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

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 3: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 3: you listen to podcasts, and at Bloomberg dot com Slash

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Speaker 3: podcast For broadcasting Live from the COMMONWEALTHS twenty twenty three

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Speaker 3: National Financial Advisors Conference, We're at the Gaylord Rockies Resort

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Speaker 3: in a rural Colorado, a world class water park.

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Speaker 1: I will report for those that are into the water

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Speaker 1: park thing what we're doing here. There's a lot of

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Speaker 1: registered investment advisors here. People manage money for others. They

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Speaker 1: gather here along with their platform, the folks at Commonwealth.

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Speaker 1: Matthew Jessup joins up piece as CEO and managing partner

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Speaker 1: of Jessup Wealth Management. So, Matthew, you've been in this

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Speaker 1: business a long time. You started a UBS wealth management, correct,

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Speaker 1: then you go off to form your own firm. Why

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Speaker 1: do you go off to form your own firm and

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Speaker 1: talk to us about you know, what it was like

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Speaker 1: building that business.

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Speaker 4: So, Paul, when I got started in the business that

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Speaker 4: was back in the day of you know, cold calling,

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Speaker 4: right yep, you know, smile and dial and I was

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Speaker 4: able to build a client base. And in the late

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Speaker 4: two thousands, you know, you go through the GFC. You know,

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Speaker 4: the last thing I wanted to worry about is the

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Speaker 4: custodian where my money was held. And you know, being

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Speaker 4: independent had gave me the ability to invest money the

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Speaker 4: way I wanted and grow the business in my fashion.

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Speaker 4: And it's worked out really well over the years. We're

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Speaker 4: managing over three hundred million of assets, over four hundred

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Speaker 4: households across the US.

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Speaker 1: So how do you build that business? What are some

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Speaker 1: of the tools you use to build that business? So

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Speaker 1: you know a lot of it is going to be

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Speaker 1: word of mouth and referrals. I do it old school

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Speaker 1: now these days, you know, the days of smile and

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Speaker 1: dialing is obviously over. But you know, if you look

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Speaker 1: at you know how that business has grown, it's mainly

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Speaker 1: through that word of mouth, through our entire client base.

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Speaker 5: In terms of.

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Speaker 2: What you do to get your message out there, beyond

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Speaker 2: word of mouth, I'm thinking about social media, posting on Twitter,

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Speaker 2: for example. Bailey was just talking about putting charts up there,

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Speaker 2: or maybe even going a little bit further a YouTube

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Speaker 2: account or a podcast. What do you think are the

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Speaker 2: best bang for your buck ways to spread the word.

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Speaker 4: Matt, great question for us, It's gonna be our podcast.

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Speaker 4: So we started the Independent Advisor's Podcast. We've been doing

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Speaker 4: it for two hundred and twenty two consecutive weeks. Each

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Speaker 4: of those podcasts last about thirty forty minutes. And what

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Speaker 4: we do is a really good job of educating our

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Speaker 4: client base and potential clients. You know, we're gonna talk

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Speaker 4: about big news and headlines over the past week. We're

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Speaker 4: gonna highlight you know, tweets or exes, articles and research,

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Speaker 4: and then we do financial planning topics of the week.

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Speaker 4: And this was started with me and my business partner,

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Speaker 4: Mark mcavy, who's our firm's chief investment officer.

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Speaker 1: So what do you find that your clients need the

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Speaker 1: most these days? I mean, if you kind of just

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Speaker 1: lose yourself in social media or in the news, it

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Speaker 1: can be dizzying. So I mean, how do you try

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Speaker 1: to get your clients to focus on.

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Speaker 4: You know, at the end of the day, it's helping

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Speaker 4: them meet their long term financial goals and avoiding the

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Speaker 4: short term noise, and we if we look at the

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Speaker 4: market day to day and react to that, we're going

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Speaker 4: to get them off base. And so I think we

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Speaker 4: do a good job putting the news headlines into perspective.

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Speaker 4: You know, let's take geopolitics as an example. You know,

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Speaker 4: if an investor was waiting for the absence of geopolitics,

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Speaker 4: they never own stocks. And so I think we do

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Speaker 4: a good job managing and balancing what they're seeing day

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Speaker 4: to day in the markets pall, and managing that with

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Speaker 4: their long term goals.

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Speaker 1: So how do they think? I mean, everybody's different or

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Speaker 1: everybody's got different goals here when you start off the

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Speaker 1: conversation kind of where would you like to take them?

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Speaker 1: For most of these people, it's say sixty forty portfolios

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Speaker 1: still the place to start or is there a different place?

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Speaker 4: You know, if a lot of retirees, I think that's fine.

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Speaker 4: You know, I think that the sixty forty, due to

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Speaker 4: the way the market was in twenty twenty two, is

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Speaker 4: getting a bad rap lately. We don't think it's dead,

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Speaker 4: you know. I think ultimately the way our firm manages money,

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Speaker 4: we don't sub anything out mainly to third parties. We're

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Speaker 4: using individual securities, our own research, and we have our

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Speaker 4: own in house trader, and right now, I know we're

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Speaker 4: going to get to it a little bit. You know,

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Speaker 4: we're overweight equities right now. We have a different contrarian

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Speaker 4: view than Wall Street right now. Why well, ultimately we

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Speaker 4: think that Wall Street is too pessimistic right now. I

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Speaker 4: think when you look at a lot of the indicators, Matt,

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Speaker 4: it could be everything from investor sentiment, y you look

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Speaker 4: at a lot of the extreme ratios we've seen over

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Speaker 4: the past year. I think the market can't get around

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Speaker 4: the fact that stocks can do good in higher interest

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Speaker 4: rate environments. You know, NYU did a great study that

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Speaker 4: looked at four variables, rising rates, falling rates, rising interest rates,

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Speaker 4: falling with inflation on the other two variables. And when

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Speaker 4: you look at those and all those scenarios of falling

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Speaker 4: interest rates in inflation, ultimately stocks only do bad in

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Speaker 4: one of the three, and that is going to be

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Speaker 4: a rising inflationary environment. And ultimately we are seeing inflation

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Speaker 4: come down. It's not going to come down every month.

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Speaker 4: We know that data point just recently, but we're making

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Speaker 4: a lot of headway and these fed rates hikes take

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Speaker 4: time to work their self through the system.

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Speaker 5: Yeah, fair enough.

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Speaker 2: Hey, I want to know about your take on the

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Speaker 2: long end of the curve here. I think a lot

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Speaker 2: more people have been learning about it. Certainly we've seen

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Speaker 2: massive inflows to TLT, which is a twenty year plus

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Speaker 2: bond fund.

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Speaker 5: ETFU and YEP.

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Speaker 2: And one of the things that I think people are

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Speaker 2: noticing is small moves in yield contribute to very big

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Speaker 2: moves in principle on the long end. But a lot

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Speaker 2: of your investors, a lot of your clients may be

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Speaker 2: looking at say the thirty year at four and three

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Speaker 2: quarters percent and saying, I don't care about moves in

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Speaker 2: the principle over the time because I'm gonna hold this

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Speaker 2: to maturity.

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Speaker 5: Those rates look juicy. Are they gonna look juicy when

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Speaker 5: we look back in ten fifteen years.

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Speaker 4: Well, man, I will kind of take the other side

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Speaker 4: of it. Right now, we're on the short end of

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Speaker 4: the curve, because the big concern for us is ultimately

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Speaker 4: rates are gonna come down, we feel over the next

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Speaker 4: couple of years, and what we're going to look for

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Speaker 4: is a definitive move and consistency before we start locking

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Speaker 4: in some of those longer term rates. Now, I don't

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Speaker 4: think I'm unique in that feeling ultimately, but I think

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Speaker 4: at a certain point, owning individual bonds for our clients

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Speaker 4: takes away a lot of the risk that you just mentioned, sir.

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Speaker 1: All right, So Matthew talk to us about some younger investors.

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Speaker 1: How do you go out and try to attract younger

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Speaker 1: investors because a lot of folks are just concerned that

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Speaker 1: maybe they're not saving enough early enough. Maybe they're not

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Speaker 1: because they have a lot of challenges, whether it's student

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Speaker 1: debt or other things. How do you approach some of

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Speaker 1: the younger investors out there?

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Speaker 4: Great question, Paul, So you and matt were just talking about,

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Speaker 4: you know, presence on social media. You know, if you

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Speaker 4: look at these next generational investors, they're looking towards professionals

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Speaker 4: that can guide them and provide that advice, but they

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Speaker 4: want to connect on a personal level.

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Speaker 6: You know.

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Speaker 4: I'm at a firm where I'm the oldest team member

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Speaker 4: in my young forties. So what's great is I've built

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Speaker 4: up Me and Mark have built up a great team

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Speaker 4: that can sit down one on one with these younger

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Speaker 4: investors who can relate to them right to their goals.

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Speaker 4: That they're dealing with. And so I think that's a

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Speaker 4: good thing, is that ultimately we can relate on a

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Speaker 4: one to one basis in multiple levels. And what do

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Speaker 4: you think they do they want anything different in their

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Speaker 4: investments than maybe some of the I don't know. The

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Speaker 4: baby boomers are just some of the older investors, great question, Paul.

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Speaker 4: They're more risk averse, believe it or not. Okay, So

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Speaker 4: what we find out is that investors in their twenties

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Speaker 4: and thirties, they're not having experience shed in investing into equities.

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Speaker 4: And so what we see in a lot of times is

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Speaker 4: we are spending a lot of time educating in Paul

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Speaker 4: up front on risk, reward, volatility, goals and objectives because ultimately,

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Speaker 4: with the time horizon they have, they're going to be

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Speaker 4: very much benefited by having that equity exposure. But then

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Speaker 4: we have to get them past those day to day

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Speaker 4: and month to month headlines that might derail that bigger

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Speaker 4: plan if you think of it.

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Speaker 1: And it's interesting, I mean the younger investors now fixed

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Speaker 1: in come is actually an option. There's a generation of

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Speaker 1: people who have had nothing but zero interest rates that

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Speaker 1: it had to go out and take more and more risk,

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Speaker 1: whether it's equities or alternative Now fixed income can really

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Speaker 1: be a percentage of your portfolio.

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Speaker 5: Absolutely.

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Speaker 4: I mean I think, you know, going back to Matt's

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Speaker 4: point about it, at some point, you know you've got

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Speaker 4: to start thinking about locking in some longer term rates.

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Speaker 4: While we have these great short term rates, you got

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Speaker 4: to go out and enjoy that. It's time to harvest.

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Speaker 4: But at a certain point, I think over the next say,

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Speaker 4: you know, six to twelve months, looking at longer durations

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Speaker 4: is probably gonna make a lot of sense.

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Speaker 1: What are you were hoping to gain from this week

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Speaker 1: here at this conference.

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Speaker 4: First and foremost easy question. Networking with my peers. That's

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Speaker 4: where I get a lot of good information best practices.

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Speaker 4: You know, we're not here to reinvent the wheel, and

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Speaker 4: so I have a good group of like minded individuals

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Speaker 4: that we network with. We have a great study group

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Speaker 4: of about ten other advisors that me and my business

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Speaker 4: partner Mark we meet with and we share and get

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Speaker 4: a lot of good ideas on how to run our practices.

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Speaker 1: All right, Matthew, thank you so much for joining us.

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Speaker 1: Matthew Jessup, he's a CEO and managing partner. Jessup Wealth Management.

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Speaker 7: You're listening to the tenth can'shur Live program Bloomberg Markets

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Speaker 7: weekdays at ten am Eastern conn Bloomberg dot Com, the

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Speaker 7: iHeartRadio app, and the Bloomberg Business App, or listen on

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Speaker 7: demand wherever you get your podcasts.

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Speaker 1: We're broadcasting live from Commonwealth's twenty twenty three National Financial

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Speaker 1: Advisors Conference at the Gaylord Rockies Resort in Aurora, California.

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Speaker 1: Today we're joined with our host here, Brad McMillan. He's

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Speaker 1: the CIO, that's Chief Investment Officer for Commonwealth. Brad, thanks

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Speaker 1: so much for joining us. Thanks for having us out

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Speaker 1: here in Denver. Appreciate it. So I see a bunch

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Speaker 1: of your clients walking around here, registered investment advisors. When

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Speaker 1: you sit down and talk with them and mingle with them,

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Speaker 1: what are some of their biggest concerns here is they

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Speaker 1: try to figure out how to navigate these markets on

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Speaker 1: behalf of their clients.

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Speaker 8: There's a couple of things that are really dominating the

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Speaker 8: conversation right now. One is inflation. We see it coming down,

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Speaker 8: but you know there's a real fear is it going

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Speaker 8: to go back up? Is it going to go back

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Speaker 8: to normal levels? And what are normal levels anyway, So

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Speaker 8: that's one thing, and very closely tied to that as

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Speaker 8: interest rates. And you just had Matt jessipull in here,

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Speaker 8: you know, talking about how rates are evolving and we

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Speaker 8: have you know, very good short term rates right now

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Speaker 8: and people love that. But is that going to last?

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Speaker 8: You know, how is that going to change? So how

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Speaker 8: do we navigate this significant shift in the fiscal and

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Speaker 8: monetary structure. It's a real challenge.

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Speaker 1: So what do we What are some of the big

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Speaker 1: issues here? I mean, I think we heard some We

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Speaker 1: had some earnings today from some of the big banks

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Speaker 1: this morning, and it seems like pretty solid out there.

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Speaker 1: I mean, you know, they had some good loan growth,

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Speaker 1: they had some good net interest markets, some of their

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Speaker 1: capital markets businesses are pretty pretty strong. So at least

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Speaker 1: looking just from today's companies reporting, it looks like the

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Speaker 1: economy is in decent shape. Is that concidned with how

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Speaker 1: you guys think about it?

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Speaker 8: It does because we've had a lot of talk over

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Speaker 8: the past year eighteen months about how we're going to

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Speaker 8: have a recession, and a recession is inevitable and the

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Speaker 8: world is coming to an end and so forth, and

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Speaker 8: so on. What we've been saying consistently is we see

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Speaker 8: an economy driven by the consumer, and we see the

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Speaker 8: consumer getting more jobs at higher wages. You know, when

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Speaker 8: you have when you have this kind of job growth,

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Speaker 8: and we've just seen that is not softened. Really, we

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Speaker 8: just saw the most recent data. You know, when you

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Speaker 8: have this kind of job growth, when we have this

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Speaker 8: kind of wage growth, when have this kind of spending

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Speaker 8: ability growth, we don't see a recession. So when you

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Speaker 8: look at the earnings expectations, they're kind of based on

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Speaker 8: that recession thesis and we just don't see that. And

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Speaker 8: I think, as you say today's data, the banks are

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Speaker 8: doing okay because people are out there spending.

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Speaker 5: Concern that're spending.

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Speaker 2: My concern is that people are out spending their income

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Speaker 2: because we have seen wage growth, but it has not

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Speaker 2: kept up with inflation. So prices are rising faster than

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Speaker 2: people's paychecks. And you can see that everywhere when you

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Speaker 2: look at the affordability of homes, of cars, of gasoline,

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Speaker 2: all the things that the Fed doesn't really necessarily want

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Speaker 2: to put into the core inflation category, right, but the

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Speaker 2: things that we need excess savings have been spent off.

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Speaker 2: People are putting much more or in terms of payments

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Speaker 2: on credit cards. They're also delinquent on those credit cards

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Speaker 2: at a higher rate, delinquent on auto loans which are

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Speaker 2: too much for them to afford at a higher rate,

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Speaker 2: and they've got to start paying back student loans, which

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Speaker 2: they haven't been doing for a couple of years.

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Speaker 5: Doesn't the consumer worry you?

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Speaker 8: The consumer does worry me. And everything you've pointed out

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Speaker 8: is are real issues. But at the same time, when

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Speaker 8: you look at the data, we have gotten worse than

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Speaker 8: we've been over the past year, and that's true, but

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Speaker 8: we're still better than we have been, you know, at

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Speaker 8: typical points previously in the cycle, so we still have

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Speaker 8: some running room here. I mean, things are softening, We're

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Speaker 8: seeing consumers maybe start to pull back a little bit,

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Speaker 8: and certainly interest rates are having an effect, there's no

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Speaker 8: doubt about that. But the flip side of this is

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Speaker 8: a lot of people own homes with low mortgages locked in.

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Speaker 8: Their spending is not going to be affected by interest rates,

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Speaker 8: So there's another side to the story. But are things

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Speaker 8: slowing Absolutely? Does that mean we're going to have a

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Speaker 8: re anytime soon? I don't see it in the data.

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Speaker 1: All right, So what do you want this Federal Reserve

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Speaker 1: to do? We're gonna you know, I mean, it's they've

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Speaker 1: been very, very clear and very aggressive in fighting inflation

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Speaker 1: and rise and raising interestratetions. What do you think they're

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Speaker 1: gonna do over the next several meetings.

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Speaker 8: I think they've gotten to where they need to be.

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Speaker 8: When you look at the inflation numbers, they're going to

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Speaker 8: be trending down, if only because of housing. We know

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Speaker 8: how the housing numbers are gonna trend. They're going to

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Speaker 8: trend down. We should see inflation in the three three

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Speaker 8: and a half range by the end of the year.

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Speaker 8: That being the case. When you look at the surge

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Speaker 8: in tenure yields, that's already done a significant amount of

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Speaker 8: the tightening.

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Speaker 6: You know.

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Speaker 8: If the Fed wants rates to be in the five

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Speaker 8: range for the ten year, hey guess what we're about there.

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Speaker 8: So they have little, if anything more to do. I

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Speaker 8: expect them to keep talking hawkishly because that's what the

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Speaker 8: Fed does, you know, But I don't see a need

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Speaker 8: to raise rates much further, if at all.

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Speaker 1: All Right, So given that backdrop here, as you talk

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Speaker 1: to some of these ris, I mean, are you sensing

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Speaker 1: that now it's the time to get a little bit

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Speaker 1: more aggressive here. Maybe you know, maybe increase your equity allocation,

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Speaker 1: maybe go out a little bit more duration in your

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Speaker 1: fixing come portfolio.

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Speaker 8: We are talking a little bit in going out in

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Speaker 8: the equity and the duration of the portfolio. You know,

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Speaker 8: as Matt was talking about a minute ago. Now is

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Speaker 8: the time to lock in some rates. Yeah, you can

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Speaker 8: get more, you know, on a current basis, but at

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Speaker 8: the same time that's going to change. So if I'm

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Speaker 8: looking to lock in a longer term liability and I

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Speaker 8: can get you know, four eight, four nine percent, that's

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Speaker 8: a great long term yield to lock in. And I

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Speaker 8: think you're going to start seeing that with insurance companies

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Speaker 8: for example. As far as equities go, I'm not as pessive.

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Speaker 8: I'm still optimistical inequities going forward. I think we have

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Speaker 8: some opportunity for some earnings out performance. We talked about that.

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Speaker 8: I think valuations, most of the hit has already been

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Speaker 8: taken from rising rates, So I do think there's some

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Speaker 8: optimism there. I am a little bit concerned at the

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Speaker 8: index level when you look at the vulnerability to the

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Speaker 8: seven major socks, so you know, individual stocks. Yeah, I

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Speaker 8: think there's a running room for a lot of them,

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Speaker 8: but we might see some volatility at the index level.

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Speaker 2: What is your outlook in terms of rate cuts? I mean,

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Speaker 2: if you're optimistic on the economy and not too worried

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Speaker 2: anymore about rising rates, do you see them being held

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Speaker 2: at this level for much longer or do you think

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Speaker 2: that the Fed cuts rates for any particular reason next year?

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Speaker 8: You know, it's interesting a lot of people are calling

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Speaker 8: for rate cuts, and I think that's the wrong question.

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Speaker 8: I don't think we should be asking when does the

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Speaker 8: Fed cut rates? I think the question has to be

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Speaker 8: why would the Fed cut rates? They are at a

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Speaker 8: level that historically is normal, you know, And I think

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Speaker 8: one of Powell's overriding objectives is to restore normality to

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Speaker 8: the market, so he's there. So what would make them

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Speaker 8: cut rates? If inflation were to rise again, they're going

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Speaker 8: to raise rates. If inflation goes down to normal and

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Speaker 8: they don't have to cut rates, why would they cut rates?

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Speaker 8: The only thing that really might make them cut rates

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Speaker 8: is a severe recession, and as I said, I don't

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Speaker 8: see that. So I don't see any rate cuts for

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Speaker 8: probably at least through next.

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Speaker 1: Year, all right, So I guess one of the other.

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Speaker 1: When you speak to some of your rias here, are

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Speaker 1: you telling them maybe like some of the sectors you

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Speaker 1: guys like like, you know, I'm still bullish on tech,

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Speaker 1: or I think there's still room and energy. How do

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Speaker 1: you kind of frame that discussion?

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Speaker 8: Generally speaking, we're not tactical investors, but at the same time,

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Speaker 8: we do recognize that, for example, small cap has outperformed

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Speaker 8: over the past several years. Value has outperformed over the

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Speaker 8: past several years, and we look at that and we

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Speaker 8: know why that is, and we see, you know, potential

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Speaker 8: catalysts for more outperformance going forwards. So we do have

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Speaker 8: some overweights in those spaces. You know, when people talk

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Speaker 8: about vulnerabilities, we've already talked about the magnificent seven there.

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Speaker 8: I think there's a chance that we might see a

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Speaker 8: repricing of that as we see higher yielding investments like

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Speaker 8: value stocks start to become more stable. In other words,

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Speaker 8: I think we're going to see a rotation. We've seen

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Speaker 8: some outperformance in large growth. I think the reverse of

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Speaker 8: that is due to do some catch up.

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Speaker 1: All Right, we're out here in Colorado. I feel like

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Speaker 1: it's kind of energy country. What's your energy call here?

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Speaker 1: I mean with these energy stocks.

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Speaker 8: The interesting thing is when you look at energy, you're

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Speaker 8: basically talking about the oil and gas prices, and that

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Speaker 8: has gone up a bit, but it hasn't really gone

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Speaker 8: up that much. And I think the real tell here

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Speaker 8: is what's happened in the Middle East. We haven't seen

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Speaker 8: oil prices spiked to any significant degree, and that tells

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Speaker 8: me a couple of things. First of all, there's a

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Speaker 8: perception out there, right or wrong, that this is not

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Speaker 8: going to be a wider war. Second of all, that

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Speaker 8: we have the US production as a stabilizer now, and

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Speaker 8: I think we just hit an all time high for production.

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Speaker 8: So the US oil industry is continuing to do very

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Speaker 8: well and that's stabilizing prices. So I'm not sure I

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Speaker 8: see too much upside from prices. I do think we're

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Speaker 8: going to see consolidation, as we just saw with the

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Speaker 8: Exxon deal. So you know, it's very much an industry

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Speaker 8: in fox. I think I'm not sure there's a lot

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Speaker 8: about performance going forward there.

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Speaker 1: All right, Bret, thanks so much for joining us. Brad McMillan,

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Speaker 1: he is the CIO of Commonwealth, the host of this

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Speaker 1: gig add here in Aurora, Colorado.

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Speaker 7: You're listening to the tape Cat's our live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 7: tune in app, Bloomberg dot Com, and.

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Speaker 6: The Bloomberg Business App.

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Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: We're broadcasting live from Commonweal's twenty twenty three National Financial

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Speaker 1: Advisors Conference or at the Gaylord Rockies Resort in Aurora, Colorado.

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Speaker 1: Matt Tons of big banks reporting earnings this morning. You

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Speaker 1: know who we need to talk to is Allison Williams.

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Speaker 2: Yeah, absolutely, our number one go to source on the

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Speaker 2: big banks. Allison is here with me in the Interactive

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Speaker 2: Brokers studio. And what morning we've had in terms of earnings.

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Speaker 2: We had Blackrock come out, we had Wells, Fargo come out,

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Speaker 2: JP Morgan, PNC Financial, and City. All of them beat

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Speaker 2: at least on the bottom line. Alison, what stands out

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Speaker 2: to you?

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Speaker 9: So maybe I'll start with black Rock. They were the

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Speaker 9: first to report they had a rare quarter of outflows,

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Speaker 9: but it really was tied to Lofi Institutional. So we

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Speaker 9: think that there's limited earnings impacts there, so we're less

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Speaker 9: worried about them from the three big banks beats, So

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Speaker 9: net interest income coming in better than expected, I would

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Speaker 9: say this is consistent with a lot of the optimism

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Speaker 9: that we felt in late September. The issue, really though,

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Speaker 9: for the banks is twenty twenty four, so we're happy

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Speaker 9: that there's upside to four Q. We have a higher

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Speaker 9: run rate entering next year, but with expectations that previously

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Speaker 9: suggested the FED could be cutting soon, now that's being

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Speaker 9: pushed out. We're even talking about hikes that poses risk

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Speaker 9: to the outlook. On the other side of things, credit,

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Speaker 9: I mean, wow, the credit beat at JP Morgan was

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Speaker 9: pretty tremendous. We analysts expected about a billion dollars of

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Speaker 9: reserve building. They actually had a net release. So the

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Speaker 9: better economy better than expected. Right like a year ago,

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Speaker 9: we're talking about recession. The economy's coming better. There's rate risk,

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Speaker 9: but the credit is also holding up better.

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Speaker 2: So I wonder what they're making in terms of rates

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Speaker 2: on an average loan compared to what they're paying in

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Speaker 2: terms of average late rates. I know on a checking

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Speaker 2: account you're going to get like zero point two percent

436
00:20:34,600 --> 00:20:36,040
Speaker 2: and if you need a mortgage, it's going to be

437
00:20:36,080 --> 00:20:36,679
Speaker 2: eight percent.

438
00:20:36,800 --> 00:20:38,199
Speaker 5: So that's a killer spread.

439
00:20:38,880 --> 00:20:39,080
Speaker 10: Right.

440
00:20:39,240 --> 00:20:40,600
Speaker 11: So what we've.

441
00:20:40,440 --> 00:20:43,239
Speaker 9: Seen in the past year, you know, a year ago

442
00:20:43,280 --> 00:20:46,560
Speaker 9: where about higher rates are good because we saw the yield,

443
00:20:47,080 --> 00:20:49,920
Speaker 9: as you said, what customers are paying them when they

444
00:20:49,960 --> 00:20:55,240
Speaker 9: borrow that repriced pretty quickly. Yeah, and the deposit costs

445
00:20:55,760 --> 00:20:59,359
Speaker 9: have come later. That's cutting into the net interest income,

446
00:20:59,480 --> 00:21:03,399
Speaker 9: but not as much as expected. So I think a

447
00:21:03,400 --> 00:21:05,960
Speaker 9: lot of banks were excited in September or at least

448
00:21:06,000 --> 00:21:10,399
Speaker 9: alluded to the fact that things were trending better stabilizing. Again,

449
00:21:10,440 --> 00:21:13,400
Speaker 9: the question is, you know, does that sort of reinvigorate

450
00:21:13,520 --> 00:21:15,680
Speaker 9: as and funding costs go higher.

451
00:21:16,080 --> 00:21:19,919
Speaker 2: Well, we thought after SVB that there would be, you know,

452
00:21:20,040 --> 00:21:24,240
Speaker 2: a big war for deposits and that costs would rise,

453
00:21:24,320 --> 00:21:25,840
Speaker 2: but it really hasn't happened, has it.

454
00:21:26,560 --> 00:21:30,040
Speaker 9: Well, yeah, it hasn't. I mean it has to some extent.

455
00:21:30,320 --> 00:21:34,199
Speaker 9: So we did see further increases in deposit costs, but

456
00:21:34,280 --> 00:21:37,720
Speaker 9: at a slowing rate. So investors are always sort of

457
00:21:37,720 --> 00:21:41,000
Speaker 9: looking for that second derivative, and so that's where we're

458
00:21:41,040 --> 00:21:44,320
Speaker 9: getting the positive news. The other thing I would point

459
00:21:44,359 --> 00:21:48,760
Speaker 9: to is good cost control. We did see higher than

460
00:21:48,800 --> 00:21:51,560
Speaker 9: expective costs at Wells Fargo, but part of that was Severn,

461
00:21:51,680 --> 00:21:55,000
Speaker 9: so that that could imply a better run rate for costs.

462
00:21:55,000 --> 00:21:58,160
Speaker 9: They do have some good efficiency measures JP Morgan, their

463
00:21:58,200 --> 00:22:02,439
Speaker 9: core costs coming in better than expected. That guidance again

464
00:22:02,560 --> 00:22:07,120
Speaker 9: also better than expected. You know, loans is the one

465
00:22:07,200 --> 00:22:09,720
Speaker 9: area that was a little bit weaker than we thought

466
00:22:09,800 --> 00:22:12,080
Speaker 9: a few months ago in terms of commercial loans. But

467
00:22:12,160 --> 00:22:14,560
Speaker 9: what these big banks are benefiting from is card so

468
00:22:14,720 --> 00:22:17,600
Speaker 9: JP Morgan City Group. You know, aside from Capital One,

469
00:22:17,600 --> 00:22:21,560
Speaker 9: there have some of the biggest card exposures out there,

470
00:22:21,960 --> 00:22:24,520
Speaker 9: Bank America, Wells Fargo to a lesser extent, but still

471
00:22:24,520 --> 00:22:27,600
Speaker 9: better than those regional banks. And so I think the

472
00:22:27,680 --> 00:22:31,840
Speaker 9: loan the loan portfolios and the net interest income trends

473
00:22:32,280 --> 00:22:36,000
Speaker 9: might not you know, necessarily repeat for those regionals.

474
00:22:37,920 --> 00:22:40,640
Speaker 1: Hey, Alison, commercial real estate, what are the banks saying

475
00:22:40,640 --> 00:22:43,000
Speaker 1: about the commercial real estate exposure? Is this going to

476
00:22:43,000 --> 00:22:43,800
Speaker 1: be a problem for them?

477
00:22:44,440 --> 00:22:46,679
Speaker 9: It is going to be a problem, but it's you know,

478
00:22:46,760 --> 00:22:49,040
Speaker 9: it's it's overwhelmed this quarter. I think by all the

479
00:22:49,040 --> 00:22:53,679
Speaker 9: positives that I talked about, but most significantly Wells Fargo

480
00:22:53,680 --> 00:22:57,080
Speaker 9: they're the biggest commercial real estate lender. They had said

481
00:22:57,080 --> 00:23:01,159
Speaker 9: in September that you know, a year ago, eighteen months ago,

482
00:23:01,640 --> 00:23:05,200
Speaker 9: they were concerned about specific pockets and specific cities.

483
00:23:05,800 --> 00:23:06,960
Speaker 5: Today that risk.

484
00:23:06,800 --> 00:23:11,080
Speaker 9: Has broadened out. They are taking reserves, so we did

485
00:23:11,080 --> 00:23:14,840
Speaker 9: see reserve building for office, commercial real estate. On the

486
00:23:14,880 --> 00:23:18,960
Speaker 9: other side of that, you know, JP Morgan taking a

487
00:23:19,000 --> 00:23:23,359
Speaker 9: reserve release in home mortgage, so we're seeing reserves for

488
00:23:23,400 --> 00:23:26,360
Speaker 9: commercial real estate, in office, we're seeing reserves for car

489
00:23:26,400 --> 00:23:28,440
Speaker 9: and as I said, there's growth there, so they're reserving

490
00:23:28,520 --> 00:23:31,840
Speaker 9: for that. But we're seeing some offset.

491
00:23:32,520 --> 00:23:32,680
Speaker 12: You know.

492
00:23:32,800 --> 00:23:36,040
Speaker 9: JP Morgan talked about some of their economic exsumptions changing

493
00:23:36,160 --> 00:23:39,760
Speaker 9: and that is really the driver in terms of the

494
00:23:39,800 --> 00:23:41,640
Speaker 9: provisions coming in better than expected.

495
00:23:41,880 --> 00:23:44,760
Speaker 2: And at the same time, Jamie Diamond says these are

496
00:23:44,800 --> 00:23:47,960
Speaker 2: the most dangerous times in decades. I guess he's talking

497
00:23:48,000 --> 00:23:51,320
Speaker 2: more about geopolitical risk than he is about the economy.

498
00:23:51,359 --> 00:23:55,359
Speaker 9: I think he's talking broadly, but it's at the margin, right.

499
00:23:55,440 --> 00:23:59,359
Speaker 9: So their assumptions are a bit better, but they're still conservative,

500
00:23:59,440 --> 00:24:04,119
Speaker 9: So they ill are I guess, writing more conservatively, but

501
00:24:04,240 --> 00:24:06,679
Speaker 9: maybe a less little bit less worried than they were

502
00:24:06,720 --> 00:24:09,639
Speaker 9: a last quarter. And I think Jamie's comments go to

503
00:24:10,480 --> 00:24:13,200
Speaker 9: you know, the fact that we really are in unprecedented

504
00:24:13,280 --> 00:24:16,200
Speaker 9: times for a big reason. And to me, I think

505
00:24:16,240 --> 00:24:20,879
Speaker 9: the biggest factor is, you know, we've never seen central

506
00:24:20,880 --> 00:24:24,760
Speaker 9: bank balance sheets have this huge build up. We don't

507
00:24:24,760 --> 00:24:26,920
Speaker 9: know what that unwind is going to look like, and

508
00:24:27,600 --> 00:24:30,000
Speaker 9: I'd be surprised if we didn't get a surprise. Right,

509
00:24:30,320 --> 00:24:32,000
Speaker 9: No one knows what that's going to look like, and

510
00:24:32,080 --> 00:24:35,000
Speaker 9: so this is a very different cycle again, the consumer,

511
00:24:35,359 --> 00:24:37,800
Speaker 9: very different cycle. Normally we would not be seeing card

512
00:24:37,800 --> 00:24:39,680
Speaker 9: growth fueling these banks.

513
00:24:40,080 --> 00:24:43,320
Speaker 5: We would that in itself has to be a concern, right.

514
00:24:43,400 --> 00:24:46,360
Speaker 2: That means that more and more consumers are putting more

515
00:24:46,359 --> 00:24:49,080
Speaker 2: stuff on credit cards and they're not paying their balance

516
00:24:49,119 --> 00:24:52,160
Speaker 2: off right away, so they're rolling them over, even though

517
00:24:52,240 --> 00:24:55,040
Speaker 2: interest rates on credit cards are extremely.

518
00:24:54,600 --> 00:24:58,840
Speaker 9: High, So at this point it's more about their growing

519
00:24:58,920 --> 00:25:00,960
Speaker 9: loans and so they want to reserve.

520
00:25:00,720 --> 00:25:03,040
Speaker 12: For it card.

521
00:25:03,400 --> 00:25:07,280
Speaker 9: It is normalizing, but it is normalizing but still very

522
00:25:07,400 --> 00:25:09,960
Speaker 9: very strong. I would say the one thing to watch

523
00:25:10,000 --> 00:25:13,520
Speaker 9: for for consumer is that spending is slowing, but they're

524
00:25:13,600 --> 00:25:16,200
Speaker 9: still using up those deposit balances.

525
00:25:16,440 --> 00:25:19,359
Speaker 2: Alison, Great, talking to you as usual. Alison Williams runs

526
00:25:19,359 --> 00:25:21,879
Speaker 2: our bank coverage here at Bloomberg.

527
00:25:23,119 --> 00:25:24,320
Speaker 6: You're listening to the team.

528
00:25:24,680 --> 00:25:28,879
Speaker 7: Ken's a live program Bloomberg Markets weekdays at ten am Eastern.

529
00:25:28,640 --> 00:25:31,560
Speaker 6: On Bloomberg dot Com, the iHeartRadio.

530
00:25:30,960 --> 00:25:33,760
Speaker 7: App and the Bloomberg Business app, or listen on demand

531
00:25:33,800 --> 00:25:35,360
Speaker 7: wherever you get your podcasts.

532
00:25:36,920 --> 00:25:39,680
Speaker 5: Well, I'm here in New York City, capital of the world.

533
00:25:40,080 --> 00:25:42,200
Speaker 2: Thank you very much for that, Paul, and we want

534
00:25:42,200 --> 00:25:45,040
Speaker 2: to talk about, you know, what you do in markets

535
00:25:45,080 --> 00:25:47,760
Speaker 2: when there's so much going on.

536
00:25:49,160 --> 00:25:51,400
Speaker 5: From geopolitical issues like.

537
00:25:51,520 --> 00:25:54,720
Speaker 2: The Hamas attacks in Israel, and of course we're all

538
00:25:54,720 --> 00:26:00,280
Speaker 2: waiting for the counter attack to issues that we face

539
00:26:00,359 --> 00:26:03,760
Speaker 2: here in the US, like Steve'scalisee can't even work with

540
00:26:03,800 --> 00:26:06,320
Speaker 2: the Republicans, so he drops out of the run for

541
00:26:06,440 --> 00:26:07,439
Speaker 2: Speaker of the House.

542
00:26:08,119 --> 00:26:09,960
Speaker 5: That's likely gonna lead to or.

543
00:26:10,119 --> 00:26:14,000
Speaker 2: Could likely lead to a government shutdown. But we also

544
00:26:14,040 --> 00:26:17,640
Speaker 2: need funding for Israel and Ukraine. And then you've got

545
00:26:17,960 --> 00:26:20,320
Speaker 2: massive swings in the bond market.

546
00:26:20,400 --> 00:26:21,879
Speaker 5: Yesterday, I think the thirty year.

547
00:26:24,080 --> 00:26:27,639
Speaker 2: Bond moved by like twenty basis points and that caused

548
00:26:27,680 --> 00:26:30,600
Speaker 2: moves in the equity indexes and everything else as well.

549
00:26:30,880 --> 00:26:32,960
Speaker 5: Let's go to Jared Dillion.

550
00:26:33,200 --> 00:26:36,359
Speaker 2: He is an investment strategist at Malden Economics, also editor

551
00:26:36,400 --> 00:26:41,280
Speaker 2: of The Daily Dirt Nap and Jared, what do you

552
00:26:41,359 --> 00:26:44,959
Speaker 2: make of these markets? I guess probably the rates moves

553
00:26:45,000 --> 00:26:46,399
Speaker 2: are the most interesting.

554
00:26:48,720 --> 00:26:50,720
Speaker 13: Yeah, the rates moves are definitely the most interesting. And

555
00:26:50,760 --> 00:26:51,600
Speaker 13: thanks for having me on.

556
00:26:53,000 --> 00:26:53,280
Speaker 12: Yeah.

557
00:26:53,320 --> 00:26:56,720
Speaker 13: I mean there was a lot of bond bears a

558
00:26:56,720 --> 00:26:59,960
Speaker 13: week or two ago, and there's a lot less today.

559
00:26:59,760 --> 00:27:02,359
Speaker 12: With the war in the Middle East.

560
00:27:03,880 --> 00:27:09,080
Speaker 13: It's you know, I think the trend reached just absolute exhaustion.

561
00:27:10,240 --> 00:27:10,600
Speaker 12: People.

562
00:27:10,680 --> 00:27:14,480
Speaker 13: I saw forecasts for five percent on tens, five and

563
00:27:14,480 --> 00:27:18,320
Speaker 13: a half, six percent. People were extrapolating the trend forever.

564
00:27:18,880 --> 00:27:20,960
Speaker 13: You know, we came in on Monday morning and we

565
00:27:21,119 --> 00:27:26,280
Speaker 13: had a completely different world. And in an environment where

566
00:27:27,480 --> 00:27:32,440
Speaker 13: you have huge geopolitical tensions, you know, really what you're

567
00:27:32,480 --> 00:27:36,359
Speaker 13: looking to do is do things like buy bonds by gold,

568
00:27:36,480 --> 00:27:38,920
Speaker 13: buy oil, and probably sell stocks.

569
00:27:38,960 --> 00:27:41,560
Speaker 12: And by volatility, well.

570
00:27:41,640 --> 00:27:44,480
Speaker 2: I mean, how hard is it to deal in a

571
00:27:44,520 --> 00:27:47,720
Speaker 2: bond market when you have this kind of volatility? Do

572
00:27:47,760 --> 00:27:51,040
Speaker 2: you just stick to the front end or what's your take?

573
00:27:52,440 --> 00:27:56,199
Speaker 13: So I actually, I personally have a pretty large position

574
00:27:56,240 --> 00:27:59,639
Speaker 13: in the front end. And you know, just yesterday we

575
00:27:59,720 --> 00:28:01,840
Speaker 13: had a whole parade of or I guess it was two

576
00:28:01,920 --> 00:28:04,040
Speaker 13: days ago. We had a parade of FED speakers who

577
00:28:04,080 --> 00:28:06,840
Speaker 13: said that we pretty much eliminated the last rate hike,

578
00:28:07,440 --> 00:28:10,520
Speaker 13: and what that did was that really started the clock

579
00:28:11,200 --> 00:28:13,720
Speaker 13: on when the first rate cut is going to be.

580
00:28:14,359 --> 00:28:19,199
Speaker 13: And generally after a rate hike cycle, there's not a

581
00:28:19,200 --> 00:28:22,040
Speaker 13: lot of time before the FED begins cutting rates again.

582
00:28:22,359 --> 00:28:24,920
Speaker 13: The longest that the FED has been able to maintain

583
00:28:25,040 --> 00:28:28,520
Speaker 13: rates at the highest level was at seven months, and

584
00:28:28,560 --> 00:28:30,439
Speaker 13: that was back in two thousand and seven. So I

585
00:28:30,480 --> 00:28:32,560
Speaker 13: think we're gonna be getting We're gonna be talking about

586
00:28:32,640 --> 00:28:36,400
Speaker 13: rate rate cuts within the next few months.

587
00:28:38,040 --> 00:28:40,200
Speaker 1: Hey, Jedal's just looking through your notes you provided is

588
00:28:40,280 --> 00:28:41,840
Speaker 1: one of the things that really jumped out of me

589
00:28:42,000 --> 00:28:44,600
Speaker 1: was your point here that shorter work weeks will cause

590
00:28:44,720 --> 00:28:47,880
Speaker 1: lower economic growth. We won't see three to four percent

591
00:28:47,920 --> 00:28:51,720
Speaker 1: GDP growth again, that's a big statement. Tell us what

592
00:28:51,760 --> 00:28:52,320
Speaker 1: you're thinking.

593
00:28:52,160 --> 00:28:56,160
Speaker 13: There, Yeah, it's you know, it's really output is a

594
00:28:56,200 --> 00:29:00,960
Speaker 13: function of work. It's a function of how hard you

595
00:29:01,080 --> 00:29:04,320
Speaker 13: work and how long you work, and how productively you work.

596
00:29:04,840 --> 00:29:08,440
Speaker 13: I mean, if you don't, if we collectively as a country,

597
00:29:08,520 --> 00:29:11,440
Speaker 13: if we work less, we will have less output and

598
00:29:11,560 --> 00:29:14,000
Speaker 13: GDP will go down. I don't think that's a really

599
00:29:14,040 --> 00:29:16,920
Speaker 13: controversial statement. I think, I think a lot of people

600
00:29:17,080 --> 00:29:19,000
Speaker 13: want to have their cake and eat it too. I

601
00:29:19,040 --> 00:29:22,200
Speaker 13: think that, you know, we think that we can have

602
00:29:22,240 --> 00:29:24,160
Speaker 13: a thirty two hour work week or a three and

603
00:29:24,200 --> 00:29:26,960
Speaker 13: a half day work week and still maintain the same

604
00:29:27,040 --> 00:29:30,320
Speaker 13: output and the same level of prosperity and standard of living.

605
00:29:30,840 --> 00:29:33,479
Speaker 13: But it's just not possible. And what's going to happen

606
00:29:33,600 --> 00:29:36,440
Speaker 13: is is that when we as a society start to

607
00:29:36,560 --> 00:29:41,440
Speaker 13: value leisure time over work in productivity, then we start

608
00:29:41,480 --> 00:29:43,480
Speaker 13: to look a little bit more like Europe, which has

609
00:29:43,560 --> 00:29:46,840
Speaker 13: had growth you know, pretty pretty pretty close to zero

610
00:29:46,880 --> 00:29:48,120
Speaker 13: over the last fifteen years.

611
00:29:48,720 --> 00:29:49,760
Speaker 5: But it's lovely.

612
00:29:49,960 --> 00:29:52,720
Speaker 2: I'm here to tell you, having just lived in Germany

613
00:29:52,720 --> 00:29:56,959
Speaker 2: for the last six years.

614
00:29:54,960 --> 00:29:57,560
Speaker 5: It's much less stressful.

615
00:29:58,600 --> 00:30:01,760
Speaker 2: What about the down side, Jared, I mean, if we

616
00:30:01,800 --> 00:30:03,800
Speaker 2: don't grow three to four percent, does that mean we

617
00:30:03,880 --> 00:30:06,880
Speaker 2: also won't have bigger sessions or do we have to

618
00:30:06,880 --> 00:30:08,640
Speaker 2: deal with bigger sessions without the growth.

619
00:30:09,880 --> 00:30:12,280
Speaker 13: Well, I mean, the interesting thing is is that the

620
00:30:12,400 --> 00:30:18,160
Speaker 13: US has really leapfrogged most western countries in terms of

621
00:30:18,400 --> 00:30:21,320
Speaker 13: wealth in the last fifteen twenty years. I mean, our

622
00:30:21,360 --> 00:30:24,760
Speaker 13: per capita GDP is about sixty thousand dollars, and throughout

623
00:30:24,800 --> 00:30:28,040
Speaker 13: Europe it kind of ranges between thirty five and forty

624
00:30:28,040 --> 00:30:30,600
Speaker 13: five thousand dollars. I mean, you know, the United States

625
00:30:31,040 --> 00:30:35,040
Speaker 13: has become fabulously wealthy. It is more stressful, you know,

626
00:30:35,160 --> 00:30:38,240
Speaker 13: I'm stressed out. I work pretty much all the time.

627
00:30:38,320 --> 00:30:39,680
Speaker 13: You know, I work a full day and I go

628
00:30:39,800 --> 00:30:41,280
Speaker 13: home and I sit on the couch and I do

629
00:30:41,360 --> 00:30:44,080
Speaker 13: more work. And that's kind of what we do as

630
00:30:44,080 --> 00:30:44,560
Speaker 13: a culture.

631
00:30:45,800 --> 00:30:49,680
Speaker 5: Yeah, me too, pretty much. It's a little bit of

632
00:30:49,680 --> 00:30:52,640
Speaker 5: a bummer, but I actually I like work. Not everyone

633
00:30:53,120 --> 00:30:57,640
Speaker 5: is that lucky. Talk to me about your view of.

634
00:30:57,960 --> 00:31:02,120
Speaker 2: The economy and the sling that we're seeing here, because

635
00:31:03,040 --> 00:31:04,720
Speaker 2: you know, you talk about having your cake and eat

636
00:31:04,720 --> 00:31:07,600
Speaker 2: it too. Paul wants to see a soft landing and

637
00:31:07,880 --> 00:31:08,640
Speaker 2: lower rates.

638
00:31:10,840 --> 00:31:13,600
Speaker 13: Well, somebody told me early in my career, like twenty

639
00:31:13,680 --> 00:31:16,840
Speaker 13: years ago, that there's no such thing as a soft landing.

640
00:31:17,320 --> 00:31:21,520
Speaker 13: But having said that, you know, we've been on recession

641
00:31:21,680 --> 00:31:26,440
Speaker 13: watch ever since the curve inverted sixteen months ago. Sixteen

642
00:31:26,480 --> 00:31:28,320
Speaker 13: months ago, the yield curve inverted, So we've been on

643
00:31:28,440 --> 00:31:30,719
Speaker 13: recession watch ever since then, and we haven't had a

644
00:31:30,760 --> 00:31:34,520
Speaker 13: recession yet. I believe that we will. I don't believe

645
00:31:34,600 --> 00:31:39,200
Speaker 13: that it will be severe, certainly not on the scale

646
00:31:39,280 --> 00:31:41,680
Speaker 13: of what happened in two thousand and eight, which is

647
00:31:41,840 --> 00:31:46,040
Speaker 13: really the last real recession that we got. We had

648
00:31:46,040 --> 00:31:49,400
Speaker 13: a technical recession during the pandemic in the early days

649
00:31:49,400 --> 00:31:50,960
Speaker 13: of the pandemic, and we had a little bit of

650
00:31:50,960 --> 00:31:54,520
Speaker 13: a slowdown in twenty fifteen, but we haven't really had

651
00:31:54,520 --> 00:31:57,880
Speaker 13: the downside of the business cycle in fifteen years, and

652
00:31:57,920 --> 00:31:59,920
Speaker 13: a lot of people have forgotten what that feels like.

653
00:32:00,520 --> 00:32:00,680
Speaker 12: Now.

654
00:32:00,720 --> 00:32:03,719
Speaker 13: What's happening right now is that the yield curve is

655
00:32:03,760 --> 00:32:07,440
Speaker 13: steepening pretty quickly. And as you know that, when the

656
00:32:07,480 --> 00:32:10,480
Speaker 13: yield curve inverts, it signals that a recession is going

657
00:32:10,480 --> 00:32:13,680
Speaker 13: to happen, and when the yield curve steepen, it is

658
00:32:13,800 --> 00:32:17,400
Speaker 13: actually happening. So we should be seeing signs of that

659
00:32:17,440 --> 00:32:18,320
Speaker 13: relatively soon.

660
00:32:20,600 --> 00:32:22,760
Speaker 1: Hey, Jared, talk to us about your your thoughts on

661
00:32:22,840 --> 00:32:24,880
Speaker 1: oil here. It's had a lot of near term volatility

662
00:32:24,920 --> 00:32:27,720
Speaker 1: here due to some geopolitical issues, certainly over the last

663
00:32:27,720 --> 00:32:31,040
Speaker 1: week and then over the last several months. What's your

664
00:32:31,160 --> 00:32:33,880
Speaker 1: maybe intermediate to longer term call on oil.

665
00:32:35,400 --> 00:32:37,520
Speaker 13: I don't think that I have a really strong opinion.

666
00:32:37,760 --> 00:32:42,440
Speaker 13: I mean, there's the people who work in the energy

667
00:32:42,480 --> 00:32:45,960
Speaker 13: space full time. You know, the axiom is that you

668
00:32:46,080 --> 00:32:50,600
Speaker 13: generally want to fade geopolitical events. My memory of this

669
00:32:50,680 --> 00:32:53,160
Speaker 13: is pretty hazy, but there was something that happened in

670
00:32:53,200 --> 00:32:57,720
Speaker 13: Iran three or four years ago where oil spiked and

671
00:32:57,880 --> 00:32:59,600
Speaker 13: that was a high and it never came back to

672
00:32:59,600 --> 00:33:02,160
Speaker 13: that level again. I think this time is a little

673
00:33:02,160 --> 00:33:07,240
Speaker 13: bit different. You know, the conflict in Israel really opens

674
00:33:07,320 --> 00:33:09,960
Speaker 13: up a whole bunch of possibilities of things that could

675
00:33:09,960 --> 00:33:14,240
Speaker 13: go wrong. I think, you know, if you were a trader,

676
00:33:15,480 --> 00:33:18,680
Speaker 13: buying some far upside calls.

677
00:33:18,240 --> 00:33:20,440
Speaker 12: In oil might not be a bad idea.

678
00:33:21,560 --> 00:33:23,720
Speaker 13: We could walk in one morning it could be twenty

679
00:33:23,760 --> 00:33:27,520
Speaker 13: percent higher, you know, based on a rounds involvement or

680
00:33:27,560 --> 00:33:32,000
Speaker 13: something like that. So in the short term, I'm definitely bullish.

681
00:33:32,480 --> 00:33:33,880
Speaker 5: Isn't this time different? For everything?

682
00:33:33,920 --> 00:33:38,280
Speaker 2: Alison Williams was just telling me about Jamie Diamond's comments

683
00:33:38,320 --> 00:33:40,720
Speaker 2: on world danger and saying, you know, we're in an

684
00:33:40,840 --> 00:33:44,440
Speaker 2: unprecedented situation in terms of FED balance sheets, and I

685
00:33:44,480 --> 00:33:47,960
Speaker 2: was thinking, we've been in an unprecedented situation for like

686
00:33:48,040 --> 00:33:49,360
Speaker 2: fifteen years.

687
00:33:51,680 --> 00:33:55,480
Speaker 12: That's always the case, That's always the case, you know.

688
00:33:55,560 --> 00:33:57,720
Speaker 13: It was funny, I was I was on Twitter the

689
00:33:57,760 --> 00:34:01,160
Speaker 13: other day and my friend Porter Collin, who's one of

690
00:34:01,160 --> 00:34:04,720
Speaker 13: the figures in the Big Short movie. He's a friend

691
00:34:04,720 --> 00:34:08,879
Speaker 13: of mine, and he tweeted that the end of quantitative

692
00:34:08,920 --> 00:34:12,719
Speaker 13: tightening is probably near. You know, we've been rolling off

693
00:34:12,760 --> 00:34:15,200
Speaker 13: the bounce sheet for the last year, year and a half,

694
00:34:15,800 --> 00:34:19,280
Speaker 13: and you know, it's it hasn't really helped the situation

695
00:34:19,360 --> 00:34:21,759
Speaker 13: with rates because when the Fed's selling three to five

696
00:34:21,760 --> 00:34:23,960
Speaker 13: billion of treasuries every day, like it puts a lot

697
00:34:23,960 --> 00:34:27,000
Speaker 13: of pressure on the Yell curve. But I think I

698
00:34:27,000 --> 00:34:30,279
Speaker 13: thought that was a pretty smart comment. I think it is.

699
00:34:30,760 --> 00:34:33,880
Speaker 13: I think it is likely that we will end QT

700
00:34:34,239 --> 00:34:35,640
Speaker 13: sometime in the near future.

701
00:34:37,760 --> 00:34:40,720
Speaker 1: Yep, all right, Jared, thank you so much for joining us, Jared,

702
00:34:40,800 --> 00:34:43,239
Speaker 1: I really appreciate it. Jared Dillion. He's an investment strategist

703
00:34:43,280 --> 00:34:45,279
Speaker 1: at Malden Economics Scholl.

704
00:34:45,400 --> 00:34:48,440
Speaker 7: You're listening to the tape catch are Live program Bloomberg

705
00:34:48,520 --> 00:34:52,080
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

706
00:34:52,160 --> 00:34:54,239
Speaker 7: tune in app, Bloomberg dot Com.

707
00:34:53,960 --> 00:34:55,359
Speaker 6: And the Bloomberg Business App.

708
00:34:55,440 --> 00:34:58,239
Speaker 7: You can also listen live on Amazon Alexa from our

709
00:34:58,280 --> 00:35:02,240
Speaker 7: flagship New York station, Just Alexa playing Bloomberg eleven.

710
00:35:04,239 --> 00:35:06,759
Speaker 1: We are broadcasting live from Commonwealth's twenty twenty three National

711
00:35:06,840 --> 00:35:10,719
Speaker 1: Financial Advisors Conference at the Gaylord Rockies Resort in Aurora, Colorado.

712
00:35:11,560 --> 00:35:14,360
Speaker 1: Joining me right now. We're right here at the conference

713
00:35:14,400 --> 00:35:16,800
Speaker 1: and it's very nice. I could show you the results.

714
00:35:17,239 --> 00:35:19,360
Speaker 1: Karen McCall joins us. She is senior vice president of

715
00:35:19,360 --> 00:35:22,319
Speaker 1: Wealth Management at Commonwealth. Joins us, Karen, We've seen a

716
00:35:22,320 --> 00:35:24,920
Speaker 1: lot of the you know, investment advisors building around here

717
00:35:24,960 --> 00:35:27,600
Speaker 1: over the past couple of days. What's kind of what

718
00:35:27,600 --> 00:35:30,319
Speaker 1: do they really need from you guys as they try

719
00:35:30,360 --> 00:35:32,959
Speaker 1: to manage their business. They've got retail clients, They've got

720
00:35:33,320 --> 00:35:36,520
Speaker 1: compliance issues, they got back office issues. I think a

721
00:35:36,520 --> 00:35:38,920
Speaker 1: lot of them just want to interact with their clients.

722
00:35:39,360 --> 00:35:42,000
Speaker 14: What do you what do you hear from them in

723
00:35:42,120 --> 00:35:43,440
Speaker 14: terms of our advisors?

724
00:35:43,640 --> 00:35:45,120
Speaker 1: Paul, is that yeah, exactly?

725
00:35:45,239 --> 00:35:45,439
Speaker 8: Yeah.

726
00:35:45,520 --> 00:35:48,560
Speaker 14: So this national conference, this is a great opportunity to

727
00:35:48,560 --> 00:35:52,520
Speaker 14: bring our community together. We have over two thousand advisors

728
00:35:52,560 --> 00:35:56,040
Speaker 14: all over the country and they really enjoy coming together

729
00:35:56,560 --> 00:35:59,799
Speaker 14: in a community like this. We have the opportunity to

730
00:35:59,800 --> 00:36:02,360
Speaker 14: really share with them the things that we're doing in

731
00:36:03,120 --> 00:36:08,560
Speaker 14: the home office. We basically in wealth management, we exist

732
00:36:09,120 --> 00:36:13,520
Speaker 14: to help the advisors attract, retain, and grow assets. We

733
00:36:13,560 --> 00:36:16,680
Speaker 14: serve as an extension of their practice, and we're really

734
00:36:16,680 --> 00:36:20,200
Speaker 14: there to assist them. Their client's needs are becoming more

735
00:36:20,239 --> 00:36:24,400
Speaker 14: and more complex every day, and each advisor cannot be

736
00:36:24,440 --> 00:36:28,320
Speaker 14: an expert in every realm that that is necessary for

737
00:36:29,239 --> 00:36:31,360
Speaker 14: a client. So we're there to help them to bring

738
00:36:31,480 --> 00:36:35,239
Speaker 14: that subject matter expertise to help them navigate that complexity

739
00:36:35,320 --> 00:36:39,120
Speaker 14: to be able to choose the right products for clients' needs.

740
00:36:39,360 --> 00:36:43,239
Speaker 1: Talk to us about high net worth ultra high net

741
00:36:43,280 --> 00:36:45,480
Speaker 1: worth kind of people. It seems like we're getting more

742
00:36:45,480 --> 00:36:47,800
Speaker 1: and more of those. How do you kind of adapt

743
00:36:47,800 --> 00:36:51,160
Speaker 1: to some of your you know, the RAA's clients actually

744
00:36:51,160 --> 00:36:51,760
Speaker 1: getting bigger.

745
00:36:51,840 --> 00:36:55,360
Speaker 14: Yes, that's absolutely happening. Our advisors are seeing that on

746
00:36:55,400 --> 00:36:59,879
Speaker 14: a daily basis. We're seeing lots of opportunities to work

747
00:37:00,000 --> 00:37:02,960
Speaker 14: with clients at that five million dollar threshold and above,

748
00:37:02,960 --> 00:37:04,840
Speaker 14: and even at that ultra high net worth, which we

749
00:37:05,000 --> 00:37:08,239
Speaker 14: define at twenty million dollars and above. And you can

750
00:37:08,280 --> 00:37:13,600
Speaker 14: imagine that at those asset levels, there are all sorts

751
00:37:13,600 --> 00:37:15,279
Speaker 14: of needs that come into play. It's not just the

752
00:37:15,360 --> 00:37:18,560
Speaker 14: investment portfolio. It's not just thinking through the asset allocation

753
00:37:18,760 --> 00:37:22,239
Speaker 14: and the underlying manager selection. But you're also having to

754
00:37:22,280 --> 00:37:26,719
Speaker 14: bring expertise around tech strategies and protection strategies, how to

755
00:37:26,800 --> 00:37:30,759
Speaker 14: use some insurance products for example. We also can help

756
00:37:30,800 --> 00:37:35,279
Speaker 14: them with estate planning, bring in legal experts where we

757
00:37:35,360 --> 00:37:38,400
Speaker 14: need to. So it's the way that we've done it

758
00:37:38,440 --> 00:37:41,279
Speaker 14: is really we stood up an entirely new service within

759
00:37:41,320 --> 00:37:46,360
Speaker 14: Commonwealth called Private Client, and when our advisors utilize that service,

760
00:37:46,480 --> 00:37:49,240
Speaker 14: a team of experts from all the realms across wealth

761
00:37:49,280 --> 00:37:52,200
Speaker 14: management come together to work with that advisor so that

762
00:37:52,280 --> 00:37:55,879
Speaker 14: we are addressing all of the dimensions of that client's needs.

763
00:37:56,000 --> 00:37:58,800
Speaker 2: Yah Paul mentioned that it seems like there's an increasing

764
00:37:58,800 --> 00:38:01,600
Speaker 2: amount of high networth individuals. Do you see that in

765
00:38:01,640 --> 00:38:04,600
Speaker 2: your business as well? Are more and more people very

766
00:38:04,719 --> 00:38:06,080
Speaker 2: rich and need to invest?

767
00:38:07,200 --> 00:38:10,640
Speaker 14: Yeah, yes, which is a good problem to have. We

768
00:38:10,680 --> 00:38:13,240
Speaker 14: are absolutely seeing more and more wealthy clients.

769
00:38:13,280 --> 00:38:13,480
Speaker 5: Come.

770
00:38:14,719 --> 00:38:17,239
Speaker 14: A place where we're seeing this is we have a

771
00:38:17,280 --> 00:38:19,280
Speaker 14: lot of our our advisors have a lot of business

772
00:38:19,280 --> 00:38:23,920
Speaker 14: owner clients, and as they sell businesses, their financial picture

773
00:38:24,280 --> 00:38:27,359
Speaker 14: changes radically from one day to the next, and we

774
00:38:27,400 --> 00:38:29,920
Speaker 14: want to make sure that our advisors are ready to

775
00:38:30,000 --> 00:38:32,680
Speaker 14: deal with that, to be able to address the needs

776
00:38:32,680 --> 00:38:35,800
Speaker 14: of an existing client that suddenly comes into an enormous

777
00:38:35,840 --> 00:38:36,520
Speaker 14: amount of wealth.

778
00:38:36,680 --> 00:38:41,320
Speaker 1: How about alternative investments. I've heard some of these advisors say,

779
00:38:41,560 --> 00:38:42,839
Speaker 1: you know, over the last couple of years, they've heard

780
00:38:42,880 --> 00:38:45,320
Speaker 1: they've been asked a lot more by their clients about

781
00:38:45,360 --> 00:38:49,480
Speaker 1: private equity, hedge funds, private credit. How has that been

782
00:38:49,520 --> 00:38:51,920
Speaker 1: growing as part of their business? We've seen.

783
00:38:53,680 --> 00:38:57,640
Speaker 14: A heightened demand for alternatives as well, and so at

784
00:38:57,640 --> 00:39:00,880
Speaker 14: Commonwealth we have a team that's dedicated to the alternative space,

785
00:39:00,920 --> 00:39:03,960
Speaker 14: that really focuses there and has that expertise and is

786
00:39:04,000 --> 00:39:08,919
Speaker 14: helping our advisors utilize those those solutions in the best

787
00:39:08,920 --> 00:39:12,640
Speaker 14: way possible. We also recently entered a partnership with a

788
00:39:12,719 --> 00:39:16,120
Speaker 14: company called I Capital, which is basically a platform of

789
00:39:16,280 --> 00:39:19,960
Speaker 14: hedge funds, private equity, private debt, and our advisors are

790
00:39:20,600 --> 00:39:25,360
Speaker 14: reacting very well to that and increasingly utilizing the platform.

791
00:39:25,400 --> 00:39:28,240
Speaker 5: How helpful is this conference? How helpful is this conference

792
00:39:28,320 --> 00:39:28,560
Speaker 5: to you?

793
00:39:28,680 --> 00:39:29,000
Speaker 6: Karen?

794
00:39:29,160 --> 00:39:30,040
Speaker 5: What are you doing there?

795
00:39:31,880 --> 00:39:34,319
Speaker 14: This conference is incredibly helpful. I spent a lot of

796
00:39:34,360 --> 00:39:38,160
Speaker 14: time in conversations with advisors. I had the opportunity yesterday

797
00:39:38,239 --> 00:39:41,920
Speaker 14: to update the entire group on all of the initiatives

798
00:39:41,920 --> 00:39:44,040
Speaker 14: that we have in wealth Management, and I think it

799
00:39:44,120 --> 00:39:46,799
Speaker 14: really drums up excitement when they hear about things that

800
00:39:46,840 --> 00:39:50,600
Speaker 14: we're doing, like our Virtual Paraplanner program, which allows them

801
00:39:50,680 --> 00:39:54,239
Speaker 14: to delegate a lot of the financial planning that that

802
00:39:54,280 --> 00:39:58,560
Speaker 14: they're doing. We also have the opportunity to promote things

803
00:39:58,600 --> 00:40:03,120
Speaker 14: like our custom trading services, which allows which allows advisors

804
00:40:03,160 --> 00:40:06,680
Speaker 14: that want to serve as portfolio managers to outsource some

805
00:40:06,760 --> 00:40:09,759
Speaker 14: of the more administrative tasks like the monitoring, oversight, and

806
00:40:09,800 --> 00:40:12,760
Speaker 14: trading to our team of experts. So that really allows

807
00:40:12,800 --> 00:40:14,840
Speaker 14: them to free up time to be able to spend

808
00:40:14,880 --> 00:40:15,800
Speaker 14: with their clients.

809
00:40:16,480 --> 00:40:18,120
Speaker 5: All right, Karen, thanks so much for joining us.

810
00:40:18,200 --> 00:40:21,080
Speaker 2: Really appreciate it, and I know Paul really appreciates being

811
00:40:21,120 --> 00:40:24,200
Speaker 2: out at that conference as well. Karen McCall, Senior VP

812
00:40:24,520 --> 00:40:28,479
Speaker 2: at a Wealth Management at Commonwealth, talking to us about

813
00:40:28,520 --> 00:40:32,359
Speaker 2: her business, today's investment environment, and the conference that they

814
00:40:32,400 --> 00:40:34,400
Speaker 2: are hosting out there in Colorado.

815
00:40:34,719 --> 00:40:37,840
Speaker 7: You're listening to the tape catch are live program Bloomberg

816
00:40:37,920 --> 00:40:41,480
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

817
00:40:41,560 --> 00:40:43,640
Speaker 7: tune in app, Bloomberg dot Com.

818
00:40:43,360 --> 00:40:44,800
Speaker 6: And the Bloomberg Business App.

819
00:40:44,840 --> 00:40:47,640
Speaker 7: You can also listen live on Amazon Alexa from our

820
00:40:47,640 --> 00:40:52,640
Speaker 7: Flagship New York station. Just say Alexa, play Bloomberg eleven thirty.

821
00:40:53,200 --> 00:40:55,560
Speaker 1: We're down here, We're out here, I should say, man,

822
00:40:55,560 --> 00:41:00,360
Speaker 1: we're out here in Aurora, Colorado. We're broadcasting live on almost

823
00:41:00,320 --> 00:41:02,880
Speaker 1: twenty twenty three National Financial Advisors Conference. We're at the

824
00:41:02,920 --> 00:41:06,719
Speaker 1: Gaylord Rockies Resort Hotel and a roar and I look

825
00:41:06,800 --> 00:41:09,359
Speaker 1: up at the mountains and there is snow up there,

826
00:41:09,360 --> 00:41:11,680
Speaker 1: and matt at the highest elevations. I'm heading up the

827
00:41:11,680 --> 00:41:14,920
Speaker 1: Breckenridge in just minutes, so I'll be able to report

828
00:41:14,960 --> 00:41:18,000
Speaker 1: back on some real time conditions there. Let's go to

829
00:41:18,080 --> 00:41:21,719
Speaker 1: our next guest here at the conference, Sam Millett. He's

830
00:41:21,760 --> 00:41:24,399
Speaker 1: a director of fixed income at Commonwealthy Joins US. Sam,

831
00:41:24,400 --> 00:41:26,880
Speaker 1: thanks so much for making your way over to the

832
00:41:27,120 --> 00:41:30,799
Speaker 1: Bloomberg remote booth here. Let's talk about Fixingcome here. I mean,

833
00:41:30,800 --> 00:41:34,879
Speaker 1: we've got a federal reserve that appears to be at

834
00:41:34,960 --> 00:41:38,319
Speaker 1: or near peak rates. How do you expect I don't know,

835
00:41:38,320 --> 00:41:40,239
Speaker 1: the next twelve months to unfold in terms of what

836
00:41:40,280 --> 00:41:42,720
Speaker 1: the Fed does with interest rates.

837
00:41:42,760 --> 00:41:45,719
Speaker 10: Hey, Paul, thanks so much for having me. It's a

838
00:41:45,719 --> 00:41:47,560
Speaker 10: great question. It's definitely been on the mind of our

839
00:41:47,560 --> 00:41:50,640
Speaker 10: advisors here at this conference. You know, I like to

840
00:41:50,680 --> 00:41:52,239
Speaker 10: listen to the FED when they try to tell us

841
00:41:52,280 --> 00:41:54,279
Speaker 10: what they're saying and what they're planning to do. So

842
00:41:54,320 --> 00:41:56,279
Speaker 10: I believe they're going to be very data dependent at

843
00:41:56,320 --> 00:42:01,160
Speaker 10: the upcoming meetings. Looking at you know, rate probabilities, i'd

844
00:42:01,239 --> 00:42:04,160
Speaker 10: say that most likely, it seems like we're probably going

845
00:42:04,200 --> 00:42:08,080
Speaker 10: to keep flat at this most the upcoming FED meeting,

846
00:42:08,120 --> 00:42:10,839
Speaker 10: but you know, going forward from there, we're just gonna

847
00:42:10,840 --> 00:42:11,359
Speaker 10: have to watch the.

848
00:42:11,360 --> 00:42:14,000
Speaker 1: Data, all right. So, I mean, I think the is

849
00:42:14,040 --> 00:42:17,080
Speaker 1: you when you talk to your registered investment advisors here,

850
00:42:18,080 --> 00:42:20,360
Speaker 1: what are you suggesting that they do? What do you

851
00:42:20,400 --> 00:42:24,239
Speaker 1: suggest they tell their clients about kind of their allocation

852
00:42:24,360 --> 00:42:27,200
Speaker 1: to fixed and come where should they go? Kind of duration,

853
00:42:27,320 --> 00:42:28,040
Speaker 1: all that kind of stuff.

854
00:42:28,120 --> 00:42:28,319
Speaker 6: Yeah.

855
00:42:28,360 --> 00:42:32,359
Speaker 10: Absolutely, So we've really had kind of a bias towards

856
00:42:32,400 --> 00:42:34,799
Speaker 10: higher quality throughout the course of this year, and that's

857
00:42:34,800 --> 00:42:38,880
Speaker 10: really resonated with a lot of our advisors. Additionally, you know,

858
00:42:39,000 --> 00:42:41,520
Speaker 10: I think the duration question has been, you know, front

859
00:42:41,520 --> 00:42:43,680
Speaker 10: and center on everyone's mind after the last couple of

860
00:42:43,800 --> 00:42:47,640
Speaker 10: years and looking at most of our advisors, many of

861
00:42:47,680 --> 00:42:51,560
Speaker 10: them entered the year with relatively low durations compared to

862
00:42:51,600 --> 00:42:55,400
Speaker 10: their benchmarks. Therefore seeing them move a little bit closer

863
00:42:55,520 --> 00:42:58,640
Speaker 10: higher up in duration get to market rate duration has

864
00:42:58,680 --> 00:42:59,399
Speaker 10: really been the key.

865
00:43:00,920 --> 00:43:02,120
Speaker 5: What do you think about.

866
00:43:03,480 --> 00:43:06,040
Speaker 2: The current state of the thirty year I mean, yesterday

867
00:43:06,080 --> 00:43:08,480
Speaker 2: we saw it jump twenty basis points, and that's not

868
00:43:08,520 --> 00:43:11,719
Speaker 2: the first time we've seen this extreme volatility.

869
00:43:11,880 --> 00:43:12,720
Speaker 5: Is that here to stay?

870
00:43:15,120 --> 00:43:17,239
Speaker 10: Yeah, I think it's definitely been a pretty big move

871
00:43:17,239 --> 00:43:18,880
Speaker 10: in the past couple of weeks. When you're looking at

872
00:43:18,880 --> 00:43:22,040
Speaker 10: long term rates, I do believe that there's a likelihood

873
00:43:22,080 --> 00:43:23,719
Speaker 10: we'll see them come down a bit over the course

874
00:43:23,719 --> 00:43:26,360
Speaker 10: in the next few months. But you know, ultimately, I

875
00:43:26,360 --> 00:43:29,280
Speaker 10: think it's very difficult to call the direction of rates

876
00:43:29,680 --> 00:43:30,960
Speaker 10: when you go any further than that.

877
00:43:31,719 --> 00:43:34,080
Speaker 1: How about the you know, I'm a I don't mind

878
00:43:34,080 --> 00:43:36,080
Speaker 1: taking a little risk out there. I mean, should I

879
00:43:36,120 --> 00:43:38,359
Speaker 1: be thinking about, you know, the high yield market, because

880
00:43:38,360 --> 00:43:40,240
Speaker 1: if I look at the returns year to date across

881
00:43:40,239 --> 00:43:42,959
Speaker 1: the fixing come spectrum, the only place where I see

882
00:43:43,000 --> 00:43:45,520
Speaker 1: positive returns is in high yield. And the kind of

883
00:43:45,560 --> 00:43:48,120
Speaker 1: surprising to me, because again, the recession talk is pretty

884
00:43:48,239 --> 00:43:51,400
Speaker 1: pretty prevalent out there, is the should I be out

885
00:43:51,440 --> 00:43:54,480
Speaker 1: there thinking about high yield debt here as opposed to

886
00:43:54,880 --> 00:43:56,440
Speaker 1: just kind of sitting where I am now with my

887
00:43:56,440 --> 00:43:57,760
Speaker 1: two year Treasury at five percent.

888
00:43:58,000 --> 00:44:00,000
Speaker 10: Yeah, I think you know, when you look at high yield,

889
00:44:00,400 --> 00:44:03,879
Speaker 10: the performance this year has been exemplary. It's really stood out,

890
00:44:04,160 --> 00:44:08,080
Speaker 10: especially compared to most sectors within fixed income. With that

891
00:44:08,160 --> 00:44:10,880
Speaker 10: being said, we do have some concerns about valuation levels.

892
00:44:11,040 --> 00:44:13,440
Speaker 10: You know, you look at historical spreads in the high

893
00:44:13,480 --> 00:44:16,600
Speaker 10: yield space and frankly, they seem to be relatively low

894
00:44:16,880 --> 00:44:19,160
Speaker 10: if you're expecting some sort of economic slowdown in the

895
00:44:19,239 --> 00:44:21,160
Speaker 10: year ahead, which gives us a little bit of pause

896
00:44:21,200 --> 00:44:23,520
Speaker 10: when we hear questions about should I be moving from

897
00:44:24,040 --> 00:44:28,640
Speaker 10: relatively you know, credit safe and shorter duration assets like

898
00:44:28,640 --> 00:44:31,200
Speaker 10: a two year treasury out into the high yield space

899
00:44:31,200 --> 00:44:33,760
Speaker 10: because you know, frankly, I think that there's a really

900
00:44:35,080 --> 00:44:36,960
Speaker 10: big shift in risk that you're taking when you do

901
00:44:37,040 --> 00:44:39,239
Speaker 10: that trade, and you have to be aware of the

902
00:44:39,280 --> 00:44:42,960
Speaker 10: fact that you know that can work against you if

903
00:44:43,000 --> 00:44:43,960
Speaker 10: you jump too soon.

904
00:44:44,000 --> 00:44:46,440
Speaker 1: Well, Matt gets on, nybe my co host, Matt Miller,

905
00:44:46,440 --> 00:44:48,279
Speaker 1: because I'm sitting here in two and a half to

906
00:44:48,400 --> 00:44:50,520
Speaker 1: two year treasury is getting five percent. But he keeps

907
00:44:50,520 --> 00:44:53,200
Speaker 1: tell me I have to worry about reinvestment risk. So

908
00:44:53,280 --> 00:44:54,000
Speaker 1: what do you tell.

909
00:44:55,719 --> 00:44:57,000
Speaker 5: For a year you only got a year left?

910
00:44:57,000 --> 00:45:00,360
Speaker 1: Paul, I know I've a got go I think it

911
00:45:00,360 --> 00:45:02,840
Speaker 1: about it, And so the question is what do you

912
00:45:02,880 --> 00:45:05,960
Speaker 1: tell your advisors here about you know, maybe sitting here

913
00:45:05,960 --> 00:45:07,839
Speaker 1: in this two year paper, or you know, you can

914
00:45:07,880 --> 00:45:10,040
Speaker 1: even get a CD these days, you can you know,

915
00:45:11,239 --> 00:45:14,000
Speaker 1: savings account, which my twenty seven year old daughter did,

916
00:45:14,040 --> 00:45:16,280
Speaker 1: which is very good on her part. I'm very proud

917
00:45:16,400 --> 00:45:20,160
Speaker 1: of that firsts going up maybe a little bit more duration,

918
00:45:20,239 --> 00:45:22,319
Speaker 1: taking out some of that reinvestment risk.

919
00:45:22,600 --> 00:45:25,480
Speaker 10: Yeah, I've definitely had that conversation a lot with our

920
00:45:25,480 --> 00:45:28,120
Speaker 10: advisors because that's something their clients are asking them for

921
00:45:28,160 --> 00:45:30,720
Speaker 10: a lot. You know, one year to two year CDs

922
00:45:30,719 --> 00:45:33,960
Speaker 10: and treasuries have been extremely popular. The only thing that

923
00:45:33,960 --> 00:45:36,400
Speaker 10: we caution with that is, you know, the idea of

924
00:45:36,400 --> 00:45:39,799
Speaker 10: a lot of these client requests for this paper, they

925
00:45:39,840 --> 00:45:41,680
Speaker 10: come in and say, I want to lock in yields

926
00:45:41,680 --> 00:45:42,960
Speaker 10: at a high rate right now.

927
00:45:43,040 --> 00:45:43,239
Speaker 12: Yep.

928
00:45:43,400 --> 00:45:45,439
Speaker 10: And while you certainly can for a year or two,

929
00:45:45,880 --> 00:45:48,840
Speaker 10: you know, if you look at longer term interest rate projections,

930
00:45:48,840 --> 00:45:52,120
Speaker 10: including those directly from the Federal Reserve, you know, it

931
00:45:52,160 --> 00:45:54,680
Speaker 10: seems quite likely that those will not be available for

932
00:45:54,719 --> 00:45:56,759
Speaker 10: reinvestment at similar rates two years from now.

933
00:45:56,960 --> 00:46:00,000
Speaker 1: Right, all right, Matt, thanks for joining us. Really appreciate it,

934
00:46:00,040 --> 00:46:00,680
Speaker 1: Thanks so much.

935
00:46:01,880 --> 00:46:02,000
Speaker 12: So.

936
00:46:02,000 --> 00:46:03,839
Speaker 1: We're just kind of getting the lay of the land

937
00:46:03,880 --> 00:46:05,840
Speaker 1: there on the fixed income space, and we did that

938
00:46:05,880 --> 00:46:09,960
Speaker 1: with Sam Malett. He joins us here at the conference

939
00:46:09,960 --> 00:46:11,960
Speaker 1: here in a Rura, California. That's Sam Mallett, director of

940
00:46:12,040 --> 00:46:13,600
Speaker 1: fixed Income at Common Model.

941
00:46:13,719 --> 00:46:16,799
Speaker 7: You're listening to the tape cans are Live program Bloomberg

942
00:46:16,840 --> 00:46:20,440
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

943
00:46:20,480 --> 00:46:22,640
Speaker 7: tune in app, Bloomberg dot Com, and the.

944
00:46:22,520 --> 00:46:23,719
Speaker 6: Bloomberg Business App.

945
00:46:23,760 --> 00:46:26,600
Speaker 7: You can also listen live on Amazon Alexa from our

946
00:46:26,600 --> 00:46:31,640
Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

947
00:46:32,320 --> 00:46:34,799
Speaker 1: So, Madam saying, there's a lot of stuff out there

948
00:46:34,840 --> 00:46:37,440
Speaker 1: for you and you know, the litigation folks and the

949
00:46:37,480 --> 00:46:40,560
Speaker 1: antitrust folks to really focus on the most recent deal

950
00:46:40,600 --> 00:46:43,320
Speaker 1: I wanted to get your opinion on was exon Pioneer.

951
00:46:44,200 --> 00:46:46,080
Speaker 1: You know, it's a big deal. How do you think

952
00:46:46,080 --> 00:46:47,200
Speaker 1: the regulars are going to look at that?

953
00:46:47,640 --> 00:46:49,560
Speaker 15: You know, I think that deal is going to get scrutiny.

954
00:46:49,600 --> 00:46:52,000
Speaker 11: You said it's a big deal. It involves exon.

955
00:46:52,160 --> 00:46:55,640
Speaker 15: It's a sensitive area oil and gas, but I think

956
00:46:55,719 --> 00:46:58,399
Speaker 15: in the end it's probably okay. I don't see how

957
00:46:58,400 --> 00:47:01,920
Speaker 15: the FTC challenges it. Mean, this is really a combination

958
00:47:02,040 --> 00:47:04,839
Speaker 15: in the Permian Basin where there's a lot of competition,

959
00:47:04,920 --> 00:47:07,759
Speaker 15: still a lot of other biggies, and most of the

960
00:47:07,760 --> 00:47:10,640
Speaker 15: company's holdings in this area, which is called the basin.

961
00:47:10,680 --> 00:47:13,799
Speaker 15: It actually comprises several basins are not really all that

962
00:47:14,000 --> 00:47:16,960
Speaker 15: close to each other, and combined.

963
00:47:16,560 --> 00:47:18,000
Speaker 11: They'd have about fifteen percent.

964
00:47:18,120 --> 00:47:20,040
Speaker 15: So I think it's going to get some scrutiny and

965
00:47:20,120 --> 00:47:22,480
Speaker 15: it could take some time, but I think eventually this

966
00:47:22,520 --> 00:47:23,200
Speaker 15: will get cleared.

967
00:47:24,760 --> 00:47:29,719
Speaker 5: But I wonder why the FTC seems I mean, why

968
00:47:29,760 --> 00:47:32,400
Speaker 5: can we count on them to oppose big M and

969
00:47:32,480 --> 00:47:35,000
Speaker 5: A what's the idea behind that? You know?

970
00:47:35,120 --> 00:47:38,600
Speaker 15: I think that essentially this is an FTC that sort

971
00:47:38,640 --> 00:47:41,120
Speaker 15: of has a generally I don't like to say this

972
00:47:41,200 --> 00:47:43,959
Speaker 15: because it really shouldn't be this way, and they say

973
00:47:44,239 --> 00:47:47,080
Speaker 15: they'll deny this, but they really tend to think that

974
00:47:47,160 --> 00:47:49,560
Speaker 15: big is bad. You know, the bigger the company, the

975
00:47:49,600 --> 00:47:51,840
Speaker 15: more power it has, the more dominance it has, the

976
00:47:51,880 --> 00:47:55,640
Speaker 15: more ability it has to engage in anti competitive actions

977
00:47:55,640 --> 00:47:59,319
Speaker 15: that could harm consumers, that could harm labor that could

978
00:47:59,600 --> 00:48:00,960
Speaker 15: have also different harms.

979
00:48:01,120 --> 00:48:03,920
Speaker 5: That sounds like a fair take, actually, I mean in

980
00:48:03,960 --> 00:48:05,360
Speaker 5: the abstract, right.

981
00:48:05,440 --> 00:48:08,200
Speaker 15: Well, in the abstract that's in the abstract, it could

982
00:48:08,200 --> 00:48:09,839
Speaker 15: be a fair take. But you really have to look

983
00:48:09,840 --> 00:48:12,120
Speaker 15: at these deals one by one because if you take

984
00:48:12,160 --> 00:48:14,399
Speaker 15: the position that any big deal is bad, that any

985
00:48:14,480 --> 00:48:17,640
Speaker 15: kind of merger and consolidation is bad, what you're not

986
00:48:17,760 --> 00:48:20,799
Speaker 15: thinking about are those deals that can be pro competitive

987
00:48:20,880 --> 00:48:24,040
Speaker 15: and can have efficiencies and can ultimately be actually.

988
00:48:23,800 --> 00:48:26,200
Speaker 11: Be good for consumers. Right, So you're really.

989
00:48:26,000 --> 00:48:28,600
Speaker 15: Just discounting any of that, and it's kind of just

990
00:48:28,640 --> 00:48:32,040
Speaker 15: a blanket application across the board that simply may not

991
00:48:32,160 --> 00:48:34,279
Speaker 15: be the case. It may very well be the case

992
00:48:34,280 --> 00:48:36,120
Speaker 15: for some of the deals that they're looking at now,

993
00:48:37,000 --> 00:48:38,640
Speaker 15: and some of the deals they've tried to block and

994
00:48:38,719 --> 00:48:41,120
Speaker 15: actually have been able to block in the past. But

995
00:48:41,280 --> 00:48:44,040
Speaker 15: I just think that to look at everything across the

996
00:48:44,040 --> 00:48:46,000
Speaker 15: board that way probably is a mistake.

997
00:48:46,360 --> 00:48:49,040
Speaker 2: I wonder how Microsoft activision. I mean by the way

998
00:48:49,040 --> 00:48:49,920
Speaker 2: that deal's completed.

999
00:48:50,080 --> 00:48:52,600
Speaker 5: It's done. It's not like they're looking to close it.

1000
00:48:52,600 --> 00:48:53,279
Speaker 5: It's quite done.

1001
00:48:53,320 --> 00:48:53,880
Speaker 11: It's closed.

1002
00:48:54,960 --> 00:48:59,040
Speaker 2: But if I think about it, you know, Microsoft a

1003
00:48:59,160 --> 00:49:05,120
Speaker 2: gigantic behemoth that owns the Xbox, you know, one of

1004
00:49:05,320 --> 00:49:09,279
Speaker 2: two video game platforms, has now bought the maker of

1005
00:49:09,520 --> 00:49:14,359
Speaker 2: Call of Duty, the most important video game that exists, Right, So,

1006
00:49:14,840 --> 00:49:16,840
Speaker 2: I mean they're vertically integrating.

1007
00:49:17,360 --> 00:49:20,960
Speaker 15: They're vertically integrating. They were vertically integrated already, they're vertically

1008
00:49:20,960 --> 00:49:23,400
Speaker 15: integrating more. But at the end of the day, it

1009
00:49:23,480 --> 00:49:26,520
Speaker 15: comes down to what the economics of this deal shows.

1010
00:49:27,320 --> 00:49:28,239
Speaker 10: Is there an.

1011
00:49:28,120 --> 00:49:31,440
Speaker 15: Ability and incentive by Microsoft to keep all those activision

1012
00:49:31,440 --> 00:49:34,239
Speaker 15: games to itself and not supply these games to their

1013
00:49:34,239 --> 00:49:38,479
Speaker 15: distribution competitors, to forego the licensing piece that they would

1014
00:49:38,480 --> 00:49:42,120
Speaker 15: get from that, to have the customer bad will of

1015
00:49:42,400 --> 00:49:45,480
Speaker 15: gamers that we have the other options and would like

1016
00:49:45,520 --> 00:49:47,200
Speaker 15: to play the game and now can't.

1017
00:49:48,880 --> 00:49:51,200
Speaker 11: Which side is better for them? And what was proven

1018
00:49:51,239 --> 00:49:51,960
Speaker 11: in court.

1019
00:49:51,760 --> 00:49:54,120
Speaker 15: Was that it didn't make sense financially in the long

1020
00:49:54,200 --> 00:49:57,360
Speaker 15: run for Microsoft to withhold these games from its competitors.

1021
00:49:57,360 --> 00:49:59,000
Speaker 11: That's essentially what the judge found.

1022
00:49:59,120 --> 00:50:02,400
Speaker 2: Right, More people play video games in PlayStation then Xbox

1023
00:50:02,400 --> 00:50:06,279
Speaker 2: Sony's PlayStation, and they're definitely they definitely want to play

1024
00:50:06,320 --> 00:50:09,920
Speaker 2: Call of Duty on that platform. If Microsoft didn't allow

1025
00:50:09,960 --> 00:50:11,840
Speaker 2: them that, they would be looking at a lot of

1026
00:50:11,840 --> 00:50:12,600
Speaker 2: lost revenue.

1027
00:50:12,840 --> 00:50:14,920
Speaker 15: Now, that's right, And I also think that there's still

1028
00:50:15,120 --> 00:50:17,480
Speaker 15: if you look at market shares just in gaming, that

1029
00:50:17,560 --> 00:50:20,560
Speaker 15: companies that create device and create and produce these games,

1030
00:50:20,760 --> 00:50:24,040
Speaker 15: there's still a lot of competition. You know, globally, Activision

1031
00:50:24,080 --> 00:50:26,359
Speaker 15: isn't one of the biggest players, right It has Call

1032
00:50:26,400 --> 00:50:29,280
Speaker 15: of Duty, which is a very popular game, but who's

1033
00:50:29,280 --> 00:50:31,040
Speaker 15: to say that there's not another game that's going to

1034
00:50:31,080 --> 00:50:32,640
Speaker 15: come along in a year or two or in five

1035
00:50:32,719 --> 00:50:34,239
Speaker 15: years that surpasses that.

1036
00:50:36,560 --> 00:50:39,879
Speaker 1: All right, let's go from gaming to supermarkets. Here, what's

1037
00:50:39,920 --> 00:50:42,120
Speaker 1: the status of Kroger Albertson's.

1038
00:50:42,680 --> 00:50:45,240
Speaker 15: It's not looking good right now. You know, the companies

1039
00:50:45,280 --> 00:50:47,520
Speaker 15: seem to be trying to play ball. They're talking about

1040
00:50:47,520 --> 00:50:51,239
Speaker 15: divesting stores in order to get antitrust clearance to a

1041
00:50:51,280 --> 00:50:52,920
Speaker 15: company called CNS.

1042
00:50:53,120 --> 00:50:55,960
Speaker 11: But it's looking like the FTC might end up suing.

1043
00:50:56,320 --> 00:50:59,040
Speaker 15: This was sort of what I thought early on, and

1044
00:50:59,080 --> 00:51:01,680
Speaker 15: now we've also heard that the California State Ag is

1045
00:51:01,719 --> 00:51:04,920
Speaker 15: thinking about doing the same. So it looks like if

1046
00:51:04,960 --> 00:51:06,799
Speaker 15: the companies want to get this closed, they're going to

1047
00:51:06,840 --> 00:51:07,959
Speaker 15: have to end up winning at court.

1048
00:51:10,600 --> 00:51:12,640
Speaker 1: That doesn't seem I mean, it seems like an easy fix.

1049
00:51:12,680 --> 00:51:16,239
Speaker 1: Here just to say, hey, here's our geographic overlap, and

1050
00:51:16,360 --> 00:51:17,279
Speaker 1: mullt divest.

1051
00:51:16,960 --> 00:51:19,920
Speaker 15: These right, And that's essentially what the companies are doing.

1052
00:51:20,040 --> 00:51:22,160
Speaker 15: And because of that, Paul I actually think they have

1053
00:51:22,239 --> 00:51:24,520
Speaker 15: a good shot at winning in court in front of

1054
00:51:24,560 --> 00:51:25,160
Speaker 15: a judge.

1055
00:51:25,320 --> 00:51:26,960
Speaker 11: But this particular.

1056
00:51:26,520 --> 00:51:31,360
Speaker 15: FTC was very skeptical of remedies generally, any kind of remedy,

1057
00:51:31,400 --> 00:51:35,319
Speaker 15: whether structural like this divesting stores, or whether it's just

1058
00:51:35,360 --> 00:51:38,960
Speaker 15: behavioral promises like Microsoft had offered up And in this case,

1059
00:51:39,400 --> 00:51:42,520
Speaker 15: the FDC is particularly skeptical because there was a big

1060
00:51:42,560 --> 00:51:46,239
Speaker 15: grossery deal years ago in which many stores were divested.

1061
00:51:46,239 --> 00:51:50,120
Speaker 15: This was Albertsonson Safe Way, and it failed spectacularly. The

1062
00:51:50,120 --> 00:51:53,200
Speaker 15: buyer of the divested assets went bankrupt and Albertson's ended

1063
00:51:53,280 --> 00:51:55,080
Speaker 15: up buying back a bunch of the stores that they

1064
00:51:55,080 --> 00:51:56,160
Speaker 15: were supposed to divest.

1065
00:51:56,480 --> 00:51:58,239
Speaker 11: So there's particular.

1066
00:51:57,719 --> 00:52:01,200
Speaker 15: Skepticism in this industry that this work. And this is

1067
00:52:01,640 --> 00:52:03,920
Speaker 15: a lot of stores. You're talking up to six hundred

1068
00:52:03,960 --> 00:52:07,440
Speaker 15: to be divested to CNS, which is primarily a wholesaler.

1069
00:52:08,640 --> 00:52:10,080
Speaker 5: What are the other deals that we need to be

1070
00:52:10,120 --> 00:52:11,680
Speaker 5: watching out for, Jen, Well.

1071
00:52:11,520 --> 00:52:14,360
Speaker 15: Look, we're going to trial later this month in the

1072
00:52:14,440 --> 00:52:17,720
Speaker 15: Jet Blue Spirit Challenge. Oh yeah, Paul has talked about

1073
00:52:17,760 --> 00:52:20,640
Speaker 15: that one a bit. He's skeptical about that one. But

1074
00:52:20,680 --> 00:52:22,800
Speaker 15: that starts trial October twenty third. It's going to go

1075
00:52:22,800 --> 00:52:27,239
Speaker 15: about four weeks in Boston. So that's coming up. And

1076
00:52:27,320 --> 00:52:29,400
Speaker 15: we still are kind of waiting around to see what

1077
00:52:29,400 --> 00:52:32,120
Speaker 15: happens with Adobe en Figma. This one's been dragging on

1078
00:52:32,200 --> 00:52:34,920
Speaker 15: and the DOJ has been really quiet about it. We

1079
00:52:35,000 --> 00:52:37,439
Speaker 15: know the UK and the EU are investigating that deal

1080
00:52:37,480 --> 00:52:41,280
Speaker 15: as well and possibly have some concerns, and the Department

1081
00:52:41,320 --> 00:52:43,680
Speaker 15: of Justice may be just sort of biding its time

1082
00:52:43,800 --> 00:52:46,680
Speaker 15: because the deal cannot close while the UK and the

1083
00:52:46,680 --> 00:52:49,439
Speaker 15: EU investigations are ongoing. But I tend to think there's

1084
00:52:49,440 --> 00:52:50,800
Speaker 15: going to be a lawsuit there.

1085
00:52:50,600 --> 00:52:55,800
Speaker 1: Too, all right, Jenry, that's good business for the attorneys

1086
00:52:56,120 --> 00:52:58,840
Speaker 1: if nobody else. Genery, she's a senior legal analyst.

1087
00:52:58,920 --> 00:52:59,360
Speaker 5: He covers the.

1088
00:52:59,320 --> 00:53:02,080
Speaker 1: Antitrust business for Bloomberg Intelligence.

1089
00:53:03,440 --> 00:53:06,520
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1090
00:53:06,560 --> 00:53:10,360
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1091
00:53:10,440 --> 00:53:11,920
Speaker 2: podcast platform you prefer.

1092
00:53:12,320 --> 00:53:13,120
Speaker 5: I'm Matt Miller.

1093
00:53:13,360 --> 00:53:16,759
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three, and

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Speaker 2: i'm Faull Sweeney.

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Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You

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Speaker 1: can always catch us worldwide at Bloomberg Radio.