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 called Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,000 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash 7 00:00:20,040 --> 00:00:25,599 Speaker 1: podcast ups United Parcel Service. This stock is up, but 8 00:00:25,640 --> 00:00:27,400 Speaker 1: it's off two hundred quarter percent today. It's only up 9 00:00:27,400 --> 00:00:29,440 Speaker 1: about three percent year to date, one hundred and fifty 10 00:00:29,480 --> 00:00:31,880 Speaker 1: five billion dollar market cap. But we got some problems 11 00:00:31,880 --> 00:00:36,120 Speaker 1: there potentially later this month with the labor contract there. 12 00:00:36,159 --> 00:00:39,400 Speaker 1: Kritty Gupda Markets editor and host of Bloomberg Surveillance Early 13 00:00:39,520 --> 00:00:42,080 Speaker 1: Edition ge joins us here in our Bloomberg Interactive Broker 14 00:00:42,120 --> 00:00:44,080 Speaker 1: studio Krity. What are you looking at UPS? Talk to 15 00:00:44,159 --> 00:00:45,600 Speaker 1: us about the labor situation there. 16 00:00:45,680 --> 00:00:48,840 Speaker 3: Oh, there's so much going on. Look, remember when last 17 00:00:48,840 --> 00:00:52,600 Speaker 3: fall we had those massive rail strikes where the essentially 18 00:00:52,600 --> 00:00:54,840 Speaker 3: the government had to get involved and say, look, we're 19 00:00:54,840 --> 00:00:57,880 Speaker 3: shutting down these negotiations because you clearly can't seem to 20 00:00:57,880 --> 00:01:00,360 Speaker 3: come to some sort of reasonable conclusion. It looks like 21 00:01:00,360 --> 00:01:02,080 Speaker 3: we're on the cusp of that happening again, except this 22 00:01:02,120 --> 00:01:05,120 Speaker 3: time with ups. The shares are down about two point 23 00:01:05,160 --> 00:01:07,440 Speaker 3: two percent in the pre market over the weekend. They 24 00:01:07,440 --> 00:01:09,920 Speaker 3: were supposed to have some pretty good negotiations and they 25 00:01:10,000 --> 00:01:13,280 Speaker 3: were going well until now it looks like they've collapsed. 26 00:01:13,280 --> 00:01:15,319 Speaker 3: And what's important to keep in mind here is that 27 00:01:15,560 --> 00:01:18,319 Speaker 3: the contract is coming up pretty quickly to end, So 28 00:01:18,400 --> 00:01:21,040 Speaker 3: July thirty four first is when it ends. And this 29 00:01:21,080 --> 00:01:24,720 Speaker 3: is why we care. Three hundred and thirty thousand workers 30 00:01:24,840 --> 00:01:28,600 Speaker 3: in this country. This is the largest private sector union agreement. 31 00:01:28,800 --> 00:01:31,440 Speaker 1: That's the reporting that got my attention. I didn't think 32 00:01:31,440 --> 00:01:33,280 Speaker 1: about that, but it's massive, yes it is. 33 00:01:33,319 --> 00:01:35,840 Speaker 3: It's even bigger than the rail strikes. And this has 34 00:01:35,880 --> 00:01:38,680 Speaker 3: even as a bigger implication for supply chains, the match 35 00:01:38,720 --> 00:01:41,200 Speaker 3: of the folks who who can't get their packages. So 36 00:01:41,560 --> 00:01:43,080 Speaker 3: that's kind of what we're dealing with here. They're going 37 00:01:43,120 --> 00:01:45,080 Speaker 3: through the nitty gritty. It looks like the union itself 38 00:01:45,120 --> 00:01:48,200 Speaker 3: has walked away from talks this time around, but some 39 00:01:48,280 --> 00:01:51,200 Speaker 3: pretty huge implications that this market is really reacting to. 40 00:01:51,480 --> 00:01:53,320 Speaker 4: Ye I wanted to ask you more about the supply chain, 41 00:01:53,320 --> 00:01:55,440 Speaker 4: their creedy, So of course, like no, one wants to 42 00:01:55,440 --> 00:01:58,800 Speaker 4: get their packages late. That's frustrating. We all experience that 43 00:01:58,880 --> 00:02:02,280 Speaker 4: during COVID. But what is there like a bigger takeaway here, 44 00:02:02,400 --> 00:02:05,040 Speaker 4: bigger problem besides delace. 45 00:02:04,840 --> 00:02:05,920 Speaker 3: There is a bigger problem. 46 00:02:05,920 --> 00:02:06,120 Speaker 5: Look. 47 00:02:06,240 --> 00:02:09,040 Speaker 3: So, so the way to think about the shipping industry 48 00:02:09,120 --> 00:02:11,480 Speaker 3: right now is everyone's kind of tackling a little bit differently. 49 00:02:11,480 --> 00:02:14,880 Speaker 3: There's three different players here. There's UPS, FedEx, DHL, and 50 00:02:14,919 --> 00:02:16,720 Speaker 3: they all kind of do a little bit of everything. 51 00:02:17,120 --> 00:02:19,800 Speaker 3: So they will take your package or a business's package 52 00:02:19,880 --> 00:02:24,160 Speaker 3: or a freight package via plane, train, automobile, thrown a 53 00:02:24,160 --> 00:02:26,840 Speaker 3: ship in there. And what's important to keep in mind 54 00:02:26,919 --> 00:02:29,280 Speaker 3: is that FedEx and DHL have taken a very different 55 00:02:29,320 --> 00:02:32,919 Speaker 3: approach than UPS has post pandemic, when everyone was kind 56 00:02:32,919 --> 00:02:36,600 Speaker 3: of paying top dollar to get their shipments, FedEx and 57 00:02:36,680 --> 00:02:39,400 Speaker 3: DHL really invested in their labor and that's something that 58 00:02:39,400 --> 00:02:41,600 Speaker 3: FedEx is now paying for. They're saying, we over hired. 59 00:02:41,919 --> 00:02:43,840 Speaker 3: Now we're pulling back. So we've see all these layoffs. 60 00:02:43,919 --> 00:02:46,240 Speaker 3: DHL they're not doing layoffs, but they are kind of 61 00:02:46,280 --> 00:02:50,280 Speaker 3: dealing with that crunch now that packages are declining through 62 00:02:50,400 --> 00:02:52,280 Speaker 3: kind of attrition, and they're saying, we're just not going 63 00:02:52,320 --> 00:02:56,200 Speaker 3: to replace roles. UPS is a completely different ballgame because 64 00:02:56,240 --> 00:02:58,280 Speaker 3: they never invested in labor in the first place, and 65 00:02:58,280 --> 00:03:00,280 Speaker 3: that's a big problem. And a big part of that 66 00:03:00,320 --> 00:03:03,120 Speaker 3: was because they're unionized, whereas FedEx has more kind of 67 00:03:03,160 --> 00:03:05,679 Speaker 3: an independent contractor network, which they are kind of now 68 00:03:05,720 --> 00:03:08,520 Speaker 3: dealing with as well. UPS said, we're going to focus 69 00:03:08,560 --> 00:03:11,320 Speaker 3: on margins. We're going to increase prices, They're going to 70 00:03:11,400 --> 00:03:14,040 Speaker 3: focus on the smaller consumer and make up our margins 71 00:03:14,080 --> 00:03:16,920 Speaker 3: from there. And you really saw that strategy work because 72 00:03:17,160 --> 00:03:19,079 Speaker 3: if you look at the stock of the three companies, 73 00:03:19,760 --> 00:03:22,400 Speaker 3: UPS has won out. They've outperformed over and over and 74 00:03:22,440 --> 00:03:25,880 Speaker 3: over again. Except now because of those margins. They're saying, look, 75 00:03:25,919 --> 00:03:29,079 Speaker 3: we can't pay up, whereas the union is saying, well, 76 00:03:29,200 --> 00:03:32,000 Speaker 3: our wages aren't rising in line with profits, so why 77 00:03:32,000 --> 00:03:34,280 Speaker 3: should we work if we're not getting that. So they 78 00:03:34,320 --> 00:03:37,680 Speaker 3: are making some concessions UPS to these drivers of things 79 00:03:37,760 --> 00:03:40,160 Speaker 3: like part time drivers changing a little bit of a shift. 80 00:03:40,160 --> 00:03:44,160 Speaker 3: They're now getting MLKDA as a paid holiday, no more 81 00:03:44,200 --> 00:03:47,920 Speaker 3: mandatory over time. There's no two tier system anymore. Basically, 82 00:03:48,000 --> 00:03:50,160 Speaker 3: part time workers, we're making about five dollars less an 83 00:03:50,160 --> 00:03:52,880 Speaker 3: hour than full time workers. So there are pieces of 84 00:03:52,880 --> 00:03:55,400 Speaker 3: the equation, but it's still not at the salary level 85 00:03:55,800 --> 00:03:57,240 Speaker 3: that a lot of these workers want. 86 00:03:57,320 --> 00:03:59,800 Speaker 1: Well, I mean the old contract full time, they can 87 00:03:59,840 --> 00:04:03,920 Speaker 1: make up the thirty nine dollars per hour. That seems 88 00:04:04,000 --> 00:04:07,600 Speaker 1: like a good number. But are they saying, yeah, but 89 00:04:08,200 --> 00:04:10,360 Speaker 1: you guys, being the company made so much money during 90 00:04:10,400 --> 00:04:13,080 Speaker 1: the pandemic, we want some of that pretty much. 91 00:04:13,080 --> 00:04:15,560 Speaker 3: And look, it's also because of the overtime policy, because 92 00:04:15,560 --> 00:04:18,719 Speaker 3: a lot of these kind of shipping constraints require some 93 00:04:18,800 --> 00:04:21,160 Speaker 3: of these workers to go over time. And I think 94 00:04:21,160 --> 00:04:23,720 Speaker 3: it's better perhaps because from an hourly perspective, thirty nine 95 00:04:23,720 --> 00:04:25,600 Speaker 3: dollars an hour sounds pretty juicy. Let's talk about it 96 00:04:25,640 --> 00:04:29,080 Speaker 3: from an annual perspective. Full time delivery drivers making about 97 00:04:29,160 --> 00:04:31,680 Speaker 3: ninety five thousand a year, even though they're doing it 98 00:04:31,720 --> 00:04:35,640 Speaker 3: through kind of rain, hail storm, through COVID, through all 99 00:04:35,680 --> 00:04:37,200 Speaker 3: of these kind of issues. 100 00:04:37,800 --> 00:04:41,280 Speaker 1: Did they ever get anything for COVID working through COVID? 101 00:04:41,520 --> 00:04:43,520 Speaker 3: They didn't. And this is I think where a lot 102 00:04:43,560 --> 00:04:46,240 Speaker 3: of the parallels with the rail worker story came because remember, 103 00:04:46,320 --> 00:04:49,800 Speaker 3: for the rail strikes last fall, they weren't getting paid 104 00:04:50,040 --> 00:04:53,120 Speaker 3: time off, they weren't getting a sick leave for example, 105 00:04:53,120 --> 00:04:55,360 Speaker 3: they weren't even getting access to benefits. So it's a 106 00:04:55,440 --> 00:04:58,520 Speaker 3: lot of these same issues. Essentially, these are industries rail 107 00:04:58,720 --> 00:05:02,920 Speaker 3: or shipping that are very intensive. Truck drivers really have 108 00:05:02,400 --> 00:05:05,080 Speaker 3: to have to kind of sacrifice a lot physically but 109 00:05:05,200 --> 00:05:07,440 Speaker 3: also in terms of family and how much time they 110 00:05:07,440 --> 00:05:09,320 Speaker 3: get off as well, so they want to be compensated 111 00:05:09,320 --> 00:05:11,720 Speaker 3: for it, especially with the overtime. And I think that's 112 00:05:11,720 --> 00:05:14,240 Speaker 3: where they're struggling here, and they're basically saying, look, we've 113 00:05:14,600 --> 00:05:16,720 Speaker 3: we've made some concessions, but really you got to meet 114 00:05:16,800 --> 00:05:18,720 Speaker 3: us on the pay and ups just isn't budget here. 115 00:05:18,920 --> 00:05:19,080 Speaker 6: Yeah. 116 00:05:19,080 --> 00:05:21,120 Speaker 4: I saw with the West Coast dock workers too, even 117 00:05:21,120 --> 00:05:23,880 Speaker 4: more recently this spring, and as you've mentioned, you know 118 00:05:23,920 --> 00:05:27,080 Speaker 4: that the government did have to intervene it that we 119 00:05:27,120 --> 00:05:29,559 Speaker 4: don't think a lot of us probably remember Joe Biden 120 00:05:29,680 --> 00:05:31,440 Speaker 4: taking a nice trip out there, yeah, to visit. 121 00:05:31,920 --> 00:05:33,720 Speaker 3: And I'll say this isn't really quickly. This is an 122 00:05:33,720 --> 00:05:36,560 Speaker 3: international story too, because Canada also now dealing with with 123 00:05:36,640 --> 00:05:39,479 Speaker 3: port strikes as well, so you're seeing this all over. 124 00:05:39,640 --> 00:05:41,920 Speaker 1: I want to say the world, what's GPS saying. Are 125 00:05:41,920 --> 00:05:46,000 Speaker 1: they what's their bargaining position? Are they saying we pay competitively. 126 00:05:46,040 --> 00:05:47,120 Speaker 1: What are they saying here? 127 00:05:47,160 --> 00:05:50,200 Speaker 3: So UPS is saying that, look, we are negotiating, we've 128 00:05:50,240 --> 00:05:52,240 Speaker 3: already made a lot of concessions, which, to be fair, 129 00:05:52,279 --> 00:05:54,960 Speaker 3: they have a normal mandatory overtime, they've changed their two 130 00:05:55,000 --> 00:05:57,799 Speaker 3: tier payment system. But they're saying that the team stars 131 00:05:57,839 --> 00:06:00,360 Speaker 3: kind of have to give some sort of lead here. 132 00:06:00,400 --> 00:06:02,400 Speaker 3: And if you look at this last round of negotiations 133 00:06:02,560 --> 00:06:05,760 Speaker 3: which collapsed this morning, by the way, they're saying that 134 00:06:05,760 --> 00:06:07,680 Speaker 3: the teamsters are the ones who walked away from the 135 00:06:07,720 --> 00:06:09,760 Speaker 3: bargaining table, so you have to They're saying, you have 136 00:06:09,800 --> 00:06:12,600 Speaker 3: to continue this dialogue. Of course, we're going to keep 137 00:06:12,600 --> 00:06:14,679 Speaker 3: you updated on because this is not over yet. But 138 00:06:14,680 --> 00:06:15,599 Speaker 3: but we'll see how this is. 139 00:06:15,680 --> 00:06:17,560 Speaker 1: What have we heard from the administration is like, I 140 00:06:17,560 --> 00:06:19,720 Speaker 1: haven't heard anything like President Biden talking about this. Is 141 00:06:19,760 --> 00:06:21,719 Speaker 1: this just because we've got, you know, three weeks to 142 00:06:21,760 --> 00:06:24,000 Speaker 1: go before it really gets pretty much? 143 00:06:24,120 --> 00:06:26,760 Speaker 3: Look, I don't I think the Biden administration, and Molly 144 00:06:26,839 --> 00:06:29,320 Speaker 3: correct me if I'm wrong. You're here on the Economics team, 145 00:06:29,640 --> 00:06:32,400 Speaker 3: they really want to not intervene until they really have to. 146 00:06:32,480 --> 00:06:34,080 Speaker 3: When you saw this with the rail strike, I keep 147 00:06:34,080 --> 00:06:35,880 Speaker 3: bringing this back to the real strikes because we just 148 00:06:35,960 --> 00:06:38,440 Speaker 3: went through this a couple of months ago. Marty Walsh, 149 00:06:38,600 --> 00:06:42,320 Speaker 3: the Labor Secretary at the time, got involved at the 150 00:06:42,440 --> 00:06:45,080 Speaker 3: very last minute, and it ended up being because Congress 151 00:06:45,600 --> 00:06:47,760 Speaker 3: had to intervene. It was some sort of very old 152 00:06:47,960 --> 00:06:51,760 Speaker 3: rail laft nineteen twelve that only applied to rail for 153 00:06:52,120 --> 00:06:55,359 Speaker 3: some reason, and that's what they ended up instigating. But 154 00:06:55,520 --> 00:06:57,040 Speaker 3: you kind of want to make this work on its 155 00:06:57,080 --> 00:06:59,440 Speaker 3: own before the Biden administration gets involved, especially because of 156 00:06:59,440 --> 00:07:00,599 Speaker 3: the political consequences. 157 00:07:00,800 --> 00:07:04,160 Speaker 4: Absolutely, I mean, yeah, that is definitely the eleventh hour, 158 00:07:04,279 --> 00:07:06,880 Speaker 4: Hail Mary. We need to call in the top guns 159 00:07:06,960 --> 00:07:09,760 Speaker 4: to make this happen. So, yeah, it doesn't seem like 160 00:07:09,800 --> 00:07:12,680 Speaker 4: we're quite there yet, but it certainly would be concerning 161 00:07:13,120 --> 00:07:16,120 Speaker 4: over the next three weeks if it does escalate to 162 00:07:16,160 --> 00:07:19,240 Speaker 4: that point. Does is there an indication that this could 163 00:07:19,320 --> 00:07:21,600 Speaker 4: be drawn out? For it could? Yeend, it could. 164 00:07:21,640 --> 00:07:23,840 Speaker 3: So I think what was kind of the difference again, 165 00:07:23,840 --> 00:07:25,240 Speaker 3: I'm gonna bring them back to the real strikes, because 166 00:07:25,240 --> 00:07:27,160 Speaker 3: it's a little bit of deja vous here, is that 167 00:07:27,200 --> 00:07:30,119 Speaker 3: the voting periods were longer, So you had kind of, Okay, 168 00:07:30,200 --> 00:07:32,160 Speaker 3: we're going to go to the eleventh hour and then 169 00:07:32,160 --> 00:07:34,360 Speaker 3: we're going to have three or six weeks to vote 170 00:07:34,440 --> 00:07:35,960 Speaker 3: and then come back, So it was kind of a 171 00:07:36,000 --> 00:07:39,040 Speaker 3: drawn out process, specifically because of that law that dayed 172 00:07:39,080 --> 00:07:41,440 Speaker 3: back to like nineteen twelve or whatever. This time around, 173 00:07:41,520 --> 00:07:44,640 Speaker 3: that's not true. It has been voted ninety seven percent 174 00:07:44,680 --> 00:07:46,920 Speaker 3: by the union that if this agreement isn't hit by 175 00:07:47,000 --> 00:07:50,360 Speaker 3: July thirty first, which is when the contract ends August first, 176 00:07:50,440 --> 00:07:52,720 Speaker 3: they are going on strike. So we're still about two 177 00:07:52,880 --> 00:07:54,720 Speaker 3: three weeks away, but it's certainly something you want to 178 00:07:54,760 --> 00:07:56,640 Speaker 3: keep an eye on because there is no long drawn 179 00:07:56,640 --> 00:07:59,160 Speaker 3: out process here. It's very simple. 180 00:07:59,720 --> 00:08:01,520 Speaker 1: And Marty Walsh is not going to come in and 181 00:08:01,600 --> 00:08:04,040 Speaker 1: save the day because he is no longer the Secretary 182 00:08:04,040 --> 00:08:06,080 Speaker 1: of Labor. I'm just looking at me. He's the director 183 00:08:06,400 --> 00:08:08,600 Speaker 1: of the National Hockey League Players Association. 184 00:08:08,640 --> 00:08:09,920 Speaker 3: Oh yeah, he traded up. 185 00:08:10,240 --> 00:08:13,560 Speaker 1: Okay, interesting, all right, So UPS will keep on the 186 00:08:13,720 --> 00:08:16,440 Speaker 1: lookout for that, because who doesn't receive a package every 187 00:08:16,520 --> 00:08:18,400 Speaker 1: day at home? I mean every day. 188 00:08:18,480 --> 00:08:21,240 Speaker 3: So, and I'll give you an added piece of kind 189 00:08:21,240 --> 00:08:24,680 Speaker 3: of trivia here. One of UPS's biggest customers is Amazon. 190 00:08:24,880 --> 00:08:27,200 Speaker 3: So Amazon has their own logistics company, but they're kind 191 00:08:27,200 --> 00:08:29,160 Speaker 3: of leftover. Goes through UPS. 192 00:08:28,960 --> 00:08:32,440 Speaker 1: Really because again I see the Amazon trucks everywhere. Yeah, 193 00:08:32,480 --> 00:08:34,800 Speaker 1: I mean they've got to have to ask Lee Klascal. 194 00:08:34,880 --> 00:08:36,559 Speaker 1: This's a Bloomberg Intelligence. They got to be one of 195 00:08:36,600 --> 00:08:39,160 Speaker 1: the biggest trucking companies in the country. Amazon. Yeah, I 196 00:08:39,200 --> 00:08:41,480 Speaker 1: think they're headed that way. Yeah, that it's extorting. All right, 197 00:08:41,480 --> 00:08:43,720 Speaker 1: pretty Goop that thanks so much for joining us. Pretty 198 00:08:43,720 --> 00:08:47,240 Speaker 1: good to markets report. It does all that Bloomberg TV stuff. 199 00:08:47,240 --> 00:08:51,240 Speaker 1: We appreciate getting some reporting there on UPS. Again, huge company. 200 00:08:51,280 --> 00:08:53,840 Speaker 1: I didn't know. This is the largest private sector union 201 00:08:54,840 --> 00:08:56,839 Speaker 1: agreement there is. The team starts with the UPS, so 202 00:08:56,880 --> 00:08:59,000 Speaker 1: we'll keep an eye on that. This is Bloomberg. 203 00:09:01,640 --> 00:09:05,079 Speaker 7: You're listening to the team. Ken's are live program Bloomberg 204 00:09:05,120 --> 00:09:08,480 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com, 205 00:09:08,559 --> 00:09:11,720 Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen 206 00:09:11,760 --> 00:09:13,920 Speaker 7: on demand wherever you get your podcasts. 207 00:09:16,080 --> 00:09:18,000 Speaker 1: All right, let's get right down to it here. Lots 208 00:09:18,040 --> 00:09:20,559 Speaker 1: of economic data coming out this week. We got to 209 00:09:20,640 --> 00:09:24,160 Speaker 1: fed you gonna be making some decision later on here 210 00:09:24,320 --> 00:09:25,959 Speaker 1: in the month, So that means we need to check 211 00:09:25,960 --> 00:09:28,640 Speaker 1: in with Ira Jersey does all of that interest rate 212 00:09:28,720 --> 00:09:32,160 Speaker 1: stuff for Bloomberg Intelligence, Chief US interest rate Strategist Ira, 213 00:09:32,200 --> 00:09:34,240 Speaker 1: Thanks so much for joining us here via zoom here 214 00:09:34,920 --> 00:09:38,080 Speaker 1: give us a sense of I don't know where the 215 00:09:38,120 --> 00:09:40,559 Speaker 1: FED is leaning. Let let's start this way. Here's my 216 00:09:40,960 --> 00:09:43,400 Speaker 1: question about the FED, and I just I've been asking 217 00:09:43,440 --> 00:09:46,400 Speaker 1: it from for some smart people, and this is not 218 00:09:46,440 --> 00:09:48,880 Speaker 1: a smart question. The optics of it. It just doesn't 219 00:09:48,880 --> 00:09:51,240 Speaker 1: look good when my FED is raising interest rates every 220 00:09:51,240 --> 00:09:54,400 Speaker 1: single quarter over five hundred basis points. Then it pauses 221 00:09:54,840 --> 00:09:57,559 Speaker 1: because maybe that's what you do after you've raised rates 222 00:09:57,559 --> 00:09:59,679 Speaker 1: so much. Are they really going to get back on 223 00:09:59,800 --> 00:10:01,240 Speaker 1: and start raising rates again? 224 00:10:01,800 --> 00:10:05,000 Speaker 8: Yeah, seems good. It seems like they really want to, Paul, 225 00:10:05,240 --> 00:10:07,560 Speaker 8: and and you know, they they made it pretty clear 226 00:10:07,600 --> 00:10:10,040 Speaker 8: at the last meeting that that that you still want 227 00:10:10,040 --> 00:10:12,440 Speaker 8: to be hawkish. They wanted to make sure that the 228 00:10:12,480 --> 00:10:15,079 Speaker 8: market knew that if nothing else, they weren't cutting interest 229 00:10:15,160 --> 00:10:17,920 Speaker 8: rates too early. So I think the bar at this 230 00:10:18,040 --> 00:10:22,400 Speaker 8: point is actually reasonably Uh, the bar for them to 231 00:10:22,400 --> 00:10:25,520 Speaker 8: to hike is actually very low. So you really, as 232 00:10:25,559 --> 00:10:28,199 Speaker 8: long as you don't have like an absolutely crazy low 233 00:10:28,280 --> 00:10:30,840 Speaker 8: employment number, if you don't have wages that you know, 234 00:10:30,880 --> 00:10:34,440 Speaker 8: fall significantly more than than the market expects, and and 235 00:10:34,440 --> 00:10:38,600 Speaker 8: and if we if we get anywhere near Consensus CPI report. 236 00:10:39,160 --> 00:10:40,840 Speaker 8: Then I think the Fed's gonna hike. I think it's 237 00:10:40,840 --> 00:10:44,040 Speaker 8: that second Fed hike that the dots suggested might occur. 238 00:10:44,480 --> 00:10:46,559 Speaker 8: That's much more in doubt at this point because you 239 00:10:46,559 --> 00:10:49,559 Speaker 8: you are seeing a moderation of inflation, just not as 240 00:10:49,640 --> 00:10:52,240 Speaker 8: quickly as they want so so I think that was 241 00:10:52,240 --> 00:10:55,199 Speaker 8: a signal that that was signaling a little bit more 242 00:10:55,240 --> 00:10:57,160 Speaker 8: that the FED wants to be hawkish if they need 243 00:10:57,160 --> 00:11:00,559 Speaker 8: to be so. So so yeah, so this I think 244 00:11:00,559 --> 00:11:03,000 Speaker 8: that they'll hike. You know, the market, the market is 245 00:11:03,040 --> 00:11:05,960 Speaker 8: now almost fully priced for that and also priced for 246 00:11:06,280 --> 00:11:09,360 Speaker 8: some chance of a of a second hike as well. 247 00:11:09,440 --> 00:11:12,640 Speaker 8: So so the market's already there regardless, So you won't 248 00:11:12,679 --> 00:11:15,480 Speaker 8: see any more, you know, major moves unless the data 249 00:11:15,520 --> 00:11:16,920 Speaker 8: really shocks one way or the other. 250 00:11:17,120 --> 00:11:19,800 Speaker 4: Yeah. So, Ira, We've heard from Powell as well as 251 00:11:19,800 --> 00:11:23,760 Speaker 4: a few other FED speakers, uh since that June meeting, 252 00:11:23,840 --> 00:11:26,640 Speaker 4: and I think the market is still fairly confused as 253 00:11:26,679 --> 00:11:29,320 Speaker 4: to what's going on here. Do we really think the 254 00:11:29,360 --> 00:11:32,400 Speaker 4: minutes are going to give the answer that everyone's been 255 00:11:32,400 --> 00:11:32,880 Speaker 4: looking for. 256 00:11:34,040 --> 00:11:36,280 Speaker 8: I think that the minutes are going to be probably 257 00:11:36,320 --> 00:11:39,800 Speaker 8: pretty mixed, you know. Interestingly, even though the dot plot 258 00:11:39,880 --> 00:11:43,120 Speaker 8: and some of the rhetoric out of j Powell at 259 00:11:43,160 --> 00:11:47,440 Speaker 8: the last press conference. Overall, our our natural language processing 260 00:11:47,480 --> 00:11:48,920 Speaker 8: model suggested that actually. 261 00:11:49,880 --> 00:11:53,040 Speaker 1: Let's let's take a step back. I know you're a 262 00:11:53,080 --> 00:11:55,440 Speaker 1: model geek. You have a natural what is it again, 263 00:11:55,480 --> 00:11:56,400 Speaker 1: a language. 264 00:11:56,000 --> 00:12:00,360 Speaker 8: Model, natural language processing. So so we take every cents 265 00:12:00,920 --> 00:12:05,200 Speaker 8: within the opening remarks of the of Chair Powell's opening 266 00:12:05,240 --> 00:12:08,120 Speaker 8: statement at the press conference, and then try to determine 267 00:12:08,160 --> 00:12:11,520 Speaker 8: whether or not that statement is is hawkish or duvish, 268 00:12:11,880 --> 00:12:14,959 Speaker 8: modestly hawkish or modestly dubvish, and then we combine that 269 00:12:15,080 --> 00:12:18,480 Speaker 8: into into an index. And what we actually found was 270 00:12:18,520 --> 00:12:21,840 Speaker 8: that he was still pretty neutral overall, So he was 271 00:12:21,880 --> 00:12:25,400 Speaker 8: pretty balanced in talking both hawkish and duvish, even though 272 00:12:26,200 --> 00:12:29,160 Speaker 8: the dots and some of his rhetoric suggested that the 273 00:12:29,200 --> 00:12:31,800 Speaker 8: FED is going to hike again. Now, the fact that 274 00:12:31,840 --> 00:12:33,760 Speaker 8: they're going to hike again doesn't mean that they're going 275 00:12:33,800 --> 00:12:35,560 Speaker 8: to hike another one hundred and fifty or two hundred 276 00:12:35,600 --> 00:12:37,520 Speaker 8: basis points. So it kind of makes sense that, yes, 277 00:12:37,559 --> 00:12:40,160 Speaker 8: they're getting to the top of the cycle. The question 278 00:12:40,360 --> 00:12:42,880 Speaker 8: is that they're trying to calibrate exactly where they think 279 00:12:43,120 --> 00:12:46,559 Speaker 8: the FED funds rate should be in order for inflation 280 00:12:46,640 --> 00:12:48,599 Speaker 8: to continue to come down and maybe come down a 281 00:12:48,640 --> 00:12:50,720 Speaker 8: little bit faster than it has in the recent past. 282 00:12:51,640 --> 00:12:54,640 Speaker 4: Yeah, so you're so it sounds like, like you said, 283 00:12:55,000 --> 00:12:58,400 Speaker 4: July seems almost like a given at this point. And 284 00:12:58,840 --> 00:13:01,000 Speaker 4: Powell even said, you know, he would not rule out 285 00:13:01,080 --> 00:13:05,120 Speaker 4: consecutive hikes at you know, concurrent meetings. So do we 286 00:13:05,240 --> 00:13:08,400 Speaker 4: are we already maybe even thinking what's the bar for September? 287 00:13:09,240 --> 00:13:09,440 Speaker 7: Yeah? 288 00:13:09,679 --> 00:13:11,240 Speaker 8: I think we do have to think about what the 289 00:13:11,240 --> 00:13:13,640 Speaker 8: bar for September would be, and I think that bar 290 00:13:13,800 --> 00:13:17,440 Speaker 8: is higher than the bar for July. And it's also 291 00:13:17,480 --> 00:13:20,400 Speaker 8: one of the reasons why so a very smart investor 292 00:13:20,440 --> 00:13:23,760 Speaker 8: actually suggested this, and this is an interesting concept, was 293 00:13:24,040 --> 00:13:25,880 Speaker 8: that the FED was hiking at seventy fives and they 294 00:13:25,920 --> 00:13:27,880 Speaker 8: hiking in then they were hiking in fifties, and they 295 00:13:27,880 --> 00:13:30,160 Speaker 8: were hiking in twenty fives. Now they might be hiking 296 00:13:30,160 --> 00:13:32,840 Speaker 8: in twelve and a half's and in order, and the 297 00:13:32,880 --> 00:13:34,680 Speaker 8: FED doesn't do that, right, They're not the Bank of 298 00:13:34,720 --> 00:13:41,040 Speaker 8: Japan hiking in decimals, So basically every other meeting they 299 00:13:41,080 --> 00:13:43,800 Speaker 8: could be hiking in quarter point increments. And again it 300 00:13:43,880 --> 00:13:47,560 Speaker 8: makes sense in that regard from it because it's because 301 00:13:47,600 --> 00:13:51,080 Speaker 8: they're in this calibration mode. You know, they don't want 302 00:13:51,120 --> 00:13:52,760 Speaker 8: to go too fast, and they also want to have 303 00:13:52,800 --> 00:13:56,040 Speaker 8: the ability to stop hiking at any moment, which was 304 00:13:56,080 --> 00:13:58,040 Speaker 8: harder to do when they were hiking at fifties. Right 305 00:13:58,040 --> 00:14:00,719 Speaker 8: now that they're hiking in twenty five, they've skipped now 306 00:14:00,720 --> 00:14:03,440 Speaker 8: a meeting. It makes it a little bit easier for 307 00:14:03,480 --> 00:14:06,320 Speaker 8: them to do that calibration. And nobody knows right. So 308 00:14:06,360 --> 00:14:08,800 Speaker 8: the problem is is that ex ante, it's difficult to 309 00:14:08,800 --> 00:14:11,560 Speaker 8: know exactly where the FED funds rate should be. I 310 00:14:11,559 --> 00:14:13,840 Speaker 8: think that they've probably done enough in order for inflation 311 00:14:13,880 --> 00:14:15,520 Speaker 8: to come down now they just need to give it 312 00:14:15,600 --> 00:14:18,600 Speaker 8: time to occur. But they don't see it that way. 313 00:14:18,640 --> 00:14:21,280 Speaker 8: And you know, until they they wind up with a 314 00:14:21,360 --> 00:14:23,880 Speaker 8: with a real funds rate that is, you know, significantly 315 00:14:23,920 --> 00:14:28,800 Speaker 8: higher than headline inflation, that they're gonna still think about hiking, 316 00:14:28,840 --> 00:14:31,080 Speaker 8: even if they actually don't do it every meeting. 317 00:14:31,520 --> 00:14:33,760 Speaker 1: All right, Lisa Promise says, I have to ask this question. 318 00:14:33,840 --> 00:14:36,560 Speaker 1: She just emailed in from her vacation. Yield curve still 319 00:14:36,560 --> 00:14:39,360 Speaker 1: inverted one hundred and three basis points. Do we care? 320 00:14:39,440 --> 00:14:41,040 Speaker 1: Do you care? What's the market telling you? 321 00:14:41,720 --> 00:14:45,040 Speaker 8: Yeah, it's just telling us. It's just telling us that 322 00:14:44,520 --> 00:14:48,800 Speaker 8: that the market is expecting the interest rates to be 323 00:14:48,840 --> 00:14:50,800 Speaker 8: lower in the future. I mean, that's the whole reason 324 00:14:50,840 --> 00:14:52,800 Speaker 8: why you get the inversions in the yield curve, is 325 00:14:52,880 --> 00:14:55,920 Speaker 8: just the expectation that, yes, we're going to have five 326 00:14:56,000 --> 00:14:58,680 Speaker 8: percent interest rates now, but we might have three percent 327 00:14:58,720 --> 00:15:01,400 Speaker 8: interest rates, you know, to or three four years from now, 328 00:15:01,680 --> 00:15:03,440 Speaker 8: and because of that you get this inversion of the 329 00:15:03,480 --> 00:15:03,920 Speaker 8: yield curve. 330 00:15:03,960 --> 00:15:04,080 Speaker 2: You know. 331 00:15:04,120 --> 00:15:06,680 Speaker 8: The fact that it's lasted now for the better part 332 00:15:06,720 --> 00:15:10,280 Speaker 8: of eighteen months, you know, does suggest that the market 333 00:15:10,360 --> 00:15:12,880 Speaker 8: thinks that we might be heading into a recession or 334 00:15:12,920 --> 00:15:15,520 Speaker 8: if not a recession and then at least a very 335 00:15:15,560 --> 00:15:19,240 Speaker 8: significant reduction and inflation over the over the medium term. 336 00:15:19,320 --> 00:15:22,560 Speaker 8: And it you know, at some point we're going to 337 00:15:22,600 --> 00:15:26,800 Speaker 8: start to really uninvert quite aggressively, I think, but the 338 00:15:26,840 --> 00:15:29,360 Speaker 8: timing of that is probably not until it's very clear 339 00:15:29,440 --> 00:15:32,720 Speaker 8: that the federal reserves done hiking. Until then, the two 340 00:15:32,760 --> 00:15:35,200 Speaker 8: year yield is probably going to keep on hovering, you know, 341 00:15:35,320 --> 00:15:38,760 Speaker 8: kind of just a little bit below where where the 342 00:15:38,840 --> 00:15:42,080 Speaker 8: high the highest Fed fundrate might actually be, you know. 343 00:15:42,040 --> 00:15:45,000 Speaker 4: And it really took until the last Fed meeting for 344 00:15:45,080 --> 00:15:47,800 Speaker 4: the market expectations to kind of be more in sync 345 00:15:48,200 --> 00:15:50,600 Speaker 4: with what Powell and the Fed have been saying. Looking 346 00:15:50,640 --> 00:15:54,320 Speaker 4: at the world interest rate probability function now on the terminal, 347 00:15:54,960 --> 00:15:57,080 Speaker 4: you know, it looks like those you know, prop those 348 00:15:57,120 --> 00:16:00,840 Speaker 4: expectations for rate cuts this here dramatically have come down. 349 00:16:01,000 --> 00:16:03,600 Speaker 4: So you know, what, does the market have some of 350 00:16:03,640 --> 00:16:06,920 Speaker 4: that natural language processing model that you do, or what 351 00:16:07,360 --> 00:16:09,280 Speaker 4: is it that they finally believe the Fed? 352 00:16:10,160 --> 00:16:10,440 Speaker 6: Yeah? 353 00:16:10,520 --> 00:16:12,760 Speaker 8: Yeah, I think that a lot of people thought that 354 00:16:12,800 --> 00:16:16,080 Speaker 8: the Fed didn't have the resolve to continue to hike 355 00:16:16,120 --> 00:16:19,400 Speaker 8: interest rates beyond beyond June. So you had a lot 356 00:16:19,440 --> 00:16:22,960 Speaker 8: of people thinking, oh, the economy is going to fall apart. 357 00:16:23,000 --> 00:16:25,400 Speaker 8: They've hiked five hundred basis points. We're going to wind 358 00:16:25,480 --> 00:16:28,120 Speaker 8: up seeing a recession later this year. But a lot 359 00:16:28,200 --> 00:16:30,480 Speaker 8: of the data that's been coming in suggested even if 360 00:16:30,480 --> 00:16:33,120 Speaker 8: we do have a recession, it'll be very shallow and 361 00:16:33,200 --> 00:16:37,960 Speaker 8: won't necessarily be enough to pull inflation down significantly more So, therefore, 362 00:16:38,040 --> 00:16:40,480 Speaker 8: the Fed Reserve is not going to be cutting interest 363 00:16:40,560 --> 00:16:42,720 Speaker 8: rates later this year. Now, Now keep in mind that 364 00:16:43,200 --> 00:16:45,920 Speaker 8: is not that we've priced out cuts. We actually still 365 00:16:45,920 --> 00:16:49,040 Speaker 8: have a cut price for six months from now, right, 366 00:16:49,080 --> 00:16:52,360 Speaker 8: So the market keeps pricing for a cut six months 367 00:16:52,400 --> 00:16:55,000 Speaker 8: after the last hike, a cut six months after last hike. 368 00:16:55,200 --> 00:16:58,480 Speaker 8: The problem is is that we've pulled forward now when 369 00:16:58,520 --> 00:17:00,840 Speaker 8: that last hike is going to be, because now if 370 00:17:00,880 --> 00:17:03,640 Speaker 8: the last hike is in July, then they're gonna wind up, 371 00:17:03,840 --> 00:17:05,800 Speaker 8: you know, the first cut is now priced for January, 372 00:17:06,119 --> 00:17:07,760 Speaker 8: and then if they you know, wind up hiking again 373 00:17:07,800 --> 00:17:10,680 Speaker 8: in September, like Paul was suggesting, if that happens, then 374 00:17:10,720 --> 00:17:13,359 Speaker 8: maybe the first cuts not priced then until March. So 375 00:17:13,400 --> 00:17:16,280 Speaker 8: it's always this kind of rolling six month window for 376 00:17:16,760 --> 00:17:17,320 Speaker 8: the first Cup. 377 00:17:17,440 --> 00:17:20,080 Speaker 1: A Ramali and I, let's be honest, we're focused entirely 378 00:17:20,119 --> 00:17:22,320 Speaker 1: on Wimbledon for the next two weeks. But if I 379 00:17:22,359 --> 00:17:24,280 Speaker 1: had a spare moment, is there anything in the world 380 00:17:24,320 --> 00:17:25,879 Speaker 1: of soccer that we should be paying attention to? 381 00:17:26,960 --> 00:17:28,879 Speaker 8: Well, the Gold Cup's going on right now. We're in 382 00:17:28,880 --> 00:17:32,160 Speaker 8: the semifinals or quarterfinals, excuse me. So the US plays 383 00:17:32,200 --> 00:17:35,359 Speaker 8: Canada and and you have to Later this month starts 384 00:17:35,359 --> 00:17:37,879 Speaker 8: the Women's World Cup out in New Zealand and Australia. 385 00:17:37,960 --> 00:17:42,000 Speaker 8: So the roster drops for that are are pretty interesting. 386 00:17:42,040 --> 00:17:43,600 Speaker 8: You know, especially in the US, we have a lot 387 00:17:43,640 --> 00:17:46,359 Speaker 8: of younger, younger women's who are going to be headed 388 00:17:46,359 --> 00:17:49,120 Speaker 8: down to to down Under to play some football. 389 00:17:49,320 --> 00:17:51,080 Speaker 1: All right, good stuff. You ask a question, you'll get 390 00:17:51,080 --> 00:17:54,520 Speaker 1: an answer from this guy, Ira Jersey. He is our 391 00:17:54,560 --> 00:17:56,880 Speaker 1: soccer guru, is off O or I think he does 392 00:17:56,960 --> 00:17:59,320 Speaker 1: interest rates and stuff like that for Bloomberg Intelligence. That's 393 00:17:59,359 --> 00:18:01,840 Speaker 1: what gets the paycheck, so I'm told. So he's our 394 00:18:01,840 --> 00:18:05,359 Speaker 1: go to guy on the FED and on global soccer 395 00:18:05,400 --> 00:18:07,480 Speaker 1: as well. So again we'll keep an eye on that. 396 00:18:07,680 --> 00:18:11,240 Speaker 1: S and P five hundred basically unchanged on the day, 397 00:18:11,640 --> 00:18:13,639 Speaker 1: we've got to dow off about four tens a one percent. 398 00:18:13,680 --> 00:18:15,879 Speaker 1: That's one hundred and twenty five points. For those of 399 00:18:15,880 --> 00:18:17,360 Speaker 1: you keeping scored at home. 400 00:18:17,560 --> 00:18:20,679 Speaker 7: You're listening to the tape catch are live program Bloomberg 401 00:18:20,720 --> 00:18:24,320 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 402 00:18:24,359 --> 00:18:27,600 Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 403 00:18:27,640 --> 00:18:30,439 Speaker 7: You can also listen live on Amazon Alexa from our 404 00:18:30,480 --> 00:18:35,480 Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 405 00:18:36,720 --> 00:18:39,600 Speaker 1: Paul Sweeney here in the Bloomberg Interactive Broker Studio. Boy, 406 00:18:39,600 --> 00:18:42,560 Speaker 1: you think about twenty twenty two, that was just ugly 407 00:18:42,600 --> 00:18:46,240 Speaker 1: for asset allocators. That sixty to forty portfolio did not 408 00:18:46,560 --> 00:18:48,879 Speaker 1: work out at all for anybody. See think about it 409 00:18:48,880 --> 00:18:51,399 Speaker 1: here here to date twenty twenty three. Heck of a 410 00:18:51,480 --> 00:18:55,359 Speaker 1: first half when you look at particular the equity markets, 411 00:18:55,400 --> 00:18:58,680 Speaker 1: but also fixed income, so brings into question asset allocation. 412 00:18:58,840 --> 00:19:00,800 Speaker 1: What do you do here second half of the year 413 00:19:00,840 --> 00:19:04,320 Speaker 1: going into twenty twenty four? Fortunate? Our next guest does 414 00:19:04,359 --> 00:19:08,560 Speaker 1: that stuff for living Nimerick Kang co Cio, Senior portfolio 415 00:19:08,840 --> 00:19:12,320 Speaker 1: manager at north Star Asset Management. He gets his chemical 416 00:19:12,320 --> 00:19:14,920 Speaker 1: engineering degree. I mean, who does that at Virginia Tech? 417 00:19:15,000 --> 00:19:17,000 Speaker 1: Really good tech school. Then he gets an NBA from 418 00:19:17,000 --> 00:19:20,720 Speaker 1: some trade school up in Boston. Yeah exactly. Hey, Nimrit, 419 00:19:20,840 --> 00:19:24,359 Speaker 1: thanks much for joining us here. Asset allocation. Where are 420 00:19:24,440 --> 00:19:27,520 Speaker 1: you guys these days after what's been I think for 421 00:19:27,560 --> 00:19:31,040 Speaker 1: a lot of people, surprisingly strong first half of the year. 422 00:19:31,920 --> 00:19:35,760 Speaker 9: Yeah, thank you for having me. Yes, Going into twenty 423 00:19:35,800 --> 00:19:40,119 Speaker 9: twenty three, we were very cautious on the markets, you know, 424 00:19:40,560 --> 00:19:44,960 Speaker 9: like everyone else. We expected this lag between monetary policy 425 00:19:45,000 --> 00:19:49,159 Speaker 9: and economic effects, which has which is really still a 426 00:19:49,200 --> 00:19:52,560 Speaker 9: missing in action. Equity markets have been strong. We had 427 00:19:52,600 --> 00:19:57,080 Speaker 9: been underweight equities going into twenty twenty three, and we 428 00:19:57,160 --> 00:20:02,200 Speaker 9: remain underweight equities slightly versus targets. And the reason there 429 00:20:02,359 --> 00:20:07,959 Speaker 9: is that just history shows there are considerable lags between 430 00:20:08,000 --> 00:20:11,760 Speaker 9: monetary policy and economic effects. We have never had this 431 00:20:11,920 --> 00:20:16,439 Speaker 9: kind of steep rice in interest rates over such a 432 00:20:16,480 --> 00:20:20,320 Speaker 9: short period. Yes, we've seen some effects of that, from 433 00:20:20,359 --> 00:20:23,280 Speaker 9: the regional bank crisis to you know, the busting of 434 00:20:23,320 --> 00:20:26,440 Speaker 9: the crypto acids, but we think these are effects that 435 00:20:26,440 --> 00:20:29,080 Speaker 9: are going to bear out over a much longer time. 436 00:20:29,880 --> 00:20:32,360 Speaker 9: And in general, we just feel like we're in this 437 00:20:32,920 --> 00:20:36,280 Speaker 9: period where, you know, a lot of people are calling 438 00:20:36,320 --> 00:20:38,520 Speaker 9: this a poly crisis age. There are a number of 439 00:20:38,560 --> 00:20:42,399 Speaker 9: things that are coming together, but generally all that means 440 00:20:42,480 --> 00:20:45,600 Speaker 9: is higher level of uncertainty and volatility in the markets. 441 00:20:46,040 --> 00:20:48,159 Speaker 9: That to us just says that, you know, we just 442 00:20:48,200 --> 00:20:51,320 Speaker 9: need to be very risk aware and focused on running 443 00:20:51,400 --> 00:20:55,000 Speaker 9: very diversified portfolios for our clients. 444 00:20:55,600 --> 00:20:59,040 Speaker 4: When I hear acid allocators talk about higher volatility, it 445 00:20:59,160 --> 00:21:02,840 Speaker 4: sounds like more opportunities. So where are you finding those 446 00:21:02,840 --> 00:21:04,440 Speaker 4: pockets right now to invest in? 447 00:21:05,359 --> 00:21:09,440 Speaker 9: Yeah? Yeah, no, really good question. So when we think 448 00:21:09,440 --> 00:21:12,800 Speaker 9: about higher volatility, of course, you know, right away we 449 00:21:12,840 --> 00:21:16,879 Speaker 9: think about just going back to the basics investing in 450 00:21:16,960 --> 00:21:20,480 Speaker 9: those companies where we have pretty strong conviction on the 451 00:21:20,520 --> 00:21:23,879 Speaker 9: cash flows going forward. And if we have conviction on 452 00:21:23,920 --> 00:21:27,160 Speaker 9: the strong cash flows and we don't pay too much 453 00:21:27,200 --> 00:21:30,800 Speaker 9: for those stocks, we know that over the longer time, 454 00:21:30,880 --> 00:21:33,560 Speaker 9: those companies are going to hold up both in down 455 00:21:33,600 --> 00:21:36,320 Speaker 9: markets and up markets. They can be both offensive and 456 00:21:36,359 --> 00:21:39,920 Speaker 9: defensing foldings. And then of course on the fixed income side, 457 00:21:39,920 --> 00:21:45,560 Speaker 9: we are taking the opportunity to extend maturities for our clients, 458 00:21:45,640 --> 00:21:48,879 Speaker 9: getting locking in higher interest rates where we can. And 459 00:21:48,960 --> 00:21:51,199 Speaker 9: if down the road there is an end to this 460 00:21:51,359 --> 00:21:55,639 Speaker 9: monetary tightening cycle and we do see interest rates come down, 461 00:21:55,840 --> 00:21:58,200 Speaker 9: there is that appreciation potential as well. 462 00:21:59,160 --> 00:22:01,600 Speaker 1: I'd love to get some on the equity space here. 463 00:22:01,640 --> 00:22:03,360 Speaker 1: What are some names that you're looking at, What are 464 00:22:03,359 --> 00:22:06,160 Speaker 1: some themes that you guys pursue when you're when you're 465 00:22:06,200 --> 00:22:09,360 Speaker 1: looking to you know, invest on the equity side. 466 00:22:09,960 --> 00:22:14,520 Speaker 9: Absolutely, So, the way we build our portfolios is we've 467 00:22:15,240 --> 00:22:18,760 Speaker 9: it's intersection of a number of different factors, but really 468 00:22:18,800 --> 00:22:22,040 Speaker 9: our process starts with identifying some of those long term 469 00:22:22,080 --> 00:22:26,679 Speaker 9: societal challenges that we feel are going to need a 470 00:22:26,720 --> 00:22:30,520 Speaker 9: tremendous innovation to solve. So, for example, we have been 471 00:22:30,600 --> 00:22:34,679 Speaker 9: in that digital transformation space for a while, and you know, 472 00:22:34,720 --> 00:22:39,120 Speaker 9: we did not expect this new boom coming from artificial intelligence. 473 00:22:39,480 --> 00:22:42,800 Speaker 9: That has basically been the big story for twenty twenty three. 474 00:22:43,119 --> 00:22:45,880 Speaker 9: But several of those companies have been benefiting from that. 475 00:22:46,359 --> 00:22:50,920 Speaker 9: You know, that's your Bellweather, Microsoft, Adobe, CRM, all those 476 00:22:50,960 --> 00:22:54,000 Speaker 9: types of stocks. So that's a theme that's been in 477 00:22:54,040 --> 00:22:56,480 Speaker 9: the portfolio for a while. We just see that these 478 00:22:56,520 --> 00:22:59,360 Speaker 9: companies are going to continue to solve the problem related 479 00:22:59,400 --> 00:23:03,480 Speaker 9: to productivity, labor, productivity, and some of the other challenges 480 00:23:03,520 --> 00:23:06,160 Speaker 9: that we see. But then on the other side, there 481 00:23:06,200 --> 00:23:10,639 Speaker 9: are other examples. For example, you know, all the challenges 482 00:23:10,720 --> 00:23:15,000 Speaker 9: related to climate change and some of the things that 483 00:23:15,000 --> 00:23:19,040 Speaker 9: we're coming to see. They're coming together very quickly relating 484 00:23:19,160 --> 00:23:25,080 Speaker 9: to you know, very high temperatures, hotter summers, draw outs, floods, 485 00:23:25,119 --> 00:23:28,720 Speaker 9: all types of issues that we're seeing. There some of 486 00:23:28,760 --> 00:23:30,840 Speaker 9: the companies that we think are going to be at 487 00:23:30,840 --> 00:23:34,960 Speaker 9: the forefront of challenging them, especially related to water efficiency. 488 00:23:35,480 --> 00:23:38,960 Speaker 9: You know, lately we've heard a lot about the Colorado 489 00:23:39,160 --> 00:23:42,840 Speaker 9: River levels drying up, creating all kinds of challenges there. 490 00:23:43,320 --> 00:23:45,760 Speaker 9: We have been investing it in a number of stocks. 491 00:23:45,960 --> 00:23:49,160 Speaker 9: There's some smaller cap companies that are not your household 492 00:23:49,200 --> 00:23:54,760 Speaker 9: names like Badger Meter or Asylum. These companies provide instruments, meters, valves, 493 00:23:55,720 --> 00:23:59,840 Speaker 9: all kinds of other solutions to help drive water conservation 494 00:24:00,080 --> 00:24:03,960 Speaker 9: measurement and efficiency, and we think the demand for those 495 00:24:04,040 --> 00:24:07,720 Speaker 9: products and solutions is only going to increase over time. 496 00:24:08,520 --> 00:24:11,080 Speaker 4: So nimrate, you're just saying that you came into twenty 497 00:24:11,119 --> 00:24:14,840 Speaker 4: twenty three underweight equities, looking at the S and P 498 00:24:14,920 --> 00:24:18,840 Speaker 4: five hundred up sixteen percent year to date, you rethinking 499 00:24:19,119 --> 00:24:21,000 Speaker 4: going into the second half of the year if that's 500 00:24:21,040 --> 00:24:23,440 Speaker 4: still where you want to be or sticking to your 501 00:24:23,440 --> 00:24:25,600 Speaker 4: guns and that and those lags are going to kick in. 502 00:24:26,520 --> 00:24:31,080 Speaker 9: Yes, yes, So you know, it's interesting. There's an adage 503 00:24:31,080 --> 00:24:34,240 Speaker 9: in the stock market nobody knows nothing right, and twenty 504 00:24:34,280 --> 00:24:37,720 Speaker 9: twenty three definitely proved that by spades if you had 505 00:24:37,760 --> 00:24:40,159 Speaker 9: to ask anyone. It was interesting. I was reviewing my 506 00:24:40,280 --> 00:24:43,400 Speaker 9: notes and across the board, you know, there's no way 507 00:24:43,440 --> 00:24:46,040 Speaker 9: you can have continue to have the kind of interest 508 00:24:46,119 --> 00:24:50,159 Speaker 9: rate normalization going on as we did, like five hundred 509 00:24:50,160 --> 00:24:52,760 Speaker 9: basis points on the low end over the last eighteen 510 00:24:52,800 --> 00:24:56,679 Speaker 9: months and not have a major slowdown in that economy. 511 00:24:57,040 --> 00:25:00,720 Speaker 9: Yet the economy has defied all those odds or especially 512 00:25:00,760 --> 00:25:03,720 Speaker 9: the resiliency of the economy. So I think there's so 513 00:25:03,840 --> 00:25:07,040 Speaker 9: many different puts and takes that are affecting the economy 514 00:25:07,080 --> 00:25:11,160 Speaker 9: in general. It's hard to really understand when that inflection 515 00:25:11,320 --> 00:25:15,880 Speaker 9: point happens between the negatives i e. The credit tightening 516 00:25:15,920 --> 00:25:19,960 Speaker 9: cycle that we're expecting, just you know, the pressure overall. 517 00:25:20,560 --> 00:25:25,679 Speaker 9: Going from a very easy monetary policy, an era almost 518 00:25:25,760 --> 00:25:28,119 Speaker 9: a decade more than a decade of where there was 519 00:25:28,359 --> 00:25:31,639 Speaker 9: basically money, there was no cost related to money, to 520 00:25:31,840 --> 00:25:36,760 Speaker 9: actually having higher interest rates. That's a sizable shift in regime. 521 00:25:37,240 --> 00:25:40,160 Speaker 9: I was just reading a study which showed that one 522 00:25:40,240 --> 00:25:43,000 Speaker 9: third of an increase in profit margins for S and 523 00:25:43,040 --> 00:25:46,199 Speaker 9: P five hundred has come from lower interest rates and 524 00:25:46,359 --> 00:25:49,720 Speaker 9: reduce taxes. Nothing about the taxes yet, but we know 525 00:25:49,840 --> 00:25:54,679 Speaker 9: interest rates are definitely changing. So when we look further out, 526 00:25:54,840 --> 00:25:59,320 Speaker 9: it's hard to ascern when that inflection does happen. But 527 00:25:59,720 --> 00:26:02,960 Speaker 9: it's it's hard to imagine that we will not start 528 00:26:03,000 --> 00:26:06,240 Speaker 9: to see some impact from this type of a sea 529 00:26:06,400 --> 00:26:11,840 Speaker 9: change in monetary policy. That's just really on the financial side. Now, 530 00:26:11,960 --> 00:26:14,199 Speaker 9: let me talk about some of the social issues that 531 00:26:14,200 --> 00:26:17,679 Speaker 9: we're talking about. Yes, you know, despite all the different 532 00:26:17,680 --> 00:26:21,640 Speaker 9: things that we're talking about, economic inclusion is probably at 533 00:26:21,680 --> 00:26:25,120 Speaker 9: its lowest levels that we've seen. It's hard and harder 534 00:26:25,200 --> 00:26:29,320 Speaker 9: for low income families to meet daily needs. How does 535 00:26:29,359 --> 00:26:33,720 Speaker 9: that all translate into the broad based ramification. So when 536 00:26:33,760 --> 00:26:37,720 Speaker 9: we put all that together, Molly, we're still staying underweight 537 00:26:37,840 --> 00:26:41,880 Speaker 9: equities and again staying underweight but remaining very much invested 538 00:26:41,920 --> 00:26:43,399 Speaker 9: in these high quality names. 539 00:26:43,400 --> 00:26:45,200 Speaker 1: Ah Rightnimmer, thank you so much for joining us. Nimrick 540 00:26:45,240 --> 00:26:49,040 Speaker 1: Kank coc Cio and senior portfolio manager at Northstar Asset Management, 541 00:26:49,040 --> 00:26:49,600 Speaker 1: and joining us. 542 00:26:51,119 --> 00:26:54,960 Speaker 7: You're listening to the Team Cancer Live program Bloomberg Markets 543 00:26:55,000 --> 00:26:58,080 Speaker 7: weekdays at ten am Eastern on Bloomberg dot Com, the 544 00:26:58,160 --> 00:27:01,679 Speaker 7: iHeartRadio app, and the Bloomberg Business or listen on demand 545 00:27:01,760 --> 00:27:03,320 Speaker 7: wherever you get your podcasts. 546 00:27:05,760 --> 00:27:08,600 Speaker 1: All right, let's switch gears. Let's go global energy here. 547 00:27:08,600 --> 00:27:11,320 Speaker 1: I'm gonnat WTI crude oil. It's about two point two 548 00:27:11,359 --> 00:27:13,920 Speaker 1: percent today, just above seventy one dollars A brow gets 549 00:27:13,920 --> 00:27:16,840 Speaker 1: my opinion, it gets my attention. I'd been trading below seventy. 550 00:27:16,920 --> 00:27:19,640 Speaker 1: Let's bring in a couple smart people who know about 551 00:27:19,720 --> 00:27:23,440 Speaker 1: global energy. That would be Mike mcgloone, senior macro strategist 552 00:27:23,480 --> 00:27:28,119 Speaker 1: with Bloomberg Intelligence, and Fernando Ali, senior analysts with Bloomberg Intelligence. 553 00:27:28,160 --> 00:27:31,600 Speaker 1: Mike Joints Is from Miami via zoom and Fernandez here 554 00:27:31,600 --> 00:27:34,000 Speaker 1: in our Bloomberg Interactive Brokers studio. Mike, let's start with 555 00:27:34,040 --> 00:27:38,640 Speaker 1: you down in in Miami dealing with the heat down there? 556 00:27:38,680 --> 00:27:39,080 Speaker 7: Good for you? 557 00:27:39,119 --> 00:27:40,720 Speaker 1: How is it now? 558 00:27:41,920 --> 00:27:43,680 Speaker 6: Oh, it's nice and humid, but I hear it's much 559 00:27:43,680 --> 00:27:45,600 Speaker 6: warmer up north. It just colder nights. 560 00:27:46,000 --> 00:27:47,600 Speaker 1: I'm gonna I'm gonna give you a hard time all 561 00:27:47,600 --> 00:27:49,920 Speaker 1: summer here because I know you enjoyed in a water time. Hey, Mike, 562 00:27:50,000 --> 00:27:51,679 Speaker 1: just give us a CeNSE here. What's you know? Just 563 00:27:51,720 --> 00:27:55,720 Speaker 1: from commodity trading perspective, what do you what do you 564 00:27:55,720 --> 00:27:57,280 Speaker 1: think about oil? Right here? 565 00:27:58,080 --> 00:27:59,920 Speaker 6: It's a bear market? What stops it to me? That 566 00:28:00,000 --> 00:28:04,200 Speaker 6: it's the bottom line? The question is has the market plateaued? 567 00:28:04,200 --> 00:28:08,800 Speaker 6: And typically there's no indications that at all. Typically, what 568 00:28:08,800 --> 00:28:11,840 Speaker 6: it takes for a broad commodity market to bottom you 569 00:28:11,960 --> 00:28:16,359 Speaker 6: need some form of significant lag to significant feeda reserve easing, 570 00:28:16,440 --> 00:28:19,680 Speaker 6: and maybe, as Vince pointed at, maybe a week hour 571 00:28:19,840 --> 00:28:23,480 Speaker 6: and a pretty significant pickup in China demand. They're all 572 00:28:23,520 --> 00:28:25,200 Speaker 6: going the wrong way right now. The only thing that's 573 00:28:25,200 --> 00:28:27,360 Speaker 6: going and really cheap price is the only thing that's 574 00:28:27,400 --> 00:28:30,239 Speaker 6: going the right right ways. Prices have gotten low. So 575 00:28:30,600 --> 00:28:32,840 Speaker 6: let's look at let's start with we're talking about WTI. 576 00:28:32,840 --> 00:28:35,120 Speaker 6: It's around seventy bucks a barrel, and it's almost half 577 00:28:35,200 --> 00:28:36,960 Speaker 6: last year's price, but it's the same price as it 578 00:28:36,960 --> 00:28:39,320 Speaker 6: first started to trade in two thousand and five. The 579 00:28:39,360 --> 00:28:43,320 Speaker 6: bottom line is natural gas, its cousin has already collapsed. 580 00:28:43,440 --> 00:28:45,320 Speaker 6: It got really cheap, and it's bounced. It got down 581 00:28:45,360 --> 00:28:47,480 Speaker 6: to two, it's bounced up to near three. It's in 582 00:28:47,480 --> 00:28:49,840 Speaker 6: the middle there now, and I think that's the trajectory 583 00:28:50,000 --> 00:28:51,840 Speaker 6: for crude oil. And the key thing I asked myself 584 00:28:51,880 --> 00:28:55,000 Speaker 6: is what stops this? As we tilt towards the second half. 585 00:28:55,280 --> 00:28:57,960 Speaker 6: As Vince pointed out, these long and variable legs, the 586 00:28:58,000 --> 00:29:02,200 Speaker 6: federal reserve is still tightening, and I don't and our 587 00:29:02,320 --> 00:29:04,360 Speaker 6: chief economists on along says we're going to get a 588 00:29:04,400 --> 00:29:07,280 Speaker 6: recession likely in the second half. Yes, it's been delayed, 589 00:29:07,440 --> 00:29:09,880 Speaker 6: and US unemployments to start picking up around four point 590 00:29:09,880 --> 00:29:11,920 Speaker 6: three percent. None of that, to me is good for 591 00:29:12,000 --> 00:29:15,800 Speaker 6: crude all to sustain a bounce. It might have bounces, 592 00:29:15,800 --> 00:29:17,920 Speaker 6: but none of that's good for to sustain a new 593 00:29:17,920 --> 00:29:20,080 Speaker 6: bull market for NATO. 594 00:29:20,120 --> 00:29:22,760 Speaker 4: I want to bring you in your your senior analysts 595 00:29:22,760 --> 00:29:26,520 Speaker 4: with Bloomberg Intelligence here, Fernando Valet, let's talk about so 596 00:29:26,600 --> 00:29:30,040 Speaker 4: this lot that the Saudis and Russia are extending these 597 00:29:30,040 --> 00:29:33,560 Speaker 4: oil supply cuts to prop up the market. So do 598 00:29:33,600 --> 00:29:35,440 Speaker 4: you think it's going to work. This isn't the first time, 599 00:29:36,720 --> 00:29:38,360 Speaker 4: and like we said, prices are so low. 600 00:29:38,880 --> 00:29:41,040 Speaker 10: Well, I think part of the bounce today is that 601 00:29:41,120 --> 00:29:44,120 Speaker 10: these cuts, the additional cuts started in July, and today 602 00:29:44,200 --> 00:29:47,000 Speaker 10: is really the first real trading day with volume because 603 00:29:47,000 --> 00:29:51,320 Speaker 10: we had the holiday yesterday in the US. But even then, 604 00:29:51,560 --> 00:29:54,280 Speaker 10: you're not seeing the huge jump up in prices. You're 605 00:29:54,320 --> 00:29:58,200 Speaker 10: seeing a relative strong but nothing really to write home about. 606 00:29:58,960 --> 00:30:00,959 Speaker 10: And you know, a lot out of the bulcase that 607 00:30:01,040 --> 00:30:04,320 Speaker 10: was predicated on the lack of spare capacity in global 608 00:30:04,320 --> 00:30:07,000 Speaker 10: oil production. And when you cut production, what do you 609 00:30:07,080 --> 00:30:10,440 Speaker 10: make you create spare capacity? So we don't think that 610 00:30:10,480 --> 00:30:13,760 Speaker 10: this is necessarily a bullish signal. As Mike was alluding to, 611 00:30:15,240 --> 00:30:17,760 Speaker 10: Demand is really the biggest driver that we're looking for 612 00:30:18,240 --> 00:30:21,840 Speaker 10: China demands still not there. We're seeing some weaknesses in 613 00:30:22,280 --> 00:30:25,120 Speaker 10: the US as well, and on the housing side, on 614 00:30:25,160 --> 00:30:28,920 Speaker 10: the office real state side. Those are the big concerns 615 00:30:29,480 --> 00:30:32,840 Speaker 10: for the summer. And when we looked at the inventory 616 00:30:32,880 --> 00:30:36,880 Speaker 10: report from last week from the EIA, we saw lower 617 00:30:37,000 --> 00:30:41,520 Speaker 10: refinery utilization, lower refinery consumption of crude oil. And that's 618 00:30:41,680 --> 00:30:45,120 Speaker 10: weird when you have crack spreads. The margin that refiners 619 00:30:45,160 --> 00:30:48,360 Speaker 10: make at nearly two and a half times the average 620 00:30:48,400 --> 00:30:51,520 Speaker 10: for the past fifteen years, why aren't they running that 621 00:30:51,840 --> 00:30:55,200 Speaker 10: to just maybe the physical market is not as as 622 00:30:55,280 --> 00:30:56,640 Speaker 10: tight as we expected. 623 00:30:57,320 --> 00:31:00,240 Speaker 1: Well John Tucker, I mean he moves the needlebimes off 624 00:31:00,280 --> 00:31:02,280 Speaker 1: just on a daily basis, how much he drives back 625 00:31:02,280 --> 00:31:04,560 Speaker 1: every fifty at the wah wall three fifty at the 626 00:31:04,560 --> 00:31:06,440 Speaker 1: wah Wah and Route thirty six in Jersey, just to 627 00:31:06,440 --> 00:31:10,719 Speaker 1: get your price checked there for noan. What are your 628 00:31:10,720 --> 00:31:13,480 Speaker 1: companies telling you? What are the big majors telling you 629 00:31:13,560 --> 00:31:17,360 Speaker 1: about what they're doing? Where were they think energy is going? 630 00:31:17,400 --> 00:31:18,760 Speaker 1: Where are they investing these days? 631 00:31:19,320 --> 00:31:23,760 Speaker 10: Well, there's a big bifurcation between the Europeans and the 632 00:31:23,800 --> 00:31:27,000 Speaker 10: American major oil companies. When you look at the major 633 00:31:27,040 --> 00:31:30,400 Speaker 10: oil companies, they're saying, we're investing oil is our business, 634 00:31:30,400 --> 00:31:33,160 Speaker 10: and we're going to continue to invest, and we're going 635 00:31:33,160 --> 00:31:36,760 Speaker 10: to invest in reducing the carbon emissions from existing production 636 00:31:36,840 --> 00:31:39,760 Speaker 10: as opposed to investing in new ways of energy, and 637 00:31:39,880 --> 00:31:42,760 Speaker 10: so far it's proven to be the right call as 638 00:31:42,760 --> 00:31:46,320 Speaker 10: far as as a return standpoint. We've seen some of 639 00:31:46,320 --> 00:31:49,920 Speaker 10: the Europeans like BP and Shell acquiesce before they said 640 00:31:49,920 --> 00:31:52,960 Speaker 10: they were they were going to let their production fall 641 00:31:53,200 --> 00:31:56,240 Speaker 10: by as much as thirty percent, and now they're saying, well, well, 642 00:31:56,480 --> 00:31:58,600 Speaker 10: the prices are too good, the returns are too good, 643 00:31:58,640 --> 00:32:01,200 Speaker 10: and the returns on the renewables side are not nearly 644 00:32:01,240 --> 00:32:03,760 Speaker 10: as good as we expected them to be. So we're 645 00:32:03,800 --> 00:32:06,080 Speaker 10: going to invest on our oil side. 646 00:32:06,120 --> 00:32:06,400 Speaker 7: Again. 647 00:32:07,120 --> 00:32:10,280 Speaker 10: The question is where do you invest now, Mike. 648 00:32:10,120 --> 00:32:11,600 Speaker 4: I want to bring you back in here. You were 649 00:32:11,600 --> 00:32:14,120 Speaker 4: talking to us before about these different factors right now 650 00:32:14,120 --> 00:32:17,040 Speaker 4: that are keeping prices low, that we've got the China 651 00:32:17,160 --> 00:32:20,240 Speaker 4: demand pictures and so great. The FED is obviously not easing. 652 00:32:21,000 --> 00:32:23,080 Speaker 4: Which one of these are you know you think could 653 00:32:23,760 --> 00:32:25,720 Speaker 4: among the other factors you mentioned too, what do you 654 00:32:25,720 --> 00:32:29,600 Speaker 4: think could turn first and really get things moving in 655 00:32:29,600 --> 00:32:30,240 Speaker 4: the other direction. 656 00:32:31,480 --> 00:32:35,080 Speaker 6: That's the big problem, Mollie. Typically for the FED in 657 00:32:35,080 --> 00:32:37,160 Speaker 6: this case, I think it's one of those most unique 658 00:32:37,160 --> 00:32:39,440 Speaker 6: cases I've seen in my career in this business of 659 00:32:39,560 --> 00:32:42,520 Speaker 6: almost four decades, and that is the FED is unlikely 660 00:32:42,640 --> 00:32:45,560 Speaker 6: to pivot or start easing until markets tell them to, 661 00:32:45,960 --> 00:32:48,280 Speaker 6: i e. Stock market going down. And this is somewhat 662 00:32:48,280 --> 00:32:51,960 Speaker 6: the view from our chief economists because the measures they 663 00:32:51,960 --> 00:32:55,960 Speaker 6: watch for inflation are very sticky. Personal consumption expenditure is still, 664 00:32:56,240 --> 00:32:59,840 Speaker 6: howevering just below five percent, and FED funds are heading higher, 665 00:32:59,880 --> 00:33:03,080 Speaker 6: so I don't see what it's gonna take. And to me, 666 00:33:03,240 --> 00:33:05,480 Speaker 6: the biggest risk for the second half is something I 667 00:33:05,560 --> 00:33:08,480 Speaker 6: started really worried about starting pointing out a year agoes. 668 00:33:08,520 --> 00:33:11,360 Speaker 6: This is probably be one of the biggest economic resets 669 00:33:11,400 --> 00:33:13,520 Speaker 6: of a lifetime. And we've had a bounce and we've 670 00:33:13,560 --> 00:33:16,720 Speaker 6: had all the markets, equity markets think that we're not 671 00:33:16,760 --> 00:33:19,600 Speaker 6: gonna have a US recession now if we do tilt 672 00:33:19,640 --> 00:33:22,240 Speaker 6: towards that in the second half, just the normal lag 673 00:33:22,280 --> 00:33:25,560 Speaker 6: to the most aggressive federal rate hike easing tightening. Ever, 674 00:33:25,920 --> 00:33:27,960 Speaker 6: Crudel could just be a pawn in that space. 675 00:33:28,000 --> 00:33:28,120 Speaker 7: Now. 676 00:33:28,160 --> 00:33:29,840 Speaker 6: Crude oil is down ten percent on the year, is 677 00:33:29,880 --> 00:33:33,040 Speaker 6: not a big deal, but it's Brethren copper. The medal 678 00:33:33,080 --> 00:33:37,400 Speaker 6: with the PhD in economics. Is it's wiped out a 679 00:33:37,400 --> 00:33:39,640 Speaker 6: pretty good rally in January. Now it's down in the 680 00:33:39,720 --> 00:33:42,320 Speaker 6: year two and gold is the best performing commodity. So 681 00:33:42,360 --> 00:33:46,560 Speaker 6: from a commodity standpoint, gold up, crude oil, and industrial 682 00:33:46,600 --> 00:33:49,520 Speaker 6: metals down. That's a recessionary trajectory. And then I look 683 00:33:49,560 --> 00:33:52,280 Speaker 6: over at the yield curve. Okay, that's tilting towards inversion, 684 00:33:52,480 --> 00:33:55,280 Speaker 6: recessionary trajectory. And I look at the FED still tightening. 685 00:33:55,480 --> 00:33:58,280 Speaker 6: There's nothing good in there except some kind of surprise. 686 00:33:58,360 --> 00:34:02,200 Speaker 6: I can't predict for the commodity market to end, all right. 687 00:34:02,240 --> 00:34:03,800 Speaker 1: So, Mike, when people come up to me at cocktail 688 00:34:03,800 --> 00:34:06,400 Speaker 1: parties and ask me for my commodities call, because they 689 00:34:06,440 --> 00:34:08,920 Speaker 1: never do, I just quote you and just say, am 690 00:34:09,000 --> 00:34:10,799 Speaker 1: I still long gold? Short everything else? 691 00:34:12,160 --> 00:34:16,000 Speaker 6: Well, I think gold is much likely to continue the rally, 692 00:34:16,080 --> 00:34:18,279 Speaker 6: to break out above this two thousand level and never 693 00:34:18,320 --> 00:34:20,920 Speaker 6: look back. It's a matter of time, and crude oils 694 00:34:20,960 --> 00:34:22,840 Speaker 6: and most commids are going to continue to do what 695 00:34:22,880 --> 00:34:26,040 Speaker 6: they normally do. They get too expensive and then pendulum 696 00:34:26,040 --> 00:34:28,000 Speaker 6: swings to too cheap, and it has to get too 697 00:34:28,080 --> 00:34:30,640 Speaker 6: cheap before they can bounce again. And we're nowhere near 698 00:34:30,760 --> 00:34:33,239 Speaker 6: that too cheat phase. As Fernando says, there's still a 699 00:34:33,239 --> 00:34:35,520 Speaker 6: lot of profits to be made. The average cost of 700 00:34:35,560 --> 00:34:39,600 Speaker 6: production from US producers is around fifty dollars a barrow, 701 00:34:39,640 --> 00:34:42,480 Speaker 6: So I just look at forty as the key level 702 00:34:42,560 --> 00:34:44,879 Speaker 6: should go back to. That was a key level in 703 00:34:45,120 --> 00:34:47,319 Speaker 6: nineteen ninety I was in the trading pits. Then when 704 00:34:48,120 --> 00:34:52,040 Speaker 6: Sodom's saying invaded Kuwait, it bounced to forty. And get this, 705 00:34:52,160 --> 00:34:54,359 Speaker 6: the bounce at the bottom. The ultimate body didn't come 706 00:34:54,480 --> 00:34:58,719 Speaker 6: until ten until about ten until nineteen ninety eight. Now 707 00:34:58,719 --> 00:35:00,880 Speaker 6: things have really changed. Now is the biggest one of 708 00:35:00,880 --> 00:35:03,680 Speaker 6: the net one of the biggest net energy producers on 709 00:35:03,719 --> 00:35:05,360 Speaker 6: the planet in the net export. 710 00:35:05,320 --> 00:35:08,239 Speaker 1: Yep, Hey, Fernanda, real quick thirty seconds? What do you think? 711 00:35:08,480 --> 00:35:10,359 Speaker 1: Which company think is the best position here? These big 712 00:35:10,480 --> 00:35:11,160 Speaker 1: energy companies? 713 00:35:11,800 --> 00:35:14,440 Speaker 10: Well, I think Excellent has done a terrific job in 714 00:35:14,480 --> 00:35:18,200 Speaker 10: turning around as investments by US growing in Guiana by 715 00:35:18,239 --> 00:35:23,480 Speaker 10: acquiring the Permian Chevron equally has a sizeable permium position 716 00:35:23,520 --> 00:35:25,759 Speaker 10: and it's in good position. So I think the US 717 00:35:25,800 --> 00:35:26,760 Speaker 10: over Europe overall. 718 00:35:26,920 --> 00:35:29,839 Speaker 1: Okay, great stuff. As always, always get the nice, clean, 719 00:35:29,880 --> 00:35:32,359 Speaker 1: concise call from both of you, guys. Mike McLoone, senior 720 00:35:32,400 --> 00:35:36,920 Speaker 1: micro macro strategists with the Bloomberg Intelligence from the Miami office. 721 00:35:36,920 --> 00:35:38,960 Speaker 1: Some folks referred to now as Miami Mike. I don't 722 00:35:38,960 --> 00:35:41,480 Speaker 1: know if that's going to stick. Fernando Vallei, senior analyst 723 00:35:41,560 --> 00:35:45,360 Speaker 1: with Bloomberg Intelligence. He covers the global energy space, covers 724 00:35:45,400 --> 00:35:48,160 Speaker 1: all the big major oil companies. So we'd like to 725 00:35:48,160 --> 00:35:50,759 Speaker 1: speak to these two folks get a good view of 726 00:35:50,880 --> 00:35:51,880 Speaker 1: global energy. 727 00:35:52,320 --> 00:35:55,440 Speaker 7: You're listening to the tape Can's are Live program Bloomberg 728 00:35:55,520 --> 00:35:59,040 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 729 00:35:59,160 --> 00:36:02,359 Speaker 7: tune in Appoomberg dot Com, and the Bloomberg Business App. 730 00:36:02,440 --> 00:36:05,239 Speaker 7: You can also listen live on Amazon Alexa from our 731 00:36:05,239 --> 00:36:10,280 Speaker 7: flagship New York station, Just Say Alexa play Bloomberg eleven thirty. 732 00:36:12,040 --> 00:36:14,240 Speaker 1: Molly Smith and Paul Sweeney here in a Bloomberg Interactive 733 00:36:14,239 --> 00:36:16,440 Speaker 1: Broker studio. I want to get right to our next guest, 734 00:36:16,760 --> 00:36:19,759 Speaker 1: Jerry Smith, mediate reporter for Bloomberg News, one of the 735 00:36:19,760 --> 00:36:22,960 Speaker 1: top media reporters out there, breaking lots of news, and 736 00:36:23,200 --> 00:36:25,800 Speaker 1: we got him here in studio. All right, So Jerry, 737 00:36:25,880 --> 00:36:29,640 Speaker 1: I want to start with ESPN. Back on my banking days, 738 00:36:29,640 --> 00:36:32,000 Speaker 1: we pitched to spin that thing out. We thought we 739 00:36:32,040 --> 00:36:34,359 Speaker 1: could get forty times earnings, double the value back when 740 00:36:34,400 --> 00:36:37,120 Speaker 1: Disney was trading at twenty times. We always got laughed 741 00:36:37,120 --> 00:36:39,239 Speaker 1: out of the office, if not physically thrown out of 742 00:36:39,239 --> 00:36:42,800 Speaker 1: the office by the CFO of Disney. What is ESPN 743 00:36:42,880 --> 00:36:44,120 Speaker 1: going to do? What is Disney to do with the 744 00:36:44,200 --> 00:36:46,640 Speaker 1: ESPN these days? What do you think going forward? 745 00:36:46,920 --> 00:36:49,120 Speaker 11: I think that's one of the biggest questions in the 746 00:36:49,160 --> 00:36:51,960 Speaker 11: media in business right now, is the future of ESPN. 747 00:36:53,000 --> 00:36:55,040 Speaker 11: You know, it still makes a lot of money for Disney, 748 00:36:55,080 --> 00:36:57,799 Speaker 11: and that's important to think about because Disney also has 749 00:36:57,840 --> 00:37:01,320 Speaker 11: this whole streaming business with Disney Plus, where that loses 750 00:37:01,320 --> 00:37:04,160 Speaker 11: a lot of money. So the money that ESPN and 751 00:37:04,200 --> 00:37:06,880 Speaker 11: the cable network business makes is used to fund the 752 00:37:06,880 --> 00:37:10,160 Speaker 11: streaming business. So you get rid of ESPN and suddenly 753 00:37:10,239 --> 00:37:11,799 Speaker 11: you have to ask, where are you going to fund 754 00:37:11,880 --> 00:37:16,520 Speaker 11: your streaming business? But yeah, ESPN is dealing with the 755 00:37:16,560 --> 00:37:18,600 Speaker 11: same thing that a lot of cable networks are dealing with, 756 00:37:18,640 --> 00:37:21,319 Speaker 11: which is cord cutting. The number of subscriptions keeps going 757 00:37:21,360 --> 00:37:24,240 Speaker 11: down and down, and they have a lot They're spending 758 00:37:24,280 --> 00:37:26,680 Speaker 11: billions of dollars on sports rights, and they have a 759 00:37:26,680 --> 00:37:30,600 Speaker 11: lot of high profile talent. Last Friday we saw about 760 00:37:30,600 --> 00:37:34,080 Speaker 11: twenty of those people who appear on Camber. Jeff and Gundhy, 761 00:37:34,160 --> 00:37:36,880 Speaker 11: Jalen Rose, Susi Kolber were three of the big names 762 00:37:37,560 --> 00:37:40,719 Speaker 11: who were laid off as part of a cost cutting initiative. 763 00:37:40,760 --> 00:37:44,040 Speaker 11: And part of that is really because ESPN is going 764 00:37:44,040 --> 00:37:46,600 Speaker 11: to be under bigger scrutiny from Wall Street than ever before. 765 00:37:46,640 --> 00:37:49,600 Speaker 11: Coming up. They are Disney for the first time in 766 00:37:50,000 --> 00:37:52,600 Speaker 11: one of the next few quarters is going to break 767 00:37:52,600 --> 00:37:55,960 Speaker 11: out ESPN's financial numbers for the first time. So that 768 00:37:56,080 --> 00:38:00,200 Speaker 11: is clearly ESPN wants those numbers to look good. They 769 00:38:00,200 --> 00:38:02,640 Speaker 11: are going to you know, they made some cuts to 770 00:38:02,680 --> 00:38:04,200 Speaker 11: some of the high profile talent. 771 00:38:04,520 --> 00:38:07,000 Speaker 4: At least they've kept the high profile tennis talent. I 772 00:38:07,040 --> 00:38:10,040 Speaker 4: will vouch for that. They're all very much informed at Wimbledon, 773 00:38:10,239 --> 00:38:14,080 Speaker 4: so happy from my perspective. But I'm wondering, Jerry, because 774 00:38:14,400 --> 00:38:17,680 Speaker 4: isn't so much of the value of you know, cable 775 00:38:17,760 --> 00:38:20,680 Speaker 4: right now sports right Isn't that so much of like 776 00:38:20,719 --> 00:38:23,360 Speaker 4: where people have been saying, this is why cable is 777 00:38:23,400 --> 00:38:27,319 Speaker 4: still around and why streaming has not completely overtaken it 778 00:38:27,719 --> 00:38:28,960 Speaker 4: the whole picture. 779 00:38:29,080 --> 00:38:31,040 Speaker 11: That's right, Yeah, I mean if the people who subscribe 780 00:38:31,080 --> 00:38:34,200 Speaker 11: to cable right now are in large part sports fans, 781 00:38:34,440 --> 00:38:36,759 Speaker 11: some news fans as well, but live sports is really 782 00:38:36,800 --> 00:38:39,279 Speaker 11: what's keeping the whole industry together. So one of the 783 00:38:39,320 --> 00:38:42,120 Speaker 11: big questions with ESPN is when do they make that 784 00:38:42,200 --> 00:38:47,040 Speaker 11: flagship channel available as a streaming service. And the day 785 00:38:47,080 --> 00:38:49,680 Speaker 11: that they do that could really, you know, unravel the 786 00:38:49,719 --> 00:38:52,080 Speaker 11: whole business because you could see more people cut the 787 00:38:52,120 --> 00:38:55,319 Speaker 11: cord to sign up for this ESPN service. And how 788 00:38:55,400 --> 00:38:58,239 Speaker 11: much you price it as an open question, but yeah, 789 00:38:58,239 --> 00:39:00,279 Speaker 11: I mean live sports is really what's keeping and it's 790 00:39:00,320 --> 00:39:01,759 Speaker 11: the whole business together right now. 791 00:39:02,080 --> 00:39:05,000 Speaker 1: And you know, you say that live sports absolutely that's 792 00:39:05,040 --> 00:39:07,120 Speaker 1: always been the case. But you think about the regional 793 00:39:07,120 --> 00:39:11,640 Speaker 1: sports network business. The number one player out there's in bankruptcy. 794 00:39:12,000 --> 00:39:13,560 Speaker 1: You know, a lot of teams aren't even having their 795 00:39:13,600 --> 00:39:17,480 Speaker 1: games broadcast anymore. So that whole model is really under pressure. 796 00:39:18,280 --> 00:39:22,680 Speaker 1: ESPN model under pressure. In that background, the rights keep 797 00:39:22,719 --> 00:39:24,959 Speaker 1: going up. I mean, who's going to pay these thirty 798 00:39:25,000 --> 00:39:27,920 Speaker 1: forty fifty increase in rates if it's not ESPN. 799 00:39:27,960 --> 00:39:29,920 Speaker 11: Right, I think we're really heading towards a cliff with 800 00:39:29,960 --> 00:39:33,200 Speaker 11: this whole business, where at some point some sports league 801 00:39:33,320 --> 00:39:35,600 Speaker 11: is not going to be able to command the kind 802 00:39:35,640 --> 00:39:38,440 Speaker 11: of increase in their rights fees that they have in 803 00:39:38,480 --> 00:39:42,319 Speaker 11: the past. That hasn't happened yet. It's the amount that 804 00:39:42,800 --> 00:39:45,360 Speaker 11: live sports costs just keeps going up and out. But 805 00:39:45,600 --> 00:39:47,400 Speaker 11: I think there's going to be a point where some 806 00:39:47,440 --> 00:39:49,360 Speaker 11: of these sports leagues are going to take a haircut. 807 00:39:49,920 --> 00:39:51,440 Speaker 11: I don't think it's going to be the really high 808 00:39:51,520 --> 00:39:53,640 Speaker 11: profile leagues. The big one coming up is the NBA, 809 00:39:53,760 --> 00:39:55,799 Speaker 11: and I think everyone expects the NBA is still going 810 00:39:55,840 --> 00:39:58,319 Speaker 11: to get a nice premium from what they got. But 811 00:39:58,920 --> 00:40:00,919 Speaker 11: people I talk to in the end industry to say, look, 812 00:40:00,960 --> 00:40:04,640 Speaker 11: watch for some of those middle tier sports that are 813 00:40:04,640 --> 00:40:06,160 Speaker 11: really going to get squeezed right now. 814 00:40:06,760 --> 00:40:09,080 Speaker 12: So if it's not if ESPN, you know, you would 815 00:40:09,080 --> 00:40:11,040 Speaker 12: think this is going to be like the channel here. 816 00:40:11,080 --> 00:40:13,920 Speaker 12: They can obviously weather whatever's going on in the sports industry. 817 00:40:14,280 --> 00:40:16,600 Speaker 12: If they're not able to put it together, you know, 818 00:40:16,600 --> 00:40:20,000 Speaker 12: how are the networks fairing? Obviously ABC still part of 819 00:40:20,000 --> 00:40:23,360 Speaker 12: the Disney Empire. But when you look at NBC, CBS, 820 00:40:23,360 --> 00:40:26,360 Speaker 12: some of the other ones that will you know, broadcast 821 00:40:26,400 --> 00:40:29,080 Speaker 12: live sports, how are they holding up well? 822 00:40:29,239 --> 00:40:32,759 Speaker 11: Those broadcast channels? I mean, one interesting trend we've seen 823 00:40:32,760 --> 00:40:34,359 Speaker 11: with cord cutting is a lot of people who not 824 00:40:34,400 --> 00:40:37,080 Speaker 11: only cancel their cable for Netflix, but they also get 825 00:40:37,080 --> 00:40:39,560 Speaker 11: the digital antennas and you can actually get a lot 826 00:40:39,560 --> 00:40:43,239 Speaker 11: of programming on that, including CBS, NBC, Fox, So those 827 00:40:43,320 --> 00:40:47,360 Speaker 11: channels are are weathering the storm better. And in fact, 828 00:40:47,760 --> 00:40:49,600 Speaker 11: you know the NBA, when they're looking for this next 829 00:40:49,600 --> 00:40:51,560 Speaker 11: sports right deal, they really want to find a media 830 00:40:51,600 --> 00:40:55,200 Speaker 11: partner that can offer them streaming and also a broadcast 831 00:40:55,280 --> 00:40:58,480 Speaker 11: channel like an ABC or an NBC or a CBS 832 00:40:58,560 --> 00:41:01,239 Speaker 11: or Fox, because those channels have a lot more reach. 833 00:41:01,320 --> 00:41:03,920 Speaker 11: We're seeing with these regional sports networks. Just a few 834 00:41:03,960 --> 00:41:06,640 Speaker 11: weeks ago, the Utah Jazz did a deal where they 835 00:41:07,080 --> 00:41:09,400 Speaker 11: their games are going to be available over an antenna 836 00:41:09,520 --> 00:41:12,000 Speaker 11: over a free over the air channel and they did 837 00:41:12,040 --> 00:41:15,080 Speaker 11: away with their cable deal. They had a cable network 838 00:41:15,280 --> 00:41:17,440 Speaker 11: that aired their games. That's not going to happen anymore. 839 00:41:17,480 --> 00:41:19,239 Speaker 11: So that's something that we're starting to see in the 840 00:41:19,239 --> 00:41:22,760 Speaker 11: sports business, is the cable channels because of cord cutting, 841 00:41:23,000 --> 00:41:27,040 Speaker 11: their reach is diminishing, and you're seeing a combination of 842 00:41:27,239 --> 00:41:30,040 Speaker 11: more free over the air channels and streaming channels to 843 00:41:30,120 --> 00:41:33,360 Speaker 11: kind of reach the widest audience. Possible. The real question 844 00:41:33,440 --> 00:41:36,520 Speaker 11: there is at what point can those leagues still command 845 00:41:36,520 --> 00:41:38,760 Speaker 11: the same kind of money they got from the cable channels. 846 00:41:39,280 --> 00:41:41,080 Speaker 11: Right now they're not getting the same kind of money, 847 00:41:41,200 --> 00:41:42,640 Speaker 11: So how do they make up that loss? 848 00:41:42,760 --> 00:41:44,759 Speaker 1: Yeah, if I'm a I think it's some point just 849 00:41:44,760 --> 00:41:46,719 Speaker 1: going to trickle down to the athletes themselves. If I 850 00:41:46,719 --> 00:41:49,800 Speaker 1: were somebody, I'd be locking up a long term contract now, know. 851 00:41:49,880 --> 00:41:52,400 Speaker 11: Yeah, That's what's fascinating about the sports media business is 852 00:41:52,400 --> 00:41:55,560 Speaker 11: everything's connected. Everything from how much the sports player is 853 00:41:55,560 --> 00:41:58,839 Speaker 11: getting paid to the person at home who's canceling their 854 00:41:58,880 --> 00:42:01,880 Speaker 11: cable service. There's a a chain link and everybody's connected, 855 00:42:01,880 --> 00:42:04,000 Speaker 11: and so more and more people cut the cord and 856 00:42:04,040 --> 00:42:06,560 Speaker 11: that trickles down all the way to the teams how 857 00:42:06,600 --> 00:42:08,600 Speaker 11: much they can play their pay their players. 858 00:42:09,200 --> 00:42:11,520 Speaker 4: Does that mean that people are even maybe, you know, 859 00:42:11,560 --> 00:42:14,720 Speaker 4: if they're not paying to watch this stuff on cable anymore, 860 00:42:15,040 --> 00:42:17,719 Speaker 4: does it even say like, if you still really want 861 00:42:17,719 --> 00:42:19,520 Speaker 4: to watch these games, you're going more in person. 862 00:42:20,520 --> 00:42:21,240 Speaker 10: That's a good question. 863 00:42:21,320 --> 00:42:24,759 Speaker 11: I think attendance and in sports has actually been doing 864 00:42:24,760 --> 00:42:27,359 Speaker 11: pretty well. I think Major League Baseball attendants is doing well. 865 00:42:27,719 --> 00:42:29,719 Speaker 11: They actually made an interesting change this year where they 866 00:42:29,719 --> 00:42:32,000 Speaker 11: made the game shorter, which I think has helped both 867 00:42:32,040 --> 00:42:35,880 Speaker 11: the viewership and the attendance. But yeah, I mean, that's 868 00:42:36,000 --> 00:42:38,920 Speaker 11: that's something that years and years ago there were these 869 00:42:38,920 --> 00:42:42,279 Speaker 11: blackout rules where you could watch sporting events because they 870 00:42:42,280 --> 00:42:44,200 Speaker 11: wanted to make sure that enough people actually went to 871 00:42:44,239 --> 00:42:47,480 Speaker 11: the games. But yeah, I mean, if you think about 872 00:42:47,520 --> 00:42:50,640 Speaker 11: the business of owning a sports franchise, media rights are 873 00:42:50,640 --> 00:42:52,839 Speaker 11: a huge piece of it, but also people go into 874 00:42:52,880 --> 00:42:56,239 Speaker 11: the games, the attendance ticket costs, things like that. So yeah, 875 00:42:56,280 --> 00:42:58,960 Speaker 11: that's an excellent question. I'm not sure what the answer isre. 876 00:42:58,560 --> 00:43:01,040 Speaker 1: You cover the whole media based soup the nuts here, 877 00:43:02,200 --> 00:43:05,439 Speaker 1: Have we reached peak Hollywood in a sense that boy, 878 00:43:05,520 --> 00:43:10,400 Speaker 1: the spending on TV shows and movies just exploded due 879 00:43:10,440 --> 00:43:13,160 Speaker 1: to Netflix and all the other streaming competitors. But now 880 00:43:13,200 --> 00:43:15,040 Speaker 1: we're seeing companies like Disney saying, oh, we got to 881 00:43:15,080 --> 00:43:19,319 Speaker 1: cut costs, including production costs. Your colleague at Bloomberg News, 882 00:43:19,400 --> 00:43:22,680 Speaker 1: Lucashaw's got a story out about Amazon CEO wants to 883 00:43:22,719 --> 00:43:24,920 Speaker 1: know why they're spending so much money on program So 884 00:43:24,960 --> 00:43:28,400 Speaker 1: if Amazon's asking that question, have we maybe had peak 885 00:43:28,440 --> 00:43:29,640 Speaker 1: spending in Hollywood? 886 00:43:30,400 --> 00:43:33,360 Speaker 11: Yeah, I think that's an interesting question. And I'd encourage 887 00:43:33,360 --> 00:43:36,880 Speaker 11: everyone to read Lucas's story because it's it's really one 888 00:43:36,920 --> 00:43:40,680 Speaker 11: of the first times we've seen Amazon really look at 889 00:43:40,719 --> 00:43:43,520 Speaker 11: the cost of their Hollywood studio. I think it helps 890 00:43:43,560 --> 00:43:47,240 Speaker 11: to think of these streamers as different kinds of companies 891 00:43:47,239 --> 00:43:51,040 Speaker 11: with different priorities. You have Apple and Amazon who just 892 00:43:51,080 --> 00:43:56,320 Speaker 11: have such enormously deep pockets that the losses that everyone's 893 00:43:56,360 --> 00:43:59,280 Speaker 11: losing money on streaming, but they can sustain the losses 894 00:43:59,800 --> 00:44:03,359 Speaker 11: much easier than some of these other companies that where 895 00:44:03,440 --> 00:44:06,239 Speaker 11: media is their whole business, someone like a Disney or 896 00:44:06,280 --> 00:44:10,680 Speaker 11: Comcast or Paramount, where they're having real cost cutting issues. 897 00:44:11,080 --> 00:44:15,239 Speaker 11: Again getting back to the whole cord cutting phenomenon, but yeah, 898 00:44:15,239 --> 00:44:17,839 Speaker 11: we're starting to see even someone like Amazon. I mean, 899 00:44:18,120 --> 00:44:22,480 Speaker 11: they're spending seven billion dollars a year on streaming on programming, 900 00:44:22,560 --> 00:44:24,960 Speaker 11: and then that's a drop in the bucket for them, 901 00:44:25,120 --> 00:44:27,240 Speaker 11: but they're still looking at these losses. 902 00:44:27,760 --> 00:44:30,120 Speaker 1: Hey, you know it's reading a research note by Laura 903 00:44:30,200 --> 00:44:32,520 Speaker 1: Martin at Needham and Company, and she was talking about 904 00:44:32,600 --> 00:44:34,719 Speaker 1: Paramount and her question She was saying, Hey, here are 905 00:44:34,760 --> 00:44:37,200 Speaker 1: the questions I'm getting from institutional investors, and then what 906 00:44:37,280 --> 00:44:39,719 Speaker 1: came up to Paramount the question was, what are they 907 00:44:39,760 --> 00:44:42,040 Speaker 1: going to sell? Is that really a story? Is there 908 00:44:42,200 --> 00:44:44,880 Speaker 1: a belief out there, Jerry that maybe they're you know, 909 00:44:44,960 --> 00:44:48,040 Speaker 1: Sherry Redstone and the Redstone family and the trust whatever 910 00:44:48,120 --> 00:44:48,840 Speaker 1: sell Paramount. 911 00:44:49,920 --> 00:44:52,400 Speaker 11: I think that's something that people have been talking about 912 00:44:52,440 --> 00:44:54,040 Speaker 11: for as long as I've been covering this beat. I 913 00:44:54,040 --> 00:44:58,200 Speaker 11: mean it's years and years. I think that the you know, 914 00:44:58,239 --> 00:45:01,120 Speaker 11: this is an industry about scale, how big you can be, 915 00:45:01,400 --> 00:45:05,040 Speaker 11: and I think Paramount, even after they combined Viacom with CBS, 916 00:45:05,080 --> 00:45:09,279 Speaker 11: has always been seen as being undersized and everyone's always wondering, well, 917 00:45:09,280 --> 00:45:12,560 Speaker 11: when is someone going to buy them? But you know, 918 00:45:12,920 --> 00:45:15,279 Speaker 11: there's also the companies that can afford to buy them, 919 00:45:15,320 --> 00:45:18,560 Speaker 11: are companies like an Apple or an Amazon. Everyone always wonders, 920 00:45:18,600 --> 00:45:21,400 Speaker 11: but do those companies really want to get into the 921 00:45:21,440 --> 00:45:24,400 Speaker 11: cable channel business with all the challenges that they're facing 922 00:45:24,480 --> 00:45:26,960 Speaker 11: right now? You know, maybe they could just sell off 923 00:45:26,960 --> 00:45:29,960 Speaker 11: the studio. That might be attractive, But yeah, it's a 924 00:45:29,960 --> 00:45:32,799 Speaker 11: scale business and they've always been seen as undersized. So 925 00:45:32,880 --> 00:45:35,560 Speaker 11: I think that's something everybody's always wondering. I think the 926 00:45:35,600 --> 00:45:38,880 Speaker 11: Allen and Company Sun Valley conference is coming up. Oh yeah, 927 00:45:38,920 --> 00:45:41,239 Speaker 11: everybody loves to talk about how there's deals being done. 928 00:45:41,239 --> 00:45:42,640 Speaker 1: There's this month. 929 00:45:42,520 --> 00:45:43,680 Speaker 11: Right, I believe that's coming up. 930 00:45:43,760 --> 00:45:44,480 Speaker 10: Yeah, so that's I. 931 00:45:44,480 --> 00:45:47,040 Speaker 1: Didn't get my invite. I'm still waiting, all right, all right, 932 00:45:47,440 --> 00:45:49,399 Speaker 1: New York Times, we talked about it. The New York 933 00:45:49,400 --> 00:45:51,799 Speaker 1: Times still cranking it out. It's got a six point 934 00:45:51,840 --> 00:45:54,279 Speaker 1: five billion dollar market cap. Everybody thought The New York 935 00:45:54,320 --> 00:45:55,879 Speaker 1: Times was going out of business. A lot of other 936 00:45:55,920 --> 00:45:58,759 Speaker 1: papers have unfortunately, but just locks up twenty two percent 937 00:45:59,000 --> 00:46:01,640 Speaker 1: to date. Because content is king. So as long as 938 00:46:01,680 --> 00:46:04,200 Speaker 1: you got the premium content, they'll figure out a way 939 00:46:04,280 --> 00:46:05,720 Speaker 1: to get paid for it. In the New York Times, 940 00:46:05,719 --> 00:46:09,200 Speaker 1: their app has been extraordinary. Their digital advertising has been great. 941 00:46:09,239 --> 00:46:11,120 Speaker 1: So there's my little plug. I've been found New York 942 00:46:11,120 --> 00:46:13,160 Speaker 1: Times company for like, you know, forty. 943 00:46:12,960 --> 00:46:15,600 Speaker 4: Years cooking in games. Those are the big ones exactly. 944 00:46:15,880 --> 00:46:19,000 Speaker 7: You're listening to the tape. Can's are live program Bloomberg 945 00:46:19,040 --> 00:46:22,640 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 946 00:46:22,680 --> 00:46:25,919 Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business app. 947 00:46:25,960 --> 00:46:28,759 Speaker 7: You can also listen live on Amazon Alexa from our 948 00:46:28,800 --> 00:46:33,200 Speaker 7: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty. 949 00:46:35,000 --> 00:46:38,359 Speaker 1: Let's check about the fixed income business. Twenty twenty two 950 00:46:38,440 --> 00:46:41,200 Speaker 1: a year two ford get for pretty much everybody in 951 00:46:41,239 --> 00:46:43,080 Speaker 1: the fixed income space a little bit better this year. 952 00:46:43,360 --> 00:46:45,320 Speaker 1: So we want to check in with Ward Borts. He 953 00:46:45,600 --> 00:46:48,600 Speaker 1: is Ward bots. He is the ETF portfolio manager, head 954 00:46:48,600 --> 00:46:52,440 Speaker 1: of Distribution public Strategies at Angel Oak. So Ward, you know, 955 00:46:52,480 --> 00:46:55,040 Speaker 1: I'm looking at the two year treasury, I don't know, 956 00:46:55,239 --> 00:46:57,400 Speaker 1: four point nine one percent. I'll put some money in 957 00:46:57,440 --> 00:46:59,440 Speaker 1: there and I think I'll be quite happy. You know, 958 00:46:59,719 --> 00:47:02,279 Speaker 1: what do you think about fixed to come space these days? 959 00:47:02,640 --> 00:47:05,719 Speaker 5: Yeah, to your point, I think twenty twenty two it 960 00:47:05,760 --> 00:47:06,880 Speaker 5: was painful. 961 00:47:06,400 --> 00:47:09,480 Speaker 13: Getting there after years of really getting no yield, no 962 00:47:09,640 --> 00:47:10,839 Speaker 13: return in the in. 963 00:47:10,760 --> 00:47:12,400 Speaker 5: The fixed income markets. 964 00:47:12,840 --> 00:47:15,520 Speaker 13: But twenty twenty three has been off to a decent 965 00:47:15,520 --> 00:47:17,640 Speaker 13: start in fixed income. You know, our view at the 966 00:47:17,680 --> 00:47:20,759 Speaker 13: beginning of the year was you could get equity like 967 00:47:20,840 --> 00:47:25,160 Speaker 13: returns in fixed income, and you know, in our head 968 00:47:25,200 --> 00:47:28,400 Speaker 13: that's kind of called it eight to twelve percent, depending 969 00:47:28,400 --> 00:47:30,359 Speaker 13: on what interest rates do throughout the year. 970 00:47:30,719 --> 00:47:34,160 Speaker 5: We're about halfway there now, right around four percent. 971 00:47:34,280 --> 00:47:37,200 Speaker 13: I think high yield so far this year is up 972 00:47:37,239 --> 00:47:41,560 Speaker 13: five and a half percent, So you know, thus far. 973 00:47:41,440 --> 00:47:43,480 Speaker 5: It's been pretty good and our expectation is through the 974 00:47:43,480 --> 00:47:44,000 Speaker 5: rest of the year. 975 00:47:44,040 --> 00:47:46,280 Speaker 13: It's it's not a bad place to be a positioned, 976 00:47:46,520 --> 00:47:50,239 Speaker 13: particularly given what you've seen on the equity market so 977 00:47:50,280 --> 00:47:50,879 Speaker 13: far this year. 978 00:47:51,120 --> 00:47:53,120 Speaker 4: Yeah, we're you know, I used to cover credit and 979 00:47:53,360 --> 00:47:55,560 Speaker 4: you know a lot of this. I'm really just scratching 980 00:47:55,560 --> 00:47:58,200 Speaker 4: my head here because rates have still gone up this year. 981 00:47:58,640 --> 00:48:01,040 Speaker 4: We are hearing that rates are going to stay high 982 00:48:01,040 --> 00:48:04,040 Speaker 4: this year, and yet you're seeing high yield, like you 983 00:48:04,040 --> 00:48:06,520 Speaker 4: said up close, around five and a half percent, investment 984 00:48:06,560 --> 00:48:10,040 Speaker 4: grade up three percent. Where is the where is this 985 00:48:10,120 --> 00:48:10,720 Speaker 4: coming from? 986 00:48:11,560 --> 00:48:14,319 Speaker 13: It's it's the first time in you know, I don't 987 00:48:14,360 --> 00:48:17,640 Speaker 13: know how long where carry actually matters. The coupon that 988 00:48:17,680 --> 00:48:20,360 Speaker 13: you're getting from bonds, you know, or able to offset 989 00:48:21,120 --> 00:48:24,160 Speaker 13: the increases in yields. So you know, to the point 990 00:48:24,200 --> 00:48:27,879 Speaker 13: made earlier, if you can get five percent in short 991 00:48:27,960 --> 00:48:31,320 Speaker 13: term treasuries, even if yields go up one hundred basis points, 992 00:48:31,800 --> 00:48:33,040 Speaker 13: it's going to be offset. 993 00:48:32,719 --> 00:48:35,839 Speaker 5: By the yield you're getting in bonds. And that's really 994 00:48:35,920 --> 00:48:37,360 Speaker 5: what we're seeing with investors. 995 00:48:37,680 --> 00:48:39,799 Speaker 13: We're seeing investors kind of doing the math on that 996 00:48:40,040 --> 00:48:41,960 Speaker 13: and saying, you know what, I'm going to increase my 997 00:48:42,000 --> 00:48:45,600 Speaker 13: allocation to bonds a bit to really take advantage of 998 00:48:45,680 --> 00:48:48,279 Speaker 13: what historically, or for at least for the last ten years, 999 00:48:48,280 --> 00:48:49,800 Speaker 13: has really been no opportunities. 1000 00:48:50,600 --> 00:48:54,080 Speaker 1: So how do you play this in the ETF space war. 1001 00:48:55,719 --> 00:49:00,000 Speaker 13: On? So what we think is attractive, So maybe i'll 1002 00:49:00,120 --> 00:49:02,400 Speaker 13: answer that slightly different. Where do the risk to this? 1003 00:49:03,080 --> 00:49:05,640 Speaker 13: So if we think about our outlook for the rest 1004 00:49:05,640 --> 00:49:07,640 Speaker 13: of the year, we think that the economy is going 1005 00:49:07,640 --> 00:49:11,040 Speaker 13: to start to slow down, So the impact of the 1006 00:49:11,080 --> 00:49:13,360 Speaker 13: FED raising rates over the last year is going to 1007 00:49:13,360 --> 00:49:16,719 Speaker 13: start to be felt and you'll see an economic slow down. 1008 00:49:17,000 --> 00:49:23,000 Speaker 13: Right now in traditional corporate credit, spreads are very tight, 1009 00:49:23,600 --> 00:49:29,080 Speaker 13: and so we are encouraging investors to underweight corporate credit 1010 00:49:29,520 --> 00:49:31,880 Speaker 13: because if we do see a slow down in the economy, 1011 00:49:31,880 --> 00:49:37,480 Speaker 13: that's going to feed into corporations, feed into earnings. Potentially 1012 00:49:37,520 --> 00:49:40,600 Speaker 13: you can see defaults start to increase, if not late 1013 00:49:40,640 --> 00:49:44,320 Speaker 13: this year, then early next year. And so we're saying 1014 00:49:44,440 --> 00:49:47,920 Speaker 13: underweight corporate credit where you've already had decent returns. 1015 00:49:47,480 --> 00:49:49,360 Speaker 5: For the year, as it's been highlighted. 1016 00:49:49,960 --> 00:49:52,839 Speaker 13: And what we really like is mortgage backed securities, So 1017 00:49:53,200 --> 00:49:54,840 Speaker 13: we call this securitized credit. 1018 00:49:54,960 --> 00:49:55,479 Speaker 5: So these are. 1019 00:49:55,400 --> 00:49:59,319 Speaker 13: Bonds that you know are issued by Fanny and Freddy. 1020 00:50:00,120 --> 00:50:03,160 Speaker 5: Or those that aren't backed by the government. 1021 00:50:03,400 --> 00:50:05,960 Speaker 13: Here, you're able to get similar yields to what you 1022 00:50:06,040 --> 00:50:09,840 Speaker 13: get in the corporate space, if not higher, and we 1023 00:50:09,920 --> 00:50:12,720 Speaker 13: think a lot more upside because these are actually priced 1024 00:50:12,760 --> 00:50:16,680 Speaker 13: a lot wider than historical levels relative to to corporate 1025 00:50:16,719 --> 00:50:19,480 Speaker 13: So we really think that's the attractive place to play 1026 00:50:19,640 --> 00:50:23,360 Speaker 13: in the marketplace. So from an ETF standpoint, if you 1027 00:50:23,360 --> 00:50:29,799 Speaker 13: look at agency mortgage backed ETFs like MVB is A 1028 00:50:29,960 --> 00:50:34,399 Speaker 13: is a big one. You know you're gonna benefit both 1029 00:50:34,400 --> 00:50:37,800 Speaker 13: if rates start to decline and if the the yields 1030 00:50:37,800 --> 00:50:40,560 Speaker 13: and spreads of these mortgage backed securities start to define. 1031 00:50:40,840 --> 00:50:44,640 Speaker 13: In addition, we have a non agency ETF c A 1032 00:50:44,920 --> 00:50:47,239 Speaker 13: r Y and this is kind of a little bit 1033 00:50:47,239 --> 00:50:49,360 Speaker 13: more bang through your book, a little bit higher yield, 1034 00:50:49,680 --> 00:50:52,920 Speaker 13: but still investing in that mortgage backed security opportunity that 1035 00:50:53,000 --> 00:50:53,759 Speaker 13: we see right now. 1036 00:50:54,360 --> 00:50:57,279 Speaker 4: And per that, yeah, that what you're talking about here 1037 00:50:57,320 --> 00:51:01,680 Speaker 4: with MPs. What's your view then on mortgages and how 1038 00:51:01,719 --> 00:51:03,439 Speaker 4: does that filter into this. 1039 00:51:03,440 --> 00:51:08,200 Speaker 13: Call on the mortgage market generally. So that's going to 1040 00:51:08,200 --> 00:51:10,799 Speaker 13: be driven by a couple of things. So one is, 1041 00:51:11,080 --> 00:51:12,840 Speaker 13: you know, home prices, So what do we think is 1042 00:51:12,840 --> 00:51:16,040 Speaker 13: going to happen with home prices, and what you've seen 1043 00:51:16,120 --> 00:51:20,000 Speaker 13: so far this year is generally a stabilization in home prices. 1044 00:51:20,080 --> 00:51:23,480 Speaker 13: After you know, what everybody knows was an incredible two thousand, 1045 00:51:24,080 --> 00:51:26,759 Speaker 13: twenty twenty one, and even twenty two in terms of 1046 00:51:26,760 --> 00:51:29,640 Speaker 13: home price appreciation, we think you'll start to see a 1047 00:51:29,680 --> 00:51:34,520 Speaker 13: stabilization in home priss, but not really a significant appreciation. 1048 00:51:35,080 --> 00:51:38,000 Speaker 13: So we think from a credit standpoint, those mortgage bonds, 1049 00:51:38,040 --> 00:51:41,320 Speaker 13: those mortgage backed securities are actually in really great shape 1050 00:51:41,320 --> 00:51:45,359 Speaker 13: because the houses that back them are doing great from 1051 00:51:45,640 --> 00:51:46,759 Speaker 13: a price standpoint. 1052 00:51:47,880 --> 00:51:48,520 Speaker 3: Ward, what do you. 1053 00:51:48,440 --> 00:51:52,080 Speaker 1: Think about private credit? It's a business, it's a market. 1054 00:51:52,080 --> 00:51:54,120 Speaker 1: It's an asset class that has really has come on 1055 00:51:54,160 --> 00:51:56,920 Speaker 1: to the scene in the last I don't know decade 1056 00:51:57,000 --> 00:51:58,759 Speaker 1: or so, and it's gotten so popular. How do you 1057 00:51:58,800 --> 00:52:01,319 Speaker 1: guys think about that? You've ex bosure there. What do 1058 00:52:01,320 --> 00:52:02,000 Speaker 1: you think about that? 1059 00:52:02,760 --> 00:52:06,799 Speaker 5: So we do not so. Number one, it has been 1060 00:52:06,800 --> 00:52:07,560 Speaker 5: an explosion. 1061 00:52:08,200 --> 00:52:08,600 Speaker 6: Uh. 1062 00:52:08,680 --> 00:52:11,040 Speaker 13: You know, we kind of thought, given the increase in 1063 00:52:11,160 --> 00:52:14,400 Speaker 13: yields that you've seen in traditional public markets over the 1064 00:52:14,480 --> 00:52:17,560 Speaker 13: last year, that there would be a decline in growth 1065 00:52:17,680 --> 00:52:21,719 Speaker 13: in UH in private credit, but but it hasn't worked 1066 00:52:21,719 --> 00:52:26,200 Speaker 13: out the way people continue to demand private credit significantly. 1067 00:52:26,239 --> 00:52:31,239 Speaker 13: And this is really uh, you know, backed by corporation, 1068 00:52:31,560 --> 00:52:35,640 Speaker 13: similar to corporate bonds, except you know, private loans. We 1069 00:52:35,760 --> 00:52:37,840 Speaker 13: think that, you know, from everything we've seen, they'll be 1070 00:52:38,000 --> 00:52:42,680 Speaker 13: continued growth there. Our concern is whenever you see an 1071 00:52:42,719 --> 00:52:47,040 Speaker 13: asset class explode in growth, as you've seen in private credit, uh, 1072 00:52:47,440 --> 00:52:50,720 Speaker 13: you can see lending standards starts at the climb, and 1073 00:52:50,840 --> 00:52:54,560 Speaker 13: the private credit asset class really has not been tested yet. 1074 00:52:55,000 --> 00:52:58,120 Speaker 13: And so our concern about it is when you start 1075 00:52:58,120 --> 00:53:01,560 Speaker 13: to see that economics slow down, you've seen significant growth 1076 00:53:01,560 --> 00:53:04,239 Speaker 13: in the size of the asset class, have the underwriting 1077 00:53:04,280 --> 00:53:07,319 Speaker 13: standards held up as much as you know, as much 1078 00:53:07,320 --> 00:53:10,160 Speaker 13: as they were historically where you've got very low default 1079 00:53:10,200 --> 00:53:13,440 Speaker 13: rates and high recovery rates and private right, so you know, 1080 00:53:14,040 --> 00:53:16,120 Speaker 13: in our head, the jury is still out on whether 1081 00:53:16,200 --> 00:53:19,200 Speaker 13: or not private credit is able to withstand the first 1082 00:53:19,200 --> 00:53:21,160 Speaker 13: down tournament the seeds. 1083 00:53:20,880 --> 00:53:22,640 Speaker 1: All right ward, Thanks so much for joining us, Really 1084 00:53:22,680 --> 00:53:25,720 Speaker 1: appreciate it getting some of your time here. War Borts. 1085 00:53:25,760 --> 00:53:29,480 Speaker 1: He's a ETF portfolio manager, head of Distribution Public Strategies 1086 00:53:29,520 --> 00:53:32,200 Speaker 1: at angel O. Before that, he was a dimensional fund 1087 00:53:32,200 --> 00:53:35,319 Speaker 1: Advisors trade er trading at RBC capital markets, all kinds 1088 00:53:35,360 --> 00:53:38,640 Speaker 1: of stuff there at black Rock as well, so lots 1089 00:53:38,680 --> 00:53:41,479 Speaker 1: of experience out there in the space getting his thoughts 1090 00:53:41,560 --> 00:53:44,239 Speaker 1: on fixing him much better year in twenty twenty three. 1091 00:53:44,960 --> 00:53:47,799 Speaker 1: And the high yield, you know, return of over five 1092 00:53:47,800 --> 00:53:49,719 Speaker 1: percent or about five percent this year so far as 1093 00:53:49,800 --> 00:53:50,920 Speaker 1: it's pretty done, impressive. 1094 00:53:51,040 --> 00:53:53,560 Speaker 4: I was just looking even Triple C's up about ten 1095 00:53:53,640 --> 00:53:56,480 Speaker 4: percent this year, so could not seeing the stress yet. 1096 00:53:56,640 --> 00:54:00,239 Speaker 1: Yeah, definitely not exactly, but that's after a brutal twenty 1097 00:54:00,280 --> 00:54:02,719 Speaker 1: twenty two so a lot of room, a lot of 1098 00:54:02,960 --> 00:54:04,759 Speaker 1: still digging needs to be done to get out of 1099 00:54:04,800 --> 00:54:05,200 Speaker 1: that hole. 1100 00:54:07,920 --> 00:54:11,040 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 1101 00:54:11,080 --> 00:54:14,840 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1102 00:54:14,920 --> 00:54:18,640 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1103 00:54:18,840 --> 00:54:20,960 Speaker 2: at Matt Miller nineteen seventy three. 1104 00:54:21,239 --> 00:54:23,600 Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 1105 00:54:23,719 --> 00:54:26,400 Speaker 1: Before the podcast, you can always catch us worldwide at 1106 00:54:26,400 --> 00:54:28,160 Speaker 1: Bloomberg Radio