1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,240 Speaker 1: on Apple car Play or Android Auto with the Bloomberg 4 00:00:21,320 --> 00:00:24,840 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:25,280 --> 00:00:27,000 Speaker 1: or watch us live on YouTube. 6 00:00:27,160 --> 00:00:30,040 Speaker 2: We start strong this morning with Monica the Sense of 7 00:00:30,120 --> 00:00:33,879 Speaker 2: joins us. Thrilled to have her and hear from JP Morgan. 8 00:00:34,200 --> 00:00:36,800 Speaker 2: I gotta go over a year to date down, I'm 9 00:00:36,960 --> 00:00:41,239 Speaker 2: six s and B five hundred ten, NaSTA Composite up 10 00:00:41,320 --> 00:00:44,440 Speaker 2: twelve percent, and as you say, surprise, it's a great 11 00:00:44,520 --> 00:00:45,360 Speaker 2: year for equities. 12 00:00:45,680 --> 00:00:46,800 Speaker 3: It is a message out there. 13 00:00:47,800 --> 00:00:50,920 Speaker 4: I mean, people are still skeptical and nervous, are just funny. 14 00:00:50,920 --> 00:00:53,000 Speaker 4: It's been an amazing year by any measure from an 15 00:00:53,040 --> 00:00:57,160 Speaker 4: equity standpoint. That's a yet feel great. So you could 16 00:00:57,240 --> 00:00:58,680 Speaker 4: argue you just go home and enjoy the rest of 17 00:00:58,680 --> 00:01:00,840 Speaker 4: the year and call it a day. But I think 18 00:01:00,840 --> 00:01:03,160 Speaker 4: the challenge for many people I work with they're still 19 00:01:03,200 --> 00:01:04,760 Speaker 4: sitting in a lot of cash. So it argue not 20 00:01:04,800 --> 00:01:07,120 Speaker 4: everyone has participated in that equity rally. 21 00:01:07,160 --> 00:01:10,040 Speaker 2: Well, not only is everyone participated, but there's a rent 22 00:01:10,160 --> 00:01:17,320 Speaker 2: here between the retail investors I guess participating and institutions 23 00:01:17,360 --> 00:01:18,480 Speaker 2: about smarter themselves. 24 00:01:18,560 --> 00:01:19,479 Speaker 3: Is that how you see it? 25 00:01:20,240 --> 00:01:23,440 Speaker 4: Yeah, I think to a degree, the retail investors tend 26 00:01:23,480 --> 00:01:26,200 Speaker 4: to overanalyze, right, because there's a fair amount of recency 27 00:01:26,200 --> 00:01:28,960 Speaker 4: bias that creeps in there and you can't underestimate. Again 28 00:01:29,040 --> 00:01:30,760 Speaker 4: twenty twenty two, it was a few years ago, but 29 00:01:30,800 --> 00:01:33,679 Speaker 4: it's still very recent people's minds. That the fact that 30 00:01:33,920 --> 00:01:37,200 Speaker 4: when volatility happened, nothing worked equities or down. Bonds were down. 31 00:01:37,400 --> 00:01:39,040 Speaker 4: And that's the big challenge I've been having to get 32 00:01:39,080 --> 00:01:41,360 Speaker 4: people to move out of cash and look at fixed 33 00:01:41,400 --> 00:01:44,520 Speaker 4: income as a real significant allocation their portfolio. 34 00:01:44,560 --> 00:01:49,960 Speaker 2: Again, Paul, the Madrid stock exchange in US dollars, I 35 00:01:50,000 --> 00:01:52,640 Speaker 2: think it's up thirty two percent a year to day. 36 00:01:52,960 --> 00:01:54,320 Speaker 5: I guess we miss that again. 37 00:01:54,600 --> 00:01:57,360 Speaker 6: My word, Monica, when you talk to some of your largest, 38 00:01:57,840 --> 00:02:01,880 Speaker 6: you know, clients, your high networth your high networth clients, are. 39 00:02:01,760 --> 00:02:03,400 Speaker 5: They fully invested? 40 00:02:03,440 --> 00:02:05,760 Speaker 6: Do you feel or do you feel like they're still. 41 00:02:06,120 --> 00:02:09,400 Speaker 4: Just kind of still cash balances? They are a bit 42 00:02:09,400 --> 00:02:11,359 Speaker 4: too high. If you go back over the last ten years, 43 00:02:11,400 --> 00:02:13,600 Speaker 4: I still see cash balances like thirty forty percent higher 44 00:02:13,600 --> 00:02:16,640 Speaker 4: and would have seen in the past from their old balances, right, 45 00:02:16,720 --> 00:02:19,679 Speaker 4: so some you know, I see like fifteen twenty twenty 46 00:02:19,720 --> 00:02:22,560 Speaker 4: five percent cash balances, which is too high for people 47 00:02:22,600 --> 00:02:24,600 Speaker 4: with generational wealth, which you would argue they should have. 48 00:02:24,600 --> 00:02:25,320 Speaker 1: Almost no cash. 49 00:02:25,440 --> 00:02:27,200 Speaker 4: They don't need it, right, they don't need the cash. 50 00:02:27,240 --> 00:02:30,360 Speaker 6: So in fixed income you can actually get real returns 51 00:02:30,360 --> 00:02:32,040 Speaker 6: here today, even like municipal bonds. 52 00:02:32,040 --> 00:02:33,200 Speaker 5: I mean, I don't know where you're you're. 53 00:02:33,040 --> 00:02:35,440 Speaker 4: A US taxpayer, means are a no brainer. If you write, 54 00:02:35,440 --> 00:02:37,360 Speaker 4: like me, the privilege of living in New York City, 55 00:02:37,440 --> 00:02:40,240 Speaker 4: it's especially no brainer. You're talking high single digit tacticle 56 00:02:40,320 --> 00:02:43,560 Speaker 4: than yields with I would argue you much less risk 57 00:02:43,560 --> 00:02:45,919 Speaker 4: than you're gonna get in equities, So probably do better 58 00:02:45,960 --> 00:02:47,440 Speaker 4: than I think you will in US equities over the 59 00:02:47,480 --> 00:02:48,760 Speaker 4: next twelve months with less risk. 60 00:02:48,960 --> 00:02:52,960 Speaker 6: That seems about alternatives, I mean, you know, private equity, 61 00:02:53,040 --> 00:02:55,480 Speaker 6: hedge funds, private credit, real estate. 62 00:02:55,440 --> 00:02:57,640 Speaker 5: I mean, how do you guys talk to your clients 63 00:02:57,639 --> 00:02:58,560 Speaker 5: about alternatives. 64 00:02:59,040 --> 00:03:01,360 Speaker 4: It's a big allocation for large families because again they 65 00:03:01,360 --> 00:03:03,559 Speaker 4: don't need the liquidity, so you tend to see allocations 66 00:03:03,560 --> 00:03:05,679 Speaker 4: and alternatives they could be as high as fifty percent 67 00:03:05,680 --> 00:03:08,760 Speaker 4: of them. Markelia, Yeah, it's not, it's not where we start, 68 00:03:08,960 --> 00:03:10,120 Speaker 4: but that is what I see for some of the 69 00:03:10,160 --> 00:03:10,760 Speaker 4: larger families. 70 00:03:10,760 --> 00:03:16,280 Speaker 2: Expert have the blue button Detroit Lions blue button. You 71 00:03:16,400 --> 00:03:21,520 Speaker 2: have a wonderful resume for this question. Forget about family 72 00:03:21,639 --> 00:03:25,079 Speaker 2: networth JP Morgan Mega hitters. You know eight zero's off 73 00:03:25,120 --> 00:03:28,639 Speaker 2: to the left of the decimal point. Should people have 74 00:03:28,800 --> 00:03:31,040 Speaker 2: alternative investments in their four oh one? 75 00:03:31,120 --> 00:03:31,280 Speaker 6: Kay? 76 00:03:33,040 --> 00:03:37,080 Speaker 4: If for long term money? Yes, because you know data 77 00:03:37,120 --> 00:03:39,240 Speaker 4: tells me you're going to compound at a rate higher 78 00:03:39,280 --> 00:03:42,920 Speaker 4: than you would in public markets. Now that's that there 79 00:03:42,960 --> 00:03:45,480 Speaker 4: is a different risk protofile there, and you always want 80 00:03:45,520 --> 00:03:47,880 Speaker 4: people to be comfortable with that risk. And so it 81 00:03:47,920 --> 00:03:49,720 Speaker 4: depends what age you are, right, if you're in your 82 00:03:49,760 --> 00:03:52,880 Speaker 4: thirties or forties, yeah, that wouldn't scare me. If you're 83 00:03:52,920 --> 00:03:55,280 Speaker 4: in your fifty sixties seventies, are tapping to that money sooner? 84 00:03:55,360 --> 00:03:56,400 Speaker 4: That's a different question. 85 00:03:56,440 --> 00:03:58,600 Speaker 3: Okay, So let's you mentioned cash earlier. 86 00:03:58,600 --> 00:04:02,680 Speaker 2: What's the to do list for Monica Descenzo going into 87 00:04:02,760 --> 00:04:03,280 Speaker 2: labor day? 88 00:04:03,480 --> 00:04:06,000 Speaker 3: People are like, I need to do action. What's the 89 00:04:06,080 --> 00:04:07,040 Speaker 3: action mandate? 90 00:04:07,320 --> 00:04:08,960 Speaker 4: If you believe what the market is telling you, which 91 00:04:09,000 --> 00:04:10,680 Speaker 4: is the feed is in a cut in September. You 92 00:04:10,760 --> 00:04:12,840 Speaker 4: need to own more fixed income because your cash is 93 00:04:12,880 --> 00:04:15,120 Speaker 4: going to earn you less. And it seems so obvious, 94 00:04:15,240 --> 00:04:17,200 Speaker 4: but people don't believe it because I think they've been 95 00:04:17,240 --> 00:04:19,680 Speaker 4: hearing people like me say cuts are coming, cuts are coming, 96 00:04:19,720 --> 00:04:21,400 Speaker 4: and they haven't been coming as fast as people thought. 97 00:04:21,600 --> 00:04:22,760 Speaker 3: Do you want to weigh in on NATO? 98 00:04:24,160 --> 00:04:26,760 Speaker 4: You know, it's it's a thing I talk about with 99 00:04:26,800 --> 00:04:28,240 Speaker 4: a lot of clients, but then have to remind them, 100 00:04:28,320 --> 00:04:30,800 Speaker 4: do not let your geopolitical concerns on the tail wag 101 00:04:30,839 --> 00:04:34,039 Speaker 4: the dog because generally speaking, over any intermediate term, it 102 00:04:34,040 --> 00:04:34,760 Speaker 4: doesn't matter for me. 103 00:04:34,920 --> 00:04:39,679 Speaker 2: It's just it's a nuts summer. Where were two hundred 104 00:04:39,720 --> 00:04:43,039 Speaker 2: and forty days in the in the term? Monica, thank you, 105 00:04:43,480 --> 00:04:44,560 Speaker 2: soone's too short a visit. 106 00:04:44,839 --> 00:04:48,840 Speaker 3: Let's do this sooner. Monica Descenzo is with JP Moore. 107 00:04:50,560 --> 00:04:51,279 Speaker 3: Stay with us. 108 00:04:51,520 --> 00:04:54,760 Speaker 2: More from Bloomberg's Surveillance coming up after this. 109 00:05:02,000 --> 00:05:05,560 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 110 00:05:05,640 --> 00:05:09,159 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on Apple, 111 00:05:09,200 --> 00:05:12,520 Speaker 1: Karplay and Android Otto with the Bloomberg Business app, or 112 00:05:12,680 --> 00:05:14,200 Speaker 1: watch us live on YouTube. 113 00:05:14,440 --> 00:05:19,040 Speaker 2: Jim Karen Torstenslack publishes moments ago in Apollo Global Management 114 00:05:19,120 --> 00:05:22,840 Speaker 2: on what I walked in the building and looked at today, which. 115 00:05:22,640 --> 00:05:23,520 Speaker 3: Is a yield curve. 116 00:05:23,600 --> 00:05:26,919 Speaker 2: The vanilla curve is comparing the two year yield with 117 00:05:26,960 --> 00:05:29,279 Speaker 2: a ten year I went out and looked at the 118 00:05:29,320 --> 00:05:33,200 Speaker 2: two year as compared to the thirty year yield, and 119 00:05:33,279 --> 00:05:35,200 Speaker 2: they answer, I think a lot of people Jim Karen 120 00:05:35,279 --> 00:05:39,320 Speaker 2: don't know this. Going back thirty years, the steepness, the 121 00:05:39,360 --> 00:05:43,800 Speaker 2: difference in yield of the two's thirty yield curve is 122 00:05:43,839 --> 00:05:47,160 Speaker 2: not even back to normal. We were so negative. We're 123 00:05:47,200 --> 00:05:48,720 Speaker 2: still trying to get back to normal. 124 00:05:48,920 --> 00:05:49,479 Speaker 3: Is that right? 125 00:05:50,560 --> 00:05:54,400 Speaker 7: That is absolutely correct. If I look at there are 126 00:05:54,480 --> 00:05:56,600 Speaker 7: various curves that people look at. Some people look at 127 00:05:56,600 --> 00:05:59,839 Speaker 7: the three month T bill rate versus the ten year yield, 128 00:05:59,839 --> 00:06:02,600 Speaker 7: and some people look at FED funds versus tenure. If 129 00:06:02,640 --> 00:06:04,840 Speaker 7: you look at the yield curves, right now, we are 130 00:06:04,880 --> 00:06:09,279 Speaker 7: still below historical averages, so the curve has a lot 131 00:06:09,400 --> 00:06:11,920 Speaker 7: more it could potentially steepen, and that has a lot 132 00:06:11,920 --> 00:06:15,760 Speaker 7: of implications, right because in one sense, we're talking about 133 00:06:15,800 --> 00:06:18,120 Speaker 7: FED rate cuts, and yes, that means that front end 134 00:06:18,200 --> 00:06:21,400 Speaker 7: rates can come down, but it doesn't necessarily mean that 135 00:06:21,480 --> 00:06:25,039 Speaker 7: back end rates actually have to come down, and that 136 00:06:25,160 --> 00:06:29,840 Speaker 7: might actually be not exactly an intended consequence if you're 137 00:06:29,839 --> 00:06:33,479 Speaker 7: trying to lower mortgages or longer term borrowing rates. 138 00:06:34,200 --> 00:06:36,840 Speaker 2: I mean, within all, this is the basic idea, Paul 139 00:06:36,880 --> 00:06:39,600 Speaker 2: am I right, A steeper yield curve is evil. 140 00:06:40,279 --> 00:06:42,960 Speaker 3: I mean FORBOSEI one oh one, I don't know, Jimkaren. 141 00:06:43,080 --> 00:06:46,839 Speaker 2: Is a steeper yield curve bad for our listeners and viewers? 142 00:06:48,000 --> 00:06:49,960 Speaker 8: No, not necessarily right. 143 00:06:50,240 --> 00:06:53,800 Speaker 7: So it depends on why the curve is steepening and 144 00:06:53,839 --> 00:06:56,600 Speaker 7: what the conditions are that are surrounding it. So in 145 00:06:56,600 --> 00:07:00,000 Speaker 7: some cases a steep yield curve is actually really positive 146 00:07:00,440 --> 00:07:03,360 Speaker 7: for the financial sector and for banks. Why because bends 147 00:07:03,880 --> 00:07:07,200 Speaker 7: Banks borrow at the short term at a low interest rate, 148 00:07:07,279 --> 00:07:10,880 Speaker 7: and they lend longer terms. So therefore the spreads get wider, 149 00:07:11,240 --> 00:07:13,760 Speaker 7: banks can earn more money, and what that means is 150 00:07:13,760 --> 00:07:16,720 Speaker 7: that banks are more willing to lend into the economy. 151 00:07:16,760 --> 00:07:19,239 Speaker 7: So that could actually be a positive thing. So usually 152 00:07:19,560 --> 00:07:22,160 Speaker 7: a steeper yale curve could be a positive. The other 153 00:07:22,320 --> 00:07:26,800 Speaker 7: thing that also it creates is some form of easier leverage, 154 00:07:26,840 --> 00:07:29,160 Speaker 7: meaning if you can borrow at those shorter term rates 155 00:07:29,280 --> 00:07:33,000 Speaker 7: at those lower rates, and you can invest longer term, 156 00:07:33,440 --> 00:07:38,160 Speaker 7: then you could actually you can actually generate more potential revenues. 157 00:07:38,520 --> 00:07:42,920 Speaker 7: But usually the yeal curve steepens when the FED starts 158 00:07:42,920 --> 00:07:47,280 Speaker 7: to cut interest rates aggressively, and that's usually in response 159 00:07:47,320 --> 00:07:51,600 Speaker 7: to something bad happening in the economy. So that's the 160 00:07:52,200 --> 00:07:56,000 Speaker 7: coincident component of the indicator that you may be referring to. 161 00:07:56,000 --> 00:07:56,320 Speaker 8: Tom. 162 00:07:56,960 --> 00:07:59,920 Speaker 6: Hey, Jim, Tomorrow, Tom's gonna get on the Gulf stream 163 00:08:00,720 --> 00:08:02,120 Speaker 6: and head out to Jackson Hole. 164 00:08:02,760 --> 00:08:03,240 Speaker 5: What are you. 165 00:08:03,240 --> 00:08:06,840 Speaker 6: Looking for from Jackson Hole? Fed Cherirman J pallin Friday. 166 00:08:08,320 --> 00:08:09,680 Speaker 8: So I really think that. 167 00:08:11,240 --> 00:08:15,880 Speaker 7: He's not going to alert us to a potential rate cut, 168 00:08:15,880 --> 00:08:17,800 Speaker 7: but I think he's going to open the door. I 169 00:08:17,800 --> 00:08:20,480 Speaker 7: think what he's going to do his mission is ultimately 170 00:08:20,560 --> 00:08:24,640 Speaker 7: just to basically say that the risks are more balanced 171 00:08:24,720 --> 00:08:29,680 Speaker 7: and potentially tilted to the downside, especially as it pertains 172 00:08:29,720 --> 00:08:34,560 Speaker 7: to the employment situation that gives him the opportunity to 173 00:08:34,600 --> 00:08:37,360 Speaker 7: cut interest rates. Now, we have a payroll number before 174 00:08:37,400 --> 00:08:40,240 Speaker 7: the next FED meeting in mid September, and we also 175 00:08:40,320 --> 00:08:44,400 Speaker 7: have inflation data coming out. The payroll numbers coming out 176 00:08:44,440 --> 00:08:47,120 Speaker 7: over the next several months, are not going to be good. 177 00:08:47,520 --> 00:08:49,720 Speaker 7: I think it's on September ninth, we have a quarterly 178 00:08:49,760 --> 00:08:52,880 Speaker 7: sensus of employment and wages. This is that downward revision 179 00:08:52,880 --> 00:08:55,840 Speaker 7: that we're supposed to get in jobs data, So we 180 00:08:55,960 --> 00:08:59,880 Speaker 7: may actually start to realize that our monthly job's rate 181 00:09:00,120 --> 00:09:02,800 Speaker 7: of growth over the past six months or so has 182 00:09:02,840 --> 00:09:06,280 Speaker 7: actually been a lot worse than what's actually been reported 183 00:09:06,280 --> 00:09:09,040 Speaker 7: by the BLS. So I think the labor data is 184 00:09:09,400 --> 00:09:12,840 Speaker 7: sending a very strong signal that the jobs market is 185 00:09:13,000 --> 00:09:16,079 Speaker 7: not overly strong right now. And I think we know that, 186 00:09:16,160 --> 00:09:18,040 Speaker 7: and I think that opens the door for the FED 187 00:09:18,080 --> 00:09:22,160 Speaker 7: to interest rates, and I think that POW will probably 188 00:09:22,280 --> 00:09:25,719 Speaker 7: allude to something along those lines with respect to the 189 00:09:25,760 --> 00:09:26,480 Speaker 7: labor market. 190 00:09:27,160 --> 00:09:30,360 Speaker 6: Jim, you're the CIO of Cross Asset Solutions. I have 191 00:09:30,440 --> 00:09:33,400 Speaker 6: no idea what that means, but I guess I'm guessing 192 00:09:33,400 --> 00:09:34,840 Speaker 6: it means you and your team can look at a 193 00:09:34,840 --> 00:09:36,559 Speaker 6: lot of different places for value. 194 00:09:36,600 --> 00:09:38,079 Speaker 5: Where do you see value these days? 195 00:09:39,360 --> 00:09:43,760 Speaker 7: Yeah, So effectively, what we're seeing right now is actually 196 00:09:44,000 --> 00:09:48,560 Speaker 7: equities look a bit more attractive than fixed income does 197 00:09:49,080 --> 00:09:53,520 Speaker 7: now let me let me explain that. So clearly, fixed 198 00:09:53,559 --> 00:09:55,720 Speaker 7: income has a higher yield and has a higher coupon, 199 00:09:55,840 --> 00:09:56,240 Speaker 7: and it's good. 200 00:09:56,280 --> 00:09:58,480 Speaker 3: It's very good, stable place to put. 201 00:09:58,360 --> 00:10:02,640 Speaker 7: Your money, and it's a good component a portfolio for diversification. However, 202 00:10:02,800 --> 00:10:05,680 Speaker 7: we think that within the equity markets, if you look 203 00:10:05,720 --> 00:10:08,760 Speaker 7: at the broader parts of the market, so not the 204 00:10:08,800 --> 00:10:11,600 Speaker 7: top flying mag seven, but the other four ninety three, 205 00:10:12,120 --> 00:10:14,439 Speaker 7: what we're starting to see right now is a broadening 206 00:10:14,520 --> 00:10:17,680 Speaker 7: out of earnings revisions to the upside. In fact, second 207 00:10:17,760 --> 00:10:21,280 Speaker 7: quarter earnings which just came out, we're actually very very 208 00:10:21,280 --> 00:10:25,720 Speaker 7: strong from a historical standpoint. We're very strong that many 209 00:10:25,760 --> 00:10:28,599 Speaker 7: of these companies in the second quarter actually beat expectations 210 00:10:28,640 --> 00:10:33,559 Speaker 7: quite significantly, and that is actually pretending to something relatively 211 00:10:33,640 --> 00:10:36,560 Speaker 7: strong going into the future. So when we think about 212 00:10:36,600 --> 00:10:38,680 Speaker 7: the markets and we think about the next six to 213 00:10:38,679 --> 00:10:41,199 Speaker 7: eight nine months ahead, I don't like to think very 214 00:10:41,240 --> 00:10:44,480 Speaker 7: short term, but if we think over that period of time, 215 00:10:45,160 --> 00:10:48,360 Speaker 7: what we have to recognize is that we have some 216 00:10:48,559 --> 00:10:51,680 Speaker 7: tower fallout that we're going through right now. Inflation's likely 217 00:10:51,720 --> 00:10:54,440 Speaker 7: to be higher over the next couple of months. But 218 00:10:54,520 --> 00:10:57,040 Speaker 7: once we get beyond that, what we're left with is 219 00:10:57,080 --> 00:10:59,640 Speaker 7: a lot of business investment, a lot of cap x, 220 00:11:00,040 --> 00:11:02,520 Speaker 7: a lot of companies starting to invest in their own future, 221 00:11:02,840 --> 00:11:05,480 Speaker 7: and I think what that's going to do is increase 222 00:11:06,160 --> 00:11:09,560 Speaker 7: private sector jobs growth, and I think that's a positive. 223 00:11:09,760 --> 00:11:12,319 Speaker 2: Are you managing for the coupon right now or can 224 00:11:12,360 --> 00:11:14,200 Speaker 2: you actually make total return forward? 225 00:11:15,720 --> 00:11:17,520 Speaker 8: That's a great question. Tom. 226 00:11:18,160 --> 00:11:21,480 Speaker 7: What I've been saying in fixed income is I'm managing 227 00:11:21,520 --> 00:11:22,800 Speaker 7: for the coupon right now. 228 00:11:23,679 --> 00:11:26,400 Speaker 3: The reason I say that, do you realize that only. 229 00:11:26,240 --> 00:11:29,160 Speaker 2: Twelve percent of our audience Jim Karen has ever done 230 00:11:29,240 --> 00:11:30,280 Speaker 2: that because there. 231 00:11:30,200 --> 00:11:31,040 Speaker 3: Wasn't a coupon. 232 00:11:32,000 --> 00:11:37,280 Speaker 7: Yes, well that is true, but well effectively, I think 233 00:11:37,360 --> 00:11:40,320 Speaker 7: that the duration movement. So what Tom is referring to 234 00:11:40,440 --> 00:11:42,200 Speaker 7: is if you get this drop in interest rates, you 235 00:11:42,240 --> 00:11:45,080 Speaker 7: get this increase in price, this total return just in 236 00:11:45,160 --> 00:11:48,320 Speaker 7: terms of price. I think that interest rates are have 237 00:11:48,480 --> 00:11:53,720 Speaker 7: already fallen reasonably enough at this point. They may fall 238 00:11:53,800 --> 00:11:55,600 Speaker 7: a little bit more, but I don't think that's going 239 00:11:55,679 --> 00:11:57,320 Speaker 7: to be the majority of the game. I think the 240 00:11:57,400 --> 00:11:59,240 Speaker 7: majority of the game that you can look for in 241 00:11:59,280 --> 00:12:02,880 Speaker 7: fixed income is the yield or it's the actual COUPI 242 00:12:03,440 --> 00:12:06,679 Speaker 7: So for fixed income, it's really a question of that stability, 243 00:12:06,760 --> 00:12:09,280 Speaker 7: and you can add that to your portfolio for diversification, 244 00:12:09,480 --> 00:12:11,079 Speaker 7: which is which is what we're doing well. 245 00:12:11,120 --> 00:12:14,120 Speaker 2: Sweeney's been lecturing me on a daily basis. Jim Karen, 246 00:12:14,600 --> 00:12:19,760 Speaker 2: thank you so much. Margan Stanley, stay with us. More 247 00:12:19,880 --> 00:12:22,800 Speaker 2: from Bloomberg Surveillance coming up after this. 248 00:12:30,040 --> 00:12:33,640 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 249 00:12:33,679 --> 00:12:36,880 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 250 00:12:36,920 --> 00:12:40,319 Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app, 251 00:12:40,520 --> 00:12:42,319 Speaker 1: or watch US Live on YouTube. 252 00:12:42,559 --> 00:12:45,840 Speaker 2: We speak with Douglas Cast a Pinata on Wall Street. 253 00:12:46,000 --> 00:12:48,000 Speaker 2: People love to go after him, but the fact is 254 00:12:48,000 --> 00:12:52,120 Speaker 2: it's an esteemed career starting out a kidder peavity, A. 255 00:12:52,120 --> 00:12:54,920 Speaker 5: Zillion people started, a lot of people done. 256 00:12:55,720 --> 00:12:58,160 Speaker 2: It was great for him. Doug Cast joins US now 257 00:12:58,200 --> 00:13:01,760 Speaker 2: with Seaberg's partners. He is been cautious on the market 258 00:13:02,120 --> 00:13:04,960 Speaker 2: and run, Doug. I just looked at a toothpaste company. 259 00:13:05,000 --> 00:13:08,199 Speaker 2: We'll keep the name out that. Since the Poldic has 260 00:13:08,240 --> 00:13:12,800 Speaker 2: made four point five percent return, there's basically two markets. 261 00:13:13,280 --> 00:13:17,040 Speaker 2: Have you been wrong because you missed Meg seven or 262 00:13:17,040 --> 00:13:19,520 Speaker 2: have you been wrong for another specific reason. 263 00:13:20,840 --> 00:13:21,640 Speaker 8: That's a good question. 264 00:13:21,720 --> 00:13:23,280 Speaker 9: I just want to warn you that I prep for 265 00:13:23,320 --> 00:13:26,520 Speaker 9: this interview with one hour of Peppa Pig and Baby. 266 00:13:26,120 --> 00:13:27,679 Speaker 8: Shark with my granddaughter Carlin. 267 00:13:28,280 --> 00:13:30,160 Speaker 3: Good look. 268 00:13:30,200 --> 00:13:31,520 Speaker 8: I'm painfully honest. 269 00:13:33,400 --> 00:13:35,600 Speaker 9: I don't go on Bloomberg or any of the other 270 00:13:35,640 --> 00:13:38,560 Speaker 9: shows to improve my brand or sell a service. I 271 00:13:38,640 --> 00:13:41,520 Speaker 9: try typically to explain my view in the market's individual 272 00:13:41,559 --> 00:13:45,760 Speaker 9: stocks without an agenda to promote that view. My view 273 00:13:45,880 --> 00:13:49,040 Speaker 9: is currently is often a contraryan one it is today. 274 00:13:49,679 --> 00:13:52,080 Speaker 9: So I'm going to briefly explain how dumb I've been 275 00:13:52,120 --> 00:13:55,200 Speaker 9: in the market, but how I addressed and managed through 276 00:13:55,240 --> 00:13:59,160 Speaker 9: a wrong sided market view, effectively managing risk and even profiting. 277 00:13:59,559 --> 00:14:02,480 Speaker 9: I think that it's instructive for your viewers. It'll benefit 278 00:14:02,520 --> 00:14:07,280 Speaker 9: from my transparency and technique because I honestly to be blunt. 279 00:14:07,280 --> 00:14:10,280 Speaker 9: Few come on market surveillance and say how wrong they've been. 280 00:14:10,760 --> 00:14:14,440 Speaker 9: The opposite is the case. People usually talk about their successes, 281 00:14:14,480 --> 00:14:17,120 Speaker 9: the winners in the forum. They want to appear smart 282 00:14:17,160 --> 00:14:20,720 Speaker 9: and conveniently forget their views and performance during drawdowns like 283 00:14:20,760 --> 00:14:23,600 Speaker 9: in twenty twenty two. It reminds me of the old 284 00:14:24,000 --> 00:14:27,479 Speaker 9: Harold arl And and Johnny Mrcy's song. Accentuate the positives, 285 00:14:27,520 --> 00:14:30,880 Speaker 9: the emphasize the negatives. So since we first we last met, 286 00:14:30,920 --> 00:14:33,320 Speaker 9: and with the exception of the fall in February and March, 287 00:14:33,680 --> 00:14:36,080 Speaker 9: and really since the S and P was fifty eight hundred, 288 00:14:36,080 --> 00:14:37,120 Speaker 9: I've basically. 289 00:14:36,760 --> 00:14:37,720 Speaker 8: Been burish and wrong. 290 00:14:38,360 --> 00:14:41,880 Speaker 9: But astonishingly, Lee, my hedge Front Sea Breeze has been 291 00:14:41,920 --> 00:14:45,400 Speaker 9: net short in almost every month except for the March 292 00:14:45,440 --> 00:14:49,960 Speaker 9: April sell off since early twenty twenty four. Despite that, 293 00:14:50,080 --> 00:14:52,800 Speaker 9: our monthly returns have been positive and eighteen of. 294 00:14:52,840 --> 00:14:55,080 Speaker 3: The last done that. But Doug, how is you? 295 00:14:55,520 --> 00:14:57,280 Speaker 8: I've done it? That's a great question. 296 00:14:58,200 --> 00:15:03,640 Speaker 9: We employee good risk management by taking a number of 297 00:15:03,680 --> 00:15:08,680 Speaker 9: small losses rather than get involved in shurre evaluation AI 298 00:15:09,040 --> 00:15:14,120 Speaker 9: AI mag seven short of the mundane companies business models 299 00:15:14,720 --> 00:15:15,360 Speaker 9: we're roading. 300 00:15:15,480 --> 00:15:16,480 Speaker 3: Paul wants to get in here. 301 00:15:16,480 --> 00:15:18,440 Speaker 2: I want to ask you one question, Paul Sweeney's got 302 00:15:18,480 --> 00:15:19,800 Speaker 2: to be you can ask me any question in a 303 00:15:19,840 --> 00:15:23,680 Speaker 2: short time. I on the Bloomberg have Walmart. It's a 304 00:15:23,760 --> 00:15:28,040 Speaker 2: pe of forty point one six. Can you explain to 305 00:15:28,120 --> 00:15:31,880 Speaker 2: me by somebody dropping pennies down to the bottom line 306 00:15:32,360 --> 00:15:36,240 Speaker 2: deserves a forty multiple. You're the only one living who 307 00:15:36,280 --> 00:15:37,800 Speaker 2: remembers the nifty to fifty? 308 00:15:38,120 --> 00:15:39,680 Speaker 3: How do we get here with Walmart? 309 00:15:41,720 --> 00:15:43,000 Speaker 8: It is astonishing to me. 310 00:15:43,240 --> 00:15:46,000 Speaker 9: We are been short our largest short exposure in the 311 00:15:46,080 --> 00:15:49,200 Speaker 9: last year and a half have been in consumer stocks. 312 00:15:49,360 --> 00:15:53,480 Speaker 9: We actually recently showed at Walmart. And I think it's 313 00:15:53,800 --> 00:15:58,080 Speaker 9: condition of the market. It's what's It's what Warren Buffett 314 00:15:58,080 --> 00:16:02,000 Speaker 9: wrote in a in a report to his Berkshire Hathaway 315 00:16:02,040 --> 00:16:06,120 Speaker 9: shareholders in nineteen ninety nine. God's plan basically, people wait up, 316 00:16:06,160 --> 00:16:08,440 Speaker 9: wake up in the morning, expect stock prices to go 317 00:16:08,560 --> 00:16:12,920 Speaker 9: ever higher. So you've seen that this substantial expansion reevaluation 318 00:16:13,600 --> 00:16:18,080 Speaker 9: in price earnings ratios, and we think that equity is 319 00:16:18,080 --> 00:16:22,040 Speaker 9: a terribly overpriced against interest rates. The equity risk premium 320 00:16:22,120 --> 00:16:25,320 Speaker 9: is a two decade low that's typically consistent with the 321 00:16:25,360 --> 00:16:28,840 Speaker 9: slide in stocks. The S and P dividend yield is 322 00:16:28,840 --> 00:16:31,280 Speaker 9: at a near record low one point twenty five percent, 323 00:16:31,320 --> 00:16:35,600 Speaker 9: and spread between that and the ten year treasury has 324 00:16:35,720 --> 00:16:38,400 Speaker 9: rarely been so wide. As you know, I'm very close 325 00:16:38,440 --> 00:16:42,160 Speaker 9: to Coops. Iway was Lee's director of research for a 326 00:16:42,160 --> 00:16:45,400 Speaker 9: while to make advisors Lee fields bonds or over prices. 327 00:16:45,480 --> 00:16:49,200 Speaker 9: Stocks may be overpriced against overpriced sixt income And. 328 00:16:49,160 --> 00:16:51,840 Speaker 3: That's just real. 329 00:16:51,920 --> 00:16:55,640 Speaker 6: Quickly, given that stance, given that conservative outlook on maybe evaluation, 330 00:16:56,760 --> 00:16:58,320 Speaker 6: how are you positioned here today? 331 00:16:59,880 --> 00:17:03,080 Speaker 9: I've been net short between ten and twenty percent, as 332 00:17:03,120 --> 00:17:06,800 Speaker 9: I said, for most of the last nineteen months, and 333 00:17:06,960 --> 00:17:12,040 Speaker 9: we are currently considering expanding our next short exposure. Outside 334 00:17:12,040 --> 00:17:15,560 Speaker 9: of that range, I think current valuations are twenty four times. 335 00:17:15,840 --> 00:17:19,040 Speaker 9: That's in the ninety eighth percentile. It's a poor launching 336 00:17:19,080 --> 00:17:22,720 Speaker 9: pad for future investment returns. Bob Barrel, in one of 337 00:17:22,720 --> 00:17:25,760 Speaker 9: his ten Lessons of Investing, said there are no new 338 00:17:25,800 --> 00:17:30,320 Speaker 9: eras excesses are never permanent. The SMP index trailing multiple 339 00:17:30,400 --> 00:17:32,320 Speaker 9: is twenty six. You take out the twenty three p 340 00:17:32,920 --> 00:17:35,840 Speaker 9: in twenty twenty one, and it's similar to the valuation 341 00:17:35,960 --> 00:17:38,439 Speaker 9: of August twenty two thousand, right before two year by 342 00:17:38,880 --> 00:17:39,280 Speaker 9: bear Mark. 343 00:17:39,359 --> 00:17:41,399 Speaker 3: I'm going to pick up on this with Paul jumping here. 344 00:17:41,560 --> 00:17:44,800 Speaker 6: So, Doug, how about in the fixed income space? Here 345 00:17:44,840 --> 00:17:47,600 Speaker 6: are you can you go there and just clip coupons? 346 00:17:47,600 --> 00:17:48,800 Speaker 6: Here is our opportunity there. 347 00:17:50,280 --> 00:17:51,040 Speaker 8: I think that. 348 00:17:52,600 --> 00:17:54,879 Speaker 9: If you're a high net worth individual I listened to 349 00:17:54,880 --> 00:18:00,199 Speaker 9: your prior segment about just earning the coupon, you can 350 00:18:00,200 --> 00:18:02,960 Speaker 9: get a seven and a half percent pre tax equivalent 351 00:18:03,080 --> 00:18:07,160 Speaker 9: if you're a high net worth individual in municipals. So 352 00:18:07,480 --> 00:18:11,480 Speaker 9: I think that four point three percent is thereabouts where 353 00:18:11,520 --> 00:18:14,199 Speaker 9: the ten year yield is it's a good place to 354 00:18:14,240 --> 00:18:16,639 Speaker 9: hang out. And if you go a little riskier in credit, 355 00:18:16,920 --> 00:18:20,520 Speaker 9: you get equity like returns for limited risk and no volatility. 356 00:18:21,359 --> 00:18:23,960 Speaker 3: Doug, I got time for one more question. I got 357 00:18:23,960 --> 00:18:24,920 Speaker 3: eight ways to go here. 358 00:18:25,200 --> 00:18:27,359 Speaker 9: Don't ask me about the Yankees. I'm not going to 359 00:18:27,560 --> 00:18:29,199 Speaker 9: about the Yankees. I hang up. 360 00:18:30,440 --> 00:18:32,760 Speaker 2: Well you should, and you know it's a glorious and 361 00:18:32,760 --> 00:18:36,000 Speaker 2: beautiful thing, Doud Cass, I want you to speak to 362 00:18:36,040 --> 00:18:39,880 Speaker 2: the people listening and viewing who aren't sophisticates. They didn't 363 00:18:39,960 --> 00:18:43,600 Speaker 2: have an office next to Julian Robertson. They haven't done 364 00:18:43,680 --> 00:18:46,720 Speaker 2: what you've done. They haven't been as visible an Opinionata 365 00:18:46,880 --> 00:18:50,639 Speaker 2: like you. What do you say to our audience about 366 00:18:50,680 --> 00:18:54,119 Speaker 2: this addiction, this belief in MEG seven. 367 00:18:57,520 --> 00:18:59,040 Speaker 8: Well, I'm I'm you know. 368 00:18:59,160 --> 00:19:02,399 Speaker 9: No one I know is concerned that there'll be a 369 00:19:02,480 --> 00:19:07,560 Speaker 9: large drawer down inequities. And I think there's any number 370 00:19:07,840 --> 00:19:11,080 Speaker 9: of conditions that could bring down the market meaningfully. And 371 00:19:11,119 --> 00:19:14,240 Speaker 9: the most important one as it relates to MAG seven, 372 00:19:14,720 --> 00:19:18,160 Speaker 9: is a hiccup and AI. For example, a slow down 373 00:19:18,200 --> 00:19:21,280 Speaker 9: in AI cap spending could occur. We could see growing 374 00:19:21,320 --> 00:19:24,560 Speaker 9: evidence of double and triple chip ordering. We could see 375 00:19:24,560 --> 00:19:27,280 Speaker 9: the failure of AI to improve from its current state. 376 00:19:27,920 --> 00:19:30,240 Speaker 9: We can see the failure of use sets to develop 377 00:19:30,320 --> 00:19:33,920 Speaker 9: for AI. We could see an accounting scandal in AI 378 00:19:34,480 --> 00:19:40,640 Speaker 9: because companies Hyperscalers are depreciating their massive capital expenditures over 379 00:19:40,680 --> 00:19:44,160 Speaker 9: ten years well in excess of useful life. I've written 380 00:19:44,200 --> 00:19:46,920 Speaker 9: over one hundred and five columns on the street about that, 381 00:19:47,000 --> 00:19:52,680 Speaker 9: called wartales from Navidia. I think Navidia and the Hyperscalers, 382 00:19:53,320 --> 00:19:56,080 Speaker 9: and on long two of them, Meta and Amazon are 383 00:19:56,200 --> 00:19:57,200 Speaker 9: over earning. 384 00:19:58,320 --> 00:20:01,440 Speaker 3: Right, Derek, quickly, You're an Apple? You long your short? Apple? 385 00:20:03,080 --> 00:20:03,760 Speaker 8: No position? 386 00:20:03,800 --> 00:20:08,199 Speaker 9: I was short into the move under two hundred and 387 00:20:08,280 --> 00:20:10,720 Speaker 9: I have no position. I think it's overvalued, but I 388 00:20:10,720 --> 00:20:12,600 Speaker 9: think they are far better shorts available. 389 00:20:12,640 --> 00:20:14,320 Speaker 3: Can the Red Sox make the Wild Card? 390 00:20:16,000 --> 00:20:19,520 Speaker 9: Red Sox, I believe are tied with the Yankees five 391 00:20:19,560 --> 00:20:23,040 Speaker 9: games out. The Red Sox are four and six in 392 00:20:23,080 --> 00:20:26,720 Speaker 9: the last ten. The Yankees is seven to three. The 393 00:20:26,800 --> 00:20:29,720 Speaker 9: leading team, Toronto is five and five. The momentum is 394 00:20:29,760 --> 00:20:32,480 Speaker 9: with the Yankees. There go the Yankees. 395 00:20:34,000 --> 00:20:36,159 Speaker 2: Thank you so much. Get back to Peppa Pig with 396 00:20:36,200 --> 00:20:40,120 Speaker 2: your granddaughter. Mister kass Is with Seabreez Partners. He's been 397 00:20:40,240 --> 00:20:44,240 Speaker 2: very open about missing a great bullmark. 398 00:20:44,320 --> 00:20:47,960 Speaker 3: Greatly appreciate it. Stay with us. 399 00:20:47,960 --> 00:20:58,639 Speaker 2: More from Bloomberg Surveillance coming up after this. 400 00:20:58,640 --> 00:21:02,120 Speaker 1: This is the Bloomberg serve Balen's podcast. Listen live each 401 00:21:02,160 --> 00:21:05,199 Speaker 1: weekday starting at seven am Eastern on Apple, Cocklay and 402 00:21:05,200 --> 00:21:08,240 Speaker 1: Android Auto with the Bloomberg Business app. You can also 403 00:21:08,359 --> 00:21:11,480 Speaker 1: watch us live every weekday on YouTube and always on 404 00:21:11,560 --> 00:21:12,760 Speaker 1: the Bloomberg terminal. 405 00:21:13,400 --> 00:21:16,280 Speaker 2: Joining us out for clarity, Kristin Biddle, It's been wait long, 406 00:21:16,960 --> 00:21:20,360 Speaker 2: had a welts at work at City Global Markets, and 407 00:21:20,640 --> 00:21:23,639 Speaker 2: I guess just this has come up this week. Kristin, 408 00:21:23,760 --> 00:21:25,520 Speaker 2: do you believe in rebalancing? 409 00:21:26,680 --> 00:21:26,760 Speaker 1: Like? 410 00:21:27,040 --> 00:21:28,200 Speaker 2: Is this like a formula? 411 00:21:28,800 --> 00:21:30,760 Speaker 10: I absolutely believe in rebalancing. 412 00:21:30,800 --> 00:21:33,320 Speaker 11: I think look like at a very high level, what's 413 00:21:33,320 --> 00:21:35,600 Speaker 11: the number one question we're getting from our clients is 414 00:21:36,040 --> 00:21:38,720 Speaker 11: really questioning around like the sixty forty portfolio, and I 415 00:21:38,720 --> 00:21:40,440 Speaker 11: think it's gotten a little bit of a bad rap 416 00:21:40,480 --> 00:21:42,200 Speaker 11: because when you look at it over time. Just look 417 00:21:42,240 --> 00:21:45,200 Speaker 11: at it over the past decade, it's been returning around 418 00:21:45,320 --> 00:21:48,840 Speaker 11: nine percent perannum. Even year to date, you have nine 419 00:21:48,840 --> 00:21:52,360 Speaker 11: percent paranum or nine percent total year to date. 420 00:21:52,520 --> 00:21:53,960 Speaker 10: Through the sixty forty portfolio. 421 00:21:54,119 --> 00:21:56,440 Speaker 11: So I think where the question comes into place though, 422 00:21:56,840 --> 00:21:59,960 Speaker 11: is really looking at what does cash provide in this market? 423 00:22:00,119 --> 00:22:02,480 Speaker 11: It should you have an allocation to cash to be 424 00:22:02,520 --> 00:22:05,639 Speaker 11: a little bit more nimble. And then also the question 425 00:22:05,680 --> 00:22:08,760 Speaker 11: that everyone's been discussing around the fact that your equity 426 00:22:08,800 --> 00:22:11,960 Speaker 11: exposure is actually highly concentrated. Is that a good thing 427 00:22:12,160 --> 00:22:13,760 Speaker 11: or something that you should diversify away for? 428 00:22:13,760 --> 00:22:17,159 Speaker 2: We want diversification. I mean my basic thing as I 429 00:22:17,200 --> 00:22:20,679 Speaker 2: see a lot of portfolio is over diversified, so that 430 00:22:20,720 --> 00:22:24,640 Speaker 2: if you have a winner, it doesn't matter because you're overdiversified. 431 00:22:24,960 --> 00:22:28,399 Speaker 11: So the diversification across let's just say like fixed income, 432 00:22:28,800 --> 00:22:32,360 Speaker 11: alternatives and equities certainly a case for it. I think 433 00:22:32,359 --> 00:22:36,080 Speaker 11: there's a case for having some cash. Now within our portfolios, 434 00:22:36,080 --> 00:22:38,760 Speaker 11: we have about a one percent cash allocation killed in 435 00:22:38,800 --> 00:22:43,880 Speaker 11: our investors. Well, you know, you have a little bit 436 00:22:44,040 --> 00:22:46,600 Speaker 11: just to do some rebalancing on the edges. But if 437 00:22:46,600 --> 00:22:49,080 Speaker 11: you look at the average client's portfolio, some of those 438 00:22:49,119 --> 00:22:51,800 Speaker 11: are upwards of twenty to thirty percent in cash, which 439 00:22:52,000 --> 00:22:53,760 Speaker 11: then you have to ask the question is that really 440 00:22:53,840 --> 00:22:58,399 Speaker 11: an investment or are you kind of stuck in in inertia. 441 00:22:58,480 --> 00:23:01,240 Speaker 6: I love some of this data from the cap Gemini report, 442 00:23:01,240 --> 00:23:03,760 Speaker 6: which I've seen in so many places. High net worth 443 00:23:03,800 --> 00:23:06,639 Speaker 6: individual wealth showed strong growth in twenty twenty four, reaching 444 00:23:06,760 --> 00:23:09,680 Speaker 6: ninety and a half trillion dollars globally. 445 00:23:10,040 --> 00:23:12,000 Speaker 5: And this is the number I keep telling. 446 00:23:11,840 --> 00:23:14,680 Speaker 6: My number three offspring that works at a big investment 447 00:23:14,720 --> 00:23:17,720 Speaker 6: from sixty three percent of global wealth is expected to 448 00:23:17,800 --> 00:23:19,400 Speaker 6: change hands by twenty thirty five. 449 00:23:20,040 --> 00:23:22,320 Speaker 10: That is unbelievable, unbelievable. 450 00:23:22,400 --> 00:23:23,520 Speaker 5: How is that going to happen? 451 00:23:23,560 --> 00:23:25,639 Speaker 6: By the way, is that just I mean, you've got 452 00:23:25,680 --> 00:23:27,119 Speaker 6: to plan for it now, don't you know? 453 00:23:27,320 --> 00:23:28,919 Speaker 11: You have to plan for it now. And this is 454 00:23:28,960 --> 00:23:31,399 Speaker 11: something so the cap Gemini team, they've been producing this 455 00:23:31,520 --> 00:23:34,480 Speaker 11: report for the past twenty nine years, and this is 456 00:23:34,560 --> 00:23:36,760 Speaker 11: really kind of one of the leading publications when it 457 00:23:36,760 --> 00:23:40,200 Speaker 11: comes to wealth management and the broader kind of spectrum 458 00:23:40,200 --> 00:23:42,919 Speaker 11: of ultra high networth and high net worth investors. So 459 00:23:43,160 --> 00:23:45,720 Speaker 11: I was part of the exact steerco this year, and 460 00:23:45,760 --> 00:23:48,160 Speaker 11: the focus of this is really this great wealth transfer 461 00:23:48,520 --> 00:23:50,920 Speaker 11: and so that sixty three percent is expected to change 462 00:23:50,960 --> 00:23:54,159 Speaker 11: hands by twenty thirty five. I think the more important 463 00:23:54,200 --> 00:23:57,159 Speaker 11: stat there is not just the movement of wealth, but 464 00:23:57,280 --> 00:24:00,520 Speaker 11: the fact that whenever you have whether it's like interspousal transfer, 465 00:24:00,640 --> 00:24:03,680 Speaker 11: whether it's in a state situation, intergenerational transfer. 466 00:24:03,960 --> 00:24:05,080 Speaker 10: There's two key insights. 467 00:24:05,160 --> 00:24:08,639 Speaker 11: One, within one to two years, close to ninety percent 468 00:24:08,680 --> 00:24:11,479 Speaker 11: of people change their advisor. So simply because you were 469 00:24:11,520 --> 00:24:13,760 Speaker 11: advising a family does not mean if you have one 470 00:24:13,760 --> 00:24:16,360 Speaker 11: of these big life events that you're going to continue 471 00:24:16,400 --> 00:24:18,679 Speaker 11: being the advisor. I think the other thing is when 472 00:24:18,720 --> 00:24:22,520 Speaker 11: people talk about next gen, it really is people aged 473 00:24:22,680 --> 00:24:25,480 Speaker 11: forty to sixty. You hear something like next gen and 474 00:24:25,520 --> 00:24:27,439 Speaker 11: you think it's someone in their early twenties or in 475 00:24:27,480 --> 00:24:30,919 Speaker 11: their teens. That transfer is going to happen first and 476 00:24:30,960 --> 00:24:32,000 Speaker 11: foremost to Gen X. 477 00:24:32,320 --> 00:24:35,000 Speaker 2: Here's what I want to know for the listeners and 478 00:24:35,119 --> 00:24:39,280 Speaker 2: viewers that are doing all this estate planning, etc. And 479 00:24:39,320 --> 00:24:44,080 Speaker 2: the kids have no visceral interest in the markets. They 480 00:24:44,080 --> 00:24:46,280 Speaker 2: wouldn't know yield to maturity if it hit them over 481 00:24:46,320 --> 00:24:49,720 Speaker 2: the head. What do you do if you have all 482 00:24:49,760 --> 00:24:53,280 Speaker 2: your kids or some of your kids who they just 483 00:24:53,560 --> 00:24:56,840 Speaker 2: don't care about the material. 484 00:24:57,400 --> 00:25:00,880 Speaker 11: So this is this is a really interesting questioned Tom, 485 00:25:00,920 --> 00:25:04,480 Speaker 11: because I think it's fascinating and almost kind of ludicrous 486 00:25:04,560 --> 00:25:06,879 Speaker 11: that you can graduate from the best universities in this 487 00:25:07,000 --> 00:25:11,240 Speaker 11: country without a foundational knowledge of financial planning, estate planning, 488 00:25:11,640 --> 00:25:15,200 Speaker 11: and just understanding investments one oh one. So since we're 489 00:25:15,240 --> 00:25:17,320 Speaker 11: dealing with that as a base case and some people 490 00:25:17,359 --> 00:25:21,159 Speaker 11: are not interested, the educational component and having a trusted 491 00:25:21,200 --> 00:25:24,760 Speaker 11: advisor becomes a mission critical and so everyone should have 492 00:25:24,800 --> 00:25:27,000 Speaker 11: a foundational knowledge of financial planning. 493 00:25:27,080 --> 00:25:29,080 Speaker 10: They don't, but they need to. 494 00:25:29,400 --> 00:25:31,960 Speaker 2: Okay, they need to. But come on, this is like 495 00:25:32,080 --> 00:25:36,000 Speaker 2: a huge deal. We have a generation behind us, whether 496 00:25:36,080 --> 00:25:38,879 Speaker 2: we have you know, the megabucks John Tucker has or 497 00:25:38,880 --> 00:25:40,600 Speaker 2: you're like me, I can never retire it. 498 00:25:41,160 --> 00:25:45,040 Speaker 3: I mean, I mean, Kristen, the kids don't care. 499 00:25:45,440 --> 00:25:48,040 Speaker 10: Well, we see them caring, but just in different ways. 500 00:25:48,200 --> 00:25:48,400 Speaker 2: Right. 501 00:25:48,440 --> 00:25:50,399 Speaker 11: So a lot of the barriers to entry from a 502 00:25:50,400 --> 00:25:54,240 Speaker 11: technology perspective, hear me out on this time. The barriers 503 00:25:54,280 --> 00:25:58,120 Speaker 11: to entry from a technology perspective, even accessing financial markets. 504 00:25:58,440 --> 00:26:01,159 Speaker 11: You've never seen so many people in their twenties and 505 00:26:01,200 --> 00:26:04,959 Speaker 11: thirties actively trading, and so the democratization in terms of 506 00:26:05,040 --> 00:26:08,000 Speaker 11: trading is free access to markets. That was a very 507 00:26:08,040 --> 00:26:11,159 Speaker 11: different story a decade ago or two decades ago. So 508 00:26:11,200 --> 00:26:13,480 Speaker 11: a lot of those barriers have been brought down, and 509 00:26:13,520 --> 00:26:15,960 Speaker 11: I think it's a question of meeting people where they're at. 510 00:26:16,040 --> 00:26:18,600 Speaker 11: And also with their interests. So where do we see 511 00:26:18,600 --> 00:26:21,919 Speaker 11: the primary interests of this next generation. It's definitely in 512 00:26:22,000 --> 00:26:24,719 Speaker 11: terms of digital engagement and the platform in terms of 513 00:26:24,800 --> 00:26:28,359 Speaker 11: accessing advice twenty four to seven, But it's also interest 514 00:26:28,400 --> 00:26:31,240 Speaker 11: in other asset classes. And you see a higher tendency 515 00:26:31,240 --> 00:26:34,959 Speaker 11: towards alternatives as opposed to public markets. And I'm not 516 00:26:35,000 --> 00:26:37,600 Speaker 11: just talking about crypto and what you would think. It's 517 00:26:37,600 --> 00:26:40,879 Speaker 11: actually alternatives because ninety nine percent of the companies in 518 00:26:40,920 --> 00:26:45,200 Speaker 11: the US market are private companies. And actually, if you say, like, okay, 519 00:26:45,200 --> 00:26:47,440 Speaker 11: fair enough, but a lot of them are small. Even 520 00:26:47,440 --> 00:26:49,600 Speaker 11: if you use the threshold of over one hundred million 521 00:26:49,640 --> 00:26:51,879 Speaker 11: in revenue, you're still talking ninety percent. 522 00:26:51,920 --> 00:26:53,240 Speaker 10: So a lot of those themes. 523 00:26:53,560 --> 00:26:55,679 Speaker 11: You can meet someone where they're at in terms of 524 00:26:55,720 --> 00:26:58,679 Speaker 11: what does interest them without it being financial planning one 525 00:26:58,720 --> 00:27:02,000 Speaker 11: oh one or kind of are the benefits of asset 526 00:27:02,040 --> 00:27:03,360 Speaker 11: allocation and diversification. 527 00:27:03,520 --> 00:27:06,040 Speaker 6: Well, I've told my kids the last check I write, 528 00:27:06,200 --> 00:27:08,960 Speaker 6: I want it to bounce, So don't plan on anything else. 529 00:27:09,920 --> 00:27:12,320 Speaker 6: So what are some of the questions you get from 530 00:27:12,400 --> 00:27:15,000 Speaker 6: your clients? How do I set up the states, how 531 00:27:15,000 --> 00:27:16,439 Speaker 6: do I set up trust? What do I do with 532 00:27:16,440 --> 00:27:18,280 Speaker 6: my investments today? What kind of questions do you get 533 00:27:18,320 --> 00:27:19,600 Speaker 6: from your clients these days? 534 00:27:19,640 --> 00:27:22,080 Speaker 11: So I would say the first question oftentimes when we 535 00:27:22,119 --> 00:27:23,760 Speaker 11: meet with a new client, right, So if it's an 536 00:27:23,760 --> 00:27:26,280 Speaker 11: existing client, you generally are going to already have a 537 00:27:26,280 --> 00:27:28,040 Speaker 11: financial plan in place, You're going to have an estate 538 00:27:28,080 --> 00:27:29,840 Speaker 11: plan in place, and you're going to have an asset 539 00:27:29,880 --> 00:27:33,439 Speaker 11: allocation and understanding your risk profile. So oftentimes when we 540 00:27:33,480 --> 00:27:36,320 Speaker 11: have that initial interaction. And by the way, we cover 541 00:27:36,359 --> 00:27:39,479 Speaker 11: people in the legal industry, we cover professional services, we 542 00:27:39,520 --> 00:27:43,240 Speaker 11: cover asset managers, pre ipo post ipo companies, so you're 543 00:27:43,240 --> 00:27:46,760 Speaker 11: talking about a very diverse set of individuals, but they're 544 00:27:46,840 --> 00:27:51,119 Speaker 11: very ambitious in terms of their careers and their goals 545 00:27:51,160 --> 00:27:54,960 Speaker 11: for themselves personally as well as professionally. One of those 546 00:27:55,000 --> 00:27:57,159 Speaker 11: common things that we find is people have all their 547 00:27:57,200 --> 00:28:01,320 Speaker 11: money in a savings account, right, so that they have 548 00:28:01,440 --> 00:28:03,879 Speaker 11: not actually done a financial plan or that they just 549 00:28:03,920 --> 00:28:06,560 Speaker 11: simply they've been saving and they start with kind of 550 00:28:06,640 --> 00:28:09,359 Speaker 11: a traditional path of I'm going to buy my first house, 551 00:28:09,560 --> 00:28:12,159 Speaker 11: I have my mortgage, then I come into liquidity and 552 00:28:12,200 --> 00:28:15,320 Speaker 11: I don't even realize and many people think it's too late. 553 00:28:15,680 --> 00:28:17,920 Speaker 11: So the question around, like, these are people who are 554 00:28:18,000 --> 00:28:21,399 Speaker 11: fine from a retirement standpoint, but then really getting an 555 00:28:21,520 --> 00:28:25,280 Speaker 11: estate plan in place, understanding wealth transfer and then understanding 556 00:28:25,320 --> 00:28:26,040 Speaker 11: acid allocation. 557 00:28:26,119 --> 00:28:28,679 Speaker 2: Yeah, all I can say, Folks, is just on probate alone, 558 00:28:29,200 --> 00:28:32,359 Speaker 2: get an estate plan in order. Kristin Biddley, thank us 559 00:28:32,359 --> 00:28:34,880 Speaker 2: so much for Citygroup this morning. There. 560 00:28:34,880 --> 00:28:35,760 Speaker 3: We don't do enough for that. 561 00:28:35,800 --> 00:28:38,240 Speaker 10: Can you come back anytime. I'll be here. 562 00:28:38,440 --> 00:28:41,320 Speaker 3: Kristin, thank you so much early, really well, I appreciate that. 563 00:28:41,840 --> 00:28:46,680 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 564 00:28:46,800 --> 00:28:51,080 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 565 00:28:51,200 --> 00:28:54,680 Speaker 1: seven to ten am Eastern on Bloomberg dot com, the 566 00:28:54,760 --> 00:28:58,800 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 567 00:28:58,840 --> 00:29:02,200 Speaker 1: can also watch us live every weekday on YouTube and 568 00:29:02,400 --> 00:29:04,120 Speaker 1: always on the Bloomberg terminal