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Speaker 2: Say the action here is not in a stock market today.
Speaker 2: It's in bitcoin up seven point eight four hundred, almost
Speaker 2: forty five hundred dollars higher. For now it's sixty one
Speaker 2: thousand and ninety. What is going on there? I have
Speaker 2: no idea, but I know somebody who does. That's Mike mcloan.
Speaker 2: He's a senior commodity strategist for Bloomberg Intelligence. He joins
Speaker 2: is on Zoom from our Miami BI outpost down there
Speaker 2: in South Beach. Mike, you've been on this thing since
Speaker 2: day one, consistent from day one. You know, fixed supply,
Speaker 2: presumably ever increasing use cases which will drive demand and
Speaker 2: that's all you need. So is that still the case here?
Speaker 3: It's certainly the case. So I appreciate you saying consistent,
Speaker 3: because I haven't been that consistent. I was quite concerned
Speaker 3: that it was getting a little too speculatively excessive around
Speaker 3: the launch all of the ETFs in the beginning of
Speaker 3: the year, but it's still the case. In April, we'll
Speaker 3: have The having is when you cut the supply right
Speaker 3: now you can only mind nine hundred bit coins a day,
Speaker 3: it'll drop to four hundred and fifty. That's every four years,
Speaker 3: so it'll cut the supply. And we have obviously from
Speaker 3: ETF flows just in the last week this week a
Speaker 3: loan one billion of in flows since ETF's have been launched,
Speaker 3: a total of about seven billion. Yeah, Eric Belchun has
Speaker 3: been all but that's it, and I'm glad you mentioned
Speaker 3: so there's a key. But the thing that really struck
Speaker 3: me is that the ETF conference, the big one they
Speaker 3: have in Miami every year.
Speaker 2: So that wasn't the one in Cleveland in February. This
Speaker 2: is one in Miami. If okay, right, no hurry to
Speaker 2: go to Cleveland February.
Speaker 3: But so Eric was moderated, a panel in the room
Speaker 3: was packed, So I went to another presentation room at
Speaker 3: the same time where actually bigger and no one was
Speaker 3: no one really cared what they were presenting on. So everybody,
Speaker 3: all these professional money managers were really looking at watching
Speaker 3: bitcoin and want to learn about bitcoin.
Speaker 1: ETFs.
Speaker 4: Wait, can you just break down this whole having thing.
Speaker 4: I don't understand how that's okay to do that.
Speaker 3: You got, Hello, it's it's in the code. I have
Speaker 3: a son who's a programmer, I asked. Thembuddy says, no,
Speaker 3: it's the code dead. It's just by by by code.
Speaker 3: Every four years the supply gets cut in half. So
Speaker 3: right now all the miners in the world will only
Speaker 3: be going to creating nine hundred coins a day, and
Speaker 3: then as of having it cut the four fifties, so
Speaker 3: it doesn't have that high price cure that you really
Speaker 3: see effect most commodities and why most commodities are in
Speaker 3: bear markets with exception of goal, but also on the
Speaker 3: supply side, it's just the way it set up. And
Speaker 3: as our colleague Zeke false roade out wrote, number go up. Well,
Speaker 3: that's bitcoin is designed to go up. But now it's
Speaker 3: becoming an alternative currency on a global basis, and the
Speaker 3: US is jumping in that frame. We also a key
Speaker 3: thing you have to look at it from a macroeconomic
Speaker 3: standpoint is China's kind of pushing back. Remember China's going
Speaker 3: for gold, the largest gold buyer in the world, and
Speaker 3: they were associated with this war and the US is
Speaker 3: just to prove ETFs and bitcoins. So you see where
Speaker 3: the world's going towards intangible assets and bitcoins the most
Speaker 3: significant in cryptos.
Speaker 2: So how do we let me go back to something
Speaker 2: really fundamental, How do we value this thing? How do
Speaker 2: we decide whether it's expensive or not? Is there any
Speaker 2: fundamental analysis here or is it just the it's a
Speaker 2: commodity and supplying demand, it'll go up and then you.
Speaker 4: Should buy it at some point. Yes, well I do.
Speaker 3: I do appreciate that pole Typically coming from an equity
Speaker 3: kind of person, that's a question often getting commodities. The
Speaker 3: one way you can value it is by watching the
Speaker 3: hash rate. That's just the amount of transactions and and
Speaker 3: and I guess you could say computer power in the
Speaker 3: space kind of looking at the voltage and things, and
Speaker 3: it's it's exponential, still rising rapidly. But one thing also
Speaker 3: like the tilt over to when people push back on
Speaker 3: this particular crypto, I mean, rememb there's thirty thousand wannabes.
Speaker 3: Is I like to say, when you go on any
Speaker 3: of the major crypto sites and you click on volume,
Speaker 3: the number one traded crypto is the dollar via tokens
Speaker 3: and then one and that is Tether basically trades double
Speaker 3: the volume of bitcoins, So I'd say bitcoin's the leading
Speaker 3: one is like gold in the space. But when people
Speaker 3: push back to the technology, I'm saying, it's really the
Speaker 3: whole world's gone for the space, and the base layer
Speaker 3: they've gone for is the dollar, not any other currency.
Speaker 4: That's actually quite interesting. What about ether though, for example,
Speaker 4: Like you mentioned tether, but ether I've read like ethere
Speaker 4: ETFs maybe coming too, and I'm wondering what the effect
Speaker 4: of that would be on the thesis that you have.
Speaker 3: Well, to answer your question, Alex, to me, it's a
Speaker 3: matter of time get ETFs to track a broad index
Speaker 3: in the space. So Bloomberg Intaligence first proposed the Bloomberg
Speaker 3: Galaxy Crypto index in twenty seventeen and we launched that
Speaker 3: in twenty eighteen, so that's what almost six years now.
Speaker 3: It's just a matter of time. But ethereum ether ETFs
Speaker 3: will come. It's a question of when the key that
Speaker 3: theorem has it, do you do have a yield in ethereum?
Speaker 3: And that's where most equity people come in and say, oh, well,
Speaker 3: I can do that and then cost. So it's part
Speaker 3: of it's the technology e theorem is really kind of
Speaker 3: making possible. What's happening in the space is NFTs might
Speaker 3: be speculative, but also coaching token's tokenization of most assets.
Speaker 3: As I mentioned, the dollar is the most widely traded crypto.
Speaker 2: All right, so let's let's back away. We got to
Speaker 2: let cryptos going higher. I get it in the commodity
Speaker 2: space that you look at, Mike, you look at everything,
Speaker 2: and we'll get the pork bellies later. That's that's my
Speaker 2: air of expertise. What do you like right now? What
Speaker 2: are you talking to clients about these days?
Speaker 1: Gold?
Speaker 3: I have to say, because that's what that's what really
Speaker 3: brought me into cryptos in the first place. And gold
Speaker 3: is the most enduring, outperforming commodity over time, particularly in
Speaker 3: times when you have maybe i'd say, in the back
Speaker 3: end of FED rate hikes, which we're heading towards easing
Speaker 3: and with China potentially declining. So right now gold is
Speaker 3: up about ten percent on a one year basis, and
Speaker 3: broad commodity and this they're down about ten percent. I
Speaker 3: think that's going to accelerate. The key thing I think
Speaker 3: that's been saying about gold forever now is you can't
Speaker 3: really hold gold anymore without some bitcoin in space and
Speaker 3: the mess you're willing to take a risk that the
Speaker 3: world is not going to continue advancing towards a digitalization.
Speaker 3: So I see gold going higher. And here's a key
Speaker 3: take is I think crude oil at seventy eight dollars
Speaker 3: a barrel WTI is more likely head towards fifty. And
Speaker 3: there's a good indication for that, and that's natural gas.
Speaker 3: US natural gas, the number one measure for heat, electricity
Speaker 3: and fertilizer, has dropped at least a monthly a couple
Speaker 3: of weeks ago. It dropped to the lowest price when
Speaker 3: it was first traded in futures in nineteen ninety.
Speaker 1: Wow.
Speaker 4: Yeah, it's pretty bad. But I mean there's reasons for
Speaker 4: that in terms of demand here in the US, which
Speaker 4: is different than say the broader look for oil. So
Speaker 4: why do you think we're going to go to fifty?
Speaker 4: I mean, there's no way that OPEC plus will be.
Speaker 5: Down with that.
Speaker 3: That's the problem. They don't control oil anymore, which just
Speaker 3: look at the facts. The excess of US and Canadian fuel,
Speaker 3: liquid fuel and crude oil supply over demand now is
Speaker 3: about six million barrels a day. And guess what OPEC's
Speaker 3: spare capacity is about six million barrels a day. So
Speaker 3: they're fighting a losing battle. But the key fact is
Speaker 3: if Crudell catches up to industrial metals, it kept us
Speaker 3: up to grains and corn and virtually all the other commodities,
Speaker 3: it will go to fifty dollars a barrel. So I
Speaker 3: look at the premium, the geopolitical premium. Right now, Crudell
Speaker 3: is about twenty bucks.
Speaker 4: Twenty buck really yeah, that's really interesting because the thesis
Speaker 4: out there, like the common thought on the street, is
Speaker 4: that there is no geopotical growth premium, or it's there,
Speaker 4: it's like a couple bucks. Because you've had the backsup
Speaker 4: of US supply that's kind of helped offset that. And
Speaker 4: because Russia is still doing their thing despite sanctions.
Speaker 3: Yes, I do appreciate that. And then it's oftentimes they
Speaker 3: ignore the other commodities. So number one natural gas, number
Speaker 3: two corn, number three copper, You look at all of them,
Speaker 3: they're all in pretty severe beer markets. And the laggard
Speaker 3: in this commodity bear market is crude oil at the moment.
Speaker 3: So I look at it to me, I just published.
Speaker 3: I think it's on a cliff's edge. And obviously I've
Speaker 3: been a bit early. If I was a trader, I
Speaker 3: would have been stopped out. But now the trend is
Speaker 3: clearly lower and you have to ask yourself what keeps
Speaker 3: it elevated? And I say, you have to have sustained
Speaker 3: deal political risk. But every day we turn around that
Speaker 3: these prices right are above the US average cost of production,
Speaker 3: which is around fifty five dollars a barrel. You just
Speaker 3: see more supplying coming on and demand is not really
Speaker 3: picking up. And here's a key fact that I can
Speaker 3: mentioned is diesel demand in this country is stagnated to
Speaker 3: about the same level as it was in twenty seventeen.
Speaker 3: That's virtually never happened without a recession, unlet a gas
Speaker 3: to manage declining paperboard demand is declining. So certainly from
Speaker 3: the largest economy standpoint, we have a problem. And then
Speaker 3: you look over at China, the number one importer. They
Speaker 3: are completely dependent on fiscal monetary stimulus for economic buoyancy
Speaker 3: at the moment. So the outlook for me for crude oils,
Speaker 3: I'll put phil kill on it. This year. Initially I
Speaker 3: said forty about two years ago, and I'm going to
Speaker 3: at least give it this year if it's going to
Speaker 3: make it.
Speaker 2: There, Phil and killing nice.
Speaker 4: Yeah.
Speaker 2: So when you get stopped out of a trade, did
Speaker 2: you put it right back on Mike back in the day.
Speaker 6: Well, I used to have hair and you can see
Speaker 6: on the YouTube, but no, it's it all depends a
Speaker 6: lot of times it was with my own money, with clients,
Speaker 6: or with institutional money.
Speaker 3: But that was the key thing that really struck me
Speaker 3: is I was way early. But now that's the advantage
Speaker 3: I have is being an X trader. I can see
Speaker 3: where I would have been stopped out, and as an analyst,
Speaker 3: I can point out the macro. But I think the
Speaker 3: key thing that people really missed last two years was
Speaker 3: the significant macro economic stimulus of this unlimited friendship between
Speaker 3: President Z and President Putin. It's tilted the whole world
Speaker 3: backwards versus against China, and China was an emoral source
Speaker 3: at demand poll for comminities. And then you also had
Speaker 3: this incentive of high prices because of a war which
Speaker 3: really kicked in that elasticee. A supplying demand which has
Speaker 3: been US has been leading that way in almost all
Speaker 3: commodities I mean yeah, so I think it just accelerated
Speaker 3: those forces.
Speaker 4: Hey, Mike, we gotta leave it there.
Speaker 2: And we're gonna do port bellies next time. Don't worry
Speaker 2: about it.
Speaker 4: I'm all up for pork bellies, man. We can definitely
Speaker 4: hit that for sure. Cattle chicken anyway. Mikelgon on Boomberg Intelligence,
Speaker 4: Senior Commodity Strategists, you're listening.
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Speaker 4: The S and P is just down one tenth and
Speaker 4: one percent. I mean, we can say that investors are conscious,
Speaker 4: we can say the stocks are lower, but volume is light.
Speaker 4: It's hard to get excited about any kind of quote
Speaker 4: unquote selloup. And my real question is like, what's it
Speaker 4: going to take for the markets to actually consistently go down?
Speaker 4: An Barry is founder and managing partner over at thread Needle.
Speaker 4: She joins us, right now, what's it going to take
Speaker 4: in for markets to really go down? Here?
Speaker 7: Alex, I think it's going to take one of two things.
Speaker 7: At the macro levels.
Speaker 8: Why they're going to take really strong inflation and then
Speaker 8: for even more resetting by the market of what they
Speaker 8: think the FED is going to do in terms of
Speaker 8: continuing to push out rate cuts or is that the
Speaker 8: macro level or when it comes looking at fundamentals, we
Speaker 8: need to see a flew of earnings. So we sort
Speaker 8: of through the season now, but looking ahead for another
Speaker 8: three months that basically continues to sort of reset expectations
Speaker 8: to be a bit more realistic around some of these
Speaker 8: big productivity boosts and AI boosts that people have been sitting.
Speaker 7: We've seen that.
Speaker 8: Break a little bit already in places like Palowel to networks,
Speaker 8: for example. But I think we need some more expectation
Speaker 8: resetting and it just hasn't happened as any season I
Speaker 8: think some people thought it might.
Speaker 2: So that kind of brings me to valuation here and
Speaker 2: should we have some valuation concerns in this market because
Speaker 2: we've seen a big move off of the October lows,
Speaker 2: yet I'm not sure we saw a commentsar horizon earnings
Speaker 2: per share of this market. How do you think about valuation?
Speaker 8: I think I've long been saying and Alex I've had
Speaker 8: this conversation that this market feels extremely overvalued on a
Speaker 8: couple of different dimensions. If you take a look at
Speaker 8: the equity of RESC premium, it's absolutly low relative to
Speaker 8: some of the macro risk factors out there, and if
Speaker 8: you look back historically, so that's number one. Number two,
Speaker 8: we're looking at p ratios p to growth ratios that
Speaker 8: are completely unprecedented across the entire industry and then within sectors,
Speaker 8: particularly within tech. So I've long been of the view
Speaker 8: that we were in over valued territory. I think the
Speaker 8: question is what is that capitalist going to be to
Speaker 8: get people to focus on.
Speaker 7: That again, rather than the sort of vague euphoria.
Speaker 4: HSBC had the most reluctant call change I'm beginning I've
Speaker 4: ever seen. They've had a tactical underweight stands for a while,
Speaker 4: and they finally said that sentiment and positioning have been
Speaker 4: stretched and remain elevated, but it isn't enough to prompt
Speaker 4: a significant correction and risk assets at the same time,
Speaker 4: and we have I don't I mean Goldman, I'm trying
Speaker 4: to think Barclays that ubs all kind of chasing the
Speaker 4: rally and upgrading their price forecasts for the S and
Speaker 4: P for this year. I mean, what does that tell you?
Speaker 8: I mean there's a little bit of function alex of
Speaker 8: upgrading of certain of the really big stocks that take
Speaker 8: up such a big chunk of the S and P
Speaker 8: and of the NASDAC. So when you're getting big companies
Speaker 8: like Nvidio getting rerated upwards, when you're getting a lot
Speaker 8: of the big tech companies rerated up with that sort
Speaker 8: of lifting the entire And that's where I get really nervous.
Speaker 8: Back to this point, I think tech has been such
Speaker 8: a massive driver of uplift. I do think the sector
Speaker 8: is over valued and that's spilling over into much broader
Speaker 8: market sort of bubble charity, and so I'm nervous about it.
Speaker 2: So what does that mean for kind of when you
Speaker 2: talk to your clients here, is it kind of get
Speaker 2: out of tech those names are lightening up on some
Speaker 2: of those tech names, try to sign find some value
Speaker 2: in other parts of the market, or like hold.
Speaker 7: Well, it's a little bit of a hybrid.
Speaker 8: So it's really trying to look the secular tailwinds I
Speaker 8: think are going to be there in the long term.
Speaker 7: And I'll give you an example cybersecurities that they.
Speaker 8: Throw out their pallele outer networks I have invested, for example,
Speaker 8: this is on the private side of as you clients
Speaker 8: in a private company that is in the of deep
Speaker 8: fake detection. So if you think about whether it's Taylor
Speaker 8: Swift Images or whether it's President Biden's voice being deep faked,
Speaker 8: this is an area in cybersecurity that's really picking up
Speaker 8: in terms of public attention. That's the kind of space
Speaker 8: that is going to be I think why for consolidation,
Speaker 8: and players like the Palo Alto Networks and others I
Speaker 8: think are going to be the acquirers of these companies.
Speaker 8: So this is one where I say, look, you've got
Speaker 8: to look for industries of sexuler tael Insider being one
Speaker 8: of them.
Speaker 7: Look for breakpoints. In this case, I did buy that stop.
Speaker 8: When I saw it go down with a ninety billion
Speaker 8: dollars set off, just because the CEO had dared to say,
Speaker 8: we need a real strategy around pricing, and it's going
Speaker 8: to be a little bit less, a little bit more aggressive,
Speaker 8: a little bit less casually positive than someone you thought.
Speaker 8: So those are the breakpoints I like CEOs that are
Speaker 8: coming out in these kinds of sectors saying, look, here's reality.
Speaker 8: It's really tough to execute, but here's a plan. This
Speaker 8: is how we're going to do it. And when we
Speaker 8: see cell offs in those names, that's why I'm looking
Speaker 8: to go back in.
Speaker 4: What about what do you do with the big guys
Speaker 4: like say Google that's gotten hit hard and also Apple,
Speaker 4: which were making a bit a lot of hay about
Speaker 4: technical levels. The chart doesn't look that great when you're
Speaker 4: looking at maybe a breakdown of some of the big
Speaker 4: tech names. Do you go on and buy I do.
Speaker 7: Alex And it really depends on why the breakdown has happened.
Speaker 8: I thought that I think a bit more forgiveness when
Speaker 8: it to big companies that at the end of the day,
Speaker 8: our cash flow machines have real market share and big
Speaker 8: growing markets. When those companies come out and say, look,
Speaker 8: we've made a mistake or we're going to shut your
Speaker 8: product line, as Apple has done when it comes to
Speaker 8: ev for example, or when we see GEM and I
Speaker 8: get rolled out too quickly and we see therefore a
Speaker 8: missteff put Google and therefore Alphabet now saying look, we're
Speaker 8: really going to have to invest behind slowing this down
Speaker 8: and fixing it. I've got patience for that, Alex because
Speaker 8: I think those are still fundamentally good businesses. Where again,
Speaker 8: we're seeing these companies experiments.
Speaker 7: Sometimes they'll get it wrong.
Speaker 8: I'd like to make sure they're not shredding too much
Speaker 8: capital in the process, and they're being disciplined in their allocation.
Speaker 8: But at the end of the day, you can't take
Speaker 8: away the fact these companies aren't going anywhere. They will
Speaker 8: redirect resources to more profitable outlets, and I've got patients
Speaker 8: for that. I see those are buying opportunities of them.
Speaker 8: The rest of the market's running in those.
Speaker 2: Moments talking about making a pivot or having some patients
Speaker 2: for a business line. How about Apple kind of saying
Speaker 2: back and away from the electric vehicle business, autonomous vehicle business.
Speaker 2: That's a pretty big move, would it? Would you make
Speaker 2: of that?
Speaker 7: It is a big move.
Speaker 8: But here's what I say about Apple again, to compare
Speaker 8: it specifically and deliberately to another tech names, and that's Amazon.
Speaker 7: If you take a look at Amazon, the amount of.
Speaker 8: Forgiveness that there has been over the over the decade
Speaker 8: for that company to experiment throw a bunch of money
Speaker 8: into big new ideas, whether it's in grocery or whether
Speaker 8: it's in healthcare, and if it fails, Amazon shuts down
Speaker 8: relatively quickly those experiments. The market thinks that's great, and
Speaker 8: they say this is called to its culture and this
Speaker 8: is why it's such an agile.
Speaker 7: Nimble company and will continue to win in the long run.
Speaker 8: For some reason, that attitude has faded when it comes
Speaker 8: to the Apples of the world. I have forgiveness for
Speaker 8: that because Apple tried. It's still got a huge cash
Speaker 8: flow machine in its core iPhone eye.
Speaker 7: Products, and if easy it's not going to generate return.
Speaker 7: I'd much rather they.
Speaker 8: Shut up, shut up shop in that front, and go
Speaker 8: refocus and reinvest behind more profitable lines. So I think
Speaker 8: it's a good thing when companies come out and say
Speaker 8: didn't work, to move.
Speaker 4: On right and thanks lot really appreciate it. Always fun
Speaker 4: to get your perspective. And Barry founder and managing partner
Speaker 4: at Thread Needle, I kind of say when I interviewed CEOs,
Speaker 4: I feel the same way, like when you deliver information
Speaker 4: to the CEO and they're like, no, no, it's great,
Speaker 4: Like this is a great buying opportunity for our stock.
Speaker 4: Everything's amazing. You're like, okay, yea, we know, we know
Speaker 4: what you're doing. Guys, we can see through that.
Speaker 2: And I saw, yeah, Apple just kind of coming right out. Well,
Speaker 2: I guess they didn't say it's Mark Drman re reporting. Yeah,
Speaker 2: they haven't had a statement that I was correct on
Speaker 2: that earlier today, But basically Mark German Bloomberg News reporting
Speaker 2: that you know, we're going to back away from electric
Speaker 2: vehicle business. A lot of employees assigned to it, some
Speaker 2: of them will be re allocated to their AI efforts,
Speaker 2: some probably losing the jobs. But again it's a big,
Speaker 2: big pivot there.
Speaker 4: I mean, it also makes sense like if you want
Speaker 4: to be a services business at the end of the day,
Speaker 4: how does a car kind of fit into that.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 4: David Welch is our Detroit bureau chief. He joins us
Speaker 4: now on Zoom from Detroit. Hey David, when we talked
Speaker 4: about Apple pushing back from the EV market, Is there
Speaker 4: a China connection there, that China's flooding the market with
Speaker 4: their own cheap evs, every other car maker's having a
Speaker 4: hard time with it. Is there something to that?
Speaker 9: Very very little, honestly, I mean.
Speaker 3: I think, sorry, thanks, No, it's in a way in
Speaker 3: the sense that the EV market's tough.
Speaker 9: It's very competitive in China, even Tesla's losing share there,
Speaker 9: and it's even tougher here, and then there's a lot
Speaker 9: of competition in Europe. But look, really, you take the
Speaker 9: airplane up about twenty thousand feet on Apple's decision, their
Speaker 9: margins are what thirty or forty percent, and gross margins
Speaker 9: for Tesla and General motors about the same these days
Speaker 9: at about sixteen percent, And you have to spend billions
Speaker 9: of dollars to make this vehicle. Why would they do that?
Speaker 9: So I think that's really what this is about. And
Speaker 9: it's you know, they're also looking at they were looking
Speaker 9: at a an electric vehicle that was going to be
Speaker 9: about one hundred thousand dollars, So this was gonna be
Speaker 9: a luxury Apple EV and we're you know, we see Rivian,
Speaker 9: we see Lucid. Yeah, you know, that's rarefied air that's
Speaker 9: a tough sell. There's just they're just don't that many
Speaker 9: people who can afford one hundred thousand dollars vehicle. And
Speaker 9: then one other thing I'd like to bring up with
Speaker 9: Apple is they talked about Apple TV for a long
Speaker 9: time and everyone thought we were going to have this
Speaker 9: Apple TV hanging on the wall. But making television just
Speaker 9: allows you high capital the bow marching business kind of
Speaker 9: like automobiles. And then they gave us a box with content.
Speaker 9: So you know, Apple supplies car plator automakers. You know,
Speaker 9: they may still have an auto play with some kind
Speaker 9: of content sort of thing in their vehicles. But I
Speaker 9: think they looked at the capital side of this and
Speaker 9: and said, you know, that's not what they do. They
Speaker 9: create cool stuff and kind track someone else to make it.
Speaker 9: The business just never made a lot of sense.
Speaker 2: But hey, David, what's the feeling in Detroit these days
Speaker 2: as to kind of how this ev thing is going
Speaker 2: to evolve going forward? I mean, it seems to have
Speaker 2: hit kind of a lull here in terms of the enthusiasm,
Speaker 2: and I guess a lot of folks are trying to
Speaker 2: get a sense of is it because the costs is
Speaker 2: just too high. Is it because people just don't like evs?
Speaker 2: Is it because there's not enough choice, there's not enough
Speaker 2: charging stations. What's the feeling in Detroit is how this
Speaker 2: thing will evolve?
Speaker 9: It's all of that, But I would say especially choice and.
Speaker 1: Price.
Speaker 9: I mean, look, there's one EV on the US market
Speaker 9: that sells for less than forty thousand dollars. Now it's
Speaker 9: a Nissan Lead. It's a compact hatchback, which Americans hate,
Speaker 9: that gets about two hundred miles of range, which nobody thinks,
Speaker 9: isn't it, And so everything else is much more expensive
Speaker 9: than that, and for most Americans that doesn't cut it,
Speaker 9: particularly when the charging network is bad. So all these
Speaker 9: things are sort of related. But you know, I think
Speaker 9: the carmakers are now really cautiously watching this, and in
Speaker 9: the vehicle to watch in the next year is General
Speaker 9: Motors is going to sell an electric Chevy Equinox. So
Speaker 9: the Equinox is a small crossover suv. It's that's kind
Speaker 9: of the new family car because no one buys Sidanzen.
Speaker 9: And they're going to sell that EV for thirty five
Speaker 9: thousand dollars and it'll go three hundred and twenty miles
Speaker 9: on a charge, which is pretty good, and that will
Speaker 9: kind of tell us if the mass market is ready
Speaker 9: to go electric, because right now, a lot of the
Speaker 9: people who buy evs, they're not just early adopters and
Speaker 9: rich people. They are early adopters and rich people with
Speaker 9: three or four other cars in the garage. So if
Speaker 9: they need to drive on a long road trip, they
Speaker 9: pull the land rover out, gass it up, and go.
Speaker 9: And so can the industry sell evs to people who
Speaker 9: have one car in their garage?
Speaker 7: And we'll see.
Speaker 9: So that's going to tell us a lot about what's
Speaker 9: going to happen with this market and how flat the
Speaker 9: middle of this S curve is in order to get
Speaker 9: to the next way.
Speaker 4: Those are the people that can qualify for the one
Speaker 4: it in that survey, right, so some of us may
Speaker 4: fall short. David, I'm also wondering just the mood, I mean,
Speaker 4: to Paul's point, the mood in Detroit, Like, how do
Speaker 4: the workers feel about all of this? Right? I mean,
Speaker 4: we know the shift to evs eventually, when you're just
Speaker 4: making EV's, you need less workers, et cetera. And I'm
Speaker 4: just wondering, kind of, yeah, like how do they feel
Speaker 4: right now?
Speaker 10: So?
Speaker 9: I'm not totally convinced by the way that it's going
Speaker 9: to need fewer workers. I think over a long period
Speaker 9: of time maybe, but that's a different issue. That the
Speaker 9: union worker does think that, and they also think that
Speaker 9: the engine and transmission jobs will be gone and batteries
Speaker 9: will come in from someplace else and they won't be
Speaker 9: the ones making them.
Speaker 5: So there is a lot.
Speaker 9: Of fear, and I think they're breathing some kind of
Speaker 9: a sigh of relief that maybe a lot of these
Speaker 9: workers are a bit older, they'll be retired before this
Speaker 9: is a real issue. And so I think if you're
Speaker 9: the union, you're looking at this transition as being longer
Speaker 9: and slower than everybody thought probably two years ago, and
Speaker 9: so to be more manageable. You know that the you know,
Speaker 9: the attrition can be just done by retirements and people
Speaker 9: want to lose their jobs and be left with nothing.
Speaker 2: It'll just But it is the commitment from the car
Speaker 2: companies still there, David, because I could make an argument
Speaker 2: I think half of this country will never go electric
Speaker 2: for reasons other than economics, other than powertrain.
Speaker 4: Was it like, look or what politics?
Speaker 2: I'm not going green?
Speaker 9: You know that's interesting I've sort of thought for a
Speaker 9: long time that Elon Musk has gone conservative for two reasons. One,
Speaker 9: he's been fighting with the government, so he hates regulators.
Speaker 9: Democrats get pinned with regulation, so he went conservative. I
Speaker 9: think the other is that guy's a brilliant marketer. It's
Speaker 9: the most underrated thing about Elon Musk. And he knows
Speaker 9: that EV's have been politicized. He knows those conservatives don't
Speaker 9: like them, and so I think he went conservative because
Speaker 9: maybe they'll buy evs from their guy. Right, he's the
Speaker 9: guy on Twitter letting them say whatever they want. And
Speaker 9: I've always sort of thought, with no evidence, that maybe
Speaker 9: that's what he's doing.
Speaker 7: But look, I.
Speaker 9: I eventually everyone's going to go EV because I'll just
Speaker 9: be the powertrain available. Question is how long does it
Speaker 9: take to get there? And I do think it's going
Speaker 9: to take a very long time. Price is one thing,
Speaker 9: and the Parker dwellers and all of that. I mean,
Speaker 9: there's just practical reasons why not. But look, you know,
Speaker 9: in the eighties, cell phones were the sides of a suitcase.
Speaker 9: They were very expensive, the services obuseeing. A lot of
Speaker 9: people said I'll never get a cell phone and now
Speaker 9: everyone's eighty seven percent of the market has a smartphone
Speaker 9: glued to their head or in their hands, So you know,
Speaker 9: never is a very long time. I think it will happen,
Speaker 9: but it's not twenty thirty five or twenty thirty like
Speaker 9: Mercedes and General Motors tell this. It's like twenty forty five.
Speaker 2: Okay, because I'm you know, I think there's a reasonable
Speaker 2: argument to be made in the boardrooms, like what if
Speaker 2: this isn't the mass market we thought it was, And
Speaker 2: I don't know, everything else has been politicized, why not that?
Speaker 4: But then at some point you're just gonna have regulations
Speaker 4: that's going to demand it, so you don't have a choice,
Speaker 4: which is kind of where we were, and now some
Speaker 4: of that's being rolled back a little bit. So I
Speaker 4: think it's it's the whole idea that you're in an
Speaker 4: industry that is in a structural shift, but there's all
Speaker 4: these short term headwinds, like how do you manage a
Speaker 4: business like that? That must be very difficult.
Speaker 2: Yep, that's why.
Speaker 4: Then again, I don't buy a car from Mary Barra, right, No,
Speaker 4: I mean, I guess only Tesla. You'd buy it for
Speaker 4: ELM maybe.
Speaker 2: Yeah, I don't know. All right, David, thanks so much
Speaker 2: for joining us. David Welch, Detroit bureau chief for Bloomberg News.
Speaker 2: He's in Detroit. I mean he's got his you know,
Speaker 2: feet to the ground, ear to the ground, that all
Speaker 2: that kind of stuff for what's happening in the auto business.
Speaker 2: But it's tough. I mean, it's tough to to make
Speaker 2: the case to invest in GM or Ford Stock is tough.
Speaker 2: I know, these industries that are in fundamental transition, and
Speaker 2: I equate the auto industry to the entertainment industry fundamental.
Speaker 4: Change and the energy industry.
Speaker 2: But yeah, yeah, exactly right, exact fundament change to their
Speaker 2: core business model, and you want me to invest in
Speaker 2: the equity of this thing.
Speaker 4: I mean, I think the difference is that there's a
Speaker 4: manufacturing element, whether you're in media or whether you're in
Speaker 4: a car company, versus energy where it's the underlying hydrocarbon.
Speaker 4: It's different. So they can actually make money. Well, this
Speaker 4: is all happening, which is a novel idea.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 4: We also got that data that was pretty solid, right,
Speaker 4: you get a second quarter of the second read on
Speaker 4: the fourth quarter GDP coming a little lighter than estimated,
Speaker 4: but really that was an inventory issue. The personal consumption
Speaker 4: part added about two points to that at three percent.
Speaker 4: Again super solid. It's a big head scratcher. It is
Speaker 4: joining us now, Heaving in a trades managing partner and
Speaker 4: director of economic policy at Beta partners Man. There's a
Speaker 4: lot to get through. There's this, there's politics. But if
Speaker 4: I'm Biden's campaign, do I like these numbers?
Speaker 5: I mean, there's a double edged sword here. On one hand,
Speaker 5: you want the Fed to cut interest.
Speaker 11: Rates, not that they're encouraging them to or in any
Speaker 11: way manipulating it, but the perceived benefit of the Fed
Speaker 11: cutting interest rates is something that any administration running for
Speaker 11: reelection would like to see going into an election year.
Speaker 11: But simultaneously, strong GDP growth, which is what we're forecasting
Speaker 11: and expecting and is consensus at this point and even
Speaker 11: being revised upwards by NAB and groups like it, is
Speaker 11: also a strong indicator. So I have to say, I
Speaker 11: don't know that there's losing data for Biden in the
Speaker 11: upcoming economic information that we're about to be getting out.
Speaker 11: What you really want to see, and I think is
Speaker 11: a really interesting dynamic, is actual inflation come down, particularly
Speaker 11: on household.
Speaker 5: Goods and groceries.
Speaker 11: There is some a study that I conducted a few
Speaker 11: weeks back about the the gap between women's perception of
Speaker 11: the US economy and men's perception, and in a number
Speaker 11: of cases it's you know, sixty seventy eighty, even ninety
Speaker 11: three percent negative views amongst on the economy from Republican women.
Speaker 11: And it's an outsized portion of women versus men who
Speaker 11: believe the economy is struggling right now, and.
Speaker 5: That's mostly because of inflation.
Speaker 11: So I think the most important data for the Biden
Speaker 11: campaign writ large is really just inflation on household goods
Speaker 11: and groceries.
Speaker 2: So on that end, I guess, Henriette, Tomorrow's going to
Speaker 2: be an important day here with the PC deflator data.
Speaker 2: What do you expect me to see here?
Speaker 11: I mean, we've seen economic expectations and forecasts for consumer
Speaker 11: sentiment come down. You have to think that there's some
Speaker 11: inflation related components to that, but it could also just
Speaker 11: be that the four month rise that we've seen is
Speaker 11: you know, just sort of plateauing or something along those lines.
Speaker 11: So I don't think inflation is going to be cured
Speaker 11: by any PC is still going to be a problem.
Speaker 11: I think it's just really slow going and a struggle
Speaker 11: for the Fed, which is why the market is repricing
Speaker 11: so aggressively on whether there will be interest freecuts. One
Speaker 11: of the conversations that I used to have a lot
Speaker 11: was how many cuts are we going to get, you know,
Speaker 11: between March and June, And now it's more question of
Speaker 11: are they actually going to cut in March or will
Speaker 11: it come in June? And I think that signals that
Speaker 11: there's still a long way to go on inflation.
Speaker 4: Right, like no longer how many, but sort of when
Speaker 4: it actually starts, it does feel like maybe some of
Speaker 4: the repricing has finally worked its way through. Henrietta tie
Speaker 4: this into the Michigan primaries yesterday. What did we learn?
Speaker 4: And I say that because it did feel like anti
Speaker 4: Israel pro Palestinian group there really sort of put the
Speaker 4: screws to the Biden campaign, right, And I wonder how
Speaker 4: much that's going to start affecting the campaign versus say,
Speaker 4: how much I'm paying for eggs at the grocery store.
Speaker 11: Well, I obviously Michigan is a critic state. There's two
Speaker 11: hundred to three hundred thousand Muslim or Arab voters in
Speaker 11: that state. Biden was able to win the state by
Speaker 11: one hundred and fifty thousand last time around, so he
Speaker 11: does have a cushion. But you know, if female voters,
Speaker 11: if youth voters, if black voters are migrating to Trump,
Speaker 11: which is what the polling is suggesting but not necessarily
Speaker 11: representative of primary turnout data, then you have a problem
Speaker 11: when every vote counts. You know, in twenty sixteen, the
Speaker 11: threshold was just a couple ten or so thousand voters.
Speaker 5: So you really want to work for everyone.
Speaker 11: But I think there's a misunderstanding of what happened last
Speaker 11: night because a lot of the takeaways were sort of
Speaker 11: gelled in the public consciousness a little early in the night.
Speaker 11: It takes fifteen percent for the undeclared vote to send
Speaker 11: a delegate to the DNC this summer, and they're only
Speaker 11: at thirteen percent.
Speaker 5: As of this morning.
Speaker 11: So this is really the last hurrah in terms of
Speaker 11: national attention that Michigan and these voters specifically are going
Speaker 11: to have in a way that I think will carry
Speaker 11: any of the weight that we've seen for the Biden
Speaker 11: team to be worried about for the last you know,
Speaker 11: three or four weeks now that they're not.
Speaker 5: Worried about the Israel Kaza situation in general.
Speaker 11: They ask for a massive funding request, including humanitarian aid,
Speaker 11: all the way back in October, and Congress has yet
Speaker 11: to authorize that, which makes it difficult for Biden to
Speaker 11: get any messages across. But in general, I think the
Speaker 11: undeclared vote was not the political earthquake that a lot
Speaker 11: of folks in that community wanted it to be. And
Speaker 11: I think that there should be a lot of breathing
Speaker 11: room for the Biden administration understanding that they will not
Speaker 11: have to worry about a delegate from this contingency at
Speaker 11: the DNC this summer.
Speaker 2: All right, So staying on the political front, here are
Speaker 2: good friends in Congress. So I guess they're getting back
Speaker 2: to work today or tomorrow, who knows. Let's put that
Speaker 2: in quotes, yam, Yes, what are they going to do
Speaker 2: here about keeping this government open? Should the markets be concerned.
Speaker 2: Learned that we could have an issue here, but either
Speaker 2: this Friday or next Friday.
Speaker 11: Next Friday would be a big issue, and it comes
Speaker 11: at a very precarious time for the Biden administration specifically.
Speaker 11: But here's the state of play as I understand it.
Speaker 11: We're going to get another short term cr It's just
Speaker 11: a matter of how long. This Friday's deadline only covers
Speaker 11: about twenty five percent of US federal spending.
Speaker 5: It is a three.
Speaker 11: Hundred and twenty one billion dollars if I'm not mistaken.
Speaker 11: Next Friday is the big cahuna at one point two trillion.
Speaker 5: So I do think that there's.
Speaker 11: Going to be a deal to avert a shutdown this week.
Speaker 11: That's contrary to my earlier view. What happened is the
Speaker 11: House changed its schedule. They decided to actually come back
Speaker 11: into town, as you point out, instead of being gone
Speaker 11: all week, they are coming back today so that they
Speaker 11: will be in a position to at least.
Speaker 5: Take some votes.
Speaker 11: But you can tell from Speaker Johnson's reticence to even
Speaker 11: release text that this is going to get slammed and
Speaker 11: Daylight is going to kill it.
Speaker 5: If he releases it too early.
Speaker 11: So we need to see text, you know, no earlier
Speaker 11: than tonight, and a vote would come on Friday, but
Speaker 11: the potential for a short team CR is effectively guaranteed.
Speaker 11: The real lynchpin here is that, for the first time
Speaker 11: in two cycles, the Senate Republican conference is really hoping
Speaker 11: not to lose their races through unforced errors or through
Speaker 11: endorsing MAGA candidates. This is their last best chance in
Speaker 11: a while, and they've got eight Democratic seats in purple
Speaker 11: states that are highly at risk. On that list is Arizona, Michigan, Nevada, Wisconsin, Ohio, Pennsylvania, Montana. Certainly, so,
Speaker 11: the Senate Republicans are effectively trying to pull rank on
Speaker 11: House Republicans here and say, yo, let me get a
Speaker 11: majority in Congress and in the US Senate. Don't shut
Speaker 11: it down. Don't ruin our chances by making us all
Speaker 11: look dysfunctional. Let's keep the government open. I on the prize,
Speaker 11: focus on the White House, focus on immigration, and move
Speaker 11: on from these, you know, sort of futile efforts to
Speaker 11: cut federal spending from very popular programs like so.
Speaker 5: I think that is very helpful.
Speaker 11: I would like to see Minority Leader McConnell have a
Speaker 11: little bit more sway over House Republicans and particularly Speaker Johnson.
Speaker 11: I think we will get there and we'll avoid a
Speaker 11: shutdown on Friday, and then optimistically, we'll avoid a bigger
Speaker 11: one next Friday. The one caveat or the several caveats
Speaker 11: are one. It's super Tuesday, next Tuesday. The President will
Speaker 11: deliver the State of the Union address on Thursday, and
Speaker 11: then that big shutdown would come on Friday.
Speaker 5: So there's a lot of moving parts here to be watching.
Speaker 4: Oh I love It's like, I don't want to be
Speaker 4: the most dysfunctional person in my friting. I like that's
Speaker 4: the bar for some Hey, Henritta, thanks a lot, Henry
Speaker 4: to tre Is, managing partner and director of Economic Policy
Speaker 4: at Veda Partners. But I also wonder we didn't get
Speaker 4: a chance to ask about Nikki Haley. But we know
Speaker 4: the nomination is not going to happen, but she keeps
Speaker 4: making the case like thirty to forty percent of the
Speaker 4: voters in this state don't want Trump, and I wonder
Speaker 4: how that eventually evolves over the next few months.
Speaker 2: Yeah, and a lot of folks we talked to in
Speaker 2: the political front say that she may stay in this
Speaker 2: race longer, if for no other reason than to get
Speaker 2: to the convention and just kind of be there.
Speaker 4: And just sit there and see what happens. Yeah, I've
Speaker 4: heard that too. I wonder what that winds up looking
Speaker 4: like and if the polling winds up showing up.
Speaker 2: The conventions this year are actually going to be very interesting,
Speaker 2: I think, I mean, I think both of them are
Speaker 2: going to be very interesting, and maybe not for the incumbents,
Speaker 2: but there's gonna be a lot of rhetoric out there,
Speaker 2: so we'll pay attention to them this summer.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 4: Let's drill deeper now into the bond market here. We
Speaker 4: had a ton of supply coming on this week in
Speaker 4: the corporate bond market. We had record February issuance for
Speaker 4: the month. We had seven two fives for the treasury market,
Speaker 4: all doing really well. I want to bring in Jerry Kudziel,
Speaker 4: He's a group managing director in General's generalist portfolio manager
Speaker 4: at t c W. Let's kind of get into fixed
Speaker 4: income here. What is the pain trade headed into tomorrow's
Speaker 4: PCE in the bond market?
Speaker 10: Well, good afternoon, Thanks for having me. I appreciate it.
Speaker 10: It's a it's a it's a great question. I think
Speaker 10: the reality is the the market has set itself up
Speaker 10: for complacency kind of across the board. What we would
Speaker 10: say is the pain trade is probably for a little
Speaker 10: bit of a of a of a higher print on inflation,
Speaker 10: although what you know, the the reality is that there's
Speaker 10: not a lot of room for error price into the
Speaker 10: markets at all either way.
Speaker 2: So it feels like, is it safe to say, though, Jerry,
Speaker 2: that from your perspective that we've seen peak inflation? Can
Speaker 2: we at least say that.
Speaker 10: I think we would say we've definitely seen piece whether
Speaker 10: whether or not inflation ticks back up a little bit
Speaker 10: or or we see we're both a little bit stronger.
Speaker 10: I think ultimately, when you look at the numbers of
Speaker 10: the three month or six month annualized the Feds already
Speaker 10: hit their target. You know, we're already at we're already
Speaker 10: at two percent inflation numbers. And I think the data
Speaker 10: that we're seeing the micro up time internally here is
Speaker 10: that macro views and formed by the micro you know,
Speaker 10: laural of anecdote is data a little bit. We're seeing
Speaker 10: a lot of things under the surface that lead us
Speaker 10: to believe that the economy is not as healthy and
Speaker 10: that inflation is not is not going to remain as
Speaker 10: strong as so, yes, we've already seen peak inflation.
Speaker 4: In our view, does that mean that you like steepeners
Speaker 4: even though if you were in steepeners the last six
Speaker 4: months you got you got hurt.
Speaker 10: Indeed, I think the calling the timing of a FED cut,
Speaker 10: and I think we all want to everyone wants to
Speaker 10: know everyone's opinion of when is the FED going to
Speaker 10: get moving on interest rate cuts? Are they going to cut?
Speaker 10: How are they going to roll it back? I think
Speaker 10: our view is inflation is peaked, real comfortable adding duration, uh,
Speaker 10: and we think the curve is going to and will normalize,
Speaker 10: and so we we do we do like steepeners. I
Speaker 10: think the reality is this has been you know, obviously
Speaker 10: the market's pushed pushed just out it. But our view
Speaker 10: is that's a little bit reflexive. There's a there's a
Speaker 10: lot of complacency in the market. You can see that
Speaker 10: in VIX, you can see that in S and P,
Speaker 10: you can see that in individual equities. You can see
Speaker 10: that in the corporate bond, in disease UH, in the
Speaker 10: face of record issue with alex as you mentioned, we're
Speaker 10: staring at just about all time tights or you know,
Speaker 10: definitely post GFC tights, and the and the reality is
Speaker 10: is not, in our opinion, not a lot of not
Speaker 10: a lot of room for error. But yeah, I think
Speaker 10: the short answer to the question is we we like steepeners,
Speaker 10: and we like and we like duration.
Speaker 2: How about corporate credit, how do you feel about going
Speaker 2: out on the risk premium a little bit?
Speaker 10: Well, I think let's look at it this way. We'd
Speaker 10: say you're supposed to be high grading your credit portfolios
Speaker 10: right now. When you think about the investment grade credit
Speaker 10: diet of eighty seven over treasuries, the high yield index
Speaker 10: trades at three oh seven. But when you start stripping
Speaker 10: out distressed the high yield index, if you take out
Speaker 10: the four percent of the high old index that's distressed,
Speaker 10: the high yield index trades that have spread at two forty.
Speaker 10: If you pull that back historically, that's a really difficult
Speaker 10: time to invest in high yield, and it's a really
Speaker 10: difficult time to go out the risk spectrum. We've seen
Speaker 10: spread compression, whether that's between credit quality, between high yield
Speaker 10: and investment grade, and so we would not recommend going
Speaker 10: out this picture. The risk spectrum was thing's supposed to
Speaker 10: be high grading portfolios, being moving up in quality, and
Speaker 10: we don't. We would not recommend moving out the risk
Speaker 10: spectrum right now. We've we've been highgrading our portfolios across
Speaker 10: the board.
Speaker 4: Where do you think you could be wrong? Is it
Speaker 4: going to be the when the FED cuts?
Speaker 8: Is it?
Speaker 4: Is it going to be a consistently stronger economy? And
Speaker 4: I was talking to someone earlier today. They talk very
Speaker 4: much about a two speed economy. On the one hand,
Speaker 4: you have big banks, you have a lot of liquidity,
Speaker 4: and that's pointing us in a positive direction, consumer spending
Speaker 4: relatively okay. And then the flip side, you have mid
Speaker 4: sized banks, small caps not doing really well. And it's
Speaker 4: hard to kind of look at those two and see
Speaker 4: who's going to win.
Speaker 10: Yeah, No, it's we asked this are to ourselves all
Speaker 10: the time, Where could we where could we be wrong?
Speaker 10: I'd say the consumer has been significantly more resilient than
Speaker 10: certainly we anticipated. I think certainly that. I think that
Speaker 10: probably the majority of the markets anticipated. Could you get
Speaker 10: a productivity enhanced you know, expansion and boom and the
Speaker 10: you know a AI you know a AI productivity boom.
Speaker 10: I think we we ask ourselves this all the time.
Speaker 10: It's really can the can the economy grow? Can the
Speaker 10: consumer remain resilient? And can you continue to see uh
Speaker 10: upward momentum in or sustained growth in wages. I think
Speaker 10: we've we've considered all these things. We would say we
Speaker 10: think we're closer to consumer exhaustion then than not. Excess
Speaker 10: savings have been spent down. We think the labor market
Speaker 10: underneath is definitely a little bit weaker than the headline
Speaker 10: would imply. So we do ask ourselves out all the time.
Speaker 10: The reflation, growth, productivity boom, those are kind of the
Speaker 10: things that would where where you know, kind of a
Speaker 10: duration long and a steepener call would certainly prove to
Speaker 10: be premature, you know.
Speaker 2: I finally Jerry got around yesterday truly to watching the
Speaker 2: Big Short, so I got to ask a question about
Speaker 2: mortgage back secure agency mortgages. How do you feel about
Speaker 2: that part of the market.
Speaker 10: Yeah, I was, it's that's a great question. So agency
Speaker 10: mortgages look attractive nominally, but they look really attractive relative
Speaker 10: to corporals. You think about where agency mortgages, you know,
Speaker 10: the spread on agency mortgage I'll just put it this way.
Speaker 10: The spread on agency mortgages relative to corporates looks like
Speaker 10: looks like multi standard deviations, differential, and so our opinion
Speaker 10: is that we like we like agency mortgages. Essentially, what
Speaker 10: you're doing is trading duration risk for credit risk, you know,
Speaker 10: full faith and credit of the government. Our thought is
Speaker 10: at one hundred and fifty five over on current coup
Speaker 10: on agency mortgages, and we can adjust for negative convexity
Speaker 10: and some other things that we don't need to get into. Ultimately,
Speaker 10: we think they're really attractive. There are parts of the
Speaker 10: mortgage market, commercial mortgages, some other areas that are a
Speaker 10: little bit more concerting. We think there'll be a lot
Speaker 10: of opportunity there, but ultimately, you know, we're being but
Speaker 10: we're certainly buying DC mortgages and we like agency mortgages
Speaker 10: a lot.
Speaker 4: All right, Jerry, thanks a lot, really appreciate. Jerry Kudz,
Speaker 4: Group Managing Director and Generalist Portfolio manager at TCW. So
Speaker 4: did you like it most? Kay? Everybody think it's better though.
Speaker 2: But yeah, I mean, you know, but no, it's good.
Speaker 4: So you're only catching up to that now exactly. Time
Speaker 4: to kill us time.
Speaker 2: Going to the Nick game last night, and my day
Speaker 2: is over at twelve, literally over at twelve, so I
Speaker 2: had to wait around the Nick game, So I went up.
Speaker 4: What does one do? You can't make fun of him
Speaker 4: because you're watching a documentary on the Crimean War. Okay,
Speaker 4: so I'm up to part three now, Yeah, okay, that's
Speaker 4: just what we do for fun.
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