1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,960 --> 00:00:15,560 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 3 00:00:15,600 --> 00:00:18,960 Speaker 2: with Paul Sweeney. Join us each day for insight from 4 00:00:18,960 --> 00:00:23,160 Speaker 2: the best in economics, finance, investment, and international relations. You 5 00:00:23,160 --> 00:00:26,520 Speaker 2: can also watch the show live on YouTube. Visit the 6 00:00:26,520 --> 00:00:31,280 Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday 7 00:00:31,280 --> 00:00:34,320 Speaker 2: mornings from seven to ten am Eastern from our global 8 00:00:34,360 --> 00:00:39,000 Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 9 00:00:39,360 --> 00:00:42,920 Speaker 2: or anywhere else you listen, and always I'm Bloomberg Radio, 10 00:00:43,080 --> 00:00:47,600 Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. Here's the secret, folks, 11 00:00:48,120 --> 00:00:50,920 Speaker 2: guy asked me. Wonderful guy email me this weekend. He said, 12 00:00:51,080 --> 00:00:53,239 Speaker 2: how in God's name do you do it? And the 13 00:00:53,320 --> 00:00:57,240 Speaker 2: answer is you read, reread. And I learned decades ago 14 00:00:58,400 --> 00:01:01,680 Speaker 2: that if you read anything from Outlage Press, you will 15 00:01:01,720 --> 00:01:06,759 Speaker 2: be happy. It is a esteemed British firm. This little jewel, 16 00:01:06,800 --> 00:01:10,200 Speaker 2: one hundred and sixty five pages came in. This should 17 00:01:10,200 --> 00:01:13,560 Speaker 2: be in the CFA curricula. Immediately he's with federator or 18 00:01:13,600 --> 00:01:16,559 Speaker 2: MESI has to put up with Steve Off. Daniel Parris 19 00:01:16,720 --> 00:01:20,920 Speaker 2: joins US historian PhD. And this is about what Paul 20 00:01:21,000 --> 00:01:25,920 Speaker 2: Sweeney cares about more than anything, the ownership dividend. It 21 00:01:26,080 --> 00:01:32,639 Speaker 2: is a magnificent global Wall Street primer on dividends. Daniel Paris, 22 00:01:32,680 --> 00:01:36,360 Speaker 2: thank you so much for joining us today. You have 23 00:01:36,480 --> 00:01:41,960 Speaker 2: the Paul Sweeney page, which is Cliff Asnes at AQR 24 00:01:42,560 --> 00:01:46,160 Speaker 2: saying we've done the work, don't worry about paying taxes 25 00:01:46,200 --> 00:01:49,880 Speaker 2: on dividends. Dividends are good. What does that mean for 26 00:01:49,960 --> 00:01:51,320 Speaker 2: our listeners, our viewers? 27 00:01:52,680 --> 00:01:54,480 Speaker 3: You know, Tom, thank you for having me on the show. 28 00:01:54,800 --> 00:01:56,800 Speaker 3: The way I phrased it a little bit differently is 29 00:01:56,840 --> 00:01:59,480 Speaker 3: that in my day job, I do run into a 30 00:01:59,520 --> 00:02:04,600 Speaker 3: lot of advisors and clients who really really want to 31 00:02:04,640 --> 00:02:09,080 Speaker 3: subordinate investment policy to tax minimization. It seems to be 32 00:02:09,160 --> 00:02:12,480 Speaker 3: more important to them than the investment policy. And I 33 00:02:12,560 --> 00:02:15,280 Speaker 3: make the simple statement that's a choice, not a necessity. 34 00:02:15,760 --> 00:02:19,320 Speaker 3: Academic finance is really really strong on tax minimization. There's 35 00:02:19,320 --> 00:02:21,400 Speaker 3: nothing wrong with that, but I take a stand as 36 00:02:21,440 --> 00:02:26,240 Speaker 3: a business owner that investment policy should not be subordinated 37 00:02:26,280 --> 00:02:29,799 Speaker 3: to tax minimization policy. And while the tax code is 38 00:02:29,840 --> 00:02:33,440 Speaker 3: often adverse, you know, it's a sign of success or 39 00:02:33,480 --> 00:02:35,000 Speaker 3: victory if you find yourself having to. 40 00:02:36,680 --> 00:02:37,160 Speaker 1: Pay a bit. 41 00:02:37,240 --> 00:02:40,920 Speaker 3: So it's one of the biggest issues I run into 42 00:02:40,960 --> 00:02:41,840 Speaker 3: on a daily basis. 43 00:02:41,919 --> 00:02:45,200 Speaker 2: Page fifty three, Philip Fisher. There was the Old Testament, 44 00:02:45,320 --> 00:02:48,440 Speaker 2: the New Testament, and then there was common stocks in 45 00:02:48,600 --> 00:02:53,200 Speaker 2: uncommon profits a million like a generation ago. Danielle Paris, 46 00:02:53,240 --> 00:02:54,959 Speaker 2: Should Apple raise their dividends? 47 00:02:56,320 --> 00:02:56,600 Speaker 1: Yeah? 48 00:02:56,800 --> 00:02:59,680 Speaker 3: The biggest pushback I get from this book and Apple's 49 00:02:59,680 --> 00:03:02,680 Speaker 3: are perfec example of that is listen, buybacks are fine, 50 00:03:03,200 --> 00:03:07,920 Speaker 3: and I don't dispute the utility of buybacks in certain circumstances, 51 00:03:07,919 --> 00:03:12,360 Speaker 3: not how they're widely used. But I'm challenged and said, well, 52 00:03:12,560 --> 00:03:14,799 Speaker 3: you know where would these dividends come from. We don't 53 00:03:14,800 --> 00:03:17,760 Speaker 3: want to starve companies of growth opportunities, and of course 54 00:03:17,880 --> 00:03:22,600 Speaker 3: we don't companies should invest in positive MPV projects. But 55 00:03:22,840 --> 00:03:26,000 Speaker 3: when there's close to a trillion dollars spent from the 56 00:03:26,040 --> 00:03:29,000 Speaker 3: S and P five hundred companies, notably concentrated in a 57 00:03:29,000 --> 00:03:33,040 Speaker 3: handful of very very large tech companies on buybacks, shifting 58 00:03:33,080 --> 00:03:35,120 Speaker 3: some of that over time, which I believe will happen 59 00:03:35,280 --> 00:03:38,520 Speaker 3: as interest rates have stopped falling, is not going to 60 00:03:38,600 --> 00:03:41,200 Speaker 3: come at the expense of investment and growth. It's going 61 00:03:41,240 --> 00:03:44,520 Speaker 3: to come out out of the buybacks. And Apple and 62 00:03:44,600 --> 00:03:47,800 Speaker 3: many of the other companies that say they can't afford 63 00:03:48,240 --> 00:03:50,880 Speaker 3: to pay a dividend because they've got so many good 64 00:03:50,920 --> 00:03:54,200 Speaker 3: growth projects are also buying their shares backhand over fist. 65 00:03:54,440 --> 00:03:56,920 Speaker 3: Looks good in a rising market. They need to do 66 00:03:56,960 --> 00:03:59,560 Speaker 3: so when they're issuing shares out the back door to employees. 67 00:04:00,280 --> 00:04:05,640 Speaker 3: But yeah, the payout ratio for the large tech companies 68 00:04:05,680 --> 00:04:08,680 Speaker 3: which is currently pretty low, and for well, it's called 69 00:04:08,720 --> 00:04:11,760 Speaker 3: the Nasdaq one hundred, whether they're in the Nasdaq one 70 00:04:11,840 --> 00:04:13,600 Speaker 3: hundred or not. But I'm just talking about the large, 71 00:04:13,600 --> 00:04:17,080 Speaker 3: mature tech companies. I believe over the next couple years, 72 00:04:17,120 --> 00:04:18,880 Speaker 3: over the next five to ten years, you're going to 73 00:04:18,920 --> 00:04:25,440 Speaker 3: see many of them follow in the footsteps of Meta And. 74 00:04:25,279 --> 00:04:29,680 Speaker 4: There we go. So, Daniel, is there an ideal payout ratio? 75 00:04:29,839 --> 00:04:31,640 Speaker 4: What does the academic research say? 76 00:04:33,440 --> 00:04:36,200 Speaker 3: You just stepped on an academic land mine. I don't 77 00:04:36,200 --> 00:04:39,760 Speaker 3: know if we want to go there. In nineteen sixty one, 78 00:04:40,080 --> 00:04:42,200 Speaker 3: the issue of whether there's an ideal pay at ratio 79 00:04:42,320 --> 00:04:46,919 Speaker 3: was raised and answered definitively. So the answer is no, 80 00:04:47,880 --> 00:04:51,600 Speaker 3: and I don't dispute that finding from nineteen sixty one, though, 81 00:04:51,720 --> 00:04:56,159 Speaker 3: much of my work is historically critical of academic finance, 82 00:04:56,200 --> 00:04:59,520 Speaker 3: of modern academic finance, some would say very critical. But 83 00:05:00,800 --> 00:05:02,600 Speaker 3: in the book I do argue that listen, I don't 84 00:05:02,640 --> 00:05:03,920 Speaker 3: know what the payout ratio is going to be in 85 00:05:03,960 --> 00:05:05,480 Speaker 3: the yield of the S and P five hundred is 86 00:05:05,520 --> 00:05:07,040 Speaker 3: going to be. I just know it's going to be 87 00:05:07,120 --> 00:05:09,440 Speaker 3: higher than it is now. We've had a thirty year 88 00:05:09,520 --> 00:05:15,800 Speaker 3: anomaly of declining yields, declining payout ratios, rising buybacks, and 89 00:05:15,880 --> 00:05:19,240 Speaker 3: other phenomena which I think, as the book articulates, kind 90 00:05:19,240 --> 00:05:21,560 Speaker 3: of came to an end starting in twenty twenty. And 91 00:05:21,839 --> 00:05:23,440 Speaker 3: is the yield of the S and P five hundred ready? 92 00:05:23,440 --> 00:05:25,479 Speaker 3: Is everyone sitting down you know? Is it going to 93 00:05:25,480 --> 00:05:28,280 Speaker 3: be three percent, four percent, four and a half. I 94 00:05:28,600 --> 00:05:31,720 Speaker 3: don't know. I think it's going to normalize in that direction. 95 00:05:31,800 --> 00:05:35,440 Speaker 2: If Tim if Lucas was here from Apple, he'd say, 96 00:05:35,680 --> 00:05:38,080 Speaker 2: all of our research as shareholders don't want to big 97 00:05:38,160 --> 00:05:40,960 Speaker 2: text on that four percent SPX dividend. 98 00:05:41,040 --> 00:05:42,760 Speaker 4: So what do you say to that, Daniel about that 99 00:05:42,800 --> 00:05:45,200 Speaker 4: the tax implications here? What's the Kundter argument? I guess 100 00:05:45,200 --> 00:05:45,599 Speaker 4: if there is one? 101 00:05:45,680 --> 00:05:49,760 Speaker 3: Yeah, the only difference right now, remember long term capital 102 00:05:49,800 --> 00:05:53,520 Speaker 3: gains and qualified dividends attacked at the same rate. So 103 00:05:53,720 --> 00:05:59,360 Speaker 3: from a purely investment perspective, or there's no penalty. When 104 00:05:59,560 --> 00:06:03,080 Speaker 3: modern academic finance and when that Apple executive was being trained, 105 00:06:03,320 --> 00:06:06,479 Speaker 3: tax rates were higher on dividends than they were on 106 00:06:06,520 --> 00:06:08,320 Speaker 3: capital gains. That's no longer case, and it hasn't been 107 00:06:08,520 --> 00:06:10,760 Speaker 3: since two thousand and three. The only difference is timing 108 00:06:11,960 --> 00:06:15,440 Speaker 3: so that a investor can time a capital gain or 109 00:06:15,520 --> 00:06:19,119 Speaker 3: capital loss. Again, investors can harvest capital losses as easily 110 00:06:19,120 --> 00:06:21,440 Speaker 3: as they can harvest capital gains, but investor can time that. 111 00:06:21,440 --> 00:06:25,080 Speaker 3: Where's a dividend occurs more regularly. My answer, and it's 112 00:06:25,080 --> 00:06:26,320 Speaker 3: really the theme of the book, and it's in the 113 00:06:26,360 --> 00:06:30,919 Speaker 3: title and you caught it, Tom, is a harvested capital 114 00:06:30,920 --> 00:06:34,880 Speaker 3: gain is a market outcome for which many many people, 115 00:06:35,040 --> 00:06:36,880 Speaker 3: when the market moves up into the right, are very 116 00:06:36,880 --> 00:06:41,839 Speaker 3: happy with. A dividend payment is a business outcome. You 117 00:06:41,880 --> 00:06:43,600 Speaker 3: can choose to play the market, or you can choose 118 00:06:43,640 --> 00:06:45,600 Speaker 3: to be a business owner. Now there are a lot 119 00:06:45,680 --> 00:06:48,840 Speaker 3: of young people in particular who don't care about being 120 00:06:48,839 --> 00:06:50,800 Speaker 3: a business owner. They just think of stocks by low, 121 00:06:50,880 --> 00:06:52,960 Speaker 3: sell high repeat frequently. It goes up to the right 122 00:06:53,400 --> 00:06:56,240 Speaker 3: and that's fine. There's nothing wrong with them that kind 123 00:06:56,240 --> 00:06:57,680 Speaker 3: of a client tele effect. There are a lot of 124 00:06:57,680 --> 00:07:00,280 Speaker 3: people very satisfied with that. I'm just pointing out, if 125 00:07:00,279 --> 00:07:05,920 Speaker 3: you bring a business owner sensibility to stocks the same 126 00:07:05,920 --> 00:07:08,240 Speaker 3: way you might turn real estate or a private enterprise, 127 00:07:08,680 --> 00:07:12,160 Speaker 3: you view a harvesting capital gain as something dramatically different 128 00:07:12,280 --> 00:07:13,280 Speaker 3: from a dividend pact. 129 00:07:13,360 --> 00:07:15,920 Speaker 2: I got one minute left. Daniel Paris is Zuckerberg the 130 00:07:16,000 --> 00:07:19,320 Speaker 2: executive of the year because he turned here here and 131 00:07:19,520 --> 00:07:21,680 Speaker 2: just simply said, no, we're going to change this. We're 132 00:07:21,680 --> 00:07:24,480 Speaker 2: going to do this like a conservative, measured company. 133 00:07:25,320 --> 00:07:26,960 Speaker 3: I just think he's a quick reader. So the book 134 00:07:27,000 --> 00:07:30,120 Speaker 3: came out one day and the very next day, and 135 00:07:30,240 --> 00:07:32,520 Speaker 3: that it made its decision. So I applaud him for 136 00:07:32,880 --> 00:07:34,600 Speaker 3: reading getting a copy and reading it quickly. 137 00:07:34,880 --> 00:07:37,320 Speaker 2: Daniel, thank you so much. He's the federator Mez. But 138 00:07:37,360 --> 00:07:40,160 Speaker 2: I just can't say enough about the history of this, folks. 139 00:07:40,160 --> 00:07:44,320 Speaker 2: This goes back to my grandparents. It's that strong. It's 140 00:07:44,360 --> 00:07:48,800 Speaker 2: got eminem in it, Mertin and Medigliani, all sorts of theories. 141 00:07:48,920 --> 00:07:51,760 Speaker 2: V body, if you're listening up, it be you this morning, 142 00:07:51,800 --> 00:07:53,880 Speaker 2: your great corporate team. This is a book for you 143 00:07:54,280 --> 00:07:57,800 Speaker 2: The Ownership Dividend. It's a pro book, folks. I'm not 144 00:07:57,800 --> 00:08:00,960 Speaker 2: going to kid you. Lots of footnotes, lots of what 145 00:08:01,000 --> 00:08:05,040 Speaker 2: you'd expect in an academics treaties from the PhD historian 146 00:08:05,200 --> 00:08:09,760 Speaker 2: Daniel Parris. The Ownership Dividend. The coming paradigm shift is 147 00:08:09,800 --> 00:08:13,040 Speaker 2: the stock market catches up with Paul Sweeney. That's a 148 00:08:13,040 --> 00:08:14,280 Speaker 2: good Paul, take that book. 149 00:08:14,320 --> 00:08:14,720 Speaker 5: Take it. 150 00:08:14,720 --> 00:08:16,600 Speaker 4: I'm going to give it to mister Tim Cook that 151 00:08:16,720 --> 00:08:27,440 Speaker 4: I see him this spring on the campus of university. 152 00:08:28,880 --> 00:08:32,080 Speaker 2: This is the conversation of the day, flat out. I'm gonnay. 153 00:08:32,080 --> 00:08:35,079 Speaker 2: We're gonna talk to Sarah a rap report about Queen 154 00:08:35,520 --> 00:08:38,880 Speaker 2: in the next hour. This is, without question, the conversation 155 00:08:39,080 --> 00:08:43,960 Speaker 2: of the day. Patrick Armstrong believes in the frenzy. He says, 156 00:08:43,960 --> 00:08:47,000 Speaker 2: it's not a frenzy, and you gotta own Amazon the 157 00:08:47,080 --> 00:08:50,280 Speaker 2: rest and what date matters. Here's the date that matters, 158 00:08:50,320 --> 00:08:54,320 Speaker 2: market on your surveillance calendar, May twenty fourth in Nvidia 159 00:08:54,440 --> 00:08:58,480 Speaker 2: reports Again, Patrick Armstrong, why do you own in Vidia? 160 00:09:00,400 --> 00:09:03,400 Speaker 1: Well, it's obviously a great company. It's the epicenter of 161 00:09:03,440 --> 00:09:07,880 Speaker 1: everything that's AI, and it's not trading at a ridiculous multiple. 162 00:09:08,440 --> 00:09:11,920 Speaker 1: Stock is up four hundred percent over the last fourteen months. 163 00:09:11,960 --> 00:09:14,360 Speaker 1: Earnings are up over one thousand percent over that time. 164 00:09:14,400 --> 00:09:17,679 Speaker 1: It's a thirty two times twelve month forward earnings twenty 165 00:09:17,679 --> 00:09:21,920 Speaker 1: six times twenty four months forward. So elevated multiple great company, 166 00:09:21,960 --> 00:09:25,800 Speaker 1: incredible margins, and it can produce as much as there 167 00:09:25,840 --> 00:09:28,200 Speaker 1: is demand for his product. So I love companies with 168 00:09:28,240 --> 00:09:30,920 Speaker 1: pricing power that basically set the price and people are 169 00:09:30,920 --> 00:09:33,840 Speaker 1: clamoring to get whatever they can from whatever it produces. 170 00:09:33,600 --> 00:09:36,000 Speaker 2: Over the weekend. And thanks to shout out to zero head, 171 00:09:36,040 --> 00:09:39,280 Speaker 2: he does a great service on this. They have the 172 00:09:39,360 --> 00:09:44,960 Speaker 2: Golden Sax Hedge fund by side long only long short report. 173 00:09:45,080 --> 00:09:49,120 Speaker 2: It's absolutely spectacular. Thank you for that service. And Patrick, 174 00:09:49,160 --> 00:09:53,120 Speaker 2: it's simple. In the last x number of days institutions 175 00:09:53,120 --> 00:09:57,640 Speaker 2: have sold what Patrick Armstrong owns in retail is bought 176 00:09:57,720 --> 00:10:01,320 Speaker 2: what Patrick arms Strong owns. What's that signal to you. 177 00:10:02,800 --> 00:10:05,120 Speaker 1: I don't know if it's a strong signal either way, 178 00:10:05,240 --> 00:10:09,160 Speaker 1: but you always have an instinct to take profits on 179 00:10:09,240 --> 00:10:12,240 Speaker 1: something that's gone up so much. But I just look 180 00:10:12,280 --> 00:10:16,480 Speaker 1: at the valuations versus the price, and valuations aren't rising. 181 00:10:16,640 --> 00:10:19,200 Speaker 1: It's the price that's rising for in video, So I'm 182 00:10:19,280 --> 00:10:21,560 Speaker 1: sticking with it right now. You've got the earnings in 183 00:10:21,600 --> 00:10:23,560 Speaker 1: May that you just reference. But in March, the middle 184 00:10:23,600 --> 00:10:26,559 Speaker 1: of March, they're coming out with their next generation chip. 185 00:10:26,679 --> 00:10:28,840 Speaker 1: What that's capable of as well, And I think that's 186 00:10:28,840 --> 00:10:30,800 Speaker 1: going to be a really important date that you don't 187 00:10:30,800 --> 00:10:33,920 Speaker 1: schedule that ahead after incredible blowout earnings unless you know 188 00:10:34,400 --> 00:10:37,040 Speaker 1: you're going to really shop the market again and just 189 00:10:37,120 --> 00:10:40,560 Speaker 1: basically create that momentum that everyone's clamoring for on the 190 00:10:40,559 --> 00:10:45,679 Speaker 1: retail side of things. But it's not two thousand type bubble, right, 191 00:10:45,800 --> 00:10:50,199 Speaker 1: it's maybe the estimates are too high. That's possibility basically 192 00:10:50,240 --> 00:10:52,400 Speaker 1: if another company comes in with a competing chip and 193 00:10:52,440 --> 00:10:54,480 Speaker 1: then in video all of a sudden has to compete 194 00:10:54,480 --> 00:10:56,760 Speaker 1: on price. They don't have to compete on price right now. 195 00:10:56,800 --> 00:10:59,960 Speaker 1: But it's not a multiple story. It may be overall 196 00:11:00,080 --> 00:11:03,240 Speaker 1: domestic earning macimates, but I actually believe those area. 197 00:11:03,640 --> 00:11:06,520 Speaker 2: Listening to Patrick Armstrong Neil Datta at run Back, thank 198 00:11:06,520 --> 00:11:09,319 Speaker 2: you Neil for getting off the Delta airplane, and Neil 199 00:11:09,480 --> 00:11:12,680 Speaker 2: says it's simple consensus is wrong. He agrees with the 200 00:11:12,720 --> 00:11:15,000 Speaker 2: optimistic tone that we are from mister Armstrong. 201 00:11:15,320 --> 00:11:17,640 Speaker 4: So Patrick, in addition to Nvidia, how do you feel 202 00:11:17,640 --> 00:11:21,319 Speaker 4: about those other big cap magnificent five six names. You know, 203 00:11:21,400 --> 00:11:24,559 Speaker 4: whether it's the Amazon's, the Googles and metas, do you 204 00:11:24,640 --> 00:11:27,120 Speaker 4: have a similar level of conviction to remain long those 205 00:11:27,200 --> 00:11:27,760 Speaker 4: names here? 206 00:11:28,480 --> 00:11:31,079 Speaker 1: So I own Google, I own Meta And those are 207 00:11:31,160 --> 00:11:34,240 Speaker 1: companies that aren't trading at demanding multiples. They're trading at 208 00:11:34,240 --> 00:11:37,240 Speaker 1: discounts to the Nasdaq, trading almost in line with the SMP. 209 00:11:37,440 --> 00:11:40,240 Speaker 1: But they're growing at a faster rate. They're buying back 210 00:11:40,280 --> 00:11:42,480 Speaker 1: shares at a faster rates, still producing a lot of 211 00:11:42,520 --> 00:11:45,640 Speaker 1: free cash flow. You've got a lot of advertising risk 212 00:11:45,720 --> 00:11:49,200 Speaker 1: with that, but you've got an incredibly resilient consumer, and 213 00:11:49,240 --> 00:11:51,840 Speaker 1: I think advertising is going to continue to drive revenue 214 00:11:51,840 --> 00:11:53,800 Speaker 1: growth to those companies. So I owned both of those. 215 00:11:54,000 --> 00:11:56,520 Speaker 1: I own Amazon as well, which is again a play 216 00:11:56,600 --> 00:11:58,640 Speaker 1: on the US consumer that's just very strong. 217 00:11:58,840 --> 00:12:00,640 Speaker 3: All right, So wow, I know who? 218 00:12:01,400 --> 00:12:03,880 Speaker 4: Yeah, yeah, doubt you're exactly right town doubt component today. 219 00:12:04,120 --> 00:12:06,080 Speaker 4: All right, So Patrick, you and Tom you're both long 220 00:12:06,120 --> 00:12:08,000 Speaker 4: the big tech names that have been working. Both of 221 00:12:08,040 --> 00:12:10,280 Speaker 4: you guys are just clipping coupons. The rest of us 222 00:12:10,320 --> 00:12:12,960 Speaker 4: are out there working for our money here. How about energy? 223 00:12:13,360 --> 00:12:15,440 Speaker 4: What do you feel about ENERGYE? Looking at WTI crude 224 00:12:15,440 --> 00:12:17,599 Speaker 4: here at seventy six bucks a barrel. How do you 225 00:12:17,640 --> 00:12:18,640 Speaker 4: think about the energy space. 226 00:12:19,520 --> 00:12:21,920 Speaker 1: I like the oil and gas companies for a number 227 00:12:21,920 --> 00:12:24,440 Speaker 1: of reasons. I think you get an in built geopolitical 228 00:12:24,480 --> 00:12:26,959 Speaker 1: hedge against unfortunate events that might be happening in the 229 00:12:27,000 --> 00:12:29,959 Speaker 1: Middle East or with Russia, or the war expanding in 230 00:12:30,000 --> 00:12:32,360 Speaker 1: the Middle East, where more sanctions come on around things 231 00:12:32,400 --> 00:12:34,960 Speaker 1: like that. But if you look at the future strip, 232 00:12:35,960 --> 00:12:38,400 Speaker 1: bought prices for WTI are the same as they were 233 00:12:38,440 --> 00:12:40,880 Speaker 1: six months ago and twelve months ago, but the longer 234 00:12:40,960 --> 00:12:43,360 Speaker 1: dated contracts are up to thirty percent over that time. 235 00:12:43,400 --> 00:12:45,560 Speaker 1: So oil and gas stocks are flat over the last 236 00:12:45,559 --> 00:12:49,080 Speaker 1: twelve months, but they're implied profitability based on the future 237 00:12:49,120 --> 00:12:51,560 Speaker 1: strip going out the next ten years. That part of 238 00:12:51,559 --> 00:12:53,440 Speaker 1: the curve is really jumped higher, and I think the 239 00:12:53,480 --> 00:12:57,640 Speaker 1: companies aren't really reflecting that higher for longer food prices, 240 00:12:57,679 --> 00:13:00,200 Speaker 1: and I do think they'll start to move that way. 241 00:13:00,480 --> 00:13:03,600 Speaker 4: So it's interesting here because we're looking at the supply 242 00:13:03,640 --> 00:13:07,560 Speaker 4: and demand out there for energy, and again I'm not 243 00:13:07,559 --> 00:13:10,080 Speaker 4: sure what's driving this thing is it's the supply side 244 00:13:10,080 --> 00:13:11,760 Speaker 4: of the equation of the demand side of the equation, 245 00:13:12,520 --> 00:13:15,840 Speaker 4: But I guess if you feel like the economies in 246 00:13:15,880 --> 00:13:18,080 Speaker 4: the US are going to remain strong, that would suggest 247 00:13:18,160 --> 00:13:19,960 Speaker 4: maybe higher oil. Is that how you think about it. 248 00:13:21,040 --> 00:13:23,160 Speaker 1: I'm not sure if it's going to be higher, But 249 00:13:23,480 --> 00:13:25,760 Speaker 1: the bolt case on oil and gas companies don't need 250 00:13:25,840 --> 00:13:28,880 Speaker 1: higher oil. They need oil to maintain these prices because 251 00:13:28,960 --> 00:13:31,920 Speaker 1: right now, the cash flows they're producing are incredible, and 252 00:13:32,000 --> 00:13:33,880 Speaker 1: they've paid off a big chunk of debt over the 253 00:13:33,960 --> 00:13:37,720 Speaker 1: last twelve months. They've bought back shares, paying dividends as well, 254 00:13:37,720 --> 00:13:40,760 Speaker 1: and all of those things are boring compared to the 255 00:13:40,800 --> 00:13:43,640 Speaker 1: technology companies. But the market is going to re rate 256 00:13:44,240 --> 00:13:48,079 Speaker 1: as you see persistently high food prices based on going 257 00:13:48,120 --> 00:13:51,920 Speaker 1: demand and supply not quite keeping up. Basically, there's not 258 00:13:51,960 --> 00:13:55,440 Speaker 1: been enough capex to probably deliver the new supply that's 259 00:13:55,480 --> 00:13:57,120 Speaker 1: going to be needed to meet demand. 260 00:13:57,640 --> 00:14:01,960 Speaker 4: What shorts have been working for you, guys, Patrick, So you. 261 00:14:02,000 --> 00:14:06,000 Speaker 1: Talked about the auto companies, we're short Rivian short forward 262 00:14:07,080 --> 00:14:10,800 Speaker 1: and yeah, I love companies that have pricing power. I 263 00:14:10,840 --> 00:14:14,600 Speaker 1: hate companies that are market takers of price. And unfortunately, 264 00:14:14,600 --> 00:14:17,760 Speaker 1: if you're an EV producer, there's still demand for what 265 00:14:17,800 --> 00:14:20,480 Speaker 1: you're producing, but you've really got to compete on the truck. 266 00:14:20,560 --> 00:14:25,640 Speaker 2: Looks really cool though, product, but I've yet to see 267 00:14:25,680 --> 00:14:29,680 Speaker 2: a positive review. Yeah seriously, Yeah, I mean Lisa took 268 00:14:29,680 --> 00:14:32,040 Speaker 2: one for driving this week. Lisa, what do you think 269 00:14:32,040 --> 00:14:35,640 Speaker 2: of the Tesla? The car? Yeah? 270 00:14:35,880 --> 00:14:37,720 Speaker 5: Would you feel like you're out of a version of 271 00:14:37,760 --> 00:14:38,440 Speaker 5: Mad Max? 272 00:14:38,920 --> 00:14:41,360 Speaker 2: You know we're not, Patrick, We're just going to Lisa 273 00:14:41,400 --> 00:14:44,280 Speaker 2: to talk, you know, cyber truck and all that. Patrick, 274 00:14:44,320 --> 00:14:46,200 Speaker 2: I want to ask your pro question. You got your 275 00:14:46,240 --> 00:14:49,680 Speaker 2: own PLAAMI Capital. Now, what would you do as a 276 00:14:49,720 --> 00:14:54,680 Speaker 2: portfolio manager if they said, Patrick, you own thirteen percent 277 00:14:54,720 --> 00:14:57,880 Speaker 2: in Meta, you own ten percent in Amazon, you got 278 00:14:57,920 --> 00:15:01,200 Speaker 2: to lighten up based on prospectus. How would you respond 279 00:15:01,200 --> 00:15:01,520 Speaker 2: to that? 280 00:15:02,960 --> 00:15:05,600 Speaker 1: Well, in our useage funds, we do have those restrictions. 281 00:15:05,600 --> 00:15:07,560 Speaker 1: In Europe, there's a five to ten forty rule, meaning 282 00:15:07,600 --> 00:15:09,720 Speaker 1: you can only have ten percent in one position. But 283 00:15:10,480 --> 00:15:13,440 Speaker 1: with global mandates that's more than enough for me. Anyway, 284 00:15:13,440 --> 00:15:15,960 Speaker 1: in a US centric mandate, you might start to feel 285 00:15:15,960 --> 00:15:18,760 Speaker 1: constrained by those kind of things. I'm happy to run 286 00:15:18,760 --> 00:15:20,960 Speaker 1: in a global mandate less than ten percent of those 287 00:15:21,000 --> 00:15:23,120 Speaker 1: kind of stocks. So I don't want my portfolios to 288 00:15:23,160 --> 00:15:26,760 Speaker 1: be one stop. That's a client can do that themselves, 289 00:15:26,840 --> 00:15:30,480 Speaker 1: but we manage a thirty stock portfolio, so that's not 290 00:15:30,560 --> 00:15:32,400 Speaker 1: a constraint for me really that I worry about. 291 00:15:33,160 --> 00:15:36,680 Speaker 4: So Patrick, what's your aside from the big tech here? 292 00:15:36,880 --> 00:15:39,560 Speaker 4: What are there any themes that you're playing here in 293 00:15:39,600 --> 00:15:41,480 Speaker 4: twenty twenty four and beyond. 294 00:15:42,360 --> 00:15:46,320 Speaker 1: So we like the big cap tech, We like Energy, Novo, 295 00:15:46,360 --> 00:15:49,360 Speaker 1: nordist Eli, Lilly. Those are the other market darlings that 296 00:15:49,400 --> 00:15:50,320 Speaker 1: I still think. 297 00:15:50,200 --> 00:15:53,120 Speaker 4: Maybe Okay, So yeah, you're right, there are all the 298 00:15:53,120 --> 00:15:55,240 Speaker 4: good spots there, tech and weight loss. 299 00:15:55,600 --> 00:15:58,400 Speaker 2: I can't say enough the value of talking to Patrick Arnstein. 300 00:15:58,520 --> 00:16:01,800 Speaker 2: Look for his work been quoted in essays in the 301 00:16:01,800 --> 00:16:05,320 Speaker 2: Financial Times as well. Patrick Armstrong, thank you so much. 302 00:16:05,360 --> 00:16:09,120 Speaker 2: Form Plurimi Wealth their chief investment. 303 00:16:09,240 --> 00:16:17,440 Speaker 4: Officers Society General great offices in Paris. Man I was there. 304 00:16:17,600 --> 00:16:20,880 Speaker 4: I love those offices there. Subajo Rajapa joints that she's 305 00:16:20,880 --> 00:16:24,000 Speaker 4: head of US rate strategy for Society General or is 306 00:16:24,040 --> 00:16:27,160 Speaker 4: the old school we call it sac gen Sbajo. What 307 00:16:27,320 --> 00:16:29,800 Speaker 4: is our Federal Reserve going to do next? Because we've 308 00:16:29,800 --> 00:16:32,760 Speaker 4: had some guests come in here the past couple of weeks, 309 00:16:32,800 --> 00:16:36,440 Speaker 4: I would say that, say you have in your scenario analysis, 310 00:16:36,560 --> 00:16:39,520 Speaker 4: you have to have a rate hike in your scenario analysis, 311 00:16:39,600 --> 00:16:41,920 Speaker 4: I'm like, what a rate hike? I'm just like, when 312 00:16:41,920 --> 00:16:44,160 Speaker 4: are they cutting and how fast can they cut? Is 313 00:16:44,200 --> 00:16:47,360 Speaker 4: there a scenario where maybe they think about pushing rates 314 00:16:47,400 --> 00:16:47,840 Speaker 4: up a little bit? 315 00:16:49,000 --> 00:16:51,640 Speaker 6: I don't see that scenario at least as of now. 316 00:16:52,160 --> 00:16:56,480 Speaker 6: Perhaps the off chance and we see a sharp prize 317 00:16:56,560 --> 00:17:01,280 Speaker 6: in geopolitical risks leading to supply chain destruct options and 318 00:17:01,400 --> 00:17:05,399 Speaker 6: the economy remaining resilient under the circumstances could argue for 319 00:17:05,480 --> 00:17:10,560 Speaker 6: a policy adjustment. But really, everything we've heard from our 320 00:17:11,240 --> 00:17:15,399 Speaker 6: FED speakers so far has been that yields have peaked, 321 00:17:15,920 --> 00:17:20,520 Speaker 6: so we're looking towards perhaps, you know, if anything, if 322 00:17:20,560 --> 00:17:23,080 Speaker 6: the economy remains strong and resilient, that they might that 323 00:17:23,160 --> 00:17:26,840 Speaker 6: they might cut rates later than the market expects, okay, 324 00:17:27,160 --> 00:17:30,920 Speaker 6: and less than the market expects, but not necessarily hike 325 00:17:31,000 --> 00:17:32,480 Speaker 6: from here on for. 326 00:17:32,480 --> 00:17:34,680 Speaker 4: Better or worse. It's a presidential year. How does that 327 00:17:34,760 --> 00:17:38,000 Speaker 4: factor into kind of the Fed's behavior. Do you think 328 00:17:38,160 --> 00:17:40,520 Speaker 4: a lot of folks are saying they probably got to 329 00:17:40,560 --> 00:17:43,160 Speaker 4: do something no later than June because you don't want 330 00:17:43,200 --> 00:17:46,000 Speaker 4: it to feel like you're starting a rate cutting cycle 331 00:17:46,160 --> 00:17:47,480 Speaker 4: in an election period. 332 00:17:47,520 --> 00:17:49,120 Speaker 5: I guess so. 333 00:17:49,080 --> 00:17:52,480 Speaker 6: Paul has told us that they're not, you know, partisan 334 00:17:52,560 --> 00:17:55,400 Speaker 6: in any way. They're not focused on the political scenario, 335 00:17:55,400 --> 00:17:58,760 Speaker 6: and they tend to do what's what's right for the economy, 336 00:17:58,760 --> 00:18:01,400 Speaker 6: and I do believe them in that. But that said, 337 00:18:01,440 --> 00:18:05,680 Speaker 6: there is no precedence for the FED cutting rates or 338 00:18:05,680 --> 00:18:10,000 Speaker 6: adjusting policy just before an election. So in some respects 339 00:18:10,000 --> 00:18:13,159 Speaker 6: that argues for perhaps a May or June rate cut 340 00:18:13,480 --> 00:18:16,000 Speaker 6: kind of get that process started, even though if they 341 00:18:16,040 --> 00:18:20,040 Speaker 6: don't deliver on subsequent meetings, I think that they might 342 00:18:20,080 --> 00:18:23,239 Speaker 6: space outcuts, but I don't think they take it all 343 00:18:23,280 --> 00:18:25,879 Speaker 6: the way to November to cut rates. 344 00:18:26,400 --> 00:18:29,960 Speaker 2: I want you to overlay your world into the equity 345 00:18:30,040 --> 00:18:33,560 Speaker 2: melt up we're seeing right now, largely from Globin Sachs 346 00:18:33,640 --> 00:18:35,439 Speaker 2: was just done, and he made very clear it's an 347 00:18:35,440 --> 00:18:40,720 Speaker 2: economics call, a productivity call, better economy up, everything goes. 348 00:18:40,840 --> 00:18:43,719 Speaker 2: Do you buy that? How do you link fixed income 349 00:18:43,880 --> 00:18:45,959 Speaker 2: into the equity melt up we're living? 350 00:18:47,080 --> 00:18:49,240 Speaker 6: You know, the equity melt up in the strength of 351 00:18:49,280 --> 00:18:52,200 Speaker 6: the economy is definitely caught everybody by surprise. We have 352 00:18:52,600 --> 00:18:55,919 Speaker 6: very strong growth momentum going into the second half of 353 00:18:56,040 --> 00:18:59,199 Speaker 6: last year, and the momentum in the first quarter is 354 00:18:59,240 --> 00:19:00,440 Speaker 6: also very. 355 00:19:00,840 --> 00:19:02,600 Speaker 2: To get ahead of this because the time because Paul 356 00:19:02,600 --> 00:19:06,000 Speaker 2: wants to jump in here, what's it mean in the 357 00:19:06,040 --> 00:19:08,840 Speaker 2: fixed income space? What does CFOs do? Are we going 358 00:19:08,880 --> 00:19:12,200 Speaker 2: to have an issue ince frenzy? Because times are good. 359 00:19:12,840 --> 00:19:15,240 Speaker 6: We've already seen a little bit of an issuance frenzy 360 00:19:15,280 --> 00:19:17,800 Speaker 6: in the first month of the year, and that's carrying 361 00:19:17,840 --> 00:19:23,120 Speaker 6: over into February with tenny yields coming from say five 362 00:19:23,160 --> 00:19:26,320 Speaker 6: percent last year to around four and a quarter percent now. 363 00:19:26,920 --> 00:19:31,600 Speaker 6: But broadly speaking, it is a buyer's market in bonds 364 00:19:31,680 --> 00:19:36,879 Speaker 6: because yields are very attractive, whether it be in investment 365 00:19:36,960 --> 00:19:40,719 Speaker 6: grade or high yield, as well as in treasures. I mean, 366 00:19:40,760 --> 00:19:44,040 Speaker 6: we get two year and five year bonds being issued, 367 00:19:44,920 --> 00:19:46,960 Speaker 6: you know, this week, and you're going to see a 368 00:19:47,000 --> 00:19:50,479 Speaker 6: pretty decent amount of demand from investors because of the 369 00:19:50,640 --> 00:19:53,280 Speaker 6: higher interest rates that you can and yield that you 370 00:19:53,320 --> 00:19:53,920 Speaker 6: can pick up. 371 00:19:54,720 --> 00:19:57,840 Speaker 4: So I'm looking at a ten year like four point 372 00:19:57,920 --> 00:20:02,280 Speaker 4: two four percent here. Are we going meaningfully higher here? 373 00:20:02,400 --> 00:20:04,240 Speaker 4: Or can are Do you expect rates in the back 374 00:20:04,280 --> 00:20:06,640 Speaker 4: half of this year to come down as we look 375 00:20:06,640 --> 00:20:08,440 Speaker 4: at our yield curve, I. 376 00:20:08,359 --> 00:20:11,160 Speaker 6: Do expect rates to come down gradually during the course 377 00:20:11,200 --> 00:20:14,120 Speaker 6: of this year. I think the tenure yields around four 378 00:20:14,119 --> 00:20:16,720 Speaker 6: and a quarter percent is a buy. In my view, 379 00:20:17,480 --> 00:20:20,680 Speaker 6: investors are going to be looking at you know, two 380 00:20:20,720 --> 00:20:24,360 Speaker 6: years around four seventy five and tens around for twenty 381 00:20:24,400 --> 00:20:28,840 Speaker 6: five as a buying opportunity. And every time you know, 382 00:20:28,920 --> 00:20:31,800 Speaker 6: bonds sell off, I see the buye the dip mentality 383 00:20:31,840 --> 00:20:35,240 Speaker 6: come in and put a cab on how high yields 384 00:20:35,240 --> 00:20:38,240 Speaker 6: can rise. So that's our base case, and I think 385 00:20:38,240 --> 00:20:41,879 Speaker 6: we think teny yields will probably decline to around you know, 386 00:20:41,920 --> 00:20:45,200 Speaker 6: three seventy five sometime in the middle of this year, 387 00:20:45,640 --> 00:20:48,200 Speaker 6: and then perhaps start rising towards the end of the year. 388 00:20:48,240 --> 00:20:50,399 Speaker 2: Again, what does the tenure really you'ld do with a 389 00:20:50,440 --> 00:20:53,760 Speaker 2: three seventy five nominal yield? You take the nominal yield, folks, 390 00:20:54,119 --> 00:20:58,119 Speaker 2: you subtract out Sivadra's best guess on inflation, and that 391 00:20:58,240 --> 00:21:02,719 Speaker 2: gives you the residualtion adjusted yield. What's that number? Can 392 00:21:02,760 --> 00:21:05,120 Speaker 2: you get down to two point zero zero? One point 393 00:21:05,240 --> 00:21:05,760 Speaker 2: zero zero? 394 00:21:06,320 --> 00:21:10,200 Speaker 6: So tenre yields around ten real yields I should say 395 00:21:10,240 --> 00:21:13,840 Speaker 6: around two percent or higher is again a buying opportunity 396 00:21:13,840 --> 00:21:18,240 Speaker 6: over the long run, because inflation expectations aren't really moving 397 00:21:18,280 --> 00:21:21,920 Speaker 6: that much ten year break heavens have been anywhere between 398 00:21:22,400 --> 00:21:23,840 Speaker 6: two and two and a half percent. 399 00:21:24,000 --> 00:21:26,320 Speaker 2: So you have a three seventy five nominal. Right, you 400 00:21:26,440 --> 00:21:29,280 Speaker 2: just said that, where does the ten year real yield end? 401 00:21:30,440 --> 00:21:33,359 Speaker 6: It's going to probably be, you know, about two percent 402 00:21:33,440 --> 00:21:36,240 Speaker 6: lower from there, given that low one. 403 00:21:36,680 --> 00:21:39,359 Speaker 2: Yeah, this is really important, Paul, because you say to yourself, 404 00:21:39,359 --> 00:21:41,760 Speaker 2: how do you get a roaring twenties like your Denny's 405 00:21:41,920 --> 00:21:44,800 Speaker 2: talking about. That's precisely how you get there. 406 00:21:45,000 --> 00:21:48,600 Speaker 4: Yep, absolutely, So what is my what is my feeder 407 00:21:48,680 --> 00:21:50,800 Speaker 4: reserve doing here? With its balance sheet? Are they still 408 00:21:50,840 --> 00:21:54,639 Speaker 4: tightening here? I don't hear as much about that these days. 409 00:21:54,960 --> 00:21:55,680 Speaker 5: So I think the. 410 00:21:55,600 --> 00:21:57,920 Speaker 6: Fed is going to want to continue to run off 411 00:21:57,920 --> 00:21:59,040 Speaker 6: its balance sheet. 412 00:21:58,960 --> 00:22:01,600 Speaker 4: Is like sixty what is it, sixty billion a month 413 00:22:01,680 --> 00:22:02,040 Speaker 4: or something? 414 00:22:02,080 --> 00:22:05,800 Speaker 6: Sixty billion? It's the runoffs are capped at sixty billion 415 00:22:05,800 --> 00:22:09,600 Speaker 6: for treasuries, and I think that they're probably going to 416 00:22:09,720 --> 00:22:13,040 Speaker 6: lower that cap sometime in the second half from sixty 417 00:22:13,080 --> 00:22:16,960 Speaker 6: billion to thirty billion. But I think that they're going 418 00:22:17,000 --> 00:22:19,720 Speaker 6: to want to continue to run off the balance sheet 419 00:22:20,040 --> 00:22:22,160 Speaker 6: for the remainder of the year, perhaps into the early 420 00:22:22,200 --> 00:22:24,639 Speaker 6: part of twenty twenty five and That's really where we 421 00:22:24,640 --> 00:22:27,159 Speaker 6: have a little bit of an outer consensus call because 422 00:22:27,520 --> 00:22:30,800 Speaker 6: the FED, I believe, is going to try to reduce 423 00:22:30,840 --> 00:22:34,400 Speaker 6: its balance sheet as it's cutting rates, which hasn't done 424 00:22:34,400 --> 00:22:36,960 Speaker 6: in the past, because they want to right size the 425 00:22:37,000 --> 00:22:39,680 Speaker 6: balance sheet and get that liquidity or the access liquidity 426 00:22:40,160 --> 00:22:43,880 Speaker 6: in the system out of the system as they're unwinding 427 00:22:43,920 --> 00:22:44,639 Speaker 6: their balance sheet. 428 00:22:45,280 --> 00:22:47,720 Speaker 4: So, I mean, a lot of folks feel like the 429 00:22:47,760 --> 00:22:50,600 Speaker 4: Federal Reserve is already late to the game here. They 430 00:22:50,640 --> 00:22:52,920 Speaker 4: should have been cutting rates like now, because if you 431 00:22:52,960 --> 00:22:55,800 Speaker 4: look at the real time data, inflation has in fact 432 00:22:55,960 --> 00:23:00,360 Speaker 4: been beaten and they should be cutting rates now. Think 433 00:23:00,720 --> 00:23:02,040 Speaker 4: what do you say to those folks. 434 00:23:02,760 --> 00:23:04,840 Speaker 6: The way I think the FED looks at the markets 435 00:23:04,880 --> 00:23:08,240 Speaker 6: is holistically. Inflation is one piece of the puzzle. Yes, 436 00:23:08,680 --> 00:23:10,560 Speaker 6: if you look at the three month and six month 437 00:23:10,640 --> 00:23:14,600 Speaker 6: annualized rates and core PC it's around two percent. But 438 00:23:14,640 --> 00:23:18,520 Speaker 6: growth has been extraordinarily resilient. They want to avoid what 439 00:23:18,640 --> 00:23:21,560 Speaker 6: happened in the seventies and eighties where they cut rates 440 00:23:21,560 --> 00:23:25,760 Speaker 6: prematurely and they saw a resurgence in inflation. So the 441 00:23:25,800 --> 00:23:28,920 Speaker 6: FED is very much focused on both the inflation dynamics 442 00:23:28,920 --> 00:23:31,280 Speaker 6: as well as the growth dynamics, and as long as 443 00:23:31,320 --> 00:23:34,680 Speaker 6: growth remains relatively strong, I think that they're going to 444 00:23:34,760 --> 00:23:35,880 Speaker 6: hold out on cutting rights. 445 00:23:35,960 --> 00:23:37,760 Speaker 4: Yes, all right, Sabaja, thank you so much for joining 446 00:23:37,800 --> 00:23:41,840 Speaker 4: Sabaja Djappa from Society General giving us our thoughts on 447 00:23:42,000 --> 00:23:43,280 Speaker 4: the rate outlooking. 448 00:23:53,040 --> 00:23:55,719 Speaker 2: You take a look at the front pages around the world, 449 00:23:56,240 --> 00:23:59,080 Speaker 2: a zillion stories. She was in here early. She got 450 00:23:59,200 --> 00:24:03,320 Speaker 2: unked six fifty or something that at the newspaper's lease. 451 00:24:03,400 --> 00:24:04,440 Speaker 2: So what do you got? 452 00:24:04,760 --> 00:24:07,040 Speaker 5: All right? The New York Times, this one really stood 453 00:24:07,040 --> 00:24:07,399 Speaker 5: out to me. 454 00:24:07,440 --> 00:24:10,520 Speaker 7: So they are reporting that unused money in college saving 455 00:24:11,200 --> 00:24:15,280 Speaker 7: accounts can now go toward your child's retirement. So this 456 00:24:15,400 --> 00:24:17,520 Speaker 7: really stood out to me because there are parents out 457 00:24:17,520 --> 00:24:19,600 Speaker 7: there who don't open the five twenty nine because they're 458 00:24:19,680 --> 00:24:21,879 Speaker 7: worried that what if my child changes his mind, you know, 459 00:24:21,920 --> 00:24:23,720 Speaker 7: he decides not to go to college. What if they 460 00:24:23,800 --> 00:24:25,600 Speaker 7: choose a more affordable school and you're left with this 461 00:24:25,680 --> 00:24:27,679 Speaker 7: chunk of money. What if they get a scholarship and 462 00:24:27,720 --> 00:24:29,359 Speaker 7: you're you're left with this chunk of money, what do 463 00:24:29,400 --> 00:24:33,240 Speaker 7: you do without without getting the taxes taken out of it? 464 00:24:33,280 --> 00:24:34,920 Speaker 7: Because you get that, you know, the taxes have to 465 00:24:34,920 --> 00:24:37,439 Speaker 7: get taken out of it. So that's what they're saying. 466 00:24:37,840 --> 00:24:40,240 Speaker 7: Sometimes you can pass it on to a sibling. For example, 467 00:24:40,440 --> 00:24:43,080 Speaker 7: I'm doing that with my son. He decided to stop 468 00:24:43,119 --> 00:24:45,000 Speaker 7: a little bit early, so that money is going. 469 00:24:44,880 --> 00:24:47,400 Speaker 5: To a sister. But some people don't hook up the siblings. 470 00:24:47,600 --> 00:24:49,919 Speaker 7: So this new rule, under a federal law, it allows 471 00:24:50,000 --> 00:24:52,880 Speaker 7: up to thirty five thousand dollars in a five twenty 472 00:24:52,920 --> 00:24:55,560 Speaker 7: nine account to be rolled over to a wroth retirement 473 00:24:55,600 --> 00:24:59,240 Speaker 7: account for the beneficiary if certain conditions are met. 474 00:24:59,280 --> 00:24:59,920 Speaker 5: One of them. 475 00:25:00,080 --> 00:25:02,399 Speaker 7: Conditions it has to be have have been open for 476 00:25:02,440 --> 00:25:05,159 Speaker 7: at least fifteen years that five twenty nine account. No 477 00:25:05,280 --> 00:25:08,280 Speaker 7: contributions or earnings from the past five years can be transferred. 478 00:25:08,320 --> 00:25:10,280 Speaker 7: I mean, there's a few other rules in there, but 479 00:25:10,760 --> 00:25:12,520 Speaker 7: it's opening a new conversation. 480 00:25:12,760 --> 00:25:15,879 Speaker 2: You know what, the conversation. We don't have time for 481 00:25:15,920 --> 00:25:17,960 Speaker 2: me to get up in a soapbox and go mental 482 00:25:18,000 --> 00:25:20,840 Speaker 2: about this. This is the problem with Arisa beec in 483 00:25:20,920 --> 00:25:25,320 Speaker 2: nineteen seventy four is the solution for legislators is complexity. 484 00:25:25,880 --> 00:25:29,040 Speaker 2: It's simple. You put money aside for your kid, you're 485 00:25:29,040 --> 00:25:31,200 Speaker 2: not going to use it, put it in the parent's 486 00:25:31,240 --> 00:25:34,680 Speaker 2: retirement account. Because the parents can't afford to retire because 487 00:25:34,680 --> 00:25:38,480 Speaker 2: they're raising the kids. That's a national issue that we 488 00:25:38,600 --> 00:25:41,160 Speaker 2: have right now. Paul can help me here. 489 00:25:41,240 --> 00:25:43,280 Speaker 4: Yeah, that's the first thing I thought. I was like, Hey, 490 00:25:43,280 --> 00:25:45,120 Speaker 4: if the kids aren't gonna use it, I'm taking it back. 491 00:25:45,240 --> 00:25:47,920 Speaker 5: Yeah, but I take it back after Now you got. 492 00:25:47,920 --> 00:25:53,040 Speaker 2: To okay, a rawth or whatever. But this Roger Ferguson 493 00:25:53,119 --> 00:25:56,120 Speaker 2: is expert on this at TIA Craft, the former vice chairman. 494 00:25:56,800 --> 00:25:59,760 Speaker 2: Make it simple, and I refuse to do that because 495 00:25:59,800 --> 00:26:02,200 Speaker 2: you're afraid Paul Sweeny's gonna get away with murder. 496 00:26:02,440 --> 00:26:04,119 Speaker 3: Yes, all there is exactly next. 497 00:26:04,480 --> 00:26:07,240 Speaker 5: Okay, this is about the housing market. 498 00:26:07,280 --> 00:26:09,000 Speaker 7: So a lot of renters, what they're starting to do 499 00:26:09,080 --> 00:26:12,000 Speaker 7: is they're realizing that they might not be able to 500 00:26:12,000 --> 00:26:13,760 Speaker 7: buy a house. So what they're doing is they're saying, 501 00:26:13,760 --> 00:26:15,720 Speaker 7: you know what, I'm gonna give up on my deposit 502 00:26:15,800 --> 00:26:18,639 Speaker 7: and I'm gonna make this apartment for me. I'm gonna 503 00:26:18,680 --> 00:26:21,600 Speaker 7: paint it, I'm gonna wallpaper it, I'm going to decorate it, 504 00:26:22,119 --> 00:26:24,600 Speaker 7: I'm gonna pay pictures and you know, nail things in 505 00:26:24,640 --> 00:26:27,880 Speaker 7: the wall, you know, and and forge over that deposit 506 00:26:27,960 --> 00:26:29,880 Speaker 7: because they just realized that it's. 507 00:26:29,720 --> 00:26:31,360 Speaker 5: It's not going to be a reality for them. They're 508 00:26:31,359 --> 00:26:32,760 Speaker 5: not gonna be able to get that house that they want. 509 00:26:32,800 --> 00:26:34,560 Speaker 4: Yeah, with interest rates where they are, I mean, you know, 510 00:26:34,600 --> 00:26:38,160 Speaker 4: and there's just no housing stock for sale. So even 511 00:26:38,200 --> 00:26:40,240 Speaker 4: if I wanted to go into something, there's there's not 512 00:26:40,280 --> 00:26:40,920 Speaker 4: a lot out there. 513 00:26:41,080 --> 00:26:43,760 Speaker 2: I just looked in Skinny Atlas. We had Eric Friedman 514 00:26:43,840 --> 00:26:45,840 Speaker 2: with us this morning, who lives in arguably the most 515 00:26:45,880 --> 00:26:50,200 Speaker 2: beautiful town in all of New York State, and there's 516 00:26:50,240 --> 00:26:51,080 Speaker 2: nothing for sale. 517 00:26:51,080 --> 00:26:51,240 Speaker 1: Now. 518 00:26:51,320 --> 00:26:53,000 Speaker 2: I mean I looked on really I looked on Zillo 519 00:26:53,119 --> 00:26:55,160 Speaker 2: to talk to Eric about it, and there was no 520 00:26:55,200 --> 00:26:58,800 Speaker 2: property to talk to him about, because literally, Paul, nothing's 521 00:26:58,800 --> 00:26:59,200 Speaker 2: for sale. 522 00:26:59,240 --> 00:27:01,840 Speaker 7: Well, were open houses this week and the town I 523 00:27:01,880 --> 00:27:03,800 Speaker 7: live in there were open houses this weekend and there 524 00:27:03,800 --> 00:27:04,520 Speaker 7: were lines. 525 00:27:04,680 --> 00:27:06,640 Speaker 5: We had to wait because we're renting right now. 526 00:27:06,800 --> 00:27:10,800 Speaker 7: We're waiting, and there were lines on the door of 527 00:27:10,840 --> 00:27:11,840 Speaker 7: these open houses. 528 00:27:12,000 --> 00:27:14,600 Speaker 5: So because there's whole few of them, Ye, it's it's true. 529 00:27:15,240 --> 00:27:15,560 Speaker 1: All right. 530 00:27:15,880 --> 00:27:19,200 Speaker 7: Let's say Apple they want to make more wearable devices 531 00:27:19,240 --> 00:27:20,520 Speaker 7: to attract customers. 532 00:27:20,520 --> 00:27:24,080 Speaker 5: Okay, so here we go. What do we go? This 533 00:27:24,760 --> 00:27:28,200 Speaker 5: is ay Mark German. Okay, he says wearable devices. 534 00:27:28,240 --> 00:27:29,960 Speaker 7: Okay, they want to you know, Apple wants to keep 535 00:27:30,000 --> 00:27:32,440 Speaker 7: their Apple family. They want to keep people locked in there. 536 00:27:32,800 --> 00:27:35,720 Speaker 7: So they're talking about a smart ring that could take 537 00:27:35,920 --> 00:27:40,040 Speaker 7: health tracking features from the Apple Watch and apps, apps 538 00:27:40,040 --> 00:27:41,840 Speaker 7: on the phone and phone calls and things like that. 539 00:27:42,520 --> 00:27:44,760 Speaker 7: So the smart ring why people will like it is 540 00:27:44,800 --> 00:27:47,000 Speaker 7: because sometimes you have the watch and you might not 541 00:27:47,200 --> 00:27:49,439 Speaker 7: want all the additional things. You know, you might just 542 00:27:49,520 --> 00:27:51,560 Speaker 7: want to know the health benefits, so you might not 543 00:27:51,600 --> 00:27:54,120 Speaker 7: want to watch. So maybe this ring could be something that. 544 00:27:54,080 --> 00:27:59,520 Speaker 5: You could use. No, okay, this one about this one 545 00:28:00,119 --> 00:28:01,040 Speaker 5: Art glasses. 546 00:28:01,280 --> 00:28:04,520 Speaker 7: It's something similar to new products from Meta Amazon. They 547 00:28:04,520 --> 00:28:06,639 Speaker 7: could provide audio so you don't have to do the 548 00:28:06,680 --> 00:28:07,720 Speaker 7: air pods. 549 00:28:07,359 --> 00:28:10,399 Speaker 4: Which they don't say which does Yes, that's my biggest 550 00:28:10,400 --> 00:28:11,840 Speaker 4: problem with them. 551 00:28:12,040 --> 00:28:15,240 Speaker 7: And they use AI cameras they can identify things around 552 00:28:15,280 --> 00:28:18,840 Speaker 7: the world. So it's taking Apple that step closer to 553 00:28:18,960 --> 00:28:22,320 Speaker 7: the reality spectacles that you can wear all day. 554 00:28:23,200 --> 00:28:24,240 Speaker 5: So that's another thing. 555 00:28:24,320 --> 00:28:28,400 Speaker 7: The regular glasses, not the Vision pro but the regular glasses. 556 00:28:28,520 --> 00:28:32,080 Speaker 2: Listen Mateo with our newspaper and report today. Thank you 557 00:28:32,280 --> 00:28:35,879 Speaker 2: so much. This is a Bloomberg Surveillance podcast bringing you 558 00:28:35,960 --> 00:28:40,600 Speaker 2: the best in economics, finance, investment, and international relations. You 559 00:28:40,640 --> 00:28:43,960 Speaker 2: can also watch the show live on YouTube. Visit the 560 00:28:43,960 --> 00:28:48,720 Speaker 2: Bloomberg Podcast channel on YouTube to see the show weekday 561 00:28:48,760 --> 00:28:51,760 Speaker 2: mornings from seven to ten am Eastern from our global 562 00:28:51,800 --> 00:28:56,480 Speaker 2: headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 563 00:28:56,800 --> 00:29:00,360 Speaker 2: or anywhere else you listen, and always I'm Bloomberg Radio, 564 00:29:00,560 --> 00:29:03,720 Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. 565 00:29:11,760 --> 00:29:11,960 Speaker 4: Hmm