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Speaker 2: Cleveland Fed names former Goldman partner as president. Beth Hammock
Speaker 2: will be starting on August twenty first. The incoming Cleveland
Speaker 2: FED chief left Goldman Sachs in early of twenty twenty four.
Speaker 3: So following up on that news for the Cleveland Fed,
Speaker 3: let's check out with Steve Matthews, Fed, a reserve reporter
Speaker 3: for Bloomberg News, joining us from Atlanta via zoom. Steve
Speaker 3: tell us about the news coming out of the Cleveland Fed.
Speaker 4: So, Beth Hammick is the co head. Recently, it was
Speaker 4: the co head of the global financing at Goldman Sachs.
Speaker 4: And she will be joining the Cleveland Fed as president
Speaker 4: in August, and she will be a voter this year,
Speaker 4: so it should be interesting. The Cleveland Fed has been
Speaker 4: kind of a leader among the twelve FED banks in diversity.
Speaker 4: The first woman ever to have had a FED bank
Speaker 4: was at the Cleveland Fed. This is a fourth woman following.
Speaker 4: She replaces Loretta Mester, who was very much a force
Speaker 4: to be reckoned with on the FED and generally viewed
Speaker 4: as moderately hawkish. So we don't really know how Hemmick
Speaker 4: is going to going to be. But it's also a
Speaker 4: note and you know, this will probably cause some discussion,
Speaker 4: possibly even on my Congress, but this will be the
Speaker 4: third significant FED hire from Wall Street. I mean, the
Speaker 4: Saint Louis FED just hired someone who from a hedge
Speaker 4: fund background, and of course Neil Cashcari at one point
Speaker 4: worked at Pimco, So it's interesting. You know, the FED
Speaker 4: obviously cares a lot about transmission of monetary policy and
Speaker 4: understanding the nuts and bolts of Wall Street and regulation
Speaker 4: is really important. So this is a kind of a
Speaker 4: deep Wall Street background and understanding that she'll bring to
Speaker 4: the job.
Speaker 2: Yeah, talk a little bit more about her resume, because
Speaker 2: not only Goldman, but she was also a part of
Speaker 2: TABAC right the Treasury what's my acronym here on this one?
Speaker 2: But I know that because I interviewed her talking about
Speaker 2: that was the Treasury Borrowing Advisory Committee. What is that?
Speaker 3: Like?
Speaker 2: How did you play a role in that?
Speaker 4: That's right. I mean, it's essentially it's kind of a
Speaker 4: committee that deals with the Treasury Department and advising them,
Speaker 4: and she led that committee, and she was considered that
Speaker 4: Goldman as a leading candidate to be chief financial officer.
Speaker 4: She didn't get that job a few years ago, but
Speaker 4: she's had like a ton of different high ranking positions
Speaker 4: at Goldman, and you know, certainly her experience dealing with
Speaker 4: regulators and understanding the regulatory background that's going to be
Speaker 4: helpful at the FED, which is a big bank regulator,
Speaker 4: including of Goldman, although she presumably would not be involved.
Speaker 4: That's done by the New York FED.
Speaker 3: It just enlighten me, Steve. Is there any approval process
Speaker 3: here for this appointment or is it no?
Speaker 4: There is? I mean the way the process works, they
Speaker 4: started a search nationwide search last November. It involved the
Speaker 4: six directors other than the bankers. The bankers on the
Speaker 4: who are directors of the Cleveland FED are not involved.
Speaker 4: And then after they select a candidate, that candidate then
Speaker 4: has to be interviewed by the board of Governors. And
Speaker 4: right now Chris Waller is the governor who used to
Speaker 4: work for the Saint Louis FED and was appointed by Trump.
Speaker 4: He kind of leads the effort to discreen presidents, but
Speaker 4: the board will vote on them and they have to
Speaker 4: be approved by the FED Board of Directors, the Board
Speaker 4: of Governors.
Speaker 2: We've interviewed her on TV before she was still a Goldman.
Speaker 2: She's such a firecracker. She's only fifty two. Such a firecracker.
Speaker 2: Walkers through sort of the district of Cleveland, like not
Speaker 2: the actual city, but in terms of the FED, Like,
Speaker 2: how is that region doing?
Speaker 4: The Cleveland region has always been kind of a min
Speaker 4: it's a US about region Ohio. It's not one of
Speaker 4: the uh, you know, each of the twelve regions are different,
Speaker 4: but this is a region that's that's more suffering and
Speaker 4: more struggling, and there are a lot of issues like
Speaker 4: with education and uh, you know, with with not having
Speaker 4: the best jobs, and so it's a tough it's a
Speaker 4: tough district, Steve.
Speaker 3: I mean, you know, she's a wall streeter, as you
Speaker 3: mentioned before, and there's been a couple of those in
Speaker 3: the past. Is does that get pushed back anywhere? I mean,
Speaker 3: but I'm not sure who would rather have than somebody
Speaker 3: from financial services at a federal reserve job. But where
Speaker 3: do they typically come from.
Speaker 4: There has been some pushback. I mean, there are there
Speaker 4: are groups that are kind of the more some of
Speaker 4: the liberal think tanks, and I think Elizabeth Warren has
Speaker 4: occasionally weighed in h of the Senator in opposition of
Speaker 4: there being too many uh you know, Goldman in Wall
Speaker 4: Street alums. I mean the uh that there have been
Speaker 4: quite a few.
Speaker 5: Uh.
Speaker 4: The former head of the New York Fed uh was
Speaker 4: a Goldman economist, and uh Robert Kaplan, who was with
Speaker 4: the Dallas Fed uh was a Goldman Uh you know, alum.
Speaker 4: So it's like sometimes there has been criticism that you know,
Speaker 4: the FED is like too close to Wall Street. But
Speaker 4: you know, as you say, I mean that that the
Speaker 4: flip side is you really need to understand the nuts
Speaker 4: and bolts if you're going to regulate it, if you're
Speaker 4: going to understand monetary policy transmission and all the the
Speaker 4: ins and outs of of q E and QT and
Speaker 4: those kinds of things.
Speaker 2: I mean, we know that Mester has been on the
Speaker 2: more hawkish side of the FED. Best guess and I
Speaker 2: know you said we don't know, so okay, best guess
Speaker 2: is to where Methamma, good lie.
Speaker 4: But best guess is that she would be hawkish. And
Speaker 4: that's just because there seems to have been those presidents
Speaker 4: that have come in from Wall Street have tended to
Speaker 4: lean a little bit hawkish, and the Cleveland Fed over
Speaker 4: the years has leaned hawkish, and sometimes the directors of
Speaker 4: the fed banks like the tradition. So it's like, for example,
Speaker 4: Kansas City is almost always leaned hawkish, and it's like
Speaker 4: you go back a year after year after year, and
Speaker 4: whoever the president is, they're leading hawk and that's been
Speaker 4: true at Cleveland as well. So it's like if you
Speaker 4: were betting, the odds would be well over fifty percent
Speaker 4: that she's going to be hawkish.
Speaker 3: Very good, Steve Matthews, I thank you so much. We
Speaker 3: appreciate Steve Matthews, fored Reserve reporter for Bloomberg News. Again,
Speaker 3: the feder Reserve Bank of Cleveland a point at Beth Hammock,
Speaker 3: a Goldman Sachs Group a veteran, as its next president. Hammock,
Speaker 3: who was most recently co out of global Financing at
Speaker 3: the Wall Street Heavyweight, has more than three decades of
Speaker 3: experience in finance, capital markets, and risk management. She replaced
Speaker 3: Loretta Mester, who was stepping down June thirtieth, after eight
Speaker 3: decade in the post.
Speaker 2: It's interesting because we've also reported a lot about the
Speaker 2: revolving door of women executives over at Goldman Sachs and
Speaker 2: sort of the why behind it and kind of where
Speaker 2: they wind up going. And now we know where one
Speaker 2: of them goes up to the Velt.
Speaker 3: Yep, very cool.
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Speaker 3: Let's pivot to oh, I don't know energy, there's some stuff.
Speaker 3: Can you take the ball here?
Speaker 2: Because oh yeah, okay, So the latest. So yesterday we
Speaker 2: got the news that the Hash shareholders approved the able
Speaker 2: with Chevron. There's still an excellon situation there with the
Speaker 2: right of first refusal for an ACCID in Guyana. However,
Speaker 2: today we get another big deal Conicco Phillips buying Marathon
Speaker 2: Oil for twenty two and a half billion dollars and
Speaker 2: that's including about four billion dollars in debt. I'm getting
Speaker 2: a slew of analyst notes coming out. It's quite interesting
Speaker 2: because the question seems to be does this make Conic
Speaker 2: go bigger or better? And I think that's a really
Speaker 2: interesting point because a lot of them and a that
Speaker 2: we've seen has been making them better and bigger, and
Speaker 2: you have to wonder what the distinction is here with Conico.
Speaker 2: So Vincent Piazza is Boomberg Intelligence senior equity research analysts
Speaker 2: for oil and gas. He joins us, what do you think,
Speaker 2: bigger or better?
Speaker 6: I think a little bit of both. It makes them
Speaker 6: better in certain basins because it does consolidate opportunity set
Speaker 6: in places like the Delaware, the Bak and even the
Speaker 6: Eagle Forward, but it does extend the franchise into other
Speaker 6: areas that probably dilutes some of that narrative. You know,
Speaker 6: the narrative has been consolidate streamline leverage to what you
Speaker 6: do best. We saw that in the Permian. We saw
Speaker 6: that for natural gas as well, with Southwestern and Chesapeake
Speaker 6: likely getting together. So in this case, you have some
Speaker 6: pieces of that Marathon pie that don't really may not
Speaker 6: work as well within the broader Conico platform, but that's
Speaker 6: an opportunity set to divest some of those pieces and
Speaker 6: really concentrate around Texas and the Bakan. But the bocket
Speaker 6: itself is maturing as well. What you're really getting here
Speaker 6: is a ton of free cash flow as well. You know,
Speaker 6: this is consistent with the formula, the theme, the narrative
Speaker 6: that we've heard and seen in the past, the acquirer
Speaker 6: you U being a slightly higher multiple to do an
Speaker 6: all stock transaction by the company, bring those assets, those
Speaker 6: cash flow generating assets into the platform, lower the spend,
Speaker 6: generate that free cash flow, be able to boost the
Speaker 6: ordinary dividend and also the supplemental dividend, and support the
Speaker 6: stock by buying back shares as well. And in this
Speaker 6: case financially, financially, engineering wise, it actually works out right.
Speaker 3: Hey, Vince, I noticed there's a lot of M and
Speaker 3: A stuff going on in your energy world here. Do
Speaker 3: the regulators care about this stuff?
Speaker 6: Oh yeah, oh yeah, they definitely do care. They will
Speaker 6: take a look at this. Look we wrote about this
Speaker 6: this morning earlier this morning. This will take a They
Speaker 6: will take a serious look at this. They will increase
Speaker 6: the scrutiny of all of these deals. I know that
Speaker 6: they're looking to close this by four q twenty two,
Speaker 6: twenty four. I think that's kind of tight. We have
Speaker 6: seen other deals close Exxon closing Pioneer around that same
Speaker 6: time as the as As a projected closing date as well.
Speaker 6: But there are other deals that may be prolonged. And
Speaker 6: this will be a rather large entity. It's going to
Speaker 6: be roughly, you know, two point two million barrels a
Speaker 6: day of production, so it will get scrutiny. It will
Speaker 6: get scrutiny more broadly, but in general it's really not
Speaker 6: sizeable in those particular basins that they are consolidated.
Speaker 2: So to that point, do we see another bitter come in?
Speaker 2: So Bloomberg has reported that Devin was also interested in
Speaker 2: Marathon Oil. Do you think we see this happening now?
Speaker 6: Well, you know they were looking at it. When you
Speaker 6: work out the numbers, it would have been kind of
Speaker 6: difficult to make it work. But the increation here Conico
Speaker 6: Marathon probably works out best, actually works out better for
Speaker 6: Marathon holders. It's interesting because within the first three years
Speaker 6: of the deal, Conico suggests that they'll buy back as
Speaker 6: much stock as the entire market cap of Marathon, including
Speaker 6: a boosted dividend for legacy Conical holders, and new holders
Speaker 6: from the the marathon purchase.
Speaker 3: You know, it's an all stock deal, which all right,
Speaker 3: I get my M and A fee, Alex, but I
Speaker 3: don't get to do the high heel piece which chooses
Speaker 3: mynd here. So I'm not really happy with an all
Speaker 3: stocks it's evercore.
Speaker 2: I think that led kind of go on this one.
Speaker 7: Yeah.
Speaker 3: I looked at M A go, but they did not
Speaker 3: have the M and A advisors. They're a little bit
Speaker 3: slow on that.
Speaker 5: Vince.
Speaker 3: Are we going to see more of this? I mean
Speaker 3: we're going to be talking to you more about M
Speaker 3: and A in your space.
Speaker 6: Yeah, we've seen it across the Permian. We've seen it
Speaker 6: in natural gas as well. Haven't seen it as much
Speaker 6: in natural gas, but I think that'll pick up as
Speaker 6: well as we're seeing, you know, a big here for
Speaker 6: Henry Hub and various prices across the regions. When you
Speaker 6: have a commodity that is in the crosshairs or industry
Speaker 6: that is in the crosshairs of both civic and political leaders,
Speaker 6: the one way to survive is to consolidate and get bigger.
Speaker 6: If you're not able to grow organically.
Speaker 2: Who's still next on what to buy? Endeavor was one
Speaker 2: that's being taken out. There were a few others also,
Speaker 2: you Born, which I'm not that familiar with. It's a
Speaker 2: private company, but that was kind of on the list.
Speaker 2: Who are the top targets now.
Speaker 6: Well, I think you've mentioned the two top private entities
Speaker 6: in the Permian Look you can you can also have
Speaker 6: You can also see still more consolidation across Appalachia and
Speaker 6: also the Hainesville. There's some fragmented spaces there that can
Speaker 6: be consolidated, you know, Chesapeake and Southwestern. Likely it's done.
Speaker 6: Devin was looking at Marathon, you know, there's there they
Speaker 6: could still do. They could still do do something in
Speaker 6: the industry as well, trying to block up more space
Speaker 6: for their Permium platform. You have a lot of smaller
Speaker 6: players across the basin that still need to address their size. Again,
Speaker 6: this is about consolidating to grow inorganically because the big
Speaker 6: players they've blocked up the takeaway, they've blocked up the
Speaker 6: services at reasonable prices, so it becomes more difficult for
Speaker 6: some of the smaller players across gas and oil.
Speaker 3: All Right, Vince, thanks so much for joining us. We
Speaker 3: appreciate getting your insight and analysis there. Vince Piazza senior
Speaker 3: equity research. Channel's covering all the energy space for Bloomberg
Speaker 3: Intelligence again, Knicco bidding for Marathon Oil, another M and
Speaker 3: a trade in the oil patch. Good to be an
Speaker 3: energy M and a banker.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: I'm Alex Stee alongside Paul Sweeny and John Tucker. This
Speaker 2: is Bloomberg Intelligence Radio. We bring you all the top
Speaker 2: news and economics and finance and business through a lens
Speaker 2: of our Bloomberg Intelligence analysts. They cover two thousand companies
Speaker 2: and one hundred and thirty industries worldwide. Also, once an
Speaker 2: hour we go outside of Bloomberg Intelligence and get the
Speaker 2: read on the market. And today we're going to cattery
Speaker 2: to Seminetti, Senior and Vice president, Private Wealth Advisor, Morgan
Speaker 2: Stanley Private Wealth Management. She is joining us from Philadelphia.
Speaker 2: So we're looking at a market here and the excuse,
Speaker 2: I say excuse, we're seeing a sell off because the takedown,
Speaker 2: the two and the five year supply yesterday in the
Speaker 2: bond market was really tepidomy of the seven year today,
Speaker 2: and all of a sudden everyone's worried about is there
Speaker 2: enough demand for treasuries? And then that's why stocks are
Speaker 2: selling off? Is that narrative, right, Alex?
Speaker 7: You know, there is such a cross fire of news
Speaker 7: coming at us lately. Investors, you know, are not sure
Speaker 7: which side they're on. You know, on one day they're
Speaker 7: worried about the FED action, another day they're excited about
Speaker 7: the market. And what we are trying to keep them
Speaker 7: focused on is that the long term narratives should be
Speaker 7: the balance and the correct approach that should align with
Speaker 7: their goals. That the balance of their portfolios should not
Speaker 7: really be dependent on what is happening day to day
Speaker 7: with the treasury market or whether FED is going to
Speaker 7: have two rate cuts or three rate cuts or no
Speaker 7: cuts at all. It should be a longer term approach
Speaker 7: in making sure that the income and quality of their
Speaker 7: portfolios reflect their objectives of what they're trying to accomplish
Speaker 7: with their investments.
Speaker 3: All right, So given that Backdropkkaterina, when you talk to
Speaker 3: a perspective client, how do you and yet you know,
Speaker 3: say they've got a twenty plus year kind of investment horizon.
Speaker 3: Is it sixty forty stocks, bonds or have alternatives in there?
Speaker 3: What's kind of a monol portfolio looking for you guys
Speaker 3: more extaning these days?
Speaker 7: Well, pull the benefit of the current environment is for
Speaker 7: the first time in many years, we're actually seeing good
Speaker 7: yields in the short term investments, so our emergency points cash,
Speaker 7: you know, should be earning adequate yield. I mean, this
Speaker 7: is just such an incredible opportunity. The second part of
Speaker 7: it is really the quality and health of the fixed
Speaker 7: income portfolio. This is the time to really improve that side,
Speaker 7: to make sure that we are as diversified with fixed income,
Speaker 7: both in treasuries, municipal, corporate bonds, high yield preferreds as
Speaker 7: we can be, because this is a unique opportunity to
Speaker 7: really align the portfolios for twenty years out and take
Speaker 7: advantage of the higher quality and higher interest rate environment.
Speaker 7: And last, but not least, is really the stock part
Speaker 7: of the portfolio and the trap there is to fall
Speaker 7: into this excitement about AI and tech and all of
Speaker 7: a sudden, you know, we see portfolios that are lumps
Speaker 7: that are not balanced in the way that they should be.
Speaker 7: And while we believe in AI and the fact that
Speaker 7: it will increase profitability and will have a profound effect
Speaker 7: on the performance and like really efficiency of all the
Speaker 7: sectors and outside of technology, we think that portfolios need
Speaker 7: to remain balanced. So healthy profit taking, you know, would
Speaker 7: be good here.
Speaker 2: So going to the fixing come allocation. Is it credit
Speaker 2: risk or is a duration risk that's most appealing to you?
Speaker 7: Well, really both, Alex. You know, when when you look
Speaker 7: at the inverted yield curve, you know, we see very
Speaker 7: clearly that going out, you know, as much as we
Speaker 7: would love to, you know, lock in these higher rates
Speaker 7: for you know, as long as possible, you know, there
Speaker 7: is a time horizon there that is reasonable, which is,
Speaker 7: you know, somewhere there in the middle, we are concerned
Speaker 7: about the duration risk, but most important factor in our
Speaker 7: opinion is really the quality. This is the time where
Speaker 7: you know, we don't have to compromise the quality of
Speaker 7: the fixed income portfolios in order to get higher yields.
Speaker 3: How do you think about valuation here, Katerina and the
Speaker 3: equity market, So we've had obviously a big, big move
Speaker 3: in equity market prices off those October levels, and we've
Speaker 3: had good earnings certainly in that period as well, But
Speaker 3: have you earnings been enough to support kind of the
Speaker 3: valuations right here do you think.
Speaker 7: Well, there's a lot of pressure and earnings. The reality
Speaker 7: that we might be in the higher interest rate environment
Speaker 7: for longer is hitting both consumers you know, and their
Speaker 7: spending patterns, but also the profitability and the long term
Speaker 7: outlook before the companies. We're seeing the slow down in
Speaker 7: the labor market, we're seeing just general, you know, the
Speaker 7: slow down in the economy, and while with the stimulus,
Speaker 7: we think that the longer term outlook is actually quite positive,
Speaker 7: and we're positioning portfolios for quality, and we are looking
Speaker 7: at the sectors like industrials, consumer, stables, financials, and you
Speaker 7: want to make sure that the portfolios are well represented
Speaker 7: in the dividend things. We still are, of course concerned
Speaker 7: about the fact that this economy is very much showing
Speaker 7: the signs of the slowdown and are trying to make
Speaker 7: sure that portfolios are protected.
Speaker 2: So what is protection right now within the equity market, Alex.
Speaker 7: It's emphasis on quality and it always has been the case,
Speaker 7: but more so now. And what is unique about this
Speaker 7: market is the companies with very clear competitive positioning are
Speaker 7: somewhat evident. This is definitely a stock picker's market. This
Speaker 7: is where are owning the portfolio of good quality names
Speaker 7: that are showing healthy balance sheets and are positioned well
Speaker 7: to improve and continue to grow their earnings and really
Speaker 7: the support the valuations and that that we're seeing right
Speaker 7: now versus the broad index. This is the time that
Speaker 7: to definitely own this very individually crafted portfolios and pick
Speaker 7: individual names.
Speaker 3: Hey, Keterine, it it's an action year and you know
Speaker 3: likely there will be a lot of noise around that
Speaker 3: in the second half of the year. Here when you're
Speaker 3: actually question to you do your clients call you up
Speaker 3: and say what do I do for my portfolio? And
Speaker 3: an election year? Is that a concern for your clients?
Speaker 7: Well? Absolutely, And the questions that we get usually is
Speaker 7: how one or another outcome of the election would affect
Speaker 7: their portfolios and should we do anything at all to
Speaker 7: really position the portfolios for the outcome of the election.
Speaker 7: And of course, you know, our crystal ball is a
Speaker 7: little marky these days and it's so hard to predict,
Speaker 7: and we tell the investors that they really should keep
Speaker 7: their eye on the price that the balance and allocation
Speaker 7: of their portfolio should not be dependent on who is
Speaker 7: in the White House or you know, the really even
Speaker 7: the Fed action. It should be on the current economic environment.
Speaker 7: They should be well balanced. The asset allocation and diversification
Speaker 7: is really the key, you know to the long term
Speaker 7: ho look, but also rebalancing, you know, it's just staying
Speaker 7: that with that balance, right, you know, making sure that
Speaker 7: we take advantage of the buying opportunities in the market,
Speaker 7: that we take some growth of the table that makes
Speaker 7: sense and refocus it in the sectors that has not
Speaker 7: have not had you know, the run yet, which is
Speaker 7: really something that is going to ensure the longer term
Speaker 7: performance of the portoli.
Speaker 3: Is Katerina, thank you so much for joining us. Katerina
Speaker 3: sam Eddi, Senior vice president in Private wealth Management at
Speaker 3: Morgan Stanley.
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Speaker 2: Another story that we're obviously following that's really important is
Speaker 2: the latest and President Donald Trump's hush money trial. I
Speaker 2: gotta tell you, the traffic coming to work the last
Speaker 2: couple of days have been terrible, and I don't know
Speaker 2: if that's because of the trial, but it's something I'm kidding.
Speaker 3: Sounds a little bit dicey because I guess he's staying
Speaker 3: at Trump Tower. Yes, this makes sense there so I
Speaker 3: had to go to the store near there yesterday it
Speaker 3: was kind of congested.
Speaker 2: This is important stuff to know. We also want to know,
Speaker 2: like what happens now, so we have closing arguments, what's
Speaker 2: going on with the jury with the judge in terms
Speaker 2: of timing as well joining us in the studio as
Speaker 2: David boorakas he's a legal reporter for Bloomberg News. What
Speaker 2: is the TikTok? What happens now?
Speaker 8: The judge has been instructing the jury this morning on
Speaker 8: how to apply the law to the evidence. This was
Speaker 8: after more than eight hours of closing arguments yesterday. Once
Speaker 8: the judge finishes his instructions, the jury will begin to
Speaker 8: deliberate on thirty four felony counts against Donald Trump, and
Speaker 8: at some point in the near future will have a verdict.
Speaker 3: And he thought as to how long this type of
Speaker 3: trial may take in terms of deliberations, is measured in
Speaker 3: days or.
Speaker 8: Longer anyone It's anyone's guess. Really, I would think it
Speaker 8: would be at least a couple of days, but there's
Speaker 8: no way to know for sure. There's a lot of
Speaker 8: evidence to go through, there's some fairly complicated law to
Speaker 8: apply to that evidence. It seems to have been quite
Speaker 8: a serious jury who's been paying close attention. They have
Speaker 8: five weeks of testimony, twenty two witnesses to review, and
Speaker 8: an awful lot of exhibits.
Speaker 2: What has the judge told the jury about things today?
Speaker 8: The judge has told them essentially to put aside any
Speaker 8: political beliefs they have. He's also instructed them on how
Speaker 8: election law applies to this case, and that they can
Speaker 8: have any of the evidence read back to them or
Speaker 8: played back to them. He's essentially setting them up so
Speaker 8: that they can enter this little world where it's just
Speaker 8: them and they make a rational decision on guilt or innocence.
Speaker 8: On the thirty four counts, would these normally be felony counts.
Speaker 8: These counts of falsifying business records under New York law
Speaker 8: would normally be misdemeanors. But are elevated to felonies. If
Speaker 8: the jury decides that Trump intended to violate either state
Speaker 8: or federal election law or state tax law, he doesn't
Speaker 8: actually have to have accomplished that, only that he intended
Speaker 8: to do that. So a lot of this is going
Speaker 8: to turn on Donald Trump's intent, and the instruction is
Speaker 8: going to focus on how jurors can decide Trump's intent.
Speaker 3: So can he be found guilty or not guilty on
Speaker 3: some counts and some different on the other counts, or
Speaker 3: is it all kind of one big package.
Speaker 8: He definitely could be found guilty on some counts but
Speaker 8: not others. If the jury buys the prosecution's theory, which
Speaker 8: was that these repayments was to conceal damaging personal information
Speaker 8: that would have influenced the twenty sixteen election, it's more
Speaker 8: likely than not that he would be convicted on all accounts.
Speaker 8: But one way the jury might split the difference is
Speaker 8: that there are eleven checks involved. Two of them were
Speaker 8: signed by his former CFO, Ellen Weiselberg and by one
Speaker 8: of his two sons. The other nine were signed by
Speaker 8: Trump when he was president in twenty seventeen. And they
Speaker 8: may say, well, we'll convict on these nine counts because
Speaker 8: Donald Trump himself signed the checks. There's also counts involving
Speaker 8: invoices from Michael Cohen and vouchers that were in the
Speaker 8: Trump organization system. It may be that they conclude, dude,
Speaker 8: that Trump didn't know about those invoices or vouchers, but
Speaker 8: they he knew about the checks that he signed.
Speaker 2: Way, how did things go yesterday? How are closing arguments
Speaker 2: and how that kind of sets them up?
Speaker 8: It was a pretty dramatic day. It went on for
Speaker 8: a long time. It started at nine thirty and didn't
Speaker 8: end until eight pm last night, and it was kind
Speaker 8: of grueling to follow it all. But it was an
Speaker 8: excellent overview. I would say both sides were able to
Speaker 8: put their best foot forward and make the best arguments
Speaker 8: they had.
Speaker 3: What's the Is there an informed opinion out there in
Speaker 3: the legal world as how this might go in terms
Speaker 3: of a decision.
Speaker 2: Non partisan informed legal opinion?
Speaker 8: Yeah?
Speaker 3: Is there anything? Is there any kind of consensus in
Speaker 3: your reporting that you guys have found.
Speaker 8: I would say that generally legal analysts believe the case
Speaker 8: against Trump is strong, but it's hard to know whether
Speaker 8: there are supporters on the jury for an acquittal and
Speaker 8: so I think generally the consensus is that a conviction
Speaker 8: is more likely than an acquittal, but that a hung
Speaker 8: jury is a real possibility.
Speaker 2: And then I guess appeals will happen, but as jail
Speaker 2: time a real possibility.
Speaker 8: With this judge, I know, he.
Speaker 4: Really takes seriously, it seems white collar convictions, right.
Speaker 8: This judge, one Mershawan threatened a couple of times, and
Speaker 8: the second time more seriously to jail Donald Trump if
Speaker 8: he continued to violate a gag order against him, threatening
Speaker 8: witnesses or members of the prosecution staff. But he never
Speaker 8: actually put Trump in jail. And so that's the real
Speaker 8: open question that if he were convicted, would he actually
Speaker 8: sentence Trump to jail. Well, he faces up to four
Speaker 8: years in prison if convicted.
Speaker 2: Wow, A lot of unpack on that one. All right,
Speaker 2: we really appreciate it. Thank you very much. I know
Speaker 2: it's a lot to get through. David Mariaco's a Bloomberg
Speaker 2: legal reporter. Joining us.
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Speaker 3: All right in a fixed income markets, folks, I don't
Speaker 3: think I need to be a hero here. I can
Speaker 3: get the two year treasuring kid right around five percent.
Speaker 3: That's not bad, folks, And you think about where we
Speaker 3: were the last ten fifteen years. That's a that's a
Speaker 3: living I think. But maybe our next cast will get
Speaker 3: me to be a little bit more adventurous and take
Speaker 3: some credit risk out there. Jerry Kudzel, he's a group
Speaker 3: managing director and generalist portfolio manager TCW boy. He's been
Speaker 3: stuck at a bond market his entire career, by side sellside,
Speaker 3: no creativity whatsoever, no equities. Just Jerry, you're like mister
Speaker 3: bond person out there. So I guess TCW is a
Speaker 3: great place to be because you guys are a serious
Speaker 3: bond shop out there. So, Jerry, how about my two percent?
Speaker 3: How about my five percent on the two year treasury?
Speaker 3: Is that such a bad thing?
Speaker 5: It's it's not a bad thing. There's something for everybody,
Speaker 5: as as you mentioned. I mean five percent on a
Speaker 5: on a two year treasury risk free in a world
Speaker 5: where you know a couple of years ago, you would
Speaker 5: have you know, you you would have reached for one
Speaker 5: and a half percent in a ten year. Note that's
Speaker 5: not so bad. That's not so bad. I think we
Speaker 5: would we would agree. I think we would probably tell
Speaker 5: you not a bad time to think about, you know,
Speaker 5: moving out the curve a little bit, you know, three
Speaker 5: and five year but you know, earning five percent over
Speaker 5: two years for risk pre rate, that's that's pretty attractive.
Speaker 2: What do you make of what's going on right now?
Speaker 4: Though?
Speaker 2: Because the excuse is like, oh that two in the
Speaker 2: five year yesterday was not great. We get the seven
Speaker 2: year or forty four billion coming today at one that
Speaker 2: might not be that great, and the markets are trading
Speaker 2: heavy because that does that not hold water for you?
Speaker 5: No, it it might. I think, Look, technicals will be
Speaker 5: what they'll be in the short term, and you know,
Speaker 5: that'll maybe create a slightly better entry point, you know,
Speaker 5: for for for investors. I think what we would I think, Alex,
Speaker 5: what we would what we would say? You know, if
Speaker 5: you think about the real question is okay, if you're
Speaker 5: in a higher for longer environment, what might that mean?
Speaker 5: Essentially kind of kind of overall, I mean, whether whether
Speaker 5: you put a little bit of pressure and you can
Speaker 5: buy it to your note at five percent or four
Speaker 5: ninety five or you know, rates rates move five five
Speaker 5: bps higher. That's not really the story. The story is
Speaker 5: going to be when's the FED gonna move, what's the
Speaker 5: pace of the move, and what's that going to mean
Speaker 5: for you know, kind of for risk kind of broadly so.
Speaker 3: So, Jerry, what is the TCW call on the Fed?
Speaker 5: Well, our view is that simply inflation is is moving
Speaker 5: in the right direction. I think it's doesn't ever come
Speaker 5: down in a straight line, you know. I think as
Speaker 5: as we see it, I think simply stated and we
Speaker 5: and we as we look at it, we think that
Speaker 5: the jobs market, the employment market is just it's softening,
Speaker 5: you know, real time. Whether you think that's going to
Speaker 5: roll over and create a recession, and we think, why don't.
Speaker 7: We focus on that?
Speaker 5: What does that ultimately mean? Is that ultimately all inflation
Speaker 5: will need to be sustained by by wages, and real
Speaker 5: wages are you know, kind of scratching positive still at
Speaker 5: the moment, but you have a real uh, you have
Speaker 5: a real stretch consumer uh. And ultimately, our our view
Speaker 5: is that rates are going to come down, Uh, looks
Speaker 5: like that, you know, we're in a little bit of
Speaker 5: a higher for longer environment. Looks like it might get
Speaker 5: extended out a little bit, but ultimately, once the Fed goes,
Speaker 5: they're going to have to go at a pace that's
Speaker 5: faster than what was priced into the market today.
Speaker 2: So when you're looking at the curve, for example, how
Speaker 2: much duration do you want to take on, Like do
Speaker 2: you like fixed income for its yield or for its price?
Speaker 5: We would say that there's probably a little bit. It's
Speaker 5: a little bit of a nuanced answer. We like going
Speaker 5: out a little bit into the kind of intermediate part
Speaker 5: of the curves. You know, maybe as a as a
Speaker 5: bond guy, that's exciting, you know, Paul to mention, you know,
Speaker 5: in my career the bond market, my whole career, maybe
Speaker 5: not as an equity person, I'd say extending out the
Speaker 5: curve into kind of ten and thirty year duration, we're
Speaker 5: not as uh, not as excited about that. But I
Speaker 5: think in two and five year we think you're supposed
Speaker 5: to be moving out the curve at least into the
Speaker 5: intermediate part of the curve, and that could actually be
Speaker 5: a real that could give you kind of income today
Speaker 5: and then also give you a little bit of price
Speaker 5: appreciation to the extent that the curve does normalize, does
Speaker 5: begin to steepen out, and you do get to see
Speaker 5: some more cuts that are priced into the marketplace.
Speaker 3: Alex, when I was a sell side analyst, I'd go
Speaker 3: to TCW all time because they're like a really big account.
Speaker 3: You have to get their I I vote one day,
Speaker 3: I got off the elevator and the wrong floor with
Speaker 3: all the bond people is a disaster convexity.
Speaker 2: Duration god, and you ran. You fear for your life
Speaker 2: in the jargon world, I had to get back to
Speaker 2: the floor.
Speaker 3: We could talk pees and stuff like that. Jerry, do
Speaker 3: I take credit risk here? Or you know, people like
Speaker 3: you were telling me that the spreads are so tight,
Speaker 3: I'm really not getting paid for it. How do you
Speaker 3: think about credit and opportunities there?
Speaker 5: Yeah, that's that's the you know, that's really the question.
Speaker 5: The question is why is there all this demand for credit? Right,
Speaker 5: it'll be private credit. You have the public markets issue.
Speaker 5: It's almost at all time highs. It just about every
Speaker 5: segment of the marketplace, investment, great high yield, and so
Speaker 5: the question is technicals are really strong, but we think
Speaker 5: what's driving the interest in credit is really the risk
Speaker 5: re rate. It's not the eighty basis point you're receiving
Speaker 5: an investment great credit. It's not the three hundred basis
Speaker 5: points you're receiving in high yo credit. Actually, those historically
Speaker 5: look really hyph doesn't mean they can't get tighter, doesn't
Speaker 5: mean they can't sit here for quite some time, but
Speaker 5: they don't look attractive from a total return perspective. As
Speaker 5: a matter of fact, prospective returns when you consider starting
Speaker 5: spreads today, they.
Speaker 6: Get challenged all over time.
Speaker 5: So we don't think you're supposed to be reaching out
Speaker 5: the risk spectrum in credit broadly.
Speaker 6: That we do do think there are plenty of opportunities.
Speaker 5: It's just if you're trying to say broadly, what are
Speaker 5: you supposed to do?
Speaker 6: They moved out their.
Speaker 5: Risk spectrum, you know, into riskier parts of the credit markets.
Speaker 6: We don't think it's being compensated for that.
Speaker 2: I feel like I'm gonna ask a verbontan question, but
Speaker 2: typically when I'm looking at the risk free rate, that's
Speaker 2: the tenure. Is the tenure still the risk free rate?
Speaker 5: Yeah? Look, I think you have to think about you
Speaker 5: have to think about the entire curve at this point,
Speaker 5: and it's a it's a it's an interesting question given
Speaker 5: the pronounced and prolonged inversion of the curve and what
Speaker 5: that has meant or really hasn't meant, uh for the economy,
Speaker 5: and whether or not this inflation signal, you know, this
Speaker 5: recession signal is dead in terms of the inverted inverted curve,
Speaker 5: Whether or not our star is higher, you know, terminal
Speaker 5: rate and is all that so?
Speaker 6: So where so where are you?
Speaker 5: Where are you supposed to look? We still we still
Speaker 5: think that's we still think that's the right place to
Speaker 5: look out. But it's I think you have to you
Speaker 5: definitely have to consider all parts of the curve. And
Speaker 5: there's some plumbing changes that have happened historically and the
Speaker 5: you know, in the marketplace that we don't need to
Speaker 5: get into. But what we would say is you're probably
Speaker 5: you probably need to look at the whole curve. You
Speaker 5: got probably got to look a little bit more holistically today.
Speaker 3: All right, Jerry, thanks for so much for joining us.
Speaker 3: Really appreciate it. As always, Jerry Kutzel, Group managing Director
Speaker 3: and generalists over there at TCW Good Folks in Los Angeles.
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