1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,560 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,560 --> 00:00:18,400 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,599 Speaker 1: at Bloomberg dot com slash podcast. I was thunderstruck in 7 00:00:22,680 --> 00:00:26,560 Speaker 1: your speech and what your world economic outlook says about 8 00:00:26,600 --> 00:00:30,319 Speaker 1: a five year vision of the International Monetary Fund of 9 00:00:30,440 --> 00:00:34,040 Speaker 1: growth from three point eight percent down to three percent, 10 00:00:34,120 --> 00:00:37,880 Speaker 1: a twenty one percent decline in the five year vision, 11 00:00:38,200 --> 00:00:41,640 Speaker 1: are you modeling global recession? And dare I say global 12 00:00:41,680 --> 00:00:45,920 Speaker 1: recession for five years? What permodelink is a period of 13 00:00:45,960 --> 00:00:50,000 Speaker 1: slow growth that is being held back by a number 14 00:00:50,000 --> 00:00:55,920 Speaker 1: of factors. One is not so dramatic. Some of the 15 00:00:55,960 --> 00:01:00,640 Speaker 1: fuzz growing economies like China or South Korea are growing 16 00:01:00,680 --> 00:01:05,039 Speaker 1: fast no more. But you would expect that there would 17 00:01:05,080 --> 00:01:09,080 Speaker 1: be others to pick up the torch of strong growth 18 00:01:09,640 --> 00:01:14,720 Speaker 1: and this is not happening. What is holding growth back 19 00:01:15,040 --> 00:01:20,880 Speaker 1: are three groups of factors. First, low productivity. We have 20 00:01:21,000 --> 00:01:27,399 Speaker 1: been struggling with this phenomenon before the pandemic and we 21 00:01:27,480 --> 00:01:35,000 Speaker 1: continue to struggle with it. Second, it is fragmentation, the 22 00:01:35,040 --> 00:01:39,640 Speaker 1: fact that the world economy does not enjoy the same 23 00:01:39,840 --> 00:01:44,480 Speaker 1: impetus that comes from more to understand, we're going to 24 00:01:44,480 --> 00:01:47,200 Speaker 1: spend this entire interview on trade for imitation. Give you 25 00:01:47,319 --> 00:01:50,480 Speaker 1: the third point right now. And the third point is 26 00:01:50,560 --> 00:01:55,960 Speaker 1: that countries that we would expect to add to growth 27 00:01:57,880 --> 00:02:03,320 Speaker 1: from TM markets, low income country are in particularly difficult 28 00:02:03,480 --> 00:02:11,680 Speaker 1: place because they have been innocent bystanders, repetitive shocks that COVID, 29 00:02:12,480 --> 00:02:17,359 Speaker 1: Russia's invasion. The fact that the world ecolling me as 30 00:02:17,360 --> 00:02:23,359 Speaker 1: a whole, is now less able to support the weakest members. 31 00:02:23,600 --> 00:02:27,799 Speaker 1: Why the piece divident is gone well, and we're through COVID, 32 00:02:27,840 --> 00:02:30,280 Speaker 1: and it is a celebration of these meetings as we 33 00:02:30,360 --> 00:02:33,720 Speaker 1: come beyond COVID, the assistance of you and other institutions 34 00:02:33,800 --> 00:02:36,960 Speaker 1: in getting us beyond this pandemic. But you end your 35 00:02:37,000 --> 00:02:40,800 Speaker 1: speech talking about the ropes that tie us together. The 36 00:02:40,960 --> 00:02:44,680 Speaker 1: ropes between Washington and Beijing are afraid as you and 37 00:02:44,720 --> 00:02:48,239 Speaker 1: I haven't seen from our youth. How does the IMF 38 00:02:48,400 --> 00:02:53,560 Speaker 1: tie the ropes between Beijing and Washington back together? Where 39 00:02:53,680 --> 00:02:59,160 Speaker 1: we see an opportunity to do better is to identify 40 00:02:59,440 --> 00:03:04,919 Speaker 1: very proud practically areas where cooperation is a must. Climate 41 00:03:05,000 --> 00:03:11,000 Speaker 1: change cannot be fought by individual countries. The criticality of 42 00:03:11,280 --> 00:03:19,120 Speaker 1: adjusting to more supply security at the lowest possible cost, 43 00:03:20,480 --> 00:03:25,760 Speaker 1: engaging on securing areas of the world that have become 44 00:03:26,400 --> 00:03:30,240 Speaker 1: more fragile. It is in everybody's interest that we do 45 00:03:30,320 --> 00:03:34,480 Speaker 1: not have more civil wars more comright, But in everybody's 46 00:03:34,639 --> 00:03:38,120 Speaker 1: interest in the tone here and particularly in the Economist 47 00:03:38,360 --> 00:03:41,760 Speaker 1: article of two or three days ago, is China doesn't 48 00:03:41,800 --> 00:03:45,000 Speaker 1: want to participate. Now you've spoken your comments in your 49 00:03:45,040 --> 00:03:49,120 Speaker 1: speech of the new practicality of the Premier of China, 50 00:03:49,240 --> 00:03:52,160 Speaker 1: can you report that there's a new practicality out of 51 00:03:52,200 --> 00:03:56,200 Speaker 1: Beijing to help us with those ropes. Tie together what 52 00:03:56,760 --> 00:04:01,200 Speaker 1: I hurt in our bilateral meeting, can also publicly from 53 00:04:01,840 --> 00:04:08,480 Speaker 1: Premier Li Chang. Are three important messages. First, Chinese commitment 54 00:04:08,640 --> 00:04:16,479 Speaker 1: to continue to open its economy for private investors from 55 00:04:16,480 --> 00:04:23,039 Speaker 1: all over the world. Second, China's commitment to play a 56 00:04:23,120 --> 00:04:29,880 Speaker 1: constructive role in multi lateral institutions, including the IMAN, and third, 57 00:04:30,120 --> 00:04:35,599 Speaker 1: Chinese commitment to support developing countries that are struggling with 58 00:04:35,800 --> 00:04:39,320 Speaker 1: high that levels for making them China, the major A 59 00:04:39,480 --> 00:04:42,440 Speaker 1: major sore so important here and this goes to our 60 00:04:42,520 --> 00:04:45,200 Speaker 1: en Rehardens conversation with the Speaker of the House last 61 00:04:45,320 --> 00:04:47,680 Speaker 1: night in Los Angeles. But to take it away from 62 00:04:47,720 --> 00:04:50,880 Speaker 1: the politics and go back to IMF one on one, 63 00:04:51,200 --> 00:04:54,919 Speaker 1: the Chinese don't want to participate in the normal and 64 00:04:55,120 --> 00:05:00,440 Speaker 1: historic IMF restructuring process. They don't want to exgeneration, they 65 00:05:00,480 --> 00:05:02,200 Speaker 1: don't want to take a hair cut and bring down 66 00:05:02,200 --> 00:05:04,440 Speaker 1: the interest rate. They don't even want to write down 67 00:05:04,520 --> 00:05:07,400 Speaker 1: some of the debts that they were directly or indirectly 68 00:05:07,520 --> 00:05:10,640 Speaker 1: involved in. I spoke to our Matthew Hill and Mozambique 69 00:05:10,640 --> 00:05:15,040 Speaker 1: and Zambia today. Can Chinese help you with the challenges 70 00:05:15,160 --> 00:05:20,360 Speaker 1: of Zambia. What I am very mindful of is that 71 00:05:21,279 --> 00:05:28,240 Speaker 1: China has been very slow to recognize that multilateral debt 72 00:05:28,279 --> 00:05:34,320 Speaker 1: restructuring requires China to play by the rules that are 73 00:05:34,360 --> 00:05:39,200 Speaker 1: already established. It is now the time for China to 74 00:05:39,279 --> 00:05:46,719 Speaker 1: demonstrate that they are capable of playing by these rules. Yes, 75 00:05:47,440 --> 00:05:52,200 Speaker 1: we have had very slow process on that restructuring on Chat, 76 00:05:52,880 --> 00:05:57,440 Speaker 1: but we have completed it. We have now initiated a 77 00:05:57,520 --> 00:06:02,120 Speaker 1: debt restructuring for Zambia, and I got the assurances from 78 00:06:02,160 --> 00:06:07,119 Speaker 1: the Chinese premier that China would play its role. They're 79 00:06:07,120 --> 00:06:11,479 Speaker 1: the largest creditor to Zambia for Zambia to move to 80 00:06:11,680 --> 00:06:17,520 Speaker 1: a more reliable path. The same applies to Sri Lanka, 81 00:06:17,520 --> 00:06:20,919 Speaker 1: where China has taken a commitment to play by the 82 00:06:21,000 --> 00:06:25,680 Speaker 1: international rules. The same applies to Ghana, Tree Ekiopia. We 83 00:06:25,760 --> 00:06:30,120 Speaker 1: have created, together with the World Bank and India as 84 00:06:30,200 --> 00:06:35,160 Speaker 1: G twenty Presidency, a new global sovereign that round table. 85 00:06:35,920 --> 00:06:41,280 Speaker 1: China is participating, They're they're part of it. They're participating 86 00:06:41,680 --> 00:06:47,400 Speaker 1: fully and they're participating constructively. Where we need to continue 87 00:06:47,480 --> 00:06:52,200 Speaker 1: to engage with China is on how we can achieve 88 00:06:52,279 --> 00:06:56,359 Speaker 1: the same result for countries in terms of shrinking that 89 00:06:56,360 --> 00:07:02,520 Speaker 1: that level that China can implement meant domestically given their 90 00:07:02,680 --> 00:07:10,160 Speaker 1: own internal domestic constraints. Direct haircut is the most straightforward way, 91 00:07:10,720 --> 00:07:15,119 Speaker 1: but we can achieve the same shrinking of death through 92 00:07:15,360 --> 00:07:20,320 Speaker 1: that reprofiling, in other words, extending by many more years 93 00:07:20,640 --> 00:07:24,960 Speaker 1: the time of services trying to agree to that traditional methodology. 94 00:07:25,280 --> 00:07:28,000 Speaker 1: They are not well. They have agreed in the case 95 00:07:28,040 --> 00:07:31,560 Speaker 1: of chat We are now working on having them agreeing 96 00:07:31,640 --> 00:07:34,600 Speaker 1: in the case of Zambia. But look proof of the 97 00:07:34,640 --> 00:07:38,600 Speaker 1: pudding is where it is in the meeting, so I 98 00:07:38,640 --> 00:07:43,040 Speaker 1: can say we got reassurances from the Chinese leadership that 99 00:07:43,120 --> 00:07:46,160 Speaker 1: they would play constructively. From now we need to eat 100 00:07:46,200 --> 00:07:48,720 Speaker 1: the cake. Now we need to see China delivering on 101 00:07:48,920 --> 00:07:52,240 Speaker 1: How urgent is it, as you said in your speech, 102 00:07:52,280 --> 00:07:56,400 Speaker 1: as you start these spring meetings, this difficult climb. How 103 00:07:56,600 --> 00:08:00,920 Speaker 1: urgent is it for President Biden to meet President to 104 00:08:01,000 --> 00:08:05,800 Speaker 1: begin the path of practicality and the path towards the 105 00:08:06,080 --> 00:08:09,560 Speaker 1: huge tensions that we have now to improve those tensions. Well, 106 00:08:09,800 --> 00:08:12,040 Speaker 1: this is for the leadership of the of these two 107 00:08:12,160 --> 00:08:16,800 Speaker 1: countries to decide. What I can say is that when 108 00:08:17,400 --> 00:08:22,360 Speaker 1: there is so much tension between the two largest economies, 109 00:08:23,440 --> 00:08:30,600 Speaker 1: then the innocent bystanders are being hurt. We calculated the 110 00:08:30,640 --> 00:08:38,480 Speaker 1: economic impact of the taris US impulsed on China for 111 00:08:38,679 --> 00:08:43,199 Speaker 1: last year. This shrunk global growth by zero point four 112 00:08:43,320 --> 00:08:45,160 Speaker 1: or you want to player, come on, it's a working 113 00:08:45,200 --> 00:08:48,400 Speaker 1: paper the IMF and basically we're shrinking in Japan and 114 00:08:48,559 --> 00:08:51,839 Speaker 1: Germany out of the global system. Right Well, now, this 115 00:08:52,080 --> 00:08:55,040 Speaker 1: is this is a separate issue. I'm talking specifically about 116 00:08:55,080 --> 00:09:01,240 Speaker 1: the tariffs. Okay, the taris that have been impulse they 117 00:09:01,320 --> 00:09:08,679 Speaker 1: reduce global GDP because the impact of trade restrictions. We 118 00:09:08,760 --> 00:09:11,360 Speaker 1: know it from I'm running out of time. Are gonna 119 00:09:11,360 --> 00:09:14,120 Speaker 1: make some news. Are you suggesting that President Biden should 120 00:09:14,160 --> 00:09:19,560 Speaker 1: eliminate or diminished the Trump tariffs? We think that getting 121 00:09:19,960 --> 00:09:25,720 Speaker 1: on a path of less fragmentation in the world economy 122 00:09:25,960 --> 00:09:29,880 Speaker 1: is good for everybody, including for middle class in the 123 00:09:29,960 --> 00:09:37,080 Speaker 1: United States, because when we impose more costs, they trickled 124 00:09:37,200 --> 00:09:42,200 Speaker 1: down and somebody pays. Who pays it is in the 125 00:09:42,360 --> 00:09:48,480 Speaker 1: end consumers here, consumers everywhere. So less fragmentation in the 126 00:09:48,480 --> 00:09:54,040 Speaker 1: world economy means the highest standard of living for people everywhere. 127 00:09:55,480 --> 00:09:59,320 Speaker 1: You're listening to the Team Cancer ALIGNE program, Bloomberg Markets 128 00:09:59,360 --> 00:10:02,480 Speaker 1: We Jason ten A m Eastern Bloomberg dot Com, the 129 00:10:02,600 --> 00:10:05,280 Speaker 1: r Heard radio app, and the Bloomberg Business app. We're 130 00:10:05,280 --> 00:10:10,400 Speaker 1: listening on demand wherever you get your podcast. I want 131 00:10:10,400 --> 00:10:12,360 Speaker 1: to talk about it. Now. We have an economist who 132 00:10:12,440 --> 00:10:17,199 Speaker 1: has a PhD. Wow, that's big. I'm not that's University 133 00:10:17,200 --> 00:10:19,440 Speaker 1: of Maryland. When you make the commitment for PhD, that 134 00:10:19,600 --> 00:10:22,079 Speaker 1: is a huge commitment. I mean the masters I got 135 00:10:22,080 --> 00:10:23,839 Speaker 1: my NBA is two years. I spent half of it 136 00:10:24,000 --> 00:10:26,080 Speaker 1: on the golf course. But when you go to get 137 00:10:26,080 --> 00:10:30,360 Speaker 1: a PhD. You know, that is a commitment. Uh some 138 00:10:30,640 --> 00:10:32,960 Speaker 1: more rigorous than an MBA. It's a little bit more rigorous. 139 00:10:33,000 --> 00:10:36,079 Speaker 1: Yeah some. I have chief economists at Core Lodgist Joints 140 00:10:36,080 --> 00:10:38,000 Speaker 1: this year. We want to talk about the housing market here, 141 00:10:38,280 --> 00:10:40,280 Speaker 1: so Selma, give us a sense here. We've had these 142 00:10:40,360 --> 00:10:43,880 Speaker 1: rates move up dramatically. That didn't stop me from diving 143 00:10:43,880 --> 00:10:45,679 Speaker 1: into the real estate market. Well, and then, as Critti 144 00:10:45,760 --> 00:10:49,360 Speaker 1: pointed out, we've had rates then moved down dramatically. I 145 00:10:49,360 --> 00:10:52,200 Speaker 1: mean the ten year was over four percent like what 146 00:10:52,400 --> 00:10:58,080 Speaker 1: three weeks ago, and now we're at three twenty eight. Selma, 147 00:10:58,280 --> 00:11:04,319 Speaker 1: is that like a concern? Um? Yes, Well, first of all, 148 00:11:04,360 --> 00:11:07,520 Speaker 1: thank you very much for having me on the show. Um. Yeah, 149 00:11:07,559 --> 00:11:10,520 Speaker 1: I mean we've we've been muddling through this transition in 150 00:11:10,600 --> 00:11:14,120 Speaker 1: the housing market brought on by by Surgeon mortgage rates 151 00:11:14,240 --> 00:11:17,120 Speaker 1: and and you know, we had a really miserable winter. 152 00:11:17,679 --> 00:11:21,200 Speaker 1: Homesales ended up with the thirty to forty percent lower 153 00:11:21,240 --> 00:11:24,160 Speaker 1: activity at the end of the year than than at 154 00:11:24,160 --> 00:11:26,840 Speaker 1: the end of twenty twenty one. But now mortgages have 155 00:11:27,000 --> 00:11:30,079 Speaker 1: come down from the November peak. You know, after picking 156 00:11:30,240 --> 00:11:33,200 Speaker 1: seven at seven percent, mortgage rates have been. You know, 157 00:11:33,600 --> 00:11:35,760 Speaker 1: they even came down to six percent, went up to 158 00:11:35,840 --> 00:11:38,880 Speaker 1: six and a half, coming back down towards six percent. 159 00:11:39,320 --> 00:11:42,280 Speaker 1: So um. You know, lower mortgage rates have definitely helped 160 00:11:42,280 --> 00:11:45,440 Speaker 1: the home sales activity which has which was really really 161 00:11:45,480 --> 00:11:48,080 Speaker 1: strong in the first couple of months of this year. 162 00:11:48,240 --> 00:11:51,000 Speaker 1: And we are seeing is that the buyers are very 163 00:11:51,120 --> 00:11:54,520 Speaker 1: very responsive to these low lower mortgage rates. Um and 164 00:11:54,559 --> 00:11:58,320 Speaker 1: then as soon as mortgages start coming down, buyers jumped in. 165 00:11:58,480 --> 00:12:01,599 Speaker 1: It's the only problem really at this point is inventory 166 00:12:01,920 --> 00:12:05,360 Speaker 1: that continues to be extremely scarce. And you know, the 167 00:12:05,440 --> 00:12:09,480 Speaker 1: usually spring increase that we see for spring homebuying season, 168 00:12:09,559 --> 00:12:11,720 Speaker 1: it's just not there this time. Run well, and also 169 00:12:11,720 --> 00:12:14,480 Speaker 1: the question, you know, why our rates coming down so quickly. 170 00:12:14,559 --> 00:12:17,439 Speaker 1: I mean, it's great to have lower mortgages, obviously more 171 00:12:17,480 --> 00:12:20,360 Speaker 1: people can afford to buy a house, but if we're 172 00:12:20,360 --> 00:12:23,959 Speaker 1: heading into a recession, that's got to concern you a little. Right. 173 00:12:24,400 --> 00:12:26,520 Speaker 1: If you look at the World to interest rate probability 174 00:12:27,679 --> 00:12:31,440 Speaker 1: page on the Bloomberg Terminal, which is how we calculate 175 00:12:31,559 --> 00:12:34,400 Speaker 1: what markets are forecasting for the FED, there was a 176 00:12:34,480 --> 00:12:36,920 Speaker 1: seventy percent chance of a rate hike at the beginning 177 00:12:36,920 --> 00:12:39,720 Speaker 1: of this week. Now it's only a forty four percent chance. 178 00:12:40,240 --> 00:12:44,360 Speaker 1: So that means the market is really worried that the 179 00:12:44,440 --> 00:12:49,719 Speaker 1: Fed is going to freak out a pause right right, absolutely, 180 00:12:49,800 --> 00:12:52,880 Speaker 1: And and that's actually reflected in the mortgage ry spread, 181 00:12:53,040 --> 00:12:56,320 Speaker 1: you know it has. It's we've had one of the 182 00:12:56,360 --> 00:12:59,520 Speaker 1: most volatil years in terms of mortgage ry spread, and 183 00:13:00,200 --> 00:13:03,199 Speaker 1: we ended the year at three hundred basis points. It's 184 00:13:03,280 --> 00:13:07,040 Speaker 1: over the ten year treasury from thirty year fixed. You know, 185 00:13:07,120 --> 00:13:09,640 Speaker 1: this is almost double that that, you know, the long 186 00:13:09,760 --> 00:13:12,320 Speaker 1: term average of a five hundred and seventy based points. 187 00:13:12,360 --> 00:13:15,079 Speaker 1: It has come down and now again over the last 188 00:13:15,720 --> 00:13:18,640 Speaker 1: month or so, it has jumped back to closer to 189 00:13:18,800 --> 00:13:21,719 Speaker 1: three hundred basis points. So he has mortgage right, volatility 190 00:13:21,840 --> 00:13:24,120 Speaker 1: is huge, and I mean, imagine how difficult it is 191 00:13:24,160 --> 00:13:27,719 Speaker 1: for potential homebuyers to plan in this environment because you 192 00:13:27,760 --> 00:13:29,600 Speaker 1: don't know if you're going to be space six percent, 193 00:13:29,720 --> 00:13:31,760 Speaker 1: if you're gonna bay seven percent. And for some folks 194 00:13:31,760 --> 00:13:33,800 Speaker 1: that matters a lot in terms of how much they 195 00:13:33,800 --> 00:13:36,960 Speaker 1: can afford. Well, I'm going to refinance my mortgage I 196 00:13:37,000 --> 00:13:38,840 Speaker 1: just got into I'm gonna say twelve to eighteen months, 197 00:13:38,840 --> 00:13:40,680 Speaker 1: and it's gonna have a four handle on the front. 198 00:13:40,679 --> 00:13:43,240 Speaker 1: That's my prediction. So you got a floating rate, Well, 199 00:13:43,320 --> 00:13:44,840 Speaker 1: we'll see about that. Yeah, we got some we got 200 00:13:44,880 --> 00:13:47,480 Speaker 1: some work going on there in the mortgage market. So 201 00:13:47,480 --> 00:13:49,560 Speaker 1: I'm gona talk to us about the regionality of what's 202 00:13:49,559 --> 00:13:51,600 Speaker 1: going on out there in the housing market. Is it 203 00:13:51,920 --> 00:13:54,559 Speaker 1: as simple as everybody's moving down to the sun belt 204 00:13:54,600 --> 00:13:58,520 Speaker 1: and that's good, and everybody's moving out of the coastal cities. 205 00:13:58,640 --> 00:14:02,040 Speaker 1: Is that kind of the story? Um, well, I don't 206 00:14:02,080 --> 00:14:04,000 Speaker 1: know that it's as simple as that, but I mean 207 00:14:04,040 --> 00:14:06,679 Speaker 1: that's actually what the data is reflecting at this point. 208 00:14:07,160 --> 00:14:11,160 Speaker 1: You know, it's it's very the home price changes are 209 00:14:11,280 --> 00:14:16,440 Speaker 1: varying so so much across the US. On the West coast, 210 00:14:16,480 --> 00:14:20,320 Speaker 1: Mountain West, we've seen significant declines from last year's peaks, 211 00:14:20,640 --> 00:14:24,800 Speaker 1: as much as ten to fourteen percent, so double digit declines. 212 00:14:25,680 --> 00:14:31,000 Speaker 1: On the East coast, Southeast Texas, New England not as much. 213 00:14:31,120 --> 00:14:34,480 Speaker 1: Home prices are down in very low single digits, up 214 00:14:34,520 --> 00:14:38,440 Speaker 1: to down three percent, So there is huge variation. But 215 00:14:38,520 --> 00:14:42,480 Speaker 1: I think it's really it's it's about affordability. You know, 216 00:14:42,520 --> 00:14:45,840 Speaker 1: Mortgage rates really took a huge chunk of the purchase 217 00:14:45,920 --> 00:14:49,480 Speaker 1: budget for buyers, so it's about affordability, it's about lack 218 00:14:49,520 --> 00:14:52,880 Speaker 1: of inventory. The areas that are doing much better are 219 00:14:52,920 --> 00:14:57,240 Speaker 1: areas that do have new construction activity where builders have 220 00:14:57,360 --> 00:15:01,120 Speaker 1: been able to compensate buyers for that and mortgage rates. 221 00:15:01,200 --> 00:15:05,960 Speaker 1: So it's it's about more than just um sunshine. Right, Yeah, 222 00:15:05,960 --> 00:15:08,960 Speaker 1: it's taxes, It's all that kind of good stuff. Real 223 00:15:09,040 --> 00:15:13,240 Speaker 1: quickly m thirty seconds. Some what's your expectation for where 224 00:15:13,400 --> 00:15:17,120 Speaker 1: mortgage rates are going to go? Well, I think we're 225 00:15:17,120 --> 00:15:20,000 Speaker 1: going to continue to see volatility in mortgage rates, but 226 00:15:20,120 --> 00:15:24,000 Speaker 1: I think generally speaking, we're going to be uh driving 227 00:15:24,040 --> 00:15:27,280 Speaker 1: a mortgagees are going to be coming lower. Um. You 228 00:15:27,320 --> 00:15:30,240 Speaker 1: know when you look at the consensus forecast, it's all 229 00:15:30,240 --> 00:15:33,520 Speaker 1: over the place. I mean, it's it's so uncertain and 230 00:15:33,560 --> 00:15:37,760 Speaker 1: wide ranging. Um. I think generally speaking, uh, we expect 231 00:15:37,760 --> 00:15:40,200 Speaker 1: mortgage rates to come below six percent by the end 232 00:15:40,240 --> 00:15:44,040 Speaker 1: of the year. Um. Some expect still in that six 233 00:15:44,480 --> 00:15:46,640 Speaker 1: percent handle, but but I think we're going to be 234 00:15:47,800 --> 00:15:50,920 Speaker 1: drifting lower to five and a half. All right, SMA, 235 00:15:50,920 --> 00:15:52,960 Speaker 1: thank you so much. I'm again I'm holding out for 236 00:15:53,000 --> 00:15:54,720 Speaker 1: something with a four handle on it, So see what 237 00:15:54,760 --> 00:15:57,240 Speaker 1: you can do for me. Some have she's a chief 238 00:15:57,280 --> 00:16:01,720 Speaker 1: economist at a core logic coming up and just moments. Yeah, 239 00:16:01,760 --> 00:16:06,160 Speaker 1: so I'm confused. Did you buy I actually asked, are 240 00:16:06,200 --> 00:16:09,200 Speaker 1: you no? I haven't fixed or I have a fixed mortgage, 241 00:16:09,200 --> 00:16:11,440 Speaker 1: but I'm gonna be financi that bad boy. Um oh, 242 00:16:11,480 --> 00:16:14,120 Speaker 1: I see okay, yeah, okay. For a second, I suspected 243 00:16:14,160 --> 00:16:17,720 Speaker 1: you just bought in cash and then you're waiting to no, 244 00:16:17,840 --> 00:16:19,640 Speaker 1: I need that. I like the tax deduction. I didn't 245 00:16:19,680 --> 00:16:21,600 Speaker 1: have that for a while. So you're listening to the 246 00:16:21,680 --> 00:16:25,480 Speaker 1: tape Cancer Live program Bloomberg Markets weekdays at ten am 247 00:16:25,520 --> 00:16:29,440 Speaker 1: Eastern on Bloomberg Radio tuning half, Bloomberg dot Com and 248 00:16:29,480 --> 00:16:32,280 Speaker 1: the Bloomberg Business Half. You can also listen live on 249 00:16:32,360 --> 00:16:35,640 Speaker 1: Amazon Alexa from our flagship New York station, Just say 250 00:16:35,680 --> 00:16:40,960 Speaker 1: Alexa play Bloomberg eleven thirty. You know, cars for the 251 00:16:41,040 --> 00:16:45,360 Speaker 1: American market designed and built more quickly. Now, absolutely, this 252 00:16:45,560 --> 00:16:47,920 Speaker 1: is a journey, Matt, So it would not be from 253 00:16:47,960 --> 00:16:50,280 Speaker 1: one day to the next. It's not gonna happen tomorrow. 254 00:16:50,640 --> 00:16:54,920 Speaker 1: But I think by bringing digitalization engineering combined with the design, 255 00:16:55,320 --> 00:16:59,440 Speaker 1: it will increase the amount of vehicles that we'll bring 256 00:16:59,520 --> 00:17:01,760 Speaker 1: to the market, and it would decrease the amount of time. 257 00:17:02,640 --> 00:17:04,760 Speaker 1: This would not be possible if we would not have 258 00:17:04,840 --> 00:17:07,280 Speaker 1: the support from Bozai and in Germany. Yeah, I know 259 00:17:07,320 --> 00:17:10,560 Speaker 1: that Oliver Bloom fully supports. They studied along with the board. Yeah, 260 00:17:10,600 --> 00:17:13,320 Speaker 1: we have our non leads and we are also the 261 00:17:13,640 --> 00:17:17,080 Speaker 1: bd W brand CEO, Tomas Schaeffer. So everybody's supporting the 262 00:17:17,200 --> 00:17:20,760 Speaker 1: strategy that we need to get more responsibility for the 263 00:17:20,840 --> 00:17:23,520 Speaker 1: design on the developer of the vehicles. She in the US. 264 00:17:23,600 --> 00:17:26,040 Speaker 1: I was just down in Mexico and I saw down 265 00:17:26,080 --> 00:17:29,560 Speaker 1: there some of the original bugs, right, and my heart 266 00:17:29,600 --> 00:17:32,840 Speaker 1: flutters a little bit. It's such an iconic design. I 267 00:17:32,880 --> 00:17:36,520 Speaker 1: grew up partially in Germany, so for me, the golf 268 00:17:36,760 --> 00:17:40,640 Speaker 1: is almost synonymous with car. Right. My mother has pined 269 00:17:40,720 --> 00:17:43,520 Speaker 1: for a Volkswagen bus for the better part of my life, 270 00:17:43,520 --> 00:17:47,840 Speaker 1: and I'm old. Are these iconic nameplates gonna come back? 271 00:17:48,280 --> 00:17:50,040 Speaker 1: I was worried when I heard the golf this may 272 00:17:50,080 --> 00:17:52,840 Speaker 1: be the last generation of the Golf. Yeah, So going 273 00:17:52,920 --> 00:17:54,400 Speaker 1: to your point, they will come back. I mean, we're 274 00:17:54,400 --> 00:17:58,080 Speaker 1: going to maintain the DNA of the brand, the iconic products. 275 00:17:58,119 --> 00:18:02,040 Speaker 1: For example, we are launching the ID bus in a 276 00:18:02,119 --> 00:18:04,399 Speaker 1: couple of months here in the US. It will be 277 00:18:04,480 --> 00:18:07,879 Speaker 1: a global launch. It will be in the beginning of June, 278 00:18:08,720 --> 00:18:11,800 Speaker 1: and the launch of the product will be available in 279 00:18:11,920 --> 00:18:15,359 Speaker 1: twenty twenty four. So this type of vehicles, iconic vehicles, 280 00:18:15,440 --> 00:18:19,000 Speaker 1: we will preserve the DNA of the brand. Going forward, 281 00:18:19,040 --> 00:18:21,080 Speaker 1: there will be a next gen golf. We're gonna still 282 00:18:21,200 --> 00:18:24,480 Speaker 1: see a golf in twenty thirty. We're gonna maintain the 283 00:18:24,600 --> 00:18:27,960 Speaker 1: DNA of the brand, probably a golf. I cannot guarantee you, 284 00:18:28,040 --> 00:18:30,120 Speaker 1: but I guarantee you that the DNA of the brand 285 00:18:30,160 --> 00:18:33,000 Speaker 1: of these iconic products will remain in Let means you, yes, 286 00:18:33,080 --> 00:18:38,159 Speaker 1: have to buy your mother one as sure. Okay, so 287 00:18:38,200 --> 00:18:41,320 Speaker 1: she's just getting on. So speaking of demand, what is 288 00:18:41,359 --> 00:18:43,560 Speaker 1: your view on where the US is right now in 289 00:18:43,800 --> 00:18:47,280 Speaker 1: terms of recessionary fears, et cetera. Yeah, So, first of all, 290 00:18:47,400 --> 00:18:49,480 Speaker 1: let me tell you that on the first quarter of 291 00:18:49,560 --> 00:18:54,119 Speaker 1: this year, the marker is growing nine percent, So despite 292 00:18:54,680 --> 00:18:59,040 Speaker 1: the recession fears, despite inflation, and despite the interest rate 293 00:18:59,119 --> 00:19:02,680 Speaker 1: the market, we mains strong and we have gained market 294 00:19:02,720 --> 00:19:06,280 Speaker 1: share as VAW over the last three three months, so 295 00:19:06,760 --> 00:19:11,040 Speaker 1: that's very positive. How strong nine percent market growth is 296 00:19:11,320 --> 00:19:14,159 Speaker 1: very strong, I mean, and we grew almost ten percent, 297 00:19:14,560 --> 00:19:19,040 Speaker 1: so I think that, Yeah, there's inflation pressure. There's interest 298 00:19:19,119 --> 00:19:21,560 Speaker 1: rates obviously, particularly on the least. When the consumers go 299 00:19:22,160 --> 00:19:24,280 Speaker 1: to the dealer and they see that the least has 300 00:19:24,440 --> 00:19:27,399 Speaker 1: you know, almost double, he has an impact. But he 301 00:19:27,520 --> 00:19:30,200 Speaker 1: has not slowed down the industry. Now. I think the 302 00:19:30,359 --> 00:19:34,000 Speaker 1: FED has made really good decisions on increasing the indust 303 00:19:34,080 --> 00:19:36,640 Speaker 1: rate to keep the interest rate under control. I think 304 00:19:36,680 --> 00:19:40,879 Speaker 1: this strategy will pay off by the year end twenty 305 00:19:40,920 --> 00:19:43,720 Speaker 1: twenty three, and I would expect that the interestry would 306 00:19:43,720 --> 00:19:46,760 Speaker 1: start coming down slowly early next year. We've seen in 307 00:19:46,840 --> 00:19:49,480 Speaker 1: the last couple of days a number of carmakers put 308 00:19:49,520 --> 00:19:52,720 Speaker 1: out news about their own finance arms. Right, it's really 309 00:19:52,760 --> 00:19:55,240 Speaker 1: important to have your own finance arm, especially in this 310 00:19:55,320 --> 00:19:58,399 Speaker 1: kind of situation, a high prices, rising rates, How do 311 00:19:58,480 --> 00:20:00,920 Speaker 1: you plan to finance your growth? So we do have 312 00:20:01,080 --> 00:20:03,600 Speaker 1: estric customers, so we do have a bank here in 313 00:20:03,720 --> 00:20:08,200 Speaker 1: the US, a very solid bank. But again it goes 314 00:20:08,240 --> 00:20:09,720 Speaker 1: back to the products. So let me give you an 315 00:20:09,760 --> 00:20:12,879 Speaker 1: example of the eighty four, which when we started manufacturer 316 00:20:12,960 --> 00:20:15,840 Speaker 1: in Chatauga in the state of Tennessee last year, it's 317 00:20:15,880 --> 00:20:20,200 Speaker 1: our first electric vehicle manufacturing in the US. Today, for 318 00:20:20,320 --> 00:20:23,000 Speaker 1: the first three months, we're number four in the rankings 319 00:20:23,320 --> 00:20:26,280 Speaker 1: in the electric vehicles. And then on top of that, 320 00:20:26,520 --> 00:20:30,080 Speaker 1: we have a company called Electrify America which are charging stations, 321 00:20:30,400 --> 00:20:33,840 Speaker 1: you know, three hundred charging stations, three thousand, five hundred superchargers. 322 00:20:34,240 --> 00:20:37,880 Speaker 1: We're gonna duble that in two years. And the most 323 00:20:37,880 --> 00:20:40,480 Speaker 1: important thing is that one percent of that comes from 324 00:20:40,560 --> 00:20:44,240 Speaker 1: renewable energy. Yeah, and then we give the buyer of 325 00:20:44,400 --> 00:20:47,200 Speaker 1: the i D four up to three years thirty minute 326 00:20:47,280 --> 00:20:50,399 Speaker 1: charge for free, included in the package of a vehicle 327 00:20:50,440 --> 00:20:53,000 Speaker 1: which starts around thirty nine thousand dollars. So when you're 328 00:20:53,040 --> 00:20:55,440 Speaker 1: a consumer and you look at the total picture, you're 329 00:20:55,440 --> 00:21:01,640 Speaker 1: an affordable I D four with three energy renewal energy 330 00:21:01,720 --> 00:21:05,120 Speaker 1: for the next three years on, you have some financing options. 331 00:21:05,280 --> 00:21:07,600 Speaker 1: On top of that, you had the IRD credit. That's 332 00:21:07,600 --> 00:21:10,440 Speaker 1: a company package. All right, Pablo, thank you so much. 333 00:21:10,440 --> 00:21:13,240 Speaker 1: I really appreciate it. Matt also appreciate having a set 334 00:21:13,320 --> 00:21:16,760 Speaker 1: with me. Thank you for allowing me to come Pablo 335 00:21:16,960 --> 00:21:21,320 Speaker 1: to see Volkswagen of America CEO and Bloomberg's Matt Miller. 336 00:21:21,560 --> 00:21:26,520 Speaker 1: This is Bloomberg. You're listening to the Team Cancer Line 337 00:21:26,600 --> 00:21:30,480 Speaker 1: program Bloomberg Markets weekdays at ten am Eastering on Bloomberg 338 00:21:30,560 --> 00:21:33,120 Speaker 1: dot com. The I Heart Radio app and the Bloomberg 339 00:21:33,200 --> 00:21:36,440 Speaker 1: Business app. We're listening on demand wherever you get your podcast. 340 00:21:39,119 --> 00:21:41,240 Speaker 1: All right, let's bring in Herman Chan. He covers the 341 00:21:41,280 --> 00:21:44,600 Speaker 1: regional banks for Bloomberg Intelligence. He's been a busy, busy 342 00:21:44,960 --> 00:21:49,119 Speaker 1: analyst over the last several weeks here, So Herman, I 343 00:21:49,240 --> 00:21:51,399 Speaker 1: guess I'm just looking at Western Alliance. That's kind of 344 00:21:51,400 --> 00:21:53,080 Speaker 1: the one of the banks I have on my screen 345 00:21:53,160 --> 00:21:56,480 Speaker 1: to keep an eye on. Is maybe a potential at 346 00:21:56,600 --> 00:21:59,120 Speaker 1: risk type of institution out there on the West coast. 347 00:21:59,160 --> 00:22:01,040 Speaker 1: It's up five percent today. I don't know what to 348 00:22:01,119 --> 00:22:04,200 Speaker 1: make of it. What are we hearing from some of 349 00:22:04,320 --> 00:22:06,600 Speaker 1: these banks or are we just waiting for earnings to 350 00:22:06,760 --> 00:22:09,600 Speaker 1: really get a sense of how their balanceies are, how 351 00:22:09,640 --> 00:22:11,960 Speaker 1: their deposit levels are. Is that kind of where we are? Yeah? 352 00:22:12,119 --> 00:22:14,880 Speaker 1: I heard the segment earlier in terms of Western Alliance 353 00:22:15,040 --> 00:22:17,240 Speaker 1: and how they positioned themselves over the last couple of 354 00:22:17,320 --> 00:22:19,960 Speaker 1: days in terms of their update and lack of the 355 00:22:20,040 --> 00:22:25,480 Speaker 1: deposit disclosure. The disclosure that they subsequently came out with 356 00:22:25,680 --> 00:22:30,760 Speaker 1: yesterday afternoon was actually pretty positive in the grand scheme 357 00:22:30,800 --> 00:22:36,360 Speaker 1: of things. Deposits down and they finally gave that number. 358 00:22:36,400 --> 00:22:38,960 Speaker 1: They didn't give that initial number in the in the 359 00:22:39,080 --> 00:22:43,120 Speaker 1: Tuesday update, so that was a big consternation for them. 360 00:22:44,440 --> 00:22:48,560 Speaker 1: Eleven percent pretty decent. I think some of the analysts 361 00:22:48,600 --> 00:22:50,840 Speaker 1: were expecting something that was worse than that, So I 362 00:22:50,920 --> 00:22:52,919 Speaker 1: think that's why you're seeing a bit of a relief 363 00:22:53,080 --> 00:22:55,760 Speaker 1: rally from Western. Liane. If I'm a banker and I've 364 00:22:55,800 --> 00:23:00,320 Speaker 1: got like Western in my name, I'm gonna I've probably 365 00:23:00,359 --> 00:23:02,840 Speaker 1: lost deposits, or i got some kind of Silicon Valley 366 00:23:03,240 --> 00:23:08,480 Speaker 1: name in my name, I'm losing deposits. Well, right, what 367 00:23:08,600 --> 00:23:10,439 Speaker 1: do I do if I'm a banker? Do I literally 368 00:23:10,760 --> 00:23:12,840 Speaker 1: get on the phone and call these people up and say, 369 00:23:12,920 --> 00:23:16,160 Speaker 1: take your money back from JP Morgan Chase, from Bank 370 00:23:16,200 --> 00:23:18,479 Speaker 1: of America wherever you put it, and bring it back. 371 00:23:18,640 --> 00:23:20,560 Speaker 1: Is we're okay? Is that what I'm doing? Yeah, that's 372 00:23:20,600 --> 00:23:25,920 Speaker 1: what you're doing. Uh, you're going, dude that listen, I 373 00:23:26,880 --> 00:23:29,520 Speaker 1: give you a toaster. Although I'm perfectly happy with my bank, 374 00:23:30,160 --> 00:23:35,560 Speaker 1: um full disclosure to bank, they have obviously no branches here, 375 00:23:35,720 --> 00:23:39,960 Speaker 1: so it makes banking for me particularly difficult. Nonetheless, I 376 00:23:40,080 --> 00:23:42,560 Speaker 1: have not changed my bank since I moved here from 377 00:23:42,640 --> 00:23:46,800 Speaker 1: Ohio like thirty years ago. Right, I'm more likely to 378 00:23:46,960 --> 00:23:51,240 Speaker 1: change my wife than my bank, right, I mean, it's 379 00:23:51,320 --> 00:23:54,680 Speaker 1: just something people don't do, right. She doesn't listen to radio, 380 00:23:55,080 --> 00:23:59,119 Speaker 1: so um, I just can't imagine that people would change 381 00:23:59,440 --> 00:24:03,679 Speaker 1: their bank and then change back, right, unless I mean, 382 00:24:03,720 --> 00:24:07,280 Speaker 1: I'm also maybe extraordinarily lazy and disorganized. But you're a 383 00:24:07,359 --> 00:24:10,680 Speaker 1: super loyal customer that I'm sure Huntington is glad to 384 00:24:10,760 --> 00:24:15,400 Speaker 1: have you. But some of these other institutions, specifically technology 385 00:24:15,560 --> 00:24:19,479 Speaker 1: and startup companies, have had this heard mentality where they 386 00:24:19,480 --> 00:24:22,920 Speaker 1: don't want to operate within a regional bank structure because 387 00:24:22,960 --> 00:24:26,120 Speaker 1: they view them as less safe. So you've seen them 388 00:24:26,800 --> 00:24:29,639 Speaker 1: jettison their deposits over to a larger, too big to 389 00:24:29,680 --> 00:24:33,640 Speaker 1: fail banks. It's unfortunate, but the hope is that when 390 00:24:33,760 --> 00:24:35,840 Speaker 1: things start to stabilize, and you've seen that a bit 391 00:24:35,960 --> 00:24:41,600 Speaker 1: with SBB being acquired by for Citizens and the signature 392 00:24:41,760 --> 00:24:44,639 Speaker 1: deal with New Your Community, it has quelled some of 393 00:24:44,720 --> 00:24:48,760 Speaker 1: the concerns and specifically within regional banks that they are 394 00:24:48,920 --> 00:24:52,600 Speaker 1: operating as as expected. So the hope is that the 395 00:24:54,000 --> 00:24:57,000 Speaker 1: concern sort of goes away and then things can move 396 00:24:57,040 --> 00:24:59,840 Speaker 1: back to normal and deposits can come back to the regionals. Yeah, 397 00:25:00,000 --> 00:25:03,960 Speaker 1: because I think the greater or wider economic concern is, Hey, 398 00:25:04,080 --> 00:25:07,359 Speaker 1: if regional bank A has lost deposits, that bank is 399 00:25:07,440 --> 00:25:10,680 Speaker 1: less likely to lend to my new little store I 400 00:25:10,760 --> 00:25:12,720 Speaker 1: want to open up on main Street and that could 401 00:25:12,760 --> 00:25:16,879 Speaker 1: impact you know, growth, economic growth GDP in this in 402 00:25:16,960 --> 00:25:20,320 Speaker 1: this country. I mean, when the banks report numbers, how 403 00:25:20,359 --> 00:25:22,400 Speaker 1: do I get a gauge of whether that's happening, whether 404 00:25:22,480 --> 00:25:25,720 Speaker 1: they're getting credit is a lot tougher than it used 405 00:25:25,720 --> 00:25:28,400 Speaker 1: to be. Yeah, I think the analyst community will ask 406 00:25:28,440 --> 00:25:32,160 Speaker 1: those questions and those the management teams will talk about 407 00:25:32,200 --> 00:25:34,680 Speaker 1: that in terms of their guidance for long growth. The 408 00:25:34,880 --> 00:25:38,400 Speaker 1: general expectation is that if funding costs and deposit costs 409 00:25:38,480 --> 00:25:41,280 Speaker 1: are increasing because banks need to pay up to retain 410 00:25:41,359 --> 00:25:46,280 Speaker 1: your deposits, and the availability of funding with deposits declining 411 00:25:47,320 --> 00:25:51,160 Speaker 1: is weekend, then banks should have less appetite to land, 412 00:25:51,440 --> 00:25:56,399 Speaker 1: and so credit underwriting will be tougher for for folks 413 00:25:56,480 --> 00:25:58,400 Speaker 1: that are looking to borrow. So you're going to see 414 00:25:58,480 --> 00:26:01,600 Speaker 1: hiring bar and costs, You're going to be tougher underwriting standards, 415 00:26:01,640 --> 00:26:04,959 Speaker 1: and that all can trickle through the economy and deliver 416 00:26:05,160 --> 00:26:08,119 Speaker 1: some slower GDP growth. As you mentioned, So is that 417 00:26:08,280 --> 00:26:10,560 Speaker 1: something that you'll see in the numbers, or that's just 418 00:26:10,720 --> 00:26:13,600 Speaker 1: you're going to hear in a commentary from the companies. 419 00:26:13,680 --> 00:26:16,160 Speaker 1: You're not going to see it quite in the numbers yet. 420 00:26:16,240 --> 00:26:21,080 Speaker 1: You'll see potentially slowing loan growth, But more in focus 421 00:26:21,200 --> 00:26:23,840 Speaker 1: for us is the commentary and the guidance in terms 422 00:26:23,880 --> 00:26:28,080 Speaker 1: of what loans will look like for the full year, 423 00:26:28,240 --> 00:26:32,080 Speaker 1: and i'd expect those the guidance for that to come down. Generally, 424 00:26:32,680 --> 00:26:37,960 Speaker 1: loans growth mirrors GDP growth, so you could potentially see 425 00:26:38,040 --> 00:26:41,680 Speaker 1: that decline for at least the regionals because of all 426 00:26:41,720 --> 00:26:45,480 Speaker 1: the funding issues that they're facing. When when is the 427 00:26:45,600 --> 00:26:48,000 Speaker 1: tide going to turn so that these banks can make 428 00:26:48,119 --> 00:26:52,800 Speaker 1: money like net interus margin money, old school bank banking money, right, 429 00:26:53,920 --> 00:26:56,960 Speaker 1: So what we are expecting is that it's going to 430 00:26:57,040 --> 00:27:00,960 Speaker 1: be tough for them because margins are tightening for for 431 00:27:01,320 --> 00:27:03,879 Speaker 1: across the regional banks, space funding costs are rising and 432 00:27:04,000 --> 00:27:06,560 Speaker 1: your loan yields aren't going to go up as fast, 433 00:27:06,640 --> 00:27:11,440 Speaker 1: so you need a competition to raise They got to 434 00:27:11,520 --> 00:27:14,000 Speaker 1: pay more right to depositors, so they got to pay 435 00:27:14,040 --> 00:27:17,159 Speaker 1: more for depositors to keep them in the door. And 436 00:27:17,880 --> 00:27:20,760 Speaker 1: what you need from a macro perspective is the FED 437 00:27:20,840 --> 00:27:23,800 Speaker 1: to cut rate so they can lower their deposit costs 438 00:27:23,920 --> 00:27:27,040 Speaker 1: by by cutting what they're paying out, So that that's 439 00:27:27,080 --> 00:27:32,560 Speaker 1: what can drive margin expansion going forward. Number though, because 440 00:27:32,600 --> 00:27:36,600 Speaker 1: you know now that investors that depositors, I'm sorry, have 441 00:27:36,720 --> 00:27:40,320 Speaker 1: gotten used to actually making money, um by giving it 442 00:27:40,560 --> 00:27:46,439 Speaker 1: to banks, and uh, they've gotten mobility right now, Depositors 443 00:27:46,480 --> 00:27:48,600 Speaker 1: are like, oh, I can move my money out of 444 00:27:48,680 --> 00:27:51,560 Speaker 1: bank A and into bank B. Um. They're going to 445 00:27:51,640 --> 00:27:55,360 Speaker 1: be doing so with more frequency, right um, So it's 446 00:27:55,400 --> 00:27:58,480 Speaker 1: going to be hard for banks to go back to 447 00:27:58,960 --> 00:28:01,960 Speaker 1: getting you know, money for nothing. The good thing, at 448 00:28:02,000 --> 00:28:04,680 Speaker 1: least from a bank perspective, is that you have a 449 00:28:04,760 --> 00:28:07,680 Speaker 1: lot of price reactivity wants interest rates to do cuts. 450 00:28:07,720 --> 00:28:12,440 Speaker 1: So the differential you mentioned banks can see their depositis 451 00:28:12,480 --> 00:28:15,359 Speaker 1: go to other places where're focused on what's going on 452 00:28:15,480 --> 00:28:18,760 Speaker 1: in the muddy market mutual fun complex, which is seeing 453 00:28:20,000 --> 00:28:22,720 Speaker 1: very strong inflows over the past several weeks after the 454 00:28:22,920 --> 00:28:26,840 Speaker 1: SBB fallouts. You know, the attractive of that sort of 455 00:28:27,160 --> 00:28:30,320 Speaker 1: asset class world diminished once we see some FED rate cuts, 456 00:28:30,400 --> 00:28:33,920 Speaker 1: so that differential should narrow and that's only going to 457 00:28:33,960 --> 00:28:36,080 Speaker 1: be positive for the banks. So Herman if I'm a 458 00:28:36,119 --> 00:28:38,720 Speaker 1: regional bank investorate. I might just mind banks in Texas 459 00:28:38,800 --> 00:28:42,480 Speaker 1: and Florida and Nashville or something. Yeah, I think that's 460 00:28:42,560 --> 00:28:46,200 Speaker 1: that's the right perspective. Folks that are in Middle America 461 00:28:46,240 --> 00:28:49,840 Speaker 1: and Ohio, like Huntington, aren't going to be affected by 462 00:28:50,200 --> 00:28:53,520 Speaker 1: the fallout with with SBB and signature. These are all 463 00:28:53,960 --> 00:28:58,080 Speaker 1: sort of coastal markets in California and New York and 464 00:28:58,280 --> 00:29:02,200 Speaker 1: so I'm sure out of the folks in Columbus probably 465 00:29:02,320 --> 00:29:05,000 Speaker 1: haven't even heard of SBB. So that's actually a good thing, 466 00:29:05,400 --> 00:29:08,200 Speaker 1: and we'd expect more stability from some of the smaller 467 00:29:08,280 --> 00:29:12,280 Speaker 1: banks that operates in the Midwest or the southeast real quickly. 468 00:29:12,360 --> 00:29:15,560 Speaker 1: There are worldly people in Columbus, Ohio, you know, Ohio 469 00:29:15,640 --> 00:29:18,640 Speaker 1: State University. It's not like we're these provincial you know, 470 00:29:19,280 --> 00:29:22,640 Speaker 1: We're not a town of farmers. We're pretty advanced. What's 471 00:29:22,680 --> 00:29:25,040 Speaker 1: pretty advanced. We can play football. You can play football 472 00:29:25,040 --> 00:29:28,240 Speaker 1: and get great all right, Herman Chen real quick scale 473 00:29:28,320 --> 00:29:30,360 Speaker 1: one to ten. How's your experience at Penn State Back 474 00:29:30,360 --> 00:29:33,320 Speaker 1: in the day, Penn State was great. Go Lion's got 475 00:29:33,360 --> 00:29:36,320 Speaker 1: a great football team, gonna be potentially in the playoffs 476 00:29:36,400 --> 00:29:38,560 Speaker 1: next year. So really looking forward to the seas ago 477 00:29:38,600 --> 00:29:40,760 Speaker 1: like a little Penn State plug in their Hermit Chin 478 00:29:41,280 --> 00:29:44,960 Speaker 1: senior analyte covers the regional banks in fintech for Bloomberg Intelligence. 479 00:29:45,600 --> 00:29:49,320 Speaker 1: Proud graduate of the Penn State University. Here looking at 480 00:29:49,360 --> 00:29:51,120 Speaker 1: the markets here, kind of unched here, not much a 481 00:29:51,160 --> 00:29:53,160 Speaker 1: little bit of red on the tape, but not a 482 00:29:53,240 --> 00:29:56,080 Speaker 1: whole lot going on. You're listening to the tape. Catch 483 00:29:56,120 --> 00:29:59,560 Speaker 1: our line program Bloomberg Markets weekdays at ten am Eastern 484 00:30:00,000 --> 00:30:03,120 Speaker 1: on Bloomberg Radio. Tune in ALF, Bloomberg dot Com and 485 00:30:03,200 --> 00:30:05,960 Speaker 1: the Bloomberg Business ALF. You can also listen live on 486 00:30:06,040 --> 00:30:09,840 Speaker 1: Amazon Alexa from our flagship New York station. Just say Alexa, 487 00:30:10,120 --> 00:30:15,719 Speaker 1: play Bloomberg eleven thirty. Let's talk ETFs again, I mean 488 00:30:15,840 --> 00:30:17,800 Speaker 1: again just in my career. This is one of the 489 00:30:18,040 --> 00:30:20,960 Speaker 1: most amazing growth stories that I've seen in my career, 490 00:30:21,040 --> 00:30:23,240 Speaker 1: just the growth of ETF some money coming out of 491 00:30:23,360 --> 00:30:27,320 Speaker 1: mutual funds into ETFs, just extraordinary when you think about 492 00:30:27,560 --> 00:30:31,360 Speaker 1: all the funds flows into ETFs. We welcome Amanda Robello. 493 00:30:31,440 --> 00:30:35,400 Speaker 1: She's had a passive sales US on shore for DWS Group. Man. 494 00:30:35,520 --> 00:30:37,760 Speaker 1: Thanks for joining us here on a Bloomberg Interactive Broker studio. 495 00:30:37,800 --> 00:30:40,160 Speaker 1: You get a gold star today for showing up. It's 496 00:30:40,240 --> 00:30:42,239 Speaker 1: more than we can say about most of our people here. 497 00:30:43,080 --> 00:30:46,480 Speaker 1: But you guys recently announced the listening of X trackers 498 00:30:47,040 --> 00:30:52,040 Speaker 1: MSCI USA Climate Action Equity ETF. Oh boy, what is that. 499 00:30:52,360 --> 00:30:54,760 Speaker 1: That's a mouthful, that's a big one. Tell us about 500 00:30:54,760 --> 00:30:58,200 Speaker 1: this ETF. Yeah, absolutely, thanks very much for KAM has 501 00:30:58,240 --> 00:31:00,480 Speaker 1: the chance to do that. So it is tracking the 502 00:31:00,640 --> 00:31:05,640 Speaker 1: MSCI USA Climate Action Index. And so what we're looking 503 00:31:05,680 --> 00:31:10,000 Speaker 1: to do is with this product invest in US equities 504 00:31:10,320 --> 00:31:14,200 Speaker 1: which are on a strong trajectory towards minimizing or reducing 505 00:31:14,440 --> 00:31:18,280 Speaker 1: their carbon emissions. Have there any changes? I mean, MSCI 506 00:31:18,440 --> 00:31:20,520 Speaker 1: recently said they're going to change their way they grade 507 00:31:21,200 --> 00:31:26,000 Speaker 1: I guess other funds. Yeah, are they making changes to 508 00:31:26,120 --> 00:31:28,600 Speaker 1: their index as well? So as far as we know, 509 00:31:28,640 --> 00:31:31,840 Speaker 1: they're not making changes to their indices. The data universe 510 00:31:32,000 --> 00:31:34,400 Speaker 1: is always evolving for them, so as they kind of 511 00:31:34,520 --> 00:31:36,520 Speaker 1: update all of their individual data points and then this 512 00:31:36,680 --> 00:31:39,160 Speaker 1: then feeds in when we have the index rebalances, which 513 00:31:39,200 --> 00:31:42,800 Speaker 1: then get executed inside the funds. But great news, actually, 514 00:31:42,800 --> 00:31:45,840 Speaker 1: I think in terms of them further enhancing their ESG 515 00:31:46,040 --> 00:31:48,640 Speaker 1: rating methodology for funds. But I think this only helps 516 00:31:48,640 --> 00:31:51,880 Speaker 1: investors more. Is ESG? I mean, it was such a 517 00:31:52,040 --> 00:31:55,959 Speaker 1: huge draw for a while, and then there has been 518 00:31:56,080 --> 00:32:00,520 Speaker 1: backlash recently, at least in the US. I'm not sure 519 00:32:00,560 --> 00:32:04,600 Speaker 1: if it's backlash against ESG specifically, but against that as 520 00:32:04,640 --> 00:32:09,880 Speaker 1: an investment product. Is it coming back? I mean, is 521 00:32:09,920 --> 00:32:12,200 Speaker 1: it here this day? I think in the long run 522 00:32:12,280 --> 00:32:14,880 Speaker 1: it is here to say, when we look at, you know, 523 00:32:14,960 --> 00:32:17,240 Speaker 1: where markets are, I think maybe it's not at the 524 00:32:17,400 --> 00:32:20,320 Speaker 1: forefront of investor's mind like it was before. They're more 525 00:32:20,360 --> 00:32:24,959 Speaker 1: concerned with generating returns, generating yield, reducing volatility in their 526 00:32:25,000 --> 00:32:27,680 Speaker 1: pose things should be aligned, though, Yeah, And the thing 527 00:32:27,800 --> 00:32:30,240 Speaker 1: is actually, in reality they are. So I think that 528 00:32:30,480 --> 00:32:33,080 Speaker 1: what we're seeing more and more is that clients start 529 00:32:33,120 --> 00:32:37,160 Speaker 1: to use, especially that governance piece in ESG, for risk reduction, 530 00:32:37,280 --> 00:32:41,400 Speaker 1: for drawdown reduction. So it's good. It's funny because actually 531 00:32:41,480 --> 00:32:44,120 Speaker 1: we were just talking about this the due diligence sessions 532 00:32:44,160 --> 00:32:47,360 Speaker 1: that we do with some of the largest investors globally. Beforehand, 533 00:32:47,640 --> 00:32:50,000 Speaker 1: ESG would be like a little ten minutes segment in 534 00:32:50,120 --> 00:32:53,680 Speaker 1: that kind of one day agenda, And now it's intrinsic 535 00:32:53,760 --> 00:32:56,480 Speaker 1: and pretty much all of the different segments. Yeah, I 536 00:32:56,520 --> 00:32:58,600 Speaker 1: want to follow on when Matt was going the pet 537 00:32:58,680 --> 00:33:00,720 Speaker 1: Matt was going down because you know here in the 538 00:33:00,800 --> 00:33:03,720 Speaker 1: US we have seen some pushback and I probed some 539 00:33:03,840 --> 00:33:06,960 Speaker 1: of our European colleagues that are based in our London 540 00:33:07,000 --> 00:33:08,880 Speaker 1: office and they say no, in Europe it is the 541 00:33:09,200 --> 00:33:11,520 Speaker 1: ESG push is as strong as ever and if and 542 00:33:11,640 --> 00:33:16,440 Speaker 1: they particularly called out Finland, Swedeland, you know, the Nordic countries. 543 00:33:16,480 --> 00:33:18,600 Speaker 1: And I see here in your launch you had a 544 00:33:18,640 --> 00:33:21,400 Speaker 1: big support from the fund in Finland talked to us 545 00:33:21,440 --> 00:33:24,600 Speaker 1: about this h this etf you launch and in the 546 00:33:24,680 --> 00:33:30,240 Speaker 1: investment by uh this Finish firm. Yeah. Sure, So we 547 00:33:30,320 --> 00:33:33,880 Speaker 1: were working together with a very good client of US, 548 00:33:34,320 --> 00:33:37,560 Speaker 1: il Marin and it's in the public domain and they are, um, 549 00:33:37,800 --> 00:33:40,440 Speaker 1: you know, we've worked with them previously. We launched a 550 00:33:40,520 --> 00:33:44,040 Speaker 1: fund for them four years ago, and with them and 551 00:33:44,200 --> 00:33:46,120 Speaker 1: also with a number of the other large investors in 552 00:33:46,200 --> 00:33:48,600 Speaker 1: Europe and also where the regulation is heading, everyone has 553 00:33:48,640 --> 00:33:51,479 Speaker 1: become more kind of precise in terms of what EESG 554 00:33:51,680 --> 00:33:54,000 Speaker 1: is going to mean for them. So then we further 555 00:33:54,040 --> 00:33:56,840 Speaker 1: fine tune their exposure with this new product. I want 556 00:33:56,840 --> 00:34:01,280 Speaker 1: to ask about your job, okay, um, the title head 557 00:34:01,320 --> 00:34:04,000 Speaker 1: of passive sales. Yes, and your parents must be like, 558 00:34:04,120 --> 00:34:06,840 Speaker 1: do you don't not do anything? I just around exactly, 559 00:34:07,760 --> 00:34:13,520 Speaker 1: But no, to be more serious, active is getting so important, right, 560 00:34:13,560 --> 00:34:15,520 Speaker 1: I mean we talk about that on the ETF show 561 00:34:15,640 --> 00:34:19,200 Speaker 1: all the time. The interesting active has just really climbed. Um, 562 00:34:19,960 --> 00:34:23,279 Speaker 1: can you take on that part of ETFs as well? Yeah, 563 00:34:23,320 --> 00:34:26,440 Speaker 1: actually my job possible. My titles change is now extract 564 00:34:26,480 --> 00:34:32,840 Speaker 1: of sales have refle But secondly, m yeah, you know 565 00:34:32,960 --> 00:34:35,200 Speaker 1: what the beauty of the ETF wrapper is that is 566 00:34:35,239 --> 00:34:38,400 Speaker 1: providing transparency access. You know, you don't need to think 567 00:34:38,400 --> 00:34:40,719 Speaker 1: about setting up an account with the transfer agent. You 568 00:34:40,760 --> 00:34:42,960 Speaker 1: can just buy things on exchange right with an ETF. 569 00:34:43,320 --> 00:34:46,040 Speaker 1: So um, yeah, this trend and we strongly believe it 570 00:34:46,120 --> 00:34:49,120 Speaker 1: at DWS as well that the mutual fund sadly is 571 00:34:49,160 --> 00:34:50,880 Speaker 1: not as relevant as it used to be, but the 572 00:34:50,960 --> 00:34:54,640 Speaker 1: ETF is exactly that's fantastic for you, right, I think 573 00:34:54,680 --> 00:34:56,600 Speaker 1: of everyone. I wonder if we had a story in 574 00:34:56,640 --> 00:35:00,800 Speaker 1: the Bloomberg today about assets going into you know, mutual 575 00:35:00,960 --> 00:35:05,680 Speaker 1: funds and ultrashort treasury ETFs. I mean I think Barkley's 576 00:35:06,239 --> 00:35:09,120 Speaker 1: expects one and a half trillion dollars of assets to 577 00:35:09,200 --> 00:35:12,040 Speaker 1: go there in the next ten years or so. What 578 00:35:12,200 --> 00:35:16,320 Speaker 1: kind of flows are you seeing and you know, is 579 00:35:16,400 --> 00:35:18,759 Speaker 1: there any future for the mutual fund? I mean, I 580 00:35:18,800 --> 00:35:20,880 Speaker 1: guess it still has a place in four o one ks, 581 00:35:21,040 --> 00:35:24,600 Speaker 1: but everyone is turning to an ETF. Yeah, we do 582 00:35:24,719 --> 00:35:26,680 Speaker 1: still think that there's a time and the face for that. 583 00:35:26,800 --> 00:35:29,800 Speaker 1: Some clients don't need to pay, don't need to have liquidity, 584 00:35:29,800 --> 00:35:32,239 Speaker 1: They might have favorable share classes, for example, which are 585 00:35:32,320 --> 00:35:34,279 Speaker 1: cheaper so they don't need to pay for all of 586 00:35:34,320 --> 00:35:37,480 Speaker 1: the benefits. And then definitely from some tax consideration wrapper 587 00:35:37,520 --> 00:35:40,799 Speaker 1: consideration perspectives, it's still relevant. But I think for those 588 00:35:40,840 --> 00:35:44,240 Speaker 1: clients that you want to be more tactical and also 589 00:35:44,320 --> 00:35:46,759 Speaker 1: just it's very It seems to be much easier as 590 00:35:46,800 --> 00:35:48,960 Speaker 1: well to launch GTF, so we have way more exposures 591 00:35:49,000 --> 00:35:51,480 Speaker 1: than you do on the mutual fund side. Choice is 592 00:35:51,520 --> 00:35:54,000 Speaker 1: provided there. But also as the markets are moving, when 593 00:35:54,080 --> 00:35:56,040 Speaker 1: we think that we're in this kind of part of 594 00:35:56,120 --> 00:35:58,640 Speaker 1: the cycle that we've not seen for around fifteen years, 595 00:35:58,760 --> 00:36:01,720 Speaker 1: right that then what was needed in the last fifteen 596 00:36:01,800 --> 00:36:04,400 Speaker 1: years is not what's needed for the next fifteen years necessarily, 597 00:36:04,560 --> 00:36:06,920 Speaker 1: So I would imagine that even more ETFs get launched 598 00:36:06,960 --> 00:36:11,000 Speaker 1: two and we see in terms of trends like a 599 00:36:11,120 --> 00:36:13,960 Speaker 1: lot of searching for yields. So probably our most popular 600 00:36:14,040 --> 00:36:17,440 Speaker 1: fund this year has been our HDF product. It's international 601 00:36:17,560 --> 00:36:22,000 Speaker 1: equity dividends, So international equities typically yield more than the 602 00:36:22,200 --> 00:36:25,479 Speaker 1: SMP stocks kind of for four and a half percent 603 00:36:25,640 --> 00:36:28,200 Speaker 1: versus one point five two percent, and then if you 604 00:36:28,280 --> 00:36:31,440 Speaker 1: then look at a dividend focused strategy on that asset class, 605 00:36:31,520 --> 00:36:34,560 Speaker 1: then that's even more juice around five point two percent. 606 00:36:34,800 --> 00:36:37,560 Speaker 1: So what's your pipeline look like? I mean, you don't 607 00:36:37,600 --> 00:36:42,000 Speaker 1: even have to imagine, you probably know if more ets, well, 608 00:36:42,000 --> 00:36:44,560 Speaker 1: we're definitely going to How does twenty three look like? 609 00:36:44,760 --> 00:36:47,120 Speaker 1: I mean, because twenty twenty two was a huge year 610 00:36:47,200 --> 00:36:50,520 Speaker 1: for bringing ETFs to market, I don't know if it's 611 00:36:50,560 --> 00:36:54,640 Speaker 1: even reasonable to expect to match that again. So we're 612 00:36:54,680 --> 00:36:56,879 Speaker 1: going to be keeping busy this year. Definitely, we're hoping 613 00:36:56,920 --> 00:37:00,040 Speaker 1: to launch ten new funds. Thematics is an area that 614 00:37:00,120 --> 00:37:02,560 Speaker 1: we think is really important in the market. So I think, 615 00:37:03,000 --> 00:37:05,120 Speaker 1: you know, it's you can look at sectors, but also 616 00:37:05,200 --> 00:37:10,120 Speaker 1: maybe thematics are better tool for tapping into broader megatrends, 617 00:37:10,160 --> 00:37:12,120 Speaker 1: and I think especially where we are in the market 618 00:37:12,160 --> 00:37:14,719 Speaker 1: at the moments good at buying opportunities for those kinds 619 00:37:14,760 --> 00:37:17,880 Speaker 1: of things. Additionally, as well, we have some strong active 620 00:37:17,960 --> 00:37:21,799 Speaker 1: strategies on our DWS side and so look to bring 621 00:37:21,840 --> 00:37:25,040 Speaker 1: them into the ETF wrapper. Two. Also thinking as well 622 00:37:25,080 --> 00:37:28,400 Speaker 1: about kind of shorter dated fixed income as well, and 623 00:37:28,560 --> 00:37:31,279 Speaker 1: then I would say the last block of where we're 624 00:37:31,320 --> 00:37:35,320 Speaker 1: building is going to be going further down the yield 625 00:37:35,719 --> 00:37:39,200 Speaker 1: trend like for fixed income. So breaking news here, I 626 00:37:39,360 --> 00:37:42,319 Speaker 1: know exactly you stuck coming. I mean, there's so many 627 00:37:42,400 --> 00:37:45,680 Speaker 1: ETFs out there for you guys at DWS. What's kind 628 00:37:45,719 --> 00:37:48,360 Speaker 1: of a minimum size that you want to have? I 629 00:37:48,440 --> 00:37:50,160 Speaker 1: see like this on this one you just launched. You 630 00:37:50,200 --> 00:37:52,279 Speaker 1: had two billion come in on the first day, which 631 00:37:52,400 --> 00:37:55,839 Speaker 1: is just monstrous. But what's kind of a minimum It's 632 00:37:55,880 --> 00:37:59,000 Speaker 1: worth your time. So I think the intention is always 633 00:37:59,040 --> 00:38:00,879 Speaker 1: to have a fund that by the end of twelve 634 00:38:00,920 --> 00:38:03,640 Speaker 1: months is going to be a billion or more. But 635 00:38:03,840 --> 00:38:08,880 Speaker 1: depending on the on the exposure, it's not always easy 636 00:38:09,080 --> 00:38:11,839 Speaker 1: to get that day one investment. Others are maybe more 637 00:38:11,880 --> 00:38:14,440 Speaker 1: relevant trends for like a more retail kind of investor, 638 00:38:14,760 --> 00:38:16,840 Speaker 1: and so you need to get ticket by ticket by 639 00:38:17,440 --> 00:38:21,200 Speaker 1: your investors in your tfs. Typically we're very lucky that 640 00:38:21,360 --> 00:38:27,239 Speaker 1: we are basically doing business with everyone, so retail platforms, wirehouses, IBDs, 641 00:38:27,680 --> 00:38:33,680 Speaker 1: ria's other asset managers, pension fund sovereign wealth funds. When 642 00:38:34,040 --> 00:38:36,680 Speaker 1: you have a big institutional interest DW, when does this 643 00:38:36,840 --> 00:38:39,320 Speaker 1: train end? I mean, it's been how long has the 644 00:38:39,400 --> 00:38:42,640 Speaker 1: ETF business been on this trajectory and how long is 645 00:38:42,640 --> 00:38:44,440 Speaker 1: it going to continue? Do you think? I think that's 646 00:38:44,480 --> 00:38:46,279 Speaker 1: a great question to ask. I think we need to 647 00:38:46,480 --> 00:38:48,759 Speaker 1: we can't be complacent. So I think things that we 648 00:38:48,920 --> 00:38:51,480 Speaker 1: start to think about as well at DWS is the 649 00:38:51,560 --> 00:38:53,319 Speaker 1: ETFs did so well because they are a great way 650 00:38:53,360 --> 00:38:57,680 Speaker 1: to invest in something quickly. Right. Blockchain technology is also 651 00:38:57,840 --> 00:39:00,400 Speaker 1: very interesting when you start to think about, for example, 652 00:39:01,040 --> 00:39:05,560 Speaker 1: operational aspects of the Ledger and everything, tokenization, valization of assets, 653 00:39:05,640 --> 00:39:08,360 Speaker 1: and so on. So expect some things here from I mean, 654 00:39:08,440 --> 00:39:10,080 Speaker 1: let me put the question this way. I have an 655 00:39:10,120 --> 00:39:12,920 Speaker 1: ETF show right now. It's a weekly program at one 656 00:39:13,040 --> 00:39:17,440 Speaker 1: pm on my invitation. You are invited, for sure, But 657 00:39:17,600 --> 00:39:20,279 Speaker 1: the thing is should we make it? Should we make 658 00:39:20,280 --> 00:39:22,360 Speaker 1: it a full hour? Should we should we make it 659 00:39:22,400 --> 00:39:25,200 Speaker 1: an everyday show? In the future? Is that going to 660 00:39:25,280 --> 00:39:30,000 Speaker 1: be the case. I think the frequency will be important yeah. Um, 661 00:39:30,560 --> 00:39:34,439 Speaker 1: we see yeah, because we see more and more types 662 00:39:34,480 --> 00:39:36,680 Speaker 1: of investors using them now as well. It's not just 663 00:39:36,760 --> 00:39:39,960 Speaker 1: about the AUM, it's also about who's using them as well. 664 00:39:40,000 --> 00:39:43,040 Speaker 1: I don't think I own an EF. Are you sure 665 00:39:43,120 --> 00:39:44,920 Speaker 1: you don't. I don't know if the check because you 666 00:39:45,080 --> 00:39:48,680 Speaker 1: also have probably fun managers working for you that use 667 00:39:48,840 --> 00:39:51,680 Speaker 1: ETFs as part of their strategy. It's an important part 668 00:39:51,760 --> 00:39:54,200 Speaker 1: of building your portfolio in a lot of cases. I'll 669 00:39:54,200 --> 00:39:55,920 Speaker 1: take a look. I got the app. I'll take a 670 00:39:55,960 --> 00:39:57,440 Speaker 1: look to see what I got there. I got a 671 00:39:57,480 --> 00:40:00,480 Speaker 1: lot of New Jersey municipals. John t Her over there, 672 00:40:00,480 --> 00:40:03,240 Speaker 1: he's laughing. I want to I want a bond ETF 673 00:40:03,520 --> 00:40:06,160 Speaker 1: that's in the market for that, so you can have 674 00:40:06,400 --> 00:40:10,719 Speaker 1: many time infrastructure MEUNI so cash back to menis there 675 00:40:10,800 --> 00:40:12,960 Speaker 1: you go see. Amanda Robello, thanks so much for joining us. 676 00:40:12,960 --> 00:40:17,160 Speaker 1: Amanda Rebello, her title now is Head of xtrack Sales 677 00:40:17,320 --> 00:40:20,600 Speaker 1: US on Shore, Head of x Tracker Sales on Shore 678 00:40:21,080 --> 00:40:23,920 Speaker 1: US on shore US on Shore at DWS Group and 679 00:40:24,080 --> 00:40:26,520 Speaker 1: RVNU is the ticker she pointed out for you, John, 680 00:40:26,600 --> 00:40:31,439 Speaker 1: that's the X Trackers Municipal Infrastructure Revenue Bond Fund. You're 681 00:40:31,480 --> 00:40:35,440 Speaker 1: listening to the tape cancer Live program Bloomberg Markets weekdays 682 00:40:35,440 --> 00:40:38,680 Speaker 1: at ten am Eastern on Bloomberg Radio, the tune in app, 683 00:40:38,760 --> 00:40:41,600 Speaker 1: Bloomberg dot Com, and the Bloomberg Business App. You can 684 00:40:41,640 --> 00:40:44,880 Speaker 1: also listen live on Amazon Alexa from our flagship New 685 00:40:44,960 --> 00:40:50,040 Speaker 1: York station, Just say Alexa play Bloomberg eleven thirty. So 686 00:40:50,160 --> 00:40:53,360 Speaker 1: newscooking out at Japan the back of Japan Governor Kuroda. 687 00:40:54,280 --> 00:40:57,839 Speaker 1: He is stepping aside. It served two terms ten years 688 00:40:57,880 --> 00:41:01,400 Speaker 1: in total. What does this mean for Japan? What does 689 00:41:01,400 --> 00:41:03,920 Speaker 1: it mean for the global economy? To get a sense 690 00:41:03,960 --> 00:41:05,600 Speaker 1: of that, we walk in Kathleen. Hey, she is the 691 00:41:05,680 --> 00:41:08,200 Speaker 1: host of Bloomberg News. She joins us here in our 692 00:41:08,200 --> 00:41:10,919 Speaker 1: Bloomberg Interactive Broker studios. So she gets a gold star 693 00:41:11,040 --> 00:41:14,160 Speaker 1: for showing up, not phoning it in, Kathleen. So big 694 00:41:14,280 --> 00:41:18,520 Speaker 1: changes for Japan. What does that mean for Japan? What 695 00:41:18,600 --> 00:41:21,319 Speaker 1: does that mean for kind of the global market? Well, 696 00:41:21,920 --> 00:41:25,000 Speaker 1: you know, the Bank of Japan is there's there's the 697 00:41:25,080 --> 00:41:27,960 Speaker 1: big three of global central banks, and that's a Federal Reserve, 698 00:41:28,400 --> 00:41:31,960 Speaker 1: European Central Bank, and the Bank of Japan. And remember, uh, 699 00:41:32,120 --> 00:41:34,760 Speaker 1: that's Japan with one hundred and twenty people, one hundred 700 00:41:35,320 --> 00:41:38,440 Speaker 1: five million people, is still the third largest economy in 701 00:41:38,520 --> 00:41:42,880 Speaker 1: the world. Okay, so, and and it's uh, it's it's investors, 702 00:41:43,120 --> 00:41:45,759 Speaker 1: you know, uh send a lot of capital out of 703 00:41:45,800 --> 00:41:48,120 Speaker 1: the country. They attract a lot of the capital in 704 00:41:48,480 --> 00:41:52,879 Speaker 1: Japan is quietly powerful on that stage. They have been 705 00:41:53,280 --> 00:41:59,000 Speaker 1: through a long period of abeonomics, which became corononomics. Abe, 706 00:41:59,040 --> 00:42:02,400 Speaker 1: of course, the one of the most long serving successful 707 00:42:02,440 --> 00:42:06,319 Speaker 1: prime ministers in Japan's history recently deceased, started to see 708 00:42:06,360 --> 00:42:10,359 Speaker 1: in the last year and Governor Krota two terms. He's 709 00:42:10,360 --> 00:42:13,640 Speaker 1: the longest serving boj governor in there one hundred forty 710 00:42:13,719 --> 00:42:17,640 Speaker 1: year history. So we're it's, you know, a crux. We're 711 00:42:17,680 --> 00:42:19,759 Speaker 1: at a point, maybe not a turning point. He got 712 00:42:19,800 --> 00:42:24,160 Speaker 1: the yield curve control, which is kind of the main 713 00:42:24,280 --> 00:42:28,000 Speaker 1: thing I think that markets, maybe people participants that don't 714 00:42:28,040 --> 00:42:29,920 Speaker 1: know as much about the bankas fan as you. That's 715 00:42:29,960 --> 00:42:32,399 Speaker 1: that's what they kind of grasp onto as the thing 716 00:42:32,520 --> 00:42:35,719 Speaker 1: that could change. Right well, they do. And remember when 717 00:42:36,040 --> 00:42:39,120 Speaker 1: Krota Abe came back in office in twenty twelve and 718 00:42:39,160 --> 00:42:43,319 Speaker 1: twenty thirteen, there was a he dragged in Kuroda or got, 719 00:42:43,400 --> 00:42:46,799 Speaker 1: you know, to stimulate the economy. The previous governor had 720 00:42:46,840 --> 00:42:50,000 Speaker 1: been slow to do that. Cautious. No, he wanted quota 721 00:42:50,080 --> 00:42:54,560 Speaker 1: to fire it up. So they did quantitative and qualitative easing. 722 00:42:54,680 --> 00:42:57,840 Speaker 1: They said, where're gonna get to two percent inflation within 723 00:42:58,600 --> 00:43:00,279 Speaker 1: as soon as we could, And then they said within 724 00:43:00,400 --> 00:43:03,359 Speaker 1: two years fast forward. Things went up and down. Uh, 725 00:43:03,480 --> 00:43:07,600 Speaker 1: and in it was twenty sixteen when inflation had been 726 00:43:07,680 --> 00:43:10,960 Speaker 1: rising but mostly oil prices, and it started falling back again. 727 00:43:11,320 --> 00:43:13,360 Speaker 1: That's where they came up. They they had an almost 728 00:43:13,360 --> 00:43:15,759 Speaker 1: an all night meeting on a forty five vote, they 729 00:43:15,800 --> 00:43:19,440 Speaker 1: put in yield curve control and that's when they tied 730 00:43:19,600 --> 00:43:23,560 Speaker 1: the ten year j JGB to to zero and then 731 00:43:23,680 --> 00:43:24,960 Speaker 1: and gave it a little bit of a range on 732 00:43:25,080 --> 00:43:26,840 Speaker 1: both sides. And over time they kind of had to 733 00:43:27,560 --> 00:43:31,160 Speaker 1: pull that out, but they bought trillions and trillions of 734 00:43:31,320 --> 00:43:34,400 Speaker 1: yen to keep their ten year JGB anchored. I was 735 00:43:34,400 --> 00:43:37,239 Speaker 1: gonna say, does anybody else own jgbs besides the Bank 736 00:43:37,280 --> 00:43:40,440 Speaker 1: of Japan, Well, they own something like ninety percent of 737 00:43:40,480 --> 00:43:42,719 Speaker 1: the ten year jgbs and over fifty percent of all 738 00:43:42,800 --> 00:43:47,239 Speaker 1: the outstanding government bonds. Well, hey, it's it's it's like 739 00:43:47,520 --> 00:43:50,520 Speaker 1: what a quantitative easing by the FED and the European 740 00:43:50,560 --> 00:43:54,560 Speaker 1: Central Bank taken to like a whole other level. Has 741 00:43:54,600 --> 00:43:57,840 Speaker 1: it worked well there there's kind of a two percent 742 00:43:57,960 --> 00:44:00,239 Speaker 1: plus inflation now, but is it going to stay there? 743 00:44:00,239 --> 00:44:03,640 Speaker 1: But not because of that, right having nothing to do, 744 00:44:03,840 --> 00:44:07,759 Speaker 1: the whole world is facing rising inflation. I mean, yeah, 745 00:44:07,960 --> 00:44:11,680 Speaker 1: they've only gotten there without doing anything very lately. Will 746 00:44:11,760 --> 00:44:14,719 Speaker 1: you never know for sure? Will we if they if 747 00:44:14,719 --> 00:44:17,520 Speaker 1: they did absolutely nothing, Because they did, they did get 748 00:44:17,640 --> 00:44:21,920 Speaker 1: Japan up to about consistently above zero Okay, not in deflation. 749 00:44:22,200 --> 00:44:23,719 Speaker 1: And you're right now a lot of the gain has 750 00:44:23,760 --> 00:44:26,640 Speaker 1: been in commodity prices, but right now they're almost a 751 00:44:26,640 --> 00:44:28,520 Speaker 1: four percent. They're starting to pull back a bit. But no, 752 00:44:28,600 --> 00:44:29,640 Speaker 1: this is a big deal for the rest of the 753 00:44:29,680 --> 00:44:33,000 Speaker 1: world because if the Japanese have already started repatritating some 754 00:44:33,200 --> 00:44:36,440 Speaker 1: of their bonds from overseas, and if they continue to 755 00:44:36,520 --> 00:44:39,800 Speaker 1: do that, they this is going to be a major 756 00:44:40,400 --> 00:44:44,640 Speaker 1: upward pressure potentially on global bond deals. And they have Sorry, 757 00:44:45,040 --> 00:44:47,759 Speaker 1: I just have a million questions. I love getting you 758 00:44:47,840 --> 00:44:49,840 Speaker 1: in the studio because we hardly ever gets talked to you. 759 00:44:51,480 --> 00:44:55,960 Speaker 1: I wonder about how much treasuries do the Japanese own. 760 00:44:56,120 --> 00:44:59,000 Speaker 1: They used to be a huge holder of US debt right, well, yeah, 761 00:44:59,000 --> 00:45:00,959 Speaker 1: and they still own a lot. And I wonder about 762 00:45:01,000 --> 00:45:03,000 Speaker 1: what happens if yield control is a way they're going 763 00:45:03,040 --> 00:45:04,680 Speaker 1: to go away from yield control? Are you gonna do 764 00:45:04,719 --> 00:45:07,160 Speaker 1: it slowly? Okay? The way there is the new Bank 765 00:45:07,200 --> 00:45:11,000 Speaker 1: of Japan governor. Right. He's at the Bank of Japan 766 00:45:11,040 --> 00:45:13,759 Speaker 1: from nineteen ninety eight to two thousand and five. He 767 00:45:14,280 --> 00:45:17,400 Speaker 1: at the time was one of the few when they 768 00:45:17,480 --> 00:45:19,560 Speaker 1: decided to cut rates when they shouldn't have. Who voted 769 00:45:19,600 --> 00:45:21,320 Speaker 1: a race rates I should say, voted against it. So 770 00:45:21,400 --> 00:45:23,640 Speaker 1: here you got this man an academic over the years, 771 00:45:23,719 --> 00:45:26,360 Speaker 1: knows everybody. He's about seventy. He's been around for a 772 00:45:26,440 --> 00:45:30,000 Speaker 1: long time. I think the bet right now is eventually 773 00:45:30,120 --> 00:45:32,440 Speaker 1: he'll have to do something and they may start signing them. 774 00:45:32,480 --> 00:45:36,000 Speaker 1: But they're not going to move around right away. So 775 00:45:36,239 --> 00:45:39,160 Speaker 1: I mean, what do people think of yended? This ten 776 00:45:39,239 --> 00:45:41,680 Speaker 1: year career for Krota? Did he do a good job? 777 00:45:41,840 --> 00:45:44,320 Speaker 1: Will you miss him? You interviewed him a lot. Well, 778 00:45:44,960 --> 00:45:49,640 Speaker 1: oh yeah, I'm a fan. Um he will people miss him? 779 00:45:49,840 --> 00:45:53,919 Speaker 1: I think? Or was he successful? Well? We had a poll, 780 00:45:54,360 --> 00:45:56,400 Speaker 1: had a pole I think fifty six percent said he 781 00:45:57,400 --> 00:46:00,600 Speaker 1: was a success and forty four percent saying no, and 782 00:46:00,680 --> 00:46:06,200 Speaker 1: the people say no, it's it's your argument, okay that uh, 783 00:46:06,360 --> 00:46:08,640 Speaker 1: well you didn't. The yeld curve control and all that 784 00:46:08,680 --> 00:46:11,960 Speaker 1: didn't really get you sustainably there. But I would say, look, 785 00:46:12,000 --> 00:46:15,800 Speaker 1: if he's leaving office with inflation at coming down to 786 00:46:15,840 --> 00:46:18,520 Speaker 1: about three percent year over yere from four percent with 787 00:46:18,719 --> 00:46:23,160 Speaker 1: the boj at his last outlook update on the economy 788 00:46:23,160 --> 00:46:25,200 Speaker 1: and inflation saying well, it's going to be one point 789 00:46:25,320 --> 00:46:26,960 Speaker 1: nine percent by the end of the year, and then 790 00:46:26,960 --> 00:46:29,160 Speaker 1: it's but you know that's two percent. Okay, that's a 791 00:46:29,239 --> 00:46:31,120 Speaker 1: rounding area, you guys. So he leaves office with two 792 00:46:31,160 --> 00:46:34,320 Speaker 1: percent inflation. The Shuntel the spring wage negotiations, who do 793 00:46:34,400 --> 00:46:37,440 Speaker 1: that every year, came out on the stronger side, not 794 00:46:37,600 --> 00:46:39,759 Speaker 1: super strong, but strong enough to give a sense, well, 795 00:46:39,840 --> 00:46:43,840 Speaker 1: maybe there's there's a shift, a shift in the country 796 00:46:43,880 --> 00:46:46,680 Speaker 1: where the companies are realizing they have to pay people more. 797 00:46:48,239 --> 00:46:52,080 Speaker 1: The people are are wanting to see all that. They're 798 00:46:52,160 --> 00:46:54,480 Speaker 1: they're ready for a little more inflation, right, And that 799 00:46:54,800 --> 00:46:59,000 Speaker 1: was his biggest One of his biggest obstacles was deflationary mindset. 800 00:46:59,239 --> 00:47:03,120 Speaker 1: Japanese don't want to pay more for anything. That's their culture, seriously, 801 00:47:03,920 --> 00:47:07,480 Speaker 1: but now that seems so shifted to It's the biggest 802 00:47:07,480 --> 00:47:09,160 Speaker 1: problem though, is getting out of it, Getting out of 803 00:47:09,239 --> 00:47:11,920 Speaker 1: ye curve control when you own so many bonds? How 804 00:47:12,040 --> 00:47:14,640 Speaker 1: do you do that gracefully? And oh and another big 805 00:47:14,719 --> 00:47:16,560 Speaker 1: one more thing I forgot to throw in politics. They've 806 00:47:16,560 --> 00:47:20,520 Speaker 1: got a big budget deficit ruling Democratic party there there 807 00:47:20,600 --> 00:47:24,520 Speaker 1: there are a lot of old aubeonomics people and two 808 00:47:24,640 --> 00:47:26,960 Speaker 1: hundred and sixty four percent of GDP or something like that, 809 00:47:29,840 --> 00:47:32,799 Speaker 1: and so not surprising a lot of politicians. Hey, don't 810 00:47:32,880 --> 00:47:35,919 Speaker 1: get away from yel curve control too quickly. We don't 811 00:47:35,960 --> 00:47:38,360 Speaker 1: want our financing costs to go up. So that's another 812 00:47:38,440 --> 00:47:40,040 Speaker 1: thing go and wait is going to have to face. 813 00:47:40,239 --> 00:47:42,480 Speaker 1: But I think it's pretty much inevitable that they'll be 814 00:47:42,840 --> 00:47:46,479 Speaker 1: gradual adjustments. They'll go from point five on either side 815 00:47:46,480 --> 00:47:48,880 Speaker 1: of zero, and they'll gradually widen that out to get 816 00:47:49,080 --> 00:47:52,840 Speaker 1: a more a kind of a gradual shift that the 817 00:47:52,920 --> 00:47:55,000 Speaker 1: rest of the world financial markets can deal with, can 818 00:47:55,080 --> 00:47:57,360 Speaker 1: deal with, all right, Kathleen Hasty, great stuff, Thank you 819 00:47:57,480 --> 00:48:01,120 Speaker 1: very much for coming into our Bloomberg Interactive studio. Kathleen Hayes, 820 00:48:01,320 --> 00:48:03,560 Speaker 1: a host of Bloomberg next time. Later, we should have 821 00:48:03,640 --> 00:48:05,160 Speaker 1: Kathleen off for like a half hour because I have 822 00:48:05,200 --> 00:48:08,239 Speaker 1: a million still half a million. Yeah, you guys make 823 00:48:08,320 --> 00:48:11,920 Speaker 1: me think. My god, see, there's really challenging. That's exactly good. 824 00:48:11,960 --> 00:48:14,799 Speaker 1: Stove all right, Kathleen, thanks so much for joining us here. 825 00:48:15,360 --> 00:48:18,440 Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can 826 00:48:18,480 --> 00:48:22,240 Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever 827 00:48:22,360 --> 00:48:26,000 Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 828 00:48:26,280 --> 00:48:29,719 Speaker 1: at Matt Miller nineteen seventy three. I'm fall Sweeney. I'm 829 00:48:29,719 --> 00:48:32,319 Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can 830 00:48:32,400 --> 00:48:34,600 Speaker 1: always catch us worldwide at Bloomberg Radio