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Speaker 1: This is a Bloomberg Business Flash M. Bloomberg World Headquarters.
Speaker 1: I'm Charlie Pellot. The down in SMPR lower NAZDAK is
Speaker 1: trading higher, the ten year down thirteen thirty seconds, the
Speaker 1: yield there one point six two percent, the SMP down
Speaker 1: three points now at sixty nine, a drop of one
Speaker 1: tenth of one percent. Down Industrials down forty four a
Speaker 1: drop of two tenths of one percent, and Nasdaq is
Speaker 1: up by one tenth of one percent. Gold down sixty
Speaker 1: cents to thirteen twenty the ounce and drop there of
Speaker 1: less than point one percent. Crude Oil West Texas Intermediate
Speaker 1: up one cent, little changed at forty four barrel. I'm
Speaker 1: Charlie Peloton. That's a Bloomberg Business flash. Is taking stock
Speaker 1: with Kathleene Hayesan pim Fox line from the Jackson Hall
Speaker 1: Economic Symposium on Bloomberg Radio bubbles, negative interest rates? What
Speaker 1: are people to do well? First things? Probably to ask
Speaker 1: Heather Loomis tie market strategies for black Rocks Family Office,
Speaker 1: Foundations and Endowments Group, and she joins us from our
Speaker 1: San Francisco studio, Hometool nine sixties. She can be followed
Speaker 1: on Twitter at h Loomis. Heather Loomis, thank you very
Speaker 1: much for being with us. Tell us a little bit
Speaker 1: about the challenges that institutional investors such as family offices, foundations, endowments.
Speaker 1: They're looking long term they have to deal with low
Speaker 1: interest rates or they get have interest rates for perhaps
Speaker 1: a much longer period of time. What are their specific
Speaker 1: challenges right, No, you highlight something very real, and Chair
Speaker 1: Yellin's remarks today underscored this that we are in a
Speaker 1: very low interest rate environment, which despite the fact that
Speaker 1: we may see a couple of rate hikes over the
Speaker 1: course of a year to two years, this will persist.
Speaker 1: And so these types of institutions are in need of
Speaker 1: income which they have been deprived of in traditional sources
Speaker 1: of the bond market as yields have fallen. So aren't
Speaker 1: up today's to find pockets within both bonds, equities and
Speaker 1: alternatives which could satisfy their needs for that income while
Speaker 1: not orienting them too far into the risk spectrum or
Speaker 1: creating any concentrations within their portfolios. So Heather, who is
Speaker 1: actually here in Jackson Hole today. She just couldn't stay
Speaker 1: away for a chance to snag a conversation with the
Speaker 1: FED official or two as they're going in and out
Speaker 1: of these meetings. She's a fedder like so many of
Speaker 1: us here at Bloomberg Radio and Tevy, so the the
Speaker 1: successful Bob. We do have a two year no yield
Speaker 1: rising a bit again the hyacinths June. If you look
Speaker 1: at w I RP World indest Rate projections on your Bloomberg,
Speaker 1: you can see that the odds of the hike by
Speaker 1: the end of the year are now to something like
Speaker 1: I think it doesn't That's a much stronger the bet
Speaker 1: than we saw from the bond market just even a
Speaker 1: couple of weeks ago. You're absolutely right. We were looking
Speaker 1: at numbers which were you know, in the in the
Speaker 1: high forties, even like even about fifty three after after
Speaker 1: yelling speech today, and have since drifted up. You know,
Speaker 1: from our perspective, we think a probability of September is
Speaker 1: still fairly low, called eighteen to. We think the probability
Speaker 1: of December is much higher, you know, a little bit
Speaker 1: over fifty. The fundamentals are there to make a hike.
Speaker 1: There's credibility on on the line as well. Um. But
Speaker 1: you know, we're seeing some improvements in the labor market
Speaker 1: percolating wage growth. You're also seeing an incredible market resilience
Speaker 1: to things which could create faultility like Brexit. Faultilities extremely
Speaker 1: low right now. How the crowding in all assets that
Speaker 1: offer yield almost of any kind, that doesn't sound like
Speaker 1: a rest for success when they ring the bell, because
Speaker 1: they won't ring the bell, correct, right. I think you
Speaker 1: have to be aware of crowding in certain positions, and
Speaker 1: so we've seen that across the board. That's you know,
Speaker 1: that is one thing to consider in the short term
Speaker 1: because that could create some price volatility over the long term. Though,
Speaker 1: if you think about things which offer yield in public markets,
Speaker 1: there may be a very long term demand for these
Speaker 1: type of assets as we see demographics, as we see
Speaker 1: people age, as we see demands from from pensions, from
Speaker 1: insurance companies remain high. Those will offset some of that
Speaker 1: short term volatility from crowding. UM. Having said that, I
Speaker 1: think you do need to look for places within the
Speaker 1: market which can offer differentiated source of yield which aren't
Speaker 1: so crowded for a lot of people. Um. They have
Speaker 1: found that in the alternative space where you don't see
Speaker 1: so such an significant magnitude of entering into that space
Speaker 1: pushing down yields, pushing up valuations. So avoid crowding. And
Speaker 1: that's one rule of thumb. How about looking globally right
Speaker 1: now and again in a world of negative rates negative
Speaker 1: bond yields. A lot of debate today over the negative
Speaker 1: rates are something us should adopt in some really interesting
Speaker 1: ideas about how to do that. But for right now,
Speaker 1: what do you see when you look globally? Right so,
Speaker 1: when we look globally, especially as it relates to questions
Speaker 1: on where to find income today, where to find relative
Speaker 1: value today, the emerging markets are um a place where
Speaker 1: we see some value as a result of the fact
Speaker 1: that you have seen outflows for a number of years
Speaker 1: which have been reversed, but not in large part. Only
Speaker 1: a small amount of the outflows has has been reversed
Speaker 1: over the course of the past um called year to
Speaker 1: date period. You're looking at fundamentals which are improving from
Speaker 1: a political standpoint, from a reform standpoint, and you're looking
Speaker 1: at carry something which we don't find in markets today,
Speaker 1: the ability to earn something like five six percent in markets,
Speaker 1: there will be a demand for that. There will be,
Speaker 1: of course more volatility. You'll have to accept local currency
Speaker 1: risk um, but a lot of that risk can be
Speaker 1: abated by the downward move we've already seen and has
Speaker 1: already been behind us. We're speaking with Heather loomas time
Speaker 1: market Strategies for Black Rocks Family Office, Foundations and Endowments Group. Heather,
Speaker 1: do even sophisticated investors recognize that there may be greater
Speaker 1: value in holding cash because it is so liquid, Because
Speaker 1: if there is any kind of upset or chaos in
Speaker 1: the market, even those with fixed income, they may find
Speaker 1: the exits crowded. It's a very very interesting point you
Speaker 1: bring up, especially because we have been sitting with billionaire
Speaker 1: family offices, endowments and foundations for the better part of
Speaker 1: this week leading up to this conference, and the conversation
Speaker 1: has been around exactly that they're making independent decisions to
Speaker 1: raise cash and portfolios because they feel more comfortable with that. Now.
Speaker 1: If you look back to call you nighteen and think
Speaker 1: about the worst performing asset class um of every one
Speaker 1: of those over time, it has been cash. And I
Speaker 1: don't think that this time period is any exception with
Speaker 1: cash rates actually lower than the rate of inflation, the
Speaker 1: state of rate of inflation. I think that we could
Speaker 1: think about some different ways to express call it a
Speaker 1: negative you on markets, or a view that maybe markets
Speaker 1: are going to go down and they need to hold
Speaker 1: some dry powder. Think about perhaps owning the vix. You know,
Speaker 1: going long ball is not expensive right now, it's a
Speaker 1: good hedge. Gold also plays diversifying role. And then you
Speaker 1: could also think about investing in some of these longer term, uh,
Speaker 1: longer term alternatives which pay off an income stream which
Speaker 1: is quite stable, tied to investment grade credits, and maybe
Speaker 1: if you need a line of credit against that for
Speaker 1: your cash, for your liquidity, you could kind of have
Speaker 1: your cake and need it too in a certain way
Speaker 1: by having something that's income producing but then also having
Speaker 1: the ability to to access cash if you need it.
Speaker 1: So what about emerging markets for example, again a little
Speaker 1: bit of the shadow of that hanging over them, and
Speaker 1: broadly or specifically an emerging market where do you see
Speaker 1: some some opportunity. So we're looking at emerging markets where
Speaker 1: we're seeing signs of political reform, where you can at
Speaker 1: least look at a market and say I'm going to
Speaker 1: be able to access to this market better tomorrow than
Speaker 1: I have been yesterday because of reform kind of around politics,
Speaker 1: around corruption, making the markets a safer place to invest.
Speaker 1: Some some of the areas which we're seeing pockets of
Speaker 1: value and could be Brazil, could be UM, could be
Speaker 1: places like India, UM, countries like Indonesia. And importantly, I
Speaker 1: think one of the things which we need to see
Speaker 1: remain stable for that view to play out is that
Speaker 1: we need to see the dollar remain relatively stable, which
Speaker 1: we do expect to happen even into the face of
Speaker 1: one to two rate hikes. We think that there's some
Speaker 1: stability which we could access there in the dollar and
Speaker 1: the I just want to pick up on something you
Speaker 1: said having to do with the VIX, the volatility index.
Speaker 1: Do you think that stock investors are too complacent? To me?
Speaker 1: The VIX is under fourteen. There is an incredible sense
Speaker 1: of complacency in the market right now and UM and
Speaker 1: I think that that's why there was a lot of
Speaker 1: importance placed around cheer, yell and speech today, Uh, simply
Speaker 1: because the market seem to be waiting for something, and
Speaker 1: yet you see the volatility continue to hit new lows. UM.
Speaker 1: I think that that, in part, back to your comments before,
Speaker 1: makes people a little bit nervous. It actually adds that
Speaker 1: these cash positions that they're buffering, saying this is a
Speaker 1: little bit of an eerie calm in the markets right now.
Speaker 1: There are things which are looming from valuations UM to
Speaker 1: geopolitical issues UM that people feel comfortable with. Yet markets
Speaker 1: keep marching forward. And for that reason, that's why we
Speaker 1: like to build in some stability some places in the market,
Speaker 1: especially where we see an altar where they're not correlated
Speaker 1: to bonds or stocks UM, because that will buffer clients
Speaker 1: investments against potential future volatility. So if you had to
Speaker 1: bet on the FED, would you be going against the
Speaker 1: grain a little bit heather and say maybe that'll move
Speaker 1: it all this year? Or you do you think it's
Speaker 1: more baked than the cake. I my expectation. I think
Speaker 1: you know what the FED has conditioned us, and today
Speaker 1: was no exception, is that they have to be data dependant.
Speaker 1: There's no preset course. But based upon what we have
Speaker 1: already seen in terms of US and even global economic data,
Speaker 1: we think that December could be a possibility here, probably
Speaker 1: greater than all. Right, the market agrees with you, head
Speaker 1: of the list side you thank you so much for
Speaker 1: joining us here. To Dan Jackson Hall, so great to
Speaker 1: be here. Thank you. She's usually in San Francisco at
Speaker 1: black Rocks Family Office for foundations and endowments. On Kathleen
Speaker 1: Hayes along with Pim Fox. This is Wilberg. Yeah,