WEBVTT - Wall Street Awaits Fed, Multiple Mergers Get Green Light in Court 0:00:02.440 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:12.120 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.200 --> 0:00:15.320 weekdays at ten am Eastern on Affo card playing Android 0:00:15.320 --> 0:00:18.440 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:18.480 --> 0:00:21.680 you get your podcasts, or watch us live on YouTube. 0:00:23.040 --> 0:00:25.279 It is FED Day, of course, and the question for 0:00:25.320 --> 0:00:28.840 a lot of investors today, obviously is what does the 0:00:28.920 --> 0:00:30.600 FED do here? Did they go twenty five, do they 0:00:30.600 --> 0:00:34.440 go fifty? What kind of rationale does the FED give 0:00:34.520 --> 0:00:36.640 for whatever decision they do make, and what does it 0:00:36.640 --> 0:00:38.960 mean for this economy? Dennis Lockhart joins us. He's a 0:00:38.960 --> 0:00:44.360 former Atlanta FED president, and he joins us via zoom. Dennis, 0:00:44.360 --> 0:00:47.199 thanks so much for joining us here. How do you 0:00:47.280 --> 0:00:50.800 think your Federal Reserve will kind of act later this afternoon? 0:00:50.840 --> 0:00:52.040 What do you think we're going to hear from the Fed? 0:00:53.720 --> 0:00:56.960 Well, my expectation is that they will opt for a 0:00:57.000 --> 0:01:00.720 twenty five basis point to cut, but it could go 0:01:00.880 --> 0:01:03.639 either way. I do think it's a close call, and 0:01:04.440 --> 0:01:07.000 I could very much be wrong. I have to laugh. 0:01:07.600 --> 0:01:10.880 Usually I have more time for people to forget, but 0:01:11.000 --> 0:01:13.720 it's less than four hours until we'll find out, So 0:01:15.440 --> 0:01:18.960 I could be proven wrong very very quickly. I think 0:01:18.959 --> 0:01:23.280 a case can be made for either move, and if 0:01:23.360 --> 0:01:28.960 the committee is sort of ambivalent, often the leadership of 0:01:29.080 --> 0:01:33.360 the chair is asserted, and in this case, Chairman Powell 0:01:34.040 --> 0:01:37.520 may state his preference and I think then the Committee 0:01:37.520 --> 0:01:38.520 will go along with that. 0:01:39.080 --> 0:01:45.680 Why do you think, Dennis, it is such a close call. 0:01:43.520 --> 0:01:46.400 Because I think you can make a legitimate case and 0:01:47.000 --> 0:01:54.040 neither case is panicky, or is emergency based or whatever 0:01:54.160 --> 0:01:59.840 that twenty five basis points is appropriate or fifty with 0:02:00.000 --> 0:02:03.480 a little bit of catch up in it and perhaps 0:02:04.560 --> 0:02:08.640 a bit more of an insurance angle to it. So 0:02:08.800 --> 0:02:12.679 I think you can make a serious case for either decision. 0:02:13.960 --> 0:02:17.040 A fifty basis point move, of course, is not that 0:02:17.280 --> 0:02:22.400 the normal increment that the Fed typically cuts or raises, 0:02:23.040 --> 0:02:25.840 and it does have a little bit of a hint 0:02:25.480 --> 0:02:31.280 of panic, and I don't see any basis for that. 0:02:31.280 --> 0:02:35.000 That's why I'm opting for twenty five Dennis. 0:02:35.080 --> 0:02:38.560 If we were to see a dissenting vote today, would 0:02:38.560 --> 0:02:40.720 that be news? Would that mean anything to you? Should 0:02:40.720 --> 0:02:42.160 the market read anything into that? 0:02:43.560 --> 0:02:47.040 I don't think so. At first. I doubt that we 0:02:47.080 --> 0:02:50.040 will see a descending vote. If we see a descending vote. 0:02:50.320 --> 0:02:56.239 It might come from an inflation hawk who's still concerned 0:02:56.240 --> 0:03:00.880 about the level of inflation and the distance to two percent. 0:03:02.560 --> 0:03:06.680 The chair, I think, has welcomed adversity of opinion on 0:03:06.720 --> 0:03:10.160 the committee. You've heard him say that in his press conferences. 0:03:11.600 --> 0:03:15.160 I don't think one or two descents would mean that much. 0:03:15.880 --> 0:03:20.120 Having said that, at a momentous event like today, where 0:03:20.120 --> 0:03:24.200 they're pivoting policy in the first cut in what four years, 0:03:25.600 --> 0:03:28.880 they would, I think like to present a unified face. 0:03:29.120 --> 0:03:31.200 But it's not going to be a big deal if 0:03:31.200 --> 0:03:32.400 someone disagrees. 0:03:33.000 --> 0:03:35.720 So I was in Canada in Toronto yesterday and I 0:03:35.720 --> 0:03:38.480 had the pleasure of interviewing Carolyn Rodgers. She's the Deputy 0:03:38.480 --> 0:03:41.280 Governor of the Bank of Canada, and many times I 0:03:41.320 --> 0:03:42.720 tried to get her to tell me whether or not 0:03:42.800 --> 0:03:44.840 they were going to go another twenty five in October. 0:03:45.000 --> 0:03:48.840 The conversation eventually came into the transmission EFFECTI of monetary policy, 0:03:48.880 --> 0:03:50.440 and how it took a long time for the hikes 0:03:50.440 --> 0:03:52.080 to be felt, and then how it's going to take 0:03:52.080 --> 0:03:55.160 a long time for the cuts to be felt. How 0:03:55.280 --> 0:03:57.920 do we know what that transmission mechanism is when you 0:03:58.000 --> 0:04:02.080 have something like housing which seems to be a structural shift. 0:04:04.360 --> 0:04:07.760 Well, we don't know with any precision exactly what that 0:04:08.360 --> 0:04:13.240 mechanism is. It's estimated as short as a few months, 0:04:13.280 --> 0:04:18.200 maybe six months to eighteen months. What is generally accepted, 0:04:18.240 --> 0:04:22.440 of course, is the idea that monetary policy has its 0:04:22.480 --> 0:04:26.599 effect with a lag, and I think there's plenty of 0:04:26.640 --> 0:04:31.000 evidence if that's the case. Therefore, the decision that the 0:04:31.040 --> 0:04:36.840 FED makes today is not going to immediately have an 0:04:36.960 --> 0:04:40.719 enormous effect on the economy. It will take some time 0:04:40.839 --> 0:04:44.039 and it will accumulate over the coming months. 0:04:45.360 --> 0:04:47.280 Dennis, can you give us a sense of how this 0:04:47.360 --> 0:04:51.240 FED may proceed over the coming meetings over the next 0:04:51.279 --> 0:04:54.080 several quarters. Is this something in terms of the cadence 0:04:54.120 --> 0:04:55.920 of the cuts that they make. Is it's something they 0:04:55.920 --> 0:04:58.120 want to do in a chunky style? Do they do 0:04:58.120 --> 0:05:01.040 twenty five basis points every meeting? How do you envision 0:05:01.040 --> 0:05:01.719 that taking place? 0:05:03.520 --> 0:05:08.480 What I would expect to be a methodical, deliberate approach 0:05:09.279 --> 0:05:13.560 that doesn't bring a lot of surprises to the financial markets. 0:05:14.520 --> 0:05:20.520 The communications challenge around chunkiness to use your order or 0:05:22.000 --> 0:05:26.559 pauses and then a resumption and fifty versus twenty five. 0:05:27.720 --> 0:05:32.440 That requires some very very skillful communication and in order 0:05:32.520 --> 0:05:38.280 not to create unnecessary volatility. So I think once they've 0:05:38.360 --> 0:05:41.599 started this, they'll stay with a base case of twenty 0:05:41.600 --> 0:05:44.839 five basis points at each meeting until they feel it's 0:05:44.880 --> 0:05:45.640 time to pause. 0:05:46.240 --> 0:05:50.600 So based on that, the futures market is really out 0:05:50.680 --> 0:05:53.279 priced for that. So we're still looking at over one 0:05:53.320 --> 0:05:55.800 hundred basis point cut so far for this year if 0:05:55.800 --> 0:05:57.440 you take a look at work. So if it's a 0:05:57.480 --> 0:05:59.560 twenty five to twenty five kind of scenario, we still 0:05:59.640 --> 0:06:03.000 to price out as much as like, I don't know, 0:06:03.360 --> 0:06:06.279 thirty five forty basis points of cuts. How do you 0:06:06.320 --> 0:06:09.240 think that J. Powell does that or is it the dots? 0:06:11.200 --> 0:06:14.000 Well, he's not going to commit to much in the 0:06:14.040 --> 0:06:17.239 way of a path of policy, other than perhaps saying 0:06:17.279 --> 0:06:21.000 something general. Is it that the expectation of the committee 0:06:21.040 --> 0:06:24.880 is that there will be further reductions in the policy rate, 0:06:26.040 --> 0:06:28.680 and certainly beyond the end of the year. I think 0:06:28.880 --> 0:06:34.400 you'd be very careful about committing to anything. But I 0:06:34.400 --> 0:06:37.840 think in speeches and in FED speak in general, you'll 0:06:37.880 --> 0:06:41.520 get some sense that, and of course in the Summary 0:06:41.520 --> 0:06:45.360 of Economic Projections which will be published today, you'll get 0:06:45.400 --> 0:06:48.480 some sense of what they're thinking, and I suspect what 0:06:48.520 --> 0:06:52.000 you're going to see is that they're thinking of seventy 0:06:52.000 --> 0:06:55.360 five basis points by year end, So the markets are 0:06:55.360 --> 0:06:59.880 going to have to adjust that thinking, or the markets 0:07:00.160 --> 0:07:02.080 often have their own point of view. 0:07:02.760 --> 0:07:04.960 Do you think the timing of these FED cuts is 0:07:05.000 --> 0:07:07.520 appropriate here at datish or do you think perhaps this 0:07:07.600 --> 0:07:10.200 FED might have been at least a meeting maybe too 0:07:10.560 --> 0:07:12.720 late in terms of starting this process. 0:07:14.320 --> 0:07:16.920 Well, according to the minutes, there was a pretty serious 0:07:16.960 --> 0:07:21.640 discussion of the first cut being in July. They decided 0:07:21.640 --> 0:07:24.680 to defer that. One reason they did is because the 0:07:25.000 --> 0:07:28.920 interval between the July meeting the September meeting is the 0:07:29.040 --> 0:07:32.160 longest on the calendar, and they get quite a bit 0:07:32.240 --> 0:07:36.040 more information in that eight week period than they get 0:07:35.880 --> 0:07:40.280 in a six week period, for example. So I think 0:07:40.320 --> 0:07:45.720 they decided to hold off for more information. So what 0:07:46.280 --> 0:07:51.600 Jay Palse said at Jackson Hole that the time had come, Boy, 0:07:51.680 --> 0:07:54.840 you really can't be very more definitive than that. He 0:07:55.000 --> 0:07:59.520 had to be. He had to be very confident that 0:07:59.560 --> 0:08:02.840 he could lead his committee to this decision today. And 0:08:02.880 --> 0:08:06.280 that's probably because of how seriously they took the idea 0:08:06.800 --> 0:08:09.800 in July of making a cut in July. So to 0:08:09.800 --> 0:08:14.800 answer your question, maybe they're a meeting behind, But in 0:08:14.840 --> 0:08:17.960 the greater scheme of things, I don't think there is 0:08:18.880 --> 0:08:24.880 great danger associated with maybe being a little bit behind. 0:08:25.640 --> 0:08:27.720 All Right, Dennis, thanks a lot. We truly appreciate it. 0:08:27.760 --> 0:08:30.800 We appreciate all your insight on FED Day. Dennis Lockhart, 0:08:30.880 --> 0:08:32.240 former Atlanta FED President. 0:08:33.760 --> 0:08:37.640 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:37.720 --> 0:08:41.240 weekdays at ten am Eastern on applecar Play and Android 0:08:41.280 --> 0:08:44.040 Auto with the Bloomberg Business app. You can also listen 0:08:44.160 --> 0:08:47.240 live on Amazon Alexa from our flagship New York station 0:08:47.640 --> 0:08:50.400 just say Alexa playing Bloomberg eleven thirty. 0:08:51.800 --> 0:08:54.880 Joining us now. Also in the studio is Alo Lua Ganga, 0:08:55.040 --> 0:08:59.320 a US chief investment officer over at Mercer. So, okay, 0:08:59.360 --> 0:09:01.240 do you care about twenty five or fifty today? Or 0:09:01.240 --> 0:09:03.839 how are you looking at this monumental decision at too? 0:09:04.080 --> 0:09:06.440 She's laughing at me, you know, I'm laugh because there 0:09:06.440 --> 0:09:08.560 are two things. Personally, it's monumental because it's the first 0:09:08.600 --> 0:09:11.920 rate cut in years, so that's the big thing. But 0:09:12.559 --> 0:09:16.400 is twenty five basis point going to move the need? Unlikely? 0:09:16.480 --> 0:09:16.600 Right? 0:09:16.720 --> 0:09:19.480 Is just the direction that we're happy about we're finally moving. 0:09:20.200 --> 0:09:24.040 All right, So you got your MBA from Stanford. I'm 0:09:24.080 --> 0:09:26.120 not sure if you're aware, but yesterday Bloomberg business Week 0:09:26.120 --> 0:09:29.240 magazine came out with the rankings of MBA programs for 0:09:29.280 --> 0:09:31.440 the six year in a row. Stanford was number one, 0:09:31.480 --> 0:09:34.000 who Woo Duke was twelve. I don't know what they're 0:09:34.040 --> 0:09:35.720 doing down there, business Week, but I have to go 0:09:35.760 --> 0:09:37.600 have a talk with those people. But all right, so 0:09:38.360 --> 0:09:40.600 talk to us about the business at Mercier. What are 0:09:40.640 --> 0:09:44.200 your institutional clients, what are they what's changing these days 0:09:44.480 --> 0:09:45.960 or maybe in the last twelve to eighteen months back 0:09:46.040 --> 0:09:48.240 where they're allocating capital these days? 0:09:48.600 --> 0:09:51.199 So you know, we're talking about the rate cut. Is 0:09:51.240 --> 0:09:53.800 it a big deal? It could be, and it could 0:09:53.840 --> 0:09:57.800 be for defined benefit pension plans because those out there, 0:09:57.840 --> 0:09:59.840 they are still those out there. I mean a lot 0:09:59.880 --> 0:10:02.360 of them have benefited from the equity markets, right, so, 0:10:02.400 --> 0:10:04.880 like that's been great, but in a lower rate environment, 0:10:05.200 --> 0:10:08.679 the liabilities could become more valuable. So that's what we're watching, right, 0:10:08.800 --> 0:10:12.200 is that are you appropriately hedged? But then they have 0:10:12.559 --> 0:10:15.240 great equity portfolios. They have private equity portfolios that have 0:10:15.360 --> 0:10:18.880 done well and they've moved into private markets across the board. 0:10:19.160 --> 0:10:22.760 So what is that like rate threshold, right, because we're 0:10:22.760 --> 0:10:26.080 not going back to zero. So if it goes to 0:10:26.200 --> 0:10:29.400 like four, is that where allocations start to change or 0:10:29.480 --> 0:10:31.360 is it three? Like? How do you look at that? 0:10:31.679 --> 0:10:34.480 So I'll give an example of just the real estate 0:10:34.520 --> 0:10:37.920 capital markets, right, So, like financing has almost ground to 0:10:37.960 --> 0:10:41.120 a halt. It's really hard to finance things. Developers are 0:10:41.160 --> 0:10:43.440 having a hard time. They had one year interest rate 0:10:43.480 --> 0:10:46.560 type hedges and they're not moving. So an indication there 0:10:46.600 --> 0:10:49.120 of when things start working is rates low enough to 0:10:49.200 --> 0:10:53.679 get that to unfreeze the real estate capital markets. So 0:10:53.760 --> 0:10:56.160 it's great for mortgages, it's great for lending, it's great 0:10:56.160 --> 0:10:58.160 for borrowing, all of that stuff. So we start looking 0:10:58.200 --> 0:11:02.200 at activity and some those other areas private credit. 0:11:02.520 --> 0:11:04.400 Alex and I were just fascinated by the growth of 0:11:04.440 --> 0:11:08.439 private credit. How does that impact your institutional investor clients? 0:11:08.440 --> 0:11:11.240 Are they asking you to get more exposure to private credit? 0:11:11.360 --> 0:11:11.920 How do you do so? 0:11:12.600 --> 0:11:14.640 Private credit definitely has been one of the areas that's 0:11:14.679 --> 0:11:17.280 benefited from the higher rate environment. It's floating rate, so 0:11:18.120 --> 0:11:20.920 the debt covenants and the negotiations that happen there, mean 0:11:20.960 --> 0:11:24.760 that even though it's not syndicated loan, it's not publicly traded, 0:11:25.160 --> 0:11:27.960 there was more protections there, so lots of capital that 0:11:28.080 --> 0:11:32.440 was flowing into just senior direct lending. So clearly, as 0:11:32.440 --> 0:11:35.200 you're moving into a lower interest rate environment, could that 0:11:35.280 --> 0:11:37.720 be impactful. Yes, But on the senior direct lending side, 0:11:37.720 --> 0:11:40.160 there are other aspects of private credit that are attractive. 0:11:41.679 --> 0:11:44.520 So what are their areas also in private credit? And 0:11:44.559 --> 0:11:47.400 then also side note in terms of say commercial office, 0:11:47.400 --> 0:11:49.920 commercial real estate. I know that's not private credit, but 0:11:50.000 --> 0:11:51.960 like in terms of an asset class that's been really 0:11:52.040 --> 0:11:52.559 messed up. 0:11:53.679 --> 0:11:58.000 So I'll say, from a private credit standpoint, opportunistic credits. 0:11:58.040 --> 0:12:00.800 So some of the more distressed opportunities we're senior direct 0:12:00.880 --> 0:12:03.640 lending or you know, it's still relatively good. So the 0:12:03.679 --> 0:12:08.480 opportunistic credit space is great. They have more equity like properties. 0:12:09.160 --> 0:12:10.880 But to your point, if you go to something like 0:12:10.960 --> 0:12:14.640 real estate, real estate valuations, especially core real estate has 0:12:14.679 --> 0:12:19.000 been stabilizing outside of office and you know, offices is 0:12:19.040 --> 0:12:21.439 a different category in and of itself, because if you 0:12:21.520 --> 0:12:24.680 start looking at newer office buildings, older office buildings, what 0:12:24.800 --> 0:12:28.040 kind of rehab is there The rental everything. So office 0:12:28.120 --> 0:12:30.440 is still a little challenged, but for the most part, 0:12:30.520 --> 0:12:33.840 core real estate valuations outside of office has been stabilizing. 0:12:34.120 --> 0:12:35.640 I guess one of the challenges there for real estate 0:12:35.679 --> 0:12:37.480 we've heard from other folks in the real estate business, 0:12:37.480 --> 0:12:39.320 because Alex and I like to talk to as many 0:12:39.320 --> 0:12:41.839 people in that commercial real estate business as we can, 0:12:42.320 --> 0:12:45.240 is just the banks aren't quite as constructive on real 0:12:45.360 --> 0:12:47.880 estate commercial real estate as maybe people would like, So 0:12:47.920 --> 0:12:49.960 it's tough to find financing. Maybe you can get it 0:12:49.960 --> 0:12:52.520 to the private credit market, but you can't just go 0:12:52.600 --> 0:12:55.280 to your relationship bank and you know, necessarily get a 0:12:55.280 --> 0:12:56.520 mortgage on a big piece of commercial. 0:12:56.600 --> 0:12:59.559 Yeah, real estate is definitely the area that's taken one 0:12:59.600 --> 0:13:02.439 of the the hardest hits with the rise in the 0:13:02.520 --> 0:13:06.840 raid environment. To be frank again, it's painted almost with 0:13:06.880 --> 0:13:10.400 a broad brush. It truly is office that's having the 0:13:10.480 --> 0:13:14.680 toughest time. Valuations in other areas has been challenged as well, 0:13:14.720 --> 0:13:17.400 but it does look like it's starting to stabilize. 0:13:17.800 --> 0:13:20.800 What other trends are you seeing right now in terms 0:13:20.880 --> 0:13:24.520 of interest, money flow, questions, worry spots. 0:13:25.080 --> 0:13:29.280 So there's been a big focus with regards to infrastructure 0:13:30.000 --> 0:13:32.880 and this started some time ago when we started seeing 0:13:32.960 --> 0:13:37.560 the capital flows from the Inflation Reduction Act and finally 0:13:37.640 --> 0:13:40.560 dollars going to work there. So that's a focus as 0:13:40.559 --> 0:13:42.679 we're going into the election. It's also a focus to 0:13:42.720 --> 0:13:45.360 see if some of those trends stay. So that's one 0:13:45.960 --> 0:13:49.480 Private equity has always been an area of focus. However, 0:13:50.120 --> 0:13:53.959 venture capital, that a lot of clients were very focused 0:13:53.960 --> 0:13:57.520 on the new innovative types of areas, had slowed somewhat 0:13:57.920 --> 0:14:00.960 because from a capital standpoint, that's the law, guest, time 0:14:01.240 --> 0:14:06.199 to get your money back. So venture has been real 0:14:06.320 --> 0:14:08.400 estate has taken ahead. Venture has taken a little bit 0:14:08.400 --> 0:14:09.600 of a hit as well. 0:14:10.200 --> 0:14:12.520 How about just the big tech trade, the Magnificent seven 0:14:12.559 --> 0:14:14.360 trade that John Tucker's been in for the past two years. 0:14:14.400 --> 0:14:16.720 She's just clipping coupons on the way to the bank. 0:14:17.679 --> 0:14:19.880 Is that still a thing or do we have to 0:14:19.880 --> 0:14:22.520 go look for other areas of opportunity in the marketplace. 0:14:22.640 --> 0:14:26.960 It's the talk about the magnificent seven, it becomes six 0:14:27.280 --> 0:14:29.640 or what have you. I keep saying it is really 0:14:29.680 --> 0:14:32.800 because of the index construction, right, So like the weight 0:14:32.880 --> 0:14:35.480 in the index is what makes it the big focus. 0:14:35.520 --> 0:14:37.920 It lifts up everything. But if you remove them and 0:14:37.920 --> 0:14:40.040 look at the rest of the index, like like we've 0:14:40.080 --> 0:14:44.440 seen some decent returns. Of course, earnings growth coming out 0:14:44.520 --> 0:14:47.400 of the earning season was good, but the focus on 0:14:47.440 --> 0:14:49.240 the seven was because of the weight in the index. 0:14:49.320 --> 0:14:51.760 So these types of rotations happened. 0:14:52.080 --> 0:14:54.280 But the theme of it in terms of AI, which 0:14:54.320 --> 0:14:57.600 also goes back to your infrastructure play too, how do 0:14:57.600 --> 0:15:01.600 your clients then, not straight up in video or the 0:15:01.640 --> 0:15:04.360 equity market, how can they invest in that trend? 0:15:05.480 --> 0:15:08.480 I mean, right now, from a publicly traded standpoint, right, 0:15:08.480 --> 0:15:12.080 there are only a few limited options. However, from a 0:15:12.080 --> 0:15:14.920 private market standpoint, there are lots of capital that's going 0:15:14.960 --> 0:15:18.040 into new and innovative companies. It still is venture. It's 0:15:18.040 --> 0:15:21.200 a longer term type of trend. What we are seeing 0:15:21.280 --> 0:15:26.280 is investigating from an AI perspective, there is efficiencies, right, 0:15:26.360 --> 0:15:28.760 so from redundant type of task, but like what are 0:15:28.760 --> 0:15:30.880 we really going to get from a benefit standpoint? There's 0:15:30.920 --> 0:15:32.400 a lot of work going into and seeing how you 0:15:32.440 --> 0:15:35.200 can integrate it into your day to day, but more 0:15:35.320 --> 0:15:39.360 private equity and venture investments to get into AI, and 0:15:39.400 --> 0:15:42.200 then there are only very few from a publicly traded 0:15:42.200 --> 0:15:43.160 company standpoint, did. 0:15:43.080 --> 0:15:49.200 We see Microsoft yesterday unveiling that AI infrastructure fund with yeah, 0:15:49.240 --> 0:15:51.280 I mean huge amount of money. So speaking of that 0:15:51.360 --> 0:15:53.200 non public opportunity. 0:15:52.760 --> 0:15:54.640 Yeah, I thought the biggest tech trend was me upgrading 0:15:54.680 --> 0:15:55.400 my iPhone. 0:15:55.880 --> 0:15:57.920 Okay, can we just say so, I put my phone 0:15:57.960 --> 0:15:59.720 down next to Paul. I've had my phone the entire 0:15:59.720 --> 0:16:02.240 time known me, and because he ordered this new iPhone 0:16:02.240 --> 0:16:04.440 sixteen pro, he looks at it and starts judging it 0:16:04.480 --> 0:16:06.720 because he has a chip. So now we've become an 0:16:06.720 --> 0:16:08.400 iPhone sixteen pros. 0:16:08.480 --> 0:16:10.800 No, I'll say, my husband does the same thing. Really, 0:16:10.840 --> 0:16:13.640 He's like he judges my phone and then I'll get 0:16:13.640 --> 0:16:16.840 a new one and like a hint to change my exactly. 0:16:17.080 --> 0:16:19.600 So that's that's a tech cycle that you can use. 0:16:19.680 --> 0:16:22.640 Replacement cycle all right in a fixed income space, I 0:16:22.640 --> 0:16:25.360 don't know. I mean to your treasure's three point sixty 0:16:25.360 --> 0:16:27.040 five percent, it's not the five percent I had a 0:16:27.040 --> 0:16:29.560 few months ago, but it's still for like no risk, 0:16:29.640 --> 0:16:31.880 that's a pretty good return. Do I do that or 0:16:31.880 --> 0:16:32.840 do I take credit risk? 0:16:33.120 --> 0:16:34.920 So to your point, it's not the five percent that 0:16:34.960 --> 0:16:38.080 it was before. Right now, here's you know we're at 0:16:38.120 --> 0:16:41.160 current levels, but we know the direction is lower right, 0:16:41.240 --> 0:16:42.720 So it's how long are you going to be able 0:16:42.720 --> 0:16:45.320 to sit on that? For as long as you can, 0:16:45.400 --> 0:16:48.479 that's great. But for our investors that are more institutional 0:16:48.600 --> 0:16:51.760 in nature longer term, they don't typically turn over their 0:16:51.800 --> 0:16:54.720 portfolios as much. So if you're focusing on the long term, 0:16:54.760 --> 0:16:57.720 you go to the spaces that have a little bit 0:16:57.760 --> 0:17:00.200 more longevity and where you can get raded. So they 0:17:00.200 --> 0:17:02.240 were shorter duration at first, you know, maybe a few 0:17:02.280 --> 0:17:04.600 years ago, and that's moved. They're now investing in equities, 0:17:04.640 --> 0:17:08.120 private credit to your point, and looking at areas where 0:17:08.520 --> 0:17:11.160 valuations were depressed. So real estate is an area now 0:17:11.160 --> 0:17:12.640 that we are looking closely at. 0:17:13.080 --> 0:17:16.399 So when you mentioned the areas that have growth, a 0:17:16.440 --> 0:17:19.439 lot of it does tie into fiscal policy and then 0:17:19.440 --> 0:17:22.919 obviously that becomes like an election risk, et cetera. But 0:17:23.119 --> 0:17:25.119 is this time different? Oh God, I hate that I 0:17:25.160 --> 0:17:29.400 just said that. There's like so much fiscal coming out 0:17:29.400 --> 0:17:32.280 of DC regardless of who wins in November, and no 0:17:32.320 --> 0:17:35.720 matter who wins, the will be fiscal spend on stuff. 0:17:35.920 --> 0:17:39.720 And this is in comparison to say Europe or even Canada, Like, 0:17:39.760 --> 0:17:41.520 how do you look at that divergence? 0:17:41.920 --> 0:17:43.800 So we spend a lot of time looking at the 0:17:43.840 --> 0:17:47.640 policy or potential policy that's being discussed because the elections 0:17:47.680 --> 0:17:50.960 are important, of course they're important, but the more important 0:17:50.960 --> 0:17:54.080 thing is can you get anything through? So what's the 0:17:54.080 --> 0:17:57.360 makeup of the House, what's the makeup of Senate that 0:17:57.400 --> 0:17:59.679 will truly drive and determine what we can do on 0:17:59.680 --> 0:18:01.800 to go ward basis. So we're watching some of those, 0:18:02.320 --> 0:18:04.720 you know, more local type elections as well. 0:18:04.840 --> 0:18:07.560 It's funny they'd be interviewing somebody from BNP Power Boss 0:18:07.560 --> 0:18:10.240 Strategists there this morning and they had a great flow 0:18:10.320 --> 0:18:12.720 chart in their piece of research. It's basically if then 0:18:12.840 --> 0:18:16.040 kind of thing. So if the you know, if it's 0:18:16.840 --> 0:18:20.199 you know, the economy is good, the economy's bed, if 0:18:20.200 --> 0:18:22.840 it's the Democrat, if it's Republican, here all the possible outcomes, 0:18:22.840 --> 0:18:24.480 and they kind of had to play it there and 0:18:24.520 --> 0:18:27.000 it just kind of made it very clear so again 0:18:27.000 --> 0:18:29.960 again that you can't really hedge politically, can you. So 0:18:30.080 --> 0:18:32.600 it's just yeah, and so I guess the question becomes, 0:18:32.960 --> 0:18:35.800 you know, can anything actually get done once whoever is 0:18:35.840 --> 0:18:37.120 in the White House is in the White House. 0:18:37.200 --> 0:18:39.200 That's the point. So whoever is in the White House 0:18:39.240 --> 0:18:41.240 and then can they get anything done. 0:18:41.240 --> 0:18:43.399 Right in the interim, we wait for the FED at 0:18:43.440 --> 0:18:44.360 two o'clock. 0:18:44.160 --> 0:18:46.320 And then after that, then what you're going to talk 0:18:46.320 --> 0:18:47.119 about tomorrow morning? 0:18:47.200 --> 0:18:50.320 What did what did that? It was twenty four hours. 0:18:50.320 --> 0:18:52.600 I don't know. It's just economic data coming up. 0:18:52.640 --> 0:18:53.719 But you can drag it out for the week. 0:18:53.760 --> 0:18:58.680 There'll be some earnings. Ganga Chief US Interest investment Officer 0:18:58.760 --> 0:19:01.760 for Mercer Joining is here in our Bloomberg Interactive Broker studio. 0:19:03.160 --> 0:19:07.040 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:19:07.119 --> 0:19:09.840 weekdays at ten am Eastern on Affo card Playing and 0:19:09.960 --> 0:19:12.880 broud Otto with the Bloomberg Business App. Listen on demand 0:19:12.880 --> 0:19:17.240 wherever you get your podcasts, or watch us live on YouTube. 0:19:18.040 --> 0:19:21.120 We've got some news in the global airspace airline business 0:19:21.119 --> 0:19:25.880 looks like Alaska Airlines, the Jerry Garcia Airline and Hawaiian 0:19:25.960 --> 0:19:28.440 the merger looks like it's going to be cleared to close. 0:19:28.800 --> 0:19:32.159 It's an apartment of camp, it's an innuit. Please, now, 0:19:32.200 --> 0:19:34.160 I understand that George Ferguson, he knows all this stuff. 0:19:34.200 --> 0:19:37.600 Senior Airspace and Airlines zanols for Bloomberg Intelligence. So George, 0:19:37.600 --> 0:19:40.560 what's it meaning for Alaska and Hawaiian to get approval 0:19:40.600 --> 0:19:43.960 here where where does this combined dentity go? How competitive 0:19:44.200 --> 0:19:45.800 can it be? Is this a good deal? 0:19:46.640 --> 0:19:46.840 Yeah? 0:19:46.880 --> 0:19:47.680 So I think it's. 0:19:47.840 --> 0:19:47.959 Uh. 0:19:49.160 --> 0:19:51.560 I think it's a good deal for the US consumer 0:19:51.600 --> 0:19:56.320 because I think there was a risk that potentially Hawaiian 0:19:56.359 --> 0:19:58.000 could have gone out of business, and so I think, 0:19:58.680 --> 0:20:02.840 really what this whole thing adds up to is Hawaiian was, 0:20:02.920 --> 0:20:05.919 you know, was a bit distressed. They've had some problems 0:20:05.960 --> 0:20:11.199 in their core businesses, especially from you know, wildfires, Japanese travel, 0:20:11.320 --> 0:20:13.520 things like that. It just hurt their their core business, 0:20:14.359 --> 0:20:18.200 their their balance sheet was stressed. And so Alaska coming 0:20:18.240 --> 0:20:20.280 in and taking them over, you know, shure as that 0:20:20.320 --> 0:20:23.760 they continue to exist. The combinity had you know, has 0:20:23.800 --> 0:20:27.600 a footprint that looks like or route network that looks 0:20:27.640 --> 0:20:31.760 like West Coast US into Alaska, and then Alaska has 0:20:31.800 --> 0:20:36.200 some long haul into Asia. So it makes Alaska's operations 0:20:36.200 --> 0:20:39.720 a little more complex with some long haul wide body aircraft. 0:20:40.119 --> 0:20:43.159 For most US consumers, it's not They're not going to 0:20:43.200 --> 0:20:45.480 really be able to tell. But I think the US 0:20:46.040 --> 0:20:49.480 Department of Transportation, Department of Justice figured out that, you know, 0:20:49.560 --> 0:20:53.720 like the Spirit in the Spirit Jet Blue merger purchased 0:20:53.720 --> 0:20:56.720 by Jet Blue, whatever you want to call it. You know, 0:20:56.760 --> 0:21:01.440 I think letting that fail means it's Spirits in difficult straits. 0:21:01.760 --> 0:21:03.840 Alaska would have been sorry, Hawaiian had been in a 0:21:03.840 --> 0:21:06.800 similar place, and I think they've decided let's just let 0:21:06.800 --> 0:21:07.160 this go. 0:21:07.680 --> 0:21:09.639 Does this mean that the Spirit deal could get on 0:21:09.760 --> 0:21:11.880 the lookthrough or that's definitely dead. 0:21:12.920 --> 0:21:16.280 I think that's definitely dead from a Jet Blue perspective. 0:21:16.320 --> 0:21:19.400 I'm not sure if Justice would think differently about it now, 0:21:19.440 --> 0:21:20.600 but I think it's dead. 0:21:22.320 --> 0:21:25.240 George, what's the current status of just demand for air 0:21:25.280 --> 0:21:28.200