1 00:00:00,760 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news on the Bloomberg Markets Podcast, 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,800 Speaker 1: at Bloomberg dot com slash podcast. A couple weeks ago, 7 00:00:21,800 --> 00:00:24,040 Speaker 1: I'm sitting at the Veil airport, Matt, and there's this 8 00:00:24,120 --> 00:00:26,520 Speaker 1: guy pounded away next to me on his laptop work. Wait, 9 00:00:26,560 --> 00:00:29,360 Speaker 1: there's an airport in Vail. There is Eagle. It's not 10 00:00:29,480 --> 00:00:31,440 Speaker 1: a half hour from Vail. So I see this guy 11 00:00:31,440 --> 00:00:33,480 Speaker 1: next to me. He looks kind of familiar to say, hey, 12 00:00:33,760 --> 00:00:37,199 Speaker 1: Matt Luzetti. He's's economist guy at Deutsche Bank. So I say, hey, 13 00:00:37,200 --> 00:00:39,960 Speaker 1: how is your ski trip? He didn't ski. He was 14 00:00:39,960 --> 00:00:42,840 Speaker 1: actually out there on a conference and he didn't ski. 15 00:00:42,960 --> 00:00:45,239 Speaker 1: So I said, people do that. It's we're no. I mean, 16 00:00:45,600 --> 00:00:47,159 Speaker 1: I said, we got to get you in studio here. 17 00:00:47,240 --> 00:00:49,040 Speaker 1: We need to figure out what's going on. Matt Luzetti's 18 00:00:49,080 --> 00:00:51,720 Speaker 1: in our studio today. He's from Deutsche Bank, chief US 19 00:00:51,800 --> 00:00:56,360 Speaker 1: economist and not an Avid skier obviously, but I appreciate 20 00:00:56,400 --> 00:00:58,160 Speaker 1: the work. He did actually ski for the first time 21 00:00:58,240 --> 00:01:02,000 Speaker 1: this past weekend. Oh you did, Okay, you are We appreciate. 22 00:01:02,160 --> 00:01:04,480 Speaker 1: I could tell Matt to clients he was at a vail, 23 00:01:04,640 --> 00:01:07,520 Speaker 1: working hard, and that's what you want for your chief 24 00:01:07,640 --> 00:01:10,600 Speaker 1: US economists. So, Matt, we had some ECO data today 25 00:01:10,640 --> 00:01:13,840 Speaker 1: that just seem kind to kind of put a you know, 26 00:01:14,160 --> 00:01:16,840 Speaker 1: I guess solidify the call that this FED can go 27 00:01:16,959 --> 00:01:19,080 Speaker 1: higher for longer? Is that what you guys? A Deutsche 28 00:01:19,080 --> 00:01:21,400 Speaker 1: banker thinking, yeah, absolutely, I think you got the data 29 00:01:21,440 --> 00:01:24,600 Speaker 1: this morning. Obviously, the jobless claims data remain very low, 30 00:01:24,680 --> 00:01:27,160 Speaker 1: consistent with a tight labor market with a lot of momentum. 31 00:01:27,520 --> 00:01:30,520 Speaker 1: I'd also note the core PC inflation data were revised higher. 32 00:01:30,520 --> 00:01:32,760 Speaker 1: We expected that a little bit because it's reflecting what 33 00:01:32,800 --> 00:01:35,720 Speaker 1: we've already seen from the CPI data. I think tomorrow 34 00:01:35,720 --> 00:01:38,720 Speaker 1: would get core PC. We're above consensus we expected to 35 00:01:38,720 --> 00:01:41,280 Speaker 1: be point five month on month, and I really think 36 00:01:41,280 --> 00:01:43,679 Speaker 1: the trend of the recent data is with upward revisions, 37 00:01:44,080 --> 00:01:45,800 Speaker 1: a lot of momentum in the economy, a lot of 38 00:01:45,800 --> 00:01:48,080 Speaker 1: resilience in the economy and the labor market, and less 39 00:01:48,120 --> 00:01:50,560 Speaker 1: disinflation than the FED thought at the February meeting, So 40 00:01:50,760 --> 00:01:54,080 Speaker 1: inflation looked like it was slowing down pretty quickly from 41 00:01:54,120 --> 00:01:58,280 Speaker 1: the June headline CPI peak of nine point one percent, 42 00:01:58,680 --> 00:02:02,040 Speaker 1: And what's the idea now that we've slowed at around 43 00:02:02,080 --> 00:02:05,120 Speaker 1: six and we're not getting any lower. Yeah, I think 44 00:02:05,160 --> 00:02:07,840 Speaker 1: I would focus on these three month changes because it 45 00:02:08,120 --> 00:02:10,880 Speaker 1: strips out the very high prints that we saw early 46 00:02:10,960 --> 00:02:13,560 Speaker 1: last year, and I think the revisions there have been 47 00:02:13,560 --> 00:02:16,600 Speaker 1: really important. So course CPI looked like on a three 48 00:02:16,639 --> 00:02:19,080 Speaker 1: month change it was decelerating down to three point one percent, 49 00:02:19,160 --> 00:02:21,880 Speaker 1: getting closer to the level that's consistent with the FED 50 00:02:21,960 --> 00:02:24,280 Speaker 1: subjective that was actually revised higher by more than a 51 00:02:24,320 --> 00:02:26,920 Speaker 1: percentage point. And then with this latest data you have 52 00:02:26,919 --> 00:02:29,160 Speaker 1: a three month annualized change for course CPI that's four 53 00:02:29,200 --> 00:02:31,200 Speaker 1: and a half four point six percent, you know, very 54 00:02:31,240 --> 00:02:34,080 Speaker 1: far away from the FED subjectives. I do think, you know, 55 00:02:34,080 --> 00:02:36,359 Speaker 1: as we see corepc tomorrow, it'd be closer to four 56 00:02:36,400 --> 00:02:39,519 Speaker 1: point four four and a half percent. You've seen some disinflation, 57 00:02:39,560 --> 00:02:42,040 Speaker 1: we're off the peak, but the latest data tell us 58 00:02:42,040 --> 00:02:44,720 Speaker 1: that the path here isn't easy. It's not just continued disinflation. 59 00:02:44,760 --> 00:02:46,680 Speaker 1: We're likely to see somewhat higher in prints over the 60 00:02:46,680 --> 00:02:49,600 Speaker 1: next few months. So, Matt, smart guys like you, are 61 00:02:49,639 --> 00:02:52,440 Speaker 1: you taking the recession call off the table? I'm not 62 00:02:52,440 --> 00:02:54,040 Speaker 1: sure if you had a recession call, but are the 63 00:02:54,160 --> 00:02:56,959 Speaker 1: economists in general taking that recession call off the table? 64 00:02:57,000 --> 00:02:58,679 Speaker 1: Do you think we've always had a recession call, but 65 00:02:58,680 --> 00:03:00,440 Speaker 1: it's always been the back half of this year? Okay, 66 00:03:00,800 --> 00:03:02,760 Speaker 1: it is in Q four for us right now. I 67 00:03:02,800 --> 00:03:05,680 Speaker 1: think the latest flow the data fits well with that 68 00:03:05,720 --> 00:03:08,680 Speaker 1: type of timeline. And it fits well with that because, look, 69 00:03:08,680 --> 00:03:11,400 Speaker 1: the economy has good momentum. Now, the idea that's going 70 00:03:11,440 --> 00:03:13,240 Speaker 1: to fall into recession in Q one or probably even 71 00:03:13,320 --> 00:03:16,840 Speaker 1: Q two doesn't seem very likely given the momentum. At 72 00:03:16,880 --> 00:03:19,040 Speaker 1: the same time, the repricing that we're seeing with the FED, 73 00:03:19,240 --> 00:03:21,480 Speaker 1: the idea that the terminal rate needs to be higher. 74 00:03:21,639 --> 00:03:23,560 Speaker 1: We're at five point six for the terminal rates, so 75 00:03:23,600 --> 00:03:25,840 Speaker 1: we think they hike through through July. I think that 76 00:03:25,880 --> 00:03:30,160 Speaker 1: will create tighter financial conditions consumers that that households are 77 00:03:30,560 --> 00:03:33,120 Speaker 1: eating through their excess savings through the second half of 78 00:03:33,120 --> 00:03:36,240 Speaker 1: this year. So we still have that timeline in place 79 00:03:36,280 --> 00:03:38,160 Speaker 1: for our recession call. So how bad does it get? 80 00:03:38,200 --> 00:03:41,160 Speaker 1: How bad to these long and variable lags hit us 81 00:03:41,720 --> 00:03:46,160 Speaker 1: in Q four. We're already hearing news about huge price 82 00:03:46,200 --> 00:03:53,000 Speaker 1: drops in housing, over a trillion dollars nationwide off five percent. 83 00:03:53,080 --> 00:03:56,480 Speaker 1: We're hearing news about a slowdown in I just stuck 84 00:03:56,520 --> 00:03:58,880 Speaker 1: to the CEO of Ducati in North America and he said, 85 00:03:58,920 --> 00:04:01,040 Speaker 1: you know, the high rates are putting a crimp on 86 00:04:01,080 --> 00:04:03,880 Speaker 1: motorcycle sales for example. Yeah, I think that's been you know, 87 00:04:04,040 --> 00:04:06,440 Speaker 1: assessing that long and variable acts is always difficult. I 88 00:04:06,480 --> 00:04:10,040 Speaker 1: think that there's been some quick transmission from the Fed's 89 00:04:10,240 --> 00:04:12,640 Speaker 1: policies to financial conditions. We saw certainly what happened with 90 00:04:12,640 --> 00:04:16,719 Speaker 1: the housing market mortgage rates spiking, but it's been I 91 00:04:16,800 --> 00:04:19,080 Speaker 1: think a little bit slower to impact the consumer and 92 00:04:19,080 --> 00:04:21,479 Speaker 1: a little bit slower to impact the labor market. I 93 00:04:21,480 --> 00:04:23,640 Speaker 1: think in part that's because you've had this latent fiscal 94 00:04:23,640 --> 00:04:26,480 Speaker 1: stimulus out there, with households still with one trillion of stimulus. 95 00:04:26,800 --> 00:04:29,640 Speaker 1: And it's also because you have a structurally undersupplied labor market, 96 00:04:29,800 --> 00:04:33,440 Speaker 1: so you have firms that need labor have had difficulty 97 00:04:33,440 --> 00:04:36,359 Speaker 1: in finding labor and has led to this very resilient 98 00:04:36,440 --> 00:04:39,839 Speaker 1: labor market. Knowing exactly when when that financial condition tightening 99 00:04:39,880 --> 00:04:41,760 Speaker 1: hits the economy, I think is always always very difficult. 100 00:04:41,760 --> 00:04:44,159 Speaker 1: How deep do you think the recession could be? Because 101 00:04:44,200 --> 00:04:47,160 Speaker 1: two quarters of contraction, we've seen that already and it 102 00:04:47,279 --> 00:04:51,040 Speaker 1: wasn't a recession apparently as far as we know, and 103 00:04:51,839 --> 00:04:55,039 Speaker 1: we could see it again without feeling like we're in 104 00:04:55,080 --> 00:04:57,680 Speaker 1: a deep recession. Is that what you expect? Shallow or 105 00:04:57,720 --> 00:04:59,720 Speaker 1: do you think it could hit us hard and unemployment 106 00:04:59,760 --> 00:05:02,960 Speaker 1: could eyes to five percent or more? Yeah? So I 107 00:05:02,960 --> 00:05:04,680 Speaker 1: think it's all about the labor market. You know, whether 108 00:05:04,720 --> 00:05:06,560 Speaker 1: or not we have a technical recession that has two 109 00:05:06,640 --> 00:05:09,400 Speaker 1: quarters of negative growth I think is somewhat irrelevant to 110 00:05:09,400 --> 00:05:11,120 Speaker 1: the market and the FED at this point. It's really 111 00:05:11,160 --> 00:05:13,920 Speaker 1: about does the labor market begin to crack and does 112 00:05:13,960 --> 00:05:16,840 Speaker 1: it begin to weaken. From a historic perspective, our recession 113 00:05:16,920 --> 00:05:19,839 Speaker 1: looks kind of moderate. It looks like the early nineteen nineties. 114 00:05:20,160 --> 00:05:22,640 Speaker 1: You have the unemployment rate rising by about two percentage 115 00:05:22,640 --> 00:05:25,560 Speaker 1: points from from trough to peak. It's a big move 116 00:05:25,600 --> 00:05:28,359 Speaker 1: from today's perspective, no doubt, But from a historic perspective, 117 00:05:28,520 --> 00:05:32,560 Speaker 1: it's actually a relatively mild recession that we're expecting. What 118 00:05:32,760 --> 00:05:35,760 Speaker 1: is your view on the labor market, it's just shocking 119 00:05:35,800 --> 00:05:39,400 Speaker 1: to me that it is so strong, so vibrant, the 120 00:05:39,480 --> 00:05:42,760 Speaker 1: jolts data, the unemployment day, everywhere you look. We don't 121 00:05:42,760 --> 00:05:45,600 Speaker 1: see any cracks, do we No. I think you've seen 122 00:05:45,600 --> 00:05:48,039 Speaker 1: it in some sectors. You know, obviously you have tech 123 00:05:48,120 --> 00:05:50,960 Speaker 1: layoffs that are ongoing. You've seen it in the sectors 124 00:05:50,960 --> 00:05:53,520 Speaker 1: that have employment well above the pre COVID trend. You know, 125 00:05:53,560 --> 00:05:56,240 Speaker 1: all those sectors have slowed materially. Many of them are 126 00:05:56,240 --> 00:05:59,479 Speaker 1: actually reducing their jobs in those sectors that have employment 127 00:05:59,520 --> 00:06:02,600 Speaker 1: that are well below pre COVID trends. Leisure and hospitality 128 00:06:02,680 --> 00:06:05,600 Speaker 1: is one, healthcare is another, the government sector is another. 129 00:06:05,640 --> 00:06:08,440 Speaker 1: They've really been driving employment growth. They're really driving I 130 00:06:08,440 --> 00:06:10,119 Speaker 1: think a lot of the tightness in the labor market, 131 00:06:10,680 --> 00:06:13,200 Speaker 1: and really until that changes, it's unlikely that you're going 132 00:06:13,240 --> 00:06:16,320 Speaker 1: to see negative payrolls prints. I don't think that that's 133 00:06:16,320 --> 00:06:18,440 Speaker 1: happening over the next few months, just given the momentum. 134 00:06:18,680 --> 00:06:20,440 Speaker 1: But the FED needs something to change here in the 135 00:06:20,480 --> 00:06:23,880 Speaker 1: labor market, especially with what's happened with the inflation data recently. 136 00:06:24,080 --> 00:06:25,920 Speaker 1: I think that we should have a lot less confidence 137 00:06:25,920 --> 00:06:28,599 Speaker 1: than inflation is on this very clear downtrend back to target. 138 00:06:28,960 --> 00:06:31,880 Speaker 1: So what about if we do have a recession. If 139 00:06:31,880 --> 00:06:36,480 Speaker 1: we do have a weakening labor market, and you know 140 00:06:36,800 --> 00:06:39,320 Speaker 1: that affects growth, do we see cuts? Do you expect 141 00:06:39,360 --> 00:06:41,600 Speaker 1: the FED to cut rates at the end of this year, 142 00:06:41,640 --> 00:06:43,840 Speaker 1: at the beginning of twenty twenty four, So we've pushed 143 00:06:43,880 --> 00:06:46,400 Speaker 1: out our expectation for cuts. We do expect that they 144 00:06:46,440 --> 00:06:48,760 Speaker 1: begin to cut rates in early twenty twenty four. But 145 00:06:48,800 --> 00:06:51,120 Speaker 1: I think it's all about not only inflation, but what 146 00:06:51,120 --> 00:06:53,480 Speaker 1: happens with the labor market. If we end this year 147 00:06:53,600 --> 00:06:55,240 Speaker 1: and the labor market looks a lot like it does 148 00:06:55,279 --> 00:06:58,200 Speaker 1: today and core inflation is three percent or above, the 149 00:06:58,240 --> 00:07:00,279 Speaker 1: Fed's not going to be cutting rates. Yeah, and you 150 00:07:00,279 --> 00:07:03,039 Speaker 1: know that that's close to what the FED has been forecasting. 151 00:07:03,080 --> 00:07:05,039 Speaker 1: They have this rise in the unemployment rate. So I 152 00:07:05,040 --> 00:07:07,120 Speaker 1: think it's if you get this weekending in the labor market, 153 00:07:07,160 --> 00:07:08,840 Speaker 1: if you see that uemployment rate rising four and a 154 00:07:08,839 --> 00:07:12,240 Speaker 1: half five percent, that's an environment where if inflation is 155 00:07:12,240 --> 00:07:14,040 Speaker 1: closer to three percent, I do think the FED would 156 00:07:14,040 --> 00:07:17,720 Speaker 1: be cutting rates. That's our baseline, But there's this risk 157 00:07:17,800 --> 00:07:20,880 Speaker 1: of the labor market remaining more resilient, inflation remaining a 158 00:07:20,880 --> 00:07:25,880 Speaker 1: bit closer to three percent inflation. Do they they say 159 00:07:25,920 --> 00:07:28,920 Speaker 1: two percent, right, But do they really mean three? No? 160 00:07:29,040 --> 00:07:31,080 Speaker 1: I think they're you know, they're adamant today, no doubt, 161 00:07:31,080 --> 00:07:32,600 Speaker 1: and I think that they will stick to that. But 162 00:07:32,640 --> 00:07:34,400 Speaker 1: the question is what does the labor market look like 163 00:07:34,440 --> 00:07:37,200 Speaker 1: in that environment. If it's still very tight producing wage 164 00:07:37,200 --> 00:07:39,640 Speaker 1: growth that's very elevated, they can't cut rates. If the 165 00:07:39,680 --> 00:07:42,640 Speaker 1: labor market is looking very loose and disinflationary pressures are 166 00:07:42,640 --> 00:07:45,240 Speaker 1: clear looking forward, then they can back off of a 167 00:07:45,320 --> 00:07:48,080 Speaker 1: plus five percent fed funds rate, bring it back down, 168 00:07:48,080 --> 00:07:51,400 Speaker 1: and track inflation lower to a more normal level. Got 169 00:07:51,400 --> 00:07:56,240 Speaker 1: a PhD in UCLA? How good was that? UCLA? So 170 00:07:56,280 --> 00:07:57,880 Speaker 1: it'd be a lot more fun if you weren't getting 171 00:07:57,880 --> 00:08:02,880 Speaker 1: a PhD undergrad? CLA sounds awesome, Not so much, not 172 00:08:02,920 --> 00:08:04,800 Speaker 1: as fun. You look out out of the library at 173 00:08:05,000 --> 00:08:06,720 Speaker 1: the weather, and it's not as fun as you would expect. 174 00:08:06,720 --> 00:08:09,560 Speaker 1: I guess, are you good? Matt Lozetti, proud graduate of 175 00:08:09,640 --> 00:08:13,280 Speaker 1: Villanova undergrad got his PhD at UCLA. Pretty cool. They're 176 00:08:13,360 --> 00:08:16,880 Speaker 1: great business school at UCLA, at the high school. Matt Louseettie, 177 00:08:16,920 --> 00:08:19,080 Speaker 1: chief US economist Story Bank, joining us live in our 178 00:08:19,080 --> 00:08:22,200 Speaker 1: Bloomberg Interactive Broker studio, And again I can attest to 179 00:08:22,240 --> 00:08:24,640 Speaker 1: all Matt's institutional investor clients out there that he was 180 00:08:24,640 --> 00:08:27,200 Speaker 1: in veil, but he was working. He wasn't skiing bumming 181 00:08:27,240 --> 00:08:33,640 Speaker 1: off like I was so good stuff there. I'm gonna 182 00:08:33,640 --> 00:08:36,760 Speaker 1: talk aboutferred stock. Their analysts don't know if from livestock 183 00:08:36,800 --> 00:08:41,199 Speaker 1: and preferred stock and named that movie Wall Street. Yeah, okay. 184 00:08:41,440 --> 00:08:44,400 Speaker 1: Doug Baker, portfolio manager and head of preferred securities at 185 00:08:44,480 --> 00:08:46,400 Speaker 1: New Ven. He's based in Chicago, but we got him 186 00:08:46,440 --> 00:08:50,840 Speaker 1: live in our Bloomberg Interactive broker studio. We don't talk enough, 187 00:08:51,040 --> 00:08:54,520 Speaker 1: nearly enough, Doug about preferred stock, preferred securities. What's the 188 00:08:54,600 --> 00:09:00,199 Speaker 1: pitch to own preferred securities? What's the advantage I think? 189 00:09:00,240 --> 00:09:02,719 Speaker 1: I think for us it's an income solution that's that's 190 00:09:02,800 --> 00:09:05,880 Speaker 1: high quality, okay. And you can generate this income without 191 00:09:05,880 --> 00:09:09,719 Speaker 1: taking excessive credit risk. And if you choose your securities carefully, 192 00:09:10,120 --> 00:09:13,160 Speaker 1: you can do it without taking significant duration risk or 193 00:09:13,160 --> 00:09:15,600 Speaker 1: interest rate risk. And I think in this environment today, 194 00:09:15,720 --> 00:09:18,960 Speaker 1: with rates as volatile as they are, finding a solution 195 00:09:19,000 --> 00:09:21,960 Speaker 1: where you can generate and it's also tax efficient income 196 00:09:22,440 --> 00:09:25,600 Speaker 1: in a lot of instances, doing that without having to 197 00:09:25,679 --> 00:09:28,120 Speaker 1: make a significant call on interest rates, I think is 198 00:09:28,200 --> 00:09:31,000 Speaker 1: appealing for a lot of folks, and then again for 199 00:09:31,040 --> 00:09:33,560 Speaker 1: those folks that think, hey, there's a recession around the corner, 200 00:09:34,200 --> 00:09:36,920 Speaker 1: not driving that income through taking a lot of credit 201 00:09:37,000 --> 00:09:38,800 Speaker 1: risk at this point in time too, is also kind 202 00:09:38,800 --> 00:09:41,480 Speaker 1: of compelling. So why are they called preferred? I mean, 203 00:09:41,600 --> 00:09:45,360 Speaker 1: are you higher up on the credit list, creditors list 204 00:09:45,760 --> 00:09:48,560 Speaker 1: if you if they go bankrupt, are you not broke 205 00:09:48,679 --> 00:09:51,640 Speaker 1: as a preferred holder? Do you get better voting rights? 206 00:09:52,040 --> 00:09:55,560 Speaker 1: That's yeah, so if you get special dividends, that's that's 207 00:09:55,559 --> 00:09:59,160 Speaker 1: that's the So you're preferred, but not very preferred. If 208 00:09:59,160 --> 00:10:02,560 Speaker 1: you're preferred to the common shareholder, and that's typically about it. 209 00:10:02,920 --> 00:10:05,320 Speaker 1: So you're typically your payments, and for a lot of 210 00:10:05,320 --> 00:10:09,440 Speaker 1: our securities, there will be a clause that will say, hey, 211 00:10:09,440 --> 00:10:12,600 Speaker 1: if you're making a distribution to your common shareholder that 212 00:10:12,600 --> 00:10:15,760 Speaker 1: common equity dividends going out, you have to pay your 213 00:10:15,800 --> 00:10:18,920 Speaker 1: preferred security. So you do get some preference from that point. 214 00:10:18,960 --> 00:10:21,800 Speaker 1: And then also if and we'll talk about why this 215 00:10:21,880 --> 00:10:24,480 Speaker 1: is a low probability event, but if you did have 216 00:10:24,559 --> 00:10:28,080 Speaker 1: one of our issuers say default or go bankrupt in 217 00:10:28,160 --> 00:10:31,640 Speaker 1: our space, you would have a claim on assets above 218 00:10:31,640 --> 00:10:34,720 Speaker 1: the common shareholder, So you do get a preferential treatment 219 00:10:34,720 --> 00:10:38,559 Speaker 1: in that from that perspective, From the issuer's perspective, are 220 00:10:38,559 --> 00:10:42,120 Speaker 1: there certain sectors that whether their financials or whatever, that 221 00:10:42,200 --> 00:10:45,480 Speaker 1: typically our issuers or preferreds And if so, why so? 222 00:10:45,520 --> 00:10:49,280 Speaker 1: It's heavily dominated by financial services and in particular banks. 223 00:10:49,679 --> 00:10:52,520 Speaker 1: So banks are a big issue or preferreds roughly about 224 00:10:52,520 --> 00:10:55,640 Speaker 1: sixty five percent of our issuer base. Banks, another ten 225 00:10:55,720 --> 00:10:59,160 Speaker 1: or fifteen percent insurance companies. That's a plus and no minus. 226 00:10:59,160 --> 00:11:01,960 Speaker 1: So we're going to have se concentration. But we think 227 00:11:01,960 --> 00:11:04,720 Speaker 1: that that's a good thing in this environment because look, 228 00:11:04,800 --> 00:11:07,880 Speaker 1: let's face it, banks today are incredibly strong and it's 229 00:11:07,920 --> 00:11:10,360 Speaker 1: really a result of the financial crisis we had close 230 00:11:10,440 --> 00:11:13,520 Speaker 1: to ten twelve years ago that they're in a great 231 00:11:13,559 --> 00:11:17,880 Speaker 1: position today. But the outlook is also really constructive for banks. 232 00:11:18,240 --> 00:11:21,120 Speaker 1: They're benefiting tremendously from this rise and interest rate environment, 233 00:11:21,360 --> 00:11:25,680 Speaker 1: and so it's a it's a way, I think for 234 00:11:25,800 --> 00:11:29,240 Speaker 1: us to also benefit from rise and interest rates from 235 00:11:29,320 --> 00:11:34,000 Speaker 1: a fundamental perspective when you invest in prefers, so the 236 00:11:35,080 --> 00:11:36,960 Speaker 1: story that gets lost a lot of times and preferred. 237 00:11:36,960 --> 00:11:39,320 Speaker 1: So when people look at the securities, they're often rated 238 00:11:39,360 --> 00:11:42,280 Speaker 1: triple B, sometimes double B, and people will say, oh, 239 00:11:42,280 --> 00:11:44,480 Speaker 1: this is kind of a high yield type of investment. 240 00:11:45,000 --> 00:11:48,560 Speaker 1: The reality is that the senior rating on average for 241 00:11:48,600 --> 00:11:51,960 Speaker 1: the issuers is closer to single A. Our securities are 242 00:11:52,000 --> 00:11:55,079 Speaker 1: rated lower because they're subordinate. And we use JP Morgan 243 00:11:55,120 --> 00:11:57,520 Speaker 1: as an example all the time. JPMorgan at the senior 244 00:11:57,640 --> 00:11:59,880 Speaker 1: level rated single A, single A, double A by the 245 00:12:00,040 --> 00:12:02,959 Speaker 1: big three radiing agencies across the board, preferred A triple B. 246 00:12:03,559 --> 00:12:06,040 Speaker 1: But if you own a JP Morgan preferred, you don't 247 00:12:06,080 --> 00:12:09,080 Speaker 1: have exposure to a triple B company, right you're subordinate 248 00:12:09,120 --> 00:12:12,040 Speaker 1: to JP Morgan, you really have that single A slash 249 00:12:12,080 --> 00:12:14,800 Speaker 1: double A type of credit exposure. So so there's a 250 00:12:14,840 --> 00:12:18,000 Speaker 1: lot of I think benefits to preferreds, But at the 251 00:12:18,080 --> 00:12:20,199 Speaker 1: end of the day, when you have this much sector concentration, 252 00:12:20,440 --> 00:12:23,280 Speaker 1: you need to be cognizant at in your overall portfolio. 253 00:12:23,320 --> 00:12:27,760 Speaker 1: That's JP Morgan's your go to example. In the US, 254 00:12:27,800 --> 00:12:30,720 Speaker 1: I just got back last year from living in Berlin 255 00:12:30,840 --> 00:12:34,040 Speaker 1: for five years. I think of Volkswagen. I don't know 256 00:12:34,480 --> 00:12:38,840 Speaker 1: if it's a different structure, but VAW three GI on 257 00:12:38,880 --> 00:12:42,080 Speaker 1: the terminal is preferred and that's almost traded like they're common. 258 00:12:42,200 --> 00:12:44,280 Speaker 1: Like if you buy Volkswagen shares, you're buying those. I 259 00:12:44,480 --> 00:12:48,600 Speaker 1: don't get why. So there are sector there is sector 260 00:12:48,640 --> 00:12:53,000 Speaker 1: exposure outside of financial services, and for US, we really 261 00:12:53,120 --> 00:12:56,280 Speaker 1: still like to kind of even though it's it's concentrated 262 00:12:56,400 --> 00:12:59,400 Speaker 1: in that space, that's where we like to hit the 263 00:12:59,440 --> 00:13:02,320 Speaker 1: ball down the fairway, kind of like staying within the banks, 264 00:13:02,320 --> 00:13:05,640 Speaker 1: the insurance utilities because the US in the US. But 265 00:13:05,679 --> 00:13:07,599 Speaker 1: you know, do you stay in the US though, or 266 00:13:07,679 --> 00:13:10,080 Speaker 1: do you also look overseas? When we go overseas, the 267 00:13:10,120 --> 00:13:13,640 Speaker 1: market is still dominated by non I would say, non 268 00:13:13,800 --> 00:13:19,599 Speaker 1: US financial institutions. The corporate hybrid corporate preferred universe is 269 00:13:20,240 --> 00:13:23,640 Speaker 1: larger outside the US, but still the majority of the 270 00:13:23,679 --> 00:13:26,560 Speaker 1: exposure is financial services. And so you know, just remember 271 00:13:26,600 --> 00:13:28,760 Speaker 1: we're benefiting not just here in the US, but also 272 00:13:28,800 --> 00:13:34,240 Speaker 1: globally from this higher regulatory environment that these banks are 273 00:13:34,280 --> 00:13:37,520 Speaker 1: operating under today, and we benefit as investors from that 274 00:13:37,559 --> 00:13:40,960 Speaker 1: added layer of security from that oversight. These banks are 275 00:13:41,000 --> 00:13:45,440 Speaker 1: incredibly well capitalized, and the insurance space is incredibly strong too, 276 00:13:45,480 --> 00:13:49,600 Speaker 1: I mean, sitting on record levels of statutory capital. The 277 00:13:49,640 --> 00:13:53,319 Speaker 1: pricing environment for insurance has been incredibly strong. So so 278 00:13:53,720 --> 00:13:56,720 Speaker 1: the one big takeaway that we want people to know 279 00:13:56,800 --> 00:14:00,160 Speaker 1: and understand is that, look, the underlying fundamentals of the 280 00:14:00,360 --> 00:14:04,080 Speaker 1: large sectors in the preferred space are incredibly compelling, and 281 00:14:04,160 --> 00:14:07,439 Speaker 1: that this income which we you know, I only touched 282 00:14:07,480 --> 00:14:09,920 Speaker 1: on briefly, which is why a lot of people will 283 00:14:09,920 --> 00:14:14,240 Speaker 1: access our asset class oftentimes as tax advantage. For individual investors, 284 00:14:14,240 --> 00:14:16,880 Speaker 1: a lot of times the distributions are treated as dividends, 285 00:14:17,360 --> 00:14:19,600 Speaker 1: and so for folks that are in a high tax 286 00:14:19,640 --> 00:14:23,760 Speaker 1: bracket that needs some income but they don't have any 287 00:14:23,800 --> 00:14:27,040 Speaker 1: more room in a qualified account, the tax advantage of 288 00:14:27,360 --> 00:14:30,200 Speaker 1: the distributions from a lot of preferred strategies puts the 289 00:14:30,240 --> 00:14:33,720 Speaker 1: taxable equivalent yield much higher than even the stated yield. Now, 290 00:14:33,760 --> 00:14:36,040 Speaker 1: when I buy a preferred am I getting a fixed 291 00:14:36,120 --> 00:14:39,200 Speaker 1: rate a floating rate, How does that'll work? It just 292 00:14:39,240 --> 00:14:41,520 Speaker 1: depends what you want you can find at all. And 293 00:14:41,600 --> 00:14:44,360 Speaker 1: so this is where we think also active management comes 294 00:14:44,360 --> 00:14:47,360 Speaker 1: into play, because an active manager can go out there 295 00:14:47,360 --> 00:14:50,640 Speaker 1: and find those securities that have either a fixed rate 296 00:14:50,640 --> 00:14:53,520 Speaker 1: coupon or something that's a floating rate, or something that's 297 00:14:53,520 --> 00:14:56,880 Speaker 1: a hybrid affixed to a floating rate structure. And so 298 00:14:57,240 --> 00:14:59,720 Speaker 1: when we look at the overall preferred universe, You're going 299 00:14:59,760 --> 00:15:02,840 Speaker 1: to some securities that do have durations of seven, eight, 300 00:15:02,960 --> 00:15:08,600 Speaker 1: nine plus years, others floating rate pretty much zero durations. 301 00:15:08,680 --> 00:15:13,120 Speaker 1: So you can, depending on your appetite for interest rate risk, 302 00:15:13,640 --> 00:15:17,520 Speaker 1: you know, really customize a portfolio preferreds to meet your needs. 303 00:15:17,920 --> 00:15:20,480 Speaker 1: I would need an active manager like a seeing eye dog. 304 00:15:20,480 --> 00:15:23,800 Speaker 1: And I'm blind here, but I mean, for example, I 305 00:15:23,840 --> 00:15:26,400 Speaker 1: look at JP Morgan's preferred LA see seven. I don't 306 00:15:26,400 --> 00:15:29,120 Speaker 1: know where I would go. I guess this dividends six 307 00:15:29,120 --> 00:15:33,000 Speaker 1: percent dividend is a strong one. But are you worried 308 00:15:33,040 --> 00:15:36,200 Speaker 1: your job gets replaced by AI soon? Or do you 309 00:15:36,320 --> 00:15:39,920 Speaker 1: use AI? Can you use AI at your job? You? 310 00:15:40,440 --> 00:15:43,280 Speaker 1: I think it's really really tough because there's such very 311 00:15:43,320 --> 00:15:47,320 Speaker 1: little standardization across the preferred market, and a lot of 312 00:15:47,360 --> 00:15:51,440 Speaker 1: the things that create value and help alleviate risk is 313 00:15:51,600 --> 00:15:54,840 Speaker 1: how the prospectus is written. So could we get to 314 00:15:54,880 --> 00:15:57,520 Speaker 1: a point where AI could go through a prospectus and 315 00:15:57,640 --> 00:16:01,600 Speaker 1: really pull out those important data points, those minute details 316 00:16:01,640 --> 00:16:05,400 Speaker 1: that make one security meaningfully different from another. Absolutely, are 317 00:16:05,400 --> 00:16:08,240 Speaker 1: we there yet? You know, I think we're still a 318 00:16:08,320 --> 00:16:11,680 Speaker 1: ways off. But you feel comfortable, you're secure in your job. 319 00:16:11,720 --> 00:16:13,720 Speaker 1: I'm probably more likely to get replaced at home by 320 00:16:13,760 --> 00:16:18,560 Speaker 1: aim in the workplace. Yeah, all right, City a thousand 321 00:16:18,600 --> 00:16:22,160 Speaker 1: dollars par floating rate preferred. It's got a current coupon 322 00:16:22,240 --> 00:16:25,440 Speaker 1: of nine point zero nine three five seven. I mean 323 00:16:25,480 --> 00:16:29,320 Speaker 1: that's pretty good, right, And it's qdi qdi meaning it's 324 00:16:29,520 --> 00:16:33,200 Speaker 1: tax advantage. It's tax advantaged, right. So so this was 325 00:16:33,240 --> 00:16:35,640 Speaker 1: one of those structures that started off paying a fixed 326 00:16:35,720 --> 00:16:38,760 Speaker 1: rate coupon. It was just shy of six percent, got 327 00:16:38,840 --> 00:16:41,400 Speaker 1: up to its call date, and then for these types 328 00:16:41,440 --> 00:16:44,600 Speaker 1: of structures, if if the issuer doesn't redeem the security, 329 00:16:44,680 --> 00:16:47,040 Speaker 1: then the coupon starts to reset. This is one of 330 00:16:47,080 --> 00:16:51,120 Speaker 1: those examples. Now, City right now, could they refinance this 331 00:16:51,200 --> 00:16:56,040 Speaker 1: security at a lower coupon, absolutely, but if they do, 332 00:16:56,440 --> 00:16:58,320 Speaker 1: they're going to be locked into a new preferred for 333 00:16:58,760 --> 00:17:02,480 Speaker 1: probably at minimum five years. So what they're doing right now, 334 00:17:02,520 --> 00:17:05,880 Speaker 1: in our opinion, is they're paying up now to maintain 335 00:17:05,960 --> 00:17:10,280 Speaker 1: optionality to take this preferred exposure out if they don't 336 00:17:10,280 --> 00:17:12,679 Speaker 1: need it down the road. And what we feel is 337 00:17:12,720 --> 00:17:14,399 Speaker 1: and is some of the feedback we're getting from the 338 00:17:14,400 --> 00:17:17,280 Speaker 1: banks is that they're expecting their balance sheets to shrink 339 00:17:17,359 --> 00:17:21,040 Speaker 1: over time as the economy shrinks, and if that's the case, 340 00:17:21,280 --> 00:17:23,560 Speaker 1: they won't need as much capital, and that's why they 341 00:17:23,560 --> 00:17:26,439 Speaker 1: issue prefers. Preferreds count as capital, so as their balance 342 00:17:26,440 --> 00:17:31,359 Speaker 1: sheet shrinks, this security now is really cullable quarterly, so 343 00:17:31,440 --> 00:17:33,320 Speaker 1: it gives them a lot of optionality just to take 344 00:17:33,320 --> 00:17:36,560 Speaker 1: it out at some point, whereas if they refinance it today, 345 00:17:36,680 --> 00:17:38,840 Speaker 1: they'd lock themselves into a new preferred for a long 346 00:17:38,880 --> 00:17:41,679 Speaker 1: period of time. All right, just real quick, thirty seconds. 347 00:17:41,760 --> 00:17:45,280 Speaker 1: Aircraft lesser sector, Yeah, what's that all about it? Yeah, 348 00:17:45,359 --> 00:17:48,560 Speaker 1: so this is important, right, We're just talking about sector concentration, 349 00:17:48,640 --> 00:17:50,760 Speaker 1: so we try and come with some ideas, some thoughtful 350 00:17:50,800 --> 00:17:54,480 Speaker 1: ideas outside of outside of that area. So the aircraft 351 00:17:54,560 --> 00:17:58,040 Speaker 1: lesser space is a weight I think to really leverage 352 00:17:57,760 --> 00:18:03,199 Speaker 1: the very strong story that's that's underlining and underpinning the 353 00:18:03,280 --> 00:18:08,439 Speaker 1: airlines air travel today, this post COVID environment and the 354 00:18:08,520 --> 00:18:12,880 Speaker 1: air lesser business model oversimplifying it as to provide financing 355 00:18:13,000 --> 00:18:15,879 Speaker 1: to the airlines when they buy fifty sixty seventy aircraft. 356 00:18:16,680 --> 00:18:21,119 Speaker 1: These guys today, I think offer us exposure to a 357 00:18:21,240 --> 00:18:26,879 Speaker 1: unique opportunity. It's timely and you can still find securities 358 00:18:26,920 --> 00:18:29,840 Speaker 1: here that our interest rate, you know, kind of moderate 359 00:18:29,880 --> 00:18:32,679 Speaker 1: exposure interesting stuff, really interesting stuff. Glad we got some 360 00:18:32,680 --> 00:18:34,760 Speaker 1: some of your time. Doug Baker, portfolio Management, head of 361 00:18:34,760 --> 00:18:39,400 Speaker 1: Preferred Securities at Nouvene, talking about preferred securities. Really interesting 362 00:18:39,800 --> 00:18:42,560 Speaker 1: discussion there. We'll get Doug back and we appreciate them 363 00:18:42,560 --> 00:18:50,320 Speaker 1: coming into our Bloomberg Interactive Broker studio the Northern Line. 364 00:18:50,560 --> 00:18:52,920 Speaker 1: I've been commuting to the City of London on this 365 00:18:53,200 --> 00:18:57,240 Speaker 1: train for decades. Raised in the era of Margaret Thatcher 366 00:18:57,320 --> 00:19:00,760 Speaker 1: and the city's big bang women thought that we'd be 367 00:19:00,800 --> 00:19:05,520 Speaker 1: making the decisions by now and getting the rewards. But 368 00:19:05,880 --> 00:19:09,000 Speaker 1: how wrong we were. The reality is that only twelve 369 00:19:09,080 --> 00:19:12,640 Speaker 1: percent of UK fund managers are women. The person who's 370 00:19:12,680 --> 00:19:15,720 Speaker 1: been at the vanguard of advancing women in the city 371 00:19:16,040 --> 00:19:21,040 Speaker 1: is Helena Morrissey, Dame Helena, former CEO of Newton Investment Management, 372 00:19:21,200 --> 00:19:24,040 Speaker 1: ex chair of aj Bell. She's advised the government and 373 00:19:24,080 --> 00:19:27,040 Speaker 1: has a seat in the House of Lords. She's now 374 00:19:27,080 --> 00:19:31,520 Speaker 1: putting her considerable contacts, book and profile to work to 375 00:19:31,560 --> 00:19:35,480 Speaker 1: get more women managing money. I do think there's an 376 00:19:35,480 --> 00:19:38,919 Speaker 1: image problem that people look and they think, oh, fund management, 377 00:19:38,920 --> 00:19:41,600 Speaker 1: it's not for me. It would be very isolated to 378 00:19:41,640 --> 00:19:45,639 Speaker 1: be a woman. It's kind of macho environment, and I 379 00:19:45,680 --> 00:19:47,360 Speaker 1: think there is still though a bit of a sort 380 00:19:47,400 --> 00:19:51,720 Speaker 1: of cultural impediment as well. I think many men now, 381 00:19:52,040 --> 00:19:55,359 Speaker 1: especially in our industry, really are just as frustrated as 382 00:19:55,400 --> 00:19:57,919 Speaker 1: the women that we're not seeing more progress. So is 383 00:19:58,000 --> 00:20:02,640 Speaker 1: this Morrissey's more muscular approach to diversity. I love your expression, 384 00:20:02,800 --> 00:20:05,919 Speaker 1: Karim muscular, because you know it should feel very robust. 385 00:20:05,960 --> 00:20:08,400 Speaker 1: It should be like a you've got a business objective here, 386 00:20:08,760 --> 00:20:12,359 Speaker 1: Let's improve diversity of talent. Let's make sure that people 387 00:20:12,400 --> 00:20:15,240 Speaker 1: are included when they join if they're diverse, and let's 388 00:20:15,280 --> 00:20:18,879 Speaker 1: achieve better results for our clients. Mentoring some sixty women 389 00:20:18,960 --> 00:20:22,000 Speaker 1: over a year sounds modest, smaller than the intake at 390 00:20:22,040 --> 00:20:25,679 Speaker 1: a big investment or law firm. There are around one thousand, 391 00:20:25,760 --> 00:20:30,400 Speaker 1: six hundred UK fund managers but only about two hundred 392 00:20:30,440 --> 00:20:33,600 Speaker 1: women in all. You could fit all of those women 393 00:20:33,760 --> 00:20:38,640 Speaker 1: on a single London Underground tube train seated. So as 394 00:20:38,720 --> 00:20:41,879 Speaker 1: Morrissey's legacy achievable. You know they used to go to 395 00:20:41,880 --> 00:20:44,720 Speaker 1: be a veteran. Now, Lexie, I'm not beyond the grave 396 00:20:44,880 --> 00:20:46,600 Speaker 1: next tithing my hope. This is not sort of you know, 397 00:20:46,640 --> 00:20:48,600 Speaker 1: my parting shop. But I've always said you know, I 398 00:20:48,600 --> 00:20:51,840 Speaker 1: really don't want to leave this industry until it looks 399 00:20:51,840 --> 00:20:54,199 Speaker 1: and feels very different. And for me, that means that 400 00:20:54,240 --> 00:20:56,520 Speaker 1: we have, you know, as many women in it as men, 401 00:20:56,720 --> 00:20:59,800 Speaker 1: and so people expect if they have a fun manager 402 00:20:59,800 --> 00:21:02,040 Speaker 1: to come visit them and their thorough client. They have 403 00:21:02,119 --> 00:21:03,960 Speaker 1: just as much expectation that's going to be a woman 404 00:21:03,960 --> 00:21:06,440 Speaker 1: as a man, and that's not the case. Now meet 405 00:21:06,520 --> 00:21:09,600 Speaker 1: the mentors and what they hope to pass on. My 406 00:21:09,680 --> 00:21:12,880 Speaker 1: name is Rosie McMillan. I work at Fidelity International, where 407 00:21:12,880 --> 00:21:15,760 Speaker 1: I'm the director of portfolio Management. To say it's been 408 00:21:15,800 --> 00:21:20,320 Speaker 1: an easy ride would be a lie. It's a case 409 00:21:20,359 --> 00:21:26,480 Speaker 1: of changing mindset, changing habits, changing deeply in rooted beliefs, 410 00:21:26,760 --> 00:21:32,080 Speaker 1: and opening people's eyes to possibility. If gender diversity has stalled, 411 00:21:32,400 --> 00:21:36,280 Speaker 1: ethnic diversity is even worse. My name is I'm Jim 412 00:21:36,359 --> 00:21:38,720 Speaker 1: day Lawal and I work at Bearings. I'm the head 413 00:21:38,720 --> 00:21:41,679 Speaker 1: of Ian Corporate Debt at Bearings. I think there are 414 00:21:41,720 --> 00:21:45,720 Speaker 1: certain circumstances in certain situations you find yourself in as 415 00:21:45,720 --> 00:21:49,320 Speaker 1: a female portfolio manager, a female fund manager, and you 416 00:21:49,480 --> 00:21:53,399 Speaker 1: feel you'ressuming against the tide. I've got the intersectionality of 417 00:21:53,560 --> 00:21:56,679 Speaker 1: being an ethnic minority as well as a female, and 418 00:21:56,720 --> 00:22:00,320 Speaker 1: I see that come through in my own journey. Ellen 419 00:22:00,400 --> 00:22:03,960 Speaker 1: Man is a mentee. She's studying to become a chartered 420 00:22:04,000 --> 00:22:08,520 Speaker 1: financial analyst at Cambridge Graduate in Japanese. She's working at 421 00:22:08,640 --> 00:22:13,920 Speaker 1: Jupiter Asset Management. I'd started my career during lockdown, so 422 00:22:14,080 --> 00:22:18,800 Speaker 1: I spent almost two years working pretty much by myself. 423 00:22:19,280 --> 00:22:22,600 Speaker 1: So I just was really excited to honestly meet other 424 00:22:22,680 --> 00:22:26,600 Speaker 1: people getting started and here from them. I've joined a 425 00:22:26,680 --> 00:22:33,600 Speaker 1: team where my my line manager is someone very committed 426 00:22:33,600 --> 00:22:37,320 Speaker 1: to the mentor role already. So you've got a mail mentor. Yes, 427 00:22:37,720 --> 00:22:40,399 Speaker 1: the idea of having a mentor and the kind of 428 00:22:40,480 --> 00:22:44,320 Speaker 1: check ins with them and providing some guidance on how 429 00:22:44,320 --> 00:22:47,760 Speaker 1: do you support someone in those career goals. I think 430 00:22:47,760 --> 00:22:51,480 Speaker 1: that's very valuable, especially from the kind of gender perspective. 431 00:22:52,520 --> 00:22:57,879 Speaker 1: So cautious optimism then, because the numbers truly are embarrassing. 432 00:22:58,240 --> 00:23:02,400 Speaker 1: Citywar totted up five hundred and sixty two new funds 433 00:23:02,720 --> 00:23:06,160 Speaker 1: launched in the UK in twenty twenty two, but only 434 00:23:06,320 --> 00:23:10,720 Speaker 1: ten percent are being managed by women. It's hard, though, 435 00:23:10,760 --> 00:23:14,879 Speaker 1: not to be swept up by Helena Morrissey's determination. But 436 00:23:15,000 --> 00:23:17,960 Speaker 1: in the twenty years that I've been covering finance, the 437 00:23:18,080 --> 00:23:22,880 Speaker 1: sector has seen little change. Helena and others have a 438 00:23:22,920 --> 00:23:27,560 Speaker 1: battle to move fund management forwards. I'll leave the final 439 00:23:27,600 --> 00:23:31,560 Speaker 1: word though, to Ellen, I'm hopeful, but I think my 440 00:23:31,640 --> 00:23:35,240 Speaker 1: hopefulness is very much in the context of being lucky 441 00:23:35,320 --> 00:23:38,119 Speaker 1: enough to be around a team who are very supportive, 442 00:23:38,240 --> 00:23:41,520 Speaker 1: and to have a kind of first boss who has 443 00:23:41,520 --> 00:23:47,160 Speaker 1: been extremely supportive and wants me to flourish. Caroline joins 444 00:23:47,240 --> 00:23:50,760 Speaker 1: us right now on the phone from Lunn. Caroline, what 445 00:23:50,960 --> 00:23:54,800 Speaker 1: is your level of optimism about change here in the 446 00:23:54,880 --> 00:23:59,400 Speaker 1: UK fund business? Well, great to be speaking to you. Look, 447 00:23:59,440 --> 00:24:01,480 Speaker 1: I think it's it's very difficult. On the one hand, 448 00:24:01,520 --> 00:24:05,679 Speaker 1: this is hugely ambitious, right Helena Morrissey. If she continues 449 00:24:05,720 --> 00:24:09,040 Speaker 1: this program with the Diversity Project, in three years time, 450 00:24:09,119 --> 00:24:12,320 Speaker 1: she could double the number of female fund managers. That 451 00:24:12,480 --> 00:24:16,240 Speaker 1: is massively ambitious, even though it's only sixty women. So 452 00:24:16,280 --> 00:24:20,359 Speaker 1: you could have sort of Morrissey's view and this whole 453 00:24:20,520 --> 00:24:25,480 Speaker 1: program really amazingly influential in the space. On the other hand, 454 00:24:25,520 --> 00:24:28,560 Speaker 1: we've had so many initiatives and the numbers have been 455 00:24:28,600 --> 00:24:32,920 Speaker 1: so difficult to move. The UK's got gender pay reporting 456 00:24:32,960 --> 00:24:36,639 Speaker 1: for the big financial institutions, big, big employers in the 457 00:24:36,720 --> 00:24:39,360 Speaker 1: UK that hasn't moved the needle that much. You look 458 00:24:39,359 --> 00:24:42,560 Speaker 1: at the Alison Rose review just this week. She's the 459 00:24:42,600 --> 00:24:45,639 Speaker 1: CEO of nat West Bank here in the UK, and 460 00:24:45,720 --> 00:24:49,600 Speaker 1: that review of entrepreneurship record numbers of women starting new businesses, 461 00:24:49,720 --> 00:24:53,000 Speaker 1: but they still struggle to get funding. So that's the context, 462 00:24:53,000 --> 00:24:55,760 Speaker 1: and I think it's reflected in some of the comments 463 00:24:55,760 --> 00:24:58,359 Speaker 1: by the women that I spoke to. For me, it's 464 00:24:58,400 --> 00:25:00,679 Speaker 1: great having on the program. I'll listen to your show 465 00:25:00,840 --> 00:25:03,359 Speaker 1: every single morning as I drive to work and I 466 00:25:03,400 --> 00:25:05,879 Speaker 1: can't think of any better way to prepare for my 467 00:25:05,960 --> 00:25:12,520 Speaker 1: trading day, well, my reporting day. I wonder if this 468 00:25:12,600 --> 00:25:15,679 Speaker 1: is specifically a UK problem or if you see it, 469 00:25:15,840 --> 00:25:18,359 Speaker 1: you know any better or worse in New York? Is 470 00:25:18,359 --> 00:25:22,040 Speaker 1: it any better or worse in Frankfurt? Look, the numbers 471 00:25:22,040 --> 00:25:27,520 Speaker 1: speak for themselves, right Globally eighteen percent of fun managers 472 00:25:27,640 --> 00:25:31,560 Speaker 1: are female, so it's not particularly better anywhere else in 473 00:25:31,600 --> 00:25:34,439 Speaker 1: the world. But also I think that it's important not 474 00:25:34,480 --> 00:25:38,640 Speaker 1: to think about this pathway program, which is accompanied by 475 00:25:38,720 --> 00:25:42,320 Speaker 1: doing your CFA, your exams as well to be a 476 00:25:42,359 --> 00:25:45,399 Speaker 1: fun manager in Britain. It is global isn't it, Because 477 00:25:46,160 --> 00:25:49,200 Speaker 1: as one of the women told me, Rosie, these companies 478 00:25:49,200 --> 00:25:52,520 Speaker 1: that are taking part thirty three firms, they're global investors, 479 00:25:52,600 --> 00:25:55,560 Speaker 1: and so perhaps the optimism also is that there's a 480 00:25:55,600 --> 00:26:00,359 Speaker 1: cascade effect and financial cities and centers around the world. 481 00:26:00,600 --> 00:26:03,520 Speaker 1: We'll be looking at London maybe maybe take that example. 482 00:26:03,840 --> 00:26:06,320 Speaker 1: All right, great stuff. I really appreciate you taking the time, Caroline, 483 00:26:06,320 --> 00:26:10,760 Speaker 1: and a fascinating piece of reporting there Bloomberg Daybreak Europost 484 00:26:10,840 --> 00:26:13,639 Speaker 1: Caroline Hepcker with the story about the I guess what 485 00:26:13,760 --> 00:26:16,480 Speaker 1: is a stubborn problem on a global basis. It is 486 00:26:16,480 --> 00:26:20,520 Speaker 1: the lack of diversity, gender and otherwise in the fund 487 00:26:20,560 --> 00:26:25,000 Speaker 1: management business. Yeah. Absolutely, and again I'll encourage people four Am. 488 00:26:25,080 --> 00:26:28,880 Speaker 1: Caroline Hepker and team act Tom Mackenzie on the radio 489 00:26:28,960 --> 00:26:33,560 Speaker 1: deliver everything you need to get started. And uh, it's 490 00:26:33,560 --> 00:26:37,439 Speaker 1: really don't miss programming. And they're assuming you're awake it 491 00:26:37,480 --> 00:26:42,720 Speaker 1: for you, Assuming you're awake it for you. Let's talk 492 00:26:42,760 --> 00:26:45,280 Speaker 1: stocks with an old friend, Callie Cox. She's in our 493 00:26:45,320 --> 00:26:48,920 Speaker 1: Bloomberg in Actor Broker studio. She's US equity analyst with 494 00:26:49,080 --> 00:26:53,000 Speaker 1: e Turo. And I think memory serves you went to 495 00:26:53,040 --> 00:26:56,240 Speaker 1: that trade school in Chapel Hill is right if I remember, Yeah, 496 00:26:56,240 --> 00:27:00,000 Speaker 1: that trade school that's not doing so hot with basketball. Yeah. Anyway, Callie, 497 00:27:00,000 --> 00:27:01,400 Speaker 1: do you make of this market? I think the last 498 00:27:01,400 --> 00:27:03,560 Speaker 1: time we talked to you a month or so ago, 499 00:27:03,680 --> 00:27:06,240 Speaker 1: the narrative is very different. People were talking about the FED, 500 00:27:06,560 --> 00:27:09,480 Speaker 1: this inflation things. It's it's in the past. The FED 501 00:27:09,560 --> 00:27:12,359 Speaker 1: actually made pause and pivot sooner than we think. That 502 00:27:12,400 --> 00:27:14,760 Speaker 1: was driving the markets in January. But the narts a 503 00:27:14,760 --> 00:27:17,400 Speaker 1: little bit differently. Now, how are you thinking about it? Yeah, well, 504 00:27:17,400 --> 00:27:19,320 Speaker 1: now people think the FED could go even higher, and 505 00:27:19,359 --> 00:27:22,520 Speaker 1: FED officials are saying the same thing. We have FED 506 00:27:22,560 --> 00:27:24,639 Speaker 1: speakers stepping out and saying, you know, maybe a fifty 507 00:27:24,680 --> 00:27:27,320 Speaker 1: basis point hike is warranted. You know, maybe we should 508 00:27:27,320 --> 00:27:30,440 Speaker 1: re accelerate, and markets are pricing that back in. From 509 00:27:30,440 --> 00:27:32,640 Speaker 1: our side, you know, we didn't expect a rate cut 510 00:27:32,680 --> 00:27:35,280 Speaker 1: anytime soon. We expected maybe a little bit of excitement 511 00:27:35,320 --> 00:27:38,480 Speaker 1: around the fact that inflation is coming under control. But 512 00:27:38,920 --> 00:27:41,520 Speaker 1: maybe it's not coming under control as quickly as people think. 513 00:27:41,560 --> 00:27:43,439 Speaker 1: So I think that's just shifted the mindset of it. 514 00:27:43,720 --> 00:27:45,600 Speaker 1: So what does that mean? I just saw Cliff Assess 515 00:27:45,680 --> 00:27:48,960 Speaker 1: actually from AQR on Bloomberg TV and he was saying, 516 00:27:49,240 --> 00:27:53,640 Speaker 1: this market has priced in inflation coming down pretty rapidly. 517 00:27:54,119 --> 00:27:57,280 Speaker 1: So that to me says Cliff thinks we got a 518 00:27:57,400 --> 00:27:59,640 Speaker 1: ways to go on the down side. What do you think? 519 00:28:00,080 --> 00:28:01,720 Speaker 1: I agree with him. I think it's going to be 520 00:28:01,760 --> 00:28:04,199 Speaker 1: a lot harder to take inflation from six percent to 521 00:28:04,240 --> 00:28:06,679 Speaker 1: two percent than it was from nine percent to six percent. 522 00:28:06,840 --> 00:28:09,760 Speaker 1: I'm talking about CPI when I say that, right headline, CPI, 523 00:28:10,040 --> 00:28:11,760 Speaker 1: right right. And the reason why I say that is 524 00:28:11,760 --> 00:28:15,159 Speaker 1: because services inflation is still fiery hot, and that's the 525 00:28:15,200 --> 00:28:17,159 Speaker 1: strong part of the economy too. This is not a 526 00:28:17,200 --> 00:28:19,199 Speaker 1: bad story if you step back and look at it, 527 00:28:19,359 --> 00:28:21,520 Speaker 1: but it does make the Fed's job a lot harder 528 00:28:21,560 --> 00:28:24,840 Speaker 1: because services inflation is more demand driven and more tied 529 00:28:24,880 --> 00:28:28,040 Speaker 1: to the job market. And let's be honest, investors did 530 00:28:28,040 --> 00:28:30,720 Speaker 1: get over their skis. It makes sense because bon yields fell, 531 00:28:30,920 --> 00:28:33,080 Speaker 1: but now that bonn yields are rising again, there is 532 00:28:33,119 --> 00:28:35,720 Speaker 1: a bit of a mismatch. So what do we do here? 533 00:28:35,800 --> 00:28:37,879 Speaker 1: I mean, do we just wait for the Fed to 534 00:28:38,280 --> 00:28:41,280 Speaker 1: signal that rates of peaked endor they would put a 535 00:28:41,400 --> 00:28:43,360 Speaker 1: rate cut on the table, or is there some way 536 00:28:43,360 --> 00:28:46,720 Speaker 1: to be active here and trying to get positioned for 537 00:28:46,760 --> 00:28:49,680 Speaker 1: the remainder of this year. Well, I think it's important 538 00:28:49,680 --> 00:28:52,160 Speaker 1: to sit down and figure out what your view is 539 00:28:52,160 --> 00:28:54,360 Speaker 1: if you're looking for a short term opportunity, and I 540 00:28:54,360 --> 00:28:57,320 Speaker 1: put it in three camps. I think of doomsday bears, 541 00:28:57,360 --> 00:28:59,160 Speaker 1: I think of cautious bears, and I think of straight 542 00:28:59,200 --> 00:29:02,080 Speaker 1: up bulls. We fall into the cautious bearers camp, where 543 00:29:02,120 --> 00:29:04,000 Speaker 1: we think that prices are a little bit too high, 544 00:29:04,080 --> 00:29:06,200 Speaker 1: sentiment has gone a little bit too far, but at 545 00:29:06,200 --> 00:29:08,680 Speaker 1: the same time, we're still hopeful that the economy can 546 00:29:08,720 --> 00:29:11,320 Speaker 1: avoid a recession, and that means markets may not take 547 00:29:11,320 --> 00:29:14,040 Speaker 1: out the lows. So in that camp, you know, we 548 00:29:14,160 --> 00:29:17,000 Speaker 1: really like looking for value. We like looking for quality, 549 00:29:17,720 --> 00:29:20,680 Speaker 1: low valuations. Uh, you know, maybe looking at some cheap 550 00:29:20,680 --> 00:29:23,400 Speaker 1: cyclical sectors. But I think depending on what camp you 551 00:29:23,480 --> 00:29:26,400 Speaker 1: fall in, that could determine how you approach this market. 552 00:29:26,760 --> 00:29:29,280 Speaker 1: I don't know if you have a view on crypto. 553 00:29:29,520 --> 00:29:33,800 Speaker 1: I think of e toro and crypto together, just because 554 00:29:34,080 --> 00:29:37,040 Speaker 1: so much of the great analysis I read, you know, 555 00:29:37,080 --> 00:29:41,240 Speaker 1: I first started covering bitcoin was from e Toro. Um, 556 00:29:42,040 --> 00:29:45,160 Speaker 1: I've been amazed by the fact that it's holding at 557 00:29:45,440 --> 00:29:48,120 Speaker 1: let's check where bitcoin is right now see rypico on 558 00:29:48,160 --> 00:29:52,880 Speaker 1: the twenty three thousand, So it's holding at twenty four 559 00:29:52,920 --> 00:29:57,360 Speaker 1: thousand dollars, basically just about fifteen bucks under and at 560 00:29:57,360 --> 00:30:00,720 Speaker 1: a time when the market has decided, oh darn it, 561 00:30:00,800 --> 00:30:03,760 Speaker 1: we believe the FED narrative. Now they really are going 562 00:30:03,800 --> 00:30:07,200 Speaker 1: to keep raising and holding. And so stocks, you know, 563 00:30:07,320 --> 00:30:09,880 Speaker 1: tanked a couple days ago. Bitcoin did nothing. Why is 564 00:30:09,920 --> 00:30:12,960 Speaker 1: it so resilient? So this is a really interesting story 565 00:30:13,000 --> 00:30:15,560 Speaker 1: that I'm watching, and there are a bunch of different theories. 566 00:30:15,600 --> 00:30:19,360 Speaker 1: But within crypto bitcoin is seen as the quality. It's 567 00:30:19,400 --> 00:30:21,880 Speaker 1: seen like seen as the gold of the crypto space, 568 00:30:22,120 --> 00:30:24,960 Speaker 1: and from a portfolio management perspective you look at it differently, 569 00:30:25,040 --> 00:30:27,240 Speaker 1: but let's be honest, that's the brand that it has. 570 00:30:27,560 --> 00:30:29,920 Speaker 1: So we're seeing the flight to quality within the crypto 571 00:30:29,960 --> 00:30:33,400 Speaker 1: space out of alt coins, out of stable coins, into 572 00:30:33,560 --> 00:30:36,239 Speaker 1: bitcoin and ethereum, just because they're so well known and 573 00:30:36,520 --> 00:30:39,840 Speaker 1: because there is that institutional underpinning. It's a little weird 574 00:30:39,880 --> 00:30:42,880 Speaker 1: to me, I'll be honest, because again, as from a 575 00:30:42,880 --> 00:30:46,480 Speaker 1: portfolio management perspective, it's a risk asset, and risk assets 576 00:30:46,480 --> 00:30:49,560 Speaker 1: tend to do worse in high rate environments, especially if 577 00:30:49,560 --> 00:30:52,760 Speaker 1: they don't have underlying cash flows and profits. But it's 578 00:30:52,920 --> 00:30:54,880 Speaker 1: it's a perspective thing. From what I've seen, there are 579 00:30:54,920 --> 00:30:57,840 Speaker 1: just more flows going into bitcoin within the space, and 580 00:30:57,880 --> 00:31:02,200 Speaker 1: that's kept the price afloat. How about fixed income? It 581 00:31:02,280 --> 00:31:05,840 Speaker 1: was so so brutal performance in twenty twenty two. What 582 00:31:05,960 --> 00:31:08,400 Speaker 1: are the you guys at eteral thinking about just broadly 583 00:31:09,280 --> 00:31:12,800 Speaker 1: fixed income? So fixed income, You're right, it was a 584 00:31:12,840 --> 00:31:15,800 Speaker 1: really weird year last year. I mean, stocks were down 585 00:31:15,840 --> 00:31:18,720 Speaker 1: ten percent, bonds in general were down more than ten percent. 586 00:31:18,920 --> 00:31:21,640 Speaker 1: It seems like they're rebounding at the same time. You know, 587 00:31:21,760 --> 00:31:24,040 Speaker 1: we look at the ten year yield, we say, you know, 588 00:31:24,160 --> 00:31:27,040 Speaker 1: it probably can't go much higher than four percent here. 589 00:31:27,080 --> 00:31:29,240 Speaker 1: There seems to be a lot of technical push and 590 00:31:29,320 --> 00:31:32,400 Speaker 1: pull around that point. Look at short term yields too. 591 00:31:32,480 --> 00:31:34,920 Speaker 1: You know, the FETE is talking about re accelerating rate hikes, 592 00:31:35,200 --> 00:31:37,760 Speaker 1: but again, let's be honest here, how much more are 593 00:31:37,760 --> 00:31:40,000 Speaker 1: they going to re accelerate it? Because the FETE is 594 00:31:40,000 --> 00:31:43,120 Speaker 1: trying to keep this balance and check of controlling inflation 595 00:31:43,560 --> 00:31:46,760 Speaker 1: and you know, basically steering the economy and the job 596 00:31:46,800 --> 00:31:51,560 Speaker 1: market through a slowdown. So, you know, we talk to 597 00:31:51,600 --> 00:31:55,160 Speaker 1: more speculative short term traders, we remind them that. Of course, 598 00:31:55,200 --> 00:31:56,960 Speaker 1: the recession is still a risk out there, and it 599 00:31:57,000 --> 00:31:59,560 Speaker 1: may be smart to head your positions. Bonds are the 600 00:31:59,560 --> 00:32:02,480 Speaker 1: obvious hedge there. But at the same time, you know, 601 00:32:02,520 --> 00:32:05,000 Speaker 1: as a retail investor, you have to realize your time frame. 602 00:32:05,200 --> 00:32:07,480 Speaker 1: So we're also saying if you're longer term, you know, 603 00:32:07,560 --> 00:32:09,480 Speaker 1: maybe you have those short term goals that you want 604 00:32:09,480 --> 00:32:12,200 Speaker 1: to meet, but longer term, let's look at more risk 605 00:32:12,280 --> 00:32:15,760 Speaker 1: at these levels. Because stocks are ten to fifteen percent 606 00:32:15,800 --> 00:32:18,280 Speaker 1: away from their highs. This is a buying opportunity if 607 00:32:18,360 --> 00:32:21,480 Speaker 1: you have the time on your side. So tell me 608 00:32:21,520 --> 00:32:23,600 Speaker 1: about ETRO. I don't know that much about it. Who's 609 00:32:23,720 --> 00:32:27,120 Speaker 1: kind of your customer base talk to us about Yeah, 610 00:32:27,160 --> 00:32:31,320 Speaker 1: so I love E Toro bias so I Toro is 611 00:32:31,320 --> 00:32:34,520 Speaker 1: a retail brickrage. We have a lot of millennial and 612 00:32:34,600 --> 00:32:37,760 Speaker 1: Gen X clients are kind of claim to fame is 613 00:32:37,760 --> 00:32:40,040 Speaker 1: that we have a social investing feed and we offer 614 00:32:40,120 --> 00:32:43,200 Speaker 1: a lot a lot globally in the US we offer 615 00:32:43,360 --> 00:32:45,800 Speaker 1: stocial investing is not going to be enough for Paul. 616 00:32:45,840 --> 00:32:48,360 Speaker 1: You got to tell them what that is, Paul. There's 617 00:32:48,360 --> 00:32:51,600 Speaker 1: a social feed and you can post your trades and 618 00:32:51,720 --> 00:32:54,680 Speaker 1: so you can then follow other people's trades. Right. So 619 00:32:54,760 --> 00:32:58,000 Speaker 1: the idea is you can, if you you know, love 620 00:32:58,080 --> 00:33:01,920 Speaker 1: Callie's portfolio management, you can follow her trades online. You 621 00:33:01,920 --> 00:33:05,360 Speaker 1: can just copy her portfolio, okay, which is kind of 622 00:33:05,360 --> 00:33:08,400 Speaker 1: a cool idea. I had never heard of it before that. Yeah, 623 00:33:08,440 --> 00:33:11,200 Speaker 1: it's really cool, especially in this era of community when 624 00:33:11,200 --> 00:33:14,080 Speaker 1: everybody's looking to everybody else on how to trade, how 625 00:33:14,120 --> 00:33:18,200 Speaker 1: to invest, and more and more, how to speak. Yes 626 00:33:19,080 --> 00:33:22,920 Speaker 1: for good and bad reasons, yes, but you know, being 627 00:33:22,920 --> 00:33:26,200 Speaker 1: in that space and having that power to help investors 628 00:33:26,280 --> 00:33:28,760 Speaker 1: find each other and find community is just such a 629 00:33:28,800 --> 00:33:31,200 Speaker 1: cool offering. And I feel really honored that, you know, 630 00:33:31,240 --> 00:33:33,120 Speaker 1: I'm I'm kind of the face of that in the 631 00:33:33,240 --> 00:33:36,760 Speaker 1: US and helping helping, you know, connect this community along 632 00:33:36,760 --> 00:33:38,920 Speaker 1: with the markets that we're all trying to understand alone. 633 00:33:39,240 --> 00:33:42,800 Speaker 1: Gen Z. Millennials do they invest? Are the active investors? Yes? 634 00:33:42,880 --> 00:33:46,640 Speaker 1: They invest? You're talking to a millennial Rod, Yeah, you 635 00:33:47,160 --> 00:33:52,320 Speaker 1: are talking and she invests. Yeah. From data that we 636 00:33:52,480 --> 00:33:54,760 Speaker 1: run and we keep a close pulse check on the 637 00:33:54,760 --> 00:33:57,320 Speaker 1: retail investors through a bunch of different surveys we do. 638 00:33:57,880 --> 00:34:01,800 Speaker 1: But retail investors, millennials and gens excuse me, gen X, 639 00:34:02,120 --> 00:34:03,960 Speaker 1: We'll talk about all of them, gen X, gen Z. 640 00:34:04,120 --> 00:34:06,720 Speaker 1: Millennials are investing at a more and more rapid clip. 641 00:34:07,000 --> 00:34:10,200 Speaker 1: We're seeing a millennial coming of age basically in the economy, 642 00:34:10,280 --> 00:34:13,040 Speaker 1: and when people have more money, they tend to invest it. 643 00:34:13,560 --> 00:34:16,360 Speaker 1: So yeah, we're seeing a lot of those demographic shifts 644 00:34:16,360 --> 00:34:19,400 Speaker 1: where these younger investors are feeling more empowered to invest. 645 00:34:19,520 --> 00:34:22,560 Speaker 1: Great stuff. I love learning about the new ways to invest. 646 00:34:22,800 --> 00:34:25,799 Speaker 1: Kelly Cox, she's a US investment analyst for e Turo. 647 00:34:26,120 --> 00:34:27,799 Speaker 1: I think you guys are based in Hoboken, right, that's 648 00:34:27,800 --> 00:34:29,879 Speaker 1: pretty cool. We are. We are, but we just got 649 00:34:29,920 --> 00:34:32,200 Speaker 1: our New York bit license so we can move across 650 00:34:32,239 --> 00:34:34,520 Speaker 1: the river. Now, Okay, I'm a big Hoboken fan, So 651 00:34:34,560 --> 00:34:36,840 Speaker 1: that's good. There. Good stuff kind of Cox join us 652 00:34:36,880 --> 00:34:41,920 Speaker 1: here in our Bloomberg Interactor Broker studio today in our 653 00:34:41,960 --> 00:34:45,239 Speaker 1: c suite conversation, we'll talk about the snack food business. 654 00:34:45,239 --> 00:34:47,440 Speaker 1: We'll be there with our good friends and Hostess Brands 655 00:34:47,760 --> 00:34:50,320 Speaker 1: stock symbol. This is one of my faves. T w 656 00:34:50,760 --> 00:34:54,280 Speaker 1: n K think Twinkie, Hostess Brands. It's a three point 657 00:34:54,320 --> 00:34:57,960 Speaker 1: three billion market cap company. Stocks up nine percent. They 658 00:34:57,960 --> 00:35:00,400 Speaker 1: report it's some better and expected results Tuesday, after the 659 00:35:00,400 --> 00:35:03,960 Speaker 1: clothes stock traded up yesterday. We're joined by the CEO 660 00:35:04,000 --> 00:35:08,000 Speaker 1: of Hostess Brands, Andy Callahan, joins us via the phone. Andy, 661 00:35:08,080 --> 00:35:10,560 Speaker 1: thanks so much for joining us here. You had some 662 00:35:10,560 --> 00:35:13,239 Speaker 1: pretty good numbers Tuesday after the close. What are some 663 00:35:13,280 --> 00:35:16,440 Speaker 1: of the highlights from your quarterly results? Yeah, thanks for 664 00:35:16,520 --> 00:35:19,600 Speaker 1: having me. We're coming off a great week in total earnings. 665 00:35:19,600 --> 00:35:21,520 Speaker 1: As part of that, I mean, we're coming off our 666 00:35:21,560 --> 00:35:25,600 Speaker 1: third consecutive year of double digit top line growth. We 667 00:35:25,680 --> 00:35:29,400 Speaker 1: have double digit earnings growth and double digit EPs growth, 668 00:35:29,440 --> 00:35:33,680 Speaker 1: so we're really we're really feel like we're in a 669 00:35:33,719 --> 00:35:38,360 Speaker 1: good spot on our sustainable growth plan, and we reaffirmed 670 00:35:38,360 --> 00:35:41,240 Speaker 1: our long term algorithm, gave guidance that was once again 671 00:35:41,280 --> 00:35:46,839 Speaker 1: another profit guidance above our long term algorithm. And what's 672 00:35:46,920 --> 00:35:51,000 Speaker 1: really driving our growth is our ability to be able 673 00:35:51,040 --> 00:35:54,759 Speaker 1: to connect with consumers reimagine the snacking category for a 674 00:35:54,800 --> 00:35:56,560 Speaker 1: new set of consumers, and a lot of that has 675 00:35:56,600 --> 00:35:59,239 Speaker 1: driven by our innovation. We launched Bouncers back at the 676 00:35:59,320 --> 00:36:02,080 Speaker 1: end of last year, and yesterday we just announced the 677 00:36:02,160 --> 00:36:05,040 Speaker 1: launch of KS Bars, which is really bringing baking, which 678 00:36:05,080 --> 00:36:08,280 Speaker 1: we do better than anybody else, into a new confectionery 679 00:36:08,360 --> 00:36:11,680 Speaker 1: form and both our customers and consumers are really excited 680 00:36:11,719 --> 00:36:15,040 Speaker 1: about it. So a big week overall. All right, I'll 681 00:36:15,040 --> 00:36:18,480 Speaker 1: bite there you go. What are casbars? So? I love it? 682 00:36:18,560 --> 00:36:21,359 Speaker 1: I love the so well consumers, So I love it. 683 00:36:21,840 --> 00:36:25,400 Speaker 1: What are cas bars? Are? We? I mean as I 684 00:36:25,560 --> 00:36:28,719 Speaker 1: know obviously, and everyone knows the twinkie. I'm a big 685 00:36:28,719 --> 00:36:31,960 Speaker 1: fan of the Choco dial and the ding Dongs. I 686 00:36:32,040 --> 00:36:35,200 Speaker 1: like the cupcakes, prefer the orange ones. But you don't 687 00:36:35,280 --> 00:36:40,200 Speaker 1: drink soda. Uh well, I don't drink soda any right, 688 00:36:40,200 --> 00:36:42,360 Speaker 1: we're not going out. I don't drink soda anymore. But anyway, 689 00:36:42,400 --> 00:36:46,160 Speaker 1: I still do eat this stuff when I can. Um, 690 00:36:46,520 --> 00:36:48,400 Speaker 1: it's because it's not an everyday thing, right, I'm not 691 00:36:48,440 --> 00:36:51,960 Speaker 1: like living on twinkies. It's just occasionally in the gas station, 692 00:36:52,000 --> 00:36:54,520 Speaker 1: I'll be like, damn, I need some cupcakes. Um. So, 693 00:36:54,600 --> 00:36:58,000 Speaker 1: what is a casbar? Yeah? So a cas bar in 694 00:36:58,000 --> 00:37:00,240 Speaker 1: a basic And then I'll give you the background because 695 00:37:00,600 --> 00:37:04,360 Speaker 1: although your behaviors are terrific to you, what we find 696 00:37:04,360 --> 00:37:07,400 Speaker 1: at a macro level is that snacking continues to grow. 697 00:37:07,880 --> 00:37:10,680 Speaker 1: Snacking is growing greater than food and indulgence. Snacking is 698 00:37:11,080 --> 00:37:15,560 Speaker 1: growing greater than a non indulgence, snacking by about twenty percent. 699 00:37:16,320 --> 00:37:19,160 Speaker 1: And with all that being said, almost fifty percent of 700 00:37:19,200 --> 00:37:23,600 Speaker 1: Americans snack more than three times a day, and so 701 00:37:24,000 --> 00:37:26,480 Speaker 1: they take a balance sheet of prowth. Our Teeth chief 702 00:37:26,600 --> 00:37:30,560 Speaker 1: growth officer talked about that and baking specifically. Consumers care 703 00:37:30,600 --> 00:37:33,480 Speaker 1: about quality. We've invested in quality, and there's a lot 704 00:37:33,520 --> 00:37:36,640 Speaker 1: of confections company the indulgence of confections that are trying 705 00:37:36,680 --> 00:37:39,200 Speaker 1: to get into baking. Well, guess why we bring in 706 00:37:39,280 --> 00:37:44,200 Speaker 1: baked goods to the confection category with a hostless strength 707 00:37:44,239 --> 00:37:47,000 Speaker 1: of a baked good in a convenient package form. But 708 00:37:47,120 --> 00:37:51,080 Speaker 1: you can discover a kazillion layers of delicious in our 709 00:37:51,120 --> 00:37:55,479 Speaker 1: kaz bars. And that's gooey gooey cream, fluffy fluffy chocolate cake, 710 00:37:55,600 --> 00:37:59,839 Speaker 1: pieces of sweet crunch, delightful drizzle. It is really an 711 00:38:00,000 --> 00:38:03,000 Speaker 1: affection form with all the great goodness and quality that 712 00:38:03,040 --> 00:38:05,560 Speaker 1: consumers wanted a bake goods, and we think it is 713 00:38:05,640 --> 00:38:07,960 Speaker 1: really a big idea. Hey, Andy, When I think about 714 00:38:08,000 --> 00:38:10,040 Speaker 1: the food business, whether it's a snack business or just 715 00:38:10,200 --> 00:38:13,600 Speaker 1: overall food, I think of a GDP or GDP plus 716 00:38:13,680 --> 00:38:16,799 Speaker 1: type type of top line growth story. But as you mentioned, 717 00:38:16,840 --> 00:38:19,560 Speaker 1: the last three years, you guys put up low double digits. 718 00:38:19,600 --> 00:38:22,960 Speaker 1: That also coincides with the pandemic. How did the pandemic 719 00:38:23,320 --> 00:38:27,720 Speaker 1: impact your business? And will let have any residual effect 720 00:38:27,719 --> 00:38:30,799 Speaker 1: going forward? Yeah, So the residual effects means will we 721 00:38:30,840 --> 00:38:34,000 Speaker 1: continue to grow in the answer is a resounding yes. 722 00:38:34,160 --> 00:38:37,120 Speaker 1: What the pandemic did for us. As consumers are in 723 00:38:37,160 --> 00:38:39,359 Speaker 1: their home, around their home and traveling around their home, 724 00:38:39,600 --> 00:38:42,759 Speaker 1: they snack more and snacking before COVID, during COVID, and 725 00:38:42,840 --> 00:38:46,600 Speaker 1: after COVID had trends, especially indulgent snacking that were greater 726 00:38:46,640 --> 00:38:50,520 Speaker 1: than total food. Consumers are changing the way they eat. 727 00:38:50,600 --> 00:38:53,560 Speaker 1: They eat more with now with a balance sheet approach. 728 00:38:54,480 --> 00:38:57,279 Speaker 1: My chief growth officer talked about that yesterday. So as 729 00:38:57,320 --> 00:39:01,319 Speaker 1: they increase the total occasions or interactions food there, each 730 00:39:01,360 --> 00:39:03,440 Speaker 1: of those occasions are more choiceful and they have a 731 00:39:03,520 --> 00:39:05,640 Speaker 1: role in their life. And if they have an indulgence 732 00:39:05,640 --> 00:39:08,919 Speaker 1: snack one time, they may then later in the day 733 00:39:09,000 --> 00:39:11,640 Speaker 1: or earlier in the day have a more non indulgence 734 00:39:11,680 --> 00:39:14,480 Speaker 1: snack to balance that all out. So that macro trend 735 00:39:15,120 --> 00:39:19,040 Speaker 1: is unmistakable and we're living in that. So that what 736 00:39:19,160 --> 00:39:22,200 Speaker 1: happened with COVID is we were able to given our 737 00:39:22,239 --> 00:39:25,000 Speaker 1: investment in quality, the new innovation forms, we're able to 738 00:39:25,040 --> 00:39:29,399 Speaker 1: reintroduce a new consumer to host this in a way 739 00:39:29,440 --> 00:39:32,880 Speaker 1: that they hadn't seen before. And those investments during COVID, 740 00:39:32,960 --> 00:39:35,680 Speaker 1: both innovation, reaching out to consumers, talking to them, our 741 00:39:35,719 --> 00:39:39,200 Speaker 1: investment in quality, our ability to do that has been 742 00:39:39,239 --> 00:39:42,560 Speaker 1: able to propel this business and that momentum has continued 743 00:39:42,600 --> 00:39:45,480 Speaker 1: after COVID. You know, just a finer point on that, 744 00:39:45,800 --> 00:39:49,919 Speaker 1: when we attract new consumers into our franchise, a lot 745 00:39:49,960 --> 00:39:54,880 Speaker 1: of those are millennial parents. They then repeat at In 746 00:39:54,920 --> 00:39:58,520 Speaker 1: other words, our addition of two times buyers is growing 747 00:39:58,520 --> 00:40:00,960 Speaker 1: at more than twice the rate of anybody else that 748 00:40:01,040 --> 00:40:06,279 Speaker 1: does bake goods. So we're really attracting consumers. But when 749 00:40:06,280 --> 00:40:08,880 Speaker 1: we attract them, we really keep them. So those trends 750 00:40:08,920 --> 00:40:12,439 Speaker 1: are really unmistakable the same consumer. It's not a it's 751 00:40:12,480 --> 00:40:15,920 Speaker 1: not a binary choice of eating healthy or eating indulgence. 752 00:40:15,920 --> 00:40:17,759 Speaker 1: It's really a balance sheet of how does it all 753 00:40:17,800 --> 00:40:21,080 Speaker 1: fit within my life? And we're really capitalizing those trends 754 00:40:21,080 --> 00:40:24,760 Speaker 1: with our innovation, our marketing outreaching, our investment in quality. 755 00:40:24,840 --> 00:40:27,000 Speaker 1: I got to ask, but this is going to sound 756 00:40:27,040 --> 00:40:31,879 Speaker 1: maybe flippant or but I'm wondering, really in states where 757 00:40:32,120 --> 00:40:34,720 Speaker 1: marijuana is legal. Do you see a bump in sales? 758 00:40:36,440 --> 00:40:38,920 Speaker 1: You know what? I don't know that specifically, but you know, 759 00:40:39,440 --> 00:40:43,160 Speaker 1: consumers have choices, and that's what we provide. We want 760 00:40:43,200 --> 00:40:47,520 Speaker 1: to provide them the best choice at the really accessible value. 761 00:40:47,960 --> 00:40:50,279 Speaker 1: That's what we do and that's why we invest in 762 00:40:50,280 --> 00:40:53,720 Speaker 1: our productivity. We want our operation to be really focused 763 00:40:53,719 --> 00:40:57,080 Speaker 1: on what consumers care about, really focused on what customers 764 00:40:57,160 --> 00:41:00,759 Speaker 1: care about. Growing the category by doing that and then 765 00:41:00,960 --> 00:41:03,800 Speaker 1: running an operation and a team that unlocks the greatest 766 00:41:03,840 --> 00:41:07,040 Speaker 1: potential of our terrific team and our culture to be 767 00:41:07,080 --> 00:41:10,239 Speaker 1: able to provide that to our customers. And we're doing 768 00:41:10,280 --> 00:41:12,600 Speaker 1: that in a real, real good way. So consumers have 769 00:41:13,280 --> 00:41:17,120 Speaker 1: a breath of choices and uh, and I support all 770 00:41:17,160 --> 00:41:19,919 Speaker 1: of those we want to give Andy, do you? I mean, 771 00:41:19,960 --> 00:41:21,960 Speaker 1: but you seem very focused and I'm not sure if 772 00:41:22,000 --> 00:41:24,200 Speaker 1: I know all of your brands, but they all seem 773 00:41:24,280 --> 00:41:27,319 Speaker 1: like something that could add to my waistline. Do you 774 00:41:27,400 --> 00:41:30,600 Speaker 1: also go after food categories, you know, in the fitness 775 00:41:30,680 --> 00:41:34,239 Speaker 1: or our health food sector. Yeah, so I'm glad you 776 00:41:34,280 --> 00:41:35,719 Speaker 1: brought that up because I was going to bring that 777 00:41:35,800 --> 00:41:37,840 Speaker 1: up to you. Not only do we have an indulgent 778 00:41:37,920 --> 00:41:42,799 Speaker 1: snacks We are the number one cookie brand with our 779 00:41:42,840 --> 00:41:46,520 Speaker 1: Avoortment brand in the reduced sugar and sugar free segment 780 00:41:46,719 --> 00:41:50,920 Speaker 1: and our Avoortment business that which we purchased three years ago, 781 00:41:51,040 --> 00:41:55,960 Speaker 1: Integrate It and Grew, is one of the fastest brands 782 00:41:56,000 --> 00:41:59,800 Speaker 1: in an eight billion dollar cookie segment. It's been growing 783 00:42:00,320 --> 00:42:03,640 Speaker 1: at a rate last year of nearly twenty eight percent 784 00:42:03,719 --> 00:42:07,040 Speaker 1: a point of sale, slightly above twenty eight percent point 785 00:42:07,040 --> 00:42:10,239 Speaker 1: of sale, and we think we're well positioned to capitalize 786 00:42:10,520 --> 00:42:14,080 Speaker 1: on consumers focus on reduced sugar as well. We have 787 00:42:14,080 --> 00:42:17,279 Speaker 1: a leading position that subsegment of cookies is growing a 788 00:42:17,360 --> 00:42:19,960 Speaker 1: greater than twice the rate of total cookies. So we 789 00:42:20,080 --> 00:42:25,799 Speaker 1: have a portfolio of bait goods that provide for what 790 00:42:25,920 --> 00:42:29,200 Speaker 1: consumers choices are. That's an important consumer segment, so we 791 00:42:29,360 --> 00:42:31,600 Speaker 1: provide both of them. All right, Andy, great stuff. I 792 00:42:31,680 --> 00:42:34,160 Speaker 1: really appreciate you taking the time to speak with us. 793 00:42:34,200 --> 00:42:38,280 Speaker 1: Andy Callahan, he's the CEO of Hostess Brands, NASAC, Symbolt 794 00:42:38,960 --> 00:42:43,040 Speaker 1: w n K think Twinkie again. The stock is up 795 00:42:43,080 --> 00:42:45,760 Speaker 1: about nine percent year to date. Had a nice quarterly 796 00:42:45,840 --> 00:42:50,000 Speaker 1: earnings reported after the closed Tuesday. Stock popped yesterday, so 797 00:42:50,200 --> 00:42:56,160 Speaker 1: good to check in with the CEO. Thanks for listening 798 00:42:56,200 --> 00:42:59,680 Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen 799 00:42:59,719 --> 00:43:03,520 Speaker 1: to an interviews with Apple Podcasts or whatever podcast platform 800 00:43:03,600 --> 00:43:06,920 Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt 801 00:43:06,920 --> 00:43:09,960 Speaker 1: Miller nineteen seventy three. And I'm Fall Sweeney. I'm on 802 00:43:10,000 --> 00:43:12,880 Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always 803 00:43:12,920 --> 00:43:14,799 Speaker 1: catch us worldwide at Bloomberg Radio