1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,880 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:27,040 Speaker 1: or watch us live on YouTube. 6 00:00:27,440 --> 00:00:31,520 Speaker 2: Mike McLoone, Senior commodity strategist, Bloomberg Intelligence. Mike, this is 7 00:00:31,680 --> 00:00:35,800 Speaker 2: such an unknown scenario here as to how the warn 8 00:00:35,840 --> 00:00:37,400 Speaker 2: Iran will play out in. 9 00:00:37,400 --> 00:00:38,320 Speaker 3: The coming days and weeks. 10 00:00:38,360 --> 00:00:40,760 Speaker 2: We could wake up tomorrow and President Trump, for whatever reason, 11 00:00:40,800 --> 00:00:44,800 Speaker 2: decides to claim victory and bring everybody home here. If 12 00:00:44,840 --> 00:00:47,960 Speaker 2: that were to happen, how do you think energy prices 13 00:00:48,080 --> 00:00:50,879 Speaker 2: would ebb here and pull back when they get back 14 00:00:50,880 --> 00:00:51,840 Speaker 2: to pre war levels? 15 00:00:51,880 --> 00:00:53,800 Speaker 3: Would it take? How quickly would it happen? 16 00:00:54,160 --> 00:00:56,320 Speaker 2: Or are we at maybe a little bit higher levels 17 00:00:56,360 --> 00:00:59,320 Speaker 2: here just given the damage that's been done and maybe 18 00:00:59,320 --> 00:01:00,720 Speaker 2: the tension level that still remain. 19 00:01:02,000 --> 00:01:04,640 Speaker 4: I think the crude oil peak so far this year 20 00:01:04,720 --> 00:01:07,120 Speaker 4: near one hundred and twenty dollars a barrel in WTI 21 00:01:07,319 --> 00:01:10,199 Speaker 4: Paul will go down in history similar to one forty 22 00:01:10,240 --> 00:01:12,720 Speaker 4: seven in two thousand and eight and one thirty in 23 00:01:12,720 --> 00:01:15,959 Speaker 4: twenty twenty two. Right now on the week WTI crude 24 00:01:15,959 --> 00:01:18,280 Speaker 4: oil is down almost four percent, and part of that 25 00:01:18,400 --> 00:01:20,720 Speaker 4: is it's switching contracts. It's gone from the April to 26 00:01:20,760 --> 00:01:22,920 Speaker 4: the May. You go out to December, it's down the 27 00:01:23,000 --> 00:01:24,160 Speaker 4: seventy eight dollars of barrow. 28 00:01:24,200 --> 00:01:26,360 Speaker 5: Why is December is important. It's going to be front 29 00:01:26,400 --> 00:01:29,360 Speaker 5: month right before the midterms. So the scenario you mentioned, 30 00:01:29,400 --> 00:01:30,679 Speaker 5: I think is very unlikely. 31 00:01:30,920 --> 00:01:33,280 Speaker 4: Right now, we're at the stage of trying to produce 32 00:01:33,560 --> 00:01:37,360 Speaker 4: capitulation from Iran where they have no more ability to 33 00:01:37,440 --> 00:01:40,199 Speaker 4: create offensive issues in the golf. 34 00:01:40,360 --> 00:01:41,039 Speaker 5: It's happening. 35 00:01:41,360 --> 00:01:43,720 Speaker 4: The key thing I think people are under estimating is 36 00:01:43,959 --> 00:01:47,560 Speaker 4: there's some significant forces there, not only US President Trump. 37 00:01:47,640 --> 00:01:51,600 Speaker 4: US military is really military, but also is really military intelligence. 38 00:01:51,600 --> 00:01:54,320 Speaker 4: When people talk about boots on the ground, they're there. 39 00:01:54,560 --> 00:01:56,920 Speaker 4: I just things I've read. So I'm pretty sure the 40 00:01:57,520 --> 00:02:00,360 Speaker 4: crude oil market's already saying this weekend, if we wake 41 00:02:00,440 --> 00:02:03,760 Speaker 4: up Monday morning, there's so any major incidents of you know, 42 00:02:03,840 --> 00:02:07,280 Speaker 4: we see burning tankers, crudell is going to have a 43 00:02:07,440 --> 00:02:08,880 Speaker 4: problem and continue to go lower. 44 00:02:09,200 --> 00:02:11,679 Speaker 6: Hey, Mike, the US, other countries, they're taking steps to 45 00:02:11,720 --> 00:02:14,640 Speaker 6: tame prices. Right we're talking about the release of strategic reserves. 46 00:02:15,480 --> 00:02:18,960 Speaker 6: From your history following this and tracking this market is 47 00:02:19,440 --> 00:02:21,440 Speaker 6: would this I mean, is this just a band aid? 48 00:02:21,560 --> 00:02:23,880 Speaker 5: To put it that way, I think that's a good 49 00:02:23,880 --> 00:02:24,560 Speaker 5: way to describe it. 50 00:02:24,840 --> 00:02:27,200 Speaker 4: The first thing I thought of when I heard that 51 00:02:27,320 --> 00:02:30,760 Speaker 4: is it's a sign that yes, oops, we made a 52 00:02:30,800 --> 00:02:32,200 Speaker 4: mistake the hormones. 53 00:02:32,280 --> 00:02:33,560 Speaker 5: The strait is closed now. 54 00:02:33,600 --> 00:02:36,120 Speaker 4: That is enduring for now, but it just means they're 55 00:02:36,160 --> 00:02:38,680 Speaker 4: going to pound harder and harder and harder on this 56 00:02:38,800 --> 00:02:41,880 Speaker 4: offensive capability of Iran. I think that's what's happening now. 57 00:02:42,040 --> 00:02:45,240 Speaker 4: They're bringing in more and more and more offensive capabilities 58 00:02:45,280 --> 00:02:46,200 Speaker 4: that just stop it enough. 59 00:02:46,240 --> 00:02:48,000 Speaker 5: They can't. That's a major failure. 60 00:02:48,240 --> 00:02:50,640 Speaker 4: But right now we're seeing the markets starting saying, yeah, 61 00:02:50,880 --> 00:02:53,480 Speaker 4: a lot of these attacks are slowing down. The worst 62 00:02:53,520 --> 00:02:56,280 Speaker 4: is probably over, and a key indicator that is collapsing gold. 63 00:02:56,320 --> 00:02:58,440 Speaker 5: I think it's looking forward to a safer world. 64 00:02:59,320 --> 00:03:02,359 Speaker 2: What are the future markets telling us Mike today about 65 00:03:02,400 --> 00:03:04,000 Speaker 2: the oil market. 66 00:03:04,760 --> 00:03:07,640 Speaker 5: There's a major burden to go higher. 67 00:03:07,720 --> 00:03:10,520 Speaker 4: Like I mentioned, if you go every future contract is 68 00:03:10,560 --> 00:03:12,359 Speaker 4: in backgradation, which means is lower. 69 00:03:12,480 --> 00:03:13,880 Speaker 5: So I'm focusing on the US. 70 00:03:14,080 --> 00:03:16,320 Speaker 4: Why the US is the largest energy producer and a 71 00:03:16,360 --> 00:03:19,320 Speaker 4: net exporterer it's the one that matters. That's what's shifted 72 00:03:19,320 --> 00:03:21,880 Speaker 4: from the last ten twenty years, and US is a 73 00:03:21,880 --> 00:03:25,240 Speaker 4: complete upper hand. But we're also seeing the price of 74 00:03:25,280 --> 00:03:27,640 Speaker 4: gasoline went to four dollars a gallon. Remember what happened 75 00:03:27,639 --> 00:03:30,320 Speaker 4: in two thousand and eight. When that happened, it accelerates recession. 76 00:03:30,400 --> 00:03:32,800 Speaker 4: So we're seeing right now as a global energy crisis 77 00:03:32,880 --> 00:03:35,920 Speaker 4: ticking over. The straight of har Moose might be somewhat 78 00:03:35,960 --> 00:03:38,520 Speaker 4: safe within a few days. It's already getting safeer and 79 00:03:38,560 --> 00:03:41,400 Speaker 4: Crudell's anticipating. And what I point out is now we're 80 00:03:41,400 --> 00:03:44,080 Speaker 4: seeing collapsing in dustrial metals, which I think that's a 81 00:03:44,160 --> 00:03:47,760 Speaker 4: sign that this is a global recessionary trajectory on the 82 00:03:47,760 --> 00:03:51,480 Speaker 4: back of the spike and the shock of the straight 83 00:03:51,480 --> 00:03:52,160 Speaker 4: being closed. 84 00:03:52,440 --> 00:03:54,400 Speaker 6: Hey, Mike, we have about thirty seconds left. So you 85 00:03:54,440 --> 00:03:56,360 Speaker 6: mentioned golds. I want you to kind of expand on 86 00:03:56,440 --> 00:03:57,760 Speaker 6: that a little bit. I mean, it's seen of this 87 00:03:57,880 --> 00:04:00,720 Speaker 6: haven heading for the biggest weekly loss in Sea. I mean, 88 00:04:01,040 --> 00:04:03,320 Speaker 6: what does gold see kind of moving forward? 89 00:04:04,360 --> 00:04:07,839 Speaker 4: Gold predicted this, It went up too much last year. 90 00:04:07,960 --> 00:04:09,760 Speaker 5: It warned us something might be happened. 91 00:04:09,800 --> 00:04:12,720 Speaker 4: So by the rumor sell effect, the significance is gold 92 00:04:12,920 --> 00:04:15,080 Speaker 4: was a store value, but right now, at almost two 93 00:04:15,120 --> 00:04:17,640 Speaker 4: point four times the volatility of the S and B 94 00:04:17,720 --> 00:04:20,400 Speaker 4: five hundred, it's now a speculative risk asset in the 95 00:04:20,480 --> 00:04:21,680 Speaker 4: late days of a bear mark. 96 00:04:21,680 --> 00:04:23,040 Speaker 5: And I think it's more like a go down to 97 00:04:23,080 --> 00:04:24,320 Speaker 5: four thousand dollars and announce. 98 00:04:25,040 --> 00:04:27,720 Speaker 3: All right, Micha maclohan, thank you so much. We appreciate that. 99 00:04:27,839 --> 00:04:32,080 Speaker 2: Mike mcloon, he is the senior commodity strategist for Bloomberg Intelligence. 100 00:04:32,120 --> 00:04:34,600 Speaker 2: He's spaced down there in Miami Beach, Florida, and if 101 00:04:34,640 --> 00:04:37,560 Speaker 2: you care about that part of the world, Sonny and eighty, 102 00:04:38,040 --> 00:04:40,720 Speaker 2: as far as the I can see, Mike McLoone the 103 00:04:40,880 --> 00:04:43,400 Speaker 2: smartest guy in the room, no doubt. 104 00:04:45,120 --> 00:04:48,240 Speaker 3: Stay with us. More from Bloomberg Surveillance coming up after this. 105 00:04:54,480 --> 00:04:58,080 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 106 00:04:58,120 --> 00:05:02,160 Speaker 1: weekday afternoons from seven to ten. Listen on Apple Karplay 107 00:05:02,160 --> 00:05:05,440 Speaker 1: and Android Otto with the Bloomberg Business app, or watch 108 00:05:05,520 --> 00:05:06,720 Speaker 1: us live on YouTube. 109 00:05:07,080 --> 00:05:09,000 Speaker 3: Welcome Cole Smeat into our studio. 110 00:05:09,560 --> 00:05:12,280 Speaker 2: Cole Smith is the CEO and portfolio manager Smeat Capital 111 00:05:12,279 --> 00:05:14,840 Speaker 2: Manager based out there in Phoenix. Your summer has already 112 00:05:14,839 --> 00:05:18,760 Speaker 2: started in Phoenix, Right, I've seen some crazy temperatures it has. 113 00:05:18,800 --> 00:05:20,320 Speaker 7: In fact, I need to invite both of you to 114 00:05:20,360 --> 00:05:22,359 Speaker 7: come out breakfast with us like Tom Keane did a 115 00:05:22,360 --> 00:05:24,440 Speaker 7: few weeks ago here yep, before he went off to 116 00:05:24,520 --> 00:05:27,159 Speaker 7: his you know, San Francisco Giants spring training game LA 117 00:05:27,240 --> 00:05:27,880 Speaker 7: that afternoon. 118 00:05:28,120 --> 00:05:31,000 Speaker 8: So that's an open welcome, by the way, one hundred percent. 119 00:05:31,360 --> 00:05:33,279 Speaker 7: We are we already We're gonna think we're gonna hit 120 00:05:33,279 --> 00:05:36,039 Speaker 7: a hundred degree temperature this next week, earliest we've seen 121 00:05:36,080 --> 00:05:36,599 Speaker 7: for a while. 122 00:05:37,480 --> 00:05:40,040 Speaker 8: That being said, as I walk around to Cole New York, Yep, 123 00:05:40,279 --> 00:05:42,440 Speaker 8: I'm not exactly sad about that. So it's back for 124 00:05:42,480 --> 00:05:44,360 Speaker 8: ski season, but it is what it is. 125 00:05:44,440 --> 00:05:47,159 Speaker 2: It is, and it's a dry heat. Col what's the 126 00:05:47,200 --> 00:05:49,520 Speaker 2: conversation you're having with your clients these days? The last 127 00:05:49,520 --> 00:05:52,040 Speaker 2: three weeks have kind of thrown that Black Swan event 128 00:05:52,120 --> 00:05:53,599 Speaker 2: out there, and I'm sure it's got a lot of 129 00:05:53,880 --> 00:05:56,880 Speaker 2: volatility into the marketplaces. Probably your phones might be bringing 130 00:05:56,880 --> 00:05:59,000 Speaker 2: a little bit more than usual. What's the message you're 131 00:05:59,000 --> 00:05:59,800 Speaker 2: bringing to your clients? 132 00:06:00,120 --> 00:06:01,400 Speaker 8: Yeah, so here's what I would say. 133 00:06:01,880 --> 00:06:03,640 Speaker 7: You know, you were just mentioning the timeline of what's 134 00:06:03,640 --> 00:06:05,760 Speaker 7: going on in this conflict. Let's just go back to 135 00:06:05,839 --> 00:06:09,120 Speaker 7: nineteen seventy three Yam Kapor War lasted thirty days, and 136 00:06:09,200 --> 00:06:11,760 Speaker 7: yet the effects of it were seen throughout the rest 137 00:06:11,800 --> 00:06:12,359 Speaker 7: of the decade. 138 00:06:13,160 --> 00:06:15,520 Speaker 8: So I say that because I. 139 00:06:15,440 --> 00:06:17,320 Speaker 7: Think that the idea was this is going to be 140 00:06:17,360 --> 00:06:19,640 Speaker 7: like venny aka Venezuela. 141 00:06:19,720 --> 00:06:22,080 Speaker 8: We're going to come in. It's gonna be strategic, super surgical. 142 00:06:22,440 --> 00:06:26,000 Speaker 7: This has been everything but that, okay, And therefore what 143 00:06:26,000 --> 00:06:28,600 Speaker 7: we're in is a longer term conflict. And what are 144 00:06:28,600 --> 00:06:30,920 Speaker 7: we seeing. We are seeing longer term problems arise. 145 00:06:31,000 --> 00:06:32,840 Speaker 8: Okay, you're Calleague in Dubai. 146 00:06:32,880 --> 00:06:34,360 Speaker 7: If they go out to the spot market and oil 147 00:06:34,440 --> 00:06:37,840 Speaker 7: right now, they're not going to see that price on Brent. 148 00:06:38,160 --> 00:06:40,360 Speaker 7: They're looking at one seventy the highest price ever paid 149 00:06:40,360 --> 00:06:41,280 Speaker 7: in the history of the world. Yep. 150 00:06:41,400 --> 00:06:41,719 Speaker 8: Okay. 151 00:06:42,120 --> 00:06:44,680 Speaker 7: And so I point that out because just think of what. 152 00:06:44,760 --> 00:06:47,000 Speaker 7: Let's go back one year ago. We're sitting there staring 153 00:06:47,040 --> 00:06:51,159 Speaker 7: at the tariff tantrum. We're watching economic cyclicality get bludgeoned. 154 00:06:51,720 --> 00:06:54,719 Speaker 7: OPEC plus is increasing supply. It's going to be a 155 00:06:54,800 --> 00:06:56,719 Speaker 7: nightmare for the oil business because we might have a 156 00:06:56,760 --> 00:07:00,440 Speaker 7: recession YadA, YadA, YadA. And here we are less than 157 00:07:00,440 --> 00:07:02,800 Speaker 7: twelve months later, and that seems to be a place 158 00:07:02,800 --> 00:07:04,839 Speaker 7: to be. And guess where investors are not. They do 159 00:07:04,920 --> 00:07:07,719 Speaker 7: not own the energy assets to quote the money python. 160 00:07:07,920 --> 00:07:10,320 Speaker 7: The energy business started off as tis merely a flesh 161 00:07:10,360 --> 00:07:13,440 Speaker 7: wound at three percent, and now investors are having to 162 00:07:13,440 --> 00:07:15,440 Speaker 7: ask the question, what should I be doing? What am 163 00:07:15,480 --> 00:07:18,360 Speaker 7: I doing differently? But here's what's weird. Markets are very 164 00:07:18,400 --> 00:07:18,840 Speaker 7: slow to. 165 00:07:18,800 --> 00:07:21,760 Speaker 8: Adapt to this. I mean, the first week the oil 166 00:07:21,760 --> 00:07:22,920 Speaker 8: stocks didn't even go up. 167 00:07:23,440 --> 00:07:27,040 Speaker 7: Okay, you wake up two. Week two there's a marginal bid. 168 00:07:27,160 --> 00:07:30,360 Speaker 7: Week three, there's more of a bid. This looks like 169 00:07:30,400 --> 00:07:33,200 Speaker 7: it's going to just continue on. But the former trade, 170 00:07:33,240 --> 00:07:37,640 Speaker 7: the former great glorious mania in America, the AI Campex 171 00:07:38,000 --> 00:07:40,240 Speaker 7: hyper scaling game that year is over. 172 00:07:40,920 --> 00:07:44,080 Speaker 6: Well, all that said, I mean, where are their opportunities? 173 00:07:44,480 --> 00:07:45,320 Speaker 6: Where's their value? 174 00:07:45,520 --> 00:07:48,760 Speaker 7: Yeah, you know, if you want to beat Bobby Fisher, 175 00:07:49,200 --> 00:07:51,880 Speaker 7: you got to play him in any game. But chess, Okay, 176 00:07:52,160 --> 00:07:55,360 Speaker 7: chess in the American stock market is big cap tech. 177 00:07:55,880 --> 00:07:56,920 Speaker 7: You can't play that game. 178 00:07:57,040 --> 00:07:59,760 Speaker 8: Okay. Go look at all the quality. 179 00:07:59,400 --> 00:08:02,040 Speaker 7: Growth manager that hid out in the SaaS businesses the 180 00:08:02,080 --> 00:08:03,840 Speaker 7: last couple of years, thinking that that's the way they'll 181 00:08:03,840 --> 00:08:05,480 Speaker 7: beat the game of chess and they found out they 182 00:08:05,520 --> 00:08:08,360 Speaker 7: are actually playing chess. Been pretty nightmare in the last 183 00:08:08,400 --> 00:08:11,080 Speaker 7: six months. So I say that because ultimately, you know, 184 00:08:11,120 --> 00:08:13,960 Speaker 7: we have found to be more attractive in economic cyclical businesses. 185 00:08:14,000 --> 00:08:18,400 Speaker 7: So like think of housing mall rates. We're in a 186 00:08:18,440 --> 00:08:20,560 Speaker 7: world today. We're in nineteen seventy three, we did not 187 00:08:20,680 --> 00:08:23,800 Speaker 7: have energy security. We are the largest oil producing nation 188 00:08:23,840 --> 00:08:25,920 Speaker 7: in the world. We have this neighbor to the north 189 00:08:26,120 --> 00:08:27,880 Speaker 7: that we have a lot of security with, who's a 190 00:08:27,960 --> 00:08:31,320 Speaker 7: large oil producing nation as well. We look at the tars, 191 00:08:31,600 --> 00:08:34,360 Speaker 7: the oil stands in Canada. Our largest holding across our 192 00:08:34,360 --> 00:08:37,559 Speaker 7: book is Sonovas. Okay, Sonovas is a thirty plus year asset. 193 00:08:38,320 --> 00:08:40,400 Speaker 7: You know, they bought out Meg last year. It's a 194 00:08:40,440 --> 00:08:42,520 Speaker 7: great business to own. We think it's very attractive price. 195 00:08:42,559 --> 00:08:44,320 Speaker 7: But what's going on right now is if you look 196 00:08:44,360 --> 00:08:46,800 Speaker 7: at the returns on invested capital accruing per day at 197 00:08:46,840 --> 00:08:50,400 Speaker 7: these prices, these oil companies are producing higher returns on 198 00:08:50,440 --> 00:08:53,840 Speaker 7: capital than SaaS businesses, then software businesses, then all the 199 00:08:53,880 --> 00:08:57,240 Speaker 7: asset light players in the world. So what's perverse is 200 00:08:57,320 --> 00:08:59,599 Speaker 7: why are some of the most capital intensive businesses in 201 00:08:59,600 --> 00:09:03,080 Speaker 7: the world producing the highest returns on capital, and yet 202 00:09:03,640 --> 00:09:06,319 Speaker 7: investors are still treating the asset light businesses like they're 203 00:09:06,360 --> 00:09:09,480 Speaker 7: producing great returns, even though, like I just said, we 204 00:09:09,600 --> 00:09:12,080 Speaker 7: know that in this cap X game, the cash returns 205 00:09:12,080 --> 00:09:14,959 Speaker 7: are declining rapidly in these hyperscalers. 206 00:09:15,360 --> 00:09:17,360 Speaker 2: Aside from energy, which you guys have a couple of 207 00:09:17,440 --> 00:09:21,160 Speaker 2: names including APA in this so novas you mentioned, yep, 208 00:09:22,080 --> 00:09:25,160 Speaker 2: we're else what other sector may be screens wall for you. 209 00:09:25,080 --> 00:09:29,040 Speaker 7: Guys these days, Yeah, the banking world looks attractive because 210 00:09:29,080 --> 00:09:33,560 Speaker 7: people are overplaying fears. Okay, I don't doubt for one 211 00:09:33,600 --> 00:09:36,280 Speaker 7: second that institutions and a bunch of ultra high net 212 00:09:36,320 --> 00:09:39,400 Speaker 7: worth people bought some assets they shouldn't have in places 213 00:09:39,440 --> 00:09:42,559 Speaker 7: like private credit and other alternatives. That is a totally 214 00:09:42,600 --> 00:09:46,199 Speaker 7: plausible theory. The idea that that is the average American 215 00:09:46,400 --> 00:09:49,800 Speaker 7: and the average American household if you go look, if 216 00:09:49,800 --> 00:09:52,360 Speaker 7: you go look at the Federal reserves reports on household 217 00:09:52,440 --> 00:09:55,160 Speaker 7: net worth equity is a percentage of household assets. Is 218 00:09:55,200 --> 00:09:58,440 Speaker 7: the highest I ever been right now, fifty four percent. Okay. Now, 219 00:09:58,480 --> 00:10:01,679 Speaker 7: what's more normal is real estate is bigger in that 220 00:10:01,720 --> 00:10:04,360 Speaker 7: because your home is typically your largest asset, and that's 221 00:10:04,440 --> 00:10:07,120 Speaker 7: very typical for most Americans to retire. We're at a 222 00:10:07,120 --> 00:10:11,079 Speaker 7: point where stocks have become bigger than real estate, and ultimately, 223 00:10:11,120 --> 00:10:13,160 Speaker 7: what it means is we're probably in an era where 224 00:10:13,800 --> 00:10:18,040 Speaker 7: your home out punches your stocks and the problems of 225 00:10:18,080 --> 00:10:21,120 Speaker 7: these products that we're sold to institutions and high network folks, 226 00:10:21,320 --> 00:10:23,439 Speaker 7: you know, the private credit type stuff that is going 227 00:10:23,440 --> 00:10:27,440 Speaker 7: to be contained in wealthy and institutional arenas. But the 228 00:10:27,600 --> 00:10:30,040 Speaker 7: average American doesn't take risk in that. And so the 229 00:10:30,080 --> 00:10:32,599 Speaker 7: idea that there's some massive spill over the economy and 230 00:10:32,640 --> 00:10:34,280 Speaker 7: therefore banking is can be really terrible. 231 00:10:34,800 --> 00:10:36,920 Speaker 8: We just don't see proof to that theory. 232 00:10:37,120 --> 00:10:39,840 Speaker 6: How are you talking to your clients and this kind 233 00:10:39,880 --> 00:10:41,400 Speaker 6: of climate that we're living, mean, well, what kind of 234 00:10:41,440 --> 00:10:42,719 Speaker 6: questions do they have for you? 235 00:10:44,240 --> 00:10:48,040 Speaker 7: Disbelief that the folks that own energy might win the game? 236 00:10:48,480 --> 00:10:51,280 Speaker 7: I mean disbelief where it's like, gosh, you know. The 237 00:10:51,320 --> 00:10:53,280 Speaker 7: main thing we've been talking about with investors is like, listen, 238 00:10:53,360 --> 00:10:56,240 Speaker 7: this is a very concentrated, narrow world, and if the 239 00:10:56,280 --> 00:10:59,560 Speaker 7: future is unknown, which it always is unknown, are we 240 00:10:59,600 --> 00:11:00,720 Speaker 7: all playing the wrong game? 241 00:11:00,880 --> 00:11:01,240 Speaker 8: Okay? 242 00:11:01,720 --> 00:11:04,200 Speaker 7: And ultimately, what's happened the last twelve months is people 243 00:11:04,240 --> 00:11:06,160 Speaker 7: went from being like I know, I should probably get 244 00:11:06,200 --> 00:11:07,880 Speaker 7: away from some of this stuff and diversify a way. 245 00:11:08,040 --> 00:11:09,880 Speaker 7: And if you look at our portfolio, we're a diversifier. 246 00:11:09,920 --> 00:11:12,119 Speaker 7: Whether you're talking us or not. Us and our portfolio, 247 00:11:12,160 --> 00:11:15,160 Speaker 7: we just we tend on things that people don't. And 248 00:11:15,240 --> 00:11:17,720 Speaker 7: now people are actually asking that question for the first time, 249 00:11:17,920 --> 00:11:19,840 Speaker 7: why should I look at this? Because if this is 250 00:11:19,880 --> 00:11:22,720 Speaker 7: a longer term problem, maybe I haven't been doing what 251 00:11:22,760 --> 00:11:25,800 Speaker 7: I should. But again there we're nowhere near money moving 252 00:11:25,840 --> 00:11:26,480 Speaker 7: based on that. 253 00:11:26,920 --> 00:11:29,000 Speaker 5: Col, thanks so much for coming in here. We appreciate it. 254 00:11:29,040 --> 00:11:31,400 Speaker 2: Col Sweeden, he's the CEO of portfolio manager of SMED 255 00:11:31,679 --> 00:11:32,839 Speaker 2: Capital Management. 256 00:11:34,800 --> 00:11:35,400 Speaker 5: Stay with us. 257 00:11:35,440 --> 00:11:37,880 Speaker 3: More from Bloomberg Surveillance coming up after this. 258 00:11:44,160 --> 00:11:47,760 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 259 00:11:47,800 --> 00:11:50,960 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 260 00:11:51,040 --> 00:11:54,720 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 261 00:11:54,840 --> 00:11:56,319 Speaker 1: watch us live on YouTube. 262 00:11:56,840 --> 00:12:00,240 Speaker 2: Karon Mannet vice president and Fixed Income Investment Directors. IT 263 00:12:00,600 --> 00:12:03,440 Speaker 2: federated her as she is a proud Nitly Lion from 264 00:12:03,480 --> 00:12:07,000 Speaker 2: Penn State University. That's the highlight for me, I think, Karen, 265 00:12:07,280 --> 00:12:10,800 Speaker 2: let's step back here. How are you kind of rethinking 266 00:12:12,360 --> 00:12:14,680 Speaker 2: your fixed income strategy here and what does it become 267 00:12:14,679 --> 00:12:18,559 Speaker 2: a more turbulent world over the last three to four weeks. 268 00:12:19,600 --> 00:12:23,440 Speaker 9: Well, good morning and thank you. Definitely more volatility in 269 00:12:23,679 --> 00:12:27,559 Speaker 9: fixed income markets and to you know, reset that range 270 00:12:27,640 --> 00:12:30,560 Speaker 9: or put it into context. We entered the conflict at 271 00:12:30,600 --> 00:12:34,280 Speaker 9: the end of February with yields really at the lower 272 00:12:34,400 --> 00:12:36,720 Speaker 9: end of that range. As you said, we had pushed 273 00:12:36,720 --> 00:12:39,920 Speaker 9: down below four percent on that guiding star for US 274 00:12:39,960 --> 00:12:43,160 Speaker 9: long term fixed income managers, the ten year rate, and 275 00:12:43,240 --> 00:12:46,120 Speaker 9: I think we entered the conflict a little bit low. 276 00:12:46,520 --> 00:12:49,319 Speaker 9: You know, that was a rate that priced in significant 277 00:12:49,360 --> 00:12:53,080 Speaker 9: movement from the Federal Reserve, likely on the heels of 278 00:12:53,400 --> 00:12:57,280 Speaker 9: Kevin Warsh being nominated as the new head, and then 279 00:12:57,360 --> 00:13:00,400 Speaker 9: we got into a more reasonable trading range. But what 280 00:13:00,440 --> 00:13:05,160 Speaker 9: we saw, particularly yesterday and through this week is a 281 00:13:05,280 --> 00:13:09,640 Speaker 9: significant reprising of expectations of what the Federal Reserve can 282 00:13:09,720 --> 00:13:12,079 Speaker 9: do or what they will do at the front end 283 00:13:12,120 --> 00:13:15,840 Speaker 9: of the curve. So tens pushing a little bit higher, 284 00:13:16,320 --> 00:13:19,600 Speaker 9: but really that two year rate going even higher than 285 00:13:19,640 --> 00:13:23,440 Speaker 9: that and flattening yield curves. So here we see the 286 00:13:23,520 --> 00:13:28,240 Speaker 9: bond market fighting off its eternal foe inflation. And it's 287 00:13:28,280 --> 00:13:32,200 Speaker 9: a good time for investors to look more to coupon 288 00:13:32,320 --> 00:13:37,479 Speaker 9: clipping or income rather than the price appreciation or diversification 289 00:13:37,600 --> 00:13:38,480 Speaker 9: of the bond market. 290 00:13:38,760 --> 00:13:41,040 Speaker 6: Karen, you mentioned the FED, I mean the composition of 291 00:13:41,080 --> 00:13:44,520 Speaker 6: it continues, of course to be interesting. Is your house 292 00:13:44,600 --> 00:13:47,680 Speaker 6: view still for one ease this year? Has that changed? 293 00:13:49,320 --> 00:13:52,360 Speaker 9: It hasn't changed, well moderated since the beginning of the year. 294 00:13:52,760 --> 00:13:54,920 Speaker 9: We went into the beginning of the year looking for 295 00:13:55,160 --> 00:13:58,680 Speaker 9: maybe two cuts, expected maybe one in June than one 296 00:13:58,720 --> 00:14:02,720 Speaker 9: in September through decem With the behavior of the markets, 297 00:14:02,760 --> 00:14:05,520 Speaker 9: and some of that is health Lisa, it is a 298 00:14:05,800 --> 00:14:11,319 Speaker 9: relatively resilient and stable economy. I describe it as equilibrium. 299 00:14:11,520 --> 00:14:16,960 Speaker 9: Equilibrium is not necessarily comfortable. But now with inflation coming 300 00:14:17,040 --> 00:14:21,720 Speaker 9: back in, with the spike in oil prices, extreme sensitivity 301 00:14:21,880 --> 00:14:26,560 Speaker 9: around the length of this conflict, we are now expecting 302 00:14:26,680 --> 00:14:29,400 Speaker 9: one and perhaps that would be later in the year. 303 00:14:29,480 --> 00:14:32,480 Speaker 9: So you hear you hear that hedging in my voice, 304 00:14:32,520 --> 00:14:35,000 Speaker 9: and in that position, it's a little bit wait and see. 305 00:14:35,520 --> 00:14:36,400 Speaker 3: High yield market. 306 00:14:36,480 --> 00:14:37,400 Speaker 5: What's your view there? 307 00:14:37,640 --> 00:14:39,720 Speaker 2: You have credit concerns there in a high yield market 308 00:14:39,800 --> 00:14:42,480 Speaker 2: or do you feel like the risk reward. 309 00:14:42,240 --> 00:14:45,640 Speaker 9: Is worth it here, I would say the latter, Paul, 310 00:14:45,840 --> 00:14:49,720 Speaker 9: it's not so much a'll recharacterize it. We're more sensitive 311 00:14:49,760 --> 00:14:53,200 Speaker 9: to valuation with high yield. Still, we have seen a 312 00:14:53,320 --> 00:14:57,080 Speaker 9: nice orderly widening of spreads there, but we are not 313 00:14:57,280 --> 00:15:01,200 Speaker 9: at our target to lift out of the underweight position 314 00:15:01,320 --> 00:15:04,320 Speaker 9: where we've been. We would like to see spreads closer 315 00:15:04,400 --> 00:15:09,720 Speaker 9: to four hundred basis points on a pretty stabilized basis point, sorry, 316 00:15:09,840 --> 00:15:12,480 Speaker 9: stabilized point, not just a flash in the pan. We 317 00:15:12,680 --> 00:15:16,360 Speaker 9: are above three hundred, but still waiting to see more 318 00:15:16,480 --> 00:15:20,560 Speaker 9: value there. The companies are largely doing fine. They would 319 00:15:20,640 --> 00:15:24,120 Speaker 9: not have the ability to move out of non investment 320 00:15:24,160 --> 00:15:28,080 Speaker 9: grade to investment grade. The pricing power isn't there, the 321 00:15:28,080 --> 00:15:32,280 Speaker 9: ability to grow volumes. You know, they can't correct what 322 00:15:32,440 --> 00:15:35,920 Speaker 9: made them non investment grade. Our analysts there think results 323 00:15:35,960 --> 00:15:40,600 Speaker 9: are largely fine to inline. Nothing to make them overly worried, 324 00:15:40,720 --> 00:15:44,080 Speaker 9: but nothing to make them overly excited that they can, 325 00:15:44,200 --> 00:15:46,960 Speaker 9: you know, eclipse that non investment grade rating. 326 00:15:47,280 --> 00:15:49,320 Speaker 6: Karen, I'm looking through your notes here. You talk about 327 00:15:49,400 --> 00:15:51,880 Speaker 6: private credit being in the headlines, of course, does it 328 00:15:51,920 --> 00:15:55,080 Speaker 6: have the characteristics to build toward this systemic crisis that 329 00:15:55,440 --> 00:15:58,280 Speaker 6: we've been hearing, we don't think so. 330 00:15:58,800 --> 00:16:02,320 Speaker 9: And we took a look at what has caused systemic 331 00:16:02,520 --> 00:16:06,560 Speaker 9: crisis in the past, and oftentimes, yes, you do see 332 00:16:06,720 --> 00:16:10,120 Speaker 9: an increase in defaults, and we look at defaults by 333 00:16:10,280 --> 00:16:14,200 Speaker 9: number and also by dollar amount. But you really need 334 00:16:14,520 --> 00:16:18,160 Speaker 9: leverage in the system in order to become a systemic 335 00:16:18,200 --> 00:16:21,560 Speaker 9: event like long term capital management the late eighties or 336 00:16:21,600 --> 00:16:24,720 Speaker 9: the Great Financial Crisis. But we all know that there's 337 00:16:25,040 --> 00:16:28,400 Speaker 9: a lot of market value and road between systemic crisis 338 00:16:28,880 --> 00:16:32,520 Speaker 9: and optimal markets. And I think what we're really seeing, 339 00:16:32,560 --> 00:16:35,000 Speaker 9: and as many of your speakers have said over the morning, 340 00:16:35,560 --> 00:16:41,040 Speaker 9: is a recalibration of liquidity and pricing around liquidity. These 341 00:16:41,040 --> 00:16:45,160 Speaker 9: are loans to middle market companies that are very necessary, 342 00:16:45,520 --> 00:16:48,520 Speaker 9: and we're getting a lot of our information from Bloomberg 343 00:16:48,680 --> 00:16:52,440 Speaker 9: on these private markets and from media. Roger Ferguson wrote 344 00:16:52,480 --> 00:16:55,720 Speaker 9: a great piece in the Financial Times where you characterize 345 00:16:55,760 --> 00:16:59,880 Speaker 9: these loans and how private credit came about. But what happened, 346 00:17:00,000 --> 00:17:03,400 Speaker 9: as with the success of private credit with the attractive yields, 347 00:17:03,600 --> 00:17:06,920 Speaker 9: it began to be sold down into retail channels. The 348 00:17:06,960 --> 00:17:13,000 Speaker 9: retail vehicles provide for greater liquidity or faster liquidity than 349 00:17:13,040 --> 00:17:16,080 Speaker 9: the tenor of the underlying loans, those are mostly three 350 00:17:16,080 --> 00:17:19,159 Speaker 9: to five years. So when you have a liquidity mismatch 351 00:17:19,400 --> 00:17:21,879 Speaker 9: and then you have something in the headlines that was 352 00:17:21,960 --> 00:17:26,000 Speaker 9: sold for being attractive and something that you needed to 353 00:17:26,200 --> 00:17:29,040 Speaker 9: have in the portfolio, and then you're seeing in the 354 00:17:29,080 --> 00:17:31,800 Speaker 9: headlines that you need to get out, you're just having 355 00:17:31,920 --> 00:17:36,200 Speaker 9: a mismatch in the vehicle versus the purchaser. 356 00:17:37,000 --> 00:17:37,640 Speaker 5: Karen Mike, my. 357 00:17:37,600 --> 00:17:40,160 Speaker 2: Good friends on the debt capital markets desks across Wall 358 00:17:40,200 --> 00:17:42,000 Speaker 2: Street are having a heck of a year here. The 359 00:17:42,040 --> 00:17:45,320 Speaker 2: supply has been really really heavy. How's the market been 360 00:17:45,800 --> 00:17:47,240 Speaker 2: receiving this supply. 361 00:17:48,680 --> 00:17:52,680 Speaker 9: It's been received extraordinarily well. We went into the year 362 00:17:52,800 --> 00:17:57,160 Speaker 9: knowing that we would see significant new supply from merger 363 00:17:57,400 --> 00:18:00,600 Speaker 9: and activity funding, and then that we would also see 364 00:18:00,600 --> 00:18:03,639 Speaker 9: the hyperscalers coming to the market. They have already done 365 00:18:03,680 --> 00:18:06,840 Speaker 9: more than half of their expected supply. But the supply 366 00:18:07,000 --> 00:18:10,160 Speaker 9: is coming in, and because the yield and the income 367 00:18:10,359 --> 00:18:14,359 Speaker 9: it's that known variable are attractive, it seems that investors 368 00:18:14,359 --> 00:18:17,800 Speaker 9: are flocking to investment grade corporate bonds for that known income, 369 00:18:18,119 --> 00:18:21,040 Speaker 9: that little bit of spread over the US Treasury and 370 00:18:21,280 --> 00:18:25,200 Speaker 9: enjoying that rather than taking excessive duration risk. So we've 371 00:18:25,240 --> 00:18:28,440 Speaker 9: seen again a little bit of widening. We've gone out 372 00:18:28,480 --> 00:18:33,119 Speaker 9: from the high seventies for the investment grade oas until 373 00:18:33,160 --> 00:18:34,200 Speaker 9: now we're into. 374 00:18:34,080 --> 00:18:35,760 Speaker 3: The mid nineties or so. 375 00:18:36,080 --> 00:18:39,480 Speaker 9: But we see that as a restoration of value and 376 00:18:39,600 --> 00:18:44,040 Speaker 9: a time where selection security, selection can begin to matter. 377 00:18:44,359 --> 00:18:46,720 Speaker 9: So one of our big themes in houses. While we 378 00:18:46,760 --> 00:18:50,280 Speaker 9: have a top down framework, we are bottom up fundamental 379 00:18:50,440 --> 00:18:54,280 Speaker 9: reviewers of credit day in, day out. We speak to 380 00:18:54,600 --> 00:18:59,200 Speaker 9: discernment and discipline around valuation. Of course we're cognizant of themes, 381 00:18:59,400 --> 00:19:02,040 Speaker 9: but as we say in health, it wasn't likely that 382 00:19:02,200 --> 00:19:05,919 Speaker 9: all software companies were great going into the beginning of 383 00:19:05,960 --> 00:19:09,199 Speaker 9: this year, and it's similarly just as likely that they 384 00:19:09,240 --> 00:19:12,680 Speaker 9: are not all going to fail just because the tide 385 00:19:12,760 --> 00:19:13,159 Speaker 9: is turned. 386 00:19:13,880 --> 00:19:17,040 Speaker 2: Thanks so much appreciating Arent Man, vice president and fixing them. 387 00:19:17,040 --> 00:19:20,919 Speaker 2: Investment director for Federator, Hermie Stay with us. 388 00:19:21,040 --> 00:19:23,520 Speaker 3: More from Bloomberg Surveillance coming up after this. 389 00:19:29,760 --> 00:19:33,320 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 390 00:19:33,400 --> 00:19:36,560 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 391 00:19:36,640 --> 00:19:40,320 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 392 00:19:40,440 --> 00:19:41,960 Speaker 1: watch us live on YouTube. 393 00:19:42,280 --> 00:19:45,360 Speaker 2: Rebecca Walser joins us here Presidency of Walser Wealth Management. 394 00:19:45,480 --> 00:19:47,800 Speaker 3: Rebecca, thanks so much for joining us here in the studio. 395 00:19:47,880 --> 00:19:48,040 Speaker 7: Home. 396 00:19:48,240 --> 00:19:52,919 Speaker 2: Crazy times out there, crazy lots of volatility. What are 397 00:19:52,960 --> 00:19:54,760 Speaker 2: the conversation I'm sure your phone's bringing off the hook 398 00:19:54,760 --> 00:19:56,719 Speaker 2: from your clients. What's the conversation you're having here? 399 00:19:57,080 --> 00:19:59,560 Speaker 10: I mean, we've been big commodity bugs for the lascence 400 00:19:59,600 --> 00:20:01,520 Speaker 10: twenty twenty pandemic, so I think a lot of people 401 00:20:01,560 --> 00:20:04,720 Speaker 10: are really concerned about the routing down again of precious metal, 402 00:20:04,760 --> 00:20:07,399 Speaker 10: specifically gold and silver, and so that's definitely something that 403 00:20:07,400 --> 00:20:09,400 Speaker 10: we have to explain to them. This is a three 404 00:20:09,520 --> 00:20:12,520 Speaker 10: part attack on gold. First of all, there's profit taking 405 00:20:12,600 --> 00:20:15,439 Speaker 10: because it's you know, obviously done extremely well. Second of all, 406 00:20:15,440 --> 00:20:17,840 Speaker 10: I think it's a panic selling because you see high 407 00:20:17,920 --> 00:20:22,080 Speaker 10: volume on GLD ETF and people are really getting up fast. 408 00:20:22,520 --> 00:20:25,280 Speaker 10: And then also you have a rotation out because now 409 00:20:25,280 --> 00:20:27,679 Speaker 10: that we don't expect interest rates to potentially be cut 410 00:20:27,840 --> 00:20:30,640 Speaker 10: or cut as much or as soon, people are looking 411 00:20:30,640 --> 00:20:32,760 Speaker 10: for higher yield than maybe a non yielding asset. So 412 00:20:32,920 --> 00:20:35,520 Speaker 10: it's really a three part attack and we have to 413 00:20:35,640 --> 00:20:40,040 Speaker 10: just stay the course because nothing fundamentally, actually everything has 414 00:20:40,040 --> 00:20:44,720 Speaker 10: actually increased the likelihood of price increases in actual precious metals. 415 00:20:45,040 --> 00:20:46,919 Speaker 10: It's just that they're not going to happen in the 416 00:20:46,920 --> 00:20:49,080 Speaker 10: short term right now. There's a lot of consternation of 417 00:20:49,640 --> 00:20:52,160 Speaker 10: moving capital around, but when you look at the private. 418 00:20:51,840 --> 00:20:54,119 Speaker 11: Credit situation, the liquidity course isn't that other thing. 419 00:20:54,119 --> 00:20:56,960 Speaker 10: I think private credit and liquidity raises are also having 420 00:20:56,960 --> 00:20:58,280 Speaker 10: an impact on selling off. 421 00:20:58,359 --> 00:20:59,840 Speaker 11: And getting out of gold and silver. 422 00:21:00,119 --> 00:21:02,640 Speaker 10: So we just have to stay the course and remember 423 00:21:02,960 --> 00:21:05,080 Speaker 10: that we are not in it for these short term 424 00:21:05,080 --> 00:21:07,879 Speaker 10: price actions. We're really in it because fundamentally, we believe 425 00:21:08,080 --> 00:21:10,240 Speaker 10: that we are at the beginning stages of a transition 426 00:21:10,320 --> 00:21:13,119 Speaker 10: of currency from fiat to stable coin, to the blockchain, 427 00:21:13,160 --> 00:21:15,359 Speaker 10: and ultimately there's going to be a tether to some 428 00:21:15,520 --> 00:21:17,399 Speaker 10: kind of hard assets, and we believe metals will be 429 00:21:17,440 --> 00:21:18,040 Speaker 10: that well. 430 00:21:18,080 --> 00:21:21,320 Speaker 6: So that's it has goal become more volatile than equities. 431 00:21:21,680 --> 00:21:24,240 Speaker 10: I mean, I wouldn't say more volatile than equities, but 432 00:21:24,480 --> 00:21:26,600 Speaker 10: certainly this year in twenty twenty six, we've seen the 433 00:21:26,600 --> 00:21:28,879 Speaker 10: most volatility. We know, it's the worst trading week for 434 00:21:29,000 --> 00:21:31,320 Speaker 10: it and the six years, So from that perspective, it's 435 00:21:31,320 --> 00:21:33,199 Speaker 10: we're seeing a lot more volatile than we're seeing to 436 00:21:33,200 --> 00:21:35,600 Speaker 10: act like a risk on asset, which we're not used to. 437 00:21:35,720 --> 00:21:37,440 Speaker 10: So that's why the consternation, that's why we have to 438 00:21:37,480 --> 00:21:40,560 Speaker 10: explain and just take a breath and remember that, you know, 439 00:21:40,600 --> 00:21:44,320 Speaker 10: it's really, you know, the wrong move to act emotionally 440 00:21:44,359 --> 00:21:46,440 Speaker 10: and to remember the fundamentals and the technicals and why 441 00:21:46,440 --> 00:21:47,359 Speaker 10: we're here in something. 442 00:21:47,840 --> 00:21:51,840 Speaker 2: So where are you asking or where you're telling your 443 00:21:51,840 --> 00:21:53,080 Speaker 2: clients that they should be focusing here? 444 00:21:53,119 --> 00:21:55,680 Speaker 3: Is it US equities? Non US equities? Should we be 445 00:21:55,720 --> 00:21:56,560 Speaker 3: looking at fixed income? 446 00:21:56,760 --> 00:21:57,119 Speaker 8: Where's it? 447 00:21:57,119 --> 00:21:58,640 Speaker 3: Because there is a lot of cross. 448 00:21:58,320 --> 00:21:59,000 Speaker 2: Currents out there. 449 00:21:59,080 --> 00:22:02,000 Speaker 3: Yes, absolutely, So where's the area focused for you? Guys? 450 00:22:02,000 --> 00:22:04,720 Speaker 10: Well, I think right now the global world has got 451 00:22:04,760 --> 00:22:08,800 Speaker 10: some major issues, not geopolitical war aside with a RAN. 452 00:22:08,920 --> 00:22:11,160 Speaker 10: If you look at kretar energy, if you look at 453 00:22:11,200 --> 00:22:15,280 Speaker 10: the actual damage that has happened until liquefied natural gas production, 454 00:22:15,600 --> 00:22:18,440 Speaker 10: the straight being closed, you're looking at for the first time, 455 00:22:18,520 --> 00:22:22,760 Speaker 10: really a three part bifurcation of energy price Asia being 456 00:22:22,880 --> 00:22:25,920 Speaker 10: really the worst, you know, then Europe being the second worst, 457 00:22:25,960 --> 00:22:27,920 Speaker 10: and US, of course, being energy independent, we. 458 00:22:27,920 --> 00:22:29,159 Speaker 11: Are a little bit insulated. 459 00:22:29,400 --> 00:22:32,000 Speaker 10: But so the bottom line is people are trying to 460 00:22:32,000 --> 00:22:33,639 Speaker 10: figure out what is this going to be it's going 461 00:22:33,680 --> 00:22:37,200 Speaker 10: to take some time. I will note that this administration 462 00:22:37,359 --> 00:22:40,879 Speaker 10: is trying to reduce bank capital requirements and reserve requirements 463 00:22:41,000 --> 00:22:43,560 Speaker 10: to make things a little bit easier credit That will 464 00:22:43,560 --> 00:22:46,639 Speaker 10: obviously be good for the rest of two thousand companies. 465 00:22:46,680 --> 00:22:48,520 Speaker 11: And so if you look at. 466 00:22:48,440 --> 00:22:50,480 Speaker 10: That in the framework of the rest of the world 467 00:22:50,480 --> 00:22:53,280 Speaker 10: that's not already talking Europe already talking about rate hikes, 468 00:22:53,960 --> 00:22:56,720 Speaker 10: you know, and all of this inflationary pressure from energy costs. 469 00:22:56,760 --> 00:22:59,320 Speaker 10: I mean, Europe has got a massive energy crisis that's 470 00:22:59,359 --> 00:23:02,720 Speaker 10: approaching very quickly. So I'm going to say no on 471 00:23:02,720 --> 00:23:05,080 Speaker 10: on out going outside of the United States for now, 472 00:23:05,320 --> 00:23:07,040 Speaker 10: and then we'll see if there's pockets of opportunity that 473 00:23:07,080 --> 00:23:09,760 Speaker 10: we can maybe pick up on and dissect. But right now, 474 00:23:09,760 --> 00:23:12,919 Speaker 10: things are extremely fast moving, very fluid, and we just 475 00:23:12,920 --> 00:23:15,120 Speaker 10: have to remain calm and remember. 476 00:23:14,840 --> 00:23:16,040 Speaker 11: Especially in a time of war. 477 00:23:16,119 --> 00:23:18,360 Speaker 10: So we've got the kind of the confluence of all 478 00:23:18,400 --> 00:23:21,320 Speaker 10: the convergence of all things, Paul, We've got literally, you know, 479 00:23:21,720 --> 00:23:25,320 Speaker 10: energy crisis, war, blockchain. 480 00:23:24,960 --> 00:23:28,640 Speaker 11: Fiat bank reserves. I mean, it's just I mean, could 481 00:23:28,680 --> 00:23:29,480 Speaker 11: we add anything else? 482 00:23:29,480 --> 00:23:31,320 Speaker 10: And I don't even say that, because as soon. 483 00:23:31,160 --> 00:23:32,800 Speaker 11: As I say it, something else is going to come 484 00:23:32,800 --> 00:23:33,280 Speaker 11: into the mix. 485 00:23:33,320 --> 00:23:36,200 Speaker 10: But yeah, I mean this is a literally crazy time 486 00:23:36,200 --> 00:23:38,560 Speaker 10: and so therefore calm, cooler heads will prevail. 487 00:23:38,680 --> 00:23:42,920 Speaker 6: And we even talk terrors trade I mean two exactly, 488 00:23:43,080 --> 00:23:45,640 Speaker 6: that's one thing missing from that. So all this uncertainty 489 00:23:45,640 --> 00:23:48,639 Speaker 6: that you're talking about, I mean, does it usually scream 490 00:23:48,920 --> 00:23:51,959 Speaker 6: recession or stagflation? I mean, what's your take with it? 491 00:23:52,359 --> 00:23:55,040 Speaker 10: I mean, I definitely do think that there is going 492 00:23:55,119 --> 00:23:57,760 Speaker 10: to be with the energy crisis alone, with with just 493 00:23:57,800 --> 00:23:59,760 Speaker 10: going back to catar energy saying three to five years 494 00:23:59,760 --> 00:24:02,760 Speaker 10: state and fix the one plant that produces seventeen percent 495 00:24:02,760 --> 00:24:06,000 Speaker 10: of the world's global LNG. I mean, these kinds of 496 00:24:06,040 --> 00:24:09,600 Speaker 10: things definitely have an impact and will be recessionary and 497 00:24:09,720 --> 00:24:14,280 Speaker 10: nature job creation and as a positive, right, energy prices 498 00:24:14,320 --> 00:24:17,080 Speaker 10: going up have some other influationary aspects that help with 499 00:24:17,160 --> 00:24:20,439 Speaker 10: some kinds of investments. Right, But overall, this is a 500 00:24:20,520 --> 00:24:22,080 Speaker 10: time I think we'll look back. You know, you look 501 00:24:22,080 --> 00:24:23,479 Speaker 10: at the S and P five hundred chart. You can 502 00:24:23,520 --> 00:24:27,560 Speaker 10: see dot com, you can see GFC. Will twenty twenty 503 00:24:27,600 --> 00:24:29,920 Speaker 10: six be the beginning of something new that we can 504 00:24:29,920 --> 00:24:32,200 Speaker 10: really see a breakout towards a new a new way 505 00:24:32,240 --> 00:24:34,280 Speaker 10: forward and I do think with you add in there, 506 00:24:34,359 --> 00:24:36,879 Speaker 10: you know, blockchain and stable coin, which is really under 507 00:24:36,960 --> 00:24:38,720 Speaker 10: Congress with right with the Clarity Act that we got 508 00:24:38,760 --> 00:24:41,119 Speaker 10: the Genius Act last year, You've got a lot of 509 00:24:41,240 --> 00:24:43,439 Speaker 10: changing parts and so this is going to be the 510 00:24:43,440 --> 00:24:45,399 Speaker 10: beginning of something that is new, I believe. 511 00:24:45,480 --> 00:24:48,720 Speaker 2: Yeah, so how are you What is your strategy your 512 00:24:49,000 --> 00:24:52,280 Speaker 2: advice to your clients as it relates to crypto broadly defined. 513 00:24:52,640 --> 00:24:54,879 Speaker 10: Yeah, Well, we do believe crypto is a risk on asset. 514 00:24:54,920 --> 00:24:57,280 Speaker 10: We haven't had enough of a use case to prove 515 00:24:57,320 --> 00:24:59,359 Speaker 10: that even through a recession it will do well, like 516 00:24:59,760 --> 00:25:03,240 Speaker 10: talking specifically bot coin, So definitely see it as risk one. 517 00:25:03,240 --> 00:25:05,359 Speaker 10: But we do see that stable coin is the future 518 00:25:05,359 --> 00:25:07,560 Speaker 10: transaction system and so we want to be on the 519 00:25:07,560 --> 00:25:09,600 Speaker 10: frontier of that. We want to be on the forefront 520 00:25:09,680 --> 00:25:12,280 Speaker 10: of that and not be afraid of it. I would 521 00:25:12,320 --> 00:25:14,679 Speaker 10: say that overall, we're going to look for pockets of 522 00:25:14,720 --> 00:25:17,680 Speaker 10: picking up a price action on obviously the energy front 523 00:25:17,680 --> 00:25:20,840 Speaker 10: for sure, we've really kind of moved our portfolio from 524 00:25:20,840 --> 00:25:23,800 Speaker 10: commodities and specifically precious metals. 525 00:25:23,359 --> 00:25:24,040 Speaker 11: More to oil. 526 00:25:24,119 --> 00:25:26,080 Speaker 10: Starting October of last year, we pair down and moved 527 00:25:26,160 --> 00:25:28,359 Speaker 10: over to energy. So we've enjoyed really some nice price 528 00:25:28,400 --> 00:25:31,640 Speaker 10: action to the upside. But we still truly believe that 529 00:25:31,720 --> 00:25:34,160 Speaker 10: the system, the global world system, as we move away 530 00:25:34,160 --> 00:25:37,400 Speaker 10: from FIAT, will be anchored in tether too hard precious assets, 531 00:25:37,560 --> 00:25:40,000 Speaker 10: precious metals specifically, So we're going to continue to have 532 00:25:40,320 --> 00:25:42,960 Speaker 10: a gold and silver perspective in our portfolios. 533 00:25:43,280 --> 00:25:45,680 Speaker 6: I'm curious what areas will you be looking to when 534 00:25:45,720 --> 00:25:47,520 Speaker 6: when things sort of calm down. 535 00:25:48,480 --> 00:25:50,000 Speaker 10: The calm down is we're going to be I mean, 536 00:25:50,040 --> 00:25:54,520 Speaker 10: obviously AI everything right, AI disruption. Software as a service 537 00:25:54,560 --> 00:25:57,040 Speaker 10: obviously has been a really big problem for Shear. Private 538 00:25:57,119 --> 00:25:59,320 Speaker 10: credit being invested in software, and you know, private credit 539 00:25:59,359 --> 00:26:01,800 Speaker 10: is really interesting is it's tied into our banking system 540 00:26:02,080 --> 00:26:03,960 Speaker 10: in the sense of all of the credit lines. You know, 541 00:26:04,000 --> 00:26:06,560 Speaker 10: I did an analysis of the top our top you know, 542 00:26:06,680 --> 00:26:09,120 Speaker 10: six banks and how much credit lines they have outstanding 543 00:26:09,200 --> 00:26:11,440 Speaker 10: to private credit, which might be drawing down because there's 544 00:26:11,440 --> 00:26:15,760 Speaker 10: so many redemptions blue alcol pausing redemptions Blackstones b cred 545 00:26:15,840 --> 00:26:18,960 Speaker 10: basically and the last quarter had an eight percent redemptions, 546 00:26:18,960 --> 00:26:23,200 Speaker 10: their largest quarterly redemption on record. So we're we're expecting 547 00:26:23,440 --> 00:26:26,119 Speaker 10: this volatility. But to that point, on the other end 548 00:26:26,160 --> 00:26:28,280 Speaker 10: of it, what are the new AI technologies that are 549 00:26:28,280 --> 00:26:32,680 Speaker 10: going to be kind of pushing aside the old software route. 550 00:26:32,760 --> 00:26:34,760 Speaker 10: I mean, I don't believe that it's going to happen tomorrow, 551 00:26:34,800 --> 00:26:36,280 Speaker 10: but it is going to happen eventually. 552 00:26:36,320 --> 00:26:38,000 Speaker 11: So the route was over sold. 553 00:26:38,040 --> 00:26:40,080 Speaker 10: We didn't need to see that much consternation in the 554 00:26:40,119 --> 00:26:43,040 Speaker 10: software market. But it is a reality in the future. 555 00:26:43,080 --> 00:26:43,560 Speaker 6: So is it. 556 00:26:43,560 --> 00:26:46,480 Speaker 10: Sixty months, is it thirty six months? Is it next year? 557 00:26:46,800 --> 00:26:49,040 Speaker 10: Not sure, it's not tomorrow, It's not probably this year, 558 00:26:49,119 --> 00:26:51,200 Speaker 10: especially with all of this. This is obviously the world 559 00:26:51,320 --> 00:26:53,400 Speaker 10: is going to be focused on energy and pricing that 560 00:26:53,520 --> 00:26:55,720 Speaker 10: and AI will continue to go on. But you know, 561 00:26:55,760 --> 00:26:57,880 Speaker 10: I do think that anthropic maybe won't be a little 562 00:26:57,960 --> 00:26:59,919 Speaker 10: to disrupt as much as we as it has been 563 00:27:00,080 --> 00:27:00,880 Speaker 10: able to do this year. 564 00:27:01,160 --> 00:27:02,440 Speaker 3: Very good, Rebecca, thank you so much. 565 00:27:02,440 --> 00:27:02,680 Speaker 1: Thanking you. 566 00:27:03,640 --> 00:27:06,760 Speaker 2: She's the president, and so you have Walser, welcome management 567 00:27:06,800 --> 00:27:08,960 Speaker 2: joining us live here in our Bloomberg Interactive Brooke Studio. 568 00:27:08,960 --> 00:27:09,879 Speaker 5: So we appreciate that. 569 00:27:10,160 --> 00:27:14,959 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify 570 00:27:15,080 --> 00:27:18,840 Speaker 1: and anywhere else you get your podcasts. 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