Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. And
Speaker 1: you know, we are broadcasting from Orlando at the Highatt
Speaker 1: Regency at the b n Y Melon Pershing's Insight eighteen
Speaker 1: and one of the insights who want to get a
Speaker 1: little bit more of has to do with the world's
Speaker 1: currency and fixed income markets, and here to help us
Speaker 1: is an Matthias Global rates and foreign currency strategist for
Speaker 1: Vanguard and so nice to have you with us. Thank
Speaker 1: you for being here. Um. You know, one of the
Speaker 1: things I was looking at was the value of the
Speaker 1: euro down six for sense since it's January. End of January, uh,
Speaker 1: strength of we're now one seventeen. With today's comments from
Speaker 1: the European Central Bank about going ahead with their less
Speaker 1: accommodative of posture, do you think that the dollar is
Speaker 1: going to remain strong? Well, it's interesting the currencies have
Speaker 1: not been behaving the way you would often have expected
Speaker 1: them to behave. They're kind of like the the pre
Speaker 1: teens of of the world at the moment. In terms
Speaker 1: of markets. Um, you know, there's a pretty giant interest
Speaker 1: rate differential between the US and Europe UM. And you
Speaker 1: would think that that would just strive, continued strengthen the dollar.
Speaker 1: That's the sort of traditional thing that you learn in school.
Speaker 1: But you had the euros strengthening pretty strongly at the
Speaker 1: beginning part of the year, mostly on economic expectations about
Speaker 1: economic growth, this global synchronized growth in Europe, and that
Speaker 1: really started to fade. Um. And now now the story
Speaker 1: is away from economic growth and back to interest rate
Speaker 1: differentials looking forward. Yeah, so we're going to try to
Speaker 1: figure them out, just as we try to figure out
Speaker 1: preteen children. I do want to get your sense though,
Speaker 1: today we did hear from the c B officials saying
Speaker 1: they might talk about talking about talking about reducing their
Speaker 1: bond purchasing at their June meeting. Um, And we were
Speaker 1: talking ahead of this segment. Is this basically just giving
Speaker 1: the finger to Italy? Well, Um, it definitely part of
Speaker 1: the vocal nature of the talking about the talking about
Speaker 1: you know, coming out with it right now probably has
Speaker 1: a little bit of something to do with Italy, especially
Speaker 1: as they've been pairing their purchases of Italian debt exactly exactly.
Speaker 1: I think what the c B is trying to say is, hey,
Speaker 1: you know, this is our party and you're welcome to it,
Speaker 1: but if you're gonna leave, it is not going to
Speaker 1: be easy for you. They're really trying to avoid the
Speaker 1: moral hazard situation with Italy and trying to kind of
Speaker 1: show them a future without the CBS backstop. So I
Speaker 1: do think there's part of it that is around that.
Speaker 1: But we've thought for a long time that, you know,
Speaker 1: in term of timing a fall more specific commentary, more
Speaker 1: specific plan in the fall of this year around around
Speaker 1: getting out of the KIWI or easing the qui um
Speaker 1: that they would have to start communicating in the summer.
Speaker 1: You know, I do want to just note that that
Speaker 1: indeed you did see Italian yields increase more than German
Speaker 1: boon yields in response to this ECB meeting. The idea
Speaker 1: here being but as ECB pairs its purchases the peripheral regions,
Speaker 1: particularly Italy, which seems to be at higher risk would
Speaker 1: suffer more as a result of the pull back. So
Speaker 1: I think that's interesting. Then, well, I just want to know,
Speaker 1: is this such a situation in which the ECB is
Speaker 1: cutting off its nose despite its face because you can
Speaker 1: stick to rules for the sake of sticking to rules,
Speaker 1: But when you have a potential crisis, why wait for
Speaker 1: it to be a real crisis such as Italy which
Speaker 1: the new government has pledged to spend a lot of
Speaker 1: money to lower taxes while they still have a huge
Speaker 1: government deficit. Why would the ECB do that? Sure? Well,
Speaker 1: I think the reality is we are economics team at
Speaker 1: Vanguard has done some work on the structure of Italian debt,
Speaker 1: and they have a very low interest rate on that debt.
Speaker 1: I mean they've issued most of it in these super
Speaker 1: low interest rate conditions, so so really their interest cost
Speaker 1: of quite low on their existing debt, Plus the maturity
Speaker 1: is really quite long, so they would have to blow
Speaker 1: their budget deficit really up in order to create a
Speaker 1: situation where the actual interest um payment on the debt
Speaker 1: becomes extremely punitive to them. So they're in a weird way.
Speaker 1: They're in a good situation to have this kind of
Speaker 1: populist environment going on in Italy right now, because the
Speaker 1: reality of it is it it's going to take a
Speaker 1: lot before it really starts to hurt. You know, I'm
Speaker 1: struck by the fact that we still have more than
Speaker 1: seven trillion dollars of negative yielding debt out there in
Speaker 1: the world, even as the FED continues to pull back
Speaker 1: from a stimulus and the ECB talks about talking about
Speaker 1: talking about withdrawing from its quantitative easing program. Do you
Speaker 1: think that we are going to see this volume of
Speaker 1: yielding debt persists or you think we're going to see
Speaker 1: it slowly whittled down as the tape ring goes on.
Speaker 1: You know that that is the need to move away
Speaker 1: from this massive bulk of negative yielding debt is something
Speaker 1: that is driving the more programmatic nature of the European
Speaker 1: Central Bank that they know, just like the FED new
Speaker 1: that they had to get away from the zero bound
Speaker 1: um you know, zero in the US, it's like negative
Speaker 1: in Euros, So it's the same understood thing. But um
Speaker 1: central banks feel like they have to get away from
Speaker 1: this sort of you know, magnet of super low rates,
Speaker 1: and they're gonna do it every chance they can until
Speaker 1: they get to some neutral level. But I'm struck by
Speaker 1: the idea of can the European economy withstand the shock
Speaker 1: of that? Well, that's a big question. Earlier in the
Speaker 1: year it looked like it definitely could you know, the
Speaker 1: economic numbers were looking good, growth was looking good. Um.
Speaker 1: We view this current situation a little bit more like
Speaker 1: a soft patch and not a complete derailment of the train. Um.
Speaker 1: But but that's a big question, which is why I
Speaker 1: do you find it interesting that the ECB has decided
Speaker 1: to make noise right now about talking about talking about
Speaker 1: talking guy. We have listened a minute left. I just
Speaker 1: want to get real quick tenure treasure yields. Do you
Speaker 1: think that they're going lower or higher? They definitely seem
Speaker 1: like they want to go lower. Um. You know, every
Speaker 1: opportunity we have, the market seems more sensitive to bad
Speaker 1: news and a and a rally or lower yields UM,
Speaker 1: and and less sensitive to a big sell off for
Speaker 1: higher yields. And Matthias, thank you so much for being
Speaker 1: with us. Come back. It's wonderful to be here with you.
Speaker 1: And Matthias Global rates and foreign currency strategies to for
Speaker 1: Vanguard talking about the world of interest rates, especially as
Speaker 1: the ECB talks about talks about talking about possibly talking
Speaker 1: about reducing it's bond purchase. It sounds so good when
Speaker 1: they do it in German, French and Italian. We're broadcasting
Speaker 1: live from b N Y Melon Pershing's Inside eighteen, Orlando, Florida.
Speaker 1: I'm Pim Fox along with Lisa Ramoitz. Our next guest
Speaker 1: is at the forefront of the digital revolution when it
Speaker 1: comes to the financial services industry. Ram Nagapon is the
Speaker 1: chief information officer at b N Y Melon Pershing and
Speaker 1: he joins us now, rom thank you very much for
Speaker 1: being with us, and thank you for having us here
Speaker 1: at the conference. Thank you for having me as well.
Speaker 1: One of the things I do when I come down
Speaker 1: in the morning here is I take a look at
Speaker 1: all of the different boots and all of the different presentations.
Speaker 1: And in addition to the hockey table and the foosball table,
Speaker 1: what I've noticed is an increase in the amount of
Speaker 1: digital offerings. Whether it is just flat panels that are
Speaker 1: being used, but more often it is about the technology
Speaker 1: that registered reps or people in the industry are being offered.
Speaker 1: And I'm wondering what is the biggest issue for you.
Speaker 1: Right now, we can go into things like softwares of services,
Speaker 1: but what is the biggest focus for you? The biggest
Speaker 1: focus is our customer wants the best experience in consuming
Speaker 1: our services. So this technology, the innovation and technology and
Speaker 1: all these new tools and other innovations is going to
Speaker 1: help us deliver that experiences. Right, That's the key and
Speaker 1: our challenges how do we get that best experience to you?
Speaker 1: Because we are financial services and we are getting compared
Speaker 1: not with our competition and finance services, but with companies
Speaker 1: like Apple, Google, Amazon and those So you know, we're
Speaker 1: all getting about taking these technology innovations that are coming
Speaker 1: out UM and applying it to wealth management and delivering
Speaker 1: the best experience. So how much is this just making
Speaker 1: the interface nicer? It's not just the interface, right, Interfaces
Speaker 1: that's a misconsumption. People think experiences of our interface know
Speaker 1: and experience is about UM. For example, you know, I
Speaker 1: want to tell your password is one of the biggest
Speaker 1: challenges of people, telling my god, it is so frustrating.
Speaker 1: You've got forty million passwords from every single difference. Look
Speaker 1: at it. I'm going to give you a biometric face
Speaker 1: idea and finger idea. You know fingerprint, that is an experience.
Speaker 1: It is an interface. It starts with an interface, but
Speaker 1: experience is more in depth. It starts from experience. You
Speaker 1: know how you interact to efficiency, you do things a
Speaker 1: lot faster than you know, just having a nice interface
Speaker 1: to end you don't look at one click purchase. Is
Speaker 1: that an interface or is an experience? The ability of
Speaker 1: the customer to now have access to all of their
Speaker 1: information is well known. But where that information lives. Does
Speaker 1: it live in the cloud, does it live at b
Speaker 1: n Y melon pershing? Where does it live? And what
Speaker 1: does the cloud movement mean for your business? Yet? So
Speaker 1: you are touching a very important topic about data, how
Speaker 1: you keep it and where you keep it and how
Speaker 1: secure you keep it. Right now, cloud it's getting more
Speaker 1: secure because people understand. You know, if you put in
Speaker 1: a cloud, somebody can come and take it. But no,
Speaker 1: it is getting secured. So I think it is all
Speaker 1: about who is the custodian that keeps the data more
Speaker 1: secure so that the privacy information get doesn't get easily tampered.
Speaker 1: So if you ask me, different people keep the data.
Speaker 1: But there are regulations and other things that you need
Speaker 1: to keep data safe that somebody else doesn't compromise it,
Speaker 1: take it and do something wrong. So data point of view,
Speaker 1: it's a very biggest challenge in this industry is to
Speaker 1: make sure that the data is secure and kept intact. Okay,
Speaker 1: data security is kind of a fuzzy concept because it's
Speaker 1: one thing for somebody to steal with malicious purposes. It's
Speaker 1: another for somebody to use somebody's financial data to better
Speaker 1: market things to them, which could be a huge financial bond.
Speaker 1: Whoever can sell such data, I'm wondering, you know what
Speaker 1: sort of the overall regulation on that front. Well, we
Speaker 1: need to get a client consent even to give it
Speaker 1: to someone. Even from marketing, you cannot just give your
Speaker 1: clients data that you're comment Well, but what about you know,
Speaker 1: overall data, maybe not on a specific person, but sort
Speaker 1: of trends in in in their financial information. There's a
Speaker 1: lot of regulations around data on how you need to keep,
Speaker 1: how do you need, how you keep store it, how
Speaker 1: do you share it? All of them do exist, but
Speaker 1: as you know, in the industry, there's a lot more
Speaker 1: happening around the data and the use. I don't want
Speaker 1: to name all the companies. Everybody knows that um so
Speaker 1: there's a lot more you're gonna if you're gonna see
Speaker 1: around this data. Um see my view as a technologist,
Speaker 1: you've got to desensitize the data, meaning value of the
Speaker 1: data when somebody takes it should not be too much.
Speaker 1: What I meant, if you have a credit card, you
Speaker 1: cannot just charge. You need something else on top of
Speaker 1: a curdit card that somebody doesn't misuse it. Things like that.
Speaker 1: That's where this biometrics and all other technology innovation is
Speaker 1: going to help us change. It's a slow change, but
Speaker 1: people are getting to it. Just imagine you come and
Speaker 1: go into a country and you stand in the turn
Speaker 1: style and it lets you go in. See that is
Speaker 1: a you know, biometrics, everything works and to make your
Speaker 1: experience better a lot of technology and your kid you
Speaker 1: don't have to worry about keeping the password really really
Speaker 1: tight because they need your biometrics along with the password
Speaker 1: to let you in. Tell us about robot advising companies
Speaker 1: like Betterment Wealth Front, all of them have some form
Speaker 1: of sig FIG. That's from schwab a Merritrade. What what's
Speaker 1: your view on robot advisors and how they have progressed
Speaker 1: in the years since we've spoken to you, meaning this
Speaker 1: is a topic that has been widely discussed orable but
Speaker 1: for the last two years. Right. It started as if
Speaker 1: the technology is going to replace the adviser. My view
Speaker 1: is it's not going to. So the technology is going
Speaker 1: to augment our healthy advisor to do a better job.
Speaker 1: Even the companies you mentioned. It started as if I'm
Speaker 1: just gonna ask your ten questions, give you a portfolio,
Speaker 1: and your job is over as an advisor. No. Now
Speaker 1: they are getting into hybrid models where they're going to
Speaker 1: kind of put in people at the right time to
Speaker 1: give you a technology and the hybrid so that which
Speaker 1: costs more, which costs more? Yes, Um, So the space
Speaker 1: of robot advice is actually moving from a technology only
Speaker 1: solution into a hybrid or a digitally enabled advisor type solution.
Speaker 1: It's so interesting because this is actually echoing what Bank
Speaker 1: of America's chief Operations and Technology officers said yesterday at
Speaker 1: a conference at Bloomberg headquarters, where she said, you know
Speaker 1: that there's been a lot of fear that your job
Speaker 1: is going to get replaced by automation, but it's really
Speaker 1: used to augment sort of those human qualities that are
Speaker 1: really prized. What are those human qualities that are most
Speaker 1: important now for an adviser, it's understanding the relationship and
Speaker 1: the entire not just the account or the car and
Speaker 1: whole the account holder, but do know a lot more
Speaker 1: your entire life events. It's not just to give you
Speaker 1: a portfolio and make sure that a tone is Thereay,
Speaker 1: do you know what color you like? Yes? Yes, There's
Speaker 1: a lot of things you got to know when you
Speaker 1: go through your life events. People getting mad with people
Speaker 1: having a child, people sending it to the college, retirement.
Speaker 1: You have to know. The holistic technology will help. It's
Speaker 1: not going to replace. Thank you so much for being
Speaker 1: with us. We really love having you on Roum knock
Speaker 1: up In. He is chief information Officer at B and
Speaker 1: Y Melon Perishing. Definitely. Fintech is transforming a lot of industries.
Speaker 1: Five years ago, Robert advisory firms were the hot thing.
Speaker 1: Now everyone is a robo advisor in the investment management
Speaker 1: space pretty much. Simon Roy joins is now President chief
Speaker 1: executive officer of gem step invest goos robo advisor. He
Speaker 1: joins us here at the B n Y Melan Inside
Speaker 1: conference in Orlando, Florida. Simon, it seems like everyone says
Speaker 1: they're using, uh, you know, whether it is streamlined data
Speaker 1: aggregators or other technology to help them be a better advisor. Uh.
Speaker 1: Doesn't this mean that almost everyone is sort of leading
Speaker 1: toward robo advisory? Yeah, Lisa, I think if everyone is
Speaker 1: a robot, part of the reason is we're all millennials now,
Speaker 1: all right, so give us a sense what what's what
Speaker 1: is it a robo advisory? And just sort of you know,
Speaker 1: how much competition is there in this space and how
Speaker 1: is it defined within a world of technology. The way
Speaker 1: I look at it is, given we're all millennials, we're
Speaker 1: all becoming very adept at using technology smartphones and and
Speaker 1: and other other such technology. Um, the key is how
Speaker 1: do we make advice more accessible to the massive Americans
Speaker 1: who don't currently have access? And so we welcome firms
Speaker 1: leaning into robo and digital advice as we call it, uh,
Speaker 1: And we think there's a long runway for advisory firms
Speaker 1: for banks, create a unions, insurance companies to make it
Speaker 1: easy for clients existing and prospects to sign up for advice.
Speaker 1: And so part of what Jim SIP does is make
Speaker 1: it a drop dead five ten minute process to go
Speaker 1: from an initial context to a client. All right, so
Speaker 1: as you say this, I have to wonder how many
Speaker 1: people are open to receiving financial advice and can understand it.
Speaker 1: I think about my nine year old son will sometimes
Speaker 1: say to me, Mom, I was listening to you on radio.
Speaker 1: Why can't you just speak English? You know, because it's
Speaker 1: it's hard to understand if you're not deeply in the world. Absolutely, so,
Speaker 1: at the end of the day, individuals invests to achieve
Speaker 1: their goals secure retirement, kids. You know, you're nine old
Speaker 1: son going to college. You saved for it for a goal.
Speaker 1: But but but you have to start Maybe we need
Speaker 1: to talk offline, but you should start saving now if
Speaker 1: you haven't, because it's just look crazy. God no, But
Speaker 1: but the key is at the end of the day,
Speaker 1: we're looking to help clients meet their financial and ultimately
Speaker 1: life goals, and so in simple terms, we provide technology
Speaker 1: to banks, created unions, and other financial institutions to help
Speaker 1: their clients identify the goals that are important to them.
Speaker 1: Your kids college and go through a simple questionnaire asking
Speaker 1: about how old is your son, when would you expect
Speaker 1: them to go to college? How much do you have
Speaker 1: saved to date? Sorry about that one and then and
Speaker 1: then what you can do in working with the firm
Speaker 1: to have a better chance of actually reaching that goal.
Speaker 1: And in simple terms, that is what digital or like
Speaker 1: as we like to say by OIC advice is about
Speaker 1: how do we help individual how do we help our
Speaker 1: clients help their investors meet their financial goals. Now, I
Speaker 1: just want to see if this is accurate that GEM
Speaker 1: step you don't automate the portfolio management. I mean that's
Speaker 1: a distinction, right, and because when you think of robot advisor,
Speaker 1: you think, okay, you plugged on a bunch of information
Speaker 1: and it gives you this model portfolio and then it
Speaker 1: just sort of adjust. But the idea is, I think
Speaker 1: what GEM step you tell us is that if you
Speaker 1: want to be if you're a registered rep of you're
Speaker 1: managing money or at a bank or pench whatever it is,
Speaker 1: and you want to be an active investor, passive investor,
Speaker 1: you want e t s, want mutual funds, you can
Speaker 1: do all of that using the GEM step platform. So
Speaker 1: the GYM step platform is an open investment platform, meaning
Speaker 1: we don't prescribe to our client firms what their strategy
Speaker 1: should be. We help them bring their value proposition to
Speaker 1: the full for their clients, so plane speak. If they
Speaker 1: want to have an all E T F set of portfolios,
Speaker 1: we can support that. If they want to have mutual
Speaker 1: funds or individual securities, we can support that as well.
Speaker 1: And so we we provide them with the choice to
Speaker 1: bring their value proposition to bear. The investment side is
Speaker 1: only one piece of the value proposition, right. The other
Speaker 1: side is I have a question, how do I raise
Speaker 1: my hand? How do I get help? And so our
Speaker 1: belief is that full you know, full Robo maybe serves
Speaker 1: a small portion of the market. At the end of
Speaker 1: the day, this is personal finance. You want to be
Speaker 1: able to reach out and get advice. And so the
Speaker 1: second part of the value proposition is often what form
Speaker 1: of access do I have and level of access do
Speaker 1: I have to an individual advisor or a call center
Speaker 1: or someone in the branch, so that if I have questions,
Speaker 1: I know there's someone to talk to. And I may
Speaker 1: not need it all the time, but when I do
Speaker 1: raise my hand, I want to know there's someone there.
Speaker 1: And so whether it's an open platform point Esmonds and
Speaker 1: supporting that bionic advice, you know, we provide that as
Speaker 1: a service. You know, we have less in a minute left.
Speaker 1: But I'm wondering, do you think that more people are
Speaker 1: financially literate today than they used to be. I think
Speaker 1: there's been an education process of you know, over the
Speaker 1: last two decades that have made them a little bit
Speaker 1: more a little bit more educated when it comes to
Speaker 1: certain aspects of investment. But I really think that literacy
Speaker 1: is going to be increasing over the next ten twenty
Speaker 1: years as this digital technology makes advice and planning goals
Speaker 1: more accessible to individuals. And I think what what what
Speaker 1: we'll see is by using services such as gemstep and
Speaker 1: being able to see the impact of saving more, they'll
Speaker 1: learn what it means to actually, you know, achieve their
Speaker 1: goals on the financial side. So I'm optimistic it will increase.
Speaker 1: And he's also going to make us all younger because
Speaker 1: we're all millennials. Thank you very much. Simon Roy is
Speaker 1: the president and the chief executive of invest Goos gems Step.
Speaker 1: We are broadcasting from b n Y Melon's inside in Orlando, Florida,
Speaker 1: and that one of the topics today is the European
Speaker 1: Central Bank, the chief economists signaling that the bank's first
Speaker 1: formal round of talks on when to stop buying bonds
Speaker 1: is imminent. Here to tell us more about this and
Speaker 1: what it means for your investments is Marvin Low, Managing Director,
Speaker 1: senior global market strategist for b n Y Melon. Marvin,
Speaker 1: A pleasure to have you with us, and thank you
Speaker 1: for being with us here at this conference. So what
Speaker 1: do you make of these comments from the European Central Bank?
Speaker 1: You know, I guess, um, everyone's certainly UH is worried
Speaker 1: about it because it does represent a turning point to
Speaker 1: one of the largest amounts of liquid that has been
Speaker 1: put into the financial systems in the history of the world.
Speaker 1: But ultimately, you know, it shouldn't be a surprise. It's
Speaker 1: you know, they need to make some an announcement by September.
Speaker 1: Um data has been okay, you know, firming from kind
Speaker 1: of where we were last year. But I guess just
Speaker 1: the fact that it's stark and in front of us
Speaker 1: now people are are someone concerned about it. You know.
Speaker 1: One thing that I'm struck with is investor positioning right now,
Speaker 1: because you do have a generally hawkish tone coming out
Speaker 1: of the central banks UH, and people had been flooding
Speaker 1: into short term debt, which sensibly would suffer if rates
Speaker 1: rose substantially on the short end, I was done seeing
Speaker 1: a couple of really big flows out of short term
Speaker 1: exchange traded funds. There was about a billion dollars pulled
Speaker 1: from uh I share a short term Higle bondy TF
Speaker 1: in the past week, and there was another billion dollars
Speaker 1: overnight from SHY the one of three year Treasury e
Speaker 1: t F run by black Rock. Does this mean anything
Speaker 1: to you? You know, certainly the expectations around and a
Speaker 1: lot a lot of that is um you know, a
Speaker 1: FED story, if you will, but expectations around the FED
Speaker 1: with regard to how aggressive they could get or couldn't get,
Speaker 1: as Waxton Wayne recently, um, you know, particularly around uh
Speaker 1: some of the geopolitical aspects that push yields lower, if
Speaker 1: you will. But you know, the data that has come
Speaker 1: out recently, you know, affirms that the FEDS on the
Speaker 1: right path in terms of you know, talking about another
Speaker 1: two and I guess the market is gravitating whether or
Speaker 1: not there's a three. UH for Marvin, if the European
Speaker 1: Central Bank just to go back there for a second,
Speaker 1: does curtail their purchases, were like, I think that what
Speaker 1: they do about two point nine trillion something like that dollars. UM.
Speaker 1: Don't you think that's gonna tank European stocks? Well, you know,
Speaker 1: I mean it's a known known UM. You know, the
Speaker 1: world has you know, certainly been perfect. But wait, wait,
Speaker 1: wait wait, we knew that. For example, we knew that
Speaker 1: with the US Federal Reserve, and then you had that nice,
Speaker 1: huge sell off in US stocks on the twenty of January.
Speaker 1: I mean, it was like a cliff. I think that.
Speaker 1: I think that just at you know, looking at volatility
Speaker 1: kind of in this world where liquidity has played as
Speaker 1: big of a role, you know, certainly UM is going
Speaker 1: to create those drifts. And we've got market structure which
Speaker 1: is very unique from what it was before the crisis.
Speaker 1: And you know, um, nobody really knows what all of
Speaker 1: these e t f s, what all of this um
Speaker 1: UH algorithmic trading is ultimately going to do once the
Speaker 1: central banks are out of there. But while we had
Speaker 1: the downdraft, valuations ultimately did come back, and you know,
Speaker 1: asset values are starting to settle around UM differentials that
Speaker 1: make a bit more sense. You know, we talked about
Speaker 1: Italy and kind of the blow out in Italy, but
Speaker 1: should Italy trade as tight to buns. Probably not. You know,
Speaker 1: Germany and Italy are very very different economies and they
Speaker 1: should have that differential within those numbers. Well, and then
Speaker 1: you're talking about differentials and talk about the differential between
Speaker 1: US and German yields, right, because that's also blown out
Speaker 1: and should that be as wide as it is? Um No,
Speaker 1: I don't think so. I think I think that there's
Speaker 1: going to be a convergence around this, particularly as we
Speaker 1: get more into this ECB discussion, where you know, they
Speaker 1: will stop buying bonds at the end of this year. Um.
Speaker 1: Draggy term ends late in twenty nineteen, so we'll see
Speaker 1: if he takes the route that Yelling did in terms of,
Speaker 1: you know, getting a little bit more to the middle
Speaker 1: rather than being as as devilish as he has been
Speaker 1: during his entire uh tenure. But um, you know, they
Speaker 1: are slowly going down that path the way the Fed
Speaker 1: slowly went down that path. So you think that the
Speaker 1: gap in the yields are going to shrink because German
Speaker 1: boon yields are gonna rise faster even then US yields
Speaker 1: going forward, And and some of that's a reversal from
Speaker 1: what we saw this year, just the U S yields
Speaker 1: have gapped out so much more, and we UM can
Speaker 1: conceivably have a conversation about end the FED might be
Speaker 1: forced to pull back a little bit from its more
Speaker 1: aggressive stance that it's that's out there. You know, I
Speaker 1: find it difficult to see them doing another seven or
Speaker 1: eight rate hikes during the cycle, to be honest with you,
Speaker 1: any thoughts on trade wars and what increases in tariffs
Speaker 1: would do to all of the projections for corporate earnings,
Speaker 1: you know, uh, most most certainly it's going to be
Speaker 1: a UM pick and choose kind of environment in terms
Speaker 1: of which companies are are better off than not. You know,
Speaker 1: I don't I can't offer a whole lot of insight
Speaker 1: into UM, you know, the more other than the more
Speaker 1: obvious types of industries that that are that are hurt,
Speaker 1: you know, auto outo manufacturers, et cetera. UM. The fact
Speaker 1: that we really have had a lot of rhetoric but
Speaker 1: not a lot of action, I think is a constructive
Speaker 1: view that the market is ultimately taking. You know what,
Speaker 1: we'll we'll we'll see what we'll see what happens. Okay,
Speaker 1: But UM, just taking a look at what has already happened.
Speaker 1: If you look at stocks in your stocks in Asia,
Speaker 1: they're flat or down for the year. And it's not
Speaker 1: as if you've made a lot of money in the
Speaker 1: SMP five this year either you're up maybe three three
Speaker 1: and a quarter percent. So I mean, that's not a
Speaker 1: ringing endorsement, you know what, UM. I mean, there's certainly something.
Speaker 1: There's certainly some negatives to it, no doubt, U U
Speaker 1: S stocks themselves are not screaming by by by any means.
Speaker 1: You know, they're holding their own, which kind of given
Speaker 1: where valuations have been, is pretty good given all of
Speaker 1: the tail once. I mean, there's there's volatility that's been
Speaker 1: created by certainly the geopolitical aspects that are going on
Speaker 1: in the world, and there are and there's volatility based
Speaker 1: on the fact that the central banks are UM, you know,
Speaker 1: starting to move towards a more neutral position. UM. At
Speaker 1: some point this year, we'll probably be talking about shrinking
Speaker 1: balance sheets across the G four, which will be the
Speaker 1: first time. And you know that's since certainly all of
Speaker 1: us have been coming to insight. So what's the one
Speaker 1: question that everyone asks you, all your clients and traders.
Speaker 1: You know, I think UM, I think there are still
Speaker 1: and you kind of see it whenever we get, um,
Speaker 1: a little bit of a calm in the world. And
Speaker 1: it's not as if there's not headlines today, but you
Speaker 1: see yields gapping out, and I think that there is
Speaker 1: concern about a four percent um four percent ten year.
Speaker 1: You know, do some of those prognosis is hold any weight.
Speaker 1: I'm in the camp that we might have seen the
Speaker 1: highs of the year, or you know, close to the
Speaker 1: highs of the year, if you will. Um, I think
Speaker 1: things get a little bit more murky and cloudier later
Speaker 1: in the year, particularly if we start talking about an
Speaker 1: e c P that's pulling things back. UM. So you know,
Speaker 1: everyone is looking at yields, which is great for a
Speaker 1: fixed income guy. Yeah, Marvin Love, thank you so much
Speaker 1: for joining us here. Marvin Lowe is managing director and
Speaker 1: senior Global market strategist for the n Why melon joining
Speaker 1: us here at Inside in Orlando, Florida. Thanks for listening
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
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