Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
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Speaker 1: already seeing Christmas merchandise in stores. Doesn't mean you've done
Speaker 1: your Christmas shopping. Uh No, but I did this week
Speaker 1: and buy a Christmas holiday shower curtain. That doesn't count
Speaker 1: at all. I like Christmas everywhere in the house. Something
Speaker 1: that does not count. No, well, we'll come on. There
Speaker 1: were Chris. Did it seem expensive or did it seem
Speaker 1: like it was at a discount? Were they trying to
Speaker 1: get rid of it? No? No, no, it was they
Speaker 1: were introducing Christmas merchandise ordered and adjusted. Oh I think
Speaker 1: they're just like, hey, start buying. It was a long
Speaker 1: said the Thanksgiving merchandise alongside, wasn't I don't think there
Speaker 1: was any Halloween. I think that was gone already. Not
Speaker 1: Valentine's Day, alright. Valentine's Day alright. So let's get a
Speaker 1: look at our retail environment and the all important holiday
Speaker 1: retail shopping season. For that, we welcome Patrick Brown, VP
Speaker 1: of Growth, Marketing and Insights at Adobe. He's on the
Speaker 1: phone from at Burlingham, California. Patrick, Good to have you
Speaker 1: here with Tim and myself. So let's start macro the
Speaker 1: very very high level retail. What does it look like
Speaker 1: right now and what does it tell of us maybe
Speaker 1: about the upcoming holiday shopping season. Great to be with you,
Speaker 1: Carol and him. Really excited, and you're right, some of
Speaker 1: the holidays trends that we're seeing our continuation of what
Speaker 1: we saw last year. We're shopping and just starting earlier.
Speaker 1: And as we look ahead to the holiday season, we're
Speaker 1: expecting growth your rear of about two and a half
Speaker 1: percent in the US retail market. But really some of
Speaker 1: the drivers of the growth they're gonna be a little
Speaker 1: bit different. And what we're seeing is people's shopping earlier
Speaker 1: some of the trends from last year. Last year one
Speaker 1: of the big drivers as we know, like you were mentioning,
Speaker 1: supply chain constraints made very weary customers and consumers start
Speaker 1: to shop earlier. This year, it's really going to be
Speaker 1: more of a discounting story. And those are some of
Speaker 1: the trends that will will see carry out through the
Speaker 1: holiday season. How and why are we going to be
Speaker 1: seeing discounting right now? I mean we're talking about a
Speaker 1: CPI report that on when Thursday, excuse me, is supposed
Speaker 1: to show US inflation growing at eight point one you
Speaker 1: I know, but I mean you know, so it's like
Speaker 1: on in the one sense, we are having certain prices
Speaker 1: move higher, but in the other sense, uh, you know
Speaker 1: a lot of the retails. Look, we heard about this
Speaker 1: three months ago to Carol, right, so so explain what's
Speaker 1: going on, Patrick? How did it set up this dynamic?
Speaker 1: When you're exactly right, and the spread between the core
Speaker 1: and the non core price, it's just it's just really
Speaker 1: going to be spreading out, even online. And so for
Speaker 1: categories that you consider kind of core um inflation, like grocery,
Speaker 1: we're actually not expecting much of a discount as you
Speaker 1: might imagine if it's a similar trend online. As a
Speaker 1: shoppers are buying more and more of their kind of
Speaker 1: their basket of goods UH their grocery basketting goods online
Speaker 1: as well, and they'll still be paying a higher price. However,
Speaker 1: as supply chain constraints have eased for some of the
Speaker 1: other products like computers and electronics, we're expecting some really
Speaker 1: significant discounting because retailers are looking to capture some of
Speaker 1: the some of the strength that is in the market.
Speaker 1: And another thing one of the big drivers the last
Speaker 1: year as consumers were wary of supply chain. This year
Speaker 1: again it's really driven by by discounting and things like
Speaker 1: the Prime early access sales that are starting this week
Speaker 1: are going to pull sales into mid October starting this week. Frankly,
Speaker 1: that will then carry through to the through the entire
Speaker 1: holiday season. And and the last time there was a
Speaker 1: Prime day in October, we saw year over year growth
Speaker 1: it would have been and so we're really watching closely
Speaker 1: how much sales to get pulled up starting this week.
Speaker 1: So I don't know if you can, I know, you
Speaker 1: guys go through a lot of data and track a
Speaker 1: lot of stuff, Patrick, But are we going to see
Speaker 1: so that the number dollar amount up year over year
Speaker 1: ultimately when all of a sudden done, Yeah, you're right,
Speaker 1: So we uh we do. We track trillions of actual
Speaker 1: transactions across the analytics platforms, and we are going to
Speaker 1: be up here over year. It's gonna be up about
Speaker 1: three two and a half percent year over year um.
Speaker 1: But that is looking at a holiday season that really
Speaker 1: starts in November through to December end of December, and
Speaker 1: one of the things that we're exploring is you start
Speaker 1: to define what the holiday season is. If we're continuing
Speaker 1: to look at holiday season, start to pull back into October,
Speaker 1: we have to kind of expand our aperture a little
Speaker 1: bit and look a little broader. But even in the
Speaker 1: November to December time frame, we're expecting an increase here
Speaker 1: over here. And I get just just just a quick
Speaker 1: follow and is it a case of the number up
Speaker 1: because there's more individual items being sold or is it
Speaker 1: because things that are being bought are just more intive?
Speaker 1: I guess I'm trying to figure out what it means. Yeah,
Speaker 1: it's the real nominal question, I think is the one
Speaker 1: that we're all kind of keeping an eye on. You know,
Speaker 1: we're expecting what we're going into the holiday season with
Speaker 1: some of the prices of course elevated as we're seeing everywhere,
Speaker 1: we are expecting deeper discounts to bring that down. So
Speaker 1: it shouldn't just be a you know, a revenue story,
Speaker 1: it should also be a unit in volume story. For example,
Speaker 1: in the computers space, last year, we saw discounts of
Speaker 1: around ten percent, which is really nothing when we're used
Speaker 1: to something over the holiday season. This year, we're projecting
Speaker 1: upwards of discounting for computers electronics. We're expecting a change
Speaker 1: from eight percent last year to nearly So what we're
Speaker 1: already seeing that in some of the raw data that
Speaker 1: we're looking at is received few purchasing and prices come down.
Speaker 1: So it seems like in certain segments there there will
Speaker 1: be more kind of unit volume that then supports some
Speaker 1: of the top line numbers. Interesting to hear this from you, Patrick,
Speaker 1: and think back to what a month ago and Apple
Speaker 1: and build its new eye phone and said it wasn't
Speaker 1: raising the price for that base model. That's an entirely
Speaker 1: different discussion. We only have a minute left, Patrick, and
Speaker 1: I'm wondering about the strength of the consumer and what
Speaker 1: you see in terms of data from Adobe right now
Speaker 1: that tell you how strong the consumer is. You know,
Speaker 1: we've we've seen the continued march to online sales for consumers.
Speaker 1: I think some of the trends from covid where we
Speaker 1: got really comfortable buying more categories online, we see those continuing.
Speaker 1: I mentioned grocery before that continues to make up a
Speaker 1: larger percentage of our online purchasing overall. You know, the
Speaker 1: thing we're really watching is how the discounting is going
Speaker 1: to allow consumers to get more bang for their book
Speaker 1: online potentially versus an online like an offline single. So
Speaker 1: we think it may go back to the days when
Speaker 1: you can find a better deal online and and that's
Speaker 1: really what we're watching. And I think that that should
Speaker 1: create some more bullish consumers from the online sit Patrick
Speaker 1: really quickly fifteen seconds by now pay later? Are people
Speaker 1: using more credit or no? You know, that's kind of plateau, frankly,
Speaker 1: and so we've seen people using it for a lot
Speaker 1: of a lot of years. Exceller, right, but it started
Speaker 1: the slow down a little bit. All right, We're gonna
Speaker 1: leave with their Patrick, thank you so much, Patrick Brown,
Speaker 1: VP of Growth Marketing and Insights. Over at Adobe. You
Speaker 1: are listening and watching Bloomberg Business Week. This is Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stenovic on Bloomberg Radio. Well geopolitical tensions heightening fellowing comments
Speaker 1: by President President Vladimir Putin, who threatened further missile attacks
Speaker 1: on Ukraine after Russia hit Kiev and other cities in
Speaker 1: the most intense barage of strikes since the first days
Speaker 1: of its invasion, marking a dangerous new escalation in the
Speaker 1: war that is going on much longer than everybody anticipated.
Speaker 1: At the same time, a warning from President bidenough fundraiser
Speaker 1: in recent days as sending shivers down many people's spines
Speaker 1: around the world. We've got a great guest with us
Speaker 1: this afternoon. Angela sten is senior advisor for the Center
Speaker 1: for Eurasian, Russian and East European Studies. She joins us
Speaker 1: on the phone from Washington, d C. Her most recent book,
Speaker 1: Putin's World, Russia Against the West and with the Rest. Angela,
Speaker 1: really good to have you with us this afternoon. Where
Speaker 1: do we begin with the most recent action in Crimea
Speaker 1: in Russia and of course in Ukraine as well in
Speaker 1: terms of how this conflict could spread even beyond those borders.
Speaker 1: So Putin obviously has escalated the conflict since the attack
Speaker 1: on the bridge to Crimea a couple of days ago.
Speaker 1: And there was this really indiscriminate bombing all around Ukraine,
Speaker 1: major cities losing all their electricity and water um, and
Speaker 1: some of them still in the dark. So real attacks
Speaker 1: on infrastructure, but also indiscriminate attacks on civilians. Children's playgrounds
Speaker 1: blown up, shopping malls blown up. You know, this is
Speaker 1: not these aren't military targets. So this is Putin's way
Speaker 1: of saying, um, you know, we're going to really fight back.
Speaker 1: He's disappointed a new commander of all the troops and
Speaker 1: the Ukraine operation, a man called General Sua Vicin, who
Speaker 1: has a reputation for being particularly brutal from this here
Speaker 1: in civil war and down. He's even served time in jail,
Speaker 1: and he you know, didn't waste any time, having just
Speaker 1: been appointed after Putin was criticized for not doing off
Speaker 1: in Ukraine. And clearly this is his first act um
Speaker 1: and as Putine has warned, this isn't the last one.
Speaker 1: So what does that mean? How do you interpret that?
Speaker 1: How would you advise world leaders with comments like that? Well,
Speaker 1: I think they have to expect more of these indiscriminate bombings. However,
Speaker 1: we do know that Russia hasn't does not have an
Speaker 1: infinite supply of these long range weapons, and they may
Speaker 1: run out of them sooner, maybe than they themselves want
Speaker 1: to admit. I think world leaders have to, you know,
Speaker 1: redouble their efforts to support Ukraine. There is going to
Speaker 1: be more pressure from some people on the Biden administration
Speaker 1: to supply even more lethal and long range weapons to Ukraine.
Speaker 1: Thinks of President Teleski has been asking for and no
Speaker 1: doubt will ask for again when he has beamed into
Speaker 1: this emergency G seven summit to discuss us what's happening.
Speaker 1: So I think that that's where the emphasis will be
Speaker 1: and there will be have to be a discussion is
Speaker 1: there more that we could be doing, uh, particularly with
Speaker 1: air defenses to help y Ukrainian send off these attacks? Angela,
Speaker 1: As Tim mentioned, your latest book is on Vladimir Putin.
Speaker 1: Putin's World, Russia against the West End with the rest
Speaker 1: um get inside Putin's head as much as you can
Speaker 1: for us and tell us tell the world what we
Speaker 1: need to be nervous about right now. Well, the Russians
Speaker 1: aren't winning this war. I think Putin's grip on power
Speaker 1: is now weaker than it's been at any time since
Speaker 1: he came to power twenty two years ago. Uh, he
Speaker 1: just celebrated the seventieth birthday. He thought he was going
Speaker 1: to leave this legacy of conquering Ukraine. So he is,
Speaker 1: from his point of view, cornered. He's under attack from
Speaker 1: people who are more hawkish than he is to show
Speaker 1: that Russia can win. So I think we are a
Speaker 1: dangerous moment. I think we can expect more escalation, at
Speaker 1: least in a conventional way, and less concerned about these
Speaker 1: nuclear threats although uh, you know, President Biden, as you said,
Speaker 1: alluded to them before. Because Russia can do an enormous
Speaker 1: amount of damage to Ukraine without going nuclear. Why are
Speaker 1: you less concerned about the nuclear threat here? Because it
Speaker 1: wouldn't you know, using a tactical nuclear weapon. It would
Speaker 1: set the Ukraine's back a bit, but it wouldn't really
Speaker 1: accomplish the kind of territorial gains that Plutin is trying
Speaker 1: to make, and it would really by breaking a taboo
Speaker 1: like that. It would alienate a number of countries that
Speaker 1: up till now have supported or be neutral. Would it
Speaker 1: begin World War three? Well, it would begin to would
Speaker 1: world War three if it escalated from one tactical nuclear
Speaker 1: weapons to strategic nuclear weapons, the ones that can reach
Speaker 1: the United States. And some people say, we've never had
Speaker 1: a situation where someone's used to a tactical nuclear weapon,
Speaker 1: but in fact, it would escalate quite quickly, and then
Speaker 1: that would be World War three. Servers up my spine
Speaker 1: just by even talking about this, Hey, um, Angela. Before
Speaker 1: we got into this interview, we Tim and I talked
Speaker 1: about a pro an activist group claiming credit for a
Speaker 1: series of disruptions that temporarily knocked the websites of some
Speaker 1: US airports offline. You know, it's traditional warfare, if you will,
Speaker 1: using you know, ground war missiles and so on, but
Speaker 1: it's also a cyber war. How do we need to
Speaker 1: think about that as Russia? As you said, President Putin.
Speaker 1: Putin certainly feels cornered at this point, so I think
Speaker 1: we should expect. In fact, people have wondered why there
Speaker 1: hadn't been more of these kind of cyber attacks. The
Speaker 1: German train system in the last couple of lace days
Speaker 1: were suddenly disrupted in northern Germany. Who did that? So
Speaker 1: I think we we these kind of asymmetric cyber attacks
Speaker 1: UM are probably what's going to happen in the future,
Speaker 1: and we have to be well prepared for that and
Speaker 1: we have to know how to strike back against that.
Speaker 1: So what does this mean potentially for Taiwan, China and
Speaker 1: everyone else? Well, I think for the Chinese UM were
Speaker 1: they're watching what's happening in Ukraine and they're seeing how
Speaker 1: the Ukrainians are fighting back, so they might want to
Speaker 1: how the Taigwanese, also equipped with American weaponry, might fight back.
Speaker 1: And then uh, they're watching the sanctions that were imposed
Speaker 1: on Russia and that presumably those kinds of sanctions would
Speaker 1: be on impost on China. So I don't think what's
Speaker 1: happening it's going to win bold in China. I think
Speaker 1: it would give them pause for thought before they did anything.
Speaker 1: All right, thirty seconds left angela potential off ramp for
Speaker 1: Vladimir Putin? What could it be? I don't see an
Speaker 1: off ramp at the moment because Putin wants the whole
Speaker 1: of Ukraine. So there's there's nothing at the moment I
Speaker 1: think that would work as an off ramp unless Ukraine
Speaker 1: we're willing to see an enormous amount of its territory,
Speaker 1: which is not willing to do. Is it just Ukraine
Speaker 1: or is there more in his sights? Ten seconds? Oh yeah,
Speaker 1: I mean he would like to go further than Ukraine,
Speaker 1: and that was his goal at the beginning. It doesn't
Speaker 1: look as if that's very likely now, so appreciate you.
Speaker 1: Angela Stance, Senior Advisors, Center for Eurasian, Russian and East
Speaker 1: European Studies. Check out her book Putin's World Rush Against
Speaker 1: the West End with the rest. You're listening to Bloomberg
Speaker 1: Business Week on Bloomberg Radio. This is Bloomberg Business Week
Speaker 1: with Carol Messer and Bloomberg Quick Takes Tim Stinovic on
Speaker 1: Bloomberg Radio. She us on fire recent Bloomberg Business Week
Speaker 1: cover story and the dollar problem for the world, remember
Speaker 1: that just recently, and then today out with one of
Speaker 1: the most red stories on the Bloomberg about how the
Speaker 1: most powerful buyers in US treasuries are all bailing at once.
Speaker 1: It's what I call a wait what moment. Liz McCormick
Speaker 1: is Chief correspondent for Global macro Markets with Bloomberg News.
Speaker 1: She's with us right now in the Bloomberg Interactive Broker's studio. Liz,
Speaker 1: good to have you with us this afternoon. So where
Speaker 1: are the biggest players going. I mean we're talking about pensions,
Speaker 1: life insure, life insurers, foreign government's, US commercial banks. Where
Speaker 1: are they going? Well, a lot of them are sitting
Speaker 1: in cash. I mean, of course there's the FED also,
Speaker 1: who they're not a trader, right, so they're doing q
Speaker 1: T now, so instead of buying like Quie, they're rolling
Speaker 1: stuff off. And they were the biggest buyer of treasuries
Speaker 1: in the last couple of years, right, commercial banks, you know,
Speaker 1: as deposits are going down, you know, I know you
Speaker 1: were talking about Jamie Diamond. But as the FED is
Speaker 1: pulled back and there's less reserves, deposits are going down
Speaker 1: also because the interest rates on banks are not so
Speaker 1: good relative to some of the other high yield things,
Speaker 1: so they have less money to invest in treasuries, just
Speaker 1: some of it. There's less money like FED commercial banks,
Speaker 1: other foreign accounts. Some of the local bond yields are
Speaker 1: pretty nice. Yeah, And the headshield in the US is
Speaker 1: kind of negative. You know, so how much? And I
Speaker 1: think in your story you say, if it was just
Speaker 1: one of the overseas buyers, right, it wouldn't maybe be
Speaker 1: such a story. But you're talking about like all of them?
Speaker 1: Are most of them? Are? Many of them? Yeah, the
Speaker 1: major ones, Because you know, sometimes even like in the
Speaker 1: wonky world of supplying demand, editors will be like, that
Speaker 1: doesn't matter too much, Let's go away, you know, let's
Speaker 1: not a good story. But when it's like the big
Speaker 1: players are all going in the same direction, that's like
Speaker 1: a flow story that matters, right, So I think that
Speaker 1: is the story, like, and JP Morgan has done some
Speaker 1: good data on it, breaking down that the key by years,
Speaker 1: and they're saying, we're at a little concerned here. You know,
Speaker 1: you have these players, especially like commercial banks who who
Speaker 1: bought so much as all the liquidity came in going
Speaker 1: the other direction. I mean, I keep saying to myself,
Speaker 1: it's a mix of this now supply demand that's working
Speaker 1: against treasuries. And although we don't know what ends, inflation
Speaker 1: is still staying hot, although Lyle Brainers said some caution,
Speaker 1: but the Feds still being hawkish, So they're both a
Speaker 1: negative for the treasury market. Well, that's what I'm thinking
Speaker 1: when we think about how high yields are go, right.
Speaker 1: I mean, this is a conversation Tim and I have
Speaker 1: and with our TV colleagues of you know, where's the
Speaker 1: bottom inequities and where's the top and yields. So that's
Speaker 1: another dynamic that plays into pushing uppeals even higher exactly.
Speaker 1: And I feel like my daughter says, you don't do that.
Speaker 1: You sound old, but like I feel like I've been
Speaker 1: around for a while, and sometimes I almost like, oh,
Speaker 1: this peak yield thing, like a three and a half
Speaker 1: yield when treasury tenure yields were there, Like that's not
Speaker 1: so bad if you were around a long time. You know,
Speaker 1: we're just kind of used to this zero rate era.
Speaker 1: So I think that's the thing that the door just
Speaker 1: keep getting blown off, like, oh, we couldn't go above
Speaker 1: four and now, of course we went above four in yields,
Speaker 1: and the FED might go to four point six and
Speaker 1: a long a Bloomberg Economics says five percent of you know,
Speaker 1: at the terminal rate. So I think that's the hard thing.
Speaker 1: Are we at the peak? No? You know it's scary, right,
Speaker 1: you know, you don't want to buy when you think
Speaker 1: it could be worse. Right, Well, that's the question, li is.
Speaker 1: I mean, what gets these institutions, these governments to get
Speaker 1: off the sidelines and move from cash back into you know, treasuries.
Speaker 1: Well as far as the central banks, I think they're
Speaker 1: backs to the wall, right because they for now have
Speaker 1: to do this q til though the Bank of England
Speaker 1: did a finessing thing of a market structure kind of
Speaker 1: you know, kind of call it financial stability support, as
Speaker 1: you know, for the long end, I think the foreign
Speaker 1: private accounts, it depends on when yields get attractive enough, right,
Speaker 1: maybe when the dollar eases off, because that's making hedging
Speaker 1: costs more expensive. It's all relative value. If it gets
Speaker 1: more appealing, they may come back. Or I mean the
Speaker 1: US was first and lost like first but fastest with hiking, right,
Speaker 1: So maybe if if we slowly get signs that they're
Speaker 1: going to at least and I don't like the word pivot,
Speaker 1: but maybe slowly from this room, yeah, it's like, you know,
Speaker 1: I keep thinking, Palasa, let's retire transitory, Let's retire pivot please.
Speaker 1: You know, week a long time and one of the
Speaker 1: one of the shows without actually saying I kind of
Speaker 1: pointed out, but yeah, and I ruined it, brought it back.
Speaker 1: But m but that's what I think. What I think
Speaker 1: we need to see like the whites of the eyes
Speaker 1: of the Fed actually slowing, you know, like they used
Speaker 1: to say about inflation. So when maybe they finally do
Speaker 1: a fifty racist point hike instead us supposedly we're looking
Speaker 1: for another seventy five that's four in a row. I
Speaker 1: mean that's a lot. So is it just a market
Speaker 1: cycle when it comes to treasuries, because I guess what
Speaker 1: I always think about is we need foreign buyers to
Speaker 1: buy US debt, right, That's what you know, keeps the
Speaker 1: US government going. So is it something more? We've always
Speaker 1: talked about this with you know, in regards to China.
Speaker 1: If it gets to be political, we'll trying to stop buying.
Speaker 1: But is it Is it just a case of where
Speaker 1: in this is a market cycle we're in right now
Speaker 1: and that's why you have foreign buyers pulling back? Or
Speaker 1: is there something more at playing we need to be concerned? Well,
Speaker 1: you know, it's interesting on the foreign buyers account um
Speaker 1: they have been Remember China was such the force and
Speaker 1: they if you forget about this, this recent stuff. They've
Speaker 1: been slowly less of a force, you know, number one,
Speaker 1: because the Fed is bought a lot. But you know,
Speaker 1: foreign accounts haven't had as much sway as they had
Speaker 1: let's say ten years ago, because they were the main force.
Speaker 1: Everyone was worried like, oh my gosh, if China moves away, um,
Speaker 1: but they still matter a lot. I mean when I
Speaker 1: say they have less force, you know, say for months
Speaker 1: and months their amount of holdings went down, but they
Speaker 1: still hold a heck of a lot. Right, So I
Speaker 1: think it's a market cycle and we're eventually going to
Speaker 1: have a recession. I mean, I want to say, Bernanke,
Speaker 1: where's my brain? But Pal is said, we're trying to
Speaker 1: get about price, so he's all over today. But Pal
Speaker 1: is trying to pull this off without a recession, maybe
Speaker 1: a soft landing. But you know, history shows that probably
Speaker 1: we're going to have a slowdown that will start, Like
Speaker 1: you're saying, the cycle, let's go down, Investors will come back, Yes, exactly.
Speaker 1: It's it worth because central banks are in such a
Speaker 1: pickle right now. Is it worth distinguishing their goals with
Speaker 1: the other institutions that usually buy up for in debt,
Speaker 1: whether it's a sovereign wealth fund, for example, or perhaps
Speaker 1: a pension fund. Right, absolutely, their their goals and desires
Speaker 1: are much different, right, And I think that's why a
Speaker 1: few folks in our story said, whoever these buyers are,
Speaker 1: they're more price sensitive because the FED. Although they do
Speaker 1: models and try to buy the right spots, they're not buying,
Speaker 1: you know, for like a relative value player or anything.
Speaker 1: But you're right pension funds because they need these long
Speaker 1: term investments. And you start to hearing more investors saying
Speaker 1: I'm starting to like longer term, you know, duration securities.
Speaker 1: I don't think it's enough of a force that it's
Speaker 1: moved the market around, although we do have a deeply
Speaker 1: inverted deeal curve. Right, that's kind of because the recession coming.
Speaker 1: But I think you're right, Tim, that pension funds really
Speaker 1: need this security. But they're very overfunded. Now you've probably
Speaker 1: talked about that. So they've done very well with stocks
Speaker 1: before this year, so they have less of a need.
Speaker 1: But I think that that kind of money is going
Speaker 1: to come back, because it makes me even think about oh, annuities.
Speaker 1: It's usually a bad word, but yields are higher. Right.
Speaker 1: We may not have grandfather wasn't invested in annuities like
Speaker 1: it is amazing the things that we're talking about right
Speaker 1: that we thought kind of had had their day in
Speaker 1: the sun. Um. I think it's a really powerful story
Speaker 1: in terms of where we are in the market right now.
Speaker 1: Um so, Liz, thank you so much. Twenty seconds. Investors
Speaker 1: should think then about what that Maybe we're going to
Speaker 1: see even more higher yields. Yeah, I think you can't say,
Speaker 1: you know too easy. We're seeing the peak and like
Speaker 1: you said, buyers are going to come in, but it
Speaker 1: doesn't seem like right away anytime soon, so a little
Speaker 1: more cautient. Well, certainly another thing to keep in mind.
Speaker 1: Let's thank you so much. Liz McCormack, chief correspondent for
Speaker 1: Global macro Markets at Bloomberg News. As we mentioned recent
Speaker 1: cover story Bloomberg Business Week about the higher US dollar
Speaker 1: and how they didn't care about the impact it was
Speaker 1: having on the world, so relevant to what's going on
Speaker 1: right now. Yeah, good to have you back with us.
Speaker 1: Let's really appreciated. Congratulations on the recent cover. I'm roc journal. Yeah,
Speaker 1: but you let me drive? Oh no, no, no, please,
Speaker 1: I want to drive. It's good question. This is the
Speaker 1: drive to the clothes on Bluebird Radio. All right, everybody,
Speaker 1: just got about ten minutes left in today's trading session,
Speaker 1: just under ten. Bouncing around here. We're definitely off our
Speaker 1: loads of the session, but we are down certainly across
Speaker 1: the boarders. You just heard from Charlie when it comes
Speaker 1: to the major equity averages though tech once again though
Speaker 1: the underperformer to really eager to hear what Jordan Conn
Speaker 1: asked to think about it. This is Jordan's is chief
Speaker 1: investment officer at a c M Funds. Jordan joins us
Speaker 1: this afternoon on the phone from Los Angeles. Jordan managed
Speaker 1: is the a c M Dynamic Opportunity Fund. It's ticker
Speaker 1: a d O i X, and it's actually outperforming the
Speaker 1: SMP five hundred this year a year to date, down
Speaker 1: only eleven point three p versus the SP five hundred
Speaker 1: slide of close to Jordan's good to have you with
Speaker 1: us this afternoon. Help us understand where we are within
Speaker 1: the context of Wow, the slide that we're seeing in
Speaker 1: the SMP five hundred this year, and what the Federal
Speaker 1: Reserve is doing to get inflation under control. Yeah, I mean,
Speaker 1: I think you know a lot of this started with
Speaker 1: the FED. Obviously the side was behind the curve in
Speaker 1: terms of inflation and characterizing it as transitory, so they
Speaker 1: had to play catch up and start hiking rates at
Speaker 1: a pace this year, you know, much faster than we've
Speaker 1: seen probably in decades, and so that kind of caused
Speaker 1: valuations to contract, you know, risk assets to start coming down, um,
Speaker 1: you know, pretty pretty pretty pervasively. And now what we're
Speaker 1: getting into is kind of this this second phase of
Speaker 1: the down leg where earnings estimates, which have held up
Speaker 1: for most of the year, are only just starting to
Speaker 1: be revised downward. And so I think that kind of,
Speaker 1: you know, weakened the valuation thesis, so to speak. And
Speaker 1: so this is going to be a really important earning
Speaker 1: season in the sense that do we see more companies
Speaker 1: guiding down and taking down numbers, and you know, just
Speaker 1: how well the market can hold up in the face
Speaker 1: of that sort of scenario. Hey, your other fun, your
Speaker 1: a c M tactical income fun. If I look at
Speaker 1: it um it is in the nine percentile for the
Speaker 1: past month. If I look at a three year, it's
Speaker 1: in the eight percentile. And this is you know, you're
Speaker 1: investing in bonds, you're looking at floating rate bonds. You
Speaker 1: look at it, you look at MUNI, high yield UM,
Speaker 1: foreign and Emerging market issuance UM. Where are the opportunities there?
Speaker 1: You've you've done well, you're to date and in particular
Speaker 1: over the past month. What has worked well for you
Speaker 1: in terms of strategy, So, you know, and that's fun
Speaker 1: that you're talking about. In our fixed income fund, we
Speaker 1: um utilized fixed income ts pretty much across the spectrum,
Speaker 1: you know, all the different sectors of the fixed income area,
Speaker 1: and we do so in a tactical fashion. So when
Speaker 1: when any given area of the fixed income market is
Speaker 1: in a downtrend, we will move to cash. And so
Speaker 1: what has really helped us as just being altered defensive recently,
Speaker 1: you know, we have we have a high amount of
Speaker 1: cash in that fun and that has kind of really
Speaker 1: helped us. A few things that have that have held up,
Speaker 1: you know, things like bank loans, floating rate UM bombs
Speaker 1: have held up a little bit better than the rest
Speaker 1: of the market. We also have am I writing about
Speaker 1: six in cash right now? I mean I'm looking at
Speaker 1: numbers and maybe is that right? And that's not typical. Yeah,
Speaker 1: And it's just a function of you know, we allocate
Speaker 1: to sectors that are experiencing up trends in the market,
Speaker 1: and we kind of add to them as those up
Speaker 1: trends kind of um take hold and strength and and
Speaker 1: so right now that those up trends are just so
Speaker 1: few and far between, that we have a really really
Speaker 1: high probably the highest cash amount that we've had since
Speaker 1: mart So a bear would you say is that it
Speaker 1: is safe to say a bearer stance in terms of
Speaker 1: the fun right now? Yeah? I think so. I mean
Speaker 1: it is a bearer stance just because, like you said,
Speaker 1: there are so few opportunities. But a lot of these
Speaker 1: areas of the market and the fixed income market are
Speaker 1: really getting over sold here that come down quite a bit.
Speaker 1: Yields are much higher than we've seen in years, and
Speaker 1: so I think as soon as the market gets a
Speaker 1: sense that inflation is peaking um and and tenure, you'll
Speaker 1: start to stabilize more. You know, I think there could
Speaker 1: be a lot of good buying opportunities. But for us,
Speaker 1: you know, we're not gonna put the part before the horse.
Speaker 1: What is what is your sense of inflation peaking here?
Speaker 1: Because if he's going from eight point three to eight
Speaker 1: point one percent, when it comes to c P. I
Speaker 1: is that evidence that inflation is peaking or has peaked?
Speaker 1: I think so, you know that they always like to
Speaker 1: say one data point doesn't make a trend, so you
Speaker 1: need to see it persist for a few months. But
Speaker 1: one of the things you know, people kind of don't
Speaker 1: often differentiate between inflation is a rate of change measure
Speaker 1: on a year over your basis. It's not a measure
Speaker 1: of prices. So even if prices stay high. Right here
Speaker 1: in l A gas prices are six dollars and fifty cents.
Speaker 1: Even if prices were to stay at that level, let's
Speaker 1: stay for the next year, the the the inflation rate
Speaker 1: on a year over your basis would start to come
Speaker 1: down and trend towards zero, you know, as those comparisons
Speaker 1: came to fruition, But prices would still be high. It
Speaker 1: still would be difficult for the consumer. But you know
Speaker 1: what I mean. So inflation can come down, even though
Speaker 1: it doesn't necessarily feel like it when you're looking at
Speaker 1: the average prices is being hey toward your dynamic opportunity
Speaker 1: fund to UH and correct me if I'm wrong, But
Speaker 1: according to our data as of the I guess the
Speaker 1: last update it's about about in cash. You also owned
Speaker 1: some it looks like Alphabet and Amazon, some Eli Lily,
Speaker 1: some Microsoft. Um that feels like a high level too.
Speaker 1: What will signal to you that it's time to put
Speaker 1: that cash to work in either of the funds for
Speaker 1: that matter. But you know, I'm just curious, what do
Speaker 1: you looking for? What's the trigger? Yeah, and the dynamic funds.
Speaker 1: You know, we're holding some of those core positions, like
Speaker 1: you said, the Apples and Googles, but then on the
Speaker 1: flip side, we use short positions in in e t
Speaker 1: s and index EPs and that's kind of how we
Speaker 1: hedge our exposure. So even though we hold those socks,
Speaker 1: you know, we have a lot of hedges on the
Speaker 1: et F side and that has limiting our exposure for
Speaker 1: us and just helping us act defensive in this down market.
Speaker 1: So for us, you know, we follow a lot of
Speaker 1: different indicators. One of the simplest ones for your listeners
Speaker 1: is we look at the market the major industries, things
Speaker 1: like the SMP, then mas Back, the Russell and we
Speaker 1: kind of overlay a series of moving averages on them.
Speaker 1: So we're looking at both short term in the utic
Speaker 1: term as well as long term. Right now, the market
Speaker 1: is below you know, if you look at the SMP
Speaker 1: for example, it's below all of its major respective moving
Speaker 1: averages and they're all actually in downtrends if you look
Speaker 1: at the smoke of those moving averages. So for us,
Speaker 1: you know, we just need to see a change in trend.
Speaker 1: We need need to good market start to break back
Speaker 1: above the moving averages and for some of them to
Speaker 1: actually bottom out and start sloping upward again. You know,
Speaker 1: that's kind of how we define the trend, the overall
Speaker 1: trend of the market, And right now it's still just
Speaker 1: the market just still just stuck in the downturn. When
Speaker 1: do you what's the signal to you that things are
Speaker 1: on an upswing and it's not a bear market route? Um,
Speaker 1: I mean, I think you know, it will be a
Speaker 1: few things. You know, I mentioned the technical So the
Speaker 1: technicals are obviously a big part of it. When we
Speaker 1: start to see the market to swing back above those
Speaker 1: moving averages and the slopes change. Also, you know, it's
Speaker 1: very rare for the market to bottom while the FED
Speaker 1: is still hiking rate and while the yield curve is
Speaker 1: still negatively sloped. So a good indicator that we'd be
Speaker 1: looking for is for the yield curve to bottom out
Speaker 1: and move to a positive slope. Right, That would be
Speaker 1: an indicator at the bottom market at least as pricing
Speaker 1: and some built ahead, as opposed to right now where
Speaker 1: it's still forecasting recession. Um. Right, So things like that,
Speaker 1: All right, Gonna leave it there, Hey, Jordan, Thank you
Speaker 1: so much. Jordan Conny's chief investment officer and President at
Speaker 1: a c M Funds, joining us on the phone from
Speaker 1: Los Angeles. Thanks for listening to Bloomberg Business Week. Download
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