00:00:02 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News, Bloomberg Money. 00:00:12 Speaker 2: This is the Bloomberg Money Podcast. I'm Tom Keene with Scarlet Foo. Join us each week for a smart look at the forces shaping your financial life. On personal finance, on retirement and wealth management. We will explore how people are earning, investing, and building wealth. We are live Fridays at noon Eastern on Bloomberg Television. Subscribe to the podcast wherever you listen, and is always on the Bloomberg Terminal and the Bloomberg Business app. What I want to talk about is unspoken. Everything is down in a market. Apple like a rock on the edge of a five trillion dollar company. Is personal Finance by Apple twenty years ago and. 00:00:53 Speaker 1: Just hold it well for some people. 00:00:55 Speaker 3: But increasingly Americans are having a hard time saving for retirement because of rising living They're not putting money into their retirement accounts because they have to pay for the kiddie litter. 00:01:03 Speaker 2: They got to pay for the kidy litter, they got to pay for school. And that will talk about some of those themes today. I think what's fascinating here is Mark German with that story a few days ago on rebuilding the iPad and it's these buy and hold companies that's what makes. 00:01:17 Speaker 4: A winning retirement. 00:01:18 Speaker 1: That's what makes a real winning retirement. 00:01:20 Speaker 3: We're going to get into all of that and whether there's a room for bonds in that portfolio. 00:01:24 Speaker 4: Well, bonds is a big thing. We're going to do that here. We're going to do that in a bit. Here. 00:01:28 Speaker 2: We have a wonderful guest for you today, Noural Raubini. Not the normal Rabini you think you know, yes, senior economic strategist Hudson Bay Capital, but Nora Rabini when he was with Clinton, when he was trying to figure out the future of social security. We'll talk to Professor Rubini about his crisis that he's seen. 00:01:47 Speaker 3: Right the softer side of Norael Raubini. We've also got Amanda Line. I'm Chief Credit Strategies at Goldman Sacks. Fancy title, but we're going to keep our topic of conversation very basic. The failure of bonds to produce much in the way of total returns in the last five years. 00:02:00 Speaker 4: Back to be fair, it was like a five. 00:02:02 Speaker 3: But twenty twenty two, you know, is scarred in our brains. 00:02:04 Speaker 4: Let's scarred everyone. 00:02:05 Speaker 2: They had a great moderation for years and then up we went. 00:02:09 Speaker 4: Let's do this. 00:02:09 Speaker 2: Let's do a data check right now, and it's on the stock market and it's not so pretty apple as I said, like a rock is really holding on well, you wouldn't know it anywhere else. 00:02:18 Speaker 4: But it is better from when Scar. 00:02:20 Speaker 2: Came in the door today at nine fifty five am, nastack down one percent. 00:02:25 Speaker 4: It was down two percent or more in futures. 00:02:27 Speaker 2: We ought to a VICX of nineteen and we do better now to take much better in the last two hours. 00:02:33 Speaker 1: It certainly is all right. 00:02:34 Speaker 3: Let's take a look at what's going on in a cross asset. You have the tenure yield not doing much of anything, basically at four and a half percent. After this week's inflation prints showed that price pressures are easing. The dollar also not doing a whole lot. But the story for this year is a stronger dollar because the US economy remains resilient. 00:02:50 Speaker 1: But the big story is in oil. The bottom of. 00:02:53 Speaker 3: Oil prices coincided with the end of the first half, and since it started the second half, Brent, which you see there, has gone from the low seventies, was highs the mid eighties, a little bit. 00:03:01 Speaker 4: Of news flow as well, and what will be the. 00:03:03 Speaker 1: News was open. It's kind of an unanswerable question. 00:03:06 Speaker 2: It's a unanswerable question right now, I would say because insight Vanessa there, Okay, here's. 00:03:11 Speaker 4: The reality fault. 00:03:13 Speaker 2: Michael Ball, Eric Beltunas, the Foo and me. We're only here because Vanessa Perdomo has World Cup tickets to give us, right, I don't think so. 00:03:23 Speaker 5: I think that would be quite a price time for everyone. 00:03:26 Speaker 2: It's up to seven thousand dollars I saw in my life, and that was a few days ago. We've got a great set of people where there's Eric Beltunas holds a high ground on exchange traded funds for Vanessa Perdomo drives so much of our sports coverage as well. And Michael Ball is with us as well. He's always like nerdo fed stuff and we're going to talk to him some of the basic responsibilities maybe the new chairman has. Eric, thank you so much for joining today. You stopped traffic this week by saying our retirement system is now the stock market discuss. 00:03:58 Speaker 1: Yeah. 00:03:58 Speaker 6: Look, it was the Trump account innouncement which I had been following. But when you really dig into the numbers, you know, fifty eight percent of Americans own stocks. 00:04:07 Speaker 7: That is by far the most in the world. 00:04:08 Speaker 6: So we're kind of an experiment here most countries is only the rich people that own stocks. Trump accounts are going to bring in like another twenty percent, maybe even more depending on how many philanthropists get involved, And that would be a lot of people who don't even care or know about the stock market are now going to have a kind of a vested interest in how it does. So now you've got almost the entire voting public who is going to care what the stock market does. So if the Fed and the government have stepped in multiple times since two thousand and eight, with more people interested in it, you really can't let it go. You can't let it fail. It's kind of like a public utility, like the electro grid. 00:04:44 Speaker 2: Right, I'm in the triple leverage Netflix account. That's really working out today. Well, are we learning in the double leverage triple leverage comedy that it's speculation and that investment? 00:04:55 Speaker 4: Yeah? 00:04:56 Speaker 6: Absolutely, I think there's two a lot of games being played at the same time in the stock market. You know, there's plenty of money going into VU and Vanguard. I call them the vanguardians. Then there's the digens, you know, and they both buy the dip for different reasons, but they're both playing different games. What some are trading, some are going long term and ets. We see both both kinds. But I'll say that the big blob of money is generally pretty conservative. They're buying cheap beta both stocks, bonds, and maybe some commodities, and they're holding for the long term. 00:05:25 Speaker 7: And that's the It's just boring, you know. 00:05:27 Speaker 6: They don't get much media because it's like, Okay, I'm going to buy Voo today. 00:05:30 Speaker 7: What else can I say? It's the S and P five hundred. 00:05:32 Speaker 6: We're going to talk about these shiny objects over here, but most of the money is pretty vanilla. 00:05:36 Speaker 3: All right, let's talk about shiny objects, because two weeks ago SpaceX was a shiny object, but it's now trading below it's IPO price. Yeah, it's at about one twenty four and change. What does that signal, Michael Ball about speculative appetite right now? Because we know that there's gonna be a lot of volatility. How can you tell when we're just going through normal swings versus there's really a change, an inflection point in whether people chase rallies. 00:05:59 Speaker 4: Yeah. Two things. 00:06:00 Speaker 8: It came in very expensive valuation wise, and it also was sort of marketed as a neo cloud in the sky literally floating around the planet versus a rocket ship company. 00:06:09 Speaker 4: So it changed kind of flavor. 00:06:10 Speaker 8: And it's now fallen into this momentum Unwine and almost all things AI. 00:06:14 Speaker 3: There are some other big IPOs to look forward to, not just space X. We've got Anthropic Open AI at some point, and Alphabet and other big tech companies are busy selling stock. The setup seems to be there's going to be a lot of supply coming to market. Do you think, given the increased role that individual investors play in the market, that there's going to be enough demand to absorb all of this supply. 00:06:33 Speaker 8: Yeah, And that's been the real macro dynamic changes here that finally we're going to have more supply than demand. The buyback story is actually worsened as well. We know free cash flows come off from the hyperscollers and some of the mega techs, so that's even more questionable next year. But to your point, we keep getting new bytes of additional paper coming to fund not only capex in AI but even elsewhere with other IPOs coming more than expected as people are sort of rushing in, and with credit markets now looking a little more wildly, and some of the rejection there from the paper that we've reached only gotten it means ai paper may even come more for stocks. 00:07:03 Speaker 2: I mean, I mean Michael helped me or dovetail this in with that, Eric said, because Carol's got to get to Vanessa. She's more important than we are in this conversation. If German warsh levels or raises interest rates. 00:07:14 Speaker 4: What does it do to my four oh one k? 00:07:16 Speaker 8: Yeah, Look, equity financing is actually coming up into conversation again because this is a lot of balance sheet constraints on the banks who helped not only help the paper come to market through IPOs, but then actually lend to the you know, not only buyside but other areas of the market to borrow and basically buy stocks, and that is coming under more pressure. 00:07:32 Speaker 2: Are we asleep about any instabilities to come up here? I mean in personal finance, retirement, wealth management? 00:07:38 Speaker 4: Are we all in sleep right now? 00:07:40 Speaker 8: So right now, as the macro picture stands, with growth and inflation where it is, I think we can expect maybe a reversal of the palle cuts and maybe a subsequent maybe seventy five basis points of hikes just to reset the levels and basically get markets. You know, even but you know, I don't see a large hiking cycle coming in. Worsh is certainly not signaling that, So I don't you need to be surprised by any sort of tail risk. What you should expect is that financial conditions will be not easy. 00:08:05 Speaker 4: Further, do you have a clue what he just said? 00:08:06 Speaker 1: There a part of it, some of it. Well, let's bring that back. 00:08:10 Speaker 3: To the World Cup and how we spend our money on a daily basis, because the buoyant stock market of the last couple of years is one big reason why you're seeing so much froth built into the World Cup. I mean, Vanessa, you've been going to the matches, not just necessarily in New York, New Jersey, but around the country, and there's all these luxury suites built in. There's these like fast ways for the uber wealthy to get to these games where they don't have to wait in line and put up with all the inconveniences that people who pony up thousands of dollars do. 00:08:37 Speaker 5: It's interesting because no matter who you are right now, if you're going to the World Cup Final, you are probably in an upper echelon level of having money. I mean, getting into the World Cup Final is seven thousand dollars just to get in. The average price and depending on what you know secondary ticket marketing you look at it's eleven to twelve thousand dollars. 00:08:54 Speaker 1: So but these ultra rich who are going to the game and. 00:08:57 Speaker 5: They're spending tens of thousands of dollars on helicopter rides, they still have to find their way around the stadium. They still have to deal with a little bit of traffic as well. 00:09:05 Speaker 3: Okay, so a little bit of friction there for even the uber wealthy. The other thing about the World Cup is kind of the cultural impact. 00:09:11 Speaker 1: It's having all. 00:09:12 Speaker 3: These footballers that people, you know, three months ago didn't know who they were. Jude Bellingham, Earling Holland. Everyone knows who they are now, including how they dress off the pitch. Earling Holland has a fifty thousand dollars man bag. It's ludicrously capacious. As someone from Succession once said, it's very large. And I know you have a man bag. 00:09:31 Speaker 4: Too, right, I do have a man bag. Yes, I do. 00:09:33 Speaker 1: Okay, so we have man bag experts here. 00:09:36 Speaker 5: Fifty thousand dollars burken bag as well. 00:09:38 Speaker 2: No it's not a burkin, but I did look at the mini Kelly. 00:09:40 Speaker 4: Continue. 00:09:41 Speaker 3: My point is here is that what we see on the world at the World Cup, and you know the players involved, has a huge influence on the rest of the economy, for instance, like the luxury sector. And there's why the way Holland's man bag see ludicrously capacious, along with some other players too. 00:09:58 Speaker 4: I'll just get through at it. Are you kidding me? Where's the raccoon? Where's the raccoon? I have a question. 00:10:05 Speaker 2: You're legit d one serious soccer. Nobody's falling down at Ducaine and withering on the ground, and then when the ball goes on the field they moranculous to get up. What do you think about this madness where I'm screaming at the screen, get up, get up? 00:10:21 Speaker 4: Get up? Am I wrong? 00:10:22 Speaker 9: No? 00:10:22 Speaker 1: You're not wrong. 00:10:23 Speaker 5: And I would also like to just wint out that I did play women's soccer and this is not something we definitely see as much in the women's game. 00:10:29 Speaker 1: This is a very male How. 00:10:30 Speaker 2: Do you respond to the stupid fall down, the ball goes by. 00:10:33 Speaker 4: Oh, I'm miraculously cured. 00:10:36 Speaker 5: It's a part of the game in a way that I think is one of the reasons why it's not as big in the US. 00:10:41 Speaker 4: I agree. 00:10:42 Speaker 5: I think, you know, you have American football here in hockey and all these other sports that are very American, and we love it here, and they're very strong and. 00:10:52 Speaker 4: Free time fix it. 00:10:53 Speaker 3: That's in hockey. They're actually fighting. 00:10:56 Speaker 7: They do. 00:10:57 Speaker 2: She drops the gloves, they run. I mean she's in the corner in the third period. She's frightening. You should see her. Folks, the terror of Northern New York City. Well, this is lovely, this is fine, This was great. Eric Belchunis, thank you. Vanessa Predoma, thank you. And Michael Ball seriously looked for Michael Balls academics on the FED all out through the weekend, on Bloomberg and other news sources as well. 00:11:21 Speaker 4: I mean, coming up here, it's going to be interesting. 00:11:24 Speaker 2: You got Nora Rabini, a senior economic strategist at Hudson Bay Capital. 00:11:28 Speaker 4: We've known each other for decades. 00:11:30 Speaker 2: I want to know what he thinks, Like with Ted lu the other week, the future of social Security. 00:11:36 Speaker 3: Yeah, a lot to talk about with Noriel Rabini. It's a different Noriel Rabini. I'm good more money. 00:11:40 Speaker 4: He's sensitive. You get us tickets. That's all I care about it. 00:11:44 Speaker 2: No, I don't even know if I'll sit where I can see Pennsylvania. 00:11:48 Speaker 4: Can you get us tickets? 00:11:50 Speaker 2: You're listening to Bloomberg money. Stay with us with more to come after this welcome back. It's Bloomberg money. Tom Keene alongside scholar. If both of us were talking about the smoke and the fire from I looked at du Luth, Minnesota today, just unbelievable. 00:12:11 Speaker 1: Have you been walking around with the mascot? 00:12:12 Speaker 4: No, I don't do the mask thing. But the dogs aren't healthy. 00:12:15 Speaker 1: I mean no, they dogs don't want. 00:12:16 Speaker 2: To want it at all. We'll see on that as we go through. They stay with Bloomberg all of our media for the continued coverage of what we're. 00:12:24 Speaker 4: Seeing in the smoke, it is not smoke and mirrors. 00:12:28 Speaker 2: With Nora Rabini, his senior economic strategist at Hudson Bay Capital. That barely describes his contribution to the Clinton administration, his years of service to New York University, and the books that just keep on coming. 00:12:43 Speaker 4: One of them. No beef with getting older. 00:12:44 Speaker 2: Okay, that's fine, and we'll look at that. I want to talk about that in a minute, Nora, Welcome to the show. Ted Leu was on the other day, what's the sweat on social Security? Do we really have to risk losing a check on social security into the twenty thirties. 00:13:03 Speaker 10: Well, we know that the trust fund is going to start running out of money, and therefore whatever is going to be president after this administration in twenty twenty eight, he or she will have to figure out together in about a partisan way, what to do about it. You can how to selength the retirement age, you can raise peril taxes, you can cut benefits, you can do a combination of all those things. But definitely we have to do something about it. 00:13:26 Speaker 2: It just popped into my puny head. He wasn't picked by a task force for chairman works. 00:13:31 Speaker 4: What oversight that was? 00:13:33 Speaker 2: Let's go to normal Rabini from I believe it's four years ago. 00:13:36 Speaker 4: No be for getting older. 00:13:38 Speaker 2: In nineteen sixty there were five active workers for every retired and disabled worker in these United States. But well it's going to three to one in two thousand and nine, headed towards two to one. 00:13:49 Speaker 4: In four years. 00:13:50 Speaker 2: Instead of moving forward, we have slipped backward out of Fortune magazine in two twenty two. 00:13:57 Speaker 4: So the clock is ticket. 00:13:59 Speaker 2: I mean, we're moving a Do you get the sense that politicians have any understanding of what's going to happen the first Wednesday of November in twenty twenty eight when we got to start really fixing this. 00:14:10 Speaker 10: Well, you know, the politicians always kick the canda on the road until something becomes critical. They prefer to avoid it. Then, as we know, social security has been for a long time the third rail of American politics. So we'll have to deal with it like we did a few decades ago by creating commission. At that time was run by Alan Greenspan. This time around somebody else, and they'll come with sensible ideas. We have to increase retirement age, we have to increase peral taxes, or have the corporates that winners pay for the workers, or we'll have to cut some benefits. So any combination of those things is going to have to happen at some point. 00:14:44 Speaker 4: On the line. 00:14:45 Speaker 3: Eric Welchin has just pointed out to me that Senator Tim Kaine, a Democrat from Virginia, and Senator Bill Cassidy. A Republican from Louisiana have proposed a plan to save social security by borrowing up one and have trillion dollars to invest in the stock market, which would grow over seventy five years of pay future. And ifits does that sound like something that could work or is that kind of craziness? 00:15:04 Speaker 10: Well, there are some ideas in the past about unquote privatizing social security and in countries that have solving well funds because they're running physical surpluses and current accounts, soupers that can build up net for an assets, like Norway does, like in the Gulf, they do to create something of a buffer for the future. The problem us that we run a fiscal deficit and a large current account deficits. So if you borrow more to invest in the stock market, yeah, you get that margin some returns because the returns on the stock market be higher than what you pay on that borrowing. But there's a gimmick. At the end of the day, you have to do something else. That's not going to solve the problem. It's one step in one direction, but it's not gonna be enough. 00:15:42 Speaker 1: Okay, not a solution. 00:15:43 Speaker 3: In the meantime, Inflation is getting in the way of everyone's best laid plans. You look at pricing increases in elderly healthcare, for instance, home healthcare because of immigration curves, it's outstripping, far outstripping the rise in college tuition. You can see there, although of course the absolute costs of each as comparing apples with oranges. Noel are genetsers and millennials all going to work until we're ninety years old because we need to pay for six figure college tuition as well as twenty four to seven care for our parents. 00:16:09 Speaker 10: Well, in principle, yes, the problem is going to be the VII. Eventually we're going to have a long term permanent tech Unemployment's going to happen only slowly. That's going to happen the next twenty years. So even if you increase the retirement age, the problem is going to be a large chunk of the population is going to be replaced by AI and robots in the next twenty twenty five years. So increasing retirement age is not going to be a solution. It's true that we higher potential growth, that ratio tend to fall because it's that to GDP, so our physical condition is not as bad as it would be in a situation where growth is lower, But at some point we have to do something. But eventually we need some form of universal basic income for everybody while they work and once they retire. 00:16:49 Speaker 4: And we're already on the way to that. 00:16:50 Speaker 2: One evening at Dabos, you and I said a lovely old German bar. There was a public official down three seats down from us who didn't participate. 00:16:58 Speaker 4: But listened in. 00:17:00 Speaker 2: When you framed out seven eighth nine, can you use eight oh nine? 00:17:05 Speaker 4: Or frankly, two. 00:17:06 Speaker 2: Thousand and two thousand and one is an analogue for this exuberance we have now in the stock market. 00:17:12 Speaker 10: Well, let's become more optimist. Of course, there is fraudin as there will be excesses. But I think that this AI revolution is the most important in human history in terms of tech innovation. 00:17:21 Speaker 4: But you just told us we're going to lose all our jobs. 00:17:24 Speaker 10: Yeah, but I suppose that God goes from two to four by the end of the decade, and that's going to be six percent by two thousand and forty or ten percent by two thousand and fifty, because they're going to get to AGI. Then we've grown doubling every five years a ten percent you can tax the winner, redistribute everybody to everybody else, and make everybody better off. 00:17:40 Speaker 4: So that's going to be a factor. 00:17:42 Speaker 10: We'll have either expository distribution that is universal busy income, or we'll have it something means some form of socialism. Essentially, the government's going to take over some fraction of the big tech firms, as they're already willing to do five ten percent of it. We create a solven fund that way, and we create the market, and we're going already in that direction effectively. 00:18:02 Speaker 3: The fact, Okay, this is a very gloomy picture that you're painting. That brings true with your doctor Jim kind of No, it's not gloomy. 00:18:08 Speaker 10: It's optimist. With ten percent growth and machines doing all the work, we don't need to work. 00:18:12 Speaker 1: Do you know what these economic theories inside it? 00:18:14 Speaker 9: Now? 00:18:14 Speaker 1: You understand why things happen the way they do. 00:18:16 Speaker 3: As an individual, do you manage your finances in a way that aligns with them? Or is there some element of irrational behavior in how you look at your own finances recently? 00:18:25 Speaker 10: Rational I've never traded in my life. I've never bought any individual security of any sort, I invest for the long term. I've a diversified portfolio, mostly if equities, if everything were to go on a severe session, or move some of it into liquid assets and so on. But I think that most people that are not sophisticated investors should just buy an old until they retire, rather than tay trading or mimis talk or crypto or the stuff that makes me lose money. 00:18:49 Speaker 1: So you're very much a buy and old guy. You don't touch it at all. 00:18:51 Speaker 2: Absolutely twenty seconds you're in my ear here talk crypto. 00:18:55 Speaker 4: The young one to know about crypto. 00:18:56 Speaker 2: You and I love crypto so much. Twenty sixty Is it going to thirty? 00:19:01 Speaker 10: Most likely? Yes, most likely? 00:19:03 Speaker 4: Yes. 00:19:03 Speaker 10: I mean really, listen, crypto is not a cryptocurrency. They're not the means of payment. They're not a unit of account, they're not the stable store of value. They're not a single number. So calling them crypto currencies actually missnomer. Whatever they are, they're not really neither acid or currency. It's mostly bibble. Upon's a game, most of them scathing. 00:19:23 Speaker 3: Well, he's been skating on a lot of crick was on the edge of Rubini there, all right, doctor Noriel Rubini, Thank you so much for joining us today anything. He is, of course, Hudson Bay Capital senior economic strategist. 00:19:34 Speaker 2: Joining us now Amanda Linham. She's chief credit strategist at Goldman Sachs. And I just want to bring up the chart here for you, Amanda, because you're expert at this a Bloomberg. We have the total return indices that are just absolutely exquisite off of all the heritage of Lehman and Barclays as well. And the chart of the week is the lineup chart here and it's a great moderation. The bond market price up forever, forever, forever, seven standard deviation move and we've come back, but come on home. We flatlined over the last five or six years. Does that mean bonds are of vailue or does that mean you're still catching up? 00:20:10 Speaker 11: Well, first of all, thank you for having me. Good afternoon. 00:20:12 Speaker 12: If you looked at that chart, Tom and you maybe you started it at year in twenty twenty one, which is just before the Fed started hiking rates and just before interest rates really started their trend upward, what you would see is that IG bonds are roughly flat. However, high yield bonds are up over twenty percent leverage loans floating rate are up over thirty percent over that same timeframe. So I think this speaks to the point that we've been emphasizing for a bit, and very relevant for your audience as well, is that there's an opportunity cost to being too defensive in this market. 00:20:40 Speaker 11: Now. 00:20:41 Speaker 12: To answer your question on do bonds fit in a portfolio, absolutely, but they just can't be the only part. And that chart you showed telled a great story in terms of what the rise in interest rates has done to pressure bond total returns. But at the same time, equities have enjoyed a pretty meaningful upswing. 00:20:57 Speaker 11: And so that's the point. On devers, I've never. 00:20:59 Speaker 2: Asked this question, and how long have they been doing this sex seven or eight years. I've never asked this question. How much of our four to one k's in America are in boring, sleepy, underperforming bonds versus the high yield magic you just talked about. 00:21:13 Speaker 12: I mean, our investors that are managing a lot of these four to one k's on behalf of retirees and workers typically will employ pretty diversified portfolios. And then, as you know, there are target date funds that become less risky as you get closer to retirement. In general, it's a pretty good way to be invested. I think there's a difference between saving and investing in this market, and I think one of the big lessons is that being invested over the long term is really what is critical. It's hard to time over the arc of a career for anyone rate backdrop or equity market backdrop, So staying invested and in a diversified portfolio is key. 00:21:50 Speaker 3: Saving and investing. I like that when my son was born, my mother in law gave him a bond. Today, when kids are born, they have access to a Trump account. Their grandparents can contribute to that. These Trump accounts only invest in stock funds or ets. That's a pretty strong signal about the role of bonds and building a portfolio of personal's a person's financial future, doesn't it well. 00:22:12 Speaker 12: I think it's one part of an overall plan. But from my perspective, when we think about the role of a portfolio and where fixed kicks in, it's really to provide income later in life that's more regular as opposed to waiting for an equity dividend. And then importantly, it's to offset periods of equity market. 00:22:30 Speaker 11: Weakness like we see today. 00:22:31 Speaker 12: And so while we've had a pretty meaningful uptrend in equities over the past few years, we've known from cycles that those don't go on in perpetuity, and so ideally what you would want to have is some fixed rate exposure across the curve, some floating rate exposure. Actually, we've been our portfolio strategy colleagues have been emphasizing. 00:22:48 Speaker 11: The role of real assets. 00:22:49 Speaker 12: And kind of inflation protection and then typical equities and it all. 00:22:52 Speaker 4: Fixed together, fixed incomes, recommending goals. 00:22:56 Speaker 11: Our portfolio strategists. 00:22:57 Speaker 12: So our portfolio strategists who take a multisector have basically made the point that, as you alluded to, the sixty to forty portfolio isn't as straightforward as it was in the years past, and so given some of the shifts in the market, that we actually do have to incorporate things like. 00:23:12 Speaker 1: Real essets in the stock market. 00:23:14 Speaker 3: Individual investors are just as influential now as institutional investors. 00:23:17 Speaker 1: That's really changed over the last few years. 00:23:18 Speaker 3: I don't know who the dumb money is anymore versus the smart money. 00:23:21 Speaker 1: That line is blurred. 00:23:23 Speaker 3: Does that kind of blurring exist in the fixed income and credit world or will this asset class always be the domain of institutions and professionals. 00:23:31 Speaker 12: We have a wide range of investors in our market. I think the really interesting bifurcation that I've seen in corporate credit over the past couple of years, but definitely recently, has been this bifurcation between investors who are buying bonds for yield versus investors who are buying bonds for spread. 00:23:46 Speaker 11: And total return. 00:23:48 Speaker 12: And that is the key, and what we have emphasized is if you are allocating to credit right now, you should be buying for income and yield, not because there's material scope for a total return boost from tighter spreads because they're already height, or from lower rates because our rate strategists are expecting rates to be worded. 00:24:03 Speaker 2: Want bond exposure to a data center in Ohio. Here is Amanda Lineum, She's been burning it up. Zero heads you a thirty page article and lead with. 00:24:12 Speaker 4: Amanda Lineum of Goldman Sachs here it is a mix of markets will be required. 00:24:18 Speaker 2: Our equity research colleagues expect the five hyper scalers to invest a combined zillion trillion in AI capex to now four years out. It would push hyper scalers rights well above the current market conventions in our wealth management. Are we going to be overwhelmed by this tech capex juggernaut. 00:24:38 Speaker 12: This is the main debate in the corporate credit market right now. And just for your listeners, that number is five point eight trillion that are equity conser is not a zillion, it's five point eight trillion, And I think what a lot of investors do is they will look at the hyperscaler's balance sheets and expect that that will largely be financed with debt, and that a lot of that will come through the traditional IT corporate credit market. The point that we've made is that the bond market has issue where concentration constraints to a certain degree, and so the key takeaway there is that we expect a portion of that five point eight trillion to be funded with debt, a portion of which will come through the traditional bond markets. But we also see scope for the private infrastructure market to play a role. We see scope for these new project finance jvs to do some of the heavy lifting. Cash flow from operations from the hyperscalers will contribute. We're also expecting equity issue, and some of. 00:25:24 Speaker 11: The rating agaties have said that afraid. 00:25:26 Speaker 1: I don't like it, check them. 00:25:28 Speaker 12: I am not concerned about in access to capital constraint. I just think as we progress through what is a multi year investment cycle, that there will be more nuanced conversations around which market I should be accessing, and at one price that's largely a twenty twenty seven to twenty twenty eight event. 00:25:43 Speaker 3: We think, I want to take a step back here because you think about the different generations and gen Z right now is graduating from college, they're joining the workforce, they're building up savings. They know about memestocks, they know about crypto, they know about prediction markets. These are all go big or go home kinds of bets. Is there anything within the fixed income space that response to that impulse? 00:26:02 Speaker 1: Well? 00:26:02 Speaker 12: More subject to risk sentiment like other markets are in terms of when there's a real risk off tone, we feel it in our market, I would say we tend to be a bit more defensive. We actually put a piece out on this earlier this week, my colleague Spencer did, which really emphasized that the credit equity beta has diverged in twenty twenty six in particular, meaning credit hasn't been participating as much on the upside, but it's also been more defensive on risk off tones on the downside. And I think going back to over the arc of a career and investment cycle, just being invested as the keeper. 00:26:33 Speaker 2: I love that we're doing credit beta, but you're at this weekend it's a family event or you know, friends in Romans and countrymen, and somebody says, should I buy a five year CD or a three year CD? America is still stuck in that question of personal finance versus a lot of if they. 00:26:50 Speaker 1: Had any money to put in a CD to begin with. 00:26:52 Speaker 4: Well, okay, but the arch question is on duration. How short should I be right now? 00:26:57 Speaker 12: So we like being more towards the front, an intermediate part of the curve. At the longer end of the curve, so thirty year bonds, for example, it tends to be a bit more whippy. If your question is is do we expect the FED to be kind of cutting or hiking or holding? Pat From here, our economists are expecting the FED to essentially be on hold through twenty twenty six. I would say the Middle East conflict has been flagged as an upside risk in terms of inflation, which does provide some risk to that view, but in general we're expecting rates to remain on hold. So staying invested amid in elevated rate environment you are actually earning some coupon from there as well. 00:27:33 Speaker 3: All right, so staying invested is the message here from Milanda Amandeline of Goldman Sachs Chief Credit Strategy. 00:27:39 Speaker 1: Thank you so much for joining us, all right. 00:27:41 Speaker 3: Coming up on Bloomberg Money, adult happy meals they're a thing and they're pulling in customers across tax brackets. More restaurants are trying to lured diners looking for deals. Sometimes the hours are a little bit earlier, you know, verging on early bird special. 00:27:54 Speaker 1: Plus we're bullish on books. Tom and I share what we're reading. How did you narrow it down classic? 00:27:59 Speaker 2: I narrowed it down to the classic. Amanda's rerouted three times. 00:28:03 Speaker 1: That's all. Coming up on Bloomberg Money. Thanks time, We'll hip you've your recommenition. 00:28:09 Speaker 4: Jesse Livermore. 00:28:19 Speaker 1: Bloomberg Money. 00:28:20 Speaker 3: It's your new destination for personal finance. It's a cross platform effort that extends beyond your television, including our new digital hub at bloomberg dot Com, Slash Money and Tom. That reminds me of a story that I saw this week. When was the last time that you enjoyed a happy meal? 00:28:34 Speaker 4: A happy meal that was a few years ago, to say the least, we just went for the toys. 00:28:38 Speaker 1: You just went for the toys. 00:28:39 Speaker 3: Well, there's you know, some adult happy meals now being offered by restaurants which give you an entree aside and adult beverage of your toys for a flat price. And the reason, of course, is inflation. Bloomberg's Sarah Foster writes bundle deals that often include an entree aside and a drink are up fifteen percent from a year earlier across all restaurants segments, and find dining establishments like the ones you attend. They're the fastest growing entrede category on restaurant menus, and Sara joins us. Now, so what's an example of a restaurant that Tom might deign to go do? 00:29:09 Speaker 1: Not just a McDonald's. 00:29:11 Speaker 9: Well, I was doing a lot of traveling around the city to kind of hunt down these adult happy words. 00:29:15 Speaker 11: Sure that I parked at this. 00:29:20 Speaker 9: I will probably be holding off on the red meat for a while. But and sun Steake Easy in Greenwich Village. That was this place that I parked at. You know, what really stood out to me is that these are not your fine, you know. 00:29:32 Speaker 11: Value menu eaters. 00:29:34 Speaker 9: They are going for these fine dining restaurants. A lot of them work in finance, a lot of them work in tech, and they are really drawn to these predictable pricing. 00:29:42 Speaker 11: You know you mentioned the toy thing, Tom. 00:29:44 Speaker 9: It's what's interesting I think is the adult version of this happy meal always replaces the toy with a cocktail. 00:29:50 Speaker 11: I think that's in a way of a different what makes them happy. 00:29:53 Speaker 9: But a lot of them really do say you know, they would be interested in a toy too, if that adult one would provide it. 00:29:57 Speaker 1: And these pictures are phenomenal. 00:29:58 Speaker 3: I think part of this too is when you talk to the restaurant tours is they made sure that they wanted it to be really visually appealing so that people can post it to their social media. 00:30:07 Speaker 9: What was really fascinating is that a lot of these adult happy meals looked luxurious. I was talking with this one restaurant in DC. They call it the Lobby Meal. Included in that was a glass of champagne and it was branded with that blow clicko, you know, champagne branding that was really attracting the people's facing this. 00:30:26 Speaker 2: And I'll do a shout out to Michael's, which is just iconic and also vot or right across the street from our effort here is it seems to me everybody simplifying the menus, it just seems to be easier now to order than twelve pages of choices from years ago. 00:30:43 Speaker 3: Yeah, it makes things easier for the restaurant themselves because they only offer one or two things, right, there's not a whole lot of things you have to worry about with your supply chain and your suppliers. 00:30:51 Speaker 9: It's true, it's easier to offer these curated menus because a lot of the diners who I spoke with, they say that they face. 00:30:58 Speaker 11: Decision fatigue when they go out exactly. 00:31:01 Speaker 9: You know, you see that with line culture, TikTok and social media is just proliferating all of these new restaurants to try and sometimes people, you know, on a busy day, they just want to have the meal. 00:31:10 Speaker 11: Laid out for them. 00:31:11 Speaker 3: And some of these deals are hidden too, right, it's not totally advertised. You kind of have to be in the know. 00:31:16 Speaker 9: It's this layer of prestige and exclusivity. It's like a club that if I spoke with one restaurant that was selling so many adult happy meals that they had to kind of pull it away, and now they still sell it to people who ask for it. 00:31:29 Speaker 4: Stay with Sarah. 00:31:29 Speaker 2: This is the acid test. I want to know if you've read my book. We've got two books here on trading. We had a lot of fun with this. We're doing different things we did elon Musk, like bow. 00:31:37 Speaker 4: Ties a mask. Come on, Scar tell me when the bow ties out of line. 00:31:40 Speaker 1: It's trying. 00:31:41 Speaker 2: Now. We got the trading game here. This is Scarfu's book, Scar tell Us about. 00:31:44 Speaker 4: The trading game. 00:31:45 Speaker 1: Okay. 00:31:45 Speaker 3: It's by Gary Stevenson, who is a trader on the FX and rates to us at City in London just before and during the financial crisis. He grew up in the wrong part of London but went to LSE because he was a math whiz. He made a ton of money for City and himself a four hundred thousand pounds bonus in his first year as a trader when he was twenty three and he had a thesis driving all his trades, which is that interest rates would stay low and inequality would worsen. What's interesting to me is that later on in the book gets into this he had to come to Jesus moment where he quit the industry, and now he has a YouTube channel teaching people about real world economics. 00:32:18 Speaker 4: This is great. 00:32:18 Speaker 2: The iconic math exam at the London School of Economics. That's what mister Jagger who went on to sing. 00:32:24 Speaker 1: Oh the one Jager. 00:32:26 Speaker 2: Mister Jagger went on after he bombed out of the math exam at LS years ago. 00:32:30 Speaker 4: It's a rigorous test. 00:32:32 Speaker 3: I mean, I'm making him sound preachy here, but he's really not. Because the book is fun, with a lot of descriptions of the characters on trading floors. 00:32:38 Speaker 2: My book is definitive. You read it every five years. If you're in the game, this is a book. If Sarah, if you haven't read this book, you're in my time out chair. Reminiscence of a Stock Operator. His book is one hundred and three years old and there is a lesson about every four pages. 00:32:52 Speaker 4: There's a point in here. 00:32:54 Speaker 2: With Jesse Livermore, it's so stressful in New York. In Boston, he goes to Florida for vacation, and he learns more about trading in Florida from the cotton traders than he does in New York or Boston. This is a classic, classic book. It's criminal that it's not part of a job assigned. 00:33:14 Speaker 1: What was the last one we read it? 00:33:15 Speaker 4: I read it about three or four years ago, and I'm due to read it again about right now. 00:33:19 Speaker 2: I think i'll do that. The annotated version is worth its weight in gold. It's a bigger almost like coffee table. 00:33:24 Speaker 1: Yeah, and it's hardcover too, hardcover. 00:33:26 Speaker 4: Well, yeah, we only do a hardcover. I'm blueberg. 00:33:28 Speaker 2: Oh well, I'm a terrible snuff Sarah. Have you read Jesse Livermore? 00:33:33 Speaker 11: I haven't, but I need. 00:33:34 Speaker 4: There're yours, Simon. 00:33:35 Speaker 2: I'm going to tell Nikki Waller, Sarah's deep into Jesse Livermore. 00:33:38 Speaker 3: All Right, it's Friday, so we need to look ahead to the weekend and next week. Just get a sense of how you're going to spend your money. And I'm going to focus in on earnings because it's going to be a pretty light week for data. There's not a whole lot going on on that front. And of course FED officials are in a blackout period before their meeting. So let's focus on earnings because on Tuesday week at General Motors and tom you know that all the big car makes have seemingly given up on hybrids or electric vehicles. They've all put their eggs in the gas guzzling suv basket. 00:34:07 Speaker 4: Well they have. 00:34:08 Speaker 2: And you know, I look at alphabet moving on and then the following week into technology, and it's as big a deal as a bank store. 00:34:14 Speaker 1: Oh for sure. 00:34:14 Speaker 3: You know, Alphabets the first of the hyperscalers to report earnings, and people aren't even calling it earning season anymore. They're calling it capex season because it's all about what they say when it comes to capital expenditures, and it's really going to be a show me moment to me. 00:34:27 Speaker 2: The big thing here, folks, to get a little nerd on you, is the nominal GDP. Right now, the animal spirit of the country is basically, you know, like a third world country like China or whatever. 00:34:37 Speaker 4: Percent five point six percent is. 00:34:40 Speaker 2: Well and that's really an important What we do on Bloomberg Money as well, is when there's really important breaking news, we're going to stay with that. 00:34:48 Speaker 4: Scarlett's going to queue it up right now. This on Apple. 00:34:51 Speaker 1: This is on Apple. 00:34:53 Speaker 3: Apple is an early settlement talks with the US Department of Justice over an antitrust suit from twenty twenty four that alleges the iPhone maker violated antitrust laws. According to Bloomberg reporting by Mark German and his colleagues, the discussions are active, there are no guarantees that the two size will reach an agreement, and no trial date has been set in the case. Apple has made multiple offers this year to the DOJ to bring the case to a close. This is according to people familiar with the matter, but the discussions are private that discussions can end without an agreement being reached. 00:35:24 Speaker 2: The initial tick up here is a nice move up back to three thirty two. Again, I said earlier in the show, Devin, I think we've got that headline. Apple at three point forty one ishes a five trillion dollar company. And what's important here and pulls it back into Bloomberg money, is basically who doesn't own Apple? Yes, Because within a four oh one k portfolio, whatever the mix is, it can be something tech dominated where it's four or five, six, eight percent or maybe less, or just individual stack ownership. 00:35:53 Speaker 4: It's part of America. 00:35:54 Speaker 1: It's kind of like SpaceX. 00:35:55 Speaker 3: Even if you didn't want it, you have it because of exposure to, for instance, the now like one hundred. So the DJ's main allegations here are basically about Apple blocking super apps programs that include mini apps within them, like we chat in China. 00:36:09 Speaker 1: And you know, Apple with. 00:36:10 Speaker 3: This walled garden business model is something that a lot of people have not necessarily complained about, but brought up as something that works against. It's how it's viewed as a competitive company. 00:36:23 Speaker 2: It's been a permanent fixture of people going after Apple for as you say, nicely, the world garden. What I would suggest if you talk to the cell side of any persuasion, the suber bowls, I think of Gene Munster and Dan Eyes and others much more cautious. This app section of the business, the service section, just continually grows. 00:36:44 Speaker 1: Well, they have to have. 00:36:45 Speaker 3: It has to because the hardware is increasingly a commodity and companies like Apple face increased costs for memory chow. 00:36:52 Speaker 2: Because everyone in my family is doing Apple movies every night. I look at my visa Apple this, Apple, this, Apple that, and the answer is that subset of Apple is so so important away from the Frenzy over iPhones. 00:37:06 Speaker 3: No, that's a really good point. By the way, you mentioned movies on Apple. 00:37:10 Speaker 4: Yeah, it can you a touch here in Odyssey? 00:37:11 Speaker 3: Is it or the Odyssey was released today so you can go see it. It's the first movie I believe that was completely made and designed to be made on the IMAX with iMX cameras, So this is a big one. Matt Damon plays the main character and Hathaway's part of it. Our producer said. The reviews from the UK were it could have been better, But I'm excited about this. 00:37:31 Speaker 2: I've heard very mixed reviews. I mean it's not like Milana. I mean, you're the celebrity Loadstone. Milana tanked right. 00:37:38 Speaker 3: The live action movies like, I don't know that they really catch on. I'm not sure who wants the live action movies aside from the studios because it allows them to renew the asset. 00:37:46 Speaker 2: But if we can summarize with Warner Brothers, with all the merger, Frenzy had a bang up year. It's a good year. Is it a good summer for Hollywood? 00:37:54 Speaker 1: And I think it's a good year for Hollywood. 00:37:56 Speaker 3: Yes, it's no longer resting on the laurels of two movies like Barbie or Oppenheimer. 00:38:01 Speaker 1: It's a lot more than that. 00:38:02 Speaker 2: The time we've got here, I think this is really important as we as we've really enjoyed launching the show and giving you. 00:38:07 Speaker 4: A perspective here. 00:38:08 Speaker 2: For me, the major major thing here is all the marketing of wealth management, all the concepts and mergers, and we're trying to slice through that, try to figure out, okay, what's really going on, I think with a mandoline, and we did a nice job of that today to say, okay, what do you do with bonds? And our message was all bonds aren't the same. 00:38:28 Speaker 3: Right, And of course people are scarred from what happened in twenty twenty two when bonds were supposed to be the ballast for your portfolio. The stock market tanked and bonds didn't do it right. 00:38:38 Speaker 1: Negative returns. 00:38:39 Speaker 2: Give me an Apple banner here. I just think it's so important. Apple from two hundred and eighty, two hundred and eighty the end of June, and it's been not a moonshot that over says it, but nicely up here it's three thirty one, just below the recent record high. And to get onto three forty one five trillion dollar company is remember I mean you don't remember this, you know, Steve Jobs, John Scully, We're. 00:39:02 Speaker 4: All going to die lease as a failure. It's a long way from that. 00:39:05 Speaker 1: It's a long way from that. 00:39:06 Speaker 3: And of course this is a company that has been kind of behind the curve when it comes to AI adoption too. But maybe that's a little bit of it saving grace right now as we see some pressure on ship makers and the whole question of the AI trade. 00:39:16 Speaker 2: Of course, all I know is Mark German has the cool orange iPhone. 00:39:21 Speaker 1: Does he I do? Of course he does. He's ahead of uner one. 00:39:26 Speaker 4: Thank you so much. It's Bloomberg Money. This is Bloomberg. 00:39:32 Speaker 2: This is the Bloomberg Money podcast, bringing you a smart look at the forces shaping your financial life. 00:39:39 Speaker 4: I'm Tom Keen with Scarlet Food. 00:39:42 Speaker 2: You can watch the show live on Bloomberg TV every Friday at noon Wall Street Time. Subscribe to the podcast on Apple, Spotify or wherever you listen, and as always on. 00:39:54 Speaker 4: The Bloomberg Terminal and The Bloomberg Business, Apple 00:40:00 Speaker 7: Damper