1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,240 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day, we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,360 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:20,920 --> 00:00:24,599 Speaker 1: All right, let's switch gears to real estate, and we 8 00:00:24,640 --> 00:00:26,400 Speaker 1: can do that because I've got a lot of questions 9 00:00:26,440 --> 00:00:29,200 Speaker 1: about real estate, particularly because half of midtown Manhattan nobody's 10 00:00:29,240 --> 00:00:31,960 Speaker 1: in their office buildings, So we want to get to 11 00:00:32,000 --> 00:00:35,800 Speaker 1: the bottom of that. Lisa Nie, she is managing partner 12 00:00:35,880 --> 00:00:38,199 Speaker 1: of real estate at Eisner Amper. I'm taking that as 13 00:00:38,240 --> 00:00:41,480 Speaker 1: a promotion, dude, managing partner anywhere you go, managing partner 14 00:00:41,560 --> 00:00:43,640 Speaker 1: is big. But she helps us kind of think about 15 00:00:43,640 --> 00:00:45,800 Speaker 1: what's going on in the real estate sector. She's at 16 00:00:45,800 --> 00:00:49,559 Speaker 1: Eisner Amper, So Lisa talk to us about kind of 17 00:00:49,560 --> 00:00:52,080 Speaker 1: where we are with the real estate market today. We 18 00:00:52,240 --> 00:00:54,520 Speaker 1: are on the other side of the pandemic that's in 19 00:00:54,600 --> 00:00:58,160 Speaker 1: the rear view. The world's back to normal on so 20 00:00:58,240 --> 00:01:00,600 Speaker 1: many metrics. Where are we in real estate? Yeah? 21 00:01:00,600 --> 00:01:00,920 Speaker 3: Thank you? 22 00:01:00,960 --> 00:01:01,480 Speaker 1: For having me. 23 00:01:01,560 --> 00:01:03,400 Speaker 4: But that's that's a great point and a great question. 24 00:01:03,720 --> 00:01:05,600 Speaker 4: But let's put a little bit of landscape on that. 25 00:01:05,680 --> 00:01:07,919 Speaker 4: So everyone's worried about where we are in office space, 26 00:01:08,120 --> 00:01:11,120 Speaker 4: but when we look back, it's a supply and demand problem. 27 00:01:11,240 --> 00:01:12,320 Speaker 1: And you go back. 28 00:01:12,440 --> 00:01:14,880 Speaker 4: Even to the nineteen nineties. I don't know if you remember, 29 00:01:14,959 --> 00:01:17,640 Speaker 4: but there was the sea through office problem, so the 30 00:01:17,720 --> 00:01:20,840 Speaker 4: offices were empty. People weren't in those office buildings in 31 00:01:20,920 --> 00:01:23,920 Speaker 4: nineteen ninety. We had too much supply at that point, 32 00:01:24,080 --> 00:01:26,520 Speaker 4: and then as we've sort of grown over the last 33 00:01:26,560 --> 00:01:29,840 Speaker 4: couple of years, the pandemic is one of many problems 34 00:01:29,840 --> 00:01:32,000 Speaker 4: that office has had. First we started with it was 35 00:01:32,040 --> 00:01:33,880 Speaker 4: three hundred square foot of person, and then it went 36 00:01:33,880 --> 00:01:37,000 Speaker 4: down to one hundred square feed. Then we started doing hotel, 37 00:01:37,240 --> 00:01:39,840 Speaker 4: so now we needed less people in the space. Then 38 00:01:39,840 --> 00:01:43,280 Speaker 4: when you start looking at office open space concept, exactly 39 00:01:43,280 --> 00:01:45,119 Speaker 4: what we have at Bloomberg, exactly what we. 40 00:01:45,120 --> 00:01:47,120 Speaker 1: Might get that in nineteen eighty two, by the way, 41 00:01:47,160 --> 00:01:51,080 Speaker 1: before like Zuckerberg was even born, before there was an Internet, 42 00:01:51,280 --> 00:01:52,200 Speaker 1: I was doing. 43 00:01:52,120 --> 00:01:55,600 Speaker 4: Fully space, so that's also less space. And then we looked, 44 00:01:55,760 --> 00:01:59,000 Speaker 4: you know, I'm in a service profession. We had libraries, 45 00:01:59,240 --> 00:02:02,920 Speaker 4: we had file rooms, file cabinets. You don't have any 46 00:02:02,960 --> 00:02:05,240 Speaker 4: of that. So that was four problems that were happening 47 00:02:05,320 --> 00:02:08,160 Speaker 4: with office before we even got to the pandemic, which 48 00:02:08,200 --> 00:02:10,920 Speaker 4: is now a behavioral issue of where are we at 49 00:02:11,000 --> 00:02:13,639 Speaker 4: when where we need that hybrid office space? So what's 50 00:02:13,680 --> 00:02:16,520 Speaker 4: the nail on the coffin and where's that equilibrium of 51 00:02:16,560 --> 00:02:19,520 Speaker 4: what really people need for space to do their jobs. 52 00:02:19,720 --> 00:02:22,440 Speaker 4: And I think that's that realignment right now is what 53 00:02:22,680 --> 00:02:25,080 Speaker 4: the pain we're having, and no one's able to figure 54 00:02:25,080 --> 00:02:27,360 Speaker 4: out where we're going to solve that. And so that's 55 00:02:27,440 --> 00:02:30,559 Speaker 4: why you hear about Crepsy's watch list and the delinquency 56 00:02:30,680 --> 00:02:33,400 Speaker 4: rate for the mortgages is going up. People are giving 57 00:02:33,480 --> 00:02:36,280 Speaker 4: back office buildings here in New York. And it's not 58 00:02:36,440 --> 00:02:39,240 Speaker 4: because they don't believe or that they don't have the 59 00:02:39,280 --> 00:02:41,640 Speaker 4: capital to invest. They just don't think that that is 60 00:02:41,680 --> 00:02:44,280 Speaker 4: a good investment right now of their capital. And so 61 00:02:44,360 --> 00:02:47,600 Speaker 4: I think that's where we're sitting with office, well the core. 62 00:02:47,440 --> 00:02:50,120 Speaker 5: Of any kind of investment. Paul will agree to this 63 00:02:50,200 --> 00:02:54,120 Speaker 5: as timing right, it's kind of forecasting exactly how long 64 00:02:54,160 --> 00:02:56,000 Speaker 5: that trend is going to last. And it feels like 65 00:02:56,040 --> 00:02:58,200 Speaker 5: when we talk about commercial real estate. This idea of 66 00:02:58,600 --> 00:03:01,320 Speaker 5: hybrid work or hybrid lie or whatever it is something 67 00:03:01,639 --> 00:03:05,840 Speaker 5: still kind of registers as temporary when you are valuing 68 00:03:05,880 --> 00:03:09,440 Speaker 5: commercial real estate or looking at it. Is this something 69 00:03:09,480 --> 00:03:11,400 Speaker 5: that we're going to be still talking about in ten 70 00:03:11,480 --> 00:03:13,000 Speaker 5: years time or is this something that's going to kind 71 00:03:13,000 --> 00:03:14,919 Speaker 5: of maybe dissipate once this recession hits. 72 00:03:15,000 --> 00:03:17,520 Speaker 4: So real estate's cyclical, so we can talk about retail, 73 00:03:17,560 --> 00:03:20,639 Speaker 4: we can talk about multi family, single family, and it's 74 00:03:20,639 --> 00:03:23,160 Speaker 4: all pretty cyclical, and we don't really know the value 75 00:03:23,160 --> 00:03:25,200 Speaker 4: of real estate because there's not a lot of transactions 76 00:03:25,200 --> 00:03:27,960 Speaker 4: happening right now. So to your point, we don't know 77 00:03:28,000 --> 00:03:30,720 Speaker 4: where things are going to end up with office or 78 00:03:30,760 --> 00:03:33,320 Speaker 4: with any of the sectors of real estate. And that's 79 00:03:33,320 --> 00:03:35,160 Speaker 4: what people are waiting for, is when is the trading 80 00:03:35,200 --> 00:03:37,840 Speaker 4: going to happen so I know the value And it's 81 00:03:37,880 --> 00:03:41,200 Speaker 4: a behavioral issue of when are people going to come back? 82 00:03:41,560 --> 00:03:43,400 Speaker 4: It's more of remember, really, when you think about an 83 00:03:43,440 --> 00:03:47,040 Speaker 4: office building, you are leasing it for seven days of 84 00:03:47,040 --> 00:03:48,720 Speaker 4: a week, but you were only ever using it for 85 00:03:48,760 --> 00:03:51,080 Speaker 4: five and now you're at two or three. So it 86 00:03:51,120 --> 00:03:54,800 Speaker 4: was a unique rental or a unique acquisition to begin with. 87 00:03:55,160 --> 00:03:57,560 Speaker 4: So where's that behavioral and where does the pencil mark 88 00:03:57,600 --> 00:03:59,560 Speaker 4: out what am I going to pay for that office 89 00:04:00,120 --> 00:04:01,880 Speaker 4: lease if I'm only using it two to three days 90 00:04:01,920 --> 00:04:04,400 Speaker 4: a week. To your point, it's valuation exactly. 91 00:04:04,440 --> 00:04:06,280 Speaker 1: And do we have any evidence yet? I don't know 92 00:04:06,280 --> 00:04:10,920 Speaker 1: when if there's a big waterfall of leases expiring and 93 00:04:10,960 --> 00:04:14,880 Speaker 1: renewing in New York or San Francisco or Chicago, is 94 00:04:14,880 --> 00:04:17,400 Speaker 1: there a year or a time when we're going to 95 00:04:17,440 --> 00:04:19,960 Speaker 1: get a really good market sense of where the market is, 96 00:04:20,000 --> 00:04:22,440 Speaker 1: Like you can tell me like five jillion square feet 97 00:04:22,440 --> 00:04:23,880 Speaker 1: are going to come up for renewal next year in 98 00:04:23,880 --> 00:04:26,640 Speaker 1: New York. And the question is is it down twenty percent? 99 00:04:26,760 --> 00:04:29,200 Speaker 1: Is down thirty percent? Do we have any sense of 100 00:04:29,240 --> 00:04:30,680 Speaker 1: when we're going to get that or is it just 101 00:04:30,760 --> 00:04:31,560 Speaker 1: kind of over time. 102 00:04:31,800 --> 00:04:34,400 Speaker 4: So that's a great question because the realignment is two things. 103 00:04:34,440 --> 00:04:36,880 Speaker 4: It's the expiration of your mortgages and it's the expiration 104 00:04:36,920 --> 00:04:39,360 Speaker 4: of leases. Mortgages we can tell because we know when 105 00:04:39,600 --> 00:04:41,120 Speaker 4: when the debt cycle is going to come up, and 106 00:04:41,160 --> 00:04:43,080 Speaker 4: we know when it is the lease is that's going 107 00:04:43,120 --> 00:04:44,920 Speaker 4: to be a slow bleed because we don't know when 108 00:04:44,920 --> 00:04:46,880 Speaker 4: people are going to start giving back or what their 109 00:04:46,920 --> 00:04:50,080 Speaker 4: needs are, and so that's where the uncertainty is that 110 00:04:50,520 --> 00:04:52,760 Speaker 4: credit worthy tenant that people were so excited to have 111 00:04:52,839 --> 00:04:55,720 Speaker 4: into their space. We don't know how much space they're 112 00:04:55,760 --> 00:04:57,800 Speaker 4: going to take back and when those leases are going 113 00:04:57,839 --> 00:04:59,880 Speaker 4: to start to expire within the building. And so that's 114 00:05:00,760 --> 00:05:03,960 Speaker 4: your point is exact onto that's the uncertainty. 115 00:05:04,800 --> 00:05:07,279 Speaker 5: What about kind of all the talk we hear about 116 00:05:07,520 --> 00:05:09,880 Speaker 5: that this banking turmoil that we've talked about in the community 117 00:05:09,920 --> 00:05:13,960 Speaker 5: banks is ultimately going to have this big ripple effect 118 00:05:14,000 --> 00:05:17,800 Speaker 5: in commercial real estate. One has that kicked off, are 119 00:05:17,800 --> 00:05:19,800 Speaker 5: we seeing that? Are we going to see that? How 120 00:05:19,800 --> 00:05:22,840 Speaker 5: are you viewing it as someone who's part of this industry? 121 00:05:23,960 --> 00:05:26,240 Speaker 4: So that that is going to have a huge impact, 122 00:05:26,279 --> 00:05:28,640 Speaker 4: and it's part of what the regulators within the banking 123 00:05:28,640 --> 00:05:30,760 Speaker 4: community are going to allow the banks to have on 124 00:05:30,800 --> 00:05:33,760 Speaker 4: their balance sheets and where underwriting is. And so they're 125 00:05:33,800 --> 00:05:37,080 Speaker 4: all very skittish, they're skittish to invest back in there. 126 00:05:37,120 --> 00:05:40,599 Speaker 4: And so as the mortgagees come back up, somebody's going 127 00:05:40,640 --> 00:05:42,839 Speaker 4: to have to put capital back in and infuse capital 128 00:05:42,920 --> 00:05:46,279 Speaker 4: back into those buildings, because if you had a hedge, 129 00:05:46,400 --> 00:05:49,000 Speaker 4: or if they're for the interest rate environment, somebody has 130 00:05:49,040 --> 00:05:51,080 Speaker 4: to come up with that capital, and the banks most 131 00:05:51,120 --> 00:05:53,120 Speaker 4: likely are going to keep a very low loan to 132 00:05:53,200 --> 00:05:55,680 Speaker 4: value ratio. They don't want to take the properties back, 133 00:05:55,720 --> 00:05:57,280 Speaker 4: they don't want to put them on the balance sheet, 134 00:05:57,400 --> 00:05:59,599 Speaker 4: and they absolutely don't want to write down their balance 135 00:05:59,640 --> 00:06:02,479 Speaker 4: sheets for those discounts. And so there is going to 136 00:06:02,560 --> 00:06:05,120 Speaker 4: be a point where the banks, and this the banking 137 00:06:05,160 --> 00:06:07,520 Speaker 4: industry is going to have a huge role as to 138 00:06:08,080 --> 00:06:09,920 Speaker 4: when they go out there. Are they going to sell 139 00:06:09,960 --> 00:06:13,159 Speaker 4: portfolios of loans that's very expensive. Are they going to 140 00:06:13,160 --> 00:06:15,320 Speaker 4: give back the buildings one at a time? The banks 141 00:06:15,320 --> 00:06:17,760 Speaker 4: don't want to run those buildings, and so the regulators 142 00:06:17,800 --> 00:06:22,400 Speaker 4: are going to keep really really strict lending restrictions going forward, 143 00:06:22,640 --> 00:06:24,400 Speaker 4: and certainly they're going to be looking at what's on 144 00:06:24,440 --> 00:06:27,279 Speaker 4: the balance sheets of those banks right now and be 145 00:06:27,520 --> 00:06:28,960 Speaker 4: very concerned about. 146 00:06:28,760 --> 00:06:31,040 Speaker 1: Uh boy, is how they do that. I just feel 147 00:06:31,040 --> 00:06:32,760 Speaker 1: like this is can get worse before it gets better. 148 00:06:32,839 --> 00:06:34,960 Speaker 1: Lisa Nie, thanks so much for joining us. Lisa Nie 149 00:06:35,040 --> 00:06:37,800 Speaker 1: is the managing partner of real estate at Eisner Amper, 150 00:06:38,360 --> 00:06:41,200 Speaker 1: joining us live in our Bloomberg Interactive Broker studio. Talking 151 00:06:41,200 --> 00:06:43,520 Speaker 1: about that the commercial real estate is some tough times 152 00:06:43,760 --> 00:06:44,839 Speaker 1: and some tough times ahead. 153 00:06:46,839 --> 00:06:50,680 Speaker 6: You're listening to the Team Ken's live program Bloomberg Markets 154 00:06:50,720 --> 00:06:53,839 Speaker 6: weekdays at ten am Eastern on Bloomberg dot com, the 155 00:06:53,920 --> 00:06:57,039 Speaker 6: iHeartRadio app and the Bloomberg Business app, or listen on 156 00:06:57,120 --> 00:06:59,719 Speaker 6: demand wherever you get your podcasts. 157 00:07:01,080 --> 00:07:04,280 Speaker 1: Pretty you know, on the Mount rushmore of work from Home. 158 00:07:04,880 --> 00:07:07,640 Speaker 1: The two of the founding members, Yeah, to be our 159 00:07:07,720 --> 00:07:08,200 Speaker 1: next guest. 160 00:07:08,440 --> 00:07:10,400 Speaker 5: I used to sit between both of them. 161 00:07:10,760 --> 00:07:11,320 Speaker 1: Really, yeah. 162 00:07:11,400 --> 00:07:12,880 Speaker 5: My desk was nestled right in between. 163 00:07:13,000 --> 00:07:15,200 Speaker 1: I have such huge respect for these guys and how 164 00:07:15,200 --> 00:07:18,600 Speaker 1: they're doing their business these days. Cameron Christ and Vince Cignirella. 165 00:07:19,160 --> 00:07:22,080 Speaker 1: They cover their macro strategists. They write some really good 166 00:07:22,240 --> 00:07:25,040 Speaker 1: smart stuff on these markets. They talk to a lot 167 00:07:25,080 --> 00:07:27,360 Speaker 1: of smart people and we get a few minutes of 168 00:07:27,400 --> 00:07:28,480 Speaker 1: their time every once in a while. 169 00:07:28,360 --> 00:07:30,920 Speaker 5: And went together every once in a while they're even right, 170 00:07:31,120 --> 00:07:31,760 Speaker 5: and every once. 171 00:07:31,600 --> 00:07:33,040 Speaker 1: In a while they're even right. But to get them 172 00:07:33,040 --> 00:07:36,400 Speaker 1: together at one spot is big, camer I want to 173 00:07:36,440 --> 00:07:38,920 Speaker 1: start with you here. Matt Miller just walked in. You know, 174 00:07:38,960 --> 00:07:40,520 Speaker 1: he starts his day a little bit. Lady gets in 175 00:07:40,520 --> 00:07:42,600 Speaker 1: here around ten thirty. But he walked in here with 176 00:07:42,680 --> 00:07:45,040 Speaker 1: his brand new leather jacket, and he says he doesn't 177 00:07:45,040 --> 00:07:47,640 Speaker 1: believe he thinks the FED is not going to raise 178 00:07:47,720 --> 00:07:50,640 Speaker 1: rates this June meeting. Do I should I listen to 179 00:07:50,680 --> 00:07:51,160 Speaker 1: Matt Miller? 180 00:07:52,200 --> 00:07:55,800 Speaker 7: Well, I mean they've basically told you they're not. Philip 181 00:07:55,840 --> 00:08:01,440 Speaker 7: Jefferson is the mooted new vice Erman basically came out 182 00:08:01,520 --> 00:08:06,560 Speaker 7: last week and uh said that they should pause and 183 00:08:06,600 --> 00:08:10,520 Speaker 7: have a look around, not necessarily saying they're gonna it's 184 00:08:10,560 --> 00:08:14,440 Speaker 7: a definitive end, but that they they should they should pause. 185 00:08:14,520 --> 00:08:17,320 Speaker 7: And you know, it's kind of they're like Ef Hutton 186 00:08:17,320 --> 00:08:19,400 Speaker 7: when they talked, you're supposed to you're supposed to listen. 187 00:08:19,400 --> 00:08:23,200 Speaker 7: Pretty pretty won't get that joke, but I know you will, Paula, 188 00:08:23,240 --> 00:08:25,040 Speaker 7: I know Vince will as well. 189 00:08:25,160 --> 00:08:27,360 Speaker 1: See what I had to deal with every day. 190 00:08:28,400 --> 00:08:30,200 Speaker 7: If you guys give us a stick for where we work, 191 00:08:30,320 --> 00:08:33,719 Speaker 7: you know, we can give you, uh you know, let 192 00:08:33,720 --> 00:08:36,840 Speaker 7: it let our experience come to bear. Yeah. So, I 193 00:08:36,880 --> 00:08:40,679 Speaker 7: mean they basically provided some some jawboning over the last 194 00:08:40,720 --> 00:08:43,320 Speaker 7: week or so that June is probably off the table. 195 00:08:43,400 --> 00:08:46,160 Speaker 7: So that's adjusted market pricing, and we're kind of going 196 00:08:46,200 --> 00:08:50,520 Speaker 7: to be left parsing the signals for the second half 197 00:08:50,559 --> 00:08:52,960 Speaker 7: of the year. Right now. Market still thinks there's a 198 00:08:53,000 --> 00:08:56,239 Speaker 7: decent chance that they'll have to go again. But obviously 199 00:08:57,000 --> 00:09:01,079 Speaker 7: things can change, and and today's service services eyes ISM 200 00:09:01,520 --> 00:09:06,560 Speaker 7: provides a less robust or less upbeat signal than we 201 00:09:06,720 --> 00:09:09,840 Speaker 7: had from say, the labor market data last Friday. 202 00:09:10,400 --> 00:09:12,560 Speaker 5: Well, Vin's hop on in here because one of the 203 00:09:13,160 --> 00:09:18,680 Speaker 5: key stark memories of the start of this monetary tightening regime, 204 00:09:19,000 --> 00:09:21,480 Speaker 5: Chairman Powell said over and over and over again, we 205 00:09:21,520 --> 00:09:23,360 Speaker 5: don't want to make the mistake of the seventies. We 206 00:09:23,360 --> 00:09:25,640 Speaker 5: don't want to stop too prematurely, and therefore we're going 207 00:09:25,679 --> 00:09:29,200 Speaker 5: to kind of put our full force behind tightening. And 208 00:09:29,280 --> 00:09:32,640 Speaker 5: yet here we are with a super super hot payrolls 209 00:09:32,640 --> 00:09:36,960 Speaker 5: report on Friday, one trading session later, not even we 210 00:09:37,040 --> 00:09:40,880 Speaker 5: have this ISM data. How does the Federal Reserve in 211 00:09:40,920 --> 00:09:45,239 Speaker 5: that context avoid some sort of vulgar repeat by potentially 212 00:09:45,360 --> 00:09:46,200 Speaker 5: skipping this month. 213 00:09:47,200 --> 00:09:50,319 Speaker 3: Well, you know, I think any comparison to the seventies, 214 00:09:50,600 --> 00:09:53,760 Speaker 3: having sat on guess lines waiting for the ODDI even 215 00:09:53,840 --> 00:09:57,119 Speaker 3: number license plate situation, this is nowhere near the seventies. 216 00:09:57,440 --> 00:10:01,000 Speaker 3: And I think what Powell is speaking about and worrying 217 00:10:01,000 --> 00:10:04,559 Speaker 3: about credibility, it's not credibility that they're going to make 218 00:10:04,600 --> 00:10:07,600 Speaker 3: the mistake of the nineteen seventies, I think realistically, and 219 00:10:07,640 --> 00:10:09,280 Speaker 3: he's not emitting it. They don't want to make the 220 00:10:09,320 --> 00:10:13,040 Speaker 3: mistake they made with calling inflation transient. They're trying to 221 00:10:13,080 --> 00:10:15,360 Speaker 3: catch up for a major mistake they made through the pandemic, 222 00:10:15,440 --> 00:10:18,400 Speaker 3: and not to be fair to them, wasn't so much 223 00:10:18,400 --> 00:10:20,520 Speaker 3: of their mistake as much as it was the fiscal 224 00:10:20,600 --> 00:10:24,800 Speaker 3: policy of overstimulating the economy at that time. Now, all 225 00:10:24,840 --> 00:10:27,040 Speaker 3: well and good, it was necessary, but then when the 226 00:10:27,040 --> 00:10:30,200 Speaker 3: economy started a turn, there was no movement interest rates 227 00:10:30,240 --> 00:10:32,720 Speaker 3: and there was no appetite on a federal level to 228 00:10:32,720 --> 00:10:35,520 Speaker 3: take money out of the economy. So now he's faced 229 00:10:35,559 --> 00:10:40,599 Speaker 3: with this dilemma of trying to maintain the Fed's credibility 230 00:10:40,640 --> 00:10:44,720 Speaker 3: that they've actually lost the financial markets and not thinking 231 00:10:44,720 --> 00:10:48,760 Speaker 3: they're very credible at the moment, and trying to walk 232 00:10:48,800 --> 00:10:53,400 Speaker 3: this tightrope between not seeing inflation come down fast enough 233 00:10:53,400 --> 00:10:57,840 Speaker 3: for them and overtightening and perhaps pushing the economy into 234 00:10:57,840 --> 00:10:59,880 Speaker 3: a recession. I will make a note there was a 235 00:11:00,080 --> 00:11:03,520 Speaker 3: you know this headline that's going not at all really 236 00:11:03,720 --> 00:11:08,439 Speaker 3: spoken about the idea of raising capital reserves on banks 237 00:11:08,559 --> 00:11:12,120 Speaker 3: is going to be a very very big draw on 238 00:11:12,200 --> 00:11:14,840 Speaker 3: growth and no one's talking about it and no one's 239 00:11:14,840 --> 00:11:17,559 Speaker 3: seeing it. But when you raise capital reserves on banks, 240 00:11:18,400 --> 00:11:22,360 Speaker 3: that's lending they can't make, and that's not even being discussed. 241 00:11:22,360 --> 00:11:27,520 Speaker 3: So depending upon how high they raise those additional capital 242 00:11:27,600 --> 00:11:31,280 Speaker 3: requirements could be enough tightening that the FED doesn't have 243 00:11:31,320 --> 00:11:32,120 Speaker 3: to do anything else. 244 00:11:32,520 --> 00:11:36,440 Speaker 1: Interesting all right, Cameron, I was on a holiday on Friday, 245 00:11:36,440 --> 00:11:38,400 Speaker 1: so I missed this whole non farm payroll thing. But 246 00:11:38,480 --> 00:11:41,079 Speaker 1: it seems like people want a job. They can get 247 00:11:41,120 --> 00:11:43,559 Speaker 1: a job. You can't have a recession in that kind 248 00:11:43,559 --> 00:11:44,360 Speaker 1: of scenario. 249 00:11:44,080 --> 00:11:46,079 Speaker 7: Can you? 250 00:11:46,120 --> 00:11:46,200 Speaker 8: No? 251 00:11:46,960 --> 00:11:51,320 Speaker 7: You and the thoughts so, but two provisos. One is 252 00:11:51,360 --> 00:11:55,720 Speaker 7: that you often find that the labor data is misleading 253 00:11:55,920 --> 00:12:01,079 Speaker 7: at turns, because it's not like the payroll numbers comprised 254 00:12:01,400 --> 00:12:05,120 Speaker 7: of the BLS calling every business in America and saying 255 00:12:05,240 --> 00:12:06,880 Speaker 7: how many people you I'm going to feel you out 256 00:12:06,880 --> 00:12:07,360 Speaker 7: working for you? 257 00:12:08,120 --> 00:12:08,280 Speaker 8: Right? 258 00:12:08,360 --> 00:12:10,960 Speaker 7: So, there's a lot of statistical techniques that are used 259 00:12:11,360 --> 00:12:17,800 Speaker 7: to estimate a broader conclusion from a relatively limited sample, 260 00:12:17,920 --> 00:12:20,280 Speaker 7: and that works very well in normal circumstances, but at 261 00:12:20,280 --> 00:12:23,679 Speaker 7: turning points you find that these modeling techniques don't work. 262 00:12:25,000 --> 00:12:27,760 Speaker 7: So there is a that's one thing to consider and 263 00:12:27,800 --> 00:12:30,720 Speaker 7: the other is that this economic cycle is likely to 264 00:12:30,760 --> 00:12:33,520 Speaker 7: be very nonlinear. Things will look great and then you'll 265 00:12:33,520 --> 00:12:37,040 Speaker 7: have a wily coyote moment and things will suddenly look 266 00:12:37,160 --> 00:12:40,199 Speaker 7: not very great at all. Now, we thought that there 267 00:12:40,320 --> 00:12:43,920 Speaker 7: was a reasonable probability that that would be the outcome 268 00:12:44,520 --> 00:12:48,360 Speaker 7: of the March banking sector turmoil. The evidence thus far 269 00:12:48,480 --> 00:12:51,880 Speaker 7: is that that hasn't actually been the case. And I'll 270 00:12:51,920 --> 00:12:54,200 Speaker 7: admit had in the air that I thought we would 271 00:12:54,240 --> 00:12:58,199 Speaker 7: have a more immediate and more substantial impact than we've 272 00:12:58,200 --> 00:13:01,480 Speaker 7: seen in the data thus far. That han't been said. 273 00:13:01,480 --> 00:13:03,240 Speaker 7: And this is adding on to sort of Vince's point 274 00:13:03,360 --> 00:13:06,320 Speaker 7: about the transmission of credit, is that we're now at 275 00:13:06,360 --> 00:13:09,120 Speaker 7: the point, now that the dead ceiling nonsense has been resolved, 276 00:13:09,520 --> 00:13:12,319 Speaker 7: where the Treasury is going to be sucking a lot 277 00:13:12,320 --> 00:13:15,440 Speaker 7: of money out of the financial system by issuing a 278 00:13:15,559 --> 00:13:21,160 Speaker 7: veritable everest of Treasury bills, and that is going to 279 00:13:22,240 --> 00:13:26,160 Speaker 7: have an impact. Traditionally, when bank reserves at the FED 280 00:13:26,720 --> 00:13:30,800 Speaker 7: decline substantially, you tend to see lending go down, and 281 00:13:30,840 --> 00:13:33,839 Speaker 7: you tend to see financial markets, certainly the equity market 282 00:13:34,240 --> 00:13:38,040 Speaker 7: go down. At this point, it's indeterminate whether the demand 283 00:13:38,240 --> 00:13:42,480 Speaker 7: for treasury bills will come from bank deposits or from 284 00:13:42,520 --> 00:13:46,880 Speaker 7: money funds, who would then try, you know, essentially take 285 00:13:46,960 --> 00:13:49,040 Speaker 7: money out of the reverse repot facility at the FED 286 00:13:49,200 --> 00:13:51,160 Speaker 7: and use it to buy treasury bills. But it's a 287 00:13:51,160 --> 00:13:54,559 Speaker 7: significant risk that we have to consider moving forwards. 288 00:13:55,080 --> 00:13:58,640 Speaker 5: You know, the irony of Fens and Cam talking to 289 00:13:58,640 --> 00:14:02,040 Speaker 5: me about issue and treasury auctions and stuff like that. 290 00:14:02,040 --> 00:14:03,960 Speaker 5: They actually taught me how to how to interpret them 291 00:14:03,960 --> 00:14:06,760 Speaker 5: back in the day, all that funny jargon stops and 292 00:14:06,840 --> 00:14:08,120 Speaker 5: tails and all that jazz. 293 00:14:08,440 --> 00:14:10,680 Speaker 1: Yeah too, I just wait to read the first two paragraphs. 294 00:14:10,760 --> 00:14:13,160 Speaker 5: Yeah, well, they're usually the ones writing it well. Cam 295 00:14:13,240 --> 00:14:15,640 Speaker 5: following up on that point when it comes to kind 296 00:14:15,679 --> 00:14:19,400 Speaker 5: of issuance and lending, haven't both lending and liquidity kind 297 00:14:19,400 --> 00:14:22,800 Speaker 5: of been on I don't want to say like the drop, 298 00:14:22,840 --> 00:14:25,280 Speaker 5: but like they've been declining significantly in the last couple 299 00:14:25,280 --> 00:14:27,040 Speaker 5: of months because of the banking turmoil. I get your 300 00:14:27,040 --> 00:14:30,800 Speaker 5: point about liquidity, but to marry it with the point 301 00:14:30,840 --> 00:14:33,360 Speaker 5: that Ben's just made about the capital requirements. If lending 302 00:14:33,480 --> 00:14:36,840 Speaker 5: is already dropping, how big of a difference can that 303 00:14:36,880 --> 00:14:41,440 Speaker 5: capital requirement increase really make If there is an appetite 304 00:14:41,440 --> 00:14:44,320 Speaker 5: to lend anyway, Well. 305 00:14:44,880 --> 00:14:47,840 Speaker 7: Again, I think it's it's not the sort of thing 306 00:14:47,880 --> 00:14:51,400 Speaker 7: you're gonna wake up one day and lending will have 307 00:14:51,520 --> 00:14:57,680 Speaker 7: dropped by half a trillion dollars. It will be gradual 308 00:14:57,880 --> 00:15:04,440 Speaker 7: until it's not gradual. And from a financial markets perspective, 309 00:15:04,600 --> 00:15:06,960 Speaker 7: I think it's reserves that are going to be the 310 00:15:07,160 --> 00:15:11,560 Speaker 7: more timely issue to consider, because even though sort of 311 00:15:11,560 --> 00:15:17,040 Speaker 7: bank deposits have dropped over obviously substantially so far this year, 312 00:15:17,840 --> 00:15:21,880 Speaker 7: bank reserves and FED have actually increased as the Treasury 313 00:15:21,920 --> 00:15:25,880 Speaker 7: has drawn down its general account, sort of spending every 314 00:15:25,960 --> 00:15:29,440 Speaker 7: last penny that it had hidden under the FED sofa cushions. 315 00:15:29,880 --> 00:15:33,520 Speaker 7: As that treasury account is built back up through the 316 00:15:33,560 --> 00:15:35,560 Speaker 7: issues of Treasury bills, now there's going to be a 317 00:15:35,600 --> 00:15:40,080 Speaker 7: disproportioned impact on other FED liabilities, the two main components 318 00:15:40,120 --> 00:15:43,240 Speaker 7: of which are these bank reserves and the money fund 319 00:15:43,320 --> 00:15:46,880 Speaker 7: usage of the reverse repot facility, and how which one 320 00:15:46,960 --> 00:15:51,240 Speaker 7: bears the brunt of treasury. Treasury is real rebuilding a 321 00:15:51,320 --> 00:15:53,240 Speaker 7: general account, I think is going to have a significant 322 00:15:53,240 --> 00:15:58,840 Speaker 7: impact on financial markets more broadly and liquidic conditions. 323 00:15:59,400 --> 00:16:01,600 Speaker 5: All right, So thirty seconds, Vince, I'm putting you on 324 00:16:01,640 --> 00:16:04,840 Speaker 5: the spot in the context of what Cam just said, 325 00:16:04,920 --> 00:16:08,880 Speaker 5: Vince is like, bring it on. Is there a sense 326 00:16:09,080 --> 00:16:11,880 Speaker 5: then of even more risk taking to get that yield, 327 00:16:11,920 --> 00:16:13,960 Speaker 5: to get that carry? What are you seeing in that 328 00:16:14,040 --> 00:16:15,000 Speaker 5: thirty seconds? 329 00:16:15,680 --> 00:16:17,920 Speaker 3: Real quick? I will tell you this, Like you looked 330 00:16:18,040 --> 00:16:21,280 Speaker 3: that was up seven hundred on Friday. Yeah, everybody knew 331 00:16:21,320 --> 00:16:24,120 Speaker 3: on Friday this treasury issuance is coming. And this is 332 00:16:24,160 --> 00:16:29,440 Speaker 3: the third lie that media and analysts are pushing. First 333 00:16:29,440 --> 00:16:31,400 Speaker 3: Europe was going to freeze to death, and the death 334 00:16:31,400 --> 00:16:34,280 Speaker 3: ceiling was going to crush us. And now treasury issuance 335 00:16:34,320 --> 00:16:37,240 Speaker 3: is going to blow the lid off interest rates. If 336 00:16:37,240 --> 00:16:39,440 Speaker 3: they go up high enough, there'll be a lot of buyers. 337 00:16:39,560 --> 00:16:41,800 Speaker 3: It's just I think another story. 338 00:16:42,080 --> 00:16:44,360 Speaker 1: All right, guys, thanks very much for joining us. Both 339 00:16:44,360 --> 00:16:47,480 Speaker 1: of you, Cameron Christ and Vince Cignarello, the macro strategists 340 00:16:47,480 --> 00:16:51,080 Speaker 1: with Bloomberg News. They're the work from home kings. They've 341 00:16:51,160 --> 00:16:53,720 Speaker 1: mastered it, and nobody does it better than we appreciate 342 00:16:54,000 --> 00:16:56,800 Speaker 1: getting their time and getting their time together. 343 00:16:57,160 --> 00:17:00,760 Speaker 6: You're listening to the tape Cancer Live program bloom Markets 344 00:17:00,800 --> 00:17:04,200 Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune 345 00:17:04,240 --> 00:17:07,200 Speaker 6: in app, Bloomberg dot Com, and the Bloomberg Business app. 346 00:17:07,240 --> 00:17:10,040 Speaker 6: You can also listen live on Amazon Alexa from our 347 00:17:10,080 --> 00:17:15,080 Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 348 00:17:15,720 --> 00:17:17,600 Speaker 1: All right, here's one of the biggest trends I've noticed 349 00:17:17,640 --> 00:17:19,240 Speaker 1: over the last five or ten years, which is just 350 00:17:19,320 --> 00:17:22,040 Speaker 1: this whole thing of exchange traded funds. The kids call 351 00:17:22,080 --> 00:17:25,520 Speaker 1: them ETFs. Man, what an exploding business. And our next 352 00:17:25,560 --> 00:17:28,040 Speaker 1: guest was smart enough, you know, twenty some odd years 353 00:17:28,080 --> 00:17:30,760 Speaker 1: ago to kind of get in on this game, Ben Slaven, 354 00:17:30,880 --> 00:17:34,320 Speaker 1: Global head of ETFs at B and Y Mellon asset Servi. 355 00:17:34,400 --> 00:17:36,919 Speaker 1: And that's a pretty good gig. Ben, Thanks so much 356 00:17:36,960 --> 00:17:40,320 Speaker 1: for joining us here in our studio. Here again, I've 357 00:17:40,359 --> 00:17:44,159 Speaker 1: just been awed by the amount of capital going to 358 00:17:44,240 --> 00:17:47,800 Speaker 1: the ETF space just over the last five to ten years. 359 00:17:47,800 --> 00:17:50,399 Speaker 1: It seems like where are we today. Just give us 360 00:17:50,400 --> 00:17:52,879 Speaker 1: an overview of kind of the ETF space in general. 361 00:17:53,440 --> 00:17:56,080 Speaker 9: Well, first of all, thanks for having me back. Look, 362 00:17:56,160 --> 00:18:00,919 Speaker 9: this trend has not abated and actually continue to accelerate. 363 00:18:01,000 --> 00:18:05,800 Speaker 9: So we've seen a huge divergence between investor's appetite to 364 00:18:05,840 --> 00:18:10,120 Speaker 9: put capital into ETFs versus traditionally mutual funds and other 365 00:18:10,200 --> 00:18:13,240 Speaker 9: structures and what we saw really in the last couple 366 00:18:13,280 --> 00:18:15,919 Speaker 9: of years was a significant pickup. So last year was 367 00:18:15,960 --> 00:18:21,320 Speaker 9: the widest gap ever between inflows into ETFs and outflows 368 00:18:21,359 --> 00:18:24,119 Speaker 9: from mutual funds, and that gap was around one point 369 00:18:24,200 --> 00:18:27,280 Speaker 9: five trillion dollars, which is kind of hard to get 370 00:18:27,280 --> 00:18:29,920 Speaker 9: your head wrapped around. But what we're also seeing is 371 00:18:29,960 --> 00:18:32,879 Speaker 9: a little bit you know different under the hood. So 372 00:18:33,080 --> 00:18:37,080 Speaker 9: this equity trade or this equity difference in terms of 373 00:18:37,119 --> 00:18:40,200 Speaker 9: investor preference has you know, been in place for a while, 374 00:18:40,680 --> 00:18:43,680 Speaker 9: and last year we saw a much larger pickup in 375 00:18:43,680 --> 00:18:47,080 Speaker 9: investor adoption of fixed income ETFs and it picked up 376 00:18:47,119 --> 00:18:50,280 Speaker 9: about three percent of market share against mutual funds. And 377 00:18:50,320 --> 00:18:54,200 Speaker 9: that's a huge leap and a shift now showing investors 378 00:18:54,240 --> 00:18:57,159 Speaker 9: widening out their preference for the ETF structure. 379 00:18:58,600 --> 00:19:01,119 Speaker 5: When it comes to ETFs. I mean, the reason for 380 00:19:01,160 --> 00:19:04,120 Speaker 5: a lot of the retail investor based to hop into 381 00:19:04,160 --> 00:19:06,040 Speaker 5: them is liquidity. At the end of the day, access 382 00:19:06,040 --> 00:19:08,520 Speaker 5: things like the bond market or the commodities market, which 383 00:19:08,560 --> 00:19:11,240 Speaker 5: is harder to get to. Are you seeing that kind 384 00:19:11,240 --> 00:19:14,200 Speaker 5: of sustained momentum from that class of investor. 385 00:19:15,160 --> 00:19:19,119 Speaker 9: It's a mix, So retail is absolutely part of it. 386 00:19:19,920 --> 00:19:25,679 Speaker 9: And actually we saw a pretty large uptick, especially in 387 00:19:25,720 --> 00:19:28,560 Speaker 9: the pandemic and kind of the rise of the retail 388 00:19:28,600 --> 00:19:33,520 Speaker 9: trader really adopting thematic ETFs. We saw some of the 389 00:19:33,560 --> 00:19:36,520 Speaker 9: leverage and short ETFs as well catch a lot of 390 00:19:36,560 --> 00:19:39,720 Speaker 9: attention from investors. But also what's changed in the last 391 00:19:39,720 --> 00:19:43,000 Speaker 9: couple of years is certainly the institutional investors are really 392 00:19:43,040 --> 00:19:46,720 Speaker 9: getting involved in ETFs in a big way. So for example, 393 00:19:46,920 --> 00:19:50,720 Speaker 9: that stat I just quoted on fixed income ETFs, Yes, 394 00:19:50,760 --> 00:19:53,240 Speaker 9: it's some retail, but a big piece of that is 395 00:19:53,280 --> 00:19:57,280 Speaker 9: also the institutions jumping in to use ETFs exactly as 396 00:19:57,280 --> 00:20:00,000 Speaker 9: you were just saying as a liquidity vehicle priced discuss 397 00:20:01,000 --> 00:20:03,119 Speaker 9: and in a way to get access to some of 398 00:20:03,160 --> 00:20:05,800 Speaker 9: these harder to reach asset types. 399 00:20:06,359 --> 00:20:09,720 Speaker 1: What type of institutional use is there for ETFs? Is 400 00:20:09,720 --> 00:20:14,600 Speaker 1: it hedge funds? Who uses that? From an introdutional perspective? 401 00:20:15,040 --> 00:20:18,639 Speaker 9: So the short answer is yes to all of it. Okay, 402 00:20:19,560 --> 00:20:22,200 Speaker 9: you know, just a couple quick examples. You know, we're 403 00:20:22,200 --> 00:20:26,480 Speaker 9: seeing the traditional institutional investors like pension funds for example, 404 00:20:26,960 --> 00:20:30,840 Speaker 9: who again are using ETFs for a variety of different 405 00:20:30,840 --> 00:20:36,080 Speaker 9: ways to equitize cash to you know, use them as 406 00:20:36,080 --> 00:20:39,040 Speaker 9: again a source of liquidity. But we're also seeing the 407 00:20:39,080 --> 00:20:44,560 Speaker 9: hedge funds get increasingly involved in different using more sophisticated 408 00:20:44,560 --> 00:20:49,399 Speaker 9: strategies of course, But most interesting is mutual funds themselves 409 00:20:49,480 --> 00:20:53,520 Speaker 9: have become a bigger buyer of ETFs, using ETFs to 410 00:20:53,600 --> 00:20:56,520 Speaker 9: do either asset allocation. So think about a fund of 411 00:20:56,600 --> 00:21:00,320 Speaker 9: ETFs or just using again ETFs in that same way 412 00:21:00,359 --> 00:21:03,760 Speaker 9: to get exposure to a targeted asset class or a 413 00:21:03,800 --> 00:21:07,720 Speaker 9: liquidity sleeve inside their portfolio. So we're starting to see 414 00:21:07,720 --> 00:21:11,320 Speaker 9: this convergence happen, and again that's another trend that's accelerating. 415 00:21:11,760 --> 00:21:13,919 Speaker 5: Well, let's talk about trends in the marketplace then in 416 00:21:14,000 --> 00:21:18,000 Speaker 5: terms of kind of any favorites that are seeing excess 417 00:21:18,000 --> 00:21:20,520 Speaker 5: flows or no flows at all or outflows. 418 00:21:20,760 --> 00:21:21,480 Speaker 10: What are you seeing? 419 00:21:22,080 --> 00:21:25,440 Speaker 9: Well, look, in May, we've started to see a pickup 420 00:21:26,119 --> 00:21:28,760 Speaker 9: in flow into etf so we saw about thirty five 421 00:21:28,800 --> 00:21:32,320 Speaker 9: billion come into the industry, which is muted considering we 422 00:21:32,359 --> 00:21:35,600 Speaker 9: had the last two years of record inflows. Now granted 423 00:21:35,640 --> 00:21:38,040 Speaker 9: that has everything to do with markets getting a lot 424 00:21:38,080 --> 00:21:41,320 Speaker 9: of competition from money market mutual funds, so the data 425 00:21:41,400 --> 00:21:44,600 Speaker 9: is skewed. So there's really an anomaly here with all 426 00:21:44,640 --> 00:21:48,120 Speaker 9: the investor interest in chasing those high money market yields. 427 00:21:48,280 --> 00:21:50,680 Speaker 9: But we've started to see some money come back in 428 00:21:51,200 --> 00:21:55,240 Speaker 9: What's interesting is under the hood again in May, we've 429 00:21:55,240 --> 00:21:58,080 Speaker 9: started to see an increase in appetite for equity ETFs 430 00:21:58,119 --> 00:22:01,080 Speaker 9: fixed income much more so early in the year. But 431 00:22:01,400 --> 00:22:04,960 Speaker 9: looking under the hood again, what is another little trend 432 00:22:05,000 --> 00:22:07,920 Speaker 9: that we're picking up on is with that inflow, we've 433 00:22:07,920 --> 00:22:12,359 Speaker 9: seen money come out of value ETF specifically products like 434 00:22:12,440 --> 00:22:15,800 Speaker 9: dividend themed ETFs, which again had caught quite a bit 435 00:22:15,840 --> 00:22:19,800 Speaker 9: of institutional and retail attention in the last you know, 436 00:22:19,880 --> 00:22:21,120 Speaker 9: nine to twelve months for sure. 437 00:22:21,920 --> 00:22:23,960 Speaker 1: Talk to us about this. The structure of the ETF 438 00:22:24,040 --> 00:22:28,520 Speaker 1: market in general, is it who are the big players? 439 00:22:29,080 --> 00:22:32,040 Speaker 1: Is it diversified? Just give us a sense of like 440 00:22:32,040 --> 00:22:34,320 Speaker 1: who really runs this business in terms of assets? 441 00:22:35,280 --> 00:22:41,080 Speaker 9: That's a great, great question. Look, one another interesting element 442 00:22:41,160 --> 00:22:45,680 Speaker 9: here is the amount of firms, both everything from startups 443 00:22:45,720 --> 00:22:49,159 Speaker 9: to large brand name acid managers seem to be jumping 444 00:22:49,200 --> 00:22:52,840 Speaker 9: into the space. So in the last couple of years, 445 00:22:52,840 --> 00:22:57,359 Speaker 9: we've seen record amount of product issuance. Actually a stat 446 00:22:57,400 --> 00:22:59,520 Speaker 9: I like to quote it B and Y Mellon. We've 447 00:22:59,520 --> 00:23:04,520 Speaker 9: been launching approximately one ETF a day on average somewhere 448 00:23:04,560 --> 00:23:06,560 Speaker 9: in the world the last couple of years, just to 449 00:23:06,600 --> 00:23:09,920 Speaker 9: give you a sense of how quickly these products are 450 00:23:09,920 --> 00:23:13,160 Speaker 9: coming to market. At the same time, it's driven by 451 00:23:13,200 --> 00:23:19,080 Speaker 9: some of the existing players like Blackrock, Vanguard, Invesco and others, 452 00:23:19,400 --> 00:23:23,800 Speaker 9: but also startups and brand name asset managers who have 453 00:23:23,880 --> 00:23:27,600 Speaker 9: just said enough mutual funds can't just cut it anymore. 454 00:23:27,880 --> 00:23:30,560 Speaker 9: I'm looking to launch an ETF as a way to 455 00:23:31,200 --> 00:23:34,520 Speaker 9: again attract invest your interest and certainly recognize it for 456 00:23:34,560 --> 00:23:37,520 Speaker 9: the benefits and potentially the better structure in many cases 457 00:23:37,520 --> 00:23:38,520 Speaker 9: for investors. 458 00:23:39,200 --> 00:23:41,120 Speaker 5: And what does that then mean in terms of kind 459 00:23:41,160 --> 00:23:44,159 Speaker 5: of your competitive ability now that I'm thinking about it. 460 00:23:44,200 --> 00:23:46,280 Speaker 5: When you mentioned your Vanguards and your black Rocks about 461 00:23:46,280 --> 00:23:49,520 Speaker 5: thirty seconds here, I mean, if you're putting out one 462 00:23:49,720 --> 00:23:53,840 Speaker 5: ETF a day for years, are you able to see 463 00:23:53,920 --> 00:23:55,840 Speaker 5: kind of demand catch up to that or is that 464 00:23:55,920 --> 00:23:57,240 Speaker 5: just purely offerings? 465 00:23:57,680 --> 00:24:03,480 Speaker 9: It's great question. Different is obviously key. A lot of 466 00:24:03,480 --> 00:24:07,600 Speaker 9: those bigger names and those assets are in passively managed ETFs, 467 00:24:07,640 --> 00:24:09,679 Speaker 9: but a lot of the action and the majority of 468 00:24:09,720 --> 00:24:12,640 Speaker 9: products coming to market are actively managed. So it's these 469 00:24:12,640 --> 00:24:16,119 Speaker 9: are firms that are trying to differentiate and that is 470 00:24:16,200 --> 00:24:18,880 Speaker 9: going to be absolutely critical. But I would say one 471 00:24:18,880 --> 00:24:20,640 Speaker 9: of the reasons why I guess to bring it full 472 00:24:20,640 --> 00:24:23,480 Speaker 9: circle I got into ETFs all those years ago was 473 00:24:23,520 --> 00:24:26,399 Speaker 9: the innovation. And I always make the joke that it's 474 00:24:26,440 --> 00:24:28,520 Speaker 9: the most fun in the industry by far, because this 475 00:24:28,600 --> 00:24:31,200 Speaker 9: is where the actions that is, and that is where 476 00:24:31,720 --> 00:24:33,280 Speaker 9: the competitive game is being played. 477 00:24:33,359 --> 00:24:35,280 Speaker 1: All right, Ben, thanks so much for joining us. Ben Slavan, 478 00:24:35,560 --> 00:24:39,520 Speaker 1: Global head of ETFs for b n Y Melon Asset Servicing, 479 00:24:39,920 --> 00:24:42,040 Speaker 1: joining us here in our Bloomberg Interactive Broker Studio. 480 00:24:43,400 --> 00:24:46,800 Speaker 6: You're listening to the team Ken's are Live program Bloomberg 481 00:24:46,880 --> 00:24:50,240 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com, 482 00:24:50,320 --> 00:24:53,480 Speaker 6: the iHeartRadio app and the Bloomberg Business app, or listen 483 00:24:53,520 --> 00:24:55,800 Speaker 6: on demand wherever you get your podcasts. 484 00:24:58,040 --> 00:24:59,760 Speaker 1: Kind of the news today, you can make it the 485 00:24:59,840 --> 00:25:03,600 Speaker 1: lo How does Maddie was in the commodity space and 486 00:25:03,680 --> 00:25:06,399 Speaker 1: crude oil Saudi Arabia? I think a surprise to me, 487 00:25:06,480 --> 00:25:10,920 Speaker 1: at least cutting production outside of the OPEC plus group, 488 00:25:10,920 --> 00:25:13,800 Speaker 1: but just cutting production on its own by a million 489 00:25:13,840 --> 00:25:16,439 Speaker 1: barrels a day. That seems material. I don't see that 490 00:25:16,480 --> 00:25:19,240 Speaker 1: every day. So I figured, let's get this commodities guy 491 00:25:19,280 --> 00:25:21,280 Speaker 1: in the studio. Maybe he can help us out there, 492 00:25:21,280 --> 00:25:23,960 Speaker 1: Mike mcgloone. He covers all the commodities from port bellies 493 00:25:24,000 --> 00:25:27,119 Speaker 1: to corn, to oil to crypto. He's our guy, and 494 00:25:27,160 --> 00:25:30,440 Speaker 1: he's actually in the Bloomberg Interactive Broker studio. And that's 495 00:25:30,520 --> 00:25:33,720 Speaker 1: just because it's getting down towards summer. John in Miami 496 00:25:34,040 --> 00:25:36,359 Speaker 1: it's too hot, so now he has to summer up 497 00:25:36,400 --> 00:25:39,159 Speaker 1: there in Midtown Manhattan. I told him it was going 498 00:25:39,240 --> 00:25:42,120 Speaker 1: to happen. Mike, thanks so much for joining us here. 499 00:25:42,800 --> 00:25:45,760 Speaker 1: I don't recall seeing an OPEC member kind of on 500 00:25:45,800 --> 00:25:48,440 Speaker 1: its own, much less Saudi Arabia kind of stepping out 501 00:25:48,440 --> 00:25:50,280 Speaker 1: and changing production. What do you make it? 502 00:25:50,280 --> 00:25:52,879 Speaker 10: Today's it is rare for them to kind of front 503 00:25:53,040 --> 00:25:55,400 Speaker 10: run the market like this. What's typical is for them 504 00:25:55,440 --> 00:25:58,959 Speaker 10: to cut during bear markets. Okay, And that's my signal 505 00:25:59,000 --> 00:26:00,919 Speaker 10: that this is a bear market. And I think they 506 00:26:00,960 --> 00:26:02,919 Speaker 10: know you've seen it with price action today. We bounced 507 00:26:02,960 --> 00:26:05,879 Speaker 10: about two bucks overnight, three two fifty for a while now, 508 00:26:06,000 --> 00:26:08,280 Speaker 10: or maybe up a buck seventy two dollars a barrel. 509 00:26:08,520 --> 00:26:11,040 Speaker 10: And it's what's happening now is markets are kind of 510 00:26:11,040 --> 00:26:14,360 Speaker 10: waiting for this the Saudi minister warned us, you know 511 00:26:15,119 --> 00:26:17,800 Speaker 10: that they might be hurting, and so people who've been 512 00:26:17,800 --> 00:26:19,840 Speaker 10: waiting to resell at higher levels have been waiting for this, 513 00:26:19,880 --> 00:26:21,240 Speaker 10: and I think that's what's happening because. 514 00:26:21,080 --> 00:26:21,680 Speaker 8: It's a bear market. 515 00:26:21,720 --> 00:26:24,119 Speaker 10: Remember crewell peaked around one thirty last year, it's seventy 516 00:26:24,160 --> 00:26:27,280 Speaker 10: two now, and it's the macro that's overwhelming. So I 517 00:26:27,359 --> 00:26:29,159 Speaker 10: wrote about it again today. I still looking for the 518 00:26:29,200 --> 00:26:30,520 Speaker 10: head towards fifty dollars a barrel. 519 00:26:30,520 --> 00:26:33,240 Speaker 1: Now, okay, fifty dollars per barrel is your call. And 520 00:26:33,280 --> 00:26:36,720 Speaker 1: you've been there for a long time. Fifty before one fifty. 521 00:26:36,720 --> 00:26:39,760 Speaker 1: I forget how you phrased it, but yeah, you're still 522 00:26:39,760 --> 00:26:40,320 Speaker 1: sticking out with. 523 00:26:40,240 --> 00:26:42,439 Speaker 10: That, sticking with it and adding to it because to me, 524 00:26:42,520 --> 00:26:45,280 Speaker 10: now it's getting worse. We're in a situation now. First 525 00:26:45,280 --> 00:26:48,119 Speaker 10: of all, it's the macro's overwhelming. We talk about China demand. 526 00:26:48,119 --> 00:26:52,000 Speaker 10: We're all seeing that is becoming less. You know, it's disappointing. 527 00:26:52,040 --> 00:26:54,600 Speaker 10: Now that's what we expected because remember China kind of 528 00:26:54,640 --> 00:26:58,119 Speaker 10: made enemies with its best customers US and Europe. Okay, 529 00:26:58,200 --> 00:27:00,639 Speaker 10: so that's tilting that way, that's my And then it 530 00:27:00,840 --> 00:27:03,880 Speaker 10: is the massive paradigm shift of US production. So if 531 00:27:03,880 --> 00:27:07,080 Speaker 10: you add Canada to our US production liquid fuels, it's 532 00:27:07,080 --> 00:27:09,399 Speaker 10: about twenty six million barrels a day. The significance of 533 00:27:09,440 --> 00:27:13,040 Speaker 10: that is as well above consumption, maybe four million bills 534 00:27:13,040 --> 00:27:16,880 Speaker 10: above consumption. That's what's changed versus maybe the great financial crisis. 535 00:27:16,880 --> 00:27:20,080 Speaker 10: That's overwhelming force and the ruling commodities. As you're always 536 00:27:20,119 --> 00:27:22,359 Speaker 10: going towards the marginal cost of production. Now natural guests 537 00:27:22,359 --> 00:27:24,800 Speaker 10: already did that. It spike to ten, back down to two, 538 00:27:24,840 --> 00:27:27,720 Speaker 10: and it's stuck at two. Crude else is following that path, 539 00:27:27,760 --> 00:27:30,280 Speaker 10: and the US the largest producer, the average cost of 540 00:27:30,280 --> 00:27:33,119 Speaker 10: production based on data and the terminals around fifty dollars 541 00:27:33,119 --> 00:27:33,520 Speaker 10: a barrel. 542 00:27:34,040 --> 00:27:36,800 Speaker 11: Is it concerning at all? Or what's the thinking on 543 00:27:36,960 --> 00:27:40,400 Speaker 11: Saudi being the main driver, the only opet. 544 00:27:40,040 --> 00:27:43,240 Speaker 10: Plus memory Exactly, they're just trying to catch up being 545 00:27:43,280 --> 00:27:44,040 Speaker 10: the main driver. 546 00:27:44,680 --> 00:27:45,680 Speaker 1: Well, that's more. 547 00:27:47,160 --> 00:27:50,040 Speaker 10: What they're wise and what they're really doing that why. 548 00:27:50,080 --> 00:27:51,639 Speaker 10: But the matters for me is what's it going to 549 00:27:51,680 --> 00:27:55,000 Speaker 10: do for the market. It actually helps the US in 550 00:27:55,040 --> 00:27:58,480 Speaker 10: a way. We're net energy exporter in terms of massively 551 00:27:58,480 --> 00:28:01,000 Speaker 10: if he terms natural gas. This is what's change. And 552 00:28:01,119 --> 00:28:03,879 Speaker 10: yes there's some oil that's still important to us, so Saudi, 553 00:28:03,920 --> 00:28:06,040 Speaker 10: but it really hurts their customers more. I mean they're 554 00:28:06,080 --> 00:28:08,399 Speaker 10: raising price, isn't cutting production? And what's the number one 555 00:28:08,400 --> 00:28:11,480 Speaker 10: customer China? So I look at it. It's just a 556 00:28:11,520 --> 00:28:14,320 Speaker 10: part of the tree in the forest of that diminishing 557 00:28:14,400 --> 00:28:16,000 Speaker 10: significance of this cartael. 558 00:28:15,720 --> 00:28:17,040 Speaker 1: That was a big part of our lives. 559 00:28:17,359 --> 00:28:19,199 Speaker 10: I mean, I grew up in the seventies and you 560 00:28:19,240 --> 00:28:22,879 Speaker 10: remember those crisses those days. It's amazing how we've completely 561 00:28:22,920 --> 00:28:25,520 Speaker 10: shifted the other way. And now it's also part of 562 00:28:25,560 --> 00:28:27,840 Speaker 10: this significant paradigm shift. First of all, if you add 563 00:28:27,840 --> 00:28:30,840 Speaker 10: in FED tightening that's very rare, commodits collapsing, and then 564 00:28:30,840 --> 00:28:33,679 Speaker 10: towards evs. I mean almost ten percent of total Automo 565 00:28:33,720 --> 00:28:35,880 Speaker 10: sales and are evs. That's stuff that we dreamed of 566 00:28:35,920 --> 00:28:36,800 Speaker 10: ten years ago. 567 00:28:37,080 --> 00:28:40,400 Speaker 1: The United States is not part of OPEK, right Is 568 00:28:40,440 --> 00:28:42,440 Speaker 1: there any reason they should be? Now that we're kind 569 00:28:42,440 --> 00:28:44,959 Speaker 1: of a big player now, I mean, aren't we Like? 570 00:28:45,320 --> 00:28:46,480 Speaker 1: How can we not be involved in. 571 00:28:46,600 --> 00:28:49,640 Speaker 10: Free market capitalism? Natural gas is a good exactly, mean, 572 00:28:49,680 --> 00:28:51,959 Speaker 10: it's just good old free market capitalism on a global 573 00:28:51,960 --> 00:28:54,560 Speaker 10: basis is what energy has become. It's because of OPEC's 574 00:28:54,600 --> 00:28:58,000 Speaker 10: really boosting that price up above one hundred dollars a barrel, 575 00:28:58,160 --> 00:29:01,000 Speaker 10: you know, up till twenty fourteen. That really accelerated the 576 00:29:01,040 --> 00:29:04,720 Speaker 10: USL revolution. And that's part by piece of prices collapse. 577 00:29:04,760 --> 00:29:06,760 Speaker 10: Now people keep talking about, oh, Shelle production is going 578 00:29:06,840 --> 00:29:09,000 Speaker 10: to decline. They've been hearing that for a decade. And 579 00:29:09,040 --> 00:29:12,400 Speaker 10: I read this book called the Domino Effect, and it 580 00:29:12,520 --> 00:29:14,440 Speaker 10: just points out, Okay, that might peak a little, but 581 00:29:14,440 --> 00:29:16,880 Speaker 10: then there's the next technology, in the next technology. That's 582 00:29:16,880 --> 00:29:19,600 Speaker 10: what's happening so fast. And I like to point out 583 00:29:20,000 --> 00:29:23,000 Speaker 10: crude oil from a supplying demand standpoint, we're creating more 584 00:29:23,000 --> 00:29:26,719 Speaker 10: of it with technology, replacing it with technology more than 585 00:29:26,760 --> 00:29:28,920 Speaker 10: any other commodity. So if you're gonna be bush of commodity, 586 00:29:28,920 --> 00:29:31,680 Speaker 10: you start with gold and maybe triple trickle down the copper. 587 00:29:32,120 --> 00:29:34,120 Speaker 10: But crude oil is the one that's just being replaced. 588 00:29:34,160 --> 00:29:36,200 Speaker 10: I mean, I ride my electric bike too in Florida 589 00:29:36,200 --> 00:29:37,880 Speaker 10: every day and I don't need a car anyone. 590 00:29:37,960 --> 00:29:41,480 Speaker 1: Yes, you do. Look at him now, is it a 591 00:29:41,560 --> 00:29:45,120 Speaker 1: pedal assisted bike? Of course I did that, big old sissy, okay, 592 00:29:45,120 --> 00:29:49,840 Speaker 1: but but it's battered assist as opposed to these guys 593 00:29:49,840 --> 00:29:52,880 Speaker 1: who deliver the food here on sixth Avenue or Election 594 00:29:52,960 --> 00:29:54,640 Speaker 1: to Avenue. They're just you don't have to pedal, you 595 00:29:54,640 --> 00:29:56,320 Speaker 1: just fly down the show. I'm glad you mentioned that, Paul. 596 00:29:56,400 --> 00:29:57,720 Speaker 10: That was the paradigm shift for me. 597 00:29:57,760 --> 00:29:58,720 Speaker 1: About five years ago. 598 00:29:58,760 --> 00:30:00,520 Speaker 10: I remember seeing all these guys you I always here. 599 00:30:00,760 --> 00:30:03,240 Speaker 10: Here are the motorbikes right now. They're all silent, they 600 00:30:03,280 --> 00:30:05,160 Speaker 10: hardly ever pedal. But I looked at those bikes. They're 601 00:30:05,200 --> 00:30:07,640 Speaker 10: not pretty, they're ugly, but they go fast. They don't 602 00:30:07,680 --> 00:30:10,080 Speaker 10: have to pedal, Like, that's what I want. And so 603 00:30:10,160 --> 00:30:11,680 Speaker 10: I came back a couple, you know, a couple of 604 00:30:11,720 --> 00:30:12,760 Speaker 10: weeks ago, and you see. 605 00:30:12,960 --> 00:30:14,719 Speaker 1: All of you don't hear motorbikes anymore. 606 00:30:14,720 --> 00:30:17,040 Speaker 10: It's just that it's the technology is moving so fast. 607 00:30:17,040 --> 00:30:18,560 Speaker 10: And the key question I asked, so TESTA is the 608 00:30:18,560 --> 00:30:21,520 Speaker 10: same thing. It's just set power unit providing that electricity. 609 00:30:21,840 --> 00:30:24,200 Speaker 10: Where's that power unit going from? It's only getting cheaper, 610 00:30:24,240 --> 00:30:27,920 Speaker 10: faster and more powerful from batteries to made me feel sales, 611 00:30:27,960 --> 00:30:28,840 Speaker 10: it's just what's all right? 612 00:30:28,880 --> 00:30:31,800 Speaker 1: All right, so you're zipping around South Beach on your bike. 613 00:30:32,040 --> 00:30:33,880 Speaker 1: I get the visual, all right, Let's switch gears to 614 00:30:34,520 --> 00:30:36,680 Speaker 1: crypto for just a second, not a good day for 615 00:30:36,720 --> 00:30:40,800 Speaker 1: crypto space Finance Holdings, and as chief executive officer jo 616 00:30:41,000 --> 00:30:43,720 Speaker 1: workus of breaking US rules according to a federal court 617 00:30:43,720 --> 00:30:47,560 Speaker 1: following by the Securities Exchange Commission. What's it mean to 618 00:30:47,600 --> 00:30:49,760 Speaker 1: you is somebody who looks at this crypto space parish. 619 00:30:50,160 --> 00:30:52,200 Speaker 10: I hate to say, because the crypto people do not 620 00:30:52,400 --> 00:30:54,080 Speaker 10: like you when you say things they do now want 621 00:30:54,120 --> 00:30:56,600 Speaker 10: to hear, which is particularly why I have to use 622 00:30:56,600 --> 00:30:59,800 Speaker 10: my independent voice to say, I think you people are 623 00:30:59,800 --> 00:31:05,440 Speaker 10: too overwhelming, the optim optimist, optimistic that the worst is 624 00:31:05,480 --> 00:31:07,200 Speaker 10: not over. And I got that sense a lot in 625 00:31:07,200 --> 00:31:09,800 Speaker 10: the bitcoin Miami. I see it a lot. Everybodybody says 626 00:31:09,800 --> 00:31:11,600 Speaker 10: the worst is over. I hear it in the stock 627 00:31:11,640 --> 00:31:16,320 Speaker 10: market too. And that's what's happening late with crypto bloom Bloomberg, Galaxy, 628 00:31:16,320 --> 00:31:19,640 Speaker 10: Crypto in NIXT the bitcoins down on the quarter about 629 00:31:19,640 --> 00:31:22,640 Speaker 10: six percent, yet the stock market's up. That's not supposed 630 00:31:22,680 --> 00:31:24,840 Speaker 10: to happen. So I think what's happened is you're seeing 631 00:31:24,840 --> 00:31:27,440 Speaker 10: more and more. There's just massive speculation in that space 632 00:31:27,480 --> 00:31:29,720 Speaker 10: and still needs to be purged. And the fact we 633 00:31:29,760 --> 00:31:32,240 Speaker 10: had a big boom, a big bounce, means to me 634 00:31:32,280 --> 00:31:35,120 Speaker 10: the risk is it tilts back lower. So typically what 635 00:31:35,120 --> 00:31:38,200 Speaker 10: happens if we're having this, you know, NASDAK lifting all 636 00:31:38,200 --> 00:31:41,280 Speaker 10: boats rally, Crypto should be leading and they're not. So 637 00:31:41,360 --> 00:31:43,560 Speaker 10: I'm sure I'm pointing out that maybe the Nasdaq is 638 00:31:43,640 --> 00:31:45,840 Speaker 10: just in a short term bounce and everything's heading back 639 00:31:45,840 --> 00:31:48,240 Speaker 10: towards that recession. That most of the spect and on 640 00:31:48,360 --> 00:31:52,360 Speaker 10: along pointed out. Is this work from home unemployment. It's 641 00:31:52,400 --> 00:31:54,240 Speaker 10: really ticking up. It's a good sign. Ono Wong's are 642 00:31:54,320 --> 00:31:57,160 Speaker 10: chief economists. It's truly ticking up, showing signs. 643 00:31:56,880 --> 00:31:59,480 Speaker 1: Of RECESSI familiar with this whole work at home concept, 644 00:32:00,200 --> 00:32:02,640 Speaker 1: but I hear that's the thing, all right. I appreciate it. 645 00:32:02,640 --> 00:32:04,880 Speaker 1: Mike mcglohone, he covers all the strategy stuff, all the 646 00:32:04,880 --> 00:32:08,400 Speaker 1: commodity stuff for Bloomberg Intelligence based down in the self 647 00:32:08,480 --> 00:32:11,720 Speaker 1: proclaimed crypto capital of the United States, Miami, but we 648 00:32:11,760 --> 00:32:13,720 Speaker 1: got him up here on our Bloomberg INTERACTI Brooker Studio 649 00:32:13,800 --> 00:32:14,240 Speaker 1: in New York. 650 00:32:14,400 --> 00:32:17,520 Speaker 6: You're listening to the tape Cat's are live program Bloomberg 651 00:32:17,600 --> 00:32:21,160 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 652 00:32:21,240 --> 00:32:23,320 Speaker 6: tune in app, Bloomberg dot Com. 653 00:32:23,040 --> 00:32:24,480 Speaker 8: And the Bloomberg Business app. 654 00:32:24,520 --> 00:32:27,320 Speaker 6: You can also listen live on Amazon Alexa from our 655 00:32:27,320 --> 00:32:31,320 Speaker 6: flagship New York station, Just say Alexa playing Bloomberg eleven 656 00:32:31,440 --> 00:32:34,000 Speaker 6: thirty Madison. 657 00:32:34,080 --> 00:32:37,240 Speaker 1: My fixed income strategy is simple. I'm walking up, I'm 658 00:32:37,240 --> 00:32:39,920 Speaker 1: buying a two year treasury like four point five percent, 659 00:32:40,280 --> 00:32:41,800 Speaker 1: and that's it. I'm done. I'm going down to the 660 00:32:41,800 --> 00:32:44,520 Speaker 1: beach toes in the sand. That's it. But some people 661 00:32:44,560 --> 00:32:46,200 Speaker 1: make it more difficult. I think our next guest is 662 00:32:46,240 --> 00:32:48,680 Speaker 1: one of those guys, Steven O, Global head of fixed 663 00:32:48,720 --> 00:32:51,360 Speaker 1: Income at pine Bridge Investments. He's based in Los Angeles, 664 00:32:51,720 --> 00:32:53,440 Speaker 1: but of course he felt the need to come to 665 00:32:53,560 --> 00:32:56,800 Speaker 1: the global financial capital of the world that is New 666 00:32:56,880 --> 00:33:00,240 Speaker 1: York City, and he's in our Bloomberg INTERACTI Brooker Studio. Dave, 667 00:33:00,840 --> 00:33:02,520 Speaker 1: what do you think of my strategies buying to your 668 00:33:02,520 --> 00:33:04,000 Speaker 1: treasures and just kind of rolling them over. 669 00:33:04,360 --> 00:33:06,080 Speaker 12: You know, it's not a bad strategy at this point 670 00:33:06,080 --> 00:33:08,160 Speaker 12: in time, giving the yields that you're getting, although I 671 00:33:08,160 --> 00:33:10,440 Speaker 12: would recommend if that's the approach you're going to take, 672 00:33:10,680 --> 00:33:14,200 Speaker 12: you're probably better off rolling three month t bills because 673 00:33:14,680 --> 00:33:16,520 Speaker 12: our view is that the FED is not going to 674 00:33:16,520 --> 00:33:18,760 Speaker 12: be as aggressive or as quick to cut rates than 675 00:33:18,800 --> 00:33:19,680 Speaker 12: what's being priced in. 676 00:33:20,440 --> 00:33:22,360 Speaker 11: You think a longer pause or. 677 00:33:23,160 --> 00:33:25,880 Speaker 12: I do you know? Right now, the market is expecting 678 00:33:25,920 --> 00:33:27,480 Speaker 12: that the FED will start cutting at the end of 679 00:33:27,520 --> 00:33:30,600 Speaker 12: this year, as well as the depth of cuts into 680 00:33:30,640 --> 00:33:33,760 Speaker 12: next year. We think it's just unlikely to play out, 681 00:33:34,000 --> 00:33:37,440 Speaker 12: and therefore market expectations are a bit too optimistic with 682 00:33:37,600 --> 00:33:38,840 Speaker 12: respect to FED support. 683 00:33:39,440 --> 00:33:41,280 Speaker 1: All right, So if I wanted to take maybe a 684 00:33:41,320 --> 00:33:45,080 Speaker 1: little bit more risk, a little bit more duration corporate credit, 685 00:33:45,360 --> 00:33:48,120 Speaker 1: where should I start my analysis there? 686 00:33:48,320 --> 00:33:51,320 Speaker 12: Well, corporate credit right now is much maligned, in part 687 00:33:51,400 --> 00:33:54,760 Speaker 12: because of all these talks about recessionary pressures, the faults 688 00:33:54,800 --> 00:33:57,040 Speaker 12: and so forth. We think there's a lot of value 689 00:33:57,080 --> 00:34:00,520 Speaker 12: across the spectrum of corporate credit. Of course, for more 690 00:34:00,640 --> 00:34:03,440 Speaker 12: risk averse investors, investment great corporate credit is a very 691 00:34:03,440 --> 00:34:05,640 Speaker 12: good space to be. But I think some parts of 692 00:34:05,680 --> 00:34:08,680 Speaker 12: the leverage finance market right now, I think the you know, 693 00:34:09,080 --> 00:34:13,080 Speaker 12: ugly step child is leverage loans. But we think leverage 694 00:34:13,120 --> 00:34:16,319 Speaker 12: loans are a little bit misguided in terms of what 695 00:34:16,440 --> 00:34:18,600 Speaker 12: markets believe are going to be the default race and 696 00:34:18,640 --> 00:34:21,520 Speaker 12: the problems and the absolute yields that you're getting there 697 00:34:21,560 --> 00:34:25,440 Speaker 12: are more than adequately constant compensating you or another hybrid 698 00:34:25,440 --> 00:34:28,279 Speaker 12: way to play that market is CLO tranches. Right now, 699 00:34:28,320 --> 00:34:31,880 Speaker 12: when you look at where CLO tranches are yielding, you know, 700 00:34:31,960 --> 00:34:35,440 Speaker 12: double bclos are fourteen to fifteen percent, Triple a's are 701 00:34:35,800 --> 00:34:38,120 Speaker 12: spreads of you know, one eighty to two hundred over. 702 00:34:38,400 --> 00:34:41,080 Speaker 12: And then finally, last year for US was a theme 703 00:34:41,160 --> 00:34:45,000 Speaker 12: about going within the US as a defensive strategy because 704 00:34:45,000 --> 00:34:48,400 Speaker 12: we thought US was really where the fundamentals were superior. 705 00:34:48,880 --> 00:34:50,239 Speaker 1: This year it's about. 706 00:34:49,920 --> 00:34:53,040 Speaker 12: Also expanding outside of the US more toward emerging markets 707 00:34:53,080 --> 00:34:54,160 Speaker 12: and other parts of the world. 708 00:34:54,800 --> 00:34:58,160 Speaker 11: Is that strategy partially because you're anticipating downside to the 709 00:34:58,280 --> 00:35:01,680 Speaker 11: US dollar or what's the single I guess driving force find. 710 00:35:01,520 --> 00:35:04,719 Speaker 12: That the downside to the US dollar is a small component, 711 00:35:04,920 --> 00:35:08,400 Speaker 12: but more so than expecting the dollar to depreciate meaningfully. 712 00:35:08,719 --> 00:35:12,160 Speaker 12: We don't think that the dollar has much risk of appreciating, 713 00:35:12,200 --> 00:35:15,000 Speaker 12: and so the headwinds will dissipate. But the bigger element 714 00:35:15,040 --> 00:35:16,840 Speaker 12: of that is if you look out for the next 715 00:35:16,840 --> 00:35:20,719 Speaker 12: two years at the growth expectations of US, which is 716 00:35:20,760 --> 00:35:24,840 Speaker 12: decelerating versus emerging markets, the gap is going to increase, 717 00:35:25,000 --> 00:35:28,360 Speaker 12: which favors the fundamental outlook for many parts of emerging markets. 718 00:35:28,680 --> 00:35:31,680 Speaker 1: All right, Steven, So if I'm an analyst in one 719 00:35:31,680 --> 00:35:36,120 Speaker 1: of your funds and I bring an idea to my manager, 720 00:35:36,239 --> 00:35:39,400 Speaker 1: to you as the head of fixingcome, am I running 721 00:35:39,440 --> 00:35:42,560 Speaker 1: my recession model for the forecast? Or am I running 722 00:35:42,680 --> 00:35:45,120 Speaker 1: kind of the world's okay kind of model? 723 00:35:45,320 --> 00:35:48,120 Speaker 12: Well, first of all, we have over one hundred investment 724 00:35:48,160 --> 00:35:51,400 Speaker 12: professionals who are focused on the strategy, So you know, 725 00:35:51,640 --> 00:35:53,640 Speaker 12: what is the analyst giving us in terms of that 726 00:35:53,680 --> 00:35:56,319 Speaker 12: outlook and what is our top down view? And even 727 00:35:56,360 --> 00:35:58,880 Speaker 12: though we get caught up into debate around recession or 728 00:35:58,920 --> 00:36:02,040 Speaker 12: no recession, I think it's more important is what type 729 00:36:02,040 --> 00:36:05,000 Speaker 12: of recession environment will it be? You know, we believe 730 00:36:05,080 --> 00:36:08,080 Speaker 12: that there will in all likelihood be a technical recession 731 00:36:08,160 --> 00:36:12,880 Speaker 12: or recession definitionally, but we don't see unemployment levels going 732 00:36:12,960 --> 00:36:15,839 Speaker 12: up much more than another percent or so. So it's 733 00:36:15,840 --> 00:36:18,560 Speaker 12: the type of recession which would be very mild in nature. 734 00:36:18,880 --> 00:36:21,480 Speaker 12: And I think that the FED is definitely headed toward 735 00:36:21,600 --> 00:36:22,920 Speaker 12: engineering a soft landing. 736 00:36:23,600 --> 00:36:27,600 Speaker 11: Do you think the FED has had any missteps along 737 00:36:27,640 --> 00:36:29,840 Speaker 11: the way or would you advise them to do anything 738 00:36:29,880 --> 00:36:31,279 Speaker 11: differently than you're anticipating. 739 00:36:31,600 --> 00:36:34,040 Speaker 12: I think it's easy to criticize in hindsight, and that's 740 00:36:34,080 --> 00:36:36,400 Speaker 12: what we do all the time. But I think the 741 00:36:36,400 --> 00:36:39,400 Speaker 12: FED has done a fairly laudable job. I think the 742 00:36:39,440 --> 00:36:42,799 Speaker 12: one area where I would somewhat disagree with is we 743 00:36:42,840 --> 00:36:45,600 Speaker 12: are definitely in restrictive terrictory, and I would argue we 744 00:36:45,680 --> 00:36:48,279 Speaker 12: have been. It's really how quickly do you want to 745 00:36:48,360 --> 00:36:52,480 Speaker 12: achieve the deceleration goals with respect to inflation in particular. 746 00:36:53,040 --> 00:36:55,800 Speaker 12: And you know, my view is that you're much better 747 00:36:56,400 --> 00:36:59,200 Speaker 12: easing on the breaks to a glide path rather than 748 00:36:59,239 --> 00:37:00,360 Speaker 12: slamming on the bs. 749 00:37:01,080 --> 00:37:02,120 Speaker 1: And I don't think. 750 00:37:02,000 --> 00:37:05,280 Speaker 12: The FED necessarily needed to be even where we are today, 751 00:37:05,880 --> 00:37:08,240 Speaker 12: but they want to achieve their goals a lot more quickly, 752 00:37:08,520 --> 00:37:10,880 Speaker 12: and that's the differential that I would have with them. 753 00:37:11,239 --> 00:37:13,239 Speaker 1: Early in my career was at the Chase Manhattan Bank 754 00:37:13,320 --> 00:37:17,560 Speaker 1: lending money to media companies, technolo telecom companies. They had 755 00:37:17,600 --> 00:37:20,040 Speaker 1: no assets. We lent against cash flow, We land against 756 00:37:20,600 --> 00:37:24,239 Speaker 1: airwaves frequencies. My credit guys had no idea what we 757 00:37:24,239 --> 00:37:26,200 Speaker 1: were doing, but we would lend to four or five 758 00:37:26,280 --> 00:37:28,800 Speaker 1: six times cash flow on a senior basis. That's leverage lending. 759 00:37:28,800 --> 00:37:31,360 Speaker 1: To me, what are you guys doing in leverage finance 760 00:37:31,560 --> 00:37:32,000 Speaker 1: these days? 761 00:37:32,000 --> 00:37:34,160 Speaker 12: What are some of the sectors you guys like, you know, 762 00:37:34,360 --> 00:37:37,560 Speaker 12: we are value investors and traditional credit investors. 763 00:37:37,600 --> 00:37:39,280 Speaker 1: We look at cash flows. 764 00:37:38,960 --> 00:37:42,640 Speaker 12: And for me, I just never understood when the telecom 765 00:37:42,640 --> 00:37:45,600 Speaker 12: infrastructure build out was taking place into early two thousands 766 00:37:45,640 --> 00:37:48,640 Speaker 12: on business plans. That may be a great equity story, 767 00:37:48,920 --> 00:37:50,840 Speaker 12: but that's certainly not a fixed income. 768 00:37:50,600 --> 00:37:54,520 Speaker 1: Creditsortance we took on. We led money to fleet call, 769 00:37:55,000 --> 00:37:57,880 Speaker 1: no company. It was just against spectrum. People don't know 770 00:37:57,920 --> 00:38:00,399 Speaker 1: what fleek call is. It was basically a taxi thing. 771 00:38:00,960 --> 00:38:03,800 Speaker 1: But we lend money those guys, but we got warrants. 772 00:38:04,160 --> 00:38:06,880 Speaker 12: Well, you know you're talking about the days of excess, 773 00:38:06,960 --> 00:38:09,480 Speaker 12: right and during Polish periods, that's exactly what you have. 774 00:38:10,000 --> 00:38:13,360 Speaker 12: And I think make Samir John, it's very important to 775 00:38:13,400 --> 00:38:17,319 Speaker 12: have discipline when when you're chartered with making loans, when 776 00:38:17,360 --> 00:38:20,680 Speaker 12: you have capital to invest, often it's not about making 777 00:38:20,680 --> 00:38:22,960 Speaker 12: prudent investments. It's about what do you do that's the 778 00:38:23,040 --> 00:38:26,320 Speaker 12: relatively the more attractive, And I think it's important to 779 00:38:26,360 --> 00:38:28,880 Speaker 12: say we're not going to lend to those types of segments. 780 00:38:28,880 --> 00:38:31,080 Speaker 12: That's not what we do. That's beyond our knitting, that's 781 00:38:31,120 --> 00:38:33,360 Speaker 12: beyond our comfort level, and be willing to in the 782 00:38:33,440 --> 00:38:36,160 Speaker 12: short term in some ways underperformed by not getting the 783 00:38:36,200 --> 00:38:37,840 Speaker 12: type of yields that the market may offer. 784 00:38:38,719 --> 00:38:41,800 Speaker 11: Wait, but I love this line of questioning, Paul, because 785 00:38:41,920 --> 00:38:44,120 Speaker 11: you have the exact experience. 786 00:38:43,560 --> 00:38:46,120 Speaker 1: To why to what you do now we didn't know 787 00:38:46,120 --> 00:38:46,480 Speaker 1: any better? 788 00:38:46,560 --> 00:38:47,719 Speaker 11: Give me another example. 789 00:38:47,800 --> 00:38:49,759 Speaker 1: I love this, Why just again? My favorite stuff? We 790 00:38:49,800 --> 00:38:52,640 Speaker 1: just again? You lend against cash flow and Steven knows 791 00:38:52,680 --> 00:38:55,759 Speaker 1: all about that because your cash net income doesn't pay 792 00:38:55,800 --> 00:38:58,160 Speaker 1: you back. Cash flow pays you back. Free cash flow 793 00:38:58,280 --> 00:39:00,759 Speaker 1: is what pays you back. Are there some sectors here 794 00:39:00,920 --> 00:39:03,239 Speaker 1: right now? Let's talk about that emergent market thing, because 795 00:39:03,239 --> 00:39:05,800 Speaker 1: we don't talk about emerging markets enough. In emergent markets, 796 00:39:06,160 --> 00:39:08,800 Speaker 1: where would I start? I mean, I can't go to China? 797 00:39:08,840 --> 00:39:09,160 Speaker 1: Can I? 798 00:39:09,680 --> 00:39:12,920 Speaker 12: You absolutely can go to China. We think there's a 799 00:39:12,960 --> 00:39:16,359 Speaker 12: fair amount of value in you know, Asia. Credit is one. 800 00:39:16,800 --> 00:39:20,359 Speaker 12: Even though China's you know rebound right now is bit 801 00:39:20,440 --> 00:39:24,160 Speaker 12: irregular and there's fits and starts, it is absolutely rebounding. 802 00:39:24,440 --> 00:39:27,040 Speaker 12: So one component of China where there'd be no greater 803 00:39:27,120 --> 00:39:29,680 Speaker 12: comfort level. Everyone tends to focus is on real estate 804 00:39:29,719 --> 00:39:32,759 Speaker 12: and property. But that's not all about China. There's other 805 00:39:32,840 --> 00:39:36,320 Speaker 12: things beyond that. I think travel and leisure rebound. For example, 806 00:39:36,400 --> 00:39:40,040 Speaker 12: we have been proponents of the McCall casino reopening and rebound. 807 00:39:40,320 --> 00:39:43,520 Speaker 12: So there are pockets of consumer leisure and entertainment and 808 00:39:43,520 --> 00:39:46,640 Speaker 12: consumer travel that we think just as the US coming 809 00:39:46,640 --> 00:39:48,760 Speaker 12: out of COVID still is on the rebound. 810 00:39:48,960 --> 00:39:49,680 Speaker 1: That's the sector. 811 00:39:49,880 --> 00:39:53,040 Speaker 12: But also we believe that with China reopening greater parts 812 00:39:53,080 --> 00:39:56,640 Speaker 12: of Asia, whether with or without, China has also experienced 813 00:39:56,640 --> 00:40:02,080 Speaker 12: some very good growth dynamics overall our opportunities, but we 814 00:40:02,160 --> 00:40:04,719 Speaker 12: tend to approach it not from necessarily a less buy 815 00:40:04,719 --> 00:40:07,000 Speaker 12: a basket of everything. You got to pick and choose, 816 00:40:07,000 --> 00:40:09,040 Speaker 12: and we have teams on the ground over there who's 817 00:40:09,080 --> 00:40:10,200 Speaker 12: responsible for doing that. 818 00:40:10,840 --> 00:40:14,680 Speaker 11: And you think that the China reopening story has just started, 819 00:40:14,800 --> 00:40:16,959 Speaker 11: then like what inning are we in when it comes 820 00:40:16,960 --> 00:40:18,400 Speaker 11: to the demand that's going to come from that. 821 00:40:18,840 --> 00:40:22,839 Speaker 12: The demand is going to be a little bit disappointing 822 00:40:22,880 --> 00:40:27,240 Speaker 12: and has been versus expectations overall, but we do see 823 00:40:27,280 --> 00:40:30,520 Speaker 12: if you look at things like airline travel data within 824 00:40:30,640 --> 00:40:33,640 Speaker 12: and outside of China, that's one area where we're still 825 00:40:33,640 --> 00:40:37,240 Speaker 12: in the very early innings of that demand rebound. Overall, 826 00:40:37,520 --> 00:40:40,120 Speaker 12: I think the manufacturing side is going to still struggle 827 00:40:40,320 --> 00:40:43,040 Speaker 12: a bit. So that's why we're turning more toward the consumer, 828 00:40:43,440 --> 00:40:47,040 Speaker 12: more towards services, and more toward internal expenditures. 829 00:40:48,080 --> 00:40:49,799 Speaker 1: Steve, and I know you spend some time at Bank 830 00:40:49,840 --> 00:40:52,080 Speaker 1: of America, which I refer to as Merrill Lynch on 831 00:40:52,120 --> 00:40:55,680 Speaker 1: the Hyld trading and distress that trading desk. If you 832 00:40:55,680 --> 00:40:57,279 Speaker 1: have a big position in pine Bridge and you need 833 00:40:57,320 --> 00:40:59,200 Speaker 1: to move it, can you move it? 834 00:41:00,760 --> 00:41:03,640 Speaker 12: The good news is we don't have big positions because 835 00:41:03,680 --> 00:41:06,440 Speaker 12: we're mid size of institutions. But no, you cannot move 836 00:41:06,480 --> 00:41:09,760 Speaker 12: big positions anymore. The market is, you know, has always 837 00:41:09,760 --> 00:41:13,080 Speaker 12: been semi liquid for distress or even you know, any 838 00:41:13,120 --> 00:41:17,799 Speaker 12: type of credit, and now it's become much more illiquid overall, 839 00:41:18,520 --> 00:41:21,160 Speaker 12: and so it becomes a much more challenging environment where 840 00:41:21,200 --> 00:41:23,920 Speaker 12: you have to have greater conviction of what you're buying 841 00:41:23,960 --> 00:41:26,600 Speaker 12: within credit because the liquidity is definitely going to be 842 00:41:26,640 --> 00:41:29,680 Speaker 12: more challenging. And I think at some level of size, 843 00:41:29,800 --> 00:41:32,040 Speaker 12: you know, for example, in the most liquid part of 844 00:41:32,080 --> 00:41:36,280 Speaker 12: credit investment, great corporates. You know, back pre financial crisis, 845 00:41:36,280 --> 00:41:38,600 Speaker 12: we used to get fifty by fifty markets. Now you're 846 00:41:38,680 --> 00:41:41,200 Speaker 12: lucky if you can get a five y five market yep, yep. 847 00:41:41,680 --> 00:41:44,439 Speaker 1: Chat times have change. Steven Oh, thank you so much 848 00:41:44,480 --> 00:41:46,400 Speaker 1: for joining as Steven Oh. He's a global head of 849 00:41:46,400 --> 00:41:49,719 Speaker 1: fixed income at pine Bridge Investments based in the City 850 00:41:49,760 --> 00:41:51,239 Speaker 1: of angels but he joins us here in New York 851 00:41:51,280 --> 00:41:53,719 Speaker 1: City on our Bloomberg Interactor Broker studio. We appreciate him 852 00:41:53,880 --> 00:41:56,160 Speaker 1: coming in giving us his lay of the land in 853 00:41:56,200 --> 00:41:58,920 Speaker 1: the fixed income space. I'm just looking down at the market. 854 00:41:58,920 --> 00:42:00,920 Speaker 1: I'll give you some of the treasury quotes here. We 855 00:42:01,000 --> 00:42:04,360 Speaker 1: got the two year treasury four point four to nine percent. Again, 856 00:42:04,440 --> 00:42:06,040 Speaker 1: I can sit there for a couple of years and 857 00:42:06,040 --> 00:42:08,040 Speaker 1: get that that's not too bad. Ten year treasury off 858 00:42:08,040 --> 00:42:11,040 Speaker 1: about three basis points here, three spot six eight percent 859 00:42:11,719 --> 00:42:13,360 Speaker 1: on your ten year treasury. 860 00:42:13,560 --> 00:42:17,120 Speaker 6: You're listening to the tape can'ser Live program Bloomberg Markets 861 00:42:17,200 --> 00:42:20,560 Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune 862 00:42:20,600 --> 00:42:22,440 Speaker 6: in app, Bloomberg dot Com. 863 00:42:22,160 --> 00:42:23,560 Speaker 8: And the Bloomberg Business App. 864 00:42:23,600 --> 00:42:26,440 Speaker 6: You can also listen live on Amazon Alexa from our 865 00:42:26,440 --> 00:42:30,840 Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 866 00:42:33,200 --> 00:42:36,360 Speaker 1: All right, now, let's pivot to Maddie. I think this 867 00:42:36,480 --> 00:42:39,040 Speaker 1: debt ceiling discussion, which was front and center for you know, 868 00:42:39,080 --> 00:42:41,800 Speaker 1: a month or so, it seems like it's been resolved. 869 00:42:42,040 --> 00:42:46,320 Speaker 1: In My question is kind of what comes next. Doctor 870 00:42:46,400 --> 00:42:50,000 Speaker 1: Nancy Kimmelman joins us. She's an economics professor from Northeastern 871 00:42:50,120 --> 00:42:54,239 Speaker 1: University and Tuffs University. So doctor Kimmelman, thanks for joining 872 00:42:54,320 --> 00:42:58,160 Speaker 1: us here. What does come next here with this debt 873 00:42:58,200 --> 00:42:59,919 Speaker 1: ceiling deal? What should we be thinking about? 874 00:43:01,160 --> 00:43:03,840 Speaker 13: Well, I think what we're seeing on the political side 875 00:43:03,920 --> 00:43:09,000 Speaker 13: right now is sort of an interpretation of what was 876 00:43:09,120 --> 00:43:12,640 Speaker 13: the dynamic, what were the dynamics between the Biden administration 877 00:43:12,880 --> 00:43:16,080 Speaker 13: and the Republicans in Congress. And there have been some 878 00:43:16,200 --> 00:43:20,759 Speaker 13: interesting articles written about how really Biden seems to have 879 00:43:20,840 --> 00:43:24,640 Speaker 13: gotten a good handle on the Republican Party, and maybe 880 00:43:24,640 --> 00:43:28,480 Speaker 13: there's some opportunity ahead through the two parties and for 881 00:43:28,560 --> 00:43:31,360 Speaker 13: Congress and the White House to work better together. I 882 00:43:31,360 --> 00:43:34,759 Speaker 13: think that would be hopeful. At the same time, we 883 00:43:34,880 --> 00:43:38,160 Speaker 13: do know certainly that the Republican members of Congress are 884 00:43:38,400 --> 00:43:42,080 Speaker 13: our claiming this of success and that it got the 885 00:43:42,280 --> 00:43:46,200 Speaker 13: administration to take some cuts. The cuts aren't actually that significant, 886 00:43:47,600 --> 00:43:49,719 Speaker 13: and in fact, you know, everyone pretty much knew that 887 00:43:49,760 --> 00:43:51,600 Speaker 13: there was eventually going to be a deal, and there 888 00:43:51,640 --> 00:43:54,040 Speaker 13: was a deal. I think at this point, you know, 889 00:43:54,239 --> 00:43:57,279 Speaker 13: other than maybe a little bit of post mortem, I 890 00:43:57,280 --> 00:44:00,239 Speaker 13: think the markets and most people are sort of looking 891 00:44:00,280 --> 00:44:03,839 Speaker 13: ahead and saying to ourselves, Okay, well we're now what 892 00:44:03,840 --> 00:44:06,720 Speaker 13: We're past the dead ceiling. We're back into worrying about 893 00:44:07,000 --> 00:44:09,960 Speaker 13: whether what the FET has done is enough? Yette. Is 894 00:44:10,000 --> 00:44:13,080 Speaker 13: the economy weakening? Is it weakening considerably? Is it weakening 895 00:44:13,120 --> 00:44:17,480 Speaker 13: at all? So I think, unfortunately the Friday employment reports 896 00:44:17,480 --> 00:44:21,120 Speaker 13: that we got through a lot of questions our way, 897 00:44:21,600 --> 00:44:23,960 Speaker 13: and we're back into the sort of old story of 898 00:44:24,719 --> 00:44:27,960 Speaker 13: we in terms of this, in terms of this tightening cycle, 899 00:44:28,280 --> 00:44:29,959 Speaker 13: and where's the economy? Where's it going? 900 00:44:30,920 --> 00:44:34,080 Speaker 11: Does the back and forth over the debt ceiling lead 901 00:44:34,120 --> 00:44:36,800 Speaker 11: to any repercussions for the US economy on the global 902 00:44:36,840 --> 00:44:40,560 Speaker 11: stage moving forward? Or is the global world sloughing it 903 00:44:40,600 --> 00:44:41,839 Speaker 11: off as much as markets did. 904 00:44:43,239 --> 00:44:46,600 Speaker 13: I think everyone's sloughing it off. First off, I don't 905 00:44:46,600 --> 00:44:49,440 Speaker 13: think it has any repercussions in terms of economic performance 906 00:44:50,560 --> 00:44:53,040 Speaker 13: from what I have read. I don't personally have my 907 00:44:53,040 --> 00:44:55,919 Speaker 13: own macroeconomic model, but I read the results of those 908 00:44:55,920 --> 00:44:58,880 Speaker 13: who do, and the folkse who run these models do 909 00:44:59,000 --> 00:45:02,640 Speaker 13: not see any real impact on the performance of the 910 00:45:02,680 --> 00:45:04,879 Speaker 13: economy and the remainder of this year or even next year. 911 00:45:05,200 --> 00:45:09,279 Speaker 13: Did the debt ceiling talk the most aggressive? The most 912 00:45:09,320 --> 00:45:12,000 Speaker 13: aggressive result that I saw was that maybe it would 913 00:45:12,000 --> 00:45:14,799 Speaker 13: turn into a one tenth of one percent increase in 914 00:45:14,800 --> 00:45:17,000 Speaker 13: the unemployment rate at some point this year. So I 915 00:45:17,040 --> 00:45:22,239 Speaker 13: think the economic impact is mooted, muted, and I think 916 00:45:22,280 --> 00:45:26,719 Speaker 13: also the political point is moot at this point. The 917 00:45:26,760 --> 00:45:28,960 Speaker 13: fact is, everyone sort of knew that they were eventually 918 00:45:29,000 --> 00:45:31,440 Speaker 13: going to get together. They took it a little bit 919 00:45:31,480 --> 00:45:34,879 Speaker 13: too close to the wire for everyone concerned, but they 920 00:45:34,920 --> 00:45:38,239 Speaker 13: did come through and it was sort of back to normal. 921 00:45:39,440 --> 00:45:42,400 Speaker 1: So I guess with the deal in place now, there 922 00:45:42,400 --> 00:45:44,759 Speaker 1: are some folks in the in the money markets, I 923 00:45:44,760 --> 00:45:47,720 Speaker 1: guess that are concerned that the Treasury will soon replenish 924 00:45:47,760 --> 00:45:50,680 Speaker 1: its cash balance by selling more than one trillion dollars 925 00:45:50,719 --> 00:45:53,520 Speaker 1: of bills through the end of the third quarter. That 926 00:45:53,600 --> 00:45:55,360 Speaker 1: seems like a big number to me. How does that 927 00:45:55,400 --> 00:45:55,759 Speaker 1: all work? 928 00:45:55,880 --> 00:45:56,600 Speaker 3: Is a big number. 929 00:45:57,040 --> 00:46:02,160 Speaker 13: It is a big number, but it's not a surprising number. 930 00:46:02,760 --> 00:46:06,680 Speaker 13: I mean, the Treasury had to train its auction schedule 931 00:46:07,080 --> 00:46:09,800 Speaker 13: as a result of the potential for the debt ceiling 932 00:46:09,880 --> 00:46:12,359 Speaker 13: not to be lifted. Now that things have gotten back 933 00:46:12,400 --> 00:46:15,840 Speaker 13: to normal. They're going to resume a much more normal 934 00:46:15,880 --> 00:46:17,879 Speaker 13: after we get through the next couple of weeks, They're 935 00:46:17,880 --> 00:46:21,160 Speaker 13: going to resume a much more normal auction schedule. You know, 936 00:46:21,280 --> 00:46:23,800 Speaker 13: I looked this morning, and from what I could see, 937 00:46:24,560 --> 00:46:27,600 Speaker 13: the three and the six month Treasury auction, the results 938 00:46:27,600 --> 00:46:30,719 Speaker 13: that I thought eleven thirty looked pretty damn good. So 939 00:46:31,000 --> 00:46:35,319 Speaker 13: my suspicion is that people are worried about there being 940 00:46:35,440 --> 00:46:38,440 Speaker 13: enough liquidity in the market in order to be able 941 00:46:38,520 --> 00:46:41,520 Speaker 13: to stop up the new securities that the Treasury is 942 00:46:41,600 --> 00:46:44,720 Speaker 13: ready to offer. And that really hasn't been an issue 943 00:46:44,760 --> 00:46:47,480 Speaker 13: for the US Treasury for many years now. And I 944 00:46:47,560 --> 00:46:50,520 Speaker 13: suspect that there's plenty of money on the sidelines, whether 945 00:46:50,600 --> 00:46:53,239 Speaker 13: it's in money market funds or maybe it's in some 946 00:46:53,320 --> 00:46:57,120 Speaker 13: equity funds where they were just sort of hoping at 947 00:46:57,120 --> 00:46:59,200 Speaker 13: some point to be able to push it back into 948 00:46:59,239 --> 00:47:02,840 Speaker 13: a saber asset like treasury builds. So my suspicion is 949 00:47:02,840 --> 00:47:06,120 Speaker 13: that we're not going to see distortions in the yield curve, 950 00:47:06,520 --> 00:47:09,360 Speaker 13: and we're not going to see distortions in the in 951 00:47:09,400 --> 00:47:13,920 Speaker 13: the markets due to the Treasury and zooming fairly fairly 952 00:47:13,960 --> 00:47:15,680 Speaker 13: aggressive schedule of auctions. 953 00:47:16,800 --> 00:47:20,080 Speaker 11: So money market funds specifically, that's that's all good from 954 00:47:20,120 --> 00:47:20,840 Speaker 11: your perspective. 955 00:47:21,600 --> 00:47:22,719 Speaker 7: Well, I think I think the. 956 00:47:22,760 --> 00:47:24,759 Speaker 13: Money market funds. First of all, there's a lot of 957 00:47:24,760 --> 00:47:27,319 Speaker 13: money there, but I think those money market funds will 958 00:47:27,360 --> 00:47:32,320 Speaker 13: tilt towards putting more treasury securities in the portfolio. And frankly, 959 00:47:32,400 --> 00:47:34,040 Speaker 13: if I were running a money market fun and I 960 00:47:34,080 --> 00:47:37,080 Speaker 13: were an aggressive active manager, that is something that I 961 00:47:37,080 --> 00:47:41,200 Speaker 13: would want to do. First off, because the economy is 962 00:47:41,239 --> 00:47:43,600 Speaker 13: still uncertain. We don't know where the said is going. 963 00:47:44,440 --> 00:47:46,440 Speaker 13: But the other part of it is that the banking 964 00:47:46,480 --> 00:47:50,320 Speaker 13: system is a little bit risky. We're seeing we've seen, 965 00:47:50,400 --> 00:47:54,560 Speaker 13: you know, already a couple of name failures this year. 966 00:47:54,880 --> 00:47:57,680 Speaker 13: People are concerned about the fact that there's going to 967 00:47:57,680 --> 00:48:01,239 Speaker 13: be new bank capital regulations UH that are imposed upon 968 00:48:01,280 --> 00:48:04,240 Speaker 13: the banks, and that could lead to some more trouble 969 00:48:04,520 --> 00:48:07,560 Speaker 13: amongst some of the big name banks. So I think 970 00:48:07,600 --> 00:48:09,960 Speaker 13: it makes sense now that the Treasury is going to 971 00:48:09,960 --> 00:48:12,719 Speaker 13: be back selling a lot of treasury securities, I think 972 00:48:12,719 --> 00:48:14,560 Speaker 13: it does make sense for money market funds and a 973 00:48:14,600 --> 00:48:17,719 Speaker 13: lot of actively amounaged funds to put more treasuries back 974 00:48:17,840 --> 00:48:22,160 Speaker 13: in the portfolio because the risk profile is there. 975 00:48:23,040 --> 00:48:25,400 Speaker 1: So January twenty five, do we just come run and 976 00:48:25,719 --> 00:48:27,799 Speaker 1: do this all again? Is this kind of the new 977 00:48:27,800 --> 00:48:29,040 Speaker 1: normal or them? 978 00:48:29,400 --> 00:48:32,600 Speaker 13: You say, yeah, oh yeah, unless by some miracle we 979 00:48:32,719 --> 00:48:35,240 Speaker 13: end up with either a fully Republican or a fully 980 00:48:35,239 --> 00:48:38,000 Speaker 13: democratic Washington. Yeah, we're going to do it again. We've 981 00:48:38,040 --> 00:48:42,840 Speaker 13: been doing it over and over again. It is a 982 00:48:42,880 --> 00:48:45,799 Speaker 13: broken system. That's the easiest way for me to say it. 983 00:48:46,360 --> 00:48:50,200 Speaker 13: We should have a government that is functioning. We should 984 00:48:50,280 --> 00:48:53,520 Speaker 13: have a government where the Treasury, the representatives of the 985 00:48:53,640 --> 00:48:57,200 Speaker 13: Late House the Treasury sit together with representatives of Congress, 986 00:48:57,440 --> 00:49:00,279 Speaker 13: and we have to have a budget and then cows. 987 00:49:00,360 --> 00:49:02,960 Speaker 13: We've patched out the budget. There's an agreement that will 988 00:49:03,040 --> 00:49:04,759 Speaker 13: raise the debt ceiling in order to be able to 989 00:49:04,800 --> 00:49:10,920 Speaker 13: fund that budget. But for reasons which evades me, unfortunately, 990 00:49:10,920 --> 00:49:12,960 Speaker 13: we do not come up with a budget and then 991 00:49:13,040 --> 00:49:15,640 Speaker 13: at the same time agree this is what we need 992 00:49:15,680 --> 00:49:17,080 Speaker 13: to raise the debt ceiling too. 993 00:49:17,239 --> 00:49:18,360 Speaker 3: In order to fund it. 994 00:49:18,719 --> 00:49:21,319 Speaker 13: Everything that this debt ceiling was going to put off 995 00:49:21,920 --> 00:49:25,880 Speaker 13: the spending and make ways in the marketplace, it was 996 00:49:26,000 --> 00:49:29,800 Speaker 13: all based on spending that has already been approved by Congress. 997 00:49:30,120 --> 00:49:34,280 Speaker 13: Now facing at the third the Congress has already approved 998 00:49:34,280 --> 00:49:36,919 Speaker 13: the spending, and yet now they're saying, we're not gonna 999 00:49:36,960 --> 00:49:39,719 Speaker 13: let you raise the money. Uh, it's got to be 1000 00:49:39,760 --> 00:49:43,160 Speaker 13: done better than that. But we have not, we have 1001 00:49:43,239 --> 00:49:46,560 Speaker 13: not had a two party system that has allowed that 1002 00:49:46,560 --> 00:49:46,960 Speaker 13: to happen. 1003 00:49:47,160 --> 00:49:51,280 Speaker 1: All right, interesting analysis there, because this is an issue 1004 00:49:51,280 --> 00:49:52,960 Speaker 1: that just keeps coming back and back. It seems like 1005 00:49:52,960 --> 00:49:57,480 Speaker 1: doctor Nancy Kimmelman, economics professor at Northeastern University and at 1006 00:49:57,680 --> 00:50:01,640 Speaker 1: Tufts University, so got the Boston area covered there from 1007 00:50:01,840 --> 00:50:05,359 Speaker 1: economics perspective. But again, talking about the debt ceiling, it's done, 1008 00:50:05,440 --> 00:50:08,600 Speaker 1: that's the good news. Looks like the Fed has to 1009 00:50:08,640 --> 00:50:11,000 Speaker 1: rebuild its balance sheet. It's the lowest level of cash 1010 00:50:11,000 --> 00:50:13,160 Speaker 1: they've had on balance for a number of years. So 1011 00:50:13,200 --> 00:50:15,520 Speaker 1: they could be out there in the market selling up 1012 00:50:15,600 --> 00:50:20,960 Speaker 1: to one trillion dollars in securities to replenish the balance sheet. 1013 00:50:21,000 --> 00:50:22,640 Speaker 1: And so the folks in the bond market, the money 1014 00:50:22,640 --> 00:50:24,799 Speaker 1: markets are getting ready for that. 1015 00:50:25,239 --> 00:50:28,360 Speaker 6: You're listening to the tape Cat's are live program Bloomberg 1016 00:50:28,400 --> 00:50:32,000 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 1017 00:50:32,080 --> 00:50:34,040 Speaker 6: tune in app, Bloomberg dot Com, and. 1018 00:50:34,000 --> 00:50:35,279 Speaker 8: The Bloomberg Business app. 1019 00:50:35,320 --> 00:50:38,160 Speaker 6: You can also listen live on Amazon Alexa from our 1020 00:50:38,160 --> 00:50:43,200 Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 1021 00:50:44,120 --> 00:50:47,120 Speaker 1: Just do a little tech talk? Shall we round table 1022 00:50:47,120 --> 00:50:49,080 Speaker 1: at Madison. We can do that because we've got a 1023 00:50:49,080 --> 00:50:51,560 Speaker 1: couple of smart analysts joining us here, Man Deep Singing, 1024 00:50:51,560 --> 00:50:55,759 Speaker 1: anorog Rana, their senior tech analysts for Bloomberg Intelligence. We've 1025 00:50:55,760 --> 00:50:58,920 Speaker 1: got an rog Via Zoom and mandeep here in the 1026 00:50:58,960 --> 00:51:01,120 Speaker 1: studio on rag are with you. You're kind of one 1027 00:51:01,160 --> 00:51:03,600 Speaker 1: of your companies. I don't know. I think it's called Apple, 1028 00:51:03,719 --> 00:51:06,879 Speaker 1: Apple Computer or something. It's out in California. I think 1029 00:51:06,880 --> 00:51:09,240 Speaker 1: in some valley out there. They got an event today. 1030 00:51:09,800 --> 00:51:12,680 Speaker 1: What are they eventing? What are they going to show us? 1031 00:51:13,160 --> 00:51:16,560 Speaker 14: Yeah, thanks, Paul, so it Such events are very common 1032 00:51:16,600 --> 00:51:19,960 Speaker 14: for all the technology companies. And you know, historically on 1033 00:51:20,000 --> 00:51:23,960 Speaker 14: this event in or Apple, they've been launching new software updates, 1034 00:51:24,080 --> 00:51:27,200 Speaker 14: any kind of new products. So I would say the 1035 00:51:27,239 --> 00:51:30,320 Speaker 14: biggest product launch is going to be their mixed reality 1036 00:51:30,360 --> 00:51:32,960 Speaker 14: headset that's going to come out after the use of waiting. 1037 00:51:33,800 --> 00:51:35,880 Speaker 14: It's going to create a lot of buzz. It's already 1038 00:51:35,920 --> 00:51:38,080 Speaker 14: creating a lot of buzz. But I think it's going 1039 00:51:38,080 --> 00:51:41,040 Speaker 14: to be a spectacular event when it comes to showcasing 1040 00:51:41,080 --> 00:51:43,759 Speaker 14: of what this thing can do. Frankly, on the functionality 1041 00:51:43,800 --> 00:51:44,440 Speaker 14: side of it. 1042 00:51:44,800 --> 00:51:46,959 Speaker 1: What is multiple what's it called again? 1043 00:51:47,200 --> 00:51:47,880 Speaker 11: Mixed reality? 1044 00:51:47,960 --> 00:51:51,320 Speaker 1: Mix mix, mixed reality? What's mixed reality? From virtual reality? 1045 00:51:51,320 --> 00:51:54,440 Speaker 1: From augmented reality? What is mixed reality? I thought was. 1046 00:51:56,080 --> 00:51:59,960 Speaker 14: Well, mixed reality is a combination of augmented and virtual reality. 1047 00:52:00,080 --> 00:52:02,399 Speaker 14: So in virtual reality you would have you know, your 1048 00:52:02,440 --> 00:52:05,719 Speaker 14: avatar drinking some you know, something nice, and then the 1049 00:52:05,760 --> 00:52:08,080 Speaker 14: augmented reality you would have half of it real and 1050 00:52:08,120 --> 00:52:09,000 Speaker 14: half of it not real. 1051 00:52:10,520 --> 00:52:14,640 Speaker 11: So Google Glass didn't work. I'm never going to put 1052 00:52:14,640 --> 00:52:18,600 Speaker 11: a headset on my face. Menteep. Does Apple care about that? 1053 00:52:19,239 --> 00:52:19,479 Speaker 8: Well? 1054 00:52:19,520 --> 00:52:22,720 Speaker 15: So I think they're trying to create a new form factor. 1055 00:52:22,840 --> 00:52:27,799 Speaker 15: That is when they're to their you know, iPhone AirPod ecosystem, 1056 00:52:27,840 --> 00:52:31,319 Speaker 15: and really this is their way to drive more you know, 1057 00:52:32,239 --> 00:52:36,080 Speaker 15: sps out of the install base they have. And look, 1058 00:52:36,160 --> 00:52:38,880 Speaker 15: I think the reason why Apple works so well in 1059 00:52:38,960 --> 00:52:42,920 Speaker 15: terms of just keeping their ecosystem intact is because of 1060 00:52:43,000 --> 00:52:46,440 Speaker 15: the bundle that they have created. And to me, you know, 1061 00:52:46,480 --> 00:52:50,160 Speaker 15: they can sell this high priced product to a subset 1062 00:52:50,200 --> 00:52:52,880 Speaker 15: of people that can afford it, and they may find 1063 00:52:52,920 --> 00:52:54,960 Speaker 15: a use case around it, whether it's on the corporate 1064 00:52:55,000 --> 00:52:58,479 Speaker 15: side or consumer side. But the problem that Meta had 1065 00:52:58,640 --> 00:53:01,600 Speaker 15: is they never were able to bring the developer community 1066 00:53:01,640 --> 00:53:04,400 Speaker 15: to build on their ecosystem. Apple doesn't have that problem. 1067 00:53:04,800 --> 00:53:07,680 Speaker 15: They can have developers build on this ecosystem because they 1068 00:53:07,680 --> 00:53:09,719 Speaker 15: already have a big ecosystem. 1069 00:53:09,200 --> 00:53:11,320 Speaker 12: Built on the iOS. 1070 00:53:11,520 --> 00:53:11,640 Speaker 8: Oh. 1071 00:53:11,680 --> 00:53:14,719 Speaker 15: I see the apps that they already have, some of 1072 00:53:14,760 --> 00:53:17,880 Speaker 15: that can be extended into this augmented reality or the 1073 00:53:17,920 --> 00:53:21,439 Speaker 15: mixed reality form factor that Anarag mentioned, And there could 1074 00:53:21,440 --> 00:53:25,040 Speaker 15: be certain apps that are good in that sort of uh, 1075 00:53:25,239 --> 00:53:28,480 Speaker 15: you know, form factor because it can enhance productivity. And 1076 00:53:28,719 --> 00:53:31,080 Speaker 15: I think that's the part that Meta, even though they 1077 00:53:31,080 --> 00:53:34,080 Speaker 15: were early to it they have invested billions of dollars, 1078 00:53:34,400 --> 00:53:37,920 Speaker 15: they never had that ecosystem aspect where developers would come 1079 00:53:37,960 --> 00:53:39,359 Speaker 15: and build on their platform. 1080 00:53:39,960 --> 00:53:42,759 Speaker 1: Hey, an Rog, do I have to pay attention to 1081 00:53:42,800 --> 00:53:45,399 Speaker 1: this AI thing or did you guys have your time 1082 00:53:45,440 --> 00:53:47,440 Speaker 1: in the sun last week with a big boom and 1083 00:53:47,480 --> 00:53:50,960 Speaker 1: in video stock? What's your view here on AI and 1084 00:53:51,200 --> 00:53:52,000 Speaker 1: how it may develop? 1085 00:53:52,960 --> 00:53:54,920 Speaker 14: So, I mean, at the end of the day, it 1086 00:53:55,000 --> 00:53:57,640 Speaker 14: will develop at its own pace, frankly, but it is 1087 00:53:57,640 --> 00:54:00,000 Speaker 14: one of the bigger you know, you could say change 1088 00:54:00,080 --> 00:54:04,279 Speaker 14: is in the technology ecosystem and almost in each and 1089 00:54:04,320 --> 00:54:06,520 Speaker 14: every piece. We're trying to figure out how it impacts 1090 00:54:06,520 --> 00:54:09,160 Speaker 14: different players. You know, from our side, this is just 1091 00:54:09,239 --> 00:54:13,279 Speaker 14: another boost the technology industry gets. And you know, some 1092 00:54:13,360 --> 00:54:15,440 Speaker 14: of this thing is you can't run this stuff in 1093 00:54:15,520 --> 00:54:19,320 Speaker 14: older infrastructure, old and stuff. You have to have newer, 1094 00:54:19,640 --> 00:54:21,960 Speaker 14: shiny toys like moving things to the cloud. So I 1095 00:54:21,960 --> 00:54:26,960 Speaker 14: think it really helps the entire technology ecosystem in all forms, 1096 00:54:27,000 --> 00:54:30,319 Speaker 14: whether it's hardware, software services. I mean, it's going to 1097 00:54:30,320 --> 00:54:32,040 Speaker 14: be a fun thing to see how it evolves over 1098 00:54:32,040 --> 00:54:32,880 Speaker 14: the next few years. 1099 00:54:33,239 --> 00:54:36,560 Speaker 11: But this is my question. Isn't the metaverse a couple 1100 00:54:36,600 --> 00:54:39,840 Speaker 11: of years ago what AI is today? But AI is better? 1101 00:54:40,360 --> 00:54:43,560 Speaker 11: Like did Apple bet on this when the metaverse was 1102 00:54:43,640 --> 00:54:47,120 Speaker 11: cool and now the actual product is coming out a 1103 00:54:47,160 --> 00:54:49,680 Speaker 11: little too late. I'm looking at Mandy if you can't 1104 00:54:49,680 --> 00:54:50,640 Speaker 11: see that on early. 1105 00:54:50,560 --> 00:54:53,920 Speaker 15: Yes, Look, I think for me, the key thing is 1106 00:54:54,160 --> 00:54:57,759 Speaker 15: if Apple was to leverage generative AI, they have to 1107 00:54:57,760 --> 00:55:00,319 Speaker 15: do it on their phone. The difference is the loud 1108 00:55:00,320 --> 00:55:04,520 Speaker 15: guys are all adding AI capabilities in their data center, 1109 00:55:04,760 --> 00:55:08,440 Speaker 15: whether it's awlu ass, Google Cloud. Apple has the install 1110 00:55:08,480 --> 00:55:11,840 Speaker 15: base in terms of the edge and we actually distinguish 1111 00:55:11,880 --> 00:55:14,680 Speaker 15: that and a report the training versus the inference side. 1112 00:55:14,840 --> 00:55:17,000 Speaker 15: So the training side is where you train a large 1113 00:55:17,040 --> 00:55:19,640 Speaker 15: anguid model. Inference is where you use a large anguige 1114 00:55:19,680 --> 00:55:22,960 Speaker 15: model to answer questions. And that's where Apple has that 1115 00:55:23,040 --> 00:55:25,799 Speaker 15: install base. So if they develop a phone that can 1116 00:55:25,880 --> 00:55:29,280 Speaker 15: leverage generative AI, that would drive a whole new refresh cycle. 1117 00:55:29,880 --> 00:55:33,280 Speaker 15: And so imagine Apple phones are refreshed every three four years. 1118 00:55:33,560 --> 00:55:35,920 Speaker 15: This could just be things up in terms of everybody 1119 00:55:35,960 --> 00:55:38,640 Speaker 15: wanting that new iPhone version because it has that generative 1120 00:55:38,680 --> 00:55:39,360 Speaker 15: AI element. 1121 00:55:40,000 --> 00:55:41,480 Speaker 1: All right, who's our chip guy? 1122 00:55:41,520 --> 00:55:44,320 Speaker 15: We have a chip guy, right, Well, we have Kunjin 1123 00:55:44,360 --> 00:55:45,839 Speaker 15: who is based out of the West coast. 1124 00:55:45,920 --> 00:55:48,319 Speaker 1: Kunjin, right, he's right, okay, so he's our chip guy. 1125 00:55:48,680 --> 00:55:51,080 Speaker 1: So he had his moment in the sun with Nvidia 1126 00:55:51,160 --> 00:55:52,880 Speaker 1: and stuff like that. But I know you guys, and 1127 00:55:52,920 --> 00:55:56,960 Speaker 1: I know how technology works, hardware software. It's almost like 1128 00:55:57,000 --> 00:55:59,719 Speaker 1: you want to play the arms player for you know, 1129 00:56:00,000 --> 00:56:02,920 Speaker 1: I think the beginning of the Internet we said by Akamai, 1130 00:56:03,120 --> 00:56:04,600 Speaker 1: you know, because they make this stuff that makes the 1131 00:56:04,640 --> 00:56:06,240 Speaker 1: Internet go, and we don't even know what the Internet's 1132 00:56:06,280 --> 00:56:08,680 Speaker 1: going to become. What are you guys thinking about now? 1133 00:56:08,719 --> 00:56:10,319 Speaker 1: On Rock I'll start with you, what are you guys 1134 00:56:10,360 --> 00:56:15,080 Speaker 1: thinking about hardware software? How should investors approach this thing 1135 00:56:15,160 --> 00:56:15,760 Speaker 1: called AI? 1136 00:56:17,160 --> 00:56:19,880 Speaker 14: See from again, one of the things I mentioned before, 1137 00:56:20,000 --> 00:56:23,319 Speaker 14: you have to upgrade your oldest infrastructure, which means, you know, 1138 00:56:23,360 --> 00:56:26,720 Speaker 14: from our side, the hyperscale cloud providers are the biggest 1139 00:56:26,719 --> 00:56:30,680 Speaker 14: beneficiary of this particular shift on the software side. Almost 1140 00:56:30,719 --> 00:56:33,920 Speaker 14: all the all the big companies, you know, whether it's Microsoft, 1141 00:56:34,000 --> 00:56:38,000 Speaker 14: whether it's Adobe, whether it's you know, Salesforce, all of 1142 00:56:38,040 --> 00:56:41,080 Speaker 14: them will be investing heavily because remember, if they have 1143 00:56:41,120 --> 00:56:45,160 Speaker 14: the biggest installed based of users, millions of people using 1144 00:56:45,200 --> 00:56:47,560 Speaker 14: their products, they are the ones who can figure out 1145 00:56:47,600 --> 00:56:50,520 Speaker 14: things in a much faster way compared to a smaller company. 1146 00:56:51,960 --> 00:56:53,880 Speaker 11: Man do anything to add on that. 1147 00:56:53,920 --> 00:56:57,520 Speaker 15: Well, so to me, I think the interesting aspect here 1148 00:56:57,719 --> 00:57:00,960 Speaker 15: is these are all the companies that are on the 1149 00:57:01,040 --> 00:57:04,279 Speaker 15: verge of disruption, but we are betting on, you know, 1150 00:57:04,440 --> 00:57:08,680 Speaker 15: these companies actually being the kind of the torch bereers 1151 00:57:08,680 --> 00:57:11,000 Speaker 15: when it comes to the disruptive element that's going to 1152 00:57:11,040 --> 00:57:14,520 Speaker 15: play out. And so there will be I'm sure you know, 1153 00:57:14,680 --> 00:57:17,200 Speaker 15: a new startup that will really come out big in 1154 00:57:17,280 --> 00:57:21,720 Speaker 15: terms of finding that stellar use case that will scale revenues, 1155 00:57:21,800 --> 00:57:23,680 Speaker 15: and maybe chat GPT. 1156 00:57:23,720 --> 00:57:25,200 Speaker 1: Is that use case. 1157 00:57:25,240 --> 00:57:27,960 Speaker 15: But clearly there's a lot of disruption on the horizon. 1158 00:57:28,480 --> 00:57:32,120 Speaker 15: I think the interesting point to make here is that 1159 00:57:32,280 --> 00:57:35,080 Speaker 15: we're really betting on all the incumbents to drive that 1160 00:57:35,160 --> 00:57:36,120 Speaker 15: disruption forward. 1161 00:57:36,920 --> 00:57:41,000 Speaker 1: Right so, I'm waiting for the next wave of the 1162 00:57:41,040 --> 00:57:45,439 Speaker 1: Google facebooks of AI, and. 1163 00:57:45,360 --> 00:57:48,800 Speaker 15: So right now it is the Metas and the Googles 1164 00:57:48,840 --> 00:57:52,920 Speaker 15: that are the most likely gonna disrupt themselves. And you know, 1165 00:57:53,160 --> 00:57:55,400 Speaker 15: I don't see and look, there could be somebody else 1166 00:57:55,440 --> 00:57:58,280 Speaker 15: out there, and that's why I mentioned chat GPT. But Meta, 1167 00:57:58,640 --> 00:58:01,680 Speaker 15: given its scale and the first party data it has 1168 00:58:01,680 --> 00:58:05,280 Speaker 15: and the resources it has, looks to be the best position. 1169 00:58:05,440 --> 00:58:07,160 Speaker 1: Who's the merry meeker of AI? 1170 00:58:07,960 --> 00:58:08,120 Speaker 15: Is it? 1171 00:58:08,200 --> 00:58:08,240 Speaker 8: You? 1172 00:58:08,360 --> 00:58:14,240 Speaker 1: And Honora? We got to establish because all right, let's 1173 00:58:14,240 --> 00:58:16,160 Speaker 1: go down allay, this is where man Deep is. He 1174 00:58:16,200 --> 00:58:18,520 Speaker 1: can go high on the hog on some of the 1175 00:58:18,520 --> 00:58:23,920 Speaker 1: big tech but Twitter, what's elon? I mean, is anybody 1176 00:58:23,920 --> 00:58:26,200 Speaker 1: buying ads on this thing? We keep hearing the reporting 1177 00:58:26,280 --> 00:58:27,240 Speaker 1: is just brutal. 1178 00:58:27,720 --> 00:58:30,000 Speaker 15: Yeah, I mean down fifty nine percent, But to me, 1179 00:58:30,120 --> 00:58:32,880 Speaker 15: the engagement isn't down fifty nine percent. So even though 1180 00:58:32,920 --> 00:58:36,040 Speaker 15: some advertisers have pulled back that's more of a reflection 1181 00:58:36,160 --> 00:58:38,600 Speaker 15: of them being concerned in the short term about the 1182 00:58:38,680 --> 00:58:43,320 Speaker 15: brand safety on Twitter's platform. Twitter's engagement is still holding up. 1183 00:58:43,800 --> 00:58:46,200 Speaker 15: I mean, I would bet you know it's down, but 1184 00:58:46,400 --> 00:58:48,440 Speaker 15: probably not down more than single digits. 1185 00:58:48,480 --> 00:58:52,680 Speaker 1: These dollars go on to Facebook and Google and Snap and. 1186 00:58:52,800 --> 00:58:55,160 Speaker 15: I mean, we are in that part of the digital 1187 00:58:55,160 --> 00:58:58,280 Speaker 15: ad cycle where everybody is pulling back. And we know 1188 00:58:58,360 --> 00:59:00,800 Speaker 15: digital ad is a cyclical market, so some of it 1189 00:59:00,960 --> 00:59:03,840 Speaker 15: is that. But yes, clearly meta and you know, all 1190 00:59:03,880 --> 00:59:07,720 Speaker 15: the kind of the direct response players, including Alphabet, they 1191 00:59:07,760 --> 00:59:10,040 Speaker 15: are the ones who are still kind of doing much 1192 00:59:10,080 --> 00:59:11,480 Speaker 15: better than the smaller players. 1193 00:59:11,920 --> 00:59:14,520 Speaker 11: But Elon has said he doesn't care, right, hon rog 1194 00:59:14,560 --> 00:59:16,920 Speaker 11: At some point does Elon have to care about the 1195 00:59:17,680 --> 00:59:19,280 Speaker 11: lack of ad dollars? 1196 00:59:19,280 --> 00:59:19,440 Speaker 7: There? 1197 00:59:19,480 --> 00:59:21,360 Speaker 11: We have just about forty five seconds left. 1198 00:59:22,240 --> 00:59:25,439 Speaker 14: See, from my point, this is a two different business models. 1199 00:59:25,480 --> 00:59:29,320 Speaker 14: You know, I can't mix enterprise versus consumer oriented stuff. 1200 00:59:29,520 --> 00:59:32,000 Speaker 14: I think in my personal view, if he just focuses 1201 00:59:32,040 --> 00:59:33,640 Speaker 14: on the car, that's going to be best for all 1202 00:59:33,680 --> 00:59:34,000 Speaker 14: of us. 1203 00:59:34,320 --> 00:59:37,760 Speaker 1: Focus on the car there you go, right, all right, 1204 00:59:37,840 --> 00:59:39,560 Speaker 1: So all right, we're gonna let you guys go. We've 1205 00:59:39,560 --> 00:59:42,360 Speaker 1: had enough of technology talk for the day Mandy's saying 1206 00:59:42,440 --> 00:59:45,440 Speaker 1: on Rock Rana, their senior tech analysts part of this, 1207 00:59:46,040 --> 00:59:48,440 Speaker 1: I'm gonna say, a global team of close to twenty 1208 00:59:48,480 --> 00:59:53,040 Speaker 1: technology analysts around the world, and you know, we're gonna 1209 00:59:53,040 --> 00:59:54,880 Speaker 1: send man Deep to London next week. We're gonna send 1210 00:59:54,920 --> 00:59:56,440 Speaker 1: him to Asia the week after that to kind of 1211 00:59:56,520 --> 00:59:58,840 Speaker 1: check in on all our tech analysts, make sure they 1212 00:59:58,840 --> 01:00:01,000 Speaker 1: are focusing on the right things, make sure they're you know, 1213 01:00:01,280 --> 01:00:03,640 Speaker 1: focusing on the right trends. And AI has got to 1214 01:00:03,640 --> 01:00:05,120 Speaker 1: be at the top of the Listcus boy, even for 1215 01:00:05,480 --> 01:00:07,560 Speaker 1: like you know, people like you and I, Matty, we 1216 01:00:07,560 --> 01:00:08,439 Speaker 1: hear about it every day. 1217 01:00:08,720 --> 01:00:11,120 Speaker 11: We can't stop hearing about it. And it feels to 1218 01:00:11,960 --> 01:00:14,800 Speaker 11: Mendep's point, I guess the idea is that the BMTH 1219 01:00:14,920 --> 01:00:16,640 Speaker 11: names we already know are going to be the ones 1220 01:00:16,680 --> 01:00:19,480 Speaker 11: with the power to gobble up the next big AI 1221 01:00:19,640 --> 01:00:20,320 Speaker 11: names as well. 1222 01:00:20,520 --> 01:00:22,680 Speaker 1: Yeah, but it just you know, I keep again, when 1223 01:00:22,680 --> 01:00:24,320 Speaker 1: you think about the beginning of the Internet, in some 1224 01:00:24,360 --> 01:00:27,160 Speaker 1: of these big companies like a Google, and then in 1225 01:00:27,280 --> 01:00:30,440 Speaker 1: social media came along you had Facebook. You know, are 1226 01:00:30,440 --> 01:00:32,480 Speaker 1: there going to be similar moments like that when new 1227 01:00:32,520 --> 01:00:34,680 Speaker 1: companies come into the marketplace, And you got to think 1228 01:00:34,680 --> 01:00:36,920 Speaker 1: the answer is yes, But I guess people were just 1229 01:00:36,920 --> 01:00:40,520 Speaker 1: trying to identify where those companies, what type of companies 1230 01:00:40,560 --> 01:00:43,520 Speaker 1: are they, what applications do they have, What's what technologies 1231 01:00:43,520 --> 01:00:45,720 Speaker 1: do they bring to the marketplace, because we keep hearing 1232 01:00:45,720 --> 01:00:48,840 Speaker 1: about artificial intelligence being the next big, big, big thing 1233 01:00:49,200 --> 01:00:51,720 Speaker 1: in technology, so have to see how that plays out. 1234 01:00:54,640 --> 01:00:57,760 Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can 1235 01:00:57,800 --> 01:01:01,560 Speaker 2: subscribe and listen to interviews at Apple past or whatever 1236 01:01:01,640 --> 01:01:05,360 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1237 01:01:05,560 --> 01:01:07,480 Speaker 2: at Matt Miller nineteen seventy three. 1238 01:01:07,920 --> 01:01:10,400 Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 1239 01:01:10,440 --> 01:01:13,080 Speaker 1: Before the podcast, you can always catch us worldwide at 1240 01:01:13,120 --> 01:01:14,080 Speaker 1: Bloomberg Radio.