1
00:00:00,800 --> 00:00:04,040
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

2
00:00:04,040 --> 00:00:06,920
Speaker 1: my co host Matt Miller. Every business day, we bring

3
00:00:06,960 --> 00:00:11,520
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

4
00:00:11,520 --> 00:00:15,600
Speaker 1: with essential market moving news. Find 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 --> 00:00:21,960
Speaker 1: at Bloomberg dot com slash podcast. Let's check in with

7
00:00:22,000 --> 00:00:24,440
Speaker 1: a professional who does this stock stuff for a living,

8
00:00:24,440 --> 00:00:27,360
Speaker 1: Phil Orlando, chief equity market strategist and a head of

9
00:00:27,360 --> 00:00:30,640
Speaker 1: client portfolio management and federator at Herme's Phil, I'm looking

10
00:00:30,640 --> 00:00:33,320
Speaker 1: at the markets here, you know, bouncing off the bottom here.

11
00:00:33,640 --> 00:00:35,920
Speaker 1: I guess we're just throwing around the question here in

12
00:00:35,960 --> 00:00:39,120
Speaker 1: the studio. Did we see the bottom of this market?

13
00:00:39,200 --> 00:00:41,280
Speaker 1: Is this real? This? Or is this just kind of

14
00:00:41,320 --> 00:00:43,239
Speaker 1: a little bit of a headcake in the context of

15
00:00:43,240 --> 00:00:47,520
Speaker 1: a greater bear market head cake? Or head fake? Head fake?

16
00:00:47,640 --> 00:00:51,520
Speaker 1: Is that was the Monday version of head fake? Yes, Look,

17
00:00:51,600 --> 00:00:54,320
Speaker 1: we've had a really good six weeks. I mean the

18
00:00:54,320 --> 00:00:57,960
Speaker 1: month of July the SMP was up about ten. I

19
00:00:58,000 --> 00:00:59,840
Speaker 1: think that was the best month we've seen in a

20
00:01:00,040 --> 00:01:03,840
Speaker 1: up the years since the middle of June. Market went

21
00:01:04,040 --> 00:01:08,640
Speaker 1: from an oversold readings rallied about I think we're a

22
00:01:08,680 --> 00:01:12,520
Speaker 1: little overbought here. Um, but you know, I was listening

23
00:01:12,560 --> 00:01:15,480
Speaker 1: to your conversation earlier. This is kind of a bad

24
00:01:15,520 --> 00:01:19,000
Speaker 1: news is good news kind of a scenario that you know,

25
00:01:19,040 --> 00:01:21,959
Speaker 1: the inflation is sitting at a forty one year high.

26
00:01:22,160 --> 00:01:26,680
Speaker 1: The GDP report last week not particularly good. You know,

27
00:01:26,880 --> 00:01:29,800
Speaker 1: everyone's on recession watch right now. And and the way

28
00:01:29,840 --> 00:01:33,959
Speaker 1: the market has perceived all of this is that the

29
00:01:34,080 --> 00:01:37,840
Speaker 1: data is so bad that that must mean that there's

30
00:01:37,840 --> 00:01:41,119
Speaker 1: going to be an immaculate Fed pivot. You know, by

31
00:01:41,120 --> 00:01:44,520
Speaker 1: the middle of next year that the Fed will we'll

32
00:01:44,560 --> 00:01:47,720
Speaker 1: be able to stop hiking interest rates this year, and

33
00:01:47,720 --> 00:01:50,200
Speaker 1: we're gonna start to see a deceleration of that pace,

34
00:01:50,640 --> 00:01:52,040
Speaker 1: and then the Fed is going to turn around and

35
00:01:52,040 --> 00:01:56,400
Speaker 1: start actually cutting interest rates by the middle of next year. Um.

36
00:01:57,200 --> 00:02:00,600
Speaker 1: We think that that is a little too optimistic. And

37
00:02:00,600 --> 00:02:05,920
Speaker 1: and UH inflation, in our view, is stubborn. It's it's

38
00:02:06,000 --> 00:02:10,280
Speaker 1: deep seated. It's UH sitting at a forty one year high.

39
00:02:10,360 --> 00:02:12,280
Speaker 1: We're not going to be able to wave a magic

40
00:02:12,400 --> 00:02:16,120
Speaker 1: wand and in a couple of months take a nominal

41
00:02:16,200 --> 00:02:19,000
Speaker 1: CPI from nine point one percent back to two or

42
00:02:19,040 --> 00:02:22,160
Speaker 1: three percent. We're going to measure that decline we think

43
00:02:22,280 --> 00:02:24,280
Speaker 1: over the course of a couple of years, not a

44
00:02:24,280 --> 00:02:28,520
Speaker 1: couple of months. So for for all those reasons, Uh,

45
00:02:28,560 --> 00:02:33,240
Speaker 1: this very impressive rally over the next six over the

46
00:02:33,280 --> 00:02:36,480
Speaker 1: last six weeks could could very well result in some

47
00:02:36,560 --> 00:02:40,239
Speaker 1: proper taking over you know, the next couple of months,

48
00:02:40,240 --> 00:02:44,800
Speaker 1: as you know we get some some some more difficult data. Yeah,

49
00:02:44,800 --> 00:02:47,320
Speaker 1: I think that makes a lot of sense. Feel Um.

50
00:02:47,480 --> 00:02:51,960
Speaker 1: One thing I noticed or I read from Cameron Christ

51
00:02:52,000 --> 00:02:54,760
Speaker 1: We've got to get this guy in here, he screamed.

52
00:02:54,960 --> 00:02:58,400
Speaker 1: For Uh, he probably works from home. He screened for

53
00:02:58,520 --> 00:03:01,560
Speaker 1: every drop monthly drop of more than seven and a

54
00:03:01,600 --> 00:03:05,720
Speaker 1: half percent that was followed by a month that you

55
00:03:05,720 --> 00:03:08,120
Speaker 1: know more than made up for that, which is what

56
00:03:08,160 --> 00:03:11,920
Speaker 1: we just saw. And the results are pretty shocking. If

57
00:03:11,960 --> 00:03:15,600
Speaker 1: you look post war, it's only happened um a few

58
00:03:15,639 --> 00:03:21,680
Speaker 1: times in October of nine, in October of two thousand two,

59
00:03:22,480 --> 00:03:26,839
Speaker 1: in March of two thousand nine, uh, January of two

60
00:03:26,840 --> 00:03:31,239
Speaker 1: thousand nineteen, and April of two thousand twenty. So it's

61
00:03:31,240 --> 00:03:34,240
Speaker 1: only been these big bottoms that we know. I mean,

62
00:03:34,280 --> 00:03:37,440
Speaker 1: March of two thousand nine is like uh, imprinted on

63
00:03:37,520 --> 00:03:41,680
Speaker 1: my brain as a massive bottom. Um, it looks good

64
00:03:41,800 --> 00:03:44,280
Speaker 1: at least, but I take your point that people are

65
00:03:44,320 --> 00:03:47,320
Speaker 1: going to be wanting to take profits and those who

66
00:03:47,920 --> 00:03:50,840
Speaker 1: stayed with it and are just to have too much oddit.

67
00:03:50,920 --> 00:03:53,800
Speaker 1: I want to get out, But maybe we don't have

68
00:03:53,880 --> 00:03:56,440
Speaker 1: to fall another twenty is what I'm thinking, because that's

69
00:03:56,520 --> 00:03:59,560
Speaker 1: kind of what was the bad news consensus right before

70
00:03:59,560 --> 00:04:02,200
Speaker 1: this month, is that we went halfway. We have another

71
00:04:02,240 --> 00:04:05,520
Speaker 1: halfway to go. Well to some degree that's going to

72
00:04:05,560 --> 00:04:09,400
Speaker 1: be a function of economic growth and corporate earnings growth. Um.

73
00:04:09,720 --> 00:04:13,920
Speaker 1: If we were having this conversation a week ago, Uh,

74
00:04:14,040 --> 00:04:17,239
Speaker 1: the earnings for the S and P five we're probably

75
00:04:17,320 --> 00:04:21,000
Speaker 1: down about five or six percent into the quarter now,

76
00:04:21,040 --> 00:04:23,839
Speaker 1: but a lot of the energy companies have started to report,

77
00:04:23,960 --> 00:04:27,039
Speaker 1: God bless them. So we're about two thirds of the

78
00:04:27,080 --> 00:04:30,320
Speaker 1: way through the earning season and earnings have gone from

79
00:04:30,320 --> 00:04:33,520
Speaker 1: being down six or seven percent, they're now up seven percent,

80
00:04:34,200 --> 00:04:37,240
Speaker 1: largely on the strength of how good the earnings reports

81
00:04:37,240 --> 00:04:41,640
Speaker 1: have been. Discretionary financials technologies, those numbers are all negative,

82
00:04:42,240 --> 00:04:47,920
Speaker 1: and to a significant degree, companies are providing cautious guidance.

83
00:04:48,000 --> 00:04:51,400
Speaker 1: Strategists and analysts may start to cut their numbers uh

84
00:04:51,440 --> 00:04:53,719
Speaker 1: and and multiples have just moved up a couple of

85
00:04:53,760 --> 00:04:57,440
Speaker 1: turns based upon this third percent rally we've seen over

86
00:04:57,480 --> 00:04:59,360
Speaker 1: the last couple of months. So I think that as

87
00:04:59,400 --> 00:05:02,359
Speaker 1: we get into to the August September, you know, early

88
00:05:02,400 --> 00:05:06,039
Speaker 1: October period, there may be a little bit of rationalization

89
00:05:06,200 --> 00:05:11,400
Speaker 1: in terms of valuations. Lower earnings estimates, lower GDP growth estimates,

90
00:05:11,560 --> 00:05:16,840
Speaker 1: UH more UM comfortable pe multiples i E. Lower and

91
00:05:16,839 --> 00:05:19,400
Speaker 1: and I just think that that given this big rally

92
00:05:19,440 --> 00:05:22,560
Speaker 1: we've seen, uh, it would be prudent to expect a

93
00:05:22,600 --> 00:05:24,760
Speaker 1: little bit of a pullback here. All right, good stuff

94
00:05:24,800 --> 00:05:28,560
Speaker 1: as always. Phil Orlando, chief equity market strategist and head

95
00:05:28,560 --> 00:05:32,159
Speaker 1: of client portfolio management at Federator Hermy's that got over

96
00:05:32,200 --> 00:05:36,520
Speaker 1: six billion and assets under management. That's some sway right there.

97
00:05:40,240 --> 00:05:43,000
Speaker 1: Let's bring in our next guest, Robert Stimpson, c I

98
00:05:43,160 --> 00:05:48,479
Speaker 1: O and portfolio manager Oak Associates Funds. Robert, some folks

99
00:05:48,520 --> 00:05:50,440
Speaker 1: have been telling me here is I look at this

100
00:05:50,760 --> 00:05:53,839
Speaker 1: bounce off the bottom, that we can buy it here,

101
00:05:53,880 --> 00:05:57,200
Speaker 1: but you've gotta be selective. What is it? What does

102
00:05:57,200 --> 00:06:00,200
Speaker 1: this selective mean to you in a market move we're

103
00:06:00,200 --> 00:06:02,039
Speaker 1: experiencing right now? Is it is this kind of a

104
00:06:02,080 --> 00:06:05,560
Speaker 1: bear cat bounce or is this something I can really wait?

105
00:06:05,600 --> 00:06:08,360
Speaker 1: A bear market rally or dead cat dead cat bounce? Yeah,

106
00:06:08,360 --> 00:06:11,160
Speaker 1: I use a barcat market bearcat bounce. I like that.

107
00:06:12,000 --> 00:06:15,080
Speaker 1: How do you think about that stock selection? Robert, Well,

108
00:06:15,120 --> 00:06:16,880
Speaker 1: good morning guys. You no, I agree, you have to

109
00:06:16,920 --> 00:06:20,320
Speaker 1: be pretty selective in this market, simply because you know

110
00:06:20,400 --> 00:06:24,920
Speaker 1: the forward new slow UH is still very questionable. Um.

111
00:06:24,960 --> 00:06:27,400
Speaker 1: We're about to head into some earnings reports and I

112
00:06:27,440 --> 00:06:29,560
Speaker 1: think they're going to be mixed, and that's going to

113
00:06:29,680 --> 00:06:32,599
Speaker 1: affect sentiment. And we know the overall trends in the

114
00:06:32,640 --> 00:06:37,080
Speaker 1: market are are pretty strong. The status raising rates inflation

115
00:06:37,160 --> 00:06:42,560
Speaker 1: is still persistent, and that affects different areas differently. So, UM,

116
00:06:42,640 --> 00:06:46,560
Speaker 1: you know a lot of consumer focused businesses are going

117
00:06:46,600 --> 00:06:50,000
Speaker 1: to struggle because the consumer is pinched pinch by inflation

118
00:06:50,080 --> 00:06:54,400
Speaker 1: and pinched by higher interest rates. Whereas industries that have

119
00:06:54,760 --> 00:07:00,240
Speaker 1: more long tail UH spending cycles, whether it's UH bule

120
00:07:00,240 --> 00:07:03,720
Speaker 1: expenditure with intech UH, you know, those are probably gonna

121
00:07:04,839 --> 00:07:08,240
Speaker 1: fair better in this sort of environment. Is this you know?

122
00:07:08,360 --> 00:07:12,160
Speaker 1: For years, um, people have talked about active versus passive

123
00:07:12,280 --> 00:07:15,560
Speaker 1: and the kind of Jack Bogel passivity of Vanguard one out.

124
00:07:16,120 --> 00:07:20,040
Speaker 1: But is that over now? I mean, is buying an

125
00:07:20,040 --> 00:07:22,480
Speaker 1: index tracking fund just not going to do as well

126
00:07:22,520 --> 00:07:26,640
Speaker 1: as getting an active manager? You know, that's uh, you

127
00:07:26,680 --> 00:07:29,520
Speaker 1: know the million dollar question. Um. You know, I do

128
00:07:29,600 --> 00:07:31,880
Speaker 1: think there is value and active management, and I do

129
00:07:31,960 --> 00:07:34,560
Speaker 1: think a lot of the industry does not realize the

130
00:07:34,720 --> 00:07:37,840
Speaker 1: risk that come with index funds. I mean, the top

131
00:07:37,920 --> 00:07:42,400
Speaker 1: five and ten positions and an index fund um tend

132
00:07:42,440 --> 00:07:44,160
Speaker 1: to be the names that are up a lot. They

133
00:07:44,200 --> 00:07:47,360
Speaker 1: tend to be um, you know, big movers of the

134
00:07:47,400 --> 00:07:50,280
Speaker 1: market in the index. UM. So there's a risk profile

135
00:07:50,320 --> 00:07:52,960
Speaker 1: there that a lot of people, uh may not fully

136
00:07:53,040 --> 00:07:56,560
Speaker 1: understand or they're betting on Tesla essentially in a sense.

137
00:07:56,760 --> 00:07:59,680
Speaker 1: I mean, I can't believe it's I think the fourth

138
00:08:00,000 --> 00:08:04,480
Speaker 1: biggest weight or the fifth biggest weight in the SMP. Yeah.

139
00:08:04,680 --> 00:08:06,880
Speaker 1: Robert talked us about healthcare down the pass that scen area.

140
00:08:06,960 --> 00:08:10,280
Speaker 1: You guys have been looking at what's your healthcare sector

141
00:08:10,320 --> 00:08:13,560
Speaker 1: call right now? So coming out of the pandemic, we

142
00:08:13,600 --> 00:08:16,880
Speaker 1: feel like a lot of industries out there rebounded strongly

143
00:08:17,840 --> 00:08:20,800
Speaker 1: as the world returned to normal, but healthcare was one

144
00:08:20,840 --> 00:08:22,960
Speaker 1: that lagged, and it, you know, kind of makes sense

145
00:08:22,960 --> 00:08:25,160
Speaker 1: people were reluctant to head back to the doctor to

146
00:08:25,200 --> 00:08:28,280
Speaker 1: get those knees, replace those hips, or seek the care.

147
00:08:28,720 --> 00:08:30,760
Speaker 1: They were more apt to go on vacation or on

148
00:08:30,800 --> 00:08:34,480
Speaker 1: a cruise or back to concerts. So we think the

149
00:08:34,520 --> 00:08:38,040
Speaker 1: return to normal for a lot of traditional consumer healthcare

150
00:08:38,080 --> 00:08:40,520
Speaker 1: is still in front of the index, and when you

151
00:08:40,559 --> 00:08:44,199
Speaker 1: look at its relative valuation compared to other industries, it's

152
00:08:44,200 --> 00:08:48,760
Speaker 1: still very attractive. So it's more defensive. The valuation is attractive,

153
00:08:48,760 --> 00:08:51,080
Speaker 1: it has business in front of it, and it's also

154
00:08:51,160 --> 00:08:54,720
Speaker 1: an industry that is used to operating, uh in a

155
00:08:54,800 --> 00:08:57,520
Speaker 1: high inflation environment. I mean, healthcare costs been going up,

156
00:08:57,840 --> 00:09:00,800
Speaker 1: you know, mid single digits for years. UH, so this

157
00:09:00,880 --> 00:09:04,240
Speaker 1: is business as usual with a tailwind. And of course

158
00:09:04,280 --> 00:09:07,800
Speaker 1: the long term demographic So um, it's an area we like,

159
00:09:09,400 --> 00:09:12,120
Speaker 1: uh and there's nothing that can turn that around. I

160
00:09:12,120 --> 00:09:15,560
Speaker 1: mean you'd think that, especially the Democrats, would like to

161
00:09:15,760 --> 00:09:19,760
Speaker 1: slow it down, but they can't and maybe um, their

162
00:09:19,840 --> 00:09:23,400
Speaker 1: lobbyists are the same as Republican lobbyists, so they won't. Um.

163
00:09:23,440 --> 00:09:26,400
Speaker 1: You're not concerned about anything in the future that stops that,

164
00:09:26,400 --> 00:09:28,440
Speaker 1: because it does seem like such an easy such as

165
00:09:28,440 --> 00:09:33,880
Speaker 1: slam dunk. You know, the risk of regulatory oversight and

166
00:09:33,920 --> 00:09:37,600
Speaker 1: pricing pressures. Uh. You know, I'm not gonna belittle it,

167
00:09:37,640 --> 00:09:41,400
Speaker 1: but it has been around for twenty plus years. Uh,

168
00:09:41,440 --> 00:09:43,320
Speaker 1: and at the end of the day, it has very

169
00:09:43,520 --> 00:09:49,560
Speaker 1: little UM impact beyond sentiment over the group. So UM,

170
00:09:49,920 --> 00:09:53,400
Speaker 1: it's a risk, absolutely, but it's not a risk you

171
00:09:53,440 --> 00:09:56,800
Speaker 1: should embrace and avoid the sector entirely because of it,

172
00:09:57,040 --> 00:09:59,480
Speaker 1: because that would have been a losing proposition over the

173
00:09:59,520 --> 00:10:02,600
Speaker 1: last twenty years. Certainly though it's popular trade, right. I mean,

174
00:10:03,080 --> 00:10:06,880
Speaker 1: we all see and feel the rising costs of healthcare

175
00:10:06,920 --> 00:10:09,560
Speaker 1: and then make that decision for an investment. Where do

176
00:10:09,640 --> 00:10:13,880
Speaker 1: you see value what's unloved right now that that you think, um,

177
00:10:14,120 --> 00:10:18,000
Speaker 1: people have overlooked well. I do think the two sectors

178
00:10:18,000 --> 00:10:20,800
Speaker 1: within healthcare that are somewhat ever loved now, the managed

179
00:10:20,840 --> 00:10:23,880
Speaker 1: care groups have been performing well, but I think the

180
00:10:24,400 --> 00:10:29,000
Speaker 1: pricing trends are underappreciated there. With higher healthcare costs and

181
00:10:29,040 --> 00:10:31,680
Speaker 1: the cost of insurance. I mean, these prices kind of

182
00:10:31,720 --> 00:10:35,480
Speaker 1: get booked into the managed care groups, UM, and it

183
00:10:35,520 --> 00:10:38,760
Speaker 1: tends to be very profitable by locking in at higher

184
00:10:38,800 --> 00:10:41,320
Speaker 1: prices for them. So we think that's a powerful factor

185
00:10:41,360 --> 00:10:44,160
Speaker 1: for that group and the other issue is the drug

186
00:10:44,200 --> 00:10:48,440
Speaker 1: distributors UM. They have been probably the main target of

187
00:10:48,440 --> 00:10:54,319
Speaker 1: of pricing pressure regulatory concerns from Washington. But the again,

188
00:10:54,360 --> 00:10:56,960
Speaker 1: those concerns are often overblown when it comes down to

189
00:10:56,960 --> 00:11:00,760
Speaker 1: actually implementing legislation to change things. And the group was

190
00:11:00,800 --> 00:11:03,280
Speaker 1: also suppressed for a long time due to concerns over

191
00:11:03,320 --> 00:11:07,160
Speaker 1: the opioid legislation. And now that most of those concerns

192
00:11:07,160 --> 00:11:09,640
Speaker 1: have either been settled or on route to being settled,

193
00:11:09,960 --> 00:11:13,880
Speaker 1: that is a huge overhang from the group. UM that

194
00:11:14,000 --> 00:11:16,600
Speaker 1: you know, relieves a lot of the risks. So as

195
00:11:16,640 --> 00:11:18,960
Speaker 1: a result, we think those groups are attractive as well.

196
00:11:19,480 --> 00:11:21,480
Speaker 1: All right, Robert, thank you so much for taking the

197
00:11:21,480 --> 00:11:23,680
Speaker 1: time to join us and share your thoughts here on

198
00:11:23,840 --> 00:11:27,320
Speaker 1: these markets. Robert Stimpson, he's the c I O and

199
00:11:27,400 --> 00:11:34,080
Speaker 1: portfolio manager at Oak Associates Funds. All right, I'm looking

200
00:11:34,080 --> 00:11:37,800
Speaker 1: at Apple's balance sheet here D eighty billion in cash,

201
00:11:38,480 --> 00:11:40,600
Speaker 1: total debts, so that's sixty net cash. I'm looking at

202
00:11:40,600 --> 00:11:42,720
Speaker 1: the f A function on the Bloomberg terminal. I gotta

203
00:11:42,760 --> 00:11:44,800
Speaker 1: say it's one of my favorite functions. It's so basic,

204
00:11:44,960 --> 00:11:47,760
Speaker 1: but it's got everything you need, I mean everything. Whoever

205
00:11:48,080 --> 00:11:51,840
Speaker 1: thought that function up did did did good? Uh so,

206
00:11:51,840 --> 00:11:53,480
Speaker 1: all right, So sixty billion in net cash on the

207
00:11:53,520 --> 00:11:55,840
Speaker 1: balance sheet, a hundred ten billion of projected free cash

208
00:11:55,840 --> 00:11:57,839
Speaker 1: flow in each of the next couple of years. Why

209
00:11:57,880 --> 00:12:00,920
Speaker 1: are these Why is this company going to the bond market? Well,

210
00:12:00,920 --> 00:12:03,840
Speaker 1: on a rock runner, he covers all this stuff, Senior

211
00:12:03,840 --> 00:12:07,439
Speaker 1: Soccer and I T services animals from Bloomberg Intelligence on

212
00:12:07,600 --> 00:12:09,720
Speaker 1: a rug. Why are they going to the bond market?

213
00:12:09,760 --> 00:12:14,400
Speaker 1: Why does Apple borrow money? Just I mean that the

214
00:12:14,520 --> 00:12:17,480
Speaker 1: cost of money is so cheap it does make sense

215
00:12:17,480 --> 00:12:19,760
Speaker 1: to bottle it and keep it. Because, as you said,

216
00:12:19,800 --> 00:12:22,880
Speaker 1: the net cash is about sixty billion, and they spend

217
00:12:22,880 --> 00:12:26,080
Speaker 1: about eighty five to nine billion in buying back stock,

218
00:12:26,480 --> 00:12:28,760
Speaker 1: so they do have to botrow that money to buy

219
00:12:28,800 --> 00:12:32,360
Speaker 1: back that that ships that you mentioned just not that's crazy.

220
00:12:32,400 --> 00:12:35,840
Speaker 1: They borrow money to buy back shares. So and the

221
00:12:35,880 --> 00:12:39,280
Speaker 1: bond analysts and the bond investors don't care. Usually that

222
00:12:39,440 --> 00:12:42,160
Speaker 1: is a huge no. No. Can you lend us money

223
00:12:42,240 --> 00:12:45,880
Speaker 1: so we can pay our stockholders? Yeah? Yeah, But but

224
00:12:45,960 --> 00:12:48,480
Speaker 1: they're going to generator a hundred billion in free cash,

225
00:12:48,640 --> 00:12:50,679
Speaker 1: So it's not a big deal. It's just a matter

226
00:12:50,720 --> 00:12:54,200
Speaker 1: of what's most optimized for that capital structure. So if

227
00:12:54,240 --> 00:12:56,679
Speaker 1: you know, if they can bottle let's say a few

228
00:12:56,840 --> 00:12:59,360
Speaker 1: hundred let's say even a hundred bases point on hundred

229
00:12:59,360 --> 00:13:02,680
Speaker 1: a fifty basis points about tragedies, that's really cheap capital.

230
00:13:02,760 --> 00:13:04,400
Speaker 1: That's just you know, you're not gonna be able to

231
00:13:04,440 --> 00:13:07,199
Speaker 1: buy it let's say a few years from now, Um

232
00:13:07,240 --> 00:13:10,680
Speaker 1: that much cash at that that low prices. Alright, So

233
00:13:10,760 --> 00:13:13,760
Speaker 1: given that free cash low profile, given that balance sheet profile,

234
00:13:14,040 --> 00:13:17,560
Speaker 1: I then go to another great Bloomberg function that is

235
00:13:17,600 --> 00:13:20,880
Speaker 1: the most used function d e s to get a

236
00:13:20,960 --> 00:13:23,520
Speaker 1: sense of what their dividend yield is. It's less than

237
00:13:23,600 --> 00:13:27,360
Speaker 1: one percent. Why don't smart equity analysts like you on

238
00:13:27,480 --> 00:13:30,080
Speaker 1: a rock get in the ear the CFO and say

239
00:13:30,280 --> 00:13:32,800
Speaker 1: raise that to a respectable to two and a half

240
00:13:33,000 --> 00:13:38,320
Speaker 1: three percent. That would be really good to attract retail shareholders. So, Paul,

241
00:13:38,320 --> 00:13:41,000
Speaker 1: I've been writing that I think they should increase their

242
00:13:41,040 --> 00:13:44,000
Speaker 1: buy backs rather than the dividends, because you know, in

243
00:13:44,360 --> 00:13:47,520
Speaker 1: FY twenty, which their fiscal twenty, they reduced share counts

244
00:13:47,520 --> 00:13:51,000
Speaker 1: by about six percent five point seven and they brought

245
00:13:51,080 --> 00:13:54,880
Speaker 1: back seventy two billion entree cash flow and stop in

246
00:13:55,000 --> 00:13:58,200
Speaker 1: f one, they reduced the share gun by three point

247
00:13:58,280 --> 00:14:01,760
Speaker 1: eight percent on and but used about eighty six billion

248
00:14:02,160 --> 00:14:05,760
Speaker 1: this year twenty two. They're gonna reduce the share account

249
00:14:05,840 --> 00:14:11,920
Speaker 1: by somewhere around three so that inherent EPs growth is

250
00:14:12,040 --> 00:14:14,319
Speaker 1: just coming down a little. I would love for them

251
00:14:14,360 --> 00:14:17,080
Speaker 1: to buy back more shares rather than increase the divident.

252
00:14:17,240 --> 00:14:20,680
Speaker 1: But just as my personal choice, I mean, isn't one

253
00:14:20,760 --> 00:14:25,560
Speaker 1: better for dividends is probably better for the shareholder, whereas

254
00:14:25,640 --> 00:14:29,360
Speaker 1: buy backs is better for the corporation because once you

255
00:14:29,440 --> 00:14:33,240
Speaker 1: start a dividend, you can't reduce it or cut it

256
00:14:33,280 --> 00:14:36,040
Speaker 1: off without taking a lot of heat in markets, right,

257
00:14:36,080 --> 00:14:38,480
Speaker 1: whereas a buy back plan there's a beginning in an

258
00:14:38,560 --> 00:14:41,760
Speaker 1: end exactly. So no, I mean the buyback you know

259
00:14:41,800 --> 00:14:44,520
Speaker 1: once also it is it is it's a cultural thing.

260
00:14:44,760 --> 00:14:47,520
Speaker 1: If you have a company like Apple, where the free task,

261
00:14:47,600 --> 00:14:50,720
Speaker 1: though is predictable, you can't say that the buyback is

262
00:14:50,800 --> 00:14:54,200
Speaker 1: going to be predictable as well. The thing is again,

263
00:14:54,320 --> 00:14:56,280
Speaker 1: you know, there there's a lot of discussions about the

264
00:14:56,360 --> 00:14:59,280
Speaker 1: value of buybacks versus dimenon in my view, and it

265
00:14:59,320 --> 00:15:01,920
Speaker 1: has changed a of the years. If the if the

266
00:15:01,960 --> 00:15:07,080
Speaker 1: intrinsic value of the company is still below the current

267
00:15:07,080 --> 00:15:10,800
Speaker 1: share price, they should be using that cash to buy

268
00:15:10,840 --> 00:15:14,120
Speaker 1: back most here is because hendically, as a shareholder, my

269
00:15:14,840 --> 00:15:17,960
Speaker 1: you know, piece of the pie becomes growth grows every

270
00:15:18,040 --> 00:15:22,120
Speaker 1: year by that four or five percent without even putting

271
00:15:22,120 --> 00:15:24,720
Speaker 1: a new dime in. So I think from that point,

272
00:15:24,880 --> 00:15:28,000
Speaker 1: if it's a value company, and Bilkshire just started doing

273
00:15:28,040 --> 00:15:30,920
Speaker 1: this after many years of not buying back any shares,

274
00:15:31,200 --> 00:15:32,640
Speaker 1: if you can't, if you don't know what to do

275
00:15:32,680 --> 00:15:35,720
Speaker 1: with that cash, you should be buying back heres, assuming

276
00:15:35,800 --> 00:15:38,800
Speaker 1: they are trading flow the intrinsic value of the company.

277
00:15:38,880 --> 00:15:41,600
Speaker 1: By the way, um does it keep growing at that

278
00:15:41,720 --> 00:15:44,360
Speaker 1: level on a rack because you know, I bought an

279
00:15:44,880 --> 00:15:48,760
Speaker 1: I bought a desktop Apple computer back and I think

280
00:15:48,800 --> 00:15:52,960
Speaker 1: two thousand twelve, and I still don't need a new

281
00:15:53,000 --> 00:15:55,480
Speaker 1: one ten years later. It still does way more than

282
00:15:55,480 --> 00:15:59,359
Speaker 1: I could ever do with it. Um My my iPhone

283
00:16:00,240 --> 00:16:03,040
Speaker 1: eleven or twelve, even though it's got a little break

284
00:16:03,040 --> 00:16:05,160
Speaker 1: in the corner of the screen, I can't imagine what

285
00:16:05,200 --> 00:16:09,320
Speaker 1: an upgrade would really get me. Um And my Apple Watch.

286
00:16:09,640 --> 00:16:13,120
Speaker 1: Also it does everything I needed to, Like, I don't

287
00:16:13,120 --> 00:16:14,920
Speaker 1: need a new one? What what what are they gonna

288
00:16:15,080 --> 00:16:18,080
Speaker 1: come out with it? I have to buy? No, it's

289
00:16:18,080 --> 00:16:19,720
Speaker 1: just doesn't have to be you know, it's going to

290
00:16:19,800 --> 00:16:22,320
Speaker 1: be the replacement cycle for your iPhone as the single

291
00:16:22,320 --> 00:16:26,480
Speaker 1: biggest driver. Because what happens is the average lifetime of

292
00:16:26,600 --> 00:16:30,200
Speaker 1: they're about eight million units of iPhones out there, the

293
00:16:30,240 --> 00:16:32,800
Speaker 1: average life let's say, is somewhere between tea and a

294
00:16:32,840 --> 00:16:34,960
Speaker 1: half and four years. You may not want to upgrade

295
00:16:35,040 --> 00:16:36,960
Speaker 1: right now, but within the next four years you will.

296
00:16:37,200 --> 00:16:39,800
Speaker 1: It's just a matter of in slow down. So every

297
00:16:39,880 --> 00:16:43,440
Speaker 1: year they're selling two million iPhones, even without finding a

298
00:16:43,440 --> 00:16:46,040
Speaker 1: new buyer. This is just a replacement cycle. And then

299
00:16:46,080 --> 00:16:48,160
Speaker 1: what happens is and we saw this this time in

300
00:16:48,200 --> 00:16:51,520
Speaker 1: the quarter. They saw really good growth in emerging market

301
00:16:52,000 --> 00:16:56,080
Speaker 1: countries like Brazil and India and China and Indonesia where

302
00:16:56,320 --> 00:16:58,760
Speaker 1: the middle class as it starts to become a little

303
00:16:58,760 --> 00:17:01,240
Speaker 1: bit richer, Apple the brand they're going to go through.

304
00:17:01,280 --> 00:17:04,880
Speaker 1: They get rid of the Android phone load and Android

305
00:17:04,920 --> 00:17:07,680
Speaker 1: phone and they go for an iPhone. That's the growth market.

306
00:17:07,720 --> 00:17:09,560
Speaker 1: It's not going to come from you, Mark Miller. It

307
00:17:09,680 --> 00:17:11,920
Speaker 1: is you are just a replacement for every three to

308
00:17:12,000 --> 00:17:14,120
Speaker 1: four years. But it is going to come from those

309
00:17:14,119 --> 00:17:17,360
Speaker 1: emerging markets. That is not a growth market. That wasn't

310
00:17:17,480 --> 00:17:21,400
Speaker 1: very nice to say, fair fair enough, by the way,

311
00:17:21,440 --> 00:17:25,119
Speaker 1: can you settle something for our listeners? Uh, once and

312
00:17:25,119 --> 00:17:29,600
Speaker 1: for all? Does Apple have a secret self destruct mechanism

313
00:17:29,680 --> 00:17:32,280
Speaker 1: built into the phone? Like it at the time when

314
00:17:32,320 --> 00:17:36,639
Speaker 1: you're ready to renew, does your battery just automatically die? No?

315
00:17:36,840 --> 00:17:39,439
Speaker 1: I don't think so. About what happens is you really

316
00:17:39,520 --> 00:17:41,639
Speaker 1: need to take those you know you you want to

317
00:17:41,640 --> 00:17:44,440
Speaker 1: take those high end videos. You want to be able

318
00:17:44,480 --> 00:17:47,280
Speaker 1: to run the games at a much faster pace. So

319
00:17:47,320 --> 00:17:50,400
Speaker 1: over time, when these new applications are built with new

320
00:17:50,520 --> 00:17:53,399
Speaker 1: videos come out, when and you know Netflix videos at

321
00:17:53,400 --> 00:17:55,920
Speaker 1: a very high pace, your system may not be able

322
00:17:55,920 --> 00:17:58,040
Speaker 1: to handle it because the equipment is four or five

323
00:17:58,080 --> 00:18:00,800
Speaker 1: six years old. Then you will replace should at that time?

324
00:18:01,200 --> 00:18:03,000
Speaker 1: All right, Anna rock Rana, thanks so much for joining

325
00:18:03,080 --> 00:18:04,600
Speaker 1: us on a rock ran a senior software and I

326
00:18:04,680 --> 00:18:09,400
Speaker 1: T Services analyst, phoning it in from Bloomberg Intelligence. I'd

327
00:18:09,400 --> 00:18:14,080
Speaker 1: like to point it out. All right, let's switch gears,

328
00:18:14,119 --> 00:18:16,560
Speaker 1: go a little political. Let's go Watchington d C Emily Wilkins,

329
00:18:16,640 --> 00:18:19,960
Speaker 1: Congressional reporter for Bloomberg Government. So, Emily, the news coming

330
00:18:19,960 --> 00:18:24,760
Speaker 1: out today that Speaker Nancy Pelosi will in fact visit Taiwan.

331
00:18:24,840 --> 00:18:28,399
Speaker 1: What's the feeling within the nation's capital about that news.

332
00:18:29,040 --> 00:18:31,320
Speaker 1: So we've known about this trip for a while. Of course,

333
00:18:31,440 --> 00:18:35,240
Speaker 1: Speaker Pelosi's office wouldn't confirm it for security and safety reasons,

334
00:18:35,280 --> 00:18:37,320
Speaker 1: but Bloomberg has been reporting on this for a while

335
00:18:37,720 --> 00:18:40,119
Speaker 1: and we know that even though the Department of Defense

336
00:18:40,160 --> 00:18:42,679
Speaker 1: and the Pentagon have raised some concerns about it strictly

337
00:18:42,720 --> 00:18:45,359
Speaker 1: from a security standpoint, there is really a lot of

338
00:18:45,400 --> 00:18:48,280
Speaker 1: support for the Speaker to be making this trip at

339
00:18:48,320 --> 00:18:51,719
Speaker 1: this time. Um, you heard both from Democrats as well

340
00:18:51,720 --> 00:18:55,320
Speaker 1: as Republicans, and thinking about Senate Minority Leader Mitch McConnell

341
00:18:55,640 --> 00:18:57,800
Speaker 1: saying that if Pelosi was too back out of this

342
00:18:57,880 --> 00:19:00,399
Speaker 1: trip now that she'd be handing a gift to China,

343
00:19:00,720 --> 00:19:03,520
Speaker 1: and that there are supportive of her going. It's certainly

344
00:19:03,560 --> 00:19:05,800
Speaker 1: a significant trip. This is, you know, the number three

345
00:19:05,880 --> 00:19:09,240
Speaker 1: top leader in the entire United States making an official

346
00:19:09,359 --> 00:19:12,880
Speaker 1: visit from Taiwan, the first since how Speaker knew Gingrich

347
00:19:12,960 --> 00:19:17,000
Speaker 1: traveled to the island back in So another speaker has

348
00:19:17,000 --> 00:19:19,600
Speaker 1: done this and I feel like, um, Speaker is kind

349
00:19:19,600 --> 00:19:21,560
Speaker 1: of the highest level we could do this without starting

350
00:19:22,240 --> 00:19:27,879
Speaker 1: actual war. But are people still gonna possibly die because

351
00:19:27,880 --> 00:19:30,920
Speaker 1: of this trip? I mean, is she risking real military action.

352
00:19:32,040 --> 00:19:34,840
Speaker 1: I mean, certainly the military is always cognizant. Right when

353
00:19:34,840 --> 00:19:37,680
Speaker 1: a congressional leader or so someone you know, the president

354
00:19:37,760 --> 00:19:41,320
Speaker 1: goes abroad, they are security measures in place. Heck, even

355
00:19:41,320 --> 00:19:44,679
Speaker 1: when they go domestic, their security measures in place. This

356
00:19:44,760 --> 00:19:47,320
Speaker 1: is just a little bit more of of a larger situation,

357
00:19:47,440 --> 00:19:51,840
Speaker 1: a tens or situation, I think, and this is a

358
00:19:51,880 --> 00:19:53,840
Speaker 1: bit of guesswork here, but I think if the Speaker

359
00:19:53,880 --> 00:19:56,200
Speaker 1: seriously thought that someone was going to die, she would

360
00:19:56,200 --> 00:19:58,760
Speaker 1: not be going on this trip. Same with Department of Defense.

361
00:19:59,119 --> 00:20:01,200
Speaker 1: And to be clear or at this point, we still

362
00:20:01,280 --> 00:20:04,120
Speaker 1: don't have confirmation from the Speaker's office that she will

363
00:20:04,160 --> 00:20:07,040
Speaker 1: be going to Taiwan. She's in Singapore today. We know

364
00:20:07,119 --> 00:20:08,960
Speaker 1: her schedule is going to bring her to Malaysia, to

365
00:20:09,000 --> 00:20:12,879
Speaker 1: South Korea, to Japan, but her schedule isn't completely finalized.

366
00:20:12,920 --> 00:20:15,439
Speaker 1: We don't know the exact dates for all of those things,

367
00:20:15,760 --> 00:20:17,800
Speaker 1: and so there could be a potential that she could

368
00:20:17,840 --> 00:20:20,400
Speaker 1: go to Taiwan and not be announced ahead of time,

369
00:20:20,440 --> 00:20:23,800
Speaker 1: potentially for security reasons. Uh, Emily, we've got about thirty

370
00:20:23,800 --> 00:20:25,879
Speaker 1: seconds left or so, do we have any sense of

371
00:20:25,920 --> 00:20:30,000
Speaker 1: what her agenda might be with a visit to Taiwan. Well.

372
00:20:30,080 --> 00:20:33,360
Speaker 1: President Biden did tell Chinese President shi Jin paying on

373
00:20:33,400 --> 00:20:35,800
Speaker 1: the phone last week that the U S policy on

374
00:20:35,880 --> 00:20:38,880
Speaker 1: Taiwan has not changed. So I don't think we're expecting

375
00:20:38,920 --> 00:20:41,679
Speaker 1: any sort of major announcements, but perhaps to sort of

376
00:20:41,720 --> 00:20:45,280
Speaker 1: reaffirmed Taiwan, especially after we saw everything with Ukraine and

377
00:20:45,359 --> 00:20:49,080
Speaker 1: Russia in the past year. Just it seems like a

378
00:20:49,200 --> 00:20:52,879
Speaker 1: very highly highly visible trips. So we see if it's

379
00:20:52,920 --> 00:20:56,080
Speaker 1: anything more than just a photoop, I guess. I mean,

380
00:20:56,280 --> 00:20:58,280
Speaker 1: I think it'll be very interesting to see what is

381
00:20:58,359 --> 00:21:00,679
Speaker 1: done and what is said. It does seemed on a

382
00:21:00,720 --> 00:21:04,680
Speaker 1: way of reaffirming that the US does have support for Taiwan. Yeah,

383
00:21:04,880 --> 00:21:08,679
Speaker 1: cross this line. Okay, we're crossing. We're crossing exactly, all right.

384
00:21:08,680 --> 00:21:13,159
Speaker 1: Emily Wilkins, Congressional reporter joining us from Bloomberg Government in Washington,

385
00:21:13,320 --> 00:21:20,240
Speaker 1: d C. Stephanie Pierces in our Bloomberg Interactive Broker studio.

386
00:21:20,280 --> 00:21:22,080
Speaker 1: That's big news for us. She's the CEO at dry

387
00:21:22,119 --> 00:21:25,040
Speaker 1: Fust Melon does all the exchange traded funds there at

388
00:21:25,040 --> 00:21:29,359
Speaker 1: BNY Melon. So, Stephanie, crazy year, brutal, brutal first half

389
00:21:29,359 --> 00:21:33,080
Speaker 1: of the year. You could make money anywhere in that portfolio.

390
00:21:33,440 --> 00:21:35,919
Speaker 1: Now we've had a little bit of a bounce. What's

391
00:21:35,960 --> 00:21:37,879
Speaker 1: been like in the E t F world? Is that

392
00:21:38,119 --> 00:21:41,600
Speaker 1: still the hot thing out there? Well, here's what I

393
00:21:41,600 --> 00:21:43,960
Speaker 1: would say. E t F s continued to be in

394
00:21:44,000 --> 00:21:46,800
Speaker 1: any market environment, the vehicle of choice for investors. We've

395
00:21:46,840 --> 00:21:49,439
Speaker 1: seen over a three hundred billion dollars of flows here

396
00:21:49,480 --> 00:21:51,880
Speaker 1: today on a net basis in a tf SO which

397
00:21:51,880 --> 00:21:54,560
Speaker 1: just doesn't stop. But here's what's interesting. There's been a

398
00:21:54,600 --> 00:21:58,400
Speaker 1: lot of talk about the divergence between taxable fixed income

399
00:21:58,480 --> 00:22:01,520
Speaker 1: mutual fund flows which have been NETTI, and e t

400
00:22:01,640 --> 00:22:03,560
Speaker 1: F flows in the same category, which have been positive.

401
00:22:03,600 --> 00:22:05,600
Speaker 1: And it's a pretty big spread. But if you actually

402
00:22:05,600 --> 00:22:09,000
Speaker 1: peel away the onion, that's happening in multiple sectors. US equity,

403
00:22:09,119 --> 00:22:11,600
Speaker 1: same thing, mutual funds and outflows, E t f s

404
00:22:11,600 --> 00:22:14,600
Speaker 1: and inflows International equity, same thing. About. The only place

405
00:22:14,640 --> 00:22:17,800
Speaker 1: that's not true is alternatives and commodities, where both are

406
00:22:17,800 --> 00:22:20,040
Speaker 1: in positive flows. But you know, if you peel it

407
00:22:20,080 --> 00:22:22,560
Speaker 1: back one level further, was really interesting is it's not

408
00:22:22,640 --> 00:22:25,320
Speaker 1: really about just musical funds and ETFs. It's active mutual

409
00:22:25,359 --> 00:22:28,560
Speaker 1: funds in those categories that are out closed and ETFs,

410
00:22:28,600 --> 00:22:32,000
Speaker 1: both active and passive in the same categories in inflows.

411
00:22:32,040 --> 00:22:35,080
Speaker 1: So one thesis on that is that the tax loss

412
00:22:35,080 --> 00:22:39,040
Speaker 1: harvesting opportunity, as we've seen market volatility has given, you know,

413
00:22:39,080 --> 00:22:43,399
Speaker 1: opportunity here to actually book those losses or make the

414
00:22:43,520 --> 00:22:48,080
Speaker 1: kind of opportunistic trades in portfolios clean harvesting, take your

415
00:22:48,080 --> 00:22:51,719
Speaker 1: losses after drop in the SMPI. Right, you had your

416
00:22:51,760 --> 00:22:54,359
Speaker 1: index funds, and that was the thing to do for years.

417
00:22:54,960 --> 00:22:59,840
Speaker 1: Now the kids want actively managed UH funds and they

418
00:23:00,000 --> 00:23:03,000
Speaker 1: don't want to pay the mutual fund fees, right, so

419
00:23:03,119 --> 00:23:08,560
Speaker 1: they're looking for actively managed ETFs. Even um. Even Vanguard

420
00:23:08,920 --> 00:23:10,919
Speaker 1: is like starting to do this. I don't know if

421
00:23:11,000 --> 00:23:12,720
Speaker 1: Vanguard is actually starting to do it, but I think

422
00:23:12,720 --> 00:23:15,199
Speaker 1: it's right. I mean, look, the reality is it's been

423
00:23:15,359 --> 00:23:17,800
Speaker 1: years since you could actually move out of a mutual

424
00:23:17,880 --> 00:23:20,520
Speaker 1: fund without the penalty of a big capital game. And

425
00:23:20,600 --> 00:23:22,320
Speaker 1: so in the first part of this year you've had

426
00:23:22,359 --> 00:23:25,120
Speaker 1: that opportunity. So when we talk to our investment advisor clients,

427
00:23:25,480 --> 00:23:27,520
Speaker 1: this is the way they can show value to their clients.

428
00:23:27,640 --> 00:23:31,480
Speaker 1: It's also been i mean never that you've been able

429
00:23:31,560 --> 00:23:34,119
Speaker 1: to buy actively managed I mean, this is a relatively

430
00:23:34,200 --> 00:23:36,760
Speaker 1: new thing, right, not this year but in the past,

431
00:23:37,359 --> 00:23:41,439
Speaker 1: mutual funds were um or or any kind of fund

432
00:23:41,640 --> 00:23:44,600
Speaker 1: that wasn't. An e t F was, and you're only

433
00:23:44,680 --> 00:23:48,080
Speaker 1: actively managed choice. You know, now you can actually buy

434
00:23:48,080 --> 00:23:51,720
Speaker 1: an ETF for fifty sixty seventy five basis points and

435
00:23:51,760 --> 00:23:53,800
Speaker 1: you get an active manager. That's right. And if you

436
00:23:53,840 --> 00:23:56,040
Speaker 1: actually look at the flows this year, underneath that three

437
00:23:56,080 --> 00:23:59,800
Speaker 1: hundred billion active managers or active ets are punching above

438
00:23:59,840 --> 00:24:02,520
Speaker 1: their wait. Right, So active ETFs are only five percent

439
00:24:03,000 --> 00:24:06,440
Speaker 1: of the entire six trillion, seven trillion dollar ust F marketplace,

440
00:24:06,640 --> 00:24:09,240
Speaker 1: so call it three billion, but they are over fifteen

441
00:24:09,280 --> 00:24:12,600
Speaker 1: percent of the flows that I mentioned that. What about definitely?

442
00:24:12,800 --> 00:24:14,680
Speaker 1: What about people who want to hedge against inflation. We

443
00:24:14,760 --> 00:24:17,199
Speaker 1: were talking to Phil Orlando earlier and he was saying, um,

444
00:24:17,359 --> 00:24:20,320
Speaker 1: you know, healthcare actually has been a great hedge against inflation.

445
00:24:20,400 --> 00:24:22,399
Speaker 1: I thought I should be doing that for my future.

446
00:24:22,560 --> 00:24:25,760
Speaker 1: Right the day when I get cancer or your heart

447
00:24:25,840 --> 00:24:29,040
Speaker 1: disease or whatever it happens, I and I go, oh

448
00:24:29,119 --> 00:24:31,840
Speaker 1: my god, the hospital bills are insane. I will be

449
00:24:31,960 --> 00:24:34,200
Speaker 1: happy to have invested in healthcare. But our e t

450
00:24:34,440 --> 00:24:37,560
Speaker 1: F s a big vehicle for hedging against inflation. Are

451
00:24:37,640 --> 00:24:39,680
Speaker 1: people using them? For that this year. Yeah, and you

452
00:24:39,760 --> 00:24:42,800
Speaker 1: absolutely are seeing some cyclical trades, right, So, you know,

453
00:24:42,880 --> 00:24:45,200
Speaker 1: one of the things that I would note, particularly in ETFs,

454
00:24:45,280 --> 00:24:47,840
Speaker 1: and this is both active and passive, would be, you know,

455
00:24:47,920 --> 00:24:50,280
Speaker 1: particularly in the month of July, we actually saw a

456
00:24:50,320 --> 00:24:53,680
Speaker 1: reversal where instead of just the short duration fixed in

457
00:24:53,720 --> 00:24:56,119
Speaker 1: com ets that we saw or equity tfs earlier in

458
00:24:56,119 --> 00:24:59,000
Speaker 1: the year draw dominating flows, we actually started to see

459
00:24:59,200 --> 00:25:02,120
Speaker 1: fixed income take over equity overall, and within that more

460
00:25:02,200 --> 00:25:05,720
Speaker 1: extending duration, more corporate exposure being taken on. So not

461
00:25:05,880 --> 00:25:08,840
Speaker 1: just short duration of people really trying to look to say, gee,

462
00:25:09,200 --> 00:25:11,120
Speaker 1: you know, if the FED is even close to halfway

463
00:25:11,200 --> 00:25:13,560
Speaker 1: done in the tightening cycle. And we can debate whether

464
00:25:13,600 --> 00:25:15,719
Speaker 1: that's true or not, but investors are looking at what's

465
00:25:15,760 --> 00:25:17,680
Speaker 1: priced in the market and saying, Jimmy, I can extend

466
00:25:17,680 --> 00:25:19,520
Speaker 1: out the curve here, pick up a little bit more yield.

467
00:25:19,880 --> 00:25:22,320
Speaker 1: So that is definitely a theme that that we are seeing,

468
00:25:22,400 --> 00:25:24,680
Speaker 1: and yield is a theme. That's what Katie Griffold was

469
00:25:24,760 --> 00:25:27,960
Speaker 1: just telling us. People want uh dividend paying e t

470
00:25:28,200 --> 00:25:31,520
Speaker 1: f s, dividend paying ETFs and even areas like you know,

471
00:25:31,640 --> 00:25:34,200
Speaker 1: corporate investment grade. You know, you're looking at things like

472
00:25:34,280 --> 00:25:36,200
Speaker 1: high yield, which is seen, you know, for the first

473
00:25:36,240 --> 00:25:39,000
Speaker 1: time all year, two months of positive flows, a couple

474
00:25:39,000 --> 00:25:41,600
Speaker 1: of billion dollars. Why is that, Well, you can pick

475
00:25:41,680 --> 00:25:43,800
Speaker 1: up a seven to eight percent yield in a high

476
00:25:43,840 --> 00:25:46,120
Speaker 1: yield ETF. That's a nice coupon. Even if you think

477
00:25:46,440 --> 00:25:49,160
Speaker 1: there's some recession risk and there's some risk of default

478
00:25:49,359 --> 00:25:51,280
Speaker 1: call it one one and a half percent worst case

479
00:25:51,359 --> 00:25:53,679
Speaker 1: default risk. You're still picking up a nice coupon. If

480
00:25:53,720 --> 00:25:56,719
Speaker 1: you're a little shy about jumping back into equity, right,

481
00:25:56,800 --> 00:25:59,320
Speaker 1: you have equity like exposure with a nice coupon to

482
00:25:59,359 --> 00:26:02,240
Speaker 1: shield you a little bit. And certainly evaluations are very attractive.

483
00:26:02,320 --> 00:26:04,720
Speaker 1: You know, corporates still don't have a lot of um

484
00:26:05,119 --> 00:26:07,800
Speaker 1: leverage they have historically, you know, high cash on the books.

485
00:26:08,040 --> 00:26:10,800
Speaker 1: It's not a bad trade in this environment. Stephanie Suenior

486
00:26:10,840 --> 00:26:13,440
Speaker 1: extensive resume that you spend some time at fidelity. It

487
00:26:13,520 --> 00:26:15,080
Speaker 1: can't be a good time. May be a mutual fund.

488
00:26:15,160 --> 00:26:17,520
Speaker 1: Every time I stalk e t F, it's just record

489
00:26:17,600 --> 00:26:21,879
Speaker 1: inflow here, record inflow there. Well, look what's look? Mutual

490
00:26:21,880 --> 00:26:23,399
Speaker 1: funds and ETFs are going to co exist for a

491
00:26:23,560 --> 00:26:26,360
Speaker 1: long long time. But I think it's fair to say,

492
00:26:26,400 --> 00:26:27,760
Speaker 1: you know, I have a twelve year old at home.

493
00:26:28,000 --> 00:26:31,040
Speaker 1: Many of us have kids, grandkids. I'm not so sure

494
00:26:31,240 --> 00:26:34,320
Speaker 1: that those kids are or their their kids are necessarily

495
00:26:34,320 --> 00:26:36,560
Speaker 1: going to buy mutual funds. ETFs are simpler, they're more

496
00:26:36,600 --> 00:26:39,960
Speaker 1: transparent and more costom tax efficient. There's one price. It's

497
00:26:40,000 --> 00:26:42,240
Speaker 1: really what we think of as the democratization of finance,

498
00:26:42,320 --> 00:26:45,080
Speaker 1: and everybody's converting. I mean, we're seeing so many conversions

499
00:26:45,119 --> 00:26:47,560
Speaker 1: this year, mutual funds converting into e t f s.

500
00:26:48,080 --> 00:26:50,240
Speaker 1: And the only reason they wouldn't is probably because of

501
00:26:50,440 --> 00:26:54,800
Speaker 1: this aged you know, four one K infrastructure that still

502
00:26:54,920 --> 00:26:57,040
Speaker 1: doesn't allow a lot of times you to pick ets.

503
00:26:57,119 --> 00:27:00,359
Speaker 1: But that's that's right, and it is operationally calm, located

504
00:27:00,400 --> 00:27:02,760
Speaker 1: with multiple share classes, what kind of account they're sitting in,

505
00:27:02,880 --> 00:27:05,440
Speaker 1: so it's not simple to do. But I absolutely think,

506
00:27:05,680 --> 00:27:08,199
Speaker 1: um that is the wave of the future is probably

507
00:27:08,240 --> 00:27:11,480
Speaker 1: more ETFs than more next generation investors coming into the vehicle.

508
00:27:11,520 --> 00:27:13,360
Speaker 1: All right, Stephanie Pierce, thank you so much for joining

509
00:27:13,400 --> 00:27:15,720
Speaker 1: us here in our Bloomberg Interactor Broker studio. Stephanie Pierce,

510
00:27:15,760 --> 00:27:18,280
Speaker 1: CEO Dreyfus Melon and Exchange Trade of Funds at b

511
00:27:18,359 --> 00:27:22,439
Speaker 1: and Y Melan. Thanks for listening to the Bloomberg Markets podcast.

512
00:27:22,840 --> 00:27:26,000
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts

513
00:27:26,200 --> 00:27:30,080
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm

514
00:27:30,119 --> 00:27:34,159
Speaker 1: on Twitter at Matt Miller three. Put on false Sweeney

515
00:27:34,160 --> 00:27:36,800
Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You

516
00:27:36,840 --> 00:27:39,240
Speaker 1: can always catch us worldwide at Bloomberg Radio