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Speaker 3: July fourteenth, That is Why, and Jacob Mordon kicks off
Speaker 3: the earning season Apple and the Likes later in the
Speaker 3: month of July twenty eighth will come out with some
Speaker 3: of those earnings. Your emphasis on that is an important one.
Speaker 1: Chris Harvey wasn't a KEM major, but he was a
Speaker 1: bucknell which is like the Buckneil bubble. All you do
Speaker 1: is study financiers here because the winters are so cold.
Speaker 1: He joins US now Equity Strategy at Wells Fargo. Your note,
Speaker 1: Chris is absolutely brilliant about thinking back to nineteen ninety eight,
Speaker 1: ninety nine into two thousand and two thousand and one
Speaker 1: tech the analog of looking back. What's the number one
Speaker 1: message in your study of this tech bubble versus that
Speaker 1: tech bubble?
Speaker 4: So the number one issue is tech is not going
Speaker 4: to roll over. The major theme is not going to
Speaker 4: roll over until you crack the economy. That's what happened
Speaker 4: back in ninety nine. That's like what's going to happen now.
Speaker 4: And I don't think you cracked the economy until the
Speaker 4: FED gets more aggressive, and so we'll have some wiggles.
Speaker 4: I think we'll have a pull back in the market,
Speaker 4: we'll have a pullback in big tech, but that for
Speaker 4: all theme is still in place, and not until the
Speaker 4: economy breaks do we really think about that trend breaking.
Speaker 5: Is tech in a set of individual companies you study
Speaker 5: at Wells Fargo or is it this a morphous sector
Speaker 5: blob up there like a nineteen fifty sci fi movie.
Speaker 4: We do study tech, we do study individual companies, but
Speaker 4: what we do is we focus in on a lot
Speaker 4: on the uber what we call the uber cap or
Speaker 4: the top fifty names. You can look at one or
Speaker 4: two names and that's great, but that doesn't give you
Speaker 4: a trend. And we look at the uber caps because
Speaker 4: as you go across capitalization, small cap, MidCap, large cap,
Speaker 4: they all have characteristics, and the uber caps are the
Speaker 4: ones that really have that AI exposure, that tech exposure.
Speaker 4: And again going back to nineteen ninety nine, that's one
Speaker 4: of the things that we did see. We saw that
Speaker 4: uber cap out performance, we saw that tech oup performance,
Speaker 4: and before all that, we saw the economy and the
Speaker 4: old economy stocks roll over.
Speaker 3: You said something I want to pick up on. You
Speaker 3: don't crack the economy until the FED gets more aggressive.
Speaker 3: Are you saying the FED hasn't gotten aggressive?
Speaker 4: They said the FED has gotten aggressive. But I think
Speaker 4: we can all agree that the economy is a lot
Speaker 4: less interestrate sensitive than we thought. The way we're characterizing
Speaker 4: the economy is an economic malaise. We did think we
Speaker 4: were going to We thought the probability of recession spiked
Speaker 4: with the banking crisis, but now we think that's come
Speaker 4: back down, and so we're really looking at an economic
Speaker 4: malaise more or less than a recession on the horizon. Right,
Speaker 4: the consumer is still okay, still has cash on the
Speaker 4: balance sheet, eating through their savings, but still has savings.
Speaker 4: Corporations still have plenty of savings. Balance sheets are much better,
Speaker 4: and so really you need some sort of shock to
Speaker 4: get us into a recession. We need a lot more time.
Speaker 4: This is taking a lot longer than we expect, and
Speaker 4: I think it will take a lot longer than we expect.
Speaker 3: Do you think that the amount that people are willing
Speaker 3: to pay for goods will come down, that there will
Speaker 3: start to be some consumer pushback at a time when
Speaker 3: we just heard FedEx. Yes, you're seeing volumes down, but
Speaker 3: there's still increasing prices more than expected. And that is
Speaker 3: a theme across a lot of different industries.
Speaker 4: So I may go off on a little bit of
Speaker 4: a tangent if I do, just pulling back in because I.
Speaker 6: Talk about don't worry, it'll lot care about it.
Speaker 4: So I talk about the consumer a lot. And if
Speaker 4: you think about the US consumer, the US consumer has
Speaker 4: been buying, and I'll exaggerate a little bit since he
Speaker 4: or she was five years old. Right, it's a very
Speaker 4: savvy consumer. We've been spending a lot of money. We
Speaker 4: know when there's utility. And what I'm seeing is the
Speaker 4: US consumer has been pulling back. They've been pulling back
Speaker 4: on goods. They're not finding a lot of utility there.
Speaker 4: If you look at at real retail sales, if you
Speaker 4: look at at retail sales in general, it's not as
Speaker 4: strong as you would have expected. You are seeing if
Speaker 4: you go to the walmarts and the targets, you are
Speaker 4: seeing a trade down. The US consumer's behavior has changed,
Speaker 4: and I think the US consumer is a lot more
Speaker 4: savvy than we give here or she.
Speaker 3: Credit for going forward? Then do you think we have
Speaker 3: seen this rolling recession in certain areas that offset something
Speaker 3: that's deeper than an economic blaze?
Speaker 7: Regardless of what FED does.
Speaker 3: They are cracking certain segments of the economy and others
Speaker 3: continue to chug along because of different advancements and less
Speaker 3: interest rate sensitivity.
Speaker 4: You really hit on a great point, and this is
Speaker 4: something we talk about in the office a lot. You
Speaker 4: can't paid to this economy with one brush, and you
Speaker 4: are seeing kind of a it's a very heterogeneous economy
Speaker 4: and market. You're seeing certain sectors that have already rolled
Speaker 4: over and are beginning to improve. You're seeing other sectors
Speaker 4: that are beginning to roll over for the first time
Speaker 4: in a while. And so one of the things that's
Speaker 4: causing this to be in economic delays is there's not
Speaker 4: it's not synchronous.
Speaker 2: Right.
Speaker 4: The economy is very very If you look at a
Speaker 4: housing market, the housing market, the new issue market or
Speaker 4: the new market is very strong, but the old one
Speaker 4: is three and thirty. I'm not going to leave my
Speaker 4: house because I have a thirty year mortgage at three percent.
Speaker 4: Very different. If you look at some of the construction spending, manufacturing, warehousing,
Speaker 4: it's through the roof, but other parts of housing and
Speaker 4: construction are begin to roll over. So again, I think
Speaker 4: you hit on a very important point. Is something that
Speaker 4: we really have been diving into and it's it's hard
Speaker 4: to kind of disentangle. But this economy is not it's
Speaker 4: not really synced up and you cannot paint it with
Speaker 4: one brush, which is why the economy has been a
Speaker 4: lot more durable than a lot of people have expected.
Speaker 1: And a huge seam of the program this lack of
Speaker 1: aggregation right now is tangible.
Speaker 2: I want to point out one thing you can do.
Speaker 1: This off the Bloomberg folks, the Bloomberg terminal and the
Speaker 1: description screen toes JP. Morgan is owned by institutional seventy
Speaker 1: five percent. Apple is owned sixty one percent. I know
Speaker 1: you don't want to talk individual securities here, but you
Speaker 1: know what was me, Big Tech to the Moon. We're
Speaker 1: all going to die, except can I make the statement
Speaker 1: big Tech is under owned by institutions?
Speaker 4: I would agree with that one hundred percent. And what
Speaker 4: I what I would say is we do a lot
Speaker 4: of positioning work, and in our position work, what we've
Speaker 4: seen for years is the Byside community is underweight tech,
Speaker 4: but it's mainly underweight Apple and Microsoft. We were talking
Speaker 4: about this in the office five years ago, kind of
Speaker 4: a flip title, but we entitled the Return of the Mac.
Speaker 4: And what we had seen back five years ago is
Speaker 4: a very big underweight, an exceptional underweight in Apple that's
Speaker 4: never closed. And what we're seeing is one of the
Speaker 4: things that that's giving us pause andive. I think one
Speaker 4: of the things that's pushing the market is this underweight
Speaker 4: in uber caps in Apple and Microsoft and a few
Speaker 4: of the others, so I would agree with you. What
Speaker 4: you're saying is the institutions are much much more underweight.
Speaker 1: Branda John from Italy emails in and he says, get
Speaker 1: a new SPX quote from Chris Harvey here forty two hundred?
Speaker 2: Can you lift it up?
Speaker 4: Come on, I gonna make some news.
Speaker 2: Here's what I say. So are you in target? But hey,
Speaker 2: no one's watching go so.
Speaker 4: Our forty two are your on price targets for two hundred?
Speaker 4: At the end of last year, we also had a
Speaker 4: soft landing target that was forty four hundred. Right, we
Speaker 4: cannot two targets.
Speaker 2: Do you have a Harkwark target? If we get a.
Speaker 4: Horkwarks, I can't give you forty five hundred. But this
Speaker 4: is why we go back to it's about the economy.
Speaker 4: Because I can make certain adjustments, I can change my estimates,
Speaker 4: but really do I have a lot of confidence in that?
Speaker 8: No?
Speaker 4: But what I have a lot of confidence in is
Speaker 4: it's really about the economy. The major trends is not
Speaker 4: gonna break until the economy breaks.
Speaker 2: Chris Harvey Wells Frio.
Speaker 1: Francis Donald is a manual Life global chief economist and
Speaker 1: strategist she's very good at rining blistering bullet points to
Speaker 1: cut to the chase. We're gonna cut to the chase,
Speaker 1: which is, we all know the US is way out
Speaker 1: front on inflation versus what we saw in United Kingdom
Speaker 1: today and even Europe Japan being the oddity as well.
Speaker 1: And you look at the non linearity here. You picked
Speaker 1: the point three percent. The answer is core inflation's coming down.
Speaker 1: There's a little bit of a vector in place. But
Speaker 1: you say the path to two percent, it's going to
Speaker 1: be brutal.
Speaker 9: Well, the path to three percent is probably going to
Speaker 9: be quite easy. We'll be there in the next couple
Speaker 9: of months, and then a lot of people will claim bakery.
Speaker 2: Yeah, for sure, and I don't see it.
Speaker 9: Well, a huge element of this is base effects that
Speaker 9: are coming through. That's just a big part of it.
Speaker 9: But you do point out something really critical, which is
Speaker 9: that if we talk in a year over year, inflation
Speaker 9: is healing. But for most Americans and in fact global
Speaker 9: citizens of the world, their price pressures are not coming down.
Speaker 9: They're still paying substantially more than they did several years
Speaker 9: ago and are still going to have that embedded view
Speaker 9: that prices are substantially higher. And that's why these central banks,
Speaker 9: the FED, the Banks Canada, the Reserve Bank of Australia,
Speaker 9: the BOE cannot cannot imply that rate cuts are coming.
Speaker 9: If they do that, we will see a reinflation of
Speaker 9: inflation or reinflation of inflation expectations.
Speaker 3: But they've basically said that, and you're still seeing a
Speaker 3: group of people say inflation is going to be hotter
Speaker 3: for longer. They don't have what it takes to actually
Speaker 3: come through with these expectations. So at this point, if
Speaker 3: they don't raise rates further, will they lose the battle
Speaker 3: with inflation?
Speaker 9: Well, no, because a big segment of inflation is not
Speaker 9: coming from interst rate sensitive sectors. Yes, some portion of
Speaker 9: it is. But we are in a new paradigm in
Speaker 9: which inflation is being driven I know, we've said it
Speaker 9: for years now, more by global morse by supply side factors.
Speaker 6: So as we move.
Speaker 9: Forward, and this is why you know this year is interesting,
Speaker 9: The July meeting is interesting, But what keeps me up
Speaker 9: at night is twenty twenty four and onwards, because we're
Speaker 9: heading into an environment where two to three percent inflation
Speaker 9: in our view, will become the norm and central banks
Speaker 9: are going to have to make a decision. Do they
Speaker 9: continue to launch us into recessions or lower growth in
Speaker 9: order to put us towards two percent, or do they
Speaker 9: admit that the nature of inflation is changing and two
Speaker 9: to three percent is more what we're going to be
Speaker 9: looking at.
Speaker 3: This is so important and there's a lot to unpack
Speaker 3: within this. If two to three percent becomes three to
Speaker 3: four percent, how do they make sure it stays within
Speaker 3: a certain range and keep their credibility? Are you saying
Speaker 3: that it would be a mistake for this Fed to
Speaker 3: reserve to go to five and a half or even
Speaker 3: six percent in terms of a FED funds rate in
Speaker 3: order to bring inflation down faster, because all they would
Speaker 3: do would be to torpedo the economic growth without necessarily
Speaker 3: changing that paradigm.
Speaker 9: What I'm saying is that it's a mistake to ask
Speaker 9: central banks to solve inflation all by themselves. That is
Speaker 9: the nature of inflation changes. We have to have some
Speaker 9: hard conversations about what we're asking global central bankers to do. Now,
Speaker 9: the FED has a little bit of an out because
Speaker 9: it has a dual mandate. It can look towards the
Speaker 9: employment side of the picture, which, by the way, they're
Speaker 9: going to have to change the metrics they look at
Speaker 9: in order to do that.
Speaker 6: There are other.
Speaker 9: Central banks that have single mandates that are only targeting inflation.
Speaker 9: Those central banks are going to have to say, what
Speaker 9: is the cost of two percent? Now that the nature
Speaker 9: of inflation is changing.
Speaker 1: If you see the disinflationary trajectory you're outlining assumed be
Speaker 1: serious disinflation, what does as a labor component non firm
Speaker 1: payrolls do I mean we have people that come on
Speaker 1: that suggests we could see abrupt decline in non farm payrolls.
Speaker 2: Do you buy it?
Speaker 9: Here's the issue with the employment data. Now, in the
Speaker 9: past we would look at non farm payrolls as a
Speaker 9: good indicator. We look at the unemployment rate, which of
Speaker 9: course is what the federals. I am looking at weekly
Speaker 9: hours worked, among other indicators. And the reason for that
Speaker 9: is we have companies that have been very clear they
Speaker 9: are still scarred by the labor shortages that have persisted
Speaker 9: over the past several years. They will attempt to cut costs,
Speaker 9: likely in ways that are not laying people off. But
Speaker 9: what we're likely to see is you stay employed, you
Speaker 9: get to check that box. But the amount of hours
Speaker 9: that you're asked to work decline. Now, weekly hours is
Speaker 9: already back to pre COVID levels. And yet I hear
Speaker 9: all the time, but the labor market's on fire. Well
Speaker 9: not if you look at the actual amount of labor
Speaker 9: being consumed in this environment. The unemployment rate is still
Speaker 9: going to be probably rising very slowly. We don't actually
Speaker 9: have it going above five percent even in a recession.
Speaker 9: But the amount of labor consumed is going to be lower.
Speaker 9: This is why our metrics have to broaden.
Speaker 1: Lisa mentioned earlier something we've talked about in surveillance for quarters.
Speaker 1: I would say, now, which is a solution as patients
Speaker 1: and expansion of the X axis where they stay higher
Speaker 1: for longer.
Speaker 2: To me, that's just it's a.
Speaker 1: More efficacious move than to worry about twenty five to
Speaker 1: fifty beeps up down.
Speaker 2: Do you buy that?
Speaker 9: Absolutely well? The solution to most things is patients, Tom
Speaker 9: and Lisa, I agree with you on that one. So
Speaker 9: when we discuss our forecasts, yes we have penciled in
Speaker 9: one more rate hike for July, but what we spend
Speaker 9: much more time thinking about is the response to the
Speaker 9: next recession. And at this point, what we're looking at
Speaker 9: in twenty twenty four is yes, the central banks do cut,
Speaker 9: the Federal Reserve does cut, but only towards what they
Speaker 9: view as neutral, that they don't actually go into easing territory.
Speaker 9: They stay restrictive, And of course that brings a question
Speaker 9: that I know you love to ask on this, what
Speaker 9: the heck is neutral? That we don't know for sure?
Speaker 3: When you talk about the resilience in the face of
Speaker 3: the rate hikes and the lack of interest rate sensitivity
Speaker 3: in certain areas, what do you make of the fact
Speaker 3: that markets have continued to rally, that we've erased all
Speaker 3: of the losses incurred since the beginning of the raid hikes,
Speaker 3: and that we've seen to your yields rise by one
Speaker 3: hundred basis points in the past month and a half.
Speaker 9: I think you use the word reckoning earlier, which is
Speaker 9: I think an important moment. We have historically, for my
Speaker 9: entire career, believed that as you face a recession, central
Speaker 9: banks respond, and indeed, you know, my job on the byside,
Speaker 9: working for an asset manager is to input our forecast
Speaker 9: to see what different asset classes are going to do
Speaker 9: in a recession. We start saying Okay, there's going to
Speaker 9: be an opportunity for equities for fixed income throughout this.
Speaker 9: But when we start modeling recessions without material rate cuts
Speaker 9: or with less rate cuts, then we actually see a
Speaker 9: very different asset class return. It is not a standard
Speaker 9: recession playbook. So what I think is happening now is
Speaker 9: a market that's coming to that realization that recession or
Speaker 9: bank failures does not equal rate cuts. This is a
Speaker 9: paradigm change from how we've looked at things.
Speaker 3: So why is there such a resilience right if that's
Speaker 3: not going to be rate cuts to the rescue? Is
Speaker 3: that reckoning going to be lower or is it going
Speaker 3: to be that Maybe this economy just isn't interest rate
Speaker 3: sensitive in the way many people expect it.
Speaker 9: There is an element of that, and there's certainly no
Speaker 9: shortage of soft landing.
Speaker 10: Now.
Speaker 9: The issue I have with that and why I think
Speaker 9: there's a disconnect right now between equities which are being
Speaker 9: distorted by the AI story. There's no question about that,
Speaker 9: and fundamentals is that every single leading indicator of a
Speaker 9: recession is flashing red. Deeply read Lisa like flashing red.
Speaker 9: So even if I say to my team, okay, I
Speaker 9: want you to have cut in half those indicators. Is
Speaker 9: it still a recession? The answer is yes. So if
Speaker 9: you want to make the point that it's a soft landing,
Speaker 9: you have to discredit the bulk of indicators that have
Speaker 9: traditionally told us a recession.
Speaker 6: And you can do that.
Speaker 9: And there are some strategists that have made very good
Speaker 9: points about excess savings and labor shortages, but I'm not
Speaker 9: quite there yet. So a recession ahead means there's a
Speaker 9: disconnect between prices and fundamentals. That's when we make money, Lisa.
Speaker 1: Thirty seconds quick. Is a stock market disassociated from your
Speaker 1: cautious economic.
Speaker 9: View, Yes, but that's okay. We have tactical time frames,
Speaker 9: medium time frames. Macro is not everything all of the
Speaker 9: time as much time. As much as I would like
Speaker 9: macro to be the driver, sometimes you have to trade
Speaker 9: off momentum, technicals and sentiment. If you're a tactical portfolio manager,
Speaker 9: that's the moment and recession may still be a couple
Speaker 9: months away, So sometimes there's a disconnect depending on your
Speaker 9: time frame. That's also an opportunity.
Speaker 2: Francis, thank you so much.
Speaker 1: Francis Donald with us with the manual life of Montre
Speaker 1: and Manual Life Investment Management.
Speaker 2: I should say as well.
Speaker 3: By amandam Line, I'm head of macro credit research at
Speaker 3: Blackrock joining us now, Amanda, how much more restrictive do
Speaker 3: five percent rates get as time goes on?
Speaker 7: Well, thank you Lisa and Tom for having me. Good morning. Look,
Speaker 7: I think it's a challenging.
Speaker 11: Environment for a large subset of the corporate credit universe,
Speaker 11: specifically the subset that has a large exposure to floating
Speaker 11: rate debt. And you know right now, we've already seen,
Speaker 11: as you well know, the all in cost of debt
Speaker 11: for the leverage loan universe double more than double actually
Speaker 11: since the first quarter of twenty twenty two. And the
Speaker 11: signaling that we receive from central banks, both the FED
Speaker 11: and the ECB is that there's probably more room to
Speaker 11: run there, and President Leguard was very clear on that
Speaker 11: in her press conference recently. So I think that there's
Speaker 11: more upward pressure. But as you noted at the start,
Speaker 11: I think whether we get an extra twenty five or
Speaker 11: fifty basis points from here is probably less relevant than
Speaker 11: the amount of time that we stay in this kind
Speaker 11: of higher cost of capital environment. Because corporates are looking
Speaker 11: at these upcoming maturity walls, which yes they are in
Speaker 11: mostly twenty twenty five, but that will need to be
Speaker 11: addressed sooner rather than later. And for those corporates, we're
Speaker 11: not really expecting any sort of relief, certainly not in
Speaker 11: the form.
Speaker 7: Of rate cuts. And I think actually, if you look at.
Speaker 11: Where the all in yields are and a lot of
Speaker 11: the subsets of the corporate credit market, the risk free
Speaker 11: rate has done a lot of that heavy lifting, and
Speaker 11: spreads are fairly contained, and so there's probably some room
Speaker 11: for spreads even too high.
Speaker 1: There's a lot of math to mat You get that
Speaker 1: from Milando line, Amanda, let me cut to the chase. Finally,
Speaker 1: we have a risk free rate. William Sharp is happy
Speaker 1: we got a risk free rate. And then you've got
Speaker 1: spreads up. And Lisa's pointed out how narrow spreads are.
Speaker 1: What are the ramifications if the actual yield in an
Speaker 1: aggregate corporate space widens out, what actually happens to our
Speaker 1: listeners and viewers.
Speaker 11: I think the first order implication is that you uptick
Speaker 11: in financial distress, and you're already seeing that in the
Speaker 11: default rates. For example, in the US market, the leverage
Speaker 11: loan default rate is outpacing the high old bond default
Speaker 11: rate by the largest magnitude since the data on the
Speaker 11: Moody series that we use began in nineteen ninety six,
Speaker 11: and realistically over the past two decades, there have been
Speaker 11: very few instances where the loan default rate is outpacing
Speaker 11: the high old bond default rate. And I think really
Speaker 11: that speaks to the point that you're raising. It's that
Speaker 11: that real time marking to market of the higher cost
Speaker 11: of capital in the market. As the policy rate has
Speaker 11: moved higher, borrowing costs for floating rate debt, if they're unheedged,
Speaker 11: have moved higher in tandem, and that's causing stress for
Speaker 11: a subset of smaller issuers that don't have the pricing power,
Speaker 11: they don't have the financial flexibility, perhaps they don't have
Speaker 11: the refinancing options, and so they're added disadvantage. Now that's
Speaker 11: not a common subset throughout the best maturity of the market,
Speaker 11: but for the small nswers that will be stressed.
Speaker 1: Is commercial real estate, either actual or securitized. Is commercial
Speaker 1: real estate and opportunity are just a massive weight for
Speaker 1: the washout.
Speaker 11: The way that we're viewing it, is another reason for
Speaker 11: banks to be more selective in lending. So, as you know,
Speaker 11: it's a more than five point five trillion dollar market,
Speaker 11: banks both small and large, own roughly half of that,
Speaker 11: and I think it will take some time for the
Speaker 11: price to discuss process to play through. You know, it's
Speaker 11: reasonable to think that metrics that we used in past cycles,
Speaker 11: like LTVs, like cap rates may not be as relevant
Speaker 11: in this cycle given the significant change in prices that
Speaker 11: we've seen, and also given the interest rate volatility, and
Speaker 11: so I think it will take some time for investors
Speaker 11: to get clarity on the macro which determines the cash
Speaker 11: flows of those assets, and then also to figure out
Speaker 11: where the real bottom exists in price discovery. That's probably
Speaker 11: going to take longer to play out than, for example,
Speaker 11: the stresses that we might see in the corporate credit
Speaker 11: market among those smaller issuers. But it's something that we're
Speaker 11: definitely wanting because it's so interest rate sensitive. I think
Speaker 11: the real point, though, Tom, is that just like commercial
Speaker 11: real estate can't be painted with a broad brush, all
Speaker 11: cre is not created equal.
Speaker 7: Office we think is perhaps the most vulnerable.
Speaker 11: Similarly, in the corporate credit market, quality means much more
Speaker 11: than ratings. It's really nuanced it means pricing power, refin
Speaker 11: dancing options, business model resilience, and those are really things
Speaker 11: that I think will be increasingly important in the second
Speaker 11: half of the year because the fact of the matter
Speaker 11: is that we didn't make as much progress on taming
Speaker 11: inflation as we liked. There's probably upside risk to policy
Speaker 11: rates a higher cost of capital environment, and so we
Speaker 11: need to tread carefully when we think about what companies
Speaker 11: and sectors and asset classes are best positioned for that environment.
Speaker 3: And the upside risk to policy rates is what people
Speaker 3: are focused on when they listen to Fedho J. Powell
Speaker 3: as he takes the seed on Capitol Hill in about
Speaker 3: two and a half hours from your vantage point, you say,
Speaker 3: it's more important how long rates remain high. When does
Speaker 3: it start to bite the most one of the maturity
Speaker 3: walls the most painful, and you start to see the
Speaker 3: interest rate sensitivity really come to the foe.
Speaker 11: Yeah, so we've seen some early signs of that in
Speaker 11: the default rate, but I would say at current levels
Speaker 11: the default rate is still pretty well contained relative to
Speaker 11: the history. There's probably some upside risk to that. I
Speaker 11: think when the twenty twenty five maturity wall really become
Speaker 11: an issue is twelve months prior to those bond maturities,
Speaker 11: because for a host of reasons, we know that highield
Speaker 11: corporates in particular don't like to let their maturities become
Speaker 11: current on their balance sheet because has implications for the
Speaker 11: year end audit and going concern language. And so even
Speaker 11: though twenty twenty five seems far off in the distance,
Speaker 11: it's actually not that far off if you think that
Speaker 11: corporates will start to address that in twenty twenty four.
Speaker 11: One really interesting point, and I don't think that this
Speaker 11: favorable technical will persist. The magnitude of high yield supply
Speaker 11: and the purpose of highyield supply has been incredibly bondholder
Speaker 11: friendly so far here today, it's kind of the best
Speaker 11: of both worlds. We haven't had a lot of high
Speaker 11: old supply, and the supply that we've had has been
Speaker 11: used for bondholder friendly needs like refinancing and debt repayment.
Speaker 11: As we get closer to those maturity walls, that volume
Speaker 11: of supply likely picks up, and so that favorable technical
Speaker 11: has probably been an anchor for kyld spreads. Frankly, yere
Speaker 11: today will probably ease up a bit and so that's
Speaker 11: something certainly to watch as we get closer to those
Speaker 11: maturity walls. But yes, Lisa, to your point, I mean
Speaker 11: the length of time and the willingness, as you alluded
Speaker 11: to earlier in the program, for the FED to really
Speaker 11: stay the course and keep rates in restrictive territory or
Speaker 11: even move them higher, is really the key consideration for
Speaker 11: corporate credit quality.
Speaker 1: Avanda. Thank you, Amanda. Aligning with us with black Rock
Speaker 1: this morning, I'm going to talk China here at least
Speaker 1: is all fired up to talk to China with Greg Valier,
Speaker 1: and that's the lead part of his note this morning's
Speaker 1: chief policy strategist at AGF Investments.
Speaker 2: But there's Eric Canter, Greg.
Speaker 1: Valier, and you and I know he was absolutely flattened
Speaker 1: in Republican politics of a good number of years ago.
Speaker 1: Has a Republican Party changed it all since Eric Canner?
Speaker 1: I mean to me, McCarthy's in the same place as
Speaker 1: John Bayner, and there's an Eric Canter right now trying
Speaker 1: to help McCarthy and he can't get anything done.
Speaker 12: Yeah, I think the party has gotten more strident in
Speaker 12: many respects in the House, which makes life, as we
Speaker 12: all know, very difficult for McCarthy. I think the other
Speaker 12: big story is China. And just a couple of comments quickly,
Speaker 12: Tom on that the little progress they made in the
Speaker 12: last few days was negated overnight with Joe Biden inexplicably
Speaker 12: ripping into z I don't know why he did it.
Speaker 12: And number two, I think that these stories out on
Speaker 12: a military base or a spy base or a training
Speaker 12: base in Cuba by the Chinese really is a serious,
Speaker 12: serious issue.
Speaker 1: I agree because you and I lived in I have
Speaker 1: the clearest memories of my youth and the Cuban missile crisis.
Speaker 2: But I would suggest.
Speaker 1: Greg, there's not missiles involved here. It's going to be
Speaker 1: X number of soldiers one hundred miles from Key West.
Speaker 1: I get that tension, but can you really equate it
Speaker 1: to a Cuban missile crisis of John Fitzgerald Kennedy fair point.
Speaker 12: It's not as serious as nineteen sixty two. But at
Speaker 12: the same time, it's going to give fodder the politicians
Speaker 12: who don't like China in both parties, whether it's Chuck
Speaker 12: Schumer or Kevin McCarthy, and both parties, China is not popular,
Speaker 12: and I think this will simply add fuel to the fire.
Speaker 12: To speak out against the Chinese.
Speaker 3: Greg You mentioned Joe Biden inexplicably in your words going
Speaker 3: after Jijinping. I'll reach you the actual comments. He was
Speaker 3: speaking at a fundraiser last night, saying that the Chinese
Speaker 3: leader had been blindsided by the spy balloon, saying he
Speaker 3: didn't know it was there. That's what the great embarrassment
Speaker 3: for dictators. Well, they don't know what happened, and that
Speaker 3: was what really keyed off some of the concerns with
Speaker 3: people calling that irresponsible and saying that really does heightened tensions.
Speaker 3: What do you make of the why behind President Biden's comments.
Speaker 3: Was this some sort of diplomatic foray or was this
Speaker 3: another folk pa that's going to be sort of highlighted
Speaker 3: as kind of emblematic of his presidency.
Speaker 12: Well, first of all, Lisa, you've got to say, it
Speaker 12: looked to me anyway that the balloon story had been buried.
Speaker 12: I think we put that behind us three or four
Speaker 12: days ago, and Biden resurrected it. So this could be
Speaker 12: just part of a string of gas we've seen recently
Speaker 12: by Biden. After one speech last week he said, God
Speaker 12: Save the Queen. There's things that he says that leave
Speaker 12: people scratching their heads, and it could be serious for
Speaker 12: a second, it does plant seeds of doubt among a
Speaker 12: lot of Democrats who are reluctant to vote for him.
Speaker 3: Well, just putting aside the election for one second and
Speaker 3: just doubling down the theme, do you actually think that
Speaker 3: this could materially worsen relations with Tina? That the relationship
Speaker 3: is already so fragile that a gaff by the President
Speaker 3: just simply mentioning the word dictator could undermine everything that
Speaker 3: Tony blinkn accomplished while he was overseas.
Speaker 12: Well, it doesn't help, does it. It makes things more complicated.
Speaker 12: And I'm sure you've just as you have angry lawyers
Speaker 12: working for Donald Trump or shaking their head over Trump's
Speaker 12: interview with Bret Baher, you see a lot of people,
Speaker 12: I'm sure close to Blincoln shaking their heads over why
Speaker 12: Biden would say something that to me reckless?
Speaker 2: Greg, What do we follow into July?
Speaker 1: I mean, I think for so much of our audience,
Speaker 1: we're exhausted by this story, this story. We glance at
Speaker 1: the Post, glance at the Times, glance at Bloomberg, politics, etc.
Speaker 1: But what's the thing to follow into July.
Speaker 12: Well, we've got today, as you know, we've got jerown Powell.
Speaker 12: But I would say throughout the summer the number one
Speaker 12: story is Ukraine. If this war doesn't go well and
Speaker 12: they got off to a fairly slow start, I think
Speaker 12: it'll lead to a lot of anxiety that the West
Speaker 12: and the US may lighten up on our aid. We're
Speaker 12: not at that point yet. I think that this is
Speaker 12: still a winnable war, but I think there's got to
Speaker 12: be signs of progress. So to me, that is the
Speaker 12: story for the rest of the summer.
Speaker 1: I want to take the military and it's effort in Ukraine,
Speaker 1: swing it back to the Pacific ring Greg Value and
Speaker 1: one of the clear things we see is an expansion
Speaker 1: of the United States military across a Pacific rim.
Speaker 2: It seems to me to endure.
Speaker 1: It's not only a discussion, it's now being budgeted and planned.
Speaker 2: Is that how you see it?
Speaker 13: Yeah?
Speaker 12: I think so. There's going to be controversy in the
Speaker 12: House on how much we're going to spend on Ukraine
Speaker 12: and the budget, and I would say the number two
Speaker 12: issue for the next two or three months will be budget.
Speaker 12: And I don't want to sound like the little boy
Speaker 12: who cried Wilf. But I think chances of a government
Speaker 12: shut down on October one are a little bit above
Speaker 12: fifty to fifty, so that's going to be a big deal.
Speaker 12: I think at the end of the day, the defense
Speaker 12: industry and Ukraine get plenty of money from the US.
Speaker 13: We know that.
Speaker 3: Just to double down what you're talking about with respect
Speaker 3: to Ukraine and that you think that's going to be
Speaker 3: the key worry. Are you expecting to hear exactly what
Speaker 3: the progress is how Ukraine is defending against a Russian
Speaker 3: offensive that, by a number of reports is getting perhaps
Speaker 3: a bit perhaps more savvy. How much are you looking
Speaker 3: for intel from the Rebuild Ukraine conference currently ongoing.
Speaker 12: Well, of course, as we all know, the first casualty
Speaker 12: of war is the truth, so it's hard to discern
Speaker 12: what is true and what isn't. I just think this
Speaker 12: is going to be a long slog I think people
Speaker 12: were unrealistic thinking that the Ukrainians were just romped during June.
Speaker 12: Well they haven't, but we still have a long way
Speaker 12: to go this summer.
Speaker 1: Greigvillier, thank you so much, greatly appreciate it. With AGF investments.
Speaker 1: There is a movie it is called North Side seven
Speaker 1: seven seven. It is of a Chicago long ago. Jimmy
Speaker 1: Stewart takes a lens and is fabulous in that movie
Speaker 1: until halfway through you realize there's an old lady on
Speaker 1: her knee. He's at the Wriggly Building taking the movie,
Speaker 1: stealing the movie from Jimmy Stewart. And of course that
Speaker 1: is the iconic grandmother and mother within called Northside seven seven.
Speaker 1: This is an extraordinary book. I really don't know what
Speaker 1: to say Jenny Rametti Romedy, as you know, it's the
Speaker 1: most mispronounced name in corporately. Well, Jenny Romedy with us
Speaker 1: this morning on a hugely courageous book. And I want
Speaker 1: to start with the blistering first fifty pages of your childhood.
Speaker 2: And Baba came to the rescue.
Speaker 14: Who was Baba my great grandmother? And you're right, and
Speaker 14: you speak of the Wriggly Building, because I was raised
Speaker 14: by really strong women who.
Speaker 6: All suffered great tragedies.
Speaker 14: And that was my great grandmother who came here from Belarus,
Speaker 14: the last person alive from her family, who worked third
Speaker 14: shift in the Wriggly Building, cleaning bathrooms, never spoke a
Speaker 14: stitch of English English, and saved every diamond us savings
Speaker 14: bonds and one day it would would allow us to
Speaker 14: have a car.
Speaker 2: What was the first day?
Speaker 1: Like at Northwestern there were fancy people from New triermutants
Speaker 1: from New.
Speaker 6: Jas you know that. And there I was, Yes, there
Speaker 6: I was.
Speaker 14: No I I was there, by the grace of God right,
Speaker 14: just lucky enough to get a scholarship. And what I
Speaker 14: what I remember is having gone to the store and
Speaker 14: bought one pair of Jeanes and topsiders.
Speaker 6: To try to fit in a slide rule. I did
Speaker 6: use a slide rule.
Speaker 1: You're dating this is like a nerd. Yes, go to
Speaker 1: the woman from Chicago, wouldn't know a slide rule if
Speaker 1: it hit over the world.
Speaker 3: From a slide role to today, it's actually an appropriate
Speaker 3: kind of pathway at a time. Win Tech is at
Speaker 3: the epicenter of how to get from the slide rule
Speaker 3: to the graphic calculator and beyond right, how much can
Speaker 3: you see some of the lessons that you learned at
Speaker 3: the helm of IBM of how to bring a company
Speaker 3: up to speed with technology that moves more quickly than
Speaker 3: anyone could imagine.
Speaker 14: Yeah, this is it's timely because even though the book
Speaker 14: took me two years to write, Good Power there's a
Speaker 14: whole section in it on it A because a decade
Speaker 14: ago I spent quite a bit of time trying to
Speaker 14: bring AI into the world to solve really tough problems.
Speaker 14: And here we are now, and to me, the things
Speaker 14: I learned. Everybody wants to talk about the technology, this
Speaker 14: is going to be a people and a trust problem.
Speaker 6: That is what I learned from all these years.
Speaker 14: And that you know, with something like AI, I see
Speaker 14: it as two sides of one coin, and if we
Speaker 14: don't manage the good and the bad at the same time,
Speaker 14: we're going to have trouble.
Speaker 3: When you look back on your legacy at IBM and
Speaker 3: you think about some of the advancements that perhaps were
Speaker 3: shrugged off at the outset, whether it was cloud computing
Speaker 3: or some of the others, what would you do differently,
Speaker 3: or how do you understand what to identify as something
Speaker 3: that holds promise versus the next you false hope that
Speaker 3: everyone's going to cling to.
Speaker 14: Yeah, look, I think this is difficult. It's difficult because
Speaker 14: actually many of the bets we placed were correct. Some
Speaker 14: timing was not exactly right on those. But today everything
Speaker 14: we did around AI and now it's hybrid cloud is
Speaker 14: what the company is really growing from. So the idea
Speaker 14: when you run a company, and IBM's the oldest tech
Speaker 14: company and clearly I had to lead it through its
Speaker 14: most tumultuous reinvention, is that you've just got to make
Speaker 14: those decisions for the long term, even if you may
Speaker 14: not see them play out during your tenure.
Speaker 1: For joining us on radio and television, good power. I
Speaker 1: can't say enough about it. It's summer read thin. This
Speaker 1: is great but very dense. Two hundred and thirty pages
Speaker 1: here on a life story that's extraordinary and also the
Speaker 1: realities of IBM. I'm going to address it. You've been
Speaker 1: You've had critics like a Pinata here on the transformation
Speaker 1: of I've been moved. I want to get to Gersner
Speaker 1: in a minute. But the way you used to read
Speaker 1: the statement from Sam Palmisano as you looked at the
Speaker 1: free cash flow on page two of the on your
Speaker 1: report and you said, IBM to the moon.
Speaker 2: What happened? How did Palmisano get this so wrong?
Speaker 14: Look, I mean what we had done, we had done
Speaker 14: very well to a certain point. But then the world changed.
Speaker 2: The world changed.
Speaker 14: There was there was not just one tech trend, there
Speaker 14: was cloud there was data, there was AI, mobility, social media,
Speaker 14: and that's five tracks.
Speaker 1: Now the meetings was it? Did you blame mackenzie? Did
Speaker 1: you bring in consultants who screwed this up? Why did
Speaker 1: you have such an inertial force where you couldn't change faster?
Speaker 14: Yeah, I think Wich always had. When you're an incumbnent
Speaker 14: in something, it is both you're trying to protect them
Speaker 14: and not just protect a pass.
Speaker 6: You've got customers that you've.
Speaker 14: Got to serve, yet you've got to move to the
Speaker 14: future at the same time. And so that realized how
Speaker 14: every one of us had a challenge, and mine was
Speaker 14: to now prepare a whole new technology portfolio for the future.
Speaker 14: But I had a double sort of challenge in that
Speaker 14: I also had to reskill the workforce, and so when
Speaker 14: I began, folks weren't prepared for future skills.
Speaker 1: It's de late in the book, You're phenomenal on this.
Speaker 1: You go to Brian Moyne at a Bank of America,
Speaker 1: who's an animal. I mean, I love you know, Brian,
Speaker 1: you go, what's the FED gonna do? Belowning he's a
Speaker 1: bank animal. He knows the deposit flows in Kansas City,
Speaker 1: and he talks about hiring for skill. Yeah, does that
Speaker 1: mean you only hire engineers?
Speaker 6: Yeah.
Speaker 14: Look, this is something that I work passionately on now,
Speaker 14: this idea to hire for people for their skills, not
Speaker 14: just their degrees. I I came to it having had
Speaker 14: a mother. You know, I was abandoned as a kid
Speaker 14: and my mother had no education. So but I quickly
Speaker 14: saw access and aptitude were not equal, meaning she had
Speaker 14: aptitude no access to education.
Speaker 6: So she got a little bit of education and.
Speaker 14: Can get an hourly job, a little more, a little
Speaker 14: better job to get us off of things like food stamps.
Speaker 14: Fast forward, I would be searching for people like cyber
Speaker 14: They're not in the marketplace. In twenty twelve, we'd start
Speaker 14: to work with community colleges and high schools, and I'd say,
Speaker 14: why aren't we hiring these people? They can do the job.
Speaker 14: Will one hundred percent of our requirements are college degrees,
Speaker 14: and it would lead me down this path for really, now,
Speaker 14: almost two decades of a movement, I think it's essential
Speaker 14: to democracy in this country that we revisit. Having found
Speaker 14: fifty percent of our jobs were over credentialed, requiring a
Speaker 14: degree to start when you didn't need one to start.
Speaker 14: This idea that where you start shouldn't determine where you end.
Speaker 6: That skills first, you.
Speaker 3: Join the show at a really important point, and you're
Speaker 3: an important voice at a time where we talk so
Speaker 3: much about and how much that's a divergent story from
Speaker 3: the rest of the economy. Do you think that the
Speaker 3: big tech names that have really become the behemoths are
Speaker 3: doing a good job managing the technological trends, managing to
Speaker 3: train people in the appropriate ways, and creating a path
Speaker 3: for a longer type of trajectory.
Speaker 6: Let me answer that two ways.
Speaker 14: One is there's a whole chapter of what I call
Speaker 14: stort in good tech, and it isn't just the tech companies.
Speaker 14: It's now all of us and has much efforts got
Speaker 14: to be put on preparing people to see a better
Speaker 14: future because of this technology.
Speaker 6: I mean, my biggest learning with trying.
Speaker 14: To roll out AI, particular with professional people, they don't
Speaker 14: trust it. They unless they're part of its co creation
Speaker 14: and how it's used, won't use it. So as you
Speaker 14: go forward, now this is about reskilling, not just your
Speaker 14: current workers. You know it will be multiple times in
Speaker 14: our lifetime once and done. Education is over now, and
Speaker 14: so that idea that. I think that side of the
Speaker 14: coin about preparing the workforce is totally not paid attention
Speaker 14: to right now, and to me, that is the biggest thing.
Speaker 14: And second is is really getting people to trust the technology.
Speaker 14: You know, I had a lot of experience with a
Speaker 14: big company with a big brand, and when you introduce AI,
Speaker 14: there's very little tolerance for it to be wrong. When
Speaker 14: you're a big company, a startup, no problem. But when
Speaker 14: you start using it for health financial services, you're in
Speaker 14: a whole different ballgame with how people react to it.
Speaker 14: So that issue of trust and preparing people are what
Speaker 14: I think is not being acted on enough.
Speaker 1: I'm out of time, but I got to squeeze this in.
Speaker 1: I got fourteen more questions. I got time for one question.
Speaker 1: What was the best practice of lou gersnerh My?
Speaker 14: You know I you know I have a men's respect
Speaker 14: for low and to this day is a very good
Speaker 14: friend of mine. I think he was a brilliant both
Speaker 14: strategist and execution leader both sides of the coin.
Speaker 2: He got his hands dirty issues.
Speaker 6: Absolutely and to this day this is a gospel to me. Yes, absolutely,
Speaker 6: You and I share.
Speaker 1: Nothing on the show. Everybody puts it together for me,
Speaker 1: I just show up.
Speaker 14: No, No, we share that admiration. He is able to simplify
Speaker 14: the complex and an amazing way.
Speaker 1: This is a great book, Good Power, leading positive change
Speaker 1: in our life's work in world. The first fifty pages
Speaker 1: is blistering.
Speaker 2: There's no other way to put it anything. I'm not
Speaker 2: going to pronounce your last name.
Speaker 6: That's all right, joins us.
Speaker 2: Good Power here this morning.
Speaker 1: Subscribe to the Bloomberg Surveillance Podcast on Apple, Spotify, and
Speaker 1: anywhere else you get your podcasts. Listen live every weekday
Speaker 1: starting at seven am Eastern on Bloomberg dot Com, the
Speaker 1: iHeartRadio app, tune In.
Speaker 2: And the Bloomberg Business app.
Speaker 1: You can watch us live on Bloomberg Television and always
Speaker 1: on the Bloomberg Terminal. Thanks for listening. I'm Tom Keane,
Speaker 1: and this is Bloomberg. Thanks for listening to the Bloomberg
Speaker 1: Surveillance Podcast. Now, stay tuned for today's edition of Bloomberg Daybreak.
Speaker 1: It's your daily news podcast, delivering today's top stories to
Speaker 1: your podcast feed by six am Eastern. It's all the
Speaker 1: news you need in just fifteen minutes. The Bloomberg Daybreak Podcast.
Speaker 1: It starts right now.
Speaker 10: From the Bloomberg Interactive Burgers Studios is Bloomberg day Break
Speaker 10: for Wednesday, June twenty. First coming up today, A.
Speaker 15: Hopeful sound noises are detected in the search for the
Speaker 15: undersea vessel near the Titanic.
Speaker 10: New tensions emerge with China after President Biden refers to
Speaker 10: Shijin Ping as a dictator.
Speaker 8: Fed Chair J.
Speaker 15: Powell delivers his first day of congressional testimony this morning.
Speaker 10: And FedEx does not deliver for investors with its latest earnings.
Speaker 8: President Biden prepares for his state visit with India's Prime minister.
Speaker 8: Plus New York State is banning employer's use of non
Speaker 8: compete agreements. I'm Michael bar More Ahead.
Speaker 2: I'm John Stansharon.
Speaker 16: Sports Garrett Cole pitched the Yankees too much, be did
Speaker 16: and win over Seattle, the Mets, and Justin Erlander lost
Speaker 16: in Houston.
Speaker 13: That's all straight Ahead on Bloomberg day Break, the business
Speaker 13: news you need to start your day in just one
Speaker 13: fifteen minute podcast each morning on Apple Spotify, the Bloomberg
Speaker 13: Business Appen everywhere you get your podcasts.
Speaker 10: Good morning, I'm Nathan Hager and I'm Karen Moscow. Here
Speaker 10: are the stories we're following today.
Speaker 15: We want to update you first on the missing submersible
Speaker 15: near the wreckage of the Titanic and what may be
Speaker 15: a hopeful sign. The Coastguard says underwater sounds have been detected.
Speaker 15: Now search teams are being redirected to find out where
Speaker 15: those sounds came from. Coast Guard Rear Admiral John Mager
Speaker 15: says they're using planes, remotely operated vehicles, and underwater robots
Speaker 15: to find the five people on board the titan.
Speaker 2: It's a really complex case.
Speaker 17: Their active debris field down on the bottom of the ocean,
Speaker 17: and a lot of complexity of working at that time.
Speaker 15: Rear Admiral John magertell's ABC News it's a race against time.
Speaker 15: The titan is designed to carry up to ninety six
Speaker 15: hours of oxygen. At this rate, the ship may have
Speaker 15: less than twenty four hours of air left well.
Speaker 10: Another major story that we're following this morning, Nathan, involves
Speaker 10: the fallout from the plea deal for Hunter Biden. The
Speaker 10: deal may help avoid a messy public trial and key
Speaker 10: President Biden's son out of jail, but the agreement also
Speaker 10: provides fodder for the president's political opponents. Bloomberg's Amy Morris
Speaker 10: or Poorsermer ninety nine one newsroom in Washington.
Speaker 18: Hunter Biden's legal troubles haven't stopped the President from supporting him.
Speaker 2: Very proud of my son.
Speaker 18: The Republicans are outraged with the deal, vowing to continue
Speaker 18: their probes into the Biden family. Congressman James Comer is
Speaker 18: chair of the House Oversight Committee.
Speaker 19: This has absolutely nothing to do with our investigation of
Speaker 19: Joe Biden, and we're going to continue to move forward
Speaker 19: with that.
Speaker 18: The Congressman Jamie Raskin, the top Democrat on that committee, says,
Speaker 18: if there is a double standard, it's with the Trump family,
Speaker 18: not Biden.
Speaker 2: They should check out what happened with Jared Kushner.
Speaker 12: He registered to create a newport, which promptly received two
Speaker 12: billion dollars from the Saudi government.
Speaker 18: Judge still has to approve the Plea deal, even as
Speaker 18: the lead prosecutor says the investigation is ongoing. In Washington,
Speaker 18: I Amy Moore as Bloomberg Daybreak.
Speaker 2: Thank you, Amy.
Speaker 15: While the rhetoric heats up between the parties over Hunter Widen,
Speaker 15: intentions between the US and China may be rising again.
Speaker 15: China says President Biden made a quote public political provocation
Speaker 15: by referring to his counterpart, She Jinping as a dictator.
Speaker 15: Biden told a California fundraiser that the Chinese leader had
Speaker 15: been embarrassed by an alleged spy balloon because he didn't
Speaker 15: know it was there. The President says, quote, that's the
Speaker 15: great embarrassment for dictators when they didn't know what happened.
Speaker 10: Well, turning to the markets now, Nathan, all eyes today
Speaker 10: and tomorrow are focused on Washington. That's where Fed Chairman
Speaker 10: j Powell gives his semi annual report to Congress. We
Speaker 10: get a preview from Bloomberg's Michael McKee in.
Speaker 20: The House today, the Fed Chairman will have the opportunity
Speaker 20: to clarify what some feel was a confusing message on
Speaker 20: the path for interest rates would lead central bankers to
Speaker 20: raise rates again, something their own forecasts suggests will happen.
Speaker 20: Does inflation have to rise, does unemployment or does it
Speaker 20: just have to remain flat? What is the ultimate end rate?
Speaker 20: And how soon after that might they begin the rate
Speaker 20: cuts they foresee for twenty twenty four. There will also
Speaker 20: be questions about the impact of March's bank failures and
Speaker 20: on possible regulatory changes for the industry. Tomorrow poll comes
Speaker 20: back to testify before the Senate. Michael McKee Bloomberg.
Speaker 15: Daybreak, Okay, Mike, As investors await possible clues on the
Speaker 15: future of rates, Brown Brothers Harriman, head of Securrency Strategy,
Speaker 15: when thin thinks the FED is far from done, when.
Speaker 21: All it does settles, I think the Fed is going
Speaker 21: to go higher for longer. The market still doesn't quite
Speaker 21: believe the Fed one hike pricing, but the fest single
Speaker 21: number two, and I said to a lot of anas,
Speaker 21: I don't think the Fed will hike again.
Speaker 1: That this isn't just a pause, this is the end.
Speaker 19: I wholehearted disagree.
Speaker 15: Brown Brothers Harriman's whin then expects a stronger dollar the
Speaker 15: rest of the year.
Speaker 22: Well.
Speaker 10: Rates are also in focus in Europe. This morning, Nathan,
Speaker 10: after a hot inflation reading over in the UK, and
Speaker 10: we get the latest of the Bloomberg's Ewan pots in London.
Speaker 10: Good morning, Ewan, Good.
Speaker 23: Morning Kardon Nathan. It's hot in London again today. But
Speaker 23: while the weather is nice, our fourth inflation reading high
Speaker 23: that estimates is not so welcome. Consumer prizes rose eight
Speaker 23: point seven percent in the year to May. To find
Speaker 23: forecasts for a slowdown in price gains core inflation unexpected.
Speaker 23: The rose on last month. It's now at a thirty
Speaker 23: one year high. It's all a headache for the Bank
Speaker 23: of England as they weigh their next move in tomorrow's
Speaker 23: policy meeting. Traders are ramping up bets the bank will
Speaker 23: need to administer stronger medicine in their fight against rampant's inflation.
Speaker 23: In London, I'm you in pots Bloomberg.
Speaker 2: Daybreak, Marry Ewan, thank you.
Speaker 15: Back here in the US, We're watching shares of FedEx
Speaker 15: in early trading. They're down about three percent after the
Speaker 15: company gave a twenty twenty four profit outlook that came
Speaker 15: in below analysts essamates, and we get the story from
Speaker 15: Bloomberg's Charlie Palette.
Speaker 22: A drop in package demand offset CEO Raj subramanians four
Speaker 22: billion dollar cost cutting plan. The company has sought to
Speaker 22: reduce expenses as the industry deals with a decline and
Speaker 22: package volume following two years of surging demand fueled by
Speaker 22: pandemic driven online shopping. In a separate statement, FedEx said
Speaker 22: CFO Michael Lens will retire effective July thirty first.
Speaker 2: In New York.
Speaker 22: Charlie Pellett's Bloomberg Daybreak.
Speaker 10: Right, Charlie, Thanks, and JP Morgan ches is making a
Speaker 10: fresh round of layoffs in Asia. Bloomberg News has learned
Speaker 10: the bank is cutting about twenty investment banking jobs as
Speaker 10: deal flows remain muted. Sources say the reductions impact mostly
Speaker 10: junior staff and associates and analyst levels, and sectors including consumer,
Speaker 10: healthcare and private capital markets.
Speaker 15: Time now to take a look at some of the
Speaker 15: other stories making news in New York and around the world,
Speaker 15: and for that we are joined by Bloomberg's Michael Barr.
Speaker 8: Good morning, Michael, Good morning, Nathan. New York is joining
Speaker 8: other states on banning employee on compete agreements. The bill
Speaker 8: coincides with Federal Trade Commission and National Labor Relations Board
Speaker 8: actions to fight non competes. The measure now heads to
Speaker 8: Governor Kathy Oakle's desk after the state Assembly passed it yesterday.
Speaker 8: Employer's use of non compete contracts, which restrict workers from
Speaker 8: going to work for a competitor, cover an estimated one
Speaker 8: fifth of the US workforce. The FDN and Y confirmed
Speaker 8: what many suspected, a lithium ion battery was the cause
Speaker 8: of Tuesday's fire that killed four people in Manhattan. The
Speaker 8: blaze started in an e bike shop on the Lower
Speaker 8: east Side. The shop is downstairs from their apartments in
Speaker 8: the sixth story building. New York City Fire Commissioner lower
Speaker 8: kevinough his.
Speaker 24: Exact scenario where there is an e bike store on
Speaker 24: the first floor and residences above, and the volume of
Speaker 24: fire created by these lithium ion batteries is incredibly deadly.
Speaker 8: The FDN Y says the shop was inspected in August
Speaker 8: of last year and summons were issued. A former NYPD
Speaker 8: officer is among a group of people convicted of working
Speaker 8: for China. More from Bloomberg's Dan Schwartzman, three.
Speaker 25: People, including a retired New York City Police sergeant, have
Speaker 25: been convicted of acting as agents of the People's Republic
Speaker 25: of China. Prosecutors showed that the three carried out ill
Speaker 25: legal law enforcement operations in the US, including trying to
Speaker 25: pressure dissidents to return to China. The three were in
Speaker 25: a group of eight originally charged back in October of
Speaker 25: twenty twenty of participating in Operation fox Hunt, which a
Speaker 25: Chinese government says was a legitimate operation to track down
Speaker 25: fugitives in New York I. Dan Schwartzman Bloomberg Daybreak.
Speaker 8: President Joe Biden is hosting Indian Prime Minister Narindra Modi
Speaker 8: for state visit this week. Biden hopes to improve his
Speaker 8: relationship with the leader of a nation of one point
Speaker 8: four billion at the US administration sees as a pivotal
Speaker 8: force in Asia for decades to come. Dozens of Congressional
Speaker 8: members are urging President Biden to talk to Modi about
Speaker 8: human rights concerns. Todaymi is highlighting inner tranquility. His public
Speaker 8: schedule for the day opens with a group yoga session
Speaker 8: on the United Nations North Lawn. Global News twenty four
Speaker 8: hours a day, powered by more than twenty seven hundred
Speaker 8: journalist and analyst over one hundred twenty countries. I'm Michael Barr.
Speaker 8: This is Bloomberg, Nathan.
Speaker 15: Thank you, Michael. Time now for the Bloomberg Sports Update,
Speaker 15: and for that, here's John stash Out.
Speaker 16: All right, Nathan, Yankees back home after the rough weekend
Speaker 16: in Boston, and thankfully Garrett Cole was on the mound,
Speaker 16: dominant in seven to thirty means, allowed one run, only
Speaker 16: four hits, struck out eight. Clay Holmes got the last
Speaker 16: five outs. So much needed a Yankee win. Three to
Speaker 16: one over Seattle. They beat the Mariners George Kirby, the
Speaker 16: Ryan native who had shut them out in a recent
Speaker 16: game in Seattle, Billy McKinney to the two run homer
Speaker 16: off Kirby in the second inning. Before the game, Yankee
Speaker 16: g and Brian Cashman met the media to discuss the Yanks'
Speaker 16: recent struggles.
Speaker 26: Got a really good team when we're flying high and
Speaker 26: playing the way we're capable of. Right now, we haven't
Speaker 26: been doing that, So it looks bad. It feels bad,
Speaker 26: It tastes bad, and no one likes losing, so so
Speaker 26: I understand why the fans are upset and not happy
Speaker 26: with how it's playing out.
Speaker 16: Cash but said he still has belief in rookie short
Speaker 16: staff Anthony Volfe, who's among many Yankees who have been struggling.
Speaker 8: Mets at Houston.
Speaker 16: Justin Verlanders faced his former team, and Alex Bregman hit
Speaker 16: a two run homer off him. The Astros won four
Speaker 16: to two. The Mets ten only four hits, didn't have
Speaker 16: a base runner off Franbur Valdez until the sixth inning.
Speaker 16: They didn't score until the eighth Freeway Series. Dodgers shut
Speaker 16: out the Angels to nothing behind Clayton Kershaw. The Cincinnati
Speaker 16: Reds last season lost one hundred games. They just won
Speaker 16: their tenth game in a row, and the Giants, a
Speaker 16: five hundred team last year, won their ninth straight. The
Speaker 16: ex met Marcus Stroman has the lowest DRA in the
Speaker 16: National League. He pitched the Cubs to a shutout win
Speaker 16: over Pittsburgh and the ex Yankee Aaron Hicks, who's still
Speaker 16: getting paid by the Yanks. They released him with a
Speaker 16: one eighty eight batting average. He had a homer four
Speaker 16: RBIs in Baltimore's win at Tampa Bay. Hicks with the
Speaker 16: orioles is batting three four John stash that were Bloomberg.
Speaker 13: Sports from coast to coast, from New York to San Francisco,
Speaker 13: Boston to Washington, DC, nationwide on Sirias Exam, the Bloomberg
Speaker 13: Business app in Bloomberg dot Com.
Speaker 2: This is Bloomberg Daybreak.
Speaker 15: Good morning, I'm Nathan Hager. While a flurry of legal
Speaker 15: news came out of Washington yesterday morning. First we learned
Speaker 15: the trial date for former President Donald Trump in the
Speaker 15: classified documents case. A federal judge set that for mid August.
Speaker 15: It was also announced that the current President's son, Hunter Biden,
Speaker 15: is facing tax and gun charges and reached a plea
Speaker 15: deal in that case. Bloomberg's Joe Matthews spoke with former
Speaker 15: White House Chief of Staff mcmulvaaney on Bloomberg Sound On
Speaker 15: to break down the political fallout for the current and
Speaker 15: former presidents. Let's hear part of that conversation.
Speaker 19: Anything short of a felony indictment of Hunter Biden was
Speaker 19: going to be interprened by some folks as too.
Speaker 1: Tier.
Speaker 19: I think it remains to be seen as to what
Speaker 19: in what are the facts, what was the circumstance behind
Speaker 19: Hunter Biden's tax issues. Now that the Chairman Comber's made
Speaker 19: a really good point, which is now that we are
Speaker 19: either you know, at the end or moving speedily to
Speaker 19: the end of the investigation of Hunter Biden, then the
Speaker 19: Department of Justice no longer has an excuse not to
Speaker 19: share information with Congress. So as between both the public
Speaker 19: hearing on the plea deal and the congressional investigation, my
Speaker 19: guess is we'll see a lot more about Hunter Biden
Speaker 19: than we know right now, and only then will you
Speaker 19: be able to sort of have an informed opinion as
Speaker 19: to a two different tiers of justice in this com.
Speaker 15: Does this quiet the voices of concern who thought Hunter
Speaker 15: Biden was never going to be acknowledged here in Washington,
Speaker 15: that this would never actually become a case.
Speaker 19: Yeah, a little bit. In fact, I had some conversations
Speaker 19: with some of my friends, by Republican friends who are
Speaker 19: complaining about, well, they're charging trump but they're not charging Hunter.
Speaker 19: And then you know, say, well, okay, if they charge
Speaker 19: Hunter with them charging Trumpet very quiet, very quickly. So again,
Speaker 19: whether or not it's a serious charge, I guess we
Speaker 19: don't know yet until we see the facts in the file.
Speaker 15: Make the idea of an August fourteen trial date the
Speaker 15: all the while, and that might frankly be a bigger
Speaker 15: story that's been kind of overshadowed by the Hunter headline.
Speaker 15: Do you think a trial actually begins in August?
Speaker 19: And no, you're not supposed to make, you know, absolute
Speaker 19: tradictions when you're dealing with politics, and there's a lot
Speaker 19: of politics here. But I'd be willing to bet my
Speaker 19: house there's no trial in August fourteen. Keep in mind,
Speaker 19: the right to a speedy trial, which does exist under
Speaker 19: our constitution, is possessed by the accused not by the government.
Speaker 19: So you know, if Donald Trump wants to have slowed
Speaker 19: things down, there's going to be plenty of opportunities to do. So.
Speaker 19: You've made a good point about how hard it's going
Speaker 19: to be the picking jury. I disagree with your the
Speaker 19: reporter respectfully. I think it's going to be very, very
Speaker 19: difficult to pick a jury here because everybody's going to
Speaker 19: have an opinion about it, and Donald Trump is going
Speaker 19: to be looking for one juror who's willing to say,
Speaker 19: you know, I don't care what he did. I'm not
Speaker 19: convicting it because he only has to get it one
Speaker 19: person to hold out, and the government knows that. So
Speaker 19: that's going to take a long time. The government may
Speaker 19: try to recuse the judge. That may take a long time.
Speaker 19: It's going to be flights over evidence that may take
Speaker 19: a long time. So if I'm a betting man, and
Speaker 19: I am, I'm not betting among them, and.
Speaker 15: I am, says Mick mulvaney that said, does the trial
Speaker 15: begin before the presidential election? Or is that really what
Speaker 15: we're talking about here? Anything to delay it past the election.
Speaker 19: I talked to a lot of my friends who were
Speaker 19: in the federal prosecuting business. A lot of folks who
Speaker 19: used to do white collar criminal defense to a man
Speaker 19: and a woman, they all thought this trial would take
Speaker 19: place after the election. I think we're all surprised by
Speaker 19: this announcement, at least of this early date. And whether
Speaker 19: or not that changes the caucus, you know, I'd have
Speaker 19: to talk to folks who've done this for twenty thirty years.
Speaker 19: I'm not sure how Donald Trump delays it for a
Speaker 19: year and you know, four months or whatever. But I
Speaker 19: still think it's a better chance than not that it
Speaker 19: comes after the election. But again, this has thrown me
Speaker 19: a curveball along that everybody else see. It's August fourteenth day.
Speaker 15: I don't know if you saw Donald Trump and Brett
Speaker 15: Bayer on Fox News. There were some pretty remarkable moments,
Speaker 15: and it's been suggested that some of the could be
Speaker 15: entered as evidence in the trial, particularly as he discusses
Speaker 15: moving the boxes around and what was in the boxes.
Speaker 15: Here's the moment that you might have missed.
Speaker 2: So why not just hand them over then?
Speaker 13: Because I had a boxes, I want to go through
Speaker 13: the boxes and get all my personal things out.
Speaker 12: I don't want to hand that over to Narrow yet.
Speaker 15: And I was very busy, as you've sort of seen.
Speaker 19: Yeah, but according to the Diamonds, you then tell this
Speaker 19: aide to move to other locations after telling your lawyers
Speaker 19: to say you'd fully complied with the subpoena when you hadn't.
Speaker 12: But before I send boxes over, I have to take
Speaker 12: all of my things.
Speaker 15: Actually, the former president do damage to himself.
Speaker 19: Yes, I was watching it. I was actually texting a
Speaker 19: little bit with Berett Bair. You know, the interview wasn't live.
Speaker 19: All I could think of is now the public sort
Speaker 19: of gets a chance to see why so many of
Speaker 19: Donald trump lawyers quit because he made things much much
Speaker 19: worse for himself. There's one thing that it wasn't in
Speaker 19: the segment you just picked up, but it was right
Speaker 19: about the same time where he said. Brett asked him
Speaker 19: about the papers that he held up on the audio tape,
Speaker 19: and Trump said, there was nothing there. There was nothing there.
Speaker 19: It was just a newspaper clippings and stuffy pretending like
Speaker 19: it was favored or mus be classified.
Speaker 3: But it's not.
Speaker 19: In order to make that defense, he has to testify.
Speaker 19: And I can guarantee you that Donald Trump is not
Speaker 19: testifying in this case, so that is going to be
Speaker 19: used against him. Most of a lot of that video
Speaker 19: will be used to give to him.
Speaker 17: This is Bloomberg day Break Today, your morning brief on
Speaker 17: the stories making news from Wall Street to Washington and beyond.
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Speaker 10: Join us again tomorrow morning for all the news you
Speaker 10: need to start your day right here on Bloomberg Daybreak