00:13:18,120 Speaker 1: credit is one of the first places you get it. 236 00:13:18,120 --> 00:13:22,000 Speaker 1: And you've had the FED pulling pulling money supply out, 237 00:13:22,559 --> 00:13:25,960 Speaker 1: you know, for the last couple of decades. Basically we've 238 00:13:26,000 --> 00:13:29,920 Speaker 1: had central banks around the world putting, putting liquidity into 239 00:13:29,920 --> 00:13:32,360 Speaker 1: the system. Now they're pulling it out, So that's not 240 00:13:32,480 --> 00:13:35,920 Speaker 1: going to be a nice linear process either. So we're 241 00:13:35,960 --> 00:13:38,400 Speaker 1: processing it very carefully by spending a lot of time 242 00:13:38,400 --> 00:13:42,080 Speaker 1: talking to the managers and the folks that we have 243 00:13:42,160 --> 00:13:44,760 Speaker 1: that are watching those markets to see if there's other 244 00:13:44,840 --> 00:13:47,280 Speaker 1: signs of stress in those markets, and so far it's 245 00:13:47,440 --> 00:13:50,520 Speaker 1: pretty orderly. What do you guys saying about the fixed 246 00:13:50,559 --> 00:13:52,599 Speaker 1: income market? We have a big, big moves in the 247 00:13:53,440 --> 00:13:55,959 Speaker 1: yield curve today the two year off twenty five basis points, 248 00:13:55,960 --> 00:13:57,439 Speaker 1: but it was just a couple of days ago you 249 00:13:57,480 --> 00:13:59,400 Speaker 1: could park your money into your paper and get five 250 00:13:59,480 --> 00:14:03,280 Speaker 1: percent return. How are you guys thinking about fixed income 251 00:14:03,280 --> 00:14:06,520 Speaker 1: which had such a bad bed year in twenty twenty two. Yeah, 252 00:14:06,600 --> 00:14:09,600 Speaker 1: we have had a lot of clients said have Our 253 00:14:09,600 --> 00:14:12,520 Speaker 1: recommendation has been to focus on the core fixed income 254 00:14:12,559 --> 00:14:15,599 Speaker 1: and to stay shorter on the curve. We've in specific 255 00:14:15,679 --> 00:14:17,320 Speaker 1: not even gone out to the belly of the curve 256 00:14:17,520 --> 00:14:20,720 Speaker 1: farther up because of that volatility that you're seeing. You've 257 00:14:20,720 --> 00:14:23,800 Speaker 1: seen that ten year round trip in big jumps between 258 00:14:23,880 --> 00:14:26,400 Speaker 1: last year and this year. And the unique thing is 259 00:14:26,560 --> 00:14:28,640 Speaker 1: is for a lot of clients that are more nervous 260 00:14:28,680 --> 00:14:31,440 Speaker 1: about markets in particular, this is the first time in 261 00:14:31,480 --> 00:14:32,920 Speaker 1: a decade and a half you have been paid to 262 00:14:32,920 --> 00:14:35,360 Speaker 1: sit in cash. Well, speaking of that, I mean, it's 263 00:14:35,360 --> 00:14:37,240 Speaker 1: the real yield that we're really looking at, which brings 264 00:14:37,280 --> 00:14:40,240 Speaker 1: me to this the benchmark note, it's pretty simple. We 265 00:14:40,240 --> 00:14:42,360 Speaker 1: were at four percent I want to say, forty eight 266 00:14:42,400 --> 00:14:45,000 Speaker 1: hours ago. Again, the repricing year is as kind of 267 00:14:45,040 --> 00:14:47,120 Speaker 1: mind boggling. Now we're at three sixty nine on the 268 00:14:47,120 --> 00:14:48,480 Speaker 1: ten year. Now. It feels like a lot of that 269 00:14:48,560 --> 00:14:51,360 Speaker 1: is simply coming from perhaps the intra day flight to 270 00:14:51,400 --> 00:14:54,880 Speaker 1: safety they got off the SBB and arguably the FED repricing. 271 00:14:54,920 --> 00:14:57,880 Speaker 1: But how high can the ten year go if the 272 00:14:57,920 --> 00:15:01,240 Speaker 1: Fed still has some room to run. I don't think 273 00:15:01,280 --> 00:15:05,640 Speaker 1: we necessarily put pagan number on there. We'd be hard 274 00:15:05,680 --> 00:15:07,360 Speaker 1: pressed to say it's going to go much higher than 275 00:15:07,400 --> 00:15:10,200 Speaker 1: it has in here and watching it pull back, that 276 00:15:10,320 --> 00:15:13,560 Speaker 1: four percent seems to offer an awful lot of resistance, 277 00:15:14,000 --> 00:15:16,120 Speaker 1: if you will, in terms of hitting that level and 278 00:15:16,240 --> 00:15:18,840 Speaker 1: coming back. But we're going to you know, it's really 279 00:15:18,880 --> 00:15:21,000 Speaker 1: interesting that you could build out a one and a 280 00:15:21,000 --> 00:15:23,480 Speaker 1: half or two year treasury ladder and yield close to 281 00:15:23,480 --> 00:15:25,640 Speaker 1: five percent on that and The nice thing is is 282 00:15:25,680 --> 00:15:28,800 Speaker 1: then you've got the opportunity every three months when something 283 00:15:28,840 --> 00:15:30,560 Speaker 1: mature is to say do I put it back into 284 00:15:30,600 --> 00:15:32,360 Speaker 1: that market? Do I keep it in cash? So I 285 00:15:32,400 --> 00:15:35,280 Speaker 1: put it farther out on the curve, Carol, that's sixty 286 00:15:35,320 --> 00:15:37,280 Speaker 1: forty portfolio that a lot of us grew up on 287 00:15:37,640 --> 00:15:40,360 Speaker 1: just got crushed last year and really called into question 288 00:15:40,440 --> 00:15:43,280 Speaker 1: here at BEMO, at the family office that you guys 289 00:15:44,640 --> 00:15:46,800 Speaker 1: are at, how do you talk to your clients about 290 00:15:47,040 --> 00:15:50,960 Speaker 1: just portfolio construction. These days we are in the camp 291 00:15:51,080 --> 00:15:53,640 Speaker 1: or we don't think the sixty forty portfolio is dead. 292 00:15:54,000 --> 00:15:57,920 Speaker 1: It it didn't perform last year, and you have to 293 00:15:57,960 --> 00:16:00,480 Speaker 1: pull last year and look at it and contact it's 294 00:16:00,520 --> 00:16:03,160 Speaker 1: been eighty or ninety maybe a hundred years since you've 295 00:16:03,160 --> 00:16:05,640 Speaker 1: had both stocks and bonds down double digits in the 296 00:16:05,680 --> 00:16:10,800 Speaker 1: same year. That's hopefully a historical anomaly that we're not 297 00:16:10,840 --> 00:16:13,920 Speaker 1: going to see for another eighty ninety one hundred years. 298 00:16:13,960 --> 00:16:17,320 Speaker 1: But we're expecting more normalized sorts of returns out of 299 00:16:17,320 --> 00:16:20,000 Speaker 1: both stocks and bonds this year, and we do expect 300 00:16:20,120 --> 00:16:23,920 Speaker 1: that fixed income, especially at the shorter end, has seen 301 00:16:23,960 --> 00:16:26,760 Speaker 1: the bulk of that volatility or seeing inflation start to 302 00:16:26,880 --> 00:16:30,080 Speaker 1: level off, and so having you know, there's a lot 303 00:16:30,080 --> 00:16:32,320 Speaker 1: of reasons why people want to own fixed income, not 304 00:16:32,440 --> 00:16:34,640 Speaker 1: the least of which is for current income, but it's 305 00:16:34,640 --> 00:16:37,560 Speaker 1: also to provide that stability in the portfolio. And we 306 00:16:37,600 --> 00:16:39,680 Speaker 1: still think it serves that purpose. You just have to 307 00:16:39,680 --> 00:16:43,280 Speaker 1: be careful. It's one of the reasons why laddered portfolios, 308 00:16:43,640 --> 00:16:46,440 Speaker 1: or having managers that run laddered portfolios and can be 309 00:16:46,560 --> 00:16:51,280 Speaker 1: nimble going between taxable and non taxable makes a lot 310 00:16:51,280 --> 00:16:54,640 Speaker 1: of sense. All right, thirty seconds here walk us through 311 00:16:55,160 --> 00:16:59,400 Speaker 1: the case for buying tech at the moment, Oh, walk 312 00:16:59,640 --> 00:17:01,920 Speaker 1: through the case for buying tech. I think at the margin, 313 00:17:02,000 --> 00:17:05,359 Speaker 1: there are pieces of tech that makes sense to fully 314 00:17:05,400 --> 00:17:09,120 Speaker 1: write off or go full barreled into a particular industry 315 00:17:09,119 --> 00:17:11,199 Speaker 1: as in our style. It's part and parcel of a 316 00:17:11,240 --> 00:17:15,040 Speaker 1: diversified portfolio. And there's places within tech as I mentioned, 317 00:17:15,080 --> 00:17:19,159 Speaker 1: there's censors, there's artificial intelligence, there's movement to the cloud, 318 00:17:19,320 --> 00:17:22,040 Speaker 1: all of those plays. So having either good managers or 319 00:17:22,119 --> 00:17:25,240 Speaker 1: names that are diversified in their own portfolios and how 320 00:17:25,280 --> 00:17:28,119 Speaker 1: they're dealing with it, because we're not going to walk away. 321 00:17:28,160 --> 00:17:32,800 Speaker 1: We're not going back to the green Tabar paper that 322 00:17:32,880 --> 00:17:36,360 Speaker 1: I started my career on We're definitely going to keep 323 00:17:36,600 --> 00:17:41,239 Speaker 1: deploying technology, all right, great stuff. Carol Life joins us 324 00:17:41,240 --> 00:17:44,240 Speaker 1: here in our Bloomberg Interactive Broker studio. Carol's the CIO 325 00:17:44,280 --> 00:17:50,080 Speaker 1: of BEMO Family Office located in lovely Minneapolis, Minnesota. Again, 326 00:17:50,200 --> 00:17:53,000 Speaker 1: I always talking about Milwaukee being pound for pound maybe 327 00:17:53,520 --> 00:17:56,000 Speaker 1: one of the best towns for money management. Minneapolis is 328 00:17:56,000 --> 00:17:58,720 Speaker 1: not far behind. They got a lot of smart people there, 329 00:17:58,760 --> 00:18:01,600 Speaker 1: all the x IDs and Alliance folks all over town. 330 00:18:01,680 --> 00:18:07,920 Speaker 1: So some good stuff there. Kylerslife joining us. Jobs market 331 00:18:08,040 --> 00:18:12,240 Speaker 1: is Assistan remains incredibly resilient. Let's get a look down 332 00:18:12,320 --> 00:18:13,800 Speaker 1: under the hood. We can do that with Tom Gibbo. 333 00:18:13,840 --> 00:18:16,159 Speaker 1: He's a founder and CEO of La Sound Network. LA 334 00:18:16,240 --> 00:18:20,399 Speaker 1: Sound Networkers, a national staffing, recruiting and culture firm focused 335 00:18:20,400 --> 00:18:23,560 Speaker 1: on temporary and contract staffing as well as direct higher search. 336 00:18:23,960 --> 00:18:26,560 Speaker 1: Tom blow Away number here. Tell us what we need 337 00:18:26,600 --> 00:18:29,480 Speaker 1: to know. Can I get a heck? Yeah? Yeah, And 338 00:18:29,760 --> 00:18:33,640 Speaker 1: we got three hundred and eleven thousand job We're having 339 00:18:33,680 --> 00:18:36,199 Speaker 1: the same conversation every month. We are, I mean what 340 00:18:36,280 --> 00:18:41,040 Speaker 1: we've got. What we've got is an economy that companies 341 00:18:41,160 --> 00:18:47,760 Speaker 1: still believe that there is momentum moving forward. We're seeing 342 00:18:48,000 --> 00:18:51,840 Speaker 1: it is driving it. Healthcare is driving it. We're still 343 00:18:51,880 --> 00:18:56,120 Speaker 1: seeing people spending money the people have. While while individual 344 00:18:56,240 --> 00:19:01,239 Speaker 1: debt and credit is very high, there's also billions of 345 00:19:01,280 --> 00:19:04,440 Speaker 1: dollars in people's home equity that they haven't tapped into 346 00:19:04,720 --> 00:19:08,760 Speaker 1: that doesn't get talked about nearly enough. And this economy 347 00:19:08,840 --> 00:19:10,159 Speaker 1: is going to keep going, and then we have the 348 00:19:10,200 --> 00:19:13,280 Speaker 1: infrastructure package. It's finally going to get started going this year, 349 00:19:13,560 --> 00:19:15,120 Speaker 1: and I think we're going to have a really good 350 00:19:15,160 --> 00:19:19,600 Speaker 1: twenty twenty three. But it's still the headline number is 351 00:19:19,600 --> 00:19:23,439 Speaker 1: still very hot. Is there eleventh payrolls number that has 352 00:19:23,480 --> 00:19:26,240 Speaker 1: beat expectations and not my small margin. I understand that 353 00:19:26,280 --> 00:19:28,159 Speaker 1: the wages are coming down. That's why you see the 354 00:19:28,200 --> 00:19:31,439 Speaker 1: market perhaps not taking this as as much of a 355 00:19:31,480 --> 00:19:34,600 Speaker 1: negative as they have in the past. But I'm confused 356 00:19:34,640 --> 00:19:37,880 Speaker 1: about the trajectory here. The trajectory is not getting better. 357 00:19:37,920 --> 00:19:41,040 Speaker 1: Does this kind of lead to some sort of very 358 00:19:41,080 --> 00:19:45,080 Speaker 1: fast drop in jobs very quickly? What do you mean 359 00:19:45,080 --> 00:19:48,600 Speaker 1: the trajectory isn't getting better? We keep adding jobs every month, right, 360 00:19:48,680 --> 00:19:51,280 Speaker 1: So for the federal reserve, that's still extremely tight. Labor market. 361 00:19:51,680 --> 00:19:55,800 Speaker 1: O oh, the correct correct for what the Federal Reserve wants. Well, 362 00:19:55,840 --> 00:19:59,080 Speaker 1: I think what it shows is is all those years 363 00:19:59,119 --> 00:20:01,840 Speaker 1: that we were running this economy on zero interest rates, 364 00:20:01,880 --> 00:20:05,160 Speaker 1: we didn't need to and that was really the big 365 00:20:05,320 --> 00:20:07,480 Speaker 1: It's more about what the mistakes we made than the 366 00:20:07,480 --> 00:20:10,919 Speaker 1: mistakes we are making. And what this is showing is 367 00:20:10,960 --> 00:20:14,359 Speaker 1: that interest rates can go up another fifty basis points 368 00:20:14,400 --> 00:20:16,439 Speaker 1: or seven. You know, eventually what's going to happen is 369 00:20:16,600 --> 00:20:19,119 Speaker 1: we're gonna get to a point and then the market 370 00:20:19,119 --> 00:20:21,720 Speaker 1: will slow and jobs will go down, and then they'll go, oh, 371 00:20:21,760 --> 00:20:24,840 Speaker 1: we knew this was going to happen, Well, we didn't 372 00:20:24,840 --> 00:20:27,760 Speaker 1: know what was going to happen in that time. Eventually, 373 00:20:27,960 --> 00:20:30,600 Speaker 1: there is the straw that breaks the camel's back, and 374 00:20:30,640 --> 00:20:32,159 Speaker 1: this is what you get when you go into a 375 00:20:32,160 --> 00:20:34,560 Speaker 1: soft landing. A hard landing would be adding one hundred 376 00:20:34,560 --> 00:20:37,600 Speaker 1: and fifty basis points. They're not doing that. The market 377 00:20:37,720 --> 00:20:41,239 Speaker 1: is allowing it to happen at this pace because it 378 00:20:41,280 --> 00:20:43,959 Speaker 1: can handle it. You know, it's funny when the market 379 00:20:43,960 --> 00:20:47,160 Speaker 1: dictates what the naysayers want it to do, they're unhappy. 380 00:20:47,359 --> 00:20:51,240 Speaker 1: When the market goes counter, they're unhappy. It is every 381 00:20:51,240 --> 00:20:52,680 Speaker 1: once in a while you got to look at things 382 00:20:52,680 --> 00:20:55,680 Speaker 1: and say, we're in a pretty darn good situation. The 383 00:20:55,720 --> 00:20:59,639 Speaker 1: market's really really strong. The set is trying to appease 384 00:21:00,200 --> 00:21:04,359 Speaker 1: a soft landing because inflation is really high. But what 385 00:21:04,359 --> 00:21:08,240 Speaker 1: we've seen is gas prices didn't continue on that trajectory. 386 00:21:08,520 --> 00:21:11,400 Speaker 1: People aren't talking about the cost of eggs as much anymore, 387 00:21:11,600 --> 00:21:14,520 Speaker 1: and his interest rates go up. We're starting to see 388 00:21:14,560 --> 00:21:18,360 Speaker 1: people realize everyday, people realize that things aren't so bad, 389 00:21:18,400 --> 00:21:21,160 Speaker 1: and eventually they're going to stop talking about working remotely 390 00:21:21,560 --> 00:21:24,920 Speaker 1: and all these nonsense issues, and we're going to ease 391 00:21:25,000 --> 00:21:30,520 Speaker 1: into a normal standard economy that has some good months 392 00:21:30,520 --> 00:21:33,359 Speaker 1: and some bad months, and it'll settle down for a 393 00:21:33,400 --> 00:21:36,160 Speaker 1: period of nine to eighteen months like it always does, 394 00:21:36,520 --> 00:21:38,560 Speaker 1: and then we'll get a huge bowl market that'll come 395 00:21:38,600 --> 00:21:42,920 Speaker 1: in twenty five through twenty nine. Hey, Tom, help me 396 00:21:42,960 --> 00:21:45,920 Speaker 1: out with this Jolts number. I have a hard time 397 00:21:45,920 --> 00:21:48,040 Speaker 1: figuring out. You know, it came into ten point eight 398 00:21:48,040 --> 00:21:50,639 Speaker 1: million or something like that. Before the pandemic it was 399 00:21:50,720 --> 00:21:54,440 Speaker 1: five million, six million kind of on average. What all 400 00:21:54,440 --> 00:21:58,840 Speaker 1: these people doing well? I think it was funny. I 401 00:21:58,920 --> 00:22:01,600 Speaker 1: just had this conversation with the group of CEOs. If 402 00:22:01,640 --> 00:22:10,000 Speaker 1: we took away every unprofitable gig platform, so uber and 403 00:22:10,280 --> 00:22:13,880 Speaker 1: lift and instacart and all these companies that don't make 404 00:22:13,960 --> 00:22:16,840 Speaker 1: money in door Dad, and all those people were back 405 00:22:16,880 --> 00:22:19,760 Speaker 1: into the job force. I think you'd have that number 406 00:22:19,800 --> 00:22:23,600 Speaker 1: be extremely low. What we've seen is is we've seen 407 00:22:23,680 --> 00:22:27,679 Speaker 1: workers who were middle income forty to eighty thousand dollars 408 00:22:27,720 --> 00:22:30,679 Speaker 1: a year, people that have said, you know what, I 409 00:22:30,720 --> 00:22:34,240 Speaker 1: don't want to be stuck in a office doing these 410 00:22:34,280 --> 00:22:36,800 Speaker 1: things all the time. I want more flexibility, even if 411 00:22:36,840 --> 00:22:39,240 Speaker 1: I'm making the same amount of money or working more Onwards, 412 00:22:39,560 --> 00:22:43,439 Speaker 1: they're doing job share and they're they're piecing it together, 413 00:22:43,960 --> 00:22:46,840 Speaker 1: and that's really the challenge. I believe that's what's happened. 414 00:22:47,040 --> 00:22:49,360 Speaker 1: There's two things. There's that and then there's the lack 415 00:22:49,400 --> 00:22:52,040 Speaker 1: of immigrants coming into this country, not just south of 416 00:22:52,040 --> 00:22:54,440 Speaker 1: the border, but as the people coming in from other 417 00:22:54,520 --> 00:22:57,040 Speaker 1: countries to do some of the technical jobs. If we 418 00:22:57,119 --> 00:22:59,400 Speaker 1: can loosen up some of the immigration stuff, I think 419 00:22:59,400 --> 00:23:01,240 Speaker 1: we're going to see a lot of our problems solved 420 00:23:01,280 --> 00:23:04,159 Speaker 1: as well. And what about the wage stuff. Does that 421 00:23:04,200 --> 00:23:09,399 Speaker 1: include wages? Yeah? You know, wages is an interesting issue, 422 00:23:09,480 --> 00:23:14,840 Speaker 1: right because it categorizes all of the different levels together. 423 00:23:15,600 --> 00:23:18,040 Speaker 1: For the most part, and there's such a big difference 424 00:23:18,080 --> 00:23:21,280 Speaker 1: between salaried and hour lead and how that plays into 425 00:23:21,359 --> 00:23:24,639 Speaker 1: the scheme of things. We had the municipality that we're 426 00:23:24,960 --> 00:23:29,040 Speaker 1: raising minimum wages before COVID, and then during COVID, and 427 00:23:29,080 --> 00:23:32,200 Speaker 1: then when you had the hourly explosion from Target and 428 00:23:32,680 --> 00:23:35,960 Speaker 1: Amazon and Walmart and that stuff, that that that falsely 429 00:23:36,080 --> 00:23:40,399 Speaker 1: increased the hourly wages are believed to be falsely So 430 00:23:40,480 --> 00:23:42,760 Speaker 1: I think that those numbers aren't accurate either. I think 431 00:23:42,760 --> 00:23:45,520 Speaker 1: we focus as a society probably too much on the 432 00:23:45,560 --> 00:23:49,280 Speaker 1: BLF wage numbers because that's really market dictated, and when 433 00:23:49,280 --> 00:23:51,320 Speaker 1: there's low unemployment, those numbers are going to go up 434 00:23:51,359 --> 00:23:53,760 Speaker 1: no matter what if companies need to fulfill it. So 435 00:23:53,920 --> 00:23:56,280 Speaker 1: I don't I don't worry about the wage and the 436 00:23:56,320 --> 00:23:59,480 Speaker 1: participation raised. Really the interesting battle that whether this country 437 00:23:59,520 --> 00:24:03,679 Speaker 1: has been Kistan for a long time, and until we 438 00:24:03,760 --> 00:24:07,960 Speaker 1: have something solved about daycare and about unemployment and social 439 00:24:08,000 --> 00:24:10,200 Speaker 1: benefits like that, we're not going to see an increase 440 00:24:10,480 --> 00:24:12,200 Speaker 1: of more than a half a percent or so of that. 441 00:24:12,440 --> 00:24:15,879 Speaker 1: Any time you mentioned immigrants, legal and illegal, what are 442 00:24:15,920 --> 00:24:19,359 Speaker 1: the the you know, the hirers, the hiring managers that 443 00:24:19,400 --> 00:24:21,320 Speaker 1: you talk to. I mean how big of a problem 444 00:24:21,359 --> 00:24:23,359 Speaker 1: is that, because it just seems like a lot of 445 00:24:23,400 --> 00:24:26,520 Speaker 1: the you know, job openings I see are ones that 446 00:24:26,520 --> 00:24:31,800 Speaker 1: would typically be filled by immigrants, And is there any 447 00:24:31,800 --> 00:24:34,000 Speaker 1: sense that that is going to loosen in any time 448 00:24:34,040 --> 00:24:36,920 Speaker 1: going forward? Well, the problem is we don't have the 449 00:24:37,560 --> 00:24:40,280 Speaker 1: Americans who are out of work or can't find jobs, 450 00:24:40,359 --> 00:24:42,320 Speaker 1: or the skill gaps have passed, and by they don't 451 00:24:42,320 --> 00:24:45,919 Speaker 1: want to do the job. And then the media, not 452 00:24:45,960 --> 00:24:48,440 Speaker 1: trying to paint that picture, but has painted this thing 453 00:24:48,440 --> 00:24:52,359 Speaker 1: that we're the service level country and those jobs are 454 00:24:51,880 --> 00:24:55,439 Speaker 1: are are are not great jobs. And so now what 455 00:24:55,720 --> 00:24:59,600 Speaker 1: used to be done either by Eastern European immigrants coming 456 00:24:59,600 --> 00:25:04,360 Speaker 1: over or people from South America or Central America or Africa, 457 00:25:04,480 --> 00:25:07,840 Speaker 1: different continents coming over here, and the laws are so 458 00:25:07,920 --> 00:25:10,080 Speaker 1: tight that we can't do that. And people say, oh, 459 00:25:10,119 --> 00:25:12,120 Speaker 1: we're going to have the New Deal revolution, Well, gets 460 00:25:12,160 --> 00:25:16,080 Speaker 1: who built this country in the New Deal? Immigrants? Immigrants. 461 00:25:16,400 --> 00:25:19,800 Speaker 1: So if you're gonna get trillions of dollars in infrastructure 462 00:25:19,840 --> 00:25:22,480 Speaker 1: package and you think that it's not going to be immigrants, 463 00:25:22,520 --> 00:25:24,119 Speaker 1: they're going to build this thing and we're trying to 464 00:25:24,119 --> 00:25:27,200 Speaker 1: stop it. We're not repeating history in the good way, 465 00:25:27,320 --> 00:25:29,920 Speaker 1: we're creating our own and that's a negative for the 466 00:25:30,359 --> 00:25:32,320 Speaker 1: country in the economy. I think we have a real 467 00:25:32,320 --> 00:25:35,119 Speaker 1: problem there, Tom, I want to go big picture for 468 00:25:35,160 --> 00:25:38,160 Speaker 1: a moment again and talk about some of the intangibles, 469 00:25:38,200 --> 00:25:41,800 Speaker 1: things that you can't really quantify, things like paistically for example, 470 00:25:42,119 --> 00:25:45,440 Speaker 1: or maternity lead or things like that. How do you 471 00:25:45,840 --> 00:25:51,080 Speaker 1: like factor that in to your job's view? Well, I 472 00:25:51,080 --> 00:25:53,440 Speaker 1: think when you you know there's a certain we're always 473 00:25:53,440 --> 00:25:57,480 Speaker 1: going to have population and reproduction, right, You're always going 474 00:25:57,560 --> 00:26:01,600 Speaker 1: to have maternity leads and and sometimes paternity leave and 475 00:26:01,920 --> 00:26:07,320 Speaker 1: different things along those lines. The challenges is do not 476 00:26:07,400 --> 00:26:10,359 Speaker 1: always do people want to re enter the workforce after 477 00:26:10,440 --> 00:26:13,800 Speaker 1: having a baby. The question is do families want to 478 00:26:13,920 --> 00:26:17,680 Speaker 1: have somebody else raising their children? And that is a 479 00:26:17,720 --> 00:26:20,919 Speaker 1: social issue, not an economics or a job issue. And 480 00:26:20,960 --> 00:26:23,920 Speaker 1: people always want to focus on that because, oh, what's 481 00:26:23,920 --> 00:26:26,719 Speaker 1: the maternity leave. But the real answer is does the 482 00:26:26,760 --> 00:26:31,479 Speaker 1: family want the mom or the dad to re enter 483 00:26:31,560 --> 00:26:34,479 Speaker 1: the workforce at a full time capacity? And that's not 484 00:26:34,480 --> 00:26:37,359 Speaker 1: always the case, but that's get skipped over to say, well, 485 00:26:37,400 --> 00:26:39,840 Speaker 1: we need to have better leave. But the real question 486 00:26:40,000 --> 00:26:42,760 Speaker 1: is do people want that in a perfect world? Not 487 00:26:42,920 --> 00:26:45,480 Speaker 1: everybody wants to come back and work after having a baby, 488 00:26:45,760 --> 00:26:48,280 Speaker 1: and we've got to realize for society that sometimes you 489 00:26:48,680 --> 00:26:51,159 Speaker 1: do it because you need the money, and sometimes you 490 00:26:51,240 --> 00:26:54,119 Speaker 1: do it because you want the career growth. And we 491 00:26:54,200 --> 00:26:56,320 Speaker 1: just have this. We're in this infection point as a 492 00:26:56,400 --> 00:26:59,960 Speaker 1: society that some people think careers and work and satisfaction 493 00:27:00,080 --> 00:27:03,439 Speaker 1: from that are negative and bad. And I don't agree 494 00:27:03,480 --> 00:27:05,560 Speaker 1: on that. I'm not signing up for that philosophy. Do 495 00:27:05,640 --> 00:27:07,680 Speaker 1: you guys know from having me on every month? Is 496 00:27:07,720 --> 00:27:11,240 Speaker 1: that work work and the sense of accomplishment that we 497 00:27:11,359 --> 00:27:15,760 Speaker 1: get as human beings if you enjoy what you do, yep. 498 00:27:15,880 --> 00:27:18,680 Speaker 1: Helps drive the human spirit and makes the family life 499 00:27:18,680 --> 00:27:21,679 Speaker 1: that much better. All right, always a broad view of 500 00:27:21,680 --> 00:27:24,320 Speaker 1: the labor market. We always appreciate that. Tom Gibble, he's 501 00:27:24,320 --> 00:27:29,720 Speaker 1: a founder and CEO of less Out Network. All right, 502 00:27:29,800 --> 00:27:32,160 Speaker 1: let's talk about rates here. What is this Federal Reserve 503 00:27:32,320 --> 00:27:35,880 Speaker 1: gonna do here? We had a big, big jobs print 504 00:27:35,960 --> 00:27:38,920 Speaker 1: here today we're waiting on CPI. The question is twenty 505 00:27:38,960 --> 00:27:41,440 Speaker 1: five basis points fifty basis points do they cut at 506 00:27:41,440 --> 00:27:43,920 Speaker 1: some point in twenty twenty three? Let's check in with 507 00:27:43,960 --> 00:27:46,560 Speaker 1: pre A Misra Managing director and global head of rate 508 00:27:46,640 --> 00:27:49,840 Speaker 1: strategy at TV Security. She's got an opinion. So we 509 00:27:49,840 --> 00:27:53,320 Speaker 1: saw the good jobs print today. Any takeaway for you 510 00:27:53,400 --> 00:27:57,800 Speaker 1: as to how it may impact this Federal Reserve che So, 511 00:27:58,000 --> 00:28:01,080 Speaker 1: I think the jobs market strong. I mean, wages came 512 00:28:01,119 --> 00:28:03,680 Speaker 1: in a little weaker than expected, but a three hundred 513 00:28:04,080 --> 00:28:07,359 Speaker 1: eleven thousand number after the five hundred so that we 514 00:28:07,400 --> 00:28:09,720 Speaker 1: had last month, it's telling you that the labor market strong. 515 00:28:09,800 --> 00:28:12,760 Speaker 1: It's tight. Even the wages were a little bit weaker. 516 00:28:12,880 --> 00:28:15,160 Speaker 1: You know, the year over year wages are running high. 517 00:28:15,280 --> 00:28:17,320 Speaker 1: So I think the labor market strong. And what that 518 00:28:17,359 --> 00:28:19,920 Speaker 1: tells me is that the Fed is going to keep hiking. Now. 519 00:28:19,960 --> 00:28:23,359 Speaker 1: Chapaul earlier this week brought up the idea of going 520 00:28:23,760 --> 00:28:27,200 Speaker 1: high at a fastest clip. I don't know if this report, 521 00:28:28,440 --> 00:28:30,760 Speaker 1: you know, pushes them to hike fifty I think we're 522 00:28:30,760 --> 00:28:33,680 Speaker 1: waiting for CPI for that, but I think hiking to 523 00:28:33,840 --> 00:28:37,480 Speaker 1: a five fifty five seventy five, I think that is 524 00:28:37,520 --> 00:28:39,280 Speaker 1: our base case that they're going to have to keep 525 00:28:39,360 --> 00:28:42,240 Speaker 1: hiking because it's hard to see inflation get back to 526 00:28:42,280 --> 00:28:45,120 Speaker 1: two percent with the labor market as tight as it 527 00:28:45,640 --> 00:28:48,880 Speaker 1: is running currently. Preol let's talk about the trade here 528 00:28:48,920 --> 00:28:51,120 Speaker 1: I felt like earlier in the week the trade jure 529 00:28:51,400 --> 00:28:53,760 Speaker 1: was flatteners, and you saw that inversion in the two 530 00:28:53,880 --> 00:28:57,280 Speaker 1: tens gets I think negative one ten at one point. 531 00:28:57,320 --> 00:29:01,160 Speaker 1: That quickly turned around as we stars kind of repricing 532 00:29:01,200 --> 00:29:04,240 Speaker 1: for fifty verses twenty five? What does that mean for 533 00:29:04,360 --> 00:29:07,280 Speaker 1: the ten year yield three seventy three? On that note, 534 00:29:07,600 --> 00:29:11,800 Speaker 1: do we get sustainable above four? I don't. I mean, 535 00:29:11,840 --> 00:29:14,440 Speaker 1: I can we get there, and we did last week 536 00:29:15,280 --> 00:29:17,520 Speaker 1: in a short period of time, knee jerk. Can we 537 00:29:17,560 --> 00:29:20,320 Speaker 1: get above four? Wee can? But I think it's I 538 00:29:20,360 --> 00:29:23,280 Speaker 1: think treasuries are cheap. Anything above three seventy fives away 539 00:29:23,360 --> 00:29:26,600 Speaker 1: right at that level I think is not going to 540 00:29:26,640 --> 00:29:30,320 Speaker 1: be sustained. Because the stronger the economy is today, I 541 00:29:30,360 --> 00:29:33,320 Speaker 1: think the FED has to keep rates or take rates 542 00:29:33,320 --> 00:29:35,800 Speaker 1: to more restrictive levels and then keep it there for longer. 543 00:29:36,160 --> 00:29:38,640 Speaker 1: The greater the odds are of a hard landing, and 544 00:29:38,720 --> 00:29:40,920 Speaker 1: the ten years should be pricing in you know, a 545 00:29:40,960 --> 00:29:43,320 Speaker 1: longer term view. And if we have a hard landing 546 00:29:43,360 --> 00:29:46,240 Speaker 1: next year, the Fed's cutting rates, I think a ten 547 00:29:46,320 --> 00:29:48,440 Speaker 1: year close to four percents going to look very cheap. 548 00:29:48,600 --> 00:29:51,800 Speaker 1: So I don't think we should sustain close to four 549 00:29:51,840 --> 00:29:54,440 Speaker 1: percent ten year rates. I mean, even if they go 550 00:29:54,720 --> 00:29:57,960 Speaker 1: fifty or they go twenty five, I think as long 551 00:29:58,000 --> 00:30:01,760 Speaker 1: as the FED is on the path of, you know, 552 00:30:01,800 --> 00:30:04,920 Speaker 1: continuing to hike, I know, people tend just want to 553 00:30:04,920 --> 00:30:06,640 Speaker 1: stay away from bonds at that point. I think that's 554 00:30:06,680 --> 00:30:09,480 Speaker 1: when you're supposed to be buying further out the curve 555 00:30:09,560 --> 00:30:13,880 Speaker 1: bonds because you're protecting against recession risks. Per what's the 556 00:30:13,960 --> 00:30:15,840 Speaker 1: thinking about. I mean, there's there's a school thought out 557 00:30:15,840 --> 00:30:18,640 Speaker 1: there that says the FED either has gone too far 558 00:30:18,840 --> 00:30:21,720 Speaker 1: or runs the risk of going too far. That, in fact, 559 00:30:22,080 --> 00:30:24,680 Speaker 1: given that seventy percent of the US economy service based, 560 00:30:25,320 --> 00:30:28,560 Speaker 1: raising indust rates really doesn't affect you know, the price 561 00:30:28,560 --> 00:30:32,360 Speaker 1: of food that much, for example, how do you think 562 00:30:32,360 --> 00:30:34,240 Speaker 1: about that? Is that does the FED in fact run 563 00:30:34,240 --> 00:30:38,440 Speaker 1: the risk of going too far? I think they're already restrictive, 564 00:30:38,760 --> 00:30:41,640 Speaker 1: and they're not ending right now, so I think they're 565 00:30:41,640 --> 00:30:44,080 Speaker 1: going to take rates even more restrictive. I hear your 566 00:30:44,120 --> 00:30:46,960 Speaker 1: point that they can't move lots of prices, but they 567 00:30:47,000 --> 00:30:50,280 Speaker 1: can and they will slow the economy. The you know, 568 00:30:50,320 --> 00:30:53,960 Speaker 1: the inflation is a very broad based metric right now, 569 00:30:54,200 --> 00:30:57,080 Speaker 1: across the board, there's rise in prices. So how the 570 00:30:57,120 --> 00:31:00,000 Speaker 1: FED is going to have to bring inflation down, especially 571 00:31:00,000 --> 00:31:01,920 Speaker 1: because it can't control a lot of the other parts 572 00:31:01,920 --> 00:31:04,760 Speaker 1: of inflation, would be to slow the labor market down. 573 00:31:05,200 --> 00:31:08,120 Speaker 1: I think it's the intended consequence of FED tightening is 574 00:31:08,160 --> 00:31:12,840 Speaker 1: to tighten financial conditions, weaken the economy, impact consumer spending, 575 00:31:12,880 --> 00:31:16,479 Speaker 1: and then those inflation numbers start to come down. I 576 00:31:16,560 --> 00:31:18,840 Speaker 1: keep being told why interest rates don't matter anymore, or 577 00:31:18,880 --> 00:31:21,000 Speaker 1: they matter. They matter to some parts of the economy 578 00:31:21,000 --> 00:31:23,600 Speaker 1: a lot more than others, and so we're seeing the 579 00:31:23,600 --> 00:31:27,080 Speaker 1: intersensitive sectors slow down. I think with enough of time, 580 00:31:27,320 --> 00:31:30,040 Speaker 1: the economy I think needs time, not more hikes, but 581 00:31:30,160 --> 00:31:32,959 Speaker 1: we're going to get more hikes from the FED. I 582 00:31:33,000 --> 00:31:35,560 Speaker 1: think later this year you'll see a more broad based 583 00:31:35,640 --> 00:31:40,280 Speaker 1: impact of these rate increases across across the economy. Are 584 00:31:40,440 --> 00:31:44,840 Speaker 1: cuts a twenty twenty three story or twenty twenty four story. 585 00:31:45,240 --> 00:31:47,240 Speaker 1: You know, Cuts is going to be really tricky because 586 00:31:47,240 --> 00:31:51,400 Speaker 1: it needs inflation some way close to three percent. I mean, 587 00:31:51,440 --> 00:31:53,360 Speaker 1: I know the FED says two percent is their target, 588 00:31:53,440 --> 00:31:56,360 Speaker 1: but I think if inflation gets closer to three they 589 00:31:56,360 --> 00:31:59,120 Speaker 1: can somewhat take a victory lab But it also needs 590 00:31:59,160 --> 00:32:03,080 Speaker 1: the unemployment. I think closer to five. So for your 591 00:32:03,160 --> 00:32:06,120 Speaker 1: question for twenty three, you have to have a huge 592 00:32:06,160 --> 00:32:09,200 Speaker 1: increase in the unemployment rate for cuts to be in 593 00:32:09,320 --> 00:32:13,400 Speaker 1: the Fed's thinking. So we're in the twenty four rate cuts. 594 00:32:13,440 --> 00:32:15,480 Speaker 1: In fact, we have the first rate cut only in 595 00:32:15,560 --> 00:32:17,600 Speaker 1: March of twenty four, but then we have very aggressive 596 00:32:17,680 --> 00:32:20,360 Speaker 1: rate cuts because once the unemployment rate is closed to four, 597 00:32:20,680 --> 00:32:22,560 Speaker 1: I think the Fed won't be shy. They'll be cutting 598 00:32:22,600 --> 00:32:26,000 Speaker 1: at fifty, cutting quickly to try and bring some accommodation 599 00:32:26,040 --> 00:32:29,960 Speaker 1: into the into the market. On the CPI print, we're 600 00:32:30,000 --> 00:32:33,040 Speaker 1: expecting on Tuesday the consensus on a month to month 601 00:32:33,080 --> 00:32:35,480 Speaker 1: growth of zero point four percent. It's a little bit 602 00:32:35,560 --> 00:32:38,160 Speaker 1: lower than the prior month zero point five percent. What 603 00:32:38,480 --> 00:32:42,280 Speaker 1: are you guys looking for at your shop? We're actually 604 00:32:42,280 --> 00:32:45,280 Speaker 1: looking for point five because some of the goods inflation 605 00:32:45,360 --> 00:32:48,600 Speaker 1: related decline seems to be reversing, especially with used car 606 00:32:48,720 --> 00:32:51,440 Speaker 1: prices and some of the other things like shelter cost 607 00:32:51,480 --> 00:32:54,160 Speaker 1: services at shelter all that is staying strong. So we 608 00:32:54,280 --> 00:32:57,200 Speaker 1: have a point five which is why I think that 609 00:32:57,280 --> 00:32:59,840 Speaker 1: fifty basis point hike in March is very much alive, 610 00:33:00,040 --> 00:33:02,200 Speaker 1: because point five is going to be a much stronger 611 00:33:02,360 --> 00:33:04,760 Speaker 1: same pace as last month. I think there's going to 612 00:33:04,800 --> 00:33:07,959 Speaker 1: be a big debate at the FED whether they move fifty. Now, 613 00:33:07,960 --> 00:33:09,880 Speaker 1: what about the two year ye old? Prea, how high 614 00:33:10,120 --> 00:33:13,600 Speaker 1: or low do we go on the two year? Yeah, 615 00:33:13,600 --> 00:33:17,400 Speaker 1: I think the two year is close to capping out 616 00:33:17,440 --> 00:33:20,720 Speaker 1: around five percent. But you know, the risk is not 617 00:33:20,760 --> 00:33:22,760 Speaker 1: a risk reward is not great in the front end 618 00:33:22,840 --> 00:33:25,440 Speaker 1: because if you get a point five on CPI actually 619 00:33:25,480 --> 00:33:28,040 Speaker 1: our foecast, you see the labor market strong and some 620 00:33:28,080 --> 00:33:31,600 Speaker 1: of the financial contagient fears slow down. The FED can 621 00:33:31,720 --> 00:33:34,560 Speaker 1: keep hiking and can push out the market, can push 622 00:33:34,600 --> 00:33:37,520 Speaker 1: out the timing of cuts, so the two year can 623 00:33:37,600 --> 00:33:39,840 Speaker 1: sell off more than that five percent. That's why I 624 00:33:39,840 --> 00:33:42,320 Speaker 1: prefer being further out the curve. I think risk reward 625 00:33:42,440 --> 00:33:45,240 Speaker 1: is better because I don't see a breakup of four 626 00:33:45,320 --> 00:33:48,560 Speaker 1: really sustained bases, but a breakup of five on twos 627 00:33:48,680 --> 00:33:52,200 Speaker 1: is possible if the you know, the data is strong, 628 00:33:52,200 --> 00:33:54,520 Speaker 1: because this FED is very data dependent. Yes, it is 629 00:33:54,640 --> 00:33:58,720 Speaker 1: all right, We really appreciate your time. Prea Misra, Managing 630 00:33:58,720 --> 00:34:02,360 Speaker 1: director and global head of Strategy at TD Securities. Before that, 631 00:34:02,440 --> 00:34:05,160 Speaker 1: she was doing this rates things at Bank of America 632 00:34:05,240 --> 00:34:07,800 Speaker 1: Merrill Lynch and then before that Lehman Brothers. So lots 633 00:34:07,920 --> 00:34:11,000 Speaker 1: of experience looking at the rates, looking at the FED, 634 00:34:11,040 --> 00:34:13,200 Speaker 1: and again, as Preas said, this is a FED that 635 00:34:13,320 --> 00:34:16,040 Speaker 1: is data dependent, and we've got a lot of data 636 00:34:16,080 --> 00:34:21,799 Speaker 1: for this Federal Reserve to parse. Markets been kind of 637 00:34:21,800 --> 00:34:25,600 Speaker 1: all over the place here today trying to digest economic data. 638 00:34:25,640 --> 00:34:29,440 Speaker 1: And the better than expected non farm payrolls came in 639 00:34:29,680 --> 00:34:32,279 Speaker 1: pretty strong. And then on the other side, he got 640 00:34:32,280 --> 00:34:34,800 Speaker 1: a bank, the sixteenth largest bank in the United States 641 00:34:34,800 --> 00:34:38,120 Speaker 1: by assets, it's now gone under. You know that does 642 00:34:38,200 --> 00:34:40,319 Speaker 1: not happen every day, So investors are trying to put 643 00:34:40,360 --> 00:34:43,000 Speaker 1: all that together. We want to check in with a professional, 644 00:34:43,040 --> 00:34:45,320 Speaker 1: and to do that we check in with Chance finukan 645 00:34:45,640 --> 00:34:49,000 Speaker 1: CIO and partner at Oxbow Advisors. So Chance, kind of 646 00:34:49,000 --> 00:34:52,160 Speaker 1: a wild day today with lots of information for investors 647 00:34:52,200 --> 00:34:56,759 Speaker 1: to kind of parse. What's your takeaway here, You're right, 648 00:34:56,800 --> 00:34:58,920 Speaker 1: this has been a wild day or a wild couple 649 00:34:58,920 --> 00:35:01,480 Speaker 1: of days. I think the couple of things that we 650 00:35:01,560 --> 00:35:05,719 Speaker 1: look at, first off, the payrolls report, I think that's enough, 651 00:35:05,800 --> 00:35:08,239 Speaker 1: even though it's a bit mixed between the payrolls being 652 00:35:08,280 --> 00:35:10,680 Speaker 1: higher than expected for the tenth straight months while the 653 00:35:10,760 --> 00:35:13,960 Speaker 1: unemployment rate rising was a negative and wage growth being 654 00:35:13,960 --> 00:35:16,480 Speaker 1: a bit lower than expected. We think the federal still 655 00:35:16,520 --> 00:35:19,000 Speaker 1: focus on the positive parts of that report so they 656 00:35:19,000 --> 00:35:21,319 Speaker 1: can continue to raise rates, which is going to be 657 00:35:21,360 --> 00:35:24,920 Speaker 1: a more difficult environment for financial assets. But on the 658 00:35:24,960 --> 00:35:29,720 Speaker 1: point of the SMVP financial going into receivership, what really 659 00:35:29,719 --> 00:35:31,520 Speaker 1: stuck out to us is we think this is going 660 00:35:31,560 --> 00:35:35,080 Speaker 1: to cause banks to tighten lending standards even further than 661 00:35:35,120 --> 00:35:39,160 Speaker 1: they already have. In January, banks forty five percent of 662 00:35:39,200 --> 00:35:42,560 Speaker 1: banks reported that they were tightening lending standards to large 663 00:35:42,560 --> 00:35:46,080 Speaker 1: and mid market businesses. And historically going back decades, when 664 00:35:46,120 --> 00:35:49,239 Speaker 1: you see a percentage that high, you're either in a 665 00:35:49,320 --> 00:35:52,600 Speaker 1: recession or heading into a recession. And if they're going 666 00:35:52,640 --> 00:35:55,160 Speaker 1: to tighten standards even further to try and get their 667 00:35:55,480 --> 00:35:58,680 Speaker 1: houses in order, that's going to slow down economic growth 668 00:35:58,760 --> 00:36:01,080 Speaker 1: even further and make it harder for us to try 669 00:36:01,080 --> 00:36:03,680 Speaker 1: and turn things around as an economy. Because you know, 670 00:36:03,719 --> 00:36:05,719 Speaker 1: it's interesting when you look at or when I look 671 00:36:05,719 --> 00:36:09,680 Speaker 1: at least SVB, I just see a concentration risk that 672 00:36:10,080 --> 00:36:12,279 Speaker 1: had to be number one on the risk factor for 673 00:36:12,400 --> 00:36:15,560 Speaker 1: any investor creditor there, and it in fact came home 674 00:36:15,600 --> 00:36:20,719 Speaker 1: to roost. I'm not sure. If it's anything more than that, yeah, 675 00:36:20,760 --> 00:36:23,400 Speaker 1: we'd agree. We don't think this is a systemic risk. 676 00:36:24,360 --> 00:36:26,640 Speaker 1: That was something that they clearly if you looked across 677 00:36:26,680 --> 00:36:29,359 Speaker 1: the top two dozen banks in the country, they had 678 00:36:29,400 --> 00:36:32,520 Speaker 1: the most risk. And really, when you look at a 679 00:36:32,560 --> 00:36:35,440 Speaker 1: bank when they're adding deposits at the rate that SVB, 680 00:36:36,040 --> 00:36:39,040 Speaker 1: their deposit based tripled in two years from twenty twenty 681 00:36:39,040 --> 00:36:41,520 Speaker 1: to twenty twenty two, and then they had to put 682 00:36:41,560 --> 00:36:46,239 Speaker 1: all of that deposits into mortgage backed securities and things 683 00:36:46,239 --> 00:36:48,920 Speaker 1: that have really fallen off. They just were in a 684 00:36:49,000 --> 00:36:51,279 Speaker 1: very difficult spot and did not handle it well. We 685 00:36:51,320 --> 00:36:53,960 Speaker 1: don't think other banks are in as bad as shape, 686 00:36:54,040 --> 00:36:56,600 Speaker 1: but I think it is going to cause other banks 687 00:36:56,640 --> 00:36:59,000 Speaker 1: CEOs to be more cautious and just make sure that 688 00:36:59,080 --> 00:37:01,319 Speaker 1: they don't have the same risk. And the one thing 689 00:37:01,360 --> 00:37:05,080 Speaker 1: they are fighting is we are seeing with large banks 690 00:37:05,440 --> 00:37:07,640 Speaker 1: that deposits has started to come down a little bit 691 00:37:07,719 --> 00:37:10,960 Speaker 1: in recent quarters, and they're going to have to continue 692 00:37:10,960 --> 00:37:13,160 Speaker 1: to raise the rates they're willing to pay customers on 693 00:37:13,200 --> 00:37:16,160 Speaker 1: those deposits, which is going to cause further compression in 694 00:37:16,200 --> 00:37:18,719 Speaker 1: their net interest margins, and then they're gonna have to 695 00:37:18,800 --> 00:37:21,319 Speaker 1: really try and manage their books with those securities they 696 00:37:21,320 --> 00:37:24,480 Speaker 1: own that are sitting on losses that they haven't had 697 00:37:24,520 --> 00:37:27,279 Speaker 1: to recognize yet in the market. But it's just going 698 00:37:27,320 --> 00:37:28,920 Speaker 1: to make it a difficult time for them to get 699 00:37:28,960 --> 00:37:31,560 Speaker 1: through this period and chance, I guess, just you know, 700 00:37:31,840 --> 00:37:34,640 Speaker 1: twenty twenty two was brutal for equity investors. For fixed 701 00:37:34,680 --> 00:37:37,799 Speaker 1: income investors, there's no getting around that. Twenty twenty three 702 00:37:37,840 --> 00:37:40,960 Speaker 1: it's kind of an up and down. Good January, bad February. 703 00:37:41,040 --> 00:37:42,840 Speaker 1: So far in March kind of treading water a little bit. 704 00:37:42,880 --> 00:37:47,000 Speaker 1: I mean, how do you think about putting money to 705 00:37:47,120 --> 00:37:52,319 Speaker 1: work in this market? The first thing we noticed with 706 00:37:52,440 --> 00:37:55,840 Speaker 1: how strong the market opened in January this year for stocks, 707 00:37:56,160 --> 00:37:58,640 Speaker 1: we didn't anticipate this, but you take the opportunities that 708 00:37:58,680 --> 00:38:01,279 Speaker 1: the market gives you. We actually shifted more of our 709 00:38:01,320 --> 00:38:05,680 Speaker 1: portfolio for our clients equity portfolios into defensive sectors like 710 00:38:05,760 --> 00:38:09,120 Speaker 1: healthcare or gold royalty businesses, and we're starting to see 711 00:38:09,160 --> 00:38:12,200 Speaker 1: consumer staples pulled back a little bit there. We actually 712 00:38:12,200 --> 00:38:14,880 Speaker 1: shifted more into that, which is good to have a 713 00:38:14,880 --> 00:38:18,600 Speaker 1: little bit more consistent cash flow businesses with great balance 714 00:38:18,600 --> 00:38:21,440 Speaker 1: sheets on days like today and yesterday. So we think 715 00:38:21,480 --> 00:38:23,440 Speaker 1: that's been the place in the equity market that we've 716 00:38:23,520 --> 00:38:25,520 Speaker 1: kind of just been trying to make sure we retain 717 00:38:25,600 --> 00:38:28,919 Speaker 1: some balance in the portfolios. But then more broadly, we're 718 00:38:29,000 --> 00:38:32,160 Speaker 1: seeing a lot more opportunities for income investors that we're 719 00:38:32,160 --> 00:38:35,200 Speaker 1: not there in recent years, where you've got short term 720 00:38:35,200 --> 00:38:38,320 Speaker 1: treasuries were yielding up to five percent, and then you 721 00:38:38,520 --> 00:38:42,720 Speaker 1: actually have some other investment grade securities, whether it's preferred 722 00:38:42,719 --> 00:38:46,760 Speaker 1: stocks or reats or MLPs, and even a few common 723 00:38:46,800 --> 00:38:50,239 Speaker 1: stocks that are yielding six or seven percent, And as 724 00:38:50,280 --> 00:38:52,640 Speaker 1: inflation continues to come down a little bit over the 725 00:38:52,640 --> 00:38:55,800 Speaker 1: course of the next few months, we think that'll actually 726 00:38:55,840 --> 00:38:58,840 Speaker 1: be a decent way to maintain purchasing power while you 727 00:38:58,920 --> 00:39:02,000 Speaker 1: wait to see what happens here with the equity market 728 00:39:02,040 --> 00:39:04,320 Speaker 1: and if some better opportunities pop up in the future. 729 00:39:05,160 --> 00:39:07,719 Speaker 1: So you know, on the equity front here, I mean, 730 00:39:08,560 --> 00:39:10,600 Speaker 1: one of the areas that had such a great run 731 00:39:10,800 --> 00:39:13,040 Speaker 1: last year was energy, and I'm looking at W T 732 00:39:13,160 --> 00:39:15,319 Speaker 1: I COUD oil here it's still seventy six seventy seven 733 00:39:15,320 --> 00:39:17,600 Speaker 1: dollars a barrow kind of where it's been. Has that 734 00:39:17,680 --> 00:39:20,160 Speaker 1: trade been played out or is there more room to 735 00:39:20,200 --> 00:39:24,880 Speaker 1: grow on energy. We pulled back on our energy position 736 00:39:25,360 --> 00:39:28,400 Speaker 1: last year and are really just only invested in a 737 00:39:28,440 --> 00:39:32,000 Speaker 1: few of the pipeline businesses where their cash flows are 738 00:39:32,040 --> 00:39:35,479 Speaker 1: not dictated by the fluctuation in the oil price. So 739 00:39:35,760 --> 00:39:37,960 Speaker 1: that's a better place to be with an energy right now, 740 00:39:38,600 --> 00:39:41,839 Speaker 1: we think that the problem they have is their year 741 00:39:41,880 --> 00:39:44,800 Speaker 1: over year comparisons. You're going to see their cash flows 742 00:39:44,840 --> 00:39:48,160 Speaker 1: come down from the middle of last year, and especially 743 00:39:48,239 --> 00:39:51,120 Speaker 1: with their cost inflation increasing. You saw that with the 744 00:39:51,200 --> 00:39:55,239 Speaker 1: Devon Energy report last month that the cost of labor, materials, 745 00:39:55,520 --> 00:39:59,080 Speaker 1: everything's just shooting higher if you're an EMP company, and 746 00:39:59,239 --> 00:40:02,440 Speaker 1: we think that lead to some further deterioration and energy 747 00:40:02,480 --> 00:40:06,759 Speaker 1: prices just for cyclical reasons. We think investors have been 748 00:40:06,760 --> 00:40:09,799 Speaker 1: trying to stay invested in the energy sector because they 749 00:40:09,880 --> 00:40:14,520 Speaker 1: see the structural opportunity because there's just not enough drilling 750 00:40:14,600 --> 00:40:17,320 Speaker 1: right now to bring new resources out of the ground, 751 00:40:17,680 --> 00:40:20,760 Speaker 1: and that could lead to a recovery in the oil price. 752 00:40:21,120 --> 00:40:24,040 Speaker 1: But right now we think the economic slowdown is a 753 00:40:24,080 --> 00:40:27,360 Speaker 1: bigger factor, and so we're maintaining some caution and just 754 00:40:27,440 --> 00:40:30,560 Speaker 1: waiting for a better entry point. So one of the 755 00:40:30,719 --> 00:40:33,600 Speaker 1: sectors that has just been the leader, the leader of 756 00:40:33,600 --> 00:40:36,080 Speaker 1: this market for a decade plus has been technology. But 757 00:40:36,840 --> 00:40:39,000 Speaker 1: you know, how do you think tech performs in a 758 00:40:39,080 --> 00:40:41,240 Speaker 1: high interest rate environment? It really was a tough slog 759 00:40:41,280 --> 00:40:45,520 Speaker 1: in twenty twenty two, it was, and especially for some 760 00:40:45,600 --> 00:40:49,319 Speaker 1: of those very high multiple like a high price to 761 00:40:49,320 --> 00:40:52,480 Speaker 1: earnings ratio stocks or stocks that had no earnings. It 762 00:40:52,520 --> 00:40:54,799 Speaker 1: was a really terrible year in twenty twenty two, just 763 00:40:54,920 --> 00:40:57,960 Speaker 1: with interest rates rising and everyone wanted to start seeing 764 00:40:58,000 --> 00:41:01,640 Speaker 1: free cash flow generated sooner rather than and later. Our 765 00:41:01,680 --> 00:41:04,080 Speaker 1: advice would be a really focus on the companies that 766 00:41:04,160 --> 00:41:07,719 Speaker 1: have high profit margins and great balance sheets. So some 767 00:41:07,840 --> 00:41:11,279 Speaker 1: of the more mature tech businesses that you think can 768 00:41:11,320 --> 00:41:14,640 Speaker 1: continue to generate consistent cash flow through this period. You 769 00:41:14,719 --> 00:41:17,359 Speaker 1: know they'll be able to manage through things. Okay, wait 770 00:41:17,400 --> 00:41:20,080 Speaker 1: for those types of businesses and buy them evaluations you 771 00:41:20,120 --> 00:41:23,560 Speaker 1: think are attractive. We wouldn't advise trying to catch any 772 00:41:23,600 --> 00:41:26,200 Speaker 1: of these newer tech companies that still don't have any 773 00:41:26,200 --> 00:41:28,960 Speaker 1: profits to report. All right, Chance, thanks so much for 774 00:41:29,080 --> 00:41:32,839 Speaker 1: joining us. Always appreciate getting your perspective. Chance Finukan, he's 775 00:41:32,880 --> 00:41:36,520 Speaker 1: a CIO and a partner in Oxbow Advisors, giving us 776 00:41:36,520 --> 00:41:39,080 Speaker 1: his thoughts on these markets. Thanks for listening to the 777 00:41:39,120 --> 00:41:43,040 Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews 778 00:41:43,040 --> 00:41:47,359 Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm 779 00:41:47,360 --> 00:41:50,920 Speaker 1: Matt Miller. I'm on Twitter at Matt Miller nineteen seventy 780 00:41:50,920 --> 00:41:54,040 Speaker 1: three and on false Swhee, I'm on Twitter at pt Sweeney. 781 00:41:54,080 --> 00:41:56,759 Speaker 1: Before the podcast, you can always catch us worldwide at 782 00:41:56,800 --> 00:41:57,560 Speaker 1: Bloomberg Radio