1 00:00:00,760 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news on the Bloomberg Markets Podcast, 5 00:00:15,560 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,960 Speaker 1: at Bloomberg dot com slash podcast. All right, I looked 7 00:00:21,960 --> 00:00:24,320 Speaker 1: at the mortgage rate, you know on the Bloomberg termoil 8 00:00:24,320 --> 00:00:26,680 Speaker 1: you can do that. It's over seven percent now the 9 00:00:26,760 --> 00:00:29,600 Speaker 1: average thirty year mortgage. What so I feel did you 10 00:00:29,640 --> 00:00:32,360 Speaker 1: close on your tun closing later today? And I feel 11 00:00:32,360 --> 00:00:34,919 Speaker 1: like I'm gaming the market with the rate I got. 12 00:00:35,000 --> 00:00:36,800 Speaker 1: You locked in a good rate? Yeah, well, no, you 13 00:00:36,880 --> 00:00:39,760 Speaker 1: locked in a good rate. I locked in a egregious rate. 14 00:00:39,760 --> 00:00:42,640 Speaker 1: But it looks better than it does today. But let's 15 00:00:42,640 --> 00:00:45,080 Speaker 1: talk about the mortgage market. Let's talk about the housing market. 16 00:00:45,400 --> 00:00:48,240 Speaker 1: Erica Aidelberg, she joins us here on our Bloomberg Interactor 17 00:00:48,320 --> 00:00:53,160 Speaker 1: Broker's studio ericas the mortgage back security strategist for Bloomberg Intelligence. 18 00:00:53,720 --> 00:00:56,560 Speaker 1: Erica talked to us about just kind of a housing market, 19 00:00:56,600 --> 00:01:01,680 Speaker 1: just the basic housing market today, Ray Tire, it seems 20 00:01:01,680 --> 00:01:04,040 Speaker 1: like there's a real supply problem out there. What are 21 00:01:04,080 --> 00:01:06,200 Speaker 1: you seeing? But we have had big jumps in new 22 00:01:06,720 --> 00:01:08,760 Speaker 1: home sales, are pending home sales, way bigger than we 23 00:01:08,760 --> 00:01:12,000 Speaker 1: were looking for. Yeah, Hi, thanks for having me, Thanks 24 00:01:12,000 --> 00:01:16,679 Speaker 1: for coming. You know, the housing market is on a 25 00:01:16,760 --> 00:01:19,880 Speaker 1: roller coaster. It's just you know, everybody I think who's 26 00:01:19,959 --> 00:01:23,119 Speaker 1: interested in buying houses is taking close look at rates 27 00:01:23,440 --> 00:01:25,399 Speaker 1: that I think there's is a lot of It feels 28 00:01:25,400 --> 00:01:27,720 Speaker 1: like there's a lot of pent up demand. Whenever rates 29 00:01:27,720 --> 00:01:31,280 Speaker 1: fall a little bit, and new home builders have a 30 00:01:31,280 --> 00:01:33,640 Speaker 1: lot of inventory, they're probably looking to move because they 31 00:01:33,640 --> 00:01:37,039 Speaker 1: have more houses under constructions. So there's you know, a 32 00:01:37,040 --> 00:01:39,479 Speaker 1: lot of incentives going around to try to encourage people 33 00:01:39,520 --> 00:01:41,880 Speaker 1: to still be involved in the mortgage market, which I 34 00:01:41,920 --> 00:01:44,600 Speaker 1: think is why I'm sorry in the housing market, which 35 00:01:44,640 --> 00:01:46,840 Speaker 1: is why I think you saw the big jump in 36 00:01:47,160 --> 00:01:51,160 Speaker 1: both existing home sales and new home sales, pending home 37 00:01:51,240 --> 00:01:53,720 Speaker 1: sales and new home sales. You know, as soon as 38 00:01:53,800 --> 00:01:56,400 Speaker 1: rates dropped a little bit, existing home sales are still 39 00:01:56,520 --> 00:01:59,800 Speaker 1: very low, but pending home sales are leading indicator for that. 40 00:02:00,040 --> 00:02:02,440 Speaker 1: Let's separate all those three things. For people who don't 41 00:02:02,600 --> 00:02:06,320 Speaker 1: work in the housing industry, like you do. So pending 42 00:02:06,360 --> 00:02:10,440 Speaker 1: home sales is what contracts signed pending home sales is. 43 00:02:10,639 --> 00:02:13,720 Speaker 1: I think, I know, I know. New home sales are 44 00:02:13,720 --> 00:02:16,720 Speaker 1: contracts signed pending home sales. I'm not sure because it's 45 00:02:16,919 --> 00:02:19,919 Speaker 1: a leading indicator for existing home sales. So yeah, it's 46 00:02:19,919 --> 00:02:22,400 Speaker 1: before closing. So yeah, pending home sales are contract signed 47 00:02:23,600 --> 00:02:26,600 Speaker 1: new home sales. New home sales are just built and sold, right, 48 00:02:26,720 --> 00:02:29,280 Speaker 1: not like if Paul lived in his house for twenty 49 00:02:29,360 --> 00:02:31,560 Speaker 1: years and then sells it. That's existing home sales, right. 50 00:02:31,600 --> 00:02:34,040 Speaker 1: But new home sales haven't necessarily even closed. So there 51 00:02:34,040 --> 00:02:37,000 Speaker 1: are a lot of cancelations on new home sales because 52 00:02:37,200 --> 00:02:40,160 Speaker 1: the first time move in, right, New homesales is like yeah, 53 00:02:40,240 --> 00:02:42,920 Speaker 1: new brand new home sales. Yeah, and existing home sales 54 00:02:43,280 --> 00:02:45,799 Speaker 1: is on when the loans actually close the house is 55 00:02:45,840 --> 00:02:49,120 Speaker 1: actually true, so existing home sales is usually related to 56 00:02:49,160 --> 00:02:51,840 Speaker 1: rates a couple of months ago. Both new home sales 57 00:02:51,880 --> 00:02:55,080 Speaker 1: and especially pending home sales are based more on you know, 58 00:02:55,120 --> 00:02:57,520 Speaker 1: where rates are today and what type of incentives people 59 00:02:57,520 --> 00:03:00,680 Speaker 1: are getting, and especially for new homes sales, they may 60 00:03:00,720 --> 00:03:03,240 Speaker 1: not even close. There's a lot of cancelation. So that's 61 00:03:03,280 --> 00:03:05,360 Speaker 1: really the whole thing is kind of confusing even for 62 00:03:05,400 --> 00:03:07,400 Speaker 1: an analyst. But the bottom line is we've seen the 63 00:03:07,480 --> 00:03:14,240 Speaker 1: numbers tick up, yeah, from the doldrums, And does that 64 00:03:14,240 --> 00:03:16,840 Speaker 1: mean we've seen a bottom in housing? You know, So 65 00:03:17,080 --> 00:03:18,920 Speaker 1: there's one more number we can throw in there just 66 00:03:18,919 --> 00:03:22,040 Speaker 1: to confuse people. The Mortgage Banker Association does a weekly 67 00:03:22,080 --> 00:03:26,880 Speaker 1: survey and they look at purchase loan applications and refi 68 00:03:26,960 --> 00:03:29,919 Speaker 1: loan applications, which are of course in the basement. Purchase 69 00:03:30,000 --> 00:03:32,880 Speaker 1: loan applications did tick up a little in January, which 70 00:03:32,880 --> 00:03:35,840 Speaker 1: is why so many people thought that's the biggest leading indicator. 71 00:03:35,920 --> 00:03:39,120 Speaker 1: That's like two months out basically, that's that's h you know, 72 00:03:39,200 --> 00:03:41,920 Speaker 1: that's where you know, people were trying to lock in 73 00:03:42,000 --> 00:03:44,320 Speaker 1: mortgages when the race we're a little bit lower. That's 74 00:03:44,360 --> 00:03:46,360 Speaker 1: now back to twenty eight year lows. It's fallen two 75 00:03:46,400 --> 00:03:50,040 Speaker 1: weeks in a row. So I think, you know, bottom 76 00:03:50,080 --> 00:03:52,600 Speaker 1: line is I think that's NBA B perch if you 77 00:03:52,600 --> 00:03:55,120 Speaker 1: want to bring that up. But I think bottom line 78 00:03:55,240 --> 00:03:58,880 Speaker 1: is that, you know, whatever green shoots we're seeing are 79 00:03:58,920 --> 00:04:02,160 Speaker 1: obviously being peated now by the higher mortgage rates. On 80 00:04:02,200 --> 00:04:05,040 Speaker 1: the bright side, we're moving to the spring housing season 81 00:04:05,120 --> 00:04:07,040 Speaker 1: where a lot of people get involved in the markets 82 00:04:07,360 --> 00:04:10,120 Speaker 1: and then okay, so this is not even the season anyway, 83 00:04:10,200 --> 00:04:12,800 Speaker 1: it's just a yeah, we can't really judge it by 84 00:04:12,800 --> 00:04:15,160 Speaker 1: these numbers. I want to ask about something that I 85 00:04:15,200 --> 00:04:17,520 Speaker 1: think Paul's going to be doing next year, and I 86 00:04:17,560 --> 00:04:20,479 Speaker 1: think maybe a lot more people are than have been 87 00:04:20,480 --> 00:04:24,680 Speaker 1: in the past decade, at least maybe longer people are 88 00:04:24,680 --> 00:04:28,520 Speaker 1: getting adjustable rate mortgages because we're so high right bank 89 00:04:28,600 --> 00:04:32,400 Speaker 1: rate says seven point one two percent right now, are 90 00:04:32,480 --> 00:04:34,599 Speaker 1: more people going to be you said, refies are in 91 00:04:34,600 --> 00:04:38,400 Speaker 1: the basement. Obviously, nobody's refinancing at seven percent. That's why 92 00:04:38,480 --> 00:04:40,960 Speaker 1: city is letting go hundreds of people and get mortgage 93 00:04:40,960 --> 00:04:44,599 Speaker 1: in it. But next year people may be doing just that. 94 00:04:44,720 --> 00:04:47,520 Speaker 1: Are a lot of people picking up adjustable rate mortgages 95 00:04:47,560 --> 00:04:50,600 Speaker 1: hoping that rates go down in the future. Adjustable rate 96 00:04:50,600 --> 00:04:53,479 Speaker 1: mortgages have picked up a little bit. You know, keep 97 00:04:53,520 --> 00:04:56,080 Speaker 1: in mind when you think about adjustable rate mortgage, it's 98 00:04:56,120 --> 00:04:59,160 Speaker 1: not the adjustable rate mortgage of yesteryear, where you might 99 00:04:59,200 --> 00:05:02,039 Speaker 1: even get a teaser rate, or at least you can reset, 100 00:05:02,080 --> 00:05:04,760 Speaker 1: you know, resets annually so you get a low rate. 101 00:05:05,000 --> 00:05:07,400 Speaker 1: Right now, there were like five ones, ten ones, so 102 00:05:07,440 --> 00:05:11,120 Speaker 1: the rates only incrementally lower than thirty year. You can 103 00:05:11,120 --> 00:05:13,160 Speaker 1: look at the bank rate. I think it's you know, 104 00:05:13,440 --> 00:05:15,680 Speaker 1: maybe a hundred based points saving, right, So some people 105 00:05:15,720 --> 00:05:17,880 Speaker 1: are taking those out. They don't have to reset for 106 00:05:17,920 --> 00:05:20,560 Speaker 1: five years, and there's pretty serious caps on the first reset, 107 00:05:20,680 --> 00:05:22,880 Speaker 1: so it's not really a risk for the mortgage market. 108 00:05:23,160 --> 00:05:24,960 Speaker 1: But yeah, we are seeing a little bit of pickup 109 00:05:24,960 --> 00:05:27,159 Speaker 1: and it's almost one hundred percent correlated right now with 110 00:05:27,200 --> 00:05:30,440 Speaker 1: the spread between thirty year and five ones. So that's 111 00:05:30,520 --> 00:05:33,200 Speaker 1: that's the math people are doing. All right, Erica, let's 112 00:05:33,200 --> 00:05:36,120 Speaker 1: talk about the mortgage backed securities market, fixed income market 113 00:05:36,160 --> 00:05:40,200 Speaker 1: in general. Good January, bad February. Talk to us about 114 00:05:40,200 --> 00:05:43,080 Speaker 1: the MBS market. Where you're seeing opportunities risk? What are 115 00:05:43,120 --> 00:05:46,480 Speaker 1: you telling your clients? Yeah, it was very interesting. We 116 00:05:46,800 --> 00:05:49,440 Speaker 1: came out of a really rotten, the worst ever year 117 00:05:49,520 --> 00:05:51,520 Speaker 1: in twenty twenty two. You know, it came out of 118 00:05:51,520 --> 00:05:54,400 Speaker 1: the gates strong. We had the best January that I've seen, 119 00:05:54,440 --> 00:05:56,560 Speaker 1: at least, you know, in history, I mean going back 120 00:05:56,560 --> 00:05:58,760 Speaker 1: as far as any of our series go, both on 121 00:05:58,800 --> 00:06:00,760 Speaker 1: you know, a hedge return basis as well as a 122 00:06:00,880 --> 00:06:04,040 Speaker 1: bondser back you know, total return basis, and it's just 123 00:06:04,200 --> 00:06:07,599 Speaker 1: been you know, dripped by drip pain since then. And 124 00:06:07,880 --> 00:06:10,159 Speaker 1: what turned the market is the fact that I think 125 00:06:10,200 --> 00:06:13,680 Speaker 1: every the markets have been pricing in after you know, 126 00:06:13,839 --> 00:06:16,039 Speaker 1: a nice turn in CPI, what appeared to be a 127 00:06:16,040 --> 00:06:18,080 Speaker 1: turn in CPI, they've been pricing in the end of 128 00:06:18,080 --> 00:06:21,240 Speaker 1: FED tightening and maybe even easing by the end of 129 00:06:21,240 --> 00:06:23,440 Speaker 1: the year. That's all gone out the window as soon 130 00:06:23,480 --> 00:06:27,240 Speaker 1: as last month's non farm payrolls number came in way 131 00:06:27,240 --> 00:06:30,440 Speaker 1: stronger than anyone expected. And other data is also you know, 132 00:06:30,520 --> 00:06:33,760 Speaker 1: made us think, including isems and numbers today, that you know, 133 00:06:33,800 --> 00:06:35,520 Speaker 1: we're not out of the woods yet. The Fed's probably 134 00:06:35,520 --> 00:06:37,240 Speaker 1: gonna have to go a lot higher and keep rates 135 00:06:37,240 --> 00:06:39,919 Speaker 1: a lot higher for a lot longer than people expected. 136 00:06:40,279 --> 00:06:44,800 Speaker 1: And mortgages don't love that scenario, you know, bobs in 137 00:06:44,839 --> 00:06:47,360 Speaker 1: general don't love that scenario. But it also means there's 138 00:06:47,360 --> 00:06:50,919 Speaker 1: probably ongoing you know, volatility while we're trying to figure 139 00:06:50,920 --> 00:06:53,440 Speaker 1: out what's actually going to happen. So as I say, 140 00:06:53,480 --> 00:06:55,600 Speaker 1: mortgages have given up all of their total raid to 141 00:06:55,640 --> 00:06:57,840 Speaker 1: return near to date, and a lot of their excess 142 00:06:57,839 --> 00:07:00,920 Speaker 1: returned near to date as well. Thirty seconds credit quality 143 00:07:00,920 --> 00:07:04,800 Speaker 1: in the NBAS market mortgage market um. Credit quality is 144 00:07:04,800 --> 00:07:08,799 Speaker 1: still very strong. Delinquencies are still very low. Most people 145 00:07:08,839 --> 00:07:11,400 Speaker 1: still have those two percent mortgages or three percent mortgages, 146 00:07:11,480 --> 00:07:14,840 Speaker 1: So look strong. All right, My man over here's got 147 00:07:15,000 --> 00:07:18,240 Speaker 1: a very low mortgage, don't you on the estate in 148 00:07:18,360 --> 00:07:21,520 Speaker 1: west Chester? Yeah, yeah, it's pretty fantastic. Yeah, I'm paying 149 00:07:21,520 --> 00:07:23,640 Speaker 1: glad I locked that in. Yeah, but it doesn't change 150 00:07:23,680 --> 00:07:26,640 Speaker 1: the fact that my taxes are so high. I could 151 00:07:26,640 --> 00:07:30,080 Speaker 1: honestly be buying like a new nine to eleven every year. 152 00:07:30,600 --> 00:07:33,560 Speaker 1: Just insane. Right when you get the scat pack thing coming, 153 00:07:33,600 --> 00:07:36,280 Speaker 1: and you'll be all, you'll be happy. Erica Aidelberg, mortgage 154 00:07:36,280 --> 00:07:39,840 Speaker 1: backed security strategist for Bloomberg Intelligence, joining us here live 155 00:07:40,080 --> 00:07:42,600 Speaker 1: in our Bloomberg Interactive Broker studio on a Friday, so 156 00:07:42,640 --> 00:07:48,640 Speaker 1: that's a double start. I love to Betty Kis. I 157 00:07:48,680 --> 00:07:52,560 Speaker 1: love exchange traded funds. I think, what are they thirty 158 00:07:52,640 --> 00:07:56,120 Speaker 1: years old now, and they just continue to innovation. The 159 00:07:56,240 --> 00:08:00,280 Speaker 1: industry continues to grow. We're talking about at least at 160 00:08:00,400 --> 00:08:05,800 Speaker 1: least nine trillion dollars of funds globally, so incredible growth stories. 161 00:08:05,800 --> 00:08:08,160 Speaker 1: Sylvia Jablonski joins us here a chief investment officer and 162 00:08:08,160 --> 00:08:12,440 Speaker 1: co founder of defiance ETFs and you know Sylvia on 163 00:08:12,480 --> 00:08:15,080 Speaker 1: the Bloomberg terminal. There's this great stories every day on 164 00:08:15,200 --> 00:08:18,080 Speaker 1: ETF space. One that got my attention just recently, Jim 165 00:08:18,160 --> 00:08:21,880 Speaker 1: Kramer ETFs arrives to bet on and against the CNBC 166 00:08:22,000 --> 00:08:26,280 Speaker 1: host picks talk to us. So just about these specialized, 167 00:08:26,400 --> 00:08:30,320 Speaker 1: super specialized kind of ETFs like a pro or con 168 00:08:30,440 --> 00:08:34,439 Speaker 1: Jim Kramer ETF is that is that where the growth 169 00:08:34,520 --> 00:08:37,120 Speaker 1: is as opposed to just like buying in index ETF 170 00:08:38,640 --> 00:08:41,840 Speaker 1: Good morning. You know, it's it's a great question. I 171 00:08:41,880 --> 00:08:44,320 Speaker 1: think it's certainly where the popularity is and where the 172 00:08:44,400 --> 00:08:47,440 Speaker 1: interest is. Um. You know, my sense of it is 173 00:08:47,480 --> 00:08:51,000 Speaker 1: that you kind of have the ETFs out there already 174 00:08:51,040 --> 00:08:55,640 Speaker 1: that you know, a track and represent the classics sectors 175 00:08:55,640 --> 00:08:58,720 Speaker 1: and investors want access to. So for example, there are 176 00:08:58,760 --> 00:09:01,920 Speaker 1: you know, many many options to get SMP five hundred 177 00:09:01,920 --> 00:09:06,120 Speaker 1: exposure and an ETF rapper NASDAK emerging markets you know 178 00:09:06,160 --> 00:09:08,400 Speaker 1: fixed it basic fixed income products and things like that. 179 00:09:08,520 --> 00:09:12,120 Speaker 1: So the second wave of products was really in the 180 00:09:12,120 --> 00:09:15,360 Speaker 1: thematic space and you started to see these cool broader 181 00:09:15,400 --> 00:09:18,840 Speaker 1: themes you know, like um, whether it's space or or 182 00:09:18,840 --> 00:09:20,960 Speaker 1: EVS and things like that. And now you have, as 183 00:09:21,000 --> 00:09:23,880 Speaker 1: you said this this Jim Kramer long, sure, I think 184 00:09:23,920 --> 00:09:26,280 Speaker 1: providers are just coming trying to come out with something 185 00:09:26,360 --> 00:09:29,360 Speaker 1: new that will um, you know, gather assets and will 186 00:09:29,400 --> 00:09:31,640 Speaker 1: represent something that people actually want to trade. And you know, 187 00:09:31,640 --> 00:09:34,080 Speaker 1: people do follow Jim Cramer and have strong opinions either 188 00:09:34,120 --> 00:09:38,920 Speaker 1: way on his side. What's what's a successful ETF in 189 00:09:39,000 --> 00:09:41,319 Speaker 1: terms of size, Like, what's what's considered to be a 190 00:09:41,360 --> 00:09:45,280 Speaker 1: successful et kind of clothes do you need to see? Yeah? Right, 191 00:09:45,280 --> 00:09:47,280 Speaker 1: well it's you know, it depends on the management fee. 192 00:09:47,320 --> 00:09:50,240 Speaker 1: So if obviously the higher the fee, the lower the 193 00:09:50,280 --> 00:09:53,080 Speaker 1: thresholds that you need for success. So if you have 194 00:09:53,120 --> 00:09:56,320 Speaker 1: an ETF that has you know, ninety BIPs to one 195 00:09:56,400 --> 00:10:00,199 Speaker 1: percent and you gather twenty million, you know that's of 196 00:10:00,200 --> 00:10:02,480 Speaker 1: a decent baseline. But if you have an ETF that's 197 00:10:02,520 --> 00:10:05,040 Speaker 1: priced at you know, ten twenty thirty books, you need 198 00:10:05,040 --> 00:10:08,040 Speaker 1: to see hundreds and millions of assets to actually, you know, 199 00:10:08,120 --> 00:10:10,480 Speaker 1: really generate a profit on that product. Because ETFs are 200 00:10:10,480 --> 00:10:13,240 Speaker 1: actually pretty costly to run on the back end, we 201 00:10:13,360 --> 00:10:17,360 Speaker 1: see more and more of these ETFs like the Kramer one. 202 00:10:17,679 --> 00:10:21,000 Speaker 1: UM I think before that we got crews and nance 203 00:10:21,600 --> 00:10:26,480 Speaker 1: tracking what not. Nancy Pelosi and Ted Cruise specifically do. 204 00:10:26,640 --> 00:10:28,920 Speaker 1: But what the Republicans do or what the Democrats doing 205 00:10:29,000 --> 00:10:32,680 Speaker 1: for in terms of you know, front running their legislation 206 00:10:32,760 --> 00:10:39,000 Speaker 1: to make money. Are these just a fad? I think 207 00:10:39,080 --> 00:10:42,720 Speaker 1: time will tell, you know, if if they perform. For example, 208 00:10:43,360 --> 00:10:45,800 Speaker 1: there was a period of time last year where um, 209 00:10:46,200 --> 00:10:48,680 Speaker 1: you know, you saw that short ARCTF right where everybody 210 00:10:48,720 --> 00:10:51,520 Speaker 1: became super sour on Kathy what the year prior? You know, 211 00:10:51,559 --> 00:10:53,800 Speaker 1: she was sort of the here the hero of ETFs, 212 00:10:53,800 --> 00:10:56,839 Speaker 1: and her ETF took off and then last year was terrible. No, 213 00:10:57,000 --> 00:10:59,160 Speaker 1: this year her ETF is up twenty percent again. So 214 00:10:59,679 --> 00:11:02,040 Speaker 1: um flows are kind of leaving the short arc and 215 00:11:02,080 --> 00:11:04,040 Speaker 1: going into the long one. So I think it's it'll 216 00:11:04,080 --> 00:11:06,200 Speaker 1: be the same thing with a long short Cramer fund. 217 00:11:06,240 --> 00:11:08,120 Speaker 1: You know, if the performance is there, I think it'll 218 00:11:08,160 --> 00:11:11,360 Speaker 1: generate assets, and there's enough kind of retail investors that 219 00:11:11,400 --> 00:11:13,600 Speaker 1: are interested in in you know, the media of it 220 00:11:13,640 --> 00:11:16,320 Speaker 1: and the publicity of it all. But you know, do 221 00:11:16,360 --> 00:11:17,840 Speaker 1: I think it's going to end up in an asset 222 00:11:17,880 --> 00:11:21,800 Speaker 1: manager's ETF application? You know, probably not got ETF. I 223 00:11:21,840 --> 00:11:24,320 Speaker 1: think a lot of thematic ETFs have a shot too, 224 00:11:25,120 --> 00:11:27,760 Speaker 1: because you know, there is this interest in disruptive technology 225 00:11:27,760 --> 00:11:30,320 Speaker 1: and innovation things like that. But something like that almost 226 00:11:30,320 --> 00:11:32,800 Speaker 1: feels a little bit memi and will probably you know, 227 00:11:32,880 --> 00:11:35,560 Speaker 1: gather some assets in the moment and then unless performance 228 00:11:35,600 --> 00:11:40,160 Speaker 1: is phenomenal or price fade away, unless the congressional stock 229 00:11:40,240 --> 00:11:43,200 Speaker 1: traders are forced to disclose what they do, you know, 230 00:11:43,320 --> 00:11:46,160 Speaker 1: within like ten years of their buy or self. By 231 00:11:46,160 --> 00:11:49,200 Speaker 1: the way, speaking of Cruz, you have an ETF that 232 00:11:49,280 --> 00:11:55,040 Speaker 1: I think Paul would like. Um, he's obsessed with hotels, planes, cruise, 233 00:11:55,040 --> 00:12:01,080 Speaker 1: ships and you've got Cruz. Yeah, I mean, so we've 234 00:12:01,280 --> 00:12:05,040 Speaker 1: we've we launched that ETF to really tackle the the 235 00:12:05,120 --> 00:12:07,600 Speaker 1: idea that you know, post pandemic, there would be this 236 00:12:07,640 --> 00:12:09,400 Speaker 1: pent up demand for people to travel. And you know, 237 00:12:09,440 --> 00:12:11,760 Speaker 1: there's a very popular airline ETF out there, but there 238 00:12:11,800 --> 00:12:15,000 Speaker 1: wasn't something that sort of captured the full picture with 239 00:12:15,120 --> 00:12:18,880 Speaker 1: hotels and cruises and whatnot. So UM, cruise gives you 240 00:12:18,920 --> 00:12:20,800 Speaker 1: just that, it gives you access to the airline, so 241 00:12:20,800 --> 00:12:23,280 Speaker 1: you're getting domestic, but you're also getting that China reopen 242 00:12:23,400 --> 00:12:26,840 Speaker 1: trade that East meets West, you know, um tailwin that 243 00:12:26,840 --> 00:12:29,280 Speaker 1: we're going to see this year. You get cruises and 244 00:12:29,559 --> 00:12:31,600 Speaker 1: we've seen the data there, a lot of the CEOs 245 00:12:31,600 --> 00:12:34,600 Speaker 1: are coming out and saying that pandemic book bookings are 246 00:12:34,600 --> 00:12:37,640 Speaker 1: backed up to pandemic levels. They're starting to generate revenues again. 247 00:12:37,679 --> 00:12:40,680 Speaker 1: They have pricing power, and of course hotels, business travels 248 00:12:40,720 --> 00:12:43,079 Speaker 1: back up. People are out there traveling. So I think 249 00:12:43,080 --> 00:12:45,600 Speaker 1: in the short term, um, particularly if we don't see 250 00:12:45,640 --> 00:12:47,600 Speaker 1: any kind of hard landing and we start to see 251 00:12:47,600 --> 00:12:50,760 Speaker 1: some of this you know, inflationary pressure cool off, Um, 252 00:12:50,920 --> 00:12:53,640 Speaker 1: you might get some gailwinds and in cruise and some 253 00:12:53,679 --> 00:12:56,120 Speaker 1: of these types of names within that ETF for the 254 00:12:56,200 --> 00:13:01,280 Speaker 1: next year or two, it's your highest year to date return. 255 00:13:01,480 --> 00:13:05,320 Speaker 1: That ETF is up like twenty percent year to date. Yeah, 256 00:13:05,360 --> 00:13:10,960 Speaker 1: in terms of the largest fund assets you operate, the 257 00:13:11,040 --> 00:13:15,319 Speaker 1: five G Right Defiance, next Gen Connectivity ETF. It's also 258 00:13:16,480 --> 00:13:19,800 Speaker 1: lowest fees of the of the ETFs that you operate 259 00:13:19,800 --> 00:13:24,880 Speaker 1: a guess because it's so big, right, and the highest yield. Yeah. 260 00:13:24,880 --> 00:13:27,480 Speaker 1: So the interesting thing about that is when we launched 261 00:13:27,480 --> 00:13:31,040 Speaker 1: that ETF, we were a new fund and a new 262 00:13:31,080 --> 00:13:33,840 Speaker 1: company and we wanted to come to market. We thought that, 263 00:13:34,040 --> 00:13:35,640 Speaker 1: you know, we really need to make a splash. So 264 00:13:35,760 --> 00:13:37,760 Speaker 1: let's let's try to come up with the most innovative 265 00:13:37,760 --> 00:13:40,320 Speaker 1: product that we can and we thought to ourselves, there's 266 00:13:40,360 --> 00:13:43,400 Speaker 1: no you know, great innovative product in terms of the 267 00:13:43,400 --> 00:13:45,760 Speaker 1: feature of communication, and what is the feature of communication? 268 00:13:45,800 --> 00:13:48,360 Speaker 1: It's really five G. So we structured the product and 269 00:13:48,360 --> 00:13:50,960 Speaker 1: then we thought to ourselves, and this is also around 270 00:13:51,160 --> 00:13:53,600 Speaker 1: you know, kind of it's pre covid, but it kind 271 00:13:53,640 --> 00:13:56,560 Speaker 1: of dove into covid around the time that we launched, 272 00:13:57,320 --> 00:13:58,959 Speaker 1: and we thought to ourselves, you know, who's going to 273 00:13:59,040 --> 00:14:00,360 Speaker 1: trade this. It's going to be a kind of that 274 00:14:00,400 --> 00:14:02,640 Speaker 1: younger Robin hood trader and whatnot. And so let's make 275 00:14:02,640 --> 00:14:04,760 Speaker 1: it your transparent, Let's make it as cost effective as 276 00:14:04,800 --> 00:14:07,680 Speaker 1: possible and try to gather assets and really start a company. 277 00:14:07,720 --> 00:14:09,920 Speaker 1: And so it's really it's really our flagship fund, and 278 00:14:09,960 --> 00:14:12,679 Speaker 1: it's what caught us on the map. And you know, 279 00:14:12,720 --> 00:14:14,640 Speaker 1: we're super proud of that ETF today and we hope 280 00:14:14,679 --> 00:14:16,120 Speaker 1: to see it. We hope to see it start to 281 00:14:16,160 --> 00:14:20,600 Speaker 1: grow again as risk app type picks up in coming years. Hey, Solvia, 282 00:14:21,000 --> 00:14:24,400 Speaker 1: talk to us about the trend of mutual funds converting 283 00:14:24,440 --> 00:14:27,160 Speaker 1: to ETF. So I find that fascinating kind of where 284 00:14:27,200 --> 00:14:29,280 Speaker 1: are we in that process and how do you think 285 00:14:29,280 --> 00:14:33,320 Speaker 1: it plays out going forward. So it's interesting because I think, 286 00:14:33,440 --> 00:14:36,880 Speaker 1: you know, I'm young enough where I've invested in ETFs 287 00:14:36,880 --> 00:14:38,720 Speaker 1: for a really long time, and I've worked with people 288 00:14:38,720 --> 00:14:43,040 Speaker 1: who were really like mutual fund believers, hardcore hutual fund believers, 289 00:14:43,040 --> 00:14:45,920 Speaker 1: and thought that the ETF would would go away. I mean, 290 00:14:45,960 --> 00:14:49,400 Speaker 1: it's just really hard to argue that mutual fund assets 291 00:14:49,400 --> 00:14:51,680 Speaker 1: will remain where they are. ETFs are just a much 292 00:14:51,720 --> 00:14:54,840 Speaker 1: better rapper. You know, they're far more efficiating, got intra 293 00:14:54,920 --> 00:14:57,440 Speaker 1: day trading, combine and sell them throughout the day. You 294 00:14:57,480 --> 00:14:59,840 Speaker 1: know what the intra day NAVI is what the fund 295 00:14:59,880 --> 00:15:02,760 Speaker 1: is actually worth versus what you're paying for it. Um. 296 00:15:02,920 --> 00:15:04,680 Speaker 1: You know, there are a lot of tax benefits to 297 00:15:04,800 --> 00:15:08,120 Speaker 1: using the ETF structure. So we've seen that transition. We've 298 00:15:08,120 --> 00:15:11,800 Speaker 1: seen the outflow from mutual funds into ets And not 299 00:15:11,840 --> 00:15:13,920 Speaker 1: to say that, you know, you have some great actively 300 00:15:13,920 --> 00:15:15,640 Speaker 1: managed mutual funds out there that are never going to 301 00:15:15,680 --> 00:15:18,840 Speaker 1: go away, but I think that the ETF rappers is 302 00:15:18,880 --> 00:15:21,520 Speaker 1: now you know, kind of the preferred product of choice 303 00:15:21,600 --> 00:15:25,280 Speaker 1: by by investors and especially the next generation of investors. 304 00:15:25,280 --> 00:15:28,160 Speaker 1: I mean, if you ask um, like a seventeen year 305 00:15:28,160 --> 00:15:30,080 Speaker 1: old about a mutual fund they but not even know 306 00:15:30,120 --> 00:15:34,280 Speaker 1: what it is. What about regulation? I mean, one thing 307 00:15:34,280 --> 00:15:37,600 Speaker 1: about mutual funds I know is that my four o 308 00:15:37,680 --> 00:15:40,680 Speaker 1: one k is like puking mutual funds. Can you put 309 00:15:40,760 --> 00:15:44,240 Speaker 1: ETFs easily in a four oh one k? Are investors limited? 310 00:15:44,240 --> 00:15:48,440 Speaker 1: Because that's a big it's a big pool there. Yeah, 311 00:15:48,480 --> 00:15:50,120 Speaker 1: that's the limit. That's the limit, and that's where the 312 00:15:50,120 --> 00:15:52,120 Speaker 1: assets are sticky for mutual funds. So I think that 313 00:15:52,840 --> 00:15:55,640 Speaker 1: UM either have been talks about this sort of you know, 314 00:15:55,840 --> 00:15:58,680 Speaker 1: forever at least for the last decade that that I've 315 00:15:58,680 --> 00:16:00,800 Speaker 1: been an ETFs that you know, all the retirement plans 316 00:16:00,840 --> 00:16:02,520 Speaker 1: are going to open up to ETFs, and some of 317 00:16:02,520 --> 00:16:05,280 Speaker 1: them have and some of them haven't. The majority have not. 318 00:16:05,680 --> 00:16:07,920 Speaker 1: You know, I suspect that there's going to become a 319 00:16:08,000 --> 00:16:11,320 Speaker 1: time just because there's so much user demand for it, 320 00:16:11,440 --> 00:16:14,880 Speaker 1: where you'll see that open up to ETF products, at 321 00:16:14,960 --> 00:16:18,520 Speaker 1: least certain ETF products, And I think, you know, I 322 00:16:18,560 --> 00:16:21,480 Speaker 1: think in that case that just even further propels the 323 00:16:21,520 --> 00:16:26,000 Speaker 1: EATTF asset number by the trillions and shrinks the mutual 324 00:16:26,000 --> 00:16:28,320 Speaker 1: fund assets. And you see a lot of the you know, 325 00:16:28,400 --> 00:16:31,160 Speaker 1: top actively managed mutual funds trying to create ETFs out 326 00:16:31,160 --> 00:16:33,160 Speaker 1: of their strategies too, so they sort of know that 327 00:16:33,160 --> 00:16:36,400 Speaker 1: they're not, you know, they're not kind of eroding their 328 00:16:36,400 --> 00:16:38,280 Speaker 1: own assets, but they sort of realize that they have 329 00:16:38,320 --> 00:16:41,400 Speaker 1: to switch over to keep their assets. Yeah, just amazing. 330 00:16:41,440 --> 00:16:43,840 Speaker 1: It's one of the just greatest or most you know, 331 00:16:43,880 --> 00:16:46,440 Speaker 1: impactful changes I've seen in the last decade, and I 332 00:16:46,440 --> 00:16:48,760 Speaker 1: know it's been longer than that. I'm going to start. 333 00:16:49,120 --> 00:16:52,440 Speaker 1: I'm gonna start dating people by your either pre ETF 334 00:16:52,520 --> 00:16:55,160 Speaker 1: or posting. Yeah, yeah, you're definitely because you started on 335 00:16:55,200 --> 00:17:02,080 Speaker 1: the street. Yes, before spies were coiled out, exactly, but Sylvia, no, 336 00:17:02,360 --> 00:17:06,639 Speaker 1: after absolutely, Sylvia Jablonski, chief investment Officer, co founder of 337 00:17:06,680 --> 00:17:10,280 Speaker 1: Defiance ETFs, and then on the Bloomberg terminal. For those 338 00:17:10,320 --> 00:17:11,879 Speaker 1: of you are sitting in front of a terminal, et 339 00:17:12,200 --> 00:17:14,840 Speaker 1: F go is a great function. Gives you all the 340 00:17:14,840 --> 00:17:18,200 Speaker 1: good information you want about the ETF space and looking 341 00:17:18,200 --> 00:17:21,440 Speaker 1: at the Defiance ones. Five G is Matt mentioned the 342 00:17:21,800 --> 00:17:23,800 Speaker 1: biggest one and it's got great returns there. It's got 343 00:17:23,880 --> 00:17:29,000 Speaker 1: seven hundred million dollars assets under management. All Right, we 344 00:17:29,080 --> 00:17:31,480 Speaker 1: got Kevin tyin in on here. He's a senior autos 345 00:17:31,520 --> 00:17:36,439 Speaker 1: analyst for Bloomberg Intelligence. No real agenda here, but I 346 00:17:36,480 --> 00:17:38,760 Speaker 1: want to just start Kevin. I know Michael Dean, your 347 00:17:38,800 --> 00:17:42,120 Speaker 1: colleague in London, follows Volf Volkswagen. But Volkswagen came out 348 00:17:42,160 --> 00:17:46,719 Speaker 1: today saying, you know, their boosting production. Demand is still there. 349 00:17:48,200 --> 00:17:51,040 Speaker 1: I want to ask you from the global auto industry, 350 00:17:51,320 --> 00:17:56,040 Speaker 1: is this supply chain issue is that fixed? Well, it's better, 351 00:17:57,080 --> 00:17:59,520 Speaker 1: but you know, and we've talked about this a lot, 352 00:17:59,560 --> 00:18:02,919 Speaker 1: like I'm not sure how much of it was chips 353 00:18:02,960 --> 00:18:06,360 Speaker 1: and supply chain and how much of it was constraining 354 00:18:06,520 --> 00:18:12,200 Speaker 1: output to maintain pricing and margins. So, um, you know, 355 00:18:12,240 --> 00:18:15,800 Speaker 1: automakers are are going to get back to a little 356 00:18:15,800 --> 00:18:19,120 Speaker 1: bit more of that growth mode as the demand is there. 357 00:18:19,160 --> 00:18:22,560 Speaker 1: But um, you know, I think it's an easier hurdle now, right, 358 00:18:22,640 --> 00:18:26,800 Speaker 1: Like across in the key regions, you you don't have 359 00:18:26,880 --> 00:18:32,000 Speaker 1: this um sales for sales sake kind of mindset anymore, right, 360 00:18:32,080 --> 00:18:36,760 Speaker 1: Like the product portfolio is different, costs irrationalized, and it's um, 361 00:18:36,800 --> 00:18:39,000 Speaker 1: you know, it's your most expensive stuff that you're putting 362 00:18:39,000 --> 00:18:42,959 Speaker 1: out there, so um, you know, demand just carmakers, by 363 00:18:42,960 --> 00:18:44,640 Speaker 1: the way, Kevin, you know last week I was down 364 00:18:44,680 --> 00:18:48,320 Speaker 1: at the Ducati shop in Soho and the North American 365 00:18:48,359 --> 00:18:52,640 Speaker 1: CEO Jason Schinnickck told me after their experience during the pandemic, 366 00:18:52,680 --> 00:18:57,600 Speaker 1: they're pushing towards basically thirtyty fifty thousand dollars models rather 367 00:18:57,640 --> 00:19:00,560 Speaker 1: than the entry level ten tho dollar bike used to sell. 368 00:19:00,800 --> 00:19:02,960 Speaker 1: And even same thing at Harley Davidson. Right, if you 369 00:19:03,000 --> 00:19:06,040 Speaker 1: look at that company, you know, this move away from 370 00:19:06,160 --> 00:19:08,520 Speaker 1: volume for volume sake because they got out of a 371 00:19:08,560 --> 00:19:13,480 Speaker 1: lot of difficult regions for them, you know, um international markets, 372 00:19:13,680 --> 00:19:19,280 Speaker 1: and are really just focused on constraining supply, driving prices higher, 373 00:19:20,040 --> 00:19:22,760 Speaker 1: you know, and just filling orders at the highest possible 374 00:19:22,800 --> 00:19:27,480 Speaker 1: price and margin. So my question to you is is 375 00:19:27,520 --> 00:19:29,560 Speaker 1: that a thing? Kevin? Is that a long term trend? 376 00:19:29,800 --> 00:19:32,119 Speaker 1: I mean, this is an industry for it seems like 377 00:19:32,200 --> 00:19:35,040 Speaker 1: my entire lifetime at least. You know, you produced seventeen 378 00:19:35,080 --> 00:19:38,600 Speaker 1: million cars and you sell them, you haggle and you 379 00:19:38,720 --> 00:19:41,000 Speaker 1: do all that kind of stuff. Now you're talking tell 380 00:19:41,040 --> 00:19:44,159 Speaker 1: me fifteen million, and it's you stick a price or 381 00:19:44,200 --> 00:19:47,080 Speaker 1: above is what you're gonna pay? Yeah, Well, here's the thing. Right, 382 00:19:47,119 --> 00:19:49,280 Speaker 1: So if you look at it from a volume perspective, 383 00:19:49,320 --> 00:19:52,159 Speaker 1: you're going to say where where do two and a 384 00:19:52,200 --> 00:19:54,600 Speaker 1: half million units go? And do they ever come back? 385 00:19:54,640 --> 00:19:57,160 Speaker 1: But the thing is at seventeen and a half million, 386 00:19:57,960 --> 00:20:01,520 Speaker 1: you know, from the manufacturer's perspective, even from the dealership's perspective. 387 00:20:01,520 --> 00:20:04,119 Speaker 1: You know, the average transaction price was thirty five thousand 388 00:20:04,160 --> 00:20:07,720 Speaker 1: dollars in twenty twenty three. If we do fifteen million units, 389 00:20:07,760 --> 00:20:09,960 Speaker 1: the average transaction price is going to be about forty 390 00:20:10,000 --> 00:20:14,159 Speaker 1: nine thousand dollars. Excuse me. So when you look at 391 00:20:14,200 --> 00:20:18,600 Speaker 1: the revenue pool, actually, this market is actually bigger than 392 00:20:18,680 --> 00:20:21,880 Speaker 1: when it was peak volume. And that's what I think 393 00:20:21,960 --> 00:20:26,040 Speaker 1: automakers are focused on that consumers aren't right, they're just 394 00:20:26,119 --> 00:20:30,960 Speaker 1: saying or the markets or analysts are just saying seventeen million, 395 00:20:31,280 --> 00:20:34,520 Speaker 1: seventeen and a half to fifteen is bad. But everybody 396 00:20:34,520 --> 00:20:36,920 Speaker 1: else or the automakers are going, yeah, but the revenue 397 00:20:36,920 --> 00:20:39,400 Speaker 1: pool is bigger by about eighty billion dollars, at least 398 00:20:39,440 --> 00:20:41,920 Speaker 1: here in the US. So I think you have to 399 00:20:42,040 --> 00:20:45,720 Speaker 1: layer in that one other data point above just simply volume, 400 00:20:45,760 --> 00:20:47,840 Speaker 1: and say like, okay, well let's look at where how 401 00:20:47,920 --> 00:20:50,399 Speaker 1: much money is this rather than how many units is this? 402 00:20:50,640 --> 00:20:53,639 Speaker 1: Because you know, look a twenty thousand or an eighteen 403 00:20:53,680 --> 00:20:56,679 Speaker 1: thousand dollars Chevrolet Cruise, which no longer exists, isn't the 404 00:20:56,720 --> 00:21:00,520 Speaker 1: same thing as a sixty thousand dollars Silverado. Is pushing 405 00:21:00,600 --> 00:21:03,880 Speaker 1: up the average selling price because uh, you know, I've 406 00:21:04,480 --> 00:21:08,679 Speaker 1: I had to fight to get my last call Dodge 407 00:21:08,760 --> 00:21:14,440 Speaker 1: Challenger scat pack wide body sum and the price was 408 00:21:15,200 --> 00:21:17,600 Speaker 1: let's just say it, I paid too much for a 409 00:21:17,600 --> 00:21:20,920 Speaker 1: car that's going to depreciate a lot um. But it's 410 00:21:21,040 --> 00:21:24,760 Speaker 1: the same everywhere. I mean, the new Mustangs are super expensive. 411 00:21:25,280 --> 00:21:27,760 Speaker 1: You want to get a Broncho, you're gonna pay up. 412 00:21:28,119 --> 00:21:31,280 Speaker 1: And it seems like, and it makes sense, these carmakers 413 00:21:31,280 --> 00:21:34,080 Speaker 1: are taking advantage of a last call for internal combustion 414 00:21:34,200 --> 00:21:38,520 Speaker 1: engines to fund their loss making EV business. Well yeah, 415 00:21:38,560 --> 00:21:41,720 Speaker 1: and it's so it's totally mix shift and not only 416 00:21:41,960 --> 00:21:45,440 Speaker 1: car to truck, but also, like you said, right, look 417 00:21:45,480 --> 00:21:49,439 Speaker 1: at that mix in that LX platform for for Stilantis 418 00:21:49,600 --> 00:21:52,639 Speaker 1: Challenger and charger. Right, there's there's really no more garden 419 00:21:52,760 --> 00:21:56,920 Speaker 1: variety Challengers or you know, rental fleet chargers. I mean 420 00:21:56,920 --> 00:21:59,800 Speaker 1: there are, but but if you were to look at 421 00:21:59,840 --> 00:22:04,040 Speaker 1: the at um penetration rate of the fire breathers, right, 422 00:22:04,200 --> 00:22:07,000 Speaker 1: the scat packs the hell Cats, all that stuff. It's 423 00:22:07,040 --> 00:22:10,240 Speaker 1: probably way higher than you would ever believe it could be, yea, 424 00:22:10,880 --> 00:22:12,680 Speaker 1: because that's what people want, right. They don't want the 425 00:22:12,720 --> 00:22:16,960 Speaker 1: garden varieties, six cylinders, want the tennis star. Sure, everybody 426 00:22:17,040 --> 00:22:21,320 Speaker 1: wants the hell Create for months now. I have no 427 00:22:21,359 --> 00:22:24,040 Speaker 1: idea what it is. What Okay, I'll just quickly tell you. Okay, 428 00:22:24,040 --> 00:22:27,399 Speaker 1: So hell Cat and the hell Cat Red Eye and 429 00:22:27,520 --> 00:22:31,600 Speaker 1: the Superstock and the Demon. These are all super charged 430 00:22:31,920 --> 00:22:35,280 Speaker 1: six point two leader V eights. Okay, so they take 431 00:22:35,640 --> 00:22:38,960 Speaker 1: um the inches down a little bit and slap on 432 00:22:39,200 --> 00:22:44,480 Speaker 1: a power pusher. The scat pack is a six point 433 00:22:44,600 --> 00:22:46,720 Speaker 1: four leader V eight, so a little bit more in 434 00:22:46,840 --> 00:22:50,960 Speaker 1: inches three ninety two, but there's no forced induction, okay, 435 00:22:51,040 --> 00:22:53,840 Speaker 1: so it's naturally aspirated. I give up, though, because I 436 00:22:53,840 --> 00:22:58,560 Speaker 1: don't believe that you're really paying attention. All right, Kevin, Kevin, 437 00:22:58,600 --> 00:23:00,720 Speaker 1: what's the when you talk to institutional investors today, what's 438 00:23:00,720 --> 00:23:04,960 Speaker 1: the number one question you get about the autobiz? You know, 439 00:23:05,040 --> 00:23:09,960 Speaker 1: that idea that pricing new and used is set to tumble, 440 00:23:10,320 --> 00:23:13,879 Speaker 1: you know, and it really comes you know, there's a 441 00:23:13,880 --> 00:23:16,760 Speaker 1: lot of inputs into that Supply versus demand is really 442 00:23:16,760 --> 00:23:20,280 Speaker 1: what's going to determine it. So I don't think automakers 443 00:23:20,359 --> 00:23:22,640 Speaker 1: for the most part, are going to run into an 444 00:23:22,640 --> 00:23:26,520 Speaker 1: oversupply condition, unless, of course, demand goes through the floor, 445 00:23:26,520 --> 00:23:29,400 Speaker 1: which I don't really see either, right, So I think 446 00:23:29,720 --> 00:23:33,240 Speaker 1: the control or the power still stays in the hands 447 00:23:33,280 --> 00:23:37,359 Speaker 1: of the automakers. You know, while we could see some 448 00:23:37,480 --> 00:23:40,639 Speaker 1: softening demand just because of interest rates and prices and whatever, 449 00:23:41,200 --> 00:23:44,159 Speaker 1: you know that fifteen million unit isn't as high a 450 00:23:44,240 --> 00:23:46,320 Speaker 1: hurdle in terms of pent up demand. And I think 451 00:23:46,320 --> 00:23:48,879 Speaker 1: it's the number we can easily do and do it 452 00:23:48,960 --> 00:23:53,639 Speaker 1: basically at MSRP and do it very profitably. All right, 453 00:23:53,680 --> 00:23:56,800 Speaker 1: everybody wins here, but the consumer, right, that's the thing, 454 00:23:56,840 --> 00:23:59,399 Speaker 1: all right to me, that's a bullish call on his 455 00:23:59,480 --> 00:24:02,000 Speaker 1: auto name across the sport with Kevin just well, well 456 00:24:02,040 --> 00:24:03,959 Speaker 1: here here's the other thing too, Paul, is that you know, 457 00:24:04,320 --> 00:24:07,480 Speaker 1: if the process is better for the consumer, everybody paying 458 00:24:07,520 --> 00:24:10,639 Speaker 1: the same and they're being transparency the pricing, arguably they 459 00:24:11,840 --> 00:24:13,439 Speaker 1: all right, all right, we'll see how it plays out 460 00:24:13,520 --> 00:24:17,320 Speaker 1: until I replaced the BMW twenty fourteen with manual transmission. 461 00:24:17,320 --> 00:24:20,320 Speaker 1: Thank you very much, Kevin Tyne and Senior Automotive analyst 462 00:24:20,800 --> 00:24:23,960 Speaker 1: for Bloomberg Intelligence. He's based down in our Princeton, New 463 00:24:24,040 --> 00:24:26,399 Speaker 1: Jersey office, and the cool thing about him is, like 464 00:24:26,440 --> 00:24:28,680 Speaker 1: Matt Miller, he gets to test drive pretty much every 465 00:24:28,680 --> 00:24:31,240 Speaker 1: single car that comes out, so he knows what he's 466 00:24:31,240 --> 00:24:36,199 Speaker 1: talking about. But left talking to Kevin looking at the 467 00:24:36,240 --> 00:24:40,600 Speaker 1: fixed income landscape, Well, you guys had a really good January, 468 00:24:40,840 --> 00:24:43,880 Speaker 1: February not so much. Give us a sense of kind 469 00:24:43,880 --> 00:24:48,360 Speaker 1: of your thoughts are here in early March about your space. Yeah, hey, 470 00:24:48,359 --> 00:24:51,800 Speaker 1: good morning. You were absolutely spot on. January was amazing, 471 00:24:52,760 --> 00:24:56,240 Speaker 1: February not so much. And you know, we've almost erased 472 00:24:56,280 --> 00:24:58,119 Speaker 1: all the games we had to start the year. Year 473 00:24:58,200 --> 00:25:01,479 Speaker 1: to dates are only up about thirty basis points. You know, 474 00:25:01,640 --> 00:25:04,399 Speaker 1: the bad news is we're not predicting a lot of 475 00:25:04,440 --> 00:25:08,000 Speaker 1: positive tailwinds carrying the sector into March. There's not a 476 00:25:08,040 --> 00:25:11,800 Speaker 1: lot of cash coming back to investors. Primary supply continues 477 00:25:11,840 --> 00:25:14,840 Speaker 1: to be really light, and you know the problem is 478 00:25:14,960 --> 00:25:18,280 Speaker 1: we're really just attached to where rates are traveling, and 479 00:25:18,400 --> 00:25:20,520 Speaker 1: treasuries have had a rough time. I know today looks 480 00:25:20,520 --> 00:25:23,280 Speaker 1: a little better, but last time I checked, inflation isn't 481 00:25:23,320 --> 00:25:26,520 Speaker 1: dead yet. So until that really gets under control, we're 482 00:25:26,600 --> 00:25:29,159 Speaker 1: sort of hamstrung. All right, the good news is well, 483 00:25:29,200 --> 00:25:32,440 Speaker 1: first of all, I forgot to say bam, yeah, I 484 00:25:32,480 --> 00:25:35,359 Speaker 1: almost want to read the billboard again. Bam, there you go. 485 00:25:35,640 --> 00:25:38,480 Speaker 1: Last time we were down at Bild America Mutual. We've 486 00:25:38,480 --> 00:25:40,600 Speaker 1: got to talk to Chris Bergotti. He's the managing director 487 00:25:40,680 --> 00:25:43,400 Speaker 1: Senior VP of Muni Investments over at Valley National Bank. 488 00:25:43,440 --> 00:25:45,880 Speaker 1: And the good news is we have him here with 489 00:25:46,000 --> 00:25:48,520 Speaker 1: us today, so Chris, we can bring you in to 490 00:25:48,640 --> 00:25:51,320 Speaker 1: follow on to what Eric just said. First of all, 491 00:25:51,359 --> 00:25:55,600 Speaker 1: good morning, thanks for joining us. What are your expectations 492 00:25:55,720 --> 00:26:00,239 Speaker 1: in terms of inflation. It's clearly not died down over night. 493 00:26:00,280 --> 00:26:03,120 Speaker 1: What are your expectations in terms of rates? The Fed 494 00:26:03,200 --> 00:26:06,879 Speaker 1: is clearly rethinking any kind of pause that was thought 495 00:26:06,880 --> 00:26:09,639 Speaker 1: to come. Yeah, good morning man, thanks for having me. 496 00:26:09,680 --> 00:26:12,760 Speaker 1: And you know, my thoughts are basically, inflation is still 497 00:26:12,760 --> 00:26:15,919 Speaker 1: going to be a little bit of challenge for the 498 00:26:15,960 --> 00:26:19,200 Speaker 1: economy and the markets, and I expect net net to 499 00:26:19,800 --> 00:26:22,520 Speaker 1: test those higher yields that we saw back in October, 500 00:26:22,800 --> 00:26:25,240 Speaker 1: which would have put ten years at treasuries at a 501 00:26:25,280 --> 00:26:28,480 Speaker 1: four thirty two and thirty year treasuries at a four 502 00:26:28,640 --> 00:26:32,400 Speaker 1: thirty three, so that four forty two. I'm sorry. So 503 00:26:32,440 --> 00:26:35,080 Speaker 1: that being said, you know, I'm expecting a little bit 504 00:26:35,080 --> 00:26:37,280 Speaker 1: more pain to be had in the fixed income markets 505 00:26:37,280 --> 00:26:39,720 Speaker 1: as a result of the inflationary environment. And we got 506 00:26:39,760 --> 00:26:42,480 Speaker 1: the Fed talking about finally having to do another fifty 507 00:26:42,520 --> 00:26:45,560 Speaker 1: basis point move, possibly in March. That's being put out 508 00:26:45,600 --> 00:26:47,560 Speaker 1: there and has some credibility behind. It's not a good 509 00:26:47,600 --> 00:26:49,439 Speaker 1: look if it has to happen. Paul pointed out, you know, 510 00:26:49,480 --> 00:26:52,520 Speaker 1: once you've stepped down to twenty five, it doesn't make 511 00:26:52,520 --> 00:26:54,159 Speaker 1: you look great to have to turn around and go 512 00:26:54,200 --> 00:26:58,840 Speaker 1: back to fifty exactly exactly. So, Chris, I mean, what 513 00:26:58,880 --> 00:27:01,400 Speaker 1: do I mean again? Flation data? I guess we can say, 514 00:27:01,920 --> 00:27:04,800 Speaker 1: you know, with some certain the inflation has peaked, But 515 00:27:04,960 --> 00:27:08,680 Speaker 1: is the market just telling us and the FED feder 516 00:27:08,760 --> 00:27:12,240 Speaker 1: Reserve in particular, saying, yeah, but it's not coming down 517 00:27:12,240 --> 00:27:14,639 Speaker 1: as fast as maybe we thought maybe towards the end 518 00:27:14,680 --> 00:27:16,720 Speaker 1: of last year. Is that kind of what you think 519 00:27:16,760 --> 00:27:20,240 Speaker 1: this Federal Reserve is looking at. I think it looked 520 00:27:20,240 --> 00:27:22,639 Speaker 1: like there was a deceleration happening towards the end of 521 00:27:22,960 --> 00:27:26,760 Speaker 1: last year, and then January data indicated that the deceleration 522 00:27:27,359 --> 00:27:30,240 Speaker 1: was not decelerating at quite the same pace as we 523 00:27:30,320 --> 00:27:33,320 Speaker 1: might have seen previously. So, you know, higher inflation as 524 00:27:33,359 --> 00:27:35,960 Speaker 1: a challenge, and the fact that FED funds rate is 525 00:27:35,960 --> 00:27:40,679 Speaker 1: still well below the core piece core CPI. It's a 526 00:27:40,760 --> 00:27:43,320 Speaker 1: challenge for the markets that I don't think we've got 527 00:27:43,320 --> 00:27:46,600 Speaker 1: to close that gap before we can see meaningful progress. So, Eric, 528 00:27:46,840 --> 00:27:50,320 Speaker 1: as you talk to your institutional investor clients kind of 529 00:27:50,359 --> 00:27:53,639 Speaker 1: what's the conversation centering on today. Is it just the 530 00:27:53,720 --> 00:27:56,960 Speaker 1: FED or is there something inn immunity space specifically that 531 00:27:57,040 --> 00:28:00,200 Speaker 1: maybe gets your attention gets attention to some of your clients. 532 00:28:01,359 --> 00:28:03,399 Speaker 1: I think it's a combination of things. So, you know, 533 00:28:03,480 --> 00:28:05,520 Speaker 1: first off, everyone is sort of vexed by the lack 534 00:28:05,560 --> 00:28:08,719 Speaker 1: of primary supplying the market. You know, that's obviously a 535 00:28:08,800 --> 00:28:11,840 Speaker 1: huge challenge because we're so technically driven, but you sort 536 00:28:11,840 --> 00:28:14,280 Speaker 1: of compounded on top of that is just sort of 537 00:28:14,280 --> 00:28:17,359 Speaker 1: this uncertainty where credit and credit spreads are going to 538 00:28:17,440 --> 00:28:19,480 Speaker 1: go for the duration of the year. You know, one 539 00:28:19,480 --> 00:28:21,640 Speaker 1: of the things we're paying attention to. And we had 540 00:28:21,920 --> 00:28:24,680 Speaker 1: Nick Bloom from Stanford University during our podcast last month 541 00:28:24,960 --> 00:28:27,479 Speaker 1: to talk about the challenges that cities are still having 542 00:28:27,680 --> 00:28:29,800 Speaker 1: with a good amount of people still working from home. 543 00:28:29,920 --> 00:28:31,359 Speaker 1: You know, either full time or part time on a 544 00:28:31,440 --> 00:28:33,840 Speaker 1: hybrid basis. And now you just had a headline come 545 00:28:33,840 --> 00:28:36,960 Speaker 1: out this morning about Amazon canceling plans for their second 546 00:28:36,960 --> 00:28:40,000 Speaker 1: headquarters in Virginia as a result of sort of those trends. 547 00:28:40,000 --> 00:28:44,160 Speaker 1: So definitely like something that we're keeping an eye on, Chris, 548 00:28:44,200 --> 00:28:48,200 Speaker 1: in terms of you know, demand, what's it look like 549 00:28:48,280 --> 00:28:51,440 Speaker 1: this year after the horrible, no good, very bad twenty 550 00:28:51,520 --> 00:28:54,760 Speaker 1: twenty two and is there going to be enough to 551 00:28:54,720 --> 00:28:58,560 Speaker 1: supply to satisfy it? You know, I think that's a challenge, 552 00:28:58,640 --> 00:29:00,880 Speaker 1: and that's why we're seeing ratios where they are. Demand 553 00:29:01,600 --> 00:29:05,160 Speaker 1: is still relatively strong. Fund flows and the ETFs have 554 00:29:05,440 --> 00:29:09,200 Speaker 1: as a barometer for that are kind of flatish versus 555 00:29:09,280 --> 00:29:12,800 Speaker 1: last year there was a pretty pretty decent liquidations from 556 00:29:12,800 --> 00:29:14,960 Speaker 1: those types of funds, which are a good way to 557 00:29:14,960 --> 00:29:17,120 Speaker 1: look at the market in terms of demand. And so 558 00:29:17,320 --> 00:29:21,680 Speaker 1: you know, flatish demand versus really light supply down thirty 559 00:29:21,680 --> 00:29:24,360 Speaker 1: percent so far year over year in twenty twenty two, 560 00:29:25,760 --> 00:29:27,560 Speaker 1: and that's not a good dynamic to be able to 561 00:29:27,920 --> 00:29:31,520 Speaker 1: have from a supply standpoint. So let's even say steady 562 00:29:31,560 --> 00:29:34,800 Speaker 1: demand versus much lighter supply, there's plenty of demand to 563 00:29:34,840 --> 00:29:37,160 Speaker 1: eat it up and that's why ratios are so low. 564 00:29:37,240 --> 00:29:39,680 Speaker 1: And you know, one of the interesting things as a 565 00:29:39,720 --> 00:29:43,720 Speaker 1: result of that is seeing is the treasury curve we 566 00:29:43,760 --> 00:29:46,680 Speaker 1: know is inverted, but for the first time in forever 567 00:29:46,840 --> 00:29:51,200 Speaker 1: for those that are Disney fans, the municipal ield curve inverted. 568 00:29:51,520 --> 00:29:54,280 Speaker 1: And that's that's whatever happened. Yes, So that is a 569 00:29:54,400 --> 00:29:57,640 Speaker 1: unique dynamic that has not happened before, and that just 570 00:29:57,760 --> 00:30:00,160 Speaker 1: indicates the strong demand on the front end of the 571 00:30:00,200 --> 00:30:06,520 Speaker 1: muni for vapor the first time in forever. Music they'll 572 00:30:06,560 --> 00:30:11,480 Speaker 1: be fun boy, get it all here, And who's got 573 00:30:11,480 --> 00:30:13,280 Speaker 1: the two year old in this studio? I guess we 574 00:30:13,320 --> 00:30:16,760 Speaker 1: can tell. Hey, Eric, what little I know about the 575 00:30:16,760 --> 00:30:20,280 Speaker 1: taxabotle municipal bond market I've learned from you in your research. 576 00:30:20,760 --> 00:30:25,440 Speaker 1: What's the outlook for taxable muni market this year? I mean, 577 00:30:25,560 --> 00:30:28,240 Speaker 1: pretty dismal from a supply standpoint, if you can imagine, 578 00:30:28,240 --> 00:30:30,760 Speaker 1: we made so much volume, you know in the beginning, 579 00:30:30,880 --> 00:30:33,080 Speaker 1: you know, stages of the pandemic, just because rates were 580 00:30:33,080 --> 00:30:35,080 Speaker 1: so much lower, and a lot of the activity the 581 00:30:35,120 --> 00:30:39,360 Speaker 1: keen in taxable muni states was refunding of tax exam bonds. Really, 582 00:30:39,760 --> 00:30:42,040 Speaker 1: you know, we're trying to take economic advantage of that 583 00:30:42,120 --> 00:30:44,440 Speaker 1: trade has totally gone away, and supply has gone with it. 584 00:30:44,680 --> 00:30:47,000 Speaker 1: You know, you're looking down almost like seventy percent year 585 00:30:47,040 --> 00:30:49,680 Speaker 1: of a year basis for supply. And again you know 586 00:30:49,720 --> 00:30:53,280 Speaker 1: you're talking taxible MUNI rates tied to treasury rates. It's 587 00:30:53,320 --> 00:30:56,280 Speaker 1: attractive from a buying standpoint, but the challenge is finding 588 00:30:56,320 --> 00:31:00,400 Speaker 1: those bonds to buy. Why is there thirty percent decline, 589 00:31:00,480 --> 00:31:03,800 Speaker 1: Chris in supply here? Is it just because interest rates 590 00:31:03,800 --> 00:31:07,520 Speaker 1: have risen? Because I've I've been told that, true, they 591 00:31:07,520 --> 00:31:10,080 Speaker 1: don't really care about rates exactly. They issue money, They 592 00:31:10,080 --> 00:31:12,080 Speaker 1: issue bonds when they need the money. We need to 593 00:31:12,080 --> 00:31:14,280 Speaker 1: get Joe Meisek in here, because he's been telling us 594 00:31:14,280 --> 00:31:17,800 Speaker 1: this for years. So yeah, I thought, like, they don't 595 00:31:17,840 --> 00:31:20,200 Speaker 1: even care what the rate is. Whenever they need the money, 596 00:31:20,760 --> 00:31:23,080 Speaker 1: they issue the bonds. It's not like what Paul used 597 00:31:23,080 --> 00:31:25,000 Speaker 1: to tell his clients, you know, get the money when 598 00:31:25,000 --> 00:31:27,880 Speaker 1: you can, not when you need it. Muni's you know, 599 00:31:28,040 --> 00:31:32,760 Speaker 1: towns and cities they're dumb. They don't do that. They 600 00:31:32,800 --> 00:31:35,000 Speaker 1: do when they don't. I think you know, you're looking 601 00:31:34,960 --> 00:31:37,680 Speaker 1: at it the way that when there's a really big shock, 602 00:31:37,960 --> 00:31:41,240 Speaker 1: you know, the markets in general, and look at issuers 603 00:31:41,280 --> 00:31:44,400 Speaker 1: as well. They don't like indecision, they don't like volatility, 604 00:31:44,400 --> 00:31:46,640 Speaker 1: and so they just step back and say they can push, 605 00:31:46,800 --> 00:31:48,400 Speaker 1: you know, kick the can down the road a little bit, 606 00:31:48,440 --> 00:31:50,560 Speaker 1: and they don't need to borrow today with the higher 607 00:31:50,600 --> 00:31:53,600 Speaker 1: interest rate, and they're hopeful that things can improve for 608 00:31:53,640 --> 00:31:56,760 Speaker 1: them and they can borrow it better rates down the road. 609 00:31:57,080 --> 00:31:59,400 Speaker 1: They might be willing to do that, and that in 610 00:31:59,440 --> 00:32:01,960 Speaker 1: the phase of a challenging environment with a lot of 611 00:32:02,040 --> 00:32:04,880 Speaker 1: volatility just scares them. And so just think of them 612 00:32:04,880 --> 00:32:08,400 Speaker 1: not wanting to step into it when there's volatility is 613 00:32:08,640 --> 00:32:12,040 Speaker 1: one way I tend to look at it. Hey, Eric, 614 00:32:12,480 --> 00:32:15,520 Speaker 1: credit quality here, we've I guess since in the last 615 00:32:15,560 --> 00:32:19,400 Speaker 1: several years, we've had no credit quality issues out there 616 00:32:19,440 --> 00:32:21,959 Speaker 1: generally speaking. I mean, there's been so much liquidity from 617 00:32:22,000 --> 00:32:24,640 Speaker 1: the federal government out there in the marketplace. Is that 618 00:32:24,800 --> 00:32:27,080 Speaker 1: still the case here? I mean, do you even run 619 00:32:27,520 --> 00:32:31,720 Speaker 1: recession models for some of these issuers? Oh, we have 620 00:32:31,800 --> 00:32:33,960 Speaker 1: tons of models. We're running them all the time now. 621 00:32:34,640 --> 00:32:37,360 Speaker 1: I mean, they did look these cities, states, counties. They've 622 00:32:37,360 --> 00:32:39,960 Speaker 1: had a ton of cash the first year and a 623 00:32:39,960 --> 00:32:41,640 Speaker 1: half two years of the pandemic, but they've they've sort 624 00:32:41,680 --> 00:32:43,400 Speaker 1: of worked their way through that, and to sort of 625 00:32:43,400 --> 00:32:45,360 Speaker 1: add on to la Chris said, you know, some of 626 00:32:45,360 --> 00:32:47,920 Speaker 1: this lack of supply has been them having these stock 627 00:32:47,960 --> 00:32:50,280 Speaker 1: pads of cash they hadn't really needed to access to 628 00:32:50,440 --> 00:32:53,480 Speaker 1: market in times of higher rates. That's sort of running 629 00:32:53,480 --> 00:32:55,640 Speaker 1: out now right. They're on the clock, and we might 630 00:32:55,680 --> 00:32:58,120 Speaker 1: actually see them being forced to issue into a higher 631 00:32:58,160 --> 00:33:00,440 Speaker 1: rate environment when they don't really want to, which will 632 00:33:00,480 --> 00:33:03,400 Speaker 1: be you know, obviously like eighteenful situation, because it's just 633 00:33:03,440 --> 00:33:06,920 Speaker 1: going to translate into you know, higher taxes to trickle through. 634 00:33:07,840 --> 00:33:10,400 Speaker 1: You know, we're not predicting anything from a default standpoint, 635 00:33:10,400 --> 00:33:12,240 Speaker 1: but they're always just the you know, the thread of 636 00:33:12,360 --> 00:33:15,040 Speaker 1: spread widening as credits offtens through the rest of the year. 637 00:33:15,200 --> 00:33:17,680 Speaker 1: Oh we even saw Illinois get upgraded a few weeks ago, 638 00:33:17,680 --> 00:33:19,200 Speaker 1: So who knows what's going on up there? All right, 639 00:33:19,640 --> 00:33:22,360 Speaker 1: that was fun a municipa bond round table, that is 640 00:33:22,400 --> 00:33:24,760 Speaker 1: absolutely it was Max. I mean Max's been calling for 641 00:33:24,800 --> 00:33:26,920 Speaker 1: that for the longest time, folks. We finally got it together. 642 00:33:27,200 --> 00:33:31,120 Speaker 1: Eric Kazaski, senior municipal strategists out of prison and wait, Chris, 643 00:33:31,160 --> 00:33:34,600 Speaker 1: where are you a Wayne, New Jersey? Beautiful Wayne? So 644 00:33:34,600 --> 00:33:36,160 Speaker 1: if I wanted to ask, if you do you want 645 00:33:36,160 --> 00:33:37,880 Speaker 1: to go to Brooklyn Bolden night and see a dead 646 00:33:37,920 --> 00:33:42,080 Speaker 1: cover band. I wonder if it wasn't for the commune. 647 00:33:42,200 --> 00:33:44,640 Speaker 1: There you go. Chris Bergotti, Managing Director, Senior VP of 648 00:33:44,720 --> 00:33:48,720 Speaker 1: Municipal Investments at Valley National Bank, talk at all things 649 00:33:48,880 --> 00:33:53,680 Speaker 1: munis there. How fun is that? Paul and I have 650 00:33:53,720 --> 00:33:55,760 Speaker 1: a guest in studio who runs what I think is 651 00:33:55,840 --> 00:33:59,360 Speaker 1: one of the most fascinating businesses that we've talked about 652 00:33:59,400 --> 00:34:02,680 Speaker 1: in a long time. Ali ben Elmadanni joins us. He 653 00:34:02,800 --> 00:34:07,239 Speaker 1: is the CEO of ABL Aviation, and this is a 654 00:34:07,280 --> 00:34:12,360 Speaker 1: company that buys planes for airlines, I mean big planes, 655 00:34:12,960 --> 00:34:15,320 Speaker 1: um not you know, little private jets, and then leases 656 00:34:15,360 --> 00:34:19,239 Speaker 1: them back. So he has a bird's eye view of 657 00:34:19,600 --> 00:34:25,160 Speaker 1: the airline industry and the crunch we're experiencing now in 658 00:34:25,280 --> 00:34:29,400 Speaker 1: terms of capacity, which results of course in higher prices. 659 00:34:29,680 --> 00:34:32,000 Speaker 1: How is that going to go in the coming months 660 00:34:32,000 --> 00:34:34,000 Speaker 1: and years? Ali, thanks so much for joining us. Pleasure 661 00:34:34,040 --> 00:34:37,200 Speaker 1: having you in the in the studio. Um, what do 662 00:34:37,280 --> 00:34:39,640 Speaker 1: you how do you view the aviation industry right now? 663 00:34:39,680 --> 00:34:45,000 Speaker 1: We've been talking about the bounce back in travel across hotels, 664 00:34:45,160 --> 00:34:49,319 Speaker 1: cruises and airlines, We've seen planes packed to full capacity 665 00:34:49,400 --> 00:34:51,759 Speaker 1: here in the US, and now we have Europe not 666 00:34:51,880 --> 00:34:55,799 Speaker 1: doing as badly as we thought it would, plus China reopening. 667 00:34:55,840 --> 00:34:57,640 Speaker 1: What does that mean for you? Thank you, thank you 668 00:34:57,640 --> 00:35:01,239 Speaker 1: so much about you on well, a big shortage of 669 00:35:01,360 --> 00:35:03,960 Speaker 1: supply of aircrafts. And you see that's all the flights 670 00:35:03,960 --> 00:35:06,719 Speaker 1: that are going, knowing Europe and Americas are all full. 671 00:35:07,400 --> 00:35:10,120 Speaker 1: The demand is very high. Everybody is sultling. And that's 672 00:35:10,120 --> 00:35:13,640 Speaker 1: without Asia being fully opened. So just with America and Europe, 673 00:35:13,640 --> 00:35:16,400 Speaker 1: there's a big demand for flying and you see it 674 00:35:16,480 --> 00:35:19,240 Speaker 1: into piles of tickets going higher and all the flights 675 00:35:19,320 --> 00:35:22,520 Speaker 1: being fully booked. You don't have enough supply of aircraft 676 00:35:22,680 --> 00:35:26,160 Speaker 1: to all the airlines. So there's shortage and the slowdown 677 00:35:26,239 --> 00:35:28,759 Speaker 1: of supply of aircrafts. Why not enough supply? Is it 678 00:35:28,800 --> 00:35:33,239 Speaker 1: because the airlines stopped putting in orders over COVID? Is 679 00:35:33,239 --> 00:35:36,239 Speaker 1: it because they parked aircraft that they haven't been able 680 00:35:36,239 --> 00:35:39,280 Speaker 1: to get back yet? Is it? Is there some other reason? 681 00:35:39,320 --> 00:35:41,239 Speaker 1: Why is there a shortage on the supply side? Because 682 00:35:41,280 --> 00:35:43,160 Speaker 1: I'm sure Boeing and Airbus are willing to make as 683 00:35:43,160 --> 00:35:46,200 Speaker 1: many as they can. Well, Bowling and Airbus are producing 684 00:35:46,239 --> 00:35:48,120 Speaker 1: as fast as they can, but then as producing enough. 685 00:35:48,160 --> 00:35:51,120 Speaker 1: There's delay on both Bowling and Airbus, which had supply 686 00:35:51,160 --> 00:35:53,480 Speaker 1: chain problems, just like the carmakers. Yes, so they had 687 00:35:53,520 --> 00:35:56,560 Speaker 1: a big supply changine COVID issues and they're fixing it, 688 00:35:56,640 --> 00:35:58,680 Speaker 1: but there's a delay on us. In addition to that, 689 00:35:58,800 --> 00:36:00,920 Speaker 1: the demand is so high. We didn't expect that the 690 00:36:00,920 --> 00:36:03,240 Speaker 1: demand would be so high after COVID, and that's without 691 00:36:03,320 --> 00:36:05,600 Speaker 1: even Asia being open. That's they so much demand of 692 00:36:05,680 --> 00:36:07,840 Speaker 1: people flying all over the world that didn't fly for 693 00:36:08,120 --> 00:36:11,080 Speaker 1: two years or three years all flying again. And I'm 694 00:36:11,120 --> 00:36:13,440 Speaker 1: sure like people like you are going on vacation like before, 695 00:36:14,320 --> 00:36:16,879 Speaker 1: going on much more flying on the country. And if 696 00:36:16,880 --> 00:36:19,000 Speaker 1: you fly like a Vegas New York, all the flights 697 00:36:19,000 --> 00:36:21,080 Speaker 1: are full and there's a big demand. Voice when you 698 00:36:21,120 --> 00:36:23,200 Speaker 1: get it, when you believe it would have that supplying 699 00:36:23,239 --> 00:36:25,319 Speaker 1: demand will come back into balance a little bit more. 700 00:36:25,320 --> 00:36:27,560 Speaker 1: When do you think that will occur? Well, it's not 701 00:36:27,719 --> 00:36:29,640 Speaker 1: happened in my personal view for the next twenty four months, 702 00:36:29,719 --> 00:36:32,120 Speaker 1: because Asia is not open yet, so Evan would just 703 00:36:32,200 --> 00:36:35,640 Speaker 1: America and Europe being at full speed. We see that 704 00:36:35,760 --> 00:36:38,799 Speaker 1: there's a huge demand the moments. If we assume that's 705 00:36:38,800 --> 00:36:40,640 Speaker 1: maybe America and Europe is going to slow down a 706 00:36:40,640 --> 00:36:42,520 Speaker 1: little base. Then you have all of the demanda from 707 00:36:42,520 --> 00:36:45,640 Speaker 1: Asia that's going to happen, and this will keep on going. Wow. 708 00:36:45,760 --> 00:36:49,799 Speaker 1: So this kind of goes the Airbus and Boeing. That's 709 00:36:49,840 --> 00:36:52,840 Speaker 1: the production site we're talking about earlier, all the stories 710 00:36:52,840 --> 00:36:55,600 Speaker 1: at the beginning of the pandemic airlines taking the planes 711 00:36:55,600 --> 00:36:58,400 Speaker 1: and parking them in the desert in Arizona or whatever. 712 00:36:58,480 --> 00:37:01,120 Speaker 1: By the way, which airlines do you supply a at 713 00:37:01,160 --> 00:37:03,600 Speaker 1: abl We have few Alnes and do us who have 714 00:37:03,600 --> 00:37:06,839 Speaker 1: a making airlines? We have Delta, we have Alaska, as 715 00:37:06,840 --> 00:37:10,960 Speaker 1: we supply in Europe. We have Lifton's Air francel in Israel, 716 00:37:11,239 --> 00:37:14,160 Speaker 1: so different airlines as we provided. As an aside, I'll 717 00:37:14,200 --> 00:37:18,160 Speaker 1: tell you that for years Paul thought that the picture 718 00:37:18,200 --> 00:37:21,080 Speaker 1: of the man on the tail of an Alaska airliner 719 00:37:21,239 --> 00:37:25,239 Speaker 1: was Jerry Garcia the Great Debt, and then he realized 720 00:37:25,400 --> 00:37:29,280 Speaker 1: eventually that it was an Escama. Yes, well into my adulthood, 721 00:37:29,320 --> 00:37:32,840 Speaker 1: I thought that, which is an amazing all right, I 722 00:37:32,960 --> 00:37:36,239 Speaker 1: park a plane in the desert. Why can't I just 723 00:37:36,320 --> 00:37:38,040 Speaker 1: if the man picks up, just go start it up 724 00:37:38,040 --> 00:37:39,759 Speaker 1: again and put it back, Which they all did write 725 00:37:39,760 --> 00:37:42,480 Speaker 1: a lot of your customers during COVID said listen, uh, 726 00:37:42,520 --> 00:37:44,120 Speaker 1: you know that we're releasing planes from you. We're gonna 727 00:37:44,120 --> 00:37:45,719 Speaker 1: park them in Arizona for a while, some of them 728 00:37:45,719 --> 00:37:47,520 Speaker 1: in buckets. But you need to make those aircuffs air 729 00:37:47,560 --> 00:37:50,000 Speaker 1: water again, so like to make its air water, it 730 00:37:50,120 --> 00:37:52,960 Speaker 1: takes time. You have to have a check in what 731 00:37:53,080 --> 00:37:56,839 Speaker 1: we call an l facilities, so mantenance over whole facility. 732 00:37:56,960 --> 00:37:59,440 Speaker 1: But there's no spots, like there's a shortage of spots 733 00:37:59,440 --> 00:38:01,640 Speaker 1: in all those but there's a delay. Everybody is going 734 00:38:01,640 --> 00:38:03,800 Speaker 1: back to those amables to have those aircrafts airwards. You 735 00:38:03,880 --> 00:38:06,720 Speaker 1: or to have those checks, and there's not enough space 736 00:38:06,760 --> 00:38:09,120 Speaker 1: for all those aircrafts. So you have I mean, you're 737 00:38:09,120 --> 00:38:11,800 Speaker 1: basically sitting pretty right now in terms of your business. 738 00:38:12,600 --> 00:38:15,880 Speaker 1: You're a happy man. Not well. Yes, if you have 739 00:38:16,040 --> 00:38:19,640 Speaker 1: naked aircraft, you can lease them at a high powers today, 740 00:38:19,800 --> 00:38:21,359 Speaker 1: but you have to remember that there's in a case 741 00:38:21,360 --> 00:38:23,200 Speaker 1: of answer state that's happened in the last few months 742 00:38:23,200 --> 00:38:25,640 Speaker 1: that will have an impact on the leasers and the 743 00:38:25,680 --> 00:38:28,719 Speaker 1: cost of financing that has not been implemented yet. So 744 00:38:28,760 --> 00:38:30,680 Speaker 1: the least rates of all those leasers that have been 745 00:38:30,760 --> 00:38:34,239 Speaker 1: leased to airlines is not seeing yet, so you have 746 00:38:34,280 --> 00:38:37,000 Speaker 1: to adjust for those new ancestais environments, for this new 747 00:38:37,040 --> 00:38:39,359 Speaker 1: cost of financing. And that's just happening now. So it's 748 00:38:39,360 --> 00:38:41,280 Speaker 1: just starting, so I would be a happy man into amount. 749 00:38:42,840 --> 00:38:46,239 Speaker 1: How do you anticipate, how does the industry anticipate they're 750 00:38:46,239 --> 00:38:49,280 Speaker 1: reopening a China to impact kind of just the global 751 00:38:49,280 --> 00:38:52,400 Speaker 1: aviation market and over what time frame? Well, the moments 752 00:38:52,400 --> 00:38:54,320 Speaker 1: that we are going to have a full opening of Asia, 753 00:38:54,440 --> 00:38:56,640 Speaker 1: not only Channel as Asia. You are going to see 754 00:38:56,719 --> 00:38:58,720 Speaker 1: all those people like what's happened in America, what's happening 755 00:38:58,719 --> 00:39:01,080 Speaker 1: in Europe. The first thing you did when COVID was 756 00:39:01,120 --> 00:39:02,440 Speaker 1: the way it said, I want to go on the 757 00:39:02,480 --> 00:39:04,200 Speaker 1: flight to Piace. I want to go to see Venice. 758 00:39:04,200 --> 00:39:06,239 Speaker 1: I want to see what I couldn't see anymore. Because 759 00:39:06,320 --> 00:39:08,239 Speaker 1: COVID is gone, you're going to have the same thing 760 00:39:08,280 --> 00:39:11,879 Speaker 1: from Asian people as I want to see New York, 761 00:39:11,920 --> 00:39:13,920 Speaker 1: I want to see Vegas like there's no more you 762 00:39:13,960 --> 00:39:16,319 Speaker 1: can finally go back to Tokyo for example, exactly. So 763 00:39:16,440 --> 00:39:18,520 Speaker 1: then you are going to have big demand, and that 764 00:39:18,560 --> 00:39:20,839 Speaker 1: demand you need to supply aircraft for that. You need 765 00:39:20,880 --> 00:39:23,239 Speaker 1: to supply good roots for that and there will be 766 00:39:23,239 --> 00:39:25,839 Speaker 1: a huge demand for it. In terms of one are 767 00:39:25,840 --> 00:39:28,680 Speaker 1: the other things that you care about? I mean fuel prices, 768 00:39:29,000 --> 00:39:32,040 Speaker 1: they haven't gone up substantially yet. I've been watching at 769 00:39:32,080 --> 00:39:35,800 Speaker 1: least you know, Brent crude and it hasn't been boosted 770 00:39:35,880 --> 00:39:39,240 Speaker 1: so much by the reopening in China yet. Well, it's happens. 771 00:39:39,239 --> 00:39:41,640 Speaker 1: But you have to remember that the cost of most airlines, 772 00:39:41,719 --> 00:39:43,880 Speaker 1: one sort of the cost is fueled, and some of 773 00:39:43,960 --> 00:39:46,399 Speaker 1: them did hedge, some of them did hedge. But as 774 00:39:46,400 --> 00:39:49,000 Speaker 1: long as the fuel stays where it is, we have 775 00:39:49,280 --> 00:39:52,640 Speaker 1: enough demand to make sure that airlines in very good health. 776 00:39:52,680 --> 00:39:54,719 Speaker 1: So airlines are very very happy today. If you look 777 00:39:54,719 --> 00:39:57,359 Speaker 1: at the ticket prices versus before COVID, it's almost three 778 00:39:57,400 --> 00:39:59,400 Speaker 1: times where it's used to be. So that's due to 779 00:39:59,440 --> 00:40:02,239 Speaker 1: the demand supply issue. What's the biggest challenge right now 780 00:40:02,280 --> 00:40:06,120 Speaker 1: for your business? The costs of finance in the cost 781 00:40:06,160 --> 00:40:08,360 Speaker 1: of debt because of a is going and the inflation 782 00:40:08,520 --> 00:40:10,359 Speaker 1: is going to be one of the big issues. Are 783 00:40:10,400 --> 00:40:12,520 Speaker 1: you a big borrower? Are you have a lot of 784 00:40:12,560 --> 00:40:17,680 Speaker 1: debt to finance your aircraft? Well before ants in case, 785 00:40:17,760 --> 00:40:20,200 Speaker 1: we used to boil lots of money to finance aircrafts. 786 00:40:20,280 --> 00:40:22,360 Speaker 1: I know in the last twelve months with the ants 787 00:40:22,400 --> 00:40:24,000 Speaker 1: in case while doing most of our aircrafts, that's one 788 00:40:24,040 --> 00:40:26,680 Speaker 1: hundred percents equity and with the ideas to back lover 789 00:40:27,440 --> 00:40:30,160 Speaker 1: lets on. Where do you get the equity? Well, one 790 00:40:30,200 --> 00:40:32,800 Speaker 1: of our biggest partners, the Japanese Big House in Japan, 791 00:40:33,320 --> 00:40:35,680 Speaker 1: is one of eques partners, and we have two partners 792 00:40:35,719 --> 00:40:39,600 Speaker 1: here in the US. Interesting, Okay, it is a fascinating business. 793 00:40:39,640 --> 00:40:42,360 Speaker 1: I have to say, uh, And we could spend like 794 00:40:42,400 --> 00:40:44,399 Speaker 1: an hour talking with you about this. So I hope 795 00:40:44,440 --> 00:40:48,880 Speaker 1: you come back or we could go so so Ali 796 00:40:48,960 --> 00:40:51,160 Speaker 1: has just moved to Marrakesh, if we can share that, 797 00:40:51,239 --> 00:40:54,680 Speaker 1: and Paul is like on eBookers right now booking his 798 00:40:54,760 --> 00:40:57,759 Speaker 1: next flight. I honestly really want to go there, and 799 00:40:57,840 --> 00:40:59,759 Speaker 1: you can go there from my brother just went there. 800 00:41:00,040 --> 00:41:01,520 Speaker 1: I think it would be a great place to take 801 00:41:01,560 --> 00:41:03,640 Speaker 1: a motorcycle trip, like I want to go there, get 802 00:41:03,680 --> 00:41:06,080 Speaker 1: a BMW like a GS twelve fifty and just ride 803 00:41:06,080 --> 00:41:07,799 Speaker 1: around Morocco. I would love to have you though, love 804 00:41:07,840 --> 00:41:09,759 Speaker 1: to have you Mudcas. I love you a great when 805 00:41:09,800 --> 00:41:14,360 Speaker 1: I get there, exactly. Ali ben Lemnadi, CEO of ABL Aviation, 806 00:41:17,320 --> 00:41:20,440 Speaker 1: Thanks for listening. To the Bloomberg Markets podcast. You can 807 00:41:20,440 --> 00:41:24,240 Speaker 1: subscribe and listen to interviews of Apple Podcasts or whatever 808 00:41:24,320 --> 00:41:28,000 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 809 00:41:28,239 --> 00:41:31,520 Speaker 1: at Matt Miller nineteen seventy three. And I'm false Sweeney. 810 00:41:31,560 --> 00:41:34,160 Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you 811 00:41:34,160 --> 00:41:36,600 Speaker 1: can always catch us worldwide at Bloomberg Radio