Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio.
Speaker 1: Late last year, Bloomberg News reported how for gen Z,
Speaker 1: it's daunting to think about saving, investing and planning for
Speaker 1: a retirement and in markets that have been in turmoil
Speaker 1: with a possible recession looming, and as wages haven't kept
Speaker 1: pace with inflation and more so, let's get some thoughts
Speaker 1: on financial wellness with us is Sarah Levy. She's chief
Speaker 1: executive officer of the independent Digital Investment Advisor. We're talking
Speaker 1: about betterment. Sarah, by the way, spend over twenty years
Speaker 1: at Viacom, was COO there. She is joining us via
Speaker 1: zoom in New York City. Hey Sarah, great to have
Speaker 1: you here with Katie and myself. What's the question, first
Speaker 1: of all, that you get most asked about in this
Speaker 1: investment environment. To say it's unusual probably an understatement. That
Speaker 1: is an understatement. Thank you so much to both of
Speaker 1: you for having me. I think probably right now, the
Speaker 1: most common question is a pretty basic one, which is
Speaker 1: what should I do with my money in these volatile times?
Speaker 1: And I think that's a question being asked by investors
Speaker 1: really at all stages of their investment journey, and so
Speaker 1: all stages of their investment journey. Obviously, if you think
Speaker 1: over the past two years, the retail investor was a
Speaker 1: type of investor that we got very well acquainted with. Obviously,
Speaker 1: the market environment in twenty twenty two was much different
Speaker 1: from twenty twenty one. Twenty twenty What is the state
Speaker 1: of the retail investor now? What are you seeing at Betterment?
Speaker 1: So our philosophy in general has been sort of tried
Speaker 1: and true in terms of starting with a long term plan,
Speaker 1: sticking to your plan, being diversified, and not getting distracted
Speaker 1: by the markets. What is interesting to see right now
Speaker 1: is that you know, there are other platforms and investment
Speaker 1: solutions that don't necessarily preach that sort of consistency. And so,
Speaker 1: as you point out in twenty twenty one that there
Speaker 1: was a lot of excitement sort of chasing the latest trend,
Speaker 1: we a Betterment never really believed in that, and so
Speaker 1: I think by and large we attract that a consumer
Speaker 1: who agreed with that philosophy, which was, you know, don't
Speaker 1: get just don't get distracted, and don't make changes when
Speaker 1: the market moves, because this is really about a long
Speaker 1: term play and it's about long term savings. So if
Speaker 1: you take that as context, what we're seeing now is
Speaker 1: that we're seeing a lot more money being put into
Speaker 1: savings because it's a high yield environment and there are
Speaker 1: a lot of great rate available while people are sort
Speaker 1: of waiting out you know, the Fed, and waiting to
Speaker 1: see kind of what the markets are going to do. Great,
Speaker 1: that's what I wanted to ask you. Your platform, you know,
Speaker 1: avails you a lot of information, and I was curious
Speaker 1: what were some of the dominant broader investment trends right now.
Speaker 1: So people in cash shorter investment trends basically maybe assign
Speaker 1: a big sign of risk off at this point and
Speaker 1: just kind of waiting it out. Yes, I would say
Speaker 1: for sure risk off. Savings is absolutely a place people
Speaker 1: are putting their money. But retirement investing, I would say,
Speaker 1: is remaining stable. So people putting money into iras, people
Speaker 1: putting money into their four oh one ks, those remain
Speaker 1: really good sort of long term thinking about compounding interest
Speaker 1: and thinking about kind of tax advantaged investing, I would
Speaker 1: say is much more resilient than taxable accounts. Right now, Sara,
Speaker 1: are they reducing the amount of money that they're putting
Speaker 1: in their four oh one K or retirement accounts as
Speaker 1: a result, as we talk about this kind of more
Speaker 1: cautious stance, we're not seeing that. We're seeing a very
Speaker 1: consistent habits in retirement accounts. And what we're seeing is
Speaker 1: really a shift that money we maybe saw last year
Speaker 1: going into investing, those same dollar values are going into
Speaker 1: savings this year. And when you say going into savings,
Speaker 1: could you break down a little bit more of what
Speaker 1: that means because the conversation I have all the time
Speaker 1: is that cash earns something. Right now, if you're talking
Speaker 1: about treasury bills, if you're talking about money market accounts,
Speaker 1: you know the yields there are higher than they have
Speaker 1: been in a long time. I mean, just specify what
Speaker 1: you mean by savings, that's right, Yes, So I think
Speaker 1: on our platform what we offer is a high yield
Speaker 1: cash account. So that's where we're really seeing the activity.
Speaker 1: We're currently offering a four percent apy and that's really
Speaker 1: top of market. One of the things you see is
Speaker 1: that you know, the bigger banks have lower rates and
Speaker 1: that they are benefiting from this cash environment, but we
Speaker 1: see the opportunity to really pass that along to our consumers.
Speaker 1: And so it's been a really great way for our
Speaker 1: particularly for our tenured customer base, but also for new
Speaker 1: customers to kind of enter for the first time and say,
Speaker 1: I'm going to put my cash here, I'm going to
Speaker 1: get some yield. And there hasn't really been a tremendous
Speaker 1: amount of incremental yield to be gained through duration. So
Speaker 1: the idea of sort of locking up your money isn't
Speaker 1: really necessary right now in this climate because short term
Speaker 1: rates are so high. So that's what we're seeing, Sarah.
Speaker 1: One thing I wanted to ask you aim you guys
Speaker 1: generally speaking, you know, platforms like Betterment or robo advisors,
Speaker 1: no stranger to investment algorithms. The focus now on chat,
Speaker 1: GPT and generative AI. What are the conversations that you
Speaker 1: guys are having around that and whether some of the
Speaker 1: folks on your platform are like, hey, what are you doing?
Speaker 1: What does this mean for us? So it's interesting because
Speaker 1: I would say we are an automated platform. I think
Speaker 1: to say that AI is powering or investing would be disingenuous.
Speaker 1: So we really have real professionals behind the scenes, those
Speaker 1: human beings. So not the technology are actually putting together
Speaker 1: the portfolios for us. What the technology is doing is
Speaker 1: rebalancing portfolios according to the rules set by the humans.
Speaker 1: So I think in that sense, things like chat GPT
Speaker 1: are not acting our portfolio construction. I think where we're
Speaker 1: seeing the potential of chat CHPT again sort of very
Speaker 1: early days, is thinking about messaging and marketing and taking
Speaker 1: the temperature of things going on in the industry. UM
Speaker 1: where you know, where you can you can work with
Speaker 1: your creative teams um to really kind of meet the moment.
Speaker 1: So let's so for necessarily screening for holdings more like
Speaker 1: you say, it sounds like more language based applications is
Speaker 1: what you're looking for. So far, that's where that's where
Speaker 1: we are. Um, we don't. We don't yet see the
Speaker 1: application necessarily. I think, you know, humans still have a
Speaker 1: real role to play an investment selection UM, and it's
Speaker 1: pretty complicated, so we're not We're not there yet. I
Speaker 1: will say the humans around the world, thank you, Sarah.
Speaker 1: We do want to ask you Goldman Sachs with Goldman Tomorrow,
Speaker 1: you guys are hosting a panel uh and an event
Speaker 1: International Women's Day, Financial Impowerment on the agenda. Tell us
Speaker 1: a little bit about it and what your your focus is. Yes,
Speaker 1: so I'm really excited to be joined by Patti Rafael,
Speaker 1: who is a longtime Goldman Sachs Wealth Wealth executive. She's
Speaker 1: had a tremendous career and so the two of us,
Speaker 1: what we're hoping to do is really sheer tips on investing,
Speaker 1: on careers, maybe on life. And she's a fun and
Speaker 1: fabulous woman, So hopefully there'll be a little personality and
Speaker 1: people will come away with some practical and easy to
Speaker 1: implement tips on sort of how to do the best
Speaker 1: with your money. Are we getting more empowered? Can I
Speaker 1: just ask you? I feel like we've been talking about
Speaker 1: financial empowerment for an awfully long time, probably easily a
Speaker 1: decade or two. Are we getting more financially empowered? In
Speaker 1: your view? Well, I don't know that this is really
Speaker 1: just about women. To be honest, I agree. I think
Speaker 1: women sort of carry the stress sometimes more, and so
Speaker 1: what we can do is we can demystify some of
Speaker 1: that by really breaking it down by offering ways that
Speaker 1: technology can make things kind of simple and set it
Speaker 1: and forget it, you know. I think what I'd like
Speaker 1: to do is really show people that it's not that scary.
Speaker 1: I think the word investing can be scarier than the
Speaker 1: word saving. And really there are just two sides at
Speaker 1: the same coin. Right, It's about starting early. So are
Speaker 1: we more empowered? I mean, you know, I like to think,
Speaker 1: so I like to I like to think about these
Speaker 1: you know, senior women who have had great careers and
Speaker 1: think that that sets an example for what the future
Speaker 1: can hold for the you know, the next generation. I
Speaker 1: really like that point that savings sounds safer than investing.
Speaker 1: But I mean, we don't have much time left. But
Speaker 1: I'm also curious. I mean, in thirty forty seconds, what
Speaker 1: does financial empowerment look like? That's a word we toss
Speaker 1: around all the time, but what does being empowered financially
Speaker 1: actually mean? I think being empowered financially starts with a plan, right,
Speaker 1: and there's a rule of thumb you can follow or
Speaker 1: you can personalized, and that's you know, your choice in
Speaker 1: terms of how deep you want to go. I think
Speaker 1: being financially empowered is understanding what's available to you. The
Speaker 1: government offers a tremendous amount of tax advantages. You want
Speaker 1: to take advantage of that, right, whether that's a four
Speaker 1: owin k or an IRA or all the other various
Speaker 1: accounts for educational savings. I think being empowered means means
Speaker 1: compound interest means taking advantage. Time is money, Start now,
Speaker 1: no matter how small, and think and then I think. Lastly,
Speaker 1: I would say, you know, make it simple and stress free.
Speaker 1: And that's where technology can help. All right, I gotta
Speaker 1: leave it on that note. Good luck with your event tomorrow.
Speaker 1: Sarah Levy, she's chief executive officer at Betterment. Joining s
Speaker 1: via Zoom from New York City, Carol Master, Katie Greifeld.
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Speaker 1: and Dirty. Yeah. We are talking about a ceiling, the
Speaker 1: debt ceiling, to be exact, it's potentially the risk that
Speaker 1: Wall Street doesn't want to ponder this story in the
Speaker 1: upcoming issue of Bloomberg BusinessWeek magazine, add on newstands later
Speaker 1: this week, already online at Bloomberg dot com slash business Week.
Speaker 1: It's also on the Bloomberg Terminal. It is written by
Speaker 1: Bloomberg's Liz McCormick, Eric Watson, and Josh Wingrove and Mike Dorning. Liz,
Speaker 1: by the way, Bloomberg News, chief correspondent for Global macro markets,
Speaker 1: are go to for everything on this topic, and I
Speaker 1: feel like the bond market man, you are so revered
Speaker 1: around here. She joins us along with the editor of
Speaker 1: Bloomberg Business Week, Joel Webbert Joel and Liz both in
Speaker 1: our Bloomberg Interactive Broker Student. I mean, she's kind of
Speaker 1: a goddess, like her reputation proceeds are. I don't know
Speaker 1: if she knows that, but it does. Can you tell
Speaker 1: my kids that let's talk about let's talk about the
Speaker 1: bonds and really let's talk about the debt ceiling. And
Speaker 1: I just want to say, Lionel Richie's dancing on the ceiling.
Speaker 1: The tone of that music and that song not the
Speaker 1: same thing that's in the tone of this story. The
Speaker 1: story is all about the debt ceilings down, aren't you?
Speaker 1: We are? And look like it's in the forthcoming issue
Speaker 1: of Business Speak also Today's Big Take. What really resonated
Speaker 1: with me here is that it's like we've been in
Speaker 1: this showdown for a while already. Technically we may have
Speaker 1: already crossed a line a little while ago that was
Speaker 1: kind of a significant when Treasury's kind of bailed us out.
Speaker 1: But it might get a lot worse between now and summer.
Speaker 1: I'm trying to suppress the laughter. We're going to talk
Speaker 1: about this like every day for eternity soon, Yeah, I not,
Speaker 1: But like, how bad could it get less? Well, that's
Speaker 1: the thing. And like you said, we in January hit
Speaker 1: that debt ceiling in which they had set a bit ago,
Speaker 1: and thirty one point four trillion. Now the Treasury departments,
Speaker 1: using extraordinary measures kind of a special accounting moves to
Speaker 1: stay under it because they can't go above it. But
Speaker 1: you're right, Joel, that this is only going to get
Speaker 1: worse because there is, of course a limit to how
Speaker 1: long Treasury Secretary Janet Yellen and her team can do
Speaker 1: these maneuvers and stay under the debt limit, So they
Speaker 1: really needs to raise it or resuspend it, which they
Speaker 1: do many times, and even Chairman Pal today was talking
Speaker 1: and saying this is crucial. We need this, you know,
Speaker 1: full stop. They need to raise the death ceiling. So
Speaker 1: I think it's only going to heat up. So maybe
Speaker 1: we're kind of prodding the markets today and our story
Speaker 1: saying you know, listen, you should be worried more, but
Speaker 1: they'll get more worried for sure. I feel like part
Speaker 1: of the problem though, is that, you know, like you said,
Speaker 1: we reach the debt limit in January and then through
Speaker 1: extraordinary measures, the FED figure is something out and it
Speaker 1: seems like we come up against the seas ceiling and
Speaker 1: then we always figure something out. What's different this time around? Potentially, well,
Speaker 1: I think this time around, and you know, the gentleman
Speaker 1: on the story with me are the you know, Washington
Speaker 1: politics experts, but that you know, Eric Wawson will tell
Speaker 1: you that we have a very contentious situation here where
Speaker 1: both sides, you know, are you know, jockeying. You know,
Speaker 1: the Republicans don't want a clean death sailing raise, which
Speaker 1: means that we just raise it. They want to kind
Speaker 1: of jockey for some future spending cuts. And President Biden
Speaker 1: and his team is saying, no, we don't want to
Speaker 1: do that, and you know, they seem pretty entrenched, and
Speaker 1: it kind of hearkens to twenty eleven where we had
Speaker 1: a very contenent stat sailing episode that they eventually did
Speaker 1: come to something in the final hour, but it was
Speaker 1: such a messy process that the US for the first
Speaker 1: time ever by SMP got there rating downgraded from triple A,
Speaker 1: and you know that had a sting, even though we
Speaker 1: didn't see rates jump up sharply. Then you know, the
Speaker 1: stock market went down and it was a tumultuous time.
Speaker 1: So I think that's what people think this time, it's
Speaker 1: going to go down to the wire. And Joel and
Speaker 1: I were talking that, you know, Eric had a nice
Speaker 1: story of like the Democratic leader on this debt negotiation saying, hey,
Speaker 1: we're going to go to the mat here and that
Speaker 1: it really might make them What mean, the markets have
Speaker 1: to go crazy till Washington gets a fire under them, right,
Speaker 1: stock market sells off their constituent saying what's going on?
Speaker 1: You know, and then then he's realized we got to
Speaker 1: come up with an agreement, right, So that that story
Speaker 1: that Eric wasn't did about Brendan Boyle of Pennsylvania representative
Speaker 1: top democrat on the budget community. When I read our
Speaker 1: story and then I read that story, I was like,
Speaker 1: oh boy, this is this got scarier all of a sudden,
Speaker 1: right because he's basically saying like, we're not going to
Speaker 1: back down, like this will have to come from Republicans.
Speaker 1: That is not the dynamic that we had back then.
Speaker 1: So do that calculus exactly. That's why, like I printed
Speaker 1: out Eric's story, I'm like, oh, this is troublesome, you know,
Speaker 1: And you know, it's funny, Joel, because everyone thinks, which
Speaker 1: we came to in our story, that of course they'll
Speaker 1: come to something. We've seen this movie before. It's a headache,
Speaker 1: we hate it, but well they'll do it. But when
Speaker 1: you know, you look at some of this stuff like
Speaker 1: Eric's laying out, it's really troublesome, and you know, like
Speaker 1: we hope, you know, cooler heads will prevail. No one
Speaker 1: would jeopardize the US treasuries as the world's safe haven security,
Speaker 1: which some people say. People may not realize if there's
Speaker 1: a default, be it short, you know, because they'll say, oh,
Speaker 1: well it'll be short, you know, but that doesn't matter.
Speaker 1: You know, the US doesn't default on their debt and
Speaker 1: if they do, it could have repercussions for years and years. Okay,
Speaker 1: so X date, we don't know when that is. What's
Speaker 1: our best sense of not a new dating app is
Speaker 1: it's not well. Janet Yellen says they have at least
Speaker 1: until like June. It seems like most of Wall Street
Speaker 1: is saying it probably goes until August. But it's very
Speaker 1: unclear because you know, it's kind of coming at the
Speaker 1: worst time. We're in tax season right and the government
Speaker 1: doesn't know exactly how tax flows are going. I know,
Speaker 1: I want a refund. They're trying to figure out of
Speaker 1: a Yeah, if we didn't get our refunds, I know,
Speaker 1: I know, I mean, that will happen. But they don't
Speaker 1: know how the flows are going to be, how much
Speaker 1: you know, the cash flows are going to go, how
Speaker 1: much refunds they're gonna have to pay out, how much
Speaker 1: inflows people paying their taxes. So it's very hard for
Speaker 1: the Treasury to kind of have a good timing of,
Speaker 1: you know, when we'll run out of these maneuvers. Help
Speaker 1: if I was getting a refound and I said, why
Speaker 1: don't you guys just sit on it till August and
Speaker 1: like it's like social Security a little bit and maybe
Speaker 1: I get a little bonus. Wow, you're the man. I'm
Speaker 1: just thinking he's got of I don't think I'll give
Speaker 1: mine whatever. Now, what rate do you want? Exactly exactly?
Speaker 1: So that's made it harder. That's why, you know, we
Speaker 1: know in past times, what a lot of the traders
Speaker 1: do is say, hey, listen, I'm not buying any Treasury
Speaker 1: bills or bonds that have coupon payments, which is this
Speaker 1: semi annual interest that's coming around that crazy X date time.
Speaker 1: But now this X date range is so wide that
Speaker 1: it's kind of murky in the market. Right, people are like,
Speaker 1: I don't know yet what debt to avoid, right, So
Speaker 1: maybe maybe that will become more clear as a troublesome
Speaker 1: when we get a better date. You know, maybe we'll
Speaker 1: get an update from the Treasury of when that X
Speaker 1: date is going to be. And is there any sense
Speaker 1: if if the wheels start coming off this car ahead
Speaker 1: of that X date, do we have any sense what
Speaker 1: what's going to break? Or is it just gonna break?
Speaker 1: And then we're gonna find out. Well, you know, after
Speaker 1: twenty eleven, a lot of the called parties that be
Speaker 1: that oversee the treasury market did a lot. They were like,
Speaker 1: we don't want to go through this again with having
Speaker 1: no idea, So they did a lot of backup plans,
Speaker 1: like what if, like maybe Treasury says, well, we'll delay
Speaker 1: the maturities a day. You know, they can deal with
Speaker 1: that because you have to remember there's the repurchase agreement
Speaker 1: market that uses treasuries as collateral. So there's a lot
Speaker 1: of things that you know, what if it couldn't even function.
Speaker 1: So there's been some backup plans. But even those officials say,
Speaker 1: but we're not sure. You know, we haven't been through
Speaker 1: this before. You hope the treasury market will function. But
Speaker 1: Chairman Pale has also said, like, don't expect that the
Speaker 1: Fed can swoop in and make a cure all evils.
Speaker 1: That it would be repercussions on the economy for a
Speaker 1: long time. It may sting borrowing costs for years and
Speaker 1: Years's playing that to me that if indeed we get
Speaker 1: that default, I mean, if somehow then there's a fix,
Speaker 1: quick fix after it, list would we still have that
Speaker 1: long term impact. Well, that's what a lot of people say.
Speaker 1: If course, we don't know till it happens. But you know,
Speaker 1: some very smart people have said in various stories we've
Speaker 1: done that it could be cured very fast. But you
Speaker 1: have to think some big investors say, I might add
Speaker 1: that I need a little cushion because you know the
Speaker 1: US has defaulted, right, you know, so you would say
Speaker 1: there might be some premium added to yields, not just
Speaker 1: for a day or two, maybe maybe small, but as
Speaker 1: a baseline for a long time because it's totally different dynamic.
Speaker 1: You know. Yeah, okay, so this is gonna be fun.
Speaker 1: We're gonna talk about this how many times? Yeah, I know,
Speaker 1: we're gonna be here for a little bit. Um, what
Speaker 1: do we think on the Republican side? Um, are they
Speaker 1: Is there any cracks anywhere in the in the in
Speaker 1: the wall that may be exposed here that may lead
Speaker 1: you know, a small group of people to say, you
Speaker 1: know what, we're not standing with McCarthy anymore. Well, not yet.
Speaker 1: And again the guys on the story were better on this,
Speaker 1: and Eric was saying earlier today when we talk that
Speaker 1: you know there's a few strongholds. Remember McCarthy took so
Speaker 1: many votes to get him in as speaker, and he
Speaker 1: had to cut some deals and you know that's made
Speaker 1: it harder because they also can kind of, let's just say,
Speaker 1: in late terms, spike him as the speaker. They have
Speaker 1: that option, so he has a lot to kind of
Speaker 1: payback to, do you know. Eric was saying that maybe,
Speaker 1: you know, McCarthy in the end, you know, do the
Speaker 1: best for the country and say, you know, I'll followed
Speaker 1: by sword and you know, we'll make a bipartisan deal,
Speaker 1: you know, so that it may go that way. But again,
Speaker 1: I think it comes down to markets getting ginned up,
Speaker 1: stock selling off, and that being in the front of
Speaker 1: the local papers and things that policymakers may realize, oh,
Speaker 1: this is bad, and you know, we'll come up with
Speaker 1: a deal. So it's just hard for me to believe
Speaker 1: that they won't. But like you know, one investor said
Speaker 1: to me, I don't know, never say never, you know,
Speaker 1: don't know. You know, Okay, So why throughout all of
Speaker 1: this and whatever may come yet Marcus been kind of
Speaker 1: singling like everything seems like it's not quite registered that
Speaker 1: this could go awry. Well, I think there's a few things.
Speaker 1: One is, like we said, they can't kind of know
Speaker 1: yet exactly when we'll hit that wall. Number two there's
Speaker 1: a lot of other problems, right, you know that we're
Speaker 1: market went crazy today because it looks like FED will
Speaker 1: raise rates even further. Inflation is going to be sticky,
Speaker 1: you know, not to minimize traders, but there's only so
Speaker 1: many things they can worry about at once, right, So
Speaker 1: the death ceiling, they're kind of far away, yea far
Speaker 1: away a little bit. We have seen US credit default swaps,
Speaker 1: which is insurance against a default in the US. They're
Speaker 1: not a huge product here and they're not that liquid,
Speaker 1: but those you know, rates have gone up, so there
Speaker 1: is a few people buying some hedges against a default. Right,
Speaker 1: So I guess there's a little concern, but I think
Speaker 1: we need to get some more clarity. You know, when
Speaker 1: this we could hit this wall from Marcus to really
Speaker 1: kind of like sell treasuries at that point in etc.
Speaker 1: Have we heard anything from the biggest holders of US
Speaker 1: treasuries at this point? And I think about whether to Japan.
Speaker 1: We always think about China when you talk about maybe
Speaker 1: ultimately in the future, if we do get a default,
Speaker 1: they'll a lot more in terms of holding them. But
Speaker 1: have we heard anything from global investors on that front? Well,
Speaker 1: sovereign nation Yeah, no, they haven't. I think they don't
Speaker 1: want to get in the middle of this fight. I'm
Speaker 1: sure if it gets down to the wire, you know,
Speaker 1: we've gone through this before. You know, China's a little
Speaker 1: bit and they still hold a lot, but they're a
Speaker 1: little bit less of a player. US has a lot
Speaker 1: more domestic investors than they ever had, so we're not
Speaker 1: getting into that political jockeying. And I don't think they
Speaker 1: would speak beforehand. But you do have private investors saying, like,
Speaker 1: I'm worried, Like I think I had some stories saying, oh,
Speaker 1: there's not gonna be too much volatility ahead, and one
Speaker 1: investor emailed me, Liz the debt ceiling. You know, so
Speaker 1: there are a lot of the private investors that are
Speaker 1: concerned that this could be you know, a lot of havoc.
Speaker 1: And even if we don't get a default, if it
Speaker 1: goes down to the wire and there's real concern, you
Speaker 1: might see just see more selling of treasures. Again, we
Speaker 1: have a backdrop of rates rising, inflation being sticky. There's
Speaker 1: a lot of concern out there. Anyway, what I like,
Speaker 1: it's it to me like it is like this thing
Speaker 1: that when we started the year, I was like, oh,
Speaker 1: that'll never happen, and then it's like, oh, wait, it
Speaker 1: totally could happen, or or how much chicken are we
Speaker 1: willing to play here with the thing that is unknown?
Speaker 1: And politically it is a great instrument to play to
Speaker 1: play with because it's like, oh, nothing bad's really going
Speaker 1: to happen and we haven't, and so it does create
Speaker 1: this artifact that you can play with and turn into
Speaker 1: a political football. Um. And DC's obviously doing that. Um.
Speaker 1: But to me, like the most worrisome thing is like
Speaker 1: what breaks and you didn't know it was going to
Speaker 1: break and becomes very difficult to put back together on
Speaker 1: it once it happens. And to this end, I mean,
Speaker 1: do markets have any sense of like what Treasury is
Speaker 1: actually doing behind the scenes right now just to make
Speaker 1: good on the existing promises that we have. Well, the
Speaker 1: Treasury they can't do anything shady, right They're doing this
Speaker 1: is like all official that they're allowed to do, things
Speaker 1: like not pay the retirement funds for different things like that.
Speaker 1: They're you know, able to kind of maneuver around. They
Speaker 1: are issuing less treasury bills, which is their shortest of maturities.
Speaker 1: They've started to cut how much they issue, you know,
Speaker 1: whittling down there. They usually have what they call a
Speaker 1: cash balance, kind of like their buffer. I think something
Speaker 1: goes bad, you know, call it whatever, you know, a
Speaker 1: spam attack or something that they can't get new funding,
Speaker 1: that they have a stockpile of cash to fund you know,
Speaker 1: maybe for five days of funding needs. So but they're
Speaker 1: whittling that down. So they're doing these things and that,
Speaker 1: but there's a limit. Josh, they can't you know, like
Speaker 1: all these kind of crazy issue the platinum coin, and
Speaker 1: we've talked about that before, it's not really Janet Yelling
Speaker 1: has said this stuff is kind of gimmicky, So you
Speaker 1: know that doesn't seem like I guess I would just say,
Speaker 1: and you know, here we are. We just marked one
Speaker 1: year the Russian invasion Ukraine. Just these things that come
Speaker 1: at US pandemic, a war, financial crisis, just when you
Speaker 1: think things won't happen. You know. That's just a little reminder.
Speaker 1: Have a great Tuesday, everybody. Liz McCormick, thank you so much. Complicated,
Speaker 1: important issue and you laid it out so well. Liz McCormick,
Speaker 1: as she always does. She corresponded for Global Macro Markets
Speaker 1: here at Bloomberg News is storying the upcoming new issue
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Speaker 1: Yeah but you let me drive? Oh no, no, no no no,
Speaker 1: who's gonna drive home? Honney? Please, I'll do the riding gravels.
Speaker 1: I'm want to drive. It's good question. This is the
Speaker 1: drive to the Globe comkimmu thing well, driver up to
Speaker 1: other dawn on bloom Bird Radio. All right, everybody, just
Speaker 1: about eight minutes left in today's trading session. Charlie of
Speaker 1: course breaking down the trade. Let's get to it. Let's
Speaker 1: get to our drive to the clothes gas Katie, all right,
Speaker 1: we're gonna speak be speaking with Sue Crotty. She is
Speaker 1: senior vice president and chief investment Officer over at Seagell
Speaker 1: Marco Adviser. She joins us on Zoom from New York
Speaker 1: City and Sue, we were just listening to Ken Griffin,
Speaker 1: but if we rewind back to ten am, we heard
Speaker 1: from Jerome Powell himself the FED share and it seemed
Speaker 1: like he really shocked markets here by sticking to the script.
Speaker 1: He did seem to open the door to maybe a
Speaker 1: fifty basis point hike at the next meeting, But other
Speaker 1: than that, I mean, it was higher for longer, the
Speaker 1: same kind of messaging that we've been hearing from him.
Speaker 1: What was your takeaway, Well, exactly that higher for longer.
Speaker 1: But I'm always amazed that people have not believed him
Speaker 1: when he's been saying this pretty clearly throughout. The problem
Speaker 1: is not solved. We still have inflation. We saw the
Speaker 1: pattern of it coming down, you know, through the end
Speaker 1: of the year, which was good news, but it wasn't
Speaker 1: down to the levels that you know, you you could
Speaker 1: say that the market was going to be able to pause,
Speaker 1: or that he was going to be able to go
Speaker 1: the other way, which was sort of why it was
Speaker 1: amazing that the whole year end and into January phenomenon
Speaker 1: did occur. So a lot of hope, a hope, well,
Speaker 1: fair enough, do you feel like the markets are now
Speaker 1: priced in terms of fixed income, treasury trade and equity
Speaker 1: trade priced for what? Jay Powell reminded everybody again that
Speaker 1: he's going to do. So, yeah, we're getting there, you know,
Speaker 1: we we were saying, um here at Seagle Marco through
Speaker 1: the end of last year. This is a very data
Speaker 1: dependent market, and you know, as it zoomed through the
Speaker 1: fourth border and up through January, you know, having eye up,
Speaker 1: you know, twenty seven percent was clearly you know things
Speaker 1: or the s and p up you know equally almost equally.
Speaker 1: It got far away from itself, but you know it
Speaker 1: was the you know, the world trying to look ahead
Speaker 1: and not really listening to what the reality of the
Speaker 1: data is. These things take time. This is not a
Speaker 1: quick reversal. It never has been in the history of
Speaker 1: the markets, and it won't be this time either. I
Speaker 1: think a lot of it is there's a lot of
Speaker 1: people out here investing in the markets that have never
Speaker 1: seen this sort of thing. So they just hoped we'd
Speaker 1: go back to the you know, to anybody really seen
Speaker 1: this sort of thing. So to be fair in that
Speaker 1: we're coming off a pandemic, we had tons of stimulus
Speaker 1: coming at us globally, you know. True. Yeah, No, we
Speaker 1: haven't seen a pandemic before. We haven't seen that sort
Speaker 1: of consumer demand that was the first thrust of this
Speaker 1: whole inflation era. Absolutely, But we've seen inflation before, and
Speaker 1: we've known what tools are there, and we've known how
Speaker 1: long it takes for those numbers to come through into
Speaker 1: you know, the data. And no one seems to be
Speaker 1: you know, looking at history very well these days, and
Speaker 1: there's a lot of people that just keep you know, look,
Speaker 1: we want it too. But we've always been in the
Speaker 1: camp here that raising rates is a really good thing.
Speaker 1: We were you know, when we started to raise rate
Speaker 1: before the pandemic, it reversed it all we were cheering.
Speaker 1: You can't live an world of zero rates. Zerbe is
Speaker 1: not a world where you don't create a lot of
Speaker 1: excesses and a lot of issues that are going to
Speaker 1: come to the front at some point. So in our books,
Speaker 1: this is good news. You know, having a real return
Speaker 1: on your fixed income portfolio provides a lot of protection
Speaker 1: for people. It provides savers and retirees with money that
Speaker 1: they just couldn't get for, you know, over a decade
Speaker 1: through the eighties as we as we you know, wore
Speaker 1: off the first the GFC and then and then the pandemic,
Speaker 1: and so we don't have a ton of time here.
Speaker 1: But when you say fixed income income actually has income nowadays,
Speaker 1: what specific are you talking about? Are you talking about treasuries?
Speaker 1: Are you looking at corporate credit as well? And just
Speaker 1: got about forty seconds, Well, yeah, both for sure. You know,
Speaker 1: we're we think you should be high quality because we
Speaker 1: are late in the cycle in terms of you know,
Speaker 1: the credit. We've funded a lot of companies you know,
Speaker 1: through the last decade plus that probably couldn't have gotten
Speaker 1: it in another environment. So you do have to be careful.
Speaker 1: We do believe in active management as a result of that,
Speaker 1: because you know it is going to be a little
Speaker 1: trickier in corporate credit. All right, We wish we had
Speaker 1: more time. Come back soon, Sue Crotty. She's Senior VP
Speaker 1: and Chief Investment Officer at Seagull Marco Advisors. Joining us
Speaker 1: via zoom from New York City. This is the Bloomberg
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