Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: One thing for certain is the big banks have reported.
Speaker 2: We got another drop today, Goldman Sachs topping profit estimates
Speaker 2: as its equities trading unit posted a jump at revenue.
Speaker 2: It was triple what analysts expected. Capping off what is
Speaker 2: it's pitching as a year of transition. We did see
Speaker 2: Goldman shares trading slightly higher today.
Speaker 3: And then there's Morgan Stanley shares sold off the most
Speaker 3: in three months as its traders fell short of expectations.
Speaker 3: Also executive said Carol that lower wealth management margins may
Speaker 3: stick around. A nice welcoming gift to Morgan's new CEO.
Speaker 4: Ted Peck.
Speaker 2: Yeah, have fun. Morgan Stanley shares down four point seven percent.
Speaker 2: Goldman just up a hare, just up for actually, So
Speaker 2: let's get to with CFA Research, Global Director Industry and
Speaker 2: Equity Research, Ken Leon. He's on Zoom in New York City. Ken,
Speaker 2: by the way, has a hold on Goldman and a
Speaker 2: buy on Morgan Stanley. Ken good to have you here.
Speaker 2: What are the key points for Goldman? What are the
Speaker 2: key points for Morgan Stanley.
Speaker 5: Well, they're in many of the same businesses, but really
Speaker 5: the direction of these companies are a little bit different. Goldman,
Speaker 5: of course, is really downsizing or closing the book on
Speaker 5: a failed strategy, which was the consumer area, and they're
Speaker 5: looking to get in the more positive areas such as
Speaker 5: alternative investment and private credit. Morgan Stanley, it's just because
Speaker 5: of market conditions that we did see a week fourth
Speaker 5: quarter for investment banking, but their strategy is firmly in
Speaker 5: place and think that they will execute well in twenty four.
Speaker 3: Well, now that all the banks have reported Friday and
Speaker 3: then today, what's a way that you could characterize the
Speaker 3: quarter that was in the quarter that is.
Speaker 5: So, what we're seeing is still a healthy US economy
Speaker 5: and that speaks to both loan growth and also credit
Speaker 5: loan risk, whether it's a commercial or consumer that held
Speaker 5: up incredibly well. We also saw the opportunities for these
Speaker 5: banks to gain wallet share from some of the smaller banks,
Speaker 5: and part of that was really the effects we had
Speaker 5: from last March with the bank failures. On a global basis,
Speaker 5: all these banks that do investment banking are really getting
Speaker 5: the lion's share of their revenue from the US, and
Speaker 5: the US is expected to still be the driver for
Speaker 5: growth in twenty four, Asian next and then perhaps Europe.
Speaker 5: So it's an interesting time to look at these banks,
Speaker 5: particularly since they're not firing on all cylinders. There are
Speaker 5: some doubt in terms of both the economic outlook and
Speaker 5: also investment banking, but their strategy has led to durable assets,
Speaker 5: more predictable revenue and cash flow and return of capital.
Speaker 5: I think the only dark shadow for these banks as
Speaker 5: we progress in the early months of this year would
Speaker 5: be what we're hearing from Washington in terms of bank regulation.
Speaker 2: Hey can you have a hold on Goldman and a
Speaker 2: buy on Morgan Stanley? Last year Morgan Stanley gained about
Speaker 2: ten percent, Goldman was up more than twelve percent. Why
Speaker 2: the hold on Goldman? Why the buy on Morgan?
Speaker 5: So we were negative on the strategy that Goldman had.
Speaker 5: It was a major action of time for management, not
Speaker 5: only for last year but the last three years. And
Speaker 5: in terms of right sizing the ship, yeah, Goldman finally
Speaker 5: did that. But again, these are highly competitive markets, whether
Speaker 5: it's the capital markets, we're moving into some of the
Speaker 5: more attractive areas of investment and asset management, and Morgan
Speaker 5: Stanley is not distracted.
Speaker 2: As you look forward, what are you going to be
Speaker 2: watching out for these names in particular that you think
Speaker 2: investors bloom And I'm thinking about our audience who are
Speaker 2: listening and watching right now, she'd kind of keep an
Speaker 2: eye on Goldman, Morgan, but the whole group.
Speaker 5: So I think the key point is that we did
Speaker 5: see in the financial sector but also the large banks
Speaker 5: outsized gains in the fourth quarter of last year. So
Speaker 5: we expect the stock prices to trade sideways, perhaps for
Speaker 5: a month or two, kind of consolidate their positions, and
Speaker 5: then as we see closer to a FED rate cut
Speaker 5: and what it means in terms of whether it's three
Speaker 5: or four, that might create the signal of a risk
Speaker 5: on environment, both in the boardrooms for M and A
Speaker 5: or in other aspects of investment banking.
Speaker 2: So as long as the FED isn't too aggressive right
Speaker 2: which signals things are going south, it should be at
Speaker 2: least initially positive for the bank's bottom line. Twenty seconds here,
Speaker 2: we're pretty.
Speaker 5: Confident because looking back at twenty nineteen to twenty when
Speaker 5: the Fed did raise rates, bank stocks, the large bank
Speaker 5: stocks of quality did well.
Speaker 2: All right, good to know, great to check in with
Speaker 2: you so appreciate it. Have a great week. Ken Leeon,
Speaker 2: Global Director of Industry and Equity Research at CFI Research
Speaker 2: on Zoom in New York City. As we said, hold
Speaker 2: on Goldman By and Morgan, but breaking down the results.
Speaker 2: If you want to know more, do check out our
Speaker 2: complete reporter analysis of those names and they're reporting. Just
Speaker 2: head to Bloomberg dot com of course, the Bloomberg terminal.
Speaker 2: This is Bloomberg Radio.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
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Speaker 3: Well, airline stocks falling for yet another day, this after
Speaker 3: they got absolutely hammered on Friday. Back then, Carol. The
Speaker 3: smpage of airlines declined the most in nineteen months. United
Speaker 3: sell more than ten percent, Delta fell nine percent, American
Speaker 3: Airlines fell nine point five percent. This all a result
Speaker 3: of Delta lowering its profit forecast for the full year,
Speaker 3: which really underscores the challenges the broader industry faces when
Speaker 3: it comes back to recapturing that pre pandemic performance.
Speaker 2: Yeah, like you said, the group overall down seven point
Speaker 2: six percent on Friday, then another one point three percent
Speaker 2: today's session. All right, so concern lingers even after what
Speaker 2: was the busy stay over for US air travel just
Speaker 2: a few months ago. We're talking about the Sunday after Thanksgiving.
Speaker 2: So all right, what's going on?
Speaker 3: Yeah, Haley Berg is back with us. She's lead economist
Speaker 3: for the travel app hop. That app analyzes trillions of
Speaker 3: data points i e. Prices on flights, car rentals, and
Speaker 3: hotels to make predictions about how much tickets are going
Speaker 3: to cost. Haley joins us on Zoom from Boston. Haley,
Speaker 3: good to have you back with us. So what gives here?
Speaker 3: Because Hopper says that more than three quarters of Americans
Speaker 3: are going to spend the same or even more on
Speaker 3: travel this coming year. So why are we hearing the
Speaker 3: gloominess when it comes to airlines?
Speaker 6: You know, one of the biggest sticking points for prices
Speaker 6: in the last three or four years has been supply.
Speaker 6: There have not been enough seats to book and that's
Speaker 6: why fares have been so incredibly high over the past
Speaker 6: few years. Think back to summer twenty twenty two, domestic
Speaker 6: airfare the highest that we had seen in all of
Speaker 6: our history at Hopper. So supply is now exceeding where
Speaker 6: it was in twenty nineteen. A lot of it is
Speaker 6: exceeding now on international routes. So part of this is
Speaker 6: just the equation of travelers are looking for low prices.
Speaker 6: There are more seats available to books, so they have
Speaker 6: more options. A lot of those options are low cost
Speaker 6: carriers who may have entered or expanded in the last
Speaker 6: two years. All of that is putting downward pressure on prices,
Speaker 6: despite the fact that fifty percent of our users at
Speaker 6: Hopper are expecting to travel more this year than they
Speaker 6: did last year.
Speaker 2: Is that true domestic versus international travel.
Speaker 6: Yes, we're seeing a tremendous amount of demand for international travel,
Speaker 6: especially among younger travelers, and they're not just hitting the London.
Speaker 7: And Paris of the world.
Speaker 6: They're really going to more off the beaten track destinations,
Speaker 6: destinations where there might be deals or just more unique experiences.
Speaker 6: So still very strong demand on international capacity. There has
Speaker 6: been slower to recover prices to Europe are recovering because
Speaker 6: we've seen capacity added back there. Prices trans Pacific very
Speaker 6: different story. They still remain thirty to sixty percent higher
Speaker 6: because capacity has been slow to recover there.
Speaker 3: What about when it comes to other parts of the
Speaker 3: travel experience? Hotels? I couldn't believe how expensive hotels were
Speaker 3: in the fall when Carol and I were traveling and
Speaker 3: we weren't even staying maybe I'm giving to we weren't
Speaker 3: even staying in nice hotels and like I was, what
Speaker 3: hotel one of the one remain It was not nice,
Speaker 3: but it was so I couldn't believe how expensive it was.
Speaker 3: What's it going to look like this year?
Speaker 6: You're not alone in feeling like accommodation prices have been
Speaker 6: incredibly high. They have been, and we're expecting them to
Speaker 6: stay about the same this year. If we do see improvement,
Speaker 6: it would probably be towards summer or the second half
Speaker 6: of the year. But yes, demand for travel remains high,
Speaker 6: and that means that hotel stays vacation rentals, especially in
Speaker 6: those peak markets, they're selling out, and that means that
Speaker 6: if you're not booking far enough in advance, you're probably
Speaker 6: seeing incredibly high prices. What we always recommend is for
Speaker 6: hotels in particular, if you're headed to a big city,
Speaker 6: book at the last minute. That's when those perishable rooms
Speaker 6: are going to go on sale. You're headed to a
Speaker 6: lesion your destination, you go to Miami, you're doing a
Speaker 6: spring break trip. Book that very far in advance a
Speaker 6: couple of months, because that's when prices will be lowest,
Speaker 6: when that availability is still high.
Speaker 3: What are you looking at, Carol.
Speaker 2: No, I'm just kind of close now.
Speaker 4: I'm thinking are you thinking?
Speaker 2: No, It's just interesting and I just wonder you know
Speaker 2: what you're seeing. We've got a great chart for our
Speaker 2: folks who are watching on YouTube and a streaming service.
Speaker 2: I'm just not sure. So if you're basically it says,
Speaker 2: if you're thinking about the main vacation plan you want
Speaker 2: to take in twenty twenty four, and this comes courtesy
Speaker 2: of our Bloomberg Intelligence team, if the costs exceeds your
Speaker 2: plan budget, what will you do? Twelve percent are going
Speaker 2: to look for a cheaper destination, fifteen percent are going
Speaker 2: to look I guess at attractions and maybe what they're
Speaker 2: spending there. Forty five percent will increase their budgets. O.
Speaker 4: Yeah, that's the tax.
Speaker 3: And if you're just listening to us and not watching,
Speaker 3: the forty five percent is like, you know, the possible
Speaker 3: changes of your budget exceeeds plan. The majority of people,
Speaker 3: almost the majority of people, almost half the people said
Speaker 3: they'll just increase.
Speaker 8: I manage it.
Speaker 2: Yeah that's bullish, but it's bullish. But it's also interesting
Speaker 2: when we just did a story about where if people
Speaker 2: found that they had what a ten percent bump in incomers.
Speaker 3: Yeah, they pay down debt.
Speaker 2: They're going to pay down debt. So help me. Are
Speaker 2: you talking about I don't know what are you seeing?
Speaker 2: Higher end traveler, a bigger pocketbook, lower end? Is there
Speaker 2: any differences?
Speaker 7: There are a few things happening.
Speaker 6: So our Hopper users are primarily millennial in gen Z
Speaker 6: and seventy seven percent of them say that they are
Speaker 6: going to spend the same or more on travel this year.
Speaker 6: And there's really two schools here. One is our millennial generation.
Speaker 6: They built wealth. They are coming out, many of them
Speaker 6: of a few years of savings. Those who were in
Speaker 6: advantageous positions headed into the pandemic. They are spending more
Speaker 6: on travel a larger proportion of their wealth is going
Speaker 6: towards trips vacations. They have credit cards that allow them
Speaker 6: to gain points the more they book. They are loyal
Speaker 6: So this group is absolutely spending more in traveling more.
Speaker 6: And then on the flip side, we have incredibly priced
Speaker 6: conscious travelers more on the gen Z and in what
Speaker 6: they're doing. They're taking their travel budget and they're saying,
Speaker 6: can I get two trips out of my budget from
Speaker 6: last year that might have been one trip?
Speaker 7: And we often see this.
Speaker 6: Travelers are skipping the trip to Miami and they're going
Speaker 6: to a destination in Puerto Rico that might be a
Speaker 6: whole lot less expensive and flight and in country expenses,
Speaker 6: So there is some optimization within the budget.
Speaker 7: That's absolutely happening.
Speaker 6: We see that a lot among Copper users because they're
Speaker 6: very price insitle.
Speaker 3: Okay, very briefly, we have top domestic and top international locations.
Speaker 3: Your top domestic locations. We got a list of them.
Speaker 3: We're about to show on the screen which one sticks
Speaker 3: out to you of these five.
Speaker 6: Here, I would say that Orlando is always a big one.
Speaker 6: It's popular not just for those Disney trips, but also
Speaker 6: for Port of Orlando starting on cruises, which as we know,
Speaker 6: are coming back, you know, in the last year or two.
Speaker 6: So Orlando is always a big one, in part because,
Speaker 6: no matter how much demand we see going there, prices
Speaker 6: are low. It's inaccessible and affordable place to visit and international.
Speaker 2: Your top international locations Cancun, Mexico, Dominican Republic, London, England, Rome, Italy, Tokyo, Japan.
Speaker 2: That's kind of a mixed bag. Just got about fifteen
Speaker 2: seconds left. Any thoughts on that.
Speaker 6: Those tropical destinations are inexpensive alternatives to some of those
Speaker 6: longer hauled trips. But really this year is going to
Speaker 6: be all about Tokyo and the return to Asia.
Speaker 1: Wow. That's cool to do.
Speaker 2: That's interesting. Where are you going me?
Speaker 3: Yeah, we don't have anything planned. Oh, I'll probably go
Speaker 3: to the American West.
Speaker 2: Oh that's what you said that earlier. All right, Haley Burg,
Speaker 2: lead economist at Hopper, Thank you so much. That was fun.
Speaker 8: This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 7: Putting all my eggs in one basket, pop bit.
Speaker 2: You know, when we think about baskets of stocks.
Speaker 3: We used to think about mutual funds.
Speaker 2: We did, but alas no more.
Speaker 3: Now we think about ETFs. And as I mentioned earlier, Carol,
Speaker 3: this year is already a huge year for ETFs thanks
Speaker 3: to last week's SEC approval of eleven.
Speaker 2: This spot, well, we get approval, yefs we did, as
Speaker 2: tex sarcus, we got approval, you.
Speaker 3: Know, via tweet that ended up not being correct. I
Speaker 3: don't know if can't remember that.
Speaker 2: What a week it was.
Speaker 3: In the next day, the actual approval came. But there's
Speaker 3: so much more to ETFs than the shiny new bitcoin ETFs.
Speaker 4: Yes.
Speaker 2: Indeed, Unfortunately, the team that covers ETFs at Bloomberg Intelligence,
Speaker 2: led by senior analyst Eric baltunis who hopefully got some
Speaker 2: sleep over the weekend. Uh while that team led by
Speaker 2: Eric whittled their global list of two dozen picks down
Speaker 2: to just a handful.
Speaker 3: The story featured in the year ahead issue of BusinessWeek magazine,
Speaker 3: which is available now on newsstands on the Bloomberg terminal
Speaker 3: and at Bloomberg dot com slash BusinessWeek. This story, by
Speaker 3: the way, written none other than Bloomberg BusinessWeek editor Joel Weber.
Speaker 3: Joel's here in the Bloomberg Interactive Broker's studio with us.
Speaker 3: Also with us is Eric Belchunis, senior ETF analyst for
Speaker 3: Bloomberg Intelligence. He joins us on zoom in Philadelphia.
Speaker 2: Joel, If I you know how to write a story.
Speaker 3: It's amazing.
Speaker 4: Oh come on, you have time.
Speaker 3: Jeez, you have time for a story.
Speaker 4: Oh come on. So Eric and I co host this
Speaker 4: podcast and we've been doing it for years.
Speaker 3: Trillions You love ETF.
Speaker 4: We you know, it's just this thing. It's an Eric.
Speaker 4: I think it's Eric's theory of everything. Like if you
Speaker 4: could kind of like put it, put the universe into
Speaker 4: one thing, the ETF would explain Eric and investment, investing
Speaker 4: in all kinds of other stuff. That's what working on
Speaker 4: trillions with him for me, he has felt like and
Speaker 4: so it becomes a really interesting way to kind of
Speaker 4: I think, look at finance and investing and there are
Speaker 4: there's just more and more interest in it. We named
Speaker 4: it trillions because every year there's more trillions that go
Speaker 4: into these things. You can still talk about mutual funds.
Speaker 4: We actually make time occasionally on trillions to do so,
Speaker 4: and we also do this episode every year that we
Speaker 4: have not had a chance to talk about yet. And
Speaker 4: if you're if you'd like to listen to the whole thing,
Speaker 4: you can do so wherever you listen to podcasts. But
Speaker 4: for the year ahead issue, I took that conversation and
Speaker 4: kind of whittled it down to just a handful. And
Speaker 4: while we were first talking about it, you know, we
Speaker 4: didn't have an approved ETF for bitcoin, for spot bitcoin,
Speaker 4: and then last week happened and it was just like
Speaker 4: we got to talk about this with Eric a little
Speaker 4: bit as well as some of.
Speaker 9: These other ones.
Speaker 4: So Eric, you I quote you in the story because
Speaker 4: you say, by what march. By the end of March,
Speaker 4: we're gonna know who the winner of the race is.
Speaker 4: Sec let a lot of ETFs out at first, who's
Speaker 4: the early who's got the early lead?
Speaker 9: Okay, So I've separated the ten launches into what I
Speaker 9: call the newborn nine and GBTC because it's different being
Speaker 9: a newborn in the ETF world, Joel, As you know,
Speaker 9: we call the terodome. It's a tough industry, so being
Speaker 9: a newborn is a different playing field. GBTC was a
Speaker 9: trust that existed, had thirty billion dollars in assets in
Speaker 9: a bunch of volume, and it converted into an ETF.
Speaker 9: So it came over with like ammunition, right, and all
Speaker 9: kinds of supplies into the terodome. So if you if
Speaker 9: you look at all of them, GBTC still has the
Speaker 9: most assets and volume, but of the newborn nine, black Rock,
Speaker 9: no shocker, is in the lead. Fidelity a close second
Speaker 9: arc bit wise, you know, jockeying for the third position.
Speaker 9: But a lot of them are doing well, Like if
Speaker 9: you look at the volume of even like the least
Speaker 9: traded one, which I believe is the Wisdom Tree, it
Speaker 9: did six ten million dollars in the first two days.
Speaker 9: That would be a big hit, a big day for
Speaker 9: any regular new ETF. So a lot of them has
Speaker 9: traded over ten billion dollars in the first three days.
Speaker 9: Unbelievable action in these ETFs. But Blackrock looking like the
Speaker 9: early favorite to be sort of the GLD of bitcoin,
Speaker 9: but it's got to overtake GBTC, which again came in
Speaker 9: with all this assets and volume and still has.
Speaker 2: More there's a story though on the Bloomberg that talks
Speaker 2: about investors pulling over half a billion dollars from the
Speaker 2: Gray Scale Bitcoin Truster in the first days of trading
Speaker 2: as an ATF. Is that significant or how do you
Speaker 2: read that?
Speaker 8: Eric?
Speaker 9: Yeah, so this is a big situation. So the Newborn nine,
Speaker 9: all the volume is influenced pretty much because there's nobody
Speaker 9: who shares to sell because they didn't exist, right. So
Speaker 9: the GBTC, however, are people who probably want to get out.
Speaker 9: Now that said, you have to take a tax sit
Speaker 9: if you want to get out. So I don't think
Speaker 9: all twenty six billion as it stands now we're going
Speaker 9: to get out, but there could be some people who
Speaker 9: want to get out take the tax hit. Now. It's
Speaker 9: a long story short, but it can't go right into
Speaker 9: the new ETF. So that's why I think a lot
Speaker 9: of the new funds into the newborns are new money,
Speaker 9: some maybe GBTC refugees. But over time, I do believe
Speaker 9: GBTC will be like a slowly melting ice cube and
Speaker 9: the Newborn nine will build up and at some point
Speaker 9: they'll probably be it. They'll both settle a little bit.
Speaker 9: But there is an interesting dynamic of play that you
Speaker 9: don't normally see. And so if I had to guess,
Speaker 9: I'd say gbtcc's you know, four or five billion of
Speaker 9: outflows in the first couple of months and then kind
Speaker 9: of settles down.
Speaker 4: Isn't it bigger than an ice cube? Though, it's like
Speaker 4: more like a glacier.
Speaker 9: It's a glacier. Yeah, twenty six billion. I mean I
Speaker 9: believe that makes GBTC like the top three biggest holder
Speaker 9: of bitcoin on Earth. So yeah, it's a total glacier
Speaker 9: glacier change.
Speaker 4: Yeah, yeah, hey, sorry, take it over the show, guys.
Speaker 2: Podcast, This is a trillion podcast.
Speaker 3: Eric, I got a question. I'm curious if you look
Speaker 3: at the eleven different spot bait, cooinytfs, should they all
Speaker 3: have the exact same performance every single day because they're
Speaker 3: tracking the exact same thing like Voo and Spy for example,
Speaker 3: that track the S and P five hundred. Shouldn't they
Speaker 3: have the same performance?
Speaker 9: Yeah, it should be very close. The only thing you
Speaker 9: might find difference this is what the premium discount the
Speaker 9: price to the NAV. There's been like I don't know,
Speaker 9: a thirty basis point swing between them. But again, these
Speaker 9: are minor points. We were a little worried that the
Speaker 9: price in the NAB would be a little further apart,
Speaker 9: which is a sign that arbitrage and the mechanics of
Speaker 9: the ETF were more difficult because you can only do
Speaker 9: cash creations. Long story short, everything looks pretty good. So
Speaker 9: the dollars you buy it at, like I think, ib
Speaker 9: ibit start at twenty five dollars. Another one might be
Speaker 9: trading at fifty, but the percentage day on each that
Speaker 9: it changes each day should be pretty much lining up
Speaker 9: minus ten twenty BIPs basis points.
Speaker 4: You know the other thing that I wanted to ask
Speaker 4: you about where it's trading volumes, because I thought that
Speaker 4: was a really interesting insight. Here you said, don't don't
Speaker 4: look at you know, assets under management, and obviously GBTC
Speaker 4: is representative of that. But what why are trading volumes
Speaker 4: the thing that you all are watching as you evaluate
Speaker 4: these new newborn nine?
Speaker 9: Yeah? Because volume. You need two things for a new
Speaker 9: category to have long term growth. You need volume and
Speaker 9: you need low fees. These have both. Because we already
Speaker 9: saw the few war breakout. You can get them all
Speaker 9: between twenty and thirty basis points.
Speaker 4: Even before they were approved even before them.
Speaker 9: If few war happened before the race even started again
Speaker 9: wild stuff. The volume is crucial because when you're an
Speaker 9: investor in ETF investor with the advisor and institution, volume
Speaker 9: is like a party with people there. No volume is
Speaker 9: like someone who invites you to a party, but there's
Speaker 9: nobody going. And it's just the general way. You don't
Speaker 9: need volume to buy an ETF, but people just like
Speaker 9: to see liquidity. And so when liquidity forms around these ETFs,
Speaker 9: and it's hard because it has to grow naturally. Assets
Speaker 9: you can just shove in there, but volume only grows
Speaker 9: in nature, and so it's harder and more covetive. But
Speaker 9: once you get liquidity, you get more liquidity because liquidity
Speaker 9: attracts the bigger fish because they like to go in
Speaker 9: and not have impact costs. So as you get more
Speaker 9: and more liquid you get bigger and bigger fish and
Speaker 9: more and more liquidity. And I think the volume the
Speaker 9: start that they're off to is really really good. It
Speaker 9: shows that you will find a comfort level to any
Speaker 9: investor pretty quickly. Again, I got the low fees, I
Speaker 9: got the liquidity, and I'm off and get this stat
Speaker 9: I just ran the numbers of the five hundred ETFs
Speaker 9: launched last year, these bitcoin ETFs are are already averaging
Speaker 9: three times what all five hundred of those traded today.
Speaker 9: So again the numbers are just outrageously high for these products.
Speaker 4: Okay, so do you want to keep talking about bitcoin
Speaker 4: ETFs or do you want to talk about.
Speaker 9: Let's move on psyche words.
Speaker 4: Amazingly, there are other things.
Speaker 9: Interventions are coming for me. I know it. My friends,
Speaker 9: I can hear them talking about my back.
Speaker 4: Okay, I want to talk about the small caps ETF
Speaker 4: calf and why that's been an interesting one that stuck
Speaker 4: out to you.
Speaker 9: Yeah, because small caps were left behind last year and
Speaker 9: honestly a lot of the last decade. And here's this
Speaker 9: small cap ETF calf that did better than the S
Speaker 9: and P last year. So that just blew my mind.
Speaker 9: How can a group of small caps actually beat the
Speaker 9: large caps? And the way they did it was they
Speaker 9: looked it's a ETF that looks at cash flow, and
Speaker 9: why looking at cash flow you get to more quality
Speaker 9: small caps, you get to the quality factor. And the
Speaker 9: quality factor was the best of all the quantitative factors
Speaker 9: last year, so it was enough to lift it above
Speaker 9: large So I thought it was interesting. Also, the CTF
Speaker 9: has seen flows for the past forty four months. It
Speaker 9: is decimated the Russell two thousand, which is it's index.
Speaker 9: Like I said, it beat the large caps, so you know,
Speaker 9: it's decimating the small caps in general. And I think
Speaker 9: when people think of small caps this year, the big
Speaker 9: word on the street is it's time for them to
Speaker 9: play catch up. Well, here's some that already are off
Speaker 9: to a good start, so we wanted to look at it.
Speaker 9: We also want to know if it could keep these
Speaker 9: flows going, because these kind of flows for an ETF,
Speaker 9: it's like Indy like not a big three, are really unusual,
Speaker 9: and so it was also an indie feel good hit
Speaker 9: of last year, so that's why I chose it.
Speaker 3: Okay, for my transition to the next ETF, I want
Speaker 3: to bring up a news story that was just published
Speaker 3: in the last fifteen minutes or so. Blackstone's defaulted NYC
Speaker 3: office loan is for sale at a fifty percent discount.
Speaker 3: Right now, we're certainly seeing some stress when it comes
Speaker 3: to commercial real estate as the return to work, despite
Speaker 3: Joel's all of Joel's best efforts to get everybody in
Speaker 3: the office.
Speaker 4: I'm going propaganda campaign.
Speaker 3: It's working for me, Matt. There's a way to bet.
Speaker 3: There's a way to bet on returning to work? Eric,
Speaker 3: how do you do that with a desk? Is the
Speaker 3: ticker that.
Speaker 4: Can makes sense?
Speaker 9: Yeah, this was a classic thematic ETF. My colleague Athanasios
Speaker 9: shows it. So this is the Van Neck office in
Speaker 9: commercial reate ETF. And basically this is a play on
Speaker 9: return to office. Commercial real estate has really lagged the
Speaker 9: real estate stocks in general, or the index for real
Speaker 9: estate stocks. So here you have a laggard and you
Speaker 9: have a trend of like all these companies wanted to
Speaker 9: feel back in the office, and so you know that
Speaker 9: we're interested to see if this thing sort of plays
Speaker 9: ketch up, because even if the real estate index is flat,
Speaker 9: if this plays ketch up, you get a bump. Plus,
Speaker 9: it was a novel way to slice and dice the
Speaker 9: real estate market. So it's got Boston properties Vernado are
Speaker 9: the top two holdings, and a lot of people use
Speaker 9: Vernado as sort of the proxy already for the return
Speaker 9: to office. So that's the top holding, so you get
Speaker 9: a lot of that stock in there as well.
Speaker 4: I think it's just interesting, Like I can't speak to
Speaker 4: the Blackstone story necessarily, but there has been this perception that,
Speaker 4: you know, commercial real estate is down and out and
Speaker 4: no amount of rto can help it. But like slowly
Speaker 4: but surely, like there's at some point it becomes like, Wow,
Speaker 4: maybe this is a contrarian investment opportunity. And what's amazing
Speaker 4: about that ETF which is brand new. It's like ETF
Speaker 4: can take a whole trade and just like package it
Speaker 4: into a ticker that you can trade like a like a.
Speaker 2: Stock if we get a lower rate environment. So it's incredible, right,
Speaker 2: and make it much easier for this for these firms.
Speaker 4: Yeah, yeah, Okay, here's another interesting one, especially off of
Speaker 4: last year where you had this Magnificent seven and the
Speaker 4: tech companies just ran away with it. Eric, what is
Speaker 4: Athanasios put forward as as another way to think about
Speaker 4: tech perhaps in twenty twenty four.
Speaker 9: Yeah, so this is the Invesco SMP have hundred equal
Speaker 9: weight tech RSPT. So equal weighting is a way to
Speaker 9: sort of like take out any kind of imbalance in
Speaker 9: your index, and so people like it. Whether it's the
Speaker 9: SMP equal weighted, this is Tech equal weighted, so you
Speaker 9: get all of the big magnificent seven most of them,
Speaker 9: but you get them at one percent or two percent
Speaker 9: weighting each, so you get a little bit more of
Speaker 9: an overweight to the tech stocks that haven't done so well.
Speaker 9: So overall we're calling this sort of like the methadone
Speaker 9: version of the cues, right, And there's many ways to
Speaker 9: do this. Many people are figuring out how to get
Speaker 9: off of the sort of reliance on these seven stocks,
Speaker 9: yet they want to stay invested in equities. So we've
Speaker 9: got NASDAK cover call is a way to do it.
Speaker 9: You've got equal weighting is another way to do it.
Speaker 9: Midcaps or another way to do it. So we think
Speaker 9: there'll be a movement of flows away from the market
Speaker 9: cap weighted indexes a little bit this year to these
Speaker 9: types of less magnificent seven up ETFs.
Speaker 4: Still get the tech but just you know that equal
Speaker 4: weighting kind of makes it all fast. Well obviously, yeah,
Speaker 4: and then.
Speaker 2: Well I mentioned if we actually get a FED that
Speaker 2: cuts rates. Here there's a treasury play here.
Speaker 9: Yeah, this is TUA. This is designed by hedge fund
Speaker 9: people who start a company called Simplify and it's I
Speaker 9: like it because these products are really interesting. This is
Speaker 9: almost like five times leverage short end of the curve.
Speaker 9: So because you're short in five, it's not that much.
Speaker 9: But it's a it's a it's a kind of a
Speaker 9: strategy that you might find Pimp Goo doing for institutions
Speaker 9: or a hedge fund. Two is the ticker, and this
Speaker 9: company has gotten a lot of actual institutional investors, which
Speaker 9: is rare for a small company. And so I like
Speaker 9: to highlight it because a lot of ETF they don't
Speaker 9: just package different asset classes. They package like people. I mean,
Speaker 9: these are hedge fund brains designing funds. And TUA is
Speaker 9: their biggest hit so far, and if if the rates fall,
Speaker 9: this should pop.
Speaker 3: Hey, Eric, make sure to tell your friends and family
Speaker 3: you talked about stuff today other than bitcoin ETFs. Okay,
Speaker 3: my name is Eric.
Speaker 1: Clip.
Speaker 9: Hopefully they make they turn it into a clip all
Speaker 9: forward into my friends.
Speaker 2: Okay, good, you definitely sound like I got sleep, so
Speaker 2: really good stuff. This is so much fun.
Speaker 4: The two of you are.
Speaker 8: Pretty you know, if we should do a podcast, you know,
Speaker 8: it's called trillions about you Nis and of course Jill Webber,
Speaker 8: this is Bloomberg brother Mark.
Speaker 9: A journal.
Speaker 1: How about you let me drive?
Speaker 4: No, no, no, no, who's going to drive? Honey? Please, how
Speaker 4: do the gravels Let's wait, I want to drive.
Speaker 9: It's a good question.
Speaker 4: Good, this is the drive to the clothes downs me.
Speaker 1: I think we'll buy around on Bloomberg Radio.
Speaker 2: All right, Well, her firm closed out a more than
Speaker 2: two year short bet against US bonds with its model,
Speaker 2: signaling that it's starting to become a time to buy
Speaker 2: as the market emerges from its worst route in decades.
Speaker 2: We were talking about the bond market, time for the
Speaker 2: drive to the clothes with us as Katie Kaminski, chief
Speaker 2: research strategiest portfolio manager at Alpha Simplex Group. They've got
Speaker 2: eight point two billion in assets under management. Katie, we're
Speaker 2: so delighted to have you back because we feel like
Speaker 2: you've been talking about what is kind of playing out,
Speaker 2: not kind of, it's starting to play out in the
Speaker 2: bond market. Tell us how you see it. And I
Speaker 2: do wonder if you think the bond market is getting
Speaker 2: it more right when the US yield curve trades above
Speaker 2: four percent, because you were on our air talking about
Speaker 2: a six percent in the tenure. What was a ten
Speaker 2: back in August.
Speaker 7: Yeah, we didn't get there, but we didn't get to five.
Speaker 7: So we're on our way. I guess what we're looking
Speaker 7: for now is a completely different phase. I mean, we
Speaker 7: saw nine quarters of short positioning and short views and
Speaker 7: fixed income and that has dissipated. And I think the
Speaker 7: next step is looking for the steepener in the yield curve.
Speaker 7: And look at today, I mean, wow, like some of
Speaker 7: those rate cut bets have really come back. And look
Speaker 7: at where yields are now. You're seeing steepening in the
Speaker 7: curve right now, the thirty or four point three something, all.
Speaker 2: Right, And I'm gonna be honest with you because Liz
Speaker 2: mc kapa, mcorn, she's like a killer when it comes
Speaker 2: to the bond market. You know her well, and I'm like,
Speaker 2: le's laske because she's been covering you know, your your
Speaker 2: moves and your thoughts on the market. And she's like, say,
Speaker 2: you know, she said, ask her. Has the trend following
Speaker 2: signals gotten more strongly bullish since you discussed them earlier
Speaker 2: this month? And can you talk about how they look
Speaker 2: in more detail now? So have they gotten more bullish?
Speaker 7: Yes, you are seeing more of a long view. And actually,
Speaker 7: even when we've looked empirically over different historical periods, it
Speaker 7: really is the next phase is really for the curve
Speaker 7: to actually normalize. It feels like we hit the bottom
Speaker 7: of that particular short trade and now we're pivoting towards
Speaker 7: a stabilized yield curve. The question we're asking is, given
Speaker 7: the wide range of outcomes, what is that steep yield curve?
Speaker 7: Is that going to be cuts on the short end
Speaker 7: or could it possibly be unexpectedly that we start to
Speaker 7: see weakness in long term bonds and we have a
Speaker 7: longer time to wait for cuts and we actually see
Speaker 7: a steepen on the long end something like we're seeing today.
Speaker 3: What do you think it's going to be?
Speaker 2: And do you still think six percent of the tenure
Speaker 2: is possible?
Speaker 7: I mean, I think it's always possible. It's going to
Speaker 7: be a question of how is.
Speaker 2: A unicorn possible?
Speaker 3: Or is it I don't know somebody, but it's like,
Speaker 3: is it possible in this cycle? Like are we still
Speaker 3: in the cycle where you say we could see ten
Speaker 3: six percent yields on the tenure?
Speaker 7: I mean, we've already come back to four to three
Speaker 7: on the thirty year, so I think six may be
Speaker 7: a little bit of a way to go at this point.
Speaker 7: But I think the difficult scenario would be a situation
Speaker 7: where we have cuts and it's not doing enough for
Speaker 7: the economy and sort of we have week becomes two weak.
Speaker 7: Nobody wants to talk about that, but that's the scenario
Speaker 7: with a wide range of outcomes, where you'd have a
Speaker 7: steeper yield curve where basically long term debt didn't have
Speaker 7: as many buyers and we just have too much supply.
Speaker 7: I think we're far from that right now, but that's
Speaker 7: always possible, right I mean, unicorn, I'm not sure, but
Speaker 7: I always try to think about the range of outcomes,
Speaker 7: and if we're looking for a steepener, there's the happy steepener,
Speaker 7: which is everybody wants which you get cuts in the
Speaker 7: short term, and then there's the not so happy steepener,
Speaker 7: which would be you know, a situation where long term
Speaker 7: yields go higher.
Speaker 2: Again, well that's what just to follow. You know that
Speaker 2: bet on a steeper usuel curve this year? Can that
Speaker 2: pan out even if the Fed doesn't come through with
Speaker 2: the about six quarter point cuts that the market is
Speaker 2: priced in for them doing this year. I mean if
Speaker 2: the FED dot plot showed something about half of that,
Speaker 2: so different, But the trade and what traders are saying
Speaker 2: is it's going to be a lot more aggressive. So
Speaker 2: can it come through with the FED doesn't do those
Speaker 2: six rate cuts?
Speaker 7: Well, I think, I mean, I think that's the challenge.
Speaker 7: That people are very very optimistic, hoping that cuts are
Speaker 7: going to be coming sooner than later. But if you
Speaker 7: even listen to the common terry today, I've tended to
Speaker 7: kind of think that the FED is taking their time.
Speaker 7: They would have to see something that would be a
Speaker 7: catalyst to get them to act, and I don't think
Speaker 7: that catalyst would be a good catalyst. So from my perspective,
Speaker 7: it's more likely that we're going to bounce around and
Speaker 7: what would be I'm calling a bumpy landing where we're
Speaker 7: sort of trying to get there as opposed to a
Speaker 7: situation where you know, everything just goes back really quickly.
Speaker 7: I think it's going to take time, and I think
Speaker 7: they're going to be cautious because inflation still is not
Speaker 7: above target, is still above target, So I think we're
Speaker 7: in for sort of a bumpy ride to get there,
Speaker 7: and we're not going to get the cuts perhaps as aggressively,
Speaker 7: unless something more negative occurs, which isn't positive.
Speaker 3: How many cuts do you think we'll see this year.
Speaker 7: Most people are looking at four or three. I think
Speaker 7: it's going to depend when they start, and what do
Speaker 7: you aggressively they start?
Speaker 2: What do you think?
Speaker 7: What do I think you have to.
Speaker 2: Make investment bets. I'm just curious, We're curious kind of
Speaker 2: what you're betting on.
Speaker 7: I mean, I think for us, if you look at
Speaker 7: what's happening, you're seeing definitely those long signals on the
Speaker 7: short end and across the curve, which to me is
Speaker 7: suggesting that the market is really starting to price in
Speaker 7: more and more. From a technical perspective of those cuts,
Speaker 7: Are they too optimistic in terms of how they're buy
Speaker 7: and selling? Possibly? But in general I think there will
Speaker 7: be a convergence towards somewhere in between, maybe not as
Speaker 7: aggressive as people would like, but also not as patient
Speaker 7: as some might think.
Speaker 1: So if that.
Speaker 4: What's in the middle, I.
Speaker 7: Don't know, maybe three, Yeah, I think it's it's I
Speaker 7: think we need to see something start happening.
Speaker 4: I mean, it's not that of it.
Speaker 3: Yeah, I was gonna say, that's not that out of
Speaker 3: this world. I mean, that's kind of what the dot
Speaker 3: plot showed, is that there are going to be three
Speaker 3: cuts this year. It was that. You know, at the
Speaker 3: end of last year, vestors really started saying, wait a second, Carol,
Speaker 3: we're going to see we think we're going to see
Speaker 3: six cuts.
Speaker 2: Yeah, it's really interesting. But I will say the conversations,
Speaker 2: the market conversations at the end of twenty twenty three,
Speaker 2: we're definitely starting to pull back on that that they
Speaker 2: didn't think it was going to be that aggressive, because
Speaker 2: let's remember, if the FED is going to be that aggressive, folks,
Speaker 2: you know, Houston, we have a problem, you know, us
Speaker 2: we have a problem. Hey, the dollar it's up about
Speaker 2: one percent this year. I'm just looking at the dollar index.
Speaker 2: You know, do you still see a very short signal
Speaker 2: on the US dollar despite it doing well?
Speaker 7: Actually, the dollar, the short signal really was gaining a
Speaker 7: lot of momentum towards the end of the year. But
Speaker 7: I'm not surprised that we're seeing some respite there because
Speaker 7: we saw so much selling of the dollar in the
Speaker 7: end of the quarter. And also, as you see pressure
Speaker 7: and equities, that tends to be very favorable for the
Speaker 7: US dollar. And if the FED is actually not going
Speaker 7: to be as aggressive in cuttings, that's also favorable for
Speaker 7: the dollar. So lot of stuff moving towards that long
Speaker 7: dollar signal, but it's still kind of mixed, given from
Speaker 7: our side, given just how noisy we've seen it.
Speaker 2: Hey really quick ten. Secondly, what's a key thing that
Speaker 2: you watch really quickly?
Speaker 7: Oh, I'm watching bond volatility it's still way high and
Speaker 7: bondstock correlation. Those two things are the things that are different.
Speaker 2: You're Jack now so much fun. Kati Kaminski over at
Speaker 2: Alpha Simplex Group, Thank you so much. This is Bloomberg.
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