WEBVTT - Cleveland Fed Names President, ConocoPhillips & Marathon Deal 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:18.040 Eastern on Apple Car playing Android Auto with the Bloomberg 0:00:18.120 --> 0:00:21.440 Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.079 or watch us live on YouTube. 0:00:25.040 --> 0:00:31.560 Cleveland Fed names former Goldman partner as president. Beth Hammock 0:00:31.840 --> 0:00:36.080 will be starting on August twenty first. The incoming Cleveland 0:00:36.120 --> 0:00:40.560 FED chief left Goldman Sachs in early of twenty twenty four. 0:00:40.880 --> 0:00:44.600 So following up on that news for the Cleveland Fed, 0:00:44.880 --> 0:00:47.120 let's check out with Steve Matthews, Fed, a reserve reporter 0:00:47.159 --> 0:00:50.600 for Bloomberg News, joining us from Atlanta via zoom. Steve 0:00:50.640 --> 0:00:53.480 tell us about the news coming out of the Cleveland Fed. 0:00:54.600 --> 0:00:58.840 So, Beth Hammick is the co head. Recently, it was 0:00:58.840 --> 0:01:02.000 the co head of the global financing at Goldman Sachs. 0:01:03.840 --> 0:01:07.720 And she will be joining the Cleveland Fed as president 0:01:07.880 --> 0:01:10.679 in August, and she will be a voter this year, 0:01:10.800 --> 0:01:16.119 so it should be interesting. The Cleveland Fed has been 0:01:16.280 --> 0:01:19.520 kind of a leader among the twelve FED banks in diversity. 0:01:20.600 --> 0:01:24.240 The first woman ever to have had a FED bank 0:01:24.680 --> 0:01:28.840 was at the Cleveland Fed. This is a fourth woman following. 0:01:29.680 --> 0:01:34.039 She replaces Loretta Mester, who was very much a force 0:01:34.120 --> 0:01:39.639 to be reckoned with on the FED and generally viewed 0:01:39.680 --> 0:01:44.360 as moderately hawkish. So we don't really know how Hemmick 0:01:44.480 --> 0:01:49.280 is going to going to be. But it's also a 0:01:49.320 --> 0:01:53.600 note and you know, this will probably cause some discussion, 0:01:54.720 --> 0:01:57.800 possibly even on my Congress, but this will be the 0:01:57.840 --> 0:02:03.640 third significant FED hire from Wall Street. I mean, the 0:02:03.680 --> 0:02:07.120 Saint Louis FED just hired someone who from a hedge 0:02:07.120 --> 0:02:13.440 fund background, and of course Neil Cashcari at one point 0:02:13.480 --> 0:02:18.280 worked at Pimco, So it's interesting. You know, the FED 0:02:18.320 --> 0:02:24.040 obviously cares a lot about transmission of monetary policy and 0:02:24.320 --> 0:02:27.480 understanding the nuts and bolts of Wall Street and regulation 0:02:27.680 --> 0:02:29.679 is really important. So this is a kind of a 0:02:30.840 --> 0:02:35.400 deep Wall Street background and understanding that she'll bring to 0:02:35.440 --> 0:02:35.880 the job. 0:02:36.520 --> 0:02:39.040 Yeah, talk a little bit more about her resume, because 0:02:39.840 --> 0:02:42.440 not only Goldman, but she was also a part of 0:02:42.480 --> 0:02:46.760 TABAC right the Treasury what's my acronym here on this one? 0:02:46.800 --> 0:02:48.960 But I know that because I interviewed her talking about 0:02:48.960 --> 0:02:52.240 that was the Treasury Borrowing Advisory Committee. What is that? 0:02:52.639 --> 0:02:52.720 Like? 0:02:53.320 --> 0:02:56.040 How did you play a role in that? 0:02:55.800 --> 0:02:59.080 That's right. I mean, it's essentially it's kind of a 0:02:59.120 --> 0:03:02.760 committee that deals with the Treasury Department and advising them, 0:03:03.280 --> 0:03:06.239 and she led that committee, and she was considered that 0:03:06.400 --> 0:03:10.760 Goldman as a leading candidate to be chief financial officer. 0:03:11.040 --> 0:03:13.800 She didn't get that job a few years ago, but 0:03:13.880 --> 0:03:18.400 she's had like a ton of different high ranking positions 0:03:19.120 --> 0:03:24.160 at Goldman, and you know, certainly her experience dealing with 0:03:24.280 --> 0:03:28.120 regulators and understanding the regulatory background that's going to be 0:03:28.160 --> 0:03:31.959 helpful at the FED, which is a big bank regulator, 0:03:32.480 --> 0:03:37.080 including of Goldman, although she presumably would not be involved. 0:03:37.640 --> 0:03:39.160 That's done by the New York FED. 0:03:39.840 --> 0:03:42.760 It just enlighten me, Steve. Is there any approval process 0:03:42.760 --> 0:03:44.880 here for this appointment or is it no? 0:03:46.240 --> 0:03:50.120 There is? I mean the way the process works, they 0:03:50.200 --> 0:03:55.560 started a search nationwide search last November. It involved the 0:03:55.840 --> 0:03:59.800 six directors other than the bankers. The bankers on the 0:04:00.720 --> 0:04:04.000 who are directors of the Cleveland FED are not involved. 0:04:04.800 --> 0:04:09.800 And then after they select a candidate, that candidate then 0:04:09.880 --> 0:04:15.760 has to be interviewed by the board of Governors. And 0:04:15.920 --> 0:04:20.800 right now Chris Waller is the governor who used to 0:04:20.800 --> 0:04:24.520 work for the Saint Louis FED and was appointed by Trump. 0:04:25.080 --> 0:04:30.839 He kind of leads the effort to discreen presidents, but 0:04:31.000 --> 0:04:33.560 the board will vote on them and they have to 0:04:33.600 --> 0:04:38.240 be approved by the FED Board of Directors, the Board 0:04:38.279 --> 0:04:38.800 of Governors. 0:04:39.200 --> 0:04:41.880 We've interviewed her on TV before she was still a Goldman. 0:04:41.920 --> 0:04:45.800 She's such a firecracker. She's only fifty two. Such a firecracker. 0:04:46.760 --> 0:04:49.839 Walkers through sort of the district of Cleveland, like not 0:04:49.920 --> 0:04:51.960 the actual city, but in terms of the FED, Like, 0:04:52.000 --> 0:04:53.320 how is that region doing? 0:04:56.080 --> 0:04:59.600 The Cleveland region has always been kind of a min 0:04:59.640 --> 0:05:03.680 it's a US about region Ohio. It's not one of 0:05:03.760 --> 0:05:09.960 the uh, you know, each of the twelve regions are different, 0:05:10.040 --> 0:05:13.279 but this is a region that's that's more suffering and 0:05:13.360 --> 0:05:17.240 more struggling, and there are a lot of issues like 0:05:17.440 --> 0:05:23.560 with education and uh, you know, with with not having 0:05:23.760 --> 0:05:28.599 the best jobs, and so it's a tough it's a 0:05:28.640 --> 0:05:30.719 tough district, Steve. 0:05:30.839 --> 0:05:33.320 I mean, you know, she's a wall streeter, as you 0:05:33.360 --> 0:05:35.039 mentioned before, and there's been a couple of those in 0:05:35.080 --> 0:05:37.760 the past. Is does that get pushed back anywhere? I mean, 0:05:37.760 --> 0:05:40.159 but I'm not sure who would rather have than somebody 0:05:40.160 --> 0:05:43.840 from financial services at a federal reserve job. But where 0:05:43.880 --> 0:05:45.080 do they typically come from. 0:05:46.240 --> 0:05:49.680 There has been some pushback. I mean, there are there 0:05:49.720 --> 0:05:54.520 are groups that are kind of the more some of 0:05:54.520 --> 0:05:57.720 the liberal think tanks, and I think Elizabeth Warren has 0:05:57.720 --> 0:06:03.919 occasionally weighed in h of the Senator in opposition of 0:06:03.960 --> 0:06:08.160 there being too many uh you know, Goldman in Wall 0:06:08.160 --> 0:06:11.279 Street alums. I mean the uh that there have been 0:06:11.400 --> 0:06:12.040 quite a few. 0:06:12.320 --> 0:06:12.760 Uh. 0:06:13.040 --> 0:06:16.320 The former head of the New York Fed uh was 0:06:16.360 --> 0:06:22.960 a Goldman economist, and uh Robert Kaplan, who was with 0:06:23.000 --> 0:06:28.120 the Dallas Fed uh was a Goldman Uh you know, alum. 0:06:28.279 --> 0:06:32.280 So it's like sometimes there has been criticism that you know, 0:06:32.520 --> 0:06:35.680 the FED is like too close to Wall Street. But 0:06:36.040 --> 0:06:38.400 you know, as you say, I mean that that the 0:06:38.440 --> 0:06:41.679 flip side is you really need to understand the nuts 0:06:41.720 --> 0:06:43.880 and bolts if you're going to regulate it, if you're 0:06:43.880 --> 0:06:48.360 going to understand monetary policy transmission and all the the 0:06:48.360 --> 0:06:52.599 ins and outs of of q E and QT and 0:06:52.680 --> 0:06:53.719 those kinds of things. 0:06:54.360 --> 0:06:56.520 I mean, we know that Mester has been on the 0:06:56.520 --> 0:07:00.880 more hawkish side of the FED. Best guess and I 0:07:00.920 --> 0:07:03.440 know you said we don't know, so okay, best guess 0:07:03.520 --> 0:07:04.960 is to where Methamma, good lie. 0:07:05.800 --> 0:07:10.080 But best guess is that she would be hawkish. And 0:07:10.120 --> 0:07:15.680 that's just because there seems to have been those presidents 0:07:15.680 --> 0:07:19.280 that have come in from Wall Street have tended to 0:07:19.400 --> 0:07:24.440 lean a little bit hawkish, and the Cleveland Fed over 0:07:24.480 --> 0:07:29.480 the years has leaned hawkish, and sometimes the directors of 0:07:30.000 --> 0:07:33.960 the fed banks like the tradition. So it's like, for example, 0:07:34.080 --> 0:07:38.080 Kansas City is almost always leaned hawkish, and it's like 0:07:38.160 --> 0:07:39.880 you go back a year after year after year, and 0:07:40.760 --> 0:07:44.280 whoever the president is, they're leading hawk and that's been 0:07:44.280 --> 0:07:47.920 true at Cleveland as well. So it's like if you 0:07:47.960 --> 0:07:51.200 were betting, the odds would be well over fifty percent 0:07:51.280 --> 0:07:52.720 that she's going to be hawkish. 0:07:52.800 --> 0:07:54.960 Very good, Steve Matthews, I thank you so much. We 0:07:55.000 --> 0:07:58.480 appreciate Steve Matthews, fored Reserve reporter for Bloomberg News. Again, 0:07:58.520 --> 0:08:00.840 the feder Reserve Bank of Cleveland a point at Beth Hammock, 0:08:01.360 --> 0:08:04.800 a Goldman Sachs Group a veteran, as its next president. Hammock, 0:08:04.800 --> 0:08:06.840 who was most recently co out of global Financing at 0:08:06.840 --> 0:08:09.240 the Wall Street Heavyweight, has more than three decades of 0:08:09.280 --> 0:08:12.920 experience in finance, capital markets, and risk management. She replaced 0:08:12.960 --> 0:08:16.280 Loretta Mester, who was stepping down June thirtieth, after eight 0:08:16.320 --> 0:08:17.239 decade in the post. 0:08:17.520 --> 0:08:20.920 It's interesting because we've also reported a lot about the 0:08:21.000 --> 0:08:24.800 revolving door of women executives over at Goldman Sachs and 0:08:24.840 --> 0:08:26.400 sort of the why behind it and kind of where 0:08:26.400 --> 0:08:28.080 they wind up going. And now we know where one 0:08:28.120 --> 0:08:29.320 of them goes up to the Velt. 0:08:29.520 --> 0:08:30.240 Yep, very cool. 0:08:31.720 --> 0:08:35.600 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:35.679 --> 0:08:38.719 weekdays at ten am Eastern on Apple car Play and 0:08:38.720 --> 0:08:41.600 Android Auto with the Bloomberg Business Act. You can also 0:08:41.720 --> 0:08:45.240 listen live on Amazon Alexa from our flagship New York station, 0:08:45.600 --> 0:08:49.320 Just say Alexa play Bloomberg eleven thirty. 0:08:50.320 --> 0:08:53.680 Let's pivot to oh, I don't know energy, there's some stuff. 0:08:53.679 --> 0:08:54.760 Can you take the ball here? 0:08:54.800 --> 0:08:58.240 Because oh yeah, okay, So the latest. So yesterday we 0:08:58.280 --> 0:09:00.199 got the news that the Hash shareholders approved the able 0:09:00.200 --> 0:09:02.319 with Chevron. There's still an excellon situation there with the 0:09:02.400 --> 0:09:05.560 right of first refusal for an ACCID in Guyana. However, 0:09:05.600 --> 0:09:09.360 today we get another big deal Conicco Phillips buying Marathon 0:09:09.440 --> 0:09:11.680 Oil for twenty two and a half billion dollars and 0:09:11.720 --> 0:09:14.360 that's including about four billion dollars in debt. I'm getting 0:09:14.360 --> 0:09:17.200 a slew of analyst notes coming out. It's quite interesting 0:09:17.240 --> 0:09:20.120 because the question seems to be does this make Conic 0:09:20.200 --> 0:09:24.040 go bigger or better? And I think that's a really 0:09:24.040 --> 0:09:25.800 interesting point because a lot of them and a that 0:09:25.840 --> 0:09:28.240 we've seen has been making them better and bigger, and 0:09:28.280 --> 0:09:31.079 you have to wonder what the distinction is here with Conico. 0:09:31.160 --> 0:09:34.360 So Vincent Piazza is Boomberg Intelligence senior equity research analysts 0:09:34.360 --> 0:09:37.120 for oil and gas. He joins us, what do you think, 0:09:37.160 --> 0:09:38.040 bigger or better? 0:09:39.760 --> 0:09:42.800 I think a little bit of both. It makes them 0:09:43.160 --> 0:09:49.600 better in certain basins because it does consolidate opportunity set 0:09:49.760 --> 0:09:53.840 in places like the Delaware, the Bak and even the 0:09:54.320 --> 0:09:58.720 Eagle Forward, but it does extend the franchise into other 0:09:58.880 --> 0:10:04.440 areas that probably dilutes some of that narrative. You know, 0:10:04.480 --> 0:10:09.800 the narrative has been consolidate streamline leverage to what you 0:10:09.960 --> 0:10:13.680 do best. We saw that in the Permian. We saw 0:10:13.720 --> 0:10:19.240 that for natural gas as well, with Southwestern and Chesapeake 0:10:19.440 --> 0:10:22.840 likely getting together. So in this case, you have some 0:10:22.960 --> 0:10:29.760 pieces of that Marathon pie that don't really may not 0:10:29.920 --> 0:10:35.240 work as well within the broader Conico platform, but that's 0:10:35.280 --> 0:10:39.840 an opportunity set to divest some of those pieces and 0:10:39.880 --> 0:10:44.320 really concentrate around Texas and the Bakan. But the bocket 0:10:44.360 --> 0:10:48.280 itself is maturing as well. What you're really getting here 0:10:48.520 --> 0:10:51.200 is a ton of free cash flow as well. You know, 0:10:51.280 --> 0:10:55.400 this is consistent with the formula, the theme, the narrative 0:10:55.880 --> 0:10:59.720 that we've heard and seen in the past, the acquirer 0:10:59.800 --> 0:11:04.520 you U being a slightly higher multiple to do an 0:11:04.520 --> 0:11:10.120 all stock transaction by the company, bring those assets, those 0:11:10.280 --> 0:11:15.480 cash flow generating assets into the platform, lower the spend, 0:11:15.760 --> 0:11:20.400 generate that free cash flow, be able to boost the 0:11:20.520 --> 0:11:24.240 ordinary dividend and also the supplemental dividend, and support the 0:11:24.280 --> 0:11:26.720 stock by buying back shares as well. And in this 0:11:26.840 --> 0:11:31.640 case financially, financially, engineering wise, it actually works out right. 0:11:32.120 --> 0:11:35.040 Hey, Vince, I noticed there's a lot of M and 0:11:35.080 --> 0:11:37.319 A stuff going on in your energy world here. Do 0:11:37.400 --> 0:11:39.400 the regulators care about this stuff? 0:11:39.679 --> 0:11:42.960 Oh yeah, oh yeah, they definitely do care. They will 0:11:43.000 --> 0:11:45.440 take a look at this. Look we wrote about this 0:11:45.440 --> 0:11:50.040 this morning earlier this morning. This will take a They 0:11:50.120 --> 0:11:53.120 will take a serious look at this. They will increase 0:11:53.160 --> 0:11:56.559 the scrutiny of all of these deals. I know that 0:11:56.880 --> 0:11:59.960 they're looking to close this by four q twenty two, 0:12:00.040 --> 0:12:04.960 twenty four. I think that's kind of tight. We have 0:12:05.200 --> 0:12:10.600 seen other deals close Exxon closing Pioneer around that same 0:12:10.640 --> 0:12:16.679 time as the as As a projected closing date as well. 0:12:17.679 --> 0:12:21.120 But there are other deals that may be prolonged. And 0:12:21.240 --> 0:12:24.640 this will be a rather large entity. It's going to 0:12:24.720 --> 0:12:27.199 be roughly, you know, two point two million barrels a 0:12:27.280 --> 0:12:31.360 day of production, so it will get scrutiny. It will 0:12:31.400 --> 0:12:36.400 get scrutiny more broadly, but in general it's really not 0:12:36.880 --> 0:12:40.880 sizeable in those particular basins that they are consolidated. 0:12:41.320 --> 0:12:45.439 So to that point, do we see another bitter come in? 0:12:45.640 --> 0:12:49.040 So Bloomberg has reported that Devin was also interested in 0:12:49.080 --> 0:12:51.720 Marathon Oil. Do you think we see this happening now? 0:12:52.880 --> 0:12:55.880 Well, you know they were looking at it. When you 0:12:55.920 --> 0:12:58.440 work out the numbers, it would have been kind of 0:12:58.440 --> 0:13:02.840 difficult to make it work. But the increation here Conico 0:13:03.040 --> 0:13:08.559 Marathon probably works out best, actually works out better for 0:13:08.920 --> 0:13:13.319 Marathon holders. It's interesting because within the first three years 0:13:13.360 --> 0:13:17.160 of the deal, Conico suggests that they'll buy back as 0:13:17.240 --> 0:13:21.199 much stock as the entire market cap of Marathon, including 0:13:21.280 --> 0:13:26.439 a boosted dividend for legacy Conical holders, and new holders 0:13:26.679 --> 0:13:28.760 from the the marathon purchase. 0:13:29.360 --> 0:13:31.199 You know, it's an all stock deal, which all right, 0:13:31.240 --> 0:13:32.959 I get my M and A fee, Alex, but I 0:13:32.960 --> 0:13:34.960 don't get to do the high heel piece which chooses 0:13:35.000 --> 0:13:37.440 mynd here. So I'm not really happy with an all 0:13:37.440 --> 0:13:38.800 stocks it's evercore. 0:13:38.880 --> 0:13:41.160 I think that led kind of go on this one. 0:13:41.679 --> 0:13:41.880 Yeah. 0:13:41.920 --> 0:13:43.280 I looked at M A go, but they did not 0:13:43.360 --> 0:13:45.439 have the M and A advisors. They're a little bit 0:13:45.440 --> 0:13:45.920 slow on that. 0:13:46.240 --> 0:13:46.440 Vince. 0:13:46.440 --> 0:13:47.840 Are we going to see more of this? I mean 0:13:48.080 --> 0:13:50.160 we're going to be talking to you more about M 0:13:50.240 --> 0:13:51.880 and A in your space. 0:13:52.800 --> 0:13:55.880 Yeah, we've seen it across the Permian. We've seen it 0:13:56.160 --> 0:13:58.760 in natural gas as well. Haven't seen it as much 0:13:59.440 --> 0:14:01.959 in natural gas, but I think that'll pick up as 0:14:02.000 --> 0:14:05.080 well as we're seeing, you know, a big here for 0:14:05.280 --> 0:14:09.360 Henry Hub and various prices across the regions. When you 0:14:09.559 --> 0:14:13.080 have a commodity that is in the crosshairs or industry 0:14:13.320 --> 0:14:17.440 that is in the crosshairs of both civic and political leaders, 0:14:17.920 --> 0:14:21.800 the one way to survive is to consolidate and get bigger. 0:14:22.000 --> 0:14:24.720 If you're not able to grow organically. 0:14:24.440 --> 0:14:28.640 Who's still next on what to buy? Endeavor was one 0:14:28.800 --> 0:14:32.080 that's being taken out. There were a few others also, 0:14:32.640 --> 0:14:34.520 you Born, which I'm not that familiar with. It's a 0:14:34.520 --> 0:14:36.400 private company, but that was kind of on the list. 0:14:36.520 --> 0:14:37.880 Who are the top targets now. 0:14:38.640 --> 0:14:42.560 Well, I think you've mentioned the two top private entities 0:14:43.280 --> 0:14:45.720 in the Permian Look you can you can also have 0:14:45.840 --> 0:14:51.600 You can also see still more consolidation across Appalachia and 0:14:51.680 --> 0:14:55.760 also the Hainesville. There's some fragmented spaces there that can 0:14:55.800 --> 0:15:00.800 be consolidated, you know, Chesapeake and Southwestern. Likely it's done. 0:15:01.400 --> 0:15:06.520 Devin was looking at Marathon, you know, there's there they 0:15:06.520 --> 0:15:09.120 could still do. They could still do do something in 0:15:09.160 --> 0:15:13.080 the industry as well, trying to block up more space 0:15:13.920 --> 0:15:18.080 for their Permium platform. You have a lot of smaller 0:15:18.120 --> 0:15:24.080 players across the basin that still need to address their size. Again, 0:15:24.160 --> 0:15:29.480 this is about consolidating to grow inorganically because the big 0:15:29.520 --> 0:15:33.080 players they've blocked up the takeaway, they've blocked up the 0:15:33.120 --> 0:15:37.520 services at reasonable prices, so it becomes more difficult for 0:15:37.640 --> 0:15:40.280 some of the smaller players across gas and oil. 0:15:40.400 --> 0:15:42.360 All Right, Vince, thanks so much for joining us. We 0:15:42.400 --> 0:15:45.080 appreciate getting your insight and analysis there. Vince Piazza senior 0:15:45.160 --> 0:15:48.800 equity research. Channel's covering all the energy space for Bloomberg 0:15:49.120 --> 0:15:53.880 Intelligence again, Knicco bidding for Marathon Oil, another M and 0:15:53.960 --> 0:15:56.240 a trade in the oil patch. Good to be an 0:15:56.400 --> 0:15:57.560 energy M and a banker. 0:16:00.080 --> 0:16:03.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:16:04.040 --> 0:16:07.360 weekdays at ten am Eastern on Apocarplay and Android Auto 0:16:07.440 --> 0:16:10.360 with the Bloomberg Business App. Listen on demand wherever you 0:16:10.440 --> 0:16:14.640 get your podcasts, or watch us live on YouTube. 0:16:15.200 --> 0:16:17.520 I'm Alex Stee alongside Paul Sweeny and John Tucker. This 0:16:17.560 --> 0:16:19.680 is Bloomberg Intelligence Radio. We bring you all the top 0:16:19.680 --> 0:16:22.520 news and economics and finance and business through a lens 0:16:22.520 --> 0:16:25.480 of our Bloomberg Intelligence analysts. They cover two thousand companies 0:16:25.600 --> 0:16:28.360 and one hundred and thirty industries worldwide. Also, once an 0:16:28.400 --> 0:16:31.160 hour we go outside of Bloomberg Intelligence and get the 0:16:31.920 --> 0:16:34.640 read on the market. And today we're going to cattery 0:16:34.720 --> 0:16:37.760 to Seminetti, Senior and Vice president, Private Wealth Advisor, Morgan 0:16:37.800 --> 0:16:42.479 Stanley Private Wealth Management. She is joining us from Philadelphia. 0:16:42.560 --> 0:16:45.320 So we're looking at a market here and the excuse, 0:16:45.480 --> 0:16:48.320 I say excuse, we're seeing a sell off because the takedown, 0:16:48.400 --> 0:16:50.160 the two and the five year supply yesterday in the 0:16:50.160 --> 0:16:52.680 bond market was really tepidomy of the seven year today, 0:16:52.720 --> 0:16:55.080 and all of a sudden everyone's worried about is there 0:16:55.160 --> 0:16:57.280 enough demand for treasuries? And then that's why stocks are 0:16:57.280 --> 0:17:01.520 selling off? Is that narrative, right, Alex? 0:17:01.800 --> 0:17:05.320 You know, there is such a cross fire of news 0:17:05.520 --> 0:17:09.760 coming at us lately. Investors, you know, are not sure 0:17:09.880 --> 0:17:12.480 which side they're on. You know, on one day they're 0:17:12.520 --> 0:17:15.840 worried about the FED action, another day they're excited about 0:17:15.880 --> 0:17:19.400 the market. And what we are trying to keep them 0:17:19.440 --> 0:17:23.200 focused on is that the long term narratives should be 0:17:23.680 --> 0:17:26.760 the balance and the correct approach that should align with 0:17:26.840 --> 0:17:30.239 their goals. That the balance of their portfolios should not 0:17:30.320 --> 0:17:33.320 really be dependent on what is happening day to day 0:17:33.359 --> 0:17:36.199 with the treasury market or whether FED is going to 0:17:36.240 --> 0:17:38.560 have two rate cuts or three rate cuts or no 0:17:38.720 --> 0:17:41.560 cuts at all. It should be a longer term approach 0:17:41.880 --> 0:17:44.400 in making sure that the income and quality of their 0:17:44.400 --> 0:17:48.080 portfolios reflect their objectives of what they're trying to accomplish 0:17:48.080 --> 0:17:48.959 with their investments. 0:17:49.080 --> 0:17:51.919 All right, So given that Backdropkkaterina, when you talk to 0:17:52.480 --> 0:17:54.800 a perspective client, how do you and yet you know, 0:17:55.040 --> 0:17:57.600 say they've got a twenty plus year kind of investment horizon. 0:17:57.840 --> 0:18:01.520 Is it sixty forty stocks, bonds or have alternatives in there? 0:18:02.240 --> 0:18:04.080 What's kind of a monol portfolio looking for you guys 0:18:04.160 --> 0:18:05.600 more extaning these days? 0:18:05.920 --> 0:18:08.600 Well, pull the benefit of the current environment is for 0:18:08.640 --> 0:18:11.440 the first time in many years, we're actually seeing good 0:18:11.520 --> 0:18:15.639 yields in the short term investments, so our emergency points cash, 0:18:15.840 --> 0:18:18.199 you know, should be earning adequate yield. I mean, this 0:18:18.280 --> 0:18:21.080 is just such an incredible opportunity. The second part of 0:18:21.119 --> 0:18:24.040 it is really the quality and health of the fixed 0:18:24.080 --> 0:18:27.520 income portfolio. This is the time to really improve that side, 0:18:27.840 --> 0:18:30.720 to make sure that we are as diversified with fixed income, 0:18:30.840 --> 0:18:36.040 both in treasuries, municipal, corporate bonds, high yield preferreds as 0:18:36.080 --> 0:18:38.639 we can be, because this is a unique opportunity to 0:18:38.800 --> 0:18:42.000 really align the portfolios for twenty years out and take 0:18:42.040 --> 0:18:45.680 advantage of the higher quality and higher interest rate environment. 0:18:46.000 --> 0:18:49.720 And last, but not least, is really the stock part 0:18:49.760 --> 0:18:53.320 of the portfolio and the trap there is to fall 0:18:53.320 --> 0:18:57.040 into this excitement about AI and tech and all of 0:18:57.080 --> 0:19:00.000 a sudden, you know, we see portfolios that are lumps 0:19:00.560 --> 0:19:03.800 that are not balanced in the way that they should be. 0:19:04.040 --> 0:19:06.879 And while we believe in AI and the fact that 0:19:06.920 --> 0:19:10.240 it will increase profitability and will have a profound effect 0:19:10.680 --> 0:19:15.000 on the performance and like really efficiency of all the 0:19:15.040 --> 0:19:18.479 sectors and outside of technology, we think that portfolios need 0:19:18.560 --> 0:19:22.720 to remain balanced. So healthy profit taking, you know, would 0:19:22.760 --> 0:19:23.280 be good here. 0:19:23.680 --> 0:19:25.920 So going to the fixing come allocation. Is it credit 0:19:26.000 --> 0:19:28.359 risk or is a duration risk that's most appealing to you? 0:19:29.600 --> 0:19:32.120 Well, really both, Alex. You know, when when you look 0:19:32.119 --> 0:19:34.160 at the inverted yield curve, you know, we see very 0:19:34.160 --> 0:19:36.399 clearly that going out, you know, as much as we 0:19:36.440 --> 0:19:38.919 would love to, you know, lock in these higher rates 0:19:38.920 --> 0:19:41.080 for you know, as long as possible, you know, there 0:19:41.160 --> 0:19:45.000 is a time horizon there that is reasonable, which is, 0:19:45.119 --> 0:19:47.640 you know, somewhere there in the middle, we are concerned 0:19:47.640 --> 0:19:51.280 about the duration risk, but most important factor in our 0:19:51.359 --> 0:19:54.840 opinion is really the quality. This is the time where 0:19:55.000 --> 0:19:57.800 you know, we don't have to compromise the quality of 0:19:57.800 --> 0:20:01.040 the fixed income portfolios in order to get higher yields. 0:20:01.600 --> 0:20:04.200 How do you think about valuation here, Katerina and the 0:20:04.240 --> 0:20:06.720 equity market, So we've had obviously a big, big move 0:20:06.760 --> 0:20:10.320 in equity market prices off those October levels, and we've 0:20:10.320 --> 0:20:12.439 had good earnings certainly in that period as well, But 0:20:12.880 --> 0:20:15.159 have you earnings been enough to support kind of the 0:20:15.240 --> 0:20:16.960 valuations right here do you think. 0:20:17.680 --> 0:20:21.320 Well, there's a lot of pressure and earnings. The reality 0:20:21.400 --> 0:20:24.040 that we might be in the higher interest rate environment 0:20:24.080 --> 0:20:26.920 for longer is hitting both consumers you know, and their 0:20:27.000 --> 0:20:30.080 spending patterns, but also the profitability and the long term 0:20:30.119 --> 0:20:33.399 outlook before the companies. We're seeing the slow down in 0:20:33.440 --> 0:20:36.919 the labor market, we're seeing just general, you know, the 0:20:37.080 --> 0:20:41.359 slow down in the economy, and while with the stimulus, 0:20:41.400 --> 0:20:45.400 we think that the longer term outlook is actually quite positive, 0:20:45.520 --> 0:20:49.439 and we're positioning portfolios for quality, and we are looking 0:20:49.560 --> 0:20:56.080 at the sectors like industrials, consumer, stables, financials, and you 0:20:56.200 --> 0:20:58.920 want to make sure that the portfolios are well represented 0:20:59.000 --> 0:21:03.080 in the dividend things. We still are, of course concerned 0:21:03.080 --> 0:21:06.639 about the fact that this economy is very much showing 0:21:06.640 --> 0:21:10.000 the signs of the slowdown and are trying to make 0:21:10.000 --> 0:21:11.600 sure that portfolios are protected. 0:21:12.280 --> 0:21:18.520 So what is protection right now within the equity market, Alex. 0:21:18.560 --> 0:21:21.520 It's emphasis on quality and it always has been the case, 0:21:21.600 --> 0:21:24.199 but more so now. And what is unique about this 0:21:24.359 --> 0:21:29.280 market is the companies with very clear competitive positioning are 0:21:29.800 --> 0:21:33.159 somewhat evident. This is definitely a stock picker's market. This 0:21:33.320 --> 0:21:36.639 is where are owning the portfolio of good quality names 0:21:36.680 --> 0:21:40.160 that are showing healthy balance sheets and are positioned well 0:21:40.560 --> 0:21:44.359 to improve and continue to grow their earnings and really 0:21:44.440 --> 0:21:48.640 the support the valuations and that that we're seeing right 0:21:48.680 --> 0:21:52.879 now versus the broad index. This is the time that 0:21:53.000 --> 0:21:57.359 to definitely own this very individually crafted portfolios and pick 0:21:57.440 --> 0:21:58.360 individual names. 0:21:58.600 --> 0:22:01.240 Hey, Keterine, it it's an action year and you know 0:22:01.720 --> 0:22:03.520 likely there will be a lot of noise around that 0:22:03.560 --> 0:22:06.480 in the second half of the year. Here when you're 0:22:06.920 --> 0:22:09.399 actually question to you do your clients call you up 0:22:09.440 --> 0:22:11.720 and say what do I do for my portfolio? And 0:22:11.760 --> 0:22:13.639 an election year? Is that a concern for your clients? 0:22:14.600 --> 0:22:18.320 Well? Absolutely, And the questions that we get usually is 0:22:18.720 --> 0:22:24.000 how one or another outcome of the election would affect 0:22:24.040 --> 0:22:27.960 their portfolios and should we do anything at all to 0:22:28.080 --> 0:22:31.040 really position the portfolios for the outcome of the election. 0:22:31.359 --> 0:22:33.159 And of course, you know, our crystal ball is a 0:22:33.160 --> 0:22:35.680 little marky these days and it's so hard to predict, 0:22:35.960 --> 0:22:38.639 and we tell the investors that they really should keep 0:22:38.680 --> 0:22:41.320 their eye on the price that the balance and allocation 0:22:41.400 --> 0:22:44.800 of their portfolio should not be dependent on who is 0:22:44.880 --> 0:22:48.320 in the White House or you know, the really even 0:22:48.320 --> 0:22:51.920 the Fed action. It should be on the current economic environment. 0:22:52.200 --> 0:22:57.400 They should be well balanced. The asset allocation and diversification 0:22:57.560 --> 0:22:59.800 is really the key, you know to the long term 0:22:59.840 --> 0:23:03.679 ho look, but also rebalancing, you know, it's just staying 0:23:03.760 --> 0:23:06.440 that with that balance, right, you know, making sure that 0:23:06.680 --> 0:23:09.439 we take advantage of the buying opportunities in the market, 0:23:09.560 --> 0:23:12.040 that we take some growth of the table that makes 0:23:12.040 --> 0:23:15.320 sense and refocus it in the sectors that has not 0:23:15.600 --> 0:23:18.800 have not had you know, the run yet, which is 0:23:18.880 --> 0:23:21.560 really something that is going to ensure the longer term 0:23:21.600 --> 0:23:23.760 performance of the portoli. 0:23:23.400 --> 0:23:26.080 Is Katerina, thank you so much for joining us. Katerina 0:23:26.119 --> 0:23:29.120 sam Eddi, Senior vice president in Private wealth Management at 0:23:29.320 --> 0:23:31.320