Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays
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Speaker 3: We talk to a lot of folks at Charles Schwab.
Speaker 4: You know, a lot of smart people there helping us
Speaker 4: out thinking about these markets.
Speaker 3: One of them on the global space is Jeff Clientop.
Speaker 4: He's chief Global investment strategist, a Charles Schwab joints us
Speaker 4: here in a Bloomberg Interactive studio.
Speaker 3: Where's he in Florida?
Speaker 1: Or yeah, but he's a Nitney Lion's Florida, or he's
Speaker 1: all over the place.
Speaker 4: Jeff, thanks so much for joining us here in our studio. Hey, Jeff,
Speaker 4: we've been talking a lot about France today. You got
Speaker 4: some political issues over there that they're all trying to
Speaker 4: figure out here. You think about investment opportunities from a
Speaker 4: global perspective. When you talk to your Schwab clients these days,
Speaker 4: where do you tell them some of the best opportunities
Speaker 4: are globally.
Speaker 5: You know, I really like what I'm seeing in Europe.
Speaker 5: I like outside the US for twenty twenty five, And
Speaker 5: I know you see headlines that say what's going on
Speaker 5: in Europe and you think, wow, how could you like this?
Speaker 5: But look, we're likely to see accelerating global economic growth
Speaker 5: outside the US in China, and that means countries like
Speaker 5: France better economic growth next year than we saw last year.
Speaker 5: We've seen rolling recessions through many of these major economies
Speaker 5: over the last six quarters and earnings recessions as well.
Speaker 5: That's likely to change in twenty twenty five. So rising
Speaker 5: economic and earnings growth points me in the direction of
Speaker 5: some of these economies that are rebounding, like what we're
Speaker 5: seeing in Europe.
Speaker 1: Jueff.
Speaker 6: You know, if we're not going to find growth in
Speaker 6: the US where China and we know Europe is on it,
Speaker 6: you know what talk to us about emerging markets. I
Speaker 6: mean that's right in my wheelhouse. You know, I'm the
Speaker 6: Beichief emerging market strategist. Is that where you're looking for opportunities.
Speaker 5: Emerging markets may be a bright spot next year. A
Speaker 5: lot will depend on China, whether they get their act
Speaker 5: together on the right amount of stimulus and directed in
Speaker 5: the right areas. But one thing I'm interested in is
Speaker 5: if you take a look back to twenty sixteen, after
Speaker 5: Trump won the f time, what do we see performing
Speaker 5: well well US small cap stocks. Of course, obviously America
Speaker 5: first policies what performed the worst emerging markets. But what
Speaker 5: happened in the first year of Trump's term twenty seventeen
Speaker 5: the complete opposite. Chinese stocks were up fifty six percent
Speaker 5: in twenty seventeen, leading emerging markets to be up forty
Speaker 5: percent or so, and the worst performers were US small caps.
Speaker 5: So the reason that happened, Sure we got tariff' sure
Speaker 5: we got a lot of uncertainty around US economic policy,
Speaker 5: but what we got was better global economic growth, the
Speaker 5: same recipe WEC for twenty twenty five.
Speaker 4: So when we think about Europe, I guess, at least
Speaker 4: when I look at it, I see value, big discount
Speaker 4: evaluation relative to the S and P five hundred and
Speaker 4: the US. But I also see the risks of a
Speaker 4: value trap. They're cheap for a reason, they've got no technology,
Speaker 4: they're slower growth. So put that value trap risk into
Speaker 4: perspective for Europe.
Speaker 5: Yeah, if we continue to see the tech sector lead
Speaker 5: AI names lead over the course of the next year,
Speaker 5: then it's hard to see Europe really getting the benefit
Speaker 5: of those that valuation differential. But I think we're actually
Speaker 5: starting to see a shift towards leadership in other areas,
Speaker 5: like financials, the classic Great Cup beneficiary. In fact, in
Speaker 5: the second half of this year, financials have been outperforming
Speaker 5: tech in Europe and that's good to see, and I
Speaker 5: think that's critical. Getting that rotation is really important. And
Speaker 5: you know, when I think about different factors that I
Speaker 5: want to focus on next year, values one of those.
Speaker 5: Cash flow is one of those, and I just see
Speaker 5: that showing up better and better on my screens as
Speaker 5: I look at Europe.
Speaker 6: I mean, Jeff, you're mentioning financials, you're mentioning small caps.
Speaker 6: I mean, some of these sectors are up twenty twenty
Speaker 6: plus percent year tod eight, you know, so it's all
Speaker 6: about entry point right now. I love that you're focusing
Speaker 6: on factors because for me, it's been a carry story
Speaker 6: in a lot of our markets. You know, you're talking
Speaker 6: about a shift here though, from growth to value, a
Speaker 6: shift from growth to maybe quality. So what factors you're
Speaker 6: looking for? I mean, there is a difference between the two.
Speaker 5: Now, Yeah, there is and so you know, I think
Speaker 5: so I guess one of the examples I might give,
Speaker 5: and just looking at some of the differentials here when
Speaker 5: we talk about value, it isn't just sectors. I'd look
Speaker 5: at let's say Coke versus Nestle. This is just an example.
Speaker 5: I don't a recommendation on either, but Coke US company,
Speaker 5: Nestlee is Swiss company. They both sell the same products
Speaker 5: to the same people around the world, snacks and beverages,
Speaker 5: geographic footprints, about the same. Coke trades at a four
Speaker 5: pe premium to the Swiss Nestle, only because US investors,
Speaker 5: which make up the bulk of coke investors, are just
Speaker 5: more optimistic about everything than the Swiss investor, who's you know,
Speaker 5: just gone through a recession in Europe and a war
Speaker 5: on their border.
Speaker 4: Fixed income Where does how does that fit into your world?
Speaker 3: You know?
Speaker 5: Kathy Jones covers that primarily for US, but we see,
Speaker 5: you know, shorter durations makes some sense in the US.
Speaker 5: Outside the US, with accelerating global growth, expect to see
Speaker 5: steeper curves as those central banks continue to cut rates.
Speaker 5: I'd see maybe another five rate cuts by the European
Speaker 5: Central Bank, which historically has led to a rise in
Speaker 5: the price to earnings ratio, and that's maybe another way
Speaker 5: we get around that value trap.
Speaker 6: Jeff put on your options hat for me. I mean,
Speaker 6: we're looking at a VIX here at thirteen handle. I mean,
Speaker 6: come on, the markets are pricing in zero risk into
Speaker 6: the year end turn. I mean, what's up with that?
Speaker 5: Yeah, so you know the markets are playing that post
Speaker 5: election scenario rally, right. Every time we see a new
Speaker 5: administration come in, from election day to inauguration day, we
Speaker 5: see this low volatility almost surprisingly and arise in the markets.
Speaker 5: I think that's a different story as we get closer
Speaker 5: to January twentieth than inauguration day, where you've got the
Speaker 5: president with potential day one policies that could really stir
Speaker 5: things up a little bit. So I think as you
Speaker 5: look at options volatility, expect that to start baking in
Speaker 5: higher volatilities we get.
Speaker 6: Do you think it makes sense maybe to write some
Speaker 6: calls here, buy some puts, buy some protection taken what
Speaker 6: the market gives you.
Speaker 5: It might yeah, I mean, with the price of insuring
Speaker 5: against that somewhat low, I think it's probably something to
Speaker 5: look at in portfolios. If you've got a lot of exposure.
Speaker 4: Jeff, were just about a month removed from the US
Speaker 4: election here, did you and your team did you wake
Speaker 4: up the day after the election saying we need to
Speaker 4: change some of our outlooks.
Speaker 3: Are just some of our outlooks here? In terms of
Speaker 3: our global call, we did not.
Speaker 5: And one of the reasons was we were expecting to
Speaker 5: shift to greater global tariffs almost matter who won next year.
Speaker 5: One of the things I think that's interesting is if
Speaker 5: you look at all the tariffs that Trump has proposed,
Speaker 5: you could get a weighted average tariff right in the
Speaker 5: US of twenty six percent, up from two point six percent. Now,
Speaker 5: that's rivaling the smooth Haully tariffs of nineteen thirty and
Speaker 5: the Great Depression. But a more realistic scenario, I think
Speaker 5: the bite is probably not as bad as the bark.
Speaker 5: Maybe a rise of two and a half percent to
Speaker 5: ten percent weighted average tariffs in the US. The IMF
Speaker 5: and the recent World Economic outlook looked at that scenario,
Speaker 5: what would be a move to a ten percent across
Speaker 5: the board tariff mean it would only shave zero point
Speaker 5: one percent off of global growth next year, so still
Speaker 5: seeing intact a return to better economic performance and eernings
Speaker 5: performance outside the US.
Speaker 6: Jeff, you know, you gave that example of Neslie versus
Speaker 6: Coke a little bit earlier, and your head went to,
Speaker 6: you know, positioning in the underlying investor base. Mine goes to,
Speaker 6: you know, those businesses themselves and where they located, right
Speaker 6: and the actual currency risk there. And so I look
Speaker 6: at the Bloomberg Spot Dollar Index and I see it
Speaker 6: up five and a half percent year today, and I
Speaker 6: think to myself, just how much runway is left for
Speaker 6: dollar strength?
Speaker 1: Are you focused on that at all?
Speaker 5: We are, so we're looking at the dollars. So we
Speaker 5: had a view. This maybe is one way our view change.
Speaker 5: We were looking for a weeker dollar in twenty five
Speaker 5: and now maybe seeing the dollar retaining its strength in
Speaker 5: twenty twenty five on the back of these potential tariff threats.
Speaker 5: I mean that's the textbook reaction company. Put a country
Speaker 5: puts on a tariff, the currency tends to rise by
Speaker 5: the amount of that tariff. So that could be a
Speaker 5: factor already in the market. Pricing in a five percent
Speaker 5: rise in tariffs. I think that's probably realistic. Maybe we
Speaker 5: don't see much more beyond that, but maybe a more
Speaker 5: stable dollar next year in.
Speaker 4: Your global remit, Jeff, how do you think about Latin America.
Speaker 5: You know, Latin America is still primarily a commodity based
Speaker 5: part of the world, and so if we do see
Speaker 5: a rise in manufacturing activity, we're starting to see some
Speaker 5: signs of that. China's PMI ticked up a little bit here.
Speaker 5: Maybe more commodity demand helps to support those Latin American economies,
Speaker 5: but that's really crucial there.
Speaker 1: What do you think about Japan?
Speaker 6: I mean, let's go around the world here, right, I mean,
Speaker 6: we saw a pretty big stimulus package last week, we
Speaker 6: got the nineteenth coming up. I think the boj is
Speaker 6: expected to hike rates. I mean, what do you think about,
Speaker 6: you know, investing in Japan Japanese equity specifically.
Speaker 5: I really like it. I think capital could start coming
Speaker 5: back to Japan in a significant way as you start
Speaker 5: to see the currency now beginning to appreciate a little
Speaker 5: bit more. I think, you know, as we got through
Speaker 5: this little bubble here around the election, I think you
Speaker 5: start to see the end go up, the cost of
Speaker 5: borrowing in yen going up, and that's critical to the
Speaker 5: rest of the carry trade. Yeah, yeah, moving that back in.
Speaker 5: Remember part of that carriy trade on winding was really
Speaker 5: around futures that unwound for the most part. But all
Speaker 5: the borrowing in yend from Japanese banks there's a trillion
Speaker 5: of it according to the Bank for International Settlements. That's
Speaker 5: probably still going to get repatriated at least some of
Speaker 5: it over the course of the next year. So consider
Speaker 5: that a rising tide for Japanese equities as well.
Speaker 3: Where are you telling your clients to stay away? Where
Speaker 3: are some aspects that you just don't like it.
Speaker 5: I'm still worried about China not delivering enough, over promising
Speaker 5: and under delivering on stimulus. So while valuations are very
Speaker 5: low and we know they can bounce whenever there's a
Speaker 5: new stimulus announcement, I'm still more attracted to other emerging
Speaker 5: and developed markets than I am in the Chinese equity market.
Speaker 6: Now, are you on up to two point six percent
Speaker 6: this year? Stage a pretty sharp post election rally that
Speaker 6: means weaker ran Nimbi talk to us a little bit
Speaker 6: about property structor weakness there about more importantly Chinese deflation,
Speaker 6: whether you expect it to persist as we head into
Speaker 6: the new year.
Speaker 5: Oh yeah, this is this is the biggest problem there
Speaker 5: and I don't see that turning ground anytime soon. Again,
Speaker 5: just not delivering stimulus. President she is still focused on
Speaker 5: strategic initiatives, semiconductor self sufficiency, a green tech self sufficiency,
Speaker 5: and not really focusing on delivering stimulus to the consumer
Speaker 5: or a housing doesn't want to see capital go back
Speaker 5: in as it investible. I think with a long enough
Speaker 5: time horizon it is. But watch out, twenty twenty five
Speaker 5: made up rule the China investor.
Speaker 4: So what's the if you guys, you're sitting down with
Speaker 4: your team here these days, what's kind of ther you
Speaker 4: think your best, your smartest idea maybe a little non
Speaker 4: consensus kind of thing.
Speaker 5: Well, I mean, I have to say Europe, I mean,
Speaker 5: you know, I mean, in the face of what's been
Speaker 5: going on, particularly post election, looking at the idea that
Speaker 5: Europe could accelerate next year. You know, in Q three
Speaker 5: that just reported Q three earnings for European companies exceeded
Speaker 5: those for US companies, first time we saw that in
Speaker 5: five quarters. So I think that's a sign of things
Speaker 5: to come. This rotation to financials, which make up much
Speaker 5: larger share of the European equity market than in the US.
Speaker 5: All these things I think, pointing to a surprise outperformance
Speaker 5: by international particularly European equities there.
Speaker 6: Yeah, but Jeff, you know I got to say this.
Speaker 6: You know, the biggest conviction trade in FX land is
Speaker 6: a short euro, right. I mean, so talk to me
Speaker 6: about how you invest in Europe? Do you do it
Speaker 6: on an FX hedge basis? I mean, do you have
Speaker 6: to worry about the currency there?
Speaker 5: I think you have to worry a little bit about
Speaker 5: the currency there. But again, our outlook is more stability
Speaker 5: in the dollar rather than an ongoing rise. But you know,
Speaker 5: if you look back to twenty seventeen, widely expected to
Speaker 5: hear the dollar would rally, it actually fell in twenty seventeen.
Speaker 5: And maybe the Trump administration's policy is for a weaker
Speaker 5: dollar to support you as manufacturing. So we'll have to see.
Speaker 3: What do you think, Damian, where do you think the
Speaker 3: euro goes? What's the call in your.
Speaker 6: I think you got to watch euro yen here, I mean,
Speaker 6: I think, I mean everything I'm reading from all the
Speaker 6: experts who are far smarter than I am, are talking
Speaker 6: weaker euro yen meaning weaker euro, stronger Japanese yen. And
Speaker 6: you know it makes sense fundamentally. Whether or not the
Speaker 6: market's agree is a whole different story. But I mean, Jeff,
Speaker 6: I just have to thank you. I mean, we've been
Speaker 6: pitching you fastballs here. I mean, these are not softball questions,
Speaker 6: and I am loving this. I mean, we could do
Speaker 6: this all day ball.
Speaker 4: But I mean, when I started in All Wall Street
Speaker 4: in the mid eighties, you had to do.
Speaker 3: A tour of duty and Jap and had to. Now
Speaker 3: for a generation, we've forgotten about Japan, but now it's
Speaker 3: coming back.
Speaker 5: It's finally back. Hey, finally last year, you know, across
Speaker 5: in sineteen eighty nine peak again. So yeah, what's old
Speaker 5: is new again?
Speaker 3: Yeah, what's old is new again?
Speaker 4: Absolutely right, Jeff, Jeff Client, top chief Global investment strategist,
Speaker 4: Charles Schwap, thanks so much for joining us.
Speaker 2: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 3: A lot of.
Speaker 4: News flow coming out of Washington, DC, coming out of
Speaker 4: Marrow Lago. Ye kind of the I guess the for
Speaker 4: the president like Trump has been very active here. Let's
Speaker 4: get kind of a lowdown on what's happening down there
Speaker 4: on the political front here domestically. Heidi Krebo Redicker, Adjunct
Speaker 4: Senior Fellow for the Council of Foreign Relations, How do
Speaker 4: you think so much for joining us here?
Speaker 3: You know, I love to just get your thoughts on.
Speaker 4: I think that one of the bigger news items over
Speaker 4: the past twenty four hours coming out of Washington was
Speaker 4: the pardon of by President Biden of his son here A.
Speaker 4: What did you make of that and what might be
Speaker 4: the political fallout I guess going forward.
Speaker 7: So I think you're seeing you're seeing it come out
Speaker 7: in the news that and both Republicans and Democrats have
Speaker 7: been have been quite critical of the move that President
Speaker 7: Biden made. I think they are those who are are
Speaker 7: very sympathetic to him, particularly his own family members. But
Speaker 7: you know, this will we're it's early. We have to
Speaker 7: see what the implications are for how some of the
Speaker 7: personnel and implementation in the Justice in the Justice Department,
Speaker 7: with the FBI and with some of the some of
Speaker 7: the important I guess accusations of politicization of the legal
Speaker 7: system are actually used as an excuse by President incoming
Speaker 7: President Trump to actually take a harder line.
Speaker 6: You know, Heidie, I don't have a Trump a truth
Speaker 6: social account. But you know, last night I heard that
Speaker 6: Trump was warning of all hell to pay of hamas
Speaker 6: doesn't release hostages by January twentieth. I mean, do I
Speaker 6: need a true social account. I mean, talk to me
Speaker 6: about like how the newsflow out of the White House
Speaker 6: is going to emanate for the better part of the
Speaker 6: next four years.
Speaker 7: So I mean with both foreign policy and domestic policy,
Speaker 7: certainly for trade policy. It's a buckle your seat belt
Speaker 7: time right now, because I think we're going to have
Speaker 7: a bumpy ride at the incoming president and his new
Speaker 7: cabinet and personnel are dealing with the world that is
Speaker 7: much different than it was in Trump one point zero.
Speaker 7: And this includes what you were talking about earlier, in
Speaker 7: some instability both political and economic in the core of Europe.
Speaker 7: At the same time, where you have Russia Ukraine, you
Speaker 7: have you have the unraveling of the situation in the
Speaker 7: Middle East, all eyes on whether or not the peace
Speaker 7: between between Lebanon and his Bola and Israel actually managed
Speaker 7: to manages to you know, to stay just below the
Speaker 7: line of exploding and now you have Syria that you're
Speaker 7: throwing into the mix on top of what is the
Speaker 7: larger picture of the US competition with China. So it's
Speaker 7: a big complicated world. And I think we have some
Speaker 7: inexperienced government hands coming coming into the new administration.
Speaker 4: So let's go to that point, Heidi, kind of let's
Speaker 4: step back and take a look at some of the
Speaker 4: cabinet nominees that.
Speaker 3: Put forward by President Elect Trump.
Speaker 4: What are your views on some of the ones that
Speaker 4: presumably might have some challenges getting through Senate confirmation. How
Speaker 4: do you think that how do you think the Senate's
Speaker 4: going to really act here in terms of confirmation.
Speaker 7: So there are definitely some challenging names out there, and
Speaker 7: I think the the the background investigations that we all
Speaker 7: are you used to in the context of going into
Speaker 7: government were not actually done for some of some of
Speaker 7: the ones that the press is going to be coming
Speaker 7: out with stories over over the coming days and weeks
Speaker 7: that will likely be pretty unflattering for a couple a
Speaker 7: couple of the nominees, particularly for Defense and for Attorney
Speaker 7: General and uh and I think, you know, Telsea Gabbard
Speaker 7: in particular, is one that I would I would keep
Speaker 7: an eye on because she's been criticized by her own
Speaker 7: party as being treasonous. That were being used by by
Speaker 7: some Republicans in the past about her to take over
Speaker 7: an important role at d and I dealing with all
Speaker 7: the intelligence agencies. On the economic side, I think you
Speaker 7: have a much better story with with Treasury and with
Speaker 7: with Kevin Hassett coming into the CEA role. The big
Speaker 7: question mark and the topic for lots of Washington gossip
Speaker 7: is sort of what happened to Bob Leithheiser, because the
Speaker 7: rumors are that he's too scared to go big, and
Speaker 7: that's you know, that set off all sorts of conversations
Speaker 7: about is what is too big and why would Bob
Speaker 7: be scared?
Speaker 6: Right, Heidi, you know, I let's talk about Scott Besont,
Speaker 6: you know, Trump's nominee for Treasury secretary. Let's talk about
Speaker 6: the three three three Plan. I mean, the most important
Speaker 6: part of which is reducing the federal budgets to three
Speaker 6: percent of GDP.
Speaker 1: Talk to us about fiscal discipline under a Trump administration.
Speaker 8: It's going to be hard.
Speaker 7: I think that there are a lot of contradictory ambitions
Speaker 7: that President Elect Trump has coming into his second term,
Speaker 7: and you know, the issue with the fiscal discipline and
Speaker 7: anything that requires congressional you know, congressional action, is that
Speaker 7: you have a very thin, very thin majority in the
Speaker 7: House and you have a very very slim majority in
Speaker 7: the Senate as well. So to get everybody on board
Speaker 7: for the type of massive you know, the the renegotiation
Speaker 7: of the of the Trump tax cuts from the last administration,
Speaker 7: and and then some of the spending plans, where is
Speaker 7: he going to get the funds to actually offset some
Speaker 7: of the big the big you know, the big tax
Speaker 7: extension of the tax cuts that he actually wants.
Speaker 4: Heidi, what's your sense as to how the rest of
Speaker 4: the world is planning on dealing with a second Trump administration,
Speaker 4: whether it's our the folks we have some challenges with
Speaker 4: like China as.
Speaker 3: Well as our our allies around the world. What's the
Speaker 3: approach you think they're going to take this time around.
Speaker 7: So you've already seen early days, you've had a lot
Speaker 7: of outreach from leaders around the world, not only congratulating
Speaker 7: and coming President Trump, but also you going to spend
Speaker 7: some time with him, particularly on the back of the
Speaker 7: of the the rally, you know, the the throwing around
Speaker 7: of the of the tariff threat to our closest allies
Speaker 7: and trading partners to the north and south of US,
Speaker 7: and so I think you're going to have You're going
Speaker 7: to have a sit and wait and see with many
Speaker 7: countries about what, you know, what it is they're going
Speaker 7: to be able to to trade in order to have
Speaker 7: tariff relief. But you know, taking a step even further
Speaker 7: back Trump, I'm not sure if he understands exactly what
Speaker 7: he wants to use tariffs for. So that is a
Speaker 7: big question for for both allies. And you know, for China,
Speaker 7: I think the the EU is probably going to deal
Speaker 7: unless Chump overreaches, which he's always at a risk of doing.
Speaker 7: I think Japan as well. China, I think is waiting
Speaker 7: to see, but they'll push Backack.
Speaker 4: Heidi Kriber Hticker, Adjunct Senior Fellow, Council Farm Relations, Thanks
Speaker 4: so much for giving us some of your time. Here
Speaker 4: is again the rest of the world resets for a
Speaker 4: second at Trump administration.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 4: Ifan Devit joins US senior Family Office strategist for Monetta Group,
Speaker 4: It's been a.
Speaker 3: While since we've chatted here.
Speaker 4: I'd love to get your thoughts on if your views
Speaker 4: over there at Medeta have changed in the last month, say,
Speaker 4: since the US presidential election. We now have a much
Speaker 4: different looking administration coming in a little bit different look
Speaker 4: to the US Congress and what that means for policy.
Speaker 4: Has that had any impact on kind of how you
Speaker 4: guys look at the markets.
Speaker 9: It's interesting. I'd say it's led to a hardening of
Speaker 9: conviction around some of the trends that were really already
Speaker 9: in place. We've been mapping the Trump trade since May.
Speaker 9: It wasn't saying that we had certainty around the election outcome,
Speaker 9: but I think it was pretty clear which sectors were
Speaker 9: going to benefit. There was no surprise in the tariff rhetoric,
Speaker 9: in any of the discussion around tax cuts. We know
Speaker 9: about the America First foreign policy preference, so all of
Speaker 9: that was very much something that we were stacking up for.
Speaker 9: And now I'd say with the administration now pending. We
Speaker 9: know that that's likely to harden, and I'd say, what
Speaker 9: we are starting to change a point of view around
Speaker 9: is exactly the point of your previous discussion. Looking at
Speaker 9: outside the US, the US now represents seventy five percent
Speaker 9: of the MSCI world. Any global allocation is US dominant.
Speaker 9: It is this economic jugg or not that shows no
Speaker 9: signs of stopping, and the fundamentals look very weak outside
Speaker 9: the US. So we generally have a well diversified international portfolio.
Speaker 9: When it comes to equities, it's getting increasingly more difficult
Speaker 9: to justify some of those non US holdings. We talked
Speaker 9: about Europe, but I'd say in emerging markets, you can't
Speaker 9: see that area because the pile of towels that are
Speaker 9: covering it. Everyone has thrown in the talel at this
Speaker 9: point on emerging.
Speaker 6: Markets, well, ifan, I'd love to talk to you about
Speaker 6: emerging markets, but I can't take this, can't relinquish this
Speaker 6: opportunity to really ask you. I mean, look, let's talk
Speaker 6: about what family offices do You have really big ones
Speaker 6: that can invest themselves directly into the markets, but most
Speaker 6: of them they invest with other managers. So talk to
Speaker 6: us about manager's skill. Talk to us about what strategies,
Speaker 6: what sectors, where the racing manager depth. We're family offices
Speaker 6: allocating their wealth today, very interesting question.
Speaker 9: Certainly, manager's skill is what we're looking for because we
Speaker 9: know that the beta, we know that the markets. We're
Speaker 9: looking for that differentiated edge.
Speaker 3: Now.
Speaker 9: I will say that in the public markets arena, that
Speaker 9: has been very much a pinning commodity right now, manager's
Speaker 9: skilled to perform. Most most of family offices will choose
Speaker 9: to get their public equity exposure in just through indoicays
Speaker 9: and beta because it's increasingly hard to get that active management.
Speaker 9: What we're seeing is a lot more focus on the alternatives,
Speaker 9: private credit. You spoke earlier about the deal and HPS
Speaker 9: and how that is really that the hottest spot now
Speaker 9: in alternatives is private credit. That's very interesting for families.
Speaker 9: Contractual cash flows that are not related to market movements.
Speaker 9: We've seen a long interest in real assets, real estate,
Speaker 9: some individual deals, private equity, venture capital, very kind of
Speaker 9: very much specific to that family's own set of values
Speaker 9: and their preferences and maybe their geographic location as well.
Speaker 6: And what about capacity with these managers? I mean, are
Speaker 6: we just talking cit adel point seventy two millennium. Elliott,
Speaker 6: I mean, are there plenty of managers out there that
Speaker 6: you can get capacity with for your smaller midsized family offices.
Speaker 9: It's a really good question, and i'd say that actually,
Speaker 9: what's improved with the recent wave of democratization of alternatives
Speaker 9: we have a lot more platforms out there now, is
Speaker 9: actually the entry level the bite size is getting a
Speaker 9: lot smaller. In some cases that would have been a
Speaker 9: ten five or ten million minimum, And even though family
Speaker 9: offices can be substantial, they are not at that kind
Speaker 9: of endowment size whereby a single manager could get five million.
Speaker 9: But now that those ticket sizes are coming down, that's
Speaker 9: become very interesting. But actually capacities, particularly the hedge fund arena,
Speaker 9: is much less of an issue than it used to
Speaker 9: be before. I'd say private capital. There is a desire
Speaker 9: to diversify a client base, so family offices are really
Speaker 9: attractive for that reason. So a lot more movement into
Speaker 9: having this multiple tickets.
Speaker 4: Even we've had here in the US markets twenty percent
Speaker 4: plus gains over the each of the past two years.
Speaker 4: How are you kind of positioning twenty twenty five for
Speaker 4: your clients?
Speaker 9: Well, I think it sounds a little bit uninteresting, but
Speaker 9: more of the same in the sense that we are
Speaker 9: Our conviction, as I said, has been tested around thinking
Speaker 9: like non US investing, but when it comes to US investing,
Speaker 9: we do believe in a broad based portfolio. We've been
Speaker 9: aware that the tech team has dominated, and certainly the
Speaker 9: momentum has been there, but we also feel that having
Speaker 9: this exposure across small and mid cap that's going to
Speaker 9: come into play when tariffs come into effect. We think
Speaker 9: that that will benefit from if there are tariffs on imports,
Speaker 9: less reliance in imports. So all of that's pretty much
Speaker 9: the same. I'd say in terms of the cash as
Speaker 9: interest rates come down, which we expect them to do,
Speaker 9: it won't be as attractive to whole cash bombs. We're
Speaker 9: going to have to be a lot more selective there
Speaker 9: and otherwise focusing on these alternatives kind of one at
Speaker 9: a time, looking at what comes up, be having an
Speaker 9: open door approach, which we always do to new ideas.
Speaker 3: Ethan, thank you so much for joining us.
Speaker 4: Ethan Devitch, She's a senior family office strategist for a
Speaker 4: Meneta Group.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on applecar Play and Android
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Speaker 2: Bloomberg terminal.
Speaker 4: All right, folks, your daily look at their front pages
Speaker 4: from around the world and Lisa Mittel newspapers, what do
Speaker 4: you have for us?
Speaker 8: All right, since you were talking sports, I want to
Speaker 8: start there.
Speaker 3: Okay.
Speaker 10: The president of TKO Group, that's the one who owns
Speaker 10: Ultimate Fighting, World Wrestling Entertainment. So he tells the Financial
Speaker 10: Times that sports fans want more. They want super access.
Speaker 1: Okay.
Speaker 10: They don't just want to sit there like Damien with
Speaker 10: a hot dog and that's it.
Speaker 8: Okay, they want more.
Speaker 10: They want special treatment, they want to take pictures with
Speaker 10: the athletes, they want exclusive access experiences. So because of that,
Speaker 10: the president was telling the Financial Times they have to
Speaker 10: do different things. But you remember back in October, Tikyo
Speaker 10: said they were buying sports agency IMG hospitality business on locations,
Speaker 10: which is key to give them those experiences. So they're
Speaker 10: making all these changes. They're also seeing that potential for
Speaker 10: live events. Of course, Netflix WWE's flash of Weekly Show
Speaker 10: Raw it's going to be in January in the US,
Speaker 10: So you're starting to see these changes.
Speaker 8: But I don't know, Damon, do you have that?
Speaker 10: You know?
Speaker 8: Do you want more as a sports fan?
Speaker 6: Well, I'm gonna tell Mark Shapaire with the UFC and
Speaker 6: what fighting championships need they need body cameras. When I'm
Speaker 6: watching from home, I want to be right in there grappling.
Speaker 6: I want to when you sweep the leg. I need
Speaker 6: to be a part of it. Of course, of course, now,
Speaker 6: but I get it. You know, it's all about keeping
Speaker 6: all of the fans and the audiences at these arenas,
Speaker 6: at these ballparks, at these stadiums from six in the morning.
Speaker 1: Till eleven at night. You know, you don't want them
Speaker 1: to leave. So so I get it.
Speaker 3: I got it.
Speaker 4: TKO Group Holdings publicly traded company. TKO is a ticker
Speaker 4: twenty three billion dollar market cap. Stocks up sixty five
Speaker 4: percent today. I mean, just extraordinary. That's where that's where
Speaker 4: the growth is. So uh And they say, you know,
Speaker 4: the Shapiro guy, the head who runs this thing. Half
Speaker 4: of our fan base is in the demo of eighteen
Speaker 4: to thirty four.
Speaker 1: Yeah, I believe it. Got to get them. On Bloomberg
Speaker 1: Business Sports with Michael Barr exactly.
Speaker 4: Yeah, I'm not in that demo, but I'll take your
Speaker 4: word for Financial Times.
Speaker 10: What else you got, Okay, I'm not sure if you've
Speaker 10: been to a Subway location lately, but there's a lot
Speaker 10: of controversy. A lot of its franchise owners. They're fed up,
Speaker 10: they've had it. You had a lawyer for a few
Speaker 10: of those franchise owners who spoke with The New York Post,
Speaker 10: and they say that the subway has really ignored their
Speaker 10: screams for help.
Speaker 8: They say they're at risk of being gobbled up by
Speaker 8: Jersey Mikes. They're they're worried about it.
Speaker 10: You think about it, Jersey Mike's has about three loud
Speaker 10: three thousand locations. Subway has about twenty thousand.
Speaker 3: And by the way, Subway is the most.
Speaker 4: They have the most locations of any fast food place,
Speaker 4: more than an okay, of any fast food They're everywhere.
Speaker 3: I mean, you go everywhere around the world, there's a
Speaker 3: Subway there.
Speaker 8: And it's true.
Speaker 10: But if you notice recently, they've been shrinking, like they
Speaker 10: shrunk about fifteen percent over the past four years. And
Speaker 10: the lawyer for these for these Subway franchising not it's
Speaker 10: they're being asked for other things. They're being forced to
Speaker 10: remodel restaurants, they're being forced to, you know, pay these
Speaker 10: technology fees and all these things are adding up and
Speaker 10: they're just not making the money that they want.
Speaker 6: Two words for you, Danny de Vito, I mean I
Speaker 6: wonder what he alone is responsible for Jersey Mike Sales.
Speaker 6: I mean he is the face of that franchise. And
Speaker 6: that's what Subway needs. They need a Danny de Vito.
Speaker 3: Because he is a Jersey guy.
Speaker 4: He's a Jersey Jersey and the you know, the Jersey
Speaker 4: Mike's found it Point Pleasant, New Jersey. Now it's headquartered
Speaker 4: in Manasquan, New Jersey.
Speaker 3: But it's fast, yeah, it is. It's it is amazing.
Speaker 4: But this I do go to Subway occasionally. There's one
Speaker 4: on Electionton Avenue, but it's it's grim when you walk in.
Speaker 3: It's just not a great environment. And I think that's
Speaker 3: representative of.
Speaker 10: It's not the freshly sliced No.
Speaker 5: No, it is not so.
Speaker 3: But it's got a you know, if your franchise owner,
Speaker 3: you need some help there.
Speaker 10: It's a tough time, it is, all right, So we
Speaker 10: go from fast food to fine dining. Okay, so a
Speaker 10: lot more restaurants.
Speaker 8: I'm not sure if you've noticed this.
Speaker 10: They're starting to, you know, fatten your check totals with
Speaker 10: these tiny little appetizer. They're like bite size, like this
Speaker 10: big if you're on YouTube, okay, no smaller than top us.
Speaker 10: It takes you just pick it and your stuff it
Speaker 10: in your mouth and it's done, and that's the end
Speaker 10: of it.
Speaker 8: But the thing is, it costs like twenty to thirty
Speaker 8: dollars each for these little bite sized things. I mean
Speaker 8: it's topped with caviaar.
Speaker 10: Maybe they use yub from but one restaurant, okay, a
Speaker 10: single chicken nugget top with truffle will run you thirty dollars.
Speaker 8: So that's to give you an example.
Speaker 10: The reason why, as they're saying, diners like the novelty,
Speaker 10: it's a social media hype behind it, you know, all
Speaker 10: these influencers posting about it, but also o zembic weight
Speaker 10: loss drugs, people are eating less, they want to eat less,
Speaker 10: so they want these smaller portions and they still want
Speaker 10: the restaurant experience, so they're willing to pay for it.
Speaker 10: But it's kind of paying off for these restaurants because
Speaker 10: the check totals are starting to add up. You know,
Speaker 10: you add one, two, three for of these little tiny
Speaker 10: bites and you know, before you know it, your check
Speaker 10: tonal is a little bit more than your thought.
Speaker 1: Yeah, this is epic.
Speaker 3: Thing is real, it is.
Speaker 1: I mean, the ladies in my town look fantastic.
Speaker 6: I'm not kidding you. I mean they've lost so much weight,
Speaker 6: and I mean I get it. You know, they just
Speaker 6: you know, the drug you just you can't eat, you
Speaker 6: can't keep it down.
Speaker 3: Well, I mean the side effect is nausea constant.
Speaker 4: So if they can fix that, Yeah, when they get
Speaker 4: the oral application of some of these weight lostrucks, then
Speaker 4: they're going to have something.
Speaker 1: That's another drug to take care of the nausea. That way,
Speaker 1: that's two for one exactly.
Speaker 3: All right.
Speaker 10: Lastly, this is the season, right, you're getting all these
Speaker 10: packages on your porch, but the problem is that thieves
Speaker 10: are going on your porch and they're taking them. You
Speaker 10: got the porch pirates right in full effect. So now
Speaker 10: what some companies are doing, like people have tried. You
Speaker 10: try the high tech gadgets, right, you do the ring cameras,
Speaker 10: and you try to do that.
Speaker 4: So I can watch somebody still you can watch it exactly.
Speaker 10: You can buy four hundred dollars lockers and the person
Speaker 10: can put the you know in the locker. Some actually
Speaker 10: tailors will reimburse you, like Amazon does that. I know
Speaker 10: that if something stolen they'll replace it.
Speaker 8: But now you can buy insurance for it. So this
Speaker 8: is the new thing.
Speaker 10: Is this company called porch Pal, subscription based startup. It'll
Speaker 10: cover the cost of your stolen packages. How much will
Speaker 10: it cost. It's going to cost you one hundred and
Speaker 10: twenty dollars a year. It'll cover up to two thousand
Speaker 10: dollars of deliveries or up to three claims a year.
Speaker 10: So basically, you get this credit card, it's linked to
Speaker 10: the account and all deliveries that are paid with that card,
Speaker 10: including groceries and takeout are covered under that. So it's
Speaker 10: will Are you willing to pay that in order to
Speaker 10: have your packages secured?
Speaker 8: I guess is a way to think about it.
Speaker 6: But I'm at your location in geography has a lot
Speaker 6: of yeah with it, and you know I would never
Speaker 6: pay that, right, you know, I mean probably for me.
Speaker 6: The cost of the time, the timehead of trying to
Speaker 6: clean a lost package with the whippery is enough, right,
Speaker 6: So so for me, I guess you know, I wouldn't.
Speaker 6: It doesn't make sense, but I get it. If you're
Speaker 6: in a not so nice neighborhood, you know, and people
Speaker 6: steal from your front door, then yeah maybe.
Speaker 4: Wall Street Journal reporting nearly half of buyers can expect
Speaker 4: to be hit at least once by porch pirates during
Speaker 4: this holiday season.
Speaker 3: Lisa Mitteo, Thank you so much. Newspapers with Lisa Mittello.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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