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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus mobile app, and on your radio.

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Speaker 1: This is a Bloomberg Business Flash M. Bloomberg World Headquarters.

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Speaker 1: I'm Charlie Pellot. The down in SMPR lower NAZDAK is

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Speaker 1: trading higher, the ten year down thirteen thirty seconds, the

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Speaker 1: yield there one point six two percent, the SMP down

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Speaker 1: three points now at sixty nine, a drop of one

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Speaker 1: tenth of one percent. Down Industrials down forty four a

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Speaker 1: drop of two tenths of one percent, and Nasdaq is

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Speaker 1: up by one tenth of one percent. Gold down sixty

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Speaker 1: cents to thirteen twenty the ounce and drop there of

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Speaker 1: less than point one percent. Crude Oil West Texas Intermediate

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Speaker 1: up one cent, little changed at forty four barrel. I'm

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Speaker 1: Charlie Peloton. That's a Bloomberg Business flash. Is taking stock

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Speaker 1: with Kathleene Hayesan pim Fox line from the Jackson Hall

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Speaker 1: Economic Symposium on Bloomberg Radio bubbles, negative interest rates? What

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Speaker 1: are people to do well? First things? Probably to ask

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Speaker 1: Heather Loomis tie market strategies for black Rocks Family Office,

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Speaker 1: Foundations and Endowments Group, and she joins us from our

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Speaker 1: San Francisco studio, Hometool nine sixties. She can be followed

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Speaker 1: on Twitter at h Loomis. Heather Loomis, thank you very

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Speaker 1: much for being with us. Tell us a little bit

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Speaker 1: about the challenges that institutional investors such as family offices, foundations, endowments.

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Speaker 1: They're looking long term they have to deal with low

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Speaker 1: interest rates or they get have interest rates for perhaps

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Speaker 1: a much longer period of time. What are their specific

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Speaker 1: challenges right, No, you highlight something very real, and Chair

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Speaker 1: Yellin's remarks today underscored this that we are in a

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Speaker 1: very low interest rate environment, which despite the fact that

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Speaker 1: we may see a couple of rate hikes over the

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Speaker 1: course of a year to two years, this will persist.

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Speaker 1: And so these types of institutions are in need of

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Speaker 1: income which they have been deprived of in traditional sources

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Speaker 1: of the bond market as yields have fallen. So aren't

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Speaker 1: up today's to find pockets within both bonds, equities and

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Speaker 1: alternatives which could satisfy their needs for that income while

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Speaker 1: not orienting them too far into the risk spectrum or

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Speaker 1: creating any concentrations within their portfolios. So Heather, who is

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Speaker 1: actually here in Jackson Hole today. She just couldn't stay

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Speaker 1: away for a chance to snag a conversation with the

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Speaker 1: FED official or two as they're going in and out

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Speaker 1: of these meetings. She's a fedder like so many of

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Speaker 1: us here at Bloomberg Radio and Tevy, so the the

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Speaker 1: successful Bob. We do have a two year no yield

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Speaker 1: rising a bit again the hyacinths June. If you look

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Speaker 1: at w I RP World indest Rate projections on your Bloomberg,

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Speaker 1: you can see that the odds of the hike by

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Speaker 1: the end of the year are now to something like

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Speaker 1: I think it doesn't That's a much stronger the bet

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Speaker 1: than we saw from the bond market just even a

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Speaker 1: couple of weeks ago. You're absolutely right. We were looking

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Speaker 1: at numbers which were you know, in the in the

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Speaker 1: high forties, even like even about fifty three after after

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Speaker 1: yelling speech today, and have since drifted up. You know,

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Speaker 1: from our perspective, we think a probability of September is

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Speaker 1: still fairly low, called eighteen to. We think the probability

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Speaker 1: of December is much higher, you know, a little bit

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Speaker 1: over fifty. The fundamentals are there to make a hike.

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Speaker 1: There's credibility on on the line as well. Um. But

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Speaker 1: you know, we're seeing some improvements in the labor market

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Speaker 1: percolating wage growth. You're also seeing an incredible market resilience

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Speaker 1: to things which could create faultility like Brexit. Faultilities extremely

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Speaker 1: low right now. How the crowding in all assets that

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Speaker 1: offer yield almost of any kind, that doesn't sound like

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Speaker 1: a rest for success when they ring the bell, because

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Speaker 1: they won't ring the bell, correct, right. I think you

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Speaker 1: have to be aware of crowding in certain positions, and

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Speaker 1: so we've seen that across the board. That's you know,

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Speaker 1: that is one thing to consider in the short term

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Speaker 1: because that could create some price volatility over the long term. Though,

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Speaker 1: if you think about things which offer yield in public markets,

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Speaker 1: there may be a very long term demand for these

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Speaker 1: type of assets as we see demographics, as we see

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Speaker 1: people age, as we see demands from from pensions, from

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Speaker 1: insurance companies remain high. Those will offset some of that

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Speaker 1: short term volatility from crowding. UM. Having said that, I

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Speaker 1: think you do need to look for places within the

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Speaker 1: market which can offer differentiated source of yield which aren't

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Speaker 1: so crowded for a lot of people. Um. They have

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Speaker 1: found that in the alternative space where you don't see

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Speaker 1: so such an significant magnitude of entering into that space

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Speaker 1: pushing down yields, pushing up valuations. So avoid crowding. And

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Speaker 1: that's one rule of thumb. How about looking globally right

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Speaker 1: now and again in a world of negative rates negative

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Speaker 1: bond yields. A lot of debate today over the negative

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Speaker 1: rates are something us should adopt in some really interesting

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Speaker 1: ideas about how to do that. But for right now,

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Speaker 1: what do you see when you look globally? Right so,

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Speaker 1: when we look globally, especially as it relates to questions

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Speaker 1: on where to find income today, where to find relative

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Speaker 1: value today, the emerging markets are um a place where

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Speaker 1: we see some value as a result of the fact

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Speaker 1: that you have seen outflows for a number of years

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Speaker 1: which have been reversed, but not in large part. Only

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Speaker 1: a small amount of the outflows has has been reversed

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Speaker 1: over the course of the past um called year to

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Speaker 1: date period. You're looking at fundamentals which are improving from

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Speaker 1: a political standpoint, from a reform standpoint, and you're looking

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Speaker 1: at carry something which we don't find in markets today,

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Speaker 1: the ability to earn something like five six percent in markets,

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Speaker 1: there will be a demand for that. There will be,

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Speaker 1: of course more volatility. You'll have to accept local currency

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Speaker 1: risk um, but a lot of that risk can be

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Speaker 1: abated by the downward move we've already seen and has

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Speaker 1: already been behind us. We're speaking with Heather loomas time

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Speaker 1: market Strategies for Black Rocks Family Office, Foundations and Endowments Group. Heather,

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Speaker 1: do even sophisticated investors recognize that there may be greater

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Speaker 1: value in holding cash because it is so liquid, Because

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Speaker 1: if there is any kind of upset or chaos in

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Speaker 1: the market, even those with fixed income, they may find

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Speaker 1: the exits crowded. It's a very very interesting point you

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Speaker 1: bring up, especially because we have been sitting with billionaire

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Speaker 1: family offices, endowments and foundations for the better part of

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Speaker 1: this week leading up to this conference, and the conversation

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Speaker 1: has been around exactly that they're making independent decisions to

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Speaker 1: raise cash and portfolios because they feel more comfortable with that. Now.

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Speaker 1: If you look back to call you nighteen and think

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Speaker 1: about the worst performing asset class um of every one

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Speaker 1: of those over time, it has been cash. And I

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Speaker 1: don't think that this time period is any exception with

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Speaker 1: cash rates actually lower than the rate of inflation, the

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Speaker 1: state of rate of inflation. I think that we could

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Speaker 1: think about some different ways to express call it a

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Speaker 1: negative you on markets, or a view that maybe markets

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Speaker 1: are going to go down and they need to hold

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Speaker 1: some dry powder. Think about perhaps owning the vix. You know,

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Speaker 1: going long ball is not expensive right now, it's a

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Speaker 1: good hedge. Gold also plays diversifying role. And then you

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Speaker 1: could also think about investing in some of these longer term, uh,

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Speaker 1: longer term alternatives which pay off an income stream which

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Speaker 1: is quite stable, tied to investment grade credits, and maybe

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Speaker 1: if you need a line of credit against that for

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Speaker 1: your cash, for your liquidity, you could kind of have

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Speaker 1: your cake and need it too in a certain way

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Speaker 1: by having something that's income producing but then also having

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Speaker 1: the ability to to access cash if you need it.

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Speaker 1: So what about emerging markets for example, again a little

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Speaker 1: bit of the shadow of that hanging over them, and

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Speaker 1: broadly or specifically an emerging market where do you see

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Speaker 1: some some opportunity. So we're looking at emerging markets where

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Speaker 1: we're seeing signs of political reform, where you can at

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Speaker 1: least look at a market and say I'm going to

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Speaker 1: be able to access to this market better tomorrow than

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Speaker 1: I have been yesterday because of reform kind of around politics,

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Speaker 1: around corruption, making the markets a safer place to invest.

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Speaker 1: Some some of the areas which we're seeing pockets of

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Speaker 1: value and could be Brazil, could be UM, could be

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Speaker 1: places like India, UM, countries like Indonesia. And importantly, I

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Speaker 1: think one of the things which we need to see

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Speaker 1: remain stable for that view to play out is that

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Speaker 1: we need to see the dollar remain relatively stable, which

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Speaker 1: we do expect to happen even into the face of

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Speaker 1: one to two rate hikes. We think that there's some

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Speaker 1: stability which we could access there in the dollar and

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Speaker 1: the I just want to pick up on something you

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Speaker 1: said having to do with the VIX, the volatility index.

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Speaker 1: Do you think that stock investors are too complacent? To me?

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Speaker 1: The VIX is under fourteen. There is an incredible sense

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Speaker 1: of complacency in the market right now and UM and

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Speaker 1: I think that that's why there was a lot of

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Speaker 1: importance placed around cheer, yell and speech today, Uh, simply

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Speaker 1: because the market seem to be waiting for something, and

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Speaker 1: yet you see the volatility continue to hit new lows. UM.

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Speaker 1: I think that that, in part, back to your comments before,

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Speaker 1: makes people a little bit nervous. It actually adds that

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Speaker 1: these cash positions that they're buffering, saying this is a

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Speaker 1: little bit of an eerie calm in the markets right now.

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Speaker 1: There are things which are looming from valuations UM to

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Speaker 1: geopolitical issues UM that people feel comfortable with. Yet markets

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Speaker 1: keep marching forward. And for that reason, that's why we

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Speaker 1: like to build in some stability some places in the market,

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Speaker 1: especially where we see an altar where they're not correlated

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Speaker 1: to bonds or stocks UM, because that will buffer clients

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Speaker 1: investments against potential future volatility. So if you had to

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Speaker 1: bet on the FED, would you be going against the

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Speaker 1: grain a little bit heather and say maybe that'll move

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Speaker 1: it all this year? Or you do you think it's

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Speaker 1: more baked than the cake. I my expectation. I think

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Speaker 1: you know what the FED has conditioned us, and today

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Speaker 1: was no exception, is that they have to be data dependant.

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Speaker 1: There's no preset course. But based upon what we have

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Speaker 1: already seen in terms of US and even global economic data,

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Speaker 1: we think that December could be a possibility here, probably

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Speaker 1: greater than all. Right, the market agrees with you, head

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Speaker 1: of the list side you thank you so much for

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Speaker 1: joining us here. To Dan Jackson Hall, so great to

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Speaker 1: be here. Thank you. She's usually in San Francisco at

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Speaker 1: black Rocks Family Office for foundations and endowments. On Kathleen

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Speaker 1: Hayes along with Pim Fox. This is Wilberg. Yeah,