WEBVTT - Tech Earnings, ETFs, Markets, and Banks (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.720 Every business day, we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:20.800 --> 0:00:23.640 All right, so let's start with you on a rog Microsoft. 0:00:23.960 --> 0:00:24.360 I don't know. 0:00:24.440 --> 0:00:26.160 I thought it was a good quarter. I'm you know, 0:00:26.280 --> 0:00:28.280 if there's dips, you know, five or a PM, I'd 0:00:28.280 --> 0:00:30.600 be buying the dips here. What did you take away 0:00:30.600 --> 0:00:33.520 from Microsoft? Stocks had a rip this year. 0:00:34.280 --> 0:00:36.040 I think that's what it is. It's had to rip, 0:00:36.080 --> 0:00:38.960 and people are just digesting the news. I think it 0:00:39.000 --> 0:00:41.040 was a good quota, as you said, But people, I 0:00:41.040 --> 0:00:44.640 think had unrealistic expectations that the AI Will Cloades, is 0:00:44.680 --> 0:00:47.159 going to blad out the cloud number, which I think 0:00:47.200 --> 0:00:49.479 will happen over the next twelve to twenty four months, 0:00:49.680 --> 0:00:51.920 but it's not immediate. It's just going to take some time. 0:00:52.680 --> 0:00:54.360 Well, in terms of things that are going to take 0:00:54.400 --> 0:00:56.120 some time, I feel like that also applies to the 0:00:56.160 --> 0:01:00.800 AI play with Alphabet Google. What are you thinking, Mendep 0:01:00.840 --> 0:01:03.680 when it comes to whether that AI chatter is going 0:01:03.720 --> 0:01:06.000 to translate into actual money for Alphabet. 0:01:06.440 --> 0:01:09.480 Well, so the good thing for Alphabet was yesterday the 0:01:09.560 --> 0:01:13.840 expectations were somewhat muted around search and YouTube, and what 0:01:13.920 --> 0:01:16.840 they showed was this business is as resilient as it 0:01:16.880 --> 0:01:21.280 can be, even in an environment where at pricing is 0:01:21.319 --> 0:01:26.000 still facing some headwinds. But I think what Alphabet showed 0:01:26.120 --> 0:01:29.080 yesterday is one they are able to keep the engagement, 0:01:29.520 --> 0:01:34.000 so concerns around chat GPT eating their lunch were overblown. 0:01:34.120 --> 0:01:36.479 And then on the cloud side, it was a pretty 0:01:36.520 --> 0:01:40.120 strong number. Twenty eight percent growth, thirty two billion dollar 0:01:40.240 --> 0:01:43.319 run rate for cloud. That's pretty impressive. And now cloud 0:01:43.400 --> 0:01:45.959 business is not a drag on profitability as it was 0:01:46.080 --> 0:01:50.280 last year. So I think Netnet, I mean they're kind 0:01:50.280 --> 0:01:53.240 of optimizing the cost side of the equation. Ruth Pett 0:01:53.320 --> 0:01:58.280 actually was elevated into the president role. And look, I 0:01:58.320 --> 0:02:01.280 think once you start to see a bound cyclical rebound 0:02:01.360 --> 0:02:04.440 in AD spending, you will see double digit EPs growth 0:02:04.440 --> 0:02:07.240 in this name and they can compound for the next four. 0:02:07.160 --> 0:02:07.600 Or five years. 0:02:07.640 --> 0:02:09.880 All right, So let me ask us either both of 0:02:09.880 --> 0:02:12.280 you guys, I want to hear from Matt Miller tells 0:02:12.320 --> 0:02:17.280 me chat GPT bing is like awesome and that Google 0:02:17.720 --> 0:02:20.359 doesn't have a chance. What do you guys think about that? 0:02:20.560 --> 0:02:23.760 Well, last night they showed the search revenue grew a 0:02:23.880 --> 0:02:25.080 robust five percent. 0:02:25.520 --> 0:02:29.040 So okay, when I was covering Google, if they put 0:02:29.040 --> 0:02:31.400 a five percent print up, we take them out to 0:02:31.440 --> 0:02:33.720 the woodshed. Now you're telling me it's robust. 0:02:34.160 --> 0:02:38.880 And YouTube premium that was the real standout. So YouTube 0:02:38.960 --> 0:02:42.840 ad revenue grew four point five percent, Premium, which is 0:02:42.880 --> 0:02:46.600 incorporated in their other segment, grew twenty four percent. Compare 0:02:46.639 --> 0:02:49.360 that to a Netflix and Spotify. I mean they are 0:02:49.400 --> 0:02:52.520 having all sorts of issues which earned raising prices. In 0:02:52.560 --> 0:02:55.720 the case of YouTube, this is like YouTube premium is 0:02:55.760 --> 0:02:58.919 almost an eight to ten billion dollar revenue business growing 0:02:59.000 --> 0:03:02.000 high teens. So they are taking share of when it 0:03:02.000 --> 0:03:05.160 comes to streaming, and it's a higher margin business than 0:03:05.240 --> 0:03:08.120 Netflix because this is all usually generated content. 0:03:08.880 --> 0:03:14.440 Full disclosure, Bloomberg Markets is on YouTube, all right, So, honor, 0:03:14.680 --> 0:03:19.120 what does Microsoft say about chat GPT bing? Is it 0:03:19.160 --> 0:03:19.440 a thing? 0:03:20.240 --> 0:03:23.760 So for Microsoft, search revenue declining and going to be 0:03:23.800 --> 0:03:27.799 weak next quarter? And LinkedIn, which is based on advertising 0:03:28.000 --> 0:03:30.040 declining and going to be weak next quarter. 0:03:30.120 --> 0:03:36.800 So Google really and Snap had some weak numbers too. 0:03:36.920 --> 0:03:40.880 So social media ad pricing continues to be weak. We'll 0:03:40.920 --> 0:03:43.320 find out from Meta if that is the case, or 0:03:43.480 --> 0:03:46.640 Snap is uh, you know, a standout in terms of 0:03:46.720 --> 0:03:50.840 the weakness. But I think Search we know has the 0:03:50.960 --> 0:03:54.040 highest ry when it comes to ad spend, and in 0:03:54.120 --> 0:03:57.080 the case of Google, clearly the ad pricing was much 0:03:57.080 --> 0:03:58.120 stronger than others. 0:03:58.240 --> 0:04:00.280 So is there a potential read through of the ad 0:04:00.360 --> 0:04:03.480 Snap numbers on advertising to Meta or is Meta such 0:04:03.520 --> 0:04:04.920 a BMT that you can't reach. 0:04:05.280 --> 0:04:08.240 I'm in the camp that Meta's ad pricing numbers will 0:04:08.280 --> 0:04:11.240 also be bad. Meta is doing well in terms of 0:04:11.360 --> 0:04:14.320 cost cutting and they obviously are the scale player when 0:04:14.360 --> 0:04:17.599 it comes to social media, but this will still be 0:04:17.839 --> 0:04:21.120 a weak ad pricing environment for Meta as well. I 0:04:21.120 --> 0:04:23.840 think Reels maybe a bright spot, given they have talked 0:04:23.880 --> 0:04:26.719 so much about you know, competing with TikTok and threads. 0:04:26.920 --> 0:04:29.000 I mean, we'll find out more about it. I think 0:04:29.000 --> 0:04:31.919 they're going to pair back on their reality labs ambitions. 0:04:31.960 --> 0:04:34.159 The whole Meta Worse thing that was a big drag 0:04:34.240 --> 0:04:38.799 last year, but it's still when you compare Meta Story. 0:04:39.160 --> 0:04:42.520 It's a combination of four of their most prominent apps, 0:04:42.560 --> 0:04:45.279 and the Blue app, which is about forty billion rund 0:04:45.360 --> 0:04:48.880 rate in our view, is still declining and that is 0:04:49.000 --> 0:04:51.120 a tough way to fill. When it comes to the 0:04:51.120 --> 0:04:51.760 top line. 0:04:51.960 --> 0:04:53.880 Meta stock up one hundred and forty eight percent year 0:04:53.920 --> 0:04:56.040 to date. Wow up another one and a half percent today. 0:04:56.080 --> 0:04:58.359 Go figure? All right on rob you talk, I know 0:04:58.400 --> 0:05:01.200 you and Mandeep and the tech team have put together 0:05:01.360 --> 0:05:02.839 this seminal report on AI. 0:05:03.240 --> 0:05:03.920 How do I find it? 0:05:03.960 --> 0:05:05.000 On the Bloomberg terminal? 0:05:05.279 --> 0:05:08.280 You can go to iet Internet dashboard and. 0:05:08.200 --> 0:05:10.600 That's where it is. Okay, So that is a seminar report. 0:05:10.640 --> 0:05:12.239 If you want to know what AI is and whether 0:05:12.279 --> 0:05:15.200 it's a scam or a croc or whether it's real 0:05:16.000 --> 0:05:19.720 like Dani's from Webrosecurities says, you can go there and 0:05:19.800 --> 0:05:22.839 check it out. So BI space, I n ET you 0:05:22.920 --> 0:05:25.919 find that report there anorak. When you talk to institutional investors, 0:05:26.279 --> 0:05:29.680 how are they playing? First of all, how do they 0:05:29.760 --> 0:05:33.280 view AI? Is it a seminal event in tech? And 0:05:33.320 --> 0:05:34.479 if so, how do they play it? 0:05:34.839 --> 0:05:38.360 I mean from our side, in the software side, it 0:05:38.400 --> 0:05:41.120 is the cloud providers that can really benefit from this 0:05:41.200 --> 0:05:44.400 because you have to build those applications in the fastest 0:05:44.480 --> 0:05:47.360 processing environment, and that can only be on the cloud. 0:05:47.680 --> 0:05:50.320 Right now, Microsoft has an advantage because of its open 0:05:50.360 --> 0:05:53.200 EI relationship. We think Amazon will catch up over the 0:05:53.200 --> 0:05:55.719 next six to twelve months. We think Google's already there 0:05:55.760 --> 0:05:58.760 with their products. These three companies will benefit more than 0:05:58.760 --> 0:05:59.960 anybody else on the software. 0:06:00.800 --> 0:06:03.120 Well, I know that you know this, but I love 0:06:03.320 --> 0:06:05.240 the funny quotes from Earning's calls. I'm just going to 0:06:05.320 --> 0:06:08.080 repeat it for our audience, the AWS CEO said yesterday, 0:06:08.160 --> 0:06:10.599 kind of taking a shot at Microsoft. It's interesting that 0:06:10.680 --> 0:06:13.640 somebody who's not running their own models, like Microsoft, which 0:06:13.640 --> 0:06:16.320 outsource to open AI, would argue that they've got such 0:06:16.400 --> 0:06:19.120 deep expertise in this area. What do you make of 0:06:19.160 --> 0:06:20.000 a comment like that. 0:06:20.520 --> 0:06:23.800 See, but for the first time, Amazon's feeling the heat. 0:06:24.080 --> 0:06:26.200 They haven't felt that in like what last ten, twelve, 0:06:26.240 --> 0:06:26.919 fifteen years. 0:06:26.920 --> 0:06:27.920 They now have a petition. 0:06:28.000 --> 0:06:31.280 They have a massive competition now with Microsoft because they 0:06:31.320 --> 0:06:34.600 are coming up with products on a monthly basis. The 0:06:34.640 --> 0:06:36.960 pace at which they are coming up with add ons 0:06:37.000 --> 0:06:39.760 to their code products such as off is get Love. 0:06:40.839 --> 0:06:43.640 I mean, it's just it's just remarkable how that's happening. So, 0:06:44.320 --> 0:06:46.160 I mean they have to be feeling pressure at this point. 0:06:46.200 --> 0:06:47.520 I think there's a little bit of that. I think 0:06:47.560 --> 0:06:49.760 Amazon Web Service is going to be weak next quarter 0:06:49.920 --> 0:06:52.960 next week when they report, and let's see what he says. 0:06:52.960 --> 0:06:57.400 Then all right, men, deep the ride sharing biz. What 0:06:57.440 --> 0:06:59.120 are we going to hear from the Ubers and the 0:06:59.720 --> 0:07:02.719 lift of the world. And again I am agnostic between 0:07:02.760 --> 0:07:05.039 the two. Whatever's got the lowest price, That's how I go. 0:07:05.320 --> 0:07:08.080 I mean, so far, the story is Uber is taking 0:07:08.120 --> 0:07:13.000 market share. Lift has lowered prices to reclaim that share. 0:07:13.200 --> 0:07:16.160 But we know this is a scale business and there 0:07:16.240 --> 0:07:19.760 is a big focus on profitability this year. So clearly 0:07:19.880 --> 0:07:23.119 Uber is in a much better situation. The delivery side, 0:07:23.400 --> 0:07:26.600 I think will continue to be a drag on their 0:07:26.640 --> 0:07:29.800 overall free cash flow and the CFO transition. I think 0:07:29.840 --> 0:07:32.760 that was the other big news with Uber, so something 0:07:32.840 --> 0:07:34.760 that I think investors want to know more about. 0:07:34.920 --> 0:07:37.920 Will those third party partnerships be a tailwind for them 0:07:37.960 --> 0:07:41.040 heading into earnings for it with Domino's. 0:07:40.640 --> 0:07:45.120 Yeah, yeah, I think, Look, if everyone realizes that they 0:07:45.160 --> 0:07:48.080 have the traffic when it comes to you know, people 0:07:48.600 --> 0:07:52.440 looking for a meal or ride Uber is the go 0:07:52.520 --> 0:07:55.760 to place. It's a verb, and so every big chain 0:07:56.080 --> 0:07:59.000 right now is looking to partner with them just to 0:07:59.600 --> 0:08:03.080 be on the platform. Dominos is still doing their own delivery, 0:08:03.360 --> 0:08:06.560 so they're not bank and so that is what was interesting. 0:08:06.600 --> 0:08:10.760 They're just using them as a customer acquisition channel for 0:08:10.880 --> 0:08:12.480 people who are ordering online. 0:08:12.600 --> 0:08:13.520 I just don't get it. 0:08:13.640 --> 0:08:16.960 Over the last five years, Uber's compound and a return, 0:08:17.120 --> 0:08:20.480 it's been about flat okay, lift compoundent and your return 0:08:20.520 --> 0:08:24.480 over the last five years negative thirty percent is all 0:08:24.520 --> 0:08:27.239 because of Uber Eats, which I don't do, by the way. 0:08:27.520 --> 0:08:29.280 I think there's the charges they put on for like 0:08:29.320 --> 0:08:31.000 a twenty dollars PiZZ is ridiculous. 0:08:31.240 --> 0:08:34.520 But it's a tough business. I mean, three sided marketplace. 0:08:34.960 --> 0:08:38.079 It's a low gross margin business. You just can't change 0:08:38.080 --> 0:08:41.000 the margin profile of the business. And on top of it, 0:08:41.000 --> 0:08:43.880 it's so hard to maintain a supply. I mean, the 0:08:43.880 --> 0:08:45.400 supply is constantly turning. 0:08:46.040 --> 0:08:48.080 And in New York you've got Curb as well, which 0:08:48.120 --> 0:08:50.400 is the cheapest by far. It's the taxi hailing app. 0:08:50.520 --> 0:08:52.920 So I know that's a very niche market. 0:08:52.600 --> 0:08:54.480 But walk around the corner and get a slice. I 0:08:54.520 --> 0:08:56.120 mean what's the big deal? On a rock ran and 0:08:56.120 --> 0:08:59.359 man Deep Singh senior tech analysts, they lead our technology 0:08:59.400 --> 0:09:01.520 research covered how many analysts do you guys have around 0:09:01.520 --> 0:09:04.680 the world and all that stuff, like twenty in the 0:09:04.720 --> 0:09:06.720 tech team and the tech team we got twenty people 0:09:06.760 --> 0:09:10.439 doing nothing but the tech space based in the US, 0:09:10.480 --> 0:09:13.439 based in London, based in Hong Kong and other parts 0:09:13.440 --> 0:09:16.120 of Asia. So we got the tech space covered. Check 0:09:16.160 --> 0:09:18.480 it out. Man Deep Singh on a rock run a 0:09:18.520 --> 0:09:20.440 senior analysts. We're kind of running that business for us, 0:09:20.440 --> 0:09:21.440 and we appreciate that. 0:09:22.600 --> 0:09:25.960 You're listening to the team. Ken's are live program Bloomberg 0:09:26.080 --> 0:09:29.440 Markets weekdays at ten am Eastern on Bloomberg dot com, 0:09:29.520 --> 0:09:32.640 the iHeartRadio app and the Bloomberg Business app, or listen 0:09:32.720 --> 0:09:34.840 on demand wherever you get your podcasts. 0:09:36.480 --> 0:09:39.480 All right, I n go, it gets you the Bloomberg 0:09:39.520 --> 0:09:42.680 Index browser. I look at the Bloomberg US agg total 0:09:42.720 --> 0:09:46.080 return value UNHEEDGED. It's up two percent this year, so 0:09:46.120 --> 0:09:47.520 the bond people are doing a little bit better than 0:09:47.520 --> 0:09:49.880 the last year, which was the disaster. And I look 0:09:49.880 --> 0:09:52.840 at the Bloomberg US Corporate high Yield total return that's 0:09:52.920 --> 0:09:55.720 up six point five percent, so again some nice returns 0:09:55.720 --> 0:09:58.800 into fixed income businesses this year after a dismal twenty 0:09:58.920 --> 0:10:00.880 twenty two. Had you play it well? One of the 0:10:00.920 --> 0:10:04.320 ways is through you can do some ETFs kids. Johanna 0:10:04.320 --> 0:10:07.800 Gayegos joins us. She's a co founder of bond Blocks 0:10:08.679 --> 0:10:11.240 that is an ETF biz that focuses on the fix 0:10:11.320 --> 0:10:13.640 income business. Joanna joins us here in our Bloomberg Interactive 0:10:13.640 --> 0:10:17.720 Broker studio. So, Joanna, where are you seeing kind of 0:10:17.760 --> 0:10:21.000 opportunities in fixed income this year after again a very 0:10:21.000 --> 0:10:23.600 tough twenty twenty two for that that sector. 0:10:23.800 --> 0:10:25.880 Yeah, I think in context of twenty twenty two and 0:10:25.920 --> 0:10:28.719 the returns here today you just mentioned, like those are 0:10:28.960 --> 0:10:32.880 returns of broad indexes in fixed income AG and obviously 0:10:32.960 --> 0:10:36.320 high yields and investment grade, and what we're trying, I 0:10:36.400 --> 0:10:39.120 really want investors to do and encourage them to do. 0:10:39.679 --> 0:10:41.480 And I think what bond Blocks is all about is 0:10:41.640 --> 0:10:45.040 look across the full spectrum of fixed income opportunities to 0:10:45.040 --> 0:10:48.240 cross asset classes, and in particular look a little further 0:10:48.600 --> 0:10:51.320 down the credit spectrum all the way up into high yield. 0:10:51.840 --> 0:10:55.600 And that's because there's a lot of difference across the 0:10:55.679 --> 0:11:00.680 credit space in sectors and in ratings categories, and right 0:11:00.720 --> 0:11:03.640 now with yields the way they have progressed and they're 0:11:03.640 --> 0:11:05.440 going to continue to progress for the rest of twenty 0:11:05.520 --> 0:11:09.439 twenty three, and the resilience we've seen in these corporations 0:11:09.480 --> 0:11:13.400 balance sheets. You know, you're being compensated very well for 0:11:13.480 --> 0:11:15.520 taking on this risk. You have a lot of income 0:11:15.559 --> 0:11:19.800 to cushion any potential downturns, and you know you you 0:11:19.880 --> 0:11:23.240 should consider going even you know, as far down, you know, 0:11:23.280 --> 0:11:26.920 the high starting with triple starting with triple reinvestment grade 0:11:27.280 --> 0:11:28.920 down to triple C and high yield. 0:11:29.200 --> 0:11:30.559 You really need to take a look. 0:11:30.400 --> 0:11:32.560 At those spaces because I think there's a lot of 0:11:32.600 --> 0:11:35.880 strength there and you know, you know, so far through 0:11:35.920 --> 0:11:38.840 all of this twenty twenty three, I don't think investors 0:11:38.840 --> 0:11:39.800 are paying too much attention. 0:11:39.840 --> 0:11:43.640 Thenization And how are you thinking about longer duration and 0:11:43.800 --> 0:11:46.880 the calculation in terms of how much positioning to do 0:11:46.920 --> 0:11:47.880 around longer duration? 0:11:48.160 --> 0:11:51.080 Yeah, so I think the important thing for longer durations, 0:11:51.120 --> 0:11:54.640 if you're taking very long duration, you're thinking that something 0:11:54.720 --> 0:11:57.560 is going to turn with the economy, and that you 0:11:57.559 --> 0:11:59.800 know you're positioning yourself for that event. 0:12:00.440 --> 0:12:03.280 The way we see duration is that it's a. 0:12:03.240 --> 0:12:07.520 Really important, precise tool that you should be managing, and 0:12:07.520 --> 0:12:09.560 you should be careful of how it is existing in 0:12:09.559 --> 0:12:12.000 your portfolio because it represents all the interest rate risk 0:12:12.040 --> 0:12:14.240 in your portfolio. So the way we think about it 0:12:14.280 --> 0:12:17.200 is across a whole spectrum of duration. So we would 0:12:17.240 --> 0:12:20.280 recommend that people along this. 0:12:20.360 --> 0:12:23.720 Path start adjusting their duration as we get more and 0:12:23.760 --> 0:12:24.400 more information. 0:12:24.480 --> 0:12:26.319 I mean, what people have been doing in our duration 0:12:26.440 --> 0:12:29.400 products to date is they've been you know, buying the 0:12:29.440 --> 0:12:32.800 short side of the curve and you know, reducing their 0:12:32.880 --> 0:12:35.480 duration as much as possible. I think they've really been 0:12:35.520 --> 0:12:38.000 doing that as a cash alternative, though not really taking 0:12:38.000 --> 0:12:40.720 an investment view. And so you know, here we are. 0:12:40.760 --> 0:12:44.079 Our view is that it's unlikely that there's going to 0:12:44.120 --> 0:12:46.440 be a recession in twenty twenty three, but we have 0:12:46.480 --> 0:12:48.559 the tools that allow you to express that view. 0:12:49.040 --> 0:12:51.320 So where are you seeing your clients or where you're 0:12:51.320 --> 0:12:54.120 seeing the funds flows across your products? 0:12:54.160 --> 0:12:54.440 Right now? 0:12:54.440 --> 0:12:56.080 Where are people because I mean you could go to 0:12:56.200 --> 0:12:58.720 a piece of two your paper and get four point 0:12:58.840 --> 0:13:00.719 nine percent just sitting in a two your treasury. Where 0:13:00.760 --> 0:13:02.200 are you seeing kind of some of the fun flows. 0:13:02.320 --> 0:13:04.120 Yeah, so we're still we're seeing a lot of flows 0:13:04.120 --> 0:13:04.800 in the shorter. 0:13:04.679 --> 0:13:07.640 End because people are still positioning themselves with those risk 0:13:07.720 --> 0:13:08.600 free yields. 0:13:08.640 --> 0:13:11.559 I mean, again, I encouraging our investors to look further 0:13:11.679 --> 0:13:14.440 out on either duration spectrum or the credit on the 0:13:14.840 --> 0:13:18.960 credit spectrum. But we've also started to see couple trades 0:13:19.040 --> 0:13:21.440 across the treasury curve and the belly of the curve 0:13:22.160 --> 0:13:25.800 five seven and a few long trades. So there's a 0:13:25.920 --> 0:13:28.840 there's there's some there's some notion. There's still you know, 0:13:28.920 --> 0:13:33.120 overall in ETFs, Treasury ETFs, government ETFs are still you 0:13:33.120 --> 0:13:36.480 know close except for July, we're sixty percent of flows 0:13:36.520 --> 0:13:39.640 in ETF in ETF fixing and flow, so people aren't 0:13:39.679 --> 0:13:41.160 really stepping into that risk yet. 0:13:41.360 --> 0:13:44.080 What's what what's in your high yield ETF products? What 0:13:44.160 --> 0:13:46.680 are what's typically in that ETF. 0:13:46.880 --> 0:13:49.520 Yeah, So what's different again back to comparing us to 0:13:49.559 --> 0:13:52.600 a broad based index, whether it's investment grade or high 0:13:52.640 --> 0:13:55.080 yield or even the AG, is that we've cut up 0:13:55.320 --> 0:13:58.960 the exposures in high yield in particular into ratings categories 0:13:58.960 --> 0:14:01.839 and also sector category. And what you know is really 0:14:01.880 --> 0:14:04.040 fascinating is like you can really play some of. 0:14:04.000 --> 0:14:06.800 These views that you guys talk about every day, like. 0:14:07.200 --> 0:14:10.240 If you want, you know, the most balance sheet strength 0:14:10.360 --> 0:14:14.240 that or with the lowest default risk right now, that 0:14:14.280 --> 0:14:18.000 would be the XBB product, right, so it's the first, 0:14:18.280 --> 0:14:20.200 you know, the first frawway into high yield. 0:14:20.200 --> 0:14:22.280 That's the first the highest level of. 0:14:22.640 --> 0:14:23.920 Rating in high yield. 0:14:24.640 --> 0:14:26.760 If you really think that. 0:14:28.240 --> 0:14:30.560 The infant session isn't coming and you're gonna avoid it 0:14:30.600 --> 0:14:32.480 in twenty twenty three, which is what I think, Yeah, 0:14:33.240 --> 0:14:36.280 you should consider looking at the triple C product. It's 0:14:36.400 --> 0:14:41.400 yielding a lot, the default rate isn't above normal averages, 0:14:42.000 --> 0:14:44.560 and you know, if you even just it's not about 0:14:44.560 --> 0:14:47.200 like going all in, but it's about maybe adding some 0:14:47.280 --> 0:14:51.160 of that exposure into your portfolio just to improve your results. 0:14:51.440 --> 0:14:54.240 Another you've talked about it in the previous session of it, 0:14:54.320 --> 0:14:57.240 like consumer cyclicals and high yield is the best performing 0:14:57.320 --> 0:15:00.320 sector in high yield. So it's telling you obvious that's 0:15:00.320 --> 0:15:01.360 the strength of consumer. 0:15:01.720 --> 0:15:03.200 But in our energy. 0:15:02.880 --> 0:15:06.280 Sector, product is also a way to play a really 0:15:06.320 --> 0:15:09.960 strong balance sheet and high quality because of what's developing 0:15:10.120 --> 0:15:13.400 you know, through through through the markets. There so the 0:15:13.480 --> 0:15:16.880 dispersion amongst the sectors and just the seven sectors. 0:15:16.560 --> 0:15:19.080 That we have is over five hundred basis points. 0:15:19.160 --> 0:15:21.320 The best performing is close to nine percent, which is 0:15:21.320 --> 0:15:26.280 consumer cyclicals. The worst performing is technology and telecom, and 0:15:26.320 --> 0:15:29.360 it's it's it's. 0:15:30.040 --> 0:15:32.280 Just about three or four percent, So five. 0:15:32.200 --> 0:15:35.360 Hundred basis point difference. There's a lot of opportunity that 0:15:35.560 --> 0:15:38.200 you know, people should be considering as we still see 0:15:38.200 --> 0:15:41.160 this resilience and you know, we're getting closer and closer 0:15:41.160 --> 0:15:42.160 than a twenty twenty three. 0:15:42.360 --> 0:15:46.080 Yeah, this consumer resilience ticker is so interesting. I have 0:15:46.120 --> 0:15:47.920 it up on my terminal right now. It looks like 0:15:47.960 --> 0:15:49.960 you are having a great year in that space. What 0:15:50.000 --> 0:15:52.320 are what are kind of the specifics that go into that, 0:15:52.360 --> 0:15:55.320 because I'm I'm fascinated and kind of the continued strength 0:15:55.360 --> 0:15:57.920 of the consumer. So I'm curious about the calculation. 0:15:58.040 --> 0:16:00.360 Yeah, it's the same type of categorization you see in 0:16:00.400 --> 0:16:04.200 equity sector products. It's it's a group of issuers in 0:16:04.200 --> 0:16:07.880 that sector, consumer cyclicals. And so what it represents is 0:16:08.080 --> 0:16:10.200 all of all of the debt in our high yield 0:16:10.240 --> 0:16:14.320 products are representing those firms ability to cover their interest, 0:16:15.200 --> 0:16:18.000 their their their balance sheets, their revenues, and how well 0:16:18.040 --> 0:16:20.560 they're paying their debt. And so you know, as the 0:16:20.600 --> 0:16:24.800 default rates are again maintain for like historical. 0:16:24.400 --> 0:16:26.760 Averages this year, spreads are actually. 0:16:26.480 --> 0:16:31.040 Tightening across the category, and high yield not widening. So 0:16:31.120 --> 0:16:33.760 there's a lot to like consider that. You know, whatever 0:16:33.800 --> 0:16:36.000 category it is. If you're an energy producer, if you're 0:16:36.000 --> 0:16:39.240 an energy company, that's what's in our energy sector. So 0:16:39.240 --> 0:16:42.320 you're benefiting from the You're benefiting from the characteristics of 0:16:42.360 --> 0:16:47.360 those sectors, plus the characteristics of individual issuers and the 0:16:47.400 --> 0:16:50.240 resilience and the health of the fundamentals that are there. 0:16:50.640 --> 0:16:51.040 All right. 0:16:51.080 --> 0:16:53.080 We always love talking to Joanna and Joanna Go Diego's 0:16:53.080 --> 0:16:55.880 co founder of bond Blocks. They do the ETF thing, 0:16:55.920 --> 0:16:59.200 but they do the ETF thing with that fixing comes focused, 0:16:59.240 --> 0:17:01.360 so we don't talk about that maybe as much as 0:17:01.360 --> 0:17:03.720 you sure, So it's great checking in with Joanna occasionally. 0:17:03.920 --> 0:17:07.040 You're listening to the tape Cat's are live program Bloomberg 0:17:07.080 --> 0:17:10.679 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:17:10.760 --> 0:17:13.960 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:17:14.000 --> 0:17:16.840 You can also listen live on Amazon Alexa from our 0:17:16.840 --> 0:17:21.920 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:17:22.760 --> 0:17:25.560 Let's Go right to our next guest, Alex Chaloff. That 0:17:25.840 --> 0:17:29.520 is a jailer for Cheliff Showoff, Sholoff, shooff. Okay, I'm 0:17:29.560 --> 0:17:29.720 on that. 0:17:29.760 --> 0:17:31.920 Put your shawl on, you take your shawl off. 0:17:32.080 --> 0:17:33.080 There we go boom. 0:17:33.119 --> 0:17:35.080 I like a smart guy, because where did he get 0:17:35.119 --> 0:17:37.800 his mba usc best university in the world. 0:17:37.960 --> 0:17:40.080 We go right on, right on, man, I like it. 0:17:40.119 --> 0:17:41.840 I like it, Alex she We've got a duke guy 0:17:41.840 --> 0:17:42.359 in the room. 0:17:42.440 --> 0:17:45.320 CIO of Bernstein Private Wealth. That's a good name on 0:17:45.400 --> 0:17:48.240 this street, Bernstein, Alex. We got a fed day today. 0:17:48.240 --> 0:17:50.480 We make a big deal of it here at Bloomberg. 0:17:51.200 --> 0:17:52.600 What are you looking for here? What are you telling 0:17:52.640 --> 0:17:55.080 your clients here? As it relates to our Frederick Reserve 0:17:55.119 --> 0:17:56.480 and it's impact on the market. 0:17:56.520 --> 0:18:00.959 No surprises this afternoon they raised twenty five Palll is 0:18:01.000 --> 0:18:04.639 extremely hawkish in his comments. Market doesn't like it, but 0:18:04.680 --> 0:18:07.280 that's reality. And then we move on. It's all about 0:18:07.320 --> 0:18:08.480 September twenty. 0:18:08.960 --> 0:18:12.560 And as you know, J. Powell has to be hawkish 0:18:12.560 --> 0:18:14.639 and he's going to be. But sometimes you get a 0:18:14.680 --> 0:18:17.359 tiny slip up in his comments and he reveals a 0:18:17.359 --> 0:18:19.359 little dubbishness. Are you anticipating that? 0:18:19.880 --> 0:18:22.280 I think the last few meetings he has, we haven't 0:18:22.280 --> 0:18:26.640 seen the slip up or intentional or otherwise. Our view 0:18:26.720 --> 0:18:29.440 is that he is very deliberate in his language. It's 0:18:29.520 --> 0:18:32.600 like a free lunch. There's no cost to him being hawkish. 0:18:32.600 --> 0:18:34.639 It doesn't cost, it doesn't grow the balance sheet, it 0:18:34.640 --> 0:18:37.720 doesn't change the economy. He can do it. And if 0:18:37.800 --> 0:18:40.920 all the harm is is that he moves rist acids down, 0:18:41.320 --> 0:18:44.800 that's okay. So I think he's he'll be very disciplined, 0:18:45.040 --> 0:18:46.680 very intentional in his language. 0:18:46.760 --> 0:18:49.479 Well, I mean, the risk I see out there is 0:18:49.600 --> 0:18:52.439 he's going to push this economy through recession. Who wants that. 0:18:52.480 --> 0:18:55.000 I've taken recession off the table personally, but he could 0:18:55.000 --> 0:18:57.560 push it right into Recessionho wants that he could. But 0:18:57.760 --> 0:19:02.080 our house view is that off landing is highly likely. 0:19:02.640 --> 0:19:05.679 It's largely on the back or almost entirely on the 0:19:05.720 --> 0:19:08.440 back today of the strength and the labor market which 0:19:08.520 --> 0:19:11.159 will flow through to the consumer. You know, you have 0:19:11.200 --> 0:19:13.520 an unemployment rate which for all intents and purposes is 0:19:13.520 --> 0:19:16.320 effectively zero. Anyone that wants a job can find a job. 0:19:16.680 --> 0:19:19.960