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Speaker 2: We do also want to check in on geopolitics. There's
Speaker 2: a lot going on. You heard certainly Joe and Kelly
Speaker 2: talking about some of it on the US side, but
Speaker 2: as we broaden it out, there are a lot of
Speaker 2: things going on, among them US President Joe Biden criticizing
Speaker 2: the extent of Israel's military campaign in Gaza as tension
Speaker 2: builds over Israeli plans to push into Rafa, where more
Speaker 2: than one million people have sought refuge.
Speaker 3: He made.
Speaker 2: The President making the comments last night in a wide
Speaker 2: ranging press conference at the White House.
Speaker 3: Here's what he had to say.
Speaker 4: The conduct of the response in Gaza, in the Gaza
Speaker 4: strip has been over the top. I talked to bb
Speaker 4: to open the gate. On the Israeli side, I've been
Speaker 4: pushing really hard, really hard to get humanitarian assistants into Gaza.
Speaker 5: That was, of course, US President Joe Biden criticizing the
Speaker 5: extent of Israel's military campaign in Gaza that was last
Speaker 5: night at the White House. The president's comments marked an
Speaker 5: escalation in his criticism of Prime Minister Benjamin Netanyahu's prosecution
Speaker 5: of the war against Tamas. For more, we turn now
Speaker 5: to Mark Champion. He's a Bloomberg Opinion international affairs columnist.
Speaker 5: He joins us on Zoom in London. Mark, we want
Speaker 5: to go around the world with you, but we do
Speaker 5: want to start in Israel this afternoon. The significance of
Speaker 5: President Biden coming out and saying this, it certainly seems
Speaker 5: like he's continuing on a path of becoming more critical
Speaker 5: of Israel. What did you make of it?
Speaker 6: Yeah, it's you know, he's been on a bit of
Speaker 6: a trajectory where, you know, he began after October seventh saying,
Speaker 6: you know, we are with you no matter what. But
Speaker 6: as the casualties and the destruction in Gaza have increased,
Speaker 6: you've seen that, you know, an increasing the cautious tone
Speaker 6: to creep in with a lot of focus on you know,
Speaker 6: trying first of all to get aid in and then
Speaker 6: to get you know, focused on getting the hostages out,
Speaker 6: and increasingly a focus on getting a pause at truce
Speaker 6: in the fighting. And you know there are negotiations continuing,
Speaker 6: although we don't seem to be very close at the moment,
Speaker 6: certainly nothing imminent. So yes, this is you know, another
Speaker 6: step up. At the same time, you know, he hasn't
Speaker 6: said anything about restricting arm seales to Israel or anything
Speaker 6: of that sort. So nothing really substantive has changed yet.
Speaker 2: Right kind of gun speaking louder than words. And I
Speaker 2: do think about that, right Mark, in terms of whether
Speaker 2: it's support of Israel or whether it's support of Ukraine.
Speaker 2: What the US does says a lot about their policy.
Speaker 2: Is at a fair conclusion.
Speaker 6: Yeah, absolutely, and you know it is is critical. Probably
Speaker 6: The thing is that Israel, the conflict in Gaza is
Speaker 6: on a different scale, and you know, the opponent is
Speaker 6: on a totally different scale from what Ukraine faces in Russia.
Speaker 6: So you know, Israel can get by without a lot
Speaker 6: of military a being additional a being pumped in from
Speaker 6: the US. With Ukraine, that's a whole different ballgame.
Speaker 5: Well, let's stick with Israel for one more minute and
Speaker 5: talk more about the future of what happens in the
Speaker 5: Gaza strip. I mean, with President Biden speaking like this,
Speaker 5: is there a chance that Israel does scale back what
Speaker 5: it's doing.
Speaker 6: We haven't seen any sign so far that Nyahu is
Speaker 6: very receptive to these kinds of nudges and hints, and
Speaker 6: you know, he has done something so that the US
Speaker 6: wanted he has. You know, he did have a seven
Speaker 6: day pause earlier on in the conflict. He did get
Speaker 6: more aid in at a time when there was virtually
Speaker 6: nothing getting in. So the US has had some impact,
Speaker 6: but it's relatively limited. And I think there's a lot
Speaker 6: of concern now because they're really you know, once you
Speaker 6: move on Rafa, which is right on the Egyptian border,
Speaker 6: it is the place where people you know, would be
Speaker 6: able to get out if the border was opened. Once
Speaker 6: you move on there, there's really nowhere left for you know,
Speaker 6: the people of Gaza to go, and I think that
Speaker 6: is where the concern is. Egypt's now extremely concerned that
Speaker 6: this could end up with people just storming the border
Speaker 6: to get out of Gaza and get to safety on
Speaker 6: the Egyptian side of the border with it, which they
Speaker 6: are very very determined and not to have happened.
Speaker 2: Hey, Mark, as you just noted a moment ago, the
Speaker 2: scale and risk of what faces Israel versus what faces Ukraine.
Speaker 2: It's different, and I want to go there a little
Speaker 2: bit more deeper in terms of Ukraine versus Russia. Right now,
Speaker 2: Vladimir Putin Russian Vladimir Putin giving an interview to Tucker Carlson.
Speaker 2: It's very clear what his intentions are here. Correct, You're
Speaker 2: right about this in a Bloomberg opinion column.
Speaker 1: Yeah.
Speaker 6: Absolutely. I mean, this was a great opportunity for Putin,
Speaker 6: gifted to him by Chucker Carlson. He got to talk
Speaker 6: for well over two hours and to reach a big
Speaker 6: audience in the United States, a receptive audience in general,
Speaker 6: and he was able to set out all of his
Speaker 6: narrative about you know, why he's in Ukraine, why he
Speaker 6: did it, what the implications are for the United States,
Speaker 6: what he thinks the United States should do and the
Speaker 6: Europeans should do, et cetera. And so this was quite
Speaker 6: valuable for him. You know how much impact it will
Speaker 6: have in the end, I don't know, but you know,
Speaker 6: he got more than two hours to speak and didn't
Speaker 6: really get any hard questions or any pushback of any sort.
Speaker 5: Did you learn anything about Vladimir Putin or Russia's intentions.
Speaker 5: In that interview, Mark you followed the conflict and the
Speaker 5: region very closely for years.
Speaker 6: Yeah, no, there was really nothing new here for anybody
Speaker 6: who follows the conflict closely. What I found interesting was,
Speaker 6: you know that the way in which put In approached it.
Speaker 6: So when Tucker carlsm asked him a sort of a
Speaker 6: very leading question saying, you know, you thought that the
Speaker 6: United you had to invade Ukraine in February twenty twenty
Speaker 6: two because you thought the United States might be coming
Speaker 6: to it attack you in Russia. So why did you
Speaker 6: think that? And put In essentially just ignored that question,
Speaker 6: which you would have thought was a log where he
Speaker 6: could then, you know, come back and say, yes, we
Speaker 6: were forced to do this by NATO, et cetera. It's
Speaker 6: a team that he's you know, would come back to
Speaker 6: in the interview, and he's talked about endlessly. But he
Speaker 6: spent the next half an hour in basically a monologue
Speaker 6: on Russian Ukrainian history and describing why it is that he,
Speaker 6: in his view, Ukraine is not a country, and why
Speaker 6: it is that much of the territory that's current Ukraine
Speaker 6: he believes is in fact Russia so you know, that
Speaker 6: to me was quite telling, and I think, you know,
Speaker 6: for people who don't follow it very closely and hear
Speaker 6: all this stuff about, you know, how NATO pushed him
Speaker 6: to do it, I think that was actually quite worth
Speaker 6: listening to.
Speaker 2: I mean, this is bottom line mark right about territorial
Speaker 2: conquest for Russian President Vladimir Putin. Again there, I think
Speaker 2: folks sometimes who are far away from it, they're not
Speaker 2: over in Europe and think, Okay, how does this impact me?
Speaker 2: Although we know that there's been some impact, certainly we've
Speaker 2: talked about it in terms of companies and other issues
Speaker 2: in terms of the markets. But having said that, you
Speaker 2: do wonder if ultimately President Putin wins here, then what's next?
Speaker 3: Correct?
Speaker 2: And just got about thirty forty seconds here.
Speaker 1: Yeah.
Speaker 6: Absolutely, I mean he was asked by Carson and he
Speaker 6: came back and said, you know, it's ridiculous.
Speaker 7: Why would I you.
Speaker 6: Know, trying to go into the Baltic States or anywhere else.
Speaker 6: You know, this is unique. But unfortunately he has a long,
Speaker 6: long history of saying I'm not going to do stuff.
Speaker 6: I'm not going to next crime here, I'm not going
Speaker 6: to you know, go here or there. I'm not going
Speaker 6: to invade Ukraine and then he does it, so you know,
Speaker 6: I think one needs to exercise caution.
Speaker 2: Well, as you noted a comment about fact checking, a
Speaker 2: full fact check of the interview would take several columns.
Speaker 2: So it's important right that we understand exactly what's going on,
Speaker 2: you insight, so appreciate it. Mark Champion again with US
Speaker 2: international affairs columnist at Bloomberg Opinion. Check out his column
Speaker 2: on The Bloomberg and at Bloomberg dot com slash Opinion.
Speaker 3: This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: This is the season, tax season and a player, big
Speaker 2: player in the space. H and R Block reported earnings
Speaker 2: this past week. On Wednesday, shares though did fall nearly
Speaker 2: eleven percent, their biggest inter day drop since the onset
Speaker 2: of the pandemic in March of twenty twenty, after the
Speaker 2: company reported second quarter results. The stock, though I should
Speaker 2: point out, by the way, gaining thirty two percent last
Speaker 2: years all three percent year to date. It's up about
Speaker 2: three percent today and it did finish off its lows
Speaker 2: on Wednesday. So we're delighted to actually get into the
Speaker 2: business with Jeff Jones once again, President CEO. H and
Speaker 2: R Block on Zoom from Kansas City, Missouri. Or should
Speaker 2: I say Mazura because it so clear in your red
Speaker 2: sweatshirt if you will, who you are rooting for. I
Speaker 2: was going to say that to the end, Jeff, but
Speaker 2: it's nice to be transparent and get it out there.
Speaker 3: I guess you're excited.
Speaker 8: About you Friday and Kansas City Carrol understand.
Speaker 2: Understand, Hey, listen, how are you talk to us little
Speaker 2: bit about the business and what you guys saw last
Speaker 2: quarter and how things are evolving into the current quarter.
Speaker 8: Yeah, no, great commentary to open. We had a really
Speaker 8: strong Q two. We're off to a great start to
Speaker 8: our fiscal year and we're really seeing growth in all
Speaker 8: facets of the business, small business tax. We had a
Speaker 8: really nice extension filing season. Our Emerald Advance product performed
Speaker 8: very well, which actually speaks to some of the macro
Speaker 8: economic needs of the consumer, and our spruce product is
Speaker 8: performing well. So the stocks kind of made almost a
Speaker 8: round trip since we announced on Wednesday, But we're feeling
Speaker 8: really well positioned for for our super Bowl season, which
Speaker 8: is tax season.
Speaker 3: Well get it.
Speaker 2: We'll get into some of the products because there might
Speaker 2: be some folks who are listening, like I'm not familiar
Speaker 2: with the Emerald Advanced product, but that's where you guys
Speaker 2: essentially give some loans right in advance of a file.
Speaker 2: Give us, give us a little bit more on that
Speaker 2: color and what that tells you about maybe what's going on.
Speaker 3: We're broadly among.
Speaker 2: Main street consumers, individuals and their financial health.
Speaker 8: Absolutely so. Our Emerald Advance product is a short term
Speaker 8: loan that we offer to consumers in the holiday shopping season.
Speaker 8: So last fall in our Q two, we saw a
Speaker 8: twenty five percent increase in loan volume this year. And
Speaker 8: so you know, we've talked so many times together about recession.
Speaker 8: Is it happening, is it not? How's the consumer? But
Speaker 8: when we see the consumer seeking these products, it really
Speaker 8: speaks to the fact that in a you know, an
Speaker 8: everyday life kind of way, they are in need of cash.
Speaker 8: And that's the role at the Advanced Product place.
Speaker 5: Jeff, give us some more insight and color there, because
Speaker 5: we're right now flirting with records again. On the S
Speaker 5: and P five hundred, the economic data continues to come
Speaker 5: in very strong. We know there are more jobs out
Speaker 5: there than people who are looking for jobs. Right now,
Speaker 5: the unemployment rate is sub four percent. Does that not
Speaker 5: match with what you're seeing from your customers.
Speaker 8: This is the irony I think we've all been trying
Speaker 8: to contend with now for several years. I mean, I'm
Speaker 8: starting to believe that these broad labels we have about
Speaker 8: inflation or economy, even we see Middle America, they're just
Speaker 8: too broad to speak to the everyday reality of consumers.
Speaker 8: And so I don't dispute all of that economic data
Speaker 8: that we see, But we serve twenty million people a year,
Speaker 8: hard working Americans. We sit across a desk from them,
Speaker 8: or they use our software product. And when we see
Speaker 8: things like taking an Emerald Advance loan at a substantially
Speaker 8: higher rate, or we're in the season now for refund advances,
Speaker 8: or how quickly do people file their tax return, those
Speaker 8: are all very tangible indications that the consumer needs cash.
Speaker 2: Well, lat I think we go ahead, No, Jack, please finish.
Speaker 8: I was just going to say, I think you know
Speaker 8: we're learning that you can look at macro indicators and
Speaker 8: those certainly provide direction from a company perspective. But every
Speaker 8: single day, you know how the consumer is needing cash
Speaker 8: where they're spending it. You know, we we put out
Speaker 8: this report last fall called the Outlook on American Life,
Speaker 8: and this gave us really deep insight about Middle America.
Speaker 8: And the first thing we learned was there isn't one
Speaker 8: Middle America. We saw a gen z and a millennial
Speaker 8: Middle America, and we saw the boomer Middle America very
Speaker 8: different attitudes and mindsets toward jobs and wage growth and employment.
Speaker 8: You know, more more millennials than ever getting a second job.
Speaker 8: So yes, we have to pay attention to the macro,
Speaker 8: but obviously we see our customer behavior every single day.
Speaker 2: It's why we like talking to you, because we dig down.
Speaker 2: You know, you mentioned the Emerald Advance product, so loans
Speaker 2: of twenty five percent.
Speaker 3: You saw on loan revenue the.
Speaker 2: Spruce product, right that allows somebody to get access to
Speaker 2: their paycheck. Right a couple of days earlier, are you
Speaker 2: also seeing an uptick in that use?
Speaker 8: Spruce is really off to a nice start this year,
Speaker 8: and you know, there are several things about spruce that
Speaker 8: I think are what's resonating. Remember this product, it's only
Speaker 8: its second year in market, and so you know, we're
Speaker 8: offering the consumer to get their federal tax refund up
Speaker 8: to six days early when they deposited on Spruce, So
Speaker 8: timing really matters, very lower no fees on the product,
Speaker 8: a chance to learn about credit, a chance to build savings.
Speaker 8: So we're really positioned Spruce as a way to help
Speaker 8: the hard working American be better with their money, and
Speaker 8: we're seeing the early signs of that really starting to resonate.
Speaker 5: Jeff, you also serve small business owners small businesses, so
Speaker 5: you have some good insight there. We like to talk
Speaker 5: to you about that. Give us an update on what
Speaker 5: you're seeing, because we know that small businesses account for
Speaker 5: two out of every three jobs that have been added
Speaker 5: in the past twenty five years. What can you tell
Speaker 5: us about the small business community?
Speaker 8: Incredibly resilient, incredibly creative. You know, this is the backbone
Speaker 8: of America. It's why it's so important to us that
Speaker 8: we serve them the way we do. Our small business
Speaker 8: tax revenue was up twenty percent in the quarter, and
Speaker 8: so we're absolutely seeing small businesses. You know, in many
Speaker 8: ways they are consumers. We're talking specifically at Block small
Speaker 8: businesses nine employees are smaller and so they've had to
Speaker 8: make shifts and how they think about selling and digitizing
Speaker 8: their business. Obviously they're dealing with regulations about you know,
Speaker 8: how they deal with their business. But the small business
Speaker 8: mindset and the small business starts we continue to see
Speaker 8: very strong.
Speaker 2: That's what I wanted to ask you. What you're seeing
Speaker 2: in terms of small business creation. You're seeing it more
Speaker 2: more to the upside versus those shutting their doors.
Speaker 8: We are absolutely and obviously you know, many small businesses
Speaker 8: don't make it to their first year. But this is
Speaker 8: the entrepreneurial spirit of America. And when the labor market changes,
Speaker 8: we see more people create starts and so we are
Speaker 8: seeing that. Remember too that from a tax perspective. If
Speaker 8: you're a consumer, but you have a side hustle, which
Speaker 8: more and more Americans are doing as a second job,
Speaker 8: you know that's a small business to h and R
Speaker 8: Block because they file what we call the schedule. See,
Speaker 8: so we're seeing a lot of growth in the schedules.
Speaker 2: Net net thirty seconds left here, Jeff, how do you
Speaker 2: what are the words you use to describe the environment
Speaker 2: right now. You run a business, are you hiring? How
Speaker 2: do you describe it? And just real quickly if you could.
Speaker 8: We do not see recession. We know we have to
Speaker 8: get beyond the broad labels and manage the business in
Speaker 8: a local level. That's what we're focused on. But the
Speaker 8: consumer is resilient despite some of these pressures. They always
Speaker 8: find a way.
Speaker 3: Are you hiring?
Speaker 8: We are hiring, Yes, our business. We feel very good
Speaker 8: about how we're positioned. We have a lot of great
Speaker 8: jobs in AI and engineering and cloud. Okay, so absolutely
Speaker 8: we're hiring.
Speaker 3: And are you a fan of Taylor Swift? That's what
Speaker 3: we need to know.
Speaker 8: Who cannot be a fan of Taylor Swift? Definitely achieved?
Speaker 2: All right, Jeff Jones, Good to check in with your
Speaker 2: president CEO of H and R Block on zoom from
Speaker 2: Kansas City, Missaura, this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 2: Right, So we said S and P five thousand, a
Speaker 2: very round number. Right now we're at fivey twenty two
Speaker 2: on the S and P Charlie, of course, just breaking
Speaker 2: down the markets.
Speaker 3: It's a very round one.
Speaker 2: It's one that we market watchers and market technicians, I
Speaker 2: would say Tim safe to say, like to keep an
Speaker 2: eye on.
Speaker 5: Yeah, the S and ME five hundred index on track
Speaker 5: to finish above that number for the first time ever.
Speaker 5: Today it did it briefly right of the closed touch
Speaker 5: five thousand, close there, Yeah, it was seven hundred. Okay,
Speaker 5: So here's some stats that you put together, Carol.
Speaker 1: I love this.
Speaker 5: It took seven hundred and nineteen sessions for the index
Speaker 5: to set its latest one thousand a point milestone, much
Speaker 5: shorter than the one two hundred and twenty seven trading
Speaker 5: days it needed to get from two thousand back in
Speaker 5: twenty fourteen to threeenty and twenty nineteen. That's AC data
Speaker 5: compiled by Bloomberg. It's nothing compared to the four thousand,
Speaker 5: one hundred and sixty eight sessions yet from one thousand
Speaker 5: back in nineteen ninety eight to twenty and twenty fourteen.
Speaker 5: A lot of that has to do with I mean
Speaker 5: when you go from one thousand to two thousand, you're doubling. Okay,
Speaker 5: when you go from four thousand to five thousand, you're
Speaker 5: increasing by twenty five percent.
Speaker 3: No, you're absolutely right.
Speaker 2: So with what it means technically, if anything of S
Speaker 2: and P above five thousand back with us. Is Ryan Dietrich,
Speaker 2: chief market strategist at the Carson Group on zoom from Cincinnati,
Speaker 2: as we mentioned earlier, the market technician who nailed last
Speaker 2: year's rally, so we wanted to know what he thought
Speaker 2: about this milestone on the S and P five hundred. Ryan,
Speaker 2: Good to have you back with Tim and myself. So
Speaker 2: what do you make of this level? Is there something
Speaker 2: significant in it for you?
Speaker 9: Yeah, Carol and Tim, thanks for having me back. But
Speaker 9: you know one more for you. When it cracked one
Speaker 9: hundred was in nineteen sixty eight. That took forty years,
Speaker 9: from nineteen six or thirty years, sorry, yeah, it was
Speaker 9: forty years. Yeah, so it gets from you know, one
Speaker 9: hundred to one thousand, So think about that. But nonetheless,
Speaker 9: let's get into this. What does five thousand mean? On
Speaker 9: the surface, not a whole lot, we know that, but
Speaker 9: psychologically is.
Speaker 10: Really what matters. I think for investors.
Speaker 9: And the big question, of course, is okay, when you
Speaker 9: look at one thousand, two thousand, three thousand and four thousand,
Speaker 9: which I did, what happens next when you can cross
Speaker 9: these psychological levels will listen?
Speaker 10: Six months later, SP.
Speaker 9: Has never been lower, up like eight percent on average,
Speaker 9: almost double y at any time, returns of about four percent.
Speaker 9: So long winded way of saying, hey, making new highs
Speaker 9: give moment you guys a while last year saying when
Speaker 9: you're making new highs, it tends to lead to more
Speaker 9: new highs. Eventually will hit the final new high.
Speaker 10: We know that.
Speaker 9: We just don't think we're there yet, and we think
Speaker 9: this is a pretty strong sign that, hey, we're still
Speaker 9: in a bull market. We've said that for a while,
Speaker 9: and you know, just get on the ride. It's fun ride.
Speaker 5: What's the sign that tells you it is the final
Speaker 5: new high?
Speaker 9: Yeah, well, maybe like when your grandma calls you up
Speaker 9: and says let's buy something, right. I think that's that's
Speaker 9: the worry.
Speaker 3: But that's so funny.
Speaker 7: You know.
Speaker 5: Peter Atwater, who we have on the program a lot
Speaker 5: down at William and Mary, he wrote the Confidence Map.
Speaker 5: I saw a tweet today where he asked somebody if
Speaker 5: their grandma had called the nastabout AI, which I think
Speaker 5: is him sort of saying exactly what you're saying, Ryan,
Speaker 5: which is like it's starting to feel a little frothy.
Speaker 9: Well, I haven't had that call yet. I guess people
Speaker 9: know what I do for a living. I had a
Speaker 9: lot more calls October twenty two from concerned friends. But listen,
Speaker 9: I mean, I think there's a couple of things I
Speaker 9: like to look at. Advance in client lines for a while,
Speaker 9: talking about market breadth, and I know small caps in
Speaker 9: midcaps have struggled to start this year, but look what
Speaker 9: they've done the last two days.
Speaker 10: We're starting to see a little more leadership.
Speaker 9: So if we see less participation every ninety nine ninety nine,
Speaker 9: like tech was the only thing practically going up in
Speaker 9: ninety nine, we are seeing various groups going higher. I mean,
Speaker 9: industrials hitting like all time highs, consumer discretionary, the list
Speaker 9: goes on, and there's a lot of participation.
Speaker 10: So, Tim, to answer your question, that is what will
Speaker 10: worry me.
Speaker 9: And I'm just not seeing a lot of breakdowns in
Speaker 9: the overall stock market here. There is participation. That's a
Speaker 9: healthy sign that I'm not worried yet. I don't think
Speaker 9: this is the final all time high yet.
Speaker 3: All right, so market valuation.
Speaker 2: So bottom line, what you're saying, Ryan, is that because
Speaker 2: you're seeing it broadening out continuing, that's a healthy sign.
Speaker 3: What about the volume behind it?
Speaker 2: Broadening out is one thing, but having a market participation
Speaker 2: and volume behind it is another.
Speaker 10: All right, Carol. And again, I mean we haven't had
Speaker 10: like wild volume.
Speaker 9: But would you tend to see at extremes as major spikes,
Speaker 9: whether it on the peak or you know, the ultimate lows,
Speaker 9: And we're not seeing that yet. So to me, I
Speaker 9: mean volume matters. There's a lot more volume in options.
Speaker 9: There's different futures, there's weekly options, so people can get
Speaker 9: their volume different ways, and just simply looking at the
Speaker 9: NYSEE volume, which is what we've also looked at for
Speaker 9: a long time. So you know, I'm not seeing any
Speaker 9: major worries fom signs there one thing. What worries you, right,
Speaker 9: I mean we are in February, right, Historically February is
Speaker 9: not that great of a month. February in an election
Speaker 9: year is actually down on average. Oh and by the way,
Speaker 9: I mean we'll see where we close. We're gonna have
Speaker 9: one of the greatest fifteen week rallies in the history
Speaker 9: of the stock markets when we have a major sell
Speaker 9: off the next hours, so.
Speaker 10: And again that maybe we're just due for a break.
Speaker 3: Right back here, we will.
Speaker 2: Have one the greatest say that again, we will have
Speaker 2: one of the greatest.
Speaker 9: Fifteen week rallies ever. The fifteen weeks ago is when
Speaker 9: we bottomed on October twenty seventh, you know, last year,
Speaker 9: October twenty seventh, last year, And we'll see the final numbers,
Speaker 9: but we're up significantly obviously since then. And you know, again,
Speaker 9: that's a stretch, rubber band. I mean, I'm not naive
Speaker 9: to that. We're not naive to that. So maybe you
Speaker 9: could have some of that early and one more for
Speaker 9: you after twenty percent rally February is historically not all
Speaker 9: that great in March and all that great, So maybe
Speaker 9: we can have some consolidations what I'm saying, I'd be
Speaker 9: open to it.
Speaker 5: Okay, let's go back to five thousand and just what
Speaker 5: five thousand actually means.
Speaker 2: Ryan.
Speaker 5: For a lot of people, I think it's just a number.
Speaker 5: But are you arguing that it's more than just a number.
Speaker 5: It's something psychologically important for and it's something technically important
Speaker 5: for the market.
Speaker 9: I'm not so sure technically is the right word to use,
Speaker 9: but psychologically, yes, Tim, I mean again, I mean literally,
Speaker 9: you know what about thirteen months ago what we're hearing recession, recession,
Speaker 9: bear market. Everybody was talking about it. You know, our
Speaker 9: shop wasn't, but a lot of others were. And it's
Speaker 9: like this reminder that you know, some of the people
Speaker 9: have been the most successful, for people that every two
Speaker 9: weeks put money in their four one K every one
Speaker 9: month has put these things on auto drive and continue
Speaker 9: to invest in and now likely at all time highs
Speaker 9: in their portfolios. And this is what we've seen throughout history.
Speaker 9: So I believe we all have to time the market
Speaker 9: and talk about this stuff. And we do it for
Speaker 9: a living, right, so I'm not minimizing it. But again,
Speaker 9: I think it's important for more longer term investors to
Speaker 9: remember that, Hey, you know when the stock market goes
Speaker 9: up and down, but they say the stock market is
Speaker 9: the only place every when things go on sale, everyone
Speaker 9: runs out of the store screaming.
Speaker 10: I like to use that, and that's.
Speaker 8: What we saw.
Speaker 9: Again, We've seen that throughout history. So hopefully investors learn
Speaker 9: from that. Next time we're gonna have another bear market.
Speaker 9: It's going to happen.
Speaker 10: I don't think it's happened soon, but that's just something
Speaker 10: people need to remember.
Speaker 2: Broaden it out in terms of technically, you mentioned industrials earlier,
Speaker 2: you talked about I think consumer discretionating talked to U
Speaker 2: a little bit about too. As you dig deeper into
Speaker 2: the market internals, what you are seeing on a technical
Speaker 2: basis where there is obviously some strength signs, some strong signs,
Speaker 2: some areas for opportunity, maybe some wary signs.
Speaker 9: Also, Yeah, I mean we like to look at this
Speaker 9: relative strength, right, what's a certain sector doing against the
Speaker 9: overall market? And to keep it simple, I mean financials,
Speaker 9: which we all know about some of the issues with financials,
Speaker 9: but they were like one of the strongest groups second
Speaker 9: half of last year. So far the first half of
Speaker 9: this year, they've hung in there. Industrials also, I mean
Speaker 9: Boeing's a big part. Boeing's obviously struggled.
Speaker 4: You.
Speaker 9: Financials in general have done really well. So there's some
Speaker 9: clues there that there's a little bit more strength that
Speaker 9: I'll be very clear. If you look at the number
Speaker 9: of stocks above their fifty day moving average or two
Speaker 9: hundred day moving average on the S and P five hundred.
Speaker 9: It's slowly been trickling lower here, So is that, like,
Speaker 9: you know, kind of some weakness under the surface.
Speaker 10: It very well could be.
Speaker 9: Doesn't mean you have to have a major sellof and
Speaker 9: with seasonality and a little bit of frothy excitement coming,
Speaker 9: it kind of makes sense maybe for a little bit
Speaker 9: of a break here. Nothing overly over the top right here, Carol,
Speaker 9: that has this extra worry, but a gains you some
Speaker 9: signs after a record fifteen week rally, maybe we just
Speaker 9: can take a little pause.
Speaker 10: Wouldn't be the end of the world.
Speaker 5: Yeah, well, there hasn't been really a big pause in
Speaker 5: the last fifteen weeks. Fran What would you say to
Speaker 5: somebody who's been waiting for that pause to put a
Speaker 5: pile of cash in the market.
Speaker 10: Yeah, well that's a great question there.
Speaker 9: I mean, listen, if you've been waiting, you know, I
Speaker 9: guess unfortunately you missed a lot of it. But I
Speaker 9: mean I always say when people ask us, you know,
Speaker 9: do a third, third, a third, do a third, now
Speaker 9: a third a month and a third and another month,
Speaker 9: and maybe you'll feel a little bit better about it.
Speaker 9: But listen, your average year season ten percent correction on average.
Speaker 9: When you look at election years, you see double digit
Speaker 9: corrections on average. We're probably going to have some volatility
Speaker 9: here as we get close to the election, and that
Speaker 9: can be an opportunity for people that they kind of
Speaker 9: missed a big chunk of Hopefully they didn't miss too
Speaker 9: much of this rally, but if they did miss some
Speaker 9: of it, I'm sure there's gonna be a better time
Speaker 9: to swing the bat coming up here.
Speaker 2: Hey, we talked so much about the equity side of things,
Speaker 2: the technical side of it, and what you are noticing.
Speaker 3: Ryan.
Speaker 2: Having said that, how do you layer in maybe what
Speaker 2: we've been seeing in terms of the fixed income side
Speaker 2: of things the US Treasury curve specifically, and expectations about
Speaker 2: what the Fed may or may not do, and with
Speaker 2: that fundamentally or technically will mean ultimately for the equity
Speaker 2: trade as well.
Speaker 9: Absolutely, we've been in the camp for a while. The
Speaker 9: Fed's first cut will probably be in May. We didn't
Speaker 9: really agree with March, and probably four cuts because again, yeah,
Speaker 9: the economy is strong, but inflation is coming back, productivities high.
Speaker 9: We really don't need rates where they are. It's kind
Speaker 9: of our base case. But we've been underweight equities. I'm sorry,
Speaker 9: we've been underweight bonds, fixed income, you know, for over
Speaker 9: about a year and a half. Now, to come on
Speaker 9: with you saying that overweight socks, we're still in that camp.
Speaker 9: But again, you know, when the FED starts to cutting things,
Speaker 9: there's still some opportunity in fixed income. But again we've
Speaker 9: shortened up to duration a little bit. We're not too
Speaker 9: crazy about you know, longer term treasury still is. Again
Speaker 9: we think, you know, the FED isn't going to cut
Speaker 9: as much as the market is expecting, but there's always
Speaker 9: a place for fixed income a portfolio. Final comment on this,
Speaker 9: you know, credit spreads, triple B spreads, in vesprigay, corporate spreads.
Speaker 9: We simply are still not seeing any stress in the
Speaker 9: credit markets. My opinion, there are some of the smartest
Speaker 9: people in the room. Until they're stressed. I'm not going
Speaker 9: to be stressed. Last March, when we had, you know,
Speaker 9: the nine percent correction, the regional bank crisis, sixteenth largest
Speaker 9: bank literally disappeared. We didn't see much stress in the
Speaker 9: credit markets. Then they were right. We're still not seeing
Speaker 9: any stress in the credit markets.
Speaker 2: We're going to follow those, all right, We're gonna leave
Speaker 2: it on that note. Hey, listen, Ryan, thank you so much.
Speaker 2: Ryan Deetrich, chief market strategist over the Carson Group, joining
Speaker 2: us on zoom from Cincinnati.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekday afternoons from two to five pm Eastern on
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Speaker 5: Well, private credit is now the buzziest corner of Wall Street.
Speaker 5: We know what these are. They are loans that you know,
Speaker 5: charge floating rates. The FEDS tightening campaign has lenders collecting
Speaker 5: double digit yields where they used to get seven percent Carol.
Speaker 5: By some measures, investors in this kind of credit are
Speaker 5: earning higher returns than the buyout artists of private equity,
Speaker 5: and the market is now worth one point six trillion
Speaker 5: dollars in climbing and black Rock forecasts it could balloon
Speaker 5: to a three point five trillion dollar market in just
Speaker 5: five years.
Speaker 3: So investors are.
Speaker 2: Saying, I'm on a piece of that. It's not so
Speaker 2: easy to invest in private credit. It's kind of tough
Speaker 2: if you're not an institutional investor or ultra high net
Speaker 2: worth individual enter heraon finance. It's a different take on
Speaker 2: private credit. It's a robo advisor that allows accredited investors.
Speaker 2: That's important those with the networth over a million dollars
Speaker 2: and highest incomes to invest in private credit. We've got
Speaker 2: two gentlemen who are the co founders of it, Blake
Speaker 2: West and Mike Saw and they join us on Zoom
Speaker 2: from San Francisco. Guys, it is great to have you here.
Speaker 2: There's a crypto element to this. I feel like a
Speaker 2: lot of moving parts. Blake kick it off for us.
Speaker 2: Explain how this all works.
Speaker 11: Sure, Yeah, So just to talk a little bit about
Speaker 11: hair and Finance here. And Finance uses the blockchain to
Speaker 11: provide just really simple and straightforward access to portfolios of
Speaker 11: private credit deals. It's the easiest way that anyone's been
Speaker 11: able to access this asset class, which, as you mentioned,
Speaker 11: has typically been for institutions. So yeah, let's just do
Speaker 11: it to be credited. But otherwise it's as simple as
Speaker 11: signing up for Hair Andfinance dot com, selecting your risk tolerance,
Speaker 11: and then portfolios got automatically rebalanced and diversified across many
Speaker 11: individual deals that you know, sourced, underwritten, monitored by an
Speaker 11: in house credit team that we have.
Speaker 5: Okay, so Mike, why does the blockchain need to be
Speaker 5: part of this? Why do you have to do this
Speaker 5: on the blockchain? Why include it?
Speaker 8: Yeah?
Speaker 12: With the blockchain's really helping with here is making this
Speaker 12: into a system that can be interoperable and way more
Speaker 12: transparent than traditional kind of loans work. And so by interoperable,
Speaker 12: it's built on the Golfing protocol, is a system that
Speaker 12: other businesses can build on as well, and then all
Speaker 12: of the transactions that happen are visible on chain and transparent,
Speaker 12: so you can see the loans actually being paid back.
Speaker 2: And you guys just kick this off right in December,
Speaker 2: so it's early on in the going. Mike, talk a
Speaker 2: little bit about that. I mean, what kind of early
Speaker 2: uptick have you seen in interest among investors.
Speaker 12: Yeah, we're seeing a lot of interest basically from a
Speaker 12: lot of folks who have been thinking about private credit
Speaker 12: or learning about it. And maybe you wanted to participate
Speaker 12: in private credit funds before, but those are really only
Speaker 12: open to institutions. So this is really the first time
Speaker 12: in many ways that investors like this can get access
Speaker 12: to so we've just launched and opened it up for investing,
Speaker 12: and so now folks can start to sign up for it.
Speaker 12: So yeah, at a high level, it's just been a
Speaker 12: lot of interest so far.
Speaker 3: Well wait, wait, so we're Bloomberg. We love hard numbers.
Speaker 2: So you launched in December, if I'm correct, and I
Speaker 2: think it was. I'm just checking my dates here, so
Speaker 2: it was kind of early December. So it's been up
Speaker 2: and running a couple lenths.
Speaker 11: Well, not quite. We actually opened up for investment only
Speaker 11: on Tuesday of this week. We announced it in December, okay,
Speaker 11: and so since December we've been able to have thousands
Speaker 11: of people signed up on our wait lists and we
Speaker 11: just you know, I said open it up for investment
Speaker 11: a couple of days ago. We've already had a number
Speaker 11: of investors signed up, and you know, the AM is
Speaker 11: slowly coming in.
Speaker 5: Hey, Blake, what private credit funds are you investing in?
Speaker 7: Like?
Speaker 5: Okay, once you do the allocation, that's that's one thing,
Speaker 5: But what are the underlying assets? Like if you use
Speaker 5: a traditional world advisor for for equities, you know they're
Speaker 5: investing in a lot of index funds from you know, Vanguarden,
Speaker 5: State Street, what are you guys investing in.
Speaker 10: Yeah, people with.
Speaker 12: A number of syndicate partners here basically other kind of
Speaker 12: funds who have focused primarily on low and middle UH
Speaker 12: middle market companies throughout the US, and the kinds of
Speaker 12: deals here spend a wide range of industry. The goal
Speaker 12: here is to make it as diversified as possible, So
Speaker 12: there are a few real estate elements as well as
Speaker 12: merchant cash advanced companies as well as an early childhood
Speaker 12: education center that is part of it. But the general
Speaker 12: kind of theme is working with these private credit funds
Speaker 12: that have in the range of twenty five two hundred
Speaker 12: fifty million and aum that do deals that range between
Speaker 12: five to ten million dollars for row and middle market
Speaker 12: companies primarily in the US but also in small amounts
Speaker 12: and international geos.
Speaker 3: Why do this.
Speaker 11: Loans have level and assets back then or income from
Speaker 11: the companies.
Speaker 3: I'm sorry to say that again, Blake.
Speaker 11: I'm just saying all the loans you know, are backed
Speaker 11: in some way with collateral, you know, whether that's income
Speaker 11: of the company's assets, personal guarantees, et cetera.
Speaker 2: That's what I was curious, like, how are you doing
Speaker 2: kind of the gut check the check that where this
Speaker 2: money is going investor money ultimately who are on the
Speaker 2: platform and tapping and making sure that these are kind
Speaker 2: of smart pe bets.
Speaker 12: Blake taking that, Yeah, we have a Yeah, so what
Speaker 12: our team is doing is working. We have a we
Speaker 12: have a house credit team that works closely with these
Speaker 12: these these syndicate partners to evaluate these different borrowers. And
Speaker 12: it's understanding how is the deal structured, what is the
Speaker 12: collateral that the borrowers are providing, what are the operations
Speaker 12: of these companies, what do their financials look like, how
Speaker 12: do they approach things, what is their profitability and all
Speaker 12: of these things to make sure that, like when we're providing, providing,
Speaker 12: participating in these loans, they are backed by really high
Speaker 12: quality companies that have strong business operations across all these industries.
Speaker 5: Hey, Mike, what about fees here? Because when you think
Speaker 5: robo advisor, you also think fees being lower. You know,
Speaker 5: like I'm talking you know, twenty basis points on top
Speaker 5: of whatever the index fund that the robo advisor puts
Speaker 5: you in.
Speaker 13: What are your fees?
Speaker 12: The fee on Hair and Finance is two percent of
Speaker 12: AUM and this compares to say a typical private credit
Speaker 12: fund which will offer in the range of one and
Speaker 12: a half to two and a half percent fee, as
Speaker 12: well as kerrie above a hurdle rate typically in the
Speaker 12: range of six to eight percent hurdle rate, so it's
Speaker 12: very frequent. I feed can go to two and a
Speaker 12: half three percent with a typical private credit fund. But
Speaker 12: what we're trying to do is bring those fees down
Speaker 12: over time compared to compared to those kind of options.
Speaker 5: So is the fee only on AUM, Mike, or is
Speaker 5: it also is there also carry included?
Speaker 12: There's no there's no carry. It's just a straight AUM
Speaker 12: or two percent fee.
Speaker 2: I want to go back to, you know, what is
Speaker 2: the appeal appeal to investors specifically in bars, I mean
Speaker 2: a private credit in crypto form? Why why not Blake
Speaker 2: just use dollars US dollars?
Speaker 11: So dollars certainly are possible. People have been doing trillions
Speaker 11: of dollars of private credit using just dollars. But we
Speaker 11: see with crypto is Mike's kind of alluding to before
Speaker 11: a few key benefits here. One is does lower costs
Speaker 11: has send money around the world, which especially valuable if
Speaker 11: when we start taking international investors. But also the transparency
Speaker 11: is really unprecedented. So as an investor, when we send
Speaker 11: money back into your portfolio, you can see those payments
Speaker 11: on chain and you are you can verify that cash
Speaker 11: is actually sitting there, not just telling you that. And
Speaker 11: then a little bit more broadly, crypto has the ability
Speaker 11: to create an interoperable financial system. So you know, we
Speaker 11: can be building on the Golfinch protocol, but another company
Speaker 11: could also build on the Goldfinch protocol. Those loans can operate.
Speaker 11: We can also, for instance, talking to me, there's other
Speaker 11: crypto companies who want to be building things like borrow
Speaker 11: lend protocols against the positions that hair and Finance has,
Speaker 11: So an investor could, for example, then you know, borrow
Speaker 11: against their position without having to liquidate that position, and
Speaker 11: that can all happen in a much more interoperable and
Speaker 11: seamless way on chain. With that transparency, that really can't
Speaker 11: be beat.
Speaker 3: Mike, I want to bring you back into US.
Speaker 2: I mean, there are so many still legal and regulatory
Speaker 2: questions swirling around crypto, even when you know the spot
Speaker 2: bitcoin ETF was approved. You know, Gary Gensler still out
Speaker 2: with a list of risks and still not all in.
Speaker 2: Are there any regulatory issues that are top of mind
Speaker 2: for you guys that you know you have to be
Speaker 2: on top of and worry about.
Speaker 12: Well, hir And Finance has registered the SEC as a
Speaker 12: robo advisor here, and so we've taken a lot of
Speaker 12: efforts to be highly compliant, fully compliant with all of
Speaker 12: the requirements that go along with that. That includes involving
Speaker 12: a qualified custodian as part of what we do, building
Speaker 12: up a deep compliance function internally, making sure that we're
Speaker 12: providing appropriate disclosures and helping people understand all of the
Speaker 12: risks that go into investing in products like this. And
Speaker 12: so I view it as we are doing all the
Speaker 12: things that any kind of registered investment advisor needs to do,
Speaker 12: and what Crypto is helping us do here is handle
Speaker 12: all of these kind of payments and the rails under
Speaker 12: the hood and provide that transparency which has chilled just
Speaker 12: a net benefit to our investors.
Speaker 2: So yeah, I'm sorry, what no, no, no, please finish.
Speaker 12: Oh yeah, So compliance is super important and we are
Speaker 12: we are registered with the SEC, and we have this
Speaker 12: fiduciary responsibility now to handle our clients objectives.
Speaker 7: In the right way.
Speaker 2: Blake, you mentioned Aum you guys just started. Is there
Speaker 2: a thought in terms of AUM by the end of
Speaker 2: the year. What are you guys hoping for in terms
Speaker 2: of uptick or your expectations And just got about thirty seconds.
Speaker 11: Yeah, I'd say we're hoping to get at least into
Speaker 11: the twenty five to fifty million dollar range by the
Speaker 11: end of the year.
Speaker 3: All right, Yeah, it's interesting, it's interesting.
Speaker 2: The interest that you guys are seeing, is it US
Speaker 2: investors outside the US? Just quickly, Blake, take that one.
Speaker 1: Yeah.
Speaker 11: All US investors right now are only open to US
Speaker 11: are credited, but we plan to open up to international
Speaker 11: as soon as we can.
Speaker 2: Really interesting, guys, come back. Let us know as when
Speaker 2: you get into this and as the months tick by,
Speaker 2: I'd love to hear how things are moving along. Blake West,
Speaker 2: Mike Sahl, co founders of Hero and fan Finance, excuse me,
Speaker 2: heir and Finance joining us on Zoom from San Francisco.
Speaker 7: Probably mac.
Speaker 1: Journal.
Speaker 13: Now about you let me drive?
Speaker 10: Oh no, no, no, no.
Speaker 6: Honey, please, how do the riding gravel? Let's wait, I
Speaker 6: want to drive.
Speaker 4: It's a good question, a good time.
Speaker 1: This is the drive to the cloth to me.
Speaker 7: I think we'll buy around Jada.
Speaker 10: Don on Bluebird Radio.
Speaker 2: All Right, everybody, we've got just about eighteen minutes left
Speaker 2: in today's trading session. As we've been saying throughout the day,
Speaker 2: the S and P five hundred is on track to
Speaker 2: finish above five thousand for the first time ever today,
Speaker 2: briefly breaching that threshold late yesterday. But we as Charlie
Speaker 2: just Mentionedy twenty three on the S and P five
Speaker 2: hundred just up about half a percent though, But you've
Speaker 2: been pointing out to him throughout the day, Nasdak really
Speaker 2: the our performer, up about one point two percent here.
Speaker 5: Yeah, let's get some thoughts from Andrew Slimon, senior portfolio
Speaker 5: manager at Morgan Stanley Investment Management. He joins us from
Speaker 5: Chicago for our drive to the close this afternoon. Good
Speaker 5: to have you with us, Andrew, What do you make
Speaker 5: of five thousand? Is it just a number? Is it
Speaker 5: something more more meaningful?
Speaker 13: Well, I think it's important to consider that the market
Speaker 13: traded below it's January twenty twenty two high for two years.
Speaker 13: We hit forty seven ninety six in January of twenty
Speaker 13: twenty two, and it took until January of this year
Speaker 13: to break through that number. So that's a lot of
Speaker 13: kind of energy that built up. You know, it's kind
Speaker 13: of holding the beach ball underwater. It finally broke above that,
Speaker 13: and as you let go of the beach ball underwater,
Speaker 13: there's some energy. So it doesn't surprise me that we
Speaker 13: quickly ran from forty seven ninety six to five thousand,
Speaker 13: and we're getting followed through because inevitably, and I know
Speaker 13: this is crazy to believe, but there's once they start
Speaker 13: readjusting their high water mark on their portfolios, they become
Speaker 13: more optimistic, not less. So I think this could continue,
Speaker 13: but the market's clearly overbought short term, and I suspect
Speaker 13: the next couple of weeks it will it will run
Speaker 13: out of seat.
Speaker 6: Yeah.
Speaker 2: I mean, you've got a NASDAK that's already up about
Speaker 2: what five percent so far this year. You've got a
Speaker 2: Nasdaq one hundred that was an SMP forgive me up
Speaker 2: about five percent, six percent, almost seven percent on the
Speaker 2: Nasdaq one hundred, and I was just going to do
Speaker 2: We were talking earlier with Ryan Dietrich, who looks at
Speaker 2: market technicals. If I look at an RSI on the
Speaker 2: S and P five hundred, no doubt about it we're overbought.
Speaker 2: Having said that, I don't know, can you yet get
Speaker 2: a feel of how this year might play out when
Speaker 2: you think about earnings fundamentals, maybe what the Fed might
Speaker 2: ultimately do, or there's still too many questions out there
Speaker 2: for you to kind of make that longer term bet.
Speaker 7: Yeah.
Speaker 13: I mean, look, first of all, don't lose I mean
Speaker 13: not that you have, but don't lose sight of the
Speaker 13: fact that the.
Speaker 7: Earnings reports for the fourth quarter were very strong.
Speaker 13: So this is not just a speculative run in the
Speaker 13: market that some of the bears want you to believe.
Speaker 13: It is being supported by some excellent earnings reports and
Speaker 13: positive earnings revisions. And I am a believer that this
Speaker 13: will be another good year for equities for the simple
Speaker 13: reason that investors were underweight equities last year, and that
Speaker 13: is consistent with the first year off of bear market low. Unfortunately,
Speaker 13: investors looking in the rear view mirror, they don't turn
Speaker 13: bullish when things are low, they get more bearish. It's
Speaker 13: in the second year that you start to see money
Speaker 13: come back into the market from retail investors, and that's
Speaker 13: what is now happening. It started in November, took a
Speaker 13: pause the first couple of weeks in January.
Speaker 7: It's coming back.
Speaker 13: So I think that is classically the fuel for the second.
Speaker 7: Leg of the rally, which will be this year.
Speaker 13: However, is unfortunately the second year is more volatile than
Speaker 13: the first year. Last think about last year, market went
Speaker 13: up eight out of twelve months. It never gave those
Speaker 13: who were under invested in the opportunity to get back
Speaker 13: in second year tends to be more volatile, So I
Speaker 13: think there's you know, it's it's not going to be
Speaker 13: as easy this year, but I do think it'll be
Speaker 13: another good year, which.
Speaker 3: Makes me also wonder.
Speaker 2: You know, February one, we got to read money market
Speaker 2: fund assets reached six trillion dollars for the first time.
Speaker 2: Everybody points to, Okay, all this money that could come
Speaker 2: rushing in. I am curious when we get to the
Speaker 2: next reading March first, you know whether or not we
Speaker 2: start to see some of that money trickling out. What
Speaker 2: are you guys seeing on your end in terms of
Speaker 2: where flows are still going or not going?
Speaker 13: Well, yeah, I think you're right, the money is still
Speaker 13: coming into the money market, but we see flow. I'm
Speaker 13: an equity manager. I see the flows have turned and
Speaker 13: it's again, it's just so fascinating. Nothing really change. Is
Speaker 13: if you go back to twenty twenty, the year twenty twenty,
Speaker 13: the market bottom in March and flows didn't turn positive
Speaker 13: until February.
Speaker 7: Of twenty twenty one.
Speaker 13: You go back to the low of two thousand and nine,
Speaker 13: which was in February two thousand and nine, flows did
Speaker 13: not turn positive till the spring of twenty ten.
Speaker 7: So my point of.
Speaker 13: This is is that now that low was October twenty
Speaker 13: twenty two, it is consistent that that money will start
Speaker 13: to trickle back into into equities, But I suspect that
Speaker 13: it won't really accelerate until you start to see FED
Speaker 13: cuts where the attractiveness of money markets start to weigh.
Speaker 13: But today the money won't come back. Is to say
Speaker 13: that people will stay rational and they won't get greedy.
Speaker 13: And I think, you know, yeah, you get four percent
Speaker 13: or five percent, but that's a full year, and that's
Speaker 13: you know, equities are already up five percent. Where do
Speaker 13: you you're and it's not a full year yet.
Speaker 5: Where andrew do money market rates have to go? How far?
Speaker 1: How far?
Speaker 5: How low do they have to go in order for
Speaker 5: people to say, yeah, that's no longer worth it.
Speaker 13: That is, you know, please if you could tell me
Speaker 13: the perfect answer for that, that's the key question. And
Speaker 13: the data suggests, you know, you really need you know,
Speaker 13: a few fed cuts where you get rates down into
Speaker 13: the three to four percent range before the money starts
Speaker 13: to lot.
Speaker 7: That's kind of the history.
Speaker 13: And I think so that that that tells me that
Speaker 13: you know, you're looking at later this year for another
Speaker 13: surge in flows into agrees.
Speaker 7: But there's no there's no doubt.
Speaker 13: Now you're starting to see the fun flows have turned positive.
Speaker 7: Last week, the numbers were very very positive.
Speaker 13: Uh And and I think that's that's why you're seeing
Speaker 13: as much as everyone's focused on the MAG seven or
Speaker 13: the for six or whatever the number, that's why you're
Speaker 13: starting to see more of a broadening out because as
Speaker 13: money is coming back from the market, people look for
Speaker 13: things to buy that maybe you know, they can justify
Speaker 13: the valuation, wrap their.
Speaker 7: Head around and not just buy the you know, all.
Speaker 2: Time high lists on that MAG seven if you will,
Speaker 2: used to like Microsoft.
Speaker 7: Right, that's right. I mean, look, you know, I know
Speaker 7: it's done well very well. I know it's not.
Speaker 13: Cheap, but if you look at the numbers, the estimates
Speaker 13: for the for the success of co pilot this year.
Speaker 7: There there's a lot.
Speaker 13: Of uncertainty and they're relatively low, and I think it's
Speaker 13: going to end up being absorbed by users much more
Speaker 13: quickly than you know, the caution with which Wall Street's
Speaker 13: embracing that, and maybe the stocks start to reflect that.
Speaker 7: But I think that's, you know, really going to be
Speaker 7: the story.
Speaker 2: Yeah, it looks like the stock at another record today
Speaker 2: on an interday basis. I mean, I'm looking at Microsoft
Speaker 2: upomus twelve percent so far here in twenty twenty four. Hey, Andrew,
Speaker 2: Thank you so much to Andrew Slimon, Senior portfolio manager
Speaker 2: at Morgan Stanley Investment Management.
Speaker 3: Joining us on zoom from Chicago.
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