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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: It is a very big week of economic news, and

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Speaker 2: just a few of the highlights include that CPI report,

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Speaker 2: the latest FED decision on Wednesday. We're also going to

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Speaker 2: keep a eye on producer prices and job has claims

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Speaker 2: on Thursday. Let's get some insight on what it all

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Speaker 2: means for the bond market. Joining us is the bond

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Speaker 2: King himself, Bill Gross, co founder of Pimco. Bill, it's

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Speaker 2: our launch day. It's our first show on the news

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Speaker 2: set we relaunched. We super appreciate it joining us on

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Speaker 2: launch day. Bill, Thank you so much.

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Speaker 3: You're welcome. Good to be here.

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Speaker 2: All right, what's the trade into the Fed on Wednesday?

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Speaker 2: What do you think?

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Speaker 4: Well, I don't think there's much of a trade on treasuries,

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Speaker 4: you know, to my way of thinking, the tenure, which

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Speaker 4: is close to four and a half let's call it

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Speaker 4: four and a half percent, is dependent upon inflation, which

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Speaker 4: we'll see on Wednesday, and we'll know more because of that.

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Speaker 4: But if inflation is two percent, I think the ten

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Speaker 4: year belongs close to four percent. If it's three percent,

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Speaker 4: it belongs closer to five. And we're right in the middle.

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Speaker 4: So at the moment with four point five ten year

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Speaker 4: treasuries and break evens that are around to twenty. You know,

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Speaker 4: that's a force that's a four to seventy basically break

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Speaker 4: even for the nominal ten year treasury, and I think

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Speaker 4: we're about there. There's not much to be done until

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Speaker 4: we know more.

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Speaker 2: Well, what are the chances that we see, say the

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Speaker 2: median dot in twenty twenty four and twenty twenty five

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Speaker 2: actually move higher. I mean, do you think there's a

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Speaker 2: possibility And what would be the reaction to something like that.

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Speaker 3: Well, I think it would be negative.

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Speaker 4: You know, the Fed is basically signaled they're sort of done,

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Speaker 4: perhaps ninety five percent done in terms of raising rates.

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Speaker 4: It's not that they can't raise them. If to print

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Speaker 4: on CPI isn't bad for the next months. But you know,

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Speaker 4: I think the market basically anticipates the Fed to stay

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Speaker 4: and maybe in September, maybe in December, maybe one or

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Speaker 4: two cuts if you know, the current numbers continue as

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Speaker 4: we've seen them.

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Speaker 1: I'm curious, Bill, when we talk about all the moves

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Speaker 1: that we've been seeing in the bond market as of late,

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Speaker 1: particularly in treasuries, as people try to sort of gain

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Speaker 1: what the FED does next. Is there still a strong

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Speaker 1: correlation between what we're seeing there and what we're seeing

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Speaker 1: in the equity market or is that kind of splintered.

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Speaker 4: Yeah, I don't think it exists anymore. I mean, for

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Speaker 4: years I've followed the correlation between the two, between real

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Speaker 4: interest rates and stock prices, between the FED funds rate

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Speaker 4: and stock prices, and you know, as we've seen, you know,

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Speaker 4: the FED raised there are short term rates over the

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Speaker 4: past year and a half or two from close to

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Speaker 4: zero to now five and three eights, and the stock

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Speaker 4: market basically I has neglected all of that in terms

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Speaker 4: of the rise and not only nomenal but real interest rates.

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Speaker 4: So you know, the correlations broke down. It's more of

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Speaker 4: a momentum type of market. Actually, it's a very momentum

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Speaker 4: driven market with AI that you've just talked about.

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Speaker 3: And so.

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Speaker 4: I wouldn't be so keen I guess on correlating stock

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Speaker 4: prices to interest rates at the moment, at least.

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Speaker 1: When you look at valuations around here, and I know

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Speaker 1: you can sort of look at this market either you

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Speaker 1: could go the traditional bottom up valuation method or just

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Speaker 1: I guess, look at the technicals or ride the momentum.

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Speaker 1: But when you look at valuations and all the arguments

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Speaker 1: right now that this market might be overvalue, things might

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Speaker 1: be overpriced, here do you find I guess, credence to that?

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Speaker 3: Oh, I think so. I mean it depends upon.

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Speaker 4: Multiple, which multiple you use, whether it's the ten year

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Speaker 4: cape as they call it, or whether it's the the

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Speaker 4: immediate expectation in the next twelve months. In any case,

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Speaker 4: it's historically high or close to historically high at twenty

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Speaker 4: one twenty two times for a pe. And so to

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Speaker 4: my way of thinking, if the economy slows, and I

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Speaker 4: think it's slowing, we don't need a recession. But if

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Speaker 4: the economy slows and earning US growth fails to meet expectations,

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Speaker 4: I think there's a problem in terms of valuation at

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Speaker 4: the moment for many stocks.

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Speaker 3: Many stocks.

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Speaker 1: Well, that does that mean like right now, based on

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Speaker 1: at least what we know publicly, would you be comfortable

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Speaker 1: taking a broad market position right now in US equities?

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Speaker 4: No, But I'd be comfortable in taking a specific you know,

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Speaker 4: bet and investment in certain areas which are still very attractive.

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Speaker 4: I know that's the standard explanation that that investors basically say,

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Speaker 4: but I think there's some areas in the market that

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Speaker 4: are very attractive based upon a slowing economy and based

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Speaker 4: upon high valuations, and many stocks and the nastac well,

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Speaker 4: let's talk about a few I've owned for a long

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Speaker 4: time and I have recommended for a long time. Master

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Speaker 4: Limited Partnerships for pipelines. These are stocks. These are partnerships,

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Speaker 4: and because of that, they can't be bought by municipal

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Speaker 4: basically by the market, by mutual funds, and so it's

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Speaker 4: a narrow universe. These are stocks like energy transfer ets

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Speaker 4: a symbol like MPLX Marathon Pipeline, which is the symbol there.

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Speaker 4: You know. They yield between eight and eight and a

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Speaker 4: half percent. And there's one that I love, I actually

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Speaker 4: love Wees Western Pipeline yields about nine and a half percent.

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Speaker 4: These yields are basically utility, their taker paid type of contracts.

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Speaker 4: They defer because their partnerships, they defer taxes on their dividends,

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Speaker 4: and so it's a it's a huge you know, and

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Speaker 4: it's a huge attraction to me in terms of yield

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Speaker 4: and potential price appreciation. And they're all close to the

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Speaker 4: top of their twelve month highs along the.

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Speaker 2: Same lines you mentioned utilities. Utilities continue to sort of

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Speaker 2: outperform in a large part of that other power players

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Speaker 2: like Fistra or Constellation Energy, and that's definitely related to

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Speaker 2: the AI play. Do you buy into that kind of hype?

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Speaker 3: Yeah, I think so.

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Speaker 4: I own some Ane was just the next Energy, and

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Speaker 4: I think there's a correlation there between interest rates and between.

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Speaker 3: You know, the price of the stock.

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Speaker 4: So I think in certain areas, I think utilities as

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Speaker 4: a whole have sort of been overblown in terms of

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Speaker 4: the move relative to AI, aretill artificial intelligence and the

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Speaker 4: fact that they use more energy. But you know, there

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Speaker 4: are certain stocks there. Anye is one of them that

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Speaker 4: I like.

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Speaker 1: What about banks right now? Bill, There's been a lot

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Speaker 1: of talk here about financials and this idea that quite

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Speaker 1: a few of them might actually sort of have been

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Speaker 1: kind of valued, maybe not appropriately, the idea that there's

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Speaker 1: a little bit more juice left in some of those names.

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Speaker 1: Do you find any real value there, particularly outside of

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Speaker 1: just the big money center banks.

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Speaker 3: Yeah.

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Speaker 4: I've bought some regionals today and I do think, you know,

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Speaker 4: they're down ten or fifteen percent from their peaks, and

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Speaker 4: so that's one positive going forward. Many of them yield

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Speaker 4: five to five and a half percent. I bought this morning.

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Speaker 4: You know, Key Bank k E Y yields close to

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Speaker 4: six percent. And you know, it seems to me that

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Speaker 4: the commercial real estate problems has been reserved against for

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Speaker 4: the most part, and so k E Y or Truest

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Speaker 4: TFC or Citizens CFG, you know, to my whay, I

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Speaker 4: think in are very attractive investments for the media to

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Speaker 4: long term.

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Speaker 1: I am curious on the point though, of commercial real estate.

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Speaker 1: There's been so much handwringing right now about the next

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Speaker 1: shoe to drop, the idea that we haven't really worked

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Speaker 1: ourselves through the cire crisis or whatever we want to

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Speaker 1: call it. Here, you're not worried that we're going to

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Speaker 1: see any sort of major defaults, at least not major

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Speaker 1: enough that would really rattle the market.

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Speaker 4: Well, I think it's dependent upon the economy. If we

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Speaker 4: get a decent recession, then obviously you know, commercial real

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Speaker 4: estate loans are less attractive than they are at the moment,

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Speaker 4: So watch the economy. As I pointed out before, I

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Speaker 4: think in many cases they've these regionals have had a

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Speaker 4: year or two years to reserve. Again, it's the potential

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Speaker 4: for you know, additional losses. It's just you know, they

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Speaker 4: traded pees of around nine. They traded price to book

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Speaker 4: values of point seven or point eight relative to something

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Speaker 4: like JPM, and so you know, I like them for

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Speaker 4: the long term, Hey Bill.

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Speaker 2: One of the big news items that really move markets

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Speaker 2: for the Ust twenty four hours is what we saw

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Speaker 2: over with the parliamentary elections and Matcron calling for legislative

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Speaker 2: elections at the end of June early July. The market

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Speaker 2: moved quite sturdily here. The euro hit a one month low,

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Speaker 2: you got to pop in yields, the BTP boom spread

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Speaker 2: really blew out, you got a weakness and the equity

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Speaker 2: market over in France in particular. What did you make

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Speaker 2: of the market reaction to what we saw.

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Speaker 3: Well, I think it's to be expected.

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Speaker 4: I think in terms of an attraction German tenure boons

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Speaker 4: and French oats the tenure there there are spreads of

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Speaker 4: narrowed significantly in the past month or two relative to

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Speaker 4: treasuries and today as well by eight or ten basis points.

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Speaker 4: So there's there's coming to a point where European bonds

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Speaker 4: are more attractive than treasury bonds in my.

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Speaker 2: Opinion, where what European bonds would you be looking at.

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Speaker 4: Bill Well, I mentioned tenure buns, ten year oates, the

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Speaker 4: Italian bonds as well. Has has you know, gained more

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Speaker 4: attraction in the past several weeks, and certainly after last

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Speaker 4: night's snap election in France And.

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Speaker 1: It gets It's interesting too, Bill, because we talk about

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Speaker 1: what happened overnight with the with the EU elections and

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Speaker 1: the snap election in France coming up, we also had

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Speaker 1: three elections, uh of course in India and Mexico and

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Speaker 1: a couple other places South Africa that also rattled investors.

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Speaker 1: And of course, as you know, we still have a

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Speaker 1: big election here in the US that could have a

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Speaker 1: dramatic impact on investor psychees. Are those, at least here

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Speaker 1: in the US as we move forward to November? Do

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Speaker 1: you think that is going to be a tradable event?

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Speaker 1: Do you think that the policy difference is and the

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Speaker 1: reaction to whoever wins in November will be market moving?

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Speaker 4: Yeah?

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Speaker 3: I think so.

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Speaker 4: And in these cases that you mentioned, these prior elections

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Speaker 4: in the last few weeks, you know, they've all moved right,

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Speaker 4: and there's a certain consequence to that, But there's also

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Speaker 4: an element of uncertainty, and so what we've seen, you know,

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Speaker 4: last night, and what we've seen in the last few

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Speaker 4: weeks is a reaction to uncertainty in terms of not

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Speaker 4: only the party that's dominating, but uncertainty in terms of

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Speaker 4: what their policies will be. And I think as we

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Speaker 4: moved to November and something becomes more clear in terms

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Speaker 4: of who might or who might not win, the uncertain

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Speaker 4: plus the potential policy implications, I think you could impact

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Speaker 4: treasuries significantly.

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Speaker 1: Yeah, it's gonna be interesting to see your next investment

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Speaker 1: outlook post election to see what you have to say there.

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Speaker 1: And it's interesting too how you've compiled all of your

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Speaker 1: past investment outlooks into a new book. One thing that

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Speaker 1: I didn't really see in there, and that maybe you'll

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Speaker 1: have to do in an updated book is maybe have

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Speaker 1: a little bit more discussion about AI and what that

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Speaker 1: means for the market as a whole. When you look

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Speaker 1: at all the AI hype around here, the run up

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Speaker 1: in Nvidia, do you find any sort of opportunity there

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Speaker 1: that's to your liking? Do you think it's sustainable?

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Speaker 4: Well, not a pro there, but I would say that AI,

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Speaker 4: to my way of thinking, has the potential to increase

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Speaker 4: productivity in general across the US economy. The question is

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Speaker 4: by how much, or if at all, to the extent

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Speaker 4: that it even increases productivity by half of percent, I

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Speaker 4: think it's significant in terms of economic growth. So you

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Speaker 4: know that's the bet. You know, specific stocks, I like Microsoft.

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Speaker 4: I've never been involved with Nvidia or or Amazon or

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Speaker 4: even Apple today for instance, but Microsoft is my favorite.

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Speaker 4: Other than that, you know, it's a wait and watch

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Speaker 4: type of situation in terms of the impact on economic growth.

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Speaker 2: So, Bill, not only is it the launch of our

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Speaker 2: new show, but also you will be selling Peace by Piece,

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Speaker 2: a US stamp collection, on Friday and Saturday at Robert A.

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Speaker 2: Siegel auction House. Now you've sold your stamps before. You

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Speaker 2: are clearly a very well known collector. Some of the estimates, though,

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Speaker 2: think this could bring in a record of something like

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Speaker 2: twenty million dollars. Bill, what told you that this was

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Speaker 2: the right time to sell in this kind of environment

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Speaker 2: these stamps?

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Speaker 4: Well, I'm eighty years old, and you know it's time

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Speaker 4: to turn over to turn this over to some other

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Speaker 4: future collectors. And I also think you know a slight

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Speaker 4: negative here is that stamp collecting has always been a

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Speaker 4: function of kids and they're collecting who later on become

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Speaker 4: adults and you know, wealthy adults. But in this case,

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Speaker 4: I don't think the kids are collecting stamps anymore. They're

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Speaker 4: more involved with their cell phones and their games. But

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Speaker 4: that'd be one of the reasons too.

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Speaker 3: Well.

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Speaker 1: Well, I could tell you, Bill, there are still a

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Speaker 1: few nerdy kids out there that's still into it. I

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Speaker 1: know a couple in my family that still do it.

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Speaker 1: I don't think they're in the market for the stamps

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Speaker 1: that you're selling. They're pretty pricey here. But I was

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Speaker 1: just lucky to the collect I mean, this is just

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Speaker 1: an impressive collection. Obviously, probably the star of that, of course,

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Speaker 1: is one of the inverted Jenny's. But I am curious

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Speaker 1: that when you look at just the collection that you

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Speaker 1: had and how you put them together here, was that

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Speaker 1: really from the heart. Did you sort of look at

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Speaker 1: this and just say, oh, this will be a good

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Speaker 1: deal later, or did you say, look, I just want

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Speaker 1: to own this, and I want a piece of this.

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Speaker 1: I want to be able to hold it and look

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Speaker 1: at it.

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Speaker 3: Now.

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Speaker 4: My mother back in the forties, in the early fifties,

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Speaker 4: collected stamps in order to send me to college. I

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Speaker 4: took those stamps to San Francisco in nineteen sixty one

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Speaker 4: and tried to sell them. They'd offer me nothing relative

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Speaker 4: to the three percent on the face of the stamp.

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Speaker 3: So basically, when I had some money twenty.

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Speaker 4: Years ago, I said, she had the right idea, but

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Speaker 4: she bought the wrong stamps. And so if I can

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Speaker 4: apply bond market economic you know, terminology and philosophy to

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Speaker 4: the stamp auction, much like paintings have a provedance and

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Speaker 4: so on, then perhaps we can make some money as well.

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Speaker 1: All right, Bill, always great to talk to you, and

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Speaker 1: good luck on that auction later this week. Bill Gross,

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Speaker 1: the co founder of PIMCO, The bond King,