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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. It's a dramatic intervention

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Speaker 1: to staaloff and imminent crash in the guilt market. My

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Speaker 1: pledging unlimited purchases along dated bonds. But isn't that kind

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Speaker 1: of a cross currents with Prime Minister list trust tax

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Speaker 1: cuts bill that was just recently announced kind of whip

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Speaker 1: sawing markets. Um, you know, over the last several days,

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Speaker 1: we want to get a little bit of perspective about

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Speaker 1: what's happening on the trading floors around the world. Vince

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Speaker 1: Cignarella joins his global macro strategist with Bloomberg News. Vince,

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Speaker 1: what do you make of what's coming out of our

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Speaker 1: good friends over in London quantitative easing? No, No, this

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Speaker 1: was all taken up basically because of the pension issued.

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Speaker 1: UH pensions have taken a beating on this moving bonds Uh,

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Speaker 1: there were some questions about liquidation and liquidity issues. So

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Speaker 1: the b if you really just stepped in to protect

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Speaker 1: the pension funds, um and as one treasury uh trade

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Speaker 1: or friend of mine st today is the b V

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Speaker 1: essentially engaging in yield curve control by another name, similar

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Speaker 1: to the Bank of Japan moves of later and you

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Speaker 1: could argue that that's realisted. What's going on. I'm looking

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Speaker 1: at the long end of the curve here down a

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Speaker 1: hundred basis points in yield. Yesterday we went over five

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Speaker 1: on the UK thirty year. Today we're under four. That

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Speaker 1: kind of move um looks like panic. Well, you know

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Speaker 1: it's the it's the same situation. It is because the

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Speaker 1: pension funds are out in the long end, so that's

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Speaker 1: where the banking is playing. Um. It's almost an operation

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Speaker 1: twist if you will, um as to what they're doing

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Speaker 1: the stabilize the race situation. You know, what does it mean?

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Speaker 1: What does it mean? Vince? If you're a trader, If

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Speaker 1: you're a trader who bought the thirty year guilty yesterday,

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Speaker 1: I guess you're in pig heaven. But if you are short,

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Speaker 1: if you went short them yesterday, Um, you're closing up shop. Yeah, absolutely, no,

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Speaker 1: that's this is uh, this is a very uh, this

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Speaker 1: is a rip your face off kind of moves. Say

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Speaker 1: on the street, if you were if you decided you

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Speaker 1: were going to short that market yesterday. Um. But you know,

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Speaker 1: it's it's a little bit of you know, fiscal irresponsibility

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Speaker 1: as to what was happening prior to today and what

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Speaker 1: the markets were spanking the pound and that market yesterday

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Speaker 1: aggressively because they don't like what the what the the

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Speaker 1: fiscal policy is about cutting taxes and increasing spending, while

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Speaker 1: the Bank of England is talking about raising two bases

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Speaker 1: points to try to fight installation. It's you've got the

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Speaker 1: Treasury Department and the and the Bank of England working

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Speaker 1: at odds, which is an almost emerging market kind of crisis.

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Speaker 1: You you've taken a cheap tank jeep ten country and

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Speaker 1: you've thrown it into em almost. I mean, how often

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Speaker 1: in developed markets do um bond yields move one full

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Speaker 1: percentage point in the space of like twenty minutes. Vince,

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Speaker 1: are we highly highly a luxe Vince, are we gonna

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Speaker 1: get parity with the pounds, sterling and dollar because the

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Speaker 1: pound hasn't exactly strengthened. We're at one oh six ninety

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Speaker 1: seven right now. I think the currency is very much

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Speaker 1: in danger of a collapse. I think, you know, what

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Speaker 1: depends on on what the what the Bank of England

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Speaker 1: does next. I mean, you know, the Bank of Thing

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Speaker 1: and raising rights now to try to defend the pound

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Speaker 1: is going to make situation worse. It's gonna look like

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Speaker 1: the Sorrows era where markets are going to see the

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Speaker 1: banket thing in a panic mode trying to protect Sterling,

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Speaker 1: trying to protect the currency by raising rates, and the

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Speaker 1: market is going to take that, you know, a bit

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Speaker 1: between their teeth and see this as an opportunity to

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Speaker 1: push them to see how far they can go, because

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Speaker 1: there's only so far they can raise rates to try

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Speaker 1: to protect the pound. When you have more motgage rate

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Speaker 1: um mortgages uh going back to being marked up, and

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Speaker 1: you know what does that do to the consumer? You're

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Speaker 1: giving them money in a tax cut, but then you're

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Speaker 1: taking it away by higher mortgage rates. So it it's

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Speaker 1: it's literally like throwing money into the fireplace. It just

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Speaker 1: doesn't help you. I'll remind our listeners that you know

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Speaker 1: here in the US, you get a thirty year fixed

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Speaker 1: mortgage in the UK. Often um the mortgage you get

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Speaker 1: us for less than ten years. So you I think

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Speaker 1: there are one point eight million people in the UK

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Speaker 1: who need to refy their mortgages this year. Still, Yeah,

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Speaker 1: tough situation going from zero to you know, well maybe

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Speaker 1: they had a three percent rate and now they're looking

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Speaker 1: at like nine. So Vince, coming back to this side

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Speaker 1: of the ocean, Federal Reserve, they look at all this

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Speaker 1: global uncertainty, they look at kind of the instability coming

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Speaker 1: out of Great Britain, one of our biggest partners. Does

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Speaker 1: that influence them at all? Well, I think they have

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Speaker 1: to keep this in mind because you have the same

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Speaker 1: similar situation here in the US. You've seen the stock

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Speaker 1: markets drop some what orse um, does that put pressure

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Speaker 1: on US pension funds. It's very likely you're probably going

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Speaker 1: to see another round of earnings that are are not

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Speaker 1: going to look too rosy because of the moving a dollar. Um.

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Speaker 1: You know, I wouldn't be surprised if we took a

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Speaker 1: run at one double ow and sterling that that would

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Speaker 1: be you know, the curtain call, if you will, for

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Speaker 1: the global central banks or the G ten central banks.

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Speaker 1: Uh to step in and do some coordinated intervention because

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Speaker 1: part of the problem too it will stronger dollar, is

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Speaker 1: that that that weekends. You know that that lessons prices

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Speaker 1: on imports, um and and put potentially makes the inflation

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Speaker 1: situation worse for than set suset as well. All Right,

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Speaker 1: It's very interesting, and I also wonder if people on

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Speaker 1: the wrong side of the trade have to sell treasuries,

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Speaker 1: if energy importers have to sell treasuries, if the Bank

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Speaker 1: of Japan has to sell treasuries, or the Finance ministry

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Speaker 1: to show up their currency. All right, Vin Signarella, good stuff.

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Speaker 1: Appreciate a macro strategist for Bloomberg. Give us a sense

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Speaker 1: of just kind of what he's hearing on the street

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Speaker 1: from bond traders, currency traders, and you know a lot

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Speaker 1: of uncertainty, particularly coming out of the UK with what's

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Speaker 1: been happening over there over the past early three or

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Speaker 1: four or five days, just putting a lot of uncertainty

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Speaker 1: into the markets. Let's check in with Katarina sem and Eddie.

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Speaker 1: She's a senior VP at Morgan Stanley Private Wealth Management. Katarino,

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Speaker 1: what are the phone calls that the incoming calls you're

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Speaker 1: getting from your clients, any any themes emerging to you

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Speaker 1: uh this year, Well, this has certainly been a challenging

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Speaker 1: year and a challenging market, and investors are concerned and

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Speaker 1: the phone calls were getting uh, you know, just really

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Speaker 1: you know, the vocalize this year that that investors are

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Speaker 1: you know, experiencing looking at their portfolios being down so much.

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Speaker 1: And what has been unusual about earlier in the year

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Speaker 1: is that it wasn't just the stocks that were down,

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Speaker 1: at the stocks and bonds that were down. So investors

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Speaker 1: are looking for the guideline from us, you know, as

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Speaker 1: far as what they should do, and what we're recommending

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Speaker 1: is above all to not fear cell because as easy

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Speaker 1: as it is to you know, to to be concerned about,

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Speaker 1: you know, all of the markets, you know, in our view,

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Speaker 1: there is an end inside where nearing the end of it,

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Speaker 1: the well they're they're they're absolutely could be, and sometimes

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Speaker 1: things are worse before they get better. And in our view,

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Speaker 1: the biggest risk to the market are the earnings declining

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Speaker 1: earnings and the earnings revisions that you know, we see

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Speaker 1: ahead because the reality is that we're most likely going

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Speaker 1: to have poor inflation remain high for some time market

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Speaker 1: is already pricing in the interest rate increases, you know,

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Speaker 1: but with earnings revisions that are not done yet. You know,

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Speaker 1: this is that next leg down that we are expecting

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Speaker 1: towards the end of the year. But this is again

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Speaker 1: not to say that we are bearish in the long run,

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Speaker 1: but I mean, we're looking for this. I think the

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Speaker 1: median is for two dollars a share SMP meeting SMPUM

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Speaker 1: five hundred year end EPs. What are you what are

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Speaker 1: you looking for? Well, the question is you know what

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Speaker 1: kind of recession we're going to get. I think the

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Speaker 1: consensus is that we most likely are going to get

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Speaker 1: the economic recession. And if it's going to be a

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Speaker 1: mild recession, we probably are going to end the year

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Speaker 1: at a sumwhere around thirty four hundred and the SMP.

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Speaker 1: But if if it's more of a severe recession outcome,

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Speaker 1: you know, we might be looking at three thousand, you know,

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Speaker 1: And it's hard to predict these things because you know,

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Speaker 1: of course, there is a certain amount of lag between

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Speaker 1: the FED action and the desired outcome. And you know,

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Speaker 1: the what we're all questioning right now is that truly

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Speaker 1: going to be data dependent? You know, as we rely

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Speaker 1: on them to be or will they react to the

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Speaker 1: pressures of the market, you know, and continue tightening, you know,

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Speaker 1: and as a result push us to the economic recession.

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Speaker 1: All right, to have a programmed question here that I've

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Speaker 1: written to myself that a couple of days um. And

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Speaker 1: this comes from a long time listener. I thought it

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Speaker 1: was very smart. He said, last year's inflation is transitory.

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Speaker 1: Is this year's short and set and shallow recession? Um?

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Speaker 1: What changes short and shallow? Too long and severe? What's

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Speaker 1: what's that hinge on? Well? I think that that's where

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Speaker 1: the risk or federal reserve overshooting or raising rates too much,

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Speaker 1: you know, because we're not seeing the desired reaction from

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Speaker 1: the inflation. That's where that comes in, because we have

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Speaker 1: to allow some time between the rate hikes and an

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Speaker 1: inflation coming down, you know. But the the current economic environment,

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Speaker 1: you know, has so many pressures. The cost of doing businesses,

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Speaker 1: high profit margins are getting narrower. Consumers are reluctant to

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Speaker 1: spend money on most things outside of poor necessities, you know,

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Speaker 1: unless you know, you're looking at travel and entertainment, which

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Speaker 1: is like natural in the post COVID environment now. But

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Speaker 1: this is really the you know, the time where negative

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Speaker 1: earnings and re visions that we're expecting over the next

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Speaker 1: couple of quarters take the central stage, because ultimately, once

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Speaker 1: the earnings are revised, it will be possible for the

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Speaker 1: u S company to meet earnings and exceed earnings, which

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Speaker 1: is going to be the pivot that we're looking for

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Speaker 1: into the next bowl market. But we're not quite there yet.

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Speaker 1: So are you. If an investor comes to you with

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Speaker 1: new money, what do you do with it? Well, with

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Speaker 1: new money currently understanding the risks and understanding you know,

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Speaker 1: what is ahead of us. You know, we would dollar

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Speaker 1: cost average into the equity market. We definitely would recommend

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Speaker 1: staying invested, but we will pivot and lean towards the

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Speaker 1: defensive sectors. Sectors like healthcare, utilities, consumer staples, and reads

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Speaker 1: all given in paying stocks because income is extremely important

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Speaker 1: in this inflationary environment. You know. The other thing to

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Speaker 1: consider is relative to bonds, stocks are pretty expensive. But finally,

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Speaker 1: unlike earlier in this year, there is a little bit

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Speaker 1: of a safe haven in fixed income is actually in

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Speaker 1: short term high quality UM corporate bonds and treasuries. We

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Speaker 1: can get significant amount of yield in these sectors. And

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Speaker 1: you know, if there is an argument to be made

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Speaker 1: for a safer acid allocation while we get through this

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Speaker 1: challenging bolatile UH cycle in the market, you know that

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Speaker 1: that makes sense for a lot of investors here, all right,

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Speaker 1: Katerine and good stuff. Always appreciate getting your perspective, Katerina

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Speaker 1: semineity Uh, Senior VP at more Extantly Private Wealth Management. Well,

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Speaker 1: I've always said trading biotech stocks is a tough way

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Speaker 1: to make a living. You really have to be right.

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Speaker 1: I mean, if you're right, you make a lot of money,

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Speaker 1: but boy, if you're wrong, you'll lose a lot of money.

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Speaker 1: Here on these new drugs, today is a good day

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Speaker 1: for Biogen and it's Japanese partner ISI. Stocks are both surging.

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Speaker 1: At Biogen up about thirty six percent today. They had

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Speaker 1: some good news on one of their trials about one

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Speaker 1: of the Alzheimer's drugs. And to give us the latest

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Speaker 1: is Robert Langworth. He covers all things biotech healthcare for

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Speaker 1: Bloomberg News. Robert talked to us about what bio jen

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Speaker 1: and Isai are are are doing today, what they're drug

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Speaker 1: is and kind of what we learned today. Yeah, so

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Speaker 1: this is a trial I mean actually run by a

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Speaker 1: SI as I did this trial, in charge this trial

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Speaker 1: and did this trial. Uh it's in partnership with Biogen,

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Speaker 1: but as I was really running in biogeneral, I think

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Speaker 1: would get half of the profits as far as long

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Speaker 1: standing collaboration. But basically, this is a drug to remove amyloids,

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Speaker 1: this toxic protein for the brains Alzheimer's patients. And drug

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Speaker 1: company has been trying to do this uh uh for

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Speaker 1: many years and have tested all sorts of other drugs

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Speaker 1: to do this, and all the previous trials of other

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Speaker 1: drugs for amyloid of generating their mixed mixed results are

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Speaker 1: failed entirely in trials, so they've been working on years

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Speaker 1: and years with little success. You may remember that Biogen

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Speaker 1: itself had another drug that was actually approved called aji Helm.

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Speaker 1: It was actually approved in one of the most controversial

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Speaker 1: u S approvals and history uh and it was another

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Speaker 1: emoid drug with the and but then Medicare refused to

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Speaker 1: cover it because the results of that. Their trials are

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Speaker 1: kind of contradictory and no one could figure out whether

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Speaker 1: it worked or didn't work. So now this trial is

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Speaker 1: another amyloid lowering drug under the Biogen a side partnership.

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Speaker 1: But this one, as I said, aside was kind of

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Speaker 1: was was leading the charge on and this trial was

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Speaker 1: the first trial then emily lowering drug to show it

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Speaker 1: kind of a clearly uh clearly statistically positive effect and

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Speaker 1: slowing cognitive decline. Like I've heard it described as like

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Speaker 1: a plaque plaque on your brain. Yeah, there's kind of

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Speaker 1: a kind of four mittle plaques in the brain. No

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Speaker 1: one is exactly sure how they are toxic. It's thought

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Speaker 1: to be toxic. It's one of the leading kind of

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Speaker 1: theories of Alzheimer's. Uh everything about alzremers of controversial, but

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Speaker 1: this is kind of one of the leading theories. So

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Speaker 1: basically it appeared in this very big trial, this new

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Speaker 1: director show you know, a a small positive effect that

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Speaker 1: it appears to be kind of quite modest. It's like

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Speaker 1: zero point five, zero point four or five points from

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Speaker 1: the eight point scale. So they think the big debate

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Speaker 1: next is going to be like how clinically meaningful you know,

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Speaker 1: is this? But you know, everyone thinks this is enough

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Speaker 1: to get approval. Side question kind of why do they

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Speaker 1: give these drugs such bad names? Ad you helm was

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Speaker 1: the last one? What's this one? Called it's similarly unpronouncing. Well,

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Speaker 1: this is a generic name, is Lacannon, mab map stands

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Speaker 1: or monocola antibody. But but it's gonna get it. If

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Speaker 1: it's approved, it's going to get a brand name. And

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Speaker 1: we don't know what that's gonna be, so it could

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Speaker 1: be another incomprehensible brand name, you know, who knows. Is

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Speaker 1: that a strategy though? Is that part of the marketing strategy?

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Speaker 1: Like if you can't pronounce it and you can't remember

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Speaker 1: what it is, then you must think it's gonna work. Yeah,

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Speaker 1: I don't know where they come up with these names.

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Speaker 1: You know, drug companies lots, you know, like come up

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Speaker 1: with names, lots of xs and zs in them, you know.

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Speaker 1: And I think they've spent spent a lot of money

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Speaker 1: consultants to come up with the name. So how they

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Speaker 1: do it, that's just the mystery. So Robert, I see

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Speaker 1: this stock, this Biogen stock. It's a forty billion dollar

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Speaker 1: market cap stock. It's a thirty six day That tells

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Speaker 1: me that this is a breakthrough drug. But you're telling

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Speaker 1: me it's not really, or that there are a lot

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Speaker 1: of punters in in bio tech. I think, yeah, I guess,

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Speaker 1: I mean this move and the stock tells me that

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Speaker 1: this is radical, and it's not radical, is it. It's

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Speaker 1: a step along the way, so like so yeah, the

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Speaker 1: step along the way. But you know, they haven't had

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Speaker 1: really any clear cut steps all in the way, and

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Speaker 1: it stord of like, you know, all the steps aren't aborted.

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Speaker 1: So you know, this is like the first successful trial

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Speaker 1: disease felling trial. So in that sense, it's, you know,

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Speaker 1: a breakthrough in critical trials, you know, but whether there

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Speaker 1: was a patient, it's the medical breakthrough not not so clear. Well,

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Speaker 1: they said the they said the use of the drug

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Speaker 1: reduces the pace of cognitive decline in people with early

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Speaker 1: disease by t over eighteen months when compared to placebo.

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Speaker 1: That doesn't sound great, but it sounds better than nothing. Yeah,

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Speaker 1: it's kind of like, you know, better than nothing. It's

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Speaker 1: it's not so clear whether you know, you and the

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Speaker 1: patient of family would even detect the change in the difference.

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Speaker 1: I mean, you know, if you think about it, like,

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Speaker 1: you know, if you were going to decline, you know, yeah,

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Speaker 1: a hundred points in the scale, you're still going to

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Speaker 1: decline seventy three points in the scale. That's difference, so,

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Speaker 1: you know, but I guess they they're touting the possibility

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Speaker 1: that it over a longer period of time, it may

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Speaker 1: do even an even better job. Right. Um Um, They

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Speaker 1: say that the top line data as strong as it

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Speaker 1: can be with high statistical significance across all end points.

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Speaker 1: Data doesn't get much cleaner than this in biotech. That's

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Speaker 1: according to BEMO Capital Markets analyst Evan Seagerman. You know

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Speaker 1: that because you probably wrote the story. But um, yeah, so,

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Speaker 1: I mean, this is the first thing I read when

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Speaker 1: I woke up this morning. I looked over the headlines

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Speaker 1: and I picked this out because it's important to me

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Speaker 1: on a you know, personal level, and I think for

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Speaker 1: millions of people it's a huge issue. It's a horrible

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Speaker 1: disease that affects everybody in the family if one person

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Speaker 1: gets it. Yeah, no, it's a very difficult disease. You know,

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Speaker 1: the caregiver cost cost of this disease, you know, are

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Speaker 1: very very high. And this you know, this drug, you know,

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Speaker 1: it doesn't stop the decline. It only you know, slows

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Speaker 1: it close it somewhat. And and we don't know a

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Speaker 1: lot of these details. All we have right now is

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Speaker 1: really just a press release from the company. Is there

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Speaker 1: anything else, Robert, Is there a moon shot out there,

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Speaker 1: maybe something that attacks the disease differently than just removing

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Speaker 1: the plaque from your brain? Um? Is anyone working on

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Speaker 1: something that could be better? Yeah, So, coming are working

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Speaker 1: on lots of things. Now. One of the hopeful things

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Speaker 1: is that there's a much kind of broader array of

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Speaker 1: attempts doing different strategies to try to treat the disease. Now,

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Speaker 1: it's not all just focused on this one idea amyloid.

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Speaker 1: And you know, it seems, you know, clear a lot

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Speaker 1: of people are saying that, you know, we'll need to

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Speaker 1: make this ultimately more like cancer and attack it from

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Speaker 1: like three or four like different drugs at once, using

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Speaker 1: that attack three or four different mechanisms, because clearly, you know,

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Speaker 1: removing amyloidcase, this drug does a tremendous job at removing amyloid,

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Speaker 1: but what you get is this tony seven percent difference.

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Speaker 1: So it's clearly, you know, it seems to say that

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Speaker 1: that Emily's not the only thing where you're gonna have

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Speaker 1: to suggest go after multiple causes and over time, Robert,

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Speaker 1: just thirty seconds left in a post COVID world, is

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Speaker 1: it easier to get drugs approved or is it has

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Speaker 1: that changed at all? Um So you know there's no

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Speaker 1: fundamental change. I don't. I don't think in the in

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Speaker 1: the in the f days kind of approval strategy as

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Speaker 1: a result of COVID that I know of. But you know,

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Speaker 1: certainly the the neurology division that has been looking at

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Speaker 1: throughout s light the ones for all shimers. They you know,

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Speaker 1: they are you know, uh, it seems to me, you know,

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Speaker 1: taking an aggressive strategy and you know, and trying to

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Speaker 1: you know, get drugs approved. That show begins shows some

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Speaker 1: kind of a difference. You know, they approved the biogen

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Speaker 1: drug you know, based on bio mark is based on

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Speaker 1: emiloid loring alone. This one is the first one. This

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Speaker 1: one goes beyond that. It actually shows like a measurable

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Speaker 1: critical difference. But it's small, It's really small, all right, Robert, good,

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Speaker 1: good stuff. Thanks to that porting. We appreciate it, Robert Langreth.

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Speaker 1: I want to bring in our next guest, Alo Tero.

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Speaker 1: He's a portfolio manager at Armada E T F Advisors.

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Speaker 1: Uh and they've got a US read E T F

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Speaker 1: H A U S. Talking about the housing market. We

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Speaker 1: had some pending home sales today month on month was

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Speaker 1: down two percent. The consensus was for a decline at

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Speaker 1: one point five percent, but on a year on year basis,

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Speaker 1: that's how I like to look at it. UH came

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Speaker 1: in and minus twenty two and a half percent. So

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Speaker 1: looks like this housing market rolling over al. Thanks so

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Speaker 1: much for joining us here, talk to us about your

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Speaker 1: h A U S read E t F and kind

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Speaker 1: of kind of what you're trying to do with this

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Speaker 1: et F and then love to get also your over

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Speaker 1: you just kind of this where we are in this

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Speaker 1: housing market. Sure ture's a good good morning. Thanks so

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Speaker 1: much for having me. Yes, and our MADA et F

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Speaker 1: is a relatively newly formed U advisory firm. Houses are

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Speaker 1: first product. UH. We basically have background in UH, in

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Speaker 1: the read industry, in the into et F industry, and

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Speaker 1: then also in the direct real estate industry. And the

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Speaker 1: goal with with house was really UM and our founder

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Speaker 1: was looking at about two years ago and it was

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Speaker 1: looking for a residential red e t F UM UH

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Speaker 1: and he said, g one doesn't exist, maybe we need

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Speaker 1: to create one, and that's exactly what what he did,

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Speaker 1: and we launched a fund back in March, and again

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Speaker 1: it's residential read ets. So it's it is certainly housing

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Speaker 1: related to the extent that what goes on in the

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Speaker 1: residential read market that's multifamily, uh, single family rental manufactured

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Speaker 1: housing certainly a correlation there with the single family housing market. UM.

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Speaker 1: But again the goal here is to number one current income.

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Speaker 1: Number two hard assets, predictable cash flows, uh, you know,

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Speaker 1: attractive dividends that are are growing an attractive rate, strong

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Speaker 1: balance sheets, so lots of lots of good characteristics that

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Speaker 1: roll up into the residential read market. So what do

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Speaker 1: um the flows look like thus far? What are you

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Speaker 1: looking at in terms of assets under management? So where

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Speaker 1: we're tiny, guys. We we launched back in early March.

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Speaker 1: We have a couple of you know, uh several several

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Speaker 1: million dollars in the fund right now. We've launched into

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Speaker 1: a bit of a volatile environment. I think a lot

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Speaker 1: of folks that we're talking to like the like the

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Speaker 1: idea residential reaths uh you know at residential real estate

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Speaker 1: again broadly defined as I mentioned earlier and not just housing,

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Speaker 1: you know, has has been a favorite part of the

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Speaker 1: investment landscape at landscape for a very long time. UM. Again,

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Speaker 1: rent growth more recently has just been off the charts. Uh.

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Speaker 1: Certainly that's starting to moderate, and I think it's a

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Speaker 1: good thing. But as we look back over the last

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Speaker 1: you know, quarter, two quarters, and we talked to our

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Speaker 1: constituent companies, Uh, you know you hear the worst historic

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Speaker 1: getting tossed down a lot. We've we've had historic rent growth.

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Speaker 1: We've had occupancy levels and and tendant retention, resident retention

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Speaker 1: levels that have really just been off the charts, and

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Speaker 1: lots of lots of that house to have to do

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Speaker 1: with some of the structural change that have gone on

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Speaker 1: in the in the market of the last couple of years.

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Speaker 1: But we were continuously good demand for this product. I

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Speaker 1: can imagine if you'd launched at the beginning of UM,

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Speaker 1: you'd just be shoveling out cash, right, But uh, you

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Speaker 1: come in at a time, well basically at the peak,

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Speaker 1: right when I bought my house, you launched your house, UM,

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Speaker 1: and I feel like I got the very top price

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Speaker 1: I possibly could have paid, but I did at least

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Speaker 1: get a little rate. And now we're looking at mortgage

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Speaker 1: rates up over seven percent in some cases. UM, is

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Speaker 1: this do you think is this part of the problem

428
00:22:51,119 --> 00:22:53,120
Speaker 1: for house And do you have other products that you're

429
00:22:53,119 --> 00:22:56,879
Speaker 1: gonna that you're looking to launch around this second to

430
00:22:56,920 --> 00:22:59,200
Speaker 1: your answer second question, Yeah, we are looking at other

431
00:22:59,240 --> 00:23:02,520
Speaker 1: products touch launch around this, um, but think the heart

432
00:23:02,560 --> 00:23:04,840
Speaker 1: of the matter, you know, and as it relates to housing,

433
00:23:04,920 --> 00:23:07,640
Speaker 1: and and it's it's a long term investment. You long

434
00:23:07,760 --> 00:23:10,320
Speaker 1: term investment. You recently bought your house. You're gonna hopefully

435
00:23:10,359 --> 00:23:12,480
Speaker 1: be in there on average right right sitting you know,

436
00:23:12,560 --> 00:23:15,200
Speaker 1: you know, fifteen years or so they're about so it's

437
00:23:15,200 --> 00:23:20,160
Speaker 1: a long term investment. Obviously, historically, um HP a house

438
00:23:20,200 --> 00:23:25,040
Speaker 1: price appreciation has been inflationary plus so, so there there's

439
00:23:25,080 --> 00:23:29,080
Speaker 1: a hedge against inflation there. Um. You know, market timing

440
00:23:29,119 --> 00:23:32,520
Speaker 1: is always so so difficult, but we see an opportunity,

441
00:23:32,640 --> 00:23:34,840
Speaker 1: especially when you look at what's going on in the

442
00:23:34,920 --> 00:23:37,800
Speaker 1: housing market and as uh and and and as that

443
00:23:38,200 --> 00:23:40,600
Speaker 1: home prices have gone up so much that really tends

444
00:23:40,640 --> 00:23:44,439
Speaker 1: to also keep residents in apartments longer. And that's I

445
00:23:44,480 --> 00:23:46,879
Speaker 1: think one of the interesting things about what we're seeing

446
00:23:46,880 --> 00:23:51,520
Speaker 1: today in the rental market. Um, there's an affordability problem

447
00:23:51,560 --> 00:23:55,680
Speaker 1: with with home ownership today, and that affordability gap between

448
00:23:55,800 --> 00:23:59,760
Speaker 1: owning and renting makes it still a very attractive proposition

449
00:23:59,800 --> 00:24:02,120
Speaker 1: to rent, and we think that's a proposition that's going

450
00:24:02,200 --> 00:24:04,560
Speaker 1: to certainly last through the end of twenty two and

451
00:24:04,600 --> 00:24:08,040
Speaker 1: most likely into three as well. All Right, Al, good stuff.

452
00:24:08,080 --> 00:24:10,080
Speaker 1: I appreciate you coming on and talk to us about

453
00:24:10,080 --> 00:24:14,080
Speaker 1: the housing market here. Al oh Taro, portfolio manager of

454
00:24:14,200 --> 00:24:17,960
Speaker 1: Armada E. T F Advisors. Uh, looking at you know,

455
00:24:18,080 --> 00:24:21,240
Speaker 1: mortgage rates north of six percent and it's really really

456
00:24:21,240 --> 00:24:24,080
Speaker 1: headwinds for the real estate market after that surge during

457
00:24:24,080 --> 00:24:29,320
Speaker 1: the pandemic. Trust Company of the West the kids now

458
00:24:29,359 --> 00:24:33,240
Speaker 1: call it TCW. It's a monstrous money management firm out

459
00:24:33,280 --> 00:24:35,439
Speaker 1: on the West coast in Los Angeles. A lot of

460
00:24:35,440 --> 00:24:37,840
Speaker 1: really smart people in the equities and fixed income business.

461
00:24:38,480 --> 00:24:42,200
Speaker 1: The fixed income folks that we've talked to TCW from,

462
00:24:42,240 --> 00:24:44,320
Speaker 1: you know, over the last I don't know how long,

463
00:24:44,359 --> 00:24:47,480
Speaker 1: but you know many many quarters been really really conservative

464
00:24:47,480 --> 00:24:50,720
Speaker 1: in their outlooking. Boy have they been right? Uh here,

465
00:24:50,760 --> 00:24:54,320
Speaker 1: double digit declines and most fixed income businesses. Steve Kane

466
00:24:54,320 --> 00:24:56,639
Speaker 1: co c I O in General's portfolio manager with t

467
00:24:56,720 --> 00:24:59,960
Speaker 1: c W, joins us here today. Steve, the fix income

468
00:25:00,080 --> 00:25:02,960
Speaker 1: business is brutal. Nobody wants to talk to you guys

469
00:25:02,960 --> 00:25:05,560
Speaker 1: at cocktail parties. What do you do? What do you

470
00:25:05,600 --> 00:25:08,240
Speaker 1: do now? Good? What do you do now with your

471
00:25:08,280 --> 00:25:11,280
Speaker 1: feather reserve? Is just doubling down on raising these interest rates?

472
00:25:11,920 --> 00:25:14,680
Speaker 1: Well well, guys, actually, even in the good times when

473
00:25:14,680 --> 00:25:16,520
Speaker 1: bonds are doing well, no one wants to talk to it,

474
00:25:17,480 --> 00:25:21,080
Speaker 1: so that this environment is no different from that perspective.

475
00:25:21,640 --> 00:25:25,280
Speaker 1: Is it a buy now? Jeff Goodlock? I believe um

476
00:25:25,320 --> 00:25:29,200
Speaker 1: a tc w alum. He's been buying bonds over the

477
00:25:29,280 --> 00:25:31,320
Speaker 1: last couple of days, at least according to his Twitter,

478
00:25:31,400 --> 00:25:35,119
Speaker 1: but he says it's been partially painful. I guess until

479
00:25:35,400 --> 00:25:39,480
Speaker 1: you know, the last few hours. Yeah, yeah, and uh yeah,

480
00:25:39,560 --> 00:25:42,240
Speaker 1: I think we're seeing a lot more value in the market.

481
00:25:42,320 --> 00:25:45,240
Speaker 1: I'm you know, starting with the idea that fed tightening cycles.

482
00:25:45,320 --> 00:25:48,120
Speaker 1: You know where you were starting this conversation. They're never

483
00:25:48,200 --> 00:25:51,200
Speaker 1: fun there, you know, as I sort of joke with

484
00:25:51,520 --> 00:25:53,720
Speaker 1: some of our folks around here, you you don't know

485
00:25:53,800 --> 00:25:56,760
Speaker 1: they're over, But when you start to taste the bile

486
00:25:56,840 --> 00:25:58,480
Speaker 1: and the back of your throat, you know you're probably

487
00:25:58,480 --> 00:26:03,720
Speaker 1: getting close. And we're we're starting to get to that point. Um.

488
00:26:03,760 --> 00:26:05,960
Speaker 1: But yeah, it's been a brutal market. But you know,

489
00:26:06,000 --> 00:26:08,200
Speaker 1: when you talk about real rates in the mid one

490
00:26:08,240 --> 00:26:11,560
Speaker 1: percent level, and investment great bonds five and a half

491
00:26:11,680 --> 00:26:16,000
Speaker 1: plus percent, agency mortgages pushing six percent high yield almost

492
00:26:16,040 --> 00:26:20,080
Speaker 1: to ten. Uh, those start to look very attractive to us.

493
00:26:20,080 --> 00:26:22,679
Speaker 1: So we've you know, we've been scaling in. You know,

494
00:26:22,720 --> 00:26:25,199
Speaker 1: we're a little bit long duration. You know, we like

495
00:26:25,280 --> 00:26:28,359
Speaker 1: the rate environment. We're not firing all our bullets at

496
00:26:28,400 --> 00:26:30,840
Speaker 1: today's level. We think there could be more volatility, probably

497
00:26:30,880 --> 00:26:33,639
Speaker 1: will be in more pressure upward on rates before this

498
00:26:33,760 --> 00:26:36,560
Speaker 1: is all done. But yeah, we're seeing value. So what

499
00:26:36,600 --> 00:26:40,600
Speaker 1: do you do when you see like, uh thirty year

500
00:26:40,720 --> 00:26:46,360
Speaker 1: guilts yielding five do you start to kind of average

501
00:26:46,359 --> 00:26:50,159
Speaker 1: into that or are the markets too volatile to make

502
00:26:50,200 --> 00:26:53,359
Speaker 1: a call? Do you wait till things calm down? Well,

503
00:26:53,359 --> 00:26:55,520
Speaker 1: we actually got that one right, believe it or not,

504
00:26:55,600 --> 00:27:00,399
Speaker 1: that we we actually yesterday weighted in uh thirty year

505
00:27:00,400 --> 00:27:03,520
Speaker 1: agolts right around five percent and then we sold them today.

506
00:27:04,080 --> 00:27:08,400
Speaker 1: Nice thought. Are these long term buy and hold people?

507
00:27:08,400 --> 00:27:10,280
Speaker 1: What are you talking about? All the trades that went

508
00:27:10,359 --> 00:27:13,560
Speaker 1: the other way? But I'm happy to is the idea

509
00:27:13,600 --> 00:27:16,440
Speaker 1: that basically, when you when you make that much money,

510
00:27:16,480 --> 00:27:19,800
Speaker 1: you don't want to get greedy and you just cash in. Yeah, yeah,

511
00:27:19,840 --> 00:27:22,800
Speaker 1: there's a lot of volatility in the UK is certainly

512
00:27:22,840 --> 00:27:26,720
Speaker 1: not a an area where we have a lot of

513
00:27:26,720 --> 00:27:28,840
Speaker 1: confidence in the in the near term direction of where

514
00:27:28,840 --> 00:27:31,480
Speaker 1: things are heading. But when things get to extreme levels

515
00:27:32,240 --> 00:27:34,959
Speaker 1: like we saw, we know we weren't positive rates, we're

516
00:27:34,960 --> 00:27:36,960
Speaker 1: going to peek out there or there would be intervention.

517
00:27:37,040 --> 00:27:40,119
Speaker 1: That wasn't really the thesis, but the markets do push

518
00:27:40,160 --> 00:27:42,959
Speaker 1: back against policymakers at some point, and that will be

519
00:27:42,960 --> 00:27:47,359
Speaker 1: the case with the currency as well. Vigilantes they're back,

520
00:27:47,400 --> 00:27:52,080
Speaker 1: according to Eduard Denny. So see how about credit quality here?

521
00:27:52,160 --> 00:27:53,720
Speaker 1: You know, a lot of folks are saying we're either

522
00:27:53,760 --> 00:27:56,560
Speaker 1: intercession or certainly heading towards one and maybe be a

523
00:27:56,640 --> 00:28:01,000
Speaker 1: severe one. Your team's your analysts, you know, are they

524
00:28:01,160 --> 00:28:04,199
Speaker 1: really sharpening their pencils and kind of checking out all

525
00:28:04,200 --> 00:28:08,160
Speaker 1: the ratios to make sure that they're not overly exposed

526
00:28:08,160 --> 00:28:11,520
Speaker 1: to credit risk? Yeah, yeah, we are. I mean, I

527
00:28:11,560 --> 00:28:14,399
Speaker 1: think the area is to be very concerned about. I

528
00:28:14,440 --> 00:28:18,280
Speaker 1: think are anything that touches Europe given the degree of

529
00:28:18,640 --> 00:28:21,399
Speaker 1: stress that uh, you know that economy is can be

530
00:28:21,480 --> 00:28:25,600
Speaker 1: under with the energy crisis there here in the US. Um, yes,

531
00:28:25,680 --> 00:28:29,199
Speaker 1: we're definitely sharpening our pencils. There's areas of the market

532
00:28:29,240 --> 00:28:33,160
Speaker 1: regulated areas like banks that we think, you know, notwithstanding

533
00:28:33,160 --> 00:28:36,959
Speaker 1: the fact that banks typically do suffer a bit during recessions,

534
00:28:37,600 --> 00:28:39,440
Speaker 1: we think the banks are well positioned today, and so

535
00:28:39,520 --> 00:28:42,800
Speaker 1: there are areas in the investigrade market where we sharpen

536
00:28:42,840 --> 00:28:46,400
Speaker 1: the pencils. We've stressed. Uh, you know what what credits

537
00:28:46,400 --> 00:28:49,000
Speaker 1: will look like in a recession, even a severe one,

538
00:28:49,160 --> 00:28:52,240
Speaker 1: and feel very comfortable at for example, money Center Bank,

539
00:28:52,480 --> 00:28:54,480
Speaker 1: you know, senior debt of money Center banks north of

540
00:28:54,600 --> 00:28:57,760
Speaker 1: two basis points spread to treasuries. We think that's a

541
00:28:58,160 --> 00:29:03,479
Speaker 1: very attractive risk return. Notwithstanding a fairy fairly bearish outlook

542
00:29:03,480 --> 00:29:05,280
Speaker 1: for the economy, we would do we do think we're

543
00:29:05,560 --> 00:29:09,440
Speaker 1: we're heading for resush. Is it too bearish? Yeah? Druck

544
00:29:09,480 --> 00:29:11,760
Speaker 1: and Miller said he would be. I think he said

545
00:29:11,760 --> 00:29:14,120
Speaker 1: he would be shocked if there wasn't a recession by

546
00:29:14,160 --> 00:29:16,520
Speaker 1: the end of the year, is there, Uh, is high

547
00:29:16,600 --> 00:29:19,840
Speaker 1: yield then too risky right now? Yeah? Well, here's what

548
00:29:20,160 --> 00:29:21,959
Speaker 1: I would say about high yield. You know, as I mentioned,

549
00:29:21,960 --> 00:29:25,400
Speaker 1: you know, almost ten percent yield. If you could buy

550
00:29:25,440 --> 00:29:27,680
Speaker 1: your high yield today, put it in a drawer, you know,

551
00:29:27,760 --> 00:29:30,040
Speaker 1: go do a rumpel steel skin, fall asleep and wake

552
00:29:30,120 --> 00:29:32,160
Speaker 1: up in five years. You'd be happy you did that.

553
00:29:32,720 --> 00:29:34,600
Speaker 1: But HW yield doesn't you know, We're we're in a

554
00:29:34,640 --> 00:29:37,960
Speaker 1: mark to market world, total return world. In our sense

555
00:29:38,040 --> 00:29:40,440
Speaker 1: is that we haven't hit the wide and spreads on

556
00:29:40,640 --> 00:29:43,840
Speaker 1: high yield in this cycle at you know, fifty off

557
00:29:44,080 --> 00:29:46,240
Speaker 1: treasuries or a little north of that. We we think

558
00:29:46,280 --> 00:29:49,120
Speaker 1: there's material widening. We're adding a little bit, we're seeing

559
00:29:49,120 --> 00:29:51,880
Speaker 1: a little bit of opportunity, but we're saving our powder.

560
00:29:51,920 --> 00:29:54,760
Speaker 1: We do think, you know somewhere, you know, hundreds of

561
00:29:54,800 --> 00:29:56,800
Speaker 1: basis points wide to hear is where you start to

562
00:29:57,760 --> 00:30:00,400
Speaker 1: back up the truck. All right, good stuff, as always,

563
00:30:00,440 --> 00:30:03,480
Speaker 1: Steve Kane, co c Io and Generali's portfolio manager t

564
00:30:03,600 --> 00:30:07,640
Speaker 1: c W Investment Management. That meeting plus the Capitol Group

565
00:30:07,680 --> 00:30:09,560
Speaker 1: are your two anchor meetings when you go to Los

566
00:30:09,560 --> 00:30:11,560
Speaker 1: Angeles it Those are the ones that you build your

567
00:30:11,560 --> 00:30:13,680
Speaker 1: whole schedule around that. So you're going out there to

568
00:30:13,720 --> 00:30:16,720
Speaker 1: pitch your wears. TCW and Capitol Group. Thanks for listening

569
00:30:16,760 --> 00:30:20,240
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen

570
00:30:20,280 --> 00:30:24,560
Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer.

571
00:30:24,920 --> 00:30:28,880
Speaker 1: I'm Matt Miller, I'm on Twitter at Matt Miller. Three

572
00:30:29,320 --> 00:30:31,800
Speaker 1: pt on False Sweeney, I'm on Twitter at pt Sweeney.

573
00:30:31,840 --> 00:30:34,520
Speaker 1: Before the podcast. You can always catch us worldwide at

574
00:30:34,520 --> 00:30:35,320
Speaker 1: Bloomberg Radio