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Speaker 2: Let's check out with Anika Gup that she's the director
Speaker 2: Macroeconomic Research at Wisdom Tree. Anico, as you sit back
Speaker 2: here and think about these markets here, what are some
Speaker 2: of the key drivers for you?
Speaker 3: Is it the FED? Is it the economy? Is it
Speaker 3: corporate earnings? What are you thinking about here?
Speaker 4: I think it's a combination of the three. I think,
Speaker 4: you know, we've we've moved from this goldilocks period of
Speaker 4: you know, progress on disinflation helping to drive you know,
Speaker 4: further monetary easing, and I think that's taken a bit
Speaker 4: of a especially in the US, since we've received much
Speaker 4: stronger economic data. We're now beginning to see that benefit
Speaker 4: from lower risk premiere being offset by rising bond deals.
Speaker 4: And that's you know, that's based essentially because investors are
Speaker 4: now reducing the amount of expected FED rate cuts, and
Speaker 4: that's having an imbackground equity markets and obviously the market
Speaker 4: does also remain on dender hooks because we have the
Speaker 4: upcoming US elections and you know, they're trying to figure
Speaker 4: out whether these improving odds of a Trump victory, you know,
Speaker 4: actually do come to fruition.
Speaker 5: No shortage of things for investors to worry about. Anka
Speaker 5: and the top of the show, so Paul mentioned that
Speaker 5: gold has come in a little bit, but still at
Speaker 5: twenty seven to thirty three, we've seen it hit records
Speaker 5: here almost day after day. How are you thinking about
Speaker 5: gold and what do you see as driving that asset.
Speaker 5: Is it simply maybe not fear, but concern about the
Speaker 5: election outcome? Is it something more than that?
Speaker 4: I mean, you know, over the past month, we've seen
Speaker 4: a strong, you know, disc correlation between the US dollar
Speaker 4: and gold, alongside really yields and gold. So despite the
Speaker 4: fact that the dollar has strengthened, despite the fact that
Speaker 4: real yields have increased, uh, you know, gold still continues
Speaker 4: to attain multiple record highs. And that's because we're seeing
Speaker 4: a lot of strength on the physical market. So we're
Speaker 4: actually seeing uh, central banks increase their purchases of gold,
Speaker 4: We're seeing you know, investors increase their purchases in gold,
Speaker 4: and that's that's been you know, one of the big drivers.
Speaker 4: Now since the Rush Ukraine War, we actually saw flows
Speaker 4: into gold linked ETF's decline. But since June we've had
Speaker 4: you know, about thirteen consecutive weeks of inflows into gold
Speaker 4: related ETFs actually increase. So that's been a new catlests
Speaker 4: in the horizon drive gold prices. And I think the reason,
Speaker 4: the overarching reason for why investors are you know, flocking
Speaker 4: towards gold is primarily because of rising geopolitical risks, you know,
Speaker 4: with the tensions in the Middle East still not looking
Speaker 4: like they've subsided. And at the same time, we have
Speaker 4: you know, the U S elections, the upcoming US elections,
Speaker 4: and that is also you know, triggering a lot of volatility.
Speaker 2: All right, So let's focus on the US equity market
Speaker 2: and anika. You know, we've seen this market that's been
Speaker 2: kind of driven by you know, great performance out of
Speaker 2: a handful of stocks called the Magnificent Seven and so
Speaker 2: on and so forth. A there's a lot of folks
Speaker 2: that say that that's not really healthy for the market.
Speaker 2: Are you concerned about that lack of breath or how
Speaker 2: do you think about this US equity markets just in general.
Speaker 4: Yeah, we still remain positive. You know, we've actually, we
Speaker 4: expect obviously the bar has been lured for Q three
Speaker 4: earning season now looking at average earnings growth of around
Speaker 4: four percent. However, if we look ahead, a lot of
Speaker 4: that margin expansion for the S and P five hundred
Speaker 4: is primarily being driven by the technology sector as well
Speaker 4: as the communications sector. I mean, for technology, it's accounting
Speaker 4: for around eighteen percent earnings growth for twenty twenty five
Speaker 4: and fifteen percent for communications services. So they are going
Speaker 4: to be the key drivers for earnings going forward. And
Speaker 4: I think given the fact that the bar is so low,
Speaker 4: already so low for Q three, we expect you know,
Speaker 4: quite a few companies to actually meet or exceed that bar,
Speaker 4: which should drive a performance higher.
Speaker 5: We've listened to a lot of interviews this week from
Speaker 5: our colleagues in Washington as the IMF and World Bank
Speaker 5: meetings take place, and Christine Legard, the ECB president, was
Speaker 5: one of them who came through our studios and spoke
Speaker 5: with Francine Lockwin. And something that she said. President Leguard
Speaker 5: said is that she's confident in the direction the ECB
Speaker 5: is taken here given and what we're seeing Germany and Italy,
Speaker 5: Germany on pace for yet another year of contraction. Are
Speaker 5: there opportunities in Europe right now? And where do you
Speaker 5: see them?
Speaker 1: Are there?
Speaker 5: Are there equities opportunities in Europe as you see them?
Speaker 4: Absolutely? I think, you know, the pessimism towards Europe is
Speaker 4: over overstated. We already saw the iPhone numbers today for Germany,
Speaker 4: you know, show a slight upward trajectory, very different from
Speaker 4: what we've been seeing over the past few months for
Speaker 4: the greater part of this year. The key opportunity right
Speaker 4: now is in the small caps segment for European equities.
Speaker 4: That's because earnings for European small caps and within the
Speaker 4: small caps primarily until towards of value is you know,
Speaker 4: is showing more than a sixteen percent earnings growth rise
Speaker 4: over the prior year. And if you compare that to
Speaker 4: MSCI Europe, which is representing you know, the lot more
Speaker 4: of the large cap segment of the market, we're looking
Speaker 4: at earnings expectation actually down eight percent. So the opportunity
Speaker 4: is primarily in the small cap space, timpted towards more
Speaker 4: value oriented sectors. And that's because the small caps were
Speaker 4: the most penalized when Bates rules. It's such a sharp
Speaker 4: base and now that we're going to see a much
Speaker 4: sharper unwind of easing from Europe as opposed to the US,
Speaker 4: that's going to asymmetrically benefit the smaller cap segment of
Speaker 4: the market in comparison to the large cap.
Speaker 2: Nika, thank you so much for joining us. I really
Speaker 2: appreciate getting a few minutes from your time a Nica Gupta.
Speaker 2: She's the director of macroeconomic research for the Equities and
Speaker 2: Commodities business at Wisdom Tree. She is in London, one
Speaker 2: King William Street, which is literally right around the corner
Speaker 2: from the Bloomberg headquarters in London and Queen Victoria Street.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: Joe Matthew joins us here Balance of Power host. He's
Speaker 2: down in Washington, DC. He is hip deep in all
Speaker 2: the that is going on on both of these campaigns. Here, Joe,
Speaker 2: it looks like the Democrats are kind of trying to
Speaker 2: rely on some star power. But for me, I was
Speaker 2: just mentioned to Dave David Gera Joe, this star power thing,
Speaker 2: whether it's my boy Bruce Springsteen or whether it's Beyonce.
Speaker 2: I mean, does that even It's almost like that's so
Speaker 2: nineteen nineties or two thousands. I mean, is that even
Speaker 2: relevant anymore?
Speaker 6: Do you think?
Speaker 7: Well, I guess the bendz that you invite.
Speaker 8: But there's no evidence to suggest that celebrity endorsements move
Speaker 8: a needle when it comes to polling.
Speaker 7: But look, we're at a tied race.
Speaker 8: You saw Bloomberg's Swing state survey yesterday forty nine forty nine.
Speaker 8: Did you see today Siena College New York Times forty
Speaker 8: eight forty eight. This is as as tied up as
Speaker 8: it gets. So the campaign trying anything they can. And yeah,
Speaker 8: Kamala Harris is surrounding herself with some pretty heavy celebrity.
Speaker 8: Willie Nelson's going to be up there tonight as well.
Speaker 8: He had a big Cannabis for Kamala thing. The other
Speaker 8: I don't know if that helps either, but yeah, nuh, yeah,
Speaker 8: no surprise at all. Donald Trump is doing it himself, right.
Speaker 8: You got Eminem for Kamala Harris. He's got kid rock
Speaker 8: for Donald Trump. He's gonna be with Joe Rogan.
Speaker 7: He was with Tucker crosson the night before.
Speaker 8: Everybody's grabbing whomever they think has an audience that goes
Speaker 8: for influencers and all these podcasters getting interviews because they're
Speaker 8: flailing guys. They're throwing whatever they can at the wall
Speaker 8: to try to beat each other by what will be
Speaker 8: probably less than a point if these polls are true.
Speaker 5: Joe, Let's talk a bit about the rally that was
Speaker 5: held in Atlanta yesterday. So yes, Free Springsteen was there.
Speaker 5: President Obama was there as well with Kamala Harris, the
Speaker 5: first time the two of them appeared on the trail together.
Speaker 5: The campaign saying, this is the largest crowd that they've
Speaker 5: had for a rally yet, I think twenty three thousand
Speaker 5: people in that venue. What was the message? What is
Speaker 5: the message from the Harris campaign? Let's start there with
Speaker 5: eleven days to go till election day? Is it simply
Speaker 5: focused on making sure you get to the polls, but
Speaker 5: more so than that, voting early if you can.
Speaker 8: There's a lot of that, and you know, look, there's
Speaker 8: I don't know that they have crystallized a closing message.
Speaker 8: Both sides have really just been kind of shooting from
Speaker 8: the hip, and we've seen these messages evolving.
Speaker 7: Here's the best I'll do for you.
Speaker 8: What we're hearing from the Harris campaign. He has an
Speaker 8: enemy's list, we have a to do list. That's what
Speaker 8: we're hearing a lot about. But also going back to
Speaker 8: this threat to democracy idea that Joe Biden frankly never
Speaker 8: really connected on, and a lot of people are wondering
Speaker 8: why Kamala Harris isn't talking more about the economy than democracy.
Speaker 8: She's going to be back in Washington next week, one
Speaker 8: week before the election on Tuesday, standing on the ellipse
Speaker 8: where we all remember Donald Trump holding that speech in
Speaker 8: that rally on January sixth, to try to bring people
Speaker 8: back to that moment. So I think there are a
Speaker 8: lot of different closing arguments coming from both campaigns. Last night,
Speaker 8: Tyler Perry, Samuel L. Je Jacks, and Spike Lee. I
Speaker 8: could keep going with the names. They all got up
Speaker 8: to the podium to reinforce those points.
Speaker 3: Joe.
Speaker 2: A lot of folks are saying that what's going to
Speaker 2: be really key to this election is getting out the vote.
Speaker 3: And participation. What do we know about maybe turnout? What
Speaker 3: do we think turnout is going to be in this election?
Speaker 8: Probably an all time high based on what we're seeing
Speaker 8: the campaigns certainly hope so. And I'm saying that because
Speaker 8: of just the incredible closeness in the race, the amount
Speaker 8: of engagement that we're seeing, but also the early voting
Speaker 8: has been setting records, and it's been setting records in
Speaker 8: states that have not always been fully leaning into early voting,
Speaker 8: with Republicans specifically in states like Arizona pull in ballots
Speaker 8: more often than Democrats are.
Speaker 7: So there's a bit of noise out there.
Speaker 8: But I can tell you guys, people are voting early
Speaker 8: in person, by absentee, by mail, and that's also going
Speaker 8: to be a big reason why we have to wait
Speaker 8: a long time before this race is called. I mean,
Speaker 8: we're really going out of our way to the warrant
Speaker 8: our viewers and listeners that it could be if not
Speaker 8: a week before we know.
Speaker 5: A while, Joe, we've talked a lot about the role
Speaker 5: Elon Musk is playing in Pennsylvania in particular, and there
Speaker 5: was this blockbuster piece in the Wall Street Journal that
Speaker 5: Trump last night indicating that Elon Musk has talked repeatedly
Speaker 5: continues to talk. I think it alleged, Yeah, with Vladimir Putin,
Speaker 5: the president of Russia. Walk us through the implications of that.
Speaker 5: So we've got Elon Musk who's reportedly in regular contact
Speaker 5: with the Russian president, Donald Trump, who's reportedly in regular
Speaker 5: contact with the Russian president. And I don't need the
Speaker 5: reportedly here when I say that these two met are
Speaker 5: talking to each other all the time. Elon Muskin and
Speaker 5: Donald Trump are walk us through why this is such
Speaker 5: a significant story. Again, this is something the journal has reported,
Speaker 5: we haven't we haven't confirmed, but certainly made some seismic
Speaker 5: waves over the course of the night.
Speaker 8: Well, look, I mean this goes back to what Donald
Speaker 8: Trump likes to call Russia Russia Russia, suggesting that this
Speaker 8: was all a hoax, the idea that he was colluding
Speaker 8: somehow with Russia or Vladimir Putin, or at least enjoying
Speaker 8: the benefits of some interference. We know that his relationship
Speaker 8: is something that has rubbed people the wrong way. He
Speaker 8: says that it's it's a good thing that it in
Speaker 8: fact strengthens our nation to have a leader with relationships
Speaker 8: with other world leaders. But look, we don't really have
Speaker 8: to go to the degrees of separation here.
Speaker 7: If it's Elon Musk, Donald.
Speaker 8: Trump, and Vladimir Putin and a triangle of communication, that's
Speaker 8: a big deal. Elon Musk, according to these reports, in fact,
Speaker 8: was asked to do a favor by Vladimir Putin and
Speaker 8: not turn on the Starlink satellite service over Taiwan as
Speaker 8: a favorite decision.
Speaker 7: Ping.
Speaker 8: So you know, it's not like they're trading recipes on
Speaker 8: the phone here, guys. This actually could have major geopolitical implications.
Speaker 3: What do we know, Joe about down ballot?
Speaker 2: I'm kind of thinking about, you know, we really have
Speaker 2: to get a handle on who's going to be in
Speaker 2: the House, who's going to be in a Senate.
Speaker 3: What's the thinking with DC these days?
Speaker 8: You know, the conventional wisdom for some time, and I
Speaker 8: don't think it's any different right now, is that the
Speaker 8: Senate flips from Democrat to Republican, the House flips from
Speaker 8: Republican to Democrat, and then we'll see what happens in
Speaker 8: the White House. Both are, of course, dealing with such
Speaker 8: thin majorities that it wouldn't take a lot for either
Speaker 8: to happen. This is a tough map for Democrats in
Speaker 8: the Senate this year. There's some very difficult races when
Speaker 8: you look across the swing states in particular, whether we're
Speaker 8: talking about Pennsylvania, Ohio's a big one with shared brown Wisconsin.
Speaker 8: The Senate race has us wondering if Democrats can keep
Speaker 8: the majority the House. You know, it would take four
Speaker 8: seats essentially to flip here, but it's going to take
Speaker 8: some time. We might actually know the Senate on election night,
Speaker 8: and I don't want to predict that, but there's a
Speaker 8: good chance that we will or the following morning.
Speaker 7: The House is going to take some time.
Speaker 8: It states like New York and more specifically states out
Speaker 8: west California that are going to take probably days to count.
Speaker 8: And when we're only talking about a couple of seats here,
Speaker 8: it's ironic to think that we will have to wait
Speaker 8: days to know who controls the House of Representatives. But look,
Speaker 8: we're coming up to New York, guys. I don't think
Speaker 8: they're letting us go home until all this.
Speaker 7: Stuff is called. So we're going to experience this together.
Speaker 5: Paul Joe bringing up that Senate race in Ohio and
Speaker 5: just the amount of money that's been poured into that
Speaker 5: race in particular is just so extraordinary that we've become
Speaker 5: kind of inured to how much he's fueling all of
Speaker 5: these all of these campaigns and races. Joe, you mentioned
Speaker 5: you're coming to New York. Donald Trump is coming here
Speaker 5: as well on Sunday. He's going to be a Madison
Speaker 5: Square Garden. Elon Musk reportedly is going to be there
Speaker 5: as well. We've talked a lot about the Harris messaging
Speaker 5: that we heard in Atlanta that we're going to hear
Speaker 5: in Houston, where she goes today. What is his messaging being,
Speaker 5: Ben and so you mentioned those those house races here
Speaker 5: in New York. My guess my sense is that's that's
Speaker 5: aside from the ego boost of playing Madison Square Garden
Speaker 5: for Donald Trump, that's the importance of him coming here
Speaker 5: to kind of see if he can keep arrest some
Speaker 5: of those house seats away from Democrats in New York.
Speaker 7: Well, that's one way to look at it.
Speaker 8: I'm not sure that has any reason to do with
Speaker 8: why he's actually going. To your point, he wanted to
Speaker 8: play Madison Square Garden and look, it might be a
Speaker 8: smart strategy. It's going to get all kinds of coverage. Yeah,
Speaker 8: Elon will be there, even Mike Johnson on stage. Can
Speaker 8: you imagine a year ago telling Mike Johnson he was
Speaker 8: going to be playing Madison Square Gardening.
Speaker 7: But yeah, it's a big deal.
Speaker 8: I don't look, you know, I keep conjuring up image
Speaker 8: of Led Zeppelin, and I think I'm showing my age
Speaker 8: here because nobody I sit with in my row has
Speaker 8: ever heard of the song remains the same, and they
Speaker 8: keep telling me, no, it's Billy Joel. He wants to
Speaker 8: be Billy Joel. Everybody wants to play Madison Square Garden.
Speaker 8: So they're going to pay a million dollars to do it.
Speaker 8: By the way, they're basically renting the plays out. And
Speaker 8: I'll be honest, with the amount of coverage that will
Speaker 8: probably generate, I suspect to be worth a lot more
Speaker 8: than a million dollars.
Speaker 7: So maybe it's not that silly.
Speaker 3: Bad playing the garden. Why not?
Speaker 2: Joe Matthew, Thank you so much, Joe Matthew. He is
Speaker 2: a host of balance of power. He is in Washington, DC,
Speaker 2: he is right in the middle of it. Appreciate getting
Speaker 2: a few minutes of his time.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: Back in the day when I was a sell side analysts,
Speaker 2: he went to Boston three four times a year to
Speaker 2: shill for your II votes, which I got, by the way,
Speaker 2: I own that town for a long time. One of
Speaker 2: the places you went was Wellington Management. I mean solid
Speaker 2: old money, crusty New York money. That's where you went.
Speaker 2: Some smart people there. I never got off on the
Speaker 2: fixed income floor. I went straight to the equity elevator
Speaker 2: to the top there.
Speaker 7: Yeah.
Speaker 3: No, it's too much math. Bridge Kurana Joints is.
Speaker 2: He's a senior managing director and he's a fixed income
Speaker 2: portfolio manager at Wellington Management. Hey, Bridge, is our Federal
Speaker 2: Reserve going to cut interest rates in November? Because I'm
Speaker 2: looking at some of this economic David, even like the
Speaker 2: industrial production numbers that came out today pretty solid across
Speaker 2: the board.
Speaker 3: What do you think our Fed's going to do?
Speaker 9: Thanks for having me back. Yeah, I do think they
Speaker 9: are going to cut about another twenty five basis points
Speaker 9: in November. You know why has the Fed changed its
Speaker 9: rhetoric to focus so much on the unemployment rate from
Speaker 9: focusing on inflation. I really think it comes from their
Speaker 9: change in view. They have this line that they've been
Speaker 9: repeating quite often that the labor market is not the
Speaker 9: source of the inflation in the economy, and that is
Speaker 9: their biggest fear because that's what the nineteen seventies was about,
Speaker 9: the wage price spiral, and now they don't believe in
Speaker 9: they're right about that. I think that the leads speak
Speaker 9: to the labor market not being the reason we have
Speaker 9: inflation in the economy, and that means that they can
Speaker 9: go back to their pre COVID policy of targeting the
Speaker 9: neutral rate for the economy, which they think is about
Speaker 9: three percent. That's the level where they don't think policy
Speaker 9: is expansionary, they don't think it's contractionary. And they're looking
Speaker 9: at the economy and they say, look, we're interest rates
Speaker 9: are at five percent. We think three percent is neutral.
Speaker 9: We have a lot of room to cut and we're still.
Speaker 3: In restrictive territory.
Speaker 9: So I think they're going to continue along this path
Speaker 9: with that twenty five basis point cut.
Speaker 5: For a neophyte like myself who has heard of our
Speaker 5: star but just doesn't understand the intricacies of it, how
Speaker 5: difficult is it for them to target this and how
Speaker 5: much disagreement is there among policymakers on that committee about
Speaker 5: what it is?
Speaker 9: So there's there, It's very hard to know. You only
Speaker 9: know when you're either below it right. You don't know
Speaker 9: in a real time. What you can do is you
Speaker 9: can look at their estimates. So you go to that
Speaker 9: dot plot that we all talk about, look at where
Speaker 9: their long term dot is. It's around three percent, and
Speaker 9: there's actually a lot of that's the spot where there's
Speaker 9: consensus on So they think it's around three percent. But
Speaker 9: I don't think that really matters whether or it's three,
Speaker 9: three and a half or two and a half. The
Speaker 9: point is that they're at five and they're dealing with
Speaker 9: the inflation story, which is less pronounce than it was
Speaker 9: two years ago, and so they're basically saying, Okay, maybe
Speaker 9: it's three and a half. Let's see what the economy
Speaker 9: looks like when we get down to that three and
Speaker 9: a half level. If it's still accelerating at that point.
Speaker 9: Then yes, maybe the neutral rate is higher, but we
Speaker 9: just know that we're much higher than that at this point.
Speaker 3: All right.
Speaker 2: So if I'm in a fix and come business today,
Speaker 2: I know I don't have to be a rock star.
Speaker 5: I can sit in a two year treasury and get
Speaker 5: you could get off on that floor.
Speaker 3: I can get off on that floor.
Speaker 2: Say hey, kids, I'm long the two year treasury. I'm
Speaker 2: clipping a four point zero five percent coupon. Should I
Speaker 2: just do that or should I take some credit risk?
Speaker 7: Yeah?
Speaker 9: I mean I do think that I think bonds are attractive.
Speaker 9: I do think that when you look at credit spreads,
Speaker 9: they are are quite tight right now. So investment grade spreads,
Speaker 9: you know, looking at the bloombergency is less than one
Speaker 9: hundred basis points.
Speaker 3: Highield spreads below three hundred basis.
Speaker 9: Points, you know, that is not a lot of compensation
Speaker 9: for the riskser that are out there. I mean, we
Speaker 9: are in the first quintile of spreads, and historically over
Speaker 9: the next three to four years, that does mean negative
Speaker 9: excess returns for credit sectors. And I do think we
Speaker 9: actually are seeing defaults and the distressed exchange ratio, which
Speaker 9: is basically when your bonds get primed by other borrowers,
Speaker 9: and so you know, we're seeing that increase. It's around
Speaker 9: five point six percent right now, which is actually quite high.
Speaker 9: And so you know, relative to defaults and recovery rates,
Speaker 9: we don't really feel you're being compensated very handsomely right
Speaker 9: now in credit markets.
Speaker 5: Let me go negative here and say we're things to
Speaker 5: take a turn, were we to get this kind of
Speaker 5: phantom deep down turn or recession. How well equipped is
Speaker 5: the Federal Reserve to deal with that at this point
Speaker 5: in time when you look at through the policies that
Speaker 5: they put in place, certainly the amount assets that they
Speaker 5: bought as well at the the beginning to unwind. Should
Speaker 5: we be worried about what tools remain in the FEDS toolkit?
Speaker 9: I mean, I think given where the starting point of
Speaker 9: policy rates is, they have a lot of tools. I
Speaker 9: do think that this cycle is going to be different
Speaker 9: if we do enter that downturn in that I think
Speaker 9: as much as they're going to continue to use interest
Speaker 9: rates as the primary tool to which they change monetary policy,
Speaker 9: I think they're going to be loath to use the
Speaker 9: balance sheet as aggressively as they did after COVID, and so,
Speaker 9: you know, I think if there is a problem the
Speaker 9: treasury market, I do think they will come in and
Speaker 9: buy bonds like they did in March twenty twenty. But
Speaker 9: I think they were roundly criticized for buying so many
Speaker 9: agency mortgage backed securities after COVID and thereafter, and so
Speaker 9: I don't think they're going to be doing that the
Speaker 9: next round. And I do think that is an important
Speaker 9: point though. You know, we have been in this goldilocks
Speaker 9: type environment and we don't think about what's coming up.
Speaker 9: But if we do enter a recession, the FED is
Speaker 9: not going to be as aggressive as we've seen after
Speaker 9: the GFC or after COVID, and so you know, credit
Speaker 9: investors should keeping that in mind that the tail is
Speaker 9: not as clipped as you may think.
Speaker 2: September was the I think the biggest month for investment
Speaker 2: grade new issuance on record. All the banks have been
Speaker 2: flooding into the market with new issues. If I'm a
Speaker 2: bond salesman like Morgan Stanley or JP Morgan, are you
Speaker 2: guys at the.
Speaker 3: Top of my call list? Do you buy new issue stuff?
Speaker 2: I mean you're Wellington or do I just go to
Speaker 2: all the hedge funds to buy this new stuff.
Speaker 9: I mean, we're definitely a large asse manager, and so
Speaker 9: we certainly, you know, we do buy the IG corporate market.
Speaker 9: I do think it is interesting that we thought, we
Speaker 9: kind of entered this year thinking that net issuance, so
Speaker 9: this is not only issuance, but it's also versus redemptions,
Speaker 9: was going to be on the lighter side. We were
Speaker 9: kind of thinking four hundred to five hundred billion, and
Speaker 9: that was that was going to be kind of a
Speaker 9: tailwind to credit markets because you just have less supply
Speaker 9: than we've seen over the last few years. I've just
Speaker 9: been almost surprised by how much issuance we've seen. I
Speaker 9: think gross is one point two one point three trillion,
Speaker 9: and even net issuance is kind of six hundred billion ish,
Speaker 9: and so it definitely I've been surprised by two things.
Speaker 9: One the amount of supply we've seen in the investment
Speaker 9: grade corporate market, but just kind of the ravenous nature
Speaker 9: with which you know, everyone's taking it down.
Speaker 3: Its supply almost causes spread.
Speaker 2: Why every book I see for these things, I don't
Speaker 2: care if it's a you know, PERI in a cat
Speaker 2: Chow or JP Morgan. These things are over subscribed multiple
Speaker 2: times in the bond market. I mean I expect that
Speaker 2: from one of my IPOs back in the day, because
Speaker 2: I was a great syndicate salesman, fixed investment, great debt.
Speaker 3: Yeah, it is interesting.
Speaker 9: I think what people are really focusing on is the
Speaker 9: high level of yields compared to the level of spreads.
Speaker 9: You know, that's what we constantly hear. Well, spreads are tight,
Speaker 9: but yields are high on a long term basis. I
Speaker 9: do think that, you know, people are very focused on
Speaker 9: income right now in fixed income, focused on the income part.
Speaker 9: I don't think people should really forget about the total
Speaker 9: return nature of fixed income though as well. And you know,
Speaker 9: I think we're talking a lot about the election these days,
Speaker 9: as I'm sure you all are, and I think in
Speaker 9: this the market's really pricing in a large percentage of
Speaker 9: some kind of sweep. I think we should also think
Speaker 9: about the other tail, though, what if we get divided government,
Speaker 9: and in a divided government, you get that fiscal tightening,
Speaker 9: you get perhaps you know, slowing economic growth than we've
Speaker 9: had of the last few years, and that's an environment
Speaker 9: where bon yields could actually fall fall a lot more
Speaker 9: than people think, and so, yeah, you don't want to
Speaker 9: almost forget the other side where boniolds could fall.
Speaker 5: We ask you one other question kind of tied to
Speaker 5: the election, and we heard we've heard Donald Trump say
Speaker 5: he'd like to advise the FED chair give him his
Speaker 5: opinion on whether rage should go up or or down.
Speaker 5: Going into the interview that he did with our editor
Speaker 5: in chief John Mickelthwaite, Betsy Stevenson was making a very
Speaker 5: strong case that that shouldn't happen, that FED independence is
Speaker 5: so important. I want to get your perspective, sort of
Speaker 5: the market perspective on that. I think part of what
Speaker 5: she was conveying in her comments was the bond market
Speaker 5: in this country is propped up and fortified by the
Speaker 5: fact that the FED has independence. Are folks like you
Speaker 5: thinking about this, worried about this? How much do you
Speaker 5: give credence to what the former president has been saying
Speaker 5: about taking on that kind of new advisory role where
Speaker 5: to be reelected?
Speaker 9: Yeah, you know, I do think central independence is extremely important,
Speaker 9: and bond markets are good at pricing that in and
Speaker 9: so I think one of the reasons we have seen
Speaker 9: term premium rise with how the election might play out.
Speaker 9: Is because when you have political influence on a central bank,
Speaker 9: you should get compensated for that risk and so and
Speaker 9: particularly at the back end of the curve. And so
Speaker 9: I think you're starting to see that materialize that if
Speaker 9: this rhetoric continues an actual actions take place regarding it,
Speaker 9: you should be compensated for more yield as a result
Speaker 9: of that. Almost that you know, going back and forth
Speaker 9: on different policies and what's the President saying versus what
Speaker 9: the Fed's doing. And so I do think that term
Speaker 9: premium has increased, and that's largely as a result of that.
Speaker 2: I want to thank our good friend British Kuhana. He
Speaker 2: is fixed and come portfolio manage at Wellington Management, Undergraduate
Speaker 2: of Princeton, NBA at Harvard.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: You're daily look at the front pages around the world.
Speaker 2: East Monday, What do you have for us UH today?
Speaker 6: All right, Well, since David gur is here. We have
Speaker 6: our political guru. Okay, so I found this story swings
Speaker 6: Day voters apparently suffering from political ad fatigue. They are
Speaker 6: tired of it. Residents in the seven battleground states, they've
Speaker 6: been hit with you know, the lawn signs, the billboards,
Speaker 6: the TV ads. But on top of that, they're getting
Speaker 6: the digital ads, social media that's in their scroll. They're
Speaker 6: getting text messages. I know you've said you've gotten texts.
Speaker 5: Today, so you get a lot of the Pennsylvania stuff.
Speaker 2: No, I just get ten to day, mostly from Democrats
Speaker 2: party for money.
Speaker 7: Okay, it's only.
Speaker 3: I like, yeah, but you're right.
Speaker 2: So I want to ask Apple, so I always hit
Speaker 2: the delete and report the spam doesn't stop.
Speaker 9: It doesn't matter.
Speaker 3: No, it doesn't matter.
Speaker 5: We'll work around that.
Speaker 3: Yeah, block the number. Oh should I do that? Yeah, okay,
Speaker 3: I figure that out all.
Speaker 6: Right, although another number will probably get yes.
Speaker 2: But I mean, I just you know, I used to
Speaker 2: cover the television industry, and every two years when there's
Speaker 2: an election cycle, the TV stations make just gobs of
Speaker 2: money on political advertising, and it's in godsend to them.
Speaker 3: But it's not good if you're a viewer in those states.
Speaker 6: No, in those states, they're just saying they're tired of it.
Speaker 6: It's there, they're done. I'm wondering if it's going to
Speaker 6: make them want to push not to vote.
Speaker 5: Is effect right?
Speaker 7: They're just tired out?
Speaker 5: Yeah, irritated. I can see that.
Speaker 6: Yeah, So that was the thing over there. Okay, so
Speaker 6: we've been hearing the story about the e coli with
Speaker 6: McDonald's and the quarter pounder. So now the restaurant industry
Speaker 6: is on this high alert. So you have other restaurants
Speaker 6: starting to do this. Burger King, Young Brands, a parent
Speaker 6: of Taco Bell, Pizza Hut KFC, they removed the onions
Speaker 6: because that has been said to be linked to the
Speaker 6: Equal Eye outbreak. They're pulling the onions from their burgers. Also,
Speaker 6: Fat Brands that owns Johnny Rockets, other restaurants they're doing
Speaker 6: the same thing. They're stopped using those tailor farm onions.
Speaker 6: But it can be costly for some of these companies.
Speaker 6: You remember the Chipotle outbreak. It cost them about twenty
Speaker 6: five million, it says to settle criminal charges related to outbreaks,
Speaker 6: and it.
Speaker 7: Can last so long.
Speaker 5: I mean, it's a wait on the McDonald's stock now obviously,
Speaker 5: but you look at Chipotle that lasted for years. I
Speaker 5: feel like it was me Mickey D's. It actually is
Speaker 5: the quarter pounder with cheeses, I guess get on several
Speaker 5: states across the country.
Speaker 3: So number two with the cooks.
Speaker 7: Yeah, so you know the numbers.
Speaker 3: Yeah, yeah, it's a number. It's been my order since
Speaker 3: I was like fourteen.
Speaker 4: Is that right?
Speaker 2: Number two of the comfort in that there is, Yeah, exactly.
Speaker 2: You know, same thing with HOGI Haven and Princeton cheese.
Speaker 2: Take Hogy, no tomatoes, but everything.
Speaker 6: Else, do you supersize it? That's the question.
Speaker 5: No, No, everything in moderation.
Speaker 2: Yeah, exactly, exactly, that's right. I mean I could mcdoll's
Speaker 2: maybe once. You know, I used to do I mean,
Speaker 2: traveling in airports. That was your excuse to then you
Speaker 2: had to do it making deez er a Burger king
Speaker 2: because you're in an airport, you're Russian for a flight,
Speaker 2: that was your excuse.
Speaker 3: Sure. Now they don't even have fast food in airports anymore.
Speaker 3: It's all this it's all the fancy rush, fancy. Yeah.
Speaker 3: So I know they took that away for me. All right,
Speaker 3: what else?
Speaker 6: Well, if you're feeling hungry, okay, So how about this,
Speaker 6: a hungry group of ten people on Thanksgiving? You can
Speaker 6: feed them for one hundred dollars. Yes, this at Sam's Club.
Speaker 6: You've gotta go to Sam's Club. It's their member's mark brand.
Speaker 6: So for a hundred bucks, you can get a whole
Speaker 6: turkey dinner, rolls, mac and cheese, mashed potatoes, sweet potato mash,
Speaker 6: Brussels sprout salad, and pumpkin pie. So they're saying it
Speaker 6: can be delivered to your house under two hours. It's
Speaker 6: pre cooked. All you gotta do is heat it up,
Speaker 6: maybe in the oven. Everything is set to go. They
Speaker 6: want to just make sure everyone has, you know, access
Speaker 6: to good food. That's the reason why they're doing it.
Speaker 6: But a lot of companies have been doing this, this
Speaker 6: whole promotion, like Thanksgiving cheap meals because budget?
Speaker 3: What do you doing thanks saving? Are you trying to families?
Speaker 6: No, I go I go to family to bring the wine.
Speaker 6: That's it.
Speaker 2: I'll bring in the wine. That's a good strategy. All right,
Speaker 2: how about you, David, what do you guys do?
Speaker 5: I will be here in New York do some cooking.
Speaker 5: But it's kind of it's farmed out among all of us,
Speaker 5: so I won't take care of the turkey, but.
Speaker 7: We'll do some sides.
Speaker 3: Day after Thanksgiving, I'm working anybody else not me?
Speaker 5: I should check my calendar.
Speaker 3: Yeah, you like, mis.
Speaker 2: Called that ter So when I asked for all the
Speaker 2: fridays off in the summer, I always tell the powers that, hey,
Speaker 2: who's working a day?
Speaker 3: Different things? Christmas? Yes, yeah, that's how it works. Ok
Speaker 3: So that's how you play it there. So but Thanksgiving
Speaker 3: dinner front one hundred bucks? Not bad?
Speaker 6: Yeah, not bad for ten people.
Speaker 7: There you go.
Speaker 6: Okay, we've been talking about the World Series right fevers
Speaker 6: in the air, but this is actually in the Wall
Speaker 6: Street Journal. It's how ballpark condos are a big hit
Speaker 6: with homeowners. So they don't want the ocean view, they
Speaker 6: want the view of the ballpark. So that's becoming a
Speaker 6: big thing. Unfortunately not in New York or Los Angeles
Speaker 6: they don't have those. But in San Diego, for example,
Speaker 6: they have these residences where you can just sit out
Speaker 6: on your balcony and watch the game.
Speaker 3: It's right, I can beat that. Okay.
Speaker 2: How nineteen ninety five we did the IPO for Inner
Speaker 2: Speedway Motor Sports. They on the Charlotte Motor Speedway, the
Speaker 2: Lando Motor Speed Speedway. U SID proceeds to build condos
Speaker 2: at the Charlotte Motor Space Wow in turn two and
Speaker 2: people to me and people, they sold them out before
Speaker 2: they even built them.
Speaker 3: People wanted to have.
Speaker 2: They don't want traffic in front of their house, but
Speaker 2: they want They'll take the forty cars going two hundred miles.
Speaker 3: An hour in front of their condo. It's a Charlotte
Speaker 3: Motor Speedway.
Speaker 6: I wouldn't I live a train station in Marble. I
Speaker 6: don't want to look next to a speedway.
Speaker 3: It was great. And so they you know, for two
Speaker 3: days a year when they have the two you know, used.
Speaker 2: To be the winter regular right yeah, yeah, and then
Speaker 2: they would and people paid like that are like half
Speaker 2: a million dollars in those things.
Speaker 7: You know.
Speaker 5: I was in d C before here in the kind
Speaker 5: of growth that you've seen around the Nationals Ballpark in
Speaker 5: Navy Yard and d C just like that, all those
Speaker 5: condos around there. And then Paul and I love to
Speaker 5: talk about Duram, North Carolina, but that minor league park,
Speaker 5: the Durmaballs Athletic Park, has a lot of that now,
Speaker 5: a lot of condos kind of around the edges of it,
Speaker 5: so I get it. I mean it's like, yeah, if
Speaker 5: you're a fan, and we've talked about how much it
Speaker 5: is to watch the world, maybe it's just like the
Speaker 5: future is to do it that's way, So maybe it's.
Speaker 6: Cheaper to do it that way. Yeah, but they're not
Speaker 6: cheap either. I mean some guy paid a million dollars
Speaker 6: for him in San Diego in the San Diego and
Speaker 6: that was back in two thousand and seven, so you
Speaker 6: can imagine how much.
Speaker 5: I walked by it downtown but never been inside.
Speaker 3: Bent down San Diego system. It's a great why you
Speaker 3: would live anywhere other than San Diego. Temperature just awesome,
Speaker 3: But that's a great ballpark. I think they support the team,
Speaker 3: So we'll see. All right, that's our newspaper segment with
Speaker 3: Lisa Gonna tell you.
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