WEBVTT - A Deep Dive Into Markets And Investing 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.320 at Bloomberg dot com slash podcast. All right, let's talk 0:00:22.760 --> 0:00:26.200 middle markets, and we love to chat with Lawrence Golob, 0:00:26.360 --> 0:00:30.080 CEO of Golob Capital about middle markets. You know, how 0:00:30.200 --> 0:00:31.720 are the middle markets doing? How are some of the 0:00:31.800 --> 0:00:34.519 small midsized companies doing. We always here about in these 0:00:34.520 --> 0:00:36.559 earning seasons some of the bigger companies. But let's take 0:00:36.560 --> 0:00:39.440 a look at what the middle market is doing. Lawrence, 0:00:39.440 --> 0:00:40.960 thanks so much for joining us here. I know you 0:00:41.000 --> 0:00:44.080 guys are out with a new report looking at the 0:00:44.120 --> 0:00:46.240 middle market of this economy. What are some of the 0:00:46.320 --> 0:00:50.600 key takeaways that you guys found great, very happy to 0:00:50.640 --> 0:00:53.440 be here, Thanks for having me. Gall of Capital is 0:00:53.479 --> 0:00:56.440 one of the largest lenders to medium sized businesses in 0:00:56.480 --> 0:00:59.200 the United States, and we put together this report to 0:00:59.320 --> 0:01:02.880 look at actual monthly results from the early months in 0:01:02.920 --> 0:01:05.759 a quarter to see what's going on in the real 0:01:05.880 --> 0:01:11.280 US economy, not projections, not conjecture. So our report is 0:01:11.319 --> 0:01:15.839 based on UH, the actual results from July and August, 0:01:15.880 --> 0:01:20.240 on revenue and on profitability. And what we see almost 0:01:20.280 --> 0:01:24.959 across the board is a booming degree of growth, booming 0:01:25.000 --> 0:01:29.119 growth and revenue, booming growth and profits. Very few one 0:01:29.240 --> 0:01:33.120 but not many warning signs UH and and this is 0:01:33.160 --> 0:01:35.920 one of the strongest periods of growth we've ever seen. 0:01:36.959 --> 0:01:40.720 Hang On, you say there's one warning sign, Well, we 0:01:40.800 --> 0:01:44.680 have in the aggregate about growth rate and revenue, about 0:01:45.360 --> 0:01:50.080 growth rate and profits, but not in industrials. Industrial profits 0:01:50.120 --> 0:01:55.160 are down. We're seeing margin contraction, and that margin contraction 0:01:55.240 --> 0:02:00.680 is especially alarming because revenue is still growing. I think 0:02:00.720 --> 0:02:05.680 we're seeing the impacts of UH declining productivity, of inflation 0:02:05.960 --> 0:02:10.959 in cost components. We're seeing the impact of shipping and 0:02:11.200 --> 0:02:15.840 logistic issues. In contrast to that. On the consumer side, 0:02:16.080 --> 0:02:21.360 consumer margins have been exploding up almost fiftuh in in 0:02:21.480 --> 0:02:24.840 this period, and I say it's a warning side for 0:02:24.919 --> 0:02:30.040 industrials because eventually those margin issues may start migrating over 0:02:30.160 --> 0:02:34.679 to other industry areas. So, Lawrence, you mentioned the supply chain, 0:02:34.680 --> 0:02:37.679 and we're hearing that from companies across the board on 0:02:37.720 --> 0:02:40.320 a global scale. Even Apple had to take down their 0:02:40.720 --> 0:02:43.920 iPhone sales forecast due to supply chain issues. I would 0:02:43.919 --> 0:02:47.680 think from middle market me don't have the buying clout 0:02:47.720 --> 0:02:50.320 in the marketplace that might be even more pronounced. What 0:02:50.360 --> 0:02:56.280 are you hearing my My message to listeners is do 0:02:56.400 --> 0:03:03.160 your Christmas shopping now. Grinches for Halloween and he's not leaving, 0:03:03.639 --> 0:03:08.040 and he may not even be leaving for Christmas. Of two. Yes, 0:03:08.600 --> 0:03:12.440 middle market companies that can't hire their own ships have 0:03:12.840 --> 0:03:17.040 certain disadvantages over some of the big box or or 0:03:17.360 --> 0:03:21.840 internet retailers. But fundamentally, what's going on is we have 0:03:22.200 --> 0:03:25.440 an excess of demand. Now that's good. People want to 0:03:25.440 --> 0:03:29.880 buy things, but we've pumped five trillion dollars of fiscal 0:03:29.960 --> 0:03:34.800 stimulus into the economy and nothing's going to change that. 0:03:34.920 --> 0:03:40.040 We have a lot of buyers chasing fewer goods than exist. 0:03:40.240 --> 0:03:44.840 I think that the the supply chain issues will vary 0:03:45.080 --> 0:03:49.680 from sector to sector, but you're going to see in 0:03:50.240 --> 0:03:53.840 why areas of consumer products this Christmas something similar to 0:03:53.880 --> 0:03:57.320 the toilet paper effect we saw when COVID first hit. 0:03:57.920 --> 0:04:00.640 That people are going to see some stock outs than 0:04:00.840 --> 0:04:04.640 other people are gonna try and really load up, and 0:04:04.840 --> 0:04:07.960 the stockouts are going to be worse than fundamentally called 0:04:08.000 --> 0:04:11.880 for it. I really have concerns about the degree of 0:04:11.960 --> 0:04:15.200 consumer disappointment coming this Christmas. It's going to be a big, 0:04:15.200 --> 0:04:18.520 big Christmas for gift cards. It's not the great the 0:04:18.560 --> 0:04:22.040 greatest time to try and ship in nine eleven and 0:04:22.160 --> 0:04:25.080 a garage full of Yukati's back from Germany to New York. 0:04:25.720 --> 0:04:28.599 What about the labor um shortages that we've been hearing 0:04:28.680 --> 0:04:32.720 so much about. Isn't that a concern as well? Sure 0:04:32.760 --> 0:04:35.760 it is, and it's a puzzle. We're down five million 0:04:35.880 --> 0:04:40.120 jobs from before covid uh and you would have thought 0:04:40.240 --> 0:04:44.599 there'd be, you know, a fair amount of demand for 0:04:44.640 --> 0:04:49.839 those jobs. But it's not just it's not just non 0:04:49.880 --> 0:04:54.080 managerial labor. It's across the board. Consulting firms are having 0:04:54.120 --> 0:04:58.880 trouble hiring. NBA's entry level jobs for college graduates are 0:04:58.920 --> 0:05:04.200 going begging. It's a little bit peculiar to to really 0:05:04.200 --> 0:05:08.080 get to the bottom of. And it also emboldens everybody 0:05:08.080 --> 0:05:10.039 who's got a job that they don't love to think 0:05:10.040 --> 0:05:13.400 about moving somewhere else. One of the statistics that came 0:05:13.440 --> 0:05:16.720 out and we're seeing this in our portfolio companies. Is 0:05:17.160 --> 0:05:21.120 that that employee turnover at all different levels is going up. 0:05:21.560 --> 0:05:27.080 That's a whack to productivity. It's great that wages and 0:05:27.600 --> 0:05:30.800 UH compensation are going up. That's good for Americans, it's 0:05:30.839 --> 0:05:34.400 good for American families. But it has to go hand 0:05:34.440 --> 0:05:39.080 in hand with productivity or drives more inflation. Lawrence, where 0:05:39.120 --> 0:05:44.560 are you, guys, goal of capital, looking to invest your capital? 0:05:44.600 --> 0:05:51.120 Put your money to work. So we're very we're very 0:05:51.120 --> 0:05:55.159 excited about industrial businesses that have control over their supply chains. 0:05:55.200 --> 0:05:57.960 We have proved a deal just two days ago, for example, 0:05:58.160 --> 0:06:01.440 after a lot of work and a deep live company 0:06:01.520 --> 0:06:07.240 that manufactures inputs for other manufacturing processes. But we established 0:06:07.240 --> 0:06:11.520 for ourselves that their supplies are domestic in the United States, 0:06:11.640 --> 0:06:14.560 that they're raw materials are shipped by train and truck, 0:06:15.120 --> 0:06:17.920 and that there's not a lot of commodity price wings. 0:06:18.040 --> 0:06:21.920 Take that same business with inputs coming from Asia, where 0:06:21.960 --> 0:06:25.560 you have the risk that COVID could spring back up 0:06:25.560 --> 0:06:27.760 in Asia, You've got the risk of shipping costs, you've 0:06:27.760 --> 0:06:30.560 got the risk of international commodities, and it would have 0:06:30.600 --> 0:06:33.560 been a very different picture. We do a lot of 0:06:33.600 --> 0:06:38.320 investing in business to business software companies where the projects 0:06:38.400 --> 0:06:41.680 where the software is designed to improve productivity, and that 0:06:41.720 --> 0:06:43.760 plays into a lot of the themes we just finished 0:06:43.800 --> 0:06:50.160 talking about, like shortages of skilled labor, tremendous high returns 0:06:50.240 --> 0:07:00.200 on investment, in efficiency, inefficiency driven capex through through technology 0:07:00.200 --> 0:07:04.240 through software. I think something we've seen and that our 0:07:04.279 --> 0:07:06.719 report is is giving good news about is in the 0:07:06.760 --> 0:07:10.480 healthcare field, where actually healthcare services companies have been doing 0:07:10.480 --> 0:07:13.920 a good job of controlling their labor costs, of of 0:07:13.960 --> 0:07:16.560 not letting their labor costs get out of whack with 0:07:16.640 --> 0:07:19.760 increases in productivity. That's actually quite a bullish thing, something 0:07:19.800 --> 0:07:22.480 that we haven't seen in some prior cycles. So we 0:07:22.520 --> 0:07:26.240 haven't seen the inflation hit the health care sector yet, 0:07:26.440 --> 0:07:29.640 and that's an area we continue to look at very favorably. 0:07:31.120 --> 0:07:33.400 All Right, well, great talking to you. Thanks so much 0:07:33.720 --> 0:07:36.720 for joining us, Lawrence. Always great to get your insight. 0:07:36.880 --> 0:07:40.480 Lawrence called there from gold Capital, one of the biggest 0:07:40.560 --> 0:07:44.120 lenders to the middle market in America, talking to us 0:07:44.240 --> 0:07:49.440 about um the economics of middle market business right now 0:07:49.560 --> 0:07:52.360 and giving us his outlook as well. This is Bloomberg. 0:07:55.840 --> 0:07:57.920 Let's bring in liz Anne Saunders. Now she is chief 0:07:58.200 --> 0:08:02.960 investment strategist Charles Schwab and um, you know they have 0:08:03.320 --> 0:08:06.120 trillions of dollars and assets under management, so good to 0:08:06.160 --> 0:08:08.160 listen to what she has to say, Lizzie, And let 0:08:08.160 --> 0:08:10.680 me first get your take on the CPI five point 0:08:10.720 --> 0:08:14.080 four percent year over year growth. It's the fastest we've 0:08:14.120 --> 0:08:18.880 seen since two thousand eight. Is inflation a concern? Uh, well, sure, 0:08:18.920 --> 0:08:21.640 and I think it's it's being reflected in more volatility 0:08:21.640 --> 0:08:24.200 in the market. There's lots of other risks that have 0:08:24.400 --> 0:08:27.720 manifested themselves in in some of the weakness we've seen recently, 0:08:27.800 --> 0:08:32.000 but inflation is clearly one of them. And although we're 0:08:32.000 --> 0:08:36.560 not seeing kind of an ongoing huge month over month, sirte, 0:08:36.679 --> 0:08:40.040 we're staying at very elevated levels and I think that 0:08:40.040 --> 0:08:42.760 that has become a risk factor for the market and 0:08:42.760 --> 0:08:45.120 really puts the FED, I think, in a bit of 0:08:45.120 --> 0:08:49.400 a pickle because they would certainly concede that supply chain 0:08:49.520 --> 0:08:52.679 bottlenecks as a driver of inflation is not something solved 0:08:52.760 --> 0:08:57.679 by tighter monetary policy. So uh, it's the uncertainty around 0:08:57.800 --> 0:09:02.200 monetary policy response is is elevating as well. Lauzanne given 0:09:02.240 --> 0:09:06.160 that the CPI number. Give us your thoughts about stagflation. 0:09:06.200 --> 0:09:08.040 It's something a lot a lot of people have had 0:09:08.040 --> 0:09:11.120 to go to Google and figuring out what stagflation is, 0:09:11.160 --> 0:09:13.240 because it's not something we're just gonna talked about for 0:09:13.240 --> 0:09:15.240 a while. You as the kid of kids, So what 0:09:15.240 --> 0:09:18.480 are your thoughts there, Lausanne? Well, I think of it 0:09:18.520 --> 0:09:22.320 almost stagflation with the lower case, since stagflation with an 0:09:22.360 --> 0:09:27.679 upper case s Clearly we're in um stagflation lowercase version 0:09:27.800 --> 0:09:31.000 right now, given that we're in an environment where growth 0:09:31.000 --> 0:09:35.920 expectations are rolling over. GDP now has gone from you know, 0:09:35.960 --> 0:09:38.480 six point three to one point three in the last 0:09:38.559 --> 0:09:42.560 few months. At the same time, elevating inflation is remaining elevated. 0:09:42.640 --> 0:09:47.280 But the kind of systemic wage price spiral environment that 0:09:47.320 --> 0:09:49.880 went on for years in the midst from the mid 0:09:49.960 --> 0:09:53.199 seventies to the early eighties, was driven by a lot 0:09:53.240 --> 0:09:55.920 of forces that are or at least not yet in 0:09:56.000 --> 0:09:58.680 place here. It was a very different structure in terms 0:09:58.720 --> 0:10:02.840 of the labor market, greater munization, productivity was quite weak, 0:10:02.880 --> 0:10:06.000 which is clearly not the case right now. We're not 0:10:06.200 --> 0:10:09.600 seeing systemic wage increases. But maybe most important, and this 0:10:09.679 --> 0:10:13.280 is the more esoteric thing to to watch for is 0:10:13.320 --> 0:10:16.920 that what what feeds an environment like the nineties seventies 0:10:17.000 --> 0:10:20.440 has a lot to do with psychology. The psyche changes it. 0:10:20.920 --> 0:10:24.840 It gives workers and and even companies a feeling of 0:10:24.920 --> 0:10:27.320 power in terms of either being able to ask for 0:10:27.520 --> 0:10:32.440 consistently higher wages, consistently being able to pass higher costs on. 0:10:32.600 --> 0:10:35.839 So it's sort of the psyche changes and the and 0:10:35.880 --> 0:10:40.560 the power um is created, and that's where the spiral 0:10:40.640 --> 0:10:44.320 kicks in. And I don't think we're there yet, but um, 0:10:44.360 --> 0:10:46.960 it's certainly something to watch for. We are, though, in 0:10:47.160 --> 0:10:52.480 um extremely cash rich environment. Luzan, And I know I've 0:10:52.520 --> 0:10:55.280 been talking to you about so much cash on the 0:10:55.360 --> 0:10:59.280 sideline for over a decade now, but it's getting a 0:10:59.360 --> 0:11:02.000 little ridicut you list. I mean, I was thinking you 0:11:02.080 --> 0:11:04.240 had two trillion and assis under management, and you have 0:11:04.320 --> 0:11:08.160 more like seven and a half trillion dollars and assets 0:11:08.200 --> 0:11:11.600 under management. There's a lot of money out there, yes 0:11:11.640 --> 0:11:15.640 and no. So I think sometimes the math is done 0:11:15.840 --> 0:11:19.000 incorrectly if you look if you're talking about, you know, 0:11:19.240 --> 0:11:23.760 cash on the sidelines, so to speak, within uh sort 0:11:23.800 --> 0:11:27.000 of the investor sphere. If you look at the amount 0:11:27.040 --> 0:11:30.040 of money and money market funds. Yes, the level is 0:11:30.160 --> 0:11:33.319 very high, at about four and a half trillion dollars, 0:11:33.360 --> 0:11:36.439 but relative to the value of the stock market, it's 0:11:36.520 --> 0:11:39.080 less than ten percent, which is at the very low 0:11:39.200 --> 0:11:42.440 end of the historical range. If you're talking about cash 0:11:42.440 --> 0:11:46.800 in the economy, that household tool using say the savings rate, Yes, 0:11:46.920 --> 0:11:49.520 it's it's nine percent or so, which is above the 0:11:49.800 --> 0:11:53.840 seven and a half or so recent average. But that's 0:11:53.880 --> 0:11:59.440 down about the way from the liquidity driven spike of 0:11:59.559 --> 0:12:02.560 last year to where it is now. And we can't 0:12:02.600 --> 0:12:05.520 assume that we're going to go back down to historic averages. 0:12:06.000 --> 0:12:10.720 We can stabilize area, we don't know whether households are 0:12:10.720 --> 0:12:13.080 going to want to keep a bit more of a 0:12:13.120 --> 0:12:16.160 savings cushion, So we just can't assume that we go 0:12:16.240 --> 0:12:19.160 all the way back to the long term norm. So 0:12:19.480 --> 0:12:23.200 I'm not sure that argument is as strong if you 0:12:23.280 --> 0:12:27.800 look at sort of relative numbers rate of change versus. 0:12:27.840 --> 0:12:32.760 We do see, though, in some assets, a lot of speculation, right, 0:12:32.760 --> 0:12:35.840 I mean the fact that a string of code that 0:12:35.880 --> 0:12:39.480 makes up a bitcoin is worth almost sixty thou dollars. 0:12:40.280 --> 0:12:43.040 I get that there are believers out there, and I 0:12:43.160 --> 0:12:46.840 love a good fad, but it's a little bit crazy, right, Well, 0:12:46.880 --> 0:12:49.959 I think it's going on in lots of other nontraditional 0:12:49.960 --> 0:12:56.679 assets classes, the meme stocks, heavily shorted tech, nonprofitable bankruptcy companies, stacks, 0:12:56.880 --> 0:13:01.080 crypto and uh yeah, there there's not a lot of 0:13:01.120 --> 0:13:05.160 fundamental basis for what's happening. The only bright sort of 0:13:05.200 --> 0:13:09.080 news about all that is that heightened speculative froth has 0:13:09.120 --> 0:13:14.120 been more concentrated in those non traditional areas. Then, and say, 0:13:14.160 --> 0:13:17.080 you know the leadership names within an index like the SMP, 0:13:17.280 --> 0:13:21.240 and that's I think what is very different today versus 0:13:21.240 --> 0:13:26.120 say period where the speculative froth was concentrated in the 0:13:26.240 --> 0:13:29.800 leadership names in the benchmark indexes of the SMP in 0:13:29.840 --> 0:13:33.400 the AZTEC In just about thirty seconds, what's the area 0:13:33.440 --> 0:13:35.640 that you're focusing on right now in terms of this market. 0:13:36.800 --> 0:13:39.040 I think you want to if you're if you're a 0:13:39.080 --> 0:13:42.000 stock picker, you want to be focused on quality. I 0:13:42.000 --> 0:13:44.600 think quality is going to reign in terms of leadership 0:13:44.640 --> 0:13:48.160 in these very uncertain times. I also think you really 0:13:48.200 --> 0:13:51.000 want to take advantage of the discipline of rebalancing given 0:13:51.040 --> 0:13:54.640 the massive leadership rotational swings that we're seeing I think 0:13:54.640 --> 0:13:58.559 that is probably the most beneficial discipline right now that 0:13:58.679 --> 0:14:02.600 investors can employ what is a much trickier market environment. Luzianne, 0:14:02.600 --> 0:14:04.480 thank you so much for joining us. We always appreciate 0:14:04.480 --> 0:14:07.840 getting your thoughts and wisdom. Lazanne Saunders, she's a chief 0:14:07.880 --> 0:14:11.680 investment strategist for Charles Schwab and again assets under management 0:14:11.720 --> 0:14:16.400 for Charles Schwab uh seven point five trillion with eight 0:14:16.520 --> 0:14:23.200 t so just extraordinary there. Now let's bring in Hondres Pairson. 0:14:23.320 --> 0:14:26.880 He's the chief investment officer of Global fixed Income over 0:14:27.000 --> 0:14:31.920 at now Vene and you must be honors a a 0:14:31.960 --> 0:14:35.640 dinner guest in high demand right now as everybody kind 0:14:35.680 --> 0:14:38.440 of freaks out about inflation and we start to see 0:14:38.520 --> 0:14:43.720 rates finally rise, the tenuere um getting up to one sixty. 0:14:43.840 --> 0:14:47.120 Now it's back down to one fifty five, but still, um, 0:14:47.160 --> 0:14:51.760 there's actual movement here. What do you make of it? Yeah? 0:14:51.800 --> 0:14:53.960 Thanks for having me on um. Yeah, there was so 0:14:54.040 --> 0:14:56.920 many exciting times, a lot of a lot of crosscurrents 0:14:56.960 --> 0:14:59.200 that's still playing to earn the fixing come markets. And 0:15:00.240 --> 0:15:03.680 we just released our que for outlook report and we're 0:15:03.720 --> 0:15:06.320 still we're still quite constructive for the rest of the year, 0:15:06.440 --> 0:15:08.560 particularly when we look at the kind of the credit 0:15:08.600 --> 0:15:11.440 parts of fixed income, we still think there are some 0:15:11.480 --> 0:15:15.480 opportunities for this reflation trade to continue. And at the 0:15:15.520 --> 0:15:18.280 core we still take some comfort here that you know, 0:15:18.320 --> 0:15:22.800 COVID cases, hospital rates are declining, and economic gride growth 0:15:22.880 --> 0:15:27.320 is holding up quite well, and certainly supply side issues 0:15:27.760 --> 0:15:30.160 is something that we're keeping a close eye on, but 0:15:30.520 --> 0:15:33.000 we do expect that to ease over time, and then 0:15:33.200 --> 0:15:37.480 finding inflation you know, obviously top of mind today. Um, 0:15:37.600 --> 0:15:40.560 we still continue to think it's it's going to not 0:15:40.800 --> 0:15:45.000 be fully transitory, but manageable and not too problematical markets. 0:15:45.040 --> 0:15:47.880 So that all in all kind of keeps us in 0:15:47.920 --> 0:15:51.120 a in a quieter positive light and quite constructive for 0:15:51.160 --> 0:15:53.280 the rest of the year. Well, Andrews were you know, 0:15:53.320 --> 0:15:55.960 the growth is certainly still very good, although we are 0:15:56.200 --> 0:15:59.080 past peak growth, but a lot of investors are concerned 0:15:59.080 --> 0:16:03.800 that we're and add our near peak valuation. So where 0:16:03.800 --> 0:16:08.640 do you see opportunities, I guess in your world, Yeah, 0:16:08.680 --> 0:16:12.120 I mean, certainly growth is expected to slow down when 0:16:12.160 --> 0:16:15.160 so some of the imp numbers come out to speak obviously, 0:16:15.240 --> 0:16:18.520 but it's still you know, global rates close to six 0:16:18.560 --> 0:16:22.080 percent for this year and for twenty two sort of 0:16:22.400 --> 0:16:24.880 five percent. That's still very healthy in our minds. So 0:16:25.760 --> 0:16:28.720 we're even kind of talking about how the markets are 0:16:29.200 --> 0:16:32.960 more or less priced um sort of for reality, not 0:16:33.320 --> 0:16:37.920 price for for perfection. And we look at fundamentals being 0:16:38.000 --> 0:16:42.320 quite strong. Again, I mentioned economy growing um and earning 0:16:42.320 --> 0:16:45.160 school for corporation is very healthy. So what we what 0:16:45.240 --> 0:16:48.440 we're focusing in on right now for opportunities is basically 0:16:48.920 --> 0:16:52.640 basically sort of looking at corporate credit risk, preferring that 0:16:52.760 --> 0:16:56.280 over the governments and mortgages. We like lower quality over 0:16:56.360 --> 0:16:59.840 higher quality. In other words, were comfortable dipping down and 0:17:00.000 --> 0:17:03.560 to the lower rated kind of opportunities. We still kind 0:17:03.560 --> 0:17:06.639 of prefer shorter duration over longer duration. We do expect 0:17:06.720 --> 0:17:08.600 rates to be grinding higher and for the rest of 0:17:08.600 --> 0:17:11.840 the year, but all in all a view is uh, 0:17:12.040 --> 0:17:15.200 it's really more of a coupon clipping kinter top environment 0:17:15.320 --> 0:17:19.959 more or less a income carry kind of play. So 0:17:20.000 --> 0:17:22.760 we're comfortable reaching for a little bit of yield and 0:17:22.880 --> 0:17:26.440 certainly what spread levels are not exciting. We are comfortable 0:17:26.480 --> 0:17:32.160 going after acid classes like laverge loans, preferred securities, certain 0:17:32.200 --> 0:17:35.280 parts of the emerging market, so again kind of going 0:17:35.359 --> 0:17:38.080 after that credit part. The plus sectors of fixed in 0:17:38.119 --> 0:17:41.959 commerces are preferred approach at this point. And you know, 0:17:42.600 --> 0:17:46.920 we hear similar um a sentiment from Howard Marks right 0:17:46.920 --> 0:17:50.000 now as well. You're not then at all worried about 0:17:50.640 --> 0:17:54.919 a wave of defaults. Even though people are talking stagflation. 0:17:55.480 --> 0:17:59.000 No one's really talking about the economic economic growth grinding 0:17:59.040 --> 0:18:03.520 to a halder or been coming close to contracting. No, 0:18:03.760 --> 0:18:06.240 we're we're we're not worried about that at this point. 0:18:06.320 --> 0:18:10.320 And the learning's growth again for corporations very healthy. The 0:18:10.400 --> 0:18:13.960 faults have been coming down to record levels. Expect to 0:18:13.960 --> 0:18:16.800 be below one percent for for this year kind of 0:18:16.800 --> 0:18:18.480 one in a quarter, one and a half or two 0:18:18.520 --> 0:18:22.479 thousand twenty two. You know, rating agencies obviously have some 0:18:22.560 --> 0:18:24.720 influence in the fixed income space, and they have been 0:18:24.800 --> 0:18:29.520 upgrading their ratings significantly more than we're seeing downgrades, and 0:18:29.520 --> 0:18:32.400 and all in all, you know, start plaction. Obviously, it's 0:18:32.400 --> 0:18:34.840 a topic that that you hear a lot about right now. 0:18:34.920 --> 0:18:38.240 Our view is that with again economic growth being as 0:18:38.280 --> 0:18:42.160 healthy as it is right now, um, that's really not 0:18:42.400 --> 0:18:45.199 the top of mind on our end. So you know, 0:18:45.240 --> 0:18:47.200 we cannot come back to the fact that we're seeing 0:18:47.520 --> 0:18:52.280 healthy growth all in all, supply chains obviously being a 0:18:52.320 --> 0:18:55.080 bit concerning and taken longer to kind of play through 0:18:55.160 --> 0:18:59.800 than I think most everybody was expecting, but the demand 0:19:00.080 --> 0:19:02.240 remains very, very strong, and we think that's going to 0:19:02.320 --> 0:19:05.399 be addressed over time. And as I mentioned, inflation is 0:19:06.440 --> 0:19:09.159 mostly going to be transitory in our minds. So so 0:19:09.200 --> 0:19:12.280 all in all, I think staculations, you know, it's really 0:19:12.320 --> 0:19:14.800 not a concern of ours, and defaults continues to be 0:19:14.920 --> 0:19:18.240 very low. So the fundamentals continue to be to be 0:19:18.359 --> 0:19:20.640 very strong here if you take kind of step back 0:19:20.720 --> 0:19:23.800 and try to ignore, you know, many of the cross 0:19:23.840 --> 0:19:26.639 currents that we're dealing with, and that's why we remain 0:19:26.760 --> 0:19:30.200 quite constructive, particularly on the credit side of fixing. Coman Andrews. 0:19:30.240 --> 0:19:32.880 You mentioned emerging markets. Talk to us about China. Hear 0:19:33.080 --> 0:19:37.520 lots of changes there from our governmental regulatory perspective. How 0:19:37.520 --> 0:19:41.919 do you you China? Yeah, China, it's certainly, you know, 0:19:42.000 --> 0:19:44.600 top of mind for for all investors at this point, 0:19:44.720 --> 0:19:47.840 and you know, key focus of the past few weeks, 0:19:47.840 --> 0:19:53.720 particularly around the everground kind of type ongoing uncertainty. You know, 0:19:53.880 --> 0:19:57.520 I would say, you know, we we still are quite 0:19:57.560 --> 0:20:00.520 constructive in China overall. It's particularly to look at the 0:20:00.560 --> 0:20:03.280 sovereign kind of have level of Chinese government. Lawns were 0:20:03.280 --> 0:20:06.760 actually quite we quite like them. We're not too concerned 0:20:06.800 --> 0:20:09.240 about that. If anything, you know, a little bit of 0:20:09.240 --> 0:20:12.560 a flight to safety there and our mind. Um, you know, 0:20:12.560 --> 0:20:15.879 it could be quite attractive and there is diversification and 0:20:16.520 --> 0:20:21.000 not quite as correlated to other parts of the fixed 0:20:21.000 --> 0:20:24.040 income space. So you know, certainly from the sovereign side, 0:20:24.080 --> 0:20:28.040 require comfortable. On the corporate side, you know, we we're 0:20:28.119 --> 0:20:30.720 keeping of our clothes eye am that we prefer to 0:20:31.480 --> 0:20:33.280 take a little bit of await and see to make 0:20:33.320 --> 0:20:35.000 sure that we get a little bit of a better 0:20:35.040 --> 0:20:37.000 feel for how they're going to be handled. Ever grand 0:20:37.040 --> 0:20:41.320 but um, there's still a lot of moving parts in that. Okay, Anders, 0:20:41.320 --> 0:20:43.240 thank you so much for joining us. We always appreciate 0:20:43.240 --> 0:20:47.520 getting your global perspective. And Parson, chief investment Officer of 0:20:47.640 --> 0:20:51.560 Global fixed Income for Nouvine, another big, huge asset manager 0:20:51.640 --> 0:20:55.520 one point to trillion dollars in assets under management. Well 0:20:55.520 --> 0:21:02.400 more coming up. This is Bloomberg Markets. Good morning. Looking 0:21:02.400 --> 0:21:04.239 at the markets here, kind of mixed obviously as we 0:21:04.520 --> 0:21:08.280 head into the teeth of this third quarter earnings. Next year, 0:21:08.680 --> 0:21:10.320 it looks like tax rates are going up, and what 0:21:10.359 --> 0:21:13.199 does that mean for individual investors now is they think 0:21:13.240 --> 0:21:16.200 about their portfolio. Let's check in with Dan Griffin. He's 0:21:16.320 --> 0:21:19.280 senior vice president and director of Wealth Strategy at Huntington's 0:21:19.280 --> 0:21:23.560 Private Bank based in North Canton, Ohio, the great state 0:21:23.560 --> 0:21:25.840 of Ohio. Dan, thanks so much for joining us again 0:21:25.920 --> 0:21:29.359 here talk to us about taxes. It appears at taxes 0:21:29.840 --> 0:21:32.280 are going up. We don't know by how much. So 0:21:32.320 --> 0:21:35.560 when you talk to your clients, what do you tell 0:21:35.600 --> 0:21:38.840 them about taxes and tax planning. Well, glad to be here, 0:21:38.880 --> 0:21:40.800 Matt and Paul, and thanks for having me. It's a 0:21:41.240 --> 0:21:44.000 it's a great question. It's a wonderful thing to be 0:21:44.040 --> 0:21:46.800 able to go into another year end here with a 0:21:46.800 --> 0:21:49.480 little bit of frantic ear end planning. As everyone remembers 0:21:49.560 --> 0:21:52.439 last year, we were in a similar situation as we 0:21:52.440 --> 0:21:55.320 can think back to people's concern over what was going 0:21:55.359 --> 0:21:57.399 to happen with the potential flip in the Senate and 0:21:57.680 --> 0:21:59.200 we didn't know what was going to happen there, and 0:21:59.600 --> 0:22:01.440 I fear that we're kind of in the same position 0:22:01.520 --> 0:22:04.040 right now. So what we're telling people is be prepared, 0:22:04.080 --> 0:22:06.199 make sure you've got good advisers in place, make sure 0:22:06.240 --> 0:22:08.480 you've got a plan in place, and make sure that 0:22:08.520 --> 0:22:11.120 you're prepared to be flexible around what could be any 0:22:11.200 --> 0:22:14.920 number of responses from Washington that could happen. Is there 0:22:14.920 --> 0:22:19.720 anything you can do to limit your your income hit 0:22:20.080 --> 0:22:23.679 to taxes? I mean, obviously, if you've got money after 0:22:23.800 --> 0:22:26.920 income taxes lying around, you can put it into muni's 0:22:26.920 --> 0:22:29.720 and there a number of other things. But in terms 0:22:29.720 --> 0:22:34.440 of a salaried woman or man, is there anything besides 0:22:34.440 --> 0:22:37.240 an IRA that can be done? Oh? Sure. I think 0:22:37.359 --> 0:22:38.920 for a lot of people, what you might want to 0:22:38.960 --> 0:22:42.160 be thinking about would be obviously reductions in this year 0:22:42.200 --> 0:22:44.720 and then reductions in the future. The folks that were 0:22:45.080 --> 0:22:48.239 most concerned about and that we're working hardest to advocate for, 0:22:48.640 --> 0:22:50.080 are the people who are going to end up in 0:22:50.119 --> 0:22:53.840 that highest bracket position. And ironically a lot of our 0:22:53.880 --> 0:22:56.440 clients think that they're in the highest tax bracket, but 0:22:56.480 --> 0:22:58.359 they're not. So that's one of the first things to 0:22:58.400 --> 0:23:00.919 think about is even with the proposals that are on 0:23:00.960 --> 0:23:03.119 the table, there are many people who aren't going to 0:23:03.160 --> 0:23:07.679 be affected. It's probably only about nine hundred thousand households 0:23:07.680 --> 0:23:10.760 in the United States that are actually paying taxes at 0:23:10.760 --> 0:23:13.000 the highest brackets. So the first thing that we suggest 0:23:13.000 --> 0:23:15.520 to people is, let's make sure that you're affected. There 0:23:15.560 --> 0:23:18.160 are plenty of folks around the country club tables who 0:23:18.320 --> 0:23:20.960 complain about being in the highest tax brackets and may 0:23:21.000 --> 0:23:23.200 not actually be there, and so that's the first thing, 0:23:23.320 --> 0:23:26.520 is feeling feeling out whether or not your tax providers 0:23:26.520 --> 0:23:28.680 can put you in that position. So that's one of 0:23:28.720 --> 0:23:31.480 the first things that we do. Dan, We're going into 0:23:31.560 --> 0:23:34.480 this third quarter earning season a lot of folks saying 0:23:34.520 --> 0:23:36.600 this is really critical for the market. How do you 0:23:36.640 --> 0:23:40.120 feel about these markets here? Are you concerned about valuation 0:23:40.440 --> 0:23:44.639 or are you still kind of all in for your clients. No, 0:23:44.800 --> 0:23:49.119 we're still uh cautiously optimistic. I think we're in a 0:23:49.160 --> 0:23:52.879 position where we are still investing post recession with a 0:23:52.960 --> 0:23:56.159 real recognition that there's going to be some inflation risks. 0:23:56.440 --> 0:23:58.000 You know. In the position I'm in, I get to 0:23:58.119 --> 0:23:59.879