Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim
Speaker 1: Fox along with my co host Lisa Bramowitz. Each day
Speaker 1: we bring you the most important, noteworthy, and useful interviews
Speaker 1: for you and your money, whether you're at the grocery
Speaker 1: store or the trading floor. Find the Bloomberg p m
Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.
Speaker 1: I'm excited to bring in Bob English. He's an executive
Speaker 1: director at republic e n dot Org. It's a nonprofit
Speaker 1: climate change group that he founded. He is also a
Speaker 1: former South Carolina Republican congressman both in the nineties and
Speaker 1: the two thousands, and a former climate change denier who
Speaker 1: has turned into an environmental activist. Bob, thank you so
Speaker 1: much for joining us on this day when we are
Speaker 1: going to receive, ostensibly at three pm today New York time,
Speaker 1: a decision from President Trump and whether or not the
Speaker 1: US will remain part of the Paris Accord. Bob, I
Speaker 1: want to get started with the reaction that you faced
Speaker 1: when you changed your mind and went from being a
Speaker 1: climate change denier UH to somebody who is actively advocating
Speaker 1: the need to change practices in order to preserve the environment.
Speaker 1: Why do you think you got so much pushback from
Speaker 1: fellow conservatives. Well, unfortunately, Lisa, that was during the midst
Speaker 1: of the Great Recession, and so probably not good timing
Speaker 1: on la part. But but you know, when I came
Speaker 1: to that conviction that really this is real and something
Speaker 1: we need to attend to, UM, I had to had
Speaker 1: to do that. But UM, I think it's a different
Speaker 1: situation now and numbers of Congress who are conservative, truly conservative,
Speaker 1: UM can do this more safely than I did it
Speaker 1: back in the days of the Great Recession, because when
Speaker 1: you did it, it costs you your seat, no right
Speaker 1: at that, plus some other heresies that I had committed
Speaker 1: but against became Republican orthodox at the time. You know,
Speaker 1: when it tribes under pressure, orthodox he becomes very important.
Speaker 1: And so because you're circling the wagons to protect this
Speaker 1: food supply the tribe. Right. But now that the economy
Speaker 1: is doing better and people are seeing, um, the results
Speaker 1: of how how how renewables can really feed into the grid, well,
Speaker 1: how we can repower our lives, how this is really
Speaker 1: pretty exciting free enterprise opportunity, then then they can they
Speaker 1: can state it differently and it would be a different
Speaker 1: reaction than what I got, Like I said in the
Speaker 1: dark days of the Great Recession. Well, you know, I
Speaker 1: just want to follow up with that because I'm wondering
Speaker 1: maybe you can offer some insight. I mean if you
Speaker 1: not you personally, but if one is describing himself as
Speaker 1: a conservative, why not air on the side of caution
Speaker 1: and whether climate change is man made or not, why
Speaker 1: not take action in order to mitigate it's deleterious effects.
Speaker 1: I mean, wouldn't you want to side on the you know,
Speaker 1: with caution and protect the environment even if it wasn't
Speaker 1: man made. Oh? Absolutely. In fact, I like to tell
Speaker 1: audiences sometime here's a fresh twenty bill for anybody who
Speaker 1: will call their insurance company and cancel your homeowners insurance
Speaker 1: just for tonight, because I'm pretty sure your housing gonna
Speaker 1: burn down tonight, and the this twenty dollars it's worth
Speaker 1: more than the probability of your house burning tonight. Anybody
Speaker 1: take the offer. You know, nobody can take the offer
Speaker 1: right because you buy insurance like sexuaries. The George Schultz
Speaker 1: likes to say against things that you that could be
Speaker 1: really catastrophic, And the key to it is whether it's
Speaker 1: affordable insurance. And the reality is, there is a way
Speaker 1: to make this affordable, to make essentially affordable climate insurance
Speaker 1: by doing a tax swap, taxing income, putting a tax
Speaker 1: on carbon dioxide, making it an apply to imports. So
Speaker 1: the whole world follows American leadership and essentially you buy
Speaker 1: this insurance policy that that protects us against the downside
Speaker 1: risk and it is significant of the effects of climate change. Well, Bob,
Speaker 1: I imagine that you still are in communication with a
Speaker 1: number of Republican leaders in Congress currently. Are there many
Speaker 1: others who feel similarly to you at this point, Yeah,
Speaker 1: and a lot of them are in the process of
Speaker 1: figuring out can they come out on this, you know,
Speaker 1: and really it is a little bit like coming out
Speaker 1: to come out on climates, um and so. But that's
Speaker 1: that's going to change. Just is this is that other
Speaker 1: matter change. This is changing. People are realizing that, of
Speaker 1: course you've got a problem here, and up until now,
Speaker 1: what conservatives have heard is that's a big government is
Speaker 1: going to solve it. Once they hear that there's a
Speaker 1: small government way to do this, then they can they
Speaker 1: can open to it. Right. Well, but Bob, I think
Speaker 1: that one of the main criticisms on behalf of conservatives
Speaker 1: against some of these agreements is that they impede free
Speaker 1: market activities and that they basically put a thumb on
Speaker 1: a weight on a scale. Uh, simply on a belief,
Speaker 1: but not necessarily Uh. With the knowledge of this will
Speaker 1: definitely make everything better. Yeah. Well actually yeah, if you
Speaker 1: really believe in free markets, as I do and as
Speaker 1: we do it republic Ean dot Org, then you want
Speaker 1: all the cost in on all the fuels and all
Speaker 1: the subsidies removed, and on that level playing field. We
Speaker 1: believe that free enterprise can deliver innovation faster than government
Speaker 1: mandates or fickle tax in centers could ever imagine. And
Speaker 1: so a true belief in free markets says, okay, all
Speaker 1: costs in, all subsidies out, and then compete, right, And
Speaker 1: so the government's only role is to be the honest
Speaker 1: cop on the beat that says that enforces that that
Speaker 1: level playing field. Indeed, all right, well, thanks very much,
Speaker 1: Bob English. We look forward to hearing you hearing from
Speaker 1: you in the future. Bob English is the executive director
Speaker 1: of republic E n dot Org. It is a nonprofit
Speaker 1: climate change advocacy group. He's also a former GOP and
Speaker 1: congressman from South Carolina's fourth congressional district. Well, the Miami Marlins,
Speaker 1: they didn't necessarily take on the Philadelphia Phillies yesterday in
Speaker 1: an empty stadium, but it was pretty close. About fIF
Speaker 1: hundred and ninety fans one thousand, five nine fans were
Speaker 1: in the stadium at Marlins Park for the afternoon game.
Speaker 1: So why would anyone want to buy a major League
Speaker 1: baseball team? Well, here to tell us is Chris Russo.
Speaker 1: He is the head of the sports practice at Hulhand Loki. Chris,
Speaker 1: thanks for coming into the studio, Thanks for having me.
Speaker 1: So tell me about the Marlins, because I mean this,
Speaker 1: there's been a bidding war for the Marlins. But why
Speaker 1: a bidding war for team that can can't even draw
Speaker 1: two thou spectators. Well, there's certainly have been a lot
Speaker 1: of reports over the past months about potential bids from
Speaker 1: Derek Jeter and Jeb Bush from Mitt Bromney's son, And
Speaker 1: part of the appeal is for these professional sports teams,
Speaker 1: they become pretty good businesses. The rights fees that are
Speaker 1: being paid by television have grown dramatically, Sponsorship has grown,
Speaker 1: licensing has grown, and the reality of it is there's
Speaker 1: a real scarcity of teams available. The Marlins is practically
Speaker 1: the only team that appears to be available, and there's
Speaker 1: really only been a couple of deals in the last
Speaker 1: two years among the four major leagues, So there's really
Speaker 1: a scarcity factor that drives the interest in some of
Speaker 1: these clubs. Let's say a team does want to examine
Speaker 1: the field for a buyer. Do you have a set
Speaker 1: field of potential buyers out there or is that sort
Speaker 1: of approaching anyone who has a certain amount of net
Speaker 1: income or a certain amount of wealth above a certain
Speaker 1: amount and then they've become a candidate. In recent years,
Speaker 1: the buyers have tended to be hedge fund owners, UH,
Speaker 1: technology owners and business people, high net worth individuals, and
Speaker 1: there's a universe of folks that have either tried to
Speaker 1: buy previous teams or have expressed public interest that are
Speaker 1: typically the first ones at bat when a team like
Speaker 1: this comes up. You need a lot of wealth and
Speaker 1: and you need a lot of wealth in a relatively
Speaker 1: few amount of people. So it does kind of limit
Speaker 1: the field, all right, limiting the field, but there's certainly
Speaker 1: a lot of people who want to get in on this,
Speaker 1: at least in terms of being able to stream or
Speaker 1: broadcast sports. Amazon dot Com, Hulu, Netflix, Twitter, Facebook, Are
Speaker 1: they going to drive up the prices for everybody else?
Speaker 1: I believe that those companies again Hulu, as you mentioned Netflix,
Speaker 1: that aren't currently aggressively in sports may ultimately play a
Speaker 1: role there. Uh. Amazon recently acquired NFL rights, Twitter had
Speaker 1: NFL rights last year. Facebook is now streaming baseball games.
Speaker 1: This is really good news for the sports leagues and
Speaker 1: organizations because they now have new bidders in the mix
Speaker 1: who can drive up the prices. You'll still have some
Speaker 1: of the traditional media companies involved in wanting to have
Speaker 1: those game rights, but I think that competition is good
Speaker 1: for the owners. So how much of your job is
Speaker 1: facilitating deals with people purchasing major league teams or minor
Speaker 1: league teams and how much is talking with people in
Speaker 1: the sports universe about investing their wealth, because you also
Speaker 1: you do both, right. We we focus on being an
Speaker 1: advisor on mergers and acquisitions, deals and capital raising, and
Speaker 1: in my particular case, in the sports space, that includes
Speaker 1: not only teams, though that includes sports businesses. Last year
Speaker 1: there were transactions involving companies like Formula one in UFC
Speaker 1: and liar Field Sports, and we were involved in a
Speaker 1: deal involving a company called World Golf Tour that was
Speaker 1: sold to Top Golf. So we advise businesses and potentially
Speaker 1: teams around sports transactions, really around M and A and
Speaker 1: capital raising. So you'd probably have a fantastic view into
Speaker 1: e SP and in some of the woes that we've
Speaker 1: seen there with the viewership going down, do you see
Speaker 1: a similar kind of decrease in interest across the various
Speaker 1: sports businesses that rely on consumers to pay for the
Speaker 1: consumption of sports. I don't think there's a decrease uh
Speaker 1: in interest in sports or even paying for sports. I
Speaker 1: think it's going to be done differently over time. I
Speaker 1: think consumers are going to pay more directly for the
Speaker 1: sports they consume through digital outlets, as opposed to necessarily
Speaker 1: buying big cable bundles that include sports among everything else.
Speaker 1: So I think the interest in sports is continuing to grow.
Speaker 1: I think the way sports is being delivered is changing,
Speaker 1: and it's starting to change pretty rapidly. Is there a
Speaker 1: particular sport or league that is new that would allow
Speaker 1: new entrants at lower price points. I'm thinking For example,
Speaker 1: there's drone racing league. I mean, if you want to
Speaker 1: race your drone, there's a team I guess, and you
Speaker 1: can participate. Or even watching other people play video games
Speaker 1: and get it well, it's hot, right absolutely. I let
Speaker 1: me think about the the video. Watching people play video
Speaker 1: games in an arena draws more fans then the Marlins.
Speaker 1: Drew Less sports, which is what you're referring to, has
Speaker 1: become a huge phenomenon in terms of the fandom. In
Speaker 1: terms of streaming, there's a platform called Twitch that Amazon
Speaker 1: owns enormous usage, and so I think what digital platforms
Speaker 1: do is they allow the emergence of new sports and properties,
Speaker 1: whether it is drowne racing, whether it's e sports. There's
Speaker 1: a company called flow Sports that provides coverage of of
Speaker 1: some of the you know, lesser of covered sports on
Speaker 1: TV like wrestling, and and and track and field, and
Speaker 1: so that offers new opportunities for these sports to reach
Speaker 1: an audience. So how about the traditional sports do you
Speaker 1: has your experience shown that the value of some of
Speaker 1: these Major League Baseball teams or football teams has deteriorated
Speaker 1: as these other sports come up. I think the value
Speaker 1: of these teams. The Major League teams continues to rise,
Speaker 1: in part because they're still benefiting from the large rights
Speaker 1: fees deals that are still in place from television, and
Speaker 1: also because of the scarcity value. The question will be
Speaker 1: over time, do those media whites fees continue to be large,
Speaker 1: even if they're from different sources, or does that start
Speaker 1: to level off? But right now, again, there are so
Speaker 1: few teams available in such demand for them that the
Speaker 1: pricing continues to rise. Thank you so much for joining us.
Speaker 1: A truly fascinating area and one that I know that
Speaker 1: my husband will be asking me a lot about tonight.
Speaker 1: As I can see you're getting into drone racing. Drone racing,
Speaker 1: and so what would be the like technical you can
Speaker 1: sit and use you know, you can you can watch,
Speaker 1: you can sit all right, Chris Russo, thank you so
Speaker 1: much for joining us. Chris Russo as head of sports
Speaker 1: practice at Julihan Loki, which is based in New York,
Speaker 1: talking to us about mergers and acquisition opportunities within both
Speaker 1: sports teams and sports businesses. Know him. No, I don't
Speaker 1: think drone racing. You maybe like shuffle board. What's the board?
Speaker 1: We get you a ship to play that on anyway,
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Speaker 1: It has been a painful year for anybody looking to
Speaker 1: invest really conservatively, given the fact that gold and silver
Speaker 1: and some of the safe haven trades have not delivered
Speaker 1: the results that many were hoping. Michael Cogo is President
Speaker 1: portfolio manager of the Permanent Portfolio family of funds, which
Speaker 1: over sees about three billion dollars, and he joins us now. Michael,
Speaker 1: I was looking at your Permanent portfolio. It's a two
Speaker 1: point eight billion dollar fund, uh and I was looking
Speaker 1: at some of the top investments with gold, silver treasuries.
Speaker 1: These have not been assets that have been as reliable
Speaker 1: this year. Do you still think that they are a
Speaker 1: worthwhile Betton? Do you think that we are going to
Speaker 1: move to a more risk off environment anytime soon? Good morning, Lisa,
Speaker 1: Thanks for having me. Um. You know, yeah, I think
Speaker 1: there's always room for diversified investing, and that's what we
Speaker 1: do in our permanent portfolio. So I wouldn't say gold
Speaker 1: and silver have had awful years. They you know, they're
Speaker 1: doing okay there. But but realistically, right now, given the
Speaker 1: interest rate curve, given corporate earnings, given the likelihood of
Speaker 1: additional growth, UM kind of a bent towards policy, tax regulation,
Speaker 1: at least that's what we're all expecting at some point
Speaker 1: in time. Um, there is a little resistance two stocks
Speaker 1: continuing to drift up and and so that's what happened.
Speaker 1: And so while we would advocate a healthy UH investment
Speaker 1: in stocks as well because that is a growth asset class,
Speaker 1: we also diversify ourselves among a bunch of other asset
Speaker 1: classes just in the event that the economy turns to
Speaker 1: account for multiple scenarios to profit but also protect against
Speaker 1: downside risk. So I think there's always a good time
Speaker 1: to be diversified and to hedge your bets even in
Speaker 1: a positive stock market environment. All right, Michael, I wonder
Speaker 1: if you could tell us what is the most unloved
Speaker 1: investment category that you've been presented with over the last quarter.
Speaker 1: I would say probably energy, UM, materials, and UH and
Speaker 1: maybe financials from an equity market standpoint. Um, you know,
Speaker 1: because some of those trades had had a good bump
Speaker 1: post election on expectations UM of those types of industries outperforming.
Speaker 1: Yet while the economy is still growing, the economy so
Speaker 1: far this year sort of continues to look a lot
Speaker 1: like the last couple of years. And so we don't
Speaker 1: know where we're gonna end up in Q two. But
Speaker 1: Q one wasn't great, um, and so you're still looking
Speaker 1: at this sort of one to two percent kind of
Speaker 1: annualized GDP growth. I think everybody expects this catalyst through
Speaker 1: policy and tax and less regulation, and but but to
Speaker 1: date nothing has been passed, and so you've had incremental
Speaker 1: gains in that area, and as a result, you haven't
Speaker 1: had the the economic momentum to get us to high
Speaker 1: two to three percent GDP. So, as a result, the
Speaker 1: stocks that would benefit in that environment, the energies, the
Speaker 1: the you know, the transports, the financials, the industrials. It's
Speaker 1: been a lot more of a mixed picture in those
Speaker 1: types of industries, and people have reverted to the you know,
Speaker 1: the high profile you know, Fang plus five type stocks
Speaker 1: and and other types of growth names, and that's where
Speaker 1: a lot of liquidity has gone as well. Michael, I'd
Speaker 1: love to get your take on some comments that we
Speaker 1: heard earlier in the show from Leo Groshowski. He's the
Speaker 1: chief investment officer B and Y Melon Wealth Management, and
Speaker 1: he was saying that he does think that that the
Speaker 1: market is still has value the stock market US stock
Speaker 1: market in particular, he's going into emerging markets. He's basically
Speaker 1: going for the risk on trade, including technology shares as
Speaker 1: well as others. I'm wondering, do you agree with that assessment.
Speaker 1: Do you think that that is the correct bet for
Speaker 1: somebody generally sort of use that as a guiding principle
Speaker 1: while making allocations right now? I sure do, and I think,
Speaker 1: you know, we talked about our permanent portfolio being somewhat
Speaker 1: conservative and and sort of you know, a downside risk protector,
Speaker 1: but we also invested to make up for that to
Speaker 1: provide growth in our portfolio. We tend to invest in growth,
Speaker 1: high beta, high volatility type stocks to give us give
Speaker 1: our portfolios some some growth movement. And so I think
Speaker 1: in the stock market, I believe there's always value UM.
Speaker 1: And I think where you you look right now, you
Speaker 1: would look to the areas that have not kept up
Speaker 1: with the broad market UM. And I think some of
Speaker 1: the sectors that I mentioned would would probably get you there,
Speaker 1: and those are the sort of risk on growth oriented names.
Speaker 1: So I would totally be in line with that way
Speaker 1: of thinking, and probably our own equity based investments and
Speaker 1: where we're looking for value would would mirror that type
Speaker 1: of thinking. Now, you've got to have a strong stomach.
Speaker 1: That's not where the market has been so far this year,
Speaker 1: but looking forward, UM, where the values might be going forward, UM,
Speaker 1: I think that is the way to go. I mean,
Speaker 1: keep in mind, the last several years, you've had very
Speaker 1: low cost capital that's been buying stocks and bonds, and
Speaker 1: as a result, there's definitely some sectors. And keeping mind
Speaker 1: with low interest rates, you know, people have been searching
Speaker 1: for yields, So there's definitely some sectors that have gotten
Speaker 1: richly valued. The the yield equivalence in the stock market,
Speaker 1: the consumers, UM, you know, those sorts of things that
Speaker 1: people are still investing in, and UH, from a value standpoint,
Speaker 1: you probably want to move away from those and into
Speaker 1: some other things that haven't kept up that the prices
Speaker 1: are less and have more growth potential going forward the
Speaker 1: next for years. Well, Michael, let's say that you don't
Speaker 1: have a strong stomach for any of this, and that
Speaker 1: you know you perhaps think of actually taking some profits.
Speaker 1: How can we never hear anybody say, gee, sell a
Speaker 1: little bit. There's nothing wrong with taking a profit. You're
Speaker 1: never gonna go broke taking profits. I I agree. I mean,
Speaker 1: I think in this environment, after an eight plus year
Speaker 1: bull market in stocks and bonds, that you know, that's
Speaker 1: not to say that they will correct in and of themselves.
Speaker 1: I mean, usually it takes more than just somebody saying
Speaker 1: it's time for correction, UM. And the economic data isn't
Speaker 1: supporting a recession or anything like that right now, and
Speaker 1: so you've had UH stocks continue to go up for
Speaker 1: the reasons I mentioned. Corporate earnings have been good in
Speaker 1: the last three quarters. UM. But there's never a bad
Speaker 1: time to take some money off the table. And I mean,
Speaker 1: I think what we're hearing from our investor base a
Speaker 1: lot lately has been okay, I still want to make
Speaker 1: some money in the pocket. I think it has more
Speaker 1: room to run, or maybe it's getting close to the
Speaker 1: time that I pull back, But we're starting to hear
Speaker 1: more people talk about what's coming next, taking some money
Speaker 1: off the table, putting some some investments in even in
Speaker 1: something like our fund that that is in stocks only,
Speaker 1: you know, as a hedge against maybe the fact that
Speaker 1: the stock market won't go on at this rate forever.
Speaker 1: So I think it's never a bad time to take
Speaker 1: money to take profits. UM. Keeping what you earned along
Speaker 1: the way is as important as making it, and I
Speaker 1: do think sometimes people forget that. So i'd agree with you, Michael.
Speaker 1: What's the most contrarian bet. The most contrarian bet right now,
Speaker 1: I would say would be probably equity investments in energy
Speaker 1: and materials UM for a lot of the reasons I've
Speaker 1: given UM, and probably the financials as well. Uh. I
Speaker 1: think that in the longer term that's where a lot
Speaker 1: of value is in the stock market. And uh, you know,
Speaker 1: we certainly have strong investments there UM. But it's it's
Speaker 1: been tough riding them at the moment um. But again,
Speaker 1: we we think we tend to think out, you know, two,
Speaker 1: three or five years out with a lot of our
Speaker 1: investments and uh and so you know, we do have
Speaker 1: the strong stomach to wait, to wait the story out
Speaker 1: and hopefully it it plays out the way we think
Speaker 1: it will. But yeah, that's the Conturian move right now.
Speaker 1: You know, we're we're not in a lot of the
Speaker 1: high profile um fang type of stocks. I think they're
Speaker 1: all great businesses from a consumer standpoint um, but a
Speaker 1: lot of them are very pricey. I mean, we do
Speaker 1: own Facebook, but uh yeah, we gotta I got we
Speaker 1: gotta leave it there. But I want to thank you
Speaker 1: very much. Michael Cogino. He is the president and portfolio
Speaker 1: manager of the Permanent Portfolio family of funds, helping to
Speaker 1: manage approximately three billion dollars, based in San Francisco. This
Speaker 1: is Bloomberg Markets on him Fox along with Lisa abrama Witz,
Speaker 1: and we've been speaking about low stock market volatility. A
Speaker 1: lot of people are looking for any action in the
Speaker 1: months of April or may probably didn't get it. Here
Speaker 1: to tell us more about it is Laura Keller Financial
Speaker 1: reporter for Bloomberg. Laura, maybe you could just describe has
Speaker 1: been has this period of time, this May and April
Speaker 1: time frame, has this been unduly low when it comes
Speaker 1: to volatility? Oh? Yes, Phim, that very much has been.
Speaker 1: When we were looking back at the VIX index, which
Speaker 1: is really the best measure, um what most people use,
Speaker 1: I mean, it's really near a record low, and it's
Speaker 1: been that way close to ten points on that VIX index,
Speaker 1: uh for the last month. So it's really just been
Speaker 1: quite a period of just not a lot of price changes,
Speaker 1: and therefore, you know, for a lot of these traders,
Speaker 1: a lot of these banks and by side to not
Speaker 1: a lot of trading, you know, Laura, I was struck
Speaker 1: by the action yesterday. JP Morgan shares for example, down
Speaker 1: about a little more than two percent yesterday after the
Speaker 1: news that they and Morgan Stanley and by of America
Speaker 1: we're going to see substantially lower trading volumes. And I'm wondering,
Speaker 1: why is this a surprise to markets? I mean, isn't
Speaker 1: this clearly portrayed in all the data that things are
Speaker 1: cooling off and that people are kind of slowing down.
Speaker 1: I don't I don't know if that's quite truly, so
Speaker 1: I think, you know, in terms of chats, maybe people
Speaker 1: have some awareness of this. One of the analysts that
Speaker 1: we spoke to for our story, Gerward Cassidy of RBC,
Speaker 1: you know, he was saying, yes, you know, investors did
Speaker 1: expect this quarter to be less fantastic, but probably only
Speaker 1: about five percent or so down on the trading side
Speaker 1: of things. And here JP Morgan is telling us Mary
Speaker 1: and Lake the CFO yesterday, you know it's down about
Speaker 1: fifteen percent, and Bank of America saying, look, it's probably
Speaker 1: going to end up between ten and twelve percent down
Speaker 1: for the quarter. So those are definitely more significant moves
Speaker 1: than I think many investors had anticipated, even if you know,
Speaker 1: they themselves understand that their own activity has been muted
Speaker 1: this quarter, and then also know that banks need volume
Speaker 1: in order to have good trading for the quarter. Well,
Speaker 1: you mentioned also in your in your story, which I
Speaker 1: recommend everyone on Bloomberg dot com, is that when you
Speaker 1: have this kind of low market volatility, it may be
Speaker 1: because all of the things that people thought were going
Speaker 1: to happen didn't happen, such as a victory by the
Speaker 1: far right in the French presidential elections. But having said that,
Speaker 1: is no one really prepared for that, you know, out
Speaker 1: of body, out of mind experience that comes from nowhere,
Speaker 1: that the could crush your so far pretty stellar returns
Speaker 1: for the year. You mean, if anything could change coming
Speaker 1: up in the next that that no one can predict.
Speaker 1: I mean it's almost as if no one is buying
Speaker 1: insurance just because nothing has happened in the past. Yeah,
Speaker 1: it's a little bit that way. When you start to
Speaker 1: think about ideas and why aren't you putting money to work,
Speaker 1: I think the better way to look at it is
Speaker 1: actually more on the side of cash. Many investors that
Speaker 1: I've talked to you have said, luck, we're going to cash.
Speaker 1: There was a story a couple weeks back on the
Speaker 1: Bloomberg terminal talking about different debt investors that have moved
Speaker 1: that way as well. So once you have that happening
Speaker 1: and people are pulling back their money, they're not actively
Speaker 1: going out and buying things. So that's really what we're
Speaker 1: talking about here. I don't know that it necessarily means
Speaker 1: that you don't think that there could be something on
Speaker 1: the horizon that maybe you're positioning for in the future.
Speaker 1: It just seems like there's no you know, sort of
Speaker 1: push for that right now, and people are actually pulling
Speaker 1: back and getting more defensive therefore not trading as much. Laura,
Speaker 1: Not all trading is the same with respect to profits
Speaker 1: for the banks, and there's some higher profit, higher margin
Speaker 1: areas like corporate debt trading or mortgage backed security trading.
Speaker 1: Usually debt trading is more profitable than equity trading. Do
Speaker 1: you have a sense of where the heaviest declines in
Speaker 1: activity are right exactly, he says. You point out electronic
Speaker 1: trading is really happening in the markets for equities, so
Speaker 1: as a bank, you just don't get as much fees
Speaker 1: on that. That is an area actually where marrying Lake said,
Speaker 1: the bank gpmorgan was doing pretty well. So equities seem like,
Speaker 1: you know, they might be okay as far as trading
Speaker 1: volumes and revenues, but the debt side, which again, as
Speaker 1: you point out, is a lot where a lot of
Speaker 1: banks make more money more fees. You know, we can
Speaker 1: see when we look at trades data, which is the
Speaker 1: UM industry collective for all the different prices and all
Speaker 1: the trades, that volumes are down. I mean they're not
Speaker 1: down hugely, but you know five six percent, it can
Speaker 1: be significant in a quarter, and so far that's what
Speaker 1: we're seeing for April in May, and then when you
Speaker 1: take that and extrapolate for the banks, that can be
Speaker 1: a hefty bit of change for what they're not making
Speaker 1: on fees on these trades, especially because they've had such
Speaker 1: a good period of time of bond trading revenues over
Speaker 1: the past year or so. So this comes sort of
Speaker 1: a reality check whether this industry really is making a comeback.
Speaker 1: Laura Keller, thank you so much for joining us. Laura
Speaker 1: Kelor covers the financial industry for Bloomberg News, and she
Speaker 1: comes to us from London. Thanks for listening to the
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen
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Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox.
Speaker 1: I'm on Twitter at Lisa Abramo wits one. Before the podcast,
Speaker 1: you can always catch us worldwide on Bloomberg Radio.