WEBVTT - Yellen Makes Big Sales Pitch for $1.9 Trillion: BI's Jersey 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.400 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.000 and on Bloomberg dot com. We're awaiting comments from US 0:00:21.040 --> 0:00:24.159 Treasury Secretary Nominee Janet Yellen from her confirmation here and 0:00:24.200 --> 0:00:26.800 in Washington. Uh d C will bring them to you 0:00:26.960 --> 0:00:29.320 as they occur. Right now, let's go to IRA Jersey 0:00:29.360 --> 0:00:31.920 get some preview, if you will, of what we might 0:00:31.920 --> 0:00:35.520 hear from Secretary Nominee Janet Yellen. Ira Jersey, chief US 0:00:35.600 --> 0:00:39.760 Interest rate Strategists for Bloomberg Intelligence, joins us. Ira, thanks 0:00:39.760 --> 0:00:41.839 so much for coming on with us here today. What 0:00:41.880 --> 0:00:46.280 do you expect to hear from Mrs Yellen today? Well, first, 0:00:46.320 --> 0:00:48.640 I think we're gonna hear a big sales pitch for 0:00:48.760 --> 0:00:53.480 President elect Biden's one point nine trillion dollar stimulus plan. Um. 0:00:53.720 --> 0:00:56.560 I think that will be important. She'll probably be asked 0:00:56.760 --> 0:00:59.680 about how that will be funded and how that might 0:00:59.680 --> 0:01:02.480 have interest rates, and and she'll say well, interest rates 0:01:02.560 --> 0:01:05.319 rhetorically very low, so this is the time you want 0:01:05.360 --> 0:01:07.560 to be taking on more debt, not when interest rates 0:01:07.680 --> 0:01:10.119 or significantly higher. So I think those are the kind 0:01:10.160 --> 0:01:12.319 of the first the first couple of things. And then 0:01:12.400 --> 0:01:14.920 and then I suspect that at some levels she'll also 0:01:14.959 --> 0:01:18.880 be aft about um working with the Federal Reserve, which 0:01:19.120 --> 0:01:22.800 is not something that Secretary Manuchin necessarily always had a 0:01:23.760 --> 0:01:27.080 rosy um, a rosy time with. So so I think 0:01:27.160 --> 0:01:30.440 Janet Yellen will will be after you know, a number 0:01:30.480 --> 0:01:32.679 of things, both from the monetary and the fiscal side 0:01:32.680 --> 0:01:37.000 of things today. How will her rhetoric change from the 0:01:37.000 --> 0:01:40.200 time when she was when she was Federal Reserved here, 0:01:40.200 --> 0:01:43.200 I mean, obviously there were certain restrictions then that there 0:01:43.240 --> 0:01:46.000 aren't on her now. Should we anticipate a different kind 0:01:46.000 --> 0:01:49.360 of Johnny Yellen? I think a little bit. But you know, 0:01:49.400 --> 0:01:52.960 even Jennet Yellen, she was out front talking about things 0:01:53.000 --> 0:01:56.919 that quite frankly or not exactly in the Federal Reserve's purview. 0:01:57.000 --> 0:02:00.800 So things like income inequality was something that talked about 0:02:01.120 --> 0:02:04.440 both in public remarks as well as before members of 0:02:04.480 --> 0:02:07.680 Congress in the past. So so now she can speak 0:02:07.760 --> 0:02:11.040 much more directly about that. And I think that especially 0:02:11.120 --> 0:02:15.720 with Democrats, you know, Senator Grassley and others being um uh, 0:02:15.760 --> 0:02:17.840 the Democrats being in the majority, now that she'll be 0:02:17.880 --> 0:02:20.880 asked about income inequality a number of times and what 0:02:20.960 --> 0:02:23.280 can be done to fix that? And I think that 0:02:23.400 --> 0:02:26.919 she'll um, you know, she she'll she has very strong 0:02:26.960 --> 0:02:30.720 opinions about about income inequality and both the problems um 0:02:31.280 --> 0:02:34.640 uh that that it creates in the broader economy, but 0:02:34.720 --> 0:02:37.440 also um, you know how you can fix it, and 0:02:37.760 --> 0:02:40.320 you know it's it's not an easy and easy ask, 0:02:40.440 --> 0:02:43.200 and and you know, they're some of the people. I 0:02:43.200 --> 0:02:46.520 think once she answers that some Republicans may actually go 0:02:46.639 --> 0:02:49.520 on the I don't want to say attacker, but certainly 0:02:49.720 --> 0:02:51.320 take the other side and say, well, there has to 0:02:51.360 --> 0:02:53.440 be winners and losers then, and you know, how do 0:02:53.440 --> 0:02:57.440 you incentivize investment and at the same time ensure that 0:02:57.440 --> 0:03:01.160 that that incomes um can be more are normalized between 0:03:01.639 --> 0:03:04.080 between the halves and the half not al Right, what 0:03:04.080 --> 0:03:08.359 do we know about Janet Yellen's um thoughts and policies 0:03:08.400 --> 0:03:14.000 and strategies about the ongoing fiscal deficit the you know, 0:03:14.040 --> 0:03:16.239 the annual deficits we run every year in this country 0:03:16.280 --> 0:03:18.600 and the and the long term debt this country's racking up. 0:03:18.600 --> 0:03:21.079 How does she feel about that? That's a good question. 0:03:21.360 --> 0:03:24.600 We haven't heard a lot from her on that exact subject, 0:03:24.680 --> 0:03:27.480 except saying that, um, you know, it can't it can't 0:03:27.480 --> 0:03:30.800 go on forever. So she's not a modern monetary theorist 0:03:31.720 --> 0:03:34.240 at heart anyway. Um. But but I think that she'll 0:03:34.320 --> 0:03:36.600 probably come out and say, well, this is the time 0:03:36.640 --> 0:03:39.200 when you need to spend. She'll take a very neo 0:03:39.320 --> 0:03:41.680 Kanesian view, I would think, which is, you know, you 0:03:41.720 --> 0:03:43.760 have to spend when the economy is weak, when interest 0:03:43.840 --> 0:03:47.000 rates are low, and then reduce the amount of deficit 0:03:47.080 --> 0:03:51.560 spending as the economy recovers and you're in the good times. Um. 0:03:51.720 --> 0:03:55.000 The you know, clearly over the left of the last 0:03:55.000 --> 0:03:57.920 half century we haven't had a great, um, a great 0:03:57.920 --> 0:04:00.600 track record of that. But what has happened during good 0:04:00.640 --> 0:04:04.160 times is that you've had a nominal GDP growth growing 0:04:04.240 --> 0:04:06.839 much faster than the fiscal deficits. So you've had debt 0:04:06.840 --> 0:04:10.160 to GDP go down. But now with the massive amounts 0:04:10.200 --> 0:04:15.320 of deficit spending over the left decade, we've we've now 0:04:15.400 --> 0:04:18.800 approached a debt to GDP and in fact, this year 0:04:18.839 --> 0:04:21.680 we will um we we will go over that, and 0:04:21.720 --> 0:04:24.039 particularly if there is another one point nine trillion dollar 0:04:24.120 --> 0:04:27.240 stimulus so um, so she'll have to address that, and 0:04:27.400 --> 0:04:29.839 it'll be interesting to see, you know, how worried she 0:04:29.960 --> 0:04:33.640 is about that and how much she um you know, says, hey, 0:04:33.680 --> 0:04:35.680 we do something now, but in the future the rest 0:04:35.680 --> 0:04:38.799 of my term as as grogury Secretary, maybe we won't 0:04:38.839 --> 0:04:42.280 be have deficits that are as high as they'll they'll 0:04:42.279 --> 0:04:45.120 likely be over the next twelve months. Jerry tomp Grassley 0:04:45.320 --> 0:04:48.200 is making his opening statement right now. That will go 0:04:48.240 --> 0:04:52.039 on for a few minutes. Eira. You know, she will 0:04:52.080 --> 0:04:56.000 obviously talk about the ways to stimulate the economy. Will 0:04:56.040 --> 0:04:59.840 she be in favor of direct checks? Will she talk 0:04:59.880 --> 0:05:04.640 a helicopter money? Well, helicopter money is different than directs, 0:05:04.720 --> 0:05:07.480 right because so helicopter money is is talking about monetary 0:05:07.520 --> 0:05:10.479 policy and and basically the Federal Reserve printing money, which 0:05:11.400 --> 0:05:14.240 is a much longer discussion and is not something that 0:05:14.320 --> 0:05:17.360 necessarily works the way that that some monetary theorists think 0:05:17.360 --> 0:05:19.640 it does, at least in my opinion. Um. But but 0:05:19.680 --> 0:05:22.320 I think that that she will um talk about some 0:05:22.360 --> 0:05:26.000 direct checks. I think, UM, the the she will acknowledge 0:05:26.000 --> 0:05:28.599 though that direct checks only help in the very short term, 0:05:28.600 --> 0:05:32.400 and that um, there's other policies that um that that 0:05:32.480 --> 0:05:35.680 may be more important for the long term sustainability of 0:05:35.720 --> 0:05:39.360 the country. So um, so things like you know, mortgage 0:05:39.360 --> 0:05:43.279 moratoriums or ensuring that people keep jobs. So like something 0:05:43.320 --> 0:05:46.520 like the PPP might be better than direct stimulus checks 0:05:46.520 --> 0:05:49.480 to to the household sector, because one of the things 0:05:49.520 --> 0:05:51.200 that we have to remember is that direct checks to 0:05:51.279 --> 0:05:54.960 the household sector, they are a one time boost and 0:05:55.080 --> 0:05:57.520 if um, if all of that money is spent or 0:05:57.760 --> 0:06:00.280 or even if some is saved, it's still only it 0:06:00.560 --> 0:06:03.400 doesn't help in the longer term. So something like keeping 0:06:03.400 --> 0:06:07.279 people in their jobs or or you know, helping people 0:06:07.440 --> 0:06:11.559 stay stay at work, or helping with longer term unemployment. UM, 0:06:11.600 --> 0:06:14.240 those are things that that will probably have a greater 0:06:14.720 --> 0:06:17.159 impact on on the long term health of the economy 0:06:17.200 --> 0:06:20.040 than you know, someone getting an extra an extra five 0:06:20.120 --> 0:06:23.280 or six hundred dollars um in you know, at one time. 0:06:24.279 --> 0:06:26.560 So I you know, in addition to this one point 0:06:26.640 --> 0:06:29.039 nine trade and fiscal stimulus that is on the table 0:06:29.160 --> 0:06:32.520 right now, there's talk of already another package behind it, 0:06:32.560 --> 0:06:36.719 perhaps even the larger that may be more infrastructure oriented, 0:06:36.760 --> 0:06:40.080 more longer term, maybe even a green component. Do we 0:06:40.160 --> 0:06:43.560 know what Janet Yellen feels about some of those strategies 0:06:43.560 --> 0:06:46.320 in those policies, Well, I don't think that she. I 0:06:46.600 --> 0:06:49.359 think that ultimately she'll be on board with with the 0:06:49.400 --> 0:06:53.120 president's general plan. So if if the President does come 0:06:53.120 --> 0:06:55.680 out with some kind of you know, green uh, you know, 0:06:55.760 --> 0:06:59.120 green New Deal or um uh and infrastructure spending, that 0:06:59.160 --> 0:07:01.640 what might go under over multiple years. So so when 0:07:01.680 --> 0:07:04.200 you think about the next plan behind this, I think 0:07:04.200 --> 0:07:06.760 it's more of a yeah, it might be three trillion dollars, 0:07:06.760 --> 0:07:09.359 but it's probably three trillion dollars over five years or 0:07:09.440 --> 0:07:12.440 six years. It's not you know, two trillion dollars right now, 0:07:12.480 --> 0:07:15.000 which is what we're talking about with the with the 0:07:15.000 --> 0:07:18.200 second fiscal stimulus UM. So, so we don't know, but 0:07:18.240 --> 0:07:19.920 I think that you'll have to be on board with that. 0:07:19.960 --> 0:07:23.440 I mean, she wouldn't be nominated for Treasury Secretary without 0:07:23.760 --> 0:07:26.800 needing to be the spokesperson for the broad array of 0:07:26.840 --> 0:07:29.760 different things at President let Biden wants to do, I 0:07:29.800 --> 0:07:33.000 wrote Terry Haynes Apenergy Policy makes a good point. He 0:07:33.040 --> 0:07:37.160 says that you know, markets will receive this as positive news, 0:07:37.160 --> 0:07:44.160 this yelling you know, most likely risk asset markets might 0:07:44.160 --> 0:07:46.680 take it kindly. I'm not sure that. I'm not sure 0:07:46.760 --> 0:07:48.760 that the race market would take you know, two trillion 0:07:48.760 --> 0:07:52.560 dollars stimulus plan as as particularly kind Well, yeah, that's 0:07:52.600 --> 0:07:55.720 an excellent point. That's an extent point. We let's expend 0:07:55.720 --> 0:07:58.120 on that in a second. But just to finish that 0:07:58.240 --> 0:08:01.880 first thought, he was saying that she provides cover for regulators, 0:08:01.880 --> 0:08:05.560 for progressive regulators like for example, Arrogancer and Antiopra at 0:08:05.600 --> 0:08:09.120 the CFPB because she has been talking a lot about 0:08:09.120 --> 0:08:13.880 consumer affairs. Yeah. So, so consumer affairs is interesting because 0:08:13.920 --> 0:08:17.080 one of the one of the issues with income inequality 0:08:17.200 --> 0:08:19.520 is is who's able to get loans? Right, So, so 0:08:19.880 --> 0:08:22.320 the good things and the bad things about the CFPB 0:08:22.520 --> 0:08:25.080 and some of the work that the Consumer Financial Protection 0:08:25.120 --> 0:08:28.000 Bureaus you know, done over over the course of the 0:08:28.040 --> 0:08:30.320 last decade is you know, they want to make sure 0:08:30.360 --> 0:08:35.319 that people are getting loans that firstly are sustainable, but 0:08:35.400 --> 0:08:37.439 and and that they're not being taken to people aren't 0:08:37.440 --> 0:08:39.840 being taken advantage of, you know, like what happened at 0:08:39.880 --> 0:08:42.920 some points during the mortgage crisis. But at the same time, 0:08:42.960 --> 0:08:45.000 that also means that there's a lot of people at 0:08:45.000 --> 0:08:47.360 the margins who might not be able to get loans 0:08:48.120 --> 0:08:51.040 because they're not seen as worthy borrowers. So that means 0:08:51.120 --> 0:08:55.280 that you know, in places like under UM, you know, 0:08:55.520 --> 0:08:58.680 some underserved communities might not be able to get loans 0:08:58.720 --> 0:09:01.240 to start businesses or or to buy a house like 0:09:01.520 --> 0:09:03.720 So there's knock on effects with that. So I think 0:09:03.760 --> 0:09:05.719 that there probably needs to be some changes, and I 0:09:05.800 --> 0:09:08.600 think UM, someone like Janet Yelling can kind of find 0:09:09.280 --> 0:09:13.319 the balance between safety and soundness and UH and the 0:09:13.400 --> 0:09:17.640 ability to allow some type of risk taking h to 0:09:17.760 --> 0:09:19.880 be done and for loans to go out. You know, 0:09:19.960 --> 0:09:22.640 maybe it's on the auspices of the SBA, for example, 0:09:23.040 --> 0:09:26.520 where the Small Business Administration might ease loans in certain 0:09:26.600 --> 0:09:31.040 areas where where businesses might be able to UM might 0:09:31.080 --> 0:09:32.840 be able to take on a little bit more debt. 0:09:33.120 --> 0:09:35.120 But but all of this cost money, right, So at 0:09:35.120 --> 0:09:37.319 the end of the day, there, you know, if you 0:09:37.400 --> 0:09:40.880 do have UH riskier loans being made by the SBA, 0:09:41.280 --> 0:09:43.800 the chances for credit losses by the SBA goes up, 0:09:43.880 --> 0:09:46.040 and and that means that that has to be funded 0:09:46.080 --> 0:09:48.280 at some level, and that has to be funded via 0:09:48.360 --> 0:09:50.760 issuing treasury and security. So that's one of the reasons 0:09:50.840 --> 0:09:52.800 why I bring up. You know that that all of 0:09:52.920 --> 0:09:54.920 the spending means that you have to issue a lot 0:09:55.000 --> 0:09:57.040 more bonds, and by issuing a lot more bonds, someone 0:09:57.080 --> 0:09:59.560 has to buy them, and eventually you're going to see 0:09:59.640 --> 0:10:02.319 much high or yields because of that supply. I Jersey, 0:10:02.400 --> 0:10:04.320 thank you so much for joing us. We appreciate your 0:10:04.360 --> 0:10:07.839 extended time. Our Jersey chief US interest rate strategist for 0:10:07.880 --> 0:10:15.320 Bloomberg Intelligence. Earnings season is beginning and we always begin 0:10:15.840 --> 0:10:19.120 with the big banks in this season is no different. Uh, 0:10:19.240 --> 0:10:21.000 some mixed numbers I guess coming out of some of 0:10:21.040 --> 0:10:22.959 the big banks here. But let's break it down. We'll 0:10:22.960 --> 0:10:26.280 do that with Shanali Bassic, Wall Street porter for Bloomberg 0:10:26.480 --> 0:10:28.800 News Snally, what have we seen this morning? We had 0:10:29.040 --> 0:10:31.840 some of the big names kick us off. Yes, absolutely, 0:10:31.920 --> 0:10:34.480 I mean it's it's a very clear continuation of what 0:10:34.600 --> 0:10:37.080 we've seen all year, which is Main Street versus Wall 0:10:37.120 --> 0:10:40.360 Street and Wall Street is winning. So all right, let's 0:10:40.360 --> 0:10:42.439 talk to us about what we've seen so far that 0:10:42.800 --> 0:10:46.760 the trading numbers Sanale have been so strong for so 0:10:46.880 --> 0:10:50.480 many of these big banks. Is that trend continuing? It 0:10:50.600 --> 0:10:52.680 sure is, And a lot of this is driven by 0:10:52.720 --> 0:10:56.079 a lot of volatility and equity markets on robust I 0:10:56.280 --> 0:10:59.360 p O s Goldman Sacks just said it had one 0:10:59.400 --> 0:11:02.720 of the highest quarters from net revenue ever for equity underwriting, 0:11:02.800 --> 0:11:05.640 driven by this ip O cycle. So that's still going on. 0:11:05.880 --> 0:11:08.839 Let's see how long that can keep going on. Yeah, 0:11:08.880 --> 0:11:10.599 I mean what are on was saying, nale are the 0:11:10.640 --> 0:11:14.319 anticipation that this will continue? There certainly is an expectation, 0:11:14.440 --> 0:11:16.280 except for it's supposed to be a little less than 0:11:16.360 --> 0:11:19.120 what we've seen last year. Last year was a standout 0:11:19.160 --> 0:11:22.120 year by any means, and it was also guided higher 0:11:22.200 --> 0:11:25.040 by fixed income being so robust. We're seeing a lot 0:11:25.120 --> 0:11:29.559 of the banks here miss expectations on fixed income trading. 0:11:30.160 --> 0:11:33.080 Remember last year we've seen so much dead underwriting as 0:11:33.120 --> 0:11:36.800 companies dashed for cash that that really helped fixed income 0:11:36.960 --> 0:11:41.000 volumes higher. So without that leg can trading stay quite 0:11:41.040 --> 0:11:44.880 as high? Not expected, but high enough to keep that 0:11:45.040 --> 0:11:48.520 profit churning? Hey, Shanali, So when you take a look 0:11:48.520 --> 0:11:50.760 at a Bank of America, I mean, obviously they have 0:11:50.880 --> 0:11:53.439 the big investment bank from the acquisition of Merrill Lynch. 0:11:53.480 --> 0:11:56.439 But I think the more of is a a corporate bank, 0:11:56.559 --> 0:11:59.800 you know, relying more on net interest income, and I'm 0:12:00.080 --> 0:12:03.160 at the rate structure right here, still gotta be tough 0:12:03.360 --> 0:12:06.560 to make money in that business. It's the number one 0:12:06.760 --> 0:12:10.480 question that they've been getting today, it's net interest income. 0:12:10.600 --> 0:12:14.120 How much pressure is there. They are saying that it's 0:12:14.160 --> 0:12:16.679 probably bottomed out in terms of how bad it could get. 0:12:17.040 --> 0:12:19.520 But with that said, it's a lot of sluggish growth 0:12:19.600 --> 0:12:24.000 there because you're also seeing loan growth very sluggish as well, Paul, 0:12:24.520 --> 0:12:27.040 So how do the banks that are so focused on 0:12:27.080 --> 0:12:29.880 the consumer continue to make money when they're not lending 0:12:30.160 --> 0:12:33.319 at a fast rate and when they're not really benefiting 0:12:33.360 --> 0:12:37.000 from what the interest rates look like here? Socially, what 0:12:37.040 --> 0:12:40.000 should we anticipate from the asset managers next week, because 0:12:40.040 --> 0:12:42.319 this gives us a little little glimpse into what we 0:12:43.040 --> 0:12:45.800 see from the likes of black Hawk. Yes, absolutely, black 0:12:45.880 --> 0:12:49.040 Rock really stand out numbers there in terms of assets 0:12:49.120 --> 0:12:53.280 under management. Remember Goldman and JP Morgan also two of 0:12:53.640 --> 0:12:55.920 the top money managers in the world. We don't think 0:12:55.960 --> 0:12:58.520 about them that way because they're mostly banks. But again, 0:12:58.920 --> 0:13:02.320 many children dollars all together there in assets. They're really 0:13:02.400 --> 0:13:05.960 benefiting here from the higher market levels. That's that's number one, 0:13:06.520 --> 0:13:10.319 But number two, they're also benefiting here from really an 0:13:10.400 --> 0:13:13.559 expansion at least for Goldman's sake, and expansion in private 0:13:13.679 --> 0:13:18.199 markets as they grow that merchant banking business as well. Socionale. 0:13:18.320 --> 0:13:21.160 With the Democrats take control of the White House and 0:13:21.280 --> 0:13:25.080 a very very slight control of Congress, there's definitely concerned 0:13:25.120 --> 0:13:27.840 there that the financial services industry is going to come 0:13:27.920 --> 0:13:31.480 under some heavier regulatory scrutiny. What if we heard from 0:13:31.559 --> 0:13:34.040 some of these early conference calls from some of these 0:13:34.080 --> 0:13:37.120 big financial institutions, are they concerned? So we have not, 0:13:37.320 --> 0:13:40.360 actually you, it's the number one question on my mind. 0:13:40.480 --> 0:13:42.760 For sure. We haven't heard a lot about it yet 0:13:42.840 --> 0:13:46.200 on these calls. What's remarkable is that just last Thursday 0:13:46.640 --> 0:13:49.600 you saw these elevated and unemployment claims almost a million, 0:13:49.720 --> 0:13:52.880 more than eighteen million altogether now, but then the next 0:13:52.960 --> 0:13:55.800 day JP Morgan comes out and says they have had 0:13:55.880 --> 0:13:59.760 their most profitable three months span in history. So how 0:14:00.000 --> 0:14:02.319 how can both things be true? What can we expect 0:14:02.360 --> 0:14:05.920 from the Biden administration? Between Janet Yellen and Gary Ginstler 0:14:06.360 --> 0:14:09.439 and others who may be more progressive in the o 0:14:09.600 --> 0:14:12.920 c C and CFPBB, which are more consumer leaning organizations. 0:14:13.600 --> 0:14:16.120 Is there going to be a concern that these banks 0:14:16.200 --> 0:14:19.080 that that are making so much money are simply not 0:14:19.320 --> 0:14:22.240 lending to the broader part of the American economy? Well, 0:14:22.320 --> 0:14:25.080 how much can tell that Yellen do about this? She's 0:14:25.080 --> 0:14:28.040 been questioned right now by you know, a multiplicity of senators, 0:14:28.120 --> 0:14:29.880 and I imagine some of these questions are going to 0:14:29.960 --> 0:14:32.280 come up. So we will hear from her, you know, 0:14:32.360 --> 0:14:35.040 on what she thinks about these things. But will the 0:14:35.080 --> 0:14:38.800 Treasury Secretary have you know, that much of an impact? Well, yes, 0:14:38.960 --> 0:14:42.080 because for one thing, she will have a starring role 0:14:42.280 --> 0:14:45.200 as the head of the Financial Stability Oversight Council. Will 0:14:45.240 --> 0:14:48.320 there be stronger rules in terms of what these banks 0:14:48.440 --> 0:14:50.840 are able to do moving forward? On top of that, 0:14:51.880 --> 0:14:54.520 there are questions about whether these banks should beholden to 0:14:54.720 --> 0:14:58.400 greater regulations when it comes to serving more lower income 0:14:58.480 --> 0:15:01.760 to middle income communities, more women, and more people of color. 0:15:02.280 --> 0:15:05.080 There is an expectation that there will this will be 0:15:05.080 --> 0:15:08.040 a matter of law not too far from now. So 0:15:08.480 --> 0:15:11.120 the question is how aggressive do they get in terms 0:15:11.200 --> 0:15:14.760 of disclosures and potentially even quota as ahead. Hey Sonali, 0:15:14.840 --> 0:15:17.360 thanks so much for joining us. I know you're busy 0:15:17.440 --> 0:15:18.880 these days in business from the marriger of the week, 0:15:18.880 --> 0:15:21.480 cause we get more from the big banks and financial 0:15:21.520 --> 0:15:24.800 institutions on Wall Street Nale Basket, Wall Street Porter for 0:15:25.240 --> 0:15:28.040 Bloomberg News. Got some mixed numbers. I guess out of 0:15:28.040 --> 0:15:30.040 Goldman a Bank of America, but we'll see to get 0:15:30.080 --> 0:15:33.800 some confirmation from some of the others, including Morgan Stanley, 0:15:33.880 --> 0:15:37.200 JP Morgan and others coming up. So earning season in 0:15:37.600 --> 0:15:42.320 full swing stocks versus bonds. Boy, you look at the 0:15:42.480 --> 0:15:45.960 ten year treasury yield today trading at one point zero 0:15:46.360 --> 0:15:48.720 nine percent. Not much of return for walking up your 0:15:48.760 --> 0:15:51.720 money for ten years. That's not surprising that we see 0:15:51.760 --> 0:15:54.200 so much attention on the equity markets. Let's chat with 0:15:54.360 --> 0:15:58.840 Mike Dowdell, investment strategists and portfolio manager for BEMO Global 0:15:58.920 --> 0:16:02.360 Asset Management. They have two seventy nine billion dollars in 0:16:02.480 --> 0:16:05.680 assets on their management. Uh. Mike joins us on the 0:16:05.680 --> 0:16:08.280 phone from Chicago. Mike, thanks so much for joining us here. Well, 0:16:08.320 --> 0:16:10.720 you look at that tenure treasury at one point zero 0:16:10.840 --> 0:16:14.280 nine percent, and you're like, I just don't see that 0:16:14.440 --> 0:16:17.600 kind of return for that kind of period is very attractive. 0:16:18.080 --> 0:16:20.200 I gotta be in equities. Is that kind of how 0:16:20.280 --> 0:16:23.080 you're looking at things? Yeah, I know, I think that's 0:16:23.080 --> 0:16:25.200 a pretty good summary of kind of where the markets 0:16:25.240 --> 0:16:27.960 at right now. A lot of where we've seen in 0:16:28.120 --> 0:16:31.480 terms of this this equity rally. Uh So, a lot 0:16:31.520 --> 0:16:33.880 of it is is bond dependent. Uh there's a lot 0:16:33.920 --> 0:16:36.200 of investors out there you need to go somewhere. Where 0:16:36.200 --> 0:16:38.320 are you gonna get that growth? A lot of it's 0:16:38.360 --> 0:16:40.680 not going to come from your bond portfolio. So a 0:16:40.720 --> 0:16:42.440 lot of people have been up and been more or 0:16:42.520 --> 0:16:46.040 less forced into equities. Yeah, I mean, what about forced 0:16:46.080 --> 0:16:49.960 out of the US? Is that an alternative? Yeah? I 0:16:50.000 --> 0:16:52.760 mean if you're if you're a pure value, valuation based investor, 0:16:53.200 --> 0:16:56.600 outside the US looks particularly attractive. Um, but the US 0:16:56.600 --> 0:16:58.160 still from it. It is a pretty good place to be. 0:16:58.680 --> 0:17:01.600 It's a defensive market due to the composition. The US 0:17:01.680 --> 0:17:05.840 consumer continues to be really the driver of growth, particularly 0:17:05.840 --> 0:17:08.760 in the development markets. So we still like the US markets, 0:17:08.880 --> 0:17:11.200 although we have become a lot more constructive on emerging 0:17:11.240 --> 0:17:15.320 markets over the last few months. Alright, So an emerging markets, Mike, 0:17:15.720 --> 0:17:19.000 how much risk do I take looking there? I mean, 0:17:19.119 --> 0:17:21.120 is it simply make up trying to make some place 0:17:21.160 --> 0:17:23.320 in China? Where do I go? Perhaps even farther out 0:17:23.320 --> 0:17:26.280 than the risk curve? Yeah, we actually like a little 0:17:26.280 --> 0:17:29.479 bit broader out than just that that that straight China play. Um, 0:17:29.680 --> 0:17:31.240 you have a lot of tail wines behind you right 0:17:31.280 --> 0:17:34.080 now on emerging markets. You have when we think will 0:17:34.119 --> 0:17:38.880 be synchronized global recovery in particularly in the second half. 0:17:39.119 --> 0:17:41.560 That should help some of the higher beta markets. Um. 0:17:41.640 --> 0:17:43.960 And you also have that weaken mean dollar, which is 0:17:44.040 --> 0:17:45.920 really helpful for it give us a lot more just 0:17:46.080 --> 0:17:49.560 leeways for his person emerging market central banks to have 0:17:49.680 --> 0:17:53.840 a bit more stimulative policies than otherwise. All right, So 0:17:54.280 --> 0:17:56.879 when would be a good time using to try and 0:17:57.280 --> 0:17:58.960 make a little bit of a move in the markets? 0:17:59.400 --> 0:18:03.520 Is you know, is this a question of waiting until 0:18:04.040 --> 0:18:07.280 the vaccinations are all over the country and then we'll 0:18:07.320 --> 0:18:09.639 see rotations and things, or or do you just keep 0:18:09.680 --> 0:18:13.240 adding now? Yeah, I mean that's that's that's really the 0:18:13.359 --> 0:18:17.440 question we we think right now makes sense. So, I 0:18:17.480 --> 0:18:20.120 mean as markets aren't are aren't coincidental, they're really look 0:18:20.119 --> 0:18:24.120 forward looking. So Yeah, vaccine rollout has been flower than 0:18:24.280 --> 0:18:27.560 many had hoped. Um. However, it's it is still rolling out, 0:18:27.560 --> 0:18:30.120 particularly in the US. Here we're looking like we're gonna 0:18:30.160 --> 0:18:32.879 get up to a million uh doses a day. That 0:18:32.920 --> 0:18:35.080 should be quite positive. Um. So we think you need 0:18:35.119 --> 0:18:37.040 to get ahead of that and just looking out over 0:18:38.320 --> 0:18:40.320 we put out our our annual outlook. We called it 0:18:40.760 --> 0:18:43.600 Arousing Recovery, and we think does that make sense that uh, 0:18:43.720 --> 0:18:46.760 particularly you should see that shift from the manufacturing sector 0:18:47.080 --> 0:18:50.000 into the services sector and really see the economy start 0:18:50.040 --> 0:18:51.800 to take off in the second half of the year. 0:18:52.119 --> 0:18:54.080 So getting in front of that is important. If you 0:18:54.160 --> 0:18:56.760 wait until that actually shows up in the data, you're 0:18:56.760 --> 0:18:59.480 probably going to be behind the eight ball. Alright, So Mike, 0:18:59.600 --> 0:19:02.080 you know, it's this is a market that's been driven 0:19:02.160 --> 0:19:04.959 by the FED, all the liquidity in the marketplace, uh, 0:19:05.040 --> 0:19:07.960 fiscal stimulus. It seems like there's you know, multiple rounds 0:19:08.240 --> 0:19:11.359 uh maybe even still to come. Here. At what point 0:19:11.600 --> 0:19:14.119 as we enter this earning season right now, at what 0:19:14.200 --> 0:19:18.520 point the earnings really come front and center. That's a 0:19:18.560 --> 0:19:21.680 good question. Uh yeah, I mean earnings matter at the 0:19:21.760 --> 0:19:24.359 micro level, there's no doubt about that. UM. At the 0:19:24.440 --> 0:19:28.399 macro level. Yeah, the tail winds, particularly from policy aren't 0:19:28.400 --> 0:19:32.880 going anywhere anytime soon. So for for Paris trades, earninges matter, 0:19:33.119 --> 0:19:36.240 but for from a broader market perspective, we think that 0:19:36.440 --> 0:19:38.560 that really the market is going to give a bit 0:19:38.640 --> 0:19:42.119 of a mulligan on on the earnings more broadly until 0:19:42.520 --> 0:19:44.680 for for a little bit here, we think that Fed 0:19:44.760 --> 0:19:47.639 policy is going to remain a commody for the foreseeable 0:19:47.680 --> 0:19:51.400 future fiscal policies coming through. Even more so, as long 0:19:51.480 --> 0:19:53.840 as you have those killin, it's really hard to see 0:19:53.880 --> 0:19:57.439 a large scale uh pullback in markets without some buyers 0:19:57.520 --> 0:20:01.159 coming back in. What do you imagine John at Yellen's 0:20:01.200 --> 0:20:03.639 priorities will be as Treasury Secretary and how will they 0:20:03.880 --> 0:20:08.840 impact to the markets? Yeah, we think that Yelling and 0:20:09.000 --> 0:20:11.639 just the broader binding administration are looking at really what 0:20:11.760 --> 0:20:15.200 happened under the Obama years and that slow grinding recovery 0:20:15.400 --> 0:20:17.920 and using that as a cautionary tale. They really want 0:20:17.960 --> 0:20:20.280 to get back to tight labor markets and as soon 0:20:20.359 --> 0:20:22.920 as possible. There are ten million fewer people on the 0:20:22.960 --> 0:20:25.480 payroll today than there were this time last year, and 0:20:25.600 --> 0:20:28.280 we think that they want to accelerate that recovery and 0:20:28.400 --> 0:20:30.639 make sure that we can get to tighter labor markets 0:20:31.040 --> 0:20:33.960 much much quicker than what occurred after the Great Recession. 0:20:34.160 --> 0:20:37.360 So really that that labor market, clearly that yelling specialty, 0:20:37.680 --> 0:20:40.000 but but but tidying up that labor market is probably 0:20:40.040 --> 0:20:42.960 going to be first and foremost on our agenda. Hey, Mike, 0:20:43.040 --> 0:20:47.240 we've seen this rotation trade play very well since let's 0:20:47.280 --> 0:20:50.560 call it September. Are you a proponent of this rotation 0:20:50.760 --> 0:20:53.600 trade out of maybe some of the core growth names 0:20:53.640 --> 0:20:55.800 into some of more cyclical names that might benefit from 0:20:55.880 --> 0:21:00.520